Ahlers & Cressman Lawyers http://www.ac-lawyers.com/blogs.php?topic=20 Settlements/Releases en-us Tue, 02 Mar 2010 21:10:42 GMT Bell BCI Co. v. United States - Release of Cumulative Impact Claims http://www.ac-lawyers.com/blog_article.php?article=157 Bell involved a construction contract under which the government issued an extensive series of change orders. Following the first of those change orders, the parties executed Modification 93, which stated in part the increased contract amount set forth in the Modification represented "full and equitable adjustment for the remaining direct and indirect costs of the [changed work] . . . and full and equitable adjustment for all delays resulting from any and all Government changes transmitted to the Contractor on or before August 31, 2000." Modification 93 also included the following "release" language: "the Modification agreed to herein is a fair and equitable adjustment for the Contractor's direct and indirect costs. This Modification provides full compensation for the changed work, including both Contract costs and Contract time. The Contractor hereby releases the Government, including all liability under the Contract for further equitable adjustment attributable to the Modification."

]]> Mon, 17 Aug 2009 00:00:00 GMT John P. Ahlers Bell involved a construction contract under which the government issued an extensive series of change orders. Following the first of those change orders, the parties executed Modification 93, which stated in part the increased contract amount set forth in the Modification represented "full and equitable adjustment for the remaining direct and indirect costs of the [changed work] . . . and full and equitable adjustment for all delays resulting from any and all Government changes transmitted to the Contractor on or before August 31, 2000." Modification 93 also included the following "release" language: "the Modification agreed to herein is a fair and equitable adjustment for the Contractor's direct and indirect costs. This Modification provides full compensation for the changed work, including both Contract costs and Contract time. The Contractor hereby releases the Government, including all liability under the Contract for further equitable adjustment attributable to the Modification."

Following a trial on the merits, the Court of Federal Claims (COFC) awarded Bell $2,058,456 for "labor inefficiency costs attributable to the cumulative impact of the [series of government] changes. Bell BCI Co., v. United States, 81 Fed.Cl. 617, 619, (2008). As noted by the Federal Circuit:

"In finding for Bell, the Court of Federal Claims drew a distinction between a "delay" claim and a "disruption" for "cumulative impact" claim . . . ."

The Court then looked to the contract's "Changes" clause and determined that "[u]nless provided otherwise, the bi-lateral modifications will compensate the Contractor for the changed work, but no for the impact for the multiple change orders on the unchanged work."

Because in the court's view, Modification 93 did not "provide otherwise," the Court concluded that Bell did release its cumulative impact claims. The Federal Circuit reversed the COFC, however, the Federal Circuit examined the plain language of the release and, after determining that its terms were ambiguous, ruled that "Bell released the government from any and all liability for equitable adjustments attributable to Modification 93." The Federal Circuit then remanded the issue to the COFC to determine "which of Bell's cumulative impact claims, if any, are "attributable to" modifications other than those modifications that contain the release language discussed above.

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]]> http://www.ac-lawyers.com/blog_article.php?article=157 A Release in a Settlement Agreement is Not Effective Until All Amounts Due are Paid http://www.ac-lawyers.com/blog_article.php?article=89 An employee and his employer entered into a settlement agreement concerning a severance and salary dispute that required the employer to pay $50,000.  When the employer failed to make the payment due under the settlement agreement, the employee filed a lawsuit claiming the settlement agreement was void because the consideration specified in the agreement had never been paid and sought to recover the original claim amount rather than the $50,000.  The employer counterclaimed, asserting that the settlement had been made and that the employee's recovery was limited to $50,000.  That is the employer's position was the employee was bound to the $50,000 settlement even though the employer had not made the payment as promised.  The employer argued that its "promise" to pay $50,000 precluded the employee from pursuing its original claims, since the original claims had been released due to the employer's "promise."  The employer's stance was that the settlement was a "substituted" contract that upon signing by the employee immediately and forever extinguished the employee's previous claims.

]]> Wed, 26 Mar 2008 00:00:00 GMT John P. Ahlers An employee and his employer entered into a settlement agreement concerning a severance and salary dispute that required the employer to pay $50,000.  When the employer failed to make the payment due under the settlement agreement, the employee filed a lawsuit claiming the settlement agreement was void because the consideration specified in the agreement had never been paid and sought to recover the original claim amount rather than the $50,000.  The employer counterclaimed, asserting that the settlement had been made and that the employee's recovery was limited to $50,000.  That is the employer's position was the employee was bound to the $50,000 settlement even though the employer had not made the payment as promised.  The employer argued that its "promise" to pay $50,000 precluded the employee from pursuing its original claims, since the original claims had been released due to the employer's "promise."  The employer's stance was that the settlement was a "substituted" contract that upon signing by the employee immediately and forever extinguished the employee's previous claims.

The Court rejected the employer's argument because in Washington, a settlement agreement is presumed to be an "executory accord" unless the parties clearly intended the agreement to be a substituted contract as the employer was asserting.  With an executory accord, pending full performance of the accord (the compromise agreement) the original claim is merely suspended, it is not discharged until the promised performance is complete.  Breach of the accord empowers the claimant with the choice of the accord or the original contract.  Thus, the court held that the employee could either choose to take the $50,000 or seek recovery of the original claim, presumably which was substantially more than the compromise amount of $50,000.

There was no clear evidence in the settlement agreement itself that indicated that the original claim was discharged in the settlement agreement.  The presumption was that the parties' contemplated that the original claim was merely "suspended" pending performance of the accord (payment of the amount due).

The Court reasoned that had the employer simply paid as it promised in the settlement agreement, the employee would not have been allowed to revive its original claims, but in light of the employer's breach, the employee was allowed throw the settlement agreement out and pursue its original claim.

Practice Pointer: In a settlement agreement, to make sure the settlement agreement is "executory," the release in the document should be conditioned upon the payment.  To make it a "substituted" contract, the release should read that all issues are released, except for a breach of the settlement agreement.

 Geoffrey Rosen v. Ascentry Technologies, Inc., _____ Wn. App. ____, 177 P.3rd 765 (2008)

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