CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2723

Author:(Chiu)

As Amended Ver:August 20, 2020

Majority vote

SUMMARY:

Permits attorneys and other designated agents of an insurance company to sign agreements to settle litigation on the behalf of clients. Specifically, this bill:

1. Defines "party" for the purpose of entering into a written stipulation for the settlement of a legal case, or part thereof, to include the following:
   1. The named party to the action;
   2. An attorney who represents the named party; or
   3. An authorized agent of an insurance company involved in the action, so long as the agent is authorized in writing to sign the written stipulation on the insurance company's behalf.

The Senate Amendments:

1. Provide that the provisions of this bill do not apply to settlements involving civil harassment actions, any action brought pursuant to the Family Code, any action brought pursuant to the Probate Code, or a matter that is being adjudicated in a juvenile court or a dependency court, thereby requiring the party to sign the written stipulation.
2. Provide that in addition to any available civil remedies, an attorney who signs a writing on behalf of a party without the party's express authorization is, absent good cause, subject to professional discipline.

COMMENTS:

Seeking to streamline the settlement process, and ensure judgments can be processed in a more timely manner, this bill permits attorneys or other authorized agents to sign a stipulation to enter into a court judgment in accordance with the terms of the settlement.

Represented parties do not always participate in the day-to-day aspects of litigation. One of the primary benefits of retaining legal counsel when faced with potential litigation is the ability to outsource many of the day-to-day aspects of pursuing legal claims to trained professionals. However, when a client maintains their normal life while their legal representatives litigate potential claims, the author and proponents of this measure note that it can be difficult, at times, for attorneys to subsequently reach clients in order for the client to sign and authorize various legal documents. For example, many of the documents propounded by parties during discovery are drafted and compiled by hired counsel and not the individual party to a case. Yet, such documents must frequently be signed and approved by the named party to the action prior to being transmitted to the opposing party, thus necessitating the attorney and their staff to reach out to the client to obtain the signature. Obtaining such signatures can be particularly difficult in litigation involving businesses where those authorized to sign legal documents for the company may be scattered across the county and frequently traveling as a part of the day-to-day operations of the business. Similar issues arise if a client takes a vacation without informing counsel or otherwise disengages from the process.

Similar to discovery, client signatures must be obtained in order for an out-of-court settlement agreement to be formally entered into judgment. In the event a client is not physically present during the negotiation, even if the client authorizes the settlement remotely, delays arise if the client cannot quickly affix the proper signatures to the settlement agreements. This circumstance frequently arises when a party to a case is an insurance company and authority is required for the company to agree to the proposed settlement. Depending on the circumstances involving clients these delays can range from hours to days before a settlement can be entered and the aggrieved party provided the final judgment.

This bill. Seeking to ensure that out-of-court settlements can be properly submitted to judgment in a timely manner, this bill expands the scope of persons authorized to sign a settlement agreement. This bill would provide that, in addition to the client, a client's attorney may sign to authorize a settlement agreement on the client's behalf. Furthermore, recognizing that in many cases involving insurance claims, insurance adjusters frequently participate in settlement negotiations on their employer's behalf, this bill would also authorize agents of an insurance company to sign a settlement agreement on the company's behalf, so long as that person was previously authorized to do so in writing. The author and proponents of this measure suggest that enabling individuals who are actively negotiating settlement agreements to sign on a client's behalf will increase efficiencies within the civil litigation process by eliminating the need for settlement agreements to be transmitted to their clients for signature, particularly corporate clients that may be physically distant from the location in which the litigation and settlement negotiations are taking place.

Furthermore, this bill recognizes that not all civil actions are alike. While this bill streamlines traditional tort litigation settlements, this bill recognizes that certain cases may not be suitable for settlement without the express involvement of the parties. Accordingly, this bill does not apply to any apply to settlements involving civil harassment actions, any action brought pursuant to the Family Code, any action brought pursuant to the Probate Code, or a matter that is being adjudicated in a juvenile court or a dependency court, thereby requiring the party to sign the written stipulation.

Scope of agency to sign on a client's behalf. Existing law vests significant authority in attorneys and other authorized agents. Particularly as it relates to attorneys, the existing law also places significant restrictions on the scope of the attorney's representation of their client. Both the Business and Professions Code and the California Rules of Professional Conduct require attorneys to act in accordance with their client's wishes, avoid self-dealing, and maintain the client's best interest at all times. Accordingly, should attorneys be authorized to sign settlement agreements on the behalf of their client in accordance with this bill, an attorney doing so without consulting their client or in a manner detrimental to their client would almost certainly be subject to professional discipline by the State Bar of California.

However, unlike attorneys, there is no statewide body specifically tasked with overseeing those with granted authority to another's conduct affairs via agency relationships. While there are legal remedies for persons aggrieved by agents who act outside the scope of agency, there are fewer constraints on agents. Furthermore, the types of relationships granting a person agency far expand the professional context of an attorney and their client. The proponents of this bill note that including an agent as a person authorized to sign on behalf of a party to a settlement is designed to encompass insurance company employees, including claims adjusters and others participating in the settlement negotiation, thus this bill limits the type of agents authorized to sign on an insurance company's behalf. Recent amendments provide that no other agency relationship, outside the attorney-client context, may sign on a parties behalf. The approach appears prudent, indeed, permitting these parties to sign a settlement agreement on behalf of the company would streamline the settlement process. Furthermore, such parties would appear to be properly restrained from entering into an agreement detrimental to their employer, as such an agent would likely be terminated by the insurance company should they behave in a manner exceeding their authority.

According to the Author:

Attorneys act on behalf of their clients during the mediation and settlement process, oftentimes without their clients present. However, under current law attorneys and adjusters who come to an agreement in mediation without their clients physically present cannot enforce the settlements reached until they get their clients' signature, adding an extra and unnecessary step to the settlement process.

Because attorneys act on behalf of their clients during the mediation and settlement process, they should also be able to enter into enforceable settlements during mediation on behalf of their clients.

Arguments in Support:

This bill is jointly sponsored by the Consumer Attorneys of California and California Defense Counsel who see the benefit of streamlining the settlement process by permitting various agents to sign settlement agreements on their client's behalf. Writing in support, the California Defense Counsel states the benefit of enabling attorneys to sign on their client's behalf:

Attorneys act on behalf of their clients during the mediation and settlement process, and they should also be able to enter into enforceable settlements during mediation on behalf of their clients. This saves time and money for clients who do not have to agree to a settlement in person, in addition to increasing judicial efficiency.

Arguments in Opposition:

None on file

FISCAL COMMENTS:

None

VOTES:

ASM JUDICIARY: 10-0-1

YES: Mark Stone, Gallagher, Chau, Chiu, Gonzalez, Holden, Kiley, Maienschein, Obernolte, Reyes

ABS, ABST OR NV: Kalra

ASSEMBLY FLOOR: 75-0-4

YES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Megan Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager, Kiley, Lackey, Levine, Limón, Low, Mathis, Mayes, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Obernolte, Patterson, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wood, Rendon

ABS, ABST OR NV: Diep, Maienschein, Quirk, Wicks

SENATE FLOOR: 39-0-1

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dahle, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Leyva, McGuire, Melendez, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener, Wilk

ABS, ABST OR NV: Jones

UPDATED:

VERSION: August 20, 2020

CONSULTANT: Nicholas Liedtke / JUD. / (916) 319-2334 FN: 0003413

 CONSENT  

Bill No: AB 2723

Author: Chiu (D)

Amended: 8/20/20 in Senate

Vote: 21

SENATE JUDICIARY COMMITTEE: 9-0, 8/18/20

AYES: Jackson, Borgeas, Durazo, Lena Gonzalez, Melendez, Monning, Stern, Umberg, Wieckowski

ASSEMBLY FLOOR: 75-0, 5/26/20 (Consent) - See last page for vote

SUBJECT: Civil actions: entry of judgment: written stipulation

SOURCE: Consumer Attorneys of California

DIGEST:

This bill authorizes attorneys or agents of insurers to stipulate to settlements on behalf of the parties they represent, as specified.

ANALYSIS:

Existing law:

1. Provides that, if parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement. (Code Civ. Proc. § 664.6.)
2. Authorizes the court, if requested by the parties, to retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement. (Code Civ. Proc. § 664.6.)
3. Requires that, when trial by jury has been had, judgment be entered by the clerk, in conformity to the verdict within 24 hours after the rendition of the verdict, whether or not a motion for judgment notwithstanding the verdict be pending, unless the court orders the case to be reserved for argument or further consideration, or grants a stay of proceedings. (Code Civ. Proc. § 664.)
4. Requires that, if the trial has been had by the court, judgment must be entered by the clerk, in conformity to the decision of the court, immediately upon the filing of such decision. It further provides that a judgment is not effectual for any purpose until entered. (Code Civ. Proc. § 664.)
5. Defines an agent as one who represents another, called the principal, in dealings with third persons. Such representation is called agency. (Civ. Code § 2295.)
6. Permits an agent to be authorized to do any acts which his principal might do, except those to which the latter is bound to give his personal attention. (Civ. Code § 2304.)
7. Empowers an agent with the authority to do everything necessary or proper and usual, in the ordinary course of business, for effecting the purpose of his agency; and to make a representation respecting any matter of fact, not including the terms of his authority, but upon which his right to use his authority depends, and the truth of which cannot be determined by the use of reasonable diligence on the part of the person to whom the representation is made. (Civ. Code § 2319.)

This bill:

1. Authorizes an attorney representing a party or an agent of an insurer, where the insurer is a party, to stipulate in writing on behalf of the party they represent to the terms of a settlement.
2. Provides that this change does not apply to civil harassment actions, actions brought under the Family Code, any action brought under the Probate Code, or any matter that is being adjudicated in a juvenile or dependency court.
3. Provides that, in addition to any available civil remedies, an attorney who signs a writing on behalf of a party without the party’s express authorization shall, absent good cause, be subject to professional discipline.

Background

Section 664.6 of the Code of Civil Procedure (Section 664.6) authorizes courts to enter judgment pursuant to the terms of a settlement stipulated to by the parties to a civil action. Upon request by the parties, courts are authorized to retain jurisdiction over those parties in the event the court is needed to enforce the terms of such a settlement until full performance.

Currently the parties themselves must stipulate in writing or orally before the court to the terms of the settlement. This bill authorizes attorneys, on behalf of their clients, and the agents of insurers, on behalf of the insurer, to so stipulate in certain civil cases. This bill trades some procedural protections for efficiencies in the judicial system, but makes clear that an attorney who signs the writing on behalf of a party without the party’s express authorization shall be subject to professional discipline absent good cause.

This bill is sponsored by the Consumer Attorneys of California and supported by the California Defense Counsel. There is currently no known opposition.

Comments

Amending the Process for Conditional Settlements

Current law prescribes the manner of giving and entering judgment in civil actions. (Code Civ. Proc. § 664 et seq.) It lays out processes for entering judgment specific to whether a trial is had by a jury or by the court. It also lays out the process for when judgment comes pursuant to terms of a settlement agreed to by the parties.

Currently parties can stipulate in a writing signed by the parties or orally before the court for settlement of civil matters and request the court enter judgment pursuant thereto. (§ 664.6.) The parties can further request that the court retain jurisdiction over them, enabling the court to enforce the settlement until its terms have been fully satisfied.

The California Supreme Court has detailed the history behind Section 664.6:

Section 664.6 was enacted in 1981. As this court noted recently . . . , prior to 1981 the Courts of Appeal had expressed conflicting views concerning the proper procedures to enforce settlement agreements in pending litigation.

Under one line of authority, settlement agreements preceding the enactment of section 664.6 in 1981 could be enforced only by a motion for summary judgment, a separate suit in equity, or an amendment to the pleadings. This became the dominant view. It was based on the theory that nonstatutory motions to enforce settlements were motions based on facts outside the pleadings and, under this court's decisions had to be treated as motions for summary judgment that could be granted only if all of the papers submitted showed there was no triable issue of fact.

A second line of authority permitted motions to enforce settlements based on facts outside the pleadings if the fact of settlement and the terms of the settlement were not subject to reasonable dispute. The theory underlying this approach was that the statutory means of enforcing settlements by motions for summary judgment, separate suits in equity, or amendments to pleadings were inadequate, and that a court therefore must have authority to enforce settlements as a means of controlling proceedings before the court and protecting the interests of the parties.

The conflict was resolved in 1981 when the Legislature enacted section 664.6, which created a summary, expedited procedure to enforce settlement agreements when certain requirements that decrease the likelihood of misunderstandings are met.

(Levy v. Superior Court (1995) 10 Cal. 4th 578, 584-586, internal citations omitted.)

Delegating Authority to Settle Cases on Behalf of the Parties

Principles of efficiency and economy promote the settlement of civil disputes by the parties, involving the court and expending its resources only where absolutely needed. This bill seeks to streamline the procedure provided for in Section 664.6 by explicitly granting the authority to stipulate to settlements to attorneys, on behalf of the parties they represent, and to agents of insurers, where the insurer is a party to the settlement. However, this removes the existing procedural protection requiring more direct client involvement.

Currently, Section 664.6 requires that the parties must stipulate to the settlement underlying the motion. The California Supreme Court specifically addressed the issue of whether motions pursuant to Section 664.6 require the signature (or oral testimony) of the parties themselves, concluding that they do. As indicated in the quote above, the court found that the expedited procedure provided for by Section 664.6 required certain protective measures to “decrease the likelihood of misunderstandings.” The court held that the “parties” had to “stipulate in writing or orally before the court that they have settled the case.”

The Supreme Court specifically extolled the virtues of such a requirement:

The litigants’ direct participation tends to ensure that the settlement is the result of their mature reflection and deliberate assent. This protects the parties against hasty and improvident settlement agreements by impressing upon them the seriousness and finality of the decision to settle, and minimizes the possibility of conflicting interpretations of the settlement. It also protects parties from impairment of their substantial rights without their knowledge and consent.

(Levy, 10 Cal. 4th at 585.) For these reasons, the court concluded “the term ‘parties’ as used in section 664.6 . . . means the litigants themselves, and does not include their attorneys of record.” (Id. at 586.)

This bill eliminates the requirement that parties themselves must personally sign or orally stipulate to these settlements and instead allows counsel for the parties to so stipulate on their behalf and further authorizes agents of insurers to stipulate on the insurer’s behalf. The virtues outlined by the Supreme Court notwithstanding, the author and the sponsor, the Consumer Attorneys of California (CAOC), now seek to streamline this process in order to meet the goals of efficiency and economy.

According to the author:

Attorneys act on behalf of their clients during the mediation and settlement process, oftentimes without their clients present. However, under current law, attorneys and adjusters who come to an agreement in mediation without their clients cannot enforce the settlements reached until they get their clients’ signature, adding an extra and unnecessary step to the settlement process.

The changes made by this bill are especially productive in the context of the agents of insurers. Often adjusters act as agents of insurers, handling nearly all of the details of potential and ongoing litigation. Given that insurers are usually sophisticated parties, often involved in litigation, there is little concern that their interests are not being properly represented.

Legal guidelines exist in the Business and Professions Code and in the California Rules of Professional Conduct requiring attorneys to act in their clients’ best interests and to avoid self-dealing, mitigating somewhat the loss of the existing protection. This bill, by allowing for counsel to make a request pursuant to Section 664.6, will streamline the process and obviate the need for counsel to track down their clients before progressing toward a settlement of a civil dispute. However, this shifts the burden to attorneys to “impress[] upon [their clients] the seriousness and finality of the decision to settle,” and to “minimize[] the possibility of conflicting interpretations of the settlement.” To ensure this responsibility is upheld, the bill provides that an attorney who signs a writing on behalf of a party without the party’s express authorization shall, absent good cause, be subject to professional discipline.” This makes discipline resulting from such misconduct the default, absent a showing of good cause.

In response to concerns that have been raised about eliminating this procedural protection in certain cases, this bill provides that the changes will not apply to actions brought pursuant to the Family Code, actions brought pursuant to the Probate Code, or matters being adjudicated in a juvenile court or a dependency court. Therefore, settlements in such cases will continue to have to be signed by the party.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 8/20/20)

Consumer Attorneys of California (source)

California Defense Counsel

OPPOSITION: (Verified 8/20/20)

None received

ARGUMENTS IN SUPPORT: CAOC writes in support: “For example, as a practical matter, many times plaintiffs’ counsel will represent heirs in a wrongful death case, where the heirs are scattered about the country and it would be impractical to fly them all into town for mediation. This change would allow a settlement agreement signed by an attorney for plaintiffs to be legally enforceable by the court. Under the current law, if it isn’t signed by all the parties, it is not enforceable.

“Similarly on the defense side more often than not, defendants are not present at mediation. Therefore the defense attorney (or insurance adjuster if the matter is pre-litigation) should similarly be able to sign an agreement and have it legally enforceable by the judge. Again, under current law, even if the plaintiff is present and signs the agreement, if the actual defendant(s) are not present and do not sign the agreement, it is not enforceable by a judge.

“AB 2723 will streamline settlement procedures.”

ASSEMBLY FLOOR: 75-0, 5/26/20

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Megan Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager, Kiley, Lackey, Levine, Limón, Low, Mathis, Mayes, McCarty, Medina, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Diep, Maienschein, Quirk, Wicks

Prepared by: Christian Kurpiewski / JUD. / (916) 651-4113

8/21/20 18:16:33

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2019-2020 Regular Session

Bill No: AB 2723 (Author:Chiu)

Version: May 4, 2020

Hearing Date: August 18, 2020

Fiscal: No

Urgency: No

Consultant: CK

SUBJECT

Civil actions: entry of judgment: written stipulation

DIGEST

This bill authorizes attorneys or agents of insurers to stipulate to settlements on behalf of the parties they represent.

EXECUTIVE SUMMARY

Section 664.6 of the Code of Civil Procedure (Section 664.6) authorizes courts to enter judgment pursuant to the terms of a settlement stipulated to by the parties to a civil action. Upon request by the parties, courts are authorized to retain jurisdiction over those parties in the event the court is needed to enforce the terms of such a settlement until full performance.

Currently the parties themselves must stipulate in writing or orally before the court to the terms of the settlement. This bill authorizes attorneys, on behalf of their clients, and the agents of insurers, on behalf of the insurer, to so stipulate. The bill trades some procedural protections for efficiencies in the judicial system.

The bill is sponsored by the Consumer Attorneys of California and supported by the California Defense Counsel. There is currently no known opposition.

PROPOSED CHANGES TO THE LAW

Existing law:

1. Provides that, if parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement. (Code Civ. Proc. § 664.6.)
2. Authorizes the court, if requested by the parties, to retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement. (Code Civ. Proc. § 664.6.)
3. Requires that, when trial by jury has been had, judgment be entered by the clerk, in conformity to the verdict within 24 hours after the rendition of the verdict, whether or not a motion for judgment notwithstanding the verdict be pending, unless the court orders the case to be reserved for argument or further consideration, or grants a stay of proceedings. (Code Civ. Proc. § 664.)
4. Requires that, if the trial has been had by the court, judgment must be entered by the clerk, in conformity to the decision of the court, immediately upon the filing of such decision. It further provides that a judgment is not effectual for any purpose until entered. (Code Civ. Proc. § 664.)
5. Defines an agent as one who represents another, called the principal, in dealings with third persons. Such representation is called agency. (Civ. Code § 2295.)
6. Permits an agent to be authorized to do any acts which his principal might do, except those to which the latter is bound to give his personal attention. (Civ. Code § 2304.)
7. Empowers an agent with the authority to do everything necessary or proper and usual, in the ordinary course of business, for effecting the purpose of his agency; and to make a representation respecting any matter of fact, not including the terms of his authority, but upon which his right to use his authority depends, and the truth of which cannot be determined by the use of reasonable diligence on the part of the person to whom the representation is made. (Civ. Code § 2319.)

This bill authorizes an attorney representing a party or an agent of an insurer, where the insurer is a party, to stipulate in writing on behalf of the party they represent to the terms of a settlement.

COMMENTS

1. Amending the process for conditional settlements

Current law prescribes the manner of giving and entering judgment in civil actions. (Code Civ. Proc. § 664 et seq.) It lays out processes for entering judgment specific to whether a trial is had by a jury or by the court. It also lays out the process for when judgment comes pursuant to terms of a settlement agreed to by the parties.

Currently parties can stipulate in a writing signed by the parties or orally before the court for settlement of civil matters and request the court enter judgment pursuant thereto. (§ 664.6.) The parties can further request that the court retain jurisdiction over them, enabling the court to enforce the settlement until its terms have been fully satisfied.

The California Supreme Court has detailed the history behind Section 664.6:

Section 664.6 was enacted in 1981. As this court noted recently . . . , prior to 1981 the Courts of Appeal had expressed conflicting views concerning the proper procedures to enforce settlement agreements in pending litigation.

Under one line of authority, settlement agreements preceding the enactment of section 664.6 in 1981 could be enforced only by a motion for summary judgment, a separate suit in equity, or an amendment to the pleadings. This became the dominant view. It was based on the theory that nonstatutory motions to enforce settlements were motions based on facts outside the pleadings and, under this court's decisions had to be treated as motions for summary judgment that could be granted only if all of the papers submitted showed there was no triable issue of fact.

A second line of authority permitted motions to enforce settlements based on facts outside the pleadings if the fact of settlement and the terms of the settlement were not subject to reasonable dispute. The theory underlying this approach was that the statutory means of enforcing settlements by motions for summary judgment, separate suits in equity, or amendments to pleadings were inadequate, and that a court therefore must have authority to enforce settlements as a means of controlling proceedings before the court and protecting the interests of the parties.

The conflict was resolved in 1981 when the Legislature enacted section 664.6, which created a summary, expedited procedure to enforce settlement agreements when certain requirements that decrease the likelihood of misunderstandings are met.

(Levy v. Superior Court (1995) 10 Cal. 4th 578, 584-586, internal citations omitted.)

1. Delegating authority to settle cases on behalf of the parties

Principles of efficiency and economy promote the settlement of civil disputes by the parties, involving the court and expending its resources only where absolutely needed. This bill seeks to streamline the procedure provided for in Section 664.6 by explicitly granting the authority to stipulate to settlements to attorneys, on behalf of the parties they represent, and to agents of insurers, where the insurer is a party to the settlement. However, this removes the existing procedural protection requiring more direct client involvement.

Currently, Section 664.6 requires that the parties must stipulate to the settlement underlying the motion. The California Supreme Court specifically addressed the issue of whether motions pursuant to Section 664.6 require the signature (or oral testimony) of the parties themselves, concluding that they do. As indicated in the quote above, the court found that the expedited procedure provided for by Section 664.6 required certain protective measures to “decrease the likelihood of misunderstandings.” The court held that the “parties” had to “stipulate in writing or orally before the court that they have settled the case.”

The Supreme Court specifically extolled the virtues of such a requirement:

The litigants’ direct participation tends to ensure that the settlement is the result of their mature reflection and deliberate assent. This protects the parties against hasty and improvident settlement agreements by impressing upon them the seriousness and finality of the decision to settle, and minimizes the possibility of conflicting interpretations of the settlement. It also protects parties from impairment of their substantial rights without their knowledge and consent.

(Levy, 10 Cal. 4th at 585.) For these reasons, the court concluded “the term ‘parties’ as used in section 664.6 . . . means the litigants themselves, and does not include their attorneys of record.” (Id. at 586.)

This bill eliminates the requirement that parties themselves must personally sign or orally stipulate to these settlements and instead allows counsel for the parties to so stipulate on their behalf and further authorizes agents of insurers to stipulate on the insurer’s behalf. The virtues outlined by the Supreme Court notwithstanding, the author and the sponsor, the Consumer Attorneys of California (CAOC), now seek to streamline this process in order to meet the goals of efficiency and economy.

According to the author:

Attorneys act on behalf of their clients during the mediation and settlement process, oftentimes without their clients present. However, under current law, attorneys and adjusters who come to an agreement in mediation without their clients cannot enforce the settlements reached until they get their clients’ signature, adding an extra and unnecessary step to the settlement process.

CAOC echoes this sentiment in their letter of support and provide the following insights to illustrate the import of the bill:

For example, as a practical matter, many times plaintiffs’ counsel will represent heirs in a wrongful death case, where the heirs are scattered about the country and it would be impractical to fly them all into town for mediation. This change would allow a settlement agreement signed by an attorney for plaintiffs to be legally enforceable by the court. Under the current law, if it isn’t signed by all the parties, it is not enforceable.

Similarly on the defense side more often than not, defendants are not present at mediation. Therefore the defense attorney (or insurance adjuster if the matter is pre-litigation) should similarly be able to sign an agreement and have it legally enforceable by the judge. Again, under current law, even if the plaintiff is present and signs the agreement, if the actual defendant(s) are not present and do not sign the agreement, it is not enforceable by a judge.

AB 2723 will streamline settlement procedures.

The changes made by the bill are especially productive in the context of the agents of insurers. Often adjusters act as agents of insurers, handling nearly all of the details of potential and ongoing litigation. Given that insurers are usually sophisticated parties, often involved in litigation, there is little concern that their interests are not being properly represented.

Legal guidelines exist in the Business and Professions Code and in the California Rules of Professional Conduct requiring attorneys to act in their clients’ best interests and to avoid self-dealing, mitigating somewhat the loss of the existing protection. This bill, by allowing for counsel to make a request pursuant to Section 664.6, will streamline the process and obviate the need for counsel to track down their clients before progressing toward a settlement of a civil dispute. However, this shifts the burden to attorneys to “impress[] upon [their clients] the seriousness and finality of the decision to settle,” and to “minimize[] the possibility of conflicting interpretations of the settlement.” Concerns have been raised about eliminating this procedural protection, which has been heralded by the courts.

Specifically, concerns have been raised by the Southern California Chapter of the American Academy of Matrimonial Lawyers (AAML). They wrote in opposition to the bill “based on a concern that allowing judgments to be entered based on a writing signed by an attorney only will eliminate important consumer protection safeguards available to family law and other litigants under the current language of Code of Civil

Procedure Section 664.6.” They further assert:

Marital settlement agreements can be complex documents, dealing with important issues like domestic violence, child custody and visitation, child support, spousal support and the division of assets and debts.

Marital settlement agreements routinely include an acknowledgment by a party that they have read the agreement, they understand the agreement and they have had sufficient time to discuss this agreement with their counsel. These representations would become meaningless if such agreements are signed by counsel and not the family law litigant.

After further negotiation and consideration, the author has agreed to the following amendment that limits the application of the changes made by this bill so that the procedural protections of existing law continue to apply in cases for which they are particularly needed. With this amendment, AAML has withdrawn their opposition.

Amendment

Add subdivision (c) to read: “Subdivisions (b)(2) and (b)(3) shall not apply to civil harassment actions, any action brought under the Family Code, any action brought under the Probate Code, or any matter that is being adjudicated in Juvenile or Dependency Court.”

In addition, there were concerns raised that more needed to be done to prevent attorney misconduct, namely signing on behalf of clients without clients’ express authorization. To address this, the author has agreed to the following amendment that highlights that such misconduct is grounds for a finding of professional negligence and legal malpractice:

Amendment

Add subdivision (d) to read: “In addition to any available civil remedies, an attorney who signs the writing on behalf of a client pursuant to subdivision (b) without the client’s express authorization shall be subject to professional discipline absent good cause.”

SUPPORT

Consumer Attorneys of California (sponsor)
California Defense Counsel

OPPOSITION

None known

RELATED LEGISLATION

Pending Legislation: SB 1105 (Umberg, 2020) authorizes attorneys, on behalf of their clients, to stipulate to a settlement of the case and request the court retain jurisdiction of the case on behalf of their clients and makes clear that the court may dismiss the case without prejudice upon granting a Section 664.6 request. This bill is currently in the Assembly Judiciary Committee.

Prior Legislation: None known .

PRIOR VOTES:

Assembly Floor (Ayes 75, Noes 0)

Assembly Judiciary Committee (Ayes 10, Noes 0)

**************

Date of Hearing: May 11, 2020

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

ABPCA Bill Id:AB 2723

Author:(Chiu) – As Amended Ver:May 4, 2020

PROPOSED CONSENT

SUBJECT: Civil actions: entry of judgment: written stipulation

KEY ISSUE: SHOULD ATTORNEYS OR A DESIGNATED AGENT OF AN INSURANCE COMPANY BE PERMITTED TO SIGN AN OUT-OF-COURT LEGAL SETTLEMENT AGREEMENT ON behalf of THEIR CLIENT OR EMPLOYER?

SYNOPSIS

Presently, one of the larger impediments to settling litigation and seeking final court approval of an agreement is the need for all parties to physically sign out-of-court settlement agreements. Frequently, especially in litigation involving businesses and insurance providers, the named parties to a case are not physically in the room when a settlement is negotiated by their attorneys or other parties on their behalf. Existing law, nonetheless, requires the named parties to sign all agreements before a court can adopt the settlement as a final judgment. Especially in the business context, this can mean sending an agreement to a physically distant location, thus delaying resolution of the matter.

This straightforward measure would permit an attorney or authorized agent of an insurance provider to sign a settlement agreement on behalf of the named parties in the case. Because the attorneys and insurance company representatives are frequently the parties directly negotiating settlement agreements, this bill would enable settlements to be signed immediately and quickly brought before the court for a final judgment. Furthermore, given that both attorneys and insurance company agents have a duty to represent their client or employer, this bill limits the scope of those who may sign on a named party’s behalf to only those who can be held legally accountable to the party for their actions, thus limiting the ability for abuse. This measure is jointly sponsored by the Consumer Attorneys of California and the California Defense Counsel who praise the bill’s ability to streamline the end of litigation and simplify all parties’ ability to resolve cases after a final agreement has been reached. As currently in print this bill has no known opposition.

SUMMARY: Permits attorneys and other designated agents of an insurance company to sign agreements to settle litigation on the behalf of clients. Specifically, this bill:

1. Defines “party” for the purpose of entering into a written stipulation for the settlement of a legal case, or part thereof, to include the following:
   1. The named party to the action;
   2. An attorney who represents the named party; or
   3. An authorized agent of an insurance company involved in the action, so long as the agent is authorized in writing to sign the written stipulation on the insurance company’s behalf.

EXISTING LAW:

1. Provides that if parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement. (Code of Civil Procedure Section 664.6.)
2. Provides that, if requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement. (Id.)
3. Provides that, notwithstanding 1), if parties to a pending construction defect action stipulate personally or, where a party’s contribution is paid on its behalf pursuant to a policy of insurance, stipulate through their respective counsel, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement. (Code of Civil Procedure Section 664.7 (a).)
4. Provides that, when trial by jury has been had, judgment must be entered by the clerk, in conformity to the verdict within 24 hours after the rendition of the verdict, whether or not a motion for judgment notwithstanding the verdict is pending, unless the court orders the case to be reserved for argument or further consideration, or grants a stay of proceedings. (Code of Civil Procedure Section 664.)
5. Provides that if a trial has been had by the court, judgment must be entered by the clerk, in conformity to the decision of the court, immediately upon the filing of such decision and that in no case is a judgment effectual for any purpose until entered. (Id.)
6. Defines “agent” as one who represents another, called the principal, in dealings with third persons. (Civil Code Section 2295.)
7. Grants an agent the authority to do the following:
   1. To do everything necessary or proper and usual, in the ordinary course of business, for effecting the purpose of the agency; and,
   2. To make a representation respecting any matter of fact, not including the terms of their authority, but upon which their right to use the authority depends, and the truth of which cannot be determined by the use of reasonable diligence on the part of the person to whom the representation is made. (Civil Code Section 2319.)
8. Authorizes an agent to do any acts which their principal might do, except those to which the latter is bound to give their personal attention. (Civil Code Section 2304.)
9. Permits an agent the power to disobey instructions in dealing with the subject of the agency, in cases where it is clearly for the interest of their principal that they should do so, and there is not time to communicate with the principal. (Civil Code Section 2320.)
10. Prohibits an agent from ever possessing authority, either actual or ostensible, to do an act which is, and is known or suspected by the person with whom they deal, to be a fraud upon the principal. (Civil Code Section 2306.)
11. Provides that oral authorization is sufficient to create agency for any purpose, except that an authority to enter into a contract required by law to be in writing can only be given by an instrument in writing. (Civil Code Section 2309.)
12. Requires, among other duties, that an attorney must employ, for the purpose of maintaining the causes confided to them those means only as are consistent with truth, and never to seek to mislead the judge or any judicial officer by an artifice or false statement of fact or law. (Business and Professions Code Section 6068 (d).)
13. Prohibits an attorney from encouraging either the commencement or the continuance of an action or proceeding from any corrupt motive of passion or interest. (Business and Professions Code Section 6068 (g).)

FISCAL EFFECT: As currently in print this bill is keyed non-fiscal.

COMMENTS: Seeking to streamline the settlement process, and ensure judgments can be processed in a more timely manner, this bill permits attorneys or other authorized agents to sign a stipulation to enter into a court judgment in accordance with the terms of the settlement. In support of this bill, the author states:

Attorneys act on behalf of their clients during the mediation and settlement process, oftentimes without their clients present. However, under current law attorneys and adjusters who come to an agreement in mediation without their clients physically present cannot enforce the settlements reached until they get their clients’ signature, adding an extra and unnecessary step to the settlement process.

Because attorneys act on behalf of their clients during the mediation and settlement process, they should also be able to enter into enforceable settlements during mediation on behalf of their clients.

Represented parties do not always participate in the day-to-day aspects of litigation. One of the primary benefits of retaining legal counsel when faced with potential litigation is the ability to outsource many of the day-to-day aspects of pursuing legal claims to trained professionals. However, when a client maintains their normal life while their legal representatives litigate potential claims, the author and proponents of this measure note that it can be difficult, at times, for attorneys to subsequently reach clients in order for the client to sign and authorize various legal documents. For example, many of the documents propounded by parties during discovery are drafted and compiled by hired counsel and not the individual party to a case. Yet, such documents must frequently be signed and approved by the named party to the action prior to being transmitted to the opposing party, thus necessitating the attorney and their staff to reach out to the client to obtain the signature. Obtaining such signatures can be particularly difficult in litigation involving businesses where those authorized to sign legal documents for the company may be scattered across the county and frequently traveling as a part of the day-to-day operations of the business. Similar issues arise if a client takes a vacation without informing counsel or otherwise disengages from the process.

Similar to discovery, client signatures must be obtained in order for an out-of-court settlement agreement to be formally entered into judgment. In the event a client is not physically present during the negotiation, even if the client authorizes the settlement remotely, delays arise if the client cannot quickly affix the proper signatures to the settlement agreements. This circumstance frequently arises when a party to a case is an insurance company and authority is required for the company to agree to the proposed settlement. Depending on the circumstances involving clients these delays can range from hours to days before a settlement can be entered and the aggrieved party provided the final judgment.

This bill. Seeking to ensure that out-of-court settlements can be properly submitted to judgment in a timely manner, this bill expands the scope of persons authorized to sign a settlement agreement. This bill would provide that, in addition to the client, a client’s attorney may sign to authorize a settlement agreement on the client’s behalf. Furthermore, recognizing that in many cases involving insurance claims, insurance adjusters frequently participate in settlement negotiations on their employer’s behalf, this bill would also authorize agents of an insurance company to sign a settlement agreement on the company’s behalf, so long as that person was previously authorized to do so in writing. The author and proponents of this measure suggest that enabling individuals who are actively negotiating settlement agreements to sign on a client’s behalf will increase efficiencies within the civil litigation process by eliminating the need for settlement agreements to be transmitted to their clients for signature, particularly corporate clients that may be physically distant from the location in which the litigation and settlement negotiations are taking place.

Scope of agency to sign on a client’s behalf. Existing law vests significant authority in attorneys and other authorized agents. Particularly as it relates to attorneys, the existing law also places significant restrictions on the scope of the attorney’s representation of their client. Both the Business and Professions Code and the California Rules of Professional Conduct require attorneys to act in accordance with their client’s wishes, avoid self-dealing, and maintain the client’s best interest at all times. Accordingly, should attorneys be authorized to sign settlement agreements on the behalf of their client in accordance with this bill, an attorney doing so without consulting their client or in a manner detrimental to their client would almost certainly be subject to professional discipline by the State Bar of California.

However, unlike attorneys, there is no statewide body specifically tasked with overseeing those with granted authority to another’s conduct affairs via agency relationships. While there are legal remedies for persons aggrieved by agents who act outside the scope of agency, there are fewer constraints on agents. Furthermore, the types of relationships granting a person agency far expand the professional context of an attorney and their client. The proponents of this bill note that including an agent as a person authorized to sign on behalf of a party to a settlement is designed to encompass insurance company employees, including claims adjusters and others participating in the settlement negotiation, thus this bill limits the type of agents authorized to sign on an insurance company’s behalf. Recent amendments provide that no other agency relationship, outside the attorney-client context, may sign on a parties behalf. The approach appears prudent, indeed, permitting these parties to sign a settlement agreement on behalf of the company would streamline the settlement process. Furthermore, such parties would appear to be properly restrained from entering into an agreement detrimental to their employer, as such an agent would likely be terminated by the insurance company should they behave in a manner exceeding their authority.

ARGUMENTS IN SUPPORT: This bill is jointly sponsored by the Consumer Attorneys of California and California Defense Counsel who see the benefit of streamlining the settlement process by permitting various agents to sign settlement agreements on their client’s behalf. Writing in support, the California Defense Counsel states the benefit of enabling attorneys to sign on their client’s behalf:

Attorneys act on behalf of their clients during the mediation and settlement process, and they should also be able to enter into enforceable settlements during mediation on behalf of their clients. This saves time and money for clients who do not have to agree to a settlement in person, in addition to increasing judicial efficiency.

REGISTERED SUPPORT / OPPOSITION:

Support

California Defense Counsel (co-sponsor)

Consumer Attorneys of California (co-sponsor)

Opposition

None on file

Analysis Prepared by: Nicholas Liedtke / JUD. / (916) 319-2334