the federal claims, or would also include state court claims. Id.
(finding that a negotiated for confidentiality clause was
indefinite).

Each of these cases centered around the parties’ failure to
define a term that was negotiated for and considered to be
material to the parties’ decision to settle their litigation.
Conversely, Mr. Dillard’s at-will employee status was never
discussed during the settlement negotiations, even though other,
more seemingly mundane details (such as how many times he would
be permitted to take the B Welder exam and whether Starcon would
pay for his training) were discussed and ultimately agreed upon.
See Flood v. Ty, Inc., No. 02 C 9497, 2005 U.S. Dist. LEXIS 7974,
at *39. (N.D.I11. April 5, 2005) (stating that confidentiality
and release provisions not discussed in oral settlement
negotiations are not material terms of an oral settlement
agreement.) The Court again notes that, during the course of his
employment with Starcon, Mr. Dillard had always been an at-will
employee, as had all of his non-unionized coworkers. Thus, even
if this term had been material, the parties’ previous
relationship and course of dealing would have enabled the Court
to define this term. See Orr, 560 F.2d at 769-71.

The enforcement of this agreement is not affected by the
fact that the parties failed to address other terms regarding Mr.

Dillard’s reemployment, such as whether he would be permitted to

14


not unilateral, provisions; 2) that Mr. Dillard could be
terminated only for “just cause”?; and 3) that Mr. Dillard could
not agree to various provisions obligating him as an employee’.

Mr. Dillard sent Starcon two different drafts of his
response, deleting, revising, and adding a number of provisions.
First, Mr. Dillard inserted a provision stating that, upon
reinstatement of his employment, he could be terminated for just
cause only, and he deleted Starcon’s “at-will” provision’. (Pl’s
Mem., Exhibit D, Pg #4, 5).

Next, Mr. Dillard deleted a portion of provision 11, which
stated that, “In the event that Starcon’s Releases are made a
party to, or otherwise involved in, any dispute regarding

Dillard's discharge of that responsibility, Dillard hereby agrees

2mr. Dillard also refers to a number of re-employment terms that
the parties had not previously discussed, such as his desire to
be re-employed within 7 days of his receipt of Starcon’s cash
payment; that he would be paid at the then prevailing B-welder
rate once he passed his exam; and that he would remain as an A
Mechanic if he failed the B-Welder test two times.

3 Specifically, Mr. Dillard would not agree to: 1)comply with
undefined policies, rules and practices of Starcon or be subject
to disciplinary action and/or termination; 2) be an at-will
employee; 3) not “assist in any litigation or investigations”
against Starcon; 4)pay Starcon liquidated damages; and 5) to
recite that he had been given 21 days to consider the settlement.

4 Mr. Dillard’s provision was in direct conflict with Starcon’s
initial draft, which stated that the settlement agreement “in no
way affects the at-will status of [Mr. Dillard’s] employment or
Starcon’s right to terminate [Mr. Dillard’s] employment.” (D’s
Mem., Exhibit #2, Pg #3, q 7).


terms of the agreement. See Wilson v. Wilson, 46 F.3d 660, 667
(7°" Cir. 1995) (upholding the parties’ oral settlement agreement
despite the parties’ inability to agree on a written draft of the
oral settlement, where the disagreement centered upon
nonessential terms.)

The Court finds that the parties orally agreed to and are
bound by the following terms: (1) Starcon will pay Mr. Dillard
$65,000 in damages; (2) Mr. Dillard will be reinstated as an YA
Mechanic,” making $22.35 an hour; (3) Starcon will provide and
pay for Mr. Dillard to undergo training for the B Welder
position, provided that Mr. Dillard maintains a “B” average; 4)
Starcon will provide Mr. Dillard with two opportunities to pass
the “B Welder” test; and (6) Mr. Dillard will be reinstated in
the Chicago, Illinois area, as long as work exists in that area,
but will remain flexible to serve in other locations in the
future as the work demands. The Court further finds that these

terms are sufficiently definite and enforceable.

Conclusion

The Court rejects Mr. Dillard’s attempt to derail the
parties’ negotiated settlement agreement. While it is clear that
Mr. Dillard feels strongly about returning to Starcon as an at-
will employee -- despite the fact that he has always been an at-

will employee at Starcon —~ his failure to raise the issue during

18


interpreting settlement agreements. Id. Additionally, a
contract can be formed before there is an official document
memorializing the deal.” Fidelity Mut. Life Ins. Co. v. American
Nat’l Bank and Trust Co. of Chicago, No. 93 C 2851, 1994 WL 14635
at * 2 (N.D. Ill. Jan 20, 1994); Dawson v. General Motors Corp.,
977 F.2d 369, 374 (7th Cir. 1999) (illustrating that anticipation
of a more formal future writing does not nullify an otherwise
binding agreement).

An oral agreement to settle a lawsuit is binding and
enforceable if there is an offer, acceptance, and a meeting of
the minds regarding the material or essential terms of the
agreement. McAllister v. Hayes, 165 Ill. App.3d 426, 427, 519
N.E.2d 71 (1988); see also, Abbott Labs v. Alpha Therapeutic
Corp., 164 F.3d 385, 387 (7 Cir. 1999). Without establishing
the existence of these elements, a party cannot prevail on its
motion to enforce the settlement agreement. Schaap v- Executive
Industries, Inc., 760 F. Supp. 725, 726 (N.D. Til. 1991) (“before
a court will enforce a settlement agreement, the traditional
elements of a contract must be present.”)

Parties to a contract may or may not require, as a part of
their agreement, that there be a written document setting forth
the terms of their settlement before such a settlement can be
final. See Lambert Corp. v. Evans, 575 F.2d 132 (7th Cir. 1978).

And a party cannot avoid performance under an agreement to agree

10


deleted Mr. Dillard’s “for cause” provision, replacing it with
its original “at-will” employment provision. Starcon noted that
all of Mr. Dillard’s Starcon team members are “at-will”
employees, and Mr. Dillard should be similarly situated. (D's
Mem., Exhibit #5, Pg 3 of the letter; D’s Mem., Exhibit #5, Pg 4,
g 7). Starcon explained that “(t]he just cause standard is not
proper as [Mr. Dillard] is not unionized and the just cause
standard is only applicable to unionized environments in which a
just cause standard has been negotiated between the parties
through the collective bargaining process.” (D's Mem., Exhibit
#5, Pg 3 of the letter). Starcon amended the provision to
reflect what it considered to be a comparable “at-will” clause.
(D's Mem., Exhibit #5, Pg 4, 7 7).

Next, Starcon responded to Mr. Dillard’s deletions by
explaining that Mr. Dillard’s deletion of the language in
provision 11 was inappropriate because “the IRS holds that
damages received for non physical injury are taxable and
settlements related to employment are generally assumed to be
wage related.”(D’s Mem., Exhibit #5, Pg 1-2 of the letter; D’s
Mem. Opp., Exhibit #5, Pg 3-4, 7 4{b)). Starcon also stated that
a number of other provisions were “to be discussed in a meeting
with Mr. Dillard and Defendant representative.” (D's Mem.,

Exhibit #5, Pg 3 of the letter).


to indemnify, save and hold harmless Starcon’s Releases from any
loss or liabilities resulting from his discharge of, or failure
to discharge.” (Pl’s Mem, Opp., Exhibit D, Pg 5, G@ 11).

Finally, Mr. Dillard deleted a portion of the provision
regarding his cash payment. Specifically, Mr. Dillard deleted
the following language: “It is understood and agreed to by
Dillard that the Settlement Funds include both: all compensation
that Dillard claimed or claims that he was owed; and, an
additional amount of money in excess of $1.00 that is
consideration for execution of this Agreement. Dillard affirms
that he is entitled to no further relief than the amount
specified herein, and that he would not be entitled to receive
the sum specified in this Agreement except for his execution of
this Agreement and his agreement to fulfill the promises as
described therein.”

Notably, this same provision provided that “Dillard
specifically confirms and agrees that he is solely responsible
for the state and federal income tax consequences, if any, of the
above, for the payment made to him by Starcon, as they come due.”
(D's Mem, Exhibit #2, Pg 4, 11). Mr. Dillard did not amend
this portion of the language in either of the revisions he
submitted on March 25, 2005.

On March 30, 2005, Starcon sent Mr. Dillard a letter setting

forth its assessment of his March 25th revisions. Starcon


the negotiations culminating in an oral agreement renders the
point immaterial. Rather, for the reasons set forth above, the
Court finds that the parties reached a valid settlement agreement
on March 20, 2005, and that the parties’ agreement is enforceable
as outlined above.

DATE: December 2, 2005

ENTERED:

Qnlono._ Ky

ARLANDER KEYS °
United States Magistrate Judge

19


and (2) whether the agreed upon $65,000 cash payment was
inclusive of taxes.

In its Motion to Enforce, Starcon argues that the parties
had orally agreed to the only material terms of the agreement:
(1) the terms of Mr. Dillard’s reinstatement; (2) Mr. Dillard’s
$65,000 cash payment for damages; and (3) Mr. Dillard’s promise
to release Starcon from liability. Starcon asserts that the
issue of Mr. Dillard’s employment status and taxability were
never discussed during the oral negotiation stage and are not
material to the parties’ settlement agreement. As such, Starcon
argues, Mr. Dillard’s “buyer’s remorse” does not invalidate that
agreement. The Court agrees.

Under both federal and Illinois state law, an oral agreement
to settle a lawsuit is enforceable®. Taylor v. Gordon Flesch Co.,
Inc., 793 F.2d 858, 862 (7 Cir. 1986); Pritchett v. Asbestos
Claims Management Corp., 332 111. App. 3d 890, 773 N.B.2d 1277
(2002). Courts apply ordinary contract construction rules when
6 plaintiff argues that this case should be resolved by applying
federal, not state law, citing to Taylor, 793 F.2d at 862.
However, the Seventh Circuit effectively overruled Taylor in
Lynch, Inc. v. SamataMason Inc., 279 F.3d 487, 490 (7 Cir.
2002), which held that the enforcement of settlement agreements
in cases arising under federal law should be resolved under state
law. See Transclean Corp. v. Motorvac Tech., Inc., No. Civ.01-287
IRT/FLN, 2002 WL 31185886, at *3 (D. Minn. Sept. 30, 2002).
Practically speaking, Illinois and federal law do not differ

significantly with regard to the formulation and enforcement of
oral settlement agreements.


UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

JAMES DILLARD,

Plaintiff, No. 03 C 9408
v.
MAGISTRATE JUDGE

STARCON INTERNATIONAL, INC., ARLANDER KEYS

weve vvvwven

Defendant,

MEMORANDUM OPINION AND ORDER

Currently before the Court is Defendant Starcon
International, Inc.'s (“Starcon”) Motion to Enforce an Oral
Settlement Agreement against Plaintiff, James Dillard. Mr.
Dillard filed suit against Starcon, claiming that he was the
victim of racial discrimination and harassment, in violation of
Title VII of the Civil Rights Act and 42 U.S.C. § 1981 (West
2005). Following discovery, the parties engaged in settlement
negotiations. Starcon contends that those discussions resulted
in an enforceable oral agreement. For the reasons set forth

below, this Court grants Defendant’s Motion to Enforce the Oral

Settlement Agreement.


A. The Parties Had a Meeting of the Minds With Regard to All of
the Material Terms.

Mr. Dillard points to a host of terms in arguing that the
parties had not reached a meeting of the minds after the March
20, 2005 meeting. (Pl.’s Mem. Opp. Pg- 4-5). Mr. Dillard
specifically argues that the parties never agreed upon an
essential term regarding whether Mr. Dillard would be reinstated
as an at-will employee’. (Pl.’s Mem. Opp. Pg. 1). However, it is
undisputed that this term was never discussed during the oral
settlement negotiations. Mr. Dillard had been an at-will
employee during his entire employment history with Starcon.

Mr. Dillard relies heavily upon the decisions in three
federal cases to support his argument: United States v. Orr
Constr. Co., 560 F.2d 765 (7th Cir 1977); DeFalco v. Oak Lawn
Public Library, No. 99 CV 02137, 2000 WL 263922, at *3 (N.D. Ill.
Mar. 1, 2000); and Degerman v. S.C. Johnson & Son Inc., 875 F.
Supp. 560, 562 (E.D. Wis. 1995). The Court finds that these
three cases are distinguishable, as each case involved the

vagueness of a term that the parties had previously negotiated.

TMMr. Dillard also argues that the parties never reached an
agreement on a host of other employment-related terms, such as
when Mr. Dillard would return to work, whether he would be
credited for his previous employment tenure, and what would
happen to Mr. Dillard if he failed to pass the B-Welder exam.
For purposes of clarity and brevity, the Court’s discussion will
focus upon Mr. Dillard's at-will status.

12


by withholding its consent in bad faith. Denari v. Genesis
Insurance Co., No. 01 C 2015, 2004 WL 1375735 at * 2 (N.D. Ill.
June 17, 2004) (citing Beraha v. Baxter Health Care Corp., 956
F.2d 1436, 1442 (7th Cir. 1992)).

In this case, the record illustrates that all of the
elements for a valid oral contract existed when the parties
entered into an oral agreement to settle the case on March 20,
2005. Here, the parties conducted settlement negotiations that
resulted in an offer and acceptance on all material terms. (Pl.’s
Mem. Opp. Pg. 4). Mr. Dillard has presented no evidence that his
agreement was conditioned upon acceptance of a written version of
their agreement, Taylor v. Gordon Flesch Co., 793 F.2d 858, 862
(7 Cir. 1986), and the Court disagrees that the additional
terms that remain in dispute are material. Therefore, the Court
finds that the parties reached an oral agreement on March 20,
2005, and no further action was required to render the agreement
enforceable. See Zagone v. Bosques, No. 02 C 6371, 2004 WL
170329 at *2 (N.D. Ill. January 20, 2004) (“If all of the
conditions of a settlement agreement have been met and no further
action is required to enforce such agreement, the settlement

agreement is final for enforcement purposes.)

1


Unable to resolve their differences, the parties brought
their dispute to this Court for resolution- to no avail. On June
15, 2005, Starcon filed a Motion to Enforce the Oral Settlement
Agreement. The Court ordered the parties to brief the subject,
and offered to schedule an evidentiary hearing. The parties,
however, informed the Court that, given the state of the record
and the potential expense involved, they wished to proceed
without the benefit of an evidentiary hearing. The Court
agreed’.

For the reasons outlined below, this Court finds that there
was a meeting of the minds regarding the essential terms of the
parties’ oral agreement.

DISCUSSION

Mr. Dillard argues that, when the parties exchanged written
drafts of the settlement agreement, it became apparent that
neither party agreed on the material terms of the settlement
agreement. Previously, Mr. Dillard asserted that there was not a
meeting of the minds with regard to two terms: (1) whether Mr.

Dillard’s employment would be terminable at will or for cause;

5 The Court notes that the submitted declarations and recitations
of the events in this case do not present competing views of the
material facts. Instead, the parties dispute whether certain
terms that were not negotiated during the oral negotiations were
material; and whether there was a meeting of the minds on the

material terms.


acceptable. See Decl. Of Sallie Smylie. However, Mr. Dillard
rejected Starcon’s $45,000 cash offer, and demanded $65,000
instead. Later the same day, Starcon upped its cash offer to
$50,000, and insisted that Mr. Dillard accept or reject its offer
by 10:00 pm on Sunday, March 20, 2005.

On March 20, 2005, Mr. Dillard rejected Starcon’s offer of
$50,000, and countered at $65,000 firm. Starcon relented,
finally agreeing to Mr. Dillard’s demand for a $65,000 cash
payment. Counsel for Starcon agreed to write the initial draft
of the agreement. (Pl.’s Mem. Opp. Pg. 4)-

Written Drafts of the Settlement Agreement

On March 23, 2005, Starcon faxed the first draft of the
settlement agreement to Mr. Dillard. Starcon’s draft included a
provision stating that Mr. Dillard would be an at-will employee
and, therefore, subject to termination by Starcon “for any or no
reason, without notice.” (D's Mem., Exhibit #2, Pg #2, 49 7). Mr.
Dillard’s counsel responded on March 25, 2005, calling Starcon’s
draft “the most one-sided, overreaching agreements she had ever
seen, and that she could not advise Mr. Dillard to accept the
settlement as drafted.” Pl.’s Opp. at p.6. Mr. Dillard focused
on three areas of critical disagreement: 1) that the release,

nondisparagement, and confidentiality provisions be mutual, and
_

work existed in that area, put would remain flexible to serve in
other locations in the future as the work demanded.


remain an A Mechanic if he failed to pass the B Welder exams.
“Every feasible contingency that might arise in the future, need
not be provided for in a contract for the agreement to be
enforceable.” Pritchett, 773 N.E.2d at 1282; First Nat’l Bank of
Oak Lawn v. Minke, 425 N.E.2d 11, 99 Ill. App. 3a 10, 14 (1981)
(holding that the lack of nonessential or non-material terms will
not render a contract unenforceable). The Court cannot conclude
that there was no meeting of the minds with regard to the terms
that were negotiated, simply because Plaintiff failed to raise
other issues until after the agreement had been reached.
B. Mr. Dillard Knowingly Entered into the Agreement.

Mr. Dillard claims that the parties’ oral agreement is
unenforceable because “plaintiff never signed anything.” Pl’s
Opp. at p. 14. To the contrary, the law is clear that “an oral

.

agreement to settle a Title VII claim is enforceable.” Glass v.
Rock Island Refining Corp, 788 F.2d 450, 454 (7 Cir. 1986); see
also Pohl v. Unites Airlines, Inc., 213 F.3d 336, 337 (7 Cir.
2000) (“the belief of some litigants in pursuing settlement of
their claims that they can change their mind at any time before
they actually sign the settlement agreement is often unfounded in
law.)

Next, Mr. Dillard claims that neither he nor his attorney

believed that he had reached a final and binding agreement on

March 20, 2005. Mr. Dillard and his counsel have submitted

15


failure to communicate his desire to make the parties’ agreement
contingent upon a finalized written agreement speaks volumes’.

In short, the evidence shows that the parties engaged in
settlement negotiations covering Mr. Dillard’s re-employment, a
cash payment, and his agreement to release Starcon from
liability. Mr. Dillard communicated his acceptance of these
terms to Starcon just as discovery was about to close and knowing
that Starcon was insisting on a settlement right then and there.
And at no time did Mr. Dillard express to Starcon his desire or
belief that the settlement was not final until he had the
opportunity to review a written agreement and/or to hash out
other details and concessions. Therefore, the Court rejects Mr.
Dillard’s claim that his settlement was not knowing and
voluntary.

Finally, the Court acknowledges that the parties’ written,
competing drafts of the settlement agreement conflict in many
respects. However, those disagreements center upon non-material
terms. As such, the submission of conflicting drafts does not
negate the inference that Mr. Dillard and Starcon achieved a

meeting of the minds with regard to the essential and material

8 The Court also notes Plaintiff’s shifting explanation for why
he would not agree to sign the settlement agreement; Mr. Dillard
originally stated that the fact that he was receiving $65,000
before, aS opposed to after, taxes was a sticking point for
settlement. Plaintiff's brief, however, does not advance the
issue.

17


business on Monday, March 21, 2005, in order for Starcon to save
on the costs of further depositions of Starcon witnesses, which
were scheduled for that week. On March 18, 2005, Mr. Dillard
responded with a counter offer, demanding that Starcon reinstate
him as a “C Welder,” while allowing him two opportunities to pass
the “B Welder” test. Mr. Dillard also insisted that Starcon: (1)
pay for his training and retesting; (2) pay him $75,000 in
damages; and (3) reinstate him in the Chicagoland area.

Starcon agreed to pay for Mr. Dillard’s training, provided
that he maintain a “B” average, and to provide Mr. Dillard with
two opportunities to take and pass the “B Welder” test. In
addition, Starcon would reinstate Mr. Dillard as an “A Mechanic,”
because the “C Welder” position no longer existed, and would
reinstate him in the Chicagoland area, provided he remain
flexible about working in other locations as work demanded. But,
Starcon agreed to pay Mr. Dillard only $45,000 in cash.

Mr. Dillard’s counsel concedes that she informed defense
counsel that Starcon’s reemployment terms, including his

reinstatement as an “A Mechanic,” earning $22.35 an hour', were

' specifically, the parties orally agreed that: (1) Mr. Dillard
would initially be reinstated as an “A Mechanic” making $22.35 an
hour; (2) Mr. Dillard would have the opportunity to be employed
as a “B Welder” after training and retesting; (3) Starcon would
provide and pay for Mr. Dillard’s training, provided he maintain
a “B” average; (4) Starcon would provide Mr. Dillard with two
opportunities to pass the “B Welder” test; and (5) Mr. Dillard
would be reinstated in the Chicago, Tllinois area, as long as


BACKGROUND FACTS

Mr. Dillard began working for Starcon on April 18, 1996, as
a mechanic. Mr. Dillard alleges that, during his seven year
employment with Starcon, he was subjected to harassment and
racial epithets. After he was terminated on August 15, 2003, Mr.
Dillard filed a Charge of Discrimination with poth the Illinois
Department of Human Rights and the United States Equal Employment
Opportunity Commission (“EEOC”) . The EEOC investigated the
Charge, and issued Mr. Dillard a Right to Sue letter in October
of 2003. Mr. Dillard filed suit against Starcon on December 30,
2003.

Oral Negotiations

Discovery in the matter was scheduled to conclude on March
31, 2005. Between March 17, 2005 and March 20, 2005, the parties
engaged in oral settlement negotiations. At the conclusion of
these negotiations, both parties agreed that Mr. Dillard would
release Starcon from liability in exchange for a monetary
payment and Starcon’s promise to reinstate his employment.

On March 17, 2005, Starcon’s counsel initiated settlement
discussions with Mr. Dillard’s attorney. (Pl.’s Mem. Opp. Pg- 3).
Starcon offered Mr. Dillard a $40,000 cash payment and
reinstatement of his employment as a “B Welder;” subject to him
passing the B Welder’s test. (D.’s Mem. Pg.2). Counsel explained

that Mr. Dillard must respond to the offer by the close of


For example, the Orr Court held that the phrase “proper
legal releases,” as called for by the settlement agreement, was
not sufficiently definite and that it could not be determined
either “by virtue of the agreement itself or by commercial
practice or other usage or custom.” Orr, 560 F.2d at 769. But it
was not merely that the phrase was indefinite; the court’s
analysis hinged on the fact that the phrase was material. Id. at
770-71. The court specifically noted that the scope of the
phrase was critical to determine whether the settlement would
result in the complete termination of litigation between the
parties, and the inclusion (but not the definition) of the phrase
was specifically negotiated for during negotiations. Id.

Similarly, the Degerman court refused to enforce a purported
settlement agreement because the parties could not agree upon the
terms of a confidentiality clause. 875 F. Supp. at 562. The
Degerman parties had acknowledged that the confidentiality clause
was the subject of extensive negotiations and the parties
consistently argued about its inclusion in the settlement
agreement. Id. Finally, the Court in DeFalco found that the term
“release” and a confidentiality provision were both material and
indefinite. 2000 WL 263922 at *3-4. The court noted that,
while the parties negotiated for a release and even conceded that
the release “was one of the conditions of the settlement,” the

parties failed to discuss whether that release would include only

13


declarations stating as much, but the totality of the evidence
belies this assertion. First, the Court notes that Mr. Dillard’s
counsel, Ms. Smylie, concedes that she had communicated to
Starcon Mr. Dillard’s acceptance of the terms that had been
negotiated between the parties. Ms. smylie indicated early on in
the negotiations that the fairly detailed re-employment terms
were adequate, and later negotiations focused only upon Mr.
Dillard’s cash payment. When the parties then reached an accord
on the $65,000 cash payment, Ms. Smylie never indicated that
there were additional terms that would need to be negotiated.

In addition, Ms. Smylie repeatedly acknowledges that Starcon
had made clear on more than one occasion that Mr. Dillard would
have only until March 20, 2005 to accept Starcon’s settlement
offer; March 20‘" was Starcon’s “drop dead” date, because its
settlement position would change if it would be forced to incur
the expense of the depositions scheduled for the following week —
which happened to be the week before the close of discovery.
Given Ms. Smylie’s acknowledgment that Starcon was insisting on
an agreement from Mr. Dillard by March 20°, it is difficult to
accept that neither Plaintiff nor counsel understood that the
parties’ settlement on that day was final. And given Starcon’s

stated position regarding the March 20% cutoff date, Plaintiff’s

16