In Foufas v. Dru, a court recently held that a broadly worded release did not excuse defendant’s obligation to pay to plaintiff $275,000 as required under an earlier settlement agreement entered into between the parties.
Plato Foufas (“Foufas”) and Stanley J. Dru (“Dru”) were engaged in the management of casinos for two Native American tribes, the Lummi tribe in Washington and the Sycuan tribe in California. A dispute arose between Foufas and Dru, and Foufas filed suit. Thereafter, the parties reached a settlement in which Dru agreed to pay Foufas $275,000 in connection with the management of the Lummi tribe’s casino and 50 percent of any money Dru received in connection with the management of the Sycuan tribe’s casino.
Later, a further settlement agreement (the “release agreement”) was entered whereby the settlement related to the Sycuan tribe’s casino was changed to provide that Foufas would obtain a one-half interest in real estate owned by Dru and would receive 50 percent of any additional money received by Dru in the future from the Sycuan tribe.
The latter release agreement further provided, in part, that whereas “on or about January 1, 1999, the Parties have entered into a resolution of their business differences” and “desire to terminate any potential liability that may exist between them pursuant to such business dealings,” and that the parties agreed to release each other “from and against any and all claims, rights, debts” of “every nature, character and description, whether known or unknown, suspected or unsuspected.”
Dru argued the broadly worded language in the release agreement excused his obligations to Foufas under the earlier settlement agreement. Foufas disagreed, arguing the release agreement only released Dru’s obligations to the Sycuan tribe’s casino. Foufas then asked the court to order Dru to pay the $275,000 in connection with the management of the Lummi tribe’s casino.
The court rejected Dru’s argument, reasoning that the “whereas” clause in the release agreement indicated that the parties were only agreeing to release Dru’s obligations concerning the Sycuan tribe’s casino and not Dru’s obligations relating to the Lummi tribe’s casino. The court noted that “[a]ny other interpretation would produce absurd results, which is a good reason for declining an invitation to read contractual . . . language literally . . .”
This case illustrates that a court will look at the context in which releases were executed and will avoid an interpretation which has an absurd result. If you have any questions regarding the interpretation of language contained in a release, or any other legal document for that matter, please contact us.