Douglas J. Rykhus, Washington, D.C., for appellant.
Bruce E. Mitchell, for appellees.
Appeal from the United States District Court for the District of Columbia (Civil Action No. 83-0074).
Before GINSBURG and SILBERMAN, Circuit Judges, and McGOWAN, Senior Circuit Judge.
Opinion Per Curiam.
Defendant-appellant Robert J. Gallagher, an attorney, dishonored an agreement settling an action in which he had been charged with malpractice and breach of fiduciary duty. The agreement, incorporating modifications suggested by the trial judge, was entered as a district court judgment on March 1, 1984. Gallagher made initial payments pursuant to the agreement but soon defaulted, prompting plaintiffs’ application to the district court, on May 22, 1984, to enforce the settlement. The district court considered Gallagher’s several challenges to the agreement and, in a comprehensive Memorandum, rejected the attacks as meritless. American Security Vanlines, Inc. v. Gallagher, No. 83-0074 (D.D.C. Feb. 27, 1985). Gallagher now appeals from the district court’s order enforcing the settlement.
[1] We affirm and, on our own motion, direct appellant and attorney for appellant to pay the costs and counsel fees reasonably incurred by appellees in responding to an appeal that fully warrants the characterization “frivolous.”
; Fed.R.App.P.
Fed.R.Civ.P.
.
[2] Gallagher offers no tenable argument for disturbing the careful adjudication of this case by the district court. In the main he repeats implausible, far-fetched, or tardily-raised objections answered with thoroughgoing clarity in the district
court’s Memorandum. His central thrust is that he should be released from an undertaking he now regrets because, when he entered into the settlement agreement, he was in a “distraught frame of mind occasioned by his belief that he would lose the [malpractice/breach of fiduciary duty] case,” whereupon he would face a judgment he could not pay and, eventually, referral to the Grievance Committee leading to disbarment. Brief of Appellant at i, 9, 10.
[3] Neither in his brief nor at oral argument did Gallagher suggest any distinction between his case and that of any other attorney charged with malpractice or serious breach of duty who enters a settlement, understandably with a heavy mind, and later regrets his agreement. Instead, Gallagher urged that his plight is “virtually the same” as that of a personal injury plaintiff, destitute, sorely disabled, unfamiliar with the language of the law, indeed, barely able to speak English, who is pressed into signing a release for a relatively modest sum by her own attorney.
(D.C. Cir. 1949)). The analogy is not well made. However, it typifies the quality of argument imposed upon the district court, and now upon us, in this case. For further exposition of Gallagher’s stout resistance to the objectively reasonable settlement, we include as an appendix to this disposition the cogent Memorandum filed by the district court. No additional comment from this bench is necessary.
D.C. Cir.R. 13(c).
[4] This appeal, we conclude, has unconscionably delayed secure receipt by appellees of the periodic payments Gallagher agreed to make in exchange for the termination of the malpractice/breach of fiduciary duty claims that opened this litigation. Both Gallagher and counsel who advanced frivolous argument for him, thereby multiplying proceedings unreasonably and vexatiously, may be held accountable for the expenses and counsel fees reasonably incurred by appellees in responding to the appeal.
; Fed.R.App.P.
(7th Cir. 1985). We accordingly order that appellees’ costs and counsel fees reasonably incurred on appeal shall be borne jointly and severally by appellant and attorney for appellant. The parties shall endeavor diligently and in good faith to agree upon the fee. If they are unable to reach an agreement promptly, appellees shall submit to the court a statement setting out their counsel’s hours and rate for the representation reasonably furnished in this appeal.
[5] The court’s mandate in this case shall issue forthwith.
[6]
APPENDIX
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
Civil Action No. 83-0074
AMERICAN SECURITY VANLINES, INC., et al., PLAINTIFFS v.
ROBERT J. GALLAGHER, DEFENDANT
[Filed February 27, 1985]
MEMORANDUM
I. BACKGROUND
This action is now before the Court on plaintiffs’ motion to
unseal and enforce the settlement agreement reached in this
matter and defendant’s motion for new trial.
Plaintiff American Security Vanlines, Inc. (“ASV”) filed suit
July 2, 1982. The complaint alleged that defendant Robert J.
Gallagher, an attorney with considerable experience in
proceedings involving the Interstate Commerce Commission (“ICC”),
had committed malpractice in negligently representing ASV in the
transfer and sale
Page 1058
of certain Certificates of Public Convenience and Necessity for
interstate motor common carriers from ASV to Gray Moving
Storage, Inc. (“Gray Moving”) and the processing of the requisite
applications and documentation before the ICC. ASV also alleged
that defendant breached a fiduciary duty owed to ASV in
undertaking inconsistent and conflicting representation of Gray
Moving after agreeing to represent ASV. Specifically ASV asserted
that after ASV entered into a contract for sale and temporary
lease of an ASV certificate to Gray Moving, Mr. Gallagher
submitted additional applications to the ICC on behalf
of Gray Moving for new certificates of public convenience and
necessity, making it unnecessary for Gray Moving to purchase
ASV’s certificate and causing Gray Moving to cancel its contract
to buy the ASV certificate. ASV sought $237,500 in actual damages
plus interest, $500,000 in punitive damages, and attorneys’
fees.[1]
A trial to the Court began on February 28, 1984. Both sides
were represented by counsel.[2] On February 29, after the close
of plaintiffs’ case, defendant Gallagher took the stand as part
of defendant’s case. In the course of Mr. Gallagher’s testimony,
he made a number of statements that plaintiffs characterize as
damaging admissions, stating that “I obviously recognized that I
made a mistake” and that “later study, and particularly the
progression of this case has made me realize I was incorrect and
that I should have taken those steps [withdrawal]; I should have
withdrawn.”
At the request of counsel for defendant, the trial was then
recessed for a short period to allow defendant to confer with
counsel. Shortly thereafter, at the request of the parties, the
trial was recessed for the day to enable the parties to explore
the possibility of resolving the dispute by means of a settlement
agreement. On March 1, 1984, the Court was presented with a draft
agreement to which all parties had tentatively assented and the
Court offered a number of suggested modifications that were
accepted by the parties. The Court then entered an order
reprinted at the margin[3] setting out the settlement
Page 1059
terms to which Mr. Gallagher and counsel for plaintiffs had
agreed. In pertinent part, the settlement agreement required Mr.
Gallagher to make payments totalling $290,000 to plaintiffs. Mr.
Gallagher’s payment obligations to Mr. Breffle were to be
evidenced by a note executed by Mr. Gallagher and his wife that
was secured by a second mortgage on the principal residence of
Mr. and Mrs. Gallagher. In the event of a breach of any provision
of the agreement by Mr. Gallagher, the settlement agreement
provided for judgment to issue in favor of American Security
Vanlines in the amount of $100,000 and in favor of plaintiff
Breffle for $300,000, less any amounts previously paid under the
terms of the agreement. The Court ordered the settlement
agreement filed under seal.
On May 22, 1984, plaintiffs, alleging that defendant had
breached the settlement agreement, filed a motion for its
enforcement. According to an affidavit from Mr. Breffle, Mr.
Gallagher sent Mr. Breffle only two checks for $4,000 each to
meet his obligation to pay Mr. Breffle $4,000 per month. Mr.
Breffle reported that the second of these checks had been
returned to his bank by Mr. Gallagher’s bank with a notation that
the account had been closed. According to an affidavit from Mr.
Bruce E. Mitchell, counsel for ASV, Mr. Gallagher provided ASV
with five post-dated checks to cover his payment obligations to
ASV. The Mitchell affidavit also reported that the second of
these checks, dated April 10 for $8,333.34 had been dishonored.
Plaintiffs also maintained that defendant had failed to provide
plaintiffs with the note and second mortgage discussed in the
settlement agreement. Accordingly, plaintiffs asked the Court to
unseal the settlement agreement and enter judgment for plaintiffs
in accordance with its terms.
On June 21, 1984, the Court issued an order requiring defendant
to show cause in writing within thirty days why plaintiffs’
motion should not be granted. Defendant in his reply to the show
cause order and in the hearing held on this matter has never
represented that plaintiffs’ claims of breach of the agreement
are unfounded. Nor has he sought to deny that he entered into the
agreement or to contest plaintiffs’ interpretation of the terms
of the agreement.
Instead, Mr. Gallagher has attacked the settlement agreement on
a number of grounds and urged the Court not to enforce it.[4]
Specifically Mr. Gallagher contends that: a) defendant should be
excused
Page 1060
from the agreement as “it was entered not because of the facts
involved in the proceeding, but because of defendant’s concern
that his ability to continue to practice law might be
jeopardized”; b) the requirement that defendant make payments to
American Security Vanlines is void as such payments are, in
reality, intended to pay plaintiffs’ attorneys’ fees in this
case; c) the requirement that defendant make payments to Harold
W. Breffle “is contrary to the facts” as Mr. Breffle was not a
client of the defendant; d) the agreement is void as it “attempts
to coerce” a nonparty, Mrs. Patricia Engel Gallagher; and e) a
decision by the Court not to enforce the agreement would be
consistent with the interests of justice. The Court has carefully
considered defendant’s arguments in the context of the record as
a whole and finds Mr. Gallagher’s challenges to the agreement to
be without merit.
II. ANALYSIS
Few public policies are as well established as the principle
that courts should favor voluntary settlements of litigation by
the parties to a dispute. See, e.g., Williams v. First Nat’l
Bank, 216 U.S. 582, 595 [30 S.Ct. 441, 446, 54 L.Ed. 625] (1910)
(“[c]ompromises of disputed claims are favored by the courts”
(citation omitted)); Autera v. Robinson, 419 F.2d 1197, 1199
(D.C. Cir. 1969) (“[v]oluntary settlement of civil controversies is
in high judicial favor” (footnote omitted)); Gomes v.
Brodhurst, 394 F.2d 465, 468 (3d Cir. 1968); McCarthy v.
Cahill, 249 F.Supp. 194, 198 (D.D.C. 1966) (“The inveterate
policy of the law is to encourage, promote, and sustain the
compromise and settlement of disputed claims” (citation
omitted)).[5] Because of this strong public policy, settlement
agreements are to be “upheld whenever possible.” D.H. Overmyer
Co. v. Loflin, 440 F.2d 1213, 1215 (5th Cir. 1971), cert.
denied, 404 U.S. 851 [92 S.Ct. 87, 30 L.Ed.2d 90] (1971).
“[A] settlement is as binding, conclusive and final as if it
had been entered in a judgment.” Clinton Street Greater
Bethlehem Church v. Detroit, 484 F.2d 185, 189 (6th Cir. 1973)
(citations omitted). Indeed, in this case, the settlement
agreement was contained in an order issued by the Court and
stipulated that judgment was to be entered for specified amounts
if defendant breached the agreement. Such a stipulation “is
regarded as removed from the ordinary stipulation . . . which the
court is free to set aside . . . in its broad discretion.”
Marrajo [Marrujo] v. Chavez, 77 N.M. 595, 426 P.2d 199, 201
(1967).
An agreement to settle litigation is a contract[6] and may
not be unilaterally rescinded unless principles of contract law
would authorize rescission. See, e.g., Village of Kaktovik v.
Watt, 689 F.2d 222, 230 (D.C. Cir. 1982); Dacanay v. Mendoza,
573 F.2d 1075, 1078 (D.C. Cir. 1978) (“a litigant can no more
repudiate a compromise agreement than he could disown any other
binding contractual relationship” (citation omitted)); 15A C.J.S.
§ 31 (1967) (compromise agreement may be impeached for cause
sufficient to invalidate a contract).
In this context, the Court turns first to Mr. Gallagher’s
argument that the agreement should not be enforced as it was
“entered not because of the facts involved in the proceeding, but
because of defendant’s concern that his ability to continue to
practice law might be jeopardized.” Reply to Show Cause Order Why
Settlement Agreement Should Not Be Enforced at 4. Mr. Gallagher
maintains this concern was “aggravated” by virtue of certain
statements
Page 1061
made by Bruce E. Mitchell, counsel for plaintiffs. Id. According
to the firsthand account contained in Mr. Gallagher’s affidavit:
During the course of attempting to negotiate a
settlement counsel Mitchell asked me if I had ever
read the presiding Judge’s decision on cases
involving attorneys as defendants. I replied that I
had not. He advised me that I should read them and
stated that the decisions were tough if not harsh. I
inferred from this conversation that the Judge’s
decisions frequently involved referral to
disciplinary committees.
Affidavit of Robert J. Gallagher, ¶ IV.
Even assuming the accuracy of Mr. Gallagher’s account of Mr.
Mitchell’s statements and of Mr. Gallagher’s characterization of
his reasons for entering into the agreement, this challenge to
the settlement agreement must fail. This conclusion is unchanged
even if the Court reads Mr. Gallagher’s arguments as asserting a
defense of duress.
A party induced to enter a settlement agreement because of
duress may be entitled to relief. See, e.g., 15A C.J.S. §
33(a). According to the Restatement of Contracts test adopted in
the District of Columbia,
duress is “any wrongful threat of one person by words
or other conduct that induces another to enter a
transaction under the influence of such fear as
precludes him from exercising free will and judgment.
. . .” Duress may be exercised by “wrongful acts that
compel a person to manifest apparent assent to a
transaction without his volition or cause such fear
as to preclude him from exercising free will and
judgment in entering into a transaction.”
Sind v. Pollin, 356 A.2d 653, 656 (D.C. 1976) (quoting
Restatement of Contracts § 492-93 (1931)). Here defendant has
alleged no facts that could meet this test.[7] To begin with,
Mr. Gallagher has not alleged that Mr. Mitchell himself made
any threats but only that Mr. Mitchell characterized the
Court’s prior decisions as being “tough” on lawyer-defendants.
The conclusion that this could not be a “wrongful act” is
reinforced by the fact that this Court’s decisions are matters of
public record and therefore that Mr. Gallagher, an experienced
attorney, was free to make his own determination as to the
accuracy of Mr. Mitchell’s characterization. Mr. Gallagher does
not maintain that Mr. Mitchell’s remarks constituted fraud or
that Mr. Mitchell, who represented the parties suing Mr.
Gallagher in this litigation, had a duty to provide Mr. Gallagher
with any other information concerning this Court’s prior
decisions.
With regard to Mr. Gallagher’s assertion that he entered into
the agreement “because of defendant’s concern that his ability to
practice law might be jeopardized” and not because of the facts
in this case, this too is insufficient as a matter of law to
establish a duress defense. By definition, all defendants
considering settlement do so based upon consideration of the
adverse consequences that might result if the action proceeds and
they do not prevail on the merits. In this case, Mr. Gallagher
believed that one such risk was the possibility that he would not
be able to practice law. Mr. Gallagher has not alleged that his
consideration of that risk resulted from a “threat” or “wrongful
act” of plaintiffs or their counsel. He has not alleged that
plaintiffs or their counsel acted in any way to “preclude him
from exercising free will and judgment.” Sind v. Pollin,
356 A.2d at 656. Even if true, the claim that Mr. Gallagher agreed to
the settlement because of fear of the adverse consequences of the
litigation is insufficient as a matter of law in this case to
establish a defense of duress. See also Chrysler Credit Corp. v.
Capital Hill Dodge, Inc., et al., Civil Action No. 79-2175
(D.D.C. Dec. 7, 1982), slip op. at 9 (fear of consequences if
case not
Page 1062
settled, “rarely, if ever, amount[s] to duress”).
The Court next considers defendant’s attack on the payments to
Mr. Breffle as improper in light of Mr. Gallagher’s claim that
Mr. Breffle was not Mr. Gallagher’s client as well as defendant’s
challenge to the payments he must make to ASV as inappropriately
awarded “attorneys’ fees.” With regard to each of these
arguments, Mr. Gallagher’s arguments rest on the merits of the
positions of the parties in the underlying litigation. For
example, Mr. Gallagher characterizes the payments he is required
to make to ASV as attorneys’ fees[8] and argues that the record
does not contain evidence sufficient to award attorneys’ fees.
Such arguments on the merits are not sufficient to upset a
settlement agreement. Instead, the existence of the settlement
agreement bars inquiry into the antecedent claims and arguments
concerning the merits of the underlying litigation. See, e.g.,
Clinton Street Greater Bethlehem Church v. Detroit,
484 F.2d at 189. Prior to the agreement, Mr. Gallagher had the option of
continuing with the trial and attempting to convince the Court
that an award of attorney’s fees was not warranted or that Mr.
Breffle’s claim for damages was insufficient as Mr. Breffle had
not been a client of Mr. Gallagher. Instead, Mr. Gallagher
exercised his right to settle the litigation. Having done so, Mr.
Gallagher may not rely on the merits to defeat the agreement to
which he assented.
Defendant’s next challenge to the agreement is the claim that
it is void as it implicates the rights of Mrs. Patricia Engel
Gallagher, Mr. Gallagher’s wife, who is a nonparty to the
litigation. The Court does not find this argument to be
persuasive. It is true that the agreement required Mr. Gallagher
to provide a note signed by Mrs. Gallagher secured by a second
mortgage on their residence as security. The provision for Mrs.
Gallagher’s signature no doubt stemmed from plaintiffs’
recognition that under New Jersey law, a note signed only by Mr.
Gallagher would not provide plaintiffs with a satisfactory
security interest in the jointly-owned property. See, e.g., Retz
v. Mayor Council, Township of Saddle Brook, Bergen County,
134 N.J.Super. 290, 340 A.2d 667, 670 (1975) (where property is held
by tenancy by the entirety, one spouse cannot bind the interest
of the other on a mortgage), reversed on other grounds,
69 N.J. 563, 355 A.2d 189 (1976). Nevertheless, the agreement is not
rendered unenforceable on this basis.
Mr. Gallagher’s argument fails to take account of the fact that
the agreement did not bind Mrs. Gallagher but only required Mr.
Gallagher to produce a specified type of security. As plaintiffs
point out, this feature of the agreement is no more coercive than
a contract requiring a party to obtain security from any other
source, such as a surety, bank or other financial institution. In
such a case, as in the case at bar, the failure of a contracting
party to obtain the promised security does not impose liability
on a nonparty to the contract. Thus, it is obvious that
defendant’s challenge based on the alleged coercion of Mrs.
Gallagher is without merit.[9]
Finally, the Court considers defendant’s assertion that the
Court should vacate the settlement agreement as this course would
be “appropriate to compel justice.” Defendant’s argument in this
regard relies
Page 1063
exclusively on Kelly v. Greer, 334 F.2d 434 (3d Cir. 1964),[10]
where the Court stated:
[T]he district court has jurisdiction to vacate its
own orders of dismissal which were based upon the
stipulation of the parties in reliance upon their
settlement agreement. Rule 60(b), Fed.R.Civ.P.
However, the district court appears to have been of
the view that the dismissal of the original actions
with prejudice deprived it of jurisdiction to
entertain the ancillary complaints seeking the
enforcement of the settlement agreement. But there
can be no question of the power of a Federal district
court to vacate its own orders entered in civil
actions over which it had original jurisdiction
“whenever such action is appropriate to accomplish
justice.” Klapprott v. United States, 335 U.S. 601,
615, 69 S.Ct. 384, 390, 93 L.Ed. 266 [1099] (1949).
Kelly, 334 F.2d at 436-37.
The Kelly case provides little support for the relief
defendant seeks. To begin with, Kelly itself concerned whether
a plaintiff could enforce a settlement agreement as part of an
action which had been dismissed with prejudice. See id. at 436.
Kelly merely held that after the defendant had allegedly failed
to comply with the agreement, the trial court could vacate its
earlier dismissal of the action to consider a motion to enforce
the agreement. The Third Circuit merely allowed the nonbreaching
party to seek recovery for the breach.[11] It did not, as
defendant urges the Court, excuse the breaching party from his
obligations under a settlement agreement merely because of a
claim that enforcement would be unduly harsh.[12] Indeed, to do
so would be inconsistent with the extensive authority quoted at
the beginning of this section holding that courts should seek to
enforce settlements and limiting the instances in which courts
will excuse nonperformance.
However, even assuming that a settlement agreement can be set
aside if such relief is consistent with the interests of justice,
defendant has failed to demonstrate any basis for finding this
standard satisfied in this case. Instead, defendant’s argument on
this point merely constitutes a repetition of the individual
challenges discussed and rejected above. See, e.g., Brief in
Support of Reply to Motion to Show Cause at 4-5. Taken in the
aggregate, these arguments are no more persuasive than they were
individually. Although it is the policy of the law to favor
hearing a litigant’s claim on the merits, here that policy is
outweighed by the need to achieve finality in litigation. See
11 Wright Miller, Federal Practice Procedure § 2857 at 159
(1973).[13]
III. CONCLUSION
The Court has carefully considered defendant’s challenges to
the settlement agreement and finds them to be without merit.
Accordingly, the Court will not interfere with the agreement of
the parties.
The Court of Appeals for this Circuit has authorized summary
enforcement of settlement agreements “in connection with problems
capable of resolution without attendant hazard to the interests
of the parties.” Autera v. Robinson, 419 F.2d at 1200. This is
such a case. Defendant does not deny entering into the settlement
agreement or raise complex factual issues related to its
formation or consummation which require testimonial exploration.
Id. Accordingly,
Page 1064
the Court does not believe further proceedings are necessary to
rule on plaintiffs’ motion to enforce the settlement.
Thus, pursuant to the discussion above, the Court finds that
defendant has breached his obligations under paragraphs two and
three of the settlement agreement to which he assented.[14]
Accordingly, the Court will issue an order entering judgment in
favor of plaintiff American Security Vanlines in the amount of
$91,666.66[15] and in favor of plaintiff Breffle in the amount
of $296,000.00.[16]
/s/ Oliver Gasch
OLIVER GASCH
Judge
Date: Feb. 26th, 1985
