DEMISSIE v. STARBUCKS CORPORATE OFFICE AND HEADQUARTERS

Filing 45

MEMORANDUM OPINION re 34 defendant's motion to enforce settlement. Signed by Judge Ellen S. Huvelle on July 13, 2015. (lcesh1)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

RAHEL A. DEMISSIE,
Plaintiff,
v.

Civil Action No. 13-2002 (ESH)

STARBUCKS CORPORATE OFFICE AND
HEADQUARTERS,
Defendant.

MEMORANDUM OPINION
Plaintiff Rahel A. Demissie filed this action on December 18, 2013, against Starbucks
Corporate Office and Headquarters (“Starbucks”) based on a claim of unlawful employment
actions motivated by discrimination on the basis of race, gender, or national origin. (See Compl.,
Dec. 18, 2013 [ECF. No. 1].) The parties engaged in a lengthy series of settlement conferences
under the auspices of Magistrate Judge Robinson, but they disagree on whether a settlement was
reached during a settlement conference held on November 6, 2014.
Plaintiff, claiming that no settlement had been reached, renoticed depositions for
December 5, 2014, but defendant did not attend. Plaintiff filed a motion to compel depositions
and extend discovery on December 10, 2014. (See Pl.’s Mot. to Compel, Dec. 10, 2014 [ECF
No. 33].) On December 11, 2014, Starbucks filed a motion to enforce settlement agreement (see
Def.’s Mot. to Enforce, Dec. 11, 2014 [ECF No. 34]), an opposition to plaintiff’s motion to
compel (see Def.’s Opp. to Mot. to Compel, Dec. 11, 2014 [ECF No. 35]), and a motion for
protective order. (See Def.’s Mot. for Protect. Order, Dec. 11, 2014 [ECF No. 36]). The Court
held an evidentiary hearing on February 6, 2015. Kelly Scindian, attorney for Starbucks, and

Richard Salzman, attorney for Ms. Demissie, provided testimony about the alleged settlement
agreement, and several emails exchanged between counsel before and after the November 6,
2014 settlement conference were admitted into evidence. Mr. Salzman did not provide
testimony on direct examination, but represented that he adopted his emails relating to the
settlement as true statements. (See Evid. Hr’g Tr. at 49-50, Feb. 6, 2015 [ECF No. 43] (“Tr.”).)
Based on the testimony of the witnesses, the exhibits, and the entire record, the Court makes the
following findings of fact and conclusions of law.
BACKGROUND
Ms. Demissie, who was born in Ethiopia, filed a pro se lawsuit against Starbucks alleging
that the company violated Title VII by failing to “equally apply [its] rules and regulations”
pertaining to pay raises and work scheduling “to all employees regardless of race, gender, or
national origin” and by retaliating against her for “report[ing] the situation” to human resources.
(Compl. at 2-3.) On February 25, 2014, the Court granted defendant’s partial motion to dismiss,
dismissing plaintiff’s claims of race and gender discrimination and retaliation relating to the
reduction in hours on the grounds of failure to exhaust administrative remedies. (See Mem. Op.
and Order, Feb. 25, 2014 [ECF. No. 12] at 5.) The remaining allegations that Starbucks 1)
discriminated against plaintiff on the basis of national origin by failing to provide Ms. Demissie
with regular performance reviews and pay increases, and 2) retaliated against plaintiff by
informing her that she and her sister could no longer work at the same Starbucks store, were
permitted to proceed. (See id.)
On April 8, 2014, the Court held an initial scheduling conference and discovery was
scheduled to close on August 24, 2014. (See Min. Entry, Apr. 8, 2014.) The discovery period
was subsequently extended to December 20, 2014. (See Min. Order, Nov. 5, 2014.) The Court

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also referred the case to Magistrate Judge Robinson for settlement discussions. 1 (See Order
Referring Case, Apr. 8, 2014.) The parties met for mediation on four occasions: May 27, 2014,
June 12, 2014, June 25, 2014, and November 6, 2014. The first three settlement conferences
were mediated by Magistrate Judge Robinson, but the final conference was mediated by her term
law clerk. (See Tr. at 2-3.)
The parties initially met for mediation on May 27, 2014. During this conference, the
parties discussed plaintiff’s claims and allegations and potential terms of the settlement
agreement. (See Tr. at 21 & 23.) Plaintiff proposed a specific amount to settle the claims, and
defendant stated that any settlement agreement between the parties would be contingent on the
plaintiff’s agreement to voluntarily resign from her position at Starbucks, to not reapply, to
release all claims against defendant, and to maintain confidentiality of all material terms. (See
Tr. at 23.) The settlement amount proposed by plaintiff was not accepted. (See Tr. at 24.) Both
parties agree that they did not discuss tax treatment of the settlement amount at this mediation.
(See Tr. at 23 & 57.)
During the second mediation, held on June 12, 2014, the parties were unsure how a
potential settlement agreement would affect plaintiff’s independent workers’ compensation
claim. (See Tr. at 24.) Defendant again insisted on the terms discussed at the previous
settlement conference: voluntary resignation and no rehire, release of all claims, and
confidentiality of material terms. (See Tr. at 58-59.) The parties did not discuss tax allocation
during the second mediation. (See Tr. at 57.)

1

At the Court’s suggestion, plaintiff consulted with Richard Salzman, an experienced Title VII
lawyer. As a result, Mr. Salzman graciously agreed to enter his appearance on plaintiff’s behalf.
3

The third mediation was held on June 25, 2014. The parties discussed plaintiff’s
workers’ compensation claim, and plaintiff represented that any settlement with an agreement to
release Starbucks of all claims would need to carve out an exception for her workers’
compensation claim. (See Tr. at 25.) Defense counsel agreed to this term and reiterated
defendant’s requirements for settlement: voluntary resignation and no rehire, release of all claims
excluding the workers’ compensation claim, and confidentiality of material terms. (See Tr. at
25.) Again, how the settlement amount would be taxed was not brought up by either party. (See
Tr. at 25; 57.)
On September 17, 2014, Mr. Salzman, counsel for plaintiff sent an email to defense
counsel and proposed another settlement amount. (See Evid. Hr’g, Feb. 6, 2014, Def.’s Ex. 1.)
In his email, Mr. Salzman addressed attorney’s fees and indicated that the settlement amount
would include his fees discounted at a significant rate. (See id.) Defense counsel, Ms. Scindian,
responded the following day, inquiring whether the offer included plaintiff’s acceptance of the
voluntary resignation and no rehire terms previously discussed. (See id.) On September 25,
2014, Mr. Salzman replied that his client would agree to resign, not seek reemployment, and
release all claims except the workers’ compensation claim. (See id.)
In the meantime, preparation for trial continued. Plaintiff notified defendant on
November 3, 2014, of upcoming depositions that would need to be completed before the close of
discovery in December 2014. (See Def.’s Mot. to Enforce at Ex. A.)
The parties met for a fourth time for mediation on November 6, 2014. Magistrate Judge
Robinson was on vacation on this date, and in lieu of rescheduling the settlement conference, she

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instructed her law clerk, with the consent of the parties, to facilitate the discussion. 2 (See Tr. at
14.) The parties began the mediation by briefing the law clerk on prior discussions. (See Tr. at
28.) Plaintiff’s counsel indicated to the law clerk that defendant had said the settlement must
include “the release [of] claims, carving out Ms. Demissie’s Worker’s Compensation claim,
which was still pending, Ms. Demissie’s voluntary resignation and no rehire.” (Tr. at 29.) This
summary of settlement negotiations did not include a discussion regarding tax allocation of the
settlement amount. (See Tr. at 28.) Defense counsel then informed plaintiff that defendant had
rejected the emailed settlement amount and proposed a counteroffer, which plaintiff rejected.
(See Tr. at 29.)
The law clerk then separated the parties, leaving defense counsel in the chambers
conference room and removing plaintiff and Mr. Salzman to the chambers waiting area. (See Tr.
at 29 & 52.) The law clerk moved between the parties conveying offers and counteroffers. He
did not indicate at any point that there were additional terms suggested by the parties. (See Tr. at
31.) Defendant proposed a final settlement offer, and a few minutes later, the law clerk, plaintiff,
and Mr. Salzman returned to the conference room. According to Ms. Scindian, the law clerk
said, “We have a deal.” (Tr. at 32.) Mr. Salzman does not remember whether the law clerk said
this, but remembers that the parties thanked each other for being flexible. (See Tr. at 52.) Both
parties agree that Ms. Scindian shook hands with plaintiff and Mr. Salzman. (See Tr. at 32 &
55.)
With the settlement amount agreed upon, the parties sat down at the conference table and
discussed staying discovery pending the parties filing a stipulation for dismissal. (See Tr. at 34.)

2

The development of a complete record was hampered by Magistrate Judge Robinson’s refusal
to permit her law clerk to testify at the February 6, 2015 evidentiary hearing despite requests by
counsel and the Court.
5

Ms. Scindian agreed to draft a written agreement of the settlement. (See Tr. at 53.) At that time,
Mr. Salzman mentioned for the first time that the settlement amount owed to his client should be
submitted on a 1099 form because the settlement amount should not be considered, or taxed, as
back wages. (See Tr. at 34.) According to plaintiff, Ms. Scindian “either agreed to [the tax
allocation], or agreed to look into it.” (Pl.’s Reply, Dec. 12, 2014 [ECF No. 37] at 2.) Ms.
Scindian does not remember how she responded to Mr. Salzman’s request. (See Tr. at 35.)
Following the November 6, 2014 settlement conference, counsel for the parties engaged
in an email disagreement over what was said at the mediation regarding tax allocation and
whether the parties reached an agreement on all material terms. On November 14, 2014, Ms.
Scindian emailed Mr. Salzman regarding the portion of the settlement amount attributable to
attorney’s fees and informed him that “a majority of the settlement amount to your client must be
attributed to back wages given the basis of her claims, and thus cannot be 1099’d.” (Def.’s Mot.
to Enforce at Ex. B.) Mr. Salzman responded that same date that this tax allocation was “not
acceptable” because they had “specifically talked about this and agreed at the mediation.” (Pl.’s
Mot. to Compel at Ex. 2.) Ms. Scindian replied that she had agreed to look into the 1099 issue,
but confirmed that part of the settlement amount must be attributable to back pay. (See id.)
Disagreeing with Ms. Scindian’s memory of events, Mr. Salzman asserted that, “we were crystal
clear and you were not agreeing to look into it; you agreed to it. It is not a question of whether
she pays taxes on it; she always pays taxes on it; it’s a question of whether or not FICA comes
out. So the other option is to gross up the settlement by the small amount that she will have to
pay in FICA. If that is the option you prefer, let me know.” (Id.) Ms. Scindian responded that
the parties had “reached the settlement amount before any discussion of taxes occurred.” (Id.)
On November 17, 2014, Mr. Salzman asked Ms. Scindian to propose a percentage to allocate to

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back wages. (See id.) The attorneys proceeded to negotiate the portion of the settlement that
would be allocated as back wages. (See id.) On November 18, 2014, Mr. Salzman agreed to
recommend to his client defendant’s proposal that less than $1,000 of the settlement amount
would be attributed to back wages. 3 (See id.)
On November 20, 2014, Mr. Salzman emailed that his client would not agree to this tax
allocation and Ms. Demissie was “quite frustrated with this change in position by [defendant].”
(Def.’s Mot. to Enforce at Ex. C.) Mr. Salzman indicated to Ms. Scindian on November 24,
2014, that a change in plaintiff’s personal circumstances made it impossible for her to voluntarily
resign from her position at Starbucks. (See Mot. to Enforce at 6.) Ms. Scindian later learned that
the change in Ms. Demissie’s circumstances was that her workers’ compensation attorney had
advised her that voluntarily resigning from her position could compromise her claim. (See Tr. at
37.) 4
Intending for the litigation to recommence, Mr. Salzman re-noticed depositions of
defendant’s employees to be held in early December. (See Def.’s Mot. to Enforce at Ex. C and
Ex. D.) Counsel discussed the status of the settlement by phone, and Ms. Scindian followed up
by email on December 1, 2014. She wrote that the parties “had negotiated a settlement in
principle on Nov. 6,” but she was trying to schedule witnesses for depositions in December.
(Pl.’s Mot. to Compel at Ex. 5.) Ms. Scindian also indicated that her interpretation of the
settlement break down was that plaintiff had revoked her agreement to voluntarily resign from
3

Assuming that FICA and Medicare taxes had to be paid on the $1,000, plaintiff would have
received approximately $73.00 less in settlement proceeds. (See Tr. at 45.)
4

In her motion to compel, plaintiff stated that she “no longer wishes to enter into the settlement
on the terms previously discussed” because 1) defendant attempted to change the terms of the tax
allocation provision, and 2) plaintiff “learned that the provision requiring her voluntary
resignation from Starbucks . . . could jeopardize portions of a pre-existing workers compensation
claim.” (Pl.’s Mot. to Compel at 1-2.)
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her position. (See id.) On December 2, 2014, Mr. Salzman responded that his interpretation of
the dispute was that defendant “reneged on the material term we agreed upon at the mediation,
regarding the allocation of the settlement payment as 1099 damages, rather than as w-2 wages.”
(Pl.’s Mot. to Compel at Ex. 2.)
LEGAL STANDARD
“It is well established that federal district courts have the authority to enforce settlement
agreements entered into by the litigants in cases pending before them.” Ulliman Schutte Constr.,
LLC v. Emerson Process Mgmt. Power & Water Solutions, No. 02-1987, 2007 WL 1794105, at
*3 (D.D.C. June 19, 2007). When there is a genuine factual dispute as to whether the parties
agreed to a binding settlement, the Court must hold an evidentiary hearing in which the parties
are afforded the opportunity for cross-examination. See United States v. Mahoney, 247 F.3d 279,
285 (D.C. Cir. 2001). The moving party bears the burden of proving by clear and convincing
evidence that the parties reached a binding agreement. See Samra v. Shaheen Bus. and Inv. Grp.,
Inc., 355 F. Supp. 2d 483, 493 (D.D.C. 2005) (citing Quijano v. Eagle Maint. Servs., Inc., 952 F.
Supp. 1, 3 (D.D.C. 1997)). For a contract, written or oral, to be enforceable under D.C. law, the
court must find that there was “(1) an agreement to all material terms, and (2) intention of the
parties to be bound.” Duffy v. Duffy, 881 A.2d 630, 634 (D.C. 2005).
Which of the parties’ agreement terms are material is a question of fact. See, e.g., Queen
v. Schultz, 747 F.3d 879, 885 (D.C. Cir. 2014). Terms that are “not necessary for the parties to
understand how they are expected to perform the contract itself” are not considered material.
Tauber v. Quan, 938 A.2d 724, 730 (D.C. 2007). For example, terms that were not discussed by
the parties during negotiations, but are only brought up after-the-fact, may be deemed
immaterial. See Dyer v. Bilaal, 983 A.2d 349, 358 (D.C. 2009) (finding that confidentiality was

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not a material term in part because the parties had not discussed confidentiality while negotiating
the settlement). Whereas, courts have found that the amount to be paid and the release of
liability are material terms to a settlement agreement. See, e.g., Wise v. Riley 106 F. Supp. 2d 35,
39 (D.D.C. 2000). Thus, courts make a determination of which terms are material on a case-bycase basis.
If the court finds that the parties agreed as to all material terms orally, the court must also
determine whether the parties intended to be bound by their words alone. See Perles v. Kagy,
473 F.3d 1244, 1249 (D.C. Cir. 2007). The parties did not intend to be bound if “either party
knows or has reason to know that the other party regards the agreement as incomplete.” Perles,
473 F.3d at 1249. “[T]he fact that the exact language of [a] written settlement agreement had not
been finalized does not demonstrate that the parties did not intend to be bound by their
agreement.” Varga v. Baker, No. 92-5064, 1993 WL 20073, at *1 (D.C. Cir. Jan. 5, 1993). To
determine whether the parties intended to be bound, the court may examine written materials,
oral expressions, and the actions of the parties, including conduct that occurred after the alleged
oral agreement. See Miller v. Holzmann, 471 F. Supp. 2d 122, 124-25 (D.D.C. 2007).
ANALYSIS
Based on the testimony and exhibits admitted at the evidentiary hearing and the entire
record, the Court has concluded that Starbucks has established by clear and convincing evidence
that the parties reached an oral agreement as to all material terms of a settlement agreement on
November 6, 2014, and they intended to be bound by that agreement. Accordingly, the Court
holds that the parties entered into a binding settlement agreement that must be enforced.

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I.

MATERIAL TERMS

The parties agree on most facts pertaining to the mediation sessions and subsequent
discussions. They agree that Starbucks reiterated at every mediation session the terms it
considered to be material: voluntary resignation and no rehire, release of all claims excluding the
workers’ compensation claim, and confidentiality of material terms. These terms were also
discussed in the September 2014 email exchange between the parties.
However, the parties disagree on plaintiff’s material terms. Plaintiff argues that the tax
treatment of the settlement amount is a material term even though it was only discussed for the
first time after the parties shook hands at the close of the November 6, 2014 mediation. (See Tr.
at 55.) Plaintiff argues that as a result, the settlement should not be enforced for two reasons: 1)
defendant revoked its promise to attribute the entire settlement amount as 1099 damages; or 2)
defendant promised to look into the tax allocation question, indicating that an agreement on all
material terms had not been reached. (See id. at 11-12.)
In support of plaintiff’s position that the tax allocation was a material term, Mr. Salzman
noted that tax allocation is almost never discussed prior to reaching a settlement amount. (See
Tr. at 55.) He stated that in his experience with settlement discussions, “[t]here are almost
always many additional points that come up. There’s usually an employer ask[ing] for a nondisparagement clause. Employers almost always put in something called a liquidated damages
clause. They put in arbitration provisions. There are arguments over tax allocation and
indemnification clauses.” (Tr. at 56.) However, this anecdotal information does not necessarily
support plaintiff’s position because all of those terms might be considered immaterial under the
particular circumstances of those cases. Plaintiff also argues, contrary to the case law, that the
failure to discuss tax allocation during any of the previous settlement negotiations does not

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negate the materiality of the allocation issue. See Blackstone v. Brink, 63 F. Supp. 3d 68, 77
(D.D.C. 2014) (citing Dyer, 983 A.2d at 358). In fact, tax allocation has been determined to be
ministerial, relating more to the administration of the settlement than to the agreement itself.
Eastbanc, Inc. v. Georgetown Park Assocs. II, L.P., 940 A.2d 996, 1003 (D.C. 2008) (“The
enforceability of the agreement comes from the definitive character of the obligation to perform,
not a precise description of the ways in which the obligation might be fulfilled.”)
Under the circumstances of this case, the facts weigh heavily in favor of defendant’s
position. The tax treatment of the settlement amount was not mentioned prior to the end of the
November 6, 2014 mediation and, even then, only after the parties reconvened after reaching an
agreement and shook hands. And tax allocation does not affect defendant’s obligation to
perform under the agreement, but merely how payment should be made.
Significantly, the lack of materiality is further demonstrated by the small amount of
money at stake. The Court can imagine a scenario in which the tax allocation of the settlement
could create a substantial tax consequence. However, this is not such a case. As Mr. Salzman
pointed out in his November 15, 2014 email, Ms. Demissie is required to pay taxes on the
settlement regardless of whether it is attributed as back wages or 1099 damages. The only
difference between the two allocations is that plaintiff must pay FICA and Medicare taxes, which
Mr. Salzman admits are quite small. (See Pl.’s Mot. to Compel at Ex. 2 (Mr. Salzman emails,
“So the other option is to gross up the settlement by the small amount that she will have to pay in
FICA.”); see also supra note 3.) In their negotiations following the November 6, 2014
mediation, the lawyers’ conduct indicates that they believed that the issue could be worked out.
Indeed, defendant proposed that less than $1,000 of the settlement would be attributed to back
wages, and Mr. Salzman agreed to recommend this allocation to his client. It is therefore not

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credible to claim that this negligible amount attributed as wages could be a material term or that
it would be a deal breaker. 5
The subsequent events further suggest that the tax allocation issue was not the true bone
of contention. Rather, the alleged detrimental effect plaintiff’s compliance with the settlement
agreement would have on her workers’ compensation case appears to have been the real catalyst
for the breakdown. Mr. Salzman was willing to compromise on the tax allocation issue, agreeing
to present a proposed allocation to his client. However, it was only when Ms. Demissie learned
that her workers’ compensation claim might be negatively affected that she communicated to
defendant that the agreement reached on November 6, 2014, would not be honored. 6
As Mr. Salzman noted during the evidentiary hearing, many mediators encourage the
parties to write down the material terms on paper and sign it. (See Tr. at 55.) Unfortunately, this
desirable practice was not followed on November 6, 2014. Regardless, the Court is able to
conclude that the parties reached agreement on all material terms: the settlement amount,
plaintiff’s agreement to voluntarily resign and not reapply, plaintiff’s release of all claims,
excluding the worker’s compensation claim, and confidentiality of all material terms.
II.

INTENTION TO BE BOUND

Likewise, the Court concludes that the parties intended to be bound by their oral
settlement agreement. In their September 2014 email exchange, counsel for the parties discussed

5

It represents less than 10% of the settlement amount.

6

Another lawyer, not Mr. Salzman, represents plaintiff in her worker’s compensation case.
Based on the Court’s observations, this division of labor has frustrated settlement. In fact, in
addition to this settlement blowing up, all subsequent attempts at settlement have failed, and Mr.
Salzman has moved to withdraw based on irreconcilable differences. (Mot. of Richard Salzman
to Withdraw as Plaintiff’s Counsel, June 24, 2015 [ECF No. 42].) Plaintiff has opposed this
motion. (Pl.’s Response and Opp’n to Pl.’s Counsel’s Mot. to Withdraw, July 6, 2015 [ECF No.
44].)
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the material terms of a potential settlement. Mr. Salzman wrote on September 25, 2014, that
plaintiff would agree to the terms outlined by defendant if the settlement amount was agreed
upon and defendant agreed to carve out plaintiff’s workers’ compensation case. While this
monetary offer was ultimately rejected, these emails show the intention of the parties to be bound
by the terms that were ultimately accepted on November 6, 2014.
Further, counsel and plaintiff reconvened after reaching a mutually agreeable settlement
amount and shook hands, confirming their agreement to the material terms of the settlement.
The parties then discussed staying further litigation and who would be responsible for drafting
the settlement agreement. These actions are consistent with an intent to be bound by the terms
discussed in the previous mediation sessions and the finalized settlement amount.
Similarly, the actions of the parties following the November 6, 2014 mediation indicate
that the parties had intended to be bound by the agreement they had reached. Although in her
November 24, 2014 email Ms. Scindian stated that she was looking into scheduling witnesses for
depositions in December, she also indicated that she believed the parties had reached a
settlement in principle. When questioned on what she meant by this, Ms. Scindian responded
that she “meant that we reached an agreement on the material terms of the settlement. We just
hadn’t hammered out the actual agreement.” (Tr. at 44.) The fact that Ms. Scindian was
“contemplating in part that discovery may go forward” does not demonstrate that she had not
intended defendant to be bound by the oral agreement on November 6, 2014, because, as she
made clear, she “was also contemplating whether or not we could enforce the settlement.” (Id. at
45.)
Indeed, there is no evidence that after shaking hands at the November mediation, either
party knew or had reason to know that the other party regarded the agreement as incomplete. On

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the contrary, the stay of litigation the parties initiated at the close of the November 6, 2014
mediation suggests that both parties believed that they had reached an enforceable agreement.
Again, it was only after Ms. Demissie concluded that the agreement she had reached with
Starbucks might compromise her workers’ compensation case that she sought to recommence
litigation. In this Court’s opinion, this after-the-fact change of heart cannot serve to undo the
oral agreement that had been reached on November 6, 2014. See Blackstone, 63 F. Supp. 3d at
83 (“[B]elated objections do not convince the Court that Plaintiff[] did not intend to be bound by
the agreement.”) (citing Carlson v. Farm Mutual Automobile Insurance Co., 76 F. Supp. 2d
1069, 1076 (D. Mont. 1999)). Thus, the Court concludes that the parties intended to be bound by
their oral agreement on the material terms of the settlement.
CONCLUSION
For the foregoing reasons, the Court finds that the parties reached a binding, oral
settlement agreement on November 6, 2014, and will grant defendant’s motion to enforce
settlement.
/s/ Ellen Segal Huvelle
ELLEN SEGAL HUVELLE
United States District Judge

Date: July 13, 2015

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