Morrison Law Journal


The Morrison Law Journal April 2016 Volume XI, Edition 4 When A Statutory Offer To Compromise Has Too Many Terms? Court Of Appeal Rules That Statutory Offer To Compromise Which Includes The Execution Of A Settlement Agreement As A Condition To Acceptance Is Unenforceable By: Edward F. Morrison, Jr., Esq. Larry A. Schwartz, Esq.
While California Law strongly favors settlements of civil disputes, and has codified Statutory Offers To Compromise in Code of Civil Procedure § 998 (which imposes penalties when an offer is not accepted and a less favorable award occurs at trial), questions have arisen as to what non-monetary terms may be included in a valid Statutory Offer. In that regard, case law on point provides that non-monetary terms can be included in a Statutory Offer, so long as the offer is unconditional. See, Barella v. Exchange Bank (2000) 84 Cal.App.4th 793, 799–800. However, questions have arisen in regard to the inclusion of a settlement agreement in the Statutory Offer (i.e. that the accepting party must agree to execute a settlement agreement). Such a condition has been criticized by some practitioners because the terms of the settlement agreement are not set forth in the Statutory Offer and disputes can arise as to what terms should or should not be included in any settlement agreement. The California Court of Appeal, First District, has now answered that question. In Sanford v. Rasnick (Ct. of Appeal, 1st App. Dist., No. A145704) (“Sanford case”) the First Appellate District ruled that a Code of Civil Procedure § 998 Statutory Offer to Compromise which required the plaintiff in a personal injury lawsuit to execute a release and enter into a separate settlement agreement was invalid. The Sanford case involved a motorcycle accident involving 17 year old Jacy Rasnick, who, when driving her father’s car, ran a stop sign and struck Charles Sanford who was operating his motorcycle. Sanford filed suit against Jacy Rasnick and her father, William Rasnick, for personal injuries and property damage. Prior to trial, the Rasnicks served a Statutory Offer which required, among other things, the “notarized execution and transmittal of a written settlement agreement and general release” from Sanford. Following a trial which resulted in an award to Sanford which was (slightly) less favorable than the amount of the Rasnicks’ Statutory Offer, the trial court awarded certain post offer costs and fees to the Rasnicks based on their 1 Statutory Offer. Sanford appealed on a number of grounds including, as relevant to this article, that the Rasnicks’ Offer improperly required that Sanford execute a settlement agreement. In its decision, the Court of Appeal agreed with Sanford and reversed on the basis that the inclusion of a settlement agreement was too vague as the terms of the settlement agreement were not “described or revealed”. In doing so, the Court of Appeal commented that the inclusion of terms in a Statutory Offer such as “parties are to bear their own costs with a mutual release of all current claims” are valid. But the Sanford court ruled that the execution of an unspecified (as to terms) settlement agreement goes too far and is unenforceable. The Sanford case is important in that bars the inclusion of the execution of a settlement agreement as a term in a Statutory Offer. However, it is important to bear in mind that the inclusion of language such as “a mutual release of all current claims” in a Statutory Offer is acceptable based on the Sanford case. The Statutory Offer just needs to be as complete as possible based on the four corners of the Offer. About the Authors: Edward F. Morrison, Jr. is the founding partner and Larry A. Schwartz is Of Counsel to The Morrison Law Group, a professional corporation. Their biographies can be viewed at www.morrisonlawgroup.com. Publication Note: The Morrison Law Group wishes to disseminate this publication to all clients and colleagues of the Firm who wish to receive it. Should any recipient desire to be removed from the distribution list, or wishes to have a colleague added, please contact Jim Van Dusen at The Morrison Law Group at 213 356-5504 or vandusen@morrisonlawgroup.com. Disclaimer Note: The legal article presented above is intended to provide general information which may be of interest or use to clients and colleagues of The Morrison Law Group and should not be construed as legal advice on any matter. 2

While California Law strongly favors settlements of civil disputes, and has codified Statutory Offers To Compromise in Code of Civil Procedure § 998 (which imposes penalties when an offer is not accepted and a less favorable award occurs at trial), questions have arisen as to what non-monetary terms may be included in a valid Statutory Offer. In that regard, case law on point provides that non-monetary terms can be included in a Statutory Offer, so long as the offer is unconditional. See, Barella v. Exchange Bank (2000) 84 Cal.App.4th 793, 799–800. However, questions have arisen in regard to the inclusion of a settlement agreement in the Statutory Offer (i.e. that the accepting party must agree to execute a settlement agreement). Such a condition has been criticized by some practitioners because the terms of the settlement agreement are not set forth in the Statutory Offer and disputes can arise as to what terms should or should not be included in any settlement agreement.

The California Court of Appeal, First District, has now answered that question. In Sanford v. Rasnick (Ct. of Appeal, 1st App. Dist., No. A145704) (“Sanford case”) the First Appellate District ruled that a Code of Civil Procedure § 998 Statutory Offer to Compromise which required the plaintiff in a personal injury lawsuit to execute a release and enter into a separate settlement agreement was invalid.

The Sanford case involved a motorcycle accident involving 17 year old Jacy Rasnick, who, when driving her father’s car, ran a stop sign and struck Charles Sanford who was operating his motorcycle. Sanford filed suit against Jacy Rasnick and her father, William Rasnick, for personal injuries and property damage. Prior to trial, the Rasnicks served a Statutory Offer which required, among other things, the “notarized execution and transmittal of a written settlement agreement and general release” from Sanford.

Following a trial which resulted in an award to Sanford which was (slightly) less favorable than the amount of the Rasnicks’ Statutory Offer, the trial court awarded certain post offer costs and fees to the Rasnicks based on their

Statutory Offer. Sanford appealed on a number of grounds including, as relevant to this article, that the Rasnicks’ Offer improperly required that Sanford execute a settlement agreement.

In its decision, the Court of Appeal agreed with Sanford and reversed on the basis that the inclusion of a settlement agreement was too vague as the terms of the settlement agreement were not “described or revealed”. In doing so, the Court of Appeal commented that the inclusion of terms in a Statutory Offer such as “parties are to bear their own costs with a mutual release of all current claims” are valid. But the Sanford court ruled that the execution of an unspecified (as to terms) settlement agreement goes too far and is unenforceable.

The Sanford case is important in that bars the inclusion of the execution of a settlement agreement as a term in a Statutory Offer. However, it is important to bear in mind that the inclusion of language such as “a mutual release of all current claims” in a Statutory Offer is acceptable based on the Sanford case. The Statutory Offer just needs to be as complete as possible based on the four corners of the Offer.

About the Authors: Edward F. Morrison, Jr. is the founding partner and Larry A. Schwartz is Of Counsel to The Morrison Law Group, a professional corporation. Their biographies can be viewed at www.morrisonlawgroup.com.

Publication Note: The Morrison Law Group wishes to disseminate this publication to all clients and colleagues of the Firm who wish to receive it. Should any recipient desire to be removed from the distribution list, or wishes to have a colleague added, please contact Jim Van Dusen at The Morrison Law Group at 213 356-5504 or vandusen@morrisonlawgroup.com.

Disclaimer Note: The legal article presented above is intended to provide general information which may be of interest or use to clients and colleagues of The Morrison Law Group and should not be construed as legal advice on any matter.