Mathewson Corp. v. Allied Marine Industries, Inc.

• Citation: 827 F.2d 850
• Decision Date: 04 June 1987
• Docket Number: No. 86-2089,86-2089
• Parties: MATHEWSON CORPORATION, Plaintiff, Appellee, v. ALLIED MARINE INDUSTRIES, INC., Defendant, Appellee. Brad Foote Gear Works, Third-Party Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 850

827 F.2d 850

MATHEWSON CORPORATION, Plaintiff, Appellee, v. ALLIED MARINE INDUSTRIES, INC., Defendant, Appellee Brad Foote Gear Works, Third-Party Defendant, Appellant.

No. 86-2089.

United States Court of Appeals First Circuit.

Heard June 4, 1987.

Decided Sept. 1, 1987.

Gary D. Buseck with whom Robert M. Hacking and Parker, Coulter, Daley & White, Boston, Mass., were on brief, for appellant.

Morton H. Clark with whom R. John Barrett, Vandeventer, Black, Meredith & Martin, Norfolk, Va., Astrid Glynn and Glynn & Dempsey, Boston, Mass., were on brief, for appellee Allied Marine Industries, Inc.

Before COFFIN, DAVIS ^* and SELYA, Circuit Judges.

SELYA, Circuit Judge.

Having conducted negotiations in a leisurely sort of way, the appellant, Brad Foote Gear Works, Inc. (Foote), let a settlement offer linger overlong on the table. Evincing great displeasure when its outstanding offer was finally accepted, Foote hastily repented and tried to upset the applecart. The district court held Foote to its bargain, and this appeal ensued. We affirm.

I. DOWN THE EAST RIVER.

In 1983, appellee Mathewson Corporation (Mathewson) brought suit in the United States District Court for the District of Massachusetts against another present appellee, Allied Marine Industries, Inc. (Allied). Mathewson sought to recover $205,000 allegedly due for its installation of outdrive propulsion units on a vessel owned by Allied. The defendant not only disclaimed the debt but countersued, charging that the units were defective. Alleging that economic losses of close to $2,000,000 had been sustained, the counterclaim sought recovery of those damages. ¹

Mathewson, as defendant in counterclaim, initiated a third-party action against the present appellant. Asserting both admiralty and diversity jurisdiction, Mathewson alleged that any failure in the performance of the outdrive units was attributable to Foote (which had supplied the gears used in them). The third-party plaintiff sought (i) contribution for negligence under M.G.L. ch. 231B, and (ii) noncontractual indemnity under a strict liability theory. There followed considerable pretrial skirmishing, much of which can be left unremarked for our purposes. After summary adjudication of the strict liability claims, a bench trial on the negligence issues began. On May 1, 1986, five days into the trial, a recess was declared. Though the adjournment was anticipated to last for but two weeks, the trial never resumed.

Like a thunderhead hovering in the mackerel sky, the Third Circuit's decision in East River S.S. Corp. v. Delaval Turbine, Inc., 752 F.2d 903 (3rd Cir.) (en banc), cert. granted, 474 U.S. 814, 106 S.Ct. 56, 88 L.Ed.2d 45 (1985), hung heavy over the litigation. All of the parties understood that the Supreme Court had heard arguments in East River in January 1986 and that the Court's impending decision augured special significance for this litigation. It was widely surmised that the Court, one way or the other, might resolve the viability of product liability claims for purely economic loss in admiralty jurisdiction. Yet, the resultant uncertainty did not stall all negotiations in the case at bar. Without waiting endlessly on the bank of East River, Allied and Mathewson settled all of their differences on May 12, 1986. They elected to keep the details of their arrangement confidential, and did not reveal the terms to Foote. ² The settlement agreement expressly preserved the claim for third-party liability against Foote, but placed that initiative, essentially, under the control of Allied. Although Mathewson retained a right of approval as to any negotiated accord of the third-party action, it was agreed that Allied's counsel would pull the laboring oar in further proceedings. The district court was seasonably apprised of the partial settlement.

Negotiations continued as to the balance of the litigation. On June 10, Foote's attorney called Allied's lawyer and offered $100,000 in exchange for general releases. There was no time limit on how long the offer was to remain open. The proposition was bare of other express contingencies as well. Allied's counsel promptly conveyed the proposal to William Law, appellee's president, without making any recommendation. Law apparently decided to take the matter into his own hands, i.e., under advisement. Some six days later, the clap of thunder was heard in the land. On June 16, the Supreme Court decided East River, 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986), holding that "whether stated in negligence or strict liability, no products-liability claim lies in admiralty when the only injury claimed is economic loss." Id. at 2305. The following day, Allied (admittedly aware of the status of East River ) accepted Foote's settlement offer. Mathewson's assent followed lickety-split. And, the appellees informed the district court of the agreement.

On June 20, Foote dropped the other shoe, advising all concerned that it regarded the offer as having "expired" coincident with the resolution of East River. That being so, the purported acceptance was, in Foote's view, a nullity. The appellees took no shine to such a notion. They promptly moved to enforce the settlement. An agreed statement of facts--from which much of the foregoing narrative is drawn--was formulated and arguments were entertained. In a rescript dated October 23, 1986, the district court upheld the bargain and granted specific enforcement of the settlement. Foote was ordered to remit $100,000 to Allied within thirty days "upon the execution ... of mutually acceptable releases." This appeal followed.

II. SHOOTING THE RAPIDS.

We start by lauding the prudential policy favoring settlement as a preferred alternative to costly, time-consuming litigation. As any litigator or judge can attest, the best case is a settled case. We have characterized a settlement negotiated, as here, "under the eyes of the court [as] a most solemn undertaking...." Warner v. Rossignol, 513 F.2d 678, 682 (1st Cir.1975). Without doubt, a district court possesses the authority to insure due compliance with such a pact. See Dankese v. Defense Logistics Agency, 693 F.2d 13, 16 (1st Cir.1982) (district court "retains an inherent power to supervise and enforce settlement agreements entered into by parties"); Crown Life Insurance Co. v. Springpark Associates, 623 F.2d 1377, 1380 (9th Cir.), cert. denied, 449 U.S. 956, 101 S.Ct. 364, 66 L.Ed.2d 221 (1980) (similar); Meetings & Expositions, Inc. v. Tandy Corp., 490 F.2d 714, 717 (2d Cir.1974) (per curiam) (similar). We agree generally with the Fifth Circuit that, "[w]here the parties, acting in good faith, settle a controversy, the courts will enforce the compromise without regard to what the result might have been had the parties chosen to litigate." Terrain Enterprises, Inc. v. Western Casualty and Surety Co., 774 F.2d 1320, 1321 (5th Cir.1985), cert. denied, --- U.S. ----, 106 S.Ct. 1639, 90 L.Ed.2d 184 (1986). Thus, the district court had ample authority to discern whether or not a valid and binding settlement had been reached, and if so, to enforce it.

The appellant presents a medley of arguments to support the claim that the district court erred in exercising this acknowledged power. Viewed realistically, certain of these points can be, and by this reference are, rejected without discussion. Those which remain telescope into two basic contentions. First, Foote maintains that Allied's purported acceptance was nugatory because the offer lapsed before the acceptance occurred, i.e., when the Court's decision in East River surfaced. Second, even if the acceptance were timely, East River so eviscerated the third-party complaint that any agreement to pay was necessarily void for want of consideration. We address these contentions seriatim.

A. Timeliness of the Acceptance

It is hornbook law that an offeree's power of acceptance vanishes at the time specified in the offer, and if no deadline is prescribed, "at the end of a reasonable time." Restatement (Second) of Contracts Sec. 41(1) (1979); Minneapolis & St. Louis Ry. v. Columbus Rolling Mill, 119 U.S. 149, 151, 7 S.Ct. 168, 169, 30 L.Ed. 376 (1886). Courts in Massachusetts ³ have long endorsed this hoary principle, e.g., Loring v. Boston, 48 Mass. 409, 412-13 (1844), holding that "[w]hat is a reasonable time depends on all the circumstances of the case." Powers, Inc. v. Wayside, Inc. of Falmouth, 343 Mass. 686, 691, 180 N.E.2d 677 (1962). Foote's offer to Allied having been bereft of any deadline, our inquiry reduces to whether or not the appellee's acceptance of the offer seven days after it was made occurred within a reasonable time. We find it did.

In urging that its week-old settlement offer lapsed prior to Allied's telexed acceptance, appellant maintains that the offer was impliedly conditioned, in a temporal sense, on the uncertain status of East River. The announcement of the Court's opinion, this thesis runs, so radically altered the contours of the dispute between Allied and Mathewson, and so shook the underpinnings of the settlement negotiations, that it rendered a post-East River acceptance of a pre-East River offer unreasonable as a matter of law. In this vein, the appellant seeks to characterize its negotiations with Allied (and the ensuing offer) as a hedge--a mutually understood hedge--against the uncertainty of what might happen in East River. And, it asserts that the offer, brimming with vitality when made, turned stone cold dead by necessary implication once the Court's East River decision removed so major an unknown variable from the calculus of negotiations.

The fundamental problem with Foote's stance is that it sidesteps the established principle that "contracts depend on objective manifestations of consent and not on uncommunicated subjective expectations." Bushkin Associates, Inc. v. Raytheon Co., 815 F.2d 142, 146 (1st Cir.1987). There are no objective facts to suggest that...