What Does “Approved as to Form and Content” Really Mean in a Settlement Agreement? The California Supreme Court May Tell Us – Monster Energy v. Schechter.
The California Supreme Court has granted review in Monster Energy v. Schechter, an interesting case involving, in part, the meaning and binding-on-the-lawyer effect of the “Approved As to Form and Content” attorney signature line commonly found in California settlement agreements. The court’s eventual ruling in Monster Energy may lead to widespread reassessment of the inclusion of such signature lines in settlement agreements. Or it may not.
The facts of the case are pretty simple. The plaintiffs in an underlying case, represented by attorney Schechter, sued Monster Energy. That case settled. The plaintiffs and Monster Energy signed what appears to be a rather standard settlement agreement with broad release language and a confidentiality provision. The confidentiality provision stated that “Plaintiffs and their counsel agree that they will keep completely confidential all of the terms and conditions of this Settlement Agreement…” . The agreement was signed by the parties and included an “Approved as to Form and Content” line signed by the attorneys, including Schechter. Schechter was later interviewed by a reporter for a legal publication and, in the interview, made comments which Monster Energy alleged violated the confidentiality provision in the agreement.
Monster Energy sued Schechter and his law firm for breach of contract, breach of the implied covenant, unjust enrichment and promissory estoppel, asserting that Schechter was bound by, and had breached, the confidentiality provision of the settlement agreement. Schechter and his firm filed a SLAPP motion to strike under Code of Civil Procedure Section 425.16, asserting, in part, that Monster Energy could not establish the probability of prevailing under SLAPP Prong 2 because Schechter was not bound by the confidentiality provision. The trial court denied Schechter’s SLAPP motion as to the contract action but granted as to the other causes. As to the contract action, the trial court held that Monster Energy showed a probability of prevailing on the merits under SLAPP Prong 2 analysis because the settlement clearly contemplated counsel as being subject to the agreement because plaintiffs had the authority to execute the settlement agreement on behalf of their counsel and counsel signed the document. The trial court stated that Schechter’s “suggestion that he is not a party to the contract merely because he approved it as to form and content only is beyond reason.”
Schechter and the firm appealed. The Fourth District Court of Appeal in Monster Energy Co. v. Schechter (2018) 26 Cal App.5th 54 reversed and remanded, finding that the “Plaintiffs and their counsel agree…” language in the confidentiality provision was a “nullity” unless and until the attorneys consented to it and that the “Approved As to Form and Content” attorney signature line did not act as consent by the attorneys to the confidentiality provision. Thus, per the Fourth District opinion, Schechter was not bound by the confidentiality provision and could not have violated same with his interview comments.
Monster Energy petitioned the California Supreme Court for review. The court has granted review. One of two specific issues to be addressed in the review is:
When a settlement agreement contains confidentiality provisions that are explicitly binding on the parties and their attorneys and the attorneys sign the agreement under the legend “APPROVED AS TO FORM AND CONTENT,” have the attorneys consented to be bound by the confidentiality provisions?
What caught my attention about this case and the granting of review is that the “Approved as to Form and Content” signature line at issue is commonly used by, and signed by, by California attorneys settling cases. It is one of those things regularly included in settlement agreements because it has long been standard practice to do so and because it has been included in the form settlement agreements circulated around firms and amongst lawyers for years. Plus, the meaning of the “Approved as to Form and Content” attorney signature line has always seemed clear and self-evident. At least to me. It seemingly means only that the document has the attorney’s professional approval but does not reflect the attorney’s intent to be bound by the agreement. That is what the 4th DCA concluded in Monster Energy – the “Approved as to Form and Content” attorney signature line means only that the document has the “attorney’s professional thumb’s up”. Thus, it is quite interesting the Supreme Court wants to take a look at the meaning and binding-on-the-lawyer effect of this rather common attorney signature line in settlement agreements. This may very well turn out to be one of those cases where an Appellate or Supreme Court opinion causes California lawyers to reassess what has, for years and years, been standard practice.
Frankly, I have always shied away from “Approved as to Form and Content” lines in settlement agreements for a number of reasons. First, I have never really understood why I, as an attorney representing a party, need to acknowledge in writing that I have read and approved the form and content of an agreement that my client is signing. Inside my privileged relationship with my client, I have presumably made sure the client understands what he is signing to resolve a case. I have never really understood what the provision actually does. Further, most settlement agreements include integration clauses, and have a provision, or provisions, where the signing party affirmatively states she has read and understands the agreement, has had the opportunity to consult with an attorney concerning the terms and conditions of the agreement, and is freely entering into same. With such client representations, why is my approval as to form and content relevant or necessary? Further, adding the “Approved as to Form and Content” provision to an agreement, signed by counsel, would seemingly make it more difficult for the client to subsequently seek, through new counsel and where appropriate, to set aside the agreement for fraud, mistake, lack of consideration, …. etc. And, if the agreement were subsequently challenged, could my signature on an “Approved as to Form and Content” line make me a witness in such an action as to my understanding of the content and meaning of the agreement, as then-counsel for the signing party, and serve to waive my otherwise available work product privilege? To the detriment of my former client? I don’t know. It has always just to seemed to me that signing an “Approved as to Form and Content” provision could lead to a lot of unintended consequences and ethical problems if the settlement deal blew up and later ended in litigation. All for a provision usually included in the agreement not because it is a material, negotiated, term but because it has customarily been in such agreements.
Bottom line, signing the “Approved as to Form and Content” line has always seemed to me a weird thing to do, largely meaningless, and fraught with possible downstream unintended consequences. Others may perceive useful reasons for this provision – I really don’t. Perhaps a ruling in Monster Energy will serve to clarify the benefits and/or risks of such provisions, and lead to reassessment, one way or the other, of their use and inclusion in settlement agreements.
We shall see.
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