United States Court of Appeals 

### FOR THE EIGHTH CIRCUIT

___________ Nos. 96-1734/1829

___________ Beihua Sheng, * * Appellant/Cross-Appellee, * * Appeal from the United State s District v. * Court for the District of Minnesota

. * Starkey Laboratories, Inc., * * Appellee/Cross-Appellant. *

___________ Submitted: April 17, 1997 Filed: June 27, 1997

___________ Before BOWMAN, BEAM, and MURPHY, Circuit Judges.

___________ BEAM, Circuit Judge. The parties to this lawsuit attendeda settlement conference without knowing that the district court had handed down a summary judgmen t decision. This appeal addresses what effect, if any, should be given to the agreement they reached before discovering th e court's action. We hold that a contract was formed and was not based on mutual mistake.

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I. BACKGROUND

Beihu a Sheng sued her former employer, Starkey Laboratories, Inc

. (Starkey) alleging violations of Title VII. Starkey moved for summar y judgment and, after a hearing, the motion was submitted to the distric t court. Wh ile the request was pending, the district court ordered th e part ies' attendance at a mediated settlement conference, scheduled fo r Monda y, December 20, 1993. On Friday, December 17, the district cour t signed an order grant ing Starkey's motion for summary judgment. Although copies of the order were mailed to both counsel, the court's order was no t immediately entered i n the official docket and the clerk of court did not enter judgment. See Fed. R. Civ. P. 58 & 79. Monday morning, not ye t aware of the district court's decision, the part ies met in the chambers of a United States magis trate judge. At that conference, the parties agreed that Sheng would dismiss all of her claims again st Starkey in exchange for Starkey's payment of $73,500. At the conclusion of the meeting th e attorneys shook hands and began discussing the appropriate tax treatment for the payment.

After the conference, the magistrate judge informed the distric t court of the agreement. The district court then rescinded its summar y judgment order sua sponte , directing the clerk of court to enter neither the order nor judgment in the case docket. That afternoon, counsel fo r both parties received copies of the December 17 order granting summar y judgment and the December 20 order vacating the first order. The next day , the district court dismissed the action on the ground that it had bee n settled. Starkey f iled a Rule 60(b) motion seeking to vacate the court' s orders rescinding the summary judgment and dismissing the case. Starkey argues that there was no settlement because the parties did not agree on all material terms of the contract. Alternative ly, Starkey maintains that the agreement is unenforceable because it was based on mutual mistake. Th e district court denied Starkey's motion.

## Courts disagree on the body of law governing Title VII settlements. Compare 1 

## Snider v. Circle K Corp. , 923 F.2d 1404, 1407 (10th Cir. 1991) (applying federa l co mmon law to Title VII settlement agreement) with Morgan v. South Ben d Community Sch. Corp. , 797 F.2d 471, 478 (7th Cir. 1986) (applying state law to Title VI I settlement agreement). Both the parties and the district court have assumed that Minnesota law controls, and since it makes no p ractical difference in this case, we will apply Minnesota law. We leave the larger choice of law q uestion for another day. See Bowden v. United States , 106 F.3d 433, 439 (D.C. Cir. 1997) (declining to determine which law controls Title VII settle ment agreements when both sources of law result in same outcome). -3- Starkey a ppealed that determination to this court. In Sheng v

. Starkey Laboratories, Inc. , 53 F.3d 192, 195 (8t h Cir. 1995), we held that the d istrict court had erred by failing to hold an evidentiary hearin g before concluding that agreement existed on all material terms

. Accordingly, we reman ded and expressly declined to reach Starkey's mutual mistake argument.

Back in d istrict court, the case was assigned to another judge, and the required evidentiary hearing was held. The court found that th e parties had reached agreement on all essential terms, but held the contrac t was unenforceable because it was based on both parties' mistaken assumptio n that summary judgment had not been granted. Accordingly, the distric t court rescinded the dismissal order and reinstated the summary judgmen t order in Starkey's favor. Sheng appeals.

II. DISCUSSION

This is e ssentially an appeal of a Rule 60(b) decision. Rule 60(b) allows a district court to rescind a final judgment for a variety o f reasons, including mi stake. See Fed. R. Civ. P. 60(b)(1)-(6). We review the grant or denial o f Rule 60(b) relief for an abuse of discretion. MIF Rea ltyL.P. v. Rochester Assoc. , 92 F.3d 752, 755 (8th Cir. 1996)

. However, that discretion is limited: Rule 60(b) "does not allow district courts to indulge a party's discontent over the effects of its bargain." Andrulonis v. United States , 26 F.3d 1224, 1235 (2d Cir. 1994) (quotation omitted). Thus, if the parties had entered a binding settlement, th e district court abused its discretion in granting Starkey's 60(b) motion. We therefore turn to the existence and enforceability of the agreement , which is governed by basic contract principles. MIF Realty , 92 F.3d a t 756. 1

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A. Existence of Contract
An enforceable settlement requires t he parties to reach agreement on the essential terms of the deal. Ryan v. Ryan , 193 N.W.2d 295, 297 (Minn. 1971). Settlement agreements that do not expressly resolve ancillar y issues can, nevertheless, be enforceable. Triple B & G, Inc. v. City of Fairmont , 494 N.W.2d 49 (Minn. Ct. App. 1992) (binding settlement existed when parties had agreed on payment of damages, but failed to resolv e prop ertyowners' demand for additional drainage). The fact that th e parties left some details for counsel to work out during later negotiation s cannot be used to abrogate an otherwise valid agreement. Worthy v

. McKesson Corp. , 756 F.2d 1370, 1373 (8th Cir. 1985) (per curiam).
Here, the district court concluded t hat the parties had an agreement on all material issues. The court specifically found that the deal hinged neither on the tax treatment of the payment, nor on other particulars, suc h
as the wording of clauses regarding confidentiality, disclaimers and the release of liability. We will not set aside a district court's findings of f act unless they are clearly erroneous. Fed. R. Civ. P. 52(a). W e per ceive no such error, and therefore affirm the district court's lega l conclusion that a contract did exist between these parties.

## -5- B. Enforceability of Contract

Starke yargues that even if the parties formed a contract, th e agreement was based on a mutual mistake. A mistake is a belief that is no t in accord with the facts. Restatement (Second) of Contracts § 151 (1981). "Mutual mistake" consists of a clear showing tha t both contracting parties misund erstood the fundamental subject matter or terms of the contract

. Dubbe v. Lano Equip., Inc. , 362 N.W.2d 353, 356 (Minn. Ct. App. 1985).

The district court first held that both parties assumed tha t Starke y's summary judgment motion was still pending, and then conclude d that this misconcepti on rendered the contract voidable as mutual mistake. The intent of contracting parties is an issue of fact, reviewed only for clear error. City of Savage v. Formanek , 459 N.W.2d 173, 175 (Minn. App. 1990). H owever, the effect of a mistaken belief is a legal conclusion , reviewed de novo on appeal. Id.

As an initial matter, we are not convinced that the parties ' erro neous assumption regarding the disposition of the summary judgmen t moti on would warrant recision. Before a misconception will render a contract voidable, it must be more then an error about the monetary value of the consideration; it must go to the very nature of the deal. Gartner v. Eikill , 319 N.W.2d 397, 399 (Minn. 1982). Inthis case, while entry of summaryjudgment may have affected how much value Starkey was willing to give in exchange for Sheng's release, both parties would have had reason to bargai n had they known of the ruling. Litigants who win summar y judgment routinely settle with their opponents to avoid the costs of a n appeal, to assure confidentiality, or for a wide range of other reasons. E.g. U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership , 513 U.S. 1 8 (1994) (addressing motion for vacatur after post-judgment settlement).
Even if misapprehensi on about the pendency of Starkey's motion was a fundamental mistake, however, we hold that Starkey assumed t he risk of that error. A

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party may not avoid a contract on the grounds of mutual mistake when i t assumed the risk of that mistake. Winter v. Skoglund , 404 N.W.2d 786, 793 (Minn. 1987) (citing Restatement (Second) of Contracts § 152 (1981)). The Restat ement instructs courts to examine "the purposes of the parties" and "its own general knowledge of human behavior in bargain transactions" t o alloca te risk in these situations. Id. at § 154 cmt. d. Here, Starke y knew it h ad a dispositive motion pending, and yet chose the certainty o f settlement rather than the gamble of a ruling on its motion. "Practically
eve rysettlement . . . involves the element of chance as to futur e con sequences and developments. There are usually unknown and unknowabl e condition s . . . that may affect the ultimate recovery or failure o f
rec overy. Mutual ignorance of their existence cannot constitute 'mutua l mistake.'" Anderson v. Ciba- Geigy Corp. , 490 F.2d 438, 442 (8th Cir. 1974) (quotation omitted). Consequently, Starkey cannot avoid the deal it struck with Sheng.

III. CONCLUSION

The decision of the district court is affirmed in part and reversed in part. The case is remanded to the district court for entry of judgment dismissing the action based on the settlement agreement.
A true copy.

ATTEST:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.