Careful Wording Of Release Agreements

May 24, 2013 in Creditors Rights, FDCPA by Brad Council

Last month, the United States District Court for the Eastern District of Michigan handed down a decision regarding release agreements.  The case involved a personal debt owed by Jamie Hines to A&A American Financial, LLC (A&A), who was represented by G. Reynolds Sims & Associates (GRSA).  GRSA obtained a default judgment against Hines in state court; however, Hines and A&A entered in to a settlement agreement which allowed Hines to pay back the debt in monthly installments afterward.  The settlement agreement contained a release clause that states “Defendant [Hines] hereby forever releases the Plaintiff [A&A], their assigns, legal counsel, agents and successors from any and all further claims of whatever nature and all liability, known or unknown, foreseen and unforeseen, that could or may arise from this action or facts.”

Following the settlement agreements, Hines filed a complaint against GRSA based on the Fair Debt Collection Practices Act (FDCPA).  GRSA argues that the release agreement protects the defendant from Hines’ claims, and uses the ruling in Stolaruk v. Cent. Nat’l Ins. Co. of Omaha 522 N.W.2d 670 (Mich. Ct. App. 1994) to support his defense.  In Stolaruk, the release agreement referred to “all claims, past, present or future, known or unknown, accrued or not accrued, contingent or otherwise, relating to these parties arising out of or relating to the transactions between the Plaintiffs and the Defendants which are the subject matter of the instant litigation.” Id. at 672.  The Michigan Court of Appeals held that the release in this case dismisses any future claims Stolaruk may have.

Hines argued that the release agreement was ambiguous.  Hines stated that the wording “this action” could be interpreted to include only the state court collection case and not her FDCPA claims. Hines further argued that there was no language in the release to protect GRSA from future claims and that she could not have foretold the future actions that were currently before the court.

The court interpreted the agreement and reasoned that a contract is considered ambiguous when the language within may be reasonably interpreted in more than one way.  The court further stated that “[g]enerally, a release will ordinarily release all present, but not future, claims.”  Michigan courts have routinely found that future claims from future conduct will not be released unless the agreement specifically covers that scope.  In looking at Stolaruk v. Cent Nat’l Ins. Co. of Omaha, the court stated that the case does not support GSRA’s theory because neither release, GSRA’s or Stolaruk’s, expressly released future liability arising from conduct that had yet to occur.  Therefore, the court held that the release agreement is ambiguous.  Specifically, the court pointed out that the terms “this action”, “facts”, and “further” could have multiple interpretations.  The court thereby remanded the matter for further proceedings to determine the intent of the parties since the language of the agreement was ambiguous.

The Full Text of the Opinion May Be Found at:

http://scholar.google.com/scholar_case?case=13887224133987335086&hl=en&as_sdt=2,18

 

Many thanks to Brittany Page for her contributions to this article.  Brittany is a paralegal with Slovin & Associates Co., L.P.A.