“A settlement agreement is a binding contract.” Dabish v Gayar , 343 Mich App 285, 289 (2022) (quotation marks and citation omitted). “To settle a lawsuit, there must be an offer and acceptance.” Id . at 289-290 (quotation marks and citation omitted). “Unless an acceptance is unambiguous and in strict conformance with the offer, no contract is formed.” Id . at 290 (quotation marks and citation omitted). “Further, a contract requires mutual assent or a meeting of the minds on all the essential terms.” Id . at 290 (quotation marks and citation omitted). “An enforceable settlement depends on an offer and an acceptance that is unambiguous and in strict conformance with the offer.” Id . at 291 (cleaned up).
A. Must Be in Writing or on the Record
“An agreement or consent between the parties or their attorneys respecting the proceedings in an action is not binding unless made in open court, or unless evidence of the agreement is in writing, subscribed by the party against whom the agreement is offered or by that party’s attorney.” MCR 2.507(G) . This is essentially a statute of frauds governing legal proceedings. Kloian v Domino’s Pizza, LLC , 273 Mich App 449, 456 (2006).
“An agreement to settle a pending lawsuit is a contract and is to be governed by the legal principles applicable to the construction and interpretation of contracts.” Walbridge Aldinger Co v Walcon Corp , 207 Mich App 566, 571 (1994). However, “[a] settlement agreement will not be enforced even if it fulfills the requirements of contract principles where the agreement does not additionally satisfy the requirements of [ MCR 2.507(G)] .” 1 Columbia Assoc, LP v Dep’t of Treasury , 250 Mich App 656, 668-669 (2002).
Notes regarding possible settlement terms in the activity log of an insurance adjuster are “distinguishable from both an attorney-signed letter and a party-signed proposal,” and “does not rise to a level sufficient to satisfy the writing requirement of [ MCR 2.507(G) ].” 2 Mich Mut Ins Co v Indiana Ins Co , 247 Mich App 480, 486 (2001).
An exchange of e-mails may satisfy the requirement that the settlement be in writing as long as it is also subscribed . Kloian , 273 Mich App at 459. Subscription as contemplated by the court rule means “to append, as one’s signature, at the bottom of a document or the like; sign.” Id . (citation and quotation marks omitted). Accordingly, an “e-mail containing the terms of the settlement offer was subscribed by plaintiff’s attorney because he typed, or appended, his name at the end of the e-mail message” as did the defendant’s attorney’s reply e-mail, whereas a subsequent modification by e-mail did not comply with the subscription requirement because the plaintiff’s attorney’s name was at the top of the e-mail. Id . at 459-460.
Where the “parties’ attorneys exchanged a host of e-mails in an effort to settle the matter, but the two key documents—the ‘Settlement Agreement and Release’ and the ‘Membership Interest Purchase Agreement’—were never signed by [plaintiff],” the purported settlement agreement was not enforceable pursuant to MCR 2.507(G) . Dabish v Gayar , 343 Mich App 285, 290-291 (2022) (noting the “purported settlement in this case was not ‘made in open court,’” and thus, could “only be enforced if it was ‘in writing, subscribed by the party against whom the agreement is offered or by that party’s attorney’”). Further, “there [was] nothing in the e-mail correspondence demonstrating that [plaintiff] ever accepted defendants’ offer.” Id . at 290, 291.
Where the parties have agreed to settlement terms on the record but cannot agree on the written terms, it may be appropriate for the trial court to enforce the terms as stated on the record. Mikonczyk v Detroit Newspapers, Inc , 238 Mich App 347, 348-349 (1999).
B. Attorney’s Authority and Duty
Authority. An attorney is presumed to have authority to act on his or her client’s behalf. Jackson v Wayne Circuit Judge , 341 Mich 55, 59 (1954). However, an attorney must have specific authority from the client to settle a case. See Nelson v Consumers Power Co , 198 Mich App 82, 85 (1993).
An attorney cannot prevent a client from settling a case. Simon v Ross , 296 Mich 200, 203 (1941). However, the attorney may assert an attorney’s lien for services rendered if a client decides to settle. George v Sandor M Gelman, PC , 201 Mich App 474, 476-477 (1993). 3
Duty. “It is the lawyer’s professional duty to ensure that his client is fully advised and aware of all the ramifications of . . . a settlement.” Clark v Al-Amin , 309 Mich App 387, 400 (2015). “This professional obligation is the core duty of the [party’s] lawyer—not the opposing party or its counsel. If the [party’s] lawyer fails to fulfill this obligation—and does not ensure that he and his client consider all possible claims before signing a settlement agreement—the lawyer cannot shift this responsibility to the opposing party or opposing counsel.” Id. (holding that “[u]nder Michigan law, neither [an insurer] nor its counsel ha[s] any duty to inform [an injured party] of possible claims [he or] she [may] have . . . regarding [a PIP benefit], or to advise [him or] her to include those claims in [a] settlement”).
C. Court Approval
Committee Tips:
• Always have parties confirm the details of their settlement on the record.
• Review attorney fees and expenses if required. Approve attorney fees and expenses if appropriate.
Court approval is required for settlements of class actions and settlements for minors and incompetent persons. MCR 3.501(E) ; MCR 2.420(B) . 4 Court approval may be requested by the personal representative for wrongful death settlements. MCL 600.2922(5) . 5
Note: Authority to approve or reject a proposed settlement involving a minor remains with the judge to whom the case was assigned when the action on behalf of the minor was commenced, even when a party to the settlement has been dismissed from the case. Peterson v Auto-Owners Ins Co , 274 Mich App 407, 415 (2007) (“[a]lthough [the minor defendant] was never served, resulting in his dismissal, the action against him had been commenced,” requiring the assigned judge to approve or reject the proposed settlement pursuant to MCR 2.420) .
Taxable costs are deemed included in the settlement unless otherwise specified. MCR 2.625(H) .
D. Conditional Dismissal 6
“The court may enter a consent order for conditional dismissal under the following conditions:
(1) A consent order for conditional dismissal shall be signed and approved by all parties and shall clearly state the terms for reinstatement of the case and entry of judgment.
(2) If the breaching party defaults on the terms of the settlement agreement as provided for in the conditional dismissal order, the non-defaulting party may seek entry of an order for reinstatement of the case and entry of judgment.
(a) To obtain an order for reinstatement of the case and entry of judgment, the non-defaulting party shall file with the court an affidavit stating that the breaching party defaulted on the terms of the settlement agreement.
(b) The non-defaulting party shall serve a copy of an affidavit of non-compliance on the breaching party at its current address listed in the court records and file proof of service with the court.
(c) If the order for conditional dismissal states that judgment may be entered without notice or further process, the court shall enter the proposed judgment upon determining the conditions for entry of judgment in the conditional dismissal order are satisfied.
(d) If the order for conditional dismissal does not provide for immediate entry of judgment, the affidavit shall be accompanied by a notice to the breaching party that an order for reinstatement and for entry of judgment is being submitted to the court for entry if no written objections to its accuracy or completeness are filed with the court clerk within 14 days after service of the notice. Unless an objection is filed within 14 days after service of the notice, an order for reinstatement of the case and entry of judgment shall be signed by the court and entered.
( i ) An objection must be verified and state with specificity the reasons that an order for reinstatement of the case and entry of judgment should not enter.
( ii ) If an objection is filed, the court shall set a hearing and serve notice of that hearing to all parties.
( iii ) This 14-day notice provision may be waived in cases filed pursuant to MCR 4.201 if such waiver is acknowledged in writing.
(3) For the purposes of any statute of limitation, an action conditionally dismissed under this rule is deemed to have been initiated on the date the original complaint was properly filed.
(4) All parties to a conditional dismissal bear the affirmative duty to inform the court with jurisdiction over that case of any change of address until the terms of the settlement agreement have been satisfied.” MCR 2.602(C) .
E. Wrongful Death Settlements
MCL 600.2922 governs wrongful death settlements. 7 The personal representative may request court approval of a settlement involving a claim of damages in a wrongful death action. MCL 600.2922(5) . In wrongful death cases, it must be determined whether there was conscious pain and suffering, a claim that is an asset of the probate estate, when the court is determining how the proceeds of a settlement will be distributed. MCL 600.2922(6)(d) .
Committee Tip:
The judge may wish to determine whether there is a probate estate and/or creditors before deciding whether there was pain and suffering. MCR 8.121 addresses permissible attorney contingency fee agreements in wrongful death cases.
F. Settlements for Minors and Legally Incapacitated Individuals
MCR 2.420 governs settlements for minors and legally incapacitated individuals. 8 A hearing must be conducted. MCR 2.420(B)(1) ; Bowden v Hutzel Hosp , 252 Mich App 566, 574-575 (2002). If a conflict of interest exists for the next friend, guardian, or conservator, the court must appoint a lawyer guardian ad litem for the party. MCR 2.420(B)(2) .
If a guardian or conservator has been appointed, he or she must be appointed before the settlement is approved, and the judgment must specify that the money is to be paid to that person. MCR 2.420(B)(3) . See also Bierlein v Schneider , 478 Mich 893 (2007). In addition, the trial court may not enter a judgment or dismissal until it receives written verification from the probate court “that it has passed on the sufficiency of the bond and the bond, if any, has been filed with the probate court.” MCR 2.420(B)(3) .
If a settlement for a minor involves an immediate payment to the minor that exceeds $5,000, or involves installment payments which exceed more than $5,000 during any single year of minority, the probate court must appoint a conservator prior to entry of the judgment or dismissal. MCR 2.420(B)(4) . “The court shall not enter the judgment or dismissal until it receives written verification . . . that the probate court has passed on the sufficiency of the bond of the conservator.” MCR 2.420(B)(4)(a) . 9
“If a settlement or judgment provides for the creation of a trust for the minor or legally incapacitated individual, the circuit court shall determine the amount to be paid to the trust, but the trust shall not be funded without prior approval of the trust by the probate court pursuant to notice to all interested persons and a hearing.” MCR 2.420(B)(5) .
G. Setting Aside Settlements
A settlement agreement is a contract and is “governed by the legal principles applicable to the construction and interpretation of contracts.” Walbridge Aldinger Co v Walcon Corp , 207 Mich App 566, 571 (1994). “As a general rule, settlement agreements are final and cannot be modified . . . because settlements are favored by the law, and therefore will not be set aside, except for fraud, mutual mistake, or duress.” Clark v Al-Amin , 309 Mich App 387, 395 (2015) (quotation marks and citation omitted). “A mutual mistake is an erroneous belief, which is shared and relied on by both parties, about a material fact that affects the substance of the transaction.” Id. (quotation marks and citation omitted). Where the plaintiff agreed to “a settlement that explicitly encompassed all PIP benefits incurred as of that date,” the plaintiff could not “void this universal, binding settlement by asserting that she and her lawyer were unaware of a . . . [PIP] benefit she had incurred several months before the settlement”; the plaintiff’s “unilateral lack of knowledge of the [additional medical] bill” was not a mutual mistake where “[the] plaintiff explicitly allege[d] that [the defendant] had knowledge of [the] charge . . . when it made the settlement agreement.” Id. at 388, 398-400.
“[S]ettlement agreements are binding until rescinded for cause. . . . [T]ender of consideration received is a condition precedent to the right to repudiate a contract of settlement.” Stefanac v Cranbrook Ed Comm (After Remand) , 435 Mich 155, 163 (1990). Additionally, a party “must tender the recited consideration before there is a right to repudiate [a] release.” Id. at 165. “The only recognized exceptions in Michigan are a waiver of the plaintiff’s duty by the defendant and fraud in the execution.” Id . “A valid tender of performance of agreement to pay money requires an actual offer to pay and an ability at the time of offer to pay the amount due. . . . Furthermore, the tender must be without stipulation or condition.” Swain v Kayko , 44 Mich App 496, 501 (1973) (internal citation omitted).
H. Disclosure of Settlement
“When there is no genuine dispute regarding either the existence of a release or a settlement between plaintiff and a codefendant or the amount to be deducted, the jury shall not be informed of the existence of a settlement or the amount paid, unless the parties stipulate otherwise.” Brewer v Payless Stations, Inc , 412 Mich 673, 679 (1982). 10 “Following the jury verdict, upon motion of the defendant, the court shall make the necessary calculation and find the amount by which the jury verdict will be reduced.” Id .
The trial court has discretion whether to disclose to the jury the existence of “high-low” settlements between the plaintiff and some defendants who remain in the case. Hashem v Les Stanford Oldsmobile, Inc , 266 Mich App 61, 85-86 (2005). “[T]he interest of fairness served by disclosure of the true alignment of the parties to the jury must be weighed against the countervailing interests in encouraging settlements and avoiding prejudice to the parties.” Id . at 86. “[T]he trial court has both the duty and the discretion to fashion procedures that ensure fairness to all the litigants in these situations.” Id .
I. Standard of Review
The trial court’s decision whether to permit a party to disavow a settlement is reviewed for an abuse of discretion. Groulx v Carlson , 176 Mich App 484, 493 (1989).
When reviewing the trial court’s decision involving the distribution of wrongful death proceeds, findings of fact are reviewed for clear error. Hoogewerf v Kovach , 185 Mich App 577, 579 (1990). The court’s distribution of the proceeds based on its findings is reviewed for an abuse of discretion. Id .
3 “[A]n attorney’s charging lien for fees may not be imposed upon the real estate of a client . . . unless (1) the parties have an express agreement providing for a lien, (2) the attorney obtains a judgment for the fees and follows the proper procedure for enforcing a judgment, or (3) special equitable circumstances exist to warrant imposition of a lien.” George , 201 Mich App at 478.
4 See Section 6.8(F) regarding settlements for minors and legally incapacitated individuals. See also the Michigan Judicial Institute’s checklist on settlements for minors and legally incapacitated individuals.
5 See Section 6.8(E) regarding wrongful death settlements. See also the Michigan Judicial Institute’s checklist on wrongful death settlements.
6 See the Michigan Judicial Institute’s Conditional Dismissal Flowchart .
7 See the Michigan Judicial Institute’s checklist on wrongful death settlements.
8 See the Michigan Judicial Institute’s checklist on settlements for minors and legally incapacitated individuals.
9 “If the settlement or judgment does not require payments of more than $5,000 to the minor in any single year, the money may be paid in accordance with the provisions of MCL 700.5102 .” MCR 2.420(B)(4)(b) .
10 See also the Michigan Judicial Institute’s Evidence Benchbook , Chapter 2, regarding the admissibility of settlements and settlement negotiations.
