Does Signing "Approved As to Form and Content" Bind an Attorney to the Terms of a Settlement? New California Appellate Decision Holds "No."

Recently, the Court of Appeal in Monster Energy Co. v. Schechter (Aug. 13, 2018, E066267) (Riverside) ___Cal.App.5th __, issued an opinion holding that an attorney who signs a settlement agreement as "approved as to form and content" does not become a party to that settlement and is not bound by its terms, including a confidentiality provision. (Slip. opn., pp. 20-21.)

Monster Energy Company ("Monster") sued defendant attorneys for (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) unjust enrichment and (4) promissory estoppel for remarks made regarding a settlement and the underlying litigation, to Lawyersandsettlements.com, which were published online. The trial court ruled that the settlement "clearly" contemplated the attorneys as subject to its terms because: (1) plaintiffs had authority to execute the settlement on behalf of their attorneys; (2) the settlement specified what the attorneys could and could not do; and (3) the attorneys signed the settlement. (Slip. opn., p. 8.)

The Court of Appeal reversed. Despite language throughout the settlement agreement that "plaintiffs and their counsel agree" to various conduct and that the attorneys signed the settlement agreement, the attorneys had not consented to its terms. Focusing on contract formation, rather than interpretation, the court found that to be bound by the settlement, the attorneys would have had to "manifest their consent." (Slip. opn., p. 14.)

Although an attorney is, in some respects, the agent of her clients, and it is possible for an attorney to bind her client to a contract, the court rejected the notion that a client could bind the attorney. (Slip. opn., p. 15.) Thus, the attorneys were not parties to the settlement by virtue of their mere representation of plaintiffs and were not bound by the settlement. Consequently, Monster's cause of action for breach of the settlement agreement would lie against plaintiffs. The court did not decide whether plaintiffs would have a claim against their attorneys, but this seems likely given the ethical risks associated with the disclosure. (Id.at p. 16.)

Further, the court rejected the trial court's argument that when the attorneys signed the settlement agreement "as approved to form and content" they agreed to be bound by its terms. The court applied the reasoning in Freedman v. Brutzkus (2010) 182 Cal.App.4th 1065, 1070, to conclude that the phrase asserts only that the signatory is the attorney for her party, the document is in the proper form and it embodies the deal between the parties. Here, the attorneys "were signing solely in the capacity of attorneys who had reviewed the settlement agreement and had given their clients their professional approval to sign it." (Slip. opn., p. 20.)

In response to the contention that it would be "contrary to public policy favoring settlement to hold that there is no way to require the attorneys for the parties to keep a settlement agreement confidential," the court suggested that attorneys explicitly be made parties and explicitly be required to sign as such. (Slip. opn., pp. 20-21.)

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