* Pursuant to 5TH CIR. R. 47.5, this Court has determined that this opinion should not

be published and is not precedent except under the limited circumstances set forth in 5TH CIR.

R. 47.5.4.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 07-20347

Summary Calendar

JEFFREY COURTNEY

Plaintiff - Appellant

v.

ARTHUR ANDERSEN LLP; RODNEY R PROTO; EARL E DEFRATES;

WASTE MANAGEMENT INC

Defendants - Appellees

Appeal from the United States District Court 

for the Southern District of Texas

USDC No. 4:05-CV-1031

Before KING, DAVIS and CLEMENT, Circuit Judges.

PER CURIAM:*

The petition for rehearing is DENIED. This Court's opinion issued on

January 3, 2008 is hereby withdrawn, and the following opinion is substituted:

This case arises out of the settlement agreement from the Waste

Management, Inc. (“WMI”) securities class action. In re Waste Management, Inc.

Securities Litigation, 177 F. Supp. 2d 1373 (J.P.M.L. 2001). After receiving and

United States Court of Appeals

Fifth Circuit

F I L E D

February 1, 2008

Charles R. Fulbruge III

Clerk
No. 07-20347

2

cashing his settlement check, class member Jeffrey Courtney sued WMI, WMI’s

auditor, Arthur Andersen, LLP, and WMI officers Rodney Proto and Earl

Defrates (collectively, the “WMI defendants”) alleging that he was not

compensated for a block of 37,902 WMI shares which were not included in the

settlement agreement. The district court found that Courtney released his

claims when he signed the settlement agreement and cashed the settlement

check. For the reasons stated below, we affirm. 

I. FACTS AND PROCEEDINGS

Courtney acquired 37,902 shares of stock in USA Waste in May 1998. USA

Waste merged with the old Waste Management, Inc. in July 1998 to form the

new WMI. Following the July 1998 merger, Courtney’s USA Waste stock

changed names from USA Waste to WMI. In July 1999, WMI announced that it

would miss its projected earnings for the second quarter ofthe year. WMI’s stock

price declined dramatically, and a large number of shareholder derivative suits

followed. The Judicial Panel on Multidistrict Litigation (“JPML”) consolidated

all of the securities actions against WMI in the Southern District of Texas in

November 2001. The district court approved a class action settlement in May

2002. 

The WMI Notice of Settlement defined the class as all of those who

“purchased or otherwise acquired” WMI stocks during the class period,

“including but not limited to, individuals . . . who purchased or otherwise

acquired USA Waste securities . . . on or after June 11, 1998.” The class period

extended from June 11, 1998 until November 8, 1999. 

Courtney received the Notice of Settlement, which included a release of all

claims against WMI (“the Release”). Courtney did not opt out of the class, and

he identified two blocks of WMI stock on his proof-of-claim form. The first block

consisted of 37,902 shares of USA Waste stock, which Courtney acquired in May

1998, prior to the beginning of the class period (“Block 1”). The second block
No. 07-20347

1 Courtney’s case was assigned to the district court judge who presided over the WMI

class action settlement.

3

consisted of 9,842 WMI stocks which Courtney acquired in December 1999,

during the class period (“Block 2”). Courtney called the office of the claims

administrator in July 2003 and was informed that Block 1 was not included in

his claim because he acquired the stock before the class period. In March 2004,

Courtney received and cashed a settlement check for $6,569.32. In June 2006,

the claims administrator sent Courtney a letter informing him that his Block 1

shares were notincluded in the settlement because they “were not exchanged for

shares or assets during the Class Period as USA Waste (the acquiring company)

and its securities simply underwent a name change.”

Courtney filed suit against the WMI defendants in Louisiana state court

in April 2004, alleging securities fraud and negligence for WMI’s conduct during

and following the July 1998 merger. The WMI defendants removed the case to

federal court in Louisiana and the JPML ordered the case transferred to the

Southern District of Texas.1 The WMI defendants then moved to dismiss for

failure to state a claim. The district court denied their motion and ordered the

WMI defendants to file a motion for summary judgment on whether “the Release

prevent[s] Courtney from pursuing claims for the value that his block of 37,902

shares lost, even though the Settlement compensated Courtney only for the

value that the block of 9,842 shares lost.” The WMI defendants filed the

requested motion for summary judgment, which the district court granted.

Courtney appealed. 

II. STANDARD OF REVIEW

This Court reviews a grant of summary judgment de novo and applies the

same criteria as the district court. Fed. Deposit Ins. Corp. v. Laguarta, 939 F.2d

1231, 1236 (5th Cir. 1991). Summary judgment is appropriate if the record

discloses “that there is no genuine issue as to any material fact and that the
No. 07-20347

4

moving party is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(c).

This Court looks to the pleadings, depositions, answers to interrogatories, and

affidavits to determine whether any genuine issue of material fact remains.Fed.

Deposit Ins. Corp., 939 F.2d at 1236. “Accordingly, we review the evidence and

inferences to be drawn therefrom in the light most favorable to the non-moving

party.” Id. (internal quotations omitted). 

“Once the moving party presents the district court with a properly

supported summary judgment motion,the burden shifts to the nonmoving party

to show that summary judgment is inappropriate.” Morris v. Covan World Wide

Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998). To defeat summary judgment,

“the nonmoving party may not rest upon the mere allegations or denials of its

pleadings, and unsubstantiated or conclusory assertions that a fact issue exists

will not suffice.” Id.

III. DISCUSSION

Courtney argues thatthe Release was ambiguous, and that he reasonably,

but mistakenly, believed that he had not released his claims with regard to any

uncompensated stock when he filed his proof of loss and later accepted the

settlement check. We affirm the district court’s finding that the Release is not

ambiguous and that it bars Courtney’s claims. 

“Whether a written agreement is ambiguous or whether it clearly

demonstrates the intent of the parties is a question of law. Likewise, . . . the

interpretation of an unambiguous instrument is a question of law.” Shelton v.

Exxon Corp., 921 F.2d 595, 602–03 (5th Cir. 1991). Public policy “favors and

encourages” the settlement of claims between parties and permits them to

release future damages as part of a settlement agreement. W. J. Perryman & Co.

v. Penn Mut. Fire Ins. Co., 324 F.2d 791, 793 (5th Cir. 1963). “In the context of

contractinterpretation, only when there is a choice of reasonable interpretations

of the contract is there a material fact issue concerning the parties’ intent that
No. 07-20347

5

would preclude summary judgment.” Amoco Prod. Co. v. Tex. Meridian Res.

Exploration, Inc., 180 F.3d 664, 669 (5th Cir. 1999).

Courtney argues that “resolution of [whether he reasonably interpreted

the Release] will determine whether [he] can establish a defense of mistake

under Federal common law (or vice of consent under Louisiana law).” Without

deciding which law is applicable to this case—an issue which Courtney fails to

brief—we hold that Courtney has failed to allege a claim under either Federal

or Louisiana law. 

Federal courts have recognized that section 153 of the Restatement

(Second) of Contracts

explains that the result of a unilateral mistake as to a basic

assumption is that the contract becomes voidable if the mistaken

party does not bear the risk of the mistake and (a) the mistake

makes enforcement of the contract unconscionable, or (b) the other

party had reason to know of the mistake or his fault caused the

mistake. 

See, e.g., Johnson Mgmt. Group CFC, Inc. v. Martinez, 308 F.3d 1245, 1260 (Fed.

Cir. 2002). Under Louisiana law, “[e]rror vitiates consent only when it concerns

a cause without which the obligation would not have been incurred and that

cause was known or should have been known to the other party,” LA. CIV. CODE

ANN. art. 1949 (2007), and “unilateral error does not vitiate consent if the cause

of the error was the complaining party’s inexcusable neglect in discovering the

error,” Smith v. Remodeling Serv., Inc., 648 So. 2d 995, 999 (La. Ct. App. 1994).

The Release, which is part of the settlement agreement, states that class

members who accept the settlement release all claims “arising out of or related,

directly or indirectly, to the purchase, acquisition, exchange, retention, transfer

or sale of, or investment decision involving, any Waste Management security

during the class period.” The district court found that the Release is not

ambiguous. The district court also found that although the Block 1 stock was
No. 07-20347

6

acquired prior to the class period (and therefore not covered by the settlement),

it was stock retained during the class period and covered by the broad terms of

the Release. We agree. 

Courtney does not argue that his Block 1 stocks are not WMI stocks which

he retained during the class period; he only argues that the meaning of

“retained” is ambiguous in the Release and that he did not understand that he

was releasing his claims with regard to his Block 1 stocks when he ratified the

Release. 

Under the terms of the Release, Courtney bore the risk of mistake and

cannot avoid the contract on that basis. Johnson, 308 F.3d at 1260. Section

154(c) ofthe Restatement(Second) of Contracts states that a party bears the risk

of mistake when “the risk is allocated to him by the court on the ground that it

is reasonable in the circumstances to do so.” The Release stated: “[i]f you are a

Class Member and this settlement is approved, your rights will be affected. You

should read this Notice carefully.” The release also stated that class members

should “CAREFULLY REVIEW THE TERMS OF THE RELEASE” because “[i]t

will affect your rights if you remain in the class.” Courtney, a sophisticated

investor, was in the best position to determine whether the settlement was

advantageous to him. Under these circumstances, Courtney bore the risk of

mistake and he cannot avoid the contract under Federal common law. 

Louisiana law requires that Courtney show that his mistake was known

or should have been known to WMI.LA. CIV. CODE ANN. art. 1949. Courtney has

not introduced any evidence to show that WMI knew or had any reason to know

of his mistaken interpretation of the Release. Summary judgment against

Courtney was proper because WMI had no reason to know that Courtney

unilaterally misinterpreted the unambiguous terms of the Release. 

Courtney also argues that summary judgment is improper because he

attempted to rescind the settlement agreement by tendering the settlement
No. 07-20347

7

proceeds to WMI in November 2006, nearly two years after he filed this lawsuit

and more than three years after the claims administrator informed him, in July

2003, that his Block 1 stocks would not be compensated under the settlement.

The district court found that Courtney’s “offer to give back the consideration,

years later and in the course of litigation, does not negate the manifestation of

his assentto be bound by the settlement agreement through knowingly receiving

and retaining consideration for his claims.” Courtney cites the Restatement

(Second) of Contracts § 381 in support of his position. The Restatement states

that “[t]he power of a party to avoid a contract for misrepresentation or mistake

is lost if after he . . . has reason to know of a non-fraudulent misrepresentation

or mistake he does not within a reasonable time manifest to the other party his

intention to avoid it.” RESTATEMENT (SECOND) OF CONTRACTS § 381(2). Courtney

argues that the question of whether he rescinded the contract in a “reasonable

time” is for the jury. As discussed above, however, the settlement agreement is

not a contract that Courtney can “avoid for . . . mistake.” Therefore, his

argument for recission must fail. 

IV. CONCLUSION

The judgment of the district court is AFFIRMED.