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BarJournal BUSINESS LITIGATION

JULY/AUGUST 2015
FEATURE What Happens When Undisclosed
Settlement Agreements

Information Comes to Light

BY JOSEPH S. SIMMS & MALLORY A. ROHR

hio courts treat settlement no meeting of the minds. However, the Such information could be the basis for a
agreements as binding Court ruled that email communications defense of fraudulent inducement or a mutual
contracts that are governed between the parties clearly reflected an offer mistake between the parties, and the same
by the law of contracts. and acceptance. In those communications, result (enforcement of the agreement) may
OLike other contracts, the parties agreed to mutually dismiss their not obtain when fraud or mutual mistake
in order to be enforceable, a settlement claims against each other and bear their is shown. Indeed, the law recognizes that
agreement requires an offer, acceptance and own costs. While there was no written settlement agreements are subject to these
consideration. When a dispute arises, courts agreement formulated, their agreement standard contract defenses when one party
must give effect to the contract’s express terms was not predicated on the fact it was to be seeks to enforce or asserts a breach.
in determining the rights and responsibilities memorialized in writing before it became Among other things, a settlement is not
of the parties. Insofar as courts are guided by officially binding. The Court stated that enforceable when it is procured by fraud,
an overriding objective to conserve judicial “once there is a meeting of the minds as meaning there was a false representation or
resources and resolve disputes efficiently and to the essential terms for the settlement omission of a material fact that is reasonably
economically, courts tend to refrain from agreement, a party cannot refuse to proceed relied upon by the other party to his or
injecting themselves into parties’ efforts to due to a mere change of mind.” Mack v. her detriment. Additionally, a settlement
resolve their own disputes. Generally, courts Polson Rubber Co., 14 Ohio St.3d 34, 36, 470 agreement can be voided when it arises as a
are loath to set aside settlements and will N.E.2d 902 (1984). Therefore, the contract result of a mutual mistake. In situations where
enforce them unless there are proper defenses. defenses were unsuccessful in this case and fraud or mutual mistake is alleged, evidence
In a recent Ohio Court of Appeals the Court upheld the trial court’s decision is admissible to demonstrate the contract
decision, the Court did just that when it to enforce the settlement agreement. was procured by fraud or resulted from a
enforced a settlement agreement that one Turoczy Bonding Co. is distinguishable mutual misunderstanding. These defenses to
of the parties sought to avoid. In Turoczy from other cases in which settlement enforcement proceedings can also serve as the
Bonding Co. v. Mitchell, 2018-Ohio- agreements were rendered unenforceable basis for an affirmative action for rescission of
3173, 2018 Ohio App. LEXIS 3467, 2018 due to a contract defense such as fraud or the agreement, or a motion to vacate, void, or
WL 3815057, appellee Turoczy Bonding mutual misunderstanding. In Turoczy Bonding set aside the agreement.
Company sought to enforce a settlement Co., appellant Mitchell simply had a change Under Ohio law, a contract procured by
agreement that appellant Donnell Mitchell of heart, but he had no valid defenses to fraud may be rescinded. Micrel, Inc. v. TRW,
argued was against public policy and thus the enforceability of the settlement. Since a Inc., 486 F.3d 866, 873, 2007 U.S. App. LEXIS
unenforceable. Specifically, Mitchell argued contract had been formed, the court enforced 10512 (6th Cir.). “At common law, a party who
the settlement was unenforceable because the terms. However, that is not always the is fraudulently induced to enter into a contract
the terms of the alleged settlement were case when a settlement has been reached has the option of either rescinding the contract
indefinite as well as unclear and there was and subsequent information comes to light. or suing for damages pursuant to the terms of
the contract.” See Rolling v. Ohio State Home
Servs. (July 14, 1993), Medina App. No. 2157,
LITIGATION & LIABILITY 1993 WL 261568.
Berryhill v. Khouri, 2014-Ohio-5041, 2014
MANAGEMENT, LLC Ohio App. LEXIS 4911, 2014 WL 6065864, is
an example of a case in which a settlement was
Litigation Consulting unenforceable due to fraudulent inducement.
Forensic Accounting In Berryhill, appellees filed a motion for relief
from the settlement agreement asserting
Expert Witnesses that the settlement was premised upon
Berryhill’s fraudulent representations as to
his collectability. Months after the settlement
“Small Firm Value, www.llmconsult.com agreement was signed, evidence came to light
(440) 498-0171
that Berryhill had assets and income that were
Big Firm Benefits” info@llmconsult.com previously undisclosed and, in fact, did not
lack the funds to satisfy a judgment. The Court
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