What is A Release of Claims in Civil Litigation?
While not mandatory – as settlements are a form of contract governed by common law – nearly every written settlement agreement in civil litigation in the State of California seemingly contains a release of all claims. Generally, these provisions require the parties to surrender legal claims they may or may not possess against each other on or before the effective date of the settlement agreement, whether – as typically drafted in California – those claims are known or unknown. This means that the release applies whether the parties knew about their claims. Despite their ostensible ubiquity, individual litigating parties typically lack understanding as to what exactly they mean. This article provides a concise overview of release of claims provisions in civil litigation settlement agreements.
As a general disclaimer, litigating plaintiffs should be aware that release of claims generally benefit defendants, and not plaintiffs in civil litigation. Indeed, the defendants are typically benefit from releasing plaintiffs who are more likely to discover facts, witnesses, and other information after discharging their claims and signing a written settlement agreement containing a release of claims. But, it does not have to be this way. Plaintiffs are always able to refuse to agree to a settlement agreement containing a release of claims provision. However, in taking this action, they face the prospect of the offeror rescinding the settlement entirely and electing to simply try the case. And, a single plaintiff taking a stand will likely prove to be inconsequential. Nevertheless, a particularly assertive plaintiff may be inclined to refuse outright to sign a settlement agreement containing a release of claims. However, that person should be poised and agreeable to try the case as refusing a release of claim is almost invariably akin to selecting trial over settlement.
What is a Release of Claims in Civil Litigation?
A release of claims is a contractual provision inserted in written settlement agreements wherein the releasing party abandons, relinquishes, or surrenders their right to make a claim and commence legal proceedings against the releasor on or before the effective date of the settlement agreement. California Civil Code § 1541; Hastings v. Matlock, (1980) 107 Cal. App. 3d 876, 882. In the State of California, most releases are drafted in a manner so that the releasing party abandons, relinquishes, and surrenders both known and unknown claims. California Civil Code § 1542. It is important to remember that no law or legal opinion requires any of this, and so an individual litigant is free to agree to or refuse to sign a settlement agreement containing a release of claims provision.
What is the Practical Effect of A Release of Claims?
In plain English, a settlement agreement containing a release of claims has the practical effect of preventing the releasing party from making a demand or commencing litigation for any and all legal claims they could bring on or before the effective date of the release. The release provision applies to claims for damages that are both known, or unknown. This means that, for example, claims discovered by a releasing party five (5) years after executing a written settlement agreement containing a release may not be brought in litigation if they occurred on or before the settlement agreement effective date.
On occasion, a release may contain a carve out provision exempting certain legal causes of action from the release. However, this is not typical. Most defendants request a release of claims for any and all causes of action the plaintiff may bring. However, no law or legal opinion mandates this. So, a particularly assertive plaintiff, who is not mired by ambivalence, may refuse to agree to a settlement agreement containing a release unless they obtain the carve out provisions they desire.
Can A Party Void A Release of Claims After Executing A Written Settlement Agreement Containing A Valid Release of Claims Provision?
Although not impossible, it is very difficult to void a release of claims provision in a written settlement agreement. Absent fraud, deception, misrepresentation, duress, undue influence, compromise, estoppel, mental incompetency, or mutual mistake, a valid release will extinguish the causes of action subject to the release. Skrbina v. Fleming Companies, (1996) 45 Cal. App. 4th 1353, 1366. Additionally, in certain circumstances, it may be that the release precludes the underlying claim. Baird v. Pacific Electric Ry. Co., (1919) 39 Cal. App. 512, 514.
What Is An Alternative to A Release of Claims?
In the event that a party does not wish to release their claims, they may propose a covenant not to sue. As distinguished form a release, a covenant not to sue is not an abandonment or relinquishment of a right or claim, but an agreement not to enforce an existing cause of action. California Civil Code § 1541; Mesler v. Bragg Management Co., (1985) 39 Cal. 3d 290, 298. Further, they may demand removal of the release of claims entirely. But, as the old idiom goes, don’t hold your breath.
