Opinion
No. 01-1178-WEB
December 7, 2001
Memorandum and Order
This matter is before the court on Raytheon Aircraft Credit Corporation ("RACC") and Raytheon Aircraft Company's motion to enforce an alleged settlement agreement. The court held a hearing on the motion on December 6, 2001, and issued an oral ruling at the conclusion of the hearing. This written memorandum will supplement the court's oral ruling.
The facts underlying the plaintiff's motion are largely set forth in the briefs, the affidavits and the exhibits filed by counsel for the parties. Additionally, counsel detailed their respective positions at the hearing of December 6th. Accordingly, the facts will not be fully repeated here. Essentially, counsel for plaintiff contends that after mediation between the parties failed to reach an agreement on October 11, 2001, the attorneys communicated with each other through a series of phone calls and messages. Plaintiff alleges that on October 22, 2001, after both attorneys had consulted with their clients, the attorneys came to an oral agreement on the terms of a settlement. Plaintiff's counsel faxed defense counsel a "term sheet" the following day outlining this alleged agreement. Shortly after receiving the fax, however, defense counsel informed plaintiff's counsel that the terms in the letter were unacceptable and that defense counsel would not sign the term sheet.
Plaintiff contends that an enforceable oral agreement was reached on October 22nd and argues the defendant has attempted to repudiate the agreement. The defendant, by contrast, argues there was no "meeting of the minds" and that the term sheet was a preliminary matter subject to final approval by the parties.
There is no question but that, as plaintiff argues, an oral settlement agreement is a valid and enforceable contract under Kansas law. Lewis v. Gilbert, 785 P.2d 1367, 1368 (Kan.App. 1990). Moreover, the law favors the compromise and settlement of disputes, and absent fraud or bad faith the courts will not permit a party who has entered into a settlement agreement to repudiate it. Id. At the same time, in order for parties to form a binding contract there must be a meeting of the minds as to all essential terms thereof. Dougan v. Rossville Drainage Dist., 15 P.3d 338, 352 (Kan. 2000).
Although the parties may have reached an oral agreement as to some terms on October 22nd, the court is not persuaded that they had a meeting of the minds as to all the essential terms of a settlement agreement. As an initial matter, the nature of the dispute itself suggests the parties contemplated there would be further negotiation and an agreement finalized in writing and signed by the parties. As the defendant notes, the parties were attempting to negotiate a "global" settlement involving issues beyond the scope of this lawsuit, including disputes relating to three or four different aircraft, at least three Raytheon affiliates (one of which was not a party), the defendant and one or more of his companies, several different underlying contracts (including a purchase contract on a new jet and a maintenance agreement and trade-in arrangement for an older jet), and a refund or forfeiture of deposits. Although the outlines of an agreement may have been reached in the short phone call between counsel on October 22nd, the evidence shows that the parties contemplated further negotiation on the essential terms of an agreement. According to defense counsel, he requested that plaintiff's counsel send him the written "term sheet" after their phone call, rather than a draft agreement, because he said he needed to run the terms by his client. The term sheet letter of October 23rd itself contains evidence that an agreement had not been finalized. The letter stated in part:
Obviously, these terms outline the general terms of the settlement agreement, and both sides contemplate that a settlement agreement will be executed. I will begin drafting a settlement agreement, and will forward it to your attention hopefully next week. If these terms set forth your understanding, please sign below and fax it back to my office.
Below this, the letter contained a signature line with a provision stating: "Agreed by [defense counsel]." As indicated above, defense counsel refused to sign the letter and informed plaintiff's counsel that it did not comport with his client's understanding of the proposed settlement. Among other things, defense counsel argues that plaintiff inserted a term into the letter — i.e., that Mr. Henderson would pay any difference between RACC's bill and Henderson's deposits — that had not been negotiated by the parties. Although plaintiff argues that the difference between these two figures was relatively small, and the issue was therefore immaterial, the court cannot say that the matter of additional payments by Henderson beyond what the parties had agreed was non-essential. Defense counsel also asserted at oral argument that there was an outstanding issue as to which party would bear the expense of substantial maintenance that was due on one of the aircraft in dispute. Finally — although defense counsel was not entirely clear on this point — there was an assertion that Henderson apparently misunderstood the effect that the proposed forfeiture or application of his deposits would have on his overall proposed payment to Raytheon. In sum, the court is not persuaded that the parties reached agreement as to the extent of Henderson's liability and the manner in which the agreement would be implemented. "A district court does not have the power to impose a settlement agreement when there was never a meeting of the minds."Swift-Eckrich, Inc. v. Advantage Systems, Inc., 55 F. Supp.2d 1280, 1284 (D.Kan. 1999) (citations omitted). "Nor does the court have the power to make an agreement for the parties or to decide, contrary to the facts and the law, that a draft settlement agreement was binding when the parties did not agree on it." Id. There were simply too many loose ends left to be tied up here, and the parties obviously contemplated that those terms would be negotiated and adopted as part of a final written agreement.
Conclusion.
Plaintiff and Third Party Defendant's Motion to Enforce Settlement Agreement (Doc. 33) is hereby DENIED. The matter is referred back to Magistrate Judge Humphreys for further pre-trial proceedings.
IT IS SO ORDERED this day of December, 2001, at Wichita, Ks.