Central Laborers' Pension Fund et al v. AEH Construction, Inc. et al
Filing
30
OPINION entered by Judge Sue E. Myerscough on 03/31/2015. SEE WRITTEN OPINION. The Motion to Enforce Settlement (d/e 23 ) is DENIED. (DM, ilcd)
E-FILED
Tuesday, 31 March, 2015 12:26:13 PM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
CENTRAL LABORERS' PENSION FUND, CENTRAL )
LABORERS' SUPPLEMENTAL PENSION FUND,
)
CENTRAL LABORERS' WELFARE FUND,CENTRAL )
LABORERS' RETIREE WELFARE FUND, CENTRAL)
LABORERS' ANNUITY FUND, CENTRAL
)
LABORERS' ANNUITY PREMIUM FUND, ILLINOIS )
LABORERS' AND CONTRACTORS' JOINT
)
APPRENTICESHIP & TRAINING PROGRAM,
)
NORTH CENTRAL ILLINOIS LABORERS'
)
HEALTH & WELFARE FUND, CENTRAL ILLINOIS )
LABORERS'-EMPLOYERS' COOPERATIVE
)
EDUCATION TRUST, NORTH CENTRAL ILLINOIS )
LABORERS'-EMPLOYERS' COOPERATIVE
)
EDUCATION TRUST, NORTH CENTRAL ILLINOIS )
MIDWEST REGIONAL ORGANIZING COMMITTEE, )
NORTH CENTRAL ILLINOIS MARKET
)
PRESERVATION FUND, LABORERS' OF ILLINOIS )
VACATION FUND, SOUTHERN AND CENTRAL
)
VACATION FUND, CENTRAL ILLINOIS LEGAL
)
SERVICES FUND, SUBSTANCE ABUSE TESTING )
FUND, LABORERS' LOCAL 362, and LABORERS' )
LOCAL 538,
)
)
Plaintiffs,
)
)
v.
) No. 14-3052
)
AEH CONSTRUCTION, INC., and MID-WEST
)
ILLINOIS CONCRETE CONSTRUCTION, INC.,
)
)
Defendants.
)
OPINION
SUE E. MYERSCOUGH, U.S. District Judge.
This cause is before the Court on the Motion to Enforce
Settlement (d/e 23) filed by Plaintiffs. Because the Court finds that
the parties did not have a meeting of the minds regarding a material
term of the agreement, the Motion is DENIED.
I. JURISDICTION, APPLICABLE LAW,
AND LEGAL STANDARD
This Court has jurisdiction over the Motion to Enforce
Settlement because the case is still pending before this Court. See
Wilson v. Wilson, 46 F.3d 660, 664 (7th Cir. 1995) (holding that a
district court has the inherent power to enforce an agreement to
settle a case that is pending before the district court). The
jurisdictional problems arise when the parties settle, dismiss the
case, and then one party tries to return to federal court to enforce
the settlement. See Kokkonen v. Guardian Life Ins. Co., 511 U.S.
375, 378 (1994) (“Enforcement of the settlement agreement . . . is
more than just a continuation or renewal of the dismissed suit, and
hence requires its own basis for jurisdiction”). That is not the case
here.
The Court applies Illinois law to the Motion to Enforce
Settlement. The Seventh Circuit has expressly held that “the
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formation, construction, and enforceability of a settlement
agreement is governed by local contract law.” Carr v. Runyan, 89
F.3d 327, 331 (7th Cir. 1996); see also Lynch, Inc. v. SamataMason,
Inc., 279 F.3d 487, 490 (7th Cir. 2002) (noting that while there has
been some uncertainty in the past, it is now clear that state law
governs a suit to enforce a settlement of a federal suit). Finally,
whether to enforce a settlement agreement is within the district
court’s discretion. Hakim v. Payco-General Am. Credits, Inc., 272
F.3d 932, 935 (7th Cir. 2001) (noting that the Seventh Circuit
reviews a district court’s decision to enforce a settlement agreement
for an abuse of discretion).
II. BACKGROUND
In February 2014, Plaintiffs filed a lawsuit against AEH
Construction, Inc. (AEH) and Mid-West Illinois Concrete
Construction, Inc. under ERISA for the failure to pay certain
contributions on behalf of employees who are members of the union
and participants in Plaintiffs’ employee benefit funds. See
Complaint (d/e 1). In Count I, Plaintiffs allege that AEH owed audit
liabilities, delinquent contributions, report form shortages,
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liquidated damages and audit costs. Count II alleges that Mid-West
is liable as the successor company to AEH.
In June 2014, the Court entered an Order of Default
Judgment against AEH. See d/e 22. Since then, the case has
proceeded solely against Mid-West (hereinafter referred to as
Defendant). Plaintiffs are represented by Timothy James Shrake, II
and Patrick J. O’Hara (the latter since March 17, 2015). Defendant
is represented by Brian A. Peterson.
Plaintiffs have now filed a Motion to Enforce Settlement. See
d/e 23. In the motion and memorandum, Plaintiffs assert that the
parties reached an oral agreement but Defendant has failed to sign
the written Settlement Agreement. Defendant essentially asserts in
its memorandum in opposition that the oral agreement was
contingent upon the parties reaching a mutually agreeable
confidentiality provision. Both parties submitted affidavits and
documents to support their respective positions.
On March 17, 2015, Plaintiffs filed a Motion requesting a
status hearing. Plaintiffs asserted that, because it was clear that
two different versions of the facts were presented, neither counsel
could act as counsel in this case because they were now material
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witnesses in the case. Plaintiffs asked for a status/discovery
conference to advance the disposition of the pending issues.
On March 27, 2015, this Court held a status hearing and
heard the positions of the parties on both the Motion to Enforce
Settlement and disqualification of counsel. This Court concluded
that discovery was not required, the Court could decide the Motion
on the pleadings submitted, and that disqualification was
unnecessary.
III. FACTS PERTAINING TO THE
SETTLEMENT NEGOTIATIONS
The Affidavits and documents submitted show there are slight
differences between the parties about what occurred in this case.
The parties agree that settlement negotiations began in March 2014
and spanned approximately six months, the delay being due in part
to the fact that Plaintiffs’ Board of Trustees only meets quarterly.
The parties also appear to agree that on September 11, 2014,
Defendant offered to settle for a lump sum payment of $22,000
“with the payment being contingent upon no admission of liability
and a mutual full and final release through November 2012 with a
confidentiality provision.” Shrake Aff. ¶1. Plaintiffs’ counsel told
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Defendant’s counsel that the Board of Trustees would have to
formally accept the offer. Id. ¶ 2. On September 29, 2014, the
Board of Trustees accepted the offer, and the next day, September
30, Plaintiffs’ counsel conveyed the acceptance to Defendant’s
counsel. Id. ¶¶ 3, 4; see also Exhibit 1A, September 30, 2014 email
from Shrake to Peterson noting the committee approved the
settlement payment “which would include a final release through
November 2012 and a confidentiality provision”) (d/e 24-2).
Defendant asserts that subsequent to receiving the September 30,
2014 correspondence from Plaintiffs’ counsel, Defendant’s counsel
had a conversations with Plaintiffs’ counsel in which defense
counsel explained that a confidentiality provision was necessary to
prevent disclosure to other pension funds who may have a claim
against AEH and may want to file a similar lawsuit alleging
successor liability against Defendant Mid-West if the settlement
were disclosed. Peterson Aff. ¶ 2.
On October 15, 2014, Plaintiffs’ counsel sent Defendant’s
counsel a draft version of the settlement agreement memorializing
the previously agreed upon terms and requesting Defendant’s
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counsel redline any proposed changes. Shrake Aff. ¶ 5.1 On
November 18, 2014, Defendant’s counsel sent a redline draft of the
settlement document with Defendant’s proposed changes. Shrake
Aff. ¶ 6.
2
Defendant’s counsel asserts that after he sent the
redlined draft settlement to Plaintiffs’ counsel, Defendant’s counsel
had a telephone conversation with Plaintiffs’ counsel in which
Defendant’s counsel notified Plaintiffs’ counsel that Defendant
could not agree to a confidentiality provision which permitted
disclosure to affiliated organizations because Defendant did not
have sufficient funds to settle and defend another action for
successor liability. Peterson Aff. ¶ 3. Defense counsel also told
Plaintiffs’ counsel that, if the Agreement did not strike the phrase
“affiliated organizations,” Defendant could not agree to the
settlement. Peterson Aff. ¶ 3. Plaintiffs’ counsel told Defendant’s
The language that was ultimately in dispute was a portion of the
confidentiality provision. The initial proposed language is as follows: “It is
further hereby acknowledged by the parties that this Settlement Agreement
and all the terms thereof, including, but not limited to the amount of the
settlement, shall remain confidential and shall not be disclosed to entities or
individuals outside of the parties to the Central District litigation, their
affiliated organizations, their authorized representatives, and their respective
trustees.” See First Proposed Agreement, ¶ 4(D) (d/e 27-4).
1
Defendant attached the redline draft at d/e 27-7. The changes included
striking the “successor liability” language, adding language regarding no
admission of liability, and striking “affiliated organizations” in paragraph 4(D).
2
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counsel he was unsure whether his clients would accept the
redlined draft, but indicated he would relay the changes to them.
Peterson Aff. ¶ 4.
According to Plaintiffs, on December 8, 2014, Plaintiffs’
counsel informed Defendant’s counsel that Plaintiffs accepted all of
Defendant’s proposed changes. Shrake Aff. ¶ 7. However,
Defendant’s counsel claims, and the documents submitted show,
that while Plaintiffs’ counsel agreed to remove the phrase “affiliated
organizations” from the settlement language, Plaintiffs’ counsel
proposed adding language that permitted disclosure to additional
individuals. See Peterson Aff. ¶ 5; see also December 8, 2014
email from Shrake and Peterson (agreeing to accept all of
Defendant’s changes but, “[b]ased on our telephone conference on
December 8, 2014, however, I have added the following language to
the end of the first sentence in paragraph 4(D)”) (d/e 27-6).3
The proposed language was added to the end of the first sentence in
paragraph 4(D) so that the disputed sentence reads as follows: “It is further
hereby acknowledged by the parties that this Settlement Agreement and all the
terms thereof, including, but not limited to the amount of the settlement, shall
remain confidential and shall not be disclosed to entities or individuals outside
of the parties to the Central District litigation, their authorized representatives,
their respective trustees and, upon inquiry only, the former employees of AEH
Construction, Inc., who performed covered work for AEH, Construction Inc.
during the time period of April 1, 2009 through November 30, 2012.” Plaintiffs’
redline Agreement, d/e 24-3 (new language underlined).
3
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Defendant’s counsel told Plaintiffs’ counsel that he did not believe
that the language was troublesome but that he would have to
review it with Defendant to ensure that the language would not
permit disclosure to individuals or entities which may have a
successor liability claim against Defendant. Peterson Aff. ¶ 7.
Defendant’s counsel told Plaintiffs’ counsel that he would contact
Plaintiffs’ counsel once he had the opportunity to review the
proposed language with Defendant. Id. ¶7. That same day,
Plaintiffs’ counsel sent Defendant’s counsel correspondence
memorializing the language to be inserted. Id. ¶ 6; December 8,
2014 email from Shrake to Peterson (d/e 27-6).
On December 9, 2014, Plaintiffs’ counsel sent Defendant’s
counsel the signed signature page of the settlement documents
purportedly memorializing the parties’ agreed-upon terms. Shrake
Aff. ¶ 8. On December 9, 2014, when Defendant’s counsel received
the signed copy of the new draft settlement agreement, Defendant’ s
counsel had not yet had the opportunity to review the proposed
language with Defendant and had not notified Plaintiffs’ counsel
that Defendant was agreeable to the proposed language. Peterson
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Aff. ¶ 8. After a couple of inquiries, Plaintiffs’ counsel finally
received a telephone call on December 22, 2014 from Defendant’s
counsel informing Plaintiffs’ counsel that Defendant refused to sign
the Settlement Agreement. Shrake Aff. ¶ 9. Defense counsel told
Plaintiff’s counsel that Defendant would not abide by the terms of
the settlement because Defendant had been sued by another fringe
benefit fund. Id.
IV. ANALYSIS
The Court finds that no evidentiary hearing is necessary
because the material facts regarding the existence or terms of the
agreement are not in dispute and there is ample evidence for the
Court to decide the issue without an evidentiary hearing. See
Pritchett v. Asbestos Claims Mgmt. Corp., 332 Ill. App. 3d 890, 899
(2002); Hakim, 272 F.3d at 935 (finding that ample evidence,
consisting of the briefs, affidavits, and record evidence, supported
the district court’s finding that a binding settlement agreement
existed such that an evidentiary hearing was not required). The
slight differences in the parties’ recitation of the facts is clarified by
the written documents submitted by the parties. Because the Court
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is not holding an evidentiary hearing, there is no need for counsel
to testify and, therefore, no need for counsel to withdraw.
The Court now turns to the issue before it: whether an
enforceable oral agreement was made on September 30, 2014 or
whether the parties conditioned the final acceptance of the
agreement on the negotiation of (among other things) the
confidentiality provision. The Court finds that the parties
conditioned a binding settlement agreement on the parties reaching
a mutually acceptable confidentiality agreement.
Under Illinois law, an oral settlement agreement is binding
where there is an offer, acceptance, and a meeting of the minds
regarding the terms of the agreement. See Quinlan v. Stouffee, 355
Ill. App.3d 830, 837 (2005). The material terms of the agreement
must be definite and certain. Id. If the material terms are agreed
upon, the oral agreement is binding even if non-material terms are
missing or reserved for later discussion. Tujetsch v. Bradley
Dental, LLC, No. 09 C 5568, 2010 WL 5099981, at * 2 (N.D. Ill. Dec.
8, 2010) (Illinois law). Moreover, a contract can be formed even if
the exact language is not determined, but there must be some
agreement about what the provision must say. For example, in
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Higbee v. Sentry Ins. Co., 253 F.3d 994, 998 (7th Cir. 2001), the
Seventh Circuit found that the parties “agreed on little more than
the fact that the settlement agreement would contain a
confidentiality and non-disparagement clause, and further
negotiation was necessary to come to a specific agreement.” The
plaintiff had made it clear in open court that she would not settle
without a confidentiality clause. Id. Therefore, the confidentiality
clause was material. Id. Because the settlement conference
adjourned without “hashing out” the details of the confidentiality
provision, no oral settlement was reached. Id. (also noting that a
party’s subjective unarticulated beliefs do not preclude a finding
that a contract was formed).
The mere fact that parties anticipate the execution of a written
document does not necessarily mean that the oral agreement is not
binding. See, e.g., In re Gibson-Terry and Terry, 325 Ill. App. 3d
317, 323-24 (2001) (finding no evidence that the parties’ intention
to enter a written agreement was a condition precedent to the
binding effect of the oral agreement). Nonetheless, no “magic
language” is required to condition the finality of an agreement on a
subsequent event. See PFT Roberson, Inc. v. Volvo Trucks N.A.,
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Inc., 420 F.3d 728, 732 (7th Cir. 2005) (Illinois law) (noting that
“[w]ords expressing contingency or dependence on a subsequent
event or agreed-on element will do” to demonstrate that an
agreement is subject to future negotiation and documents); Lampe
v. O’Toole, 292 Ill. App. 3d 144, 147 (1997) (noting that “[w]hether
the parties intended to condition a settlement on the execution of a
writing is a question of fact” and finding no evidence to suggest the
parties agreement hinged on the execution of a written release).
In this case, the parties viewed the confidentiality provision as
material and they conditioned the settlement on, in part, a mutually
agreeable confidentiality provision. The September 30, 2014 email
from Plaintiffs’ counsel to Defendant’s counsel provides:
Please be advised that the Central Laborers’ Pension,
Welfare and Annuity Fund Delinquency Committee
approved the $22,000.00 lump sum settlement payment
by Mid-West Illinois Concrete Construction, which would
include a final release through November 2012 and a
confidentiality provision.
d/e 24-2; see also Shrake Aff. ¶ 1 (providing that Defendant’s
counsel offered a settlement for a lump sum of $22,000 “with the
payment being contingent upon no admission of liability and a
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mutual and final release through November 2012 with a
confidentiality provision”).
The parties have not pointed to any evidence suggesting the
parties had a “meeting of the minds” about what the confidentiality
provision would contain. In fact, the evidence of what occurred
after the September 30 offer and acceptance suggests the parties
did not have “some agreement” about what the confidentiality
provision would say. As such, a binding agreement was not
reached because the parties did not have a “meeting of the minds”
on a material term. See, e.g., Quinlan, 355 Ill. App. 3d at 839
(finding that a valid contract was not formed because there was no
meeting of the minds on the required level of future repair of the
driveway and the mechanism for resolving future disputes);
Simmons v. Collection Prof’l, Inc., No. 09-cv-1198, 2010 WL
2663100, at *2 (C.D. Ill. June 25, 2010) (finding no settlement
agreement was reached where the parties did not agree on the
scope of the release and that term was material); IMI Norgren, Inc.
v. D & D Tooling Mfg., Inc., 306 F.Supp.2d 796, 802 (N.D. Ill. 2004)
(finding no settlement agreement was reached where, among other
reasons, the plaintiff accepted the defendant’s offer of $300,000 to
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be paid $30,000 up front and the remaining $270,000 over nine
years but that the note would be subject to some security from the
defendant because security was a material term and the term
security was too indefinite). Moreover, the fact that the parties may
have ultimately agreed to the language (a fact that is not clear here
because the Court does not know if Defendant ultimately agreed to
the language proposed by Plaintiffs), does not mean that a binding
agreement was reached earlier. See Higbee, 253 F.3d at 998 (even
though parties eventually agreed to mutually satisfactory language,
that does not change that an agreement was not reached earlier
where the confidentiality provision was a material term and the
parties agreed on little more than that such a provision would be
included in the written settlement agreement).
This case is distinguishable from Dillard v. Starcon Int’l, Inc.,
483 F.3d 502 (7th Cir. 2007). In Dillard, the plaintiff did not
dispute that the parties’ oral discussions resulted in an agreement
on certain material terms. The plaintiff claimed, however, that the
agreement was not final because no agreement had been reached
on other material terms, as evidenced by the parties’ exchange of
written drafts of the agreement. The court held that those other
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terms were not material because those terms did not implicate the
“heart of their settlement.” Id. at 508. In contrast here, the
evidence shows that the parties understood that the confidentiality
provision was an important component of the settlement.
The Court is troubled by the argument Defendant’s counsel
made at the status hearing. At the hearing, Defendant’s counsel
argued that a term of the settlement agreement was that the
settlement would be completed before any additional claims against
Defendant were made by another party. There is no evidence that
such a term was part of the negotiations. Nonetheless, because the
Court finds that a confidentiality provision was a material term of
the settlement, and the parties had not agreed to the language of
such provision on September 30, 2014, no binding oral agreement
was reached on that date or any time before Defendant withdrew
from the settlement negotiations.
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V. CONCLUSION
For the reasons stated, the Motion to Enforce Settlement (d/e
23) is DENIED.
ENTER: March 31, 2015
FOR THE COURT:
s/Sue E. Myerscough
SUE E. MYERSCOUGH
UNITED STATES DISTRICT JUDGE
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