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Sixth Circuit Provides Guidance on Enforcing Settlement Agreements

Posted in Recent Cases

Have you ever had difficult settlement negotiations where you thought an agreement was reached in e-mail communication with opposing counsel, and then the other side appeared to back away from that?  That’s the situation that the Sixth Circuit confronted in Cuyahoga Valley Railway Company v. U.S. Bank Trust.  In an interesting split decision, the majority sorted through the record evidence (largely e-mail back and forth between counsel) and determined that serious questions concerning contact formation of the settlement agreement could not be resolved based on the record alone.  The Court accordingly reversed the district court’s order enforcing the settlement agreement and remanded with instructions to hold an evidentiary hearing to determine whether a settlement agreement was consummated.  Counsel had exchanged a draft settlement agreement that had not yet been executed by the parties, and the Sixth Circuit was careful to point out that execution is not always necessary to determine formation.  Nevertheless, the contradictory record of the correspondence mandated an evidentiary hearing.

The Court’s decision was an unpublished one, but it does provide guidance on how appellate courts evaluate motions to enforce settlement agreements.  It also seems to send a message to district courts that if there is doubt on the issue, an evidentiary hearing should be held.  Needless to say, an evidentiary hearing may be complicated by virtue of the fact that all of the witnesses may be lawyers in the case.  With this case, at least, the district court will have to sort through all of that on remand.