Atmosphere Hospitality Management, LLC v. Shiba Investments, Inc. et al

Filing 392

ORDER granting 385 Motion to Enforce ; denying 387 Motion to Amend/Correct. Signed by U.S. District Judge Karen E. Schreier on 3/21/19. (JLS)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
ATMOSPHERE HOSPITALITY
MANAGEMENT, LLC,

5:13-CV-05040-KES

Plaintiff,
vs.
SHIBA INVESTMENTS, INC., KARIM
MERALI, and ZELJKA CURTULLO,

ORDER GRANTING SECOND
MOTION TO ENFORCE
SETTLEMENT AGREEMENT AND
DENYING MOTION TO AMEND
COMPLAINT

Defendants.
Defendants Shiba Investments, Inc. and Karim Merali move to enforce
the settlement agreement for the second time. Docket 385. Plaintiff,
Atmosphere Hospitality Management, LLC, opposes defendants’ motion. Docket
389. Atmosphere also moves to amend/supplement the amended complaint to
add a claim for breach of the settlement agreement. Docket 387. Defendants
oppose Atmosphere’s motion to amend. Docket 390. For the reasons that
follow, the court grants defendants’ motion to enforce the settlement agreement
and denies Atmosphere’s motion to amend or supplement the complaint.
BACKGROUND
The court will briefly summarize the facts relevant to the pending
motions, but a more thorough factual background can be found in previous
orders. See Docket 367 (denying defendants’ first motion to enforce the
settlement agreement and denying defendants’ motion to dismiss with
prejudice); Docket 384 (granting Atmosphere’s motion for attorney fees in part
and denying in part).

After the parties entered into a settlement agreement in this matter, the
court entered an order and judgment of dismissal without prejudice on
September 27, 2016. Docket 329. The court retained jurisdiction until the
settlement is completed and the parties file a joint motion for dismissal with
prejudice. Id. On August 30, 2017, defendants filed a motion to reopen the case
and enforce the settlement agreement (Docket 333) and a motion to dismiss
with prejudice (Docket 334). Atmosphere did not oppose reopening the case
and enforcing the agreement but did oppose dismissal with prejudice. Docket
344. Following an evidentiary hearing, the court denied defendants’ motion to
enforce the settlement agreement and motion to dismiss, finding that
defendants had not fully complied with the settlement agreement. Docket 367.
Atmosphere then moved for an award of attorney fees and costs for
compelling enforcement of the terms of the settlement agreement. Docket 368.
Based on the settlement agreement language, the court concluded that
Atmosphere was entitled to $19,792 in attorney fees but no costs. Docket 384.
DISCUSSION
I.

Second Motion to Enforce the Settlement Agreement
Defendants move to enforce the settlement agreement for a second time,

arguing that the court should dismiss the case with prejudice because the
terms of the settlement agreement have been fulfilled. Docket 385. Specifically,
defendants state that following the evidentiary hearing on February 8, 2018,
and March 8, 2018, defendants retained Blue Ocean Global Technology to
remove all references and links to Adoba hotels from defendants’ website and
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social media. Id. at 2. Blue Ocean is an Online Reputation Management
company with expertise in “build[ing] a positive reputation for [its] clients
around select key words and mitigat[ing] a negative online reputation.” Docket
371-1 at 11. Defendants attached the Blue Ocean reports to their
memorandum in opposition to Atmosphere’s motion for attorney fees. Dockets
379-1, 379-2, 379-3.
In its memorandum in opposition to defendants’ second motion to
enforce the settlement agreement, Atmosphere argues that dismissing this
action is premature because defendants have not yet paid the attorney fees
awarded by this court on July 30, 2018. Docket 389 at 2-3. Atmosphere also
argues that the court should retain jurisdiction over this matter because it has
filed a motion to amend the amended complaint to add two new causes of
action for defendants’ breach of the settlement agreement. Id. at 3-4.
“District courts do not have inherent power, that is, automatic ancillary
jurisdiction,” to enforce settlement agreements. Miener v. Mo. Dep’t of Mental
Health, 62 F.3d 1126, 1127 (8th Cir. 1995) (citing Kokkonen v. Guardian Life
Ins. Co. of Am., 511 U.S. 375 (1994)). Ancillary jurisdiction to enforce a
settlement agreement exists when “the parties’ obligation to comply with the
terms of the settlement agreement [is] made part of the order of dismissal . . .
such as a provision ‘retaining jurisdiction’ over the settlement agreement”
because breaching the agreement violates the court’s order of dismissal or
judgment. Kokkonen, 511 U.S. at 381.

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Because the court retained jurisdiction until the settlement is completed,
the court has jurisdiction to enforce the settlement agreement here. See
Kokkonen, 511 U.S. at 381. The settlement agreement term at issue states that
defendants “will remove from the Internet, including their web site and social
media, and all references and links within their control to their association,
past or present, with Adoba hotels.” Docket 346 at 3. Atmosphere has neither
refuted defendants’ argument that all terms of the settlement agreement have
been fulfilled nor addressed whether the efforts by Blue Ocean Global
Technology are sufficient to remove the Adoba references from defendants’
website and social media.
A district court “has inherent power to enforce a settlement agreement as
a matter of law when the terms are unambiguous.” Barry v. Barry, 172 F.3d
1011, 1013 (8th Cir. 1999) (citation omitted). The Eighth Circuit has held that
an evidentiary hearing “need be held only if there are substantial questions of
fact that are not already a matter of record.” Id. (citing Stewart v. M.D.F., Inc.,
83 F.3d 247, 251 (8th Cir. 1996)). It is well established that settlement
agreements are governed by contract law principles. See id.
The court first concludes that an evidentiary hearing is unnecessary
because the parties previously held a two-day evidentiary hearing, defendants
have attached the extensive Blue Ocean Global Technology report showing how
defendants have removed references to Adoba hotels since that evidentiary
hearing, and Atmosphere has not disputed any factual issues arising from the

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Blue Ocean report. Thus, there is not a substantial factual dispute over the
settlement term at issue here.
“The power of a trial court to enter a judgment enforcing a settlement
agreement has its basis in the policy favoring the settlement of disputes and
the avoidance of costly and time-consuming litigation.” Bergstrom v. Sears,
Roebuck & Co., 532 F. Supp. 923, 934 (D. Minn. 1982) (internal quotation
omitted); see also McClaskey v. La Plata R-II Sch. Dist., 2006 WL 3803686, at *8
(E.D. Mo. Nov. 7, 2006) (“Settlement agreements are favored by the courts.”).
The court finds that enforcement of the settlement agreement is proper. The
court has reviewed the Blue Ocean Global Technology report and finds that it
satisfies the settlement agreement term still at issue. The Blue Ocean report
concludes “that all controllable references from the internet, including website
links from the past and present, with ‘Adoba’ have been removed at the
direction of Mr. Karim Merali.” Docket 379-1 at 5. And Atmosphere has not
raised any issues with Blue Ocean’s work or pointed to any other issues related
to fulfillment of other terms in the settlement agreement. Thus, the court finds
that defendants have fully complied with the terms of the settlement
agreement.
II.

Motion to Amend/Supplement the Amended Complaint
Atmosphere moves to file a second amended complaint in order to add

two new causes of action: a breach of contract claim based on defendants’
breach of the settlement agreement and a Lanham Act claim. Dockets 387,
387-1. Defendants oppose amendment, arguing that authority cited by
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Atmosphere only supports pretrial amendment, the parties entered into a
contractually binding settlement agreement, and the court only retained
jurisdiction to enforce the settlement agreement. Docket 390.
Under Federal Rule of Civil Procedure 15(a)(2), “a party may amend its
pleading only with the opposing party’s written consent or the court’s leave.”
Fed. R. Civ. P. 15(a)(2). Leave to amend should freely be given when justice
requires it. Id. A district court may deny leave to amend when there are
compelling reasons to do so, “such as undue delay, bad faith, or dilatory
motive, repeated failure to cure deficiencies by amendments previously allowed,
undue prejudice to the non-moving party, or futility of the amendment.”
Hammer v. City of Osage Beach, 318 F.3d 832, 844 (8th Cir. 2003) (internal
quotation omitted). “[W]hen late tendered amendments involve new theories of
recovery and impose additional discovery requirements, courts are less likely to
find an abuse of discretion due to the prejudice involved.” Bell v. Allstate Life
Ins. Co., 160 F.3d 452, 454 (8th Cir. 1998).
Most post-judgment motions for leave to amend complaints arise in the
context of Federal Rules of Civil Procedure 15, Rule 59, and Rule 60. See
United States v. Mask of Ka-Nefer-Nefer, 752 F.3d 737, 743 (8th Cir. 2014)
(stating that post-dismissal “[l]eave to amend will be granted if it is consistent
with the stringent standards governing the grant of Rule 59(e) and Rule 60(b)
relief.”); see also Fed. R. Civ. P. 60(b) (providing that a court “may relieve a
party . . . from a final judgment, order, or proceeding” for various reasons listed
in the rule). But see United States ex rel. Roop v. Hypoguard USA, Inc., 559 F.3d
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818, 825 (8th Cir. 2009) (“[A] post-judgment motion for leave to assert an
entirely new claim is untimely.”).
Federal courts are courts of limited jurisdiction and thus may only hear
cases over which they have subject matter jurisdiction. Kokkonen, 511 U.S. at
377. The court entered a judgment of dismissal without prejudice on
September 27, 2016. Docket 330. Because the court only “retain[ed]
jurisdiction over this matter until the settlement is completed and a joint
motion for dismissal with prejudice is filed,” the court’s remaining jurisdiction
is limited to enforcement of the settlement agreement.
Atmosphere cites to Foman v. Davis, 371 U.S. 178 (1962) to support its
position that there is legal authority to support granting leave to amend a
complaint after judgment is entered. Dockets 388, 391. In Foman, the Supreme
Court stated:
If the underlying facts or circumstances relied upon by a plaintiff
may be a proper subject of relief, he ought to be afforded an
opportunity to test his claim on the merits. In the absence of any
apparent or declared reason . . . the leave sought should, as the
rules require, be ‘freely given.’ Of course, the grant or denial of an
opportunity to amend is within the discretion of the District Court,
but outright refusal to grant the leave without any justifying reason
appearing for the denial is not an exercise of discretion; it is merely
abuse of that discretion and inconsistent with the spirit of the
Federal Rules.
Foman, 371 U.S. at 182.
Foman involved a post-judgment decision regarding leave to amend after
the district court granted a motion to dismiss for failure to state a claim upon
which relief could be granted—not a dismissal based on the parties’ settlement

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agreement that subsequently limited the court’s jurisdiction over the case. Id.
at 179. Foman also pivoted on how the lower courts erred in denying the
plaintiff’s motion to vacate a judgment in order to file the amended complaint.
Id. at 182. Here, Atmosphere has not moved to vacate the court’s 2016
judgment that was based on the parties’ settlement agreement. See Dockets
329, 330. Thus, Foman does not support amendment here. Atmosphere also
cites Eighth Circuit authority allowing post-judgment amendment and separate
Eighth Circuit authority discussing a court’s jurisdiction to enforce a
settlement agreement when the order of dismissal retains such jurisdiction.
See Docket 391 (citing Wilburn v. Pepsi-Cola Bottling Co., 492 F.2d 1288 (8th
Cir. 1974); Miener, 62 F.3d 1126). But Atmosphere has not cited authority
holding that a federal court’s limited jurisdiction over enforcement of a
settlement agreement includes allowing a party to amend its complaint to add
new causes of action. Thus, despite the liberal amendment standard embodied
in the rules, the court will not grant Atmosphere leave to amend its complaint
to add two new causes of action.
CONCLUSION
Defendants hired Blue Ocean to remove all controllable references to the
Adoba hotels from defendants’ website and social media as required by the
parties’ settlement agreement. Atmosphere has not raised any factual issues
regarding the Blue Ocean report. Based on the Blue Ocean report, the court
concludes that defendants are in compliance with the term at issue in the
settlement agreement. Additionally, the court concludes that its limited
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jurisdiction to enforce the settlement agreement does not include jurisdiction to
allow Atmosphere to amend its complaint in order to add two new causes of
action based on a breach of the settlement agreement. Thus, it is
ORDERED that defendants’ second motion to enforce the settlement
agreement (Docket 385) is granted.
IT IS FURTHER ORDERED that Atmosphere’s motion to amend the
complaint (Docket 387) is denied.
Dated March 21, 2019.
BY THE COURT:
/s/ Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE

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