Universal Settlements International, Inc. v. National Viatical, Inc. et al

Filing 385

OPINION ; signed by Judge Robert Holmes Bell (Judge Robert Holmes Bell, kcb)

UNITED STATES DISTRICT COURT F O R THE WESTERN DISTRICT OF MICHIGAN S O U T H E R N DIVISION

U N IV E R S A L SETTLEMENTS INTERNATIONAL, INC., P l a in tif f , F ile No. 1:07-CV-1243 v. H O N . ROBERT HOLMES BELL N A T I O N A L VIATICAL, INC., JAMES TORCHIA, and MARC A. CELELLO, D e f e n d a n ts . / OPINION T h is matter comes before the Court on Defendants National Viatical, Inc. and James T o rc h ia 's appeal of the Magistrate Judge's ruling denying their motion for contempt and s a n c tio n s . (Dkt. No. 379.) Defendant Marc A. Celello has joined in the appeal. (Dkt. No. 3 8 1 .) On July 28, 2009, Magistrate Judge Ellen S. Carmody ordered the parties to attend a s e ttle m e n t conference. (Dkt. No. 252.) The order explicitly stated that "[f]ailure of counsel to be accompanied by an appropriate client representative with actual authority to settle may re su lt in the imposition of sanctions or a citation for contempt of court." (Id.) Defendants c o n te n d that although Plaintiff's counsel appeared at the settlement conference with the s h a re h o ld e rs of USI, the shareholders lacked settlement authority because USI is in the

C a n a d ia n equivalent of bankruptcy, and USI's ability to settle is controlled by a creditors' c o m m itte e whose interests conflict in some respects with the interests of USI's shareholders. O n May 11, 2010, the Magistrate Judge denied Defendants' motion for contempt and s a n c tio n s , but took Defendants' request for an additional settlement conference under a d v is e m e n t . (Dkt. No. 365.) On May 17, 2010, the Magistrate Judge granted Defendants' re q u e st for an additional settlement conference. (Dkt. No. 367.) Defendants appeal both o rd e rs . A magistrate judge's resolution of a nondispositive pretrial matter should be modified o r set aside on appeal only if it is clearly erroneous or contrary to law. 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. P. 72(a); W.D. Mich. LCivr 72.3(a). The "clearly erroneous" s ta n d a rd applies only to the magistrate judge's findings of fact. Gandee v. Glaser, 785 F. S u p p . 684, 686 (S.D. Ohio 1992). The magistrate judge's legal conclusions are reviewed u n d e r the "contrary to law" standard. Id. "`A finding is `clearly erroneous' when although th e re is evidence to support it, the reviewing court on the entire evidence is left with the d e f in ite and firm conviction that a mistake has been committed.'" Adams County Reg'l W a te r Dist. v. Vill. of Manchester, 226 F.3d 513, 517 (6th Cir. 2000) (quoting United States v . U. S. Gypsum Co., 333 U.S. 364, 395 (1948)). D e f en d a n ts appeal the denial of their motion for contempt and sanctions based upon th e ir contention that USI's failure to bring a representative with full settlement authority v io late d the Magistrate Judge's July 28, 2009, order, thwarted the possibility of settlement,

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a n d caused Defendants to incur the costs of attending the conference, filing the motion for s a n c tio n s , and filing this appeal. The Magistrate Judge's July 28, 2009, order did not guarantee that a violation of the o rd e r would result in a finding of contempt or in the imposition of monetary sanctions. The o rd e r explicitly reserved that determination to the Magistrate Judge's discretion. (Dkt. No. 2 5 2 ("Failure of counsel to be accompanied by an appropriate client representative with a c tu a l authority to settle may result in the imposition of sanctions or a citation for contempt o f court.") (emphasis added).) Accordingly, the Magistrate Judge's order denying

D e f e n d a n ts' motion for contempt and sanctions will not be reversed on appeal unless it a p p e a rs that the Magistrate Judge abused her discretion in denying the relief sought. Although the Magistrate Judge suspected that USI's shareholders did not have u ltim a te settlement authority, she determined that she could not find that Plaintiff USI had n o t acted in good faith. The Magistrate Judge based her determination on the language of th e bankruptcy plan and the protocol for the creditors' committee, on the parties' common k n o w led g e that any settlement would require the approval of the Canadian bankruptcy court, o n her own assessment of the credibility of USI's shareholders, and on her determination that th e shareholders, who had knowledge of the facts of the case, had as much authority as a n yb o d y had and would be able to make a strong recommendation to the creditors' c o m m itte e . (Dkt. No. 373, 05/18/10 Mot. Hr'g Tr. 5, 9, 11, 26, 30-31.) The Magistrate Ju d g e's determination that Plaintiff USI did not act in bad faith was supported by the record

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a n d was not clearly erroneous. Based upon this finding, the Court cannot say that the M a g is tra te Judge abused her discretion or acted contrary to law. The Magistrate Judge was w e ll within her discretion in choosing not to issue a contempt order or sanctions in this case. D e f en d a n ts have also appealed the Magistrate Judge's order granting their request for a second settlement conference. Defendants' first objection is to the Magistrate Judge's f a ilu re to order the conference at USI's sole expense. Because the Court has already held th a t the Magistrate Judge's determination that USI did not act in bad faith was not erroneous, th e Magistrate Judge's failure to require USI to bear all of the costs of the settlement c o n f e r e n c e as a sanction for its violation of the first settlement conference order is not an a b u s e of her discretion or contrary to law. Defendants' second objection is to the Magistrate Judge's failure to require all of the m e m b e rs of the Litigation Committee to attend the settlement conference. The Magistrate J u d g e explained at the motion hearing her practice of not requiring a committee with final a u th o rity to attend a settlement conference where the representative at the settlement c o n f e re n c e has knowledge of the facts and the ability to made a strong recommendation to th e creditors' committee. (05/18/2010 Hr'g Tr. 5.) Moreover, as the Magistrate Judge noted o n the record, she does not have authority to require the entity with final settlement authority in this case, i.e., the Canadian bankruptcy judge, to attend the conference. (Id. at 26.) In re sp o n s e to Defendants' concerns about a potential conflict between the shareholders and the c r e d ito r s ' committee, the Magistrate Judge required that an individual from the creditors'

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c o m m itte e "whose recommendation would be favorably received by the committee shall a tte n d the conference in person." (Dkt. No. 368.) The Magistrate Judge has substantial e x p e rie n c e in conducting settlement conferences, and the manner in which she conducts th o s e conferences is a matter the Court entrusts to her sound discretion. Where, as here, any s e ttle m e n t is subject to a multi-layered process involving the shareholders, the creditors' co m m ittee, the trustee, and ultimately the bankruptcy judge, the Magistrate Judge's failure to require all of the members of the creditors' committee to attend the settlement conference w a s not an abuse of discretion or contrary to law. For the reasons stated herein, upon consideration of the appeal filed by Defendants N atio n al Viatical, Inc. and James Torchia, joined by Defendant Marc A. Celello, the Court w ill affirm the Magistrate Judge's order denying Defendants' motion for sanctions (Dkt. No. 3 6 5 ) and order requiring a second settlement conference (Dkt. Nos. 367, 368). An order consistent with this opinion will be entered.

Dated: June 8, 2010

/s/ Robert Holmes Bell ROBERT HOLMES BELL UNITED STATES DISTRICT JUDGE

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