Enforceability of Settlement Agreements in Probate Litigation

How likely are the courts to enforce settlement agreements and releases in probate and trust litigation when there are claims of fraud and misrepresentation?  The Third District Court of Appeals recently answered this question in Sugar v. Estate of Stern, 2015 WL 5603469 (Fla. 3d DCA 2015) and enforced the settlement agreements and subsequently executed releases.

Idelle Stern had four daughters, Judy Sugar (“Sugar”), Joyce Genauer, Rochelle Kevelson and Tikvah Lyons (the latter three daughters hereinafter referred to as “Appellees”).  In April 2010, the Appellees petitioned to have Idelle Stern declared incompetent and a guardian was appointed.  In January 2011, the guardian sued Sugar, who was managing Idelle Stern’s affairs, for misappropriation of funds and abuse.  This litigation resulted in a settlement agreement (“Initial Agreement”) whereby Sugar agreed to a $750,000 reduction in any distribution she would receive from Idelle Stern’s trust.   The Initial Agreement contained a reciprocal general release.  The Appellees appealed the trial court’s acceptance of the Initial Agreement.

Seven months later, the guardian sued the Appellees and asserted claims of misappropriation of funds against them.  After a lengthy settlement conference, the guardian, Sugar and Appellees entered into a settlement agreement (“Global Settlement Agreement”) which resolved all pending litigation and required mutual releases and waivers to all matters between them.  The Court described the Global Settlement Agreement as “a list of bullet points describing the parties’ understanding” which was “based upon the representations of all parties at the negotiations that occurred on the [s]ettlement [d]ate” but none of these representations were listed in the Global Settlement Agreement.

Notwithstanding the lack of a more formal agreement, the Court enforced both agreements and waivers stating: “[t]he public policy of the State of Florida, as articulated in numerous court decisions, highly favors settlement agreements among parties and will seek to enforce then whenever possible.” quoting Sun Microsystems of Cal., Inc. v. Eng’r & Mfg. Sys., C.A., 682 So. 2d 219, 220 (Fla. 3d DCA 1996).

Typically litigation related to estates and trusts involves claims of fraud, deceit and misrepresentation.  In Sugar, Appellees claimed that they were unaware that Idelle Stern had transferred funds to Sugar years earlier and attempted to get the trial court to carve out an exception to the general releases related to these transfers.  The trial court refused.

On appeal, the Court concluded that the general releases prohibited Appellees from re-litigating issues relating to the “unknown” transferred funds.  The Court noted it was apparent that Appellees knew of the transfers prior to the settlements and releases.  The Court went on to state that although the Global Settlement Agreement stated it was based upon the representations of the parties as of the date of the settlement, the agreement failed to incorporate any specific representations made by any party or attach a separate document detailing any such representations.  Accordingly, any purported representations could not be used in a later attempt to avoid any settlement terms based upon alleged misrepresentations.  The Court stated: “…after the assertion of claims involving dishonesty, the claimant in negotiations culminating in a settlement and release cannot rely on oral representations made by the party already asserted to have been dishonest.”