More Thoughts on Releases
In 2020, I wrote the post below about releases. A release is the document that ensures that one person will sue someone else. They are heavily negotiated and often misunderstood. I share the original post, together with the following thoughts I’ve had in the past few years:
A release is not the only way to defend against a claim. Some claims expire because of the statute of limitations or have other solid defenses. But a release can provide a simple, and sometimes faster, way to defend against a claim.
A release does not always arise in the context of an existing lawsuit. For example, people in the entertainment industry may seek releases from people so that they may use their images in media without concern that those people will sue them. But since people can only release claims that already exist, the timing of the release could possibly be an issue when litigating a potential claim.
Some litigants may argue that they were tricked into signing a release and argue it is ineffective. Judges may be skeptical of these claims, however. For example, a well-drafted settlement agreement may include language that the releasor isn’t relying on any of the releasee’s information when deciding to sign the release. But still, some releasees may try to get around the release by claiming deceit.
Releases often come at the end of a long agreement in fine print. That alone may not be a reason for a litigant to claim it would be unfair to enforce them. Courts often require some clauses to be in all caps or large font, but courts often enforce releases that blend in with the rest of an agreement.
“The Friendly Gossips” by Eugene de Blaas (Image Credit)
A Formal Statement That Gives Up The Right to Sue
One of the most important parts of the settlement of any dispute is the release. It is the formal statement by the aggrieved party that they give up their right to litigate the dispute. Once a party signs a release, any further litigation on the subject of their dispute may be promptly dismissed.
But releases are usually written in a complicated way. And many people may not appreciate their exact scope.
Why should you keep reading this post about releases?
You are considering signing a release and are not sure what it means.
You want to settle a lawsuit but you're not sure what the plaintiff can offer that will satisfy your concerns.
Release is an anagram of "eels' arse," and very few other words are.
Defendants Want Releases to End the Threat of Future Litigation
In a settlement negotiation, the defendant's main objective is to get a release from the plaintiff. A defendant may demand that the plaintiff promise not to sue again and to end any existing litigation. But the defendant usually also wants a release from the plaintiff because it legally ends the threat of any future litigation by the plaintiff on the subject of the dispute.
With some exceptions, a defendant can use that release as an absolute defense to the plaintiff's claim if the plaintiff ever tries to sue. Even if the plaintiff has a great claim with lots of evidence, a defendant with a release may be entitled to an early dismissal of the case. A plaintiff who sues a defendant with a release may only be able to succeed if she argues that the release does not apply to her claim or that the release was obtained improperly, such as through fraud or coercion.
Releases Vary in Scope
A release in New York may look something like this:
In exchange for [a payment discussed elsewhere in a settlement agreement], [the plaintiff], and her, heirs, successors, assigns, and representatives, releases and discharges the [defendant], its heirs, successors, assigns, shareholders, directors, and representatives, from any and all charges, claims, and actions arising out of [the subject of the dispute], whether known or unknown, that have arisen from the beginning of time through the date of this release.
This language means that the plaintiff is giving up her claims against the defendant that are related to the subject of the dispute. But it is worded such that it also applies to any potential claims the plaintiff may have had against the defendant's "heirs, successors, assigns, shareholders, directors, and representatives." So if the plaintiff tried to sue one of them, there would likely be litigation about whether the release applied to them.
But some releases are broader and apply to all claims that a plaintiff may have against a defendant, even if they do not relate to the specific dispute between the parties. Defendants may want a broad release to make sure that the plaintiff does not return soon after with a new demand for money. A person should be very careful before signing a general release because it may have unintended consequences for unrelated claims. For example, a release arising from an employment dispute against a newspaper could possibly waive the plaintiff's claims if the newspaper had also published an article defaming her.
And some releases are "mutual," which means that both the plaintiff and the defendant give up claims against each other. These may be helpful for parties in a dispute where both sides have claims against the other.
Because releases vary in scope, lawyers that negotiate settlement agreements will usually debate the exact language of the release to make sure it covers (or does not cover) specific types of claims.
Releases May Apply to Unknown Claims
In New York and many other jurisdictions, releases usually also apply to claims the plaintiff does not know about. Imagine a situation where a plaintiff signs a release because she slipped and fell inside of a bank and signs a release. Later learns she has other claims against the bank: maybe the bank improperly deducted money from her account, or discriminated against her because of her race, or her injury in the bank was more severe than she realized at the time. The release could bar those claims arising from those facts, too.
Although it may not seem fair for a plaintiff to give up claims that she does not know about, the defendant wants the security of knowing that it does not need to worry about its liability to the plaintiff for its past actions. This is why a plaintiff should carefully consider possible claims she may have against the defendant before signing a release.
Releases Do Not Apply to Future Conduct
In New York and many other jurisdictions, releases only apply to claims that arise through the date the plaintiff signs the release. They generally do not bar a plaintiff from litigating against a defendant for something the defendant did the day after the release was executed.