Shaffer v. Gte North, Inc.
| Decision Date | 28 March 2002 |
| Docket Number | No. 01-1486.,No. 01-1707.,01-1486.,01-1707. |
| Citation | 284 F.3d 500 |
| Parties | Brenda L. SHAFFER, Appellant, v. GTE NORTH, INC. |
| Court | U.S. Court of Appeals — Third Circuit |
Lawrence S. Markowitz (Argued), Markowitz & Krevsky, P.C., York, PA, for Appellant.
James W. Kraus (Argued), DKW Law Group, P.C., Pittsburgh, PA, for Appellee.
Before SLOVITER and AMBRO, Circuit Judges and SHADUR, District Judge.*
This consolidated appeal involves a variant of the frequently-encountered situation in which litigants, having agreed on the terms of a settlement but not having fully implemented its terms, obtain a dismissal order from the district court in the interim. Because such situations continue to provide a trap for the unwary despite the teaching of a unanimous 1994 Supreme Court decision (and despite the earlier announcement of the selfsame principles, plus the subsequent adherence to that teaching, by this court), we write for publication here.
Brenda Shaffer ("Shaffer") initiated this litigation by filing a seven-count complaint against her former employer GTE North, Inc. ("GTE"),1 charging it with her allegedly wrongful discharge said to be actionable under various provisions of state and federal law. After reviewing the parties' submissions on cross-motions for summary judgment under Fed.R.Civ.P. ("Rule") 56, the district court granted GTE's motion as to all counts except Shaffer's gender-based disparate treatment claim. On November 13, 2000, the date the jury trial was set to begin, counsel for both parties told the court they had reached a settlement. After GTE's counsel described the terms of the settlement agreement on the record, the court engaged Shaffer and her then counsel James Harris in the following exchange:
Then the judge entered this dismissal order ("November 13 Order"):
Counsel having reported to the court that this action has been settled, IT IS HEREBY ORDERED THAT this action is dismissed without costs and without prejudice to the right, upon good cause shown, to reinstate the action within sixty (60) days if the settlement is not consummated.
Because Shaffer later refused to sign the written settlement agreement that had then been tendered by GTE, it returned to federal court requesting a conference. That conference led to the judge's entry of an order setting a time within which GTE could move to enforce the claimed settlement agreement, a motion that was then filed on the 60th day after entry of the dismissal order. That motion was granted on January 23, 2001, prompting Shaffer to file this appeal in which she argues that her counsel was not authorized to enter into the settlement.
Although neither party had posed the question whether the district court had subject matter jurisdiction to hear GTE's motion to enforce the asserted settlement agreement, nor had the district court focused on that issue, we raised the matter sua sponte — as every court is obligated to do when subject matter jurisdiction is in question (Club Comanche, Inc. v. Gov't of the Virgin Islands, 278 F.3d 250, 255 (3d Cir.2002)). At our direction counsel for the parties tendered supplemental submissions addressing the subject matter jurisdictional issue, and we consider that legal question de novo (In re Phar-Mor, Inc. Sec. Litig., 172 F.3d 270, 273 (3d Cir.1999)).2
There are of course perfectly understandable reasons for the current dismissal of an action once the parties have reached agreement on settlement, even though the implementation of the settlement may require something further in the way of documentation or payment or both. Once the litigants are satisfied that the case is resolved, the incurring of additional lawyer time and client expense in requiring counsel to return to court one or more times to cause the later entry of an order of dismissal or for other reasons may seem needless and wasteful to the parties. That is obviously the case even if only a single payment is called for after the final paperwork is completed, and it surely applies to the quite common type of settlement agreement that looks to a defendant's staged payments over a period of months or even longer.3
Little wonder, then, that Kokkonen v. Guardian Life Insurance Co. of America, 511 U.S. 375, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) commanded the agreement of a unanimous Supreme Court. There the parties to a federal action reached a settlement and executed a stipulation and order of dismissal with prejudice, which the district court signed without referring to the settlement agreement or reserving jurisdiction to enforce it. When a dispute then ensued about one of the parties' obligations under the settlement, the district court ordered enforcement of the settlement on the premise that it had the "inherent power" to do so. But the Supreme Court held the district court had neither ancillary jurisdiction nor inherent power to enforce the settlement (id. at 380-81, 114 S.Ct. 1673). Instead a district court's power to do so exists only if one of two specified actions had been taken at the time of dismissal (id. at 381, 114 S.Ct. 1673):
The situation would be quite different if the parties' obligation to comply with the terms of the settlement agreement had been made part of the order of dismissal — either by separate provision (such as a provision "retaining jurisdiction" over the settlement agreement) or by incorporating the terms of the settlement agreement in the order. In that event, a breach of the agreement would be a violation of the order, and ancillary jurisdiction to enforce the agreement would therefore exist.
We have explicitly followed Kokkonen in Phar-Mor, 172 F.3d at 274, where we held that the phrase "pursuant to the terms of the Settlement" in the dismissal order was insufficient to incorporate the terms of the settlement agreement and therefore did not confer subject matter jurisdiction over settlement enforcement. Because there was also no provision retaining jurisdiction in the Phar-Mor dismissal order, the district court there was held to have lacked subject matter jurisdiction (id.). Indeed, we had earlier anticipated the Kokkonen analysis and holding in Sawka v. Healtheast, Inc., 989 F.2d 138, 141 (3d Cir. 1993), decided a year before the Supreme Court had occasion to address the jurisdictional issue.
Phar-Mor is more than instructive as to the effect (or rather the lack of effect) of the precise language that was employed at the outset of the November 13 Order dismissing this action: "Counsel having reported to the court that this action has been settled...." In that respect Phar-Mor, 172 F.3d at 274 holds, quoting Miener v. Missouri Dep't of Mental Health, 62 F.3d 1126, 1128 (8th Cir.1995), that "[a] dismissal order's mere reference to the fact of settlement does not incorporate the settlement agreement in the dismissal order." Moreover, Phar-Mor, 172 F.3d at 274-75 adheres to Kokkonen's further holding that approval of a settlement agreement does not suffice to make the settlement part of the dismissal order. Because the dismissal order here began by simply adverting to the counsel-reported settlement without the incorporation of any specific settlement terms, Phar-Mor makes it crystal clear that the second Kokkonen exception does not apply.
As for the first Kokkonen exception, it is of course true that the district court's November 13 Order left it open to either party, "upon good cause shown, to reinstate the action within sixty (60) days if the settlement is not consummated." But reinstatement of an action, which revives the underlying claim and sends the litigants back to the original battlefield, is totally different from the enforcement of the terms of a settlement agreement because one of the parties has not complied with those terms. As Kokkonen, 511 U.S. at 378, 114 S.Ct. 1673 said:
Enforcement of the settlement agreement, however, whether through award of damages or decree of specific performance, is more than just a continuation or renewal of the dismissed suit, and hence requires its own basis for jurisdiction.4
In this instance the district court's November 13 Order did contemplate the possibility of reinstating the lawsuit if the settlement had not been carried out. As Shaffer would have it, that somehow conferred jurisdiction on the district court to grant the entirely...
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