Bad Faith Lawyers – Was There A Settlement Agreement

Here is a 2023 opinion from the Northern District of Texas, Dallas Division worth reading when it comes to determining whether the insurer and the insured have reached a settlement agreement.  The opinion is styled, Brenda Kirby and Gary Kirby v. State Farm Lloyds’, Evan Kingery, and Kimberly Scholes.  The opinion deals with other issues and the facts make a good read along with the legal history.  We will focus on whether or not there was a settlement agreement.

After the lawsuit was filed, Defendant’s filed a motion to enforce a settlement agreement.  For support, State Farm submitted copies of the above referenced e-mail correspondence exchanged by counsel for the parties on January 18, 21, 24, and February 2, 2022. Defendant contends that this correspondence clearly establishes the formation of a binding agreement to settle the claims asserted in this lawsuit under Texas law.

A district court has inherent power to recognize, encourage, and when necessary enforce settlement agreements reached by the parties.  That one party to a suit initially agrees to a settlement but later refuses to execute a formal agreement that recites the terms of the settlement does not preclude a district court from exercising such discretion to enforce a settlement agreement.  Further, the issue of whether such withdrawal by one party is allowed under Texas law is irrelevant to whether a settlement is enforceable.  Unless the party seeking to withdraw can demonstrate that the agreement is invalid under state law at the time it was made or differs materially from any judgment entered enforcing the agreement, a federal court may hold them to their word by incorporating the terms of their agreement into a final judgment.

Although federal courts possess the inherent power to enforce agreements entered into in settlement of litigation, the construction and enforcement of settlement agreements in cases that do not involve federal claims is governed by the principles of state law applicable to contracts generally.  Texas law and the Texas Rule of Civil Procedure 11 apply to settlement agreements, and, therefore, apply here to the question of whether the parties’ settlement agreement is enforceable against Plaintiffs.

Rule 11 provides that unless otherwise provided in these rules, no agreement between attorneys or parties touching any suit pending will be enforced unless it be in writing, signed and filed with the papers as part of the record, or unless it be made in open court and entered of record.  The rule contemplates that something more is required for the enforcement of such an agreement than that it be a valid contract.  That something more is its reduction to writing and signature, or their substantial equivalents.

The purpose of Rule 11 is to forestall the misunderstandings and controversies that often
attend oral agreements between counsel.  Because no settlement in this case was made in open court, the parties’ agreement had to be in writing, signed and filed with the papers as part of the record to be enforceable under Rule 11.  Slavish adherence to the literal language of the rule, however, is not necessary.

The court determines that the e-mails exchanged by the parties’ attorneys on January 21, 2022, gave rise to a binding Settlement Agreement under Rule 11.  It is clear from these e-mails that agreement was reached as to all material terms that were contingent on the occurrence of other events, notwithstanding Plaintiffs’ later attempts to withdraw from the agreement for a purported lack of additional compensation for recoverable depreciation.

A series of e-mails such as those exchanged by the parties’ counsel in this case has been held to satisfy Rule 11’s “in writing” requirement.

Moreover, the series of e-mails in this case is complete within itself in every material detail and contains all of the essential elements of the agreement.  Specifically, counsels’ e-mails establish that Plaintiffs agreed to dismiss with prejudice all claims against Defendants in this action in exchange for a specific amount.  The parties negotiated that the specific amount was new money, that is, the settlement payment was in addition to the payments State Farm already made as part of the claim adjustment.  The e-mails confirm that the new money includes all damages and costs incurred, including attorney’s fees, court costs, and expenses.  Importantly, the new money included “any amounts of recoverable depreciation that may or may not be outstanding.”  Nothing in their e-mail exchange finalizing the payment mechanics suggests that either party considered the terms to be incomplete.

Further, as contemplated in writing, the parties filed a joint notice of settlement with the court, reflecting the intent to dismiss this action pursuant to their agreement.  Plaintiffs’ promise to dismiss with prejudice all claims against Defendants was made in exchange for Defendants’ promise to pay the agreed settlement amount.  Plaintiffs are in agreement to settle Kirby v. State Farm Lloyds for new money.  Plaintiffs’ counsel will start working on the draft of the settlement agreement and . . . a notice of settlement to the court . . . .”.  These mutual promises and the mutual release language in the agreement show that the parties intended to fully and finally resolve all claims between them.  As a result, Plaintiffs cannot avoid enforcement of the parties’ Settlement Agreement.

As to Rule 11’s requirement that a writing be signed, the court determined that a name or e-mail address in the “from” field was sufficient to satisfy the signature requirement under Texas law because the “from” field functions to identify the sender of the e-mail and authenticate the e-mail.  Accordingly, because the “from” field functions to identify the sender of the e-mail and authenticate the e-mail, the court determines that the e-mail agreement between the parties was signed by their counsel and satisfies Rule 11’s signature requirement.

In support of its Motion to enforce the parties’ Settlement Agreement, Defendants filed the
parties’ e-mail exchange.
  The court, therefore, determines that the parties’ agreement as contained in this exchange is now part of the record in this case.  Thus, the agreement meets the third and final requirement of Rule 11.

Accordingly, as the parties’ agreement meets every requirement under Rule 11, the court finds the Settlement Agreement is an enforceable contract, and therefore grants Defendant’s Motion to Enforce Settlement Agreement


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