Free Reply in Support of Motion - District Court of Arizona - Arizona

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LITTLER MENDELSON
A PROFESSIONAL CORPORATION Camelback Esplanade 2425 East Camelback Road Suite 900 Phoenix, AZ 85016 602.474.3600

J. Mark Ogden; AZ Bar No. 017018 [email protected] R. Shawn Oller; AZ Bar No. 019233 [email protected] LITTLER MENDELSON A Professional Corporation Camelback Esplanade 2425 East Camelback Road, Suite 900 Phoenix, AZ 85016 Telephone: 602.474.3600 Facsimile: 602.957.1801 Attorneys for Defendant

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

Kenneth A. Batory, Plaintiff, v. Sears, Roebuck and Co., a New York corporation, dba "The Great Indoors," Defendant. I. INTRODUCTION

Case No. CIV 02 2026 PHX-JWS DEFENDANT'S REPLY IN SUPPORT OF MOTION TO ENFORCE ORAL SETTLEMENT AGREEMENT

In his Response, Plaintiff's counsel makes several arguments regarding why the Court should not enforce the parties' oral settlement agreement. As set forth below, the arguments of Plaintiff's counsel are without merit. II. LEGAL ANALYSIS A. Plaintiff's Reliance on Ariz. R. Civ. P. 80(d) and Local Rule 83.7 to Abrogate Oral Settlement Agreements is Misplaced.

Initially, Plaintiff's counsel argues that Rule 80(d) of the Arizona Rules of Civil Procedure and Local Rule 83.7 precludes the enforcement of an oral settlement agreement. Plaintiff's reliance on procedural rules to abrogate substantive law related to oral contracts is misplaced. In Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 426 (1996), the

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U.S. Supreme Court explained that although federal diversity jurisdiction provides an alternative forum for the adjudication of state-created rights, "it does not carry with it generation of rules of substantive law." Consequently, federal courts sitting in diversity apply federal procedural law and state substantive law.1 Snead v. Metro. Prop. & Cas. Ins. Co., 237 F.3d 1080, 1090 (9th Cir. 2001) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)). As a general matter, contract interpretation and enforcement are questions of state substantive law. See Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1280 (9th Cir. 2006). The application of federal procedural law found in local rules should not be used to abridge state substantive rights.2 The federal Rules Enabling Act addresses the ability of the U.S. Supreme Court and the federal district courts to promulgate local rules. Section 2071 provides, in pertinent part: "The Supreme Court and all courts established by Act of Congress may from time to time prescribe rules for the conduct of their business," and "[s]uch rules shall be consistent with Acts of Congress and rules of practice and procedure prescribed under section 2072 of this title." 28 U.S.C. § 2071(a). Section 2072 states: "The Supreme Court shall have the power to prescribe general rules of practice and procedure and rules of evidence for cases in the United States district courts," and "[s]uch rules shall not abridge, enlarge or modify any substantive right." Id. § 2072(a-b). The Local Rules of the U.S. District Court for the District of Arizona are promulgated pursuant to Rule 83 of the Federal Rules of Civil Procedure, which states: "A local rule shall be consistent with . . . Acts of Congress and rules adopted under 28 U.S.C. §§ 2072 and 2075." Fed. R. Civ. P. 83(a)(1). Thus, Plaintiff cannot rely on Local Rule 83.7 to abridge Arizona substantive law regarding the enforcement of oral contracts. Today, Arizona courts still consider oral contract claims to be viable causes of action. See, e.g., Premium Cigars Intern., Ltd. v. Farmer-Butler-Leavitt Ins. Agency, 208 Ariz. 557, 96 P.3d 555 (App. 2004)
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LITTLER MENDELSON
A PROFESSIONAL CORPORATION Camelback Esplanade 2425 East Camelback Road Suite 900 Phoenix, AZ 85016 602.474.3600

In the present case, Rule 80(d) of the Arizona Civil Rules of Procedure does not appear to apply in the present case.

2

This is especially true given the strong public policy favoring the settlement of employment discrimination claims. See Stroman v. W. Coast Grocery Co., 884 F.2d 458, 461 (9th Cir. 1989).
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LITTLER MENDELSON
A PROFESSIONAL CORPORATION Camelback Esplanade 2425 East Camelback Road Suite 900 Phoenix, AZ 85016 602.474.3600

("An oral contract for insurance between Insurance Agency and Premium may be valid if Premium can show `that the parties have agreed on all the essential terms of the contract, including the subject matter, the risk insured against, the time of commencement and duration of the risk, the amount of insurance and the amount of the premium.'"); Long v. City of Glendale, 208 Ariz. 319, 93 P.3d 519 (App. 2004). Second, to the extent that Local Rule 83.7 applies at all, it applies only to disputed agreements. See LRCiv 83.7. Defendant's motion was filed based on the representation from Plaintiff's counsel his client, Mr. Batory, was "backing out" of the parties' settlement.3 That is, that the parties had reached an agreement but that Mr. Batory was not going to honor that agreement. The parties' agreement is evidenced by the e-mails and correspondence exchanged between Plaintiff's counsel and the undersigned. For example, the parties first negotiated the amount of the settlement: · · · · On December 11, 2006, Plaintiff's counsel wrote offering to settle the entire claim for $40,000 (12/11/06 Letter; Exhibit 1); On December 12, 2006, Plaintiff's counsel wrote offering to settle for $37,500 and raised the issue of withholding (12/12/06 email; Exhibit 1); On December 14, 2006, Plaintiff's counsel wrote offering to settle for $32,500 (12/14/06 email; Exhibit 1); On January 17, 2007, Plaintiff's counsel verbally accepted Defendant's settlement offer of $30,000 (Oller Declaration, ¶ 5 and 01/17/07 email; Exhibit 1). Defendant's counsel sent a confirming email stating "It appears that we have agreed on an amount, $30,000.00, but cannot agree on how that amount will be characterized." Id.

Until his Response, Plaintiff's counsel never disputed that the parties had reached an agreement on the settlement amount. At that time, the only disagreement between the parties was what portion of the settlement proceeds would be characterized as compensation for lost wages, subject to statutory withholdings (Oller Declaration, ¶ 6). The parties continued to
3

Indeed, Plaintiff's counsel does not specifically dispute that he told Defendant's counsel that Mr. Batory was "backing out" of the parties' settlement.
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LITTLER MENDELSON
A PROFESSIONAL CORPORATION Camelback Esplanade 2425 East Camelback Road Suite 900 Phoenix, AZ 85016 602.474.3600

negotiate this single, outstanding point, with Plaintiff's counsel asking for less of the settlement proceeds to be subject to statutory withholding (01/17/07 email; Exhibit 1). On February 2, 2007, the parties, through their respective counsel, resolved this issue and reached a final settlement of the above-styled lawsuit (Oller Declaration, ¶ 7). Again, Plaintiff's counsel does not specifically dispute that he agreed to apportion the $30,000.00 settlement as $5,000 for lost wages, leaving the remainder uncharacterized. As further evidence of the parties' settlement, Defendant's counsel: · requested the plaintiff's current mailing address, social security number, and tax identification number from Plaintiff's counsel ­ which was provided (Oller Declaration, ¶ 8, 02/13/07 email; Exhibit 1); drafted and forwarded a Stipulation to Dismiss and accompanying Order (02/13/07 email; Exhibit 1); and drafted and forwarded a Settlement Agreement and Release (02/14/07 email; Exhibit 1).

· ·

Again, at no time between February 2, 2007 and February 15, 2007 did Plaintiff's counsel dispute that the parties had reached a settlement agreement. The immediate response from Plaintiff's counsel to Defendant's counsel has been that "I don't believe there's any president [sic] for holding a claimant liable for attorney's fees of the other side if the claimant decides not to sign the settlement agreement." (02/21/07 email; Exhibit 1). Indeed, since Defendant filed its Motion to Enforce Oral Settlement Agreement, Plaintiff's counsel has offered to compromise his client's claims for $50,000.00 ­ a significantly higher amount than the parties originally agreed (03/06/07 letter from Lynn M. Laney, Jr.; Exhibit 1). Contrary to the allegations of Plaintiff's counsel, a settlement agreement was reached between Plaintiff's counsel and Defendant's counsel. Whether Mr. Laney had the authority to broker that agreement or whether Plaintiff repudiated that agreement are the only questions left in this case.

... ...
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LITTLER MENDELSON
A PROFESSIONAL CORPORATION Camelback Esplanade 2425 East Camelback Road Suite 900 Phoenix, AZ 85016 602.474.3600

B.

Plaintiff's Reliance on the Older Workers' Benefit Protection Act ("OWBPA") is Misplaced.

The fact that the parties reached a settlement agreement is only highlighted by Plaintiff's second argument. Indeed, Plaintiff's counsel now invokes the Settlement

Agreement and Release and argues that it "has a provision giving Mr. Batory an absolute and unconditional right to cancel it within seven days after he would have signed it . . . ." (Response, p. 2). That is, Plaintiff's counsel now appears to argue that the parties had an oral settlement agreement, but the written Settlement Agreement and Release authorized Mr. Batory to "back out" of it. The argument of Plaintiff's counsel misses the mark. The provision upon which Plaintiff's counsel relies is mandatory language under the OWBPA which, inter alia, provides settling parties of age discrimination claims under the Age Discrimination in Employment Act (ADEA) 21 days to consider the settlement and seven days to revoke it. 29 U.S.C. § 626 et seq. The requirements of the OWBPA, however, only apply to Batory's potential claim under the ADEA ­ not Batory's whistleblower claim under Arizona statutory law. See, e.g., Gomez v. AlliedSignal, Inc., 172 F.3d 62 (10th Cir. 1999) ("Finally, we note that requirements of the OWBPA apply to only Mr. Gomez's ADEA claim. Because the settlement agreement also resolved his non-ADEA claims, a finding that the waiver of the ADEA claim was invalid would not necessarily establish the invalidity of the settlement as to non-ADEA claims."); Indeed, the United States Supreme Court has indicated that a release and waiver could be unenforceable against an ADEA claim but enforceable against other claims. See Oubre v. Entergy Operations, Inc., 522 U .S. 422, 427-27 (1998) (stating that because the plaintiff's "release did not comply with the OWBPA's stringent safeguards, it is unenforceable against her insofar as it purports to waive or release her ADEA claim" and that complex questions may arise "where a release is effective as to some claims but not as to ADEA claims"). In sum, if the court found that the Settlement Agreement and Release was enforceable, it could enforce the waiver and release against Plaintiff's non-ADEA claims.

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LITTLER MENDELSON
A PROFESSIONAL CORPORATION Camelback Esplanade 2425 East Camelback Road Suite 900 Phoenix, AZ 85016 602.474.3600

III.

CONCLUSION For the reasons set forth above, Defendant respectfully requests that this Court grant

its Motion to Enforce Settlement Agreement. RESPECTFULLY SUBMITTED this 19th day of March, 2007. s/ R. Shawn Oller J. Mark Ogden R. Shawn Oller LITTLER MENDELSON, P.C. Attorneys for Defendant

I hereby certify that I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following if CM/ECF registrants, and mailed a copy of same to any non-registrants this 19th day of March, 2007: Lynn M. Laney, Jr. 934 West McDowell Road Phoenix, AZ 85007-1730 Attorney for Plaintiff

s/ Jaye Sanschagrin
Firmwide:82174829.1 016144.1070

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