Seals v. Herzing Inc. - New Orleans

Filing 33

ORDER & REASONS denying 19 Motion to suppress confidential consent award & 27 Motion for Leave to File amended complaint; granting 21 Motion to enforce settlement agreement & for fees & costs, the quantum of the fee award is referred to the Magistrate Judge. FURTHER ORDER that the defendants request that the Court deposit funds into the Courts registry is denied without prejudice, to be re-filed in accordance with the Local Rules. Signed by Judge Martin L.C. Feldman on 1/11/2012. (caa, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
DeROME A. SEALS

CIVIL ACTION

v.

NO. 10-2848

HERZING, INC. – NEW ORLEANS

SECTION "F"

ORDER AND REASONS
Before the Court are three motions: (1) the plaintiff’s
motion to suppress confidential consent award; (2) the defendant’s
motion to enforce settlement agreement, to deposit settlement funds
into the registry of the Court, and to award attorneys’ fees and
costs; and (3) the plaintiff’s motion for leave to amend complaint.
For the reasons that follow, the defendant’s motion to enforce
settlement agreement and request for fees and costs is GRANTED, the
defendant’s request to deposit funds into the Court’s registry is
DENIED without prejudice, and the plaintiff’s motions are DENIED.
Background
This lawsuit arises out of a paralegal student’s claim
that the defendant university wrongfully returned his Pell Grant to
the U.S. Department of Education and removed him from the school’s
paralegal program.
On April 14, 2009 DeRome Seals enrolled at the New
Orleans campus of Herzing University as a student in its paralegal
program.

When enrolling, Seals provided Herzing with copies of

1

transcripts from Tuskegee University, including copies of his
bachelor’s and masters degrees.

He also signed an Enrollment

Agreement with Herzing, which contained a provision requiring that
all disputes be resolved by binding arbitration.
During the course of enrolling at Herzing, Seals applied
for financial assistance by completing a federal Free Application
for Federal Student Aid.

In his 2009 application, executed on

April 9, 2009, Seals represented that he would not have obtained
his first bachelor’s degree before July 1, 2009. Seals was awarded
a Pell Grant.
2010,

Seals

Before his second school year began, on March 18,
completed

another

FAFSA

application

for

federal

financial assistance and again represented that he would not have
obtained his first bachelor’s degree before the start of the school
year.

Seals was awarded another Pell Grant.
In July 2010 Herzing officials discovered that Seals had

been awarded Pell Grants that they believed he was not entitled to
receive.

In

preparing

financial

packages,

Herzing

officials

noticed that Seal’s FAFSA applications stated that he had not
received his first bachelor’s degree when school records showed
that he had.

Herzing then notified Seals that it had returned his

Pell Grant of $7,150 to the Department of Education because it
believed that Seals had improperly received the grant money.
Herzing also advised Seals that his enrollment was being withdrawn

2

because of his dishonesty.1

Seals requested an appeal of the

decision to return the funds and withdraw him from school. On July
17, 2010 Herzing forwarded an email addressing the balance owed and
of

a

report

Louisiana.

made

to

the

Office

of

The

Attorney

General

of

On July 30, 2010 Seals forwarded a “formal complaint”

against Herzing to the Department of Education.

Seals, who would

have graduated from Herzing in December 2010, sent a letter to

1

The July
meeting, provides:

6,

2010

letter,

presented

to

Seals

at

a

It has come to our attention that you have
received $7150 in Pell Grant to which you were
not entitled.
On your previous 3 Free Applications for
Federal Student Aid..., you indicated that you
did not have your first Bachelor Degree.
According to documents on file with our Academic Department, you
obtained your Bachelors Degree in 1992 and Masters Degree in 1998.
Once a student has earned a Bachelor Degree, Pell Grant is no
longer awarded.
The amount of $7150 in Pell Grant was returned to the Department of
Education by our institution.
Once we removed the charges for
classes you were to take in Session B, your balance to this
institution is $4930.00.
You now owe this balance to Herzing
University.
We need to set up payment arrangements for this
amount. Failure to do so will result in this being turned over to
our collections agency.
On the Free Application for Federal Student Aid, which you signed,
it clearly states, “if you purposefully give false or misleading
information, you may be fined up to $20,000, sent to prison, or
both.”
It is our decision to withdraw you from enrollment due to
dishonesty and we will be notifying the Department of Education of
your offense....
3

Herzing denying the balance owed.
In

late

August

2010

Seals

sued

Herzing

University,

seeking $2 million in damages for Seal’s mental and emotional
anguish,

embarrassment,

illnesses,

undue

humiliation,

pre-existing

homicidal/suicidal

stress,

aggravated

ideations,

irascibility, and heightened unreasonable irritability.

Seals

asserts that Herzing violated his civil rights (under the 5th and
8th Amendments), negligently and intentionally inflicted emotional
distress on him, libeled him, defamed his character, aggravated a
pre-existing

illness,

and

attempted

extortion.

Invoking

the

arbitration clause contained in the enrollment agreement, Herzing
requested that this Court dismiss the plaintiff’s complaint and
compel arbitration.

On November 22, 2010 the Court granted

Herzing’s motion to compel arbitration.
Pursuant to the parties’ arbitration agreement, Seals and
Herzing submitted to arbitration before the American Arbitration
Association.

Herzing then filed a counterclaim against Seals,

seeking damages in the amount of $4,930 for what Herzing claimed
was owed following its return of Pell Grant overpayment to the
Department

of

Education.

Seals

counterclaim on August 1, 2011.

answered

and

denied

the

On September 8, 2011 the AAA

issued a notice of hearing, scheduling a two-day arbitration
hearing for December 7 and 8, 2011 before a neutral arbitrator.
The parties then conducted discovery pursuant to the scheduling

4

order issued on September 26, 2011.
On December 6, 2011, Seals retained David Coleman as his
counsel.

At the hearing the next day, Mr. Coleman appeared on

behalf of Seals, and presented a notice of appearance confirming
his representation.

The arbitration proceeded.

During the second

day, on December 8, 2011, Seals, after conferring with his counsel,
accepted a confidential settlement offer made by Herzing. Once the
offer was accepted, it was reduced to writing in a document
entitled “Confidential Consent Award.” The terms of the settlement
agreement were recited on the record while the parties and their
counsel listened; Seals was permitted to ask questions.

After

receiving clarification on certain provisions, Seals responded
“Okay” in response to the arbitrator’s question “So, is everybody
comfortable with the terms of this?”

Once reduced to writing, the

Confidential Consent Award was signed by the parties, counsel for
the parties, and the neutral arbitrator. The text of the agreement
was then recited on the record with the parties, counsel, and the
arbitrator present, each acknowledging that all had signed the
document.

After concluding the recitation of the agreement, the

arbitrator confirmed whether “everybody [was] comfortable with the
settlement and the Consent Award,” to which Seals responded “Yes.”
Once the settlement agreement was signed, it was agreed
that counsel for Herzing would prepare formal settlement documents
to be circulated prior to disbursing the settlement funds, and that

5

all of the plaintiff’s claims against Herzing would be dismissed
with prejudice in both the arbitration and the federal lawsuit.
Counsel for Herzing then began preparing the formal settlement
documents.
However, the plaintiff, pro se, now seeks to “suppress”
(or, presumably, rescind), the Confidential Consent Award; he also
seeks to amend his complaint.

The defendant now requests that the

Court enforce the settlement agreement,2 grant it leave to deposit
the settlement funds into the registry of the Court, and that it be
awarded from the funds deposited its attorneys’ fees and costs
incurred.
I.
This Court has inherent power to recognize, encourage,
and enforce settlement agreements.

Bell v. Schexnayder, 36 F.3d

447, 449-50 (5th Cir. 1994)(citations omitted).

Federal courts

sitting in diversity apply state law when determining the validity
of settlement agreements, so long as none of the substantive rights
and liabilities of the parties derive from federal law. See, e.g.,
Lefevre v. Keaty, 191 F.3d 596, 598 (5th Cir. 1999).

Here, the

plaintiff asserts various state law claims and purports to assert
violations

of

the

Fifth

and

Eighth

2

Amendments

to

the

U.S.

In order to preserve the confidentiality of the
Confidential Consent Award, on January 9, 2012 this Court granted
the defendant’s motion to seal those exhibits that announced the
settlement agreement’s terms.
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Constitution.

The Court will look to state law to determine

whether to enforce the settlement agreement, as proposed by the
defendant or, instead, whether to rescind the settlement agreement,
as urged by the plaintiff.
A.
Louisiana law provides:
A compromise is a contract whereby the parties, through
concessions made by one or more of them, settle a dispute or
an uncertainty concerning an obligation or other legal
relationship.
La. Civ. Code art. 3071.

Compromises are favored in the law and

the burden of proving the invalidity of such an agreement is on the
party attacking it.

Elder v. Elder & Elder Enterprises, Ltd., 948

So.2d 348, 351 (La.App. 4 Cir. 2007)(citation omitted).

Essential

elements of a compromise include: (1) mutual intent to put an end
to the litigation; and (2) reciprocal concessions of the parties in
adjustment of their differences.

Rivett v. State Farm Fire and

Casualty Company, 508 So.2d 1356, 1359 (La. 1987).
To be valid under Louisiana law, a compromise (and
contracts generally) must meet certain statutory requirements,
namely offer and acceptance.

Regarding consent, Louisiana Civil

Code article 1927 provides:
A contract is formed by the consent of
the parties established through offer and
acceptance.
Unless the law prescribes a certain
formality for the intended contract, offer and
acceptance may be made orally, in writing, or
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by action or inaction that under
circumstances
is
clearly
indicative
consent.

the
of

Unless otherwise specified in the offer,
there need not be conformity between the
manner in which the offer is made and the
manner in which the acceptance is made.
La.Civ. Code art. 1927.

A compromise “shall be made in writing or

recited in open court” (La.Civ.Code art. 3072), and “settles only
those differences that the parties clearly intended to settle.”
La.Civ. Code art. 3076.3
B.
The

Court’s

role

in

interpreting

determine the common intent of the parties.

contracts

is

to

La. Civ. Code art.

2045. In determining common intent, pursuant to Civil Code article
2047, words and phrases used in contract are to be construed using
their plain, ordinary and generally prevailing meaning, unless the
words have acquired a technical meaning.

See Henry v. South

Louisiana Sugars Co-op., Inc., 957 So.2d 1275, 1277 (La. 2007)
(citing Cadwallader, 848 So.2d at 580).

3

“When the words of a

It is not necessary that all aspects of the compromise
be contained in a single document; rather, “[w]here two
instruments, read together, outline the obligations each party has
to the other and evidence each party’s acquiescence in the
agreement, a written compromise agreement has been perfected.”
Preston Law Firm, L.L.C. v. Mariner Health Care Mgmt. Co., 622 F.3d
384, 390 (5th Cir. 2010)(per curiam)(quoting Klebanoff v. Haberle,
978 So.2d 598, 602 (La.App. 2 Cir. 2008)).
Furthermore, the
writing requirement for a valid compromise may be satisfied by
emails.
La.R.S. § 9:2607; Preston Law Firm, 622 F.3d at 391
(citations omitted).
8

contract are clear and explicit and lead to no absurd consequences,
no further interpretation may be made in search of the parties’
intent” (La. Civ. Code art. 2046), and the agreement must be
enforced as written.

Hebert v. Webre, 982 So.2d 770, 773-74 (La.

2008).
C.
It is undisputed that Seals and Herzing entered into a
valid written compromise; the agreement was also recited on the
record

during

an

arbitration

proceeding.

meaningfully dispute these facts.

Seals

does

Instead, he suggests that his

lawyer pressured him into settling his claims with Herzing.
record is to the contrary.4

not

The

And, even if it were not, the grounds

for rescinding a valid settlement agreement are limited to error,
fraud, and other grounds for annulment of contracts; a compromise
cannot be rescinded for error of law or lesion. La.C.C. art. 3082.
Louisiana law favors compromises and courts must enforce

4

The terms of the agreement and the arbitration hearing
transcript show that the parties mutually intended to put an end to
the litigation and to make reciprocal concessions in adjustment of
their differences: Seals showed that he intended to put an end to
the litigation by indicating his assent not once but twice on the
record, after being afforded and, indeed, utilizing an opportunity
to ask questions; Seals also affixing his signature on the
Confidential Consent Award.
Examining the terms of the sealed
settlement agreement, it is equally clear that the parties made
reciprocal concessions to adjust their differences, including but
not limited to Herzing’s agreement to release its counterclaim
against Seals in exchange for Seals’ agreement to completely
release Herzing of all claims that were or could have been asserted
against it.
9

them as written, unless clear and convincing evidence shows that
the compromise is invalid.

Jerome v. Duggan, 609 So.2d 1119, 1123

(La.App. 2d Cir. 1992).

There is no evidence showing that the

compromise is invalid.

While establishing that a contracting

party’s consent was obtained by duress may vitiate an otherwise
valid compromise, Seals’ unsupported suggestion that his lawyer
somehow forced him to settle his claims is not only unfounded in
the record, it falls well short of establishing duress.
dangerously borders on frivolous.

And

Louisiana Civil Code article

1959 provides that “[c]onsent is vitiated when it has been obtained
by duress of such a nature as to cause a reasonable fear of unjust
and

considerable

reputation....”

injury

to

a

party’s

person,

property,

or

There is absolutely no evidence that Seals’

lawyer, Mr. Coleman, deprived Seals of his liberty, or otherwise
resorted to threatening physical injury to his property or person,
in order to obtain his consent to the Confidential Consent Award.5
Seals had ample opportunities to confer with his lawyer, and to ask
questions or object to the settlement in the presence of opposing
counsel and the arbitrator. He could have fired his lawyer and, as
he does now, represent himself. He never suggested that he did not

5

Even Seals’ own papers fail to support that he was
“under duress”. Seals contends that Coleman was “relentless and
unyielding in his mission to persuade Plaintiff to consent” to the
agreement. Seals quotes Coleman as advising that “[t]here is clear
money on the table and this is not he [sic] time to gamble, you can
walk away with nothing.” A lawyer’s advise to his client, however,
is certainly not tantamount to duress.
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consent to the agreement and submits no evidence that his assent
was forcibly obtained by Mr. Coleman. Accordingly, the agreement
will be enforced, not rescinded.
II.
A.
Having

determined

that

the

parties’

settlement

is

enforceable, the Court next considers Herzing’s request that the
Court accept into its registry the settlement proceeds.
Federal Rule of Civil Procedure 67(a) provides:
Depositing Property.
If any part of the
relief sought is a money judgment or the
disposition of a sum of money or some other
deliverable thing, a party – on notice to
every other party and by leave of court – may
deposit with the court all or part of the
money or thing, whether or not that party
claims any of it. The depositing party must
deliver to the clerk a copy of the order
permitting deposit.
Herzing contends that it is entitled to perform its obligation
under the parties’ contract, by paying the settlement funds into
the Court’s registry.6

The Court agrees, but it appears that the

request to deposit funds is premature. Once Herzing files a motion
and proposed order that complies with this Court’s Local Rules 67.1
and 67.2, the Court can entertain the motion to deposit funds into
the Court’s registry.

6

Herzing suggests that there might be some disagreement
between Seals and Coleman regarding the fee arrangement for the
arbitration and that, therefore, they might dispute the other’s
entitlement to a certain amount of the settlement proceeds.
11

B.
Herzing next contends that it has been forced to incur
additional attorney’s fees and costs as a result of the plaintiff’s
frivolous motion to suppress; Herzing seeks an award of its fees
and costs, ordered to be paid from the settlement funds deposited
into the registry of the Court.

The Court agrees that the

plaintiff’s motion is unsupportable and that Herzing is, therefore,
entitled to a reasonable award of attorney’s fees and costs
associated with opposing the plaintiff’s motion to suppress and
pursuing its own motion to enforce the settlement, to be determined
by the Magistrate Judge.
III.
Finally, Seals seeks to amend his complaint. He suggests
that “[a]fter extensive research and court proceedings, Plaintiff
has discovered and determined the true violations perpetrated by
the Defendant against the Plaintiff.”

Herzing opposes Seals’

motion to amend his complaint, contending that by signing the
Confidential Consent Award, Seals agreed to provide a complete
release of all claims against Herzing and, therefore, his amended
claims are precluded by the doctrine of res judicata.

The Court

agrees: Seals has resolved his claims against Herzing.
A valid compromise precludes the parties from litigating
the matter that was compromised.

La.Civ.Code art. 3080.

In light

of this Court’s finding that the settlement agreement is valid and

12

enforceable, Seals’ motion to amend his complaint is DENIED. Seals
cannot resurrect claims that he agreed to release in a valid,
enforceable settlement with Herzing.
Accordingly, IT IS ORDERED: that the plaintiff’s motion
to suppress confidential consent award and the plaintiff’s motion
for leave to amend his complaint are both DENIED; the defendant’s
motion to enforce settlement agreement and for fees and costs is
GRANTED; the quantum of the fee award is referred to the Magistrate
Judge.

Finally, IT IS FURTHER ORDERED: that the defendant’s

request that the Court deposit funds into the Court’s registry is
DENIED without prejudice, to be re-filed in accordance with the
Local Rules.
New Orleans, Louisiana, January 11, 2012

______________________________
MARTIN L. C. FELDMAN
UNITED STATES DISTRICT JUDGE

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