Almost all contracts contain “boilerplate” language. You may be tempted to skip over these provisions, assuming they are nothing more than unnecessary legalese. But a recent Seventh Circuit opinion, Engineered Abrasives, Inc. v. American Machine Products & Service, Inc., No. 17-1429, 2018 WL 828211 (7^th Cir. Feb. 13, 2018), serves as a reminder to all contracting parties not to disregard any provisions of a contract, no matter how boilerplate, irrelevant, or inconsequential they may seem.

The principals of American Machine were previously employed by Engineered Abrasives, Inc. In 2011, they left Engineered Abrasives to open a competing business. Several years later, Engineered Abrasives sued American Machine and its owners for stealing trade secrets and trademark infringement. After American Machine and its principals failed to participate in that lawsuit, the court entered a default judgment against them in favor of Engineered Abrasives in the amount of $714,814.04. American Machine and its principals never paid that judgment.

Five months after obtaining the judgment in the first lawsuit, Engineered Abrasives sued American Machine and its owners again, alleging additional improper competitive activities. The parties reached a settlement in the second lawsuit and entered into a settlement agreement. The settlement agreement contained the typical boilerplate language found in most settlement agreements, including the following:

a. [Engineered Abrasives], on behalf of itself, its parents, subsidiaries, affiliates, officers, directors, employees, agents, successors and assigns, hereby releases [American Machine], their subsidiaries, affiliates, officers, directors, employees, agents, attorneys, shareholders, successors and assigns, of and from any and all rights, claims, debts, demands, acts, agreements, liabilities, obligations, damages, costs, attorneys’ fees, expenses, actions, and/or causes of action of every nature, character and description, whether known or unknown, suspected or unsuspected, which it ever had, now has, or may hereafter claim to have by reason of any matter, cause or circumstances whatsoever arising and including the date of the Agreement, including but not limited to the claims and defenses set forth in the Action.

After the parties executed the settlement agreement, American Machine filed a motion under Federal Rule of Civil Procedure 60(b), arguing that the settlement agreement in the second lawsuit released Engineered Abrasives’ judgment in the first lawsuit. That is, American Machine argued that Engineered Abrasives released any right to collect on its earlier judgment by entering into the settlement agreement in the second lawsuit. In response, Engineered Abrasives argued that it didn’t intend to release the earlier judgment, pointing to evidence outside of the settlement agreement, such as its pre-settlement demand letter that did not include any mention of the earlier judgment, a previous draft of the settlement agreement that did not include this boilerplate language, and the fact that the parties did not even discuss the first lawsuit or the earlier judgment during the settlement conference.

The district court disagreed with Engineered Abrasive’s arguments regarding its intent to release the earlier judgment. The court granted American Machine’s Rule 60(b) motion, finding that the settlement agreement was unambiguous and released “all claims, debts … liabilities, obligations, damages” between the parties, including the judgment in the first lawsuit.

Engineered Abrasives appealed, arguing that the settlement agreement was ambiguous. In particular, it argued that it was unclear from the language of the settlement agreement itself whether Engineered Abrasives had released its earlier judgment against American Machine. Thus, according to Engineered Abrasives, the court should look to evidence outside of the settlement agreement to determine whether the parties intended to release the earlier judgment.

The Seventh Circuit plainly rejected this argument. The Seventh Circuit found that the terms of the settlement agreement were unambiguous, noting that the settlement agreement did not contain any contradictory release provisions or other terms that made the agreement ambiguous. Citing black letter law, the Seventh Circuit held that the court thus had to enforce the terms of the unambiguous settlement agreement as written without considering extrinsic evidence. The court ultimately held that the settlement agreement unambiguously released the earlier judgment and, therefore, Engineered Abrasives was barred from attempting to collect the earlier judgment.

The lesson here is clear, and perhaps, seemingly obvious. All contracts contain boilerplate language. But just because the language is “boilerplate” or seems like something lawyers just put in all contracts, doesn’t make it less likely to be enforced. So, the next time you’re asked to enter into or draft a contract, carefully consider all of the terms, including the boilerplate language, or ask your lawyer to review it. That language may be more consequential than you think.