Trial Courts Must Take Specific Steps to Enforce Settlements
After a case has been dismissed, a trial court retains authority to enforce a settlement only if the court’s dismissal entry either includes the agreement’s terms or explicitly states that the court has kept jurisdiction to enforce the agreement, according to an Ohio Supreme Court ruling today.
A Lucas County trial court took neither of these steps when dismissing a case involving a 2008 fire at a Toledo apartment complex, so the court had no authority to enforce the settlement among the parties, Justice Judith L. French wrote in the 6-1 decision.
The holding affirmed the Sixth District Court of Appeals’ judgment and returns the case to the trial court for additional consideration. The decision also resolves a conflict among Ohio appeals courts on this issue.
Infinite Security Solutions filed a claim against Karam Properties I and II asking for compensation for security services it provided at the Hunter’s Ridge apartment complex in Toledo. Karam filed a counterclaim against Infinite alleging that the security company was negligent in the 2008 fire caused by the use of fireworks, which Infinite had allowed.
Travelers Indemnity Company also sued Infinite following a roughly $8.9 million insurance payout to Karam Managed Properties, which managed the apartments, and Toledo Properties, the complex owner.
The trial court combined the two cases. In May 2011, Infinite agreed to pay a set amount to settle all the claims, and the parties agreed. All issues were resolved except how to split the settlement money, the parties told the court.
Travelers argued that the court’s dismissal entry was a mistake because the settlement had not been finalized and asked the court to set aside the entry. At a hearing, the trial judge described the entry as “conditional” and a “placeholder entry.” In October 2012, the court ordered Infinite to send all but $25,000 of the settlement amount to Travelers and ordered the parties to finalize the agreement and release within 30 days.
Karam appealed to the Sixth District, which ruled that the trial court had no jurisdiction to make the October 2012 ruling because of its earlier dismissal. Travelers appealed to the Ohio Supreme Court, and the Sixth District notified the Supreme Court that its judgment conflicted with decisions in two other Ohio appeals courts.
There Are No Conditional Dismissals
Noting that both the trial and appellate courts in this case focused on whether the dismissal was conditional or unconditional, Justice French explained that Ohio’s rules for civil cases do not provide for “conditional” dismissals. Nor has the Ohio Supreme Court directly held that a court may “conditionally” dismiss a case, she added. The court rejected arguments related to this concept.
Local Rules Provide Direction
Justice French pointed out that many common pleas courts in the state have similar local rules establishing a procedure for the court and the parties to follow when a settlement is reached in a civil case. The Supreme Court concluded that the procedure in these local rules demonstrate the best way to handle settlements in civil cases.
Under this process, “a case remains pending following notification of settlement until counsel submits a notice of dismissal or, after a stated period of time, the trial court files a dismissal entry,” Justice French wrote. “The resulting delay allows the parties to finalize and execute their agreement and necessary releases while the trial court still has jurisdiction over the parties and their pending claims.”
Allowing courts to retain jurisdiction to enforce a settlement when it dismisses a case is “the most efficient means of enforcing the agreement,” she reasoned.
Language Needed for Court to Keep Authority Over Case
The Supreme Court acknowledged that parties may shy away from settling if they have to include the terms of their settlements into a public dismissal entry, and the court concluded that including a settlement’s terms in the dismissal entry is not required.
As far as what is needed for a court to keep jurisdiction, Justice French noted that “specific or hypertechnical language is inefficient and counterproductive.”
“As Karam suggests, the following language in a dismissal entry would suffice: ‘The court hereby retains jurisdiction to enforce the settlement agreement reached between the parties,’” she wrote. “If there is uncertainty as to the terms of the settlement agreement, the court should hold a hearing to determine whether an enforceable agreement exists.”
In this case, however, the trial court mentioned only that the parties had come to a resolution and “did not expressly retain jurisdiction to enforce the underlying settlement agreement or to conduct any further proceedings in relation to the cases,” Justice French continued. “Nor did the court purport to condition its dismissal on the parties’ filing of a later entry.”
Joining Justice French’s opinion were Chief Justice Maureen O’Connor and Justices Paul E. Pfeifer, Terrence O’Donnell, Judith Ann Lanzinger, and William M. O’Neill.
Justice Sharon L. Kennedy dissented.
In cases in which a trial court sua sponte issues a dismissal entry after notification of settlement, Justice Kennedy reasoned that the analysis should begin with determining whether the trial court was authorized to dismiss the case. The issue of whether the trial court properly retained jurisdiction to enforce the settlement agreement is reached only if the dismissal was proper.
In this case, the trial court lacked authority to dismiss the case pursuant to state rules for civil cases and the trial court’s local rules, Justice Kennedy noted. She concluded that the trial court committed reversible error in dismissing the action.
Accordingly, with respect to the discretionary appeal, Justice Kennedy would have reversed the appellate court and sent the case back to the trial court with instructions to vacate the dismissal entry and to conduct additional proceedings. She would have dismissed the certified-conflict case as improvidently certified.
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