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noting that courts may look to the ordinary linguistic meaning of a term to define the terms of the agreement.
Summary of this case from Dominion Nutrition, Inc. v. CescaOpinion
99 CV 02137.
February 28, 2000.
MEMORANDUM OPINION AND ORDER
Defendants Oak Lawn Public Library (the "Library"); and James Casey, Susan Baird, Ann Stovall, and James Baker (the "individual defendants"), object to Magistrate Judge Arlander Keys's Report and Recommendation ("R R") of December 3, 1999, which denied defendants' motion to enforce an oral settlement agreement reached with Plaintiff Robert L. DeFalco, ("DeFalco") on July 20, 1999. For the reasons set forth below, the court adopts the R R and reinstates DeFalco's case as amended by him on January 13, 2000.
On January 13, 2000, DeFalco filed a Second Amended Complaint that terminated all defendants except Oak Lawn Public Library. Accordingly, the court denies the individual defendants' Second Rule 12(b)(6) Motion to Dismiss [37-1] as moot.
Background
DeFalco, a former part-time security guard, filed a complaint on April 1, 1999 alleging that the Library, along with the individual defendants, engaged in sexual discrimination in violation of Title VII of the 1964 Civil Rights Act. (R R at 2); see also First Am. Compl.).
Throughout this opinion "R R" refers to Magistrate Judge Keys's Report and Recommendation dated December 3, 1999; "Tr." refers to the transcript of the hearing before Judge Keys on September 24, 1999.
On July 20, 1999 DeFalco, his court-appointed attorneys, and defendants' attorneys, with the assistance of this court, entered into a pretrial settlement conference. (R R at 2.) Following a morning of discussions, the parties reached an agreement in principle and this court entered an Order [13-1] dismissing the case with leave to reinstate within forty-five days. (Id.) After a series of unsuccessful attempts to reduce the settlement agreement to writing, particularly the release and confidentiality provisions, DeFalco moved this court to reinstate his case, vacate the dismissal order, and allow his court-appointed counsel to withdraw. (Id.) Defendants filed a motion to have the settlement agreement enforced. (Id.)
This court ordered a hearing regarding the enforcement of the settlement agreement and the withdrawal of DeFalco's court-appointed counsel before Magistrate Judge Arlander Keys. Judge Keys heard the matter on September 24, 1999 and granted DeFalco's attorneys' motion for leave to withdraw. (R R at 2-3.) On December 3, 1999, based upon testimony by DeFalco, his former court-appointed attorney, and defendants' attorney, Magistrate Judge Keys recommended that defendants' motion to enforce the settlement be denied and DeFalco's motion to vacate the dismissal order and reinstate the case be granted. (R R at 6.) Judge Keys found that there was not a meeting of the minds with respect to the enforceability of the oral agreement and the meanings of both the release and confidentiality provisions. (R R at 4.)
Specifically, DeFalco testified that he never believed that he would be bound until he signed a written agreement. (Id.) DeFalco's belief was bolstered when this court stated that the case could be reinstated. (Id.) Furthermore, no one explained either the release of claims or confidentiality provisions to DeFalco during the settlement discussion. (R R at 4-5.) DeFalco wanted to pursue a defamation claim in state court against one of the defendants and believed that the release provision only applied to the claims within the defendant's scope of employment. (Id.) Finally, the specifics of the confidentiality agreement only became evident in the first written draft. (R R at 5.) DeFalco understood confidentiality to mean that he would be precluded from disclosing the settlement dollar amount. (Id.) In fact, the confidentiality agreement meant complete confidentiality, which included even the fact that a settlement had been reached. (Id.)
Analysis
The standard of review, under Rule 72(b) of the Federal Rules of Civil Procedure, requires a de novo review of specific written objections to the Magistrate's recommendations, including an opportunity to assess new evidence. Fed.R.Civ.P. 72(b); see also Willis v. Caterpillar Inc., 199 F.3d 902, 904 (7th Cir. 1999) (reiterating that the court may also "accept, reject, or modify the recommended decision" citing Fed.R.Civ.P. 72(b));Rajaratnam v. A.D. Moyer, 47 F.3d 922, 925 (7th Cir. 1995) (noting that the de novo determination extends to facts and legal conclusions).
This de novo standard of review does not require a new hearing, rather this review "simply means that [the court] must give `fresh consideration to those issues to which specific objections have been made.'" Id. at 925 n. 8 (quoting H.R. Rep. No. 1609, 94th Cong., 2d Sess. 3 (1976)). The court has the discretion to "receive additional evidence and rehear witnesses." Id.
The disputed issue before this court is whether to hold the plaintiff to the settlement agreement. This court has the authority to hold a party to an oral settlement agreement. See Glass v. Rock Island Refining Corp., 788 F.2d 450, 455 (7th Cir. 1986); Thermos Co. v. Starbucks Corp., No. 96 C 3833, 1998 WL 299469, at *4 (N.D. Ill. May 29, 1998).
Federal law does not require . . . that the settlement be reduced to writing. Absent a factual basis rendering it invalid, an oral agreement to settle a Title VII claim is enforceable against a plaintiff who knowingly and voluntarily agreed to the terms of the settlement or authorized his attorney to settle the dispute. Glass, 788 F.2d at 454 (quoting Fulgence v. J. Ray McDermott Co., 662 F.2d 1207, 1209 (5th Cir. 1981)).
Title VII Claims require "that an employee's consent to settle . . . be voluntary and knowing." Id. at 452 (citingAlexander v. Gardner-Denver Co., 415 U.S. 36, 94 (1974)). In order to enforce an oral agreement, the following prerequisites are necessary: "an offer to compromise, an acceptance and a meeting of the minds as to the terms of the agreement." Caliber Packaging, Inc. v. Szot, No. 97 C 2975, 1999 WL 409774, at *2 (N.D. Ill. June 7, 1999) (quoting Fidelity Mut. Life Ins. Co. v. American Nat'l Bank Trust Co., No. 93 C 2851, 1994 WL 14635, at *2 (N.D. Ill. Jan. 20, 1994)); see also Taylor v. Gordon Flesch Co. Inc., 793 F.2d 858, 862 (7th Cir 1986) (requiring an "offer, an acceptance, and consideration to support the formation of a legally enforceable agreement").
Judge Keys found that there was no enforceable settlement agreement because: (1) there was no meeting of the minds to create a binding and enforceable agreement; (2) plaintiff did not realize that he would be bound by the oral settlement agreement of July 20, 1999; (3) plaintiff believed that the release of all claims against defendants meant only claims within the defendants' scope of employment; and (4) there was no meeting of the minds regarding the specific details of the confidentiality agreement. (Defs.' Objections at 3-9.) Defendants raise four objections to the R R. Their objections rely upon whether there had been a meeting of the minds. Their first two objections relate to whether DeFalco should be held to an oral agreement. Their final objections pertain to whether DeFalco understood the release of claims and confidentiality provisions that were discussed during the July 20, 1999 pretrial settlement conference.
Enforceability of the Oral Agreement
An enforceable oral agreement requires a meeting of the minds.See Thermos Co., 1998 WL 299469 at *5. DeFalco's own court-appointed attorney testified before Magistrate Keys that "I think that we all understood that it wasn't a completed agreement until such time as the parties signed a settlement agreement, a written settlement agreement." (Tr. at 74). In addition, DeFalco testified that he believed that he would not be bound by the agreement until it had been reduced to writing and signed. (Tr. at 50). DeFalco's belief was reinforced because this court ruled that the case could be reinstated. (Id; see also R R at 4.)
Defendants cite both Glass and Taylor to support their contention that the settlement agreement should be enforced. (Defs.' Objections at 7.) Glass, however, was decided on the basis of the District Court's assessment of witness credibility.See Glass, 788 F.2d at 454 (noting that plaintiff's attorney's recollection of events was more credible than the plaintiff's recollection in upholding an oral settlement agreement). In DeFalco's case, Magistrate Keys assessed the witnesses' statements and recommended that the oral settlement discussion should not be enforced. (R R at 3-5.) In Taylor, the plaintiff signed a written draft settlement agreement and then refused to sign a second draft that did not differ in material respects from the first draft. See Taylor, 793 F.2d at 861. The court enforced the agreement because the second draft merely memorialized the agreement and did not differ from the signed first draft. See id. at 864. In contrast, DeFalco never signed any of the written drafts.
Defendants state that DeFalco's attorney "had an undeniable incentive to avoid becoming a new target for it [his former client's litigiousness]." (Defs.' Objections at 3 n. 1.) Defendants provide no evidence for this assertion, and the direct testimony, rather than speculation, suggests that there was not a meeting of the minds with regard to whether DeFalco would be bound until he signed a written document detailing specific settlement provisions. Therefore, this court finds that there was not a meeting of the minds regarding the enforceability of the oral agreement.
Release of All Claims
Courts may refuse to enforce settlement agreements if settlement terms lack a definite meaning. See Thermos Co., 1998 WL 299469 at *6 (refusing to find an enforceable settlement agreement because there had been no meeting of the minds concerning the term "commercially acceptable noninfringing process"). In addition, when terms lack a definite meaning courts may look to the ordinary linguistic meaning, the term of art meaning, or the parties subsequent conduct that indicates a shared meaning of the terms. See United States v. Orr Constr. Co., 560 F.2d 765, 769-70 (7th Cir. 1977).
DeFalco's sole objection to the settlement provision was the release of defendant Susan Baird. DeFalco never objected to the release against any of the other defendants. Instead, DeFalco stated that he intended to pursue a state law defamation claim against Baird which was separate from his claim under federal law. (Tr. at 26.) DeFalco believed that the settlement discussions releasing his claims against defendants only applied to the defendants acting within the scope of their employment. (R R at 4.) Defendants, however, argue that the testimony of DeFalco's former counsel indicated that DeFalco knew which claims he was agreeing to release:
we [the Plaintiff's counsel] made it clear that the Oak Lawn Public Library did not want to see Mr. DeFalco again in court, and that was one of the conditions of the settlement. So we said, you know, you're giving up your claims, your lawsuits. He didn't, at that point say anything, well, I want to sue Susan Baird individually for these other things I may have. (Tr. at 70.)
Although general releases are common, there is not necessarily any ordinary linguistic meaning to the terms "giving up your claims, your lawsuits" that would have alerted DeFalco that a state law claim separate from his federal law claims would also be included in the release. Furthermore, there is no term of art meaning, and the behavior of the parties does not indicate a shared meaning of "release." Without a common meaning of "release" this court finds that there was no meeting of the minds with regard to the release provision.
Confidentiality Provision
The meaning of terms may preclude a meeting of the minds and subsequent enforcement of a settlement. See Thermos Co., 1998 WL 299469 at *9 (refusing to find an enforceable settlement agreement because there had been no meeting of the minds concerning the term "commercially acceptable noninfringing process"). The defendants argue that "[t]he fact that a settlement agreement calls for the parties to reach another agreement in the future, an `agreement to agree,' will not prevent the settlement from being enforced." (Defs.' Objections at 10.) (quoting Thermos Co., 1998 WL 299469 at *4). However, when a settlement term lacks a definiteness, the court can look to either the ordinary linguistic meaning, the term of art meaning, or the parties subsequent conduct that indicates a common meaning. See Orr Constr. Co., 560 F.2d at 769-70. There is neither a fixed ordinary linguistic meaning to the meaning to "confidentiality" nor a term of art meaning. Additionally, the parties conduct did not impute a common meaning to the term. In fact, during the July 20, 1999 pretrial settlement conference, DeFalco understood the confidentiality provision to preclude him from discussing only the monetary settlement figure. (Tr. at 46; R R at 5.) The first draft version of the settlement agreement, however, stipulated an absolute confidentiality agreement that extended to all aspects of the agreement including whether a settlement had even been reached. (R R at 5.)
Defendants suggest that all other terms of the oral settlement agreement should be enforced if the court finds that the parties did not agree to the terms of the confidentiality agreement. (Defs.' Objections at 10 n. 3 (citing Porter v. Chicago Bd. of Educ., 981 F. Supp. 1129, 1132 (N.D. Ill. 1997)).) Additional terms in a written agreement that are not part of the original oral agreement are unenforceable. See Porter, 981 F. Supp. at 1132. This court finds that sufficient disagreement exists regarding whether there was a meeting of the minds to create an enforceable oral agreement with respect to the meaning of the confidentiality provision because the provision was not fully revealed to DeFalco or understood by him during the settlement discussions. Because there is similar disagreement regarding the release provision and overall enforceability, this court finds that the entire agreement is unenforceable.
The court also denies plaintiff's motion to unseal documents [41-1] as moot. On December 3, 1999, plaintiff's motion to unseal documents [23-1] was granted.