Loeffel Steel Prods., Inc. v. Delta Brands, Inc., 01 C 9389
| Decision Date | 02 December 2013 |
| Docket Number | No. 01 C 9389,01 C 9389 |
| Parties | LOEFFEL STEEL PRODUCTS, INC., Plaintiff, v. DELTA BRANDS, INC., d/b/a DBI; and SAMUEL F. SAVARIEGO, individually, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
Loeffel Steel Products, Inc. ("Loeffel"), has moved to reinstate the lawsuit it filed against Delta Brands Inc. ("Delta") a dozen years ago on December 7, 2001, and to allow it to amend its complaint to add a count for breach of contract for non-compliance with the settlement agreement. Delta opposes the motion, arguing it comes far too late, and the court no longer has jurisdiction over this matter.
"Defer no time, delays have dangerous ends."
Henry VI, Part I, Act III, sc. ii 1.331
More than thirteen years ago, Loeffel purchased a sheet steel cutting and stacking machine - called a rotary shear multi-blanking line - from Delta Brands Inc. ("Delta"). Delta had made some impressive claims about the speed and accuracy of the machine. Loeffel would contend those claims were extravagant and exaggerated. The machine was installed at Loeffel's facility in August2000. It never worked properly. Engineers worked on the machine on a continuous basis, dealing with a variety of mechanical, electrical, and software problems. Finally, Loeffel had had enough and filed suit on December 1, 2001.2
The parties spent the next five years in litigation. At one point, at the parties' invitation, the court observed the machine in operation at Loeffel's plant. On that day at least, Delta's highly touted rotary shear multi-blanking line performed rather badly, and the test had to be stopped.3 Litigation continued until finally the parties reached a settlement. It called for Delta to make a substantial payment to Loeffel in monthly installments over a period of sixteen months, from April 2006 to July 2007. Delta also had to design, build, and install a host of modifications to the machine in order to get it working up to specifications set forth in the settlement agreement. . The period in which work had to be completed was about 9½ months, with an additional 21 days of run time before final testing of the modified machine. . The failure to complete the modifications would be a default, and Loeffel would then be allowed to reinstate its suit against Delta if the default was not cured within thirty days. (Dkt. # 180, Ex. B, ¶ 3(b)). Once Delta made its first installment payment on April 20, 2006, the parties would seek a dismissal order from the court. (Dkt. # 180, Ex. B, ¶ 4(a)).
The following order was entered on April 27, 2006:
The parties report that the case is settled subject to various contingencies. At the request of the parties, the case is dismissed without prejudice with leave to reinstate within one year of the draft order to follow. The settlement agreement is incorporatedherein by reference and the parties shall abide by their respective obligations. The court shall retain jurisdiction to enforce the settlement agreement.
(Dkt. #166).4
The parties' draft order titled Order of Dismissal was entered a week later on May 3rd. It echoed the earlier order, again incorporated the terms of the settlement agreement by reference, and effectively started the one year clock:
The Court has been apprised that the parties have executed a Settlement Agreement, the terms of which are incorporated in this Order by reference. The above captioned case is thus dismissed without prejudice, and the Court shall retain jurisdiction to enforce the terms of the Settlement Agreement. (Dkt. #169).
If Loeffel's version of events is to be credited, it was painfully apparent early on in the one year period that things were not going well. Thousands of dollars and hundreds of hours were being sunk into the rotary shear multi-blanking line without improvement. Loeffel had a punch list of problems that needed to be addressed, and Delta was not reimbursing it for the costs as it had promised. About a year and a half after the parties executed their settlement agreement, Loeffel had had enough - again. Its counsel informed Delta by letter on October 9, 2007, that:
[Loeffel's] frustration has reached a critical juncture. He is asking me to prepare the matter to reinstate the proceedings. I have counseled him that this should be our last resort, and that we should try to see if the parties can come to a final conclusion on the testing and remediation efforts by [Delta]. . . . I believe we are at the end of our rope . . .
(Dkt. # 180, Ex. F). Counsel demanded a meeting within 21 days and demanded reimbursementwithin 7 days. (Dkt. # 180, Ex. F). Apparently, that meeting resulted in Loeffel allowing Delta more time to make the promised modifications. (Dkt. # 180, at 5).
Seven months later, Loeffel was still at the end of its rope. Counsel's May 20, 2007 letter repeated his previous one and raised additional concerns:
We are reaching a point in the relationship between our clients which is critical that your client be proactive and do exactly what it has promised to do over time or my client (who has already insisted that I do so) triggers the litigation to ensue again and set the matter for trial. . . . while your client makes some efforts towards completing the changes on the line . . . every time we try to get to point of finality and schedule the remaining items on the punchlist to be completed so we can set a test date, he appears to vanish. My client has written numerous emails and copied on them and to date the matter has not been concluded. We do not have firm dates and a schedule from your client for that punchlist and thereafter a date out to do the testing, thus I will be forced to male a motion with the court to reinstate the litigation.
(Dkt. # 180, Ex. G). Counsel demanded Delta contact Loeffel with a schedule and reimburse Loeffel $34,000 in expenses by May 31, 2008. (Dkt. # 180, Ex. G). Delta somehow mollified Loeffel once again. On November 3, 2009, another letter from Loeffel's counsel listed specific punchlist items that had been a problem for over three years. Stunningly, the modifications at issue were specifically set forth and described in the April 2006 settlement agreement. (Dkt. # 180, Ex. E).
But, as Loeffel argues, this pattern continued, unabated, for the next five years. (Dkt. # 180, at 6). On October 7, 2010, Loeffel's counsel sent Delta yet another letter "[i]n an attempt to avoid additional litigation between the parties." (Dkt. # 180, Ex. D). He noted that there was still a punchlist of items to be completed. It was not as if there were unforeseen problems developing with the machine as time went on and work was done. Again, Loeffel complained that the modifications promised in the 2006 settlement agreement had not been made. (Dkt. # 180, Ex. D). So, in well over four years, Delta had not even been able to fix the specific problems the settlement agreement was designed to address. And expenses continued to mount and go unreimbursed. Loeffel statesthat this letter served as its default notice to Delta. It closed:
[Loeffel] hereby demands the above-mentioned modifications and/or services to the line be completed on or before October 30, 2010. We would like to schedule a test run of the line, pursuant to . . . the Settlement Agreement, for the week of November 8, 2010. Please let me know your availability for that week and we can schedule the test. If we do not hear from you and the modification are not completed by October 30, the testing will still occur by November 8, 2010, and undoubtedly it will fail the specifications and we have been instructed to file the suit per the terms of the Settlement Agreement by November 19, 2010.
(Dkt. # 180, Ex. D). Despite having provided Delta with a notice of default pursuant to the terms of the settlement agreement, after the 30 day cure period had passed, Loeffel still did not reinstate its case.
Delta went out of business some time in 2011 and has since reorganized as Delta Steel Technologies. http://www.deltasteeltech.com/MainPage.html. Loeffel asserts that it was not informed of this until March of 2013. (Dkt. # 180, Ex. H). Only then, upon learning of Delta's demise, did Loeffel move to reinstate its lawsuit. According to Loeffel, this was when it became clear - not before - that Delta was not going to complete the promised modifications. Even then, Loeffel still waited another five months before attempting to bring legal action, filing its six-paragraph motion on August 7, 2013. (Dkt. # 171). In short, it was only after more than seven years had passed following the dismissal of the case, and six years after the first signs that Delta was not going to be able to get its machine up to specifications and, incredibly, nearly three years after it gave Delta notice that it was in default on the settlement agreement, that Loeffel took action to reinstate its 2001 lawsuit.
In Kokkonen v. Guardian Life Insurance Co., 511 U.S. 375, 380-82, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994), the Supreme Court established that a district court does not have jurisdictionto enforce a settlement agreement merely because the court's dismissal of the suit was premised upon that agreement. 511 U.S. at 380-82. Thus, when a suit is dismissed with prejudice, it is gone, and the district court cannot adjudicate disputes arising out of the settlement that led to the dismissal merely by stating that it is retaining jurisdiction. Balshe LLC v. Ross, 441 Fed.Appx. 395, 396 (7th Cir. 2011). See also Dupuy v. McEwen, 495 F.3d 807, 809 (7th Cir.2007); Shapo v. Engle, 463 F.3d 641, 643 (7th Cir.2006); Lynch, Inc. v. SamataMason Inc., 279 F.3d 487, 489 (7th Cir. 2002). But, if the judgment explicitly incorporates the settlement, or reserves authority to enforce the settlement, the court possesses ancillary jurisdiction...
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