Neuberg v. Michael Reese Hosp. Foundation

• Decision Date: 29 July 1997
• Docket Number: No. 96-2383,96-2383
• Citation: 123 F.3d 951
• Parties: Leland G. NEUBERG and Joel G. Neuberg, Plaintiffs-Appellants, v. MICHAEL REESE HOSPITAL FOUNDATION, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 951

123 F.3d 951

38 Fed.R.Serv.3d 246

Leland G. NEUBERG and Joel G. Neuberg, Plaintiffs-Appellants, v. MICHAEL REESE HOSPITAL FOUNDATION, et al., Defendants-Appellees.

No. 96-2383.

United States Court of Appeals, Seventh Circuit.

Submitted Jan. 16, 1997.

Decided July 29, 1997.

Charles E. Adler, LeRoy Neuberg, Chicago, IL, for Leland G. Neuberg and Joel G. Neuberg.

Hugh C. Griffin, David C. Hall, Jason A. Parson, Lord, Bissell & Brook, Robert A. Kezelis, Margaret Wolot, Michael R. Webber, French, Kezelis & Kominiarek, James P. DeNardo, Robert Pisani, Kristin Dvorsky, McKenna, Storer, Rowe, White & Farrug, Chicago, IL, for Michael Reese Hospital and Medical Ctr., a corporation.

David A. Kanter, Wildman, Harrold, Allen & Dixon, Chicago, IL, for Arthur H. Rosenblum.

Hugh C. Griffin, David C. Hall, Hugh S. Balsam, Lord, Bissell & Brook, Chicago IL, for J. William Holland, as Special Administrator of the Estate of Philip Rosenblum, M.D., and Erich Uhlmann, M.D.

Before ESCHBACH, COFFEY, and DIANE P. WOOD, Circuit Judges.

DIANE P. WOOD, Circuit Judge.

This is an appeal from the district court's denial of a motion filed under Rule 60(b)(6) that sought to reopen a case that had been settled some 21 months earlier. The lawsuit itself had been a medical malpractice action, filed in 1975, that alleged negligence in connection with a 1947 use of radiation therapy to treat plaintiffs' tonsillitis. The district court found that Leland and Joel Neuberg, the plaintiffs, had not presented the kind of extraordinary reason to disturb the final judgment it had entered in reliance on the settlement. We agree and affirm the judgment of the district court.

This lawsuit began in 1975 when Leland and Joel Neuberg sued Michael Reese Hospital and Medical Center, Michael Reese Research Foundation, Dr. Arthur Rosenblum, and J. William Holland as Special Administrator of the estates of Dr. Philip Rosenblum and Dr. Erich Uhlmann for medical malpractice. The details of their claims are not pertinent to this appeal. As the Neubergs put it in their brief on appeal, "[i]n early 1994, the court indicated irritation with the slow pace of this 19 year-old case." District Judge Norgle decided to set March 28, 1994, as a firm trial date--an action that had the predictable effect of focusing the parties' attention on the possibility of settling the case. On March 25, the parties met at the law offices of Lord, Bissell & Brook in Chicago to discuss settlement further. Going into that meeting, the defendants tell us now that their latest settlement offer was $300,000. At the meeting, however, the plaintiffs expressed some concern about the amount of the attorneys' liens that might have accumulated in the case over its 19-year history. At least five attorneys who had not filed waivers of liens had formally represented the Neubergs, even though others orally indicated at the meeting that they would not seek to collect a fee from the settlement proceeds. Whether for this reason or for another (and it is important to note that it does not matter at this juncture), at the end of the meeting the defendants offered a $350,000 settlement to the Neubergs and they accepted.

Attorneys for the defendants reduced the agreement to writing and signed it on behalf of all the defendants; Leland signed it individually and on behalf of Joel, and Anthony McGuire signed it as counsel for both Leland and Joel, signifying (as the Neubergs concede in their brief) "plaintiffs' unconditional acceptance." As the written settlement agreement required, on March 28, 1994, the Neubergs moved under Fed.R.Civ.P. 41(a)(2) for voluntary dismissal of the suit with prejudice. The court was evidently pleased that the parties had succeeded in resolving their differences, as its remarks upon granting the Rule 41(a)(2) dismissal reflect:

THE COURT: So the entire settlement agreement but for the actual amount will be filed.

MR. PARSON (for the defendants): Your Honor, we had not anticipated filing the entire settlement.

THE COURT: I'm not going to require it, but I want to be sure that this case is totally, completely and absolutely resolved. And is that the status of the case?

MR. PARSON: Yes.

MR. MCGUIRE (for the plaintiffs): Yes.

After this exchange, the court made it clear that the dismissal would be with prejudice and that there was no need to file the written settlement agreement as long as the document would be available in the future if it was needed. He concluded by announcing that "[t]he agreed motion to voluntarily dismiss the case based upon a settlement is granted, and the matter is dismissed with prejudice.... This is a final order.... It is meant to be and is a final judgment. The matter is dismissed with prejudice." The court did not retain jurisdiction over the case, nor did it incorporate the terms of the settlement agreement into its order of dismissal.

The seven insurance companies that had policies with the various defendants entered into an agreement around the time of the settlement to split up the sum of $350,000 among themselves, assigning a particular amount to each one. Problems arose almost immediately after the dismissal order over the question of attorneys' liens for the Neubergs' prior counsel. The Neubergs took the position that prior counsel were not entitled to any of the settlement proceeds and that any claims they might have to the contrary were invalid. Defense counsel, David Hall, wrote to McGuire, who was still representing the Neubergs, on April 14, 1994, pointing out that the defendants and their insurance carriers could not release any funds until the question of liens was resolved. Hall's letter identified seven such attorneys or law firms, and it enclosed a release of attorney's lien form for each of them, explaining:

Although I understand that your clients maintain that these various attorneys do not have legally-perfected liens, that is a controversy that I cannot subject my clients, their insurance carriers and/or my firm to. Consequently, I will need each of these release[sic] of attorneys' liens to be properly executed and returned to my attention before I can direct that any of the settlement drafts be prepared and made payable to your clients in their name only. If any of the above-mentioned attorneys refuse to execute their respective release of attorney's lien, I will be compelled to include their name on all of the settlement drafts.

The plaintiffs were unwilling to handle matters as Hall proposed. They insisted that the lien releases were unnecessary. They rejected the defendants' offer to deposit $150,000 into a district court escrow account and to file an interpleader action to resolve any competing claims to that portion of the settlement, which the defendants believed to be ample to cover any possible liens. Then the defendants rejected the Neubergs' counteroffer to have $50,000 deposited in a private escrow account, under which the balance after payment of liens would revert to the Neubergs on March 29, 1995. They pointed out, correctly enough, that a private escrow would preclude them from filing a federal interpleader action, and (more worrisomely) it would not assure proper notice to the former attorneys or proper preservation of the funds.

Six months passed without any progress on the lien dispute. At a meeting of October 5, 1994, which had been scheduled for the final exchange of documents and settlement drafts, the defendants tendered checks to the Neubergs that contained (in addition to their names) the names of the prior attorneys as payees. The Neubergs rejected these checks out of hand because of that fact. (Two of the checks had also expired, but the defendants promised to reissue them promptly.) Next, the parties discussed interpleader again, but the defendants were willing to file such an action only if the Neubergs would agree not to object to the immediate dismissal of the defendants. The Neubergs were not willing to make such a promise, and so the interpleader idea was also abandoned. On May 5, 1995, Hall again wrote to the plaintiffs, more or less reiterating his position from the letter of April 14, 1994: the Neubergs could get clean checks if they furnished a full set of releases, and otherwise they would get checks made payable both to themselves and any former attorneys who had not executed a release.

Matters remained at this impasse until January 19, 1996, when the Neubergs filed a "Motion under Rule 60(b)(6) to Vacate Dismissal Order of March 28, 1994, and for Entry of Judgment in Accordance with Terms of Settlement Agreement Entered Into On March 25, 1994." In a written order issued May 3, 1996, Judge Norgle denied the motion. See Neuberg v. Michael Reese Hosp. and Medical Ctr., 166 F.R.D. 398 (N.D.Ill.1996). As he acknowledged, some courts have held that the complete repudiation of a settlement agreement can be the kind of extraordinary development that would justify Rule 60(b)(6) relief, see Keeling v. Sheet Metal Workers Int'l Ass'n, 937 F.2d 408, 410 (9th Cir.1991); Fairfax Countywide Citizens Ass'n v. Fairfax County, 571 F.2d 1299, 1302-03 (4th Cir.1978); Aro Corp. v. Allied Witan Co., 531 F.2d 1368, 1371 (6th Cir.1976), and this court has suggested in dicta that it would follow the same rule, see McCall-Bey v. Franzen, 777 F.2d 1178, 1183-84, 1186 (7th Cir.1985) (rescission of settlement agreement and vacatur of dismissal may be remedies for defendant's breach); United States v. Mt. Vernon Memorial Estates, Inc., 734 F.2d 1230, 1235 (7th Cir.1984). Nevertheless, Judge Norgle found that rule inapplicable to the situation before him. The issuance of checks made payable to additional payees and bearing allegedly expired validity dates was not, he held, tantamount to a complete frustration of the agreement. Furthermore, he pointed out that he had neither retained jurisdiction over the case nor had he incorporated the terms of the agreement into his order. See 166 F.R.D. at 400. In...