Enforceability of settlement agreements requiring court or agency approval.

The  Court of Appeals ruled that even though the parties had agreed to the terms of a settlement, because those terms were never put into writing and submitted to a tribunal for approval, that the settlement was not enforceable, and that essentially that the parties could back out of their settlement agreement.

This case arose in the industrial commission as a workers compensation case, which requires approval by the agency in order to be binding. In King v. Pike Electric (February 19, 2019), the employee was injured on the job and filed a workers compensation claim. He filed suit against the employer and also against an insurance company called Fireman's Fund. The parties reached an agreement through emails and then filed a joint motion to stay the proceedings which detailed the terms of the settlement. Following this, Fireman's Fund backed out of the settlement on the basis that it was not the proper insurance company, which should have been a company called Fireman's Insurance. The worker took the position that the parties had reached a binding settlement such that Fireman's Fund could not back out of the settlement agreement. The Industrial Commission rejected this argument, and the worker appealed to the North Carolina Court of Appeals.

The Court of Appeals concluded affirmed the Industrial Commission and concluded that the agreement was not enforceable, stating that the documents did not contain the terms required to form and enforceable agreement. It appears, however, that the only shortcoming of the settlement was that the parties did not draft a compromise settlement agreement for the industrial commission to approve.

The opinion, which is unpublished, he is a little bit difficult to decipher. It seems to mean, however, that the parties did not have an enforceable agreement, notwithstanding a chain of emails which would indicate that the parties had agreed on the terms of a settlement, and had asked the tribunal to stay the proceedings so that the parties could submit the settlement agreement to the tribunal.

In this author's opinion, this is a somewhat peculiar holding. The case is, however, an unusual fact pattern. This author has done extensive research in the area of minors settlements in North Carolina, and around the country. In the context of a minor's settlement, there was a case in which the parties agreed to a settlement, pending approval by the court, which is generally required of minors settlements to make them enforceable. Before the parties could get court approval, the case took a significant turn in favor of the minor, who then sought to rescind the settlement agreement, primarily based on the fact that the settlement had not yet been approved. A supreme court in another jurisdiction ruled that the settlement was in fact enforceable, notwithstanding that it had not yet been approved by the court. The court created a rule that such a settlement, requiring court approval, is binding for a reasonable period of time pending review before a tribunal for approval. This rule appears to make much more sense, and gives all parties much greater predictability and reaching settlements. Under the holding of this unpublished case of King v. Pike Electric, parties to a worker's compensation settlement could, for example, enter an agreement and then rescind the agreement prior to approval by the Industrial Commission. (One interpretation of the opinion would be that the mere act of submitting the settlement proposed settlement to the Industrial Commission is sufficient to make a binding contract, but this is not at all clear from the opinion.)

I have been involved in several cases pertaining to the enforceability of a settlement agreement, and the appeal of this type of decision to the North Carolina Court of Appeals. If you have been involved in a similar dispute, you may contact me for a consultation.


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