Carve Outs, General Releases, and Sloppy Lawyering

I was reading a recent motion this morning by the City of New York to set aside a plaintiff's verdict when I stumbled across a huge boo-boo committed by plaintiff's counsel. Depending on how the arguments play out, the plaintiff may have just given away a $510,000 verdict (plus legal fees that will likely be somewhere in the six figures). If nothing else, it serves as an object lesson for one way to easily avoid possible malpractice. The name of the case or the attorneys is not important (and no, it's not me).

For those of us that represent clients who are likely to have other claims that may or may not already be in suit, it is particularly useful to inquire about a client's roster of potential claims. Not only may it provide some ammo for negotiation purposes, but because allowing your client to sign a general release without some due diligence is, well, let's say it's not a good idea.

The important facts are as follows: plaintiff brings a case against NYC and members of the NYPD for a violation of his civil rights. Let's call that Case 1.

On a different date and time, the same plaintiff sues NYC and other members of the NYPD for a different violation of his civil rights that occurred on a different date and involved different officers. We will call that Case 2. Evenutally, both Cases 1 and 2 are pending at the same time in the United States District Court for the Eastern District of New York, although as separate actions before different judges.

Oh, and the same lawyer is handling both cases for the plaintiff and the same unit within City's Law Department is handling both cases for the defendants.

In May 2013, the lawyer negotiates a settlement of Case 1 for $20,000 while Case 2 is still alive and well. As part of the standard settlement paperwork, the City sends plaintiff a General Release that contains language that reads:

Know that I, [PLAINTIFF], . . . in consideration of the payment of Twenty Thousand ($20,000,00) DOLLARS to me by the City of New York, do hereby release and discharge the defendants The City of New York, . . . theìr successors or assigns; and all past and present officials, employees, representatives, and agents of the City of New York or any entìty represented by the Office of the Corporatíon Counsel, from any and all liabílíty, claims, or rights of action alleging a víolatìon of my cívíl rights and any and all related state law claims, from the begínning of the world to the date of thìs General Release, including claims for costs, expenses, and attorneys' fees. 

While plaintiff's lawyer surely must know of his client's other claims (since he is the guy's attorney and is actively litigating the claims), he apparently doesn't bring it up with defendants and does not ask for what is called a "carve out." This is a clause in the release that says, in effect, the release does not waive or negate any claims the plaintiff might have with respect to a particular series of events, such as those stemming from his arrest on X date, etc. Because counsel has not discussed the second case, nor requested the carve out, it's not in the release.

In June 2013, plaintiff's counsel lets his client execute the above. And so, plaintiff took $20k in exchange for expressly giving up his claims in Case 1 and any other civil rights claims that had accrued as of that date, which would obviously include the claims in the already filed Case 2.

That should be the end of Case 2, right? Not so fast. Some of the defendants filed an amended answer in 2012, and so reasonably did not cite the as of yet non-existent release. The individual defendant did not answer until August 2013, and he too did not raise this affirmative defense. Moreover, Case 2 was litigated through 2013 and into 2014. At no point following the June 2013 Case 1 release, did the defendants move to amend their answer to add the affirmative defense of release and waiver.

Finally, in late June 2014, less than a month before trial, the defendants wised up. Without any prior warning (having told the magistrate judge months earlier that they would not move to dismiss), they moved to dismiss on the grounds of release and waiver. They did not move to amend the complaint. The district judge understandably deferred the issue until after trial.

Plaintiff prevailed at trial on his excessive force claim. The jury awarded $480,000 in compensatory damages against the individual defendant and another $30,000 in punitives.

The defendants are now moving to set aside the verdict and dismiss the action on the sole basis of the release executed in Case 1. Plaintiff's opposition has not yet been filed.

What will he say? I would hope that he reads Federal Rule of Civil Procedure 8(c)(1), which reads, in relevant part:

In General. In responding to a pleading, a party must affirmatively state any avoidance or affirmative defense, including: . . . release [or] waiver.

Here, defendants never raised release or waiver as an affirmative defense, even while making their recent motion, and thus plaintiff's indisputable release and waiver should not be available to the defendants. Even if plaintiff's counsel makes this argument, it is not entirely clear what the court will do. There are all sorts of questions of equity and so forth.

The take away is simple: make sure you know whether your client has other civil rights claims before you allow him to waive all possible civil rights claims.