Prospect Capital Corporation v. Adkisson Sherbert & Associate
Filing
UNPUBLISHED AUTHORED OPINION filed. Originating case number: 3:09-cv-00465-MOC-DCK,3:09-cv-00546-MOC-DCK,3:07-bk-31532 Copies to all parties and the district court/agency. [999235674].. [12-2232, 12-2264]
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-2232
STANLEY MARVIN CAMPBELL, Trustee
Environmental Specialists, Inc.,
in
Bankruptcy
for
ESA
Plaintiff,
and
PROSPECT CAPITAL CORPORATION,
Plaintiff - Appellant,
v.
ADKISSON, SHERBERT & ASSOCIATES,
Defendant - Appellee,
and
NATHAN M. BENDER; HOULIHAN SMITH & COMPANY, INC.; CHARLES J.
COLE; JACOB COLE; SANDRA DEE COLE; DAVID C. EPPLING; MICHAEL
ANTHONY HABOWSKI; TRACEY HAWLEY; JOHN M. MITCHELL; DENNIS M.
MOLESEVICH; HOULIHAN SMITH; SHELTON SMITH; SUNTRUST BANKS,
INC.; CHERRY BEKAERT AND HOLLAND LLP; ELLIOT & WARREN;
CHESTER J. BANULL,
Defendants.
No. 12-2264
STANLEY MARVIN CAMPBELL, Trustee
Environmental Specialists, Inc.,
Plaintiff,
in
Bankruptcy
for
ESA
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and
PROSPECT CAPITAL CORPORATION,
Plaintiff – Appellee,
v.
ADKISSON, SHERBERT & ASSOCIATES,
Defendant – Appellant,
and
NATHAN M. BENDER; HOULIHAN SMITH & COMPANY, INC.; CHARLES J.
COLE; JACOB COLE; SANDRA DEE COLE; DAVID C. EPPLING; MICHAEL
ANTHONY HABOWSKI; TRACEY HAWLEY; JOHN M. MITCHELL; DENNIS M.
MOLESEVICH; HOULIHAN SMITH; SHELTON SMITH; SUNTRUST BANKS,
INC.; CHERRY BEKAERT AND HOLLAND LLP; ELLIOT & WARREN;
CHESTER J. BANULL,
Defendants.
Appeals from the United States District Court for the Western
District of North Carolina, at Charlotte. Max O. Cogburn, Jr.,
District Judge.
(3:09-cv-00465-MOC-DCK; 3:09-cv-00546-MOC-DCK;
3:07-bk-31532)
Argued:
September 19, 2013
Decided:
November 7, 2013
Before AGEE, DAVIS, and DIAZ, Circuit Judges.
No. 12-2232 affirmed; No. 12-2264 dismissed by unpublished
opinion.
Judge Davis wrote the opinion, in which Judge Diaz
joined.
Judge Agee wrote a separate opinion concurring in the
judgment.
ARGUED: Karl Christopher Huth, IV, PROSPECT ADMINISTRATION, LLC,
New York, New York, for Prospect Capital Corporation. Frederick
Kingsley Sharpless, SHARPLESS & STAVOLA, PA, Greensboro, North
Carolina, for Adkisson, Sherbert & Associates. ON BRIEF: Robert
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C. Bowers, MOORE & VAN ALLEN, PLLC, Charlotte, North Carolina,
for Prospect Capital Corporation.
Unpublished opinions are not binding precedent in this circuit.
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DAVIS, Circuit Judge:
Prospect Capital Corporation (“Prospect”), a New York-based
private equity firm, made a substantial commercial loan to ESA
Environmental
Specialists,
Carolina-based
Inc.
environmental
(“ESA”),
and
a
North
engineering
industrial
Charlotte,
firm.
Thereafter, ESA’s financial condition deteriorated rapidly and
it filed
a
voluntary
Chapter
11
petition
in
bankruptcy;
the
Chapter 11 case was soon converted to a Chapter 7 liquidation. 1
Prospect,
alleging
gross
misconduct
by
the
officers
and
directors of ESA and several others, filed suit in the United
States
against
District
a
host
Court
of
for
the
Southern
defendants,
District
including
Adkisson
of
New
York
Sherbert
&
Associates (“ASA”), ESA’s North Carolina accounting and auditing
firm, against which Prospect asserted claims for professional
negligence. The case was transferred to the federal district
court for the Western District of North Carolina, where the ESA
bankruptcy was pending.
In
entered
After
the
North
Carolina
into
settlement
their
counsel
district
negotiations
exchanged
1
court,
by
Prospect
telephone
several
draft
and
and
ASA
email.
settlement
In Campbell v. Hanover Ins. Co. (In re ESA Envtl.
Specialists, Inc.), 709 F.3d 388 (4th Cir. 2013), we considered
issues unrelated to those presented here arising out of the ESA
bankruptcy.
4
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agreements, Prospect refused to sign. This prompted ASA to move
the court to enforce an alleged oral settlement agreement, and
for an order of dismissal and an award of attorney’s fees.
After conducting an evidentiary hearing, the district court
rendered findings of fact and conclusions of law, holding that
(1) the parties had indeed reached a binding and enforceable
oral settlement agreement, and (2) Prospect had not proceeded in
bad faith such that an award of attorney’s fees was warranted.
The district court refused to dismiss Prospect’s claims but it
did certify its order for immediate appeal. Prospect filed a
timely appeal from the district court’s order, and ASA timely
filed a protective cross-appeal.
Upon
our
review
of
the
district
court’s
findings
and
conclusions, we discern no clear error or abuse of discretion
warranting
the
Accordingly,
enforcing
the
reversal
we
affirm
parties’
of
the
the
district
judgment
agreement,
of
and
we
court's
the
judgment.
district
dismiss
the
court
cross-
appeal.
I.
Prospect
loaned
more
than
$12
million
to
ESA.
In
its
capacity as ESA’s accounting firm, ASA had provided financial
information to Prospect in connection with the loan. Among other
claims against numerous parties, Prospect sued ASA alleging that
ASA
negligently
provided
inaccurate
5
information
about
ESA’s
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financial status. On September 2, 2011, after the transfer of
the case to the Western District of North Carolina, the district
court
ruled
that
Prospect’s
complaint
failed
to
allege
sufficient facts to state a claim against ASA but it granted
Prospect
court’s
leave
order
to
also
file
an
amended
encouraged
the
complaint.
parties
The
to
district
“discuss
an
amicable resolution” of the action. J.A. 134. 2
A little over a week later, Prospect’s counsel, H. Marc
Tepper, Esq., contacted ASA’s counsel, Rich Sharpless, Esq., and
requested ASA’s consent to a motion for an extension of time for
Prospect to file its amended complaint. In the request, Tepper
indicated that the parties could “utilize this time to place all
our efforts toward reaching a settlement rather than the ongoing
expense
of
litigation.”
J.A.
612.
On
October
10,
2011,
the
parties’ attorneys discussed the possibility of a settlement and
agreed to consult with their respective clients.
Prospect filed a Second Amended Complaint on October 14,
2011. Shortly afterwards, Sharpless asked Tepper to agree to an
2
Citations to “J.A. ---” are to the Joint Appendix filed by
the parties to this appeal. Volume II of the Joint Appendix,
consisting of pages 354 through 662, are under seal, in keeping
with the agreed Confidentiality Order entered by the district
court during proceedings in that court on the motion to enforce
settlement agreement. From time to time in this opinion, we
quote from the sealed Joint Appendix to portions of the record
that do not disclose confidential matters.
6
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extension
Complaint.
of
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time
for
Tepper
ASA
agreed,
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to
respond
but
stated
to
the
that
Second
the
Amended
consent
was
“contingent on our furthering our settlement discussions.” J.A.
613.
In due course, ASA filed a motion to dismiss the Second
Amended Complaint, and Tepper sent an email to Sharpless on or
about November 1, 2011, inquiring into the status of settlement
efforts.
After
an
exchange
of
correspondence
as
to
the
settlement amount, the parties agreed over the telephone that
ASA and Cherry Bekaert & Holland (“CBH”) 3, a second CPA firm that
Prospect was proceeding against in North Carolina state court on
similar
exchange
claims,
for
a
would
each
dismissal
pay
of
Prospect
the
a
action
sum
with
certain
in
prejudice.
Specifically, as the district court later found, Sharpless and
Tepper spoke on November 22, 2011, and agreed to settle the
litigation on the following material and essential terms:
1) ASA would pay Prospect a sum certain;
2) Prospect would file a dismissal with prejudice of
all claims against ASA;
3) Prospect would release ASA from any and all claims
it might have against ASA;
4) The terms of the settlement would be confidential;
5) The parties would bear their own costs.
3
ASA’s counsel, Sharpless, was counsel to CBH as well.
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See J.A. 608, 614, 654.
Also on or about November 22, 2011, Prospect filed a motion
for
an
extension
of
time
to
respond
to
ASA’s
still-pending
motion to dismiss. Prospect informed the court that “Prospect
and ASA (collectively the ‘Settling Parties’) have agreed to the
principal
terms
of
a
settlement
agreement,
but
require
additional time to complete the drafting and execution of the
settlement agreement.” J.A. 287. Prospect also stated that the
“Settling
Parties
negotiated
the
material
terms
of
the
settlement . . .” Id. The court granted the motion.
On November 29, 2011, Sharpless emailed Tepper confirming
the
terms
of
the
agreement.
Tepper
replied
to
Sharpless
on
December 1, 2011 with a draft Confidential Settlement Agreement.
The
draft
November
contained
29,
2011,
the
same
email,
terms
and
that
included
were
in
Sharpless’s
additional
terms.
Ultimately, the parties exchanged a total of six drafts of the
document
between
Prospect
had
December
included
1,
New
2011
York
and
December
choice-of-law
15,
2011.
and
venue
provisions in the written agreement sent to ASA on December 1,
2011. ASA objected to those clauses and replaced them with North
Carolina choice-of-law and venue provisions, to which Prospect
raised no objection. Also, each of the drafts contained merger
and integration clauses and stated that no agreement would be
binding
until
both
parties
executed
8
and
delivered
a
signed
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agreement. ASA proposed a few revisions to the additional terms,
but
never
objected
to
the
merger
and
integration
clause
or
execution and delivery requirements.
On
December
15,
2011,
Tepper,
on
behalf
of
Prospect,
emailed a “final” revised copy of the Confidential Settlement
Agreement to Sharpless, asking him to “Please sign and return.”
J.A. 615. On December 19, 2011, Sharpless asked Tepper for the
Tax Identification Number of Tepper’s law firm so that ASA could
issue a check for the settlement amount. Tepper emailed the Tax
Identification Number to Sharpless the same day. Two days later,
Sharpless, on behalf of ASA, emailed an executed copy of the
written agreement to Tepper. On December 28, 2011, Sharpless
mailed the settlement check to Tepper.
The next day, December 29, 2011, Prospect filed a second
motion
for
an
extension
of
time
to
oppose
ASA’s
motion
dismiss. Therein, Prospect represented to the court that:
2.
Prospect and ASA
Parties’) have agreed to
settlement agreement, but
complete the drafting and
agreement.
(collectively the ‘Settling
the principal terms of a
require additional time to
execution of the settlement
. . .
5.
The Settling Parties have concluded their
settlement negotiations and now need to fully execute
the Settlement Agreement.
6.
Due to the holidays, no individual with
authority to sign on behalf of Prospect will be
available to execute the Settlement Agreement prior to
9
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the January 3, 2012, deadline
Renewed Motion to Dismiss.
to
respond
to
ASA’s
7.
Accordingly and for the forgoing reasons,
Prospect respectfully requests a ten-day extension of
the January 3, 2012 deadline for Prospect to execute
the Settlement Agreement and discontinue this action.
J.A. 290-91. The court granted the motion.
Alas, the new year brought a refusal by Prospect to execute
the Confidential Settlement Agreement. Specifically, on or about
January
17,
2012,
Tepper
returned
the
settlement
check
to
Sharpless with correspondence stating, in part, that “Prospect
Capital Corporation has not authorized me to hold on to the
settlement check as its agent and has further authorized me to
inform you that it will not be executing a settlement Agreement
or directing our office to file a Stipulation of Dismissal as to
your client.” J.A. 641.
On March 30, 2012, ASA filed a motion (1) to enforce what
it alleged was a binding oral agreement reached on November 22,
2011, and (2) to dismiss the case and for an award of attorney’s
fees. Meanwhile, CBH (the other accounting firm represented by
Sharpless in connection with the settlement negotiations) filed
a
similar
motion
to
enforce
the
settlement
agreement
in
the
state court litigation, but the state court apparently denied
CBH’s motion. But see infra pp. 20-21.
On August 15, 2012, the district court held an evidentiary
hearing
during
which
it
heard
10
testimony
from
ASA’s
counsel,
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Prospect’s counsel, and Prospect’s corporate representative. 4 On
August 30, 2012, the district court granted in part ASA’s motion
to enforce settlement agreement and ordered the parties to file
a notice of settlement within 30 days. The court reasoned that
ASA
“produced
considerable
evidence”
that
demonstrated
an
enforceable agreement. J.A. 658. According to the court, this
included
several
months’
emails
indicating
that
the
parties
continued to iron out a final agreement but that the material
terms,
including
payment
price
and
costs
per
side,
mutual
releases, and a confidentiality requirement, were settled during
the November 22, 2011 telephone call. 5 See supra p. 7.
Addressing
Prospect’s
contentions
that
the
choice-of-law
and venue provisions were outstanding material terms at the time
of the November 22, 2011 call, the court found that Prospect’s
4
At a preliminary status hearing held on June 20, 2012, in
response to the district court’s inquiry into what happened to
cause the settlement efforts to break down, Prospect’s new
attorney, Karl Huth, Esq., stated “[t]he problem is senior
management thinks this case is worth a lot more than this
proposal would have been worth.” J.A. 339.
5
In the proceedings before the district court, although
Prospect did not concede Tepper’s authority, it expressly and
indeed, emphatically, disclaimed reliance on any argument that
Tepper lacked actual authority to settle the case and bind
Prospect. See J.A. 465 (“I’m saying we have not contended that
he did not have authority to settle this case and that’s not an
issue before this court . . . . Prospect has made it clear
throughout the briefing that what we are contesting is whether
an agreement was ever formed. We are not contesting Mr. Tepper’s
authority . . . .”).
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counsel “willingly agreed to ASA’s revision that North Carolina
law be applicable without additional consideration from ASA.”
J.A. 658. Prospect’s willingness to accept ASA’s revision to
that term, without demanding additional consideration, indicated
to the court that, from Prospect’s perspective, the choice-oflaw and venue provisions were not material terms.
The
court
also
found
that,
based
on
the
emails
and
counsel’s testimony, Prospect’s management did not learn of the
terms of the agreement until after ASA emailed the Confidential
Settlement Agreement and mailed the check for full payment. It
was
at
that
assent
to
settlement
time
the
that
Prospect’s
terms
amount.
of
The
the
court
management
refused
to
give
agreement,
specifically
the
concluded
that
“Prospect’s
dissatisfaction with the settlement amount, however, is simply a
risk of litigation and the nature of its investment business.
Indeed, it appears that Prospect had ‘second thoughts,’ which
are insufficient to set aside the remaining agreement.” J.A.
659.
The
court
further
found
that
Prospect
was
judicially
estopped from denying the existence of an agreement after it
represented
to
the
court
that
the
parties
had
reached
a
settlement. The court held that for Prospect to now ask ASA to
“begin
its
settlement
negotiations
anew
.
.
.
would
clearly
impose a detriment upon ASA” and “not enforcing the contract
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would strain this court’s limited resources and permit parties
to
stall
litigation
indefinitely.”
Id.
Finally,
the
court
declined to find ASA was collaterally estopped from raising the
enforceability of the November 22, 2011 agreement based on the
North Carolina state court’s decision denying CBH’s motion to
enforce the same agreement.
The district court denied ASA’s motion insofar as it sought
dismissal with prejudice of Prospect’s claims under Federal Rule
of Civil Procedure 41(b), finding that “‘dismissal other than on
the merits must be supported by a finding of bad faith or other
similar
abuse,’”
which
the
district
court
declined
to
find
occurred on the facts here. J.A. 661 (quoting Hensley v. Alcon
Laboratories, Inc., 277 F.3d 535, 542 (4th Cir. 2002)). For
the
same reason, the court declined to award attorney’s fees to ASA.
With
the
case
in
the
above
posture,
Prospect
moved
to
certify the court’s order as a final judgment under Federal Rule
of
Civil
December
Procedure
10,
2012. 6
54(b).
The
Prospect
court
filed
6
a
granted
timely
the
motion
appeal
of
on
the
We find the district court acted appropriately in
certifying its order under Rule 54(b). See Culosi v. Bullock,
596 F.3d 195, 203 (4th Cir. 2010).
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judgment and ASA filed a timely cross-appeal from the district
court’s refusal to dismiss Prospect’s claims. 7
II.
A.
To enforce a settlement agreement under its inherent equity
power,
the
district
court
“(1)
must
find
that
the
parties
reached a complete agreement and (2) must be able to determine
its terms and conditions.” Hensley, 277 F.3d at 540-41 (citing
Moore v. Beaufort Cnty., 936 F.2d 159, 162 (4th Cir. 1991))
(further citations omitted).
We review a district court’s findings of fact for clear
error and its decision to enforce a settlement agreement for
abuse of discretion. Id. at 541 (citing Young v. FDIC, 103 F.3d
1180,
1195
discretion
principles’
(4th
when
or
Cir.
its
1997)).
decision
‘rests
upon
A
district
is
“‘guided
a
clearly
court
by
abuses
erroneous
erroneous
its
legal
factual
finding.’” Brown v. Nucor Corp., 576 F.3d 149, 161 (4th Cir.
2009) (quoting Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261
(4th Cir. 1999)). As in other contexts, we will reverse for
abuse of discretion only where we have a “‘definite and firm
conviction
that
the
court
below
7
committed
a
clear
error
of
ASA does not appeal the district court’s refusal to make
an award of attorney’s fees.
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judgment in the conclusion it reached upon a weighing of the
relevant factors.’” Brown, 576 F.3d at 161 (quoting Westberry,
178 F.3d at 261). As we have held, “[h]aving second thoughts
about
the
results
of
a
valid
settlement
agreement
does
not
justify setting aside an otherwise valid agreement, [ ], and the
fact that the agreement is not in writing does not render it
unenforceable.”
Hensley,
277
F.3d
at
540
(citations
and
quotation marks omitted).
B.
As its most vigorously advanced claims of error, Prospect
challenges the district court’s order on three closely related
grounds:
(1)
the
material
terms
of
the
settlement
were
not
finalized during the telephone call, and therefore the alleged
agreement reached during the call between Tepper, representing
Prospect, and Sharpless, representing ASA, could not serve as an
enforceable oral agreement; (2) the court erred in finding that
the
choice-of-law,
material;
and
(3)
venue,
the
and
court
release
erred
in
provisions
were
considering
not
evidence
outside the actual agreement in coming to its decision. We find
no merit in any of these contentions.
1.
The district court found that the parties had settled on
the
material
terms
of
the
agreement
during
the
phone
conversation on November 22, 2011. There is no clear error in
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this finding. Prospect never expressed an intention that the
November 22, 2011 agreement be contingent upon the approval of
its senior management. And the parties never expressly stated,
nor is there evidence in the record, that their agreement was
dependent on the execution of a writing. Prospect represented to
both ASA and the court that a settlement had been reached. The
only thing that changed between Prospect receiving the signed
draft of the agreement and the settlement check, and its sending
the January 17, 2012 letter informing ASA’s counsel that there
was
no
settlement,
was
the
fact
that
Prospect’s
senior
management expressed dissatisfaction with the settlement amount.
Prospect
largely
admitted
as
much
in
a
hearing
before
the
district court. 8
Nor
was
identification
would
pay
a
there
of
sum
the
clear
error
material
certain
to
in
terms
Prospect;
the
of
the
district
court’s
agreement:
Prospect
would
“ASA
file
a
dismissal with prejudice [as to] all claims against ASA; the
settlement would be confidential; and the parties would bear
their own costs.” J.A. 654 (internal citations omitted). The
court stated that the terms could be found not only in the
November 29, 2011 email summarizing the parties’ agreement, but
8
See J.A. 339: “The problem is senior management thinks
this case is worth a lot more than this proposal would have been
worth.”
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also in the first draft of the written version, which Prospect
created. The material terms were the same in both.
At
bottom,
as
the
district
court
and
the
parties
recognized, the issues presented at the hearing on the motion to
enforce were essentially issues of credibility. See J.A. 466
(The Court: “If the issue of authority [to settle the case] is
not in here, then I’ve got to just decide whether -- who to
believe, this gentleman or this gentleman.” Prospect’s Counsel:
“I think that’s correct, Your Honor, based on the evidence and
the testimony.”). Plainly, we have no basis on which to second
guess the district court’s factual findings.
2.
Prospect’s
contention
that
the
district
court
erred
in
finding that the choice-of-law, venue, and release provisions
were not material terms of the parties’ agreement is equally
unavailing. The district court did not err in reasoning that
Prospect’s quick acceptance of ASA’s change of the choice-of-law
and venue provisions, from New York law to North Carolina law,
without
further
consideration,
demonstrated
that
those
provisions were not of “paramount importance” to Prospect. J.A.
658. The district court also did not err in determining that the
release provision was not a material term. The parties agreed to
a complete release on November 22, 2011, and after a dispute
arose over the written version of the agreement as to whether
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ESA (the debtor in the Chapter 7 liquidation) was included in
the release, ASA ultimately accepted the release of ESA after
expressing
dissatisfaction
with
it
only
once. 9
The
district
court’s finding that ASA was ready and willing to accept the
release of ESA after mildly disputing the same is neither clear
factual error nor legal error.
In advancing its contrary contention, Prospect’s reliance
on Chappell v. Roth, 548 S.E.2d 499 (N.C. 2001), is misplaced.
In
Chappell,
the
North
Carolina
Supreme
Court
held
that
a
settlement agreement that lacked a release provision was not
binding – but only because the negotiated agreement had a clause
which required “a ‘full and complete release, mutually agreeable
to both parties.’” 548 S.E.2d at 500. Because the negotiation
and agreement on a release was included in the terms, the court
determined that the parties never had a “meeting of the minds”
without
parties
that
here
release
did
provision.
not
Id.
condition
Unlike
their
in
Chappell,
settlement
on
the
the
negotiation of a specific release provision.
3.
Prospect
also
takes
issue
with
the
district
court’s
consideration of so-called outside evidence, including the final
9
Prospect had purchased most if not all of the assets of
ESA in the bankruptcy proceedings.
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settlement amount. Prospect’s position is unpersuasive. We have
specifically stated that when there is a factual dispute over
the existence of a settlement agreement (the precise issue in
this
case),
or
over
the
agreement’s
terms,
“the
court
must
‘conduct a plenary evidentiary hearing in order to resolve that
dispute,’ and make findings on the issues in dispute.” Hensley,
277 F.3d at 541 (internal citations omitted) (emphasis added).
Thus, it was entirely proper for the district court to hear the
evidence of the sequence of events that took place during the
negotiations, as well as the settlement amounts considered and
finally agreed upon.
Similarly,
Prospect’s
reliance
on
the
merger
and
integration clauses in the draft written agreement also fails.
Again, the written agreement was never fully executed because
Prospect did not sign it; thus, those provisions could not, and
did not, guide the district court’s inquiry into whether the
parties
reached
a
settlement
during
the
November
22,
2011
telephone conference. Moreover, as ASA correctly contends, the
parol evidence rule (invoked by Prospect before us) “presupposes
the existence of a legally effective written instrument” and so
is
inapplicable
here
because
neither
19
party
argues
that
the
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unexecuted
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written
agreement
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was
binding,
as
Prospect
never
executed it. Deaton v. Coble, 95 S.E.2d 569, 572 (N.C. 1956). 10
C.
Prospect further contends that the district court failed to
give the proper collateral estoppel effect to the North Carolina
state court’s ruling that CBH, the second accounting firm sued
by Prospect, could not enforce the very settlement agreement
that the district court enforced in this case. We find no error
or abuse of discretion.
We
review
a
district
court’s
decision
on
an
issue
of
collateral estoppel de novo. Tuttle v. Arlington Cty. Sch. Bd.,
195 F.3d 698, 703 (4th Cir. 1999). Federal courts must look to
the law of the forum from which a judgment comes to determine
its preclusive effects. Sartin v. Macik, 535 F.3d 284, 287 (4th
Cir. 2008). A successful assertion of collateral estoppel under
North Carolina law requires a party to “show that the issue in
question
was
identical
to
an
issue
actually
litigated
and
necessary to the judgment, that the prior action resulted in a
final judgment on the merits, and that the present parties are
10
Contrary to Prospect’s contention, the district court’s
finding that the material terms of the oral settlement agreement
are embodied in the unexecuted written agreement is not “selfcontradictory.” See Opening Br. at 2. One would surely expect
that the essential material terms of an oral agreement would
appear in the written agreement, which was, we recall, drafted
by Prospect.
20
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the same as, or in privity with, the parties to the earlier
action.” Id. (citing Thomas M. McInnis & Assocs., Inc. v. Hall,
349 S.E.2d 552, 556-57 (N.C. 1986)).
The district court was correct to reject the application of
collateral estoppel in this instance. Fundamentally, even apart
from the fact that ASA was not a party to the state court action
and appears not to be in privity with CBH, Prospect has failed
to show how the state court’s “decision” is a final judgment on
the merits. 11 North Carolina law holds that a “final judgment is
one that determines the entire controversy between the parties,
leaving nothing to be decided in the trial court.” Ratchford v.
C.C.
Magnum
(citations
Inc.,
564
omitted).
S.E.2d
It
is
245,
evident
247
(N.C.
that
the
Ct.
App.
state
2002)
court’s
decision did not fully resolve the issues between the parties.
See J.A. 387, 395 (the court stating, “I am going to give you my
initial impression . . . . I will try to sort all this out and
get back to you.”). There is not even sufficient indication in
the record that the state court ruled on the motion to enforce
11
We acknowledge that the courts in North Carolina, like
the courts in many states and the federal courts, have allowed
nonmutual offensive and defensive collateral estoppel in some
circumstances. See Rymer v. Estate of Sorrells, 488 S.E.2d 838,
840 (N.C. Ct. App. 1997). We need not and do not explore that
issue, as the record here reflects no final judgment on the
basis of which the state court litigation might give rise to a
successful invocation of collateral estoppel.
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the settlement agreement. J.A. 393 (the court stating, “I am
fairly confident . . . I am not going to enforce [the settlement
agreement].”). Prospect fails to point to any other evidence in
the record to show that the state court reached a final judgment
on
the
merits.
Without
this
essential
element,
it
would
be
improper to apply collateral estoppel in this instance.
D.
Finally, Prospect maintains that the district court erred
in invoking the doctrine of judicial estoppel to bar Prospect
from arguing that no agreement existed based on the position it
took
in
its
two
motions
for
extensions
of
time.
Because
we
affirm the district court’s judgment for the reasons discussed,
we need not and do not consider the merits of its invocation of
judicial estoppel.
III.
ASA cross-appeals and principally argues that the district
court erred when it denied ASA’s motion to dismiss Prospect’s
claims
with
prejudice
pursuant
to
Federal
Rule
of
Civil
Procedure 41(b) based on the binding settlement agreement. In
light of our disposition of the lead appeal, the issues raised
by ASA in its cross-appeal are rendered moot and need not be
addressed. Accordingly, we shall dismiss the cross-appeal.
22
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IV.
For the reasons set forth, the order of the district court
granting
the
motion
to
enforce
the
settlement
agreement
is
affirmed. The cross-appeal is dismissed.
No. 12-2232 AFFIRMED
No. 12-2264 DISMISSED
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AGEE, Circuit Judge, concurring in the judgment:
I
concur
in
the
judgment
of
the
majority,
but
write
separately to express the very narrow reasoning under which I
would affirm the district court’s enforcement of the settlement
agreement between Prospect and ASA.
First and foremost in this case, the Court must conclude
whether Prospect and ASA reached a binding settlement agreement
during their settlement negotiations. Under North Carolina law, 1
the formation of a settlement agreement is considered according
to the established rules of ordinary contract law. Harris v. Ray
Johnson
Constr.
Co.,
534
S.E.2d
653,
654–55
(N.C.
Ct.
App.
2000). Prospect does not dispute that the elements of a contract
are present in this case—Prospect made an offer of settlement to
ASA,
ASA
accepted
that
offer,
and
the
offer
included
mutual
promises, i.e., consideration. See Normile v. Miller, 326 S.E.2d
11,
18
(N.C.
1985).
Instead,
Prospect
argues
that
ASA’s
acceptance of its offer of settlement was not effective because
the
parties
binding
intended
until
both
that
the
parties
settlement
signed
a
agreement
written
not
be
settlement
agreement.
1
The parties agree that the laws of North Carolina govern
the Court’s consideration of whether the parties formed an
enforceable contract, and we therefore apply North Carolina law.
See Smith v. McDonald, 895 F.2d 147, 148 (4th Cir. 1990).
24
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Prospect’s argument fails, however, because the reviewing
court owes deference to the district court’s finding that the
parties reached agreement on the material terms of a settlement
prior to Prospect’s expression of intent not to be bound absent
a signed writing. Prospect offers no evidence that it expressed
such an intent during the November 22, 2011 phone conversation.
In the absence of evidence contradicting the district court’s
finding
that
the
parties
agreed
to
the
material
terms
of
settlement on November 22, 2011 without any expression of intent
that additional, binding formalities were required, I cannot say
that the district court’s finding was in clear error. N.C. Nat’l
Bank v. Wallens, 217 S.E.2d 12, 15 (N.C. 1975) (holding that
contracting
parties’
contemplation
of
“a
more
‘complete’
document does not necessarily indicate that material portions of
the agreement have been left open for further negotiation”); see
also Warren v. Halstead Indus., Inc., 802 F.2d 746, 752 (4th
Cir. 1986) (“It is only when the reviewing court, on the entire
evidence, is left with a definite and firm conviction that a
mistake
has
been
committed
that
an
appellate
court
may
reverse.”).
Furthermore, as the majority opinion correctly points out,
Prospect conceded before the district court that the issue of
whether a valid settlement was reached was an issue of witness
credibility.
“Absent
extraordinary
25
circumstances,
we
will
not
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disturb a factfinder’s credibility determinations.” Columbus-Am.
Discovery Grp. v. Atlantic Mut. Ins. Co., 56 F.3d 556, 567 (4th
Cir. 1995) (citing Fed. R. Civ. P. 52(a)). Prospect demonstrates
no such extraordinary circumstances here, and, thus, has not met
its burden on appeal. 2
I therefore concur in the majority’s decision to affirm the
judgment
court’s
of
the
standard
district
of
court,
review
and
but
do
so
Prospect’s
based
failure
upon
to
this
submit
evidence contradicting the district court’s findings so as to
meet that standard on appeal.
2
The majority opinion further concludes that Prospect
failed to demonstrate that collateral estoppel applied in this
case. I agree with that determination based solely on Prospect’s
failure to demonstrate privity between ASA and CBH.
26
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