Stephenson v. Young

DEBRA STEPHENSON, Plaintiff, v. DEBORAH YOUNG and SOUTHEAST KANSAS EDUCATION SERVICE CENTER INTERLOCAL NO. 609, Defendants,

CIVIL ACTION No. 10-2197-KHV

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

Dated: May 26, 2011

MEMORANDUM AND ORDER

This matter is before the Court on Defendants' Motion To Enforce Settlement Agreement (Doc. #55) filed February 2, 2011. On April 28, 2011, the Court held an evidentiary hearing on defendant's motion. For reasons stated below, the Court sustains defendants' motion.

Findings Of Fact

From August of 2007 through approximately June of 2009, plaintiff worked as a non-tenured school teacher at Southeast Kansas Education Service Center Interlocal No. 609. Deborah Young supervised plaintiff. Defendants did not renew plaintiff's teaching contract for the 2009-2010 school year. Plaintiff asserts several claims for wrongful termination.

On October 4, 2010, the parties attempted to mediate this matter before Larry Rute, an attorney and mediator. On November 23, 2010, after the parties agreed that Rute could propose a settlement, Rute submitted a mediator proposal to counsel.¹ The proposal recommended that defendants pay plaintiff $150,000 and included non-monetary terms such as a confidentiality provision. By the end of November, the Board of Directors of Southeast Kansas Education Service Center Interlocal No. 609 had discussed the mediator proposal and authorized counsel to accept theproposal.² By the end of November, defense counsel notified Rute that defendants accepted the mediator proposal.³

On December 23, 2010, Patrick McGrath, co-counsel for plaintiff, notified Rute that plaintiff accepted the mediator proposal. Between December 24 and 28, 2010, Rute notified Jill Waldman, co-counsel for defendants, that plaintiff had accepted the mediator proposal. Rute asked Waldman to reaffirm that defendants had accepted the mediator proposal. On December 28, Waldman told Rute that defendants accepted the mediator proposal subject to formal Board approval but that approval was a mere formality. On December 29, Aaron Schwartz, co-counsel for plaintiff, noted in an e-mail to Waldman that "[f]rom what Larry Rute tells me, settlement has been reached and we are just waiting on board approval and your final settlement terms. Please advise if this is not your understanding." On December 30, Waldman responded to Schwartz, "yes, your understanding is correct." Rute believed that the parties had reached a settlement. Waldman had no doubt in her mind that the parties had settled the case.

On January 6, 2011, defense counsel notified Rute that the Board had approved the settlement and would formally approve it at the next board meeting on January 19, 2011.⁴ On January 6, Rute notified Schwartz that the Board would approve the settlement.⁵ The next day, onJanuary 7, McGrath called Rute and said his client would no longer accept or approve the mediator proposal. McGrath also called Waldman and stated that plaintiff had spoken to her husband and wanted to "back out" of the settlement.

Conclusions Of Law

The Court has discretion to enforce or reject a settlement agreement while litigation is pending before it. United States v. Hardage, 982 F.2d 1491, 1495 (10th Cir. 1993). To resolve issues involving the formation, construction and enforceability of a settlement agreement, the Court applies state contract law. See United States v. McCall, 235 F.3d 1211, 1215 (10th Cir. 2005). The parties do not dispute that Kansas law applies in this matter.⁶

Whether a contract was formed is a question of fact. Reznik v. McKee, 216 Kan. 659, 671-72, 534 P.2d 243, 254 (1975). To form a binding contract, the parties must reach a meeting of the minds on all essential terms. Albers v. Nelson, 248 Kan. 575, 580, 809 P.2d 1194, 1198 (1991); see Sidwell Oil & Gas Co., Inc. v. Loyd, 230 Kan. 77, 79, 630 P.2d 1107, 1110 (1981). To constitute a meeting of the minds, the parties must have a fair understanding which normally accompanies mutual consent and the evidence must show with reasonable definiteness that the minds of the parties met upon the same matter and agreed upon the terms of the contract. Steele v. Harrison, 220 Kan. 422, 428, 552 P.2d 957, 962 (1976).

The law favors the compromise and settlement of disputes. Krantz v. Univ. of Kan., 271Kan. 234, 241-242, 21 P.3d 561, 567 (2001); Lewis v. Gilbert, 14 Kan. App.2d 201, 203, 785 P.2d 1367, 1368 (1990). Absent fraud or bad faith, neither party to an agreement is permitted to repudiate it. See Krantz, 271 Kan. at 241-42, 21 P.3d at 567; see also Lewis, 14 Kan. App.2d at 203, 785 P.2d at 1368 (party's change of mind does not amount to allegations of fraud or bad faith); Woods v. Denver Dep't of Revenue, Treasury Div., 45 F.3d 377, 378 (10th Cir. 1995) (party who knowingly and voluntarily enters settlement ordinarily cannot avoid settlement simply because she changes her mind). Settlement agreements need not be in writing to be enforceable under Kansas law. Lewis, 14 Kan. App.2d at 203-04, 785 P.2d at 1368-69; see Dougan v. Rossville Drainage Dist., 270 Kan. 468, 487-88, 15 P.3d 338, 352 (2000) (oral settlement agreement enforceable if parties have meeting of minds on essential terms and intend to be bound); Ciaramella v. Reader's Digest Ass'n, Inc., 131 F.3d 320, 322 (2d Cir. 1997) (fact that parties contemplate later memorializing agreement in executed document will not prevent them from being bound by oral agreement) (applying New York and federal common law); Fulgence v. J. Ray McDermott & Co., 662 F.2d 1207, 1209 (5th Cir. 1981) (party who orally authorized settlement bound by agreement even if she changes her mind when presented with settlement documents); Connor v. Hammer, 201 Kan. 22, 24-25, 439 P.2d 116, 118-19 (1968) (plaintiff could not repudiate oral settlement after attorney confirmed settlement by letter). Contracting parties may intend to be bound by their oral expressions and consider other outstanding matters as nonessential:

Certain matters may be expressly left to be agreed upon in the future, [and those matters] may not be regarded by the parties as essential to their present agreement. Such an expectation will not prevent an agreement already made from being an enforceable contract. This may be true even though they expressly provide in their agreement that new matters, when agreed upon, shall be incorporated into their agreement and all shall be reduced to a formal written document or documents later. The fact that the parties contemplate the subsequent execution of a formal instrument as evidence of their agreement does not necessarily imply they have not already bound themselves to a definite and enforceable contract.

Phillips & Easton Supply Co. v. Eleanor Int'l, Inc., 212 Kan. 730, 735, 512 P.2d 379, 384 (1973)(citations omitted). Compare Weil & Assocs. v. Urban Renewal Agency, 206 Kan. 405, Syl. ¶ 6, 479 P.2d 875 (1971) (where intent of parties is clear that they are negotiating with definite understanding that contract terms are not fully agreed upon and written agreement is contemplated, and no valid, enforceable contract is to exist until the execution of such an agreement, a binding contract does not come into existence in the absence of such execution). Whether the parties intended their oral agreement to be immediately effective or only to become binding on the execution of the writing is a question of fact to be resolved by the trial court. McKeon v. Giusto, 280 P.2d 782, 785 (Cal. 1955).

Plaintiff contends that the parties only reached an agreement subject to formal Board approval so that she had an unqualified right to withdraw from the agreement before formal Board approval on January 19. An understanding that an agreement is subject to approval by a governing board or similar body does not necessarily make the agreement illusory. A condition precedent is something that is agreed must happen or be performed before a right can occur to enforce the main contract. Weinzirl v. Wells Group, Inc., 234 Kan. 1016, 1020, 677 P.2d 1004, 1008 (1984). A condition of board approval may be construed either as (1) a condition precedent to the initial formation of the contract or (2) a condition precedent to an obligation to perform under an existing contract. M West, Inc. v. Oak Park Mall, L.L.C., 44 Kan. App.2d 35, 47, 234 P.3d 833, 843 (2010); Castroville Airport, Inc. v. City of Castroville, 974 S.W.2d 207, 210 (Tex. App. 1998). In the first instance, no contract is formed because the negotiating parties intend that their agreement will take effect only when and if it is approved by a governing board or entity. See Jacobs v. Freeman, 163 Cal. Rptr. 680, 686-87 (Cal. App. 5th Dist. 1980); see also M West, 44 Kan. App.2d at 47, 234 P.3d at 843 (parties may agree to condition precedent to formation of contract). In the latter instance, however, a condition of board approval does not give either party an absolute right to escape its obligations under the agreement because the reserving party has an implied obligation to carry outthe objectives of the contract in good faith including submitting the agreement to its board for approval. Jacobs, 163 Cal. Rptr. at 687; see Frankel v. Bd. of Dental Examiners, 54 Cal.Rptr.2d 128, 130-31 (Cal. App. 3d Dist. 1996) (potential lack of approval of settlement agreement by governing board by itself will not preclude parties from entering presently binding and effective contract); see also M West, 44 Kan. App.2d at 47, 234 P.3d at 843 (parties may agree to condition precedent to performance under an existing contract). If reasonably possible, courts treat a condition of board approval as an enforceable obligation which the reserving party must act in good faith to satisfy.⁷

Here, plaintiff does not allege fraud or bad faith. Instead, plaintiff asserts that defendants never formally accepted her offer before she withdrew it on January 7, 2011. Plaintiff's present position is at odds with the expressed...