Sure Fill & Seal, Inc. v. GFF, Inc.

Filing 180

ORDER adopting 176 REPORT AND RECOMMENDATION re 158 MOTION for miscellaneous relief, specifically to Enforce Settlement Agreement filed by GFF, Inc., 159 MOTION for miscellaneous relief, specifically to Extend Time to Dismiss the Case filed by Michael Vaclav Daniek, SREPORT AND RECOMMENDATION re 158 MOTION for miscellaneous relief, specifically to Enforce Settlement Agreement filed by GFF, Inc., 159 MOTION for miscellaneous relief, specifically to Extend Time to Dismiss the Case filed by Michael Vaclav Daniek, REPORT AND RECOMMENDATION re 158 MOTION for miscellaneous relief, specifically to Enforce Settlement Agreement filed by GFF, Inc., 159 MOTION for miscellaneous relief, specifically to Extend Time to Dismiss the Case fil ed by Michael Vaclav Daniek. Motion to enforce 158 is granted, motion to extend time and for sanction [159, 162] are denied, motion to be allowed to file motion for summary judgment 154 is denied as moot. The cause of action is dismissed in accordance with the Settlement Agreement. The Clerk of Court is directed to close this case. Signed by Judge Elizabeth A. Kovachevich on 8/4/2010. (SN)

Sure Fill & Seal, Inc. v. GFF, Inc.

Doc. 180

UNITED S T A T E S D I S T R I C T C O U R T MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION

S U R E F I L L & S E A L , I n c . , e t al., Plaintiffs,
v.

Case No. 8:08-cv-882-T-17TGM

GFF, Inc.,
Defendant.

ORDER ADOPTING REPORT AND RECOMMENDATION

This cause comes before the Court on defendant's Motion to Enforce the

Settlement A g r e e m e n t (Doc. 158) and plaintiffs' Motion to Extend T i m e to Dismiss the
C a s e (Doc. 1 5 9 ) p e n d i n g r e s o l u t i o n o f a M o t i o n for S a n c t i o n s ( D o c . 162). T h i s C o u r t ,

under authority o f 28 U.S.C. § 636(b)(1)(B), Rule 72(b) o f the Federal Rules o f Civil
P r o c e d u r e , a n d R u l e 6 . 0 2 , L o c a l R u l e s o f the M i d d l e D i s t r i c t o f F l o r i d a , r e f e r r e d the m o t i o n s to the H o n o r a b l e T h o m a s G. Wilson, U n i t e d S t a t e s M a g i s t r a t e J u d g e , by O r d e r

o f Referral dated April 1, 2010 (Doc 168).

After considering the parties' submissions and oral a r g u m e n t s , J u d g e Wilson, on
J u l y 6, 2 0 1 0 , filed a R e p o r t a n d R e c o m m e n d a t i o n ( " R & R " ) ( D o c 1 7 6 ) w h e r e i n he r e c o m m e n d s t h a t this C o u r t g r a n t d e f e n d a n t ' s m o t i o n and d e n y p l a i n t i f f s ' m o t i o n s . J u d g e

Wilson determined t h a t the plaintiffs have not asserted any legal j u s t i f i c a t i o n for failing to dismiss t h e i r claims in accordance with the Settlement A g r e e m e n t , and further, have

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not come close to d e m o n s t r a t i n g that the defendant engaged in s a n c t i o n a b l e conduct. On
July 13, 2 0 1 0 , p l a i n t i f f s filed t h e i r O b j e c t i o n s to the R e p o r t a n d R e c o m m e n d a t i o n ( D o c 178) and on J u l y 2 7 , 2 0 1 0 the d e f e n d a n t filed t h e i r R e s p o n s e ( D o c . 179). A f t e r r e v i e w i n g

Judge W i l s o n ' s findings in the light most favorable o f P l a i n t i f f s objections, this Court

adopts the Magistrate J u d g e ' s report and recommendation.

BACKGROUND

This case arose out o f the plaintiffs' claim that the d e f e n d a n t breached its

obligation to pay $80,878.29, which was the remaining balanced owed for the purchase
and i n s t a l l a t i o n o f a f o o d c u p filling m a c h i n e ( D o c 1). T h e d e f e n d a n t d e n i e d the

plaintiffs' claim and asserted counterclaims for breach o f c o n t r a c t and breach o f

expressed warranty, alleging the machine did not perform in accordance with specifications, and the plaintiffs failed to fix the problem (Doc 15).
During discovery the parties had a hard time agreeing w i t h e a c h other. This

resulted in the plaintiffs filing several motions for sanctions (Docs. 24, 31, 89). However,
these motions were denied on procedural grounds or withdrawn. Despite the disputes, the
lawsuit was r e s o l v e d , a n d t h e p a r t i e s a g r e e d in the S e t t l e m e n t A g r e e m e n t to d i s m i s s t h e i r
claims.

The defendant, p r o m p t e d by the plaintiffs' failure to d i s m i s s their claims, filed a

Motion to Enforce the Settlement Agreement (Doc. 158). In response, the plaintiffs filed
a Motion to Extend the T i m e to Dismiss the Case (Doc. 159) p e n d i n g resolution o f a Motion for Sanctions (Doc. 162). The sanctions motion alleges t h a t the d e f e n d a n t and its

counsel asserted frivolous claims and engaged in outrageous conduct during litigation o f
this case.

These motions were then referred to Magistrate Judge Wilson for a report and
recommendation (Doc 168). The Report and Recommendation (Doc. 176), recommended

the Motion to Enforce the Settlement Agreement (Doc. 158) be granted and the other
motions be denied.

STANDARD OF REVIEW

U n d e r the F e d e r a l M a g i s t r a t e ' s A c t (the "Act"), C o n g r e s s v e s t e d A r t i c l e III

judges with the power to authorize a United States Magistrate Judge to conduct
e v i d e n t i a r y h e a r i n g s . T h e r e l e v a n t p o r t i o n o f this a c t is f o u n d at 28 U . S . C . § 6 3 6 . A

district court j u d g e m a y designate a United States Magistrate J u d g e to c o n d u c t hearings, including evidentiary hearings, in o r d e r to submit proposed findings o f fact and recommendations (ie. R & R) for the disposition o f motions for injunctive relief. 28 U.S.C. § 636(b)(1)(B). Within fourteen days after being served w i t h a copy o f the R & R, any party may file w r i t t e n objections to the proposed findings and recommendations. Id. Section 636(b)(1) also states that a j u d g e o f the court shall m a k e a de novo determination

of those portions o f the R & R to which objection is made. 28 U.S.C. § 636(b)(1).
In U.S. v. Raddatz, 4 4 7 U . S . 667 ( 1 9 8 0 ) , the C o u r t u p h e l d t h e c o n s t i t u t i o n a l i t y o f

this provision o f the Act. T h e C o u r t found that Congress adequately p r o t e c t e d the Act
a g a i n s t an A r t i c l e III c o n s t i t u t i o n a l c h a l l e n g e by s u b j e c t i n g the M a g i s t r a t e J u d g e ' s

proposed findings and recommendations to a de novo determination by the judge, who
then exercises ultimate authority to issue an appropriate order. 4 4 7 U.S. at 681. In. Jeffrey

S. v. State Board of Education of the State of Georgia, 896 F.2d 507,512 (11th Cir. 1990),
the court stated t h a t the de novo review requirement is essential to the constitutionality o f section 636. T h e c o u r t further stated that section 6 3 6 ( b ) ( l ) ' s nonconsensual reference is saved from constitutional infirmity by the retention in the Article III j u d g e o f the ultimate adjudicatory power, to be exercised after assistance from and upon the recommendation

of the Magistrate Judge. Id. at 512-13 (citing Hill v. Sharpe, 812 F.2d 644,647 (11th Cir.
1987)). Accordingly, the de novo review is based in a realization that only the district

court judge can constitutionally dispose o f a matter such as that in the instant case.
R u l e 72 o f t h e F e d e r a l R u l e s o f Civil P r o c e d u r e p l a c e s into p r a c t i c e the p o w e r s

codified in 28 U.S.C. § 636(b)(1). Rule 72 follows the statutory example and sets forth
different provisions for the two types o f pretrial matters that can be referred to a

Magistrate Judge. The first provision under § 636(b)(1)(A) states in part that a judge may

designate a Magistrate Judge to hear and determine any pretrial matter pending before the
court, except a motion for injunctive relief. Rule 72(a) refers to the type a pretrial matter set out in § 636(b)(1)(A) as one that is not dispositive o f a claim or defense.
T h e s e c o n d provision, under § 636(b)(1)(B), states in part t h a t a j u d g e may

designate a Magistrate Judge to conduct hearings, including evidentiary hearings, and to submit proposed findings o f fact and recommendations (i.e. R & R) for disposition, by a
judge, o f any m o t i o n e x c e p t e d in subparagraph (A). Thus, s u b p a r a g r a p h (B) applies to

injunctive relief. Subparagraph (B) also allows any party, within fourteen days, to file
written objections to such proposed findings and recommendations. Additionally, § 636(b)(1) states t h a t a j u d g e shall make a de novo determination o f those portions o f the report or specified p r o p o s e d findings or recommendations to w h i c h o b j e c t i o n is made.

Rule 7 2 ( b ) d e s c r i b e s t h o s e m a t t e r s that are a c c e p t e d in § 6 3 6 ( b ) ( 1 ) ( A ) as o n e s that

are dispositive o f a claim or defense. Since injunctive relief is excepted from § 636(b)(1)(A), it is dispositive and a R & R submitted by a Magistrate Judge is subject to
de novo r e v i e w by the district j u d g e . This part o f Rule 72 also reiterates the need for a timely objection and a de novo determination upon the record. T h u s , the Magistrate Judge's R & R in the instant case is reviewed de novo by the district j u d g e who m u s t then accept it, reject it, or m o d i f y it, in whole or in part.

Courts in the Eleventh Circuit have addressed the issue of whether the same de

novo standard o f review is applicable. In LoConte v. Dugger, 847 F.2d 745 (11 Cir. 1988), the c o u r t a d d r e s s e d the issue o f what standard o f review the a p p e l l a t e court would use in reviewing the district court's adoption o f a Magistrate J u d g e ' s R & R. In do so, the court e x a m i n e d w h a t s t a n d a r d o f review the district court was required to use in its
review. T h e c o u r t in LoConte f o u n d t h a t t h e r e a r e t h r e e d i f f e r e n t c a t e g o r i e s o f f i n d i n g s

reviewable on appeal: (1) findings o f fact made by the Magistrate J u d g e to which the

parties did not object; (2) findings o f fact made by the Magistrate Judge to which the
parties did object w i t h the objections being resolved de novo by the district court; and (3)

independent findings o f fact made by the district court. Id. at 749. In reference to the findings stated in category (2), the LoConte court also stated that:
Whenever any p a r t y files a timely and specific objection to a finding o f fact by a magistrate, the district court has an obligation to c o n d u c t a de novo review o f the record with respect to t h a t factual issue. As the use o f the p h r a s e de n o v o i m p l i e s , the district c o u r t ' s c o n s i d e r a t i o n o f the factual issue m u s t be independent and based upon the record before the court.... [T]he factual conclusions reached by the district c o u r t are subject only to a "clearly erroneous" standard o f review on appeal.

Id. at 750; See also Jeffrey S. V. State Board o fEducation o f Georgia, 896 F.2d 507,513 (11 Cir. 1990), Mannings v. School Board o f Hillsborough County, Florida, 796 F.Supp
1491,1492 (M.D. Fla. 1992), McHenry v. The Florida Bar, 808 F . S u p p 1543,1544 (M.D.

Fla. 1992. It is clear that findings by the Magistrate Judge, to which the parties have
made timely objections, are subject to de novo review by the district c o u r t j u d g e

The standard o f review applicable under categories (1) and (3), are different from
the de novo r e v i e w standard o f category (2). When no objections are m a d e to the

Magistrate Judge's R & R, the case law seems to indicate that the district court should
review the findings using the s a m e clearly erroneous standard o f review t h a t an appellate court must use w h e n reviewing the district court's findings.

In Nettles v. Wainwright, 611 F.2d 404,409 (5th Cir. Unit B 1982) (en banc), the
court stated that i f no objections are filed, the judge may accept, reject, or modify, in whole or in part, the findings and recommendations. The Nettles court further states that

it is arguable that, when no objections are filed, the parties have accepted the Magistrate
Judge's report and have consented to the recommendations. Id. In Jeffrey, the court stated that on appeal there is little practical distinction between the plain error standard o f review applicable to unchallenged findings of fact by a Magistrate Judge and the clearly
erroneous standard o f r e v i e w relevant to fact findings by the district court. 896 F.2d at 513, citing LoConte, 847 F.2d at 750.

DISCUSSION

A . M o t i o n to E n f o r c e t h e S e t t l e m e n t A g r e e m e n t .

A district court has "inherent power to summarily enforce settlement agreements
entered into by p a r t i e s . . . in a pending case." Ford v. Citizens and Southern National
Bank, 928 F . 2 d 118, 1121 ( 1 1 t h Cir. 1991). " T h e m o t i o n to e n f o r c e t h e s e t t l e m e n t

agreement essentially is an action to specifically enforce a c o n t r a c t . " Id. at 1122.

In t h i s case, plaintiffs do not dispute that the Settlement A g r e e m e n t is an
e n f o r c e a b l e c o n t r a c t . P l a i n t i f f s ' h o w e v e r w i s h to k e e p the a c t i o n o p e n so t h e i r M o t i o n for

Sanctions may be resolved. However, a pending motion for sanctions is n o t a legal justification for the p l a i n t i f f s ' failure to fulfill their obligations under the Settlement

Agreement. A district court retains jurisdiction over the issue o f sanctions even i f the
underlying case has been dismissed. Cooler & Gell v. Hartmax Corp., 4 9 6 U.S. 384, 39596 (1990). Therefore, because the defendant has fulfilled its only obligation, paying the $50,000.00 consideration, the plaintiffs must dismiss their claims.

Further, w h e n a settlement agreement does not fix a d a t e for performance, the law

implies a reasonable time. De Cespedes v. Bolanos, 711 So.2d 216, 218 (Fla App. 1998).
The Settlement A g r e e m e n t in this case does not provide a s p e c i f i c t i m e for performance. A reasonable time would be shortly after January 11, 2010, w h e n the plaintiffs received
the s e t t l e m e n t c h e c k . It is s u b s t a n t i a l l y b e y o n d the c o u r t ' s 9 0 - d a y d i s m i s s a l o r d e r and still

the plaintiffs have not d i s m i s s e d their claims. Consequently the plaintiffs are in breach o f
the s e t t l e m e n t a g r e e m e n t .

B. M o t i o n f o r S a n c t i o n s .

Plaintiffs filed a M o t i o n for Sanctions against the d e f e n d a n t and its counsel

pursuant to Rules 11(c), 26(g), and 37(a)(5) of the Federal Rules o f Civil Procedure; Fla. Stat. §57.105; 28 U.S.C. 1927; Florida's inequitable conduct doctrine; and the inherent power o f the court (Doc. 162). Plaintiffs' complaints are numerous, and plaintiffs' have filed multiple requests for sanctions throughout this case (Docs. 24, 31, 89). The

plaintiffs request a monetary award of more than three-quarters o f a million dollars (Doc.
162).

The Settlement Agreement bars any such award to the plaintiffs. In the Settlement Agreement, the plaintiffs agreed to release the defendant and its counsel from all claims,
"related to, or in any w a y connected with the Claims asserted in this a c t i o n " (Doc. 158). The plaintiffs further expressly waived in the Settlement A g r e e m e n t any c l a i m s to attorneys' fees and costs.

Plaintiffs assert two grounds in support o f their contention that the Motion for Sanctions is not barred by the settlement agreement. First, the plaintiffs allege that "[sjanctions for m i s c o n d u c t during litigation are not covered b y the S e t t l e m e n t agreement" (Doc. 162 p. 7). This claim is meritless. The S e t t l e m e n t A g r e e m e n t broadly
releases the d e f e n d a n t a n d its a t t o r n e y s from " a n y and all c l a i m s , k n o w o r u n k n o w n ,

causes o f action, d e m a n d s , liabilities, or obligations arising out o f or related to, or in any way connected w i t h the C l a i m s asserted in this A c t i o n . . . " (Doc. 158 p. 3). The
a l l e g a t i o n s t h a t the d e f e n s e filed f r i v o l o u s c o u n t e r c l a i m s , s t o n e w a l l e d d i s c o v e r y and

various o t h e r c o n d u c t are all related and connected with this action. Accordingly they are
barred.

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Second, plaintiffs contend that their motion remains v i a b l e b e c a u s e " s a n c t i o n s

[are not] dischargeable by a settlement" (Doc. 159 p. 8). Although the c o u r t ' s rights to

sanction parties misconduct remains following a settlement, " compensatory sanctions
may be bargained away by the parties." Flemming & Associates v. Newby& Title, 529

F.3d 631, 640 (5lh Cir. 2008). Therefore, plaintiff cannot collect a compensatory award of
three-quarters o f a million dollars.

Moreover, since the Settlement Agreement moots the plaintiffs' claim o f compensatory damages, there is no legal basis to evaluate the plaintiffs' claims under
provisions w h i c h only afford a t t o r n e y s ' fees and expenses as a sanction. Accordingly, the plaintiffs are not entitled to any r e l i e f under 28 U.S.C. 1927; Rule 37(a)(5), F.R.Civ.P.; Fla. Stat. §57.105; and F l o r i d a ' s inequitable conduct doctrine.

Remaining for the consideration are the plaintiffs' c l a i m s under the c o u r t ' s inherent authority, and Rules 11 and 26(g) o f the Federal Rules o f Civil Procedure. The court may impose p u n i t i v e sanctions, such as a monetary fine payable to the court, or a non-monetary directive, for conduct violative o f these provisions, notwithstanding the
p a r t i e s ' S e t t l e m e n t A g r e e m e n t . H o w e v e r , no s a n c t i o n s a r e w a r r a n t e d u n d e r t h e s e

provisions because the p l a i n t i f f s ' claims are not cognizable or are meritless.

C. Motion to Extend the Time to Dismiss the Case.

A s d i s c u s s e d a b o v e , t h e M o t i o n f o r S a n c t i o n s is m e r i t l e s s . T h e r e f o r e , t h e r e is n o

basis to further delay the resolution o f this case through an extension. T h e plaintiffs must meet their contractual obligation under the Settlement Agreement.

D. P l a i n t i f f s ' O b j e c t i o n s .

The Plaintiffs allege t h a t they were not afforded a hearing in o r d e r to examine the

defense counsel's conduct, and that the Magistrate's conclusions that plaintiffs are unable
to show sanctionable c o n d u c t is contrary to the evidence on record. " D u e process requires

notice and an opportunity to respond i f Rule 11 sanctions are imposed" Baker v.

Alderman, 158 F.3d 516,525 (11th Cir. Fla. 1998). However, "[fjhere is no requirement
that a hearing be conducted before sanctions are awarded." Id. at 526. In this case, the court is not required to conduct a hearing to allow the plaintiffs to examine the
d e f e n d a n t ' s conduct. T h e c o u r t may simply review the record w h e n considering sanctions. The record d o e s not show any conduct by the defendant that is worthy o f
sanctions.

The plaintiffs further contend that the Magistrate erred in c o n c l u d i n g t h a t the Settlement A g r e e m e n t barred the imposition o f sanctions. As discussed a b o v e the

plaintiffs in the Settlement Agreement waived their right to assert any claims against the
d e f e n d a n t o r its c o u n s e l t h a t are r e l a t e d to or c o n n e c t e d in any w a y w i t h the action.

Hence, plaintiffs c a n n o t seek compensatory damages. The c o u r t h o w e v e r may still
impose p u n i t i v e s a n c t i o n s .

T h e r e f o r e , b e c a u s e t h e c l a i m s for s a n c t i o n s a r e r e l a t e d to t h e a c t i o n a n d t h e

plaintiffs have failed to d i s m i s s such claim, the plaintiffs are in violation o f the
S e t t l e m e n t A g r e e m e n t . T h e c o u r t is not required to c o n d u c t an e v i d e n t i a r y h e a r i n g and is

not convinced t h a t s a n c t i o n s are necessary. Sanctions may be imposed a g a i n s t the plaintiffs i f they c o n t i n u e to pursue frivolous claims. The M a g i s t r a t e J u d g e ' s report and

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recommendation is s u p p o r t e d in the record. Accordingly, it is:

O R D E R E D that the report and recommendation, dated July 6, 2010, be A D O P T E D and be incorporated by reference herein; the Motion to Enforce the

Settlement Agreement (Doc. 158) be G R A N T E D ; the Motion to Extend the Time to
Dismiss the Case (Doc. 159) be DENIED; the Motion for Sanctions (Doc. 162) be
D E N I E D ; and the M o t i o n to be Allowed to File a S u m m a r y J u d g m e n t (Doc. 154) be
D E N I E D a s m o o t . T h i s c a u s e o f a c t i o n is d i s m i s s e d i n a c c o r d a n c e w i t h t h e S e t t l e m e n t

A g r e e m e n t . T h e C l e r k o f C o u r t is d i r e c t e d to c l o s e t h i s c a s e .

i s j£ D O N E A N D O R D E R E D in Chambers, in Tampa, Florida on thiis& ? day o f August
2010.

Copies To: All Parties and Counsel o f Record

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