Will Oral Settlement Agreement Hold Up?

Is an oral agreement to settle a case sufficient or does it have to be signed by all parties? A recent court decision provides the answer.

The MSPB and the court of appeals will enforce a settlement agreement that is read into the record and agreed to by both sides on the MSPB record, even though it is not signed by the parties. (Brown v. Department of Army, U.S.C.A.F.C. No. 05-3177 (NP), 12/9/05)

In this case recently decided by the federal court of appeals, the Army and its terminated employee reached a settlement agreement at the opening of the hearing before an MSPB AJ. The Army attorney read the 16 paragraph agreement into the record. In it Mr. Brown agreed to withdraw his appeal and litigation challenging his termination “with prejudice.”

The agency in turn agreed to change the personnel action from “removal to resignation for personal reasons.” The agency attorney indicated for the record that he agreed to the settlement agreement. Then the AJ asked Mr. Brown and his representative if each in turn agreed to the terms of the settlement. In response to specific questions from the AJ, Mr. Brown essentially said that he had an opportunity to consult with his counsel and after having done so that he “agree[d] to these terms.”

Mr. Brown’s lawyer stated that he too “agree[d] to the terms of the agreement as read.” (Opinion p. 2) The AJ then stated for the record that he accepted the settlement agreement and dismissed the appeal based on the terms of the agreement.

He kept the record open for a specific period of time should the parties decide to submit a written settlement agreement that was consistent with the terms that had been read into the record in order to supplement the record. Notwithstanding, he said: “I’m making clear that I don’t need a supplemental written agreement to settle the appeal.” (Id.)

Apparently experiencing a change of heart, and coincidentally represented by a different attorney, Mr. Brown petitioned the full Board to review the AJ’s initial decision, contending that the settlement agreement was “ineffective” because it had not been signed by the parties.

There was one sentence in the agreement that referred to the date of Brown’s signature on the document. This was not enough to win the day, however. Because this issue had not been raised before the AJ, the Board and the court of appeals declined to consider this challenge. The court further pointed out the “well settled” principle that an oral settlement is binding on the parties, especially where its terms are included in the administrative record as was done here. (pp. 3-4)

About the Author

Susan McGuire Smith spent most of her federal legal career with NASA, serving as Chief Counsel at Marshall Space Flight Center for 14 years. Her expertise is in government contracts, ethics, and personnel law.