The error in the red and white settlement agreement stated that the defendant was «required to pay the [plaintiff] $2,100,000.00 (`Total Payment Plan Amount`) plus interest.» The court is aware of the language required to avoid this problem. «The parties could have included in the agreement terms stating that [the defendant] is required to pay the [plaintiff] $2.8 million, but as long as all payments are made on time in accordance with the payment schedule, the amount due will be discounted to $2.1 million.» Finally, an appeal decision from California gave clear instructions on how to draft a settlement agreement with payments backed by a decision that will stand in court. The Court of Appeal overturned the verdict for $2.8 million and ruled that the correct amount of the verdict was $2.1 million, or $700,000 less. This was based on the language of the settlement documents. The Rouge-Blanc case involves a debt of US$1.8 million plus interest and legal fees. To resolve the issue, the defendant agreed to make payments totalling $2.1 million, secured by a verdict of $2.8 million. The defendant defaulted and, at the plaintiff`s request, the $2.8 million verdict was recorded. Under California law, a penalty for breach of contract is illegal. A settlement agreement is a contract. In a 2015 note, we discussed the law on the subject at the time and suggested how to craft an agreement that would withstand challenge.
The recent decision in Red & White Distribution, LLC v. Osteroid Enterprises, LLC, 2019 DJDAR 7516 (August 9, 2019), confirms our advice and provides a roadmap. The rule is simple. A penalty for non-payment is not applied, but the loss of a discount for immediate payment is applied. .