A Brief Primer on Rule 11 Agreements
Rule 11 of the Texas Rules of Civil Procedure governs agreements of coordination or settlement of claims or defenses. The rule has remained consistent in Texas for more than fifty years, but has evolved from a collection of common law rules into an established and separate code of ethics from the Texas Disciplinary Rules of Conduct.
The original rule was adopted in 1941, requiring attorneys to jointly sign every motion, order, and "pleading which might conveniently be embodied in a single paper." When judges began enforcing the rule, the provision became the subject of plaintiff and defense bar ire. In 1958, Rule 11 was amended to provide that all stipulations made with intent to control the course of the action was binding upon the parties and their attorneys "unless the same are by these rules made expressly revocable." In 1982, the language was further refined to provide that stipulations or agreements in open court were binding upon the parties and their attorneys and had the force of a judgment or order if in the record and consented to by the court. Rule 11 was amended again in in 1990, to require parties to make stipulations, agreements , or plans in open court or file them with the clerk of the court.
The original rule did not specify the nature of the stipulations, agreements, or plans intended to be governed by the rule. However, committee comments before and after amendment suggest the intent to provide that any agreement of parties in a civil case would be binding if made in open court or filed with the clerk.
Courts have expanded on the concept of what Rule 11 Agreement actually is. In Eason v. Toland, the Tyler Court of Appeals held that "[a] stipulation entered after a suit is underway . . . is a Rule 11 agreement." And in Stockwell v. Stockwell, the Amarillo Court of Appeals recognized the following definition of a Rule 11 agreement: "Rule 11 allows either an agreement made in open court or a file-stamped writing contained in the record to show an agreement." Similarly, in Smith v. Smith, the Austin Court of Appeals defined a Rule 11 as "any agreement, oral or in writing, that is filed in the record, canned off the bench, or contained in a transcript of the court’s proceedings." Finally, the San Antonio Court of Appeals defined a Rule 11 Agreement as a stipulation of the parties in open court or filed with the clerk.
The Legal Nature of Rule 11 Agreements
The requirements of a Rule 11 agreement are designed to subdue any later provability problems. See, Kipp Flores Architects v. Diderrich, S.W.3d ___ (Tex.App.-San Antonio, 2-4-09, review denied)(holding that an unsigned settlement agreement in which defendant agreed to pay "a sum of money") was enforceable as a Rule 11 agreement, notwithstanding the fact that it was not signed by either party.
A Rule 11 agreement is enforceable notwithstanding the statute of frauds. Cool-dev Ice Vending, LLC v. Palazzolo, S.W.3d ____ (2012 Tex.App.-Houston [1st Dist.], 6/28/12)(holding that an unsigned settlement agreement was enforceable as a Rule 11 agreement despite the fact that it violated the statute of frauds).
In order to facilitate compliance with Rule 11, the Texas Supreme Court has adopted standardized language to be used when drafting agreements, as follows:
It is ORDERED that:
1. Any writing signed by the parties or their attorneys stating all or part of the agreement between them in a suit is enforceable under Rule 11, Tex.R.Civ.P., only if three requirements are satisfied:
A. It is signed by all parties or by their attorneys in person or by agreement;
B. It is filed with the papers of the court; and
C. It recites, or has attached, the filed consent of the attorneys to the entry of judgment on the terms stated in the writing, or it recites that it was presented to the court and the court then announced that it granted approval and ordered its entry.
2. This order supersedes the same or similar language in prior orders of this Court. After 90 days from the filing of this order, all pending orders and judgments will be modified to include this language unless the "old" language is expressly continued by order of the trial or appellate court involved.
3. All courts and clerks in the State of Texas are ordered to enter this order on the records of their courts. Sup.Ct., 8/19/98.
The legal ramifications for non-compliance with Rule 11 can be significant to litigants, however, these sanctions may be mitigated if the parties are able to divide the enforcement issue from the underlying substance of the case. The most effective approach is for a party to file a Motion to Enforce and after it is granted enter into a settlement which evades the Rule 11 issue.
Typical Uses for Rule 11 Agreements
Typically, Rule 11 agreements are used in the context of divorce proceedings in Texas, although they are valid under the Texas Rules of Civil Procedure. After a divorce is filed, Rule 11 agreements are used by parties to make verbal agreements on the record that become binding settlements on the court. A Rule 11 agreement may outline actions to be taken, or property to be divided, such as half of the proceeds from the sale of a house. If a Rule 11 agreement is not followed, an attorney cannot compel settlement compliance unless the agreement contains a mechanism for enforcement.
Many settlement issues are resolved using a Rule 11 agreement, including:
Any Rule 11 agreement should be carefully drafted by the divorcing couple’s attorneys to ensure the proper terms and language are used. Including certain language can prevent any potential loopholes in the settlement. If an ex-spouse fails to comply with the terms of a Rule 11 agreement, attorneys can execute a Request for Enforcement. This forces compliance with the divorce settlement.
Rule 11 agreements are also commonly used when the parties to a divorce involve a business. In that case, a Rule 11 agreement can outline how the business is going to be divided, whether one or both parties will continue to run it, and any other parameters each party must follow concerning the business.
If you are considering a Rule 11 agreement, speak with an experienced Texas divorce attorney. Your legal counsel will help you draft an enforceable settlement agreement and secure your financial future in the divorce.
Crafting a Rule 11 Agreement
A Rule 11 agreement is not just a filing—a true Rule 11 agreement involves a contract subject to the rules of contract construction. "Contract" in this context is not the phrase "contract for the sale of goods" or "contract for the sale of goods" as used in U.C.C. § 2.2 or 2.3, which do not apply. But "contract" in this section does refer to the Uniform Commercial Code’s "quasi-contracts," namely, "the" warranty to perform in a reasonable way, or according to "a course of dealing," or "usage of the trade," or "a course of performance." U.C.C. § 2.1.
Just like other contracts, Rule 11 agreements should be signed by parties and lawyers. The failure to have a Rule 11 agreement signed by all relevant parties may result in a situation where parties are left with premature, posturing Rule 11 motions, which ultimately will be filed because there is no possibility of settlement without the Rule 11 agreement, while abandoning discovery, and spending court resources on a Rule 11 motion hearing instead of a merits hearing. See Reid Road Mun. Util. Dist. v. Am. Home Assur. Co., 307 S.W.3d 310 (Tex. 2010) (Rule 11 agreement requires signatures of parties and attorneys, but pre-suit agreement as to entire case is enforceable); Palacios v. Dorsett, 12 S.W.3d 879, 881 (Tex. 2000) (Rule 11 agreements require signature of parties); Hayes v. McKinzie, 1 S.W.3d 244, 247 (Tex. App.-Tyler 1999, pet. denied) (Rule 11 agreements require signature of all parties). See, generally, In re Lee, 47 S.W.3d 696, 699 (Tex. 2001) (Rule 11 agreement must be in writing by parties and their attorneys; a statement made by attorney in open court not enough).
The reason a Rule 11 agreement needs to be signed now, too, is that the Official Comment 2 to Texas Rule Civil Procedure 11 states that a Rule 11 agreement is not enforceable if the terms of the agreement are never reduced to writing. Of course, this statement is not binding precedent. Committee, subcomm. on civil practice, supra (in general, Official Comments issued by the committee that promulgates the Texas Rules are not binding).
Rule 11 agreements are otherwise just like any contract, with the exception that Rule 11 agreements are oftentimes not given parallel treatment to other contracts. See, e.g., RTC Mortg., Inc. v. Scanlan, 775 S.W.2d 8 (Tex. App.-Dallas 1989, no writ) (recognizing that Rule 11 agreement failed if no consideration is present). Just like most contracts, Rule 11 agreements require the parties’ intent. Id. (citing In re Gonzalez, 739 S.W.2d 380, 382 (Tex. App.-Corpus Christi 1987, no writ)).
Unlike other contracts, Rule 11 agreements require a broader interpretation as to whether the parties intended to be bound by the agreement. In re Lee, 47 S.W.3d 696, 699 (Tex. 2001) ("Rule 11 agreements should be broadly enforced to protect the integrity of the judicial process . . . When a litigant has induced a court to act through its misconduct or misrepresentations, it can hardly expect the other party to contribute to the litigation.");
Of course, Rule 11 agreements should also be sufficiently specific. See, e.g., Goree v. Goree, 581 S.W.2d 517, 519 (Tex. Civ. App.-Fort Worth 1979, no writ) (requiring specificity regarding real property in Rule 11 agreement). In fact, the most serrated agreements can tend to be the most enforceable agreements, as a matter of law. See, e.g., In re Hagan, 967 S.W.2d 383, 386 (Tex. App.-Houston [1st Dist.] 1998, orig. proceeding) (finding Rule 11 agreement enforceable due to precise wording).
Rule 11 Agreements – The Good, The Bad, and The Ugly
Understanding Rule 11 Agreements
Rule 11 Agreements have advantages for all persons involved. They create certainty. If they are well-drafted, then doing what the Rule 11 Agreement says is all that needs to be done. It is a contract like any other between parties to a lawsuit. They provide closure by eliminating the possibility of the other side going back on an oral agreement to settle made at a hearing or conference. It eliminates all issues that could arise from some other purported "oral agreement". In short, everyone knows what will happen on a given date in the future. The date is certain and all persons know what will happen on that date. The Judge knows what to expect and what they must do, if anything. Under some circumstances, Rule 11 Agreements provide flexibility for some parties that might not be there if there is just an order entered by the Court. If an attorney makes an agreement with another attorney that is put on the record, all the other attorney can do later is require the Judge to enforce the agreement. A Rule 11 Agreement may include other provisions that provide the other attorney flexibility by allowing them to not insist on a court order or to withhold entry of an order under some circumstances. It may protect them from their client saying they want to withdraw their consent in a way that does not highlight the change in position. For instance, in a case where a party offers to settle for $500,000, a Rule 11 Agreement may allow it to settle for $480,000 unless a party comes up with information that was already known that contradicts something that was relied upon . But, if the party offers to settle for $480,000, that is all they can offer, even if something previously unknown is discovered. The flexibility afforded by the Rule 11 Agreement may permit a party to avoid damaging the other party or adversely impacting their ability to proceed. There are potential negatives in using Rule 11 agreements, as well. If the other side believes you will not actually proceed with a case because of the Rule 11 Agreement, and they rely upon that belief, a case based upon "detrimental reliance" may arise later. I have had lawyers use Rule 11 Agreements and then try to settle the same case again right afterwards because they believe the other party really has no intention of following through on the agreement. Sometimes the agreement is merely for the purpose of showing the Judge or Court that progress is being made. If there is not, and the Court wants to make sure that will not happen again, the Rule 11 Agreement can be used to show it. It is an abuse of the Rule 11 Agreement process. If you proceed with a Rule 11 Agreement, you must be prepared to follow through on the strict limits you placed upon your client or the client’s limits on your authority to proceed. The Court is not there to help you out when things become uncomfortable by "modifying" the agreed to terms of the Rule 11 Agreement. If you believe your client will agree to more later, take the time and properly prepare and reschedule the Court hearing to make sure the client understands what they are doing before having a Court take the opportunity away to "reverse" the Rule 11 Agreement reached.
Breach and Enforcement of Rule 11 Agreements
The standards for enforcement of a Rule 11 agreement are those contained in the Federal Rules of Civil Procedure. The "strictures of Rule 11" require that such agreements be in writing, be signed by the party against whom the enforcement of the agreement is sought, and be signed by the attorney for the party against whom the enforcement is sought. See, e.g., Sikora v. Ohio State University, 159 F.R.D. 529, 531 (S.D. Ohio 1994) (quoting Schaffer v. Crystal Beach Life Estate, 42 F.3d 850, 855 (11th Cir. 1994)).
In addition, "the parties must review the agreement and represent to the court [that] the agreement is information: accurate, complete, and the product of arms[-]length negotiation." Sikora, 159 F.R.D. at 531 (citing Schaffer, 42 F.3d at 855). "[A]bsent satisfaction of all the requirements of [Rule 11(a)], an agreement between counsel or a party that modifies the contemplated motion will not be enforceable in the federal courts." Dorr, 198 F.3d at 176 (finding that an oral stipulation in open court did not satisfy Rule 11(a)(2)); Thompson v. Kaczynski, 283 F.3d 1028, 1033 (9th Cir. 2002) (holding that where the parties did not enter into a written stipulation and settlement agreement with signed certification of consent required under Rule 11(a)(1), while discussing a settlement on the record, "the agreement could not be enforced as a Rule 11 stipulation"); Freeland v. American Elec. Power, 122 F.3d 363, 364 (6th Cir. 1997) (finding that where the parties’ settlement agreement did not bear the signatures of the party or its counsel, nor include a certification under Rule 11(a)(2), "there was no basis for enforcing the agreement under Rule 11"). If a court finds that all requirements of Rule 11(a) are not satisfied, then the court cannot enforce the parties’ Rule 11 agreement.
Although the Fifth Circuit has not yet addressed whether a Rule 11 agreement can be unknowingly breached, at least two courts have raised the question. In Georgetown v. Powell, 215 F. App’x 366, 370 – 71 (5th Cir. 2007), the Fifth Circuit recognized that the district court did not address plaintiff’s claim that it was "not present when her attorney signed the Rule 11 Agreement" on behalf of her. The Fifth Circuit declined to rule on this issue because it is an unsettled matter. In In re American Airlines, Inc., 972 F.2d at 613, 614, the Fifth Circuit suggested that a client could not "knowingly and voluntarily" waive his right to sue by executing a Rule 11 agreement, but it did not specifically rule on whether the bankruptcy court violated Rule 11 when it enforced the agreement against a party who claimed he was unaware of the defect in his class action settlement agreement.
The Fifth Circuit’s most recent decision on Rule 11 agreements, however, casts doubt as to whether a Rule 11 agreement can be unknowingly breached. In Settings Court Reporting Services, LLC v. U.S. District Court for the Western District of Louisiana, 30 F.4th 412, 413 (5th Cir. 2022), the Fifth Circuit stated: The Grammy Ad Contract also contained a Rule 11 agreement: italicized text, which appears before a contract’s signature block, states as follows: The undersigned, counsel of record, hereby agree to the terms and conditions of the Rule 11 agreement set forth above and certify that all counsel of record for all parties consent that this case shall proceed on these terms and conditions. . .. [T]he joint motion was signed on behalf of both parties with the words "Without Prejudice," indicating noncompliance with Rule 11.
As a result, this Circuit seems to be unclear on whether a Rule 11 agreement that is unwittingly breached may be unenforceable.
Recent Rule 11 Agreement Opinions
Recent case studies involving Rule 11 agreements abound. In Morrison v. Zhang, No. 02-CA-108 (La. App. Cir. 2/26/04), the defendant was ordered to pay lump sum alimony. Three years later, she moved to modify the ruling on the basis of changed circumstance that her income had decreased and she was about to retire. The trial judge reduced the award but the court of appeals reversed, stating that the provision of La. Civ. Code art. 112 that allows modification of joint stipulations is not applicable to ordered spousal support.
In Amar v. Amar, No. 35246 (La. App. Cir. 1/12/05), the petitioner had judgment recognizing the partition of judicial community property (all property acquired during marriage in the absence of a matrimonial agreement). The partition agreement was signed by the parties and notarized. The parties-in-trial reduced the partition agreement to a judgment. However, more than 6 months later, the petitioner filed an action for rescission of the partition of community estate, dismissal of petition for partition, and for partition of community assets. He claimed that he had never signed the agreement. The trial court sustained an exception of no right of action, which the court of appeal vacated. The parties’ representations in the original judgment were based on the signed agreement, thus precluding petitioner from challenging such representations. La. Civil Code art. 1804 states that "[a]s between themselves spouses shall be bound by a matrimonial agreement they have entered into." With respect to third parties, a matrimonial agreement is enforceable in the same manner as any other contract. Id. The court of appeal also found that the petitioner did not have a right of action to annul the partition of the property.
In Carr v. Carr, No. 2002 CA 3498 (La. App. Cir. 5/14/03) , the court found that even a joint stipulation regarding custody must be based on the best interest of the child. The original judgment provided that the wife was entitled to sole custody. On appeal, the husband argued that the wife’s household was an unstable environment for the child. The court found that the wife’s admission to being unstable, coupled with the best interest of the child standard, warranted the change in custody. Similarly, in Brainard v. Brainard, 863 So. 2d 563 (La. App. Cir. 12/29/03), parties were divorced and the ex-wife, on rare occasions, had the children sleepover at her apartment, where the biological father of her youngest child also resided. The trial court held that the mother’s claim that she had equal time with the children undermined her argument that the other man was not in the children’s presence at the time. In Willowbrook Development Corp. v. International Fidelity Insurance Company, 844 So. 2d 218 (La. 2003), two attorneys, Mr. Wiley and Mr. Sheppard, entered a joint Stipulation regarding discovery in litigation. Mr. Sheppard’s judicially-notarized affidavit in support of his contempt motion stated that Mr. Wiley had destroyed and/or discarded documents in violation of the Stipulation. The district court failed to grant Mr. Sheppard’s motion for sanctions against Mr. Wiley based on his violation of the Stipulation. The Louisiana Supreme Court held that Rule 1.15 of the Rules of Professional Conduct prohibits an attorney from destroying or discarding documents in a violation of a Stipulation. In Rodriguez v. Louisiana Dept. of Transportation and Development, 879 So. 2d 90 (La. 2003), the employer and employee entered into a Stipulation, knowing that it would be incorporated into their judgement of divorce. The Stipulation provided $350 per month in child support but at trial, the trial court awarded $1,100 in monthly child support. On appeal, the Second Circuit lowered the monthly amount to $650, citing the Stipulation.