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Settlement Agreement Is a Contract, Even Before It's Signed

By Robyn Hagan Cain | Last updated on

Bennie Walters sued his former employer, Walmart, for employment discrimination. Walmart apparently reached an agreement with Walters during a settlement conference -- which is suprising since Walmart is kind of famous for its aggressive litigation strategy -- but Walters later refused to sign the written agreement.

The district court granted Walmart's motion to enforce the agreement, and denied Walters' motion for reconsideration. The Tenth Circuit Court of Appeals affirmed that decision.

Walters, a 56-year-old African-American man, alleged that Walmart discriminated against him on the basis of race, age, disability, and gender. Approximately 18 months after he sued the superstore chain, the parties -- both represented by counsel -- reached a purported settlement agreement during a court-ordered settlement conference.

Walters later refused to sign the final agreement, claiming that his attorneys misled him at the settlement conference by erroneously telling him that his Social Security and workers' compensation claims would be at risk if he did not sign the original agreement. (The attorneys deny his claim.) Walters apparently also had other concerns about the agreement, and alleged that within a week of the settlement conference, he informed his attorneys that he did not accept the settlement's terms and would not sign the final agreement.

(Three months after the settlement conference, Walters terminated his relationship with his attorneys. Since April 2011, he has proceeded pro se.)

After Walmart moved to enforce the agreement, the district court concluded that the agreement made at the settlement conference was a complete, enforceable contract.

Because settlement agreements are contracts, "issues involving the formation and construction of a purported settlement agreement are resolved by applying state contract law." Here, Oklahoma law governed the agreement.

Under Oklahoma law, settlement agreements, which may be oral or written, are controlled by "the rules of offer and acceptance and of mutual assent which control any issue of contract formation." The consent of the parties must be free, mutual, and "communicated by each to the other." A party generally may not repudiate a settlement agreement absent fraud, duress, undue influence, or mistake.

The Tenth Circuit concluded that the district court did not err in finding that Walters and Walmart established the essential elements of a contract. As the district court noted, the "Settlement Terms" document signed by Walters evidenced the parties' intent to effectuate a defined settlement. Walters was not in a position to repudiate the agreement even if he was later unhappy with its terms.

Furthermore, there was no evidence that Walters' attorneys misled him, or that the allegedly misleading statements would have affected the settlement.

If you're dealing with a similar settle conference situation in Oklahoma, keep in mind that the contract may be formed before the settlement agreement is officially signed.

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