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Category: Governance/Legal
Title: Settlement Authority Policy
Approved by: Board of Trustees
Date Approved: December 3, 2008
History: N/A
Related Policies: Transaction Authority Policy
Additional References:
Responsible Official: Office of the General Counsel
Policy Statement
Entities Covered by this Policy
All units of the College.
Office of the General Counsel
(909) 607-8966
Overview
The President, as the Chief Educational and Administrative Officer of the College, shall be the only officer of the College who is authorized to approve any settlement transaction related to a legal claim or regulatory matter, which authorization is subject to compliance with the procedures set forth below. Unless otherwise directed by the President, prior to submitting a proposed settlement agreement to the President for approval, the relevant vice president or department supervisor shall review the proposed settlement agreement with the Business Office and of the General Counsel for a review of the material financial and legal aspects of the proposed settlement.
Procedures
In authorizing a legal or regulatory settlement, the President shall follow the procedure set forth below[1].
A settlement transaction requires the approval of the Board of Trustees when it:
- Binds the College to $1 million or more (irrespective of any amounts expected to be reimbursed by insurance proceeds); or
- Involves a significant change from a significant existing policy or practice of the College.
A settlement transaction requires the approval of the Executive Committee when it binds the College in the range of $500,000 - $1 million (irrespective of any amounts expected to be reimbursed by insurance proceeds). A settlement transaction requires the approval of the Chair of the Board of Trustees and the Chair of the Audit Committee when it binds the College between $125,000 and $500,000 (irrespective of any amounts expected to be reimbursed by insurance proceeds). If it is not practical or feasible to obtain the approval of the Chair of the Board and the Chair of the Audit Committee, then the settlement transaction may be approved by the President after consultation and agreement by:
- Any one of the Board Chair or the Chair of the Audit Committee, and
- Any Vice Chair of the Board.
A settlement transaction that binds the College below $125,000 (irrespective of any amounts expected to be reimbursed by insurance proceeds) may be approved by the President; provided, however, that in matters which are part of a series of similar transactions or that may result in a series of settlements or judgments that could significantly exceed $125,000, the President should, where practical and feasible, consult with the Chair of the Board of Trustees and/or the Chair of the Audit Committee to confirm whether additional steps are appropriate prior to approving the proposed settlement (such as calling a special meeting of the Audit Committee to review the proposed settlement).
Example One: Employment Discrimination Claim Settled through Voluntary Mediation
- The College receives a demand letter from employee (Plaintiff) alleging various forms of employment discrimination.
- The College submits the claim under its legal liability coverage with United Educators (UE), pursuant to which CMC is expected to cover the first $75,000 of expenses (including legal fees and any settlement proceeds) and UE would normally cover all expenses in excess of $75,000.
- The parties (including UE) agree to voluntary mediation, and the matter is ultimately settled for a total of $150,000.
- Pursuant to paragraph two of the Settlement Authority Policy, the President would be authorized to settle this matter after obtaining the approval of the Chair of the Board and the Chair of the Audit Committee.
Example Two: Donor Dispute Settled through Agreement to Return Gift
- The Donor of a $1 million restricted endowment gift notifies the College of an alleged violation of gift restrictions and demands a return of the gift.
- Although the College disputes the allegations, the President determines that it is in the best interests of the College to return the gift to avoid protracted litigation and a public controversy.
- Prior to authorizing the settlement, the President must obtain approval by the Board of Trustees pursuant to paragraph 1 of the Settlement Authority Policy.
Example Three: Employment Discrimination Claim Settled in advance Mediation or Litigation
- The College receives a demand letter from an employee (Plaintiff) alleging various forms of employment discrimination and offering to settle the matter for $50,000 in advance of filing a lawsuit.
- The parties engage in settlement discussions and ultimately agree to settle the matter for $25,000.
- The President may authorize this transaction without any further consultation or approval, unless the settlement may trigger a series of additional settlements or judgments that could significantly exceed $125,000.
[1] The Settlement Authority Policy’s procedures are generally adapted from the College’s Transactional Authority Policy, but include certain adjustments that reflect the unique circumstances associated with legal settlements. As a result, compliance with the procedures set forth in the Settlement Authority Policy, and not with the procedures set forth in the Transactional Authority Policy, shall govern the approval procedure for settlement transactions.
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