Signatory Settlement Made Easy

Signatory settlement

hi I'm Stuart Clark and I'm Charlotte McGee and welcome to Hall in the States you were listening to episode number 571 hello Charlotte hello Stuart a first-time podcasting together.this and my first time podcasting ever welcome to the lovely world of Hull in the state's podcasting you're gonna become internet famous you're gonna walk down the street to go to hey that's that Charlotte McGee I saw her on the Internet yeah I was talking about the estates and stuff I know that's the dream that's really big well happy to be your first podcasting partner here and I guess on words with the with the show so today we're talking about kind of it's the content not doing the whole you know hey you're the case let's break it down this is more of an issue that comes up semi frequently in the states related matters and then the the basic issue is how do or how can you or can you in fact even bind non-signatories to a settlement now that sounds kind of boring and abstract but I'll kind of break it down to Weiss practic while I from a practical level this actually is an issue that comes up quite a bit so in a state litigation often there are lots of parties in the will right you could have dozens if you know of parties in a will not all of whom may theoretically actually participating in the litigation so if you are litigating this estate fight you're more often than not if you're the challenging party litigating it with either the estate trustee or a couple beneficiaries who are really engaged in the litigation with you but a lot of other people may not they may be disinterested they may say you know what I trust you guys you fight this thing out and maybe I'll come back later on but maybe not so that's fine if you're going away to the trial because the judge can say okay you know I decree X Y or Z and now you know now this is how the way all the cards are going to fall but most litigation now settles before you get to a trial because the trials are so expensive to get to so question is how can you bind those parties who are kind of disinterested or not participated in the Gatien to a settlement when a settlement at its core is basically a contract right a settlement is based okay we collectively agree to do X and you won't go to a judge and makes them decide well if everyone who has an interest in that pie it doesn't say yeah I'm cool with X can you do X right and the answer of course is well it depends yes but yes there are there are scenarios where you can play it out well and I think that the real crux to that you're identifying here is just because someone isn't interested in participating in the litigation doesn't necessarily mean that their interests wouldn't be affected by a potential settlement exactly right that's exactly right so I mean it's not hard to imagine a scenario where there are four Wizardry beneficiaries you're litigating with one of them but one of them is kind of often this distance not talking to you right if you're paying out a settlement to dependent to a will challenged person okay here's a lump sum check of a hundred grand that hundred grand unless you structured settlement only to be from the people who are participating is gonna take money out of the pie of the material beneficiary their interest is being affected by the settlement can you do that right and so the answer for the first one is well yes trustee act so the trustee acts and specific section 48 sub two of the trustee Act gives the broad power to the estate trustee to settle claims on behalf of the estate so if someone including someone you know dependent or a will Challenger but also in theory you know Visa Visa is suing you because you're the dead person owed them ten grand and they're willing to cut a deal for six grand right the state trustee under Section 48 two is allowed to settle and air quotes hear claims on behalf of the estate with those parties right and it binds the estate it binds everyone avoids all the beneficiaries and from the third party's perspective it's now a good settlement it is that that is all those required a settlement with the estate trustee right but there's a but if you're the estate trustee doing so is not necessarily completely without risk though the trustee acts as that mystery estate trousseau you can do this but that the South Bay only insulated clients from liability as relates to the beneficiaries in doing so if the settlement was ended in - and again air quotes here in good faith and so what second applies well what does that mean yes that's correct and so in in noting up this section prior to coming to this podcast I looked at a couple of cases and I think while good faith sometimes can be a bit of an amorphous concept the one thing that I found was that just because beneficiaries or you know potentially interested parties would disagree with the set that was being entered into doesn't necessarily mean that it's entered into in bad faith per se such that it wouldn't be you know protecting me estate trustee from liability so in the case the Theriot PGT and Roseanne Kowski estate yeah you know that was my best shot so please bear with me but the Court did note that while counsel maybe had not been had been objecting to it they presented no evidence that suggested that the settlement was actually made in bad faith and in kind of assessing that that court noticed that there had been logic behind the settlement and that it reflected a reasoned analysis of risk including the time that would have otherwise been required to resolve matters by support order and the cost of doing so so to me that just kind of suggests that it almost is a little bit of a common-sense thing that's this good faith concept and similarly in another case done in Dunn estate when the court was assessing whether or not the executives were able to enter into the settlement yet the speaking judge noted that the executives had carefully weighed the pros and cons of settling the litigation and had thus decided to settle so again it just kind of seems that it's sort of a so long as you're taking into account things in a kind of rational way but that could be connected to this yeah I mean that's exactly it but it is kind of a loose concept on a case by case basis and comes down to does this settlement make sense to Kanak you know a person look at that and go yeah I guess that yeah there was some risk there there was some cost of litigation associated you know what's the the State trustees rationale or reasoning behind interview if it's oh you know what this is gonna cost the estate a ton of money this is there's a little bit of risk here and I'm willing to cut a check for X dollars that probably makes sense if however it's you know heck the estate trustee may have messed up on something and really yet getting the settlement to save their own but yes maybe that's not good maybe the beneficiary is they go hey wait a second and if your beneficiaries do go hey wait a second it's often done later on on the capacity accounts they say wait a second what's that check for for two hundred thousand dollars I see they're in your accounts what was that you know I entered into a settlement don't worry about it but if you know they could try to end them unravel it but if was done in good faith and air quotes right you're cool beneficiary from them Jack but the court should in theory say you know what that was done a good-faith trustee excess you can do that benefices you're out of luck go away right but if it's not if the Court finds you know what that wasn't done in good faith the settlement could in theory on all and rabble and since the checks already left the barn door that when it's going away yeah and these states now down whatever the settlement was in theory the bennett of the estate trustee could be liable to the beneficiaries for that payment right which of course even if it had to - miniscule you know small small small percentage chance a lot of estate trustee is going Y the heck am i putting my neck out here on the line mm-hmm you know I'm entering a settlement yes maybe it makes the most sense to ask me what's the easiest way to kind of bind this estate to the settlement but I'm at risk here I want the beneficiaries to sign off on the settlement so they can't yell at me down the road right which is fine if the beneficiary they're all saying yeah cool we'll sign off but what if as we talked before you can't kind of heard all of the beneficiaries together to to the settlement are there other ways you combine these non-signatories or if these teachers who said you know what I'm not signing off at all you got you guys go rope the beneficiaries in so way - yeah which is coumba done in limited circumstances is if there's a minor or an incapable person who is not a signatory of the settlement you can use rule 7.08 procedure which provides that a settlement can be approved again air quotes on behalf of that incapable party by the court and the court literally steps into the shoes are being cabled the person they're supposed to ask hey you know is this settlement in the best interest again air quotes of the of the beneficiary or of the party who I'm proving to settle Miha behalf of and if yes then cool order goes proving on behalf of that party settlement now binds that party but if they say no it's not in the best interest then obviously they're not bound by the settlement right well and in that case - I like my understanding is that it's not even just that 7.08 is a permissive rule for the court put like permitting them to consent it would be required for a party under disability to have to have that settlement be approved by the court here 100% right so a settlement can't find a already unless the rule seven-point-eight his views and screwed on that the court I mean there's some the they're potentially if it's the trustee at the second to trustee I can was buying everyone and then in theory the the minor beneficiaries of the sue you state trustee saying that was a bad deal there but if it's a settlement that you're actually saying hey I want this approved on behalf of mine a beneficiary X Y or Z I want to bury it this right then in theory you need to go on a 7.8 and you need this consent of the court mm-hmm but 7.8 is only available if there's an incapable party you can't just do it because you know uncle Steve isn't willing to sign off on the agreement you can't go I want to prove this on behalf of uncle Steve right if your son incapable you're out of luck uncle Steve is 11 years older than does a minor or something to that effect but that's probably that fact scenario is not gonna we don't judge so um and this comes like I'm kind of pet peeve I suppose the pet peeve often things are thrown around always hero will just approve that sell them on behalf of everyone who's nice inventory and the word approve is kind of the rules up in 48 which is available with as I said before in very limited circumstances the court has no authority and they're under the rules to approve a settlement on behalf of someone who isn't incapable what you can do however potentially is then option 3 which is you can try to seek judgment in accordance with the settlement technically you're not settling or approving rather the claim on behalf of anyone but rather you're going back to court saying okay we have a settlement everyone hasn't signed off on this but we think it's a good deal can you please issue a judgment in accordance with the terms of the settlement if the court says yes and then you basically rebroadcasting the settlement as a as a as a court order and since a court order binds you know the universe you're cool again and you've now bound these parties who are signatories this is this whole process is a little bit you know vague we'll call it there's no rule that allows you to do this there's no statute that kind of contemplates this approval on behalf you know or judgment in accordance with the settlement but you often see it brought up as it's a common-sense way to to kind of push a settlement through if the estate trustee isn't willing to buy in the estate or a third novel set of circumstances where you need to kind of rope in parties who might not be willing to consent to it and that's kind of it so I I've seen it done a couple ways you often see if you think you're gonna have this problem down the road i'ii not be able to group with rope and all the beneficiaries at the earliest stage we've been getting the order given directions at the first attendance you could in theory build into the order something like you know look any settlement reached on mediation there's gonna be conditional upon you later getting judgment in the courts with the settlement and you can even spell out you know kind of some some cheats but some ways to make it easier for you even saying look we don't have to give notice in writing or by mail rabb we don't have to actually physically go out and personally serve you again right you can contemplate how expansive the class of people have to serve is but the basic concept here look we can go out to the you know we can we get the settlement with the people who are participating if the state trustee isn't going to bind the whole estate under forty to forty eight of the trustee act we then get this judgment rebroadcasting it and i I personally think it has to be brought on notice twelve beneficiary so affected by all parties I should say who are affected by it some people have said you know what you give up your right to to complain if you don't file most of appearance and I can see some rationale there but the safest route at least from my own first perspective is serve the people who are affected by it and if they don't say anything in judgment gets issued well hey cool we've now bound you to it we've now bound you to a judgement yes yes no I agree with that I definitely do it and I think it would be interesting to try to wrap that up without putting the beneficiaries on there I think I've seen McDon a couple times again this is not what I like to do but I've see I've seen people build into their orders basically they will say you know hey the price later ten mediation on XY stage you know here's the mediator and by the way any settlement reached at mediation shall bind the interests of any beneficiaries who are not signatories now I've seen that judgment that order rather be issued right I personally have a little bit of issue with it because I at least questioned whether or not the court complete empty almost prove or to give judgment and forth with a settlement that hasn't even been reached yet right because there's element hasn't been done yet the mediation hasn't happened and and where you don't even at least you know put it under the nose of the people who could be affected say hey did you have any issues with this I've seen it done maybe they get held up I don't know but the safest route would probably be to serve and one would there ever be some sort of a scenario where the beneficiaries would see that sort of language use do you think hey wait a minute I'm not would incite them potentially to get involved maybe I mean who knows your your course assuming that people pay that much attention to stuff that you know comes in the mail yeah often you often see the same thing these orders off and CEO you know this order must be served on all parties by mail and that kind of stuff that's why you're doing that you're doing that so that you said you can't say hey guys we're telling you about this process here if you want to jump in now now's the time yeah they don't do that and judgment eventually gets issued in accordance with the settlement I mean I think they'd be an argue that they they're bound but I said the safest route is a bit hey guys we got a settlement this is it yeah we're gonna get judgment accordance with this so these are just this is what's going up so no that's very fair and that's basically it so yes there are ways haha magic ways to bind non-signatories to a settlement in going to the trustee ex and come on estate trustee this is a good deal put your neck on the line a bit and you know enter it in the contract if they're a minor or capable beneficiary one to seven point eight or as a broad kind of catch-all you just get judgment of course the settlement and hopefully if it's done you bind called non-signatories so huzzah there are ways to bind non-signatories to a settlement we have solved all of the world's problems Charlotte it has been a pleasure thank you for doing your first podcast with with me today and that concludes our podcast so again want to thank you for listening I'm Stuart Clark and I'm Charlotte McGee and should you have any questions please email us at webmaster at Pelham holcom or leave a comment on our blog thank you very much