The Boilerplate Trap Snares Trial Lawyer

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Two Monster energy drinks at the mall, and a 14 year old girl went into cardiac failure, and died. 

Her parents filed a lawsuit for products liability and wrongful death against Monster Energy Company (“Monster”). The case settled and a comprehensive settlement agreement (“Agreement”) was signed by all parties, with the attorneys signing off as “approved as to form and content.”

Not so innocent boilerplate

Trial lawyers have seen the language many times before. The Agreement is on behalf of the settling parties, individually, as well as the usual suspects (officers, directors, shareholders, employers, etc.), including their attorneys.  Yada, yada, yada.

The confidentiality clause prohibits the publication or disclosure of the amounts, conditions, terms, or contents of the Agreement in any manner. If contacted by the media, the acceptable response is “this matter has been resolved.’”

The settlement is finalized, case dismissed. On to the next case.

Settlement in the spotlight

Awhile later a reporter from Lawyersandsettlements.com contacts Plaintiffs’ counsel about cases he is handling that involve energy drinks. Cool – free PR!

Mindful of the restrictions in the Agreement, Plaintiffs’ counsel discusses other cases against Monster, as well as his view of the negative health effects of Monster’s products. Plaintiffs’ counsel mentions the recent case the 14-year-old girl, being careful to say it has “been resolved.”

In response to a question about what the resolution was, Plaintiffs’ counsel answers “[S]ubstantial dollars for the family,” and Monster “wants the amount to be sealed.”

Lawyersandsettlements.com publishes the article.

PR turns poisonous

But there is no free lunch, beverage included, because Monster filed a lawsuit against Plaintiffs’ counsel for breach of contract, breach of implied covenant of good faith, unjust enrichment, and promissory estoppel.

Plaintiffs’ counsel filed a motion to strike the complaint pursuant to California’s anti-SLAPP statute, and argued the lawsuit implicated his constitutional free speech rights.  Plaintiffs’ counsel’s further contended that Monster could not show a probability of prevailing on its breach of contract claim because Plaintiffs’ counsel wasn’t a party to the Agreement.

 Easy peasy. Well, not so fast. 

Trial court finds counsel is a party

The trial court denied the anti-SLAPP motion with respect to the breach of contact cause of action, explaining that the settlement clearly contemplated Plaintiffs’ counsel was subject to the Agreement.   Plaintiffs had the authority to execute the Agreement on behalf of their counsel, and counsel is clearly allowed and not allowed to do certain things in the settlement.  

In addition, counsel signed the document.”  

The trial court went on to say counsel’s argument he was not a party to the Settlement Agreement merely because he approved it as to form and content only “is beyond reason.”  

Never a good thing to hear from a court commenting on your legal position.

Counsel prevails on first appeal

Up it goes on appeal, where the California Court of Appeals rejects the trial court’s reasoning, and finds no matter how plainly the Agreement provided that the Attorneys were bound, they could not actually be bound unless they manifested their consent.

The provisions in the Agreement stating that Plaintiffs’ counsel agrees to keep the settlement agreement confidential, if valid at all, mean that Plaintiffs agree to direct their attorneys to keep the Agreement confidential.

To the relief of many trial attorneys , the appellate court went on to say the only reasonable construction of “approved as to form” wording is that Plaintiff’s counsel was signing solely in the capacity of attorneys who had reviewed the Agreement and had given their clients their professional approval to sign it. “In our experience, this is the wording that the legal community customarily uses for this purpose.” 

So when the plaintiffs’ counsel signs the agreement under the words, “Approved as to form and content,” Plaintiffs’ counsel cannot be liable to the defendant for breach of the confidentiality provision. Monster Energy Co. v. Schechter, 26 Cal. App. 5th 54, 236 Cal. Rptr. 3d 669 (2018)

Phew!

Supreme Court differs

And then it goes up to the California Supreme Court, which on July 11, 2019 reversed the appellate court and found that Monster sufficiently established a probability of prevailing on its breach of contract claim, and Plaintiffs’ counsel’s anti-SLAPP motion should therefore be denied.

So how did this happen?

The California Supreme Court found there was no question the Agreement stated it encompassed both the parties to the litigation as well as their counsel, at a minimum with respect to the confidentiality clause.

The court then rejected the appellate court’s reasoning that since the Agreement did not specifically state the attorneys were parties, they could not be bound. Instead, regardless of the fact the attorneys were not parties, the California Supreme Court reasoned it was the substance of the Agreement that determined the attorneys’ status as a party to the contract

Generally, the language “approved as to form and content” simply affirms that a party’s attorney has read the document and perceives no impediment to his client signing it, said the court. However, this particular Agreement contained extensive confidentiality provisions, which referred to both the parties and their attorneys.

Attorney’s signature under the terms “approved as to form and content” does not preclude, as a matter of law, a finding that the attorney also intended to be bound by the contract. The question of whether Plaintiffs’ counsel actually intended to be bound by the Agreement is a question to be resolved by the trier of fact.

Monster fight continues

Plaintiffs’ counsel is not getting out of that lawsuit without a protracted and expensive fight. And as an added bonus, an attorney E&O policy may or may not cover this kind of claim.

So, settlement agreements with confidentiality provisions signed by trial attorneys “approved as to form and content” may bind those trial attorneys to the terms of the Agreement and expose them to potential liability for any alleged breach.

Solution, if you settle a case, either don’t sign off on the settlement agreement with confidentiality clauses, or if you do, stay away from free PR – it isn’t free.