Enforceability of Settlements Announced in Open Court

When do statements by counsel to a Tennessee judge in open court give rise to a binding settlement between the parties?

In Harvey v. Turner, No. M2014-00368-COA-R3-CV (Tenn. Ct. App. March 26, 2014), three parties had been involved in protracted litigation regarding property issues for six years. The matter finally went to trial, and after three days of testimony, the trial went on a short hiatus. During that time, counsel for all the parties exchanged emails and phone calls and eventually came to an agreement in principle. When the trial resumed, the attorneys appeared to announce the settlement to the court. By agreement, the parties themselves did not attend. The attorneys announced the terms to the court and affirmed to the court that their parties had agreed to the settlement, the parties agreed that the trial court would retain jurisdiction to enforce the settlement, and the court accepted the settlement.

Subsequently, the parties were unable to come to an agreement on a final written settlement document, so a hearing was held. The defendant asserted that a sewer line was supposed to be included in the agreement, but the trial court disagreed. The trial court found that “there was a meeting of the minds and that that issue was not part of it.” The trial court held that there was an enforceable settlement agreement, and defendant appealed.

On appeal, defendant asserted that the alleged settlement agreement could not be enforced for three reasons: 1) “the ‘agreement in principle’ was subject to a more formal, written settlement agreement[;]” 2) the parties did not agree to the purported agreement in open court; and 3) the agreement was subject to a condition precedent. The Court of Appeals rejected each of these arguments and affirmed that the settlement agreement was, in fact, binding and enforceable.

Defendant first argued that what was announced in court was “nothing more than an agreement to agree,” which would be unenforceable in Tennessee due to its indefinite terms. The Court acknowledged that Defendant’s counsel noted that several items were subject to the agreement of the parties, but found that none of these made the terms indefinite. For instance, the parties “agreement to divide the maintenance of the easement equitably is not indefinite and neither are promises to use reasonable efforts to keep the gate locked and vehicles from blocking the road. These items do not make the settlement an agreement to agree.” As to defendant’s argument that what was announced was preliminary and a more formal agreement was contemplated, the Court noted that “if the agreement contains the essential terms of the transaction, it indicates that the parties intended to be bound to consummate the transaction.” Here, the agreement announced to the court was “quite detailed,” and according to the trial judge it resolved all the issues that the trial court was going to try. Further, both attorneys stated in court that their clients agreed to the settlement announcement. While a portion of agreement that was important to defendant was left out of the settlement (the sewer line), that portion was not actually part of the lawsuit and could not have an affect on whether the agreement was enforceable.

Next, defendant argued that Tennessee law required the parties themselves to agree to the settlement in open court, pointing to Environmental Abatement, Inc. v Astrum R.E. Corp., 27 S.W.3d 530 (Tenn. Ct. App. 2000). The Court pointed out, however, that while that case does hold that “a stipulation of settlement made in open court in the presence of the parties is binding,” it does not “say that without the presence of the parties, a stipulation of settlement made in open court, where the parties have agreed not to be present, is not binding even when the attorneys state that each party agrees.” In fact, the case cited by defendant actually cited authority noting that “consent to judgment must be made by or on behalf of the parties in open court or by documentary evidence of legal sufficiency.” Based on the attorneys’ statements and representations on behalf of their clients, the Court found that here there was a valid settlement agreement.

Finally, defendant asserted that conditions precedent prevented this from being a binding settlement agreement. For one, defendant identified as a condition precedent the parties’ future agreement to new boundary lines. As the Court pointed out, though, the agreement as stated to the trial court was that the parties had all agreed to be bound by a particular survey. The second condition precedent identified by defendant was the location of a certain strip of land, but again, the Court noted that its location was known within a general area and likely marked. Despite these assertions by defendant, the Court of Appeals again affirmed the trial court’s finding of a binding agreement, noting that the trial court determined that there was a meeting of the minds as to all the essential terms.

Essentially, it appears that this defendant regretted the settlement he agreed to and tried to get the court’s assistance in getting out of its terms. But as this case shows, parties must be mindful that an agreement announced in court is actually an agreement they want. Once a binding agreement has been reached and announced to the court, as it was here, the simple absence of a writing will not be enough to relieve a party of its obligations thereunder. Parties (and attorneys) must be careful to mean what they say and fully understand the implications of any settlement announced to the court.