Cashner v. Freedom Stores, Inc., s. 95-2005

Decision Date16 October 1996
Docket Number95-2019,Nos. 95-2005,s. 95-2005
PartiesThomas D. CASHNER, Plaintiff-Appellant-Cross Appellee, v. FREEDOM STORES, INC., Educational Enterprises, Inc., Leonard Melley Sr., Defendants-Appellees-Cross Appellants, and Leonard Melley Jr., and John Melley, Defendants-Appellees.
CourtU.S. Court of Appeals — Tenth Circuit

James A. Gillespie, Hinkle, Cox, Eaton, Coffield & Hensley, Roswell, NM (Richard E. Olson and Karolyn King Nelson, with him on the briefs), for Plaintiff-Appellant-Cross Appellee.

Steven K. Sanders, Albuquerque, NM, for Defendants-Appellees-Cross Appellants.

Before BRORBY, EBEL, and HENRY, Circuit Judges.

EBEL, Circuit Judge.

Thomas Cashner appeals the district court's order granting relief to Defendants under Fed.R.Civ.P. 60(b) from orders incorporating the parties' settlement agreement and enforcing the settlement order. The district court granted the Defendants' Rule 60(b) motion on the grounds of mistake and impossibility, but nevertheless ordered Defendants to pay Cashner's attorney fees in the amount of $10,000. Cashner appeals the grant of the Defendants' Rule 60(b) motion, and Defendants cross-appeal the award of attorneys' fees to Cashner. We hold that no grounds were stated to support Rule 60(b) relief and accordingly we REVERSE the district court's order granting the Rule 60(b) motion. We VACATE the award to Cashner of attorneys' fees and REMAND for further proceedings.

I.

Thomas Cashner initiated a diversity suit in federal district court against Leonard Melley, Sr., Leonard Melley, Jr., John Melley, Freedom Stores, Inc. and Educational Enterprises (hereinafter "Defendants") for breach of employment contract and defamation. On April 29, 1993, the parties filed a Stipulation for Settlement. The Stipulation provided that Defendants would pay Cashner $6,500 within ten days and deliver to Cashner collectible accounts receivable that Defendants had generated through their retail store operations under the name of Freedom Stores, Inc. ("FSI"). The principal amount of the accounts receivable was to total $1,000,000 and the accounts receivable were to be delivered in four installments of $250,000 each. The installments were to be made every four months, beginning within ten days of the entry of the stipulation. Paragraph 2.D of the stipulation provided as follows:

The accounts receivable delivered to Plaintiff shall be aged similarly to those accounts that are turned over, in a normal business practice, to the internal collection department of FSI and shall not have been previously turned over to any other collection department within any enterprise operated by Defendants or any outside collection agency. It is the intent of the parties that the accounts receivable being so turned over to Plaintiff for collection shall be those accounts which FSI has previously, in its normal business practice, delivered to its own internal collection department, from its retail store operations, after such accounts have become delinquent; the same typically being approximately ninety (90) days after default of the agreed payment schedule.... It is the intent of the parties that Plaintiff receives accounts that are no worse or no better than those received by the internal collectors of FSI.

The stipulation for settlement was incorporated into an order and judgment by the district court which was filed on May 5, 1993.

Within ten days, the defendants paid the $6,500 and delivered accounts receivable to Cashner. On July 15, 1993, Cashner moved for an order to show cause why Defendants should not be held in contempt, claiming that the accounts receivable delivered to him were not in compliance with the settlement agreement as incorporated into the order and judgment. Specifically, Cashner alleged that "none of the accounts delivered had been delinquent for 90 days or less, with some accounts having been delinquent for eight years." 1 Defendants responded that they had complied with the settlement agreement.

The district court referred the matter to a magistrate judge, who, after an evidentiary hearing, filed his proposed findings and recommended disposition on September 17, 1993. The magistrate found that the stipulation was unambiguous, and that "FSI full[y] complied with its obligations and is not in violation of the Stipulation for Settlement." In finding full compliance, the magistrate found that "[t]he accounts turned over to Cashner were of the same kind and quality as those retained by FSI for its own collection purposes." Accordingly, the magistrate recommended that Cashner's motion to hold FSI in contempt be denied, and that Cashner be ordered to reimburse FSI for costs. Cashner timely objected to the proposed findings and recommendation.

The district court, concluding that it had erred in referring the matter to a magistrate, engaged in a de novo review of the magistrate's findings. In an order entered on November 19, 1993, the district court rejected the magistrate's conclusions, and found that Defendants were in violation of the settlement agreement. The district court found that under the agreement, Defendants were required to give Cashner accounts which were approximately 90 to 180 days past due. Although the court found the language of the agreement to be ambiguous, it relied on the language and evidence presented before the magistrate to determine the parties' intent. The court also agreed with Cashner that Defendants had violated the stipulation by delivering accounts worth only $250,000 where that amount included both principal and interest, as the stipulation "undisputably" called for $250,000 in principal amount.

Defendants filed a notice of appeal on December 15, 1993. However, they subsequently withdrew the appeal, which accordingly was dismissed on January 31, 1994. On January 18, 1994, Defendants filed in the district court a motion pursuant to Fed.R.Civ.P. 60(b) for relief from the court's earlier orders incorporating and then enforcing the settlement agreement. Rule 60(b) provides that the court may relieve a party from a final judgment or order for any one of five enumerated grounds, including "mistake," or "for any other reason justifying relief from the operation of the judgment." Fed.R.Civ.P. 60(b).

On August 30, 1994, the district court granted Defendants' motion on two grounds. First, it found that the motion should be granted "for 'mistake' because defendant Leonard Melley, Sr., was mistaken as to the terms of the Stipulation for Settlement and never intended to agree to the interpretation of Paragraph 2.D. that I have given to the language of paragraph 2.D." The court found that Melley had "misunderstood the meaning" of the paragraph. Second, the court found that the motion should be granted on the ground of impossibility of performance. It found "that the defendants simply do not generate sufficient accounts receivable to enable the defendants to comply with my interpretation of paragraph 2.D. of the stipulation of settlement." The court noted that it earlier had found plaintiff entitled to attorneys' fees and costs incurred with respect to enforcing the agreement, and invited plaintiff to file again for such relief. Cashner accordingly moved for attorneys' fees, and the court awarded him $10,000 in attorneys' fees and costs incurred in connection with the motions to enforce and to vacate the settlement agreement.

After the stipulation was set aside, the case was tried and a judgment was entered in favor of the Defendants on all counts. Cashner now appeals the district court's action in setting aside the settlement agreement under Rule 60(b). Defendants cross-appeal the award of attorneys' fees to Cashner.

II.

We have jurisdiction under 28 U.S.C. § 1291 to review an order granting a Rule 60(b) motion, when, after granting the motion, the district court has entered a final decision resolving the litigation on the trial court level. Stubblefield v. Windsor Capital Group, 74 F.3d 990, 994 (10th Cir.1996). We review the grant of a Rule 60(b) motion only for an abuse of discretion. Oklahoma Radio Assocs. v. F.D.I.C., 987 F.2d 685, 697 (10th Cir.1993). However, in determining whether a district court abused its discretion, we are mindful that "[r]elief under Rule 60(b) is extraordinary and may only be granted in exceptional circumstances." Bud Brooks Trucking, Inc. v. Bill Hodges Trucking Co., 909 F.2d 1437, 1440 (10th Cir.1990).

Rule 60(b) provides, in relevant part:

On motion and upon such terms as are just, the court may relieve a party ... from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; ... or (6) any other reason justifying relief from the operation of the judgment. The motion shall be made within a reasonable time, and for reasons (1), (2), and (3) not more than one year after the judgment, order, or proceeding was entered or taken.

Fed.R.Civ.P. 60(b). The district court granted relief based on both subsection (1) and subsection (6). We may affirm if relief was appropriate on either ground, see Pelican Prod. Corp. v. Marino, 893 F.2d 1143, 1146 (10th Cir.1990), and therefore we examine each provision in turn.

A. Rule 60(b)(1)

The district court granted relief under Rule 60(b)(1) "mistake" on the grounds that "defendant Leonard Melley, Sr. was mistaken as to the terms of the Stipulation for Settlement and never intended to agree to the interpretation of paragraph 2.D. that I have given to the language of paragraph 2.D." Melley, the court found, had "misunderstood the meaning" of the paragraph "and believed that he had agreed to an entirely different manner of settling the plaintiff's claims." Cashner protests that such a "mistake" is not of the sort contemplated by Rule 60(b)(1). We agree.

Rule 60(b)(1) provides:

On motion and upon such terms as are just, the court may relieve a party or a party's legal representative from a final...

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