United States District Court, N.D. Texas, Wichita Falls Division
FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE
UNITED STATES MAGISTRATE JUDGE
RAY, JR. UNITED STATES MAGISTRATE JUDGE
the Court are the Motion to Enforce Settlement Agreement (ECF
No. 83) and Appendix in Support (ECF No. 84) filed by Y&O
WF, LLC ("Y&O") on February 14, 2019; the
Response and Counter-Motion to Enforce Settlement Agreement
(ECF No. 86) and Appendix in Support (ECF No. 87) filed on
March 7, 2019 by Sears Authorized Hometown Stores, LLC
("Sears"); Y&O's Reply (ECF No. 88) filed
on March 20, 2019; and Sears' Reply in Support of its
Counter-Motion to Enforce Settlement Agreement (ECF No. 89)
filed on April 3, 2019. United States District Judge Reed
O'Connor referred Y&O's Motion (ECF No. 83) and
all related responses, replies, briefs in support,
appendices, etc., to the undersigned by Order dated February
19, 2019. (ECF No. 85).
considering the pleadings and applicable legal authorities,
the undersigned RECOMMENDS that Judge
O'Connor GRANT Sears' Counter-Motion
to Enforce Settlement Agreement (ECF No. 86) and
DENY Y&O's Motion to Enforce
Settlement Agreement (ECF No. 83).
remains in this case is a dispute concerning the terms of a
settlement agreement. The case began when Sears sued Y&O
for injunctive relief and damages in connection with recovery
of its equipment, inventory, and intellectual property in the
Sears Hometown Store located in a shopping center owned by
Y&O in Wichita Falls, Texas. (ECF No. 1). Faith Retail,
LLC ("Faith") and Cheryl Lynn Warren
("Warren"), the owner of Faith, operated that store
until May 18, 2018, when they allegedly abandoned it and
Y&O locked the premises. (Id. at 2-3). Y&O
counterclaimed against Sears and filed a Third-Party
Complaint against Faith and Warren. (ECF No. 18). Sears,
Faith, and Warren filed no claims against each other in this
O'Connor initially referred only Sears' motion for
temporary restraining order to the undersigned, but later
referred the entire case for pretrial management.
(See ECF Nos. 15 and 36). Sears and Y&O reached
an agreement regarding Sears' motion for a temporary
restraining order. (ECF Nos. 30 and 33). Y&O ultimately
settled its third-party claims against Faith and Warren.
(See ECF Nos. 60 and 61). Y&O filed a Joint
Motion for Entry of Judgment Against Third Party Defendants.
(ECF No. 60), explaining that it entered a settlement
agreement with Faith and Warren that included "entry of
. . . judgment" and "fully and completely
resolve[d] all claims by and between . . . these
parties." (Id. at 1). Judge O'Connor
granted Y&O's Motion and entered final judgment
against Faith and Warren on October 16, 2018. (ECF No. 61).
At that time, Faith and Warren ceased to be parties to this
November 29, 2018, the undersigned entered Findings,
Conclusions, and a Recommendation that addressed
Y&O's Supplemental Motion to Dismiss (ECF No. 34) and
its Rule 12(b)(6) Motion to Dismiss Sears'
Misappropriation of Trade Secrets claim (ECF No. 51).
(See ECF No. 73). On December 17, 2018, Judge
O'Connor accepted the recommendation and denied
Y&O's Motions to Dismiss. (ECF No. 80). On December
18, 2018, Melvin Wolovits, who conducted a mediation with
Sears and Y&O, filed an ADR Summary that stated that the
parties had reached a settlement following the ADR session on
December 13, 2018 (ECF No. 81). The undersigned then entered
an order on December 19, 2018, requiring the parties to file
the appropriate dismissal papers pursuant to Federal Rule of
Civil Procedure 4l(a)(1)(A)(ii) or an agreed motion with
corresponding proposed order on or before February 17, 2019.
(ECF No. 82).
February 14, 2019, Y&O filed its Motion to Enforce
Settlement Agreement (ECF No. 83), arguing that Sears refused
to sign the draft settlement agreement attached in the
Appendix in Support (ECF No. 84-16). Y&O alleges that
Sears and it accepted the Mediator's Proposal (ECF No.
84-3) ("the Proposal"), which represented the
parties' agreement to settle the case and release all
claims that each party had against the other, including any
and all future claims that may arise from this case.
(See ECF No. 83 at 7-10). Y&O also asserts that
the parties' intent, as reflected in the Proposal, was
for Sears to release any and all claims that it had or might
in the future have against Faith and Warren as well.
(Id. at 11-14). Y&O argues that settlement of
the entire lawsuit included Sears' claims against Faith
and Warren because Y&O had agreed to defend Faith and
Warren from such claims as part of its settlement with those
parties. (Id.). Without settlement of those claims,
Y&O asserts it could not have settled all of its claims
with Sears. (Id.).
responded with its Counter-Motion to Enforce the Settlement
Agreement (ECF No. 86), arguing that the Proposal "by
its terms, applies only to claims 'by and between'
Y&O and [Sears] and does not address any claims ...
against Warren and Faith ...." (Id. at 11).
Y&O replies that: (1) Sears ignores crucial language in
the Proposal; (2) Y&O does not request the Court to
interpret its subjective intent or to consider parol
evidence; (3)Y&O asks the Court to consider the
"context and underlying factual development related to
the 'third party claims' as referenced in the
Proposal; and (4) it "requests enforcement of the
express words of the parties' agreement - all of
the words, not just the ones [Sears] seeks to have enforced
against Y&O only." (ECF No. 88 at 1-2). Finally,
Sears replies in support of its Counter-Motion that Y&O
ignores crucial language in the Proposal, attempts to add
terms through inappropriate parol evidence, and seeks to
expand the scope of the settlement to include Sears'
claims against Faith and Warren. (See generally ECF
No. 89). The parties' Motions (ECF Nos. 83 are 86) are
now ripe for adjudication.
district court may exercise its discretion to enforce a
settlement agreement. ..." Weaver v. World Fin.
Corp. of Texas, No. 3:09-CV-1124-G, 2010 WL 1904561, at
*1 (N.D. Tex. May 12, 2010) (citing Daftary v. Metro.
Life Ins. Co., 136 F.3d 137, at *1 (5th Cir. 1998) (per
curiam)). The Court has diversity of citizenship jurisdiction
over the claims in the instant case. (See ECF No. 1
at 1-5). A court exercising diversity jurisdiction applies
the law of the state in which the settlement agreement was
negotiated and is to be performed. Lockette v. Greyhound
Lines, Inc., 817 F.2d 1182, 1185 (5th Cir. 1987).
"More specifically, the enforceability of a settlement
agreement in a diversity case tried in a federal district
court in Texas is governed by the provisions of Rule 11 [of
the] Texas Rules of Civil Procedure ('Texas Rule
11')." Borden v. Banacom Manufacturing and
Marketing, Inc., 698 F.Supp. 121, 123 (N.D. Tex. 1988).
Under Texas Rule of Civil Procedure 11, "a settlement
agreement is enforceable only if it is (1) 'in writing,
signed[, ] and filed with the papers as part of the
record' or (2) 'made in open court and entered of
record.'" Williamson v. Bank of N.Y.
Mellon, 947 F.Supp.2d 704, 707 (N.D. Tex. 2013) (citing
Tex.R.Civ.P. 11; Estate of Martineau v. ARCO Chem.
Co., 203 F.3d 904, 910 (5th Cir. 2000)).
Sears nor Y&O disputes the validity or enforceability of
the Proposal that both parties signed and accepted on
December 18, 2018. (See ECF No. 83 at 7; ECF No.
84-3 at 3-4). Each party seeks to enforce the Proposal, and
their only dispute concerns the scope of the Proposal. (ECF
No. 83 at 11-14; ECF No. 86 at 11-18; ECF No. 88 at 1-2; ECF
No. 89 at 2-6). Specifically, Sears and Y&O disagree as
to whether the Proposal included a requirement that Sears
release existing and future claims against Faith and Warren.
The undersigned finds that the Proposal does not include this
Texas law, "[a] release is a writing which provides that
a duty or obligation owed to one party to the release is
discharged immediately on the occurrence of a
condition." Baty v. ProTech Ins. Agency, 63
S.W.3d 841, 848 (Tex. App-Houston [14th Dist] 2001, pet.
denied) (citing National Union Firelns. Co. v. Insurance
Co. of N. Am.,955 S.W.2d 120, 127 (Tex. App.- Houston
[14th Dist.] 1997), aff'd,20 S.W.3d 692 (Tex.
2000)). "Like any other agreement, a release is subject
to the rules of construction governing contracts."
Baty, 63 S.W.3d at 848 (citing Grimes v.
Andrews,997 S.W.2d 877, 881 (Tex. App.-Waco 1999, no
pet.)). "When construing a contract, courts must give
effect to the true intentions of the parties as expressed in
the written instrument." Baty, 63 S.W.3d at 848
(citing Lenape Resources Corp. v. Tennessee Gas Pipeline
Co.,925 S.W.2d 565, 574 (Tex. 1996)). "The
contract must be read as a whole, rather than by isolating a
certain phrase, sentence, or section of the agreement."
Baty, 63 S.W.3d at 848 (citing State Farm Life
Ins. Co. v. Beaston,907 S.W.2d 430, 433 (Tex. ...