Hutchins v. Choice Recovery, Inc.

Filing 43

OPINION AND ORDER GRANTING in part and DENYING in part 32 MOTION Enforce Settlement Agreement. The trial scheduled to begin 6/16/2015 is VACATED. Status Conference set for 5/15/2015 at 10:00 AM before Magistrate Judge Norah McCann King, unless a dismissal entry is received prior to that date. Signed by Magistrate Judge Norah McCann King on 4/28/2015. (pes)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
JERRY HUTCHINS,
Plaintiff,
vs.

Civil Action 2:14-cv-196
Magistrate Judge King

CHOICE RECOVERY, INC.,
Defendant.
OPINION AND ORDER
This matter is before the Court, with the consent of the parties
pursuant to 28 U.S.C. § 636(c), for consideration of Plaintiff’s
Motion to Enforce Settlement Agreement (“Plaintiff’s Motion”), ECF 32,
and defendant’s Memorandum in Opposition (“Defendant’s Response”), ECF
35.1
I.

Background
This is an action under the Fair Debt Collection Practices Act,

15 U.S.C. § 1692 et seq., in which plaintiff Jerry Hutchins alleges
that defendant violated the Act when it failed to update plaintiff’s
credit report as “disputed” in light of plaintiff’s challenge to the
validity of the debt.

The case was referred to a mediation to be held

on September 12, 2014. Notice of Settlement Conference, ECF 11.
Defendant apparently noticed plaintiff’s deposition to take place on
the same day.

Prior to the Settlement Week mediation and plaintiff’s

deposition, however, the parties entered into settlement negotiations
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Plaintiff was granted an extension of time until April 15, 2015 to file a
reply, Order, ECF 39, but failed to do so. Because Plaintiff’s Reply, ECF
41, which was filed on April 22, 2015 without prior leave of court, was
untimely, it will not be considered.

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in an effort to resolve this and a related case, Jerry Hutchins v.
Choice Recovery, Inc., 2:14-cv-00197 (S.D. Ohio).

Defendant offered

to settle both cases for a sum of money and its counsel advised that
he “need[ed] [his] usual complete release and dismissals with
prejudice.”

Plaintiff’s Motion, Exhibit 1.

Plaintiff accepted the

offer and the parties agreed to the filing of Plaintiff’s Notice of
Settlement on September 12, 2014.

See id. at pp. 3-5, Exhibits 1-4;

Defendant’s Response, pp. 1-2; Plaintiff’s Notice of Settlement, ECF
17.

Plaintiff’s Notice of Settlement indicated that the parties had

reached a settlement, requested a stay of all case deadlines, asked
that the parties and counsel be excused from future court appearances
and filings, and represented that a dismissal entry would be filed
within 30 days.
Defendant represents that, a few days after the parties reached a
settlement, it learned that plaintiff had “fraudulently
misrepresented” Paragraph 16 of the Amended Complaint, ECF 7.
Defendant’s Response, p. 2.

Paragraph 16 alleges that plaintiff “sent

two dispute letters to Defendant, which also requested validation of
the Alleged Debt” on July 17, 2013.

Amended Complaint, ¶ 16.

Defendant sought confirmation of the allegation in Paragraph 16 of the
Amended Complaint and included in its proposed release a requirement
that plaintiff confirm that allegation.

Plaintiff’s Motion, pp. 5-6.

In response, plaintiff took the position that the parties had agreed
to terms of settlement which did not include the confirmation
requested by defendant.

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The Court held a final pretrial conference on March 5, 2015, and
scheduled trial to begin June 16, 2015.

Final Pretrial Order, ECF 34.

Plaintiff’s motion to enforce the settlement agreement was filed on
March 2, 2015.

Defendant does not deny that the parties entered into

a settlement agreement, nor does it challenge the terms of the
agreement.

Rather, defendant argues that the settlement agreement

“should be set aside as unenforceable due to fraud in the inducement.”
Defendant’s Response, p. 4.
II.

Standard
The United States Court of Appeals for the Sixth Circuit has

“held that a district court ‘has the inherent authority and equitable
power to enforce agreements in settlement of litigation before it,
even if that agreement has not been reduced to writing.’”

Moore v.

U.S. Postal Serv., 369 F. App'x 712, 717 (6th Cir. 2010) (quoting
Bowater N. Am. Corp. v. Murray Mach., Inc., 773 F.2d 71, 76–77 (6th
Cir. 1985)).

“Once concluded, a settlement agreement is as binding,

conclusive, and final as if it had been incorporated into a judgment.”
RE/MAX Int'l, Inc. v. Realty One, Inc., 271 F.3d 633, 650 (6th Cir.
2001) (citing Clinton St. Greater Bethlehem Church v. City of Detroit,
484 F.2d 185, 189 (6th Cir. 1973)).

“Summary enforcement of a

settlement agreement for which there is no dispute as to the terms of
the agreement is the only appropriate judicial response, absent proof
of fraud or duress.”

Id. (citing Aro Corp. v. Allied Witan Co., 531

F.2d 1368, 1372 (6th Cir. 1976)).

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A party seeking to set aside a settlement agreement based on
fraud bears the burden of establishing that the agreement was tainted
with fraud.

Henley v. Cuyahoga Cnty. Bd. of Mental Retardation &

Developmental Disabilities, 141 F. App'x 437, 443 (6th Cir. 2005)
(citing Brown v. Cnty. of Genesee, 872 F.2d 169, 174 (6th Cir. 1989)).
“[F]raud in the inducement arises when a party is induced to enter
into an agreement through fraud or misrepresentation.”
Inc. v. Woods, 81 Ohio St. 3d 498, 502 (Ohio 1998).

ABM Farms,

“ʽThe fraud

relates not to the nature or purport of the [contract], but to the
facts inducing its execution . . .’”

Id. (alteration in original)

(quoting Haller v. Borror Corp., 50 Ohio St. 3d 10, 14 (Ohio 1990)).
“In order to prove fraud in the inducement, a plaintiff must prove
that the defendant made a knowing, material misrepresentation with the
intent of inducing the plaintiff's reliance, and that the plaintiff
relied upon that misrepresentation to her detriment.”
Beer v. Griffith, 61 Ohio St. 2d 119, 123 (Ohio 1980)).

Id. (citing
See also Med.

Billing, Inc. v. Med. Mgmt. Sciences, Inc., 212 F.3d 332, 338 (6th
Cir. 2000) (indicating that, under Ohio law, the elements of fraud in
the inducement are the same as the elements generally required for
fraud).

See also Williams v. Aetna Fin. Co., 83 Ohio St. 3d 464, 475

(Ohio 1998) (“Fraud is (a) a representation or, where there is a duty
to disclose, concealment of a fact, (b) which is material to the
transaction at hand, (c) made falsely, with knowledge of its falsity,
or with such utter disregard and recklessness as to whether it is true
or false that knowledge may be inferred, (d) with the intent of

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misleading another into relying upon it, (e) justifiable reliance upon
the representation or concealment, and (f) a resulting injury
proximately caused by the reliance.”) (internal quotations omitted)).
III. Discussion
Defendant argues that it was fraudulently induced to settle this
action by plaintiff’s knowingly false allegation in the Amended
Defendant’s Response, p. 6.

Complaint.

Defendant represents that, a

few days after the parties had reached settlement, it learned through
depositions and discovery obtained in similar cases filed by the same
counsel on behalf of different plaintiffs that plaintiff “fraudulently
misrepresented” Paragraph 16 in the Amended Complaint.
Response, pp. 2-4.

Defendant’s

As noted supra, Paragraph 16 alleges that

plaintiff “sent two dispute letters to Defendant, which also requested
validation of the Alleged Debt” on July 17, 2013.
¶ 16.

Amended Complaint,

The allegation is fraudulent, defendant argues, because it was

actually an employee of a credit consulting agency hired by plaintiff
who sent the dispute letter, not plaintiff.
pp. 1-6.

See Defendant’s Response,

Defendant argues that the “misrepresentation is material

because it is the heart of Plaintiff’s Complaint and Amended
Complaint.”

Id. at p. 6.

Defendant’s arguments are not well taken.

Defendant contends that it was induced by a false allegation in
Paragraph 16 of the Amended Complaint, which was filed on March 4,
2014, to enter into a settlement agreement six months later.
According to defendant, the misrepresentation was “material because it
is the heart of Plaintiff’s Complaint and Amended Complaint.”

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Defendant’s Response, p. 6.

It is significant, however, that

defendant denied the allegation made in Paragraph 16 of the Amended
Complaint. Answer, ECF 8. Moreover, although defendant had more than
five months to discover the truth or falsity of that allegation, see
Preliminary Pretrial Order, ECF 10, defendant chose not to pursue that
discovery.

Instead, defendant opted to settle the case before even

deposing plaintiff.

Indeed, plaintiff represents, and defendant does

not contest, that defendant “never inquired” about whether it was
plaintiff who signed and sent the two dispute letters that are
referred to in the Amended Complaint until after the parties had
agreed to terms of settlement.

See Plaintiff’s Motion, p. 6.

Under

these circumstances, defendant has failed to establish that any
misrepresentation contained in Paragraph 16 of the Amended Complaint –
if indeed there was a misrepresentation - was material or that
defendant was justified in relying on the allegation when it chose to
settle this case.

Moreover, defendant has offered no evidence that it

actually relied on the representation contained in Paragraph 16 of the
Amended Complaint when it chose to settle this matter.

Defendant has

therefore failed to establish that plaintiff fraudulently induced it
to enter into the settlement agreement, and plaintiff is therefore
entitled to enforcement of the settlement agreement.
Plaintiff’s Motion also seeks sanctions for defendant’s “refusal
to comply with the terms of the agreement.”

Plaintiff argues that

defendant has without justification in refusing to comply with the
terms of the settlement agreement for more than five months, despite

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the parties’ agreement “that payment would be made within a reasonable
time and in a reasonable manner.”

Plaintiff’s Motion, p. 9.

Plaintiff seeks “sanctions of $250 per day since September 12, 2014
and until the settlement sum is paid.”

Id. at pp. 9-10.

Plaintiff

also seeks $3,750 in attorneys’ fees for work performed since
September 12, 2014, including the filing of Plaintiff’s Motion.

Id.

at p. 10.
Plaintiff’s Motion does not specify a basis for an award of
sanctions. Rule 11 of the Federal Rules of Civil Procedure confers on
a district court the discretion to award sanctions when a party files
pleadings, motions, or papers for an improper purpose, or which are
not warranted by existing law or a nonfrivolous extension of the law,
or when the allegations and factual contentions made in such filings
lack evidentiary support.

See Fed. R. Civ. P. 11(c).

Rule 11

sanctions are unavailable here, because plaintiff has not established
his compliance with the rule’s safe harbor requirements.

See Fed. R.

Civ. P. 11(c)(2); Ridder v. City of Springfield, 109 F.3d 288, 296
(6th Cir. 1997).
A court is also vested with the inherent authority to sanction
misconduct and to assess attorneys’ fees “when a party has acted in
bad faith, vexatiously, wantonly, or for oppressive reasons, or when
the conduct is tantamount to bad faith.”

Metz v. Unizan Bank, 655

F.3d 485, 489 (6th Cir. 2011) (internal quotations and citations
omitted).

See also First Bank of Marietta v. Hartford Underwriters

Ins. Co., 307 F.3d 501, 517 (6th Cir. 2002) (“A court may impose

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sanctions pursuant to its inherent powers only when it finds the
action in question was taken in bad faith.”) (internal quotations
omitted)).

In the case presently before the Court, there is no

indication that defendant acted in bad faith when it challenged the
validity of the settlement agreement.

Indeed, plaintiff has not even

argued that plaintiff acted in bad faith, vexatiously, wantonly, or
for oppressive reasons.
Plaintiff bases his request for sanctions merely on the lapse of
time since the parties agreed to settle this case.

However, delay

alone is not equivalent to a finding of bad faith. This is especially
so in light of the fact that plaintiff waited months after the dispute
arose, see Order, ECF 21, and until three days prior to the final
pretrial conference to file his motion to enforce the settlement
agreement.

Under these circumstances, the Court concludes that an

award of sanctions would be unjust.
WHEREUPON Plaintiff’s Motion to Enforce Settlement Agreement, ECF
32, is GRANTED in part and DENIED in part.

The Court concludes that

the parties’ settlement agreement is enforceable but that plaintiff’s
request for an award of sanctions is without merit.
The trial scheduled to begin June 16, 2015, is VACATED.
A status conference will be held on May 15, 2015 at 10:00 a.m.,
unless the dismissal entry is received prior to that date.

April 28, 2015

s/Norah McCann King_______
Norah McCann King
United States Magistrate Judge

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