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Settling Before Judgment is Entered

Commercial collection attorneys frequently settle cases before judgment is entered with a payment stream over time and a stipulation for entry of judgment in the event of default. The lynchpin to this resolution is making sure that the court retains jurisdiction pursuant to CCP Section 664.6 to enforce the terms of the settlement, including entering judgment. This statutory section provides "[i]f parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement. If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement."

 

Here's the rub - this statute was not intended to be an equitable remedy. Because of its summary nature, strict compliance with the requirements of section 664.6 is a prerequisite to invoking the power of the court to impose a settlement agreement. (Suly-Miller Contracting Co. v. Gledson/Cashman Construction, Inc. (2002) 103 Cal.App.4th 30, 37) Finding out that your written settlement agreement, which should have resolved the matter completely, is instead your next breach of contract litigation, is a real bummer for everyone involved. 

 

First, and this is the easy one, the written agreement must be agreed by the parties. It is insufficient for the attorneys to sign on behalf of the parties. Levy v. Superior Court (1995) 10 Cal.4th 578. Also make sure that the party signing is actually authorized to sign.  And yes, e-mail exchanges are enforceable as a settlement agreement under 664.6 under certain conditions. Electronic mail can be considered a contract under the Uniform Electronic Transactions Act (UETA), Civil Code sections 1633.1-1633.17 if the party (and not the attorney) is on the e-mail chain and if they agree to conduct the transaction via e-mail as opposed to just negotiating. The e-mail must also show that the parties consented to enter into a final settlement by electronic means.

 

Second, the litigation cannot be dismissed before the agreement is made. The litigation must be "pending" at the time of the agreement. If your settlement is accomplished before a lawsuit has been filed, there is no litigation "pending" and the settlement is not enforceable under the section 664.6 summary procedure. If you dismiss the case before the parties sign the settlement agreement, section 664.6 cannot be used.

 

Finally, the agreement must expressly provide for the court to retain jurisdiction. Section 664.6 states that jurisdiction is retained after dismissal for purposes of enforcing the agreement. Thus, the court can only retain jurisdiction to enforce the terms of the settlement if the parties have requested this specific retention of jurisdiction. Without it, the case is dismissed and the court loses jurisdiction. This section has two elements: the writing signed by the parties where they agree that the court retain jurisdiction and must also show that the parties (not the 1443660093_document-dollar.pngattorneys) requested to the Court that it retain jurisdiction.  

 

Moreover, the parties may not confer continuing jurisdiction to enforce the terms of a settlement agreement on the court simply by including language to that effect in their agreements. Indeed, the parties must ask the court to retain jurisdiction and direct their request to the court; otherwise, the settlement language is a nullity.

 

Other than holding that language in a settlement agreement alone is insufficient, courts have not provided specific guidance as to the form by which parties should request that the court retain jurisdiction. Therefore, it is recommended that the parties sign a short stipulation that is attached to the dismissal wherein they specifically request that the court retain jurisdiction. An experienced collections attorney can guide you through this process.

 

Finally, out of an abundance of caution, it is wise to add to the settlement agreement that the parties agree to the tolling of any applicable statute, rule, or court order affecting timely prosecution of this action, including the 5-year dismissal statute, and that all parties specifically waive the mediation privilege and any other confidentiality privilege that may apply to this agreement for purposes of its enforcement in a court of law.

 

For more information, contact attorney Ronald P. Slates today.

 

 

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