Settlement Agreements: Who Should Sign?

The recent California appellate ruling in Glen Provost v. Regents of the University of California sheds significant light on judicial views of written settlement agreements. In particular, the case dealt with who should sign a settlement agreement and the ruling has significant implications for their enforceability in California, particularly with respect to corporations.

For corporations, whether or not a settlement agreement can be enforced depends on who signs it. A corporation acts through its employees and agents and that raises the question of what employee or agent can bind the entity to Judgment enforcement.  This issue was partially answered in the Provost case.

Glenn Provost was a former employee of the University of California who brought a whistleblower suit against coworkers and the University. It drew a cross-complaint for breach of contract and other causes of action. The case settled, but Mr. Provost backed out of the agreement and the University moved to enforce the settlement. One of the plaintiffs’ objections to enforcement was the University had an in-house lawyer and not a party sign the agreement.

In Provost, Carolyn Yee, the in-house counsel for the Regents, signed the agreement as she had been designated as the party representative. She was an employee of the University and designated, according to the court, as an authorized corporate representative. Ms. Yee was not a counsel of record on the complaint. She was a counsel of record on the cross-complaint. The court emphasized that did not disqualify her from signing as a corporate representative. The settlement agreement was upheld as enforceable since it had been signed by the “Party” defendant.

So, how do you ensure the correct person has signed the settlement agreement to make it enforceable?

Some suggestions to consider:

• The person should be an employee of the corporation and fully familiar with the case.
• The person should be designated in writing as the “authorized corporate [or entity] representative for the litigation.” In Provost that writing appears to have been in the Regent Bylaws, but without Bylaws, I suggest it be a separate document spelling out the authority for the appointment.
• The person should not be Counsel of record for the Corporation or entity in the litigation. This eliminates any conflict distinction of Counsel on the complaint or cross-complaint. The Court pointed out being an Attorney alone does not disqualify someone from being a corporate representative.
• The person should attend all mediation or settlement conference sessions or have participated in other settlement discussions.

Ultimately, it’s best to err on the side of over qualification of a corporate employee representative to sign a settlement agreement to ensure it will be enforceable in Court. The recent Provost case provides the yardstick for criteria to use in the selection of that employee.

Robert S. Luft, Esq. is a San Jose-based mediator and arbitrator who utilizes 40 years of experience for a fair, optimistic, energetic and patient approach to ADR. He can be reached at rluft@jamsadr.com.