Hendrickson et al v. United States of America

Filing 31

ORDER granting 21 Motion to enforce settlement. Signed by Hon. Michael A. Telesca on 03/25/2014. (BMB)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
________________________________________
WILLIAM R. HENDRICKSON and
PATRICIA HENDRICKSON,
Plaintiffs,

82-CV-621T
DECISION
and ORDER

v.
UNITED STATES OF AMERICA,
Defendant.
________________________________________
INTRODUCTION

Plaintiffs William R. Hendrickson and Patricia Hendrickson
brought this case in 1982 against the defendant United States of
America (“United States” or “Government”) claiming that William
Hendrickson (“Hendrickson”) suffered severe and permanent injuries
after being struck by a motor vehicle operated by the defendant.
The parties agreed to settle the case, and agreed to a structured
settlement pursuant to which the defendant paid an initial lump sum
to the plaintiffs, and additionally purchased an annuity that would
provide for monthly payments to be made to Hendrickson for a period
of forty years, with an additional 14 annual payments to be paid at
specified intervals over the course of 26 years.

A written

Settlement Agreement (“Settlement Agreement” or “Agreement”) was
prepared by the parties and submitted to the Court for approval.
On April 29, 1985, I approved the Settlement Agreement and made the
Agreement an Order of the Court.

The Agreement, inter alia,

required the defendant to purchase an annuity through the Executive
Life Insurance Company of New York (“ELNY”), and provided that the

defendant “shall be the sole owner of the Annuity Contract.” See
Settlement Agreement at p. 5.
In

2012,

insolvent,

and

the
that

plaintiffs
it

would

learned
be

that

liquidated

ELNY
by

Liquidation Bureau pursuant to New York State law.

had

the

become

New

York

As a result of

the liquidation of ELNY, the plaintiffs’ remaining benefits under
the annuity were reduced by approximately fifty percent.
Plaintiffs now move to enforce the settlement, contending that
the defendant is obligated to pay the total amounts due them as
originally provided in the Settlement Agreement and Ordered by this
Court.

The United States opposes plaintiffs’ motion on grounds

that this Court lacks jurisdiction to enforce the Settlement
Agreement because the Court did not expressly retain jurisdiction
over the settlement, and the terms of the Settlement Agreement were
not incorporated into the Order of Dismissal issued by this Court.
The

Government

further

contends

that

because

the

Settlement

Agreement constitutes a contract with the Government, and because
the amount sought by the plaintiffs from the Government exceeds
$10,000, any action to enforce the Agreement must be brought before
the United States Court of Claims, which has exclusive jurisdiction
over contract actions against the Government in amounts exceeding
$10,000.
For the reasons set forth below, I find that this Court
retained jurisdiction over the effectuation of the Settlement when

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it approved the terms of the written Settlement Agreement between
the parties and made those terms an Order of the Court.

I further

find

over

that

the

Court

retains

ancillary

jurisdiction

the

enforcement of the Settlement Agreement as part of the Court’s
inherent authorization to vindicate its authority and effectuate
its Orders.

Finally, I find that the Government is obligated to

ensure that the payments set forth in the Settlement Agreement are
to be made as promised to the plaintiffs, and therefore, to the
extent that payments from the ELNY annuity have been diminished,
the Government is obligated to pay any remaining portions not
received by the plaintiffs.

Accordingly, I grant plaintiffs’

motion to enforce the settlement and Order the Government to pay to
the plaintiffs the difference between the benefits plaintiffs are
now receiving and the benefits agreed to and promised in the
Settlement Agreement.
BACKGROUND
In 1985, this tort action went to trial before this Court, and
following two-and-a-half days of trial testimony, but before the
trial was concluded, the parties agreed to settle the case.

In

open court, the parties spread the terms of the settlement on the
record, and thereafter, submitted a written Settlement Agreement to
the Court for Court approval dated April 29, 1985.

The parties

agreed that part of the consideration to be paid by the Government
would be paid in cash in an initial lump sum, and the balance would

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be paid in a “structured” settlement, whereby the United States
would be obligated to pay Hendrickson $2,500.00 per month for 40
years

(which

amount

would

be

increased

by

4%

annually);

an

additional $625,000.00 in 10 lump sum payments over the course of
24 years; and $40,000.00 in four equal lump sum payments to be
applied towards anticipated educational expenses.

With respect to

the

agreed

initial

lump

sum

payment,

$151,782.66 to the plaintiffs

the

Government

to

pay

at the time of the settlement.

For

the purpose of making the future monthly and annual payments to the
plaintiffs, the Government purchased an annuity from ELNY in an
amount

not

exceeding

$522,217.34.

The

Settlement

Agreement

specifically provided that the Government would be the sole owner
of the annuity contract.
For almost three decades thereafter, the promised payments
were made to the plaintiffs as provided.

In 2013, however, ELNY

was liquidated, and the plaintiffs thereafter received only 50% of
the amount of the remaining payments owed to them under the
Settlement Agreement. Plaintiffs attempted to recoup the remaining
amounts from the defendant, but the Government took the position
that it had satisfied its financial obligations by making the lump
sum payment upon the settlement of the action, and by purchasing
the annuity as agreed to by the parties.

The defendant refused to

contribute amounts to make plaintiffs whole under the Settlement
Agreement, and plaintiffs then brought the instant action seeking

Page -4-

enforcement

of

the

Settlement

Agreement,

and

directing

the

defendant to pay to plaintiffs any remaining amounts owed but not
paid to them by ELNY.
DISCUSSION
I.

The Court has Retained
Settlement Agreement.

Jurisdiction

to

Enforce

the

A.

Because the Terms of the Settlement Agreement were
incorporated into an Order approved and signed by the
Court, the Court retains Jurisdiction to resolve a motion
to enforce the settlement

Plaintiffs seek to enforce the Settlement Agreement between
the

parties,

and

move

the

Court

to

Order

defendant

to

make

plaintiffs whole for the amounts that have not been paid to them
due to the insolvency of ELNY.

The United States asserts that this

court lacks jurisdiction to grant the relief requested because the
Court

did

not

expressly

retain

jurisdiction

to

enforce

the

settlement, and did not include the terms of the settlement in its
Order dismissing the case.
It is a peculiarity of federal jurisdiction that a federal
court lacks jurisdiction to enforce a settlement entered before it
absent explicit language in the settlement agreement, or from the
court itself, indicating that the court retains jurisdiction to
effectuate the settlement, or inclusion of the settlement terms in
the Order dismissing the action.

Kokkonen v. Guardian Life Ins.

Co. of Am., 511 U.S. 375, 380-81 (1994); Dahlen Kok Han Wee v.
David, 2013 WL 5656084,

(S.D.N.Y. Oct. 10, 2013)(“It is settled

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that the Court posses no inherent power to enforce a settlement, in
the absence of an express retention of jurisdiction or the entry of
the settlement terms as an order of the Court.”); Stone v. Credit
Solutions Corp., 09-CV-281A F, 2011 WL 2747572 (W.D.N.Y. June 21,
2011) report and recommendation adopted, 09-CV-281, 2011 WL 2731175
(W.D.N.Y. July 13, 2011)(“It is ‘well-settled’ that a district
court may “exercise ancillary jurisdiction to enforce a settlement
agreement

only

if

the

dismissal

order

expressly

retained

jurisdiction over that particular agreement, or incorporated [the
settlement terms] into the order.”)
In the instant case, the United States claims that this Court
does not retain jurisdiction to enforce the Settlement Agreement
because it did not explicitly retain such authority, and did not
include the terms of the settlement in its Order dismissing the
case.

I find, however, that I did retain jurisdiction over this

matter when I approved the Settlement Agreement and made the terms
of the Agreement an Order of this Court by “So Ordering” the
Agreement on April 29, 1985.
Unlike a case in which the Court has merely been advised by
the parties that a matter has settled, but has not been advised of
the terms or conditions of the settlement, the parties in this case
presented to the Court a detailed, eight-page written Settlement
Agreement which explicitly set forth the relative rights and
obligations of the parties with respect to their Agreement, and

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explicitly required the approval of the court to become effective.
Specifically, at ¶ 3 of the Agreement, the parties agreed that
“[t]he execution of this agreement and approval by the court to
provide . . . future periodic payments shall constitute a complete
release and bar to any and all causes of actions . . . . known or
unknown . . . . arising from the events . . . giving rise to this
lawsuit.

Accordingly, Court approval of the Settlement Agreement,

and its terms, was a condition of the settlement executed by the
parties.
While it is true that “[t]he judge’s mere awareness and
approval of

the

terms

of

the

settlement agreement”

will not

establish that the Court retained jurisdiction over the enforcement
of those terms, Kokkonen 511 U.S. at 381, in cases where a Judge
has made the actual settlement agreement an Order of the Court,
even in the absence of express language retaining jurisdiction over
the settlement, the court has placed its “judicial imprimatur” on
the agreement, and therefore may act to enforce the agreement. See
Perez v. Westchester County, 587 F.3d 143, 152-153 (2nd Cir.
2009)(holding that where the District Court Judge “judicially
sanctioned” the settlement, the court retained jurisdiction over
enforcement

of

the

settlement).

Accordingly,

this

case

is

distinguishable from the case in Kokkonen, where the judge who
approved the settlement of that action merely dismissed the action
upon the representation of the parties that the case had been

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settled, and did not see or review the settlement agreement between
the parties, or make the settlement agreement an Order of the
Court.

Kokkonen at p. 375 (noting that stipulation settling the

case did not include the terms of the settlement, or even refer to
the settlement agreement between the parties).
In this case, however, not only was the Settlement Agreement
submitted to the Court and made an Order of the Court, but the
parties agreed that the case would not be settled unless the Court
approved the agreement.

Moreover, this Court presided over two-

and-a-half days of trial, and once the parties indicated their
intent to settle, the Court directed the parties to spread the
terms of the settlement on the record in open court.

Once the

terms of the settlement were set forth, the court elicited the
acknowledgment of the terms and agreement thereto by the individual
plaintiffs, their attorney, and the attorney for the Government,
who acknowledged his authority to bind the government to those
terms.

See March 29, 1985 Transcript of Proceedings at p. 8.

These facts establish that the Court was far more than a passive
spectator with respect to the settlement of this action.

Rather,

it is clear that the Court placed its judicial imprimatur on the
settlement,

and

thus

retains

jurisdiction

to

enforce

the

settlement.
Indeed, the facts of this case are more in line with Perez
than with Kokkonen. In Perez, the Second Circuit Court of Appeals

Page -8-

noted that where settling parties make court approval of the
settlement

a

condition

of

settlement;

the

court

makes

the

settlement agreement an Order of the court; and the settlement is
not operative absent court approval, the court has sufficiently
demonstrated that it retains sufficient interest in the settlement
to retain jurisdiction to enforce the settlement.

Perez, 587 F.3d

at 152 (where “settlement was only made operative by the Court’s
review and approval . . . [i]n a quite literal sense, it was the
District Court’s imprimatur that made the settlement valid.”).

I

therefore find that this Court retains jurisdiction to enforce the
Order I issued on April 29, 1985: that Order being the signed,
court-approved Settlement Agreement agreed to by the parties, and
made part of the record.
unenforceable

simply

To hold that this Order of the Court is

because

it

was

not

incorporated

into

a

subsequent Order of Dismissal which was administratively prepared
by the Clerk of the Court at my direction, would elevate form over
substance, and would prevent the court from carrying out its duty,
as stated by the Supreme Court in Kokkomen, of “function[ing]
successfully, that is, to manage its proceedings, vindicate its
authority, and effectuate its decrees.” Kokkomen, 511 U.S. at 37980. See also, Cameron International Trading Co. v. Hawk Importers,
Inc.,

501

Fed.Appx

36,

37-38

(2nd

Cir.

2012)(court

retained

jurisdiction over settlement where the court “So Ordered” the
parties’ settlement agreement but order of dismissal did not recite

Page -9-

settlement terms).1

Accordingly, I find that this Court has

retained jurisdiction to enforce the Order approving the settlement
of this case.
The Government argues that Perez is inapposite in this case
because the issue before the Court in Perez was whether or not the
plaintiffs were “prevailing parties.”

Defendant argues that the

discussion of the enforceablity of the settlement agreement in that
case was dicta, and that in any event, the Order of Dismissal in
Perez, unlike the case here, included terms of the settlement in
the dismissal Order. I find, however, that Perez does control, and
mandates that the Court retain jurisdiction over this settlement.
Like the case at bar, the court in Perez “So Ordered” a settlement
agreement prepared by the parties, and then directed the Clerk of
the Court to close the case.

While the Court in Perez directed the

Clerk to Close the case in writing as part of the Settlement
Agreement, in the instant case, the Settlement Agreement provided

1

Cameron differs from the case at bar in that the
settlement agreement adopted by that court included language
providing for continued federal jurisdiction over the dispute.
Nevertheless, Cameron is instructive here because the Second
Circuit held that the District Court retained jurisdiction over
the settlement not because of the retention language contained in
the agreement, but because the court retained the authority to
effectuate its Order. Cameron, 501 Fed.Appx. at 38. (“In this
case, ancillary jurisdiction over Cameron's motion to enforce is
appropriate because it is necessary for the district court to
effectuate its order, that is, the Agreement that [the District]
Judge . . . so-ordered”).

Page -10-

that

the

plaintiffs,

upon

satisfaction

of

the

conditions

of

settlement would file with the Clerk of the Court “a dismissal of
claims.”

Settlement Agreement at ¶ 8.

And although the Judge in

Perez amended the settlement agreement to provide that the court
could, at its discretion, accept any new case related to the case
before it, and provided that any new case brought to enforce the
terms of the settlement could be referred to him, such language, as
here, did not state an explicit intention to retain jurisdiction
over settlement disputes emanating from the case before the court.
Accordingly, just as the Second Circuit held that the Perez court
retained jurisdiction to enforce a settlement agreement that did
not

retain

an

explicit

retention

of

jurisdiction

over

the

settlement, but was made an Order of the Court, I find that this
court retains authority to enforce the Order of Settlement issued
on April 29, 1985.
B.

The Court has retained Ancillary Jurisdiction over the
Effectuation of the Settlement Order.

Following the submission of the instant motion, the defendant
submitted supplemental authority to the court suggesting that
regardless of whether or not this court retained jurisdiction to
enforce the settlement, because the Settlement Agreement is a
“contract” with the Government, and because plaintiffs seek in
excess of $10,000, the United States Court of Claims has exclusive
jurisdiction over the matter, and therefore this Court cannot
assert jurisdiction over an attempt to enforce the settlement
Page -11-

between the parties.

Specifically, the Government argues that it

has not waived its sovereign immunity to be sued for breach of
contract claims exceeding $10,000 in District Court, and has only
waived such immunity for such cases when they are brought in the
United States Court of Claims.

Accordingly, the defendant argues

that this court lacks jurisdiction to entertain plaintiffs’ request
to enforce the settlement.

In support of this argument, defendant

cites the recently decided case of Franklin-Mason v. Mabus, 125057, 2014 WL 903135 (D.C. Cir. Feb. 14, 2014) in which the Circuit
Court

for

the

District

of

Columbia

held

that

“a

settlement

agreement embodied in a consent decree is a contract” under federal
law

over

which

the

Court

of

Federal

Claims

has

exclusive

jurisdiction., 2014 WL 903135 at *1.
While the Franklin-Mason case cited by the defendant was
decided after the briefs in this case were submitted to the court,
the argument that the Court of Federal Claims has jurisdiction over
the enforcement of settlement agreements in excess of $10,000
involving the Government is not a new one, and could have been made
in the Government’s initial opposition to plaintiffs’ motion.

For

example, in 2012, the United States Court of Appeals for the
Federal

Circuit

held

that

“a

settlement

agreement,

even

one

embodied in a decree, ‘is a contract within the meaning [of federal
law]’”

and

as

a

result,

the

Court

of

Federal

Claims

has

jurisdiction over an action to enforce the agreement where the

Page -12-

amount in controversy is greater than $10,000.

VanDesande v.

United States, 673 F.3d 1342, 1351 (Fed. Cir. 2012) (citing Angle
v. United States, 709 F.2d 570, 573 (9th Cir. 1983)). However,
despite the fact that the Government has improperly raised this
issue after the briefing of the plaintiffs’ motion to enforce was
closed, I nevertheless have considered the Government’s position,
and reject that position for the reasons set forth below.
This

Court

acknowledges

that

a

federal

court

has

no

jurisdiction other than that granted to it by Congress and the
United States Constitution.

Gunn v. Minton, 133 S. Ct. 1059, 1064

(2013) (“‘Federal courts are courts of limited jurisdiction,’
possessing

‘only

that

statute.’”

(quoting

power

Kokkonen,

authorized
511

U.S.

by
at

Constitution
377)).

and

Moreover,

“neither a court nor the parties has the power to alter a federal
court’s statutory grant of subject-matter jurisdiction.” FranklinMason, 2014 WL 903135 at *4.

Accordingly, even where parties

consent to jurisdiction by a court, such as in a settlement
agreement, and the court expresses its intent to exert jurisdiction
over

a

matter,

such

consent

or

a

declaration

cannot

confer

jurisdiction where none exists. Franklin-Mason, 2014 WL 903135 at
*4 (citing Ins. Corp. of Ir. v. Compagnie des Bauxites de Guinee,
456 U.S. 694, 702 (1982).
The Government contends that in this case, the Court lacks
jurisdiction to enforce the Order I issued on April 29, 1985

Page -13-

approving

the

settlement,

because

the

Settlement

Agreement,

although an Order of the Court, is also a contract (with an amount
in controversy greater than $10,000.00), and the Government has not
consented to be sued for the breach of that contract in any forum
other than the Court of Federal Claims.

The Government contends

that because it is immune from an action for breach of a contract
in excess of $10,000.00 in this court, and because there is no
independent basis for jurisdiction over the claim for breach of the
settlement

agreement,

this

court

lacks

jurisdiction

over

the

dispute, and cannot create jurisdiction by court Order.
I

find,

however,

that

because

Courts

retain

ancillary

jurisdiction to enforce their own Orders, this court has retained
jurisdiction over the enforcement of the Order issued April 29,
1985 approving the settlement of this action.

Kokkomen, 511 U.S.

at 379-80 (Courts retain ancillary jurisdiction to

“function

successfully, that is, to manage its proceedings, vindicate its
authority, and effectuate its decrees.”); Fox v. Consol. Rail
Corp.,

739

F.2d

929,

932

(3d

Cir.

1984)(citing

Pearson

v.

Ecological Science Corp., 522 F.2d 171 (5th Cir.1975), cert.
denied, 425 U.S. 912 (1976))(“It is well settled that a federal
court has the inherent power to enforce and to consider challenges
to settlements entered into in cases originally filed therein.”)
Because there is no question that this court had jurisdiction over
plaintiffs’ original tort claim against the Government, and because

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enforcement of the court order setting forth the terms of the
settlement is ancillary to the jurisdiction appropriately exercised
by the court, I find that this court retains jurisdiction to
enforce the settlement agreement.

See White v. U.S. Dep't of

Interior, 639 F. Supp. 82, 86 (M.D. Pa. 1986) aff'd, 815 F.2d 697
(3d Cir. 1987) (Where dispute is “ancillary to the original action”
resolution of the dispute “is properly within this court's subject
matter jurisdiction.).

See also Wright and Miller 17 Fed. Prac.

& Proc. Juris. 4101 (3d ed.) (Court of Federal Claims “lacks
jurisdiction over suits for breach of settlement agreements when
the agreements arise from disputes that would have been litigated
in other fora.”).
The import of the Government’s argument, and its consequences
if accepted, can hardly be understated.

Because the Government is

arguing that a district court lacks jurisdiction to enforce a
settlement agreement entered into by the Government where the
amount of the settlement exceeds $10,000.00, the result of the
Government’s argument, if adopted, is that even where the Court has
explicitly indicated its intent to retain jurisdiction over the
settlement, and even where the Court has included the terms of the
settlement in an Order, or in the final Order of dismissal, the
Court would still lack jurisdiction to enforce the settlement
because exclusive jurisdiction to enforce such an agreement lies
exclusively with the Court of Federal Claims, and no court can

Page -15-

expand its jurisdiction by Order or consent. It is exactly this
conclusion that the Eleventh Circuit Court of Appeals rejected in
Reed v. United States, where the Court of Appeals held that if such
an argument were accepted:
a
district
court
would
never
retain
jurisdiction to enforce an agreement settling
a claim of over $10,000 involving the
government because, once the action providing
the initial basis of jurisdiction was settled,
any attempt to enforce the settlement would be
deemed a breach of contract claim required to
be brought [in the Court of Federal Claims].
Reed v. United States, 891 F.2d 878, 880 (1990).

Just as the

Eleventh Circuit Court of Appeals found this conclusion to be
untenable, I decline to adopt a rule that would divest a district
court of jurisdiction to enforce a settlement entered into before
it, the terms of which were made an Order of the Court, upon the
issuing of judgment in the case.

I therefore find that the Court

retains jurisdiction to enforce the Settlement Agreement between
the parties.
II.

The Government Is Obligated to Make Payments to the
Plaintiffs as Agreed to in the Settlement Agreement.

The Settlement Agreement entered into by the parties provided
that the United States was “obligated” to make payment of future
periodic payments as set forth in the Agreement.
Agreement at ¶ 3.

Settlement

(“The United States of America shall be

obligated to make payment of certain future periodic payments as
set forth [in the Agreement]”). Paragraph 5 of the Agreement stated

Page -16-

that “The United States of America, will make payment of [the
specified] amounts by purchase of an annuity from Executive Life
Insurance Company of New York . . . .”

In correspondence with the

plaintiffs prior to the filing of this motion, the Government
argued that it had satisfied its obligation under the Agreement by
purchasing the annuity from ELNY, and that it was not responsible
for payments beyond those provided by ELNY.

In opposition to the

plaintiffs’ motion here, the Government has not denied that it is
obligated to make full payment to the plaintiffs.

Rather, it has

taken no position on the merits, and simply asserts that the court
lacks jurisdiction to enforce the Settlement.
As stated above, however, I find that this Court has retained
jurisdiction to enforce the Settlement.

I further find that the

Government is obligated to ensure that full payment is made to the
plaintiffs as promised under the Settlement Agreement. Paragraph 3
of the Agreement states the Government “shall be obligated to make
certain

future

payments”

as

set

forth

in

the

Agreement.

Additionally, Paragraph 7 of the Agreement states that “[t]he
purchase of annuity contracts and lump sum payments as outlined in
[the Agreement] and payments thereunder shall operate as full and
complete discharge and satisfaction of the periodic or other
payments with respect to the United States of America, pro tanto.”
Accordingly, it is not simply the purchase of the annuity that
satisfies the Government’s obligation under the Agreement, but also

Page -17-

the

making

of

“payments

thereunder”

in

accordance

with

the

Agreement.
There is no dispute that the Government complied with its
obligations under the Agreement to pay a lump sum and purchase an
annuity.

If those were the only obligations that the Government

undertook, perhaps the defendant could argue that it has discharged
its duty under the Agreement.

But the plain language of the

Agreement states unequivocally that the Government was not only
obligated to pay a lump sum and purchase an annuity, but also to
ensure that payments were made as set forth in the Agreement.

At

Paragraph 3 of the Agreement the Government agreed that it “shall
be obligated to make certain future payments” as set forth in the
Agreement.

Because ELNY is no longer making full payments as

promised under the Agreement, it is the duty of the Government to
fulfill its obligation under the Agreement by ensuring that the
periodic payments specified in the Agreement are paid in full at
the time they are due. Accordingly, I grant the plaintiffs’ motion
to enforce the Settlement Agreement, and direct the Government to
meet and confer with plaintiffs’ counsel within 15 days of the date
of this Order for the purpose of determining the past and future
amounts owed to the plaintiffs.

I further direct that any past

amounts owed to the plaintiffs be paid within 60 days of the date
of this Order.

Page -18-

CONCLUSION
For the reasons set forth above, I grant plaintiffs’ motion to
enforce the April 29, 1985 Order of this Court setting forth the
terms of settlement in this action. The defendant shall, within 60
days of the date of this order, remit past amounts owed under the
Agreement, and shall ensure all future payments are made in full
when due.
ALL OF THE ABOVE IS SO ORDERED.
S/ Michael A. Telesca
____________________________
Michael A. Telesca
United States District Judge
DATED:

Rochester, New York
March 25, 2014

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