American University Law Review
Volume 60
|
Issue 2 Article 1
2010
Six Decrees of Separation: Selement Agreements
and Consent Orders in Federal Civil Litigation
Anthony DiSarro
adisarro@optonline.net
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Recommended Citation
DiSarro, Anthony (2010) "Six Decrees of Separation: Selement Agreements and Consent Orders in Federal Civil Litigation,"
American University Law Review: Vol. 60: Iss. 2, Article 1.
Available at: hp://digitalcommons.wcl.american.edu/aulr/vol60/iss2/1
ANTHONY DISARRO 60.2
275
ARTICLES
SIX DECREES OF SEPARATION:
SETTLEMENT AGREEMENTS
AND CONSENT ORDERS IN
FEDERAL CIVIL LITIGATION
ANTHONY DISARRO
TABLE OF CONTENTS
Introduction ............................................................................................... 276
I. Enforcement: Contempt Versus Breach......................................... 279
A. Requirement of a Court Order ................................................. 280
B. Advantages of the Contempt Route to the Movant ................. 282
C. Deciding Whether the Availability of Contempt is
Important ................................................................................. 285
D. Why the Consent Decree Route Might Be Acceptable to
the Obligor ............................................................................... 287
II. A Consent Decree Is a Public Document ........................................ 288
A. Common Law and First Amendment Rights of Access to
Consent Decrees ...................................................................... 288
B. Partial Confidentiality.............................................................. 290
C. The Confidentiality of Settlement Agreements ....................... 291
III. A Consent Decree Ensures the Right to Return to Federal Court ... 293
A. The Settling Parties‘ Natural Desire to Preserve
Jurisdiction .............................................................................. 294
B. The Non-Statutory Doctrine of Ancillary Jurisdiction ............ 295
C. Kokkonen and the False Correlation of Consent Decrees
with Settlement Agreements ................................................... 299
Adjunct Professor of Law, New York Law School; formerly, a litigation partner for
fifteen years at Winston & Strawn. LLM Candidate, 2010–2011, Columbia University
School of Law; J.D. 1986, New York Law School; B.A. 1983, State University of New York
at Albany. I am grateful for the assistance of the editors and staff of the American
University Law Review.
ANTHONY DISARRO 60.2
276 AMERICAN UNIVERSITY LAW REVIEW [Vol. 60:275
D. The Distinction between Consent Decrees and Settlement
Agreements from a Jurisdictional Perspective ........................ 301
E. The Prison Litigation Reform Act Codifies the Distinction .... 303
F. The Seventh Circuit Rejects Jurisdictional Retentions ............ 305
G. Other Circuits Endorse Temporal Limitations on
Retentions ................................................................................ 308
H. Other Federal Courts Begrudgingly Give Effect to
Jurisdictional Retentions.......................................................... 309
I. Eliminating Jurisdictional Retentions Will Not Hinder
Settlements .............................................................................. 311
IV. Consent Decrees Are Subject to a Specificity Requirement ........... 312
A. The Reasonable Detail Requirement ....................................... 313
B. No Incorporating By Reference ............................................... 314
V. A Consent Decree Is the Court‘s Document ................................... 317
A. Consent Decree as Both Contract and Order: Entry of the
Decree ...................................................................................... 318
B. Modification of Consent Decrees ............................................ 320
VI. A Consent Decree Can Confer Prevailing Party Status .................. 323
A. Parties Will Need to Consider Whether to Address
Attorneys‘ Fees in Settlement .................................................. 323
B. The Supreme Court‘s Efforts to Distinguish between
Consent Decrees and Settlement Agreements in the
Prevailing Party Context .......................................................... 325
C. The Distinction Is Applied in Determining Prevailing Party
Status ....................................................................................... 326
D. Some Courts Blur the Distinction that the Supreme Court
Clarified ................................................................................... 328
Conclusion ................................................................................................. 330
INTRODUCTION
At last, the parties to a prolonged and bitterly fought commercial dispute
in federal court have agreed to a settlement. As lead counsel for one of the
parties, there are a few things you need to do right away. First, you need to
call the experts and trial consultants and tell them to stop working on the
case (or, more to the point, stop billing time on the case). Then, you need
to inform the presiding judge of the settlement so that she does not upset
the apple cart by suddenly ruling on one of those motions that have been
pending before her for months.
But, once you do those things, there is something else to which you
should turn your attention. The parties are going to prepare a settlement
agreement; should you seek to put some or all of the terms into a consent
ANTHONY DISARRO 60.2
2010] SIX DECREES OF SEPARATION 277
decree?
1
A consent decree is a judgment or order that reflects the
settlement terms agreed to by the parties, and that contains an injunction.
2
This Article identifies and analyzes the six key distinctions between
consent decrees and settlement agreements so that counsel can make an
informed choice when deciding which to use at the time of settlement.
This Article also describes two areas—enforcement jurisdiction and fee
shifting—where misguided courts have pronounced erroneous results due
to a failure to appreciate these distinctions. Finally, the Article prescribes a
correct rule of law that should be applied in these areas.
The first distinction between a consent decree and a settlement
agreement is the mode of enforcement.
3
The presence of an injunction in
the consent decree makes non-compliance with the settlement terms
contempt of court.
4
By contrast, failure to comply with a settlement
agreement is simply a breach of contract.
5
Second, a consent decree is a public document that can be accessed by
anyone.
6
Therefore, the settlement terms included in a consent decree will
not remain secret. A settlement agreement is a private document and its
terms can be kept confidential.
7
Third, because a consent decree is a court order, the issuing federal court
has the inherent power to enforce the consent decree.
8
The parties will be
able to return to the issuing court to enforce the decree, even where the
original action has been dismissed and there is no independent basis for
federal jurisdiction. An action to enforce a settlement agreement must be
brought in state court, unless the parties are diverse.
9
1. Understandably, this is not an ―either/or‖ proposition. Parties will want a written
agreement even if they intend to put some or all of the terms into a consent decree as well.
Consequently, the question is really whether the agreement will be the sole instrument or
will there be a consent decree as well?
2. FTC v. Enforma Natural Prods., Inc., 362 F.3d 1204, 1218 (9th Cir. 2004) (―[A]
consent decree is ‗no more than a settlement that contains an injunction.‘‖ (quoting In re
Masters Mates & Pilots Pension Plan & IRAP Litig., 957 F.2d 1020, 1025 (2d Cir. 1992)));
Gates v. Shinn, 98 F.3d 463, 468 (9th Cir. 1996) (―[W]hen a decree commands or prohibits
conduct, it is called an injunction.‖). When the settlement involves no injunctive relief but
simply the payment of money, the often-used term is ―consent judgment.‖ See Limbright v.
Hofmeister, 566 F.3d 672, 673 (6th Cir. 2009) (term ―consent judgment‖ used where
monetary obligations are involved).
3. See infra Part I.
4. Local No. 93, Int‘l Assoc. of Firefighters v. City of Cleveland, 478 U.S. 501, 518
(1986).
5. See D. Patrick, Inc. v. Ford Motor Co., 8 F.3d 455, 460 (7th Cir. 1993) (noting that,
in the absence of the judicial imprimatur necessary to render a settlement agreement a
consent decree, a settlement agreement is nothing more than a contract).
6. See infra Part II.
7. See Janus Films, Inc. v. Miller, 801 F.2d 578, 585 (2d Cir. 1986).
8. See infra Part III.
9. See Fairfax Countywide Citizen Ass‘n v. Cnty. of Fairfax, 571 F.2d 1299, 1305 (4th
Cir. 1978) (noting that, where a party to a settlement agreement lacks independent grounds
ANTHONY DISARRO 60.2
278 AMERICAN UNIVERSITY LAW REVIEW [Vol. 60:275
Some courts have concluded that parties stipulating to the jurisdiction of
a federal court to resolve settlement disputes is the functional equivalent of
a consent decree.
10
This reasoning is flawed. The retention of jurisdiction
does not transform the terms of a settlement agreement into the
requirements of a court order, nor would it permit the court to enforce its
terms by using the contempt power. Federal jurisdiction over settlement
disputes should be limited to the enforcement of consent decrees.
Fourth, the injunctive provisions of a consent decree must be stated in
reasonable detail and cannot incorporate other documents by reference,
even publicly available court records.
11
In contrast, settlement agreements
are not held to any requisite level of particularity (although specificity in a
contract can be a good thing), and the drafters are free to incorporate other
documents by reference.
Fifth, a consent decree will be the court‘s document, and thus the court
can insist that a proposed decree be changed.
12
Furthermore, consent
decrees can subsequently be modified or terminated by the court, even over
the objections of one of the parties.
13
A settlement agreement is the parties‘
document. It will reflect whatever the parties have agreed to, irrespective
of what the court thinks, and cannot be changed, except to reflect their
mutual consent.
Sixth, a consent decree represents a court-ordered change in the legal
relationship between the parties.
14
Accordingly, it can form the basis of
attorney‘s fees awarded to the plaintiff under statutes that permit such
awards to ―prevailing parties.‖
15
A settlement agreement does not bear the
requisite judicial imprimatur to confer prevailing party status to a
plaintiff.
16
Here, too, courts have employed a false correlation of consent decrees
with settlement agreements that stipulate to enforcement jurisdiction.
These decisions have awarded attorneys‘ fees under the erroneous theory
that where a court possesses jurisdiction to enforce a settlement, the
contractual duties become judicially imposed obligations.
17
These
for federal jurisdiction to litigate a breach of contract claim, the party must seek
enforcement in state court).
10. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 381 (1994); see also
infra notes 141–142 and accompanying text.
11. See infra Part IV.
12. See infra Part V.A.
13. See infra Part V.B.
14. See infra Part VI.
15. See infra Part VI.A.
16. Tex. State Teachers Ass‘n v. Garland Indep. Sch. Dist., 489 U.S. 782, 792 (1989).
17. See infra notes 302–306.
ANTHONY DISARRO 60.2
2010] SIX DECREES OF SEPARATION 279
decisions are a transparent attempt to evade a Supreme Court
pronouncement that settlement agreements cannot bestow prevailing party
status on a plaintiff.
Much of the scholarship devoted to consent decrees focuses on their
utility in public interest litigation.
18
Settlement of litigation is also a
frequent topic of academic articles, mostly concerning whether courts
should approve settlements,
19
encourage settlements,
20
or require that
settlements be publicly revealed.
21
Relatively little has been written about
the pros and cons of consent decrees and settlement agreements in ordinary
civil litigation between private parties.
22
Hopefully, this Article will help
to fill this lacuna.
I. ENFORCEMENT: CONTEMPT VERSUS BREACH
One significant distinction between a settlement agreement and a consent
decree concerns how the settlement terms will be enforced. When
settlement terms are part of a consent decree, they can be enforced via the
court‘s contempt powers.
23
This procedure will likely be quicker and
simpler—and lead to a more complete and effective remedy—than when
the terms are solely put into a settlement agreement.
24
18. The virtues and shortcomings of consent decrees in ―public interest‖ or
―institutional reform‖ litigation are explored at length in a series of scholarly articles
presented at a 1987 symposium sponsored by the University of Chicago Legal Forum. See
Consent Decrees: Practical Problems and Legal Dilemmas, 1987 U. CHI. LEGAL F. 1.
See generally Thomas M. Mengler, Consent Decree Paradigms: Models Without Meaning,
29 B.C. L. REV. 291 (1988). For more of the shortcomings and less of the virtues, see
generally ROSS SANDLER & DAVID SCHOENBROD, DEMOCRACY BY DECREE: WHAT HAPPENS
WHEN COURTS RUN GOVERNMENT (2003).
19. E.g., Margaret Meriwether Cordray, Settlement Agreements and the Supreme Court,
48 HASTINGS L.J. 9 (1996) (encouraging courts to promote the public policy of dispute
settlement).
20. E.g., Sanford I. Weisburst, Judicial Review of Settlements and Consent Decrees:
An Economic Analysis, 28 J. LEGAL STUD. 55 (1999) (studying the economic efficiency of
judicial review for every settlement agreement).
21. E.g., Emily Fiftal, Note, Respecting Litigants’ Privacy and Public Needs: Striking
Middle Ground in an Approach to Secret Settlements, 54 CASE W. RES. L. REV. 503 (2003)
(offering a general balancing approach for when to respect litigants‘ desire for secrecy in
settlement agreements and when, for public policy reasons, to publish a settlement
agreement).
22. For one of the few scholarly articles on this topic, see Jeffrey A. Parness &
Matthew R. Walker, Enforcing Settlements in Federal Civil Actions, 36 IND. L. REV. 33
(2003).
23. Local No. 93, Int‘l Ass‘n of Firefighters v. City of Cleveland, 478 U.S. 501, 518
(1986) (―Noncompliance with a consent decree is enforceable by citation for contempt of
court.‖ (citing United States v. City of Miami, 664 F.2d 435, 440 & n.8)); United States v.
Armour & Co., 402 U.S. 673, 676–77 (1971).
24. See infra notes 46–58 and accompanying text; see also Frank H. Easterbrook,
Justice and Contract in Consent Judgments, 1987 U. CHI. LEGAL F. 19, 20 (1987) (―When
the settlement includes a court order the parties can resolve disputes and get enforcement
without filing a new suit and starting at the end of the queue.‖).
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280 AMERICAN UNIVERSITY LAW REVIEW [Vol. 60:275
A. Requirement of a Court Order
A prerequisite to the exercise of a court‘s contempt power is the
existence of a court order.
25
A party can be held in contempt for
disobeying a court order, but not for disregarding a statute or breaching a
private agreement.
26
Courts have consistently ruled that judicial
enforcement of settlement terms cannot be effected through contempt
unless those terms are part of a court order.
27
A settlement agreement that provides that the court retains jurisdiction to
enforce the agreement merely allows the court to entertain a breach of
contract action, and potentially award damages or a decree of specific
performance.
28
It neither converts the contractual terms into court-
mandated duties, nor does it authorize the court to enforce the agreement
through the use of its civil contempt powers.
29
These principles have been applied even in a situation where the parties
have expressly stipulated that the court retains jurisdiction to enforce the
settlement through use of its contempt powers.
30
The Seventh Circuit
concluded that, because the settlement obligations were not contained in
the court order, a failure to comply with them could not be punished by
contempt.
31
The court stated:
[T]he district court never entered an order spelling out the parties‘ rights
and obligations [under the settlement]; only the settlement agreement
25. Harris v. City of Philadelphia, 47 F.3d 1311, 1326 (3d Cir. 1995); Stotler & Co. v.
Able, 870 F.2d 1158, 1163 (7th Cir. 1989).
26. See Stotler, 870 F.2d at 1163 (stating that, in order to hold a party in contempt, a
trial court must have made a decree to that party which the party willfully violated).
27. Tranzact Techs., Inc. v. 1Source Worldsite, 406 F.3d 851, 855 (7th Cir. 2005)
(rejecting party‘s claim that settlement agreement was unenforceable through a contempt
proceeding because its terms were ―specifically set forth in the order itself‖); Smyth v.
Rivero, 282 F.3d 268, 283 (4th Cir. 2002); Consumers Gas & Oil, Inc. v. Farmland Indus.,
Inc., 84 F.3d 367, 370 (10th Cir. 1996); D. Patrick, Inc. v. Ford Motor Co., 8 F.3d 455, 460–
61 (7th Cir. 1993) (holding that, although the district court reserved jurisdiction to enforce
the settlement agreement, the agreement was not enforceable by contempt).
28. See H. K. Porter Co. v. Nat‘l Friction Prods. Corp., 568 F.2d 24, 27 (7th Cir. 1977);
Hanna v. Lane, No. 84 C 1635, 1989 U.S. Dist. LEXIS 5910, at *12–14
(N.D. Ill. May 22, 1989); Smith v. Schermerhorn, No. 85 C 07372, 1989 U.S. Dist. LEXIS
1571, at *4–5 (N.D. Ill. Feb. 10, 1989) (awarding specific performance). But see Davis v.
City of San Francisco, 890 F.2d 1438, 1450–51 (9th Cir. 1989) (concluding that the district
court‘s failure to attach a consent decree to a subsequent injunction does not invalidate the
injunction).
29. United States v. City of Miami, 664 F.2d 435, 439 (5th Cir. 1981) (en banc) (Rubin,
J., concurring) (per curiam) (―If the parties agree to compromise their differences by a
settlement agreement, . . . the only penalty for failure to abide by the agreement is another
suit.‖).
30. D. Patrick, Inc., 8 F.3d at 460–61. The district court entered a dismissal order that
reiterated these terms. Id. at 461.
31. Id.
ANTHONY DISARRO 60.2
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purports to do that. Standing alone, a settlement agreement is nothing
more than a contract; the imprimatur of an injunction is required to
render it a consent decree enforceable through contempt.
32
The Court of Appeals for the Tenth Circuit applied the same reasoning to
a situation where the district court included some settlement terms in an
order but not others.
33
The court concluded that the settlement provisions
that were not set forth in the order could not be enforced by contempt,
notwithstanding the district court‘s retention of jurisdiction to enforce the
entire settlement.
34
The terms must be made part of the order for contempt
to become an enforcement tool.
The Court of Appeals for the Second Circuit‘s ruling in Hester
Industries, Inc. v. Tyson Foods, Inc.,
35
is instructive in this regard. The
parties entered into a settlement agreement that expressly stated that the
action would be dismissed without any judgment or injunction.
36
However,
the settlement agreement further provided that its terms were subject to
enforcement by the district court and the agreement was attached to a
stipulated order of dismissal that was signed by the judge.
37
The district court held that, as a result of the attachment and
jurisdictional retention, the settlement agreement had been incorporated
into the dismissal order and that it could hold a party in contempt for
nonperformance.
38
The Second Circuit reversed, concluding that the
district court lacked the power to issue a contempt citation.
39
Circuit Judge
Roger Miner reasoned that compliance with the settlement agreement could
not have been intended to be court-ordered because that would be
―tantamount to a mandatory injunction‖ and the parties‘ agreement
provided that no injunction would be entered.
40
Noncompliance with the
32. Id. at 460 (citing People Who Care v. Rockford Bd. of Educ. Sch. Dist. No. 205,
961 F.2d 1335, 1337 (7th Cir. 1992); In re Masters Mates & Pilots Pension Plan & IRAP
Litig., 957 F.2d 1020, 1025 (2d Cir. 1992)); see also H.K. Porter Co., 568 F.2d at 25–27.
33. Consumers Gas & Oil, Inc. v. Farmland Indus., Inc., 84 F.3d 367, 370–71 (10th Cir.
1996).
34. Id. at 371. The Tenth Circuit explained that Federal Rule of Civil Procedure 65(d)
which applies to consent decrees, see infra note 224 and accompanying text, requires a
federal court to explicitly set forth in the decree or order those terms that are enforceable by
contempt. Consumers Gas & Oil, Inc., 84 F.3d at 370 (quoting
11A CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE
AND PROCEDURE § 2955 (2d ed. 1995)).
35. 160 F.3d 911 (2d Cir. 1998).
36. Id. at 913.
37. Id. at 913–14.
38. Id. at 914.
39. Id. at 917.
40. Id. at 916. The court further held that the district court could not include settlement
terms in a court order absent consent of all parties. Id.
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282 AMERICAN UNIVERSITY LAW REVIEW [Vol. 60:275
agreement, the court explained, could amount to a contractual breach, but it
could not serve as the basis for a contempt finding.
41
To ensure enforcement by contempt, the parties must actually put the
settlement terms into a court order that directs the parties to perform those
obligations.
42
B. Advantages of the Contempt Route to the Movant
The contempt route fulfills the ―need for speed‖ by enabling a party to
use a single-step enforcement process.43 The party seeking enforcement
simply files a motion to hold the violator in contempt of court. Some
district courts will even permit a party seeking to hold another in contempt
to proceed by way of an expedited procedure known as an ―order to show
cause‖ or ―rule to show cause,‖ which will set a more abbreviated briefing
schedule than is typical for motions.
44
Where they are part of a contract, settlement terms can only be enforced
via the breach-of-contract route.
45
This entails a two-step process.
46
First,
the party seeking enforcement will have to commence a plenary action to
obtain a decree of specific performance.
47
Then, the party can enforce the
specific performance decree through a contempt proceeding.
48
The two-
step enforcement process is lengthier and consumes more judicial
resources.
The consent decree route is also quicker because a party can use a
summary proceeding to enforce the decree, instead of initiating a plenary
action.
49
In a summary contempt proceeding, the district court will proceed
41. Id. at 917.
42. Courts refer to this as ―incorporating‖ or ―embody[ing]‖ the settlement terms into a
court order. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 381 (1994).
43. See Sacher v. United States, 343 U.S. 1, 21 (1952) (Black, J., dissenting) (―[C]ourts
must have power to act immediately, and upon this need the power of contempt rests.‖).
44. Tranzact Techs., Inc. v. 1Source Worldsite, 406 F.3d 851, 853–54 (7th Cir. 2005)
(rule to show cause); Consumers Gas & Oil, Inc. v. Farmland Indus., Inc., 84 F.3d 367, 369
(10th Cir. 1996) (order to show cause); see also Quilling v. Trade Partners, Inc., No. 1:03-
CV-236, 2010 WL 565155, at *2 (W.D. Mich. Feb. 12, 2010) (―Contempt proceedings are
‗summary in form and swift in execution.‘‖ (quoting Am. Airlines, Inc. v. Allied Pilots
Assoc., 228 F.3d 574, 583 (5th Cir. 2000))).
45. Christina A. ex rel. Jennifer A. v. Bloomberg, 315 F.3d 990, 993 (8th Cir. 2003);
Hazen v. Reagen, 208 F.3d 697, 699 (8th Cir. 2000); Benjamin v. Jacobson, 172 F.3d 144,
157 (2d Cir. 1999) (en banc).
46. Morton Denlow, What’s an Attorney to Do? Ensuring Federal Jurisdiction Over
Settlement Agreements in Light of Recent Seventh Circuit Cases, THE CIRCUIT RIDER, May
2007, at 24, 26 (characterizing a settlement agreement as requiring a two-tier enforcement
procedure).
47. See Roberson v. Giuliani, 346 F.3d 75, 83 (2d Cir. 2003).
48. Id.
49. See generally D. Patrick, Inc. v. Ford Motor Co., 8 F.3d 455, 459 (7th Cir. 1993);
Blalock v. United States, 844 F.2d 1546, 1550 (11th Cir. 1988). The benefits of summary
ANTHONY DISARRO 60.2
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expeditiously, and parties will have limited rights to conduct discovery.
50
The party charged with contempt is entitled to due process and an
opportunity to be heard, but not an evidentiary hearing.
51
The law is unclear regarding whether a party can use a summary
proceeding to enforce a settlement contract.
52
Moreover, even when
permissible, a summary action to enforce a settlement agreement can easily
devolve into a prolonged fact-driven proceeding, particularly where
issues—such as whether there was a meeting of the minds or the
signatories had the proper authority—are disputed.
53
In addition to speed, there is the efficacy of the remedy to consider.
Being adjudicated a contemnor has a stigmatizing effect that a party and its
lawyers will be anxious to avoid. The threat of a contempt charge will
cause parties to take precautions to ensure that their settlement obligations
are performed and to perform tasks that arguably are not even required out
of an abundance of caution.
54
No similar apprehension arises from the
prospect of being adjudicated as a party in breach. For this reason, the
obligor will typically be reticent to incorporate settlement terms into a court
order.
enforcement may be overstated. As one court observed, the preparation and filing of a
summary motion to enforce a settlement agreement may be as expensive as the preparation
and filing of a complaint and a summary judgment motion in a plenary action. Woodcock
Bros. Transp. Grp. v. Transp. Res., Inc.,
No. 01 C 8067, 2003 WL 1873928, at *4 n.2 (N.D. Ill. Apr. 14, 2003) (―As to economies, it
would not have been any more expensive to have drafted a new complaint than to have
drafted the allegations in the motion to enforce the settlement agreement . . . .‖).
50. D. Patrick, Inc., 8 F.3d at 459; In re Grand Jury Matter, 906 F.2d 78, 85–86
(3d Cir. 1990); Ferrell v. Pierce, 785 F.2d 1372, 1383 (7th Cir. 1986) (per curiam).
51. Goya Foods, Inc. v. Wallack Mgmt. Co., 290 F.3d 63, 77 (1st Cir. 2002); Alexander
v. Chi. Park Dist., 927 F.2d 1014, 1025 (7th Cir. 1991); Leadsinger, Inc. v. Cole, No. 05
Civ. 5606(HBP), 2006 WL 2266312, at *7 (S.D.N.Y. Aug. 4, 2006).
52. Compare Municipality of San Juan v. Rullan, 318 F.3d 26, 31 (1st Cir. 2003)
(determining that the settlement agreement did not grant summary enforcement power to the
district court), and Neuberg v. Michael Reese Hosp. Found., 123 F.3d 951, 954 (7th Cir.
1997) (affirming district court‘s refusal to summarily enforce settlement agreement), and
Geiringer v. Pepco Energy Servs., Inc., No. CV05-4172 (WDW), 2007 WL 4125094, at *1
(E.D.N.Y. Nov. 16, 2007), and Cross Media Mktg. Corp. v. Budget Mktg. Inc., 319 F. Supp.
2d 482, 483 (S.D.N.Y. 2004), with Limbright v. Hofmeister, 566 F.3d 672, 675 (6th Cir.
2009) (following its own precedent in affirming the use of a summary enforcement
proceeding) (citing Bobonik v. Medina Gen. Hosp., 126 F. App‘x 270, 273 (6th Cir. 2005)),
and Blue Cross & Blue Shield Ass‘n. v. Am. Express Co., 467 F.3d 634, 638 (7th Cir. 2006)
(noting that refusing to allow a summary enforcement proceeding in this case would only
compound already extensive delays and expenditures).
53. See Millner v. Norfolk & W. Ry. Co., 643 F.2d 1005, 1009 (4th Cir. 1980) (holding
that where there is a factual dispute regarding the enforceability of a settlement agreement, a
plenary evidentiary hearing is required); see also Ford v. Citizens & S. Nat‘l Bank, 928 F.2d
1118, 1121–22 (11th Cir. 1991).
54. McComb v. Jacksonville Paper Co., 336 U.S. 187, 191 (1949); Gene Shreve,
Federal Injunctions and the Public Interest, 51 GEO. WASH. L. REV. 382, 389 (1983).
ANTHONY DISARRO 60.2
284 AMERICAN UNIVERSITY LAW REVIEW [Vol. 60:275
The contempt procedure also offers a broader range of monetary
recoveries.
55
In addition to requiring the contemnor to compensate the
other party for losses sustained as a result of the non-compliance—the
traditional remedy for a breach of contract—the court can also require the
contemnor to disgorge its profits, which is typically not available in a
contract action.
56
Disgorgement can be a valuable remedy where the party
seeking enforcement is unable to prove, with sufficient certainty, actual
damages arising from the non-compliance.
The court can also impose a monetary sanction or fine against the
contemnor to coerce it to comply with the order.
57
In coercing the parties
to a consent decree to comply with settlement terms, a court can assess per
diem fines, and even incarcerate a contemnor, so long as the primary
purpose of these measures is to produce compliance with the order, and not
to punish the contemnor.
58
Lastly, the movant can recover attorneys‘ fees in a contempt
proceeding.
59
Attorneys‘ fees are viewed as a cost that the movant is
deemed to have incurred as a result of defendant‘s non-compliance with the
55. FTC v. Kuykendall, 371 F.3d 745, 765 (10th Cir. 2004); John T. ex rel. Paul T. v.
Del. Cnty. Intermediate Unit, 318 F.3d 545, 554 (3d Cir. 2003) (―District courts hearing
civil contempt proceedings are afforded broad discretion to fashion a sanction that will
achieve full remedial relief.‖ (citing McComb, 336 U.S. at 193–94)).
56. FTC v. Trudeau, 579 F.3d 754, 771–72 (7th Cir. 2009) (holding that a defendant‘s
profits can be a proper measure for sanctions in contempt proceedings); Abbott Labs. v.
Unlimited Beverages, Inc., 218 F.3d 1238, 1242 (11th Cir. 2000) (―Where a plaintiff‘s harm
is difficult to calculate, the court may disgorge the party in contempt of any profits it may
have received.‖ (citing Wesco Mfg., Inc. v. Tropical Attractions of Palm Beach, Inc., 833
F.2d 1484, 1487–88 (11th Cir. 1987))).
57. See, e.g., United States v. Dowell, 257 F.3d 694, 699–700 (7th Cir. 2001); Robin
Woods Inc. v. Woods, 28 F.3d 396, 400 (3d Cir. 1994) (―Sanctions for civil contempt serve
two purposes: ‗to coerce the defendant into compliance with the court‘s order and to
compensate for losses sustained by the disobedience.‘‖ (quoting McDonald‘s Corp. v.
Victory Invs., 727 F.2d 82, 87 (3d Cir. 1984))); United States v. Pozsgai, 999 F.2d 719, 735
(3d Cir. 1993).
58. See, e.g., Int‘l Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 828-
29 (1994); Connolly v. J.T. Ventures, 851 F.2d 930, 932–34 (7th Cir. 1988). Essentially, if
confinement will end, or per diem fines will cease, as soon as the contemnor obeys the
order, then the measures are deemed non-punitive and permissible. Bagwell, 512 U.S. at
828.
59. Goya Foods, Inc. v. Wallack Mgmt. Co., 290 F.3d 63, 78 (1st Cir. 2002))); Abbott
Labs., 218 F.3d at 1242 (citing Rickard v. Auto Publisher, Inc., 735 F.2d 450, 458 (11th Cir.
1984)).
ANTHONY DISARRO 60.2
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court order.
60
Attorneys‘ fees are not recoverable in breach of contract or
other ordinary civil actions.
61
C. Deciding Whether the Availability of Contempt is Important
The remedy of contempt is ineffectual where the monetary terms of the
settlement are concerned. Financial inability to pay a court-ordered
obligation is a defense to contempt.62 Consequently, access to a court‘s
contempt powers is of little value when there is a settlement payment
default.
63
When it comes to material non-monetary obligations, however, the
availability of contempt has significant benefits.
64
Settlement agreements
often include significant obligations besides those mandating the payment
of money. For example, a settlement agreement in a patent infringement
action can contain provisions obligating the defendant to redesign its
product so as to obviate the disputed infringement.
65
Also, settlements in
employment-related litigation can include obligations to promote the
60. King v. Allied Vision, Ltd., 65 F.3d 1051, 1063 (2d Cir. 1995); see also Robin
Woods Inc., 28 F.3d at 399 (noting that remedial contempt awards should ensure that the
innocent party receive the full benefits of performance, including requiring the contemnor to
pay for the movant‘s attorneys‘ fees incurred to secure compliance with the court order);
Rickard, 735 F.2d at 458.
61. Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994) (holding that awarding
attorneys‘ fees is at the court‘s discretion, in the absence of legislative authorization).
62. Huber v. Marine Midland Bank, 51 F.3d 5, 10 (2d Cir. 1995) (―[A] party‘s complete
inability, due to poverty or insolvency, to comply with an order to pay court-imposed
monetary sanctions is a defense to a charge of civil contempt.‖);
SEC v. AMX Int‘l, Inc., 7 F.3d 71, 73 (5th Cir. 1993) (per curiam) (citing Donovan v.
Sovereign Sec., Ltd., 726 F.2d 55, 59 (2d Cir. 1984)); see Badgley v. Santacroce,
800 F.2d 33, 36 (2d Cir. 1986) (explaining that a party may defend against contempt by
showing that his compliance is ―factually impossible‖ (citing United States v. Rylander, 460
U.S. 752, 757, (1983)).
63. There is some benefit to having a monetary obligation reflected in a consent
judgment, instead of a settlement agreement. If there is a default, the judgment creditor can
immediately seek to enforce the judgment against the assets of the judgment debtor using
the ordinary judgment enforcement procedures available under the Federal Rules of Civil
Procedure, instead of initiating a breach of contract action. See FED. R. CIV. P. 55 (laying
out the procedure by which default judgment can be entered). On the other hand, in a
settlement agreement, the parties can simply include a provision providing for the ex parte
entry of a consent judgment in the event of a payment default. See, e.g., Limbright v.
Hofmeister, 566 F.3d 672, 673 (6th Cir. 2009) (reaching a settlement agreement for
$950,000, provided that upon default the district court would enter a consent judgment for
$1.3 million, less the amount of any prior payments). This procedure makes the first step of
the two-step enforcement process a simple ministerial act that can quickly be accomplished.
64. See SEC v. Randolph, 736 F.2d 525, 528 (9th Cir. 1984) (―A consent decree offers
more security to the parties than a settlement agreement where ‗the only penalty for failure
to abide by the agreement is another suit.‘‖ (quoting United States v. City of Miami, 664
F.2d 435, 439 (5th Cir. 1981) (en banc) (Rubin, J., concurring) (per curiam)).
65. See Nat‘l Presto Indus., Inc. v. Dazey Corp., 107 F.3d 1576, 1577–78 (Fed. Cir.
1997) (agreeing that a redesign of the product would not infringe any of the plaintiff‘s
rights).
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employee or to evaluate the employee‘s future job performance in
accordance with specific criteria.
66
Further, settlements in trademark or trade-dress disputes frequently
involve commitments to alter product packaging or labeling, or to cease
using certain marks.
67
In false advertising litigation, parties commonly
agree to refrain from making certain advertising claims or to add qualifying
disclosures to the claims.
68
Settlements between business competitors often
involve promises not to hire or solicit each other‘s employees, or to refrain
from certain business practices.
69
If a business contract dispute is resolved
amicably, the parties might include commitments for preferential treatment
of the other party.
70
The types of long-lasting, non-monetary obligations that can be put into
a settlement agreement are limited only by the creativity of the parties‘
counsel and the desires of the settling parties. Therefore, serious
consideration should be given to using a consent decree for these types of
obligations. Litigants should also consider using a consent decree for
material non-monetary obligations, but keeping the monetary terms, for
which the decree will be of limited use, in the settlement agreement.
D. Why the Consent Decree Route Might Be Acceptable to the Obligor
Although the party saddled with significant obligations under a
settlement would obviously prefer that the obligations be memorialized in a
simple contract as opposed to a court order, agreeing to a consent decree
might also be in the obligor‘s interest. The obligor can leverage his
willingness to agree to a consent decree in order to reduce his monetary
obligations to the other party. Because settling parties are frequently
confident that they will be able to discharge the non-monetary obligations
66. See Dillard v. Starcon Int‘l, Inc., 483 F.3d 502, 505 (7th Cir. 2007) (illustrating how
provisions such as the reinstatement of the employee and specific procedures for training
and testing employee were being negotiated for inclusion in the settlement agreement);
Scelsa v. City Univ. of N.Y., 76 F.3d 37, 39 (2d Cir. 1996) (describing a settlement
agreement that provided the procedures used for appointing and granting tenure to faculty).
67. See Bear U.S.A., Inc. v. Kim, 71 F. Supp. 2d 237, 241 (S.D.N.Y. 1999) (consenting
to an injunction to prohibit the defendant from using ―any colorable or confusingly similar
imitation of [plaintiff‘s mark]‖), aff’d, 216 F.3d 1071 (2d Cir. 2000).
68. See Dyson, Inc. v. Oreck Corp., 647 F. Supp. 2d 631, 633 (E.D. La. 2009) (agreeing
to refrain from certain advertising claims such as assertions ―that either product is
unsanitary, dirty, [or] unhealthy‖).
69. Ranco Indus. Prods. Corp. v. Dunlap, 776 F.2d 1135, 1137 (3d Cir. 1985).
70. Woodcock Bros. Transp. Grp. v. Transp. Res., Inc., No. 01 C 8067, 2003 WL
1873928, at *1 (N.D. Ill. Apr. 14, 2003) (requiring defendant to designate plaintiff as the
preferred carrier for certain freight).
ANTHONY DISARRO 60.2
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they undertake—otherwise, why undertake them—they may not mind
facing greater adverse consequences in the event of a breach.
There are other considerations that can persuade an obligor to agree to a
consent decree. First, the standard of proof to compel enforcement is
higher. To prevail on an application for civil contempt, the movant bears a
higher burden—the ―clear and convincing evidence‖ standard—rather than
the ―preponderance of the evidence‖ standard that applies to contract
actions.
71
Second, the party seeking a contempt order must show that the adversary
breached a provision that is ―within the four corners‖ of the consent
decree.
72
That is, the alleged noncompliance must circumvent an express
provision of the decree.
73
In contrast, breach of contract actions can be
predicated on the implied terms of a contract, such as obligations of good
faith and fair dealing or those based on prior course of dealing or industry
custom and usage.
74
Third, an application for contempt must be based on an obligation that is
clear and unequivocal.
75
Ambiguity in a consent decree will doom a
71. FTC v. Enforma Natural Prods., Inc., 362 F.3d 1204, 1211 (9th Cir. 2004); King v.
Allied Vision, Inc., 65 F.3d 1051, 1058 (2d Cir. 1995); Robin Woods, Inc. v. Woods, 28
F.3d 396, 399 (3d Cir. 1994). Although there is a higher burden of proof associated with
contempt, proof of willfulness is not required. Robin Woods, 28 F.3d at 399 (citing Harley-
Davidson, Inc. v. Morris, 19 F.3d 142, 148–49 (3d Cir. 1994)); Donovan v. Sovereign Sec.,
Ltd., 726 F.2d 55, 59 (2d Cir. 1984). Nor is good faith or reliance on the advice of counsel a
defense. Star Fin. Servs., Inc. v. AASTAR Mortg. Corp., 89 F.3d 5, 13 (1st Cir. 1996).
72. United States v. ITT Cont‘l Baking Co., 420 U.S. 223, 233 (1975); Gates v. Shinn,
98 F.3d 463, 468 (9th Cir. 1996) (―Courts must find the meaning of a consent decree ‗within
its four corners‘ . . . .‖ (quoting United States v. Armour & Co., 402 U.S. 673, 681–82
(1971))); Harley-Davidson, Inc., 19 F.3d at 148; Crumpton v. Bridgeport Educ. Ass‘n, 993
F.2d 1023, 1028 (2d Cir. 1993) (―[A] consent decree ‗must be discerned within its four
corners‘ . . . .‖ (quoting Armour, 402 U.S. at 682)).
73. See Drywall Tapers, Local 1974 v. Local 530 of Operative Plasters, 889 F.2d 389,
395 (2d Cir. 1989) (holding that a consent order is unambiguous if the forbidden acts could
be ascertained from four corners of the order).
74. Fabri v. United Techs. Int‘l, Inc., 387 F.3d 109, 127 (2d Cir. 2004) (explaining that
―the implied warranty of good faith [and fair dealing] is read into all contracts‖ (citing
Celentano v. Oaks Condo. Ass‘n, 830 A.2d 164, 188 (Conn. 2003))); see Baer v. Chase, 392
F.3d 609, 619–20 (3d Cir. 2004) (describing how courts can imply contractual terms based
on commercial practice, custom or usage).
75. Goya Foods, Inc. v. Wallack Mgmt. Co., 290 F.3d 63, 76 (1st Cir. 2002); King v.
Allied Vision, Ltd., 65 F.3d 1051, 1058 (2d Cir. 1995).
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motion for contempt.
76
A breach of contract action, however, can be
premised on an ambiguous contractual provision.
77
These considerations might persuade a settling defendant to agree to a
consent decree, particularly when doing so will inure to its benefit when
haggling over the monetary provisions.
II. A CONSENT DECREE IS A PUBLIC DOCUMENT
Including settlement terms in a consent decree will preclude
confidentiality because they will become part of a public document that is
available for inspection. The confidentiality of a private agreement,
however, will be lost only if and when enforcement of the agreement is
sought, and even then, the parties may be able to protect the financial terms
of settlement.
A. Common Law and First Amendment Rights of Access to Consent
Decrees
Courts have recognized the right of public access to civil proceedings
under both common law and the First Amendment.
78
Public access to civil
proceedings is not limited to lawsuits that contain specific issues of public
interest. Rather, the right applies to all civil actions on the theory that
broad public access to civil proceedings serves strong societal interests in
promoting judicial and lawyer accountability and deterring court and
advocate misconduct.
79
Unfettered access to court proceedings promotes
76. See John T. ex rel. v. Del. Cnty. Intermediate Unit, 318 F.3d 545, 552
(3d Cir. 2003); Gates, 98 F.3d at 468 (―If an injunction does not clearly describe prohibited
or required conduct, it is not enforceable by contempt.‖); D. Patrick, Inc. v. Ford Motor Co.,
8 F.3d 455, 460 (7th Cir. 1993) (holding that although it is appropriate to consider extrinsic
evidence when the terms of a settlement agreement are unclear, the same ambiguity will
defeat a contempt motion); see also Ferrell v. Pierce, 785 F.2d 1372, 1383 (7th Cir. 1986)
(per curiam); N. Shore Labs. Corp. v. Cohen, 721 F.2d 514, 521 (5th Cir. 1983).
77. See, e.g., Nadherny v. Roseland Prop. Co., 390 F.3d 44, 48 (1st Cir. 2004) (―If a
contract is ambiguous, the meaning of the ambiguous terms often, but not always, presents a
question of fact for a jury.‖); First Bank & Trust v. Firstar Info. Servs., Corp., 276 F.3d 317,
322 (7th Cir. 2001) (same); Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428
(2d Cir. 1992) (same) (citations omitted). As the Nadherny court observed, ambiguity in a
contract will merely preclude summary adjudication of the dispute. 390 F.3d at 48.
78. See Rushford v. New Yorker Magazine, Inc., 846 F.2d 249, 253 (4th Cir. 1988)
(explaining that denial of access must be necessitated by a compelling government interest);
Westmoreland v. Columbia Broad. Sys., Inc., 752 F.2d 16, 23 (2d Cir. 1984); Publicker
Indus., Inc. v. Cohen, 733 F.2d 1059, 1070 (3d Cir. 1984) (holding that access to civil trials
ensures a ―fairer administration of justice‖). The Supreme Court has addressed the question
of a First Amendment right only in the criminal context. See Press-Enter. Co. v. Superior
Court, 464 U.S. 501, 508–10 (1984); Richmond Newspapers, Inc. v. Virginia, 448 U.S. 555,
580 (1980). But cf. Nixon v. Warner Commc‘ns, Inc., 435 U.S. 589, 597 (1978)
(recognizing a common law right of access to civil proceedings).
79. United States v. Amodeo, 71 F.3d 1044, 1048 (2d Cir. 1995); B.H. v. McDonald, 49
ANTHONY DISARRO 60.2
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―public respect for the judicial process‖
80
and instills public confidence in
the integrity and conscientiousness of court proceedings.
81
A necessary corollary to these rights is that the public should have the
opportunity to inspect various court papers, such as motion papers,
transcripts, orders or docket sheets, which are relevant to understanding
what has transpired in a civil case.
82
The right of access to civil
proceedings and accompanying court papers is only worthwhile if members
of the public can ascertain the material aspects of the case. The public
and press should be able to monitor the adjudication and disposition of
cases by reviewing the court files. Accordingly, there is a strong
presumption of access to court papers filed in a civil case that can only be
overcome by ―a compelling interest in secrecy, as in the case of trade
secrets, the identity of informers, [or] the privacy of children . . . .‖
83
Therefore, when settlement terms are incorporated into a consent decree,
those terms irretrievably enter the public domain.
84
The public has a right
to know about the entry of consent decrees, as well as their modification,
and their enforcement through contempt proceedings.
85
Consent decrees
are highly relevant to the performance of the judicial function, play a
central role in the exercise of Article III judicial power, and have
F.3d 294, 301 (7th Cir. 1995); Leucadia, Inc. v. Applied Extrusion Techs., Inc., 998 F.2d
157, 161 (3d Cir. 1993) (citation omitted).
80. Lugosch v. Pyramid Co. of Onondaga, 435 F.3d 110, 119 (2d Cir. 2006); Republic
of the Philippines v. Westinghouse Elec. Corp., 949 F.2d 653, 660 (3d Cir. 1991) (quoting
Globe Newspaper Co. v. Superior Court, 457 U.S. 596, 606 (1982)).
81. Amodeo, 71 F.3d at 1048; see Bank of Am. Nat‘l Trust & Sav. Ass‘n v. Hotel
Rittenhouse Assocs., 800 F.2d 339, 343–44 (3d Cir. 1986) (recognizing a strong
presumption in favor of public access); In re Cont‘l Ill. Sec. Litig., 732 F.2d 1302, 1308 (7th
Cir. 1984) (positing that ―[t]he public‘s right of access to judicial records [is] ‗fundamental
to [democracy]‘‖ and thus insures ―quality, honesty and respect for our legal system‖).
82. See Hartford Courant Co. v. Pellegrino, 380 F.3d 83, 85, 92 (2d Cir. 2004)
(analyzing case law to determine if the public and press have a right to inspect civil case
docket sheets); In re Providence Journal Co., 293 F.3d 1, 10–13 (1st Cir. 2002) (allowing
access to memoranda of law by rejecting a blanket non-filing policy in the district court);
Phx. Newspapers, Inc. v. U.S. District Court, 156 F.3d 940, 948
(9th Cir. 1998) (asserting that access to criminal case transcripts increases the fundamental
fairness of a criminal trial); Grove Fresh Distribs., Inc. v. Everfresh Juice Co., 24 F.3d 893,
897 (7th Cir. 1994) (stating that a delay in access to court documents is improper).
83. Jessup v. Luther, 277 F.3d 926, 928 (7th Cir. 2002) (citing Citizens First Nat‘l Bank
of Princeton v. Cincinnati Ins. Co., 178 F.3d 943, 945 (7th Cir. 1999)); see Doe v. Blue
Cross & Blue Shield United of Wis., 112 F.3d 869, 872 (7th Cir. 1999); Miller v. Ind.
Hosp., 16 F.3d 549, 551 (3d Cir. 1994)); see also Chi. Tribune Co. v. Bridgestone/Firestone
Inc., 263 F.3d 1304, 1314–15 (11th Cir. 2001) (noting that, upon a finding that court papers
include trade secrets, ―the district court must balance [the secret holder‘s] interest in keeping
the information confidential against . . . the public‘s legitimate interest‖ in the matter).
84. Jessup, 277 F.3d at 929; EEOC v. Nat‘l Children‘s Ctr., Inc., 98 F.3d 1406, 1409
(D.C. Cir. 1996).
85. Nat’l Children’s Ctr., Inc., 98 F.3d at 1409; see B.H. v. McDonald, 49 F.3d 294,
300 (7th Cir. 1995) (recognizing that when parties utilize the judicial process to interpret
and enforce settlements, they are no longer entitled to confidentiality).
ANTHONY DISARRO 60.2
290 AMERICAN UNIVERSITY LAW REVIEW [Vol. 60:275
significant informational value to those monitoring the federal courts.
86
They are no less critical to understanding a civil proceeding than summary
judgment motion papers, to which a strong presumption of access applies.
87
B. Partial Confidentiality
The loss of confidentiality that comes with using a consent decree is not
an all-or-nothing proposition. Parties may include only certain settlement
terms in a consent decree, and memorialize the rest of the terms in a private
settlement agreement. This will permit the parties to use a consent decree
for the significant non-monetary obligations of a settlement while keeping
the monetary terms secret.
88
It is usually the financial terms of a settlement that the parties are most
concerned about keeping confidential. This observation is plainly evident
from a research study conducted by the Federal Judicial Center (―the
Center‖) on the practice of sealing settlement agreements filed in federal
court.
89
The Center examined close to 290,000 cases that were terminated
in 2001 and 2002 across 52 federal districts.
90
The study concluded that the
practice of sealing a filed settlement agreement was rare, occurring in less
than half of one percent of the actions reviewed.
91
Significantly, in most of
those instances, the only part of the agreement sealed was the settlement
amount.
92
It is not surprising that parties are most concerned about the
confidentiality of the amount of money paid to settle a case. Defendants
want to keep the amounts secret to avoid appearing like an ―easy mark‖ for
86. Lugosch v. Pyramid Co. of Onondaga, 435 F.3d 110, 119 (2d Cir. 2006) (citing
Amodeo, 71 F.3d at 1048).
87. San Jose Mercury News, Inc. v. U.S. District Court, 187 F.3d 1096, 1102
(9th Cir. 1999); Republic of the Philippines v. Westinghouse Elec. Corp., 949 F.2d 653, 660
(3d Cir. 1991); Rushford v. New Yorker Magazine, Inc., 846 F.2d 249,
252–53 (4th Cir. 1988); In re Cont‘l Ill. Sec. Litig., 732 F.2d 1302, 1309–10 (7th Cir. 1984);
Joy v. North, 692 F.2d 880, 893 (2d Cir. 1982). By contrast, documents relating to
discovery motions are deemed to have very little protection under the First Amendment or
common law. Anderson v. Cryovac, Inc., 805 F.2d 1, 12–13
(1st Cir. 1986).
88. See Janus Films, Inc. v. Miller, 801 F.2d 578, 584–85 (2d Cir. 1986) (noting that
allowing the parties not to make full disclosure of the terms in the side agreements
encourages the consummation of some settlements).
89. See generally Robert Timothy Reagan, The Hunt for Sealed Settlement Agreements,
81 CHI.-KENT L. REV. 439 (2006).
90. See id. at 444 (explaining the research method employed by the Center). The author
notes that settlement agreements are typically not filed with the court, except in cases where
the court is asked to enforce the agreement or is required to approve the settlement, such as
cases involving minors, class actions or claims under the Fair Labor Standards Act. Id. at
459.
91. Id. at 452.
92. Id. at 439, 452, 460.
ANTHONY DISARRO 60.2
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more lawsuits.
93
Plaintiffs may also favor confidentiality so that they can
extract greater monetary consideration in exchange for their commitment to
secrecy.
94
Parties using a consent decree are able to prevent public
disclosure of settlement amounts by not incorporating those obligations
into the consent decree and keeping them in a separate settlement
agreement.
C. The Confidentiality of Settlement Agreements
A settlement agreement will be afforded whatever confidentiality the
parties desire.
95
There is no First Amendment or common law right to
access confidential settlement agreements.
96
Settlement agreements are
also difficult for parties to obtain in discovery, requiring that a
particularized showing of relevance be made.
97
Conversely, a few courts have concluded that the confidentiality of a
settlement agreement is forfeited when the parties seek to have it enforced
in court.
98
Because the agreement itself is now the subject of litigation,
these courts reason that the agreement must be opened to the public.
99
93. Herrnreiter v. Chi. Hous. Auth., 281 F.3d 634, 637 (7th Cir. 2002); Fiftal, supra
note 21, at 504.
94. Fiftal, supra note 21, at 504, 527; Anne Thérèse Béchamps, Note, Sealed Out-of-
Court Settlements: When Does the Public Have a Right to Know?, 66 NOTRE DAME L. REV.
117, 117 (1990).
95. See Gambale v. Deutsche Bank AG, 377 F.3d 133, 143 (2d Cir. 2004) (―There is no
established presumption of access . . . with respect to the information contained in
[settlement agreements].‖) (citing United States v. Glens Falls Newspapers, Inc., 160 F.3d
853, 857 (2d Cir. 1998); Pansy v. Borough of Stroudsburg, 23 F.3d 772, 781 (3d Cir. 1994);
SEC v. Van Waeyenberghe, 990 F.2d 845, 849 (5th Cir. 1993)); see also Janus Films, Inc. v.
Miller, 801 F.2d 578, 585 (2d Cir. 1986) (clarifying that ―[i]f the parties to a dispute . . . are
reluctant to disclose the terms of their agreement . . . they remain free to forgo entry of a
judgment and settle their litigation by a withdrawal of action, keeping confidential all
aspects of their settlement‖).
96. See Phillips v. Gen. Motors Corp., 307 F.3d 1206, 1211–12 (9th Cir. 2002)
(discussing that the right of access issue does not apply to confidential settlement
information, and courts must determine if a protective order is needed based on a ―good
cause‖ analysis).
97. See Multi-Tech Sys., Inc. v. Dialpad.com, Inc., No. 00-1540 ADM/RLE,
2002 WL 27141, at *2 (D. Minn. Jan. 8, 2002) (―When the requested discovery concerns a
confidential settlement agreement, the majority of courts considering the issue have required
the requesting party to meet a heightened standard . . . .‖ (quoting Young v. State Farm Mut.
Auto. Ins. Co., 169 F.R.D. 72, 76 (S.D. W. Va. 1996))); see also Hear-Wear Techs., LLC v.
Oticon, Inc., No. 07-CV-212 CVE/SAJ, 2008 WL 3388455, at *2 (N.D. Okla. Aug. 8, 2008)
(protecting the settlement agreement even when a case settles after a court ordered
settlement conference).
98. Herrnreiter v. Chi. Hous. Auth., 281 F.3d 634, 636 (7th Cir. 2002)
(―A settlement agreement is a contract, and when parties to a contract ask a court to interpret
and enforce their agreement, the contract enters the record of the case and thus becomes
available to the public . . . .‖ (citing Union Oil Co. v. Leavell, 220 F.3d 562, 567–68 (7th
Cir. 2000); Jessup v. Luther, 277 F.3d 926 (7th Cir. 2002))); Bank of Am. Nat‘l Trust &
Sav. Ass‘n v. Hotel Rittenhouse Assocs., 800 F.2d 339, 345
(3d Cir. 1986) (the confidentiality afforded a settlement agreement by the parties is forfeited
ANTHONY DISARRO 60.2
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The legal principle enunciated in these cases is overbroad and should be
refined. A motion to enforce a settlement agreement should cause the
provisions for which enforcement is sought to enter the public domain, as
well as any provisions relevant to the arguments of the parties or the
reasoning of the court; however, there is no reason why settlement terms
that are irrelevant to the enforcement issues at bar should become public
knowledge simply because enforcement of some aspects of the agreement
is sought. Parties to a breach of contract action are able to seal or redact
portions of the contract that are not relevant to the dispute.
100
The result
should be no different when a settlement agreement is involved.
For example, if the parties are contesting whether the defendant has
complied with her settlement agreement obligation to modify a product‘s
trade dress, what difference does it make that the defendant paid $675,000
to settle the claim? The fact that most of the sealed settlement agreements
that have been filed in federal courts are sealed only in part indicates that
courts are willing to permit parties to seal portions of settlement
agreements deemed irrelevant to an enforcement motion.
101
Therefore, an
enforcement action should not automatically waive all confidentiality over
the agreement.
Regardless, a settlement agreement is the route to take if the parties
would like to keep the settlement terms confidential. If the parties are only
concerned with keeping the settlement amount confidential, they can best
protect that from disclosure by not including that term in the consent
decree.
III. A CONSENT DECREE ENSURES THE RIGHT TO
RETURN TO FEDERAL COURT
Another distinction between consent decrees and settlement agreements
pertains to the parties‘ ability to return to federal court to enforce the
settlement terms. Because a consent decree is an order of the court, the
when they seek judicial enforcement).
99. Herrnreiter, 281 F.3d at 637. As Judge Easterbrook remarked, parties may be
concerned with disclosure of settlement payments, but they are ―not nearly on a par with
national security and trade secret information.‖ Id.
100. See, e.g., Converdyn v. Blue, No. 06-CV-00848-REB-CBS, 2007 WL 4570556,
at *1 (D. Colo. Dec. 26, 2007) (listing the various motions that were filed under seal or
redacted).
101. The Federal Judicial Center, in its study, noted that many of the sealed settlement
agreements had been filed because a party had sought to enforce the agreement. Reagan,
supra note 89, at 459 (citing Laurie Kratky Doré, Settlement, Secrecy, and Judicial
Discretion: South Carolina’s New Rules Governing the Sealing of Settlements, 55 S.C. L.
REV. 791, 798–800 (2004)).
ANTHONY DISARRO 60.2
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right to return to federal court is assured under the doctrine of ancillary
enforcement jurisdiction.
102
Meanwhile, the enforcement of settlement
agreements is typically relegated to state court, in the absence of diversity
of citizenship between the parties, where all other contractual disputes must
be adjudicated.
103
Parties may include a jurisdictional retention provision in a settlement
agreement in an effort to preserve their ability to return to federal court to
resolve settlement disputes.
104
Some courts do not honor those provisions,
while others have sought to discourage them by imposing time restrictions
or language conditions.
105
Regardless, the rationale for using these
provisions is flawed and they should not be given effect.
A. The Settling Parties’ Natural Desire to Preserve Jurisdiction
Parties seeking to enforce settlements often want to return to the court
where the action was originally tried. Those anxious to preserve the fruits
of an intensely-negotiated settlement are inclined to presume that the trial
court will be predisposed to enforce a settlement that the court viewed as a
welcome reduction in its crowded docket. That predisposition will be
stronger where the court has invested time in producing the settlement. For
these reasons, appellate courts have commented that trial courts are likely
to be biased in favor of finding that a binding settlement exists.
106
This ―separation anxiety‖ is typically not presented in settlements
involving a single lump-sum settlement payment. Those settlements
usually require that the payment be made before the dismissal papers are
102. See Harbor Venture, Inc. v. Nichols, 934 F. Supp. 322, 323–24
(E.D. Mo. 1996) (explaining that if the order incorporates the terms of the settlement
agreement, the court has ancillary jurisdiction); see also Sansom Comm. v. Lynn, 735 F.2d
1535, 1538–39 (3d Cir. 1984) (illuminating a federal court‘s power to enforce consent
decrees as long as the original order came ―within the general scope of the case made by the
pleadings‖ and was issued under the court‘s valid jurisdictional powers (quoting Pac. R.R.
v. Ketchum, 101 U.S. 289, 297 (1879))).
103. See Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 381–82 (1994)
(holding that a federal district court lacks jurisdiction over a breach-of-contract claim absent
some independent basis).
104. Id.; cf. Christina A. ex rel. Jennifer A. v. Bloomberg, 315 F.3d 990, 993–94
(8th Cir. 2003) (failing to view the court‘s retained enforcement jurisdiction on a settlement
agreement as a judicial ―imprimatur‖ on the settlement contract).
105. See Lopez Morales v. Hosp. Hermanos Melendez Inc., 460 F. Supp. 2d 288, 294
(D.P.R. 2006) (holding a judgment that ―does not explicitly state that [the court] will honor
the parties‘ request that it retain jurisdiction over the settlement agreement‖ is not clear
enough); Purcell v. Town of Cape Vincent, 281 F. Supp. 2d 469, 474 (N.D.N.Y. 2003)
(elucidating ―that in some circumstances, the words, context, or subsequent order of the
federal court might show that retention of jurisdiction was not intended to be exclusive‖).
106. Lynch, Inc. v. Samatamason Inc., 279 F.3d 487, 490 (7th Cir. 2002) (―[T]rial judges
have a natural desire to see cases settled and off their docket, which may shape their
recollection of settlement conferences.‖ (citing Higbee v. Sentry Ins. Co., 253 F.3d 994, 995
(7th Cir. 2001))).
ANTHONY DISARRO 60.2
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filed and the releases become effective.
107
Thus, there is little reason to be
concerned in these circumstances about being able to return to the same
judge after the case is dismissed.
Settlements involving multiple payments over time are different in that
the case will be dismissed before all the payments are made.
The benefits of having the same judge are mostly illusory in these
settlements as well. An installment payment default is a simple breach of
contract, in which familiarity with the parties or the underlying issues in the
settled case are not likely to facilitate prompt resolution.
108
A state court
judge that is new to the scene is unlikely to be more sympathetic to a
defaulting party than the previous judge.
A settlement payment schedule, moreover, is like a standard installment
contract or note, which is typically enforced by state court judges and does
not implicate any issues within the expertise of federal judges.
109
It is mostly in the interpretation and enforcement of the non-monetary
terms of the settlement that the trial court‘s familiarity with the parties and
settled claims will be beneficial.
110
Even if some of that familiarity has
dissipated by the time the settlement dispute develops,
111
the federal judge
is still better situated to handle the case than a state court judge completely
unfamiliar with the parties and issues.
107. See, e.g., Flores v. Jewels Mktg. & Agribusiness, No. CIV F 07-334 AWI DLB,
2010 WL 341409, at *1 (E.D. Cal. Jan. 22, 2010) (re-opening a case closed upon settlement
due to failure of defendant to pay the agreed upon settlement amount: ―Under the
settlement agreement, dismissal with prejudice was conditioned upon a receipt of settlement
funds.‖).
108. See Callaway Golf Co. v. Acushnet Co., 585 F. Supp. 2d 592, 599–600 (D. Del.
2008) (declining to be swayed by equitable considerations of judicial economy and
convenience in refusing to exercise supplemental jurisdiction over a breach of contract
claim); see also Downey v. Clauder, 30 F.3d 681, 687 (6th Cir. 1994) (holding that district
courts do not have an inherent authority to enforce settlement agreements, and that a claim
regarding breach of contract requires its own basis for jurisdiction (citing Kokkonen, 511
U.S. at 380)). But see Kasperek v. City Wire Works, Inc., No. 03-CV-3986(RML), 2009
WL 691945, at *2 (E.D.N.Y. Mar. 12, 2009) (maintaining that when the order specifically
retains jurisdiction, ―it would be irresponsible to burden another court with [the] dispute‖).
109. Cf. City of Springfield v. Comcast Cable Commc‘ns, Inc., 670 F. Supp. 2d 100, 106
(D. Mass. 2009) (recognizing that the state court judge was fully competent to adjudicate
claims arising out of the settlement agreement).
110. See supra text accompanying notes 64–70 (describing the types of non-monetary
obligations that can be memorialized in a settlement agreement).
111. Lynch, 279 F.3d at 490–91 (remarking that the scheduling of an evidentiary hearing
concerning what transpired at a settlement conference held many months ago would
probably not produce a reliable record, since ―memory is fallible, even of events only two
weeks in the past‖ (citing Higbee v. Sentry Ins. Co., 253 F.3d 994, 995 (7th Cir. 2001)).
ANTHONY DISARRO 60.2
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B. The Non-Statutory Doctrine of Ancillary Jurisdiction
Whether the parties can return to the same judge when a settlement
dispute arises is determined by the common law doctrine of ancillary
jurisdiction. Historically, ancillary jurisdiction had two components: (1)
allowing a federal court to adjudicate factually interdependent claims
where only one of those claims comes within the subject matter jurisdiction
of the court;
112
and (2) enabling a federal court to ―manage its proceedings,
vindicate its authority, and effectuate its decrees . . . .‖
113
The first branch,
what I will refer to as ―ancillary claims jurisdiction,‖ concerns situations
where a defendant or a non-party seeks to assert claims authorized under
the liberal joinder provisions of the Federal Rules of Civil Procedure, such
as: counterclaims against additional parties, impleader, joinder, and
intervention.
114
The doctrine of ancillary claims jurisdiction arose because
courts needed jurisdictional guidance where the use of these provisions
destroyed the complete diversity required to maintain a state law action in
federal court.
115
The doctrine of ancillary claims jurisdiction was combined with
the related pendant jurisdiction doctrine and codified as supplemental
jurisdiction in 1990.
116
The statute expressly recognized the jurisdiction of
federal courts over interrelated claims in an action, including claims that
involve the joinder or intervention of additional parties.
117
The statute does
allow federal courts to decline to exercise that jurisdiction at their
discretion.
118
A second aspect of ancillary jurisdiction, sometimes referred to as
―ancillary enforcement jurisdiction,‖ is the power of a federal court to
enforce its own orders in separate or subsequent proceedings.
119
This
112. Kokkonen, 511 U.S. at 379 (1994) (citing Baker v. Gold Seal Liquors, Inc.,
417 U.S. 467, 491 n.1 (1974); Moore v. N.Y. Cotton Exch., 270 U.S. 593, 610 (1926)).
113. Id. at 379–80 (citing Chambers v. NASCO, Inc., 501 U.S. 32 (1991); United States
v. Hudson, 7 Cranch 32, 34 (1812)).
114. FED. R. CIV. P. 13, 14, 19, 20, 24 (2009).
115. Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 376 (1978), superseded by
statute, 28 U.S.C. § 1367(b); Sandlin v. Corporate Interiors Inc., 972 F.2d 1212,
1215–16 (10th Cir. 1992); Federman v. Empire Fire & Marine Ins. Co., 597 F.2d 798, 810
(2d Cir. 1979). See generally Richard A. Matasar, A Pendent and Ancillary Primer: The
Scope and Limits of Supplemental Jurisdiction, 17 U.C. DAVIS L. REV. 103, 114–15, 189
(1983).
116. Judicial Improvements Act of 1990 § 310(c), Pub. L. No. 101-650, 104 Stat. 5089,
5113 (codified as amended at 28 U.S.C. § 1367 (2006)). Pendent jurisdiction generally
involves a situation where federal and non-federal claims are asserted in the same lawsuit.
United Mine Workers v. Gibbs, 383 U.S. 715, 725 (1966).
117. 28 U.S.C. § 1367(a) (2006).
118. For example, a court may decline to exercise supplemental jurisdiction over a claim
that raises a novel or complex issue of state law. Id. § 1367(c)(1); Arpin v. Santa Clara
Valley Transp. Agency, 261 F.3d 912, 926–27 (9th Cir. 2001).
119. See Fed. Sav. & Loan Ins. Corp. v. Ferrante, 364 F.3d 1037, 1040–42
ANTHONY DISARRO 60.2
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doctrine has been relied on by federal courts to support the exercise of
jurisdiction over proceedings to enforce a federal court judgment,
120
or to
seek relief from that judgment.
121
Ancillary enforcement jurisdiction, in contrast to ancillary claims
jurisdiction, was not subsumed within § 1367 of the U.S. Code.
122
This is
evident from the statutory text, which refers to asserting jurisdiction over
separate but interrelated claims in a single case or controversy, but makes
no mention of asserting jurisdiction over subsequent proceedings.
123
The Supreme Court‘s 1994 decision in Kokkonen v. Guardian Life
Insurance Co. of America,
124
which post-dates the enactment of the
supplemental jurisdiction statute, established that federal courts do not have
the inherent power to resolve post-dismissal settlement disputes under
(9th Cir. 2004) (holding that an attorneys‘ fees dispute was not collateral to the main action;
therefore, the federal court could not establish ancillary jurisdiction); Epperson v. Entm‘t
Express, Inc., 242 F.3d 100, 104–05 (2d Cir. 2001) (referring to the ―enforcement branch of
ancillary jurisdiction‖ as encompassing subsequent proceedings to enforce or protect a
judgment).
120. See Sandlin, 972 F.2d at 1216.
121. Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 70 (2d Cir. 1990).
122. Myers v. Richland County, 429 F.3d 740, 747 (8th Cir. 2005) (―[A]ncillary
enforcement jurisdiction is a viable doctrine that was not codified in § 1367.‖); Hudson v.
Coleman, 347 F.3d 138, 142 (6th Cir. 2003); see Fafel v. Dipaola, 399 F.3d 403, 412 (1st
Cir. 2005) (illustrating the justification given for ancillary enforcement jurisdiction);
Ferrante, 364 F.3d at 1040–42 (distinguishing ancillary jurisdiction over post-judgment
proceedings from supplemental jurisdiction under § 1367, which requires the claims to be
related); Epperson, 242 F.3d at 108 (analyzing the ―enforcement branch of ancillary
jurisdiction‖ without regard to § 1367); see also
13 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE
§ 3523.2 (3d ed. 2008) (―It seems clear that § 1367 does not apply to this form of
jurisdiction‖ and that the doctrine is ―still governed by case law‖).
123. Ortolf v. Silver Bar Mines, Inc., 111 F.3d 85, 87 (9th Cir. 1997) (explaining that the
statutory language ―require[s] that supplemental jurisdiction be exercised [on claims] in the
same case, not in a separate or subsequent case‖); Brummer v. IASIS Healthcare of Ariz.,
Inc., No. CV-07-1223-PHX-DGC, 2007 WL 2462174, at *1 (D. Ariz. Aug. 24, 2007)
(reiterating that the statutory language limits the exercise of supplemental jurisdiction to the
same case); Int‘l Union of Painters Dist. Council No. 78 v. Old Republic Surety Co., No.
8:06-CV-2222-T-24 EAJ, 2007 WL 1363135, at *1 (M.D. Fla. May 8, 2007) (providing for
supplemental jurisdiction over related claims in a single civil case); Dimitri v. Canada, Inc.,
No. Civ.A. 03-3154, 2003 WL 22948345, at *2 (E.D. La. Dec. 9, 2003) (―Section 1367
appears to contemplate related claims asserted in a single civil action.‖); Keene v. Auto
Owners Ins. Co., 78 F. Supp. 2d 1270, 1274 (S.D. Ala. 1999) (―[S]ection 1367 applies only
to claims within a single action and not to claims within related actions . . . .‖); Sebring
Homes Corp. v. T.R. Arnold & Assocs., Inc., 927 F. Supp. 1098, 1101–02 (N.D. Ind. 1995)
(―Section 1367 provides no original jurisdiction over a separate, but related suit . . . .‖);
USA One BV v. Delmont Fire Protective Serv., Inc., No. Civ. A. 93-1320, 1993 WL
140514, at *1 (E.D. Pa. May 3, 1993) (holding the statutory language ―clearly contemplates
supplemental jurisdiction arising only from claims within a single action‖); 16 JAMES WM.
MOORE ET AL., MOORE‘S FEDERAL PRACTICE § 106.05[9][a] (3d ed. 2010) (noting that §
1367 fails to speak to the issue of jurisdiction over post-judgment proceedings).
124. 511 U.S. 375 (1994).
ANTHONY DISARRO 60.2
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principles of ancillary jurisdiction.
125
Significantly, the decision makes no
reference whatsoever to § 1367 and instead relies on pre-enactment case
law pertaining to the doctrine of ancillary jurisdiction. If the Supreme
Court viewed the doctrine of ancillary enforcement jurisdiction as
subsumed by § 1367, it would have made at least some mention of the
statute and its language in the decision.
126
A few years after Kokkonen, the Supreme Court considered whether a
federal court could exercise ancillary jurisdiction over an attempt to
enforce a federal judgment against a non-party under a ―piercing the
corporate veil‖ theory.
127
In concluding that a federal court lacked
jurisdiction, the Court again made no significant mention of
§ 1367.
128
Indeed, the Court drew a sharp distinction between ancillary claims
jurisdiction and ancillary enforcement jurisdiction: ―In a subsequent
lawsuit involving claims with no independent basis for jurisdiction, a
federal court lacks the threshold jurisdictional power that exists when
ancillary claims are asserted in the same proceeding as the claims
conferring federal jurisdiction.‖
129
The Court held that ancillary
jurisdiction could not be asserted over claims in a subsequent proceeding
on the ground that they are factually interdependent with claims brought in
an earlier federal lawsuit.
130
Once the original suit is concluded, the Court
explained, ―the ability to resolve simultaneously factually intertwined
issues vanishe[s].‖
131
125. Id. at 380–81.
126. See Myers v. Richland County, 429 F.3d 740, 746 (8th Cir. 2005) (noting that the
Supreme Court in Kokkonen ignored § 1367, which indicates that the ancillary enforcement
jurisdiction doctrine is not governed by that statute).
127. Peacock v. Thomas, 516 U.S. 349, 352 (1996).
128. The only reference to the statute is a footnote remark that ―Congress codified much
of the common law doctrine of ancillary jurisdiction.‖ Id. at 354 & n.5 (emphasis added).
See MOORE ET AL., supra note 123, § 106.05[9][c] (the Court‘s failure to give meaningful
attention to § 1367 in the Peacock decision strongly suggests that the doctrine of ancillary
proceeding jurisdiction survives as a non-statutory concept). Some federal courts have
exercised what they called supplemental jurisdiction over post-judgment proceedings
without careful regard as to whether the exercise comports with the language of § 1367. See
Achtman v. Kirby, McInerney & Squire, LLP, 464 F.3d 328, 335 (2d Cir. 2006) (rejecting
but recognizing that some district courts have refused to exercise supplemental jurisdiction
for claims related to the initial claim); Kalyawongsa v. Moffett, 105 F.3d 283, 286–88 (6th
Cir. 1997) (finding that fee arrangements are contracts subject to state law but nevertheless
allowing federal courts to exercise jurisdiction over attorney fee disputes related to the main
issue); Vukadinovich v. McCarthy, 59 F.3d 58, 62 (7th Cir. 1995) (―[T]he party holding the
judgment . . . ought to be able to [enforce the judgment] without having to start a new
lawsuit in a different court system.‖).
129. Peacock, 516 U.S. at 355; Nat‘l Presto Indus. Inc. v. Dazey Corp., 107 F.3d 1576,
1581 (Fed. Cir. 1997) (stating that entry of judgment terminates the basis for jurisdiction
over factually interdependent claims).
130. Peacock, 516 U.S. at 355.
131. Id.
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Peacock v. Thomas
132
makes it clear that a federal court cannot assert
ancillary jurisdiction over post-dismissal proceedings based on the notion
that those claims are factually interrelated with the claims in the dismissed
suit.
133
Ancillary claims jurisdiction requires an anchor to which the
ancillary claims can attach, and when the initial proceeding has been
dismissed, the anchor is gone.
134
The doctrine of ancillary enforcement jurisdiction, being reflected in
federal common law and not in § 1367, has two implications.
135
First, in
the enforcement context, there is no need to consider the statutory language
of § 1367; specifically the degree of factual or legal inter-relatedness
between the claims in the original, settled case and the application to
enforce the consent decree. Second, the court should not be able to
exercise the discretion conferred by § 1367 that would allow the court to
decline to entertain an action to enforce a consent decree it has entered.
136
C. Kokkonen and the False Correlation of Consent Decrees with
Settlement Agreements
In Kokkonen, the Supreme Court held that jurisdiction over settlement
agreements is ―in no way essential to the conduct of federal-court business‖
and thus the doctrine of ancillary enforcement jurisdiction could not be
used to adjudicate claims alleging noncompliance with a private settlement
132. 516 U.S. 349 (1996).
133. Id. at 355.
134. Some commentators have opined that ancillary jurisdiction can be asserted over
post-dismissal proceedings where the claims are factually interrelated to the claims in the
dismissed action. See Parness & Walker, supra note 22, at 37 (concluding that a federal
district court can enforce a settlement in the post-dismissal environment where the
―settlement claims [are] factually interdependent‖ with the dismissed claims, ―making
adjudication before one trial court ‗efficient‘‖). The commentators do not address the
Peacock decision, which contradicts this assertion. Nor do they cite any case supporting the
proposition that ancillary jurisdiction can be asserted in the post-dismissal context so long as
the claims are factually interdependent with the dismissed claims.
135. Another aspect of ancillary jurisdiction that is not subsumed within § 1367 concerns
the power of federal courts to adjudicate matters that are ancillary to a criminal case. See
Garcia v. Teitler, 443 F.3d 202, 206–10 (2d Cir. 2006) (―Although
§ 1367 says nothing of criminal matters, it does not follow that a court may not exercise
ancillary jurisdiction in a criminal case. Indeed, a district court‘s jurisdiction over criminal
matters is defined by an entirely separate title of the United States Code.‖). By its terms, §
1367 applies only civil actions. See 28 U.S.C. § 1367(a) (2006) (expressly addressing only
―civil action[s]‖).
136. The conclusion that a court cannot decline to adjudicate a dispute regarding a
consent decree it has entered inescapably follows from the case law holding that a court‘s
jurisdiction over its own consent decrees is exclusive. See supra note 154–57. But see
Parness & Walker, supra note 22, at 43–44, 53–54 (opining that federal courts have
discretion to refuse to exercise ancillary enforcement jurisdiction).
ANTHONY DISARRO 60.2
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agreement.
137
Recognizing that the key to ancillary enforcement
jurisdiction is the court‘s inherent powers to enforce its own orders, the
unanimous Court proceeded to provide what the Justices no doubt
considered to be helpful guidance to practitioners desirous of returning to
federal court to enforce settlement agreements:
The situation would be quite different if the parties‘ obligation to comply
with the terms of the settlement agreement had been made part of the
order of dismissal—either by separate provision (such as a provision
―retaining jurisdiction‖ over the settlement agreement) or by
incorporating the terms of the settlement agreement in the order. In that
event, a breach of the agreement would be a violation of the order, and
ancillary jurisdiction to enforce the agreement would therefore exist.
138
The Court presented litigants with two separate avenues for returning to
federal court after dismissal of the case—inclusion of a jurisdictional
retention provision in the agreement or incorporation of the agreement‘s
terms into an order.
139
The use of the disjunctive words ―either‖ and ―or‖
plainly indicates that, in the Court‘s view, each approach could adequately
confer post-dismissal jurisdiction.
140
Moreover, the Court considered both
avenues as functionally equivalent; each had the effect of transforming the
settlement agreement into a court order. This is clear from the last sentence
indicating that, under either approach, a breach of the agreement would
constitute a violation of a court order.
141
The Court‘s remarks regarding the effect of a jurisdictional retention
provision were not a correct recitation of the law, and they did not become
law. Federal circuit courts have uniformly rejected the notion that the
obligations of a private settlement agreement become court-ordered when
the court retains jurisdiction to enforce the agreement.
142
Rather, only
137. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 381–82 (1994).
138. Id. These remarks are plainly dicta, as the case did not involve a situation where the
settlement agreement contained a jurisdictional retention provision or was incorporated in a
court order. Nevertheless, lower courts have not dismissed these remarks on that basis.
Ironically, the quoted statements appear in the written opinion soon after a passage where
the Court chides the parties for relying upon language from several cases that are not
essential to their rulings. The Court admonished: ―It is to the holdings of our cases, rather
than their dicta, that we must attend . . . .‖ Kokkonen, 511 U.S. at 379.
139. Id. at 381.
140. Id.
141. If there could be any doubt that this is what the court meant, it reiterated this very
point a few sentences later in the opinion. Id. at 381–82 (―[W]e think the court is authorized
to embody the settlement contract in its dismissal order (or, what has the same effect, retain
jurisdiction over the settlement contract) . . . .‖ (emphasis added)).
142. Hester Indus., Inc. v. Tyson Food, Inc., 160 F.3d 911, 917 & n.2
(2d Cir. 1998); Nat‘l Presto Indus. Inc. v. Dazey Corp., 107 F.3d 1576, 1581 (Fed. Cir.
1997) (holding that application to enforce settlement agreement does not invoke the district
court‘s contempt power); Consumers Gas & Oil, Inc. v. Farmland Indus. Inc, 84 F.3d 367,
370–71 (10th Cir. 1996.
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300 AMERICAN UNIVERSITY LAW REVIEW [Vol. 60:275
where a settlement agreement is embodied in a consent decree will
noncompliance be treated as a violation of a court order and become
subject to enforcement via the court‘s contempt powers.
143
The Kokkonen
Court was wrong to view these two concepts as functionally indistinct.
144
D. The Distinction between Consent Decrees and Settlement Agreements
from a Jurisdictional Perspective
A requirement that settlement terms be incorporated into a court order
for the court to retain jurisdiction—is wholly consistent with the concept of
ancillary enforcement jurisdiction.
145
Enforcement of a consent decree
plainly implicates the court‘s interest in vindicating its authority and
effectuating its orders. It is easy to see why federal courts view
incorporation as effective in ensuring that litigants can return to federal
court to enforce settlement terms.
146
143. Al C. Rinaldi Inc. v. Bach To Rock Music Sch., Inc., 235 F. App‘x 866, 869–70 (3d
Cir. 2007); Tranzact Technologies, Inc. v. 1Source Worldsite, 406 F.3d 851, 855 (7th Cir.
2005); T.D. v. La Grange Sch. Dist., 349 F.3d 469, 478 (7th Cir. 2003).
See also Harley-Davidson, Inc. v. Morris, 19 F.3d 142, 144, 146 (3d Cir. 1994) (where the
provisions of a settlement agreement are incorporated into a court order, they effectively
become terms of a court order that are enforceable through the judicial contempt procedure).
144. The Kokkonen decision is not the only instance where the Supreme Court
overlooked this key distinction between consent decrees and settlement agreements. The
Court made the same mistake a few years earlier in determining whether a plaintiff is a
―prevailing party‖ for purposes of shifting attorneys‘ fees. See supra text accompanying
notes 298–303. The Court acknowledged and corrected the error in 2001. See Buckhannon
Board & Care Home, Inc. v. W. Va. Dep‘t of Health & Human Servs., 532 U.S. 598, 604 &
n.7 (2001) (noting that private settlements differ from consent decrees in that private
settlements do not have the judicial approval and oversight normally applied to consent
decrees).
145. Courts have held that simply inserting phrases into a dismissal order, such as
―pursuant to the terms of the settlement agreement,‖ or making general references to
settlement in such an order, does not incorporate the settlement terms. See, e.g., F.A.C., Inc.
v. Cooperativa De Seguros De Vida De Puerto Rico, 449 F.3d 185, 190 (1st Cir. 2006);
Re/Max Int‘l, Inc. v. Realty One, Inc., 271 F.3d 633, 642
(6th Cir. 2001) (finding that reference to ―settlement talks‖ fails to incorporate agreement);
McAlpin v. Lexington 76 Auto Truck Stop, Inc., 229 F.3d 491, 497, 502 (6th Cir. 2000)
(holding that reference to fact that parties ―have settled‖ is not sufficient); Caudill v. N. Am.
Media Corp., 200 F.3d 914, 917 (6th Cir. 2000); In re Phar-Mor, Inc. Sec. Litig., 172 F.3d
270, 274 (3d Cir. 1999); Meiner v. Mo. Dep‘t of Health, 62 F.3d 1126, 1128 (8th Cir. 1995).
Rather, the settlement terms have to be physically incorporated—incorporation by reference
does not suffice—so that they appear in the decree itself. See supra notes 233–42.
146. See DiMucci v. DiMucci, 91 F.3d 845, 847 (7th Cir. 1996) (per curiam) (―Once the
terms of a settlement agreement are incorporated into the court‘s order, ancillary jurisdiction
exists because ‗breach of the agreement violates the district court‘s judgment.‘‖ (quoting
Meiner, 62 F.3d at 1127)); Meiner, 62 F.3d at 1127 (―Ancillary jurisdiction to enforce a
settlement agreement exists only ‗if the parties‘ obligation to comply with the terms of the
settlement agreement [is] made part of the order of dismissal—either by . . . a provision
‗retaining jurisdiction‘ over the settlement agreement [ ] or by incorporat[ion of] the terms
of the settlement agreement in the order.‘‖ (citing Kokkonen v. Guardian Life Ins. Co. of
Am.,
ANTHONY DISARRO 60.2
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Other federal statutory provisions recognize that a federal court has the
jurisdiction to enforce its own decrees. For example, the All Writs Act
147
authorizes federal courts to issue injunctions where necessary to aid in
effectuating its orders.
148
This power has been used by federal courts to
prevent parties from re-litigating matters in other federal or state courts in
contravention of a settlement embodied in the federal court‘s order.
149
Implicit in the power of a federal court to restrain proceedings in other
courts where they implicate its consent decree is that the federal court is the
appropriate forum to resolve all litigation concerning the decree.
Similarly, the Anti-Injunction Act,
150
while prohibiting federal courts
from enjoining most state court proceedings, permits a federal court to do
so in order ―to protect or effectuate its judgments.‖
151
This authorization
allows federal courts to issue injunctions preventing state court litigation
from interfering with consent decrees issued by a federal court.
152
Thus,
the statute recognizes that the issuing federal court, to the exclusion of all
other forums, is the place to go to enforce its decrees.
In addition to statutes, federal common law provides that federal courts
have the inherent power to enforce their own orders.
153
In Flanagan v.
Arnaiz,
154
the Court of Appeals for the Ninth Circuit held that a
jurisdictional retention provision in a judgment should be interpreted as
providing for exclusive jurisdiction, notwithstanding its failure to expressly
say so:
The reason why exclusivity is inferred is that it would make no sense for
the district court to retain jurisdiction to interpret and apply its own
511 U.S. 375, 381 (1994)).
147. 28 U.S.C. § 1651 (2006).
148. Id.
149. See, e.g., In re Int‘l Bhd. of Teamsters, 907 F.2d 277, 280–81 (2d Cir. 1990)
(stating that a federal court can enjoin proceedings in other federal courts pursuant to the All
Writs Act where such proceedings would be subject to the consent decree).
150. 28 U.S.C. § 2283 (2006).
151. Id. The non-statutory counterpart to the Anti-Injunction Act is the Younger
abstention doctrine. See Donald H. Zeigler, An Accommodation of the Younger Doctrine
and the Duty of Federal Courts to Enforce Constitutional Safeguards in the State Criminal
Process, 125 U. PA. L. REV. 266, 269 n. 19 (1976).
152. See, e.g., Flanagan v. Arnaiz, 143 F.3d 540, 545 (9th Cir. 1998) (asserting that
federal courts can enjoin state court proceedings, notwithstanding the Anti-Injunction Act,
where such proceedings are in derogation of a federal court judgment incorporating a
settlement agreement); see also Battle v. Liberty Nat‘l Life Ins. Co., 877 F.2d 877, 880–83
(11th Cir. 1989); United States v. Am. Soc. of Composers, 442 F.2d 601, 603 (2d Cir.
1971).
153. See In re Pearson, 990 F.2d 653, 658 (1st Cir. 1993); Kozlowski v. Coughlin, 871
F.2d 241, 244 (2d Cir. 1989) (―If a federal court can validly enter a consent decree, it can
surely enforce that decree.‖).
154. 143 F.3d 540 (9th Cir. 1998).
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judgment to the future conduct contemplated by the judgment, yet have a
state court construing what the federal court meant in the judgment.
155
Other federal circuit courts have similarly concluded that a jurisdictional
retention provision in a federal court judgment is presumed to be
exclusive.
156
In sum, there is ample statutory and common law authority supporting
the jurisdictional competence of federal courts to enforce their own
decrees. By contrast, reaching the same conclusion when private parties
merely stipulate to settlement agreement enforcement jurisdiction before a
federal district court runs counter to core jurisdictional principles.
A cardinal rule of federal subject matter jurisdiction prohibits parties
from stipulating to the jurisdiction of a federal court.
157
They cannot
provide for the exclusive jurisdiction of a federal court in a contractual
forum selection clause.
158
Additionally, parties cannot tacitly agree to
federal court jurisdiction by relying upon the principles of estoppel or
waiver.
159
Thus, federal jurisdiction cannot be manufactured by the parties‘
conduct or inaction. Jurisdiction does not exist simply because one party
has alleged its existence and the other party has failed to deny it, or has not
done so in a timely manner.
160
A federal court has the responsibility, sua
sponte, to examine its subject matter jurisdiction throughout the pendency
of a case and must dismiss the case when jurisdiction is lacking, even if
that fact is discovered after trial or after judgment has been entered.
161
In light of these well-settled principles, it is difficult to understand why
the Supreme Court suggested in Kokkonen that parties could effectively
stipulate federal court jurisdiction by including a retention provision in a
settlement agreement.
155. Id. at 545.
156. In re Karmen, 32 F.3d 727, 731–32 (2d Cir. 1994); Battle, 877 F.2d at 880–81.
157. See, e.g., California v. LaRue, 409 U.S. 109, 112 & n.3 (1972); Hays v. Bryan Cave
LLP, 446 F.3d 712, 714 (7th Cir. 2006); Wolff v. Cash 4 Titles, 351 F.3d 1348, 1357 (11th
Cir. 2003); Presidential Garden Assocs. v. United States, 175 F.3d 132, 140 (2d Cir. 1999).
158. Micro Focus (US), Inc. v. Bell Canada, 686 F. Supp. 2d 564, 569 & n.2
(D. Md. 2010).
159. Am. Fire & Cas. Co. v. Finn, 341 U.S. 6, 17–18 (1951).
160. See Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702
(1982) (asserting that no action or inaction of the parties can confer subject matter
jurisdiction upon a federal court); Curley v. Brignoli, Curley & Roberts Assocs., 915 F.2d
81, 83–84 (2d Cir. 1990) (stating subject matter jurisdiction is unwaivable and necessary for
a federal court to exercise jurisdiction).
161. Newman-Green Inc. v. Alfonzo-Larrain, 490 U.S. 826, 832 (1989); Herrick Co. v.
SCS Commc‘ns, Inc., 251 F.3d 315, 322 (2d Cir. 2001); see also Finn, 341 U.S. at 7, 17–18
(defendant who removed case was allowed to challenge jurisdiction after verdict for
plaintiff).
ANTHONY DISARRO 60.2
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E. The Prison Litigation Reform Act Codifies the Distinction
The distinction between consent decrees and settlement agreements,
which the Supreme Court overlooked in Kokkonen, was recognized by
Congress and codified in the Prison Litigation Reform Act (the PLRA).
162
The PLRA was intended to address what was perceived as excessive
federal court interference into the operations and administration of state
and municipal detention facilities.
163
Congress determined that, contrary to
principles of federalism and comity, federal courts were frequently
enforcing requirements for operation of state and municipal prisons that
went beyond what was required to comply with federal law.
164
The PLRA provides for the termination of federal court consent decrees
of which it cannot be said that ―the relief is narrowly drawn, extends no
farther than necessary to correct the violation of the Federal right, and is
the least intrusive means necessary to correct the violation of the Federal
right.‖
165
The PLRA defines consent decrees as ―any relief entered by the
court that is based in whole or in part upon the consent or acquiescence of
the parties‖ and expressly excludes ―private settlements‖ from that
definition.
166
The PLRA defines ―private settlement agreements‖ as
agreements that are subject to judicial enforcement as contracts in state
court.
167
As the Second Circuit explained, the PLRA ―distinguish[es] between
consent decrees and private settlement agreements‖ in that only the former
are enforceable in federal court and are conditioned on need-narrowness-
intrusiveness findings.
168
The latter are enforceable in state court and are
not subject to such findings.
169
Significantly, the court, sitting en banc,
rejected the notion that a settlement agreement could qualify as both a
consent decree and a ―private settlement agreement‖ under the PLRA,
162. 18 U.S.C. § 3626 (2006).
163. Rowe v. Jones, 483 F.3d 791, 794–95 (11th Cir. 2007).
164. Benjamin v. Jacobson (Benjamin II), 172 F.3d 144, 158–60, 165 (2d Cir. 1999) (en
banc).
165. 18 U.S.C. § 3626(b)(2)–(3). The PLRA also provides for the termination of pre-
existing consent decrees unless they can be supported by ―need-narrowness-intrusiveness‖
findings. Id.
166. Id. § 3626(g)(1).
167. See id. § 3626(g)(6) (―[T]he term ‗private settlement agreement‘ means an
agreement entered into among the parties that is not subject to judicial enforcement other
than the reinstatement of the civil proceeding that the agreement settled.‖);
id. § 3626(c)(2)(B) (―Nothing in this section shall preclude any party claiming that a private
settlement agreement has been breached from seeking in State court any remedy available
under State law.‖). Courts have remarked that the distinction drawn by Congress exists in
contexts other than institutional reform litigation. Rowe v. Jones, 483 F.3d 791, 796 & n.6
(11th Cir. 2007).
168. Benjamin II, 172 F.3d at 156.
169. Id.
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which would have made it so that if the district court could not make need-
narrowness-intrusiveness findings with respect to a settlement that was
embodied in a consent decree, the parties could still seek to enforce the
settlement in state court.
170
The court found that the two terms were
intended to be mutually exclusive under the statute, noting that while the
statute explicitly provided that private settlement agreements could be
enforced in state court, no similar provision existed for consent decrees.
171
To support its conclusion, the court pointed to the distinction between
consent decrees and settlement agreements with respect to enforcement.
Consent decrees contain obligations that are enforceable ―through the
court‘s exercise of its contempt power‖ and are subject to the court‘s
inherent power to enforce its own orders and judgments.
172
Settlement
agreements are not enforceable except through the commencement of a
new lawsuit for breach of contract under state law.
173
Thus, even Congress, albeit in a specialized context, has recognized the
jurisdictional implications of the distinction between consent decrees and
settlement agreements.
174
F. The Seventh Circuit Rejects Jurisdictional Retentions
In a series of decisions authored by Judge Richard Posner, the Court of
Appeals for the Seventh Circuit has concluded that jurisdictional retention
provisions, even when contained in court orders, will not enable parties to
return to federal court to litigate settlement disputes.
175
In Lynch v.
Samatamason Inc.,
176
the court explained that when a district court retains
jurisdiction to enforce a settlement agreement, it necessarily implies that
170. The original panel had adopted this view of the statute. Benjamin v. Jacobson
(Benjamin I), 124 F.3d 162, 167–78 (2d Cir. 1997) rev’d en banc, 172 F.3d 144 (2d Cir.
1999).
171. Benjamin II, 172 F.3d at 157–58. Other circuit courts have reached a similar
conclusion. See Rowe, 483 F.3d at 796 (reasoning that Congress intended to distinguish
consent decrees from settlement agreements); Hazen ex rel. LeGear v. Reagen, 208 F.3d
697 (8th Cir. 2000) (noting the different definitions of ―consent decree‖ and ―private
settlement‖ contained in the PLRA).
172. Benjamin II, 172 F.3d at 157 (citing Peacock v. Thomas, 516 U.S. 349, 356–57
(1996); Shillitani v. United States, 384 U.S. 364, 370 (1966)).
173. Id.; see Rowe, 483 F.3d at 796 (indicating that private settlement agreements are not
automatically subject to enforcement except through a new proceeding).
174. Benjamin II, 172 F.3d at 155, 157.
175. Dupuy v. McEwen, 495 F.3d 807, 809 (7th Cir. 2007); Shapo v. Engle,
463 F.3d 641, 643 (7th Cir. 2006); Lynch v. Samatamason Inc., 279 F.3d 487, 489
(7th Cir. 2002). Prior to these decisions, the Seventh Circuit had upheld a district court‘s
ability to retain jurisdiction retention so long as it was ―apparent‖ that the district court
intended to retain it. In re Bond, 254 F.3d 669, 676–77 (7th Cir. 2001); Ford v. Neese, 119
F.3d 560, 562 (7th
Cir. 1997).
176. 279 F.3d 487 (7th Cir. 2002).
ANTHONY DISARRO 60.2
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the suit is not being dismissed with prejudice.
177
A federal court cannot,
therefore, dismiss a case with prejudice, which is invariably a condition of
the parties‘ settlement, and simultaneously retain jurisdiction to enforce a
settlement contract.
178
In Shapo v. Engle,
179
the court reiterated the point. Judge Posner
declared that the termination of federal jurisdiction, accomplished through
the entry of an order of dismissal with prejudice, could not be undone by
the district court‘s retaining jurisdiction to enforce a settlement.
180
The
court stated that the only way for jurisdiction to survive dismissal would be
to embody the settlement agreement in a consent decree. In that instance, a
federal court has inherent power to enforce a litigation-ending injunction
by means of its contempt powers.
181
In Dupuy v. McEwen,
182
Judge Posner went for the hat trick, stating that
―when a suit is dismissed with prejudice, it is gone, and the district court
cannot adjudicate disputes arising out of the settlement that led to the
dismissal merely by stating that it is retaining jurisdiction.‖
183
Absent the
embodiment of the settlement in a consent decree, the court reasoned, the
parties‘ only other option is to dismiss the case without prejudice, with the
releases becoming effective upon that dismissal. This would duplicate the
res judicata effect of a dismissal with prejudice, while ―avoid[ing] the
paradox of dismissing a case with finality yet at the same time retaining
it.‖
184
177. Id. at 489.
178. Id. In a decision a few months prior to Lynch, Judge Posner suggested that
jurisdictional retentions were not valid. Jessup v. Luther, 277 F.3d 926 (7th Cir. 2002). In
that case, he noted that ancillary enforcement jurisdiction exists only where a settlement
agreement is ―embodied‖ in a judicial order. Id. at 929.
179. 463 F.3d 641 (7th Cir. 2006).
180. Id. at 643.
181. Id. District courts in the Seventh Circuit have observed that the circuit‘s approach
is inconsistent with Kokkonen. Hope Sch., Inc. v. Woodside Township, No. 05-CV-3153,
2009 WL 1707958, at *4–6 (C.D. Ill. June 12, 2009); Woodcock Bros. Trans. Group v.
Transp. Res., Inc., No. 01 C 8067, 2003 WL 1873928, at *3
(N.D. Ill. Apr. 14, 2003). Nevertheless, these courts have followed the Seventh Circuit‘s
teaching in this regard. See Indianapolis Fruit Co. v. SCI, Inc., No. 3:08-CV-46-TS, 2008
WL 2626671, at *2 (N.D. Ind. June 26, 2008) (advising parties that the court cannot approve
proposed orders or stipulations providing for a dismissal of the case with prejudice and the
retention of jurisdiction to enforce a settlement agreement).
182. 495 F.3d 807 (7th Cir. 2007), cert. denied, 128 S. Ct. 2932 (2008).
183. Id. at 809.
184. Id. at 810. But see Denlow, supra note 46, at 24–25. Magistrate Denlow, who
presides in the Northern District of Illinois within the Seventh Circuit, has criticized this
option, arguing that a release is not the effective equivalent of a dismissal with prejudice
because releases can be collaterally attacked. Judge Posner has replied that a dismissal with
prejudice can be collaterally attacked as well. Dupuy, 495 F.3d at 810. It is not realistic to
expect settling parties to be satisfied with a dismissal without prejudice. No party wants to
pay money to settle a case and not get a dismissal with prejudice in return.
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A fourth Seventh Circuit decision by Judge Frank Easterbrook—who
wrote on behalf of a panel that did not include Judge Posner—likewise
suggests that the inclusion of settlement terms into a consent decree is the
only sure way for a federal district judge to acquire post-dismissal
enforcement jurisdiction.
185
The court further noted that, when a settlement
contemplates long-term undertakings, logic dictates that a consent decree
be used.
186
In particular, where long-lasting obligations are involved, the
parties will not want a dismissal to be without prejudice.
According to the Seventh Circuit‘s decisions, the problem with
jurisdictional retentions is based on what Judge Posner describes as ―the
paradox‖ of dismissing a case with prejudice while at the same time
retaining jurisdiction for future settlement disputes.
187
Certainly, there is an
incongruity here, but the situation is no more paradoxical than where the
court dismisses a case with prejudice yet exercises jurisdiction to grant
attorneys‘ fees applications or to resolve motions to enforce a judgment.
188
Both circumstances involve the court continuing to act on a case that has
been finally (i.e., with prejudice) dismissed.
Indeed, in all circumstances, post-judgment enforcement proceedings in
federal court represent a true paradox. Proceedings in federal court are
supposed to be governed by federal procedural law, even in diversity cases
where state substantive law applies.
189
In the post-judgment context,
however, state procedural rules determine how that judgment will be
enforced.
190
Regardless, paradoxes are not the problem. The real difficulty with
jurisdictional retentions as a means to secure enforcement jurisdiction is
that they are based on the false premise that the provisions convert a
settlement agreement into a court order. This faulty syllogism plainly
ignores the fact that, unless an agreement is embodied in a consent decree,
its terms do not become part of an order, meaning that its terms cannot be
185. See Blue Cross & Blue Shield Ass‘n v. Am. Express Co., 467 F.3d 634, 636
(7th Cir. 2006) (finding that the district court approved a settlement rather than a consent
decree and, therefore, did not adequately retain jurisdiction).
186. Id.
187. Dupuy v. McEwen, 495 F.3d 807, 810 (7th Cir. 2007).
188. See Aerotech, Inc. v. Estes, 110 F.3d 1523, 1528 (10th Cir. 1997) (explaining that
granting attorneys‘ fees when an action has been dismissed with prejudice may be proper
where there are exceptional circumstances).
189. Shady Grove Orthopedic Assocs. v. Allstate Ins. Co., 130 S. Ct. 1431, 1437 (2010);
Hanna v. Plumer, 380 U.S. 460, 472 (1965).
190. FED. R. CIV. P. 69(a) (providing that a federal judgment creditor can use any
execution method that is authorized by the procedural rules of the state in which the
rendering district court sits).
ANTHONY DISARRO 60.2
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enforced via the court‘s contempt power and the federal court does not
retain jurisdiction.
To adjudicate a settlement dispute in the absence of a consent decree, the
court needs what the Supreme Court referred to in Peacock as the
―threshold jurisdictional power that exists when ancillary claims are
asserted in the same proceeding as the claims conferring federal
jurisdiction.‖
191
If the case has not been dismissed with prejudice, that
threshold power may still exist.
192
If, however, the case has been dismissed
with prejudice, the threshold power is gone, and no jurisdictional retention
provision can resuscitate it.
G. Other Circuits Endorse Temporal Limitations on Retentions
Other circuits have also manifested discomfort with the concept of
dismissing cases with prejudice while retaining jurisdiction to resolve
settlement disputes, but have approached the issue differently from the
Seventh Circuit. Instead of refusing to honor jurisdictional retentions, they
have endorsed rigid time limits on them.
193
The Court of Appeals for the First Circuit has approved the use of a ―60-
day Settlement Order of Dismissal‖ procedure, whereby the district court
dismisses a case without prejudice to the right of the parties to re-open the
action within sixty days if the settlement is not consummated.
194
If neither
party asks the court to re-open the case within that period, the dismissal
automatically becomes a dismissal with prejudice.
195
Should a party make
a request of the court within the period, federal court jurisdiction to enforce
a settlement will exist.
196
The First Circuit describes the procedure ―as a mechanism for the trial
courts to bring cases to closure while retaining jurisdiction to enforce a
191. Peacock v. Thomas, 516 U.S. 349, 355 (1996) (―[O]nce judgment was entered in
the original ERISA suit, the ability to resolve simultaneously factually intertwined issues
vanished.‖).
192. T Street Dev., LLC v. Dereje & Dereje, 586 F.3d 6, 10 (D.C. Cir. 2009); see also
Bailey v. Potter, 478 F.3d 409, 412 (D.C. Cir. 2007) (finding that Kokkonen‘s limitations on
the ability of federal courts to enforce settlement agreements do not apply if the underlying
case has not been dismissed).
193. E.g., Alvarado v. Table Mountain Rancheria, 509 F.3d 1008, 1018 (9th Cir. 2007);
Pratt v. Philbrook, 109 F.3d 18, 21 n.5 (1st Cir. 1997), aff’d, 141 F.3d 1150
(1st Cir. 1998); Bell v. Schexnayder, 36 F.3d 447, 448 (5th Cir. 1994).
194. Pratt, 109 F.3d at 18, 21 n.5.
195. The failure to communicate within the period may not be determinative if the
failure was due to ―excusable neglect‖ under Federal Rule of Civil Procedure 60(b)(1).
Pratt, 109 F.3d at 22. Rule 60(b)(1) permits a party to challenge, within a one-year period,
judgments flowing from excusable neglect. FED. R. CIV. P. 60(b)(1).
196. Metro-Goldwyn Mayer, Inc. v. Safety Prods., Inc., 183 F.3d 10, 13–14 (1st Cir.
1999).
ANTHONY DISARRO 60.2
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settlement for a period of time after closure is announced.‖
197
The Court of
Appeals for the Fifth Circuit has sustained a similar procedure,
198
as did the
Ninth Circuit, albeit with a longer time period.
199
These decisions permit jurisdictional retentions to be effective, but only
for circumscribed periods of time during which a dismissal will be without
prejudice. These federal courts do not allow parties to stipulate to federal
court enforcement jurisdiction for a prolonged or indefinite period of
time.
200
H. Other Federal Courts Begrudgingly Give Effect to
Jurisdictional Retentions
Because Kokkonen suggests that federal court jurisdiction over post-
dismissal settlement disputes can be secured simply upon an agreement by
the parties,
201
one would expect that federal courts would give effect to
retentions so long as the parties‘ intent is evidenced in the judicial record.
An express jurisdictional retention provision in a dismissal order is but one
manifestation of such an intention.
202
Many federal courts, however, have refused to extend federal court
jurisdiction to post-dismissal settlement disputes unless there is an express
retention provision in the order of dismissal.
203
It does not matter that there
are other overt manifestations of the parties‘ (or the court‘s) intent to retain
jurisdiction.
204
In one case, the district court stated on the record: ―I will
197. Pratt, 109 F.3d at 21 n.5; see In re Mal de Mer Fisheries, Inc., 884 F. Supp. 635,
637–38 (D. Mass. 1995) (articulating the limits on federal court jurisdiction to enforce
settlement agreements).
198. Bell, 36 F.3d at 448 (recognizing that a district court properly retains jurisdiction by
including language in its dismissal order that gives the parties the right to reopen the
judgment if a settlement is not consummated within sixty days).
199. In Alvarado v. Table Mountain Rancheria, 509 F.3d 1008 (9th Cir. 2007), the court
acknowledged the parties‘ agreement that the district court would retain jurisdiction over a
settlement agreement for a one-year period, but that ancillary jurisdiction would expire
thereafter. Id. at 1018.
200. Id. (one year); Pratt, 109 F.3d at 21 (sixty days); Bell, 36 F.3d at 448 (sixty days).
201. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 381 (1994).
202. See infra notes 204, 211 and accompanying text.
203. National Presto Indus. v. Dazey Corp., 107 F.3d 1576, 1583 (Fed. Cir. 1997);
Miener v. Mo. Dep‘t of Mental Health, 62 F.3d 1126, 1128 (8th Cir. 1995).
204. See F.A.C., Inc. v. Cooperativa de Seguros de Vida de Puerto Rico, 449 F.3d 185,
190 (1st Cir. 2006) (stating that the court did not retain jurisdiction by dismissing ―pursuant
to that [settlement] agreement‖); In re Phar-Mor, Inc. Sec. Litig., 172 F.3d 270, 274 (3d Cir.
1999) (holding that the court did not retain jurisdiction by dismissing ―pursuant to the terms
of the Settlement‖); Ortolf v. Silver Bar Mines, 111 F.3d 85, 87 (9th Cir. 1997) (finding no
jurisdiction where the parties provided that the plaintiff may ―reinstitute this action‖); Scelsa
v. City Univ. of N.Y., 76 F.3d 37, 41 (2d Cir. 1996) (construing a dismissal with prejudice
―except as set forth in the Settlement Agreement‖ as ineffective to retain jurisdiction).
Courts have held that a reference in a dismissal order to a settlement agreement or an
ANTHONY DISARRO 60.2
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act as a czar with regard to the drafting of the settlement papers and the
construction of this settlement and the execution of this settlement.‖
205
The
order of dismissal, however, made no mention of this undertaking, stating
that ―[c]ounsel having informed the court that this action has been settled,
[t]his action is dismissed with prejudice.‖
206
The Ninth Circuit held that
the district court‘s oral statements were not sufficient.
207
In another case, the Court of Appeals for the Third Circuit held that a
dismissal order providing that the action would be reinstated if the
settlement were not consummated was ineffective.
208
The court reasoned
that reinstatement of an action is of a completely different character from
enforcement of a settlement agreement, which requires its own basis for
jurisdiction.
209
The rigidity displayed in these decisions suggests that courts are
concerned with the jurisdictional soundness of the retention procedure. In
contrast, the Court of Appeals for the Sixth Circuit stands alone in not
requiring that the retention of jurisdiction be explicitly set forth in the
dismissal order.
210
That court has observed that Kokkonen merely requires
a ―reasonable indication‖ that the federal court intends to retain
jurisdiction, and an express provision retaining jurisdiction is but one
example of that indication.
211
There should be no ―magic form of words
indication that the order is being entered ―pursuant to‖ or ―based on‖ a settlement agreement
does not confer jurisdiction. See, e.g., F.A.C., 449 F.3d at 190 (stating that the court did not
retain jurisdiction by dismissing ―pursuant to that [settlement] agreement‖); Phar-Mor, 172
F.3d at 274 (holding that the court did not retain jurisdiction by dismissing ―pursuant to the
terms of the Settlement‖); Miener, 62 F.3d at 1127–28 (denying that merely stating ―[a]ll
matters hav[e] been settled‖ creates ancillary jurisdiction); O‘Connor v. Colvin, 70 F.3d
530, 532 (9th Cir. 1995) (per curiam) (finding that an order explicitly ―based on‖ the
settlement agreement does not create ancillary jurisdiction).
205. Hagestad v. Tragesser, 49 F.3d 1430, 1433 (9th Cir. 1995).
206. Id. at 1432; see also In re Valdez Fisheries Dev. Ass‘n, 439 F.3d 545, 549
(9th Cir. 2006) (refusing to find jurisdictional retention where bankruptcy court approved of
settlement and stated in the dismissal order that the ―conditions of the settlement hav[e]
been fulfilled‖). The court retained jurisdiction only over monetary issues. Hagestad, 49
F.3d at 1433 n.4.
207. Hagestad, 49 F.3d at 1433. Compare O’Connor, 70 F.3d at 532 (―[E]ven a district
court‘s expressed intention to retain jurisdiction is insufficient to confer jurisdiction if that
intention is not expressed in the order of dismissal.‖), with Harris v. Ark. State Highway &
Transp. Dep‘t., 437 F.3d 749, 751 (8th Cir. 2005) (noting that an oral settlement agreement
could confer jurisdiction to enforce the settlement if specifically reserved in the court‘s
dismissal order).
208. Shaffer v. GTE N., Inc., 284 F.3d 500, 504 (3d Cir. 2002).
209. Id. at 503–04; see also Phar-Mor, 172 F.3d at 275 (stating that ―unexpressed intent
is insufficient to confer subject matter jurisdiction‖).
210. Re/Max Int‘l, Inc. v. Realty One, Inc., 271 F.3d 633, 644 (6th Cir. 2001).
211. Id. at 643. The district court‘s order provided that any ―subsequent order setting
forth different terms and conditions relative to the settlement and dismissal of the within
action shall supersede the within order.‖ Id. at 645. The court reasoned that a court can
only enter subsequent superseding orders where it retains jurisdiction. Thus, the court
concluded that ―a continued role‖ for the district court ―was contemplated‖ and that this
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that the judge must intone‖ in order to make a retention effective.
212
Nevertheless, the Sixth Circuit‘s reasoning has not persuaded any of the
other circuits to follow its lead.
Federal courts should not honor parties‘ stipulated retentions of
jurisdiction in the post-judgment context because they do not further the
courts‘ interest in vindicating its authority or effectuating its decrees—two
of the three touchstones for the exercise of ancillary enforcement
jurisdiction.
213
Nor do they further a court‘s interest in managing its own
proceedings—the third and final touchstone
214
— because, by the time the
settlement dispute arises, the case has been dismissed with prejudice and
there is no proceeding left to manage.
215
Instead, courts should exercise
ancillary enforcement jurisdiction only where the settlement terms have
been incorporated into a court order.
I. Eliminating Jurisdictional Retentions Will Not Hinder Settlements
Precluding stipulated jurisdictional retentions will not have an adverse
impact on the desirability or likelihood of settlements. Settlement is driven
mostly by the defendant‘s fear of being forced to pay more at trial than they
would through settlement, and the plaintiff‘s fear of getting less at trial than
at settlement.
216
These fears will still exist with the same intensity if parties
are unable to use jurisdictional retention to return to federal court.
Any argument that parties will be less inclined to settle if they cannot
secure federal court jurisdiction over settlement disputes (unless they use a
consent decree) is wholly speculative. There are no indications that federal
circuit court decisions that have refused to give effect to jurisdictional
retentions have adversely impacted settlements. Logic suggests that parties
will simply adjust their practices accordingly and either use consent
decrees or look to state courts to enforce settlement agreements.
sufficed under Kokkonen. Id.; see also Lucille v. City of Chicago, 31 F.3d 546, 549 (7th
Cir. 1994) (Cudahy, J., concurring) (finding that the language ―pursuant to settlement
agreement‖ or ―in accordance with settlement agreement‖ will suffice to retain jurisdiction).
212. Re/Max, 271 F.3d at 643 (quoting McCall-Bey v. Franzen, 777 F.2d 1178, 1188
(7th Cir. 1985)); see F.A.C., Inc. v. Cooperativa de Seguros de Vida de Puerto Rico, 449
F.3d 185, 190 (1st Cir. 2006) (suggesting that ―[h]ard and fast rules‖ may be inappropriate).
213. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 379–80 (1994).
214. Id. at 380.
215. Courts have plainly recognized that the requirements of ancillary enforcement
jurisdiction enunciated in Kokkonen do not have to be met if the main action is still pending
when enforcement of the settlement agreement is sought.
T Street Dev. v. Dereje & Dereje, 586 F.3d 6, 10–11 (D.C. Cir. 2009); Bailey v. Potter, 478
F.3d 409, 412 (D.C. Cir. 2007).
216. Easterbrook, supra note 24, at 19–20.
ANTHONY DISARRO 60.2
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The Supreme Court has given short shrift to speculative assertions that
procedural considerations can negatively impact the desirability of
settlement.
217
In Digital Equipment Corp. v. Desktop Direct, Inc.,
218
the
Court rejected the argument that precluding interlocutory appeals from
orders vacating settlements would hinder settlements and frustrate the
strong federal policy favoring voluntary resolution of disputes.
219
The
Court stated that it:
[D]efies common sense to maintain that parties‘ readiness to settle will
be significantly dampened (or the corresponding public interest
impaired) by a rule that a district court‘s decision to let allegedly barred
litigation go forward may be challenged as a matter of right only on
appeal from a judgment for the plaintiff‘s favor.
220
The contention that the parties‘ inability to use jurisdictional retention
provisions will dissuade them from settling is similarly unfounded.
IV. CONSENT DECREES ARE SUBJECT TO A SPECIFICITY REQUIREMENT
The fourth area of distinction is that the injunctive provisions of a
consent decree are subject to a specificity requirement. Injunctive orders
are governed by Rule 65(d) of the Federal Rules of Civil Procedure, which
provides that every order granting an injunction ―describe in reasonable
detail—and not by referring to the complaint or other document—the act or
acts restrained or required.‖
221
The term ―injunction‖ in Rule 65(d) has
been held to include all equitable decrees compelling obedience under the
threat of contempt, including consent decrees.
222
A. The Reasonable Detail Requirement
The purpose of the reasonable detail requirement in Rule 65(d) is to
provide clear notice of what is permissible to persons and entities that are
subject to an injunctive decree.
223
Enjoined parties should not be confused
217. Digital Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 881 (1994).
218. 511 U.S. 863 (1994).
219. Id. at 881.
220. Id. In U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18 (1994),
the Court refused to permit parties to vacate prior judicial rulings as a condition of
settlement. 513 U.S. at 29. The Court again was not persuaded by the conjectural assertion
that precluding parties from vacating prior rulings as part of a settlement would make
settlement less attractive to litigants. Id. at 27–28. The Court deemed it ―impossible to
assess the effect of our holding . . . upon the frequency or systemic value of settlement.‖ Id.
at 28.
221. FED. R. CIV. P. 65(d)(1) (2009).
222. See Int‘l Longshoremen‘s Ass‘n v. Phil. Marine Trade Ass‘n, 389 U.S. 64, 75
(1967) (finding that an equitable decree compelling obedience is an injunction within Rule
65(d)); Gates v. Shinn, 98 F.3d 463, 468 (9th Cir. 1996) (―The consent decree is an
injunction.‖); see also WRIGHT & MILLER, supra note 122, § 2955, at 309.
223. Int’l Longshoremen, 389 U.S. at 74 (1967); Epstein Family P‘ship v. Kmart Corp.,
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about what they can and cannot do when the penalty they face is
contempt.
224
They must be ―able to ascertain from the four corners of the
order precisely what acts are forbidden.‖
225
Because it is such a ―potent weapon,‖ the Supreme Court has cautioned
against the use of the contempt citation where there is any doubt as to the
claimed violation.
226
As the Seventh Circuit has explained:
Because of the risks of contempt proceedings, civil or criminal,
paramount interests of liberty and due process make it indispensable for
the chancellor or his surrogate to speak clearly, explicitly, and
specifically if violation of his direction is to subject a litigant . . . to
coercive or penal measures, as well as to payment of damages.
227
The reasonable detail rule also facilitates appellate review.
228
Injunctive
decrees are among the narrow group of interlocutory orders that are
immediately appealable.
229
Precision as to what is enjoined will narrow the
range of issues that are to be resolved on appeal.
230
B. No Incorporating By Reference
Rule 65(d)‘s prohibition against incorporation of other documents by
reference has been rigorously enforced.
231
A dismissal order cannot make
13 F.3d 762, 771 (3d Cir. 1994).
224. See Schmidt v. Lessard, 414 U.S. 473, 475–76 (1974) (per curiam) (noting that Rule
65 was designed to prevent uncertainty on the part of those facing injunctive orders); Patriot
Homes, Inc. v. Forest River Hous., Inc., 512 F.3d 412, 415 (7th Cir. 2008) (finding Rule 65
violated when the party being enjoined cannot tell whether it is violating an injunction);
Am. Red Cross v. Palm Beach Blood Bank, Inc., 143 F.3d 1407, 1411–12 (11th Cir. 1998)
(finding a violation of Rule 65 where portions of an injunction do not give sufficient notice
of what actions it means to prohibit); Gates, 98 F.3d at 467 (―Specificity in the terms of
consent decrees is a predicate to a finding of contempt.‖); King v. Allied Vision, Ltd., 65
F.3d 1051, 1057 (2d Cir. 1995) (stating that an injunctive portion of a court order must leave
―no uncertainty in the minds of those to whom it is addressed‖ (quoting Hess v. N.J. Transit
Rail Operations, Inc., 846 F.2d 114, 116 (2d Cir. 1988))).
225. Goya Foods, Inc. v. Wallack Mgmt. Co., 290 F.3d 63, 76 (1st Cir. 2002) (quoting
Gilday v. Dubois, 124 F.3d 277, 282 (1st Cir. 1997)); see Drywall Tapers, Local 1974. v.
Local 530 of Operative Plasterers, 889 F.2d 389, 395 (2d Cir. 1989);
see also Harley-Davidson, Inc. v. Morris, 19 F.3d 142, 148 (3d Cir. 1994) (indicating that
the scope of the consent judgment must be discernable from within the four corners).
226. Int’l Longshoremen, 389 U.S. at 76 (―The judicial contempt power is a potent
weapon. When it is founded upon a decree too vague to be understood, it can be a deadly
one.‖); Cal. Artificial Stone Paving Co. v. Molitor, 113 U.S. 609, 618 (1885) (―Process of
contempt is a severe remedy, and should not be resorted to where there is fair ground of
doubt . . . .‖).
227. H.K. Porter Co. v. Nat‘l Friction Prods., 568 F.2d 24, 27 (7th Cir. 1977).
228. Schmidt, 414 U.S. at 477 (1974).
229. 28 U.S.C. § 1292(a)(1) (2006).
230. See Dupuy v. Samuels, 465 F.3d 757, 758 (7th Cir. 2006) (rejecting imprecise
language in the injunction as creating unnecessary disputes over what has been enjoined).
231. See id. (rejecting the Ninth Circuit‘s approach of allowing incorporation by
reference); see also Consumers Gas & Oil, Inc. v. Farmland Indus. Inc., 84 F.3d 367, 371
ANTHONY DISARRO 60.2
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the breach of a referenced settlement agreement enforceable by powers of
contempt.
232
Nor can a litigant simply attach a copy of a settlement
agreement to the dismissal order, because this does not make it clear that
compliance with that agreement is mandated by the order itself and not by
the principles of contract law.
233
The settlement terms must appear on the
face of the injunction.
234
In Blue Cross & Blue Shield Ass’n v. American Express Co.,
235
the
district court entered an amended judgment that incorporated by reference
the parties‘ settlement agreement, directed the parties to comply with the
settlement agreement, and retained jurisdiction for purposes of
enforcement.
236
The Seventh Circuit stated that the incorporation by
reference violated Rule 65(d).
237
The court remarked rather testily: ―It is
an old rule, easy to understand and easy to follow; that it should be ignored
repeatedly by both the judge and counsel in large-stakes commercial
litigation is unfathomable.‖
238
While courts in a few instances have ignored the proscription against
incorporation by reference where the party charged with contempt
unquestionably knew the contents of the referenced document,
239
better-
(10th Cir. 1996) (explaining that the ―no reference‖ requirement in Rule 65 should be
strictly construed to prohibit incorporation by reference); Dunn v. N.Y. Dep‘t of Labor, 47
F.3d 485, 489 (2d Cir. 1995) (finding that an injunction impermissibly referred to a prior
consent judgment); Seattle-First Nat‘l Bank v. Manges, 900 F.2d 795, 799–800 (5th Cir.
1990) (concluding that an order referencing the findings of a magistrate judge violates Rule
65, although the referenced materials would give the defendants specific guidance); Thomas
v. Brock, 810 F.2d 448, 450 (4th Cir. 1987) (holding that incorporation by reference of
findings of fact and conclusions of law filed the same day violates Rule 65). But see Reno
Air Racing Ass‘n, Inc. v. McCord, 452 F.3d 1126, 1132–33 (9th Cir. 2006) (stating minority
rule that incorporation by reference is permissible, but only where document is physically
attached to injunctive order). See generally WRIGHT & MILLER, supra note 122, § 2955, at
309 (arguing that the Rule 65(d) prohibition on incorporation by reference protects those
who are enjoined by informing them of the specific conduct regulated by the injunction and
subject to contempt).
232. Consumers Gas & Oil, 84 F.3d at 371; Thomas, 810 F.2d at 450.
233. Hospitality House, Inc. v. Gilbert, 298 F.3d 424, 431–32 (5th Cir. 2002).
234. Id. at 432.
235. 467 F.3d 634 (7th Cir. 2006).
236. Id. at 636.
237. Id. See also Commercial Sec. Bank v. Walker Bank & Trust Co., 456 F.2d 1352,
1356 (10th Cir. 1972) (reiterating the mandatory nature of compliance with Rule 65);
Mayflower Indus. v. Thor Corp., 182 F.2d 800, 801 (3d Cir. 1950) (per curiam) (construing
the ―mandatory language‖ of Rule 65(d)).
238. Blue Cross, 467 F.3d at 636–37; Dupuy v. Samuels, 465 F.3d 757, 758 (7th Cir.
2006) (―Rule 65(d) is simple, clear, sensible, easily complied with and not even new; we are
distressed by the failure of the parties and the district judge to have complied with it in this
case . . . .‖).
239. See Davis v. City and County of San Francisco, 890 F.2d 1438, 1450 (9th Cir.
1989) (asserting that an injunction incorporating fire department rules passes muster
because officers were already bound by such rules and could not claim that they were
unaware of them); Perfect Fit Indus. v. Acme Quilting Co., 646 F.2d 800, 809 (2d Cir.
1981) (finding an injunction referring to exhibits not impermissibly vague where defendants
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reasoned authorities hold that incorporation by reference is impermissible
regardless of the ease by which the enjoined party could obtain and read the
incorporated document.
240
In light of the ease with which contents from one document can be today
inserted into another document via the copy-and-paste functions on a
standard computer, the practice of incorporating other documents by
reference saves nowhere near as much time as it used to, and thus there is
even less reason to excuse the disregard of Rule 65(d).
241
While there is
not unanimity among courts as to the effect of non-compliance with Rule
65(d) on an injunction,
242
there is ample authority for the proposition that
failure to abide by the rule precludes enforcement.
243
At a minimum, the
appellate court should remand the case to the district court to reform the
decree so that it complies with Rule 65(d).
244
Courts should demand adherence to Rule 65(d) as both a condition to
enforcement and to the exercise of ancillary enforcement jurisdiction.
First, the language of the Rule is mandatory, using the word ―must.‖
245
The
word ―must‖ only has meaning when there are consequences of disobeying
clearly knew of exhibits and grasped their contents). Sometimes courts suggest that
incorporation by reference is permissible without addressing Rule 65(d) at all. See, e.g.,
Crumpton v. Bridgeport Educ. Ass‘n, 993 F.2d 1023, 1028 (2d Cir. 1993) (stating that
documents incorporated by reference become part of a consent decree).
240. See William Keeton Enters. v. All Am. Strip-O-Rama, Inc., 74 F.3d 178
(9th Cir. 1996) (per curiam) (highlighting that Rule 65(d) prohibits incorporation of terms
from settlement agreement); Seattle-First Nat‘l Bank v. Manges, 900 F.2d 795, 799–800
(5th Cir. 1990) (clarifying that although defendants could not have been confused by the
order‘s reference to magistrate‘s findings, such reference failed to comply with Rule 65(d));
Meltzer v. Bd. of Pub. Instruction, 480 F.2d 552 (5th Cir. 1973) (per curiam) (disallowing
incorporation of rulings from a prior court order); E.W. Bliss Co. v. Struthers-Dunn, Inc.,
408 F.2d 1108, 1117 (8th Cir. 1969) (finding a violation of Rule 65(d) where names were
incorporated from an exhibit).
241. See Blue Cross, 467 F.3d at 636–37 (asserting that Rule 65(d) is ―easy to follow‖);
Dupuy, 465 F.3d at 758 (reminding that Rule 65(d) is ―easily complied with‖).
242. Blue Cross, 467 F.3d at 639. One Seventh Circuit panel characterized as
―unorthodox‖ the view that Rule 65(d) infractions preclude enforcement of the injunction.
Dupuy, 465 F.3d at 759.
243. D. Patrick, Inc. v. Ford Motor Co., 8 F.3d 455, 461 (7th Cir. 1993) (holding that
violation of the no-incorporation-by-reference principle in Rule 65(d) prevents enforcement
of the injunction); see also Gates v. Shinn, 98 F.3d 463, 468 (9th Cir. 1996) (―If an
injunction does not clearly describe prohibited or required conduct, it is not enforceable by
contempt.‖); Seattle-First, 900 F.2d at 800 (stating that a district court‘s power to enforce an
injunction depends on compliance with Rule 65(d)); Thomas v. Brock, 810 F.2d 448, 450
(4th Cir. 1987) (ruling that language in violation of Rule 65(d) be stricken from the order).
244. Rosen v. Siegel, 106 F.3d 28, 33 (2d Cir. 1997); Seattle-First, 900 F.2d at 800;
In re Energy Co-op., Inc., 886 F.2d 921, 930 (7th Cir. 1989).
245. FED. R. CIV. P. 65(d); Consumers Gas & Oil, Inc. v. Farmland Indus., 84 F.3d 367,
370–71 (10th Cir. 1996) (―The rule is phrased in mandatory language.‖); Thomas, 810 F.2d
at 450 (the requirements of Rule 65(d) ―must be observed in every instance‖).
ANTHONY DISARRO 60.2
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it, and the logical negative consequence of doing so would be the inability
to enforce the decree.
Second, an injunctive order binds the party against whom it is entered—
as well as that party‘s officers, agents, servants, employees, and
attorneys—so long as they have notice of it, and even constructive notice
will suffice in some cases.
246
Also, people who act in concert or otherwise
participate with the party will be bound as well.
247
Non-parties who aid or
abet a party in violating an injunction are subject to contempt, along with
the party who enlisted their illicit help.
248
These non-parties may not be able to locate materials incorporated by
reference into an injunction. The reasonable detail and no-incorporation-
by-reference requirements help eliminate unknowing violations of an
injunction and disputes regarding what an alleged contemnor knew. While
it is true that individuals cannot be charged with contempt if they have
never seen materials that are incorporated by reference into an injunction, it
is equally true that injunctions will not be as effective as Rule 65 intended
them to be if non-parties cannot be bound by them.
249
Third, the prohibition on incorporation by reference ensures that the
public‘s common law and First Amendment right to know about consent
decrees is honored.
250
Settlement agreements are typically kept
confidential and not filed with the court.
251
Thus, a settlement agreement
incorporated by reference into a court order is not likely to be available to
the public. In fact, the parties may not even send the court a copy of the
246. FED. R. CIV. P. 65(d); see also Dole Fresh Fruit Co. v. United Banana Co.,
821 F.2d 106, 109 (2d Cir. 1987) (employees); Polo Fashions Inc. v. Stock Buyers Int‘l,
Inc., 760 F.2d 698, 700 (6th Cir. 1985) (officers); Pasco Int‘l, Ltd. v. Stenograph Corp., 637
F.2d 496, 501 (7th Cir. 1980) (agents).
247. FED. R. CIV. P. 65(d)(2)(C); Microsystems Software, Inc. v. Scandinavia Online
AB, 226 F.3d 35, 43 (1st Cir. 2000) (those in ―active concert or participation‖ with the
enjoined party); Portland Feminist Women‘s Health Ctr. v. Advocates For Life, Inc., 859
F.2d 681, 684, 687 (9th Cir. 1988) (non-parties acting in concert); Waffenschmidt v.
MacKay, 763 F.2d 711, 714 (5th Cir. 1985) (non-party aiders and abettors).
248. Regal Knitwear v. NLRB, 324 U.S. 9, 14 (1945) (stating that defendant cannot
circumvent decree by carrying out prohibited acts through non-parties);
SEC v. Homa, 514 F.3d 661, 673–75 (7th Cir. 2008) (holding non-parties who knowingly
violate injunctive order subject to court sanction); Goya Foods, Inc. v. Wallack Mgmt. Co.,
290 F.3d 63, 76 (1st Cir. 2002) (holding in violation a third-party that acts in concert with a
party to the injunction).
249. See Regal Knitwear, 324 U.S. at 14 (warning that without liability for aiders and
abettors, a decree could be nullified); Homa, 514 F.3d at 674 (stating that to compel
compliance with an order, a court must have jurisdiction over those who defy it);
see also Thomas, 810 F.2d at 450 (stating that Rule 65(d) helps avoid confusion regarding
who is enjoined).
250. See supra Part II.A.
251. See supra Part II.C.
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settlement agreement, even when it is incorporated by reference into the
court‘s order of dismissal.
252
The incorporation of a publicly inaccessible settlement agreement by
reference contravenes the at least the common law right to inspect consent
decrees and perhaps even the First Amendment as well.
253
Members of the
public and press would lack material portions of a court order because
those provisions would be secret. Thus, the rule prohibiting incorporation
by reference of settlement agreements serves to protects important rights.
Rule 65(d)‘s prohibition on incorporation by reference requires parties to
make careful and informed choices about what settlement terms to include
in a consent decree. Keeping monetary terms of settlement in a settlement
agreement will ensure that the financial terms remain confidential. What
parties cannot do is incorporate an entire settlement agreement by reference
into a court order and then not file the agreement.
V. A CONSENT DECREE IS THE COURT‘S DOCUMENT
The fifth area of distinction arises from the fact that a consent decree
―contemplates judicial interests apart from those of the litigants.‖
254
Courts
have an interest in the contents of their orders. Absent a statutory
obligation to approve the terms of settlement, courts have no interest in the
contents of private settlement agreements.
255
A. Consent Decree as Both Contract and Order: Entry of the Decree
A consent decree embodies an agreement of the parties that ―serves as
the source of the court‘s authority‖ to enter the decree.
256
A court should not unilaterally alter a proposed consent decree that has
252. Limbright v. Hofmeister, 566 F.3d 672, 673 (6th Cir. 2009).
253. Washington Legal Found. v. U.S. Sentencing Comm‘n, 89 F.3d 897, 906 (D.C. Cir.
1996) (stating that documents submitted to or filed with the court are subject to the
presumption of public access); FTC v. Standard Fin. Mgmt. Corp.,
830 F.2d 404, 408–09 (1st Cir. 1987) (finding that the common law public right of access
extends to financial statements referenced in consent decree).
254. EEOC v. Local 580, Int‘l Ass‘n of Bridge, Structural & Ornamental Ironworkers
(Local 580), 925 F.2d 588, 593 (2d Cir. 1991); see also United States v. Int‘l Bus. Machs.
Corp., 163 F.3d 737, 740 (2d Cir. 1998) (highlighting the court‘s obligation to consider
whether a consent decree is in the ―public interest‖).
255. See Caplan v. Fellheimer Eichen Braverman & Kaskey, 68 F.3d 828, 835 (3d Cir.
1995) (―Our federal courts have neither the authority nor the resources to review and
approve the settlement of every case brought in the federal court system.‖); Janus Films,
Inc. v. Miller, 801 F.2d 578, 582 (2d Cir. 1986) (discussing court‘s ―indifferen[ce] to the
terms the parties have agreed to‖).
256. Local No. 93, Int‘l Ass‘n of Firefighters v. City of Cleveland, 478 U.S. 501, 522
(1986); United States v. Armour & Co., 402 U.S. 673, 681 (1971) (―[T]he decree itself
cannot be said to have a purpose; rather the parties have purposes . . . .‖).
ANTHONY DISARRO 60.2
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been submitted to it for entry.
257
Nor should it refuse to enter a consent
decree merely because it would afford greater relief than that which could
have been awarded after trial.
258
However, a court does have the prerogative to at least make the
―minimal determination of whether the agreement is appropriate to be
accorded the status of a judicially enforceable decree.‖
259
A consent decree should bear some relationship to the case and pleadings
that have invoked the federal court‘s jurisdiction in the first place
260
and
―further the objectives of the law upon which the complaint was based.‖
261
The decree should not undermine judicial integrity.
262
The court should inform the parties of any concerns regarding a
proposed consent decree and give them an opportunity to address them.
263
If the court‘s concerns are not adequately addressed, it may refuse to
endorse the proposed decree because when court orders are involved,
courts have a say in their contents.
264
The court‘s role here is discretionary, not mandatory.
265
A court can opt
not to scrutinize a consent decree when it is submitted for endorsement. It
might not want to interfere with the terms of a proposed consent decree
257. FTC v. Enforma Natural Prods., Inc., 362 F.3d 1204, 1218 (9th Cir. 2004).
A court should not expand or contract the agreement of the parties, Crumpton v. Bridgeport
Educ. Ass‘n, 993 F.2d 1023, 1028 (2d Cir. 1993), or enter a decree that purports to bind a
party that did not agree to its terms, Int’l Ass’n of Firefighters, 478 U.S. at 529; United
States v. Ward Baking Co., 376 U.S. 327, 330 (1964); King v. Walters, 190 F.3d 784, 788
(7th Cir. 1999). The court‘s goal in construing a consent decree is ―to ascertain the intent of
the parties at the time of settlement.‖
Nat‘l Ecological Found. v. Alexander, 496 F.3d 466, 477–78 (6th Cir. 2007) (quoting
Huguley v. Gen. Motors Corp., 67 F.3d 129 (6th Cir. 1995)).
258. See Int’l Ass’n of Firefighters, 478 U.S. at 525 (stating that federal court is not
barred from entering consent decree that would grant greater relief than trial); Kindred v.
Duckworth, 9 F.3d 638, 641 (7th Cir. 1993) (―Consent decrees often embody outcomes that
reach beyond basic constitutional protections.‖).
259. Int’l Bus. Machs., 163 F.3d at 740 (quoting Janus, 801 F.2d at 582); see Local 580,
925 F.2d at 593 (―Where equitable remedies which exceed the confines of the consent
judgment are reasonably imposed . . . the court has not overstepped its bounds . . . . ‖).
260. Int’l Ass’n of Firefighters, 478 U.S. at 525.
261. Frew v. Hawkins, 540 U.S. 431, 437 (2004).
262. For example, the Second Circuit held that it was inappropriate for a court to enter a
consent decree that discloses a settlement amount that could actually be satisfied by
payment of a lesser amount pursuant to a private, side agreement. Janus, 801 F.2d at 584–
85. The court reasoned that the other potential defendants would be misled by the fictitious
settlement amount disclosed in the consent decree. Id. at 585.
263. FTC v. Enforma Natural Prods., Inc., 362 F.3d 1204, 1218 (9th Cir. 2004);
Williams v. Vukovich, 720 F.2d 909, 921 (6th Cir. 1983).
264. Geller v. Branic Int‘l Realty Corp., 212 F.3d 734, 737–38 (2d Cir. 2000) (discussing
the court‘s wide discretion in deciding whether to ―so order‖ a stipulated settlement
providing for sealing and other protective measures); City of Hartford v. Chase, 942 F.2d
130, 136 (2d Cir. 1991) (highlighting types of consent judgment that merit careful scrutiny).
265. United States v. Local 359, United Seafood Workers, 55 F.3d 64, 68–69 (2d Cir.
1995) (holding that courts have ―equitable discretion‖ when it comes to entering and
enforcing consent decrees).
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when doing so could undermine a settlement that removes a case from the
court‘s docket. A court might prefer instead to summarily approve the
consent decree and defer any potential concerns about its terms for a later
date.
Those concerns may, after all, become academic. The parties may never
return to court to present a dispute regarding the decree. If the parties do
return to enforce or modify the decree, the court can address its concerns at
that time, if they still exist. The consent decree will be publicly available
and, thus, if third parties believe that they are adversely affected by the
decree, they can move to intervene and to modify the decree. Deferring
concerns about a consent decree for a later date enables the court to
determine, based on the parties‘ actual experience under the consent
decree, whether those concerns are real or merely hypothetical.
Nevertheless, while there are weighty reasons why a court might not
apply exacting scrutiny to a proposed consent decree at the time of entry,
the fact remains that the court has the discretion to do so, or to insist that
the parties change portions of the proposed decree as a condition to
entry.
266
As one court aptly put it, a federal court is ―more than a ‗recorder
of contracts‘ from whom parties can purchase injunctions.‖
267
Parties need
to understand that by choosing the consent decree route, they are inviting
the court to have a say on the terms of settlement.
268
B. Modification of Consent Decrees
A consent decree is subject to the rules generally applicable to orders or
judgments.
269
This includes Rule 60(b)(5), which provides that a party may
obtain relief from a court order when it is no longer equitable that the
judgment should have prospective application.
270
Thus, the court can, and
indeed may be required to, modify or terminate a consent decree over the
objections of one (or both) of the consenting parties.
271
266. Indeed, it is said that the court has ―independent juridical interests‖ in consent
decrees ―beyond the remedial ‗contractual‘ terms agreed upon by the parties.‖ EEOC v.
Local 580, Int‘l Ass‘n of Bridge, Structural & Ornamental Workers, 925 F.2d 588, 593 (2d.
Cir. 1991).
267. Local No. 93, Int‘l Ass‘n of Firefighters v. City of Cleveland, 478 U.S. 501, 525
(1986); In re Pearson, 990 F.2d 653, 658 (1st Cir. 1993) (―Put bluntly, ‗parties cannot, by
giving each other consideration, purchase from the court of equity a continuing injunction.‘‖
(quoting Sys. Fed‘n No. 91 v. Wright, 364 U.S. 642, 651 (1961))).
268. Of course, at that point, the parties are free to use a settlement agreement instead of
a consent decree to avoid changing the deal terms to satisfy the court.
269. Rufo v. Inmates of the Suffolk Cnty. Jail, 502 U.S. 367, 378 (1992) (citing Wright,
364 U.S. at 650–51).
270. FED. R. CIV. P. 60(b)(5).
271. This is not to suggest that a court can never modify a contract over the objections of
ANTHONY DISARRO 60.2
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A court can modify a consent decree in light of ―changed
circumstances.‖
272
The court‘s power to modify a decree of injunctive
relief based on changes in the law or the facts is ―broad and flexible.‖
273
Modification also can be ordered when necessary to carry out the purposes
of the original decree
274
or when the effects of the decree are inconsistent
with the objectives of the statute that was the basis of the suit.
275
In
modifying a decree, the court is not ―rigidly confined only to the terms
contained within the four corners of the parties‘ agreement.‖
276
Much of the Supreme Court case law enunciating principles for lower
federal courts to apply in modifying consent decrees arose in the area of
public interest law, such as government-initiated antitrust lawsuits or
institutional reform litigation. These are atypical fields. In the antitrust
context, Congress has prescribed public notice and comment procedures to
be followed in connection with the entry of consent decrees.
277
It has also
one of the parties. However, when it does so, the focus is completely different. When a
court reforms a contract, its purpose is to change the contract so that it mirrors the intent of
the parties at the time it was created. Roberson Enters., Inc. v. Miller Land & Lumber Co.,
700 S.W.2d 57, 58 (Ark. 1985) (modifying a decree to omit the conditional cancellation
order); Chimart Assocs. v. Paul,
489 N.E.2d 231, 234 (N.Y. 1986) (quoting George Backer Mgmt. Corp. v. Acme Quilting
Co., 385 N.E.2d 1062, 1066 (N.Y. 1978)).
272. Rufo, 502 U.S. at 380–81, 383 (citing Phila. Welfare Rights Org. v. Shapp, 602 F.2d
1114, 1119–21 (3d Cir. 1979)); Wright, 364 U.S. at 647.
273. N.Y. State Ass‘n for Retarded Children v. Carey, 706 F.2d 956, 970 (2d Cir. 1983)
(stating that ―a consensus is emerging among commentators in favor of modification with a
rather free hand‖).
274. Kozlowski v. Coughlin, 871 F.2d 241, 247 (2d Cir. 1989) (quoting Badgley v.
Santacroce, 853 F.2d 50, 53 (2d. Cir. 1988)). In a 1932 Supreme Court decision authored
by Justice Cardozo, the Court imposed a rigorous standard upon parties seeking to modify
consent decrees: ―Nothing less than a clear showing of grievous wrong evoked by new and
unforeseen conditions should lead us to change what was decreed.‖ United States v. Swift,
286 U.S. 106, 119 (1932). The Supreme Court relaxed that standard in subsequent
decisions. See, e.g., Rufo, 502 U.S. at 380–81 (calling for a flexible approach when
modifying decrees); United States v. United Shoe Mach., 391 U.S. 244, 248 (1968).
275. Firefighters Local Union No. 1784 v. Stotts, 467 U.S. 561, 582–83 (1984). An
obligation in a federal consent decree may be enforced against a state, notwithstanding the
Eleventh Amendment, even when there was no finding that the state violated federal law.
Frew ex rel. Frew v. Hawkins, 540 U.S. 431, 439–40 (2004). The significance of this ruling
is that the Supreme Court has previously ruled that a federal court cannot compel a state to
comply with state law. Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 106
(1984). Thus, a consent decree is not viewed as simply imposing a state law contractual
obligation, but as a federal court order implementing federal law or furthering a federal
objective. Frew, 540 U.S. at 438–39.
276. Juan F. ex rel. Lynch v. Weicker, 37 F.3d 874, 878 (2d Cir. 1994); Kindred v.
Duckworth, 9 F.3d 648, 644 (7th Cir. 1993) (stating that the passage of time may impact the
need for the decree).
277. The Tunney Act, 15 U.S.C. § 16(b)–(d) (2006), requires that the government
publish a proposed consent decree in the Federal Register, public comments received
regarding the proposed decree, and government responses to such comments, prior to entry
of the decree. See United States v. AT&T, 552 F. Supp. 131, 151–52 (D.D.C. 1982)
(discussing a court‘s approach to its public interest review responsibilities), aff’d in part sub
nom. Maryland v. United States, 460 U.S. 1001 (1983).
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imposed a rigorous ―public interest‖ standard that must be satisfied before a
court can enter a consent decree.
278
In institutional reform litigation, consent decrees will likely have a
substantial effect on the rights of third parties.
279
In addition, consent
decrees pertaining to federal courts overseeing the operations of state or
local institutions present federalism concerns, which are largely absent in
private party litigation.
280
Despite the unique aspects of these two areas,
federal courts have repeatedly held that the consent decree modification
standards developed therein apply in other, more general contexts.
281
Consequently, the standards enunciated by the Supreme Court in
institutional reform cases or antitrust lawsuits are frequently cited and
applied in ordinary commercial disputes.
282
The longer a consent decree remains in effect and the more frequently
the parties (or non-parties) come to court raising issues under the decree,
the more receptive a court will be to arguments that the decree needs to be
revised or ended altogether. At this point, the court may give serious
consideration as to whether the decree is actually furthering the objectives
of the statute that formed the basis of the suit or is unfairly impinging on
the rights of third parties.
283
A district court will not want to spend more
278. 15 U.S.C. § 16(e); United States v. Microsoft Corp., 56 F.3d 1448, 1459 (D.C. Cir.
1995) (per curiam).
279. Douglas Laycock, Consent Decrees Without Consent: The Rights of Nonconsenting
Third Parties, 1987 U. CHI. LEGAL F. 103, 103 (1987).
280. Michael W. McConnell, Why Hold Elections? Using Consent Decrees to Insulate
Policies from Political Change, 1987 U. CHI. LEGAL F. 295, 298 (1987); Burt Neuborne &
Frederick A.O. Schwartz, Jr., A Prelude to the Settlement of Wilder, 1987 U. CHI. LEGAL F.
177, 184 (1987); cf. Peter M. Shane, Federal Policy Making By Consent Decree: An
Analysis of Agency and Judicial Discretion, 1987 U. CHI. LEGAL F. 241, 267 (1987)
(discussing limits of judicial power).
281. Bldg. & Constr. Trades Council v. NLRB, 64 F.3d 880, 887–88 (3d Cir. 1995)
(stating that standards enunciated in institutional reform cases apply to all types of disputes
(citing Alexis Lichine & Cie v. Sacha A. Lichine Estate Selections, Ltd.,
45 F.3d 582 (1st Cir. 1995))); United States v. W. Elec. Co., 46 F.3d 1198, 1203
(D.C. Cir. 1995); Patterson v. Newspaper & Mail Deliverers‘ Union, 13 F.3d 33, 38 (2d Cir.
1993); MOORE ET AL., supra note 123, § 60.47[2][b], at 60–176 & n.17; WRIGHT & MILLER,
supra note 122, § 2961, at 402.
282. Hendrix v. Page, 986 F.2d 195, 198 (7th Cir. 1993) (adopting a ―flexible standard‖
in institutional reform is no less suitable to other types of cases (quoting Rufo v. Inmates of
the Suffolk Cnty. Jail, 502 U.S. 367, 380 (1992))); Playtex Prods., Inc. v. Procter & Gamble
Co., No. 02 Civ. 8046 (WHP), 2008 WL 399295, at *5 (S.D.N.Y. Feb. 11, 2008) (quoting
Rufo, 502 U.S. at 384–85, 393); Gismondi, Paglia, Sherling v. Franco, 206 F. Supp. 2d 597,
599 (S.D.N.Y. 2002) (citing Rufo, 502 U.S. at 380); see also Alexis Lichine & Cie, 45 F.3d
at 586 (affirming the need for flexibility but voicing concerns). But see W.L. Gore &
Assocs., Inc. v. C.R. Bard, Inc., 977 F.2d 558, 561–63 (Fed. Cir. 1992) (―The institutional
reform cases present considerations not found in consent decrees settling commercial
disputes.‖).
283. One commentator has argued that consent decree jurisprudence is so contradictory
that it is unprincipled, and a court can emphasize whatever aspect of a consent decree—
ANTHONY DISARRO 60.2
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time monitoring a settlement than it would have to spend if it simply tried
the case and entered a nonconsensual, final judgment.
In short, choosing a consent decree will mean that the parties relinquish
some control over the settlement terms to the court. The court may not be
inclined to exercise that control at the inception of the consent decree, but
as the consent decree ages and becomes the cause of repeated trips to the
courthouse, a court will be increasingly likely to assume ownership of the
decree. This risk is a factor for the parties to consider at the time of
settlement.
VI. A CONSENT DECREE CAN CONFER PREVAILING PARTY STATUS
The sixth distinction is that consent decrees can form the basis of an
award of attorneys‘ fees to a plaintiff where a federal statute permits such
awards.
284
A settlement agreement, in contrast, does not confer prevailing
party status on a plaintiff.
285
A. Parties Will Need to Consider Whether to
Address Attorneys’ Fees in Settlement
In the course of negotiating settlement of any case, the parties will be
mindful of the attorneys‘ fees they have incurred to prosecute or defend the
action. The plaintiff will view any settlement consideration offered by a
defendant in terms of the amount by which it exceeds their attorneys‘ fees
and other litigation expenses incurred in the case. A defendant, too, will be
cognizant of its fees and expenses, as well as those likely to be incurred if
the case proceeds to trial, when making settlement offers.
Under the traditional ―American Rule‖ followed in federal courts, parties
are required to bear their own attorneys‘ fees and cannot collect them from
the losing party absent explicit contractual or statutory authority.
286
If no
such authority exists, parties are forced to shift some or all of these
expenditures to the other party by including them in, or deducting them
from, the total monetary consideration to be paid in settlement.
287
contract or court order—that will support the result it announces. Thomas M. Mengler,
Consent Decree Paradigms: Models Without Meaning, 29 B.C. L. REV. 291, 293 (1988).
There is, however, nothing unprincipled about a court emphasizing the contractual aspects
of a consent decree when it affects only the consenting parties and emphasizing the court
order aspects when it impacts third parties or judicial resources.
284. Alyeska Pipeline Serv. Co. v. Wilderness Soc‘y, 421 U.S. 240, 262 (1975).
285. Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep‘t of Health & Human Servs.,
532 U.S. 598, 605 (2001).
286. Alyeska, 421 U.S. at 247; accord Key Tronic Corp. v. United States,
511 U.S. 809, 819 (1994) (citing Alyeska, 421 U.S. at 262).
287. Cf. Gray v. Phillips Petroleum Co., 971 F.2d 591, 595 (10th Cir. 1992) (articulating
plaintiff‘s argument that expenses can be included in a settlement even where there is no
ANTHONY DISARRO 60.2
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There are numerous federal statutory provisions authorizing a court to
require one party to pay the attorneys‘ fees incurred by the other party.
288
These provisions typically confer discretion on a court to award attorneys‘
fees to the ―prevailing party‖ and courts have interpreted these nearly-
identically worded provisions consistently.
289
Although the ―prevailing
party‖ provisions are facially neutral, courts have interpreted and applied
them with a bias, so that losing defendants usually pay, but losing plaintiffs
rarely pay.
290
When parties are settling a case brought under a statute that authorizes
fee shifting, they will want to address the issue in the settlement.
291
Depending on their relative negotiating positions, the plaintiff may agree to
waive any claim to such fees, or the defendant may agree to reimburse the
plaintiff for them.
292
The parties may simply agree to disagree on the issue
and reserve their respective rights to fight it out in court after the settlement
is consummated.
293
The common law doctrine of ancillary jurisdiction enables a federal
court to resolve fees disputes between a client and attorney arising during
explicit statutory authority).
288. See, e.g., 5 U.S.C. § 552 (a)(4)(E) (2006) (Freedom Of Information Act);
15 U.S.C. §§ 1681n(c), 1681o(b) (Fair Credit Reporting Act) (2006); 29 U.S.C. § 216(b)
(2006) (incorporating a fee shifting provision into the Age Discrimination in Employment
Act); 42 U.S.C. § 1973l(e) (2006) (Voting Rights Act); 42 U.S.C. §§ 1988, 2000e-5(k)
(2006) (Civil Rights); 42 U.S.C. § 3613(c)(2) (2006) (Fair Housing Act); 42 U.S.C. § 12205
(2006) (Americans With Disabilities Act).
289. Indep. Fed‘n of Flight Attendants v. Zipes, 491 U.S. 754, 758 n.2 (1989) (quoting
Northcross v. Bd. of Educ., 412 U.S. 427, 428 (1973) (per curiam)); Hensley v. Eckerhart,
461 U.S. 424, 433 n.7 (1983).
290. Easterbrook, supra note 24, at 29. To recover attorneys‘ fees, a plaintiff need not
prevail on all or most of his claims, nor even his primary claim. Tex. State Teachers Ass‘n
v. Garland Indep. Sch. Dist., 489 U.S. 782, 790–93 (1989). He prevails even when he is
awarded merely nominal damages. Farrar v. Hobby, 506 U.S. 103, 105 (1992). A
defendant, on the other hand, must prevail on all of the claims asserted against it and prove
that the claims were either frivolous or groundless. Christiansburg Garment Co. v. EEOC,
434 U.S. 412, 422 (1978). Outside the civil rights arena, the bias does not apply and the
provisions are applied neutrally. Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994)
(copyright).
291. Indeed, they may be required to address the issue in the settlement papers. Some
courts have held that a party intending to file such a motion must reserve the right to do so
in the settlement agreement or consent decree, or he will be barred by the release provisions.
See, e.g., Bell v. Schexnayder, 36 F.3d 447, 449–50 (5th Cir. 1994) (finding that settlement
negotiations were meant to resolve all claims); Young v. Powell, 729 F.2d 563, 566–67 (8th
Cir. 1984).
292. See Evans v. Jeff D., 475 U.S. 717, 731–32 (1986) (noting that nothing in language
used by Congress indicates that statutory entitlement to attorneys‘ fees is ―nonwaivable or
nonnegotiable‖).
293. See, e.g., Smalbein ex rel. Smalbein v. City of Daytona Beach, 353 F.3d 901, 908
n.9 (11th Cir. 2003) (per curiam) (stating that the settlement agreement provides that the
parties will litigate attorneys‘ fees issue subject to a cap on the amount that could be
awarded).
ANTHONY DISARRO 60.2
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the litigation,
294
as well as post-judgment motions for fees under fee-
shifting statutes.
295
A court can rule on an application to award attorneys‘
fees even if it is made after the case has been dismissed.
296
B. The Supreme Court’s Efforts to Distinguish between Consent Decrees
and Settlement Agreements in the Prevailing Party Context
The Kokkonen decision is not the only instance where the Supreme Court
mistakenly blurred the distinction between consent decrees and settlement
agreements.
297
The Court committed a similar misstep in its jurisprudence
concerning prevailing party status under fee-shifting provisions.
In Maher v. Gagne,
298
the Supreme Court concluded that a settlement
embodied in, and enforced through, a consent decree could serve as the
basis for an award of attorneys‘ fees under a prevailing party fee-shifting
statute.
299
The Court remarked that the legislative history for the fee-
shifting statute indicated that ―parties may be considered to have prevailed
when they vindicated rights through a consent judgment.‖
300
The Court
294. Shapo v. Engle, 463 F.3d 641, 644 (7th Cir. 2006); Baer v. First Options of Chi.,
Inc., 72 F.3d 1294, 1300–01 (7th Cir. 1995) (discussing how other circuits have treated
ancillary jurisdiction); Novinger v. E.I. DuPont de Nemours & Co., 809 F.2d 212, 217 (3d
Cir. 1987); Jenkins v. Weinshienk, 670 F.2d 915, 918 (10th Cir. 1982). This authorization
includes claims by a former attorney against the client for outstanding fees owed as well as
disputes arising from a discharged attorney‘s placement of a retaining lien on the client‘s
files. Chesley v. Union Carbide Corp., 927 F.2d 60, 64 (2d Cir. 1991) (holding that a court
has ancillary jurisdiction over a dispute between a litigant and its attorney that is related to
the main action (quoting Cluett, Peabody, & Co. v. CPC Acquisition Co., 863 F.2d 251, 256
(2d Cir. 1988))); Marrero v. Christiano, 575 F. Supp. 837, 839 (S.D.N.Y. 1983) (finding that
a dispute regarding withdrawing counsel‘s right to interpose retaining lien is subject to
ancillary jurisdiction). That such a dispute would impair a federal court‘s ability to manage
its proceedings—one of the touchstones to ancillary jurisdiction—is apparent. A
withdrawing attorney‘s retaining lien interferes with the orderly adjudication of the case
because the new attorney cannot proceed if she lacks access to the files needed to prosecute
or defend the case.
295. Applications for attorneys‘ fees are collateral to the merits of the case. Bell v. Bd.
of Cnty. Comm‘rs, 451 F.3d 1097, 1101 n.2 (10th Cir. 2006) (quoting Utah Women‘s
Clinic, Inc. v. Leavitt, 75 F.3d 564, 567 (10th Cir. 1995)); Fed. Sav. & Loan Ins. Corp. v.
Ferrante, 364 F.3d 1037, 1040–42 (9th Cir. 2004). Thus, the fact that the issue is unresolved
at the conclusion of the case does not prevent the district court from entering judgment on
the merits or that judgment from being ―final and appealable.‖ Budinich v. Becton
Dickinson & Co., 486 U.S. 196, 202–03 (1988).
296. Federal Rule of Civil Procedure 54(d)(2)(B)(i) expressly provides that a motion for
attorneys‘ fees can be made up to fourteen days after judgment has been entered. An appeal
from a judgment does not prevent a district court from ruling on a motion for attorneys‘
fees. See Budinich, 486 U.S. at 202–03 (holding that the status of attorneys‘ fees provision
does not have to be known at the time that the merits of the case are appealed); Allison v.
Bank One-Denver, 289 F.3d 1223, 1242–43 (10th Cir. 2002).
297. See supra Part III.C.
298. 448 U.S. 122 (1980).
299. Id. at 129–30.
300. Id. at 129 (quoting S. REP. NO. 94-1011, at 5 (1976), reprinted in 1976
U.S.C.C.A.N. 5908, 5912).
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subsequently mischaracterized that holding twice, referring to the Maher
case as authorizing an award of attorneys‘ fees for consent decrees or
settlement agreements.
301
The Court owned up to the error in its 2001
decision in Buckhannon Board & Home Care, Inc. v. West Virginia
Department of Health & Human Resources.
302
The Buckhannon Court clarified that consent decrees, not settlement
agreements, confer prevailing party status.
303
The Court reasoned that a
consent decree effects a court-ordered change in the legal relationship of
the parties.
304
The Court emphasized the unique role that courts can play
with respect to consent decrees.
305
Justice Scalia, in a concurrence,
indicated that it ―is at least the product of, and bears the sanction of,
judicial action in the lawsuit.‖
306
The Court noted that, in contrast, ―[p]rivate settlements do not entail the
judicial approval and oversight involved in consent decrees.‖
307
The Court
further observed that, while federal jurisdiction always exists with respect
to enforcing consent decrees, ―federal jurisdiction to enforce a private
contractual agreement will often be lacking unless the terms of the
settlement are incorporated into the order of dismissal.‖
308
301. Farrar v. Hobby, 506 U.S. 103, 111 (1992) (stating that the plaintiff must obtain
―comparable relief through a consent decree or settlement‖ (citing Maher,
448 U.S. at 129)); Hewitt v. Helms, 482 U.S. 755, 760 (1987) (characterizing Maher as
obtaining judgment via ―consent decree or settlement‖ (citing Maher, 448 U.S. at 129)).
302. 532 U.S. 598, 604 n.7 (2001) (noting that the Court‘s prior ―dictum ignores that
Maher only ‗held that fees may be assessed . . . after a case has been settled by the entry of a
consent decree‘‖ (quoting Evans v. Jeff D., 475 U.S. 717, 720 (1986))); see also id. at 621
(Scalia, J., concurring) (acknowledging the Court‘s ―own misleading dicta (to which I,
unfortunately, contributed)‖).
303. Buckhannon, 532 U.S. at 605–06.
304. Id. at 604 (quoting Tex. State Teachers Ass‘n v. Garland Indep. Sch. Dist., 489 U.S.
782, 792–93 (1989)).
305. Id. at 603 n.5.
306. Id. at 618 (Scalia, J., concurring). Justice Scalia expressed reservations that a
consent decree was a viable platform for a fee award, but opined that it was ―at least some
basis for saying that the party favored by the settlement or decree prevailed in the suit. Id.
However, he opined, extending the principle ―to a case in which no judicial action whatever
has been taken‖ stretched the ―prevailing party‖ concept beyond its breaking point. Id. at
618–19.
307. Id. at 604 n.7 (majority opinion); see Smyth ex rel. Smyth v. Rivero, 282 F.3d 268,
280 (4th Cir. 2002) (describing judicial prerogative to review consent decrees); United
States v. City of Miami, 664 F.2d 435, 441 n.13 (5th Cir. 1981) (en banc) (per curiam)
(citing Metro. Hous. Dev. Corp. v. Village of Arlington Heights, 616 F.2d 1006, 1014 (7th
Cir. 1980)).
308. Buckhannon, 532 U.S. at 604 n.7 (citing Kokkonen v. Guardian Life Ins. Co. of
Am., 511 U.S. 375, 381 (1994)). It is noteworthy that the Court in Buckhannon referred to
incorporation as a means of obtaining post-judgment jurisdiction in federal court but not the
jurisdictional retention method suggested in Kokkonen. The Court, when focusing on the
distinction between consent decrees and settlement agreements as it relates to prevailing
party analysis, intimated that these distinctions also impact ancillary enforcement
ANTHONY DISARRO 60.2
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The judicial oversight attendant in consent decrees, combined with the
court-ordered nature of these devices, is sufficient to be determinative in
the prevailing party debate.
C. The Distinction Is Applied in Determining Prevailing Party Status
Most federal courts have abided by the Supreme Court‘s pronouncement
in Buckhannon and have held that settlements embodied in court orders can
confer prevailing party status, but private settlement agreements cannot.
309
The federal courts, moreover, have not insisted that the underlying order be
formally denominated as a consent decree. As explained by the Court of
Appeals for the Fourth Circuit:
Where a settlement agreement is embodied in a court order such that the
obligation to comply with its terms is court-ordered, the court‘s approval
and the attendant judicial oversight (in the form of continuing
jurisdiction to enforce the agreement) may be equally apparent. We will
assume, then, that an order containing an agreement reached by the
parties may be functionally a consent decree for purposes of the inquiry
to which Buckhannon directs us, even if not entitled as such.
310
The Court of Appeals for the Third Circuit has concluded that a
document is tantamount to a consent decree for prevailing party purposes if
it: bears the title ―order‖; sets forth settlement terms using mandatory
language; contains the signature of the district court judge instead of the
parties‘ counsel; and gives the plaintiff the right to seek judicial
enforcement of the settlement terms.
311
Similarly, other circuit courts have
held that where a district court incorporates a private settlement into an
order, and signs or otherwise indicates written approval of the order‘s
terms, the result is sufficiently analogous to a consent decree to confer
prevailing party status.
312
These courts have correctly refused to exalt form over substance by
insisting that the order be labeled a consent decree. This approach is
sensible as many practitioners, perhaps wary of the fact that consent
decrees are so often associated with public interest litigation, might be less
inclined to use the term ―consent decree‖ to describe orders that embody
settlement terms.
313
jurisdiction analysis.
309. Id. at 605–06.
310. Smyth, 282 F.3d at 281–82 (citing Buckhannon, 532 U.S. at 604 n.7).
311. Truesdell v. Phila. Hous. Auth., 290 F.3d 159, 165 (3d Cir. 2002); see also John T.
ex rel. Paul T. v. Del. Cnty. Intermediate Unit, 318 F.3d 545, 558 (3d Cir. 2003) (citing
Truesdell, 290 F.3d at 165).
312. Bell v. Bd. of Cnty. Comm‘rs, 451 F.3d 1097, 1103 (10th Cir. 2006) (citing T.D. v.
LaGrange Sch. Dist. No. 102, 349 F.3d 469, 479 (7th Cir. 2003)).
313. See supra notes 310–12.
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In contrast, a court order that merely records an obligation that a party
has agreed to undertake, without indicating that the court is directing that
the obligation be performed, is not sufficiently analogous to a consent
decree.
314
Also, where the judge was actively involved in settlement
discussions, held a settlement conference in his chambers, and made
suggestions regarding the terms of settlement, the resulting agreement does
not reflect the requisite ―judicial imprimatur‖ so that it will be regarded as
analogous to a consent decree.
315
The determinative factor in these cases is the presence of a court order
that includes the settlement terms. This inclusion makes the obligation to
comply with those terms a court-ordered one, punishable by contempt.
316
This transformation constitutes the court-ordered change in the parties‘
legal relationship that is essential to a prevailing party fee award.
317
D. Some Courts Blur the Distinction that the Supreme Court Clarified
A few circuit court decisions have seized upon the misleading comments
by the Court in Kokkonen to confer prevailing party status on a party to a
settlement agreement. The Courts of Appeals for the Eleventh and Second
Circuits have both concluded that a settlement agreement containing a
jurisdictional retention provision is the functional equivalent of a consent
decree and, thus, can serve as the basis for an attorneys‘ fees award.
318
The Eleventh Circuit, relying on Kokkonen, stated that when a district
court expressly retains jurisdiction to enforce a settlement, it achieves
―precisely the same result as would have been achieved pursuant to a
314. See Rice Servs. Ltd. v. United States, 405 F.3d 1017, 1027 (Fed. Cir. 2005)
(determining the order did not materially alter a legal relationship).
315. LaGrange Sch. Dist., 349 F.3d at 479. Court orders that merely confirm a party‘s
concessions during settlement or that reiterate proposed terms to keep settlement talks
moving forward are not sufficiently analogous to consent decrees. Smith v. Fitchburg, 401
F.3d 16, 26–27 (1st Cir. 2005).
316. Christina A. ex rel. Jennifer A. v. Bloomberg, 315 F.3d 990, 993 (8th Cir. 2003)
(quoting Hazen ex rel. LeGear v. Reagen, 208 F.3d 697, 699 (8th Cir. 2000)).
317. Carbonell v. INS, 429 F.3d 894, 900–01 (9th Cir. 2005) (holding that stipulated stay
of deportation was incorporated into court order); Pres. Coal. of Erie Cnty. v. Fed. Transit
Admin., 356 F.3d 444, 452 (2d Cir. 2004) (determining that court-ordered change in parties‘
relationship was key); Toms v. Taft, 338 F.3d 519, 529 (6th Cir. 2003) (concluding that the
absence of a court order precluded a finding of prevailing party status); Christina A., 315
F.3d at 993 (citing Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep‘t of Health & Human
Res., 532 U.S. 598, 604 (2001)); see also Oil, Chemical & Atomic Workers Int‘l Union v.
Dep‘t of Energy,
288 F.3d 452, 458 (D.C. Cir. 2002), superseded by statute, Open Government Act of 2007,
5 U.S.C. § 552(a)(4)(E), as recognized in Davis v. Dep‘t of Justice,
606 F. Supp.2d 1 (D.D.C. 2009) (holding that, after a motion to dismiss is awarded, there is
nothing left for the district court to oversee).
318. Roberson v. Guiliani, 346 F.3d 75, 83 (2d Cir. 2003); Am. Disability Ass‘n v.
Chmielarz, 289 F.3d 1315, 1318–20 (11th Cir. 2002).
ANTHONY DISARRO 60.2
2010] SIX DECREES OF SEPARATION 327
consent decree.‖
319
The Second Circuit took the Kokkonen dicta one step
further, suggesting that a breach of a settlement agreement containing a
jurisdictional retention provision would be a violation of a court order.
320
The flaw in the reasoning employed by these two courts is that a breach
of an agreement cannot be a violation of a court order unless the agreement
is incorporated into the order. These decisions used the false correlation
drawn in Kokkonen to circumvent the Supreme Court‘s prevailing party
teaching in Buckhannon.
The Second Circuit further held that the agreement effectuated a court-
ordered change in the parties‘ legal relationship because the settlement was
conditioned on the court signing the dismissal order.
321
This argument
overlooks the fact that most private settlement agreements are conditioned
on the court dismissing the case. Under this logic, it can always be argued
that a settlement agreement constitutes a court-ordered change in the
parties‘ relationship. This faulty reasoning eviscerates the distinction
drawn in Buckhannon between consent decrees and settlement agreements.
The third case in this trilogy is Barrios v. California Interscholastic
Federation.
322
In that case, the court disregarded the Supreme Court‘s
comments in Buckhannon as non-binding dicta,
323
and reasoned that,
because a settlement agreement is a ―legally enforceable instrument,‖ it
constitutes a material change in the legal relationship between the
parties.
324
This rationale ignores the distinction between an ―instrument
enforceable as a matter of contract law and a court order enforceable as a
matter of judicial oversight.‖
325
It also renders the Buckhannon distinction
between consent decrees and settlement agreements meaningless because
all settlement agreements are legally enforceable.
326
Whatever merit there is to the significance attributed by the Court in
Buckhannon to the distinction between consent decrees and settlement
agreements, that decision is now the law. Courts should not seek to
319. Chmielarz, 289 F.3d at 1321. Significantly, nowhere in its decision did the
Eleventh Circuit state or imply that compliance with the settlement‘s terms could be
enforced by a contempt citation. Accordingly, it is hard to see how the court could claim
that settlement agreements are the functional equivalent of consent decrees.
320. Roberson, 346 F.3d at 83. The Second Circuit did acknowledge that a court likely
could not use its contempt powers to enforce a settlement agreement that had not been
incorporated into a court order. Id. at 83 & n.9.
321. Id. at 83.
322. 277 F.3d 1128 (9th Cir. 2002).
323. Id. at 1134 & n.5 (citing Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep‘t of
Health & Human Resources, 532 U.S. 598, 604 n.7 (2001)). The Supreme Court‘s remarks
in Kokkonen were also dicta.
324. Barrios, 277 F.3d at 1134.
325. Bell v. Bd. of Cnty. Comm‘rs, 451 F.3d 1097, 1103 n.7 (10th Cir. 2006).
326. Id.
ANTHONY DISARRO 60.2
328 AMERICAN UNIVERSITY LAW REVIEW [Vol. 60:275
circumvent the Buckhannon Court‘s teaching by falsely equating the two
devices. Courts should refuse to grant prevailing party status to parties to
settlement agreements, regardless of whether they contain jurisdictional
retention provisions.
CONCLUSION
Certainly, there will be times when one or more of the six points of
distinction between consent decrees and settlement agreements will be
immaterial to the parties. For instance, there may not be any applicable
fee-shifting statute for the parties to fight over.
But in most instances, each of the points will be important. The threat of
a contempt citation is a powerful motivating factor to secure performance
of an obligation. Confidentiality of settlement protects parties from
becoming exposed to numerous lawsuits from other potential plaintiffs.
The right to reappear before a judge who is familiar with the issues and
parties, or thinks an opposing party was unreasonable or untrustworthy, is a
valuable asset that parties should strive to maintain.
An injunction can be neutered by an unwitting failure to comply with the
specificity requirement of Rule 65(d). Counsel will need to consider the
likelihood that the court will modify a consent decree against their client‘s
wishes, or whether, by agreeing to a consent decree, they will walk straight
into a judicial award of attorneys‘ fees to the adversary. These six factors
will merit careful consideration in deciding which route counsel should
prefer and which route their client can afford to accept.
Courts should eschew reliance upon the Kokkonen canard, that a
jurisdictional retention provision converts a breach of contract into a
contemptuous violation of a court order. To secure post-dismissal
enforcement jurisdiction in federal court, parties should be required to
insert settlement terms into a consent decree and not simply incorporate
them by reference. Similarly, parties that have the right to seek attorneys‘
fees under a fee-shifting statute should not be deemed a prevailing party on
the basis of a settlement agreement unless its terms have been included in a
court order.
