Timber Point Properties III, LLC v. Bank of America, N.A. et al
Filing
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Order Granting in Part the Parties' Motions 161 165 to Enforce Settlement Agreement. Signed on 7/20/15 by Chief District Judge Greg Kays. (Francis, Alexandra)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
SOUTHERN DIVISION
TIMBER POINT PROPERTIES III, LLC,
Plaintiff,
v.
BANK OF AMERICA, N.A., et al.,
Defendants.
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No. 13-3449-CV-S-DGK
ORDER GRANTING IN PART THE PARTIES’ MOTIONS TO ENFORCE
SETTLEMENT AGREEMENT
Plaintiff Timber Point Properties III, LLC (“Timber Point”), has settled this property
dispute litigation with Defendants. Now before the Court is Timber Point’s motion to enforce
the settlement agreement (Doc. 161) and Defendants’ cross-motion to enforce (Doc. 165). For
the reasons below, each motion is GRANTED IN PART.
Background
This case centers on a piece of property in Branson, Missouri, that Timber Point owned.
Defendant Bank of America, N.A. foreclosed on the property, with the aid of the other
Defendants. Timber Point sued to regain full title to the property, contesting the process that led
to the foreclosure.
Before discovery concluded, the parties negotiated a settlement.
They signed a
Memorandum of Settlement (Doc. 165-1) that contained the general terms that the final
settlement agreement would comprise. In particular, the parties agreed that they would “execute
a Settlement Agreement and Release drafted by Defendants including a mutual confidentiality
provision, a non-disparagement provision, release by Plaintiff of all claims against all
Defendants, [and] dismissal of the federal case with prejudice.”
Defendants submitted to Timber Point their latest draft Settlement Agreement and
Release of Claims (Doc. 165-4). Timber Point claims it never agreed to four terms contained in
this draft: (1) a provision granting damages and fees in any action to enforce the settlement
agreement (Paragraph 3.I); (2) the release of claims against Defendants (Paragraph 3.D); (3) the
confidentiality provision (Paragraph 3.K); and (4) the non-disparagement clause (Paragraph 3.L).
Defendants concede Timber Point never agreed to Paragraph 3.I. However, they refuse to
change any of the contested language.
Standard
A district court possesses the inherent power to enforce an unambiguous settlement
agreement. Barry v. Barry, 172 F.3d 1011, 1013 (8th Cir. 1999). “[A] court may enforce [a]
settlement agreement that contemplates the execution of documents at a later time,” Chaganti &
Assocs., P.C. v. Nowotny, 470 F.3d 1215, 1221 (8th Cir. 2006), including ordering specific
performance where a settlement was reached but a release was not signed, Byrd v. Liesman, 825
S.W.2d 38, 41 (Mo. Ct. App. 1992).
In a diversity case like this one, the court must construe the agreement according to state
law. Id. “In Missouri, interpreting a settlement or release agreement is a question of law, and
the agreement is ‘interpreted according to the same principles that govern the interpretation of
any other type of contract.’” Harper Enters., Inc. v. Aprilia World Serv. USA, Inc., 270 F. App’x
458, 460 (8th Cir. 2008).
Discussion
Timber Point now moves the Court to enforce the Memorandum of Settlement by striking
the four contested clauses from the draft Settlement Agreement and Release. Defendants cross-
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move the Court to enforce the Memorandum of Settlement, arguing that its general terms are
consistent with the draft Settlement Agreement and Release.
The parties do not dispute that the Memorandum of Settlement is an enforceable contract.
In that contract, the parties agreed to “execute a Settlement Agreement and Release drafted by
Defendants,” including certain provisions. The issue is whether Defendants have fulfilled this
obligation by drafting a valid Settlement Agreement and Release. If they have, then the Court
will order Timber Point to fulfill its contractual obligation to execute it. See Chaganti & Assocs.,
470 F.3d at 1221.
If they have not, then the Court will order Defendants to fulfill their
contractual obligation by executing a new, valid settlement agreement and release that conforms
with the outline in the Memorandum of Settlement.
Timber Point argues that the Settlement Agreement and Release, as drafted, is an invalid
contract on three grounds. First, it includes provisions that Timber Point never agreed to.
Second, it forfeits rights held by other entities. Third, it allegedly violates the Missouri Rules of
Professional Conduct.
I. Defendants may not insert a provision that Timber Point did not agree to.
Paragraph 3.I of Defendants’ draft agreement entitles a party to recover damages, fees,
and costs if it prevails in an action to enforce the agreement. Timber Point asserts that it never
agreed to that provision. The Memorandum of Settlement discussed several material terms of
settlement. The issue is whether the draft Settlement Agreement and Release strayed from those
material terms.
Under Missouri law, a contract is not formed unless the parties have mutually assented to
all material terms, meaning there was a “meeting of the minds.” Chaganti & Assocs., 470 F.3d
at 1221. “A mutual agreement is reached when ‘the minds of the contracting parties [] meet
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upon and assent to the same thing in the same sense at the same time.’” Grant v. Sears, 379
S.W.3d 905, 916 (Mo. Ct. App. 2012).
Here, Defendants conceded after the fact that Timber Point never agreed to Paragraph 3.I.
Therefore, there was no objective intent by the parties at the time they entered the Memorandum
of Settlement to include such a provision. See Chaganti & Assocs., 470 F.3d at 1221. The Court
will not enforce this provision. See also Barry, 172 F.3d at 1014–15 (holding, under identical
Minnesota law, that settling shareholders who failed to reserve certain claims in the parties’ oral
settlement agreement could not later integrate such a reservation into the final written settlement
agreement).1
II. Paragraph 3.D requires only the parties to forfeit rights.
Paragraph 3.D requires Timber Point to release not only its claims against Defendants,
but also claims held by its “agents,” “representatives,” “insurers,” and the like. Timber Point
complains that it cannot be forced to release claims held “by third parties over whom [it] has no
control.” Defendants respond that the release provision aims solely “to prevent Plaintiff, or any
entity that may have any rights through the Plaintiff, from asserting any claims now or in the
future against the Defendants pertaining to the subject matter of this litigation.” In other words,
Defendants disclaim that the draft Settlement Agreement and Release compromises third parties’
claims. The Court must thus determine whether either interpretation reflects a mutuality of
agreement.
The Memorandum of Settlement reflects the parties’ objective intent for the Settlement
Agreement and Release. That memorandum identified as a material settlement term the “release
by Plaintiff of all claims against all Defendants.” It does not require any other party to release
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Because Paragraph 3.J provides for invalid portions of the Settlement Agreement and Release to be severable, the
Court can strike Paragraph 3.I without jeopardizing the entire contract.
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claims. Further, the Settlement Agreement and Release was to be signed by only the parties to
this lawsuit. Therefore, the parties’ mutual agreement was for only “Plaintiff” to be bound by
Paragraph 3.D. And by “Plaintiff,” the Court finds the parties meant not only Timber Point, but
also all entities that have rights through it, because no party argues that the usual principles of
agency are inapplicable. See generally State ex rel. Elson v. Koehr, 856 S.W.2d 57, 60 (Mo.
1993) (citing Restatement (Second) of Agency § 14 (1958)).
The Court will enforce this provision as validly written.
III. The Settlement Agreement and Release does not violate the Missouri Rules of
Professional Conduct.
Finally, Timber Point argues that parts of the Settlement Agreement and Release violate
Missouri Supreme Court Rule 4, also known as the Missouri Rules of Professional Conduct.
“[A] contract or transaction prohibited by law is void.” White v. Med. Review Consultants, Inc.,
831 S.W.2d 662, 665 (Mo. Ct. App. 1992) (Fenner, J.). The Missouri Rules of Professional
Conduct have the force of law. In re Ellis, 221 S.W.2d 139, 141 (Mo. 1949). Therefore, the
Settlement Agreement and Release is void if it violates a Rule of Professional Conduct. See also
Eng v. Cummings, McClorey, Davis & Acho, PLC, 611 F.3d 428, 432 (8th Cir. 2010) (applying
Missouri law).
Timber Point argues that two provisions are ethically compromised: Paragraph 3.K, a
confidentiality clause, and Paragraph 3.L, a non-disparagement clause.
A. The confidentiality clause does not violate the Rules of Professional Conduct.
Paragraph 3.K prohibits the parties from disclosing any discovery accumulated during
this action and the terms of the Settlement Agreement and Release. This provision contains a
number of exceptions; for instance, a party may make an otherwise prohibited disclosure if so
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ordered by a governmental authority. Timber Point believes Paragraph 3.K violates Missouri
Rule of Professional Conduct 3.4(f), which states:
A lawyer shall not:
...
(f) request a person other than a client to refrain from voluntarily giving
relevant information to another party unless:
(1) the person is a relative or an employee or other agent of a client; and
(2) the lawyer reasonably believes that the person’s interests will not be
adversely affected by refraining from giving such information.
(Emphasis added).
Paragraph 3.K does not violate Rule 3.4(f). No “lawyer” is “request[ing]” any party to
refrain from divulging information here. The parties themselves negotiated and agreed to a
mutual confidentiality provision, as reflected by the parties’ signatures on the Memorandum of
Settlement. The attorneys presumably counseled the parties in making this decision, but such
was not unlawful; Rule 3.4(f) proscribes only requests to persons “other than a client.” The sole
case Timber Point cites, from another jurisdiction, is inapposite for this reason. See Ky. Bar
Ass’n v. Unnamed Atty., 414 S.W.3d 412, 418 (Ky. 2013) (holding that an attorney had violated
Kentucky’s analog to Rule 3.4(f) because he induced a non-client to contractually agree to
refrain from revealing certain facts).
Timber Point states that it contacted the Missouri Supreme Court’s Legal Ethics Counsel
about Paragraph 3.K, and its staff was “unequivocal” that this provision abets “conduct that is
prejudicial to the administration of justice,” a violation of Rule 8.4(d). The opinions of the Legal
Ethics Counsel are “not binding.” Mo. Sup. Ct. R. 5.30(c). This opinion is not even persuasive,
as Timber Point fails to elaborate the substance of the Legal Ethics Counsel’s opinion.
Therefore, the Court accords no deference to this opinion.
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Finally, Timber Point’s counsel argues that he has an ethical obligation under Rule 8.3(a)
to report professional misconduct by fellow members of the bar—for example, the filing of false
affidavits—but that Paragraph 3.K prevents him from doing so. Paragraph 3.K requires the
parties to keep as confidential the discovery and the settlement terms; it is silent on reporting
misconduct generally.
Timber Point fails to indicate why its counsel could not report
misconduct while refraining from voluntarily submitting discovery accumulated during this
litigation. The Court rejects this speculative argument. Cf. Eng, 611 F.3d at 435 (refusing to
enforce a contract that was categorically unenforceable).
For these reasons, the Court will enforce Paragraph 3.K.
B. Timber Point’s concerns about being restricted from releasing public
information are speculative.
Paragraph 3.L prohibits Timber Point from making negative or disparaging statements
against Defendants. Timber Point believes that Paragraphs 3.K and 3.L unethically prevent its
attorney from releasing information that is already in the public domain.
Missouri Rule of Professional Conduct 5.6(b) prohibits a lawyer from “participat[ing] in
offering or making . . . an agreement in which a restriction on the lawyer’s right to practice is
part of the settlement of a client controversy.” Several states have interpreted their versions of
this rule to bar settlement agreements from prohibiting a party’s lawyer from disclosing
information that is publicly available or that would be available through discovery in other cases.
Ill. State Bar Ass’n Op. 12-10, 2013 WL 683530, at *2 (Feb. 12, 2013) (collecting opinions).
Timber Point fails to establish that Paragraphs 3.K and 3.L facially prohibit the release of
public information. The Court will not strike these provisions simply because Timber Point can
envision a scenario in which the Settlement Agreement and Release, as applied, might
contravene the Rules of Professional Conduct. If such an instance arises, Timber Point will have
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adequate remedies at that time. At this juncture, the Court will enforce Paragraphs 3.K and 3.L.
Cf. Eng, 611 F.3d at 435.
Conclusion
Except as noted above, Defendants have performed their obligation under the
Memorandum of Settlement to draft a valid Settlement Agreement and Release, so per the terms
of the Memorandum of Settlement, the parties shall execute that draft. Timber Point’s motion to
enforce the Memorandum of Settlement (Doc. 161) is GRANTED IN PART. Defendants’ crossmotion to enforce the Settlement Agreement and Release (Doc. 165) is GRANTED IN PART.
The Court will now enforce the Memorandum of Settlement by ordering each party to execute
the Settlement Agreement and Release, with the exception of Paragraph 3.I. The parties shall do
so within twenty-one days.
As the parties have settled all claims, the Clerk of the Court is directed to close this case.
See Fed. R. Civ. P. 41(a)(1)(A)(ii).
IT IS SO ORDERED.
Dated:
July 20, 2015
/s/ Greg Kays
GREG KAYS, CHIEF JUDGE
UNITED STATES DISTRICT COURT
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