John Joseph (J.J.) Conway
When it comes to settlements, employee benefit lawsuits mirror settlements in other practice areas. Almost all benefit cases are settled. Courts send nearly every case to facilitative mediation. The litigation costs in a routine benefit lawsuit are predictable. And, given the speed at which benefit cases are typically resolved, most cases factor in an appeal in determining the overall length of the litigation.
Employee benefits lawyers edit a lot of settlement agreements. So, the question arises, when reviewing a standard benefits release, how much revising should an attorney do?
Obviously, if an agreement contains a term or condition which may adversely affect a client’s right to some future benefit (or infringe on an unrelated benefit) redlining is always necessary. Broad form release language should be edited so that it serves only to release claims pertaining to the specific benefit, or the benefit period, which is part of the settlement.
The typical language used to define an agreement’s “Released Parties” is often so broad that a released healthcare claim could also release a claim for a mismanaged 401(k) account. A redline edit limiting a release only to the subject of the action is simple and usually already anticipated by the opposing counsel. For example, a release involving a self-funded healthcare claim should include language exempting from the settlement any entitlement to future retirement benefits (including retiree healthcare benefits).
Another necessary redline might address any continuing relations with an employee’s health insurer. A settlement should be drafted to explicitly release only the claims at issue – nothing more - unless specifically agreed upon.
Now, however, employers, administrators, and insurance companies are adding new conditions, such as non-disparagement clauses and more expansively written confidentiality provisions, in order to stem bad online reviews and negative comments in online support groups.
What should a lawyer do about these clauses?
First, if a non-disparagement clause was not discussed as a part of the settlement, consider putting a strikethrough over the clause. If the clause was negotiated or the released party won’t back down, read the clause carefully, and ask yourself, “Can the client live with it?”
A recent case involving a routine benefit dispute caused me to question whether a redline was even worth it.
The non-disparagement clause was included in the standard agreement, and it was overbroad to the point where it was likely unenforceable. It required a settling party to ensure that the client and the client’s family members would not disparage the company. Family members was undefined, and the agreement did not provide any payment of consideration to anyone other than the plaintiff.
The opposing lawyers who drafted the agreement were from a sophisticated law firm. They had to know about the clause’s potential enforceability problems, and looking back on it now, they likely wanted it in there purely as a deterrent.
During the markup period, we added redlines to clarify the language and limit the scope of the non-disparagement clause, inadvertently highlighting the enforceability issue. Back over email came the new draft - which was worse than the original version. Now, specific family members were being identified and the company wanted them to sign off on the agreement. It took weeks to work this out and try to agree on language that everyone could live with. There was a question – was the markup worth it?
In another recent case involving a settled healthcare claim, redlines were made that were innocuous – adding the specific dates of service to a medical claim settlement where the insurer was no longer providing benefits to the plaintiff. The plaintiff had a new insurer and had been pursuing an unpaid claim against her prior insurer. Just adding the dates of service caused the opposing counsel to redraft the agreement to include a representation and warranty clause about any potential existing claims against the insurer.
In both cases, if the clauses were left as written, there would have been no material problem for the client.
The suggested redlines opened new and different issues that caused delays, new obligations, and, in some cases, new contracts.
The suggested revisions prompted counter-redlines that were much worse than the initial draft. The redlines caused defendants to dream up new scenarios that worried them. They became insistent on their new language and delayed payment while this was being resolved. Each suggested workaround resulted in more problems.
In the end, settlements are about ending a matter; moving forward; and leaving the dispute behind. Taking the time to think through whether a “few minor edits” advance the settlement is well worth it.
Summary thoughts about redlines:
• If you have a friendly relationship with the opposing counsel, you can redline as much as you want; if not, resist making a redline edit unless it involves a critical issue
• War game the provision that is being redlined– ask whether it is even enforceable
• Leave the settlement agreement alone for a day and then revisit. It may offer fresher thinking and a new perspective about a troublesome clause.
—————
John Joseph (J.J.) Conway is an employee benefits and ERISA attorney and litigator and founder of J.J. Conway Law in Royal Oak.
Employee benefits lawyers edit a lot of settlement agreements. So, the question arises, when reviewing a standard benefits release, how much revising should an attorney do?
Obviously, if an agreement contains a term or condition which may adversely affect a client’s right to some future benefit (or infringe on an unrelated benefit) redlining is always necessary. Broad form release language should be edited so that it serves only to release claims pertaining to the specific benefit, or the benefit period, which is part of the settlement.
The typical language used to define an agreement’s “Released Parties” is often so broad that a released healthcare claim could also release a claim for a mismanaged 401(k) account. A redline edit limiting a release only to the subject of the action is simple and usually already anticipated by the opposing counsel. For example, a release involving a self-funded healthcare claim should include language exempting from the settlement any entitlement to future retirement benefits (including retiree healthcare benefits).
Another necessary redline might address any continuing relations with an employee’s health insurer. A settlement should be drafted to explicitly release only the claims at issue – nothing more - unless specifically agreed upon.
Now, however, employers, administrators, and insurance companies are adding new conditions, such as non-disparagement clauses and more expansively written confidentiality provisions, in order to stem bad online reviews and negative comments in online support groups.
What should a lawyer do about these clauses?
First, if a non-disparagement clause was not discussed as a part of the settlement, consider putting a strikethrough over the clause. If the clause was negotiated or the released party won’t back down, read the clause carefully, and ask yourself, “Can the client live with it?”
A recent case involving a routine benefit dispute caused me to question whether a redline was even worth it.
The non-disparagement clause was included in the standard agreement, and it was overbroad to the point where it was likely unenforceable. It required a settling party to ensure that the client and the client’s family members would not disparage the company. Family members was undefined, and the agreement did not provide any payment of consideration to anyone other than the plaintiff.
The opposing lawyers who drafted the agreement were from a sophisticated law firm. They had to know about the clause’s potential enforceability problems, and looking back on it now, they likely wanted it in there purely as a deterrent.
During the markup period, we added redlines to clarify the language and limit the scope of the non-disparagement clause, inadvertently highlighting the enforceability issue. Back over email came the new draft - which was worse than the original version. Now, specific family members were being identified and the company wanted them to sign off on the agreement. It took weeks to work this out and try to agree on language that everyone could live with. There was a question – was the markup worth it?
In another recent case involving a settled healthcare claim, redlines were made that were innocuous – adding the specific dates of service to a medical claim settlement where the insurer was no longer providing benefits to the plaintiff. The plaintiff had a new insurer and had been pursuing an unpaid claim against her prior insurer. Just adding the dates of service caused the opposing counsel to redraft the agreement to include a representation and warranty clause about any potential existing claims against the insurer.
In both cases, if the clauses were left as written, there would have been no material problem for the client.
The suggested redlines opened new and different issues that caused delays, new obligations, and, in some cases, new contracts.
The suggested revisions prompted counter-redlines that were much worse than the initial draft. The redlines caused defendants to dream up new scenarios that worried them. They became insistent on their new language and delayed payment while this was being resolved. Each suggested workaround resulted in more problems.
In the end, settlements are about ending a matter; moving forward; and leaving the dispute behind. Taking the time to think through whether a “few minor edits” advance the settlement is well worth it.
Summary thoughts about redlines:
• If you have a friendly relationship with the opposing counsel, you can redline as much as you want; if not, resist making a redline edit unless it involves a critical issue
• War game the provision that is being redlined– ask whether it is even enforceable
• Leave the settlement agreement alone for a day and then revisit. It may offer fresher thinking and a new perspective about a troublesome clause.
—————
John Joseph (J.J.) Conway is an employee benefits and ERISA attorney and litigator and founder of J.J. Conway Law in Royal Oak.
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