Opinion
CIVIL ACTION NO. 02-2020
April 4, 2003
ORDER AND REASONS
Before the Court is the motion of defendant, General Star Indemnity Company, to enforce a settlement agreement reached by the parties and to dismiss plaintiffs' claims. For the following reasons, the Court GRANTS defendant's motion, except that the Court does not find that defendant is entitled to an award of attorneys' fees.
I. Background
Defendant provided insurance to plaintiff Tulane Property, Limited Partnership under General Star Indemnity Company Policy Number IAG360043. In January 2000, during the relevant policy period, a severe hail storm caused extensive damage to plaintiff's property. Plaintiff contracted with General Contracting Consulting Services to perform repairs of the roofing damage to the property. Tulane Property designated General Contracting Consulting Services (hereinafter collectively referred to as "plaintiffs") as its agent and representative in negotiations to effectuate the adjustment of the damages with defendant.
Plaintiffs filed this lawsuit in state court invoking the terms of the insurance policy to recover for the property damage. Defendant removed the lawsuit to this Court. As required by the insurance contract, plaintiffs' claims were put into an appraisal process to determine the amount of the property damage. The umpire, Roger Larue, issued an estimate on December 3, 2002 pegging the award at $135,702.46. Larue focused virtually entirely on roof damage caused by the hail storm. On January 24, 2003, Tulane Property signed a Receipt, Release and Indemnification Agreement for consideration in the amount of $149,203.16. Plaintiffs represent that the sum of $13,700.70 was added to Larue's estimate to cover exterior hail damage to the building's siding and fascia. The Release provides:
For and in consideration of the total sum of [$149,203.lG paid to plaintiffs, plaintiffs] forever compromise, release, acquit, and discharge General Star Indemnity Company . . . from any and all claims [plaintiffs] ha live] or may have against the Released Parties under General Star Indemnity Company Policy Number IAG360043 . . . whether for building or contents loss or damage, or any other insured and covered loss and damages . . . and any and all other claims and damages of whatsoever kind or nature without limitation whatsoever arising out of the application for insurance, the binding of insurance, the issuance of a policy of insurance, the policy of insurance itself, or out of the hail storm and resulting loss and damage to the aforesaid insured premises and property located thereon, which occurred on or about January 23, 2000 ("the Incident"), as well as of and from any and all claims arising out of the claim itself . . . and, indeed, any and all other claims resulting from, related to, or arising out of or arising from said hail storm whether known or unknown, and whether they have occurred or may occur or become manifest at some future date, without any limitation whatsoever.
(Mot. to Enforce Settlement Agreement, Ex. A.) The Release is signed by James Tzo, Owner of Tulane Property, and is sworn and notarized. Plaintiffs sent the signed Release to defendant with the expectation that defendant, upon receipt of the Release, would forward a check to plaintiffs.
The day after plaintiffs placed the signed Release in the mail, they discovered that the property damage was greater than previously thought. This occurred when national toxic mold abatement inspectors visited the damaged property and determined that mold was present in the rooms under the roof that had been damaged in the storm. Plaintiffs made an unsuccessful attempt to contact defendant to inform it not to forward the check. When the check arrived on January 29, 2003, plaintiffs did not cash it. Instead, plaintiffs notified defendant of their intent to bring a supplemental claim for toxic mold abatement. Defendant responded on February 3, 2003 by filing this motion to enforce the settlement agreement. In opposition, plaintiffs claim, first, that the parties' agreement did not encompass claims for mold abatement and, second, that the parties never reached a binding agreement to begin with.
II. Discussion
The Court has the inherent power to recognize, encourage, and enforce settlement agreements reached by the parties. Bell v. Schexnayder, 36 F.3d 447, 449-50 (5th Cir. 1994) (citing CIA Anon Venezolana de Navegacion v. Harris, 374 F.2d 33, 35-36 (5th Cir. 1967)). Federal courts sitting in diversity apply state law when determining the validity of a settlement agreement, so long as none of the substantive rights and liabilities of the parties derive from federal law. See, e.g., Lefevre v. Keaty, 191 F.3d 596, 598 (5th Cir. 1999); Mid-South Towing Company v. Har-Win, Inc., 733 F.2d 386, 389 (5th Cir. 1984). Here, the parties agree that Louisiana law governs the interpretation of the compromise agreement in dispute.
Louisiana law provides:
A transaction or compromise is an agreement between two or more persons, who, for preventing or putting an end to a lawsuit, adjust their differences by mutual consent, in the manner which they agree on, and which every one of them prefers to the hope of gaining, balanced by the danger of losing.
This contract must be either reduced into writing or recited in open court and capable of being transcribed from the record of the proceeding. The agreement recited in open court confers upon each of them the right of judicially enforcing its performance, although its substance may thereafter be written in a more convenient form.
LA. CIV. CODE art. 3071. The purpose of a compromise is to prevent or put an end to litigation. The essential elements of a compromise are (1) mutual intent to put an end to the litigation, and (2) reciprocal concessions of the parties in adjustment of their differences. Rivett v. State Farm Fire and Casualty Company, 508 So.2d 1356, 1359 (La. 1987). The Rivett court explained that reciprocal concessions in adjusting the differences between the parties is the civil counterpart of the common law requirement of consideration. Id. at 1359 n. 6. A compromise instrument is governed by the same general rules of construction applicable to contracts. Smith v. Walker, 708 So.2d 797, 802 (La.Ct.App. 1998). The interpretation of a contract is the "determination of the common intent of the parties with courts giving the contractual words their generally prevailing meaning unless the words have acquired a technical meaning." E.R. Campbell v. Melton, 817 So.2d 69, 74 (La. 2002); see also LA. CIV. CODE arts. 2045-2057. Accordingly, if the words of a contract are clear and explicit and do not lead to absurd consequences, then no further interpretation may be made in search of the intent of the parties. Campbell, 817 So.2d at 75.
Plaintiffs assert that the parties intended to settle claims regarding only roof damage. The mold problem, plaintiffs contend, was beyond the scope of the parties' agreement. As to the scope of a compromise agreement, Louisiana law provides:
Transactions regulate only the differences which appear clearly to be comprehended in them by the intention of the parties, whether it be explained in a general or particular manner, unless it be the necessary consequence of what is expressed; and they do not extend to differences which the parties never intended to include in them.
LA. Civ. CODE art. 3073. In determining the matters that the parties intended to settle, the court considers the contract as a whole and in light of attending events and circumstances. Walker, 708 So.2d at 802.
The Court recognizes that Tulane Property contracted with General Contracting Consulting Services to perform roof repair. The Court also recognizes that Larue's damage estimate focused almost entirely on roof damage. Nonetheless, plaintiffs' contention that the parties agreed to settle claims regarding the damages sustained only to the roof is belied by the unambiguous language of the signed Release. The Release provides that for consideration in the amount of $149,203.16, plaintiffs release defendant "from any and all claims . . . whether for building or contents loss or damage . . . arising out of the . . . the policy of insurance itself, or out of the hail storm. . . ." (Mot. to Enforce Settlement, Ex. A.) The Release further provides that it applies to "any and all other claims resulting from, related to, or arising out of . . . said hail storm, whether known or unknown, and whether they have occurred or may occur or become manifest at some future date. . . ." (Id.) Nowhere does the Release provide that it applies only to roof damage. Moreover, plaintiffs concede that the Release included recovery for damages other than the roof damage, namely, hail damage to the building's siding and fascia. (Pls.' Opp. to Def.'s Mot. to Enforce Settlement Agreement, at 2.)
The only "non-roof items" that Larue includes in the damage estimate are items such as the building's TV antenna, its satellite dish, and central air conditioning unit. (Pls.' Opp. to Mot. to Enforce Settlement, Ex. A.)
That plaintiffs did not discover the mold in the rooms under the roof until after the compromise had been reached does not mean that claims for mold damage are beyond the scope of the agreement. The Release clearly and expressly provides to the contrary. The law is clear that a party may not rescind a compromise agreement simply because one's damages turn out to be more serious than anticipated. See LA. CIV. CODE art. 3071; Jurado v. State Farm Mutual Insurance Company, 557 So.2d 266, 268 (La.Ct.App. 1990) The Court therefore concludes that plaintiffs' claims for mold abatement are within the scope of the parties' compromise agreement.
The Court finds plaintiffs' contention that the parties never reached a binding compromise agreement similarly unavailing. The parties clearly negotiated a release agreement with precise terms and for precise consideration. Plaintiffs signed the Release and, by their own admission, sent it to defendant believing that defendant would, upon receipt, send them a check. These actions embody the manifestation of mutual intent to put an end to litigation. Rivett, 508 So.2d at 1359. Clearly, the minds met. The Court GRANTS defendant's motion to enforce the settlement agreement, and DISMISSES plaintiffs' claims with prejudice.
Last, defendant asserts that it is entitled to receive attorneys' fees and costs incurred in bringing this motion. Under the American rule, attorneys' fees are not generally recoverable in the absence of statute or contract. Tacon Mechanical Contractors, Inc. v. Aetna Casualty and Surety Company, 65 F.3d 486, 489 (5th Cir. 1995) (citing F.D. Rich Co. v. United States ex rel. Industrial Lumber Co., 417 U.S. 116, 129, 94 S.Ct. 2157, 2165 (1974)). Defendant does not cite to an applicable statute or contractual term, and the exception to the American rule reserved for either bad faith, vexatious, and wanton actions is inapplicable. Defendant is therefore not entitled to attorneys' fees.
III. Conclusion
For the foregoing reasons, the Court GRANTS defendant's motion to enforce the settlement agreement except that the Court does not find that defendants are entitled to attorneys' fees and costs. Plaintiffs' claims are hereby dismissed with prejudice.