Opinion ID: 4536578
Heading Depth: 2
Heading Rank: 1

Heading: Terms of Summary Enforcement

Text: On appeal, LAIA concedes that the parties settled on March 5, 2019, thus forming the Settlement Agreement that became effective March 1, 2019. Relatedly, LAIA concedes that it failed to fulfill its obligations under that Agreement. Nonetheless, LAIA maintains that the district court abused its discretion by granting franchisees’ Motion to Enforce the Settlement Agreement. An initial issue raised by the district court sua sponte was whether it had subject matter jurisdiction to enforce the settlement. “[F]ederal district courts do not possess the inherent power to vindicate their own authority where parties enter into a voluntary agreement resolving their federal lawsuit.” RE/MAX Intern., Inc. v. Realty One, Inc., 271 F.3d 633, 641 (6th Cir. 2001) 5 The district court dismissed LAIA’s excuse for its failure to respond to franchisees’ April 3, 2019 notification of their signage installation until April 12, 2019, stating that its insistence that it did not receive photos of the signage until April 9, 2019 still “did not excuse [its] failure to perform under the contract. RE 48, PageID 1318. 9 Case No. 19-1927, L.A. Ins. Agency Franchising, L.L.C. v. Kutob, et al. (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 376–77 (1994)). This principle might have created a problem for the district court’s enforcement of the Settlement Agreement, given that the parties inexplicably had not submitted a proposed, stipulated order of dismissal, as they had been directed to do by the court, nor had they moved to reopen the case by the courtimposed deadline. As the district court noted, the parties neither made their “‘obligation to comply with the terms of the settlement agreement . . . part of dismissal,” id. (citing Kokkonen, 511 U.S. at 381), nor did the court explicitly retain jurisdiction to enforce the settlement. However, the district court recognized, and we agree, that under Kokkonen, “a district court can exercise jurisdiction if (1) there is ‘an independent basis for federal jurisdiction’ or (2) grounds exist for ancillary jurisdiction either because (a) ‘the dismissed claims are factually interdependent with the disputed terms of settlement’ or (b) jurisdiction is necessary to vindicate the Court's authority or for it to function properly.” (RE 48, PageID 1314 n.2 (quoting Kokkonen, 511 U.S. at 379–80)). The district court correctly held that “the present dispute has an independent basis for federal jurisdiction [that is, it satisfies the requirements for federal diversity jurisdiction], is factually interdependent with the dismissed claims, and must be addressed to vindicate the Court's authority.” Id. Having agreed with the district court that subject matter jurisdiction exists, we now “review for clear error the district court's factual determination that the parties had agreed to settlement terms; however, we review the district court’s decision to grant a motion to enforce the settlement based on its preliminary factual finding for an abuse of discretion.” RE/MAX Int’l, Inc. v. Realty One, Inc., 271 F.3d 633, 645 (6th Cir. 2001) (citing Therma-Scan, Inc. v. Thermoscan, Inc., 217 F.3d 414, 418 (6th Cir.2000)). “We will [] find an abuse of discretion only when left with the ‘definite and firm conviction that the court . . . committed a clear error of judgment in the 10 Case No. 19-1927, L.A. Ins. Agency Franchising, L.L.C. v. Kutob, et al. conclusion it reached upon a weighing of the relevant factors’ or where it ‘improperly applies the law or uses an erroneous legal standard.’” Id. (internal citations and quotation marks omitted). B. Evidence Showing LAIA Breached the Settlement Agreement The text of the Settlement Agreement stipulates that all obligations and provisions will be “interpreted in accordance with and governed in all respects by” Michigan law. RE 43-2, PageID 1232. Therefore, under governing Michigan law, a party alleging breach of contract must show: (1) “the existence of a contract between [the parties]”; (2) “the terms of the contract”; (3) “that [the adverse party] breached the contract”; and (4) “that the breach caused [the complaining party’s] injury.” Webster v. Edward D. Jones & Co., L.P., 197 F.3d 815, 819 (6th Cir. 1999). We find no abuse of discretion in the district court’s holding that all of these elements were met. First, as the district court found, there is very little question that a contract existed, as proven by franchisees’ attachment of a copy of the Settlement Agreement with their Motion to Enforce. Second, the Settlement Agreement clearly laid out the terms and obligations owed by both parties following the Agreement’s original execution on March 5, 2019, and the execution of the amendment on March 26, 2019. Third, and importantly, as the district court found, through their declarations, contemporaneous correspondence between the parties and the parties’ counsel, and other documents, the franchisees provided sufficient evidence that they had performed their own contractual obligations, which included: (1) completing the franchise agreements; (2) installing the required L.A. Insurance signage on their franchise locations; and (3) paying the appropriate franchising fees to LAIA. Of equal importance, franchisees offered sufficient evidence that although they performed their obligations, LAIA failed to fulfill its reciprocal obligations under the Settlement Agreement. Specifically, as franchisees demonstrated in their attached exhibits, LAIA did not (1) send letters to the franchisees’ former insurance carriers 11 Case No. 19-1927, L.A. Ins. Agency Franchising, L.L.C. v. Kutob, et al. notifying them of the parties settlement; and (2) release the second tranche of withheld commissions to franchisees, a total that amounted to over $ 80,000.6 The district court did not abuse its discretion in finding that these breaches of the settlement agreement resulted in monetary injuries to the franchisees. C. LAIA’s Excuses for its Failure to Perform i. LAIA’s Failure to Perform Due to Lack of Signed Lease Addenda from Franchisees To reiterate, LAIA conceded in the district court, and concedes now, that it failed to perform its contractual obligations under the Settlement Agreement. However, it argues that the district court abused its discretion in enforcing the Settlement Agreement because LAIA’s nonperformance was excused under Michigan’s contractual first-breach doctrine. Namely, LAIA argues that franchisees committed the first breach of the Settlement Agreement in failing to return to LAIA completed lease addenda, which it states were “[i]ncluded in each of the new franchise agreements” and were required to be completed under the original terms of the Settlement Agreement. Appellant Br. at 6; RE 44, PageID. 1282. However, as we outline below, the district court was correct in dismissing this excuse. “One who first breaches a contract cannot maintain an action against the other contracting party for his subsequent breach or failure to perform.” Michaels v. Amway Corp., 206 Mich. App. 644, 649 (1994); Flamm v. Scherer, 40 Mich.App. 1, 8–9 (1972). However, the first breach rule “only applies when the initial breach is substantial.” Michaels, 206 Mich. App. at 650; see Baith v. Knapp-Stiles, Inc., 380 Mich. 119, 126 (1968). 6 The franchisees did acknowledge, however, that LAIA had released the first tranche of withheld commissions to them, representing forty percent of the outstanding amount. 12 Case No. 19-1927, L.A. Ins. Agency Franchising, L.L.C. v. Kutob, et al. Therefore, in theory, LAIA offers a valid Michigan state law doctrine that could excuse its failure to perform its contractual obligations to franchisees under the Settlement Agreement. However, LAIA fails to meet the second requisite element of this doctrine—that the first breach rule “only applies when the initial breach is substantial.” Michaels, 206 Mich. App. at 650; see Baith, 380 Mich. at 126. To prove “substantiality” in this case then, the district court noted that it would have had to make two related determinations: (1) that the lease addenda were actually included in the original franchise agreements; and (2) that franchisees’ failure to return them to LAIA was a substantial omission. LAIA did not offer any evidence to support either finding. a) The Inclusion of the Lease Addenda within the Original Franchise Agreements Attached to their Motion to Enforce filed in the U.S. District Court for the Eastern District of Michigan, franchisees provided declarations stating that the “franchise agreements” had been “fully executed” pursuant to the Settlement Agreement. RE 43-1, PageID 1175; see also RE 43- 3, PageID 1265. Franchisees also included email correspondence from LAIA’s lawyer, dated April 4, 2019 and April 29, 2019, confirming that the franchise agreements had been completed by all parties. RE 43-1, PageID 1187 (“[a]ll parties have completed Franchise Agreement[s]” for the relevant franchisee locations). However, neither party actually provided a copy of the franchise agreements, so as to confirm, as LAIA insists, that the lease addenda were included or not included within the original Agreements. Yet, regardless of the presence of the actual franchise agreements themselves, the district court correctly determined that LAIA’s excuse for its nonperformance—that franchisees had not returned to it signed lease addenda—is unavailing. Certainly, as the district court acknowledged, the lease addenda “may be important to [LAIA’s] interests.” RE 48, PageID 1316. However, we agree with the district court that subjective feelings of importance “[can]not overcome [LAIA’s] 13 Case No. 19-1927, L.A. Ins. Agency Franchising, L.L.C. v. Kutob, et al. own [written] representations that the franchise agreements were completed by all parties.” Id. at 1317. In fact, as documented by the evidence submitted by franchisees, LAIA’s counsel actually “acknowledged receipt of the fully executed franchise agreements,” through statements to the franchisees on April 4, 2019 and April 29, 2019 that “[a]ll parties have completed franchise agreements[].” Id. at 1316. Yet, even with this overwhelming evidence weakening its case, LAIA attempts now to offer an additional nuance to its excuse argument, stating that the district court abused its discretion because it actually “misconstrued” the email statements of LAIA’s counsel regarding the “completed” franchise agreements. This evidence was “misconstrued,” according to LAIA because (1) the emails did not actually come from its counsel; and (2) the language was interpreted incorrectly by the district court. As to the latter proposition, LAIA states that the acknowledging text in the emails—that “[a]ll parties [had] completed franchise agreements[]”—meant only that LAIA “had signed the franchise agreements as well,” Appellant Br. at 9, not that the franchise agreement obligations had been fully performed. However, the problem with LAIA’s argument here is two-fold: First, in the absence of exceptional circumstances, “this court normally will not address an issue not first raised in the district court.” Bartel v. United States, 99 F.3d 1138  (6th Cir. 1996) (Table). As indicated by the record, LAIA never objected to the email evidence from its counsel acknowledging completion of the franchise agreements when those emails were presented to the district court. In fact, LAIA never even argued to the court that those emails were incorrect in their indication of acknowledgement. Therefore, because LAIA failed to make any objection to this evidence in the court and cites no exceptional circumstances to justify its failure to object to the emails, it is “precluded from raising the issue for the first time on appeal.” Bldg. Serv. Local 14 Case No. 19-1927, L.A. Ins. Agency Franchising, L.L.C. v. Kutob, et al. 47 Cleaning Contractors Pension Plan v. Grandview Raceway, 46 F.3d 1392, 1396 (6th Cir. 1995). Second, even absent the forfeiture, LAIA’s claims do not prevail. LAIA is now placing the blame on a third-party document signing service, “DocuSign,” for acknowledging confirmation of the completed franchise agreements. In fact, despite the address and signature of LAIA’s counsel being on the emails, LAIA claims that these emails were “automatically generated” from DocuSign, meaning their substantive language “came from DocuSign,” as opposed to its counsel. Though this is a creative, and technologically innovative argument, even it were true, LAIA cannot support its statements, because it cites no evidence on the record that DocuSign authored the text in question. Nor does LAIA provide any critical information that could help this court understand: (1) who authorized DocuSign to send the emails under the name of LAIA’s counsel, and with counsel’s e-signature; (2) any pattern or practice of LAIA’s having used DocuSign in the past to generate “automatically generated” content; or, most critically (3) even if the emails were automatically generated, whether LAIA or LAIA’s counsel lacked knowledge or consent of their transmission and text. Because we find that the district court did not “misconstrue” the email evidence regarding LAIA’s acknowledgment of the completed franchise agreements, we hold that the the district court did not abuse its discretion by rejecting LAIA lease addenda excuse for its non-performance of its contract obligations. b) The Addenda as a “Substantial” Element of the Settlement Agreement Yet, even if LAIA had shown that the franchisees had committed the “first breach” by failing to return all of the signed lease addenda, LAIA would still fail to satisfy the elements of the first breach doctrine under Michigan law, as LAIA fails to show that the addenda were a 15 Case No. 19-1927, L.A. Ins. Agency Franchising, L.L.C. v. Kutob, et al. “substantial” part of the Settlement Agreement. The district court did not reach the question of “substantiality,” given the court’s inability to determine whether the lease addenda had actually been included within the franchise agreements. Notwithstanding LAIA’s failure to produce the franchise agreements, however, we also find fatal to LAIA’s case its failure to offer any supplementary evidence, in the form of correspondence, memoranda, or declarations, to establish the alleged “substantiality” of the addenda in relation to the franchise agreements or the Settlement Agreement. Moreover, as noted supra, not one email sent from LAIA or its counsel to franchisees, where they appear to be acknowledging the completed lease agreements, mentions any lease addenda. And, in fact, LAIA’s actions suggest that the lease addenda did not constitute a “substantial” provision of the Settlement Agreement or the franchise agreements, given that LAIA started fulfilling its obligations under the Settlement Agreement by releasing to franchisees the initial forty percent tranche of commissions. It would be reasonable to infer that if LAIA had not felt the franchise agreements were “complete” on that date, it would not have even begun performing these Settlement Agreement obligations. Considering the lack of evidence showing the “substantiality” of the lease addenda in the Settlement Agreement and the franchise agreements, coupled with LAIA’s own email statements appearing to acknowledge completed franchise agreements and its actions in fulfilling part of its obligations under the Settlement Agreement, we hold that the district court did not abuse its discretion by rejecting LAIA’s excuse for its failure to perform under the Michigan first breach doctrine. ii. LAIA’s Failure to Perform Because of Lack of Proper Signage Finally, LAIA argued below that its lack of full performance under the Settlement Agreement was excused given “it never approved the new signage installed by [franchisees], in 16 Case No. 19-1927, L.A. Ins. Agency Franchising, L.L.C. v. Kutob, et al. writing or otherwise.” RE 48, PageID 1317 (quoting RE 44, PageID 1283). The district court dismissed this argument, citing email evidence showing that in violation of the terms of the Settlement Agreement, once franchisees’ counsel had provided written notice of the new signage on April 3, 2019, LAIA failed to issue any approval or timely objection to the signage within the requisite seven-day window to issue such. LAIA’s failure to comply with provisions stipulated to by the parties, therefore, did not excuse LAIA’s non-performance. We agree with the district court’s holding here, as well. On appeal, it is unclear whether LAIA is arguing that the district court’s conclusion regarding its signage excuse was an abuse of discretion, for LAIA only references the allegedly improper signage in passing on two occasions. Appellant Br. at 5 (indicating that a condition precedent of the settlement agreement was that franchisees “install[] appropriate L.A. Insurance signage”); id. at 6 (stating that franchisees “also have not installed the appropriate signage”). LAIA also did not include any mention of the signage within its Statement of the Issues. “[I]ssues adverted to in a perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed [forfeited]. It is not sufficient for a party to mention a possible argument in the most skeletal way, leaving the court to . . . put flesh on its bones.” McPherson v. Kelsey, 125 F.3d 989, 995–96 (6th Cir. 1997). Therefore, because LAIA fails to offer any further explanation regarding how the district court abused its discretion when evaluating its signage excuse, we conclude that LAIA has insufficiently preserved this issue for appeal.