Opinion
Case No. 8:00CV427
September 9, 2002
MEMORANDUM AND ORDER TO ENFORCE SETTLEMENT
This case was scheduled for trial on May 28, 2002. On or about May 24, 2002, the Court was informed by counsel that the case had settled. By Order of the Court, the parties were to file a joint stipulation for dismissal on or before July 1, 2002. They have failed to do so.
This matter is before the Court on the Plaintiff Masoud Shirazi's Motion to Enforce the Settlement Agreement (Filing No. 71). Plaintiff asks the Court to direct the Defendant, Allco Corporation ("Allco"), to conclude the settlement without requiring Plaintiff to release two corporate entities, Linc.net,. Inc. and Communicor Telecommunications, Inc. ("CTI"), and an individual, Ismael Perera, who is Linc.net's CEO. Allco opposes the motion but does not oppose enforcement of the settlement agreement, per se. Both parties have offered evidence in support of their respective positions (Filing Nos. 72-74).
The undisputed facts are that on the eve of trial, the parties verbally agreed that Allco would pay a sum certain to Shirazi, and that the parties would provide each other with a mutual, general release of claims. Following these verbal negotiations, Defendant's counsel prepared a 10-page draft written agreement that included a promise by Shirazi to release Allco and others, specifically including Linc.net, CTI, and Perera. The proposed agreement also provided for the release of the named entities' "affiliates, subsidiaries, successors and assigns." Plaintiff's counsel immediately objected in writing to proposed language requiring Shirazi to release Linc.net, CTI and Perera. Plaintiff did not object to "successors and assigns" language. In correspondence, Shirazi's counsel argued that Linc.net, CTI, and Perera are not parties to the settlement agreement, were not named in the suit, and did not provide any consideration for the release. Defendant's counsel responded with another draft agreement that incorporated other changes requested by Shirazi, but left intact the language releasing Linc.net, CIT and Perera. Defendant argues that Allco clearly sought to settle all claims and potential claims against it — including those that Shirazi may have against Linc.net, CTI, and Perera, because those entities are contractually entitled to seek indemnification from Allco for claims that Shirazi may bring against them.
With regard to the enforcement of a settlement agreement, the Eighth Circuit Court has stated:
A district court has the inherent power to summarily enforce a settlement agreement as a matter of law when the terms of the agreement are clear and unambiguous. Aro Corp. v. Allied Witan Co., 531 F.2d 1368, 1372 (6th Cir.), cert. denied, 429 U.S. 862, 97 S.Ct. 165, 50 L.Ed.2d 140 (1976). The district court must hold an evidentiary hearing, however, when there is a substantial factual dispute concerning the existence or terms of the settlement agreement, Callie v. Near, 829 F.2d 888, 890 (9th Cir. 1987), or when the situation presents complex factual issues. Hobbs Co., Inc. v. Am. Investors Management, Inc., 576 F.2d 29, 34 (3rd Cir. 1978).Gatz v. Southwest Bank of Omaha, 836 F.2d 1089, 1095 (8th Cir. 1988). The Court also acknowledges that a release need not be set aside simply because a party fails to appreciate the legal effects of such a release, provided the party is aware of its terms and alleges no fraud. Dolgner v. Dayton Co., 182 Minn. 588, 235 N.W. 275, 277 (1931).
After fully and carefully considering the parties' arguments and the record, the Court finds that the parties had a meeting of the minds and reached a settlement agreement. Neither party disputes this fact, and both parties urge the Court to enforce the settlement, as each party is construing it. The Court also finds that the material terms of the agreement are clear and unambiguous. The Court finds that the parties agreed that Allco would pay to Shirazi $150,000, and that in exchange the parties would generally release each other.
Further, the Court finds that the parties' mutual, general release included the release of successors and assigns. Neither party disputes the existence of the "successor and assigns" provision, only the effect of its application. Further, the Court observes that the inclusion of successors and assigns in release language is so commonplace under circumstances similar to this, where a former employee is seeking damages based on breach of contract, that if the parties intended to exclude successors and assigns from the release, that exclusion would have been readily ascertainable.
Thus, the issue is whether Linc.net, CTI, and Perera are successors and assigns to Allco. Black's Law Dictionary defines a "successor" as "a corporation that, through amalgamation, consolidation, or other assumption of interests, is vested with the rights and duties of an earlier corporation." The Minnesota Court of Appeals has relied upon that definition. See Johns v. Harborage I, Ltd., 645 N.W.2d 761, 766 (Minn.App. 2002) quoting Black's Law Dictionary 1446 (7th ed. 1999). Black's defines an "assignee" in relevant part as "[o]ne to whom property rights or powers are transferred by another."
In 1998, Shirazi began working as a consultant for Communicor Corporation. Sometime between November 1998 and May 2000, Communicor Corporation transferred, assigned, and sold certain of its assets, including the contracts that Shirazi had handled, to Communicor Corporation — USA. On May 10, 2000, Communicor Corporation-USA sold certain of its assets to CTI — which is a subsidiary of Linc.net, Inc., pursuant to an Asset Purchase Agreement ("APA"). In the APA, Communicor Corporation — USA is identified as the "Seller," CTI is identified as the "Buyer," and Linc.net is identified as itself, signing the APA only as the guarantor of CTI. Perera, individually, is not a signatory to the agreement. After the APA was signed, Shirazi was offered a job with Linc.net, but he declined it. Sometime after Shirazi terminated his relationship with Communicor Corporation and Communicor Corporation-USA, and sometime after Communicor Corporation-USA executed the APA with CTI, Communicor Corporation and Communicor Corporation-USA changed their names to Allco Corporation and Allco USA respectively.
Based on the Court's analysis of the evidence submitted with the motion, specifically including the APA, the undisputed facts including those contained in the Pretrial Order, and the parties' arguments, the Court finds CTI is a successor in interest and an assignee to Communicor Corporation-USA (which later changed its name to Allco-USA). Communicor Corporation-USA is a successor in interest to Communicor Corporation (which later changed its name to Allco). Thus, any claims that Shirazi may have against CTI are released under the undisputed terms of the settlement agreement, because Shirazi released the claims he had against Allco's successors in interest and assigns, CTI being among them.
Although Linc.net is the parent of CTI, and Linc.net guaranteed CTI's payment to Communicor Corporation-USA in the APA, the Court has been provided with no evidence that Linc.net is a successor-in-interest to Communicor Corporation or Communicor Corporation-USA. Similarly, the Court finds no evidence that Perera, individually, is a successor or assign of Allco. Although Perera is an officer of Linc.net, and the release intends to cover officers of the parties, there is no evidence before the Court that Perera is an officer of CTI. While the Court does not find that there was a meeting of the minds with regard to the release of Linc.net as an "affiliate" or Perera as an officer of an "affiliate," this finding should not be construed to mean that the Court believes Shirazi has a valid cause of action against Linc.net or Perera.
"The power of a trial court to enter a judgment enforcing a settlement agreement has its basis in the policy favoring the settlement of disputes and the avoidance of costly and time-consuming litigation." Kukla v. National Distillers Products Co., 483 F.2d 619, 621 (6th Cir. 1973).Bergstrom v. Sears, Roebuck and Co., 532 F. Supp. 923, 934 (D.C. Minn. 1982).
The policies articulated in the Bergstrom decision and the parties' interests are served by the Court's enforcement of this settlement agreement. Accordingly,
IT IS ORDERED:
1) Plaintiff's Motion to Enforce Settlement Agreement (Filing No. 71) is granted in all respects, except that Plaintiff must include in the release agreement a release of CTI as a successor in interest to Allco Corporation; and
2) The parties are directed to submit a Stipulation of Dismissal to this Court on or before September 20, 2002.