The purpose of a Settlement Agreement almost always includes obtaining a Release of all claims based upon the same conduct, whether or not the claims were actually made. Sometimes, even when the party receiving the Release pays lawyers handsomely to craft the Release, a Court comes along and ruins it with a holding that the previous Release does not bar the present lawsuit.
Such is the holding in a case in which the United States, joined by State Attorneys General, sued over alleged misconduct which induced the Federal Housing Administration (FHA) to insure Mortgage loans arranged by Bank of America and Wells Fargo and other high-rent-district Defendants.
The procedural basis for this ruling was Wells Fargo's Motion to Enforce a previous Consent Judgment (i.e., to enforce a settlement with a Release in it), which was drafted on behalf of some or all of the same Defendants.
Wells Fargo argued that the Release barred all litigation based on the same "underlying conduct"; the Court was of the opinion, after reading the Release, that it released only the specific "claims" which were chosen for identification in the Release.
To quote the words written by the Court to announce its holding in this regard:
In Paragraph 3(b) [of the Release drafted on behalf of the Defendants], the United States releases Wells Fargo from claims based on the annual certification. See Release ¶ 3(b) at F–16–F–17 (“[T]he United States fully and finally releases [Wells Fargo] from any civil or administrative claims it has or may have .... under FIRREA [and] the False Claims Act where the sole basis for such claim or claims is that [Wells Fargo] submitted to HUD–FHA ... a false or fraudulent annual certification that the mortgagee had “conform[ed] to all HUD–FHA regulations necessary to maintain its HUD–FHA approval ...”). Paragraph 3(b) specifically states that claims based on fraudulent annual certifications are released; it does not state that claims based on “Covered Origination Conduct” or any other underlying conduct are released. Paragraph 3(b) does not mention the conduct underlying annual certifications. Presumably, a false annual certification could jeopardize each application for FHA insurance during that year and potentially expose Wells Fargo to hundreds, if not thousands of claims under the FCA and other statutes.
United States v. Bank of Am., 2013 WL 504156 *6 (D.D.C. February 12, 2013). [Emphasis by the Court.]
To say again, the purpose of a Settlement Agreement almost always includes obtaining a Release of all claims which were made, or which could have been made, based upon the same conduct. Sometimes, even when the party receiving the Release pays lawyers handsomely to craft the Release, a Court comes along and ruins it with a holding that the previous Release was not written in such a way as to bar the present lawsuit. It appears that these troubles from time to time bedevil other parties besides Insurance Companies settling lawsuits for their Policyholders or for themselves.
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