Legal Question in Civil Litigation in California

Re: Can I still be sued?

Check with a tax attorney regarding your requirement to with hold taxes if a social security number is not provided. I disagree with the others on two counts. First how can you submitt a 1099 if you do not have the social security numbers of the recipients. Second all insurance companies will not pay a claim unless a social security number is provided by the person receiving the money.

Re: Can I still be sued?

You certainly can be sued, but the key question is who will win.

Your agreement required you to hand over $8,000. Instead, it seems you handed over less than $8,000. Sounds to me like a breach of the agreement.

If your settlement had tax implications, you should have included language in the agreement about how to resolve them. Instead, you have decided to unilaterally modify the terms of the agreement after the fact, and are satisfying your tax obligation by keeping money you agreed to pay over to him. The result is that you are trying to force the plaintiff to accept a deal which is different from the one he made with you.

Had you told the plaintiff beforehand that you planned to withhold taxes from the payment and issue a 1099, he might have rejected the deal or insisted on a larger settlement amount to offset the deduction. You have no way of knowing what terms he would have accepted, but that is the point -- the deal you made is different from the one you are imposing upon him, you can't force him to accept a lesser payment than the one he agreed to accept.

The plaintiff has his tax problems to deal with and you have yours, but you have chosen to solve yours by keeping money you had already agreed to give to him. His tax problems are not your concern and your tax problems are not his, but by withholding part of the payment you have forced your problems upon him.

I believe he has a good case against you. And while the dollar amount may seem small, chances are that the settlement agreement includes a clause which says the winner of any lawsuit brought to enforce the settlement agreement is entitled to collect attorney fees from the loser.

Finally, it probably doesn't matter what "the State agency which monitored the mediation" thinks. If he sues you a judge will decide which of you is right, and her decision will not be limited by the opinion of a state agency.

Re: Can I still be sued?

I thought 1099 by definition let's them pay their own taxes. You are about to get sued, I think. Did the agreement include attorney's fees for enforcement? If so, they may get those from you too.

Re: Can I still be sued?

Sounds like the best bet is to pay the difference, and give him a 1099 (and forward a copy to the IRS, as required).

Re: Can I still be sued?

You should 1099 but you should not deduct taxes.

Re: Can I still be sued?

Afraid I need to agree with co-counsel here. You made a major blunder by not paying the amount called for in the Settlement Agreement and may be liable for damages, attorney fees, a continuation of the lawsuit with credit for payments made, who knows what else (you have the Settlement Agreement).

Send them the difference and a 10-99, then the tax is their problem to deal with. Bogus discrimination suits for quick payments are a pain in the butt but don't take them lightly, Courts are somewhat unpredictable in how they rule on discrimination actions, but are notorious for their dislike towards those who back out of Settlement Agreements.

If the "State agency which monitored the mediation" complains, tell them to look to the other party as you issued a 10-99 for the payment.

Good Luck!