You and your client can scarcely believe it. The star witness for the deep-pocket defendant had a mid-trial meltdown straight out of Hollywood’s "A Few Good Men," and a hurried hallway conference has produced a settlement. The judge suggests the parties put the settlement on the record under CCP §664.6. You immediately agree, knowing that the statute affords a summary means of enforcing the settlement if one of the parties has a subsequent change of heart. Back in front of the court reporter, counsel confirm their clients have settled. The judge questions the parties and party representatives present in the courtroom and all express their consent. She thanks you for your efforts in bringing the lawsuit to a conclusion and you head back to the office, comfortable that whatever may happen you have an enforceable settlement.

Although this factual scenario appears to be tailor-made for summary enforcement under §664.6, what would happen if you and your client attempted to enforce the on-the-record proceedings? Would it matter if the deep-pocket defendant was represented only by an agent who assured the court of his absolute and exclusive authority to settle? Would it be significant if the proceedings, while memorializing the total dollar amount to be paid the plaintiff, did not specify the obligation of any individual defendant to fund the settlement? What if your case’s Jack Nicholson character offered no more than an angry nod as his consent to the settlement terms? Or what if one party not present at court could not agree to the settlement then and there, but her lawyer promised that written approval of the agreed terms would be forthcoming?

Recent California appellate decisions have indicated that any one of these circumstances might prove all that is needed to block enforcement of the settlement. These cases are important because they represent a departure from the traditional parameters governing the enforcement of settlements reached under §664.6, and also because they highlight several factors that should be forefront in the mind of any attorney or judicial officer seeking to memorialize such a settlement.

The problem of enforcing a settlement agreement made in or out of a courtroom is as old as settlement agreements themselves. Before 1981, the law was uncertain about what parties could do to enforce settlement agreements, and how they should proceed if they wanted to enforce such an agreement. Various cases suggested a variety of alternatives for enforcement, some of them conflicting. Thus, some cases suggested that enforcement could be obtained by summary judgment or amendment of the pleadings (raising the settlement as an affirmative claim or defense) in the underlying case, while others required a separate suit in equity. See Duran v Duran (1983) 150 CA3d 176, 179, 197 CR 497. The dominant view for many years, however, was that efforts to enforce settlements based on facts outside the pleadings had to be treated as motions for summary judgment, which could be granted only in the absence of triable issues of fact. See Hastings v Matlock (1980) 107 CA3d 876, 881, 166 CR 229. But this view was not unanimous. A second line of authority highlighted the inadequacy of the standards governing summary judgment and therefore approved consideration of facts outside the pleadings through a nonstatutory speaking motion as long as there was no opportunity for reasonable dispute over the fact and terms of settlement. See Gregory v Hamilton (1978) 77 CA3d 213, 219, 142 CR 563.

Because of the importance of settlements and the need to give the settlement process more certainty, the California Legislature fortunately took steps to resolve these conflicts by enacting CCP §664.6 in 1981. The statute sets forth an expedient means for enforcing settlement agreements, as well as direction to counsel and the courts as to when the summary enforcement procedure is appropriate. Under §664.6, a court may enter judgment on a settlement, and retain jurisdiction to enforce, when the parties "stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case." By requiring the affirmative participation of the litigants, the statute seeks to avoid hasty and improvident agreements, impress on the parties the seriousness and finality of the decision to settle, and minimize the possibility of conflicting interpretations of the settlement down the road.

Not surprisingly, after the statute’s enactment parties began to take advantage of the additional summary enforcement procedure in a variety of contexts. In keeping with the legislature’s intention, courts applied the express statutory requirements concerning party involvement and judicial supervision. See Levy v Superior Court (1995) 10 C4th 578, 584, 41 CR2d 878; Marriage of Assemi (1994) 7 C4th 896, 911, 30 CR2d 265. However, consistent with the strong public policy in favor of settling litigation and the increased use of alternative dispute resolution techniques, courts also showed flexibility in considering whether the statutory prerequisites to enforcement had been met. Thus, they found that a motion under §664.6 could be brought even when issues related to the binding nature or terms of the settlement were in dispute, because in ruling on the motion the trial court was empowered to resolve the disputed issues and ultimately determine whether a binding mutual accord as to the material terms had been achieved. See Estate of Dipinto (1986) 188 CA3d 625, 629, 231 CR 612; Casa de Valley View Owner’s Ass’n v Stevenson (1985) 167 CA3d 1182, 1189, 213 CR 790. The supreme court likewise specified that a stipulation entered outside a courtroom but before an arbitrator satisfies §664.6’s requirement for entry "orally before the court." Marriage of Assemi (1994) 7 C4th 896, 909, 30 CR2d 265. At least one court reasoned that relaxation of the party signature requirement for stipulations signed outside the presence of the court was in order when the party was an insured being defended in the litigation by a carrier without a reservation of rights. Robertson v Chen (1996) 44 CA4th 1290, 1295, 52 CR2d 264.

Until very recently, courts accordingly favored liberal enforcement of settlements under §664.6 as long as the material terms of the settlement had been defined, the supervising judicial officer had questioned the parties about their understanding of those terms, and the parties had acknowledged their understanding and agreement to be bound. In several recent cases, however, California courts have pursued a more conservative approach toward the construction and enforcement settlements reached under §664.6.

Gauss v GAF Corp. (2002) 103 CA4th 1110, 127 CR2d 370, is typical of this more conservative trend. In the several consolidated appeals involved in Gauss, the defendant and appellant GAF Corporation was one of several previous manufacturers, distributors or sellers of asbestos-containing products that had joined together to form an entity, the Center for Claims Resolution (CCR), empowered to administer all aspects of asbestos-related litigation instituted against those companies. 103 CA4th at 1113. GAF and all the other CCR members signed a document designating CCR their sole agent to defend, settle, and pay all asbestos-related claims. CCR agreed to settlements with several asbestos plaintiffs against GAF and other CCR members. 103 CA4th at 1114. GAF did not sign the settlements, and although the settlements specified the amounts to be paid to each plaintiff, they did not allocate the amounts to be paid by each of the settling defendants. When GAF refused to contribute to the settlements the amounts to which CCR had agreed, over sixty plaintiffs moved to enforce the settlements under §664.6. 103 CA4th at 1115. The trial court granted these motions and entered judgments against GAF for the unpaid portions of the settlements.

The judgments in Gauss were reversed on appeal -- despite the fact that each of the settlements was signed by CCR, GAF’s sole and exclusive agent with authority to settle asbestos claims on GAF’s behalf. The court found the settlements unenforceable under §664.6 for both of the reasons raised by GAF: It did not sign the settlement agreements, and the agreements failed to specify GAF’s share of each settlement.

On the signature issue, the Gauss court relied on the supreme court’s holding in Levy v Superior Court (1995) 10 C4th 578, 41 CR2d 878, that a court may not enter judgment under §664.6 when the written stipulation to settle is signed by a litigant’s attorney, and not by the litigant personally. The Gauss court rejected the arguments that Levy should be limited to the context of noncorporate defendants and lawyer-signed settlement agreements. Gauss v GAF Corp. (2002) 103 CA4th 1110, 1118, 127 CR2d 370. The court was unpersuaded that the broad and exclusive nature of CCR’s settlement authority should dictate a different outcome, and rejected plaintiffs’ attempt to analogize to the situation of an insurer settling a dispute in which it has provided defense and indemnity without reservation of rights. 103 CA4th at 1119. In Gauss, unlike in the insurance scenario, GAF remained responsible for millions of dollars in settlement obligations. The court concluded that these substantial rights could not be forfeited on the basis of an agent’s signature.

On the issue of specification of terms, the Gauss court found the settlement agreements independently incapable of enforcement under §664.6 due to their failure to specify the portions of the settlements allocated to the individual CCR members, including GAF. 103 CA4th at 1123. Because there was no evidence before the court of any allocation to which GAF previously had agreed, and thus no evidence the agreements contained the material terms of the settlement, the trial court erred in entering the judgments for this reason as well.

Conservatorship of McElroy (2002) 104 CA4th 536, 128 CR2d 485, is another example of the courts’ recent insistence on strict statutory compliance in considering judgments entered under §664.6. In McElroy, the parties and trial court attempted to resolve a conservatorship proceeding by confirming the settlement on the record in open court. 104 CA4th at 541. This attempt failed for purposes of settlement enforcement under §664.6 for two reasons. First and foremost, one of the parties failed to orally express her consent to the settlement but rather nodded her assent, an event reflected in both the reporter’s transcript and the trial court’s videotape of the proceedings. 104 CA4th 547. A mere nod of the head, however, falls short of the statutory requirement that assent be expressed orally, because "head movements are too ambiguous to demonstrate assent and the ambiguity produces the litigation the statute was designed to avoid." 104 CA4th at 550. The McElroy court also found the trial court’s questioning of the parties -- which asked only whether counsel’s statements about the settlement were consistent with their understanding, and failed to inquire whether they agreed to be bound by the settlement -- insufficient to satisfy the applicable enforcement requirements. 104 CA4th at 551-52.

Finally, in Elyaoudayan v Hoffman (2003) 104 CA4th 1421, 129 CR2d 41, the court enforced a settlement under §664.6 but once again emphasized the importance of the fundamental statutory requirements. At issue in Elyaoudayan was whether the statute permits a "mix and match" approach to settlement enforcement when certain parties have stipulated orally to settlement in court, while others have approved the settlement in writing outside the court. 104 CA4th at 1431. The court noted the practicality in multiple party litigation of an approach that enables all parties to agree to approve a settlement in different ways -- as long as there is no question that each party expressed consent in one of the statutorily specified manners, and as long as the material terms approved by all of the parties are the same. 104 Ca4th at 1429.

Although these recent decisions have adopted a more stringent approach, §664.6 continues to provide an expeditious route to an enforceable judgment. The message of these cases is that such a judgment is unlikely to withstand appellate review unless a court is assured that the parties were protected from entering into a hasty or improvident agreement, that they were made aware of the seriousness and finality of the decision to settle, and that they were assisted in minimizing the possibility for subsequent conflicting interpretations about the settlement. Thus, paying attention to several critical factors will enhance the stability of any §664.6 settlement.

Before Gauss, it was already well established that counsel and any judicial officer seeking to effectuate an enforceable settlement under §664.6 should:

Be Detailed. A settlement will not be enforced under §664.6 unless all the material terms are present. Erring on the side of over-inclusiveness helps minimize the possibility of controversy on this point.

Be Thorough. In oral proceedings, the presiding judicial officer should expressly question the parties regarding their understanding of the settlement terms.

Avoid Ambiguity. A party’s express affirmation that he or she understands and agrees to be bound by the settlement terms is required.

After Gauss and the other recent California decisions, it is clear that counsel and any presiding judicial officer also should be sure to:

Insist On Party Approval. In all but the most limited circumstances, the consent of a mere agent will not suffice.

Insist That All Material Party Obligations Are Specified. In a multi-party settlement, it is important to specify not just the amount to be paid, but the specific allocation of apportionment of responsibilities among the defendants.

Insist on Confirmation. Each party confirming assent to the settlement terms in an oral proceeding must audibly express his or her agreement to be bound by the settlement terms. Mere nods or gestures are unlikely to do the job.

Follow Up. If the parties are expressing their consent by different means, ensure that no party is left out and that all parties agree to the same material terms.

Expect No Free Lunch. Section 664.6 does not expand the otherwise applicable limitations on a court’s ability to enforce any provision that may be illegal, contrary to public policy, or unjust. See Timney v Lin (2003) 106 CA4th 1121, 1127, 131 CR2d 387. Consequently, do not rely on public policies favoring settlement to validate otherwise unenforceable contract terms.

The process of negotiating and executing a detailed settlement agreement can be lengthy and difficult. So too can efforts to enforce a settlement once reached. Although §664.6 provides a viable enforcement option, it is available only when no corners have been cut and no statutory requirements remain unsatisfied. To provide the strongest possible basis for enforcement of settlement under this section, the record should demonstrate in a straightforward manner, via written or spoken word, the prior knowledge and consent of the parties to all material settlement terms. It should specify the approval of all of the participating parties. It likewise should specify their respective responsibilities under the agreement. Such an approach is necessary in light of the legislature’s intent that parties understand the serious and final nature of the settlement process, and that substantial rights of litigants not be subordinated to policies favoring expedient settlement enforcement.