NOT RECOMMENDED FOR FULL
- TEXT PUBLICATION File Name: 14a0421n.06
Case Nos. 13
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UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

UNIVERSAL SETTLEMENTS INTERNATION AL , INC., a Canadian corporation , Plaintiff

- Appellee (13

- 1959) , Defendant

- Appellee (13

- 1960),
v. NATIONAL VIATICAL, INC.; JAMES TORCHIA , Defendants

- Appellants (13

- 1959) , Plaintiffs

- Appellants (13

- 1960), MARC A. CELELLO,
Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MICHIGAN

O P I N I O N

BEFORE: MOORE and COLE, Circuit Judges; and DRAIN, District Judge.  COLE, Circuit Judge. A n oral settlement agreement fell apart after National Viatical (“N ational V iatical ”) and James Torchia accused Universal Settlements International (“U niversal Settlements ”) of publishing confidential settlement terms on its publicl y - accessible website.
N ational V iatical and Torchia sued for breach of contract , and t he district court granted summary judgme nt to Universal Settlements . Because there is no genuine dispute of material fact as to

 The Honorable Gershwin A. Drain, United States District Judge for the Eastern District of Michigan, sitting by designation.Case Nos. 13

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- whether a breach of confidentiality occurred , we affirm the grant of summary judgment . In a separate opinion, the district court entered a $5 million consent judgment against N ational
V iatical and Torchia because they defaulted on their obligation s under the settlement agreement.
B ecause consent judgm ents must be strictly construed , we affirm the court’s entry of judgment. I. BACKGROUND Days before trial, N ational V iatical and Torchia entered into a settlement agreement with Universal Settlements , and t he terms of the agreement were placed on the record before Magistrate J udge Ellen Carmody

. The agreement required N ational V iatical and Torchia to pay Universal Settl ements $1 million in four installments within one year and to pledge collateral to

secure this payment. In exchange, the parties agreed to mutually release one another of all claims and cross

- claims

. The parties stipulated that a $5 million consent judgment would be entered against N ational V iatical and Torchia if they default ed on their payment obligation.
At the settlement conference, N ational V iatical and Torchia requested a “standard mutual confidentiality agreement,” but this request was difficu lt to accommodate. Because Universal Settlements had previously sought relief in a Canadian bankruptcy court , it had to notify the court about the settlement and follow its instructions with respect to disclosure

. Accordingly , the parties agreed that lim ited information could be provided to the court and others on a need

- to

know basis . At the time, however, the parties did not know what the Canadian court would require regarding disclosure , and Universal Settlement s ’ counsel explained that other entities

“ might possibly have to be exempted [from confidentiality]

. ” Nevertheless, the parties agree d to work in good fai th to maintain confidentiality. Soon after the settlement conference, Universal Settlements published a “Notice of Settlement” on its website , conveying the following information: (1) the settlement amount ,Case Nos. 13

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- (2) the payment structure, and (3) the possibility of sanctions in the event of default. Universal Settlements also provided this information to its creditors and to t he m onitor of its rest ructuring

. Though the n otice provided the total settlement amount, it did not identify how the amount would be d ivided between N ational V iatical and Torchia, nor indicate the amount of the consent judgment, n or say who would be liable for the judgment in the event of default. Troubled by the disclosures, N ational V iatical and Torchia refused to pay the $1 million the settlement required. After providing N ational V iatical and Torchia with notice and an opportunity to cure the default, Universal Settlements moved for summary judgment on the breach of contract claim and sought to enforce the $5 mil lion consent judgment. After the district court granted both motions in Universal Settlement s ’ favor , N ational V iatical and Torchia timely appealed . W e have jurisdiction to review the court’s orders under 28 U.S.C. § 1291

. 1
II . ANALYSIS A. Breach of Confidentiality We review the grant of summary judgment de novo. Cont’l Ins. Co. v. Adams , 438 F.3d 538, 540 (6th Cir. 2006)

. Summary judgment is requi red where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
N ational V iatical and Torchia claim there is a dispute of fact regarding whether Universal Settlements breached confidentiality. The district court concluded that no breach of

1 U niversal Settlements argues tha t N ational V iatical and Torchia’s appeal related to the consent judgment is untimely. The district court entered judgment on June 21, 2013. N ational V iatical and Torchia appealed this order on July 19, 2013, which is within the thirty

- day time limit requi red by Fed. R. App. P. 4(a)(A). The appeal is therefore timely.Case Nos. 13

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- confidentiality occurred because the information Universal Settlements disclosed was “generic,” limited in scope, and expressly contemplated by the parties. We agree. Although the parties were unaware of what specific instructions the Canadian court would require with respect to disclosure , Universal Settlements could not agree to absolute confidentiality because it had reporting obligations to the Canadian court

. Ultimately , the c ourt directed Universal Settlements to post a statement on its website notifying its creditors about the settlement

. In N ational V iatical and Torchia ’s view , disclosure was unnecessary because Universal Settlement s ’ creditors and the Canadian court had already approved the agreement before notice was posted

. While true, N ational V iatical and Torchia misconstrue the purpose of disclosure , which was to provide notice of the settlement , not to obtain approval of its terms. That Universal Settlem ent s ’ creditors had already approved the agreement does not dispute the fact that the Canadian court instructed the company to provide notice of the settlement to its creditors. In essence, t he parties’ agreement contemplated the very disclosure Universal Settlements eventually made. At the settlement conference, Judge Carmody specifically asked
N ational V iatical and Torchia if they agreed with the terms that were placed on the record, which included the possibility that notice could be posted on a website. They approved the agreement and did not object when Universal Settlement s ’ counsel indicated that the settlement amount could be reported to the Canadian court. Since N ational V iatical and Torchia failed to request a specific method of disclosure and failed to challenge Judge Carmody’s recitation of the settlement terms, summary judgment was proper. Finding no dispute of fact on the breach of confidentiality claim, the district court also dismissed N ational V iatical and Torchia’s argument that they sustained harm as a result of theCase Nos. 13

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- alleged breach. On appeal, N ational V iatical and Torchia claim that nominal damages are recoverable for breach of contract action s . To be sure, there are circumstances where damages may be inferred. Here, however, N ational V iatical and T o rchia have not established a breach in the first instance; therefore, they are not entitled to damages. B. Ambiguity o f the Confidentiality Agreement
N ational V iatical and Torchia ’s next attempt to survive summary judgment requires an examination of whether the settlement is ambiguous. 2 Arguing that it is, N ational V iatical and Torchia maintain that the word “website” is latently ambiguous and that it is unclear whether confidential ity pertained only to the consent judgment. We address each argument in turn.
T o detect a latent ambiguity, the court must first review any extrinsic evidence, and if an ambiguity is present, it must resolve the ambiguity in light of that evidence. Sault Ste. Marie Tribe of Chippewa Indians v. Granholm , 475 F.3d 805, 812 (6th Cir. 2007). However, a contract term does not become ambiguous as a matter of law simply because the parties disagree about its meaning. Fed. Ins. Co. v. Hartford Steam Boiler Inspection & Ins. Co. , 415 F.3d 487, 495 (6th Cir. 2005). Rather, the test for ambiguity is whether the contract language “fairly admits of but one interpretation.” Meagher v. Wayne State Univ ., 565 N.W.2d. 401, 415 (Mich. Ct. App. 1997). At the settlement conference, the following dialogue ensued with respect to confidentiality:

2 Because s ettlement agreements are a type of contract, questions of their formation and enforceability are governed by state contract law. Bamerilease Capital Corp. v. Nearburg , 958 F.2d 150, 152 (6th Cir. 1992)

. The parties apply Michigan substantive law in their briefs as this is where the se ttlement agreement was formed. We therefore apply Michigan law in our analysis.Case Nos. 13

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- Mr. Sullivan: Why don’t we just exempt from the confidentiality except to the extent necessary for reporting to the Canadian court a nd/or taxing authorities . . . ? Mr. T orchia: Then they’re going to put it on a Web site, right ? Mr. Franzinger: I don’t know. Mr. Torchia: I mean, I don’t care. It doesn’t matter

. N ational V iatical and Torchia’s subjective understanding was that “website” meant PACER or its Canadian equivale nt. Because c ontracts are “governed by what the parties said and did, and not merely by thei r unexpressed subjective intent, ” the district court properly granted summary judgment to Universal Settlements

. Fletcher v. Bd. of Educ ., 35 N.W.2d 177, 180 (Mich. 1948). As the district court explained, “Torchia was . . . well aware of the website Universal Settlements was using to com municate with its creditors.” N ational V iatical and Torchia’s subjective understanding is insufficient to create a latent am biguity

. Turner Holdings, Inc. v. Howard Miller Clock Co ., 657 F. Supp. 1370, 1380 (W.D. Mich. 1987) (holding that one party’s subjective intent as to the meaning of a contract term was “not sufficient to establish the existence of a latent ambiguity”); B urkhardt v. Bailey , 680 N.W.2d. 453, 464 (Mic h. Ct. App. 2004) (“T he unilateral subjective intent of one party cannot control the terms of a contract.”); Harbor Park Mkt., Inc. v. Gronda , 743 N.W.2d 585, 589 n.3 (Mich. Ct. App. 2007). (“[O]ne party’s understanding of what was intended by the [ contract ] language is irrelevant to determining what the language actually says.”). Thus, b y agreeing that notice could be posted on a “website,” N ational V iatical and Torchia must “live by the wo rds of their agreement.” Gronda , 743 N.W.2d at 588. The parties disagree over whether the consent judgment was the only settlement term subject to confidentiality. Torchia provided declaration testimony that he never agreed that the “default penalty woul d be the only confidential term.” On summary judgment, we view this evidence as true and draw all “justifiable inferences” in N ational V iatical and Torchia’s favor.Case Nos. 13

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- Anderson v. Liberty Lobby Inc. , 477 U.S. 242, 255 (1986)

. But “[w]hen opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of . . . summary judgment.” Scott v. H

arris , 550 U.S. 372, 380 (2007). The record contradicts N ational V iatical and Torchia’s argument that every settlement
term required confidentiality

. According to Judge Carmody , Torchia requested confidentiality because he did not “want it to appear to any credit authority or any other entity that he ha[d] a
five

- million

- dollar judgment against him.” Notably, N ational V iatical and Torchia did not
correct Judge Carmody ’s interpretation despite her invitation

. Universal Settlement s ’ counsel shared Judge Carmody’s view that the issue of confidentiality pertained only to the consent judgment and that protecting this term would “satisfy everybody’s concern.” Tellingly, a t no point did N ational V iatical or Torchia indicate that all ter ms of the settlement agreement were to be kept confidential. S uch a request would have been impossible to satisfy because Universal Settlements had to comply with the Canadian c ourt’s directives with respect to disclosure

. Admittedly, N ational V iatical an d Torchia never stated affirmatively that the consent judgment was the only provision to safeguard

. Nevertheless, they had multiple opportunities to clarify the scope of the agreement and failed to do so. W here, as here, a party “was present when
the terms of the settlement agreement were read in open court and he voiced no objections thereto, we must conclude that it met his approval.” Michigan Bell Tel. Co. v. Sfat , 442 N.W.2d
72 0, 723 (Mich. Ct. App. 1989) ; see also City of Detroit v. Simon , 247 F. 3d 619, 629 (6th Cir. 2001) (holding that a party has effectively accepted a settlement term where that party failed to express any reservation about an agreement placed on the re cord); The Beale Grp. , Inc. v.
Weiner , No. 253257, 2005 WL 1413178, at *4 (Mi ch. Ct. App. June 16, 2005) (“Defendants’Case Nos. 13

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- carelessness in agreeing to the settlement , without taking the time to ensure that they fully understood its ramifications, is not the type of mistake that will allow defendants to avoid

e nforcement of the agreemen t.”). Thus, there is no dispute that the confidentiality term protected only the $5 million consent judgment. C. National Viatical and Torchia’s Performance is Not Excused Because of Universal Settlement s ’ alleged breach, N ational V iatical and Torchia claim their performance is excused

. Under Michigan law, a party who commits the first “substantial breach” of a contract “cannot maintain an action against the other contracting party for failure to perform.” Chrysler Int’l Corp. v. Cherokee Exp. Co. , 1 34 F.3d 738, 742 (6th Cir. 1998). A breach is substantial if it has changed the “ essential operative elements of the contract [such] that further performance by the other party is thereby rendered ineffective or impossible, such as the causing of a comple te failure of consideration or the prevention of further performance by the other party.” Id

. (internal quotation marks omitted).
N ational V iatical and Torchia claim that confidentiality was essential and that they would not have settled the case without it

. While the benefit of their bargain may have contemplated some level of confidentiality, this was not the only consideration (or even primary consideration) they received. A fter the settlement, Universal Settlement s ’ lawsuit was dismissed, N ational V iatical and Torchia avoided trial and the possibility of suffering an adverse judgment, and the y were released of Universal Settlement s ’ claims

. Additionally, e ven if the breach altered an “essential operative element[]” of the settlement, N ational V iatic al and Torchia’s obligation to pay Universal Settlements $1 million was not rendered “ineffective or impossible” as Michigan law requires. See id. Thus, their performance is not excused.Case Nos. 13

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- D. The Consent Judgment Following N ational V iatical and Torchia’s default, the district court entered the $5 million consent judgment against them , and t hey challenge this decision on several grounds. First, they argue that they did not receive “formal notice” of default, such that the entry of judgment was premature . But the record shows that N ational V iatical and Torchia received notice on August 31, 2012, and that they failed to cure within the fourteen

- day period provided by the district court. N ational V iatical and Torchi a insist that the y were entitled to “for mal notice,” but they have failed to identify what type of no tice was appropriate and cannot show that the settlement agreement required “formal notice .” Therefore , Universal Settlement s ’ motion to enforce the consent judgment, filed on September 20, 2012 , was not premature. Second, N ational V iatical and Torchia claim the $5 million judgment is a penalty , designed to coerce performance. A consent judgment is a hybrid of a contract and a judicial act. Local No. 93, Int’l. Ass’n of Firefighters, AFL

- CIO C.L.C. v. City of Cleveland , 478 U.S. 501, 519 (1986 ) . It mirrors a contract in that it reflect s “an agreement by the parties,” and it is a j udicial act because it “places the power and prestige of the court behind the compromise struck by the parties.” Williams v. Vukovich , 720 F.2d 909, 920 (6th Cir. 1983)

. C ourts have an obligation to “protect the integrity of the decree with its contempt powers.” Id

. Importantly, “[f]ederal courts are not reduced to approving consent decre es and hoping for compliance. Once entered, a consent decree may be enforced.” Frew ex rel. Frew v. Hawkins , 540 U.S. 431, 440 (2004).
N ational V iatical and Torchia ask this court to construe the consent judgment as a contract and apply traditional co ntract principles to determine whether the agreement isCase Nos. 13

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- enforceable. Whether we construe th e judgment as a judicial act or a contract , the district court correctly held that the judgment may be enforced

. As a judicial act, consent judgment s must be “strictly construed to preserve the bargai ned for position of the parties. ” Vukovich , 720 F.2d at 920

. In this respect , courts have “ very limited authority to alter the terms of any consent judgment . . . . The only facts and circumstances that [the Sixth Circuit] has ruled warrant relief from a consent judgment are some showing of the existence of fraud or a mutual mistake of fact.” Mallory v. Eyrich , 922 F.2d 1273, 1280 (6th Cir. 1991) (internal quotation marks omitted) ; see also Callen v. Pen nsylvania R.R. Co ., 332 U.S. 625, 630 (1989) (“One who attacks a settlement must bear the burden of showing that the contract he had made is tainted with invalidity, either by fraud practiced upon him or by a mutual mistake under which both parties acted.” ). Simply put, N ational V iatical and Torchia have not challenged the judgment on grounds of mistake or fraud, nor have they presented any other facts permitting the court to set aside the judgment. 3 Even if we construe the judgment as a contract, we discern no error in the district court’s
decision

. N ational V iatical and Torchia have not demonstrated that the judgment was designed to be a penalty or a liquidated damages provision. Properly understood, the judgment represents an express agreement by N ational V iatical and Torchia to pay Universal Settlements $5 million if they failed to abide by the settlement. By agreeing to this provision, they are bound by its
terms

. Furthermore, as the district court correctly explained , the judgment was reasonab le

3 National Viatical and Torchia argue that Federal Rule of Civil Procedure 60(b)(6) allows the court to set aside the judgment for “any other reason that justified relief.” However, “relief under this section requires a showing of exceptional or extraordinary circumstances,” E. Brooks Books, Inc. v. City of Memphis , 6 33 F.3d 459, 465 (6th Cir. 2011), such as a change in controlling law, together with “some other special circumstance.” Blue Diamond Coal Co. v. Trs. of the UMWA Combined Benefit Fund , 249 F.3d 519, 524 (6th Cir. 2001). Because National Viatical and Torc hia have not offered the type of “exceptional or extraordinary circumstances” contemplated by Rule 60(b)(6), we wi ll not set aside the judgment.Case Nos. 13

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- because it related directly to the “losses the parties considered and agreed might be sustained.”
W e find no reason to construe the consent judgment as a penalty clause.
III . CONCLUSION For the foregoing reasons, w e affirm the district court’s order grant ing summary judgment and affirm the court’s order entering the consent judgment.