Just When You Think You Know the Law . . .

hagenow2Regular readers of this blog know that we have spent a fair amount of time giving examples of how courts in Indiana regularly state that there is a strong public policy to enforce contracts.  In doing so, the court’s goal is to determine the intent of the parties at the time they made the contract, beginning with the plain language of the contract, reading it in context, and then determining if any part of the contract is ambiguous.  If it is ambiguous, then the court will construe the terms in the contract to determine and give effect to the intent of the parties at the time of the contract.  Otherwise, the court will enforce the plain language of the contract.

 In a recent case that is pending in the United States District (Federal) Court for the Southern District of Indiana, the Court acknowledged this basis principle of Indiana law, but ultimately determined that despite the plain language of a settlement agreement from a previous case, the settlement agreement and release could not be enforced against a plaintiff. In other words, it would not enforce the contract despite the fact that the Court admitted the contract was not ambiguous and the intent of the parties was clear.

The case involved the second of two class actions in which the plaintiffs had alleged violation of certain constitutional rights.  The plaintiffs were involved in both cases, the first of which had been settled through the terms of a settlement agreement.  The court noted, and it is important for the readers to know, that a person can contract away certain constitutional rights.  However, any such waiver of constitutional rights must be done “knowingly and voluntarily.”  In this case, the court was not convinced that at least one of the plaintiffs had “knowingly and voluntarily” waived her constitutional rights because there was no evidence that she had read the settlement agreement from the first class action.  Another of the plaintiffs had actually signed that settlement agreement, and therefore the court did dismiss her claim.

The court went so far as to say that it was “troubled” by the result and its possible implications.  Indeed, such a holding could call into question other class actions where there is no evidence that all of the class members knowingly and voluntarily relinquished certain constitutional rights.  Nevertheless, the court felt compelled, at least at the early stages of the litigation, to hold that the class member’s constitutional right to procedural due process trumped Indiana’s public policy of enforcing contracts, the parties’ contractual intent, and the plain language of the settlement agreement.

It is hoped that this case truly is an outlier and that Indiana courts will continue to enforce the intent of the parties as demonstrated by the plain meaning of the language used by the parties in their contracts.  This is the only way to find certainty in the law and to be able to more accurately predict for clients the ultimate result in cases involving contract disputes.