Geologic Computer Systems, Inc. v. MacLean et al
Filing
121
ORDER denying 103 Motion to Enforce Settlement Agreement. Signed by District Judge Arthur J. Tarnow. (MLan)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
GEOLOGIC COMPUTER SYSTEMS, INC.,
Case No. 10-13569
Plaintiff,
SENIOR UNITED STATES DISTRICT
JUDGE ARTHUR J. TARNOW
v.
JOHN D. MACLEAN, ET AL.,
MAGISTRATE JUDGE R. STEVEN
WHALEN
Defendants.
/
ORDER DENYING PLAINTIFF’S MOTION TO ENFORCE
SETTLEMENT AGREEMENT [103]
Plaintiff GeoLogic Computer Systems filed the instant Motion to Enforce
Settlement Agreement [103] on April 30, 2014. On May 12, 2014, Defendant
Advanced Geo Positioning Solutions (AGPS) filed a response in support of the
motion [106]. Additional responses in support of the motion were filed by former
defendant Perry Rust [105] and by former defendants Thomas Bower, Mike Cook,
Nate Cook, and Rick Marsh [112]. However, on May 27, 2014, Defendants AMW
Group, AMW Machine Control, John D. MacLean, Alan Williams, and Mark
Williams (the Objecting Defendants) jointly filed a response opposing the motion
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[110]. Plaintiff filed a reply to the Objecting Defendants’ response [114] on June
3, 2014.
For the reasons stated below, the Court hereby DENIES Plaintiff’s Motion
to Enforce Settlement Agreement [103].
FACTUAL BACKGROUND
Plaintiff brought a copyright infringement suit on September 9, 2010.
Plaintiff alleges that the Objecting Defendants have produced software that
infringes Plaintiff’s copyright. That software has largely been sold by former
defendants Thomas Bower, Richard Marsh, Perry Rust, Michael Cook, and Nathan
Cook (the Non-Compete Defendants).
After nearly three years of litigation, the Court referred the parties’
settlement efforts to Magistrate Judge David R. Grand on July 25, 2013. Counsel
for the parties appeared at a settlement conference on October 4, 2013. Magistrate
Judge Grand said the following at the conference:
I understand that the parties have reached a settlement agreement, you
know, at least in terms of the—the overarching terms of that
settlement agreement, understanding that there’s some few loose ends
to tie up. But [Plaintiff’s counsel], if you would like to put the terms
as you understand them on the record.
Plaintiff’s counsel proceeded to identify terms of an agreement. Among other
terms, he stated that “the corporate defendants” would pay Plaintiff $1,475,000, to
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be personally guaranteed by Defendants John MacLean, Alan Williams, and Mark
Williams. He further stated the following:
We will have non-compete agreements with respect to [the NonCompete Defendants]. I do understand that there’s—one or more of
those defendants have not been contacted today. We understand that
they’ll be contacted and best efforts will be used to get their
agreement to those terms. We also understand that a caveat to those
non-competes will [be] that it will be a status quo non-compete,
meaning if there are things currently in place with respect to certain of
those defendants, they will not be precluded from continuing forward
under those relationships.
Counsel for the defendants sought to clarify some details unrelated to the noncompete term, but raised no objections to the terms placed on the record.
At the end of the conference, Magistrate Judge Grand gave the parties thirty
days to produce documents implementing the settlement agreement as placed on
the record. The parties exchanged drafts of settlement documents, all of which
included a status quo non-compete term. The drafts specified that the purpose of
the non-compete term was to prevent the Non-Compete Defendants from
undermining the corporate defendants’ ability to pay Plaintiff. The parties,
however, failed to reach an agreement on the settlement documents. A
disagreement arose regarding the non-compete term, and the parties failed to
resolve the disagreement even after two more conferences before Magistrate Judge
Grand.
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On April 14, 2014, Plaintiff and the Non-Compete Defendants—apparently
acting without the knowledge of the Objecting Defendants—entered a separate
settlement agreement. Plaintiff agreed to waive inclusion of a status quo noncompete term in the October 2013 settlement agreement. In return, the NonCompete Defendants agreed to support Plaintiff in seeking the agreement’s
enforcement and to pay Plaintiff $737,500. Plaintiff agreed to provide a stipulated
order dismissing its claims against the Non-Compete Defendants, to be entered
after the Court heard Plaintiff’s motion to enforce the agreement.
Plaintiff filed the instant Motion to Enforce Settlement Agreement [103] on
April 30, 2014. As they had agreed, the Non-Compete Defendants filed responses
supporting Plaintiff’s motion [105, 112]. Defendant AGPS also filed a response in
support [106]. The Objecting Defendants filed a response opposing the motion
[110], to which Plaintiff filed a reply [114]. The Court scheduled a hearing on the
motion for October 17, 2014. On that date, the Court met with counsel for the
parties to facilitate settlement and rescheduled the hearing for November 24, 2014.
Within days, Plaintiff submitted a stipulated order dismissing its claims against the
Non-Compete Defendants, which the Court entered [120] on October 28, 2014.
The remaining parties’ renewed settlement efforts failed. After hearing oral
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argument on the motion on November 24, 2014, the Court took the motion under
advisement.
ANALYSIS
Plaintiff asks the Court to enter an order enforcing settlement documents
prepared by Plaintiff, which mostly track the terms placed on the record at the
October 2013 settlement conference before Magistrate Judge Grand. However,
Plaintiff asks the Court not to enforce the status quo non-compete provision that
was identified as one of the “overarching” terms of the settlement at the October
2013 conference, and which imposed the Non-Compete Defendants’ only
obligation under the contract. Plaintiff argues that this term was not material, or at
least not material to the Objecting Defendants. Plaintiff notes that the Objecting
Defendants did not state on the record that their agreement was conditioned upon
the inclusion of the non-compete term. In fact, Plaintiff suggests that their
insistence on the non-compete term would make no sense, since the only purpose
of the non-compete term was to ensure Plaintiff received its payment.
The Objecting Defendants respond that the Court cannot order enforcement
of the October 2013 settlement agreement without the status quo non-compete term
because that term was identified as material on the record, and the Objecting
Defendants have never agreed to waive it. Further, they maintain that their
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agreement to settle the case was, in fact, contingent on the inclusion of the noncompete term. They point out that the purpose of the non-compete term, as
explained in Plaintiff’s own draft documents, was to prevent the Non-Compete
Defendants from undermining AMW’s ability to fulfill its payment obligations
(which were guaranteed by the other Objecting Defendants). They suggest that
Plaintiff and the Non-Compete Defendants have conspired to cause AMW to
default on these obligations, noting that their separate settlement agreement grants
the Non-Compete Defendants an option to purchase software rights in the event of
such default.
A settlement agreement is enforceable only if the parties objectively
manifest agreement to its material terms. See Therma-Scan, Inc. v. Thermoscan,
Inc., 217 F.3d 414, 420 (6th Cir. 2000); Bamerilease Capital Corp. v. Nearburg,
958 F.2d 150, 152 (6th Cir. 1992) (stating that validity of a settlement agreement is
determined by reference to state contract law); Kloian v. Domino’s Pizza, LLC, 273
Mich. App. 449, 453-54 (Mich. Ct. App. 2006) (acknowledging that under
Michigan law, “a contract requires mutual assent or a meeting of the minds on all
the essential terms,” to be judged by an objective standard). Because the analysis
turns on objective interpretation of the parties’ actions, the parties’ arguments
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concerning the Objecting Defendants’ subjective desire for inclusion of the noncompete term are legally irrelevant.
Plaintiff has not identified any action by the Objecting Defendants that
manifested their assent to a settlement agreement without the status quo noncompete term. At the October 2013 settlement conference, Magistrate Judge
Grand asked Plaintiff’s counsel to put the “overarching” terms of the settlement
agreement on the record. Plaintiff’s counsel responded by putting the status quo
non-compete term (among others) on the record. In other words, Plaintiff’s
counsel identified the non-compete term as a material term of the agreement under
discussion. Plaintiff now faults the Objecting Defendants for not insisting, on the
record, for the inclusion of the non-compete term—but they did so implicitly, by
agreeing to the terms identified as material by Plaintiff’s counsel. The defendants’
assent to an agreement defined by those terms, without more, could not also
communicate assent to an agreement without the non-compete term. But Plaintiff
has not identified any actions following the conference that manifested such assent.
The draft settlement documents exchanged by the parties included the noncompete term. And after the dispute regarding the non-compete term arose, the
Objecting Defendants seem to have consistently taken the position that the term
must be included.
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Further, Plaintiff’s motion asks the Court to sanction a contract modification
made without all parties’ consent. Plaintiff purports to have waived the status quo
non-compete term via its separate settlement agreement with the Non-Compete
Defendants. However, Plaintiff acknowledges that the non-compete term provided
the Non-Compete Defendants’ only obligation under the October 2013 settlement.
Without the obligation imposed by that term, then, the October 2013 settlement
would be unsupported by consideration with respect to the Non-Compete
Defendants and therefore invalid. See Prentis Family Found. v. Barbara Ann
Karmanos Cancer Inst., 266 Mich. App. 39, 58 (Mich. Ct. App. 2005)
(recognizing that a valid contract must be supported by consideration, defined as a
bargained-for exchange). At oral argument, Plaintiff indicated that the NonCompete Defendants supplied consideration when they agreed to pay $750,000
pursuant to the separate settlement agreement. In other words, Plaintiff suggests
that the separate settlement agreement between Plaintiff and the Non-Compete
Defendants changed the consideration underlying the October 2013 settlement
agreement. Such a modification of the October 2013 settlement agreement could
not be accomplished, however, without consent of all parties to the agreement. See
Quality Prods. & Concepts Co. v. Nagel Precision, Inc., 469 Mich. 362, 364
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(Mich. 2003) (“[M]utuality is the centerpiece to waiving or modifying a contract,
just as mutuality is the centerpiece to forming any contract.”).
At the hearing on this motion, Plaintiff raised an argument that does not
appear in its briefs: that the disputed term placed on the record was not a status quo
non-compete agreement, but merely an agreement to make best efforts to secure
such an agreement. It is true that when placing the material terms of the
contemplated settlement on the record, Plaintiff’s counsel noted that best efforts
would be made to secure agreement to the non-compete term from one or more
defendants who had not yet been contacted concerning it. In context, however, the
reference to “best efforts” should be read as an aside concerning the parties’
communications regarding the material terms, rather than a statement of those
terms’ content. Indeed, the separate settlement agreement between Plaintiff and
the Non-Compete Defendants, in which Plaintiff purported to waive the noncompete term, did not characterize it as a “best efforts” provision. The Court finds
that a status quo non-compete term was, in fact, identified as a material term of the
contemplated settlement at the October 2013 conference.
In sum, Plaintiff asks the Court to bind the Objecting Defendants to a
settlement agreement to which they never objectively manifested assent. The
Court cannot do so, and therefore must deny Plaintiff’s motion.
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CONCLUSION
At oral argument, Plaintiff urged the Court to prevent the Objecting
Defendants from protracting this litigation any further, emphasizing the years
already spent on the case and the ill will that has accumulated between the parties.
The Court respects these feelings and similarly regrets that the parties have not
reached a speedier and more amicable resolution. However, Plaintiff also
maintained at oral argument that “the terms placed on the record control” and that
“the Court must enforce what was placed on the record.” The Court agrees. The
Court finds that the status quo non-compete term was identified as material on the
record. The Court must therefore deny Plaintiff’s request to bind the Objecting
Defendants to an “agreement” without that material term. Accordingly,
IT IS ORDERED that Plaintiff’s Motion to Enforce Settlement Agreement
[103] is DENIED.
SO ORDERED.
Dated: December 10, 2014
s/Arthur J. Tarnow
Arthur J. Tarnow
Senior United States District Judge
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