In re Murray Energy Holdings Co.

Full title: In re: MURRAY ENERGY HOLDINGS CO., et al., Debtors.

Court: United States Bankruptcy Court, Southern District of Ohio

Date published: Jul 1, 2022

641 B.R. 355 (Bankr. S.D. Ohio 2022)

Opinion

Case No. 19-56885 (Jointly Administered)

2022-07-01

IN RE: MURRAY ENERGY HOLDINGS CO., et al., Debtors.

Tiffany Strelow Cobb, Columbus, OH, Melissa S. Giberson, Vorys, Sater, Seymour and Pease LLP, Columbus, OH, for Creditor Committee Pre-Effective Date Official Committee of Unsecured Creditors. Todd Goren, Jennifer Marines, Lorenzo Marinuzzi, Erica Richards, Allison B. Selick, Benjamin Butterfield, Morrison & Foerster LLP, New York, NY, Thomas Loeb, Melissa S. Giberson, Vorys Sater Seymour & Pease, Brenda K. Bowers, Tiffany Strelow Cobb, Columbus, OH, for Creditor Committee Official Committee of Unsecured Creditors. Roma N. Desai, Bernstein Shur Sawyer & Nelson PA, Portland, ME, for Special Counsel. Monica V. Kindt, John W. Peck Federal Building, Cincinnati, OH, Jeremy Shane Flannery, Office of the United States Trustee, Columbus, OH, Benjamin A. Sales, Office of the United States Trustee, Cincinnati, OH, for U.S. Trustee. Scott Alan Norcross, Kohrman Jackson & Krantz, cleveland, OH, for Respondent. Travis Bayer, Dinsmore & Shohl, Cincinnati, OH, Kara E. Casteel, Ask LLP, Eagan, MN, for Debtors.

John E. Hoffman, Jr., United States Bankruptcy Judge

Tiffany Strelow Cobb, Columbus, OH, Melissa S. Giberson, Vorys, Sater, Seymour and Pease LLP, Columbus, OH, for Creditor Committee Pre-Effective Date Official Committee of Unsecured Creditors.

Todd Goren, Jennifer Marines, Lorenzo Marinuzzi, Erica Richards, Allison B. Selick, Benjamin Butterfield, Morrison & Foerster LLP, New York, NY, Thomas Loeb, Melissa S. Giberson, Vorys Sater Seymour & Pease, Brenda K. Bowers, Tiffany Strelow Cobb, Columbus, OH, for Creditor Committee Official Committee of Unsecured Creditors.

Roma N. Desai, Bernstein Shur Sawyer & Nelson PA, Portland, ME, for Special Counsel.

Monica V. Kindt, John W. Peck Federal Building, Cincinnati, OH, Jeremy Shane Flannery, Office of the United States Trustee, Columbus, OH, Benjamin A. Sales, Office of the United States Trustee, Cincinnati, OH, for U.S. Trustee.

Scott Alan Norcross, Kohrman Jackson & Krantz, cleveland, OH, for Respondent.

Travis Bayer, Dinsmore & Shohl, Cincinnati, OH, Kara E. Casteel, Ask LLP, Eagan, MN, for Debtors.

MEMORANDUM OPINION AND ORDER

John E. Hoffman, Jr., United States Bankruptcy Judge I. Introduction

A contractual choice-of-law provision designates the law that applies to the contract. Courts typically enforce contractual choice-of-law provisions. But there are exceptions. One exception is when there is a question whether a contract has been formed at all. In this circumstance, most courts eschew the choice-of-law provision and instead apply the law of the forum with the most significant relationship to the transaction and the parties. A minority of courts apply the choice-of-law provision.

Choice of law is the gateway issue in this dispute—that is, which law should the Court apply in determining whether a contract was formed. The issue arises in the Chapter 11 cases of Murray Energy Holdings Co. and its affiliated debtors and debtors in possession ("Debtors"). The issue relates to the settlement of mechanic's lien claims secured by real property that the Debtors sold as part of their Chapter 11 plan ("Plan") (Doc. 2082, Ex. 1). Joe Morris Excavating LLC ("Morris Excavating") moves to enforce a settlement of its claims that it says it reached with two parties—Drivetrain, LLC ("Drivetrain"), in its capacity as the plan administrator appointed by the Plan, and Illinois Land Resources, Inc. ("Illinois Land"), one of the purchasers of substantially all the Debtors’ assets. Representatives of Drivetrain and Illinois Land never signed the draft settlement agreement, and the parties disagree as to whether an agreement was reached on all material terms. The choice of law matters because Morris Excavating contends that a settlement was reached through the negotiations of the parties’ attorneys. Attorneys are presumed to have settlement authority for their clients under the law set forth in the draft settlement agreement's choice-of-law provision (Delaware). But under the law with the most significant relationship to the transaction and the parties (Illinois), attorneys are not presumed to have authority to settle disputes on behalf of their clients.

According to Morris Excavating, (1) Delaware law applies; (2) the Court should enforce the presumption under Delaware law to find that the attorney for Drivetrain and Illinois Land had the authority to settle the dispute over the mechanic's lien claims on behalf of his client; (3) even if Delaware law does not apply, the Court should find that counsel had the authority to settle the dispute for Drivetrain and Illinois Land; and (4) an agreement was reached on all material terms. For their part, Drivetrain and Illinois Land contend that (1) because the effectiveness of the draft settlement agreement is disputed, the parties made no effective choice of law; (2) the Court should apply the law of Illinois, the state with the most significant relationship to the transaction and the parties; (3) Morris Excavating's motion to enforce the draft settlement agreement should be denied because there is no presumption under Illinois law that attorneys have authority to settle matters for their clients; and (4) the motion should also be denied because there is no evidence that Drivetrain and Illinois Land authorized their attorney to bind them to a settlement without their written approval and signatures.

The Court concludes that the Delaware law set forth in the draft settlement agreement's choice-of-law provision does not apply because there is a question whether a contract existed in the first instance. Rather, the applicable law is Illinois law because Illinois is the forum with the most significant relationship to the transaction and the parties. Morris Excavating's motion to enforce the draft settlement agreement cannot be granted on the record as it currently exists because there is no presumption under Illinois law that attorneys have authority to settle matters for their clients. But the fact that there is no presumption under Illinois law that attorneys have settlement authority for their clients does not mean that the motion must be denied. Instead, the issue of whether a contract was formed involves two questions: (1) whether Drivetrain's and Illinois Land's attorney had express authority to bind his clients; and (2) whether the parties intended to be bound before the execution of a settlement agreement. And these questions can be answered only after an evidentiary hearing.

II. Jurisdiction and Constitutional Authority

The Court has jurisdiction to hear and determine this matter under 28 U.S.C. § 1334(b) and the general order of reference entered in this district in accordance with 28 U.S.C. § 157(a). This is a core proceeding. 28 U.S.C. § 157(b)(2)(A), (B) & (O). And there is no constitutional impediment to the entry of this order. The matter before the Court is a motion to enforce a settlement of claims against the Debtors’ estates, and it therefore "stems from the bankruptcy itself." Stern v. Marshall , 564 U.S. 462, 499, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011).

III. Procedural History

The record consists of these affidavits and declarations:

For Morris Excavating:

1. The Affidavit of Joseph A. Morris ("Morris Affidavit"), the owner of Morris Excavating who conducted settlement negotiations on behalf of the company. Exhibit 1 to Morris Excavating's motion to enforce the settlement ("Motion") (Doc. 2781);

2. The Affidavit of Robert C. Wilson ("Wilson Affidavit"), Morris Excavating's counsel. Exhibit 3 to the Motion;¹ and

3. The Supplemental Affidavit of Joseph A. Morris ("Supplemental Morris Affidavit"). Exhibit 1 to Morris Excavating's reply in support of the Motion ("Reply") (Doc. 2797).

For Drivetrain and Illinois Land:

1 Morris Excavating filed a motion (Doc. 2783) to submit portions of the Wilson Affidavit under seal, and the Court entered an order granting the unopposed motion (Doc. 2787).

1. The Declaration of Lee M. Landon ("Landon Declaration"), the Regional Land Manager who conducted settlement negotiations on behalf of Illinois Land and American Consolidated Natural Resources, Inc. ("ACNR").² Exhibit A to Drivetrain's and Illinois Land's objection to the Motion ("Objection") (Doc. 2789); and

2. The Declaration of Douglas J. Feichtner ("Feichtner Declaration"), counsel for Drivetrain and Illinois Land. Exhibit B to the Objection.

2 ACNR is the parent of Illinois Land.

After reviewing the Motion, the Objection, the Reply and the affidavits and declarations, the Court held a status conference at which it asked the parties to brief two questions: first, which law applies to the issue of contract formation; and second, whether an attorney is presumed under the applicable law to have binding settlement authority for a client when the attorney has made statements that his or her clients have agreed to a settlement. In response, Morris Excavating filed its brief addressing these issues ("Morris Excavating Brief") (Doc. 2821), as did Drivetrain and Illinois Land (Doc. 2822) ("Drivetrain-Illinois Land Brief").

IV. Background

A. Morris Excavating's Mechanic's Lien Claims

On October 29, 2019 ("Petition Date"), the Debtors filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. The outcome of the Debtors’ cases was a sale of substantially all their assets in connection with the confirmation of their Chapter 11 plan. Before the sale, one of the Debtors, The American Coal Company ("American Coal"), owned mines in Illinois that had been closed and that needed to be reclaimed, or rehabilitated, before they could be sold. Morris Aff. ¶ 2. Morris Excavating provided reclamation services at the closed mines and was owed about $700,000 plus interest for its services as of the Petition Date. Id . ¶ 2–3. Based on this debt, Morris Excavating filed mechanic's liens on the reclaimed property, id . ¶ 3, and it also filed secured proofs of claim in the Debtors’ bankruptcy cases. The Debtors objected to the proofs of claim, contending that the claims should be reclassified as unsecured. See Proposed Order tendered with Debtors’ First Omnibus Obj. to Certain Mechanic's Lien Claims (Doc. 1749-1) at 8–9 (listing eight claims of Morris Excavating against American Coal to which the Debtors objected).

B. Negotiations Between Messrs. Landon and Morris

Settlement negotiations over the claims and the claims objection ensued in early to mid-October 2020. Morris Aff. ¶ 4; Landon Decl. ¶ 11; Suppl. Morris Aff. ¶ 13. Lee Landon was involved in the settlement negotiations on behalf of Illinois Land. Landon Decl. ¶ 1. On the other side of the negotiations was Joseph Morris. Suppl. Morris Aff. ¶ 1.

Mr. Landon is the one who broached the idea of a settlement with Mr. Morris. Morris Aff. ¶ 4. He proposed that Illinois Land convey to Morris Excavating a parcel of land that was no longer being mined ("Settlement Property"). In exchange, Mr. Morris and his wife would release all their claims, including subsidence, reclamation and crop damage claims, and Morris Excavating would release its mechanic's liens and waive its proofs of claim against American Coal. Id . ¶ 6; Landon Decl. ¶¶ 12, 23; Feichtner Decl. ¶ 6.

Mr. Morris has considerable experience taking ownership of reclaimed coal mining land. He owns more than 2,000 acres of reclaimed coal mining land that is now used for farming or hunting. Suppl. Morris Aff. ¶ 3. This includes about 90 acres of farmland and 153 acres of hunting land deeded to him by American Coal, presumably pre-bankruptcy. Id. Mr. Morris says that he was interested in obtaining the Settlement Property so that it could be used as farmland, and that this aligned with his previous acquisition of "reclaimed mine properties for use as farmland." Morris Aff. ¶ 7. According to Mr. Morris, he and Mr. Landon "had conversations ... about the intended usage of much of the parcel for farming" and "Mr. Landon knew that the primary attraction to me of this deal was the land could be used for farming." Supp. Morris Aff. ¶¶ 15–16. By contrast, Mr. Landon says that "Mr. Morris never mentioned an intent to use the Settlement Property for farming," Landon Decl. ¶ 21, and that Mr. Morris "told him that he was not concerned about [Illinois Land's] or any other ACNR subsidiary's stream and wetland mitigation activities because he intended to use the Settlement Property for hunting." Id . ¶ 20. The mitigation activities to which Mr. Landon was referring are "the restoration, creating or enhancement of streams or wetlands to compensate for permitted stream and wetland losses." Id . ¶ 16. Mr. Landon says that Illinois Land "had ongoing mitigation projects on the Settlement Property, including projects designed to obtain stream ‘credits’ from Illinois EPA." Id . ¶ 17. But, according to Mr. Morris, at least 80% of the Settlement Property's acres "are cleared row crop dry farmland which are suitable for farming and in fact have been farmed for many years." Suppl. Morris Aff. First ¶ 7. A dispute was brewing, because Illinois Land, as part of its efforts to obtain environmental credits, would later seek to include a restrictive covenant in the settlement agreement that would prohibit use of the Settlement Property for farming in the future.

C. The Involvement of the Attorneys

After about a week of negotiations between Messrs. Morris and Landon, the lawyers got involved. Doug Feichtner was counsel for Drivetrain and Illinois Land, Feichtner Decl. ¶¶ 2–3, as was Jarred Tynes, id . ¶ 18. Robert C. Wilson and David Beck were co-counsel for Morris Excavating. Wilson Aff. ¶¶ 2, 9. In the third week of October 2020, Mr. Feichtner sent the first set of draft settlement documents to Messrs. Wilson and Beck. Wilson Aff. ¶ 4; Feichtner Decl. ¶ 5. Mr. Feichtner's cover email stated:

It is my understanding that our respective clients have had settlement discussions between and among each other during the past 7–10 days.

Attached for your and your client's consideration is a DRAFT settlement agreement, together with a special corporate warranty deed and two lien releases. I am told your client has agreed to the material terms contained in these documents—at least verbally. My clients are still in the process of reviewing the attached documents, which are subject to senior management approval. We reserve the right to make changes to same.

Wilson Aff. Ex. B; Feichtner Decl. ¶ 5, Ex. 2. Given Mr. Feichtner's statements in this email that his clients were "still in the process of reviewing the attached documents, which are subject to senior management approval" and that "[w]e reserve the right to make changes to same," Morris Excavating does not contend that an agreement was reached through this email.

The draft settlement agreement that Mr. Feichtner circulated at that time provided that the transfer of the Settlement Property would be subject to, among other things, the following provision ("Easement Paragraph"):

(ii) The right of ingress, egress, and regress at all times for the purposes of conducting stream mitigation and wetland mitigation pursuant to any plan(s) approved, or order(s) issued by any state or federal governmental authority. Grantee, by executing this deed, hereby agrees on behalf of Grantee, its heirs, successors and assigns, to comply with all terms of any plan or order issued by any state or federal governmental authority in conjunction with stream or wetland mitigation efforts.

Wilson Aff. Ex. B, Attached Confidential Settlement Agreement, ¶ 3.c.ii.

According to Mr. Morris, the Easement Paragraph reflected "standard reservations in Deeds from coal companies[.]" Morris Aff. ¶ 6. See also Suppl. Morris Aff. ¶ 4 ("It is entirely common for deeds to have language granting easements so that coal companies can perform required mitigation services on streams or wetlands created by mine subsidence."). And he says that he was "willing to accept language with such easements as I have received it in other deals and this would only impact my usage of a small portion of the parcels which were supposed to be conveyed to me as streams and wetland[s] covered less than 20% of the parcel to be conveyed pursuant to [the settlement agreement]." Id . First ¶ 7.³

3 The Supplemental Morris Affidavit contains no Paragraph 6 while containing two Paragraph 7s.

D. Other Communications that Morris Excavating Does Not Contend Led to an Enforceable Settlement

Mr. Wilson had further discussions with Messrs. Feichtner and Tynes, and, on November 23, 2020, Mr. Feichtner sent revised settlement documents to Mr. Wilson. Wilson Aff. ¶ 6. His cover email stated:

Counsel,

Both [Drivetrain] (for the Debtors) and ACNR⁴ have agreed to the settlement in principle . Attached are the following for your consideration and approval:

• Settlement Agreement

• Deed Between Debtors and Illinois Land

• Deed between Illinois Land and Joe Morris Excavating

• Lien Releases

For the most part, the clients ultimately agreed to the terms we discussed (and circulated) weeks ago . I think I added release language for [Drivetrain], but otherwise—the SA should look familiar (I don't recall receiving any comments to the initial draft of the SA). The client would not agree to TACC/Consolidated Land being listed as grantors on BOTH deeds. There was concern that doing so would cloud title and conveyance of the subject property from "OldCo" to "NewCo" (and ultimately NewCo to Joe Morris). So Deed #1 is TACC and Consolidated Land conveying to Illinois Land, and Deed #2 is Illinois Land conveying to Joe Morris Excavating.

Otherwise, please review and provide comments/edits as needed. Once you approve the attached, I will present to my folks for signatures.

4 Mr. Feichtner sometimes refers to ACNR rather than Illinois Land. As noted above, ACNR is the parent of Illinois Land.

Wilson Aff. Ex. C (emphasis added).

That same day, Mr. Wilson called Mr. Tynes to discuss small changes to the language of the documents. Wilson Aff. ¶ 7. The next day, Mr. Tynes sent the following email about these changes:

All,

Per my conversation with Mr. Wilson yesterday afternoon, I have made several revisions to each of the documents previously circulated. The revisions are exactly as requested by Mr. Wilson.

Doug [Feichtner] is presenting the revised documents to his clients for review and approval. I[f] approved, we should be able to move to closing this transaction. Thanks.

Wilson Aff. Ex. D (emphasis added).

Despite Mr. Feichtner's statement in his November 23, 2020 email that his clients had "ultimately agreed to the terms we discussed (and circulated) weeks ago," Morris Excavating does not argue that this email led to the formation of an enforceable settlement agreement. This is probably because Morris Excavating itself raised a material issue after November 23 and requested a change to the settlement agreement based on that issue. On behalf of Morris Excavating, in late November 2020, Mr. Beck raised an issue as to the language in the settlement agreement relating to releases of the Debtors, Illinois Land and Drivetrain. Wilson Aff. ¶ 9; Wilson Aff. Ex. E. Mr. Feichtner disagreed with Mr. Beck's suggested approach and wrote back that he would "hold off sending the settlement documents to my client until we get a resolution on this. I thought we would be getting signatures today." Wilson Aff. Ex. E; Feichtner Decl. Ex. 6. After Mr. Beck suggested three ways to deal with the issue, Mr. Feichtner selected one and asked Mr. Beck to confirm that the revised language was acceptable, stating that he would then "revise [the settlement agreement] accordingly and send to the clients for final review and (hopefully) signatures." Wilson Aff. Ex. E. "Beautiful," Mr. Beck responded. Id . That is where things stood as of late November 2020.

E. Morris Excavating's Attorney Inquires.

On December 2, 2020, Mr. Wilson emailed Messrs. Feichtner, Beck and Tynes this message: "Gentlemen Perhaps my memory has been adversely impacted by the Corona Virus but I thought we agreed to the basic settlement on 10-23-20. Please advise when we will receive executed recordable documents." Wilson Aff. Ex. F-1. Mr. Feichtner responded that day: "I think the lawyers agreed to a tentative settlement back in October, but it was always subject to final client approval , and my clients didn't agree to the settlement in principle until November . I expect to have executed versions from both clients by end of week." Wilson Aff. Ex. F-2; Feichtner Decl. ¶ 22, Ex. 7 (emphasis added). In stating that his "clients didn't agree to the settlement in principle until November," Mr. Feichtner appears to have been referring to the November 23, 2020 email in which he said that his clients had "agreed to the settlement in principle" and that his "clients ultimately agreed to the terms we discussed (and circulated) weeks ago."

F. Communications that Morris Excavating Contends Led to an Enforceable Agreement

Several days later, Mr. Wilson asked for a "definitive day for delivery of DOCS." Wilson Aff. Ex. G. On December 10, 2020, Mr. Feichtner emailed Messrs. Wilson and Beck a revised agreement:

Attached are a few redlines received today from my client (ACNR) to the Settlement Agreement and Warranty Deed for your review and approval. It is my understanding that the right to drill mine monitoring holes was previously discussed between Mr. Morris and Lee

Landon, and agreed to by Mr. Morris.⁵

[Drivetrain] has already agreed to the deal. Upon your approval of these revisions, I will take to ACNR for signature.

5 In November 2020, Illinois Land requested an amendment to the settlement agreement under which it could dig monitoring holes to monitor mines located within parcels that were to be conveyed to Morris Excavating. Mr. Morris agreed to the amendment. Morris Aff. ¶ 12.

Wilson Aff. Ex. H.

The draft circulated on December 10, 2020 included minor revisions to the Easement Paragraph so that it then read:

(ii) The right of ingress, egress, and regress at all times for the purposes of conducting stream mitigation and wetland mitigation pursuant to any existing or future plan(s) approved, permit(s) or order(s) issued by any state or federal governmental authority. Grantee, by executing this deed, hereby agrees on behalf of Grantee, its, successors and assigns, to comply with all terms of any plan, permit or order issued by any state or federal governmental authority in conjunction with stream or wetland mitigation efforts.

Wilson Aff. Ex. H ¶ 4.c.ii.

Mr. Wilson emailed back the next day, December 11, 2020, stating that the changes Mr. Feichtner proposed were acceptable, asking him to "[p]lease get the appropriate signatures and arrange to exchange signed DOCS." Wilson Aff. Ex. I. This is the first point at which Morris Excavating contends a settlement agreement was formed:

On December 10, 2020, Mr. Feichtner sent an email providing redline changes to the documents by [Illinois Land] to permit the drilling of monitoring holes that Mr. Landon and Mr. Morris had already agreed to.... Mr. Feichtner admitted in his December 10, 2020 email that "[Drivetrain] has already agreed to the deal. Upon your approval of these revisions, I will take to ACNR for signature." ... The December 10th email contained no disclaimer that the deal was subject to further approvals at [Illinois Land]. Nor did the attached drafts contain any request for the ability to record in the future restrictive covenants on the conveyed property. The very next day (December 11th), Mr. Wilson accepted the revised documents on behalf of Joe Morris Excavating and asked for the return of the executed documents so the deeds could be recorded. Thus, by December 11, 2020, not only had agreement been reached on all material terms, the exact wording of the settlement agreement had been finalized.

Reply at 4. The version of the settlement agreement circulated on December 10, 2020 provided that it "shall be governed by and construed and interpreted in accordance with the laws of the State of Delaware, without reference to choice of law provisions." Wilson Aff., Ex. H at 7.

The second point at which Morris Excavating asserts a settlement agreement was formed occurred a few days later when Mr. Feichtner transmitted clean copies of the revised documents to Mr. Wilson, and Mr. Wilson responded by asking for the removal of an immaterial comma. Reply at 1–2. On December 14, 2020, Mr. Feichtner sent clean copies of the revised documents to Mr. Wilson, stating, "[a]s soon as your client signs off on the attached, I will present them to my clients for approval and signatures."⁶ Reply at 1–2; Wilson Aff. Ex. J; Feichtner Decl. ¶ 25, Ex. 10. On December 16, 2020, Mr. Wilson responded:

6 Like the December 10 version, the version of the settlement agreement circulated on December 14, 2020 provided that it "shall be governed by and construed and interpreted in accordance with the laws of the State of Delaware, without reference to choice of law provisions." Wilson Aff., Ex. J at 7.

The Deed shows "Joe Morris Excavating, LLC[.]"

There should be no comma.

The Grantee should be "Joe Morris Excavating LLC."

My clients approve the documents with this one correction.

Please confirm that you will obtain your clients[’] signatures and send the signed documents to a local American Coal Landman/Engineer to exchange signed documents with Joe Morris and record.

Wilson Aff. Ex. K.

That same day, Mr. Feichtner sent the revised settlement documents to Illinois Land for approval and signatures, which was consistent with his representation that as soon as Morris Excavating signed off on the documents, Mr. Feichtner would present them to his clients "for approval and signatures." Feichtner Decl. ¶ 29.

There was a lull in the discussions among the attorneys during the second half of December 2020. And there is a dispute over whether Mr. Morris rejected the deal on the table as of that time. On December 23, 2020, Mr. Morris emailed Doug Dobbins of ACNR saying, "[w]e have not received a response from anyone on our settlement. So, in regards to that, we have another area to be reclaimed." Landon Decl. ¶ 25 & Ex. 1. Mr. Morris also said that he was sending crop damage claims and needed to set a date to start the reclamation. Id. The "other area to be reclaimed" was land owned by Mr. Morris or by him and his wife, and the "crop damage claims" pertained to land owned by Mr. Morris individually or jointly by Mr. Morris and his wife. Landon Decl. ¶ 26.

Mr. Landon describes the import of Mr. Morris's email as follows:

Because [Illinois Land] had yet to approve and execute the draft settlement documents, which included Mr. Morris’ agreement to release all subsidence, reclamation and crop damage claims against [Illinois Land] (and [Drivetrain]) involving the Morris’ real property, Mr. Morris in effect rejected the draft settlement documents as of that date, and otherwise revised the settlement to not include the release of certain subsidence repairs and crop damage claims—at least as to the land designated in his December 23 email.

Landon Decl. ¶ 27.

Mr. Morris disagrees with this interpretation of his email:

[O]n December 23, 2020, when I was frustrated about the failure to timely return executed deeds that could be recorded, I emailed Doug Dobbins and raised the issue of potential subsidence claims that I might have. I hoped this would be an inducement to promptly return the signed deeds. As part of this discussion, I never said that I wanted such claims to be paid in addition to the settlement. My counsel has never provided a demand or a markup of the settlement documents to [Drivetrain and Illinois Land] requesting payment of such claims.

Suppl. Morris Aff. ¶ 20.

Mr. Dobbins responded to Mr. Morris by saying that "[y]our deal has been approved by Jim Turner [the president of Illinois Land] and is on Rob Moore[’]s desk." Landon Decl. ¶ 28, Ex. 1. Robert Moore is the CEO and President of ACNR. Feichtner Dec.¶ 9. Mr. Landon says that he had told Mr. Morris that he "did not have the authority to approve any settlement or sign any document on behalf of" Illinois Land and that "only Robert Moore had the authority to approve any settlement and sign any settlement documents on behalf of" Illinois Land. Landon Decl. ¶¶ 13, 14. Mr. Morris disputes that, saying that Mr. Landon never told him that the settlement agreement had to be signed by Robert Moore. Suppl. Morris Aff. ¶ 18. And Mr. Morris points out that drafts of the settlement documents dated November 23, 2020, December 10, 2020 and December 14, 2020 "were all set up for signature by James Turner, Jr., who is the president of [Illinois Land]." Id .⁷

7 To be clear, a signature block for James Turner on behalf of Illinois Land appeared on the versions of the settlement agreement and deeds circulated on December 10, 2020 and December 14, 2020. Wilson Aff. Exs. H & J. While the deeds circulated on November 23, 2020 included a signature block for James Turner, the version of the settlement agreement circulated on that date did not include the name of any individual designated to sign on behalf of Illinois Land. Wilson Aff. Ex.C.

The lull in the communications among the attorneys ended on January 5, 2021 when Mr. Feichtner emailed opposing counsel, attaching revised settlement documents and stating that "[p]ending your approval, I will finalize the documents and get the relevant signatures." Wilson Aff. Ex. L. The settlement document Mr. Feichtner sent on January 5, 2021 would have allowed Illinois Land to record restrictive covenants on the parcels that were to be conveyed to Morris Excavating. Specifically, the revised settlement agreement provided that the deed from Illinois Land to Morris Excavating would provide for the conveyance of the Settlement Property subject to, among other things, "all environmentally related restrictive covenants that may be necessary within, but not limited to, the 600-Foot Buffer depicted on Exhibit B to Exhibit 3 hereto," and the revised draft deed contained that restrictive covenant. That is, the draft circulated on January 5, 2021 added to the Easement Paragraph the language in bold below:

(ii) The right of ingress, egress, and regress at all times for the purposes of conducting stream mitigation and wetland mitigation, including, but not limited to all environmentally related restrictive covenants that may be necessary within, but not limited to, the 600-Foot Buffer depicted on Exhibit B to Exhibit 3 hereto, pursuant to any existing or future plan(s) approved, permit(s) or order(s) issued by any state or federal governmental authority. Grantee, by executing this deed, hereby agrees on behalf of Grantee, its, successors and assigns, to comply with all terms of any plan, permit or order issued by any state or federal governmental authority in conjunction with stream or wetland mitigation efforts.

Wilson Aff. Ex. L ¶ 4.c.ii (emphasis added).

Everyone agrees that the Easement Paragraph as revised on January 5, 2021 would operate as a restrictive covenant that would prohibit the Settlement Property from being used as farmland.

According to Mr. Morris, January 5, 2021 was the first time Illinois Land had broached the issue of restrictive covenants:

Prior to my counsel's receipt on January 5, 2021 of a revised draft deed allowing [Illinois Land] to record restrictive covenants on the parcel in the future, neither Mr. Landon nor any other person had approached me to revise the parties’ settlement to allow [Illinois Land] to record restrictive covenants in the future. This would have constituted

a major change in the settlement agreement and would eliminate most of the value to be received by [Morris Excavating] under the settlement.

Morris Aff. § 14.

Mr. Morris says that during his discussions with Mr. Landon "it was never mentioned that [Illinois Land] would be retaining the ability to record restrictive covenants on the entirety of the property to be received by [Morris Excavating]." Morris Aff. ¶ 10. "If recorded, such restrictive covenants would eliminate the ability to utilize such property for farming. It would be difficult, if not impossible, to sell property containing such a restriction." Id .; see also Supp. Morris Aff. ¶ 17 ("Mr. Landon never indicated to me in 2020 that a restrictive covenant would be required which would enable [Illinois Land] or its affiliates to convert in the future the entire parcels to wetlands to offset their destruction of wetlands elsewhere. None of the previous parcels I have received from American Coal or other coal companies have contained such restrictive covenants.").

In sum, Mr. Morris says that he was interested in obtaining the Settlement Property so that it could be used as farmland. Morris Aff. ¶ 7. He describes the reservations of rights included in the deed that was circulated on October 21, 2020 as "standard," id . ¶ 6, but says that the restrictive covenant imposed by the January 5, 2021 documents "would eliminate the ability to utilize such property for farming," making it "difficult, if not impossible to sell property containing such a restriction." Id . ¶ 10. According to Mr. Morris, Mr. Landon never mentioned the idea of Illinois Land's retaining the right to record restrictive covenants on the property that would prohibit farming. Id . ¶ 10, 13, 14. Indeed, Mr. Morris says that Illinois Land first raised the issue of a restrictive covenant in the draft circulated on January 5, 2021. Id. ¶ 14.

For his part, Mr. Landon says that he "told Mr. Morris about, and Mr. Morris otherwise expressed to me that he knew about, [Illinois Land's] perpetual easement on the Settlement Property and that it was necessary, in part, for ongoing stream and wetland mitigation projects in compliance with Illinois EPA." Landon Decl. ¶ 15. No problem, Mr. Morris responds, because deeds granting easements so that "coal companies can perform required mitigation services on streams or wetlands created by mine subsidence" are "entirely common." Suppl. Morris Aff. ¶ 4. He adds: "From the start of my discussions with Lee Landon, it was understood that the deed for the real property would contain access easements allowing work on stream and wetland mitigation." Id. ¶ 7. But a restrictive covenant that would prohibit farming was something else entirely, says Mr. Morris. See id. ¶ 21 (stating that the language allowing for restrictive covenants "represented a major change from the agreed upon settlement agreement as it permitted [Illinois Land] to in the future encumber the property with restrictive covenants preventing the usage of the property for farming in the manner done previously by American Coal and by [Illinois Land] in calendar year 2020").

Illinois Land and its affiliates were engaged in ongoing remediation projects on the Settlement Property designed to obtain stream "credits" from the Illinois EPA. Landon Decl. ¶ 17. According to Mr. Landon, Illinois Land "could not afford to have Mr. Morris or Morris Excavating doing anything on or to the Settlement Property that would interfere with [Illinois Land's] existing or future stream and wetland mitigation activities," Landon Decl. ¶ 17, and "farming could interfere with a mitigation site." Landon Decl. ¶ 18. Mr. Landon says that Mr. Morris told him that he was not concerned about mitigation activities because he intended to use the Settlement Property for hunting. Landon Decl. ¶ 20. Mr. Landon also represents that "Mr. Morris never mentioned an intent to use the Settlement Property for farming." Landon Decl. ¶ 21. And Mr. Feichtner does not recall "Attorneys Wilson or Beck mentioning [during settlement negotiations that] Mr. Morris[ ] inten[ded] to farm the Settlement Property." In fact, he says, it was his "understanding that Mr. Morris intended to use the Settlement Property for hunting." Feichtner Decl. ¶ 10.

Mr. Morris declined to sign the agreement that Mr. Feichtner circulated on January 5, 2021. Feichtner Decl. ¶ 31. In August 2021, Mr. Wilson sent Mr. Feichtner a letter demanding that Drivetrain and Illinois Land execute the documents exchanged on December 14, 2020. Feichtner Decl. ¶ 32, Ex. 14. Mr. Feichtner rejected the demand. Feichtner Decl. ¶ 32.

V. Legal Analysis

A. The Law Governing the Issue of Contract Formation

"Settlement agreements are a type of contract and are therefore governed by contract law. Thus, [w]hether [a settlement agreement] is a valid contract between the parties is determined by reference to state substantive law governing contracts generally." Bamerilease Cap. Corp. v. Nearburg , 958 F.2d 150, 152 (6th Cir. 1992) (cleaned up). The first question here is which state's law applies to the issue of contract formation under conflict of laws principles. "Resort to the principles of conflict of laws is necessary only if there is an actual conflict between local law and the law of another jurisdiction." Barents Navigation Ltd. v. W. Overseas, Inc. , No. 3:98CV7606, 1999 WL 1490855, at *3 (N.D. Ohio Dec. 13, 1999). Here, there is an actual conflict. The choice of law matters because Morris Excavating contends that a settlement was reached through the negotiations of the parties’ attorneys, and there is a difference among the potential jurisdictions on whether attorneys are presumed to have authority to settle disputes on behalf of their clients.

In the Motion, Morris Excavating identifies three candidates for the governing law without arguing for the application of any particular one: "Ohio (where [Illinois Land] is headquartered, its counsel works, and this case is pending), Illinois (where the property to be transferred is located), and Delaware (the governing law [Drivetrain] and [Illinois Land] included when they drafted the settlement agreement)." Mot. at 9. For their part, Drivetrain and Illinois Land contend that Illinois law applies because: (1) Morris Excavating "is located in and regularly conducts business in Illinois;" (2) "Any and all real property that was the subject of the contemplated settlement is located in Illinois;" (3) Illinois Land "operates and otherwise conducts business in Illinois;" and (4) Morris Excavating's underlying mechanic's lien claim "was filed in Illinois and relies on Illinois mechanic's lien law." Obj. at 12.

Under Delaware law, there is a presumption that the attorney of record has the authority to settle the dispute, while there is no such presumption under Illinois or Ohio law. See Rowe v. Rowe , No. CIV.A. 16119, 2002 WL 1271679, at *3 (Del. Ch. May 28, 2002) ("Where, an attorney of record in a pending action acknowledges that a compromise has been reached, he or she is presumed to have lawful authority to do so."); see also Schwartz v. Chase , No. CIV.A. 4274-VCP, 2010 WL 2601608, at *5 (Del. Ch. June 29, 2010) ("An attorney of record in a pending action who agrees to a compromise of a case is presumed to have lawful authority to make such an arrangement. A client challenging the authority of the attorney after settlement has the burden to overcome the presumption of authority.") (cleaned up); Shields v. Keystone Cogeneration Sys., Inc ., 620 A.2d 1331, 1335 (Del. Super. Ct. 1992), aff'd sub nom. Zencey v. Keystone Congeneration Sys., Inc ., 1992 WL 696966 (Del. Apr. 10, 1992) (holding that attorney engaging in settlement discussions is presumed to have actual authority to enter into a settlement agreement); Clark v. Ryan , No. C.M. 628-K, 1992 WL 163443, at *5 (Del. Ch. June 17, 1992) ("An attorney of record in a pending action who agrees to a compromise of a case is presumed to have lawful authority to make such an agreement. Thus, where opposing attorneys orally agree to compromise and settle a lawsuit, a binding contract is created.") (cleaned up).

By contrast, Illinois law provides that an attorney does not have the authority to settle a matter outside of court:

The authority of an attorney to represent a client in litigation is separate from and does not involve the authority to compromise or settle the lawsuit. An attorney who represents a client in litigation has no authority to compromise, consent to a judgment against the client, or give up or waive any right of the client. Rather, the attorney must receive the client's express authorization to do so.

Where a settlement is made out of court and is not made a part of the judgment, the client will not be bound by the agreement without proof of express authority. This authority [of the attorney] will not be presumed and the burden of proof rests on the party alleging authority to show that fact. Further, in such a case, opposing counsel is put on notice to ascertain the attorney's authority. If opposing counsel fails to make inquiry or to demand proof of the attorney's authority, opposing counsel deals with the attorney at his or her peril.

Brewer v. Nat'l R.R. Passenger Corp. , 165 Ill.2d 100, 208 Ill.Dec. 670, 649 N.E.2d 1331, 1334 (1995) (cleaned up).

Brewer sets forth two rules—one for in-court settlements and another for settlements struck outside of court. "[T]he existence of the attorney of record's authority to settle in open court is presumed unless rebutted by affirmative evidence that authority is lacking ." Id . By contrast, outside of court "the client will not be bound by the agreement without proof of express authority" and [t]his authority [of the attorney] will not be presumed." Id .

In the Motion, Morris Excavating cites Condon & Cook, LLC , 410 Ill.Dec. 49, 69 N.E.3d 274, 286 (Ill. Ct. App. 2017) for the proposition that the court in that case enforced an "oral settlement agreement reached by counsel despite [the] client's claim settlement was unauthorized." Mot. at 10. But in that case the defendant who refused to perform the settlement agreement did "not dispute that he gave his attorneys express authority to negotiate a settlement agreement," only "that he did not expressly authorize them to agree that he would execute a release." Condon , 410 Ill.Dec. 49, 69 N.E.3d at 283. And in Condon the negotiations were done quickly because the defendant "needed the case to be settled immediately or he would lose a lucrative refinancing deal scheduled for that same day." Id ., 410 Ill.Dec. 49, 69 N.E.3d at 284. The defendant's attorney testified that the negotiations lasted less than an hour and that he was in telephone contact with the defendant the entire time." "In effect, defendant electronically projected himself into the room." Id ., 410 Ill.Dec. 49, 69 N.E.3d at 285. "He was certainly aware of the negotiations that were taking place at his urgent request and for his benefit, and he stood silently by and let them happen. Thus, defendant cannot now challenge the apparent authority which he bestowed on his attorneys to negotiate a quick, oral settlement." Id . Thus, Condon accords with the rule in Illinois that attorneys are not presumed to have authority to settle matters.

Likewise, Ohio law holds that "[a]bsent specific authorization, an attorney has no implied or apparent authority to compromise and settle his client's claims." Prime Props. Ltd. P'ship v. Badah Enters ., No. 99827, 2014 WL 265501, at *4 (Ohio Ct. App. 2014). "[U]nder an apparent-authority analysis, it is the client's acts that must create the apparent authority, not the acts of the attorney." Id . at *5. That is:

[u]nder an apparent-authority analysis, an agent's authority is determined by the acts of the principal rather than by the acts of the agent. The principal is responsible for the agent's acts only when the principal has clothed the agent with apparent authority and not when the agent's own conduct has created the apparent authority."

Ohio State Bar Ass'n. v. Martin , 118 Ohio St.3d 119, 886 N.E.2d 827, 834 (Ohio 2008). See also Ottawa Cty. Comm'rs v. Mitchell , 17 Ohio App.3d 208, 478 N.E.2d 1024, 1031 (1984) ("In this case, the evidence fails to establish, clearly and convincingly, that appellant had given [the attorney] the express authority to bind him to a settlement agreement without his final, written approval of the terms thereof.").

In its brief addressing the issues raised by the Court, Morris Excavating recognizes Ohio's and Illinois's common law presumptions that attorneys do not have inherent authority to bind clients to settlement. Morris Excavating Br. at 8. But it also argues that the applicable law here is Delaware and that under Delaware law Drivetrain and Illinois Land are bound by the statements their counsel made during the negotiation of the settlement. See id . at 9–10. Drivetrain and Illinois Land contend that Illinois law applies. Drivetrain-Illinois Land Br. at 7.

So which state's law applies? Before answering that question, the Court must first address the choice-of-law rules that apply. "[T]he federal circuits are split on whether state or federal law supplies the choice-of-law rules in bankruptcy cases." State Bank of Florence v. Miller (In re Miller) , 513 F. App'x 566, 572 (6th Cir. 2013). While recognizing the split, the Sixth Circuit did not rule on the issue in Miller and has not ruled on it since. The Court likewise need not rule on the issue because the Restatement (Second) of Conflict of Laws ("Restatement") applies under both federal law and Ohio law. See Med. Mut. of Ohio v. deSoto , 245 F.3d 561, 570 (6th Cir. 2001) (applying the Restatement under federal law) ; Morgan v. Biro Mfg. Co. , 15 Ohio St.3d 339, 474 N.E.2d 286, 288–89 (applying the Restatement under Ohio law). The Court will thus apply the Restatement.

The starting point is Section 187, which provides:

(1) The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue.

(2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an

explicit provision in their agreement directed to that issue, unless either

(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice, or

(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.

Restatement § 187.

This section applies if there is a law "chosen by the parties to govern their contractual rights and duties." But where, as here, the "central dispute ... is whether a contract existed at all" the Court "should find that the parties have not agreed to a contractual choice of law provision." Detroit Tigers, Inc. v. Ignite Sports Media, LLC , 203 F. Supp. 2d 789, 794 (E.D. Mich. 2002). There is a split of authority on whether a contractual choice of law provision applies to questions of contract formation.

Most courts have ruled that a contract's governing law provision does not apply when the question is whether a contract exists at all. These courts include the Second, Fifth, Eighth and Ninth Circuits. See Realogy Holdings Corp. v. Jongebloed , 957 F.3d 523, 531 n.11 (5th Cir. 2020) (holding that a contractual choice-of-law provision does not govern whether a contract was formed); Schnabel v. Trilegiant Corp ., 697 F.3d 110, 119 (2d Cir. 2012) (same); John T. Jones Const. Co. v. Hoot Gen. Const. Co. , 613 F.3d 778, 782–83 (8th Cir. 2010) (same); Trans-Tec Asia v. MV Harmony Container , 518 F.3d 1120, 1124 (9th Cir. 2008) (same).⁸

8 Many district courts also have followed this line of authority. See Castillo v. Stanley , No. 19 Civ. 7072 (AKH), 2020 WL 5038611, at *2 n.1 (S.D.N.Y. Aug. 26, 2020) ; Laterra v. GE Betz, Inc ., No. 3:17-cv-00057-VAB, 2017 WL 3485505, at *4 (D. Conn. Aug. 14, 2017) ; Ecimos, LLC v. Nortek Glob. HVAC LLC , No. 2:14-cv-02703-SHM, 2017 WL 3468563, at *6 (W.D. Tenn. Aug. 11, 2017), aff'd , 736 F. App'x 577 (6th Cir. 2018) ; Schnabel v. Trilegiant Corp ., No. 3:10-CV-957 JCH, 2011 WL 797505, at *3 (D. Conn. Feb. 24, 2011), aff'd and remanded , 697 F.3d 110, 119 (2d Cir. 2012) ; Gonzalez v. Comenity Bank , No. 1:19-CV-00348-AWI-EPG, 2019 WL 5596800, at *6 (E.D. Cal. Oct. 30, 2019) ; Heiges v. JP Morgan Chase Bank, N.A ., 521 F. Supp. 2d 641, 646 (N.D. Ohio 2007) ; Aspect Grp. v. Movietickets.com, Inc. , No. CV 05-3125 SFEX, 2006 WL 5894608, at *6 (C.D. Cal. Jan. 24, 2006) ; Converge, Inc. v. Topy Corp ., 2005 WL 3434799, at *3 (E.D. Mich. Dec. 4, 2005) ; Mantin v. Cloz Cos. , Civ. No. 95-832 (WGB), 1996 WL 35048985, at *5 (D.N.J. May 2, 1996).

A few courts have held that the choice-of-law provision in a contract applies to whether there is a contract. Courts falling into the minority camp include the Second Circuit, see Motorola Credit Corp. v. Uzan , 388 F.3d 39, 50 (2d Cir. 2004) ("[A] choice-of-law clause in a contract will apply to disputes about the existence or validity of that contract.")⁹ and a handful of district courts, see Lisa Cooley, LLC v. Native, S.A. , No. 20-CV-5800 (VEC), 2021 WL 860591, at *3 (S.D.N.Y. Mar. 5, 2021) (applying law set forth in the choice-of-law provision to dispute over contract formation); Sharp v. Terminix Int'l, Inc ., No. 2:18-cv-02072-SHM-dkv, 2018 WL 3520140, at *3 (W.D. Tenn. July 20, 2018) (same); Cobble v. 20/20 Commc'ns, Inc ., No. 2:17-CV-53-TAV-MCLC, 2018 WL 1026272, at *7 n.4 (E.D. Tenn. Feb. 23, 2018) (same); Behr Salyard & Partners, L.P. v. Leach , No. Civ. A. 91-1364, 1992 WL 172615, at *7 (E.D. Pa. July 9, 1992) (same), aff'd , 986 F.2d 1408 (3d Cir. 1993).

9 But as noted in Schnabel , a later panel of the Second Circuit held that courts should not apply a contract's choice-of-law clause to resolve an issue of contract formation.

Sharp and Cobble relied on a Sixth Circuit decision— Masco Cabinetry Middlefield, LLC v. Cefla N. Am., Inc ., 637 Fed. App'x 192 (6th Cir. 2015) —for the proposition that an agreement's choice of law provision controls even when the parties dispute that an agreement was formed in the first place. See Sharp , 2018 WL 3520140, at *3 ("Using the methodology applied and approved in Masco , the Court relies on the choice of law provision in the parties’ disputed contract."); Cobble , 2018 WL 1026272, at *7 n.4 ("[T]he dissent in Masco criticized the majority for ‘put[ting] the cart before the horse by first deciding that Michigan law governs under a contractual choice-of-law provision, then applying Michigan law to determine whether there is a contract.’ Nonetheless, that is the approach a majority of the Sixth Circuit panel took.").

The problem with Sharp and Cobble is that the majority in Masco found that a contract had been formed, stating that "there simply is no dispute that Masco's execution of the Sales Agreement gave rise to a contract[,]" the only dispute being "who the parties to the contract are." Masco , 637 Fed. App'x at 197 n.2. The dissent disagreed with the majority on whether a contract had been formed, but for purposes of determining what the Masco court held, it is the majority's view that matters. Plus, as the dissent pointed out, "the choice of law [was] not determinative in [ Masco ]." Id. at 202 n.3 (White, J., dissenting). The fact that the choice of law was not outcome-determinative made anything the Sixth Circuit majority said about choice of law dicta. See On Air Entm't Corp. v. National Indem . Co., 210 F.3d 146, 149 (3d Cir. 2000) (holding that where there was no difference between potential applicable laws, there is no actual conflict and the court should avoid engaging in the choice of law analysis); Melville v. American Home Assur. Co ., 584 F.2d 1306, 1311 n.7 (3d Cir. 1978) (noting that certain decisions "represent the dangers of dicta, for in virtually all of those cases the parties were agreed as to the governing law and no conflicts question was put in issue"). Masco accordingly does not stand for the proposition that an agreement's choice of law provision controls when the parties dispute that a contract was formed.

In support of its contention "courts enforce choice of law provisions in draft unexecuted agreements when analyzing whether the agreement is enforceable," Morris Excavating relies on two decisions: Philips Credit Corp. v. Regent Health Grp., Inc ., 953 F. Supp. 482 (S.D.N.Y. 1997) and Frutico, S.A. de C.V. v. Bankers Trust Co ., 833 F. Supp. 288 (S.D.N.Y. 1993). Morris Excavating Br. at 4. These decisions provide some support for Morris Excavating's position. According to Philips , "contractual selection of governing law is generally determinative so long as the State selected has sufficient contacts with the transaction," and "this principle applies equally to a contractual choice-of-law provision in an unexecuted draft of an alleged contract." Philips , 953 F. Supp. at 506 (citing Frutico , 833 F. Supp. at 296 ).

Both Philips and Frutico , however, relied on other factors together with the choice-of-law provision in deciding the governing law. Philips cited the choice-of-law provision in the draft agreement as one factor in the determination of governing law while also relying on "the contacts between the state of New York and the events underlying the instant action." Philips , 953 F. Supp. at 506–07. Similarly, Frutico considered the choice of law provision as one factor in determining that New York "has the most significant relationship with the parties and the transactions at issue, and [that] the substantive law of this State is controlling." Frutico , 833 F. Supp. at 295, 296. Apart from the choice of law provision, Frutico also relied on the fact that the agreement at issue was negotiated in New York, that the defendants were incorporated in New York and that payments to the defendants under the agreement were to be made in New York. Id . at 296.

To sum up, although there is a split of authority on the issue, the majority of courts have held that a contract's governing law provision does not apply to the question of whether a contract has been formed. In the Court's view the majority has it right: The law set forth in a choice-of-law clause is not the "law of the state chosen by the parties" when the question is whether a contract was formed in the first instance.

Without an effective agreement of the parties, the Court must turn to section 188 of the Restatement to determine the applicable law. See Nat'l Union Fire Ins. Co. v. Watts , 963 F.2d 148, 150 (6th Cir. 1992) ("Ohio choice of law rules mandate that the law of the state with the more significant relationship to the contract should govern disputes arising from it. To determine which state has the more significant relationship to the contract, Ohio law has adopted the test set forth in [Section 188]."); Med. Mut. of Ohio , 245 F.3d at 570 (applying Section 188 under federal law).

Section 188 provides:

(1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6.

(2) In the absence of an effective choice of law by the parties (see § 187), the contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:

(a) the place of contracting,

(b) the place of negotiation of the contract,

(c) the place of performance,

(d) the location of the subject matter of the contract, and

(e) the domicil, residence, nationality, place of incorporation and place of business of the parties.

These contacts are to be evaluated according to their relative importance with respect to the particular issue.

(3) If the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied, except as otherwise provided in §§ 189–199 and 203.

Restatement § 188.

Under Restatement § 188(1), "[t]he rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6." In the absence of a statutory directive in its own state on choice of law—and the Court is unaware of any here¹⁰ —a court will apply the factors set forth in § 6:

10 Examples of statutory directives are the Uniform Commercial Code, "which provides in certain instances for the application of the law chosen by the parties ... and in other instances for the application of the law of a particular state," and the "Model Execution of Wills Act which provides that a written will subscribed by the testator shall be valid as to matters of form if it complies with the local requirements of any one of a number of enumerated states." Restatement § 6 cmt. a. "A court will rarely find that a question of choice of law is explicitly covered by statute." Restatement § 6 cmt. b.

(a) the needs of the interstate and international systems,

(b) the relevant policies of the forum,

(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,

(d) the protection of justified expectations,

(e) the basic policies underlying the particular field of law,

(f) certainty, predictability and uniformity of result, and

(g) ease in the determination and application of the law to be applied.

Restatement § 6.

Section 188(2), which controls when there is the "absence of an effective choice of law by the parties," applies when there is a question whether a contract has been formed. Restatement § 188(2). See Trans-Tec , 518 F.3d at 1124 (stating in the context of a contract that had a choice-of-law clause of questionable validity that "we also consider factors that § 188 of the Restatement identifies as relevant where a contract lacks a choice of law provision, such as the place of negotiation of the contract, the place of performance and the place of business of the parties"); Heiges , 521 F. Supp. 2d at 646 (applying the factors set forth in Restatement § 188(2) in the context of determining whether a contract existed at all); Aspect Grp ., 2006 WL 5894608, at *6 (same); Detroit Tigers , 203 F. Supp. 2d at 794–95 (same). And Restatement § 188(2) "directs a court to consider five contacts in deciding which state has the most significant relationship to the transaction and parties." Mill's Pride, Inc. v. Cont'l Ins. Co. , 300 F.3d 701, 708 (6th Cir. 2002). These five contacts are (1) the place of contracting, (2) the place of negotiation of the contract, (3) the place of performance, (4) the location of the subject matter of the contract, and (5) the domicil, residence, nationality, place of incorporation and place of business of the parties. Restatement § 188(2).

According to the Sixth Circuit, "[a]pplication of §§ 6 and 188 of the Restatement requires a sensitive, fact-specific analysis":

The key to our analysis is that the choice of law principles found in the Restatement need not be given equal weight in every circumstance, nor are they intended to be exclusive. They also are relatively elastic, and in some cases equivocal." Int'l Ins. Co. , 86 F.3d at 606. "[E]ven when sections 6 and 188 are read together, it is clear they only provide a broad general framework for the resolution of choice of law issues in the context of a contract dispute. Within that framework, a judge must balance principles, policies, factors, weights, and emphases to reach a result, the derivation of which, in all honesty, does not proceed with mathematical precision. Id .

Wise v. Zwicker & Assocs., P.C ., 780 F.3d 710, 718 (6th Cir. 2015) (quoting Int'l Ins. Co. v. Stonewall Ins. Co ., 86 F.3d 601, 606 (6th Cir. 1996) ).

"[P]olicy analysis is difficult in this case because few of these [§ 6] factors guide [the Court] in a discernable way." Robax Corp. v. Prof'l. Parks, Inc. , No. 3:07-CV-1399-D, 2008 WL 3244150, at *10 (N.D. Tex. Aug. 8, 2008) (cleaned up). But those that do point to Illinois law as the law governing the issue of contract formation. This includes "the relevant policies of the forum [Illinois]" and "the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue."¹¹ And this is so because as far as the factors in § 6 go, Illinois has a much greater interest in the transfer of an interest of land in Illinois than does than does Delaware or Ohio.

11 The remaining principles under § 6 of the Restatement do not point strongly to the law of any particular state.

This becomes clear when considering the five contacts set forth in Restatement § 188(2), which is what the Court is to do in applying the principles of § 6. See Restatement § 188(2) (setting forth the contacts to be considered "[i]n the absence of an effective choice of law by the parties ... in applying the principles of § 6 to determine the law applicable to an issue"). Taking these contacts into account, the Court concludes that Illinois law has the most significant relationship to the transaction and the parties. The place of contracting and the place of negotiation of the Settlement Agreement between Mr. Morris and Mr. Landon was Illinois. Just as important, the place of performance and the location of the subject matter (the real property) are both in Illinois. And "[i]f the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied, except as otherwise provided in §§ 189-199 and 203." Restatement § 188(3). Nothing in §§ 189–199 and 203 provides otherwise, and in fact § 189 supports the application of Illinois law. The settlement agreement involves the transfer of an interest in land in Illinois, and

[t]he validity of a contract for the transfer of an interest in land and the rights created thereby are determined, in the absence of an effective choice of law by the parties, by the local law of the state where the land is situated unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the other state will be applied.

Restatement § 189.

For all these reasons, Illinois law applies to the issue of whether the parties entered into an enforceable settlement agreement.¹²

12 One court has held that when the "question [is] whether a contract exists at all," courts should apply the "governmental interest analysis" and under that analysis "apply the law of the jurisdiction which has a more substantial interest in the case." Century Int'l Arms, Ltd. v. Fed. State Unitary Enter. State Corp. "Rosvoorouzhenie ," 172 F. Supp. 2d 79, 89, 90 (D.D.C. 2001). "It is ... appropriate for this Court to follow the government interest analysis, which addresses the competing interests of the jurisdictions, rather than the significant factor test, which focuses on facts relating to the parties, their negotiations, and the performance of the contract." Id . at 90. The Court finds that the result here would be the same under the governmental interest analysis as under the most significant relationship test, because Illinois has the most substantial interest in the case.

B. Application of Illinois Law

1. Authority of Attorneys to Settle Matters

As noted earlier, under Illinois law, "where a settlement is made out of court and is not made a part of the judgment, the client will not be bound by the agreement without proof of express authority." Brewer , 208 Ill.Dec. 670, 649 N.E.2d at 1334. [T]he "authority [of the attorney] will not be presumed and the burden of proof rests on the party alleging authority to show that fact." Id . That is, there is no presumption under Illinois law that Mr. Feichtner, as the attorney for Drivetrain and Illinois Land, had the authority to bind them. But this only means that there is a lack of a presumption. It certainly does not mean that there is a presumption of invalidity of the settlement agreement.

As to his authority, Mr. Feichtner says only that he "never told Attorneys Wilson or Beck that [he] had the authority to approve a settlement or sign any settlement documents on behalf of the Plan Administrator or senior management for [Illinois Land]." Feichtner Decl. ¶ 7. He does not, however, say that he lacked express authority, only that he never told Messrs. Wilson or Beck that he had it. Morris Excavating should have a chance to establish in an evidentiary hearing that Mr. Feichtner had express authority to bind his clients. See Zeman v. Alvarez Diaz , 2021 WL 1720002, at *8 (Ill. Ct. App. Apr. 30, 2021) (holding after an evidentiary hearing that attorney had express authority to settle matter); Millard v. BNSF Ry. Co. , No. 08 C 3752, 2010 WL 3515746, at *4 (N.D. Ill. Aug. 31, 2010) (same); Hernandez v. New Rogers Pontiac, Inc ., 332 Ill.App.3d 461, 265 Ill.Dec. 715, 773 N.E.2d 77, 83 (2002) (same); Kazale v. Flowers , 185 Ill.App.3d 224, 133 Ill.Dec. 382, 541 N.E.2d 219, 229–30 (1989) ("Evidence of the nature and extent of an agency relationship may be shown by circumstantial evidence with regard to surrounding circumstances and the acts of the parties."). In this regard, "express authority does not have to be established by direct or positive proof. Rather, it may be inferred from dealings, circumstances, acts, or conduct." Plamintr v. Phra Warasak Worathammo , No. 2–14–0312, 2015 WL 1137625, at * (Ill. Ct. App. Mar. 11, 2015).

2. Intent to Be Bound Before Execution of an Agreement

Morris Excavating should also have the opportunity to establish that the parties intended to be bound by the settlement agreement even before its execution. Drivetrain and Illinois Land rely on the fact that the draft settlement documents "contemplated the signing and execution of settlement documents." Obj. at 18. But the fact "[t]hat the parties plan later to sign an agreement does not preclude prior formation of the contract by signifying assent to an unsigned paper; the issue is one of intention." Genesco, Inc. v. Joint Council 13, United Shoe Workers of Am. , 341 F.2d 482, 486 (2d Cir. 1965) ; see also Lambert Corp. v. Evans , 575 F.2d 132, 135 (7th Cir. 1978) ("Even if parties agree, point by point, on all the terms of a contract, if they understand that the execution of a formal document shall be a prerequisite to their being bound there is no contract until the document is executed. On the other hand, if it is agreed that a formal document will be prepared to memorialize a bargain the parties have already made, the bargain is enforceable even though the document has not been executed."). The fact that the parties contemplated executing a settlement agreement does not mean that their failure to do so negates the existence of an enforceable contract. "The basic issue presented ... is whether the disputed document is a valid, enforceable contract or merely preliminary negotiation, and this depends on the intent of the parties." Anand v. Marple , 167 Ill.App.3d 918, 118 Ill.Dec. 826, 522 N.E.2d 281, 282 (1988).

Here, the question is one of intent. And given the disputed facts, it is a factual question to be determined after an evidentiary hearing. See Bamerilease , 958 F.2d at 153 (holding "that courts have the power to summarily enforce settlement agreements, though an evidentiary hearing should be held when a substantial factual dispute exists" (quoting Aro Corp. v. Allied Witan Co ., 531 F.2d 1368, 1372 (6th Cir. 1976) ); see also Ocean Atl. Dev. Corp. v. Aurora Christian Schools, Inc. , 322 F.3d 983, 996 (7th Cir. 2003) ("If ... the offers appear to include all terms essential to the deal and manifest the parties’ mutual intent to be bound by those terms, or at least are ambiguous in that respect, then whether or not a binding agreement exists is a question that must be resolved at trial."); Clawson v. IndyMac Bankcorp, Inc. (In re Clawson) , 434 B.R. 556, 569 (N.D. Cal. 2010) ("When material facts as to the existence or terms of a settlement are in dispute, an evidentiary hearing is necessary.").

Morris Excavating argues that the "Sixth Circuit has repeatedly affirmed District Court orders enforcing settlements where the parties failed to execute a written settlement agreement over the objection of a party claiming no settlement was reached." Mot. at 9. In three of the cases on which Morris Excavating relies, hearings were held to ascertain the parties’ agreement, as the Court will do here. See Glidden Co. v. Kinsella , 386 F. App'x 535, 538 (6th Cir. 2010) ("The parties also appeared at a hearing on October 23, 2008, to address whether ‘there has been a settlement reached in this matter and essentially what the terms of that settlement are.’ "); Bamerilease , 958 F.2d at 151 (noting that a full evidentiary hearing was conducted on the motion to enforce the settlement agreement); Brock v. Scheuner Corp. , 841 F.2d 151, 153 (6th Cir. 1988) (noting that the magistrate held a two-day hearing on the motion to enforce the settlement agreement). In a fourth case, "the magistrate judge directly assisted the parties in negotiating their settlement." Henley v. Cuyahoga Cnty. Bd. of Mental Retardation & Developmental Disabilities , 141 F. App'x 437, 440 (6th Cir. 2005). In the fifth case cited by Morris Excavating, the evidence included one of the attorney's notes about the settlement, and the party challenging the settlement "fail[ed] to present any evidentiary basis for concluding that essential terms remained in dispute." Graley v. Yellow Freight Sys., Inc. , No. 98-4166, 2000 WL 799779, *5 (6th Cir. June 14, 2000). None of these cases supports enforcing an unsigned settlement agreement without holding an evidentiary hearing.

C. Additional Points

The Court notes several points raised by the parties in their briefs that will be relevant in connection with the evidentiary hearing to be held in this matter:

1. Drivetrain and Illinois Land Made Delaware Law Applicable.

Morris Excavating contends that Drivetrain and Illinois Land should be prohibited from arguing that another state's law applies when they are the ones that inserted the settlement agreement's provision making Delaware law the governing law. Morris Excavating Br. at 5–6. For this proposition it relies on Milanovich v. Costa Crociere , S.p.A. , 954 F.2d 763 (D.C. Cir. 1992). But the choice of law provision in Milanovich appeared in a passenger's cruise line ticket, not in a negotiated, but unexecuted draft agreement. Milanovich , 954 F.2d at 767. In support of its argument Morris Excavating also cites two other cases—one a decision from the Ohio Supreme Court and the other from the Sixth Circuit: Jarvis v. Ashland Oil, Inc ., 17 Ohio St.3d 189, 478 N.E.2d 786, 789 (1985) and Tele-Save Merchandising Co. v. Consumers Distributing Co. , 814 F.2d 1120, 1122 (6th Cir. 1987). According to Morris Excavating, Jarvis stands for the proposition that "[w]here the parties to a contract have made an effective choice of the forum law to be applied, the Restatement ... Section 187(2) will not be applied to contravene the choice of the parties as to the applicable law." Jarvis , 478 N.E.2d at 789 (emphasis added). And it points to language in Tele-Save stating that the "Sixth Circuit agrees that Jarvis is correct that ‘Ohio choice-of-law principles strongly favor upholding the chosen law of the contracting parties.’ " See Morris Excavating Br. at 6. Jarvis and Tele-Save , however, both involved executed agreements. These decisions accordingly provide no basis for applying the Delaware choice-of-law provision to an unexecuted agreement.

2. Apparent Authority

Morris Excavating argues that the Court could, using "an apparent authority or acquiescence theory" under Illinois law, "find the settlement documents distributed by Mr. Feichtner were properly authorized by his clients." Morris Excavating Br. at 14. In particular, Morris Excavating relies on two decisions as establishing the proposition that "[w]here a party stands by silently and lets his attorney act in his behalf in dealing with another in a situation where the attorney may be presumed to have authority , the party is estopped from denying the agent's apparent authority to a third person." Morris Excavating Br. at 12 (emphasis added) (citing Kulchawik v. Durabla Mfg. Co ., 371 Ill.App.3d 964, 309 Ill.Dec. 503, 864 N.E.2d 744, 751 (2007) and Shapo v. Tires ’N Tracks, Inc. , 336 Ill.App.3d 387, 270 Ill.Dec. 254, 782 N.E.2d 813, 824 (2002) ). But Kulchawik and Shapo involved facts not present here. In Shapo "the settlement agreement was entered into in open court[.]" Shapo , 270 Ill.Dec. 254, 782 N.E.2d at 824. "[A]lthough the agreement in [ Kulchawik ] was not reached in open court, the record reflect[ed] [that] ten stipulations to dismiss were filed in the circuit court pursuant to the settlement agreement." Kulchawik , 309 Ill.Dec. 503, 864 N.E.2d at 751. And Morris Excavating's reliance on situations where the attorney may be presumed to have authority conflicts with the Illinois Supreme Court's pronouncement in Brewer that "[w]here a settlement is made out of court and is not made a part of the judgment, the client will not be bound by the agreement without proof of express authority" and "[t]his authority [of the attorney] will not be presumed." Brewer , 208 Ill.Dec. 670, 649 N.E.2d at 1334. Under Brewer , only express authority, not apparent authority, will do. See Blutcher v. EHS Trinity Hosp. , 321 Ill.App.3d 131, 254 Ill.Dec. 106, 746 N.E.2d 863, 872 (2001) ("[T]his case does not involve a situation in which there is presumed authority to act. Although the authority of an attorney to represent a client is presumed, the authority of an attorney to settle is not presumed, and cannot be done without express authorization." (citing Brewer )).

3. Agreement in Principle

Morris Excavating points out that Mr. Feichtner, counsel for Drivetrain and Illinois Land, stated in an email that his clients had approved the deal "in principle." But the words "in principle" commonly are understood to mean that there is no binding contract. See Venture Assocs. Corp. v. Zenith Data Sys. Corp ., 96 F.3d 275, 277 (7th Cir. 1996) ("The use of the words ‘in principle’ showed that ZDS had not agreed to any of the terms in Venture's offer. This is the usual force of "in principle[.]"); see also Skycom Corp. v. Telstar Corp ., 813 F.2d 810, 814 (7th Cir. 1987) ("The letter of September 1 describes itself as an ‘agreement in principle’, the sort of depiction that regularly is taken as an expression of a desire not to be bound."); CaramelCrisp LLC v. Putnam , No. 19 C 2699, 2020 WL 4912986, at *3 (N.D. Ill. Aug. 11, 2020) ("[T]he parties’ conduct informed the Court's use of ‘settlement in principle,’ a term that has been recognized as denoting something less than a binding agreement"), report and recommendation adopted sub nom. Caramel Crisp v. Putnam , No. 19 C 2699, 2020 WL 10978626 (N.D. Ill. Oct. 16, 2020). Mr. Feichtner's statement that his clients had agreed in principle therefore does not support a finding that Drivetrain and Illinois Land had approved the settlement agreement.

4. Mr. Moore's Involvement

As discussed above, the parties disagree as to whether Mr. Landon advised Mr. Morris that only Robert Moore had the authority to approve any settlement. Hearing evidence on this point will be important because a "person can prevent his submission from being treated as an offer by suitable language conditioning the formation of a contract on some further step ... such as approval by corporate headquarters." Architectural Metal Sys., Inc. v. Consol. Sys., Inc ., 58 F.3d 1227, 1230 (7th Cir. 1995) (cleaned up).

D. The Statute of Frauds

Drivetrain and Illinois Land contend that the "draft settlement documents involved two real estate transfers and thus cannot be enforced because it violates the Statute of Frauds." Obj. at 2. The statute of frauds under Illinois law provides:

No action shall be brought to charge any person upon any contract for the sale of lands, tenements or hereditaments or any interest in or concerning them, for a longer term than one year, unless such contract or some memorandum or note thereof shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized in writing, signed by such party. This section shall not apply to sales for the enforcement of a judgment for the payment of money or sales by any officer or person pursuant to a judgment or order of any court in this State.

740 Ill. Comp. Stat. Ann. 80/2 (West 2022) (emphasis added).

Drivetrain and Illinois Land argue that the draft settlement agreement is unenforceable because it is unsigned. But the requirement that a contract be "signed by the party to be charged" is broader than it might seem:

With respect to the statute of frauds’ requirement that a contract for the sale of land be signed by the party sought to be charged, "signed" has always been understood to encompass more than the narrow definition of a subscription in the handwriting of the author of the instrument. Just Pants v. Wagner , 247 Ill.App.3d 166, 173 [187 Ill.Dec. 38, 617 N.E.2d 246] (1993). A writing has been considered "signed" for the purpose of the statute of frauds even if it merely contains something which manifests that the instrument has been executed or adopted by the party to be charged with it. Just Pants , 247 Ill.App.3d at 173 [187 Ill.Dec. 38, 617 N.E.2d 246]. The statute of frauds merely requires that the party executed or adopted the agreement. Just Pants , 247 Ill.App.3d at 173 [187 Ill.Dec. 38, 617 N.E.2d 246].

Thompson v. Bebout , No. 5–11–0041, 2011 WL 10501395, at *4 (Ill. Ct. App. Nov. 16, 2011).

As already discussed, an evidentiary hearing is necessary to determine if Mr. Feichtner had express authority to bind Drivetrain and Illinois Land. If the Court finds after the evidentiary hearing that there is no binding contract, then the statute of frauds issue will be moot. By contrast, if the Court finds that there is a binding contract based on Mr. Feichtner's emails, then it would follow that Drivetrain and Illinois Land would have adopted the settlement agreement through Mr. Feichtner's emails. Further, Mr. Feichtner's December 10 and 14, 2020 email, like all his emails, included his typewritten name, and this has been held to satisfy the statute of frauds. See Lefler v. Bd. of Sch. Inspectors of City of Peoria , 241 Ill. App. 229, 232 (Ill. App. Ct. 1926) ("It has been held that the signature at the bottom of the contract need not be in writing, but it may be printed, or may be typewritten, provided there is evidence that it was the intention of the parties that it should constitute their binding obligation.").¹³

13 Morris Excavating contends that the statute of frauds does not apply because "Illinois's statute of frauds only explicitly applies to contracts for ‘sale’ and not all contracts which impact an interest in land." Reply at 10. But courts have held to the contrary. See Waddle v. Elrod , 367 S.W.3d 217, 225 (Tenn. 2012) ("Consistent with the rule applied by a majority of jurisdictions, we hereby hold that the Statute of Frauds applies to any settlement agreement requiring a transfer of an interest in real property."); Thompson v. S. Univ. LLC , No. 1–10–0442, 2011 WL 10068828, at *2 (Ill. Ct. App. July 27, 2011) ("[P]laintiffs’ allegation that the oral contract at issue was a settlement agreement in connection with their claim against defendants’ [for] breach of a previous contract for the sale of a condominium does not remove its claims from the scope of the statute of frauds."). The Court also notes that several of the decisions on which Morris Excavating relies involved settlements struck in the presence of the court, see Reply at 11, which is not the case here.

E. Whether an Adversary Proceeding Is Required

Drivetrain and Illinois Land contend that Morris Excavating's relief must be sought by a complaint commencing an adversary proceeding rather than by a motion commencing a contested matter. Obj. at 13, 19–20. This contention has support. Morris Excavating asks the Court to require Illinois Land to transfer the Settlement Property to it, and Rule 7001(7) provides that "a proceeding to obtain an injunction or other equitable relief" is an adversary proceeding. There are exceptions, though. One exception is "when a chapter 9, chapter 11, chapter 12 or chapter 13 plan provides for the injunction." Fed. R. Bank. P. 7001(7). Another is if the movant is "merely seeking to enforce an order already in place." In re Worldcorp, Inc. , 252 B.R. 890, 895 (Bankr. D. Del. 2000). Neither exception applies here. Morris Excavating's only argument against the requirement of an adversary proceeding is that the settlement agreement resolved the Debtors’ objection to Morris Excavating's proofs of claim, and "[t]he present motion represents a dispute over whether that contested claim objection matter has been resolved." Reply at 12. But this does not change the fact that Morris Excavating is asking the Court to order Drivetrain and Illinois Land to enter into a settlement agreement. If a litigant asks the Court to enjoin an opposing party from "doing anything or asks the Court to order [it] to take a particular action, Rule 7001(7) requires the filing of an adversary proceeding." In re Educ. Res. Inst., Inc ., 442 B.R. 20, 23 (Bankr. D. Mass. 2010). This includes a request to enforce a settlement. See In re Martin , 271 B.R. 333, 335 (B.A.P. 8th Cir. 2002) (holding that request to enforce settlement by ordering parties to deliver title to real property should have been brought by the filing of an adversary proceeding).

That said, "where the rights of the affected parties have been adequately protected and the parties have had an opportunity to be heard, form will not be elevated over substance, and the matter will be allowed to proceed on the merits as originally filed." In re Friedman , 184 B.R. 883, 887 (Bankr. N.D.N.Y. 1994), aff'd , 184 B.R. 890 (N.D.N.Y. 1995). As one court said:

[T]he requirement that an adversary proceeding be filed is not absolute. Even if a matter should, under the Bankruptcy Rules, be tried in the context of an adversary proceeding rather than a contested matter, where the parties have received sufficient due process, a court will not elevate form over substance and may consider the claim on its merits. In doing so, courts have found that where the record demonstrates that (i) an evidentiary hearing was held (ii) the parties were on notice that the issue was being litigated and (iii) the parties had ample opportunity to present their positions so that no prejudice occurred, sufficient due process has been served and the court should proceed on the merits.

In re Eddy , 572 B.R. 774, 781 (Bankr. M.D. Fla. 2017) (cleaned up); see also In re Serv. Merch. Co. , 256 B.R. 755, 766 (Bankr. M.D. Tenn. 2000) ("[W]hile the court finds that an adversary proceeding was required because the debtors’ requested relief was in the nature of injunctive or equitable relief, the landlords did not demonstrate prejudice sufficient to require the filing of an adversary proceeding, and to dismiss on this basis places form over substance and would serve only to delay these proceedings."); In re Command Servs. Corp. , 102 B.R. 905, 908 (Bankr. N.D.N.Y. 1989) ("While there is merit to [the] contention that a determination as to the validity, priority and extent of a lien is properly brought before a bankruptcy court within the context of an adversary proceeding pursuant to Bankr.R. 7001(2) rather than as a contested matter pursuant to Bankr.R. 9014, courts have concluded that where ... no prejudice has arisen, form will not be elevated over substance and the matter will be allowed to proceed on the merits as originally filed.").

The Court finds that Drivetrain and Illinois Land have received sufficient due process and that their rights will be adequately protected if this matter proceeds as a contested matter. An evidentiary hearing will be held, and discovery will be available. Drivetrain and Illinois Land are on notice that the enforceability of the settlement agreement is the issue being litigated, and they have had, and will continue to have, ample opportunity to present their positions. The only thing that would be accomplished by requiring an adversary proceeding is further delay. And "[i]n the absence of any demonstrable prejudice, there is no error resulting from the lack of a formal adversary proceeding." In re Hines , No. 05-8065, 2006 WL 1792705, at *5 (6th Cir. June 29, 2006). The Court therefore finds that an adversary proceeding is not required here.

VI. Conclusion

The Delaware law set forth in the draft settlement agreement's choice-of-law provision does not apply because there is a question whether a contract existed in the first instance. Rather, the applicable law is Illinois law because it is the forum with the most significant relationship to the transaction and the parties. Under Illinois law, there is no presumption that attorneys have authority to settle matters for their clients, so Morris Excavating's motion to enforce the settlement agreement cannot be granted on the record as it currently exists. Instead, the question of whether a contract was formed involves issues—whether Mr. Feichtner had express authority to bind Drivetrain and Illinois Land and whether the parties intended to be bound before the execution of a settlement agreement—that can be resolved only after an evidentiary hearing. By separate order, the Court will set a status conference to schedule this matter for hearing and establish related deadlines.

IT IS SO ORDERED.