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March 2012

Gordon & Rees Team Wins Judgment in Breach of Contract Matter

Sacramento Partners Kathleen Rhoads and George Acero obtained judgment on the pleadings on behalf of Gordon and Rees's client, a national insurance company.  The case has its origins in a prior lawsuit.  In the prior lawsuit, the plaintiffs sued their homeowner's association ("HOA") because of flooding on their property.  The case settled at a mediation, with the parties signing a "terms sheet" containing the material terms of the settlement.  The settlement fell apart when the parties attempted to agree on a full release.  The HOA moved for summary judgment, claiming the parties reached an enforceable settlement, which was granted and affirmed on appeal.  However, the trial court and Court of Appeal both commented in dismissing the case that the plaintiffs had a remedy of filing a second lawsuit, for breach of the settlement agreement.

The plaintiffs filed a second lawsuit against the HOA, various HOA employees, and the insurance company.  Plaintiffs alleged a breach of the mediation settlement and added tort claims, such as IIED and negligence.  An insurance company representative signed the mediation terms sheet under where it stated "approval as to form and content."  Plaintiffs contended this signature made the insurance company a party to the settlement, especially since all the signatures, even those of the plaintiffs, were under the phrase "approval as to form and content."  Gordon and Rees was retained to represent the insurance company and responded with an Anti-SLAPP motion which resulted in a dismissal of all the tort claims and an attorney's fee award in favor of the insurance company.  Later, Gordon and Rees followed up with a motion for judgment on the pleadings as to the remaining claim, for breach of contract.  The trial court agreed that the insurance representative's act of signing the settlement under where it stated "approval as to form and content" did not render the insurance company a party to the contract.  Moreover, no other language in the terms sheet suggested the insurance company had any direct obligation to the plaintiffs.  Since the insurance company was not a party to the contract, there was no basis to sue the insurance company under a contract theory and it was dismissed from the case.

While the insurance company ultimately prevailed, the moral of the story is that insurance company representatives should avoid signing any settlement agreements, even if the signature solely indicates approval as to form and content.

Kathleen M. Rhoads



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