June 7, 2008

New Case Law: Settlement on the record

Most family law cases settle without a trial. Courts encourage settlement of family law issues, and the legislature expressly provides that it is Oregon’s policy to “encourage the settlement of suits for marital annulment, dissolution or separation . . .” ORS 107.104. If parties have settled but cannot finalize a judgment prior to trial, the parties usually recite the terms of the agreement on the record in open court. After the settlement on the record, one of the lawyers prepares a final judgment, the parties agree on the form of judgment, and the judge then signs the final judgment.

On May 21, 2008, the Oregon Court of Appeals published an opinion in Lynch-Kirby and Kirbey that changed a term in a general judgment because it differed from the settlement read into the record. The primary issue in the case was what date to use for valuing the parties real estate. Husband wanted to use January 2005 as the valuation date. Wife wanted to use September 2005, and the final judgment said September 2005.

The parties read a settlement into the record, and offered as exhibits the letters between the parties leading up to settlement. Husband’s attorney stated the letters summarized the agreement, and he read over the “main points” which were slightly different than in the letters. The parties were asked if they understood and agreed to the settlement, to which they said yes.

After settlement on the record, the parties requested a hearing regarding the terms of the settlement on the record. Husband’s position was that the settlement was unambiguous and that the division date, per the series of letters, was January 2005. The trial court disagreed, and eventually signed a judgment ordering the valuation date to be September 30, 2005.

The Court of Appeals looked at the series of letters as a “marital settlement agreement,” and chose to interpret the agreement as a contract. Under a contract analysis, the court would first look to see if the parties’ intent can be determined by examining the test of the documents, then look outside the agreement to the parties intent if the text and context are ambiguous, and as a last resort, looking to the maxims of construction (a series of rules describing how to interpret vague contracts). In reviewing the series of letters, the court found the parties intent from the text of the letters was to use January 2005 as the real estate valuation date. Wife argued that Husband’s verbal settlement had altered the terms of the letter, and in rejecting wife’s argument, the court said the verbal settlement must be read in context with agreements already made.

What does this mean to clients and lawyers? Clearly document the terms of your settlement and negotiations with paper. Create a paper trail of your intent. Understand that you are building a contract regarding the terms of your deal, which will be interpreted under contract law.