Fleming v. U.S. Postal Service AMF O'Hare

• Decision Date: 16 June 1994
• Docket Number: No. 92-2735,92-2735
• Citation: 27 F.3d 259
• Parties: 66 Fair Empl.Prac.Cas. (BNA) 627, 65 Empl. Prac. Dec. P 43,182, 5 NDLR P 121 Beatrice FLEMING, Plaintiff-Appellant, v. UNITED STATES POSTAL SERVICE AMF O'HARE and Marvin Runyon, Postmaster General, United States Postal Service, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 259

27 F.3d 259

66 Fair Empl.Prac.Cas. (BNA) 627,

65 Empl. Prac. Dec. P 43,182, 5 NDLR P 121

Beatrice FLEMING, Plaintiff-Appellant, v. UNITED STATES POSTAL SERVICE AMF O'HARE and Marvin Runyon Postmaster General, United States Postal Service Defendants-Appellees.

No. 92-2735.

United States Court of Appeals Seventh Circuit.

Argued April 26, 1994.

Decided June 16, 1994.

Andrey Filipowicz (argued), Chicago, IL, for plaintiff-appellant.

Madeleine S. Murphy, Asst. State's Atty., Office of the U.S. Atty., Criminal Div., Michele M. Fox, Asst. U.S. Atty. (argued), Office of the U.S. Atty., Civil Div., Appellate Section, Chicago, IL, Joan C. Goodrich, U.S. Postal Service, Office of Labor Law, Washington, DC, for defendants-appellees.

Before POSNER, Chief Judge, and ESCHBACH and EASTERBROOK, Circuit Judges.

POSNER, Chief Judge.

The plaintiff, a black woman who suffers from schizophrenia and a hearing impairment, was fired by the Postal Service in 1986. She filed a charge with the EEOC alleging breach of contract, retaliatory discharge, and discrimination on grounds of race, sex, and handicap, and later this suit repeating these charges. The Postal Service offered to settle the suit for $50,000 plus attorney's fees of $25,000. At a hearing before the district judge Fleming said that the offer was "really not sitting in complete agreement with" her because she had lost more than $200,000 in wages and wanted her job back. The judge urged her to accept the offer, calling it "eminently reasonable," but said the decision was hers to make and that she should confer with her lawyer about it. The judge then turned to the other cases on his call. Later in the morning he called Fleming's case again. Her lawyer told the judge that they had conferred and that she had agreed to accept the settlement offer. Although present, she said nothing. The judge said that there was now a binding oral agreement to settle the case, which he dismissed with leave to reinstate within 30 days if the agreement was not reduced to writing. More than 30 days later Fleming asked that the case be reinstated because she did not "comprehend the significance of the written agreement." Her lawyer explained that Fleming thought she ought to be reinstated in her job as part of the settlement but realized she had entered into a binding oral agreement to settle the case without reinstatement.

The district judge denied the motion and Fleming received and cashed a check for $50,000; her lawyer (to whom presumably she had assigned her statutory entitlement to attorney's fees, as is common) received a check for $25,000. A couple of weeks after her check had been mailed to her and presumably after it had been cashed, although that date is not in the record, Fleming, no longer represented by counsel, filed a handwritten Rule 60(b) motion with the district judge. In it she claimed that she had been "confused, disoriented, and under a lot of pressure" at the settlement hearing and did not remember having instructed her lawyer to accept the Postal Service's offer. The judge denied the motion without a statement of reasons and Fleming then retained new counsel to prosecute this appeal.

The briefs have treated us to an elaborate tour of the principles that govern Rule 60(b), and when settlements or releases may be set aside, and what authority lawyers have to make settlements on behalf of their clients, and how insanity affects all this and what law governs these issues. We can cut through all this doctrinal thrust and parry by reminding the parties of one of the most elementary principles of contract law, strangely lost to sight in the jungle of doctrinal intricacies: that a party may not rescind a contract without returning to the other party any consideration received under it. Jackson v. Anderson, 355 Ill. 550, 189 N.E. 924, 926 (1934); Community Bank v. Calkins, 52 Ill.App.3d 759, 10 Ill.Dec. 444, 447, 367 N.E.2d 1053, 1056 (1977); Smith v. First National Bank, 254 Ill.App.3d 251, 191 Ill.Dec. 711, 722, 624 N.E.2d 899, 910 (1993). These are Illinois cases, and, as we noted in Fortino v. Quasar Co., 950 F.2d 389, 394-95 (7th Cir.1991), it remains unsettled in this circuit whether a dispute over the settlement of a federal case arises under state law--on the theory, for which the Supreme Court's decision in Kokkonen v. Guardian Life Ins. Co., --- U.S. ----, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994), provides support, that it is merely a contract dispute with a remote federal origin, Morgan v. South Bend Community School Corp., 797 F.2d 471, 475 (7th Cir.1986); McCall-Bey v. Franzen, 777 F.2d 1178, 1185-86 (7th Cir.1985)--or under federal law, Lumpkin v. Envirodyne Industries, Inc., 933 F.2d 449, 458 (7th Cir.1991); and whether, if the latter, state law should be adopted as the federal rule of decision anyway, unless to do so would disserve federal interests. Id. at 457-58; Riley v. American Family Mutual Ins. Co., 881 F.2d 368, 373-74 (7th Cir.1989). There is no practical difference in this case. The principle that a release can be rescinded only upon a tender of any consideration received is not a peculiarity of Illinois law; it is a general principle of contract law, Samuel Williston, 12 Williston on Contracts Sec. 1460 (Walter H.E. Jaeger ed., 3d ed. 1970); In re Peoples Marketing Corp., 347 F.2d 398, 400 (7th Cir.1965); Morta v. Korea Ins. Corp., 840 F.2d 1452, 1455 n. 4 (9th Cir.1988); Grillet v. Sears, Roebuck & Co., 927 F.2d 217, 220-21 (5th Cir.1991); Wamsley v. Champlin Refining & Chemicals, Inc., 11 F.3d 534 (5th Cir.1993); Prudential Ins. Co. v. Smith, 231 Ind. 403, 108 N.E.2d 61, 64 (1952), and would surely be a component of any federal common law of releases. Not even plaintiffs are helped in the long run by a rule allowing them to have their cake and eat it, for a defendant will not pay as much for a release that the plaintiff can challenge without having to repay the money as the price of maintaining the challenge. Whether the tender must always precede the institution of the suit, or whether, as courts now hold in equity cases (which this case is in part, as the plaintiff seeks reinstatement as well as damages), it is enough that the complaint contains an offer to restore the consideration, an offer that the court could enforce by a conditional judgment, 1 E. Allan Farnsworth, Farnsworth on Contracts Sec. 4.15, pp. 429-30 (1990), is a detail of no importance in this case. Neither tender nor offer was made.

When federal law limits a class of releases, as in cases under the Federal Employers' Liability Act, or the closely parallel Jones Act, or the Age Discrimination in Employment Act, each of which regulates releases, see 45 U.S.C. Sec. 55, 46 U.S.C. Sec. 688(a), 29 U.S.C. Sec. 626(f)(1), the common law rule requiring tender as a prerequisite to rescission may have to give way. Hogue v. Southern R. Co., 390 U.S. 516, 88 S.Ct. 1150, 20 L.Ed.2d 73 (1968) (per curiam); Oberg v. Allied Van Lines, Inc., 11 F.3d 679 (7th Cir.1993); Forbus v. Sears Roebuck & Co., 958 F.2d 1036, 1040-41 (11th Cir.1992); Smith v. Pinell, 597 F.2d 994 (5th Cir.1979) (per curiam). (But with respect to the age discrimination law, Wamsley v. Champlin Refining & Chemicals Co., supra, 11 F.3d at 541 n. 13, strongly criticized our decision in Oberg and reached the opposite result.) The idea behind these cases (and their common law counterpart, cases in which the release was fraudulently executed and therefore void, Haller v. Borror Corp., 50 Ohio St.3d 10, 552 N.E.2d 207, 210-11 (1990); Nelson v. Browning, 391 S.W.2d 873, 877 (Mo.1965)) is a little obscure to us. Of course a worker who has executed a void release should not be barred from challenging it by his inability to tender back the consideration received, as the effect would be to make the release enforceable as a practical matter. But not all the cases excusing tender are ones where the plaintiff does not have and cannot borrow the money for it. Unproblematic for excusing tender, however, is the case in which all the plaintiff obtained in exchange for the release was something to which he was already entitled, as distinct from obtaining payment of a disputed or disputable claim. For in the former case the release would fail for want of consideration, Berning v. A.G. Edwards & Sons, Inc., 990 F.2d 272, 275-76 (7th Cir.1993); General Intermodal Logistics Corp. v. Mainstream Shipyards & Supply, Inc., 748 F.2d 1071, 1074-77 (5th Cir.1984) (per curiam), and the amount that the plaintiff had received in exchange for the release would simply be set off against any recovery that he might obtain in the suit.

The Ninth Circuit, in Botefur v. City of Eagle Point, 7 F.3d 152, 155-56 (9th Cir.1993), added to the list of exceptions to the tender requirement by holding the requirement inapplicable to suits under 42 U.S.C. Sec. 1983, even though that statute does not...