Releases - make sure they bring finality.

• Author: Tanner, Michael G.
• Position: Florida

You're feeling pretty good about yourself. Your biggest case for your best client is finally over. It was complicated and hard-fought. Your client, Scorched Earth, Inc.[1] (which has provided most of your billings for the last several years), is a major builder of commercial projects and found itself embroiled in a nasty dispute with a project owner, Dissatisfied Corp., which went from bad to worse. First, the foundation of the project, Shangri-La, began to crack, then problems appeared in the electrical system, and later still the HVAC system wouldn't work properly The problems seemed endless and the general counsel of Scorched Earth was at her wit's end and turned to you for help.

The trial was in its third week when you came up with a solution that worked for everybody and, even though Ms. General didn't particularly like the deal, she agreed that it made good business sense, in this case, for Scorched Earth to buy its peace, provided there were no more claims.

The settlement documents were signed and funds and releases were exchanged. And now, after a badly needed vacation, and a few days to get your desk back in order, you're in your office, happily working on your next project. Your secretary then interrupts your reverie and says that Ms. General is on the phone and that she sounds upset. With a slight tightness in your throat, you pick up the phone and try to sound like your usual confident self. "Another demand letter from Dissatisfied," she says. "More problems at Shangri-La; this time a fire in the storage room which they say was caused by a faulty breaker box we installed. They say they didn't know about the box when we settled and that the fire is our problem. I'm faxing the letter to you right now; let me know what we should do." "That's ridiculous," you snap. "We have a release. We'll get right on it." You instantly call Mr. Associate, who assisted you in the trial against Dissatisfied, to get down to your office--NOW. This has got to be wrong, you reflect. We used our standard release. You bring out a copy and read it again:

Each party hereto acknowledges, for themselves, their heirs, successors, assigns, officers, and directors, as appropriate, the full remise, release, acquittal and discharge of each and one another, of any claim or cause of action presently existing, whether known or unknown, including, but not necessarily limited to this lawsuit.

Mr. Associate enters your office and you explain the situation. "Research this and see me first thing in the morning," you tell him. You're starting to feel better. The release, you again notice, has very broad language and Mr. Associate is a crack researcher; he'll find the cases you need and if Dissatisfied dares to file suit, you'll move for summary judgment and be a hero all over again--twice on the same project!

Next morning you're in early, feeling good, but a bit nervous, waiting for Mr. Associate to see you. Finally, he walks into your office and you notice first the creases in his forehead. "You're probably not going to like this," he starts out. "The law seemed clear, but there's this new case...."

Sound far-fetched? In a residential construction setting, this was the situation addressed in the April 1998 decision of the First District Court of Appeal in Floyd v. Homes Beautiful Constr. Co., 23 Fla. L. Weekly D1119 (Fla. 1st DCA April 27, 1998). The facts of the case are these: In 1982, Homes Beautiful constructed and sold a residence to Mr. and Mrs. Floyd. Soon after construction was completed, cracks appeared in the foundation and in 1986 the Floyds filed suit against Homes Beautiful alleging that the residence was "negligently constructed in an unworkmanlike and defective manner contrary to the applicable building code for the City of Jacksonville, Florida and minimum industry standards for home construction...." The suit also alleged that Homes Beautiful had breached its "implied warranties of fitness and habitability" by constructing the residence on soil which allowed it to "settle." After six years of litigation, including two declaratory judgment actions, a verdict against Homes Beautiful and an appeal, the Floyds, Homes Beautiful, and an insurance carrier entered into a settlement agreement in November 1992 which included a release using the language of the above fictional Shangri-La release. All seemed well until 13 months later when the residence was destroyed by fire while the Floyds were away on vacation.

As a result of the fire, the Floyds again filed suit against Homes Beautiful, again alleging faulty workmanship in the construction of the residence. This time the Floyds alleged that Homes Beautiful had improperly located an electrical fuse box next to a clothes dryer vent when it constructed the residence in 1982. The Floyds alleged that over time the dryer vent permitted moisture to accumulate in the area of the fuse box, eventually causing the wiring in the box to short-circuit, igniting the...