ADR Settlement Agreement Drafting 3 — Questions and Answers
Question 1: What must a settlement agreement involving a minor's claims typically include to be enforceable?
- Court approval of the settlement terms (Correct answer)
- A notarized signature from the minor
- An independent attorney for the opposing party
- A bond posted by the settling party
Correct answer: Court approval of the settlement terms
Most U.S. jurisdictions require court approval (a 'minor's compromise') to bind a minor to a settlement agreement.
Question 2: In an employment discrimination settlement, which federal law requires the drafter to include specific ADEA waiver language for employees over 40?
- Older Workers Benefit Protection Act (OWBPA) (Correct answer)
- Title VII of the Civil Rights Act
- Americans with Disabilities Act
- Fair Labor Standards Act
Correct answer: Older Workers Benefit Protection Act (OWBPA)
The OWBPA mandates specific disclosures and a 21-day consideration period plus 7-day revocation right for ADEA waivers by employees 40 and older.
Question 3: A settlement agreement requires the defendant to take specific actions (e.g., remove a fence). Which type of relief does this represent?
- Injunctive relief (Correct answer)
- Compensatory damages
- Liquidated damages
- Nominal damages
Correct answer: Injunctive relief
Injunctive relief requires a party to perform or refrain from specific acts, as opposed to monetary compensation.
Question 4: Which provision in a settlement agreement specifies that any disputes about the agreement itself will be resolved through arbitration?
- Dispute resolution clause (Correct answer)
- Choice of law clause
- Integration clause
- Representations clause
Correct answer: Dispute resolution clause
A dispute resolution clause designates the method (e.g., arbitration, mediation) for handling future disagreements about the settlement agreement's terms.
Question 5: When drafting a class action settlement agreement, the agreement must receive what type of approval before binding absent class members?
- Federal Rule 23(e) court approval (Correct answer)
- Arbitration panel approval
- State bar association approval
- Department of Justice approval
Correct answer: Federal Rule 23(e) court approval
FRCP Rule 23(e) requires court approval and notice to class members before a class action settlement can bind absent class members.
Question 6: What is the primary risk of omitting a 'choice of law' clause in a multi-state settlement agreement?
- Courts may apply different states' laws leading to unpredictable outcomes (Correct answer)
- The agreement becomes automatically void
- Only federal law will govern the agreement
- The agreement cannot be enforced in any state
Correct answer: Courts may apply different states' laws leading to unpredictable outcomes
Without a choice of law clause, courts apply conflict-of-law rules that may select an unfavorable or unpredictable jurisdiction's law.
Question 7: Which element distinguishes a 'structured settlement' from a lump-sum payment settlement in personal injury cases?
- Structured settlements provide periodic payments over time, often tax-free (Correct answer)
- Structured settlements require court approval while lump-sum settlements do not
- Structured settlements are only used in workers' compensation cases
- Structured settlements eliminate the need for a written agreement
Correct answer: Structured settlements provide periodic payments over time, often tax-free
Structured settlements deliver compensation in installments, and physical injury payments under IRC § 104 are typically excluded from gross income.
ADR Settlement Agreement Drafting 3
What must a settlement agreement involving a minor's claims typically include to be enforceable?