National City Golf Finance v. Golf Cars of Mississ
Opinion
*414 This appeal raises questions of judicial procedure and power arising from a lawsuit about golf carts. After a year of federal litigation, the parties settled and filed an unconditional stipulation of dismissal. The defendant later regretted that choice. So he moved to rescind the settlement and vacate the dismissal under state contract law, positing a mistake of fact and unjust enrichment. All assumed the district court had jurisdiction to resolve that motion on state-law terms. It did not. Rather, because the parties' unconditional dismissal deprived the district court of subject-matter jurisdiction, the proper vehicle for the motion was Federal Rule of Civil Procedure Rule 60(b). We construe the motion under that rule and affirm on those alternative grounds. 1
I.
Marvin Scott used to own Golf Cars of Mississippi, L.L.C. (Golf Cars), a business that bought and leased golf carts. The company financed its purchases by taking out loans, many of which Scott guaranteed personally. Among its lenders was National City Golf Finance (National). In 2008, Golf Cars defaulted on one of National's loans. So National sued Scott, his company, and his business partner, Curt Busching. (National later amended its complaint to add more defendants and to seek greater damages.) One of the complaint's ten claims was for breach of contract. This count concentrated on a personal guaranty that Scott had allegedly signed but failed to honor.
A year later, Scott and National settled. Their bargain: National would release its filed claims against Scott-plus several unfiled ones-in exchange for $500,000. More important, the parties agreed to abide by the settlement terms even if they later discovered new claims or material facts. We quote the exact terms because they matter:
Each Party acknowledges and understands that hereafter it may discover or appreciate claims, facts, issues, or concerns after the Effective Date [of the settlement] which are not otherwise specifically excluded from the releases herein but which may be in addition to or different from those that it now knows or believes to exist with respect to the subject matter of this Agreement that, if known or suspected at the time of execution of this Agreement, might have materially affected the settlement embodied herein. Each Party nevertheless agrees that it has taken that possibility into account and that it is the intention of each Party to fully, finally[,] and forever settle and release the matters, disputes[,] and differences, now known or unknown, suspected or unsuspected, arising out of or in any way relating to the matters released pursuant to ... this Agreement, and that the general releases and waivers described ... above apply to any such additional or different claims, facts, issues, or concerns.
Scott does not contest that the parties drafted the settlement agreement "with equal bargaining power" and with "the benefit of counsel of their own choosing." Indeed, Scott's current counsel negotiated and signed that contract.
*415 National and Scott executed the settlement agreement on August 27, 2009. The next day, they filed an unconditional stipulation of dismissal without prejudice 2 under Federal Rule of Civil Procedure 41(a)(1)(A)(ii). Within a few weeks, however, Scott signed-but did not immediately file-an affidavit averring that "[t]he signature on the Personal Guaranty [attached to National's complaint] is not [his] signature."
Scott's business partner, Busching, filed for bankruptcy a few months later. In March 2010 National filed an unsecured proof of claim in the bankruptcy case, but the bankruptcy court discharged that claim under
Or so it seemed. Despite having already settled his stake in this case, Scott hired a handwriting expert to opine whether someone had forged his signature. In mid-August 2010 the expert reported that the signature on the guaranty was, in his view, a fake. (Scott thinks Busching was the culprit.) So on August 27, 2010-exactly a year after Scott and National executed their settlement agreement-Scott filed in district court a "Motion to Rescind Settlement Agreement and Vacate Stipulation of Dismissal," asking "to re-join this civil action as a Defendant." The motion relied on three state-law grounds: (1) the parties mutually mistook the allegedly forged signature as Scott's; (2) alternatively, Scott made that mistake unilaterally; and (3) failing to rescind the settlement would unjustly enrich National. This was the first time Scott alerted the district court to his affidavit disputing his signature.
Six years later, the district court took evidence and denied the motion on the merits, holding that the settlement "must be enforced" because Scott expressly assumed the risk of any factual mistakes and thus failed to "satisf[y] the standard for setting aside the settlement" under state law. The parties now reprise the same state-law arguments they leveled below. Neither mentions the six grounds for relieving a party "from a final judgment, order, or proceeding" authorized by Rule 60(b).
II.
The parties' unconditional stipulation of dismissal raises a threshold question of jurisdiction, one we must raise on our own initiative and resolve de novo.
See
Owner-Operator Indep. Drivers Ass'n v. U.S. Dep't of Transp.
,
So we must ask: What authority gives a district court jurisdiction to entertain a motion to rescind a settlement agreement, if that motion was filed months after the parties filed an unconditional stipulation of dismissal? We see two possible answers: ancillary jurisdiction and Rule 60(b). As explained below, only Rule 60(b) is potentially applicable here.
A.
The doctrine of ancillary jurisdiction empowers district courts (1) to resolve "factually interdependent" claims or (2) to address issues implicating the ability "to manage [the court's] proceedings, vindicate its authority, and effectuate its decrees."
Kokkonen v. Guardian Life Ins. Co. of Am.
,
Scott cannot rely on the first category of ancillary jurisdiction to rescind his settlement agreement on state-law grounds. Generally speaking, "factually interdependent" claims are those that support supplemental jurisdiction under
Nor did Scott's motion implicate the second type of ancillary jurisdiction-the district court's enforcement authority. The court's enforcement authority extends to "collateral issues," things like fees, costs, contempt, and sanctions.
Qureshi v. United States
,
*417
see also
Kokkonen
,
There is no basis for ancillary jurisdiction here.
B.
Because ancillary jurisdiction is unavailable, we consider Rule 60(b). This rule allows a district court to "relieve a party ... from a final judgment, order, or proceeding," Fed. R. Civ. P. 60(b), including a Rule 41(a)(1)(A) dismissal,
see
Yesh Music v. Lakewood Church
,
Our sister circuits concur that Rule 60(b) is the appropriate vehicle for a motion like Scott's. In
George P. Reintjes Co. v. Riley Stoker Corp.
, for instance, the First Circuit held that the "only route to relief from [a] settlement and underlying judgment is through application of Federal Rule of Civil Procedure Rule 60(b)."
III.
We resolve Scott's motion in the first instance because his arguments track Rule 60(b)(1) and the record confirms that he is not entitled to relief.
See
Jenkens & Gilchrist v. Groia & Co.
,
Rule 60(b) names six grounds to "relieve a party ... from a final judgment, order, or proceeding":
(1) mistake, inadvertence, surprise, or excusable neglect;
(2) newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b); 5
(3) fraud ..., misrepresentation, or misconduct by an opposing party;
(4) the judgment is void;
(5) the judgment has been satisfied, released or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or
(6) any other reason that justifies relief.
*418 Fed. R. Civ. P. 60(b). A party relying on subsections (1), (2), or (3) must move "no more than a year after the entry of the [final] judgment or order or date of the [final] proceeding." Id. 60(c)(1). The last three prongs are less stringent and require movants to file "within a reasonable time." Id.
Scott clears Rule 60(b)'s timing hurdle but not its substantive standard.
Rule 60(b)(1) most naturally covers Scott's motion because he urges a mistake of fact and excusable neglect. But those arguments founder, for in the settlement itself Scott assumed the risk of such blunders. He "acknowledge[d] and underst[ood]" that he might later "discover or appreciate claims, facts, issues, or concerns" that would have "materially affected the settlement" had he grasped them earlier. He agreed that he had "taken that possibility into account" yet still wished to resolve National's claims "fully, finally[,] and forever." Rule 60(b)"was not intended to relieve [a party] of the consequences of decisions deliberately made, although subsequent events reveal that such decisions were unwise."
Fed.'s Inc. v. Edmonton Inv. Co.
,
Rule 60(b)(2) -which addresses newly discovered evidence-does not offer Scott respite either. "To obtain Rule 60(b)(2) relief, a movant must demonstrate: '(1) that it exercised due diligence in obtaining the information; and (2) that the evidence is material and controlling and clearly would have produced a different result if present before the original judgment.' "
Thermacor Process, L.P. v. BASF Corp.
,
For its part, Rule 60(b)(3) is inapposite. It targets judgments that were "unfairly obtained," not those that are "factually incorrect."
Hesling
,
Nor is Rule 60(b)(4) relevant. This provision relieves parties from a judgment if the trial court "acted in a manner inconsistent with due process of law,"
Carter v. Fenner
,
So, too, for Rule 60(b)(5). On this score, Scott must show that "the judgment has been satisfied, released or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable." Fed. R. Civ. P. 60(b)(5). Scott strives to restart this litigation, so he cannot conceivably invoke Rule 60(b)(5) 's rarely-used first clause. See 11 Wright & Miller, supra , § 2863. Nor can he satisfy the second clause, as this ground "is limited to cases in which the present judgment is based on [a] prior judgment in the sense of claim or issue preclusion." Id.
And Rule 60(b)(5) 's last clause does not apply because it addresses judgments with prospective effects. "A judgment operates prospectively if it requires a court to supervise changing conduct or conditions that are provisional or tentative."
In re Moody
,
Finally, Rule 60(b)(6) 's catch-all provision requires the same result. Subsection (b)(6) is "mutually exclusive" with the rule's other clauses and extends relief only in "extraordinary circumstances."
Hess v. Cockrell
,
*420 IV.
By unconditionally dismissing this action under Rule 41(a)(1)(A)(ii), the parties divested the district court of subject-matter jurisdiction over their dispute. To reopen this case, Scott must lean on Rule 60(b). But that rule's six doors remain closed.
AFFIRMED.
While this appeal was pending, the appellee filed an unopposed motion to amend the pleadings or to remand this case to the district court. We grant the former and deny the latter.
As it happens, the parties' settlement said the dismissal would be with prejudice, but the agreement appended a proposed stipulation that was silent on this question. The parties then filed their stipulation without indicating the dismissal's prejudicial effect. The dismissal was therefore without prejudice. Fed. R. Civ. P. 41(a)(1)(B) ("Unless the notice or stipulation [of dismissal] states otherwise, the dismissal is without prejudice.").
In a multi-defendant suit, the plaintiff may single out a party for dismissal; in those cases only the dismissed defendant need sign the stipulation.
See
Plains Growers ex rel. Florists' Mut. Ins. Co. v. Ickes-Braun Glasshouses, Inc.
,
Our precedent has noted an exception: a district court may have jurisdiction to decide a motion to intervene after a Rule 41(a)(1) dismissal with prejudice.
See
Sommers v. Bank of Am., N.A.
,
Federal Rule of Civil Procedure 59(b) imposes a 28-day deadline after entry of judgment.
Reference
- Full Case Name
- NATIONAL CITY GOLF FINANCE, a Division of National City Commercial Capital Company, L.L.C., Plaintiff-Appellee v. Marvin L. SCOTT, Defendant-Appellant
- Cited By
- 45 cases
- Status
- Published