                                                                                                                           Opinions of the United
2002 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-28-2002

Shaffer v. GTE N Inc
Precedential or Non-Precedential:

Docket 01-1486




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Recommended Citation
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PRECEDENTIAL

       Filed March 28, 2002

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 01-1486
No. 01-1707

BRENDA L. SHAFFER,

       Appellant

v.

GTE NORTH, INC.

Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. Civil Action No. 99-CV-01768)
District Judge: Honorable Sylvia H. Rambo

Argued February 7, 2002

Before: SLOVITER and AMBRO, Circuit Judges
and SHADUR,* District Judge

(Filed March 28, 2002)

Lawrence S. Markowitz (ARGUED)
Markowitz & Krevsky, P.C.
York, PA 17405-0392

 Attorney for Appellant
________________________________________________________________

       * Honorable Milton I. Shadur, United States District Court Judge for the
Northern District of Illinois, sitting by designation.


       James W. Kraus (ARGUED)
       DKW Law Group, P.C.
       Pittsburgh, PA 15219

        Attorney for Appellee

OPINION OF THE COURT

SHADUR, District Judge.

This consolidated appeal involves a variant of the
frequently-encountered situation in which litigants, having
agreed on the terms of a settlement but not having fully
implemented its terms, obtain a dismissal order from the
district court in the interim. Because such situations
continue to provide a trap for the unwary despite the
teaching of a unanimous 1994 Supreme Court decision
(and despite the earlier announcement of the selfsame
principles, plus the subsequent adherence to that teaching,
by this court), we write for publication here.

Background

Brenda Shaffer ("Shaffer") initiated this litigation by filing
a seven-count complaint against her former employer GTE
North, Inc. ("GTE"),1 charging it with her allegedly wrongful
discharge said to be actionable under various provisions of
state and federal law. After reviewing the parties’
submissions on cross-motions for summary judgment
under Fed. R. Civ. P. ("Rule") 56, the district court granted
GTE’s motion as to all counts except Shaffer’s gender-based
disparate treatment claim. On November 13, 2000, the date
the jury trial was set to begin, counsel for both parties told
the court they had reached a settlement. After GTE’s
counsel described the terms of the settlement agreement on
the record, the court engaged Shaffer and her then counsel
James Harris in the following exchange:

       THE COURT: Is that your understanding, Ms.
       Shaffer?
_________________________________________________________________

1. Although GTE is now known as Verizon Communications, for
purposes of this opinion we continue to refer to appellee as GTE.

                                2


       MS. SHAFFER: Yes.

       THE COURT: Are you satisfied with that?

       MR. HARRIS: Yes.

Then the judge entered this dismissal order ("November 13
Order"):

       Counsel having reported to the court that this action
       has been settled, IT IS HEREBY ORDERED THAT this
       action is dismissed without costs and without
       prejudice to the right, upon good cause shown, to
       reinstate the action within sixty (60) days if the
       settlement is not consummated.

Because Shaffer later refused to sign the written
settlement agreement that had then been tendered by GTE,
it returned to federal court requesting a conference. That
conference led to the judge’s entry of an order setting a
time within which GTE could move to enforce the claimed
settlement agreement, a motion that was then filed on the
60th day after entry of the dismissal order. That motion
was granted on January 23, 2001, prompting Shaffer to file
this appeal in which she argues that her counsel was not
authorized to enter into the settlement.

Although neither party had posed the question whether
the district court had subject matter jurisdiction to hear
GTE’s motion to enforce the asserted settlement agreement,
nor had the district court focused on that issue, we raised
the matter sua sponte--as every court is obligated to do
when subject matter jurisdiction is in question (Club
Comanche, Inc. v. Gov’t of the Virgin Islands, 278 F.3d 250,
255 (3d Cir. 2002)). At our direction counsel for the parties
tendered supplemental submissions addressing the subject
matter jurisdictional issue, and we consider that legal
question de novo (In re Phar-Mor, Inc. Sec. Litig., 172 F.3d
270, 273 (3d Cir. 1999)).2
_________________________________________________________________

2. We were told during oral argument that GTE has actually paid Shaffer
and her original counsel $100,000 (that had been the number discussed
and assertedly agreed upon during the parties’ November 13 settlement
conference). But that non-record information has not mooted the issue,
for the litigants have not agreed as to whether Shaffer is entitled to
retain that amount if their total dispute is not resolved to their mutual
satisfaction.

                                3


Subject Matter Jurisdiction

There are of course perfectly understandable reasons for
the current dismissal of an action once the parties have
reached agreement on settlement, even though the
implementation of the settlement may require something
further in the way of documentation or payment or both.
Once the litigants are satisfied that the case is resolved, the
incurring of additional lawyer time and client expense in
requiring counsel to return to court one or more times to
cause the later entry of an order of dismissal or for other
reasons may seem needless and wasteful to the parties.
That is obviously the case even if only a single payment is
called for after the final paperwork is completed, and it
surely applies to the quite common type of settlement
agreement that looks to a defendant’s staged payments over
a period of months or even longer.3

Little wonder, then, that Kokkonen v. Guardian Life
Insurance Co. of America, 511 U.S. 375 (1994) commanded
the agreement of a unanimous Supreme Court. There the
parties to a federal action reached a settlement and
executed a stipulation and order of dismissal with
prejudice, which the district court signed without referring
to the settlement agreement or reserving jurisdiction to
enforce it. When a dispute then ensued about one of the
parties’ obligations under the settlement, the district court
ordered enforcement of the settlement on the premise that
it had the "inherent power" to do so. But the Supreme
Court held the district court had neither ancillary
jurisdiction nor inherent power to enforce the settlement
(id. at 380-81). Instead a district court’s power to do so
_________________________________________________________________

3. We are troubled by the suggestion that has been voiced elsewhere (Otis
v. City of Chicago, 29 F.3d 1159, 1163 (7th Cir. 1994)(en banc); Ford v.
Neese, 119 F.3d 560, 562 (7th Cir. 1997) and King v. Walters, 190 F.3d
784, 786 (7th Cir. 1999)) that the practice of ordering the current
dismissal of cases involving as-yet-incomplete settlements is prompted
by the district judges’ concern over statistics--over the size of their
calendars. None of those opinions was authored by a judge with district
court experience--and for a studied response to that view, see the
concurrence in Otis, 29 F.3d at 1171-73, written by a former district
judge.

                                4


exists only if one of two specified actions had been taken at
the time of dismissal (id. at 381):

       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.

We have explicitly followed Kokkonen in Phar-Mor, 172
F.3d at 274, where we held that the phrase "pursuant to
the terms of the Settlement" in the dismissal order was
insufficient to incorporate the terms of the settlement
agreement and therefore did not confer subject matter
jurisdiction over settlement enforcement. Because there
was also no provision retaining jurisdiction in the Phar-Mor
dismissal order, the district court there was held to have
lacked subject matter jurisdiction (id.). Indeed, we had
earlier anticipated the Kokkonen analysis and holding in
Sawka v. Healtheast, Inc., 989 F.2d 138, 141 (3d Cir.
1993), decided a year before the Supreme Court had
occasion to address the jurisdictional issue.

Phar-Mor is more than instructive as to the effect (or
rather the lack of effect) of the precise language that was
employed at the outset of the November 13 Order
dismissing this action: "Counsel having reported to the
court that this action has been settled. . . ." In that respect
Phar-Mor, 172 F.3d at 274 holds, quoting Miener v. Missouri
Dep’t of Mental Health, 62 F.3d 1126, 1128 (8th Cir. 1995),
that "[a] dismissal order’s mere reference to the fact of
settlement does not incorporate the settlement agreement
in the dismissal order." Moreover, Phar Mor , 172 F.3d at
174-75 adheres to Kokkonen’s further holding that approval
of a settlement agreement does not suffice to make the
settlement part of the dismissal order. Because the
dismissal order here began by simply adverting to the
counsel-reported settlement without the incorporation of

                                5


any specific settlement terms, Phar-Mor makes it crystal
clear that the second Kokkonen exception does not apply.

As for the first Kokkonen exception, it is of course true
that the district court’s November 13 Order left it open to
either party, "upon good cause shown, to reinstate the
action within sixty (60) days if the settlement is not
consummated." But reinstatement of an action, which
revives the underlying claim and sends the litigants back to
the original battlefield, is totally different from the
enforcement of the terms of a settlement agreement
because one of the parties has not complied with those
terms. As Kokkonen, 511 U.S. at 378 said:

       Enforcement of the settlement agreement, however,
       whether through award of damages or decree of
       specific performance, is more than just a continuation
       or renewal of the dismissed suit, and hence requires its
       own basis for jurisdiction.4

In this instance the district court’s November 13 Order
did contemplate the possibility of reinstating the lawsuit if
the settlement had not been carried out. As Shaffer would
have it, that somehow conferred jurisdiction on the district
court to grant the entirely different relief of enforcing the
settlement agreement because a motion to that latter end
was brought within 60 days of the November 13 Order. But
that contention is at cross-purposes with the principles
announced in Kokkonen (as well as in our pre-Kokkonen
decision in Sawka and our post-Kokkonen decision in Phar-
Mor), and we hold today that language in a dismissal order
providing for the reinstatement of an action if a settlement
agreement is not consummated does not satisfy the first
_________________________________________________________________

4. Kokkonen, 511 U.S. at 378 referred to the holdings of some other
Courts of Appeals that Rule 60(b)(6) may sometimes be available to
reopen a dismissed suit where the agreement that was the basis for the
dismissal is breached. By contrast, we have held in Sawka, 989 F.2d at
140-41 that breach of a settlement agreement does not qualify as an
"extraordinary circumstance" as required to set aside a dismissal order
under Rule 60(b)(6). But that difference of views is truly a non-issue, for
the reason next stated in the text.

                                6


Kokkonen precondition for the enforcement of the
settlement agreement itself.5

Shaffer’s counsel has argued, both in response to our
request for supplemental briefing and at oral argument,
that the district court had inherently retained jurisdiction
through such on-the-record statements as "[t]he case is
closed unless either party for some reason needs to reopen
the case." But once again that looked to possible
reinstatement (as the November 13 Order confirmed) and
not to enforcement, and Kokkonen, 511 U.S. at 380 rejected
any such resort to notions of "inherent power" as surviving
a dismissal order. Nor will it do to point to the district
court’s December 21, 2000 order that invited GTE t o file a
motion to enforce the settlement agreement as somehow
implying that there had initially been an unvoiced intention
to retain jurisdiction for a purpose so different from the one
actually articulated in the November 13 Order. Phar-Mor,
172 F.3d at 275 makes it clear that such "unexpressed
intent is insufficient to confer subject matter jurisdiction."

Conclusion

Because neither condition for the exercise of ancillary
jurisdiction as identified in Kokkonen was met here, we
hold that the district court lacked subject matter
jurisdiction to rule on GTE’s motion to enforce the
settlement agreement.6 Accordingly we VACATE the district
_________________________________________________________________

5. In Metro-Goldwyn Mayer, Inc. v. 007 Safety Prods., Inc., 183 F.3d 10
(1st Cir. 1999)(where the district court had "conditionally dismissed the
case, subject to its reopening in the event the settlement was not
consummated within sixty days," id. at 13), the First Circuit held that
conditional dismissal amounted to an express retention of jurisdiction
over the entire settlement agreement such as to satisfy Kokkonen (id. at
14). Because we view the district court’s quite different language in our
case--an outright dismissal subject to the possibility of future
reinstatement (but not to future enforcement of the settlement itself)--as
not susceptible to such a reading, we need not address whether we
would be inclined to agree with the First Circuit’s conclusion under the
circumstances that were before it.

6. This holding is of course without prejudice to the pursuit of whatever
rights and obligations the parties may have in a state court of competent
jurisdiction.

                                7


court’s January 23, 2001 order, thus leaving in place the
November 13 Order of dismissal. It can only be hoped that
this reconfirmation of basic jurisdictional principles that
have been firmly established for almost a decade will avoid
any further repetition in other cases of the painful lesson
taught here.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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