United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

Nos. 96-1734/1829

___________

Beihua Sheng, *

*

Appellant/Cross-Appellee, *

* Appeal from the United States

District

v. * Court for the District of Minnesota.

*

Starkey Laboratories, Inc., *

*

Appellee/Cross-Appellant. *

___________

Submitted: April 17, 1997

Filed: June 27, 1997

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Before BOWMAN, BEAM, and MURPHY, Circuit Judges.

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BEAM, Circuit Judge.

The parties to this lawsuit attended a settlement conference without

knowing that the district court had handed down a summary judgment

decision. This appeal addresses what effect, if any, should be given to

the agreement they reached before discovering the court's action. We hold

that a contract was formed and was not based on mutual mistake.
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I. BACKGROUND

Beihua Sheng sued her former employer, Starkey Laboratories, Inc.

(Starkey) alleging violations of Title VII. Starkey moved for summary

judgment and, after a hearing, the motion was submitted to the district

court. While the request was pending, the district court ordered the

parties' attendance at a mediated settlement conference, scheduled for

Monday, December 20, 1993. On Friday, December 17, the district court

signed an order granting Starkey's motion for summary judgment. Although

copies of the order were mailed to both counsel, the court's order was not

immediately entered in the official docket and the clerk of court did not

enter judgment. See Fed. R. Civ. P. 58 & 79. Monday morning, not yet

aware of the district court's decision, the parties met in the chambers of

a United States magistrate judge. At that conference, the parties agreed

that Sheng would dismiss all of her claims against Starkey in exchange for

Starkey's payment of $73,500. At the conclusion of the meeting the

attorneys shook hands and began discussing the appropriate tax treatment

for the payment. 

After the conference, the magistrate judge informed the district

court of the agreement. The district court then rescinded its summary

judgment order sua sponte, directing the clerk of court to enter neither

the order nor judgment in the case docket. That afternoon, counsel for

both parties received copies of the December 17 order granting summary

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 been

settled. 

Starkey filed 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. Alternatively, Starkey maintains that

the agreement is unenforceable because it was based on mutual mistake. The

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 federal

common law to Title VII settlement agreement) with Morgan v. South Bend

Community Sch. Corp., 797 F.2d 471, 478 (7th Cir. 1986) (applying state law to Title

VII settlement agreement). Both the parties and the district court have assumed that

Minnesota law controls, and since it makes no practical difference in this case, we will

apply Minnesota law. We leave the larger choice of law question 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 settlement agreements when both sources of law result in

same outcome). 

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Starkey appealed that determination to this court. In Sheng v.

Starkey Laboratories, Inc., 53 F.3d 192, 195 (8th Cir. 1995), we held that

the district court had erred by failing to hold an evidentiary hearing

before concluding that agreement existed on all material terms.

Accordingly, we remanded and expressly declined to reach Starkey's mutual

mistake argument.

Back in district court, the case was assigned to another judge, and

the required evidentiary hearing was held. The court found that the

parties had reached agreement on all essential terms, but held the contract

was unenforceable because it was based on both parties' mistaken assumption

that summary judgment had not been granted. Accordingly, the district

court rescinded the dismissal order and reinstated the summary judgment

order in Starkey's favor. Sheng appeals.

II. DISCUSSION

This is essentially an appeal of a Rule 60(b) decision. Rule 60(b)

allows a district court to rescind a final judgment for a variety of

reasons, including mistake. See Fed. R. Civ. P. 60(b)(1)-(6). We review

the grant or denial of Rule 60(b) relief for an abuse of discretion. MIF

Realty L.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, the

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 at

756.1
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A. Existence of Contract

An enforceable settlement requires the 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 ancillary

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 resolve

property owners' demand for additional drainage). The fact that the

parties left some details for counsel to work out during later negotiations

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 that 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, such

as the wording of clauses regarding confidentiality, disclaimers and the

release of liability. We will not set aside a district court's findings

of fact unless they are clearly erroneous. Fed. R. Civ. P. 52(a). We

perceive no such error, and therefore affirm the district court's legal

conclusion that a contract did exist between these parties. 
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B. Enforceability of Contract 

Starkey argues that even if the parties formed a contract, the

agreement was based on a mutual mistake. A mistake is a belief that is not

in accord with the facts. Restatement (Second) of Contracts § 151 (1981).

"Mutual mistake" consists of a clear showing that both contracting parties

misunderstood 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 that

Starkey's summary judgment motion was still pending, and then concluded

that this misconception 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). However, 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'

erroneous assumption regarding the disposition of the summary judgment

motion 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). In this case, while entry of

summary judgment may have affected how much value Starkey was willing to

give in exchange for Sheng's release, both parties would have had reason

to bargain had they known of the ruling. Litigants who win summary

judgment routinely settle with their opponents to avoid the costs of an

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. 18

(1994) (addressing motion for vacatur after post-judgment settlement). 

Even if misapprehension about the pendency of Starkey's motion was a

fundamental mistake, however, we hold that Starkey assumed the risk of that

error. A
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party may not avoid a contract on the grounds of mutual mistake when it

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

Restatement instructs courts to examine "the purposes of the parties" and

"its own general knowledge of human behavior in bargain transactions" to

allocate risk in these situations. Id. at § 154 cmt. d. Here, Starkey

knew it had a dispositive motion pending, and yet chose the certainty of

settlement rather than the gamble of a ruling on its motion. "Practically

every settlement . . . involves the element of chance as to future

consequences and developments. There are usually unknown and unknowable

conditions . . . that may affect the ultimate recovery or failure of

recovery. Mutual ignorance of their existence cannot constitute 'mutual

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.