Westlake Invs., LLC v. MLP Mgmt., LLC

Decision Date03 January 2012
Docket NumberNo. 4:09–cv–00095–RAW.,4:09–cv–00095–RAW.
Citation842 F.Supp.2d 1119
CourtU.S. District Court — Southern District of Iowa
PartiesWESTLAKE INVESTMENTS, LLC, Plaintiff, v. MLP MANAGEMENT, LLC; MLP Investments, L.L.C., Pioneer Construction, Inc.; CCC/MLP Westlake, LLC; Westlake Apartments, LLC, Joe Leibold, Stan McCurdy, John Porta; MLP Multi–Family Construction, LLC; Westlake Apartments, LP; Pioneer Construction Services, Inc.; MLP Land Development LLC; CCC/Westlake Apartments, LLC; and CCC/MLP Investment, LLC, Defendants. MLP Management, LLC; MLP Investments, LLC; Pioneer Construction, Inc.; CCC/MLP Westlake, LLC; Westlake Apartments, LLC; Joe Leibold; Stan McCurdy; John Porta; Pioneer Construction Services, Inc.; Westlake Apartments, LP, Third–Party Plaintiffs, v. All State Gutter, Inc.; Fieldstone Products, LLC; Jordison Construction, Inc.; R & R Building Products; Solar Industries, Inc.; C. Bennett Building Supplies, Inc.; McAninch Corporation; Production Heating Services, Inc.; Community Wholesale of Des Moines Iowa, Inc.; Senninger Plumbing Company, Inc.; TKP Contracting Company, Inc.; Jim E. Parker, Parker Associates, Third–Party Defendants.

OPINION TEXT STARTS HERE

Stephen R. Eckley, David Wayne Nelmark, Belin McCormick, P.C., Des Moines, IA, for Plaintiff.

Jeffrey Dean Stone, Stephen D. Marso, Whitfield & Eddy, PLC, Richard G. Book Huber, Book, Cortese, Happe & Lanz, PLC, West Des Moines, IA, Stephen G. Olson, II, Engles, Ketcham, Olson & Keith, PC, Omaha, NE, Matthew D. Jacobson, Whitfield & Eddy PLC, Des Moines, IA, for Defendants.

RULING ON DEFENDANTS' MOTION TO COMPEL/ENFORCE THEIR SETTLEMENT AGREEMENT WITH THE PLAINTIFF AND PLAINTIFF'S MOTION TO ENFORCE SETTLEMENT AGREEMENTS

ROSS A. WALTERS, United States Magistrate Judge.

The above motions [674] [679] are before the Court. That there is a settlement agreement which should be enforced is not disputed, but there is a dispute about one element, namely whether $70,000 held in the trust account of defendants' counsel is to be distributed to plaintiff as a part of the settlement. The cross-motions came on for hearing on December 19, 2011. The parties stipulated that an evidentiary hearing was not required and that the cross-motions could be decided on the motion papers and exhibits filed by the parties in connection with their motions as well as additional exhibits received at hearing. The Court has carefully considered the parties' written filings and their oral arguments and now rules as follows.

I.PROCEDURAL AND FACTUAL BACKGROUND

The facts are not in dispute 1 though the conclusions to be drawn from them are.

To simplify things the Court will refer to the contestants as Westlake (the plaintiff), MLP (the defendants) and the subcontractors (the third-party defendants including the architect). The persons involved in negotiating the settlement as it relates to the disputed issue were, for Westlake its counsel Stephen Eckley and Todd Lantz, for MLP its counsel Steven Schwartz and Matthew Koehler, and the principal mediator, Roger Stone.

Westlake bought a 300–unit apartment complex in West Des Moines, Iowa while the complex was under construction. The construction was to be of “first class” quality. Westlake claimed the completed project was not constructed to this standard and that there were many defects. Westlake sued MLP under numerous theories and MLP in turn sued the subcontractors whose work it claimed was lacking if Westlake was to be believed. The case was factually and legally much more complicated than this simple description would imply as the caption above hints.2 Extensive discovery was conducted and numerous motions filed as the case labored to an October 12, 2011 trial date.

In November and December 2010, following a mediation, MLP settled with three of the presumably less-involved subcontractors, O/S Holdings, H & H Drywall, and R & N Components, for a total amount of $70,000. The settlements closed in June and July 2011. The settlement proceeds were deposited in the trust account of MLP's counsel. Whether Westlake is entitled to this money in addition to what MLP said it would pay in settlement is the current issue.

The numerous remaining parties and their insurers participated in a two-day mediation on September 6 and 7, 2011. The mediators, selected by the parties, were Mr. Stone and Mr. Charles Traw, both Iowa attorneys and experienced mediators. Under discussion at the time was a global cash settlement. The settlement money was to come from two sources: the subcontractors who would pay Westlake directly, and on behalf of MLP. All of the money offered on MLP's behalf was from their primary and excess insurers and the trust account $70,000. (Def. Reply Brief [689] at 2). Westlake insisted on a contribution from MLP's principals, Mr. McCurdy and Mr. Porta, a demand rejected by MLP. (Pl. Ex. K at 2).

At the end of the two-day mediation the parties were far apart on a cash deal, but settlement discussions continued. On September 8, 2011, Mr. Eckley discussed with Mr. Stone a settlement structure which would exclude MLP's excess insurance carrier from the settlement with Westlake taking an assignment of MLP's claims against the excess carrier. (Pl. Ex. M). This would permit a settlement with a lower cash component. On September 9 Mr. Eckley and Mr. Lantz called Mr. Schwartz with the idea. Mr. Eckley and Mr. Lantz were encouraged by Mr. Schwartz's response. They next contacted Mr. Stone with a proposal which Mr. Stone relayed to Mr. Schwartz and Mr. Koehler by email on September 12. (Pl. Exs. P, Q; Def. Ex. 9). Westlake proposed that in addition to the $1 million which had been offered at the mediation by MLP's primary insurance carrier (its policy limit) and anticipated funds from the subcontractors, the two totaling just short of $2.5 million, MLP would pay $3 million and assign its claims against the excess carrier which, if Westlake prevailed against the excess carrier, it would reimburse MLP up to $2 million. James Sinclair and his father Maurice “Mo” Sinclair owned/controlled Westlake. Mr. Stone stressed that Mo Sinclair was intent that MLP, by which he meant its principals, Mr. McCurdy and Mr. Porta, contribute to the settlement. (Pl. Ex. K; Def. Ex. 9).

Mr. Schwartz called Mr. Eckley on September 13 and later that day emailed Mr. Stone to say his clients were willing to work out an arrangement to let Westlake pursue the excess insurance carrier, but they would not contribute money to settle the case. He explained his clients, presumably referring to Mr. McCurdy and Mr. Porta, were “married and their personal assets are protected from creditors.” (Def. Ex. 10 at 2).

The refusal of Mr. Schwartz's individual clients to contribute to the settlement was disappointing to Mr. Stone. On September 14 Mr. Stone emailed Mr. Schwartz and Mr. Koehler, stating Mo Sinclair is impatient with the MLP individuals,” adding his assessment “I believe a contribution from your individual clients is important,” and concluding with the observation “your individual clients will be some of the primary beneficiaries of a settlement, so we need their contribution.” (Def. Ex. 10 at 1). Mr. Stone continued his efforts with the subcontractors to round up more money.

On September 16 Mr. Stone circulated an email to numerous counsel. Mr. Eckley, Mr. Schwartz and Mr. Koehler were included as “Cc” addressees. Mr. Stone reported he had obtained commitments or pledges from the subcontractors totaling $1,807,500. With an expected contribution from MLP's primary insurance carrier of $1 million there was a package of $2,807,500. Mr. Stone said he was “awaiting contributions from the MLP individuals,” and two subcontractors. (Def. Ex. 16 at 4). Mr. Stone added: “I assume that each of you receiving this email will remember the amounts you told me and the terms or conditions you placed on that discussion. If we are not clear, I would appreciate receiving an email from you stating those and I will respond promptly.” ( Id.) Mr. Stone assumed the $70,000 in the trust account previously offered by MLP remained on the table because it had not been withdrawn 3 and the MLP contribution he was attempting to obtain was a personal contribution from MLP's principals. (Def. Ex. K at 2). Mr. Stone included the trust account $70,000 in the $1,807,500 subcontractor component of the settlement package he had put together, though his email did not itemize the contributions. As noted, the $70,000 was comprised of subcontractor settlement proceeds received in June and July 2011.

On September 18 Mr. Schwartz emailed Mr. Stone repeating that his clients were not willing to contribute to the settlement. (Def. Ex. 12). Fearful settlement efforts were falling apart, the next day, September 19, Mr. Stone emailed Mr. Schwartz with what is fair to describe as a plea that his clients reconsider in view of the risk of personal exposure if they went to trial. (Def. Ex. 13). Mr. Stone said he thought another $192,500 from them would result in a settlement. ( Id.)

Mr. Stone continued to press the matter and communications went back and forth. On the evening of Sunday, September 25, 2011 Mr. Schwartz sent an email to Mr. Eckley and Mr. Stone. He said he had been authorized to make a formal settlement proposal the first paragraph of which was: “On behalf of my clients and their primary insurance carrier, a total payment of $1.1 million will be made to Westlake.” (Def. Ex. 1). Though not spelled out in the email, it was understood $1 million of this would be paid by the primary insurance carrier. Mr. Schwartz continued: “Westlake will receive all the settlement money now being offered by the subcontractors with which Roger Stone has been negotiating. I am not privy to those amounts but Westlake will be entitled to receive what is still on the table. ( Id.) (emphasis added). An assignment by MLP to Westlake of MLP's claims against its excess carrier was part of the proposal. The MLP corporate defendants would agree to confess...

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