Carty et al v. Highland Capital Management LP
Filing
82
Memorandum Opinion and Order denying 76 Chen's Motion to Enforce Mediation Settlement Agreement, granting in part and denying in part 77 Highland Capital's Motion for Sanctions and to Enforce Settlement Agreement. (Ordered by Chief Judge Sidney A Fitzwater on 11/27/2012) (aaa)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
ROGER CHEN,
Plaintiff,
VS.
HIGHLAND CAPITAL
MANAGEMENT, L.P.,
Defendant.
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§ Civil Action No. 3:10-CV-1039-D
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MEMORANDUM OPINION
AND ORDER
Plaintiff Roger Chen (“Chen”) brought this action against defendant Highland Capital
Management, L.P. (“Highland Capital”) seeking to recover under Title VII of the Civil
Rights Act of 1964, 42 U.S.C. § 2000e et seq., and 42 U.S.C. § 1981. After the parties
settled the case through mediation, a dispute arose concerning the terms of the settlement.1
Chen moves the court to enforce what he contends is the settlement agreement reached
during mediation. Highland Capital moves to enforce the version of the settlement
agreement that it maintains was agreed to during the process of drafting the formal settlement
document, and it also moves for sanctions. For the reasons that follow, the court denies
Chen’s motion to enforce, grants Highland Capital’s motion to enforce, and denies Highland
1
Chen and Highland Capital both acknowledge that the case settled. See P. Mot. 1
(“This case was settled in mediation[.]”); D. Mot. 1 (“[Highland Capital] and [Chen] reached
settlement in this matter at mediation[.]”).
Capital’s motion for sanctions.2
I
Chen sued Highland Capital to recover for alleged workplace discrimination. The
parties settled the suit during mediation. The written settlement agreement signed on June
22, 2012 (the “June 22, 2012 Settlement Agreement”) included a provision in which Chen
and Highland Capital agreed that “[t]he settlement terms shall be memor[i]alized in a more
comprehensive set of settlement documents to be drafted by Defendant’s counsel.” D. App.
4. In accordance with this clause, Highland Capital’s counsel drafted a “Confidential
Release and Settlement Agreement” and emailed it to Chen’s counsel for review. Following
communications about certain provisions of the draft, Highland Capital’s counsel, Cristina
Torres, Esquire (“Torres”), prepared a revised settlement agreement (“CRSA”), see D. App.
57-74,3 and emailed it to Chen’s counsel, Robert E. Goodman, Jr., Esquire (“Goodman”), on
July 25, 2012, at 11:09 a.m. In her email, Torres stated that she had “attached the revised
settlement agreement (clean and redline showing the changes to the last draft). I trust this
2
Due to confidentiality provisions in the settlement agreements, Highland Capital filed
under seal its appendix in support of its motion for sanctions and to enforce settlement
agreement and response to Chen’s motion to enforce mediation settlement agreement. Chen
in turn filed under seal his appendix in response to Highland Capital’s motion for sanctions,
response to Highland Capital’s motion to enforce unsigned further settlement agreement, and
reply to Highland Capital’s response to Chen’s motion to enforce mediated settlement
agreement. The court concludes that this memorandum opinion and order does not disclose
information that should be maintained under seal, and it is therefore being filed as a publiclyavailable document.
3
The CRSA is found at D. App. 57-65. The redlined version showing the changes
made to the prior draft is found at id. 66-74.
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resolves the matter.” Id. at 55. Within 90 minutes, at 12:27 p.m., Goodman responded to
Torres by email: “It is fine. We’ll get it signed. Thank you for bending toward justice.
Given lapse of time, do you have the checks?” Id. at 77.
Chen refused to sign the CRSA. Theodore C. Anderson, Esquire, another attorney
representing Chen, emailed Torres asking “Why don’t we just go with the mediated
Settlement Agreement? I would exchange Motion to Dismiss with prejudice for a check to
hold in trust pending dismissal. Then we would just operate under the mediated Settlement
Agreement. Is that doable?” Id. at 81. Torres responded that Highland Capital could not
agree to this and that it would “be moving forward with a motion to enforce the settlement
agreement that [Goodman] already agreed to.” Id.
Within a few days of this email exchange, Chen filed his motion to enforce the June
22, 2012 Settlement Agreement. Highland Capital in turn filed a motion for sanctions and
to enforce the CRSA.
II
The court turns first to Chen’s motion to enforce the June 22, 2012 Settlement
Agreement and Highland Capital’s motion to enforce the CRSA.
A
Federal law determines whether a settlement agreement is valid “where [as here] the
substantive rights and liabilities of the parties derive from federal law.” Mid-S. Towing Co.
v. Har-Win, Inc., 733 F.2d 386, 389 (5th Cir. 1984). Under federal law, settlement
agreements are contracts. Guidry v. Halliburton Geophysical Servs., Inc., 976 F.2d 938, 940
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(5th Cir. 1992). A binding settlement “agreement exists where there is a manifestation of
mutual assent, usually in the form of an offer and an acceptance.” Lopez v. Kempthorne,
2010 WL 4639046, at *4 (S.D. Tex. Nov. 5, 2010) (citing Turner Marine Fleeting, Inc. v.
Quality Fab & Mech., Inc., 2002 WL 31819199, at *4 (E.D. La. Dec. 13, 2002)). “A district
court may exercise its discretion to enforce a settlement agreement where one party to a suit
has initially agreed to a settlement but later refused to execute a formal agreement reciting
the terms of the settlement.” Weaver v. World Fin. Corp. of Tex., 2010 WL 1904561, at *2
(N.D. Tex. May 12, 2010) (Fish, J.) (citing Daftary v. Metro. Life Ins. Co., 136 F.3d 137,
1998 WL 30059, at *1 (5th Cir. Jan. 12, 1998) (per curiam) (“Daftary II”)). “Where a party
has knowingly and voluntarily agreed to settle his claims and no change of circumstances
warrants repudiation of the agreement, the courts will enforce the settlement agreement.” Id.
(quoting Bell v. Schexnayder, 36 F.3d 447, 449 (5th Cir. 1994)).
B
Chen’s counsel (Goodman) created a binding agreement when he wrote in response
to Torres’ email transmitting the CRSA: “It is fine. We’ll get it signed. Thank you for
bending toward justice. Given lapse of time, do you have the checks?” D. App. 77. Chen
argues that Goodman’s response was insufficient to manifest assent to the CRSA, especially
given that the purpose of the negotiations was to obtain a signed agreement. But “[f]ederal
law does not require settlement agreements to be reduced to writing.” E.E.O.C. v. Phillip
Servs. Corp., 635 F.3d 164, 167 (5th Cir. 2011) (citing Fulgence v. J. Ray McDermott & Co.,
662 F.2d 1207, 1209 (5th Cir. 1981) (per curiam)). Acceptance is possible through any
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manifestation of assent that occurs in any reasonable manner. See Restatement (Second) of
Contracts § 50, cmt. a (1981).4 To be sure, the parties intended in the June 22, 2012
Settlement Agreement that the terms be memorialized in a more comprehensive set of
settlement documents to be drafted by Highland Capital’s counsel. Highland Capital’s
counsel did draft those documents and made necessary revisions. Goodman then bound
Chen to the terms of the revised CRSA that Torres prepared and transmitted on July 25, 2012
when he stated in response to her transmittal, and without qualification, “It is fine. We’ll get
it signed.” D. App. 77.
Chen maintains that he did not assent, and he attempts to distinguish Daftary II,5 an
unpublished opinion in which the Fifth Circuit affirmed this court’s decision enforcing a
settlement agreement that the parties agreed to orally, but that the plaintiff later refused to
sign. See Daftary II, 1998 WL 30059, at *1, aff’g Daftary v. Metro. Life Ins. Co., No. 3:94CV-1338-D (N.D. Tex. May 22, 1997) (Fitzwater, J.) (“Daftary I”).6 Chen argues that the
settlement agreement in Daftary II was not a “settlement agreement as such,” “but only an
agreement to arbitrate such claims on a high-low basis.” P. Resp. 7. The court disagrees that
4
“The Restatements embody core principles of common law.” Lopez, 2010 WL
4639046, at *4 (citing Deville v. United States ex rel. Dep’t of Veterans Affairs, 202 Fed.
Appx. 761, 763 n.3 (5th Cir. 2006) (per curiam)).
5
Chen also attempts to distinguish other cases on which Highland Capital relies, but
the court will focus on Daftary II because it addresses and affirms a decision rendered by the
undersigned.
6
A copy of this court’s order in Daftary I is attached as an exhibit to this memorandum
opinion and order.
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Daftary II is distinguishable on this basis.
In Daftary II the panel noted that the plaintiff (Daftary) sued the defendant
(Metropolitan Life) alleging national origin discrimination and retaliation. Daftary II, 1998
WL 30059, at *1. The parties orally agreed to settle the lawsuit, the agreement was reduced
to writing after negotiation between counsel and consultation with their respective clients,
but Daftary refused to sign the agreement. This court granted Metropolitan Life’s motion
to enforce the settlement agreement, finding that the terms stated in the final draft of the
settlement agreement were the terms on which Daftary had authorized his counsel to settle
the case. On appeal, the Fifth Circuit affirmed for the reasons stated by this court. Id. (“For
the reasons stated by the district court in its Order entered May 22, 1997, the Judgment
entered of even date therewith is AFFIRMED.” (bold font omitted)). This court’s order in
Daftary I clearly reflects the finding that Daftary had entered into a binding agreement to
settle his lawsuit. Daftary I, No. 3:94-CV-1338-D, order at 2 (“The issue, instead, is whether
Daftary knowingly and voluntarily consented to the settlement agreement. The court finds
that he did.”). Regardless of the nature of the settlement, the point is that, in Daftary I, this
court held that an oral agreement to settle was binding, even though the plaintiff refused to
sign the written agreement after it was reduced to writing, and the Fifth Circuit affirmed that
decision in Daftary II.
Chen also maintains that, in subsequent litigation involving the Daftary I parties, this
court denied the defendant’s motion for summary judgment seeking to enforce an unsigned
settlement agreement entered into by the plaintiff’s attorney during mediation. See Metro.
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Life Ins. Co. v. Daftary, 2004 WL 1960101, *4 (N.D. Tex. Sept. 3, 2004) (Fitzwater, J.)
(“Daftary III”). Chen overlooks, however, that this court in Daftary III denied summary
judgment because the plaintiff had submitted an affidavit calling into question his counsel’s
authority to settle on the terms in question. Id. This was sufficient at the summary judgment
stage to create a fact issue and to overcome the “rule that an attorney of record is presumed
to have authority to compromise and settle litigation of his client.” Id. (quoting Mid-S.
Towing, 733 F.2d at 390 (citations and emphasis omitted)). Unlike Daftary III, Chen neither
argues nor has he produced evidence that his counsel (Goodman) lacked authority to settle
this case.
Chen contends that Murphy v. YRC, Inc., 2011 WL 3902760 (W.D. Tex. Sept. 6,
2011), is more instructive than is Daftary II because the Murphy court enforced a mediated
settlement agreement when the plaintiff refused to sign a later, formal agreement, even
though the plaintiff’s attorney had previously agreed to the terms of the formal agreement.
The Murphy court, however, did not address whether the parties formed an agreement
concerning the later, formal agreement. This may be so because the defendant’s motion
sought to enforce the mediated settlement agreement, not the formal settlement agreement.
Here, by contrast, Highland Capital seeks to enforce the CRSA and argues that the parties
consummated that agreement via the email between Torres and Goodman. Thus, unlike in
Murphy, the question whether Chen (through Goodman) assented to the revised CRSA
transmitted on July 25, 2012 is squarely presented, and, for the reasons discussed above, the
court finds that he did.
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Accordingly, the court grants Highland Capital’s August 27, 2012 motion to enforce
settlement agreement and denies Chen’s August 10, 2012 motion to enforce mediation
settlement agreement. The court by judgment filed today orders that the parties perform the
CRSA that Torres sent to Goodman by email on July 25, 2012, set out at D. App. 57-65.
III
Highland Capital also moves for sanctions of two types: first, striking Chen’s motion
to enforce, on the ground that Chen violated N.D. Tex. Civ. R. 7.1 and Fed. R. Civ. P.
37(a)(1) by failing to confer with Highland Capital before filing his motion, and instead
acting in bad faith by requesting a draft of Highland Capital’s motion to enforce and then
preemptively filing his own motion; and, second, awarding Highland Capital its reasonable
and necessary attorney’s fees and costs incurred in enforcing the CRSA, opposing Chen’s
motion, and seeking sanctions and any other relief the court deems proper. The court denies
the motion.
First, Rule 37(a)(1) is inapposite because it imposes a conference requirement when
a party moves for an order compelling disclosure or discovery. And although N.D. Tex. Civ.
R. 7.1(a) imposes a conference requirement that should not be disregarded, it does not
contain a sanction provision, and Highland Capital does not identify another provision of the
local civil rules that would support the entry of sanctions for violating Rule 7.1(a).
Second, Highland Capital has cited no basis for recovering reasonable and necessary
attorney’s fees and costs incurred in enforcing the CRSA, opposing Chen’s motion, and
seeking sanctions and any other relief the court deems proper. Absent a clear indication of
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the authority on which Highland Capital relies, “the court cannot apply the proper standards
to assess whether it is entitled to attorney’s fees.” Lexington Ins. Co. v. Unity/WaterfordFair Oaks, Ltd., 2001 WL 694582, at *3 (N.D. Tex. June 14, 2001) (Fitzwater, J.) (denying
motion for sanctions including “reasonable and necessary attorney’s fees incurred in
preparing and filing the motion to enforce settlement”). And if Highland Capital is
attempting to rely on this court’s inherent power, “the standard for the imposition of
sanctions using the court’s inherent powers is extremely high.” Pillar Panama, S.A. v.
DeLape, 326 Fed. Appx. 740, 744 (5th Cir. 2009) (per curiam) (quoting Goldin v. Bartholow,
166 F.3d 710, 722 (5th Cir. 1999)); see also Johnson v. Hankook Tire Am. Corp., 449 Fed.
Appx. 329, 332 (5th Cir. 2011) (per curiam) (“When inherent powers are invoked . . . they
must be exercised with restraint and discretion.” (internal quotation marks and citations
omitted)). While the court agrees that the conference requirement of Rule 7.1(a) is
important, it cannot say that Chen should be sanctioned under the circumstances presented
here.
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*
*
*
For the reasons explained, the court denies Chen’s August 10, 2012 motion to enforce
mediation settlement agreement, grants Highland Capital’s August 27, 2012 motion to
enforce the settlement agreement, and denies Highland Capital’s motion for sanctions. The
court has filed a judgment today enforcing the parties’ compliance with the CRSA.
SO ORDERED.
November 27, 2012.
_________________________________
SIDNEY A. FITZWATER
CHIEF JUDGE
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EXHIBIT
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