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A federal district court in California held that a discrimination complainant could rescind a mediated settlement agreement because her attorney applied “intense pressure” and coerced her into signing the agreement.
In Ryles v. Palace Hotel, No. C 04-5326 SBA, 2006 WL 2850025 (N.D. Cal. Oct. 4, 2006), Ryles sued Palace Hotel, her former employer, for discrimination in violation of Title VII.
The parties attended mediation and agreed to a settlement, but there was some difficulty finalizing the agreement. After the parties exchanged several drafts, Ryles signed the agreement, but only because her attorney allegedly told her that if she did not sign the agreement, she would have to pay $10,000 within the week, lose her house, and have no chance of winning the case. Within days of signing the agreement, Ryles sent a letter to the Court complaining about her attorney’s behavior.
Palace Hotel subsequently moved the Court to enforce the settlement agreement. Under Stroman v. West Coast Grocery Co., 884 F.2d 458, 462 (9th Cir. 1989), release of Title VII claims must be “voluntary, deliberate, and informed.” In applying that standard, courts must consider the “totality of the circumstances.” The factors to be considered include the clarity of the agreement, the claimant’s education and business experience, whether the atmosphere for the execution of the agreement was coercive, and whether the plaintiff had the benefit of counsel.
All but one of those factors favored enforcement. However, one of the factors – whether the atmosphere for the execution of the agreement was coercive – weighed heavily against enforcement because of the “intense pressure” applied by Ryles’ attorney. Based on that factor, the Court held that Ryles could rescind the settlement agreement.
In reaching its holding, the Court cited Ryles’ letter to the Court as bolstering her credibility. Moreover, the Court rejected Palace Hotel’s argument that California law required coercion by the other party to the contract, noting that the release of Title VII claims is governed by federal law.
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