Author: Lewis

When a case settles, most settlement agreements include a confidentiality provision for key terms.  Attorneys often believe they are bound by such terms either when they approve the settlement as to form or even when the agreement has broad language regarding its application to the client’s attorneys.

However, a recent ruling by the California Court of Appeal threw that assumption into doubt.  In Monster Energy Company v. Schechter, the parents of a 14-year old girl sued Monster Energy after she consumed two Monster brand energy drinks, went into cardiac arrest and died.  Thereafter, the parents’ attorney negotiated a settlement agreement which included a confidentiality provision purporting to bind him and his firm.  The attorney subsequently gave an interview in which he said the case had settled for “substantial dollars for the family.”  Monster Energy then sued the attorney and his firm alleging that they had breached the settlement agreement’s confidentiality provision.

The attorney and his firm then filed a special motion to strike under section 425.16 of the California Code of Civil Procedure (an anti-SLAPP motion) arguing that Monster Energy could not show a probability of prevailing on its breach of contract claim because the attorney and his firm were not parties to the settlement agreement.  The trial court denied the motion and an appeal followed.

The Court of Appeal held that “when a settlement agreement provides that the ‘[p]laintiffs and their counsel agree’ to keep the terms of the agreement confidential, and when the plaintiffs’ counsel signs the agreement under the words, ‘Approved as to form and content,” the plaintiffs’ counsel could not be liable to the defendant for breach of the confidentiality provision.  The Court noted: “The only reasonable construction of this wording is that they were signing solely in the capacity of attorneys who had reviewed the settlement agreement and had given their clients their professional approval to sign it.  In our experience, this is the wording that the legal community customarily uses for this purpose.”

Because confidentiality is often a key term of a settlement agreement, attorneys would be well-advised to keep this recent opinion in mind when drafting settlement agreements.  As the Court noted, one way to avoid this issue, and bind attorneys to a confidentiality provision, is “to draft a settlement agreement that explicitly makes the attorneys parties to the agreement (even if only to the confidentiality provision) and explicitly requires them to sign as such.”

On May 23, 2018, the Supreme Court issued a new California Rule of Court which requires most active California attorneys to be re-fingerprinted. This requirement is part of an effort by the State Bar to come into full compliance with statutory mandates that require the Bar to receive notifications of attorney arrests and convictions from the California Department of Justice. The new rule came into effect on June 1, 2018, but attorneys have until April 30, 2019 to come into compliance. For anyone who has yet to do so, you can find the necessary information here.  Don’t wait until the last minute, as LiveScan locations can become crowded and fingerprints aren’t always accepted the first time. Failure to comply with these new requirements can result in monetary penalties, and if new prints haven’t been taken by the final deadline of December 1, 2019, you may face a suspension of your license.

If you are filing a new case in the Northern District of California, and your case is assigned to the ADR Multi-Option Program, be advised that the initial case management scheduling order will no longer set a deadline by which the parties must either file a Stipulation and Proposed Order Selecting an ADR Process or a Notice of Need for ADR Phone Conference.  Instead, the scheduling order will set a deadline regarding when the parties must file a new form of ADR Certification.  This new form will include a space for parties to indicate if (1) they will be filing a Stipulation and Proposed Order Selecting an ADR Process or (2) if they need to discuss ADR at the case management conference.

In short, while ADR phone conferences may be requested or required in individual cases, they are no longer required in the standard scheduling order, effective May 1, 2018.

This new change aligns the ADR Local Rules with Civil Local Rule 16 and should streamline the process for litigation and the ADR.  As a firm that utilizes all tools in federal litigation, we look forward to following this new process.