Shapo v. Engle

• Decision Date: 11 September 2006
• Docket Number: No. 06-1255.,No. 05-4096.,05-4096.,06-1255.
• Citation: 463 F.3d 641
• Parties: Nathaniel S. SHAPO, Plaintiff, v. Clyde Wm. ENGLE, Defendant-Appellant. v. Foley & Lardner, LLP, Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 641

463 F.3d 641

Nathaniel S. SHAPO, Plaintiff, v. Clyde Wm. ENGLE, Defendant-Appellant. v. Foley & Lardner, LLP, Appellee.

No. 05-4096.

No. 06-1255.

United States Court of Appeals, Seventh Circuit.

Argued June 13, 2006.

Decided September 11, 2006.

Ellen G. Robinson, Robinson, Curley & Clayton, Chicago, IL, for Plaintiff.

F. John McGinnis (argued), Chicago, IL, for Defendant-Appellant.

Sheldon Karon (argued), Foley & Lardner, Chicago, IL, for Appellee.

Before POSNER, COFFEY, and RIPPLE, Circuit Judges.

POSNER, Circuit Judge.

This appeal challenges the district court's jurisdiction to resolve a dispute between the defendant, Engle, and the law firm, Foley & Lardner, that represented him in a suit charging Engle and others with unlawful acts that included violations of RICO. Several years into the case the parties agreed to settle it and so advised the court. In February of 2004 the court ordered the suit "dismissed, without prejudice and with leave to reinstate on or before the `Execution Date,'" defined in the order as the date on which the various undertakings set forth in it, including the parties' "sign[ing] all related agreements and exchang[ing] the consideration to which they have agreed," were completed. The order goes on to provide that upon that completion date "the dismissal of the claims in this action shall be with prejudice and without leave to reinstate," except that the court "shall retain jurisdiction to enforce the terms of the Parties' settlement and the Parties agree to this Court's jurisdiction." An accompanying minute order states: "this case is hereby dismissed without prejudice, with leave to reinstate by or on 6/7/04 at which time the dismissal will be with prejudice. This Court shall retain jurisdiction to enforce the terms of the Settlement Agreement."

The relation between the "Execution Date" and June 7, 2004, is obscure (as best we can determine, it was the date on which the district judge expected the parties to execute the settlement agreement) but not necessarily critical, because the deadline for reinstatement was extended by timely orders of the judge until January 28, 2005. That day came and went without reinstatement. Six months later Foley & Lardner moved the district court to order Engle to pay the firm money that he owed it under a "Master Payment Agreement" that they had made at the time of the settlement. That agreement required Engle to pay the firm $100,000 every three months for three years as consideration for the work it had done for him in the underlying litigation. With interest, the total due Foley & Lardner will amount, according to the law firm, to at least $1.8 million.

The court issued the order requested by Foley & Lardner, directing Engle to pay the firm $200,000 plus interest, and later issued a similar order directing him to pay a third installment of $100,000. The judge based jurisdiction to issue these orders on her having retained jurisdiction to enforce the terms of the settlement, although the "Master Payment Agreement" was a discrete agreement and Foley & Lardner was not a party to the underlying litigation. Engle appeals from both orders, challenging the district court's jurisdiction.

There is a question of our jurisdiction as well—namely whether the orders are final. 28 U.S.C. § 1291. They direct the payment of the $100,000 installments "with interest," and undoubtedly the reference is to prejudgment as well as postjudgment interest (the latter does not affect, but rather presupposes, finality), since the Master Payment Agreement specifies that interest is to accrue at a specific rate from the date of the agreement. But the agreement is not dated, so the amount of interest due cannot be calculated from the existing record. Nor does the agreement say whether simple or compound interest is contemplated.

But finality must be distinguished from clarity. The test of finality is whether the district judge has finished with the case. Chase Manhattan Mortgage Corp. v. Moore, 446 F.3d 725 (7th Cir.2006). It is not whether the judgment ending the case is clear enough to be enforced. If it is unclear, that is a basis for either party's challenging it on appeal, Sweat v. City of Fort Smith, 265 F.3d 692, 696 (8th Cir. 2001); United States v. Terry, 17 F.3d 575, 580 (2d Cir.1994), but neither party is doing so. Probably they agree on what "with interest" means, though they have not bothered to tell us. All that matters, however, so far as finality and hence our jurisdiction is concerned, is that the district judge had thought herself finished with the case upon entering the orders.

So we have jurisdiction of the appeals and turn now to the question of the district court's jurisdiction. We have criticized the practice of dismissing suits before they're really over. E.g., Shah v. Inter-Continental Hotel Chicago Operating Corp., 314 F.3d 278, 281 (7th Cir.2002); Goss Graphics Systems, Inc. v. DEV Industries, Inc., 267 F.3d 624, 626 (7th Cir. 2001); King v. Walters, 190 F.3d 784, 786 (7th Cir.1999); Adams v. Lever Bros. Co., 874 F.2d 393, 396 (7th Cir.1989). It is a potent source of confusion with no redeeming virtues in a case such as this in which the ripening depends on conditions (the signing of all agreements constituting the settlement and the exchange of the consideration required by the agreements) the fulfillment of which may require additional litigation. The judge should have waited before entering any order of dismissal until the various undertakings constituting the settlement were completed. Then the case would be over and dismissal with prejudice appropriate.

An even more serious problem is the conjunction of dismissal with prejudice with retention of jurisdiction to enforce the settlement agreement. We know from Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 380-81, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994), that a district court does not have jurisdiction to enforce a settlement agreement merely because the agreement was the premise of the court's dismissal of the suit that the agreement settled. And therefore, as we explained in Lynch v. SamataMason, Inc., 279 F.3d 487, 489 (7th Cir.2002), a district judge cannot dismiss a suit with prejudice, thus terminating federal jurisdiction, yet at the same time retain jurisdiction to enforce the parties' settlement that led to the dismissal with prejudice. (An exception is the inherent power of a court that has issued an injunction, even if that injunction ended the lawsuit, to enforce it, as by contempt proceedings. E.g., United States v. City of Chicago, 870 F.2d 1256, 1257 (7th Cir.1989).)

But this case is unusual because despite the reference in the minute order to June 7, 2004, it appears from the judgment order itself that the judge's intention was to retain jurisdiction until the settlement—incomplete at the time that the order was made—was fully implemented; for the order retains jurisdiction to enforce the terms of settlement. If the judge was correct in thinking the Master Payment Agreement part of the settlement, then until Engle completes the payments required by it the settlement will not be final.

So here we have a concrete example of the confusion injected by the "springing" type of judgment entered in this case. By making the final judgment contingent on future events, the judge created a situation in which it might be (and turned out to be) uncertain when an appealable judgment was entered. One interpretation, supported by the minute order, is that the judgment became final on January 28, 2005, the extension of the June 7 date in the minute order of February 5, 2004. But another interpretation, supported by the judgment order, is that the judgment has not yet become final if the Master Payment Agreement is a part of the settlement, because if it is, the judgment will not be final until the agreement is carried out—that is, until Foley & Lardner is paid in full.

Normally the judgment order would take precedence over a minute order. The minute order states, however: "For further detail see order attached to the original minute order." The order referred to is the judgment order. So maybe rather than there being two inconsistent orders, one of which (the judgment order) should take precedence, there is a single, internally inconsistent order, in which event a remand might be necessary to enable the district court to clarify its meaning. Alpern v. Lieb, 38 F.3d 933, 935-36 (7th Cir.1994); United States v. Michaud, 907 F.2d 750, 751, 753-54 (7th Cir.1990) (en banc); Holly D. v. California Institute of Technology, 339 F.3d 1158, 1181 n. 28 (9th Cir.2003). But in all likelihood the reference to June 7 in the minute order was merely a guess and the judge would not have wanted to relinquish jurisdiction merely because the settlement was not finally agreed to by that date.

Some disputes between a litigant and his lawyer (or his opponent's lawyer) are within the federal courts' ancillary jurisdiction. See, e.g., Baer v. First Options of Chicago, Inc., 72 F.3d 1294, 1300-01 (7th Cir.1995); Novinger v. E.I. DuPont de Nemours & Co., 809 F.2d 212, 217 (3d Cir.1987); Jenkins v. Weinshienk, 670 F.2d 915, 918 (10th Cir.1982); Valerio v. Boise Cascade Corp., 645 F.2d 699 (9th Cir.1981) (per curiam). In Baer, for example, the provision relating to the lawyer's fee was an express part of the settlement agreement, and the court had moreover an independent legal duty to determine the reasonableness of the fee. (Novinger was similar: the court had a legal duty to consider the reasonableness of the contingent-fee contract between the plaintiffs and their lawyer.) In another of our cases, Dale M. ex rel. Alice M. v. Board of Education, 282 F.3d 984 (7th Cir.2002), after we reversed the judgment for the plaintiff with directions to vacate the award of attorney's fees the plaintiff's lawyer, who had pocketed the fee, refused to return it to the defendant. We upheld the district court's...