Stoudmire v. U.S. Xpress Enterprises, Inc.

Filing 37

OPINION. Signed by Honorable Judge Myron H. Thompson on 4/3/13. (djy, )

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION

LARRY STOUDMIRE,

)
)
)
)
)
)
)
)
)

Plaintiff,
v.
U.S. XPRESS, INC.,
Defendant.

CIVIL ACTION NO.
2:12cv1055-MHT
(WO)

OPINION
Plaintiff

Larry

Stoudmire

brought

this

action

charging race discrimination against his former employer,
defendant U.S. Xpress, Inc.

He claims that the company’s

conduct violated Title VII of the Civil Rights Act of
1964, as amended (42 U.S.C. §§ 1981a, 2000e to 2000e–16).
Jurisdiction is proper under 28 U.S.C. § 1331 (federal
question) and 42 U.S.C. § 2000e–5(f)(3) (Title VII).

The

case is now before this court on motions from Stoudmire
(to set aside the court’s previously entered judgment and
reinstate the case, abrogate the settlement agreement
between the parties, and require his former attorney to

return a fee and dismiss a fee lien) and U.S. Xpress (to
enforce the settlement agreement).

I. BACKGROUND
A.
Stoudmire was a truck driver for U.S. Xpress, a
trucking company.

After he was injured on the job, he

brought a lawsuit in state court to recover claimed
workers’ compensation benefits.

That lawsuit concluded

in a settlement between Stoudmire, lacking an attorney
and

representing

settlement

himself,

agreement

stated

and

the

that,

company.
“Employee

The
hereby

resigns his employment and releases employer ... from any
and all claims he has or may have in connection with his
employment.”
3-4.

Petition and Settlement (Doc. No. 11-1) at

The state court approved the settlement.

2

B.
Before
reached

the

and

workers’

approved

compensation

by

the

state

settlement

court,

was

Stoudmire

retained an attorney, Julian McPhillips, to represent him
in a race-discrimination lawsuit against U.S. Xpress.
The

federal-court

supervisor

at

U.S.

complaint
Xpress

charged
told

other

Stoudmire was a “no-good nigger.”
No. 6) ¶ 10.

that

Stoudmire’s

employees

that

Amended Compl. (Doc.

Stoudmire complained about the incident to

the company’s human relations department, and, several
months later, the department responded, telling him that
unspecified disciplinary action had been taken against
the

supervisor.

Not

long

after

that,

the

company

contacted Stoudmire again, this time to tell him that he
was being transferred to a job that Stoudmire believed
was far less desirable than his current position.

He

alleged that the company gave him an ultimatum: he had to
decide, immediately, whether to accept the transfer or
resign his employment with U.S. Xpress.

3

He chose to

leave the company.

He contended that his supervisor was

never actually disciplined and, on the contrary, the
company’s

ultimatum

was

retaliatory

for

his

having

complained about discrimination.

C.
Shortly after this federal lawsuit began, U.S. Xpress
filed a motion to dismiss.

Among other reasons for

dismissing the case, the company argued that the prior
state-court

workers’

compensation

settlement,

which

released U.S. Xpress from “any and all claims [Stoudmire]
has or may have in connection with his employment,”
waived the former employee’s right to bring the current
race-discrimination claim.

Def.’s Br. (Doc. No. 11-6) at

18-19 (quoting Petition and Settlement (Doc. No. 11-1) at
3-4).
it

was

McPhillips was surprised to see the argument, as
the

settlement.

first

time

Stoudmire

he
was

had

become

also

aware

surprised,

of
as

the
he

understood the workers’ compensation settlement (which he

4

signed

without

consulting

any

disability-related claims only.
learn

that

he

may

have

lawyer)

to

affect

He was astounded to

already

waived

his

race-

discrimination claim in settling that lawsuit, a wholly
unrelated matter to the present case, as he saw it.
McPhillips researched the issue and concluded that
there was a substantial chance that the court would
dismiss this federal case on the basis of the earlier
state-court settlement; the attorney also feared that
there was some risk that Stoudmire would be subject to
sanctions for bringing a claim he had already waived.
McPhillips

therefore

contacted

U.S.

Xpress

to

offer

settling the matter (and not contesting the motion to
dismiss) for a small sum.

McPhillips and U.S. Xpress

agreed to another settlement, this one for $ 2,500.
Although McPhillips was disappointed with the figure, he
thought it was the best result he could obtain for
Stoudmire, given the perceived likelihood of dismissal.

5

Stoudmire met McPhillips in the attorney’s office to
discuss the proposal.

A written agreement was prepared

and ready for signing.

Stoudmire’s and McPhillips’s

recollections and interpretations of the meeting diverge.
Stoudmire states that McPhillips did not afford him time
to read the full agreement and that the attorney did not
explain adequately the agreement’s provisions, instead
imploring him to sign without delay.

In Stoudmire’s

telling, the attorney bore down on him and demanded that
he

sign

immediately.

McPhillips

insists,

in

stark

contrast to that version of events, that he explained the
agreement fully and afforded Stoudmire more than adequate
time to read it and ask questions.

The attorney concedes

that Stoudmire expressed hesitation, but he maintains
that Stoudmire was eventually convinced that signing was
in his best interest.
made,

Stoudmire

settlement

Regardless of how the decision was

acknowledges

agreement

and

that

consented

6

he
to

signed

the

McPhillips

transmitting it to U.S. Xpress.

This court dismissed

this federal lawsuit pursuant to the parties’ agreement.

D.
Days later, McPhillips, having received the promised
$ 2,500 from U.S. Xpress, contacted Stoudmire to remit
payment.

Stoudmire told the attorney that he had a

change of heart.

He refused to accept the payment,

insisting

will

that

he

continue

pursuing

the

race-

discrimination claim regardless of whether McPhillips
remained

as

his

counsel.

McPhillips

withdrew

from

representation, explaining that he believed Stoudmire was
bound by the settlement and he could no longer pursue the
lawsuit.

II. DISCUSSION
As stated, this case is now before this court on the
following motions: Stoudmire’s motions to set aside the
court’s previously entered judgment and reinstate the

7

case,

abrogate

the

settlement

agreement

between

the

parties, and require his former attorney to return a fee
he paid and dismiss a fee lien; and U.S. Xpress’s motion
to enforce the settlement agreement.

A.
A district court ordinarily has the power to enforce
a settlement agreement entered into by litigants while
litigation is pending before that court.

Jowers v. Bd.

of Pardons & Paroles, 2013 WL 424726, at *1 (M.D. Ala.
Feb. 4, 2013) (Thompson, J.) (citing Mass. Cas. Ins. Co.
v.

Forman,

curiam)).1

469
If

F.2d
the

259,

260

parties

(5th
reach

Cir.

1972)

(per

settlement

and

voluntarily dismiss the lawsuit, but a subsequent dispute
over the settlement arises, the court may adjudicate the
matter

only

if

the

prior

dismissal

retained jurisdiction to do so.

order

expressly

Kokkonen v. Guardian

1. The Eleventh Circuit has adopted as precedent all
decisions of the former Fifth Circuit rendered prior to
October 1, 1981. Bonner v. City of Prichard, 661 F.2d
1206, 1207 (11th Cir. 1981) (en banc).
8

Life Ins. Co., 511 U.S. 375, 381-82 (1994).

Here, the

court’s prior judgment dismissing the case expressly
retained

jurisdiction

over

the

settlement,

granting

“leave to any party to file, within 49 days, a motion to
have the dismissal set aside and the case reinstated or
the settlement enforced, should the settlement not be
consummated.”
settlement
Stoudmire’s

Judgment (Doc. No. 13).

dispute

has

motion

to

arisen,
set

the

aside

Now, since a

court
the

will

judgment

grant
and

reinstate the case so that the court can adjudicate
whether the parties have a settlement agreement that
should be enforced.
In

determining

whether

a

valid,

enforceable

settlement agreement has been reached by the parties,
federal courts have differed on the source of law to
apply.

Courts have decided, on some occasions, that

federal common law governs and, on other occasions, that
state law governs.

See Jowers, 2013 WL 424726, at *1

(citing cases taking both approaches); Gamewell Mfg.,

9

Inc. v. HVAC Supply, Inc., 715 F.2d 112, 113-16 (4th Cir.
1983)

(same).

In

this

case,

because

the

operative

principles under federal common law and Alabama law do
not materially differ, “the court need not resolve which
body of law applies.”

Jowers, 2013 WL 424726, at *1

(quotation marks and citation omitted).
Settlement agreements are contracts, and, like other
contracts, once a party has manifested assent to an
agreement

that

meets

all

requirements

binding contract, the party is bound.

for

a

legally

See, e.g., Cia

Anon Venezolana De Navegacion v. Harris, 374 F.2d 33, 35
(5th Cir. 1967) (“Federal courts have held under a great
variety of circumstances that a settlement agreement once
entered into cannot be repudiated by either party and
will be summarily enforced.”); Nero v. Chastang, 358 So.
2d 740, 743 (Ala. Civ. App. 1978) (“The law in Alabama is
clear in that agreements made in settlement of litigation
are

as

binding

contract.”).

on

Here,

parties

thereto

as

any

Stoudmire

signed

the

settlement

10

other

agreement, thereby manifesting his assent.

Southern

Energy Homes, Inc. v. Hennis, 776 So. 2d 105, 108 (Ala.
2000)

(“Ordinarily,

[assent]

is

signature.”) (emphasis omitted).

manifested

by

a

Therefore, unless he

shows some reason why the agreement is invalid, he is
bound by it.
Stoudmire’s

first

argument

for

the

contract’s

invalidity is that he did not exercise his own free will
in signing it and that, instead, he was forced to sign it
by McPhillips.

Under the “undue influence” principle of

contract law, “[i]f a party’s manifestation of assent is
induced by one who is not a party to the transaction”
(here, McPhillips), “the contract is voidable by the
victim”

(here,

Stoudmire).2

Contracts § 177 (1981).

Restatement

(Second)

of

For that rule to apply, “the

2. This rule does not apply if “the other party to
the transaction” (here, U.S. Xpress) “in good faith and
without reason to know of the undue influence either
gives value or relies materially on the transaction.”
Restatement (Second) of Contracts § 177 (1981). Since
Stoudmire has not yet accepted U.S. Xpress’s payment,
that exception has no bearing here.
11

will of the influencing party [must have] so overpowered
the will of the other party that the other party’s act
essentially became the act of the influencing party.”
Fortis Benefits Ins. Co. v. Pinkley, 926 So. 2d 981, 988
(Ala. 2005) (emphasis omitted).
Here, the court is not convinced that Stoudmire’s
will was so overpowered.

Admittedly, from Stoudmire’s

point of view, he probably viewed McPhillips’s comments
as overbearing, for Stoudmire was hearing something he
did not want to hear: that, in McPhillips's professional
judgment, Stoudmire’s federal race-discrimination lawsuit
would likely be dismissed because of Stoudmire’s waiver
of claims in his state workers’ compensation lawsuit.
But an attorney's relaying of bad news, as long as that
news has some reasonable basis in fact and law (as were
the circumstances here) does not mean the attorney is
overbearing; instead, it means the attorney is being
professionally

honest.

An

attorney’s

being

professionally honest does not mean the attorney is being

12

overbearing.

Indeed, if an attorney were to fail to be

professionally honest, he could leave himself open to
liability for malpractice or ethical violations.
Therefore, the court does not credit Stoudmire’s
testimony

that

his

attorney’s

pleadings

to

sign

the

agreement were exerted with such force and to such a
degree

that

Stoudmire’s

decision

was

not

his

own.

Rather, it seems that Stoudmire, understandably upset at
the regrettable circumstances creating this predicament,
begrudgingly accepted the settlement offer, and, in doing
so,

he

exercised

situation.

his

own

Stoudmire’s

choice

in

an

undue-influence

unfortunate
defense

is

meritless.
Second, Stoudmire contends that the agreement, which
forfeits his discrimination claim for a mere $ 2,500, is
unfair.

To be sure, “[i]f a contract or term thereof is

unconscionable at the time the contract is made a court
may

refuse

to

enforce

the

contract.”

(Second) of Contracts § 208 (1981).

13

Restatement

Alabama courts have

stated that a contract is “unconscionable” where it is
“such as no man in his sense and not under delusion would
make on the one hand, and as no honest and fair man would
accept on the other.”

Blue Cross Blue Shield of Alabama

v. Rigas, 923 So. 2d 1077, 1086 (Ala. 2005) (punctuation
and citation omitted).

To determine whether a contract

is unconscionable, courts take a number of considerations
into account, including “(1) whether there was an absence
of meaningful choice on one party’s part, (2) whether the
contractual

terms

are

unreasonably

favorable

to

one

party, (3) whether there was unequal bargaining power
among the parties, and (4) whether there were oppressive,
one-sided, or patently unfair terms in the contract.”
Id. at 1086 (citation omitted).
To decide unconscionability in this case, it is
critical to understand precisely what is argued to be
unconscionable.

Here, the state workers’ compensation

settlement, which waived all claims against the company
regardless of their nature (that is, if U.S. Xpress’s

14

interpretation of the agreement is to be accepted), is
not

the

agreement

before

the

court.

There,

the

underlying lawsuit was one in which Stoudmire sought
compensation
settling

for

that

injuries
case,

incurred

U.S.

on

Xpress,

the

job.

In

represented

by

sophisticated lawyers and aware that it was being charged
with serious allegations of racism, may very well have
duped Stoudmire, who had no attorney advising him, into
waiving

his

race-discrimination

claim.

This

court

credits Stoudmire’s testimony that, when he agreed to the
state-court settlement, he was completely unaware of the
effect it might have on his federal race-discrimination
case.
the

Indeed, if the state-court settlement were before

court,

it

would

present

a

serious

question

of

unconscionability.
Unfortunately for Stoudmire, as stated the statecourt settlement is not at issue; rather, the court must
decide

the

enforceability

of

the

subsequent

$

2,500

federal settlement, and circumstances in that regard are
significantly different.

That agreement was made in the
15

face of a motion to dismiss that Stoudmire’s experienced
attorney, in his professional judgment, believed was
likely to be granted, and, while, as stated, the issue
presented a serious question, there is nothing before
this court to suggest that that professional judgment was
not reasonable.

In that context, the $ 2,500 settlement

does not shock the conscience.

See Union Camp Corp. v.

Dyal, 460 F.2d 678, 689-90 (5th Cir. 1972) (“The final
argument offered on behalf of J. Edgar Dyal is that the
agreement obliges him to sell at $ 15 an acre property
worth more than ten times that amount.

But this is only

a vision of streets paved with gold, dependent upon Dyal
succeeding in all his demands.

It does not take into

account what was really bought and sold--the chances of
success or failure.”); In re Yohannes, 2007 WL 2034301,
at *3 (S.D.N.Y. July 17, 2007) (Swain, J.) (settlement
agreement in mortgage dispute was not unconscionable
because the fact that both parties faced uncertainty
regarding validity of the mortgage was taken into account
in choosing settlement amount).
16

In short, the court recognizes that the circumstances
leading up to Stoudmire’s settlement in this lawsuit were
regrettable, and it is eminently reasonable that a person
in Stoudmire’s position would feel wronged.

Regardless,

upon the advice of experienced counsel, he elected to
accept

a

company.

small

payment

in

lieu

of

challenging

the

Having done so, the law does not grant him a

right to change his mind.

Stoudmire’s unconscionability

defense is meritless.
The court will therefore deny Stoudmire’s motion to
abrogate the settlement agreement and will grant U.S.
Xpress’s motion to enforce the settlement agreement.

B.
The

court

now

turns

to

Stoudmire and McPhillips.

the

fee

dispute

between

Two federal cases are at

issue.
The first federal case is the one now before this
court: his race-discrimination case.
this

lawsuit,

Stoudmire

and
17

Before instituting

McPhillips

agreed

that

Stoudmire would pay the court’s $ 350 filing fee but
would not pay any attorney’s fee up front, although
McPhillips would, for his fee, be entitled to 50 % of
whatever sum was recovered in the lawsuit, which ended up
being $ 1,250 (half of the $ 2,500 settlement).

As to

the $ 1,250, Stoudmire stated at the court’s evidentiary
hearing

that

he

no

longer

sought

that

money,

and,

therefore, it is unnecessary for this court to resolve
the mooted issue.
as well.

(The issue is moot for a second reason

Stoudmire’s attorney, McPhillips said he is now

willing to forfeit his $ 1,250 and that Stoudmire can
have the entire $ 2,500.

Stoudmire can, therefore, pick

up the entire $ 2,500 whenever he wants.)
The second federal case was filed by McPhillips, on
Stoudmire’s behalf, to obtain a right-to-sue letter from
the Equal Employment Opportunity Commission, a document
needed to begin the current race-discrimination lawsuit.
See Stoudmire v. Equal Emp’t Opportunity Comm’n, No.
2:12cv574 (M.D. Ala. filed July 3, 2012) (Watkins, J.).
Stoudmire paid McPhillips close to $ 3,000 in fees and
18

court costs to bring this lawsuit, which is now closed.
Stoudmire seeks a refund of the fees.
“Federal courts are courts of limited jurisdiction.
They possess only that power authorized by Constitution
and statute,” Kokkonen, 511 U.S. at 377, which includes
the

power

to

adjudicate

civil

federal laws, 28 U.S.C. § 1331.

actions

arising

under

Stoudmire’s underlying

race-discrimination claim in the current case arises
under federal law, the Civil Rights Act.

The dispute he

has with McPhillips over fees in another, closed lawsuit
is twice removed.

First, it relates to another lawsuit

over which this court has absolutely no jurisdiction.
Second, it relates to a lawsuit that is now closed and
there is no evidence that that lawsuit ever reached, or
could now reach, the issue of Stoudmire’s fees with his
attorney.

Stoudmire’s fee dispute with McPhillips is, at

most, wholly a matter of state law for state courts.
Stoudmire’s motions for return of fee and to dismiss
the fee lien will be denied.

19

***
The court will, therefore, enter a judgment providing
for the following: first, in accordance with the court’s
prior judgment reserving jurisdiction to adjudicate postjudgment settlement disputes, granting Stoudmire’s motion
to set aside the judgment and reinstate the case; second,
denying Stoudmire’s motion to abrogate the settlement
agreement; third, denying Stoudmire’s motions to have
McPhillips refund the fee and to dismiss the fee lien;
fourth, granting U.S. Xpress’s motion to enforce the
settlement agreement; and, lastly, ordering the parties
to comply with that agreement.
includes,

among

its

provisions,

Because the agreement
a

requirement

that

Stoudmire’s lawsuit be dismissed, the court will dismiss
his federal race-discrimination claim.

However, this

dismissal will not be of the entire lawsuit, for the
court will retain jurisdiction to enforce the settlement
agreement;

in

other

words,
20

the

aspect

of

this

case

regarding

enforcement

of

the

settlement

will

not

dismissed.
DONE, this the 3rd day of April, 2013.

/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE

be