Fields v. SBC Communications, Inc. Disability Income Plan
ORDER GRANTING 29 Motion to Enforce Settlement. Signed by Judge Andrew W. Austin. (kkc)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SBC COMMUNICATIONS, INC.
DISABILITY INCOME PLAN,
Before the Court is Defendant’s Motion to Enforce Settlement Agreement, filed on March
7, 2014. (Dkt. # 29). Although Plaintiff did not file a response to the Motion, he did file a Status
Report with the Court on April 9, 2014 (Dkt. # 37).
Plaintiff Douglas Fields (“Plaintiff”) is a former employee of AT&T Inc. f/k/a SBC
Communications, Inc. (“Defendant”). As part of his employment contract, Plaintiff was eligible for
benefits under the Defendant’s Disability Income Plan (“DIP”). Plaintiff alleges that on September
7, 2004, he became “totally disabled” under the meaning specified in the DIP. Thereafter, Plaintiff
applied for both short-term and long-term disability benefits under the DIP. His short-term benefits
were paid through September 2005, and his long-term benefits were paid through October 2006.
Plaintiff claims that Defendant arbitrarily terminated his benefits on November 29, 2006. After
timely filing and exhausting his administrative remedies, Plaintiff states that his final denial for
benefits was dated November 16, 2007. Plaintiff subsequently qualified for Social Security
Disability benefits. According to Plaintiff, Defendant informed him that he had been overpaid
benefits and requested that he return some of the money paid to him under the DIP.
On November 29, 2011, Plaintiff filed the above-styled lawsuit against Defendant under §502
of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. 1132, and the Declaratory
Judgment Act, 29 U.S.C. § 2201. Plaintiff seeks to recover long term disability benefits and to
clarify and enforce his rights under the DIP. Plaintiff also alleges that Defendant breached its
fiduciary duties under ERISA by failing to provide an independent review of the claims decisions
made with respect to his benefits and by discontinuing his benefits under the DIP.
On April 30, 2013, the District Court reassigned this case to the undersigned after the parties
consented, pursuant to 28 U.S.C. § 636(c) Rule 73. See Dkt. No. 20. On November 18, 2013, the
Parties filed an agreed motion for extension of deadlines because they were in the middle of
negotiating a settlement of the case, which the Court granted. See Dkt. Nos. 24, 25. On January 9,
2014, the Parties filed a Notice of Anticipated Settlement and Agreement to Stay Pending Deadlines.
Dkt. No. 26. On February 14, 2014, the Parties filed a Joint Status Report with the Court stating
again that “the Parties have reached a tentative agreement to resolve all claims and causes of action
between them, subject to the execution of mutually agreeable settlement documents.” Dkt. No. 28.1
On March 7, 2014, Defendant filed a Motion to Enforce Settlement Agreement (Dkt. No. 29)
requesting the Court to enter an order enforcing the settlement agreement. At the hearing on the
motion, Defendant announced that it would be willing to consider Plaintiff’s request that a portion
of Plaintiff’s share of the settlement be paid into an annuity in an effort to minimize Plaintiff’s tax
burden. Accordingly, the Court agreed to give the Parties 10 days to consider and resolve Plaintiff’s
The Court notes that the Plaintiff failed to serve Defendant for approximately seven months
after filing this lawsuit. See Show Cause Order (Dkt. No. 2). Thereafter, the parties continuously
informed both the district judge and the undersigned that they were in engaged in settlement
discussions, and thus the case remained effectively dormant for months.
annuity proposal. On April 9, 2014, Defendant filed its Status Report with the Court informing the
Court that “Plaintiff’s proposal to reduce tax consequences is not achievable in a disability income
settlement,” and thus “Defendant insists that Plaintiff abide by the agreement undeniably reached
by the parties.” Defendant’s Status Report at p. 2. Accordingly, Defendant has renewed its Motion
to Enforce and the Court will now address that motion.
The Parties’ Settlement Discussions
As noted above, the Parties have engaged in extensive settlement negotiations in this case.
During settlement negotiations on January 7, 2014, Plaintiff’s counsel Stephen Nagle sent Rachel
Morgan, counsel for Defendant, the following email: “My marching orders are that I can accept an
offer of $200G, but I cannot make that offer, and I am to start writing [an MSJ brief] in the morning
if we cannot settle.” Exh. A(1) to Defendant’s Motion.
In response, on January 8, 2014, Ms. Morgan responded in an email as follows: “ Just got off
the phone with my internal clients who have approved me to offer $200,000 for a full release. Last
and final. Revoked if I do not receive confirmation of Mr. Fields’ acceptance by noon today.
Agreement is attached. Please execute and return it to me. . .” Id. The Confidential Release and
Indemnity Agreement attached to the email contained the following payment terms:
Defendant shall make the Payment within thirty (30) calendar days of its
receipt of the original Agreement executed by Plaintiff and Counsel for
Plaintiff, and a current and a signed IRS Form W9 from Counsel for
Employee. The Settlement Amount shall be payable as follows:
a. _______________ ($ ______) by check payable to Douglas Fields less
applicable tax withholding. Plaintiff acknowledges that this payment is made
in full and complete satisfaction of any claims he may have or claim to have.
An IRS form W2 will be issued with respect to this payment.
b. _______________ ($ ______) by check payable to Counsel for Plaintiff,
Stephen Nagle. Counsel for Plaintiff agrees to provide a signed IRS Form
W9 to counsel for the Defendant in connection with this payment. An IRS
Form 1099 will be issued with respect to this payment.
c. Defendant offers no tax advice and makes no representation about the
taxability of the proceeds or Plaintiffs obligation to pay taxes on them.
Plaintiff agrees to pay any and all taxes that might be due on the money
being paid to him, if any, and further agrees that Defendant is not and shall
not be liable for any portion of any such taxes for which Plaintiff is
Exh. A(2) to Defendant’s Motion (emphasis added). That same day, Plaintiff’s counsel accepted
Defendant’s offer on behalf of his client, as expressed in the following letter:
I am writing to confirm that my client, Douglas Fields, has authorized me to accept
your offer of $200,000 to settle all his claims against SBC, Inc. or its successor,
AT&T, Inc. arising out of his claims for long term disability benefits as reflected in
Cause No. 1:11-CV-01022; Douglas Fields v. SBC Communications, Inc.; United
States District Court, Western District of Texas, Austin Division.
Exh. B to Defendant’s Motion.
In light of the agreement to settle, the next day, on January 9, 2014, the Parties filed the Joint
Notice of Anticipated Settlement and Agreement to Stay Pending Deadlines with the Court. Dkt.
No. 26. During the next couple of weeks, the Parties communicated about the details of the
settlement agreement. For example, in an email dated January 9, 2014, Plaintiff’s counsel initially
raised two concerns: (1) That the proposed agreement contained a confidentiality provision (“my
client does not want to enter into such a confidentiality agreement and that language should be
removed”), and (2) that the agreement provided a time frame for payment that was not acceptable
to Plaintiff’s counsel. In that communication, Mr. Nagle closed with the following, “Please let me
know if you can agree to these changes. Thank you for your cooperation getting this matter
resolved. . . .” Exh. C to Defendant’s Motion. In response, Ms. Morgan agreed to remove the
confidentiality provisions, but asked to keep the 30 day payment provision to allow Defendant time
to process the check. She closed by stating, “Feel tree to make those edits directly and return an
executed agreement to me and I'll have [the client representative] sign.” Id. at p. 3.
In the next communication from Mr. Nagle, he identified “one other provision” about the
drafting of the agreement that he deleted. He then attached a PDF of his proposed agreement and
noted, “I have deleted that one sentence. I attach a PDF of the draft which I will have Mr. Fields
sign, with your approval of this last change.” Id. at p. 2. This Agreement, proposed by Nagle,
contained the same tax-related language in Paragraph 15 cited above, including that the check would
be made “payable to Douglas Fields less applicable tax withholding,” and that “Plaintiff agrees to
pay any and all taxes that might be due on the money being paid to him, if any, and further agrees
that Defendant is not and shall not be liable for any portion of any such taxes for which Plaintiff is
responsible.” Id. at ¶15. In response, Ms. Morgan responded, “That is fine. . . .” Exh. D to
Defendant’s Motion. On January 10, 2014, Mr. Nagle sent a revised draft to Ms. Morgan that
contained the same payment terms as the previous drafts. Ms. Morgan again replied, “That draft is
fine.” Exh. E to Defendant’s Motion. She then asked Nagle, “Please return a signed copy or original
to me as soon as possible and we’ll execute it on our end and get the checks. Thanks.” Mr. Nagle
responded on behalf of Plaintiff, “Thank you. We will.” Id.
On January 31, 2014, however, Mr. Nagle reported to Ms. Morgan for the first time that “Mr.
Fields was distressed to learn that his net recovery from the settlement was taxable. He was sure that
it was not.” Exh. F to Defendant’s Motion. However, Mr. Nagle added that “I’ve explained to him
that he gave me the authority to settle and the level of the agreement that we have, and that there is
no way to go back. I have recommended that he consult a CPA. He is doing so.” Id. In response,
Ms. Morgan stated “You are also right that there is ‘no way back.’ The agreement has already stated,
‘less applicable tax withholding,’ and he accepted the terms (which you and I negotiated back and
forth). There is no doubt we have an enforceable agreement.” Exh. G to Defendant’s Motion. Ms.
Morgan asked again for a signed copy of the Agreement.
On February 12, 2014, Mr. Nagle raised the possibility of a payment to an annuity company
that would allow Plaintiff to receive payments over time which would alleviate Plaintiff’s tax
concerns. Exh. H to Defendant’s Motion to Dismiss. After considering Plaintiff’s proposal,
Defendant rejected that structure, and requests that the Court order Plaintiff to abide by the original
“It is well established that courts retain the inherent power to enforce agreements entered
into in settlement of litigation pending before them.” Bell v. Shexnayder, 36 F.3d 447, 449 (5th Cir.
1994) (citation and internal quotation marks omitted). Federal law governs the validity of a
settlement agreement when “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). Federal law
considers a settlement agreement to be a contract. Guidry v. Halliburton Geophysical Servs., Inc.,
976 F.2d 938, 940 (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).
The settlement negotiations in this case (described in detail above) clearly show that the
parties entered into a binding agreement to settle the case. The email communications from January
7-10, 2014, show that Mr. Nagle on behalf of the Plaintiff and Ms. Morgan on behalf of the
Defendant agreed to settle the case for $200,000, and specifically addressed the taxability of that
sum. “A binding settlement agreement exists where there is a manifestation of mutual assent,
usually in the form of an offer and an acceptance.” Chen v. Highland Capital Mgmt., L.P., 2012 WL
5935602, at *2 (N.D. Tex. Nov.27, 2012). “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 Finance Corp.
of Texas, 2010 WL 1904561, at * 2 (N.D. Tex. May 12, 2010).
This case is analogous to Daftary v. Metropolitan Life Ins. Co., 136 F.3d 137, 1998 WL
30059, at *1 (5th Cir. Jan.12, 1998) (per curiam), in which the Fifth Circuit affirmed the district
court’s decision to enforce a settlement agreement where when one party had refused to sign the final
settlement document. In that case, the parties, through their counsel, agreed to settle the case and
reduced the agreement to writing after negotiation between counsel and consultation with their
respective clients. Id. However, when the final settlement agreement was presented to the plaintiff,
he refused to sign the agreement. Id. The Court found that terms stated in the final draft of the
settlement agreement were the terms upon which plaintiff had authorized his counsel to settle the
case. Id. Accordingly, it was proper for the district court to grant the motion to enforce the
settlement agreement. Id.
The fact Plaintiff did not personally sign the Settlement Agreement does not mean he is not
bound by it. Under Fifth Circuit precedent, “an attorney of record is presumed to have authority to
compromise and settle litigation of his client, and a judgment entered upon an agreement by the
attorney of record will be set aside only upon affirmative proof of the party seeking to vacate the
judgment that the attorney had no right to consent to its entry.” Quesada v. Napolitano, 701 F.3d
1080, 1083 (5th Cir. 2012) (quoting Mid–South Towing Co. v. Har–Win, Inc., 733 F.2d 386, 390 (5th
Cir. 1984)). Mr. Nagle, as he himself expressed in his emails to opposing counsel, clearly was
authorized by Plaintiff to settle the case. See McCardell v. Verizon Wireless Texas, LLC, 2011 WL
841519, at *3 (S.D. Tex. March 4, 2011) (“Where, as here, the plaintiff is represented throughout
the settlement negotiations by her attorney of choice, the settlement agreement is presumptively
informed, willing, and valid”). Thus, Mr. Nagle’s acceptance of the $200,000 settlement offer as
displayed in his January 8, 2014 email, created a binding, enforceable contract. See Quesada, 701
F.3d at 1084, n. 10 (attorney’s acceptance of settlement offer on behalf of his client created an
enforceable agreement). The record contains no evidence that Plaintiff objected to his counsel’s
settlement offer at any point during negotiations or even after the offer was accepted. Plaintiff only
raised his concern about the tax consequences of the payment plan approximately three weeks after
the agreement was created. Such after-the-fact concerns cannot undermine the validity of a
previously-made agreement. See id. at 1083-84 (plaintiff’s emails sent to his attorney several days
after his attorney had accepted the settlement offer had no effect on the validity of the settlement
agreement); Fulgence v. J. Ray McDermott & Co., 662 F.2d 1207, 1209 (5th Cir. 1981) (“If a party
to a Title VII suit who has previously authorized a settlement changes his mind when presented with
the settlement documents, that party remains bound by the terms of the agreement.”); McCardell,
2011 WL 841519, at *3 (although plaintiff refused to sign the settlement agreement, her lawyer’s
communication of her agreement to defense counsel bound the plaintiff to the agreement).
Finally, the Court finds that Plaintiff’s failure to understand the tax consequences of the
payment structure contained in the Settlement Agreement does not impact the validity of the
Settlement Agreement. See Farmer v. Banco Poular of North America, – Fed. App’x – , 2014 WL
661476, at * 6 (10th Cir. Feb. 21, 2014) (holding that the parties’ attempt to alter the payment
structure did not prevent the district court from enforcing the settlement agreement even though
plaintiff refused to sign the agreement); Frank v. Nostalgia Network, Inc., 1997 WL 44845, at *2
(E.D. Pa.1997) (holding that plaintiff was bound to the terms of the settlement agreement despite the
fact that she raised concerns about the tax consequences of her payment after the agreement was
reached since tax consequences was not an essential term of the agreement). At no point during the
settlement negotiations did Mr. Nagle ever bring up Plaintiff’s concern with regard to the tax
consequences of the payment terms. Every draft of the Settlement Agreement proposed by either
counsel contained the same language with regard to Plaintiff’s tax obligations. Plaintiff did not raise
his concerns regarding the tax consequences until several weeks after the agreement was reached.
Plaintiff is bound to the terms of the Settlement Agreement that he originally agreed to. “Having
entered a legally binding agreement with the defendant, [h]e may not subsequently change [his] mind
and withdraw [his] consent.” Frank, 1997 WL 44845, at * 2.
Based upon the foregoing, the Court HEREBY GRANTS Defendant’s Motion to Enforce
Settlement Agreement (Dkt. # 29) The Court will issue an Order to enforce the Settlement
Agreement proposed by Plaintiff’s Counsel on January 10, 2014 at 11:26 a.m., and attached as
Exhibit D to Defendant’s Motion to Enforce Settlement Agreement, in a separate Order issued this
SIGNED this 18th day of June, 2014.
ANDREW W. AUSTIN
UNITED STATES MAGISTRATE JUDGE
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