What happens after the settlement?
When you settle a claim, before or after a lawsuit, you sign various documents finalizing the settlement. The first is a settlement agreement. A settlement agreement is essentially a contract between the parties with the dispute, setting forth the terms of their agreed upon settlement. These documents can be simple, as in “I’ll pay you this amount of money and you’ll dismiss your lawsuit.” The agreements can grow in complexity with multiple parties, time limits for payments, confidentiality clauses, payment plans, and other terms that are unique to those particular claims. Be sure you understand the settlement agreement before you sign, because you are bound by its terms, even if the other parties do not comply. For example, assume you were in a car wreck and are bringing a claim against the other driver for your injuries. You estimate your damages at $50,000. The other driver may argue that you were at fault, that your injuries were not that severe, and that you should receive $0. Both parties compromise and the defendant agrees to pay you $25,000 in a signed settlement agreement. If, after you sign that agreement, your doctor tells you that you need additional surgery that costs another $10,000, you can’t get that money from the defendant. If the defendant fails to pay the $25,000, you still don’t have a claim for a car wreck for $50,000, but rather a breach of contract for $25,000, the settlement amount.
It is very difficult to get out of your duties under a settlement agreement. Like a contract, if you sign it, you are representing that you have read the document and understand it. Only in rare cases of forgery, fraud or mutual mistake will the court set aside a settlement agreement.
Either included in a settlement agreement or as a separate document, is a full and final release. This document will release any and all claims you have or may have against the defendant coming out of the lawsuit or event. These releases will go further than simply prohibiting you from bringing the same claim again. They will stop you from bringing any claims against that defendant even if you don’t know about them. I have seen these releases written so it prohibits any claim against the defendant for any issue, arising at any time, based on any facts and circumstances. You or your attorney should carefully consider what other claims you have or might have in determining the desirability of settlement and should limit the release to a particular car wreck or other incident.
After the settlement agreement and full and final release have signed, and the checks have been issued, deposited in your attorney’s trust account and cleared the bank, your attorney will disburse the settlement money to you, to himself for any outstanding fees and costs, and to any other entity receiving funds such as a medical lienholder. If the settlement has occurred after a lawsuit has been filed, your attorney will then take the final step and file a dismissal with prejudice with the court. Since a settlement agreement or release is seldom filed with the court, this document ends the lawsuit and again prohibits the complaint from being refiled and begun again—the “with prejudice” part of the document.
Take the time to understand any settlement documents you are signing, even if your attorney says it’s ok. Once you sign, only a time machine will let you undo the deal.
-Bradley A. Coxe is a practicing attorney in Wilmington, NC who practices in Personal Injury, Car Accidents, Medical Malpractice, Contract and Real Estate disputes, and all forms of Civil Litigation. Please contact him at (910) 772-1678.