Court Opinion

ID: 2995016
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:17:55.654683+00
Date Added: 2024-06-11T11:45:23.575334
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 00-1764

COMMODITY FUTURES TRADING COMMISSION,

Plaintiff-Appellee,

v.

CARMEN FIELD, individually and d/b/a HFI,
MONA SMITH, individually and d/b/a HFI,

Defendants-Appellants.

Appeal from the United States District Court
for the Northern District of Indiana, South
Bend Division.
No. 98 C 281--Allen Sharp, Judge.

Argued September 28, 2000--Decided April 24,
2001

  Before MANION, ROVNER, and DIANE P. WOOD,
Circuit Judges.

  ROVNER, Circuit Judge. The Commodity
Futures Trading Commission (the
"Commission") filed a civil complaint
against appellants and other defendants,
alleging that they defrauded participants
in two commodity pools by
misappropriating participants’ funds,
misrepresenting material facts while
soliciting participants, and issuing
false statements to the pool
participants. The parties engaged in
settlement discussions, which form the
basis of this appeal. Field and Smith
contend that a binding oral agreement
resulted from those discussions, and the
Commission disputes that assertion. The
district court sided with the Commission,
and after a bench trial, found Field and
Smith in violation of antifraud and
registration provisions of the Commodity
Exchange Act including 7 U.S.C. sec.sec.
1a(4), 6o(1), 6b(a)(i), and 6b(a)(ii),
and its regulation 17 C.F.R. sec.4.20.
The district court ordered permanent
injunctive relief, enjoining Field and
Smith from further violations, and inter
alia, from directly or indirectly
soliciting or accepting funds in
connection with the sale of a commodity
futures contract, trading commodity
futures or commodity options for their
own accounts or on their behalf, or
controlling or directing commodity
futures trading. They were further
ordered to disgorge their ill-gotten
gains in the amount of $880,811, and
Smith was additionally ordered to
disgorge the sum of $146,154. The court
also ordered Field and Smith to pay
restitution totaling $1,026,965.15 to
certain investors, and Field was ordered
to make further restitution of
$234,561.52 to other investors. The
appellants moved for a new trial,
asserting that the district court erred
in ruling that there was no settlement
agreement, and in failing to at least
grant an evidentiary hearing on the
issue. The court denied the motion, and
they now raise those same issues on
appeal.

  Appellants maintain that an oral
settlement agreement was reached with the
Commission as a result of a settlement
conference on June 9, 1999 with
Magistrate Judge Pierce, approximately a
month before his untimely death. We need
not explore the contours of that alleged
agreement, however, because it is clear
that the attorneys representing the
Commission at that conference were
without authority to enter into any
binding settlement agreement, and
therefore no enforceable agreement could
have resulted from that conference. The
sequence of events makes that crystal
clear.

  In the order scheduling the settlement
conference, the magistrate judge required
that, unless excused by the court in
advance, persons possessing final
decision-making authority with respect to
settlement had to attend the settlement
conference. In response to that order,
the attorneys for the Commission sent a
letter to the magistrate judge requesting
an exception to that requirement. The
letter explained that the Commission
prosecutes actions through its Division
of Enforcement (the "Division"), but that
the Division does not possess independent
settlement authority. Instead, the
Division "presents executed offers of
settlement to the Commission with
specific recommendations that any such
offer be accepted or declined, and in the
case of federal litigation, to grant the
Division authority to enter into the
proposed settlement." CFTC requested that
it be allowed to work within that
framework, and specifically requested
that it "be allowed to participate in the
settlement conference with a Division
attorney possessing authority to
negotiate the terms of a settlement that
the Division will affirmatively recommend
the Commission accept." The magistrate
judge granted that request to modify the
usual requirement that someone with final
authority to settle be present, and
issued an order tracking the language
requested by the Commission allowing
participation by persons with authority
to negotiate terms that would be
recommended to the Commission.

  It is well settled that a settlement on
behalf of the United States may be
enforced only if the person who entered
into the settlement had actual authority
to settle the litigation. United States
v. LaCroix, 166 F.3d 921, 923 (7th Cir.
1999); Urso v. United States, 72 F.3d 59,
60 (7th Cir. 1995). That stands in
contrast to settlement of cases by
private parties, where apparent authority
may be sufficient to bind a litigant. See
Pohl v. United Airlines, Inc., 213 F.3d
336 (7th Cir. 2000). The sequence of
events recited above leaves no doubt that
the attorneys who engaged in the
settlement discussion on behalf of the
Commission lacked the actual authority to
bind the government, a fact that should
have been clear to appellants as well
given the letter from the Commission and
the magistrate judge’s subsequent order
allowing the participation of the
Division attorneys even though they
lacked final authority to settle. The
appellants seem to misread the
Commission’s statement that the attorneys
would have the authority to negotiate, as
somehow implying that they had authority
to finally settle the case. That reading
defies the plain language of the letter
and the magistrate judge’s order. Because
the Division attorneys lacked the actual
authority to settle the case, no
agreement reached with them at the
settlement conference is binding on the
government. We note in passing that even
if they had the authority to settle, it
is fairly clear from the record that no
settlement was actually reached at that
conference, but that step we need not
take given their lack of authority to
enter into a binding settlement agreement
in the first place. For the above
reasons, the decision of the district
court is AFFIRMED.