Opinion ID: 729947
Heading Depth: 2
Heading Rank: 1

Heading: The Reach of the Consent Judgment

Text: 38 The standard an appellate court employs in reviewing a decision to extend the reach of a Consent Judgment to a nonparty will depend on the nature of the underlying decision. Because the district court here based its ruling on the meaning of the written agreements between Uniroyal, Tire, and UGTC, our review focuses on the correctness of the district court's interpretation of those agreements. We typically review a district court's interpretation of an ambiguous contract for clear error, see, e.g., United States Naval Inst. v. Charter Communications, Inc., 875 F.2d 1044, 1049 (2d Cir.1989), and review the district court's conclusion regarding whether a contract is clear or ambiguous de novo, see, e.g., Seiden Assocs. v. ANC Holdings, Inc., 959 F.2d 425, 429 (2d Cir.1992). In this case, Judge Nevas concluded that the various agreements between Uniroyal, Tire, and UGTC caused UGTC to be bound by the Consent Judgment. In so concluding, the district court appears to have concluded the terms of the writings were clear. Accordingly, we review the district court's ruling de novo. 4
39 UGTC argues that it was deprived due process when Judge Nevas ruled that the consent decree bound UGTC. The general rule is commonsensical: a party must consent to a consent decree before that decree can be enforced against that party. Madison Square Garden Boxing, Inc. v. Shavers, 562 F.2d 141, 143 (2d Cir.1977). Typically, such consent is manifest by participation in the litigation that gave rise to the settlement. Here, however, UGTC did not participate in the underlying litigation. UGTC understandably emphasizes this fact. This fact, however, does not extinguish the reality that Tire (and UGTC) agreed to be bound by the outcome of the underlying litigation. Consent to be bound by a settlement agreement can be shown by means other than by participating in the underlying litigation. As the district court recognized, the relationship of a nonparty to those participating in the litigation can result in the nonparty being bound by the result of the litigation. See Expert Elec., Inc. v. Levine, 554 F.2d 1227, 1233 (2d Cir.) (Generally speaking, one whose interests were adequately represented by another vested with the authority of representation is bound by the judgment, although not formally a party to the litigation.), cert. denied, 434 U.S. 903, 98 S.Ct. 300, 54 L.Ed.2d 190 (1977). 40 UGTC argues that the cases cited above are of questionable continued validity in light of more recent Supreme Court decisions, specifically Richards v. Jefferson County, --- U.S. ----, 116 S.Ct. 1761, 135 L.Ed.2d 76 (1996), Martin v. Wilks, 490 U.S. 755, 109 S.Ct. 2180, 104 L.Ed.2d 835 (1989), and International Assoc. of Firefighters v. City of Cleveland, 478 U.S. 501, 106 S.Ct. 3063, 92 L.Ed.2d 405 (1986). UGTC also claims that this court's opinion in Association for Retarded Citizens v. Thorne, 30 F.3d 367 (2d Cir.1994), cert. denied, 513 U.S. 1079, 115 S.Ct. 727, 130 L.Ed.2d 631 (1995), dictates that the older cases cited in the previous paragraphs are no longer good law. As discussed briefly below, the cases on which UGTC relies fail to support UGTC's argument. 41 In Richards, for example, the Supreme Court, while restating the general rule that one must be a party to a litigation to be bound by the results of that litigation, also reaffirmed that persons in privity with a litigating party may be bound by the judgment binding upon the litigating party. --- U.S. at ----, 116 S.Ct. at 1766. Furthermore, although there are clearly constitutional limits on the 'privity' exception, the term 'privity' is now used to describe various relationships between litigants that would not have come within the traditional definition of that term. See generally Restatement (Second) of Judgments, ch. 4 (1980). Id. Looking generally, as the Court directs us, to chapter four of the Restatement (Second) of Judgments, we see that [a] person who agrees to be bound by the determination of issues in an action between others is bound in accordance with the terms of his agreement. Restatement (Second) of Judgments § 40 (1980). 42 The relevant inquiry is thus whether UGTC has agreed to be bound by the Consent Judgment's determination of issues. The answer to this question is found in the various documents quoted above. On October 27, 1985, and again on July 31, 1986 (over a month after plaintiffs initiated this law suit), Tire, UGTC's predecessor, expressly authorized Uniroyal to defend and settle litigation which implicated liabilities Tire had assumed and for which Tire had agreed to indemnify Uniroyal. Furthermore, as the August 1, 1986, Assumption Documents make clear, UGTC assumed the retirement obligations Tire assumed from Uniroyal. 43 The other cases which Uniroyal claims support its position are distinguishable: those cases do not involve the consent of a nonparty to be bound by the terms of a litigation settlement agreement. Indeed, in Firefighters, the Supreme Court explained that it is the agreement of the parties, rather than the force of the law upon which the complaint was originally based, that creates the obligations embodied in a consent decree. 478 U.S. at 522, 106 S.Ct. at 3075. Here, Uniroyal and plaintiffs did agree to the Consent Judgment. Uniroyal and UGTC's predecessor agreed that UGTC's predecessor would be bound by the outcome of the underlying litigation. 5 44 When Uniroyal incorporated Tire, Tire agreed to assume Uniroyal's obligations whether accrued, absolute or contingent, or whether in existence on the date hereof or arising hereafter. In light of this assumption, and Tire's agreement that Uniroyal was authorized to settle this litigation, it is not at all unfair that Tire (and thus UGTC) be held to the Settlement Agreement which it had authorized Uniroyal to negotiate and enter into. Especially considering that UGTC had actual notice of this litigation, there is no due process violation in holding UGTC bound by the Settlement Agreement. 45