Court Opinion

ID: 6939342
Source: CourtListenerOpinion
Date Created: 2022-07-24 00:56:30.013443+00
Date Added: 2024-06-11T16:07:37.671147
License: Public Domain

RYAN, Circuit Judge,
dissenting.
In my judgment, the plaintiffs’ settlement with Cleveland Steel triggered the most favored nations clause in the agreement between the plaintiffs and Central Can, requiring the plaintiffs to offer Central Can comparable terms. Consequently, I respectfully dissent.
I.
The settlement agreement between the plaintiffs and appellant Central Can imposed three preconditions for application of the most-favored nations clause: (1) that the plaintiffs enter into a settlement with another defendant on terms more favorable than those accepted by Central Can; (2) that Central Can and the other defendant are similarly situated; and (3) that there has been no material change in circumstances which excuses compliance. Central Can argues that all three preconditions are met here. In response, the plaintiffs claim that their transaction with Cleveland Steel was not a settlement, and that information they learned during discovery constituted a material change in circumstances.
A.
The first requirement for application of the most-favored nations clause is that the plaintiffs must have entered into a “settlement” with Cleveland Steel. Although the majority opinion does not explicitly decide this question, I do not believe that there can be any serious question that a dismissal with prejudice in exchange for mutual releases is a settlement. Indeed, the proposition is entirely uneontroversial. A “settlement” is “an agreement by which parties having disputed matters between them reach or ascertain what is coming from one to the other.” Black’s Law DICTIONARY 1372 (6th ed.1990). If the plaintiffs had simply dismissed Cleveland Steel, for no consideration, and without discussing the matter beforehand with Cleveland Steel, such as taking a non-suit, I would *1204be disinclined to call their action a settlement. If that had occurred, there would have been no communication between the parties, which is implicit in the term “settlement,” and the effort and cost would have been all on the plaintiffs’ side, with Cleveland Steel essentially being a recipient of largesse. But here, there was a negotiation and a bilateral exchange, a quid pro quo. The plaintiffs gave a dismissal with prejudice, and Cleveland Steel gave, in return, a release. Under these circumstances, it is plain that the parties reached a mutually acceptable resolution of their dispute, that is, a settlement. See, e.g., In re General Tire and Rubber Co. Sec. Litig., 726 F.2d 1075, 1079 (6th Cir.), cert. denied, 469 U.S. 858, 105 S.Ct. 187, 83 L.Ed.2d 120 (1984); Schott Enterprises, Inc. v. Pepsico, Inc., 520 F.2d 1298, 1300 (6th Cir.1975).
B.
Having determined that a settlement occurred, the remaining question we must decide is whether a plaintiff, who learns during discovery that his case against his opponent is not what he had hoped for, has encountered a material change in circumstances. I am firmly of the belief that they have not.
It is, perhaps, worth repeating at this juncture, the pertinent language of the most favored nations clause in the contract between the parties:
Plaintiffs agree that, unless present circumstances materially change so that plaintiffs reasonably conclude that the prospect or amount of ultimate recovery from any similarly situated defendant in these cases is substantially lessened or reduced, including, but not limited to, by reason of the entry of one or more court orders in these cases or the filing of a bankruptcy or similar petition by such similarly situated defendant, they will not enter into a settlement of their claims against any such similarly situated defendant that is more favorable to such defendant without offering similar terms to Central Can.
(Emphasis added.) Like the majority, I find this clause unambiguous. Further, I do not question the plaintiffs’ claim that they learned during discovery that “the prospect or amount of ultimate recovery from [Cleveland Steel] [was] substantially lessened or reduced.” Indeed, after discovery, the plaintiffs apparently concluded that the prospect of ultimate recovery had deteriorated to the level of thin-to-nonexistent.
But, it is plain to me that when a plaintiff learns of previously existing historical facts of which he was earlier unaware, this new knowledge is not a material change in the “present circumstances” that existed at the time of the settlement agreement. Obviously, Cinteeh’s case against Cleveland Steel was never very good; a fact of which Cinteeh presumably was unaware when it filed suit, and later when it settled with Central Can. Learning that a fact is not what, earlier, one mistakenly thought it was, or hoped it would be, does not mean that the fact changed; it is only the plaintiffs’ knowledge and understanding that was altered. Here, none of the facts bearing upon the liability of Cleveland Steel, or more specifically, “the prospect or amount of ultimate recovery” from Cleveland Steel, changed from the time plaintiffs settled with Central Can. As the plaintiffs’ lawyers went about their business of getting ready for trial and educating themselves about the facts and the law of the case, they learned what they very likely wished they’d known when they drew the complaint for their client: that they had no reasonable hope of obtaining a judgment against Cleveland Steel, and that they never had. That revelation is not a change in the circumstances that existed before any settlement discussion was undertaken and before discovery was conducted; it was simply a change in the plaintiffs’ awareness of those circumstances.
Central Can is entitled to the benefit of its bargain, despite the potentially unfortunate effect upon the prospects for settlement of all the claims involved.
II.
I would reverse the district court’s judgment.