Handwritten Settlement Agreement Is Enforceable

Second thoughts about handwritten agreement not enough to overcome original deal

By Edward N. Druck Apr 21, 2016
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A handwritten settlement agreement signed by the parties’ attorneys after a mediation conference contained the necessary terms needed to make it enforceable against a former employee who later attempted to change her mind, according to the 7th U.S. Circuit Court of Appeals.

Martina Beverly sued her former employer, Abbott Laboratories (headquartered in Lake Bluff, Ill.), for national origin and disability discrimination and retaliation. During the course of the litigation, the parties engaged in private mediation. At the conclusion of the mediation, the parties signed a handwritten agreement that memorialized that Beverly had demanded $210,000 plus mediation costs to settle her lawsuit and that Abbott had offered $200,000 plus mediation costs. Both sides further committed to hold their offers open for five days.

The following day, Abbott accepted Beverly’s settlement demand. Abbott’s counsel then sent a formal draft settlement agreement to Beverly’s attorney. Beverly’s attorney responded to the news of Abbott’s acceptance of Beverly’s demand and proposed settlement agreement with an e-mail: “Oh happy days! Best $10,000 Abbott has ever spent. You are a gem.”

When Beverly later refused to sign the formal settlement agreement, Abbott moved to enforce the original handwritten agreement, claiming it was enforceable because there was an offer, acceptance and meeting of the minds. Beverly argued that the handwritten agreement was a preliminary document that was merely an expression of the parties’ intent to execute a binding agreement in the future.

The district court granted Abbott’s motion to enforce the handwritten agreement, finding that the parties had, indeed, entered into a binding settlement that included all material terms—the dismissal of the lawsuit in exchange for $210,000 and mediation costs.

The 7th Circuit affirmed. The court first noted that to have a valid and enforceable agreement, a meeting of the minds as to all material terms of a deal must exist. In this case, the handwritten agreement clearly defined both parties’ intentions and obligations; namely, that Beverly offered to “resolve the matter” if Abbott paid her $210,000 and mediation costs. The 7th Circuit further noted that the touchstone of determining enforceability is whether the agreement is sufficiently clear regarding material terms, not whether the agreement was memorialized in writing, as Beverly contended.

In addition, the court identified two other factors which supported enforcing the handwritten agreement: Both parties’ attorneys signed the document and Beverly’s counsel’s e-mail response underscored the parties’ understanding that the handwritten agreement would settle Beverly’s claims.

This case follows a line of 7th Circuit authority upholding the validity of promises to resolve lawsuits without the execution of a formal settlement agreement. And it underscores the importance of memorializing essential terms of an agreement to settle even where a more formal agreement is contemplated.

Beverly v. Abbott Laboratories, 7th Cir., No. 15-1098 (March 16, 2016).

Professional Pointer: During mediation and settlement conferences, parties are often able to come to a mutual resolution. Not infrequently, however, a plaintiff then will have second thoughts or attempt to get additional concessions from the employer. But by ensuring the essential terms of the agreement are reflected in either a preliminary agreement or written notes, employers increase the odds that the original deal will be enforceable. 

Edward N. Druck is a partner with Franczek Radelet PC, the Worklaw® Network member firm in Chicago.

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