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Med Vision Inc. v. Medigain, LLC

United States District Court, N.D. Texas, Dallas Division

March 31, 2017

MED VISION, INC., et al., Plaintiffs,
v.
MEDIGAIN, LLC, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          Sam A. Lindsay United States District Judge

         Before the court are Plaintiffs' Opposed Motion to Enforce Mediated Settlement Agreement (“Motion”) (Doc. 100), filed December 15, 2015; Plaintiffs' Supplemental Motion to Enforce Mediated Settlement Agreement (“Supplemental Motion”) (Doc. 115), filed January 21, 2016; and Plaintiffs' Motion for Leave to File Under Seal Plaintiffs' Reply in Support of Objections to Findings, Conclusions, and Recommendation of the United States Magistrate Judge (Doc. 158), filed September 7, 2016.[1] In their Motion and Supplemental Motion (collectively, “Motions”), Plaintiffs request that the court require Defendants “to execute the settlement documents which have been agreed upon, with the previously agreed upon but unincorporated modifications, including the Agreed Final Judgement proposed by Plaintiffs. Alternatively, Plaintiffs respectfully request that the Court enforce the mediated Settlement Agreement as written.” Pls.' Mot. 7, Pls.' Supp. Mot. 5.

         On July 7, 2016, United States Magistrate Judge Paul D. Stickney entered the Findings, Conclusions and Recommendation of the United States Magistrate Judge (“Report”) (Doc. 140), recommending that the court grant in part and deny in part Plaintiffs' Motions. Specifically, the magistrate judge recommended that the court grant Plaintiffs' request to enforce the mediated settlement agreement to the extent set forth in the Report but deny Plaintiffs' request for an award of attorney's fees and sanctions against Defendants.

         Plaintiffs MedVision, Inc. (“MedVision”); Medi-Tech Medical Billing Services, Inc. (“Medi-Tech”); Phycom Group, Inc. (“Phycom”); Kenneth S. Alston (“Alston”); and Alexander Wang (“Wang”) (collectively, “Plaintiffs”) and Defendant Gregory Hackney (“Hackney”) filed objections to the Report. Plaintiffs object to the magistrate judge's recommendation regarding attorney's fees. Plaintiffs also seek clarification or object to the extent that the magistrate judge “did not recommend that the District Court also Order the Defendants to execute the Agreed Judgment and the Defendants' Notice of Dismissal of Counterclaims with Prejudice which will be presented to Defendants due to their uncur[]ed default.” Pls.' Obj. 4. In addition, Plaintiffs object to the extent that the magistrate judge did not address their request for the court to retain jurisdiction “over this matter to ensure compliance with the [MSA] and for purposes of enforcement of the judgment.” Pls.' Obj. 4. Hackney objects to the magistrate judge's recommendation requiring Defendants to execute an agreed judgment and contends that the magistrate judge correctly denied Plaintiffs' request for attorney's fees and sanctions.

         Plaintiffs' Motion for Leave to File Under Seal Plaintiffs' Reply in Support of Objections to Findings, Conclusions, and Recommendation of the United States Magistrate Judge (Doc. 158) is granted, and the clerk shall file under seal with a file date of September 7, 2016, the reply brief and the exhibits to the reply brief that are attached to the Motion for Leave. After considering Plaintiffs' Motions to enforce the parties' mediated settlement agreement (“MSA”), Plaintiffs' Complaint, the parties' briefs, the MSA, the documents that Plaintiffs seek to have Defendants execute, Plaintiffs' evidence of Defendants' default, and the Report, and conducting a de novo review of the portions of the Report to which objection was made, the court, for the reasons set forth herein, accepts as herein modified the findings and conclusions of the magistrate judge. Specifically, the court rejects the magistrate judge's findings and conclusions regarding an agreed judgment; accepts the magistrate judge's findings and conclusions that Plaintiffs have not established an uncured default by Defendants; and accepts the magistrate judge's findings and conclusions regarding Plaintiffs' request for attorney's fees and sanctions. The court overrules Plaintiffs' objections, sustains Hackney's objections to the extent that the court concludes that Plaintiffs are not entitled to the relief sought, and denies Plaintiffs' Motions (Docs. 100, 115). Additionally, Plaintiffs' request in their objections to submit evidence in support of their request for attorney's fees is denied.

         I. Factual and Procedural Background

         On January 12, 2015, Plaintiffs brought this action against Butani Capital Investment Fund II, LLC (“BCIF”); Dinesh K. Butani (“Butani”) (collectively, “Butani Defendants”); and Hackney. For purposes of this order, the court refers collectively to the foregoing parties as “Defendants.” Plaintiffs also sued MediGain, LLC (“MediGain”), which was dismissed from this action on December 21, 2015, pursuant to an agreed motion. In their Second Amended Complaint (“Complaint”), Plaintiffs allege that this litigation pertains to certain Asset Purchase Agreements or “APAs” whereby BCIF, as buyer, and MediGain, as guarantor, agreed to purchase substantially all of the assets of medical billing companies MedVision, MediTech, and Phycom. Plaintiffs allege that Defendants, including Medigain, breached the APAs by failing to make required scheduled payments and fraudulently induced Plaintiffs to enter the APAs. Plaintiffs' Complaint includes claims against Defendants for breach of contract (BCIF); common law fraud (BCIF, Hackney, Butani); statutory fraud (BCIF, Hackney, Butani); negligent misrepresentation (BCIF, Hackney, Butani); breach of guaranty (Hackney, Butani); conspiracy (BCIF, Hackney, Butani); and breach of fiduciary duty (BCIF, Hackney, Butani). Plaintiffs also requested relief against BCIF under the equitable theories of money had and received, restitution, and unjust enrichment, and sought to recover economic damages, exemplary damages, an accounting, a constructive trust, disgorgement of monies and profits received by Defendants, attorney's fees, interest, and costs.

         On November 4, 2015, Plaintiffs and Defendants participated in mediation and reached what the parties refer to as a “Mediated Settlement Agreement” or “MSA, ” which is signed by Plaintiffs and Defendants. Pls.' App. 1-4 (Doc. 102). The MSA includes certain standard typed settlement language, as well as handwritten language regarding the specific terms of the parties' agreement. The MSA provides in pertinent part as follows:

         Settlement Agreement

On this 4th day of November, 2015, [Plaintiffs and Defendants] met in mediation in the matter of: MedVision, Inc. et al. v. MediGain, LLC, et al., Case No. 3:15-CV-00077-L and settled all matters in controversy between and among the parties whose signature appear below. All parties acknowledge that: (1) they freely participated in the mediation process; (2) they enter[ed] into this settlement agreement in good faith; (3) they relied upon their own good judgment and independent legal advice of their own counsel and not on the representation, if any, of the mediator; and (4) that no coercion, duress or undue influence was used by any party, attorney, or mediator to obtain their signature and consent to settle this matter on the following terms:
1. Parties to request administrative closure of case within 3 days after final Settlement Agreement executed.
2. Settlement Payment made specifically for breach of contract claims against [BCIF] and breach of guaranty claims against . . . Hackney and . . . Butani. In consideration for the Settlement Payment, and other good and valuable consideration, the parties to this [MSA] release all claims as set forth in Paragraph 7 below.
3. Total payment of $850, 000 (the “Settlement Payment”) by [BCIF], . . . Hackney, and/or . . . Butani, as follows:
(a) $50, 000 on or before Jan. 15, 2016;
(b) $50, 000 on or before May 15, 2016; and continuing $50, 000 per month on the 15th of each month thereafter for sixteen months. . . ($8[5]0, 000 in total monthly payments). This payment obligation by Defendants is joint and several.[2]
4. Secured by an Agreed Judgment in favor of . . . Alston and . . . Wang, individually, against BCIF, . . . Hackney, and . . . Butani, jointly and severally, in the amount of $850, 000 less amounts paid, including interest at the state judgment rate. Agreed Judgment will include statement that all five Plaintiffs sued and it is agreed that the Agreed Judgment is in favor of Alston and Wang.
5. Maximum of two notices of default and seven calendar day opportunity to cure.
6. In the event of uncured default, Plaintiffs may present Agreed Judgment for entry and Defendants' Notice of Dismissal of Counterclaims with Prejudice. If all settlement funds are paid, Plaintiffs shall file an Agreed Dismissal with Prejudice and return the Agreed Judgment to counsel for [BCIF], Butani, and Hackney.
7. Except for the payment obligations contained herein and the Agreement Judgment, Plaintiffs/Counter-Defendants, on the one hand, and Defendants, on the other hand, including officers, directors, representative, etc. of each, fully and completely mutually release the others (including officers, directors, representatives, etc.) [f]rom any and all claims, liabilities, causes of action, demands, and damages that they have alleged or could have alleged against the other. This includes release of obligations under the APAs and APA Amendments.
8. Mutual [s]tandard confidentiality.
9. Mutual [n]o admission of liability.
10. Mutual [n]o assignment of claims.
11. All parties bear [their] own costs, and attorney's fees, and expenses in connection with claims against each other.
12. Defendants to file Dismissal of Counterclaims Without Prejudice within 3 business days of for[mal] signed final settlement documents.
13. Mutual standard knowing and voluntary agreement.
14. No unwritten representations, not induced to enter Settlement Agreement by representations by the other parties/their counsel.
15. Governed by Texas law without regard to conflicts of law principles.
16. Applies to successors in interest, purchasers, and assigns.
17. Standard severability provision.
18. Language of Settlement Agreement construed as a whole and not for or against any party hereto.
This settlement agreement is intended to be a full and final settlement agreement containing all material terms even though the parties may prepare a more formal settlement document, release language and dismissal papers, and it is [an] otherwise valid and enforceable agreement. . . . Butani's counsel will prepare release and dismissal papers and send them to opposing counsel by Nov. 16, 2015. Signed this 4th day of November, 2015.

Pls.' App. 1-4 (Doc. 102).

         By letter dated November 10, 2015, the mediator notified the court that the case had settled, and it was the mediator's understanding that agreed filings would be submitted pursuant to the parties' settlement. The court, therefore, administratively closed the case on November 12, 2015, and directed the parties to file a stipulation or notice of dismissal or agreed motion to dismiss this action by May 10, 2016.

         After the case was administratively closed, the parties, according to Plaintiffs' Motion, undertook efforts through their counsel to “finalize their settlement with formal settlement documentation.” Pls.' Mot. 2. The parties' efforts in this regard, however, were stymied when they were unable to agree whether certain additional language should be included in the final versions of the MSA and, in particular, the “Agreed Judgment” referenced in the MSA, based on the parties' respective understandings of the MSA. Plaintiffs' Motions to enforce the MSA (Docs. 100, 115) followed on December 31, 2015, and January 21, 2016, respectively, and the Butani Defendants and Hackney filed responses in opposition to the motions.

         Although styled as Motions to enforce the MSA, the major issue of contention is the parties' disagreement regarding the scope and substance of the “Agreed Judgment” referenced in the MSA, and whether the MSA required the parties to execute an agreed judgment and other formal documentation to finalize the parties' settlement. During the course of the parties' briefing, Plaintiffs also asserted that Defendants had failed to make payments as required by the MSA. The briefing with respect to these motions and related motions filed by the parties was completed on September 20, 2016, including their briefing regarding objections to the magistrate judge's findings and recommendation. For the reasons herein explained, the court concludes that Plaintiffs are not entitled to the relief requested.

         II. Plaintiffs' Motions and Requested Relief

         A. Original Motion to Enforce MSA (Doc. 100)

         In their Motion, Plaintiffs contend that Defendants breached the MSA by failing to finalize and execute “formal settlement documents” and an agreed judgment in accordance with the MSA. Pls.' Mot. 2-3. Plaintiffs contend that the withdrawal of Defendants' counsel “is yet another tactic by these Defendants to delay the finalization of formal settlement documents and to delay the required and agreed performance of these same Defendants under the terms of their [MSA].” Id. at 3. Plaintiffs, therefore, assert that they had no option but to file their Motion to enforce the MSA, “as they have worked diligently over a more than reasonable period of time to get these Defendants to cooperate and finalize the settlement consistent with the terms of the [MSA], to no avail.” Id. In addition, Plaintiffs express concern regarding deadlines included in the MSA for Defendants' payment obligations:

Despite the passage of almost two months since mediation, repeated and constant attempts by Plaintiffs' counsel to secure the cooperation and attention of these Defendants and their counsel to finalize their settlement with formal settlement documentation, and rapidly approaching obligations on the part of these Defendants, Defendants have now, at the eleventh hour, inserted and insist upon language in an Agreed Final Judgment which was not contemplated by the parties in the mediated settlement agreement and which is not agreeable to Plaintiffs.

Id. at 2. Plaintiffs request that the court enter an order enforcing the MSA by requiring Defendants to:

execute the formal settlement documents which have been agreed upon by these parties [App. 118-125; 174-204], as modified by the additional previously agreed upon but unincorporated changes as noted in Plaintiffs' counsel's email of December 22, 2015 [App. 222] and that the Court further Order these Defendants to execute the Agreed Final Judgment proposed by Plaintiffs [App. 233-242] or otherwise enter a Final Judgment consistent with the mediated settlement agreement providing the relief to which Plaintiffs are entitled and to which Defendants agreed.

Pls.' Mot. 3; Pls.' Reply in Support of Mot. 5 (Doc. 137). Plaintiffs contend that “Defendants misrepresent that Plaintiffs seek to have the Court order Defendants to sign an agreed judgment [that] would be a judgment on all causes of action.” Pls.' Reply 4 (Doc. 137). Plaintiffs assert that, although their proposed agreed judgment lists all of the claims and counterclaims asserted by the parties in this case, it “does not make a specific finding as to any cause of action.” Id.

         Alternatively, Plaintiffs request that the court enforce the MSA as written. Plaintiffs contend that Defendants should be required to execute an agreed judgment at this time because “[a]n Agreed Judgment was obviously agreed upon by the parties and is a material part of the MSA.” Id. Plaintiffs contend that an agreed judgment “was to be prepared contemporaneously with the formal settlement documents since it is the security for the settlement payments and [was ] to be entered in the event of an uncur[]ed default.” Id. Plaintiffs also request that the court “extend the administrative closure of this case and otherwise retain jurisdiction until ...


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