604 N.E.2d 854
No. 180768.Court of Common Pleas, Cuyahoga County.
Decided February 18, 1992.
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Kelley, McCann Livingstone and Steven Goldfarb, for plaintiffs.
David Eisler, for defendants.
LINDA ROCKER, Judge.
This cause came on for hearing on April 29, 1991, on plaintiffs’ motion to enforce a settlement agreement. The underlying facts giving rise to plaintiffs’ motion are as follows:
On December 12, 1989, plaintiffs Margaret and Darrell Broz filed a complaint against defendants Gary W. Yano, Mary Lou Yano and Anne Young claiming that defendants had breached fiduciary duties to plaintiffs in connection with plaintiffs’ investment in and ownership of forty percent of the common stock of the Detroit Clinic (“Clinic”), a business operated by defendants who also control fifty-one percent of the common stock. Following the completion of discovery and exchange of expert reports, the case was set for trial on August 27, 1990.
It is undisputed that the parties engaged in extensive discussions regarding a settlement of the lawsuit during the week preceding the scheduled trial date and, on or about the day prior to that scheduled for trial, informed the court by and through plaintiffs’ attorney that the parties had reached a settlement and a journal entry would be forthcoming. Based on the representation that settlement had been reached, the scheduled trial date was canceled.
On August 24, 1990, plaintiffs’ counsel drafted and forwarded to counsel for defendants a letter to “confirm the settlement of this case which was agreed to by our respective clients yesterday.” The correspondence from plaintiffs’ counsel set forth the following “basic terms of the agreement”: (1) that defendants would jointly and severally pay to the plaintiffs $100,000, payable over a period of time; (2) that any payments due and owing after the initial payment would be “memorialized in a note” and secured by a pledge of the defendants’ stock in the Clinic as well as a protected security interest in the assets and receivables of the Clinic; (3) that plaintiffs would transfer their shares of stock to defendants upon final payment; and (4) that there would be an allocation of settlement dollars between plaintiffs’ tort claims and the purchase of plaintiffs’ stock by defendants.
The correspondence of August 24, 1990 from plaintiffs’ counsel requested a confirmation from defendants’ attorney that the general terms “set forth in this letter agreement constitute the general terms agreed to by the plaintiffs and defendants notwithstanding that these general terms will be more fully detailed” at a later date. However, a handwritten note was added by
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defendants’ counsel indicating that “said terms [were] to be reasonably agreed upon by the respective counsel of the parties,” as well as a new term regarding defendants’ stock and their resignations as directors and/or employees at the time of the initial payment.
On September 5, 1990, plaintiffs’ counsel forwarded to defendants’ counsel a number of proposed documents to be executed in connection with the settlement of the case including a promissory note and security agreement. On September 19, 1990, plaintiffs’ counsel corresponded once again with counsel for defendants, requesting an immediate response to the documents previously forwarded.
On September 19, 1990, defendants’ counsel corresponded with plaintiffs’ counsel, indicating that the provisions in the settlement documents which would render the defendants personally liable and would include a cognovit note were unacceptable and were not agreed to by defendants. This correspondence from defendants’ counsel was sent to all three defendants.
On September 21, 1990, plaintiffs’ counsel responded, insisting that the August 24, 1990 letter agreement “clearly provides that your clients will be personally liable” and confirming that, inasmuch as no payments were to be made beyond the initial payment unless contingent upon the viability of the business, no rational basis to object to the cognovit note existed and, therefore, it was anticipated that that would remain a part of the settlement. No reply was received to this correspondence, and following a subsequent effort by plaintiffs’ counsel to elicit further communication from defendants’ counsel, the motion now pending before this court was filed.
At the hearing, testimony by defendants’ former counsel, defendant Anne Young and plaintiffs’ counsel established that (1) defendants’ counsel believed he had “general” authority to engage in settlement discussions based on his conversations with defendant Gary Yano; (2) defendants’ counsel did not review the “letter agreement” with Gary Yano or any other defendant prior to affixing his signature, indicating that the general terms of settlement had been agreed upon; (3) defendant Anne Young permitted defendant Gary Yano to act as spokesperson for all defendants but specifically denied that Gary Yano was authorized to agree to settlement terms on her behalf and, furthermore, indicated that the terms when they became known to her were entirely unacceptable; (4) plaintiffs’ counsel reasonably believed at the time of his initial communication on August 24, 1990 that the litigation had been settled and further negotiation on substantive terms was no longer necessary; and (5) defendants’ counsel failed to adequately determine the extent of each individual clients’ agreement to the basic terms of the proposed settlement and, as reflected in his subsequent correspondence of September 19, 1990, apparently
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misunderstood the commitment to personal liability for each of the individual defendants implicit in the letter agreement.
Based on the foregoing facts and in light of applicable Ohio law as discussed hereafter, the court finds the motion to enforce settlement not well taken and, therefore, reinstates this case to its active docket.
Plaintiffs properly argue that public policy favors the settlement of disputes by agreement between the parties and, furthermore, that courts will enforce settlement agreements so long as the agreement incorporates the essential elements of the bargain between the parties. See Morform Tool Corp. v. Keco Industries, Inc. (1971), 30 Ohio App.2d 207, 59 O.O.2d 320, 284 N.E.2d 191; Mr. Mark Corp. v. Rush, Inc. (1983), 11 Ohio App.3d 167, 11 OBR 259, 464 N.E.2d 586; Klever v. Stow (1983), 13 Ohio App.3d 1, 13 OBR 1, 468 N.E.2d 58. However, where the “settlement” lacks agreement or consensus regarding an essential term, like hornbook contract law, Ohio law regarding settlements and their enforceability deems such a purported resolution incomplete and inherently unenforceable. “* * * Reduced to its simplest terms, a settlement agreement is a contract. The party asserting the contract (settlement agreement) must prove by a preponderance of the evidence the existence of the elements of the contract, including offer, acceptance and consideration both as to the existence of the contract and as to its terms. * * *”Ohio State Tie Timber, Inc. v. Paris Lumber Co. (1982), 8 Ohio App.3d 236, 240, 8 OBR 309, 313, 456 N.E.2d 1309, 1314.
Clearly, in this case, the disputed terms go well beyond mere minor or perfunctory details and certainly the issue of personal as opposed to corporate liability for the settlement figure is a material element in any contract or settlement.
Although this court need not reach the issue of client authorization for the “settlement” in this case given its judgment as to the material terms of the agreement, the record and the evidence adduced at hearing establish that defendants’ counsel’s authority was limited to one defendant alone; and although Gary Yano was authorized to deal with defendants’ counsel on matters in general, there exists no evidence that his authority extended to acknowledging personal liability, jointly and severally, for defendants not immediately privy to the settlement discussions. Consequently although this court, in the absence of other issues rendering the purported or attempted settlement unenforceable, could find the agreement enforceable against Gary Yano, alone, it could not under any circumstance find that defendants Mary Lou Yano and Anne Young had authorized defendants’ counsel to act on their behalf and, therefore, could be bound.
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Accordingly, this court finds that plaintiffs’ motion to enforce settlement is not well taken and is overruled. This case is reinstated to the active docket of this court and is set for trial on May 20, 1992, at 9:30 a.m.
It is so ordered.
Judgment accordingly.[1]
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