Court Opinion

ID: 3022510
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:27:06.245129+00
Date Added: 2024-06-11T11:47:34.236368
License: Public Domain

United States Court of Appeals
                        FOR THE EIGHTH CIRCUIT
                                 ___________

                                 No. 98-1567
                                 ___________

Sandra Barry, also known as Sandra    *
Barry Lieberman,                      *
                                      *
      Plaintiff - Appellee,           *
                                      *
      v.                              *
                                      *
Charles L. Barry; Melanie G. Barry,   * Appeal from the United States
                                      * District Court for the
      Defendants.                     * District of Minnesota.
                                      *
Lawrence Swartz; Marcia Barry Swartz, *
                                      *
      Defendants - Appellants,        *
                                      *
Twin City Fan and Blower Company, a *
Minnesota corporation,                *
                                      *
      Defendant.                      *
                                 ___________

                           Submitted: December 16, 1998

                               Filed: April 16, 1999
                                ___________

Before MURPHY, JOHN R. GIBSON, and MAGILL, Circuit Judges.
                           ___________

JOHN R. GIBSON, Circuit Judge.
        Lawrence and Marcia Swartz appeal from the district court's1 enforcement of
a settlement agreement between them and Marcia Swartz's sister, Sandra Lieberman.
The Swartzes argue that a new term must be inserted into the agreement, exempting
from the release any claim the Swartzes had against Marcia's brother, Charles Barry,
and his wife, or that the settlement agreement should be rescinded because their
attorney lacked authority to enter it. We affirm.

       Lieberman, Marcia Swartz, and Charles Barry are siblings whose father gave
them equal shares in a family company, Twin City Fan and Blower Co.2 Lieberman
sold her share in the company to her two siblings and their spouses for approximately
$335,000 in 1983. By 1991, the Swartzes and Barrys were embroiled in litigation
with each other. They settled that litigation by (1) the Swartzes selling their share in
Twin City Fan to the Barrys for $15 million, and (2) the Barrys agreeing to indemnify
the Swartzes for liability resulting from the Swartzes' former positions as directors,
officers, employees or agents of Twin City Fan. When Lieberman learned of the
disparity between the price she received for her stock and the price the Swartzes
received for theirs, she sued the Swartzes and the Barrys for fraud, breach of fiduciary
duty, and breach of contract. In particular, Lieberman claimed that at the time she
sold her stock, the Barrys and Swartzes had provided her false financial statements
showing that the company was losing money, when it was actually making money.

      Lieberman settled with the Barrys and Twin City Fan and agreed to indemnify
them against any contribution or indemnity claim by the Swartzes for damages
Lieberman might recover from the Swartzes. Lieberman proceeded to trial against

      1
       The Honorable Ann D. Montgomery, United States District Judge for the
District of Minnesota.
      2
       This lawsuit has already been before us twice in earlier stages. Barry v. Barry,
78 F.3d 375 (8th Cir. 1996); Barry v. Barry, 28 F.3d 848 (8th Cir. 1994).
                                          -2-
the Swartzes, but after three days of trial, the parties entered mediation. The parties
reached an agreement; counsel and Magistrate Judge Jonathan Lebedoff orally
recounted and discussed the agreement on the record and agreed that the magistrate
judge would have jurisdiction over any dispute arising under the agreement.
However, when the Swartzes' counsel later submitted a written draft purporting to
memorialize the agreement, the draft contained a clause not discussed on the
settlement record, exempting from the agreement any claim the Swartzes might have
against the Barrys. Because Lieberman had agreed in the Barry settlement to
indemnify the Barrys if they had to indemnify the Swartzes, any indemnity the
Swartzes recovered from the Barrys would ultimately come out of Lieberman's
pocket.3

       Lieberman objected to the new language and moved to enforce the agreement
without the new insertion. Although the Swartzes resisted enforcement, the
magistrate judge ordered enforcement of the agreement without the new language.
The district court affirmed, modifying the magistrate's order only as to the rate of
interest.

       The Swartzes appeal, arguing that the terms of the settlement agreement stated
on the record do not preclude their claim against the Barrys, and that therefore they
are entitled to a clause in the written settlement saying so explicitly.

      3
       Indeed, under Minnesota law the Swartzes could have raised this circuitry of
obligation as a defense to Lieberman's claim against them. See National Hydro
Systems v. M. A. Mortenson Co., 529 N.W.2d 690, 693 (Minn. 1995) ("[W]e first
recognize that a finding of circuitry of obligation will defeat a plaintiff's claim as a
matter of law. A circuitry of obligation is created when, by virtue of pre-existing
indemnity agreements or obligations, the plaintiff is in effect obligated to indemnify
the defendant for claims including the plaintiff's own claim.")
                                          -3-
       The district court has inherent power to enforce a settlement agreement as a
matter of law when the terms are unambiguous. Gatz v. Southwest Bank, 836 F.2d
1089, 1095 (8th Cir. 1988). In a diversity case, the settlement contract must be
construed according to state law, Horton Mfg. Co . v. Tol-O-Matic, Inc., 973 F.2d
649, 651 (8th Cir. 1992), in this case the law of Minnesota. Minnesota law requires
us to ascertain and give effect to the intent of the parties as expressed in the language
used. Id. If the terms are ambiguous, the court must determine the intent of the
parties, which is a question of fact that we review for clear error. Worthy v.
McKesson Corp., 756 F.2d 1370, 1372 (8th Cir. 1985). The district court has
considerable discretion in determining the procedure appropriate to a motion to
compel settlement, and a hearing need be held only if there are substantial questions
of fact that are not already a matter of record. Stewart v. M.D.F., Inc., 83 F.3d 247,
251 (8th Cir. 1996).

        The magistrate judge and the district court relied on two aspects of the
settlement record in concluding that the settlement included a release of the Swartzes'
indemnification claim against the Barrys. First, the settlement record is replete with
references to “global” settlement in the context of the entire family dispute. Second,
the parties agreed on one and only one exception to the global release, which was
Lieberman's claim for attorney's fees in a different suit pending against her mother's
estate in Florida. Because the parties found it necessary to except from the release
a claim against the mother's estate, which was not a party to the instant litigation, if
they had intended to exempt a claim against the Barrys, one would have expected
them to mention that as well. Not only were the Barrys originally parties to this
litigation, but any recovery from them would ultimately be recoverable against
Lieberman herself.

       The record begins with the Swartzes' attorney stating the Swartzes' agreement
to pay $900,000. He continued:

                                           -4-
             In consideration for those payments, there will be mutual global
      releases of any and all claims that either party may have ever had, could
      have had, from the beginning of time to today, with the exception of any
      claims that Sandra Lieberman has now currently pending against the
      estate of Frances Barry [the litigants' mother] for attorney's fees in the
      Florida litigation [concerning the mother's estate].

The magistrate judge and Lieberman's attorney said that the estate litigation exception
needed to be more clearly delineated and the hearing went on at length to pin down
the parameters of that exception, until the magistrate judge admonished counsel:

      I want you to listen very carefully here. This settlement we're entering
      into is a global settlement, and it is putting to rest and to bed all
      litigation between the parties to this lawsuit.

             I don't have any problem stating on the settlement record that this
      has been a fractious, divisive fight between siblings and in-laws over
      what amounts to a distribution of a family estate and the valuation of a
      family estate, and it has lasted for many years. I think that all the
      attorneys who have differed on many issues can acknowledge that it has
      been acrimonious.

              I quickly say that the attorneys have been gracious and
      professional while still being adversarial. But this has been a difficult,
      angry lawsuit. The intention of all the parties is to put it to bed and that
      this is the end of the lawsuit.

             There is an exception, a single exception, to that. That is the
      Florida litigation heretofore described. And this settlement has no
      impact on that. And I think that that should be the clear understanding
      of the settlement. Do you understand that?

             All other litigation will be globally settled. We discussed this.
      That Florida litigation will be resolved for one party or the other against
      the estate or whoever, but nothing in this settlement is going to impact
      on that. Do we understand that?

                                          -5-
                                          ***

      With that understanding, is this acceptable to you?
      [Swartzes' counsel]: Yes.

       Relying on the use of the word “global” and the oft-expressed idea that this
settlement would end the family litigation with the one exception of the Florida
attorney's fees motion, the magistrate judge found: “If the indemnification issue truly
was to be an exception to the global nature of the settlement, it should have been
raised during the settlement proceedings. [Lieberman] is not trying to add a term to
the settlement; she is refusing to allow [the Swartzes] an exception beyond that
exception stated at the settlement conference.” In the context of the settlement record
the parties made, the court found the Swartzes' argument “disingenuous.”

        The Swartzes argue their counsel's statements on the record cannot be taken to
mean that they released their indemnity claim, because the settlement discussions
referred to the “parties,” which can only mean present parties to this litigation, not the
Barrys, who settled earlier. To the contrary, the use of the word “parties” must be
taken together with the many references to a “global” settlement of the family
litigation. The Swartzes' attorney obviously thought so, or he would not have found
it necessary to except Lieberman's claim against her mother's estate, which was never
a party to this litigation. Moreover, the Swartzes' failure to mention, in stating the
terms of the settlement agreement, that they intended to reserve a claim that would
cause Lieberman to have to repay every dollar received in the settlement is strong
evidence that such a reservation was not contemplated as part of the settlement. See
Wray v. Clarke, 151 F.3d 807, 809 (8th Cir. 1998) (party who fails to mention
attorneys' fees issue in settling litigation has not reserved right to recover fees from
adversary). The magistrate judge's finding as to the parties' intent was not clearly
erroneous.

                                           -6-
      The Swartzes offer affidavits stating that they had no intent to relinquish their
indemnity claim. The parties to a contract are bound by the objective meaning of the
words they use; their private, unexpressed thoughts cannot alter the meaning of the
words they uttered or actions they took. Crince v. Kulzer, 498 N.W.2d 55, 57 (Minn.
Ct. App. 1993).

       In the same vein, the Swartzes have filed declarations saying that Judge
Lebedoff told them privately during the settlement negotiations, that “we would be
well advised to settle [Lieberman's] claims to preserve our rights against Charles
Barry and Twin City Fan & Blower Company . . ., which might be jeopardized in the
event of an unfavorable verdict on [Lieberman's] intentional tort claims.” However,
Judge Lebedoff specifically stated that there was "no mention of indemnification . .
. during the settlement conference."

       The Swartzes also claim that their attorney was not authorized to relinquish
their indemnity claim. Under Minnesota law, settlement of a client's claim is not
subsumed within the ordinary agency of an attorney for his clients, so an attorney
must be specially authorized to settle a claim. Schumann v. Northtown Ins. Agc'y,
Inc., 452 N.W.2d 482, 484 (Minn. Ct. App. 1990). The Swartzes do not deny that
their attorney generally had authority to settle the Lieberman litigation but contend
that he exceeded his authority by failing to reserve the indemnification claim. By
agreement of the parties, the Swartzes and Lieberman were absent from the courtroom
during memorialization of the settlement agreement. The attorney represented to the
court that the agreement as stated was acceptable to the Swartzes. Cf. Skalbeck v.
Agristor Leasing, 384 N.W.2d 209, 213 (Minn.Ct. App. 1986) (Finding of attorney's
authority based on attorney's statement: "Bob authorized me to settle this case.").
Moreover, where a client has created the appearance that his attorney has authority
to settle a case and the attorney exceeds his authority in some way, if the adversary
relies on the settlement to its detriment, the client may be estopped to deny his
attorney's authority. See Austin Farm Center, Inc. v. Austin Grain Co., 418 N.W.2d

                                          -7-
181, 186 (Minn. Ct. App. 1988);Bergstrom v. Sears, Roebuck & Co., 532 F. Supp.
923, 933 (D. Minn. 1982) (applying federal law); see generally McGee v. Breezy
Point Estates, 166 N.W.2d 81, 89 (Minn. 1969). Here, the Swartzes sent their
attorney into the courtroom to settle their case. The Swartzes consented to remain
outside the courtroom while the settlement agreement was memorialized. Lieberman
relied on the attorney's appearance of authority to settle the case, since Lieberman
discontinued the trial in reliance on the settlement. The district court did not err in
concluding that the Swartzes must live with the agreement entered in that courtroom.

      We affirm the judgment of the district court.

      A true copy.

             Attest:

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

                                          -8-