Defendant Failed to Include a Waiver of Fees and Costs in the Settlement Agreement, Which Meant Fee Shifting Statute Allowed for Later Fee Motion.
Here is a good one that reinforces an important lesson: when you settle, include a waiver of fees and costs in the settlement agreement. Without it, you may have additional and unexpected fee exposure, as the defendant learned in the next case we review.
In Gonzalez v GMP Plating, Inc., Case No. H035537 (6th Dist. Feb. 23, 2011) (unpublished), defendant settled a wage hour minimum wage/overtime dispute for $10,000 (in a check made out only to the plaintiff, not plaintiff and his attorney), including a handwritten, Spanish-framed settlement statement in front that indicated the check was a settlement of all present and future claims, but with the statement not including an express waiver of fees and costs. The rub is that Labor Code section 1194 was a one-way fee shifting clause allowing prevailing plaintiff employees the right to recoup fees in minimum wage and/or overtime compensation cases. (Bell v. Farmer’s Ins. Exchange, 87 Cal.App.4th 805, 829 (2001).) Defendant sent a formal written settlement agreement later with a fees/costs waiver, but plaintiff refused to sign. Defendant then moved to enforce the settlement under CCP § 664.6, which was granted but with the reservation that plaintiff could move for fees and costs! Plaintiff then brought a motion, with defendant protesting much–defendant thought plaintiff had waived any fees/costs claim. Nope, said the trial court, no waiver, so plaintiff should be awarded fees and costs totaling $8,530.00.
Defendant appealed.
Defendant lost in a 3-0 decision authored by Justice Bamattre-Manoukian.
The reason? Defendant should have included a waiver of fees/costs in the handwritten settlement agreement; the silence on this issue meant plaintiff could move for fee recovery under the one-way Labor Code statute. (Folsom v. Butte County Assn. of Governments, 32 Cal.3d 668, 671, 677 (1982).) It found distinguishable defense reliance on Vaillette v. Fireman’s Fund Ins. Co., 18 Cal.App.4th 680, 689 (1993), where a fees/costs waiver was found by necessary implication given “I will not execute on judgment” language. Here, by contrast, the agreement was silent on the subject, so exposure did lie.
Defendant also challenged the reasonableness of the fee award, but the record showed that the lower court had applied the lodestar analysis and made some adjustments from work being claimed in the fee proceeding. It also was reasonable because plaintiff’s attorney did not move to recoup all his hours and did not ask for “fees on fees” (i.e., the time spent on bring the fees motion).
BLOG UNDERVIEW–In dicta, the appellate court suggested that had the check been made out to both plaintiff and plaintiff’s attorney, an inference might have been drawn that the settlement was meant to encompass a waiver of fees and costs. So, the real lessons are two in number: include an express waiver and have the check made jointly payable to client/attorney.