The California Chamber of Commerce yesterday added AB 2748 (Gatto) to its job killer list, bringing the total number of bills to 20. The recently amended bill is on third reading on the Assembly Floor.
AB 2748 (Gatto; D-Glendale) deals with release clauses.
CalChamber has deemed the bill a job killer because it would eliminate incentives to settle lawsuits and would instead expose businesses to multiple rounds of litigation by creating statutory prohibitions on “release” clauses in settlements pertaining to “environmental disasters.”
California’s public policy has long been to encourage settlement over litigation in the interest of efficiently and economy for the courts and for the parties involved. However, AB 2748 would encourage just the opposite, instead requiring that otherwise resolvable claims be fully litigated at great expense to the parties, the courts and the public.
According to CalChamber’s letter of opposition, AB 2748 impedes the ability of litigants to reach a settlement related to environmental disasters and, in turn, encourages disputes to be fully litigated by statutorily prohibiting parties’ ability to waive Civil Code Section 1542 in settlement agreements. Civil Code Section 1542 is a general release clause and the ability to waive it is one of the primary incentives for defendants to settle disputes and avoid prolonged expensive litigation.
CalChamber believes that parties should be permitted to enter into a mutually agreeable settlement to avoid prolonged litigation and thus promote the long-held California policy to encourage settlement over litigation; however, AB 2748 attempts to dictate contractual provisions and, in doing so, will guarantee an influx of litigation.
Indeed, when a business settles a claim with a party, the business should have certainty that the same party will not sue the business a day after a settlement is reached regarding a claim that could have been raised at the time of settlement. Yet, AB 2748 would essentially assure such an outcome, thereby eliminating the incentive to settle.
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Staff Contact: Anthony Samson