Nat'l City Golf Fin. v. Scott, 17-60283

• Decision Date: 09 August 2018
• Docket Number: No. 17-60283,17-60283
• Parties: NATIONAL CITY GOLF FINANCE, a Division of National City Commercial Capital Company, L.L.C., Plaintiff-Appellee v. Marvin L. SCOTT, Defendant-Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

899 F.3d 412

NATIONAL CITY GOLF FINANCE, a Division of National City Commercial Capital Company, L.L.C., Plaintiff-Appellee

v.Marvin L. SCOTT, Defendant-Appellant

No. 17-60283

United States Court of Appeals, Fifth Circuit.

FILED August 9, 2018

Kristina M. Johnson, Jones Walker, L.L.P., Jackson, MS, for Plaintiff-Appellee.

Sean R. Guy, Esq., Attorney, McCraney, Montagnet, Quin & Noble, P.L.L.C., Ridgeland, MS, for Defendant-Appellant.

Before DAVIS, JONES, and HIGGINSON, Circuit Judges.

STEPHEN A. HIGGINSON, Circuit Judge:

This appeal raises questions of judicial procedure and power arising from a lawsuit about golf carts. After a year of federal litigation, the parties settled and filed an unconditional stipulation of dismissal. The defendant later regretted that choice. So he moved to rescind the settlement and vacate the dismissal under state contract law, positing a mistake of fact and unjust enrichment. All assumed the district court had jurisdiction to resolve that motion on state-law terms. It did not. Rather, because the parties’ unconditional dismissal deprived the district court of subject-matter jurisdiction, the proper vehicle for the motion was Federal Rule of Civil Procedure Rule 60(b). We construe the motion under that rule and affirm on those alternative grounds.¹

I.

Marvin Scott used to own Golf Cars of Mississippi, L.L.C. (Golf Cars), a business that bought and leased golf carts. The company financed its purchases by taking out loans, many of which Scott guaranteed personally. Among its lenders was National City Golf Finance (National). In 2008, Golf Cars defaulted on one of National’s loans. So National sued Scott, his company, and his business partner, Curt Busching. (National later amended its complaint to add more defendants and to seek greater damages.) One of the complaint’s ten claims was for breach of contract. This count concentrated on a personal guaranty that Scott had allegedly signed but failed to honor.

A year later, Scott and National settled. Their bargain: National would release its filed claims against Scott—plus several unfiled ones—in exchange for $500,000. More important, the parties agreed to abide by the settlement terms even if they later discovered new claims or material facts. We quote the exact terms because they matter:

Each Party acknowledges and understands that hereafter it may discover or appreciate claims, facts, issues, or concerns after the Effective Date [of the settlement] which are not otherwise specifically excluded from the releases herein but which may be in addition to or different from those that it now knows or believes to exist with respect to the subject matter of this Agreement that, if known or suspected at the time of execution of this Agreement, might have materially affected the settlement embodied herein. Each Party nevertheless agrees that it has taken that possibility into account and that it is the intention of each Party to fully, finally[,] and forever settle and release the matters, disputes[,] and differences, now known or unknown, suspected or unsuspected, arising out of or in any way relating to the matters released pursuant to ... this Agreement, and that the general releases and waivers described ... above apply to any such additional or different claims, facts, issues, or concerns.

Scott does not contest that the parties drafted the settlement agreement "with equal bargaining power" and with "the benefit of counsel of their own choosing." Indeed, Scott’s current counsel negotiated and signed that contract.

National and Scott executed the settlement agreement on August 27, 2009. The next day, they filed an unconditional stipulation of dismissal without prejudice² under Federal Rule of Civil Procedure 41(a)(1)(A)(ii). Within a few weeks, however, Scott signed—but did not immediately file—an affidavit averring that "[t]he signature on the Personal Guaranty [attached to National’s complaint] is not [his] signature."

Scott’s business partner, Busching, filed for bankruptcy a few months later. In March 2010 National filed an unsecured proof of claim in the bankruptcy case, but the bankruptcy court discharged that claim under 11 U.S.C. § 727. Meanwhile, National resolved its claims against all other defendants through settlements or default judgments. By June 2010 this case was over.

Or so it seemed. Despite having already settled his stake in this case, Scott hired a handwriting expert to opine whether someone had forged his signature. In mid-August 2010 the expert reported that the signature on the guaranty was, in his view, a fake. (Scott thinks Busching was the culprit.) So on August 27, 2010—exactly a year after Scott and National executed their settlement agreement—Scott filed in district court a "Motion to Rescind Settlement Agreement and Vacate Stipulation of Dismissal," asking "to re-join this civil action as a Defendant." The motion relied on three state-law grounds: (1) the parties mutually mistook the allegedly forged signature as Scott’s; (2) alternatively, Scott made that mistake unilaterally; and (3) failing to rescind the settlement would unjustly enrich National. This was the first time Scott alerted the district court to his affidavit disputing his signature.

Six years later, the district court took evidence and denied the motion on the merits, holding that the settlement "must be enforced" because Scott expressly assumed the risk of any factual mistakes and thus failed to "satisf[y] the standard for setting aside the settlement" under state law. The parties now reprise the same state-law arguments they leveled below. Neither mentions the six grounds for relieving a party "from a final judgment, order, or proceeding" authorized by Rule 60(b).

II.

The parties’ unconditional stipulation of dismissal raises a threshold question of jurisdiction, one we must raise on our own initiative and resolve de novo. See Owner-Operator Indep. Drivers Ass’n v. U.S. Dep’t of Transp. , 858 F.3d 980, 982 (5th Cir.2017). Scott and National invoked Rule 41(a)(1)(A)(ii), which permits litigants to "dismiss an action without a court order by filing ... a stipulation of dismissal signed by all parties who have appeared."³ A stipulation of dismissal under that rule ordinarily—and automatically—strips the district court of subject-matter jurisdiction. SmallBizPros, Inc. v. MacDonald , 618 F.3d 458, 461 (5th Cir.2010) ("[A] district court's jurisdiction over a case that is settled and voluntarily dismissed by stipulation cannot extend past the filing date absent an express contingency or extension of jurisdiction ...."). This typically means that "any action by the district court after the filing of such a stipulation can have no force or effect." Id. at 463 ; accord 9 Wright & Miller, Federal Practice & Procedure § 2367 (3d ed. Apr. 2018 update) ("After the dismissal, the action no longer is pending in the district court and no further proceedings in the action are proper.").⁴

So we must ask: What authority gives a district court jurisdiction to entertain a motion to rescind a settlement agreement, if that motion was filed months after the parties filed an unconditional stipulation of dismissal? We see two possible answers: ancillary jurisdiction and Rule 60(b). As explained below, only Rule 60(b) is potentially applicable here.

A.

The doctrine of ancillary jurisdiction empowers district courts (1) to resolve "factually interdependent" claims or (2) to address issues implicating the ability "to manage [the court’s] proceedings, vindicate its authority, and effectuate its decrees." Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 379–80, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). Neither type gave the district court power to resolve Scott’s motion.

Scott cannot rely on the first category of ancillary jurisdiction to rescind his settlement agreement on state-law grounds. Generally speaking, "factually interdependent" claims are those that support supplemental jurisdiction under 28 U.S.C. § 1367. See Peacock v. Thomas , 516 U.S. 349, 354 n.5, 116 S.Ct. 862, 133 L.Ed.2d 817 (1996). This kind of ancillary jurisdiction disappears, however, after the original federal dispute is dismissed. See, e.g. , id. at 355, 116 S.Ct. 862 ("[O]nce judgment was entered in the original ... suit, the [district court’s] ability to resolve simultaneously intertwined issues vanished."); Nat’l Presto Indus. v. Dazey Corp. , 107 F.3d 1576, 1580–81 (Fed. Cir.1997) ("[O]nce the original federal dispute is dismissed, claims that at one time might have been brought as ‘ancillary’ to that dispute may no longer be brought.").

Nor did Scott’s motion implicate the second type of ancillary jurisdiction—the district court’s enforcement authority. The court’s enforcement authority extends to "collateral issues," things like fees, costs, contempt, and sanctions. Qureshi v. United States , 600 F.3d 523, 525 (5th Cir.2010) ; see also Kokkonen , 511 U.S. at 379–80, 114 S.Ct. 1673. By default, this power does not include enforcing (or vacating) a settlement that prompted a Rule 41(a)(1)(A)(ii) stipulation of dismissal. See SmallBizPros , 618 F.3d at 463. But there is an exception to this rule: the district court may either "incorporate or embody the terms of a settlement agreement in a dismissal order"—such that a breach of the settlement is a violation of a court order—or otherwise "retain jurisdiction over a settlement agreement by clearly indicating such intent in a dismissal order." Id. at 462–63 ; see also Kokkonen , 511 U.S. at 381–82, 114 S.Ct. 1673. To trigger this exception, the parties’ Rule 41 stipulation must "expressly manifest[ ]" their intent that dismissal be "contingent upon a future act (such as the district court['s] issuing an order retaining jurisdiction)." SmallBizPros , 618 F.3d at 463. But where, as here, the parties unconditionally dismiss their case, "the [s]tipulation’s effectiveness [i]s immediate" and the case is over. Id.

There is no basis for ancillary...