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Precision Is Paramount: Court Enforces Terms of Email Agreement in Settlement

The US Court of Appeals for the Federal Circuit reversed a district court order enforcing one party’s version of a settlement agreement, finding that version unsupported by the record. The Court found that the other party’s version accurately reflected the parties’ understanding. PlasmaCam, Inc. v. CNCElectronics, LLC, Case No. 21-1689 (Fed. Cir. Feb. 3, 2022) (Dyk, Reyna, JJ.) (Newman, J., dissenting).

PlasmaCam and CNCElectronics (CNC) both operate in the precision cutting industry. PlasmaCam is the exclusive licensee of a patent related to precision cutting equipment, and it sued CNC for allegedly infringing the patent. In December 2019, the parties notified the district court that they had settled the case but disputes arose in the process of drafting a formal agreement, particularly with respect to the scope of “covered products” under the settlement license and the scope of a “mutual release.” Although the parties eventually advised the district court that they had reached a complete agreement, disputes remained as to the scope of covered products. On PlasmaCam’s motion, the district court ordered CNC to execute PlasmaCam’s version of the agreement, execute a promissory note contemplated by the agreement and pay any unpaid settlement funds. CNC appealed.

The Federal Circuit first evaluated whether it had jurisdiction. The Court found that it had jurisdiction because the district court’s order was an injunction (since it ordered CNC to specifically perform an action, i.e., execute an agreement and promissory note, and not merely to pay money) and a final judgment (because it resolved all substantial issues between the parties).

The Federal Circuit next considered the negotiations between the parties with regards to the settlement agreement. As to the scope of covered products, the Court found that the parties had reached agreement regarding a definition of “covered products” in an email, even though the scope of the mutual release was still being negotiated. However, the Court found that the agreed definition of “covered products” was different from the one PlasmaCam provided to the Court and the one which the Court had subsequently ordered CNC to adopt. The Court also recognized the parties’ subsequent agreement regarding the mutual release, which both parties had confirmed to the district court. Because the district court had clearly erred by adopting a definition of “covered products” different from the one that was agreed by the parties, the Court reversed the district court’s order and remanded for further proceedings consistent with the parties’ actual agreement.

Judge Newman dissented. In her view, no agreement had been reached at all, as the parties had apparently continued to disagree as to the scope of key terms.

Practice Note: In this case, the parties’ statements to the district court that they had reached an agreement played a large role in establishing that an agreement had been formed even though there was no single signed document that reflected the agreement and, in some views, there continued to be disputes about important terms. Litigants should be careful not to represent to a court that an agreement has been [...]

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School’s Out: Trademark Settlement Agreement Enforceable

Addressing issues relating to jurisdiction, contract enforceability and trademarks, the US Court of Appeals for the First Circuit concluded that two schools that used similar names had a valid and enforceable settlement agreement obligating one school to pay for the other to change its name. The Commonwealth School, Inc. v. Commonwealth Academy Holdings LLC, Case No. 20-1112 (1st Cir. Apr. 14, 2021) (Selya, J.)

It came to the attention of a Boston private school, The Commonwealth School (the School), that a more recently founded private school in Springfield, Massachusetts, was operating under a similar name, Commonwealth Academy (the Academy). In 2016, the School brought suit against the Academy under the federal Lanham Act, claiming that the School had a trademark on its “Commonwealth School” name, and that “Commonwealth Academy” infringed on that trademark. The parties entered into settlement mediation, and agreed that the School would pay the Academy $25,000 and in return the Academy would change its name to “Springfield Commonwealth Academy.”

The district court issued an order that a settlement was reached. Three years passed, and the Academy took steps to change its name in promotional materials and on its website. But the School would not pay the Academy because it claimed the Academy still had the “Commonwealth Academy” name appearing prominently on its students’ basketball jerseys. At a hearing to resolve the dispute, the district court reversed its earlier order: the parties had not actually reached a settlement agreement because there had been no “meeting of the minds” for contract formation, despite the other steps the Academy took to fulfill the agreement. The district court dismissed the case because neither party showed cause to reopen the case. The Academy appealed, arguing that the district court erred in refusing to enforce the settlement agreement.

The First Circuit addressed three main issues on appeal: (1) whether there was appellate jurisdiction to hear the appeal, (2) whether the district court had subject matter jurisdiction to hear the initial settlement agreement dispute, and (3) on the merits, whether the settlement agreement was a validly formed contract.

The First Circuit concluded it had jurisdiction to review the district court’s dismissal order. Generally, under the final judgment rule, only final decisions are appealable. But here, the order at issue was merely interlocutory, meaning it was issued during the course of litigation. The Academy claimed the order was in fact reviewable because the order resulted in the case’s dismissal, and thus it should fall under the merger doctrine exception, where interlocutory orders merge into final judgments. The Court considered this in the context of the School’s failure to prosecute, and whether the order actually fell under an exception to the exception – i.e., where a dismissal is based on a failure to prosecute, it does not fall under the merger doctrine. In its analysis, the Court considered the policy considerations underlying the merger doctrine: to preserve integrity of the final judgment rule by preventing any reward for bad faith tactics. Here, the School, as the [...]

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