DO NOT EXECUTE A WAIVER AND RELEASE IN CONSIDERATION OF PAYMENT THAT RELEASES CLAIMS YOU ARE NOT PREPARED TO RELEASE

imagesAbsolutely do NOT execute a waiver and release in consideration of a progress payment that waives and releases claims (such as change order requests, lost productivity, or delay) that you are not prepared to release through the date of the release.  Carve out such exceptions from the release—identify those claims or rights you are not prepared to release.  Otherwise, when you go to pursue such claims, the waiver and release you previously executed will come back to haunt you!

 

For example, in U.S. f/u/b/o Chasney and Company, Inc. v. Hartford Accident & Indemnity Co., 2016 WL 852730 D.Md. 2016), a prime contractor on a federal project subcontracted with a mechanical and plumbing subcontractor.  The subcontractor’s last partial waiver and release it executed in consideration of a progress payment was in November 2013 for payment through October 31, 2013. The waiver and release provided that the subcontractor waived and released all liens, claims, and demands against the prime contractor or its surety in connection with the project through the period covered by the payment (through October 31, 2013).  The waiver and release included space for the subcontractor to identify exceptions. No such exceptions were identified.  In fact, prior to November 2013, the subcontractor executed a total of 24 progress waivers and releases and never excepted a single item or claim from the release. 

 

Notwithstanding, the subcontractor encountered design defects that caused it to incur additional costs and delayed its performance.  The subcontractor asserted pass-through claims that the prime contractor submitted to the federal government.  However, when the prime contractor and government settled their issues and a global settlement was reached, no amounts were assigned to respective items such as the subcontractor’s pass-through claims. The subcontractor then asserted the Miller Act payment bond lawsuit against the prime contractor’s Miller Act payment bond surety.

 

Applicable here, the surety and prime moved for summary judgment that any damages, including delay-related damages, that the subcontractor sought through October 31, 2013 were waived and released through the subcontractor’s November 2013 progress waiver and release.  The District Court of Maryland agreed since all it had to look to was the last waiver and release the subcontractor executed where it waived and released such rights:

 

By executing the October 31 Partial Release without exempting its claim, Chasney [subcontractor] relinquished its right to pursue the claim should it ever ripen. In hindsight, Chasney may regret its decision to sign such a release—but the Court’s task is to examine the agreement the parties did sign, not the agreement that one or the other now wishes they had negotiated instead….

***

In summary, the Court’s analysis begins and ends—as it must—with the unambiguous language of the Partial Releases. By signing each release, Chasney waived all claims relating to work performed through the covered period: no reasonable factfinder could conclude otherwise. While Chasney’s opposition brief teems with subtle linguistic maneuvers (and more than a few red herrings), Chasney cannot avoid the plain consequences of its contracting through artful argument….”

 

U.S. f/u/b/o Chasney & Company, 2016 WL at *7, 9 (internal quotations omitted).

 

Do NOT let this happen to you.  Preserve your rights and claims and do NOT waive and release claims you are NOT prepared to release!

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

RELEASES ON FEDERAL PROJECTS — MAYBE THE RELEASE IS NOT A FINAL RELEASE

imagesExecuting partial releases and a final release in consideration of payment are routine on construction projects.  Counsel will correctly tell you not to sign a release if you don’t intend to release all of your claims through the date of the release.  Counsel will also tell you to be sure to exempt those claims from a release that you do not intend on releasing.  The reason for this is that if you sign a release and then seek damages or costs pre-dating the release, the party you gave the release too will waive it in front of your face and say “tough luck; you released these claims and costs!” 

 

However, the opinion in H.J. Lyness Construction, Inc. v.  U.S., 120 Fed.cl. 1 (Fed.Cl. 2015) gives those contractors (or subcontractors), particularly federal government contractors, that sign a release and do not exempt certain claims or costs from the release some hope that not all is lost.  In this case, the federal government terminated a contractor for convenience.  After the termination for convenience, the contractor submitted a release and was paid in consideration for that release.  The contractor did not exempt or carve out any claims or costs from that release even though the release allowed the contractor to do so.    In other words, the release did not carve out any termination for convenience settlement costs that the contractor would be entitled to.  Notwithstanding, the government and contractor continued to discuss termination for convenience settlement costs and when an agreement could not be reached, the contractor filed suit.

 

The government moved for summary judgment that the contractor released the government for termination for convenience settlement costs because the contractor executed the unambiguous release after the termination for convenience.  The contractor countered that the release did not apply to termination for convenience settlement costs and, to show this, the government continued to entertain discussions regarding these costs after it received the release the government is arguing under.  Furthermore, the contractor argued that it timely and properly submitted its settlement costs in accordance with F.A.R. 52.249-2(e) that provides:

 

(e) After termination, the Contractor shall submit a final termination settlement proposal to the Contracting Officer in the form and with the certification prescribed by the Contracting Officer. The Contractor shall submit the proposal promptly, but no later than 1 year from the effective date of termination, unless extended in writing by the Contracting Officer upon written request of the Contractor within this 1–year period. However, if the Contracting Officer determines that the facts justify it, a termination settlement proposal may be received and acted on after 1 year or any extension. If the Contractor fails to submit the proposal within the time allowed, the Contracting Officer may determine, on the basis of information available, the amount, if any, due the Contractor because of the termination and shall pay the amount determined.

 

Based on these facts and circumstances, the contractor took the position that the  government never intended the release the contractor furnished post-termination for convenience to operate as a final release and release of its termination for convenience costs.  The Court of Federal Claims sided with the contractor:

 

The Court finds that through the affidavit provided by Mr. Lyness [contractor’s representative], the parties’ actions and course of conduct in this case creates a genuine issue of material fact regarding whether the release constituted a full and final release of claims given in exchange for a final payment, or was simply a routine payment application form that was used with respect to all applications for partial payments requested by HJL [contractor].

H.J. Lyness Construction, supra.

 

Now, why is this case helpful?  Because it goes directly to the argument on federal projects that even if a contractor executed an unambiguous release and does not exempt or carve out any claims, there may be an argument that the conduct of the parties reflects that the parties did not intend the release to operate as a final release of all claims.  In H.J. Lyness the argument was that the release was not intended to bar termination for convenience settlement costs even though the release was executed months after the termination for convenience.

 

Regardless of the holding in H.J. Lyness, it is important for contractors to read what they sign and be cognizant of those claims and costs they do not want to release.  This includes executing a release without properly exempting termination for convenience settlement costs if the contractor does not intend its release to be a final release of all claims.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

BE CAREFUL AND APPRECIATE THE RISK WHEN EXECUTING A RELEASE IN ADVANCE OF AN EVENT OR SITUATION

imagesThe Florida Supreme Court in a non-construction case recently issued an opinion regarding the scope of a release.  Parties expecting releases (“releasee”) need to ensure that the release they are giving others to execute (“releaser”) clearly and unambiguously reflects the scope of the release they are seeking.  Regardless of the reasoning for getting a release, the release will not serve the releasee’s purpose if it is ambiguous. 

 

In Eric Sanislo v. Give Kids the World, Inc., 2015 WL 569119 (Fla. 2015), the Florida Supreme Court answered the question whether a release that does not contain express language of the releaser releasing the releasee for negligence or negligent acts was enforceable to actually release the releasee for negligence claims. 

 

This case involved a non-profit company that organizes vacations for sick children and their families. In advance of the vacation participants need to execute a release in favor of the non-profit company that reads:

 

I/we hereby release Give Kids the World, Inc. [releasee] and all of its agents, officers, directors, servants, and employees from any liability whatsoever in connection with the preparation, execution, and fulfillment of said wish, on behalf of ourselves, the above named wish child and all other participants. The scope of this release shall include, but not be limited to, damages or losses or injuries encountered in connection with transportation, food, lodging, medical concerns (physical and emotional), entertainment, photographs and physical injury of any kind….

 

I/we further agree to hold harmless and to release Give Kids the World, Inc. [releasee] from and against any and all claims and causes of action of every kind arising from any and all physical or emotional injuries and/or damages which may happen to me/us….

 

During a vacation, the mother of a child injured herself due to a malfunction of a wheelchair lift they were on.  The family sued for negligence and the non-profit organization argued that such a negligence claim was barred by virtue of the release the family executed that released the non-profit company “from any liability whatsoever…”  which would be broadly understood to include all negligence claims.  The non-profit further argued if the release did not cover negligence claims, it would essentially be worthless since the obvious intent of the release was to bar these types of claims.  Conversely, the family argued that the release did not bar negligent acts because nowhere in the release does it even use the words “negligence” or “negligent acts.”

 

The Florida Supreme Court agreed with the non-profit company and the broad language that released the non-profit company “from any liability whatsoever…” expounding:

 

[W]e are reluctant to hold that all exculpatory [release]  clauses that are devoid of the terms “negligence” or “negligent acts” are ineffective to bar a negligence action despite otherwise clear and unambiguous language indicating an intent to be relieved from liability in such circumstances. Application of such a bright-line and rigid rule would tend to not effectuate the intent of the parties and render such contracts otherwise meaningless.

***

The wish request form and liability release form signed by the Sanislos [plaintiff] released Give Kids the World [non-profit company] and all of its agents, officers, directors, servants, and employees from “any liability whatsoever in connection with the preparation, execution, and fulfillment of said wish….” The language of the agreement then provided that the scope of the agreement included “damages or losses or injuries encountered in connection with transportation, food, lodging, medical concerns (physical and emotional), entertainment, photographs and physical injury of any kind….” This agreement clearly conveys that Give Kids the World would be released from any liability, including negligence, for damages, losses, or injuries due to transportation, food, lodging, entertainment, and photographs. With regard to Give Kids the World and the wish fulfilled for the Sanislos, it is unclear what this agreement would cover if not the negligence of Give Kids the World and its agents, officers, directors, servants, and employees, given that exculpatory clauses are unenforceable to release a party of liability for an intentional tort.

Sansislo, supra.

 

What exactly does this ruling mean?

 

It means, be careful, really careful, when executing a release, especially a release given in advance of an event or situation.  Naturally, when a release is given in advance of an event or situation, the release is routinely executed without a lot of consideration given to when the release would apply.  Before the event or situation, you do not foresee the other party committing a negligent act and/or getting hurt by such negligence.  But, it certainly could happen which is why the releasee wants to give you an advance release to execute.   Further, but for the execution of the release, the releasee (or company that wants the release) will probably not allow you to participate or attend the event, etc.  This is another reason the release is routinely executed without a lot of consideration given to the context of the release.

 

But, as demonstrated by the Florida Supreme Court, this advance release can come back to haunt a person that is injured by the negligence of the releasee simply because that person executed an advance release or release given BEFORE the negligence occurred.  Thus, be careful, and appreciate this risk, when executing a release in advance of an event or situation.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

PAY ATTENTION TO THE RELEASE YOU EXECUTE!

UnknownPay attention to the release you execute! This includes the release that is executed in consideration of insurance proceeds where the release will likely include a full release of all claims and the parties forbear from pursuing legal claims against one another. Such claims would include the insured / party receiving insurance proceeds releasing its right to assert claims for additional proceeds arising from same incident and the insurer releasing its right to assert a claim that the insured breached the insurance policy and/or that there is no coverage under the policy. This is besides the fact that the monetary payment should constitute sufficient consideration for a full release of any and all rights / claims relating to the incident.

 

In Crystal Colony Condominium Ass’n, Inc.v. Aspen Specialty Ins. Co., 2014 WL 1116881 (S.D.Fla. 2014), an insurer issued a property insurance policy to an association. In October 2005, the insured-association experienced severe damage due to Hurricane Wilma. Due to the damage, the insurer agreed to pay $1,071,359.52 to its insured-association in consideration of a full release from the insured. The insured-association agreed and a release was executed that read:

 

“In consideration of the sum of [$1,071,349.52], to me/us [Plaintiff] paid, the receipt whereof is hereby acknowledged, l/we, [Plaintiff] (being of lawful age) do hereby release and forever discharge [Defendant, its] heirs, administrators, executors, successors and assigns, from any and all action, causes of action, claims and demands whatsoever for, upon, or reason of any damage, loss or injury and all consequential damage, which heretofore have been or which hereafter may be sustained by me/us [Plaintiff] in consequence of windstorm damage during Hurricane Wilma, 10/24/05.”

It is being further agreed and understood that the payment of said amount is not to be construed as an admission of liability, but is a compromise of a disputed claim and that this release is executed in full settlement and satisfaction of rights of the undersigned under Policy No. BP000106 arising out of said hurricane damage above referred to.”

Crystal Colony, supra, at *2.

 

Approximately six year later, the insured-association advised the insurer that it disagreed with the quantum of insurance proceeds it received and filed a declaratory action. The insurer moved for summary judgment based on the full release it received for the incident (the hurricane). The insured-association argued that the release was not enforceable because it lacked consideration since the money it received was only a partial payment and did not cover future damages the association incurred. The insurer argued that the release included language where there was a mutual forbearance from pursuing legal action against the other party and this constituted more than sufficient consideration.

 

The Southern District agreed with the insurer (entering summary judgment against the association-insured) and held: “Florida law provides that a promise, no matter how slight, can constitute sufficient consideration so long as a party agrees to do something that they are not bound to do. Forbearing the pursuit of a legal remedy constitutes such a promise.” Crystal Colony, supra, at *3 (internal citations and quotations omitted).

 

Unambiguous releases will typically be deemed enforceable since it will clarify the intent of the parties. Whether it is a release given in consideration of insurance proceeds or a release given in consideration of a progress or final payment, if the party giving the release wants to ensure certain rights are carved-out or preserved, they need to do so. If the other party is unwilling to accept such carved-out language, the party giving the release, at a minimum, needs to preserve its rights by sending contemporaneous documentation that they are signing the release because the other party will not accept a release with carve-outs for the following specific issues. And, as seen from this case, if a mutual release is given where both parties forbear from pursuing claims against the other, this consideration will be more than enough consideration to support the release and courts will not delve into the type of claims that the parties are potentially releasing each other from. Thus, pay attention to the release you execute so that it does not come back to haunt you later!

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.