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Guidelines for Drafting Stipulations of Settlement
(Originally appeared in print as "Last-Minute Stipulations")
The overwhelming majority of cases filed in court each year never reach judicial resolution. Rather, most of the cases are settled by the parties long before the matter is placed in the hands of the judge or jury. Because most lawsuits and motions incident to those suits are determined by agreement of the parties, it behooves every member of the legal team to become proficient in drafting stipulations of settlement.
Unfortunately, most law and paralegal studies programs rarely teach students how to draft stipulations (generally referred to by lawyers and court personnel as “stips”). Also, it’s fairly common practice for a stipulation to be drafted in court at the exact moment the parties are forced to face each other during discovery, motion practice or on the eve of trial. In many instances, the litigation legal assistant who accompanies the attorney to the courthouse will be the one called on to draft the initial version of the stipulation on the spot for the attorney’s review. For this reason, every paralegal must be familiar with the standard format used by a majority of attorneys in settling cases.
The stipulation itself might take one of two forms: Either it’s signed off only by the parties or their attorneys and has the effect of an accord and satisfaction, or it’s “so ordered” by the presiding judge, giving the agreement the force of a court order. In either instance, the stipulation must be drafted in a sufficiently detailed manner in order to cover all points raised by the parties and provide remedies in the case of default. This article provides a basic stipulation format and standard clauses you can use as a guideline in drafting stipulations of settlement.
The top of the stipulation must contain the caption of the case that follows the exact wording as the caption appears on the official court documents. In certain instances, the caption might be amended during the litigation process, but unless the court itself has changed the caption on its official records, the stipulation must conform to the caption as it first appeared. Also, be sure to include the correct index number of the case.
Statement of Settlement
The opening statement of the stipulation should indicate the nature of the document and the reason for its existence. A standard opening might appear as follows:
The parties understand that each party has the right to a trial, the right to see a judge at any time, and the right not to enter into a stipulation of settlement. However, after a review of all the issues, the parties agree that they do not want to go to trial and instead agree to the following stipulation in settlement of the issues in this matter.
Note the above wording would be changed if the stipulation concerns a non-dispositive motion. In those instances, the stipulation could simply read:
It is agreed that the above matter is settled as follows:
Submission to Jurisdiction
To avoid a later challenge that the defendant was not properly served or the court lacks personal jurisdiction over the defendant, the stipulation should include a statement that the parties voluntarily agree to submit to the jurisdiction of the court. Without this agreement, the stipulation could prove to be worthless. For example:
Defendant(s) appear(s) in this action and consent(s) to the jurisdiction of the court, or waive(s) service of the summons and complaint and consent(s) to the jurisdiction of this court.
Statement of Claim
If the stipulation is intended to terminate the lawsuit, the parties must include a statement indicating that intention and specifying the manner in which the claims will be settled. Any matter not included in this statement will not be deemed part of the settlement agreement. Take careful note that the parties might agree to settle only a portion of the lawsuit by stipulation, leaving the unresolved issues for determination at a later date by the parties themselves or the trier of fact. A simple statement of the claim might be:
Defendant(s) acknowledge(s) the claim of plaintiff(s) as set forth in plaintiff’s complaint, and plaintiff(s) acknowledge(s) the counterclaims of defendant(s) as set for in defendant’s answer. The above action is hereby settled for the principal sum of ________, plus disbursements in the sum of ____________, and attorney’s fees in the amount of _______________, which [defendant(s), plaintiff(s)] agree(s) to make payments as follows:
Once the parties have agreed on the amount of the settlement, be sure to specify: 1) the amount of the payment; 2) the date and time of payment; and 3) the last payment date. Also, to avoid confusion, be sure to write out all numbers.
Specify if the payment should be made by personal check, money order, bank check or cash. If the payment will not be in cash, specify the payee of the check. Further, indicate the address to which the check is to be sent, and whether personal delivery is acceptable. Often payment will be made to the attorney rather than to the parties themselves.
Although most claims will be settled by monetary payments, in certain situations the parties require non-monetary actions, such as specific repairs to be made, transfer of documents or relinquishment of possession. In these instances, the drafter must be sure to detail each equitable remedy to which the parties have agreed, including all dates and times of performance and notice for completion of the contemplated action in question.
Default and Notice
Every time an agreement is created, the drafter should review the document to determine what would happen if one of the parties failed to fulfill his or her obligations. The agreement should provide for remedies in the case of a default.
The following is a representative clause that can be included in settlement stipulations, directed to the fact that the stipulation has come about incident to a lawsuit having been filed.
In the event of a default of any payment, [plaintiff, defendant] is authorized to enter judgment in [his, her, its] favor, if such default continues after ten (10) days written notice to the defaulting party by regular mail for the amount due as demanded in the [summons and complaint, answer], less any sum paid on account, together with interest, costs, disbursements and attorney’s fees.
Include a sentence indicating if the obligations under the stipulation are fulfilled, the performing party will receive a stipulation of discontinuance. This is a separate stipulation, filed with the court, which has the effect of having the action removed from the court records.
In this fashion the performing party will not have any adverse information appear in a court file, which could be used to influence his or her credit rating in the future.
Upon final payment, in accordance with the terms of this agreement, [defendant(s), plaintiff(s)] will receive a stipulation of discontinuance of this action.
The stipulation might have come about when a defendant appears for the first time after the plaintiff obtained a default judgment against him or her. As a result of that default judgment, the plaintiff was able to have the defendant’s bank account attached. In this instance, the stipulation should contain a clause for having the plaintiff release the defendant’s bank account either before or after the provisions of the stipulation have been fulfilled.
Also, the agreement might call for a vacatur of any earlier judgment, if so agreed to by the parties, or the parties might decide to keep that earlier judgment intact until the obligations under the stipulation are discharged.
Date and Signatures
It is very important to have the correct date indicated on every stipulation. This becomes especially important if the parties end up entering into multiple stipulations, which can happen when a party defaults. Rather than enter judgment, many times the parties will renegotiate a new stipulation. If the court is eventually called upon to determine whether or not there has in fact been a default, the court must know which specific stipulation’s provisions are being called into question.
Once completed, the stipulation must be signed by the parties’ attorneys and sometimes by the parties themselves. Make sure the signature lines indicate the capacity in which the person is signing, such as “Plaintiff’s Attorney” or “Defendant as President of Acme Corporation.”
Also, as stated at the outset of this article, if the parties wish to have the court’s imprimatur placed on the stipulation so it has the force of a judgment, it must be “so ordered” by a judge of the court. The stipulation then should have a line for the judge’s signature.
One last note: Always review and analyze the stipulation before submitting it to the attorney to make sure all points are covered and all potential problems have remedies indicated.
A stipulation of settlement is really no different from any other contract, except for the fact that many times it must be drafted at a moment’s notice in the hallways of a courthouse with a judge waiting to review the document. You should become familiar with the stipulations entered into by your attorney, and accompany him or her to court with a sample stipulation format (see “Sample Stipulation” on Page 67) that can be used to create a settlement agreement. This article can provide a useful tickler for those of you who must draft a stipulation with little or no warning.
Jeffrey A. Helewitz, Esq. received his J.D. and LL.M. degrees from Georgetown University Law Center and his M.B.A. (Finance) from New York University. He is the author of 20 legal texts, and more than a dozen legal articles covering a wide range of legal theory and practice. For many years he was an adjunct professor of Law and an Adjunct Professor of Paralegal Studies at various schools in the New York area, and is a mediator and an arbitrator. Currently, Helewitz is a court attorney to a New York City Court judge where he uses his negotiation skills on a daily basis.
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