As we have described previously, minors generally cannot enter into binding agreements, and for this reason, attempting to enter into a binding settlement with a minor can be problematic. A conservator appointed by a court can settle a claim on a minor’s behalf, but this procedure can make a small claim unnecessarily complicated. ORS 126.700 has been relied on to settle claims under $10,000 with minors, but that statute does not explicitly state that a guardian may enter into a settlement agreement which is binding on the minor child. In response to the above concerns, the 2007 Oregon Legislative Assembly passed ORS 126.725, which established how an entity can settle a claim by a minor for $25,000 or less.

     House Bill 2687 will maintain the basic statutory scheme of ORS 126.725. Basically, the statute may be used to create a binding settlement for a claim by a minor if: (1) the total amount of the claim is $25,000 or less, (2) the person entering into the settlement has legal custody of the minor, (3) no conservator has been appointed for the minor, and (4) the person with legal custody signs both the affidavit or verified statement and a release. Some of the most significant changes to the ORS 126.725 in House Bill 2687 relate to how a settlement is paid.

     Under House Bill 2687, if the minor is represented by an attorney, payment will be much simpler for the settling party. If the settling party pays the settlement in cash (which should include “check”), there shall be a direct deposit into the minor’s attorney’s trust account. The minor’s attorney shall then deposit the money from the trust account to a federally insured savings account in the sole name of the minor. The original statute states that the settlement funds were to be deposited directly into an account in the sole name of the minor, which raised a significant question regarding how the minor’s attorney would ever be paid. The settling party can probably just instruct the minor’s attorney to distribute the funds as described in ORS 126.725, and the minor’s attorney should ultimately be responsible for complying with the statute.

     House Bill 2687 does not change how payment is made for an unrepresented minor. If a minor is unrepresented, the settling party should make payment directly to a federally insured savings account that earns interest in the sole name of the minor. Notice to the minor shall be made via personal service or first class mail.

     It should be noted that according to House Bill 2687, the funds in the savings account established for the minor cannot be withdrawn, removed, or transferred to any person, including the minor, except by court order or when the minor reaches 18 years old or when the minor dies. The original statute does not contain any restrictions on funds that are deposited in the minor’s account.

     A practical matter that the 2009 Legislative Assembly has addressed is the difficulty in locating a bank that would set up a savings account in the sole name of the minor. Most everyone who has attempted to locate a bank that would create such an account has seemingly run into some difficulties (most banks require a parent be named on the account in addition to a minor child). In response, House Bill 2687 explicitly states that an unanticipated minor may contract with a bank to establish a bank account for the purpose of depositing payments made under ORS 126.700 or 126.725. Hopefully, it will be much simpler to get an appropriate account set up.

     Another feature of House Bill 2687 is the option of paying a settlement through the purchase of annuity rather than by making a deposition into a checking account. The bill also describes how to make a payment to a minor pursuant to a judgment which is $25,000 or less.

     There are still some potential problems with the statute. As noted previously, although the drafters certainly intended the statute to govern any “settlement” of $25,000 or less, they used the term “claim”. There is a potential question as to whether a $50,000 “claim” that “settles” for $25,000 or less is subject to the statute. But, now at least, House Bill 2687 explains that the total amount of the “claim” does not include “reimbursement of medical expenses, liens, reasonable attorney fees and costs of suit.” The statute still contains references to a “verified statement” and to the lack of need for “further court approval,” which are potentially problematic, but some of the most important issues with ORS 126.725 have been addressed.

     If you have any questions, please feel free to contact the authors: Martin M. Rall (marty@lerlaw.com) and Flavio A. Ortiz (alex@lerlaw.com) at 503-768-9600.