Opinion
Case No. C-3-00-058
September 9, 2002
The Plaintiffs filed suit against the Defendants, setting forth a claim of breach of contract and related claims. See Doc. #13. The Defendants, in turn, asserted a counterclaim against the Plaintiffs.See Doc. #16. On May 29, 2001, Defendants signed a Settlement Agreement and Release ("Settlement Agreement"), under which they agreed to pay Plaintiffs the sum of $42,500.00, in three installments, and to transfer their interest in nine injection molding machines to the Plaintiffs. In addition, the parties agreed to release the claims they had asserted against their opponent and to pay their own costs. The Settlement Agreement also provided that this lawsuit would remain pending, until Defendants had made the three stipulated payments, at which time each party would dismiss its own claims.
The installments were due June 1, June 29, and August 3, 2001.
After learning that the parties had reached a settlement, the Court filed a Dismissal Entry, on June 11, 2001, dismissing this litigation and indicating that, for good cause shown, the parties could move to reopen, within 60 days, if settlement were not consummated. See Doc. #32. The Court also cautioned that the parties should include appropriate language in a stipulated judgment entry, if they intended to preserve its jurisdiction to enforce their settlement agreement. Id. (citing Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375 (1994)). Finally, the Court indicated that it would retain jurisdiction to enforce the terms of the settlement between the parties, if necessary. The parties did not file a stipulated judgment entry, indicating that the Court would retain jurisdiction to enforce the terms of their Settlement Agreement. It appears the Defendants declined to sign such a judgment entry prepared by the Plaintiffs.
On August 8, 2001, the Plaintiffs filed a motion, requesting that the Court enforce the Settlement Agreement and that it enter a judgment in favor of Plaintiffs and against Defendants in the sum of $42,500.00, plus prejudgment interest, costs and attorney's fees. See Doc. #33. The Defendants did not respond to that motion. The Court and counsel conducted a telephone conference call thereon on October 9, 2001. On October 15, 2001, the Court entered an Order in which it sustained Plaintiffs' Motion to Enforce Settlement Agreement and Release (Doc. #33). See Doc. #36. The Court also indicted that the Plaintiffs were entitled to recover $42,500.00 from the Defendants and that the Plaintiffs could file a more detailed judgment entry if such were deemed to be necessary. Id. With respect to attorney's fees and costs, the Court directed Plaintiffs to file an affidavit by October 19, 2001, setting forth the amount of attorney's fees and costs they sought to recover. Id. The Defendants were afforded ten days in which to object to any affidavit submitted by Plaintiffs. Id.
Even though the Defendants did not file a memorandum objecting to the Plaintiffs' Motion to Enforce Settlement Agreement and Release (Doc. #33), nor had they raised such an objection during the telephone conference conducted on October 9, 2001, they have now filed a motion requesting reconsideration of the Court's Decision of October 15, 2001, which sustained Plaintiffs' motion to enforce the settlement, arguing that Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375 (1994), divested the Court of jurisdiction to enter that Decision. See Doc. #37. In response, the Plaintiffs have filed a memorandum opposing the Defendants' motion. See Doc. #42. In addition, the Plaintiffs have moved for the imposition of sanctions under Rule 11 of the Federal Rules of Civil Procedure, arguing that Defendants' Motion to Reconsider Previous Order to Enforce Judgment or to Reset Case to Trial Docket (Doc. #37) was filed for purposes of unnecessary delay. See Doc. #44. The Court begins by addressing Defendants' request for reconsideration, with particular emphasis on Kokkonen, the legal predicate for that request. Thereafter, the Court turns to the Plaintiffs' request for Rule 11 sanctions, following which it sets forth the type of judgment to be entered in this litigation.
With that motion, the Defendants also request that the Court award them the reasonable attorney's fees incurred in its preparation. It is axiomatic that, under the "American Rule," courts do not ordinarily award attorney fees to a party, even if it has prevailed. Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247 (1975); Riddle v. Egensperger, 266 F.3d 542, 547 (6th Cir. 2001). Relying upon Chambers v. NASCO Inc., 501 U.S. 32 (1991), the Defendants argue that the Plaintiffs filed their motion seeking enforcement of the Settlement Agreement in bad faith. Since the Plaintiffs sought enforcement of the Settlement Agreement, because the Defendants would not abide by the obligations they voluntarily undertook by signing that document, the Court cannot agree with Defendants' premise that the Plaintiffs acted in bad faith, and, accordingly, overrules their Motion to Reconsider Previous Order to Enforce Judgment or to Restore Case to Trial Docket (Doc. #37), as it relates to the request for attorney's fees.
In Kokkonen, the Supreme Court considered a District Court's attempt to enforce a settlement agreement between parties in a diversity action. The parties had settled and had filed a stipulation of dismissal with prejudice pursuant to Fed.R.Civ.P. 41(a)(1)(ii), which the District Court then approved. When one of the parties allegedly failed to comply with the terms of their settlement agreement, the District Court, at the other party's request, enforced the settlement agreement. On appeal, the Ninth Circuit affirmed. Upon further appeal, the Supreme Court reversed, concluding that the District Court was without jurisdiction to enforce the settlement agreement. Writing for a unanimous Court, Justice Scalia explained that as courts of limited jurisdiction, District Courts do not possess the inherent power or ancillary jurisdiction to vindicate their own authority where parties enter into a voluntary agreement resolving their lawsuit. 511 U.S. at 376-77. Instead, "[e]nforcement of the settlement agreement, whether through award of damages or decree of specific performance, is more than just a continuation or renewal of the dismissed suit, and hence requires its own basis for jurisdiction." Id. at 378. See also, Downey v. Clauder, 30 F.3d 681, 687 (6th Cir. 1994) (after parties settled case and court entered a judgment without retaining jurisdiction to enforce settlement agreement, the District Court did not have jurisdiction to enforce settlement agreement). TheKokkonen Court noted that jurisdiction to enforce the settlement agreement would have existed if the parties had provided for the court's enforcement of that agreement through either one of two methods:
[T]he only order here was that the suit be dismissed, a disposition that is in no way flouted or imperiled by the alleged breach of the settlement agreement. The situation would be quite different if the parties' obligation to comply with the terms of the settlement agreement had been made part of the order of dismissal — either by separate provision (such as a provision "retaining jurisdiction" over the settlement agreement) or by incorporating the terms of the settlement agreement in the order. In that event, a breach of the agreement would be a breach of the order, and ancillary jurisdiction to enforce the agreement would therefore exist.511 U.S. at 381.
Herein, the Plaintiffs argue that the Court retained jurisdiction in its Dismissal Entry (Doc. #32). In particular, the Plaintiffs point to language in that Entry to the effect that the Court would retain jurisdiction to enforce the settlement, if necessary. This Court cannot agree with the Plaintiffs that this language was an expression of the Court's intent to retain jurisdiction in this litigation. Rather, that statement followed the Court's admonition concerning Kokkonen, and was merely an expression of the Court's willingness to retain jurisdiction to enforce the settlement, if the parties deemed it necessary and so provided in an Entry they would submit. Thus, the Court rejects the Plaintiffs' argument that it retained jurisdiction to enforce the settlement agreement, by indicating its willingness to do so. Nevertheless, for reasons which follow, the Court concludes that it did, indeed, retain jurisdiction to enforce the parties' Settlement Agreement.
The Plaintiffs also argue that the Court should decline to address Defendants request for reconsideration, because they failed to raise that argument in a timely fashion and, further, since the circumstances under which a court will reconsider a prior order have not been met herein. This Court cannot agree. The Defendants have questioned this Court's jurisdiction to enter its Order of October 15, 2001. The Plaintiffs contend, in essence, that the Defendants have waived the right to make that argument. However, it is axiomatic that the parties cannot confer subject matter jurisdiction on a District Court through waiver. Fisher v. Peters, 249 F.3d 433, 444 (6th Cir. 2001); Douglas v. E. G. Baldwin Associates, Inc., 150 F.3d 604, 608 (6th Cir. 1998). Accordingly, the Defendants' asserted waiver does not prevent this Court from examining its subject matter jurisdiction at this time.
In Re/Max International, Inc. v. Realty One, Inc., 271 F.3d 633 (6th Cir. 2001), cert. denied, 122 S.Ct. 1539 (2002), the Sixth Circuit concluded that, under Kokkonen, a District Court retained jurisdiction to enforce a settlement agreement, by indicating in a dismissal entry that any "subsequent order setting forth different terms and conditions relative to the settlement and dismissal of the within action shall supersede the within order." To reach that conclusion, the Sixth Circuit relied extensively upon Bell v. Schexnayder, 36 F.3d 447 (5th Cir. 1994), a post-Kokkonen case indistinguishable from this litigation, in which the Fifth Circuit had concluded that the District Court retained jurisdiction to enforce a settlement agreement.
In Bell, the plaintiffs brought claims against the defendants under Title IX, 20 U.S.C. § 1681-1688, which prohibits discrimination on the basis of sex in education programs. Shortly before trial, the parties were able to reach a settlement agreement, under which the defendants would pay $10,000.00 to the plaintiffs and the plaintiffs would dismiss all of their claims. After counsel had informed the District Court, in an order in which it stated that, "having been advised by counsel for the parties that the above action has been settled," it was dismissing the case "without prejudice to the right, upon good cause shown within sixty (60) days, to reopen it if settlement is not consummated." Thereafter, the plaintiffs filed a motion for attorney's fees under 42 U.S.C. § 1988, alleging that they were entitled to recover their attorney's fees since they had prevailed. In response, the defendants filed a motion requesting that the District Court enforce the parties' settlement agreement. According to the defendants, the plaintiffs had relinquished their right to seek attorney's fees, by agreeing to the settlement. The District Court enforced the settlement agreement and declined to award attorney's fees. Upon the plaintiffs' appeal, the Fifth Circuit affirmed. Of particular present importance, the appellate court concluded that, in accordance with Kokkonen, the District Court retained jurisdiction to enforce the settlement agreement because that court had provided that, within 60 days, the parties could move to reopen the action, if the settlement were not consummated, and the defendants had requested enforcement within 60 days. Herein, the circumstances are indistinguishable. The Court's Dismissal Entry (Doc. #32) provided that the parties could, within 60 days, move to reopen this litigation, if the settlement were not consummated. In addition, Plaintiffs filed their motion seeking enforcement within 60 days of the date upon which the Court filed that Dismissal Entry.
In Hagestad v. Tragesser, 49 F.3d 1430 (9th Cir. 1995), the Ninth Circuit reached the opposite conclusion in a case with materially indistinguishable facts. In Re/Max, the Sixth Circuit refused to followHagestad.
Based upon Bell, a case upon which the Sixth Circuit relied in Re/Max, the Court concludes that it retained the jurisdiction to enforce the Settlement Agreement for a period of 60 days after the Dismissal Entry was filed. Since the Plaintiffs sought enforcement within that period of time, the Court overrules the Defendants' Motion to Reconsider Previous Order to Enforce Judgment or to Restore Case to Trial Docket (Doc. #37), to the extent that, with that motion, they seek reconsideration of the Court's Order of October 15, 2001 (Doc. #37). Consequently, the Court will enforce the settlement between the parties.
The Defendants also argue that the Court should restore this litigation to its trial docket, since they have tendered to Plaintiffs the $42,500.00, which they (Defendants) agreed to pay to settle this litigation, and Plaintiffs are now demanding $45,000.00 to settle. According to the Defendants, the Settlement Agreement provides that the case will be returned to the Court's trial docket, under circumstances such as these. This Court cannot agree. The provision in the Settlement Agreement, upon which Defendants rely, provides that this lawsuit would remain pending until Defendant paid all three of the installments. That provision does not remotely suggest that the case would be returned to the Court's active trial docket under the circumstances cited by Defendants, even assuming those circumstances exist.
The Plaintiffs request that the Court impose sanctions on the Defendants' counsel, pursuant to Rule 11, for filing his client's Motion to Reconsider Previous Order to Enforce Judgment or to Restore Case to Trial Docket (Doc. #37). The Plaintiffs argue that said motion was filed for the purpose of causing unnecessary delay. This Court cannot agree, since the Defendants' motion presented a serious question of this Court's subject matter jurisdiction. Moreover, the Sixth Circuit did not decideRe/Max and approve of the Fifth Circuit's decision in Bell, until November 9, 2001, after the Defendants had sought reconsideration herein. Accordingly, the Court overrules Plaintiffs' Motion for Sanctions Pursuant to Fed.R.Civ.P. 11 (Doc. #44).
Finally, the Court must determine the appropriate judgment to enter herein. In its Order of October 15, 2001 (Doc. #36), the Court indicated that Plaintiffs' counsel would file a more complete judgment entry, if such were deemed necessary. The Plaintiffs have apparently submitted such a proposed entry to the Defendants, who have objected. As a result, no follow-up Entry was filed. The Defendants have also filed memoranda, objecting to the inclusion of prejudgment interest and attorney's fees in that entry. See Docs. #38 and #39. Given the length of time which this dispute has been pending, the Court will direct in this Decision that a judgment be entered by the Clerk of Courts. If any party objects to any part of that judgment, it must move in timely fashion under Rule 59(e) of the Federal Rules of Civil Procedure, to alter or amend that judgment. That judgment will have four components, to wit: damages, attorney's fees, prejudgment interest and costs, which the Court will address in the above order.
First, there is no disagreement between the parties that, in accordance with the Settlement Agreement, the Plaintiffs are entitled to recover $42,500.00, as damages. Accordingly, the Court will include that sum in the judgment.
Second, the Plaintiffs have requested that attorney's fees be included in that judgment. In its Order of October 15, 2001, the Court directed the Plaintiffs to submit an affidavit setting forth the amount of attorney's fees they were seeking to recover. See Doc. #36. In addition, the Court indicated that it would set the matter for a hearing, if the Defendants objected. Id. The Defendants have objected.See Doc. #39. Rather than set the matter for a hearing, the Court's judgment entry will, for the following reasons, not include the payment of attorney's fees. The Plaintiffs argued that they were entitled to an award of attorney's fees in accordance with the bad faith exception to the "American Rule." See Doc. #33 at 4 (citing Chambers v. NASCO Inc., 501 U.S. 32 (1991)). In support of that request, the Plaintiffs have failed to submit any evidence establishing that the Defendants refused to abide by the terms of the Settlement Agreement, because of their bad faith, as opposed to their financial inability to meet their obligations.
The Defendants' failure to abide by the terms of the Settlement Agreement constituted a breach of contract. Under the law of Ohio, which governs that document, attorney's fees cannot normally be recovered as an element of damages in a breach of contract action. Gates v. Toledo, 57 Ohio St. 105, 48 N.E. 500 (1897); Cincinnati Ins. Co. v. Diebold, 64 Ohio App.3d 273, 581 N.E.2d 566 (1989). Accordingly, the Defendants' breach of the contract does, without more, not provide a basis for awarding attorney's fees to the Plaintiffs.
Third, the Defendants have also objected to the inclusion of prejudgment interest in a judgment entry. See Doc. #38. The Settlement Agreement between the parties was a contract, under which the Defendants were obligated to pay Plaintiffs the sum of $10,000.00, on or before June 1, 2001, the sum of $20,000.00, on or before June 29, 2001, and the sum of $12,500.00, on or before August 3, 2001. The Defendants failed to meet any of those obligations. Under the law of Ohio, a party is entitled to recover prejudgment interest, at the rate of 10% per year, on all contracts and settlements between parties. Ohio Rev. Code § 1343.03(A). Of course, the amount of damages must be liquidated, in order for prejudgment interest to be awarded. See e.g., Shell Oil Co. v. Huttenbauer Land Co., 118 Ohio App.3d 714, 722, 693 N.E.2d 1168, 1174 (1997) (and cases cited therein). Herein, it cannot be questioned that the damages suffered by the Defendants' breach of the parties' contract are liquidated. Accordingly, the judgment entry will provide for the payment of prejudgment interest, at the rate of 10% per year, on the sum of $!0,000.00, from June 1, 2001, until entry of judgment; on the sum of $20,000.00, from June 29, 2001, until entry of judgment; and on the sum of $12,500.00, from August 3, 2001 until entry of judgment. Fourth, the Plaintiffs have prevailed in their efforts to enforce the Settlement Agreement; therefore, they are entitled to recover the costs they incurred in that endeavor. See Fed.R.Civ.P. 54(d)(1) (providing that the prevailing party is entitled to costs, as a matter of course). However, since the Settlement Agreement provides that the parties are responsible for their own costs, the Plaintiffs are not entitled to recover costs incurred prior to the date upon which the parties entered into that agreement. The Plaintiffs must file a bill of costs, in accordance with S.D. Ohio Civ.R. 54.1, to recover its costs incurred to enforce the Settlement Agreement. Defendants will have ten (10) days thereafter to object to any portion of same. The amount of costs will be dealt with post-judgment.
The judgment entry will provide for the payment of post-judgment interest in accordance with 28 U.S.C. § 1961.
The costs which are recoverable are set forth in 28 U.S.C. § 1920.
In sum, the Court directs that judgment be entered in favor of Plaintiffs and against Defendants in the following manner, to wit:
1. The sum of $42,500.00;
2. Prejudgment interest, at the rate of 10% per year, on the sum of $!0,000.00, from June 1, 2001, until entry of judgment; on the sum of $20,000.00, from June 29, 2001, until entry of judgment; and on the sum of $12,500.00, from August 3, 2001, until entry of judgment; and
3. Costs incurred to obtain enforcement of the Settlement Agreement; and
4. Post-judgment interest in accordance with 28 U.S.C. § 1961.
The captioned cause remains terminated upon the docket records of the United States District Court for the Southern District of Ohio, Western Division, at Dayton.