Settlement could be unenforceable even if opposing counsel agreed

By Mary DePaolo Haddad

A settlement agreement is not enforceable where one of its material terms is not yet resolved and a party has not yet given final approval despite its attorney’s oral agreement, the Washington Court of Appeals recently held.

In Veith v. Xterra Wetsuits, LLC, no. 25912-9-III (May 1, 2008), Michael Veith died of hypothermia while swimming. He was wearing a wetsuit manufactured by Xterra Wetsuits, LLC, and distributed by UnclePDog, LLC and King Distribution, LLC. His widow, Cristi Veith, sued Xterra, UnclePDog, and King, alleging that the wetsuit was defective and the defendants failed to provide adequate warnings.

King had agreed earlier to name UnclePDog as an additional insured under its liability policy with Montgomery Insurance Company. But the policy did not provide such coverage to UnclePDog. UnclePDog tendered the defense of Ms. Veith’s claim to Montgomery, which rejected it.

UnclePDog and Ms. Veith then discussed settlement. They eventually agreed that UnclePDog would stipulate to a $1 million judgment and assign its potential claims against Montgomery to Ms. Veith. In exchange, Ms. Veith agreed to release UnclePDog and not to execute on the judgment. UnclePDog’s attorney explicitly told Ms. Veith that they had a deal.

All parties then proceeded to mediation, where Montgomery agreed to insure UnclePDog. UnclePDog then stated it was no longer interested in the settlement. UnclePDog claimed that material terms had not been resolved, such as the confidentiality of the agreement.

At the trial court, Ms. Veith moved to enforce what she viewed to be a final settlement agreement. She argued that the agreement contained all the material terms, which UnclePDog’s attorney had accepted.

The trial court denied her motion. The court found that they had “a basic agreement as to the outlines of an agreement,” but that “the matter wasn’t completely resolved [because] various items … had not been resolved and were clearly material.” The court also found that UnclePDog’s owner had not given final approval to the settlement agreement.