What Is a Rule 11 Agreement?
A "Rule 11 Agreement" in Texas is a written agreement between the parties to a lawsuit setting out the terms of settlement of the case. Specifically, it is an agreement signed by all parties and their attorneys which (a) describes the agreement and states the terms of the settlement, (b) with respect to a modification of the agreement, states the terms of the modification, (c) is signed by all parties and their attorneys , and (d) is filed with the Clerk of the Court. A Rule 11 Agreement is enforceable as a contract and has the same effect as a judgment between the parties. It is also the equivalent of a final judgment for purposes of appeal in that a final order can be entered by the Court without requiring any further action by the parties if (i) the agreement is enforceable as written (i.e., contains no conditions precedent to breach or performance), (ii) the amount of the relief can be ascertained from the agreement, and (iii) the agreement is not ambiguous. Note, however, that the Texas Supreme Court requires that a Rule 11 Agreement must contain all of the essential elements of a judgment…everything that is necessary for rendering a judgment.
Legal Requirements for Enforcing a Rule 11 Agreement
In Texas, a Rule 11 Agreement is an enforceable settlement agreement between the parties if the following legal requirements are met: (1) It must be in writing; (2) It must be signed by all parties or their attorneys; (3) It must contain all agreements made regarding the pending actions; and (4) It must be filed with the court. The most common way for a party to execute the Rule 11 Agreement is for it to either sign the pleading itself or have its attorney sign the document. The Rule 11 Agreements are usually witnessed by a third party but that is not a requirement under the rule. All parties or their attorneys sign when the parties accept the rules and then have an agreement that is enforceable on the trial court even without a hearing or an order on file. It has been held that a signed Rule 11 Agreement will supersede all contrary provisions in other documents or in any unfiled settlement. The important thing to remember is that all parties have a duty to inspect the court record including documents electronically filed. If you were entitled to notice of the Agreement, were served with the Agreement or all parties were present and agreed to it at a hearing, then you cannot complain that the documents were never formally presented to the trial court.
How Do People Commonly Use Rule 11 Agreements?
Rule 11 Agreements are most commonly used in family law settings. The term "Rule 11" is a rule from the Texas Rule of Civil Procedure. Related to divorce, the rule states that "The court may enforce [or vary, discontinue or suspend] an agreement between counsel reciting the action taken by them in the cause and agreed to by the parties." Therefore, it is often the divorce lawyers for both spouses that are actually writing the Rule 11 agreement regarding the settlement of a case so that it can be enforced by the court.
Many litigants use Rule 11 agreements to get their case settled because of the speed and economy of a Rule 11 agreement versus the time and expense it takes to draft – and have a judge review – a final decree of divorce. Getting a divorce in Texas takes about 60 days from the day the couple signs the divorce decree to finalize the divorce (there are other requirements, but this is the general guideline). The lawyers practice what I call "divorce triage" – the couple’s divorces need to be done very quickly. By using a Rule 11 agreement, the lawyers can settle all of the issues contained in the divorce but preserve some of the more complex issues for later.
Advantages of Using a Rule 11 Agreement
When properly drafted, Rule 11 Agreements provide a significant benefit not only to the parties to a lawsuit, but to Texas Courts as well. These benefits include the following:
- Effective tool for case management – Rule 11 Agreements are useful for case management purposes and to expedite the case.
- Facilitate settlement negotiations – Rule 11 Agreements can be used to facilitate settlement negotiations between the parties. For example, a Rule 11 Agreement may be used to confirm the settlement of a lawsuit which is insufficiently detailed to constitute a Rule 11 Agreement (for example, confirmation of settlement in a case where attorneys run approximately $10,000., state a clear offer to settle for $X.00 and a rejection of same and attorneys run at $10,000., and state no counteroffer has been made), but nonetheless, confirms the settlement in the case. Such application should be exercised with caution. A handwritten note, such as, "Full and final settlement" may be sufficient to constitute a Rule 11 Agreement; however, use of the word "conditioned" should be avoided.
- Avoids unnecessary litigation costs – Rule 11 Agreements can avoid unnecessary litigation costs by allowing the parties to discuss the appropriate deadlines in a case. This allows the parties to discuss agreed pre-trial deadlines all at once without repeated letters or emails on each deadline.
- Eliminates misunderstandings between opposing counsel – Rule 11 Agreements are useful for eliminating misunderstandings between opposing counsel. For example, one attorney may be under the impression that a certain pre-trial matter was discussed and therefore agreed to, whereas the other attorney is under the impression that the other attorney did not intend to agree to the matter. In such situations, the party’s interests are best served by confirming the agreement in a Rule 11 Agreement.
Rule 11 Agreements are an important tool for attorneys handling litigation in Texas.
Disadvantages or Things That Can Go Wrong With Rule 11 Agreements
Not all Rule 11 Agreements are created the same. And parties, in their zeal to resolve a case, may fail to create a workable agreement that stands the test of time. Understanding the potential pitfalls and how to avoid them are essential to drafting an effective Agreement.
Common mistakes:
- Inadequate consideration. Agreements must be supported by adequate consideration, or they will be unenforceable. Typically, this just means a waiver, release, or agreement to give up some right. However, if one party gets substantially more than the other, it is a risk worth considering. Sure, you want to resolve the case, but you don’t want to overreach.
- Failure to clearly define all terms. Remember, this is contract law. Therefore, it is essential that all terms are clear. Otherwise, you may fail to bind your client to something they never agreed to.
- Confusing language that doesn’t give reserved rights. Under Family Code Section 6.706, an Agreement has a presumption of being true and cannot be challenged. That does not mean the parties cannot reserve rights. You must be very clear about any party’s intent to reserve their rights.
- Parties speaking on behalf of a third party. This happens often in closely held business situations . Even when parties claim that they are speaking on behalf of another, you must be careful that you have the authority to bind third parties.
- When parties do not understand the waiver. A major issue in many cases involving family businesses is that a spouse will orally agree to settlement and then later get cold feet. For instance, an ex-wife in a divorce proceeding was unhappy with her settlement and tried to side-step the Agreement when she got back to court by challenging the adequacy of the agreement. The appellate court found that the Agreement was enforceable against her, despite her claiming she did not understand the consequences.
How to avoid the pitfalls:
Be sure that all working drafts are referred to as "drafts" and that no one puts an actual name on the Agreement until the party is ready to execute a final product. Be sure to have the Agreement accurately reflect the intentions of the clients, talk through each term in open sessions and confirm the understanding of everyone. Also, if parties have given someone authority to take an action, be sure to explain that you will need that authority in writing so that there is not a misunderstanding about the extent of authority.
The more specific the terms, the less likely it is that a party can re-negotiate the terms.
Enforcing a Rule 11 Agreement in Texas
If a party fails to comply with a Rule 11 Agreement, and the other party wishes to enforce it, enforcement will likely first occur in the trial court pending the entry of a final judgment. The Texas Supreme Court previously held that the trial court cannot enforce a Rule 11 Agreement absent an arbitrable issue in the agreement. (Old Republic Nat’l Title v. Omni Fin. Corp., 192 S.W.3d 761, 763 (Tex. 2006)). In Omni, Old Republic and Omni Financial filed competing petitions in bankruptcy. The parties reached a Rule 11 Agreement settling the litigation. Omni later sought to enforce the Rule 11 Agreement after Old Republic refused to pay under the terms agreed upon in the Rule 11 Agreement. The Supreme Court found that the Rule 11 Agreement was not self-executing and that because there was no issue for arbitration to enforce, the trial court in bankruptcy court did not have authority to enforce the Rule 11 Agreement.
There is an exception for child support agreements. In re M.O.P., No. 04-12-00107-CV, 2012 WL 245081 (Tex.App.—San Antonio Jan. 19, 2012, no pet.). The San Antonio Court of Appeals held in In re M.O.P that a Rule 11 Agreement regarding child support may be enforced and is binding on the parties. The Court of Appeals relied on Section 153.0071 of the Texas Family Code: Trial courts are required to enforce agreed child support amounts unless the trial court finds the amount not to be in the best interest of the child. The Court of Appeals recognized that the dispute between Omni and Old Republic did not involve child support and therefore, the lower court would not have authority to enforce the Rule 11 Agreement.
Rule 11 Agreement Versus Other Common Settlement Agreements
Rule 11 agreements are distinct from other types of settlement agreements that may be entered into by the parties in a Texas civil lawsuit. While other forms of settlement agreement require only a basic written contract, a Rule 11 agreement must contain very specific – albeit straightforward – language to be considered enforceable. While a Rule 11 agreement is optional, these written contracts are often recommended to provide greater enforceability and clarity. If a party believes that the agreement may be contested or challenged later, a Rule 11 agreement may be the better option than more general contracts.
There are multiple types of settlement agreements that may be entered into by various parties involved in litigation. These agreements are typically straightforward written contracts between the opposing parties that require the specific actions of one or both of the parties. A typical settlement agreement would contain provisions for the performing party to take specific actions by a certain date. Examples of such actions that may be included in a settlement agreement include:
As described above , a Rule 11 agreement is a specific form of settlement agreement that is subject to Texas Rule of Civil Procedure 11. A Rule 11 agreement must contain two basic elements: While these two elements are very basic, the language actually required in a Rule 11 agreement goes beyond these two elements. The basic requirements that a Rule 11 agreement must meet accomplish two very important things. First, Texas public policy favors settlements and encourages resolution of disputes without litigation or court interference. The first element of a Rule 11 agreement – a writing signed by the attorneys and unrepresented parties – simply provides the opposing party with a document that can be used to put the court on notice that the parties have settled the action and want the court to enforce this settlement. Second, the second element of a Rule 11 Agreement – a statement that the agreement is enforceable despite failure of the parties to reduce the agreement to a written judgment – ensures that the settlement agreement between the parties will not continue to be subject to the litigation process, should the agreement be disputed.