Opinion
3.00 CV 1461 (JBA)
March 26, 2003
Jeffrey R. Hellman and Lawrence S. Grossman, Zeisler Zeisler, Bridgeport, CT, Harold F. Bernstein, St. Stamford, for NEW HORIZON FINANCIAL SVC, LLC, Plaintiff;
Benjamin Aaron Pushner and Erik J. Winton, Fitzhugh, Parker Alvaro, Boston, MA, Mark A. Newcity, Fitzhugh, Parker Alvaro, Hartford, CT, Harry W. Lipman, Steven Sloan Anderson and Mark Morvay Rottenberg, Anderson Rottenberg, New York, NY, William N. Dimin, Spector Dimin, Englewood, NJ, Timothy B. Yolen, Yolen Perzin, New Haven, CT, for FIRST FINANCIAL EQUITIES, INC., Defendants;
Benjamin Aaron Pushner, Erik J. Winton, Harry W. Lipman, Steven Sloan Anderson, Mark Morvay Rottenberg, William N. Dimin, Timothy B. Yolen, Erik J. Winton, Fitzhugh, Parker Alvaro, Boston, MA, Steven Sloan Anderson, Mark Morvay Rottenberg, Anderson Rottenberg, New York, NY, for DAVID SADEK, Defendants;
Benjamin Aaron Pushner, Erik J. Winton, Steven Sloan Anderson, Mark Morvay Rottenberg, for DAVID SADEK Third-Party Plaintiff;
Benjamin Aaron Pushner, Erik J. Winton, Steven Sloan Anderson, Mark Morvay Rottenberg, for FIRST FINANCIAL EQUITIES, INC., Counter-Claimant;
Benjamin Aaron Pushner, Erik J. Winton, Steven Sloan Anderson, Mark Morvay Rottenberg, for DAVID SADEK, Counter-Claimant;
Jeffrey R. Hellman, Lawrence S. Grossman, Zeisler Zeisler, Bridgeport, CT, Harold F. Bernstein, Stamford, CT, for v. NEW HORIZON FINANCIAL SVC, LLC, Counter-Defendant
RECOMMENDED RULING ON PLAINTIFFS MOTION FOR SUMMARY ENFORCEMENT OF SETTLEMENT AGREEMENT
The factual and procedural history behind this action is summarized by United States District Judge Janet Bond Arterton in her Order, filed January 21, 2003 (Dkt #88) On January 30. 2002, plaintiff New Horizon Financial Services, LLC, and third-party defendants Larry Rezak. Michael Klemenz and Terry Williams [collectively "New Horizon"] and defendants First Financial Equities Inc ["First Financial"] and David Sadek [collectively "First Financial"] stipulated for referral of the case to the Honorable Robert C Zampano for mediation, which stipulation was approved by Judge Arterton. (Dkt. #70). On February 7, 2002, the Clerk's Office issued its Local Rule 16(b) Notice to Counsel, indicating that on the previous day. "Judge Zampano reported the case as settled." (Dkt. #72)
On July 22, 2002, New Horizon filed its Motion for Summary Enforcement of Settlement Agreement with an affidavit of Attorney Lawrence S Grossman ["Attorney Grossman"] and its brief in support (Dkts. ##79-80). Nineteen days later, First Financial filed affidavits of Attorney William N Dimin and Attorney Harry W. Lipman ["Attorney Lipman"] in opposition (Dkts ##83-84) as to which New Horizon replied on August 20, 2003 (Dkt. #85) A supplemental affidavit by Attorney Grossman was also filed on that date (Dkt #86).
Two exhibits are attached to the motion (Dkt. #79): copy of draft settlement agreement (Exh. A); and copy of draft stipulation of dismissal, dated February 12, 2002 (Exh B).
The same two exhibits were attached to the brief in support (Dkt. #80).
Attached to Attorney Lipman's affidavit (Dkt #84) are the following five exhibits: copy of e-mail, dated February 8, 2002, with another copy of the draft of settlement agreement and a copy of the draft of general release (Exh A), copy of fax cover sheet from Attorney Lipman to Attorney Grossman, dated February 14, 2002, with copy of draft settlement agreement with handwritten changes, copy of draft of general release with handwritten changes, and copy of draft stipulation of dismissal with handwritten changes (Exh B); copy of e-mail, dated February 19, 2002 (Exh. C); copy of e-mail, dated March 1, 2002, with copy of draft Joint Motion to (A) Vacate the Clerk of Court's February 6, 2003 Notice to Counsel and (B) For Extension of Time, dated March 4, 2002 (Exh. D); and copy of e-mail, dated March 2, 2002, with another copy of draft Joint Motion to (A) Vacate the Clerk of Court's February 6, 2003 Notice to Counsel and (B) For Extension of Time, dated March 4, 2002 (Exh E).
Attached is another copy of the February 14, 2002 fax cover, with another copy of the settlement agreement and of the draft stipulation of dismissal, both with handwritten changes (Exh A).
The same exhibit is attached (Exh A).
In her Order Judge Arterton referred this motion to this Magistrate Judge for an evidentiary hearing, and narrowed the focus of the hearing "to . . . resolve whether a binding agreement was in fact reached at the February 6 meditation session." (Dkt #88, at 5) Following a telephonic status conference held on January 31, 2003 (Dkts ##91-92) on February 11, 2003 this Magistrate Judge filed Ruling on Testimony of Mediator at Evidentiary Hearing (Dkt #93 which held that Judge Robert C Zampano may testify at the evidentiary hearing on New Honzons motion pursuant to CONN GEN STAT § 52-235d(b) Such evidentiary hearing was held on March 5 2003 at which Klemenz Rezak Williams and Attorney Grossman testified for New Horizons and Attorney Lipman testified for First Financial (Dkts ##95-97, 99). Judge Zampano was the sole witness on March 24. 2003 (Dkts ##94 98)
The transcript from March 5 (Dkt #99) is referred to as "Tr."
I. FACTUAL FINDINGS
The four witnesses for New Horizon, namely Klemenz, Rezak, Williams, and Attorney Grossman all testified that on February 6 2002 they attended a full day of mediation with Judge Zampano on behalf of New Horizon First Financial's representatives included David Sadek, Elly Krieger, Attorney Jay Zucker, and Attorney Lipman. (Tr. 6-9, 15, 33. 44, 53-54 See also Tr 125-26). All four witness testified that after alternatively meeting with New Horizon. First Financial and the attorneys the parties agreed to settle the lawsuit on the following terms that First Financial would pay New Horizon the aggregate amount of $190,000.00 in twelve monthly, statments of $15,833.33 commencing on March 1, 2002 and terminating on February 3, 2003 and that First Financial would release any claim to and surrender physical possession of the Variable Universal Life Insurance Policy on the life of Linda Rezak; these three elements of settlement were all addressed in the presence of Klemenz, Rezak. and Williams (Tr 9-12, 15-17, 19-28, 33-37, 38-39, 44-48, 49-50, 54-56, 57-59, 64, 91-96, 115-117 See also Tr. 127-29, 146-47, 150-51)New Horizons argues that the parties agreed to three further settlement terms that First Financial would waive defenses to claims asserted by New Horizon, and dismiss all claims against Rezak, Klemenz and Williams; that New Horizon would be entitled to seek an entry of default against both defendants Sadek and First Financial, jointly and severally, for the full amount, less any payments previously made plus any attorneys' fees incurred by New Horizon in the enforcement of settlement, plus interest at the rate of ten percent annum from the date of default, should First Financial default and fail to cure such default; and this Court would retain jurisdiction over this matter in case of default. Rezak, Williams and Klemenz all testified that the issue of a default judgment against Sadek was not discussed at the mediation session in their presence nor was the issue of retention of jurisdiction in Connecticut. (Tr 28-30 39-43, 50) Rezak however also testified that although these issues were not explicitly discussed, it was "implicit" to him that they were part of the agreement and because he felt these two terms were important and because of the "good will" expressed among the parties at the conclusion of the mediation he "assumed" that Sadek would pay New Horizon if First Financial defaulted and that Connecticut would retain jurisdiction (Tr 39-43 See also Tr 14).
Klemenz. Rezak. Williams Attorney Grossman and Attorney Lipman all testified that at the conclusion of the mediation session the parties all shook hands (Tr 12-13, 37-38, 48, 62-63, 147-48) Attorney Grossman described defendant Sadek as "showing] himself to be [a] mensch." (Tr 63, 96) Additionally, Klemenz and Rezak testified that while shaking hands with defendants, they made comments that they were happy this was behind them so that they could now continue to conduct business with each other (Tr 12-13, 37-38).
Attorney Grossman believed that the discussed each at these issues in the presence of his clients at the mediation. Tr. 118, He clearly recalled that he did discuss them with Attorney Lipman in the presence of Judge Zarnpano (Tr 60-61, 116-19) Furthermore. according to Attorney Grossman the attorneys agreed that defendants would be liable for the $190.000.00 in the event of default and the "defendants" in this case are First Financial and Sadek. (Tr. 60-61, 64). Furthermore Attorney Grossman testified that the attorneys agreed that liability would be imposed after the necessary affidavits were submitted to this court, meaning the District Court of Connecticut (Tr. 60-61).
In contrast, Attorney Lipman however only recalled that an agreement was reached as to the amount of money that would be paid to New Horizon and the time period in which it would be paid, he testified that he did not recall who was to pay the money just that plaintiffs were entitled to it regardless of who was to pay (Tr 129-32, 147, 156-57)
Until Attorney Lipman's recollection was refreshed, Attorney Lipman could not recall the exact amount that Judge Zampano recommended and to which, in turn, the parties ultimately agreed. (Tr. 129-30). The Court finds it inconceivable that an experienced litigation attorney, called to testify in federal court, would not have reviewed his notes and/or affidavit prior to his appearance on the stand.
Judge Zampano who conducts approximately 110-30 mediation sessions a year, testified that he has no independent recollection of this mediation held on February 6, 2002. beyond his one page of notes (Exh 9) His notes reflect that the parties agreed to his recommended settlement figure of $190,000, payable in twelve equal installments commencing on March 1, 2002 Judge Zampano acknowledged that after attorneys and parties leave a successful mediation before him there can be issues that subsequently arise which can "crater" a settlement. If such issues are discussed in his presence he would make appropriate entries on his notes If the attorneys agreed in his presence that only a corporate defendant were responsible for payment Judge Zampano similarly would indicate that in his notes as well Judge Zampano's notes contain no such entries, and he had no recollection, one way or the other that there were any "outstanding issues" with respect to this particular settlement
Judge Zampano testified that when counsel encounter obstacles in consummating a settlement, counsel often will contact him and he will thereafter schedule a telephone conference with counsel, where he usually is successful in resolving these issues.
The Magistrate Judge is at a loss why both counsel failed to avail themselves of that opportunity or continue to attempt to resolve the limited outstanding issues. Had they acted like mature adults, with their clients' best interests in mind, all of this unnecessary expense and time could have been avoided. (Tr 114-15. 139-42).
Upon conclusion of the February 6, 2002. mediation session, Judge Zampano reported the case as settled and the Clerk of the Court issued the Rule 16(b) Notice to Counsel (Dkt #72).
Two days later. Attorney Grossman drafted the settlement agreement and stipulation of dismissal based on his recollection of what had been agreed to at the mediation, and forwarded them to Attorney Lipman by e-mail (Exhs. 2-4; Tr. 65-66, 99-102. See also Tr. 132-34) Attorney Grossman testified that when he sent the draft to Attorney Lipman Attorney Lipman informed him that it only needed cosmetic changes" a comment which Attorney Lipman denies (Tr 66-67 102 104. 149)
On February 14, 2002 Attorney Lipman sent Attorney Grossman a fax cover letter, with his "mark-up of the draft" (Exh. 5 Tr 67-68. 102-03) because, as Attorney Lipman testified, it was "objectionable," "overly complicated." "overlawyered," and included "material terms" to which Attorney Lipman did not agree;Tr 134-35) Attorney Lipman testified that his draft was "nor inconstant with what we had agreed [to at the mediation." (Tr. 160-61)
Of the twenty-nine paragraphs in the seven-page settlement agreement four paragraphs are at issue here Attorney Grossmans draft of ¶ 5 provided that "[First Financial] and Sadek expressly agree to waive any and all defenses to any claims asserted against [First Financial] by [New Horizon] in the Action In his mark-up, Attorney Lipman eliminated this paragraph in its entirety Attorney Grossman testified that he could not settle this lawsuit and allow First Financial to be able to assert defenses against New Horizon. (Tr 70-71). Attorney Lipman, in contrast, described ¶ 5 as over reaching" and "surplusage" in light of the language of the releases, and testified that he never agreed to it. (Tr. 136-37, 151-52).
Attorney Grossman's draft of ¶ 6 provided that "[i]n the event of a default and failure to cure by [First Financial] and Sadek, [New Horizon] may immediately apply in the Action for the entry of a judgment by the Court against [First Financial] and Sadek, jointly and severally, in the full amount claimed to be due and owing by [First Financial] and Sadek (emphasis added) In his mark-up, Attorney Lipman,inter alia, eliminated the words "and Sadek, jointly and severally." Attorney Grossman testified that this cross-out was inconsistent with ¶ 2, to which Attorney Lipman did not object which began: "[First Financial] and Sadek, individually, shall pay to [New Horizon] the aggregate amount of One Hundred Ninety Thousand Dollars." (Tr 71-72). Attorney Grossman further testified that the cross-out was inconsistent with ¶ 3, which began "To the extent that any payment is not received [First Financial] and Sadek shall be considered in default of this Settlement Agreement." (Tr 72-73). In addition Attorney Grossman further testified that this cross-out was inconsistent with the opening sentence of ¶ 6 which read "In the event of a default and failure to cure by [First Financial] and Sadek." (Tr 73-74) Attorney Grossman testified that he questioned First Financial's motivations, because if they were current on their obligations no judgment would be entered (Tr 77-78)
Attorney Lipman testified instead that he never agreed to use the mechanism of a judgment against the two defendants with attorney's fees (Tr 137) He testified that he did not recall the "specific mechanism" to enforce a judgment, but "[o]nly the concept of a simplified mechanism " (Tr 153) He further testified that at the mediation there was no discussion as to which defendant would pay New Horizon, only that New Horizon would be paid, and characterized the "default and personal liability [terms as coming] out of left field" (Tr 135). He conceded that at some point, he and Attorney Grossman discussed the question of interest, but he did not recall whether this conversation took place during or after the mediation. (Tr. 131, 138). He described the issue of personal liability as the primary one on which the parties could not agree (Tr 158) He further testified that because he added the opportunity for defendants to cure a default there was no need to create a new cause of action for enforcement of the settlement so that ¶ 20 was unnecessary. (Tr. 137-39).
Attorney Grossman's draft of ¶ 9 allowed "the Court to retain jurisdiction to enforce the terms and conditions of the Settlement Agreement." which language was eliminated by Attorney Lipman in his marked up version Similarly, the last sentence of Attorney Grossman's draft of ¶ 15 stated "Should any disagreement occur and should it be necessary to enforce this Agreement, the appropriate venue shall be in Connecticut" This sentence similarly was eliminated by Attorney Lipman in his marked up version. Using a biblical expression. Attorney Grossman described this cross-out "like a sign post on the door," because there was "no good faith reason" for it (Tr 74-75, 78) Attorney Grossman indicated to Attorney Lipman that his clients did not want to be "haul[ed] [in]to New Jersey" by First Financial (Tr. 75). Attorney Lipman testified that he thought it was "unusual" to have venue remain in Connecticut, because his clients were located in New Jersey. (Tr. 154-55) Attorney Lipman indicated that if all the other issues had been resolved, he might have "caved" on the issue of venue. (Tr 158)
II. DISCUSSION
In order to reach a valid settlement agreement, the parties must voluntarily enter into the agreement and the parties must mutually assent to the terms and conditions of the agreement Millgard Corp. v. White Oak Corp., 224 F. Supp.2d 425, 432 (D Conn 2002) (citation omitted);Brown v. Nationscredit Commercial, 2000 U.S. Dist. LEXIS 9153, at *6 (D. Conn. June 23, 2000) (citations omitted), see also Johnson v. Schmitz, 2002 WL 31863520, at *4-5 (D. Conn. Dec. 19, 2002) (multiple citations omitted). However, once reached, a settlement agreement constitutes a contract that is binding and conclusive and the parties are bound to the terms of the contract even if it is an oral agreement and even if a party has a change of heart between the time of the agreement to the terms of the settlement and the time it is reduced to writing Pultney Arms. LLC v. Shaw Industries, Inc., 2002 WL 31094971, at *2 (D. Conn. Sept 6, 2002) Johnson, 2002 WL 31863520, at *4; Brown, 2000 U.S. Dist. LEXIS 9153, at *5-6. Moreover once a settlement is reached, the "clear and unambiguous terms of the agreement" are not subject to repudiation by the parties; rather, the agreement will be summarily enforced by the court. Brown, 2000 US Dist. LEXIS, at *6; Audubon Parking Assocs. Ltd. P'ship v. Barclay Stubbs, Inc., 225 Conn. 804, 812, 626 A.2d 729, 733 (1993). "Summary enforcement is not only essential to the efficient use of judicial resources, but also preserves the integrity of settlement in a meaningful way to resolve legal disputes." Audubon, 225 Conn at 811 As Judge Newman writing for the majority of the Second Circuit, noted
Due regard for the proper use of judicial resources requires that a trial judge proceed with entry of a settlement judgment after affording the parties an opportunity to be heard as to the precise content and wording of the judgment, rather than resume the trial and precipitate an additional lawsuit for breach of a settlement agreement This authority should normally be exercised whenever settlements are announced in the midst of trial.Janus Films. Inc. v. Miller, 801 F.2d 578 583 (2d Cir. 1986).
Based on the testimony of the attorneys and parties involved and of Judge Zampano it is clear to this Court that a settlement agreement was reached on February 6 2002 There was no discussion or provision that the agreement would not be binding unless or until it was in writing. Thus, although oral, a binding contract was formed on that date. See Pultney Arms, 2002 WL 31094971 at *2. Johnson, 2002 WL 31863520 at *4: Brown, 2000 US Dist LEXIS 9153, at *5-6.
Defendants, consisting of First Financial and Sadek. agreed that they would pay New Horizon an aggregate sum of $190.000.00 over a period of twelve months commencing on March 1, 2002 and continuing consecutively until February 3, 2003, and that First Financial would release any claim to. and surrender physical possession of the Variable Universal Life Insurance Policy on the life of Linda Rezak There is no dispute that both sides agreed upon those two terms. yet defendants have not made one single payment (even to be held in escrow), when by this time, the full amount was due Attorney Lipman conceded that he and Attorney Grossman at some point had discussed the question of interest.
With regard to the issue of Sadek's liability and the imposition of a judgment upon default, an examination of defense counsel's changes to the draft agreement reflects a change of heart rather than plaintiffs' inclusion of terms not agreed upon by defendants, and as Attorney Grossman testified, Attorney Lipman's modifications to ¶ 6 are internally inconsistent with ¶¶ 2 and 3, and other provisions within ¶ 6. Judge Zampano testified that if a settlement singled out a corporate defendant to the exclusion of an individual defendant he would have included that in his notes
With regard to the two other remaining issues there would be no incentive for New Horizon to settle this case if First Financial and Sadek retained their defenses to any claims asserted against them by New Horizon and contrary to Attorney Lipman's perceptions it is not at all "unusual" to have venue remain in this district for enforcement of the settlement, as is the case right now
Therefore, plaintiff's Moson for Summary, Enforcement of Settlement Agreement (Dkt #79) is granted as agreed upon by the parties n Exhibit 5 with the following modifications (1) ¶ 5 shall be included. (2) ¶ 6 shall include the words ana Sadek jointly and severally" in the second and third lines. (3) ¶ 9 shall include New Horizon's language, not First Financial's revision (unless otherwise agreed to by counsel) and (4) ¶ 15 shall include both sentences.
Paragraph 20 is not included, in that it is duplicative of other paragraphs
"As previously indicated. First Financial should have completed payments on or before February 3, 2003 If defendants do not pay New Horizon the full $190,000 on or before April 28, 2003 . New Horizon may seek its remedies under ¶ 6 of the Settlement Agreement.
In addition, New Horizon may file a motion for attorney's fees and costs, with supporting documentation, on or April 28, 2003 bearing in mind, however, the matters raised in n. 9supra.
III. CONCLUSION
Accordingly, for the reasons stated above, plaintiffs' Motion for Summary Enforcement of Settlement Agreement (Dkt #79) is granted .See 28 U.S.C. § 636(b) ( written objections to ruling must be filed within ten days after service of same); FED R. Civ. P. 6(a) 6(e) 72 Rule 2 of the Local Rules for United States Magistrate Judges, United States District Court for the District of Connecticut,Small v. Secretary, HHS, 892 F.2d 15, 16 (2d Cir. 1989) ( failure to file timely objection to Magistrate Judge's recommended ruling may preclude further appeal to Second Circuit).
Dated at New Haven. Connecticut this 26th day of March, 2003.