• United States District Court Lacked Jurisdiction to Enforce Local Rule 111 Settlement Order
  • March 5, 2014
  • Law Firm: Semmes Bowen Semmes A Professional Corporation - Baltimore Office
  • Persaud Cos., Inc. v. S. Md. Dredging, Inc., No. 12-2114 (D. Md. Feb. 18, 2014)

    In Persaud Companies, Inc. v. Southern Maryland Dredging, Inc., the United States District Court for the District of Maryland held that it was without jurisdiction to enforce a settlement agreement between two (2) parties where the Court's order dismissing the underlying action failed to incorporate the terms of the agreement. Writing for the Court, Judge James K. Bredar ruled that a party could not reopen a case for the narrow purpose of enforcing a settlement agreement where a Local Rule 111 Settlement Order failed to incorporate the parties' obligation to comply with the terms of settlement. Accordingly, the Court denied the defendants Motion to Reopen the Case and Enter Judgment, leaving it to pursue state breach of contract remedies.

    Persaud Companies, Inc. ("PCI") filed suit against Maryland Dredging, Inc. ("SMD") in the United States District Court for the District of Maryland, claiming breach of contract based on SMD's alleged failure to supply functional dredging equipment. PCI sought judgment in the amount of approximately $360,000.00. SMD was served on August 7, 2012, but failed to answer PCI's Complaint. As a result, the Court ordered PCI to file a motion for entry of default by the Clerk and a motion for default judgment, or to provide a report as to why those motions would be inappropriate. Shortly thereafter, SMD filed an Answer without seeking leave of the Court. The Court ordered SMD to file a motion for leave to file its Answer out of time. The Court held that SMD's Motion for Leave had merit, and noted that the parties had reached a settlement agreement (the "Agreement") in principle. After some time, the parties eventually signed this settlement agreement, which the Court approved. The Court entered the Local Rule 111 Settlement Order dismissing the underlying case. This Order did not, however, include the terms of the Agreement, or incorporate the parties' obligations under the Agreement. Almost one (1) year later, SMD filed its Motion to Reopen the Case and Enter Judgment as a result of PCI's alleged failure to comply with the settlement agreement. SMD sought to enforce the parties' Agreement against PCI in an amount authorized by the Agreement.

    The Court denied SMD's Motion to Reopen the Case, finding that the Court did not have jurisdiction to enforce the terms of the parties' Agreement. The Court stated that Fourth Circuit precedent clearly required that a dismissal expressly incorporate an obligation to comply with a settlement's terms in order for a district court to exercise its jurisdiction over enforcement of that agreement. Therefore, in this case, the Court had no jurisdiction to enforce the terms of the Agreement. The Court noted, however, that SMD could file an action in state court for breach of contract. The Court also noted that SMD limited its request to reopen the case in order to pursue an enforcement remedy. "If SMD had requested reinstatement of the case to the active docket so that SMD could return to the status quo and renew its litigation against PCI, then its request for [Fed. R. Civ. P.] 60(b) relief would be a fair one." Persaud Cos., Inc. v. S. Md. Dredging, Inc., No. 12-2114, slip op. at 5 (D. Md. Feb. 18, 2014). Given that SMD's request was limited to enforcement, however, the Court found that it was not in the interest of justice to grant SMD's request to reopen the case.