Opinion
Civil Action No. 98 CV 3535 (ILG)
July 9, 2001
Charles Virginia, Esq., New York, NY, S. Mac Gutman, Esq. Port Washington, NY.
MEMORANDUM ORDER
Plaintiffs are Trustees and Fiduciaries of the Payers and Road Builders District Council Welfare, Pension and Annuity Funds ("the Funds") who have moved to enforce a Settlement Agreement in an action that was brought against defendant Tully Construction Co., Inc. ("Tully"), a participating employer, to recover $121,802.97 in unpaid interest on late contributions to a multi-employer benefit plan administered by plaintiffs and $4,832.85 in interest on that unpaid interest, for a total of $126,635.82. For the reasons described below, the Funds' motion to enforce the Settlement Agreement must be granted.
A motion to enforce a settlement agreement is decided in this Circuit pursuant to well-established principles. A settlement is a contract, and once entered into is binding and conclusive. Jannah v. GAF Corp., 887 F.2d 432, 436 (2d Cir. 1989) (internal citation omitted), cert. denied, 498 U.S. 865 (1990). A party that chooses to settle cannot be relieved of such a choice merely because its assessment of the decision to settle was incorrect. United States v. Bank of New York, 14 F.3d 756, 759-60 (2d Cir. 1994). Like any other contract, a stipulated settlement must be construed according to general principles of contract law. Geller v. Branic Int'l Realty Corp., 212 F.3d 734, 737 (2d Cir. 2000). If a contract is clear, the court must not alter or go beyond the agreement's express terms or impose obligations on the parties that are not mandated by the express terms of the contract. Red Ball Interior Demolition Corp. v. Palmadessa, 173 F.3d 481, 484 (2d Cir. 1999). Similarly, when a contract is clear, circumstances extrinsic to the contract must not be considered, and where the intention of the parties may be gathered from the four corners of the instrument, interpretation of the contract is a question of law and no trial is necessary to determine the legal effect of the contract. Bethlehem Steel Co. v. Turner Construction Co., 2 N.Y.2d 456, 460, 161 N.Y.S.2d 90, 93 (1957) (internal citations omitted).
Turning to the motion now before the court, the facts underlying it are contained in the affidavit of Charles Virginia, counsel to the Funds and are undisputed unless otherwise indicated. On May 12, 1998, the Funds commenced this action under the Employment Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (as amended), to recover: (i) unpaid interest due on late payments of fringe benefit contributions dating back to 1992 in the amount of $133,706.48 and (ii) delinquent fringe benefit contributions in the amount of $27,341.60 based on a payroll audit covering the period July 1994 through December 1995. In the initial conference before the Magistrate Judge assigned to this action on October 15, 1998, Tully claimed that the $27,341.60 in contributions had been paid as part of an earlier settlement entered into between the parties in the Spring of 1996. Later, the Funds informed Tully that the $27,341.60 had not been paid and Tully changed its position, arguing instead that the $27,341.60 was not due and owing because it was attributable to hours worked by an individual who did not perform any work within the union's jurisdiction. The Funds accepted Tully's contention and the proof furnished in support thereof and agreed to drop the claim for $27,341.60. As a result, Tully did not owe any of the contributions sought in the Complaint, and the sole remaining claim in the action was for unpaid interest. Shortly after the Funds dropped their claim for the contributions, Tully adopted the position that the Funds could not recover for the $121,802.97 in unpaid interest because it too had been part of the 1996 settlement. By a letter dated May 8, 1999 from counsel for the Funds to former counsel for Tully, the Funds once again informed Tully that the interest payments sought in this action were not part of that earlier settlement. In the letter, the Funds explained that the 1996 settlement covered delinquent contributions covering the period October through December 1995 and interest due on those late payments. (Letter dated May 8, 1999 from Charles Virginia, Esq. to Halima Gutman, Esq., Virginia Aff., Ex. A) Accordingly, the Complaint in this action did not cover any contributions due during the period October through December 1995.
Before the letter of May 8, 1999, the Funds apparently had twice before informed Tully's counsel that the interest payments sought in this action did not include interest that was paid as part of the 1996 settlement and had provided Tully with a computer printout detailing the interest payments owed by Tully.
Soon after Tully's receipt of the Funds' May 8, 1999 letter, the parties agreed to settle the action with Tully paying all of the outstanding interest plus attorneys' fees. Because Tully had continued to make late payments of contributions, the amount of interest due had increased and, on May 10, 1999, the Funds provided a computer summary indicating that the total amount of interest owing was $239,302.97 as of that date. (See Virginia Reply Decl. ¶ 11, Petrocelli Aff., Ex. A) According to the terms discussed in reaching a settlement, Tully agreed to pay the Funds $239,302.97 plus $2,500 in attorneys' fees, or $241,802.97 total. On May 27, 1999, counsel for the Funds provided Tully with unsigned copies of a Settlement Agreement, Consent Judgment and Stipulation of Dismissal. As drafted, the Settlement Agreement provides a schedule for payment of the interest owing in eight installments. (Virginia Decl. Ex. A) The Settlement Agreement explicitly is limited to interest payments arising from late contribution payments for work performed between September 1992 and January 1999 and, in it, the Funds reserve the right to pursue recovery of any other debts other than interest on the late contributions covered in the Settlement Agreement. One month later Tully still had not signed the Settlement Agreement, which prompted the Funds' counsel to write to Tully's counsel. Apparently, Tully's counsel explained to the Funds' counsel that Peter Tully, the President of Tully, did not want a Consent Judgment docketed with the court and believed that Tully had paid contributions to the Funds which were not owing. As is reflected in paragraph 3 of the Settlement Agreement, counsel for the Funds was to hold the Consent Judgment in escrow pending full payment by Tully and, as reflected in paragraph 5 (mistakenly identified as paragraph 4), the Funds was authorized to file the Consent Judgement in the event Tully failed to cure a default in payment.
The precise language of the Settlement Agreement provides:
This settlement covers all interest due and owing as a result of late payments of fringe benefit contributions by Tully for work performed during the period September 1992 through January 1999. This settlement does not cover any other debts, and the plaintiffs reserve their right to pursue recovery of all other amounts properly due and owing other than interest on late contributions for work performed during the period September 1992 through January 1999.
(Virginia Decl., Ex. A, ¶ 7)
On July 22, 1999, Tully's counsel informed the Funds' counsel by letter that he was sending an executed Settlement Agreement, an executed Consent Judgment and an executed Stipulation of Dismissal, together with the first two installment payments of $10,000 each. (Virginia Aff. Ex. B) However, annexed to the letter were only the executed Settlement Agreement and the executed Stipulation of Dismissal, not the executed Consent Judgment as had been promised by Tully's counsel. Tully's counsel returned the Settlement Agreement to the Funds but with several handwritten changes, including a change in the period within which Tully was to cure a default in payment before the Funds could file the executed Consent Judgment from five to ten business days of receipt of a notice of default. The most significant change made by Tully was the following addition to paragraph 7 (mistakenly labeled as paragraph 6 in the original): "and defendants reserve the right to contest any contribution paid". (Virginia Decl., Ex. A) Without the addition, the second sentence of paragraph 7 contained a simple reservation clause in which the Funds reserved its ability to pursue recovery of "all other amounts properly due and owing other than interest on late contributions for work performed during the period September 1992 through January 1999." (Id.) Because the phrase inserted by Tully did not appear to relate to the settlement for unpaid interest, the Funds believed that the insertion of this phrase did not change its rights under the Settlement Agreement to receive $241,802.97, the amount of interest spelled out in paragraph I. Moreover, according to the Funds, other than Tully's dispute over the $27,341.60 originally included in the Complaint but later dropped by the Funds, Tully had never before contested any payments and had, in fact, voluntarily reported and paid (albeit late) all contributions underlying the interest demanded in this action. Finally, the Funds avers that this phrase has no bearing on Tully's obligations under the settlement because the Funds never consented to, initialed or otherwise approved of the insertion of this phrase, and because Tully had never raised this clause with the Funds or given any warning that the phrase would be added. Logic would hold, as the Funds persuasively argues, that the phrase inserted by Tully cannot be interpreted to mean that Tully reserves the right to dispute the settlement amount because such an interpretation would essentially render the settlement meaningless. The Settlement Agreement was "So ordered" by this court on January 17, 2001 and filed with the Clerk of the Court on January 18, 2001 (See Docket Sheet, Entry 22) and the Stipulation of Dismissal was "So ordered" on an unknown date and filed with the Clerk of the Court on April 6, 2001. (See Docket Sheet, Entry 23) According to the Stipulation of Dismissal, jurisdiction was retained solely to assure compliance with the terms of the Consent Judgment and Settlement Agreement.
After Tully failed to return an executed copy of the Consent Judgment, counsel for the Funds, believing Tully's omission of an executed copy of the Consent Judgment to have been an oversight, wrote three letters to Tully's counsel asking for it, to none of which did Tully's counsel respond. By letter dated December 23, 1999, counsel for the Funds informed this court that Tully had failed to return an executed copy of the Consent Judgment and had failed to make further payments of the outstanding installments. Tully responded in a letter dated January 3, 2000 by notifying the Funds that Tully would pay $50,000, which "under our stipulation, would bring Tully current through December 15, 2000." (Letter dated January 3, 2000 from S. Mac Gutman, Esq. to Charles Virginia, Esq., Virginia Decl., Ex. D) In addition, Tully requested that the Funds "hold the request for a judgment in abeyance, and . . . advance this case for three months to monitor Tully's compliance with the stipulation." Tully's counsel apparently informed the Funds' counsel that his client, Peter Tully, was "being `difficult'" with respect to the failure to execute the Consent Judgment and asked that the Funds counsel not to insist on execution of the Consent Judgment in view of Tully's compliance, albeit tardy, with the payments required by the Settlement Agreement. Thus, the forebearance of an executed Consent Judgment — which Tully now argues precludes the Funds from enforcing the Settlement Agreement — was induced by Tully. The Funds agreed to refrain from demanding an executed copy of the Consent Judgment but, soon thereafter, Tully once again fell behind on the required installment payments. The Funds wrote to this court on May 23, 2000 to request a conference and, again, Tully responded by paying all amounts owed up to that date. On June 15, 2000, Tully failed to pay the final installment of $121,802.97 due under the Settlement Agreement on that date. Following the procedure set out in the Settlement Agreement, counsel for the Funds transmitted via certified mail two default notices to Tully notifying it of the default and requesting payment. (See Feb. 15, 2001 notice of default, Virginia Decl. Ex. E). More than 10 days have elapsed since receipt of these notices and Tully has not cured its default. Moreover, more than 10 months have elapsed since the date the final installment of $121,802.97 was due and, accordingly, the Funds request that simple interest of $4,832.85 be added to the payment required under the Settlement. With interest, the total amount requested by the Funds is $126,635.82.
The Settlement Agreement provides in pertinent part:
In the event any payment under paragraph 1 hereof is not made when due, Plaintiffs or their authorized agent shall mail certified mail return receipt requested or deliver a notice of such default addressed to S. Mac Gutman, Esq., Gitman Gutman, 33 Main Street, Port Washington, New York 11050, unless the Defendants shall have notified Plaintiffs in writing of another address for the giving of such notice. Such default may be cured by making payment of the installment or installments than [sic.] due to Plaintiffs within five [altered by Tully to indicate "ten"] business days of receipt of Plaintiffs' notice of default.
In the event any default in payment is not cured in accordance with the terms of paragraph 5 [sic.] hereof, plaintiffs are authorized to file the Consent Judgment with the Clerk and the Clerk is herewith authorized to enter judgment on Plaintiffs' application in accordance with the terms of the Consent Judgment against Tully for the amount of $241,802.97 less payments received pursuant to this Agreement upon the filing of this Agreement and an affidavit of the attorney for Plaintiffs as to such default.
(Virginia Decl. Ex. A, ¶¶ 4-5)
This amount was arrived at using a rate of 4.54 percent, which is the rate prescribed by the United States Internal Revenue Code, 26 U.S.C. § 6621. Simple interest on a corpus of $121,802.97 at a rate of 4.54 percent is $15.15 per day and 319 days have elapsed from June 16, 2000 through April 30, 2001, yielding a total interest of $4,832.85.
Faced with a motion that raises serious accusations about its repeated resort to delay tactics, lack of responsiveness and efforts to thwart a settlement it voluntarily entered into, Tully has submitted an opposition that leaves much to be desired both as far as legal authority and as far as facts which might justify or explain Tully's actions. The thrust of Tully's position is that the Settlement Agreement is unenforceable and that this case must proceed into discovery and a trial on the amount of unpaid interest that it owes. The legal argument section of the memorandum of law submitted by Tully's counsel contains six paragraphs. Five of these paragraphs are haphazardly assembled quotes from cases that appear to be copied and pasted from a legal research tool and that are neither supplemented with facts or applied to this case, and one of these paragraphs, the only one that even attempts to analyze these facts, contains a total of three sentences. Piecing together the bare facts and the string of cases recited by Tully would suggest that Tully maintains that the Settlement Agreement was never consummated. Tully offers two reasons in support of this position: first, the Settlement Agreement provides for simultaneous entry of an executed Consent Judgment, which never took place, and, second, Tully's agreement to enter into the Settlement Agreement somehow was conditioned on its right to audit the Funds' books to determine if the interest calculations made by the Funds were correct. Tully additionally appears to argue that, even if the Agreement were deemed enforceable, the Funds breached it by failing to make its books available to Tully for an independent determination of the Funds' interest calculations. Tully apparently contends that its insertion of the handwritten words "and defendants reserve the right to contest any contribution paid" (emphasis added) indicates that Tully has the right to contest those contributions for the purpose of challenging the interest payments claimed by the Funds. Tully next avers that to enforce the Settlement Agreement in the manner urged by the Funds would be impermissible because it would require the court to "go beyond" the terms of the Settlement Agreement. Finally, Tully contends that to enforce the Settlement Agreement would overlook the critical fact that Tully never executed a Consent Judgment or consented to its entry, thereby "complet[ing] Tully's acceptance of its offer of settlement by effectively re-creating a critical element in the formation of a contract." (Def.'s Mem. of Law, 4)
Nor does the affidavit sworn to by Peter Tully fill in the gaps in Tully's reasoning. In it, Peter Tully presents arguments that are completely inconsistent with the Settlement Agreement that was "So ordered" by this court and that the Funds now seeks to enforce. As for Peter Tully's insistence that he signed the Settlement Agreement on two conditions — that Tully would be "granted access to the Funds' books and the right to independently calculate the amount and timing of each contribution payment credited by the Fund[s] to Tully" and "that Tully [would] not deliver the consent to the entry of judgment that the Fund[s] requested" (Peter Tully Aff., ¶ 5) — neither of these representations is supported by the language of the Settlement Agreement itself, even with the handwritten changes made by counsel for Tully. Nowhere in the Settlement Agreement is there so much as a suggestion that the Funds was required to provide Tully with a copy of its books. In fact, as the affidavit of the Funds' counsel makes clear, Tully was provided long ago with everything it needed in order to challenge the Funds' claims with respect to delinquent contribution payments and, by extension, its calculation of interest associated with those payments. By signing the Settlement Agreement, the Funds plainly agreed to a schedule for the payment of interest associated with those late payments. When read in context, the handwritten addition to paragraph 7 simply suggests that for any claims relating to contributions which are not covered by the Settlement Agreement (that is, any claims other than for interest owing for contributions during the period September 1992 through January 1999), Tully reserves the right to challenge those contributions. Peter Tully's claim that he intended to challenge the method of calculating interest payments that are alleged to be owing in this action is simply unsupported by either the Settlement Agreement or anything in the record. Nor is there merit to Tully's argument that its failure to execute the Consent Judgment renders the Settlement Agreement unenforceable. The Settlement Agreement, at paragraph 3, provides that: "Immediately upon execution of this Agreement, the parties shall sign a Consent Judgment and a Stipulation of Dismissal in the forms collectively annexed hereto[.]" If anything, Tully's failure to provide an executed Consent Judgment is further evidence of its failure to comply with the terms of the Settlement Agreement, not evidence that the Settlement Agreement is unenforceable. To hold otherwise would unjustifiably permit Tully to have its cake and eat it too by allowing it, on the one hand, to settle this action and thereby avoid the expense and risk associated with defending itself in this lawsuit, and, on the other hand, to shirk its obligations under that Settlement by providing less than it promised to provide on a schedule that is significantly later than that envisioned by the Settlement. Throughout the life of this Settlement Agreement, Tully's action, or rather inaction, has forced the Funds, at no small cost, to seek judicial intervention in order to force Tully's compliance. To permit Tully to continue in its disregard for the Settlement Agreement by interpreting paragraph 7 in the manner urged by Tully would not only disregard the bargaining reflected in the Settlement Agreement but also would undermine the settlement process itself. By entering into this Settlement Agreement, Tully simply gave up its right to the discovery and trial it now requests.
Accordingly, the Funds' motion for enforcement of the Settlement Agreement is granted, and Tully must pay the Funds $121,802.97, as contemplated by the Settlement Agreement, in addition to $4,832.85 in interest, or a total of $126,635.82.
SO ORDERED.