                             In the
 United States Court of Appeals
              For the Seventh Circuit
                         ____________

No. 03-2752
JOHNNIE SIMS-MADISON,
                                             Plaintiff-Appellant,
                                v.

INLAND PAPERBOARD AND PACKAGING,
INC. (f/k/a INLAND CONTAINER CORP.),
                                             Defendant-Appellee.

                         ____________
           Appeal from the United States District Court
     for the Southern District of Indiana, Evansville Division.
        No. EV 01-125-C-Y/H—Richard L. Young, Judge.
                         ____________
     ARGUED MAY 19, 2004—DECIDED AUGUST 11, 2004
                     ____________


 Before CUDAHY, RIPPLE, and WILLIAMS, Circuit Judges.
  WILLIAMS, Circuit Judge. Johnnie Sims-Madison is an
African-American woman who was employed at Inland
Paperboard and Packaging’s Evansville, Indiana, plant
until early 2000, when she was fired for fighting with an-
other employee. Sims-Madison brought a Title VII action,
and the district court granted summary judgment to Inland.
At the same time, the district court also said that it was
enforcing a purported settlement agreement the parties had
previously reached. Sims-Madison appeals, and we vacate
and remand.
2                                                    No. 03-2752

                      I. BACKGROUND
  Sims-Madison and a co-worker, Mike Faver, were fired for
fighting in January 2000. The Paper, Allied-Industrial,
Chemical and Energy Workers International Union (the
“Union”), which represented both employees under a col-
lective bargaining agreement, immediately filed grievances
protesting their terminations. The following month, Sims-
Madison filed a charge with the EEOC alleging racial and
gender discrimination and retaliation by Inland. She also
hired attorney Kevin Kinkade to represent her.
  In December 2000, while Sims-Madison and Inland were
participating in the EEOC’s mediation program, Kinkade
sent the mediator a letter. This letter, which is the settle-
ment agreement,1 stated:
    This letter serves to confirm that my client, Johnnie
    Sims Madison, has agreed to the following:
    1) She will give up arbitration of her termina-
       tion;
    2) She will give up her EEOC Charge and not file
       any additional charges for any conduct which
       predates the Agreement;
    3) She will agree that she will not be reinstated
       and cannot apply for re-employment with the
       company; and
    4) She will execute a proper and appropriate re-
       lease of claims.
In exchange, Kinkade wrote that Inland would pay Sims-
Madison $30,000. William Hewett, an in-house attorney for
Inland, also received a copy of the letter; on the letter below



1
  For ease of reference, we refer to this letter as the “agreement”
even though its validity is disputed.
No. 03-2752                                                3

Kinkade’s signature he handwrote “Agreed William D.
Hewett 12/8/00” and returned the letter to Kinkade. Sims-
Madison first saw this letter when Kinkade provided her
with a copy a few days after he had sent it. Upon reading
the letter, Sims-Madison immediately told Kinkade that she
had never authorized him to settle the pending arbitration
of her union grievance, as provided by the first point of the
agreement. Accordingly, she refused to comply with the
fourth point of the agreement and sign a release. Two
months later, Hewett sent Kinkade a letter in which he
wrote that Inland believed it had an enforceable agreement
with Sims-Madison. Hewett’s letter stated that Inland
expected her to sign the release, and that it would pay her
as soon as she did so. Sims-Madison again refused to sign
the release and has continued to refuse ever since. Accord-
ingly, Inland has never paid her the $30,000.
   Despite the first point of the agreement that purported to
drop Sims-Madison’s union grievance, the Union and Inland
proceeded in February 2001 to arbitrate the grievances
concerning Sims-Madison’s and Faver’s terminations. In May,
the arbitrator reduced both terminations to 60-day suspen-
sions and awarded both employees backpay and benefits
dating back to January 2000 (with the exception of the
suspension period). Inland reinstated both employees, but
paid backpay and benefits only to Faver. In July 2001,
Sims-Madison (who had returned to work) sued Inland for
firing her in January 2000, alleging that the company’s ac-
tions were motivated by racial and gender discrimination
and retaliation.
  In its answer to Sims-Madison’s complaint, Inland pleaded
the affirmative defense of accord and satisfaction. Inland
later moved for summary judgment on a number of grounds,
and in November 2002 the district court granted Inland’s
motion solely based on accord and satisfaction, finding that
a “valid, binding and enforceable settlement agreement was
reached.” The court also stated that it “enforces those
4                                                No. 03-2752

portions of the settlement agreement consistent with the
authority Plaintiff bestowed upon Mr. Kinkade.”
   Eight days after the district court issued its order, Inland
fired Sims-Madison for a second time. Inland claims that
the district court’s enforcement of the agreement, specifi-
cally its third point—which provided that Sims-Madison
would not be reinstated and could not apply for re-em-
ployment—authorized it to fire her. Sims-Madison’s second
discharge prompted the Union to file a separate suit2
against Inland claiming that Inland illegally violated the
arbitrator’s award by refusing to pay her the backpay and
benefits, and by firing her for the same incident for which
the arbitrator had ordered her reinstated. The Union’s
lawsuit is not before us, and we express no opinion on its
merits.
   Sims-Madison then moved under Fed. R. Civ. P. 59(e) to
alter or amend the judgment. The district court denied the
motion, but noted that it had misunderstood the facts when
it issued its original order. Specifically, the court said it
originally believed that Inland had paid Sims-Madison the
agreed-upon $30,000, and also that it had been unaware of
the arbitration proceeding. Both of these facts, the order
said, “should have been brought to the court’s attention
prior to the court’s judgment.”


                       II. ANALYSIS
  Sims-Madison appeals (1) the district court’s enforcement of
the settlement agreement, (2) the grant of summary
judgment for Inland, and (3) the denial of her Rule 59(e)
motion.


2
  Paper, Allied-Industrial, Chemical and Energy Workers Int’l
Union v. Inland Paperboard and Packaging, Inc., No. 1:03-CV-
0741SEB-VSS, is presently pending in the Southern District of
Indiana.
No. 03-2752                                                5

A. Standard of Review
  We review the grant of summary judgment de novo. Lang
v. Ill. Dep’t of Children & Fam. Servs., 361 F.3d 416, 418
(7th Cir. 2004). We review for an abuse of discretion both
the enforcement of the settlement agreement, Hakim v.
Payco-Gen. Am. Credits, Inc., 272 F.3d 932, 935 (7th Cir.
2001), and the denial of Sims-Madison’s Rule 59(e) motion,
Hayes v. Potter, 310 F.3d 979, 980 (7th Cir. 2002).


B. Enforcement of the Settlement Agreement
  Sims-Madison argues that the district court erred by
enforcing the settlement agreement because Inland never
requested enforcement, either in its motion for summary
judgment or at any other time during the proceedings in the
district court. Issues regarding the formation, construction,
and enforcement of settlement agreements are governed by
state contract law. Pohl v. United Airlines, Inc., 213 F.3d
336, 338 (7th Cir. 2000). All of the pertinent events in this
case occurred in Indiana, and the parties agree that Indiana
law controls. In its motion for summary judgment, Inland
asserted accord and satisfaction—an affirmative defense,
Mominee v. King, 629 N.E.2d 1280, 1282 (Ind. Ct. App.
1994)—as one possible ground for granting the motion. But
by enforcing the settlement agreement, the court ordered
specific performance of the terms of the agreement, and
specific performance is a contractual remedy rather than an
affirmative defense. See Wagner v. Spurlock, 803 N.E.2d
1174, 1180 (Ind. Ct. App. 2004). Although Inland had
referenced the agreement when it moved for summary
judgment on the ground of accord and satisfaction, the only
relief it ever requested in that motion was the dismissal of
Sims-Madison’s Title VII action—it never asked the court
to authorize her termination under the contract’s terms.
  The district court acted sua sponte when it went beyond
the relief Inland requested and ordered enforcement of the
6                                                No. 03-2752

agreement. Sua sponte judgments are disfavored. See S. Ill.
Riverboat Casino Cruises, Inc. v. Triangle Insulation &
Sheet Metal Co., 302 F.3d 667, 677-78 (7th Cir. 2002). We
have cautioned district courts that they should provide liti-
gants with notice and an opportunity to present evidence
when they are considering entering judgment sua sponte.
Tranzact Techs., Ltd. v. Evergreen Partners, Ltd., 366 F.3d
542, 549 (7th Cir. 2004). Although Sims-Madison had notice
of the accord and satisfaction ground of Inland’s motion, she
was unaware of the possibility that the district court might
enforce the agreement and thereby order anything other
than the dismissal of her Title VII suit. Cf. R.J. Corman
Derailment Servs., LLC v. Int’l Union of Operating Eng’rs,
Local Union 150, AFL-CIO, 335 F.3d 643, 650 (7th Cir. 2003)
(fact that plaintiff had itself moved for summary judgment
“does not mean that it was fairly appraised of the ultimate
basis for the district court’s reasoning” in granting sum-
mary judgment for the defendant).
  In opposition to Inland’s motion for summary judgment,
Sims-Madison argued that the agreement was not binding
(and hence there was no accord and satisfaction) because
she never authorized Kinkade to settle the union grievance.
See Koval v. Simon Telelect, Inc., 693 N.E.2d 1299, 1301
(Ind. 1998) (attorney must be authorized to settle or act
pursuant to inherent agency power before he can bind his
client to a settlement agreement). She also argued that in
any event she could not have authorized Kinkade to settle
the grievance because the National Labor Relations Act pro-
vides that a unionized employee can only drop a grievance
without union intervention under certain conditions, and
she claims those conditions were not met here. See 29 U.S.C.
§ 159(a); Truserv Corp. v. Nat’l Labor Relations Bd., 254
F.3d 1105, 1119 (D.C. Cir. 2001); Shoppers Food Warehouse
Corp. v. United Food & Comm. Workers Local 400, 315
N.L.R.B. 258, 262 (1994). In response to Sims-Madison’s argu-
ments, the district court refused to enforce the first point of
No. 03-2752                                                  7

the agreement. See Harbour v. Arelco, Inc., 678 N.E.2d 381,
385 (Ind. 1997) (court can eliminate illegal provision and
enforce remainder of contract if it can do so without frustrat-
ing the contract’s basic purpose).
  But the district court’s resolution is insufficient because
the third provision of the agreement prohibiting Sims-
Madison’s reinstatement seemingly conflicts with the arbi-
tration award ordering her reinstatement. The existence of
the arbitration award renders ambiguous the otherwise
clear language of the third point of the agreement. Although
a district court has the inherent authority to summarily
enforce a settlement agreement, Carr v. Runyan, 89 F.3d
327, 331 (7th Cir. 1996); Wilson v. Wilson, 46 F.3d 660, 667
(7th Cir. 1995), when the existence or terms of a settlement
agreement are in dispute, the district court should hold an
evidentiary hearing to resolve the disputes or ambiguities,
id. at 664. Here, the agreement’s term concerning Sims-
Madison’s reinstatement is in tension with the arbitrator’s
award. The validity of the third point is further in doubt
because federal courts generally must enforce an arbitration
award that results from a proceeding pursuant to a collec-
tive bargaining agreement. Dean v. Sullivan, 118 F.3d 1170,
1171 (7th Cir. 1997). Challenges to an arbitrator’s award
must be made within 90 days or they are waived. See 9
U.S.C. § 12; Int’l Union of Operating Eng’rs, Local 150,
AFL-CIO v. Rabine, 161 F.3d 427, 429 (7th Cir. 1998).
Inland never challenged the arbitration award in federal
court, but its position now is that the district court’s
enforcement of the non-reinstatement provision of the
agreement overrides the arbitration award ordering Sims-
Madison’s reinstatement.
  The district court, however, did not consider any of these
issues because it enforced the settlement agreement sua
sponte without giving Sims-Madison an opportunity to raise
them before it issued its order. This was an abuse of
discretion. As the district court observed, Sims-Madison
8                                                No. 03-2752

first challenged the third provision of the agreement in her
motion under Fed. R. Civ. P. 59(e). But Sims-Madison had
no reason to challenge the reinstatement provision sooner
because at the time Inland moved for summary judgment,
she had already been reinstated and Inland had never
suggested that it intended to fire her a second time. The
district court never gave Sims-Madison notice that it was
contemplating enforcement of the agreement or an opportu-
nity to present evidence against its enforcement, see
Tranzact Techs., Ltd., 366 F.3d at 549, and she raised her
arguments against enforcement at the first opportunity she
had to do so. Accordingly, because the district court failed
to consider the possible impact of the arbitrator’s award on
the validity of the reinstatement provision, we vacate the
enforcement of the agreement.


C. Accord and Satisfaction
  Sims-Madison also challenges the grant of summary
judgment in favor of Inland because she claims that there
was never an accord and satisfaction. Accord and satisfac-
tion is an affirmative defense that must be specifically
pleaded and proven by the party raising it. Mominee, 629
N.E.2d at 1282. An “accord” is an express contract by which
the parties agree to settle a dispute, and a “satisfaction” is
the parties’ performance of their contractual obligations.
Reed v. Dillon, 566 N.E.2d 585, 590 (Ind. Ct. App. 1991). To
prove an accord and satisfaction, a party must establish
that: (1) there is a good faith dispute, (2) the disputed sum
is unliquidated, (3) there is consideration, (4) the parties
had a meeting of the minds with the intent to settle the
dispute, and (5) the contract was performed. Sedona Dev.
Group, Inc. v. Merrillville Rd., LP, 801 N.E.2d 1274, 1278 n.1
(Ind. Ct. App. 2004). Inland must meet its burden of proof
“on each of the elements of the defense.” Reed, 566 N.E.2d at
590 (emphasis added).
No. 03-2752                                                 9

   Sims-Madison correctly contends that Inland failed to
meet its burden of proof on the defense. Inland did not even
mention any of the elements of the defense in either its
initial memorandum or its reply memorandum in support of
its motion for summary judgment. The district court, for its
part, also did not discuss any of the elements in its order.
Having at least nominally asserted that there was an
accord and satisfaction, Inland bore the burden of proving
the defense, Mominee, 629 N.E.2d at 1282, and it failed to
meet that burden.
   Furthermore, regardless of the deficiencies in Inland’s
pleadings or any question about the validity of the agree-
ment, the record makes clear that Inland has never paid
Sims-Madison anything, and accordingly it has not per-
formed its obligations under the contract, as required to
establish an accord and satisfaction. See Sedona Dev. Group,
Inc., 801 N.E.2d at 1278 n.1. Inland responds with the
misplaced argument that it was excused from tendering
performance when Sims-Madison repudiated the agreement
by refusing to sign the release. Although Inland was allowed
to refuse performance once it knew that Sims-Madison had
repudiated the contract, see Eden United, Inc. v. Short, 573
N.E.2d 920, 929 (Ind. Ct. App. 1991), its right to refuse per-
formance is irrelevant to the question of whether an accord
and satisfaction was reached. Inland could not establish
satisfaction simply by promising to perform its obligations
if Sims-Madison performed hers—it was required to prove that
it did perform, see Chesak v. N. Ind. Bank & Trust Co., 551
N.E.2d 873, 875 (Ind. Ct. App. 1990), not simply that it was
willing to perform.
  Inland did not meet its burden to prove that there was an
accord and satisfaction, and the grant of summary judg-
ment in its favor is vacated.
10                                               No. 03-2752

D. Sims-Madison’s Rule 59(e) Motion
  Finally, Sims-Madison appeals the denial of her motion
under Fed. R. Civ. P. 59(e). In light of our disposition of the
other issues, we need not address this argument.


                    III. CONCLUSION
  The order enforcing the settlement agreement, and the
grant of summary judgment in Inland’s favor are VACATED,
and this case is REMANDED to the district court for further
proceedings consistent with this opinion.

A true Copy:
       Teste:

                         ________________________________
                         Clerk of the United States Court of
                           Appeals for the Seventh Circuit




                    USCA-02-C-0072—8-11-04
