Frazier, et al v. Calille, et al

Filing 36

OPINION and ORDER Regarding Various Motions re 10 , 16 , 29 and 9 . Signed by District Judge Denise Page Hood. (LSau) Modified on 4/1/2014 (LSau).

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

TYRONE FRAZIER, LAURENCE
HARWOOD, DANIEL THARP and
INTERNATIONAL UNION OF
UNITED AUTOMOBILE, AEROSPACE
AND AGRICULTURAL IMPLEMENT
WORKERS OF AMERICA,
Plaintiffs,
Case No. 96-73419
v.
HON. DENISE PAGE HOOD
ALBERT CALILLE, et al.,
Defendants.
____________________________________________/
OPINION AND ORDER REGARDING VARIOUS MOTIONS
I.

BACKGROUND/FACTS
On April 29, 1997, a Stipulated Judgment of Dismissal was entered by the

Court. (No. 6, 4/29/1997). On April 20, 2013, Plaintiffs filed a Motion to Enforce
Settlement Agreement and for Permanent Injunction.

Response, reply and

supplemental briefs were filed on that motion. Plaintiffs also filed a Motion to
Substitute Party and Joinder and a response and reply have been filed to that motion.
Defendants filed a Motion to Strike and a response was filed to that motion. After oral
arguments on the various motions, the parties submitted supplemental briefs.

Defendants thereafter filed a Motion for Relief form Judgment under Rule 60(b). A
response and reply were filed to that motion.
II.

JURISDICTION
A district court has the authority to dismiss pending claims while retaining

jurisdiction over the future enforcement of a settlement agreement. Futernick v.
Sumpter Township, 207 F.3d 305, 310 (6th Cir. 2000). A district court may retain
jurisdiction of a matter after settlement by (1) conditioning dismissal, when it is
pursuant to Federal Rule of Civil Procedure 41(a)(2), on the parties’ compliance with
the terms of the settlement agreement; or (2) incorporating the settlement agreement
in the dismissal order or retaining jurisdiction over the settlement agreement when it
is pursuant to Federal Rule of Civil Procedure 41(a)(1)(ii). Kokkonen v. Guardian
Life Insurance Co., of America, 511 U.S. 375, 381-82 (1994). Where a court retains
jurisdiction, “a breach of the agreement would be a violation of the order, and
ancillary jurisdiction to enforce the agreement would therefore exist.” Kokkonen, 511
at 381. Where jurisdiction is not retained, “enforcement of the settlement is for state
courts, unless there is come independent basis for federal jurisdiction.” Id. at 383.
The Sixth Circuit in Waste Management of Ohio, Inc. v. City of Dayton, 132 F.3d
1142, 1144 (6th Cir. 1997), stated that the language such as, the district court “retains
jurisdiction over this cause for all purposes and that either party may move the district
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court for clarification of the Decree and for supplemental or corrective relief in
addition to and/or in lieu of any and all remedies provided for in the aforementioned
Settlement Agreement” is sufficient to retain jurisdiction. Id. In contrast, the Sixth
Circuit has held that the phrase “pursuant to the terms of the settlement agreement”
fails to incorporate the terms of the settlement agreement into the order because “[a]
dismissal order’s mere reference to the fact of settlement does not incorporate the
settlement agreement into the dismissal order.” Caudill v. North American Media
Corp., 200 F.3d 914, 917 (6th Cir. 2000).
Here, the Stipulated Judgment of Dismissal contains the language, “the Court
retains jurisdiction to enforce the settlement agreement.” (Motion, No. 9, Ex. B) The
Court has jurisdiction to review the matter.
III.

ENFORCEMENT OF SETTLEMENT AGREEMENT
A.

Standing

The primary issue in the underlying case involved the Agency’s procedures
regarding the collection of overpaid unemployment insurance. Plaintiffs argue that
under the Settlement Agreement, once an overpayment has been determined, no
collection activity would be taken by the Agency until appeals were concluded.
Plaintiffs assert the Agency has violated the Settlement Agreement since it has
undertaken collection activities against claimants even though the appeal process had
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not been completed. Plaintiffs claim that this Court should issue a permanent
injunction for the Agency to adhere to the terms of the Settlement Agreement.
Defendants respond that the motion should be denied because the Settlement
Agreement was executed more than 16 years ago and the permanent injunction request
is without merit as to today’s Unemployment Insurance Agency. Defendants assert
that no federal law has been breached as to the current claimants. Defendants argue
the Court should abstain from exercising any jurisdiction over the claims by Plaintiffs.
The Settlement Agreement governs the following parties and claims:
This Settlement Agreement (hereafter Agreement) is
mutually entered into by the Plaintiffs, Tyrone Frazier,
Laurance Harwood, and Daniel Tharp (hereafter referred
to as the “Individual Plaintiffs”), and the International
Union, United Automobile, Aerospace, and Agricultural
Workers of America (UAW) and the Defendant, Thomas S.
Malek. In furtherance of this settlement agreement, the
Parties agree as follows:
1.

The Plaintiffs and Defendant (hereafter “Parties”)
enter into this agreement for the purpose of settling
a lawsuit, Frazier, et al., v. Calille, et al., E.D. Mich.
No. 96-CV-73419-DT, which involved legal claims
concerning the collection of non-fraud
unemployment insurance benefits overpayments by
the Michigan Employment Security Agency
(hereafter “Agency”). This Agreement represents
the entire agreement of the Parties with regard to
any and all claims and defenses presented in the
lawsuit.

(Settlement Agreement, Doc. No. 9, Ex. A)(italics added).
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The initial issue before this Court, although not clearly articulated by the
parties, is whether the Court has jurisdiction to review the specific claims as to
claimants who were unnamed in the Settlement Agreement. Although Plaintiffs assert
they are not seeking individual reviews of claimants currently before the Agency, they
are seeking an order enjoining the Agency from collection efforts until a final
determination has been made as to the overpayment issue.
Reviewing the Settlement Agreement, the Court notes it is not an agreement
settling claims of a class or other parties not a party to the agreement. The Settlement
Agreement specifically named the individual Plaintiffs Frazier, Harwood, and Daniel
Tharp. The UAW, a party to the Settlement Agreement, had and currently has no
claim before the Agency. The Defendant is the individual Malek, a State Officer at
the time the Settlement Agreement was executed. None of the individual claimants,
party to the Settlement Agreement, is asserting that the Agency has violated the terms
of the Settlement Agreement as to their individual claims.
The Sixth Circuit has held that third parties and even intended third-party
beneficiaries of a consent decree lack standing to enforce its terms. Aiken v. City of
Memphis, 37 F.3d 1155, 1168 (6th Cir. 1994); Vogel v. City of Cincinnati, 959 F.2d
594, 598 (6th Cir. 1992); S.E.C. v. Dollar General Corp., 378 Fed. Appx. 511, 515-16
(6th Cir. 2010) (Non-parties to a consent decree or analogously an agreed or consent
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judgment entered by a court incorporating a settlement agreement do not have
standing to enforce a judgment).
Plaintiffs submitted various examples of and affidavits from claimants who
received overpayments, were going through the appeal process, and yet the Agency
was conducting collection actions in violation of the Settlement Agreement. Plaintiffs
seek discovery into the breadth of the Agency’s non-compliance and development of
a factual record to determine appropriate remedy for Defendants’ breach. Plaintiffs
seek to have these claimants join in the instant action. (Motion to Substitute Party and
Joinder, Doc. No. 10) Plaintiffs argue these claimants are entitled to remedies
including refunds of any funds collected during the appeal process, with interest at a
reasonable rate. (Motion, Doc. No. 9, pg ID 25) In addition, Plaintiffs seek hardship
waivers on behalf of applicants whose applications substantially comply with the
requirements. (Motion, Doc. No. I, pg ID 25)
Based on Plaintiffs’ various requests on behalf of claimants who were not
parties to the Settlement Agreement, Plaintiffs seek remedies for these claimants.
Inasmuch as Plaintiffs are seeking an injunction and monetary remedies for the benefit
of past, current and future claimants before the Agency who were not parties to the
Settlement Agreement at issue, this Court has no authority to enter such an order. The
Sixth Circuit is clear that parties who were not parties to a settlement agreement, or
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parties seeking benefits on behalf of non-parties, do not have standing to enforce an
agreement. Aiken v. City of Memphis, 37 F.3d at 1168.
B.

Breach of the Settlement Agreement

Plaintiffs assert that Defendants breached the Settlement Agreement because
Defendants are collecting overpayments from claimants before the appeal process has
concluded. Defendants respond that the Court should abstain from this matter and not
to interfere with the administrative process authorized by the Michigan Employment
Security Act. Defendants argue that Plaintiffs failed to show that Defendants have not
satisfied the 1997 Settlement Agreement so as to warrant this Court’s involvement,
claiming the Agency has not adopted any policy authorizing the interception of any
claimant’s fund for reimbursements not yet due. Defendants request that the Court
deny Plaintiffs’ demand for a permanent injunction.
A settlement agreement is a type of contract and is governed “by reference to
state substantive law governing contracts generally.” Cogent Solutions Group, LLC
v. Hyalogic, LLC, 712 F.3d 305, 309 (6th Cir. 2013). Under Michigan law, an
agreement to settle a pending lawsuit is a contract and is reviewed by the legal
principles applicable to contract construction and interpretation. MLW Associates,
Inc. v. Certified Tool & Manufacturing Corp., 106 Fed. Appx. 307, 312 (6th Cir. Jul.
6, 2004). Under Michigan law, the primary goal in the construction or interpretation
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of any contract is to honor the intent of the parties. Rasheed v. Chrysler Corp., 445
Mich. 109, 127 n. 28 (1994). This entails a reading of the contract as a whole and an
application of its clear language. Old Kent Bank v. Sobczak, 243 Mich. App. 57, 63
(2000). If the provision is clear and unambiguous, the terms are to be taken and
understood in their plain, ordinary, and popular sense. Michigan Mut. Ins. Co. v.
Dowell, 204 Mich. App. 81, 87 (1994). Courts are governed by what the parties said
and did, and not merely by unexpressed subjective intent. Fletcher v. Bd. of Educ. of
Sch. Dist. Fractional No. 5, 323 Mich. 343, 348 (1948).
A party seeking reformation of a contract based on mutual mistake has the
burden of proof by clear and convincing evidence. Local Union 2-2000 v. Coca-Cola
Refreshments, USA, Inc., 2013 WL 596107, *7 (6th Cir. Nov. 8, 2013) (quoting,
Casey v. Auto-Owners Ins. Co., 273 Mich. App. 388 (2006)). A court of equity should
not reform a written instrument “upon probability, nor even upon a mere
preponderance of evidence, but only upon a certainty of the error.” Id. (quoting,
Holda v. Glick, 312 Mich. 394 (1945)).

If the terms are ambiguous, extrinsic

evidence may be considered to prove the existence of ambiguity. McCarty v. Mercury
Metalcraft Co., 372 Mich. 567, 575 (1964). Courts enforce contracts according to
their unambiguous terms because doing so respects the freedom of individuals freely
to arrange their affairs via contract. Rory v. Continental Ins. Co., 473 Mich. 457, 468
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(2005). Unambiguous contracts are not open to judicial construction and must be
enforced as written. Id.
As quoted above, the parties agreed that the “Agreement represents the entire
agreement of the Parties with regard to any and all claims and defenses presented in
the lawsuit.” (Settlement Agreement, Doc. No. 9, Ex. A, ¶ 1) The Settlement
Agreement stated the specific terms as to each of the three individual Plaintiffs
(Harwood, Tharp and Frazier). (Settlement Agreement, Doc. No. 9, Ex. A, ¶ 4) ) In
¶ 5, the Settlement Agreement states,
The provisions of this Agreement clarify existing policies
and practices on the part of the Michigan Employment
Security Agency with respect to the determination and
recovery of non-fraud unemployment insurance benefit
overpayments and are fully consistent with the Act and all
applicable rules and regulations.
(Settlement Agreement, Doc. No. 9, Ex. A, ¶ 5) Paragraph 6 then states,
Within 45 days of the execution of this Agreement, the
Defendant shall issue written directives to all applicable
personnel within the Michigan Employment Security
Agency clarifying its recovery procedures for non-fraud
overpayments of unemployment insurance benefits as
provided in paragraph 7 of this Agreement. As soon as
thereafter as is practicable, but no event more than 180 days
of the execution of this Agreement, the Defendant shall
issue revised manual sections for the policy and procedures
manual consistent with the terms of paragraph 7 of this
agreement. ...
(Settlement Agreement, Doc. No. 9, Ex. A, ¶ 7) Paragraph 7 provides,
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Whenever the first decision that unemployment benefits
have been improperly paid is made by a Referee, the Board
of Review or a court, the Defendant agrees to the following
policies and practices:
(a) The Defendant agrees to issue a determination of
restitution which (1) establishes amount of overpayment,
(2) state the week(s) of benefits involved in the
overpayment in question and, (3) addresses all issues of
administrative waiver of the overpayment. The restitution
determination shall include a notice that failure to appeal
the restitution determination will render it final and may
require repayment of the overpayment if the claimant loses
the appeal on the merits.
(b) If a timely appeal of the restitution determination is
made, the Defendant shall hold the adjudication of the
restitution determination in abeyance until the appeal on the
underlying issue(s) on the merits becomes final. Upon
finality of the appeal on the merits, if the claimant does not
prevail, the Defendant shall issue a redetermination of
restitution. Upon finality of the restitution (re)determination, the Defendant may begin collection activity. If
a timely appeal of the restitution determination is not made,
the claimant wins on appeal of the merits, the Defendant
will not collect on the restitution determination, even
though it has become final.
(c) All notices to claimants concerning collection of the
overpayment shall notify the claimant that if they disagree
with the amount of the restitution, they may contact the
Agency to discuss the matter which may include a seated
interview.
(d) After discussion, if the Agency agrees with the claimant
that an error has been made, appropriate adjustments will
be made in the amount to be collected, even if the
restitution determination had become final. If the Agency
does not agree with the claimant, the Agency will collect
the amount stated in the final restitution determination.
Collection under these circumstances presumes a final
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adverse decision to the claimant as to the merits of the case
as well as finality with respect to the restitution
determination.
(e) The claimant has a right to request an indigency waiver
at any time during the collection process and the Agency
will advise the claimant of this right in every notice
regarding collection or recovery of non-fraud overpayment.
(Settlement Agreement, Doc. No. 9, Ex. A, ¶7)
It is ¶ 7 which Plaintiffs allege Defendants have breached. However, nothing
in the Settlement Agreement provides any remedies if Defendants breach ¶ 7. There
is no provision in the Settlement Agreement which contemplates any process or
remedy the parties intended should Defendants breach ¶ 7. This Court’s interpretation
of the Settlement Agreement is that ¶ 7 was intended to be the Agency’s “policies and
practices,” as expressly noted in the first sentence of ¶ 7. The parties’ intent is clear
in ¶ 5 where the parties agreed that the “provisions of this Agreement clarify existing
policies and practices” with respect to determination and recovery of unemployment
insurance benefits. (Settlement Agreement, Doc. No. 9, Ex. A, ¶5) There is no
allegation that shortly after the 1997 Settlement Agreement was entered into by the
parties, that Defendants failed to implement the policies and practices set forth in ¶ 7
or that Defendants have changed said policies and practices. There is no language in
the Settlement Agreement which would allow a claimant to use the Settlement
Agreement to file a cause of action against Defendants for failing to follow the terms
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of the Settlement Agreement. As noted above, a non-party to a settlement agreement
has no standing to assert enforcement of the agreement. Aiken v. City of Memphis, 37
F.3d at 1168.
There is also no permanent injunction language in the Settlement Agreement
enjoining Defendants from any acts. The Court cannot read into or add any permanent
injunction language sought by Plaintiffs since the parties did not bargain for such
language in the Settlement Agreement. Local Union 2-2000, 2013 WL 596107 at *7.
As to Plaintiff UAW’s own interest, in order to show a breach of the Settlement
Agreement, as in any breach of contract claim, the UAW itself must show it suffered
damages as a result of the breach. A party claiming a breach of contract must
establish: 1) that there was a contract; 2) that the other party breached the contract
and, 3) that the party asserting breach of contract suffered damages as a result of the
breach. Miller-Davis v. Ahrens Constr., Inc. (On Remand), 296 Mich. App. 56, 71
(2012). Plaintiff UAW has not alleged it suffered damages as a result of the alleged
breach by Defendants.
This Court’s interpretation of the Settlement Agreement is that the parties
intended ¶ 7 to clarify the Agency’s existing policies and procedures as to
overpayment of unemployment insurance benefit collection efforts and to implement
the policies and practices noted in ¶ 7. The Settlement Agreement was not intended
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to serve as a basis for non-party claimants to seek remedy from this Court should
Defendants fail to follow the procedures agreed to by the parties. Although it is
laudable that Plaintiff UAW is seeking redress for alleged violations of Defendants’
policies and procedures on behalf of claimants who may not have the ability to do so
outside of the process outlined by Defendants’ policies and procedures, such relief
cannot be had by way of seeking enforcement of the Settlement Agreement at issue.1
IV.

CONCLUSION
For the reasons set forth above,
IT IS ORDERED that Plaintiffs’ Motion to Enforce Settlement Agreement and

for Permanent Injunction (Doc. No. 9) is DENIED.
IT IS FURTHER ORDERED that Plaintiffs’ Motion to Substitute Party and
Joinder (Doc. No. 10) is DENIED.
IT IS FURTHER ORDERED that Defendants’ Motion to Strike (Doc. No. 16)
is MOOT.

1

The parties entered into a Settlement Agreement in this matter and not a Consent Decree,
which is often entered into with a governmental entity. See Board of Educ. of Okla. City Public
Schools v. Dowell, 498 U.S. 237, 249 (1991) (“the District Court [is] to observe the good faith of
the [governmental entity] in complying with a decree.”). A consent decree is essentially a settlement
agreement, subject to “continued judicial policing.” Williams v. Vukovich, 720 F.2d 909, 920 (6th
Cir. 1983). A consent decree has an attribute of both a contract and a judicial act. United States v.
State of Michigan, 1995 WL 469430, *6 (6th Cir. Aug. 7, 1995). A consent decree, especially one
that impacts the interests of the public and specific groups of persons not a party to a decree, is more
than a contract since it is a judicial order with a continuing decree of injunctive relief. Carson v.
American Brands, 450 U.S. 79, 84 (1981); Williams, 720 F.2d at 920.
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IT IS FURTHER ORDERED that Defendants’ Motion to Dismiss/For Relief
from Judgment (Doc. No. 29) is MOOT.

s/Denise Page Hood
Denise Page Hood
UNITED STATES DISTRICT JUDGE

Dated: March 31, 2014

I hereby certify that a copy of the foregoing document was mailed to the attorneys of
record on this date, March 31, 2014, by electronic and/or ordinary mail.

s/LaShawn R. Saulsberry
Case Manager, [phone]

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