Opinion
Civil Action No. 02-0091, Section "R" (4)
December 12, 2002
ORDER AND REASONS
Before the Court are plaintiff's motion for summary judgment and defendants' cross-motion for summary judgment. The Court finds that the three written documents on which plaintiff relies represent a piece of a larger, ongoing negotiation and do not evidence a binding agreement. Accordingly, the Court denies plaintiff's motion for summary judgment and grants defendants' motion for summary judgment. The Court further finds that defendants are not entitled to attorneys' fees and costs.
I. Background
Willie Brown, an employee of plaintiff Turner Marine Fleeting, Inc. d/b/a Pelican Marine Fleeting ("Pelican"), sustained an injury while working aboard the M/V MISS SYLVIA, a vessel operated by Pelican. The cause of the accident is disputed. In December 2000, before filing a lawsuit arising from this accident, Brown entered into a settlement agreement with Pelican and Centa Corporation, another potentially liable party. Brown was not represented by counsel during the negotiations. In this settlement agreement, Brown accepted cash and an annuity in exchange for a release of all claims against Pelican and Centa and an assignment of his claims against other potentially liable parties, which included ZF Industries and Quality Fab and Mechanical, Inc. ZF and Quality are defendants in this matter, as is Quality's insurer, Admiral Insurance Company.
At a joint meeting of counsel held on June 21, 2001, the parties discussed the possibility of settling Brown's claims against ZF and Quality. Pursuant to Brown's settlement agreement with Pelican, Pelican controlled Brown's claims against ZF and Quality, and Pelican had not yet filed a lawsuit asserting Brown's claims against them. Under the proposed terms of the agreement, ZF and Quality/Admiral would each contribute $250,000 to reimburse Pelican and Centa in part for sums that they already paid to Brown. In exchange, ZF and Quality/Admiral sought a final settlement agreement precluding any future litigation arising from Brown's accident. In a letter dated July 16, 2001, counsel for ZF confirmed that he had authority to bind ZF to participate in the settlement funding agreement. He also indicated that ZF's participation is premised on the "condition . . . that there would be no further legal proceedings by or against ZF or its insurer" and that "[i]f this matter can not be resolved in that manner, I am to seek further approval for participation in the settlement funding agreement." (Pl.'s Mot. for Summ. J., Ex. A.) In a letter dated August 2, 2001, counsel for Quality also indicated that his client authorized participation in the proposed settlement "in accordance with the terms discussed at the joint meeting of counsel held on June 21, 2001." ( Id. at Ex. B.) He writes that "it is understood that the settlement agreement, as it relates to [ZF and Quality], shall be final and will thus eliminate the prospect of any future mediation, arbitration or litigation as between [Pelican, Centa, ZF and Quality], save as to the potential recourse against KS Diesel Service, Inc. by the settling parties." ( Id.) He further states that it is his understanding that the parties "will jointly execute a settlement document in full and final discharge of any claims against each other arising out of [Brown's accident]." ( Id.) Last, he writes that "I understand that efforts are still underway to schedule a meeting with counsel for KS Diesel Service, Inc. to determine whether it will participate in the joint settlement, thereby reducing the respective contributions by [Pelican, Centa, ZF and Quality.]" ( Id.)
A third letter, written by counsel for Pelican on August 7, 2001, provides as follows:
We are pleased to confirm that [Quality] has decided to join with Pelican, Centa and ZF Industries in resolving this matter on a prejudicial basis. We look forward to receiving Quality and ZF's contributions as soon as possible. We also request your advices regarding preparation of the settlement documents between our clients, reserving all parties' rights against KS. We are making arrangements to meet with Willie Brown to have him execute a new agreement including ZF and Quality in the settlement of his claims.
By copy of this letter to [counsel for ZF], we confirm our previous advices that the settlement will only include claims related to [Brown's accident].
We look forward to receiving your settlement funds, which we will hold in our Trust Account pending execution of the new settlement agreement with Willie Brown and the prejudicial funding arrangement between all four parties.
( Id. at Ex. C.) (emphasis added.)
As the precise terms of the final release had not yet been resolved, neither ZF nor Quality turned over the settlement funds to Pelican. Instead, on August 10, 2001, counsel for Quality wrote that "there are a couple of issues which I would like to address" before issuing the settlement check. (Def.'s Cross-Motion for Summ. J., Ex. 2.) One issue was the language of the settlement documents to be executed by Willie Brown and by Pelican. Another issue was whether it made sense to delay turning over the settlement checks until after negotiating with KS, or whether issuing the checks "may be necessary to ensure Willie Brown's timely execution of the settlement documents in discharge of [ZF and Quality.]" ( Id.)
Over the course of the next several months and through a series of negotiations, the parties ran into difficulties coming to terms on the release. One snag pertained to the issue of indemnification. Given that Brown, a seaman, was not represented by counsel during the course of his settlement negotiations with Pelican and Centa, ZF and Quality were concerned that Brown might successfully attack the validity of the settlement agreement, thereby rendering void his assignment to Pelican of his claims against ZF and Quality. Were Brown to succeed in such an effort, he could conceivably file suit against ZF and Quality. ZF and Quality sought to protect themselves from this scenario by requesting as consideration for their settlement contribution an agreement that Pelican would defend and indemnify them from future litigation.
Counsel for Pelican first faxed a draft of the proposed Receipt, Release and Hold Harmless Agreement to defendants on October 11, 2001. Pelican "asks that you review this document and advise whether you have any changes you wish to make to this document." (Def.'s Cross-Motion for Summ. J., Ex. 9.) In response, defendants requested that additional indemnitors be added as signatories to the agreement. Pelican agreed to "amend" the document "to include as indemnitors GATX, Brynmark and CGB." ( Id., Ex. 11.) One week later, Pelican indicated that "[w]e cannot agree to include Brynmark, GATX and CGB as signatories." ( Id., Ex. 13.) ZF and Quality continued to demand that the agreement include an indemnification provision and also demanded the opportunity to conduct due diligence to ensure the solvency of the indemnitor. Consolidated Grain and Barge, Inc., a company that may be the owner of the M/V MISS SYLVIA, agreed to sign the release as an indemnitor. Defendants, however, were prevented from conducting due diligence on the company.
Frustrated with the state of the parties' negotiations, plaintiff filed this lawsuit to compel defendants to deliver their settlement contributions. In its motion for summary judgment, plaintiff asserts that the three letters dated July 16, August 2, and August 7, 2001, evidence an enforceable settlement agreement that obligates defendants to turn over the settlement funds. In their cross-motion for summary judgment, defendants assert that these three correspondences do not embody a final, enforceable agreement and that negotiations over a final settlement are ongoing.
II. Discussion
A. Legal Standard
Summary judgment is appropriate when there are no genuine issues as to any material facts and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2551 (1986). The Court must be satisfied that no reasonable trier of fact could find for the nonmoving party or, in other words, "that the evidence favoring the nonmoving party is insufficient to enable a reasonable jury to return a verdict in her favor." Lavespere v. Niagara Mach. Tool Works, Inc., 910 F.2d 167, 178 (5th Cir. 1990); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510 (1986). The moving party bears the burden of establishing that there are no genuine issues of material fact. Krim v. BancTexas Group, Inc., 989 F.2d 1435, 1445 (5th Cir. 1993). A factual dispute precludes a grant of summary judgment if the evidence would permit a reasonable jury to return a verdict for the nonmoving party. See Hunt v. Rapides Healthcare System, LLC, 2001 WL 1650961 (5th Cir. 2001) (citations omitted).
If the dispositive issue is one for which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record contains insufficient proof concerning an essential element of the nonmoving party's claim. Celotex, 477 U.S. at 325, 106 S.Ct. at 2552; Lavespere, 910 F.2d at 178. The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553.
The Fifth Circuit has "arguably articulated an even more lenient standard for summary judgment in certain nonjury cases." Phillips Oil Co. v. OKC Corp., 812 F.2d 265, 273 n. 15 (5th Cir. 1987). In Nunez v. Superior Oil Co., 572 F.2d 1119, 1123-24 (5th Cir. 1978), the Fifth Circuit explained:
If decision is to be reached by the court, and there are no issues of witness credibility, the court may conclude on the basis of the affidavits, depositions, and stipulations before it, that there are no genuine issues of material fact, even though decision may depend on inferences to be drawn from what has been incontrovertibly proved.
Therefore, in a nonjury case, such as this case, the Court is encouraged to draw inferences, even when they appear to be factual, if a "trial on the merits would reveal no additional data." Id. at 1124; see also Professional Geophysics, Inc. v. Placid Oil Co., 932 F.2d 394, 398 (5th Cir. 1991).
B. The Settlement Agreement
Whereas federal courts sitting in diversity apply state law when determining the validity of a settlement agreement, Lefevre v. Keaty, 191 F.3d 596, 598 (5th Cir. 1999), the Fifth Circuit has long held that the enforceability or validity of settlement agreements are determined by federal law "where the substantive rights and liabilities of the parties derive from federal law." Mid-South Towing Company v. Har-Win, Inc., 733 F.2d 386, 389 (5th Cir. 1984); see also Chaplin v. NationsCredit Corporation, 307 F.3d 368, 372 (5th Cir. 2002); Fulgence v. J. Ray McDermott Co., 662 F.2d 1207, 1209 (5th Cir. 1981). Thus, in Mid-South, where the underlying claims were premised on federal general maritime law, the Fifth Circuit applied the federal common law of contract interpretation in deciding whether to enforce a settlement agreement reached by the parties. Mid-South, 733 F.2d at 389; see also M/G-T Services Inc. v. Turn Service Inc., 2002 WL 27765 (E.D.La. 2002). The underlying claims here also sound in federal general maritime law, as plaintiff alleges that the parties settled the maritime claims that it possesses as assignee of Brown's litigation rights. Therefore, federal law governs the enforceability of the settlement agreement in dispute.
Under federal law, settlement agreements and compromises are contracts. Guidry v. Halliburton Geophysical Services, Inc., 976 F.2d 938, 940 (5th Cir. 1992). The interpretation of an unambiguous contract, whether written or oral, is a question of law. Id. Courts accord the words of an unambiguous contract their plain meaning. Roberts v. Williams-McWilliams Co., Inc., 648 F.2d 255, 264 (5th Cir. 1981). A determination that a contract is ambiguous is also a question of law. Guidry, 976 F.2d at 940. Courts interpret ambiguous terms in light of other terms in the contract. Carpenters Amended and Restated Health Benefit Fund v. Holleman Construction Company, 751 F.2d 763, 766 (5th Cir. 1985). If the ambiguity cannot be resolved, the document as a whole is considered ambiguous and the court must look to extrinsic or parol evidence to determine the parties' intent. Id.
At issue in this case is not only the interpretation of a settlement agreement but also the threshold question of whether the parties reached a binding agreement. A binding agreement exists only where there is a manifestation of mutual assent, which ordinarily takes the form of an offer and its acceptance. RESTATEMENT (SECOND) OF CONTRACTS § 22 (1981); E.N. Bisso Son, Inc. v. World Marine Transport Salvage, 1996 WL 28520, *3 (E.D.La. 1996). Manifestation of mutual assent can also be made through a course of dealings where a precise moment of formation cannot be determined. RESTATEMENT (SECOND) OF CONTRACTS § 22 (1981). Whether the parties intended to and did enter into a contract is generally an issue of fact. Scaife v. Associated Air Center, Inc., 100 F.3d 406, 410 (5th Cir. 1996) (applying Texas law); Trinity Carton Company, Inc. v. Falstaff Brewing Corp., 767 F.2d 184, 190-91 (5th Cir. 1985) (applying Louisiana law); Caseilles v. Taylor Rolls Royce, Inc., 645 F.2d 498, 502 (5th Cir. 1981) (applying Florida law). At the same time, the Fifth Circuit has held that if, as is the case here, written documents are purported to embody a binding agreement, then "the question of whether an offer was accepted and a contract was formed is primarily a question of law for the court to decide." Scaife, 100 F.3d at 410 (applying Texas law).
Pelican asserts that the three letters dated July 16, August 2, and August 7, 2001 evidence an enforceable settlement agreement. In support of this assertion, Pelican asks the Court to extract from a lengthy series of negotiations three letters purported to embody a binding agreement. The Court, however, does not find that these documents evidence a binding agreement.
ZF's letter to Pelican dated July 16, 2001 does not set forth unconditional agreement to the terms of a settlement. (Pl.'s Mot. for Summ. J., Ex. A.) In the letter, counsel for ZF confirms that he has authority to bind ZF to participate in the settlement agreement, but indicates that ZF's participation is subject to the condition that there be no further legal proceedings by or against ZF or its insurer. "If this matter can not be resolved in that manner," ZF writes, then "I am to seek further approval for participation in the settlement funding agreement." ( Id.) As further evidence that no agreement has been finalized, ZF writes that it "hope[s] that Quality Fabricators and KS Diesel Service can be convinced to also participate in the settlement funding agreement. . . ." ( Id.) This letter is exactly the kind of correspondence that is exchanged between parties moving toward settlement.
Similarly, the August 2 letter from Quality to Pelican indicates that parties are moving toward a settlement, certain aspects of which remain outstanding. Counsel for Quality represents that he is authorized to participate in the settlement "in accordance with the terms discussed at the joint meeting of counsel held on June 21, 2001," but he also writes that "it is contemplated that [the parties] will jointly execute a settlement document in full and final discharge of any claims against each other arising out of [Brown's accident]." ( Id. at Ex. B.)
The third letter that Pelican relies on is that which it wrote to Quality and ZF on August 7. ( Id. at Ex. C.) Like the letters of July 16 and August 2, this letter also indicates that certain aspects of the negotiations have not been finalized. After stating that it "look[s] forward to receiving Quality and ZF's contributions as soon as possible," Pelican writes that " [w]e also request your advices regarding preparation of the settlement documents between our clients, reserving all parties' rights against KS." ( Id.) (emphasis added.) Pelican adds that it "look[s] forward to receiving your settlement funds, which we will hold in our Trust Account pending execution of the new settlement agreement with Willie Brown. . . ." ( Id.)
The Court is hard pressed to find a binding obligation in these three letters. Rather, the letters can be interpreted to mean only that sophisticated parties have found common ground and are moving toward hammering out the terms of a settlement. From the letters one might even infer that a final settlement is likely. But the Court cannot reasonably conclude that a binding obligation has been reached because the terms of such an agreement have not been finalized.
In the course of coming to a final agreement, parties may agree to a contract the terms of which include an obligation to execute subsequently a final writing that contains certain provisions that the parties have agreed upon. RESTATEMENT (SECOND) OF CONTRACTS § 27 (1981). A comment to this provision in the Restatement provides:
Parties who plan to make a final written instrument as the expression of their contract necessarily discuss the proposed terms of the contract before they enter into it and often, before the final writing is made, agree upon all the terms which they plan to incorporate therein. This they may do orally or by exchange of several writings. It is possible thus to make a contract the terms of which include an obligation to execute subsequently a final writing which shall contain certain provisions. If parties have definitely agreed that they will do so, and that the final writing shall contain these provisions and no others, they have then concluded the contract.
RESTATEMENT (SECOND) OF CONTRACTS § 27 (1981) (comment a) (emphasis added). This means that a contract is concluded only if the parties have explicitly agreed that certain provisions will be included in the subsequent writing and no others. The reasoning supporting this requirement is on full display here, where the parties contemplated a final writing — a settlement agreement and release protecting ZF and Quality from future litigation — the precise terms of which are not fully worked out. As it is said, the devil is in the details.
Further, placing the three documents within the context of the negotiations of which they are a part confirms the Court's conclusion that a binding agreement had not been reached. In a letter written just three days after Pelican's letter of August 7, counsel for Quality writes that "[b]efore I request the issuance of the settlement check on behalf of Quality Fab, there are a couple of issues which I would like to address." (Def.'s Cross-Motion for Summ. J., Ex. 2.) The letter provides that "we will need to work out the details of the language of the settlement documents to be executed by [Brown and the other parties] . . . as a final settlement." ( Id.) Because Brown was not represented by counsel when he settled his claims with Pelican and assigned to Pelican his rights as against ZF and Quality, ZF and Quality wanted indemnification from future litigation that Brown may bring if he successfully attacks the settlement agreement. To date, despite a series of negotiations among sophisticated parties, the precise terms of this indemnification provision are not finalized.
The Court recognizes that plaintiff may be frustrated by the prolonged settlement negotiations. But granting relief in favor of plaintiff would require the Court to impose an agreement on the parties that is not of their own making. This the Court cannot do. This case is therefore unlike Rose v. Super Vending, Inc., 1995 WL 640514 (E.D.La. 1995), in which this Court enforced a clearly-defined and binding settlement agreement that the parties recited into the record before a magistrate judge. Here, provisions of a final settlement remain outstanding, and it is up to the sophisticated parties involved in the negotiation, and not the Court, to resolve them. Defendants are therefore entitled to summary judgment.
In reaching this conclusion, the Court reviewed all of the documents that pertain to the settlement negotiation. In addition, at oral argument on these motions, the Court heard each of the principal negotiators in this dispute — counsel for Pelican, counsel for ZF and counsel for Quality — articulate their respective positions. In this regard, a bench trial of this dispute "would reveal no additional data." Nunez, 572 F.2d at 1124. Indeed, the three documents upon which plaintiff premises its case speak for themselves.
Defendants assert that they are entitled to receive attorneys' fees and costs incurred defending this litigation. Under the American rule, attorneys' fees are not generally recoverable in the absence of statute or contract. Tacon Mechanical Contractors, Inc. v. Aetna Casualty and Surety Company, 65 F.3d 486, 489 (5th Cir. 1995) (citing F.D. Rich Co. v. United States ex rel. Industrial Lumber Co., 417 U.S. 116, 129, 94 S.Ct. 2157, 2165 (1974)). One exception to this rule is that a successful party may recover attorneys' fees "when his opponent has acted in bad faith, vexatiously, wantonly, or for oppressive reasons." Id. Although this lawsuit is without merit, the Court does not find that plaintiff acted in bad faith. Defendants are therefore not entitled to attorneys' fees.
III. Conclusion
For the foregoing reasons, the Court DENIES plaintiff's motion for summary judgment. The Court GRANTS defendants' motion for summary judgment except that the Court does not find that defendants are entitled to attorneys' fees and costs.