Infinite Sec. Solutions, L. L.C. v. Karam Props. Ii, Ltd.

• Decision Date: 26 March 2015
• Docket Number: Nos. 2013–1671,2013–1795.,s. 2013–1671
• Citation: 37 N.E.3d 1211,143 Ohio St.3d 346,2015 Ohio 1101
• Parties: INFINITE SECURITY SOLUTIONS, L.L.C., Appellee, v. KARAM PROPERTIES II, LTD., Appellee. Travelers Indemnity Company, Appellant, v. Infinite Security Solutions, L.L.C., Appellee.
• Court: Ohio Supreme Court

143 Ohio St.3d 346

37 N.E.3d 1211

2015 Ohio 1101

INFINITE SECURITY SOLUTIONS, L.L.C., Appellee,

v.KARAM PROPERTIES II, LTD., Appellee.

Travelers Indemnity Company, Appellant,

v.Infinite Security Solutions, L.L.C., Appellee.

Nos. 2013–1671

2013–1795.

Supreme Court of Ohio.

Submitted July 9, 2014.

Decided March 26, 2015.

Davis & Young and Paul D. Eklund, Cleveland, for appellant.

Kisling, Nestico & Redick, L.L.C., John J. Reagan, Akron, Alberto R. Nestico, and Christopher J. Van Blargan, Cleveland, for appellees.

Smith, Rolfes & Skavdahl Co., L.P.A., Jerome F. Rolfes, Cincinnati, and Amanda M. Rieger, urging reversal for amicus curiae, the Ohio Association of Civil Trial Attorneys.

FRENCH

, J.

{¶ 1} In these consolidated appeals, we consider a trial court's authority to retain jurisdiction when it dismisses a civil case to thereafter enforce a settlement agreement between the parties. In case No. 2013–1671, we have accepted the following certified-conflict question: "[Is] a dismissal entry that does not either embody the terms of a settlement agreement or expressly reserve jurisdiction to the trial court to enforce the terms of a settlement agreement * * * an unconditional dismissal?" 137 Ohio St.3d 1471, 2014-Ohio-176, 2 N.E.3d 267

. We have also accepted a related discretionary appeal, case No. 2013–1795, in which appellant, the Travelers Indemnity Company ("Travelers"), asserts the following proposition of law: "A trial court's entry of dismissal that (1) states [that] the parties have resolved their differences or have arrived at a settlement agreement, (2) states that the dismissal is without prejudice, (3) permits the submission by the parties of a final entry of dismissal, and * * * (4) provides a time-frame for the filing of any final entry of dismissal, is a conditional dismissal that does not divest the trial court of jurisdiction to consider and enforce the terms of the settlement agreement."

{¶ 2} Both the conflict question and the proposition of law presume a trial court's authority to "conditionally" dismiss a civil action and thereby retain jurisdiction for further proceedings. In this opinion, we reject the notion of a "conditional" dismissal, but we hold that a trial court may, when it dismisses a civil action upon notification that the parties have settled, expressly retain jurisdiction for the specific purpose of enforcing the settlement agreement.

Factual and Procedural Background

{¶ 3} These appeals stem from two cases filed in the Lucas County Court of Common Pleas. Both cases involve claims that arose as a result of a fire at the Hunter's Ridge apartment complex in Toledo, Ohio.

{¶ 4} The first case was filed by appellee Infinite Security Solutions, L.L.C. ("Infinite"), against Karam Properties I, Ltd. ("Karam I"), and appellee Karam Properties II, Ltd. ("Karam II"), to recover for security services that Infinite provided at the Hunter's Ridge complex pursuant to a contract with Karam Managed Properties, L.L.C. Karam I and Karam II answered Infinite's complaint, but urged that Toledo Properties, L.L.C., was the proper defendant. Karam I and Karam II also filed a counterclaim against Infinite, purportedly on behalf of Toledo Properties, to recover for the portion of the damage resulting from the Hunter's Ridge fire that was not covered by insurance. The counterclaim alleged that Infinite negligently permitted the use of fireworks, which caused the fire.

{¶ 5} In an amended complaint, Infinite eliminated Karam I as a defendant. The trial court granted Infinite leave to file a second amended complaint naming Karam Managed Properties and Toledo Properties as defendants, but Infinite did not do so.

{¶ 6} Travelers filed the second case against Infinite. Travelers alleged that as a result of the fire, it paid approximately $8.9 million under an insurance policy issued to Karam Managed Properties, which managed the Hunter's Ridge complex, and Toledo Properties, which owned the complex. Travelers claimed that, to the extent of its payments under the policy, it was subrogated to its insureds' rights, claims, and causes of action against Infinite.

{¶ 7} The trial court consolidated the two cases.

{¶ 8} On May 19, 2011, during a pretrial settlement conference, the parties orally agreed to settle their claims. They agreed that Infinite would pay a fixed sum to settle all the claims against it and informed the trial court that they had resolved all issues except how to split the settlement money. The parties stated that they would attempt to resolve their competing claims to the settlement funds but that they would submit the issue to the trial court if they were unable to agree.

{¶ 9} Lucas County Gen.R. 5.05(F) affords a litigant's counsel 30 days following settlement of a case to submit a dismissal entry before "the judge may order the case dismissed for want of prosecution or file an order of settlement and dismissal and assess costs." Nevertheless, on May 26, 2011, just one week after the parties agreed to settle, the trial court sua sponte filed a dismissal entry, which stated, "Parties having represented to the court that their differences have been resolved, this case is dismissed without prejudice, with the parties reserving the right to file an entry of dismissal within thirty (30) days of this order."

{¶ 10} Travelers filed a motion to set aside the dismissal entry pursuant to Civ.R. 60(B)

on June 20, 2011. Travelers argued that the dismissal was a mistake because "the settlement had not been finalized, no monies exchanged hands, no papers were exchanged or signed and the remaining outstanding issue of the priority/apportionment of the proceeds between Travelers and Karam ha[d] not been resolved." Travelers asked the trial court to vacate the dismissal entry pursuant to Civ.R. 60(B)(1) and to reopen the case to decide the priority issue. Karam II, along with nonparties Karam Managed Properties and Toledo Properties, opposed Travelers' motion, arguing that the trial court lacked jurisdiction to decide the priority issue because it arose after the final settlement agreement and was the subject of a pending federal lawsuit. Infinite, on the other hand, filed a motion to enforce the settlement agreement and for an order permitting it to pay the agreed-upon settlement amount to the court.

{¶ 11} At a hearing on Travelers' motion, the trial judge emphasized that the May 26, 2011 dismissal was without prejudice and functioned as "a placeholder entry, pending submission of whatever the final entry is." On October 12, 2012, the trial court denied both Travelers' and Infinite's motions as moot. The court held that its dismissal was conditional, that it retained jurisdiction to determine the priority issue without vacating the dismissal entry, and that Travelers' claim to the settlement funds had priority. The trial court ordered Infinite to forward all but $25,000 of the settlement funds to Travelers and ordered the parties to complete and execute a settlement agreement and release within 30 days.

{¶ 12} Karam II, along with nonparties Karam I, Karam Managed Properties, and Toledo Properties (collectively, "Karam"), filed a notice of appeal. Karam argued that the trial court lacked subject-matter jurisdiction after dismissing the cases, lacked authority to decide the priority issue because it was not raised in either the pleadings or the settlement agreement, and erred in its reading of the Travelers policy.

{¶ 13} The Sixth District Court of Appeals agreed that the trial court lacked jurisdiction to enter the October 12, 2012 judgment because of its prior dismissal. The court of appeals held that the May 26, 2011 entry, which "unequivocally dismissed the action," was "unconditional" because it neither incorporated the terms of the parties' settlement nor expressly retained jurisdiction to enforce the settlement agreement. 2013-Ohio-4415, 2 N.E.3d 297, ¶ 16–17 (6th Dist.)

. The court of appeals therefore concluded that the dismissal had relieved the trial court of jurisdiction, and it dismissed Karam's appeal for lack of a final, appealable order. Travelers filed a discretionary appeal in this court, and we accepted it. 137 Ohio St.3d 1473, 2014-Ohio-176, 2 N.E.3d 268.

{¶ 14} Pursuant to Article IV, Section 3(B)(4) of the Ohio Constitution

, the Sixth District certified its judgment as in conflict with Estate of Berger v. Riddle, 8th Dist. Cuyahoga Nos. 66195 and 66200, 1994 WL 449397 (Aug. 18, 1994)

, and Hines v. Zofko, 11th Dist. Trumbull No. 93–T–4928, 1994 WL 117110 (Mar. 22, 1994), on the following question: "[Is] a dismissal entry that does not either embody the terms of a settlement agreement or expressly reserve jurisdiction to the trial court to enforce the terms of a settlement agreement * * * an unconditional dismissal?" 2013-Ohio-4415, 2 N.E.3d 297, at ¶ 22. In Berger and Hines, the courts characterized dismissal entries as conditional when the entries stated that all claims were settled and dismissed, even though the entries did not incorporate the terms of the settlements or expressly retain jurisdiction.

{¶ 15} This court consolidated the certified-conflict case and Travelers' discretionary appeal. 137 Ohio St.3d 1471, 2014-Ohio-176, 2 N.E.3d 267

.

Analysis

{¶ 16} A settlement agreement is a contract designed to terminate a claim by preventing or ending litigation. Continental W. Condominium Unit Owners Assn. v. Howard E. Ferguson, Inc., 74 Ohio St.3d 501, 502, 660 N.E.2d 431 (1996)

. The law highly favors settlement agreements, id., and a trial judge generally has discretion to promote and encourage settlements to prevent litigation, Rulli v. Fan Co., 79 Ohio St.3d 374, 376, 683 N.E.2d 337 (1997). Because a settlement agreement constitutes a binding contract, a trial court has authority to enforce the agreement in a pending lawsuit. Mack v. Polson Rubber Co., 14 Ohio St.3d 34, 36, 470 N.E.2d 902 (1984), citing Spercel v. Sterling Indus., Inc., 31 Ohio St.2d 36, 285 N.E.2d 324 (1972), syllabus.

{¶ 17} Many of...