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November 20, 2012

Things a lawyer should know about the enforcement of Rule 11 agreements

Attorneys who practice law in State Courts in Texas are invariably familiar with Texas Rule of Civil Procedure 11, or as it is more commonly referred, the “Rule 11 Agreement.” The Rule 11 Agreement can apply to anything from extending the deadline for objections and responses to written discovery to more complex settlement terms concerning the expenditure of company funds while an agreed temporary injunction is in place, any many things in between. However, and far less common, is a full understanding of the proper procedural steps to enforce a Rule 11 Agreement after a breach or differing interpretations of the agreement occurs.

For example, in Harris County District Court, I recently observed attorneys arguing over a “Motion to Enforce Rule 11 Agreement” related to the payment of funds “in the normal course of business.” The dispute arose over whether one side’s payment of attorney’s fees was a payment “in the normal course of business.” In response to this filing, the Court asked counsel the following:

Have you amended your pleadings to bring a cause a action for an alleged violation of the Rule 11 Agreement?
How do you respond to the case law that holds that amending your pleadings is required prior to filing a motion to enforce the Rule 11 Agreement?

Counsel had no response.

Texas Rule of Civil Procedure 11 provides that no agreement between attorneys or parties touching any suit pending will be enforced unless it is in writing, signed and filed with the papers as part of the record, or unless it be made in open court and entered of record. The Court explained in Trudy's Tex. Star, Inc. v. City of Austin that Rule 11 Agreements are contracts relating to litigation. In ExxonMobil Corp. v. Valence Operating Co., it was cited that the purpose of Rule 11 is to ensure that agreements of counsel affecting the interests of their clients are not left to the fallibility of human recollection and that the agreements themselves do not become sources of controversy. Trial courts have a ministerial duty to enforce valid Rule 11 agreements.

If fact issues are raised or a party has withdrawn consent, the only method available for enforcing a Rule 11 Agreement is through summary judgment or trial. In Baylor College of Med. v. Camberg, the non-breaching party raised its claim to enforce the disputed agreement “through an amended pleading or counterclaim asserting breach of contract.” Nothing in the record indicates that Baylor employed a proper procedure for enforcing a Rule 11 settlement agreement once the parties proffered differing interpretations of the agreement. Baylor did not file a motion for summary judgment seeking interpretation of the Rule 11 Agreement. To allow enforcement of a disputed Rule 11 Agreement simply on motion and hearing would deprive a party of the right to be confronted by appropriate pleadings, assert defenses, conduct discovery, and submit contested fact issues to a judge or jury.

Again, as ruled in ExxonMobil Corp. v. Valence Operating Co., a party may revoke their consent to a Rule 11 Agreement at any time before rendition of judgment. A court is not precluded from enforcing a Rule 11 Agreement once it has been repudiated by one of the parties, but an action to enforce a Rule 11 Agreement to which consent has been withdrawn must be based on proper pleading and proof. An action to enforce a settlement agreement pursuant to Rule 11, where consent is withdrawn, must be based on proper pleading and proof. If a party revokes his consent to a Rule 11 Agreement, the opposing party may attempt to enforce the Rule 11 agreement under contract law. Where consent to a Rule 11 Agreement has been withdrawn, a court may not render judgment on the settlement agreement, but may enforce it only as a written contract. Hence, the party seeking enforcement must pursue a separate breach of contract claim which is subject to the normal rules of pleading and proof.

Accordingly, remedying a conflict in interpretations over a Rule 11 Agreement should first begin with an amendment to the pleadings (or a counterclaim) to assert a breach of contract claim for the alleged violation of the Rule 11 Agreement. The party seeking to enforce the Rule 11 Agreement must then follow the normal rules of pleading and proof (i.e. motion for summary judgment) seeking a judicial determination that the other party breached the Rule 11 Agreement. Of course, as with any breach of contract claim, attorney fees can be recovered for such a claim.

Given the amount of cost and expense involved in litigating conflicting interpretations of Rule 11 Agreements, attorneys should be intentional in the language used in Rule 11 Agreements to ensure clarity

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