Sometimes there are no take-backs when it comes to release language in a settlement agreement.  That is essentially what the California Court of Appeal, Sixth Appellate District, announced today in its published decision, Rodriguez v. Takeshi Oto.  Plaintiff’s counsel will do well to read this opinion.  It just might influence the choice of language in your next settlement agreement.  Defense counsel, enjoy your brief moment in the sun.

Plaintiff appealed from the trial court’s decision to grant the defendants’ summary judgment thereby gutting plaintiff’s case.  A key issue on appeal was the question of how much evidence must a defendant present to establish a right to summary judgment under a global release by the plaintiff of “all persons” exposed to liability for his personal injuries.  Unfortunately for the plaintiff, the Court’s response was – Not much.

Plaintiff Heriberto Rodriguez’ car was struck by a car operated by defendant Takeshi Oto.  Unbeknownst to Rodriguez, Oto was driving from an event related to his employment with, “the deep pocket” (more on that later), a subsidiary of Toshiba America, Inc.  Oto rented the car he was driving from Hertz.  The rental was governed by an agreement between Hertz and Toshiba.  That agreement included a “liability protection override” obligating Hertz to “provide primary protection . . . for bodily injury or death up to a limit of $25,000 for each person” and to “indemnify, hold harmless, and defend [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][Toshiba] employee renters . . . and fellow employees who operate the car incidental to their business duties.”  The deep pocket just got deeper.

Rodriquez soon engaged counsel and some seven months later, he settled with Hertz for $25,000, the limit of its coverage for bodily injury or death.  As part of the settlement he extended a written release in favor of “Takeshi Oto and The hertz Corporation, its employees, agents, servants, successors, heirs, executors, administrators and all other persons, firms, corporations, association or partnerships.

Thereafter, Rodriguez filed a new action against Oto and “Toshiba America,” alleging that Oto injured Rodriguez through negligent operation of a vehicle, and that defendants, “and each of them,” negligently “owned, operated, used, drove, maintained, loaned and/or entrusted their motor vehicle,” so as to cause his injuries.  Not surprisingly, the Oto and Toshiba defendants asserted the release language as an affirmative defense and filed a summary judgment motion on that basis.  The trial court granted summary judgment finding that the undisputed evidence established that the release explicitly exonerated Oto from further liability and that it also extended to Toshiba.

On appeal, the Court noted that a contract is an agreement to do or not to do a certain thing.  As such it requires mutual assent.  It is fundamental, however, that there need not be a subjective meeting of the minds; in the absence of fraud, mistake, etc. . . ., the outward manifestation or expression of consent is controlling.  In other words, mutual consent is gathered from the reasonable meaning of the words and acts of the parties, and not from their unexpressed intentions or understanding.  In the absence of fraud, mistake, or other vitiating factor, a signature on a written contract is an objective manifestation of assent to the terms set forth there.  If the terms are unambiguous, there is ordinarily no occasion for additional evidence of the parties’ subjective intent.  Their actual intent, for purpose of contract law, is that to which they manifested assent by executing the agreement.

In the context of a third-party seeking the benefits of an agreement, the question is whether the parties to the agreement intended to confer enforceable rights on the party asserting them.  The governing substantive principle is that a nonparty who claims benefits under the contract is entitled to do so as song as the claimed benefit does not flow to him as a mere incident of the agreement, but is one the contracting parties intended to confer.

The rights of a third-party beneficiary thus depend upon the intent of the contracting parties.  Ascertaining this intent is a question of ordinary contract interpretation.  It follows that if the requisite intent appears unambiguously from the fact of the contract, the third-party makes a prima facie showing of entitled judgment merely by proving the contract, which is what Toshiba did with its summary judgment motion.  The Court noted that there are instances where it is appropriate to look beyond the four corners of the agreement, but that is generally limited to cases where performance of the contract may benefit the third-party but leaves open the question whether this is an intended object of the agreement, such that recognition of enforceable rights in the third-party is necessary to carry out the contracting parties’ intention.

Unfortunately for Rodriquez, the Court agreed with the trial court that the global release language was unambiguous and, summary judgment, was proper.  The practical effect of the Court’s decision is that Rodriguez is probably precluded from obtaining full compensation from the deep pocket, i.e., Toshiba.  I can think of a couple of legal theories that might have been viable for purposes of holding Toshiba responsible for satisfying all or a substantial portion of Rodriguez’ losses.  The potential argument that Hertz has an indemnity obligation, would sweeten the pot.  The severity, extent and value of Rodriguez’ injuries is unclear from the opinion, but obviously if his injuries were extensive, the outcome of the Court’s opinion is unfortunate.  $25,000 is rarely adequate for a car collision with moderate injuries.

This opinion serves as a reminder to us counsel that the release language in a settlement agreement is extremely important.  It deserves full attention and thought, which may be an inconvenience when the parties are attempting to pen the deal at 8:30 p.m. after 10 hours of mediation.  Counsel who represent plaintiffs, watch out.  Defense counsel, you know what to do.  Ask for a copy of that prior release agreement.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]