United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 9, 2009 Decided November 3, 2009
No. 08-7123
T STREET DEVELOPMENT, LLC,
APPELLANT
v.
DEREJE AND DEREJE, ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:05-cv-00524)
Thomas F. Murphy argued the cause for appellant. With
him on the briefs was Robert E. Greenberg.
Emil Hirsch argued the cause for appellees. With him on
the brief was Steven A. Pozefsky.
Before: HENDERSON and TATEL, Circuit Judges, and
EDWARDS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge TATEL.
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TATEL, Circuit Judge: This case involves a dispute over
the purchase of real property in the District of Columbia.
Appellant, the buyer, seeks to enforce a settlement agreement
it claims the parties reached during the pendency of its suit for
specific performance. Finding that the parties had failed to
agree to all material terms, the district court denied
enforcement of the alleged settlement and then dismissed the
buyer’s underlying specific performance action. We hold first
that contrary to the seller’s argument, the district court had
jurisdiction to entertain the buyer’s enforcement motion.
Reviewing for clear error, we then affirm.
I.
Appellee Dereje & Dereje (“the seller”) owns
commercial and residential real estate located at T Street and
Florida Avenue, N.W., in the District of Columbia. In
October 2004, the seller entered into a written contract to sell
the property to Appellant T Street Development (“the buyer”)
for $925,000. The contract called for the closing to occur by
December 22, 2004. When it became clear that neither party
could meet that deadline, the parties executed another contract
that pushed back the closing date to January 28, 2005.
Because the buyer was unable to obtain the necessary
financing, however, the settlement did not go forward as
planned.
After the January deadline had passed, the parties
discussed extending the settlement date. The parties now
disagree about whether those discussions culminated in an
agreement: the buyer was under the impression that an
agreement had been reached and that the closing was slated to
occur on February 16, 2005; the seller failed to show up at the
closing and returned the buyer’s deposit. The buyer then sued
the seller in D.C. Superior Court seeking specific performance
of the contract, and the seller removed the case on diversity
3
grounds to the U.S. District Court for the District of
Columbia. At around the same time, the buyer filed a lis
pendens against the property.
The district court ordered the parties to engage in
settlement negotiations before a magistrate judge. On March
14, 2007, the parties appeared before the magistrate judge and
announced that they had reached a settlement, which they
expected to reduce to writing in the form of a consent order
they would submit to the district court. Specifically, the
parties agreed that the seller would list and sell the property to
a third party, subject to the buyer’s right of first refusal.
Two issues, however, were tabled for further negotiation.
First, the buyer asserted at the settlement conference that there
was still “some work to do on the mechanics” of the first
refusal right. Settlement Conference Tr. at 10 (Mar. 14,
2007). Second, anticipating the possibility of a breach, the
seller’s attorney asserted that enforcement of the settlement
agreement by the district court would be the “sole and only
remedy, and no further lis pendens will be filed” against the
property. Id. at 6. The buyer’s lawyer protested: “the one
thing I want to be able to do is file a lis pendens” in the event
of a breach by the seller. Id. at 7. Acknowledging this “last-
minute glitch,” the parties asked for an additional week to
hash out the lis pendens issue. Id. at 9.
Although the parties subsequently exchanged draft
consent orders, they were ultimately unable to agree on the
details of the buyer’s first refusal right or its remedies in the
event of a breach. More than a year after the settlement
conference, while the specific performance suit was still
pending, the buyer filed a motion asking the district court to
enforce the settlement agreement as reflected in the settlement
conference transcript.
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Ruling from the bench, the district court denied the
buyer’s enforcement motion, explaining:
There is no question that there was not agreement on
all of the material issues to be decided by the parties.
Specifically, there was no agreement on the scope of
remedies or any of the important issues about
remedies. . . . [R]ight in front of [the] Magistrate
Judge . . . there was a disagreement between counsel
as to whether a lis pendens could or could not be
entered or filed by the plaintiff under certain
situations. Obviously that is a matter of great
significance. . . . There was no meeting of the minds
on all material elements.
Trial Tr. at 6–7 (Sept. 9, 2008). The district court then
proceeded to trial on the buyer’s suit to compel the sale of the
property pursuant to the original contract (as modified by the
alleged oral agreement). Finding that the parties never orally
agreed to extend the settlement date, the district court entered
judgment in favor of the seller. T St. Dev., LLC v. Dereje &
Dereje, 581 F. Supp. 2d 26, 32–33 (D.D.C. 2008).
The buyer now appeals the district court’s denial of its
enforcement motion, as well as the court’s subsequent
dismissal of its specific performance suit. In response, the
seller argues, among other things, that the district court lacked
jurisdiction to consider the enforcement motion.
II.
We begin, as we must, with jurisdiction. In support of its
claim that the district court lacked jurisdiction over the
settlement agreement, the seller relies on Kokkonen v.
Guardian Life Insurance Co. of America, 511 U.S. 375
5
(1994). There, the parties settled the underlying diversity
action and executed a stipulation of dismissal. Nothing in that
stipulation, however, expressly provided that the district court
would retain jurisdiction to enforce the settlement. After the
district court dismissed the case, the original defendant filed a
motion in federal court seeking to enforce the agreement. The
Supreme Court held that the district court lacked ancillary
jurisdiction to do so because enforcement of the agreement
would not serve the purpose of enabling the district court to
“protect its proceedings and vindicate its authority.” Id. at
380. The Court observed, however, that the “situation would
be quite different if the parties’ obligation to comply with the
terms of the settlement agreement had been made part of the
order of dismissal—either by separate provision (such as a
provision ‘retaining jurisdiction’ over the settlement
agreement) or by incorporating the terms of the settlement
agreement in the order.” Id. at 381. Absent some
independent basis for federal jurisdiction, however, the
defendant’s only recourse was to enforce the settlement
agreement in state court. Id. at 382.
Noting that the settlement agreement was never
incorporated into a final order, the seller argues that the
district court lacked jurisdiction to entertain the enforcement
motion in the first place. In pressing this argument, however,
the seller overlooks a key distinction between Kokkonen and
this case. In Kokkonen, the district court had already
dismissed the underlying suit and was then asked to enforce
the settlement agreement. Here, the district court ruled on the
buyer’s enforcement motion while the specific performance
suit was still pending before the court.
This distinction is critical. The rationale underlying
Kokkonen is that unless the district court retains jurisdiction
over the matter, a settlement agreement amounts to nothing
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more than a freestanding contract, “part of the consideration
for which was dismissal of an earlier federal suit.” Id. at 381.
In that circumstance, the doctrine of ancillary jurisdiction,
which “recognizes federal courts’ jurisdiction over some
matters (otherwise beyond their competence) that are
incidental to other matters properly before them,” provides no
basis for federal jurisdiction over a settlement agreement. Id.
at 378. Where settlement occurs during litigation, however,
enforcing the settlement enables the “court to function
successfully, that is, to manage its proceedings”—one of the
purposes of ancillary jurisdiction recognized in Kokkonen. Id.
at 380.
Indeed, we have consistently held that nothing in
Kokkonen precludes district courts from enforcing settlements
that occur during litigation. For example, in Foretich v.
American Broadcasting Cos., 198 F.3d 270 (D.C. Cir. 1999),
after the district court dismissed Foretich’s defamation suit
against ABC, ABC filed a motion seeking to recover
attorney’s fees, the parties negotiated a settlement, and ABC
then sought to enforce that agreement while its fees motion
remained pending. We held that the district court had
jurisdiction over the enforcement motion:
If enforced, the settlement agreement would require
withdrawal of ABC’s motion for fees and costs. The
motion to enforce, therefore, could moot the motion
for fees and costs and, concordantly, any judgment
on that motion. The motions were thus interrelated
and resolution of the motion to enforce allowed the
court to resolve the motion for fees and costs in a
manner that “effectuate[d] its decree[].”
Id. at 273–74 (citing Kokkonen, 511 U.S. at 379) (alterations
in original) (record citation omitted).
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We reached a similar conclusion in Bailey v. Potter, 478
F.3d 409 (D.C. Cir. 2007). There, the district court accepted
the parties’ settlement agreement but failed to issue a separate
order dismissing the plaintiff’s claims. Citing Kokkonen, the
district court concluded that it lacked jurisdiction to enforce
the agreement. We disagreed, explaining that “[b]ecause the
district court did not issue the appropriate order pursuant to
Rule 58(a) dismissing the complaint, it continued to have
jurisdiction over [the plaintiff’s] case. The district court’s
reliance on Kokkonen was therefore misplaced.” Id. at 412
(citations omitted).
The inescapable lesson of these cases is this: where, as in
Kokkonen, a party seeks to enforce a settlement agreement
after the district court has dismissed the case, the district court
lacks jurisdiction over the agreement unless the court either
incorporated the agreement’s terms into the dismissal order or
expressly retained jurisdiction over the agreement. If,
however, a party seeks to enforce a settlement while the
underlying suit remains pending, then the district court has
jurisdiction to enforce the related settlement. See Autera v.
Robinson, 419 F.2d 1197, 1200 (D.C. Cir. 1969) (“It is now
well established that the trial court has power to summarily
enforce on motion a settlement agreement entered into by the
litigants while the litigation is pending before it.”). Here, the
buyer filed its enforcement motion while its underlying
lawsuit was pending in district court, and a ruling on that
motion could have mooted the buyer’s specific performance
action. The district court therefore had jurisdiction to decide
whether the parties had entered into a binding settlement. We
thus turn to the merits of the buyer’s appeal, which we can
dispose of in short order.
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III.
The parties agree on our standard of review. With
respect to the district court’s denial of the buyer’s motion to
enforce the settlement agreement, we review the court’s
factual findings for clear error. Foretich, 198 F.3d at 273. A
finding is clearly erroneous when the appeals court is “left
with the definite and firm conviction that a mistake has been
committed.” Anderson v. Bessemer City, 470 U.S. 564, 573
(1985) (internal quotation marks omitted). Contract law
governs settlement agreements, and we apply local law in
determining whether a settlement agreement was formed.
Makins v. District of Columbia, 277 F.3d 544, 546–47 (D.C.
Cir. 2002). In the District of Columbia, a valid contract
requires “both (1) agreement as to all material terms; and (2)
intention of the parties to be bound.” Jack Baker, Inc. v.
Office Space Dev. Corp., 664 A.2d 1236, 1238 (D.C. 1995)
(internal quotation marks omitted).
The district court denied the buyer’s enforcement motion
because it found that the parties had failed to agree on all
material terms at the settlement conference. In particular, the
court highlighted the parties’ failure to agree on whether the
buyer could file a lis pendens against the property in the event
of a breach. On appeal, the buyer does not seriously contest
the district court’s determination that the parties failed to
agree on this issue. Rather, the buyer complains that the
district court erred in finding that the unresolved lis pendens
matter was in fact material because, according to the buyer,
“terms defining a party’s rights in the event of a breach are
not considered material terms.” Reply Br. 7.
In support, the buyer cites Tauber v. Quan, 938 A.2d 724
(D.C. 2007), in which the D.C. Court of Appeals stated that
“even if the parties expected to negotiate over possible default
terms, ‘the mere fact that a contract, definite in material
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respects, contains some terms which are subject to further
negotiation . . . will not bar a decree for specific
performance.’” Id. at 730–31 (quoting Hackney v. Morelite
Constr., 418 A.2d 1062, 1068–69 (D.C. 1980)). Nothing in
Tauber, however, suggests that terms pertaining to remedies
are always immaterial. Rather, Tauber stands for the
unremarkable proposition that failure to reach agreement on
default terms will not defeat formation, so long as the contract
is “definite in material respects.” Id. It is axiomatic that the
parties to a contract are free to decide for themselves what is
material and what is not. Indeed, the D.C. Court of Appeals
has made clear that materiality is not, as the buyer asserts,
preordained, but is instead a factual question that depends on
what the parties “deem to be the material elements of their
agreement.” Georgetown Entm’t Corp. v. District of
Columbia, 496 A.2d 587, 590 (D.C. 1985).
Thus, regardless of whether terms defining a party’s
rights in the event of a breach are typically considered to be
material, the key is whether the parties in this case deemed
them to be. And the record here makes clear that the parties
viewed the resolution of the lis pendens question as essential
to any settlement. When the issue arose at the settlement
conference before the magistrate judge, the parties sparred
about it at length. The buyer’s lawyer made clear that “the
one thing” that he wanted was to be able to file a lis pendens
in the event of a breach, and the parties then requested an
additional week to “work out” the dispute. Settlement Tr. at
7, 9. Given this, we can easily understand why the district
court found that the parties had failed to reach agreement on a
material element.
The buyer makes much of the fact that the seller had
initially filed its own enforcement motion, which it then
withdrew before the district court could act. In filing that
10
motion, however, the seller was not seeking to enforce the
transcript of the settlement conference. Instead, it asked the
court to adopt the proposed consent order that it drafted, an
order that would have barred the buyer from filing any lis
pendens against the property in the event of a breach—
precisely the outcome the seller sought but was unable to
obtain at the settlement conference. This post hoc effort by
the seller to insert its preferred term into the settlement
agreement in no way changes the fact that the parties viewed
resolution of the lis pendens issue as essential to agreement.
Moreover, the district court took account of the seller’s
motion: the court acknowledged that the seller had first
submitted its own enforcement motion yet it nonetheless
concluded that the parties had failed to agree on all material
terms at the settlement conference. Trial Tr. at 5–6. We see
no clear error in that ruling.
The buyer next contends that even if the settlement
agreement was unenforceable, the district court erred in
dismissing its specific performance suit. According to the
buyer, the “day before the scheduled closing, [the seller’s]
agent orally agreed to allow [the buyer] to extend closing
provided [the buyer] paid $200.00 for each day closing was
extended,” Appellant’s Br. 2–3, and the buyer relied on that
agreement to its detriment. See Landow v. Georgetown-
Inland West Corp., 454 A.2d 310, 313 n.3 (D.C. 1982) (oral
modification to land purchase agreement falls outside the
statute of frauds if the purchaser materially changes its
position in reliance thereon). Again, we review the court’s
factual findings for clear error. Steven R. Perles, P.C. v.
Kagy, 473 F.3d 1244, 1249 (D.C. Cir. 2007) (“We accept the
factual findings underlying the District Court’s contract
determination unless they are clearly erroneous.”).
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The district court’s conclusion that the parties never
agreed to extend the closing date flows directly from its
resolution of the parties’ factual dispute over the sequence of
the oral negotiations. The court found that in early February
2005—after the parties had failed to close by the January 28
deadline set forth in the contract—the seller offered to extend
the closing date. The buyer made a counteroffer, which the
seller rejected, and neither party made any subsequent
proposals. Accordingly, the court determined that the
contract had expired without any agreement to extend the
closing date. In reaching this conclusion, the district court
expressly credited the testimony of the seller’s witness and
discredited that of the buyer’s witness. Such credibility
determinations “are entitled to the greatest deference from this
court on appeal,” United States v. Broadie, 452 F.3d 875, 880
(D.C. Cir. 2006) (internal quotation marks omitted), and the
buyer has failed to provide any reason for us to second guess
the trial court’s decision to credit the seller’s version of
events. Given this, and given the district court’s thorough and
careful analysis, we have no basis for upsetting its dismissal
of the buyer’s specific enforcement action.
For the reasons stated above, we affirm.
So ordered.