• Disputed Settlement Agreements - When is an Evidentiary Hearing Required?
  • March 14, 2013 | Author: Joel M. Frederic
  • Law Firm: The Drew Law Firm Co. A Legal Professional Association - Cincinnati Office
  • Disputed settlement agreements—When is an evidentiary hearing required?

    When a Trial Court enters judgment enforcing a disputed settlement agreement it is first required to hold an evidentiary hearing (a “Rulli hearing”).  Rulli v. Fan Co., 79 Ohio St.3d 374, 1997-Ohio-380, 683 N.E.2d 337.  Indeed, it is reversible error to enforce a disputed settlement agreement without first holding an evidentiary hearing.  Id.  But is an evidentiary hearing mandatory if the Court refuses to enforce a disputed settlement agreement and enters judgment?     

    In the lawsuit underlying the disputed settlement agreement in Artisan v. Beiser, et al., a former employer (“Artisan”) sued former employees alleging that they had breached a noncompete agreement.  12th Dist. No. CA2010-02-039, 2010-Ohio-5427.  The noncompete case was conditionally dismissed as the parties agreed to negotiate the terms of a settlement agreement.  Without a Rulli hearing-and without one having been requested-the trial court entered summary judgment against Artisan concluding that no settlement agreement existed.  Artisan appealed and argued, among other things, that the trial court failed to hold a Rulli hearing before entering judgment denying enforcement.

    The Twelfth Appellate District affirmed the entry of summary judgment holding that though the parties had engaged in negotiations no meeting of the minds occurred and that the case was distinguishable from the line of “Rulli cases.”  Judge Powell writing for the majority specifically noted, “unlike the situation in Rulli, the trial court in this case refused to enforce what Artisan purported to be an enforceable, oral settlement agreement between the parties, after finding that the parties had never actually reached a settlement agreement * * * therefore, nothing in Rulli required the trial court to hold an evidentiary hearing before entering summary judgment [denying enforcement].”

    Artisan moved to certify a conflict to the Ohio Supreme Court, and the Twelfth Appellate District sustained the motion holding that its decision in Artisan conflicted with Michelle M.S. v. Eduardo H.T., Erie App. No. E-05053, 2006-Ohio-2119 and Moore v. Johnson, Franklin App. No. 96APE11-1579 (Dec. 11, 1997).  The Twelfth District certified the following question of law: “When there is a factual dispute between the parties over the existence of a valid settlement agreement, is the trial court required to conduct an evidentiary hearing regardless of whether it enforces or denies enforcement of the agreement and enters judgment pursuant to the Ohio Supreme Court decision in Rulli v. Fan Co., 79 Ohio St.3d 374, 1997-Ohio-380?”

    The Ohio Supreme Court accepted jurisdiction on the above question but after oral argument dismissed the case as having been improvidently granted.  Because the Ohio Supreme Court dismissed the appeal without opinion, the question remains: in Ohio is the trial court required to conduct an evidentiary hearing regardless whether it enforces or denies the enforcement of a disputed agreement and enters judgment?

    As noted above, under Artisan, the law in the Twelfth Appellate District is that trial courts are not required to conduct an evidentiary hearing when it denies the enforcement of a disputed settlement agreement and enters judgment.  Id. at ¶41; see, generally Mack v. Polson Rubber Co., 14 Ohio St.3d 34, 470 N.E.2d 902, syllabus (1984); FirstMerit Bank, N.A. v. Ashland Lakes, L.L.C., 5th Dist. No. 11-COA-017, 2012-Ohio-549, ¶¶ 19 and 22 (“In the absence of a legitimate factual dispute, the trial court was not required to conduct an evidentiary hearing [before refusing to enforce a disputed settlement agreement].”).  But in Myatt v. Myatt, the Ninth Appellate District impliedly ruled that an evidentiary hearing is required whether the trial court upholds or denies the motion to enforce: “it is necessary for the trial court to conduct an evidentiary hearing prior to ruling on the motion to the settlement agreement.”  9th Dist. No. CV 2007 12 8610, 2009-Ohio-5796, ¶14.  The Third Appellate District likewise impliedly ruled that a hearing must be held before enforcing or denying enforcement.  See, B.W. Rogers Co. v. Wells Bros., Inc., 3rd Dist. No. 17-11-25, 2012-Ohio-750, ¶23, (Where issues of fact remain, “the trial court was required to hold an evidentiary hearing before making a ruling.”)

    It is unclear how other Ohio Appellate Districts might rule upon the question whether a Rulli hearing is required before a trial court denies the enforcement of a disputed settlement agreement and enters judgment.  I would submit that the Twelfth Appellate District got it right in Artisan and is the best and most efficient approach.  See, also, FirstMerit Bank, N.A., supra.  A Rulli hearing is justified only when a court enforces a disputed agreement and enters judgment because (1) the law disfavors the enforcement of ambiguous contracts particularly those that aim to memorialize a settlement agreement between adversarial litigants; (2) a settlement upon which final judgment has been entered eliminates the right to adjudication by trial; (3) when a court denies the enforcement of a disputed settlement agreement it is not binding the parties to perform under ambiguous and/or disputed terms to which they may not have agreed; and (4) trial courts should retain discretion to rule on discovery issues as they see fit.  Rulli supra, citing 1 Corbin on Contracts (Rev.Ed. 1993) 525, Section 4.1; James Ward & Co. v. Wick Bros. & Co., 17 Ohio St. 159 (1867); Columbus, Hocking Valley & Toledo Ry. Co. v. Gaffney, 65 Ohio St. 104, 61 N.E. 152 (1901).

    The question whether an evidentiary hearing is mandatory when the Court refuses to enforce a disputed settlement agreement and enters judgment is one that necessarily implicates two distinct legal concepts, the first dealing with discovery, which is generally a matter of trial-court discretion, and the second is the entry of summary judgment, which is a matter of law.  In the first instance a trial court’s discretion to refuse to hold a hearing should not be divested in denial of enforcement cases.  Thus whether to hold a hearing before denying enforcement of a disputed agreement is a matter best left squarely within the trial court’s vested discretion to govern discovery as it sees fit.  With respect to the entry of judgment denying enforcement of a disputed settlement agreement, there is the underlying principle that Rulli did not abrogate the Ohio Civil Rules concerning the trial court’s authority to enter judgment.  That is, upon a summary-judgment motion Ohio trial courts may still enter judgment denying enforcement against the party contending that a settlement agreement existed-even upon a pending motion for a Rulli hearing.  After all, summary judgment may only be entered if no genuine issues of material fact exist and judgment is appropriate as a matter of law.  Further it seems that a blanket ruling, such as that implied in Myatt v. Myatt, supra, hampers judicial economy when no genuine issue of material fact exists or where the alleged evidence is not probative of the existence of a disputed settlement agreement or its terms.

    It makes sense that the party seeking enforcement of a disputed settlement should bear the burden to proffer and identify extrinsic evidence demonstrating the existence of an agreement or clarifying disputed terms.  In practice the party seeking enforcement of a disputed settlement agreement should (1) identify evidence that it believes to exist that might be instructive upon the question whether an agreement was reached and (2) request an evidentiary hearing before the trial court.  Significantly, if a party does not request an evidentiary hearing in the trial court, on appeal it waives the opportunity to argue that the trial court erred in failing to hold a Rulli hearing.  Monea v. Campisi, 5th Dist. No. 2004 CA 00381; 2005-Ohio-5215; Brown v. Spitzer Chevrolet Co., 5th Dist. No. 2012 CA 00105, 2012-Ohio-5623, ¶ 15.  Of course if the party requesting a Rulli hearing cannot articulate what evidence exists, or is believed to exist, demonstrating a genuine issue of material fact that may be gleaned from a hearing, then it would be difficult to argue that the trial court erred by failing to hold the hearing before denying enforcement and entering judgment.

    What if extrinsic and probative evidence of an agreement exists and is asserted and the trial court still refuses to hold a hearing and enters judgment denying enforcement?  An Ohio Appellate Court might reverse such a ruling if (1) probative evidence was alleged to exist substantiating the existence of a disputed settlement agreement or clarifying its terms, and (2) the trial court was aware of such evidence but denied an evidentiary hearing and entered judgment denying enforcement.  A trial court should not ignore evidence substantiating the existence of a disputed settlement agreement if such tangible and probative evidence in fact exists.  See Moore v. Johnson (Dec. 11, 1997), 10 Dist. No. 96APE11-1579; Michelle M.S. v. Eduardo KT., 6th Dist. No. E-05-053, 2006-Ohio-2119.  Again, in cases where enforcement of a disputed settlement agreement is denied and judgment entered, the trial court is in the best position to determine whether a hearing is necessary to gather evidence demonstrating the existence of a valid settlement agreement¿the terms of which must be reasonably certain and clear.  Of course, that an evidentiary hearing is necessary to determine disputed terms militates against a finding that such terms are sufficiently certain and clear to deem an agreement to have been reached.

    If a court denies enforcement of a disputed settlement agreement and enters judgment, the aggrieved party may always move for relief from judgment under Ohio Civ.R. 60(B) in the underlying dismissed action.  But should the original dismissal be set aside when the parties have agreed to dismiss the lawsuit with prejudice but failed to agree on the terms of the conditional dismissal?  What about under the conditional-dismissal language used by the trial court in Artisan: either party “may, on good cause shown, within sixty days, request further action if settlement is not consummated * * * and that on agreement, and within sixty days, the Parties may submit a supplementary entry outlining details of the settlement.”[1]  Does equity favor a party who fails before the deadline expires to notify the Court that a signed settlement agreement has not been consummated?  Probably not, but perhaps a factual scenario could be posited demonstrating excusable neglect or otherwise justifying Civ.R. 60(B) relief.

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    [1] Artisan v. Beiser et al. Butler C.P. No. CV2008-11-4889 (Feb. 20, 2009).