Legal Update

PUT TEETH IN YOUR SETTLEMENT AGREEMENTS TO END LEGAL DISPUTES IN ONE LAWSUIT INSTEAD OF MANY

  • April 10th, 2002
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The California Court of Appeal in Los Angeles ruled on April 4, 2002 that parties to a settlement agreement which did not request the court to retain jurisdiction over the case, had to start a new lawsuit to enforce breaches of the settlement agreement. Wackeen v. Malis  97 CA4th 429 (2002).

FACTS:  The Creekside Development Corporation and others were sued by Wackeen in a dispute arising out of a real property transaction. After litigating the case for more than a year, the parties entered into a settlement agreement by which the Developers sold the property to Wackeen in exchange for notes and deeds of trust . Following execution of the written settlement agreement, the lawsuit was dismissed.

After the settlement and dismissal, Wackeen failed to perform as promised in the settlement agreement, by failing to deliver a first deed of trust and failing to make payments on the note to the Developers. As a result of these breaches and other actions by Wackeen, the Developers incurred over $95,000.00 in attorney fees and costs. The Developers’ attorneys tried to enforce the settlement agreement against Wackeen by filing a simple motion in the lawsuit that was previously settled, instead of filing a whole new lawsuit against Wackeen.

ISSUES: The issue before the Court of Appeal was whether or not, the Developers could file a motion to enforce the settlement agreement in the same lawsuit that was settled and dismissed, instead of starting over with another new lawsuit.

DECISION: The Court relied on Code of Civil Procedure §664.6 which states that if the parties to a written settlement agreement ask the court to do so, the court may retain jurisdiction over the parties to enforce the settlement until its terms are performed in full. If the court retains jurisdiction under §664.6, then the court can resolve disputed issues of fact and interpretation of the terms of the settlement agreement by a simple motion based on declarations. However where, as here, the parties to the settlement did not, before the case was dismissed, agree that the court would retain jurisdiction to enforce the settlement under §664.6, then once the case was dismissed, the court no longer had jurisdiction. Since jurisdiction cannot be conferred by consent, wavier or estoppel, the court cannot retain jurisdiction it has lost. Thus the Developer’s only remedy to enforce the settlement agreement was to file a new and separate lawsuit.

ANALYSIS: Some people just can’t get along. It’s bad enough for clients to fight one long and expensive lawsuit which they finally settle, without having to start over with another lawsuit when the other party breaches the settlement agreement. Clients have better things to do than fight daisy-chain lawsuits. The Wackeen case serves as an important reminder that before a case is dismissed, every settlement agreement should include a request for continuing jurisdiction by the court to enforce the terms of the settlement. The Court of Appeal stated: “No matter how toothless the agreement may seem in retrospect, it is not the province of the trial court to rewrite it and put in the teeth the complaining side now things it should have had. Put the right teeth in your settlement agreement so you don’t have to start over.