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SmartNet, Inc. v. Kellman

March 30, 2009

SMARTNET, INC., PLAINTIFF,
v.
OLIVER N.E. KELLMAN, JR., DEFENDANT.



The opinion of the court was delivered by: Alan Kay United States Magistrate Judge

MEMORANDUM OPINION*fn1

Pending before the Court is Plaintiff SmartNet's Motion to Reopen Case to Enforce Settlement Agreement*fn2 [68] and [69], Defendant Kellman's Opposition [71], Plaintiff's Supplemental Memorandum in Support of the Motion to Reopen [77], Defendant's Renewed Opposition [78], Plaintiff's Reply [80], and Defendant's Reply [79] and [81].

I. Background

On October 19, 2005, the Parties filed a Stipulation of Dismissal with prejudice of the underlying action*fn3 and a request for the Court to retain jurisdiction over the Settlement Agreement in this case. (See Stipulation of Dismissal [60].) On October 20, 2005, the Court dismissed the case with prejudice and agreed to retain jurisdiction over the Settlement Agreement. (See 10/20/05 Minute Order.) Plaintiff filed a Motion to Reopen Case to Enforce Settlement Agreement on September 27, 2006. (See Motion to Reopen [61].) That motion was denied without prejudice to allow for compliance with the payment schedule in place, and permitted Plaintiff to re-file its Motion, in the absence of full compliance, On May 30, 2008. (See Order [66].)

On May 30, 2008, Plaintiff SmartNet filed its Renewed Motion to Re-Open Case to Enforce Settlement Agreement. (See Motion to Reopen [68]). Plaintiff asserts that Defendant Oliver N.E. Kellman, Jr. materially breached the Settlement Agreement entered into by the parties in October 2005 by (1) failing to make monthly payments of 20% of his monthly gross income, pursuant to Paragraph 2(B) of the Settlement Agreement; (2) failing to provide truthful information about his monthly income; and (3) failing to provide Plaintiff with annual copies of his federal and state income tax returns, pursuant to Paragraph 2(F) of the Settlement Agreement. (Pl.'s Mot. 1-2.) Defendant responds that he has already paid Plaintiff $21,000 of the $90,000 due to Plaintiff and that, because of his health and other issues, he has been unable to generate income and make additional payments. (Def.'s Opp'n 3.)

Because resolution of Plaintiff's Motion required the Court to make findings of fact regarding Defendant's gross income and his financial ability to comply with the payment plan set forth in Paragraph 2(B) of the Settlement Agreement, the Court held an evidentiary hearing on September 18, 2008. At the close of the hearing, the parties were directed to file written closing arguments and responses. The parties subsequently filed supplemental memoranda and replies.

II. Discussion

A. Legal Standard

This Court has jurisdiction to enforce a the Settlement Agreement in this case because the Court expressly retained such jurisdiction in its dismissal order. See FED. R. CIV. P. 41(a)(2); Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 381 (1994). The parties themselves also expressly agreed that this Court would retain jurisdiction over the Settlement Agreement. (See Pl.'s Mot. to Reopen Ex. 1 [96-2] ("Settlement Agreement") at ¶ 12.)

Pursuant to the Settlement Agreement, and under the law of this Circuit, District of Columbia law governs the agreement. (See id. at ¶ 18); Makins v. District of Columbia, 277 F.3d 533, 547 (D.C. Cir. 2002). While in many cases a district court can enforce a settlement agreement summarily, an evidentiary hearing may be necessary where there is a dispute about the settlement. See Hall v. George Washington Univ., No. CIV.A. 99-1136, 2005 WL 1378761, at *3 (D.D.C. May 13, 2005) (noting that summary proceedings are inappropriate where there is a genuine dispute about whether the parties have entered into a binding settlement). Because the parties here agree that there exists an enforceable settlement agreement, the Court need only determine whether the agreement was in fact breached by Defendant.

"An action to enforce a settlement agreement is, at bottom, an action seeking the equitable remedy of specific performance of a contract." Hall, 2005 WL 1378761 at *3 (citing Quijano v. Eagle Maintenance Servs., Inc., 952 F. Supp. 1, 3 (D.D.C. 1997)). Under District of Columbia law, the party alleging breach of a contract must prove breach by a preponderance of the evidence. See, e.g., Harvey's Inc. v. A.C. Elec. Co., 207 A.2d 660, 661 (D.C. 1965); In re Estate of McKenney, 953 A.2d 336 (D.C. 2008) (noting "the normal preponderance of the evidence standard common to contract actions").

B. Alleged Material Breach of the Settlement Agreement

Plaintiff focuses its post-hearing arguments on two contentions: (1) that Defendant Kellman failed numerous times to provide the monthly payments and explanations of his income as required under the Settlement Agreement; and (2) provided materially false information about his income in violation of the Settlement Agreement. (See Pl.'s Mem. in Supp. [77].) Plaintiff argues that these acts constitute a material breach under the terms of the agreement and trigger a default under ¶ 7, thereby entitling Plaintiff to the immediate entry of a Confessed Judgment against Defendant in the amount of $175,000 minus any payments already made by Defendant. With respect to the first contention, Plaintiff argues that Defendant has not made one single payment of the 20% of monthly income required under the Settlement Agreement and, as evidenced by several letters sent by Defendant's counsel, has on several occasions failed to provide the monthly income statements or explanations of no income required under ¶ 2(B) of the agreement. (Id. at 2-4.) Second, Plaintiff contends that Defendant provided materially false information about his income in violation of ¶ 5 of the Settlement Agreement because he received monies during periods where he reported to Plaintiff that he did not receive any income. (Id. at 2-7.)

Defendant responds that he has made some payments under the Settlement Agreement, that his various business associations do not demonstrate that he has generated income from those entities, and that monies received from his family to live on and with which to make political contributions do not constitute income as defined in the Settlement Agreement. (Def.'s Opp'n [78] at 1-3.) Defendant further argues that he properly informed Plaintiff regarding his ...


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