Legal Question in Civil Litigation in California
Settlement offers; contracts against; valid
Is it legal for a non-party to a lawsuit to contract with a party to prohibit the party from settling a lawsuit? The settlement is a good faith offer which both parties agree to, except for the third party interloper's contract to prohibit one party from settling without the permission of the third party interloper. The third party interloper wants to but the subject matter of the lawsuit at a "fire sale" price to the detriment of the non-contracting party.
Is there a public policy in favor of parties settling lawsuits?
Any ideas on the legality? Any cases or precedents or statutes I can acquire would be greatly appreaciated.
Thank you.
2 Answers from Attorneys
Re: Settlement offers; contracts against; valid
There are often provisions in insurance policies or indemnity
agreements preventing a party from settling a lawsuit without the
consent of another party (the insurance company or the indemnitor). Since
these provisions relate to valid interests of the contracting party, they
would not seem to violate law or public policy, even in light of the
strong policy to settle cases.
However, a breach of contract is not criminal. You should investigate whether
completing the settlement is in the best interests of the parties, extending the
analysis to see what the effect is on the protesting party. The damages to the
protesting party, if any, or potential relief from the duty to indemnify or insure,
may be less than the benefits gained by settlement.
If, as your question indicates, the protesting party is put at a "detriment", they may have
a valid reason or right to protest and sue or be relieved of liability.
Re: Settlement offers; contracts against; valid
As i understand the facts, there would be no violation of law or public policy.
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