Shanley v. Cadle

Not for Publication in West's Federal Reporter

United States Court of Appeals
For the First Circuit

Nos. 13-1507, 13-1510

KATHLEEN SHANLEY, ET AL.,

Plaintiffs, Appellees,

v.

DANIEL CADLE, ET AL.,

Defendants, Appellants.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. George A. O'Toole, U.S. District Judge]

Before

Lynch, Chief Judge,
Souter,* Associate Justice,
and Lipez, Circuit Judge.

Mark H. Bluver, with whom David H. Rich was on brief, for
appellants.
Orestes G. Brown, with whom Keith L. Sachs was on brief, for
appellees.

July 28, 2014

____________________
* Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
 Per curiam. This case comes to us after more than two

decades of litigation, which, for some of the individual

plaintiffs, had seemingly come to an end with a 2008 settlement

agreement. That year, the defendants (a debt collection agency and

its owners) proposed a comprehensive mediation and settlement for

three lawsuits brought by individual plaintiffs (debtors) in

federal court (Shanley v. Cadle, No. 07-12247 (D. Mass.), Martel v.

Cadle, No. 08-10388 (D. Mass.)) and Massachusetts state court

(Chase v. The Cadle Co., No. 2004-00375 (Mass. Sup. Ct.)).1

Following mediation, the plaintiffs' counsel accepted

defendants' offer of settlement via email. The settlement

agreement required that the fourteen claimants in the Shanley,

Martel, and Chase cases "release any individual claims they ha[d]"

or may have had against the defendants as of the date of settlement

and "dismiss with prejudice any such claims in any matter presently

pending waiving any rights of appeal."2 It also required that the

defendants pay $200,000 to a trust established for the plaintiffs

and assign to the plaintiffs their interests in the plaintiffs'

1
The magistrate judge's reports and recommendations on the
plaintiffs' motion for class certification (docket no. 162) and the
defendants' motion to dismiss (docket no. 182) in the Shanley case
provide a more complete history of the lengthy and tangled dispute
implicated by the cases now before us. We omit that complicated
history because this decision is written primarily for the parties,
who are all too familiar with it.
2
With respect to the federal actions, the settlement
agreement dealt only with the individual claims, leaving the
potential class action claims untouched.

-2-
debts.

A dispute arose almost immediately over the validity of

the settlement agreement and the time for each party's performance.

After some continued litigation on these issues, Massachusetts

courts and the federal district court found that a binding

settlement had been reached with respect to the named plaintiffs'

individual claims. The plaintiffs ultimately executed releases in

favor of the defendants. The Massachusetts state court action was

dismissed. The defendants nonetheless refused to put $200,000 in

the trust, and still have not done so.

The plaintiffs subsequently brought a new action for

breach of contract and violation of Massachusetts Chapter 93A3 in

federal court, claiming that the defendants did not honor the

settlement agreement. Meanwhile, in the original federal actions

-- Shanley and Martel -- the plaintiffs moved for "fairness

hearings," so that the settlements of the individual claims could

be effectuated.4 In response to those motions, the defendants

asked the district court to dismiss the individual claims, but to

3
Specifically, plaintiffs invoked Massachusetts General Laws
chapter 93A, section 2, which provides a cause of action for
"unfair or deceptive acts or practices in the conduct of any trade
or commerce."
4
Any settlement dismissing the individual claims in the
federal actions had to be approved as fair and appropriate and not
harmful to the potential class. While the motions for fairness
hearings were still pending, the district court denied class
certification. As the Magistrate Judge noted, that decision
obviated the need to conduct fairness hearings.

-3-
find that the plaintiffs' continued litigation in the federal

actions constituted a material breach of the settlement agreement,

excusing the defendants' own performance.5

Specifically, the defendants pointed to four species of

actions and statements by the plaintiffs that allegedly constituted

material breach of the agreement. The magistrate judge carefully

considered and rejected them all. He then recommended that the

district court (1) deny as moot the motions for fairness hearings,

(2) enter sixty-day settlement orders as to the individual claims,

(3) order the individual plaintiffs to release their claims and the

defendants to put $200,000 in trust, and (4) deny the defendants'

motions to dismiss in Shanley and Martel.6 The district court

agreed with the magistrate judge's analysis of the issues but

determined that the best way to effectuate the settlement was to

enter final judgment ordering both parties to perform their

obligations under the settlement agreement.7

5
In response, the plaintiffs expressed a willingness to abide
by their obligations under the agreement, going so far as to file
with the district court a copy of the Stipulation of Dismissal that
they were prepared to execute (docket no. 179, ex. 1).
6
The magistrate judge also recommended granting the
defendants motion to dismiss in the separate Chapter 93A action
based on the defendants' alleged breach of the settlement
agreement. The district court adopted that recommendation. That
decision is not before us on appeal.
7
Specifically, the judgment directed that "[w]ithin thirty
days the plaintiffs shall furnish appropriate stipulations of
dismissal and releases for delivery to the defendants, and the
defendants shall deposit the sum of $200,000 with the trustee."

-4-
 On appeal, the defendants urge us to free them from their

obligations under the settlement agreement by invoking essentially

the same arguments that they presented to the magistrate judge and

the district court. Having reviewed the record with care, we agree

with the magistrate judge's determination. Although his thoughtful

decision speaks well for itself, we briefly recount why we agree

that none of the following events excuse the defendants'

performance.

1. Appeal in Massachusetts State Court

The defendants claim that the plaintiffs' appeal in the

Chase action was a material breach of the settlement agreement's

requirement that they release all claims. In that case, the

plaintiffs appealed the Massachusetts Superior Court's decision to

dismiss the Chase action before the defendants had funded the

settlement. They also appealed the court's denial of their motion

for leave to amend their complaint and their motion to join

intervening parties.

As the magistrate judge aptly noted, appealing on these

three issues was not a material breach of the settlement agreement.

The settlement agreement was silent as to the time for performance,

and the plaintiffs had a right to present that issue to the court.

As to the joinder issue, the intervening parties had their own

right to appeal that was not affected by the settlement agreement.

Lastly, as to the amendment issue, the plaintiffs sought to add a

-5-
Chapter 93A claim based on the claim that the defendants were in

breach of the settlement agreement. A settling party has the right

to litigate an alleged breach of the agreement. As the magistrate

judge put it, the plaintiffs' appeal on the terms of the agreement

was "no more a breach than [was] the Defendants’ appeal of Judge

Gants’ ruling that the Parties had reached an agreement."8

Accordingly, we agree with the district court that the plaintiffs'

appeal in the Chase action did not constitute a material breach of

the settlement agreement.

2. Litigation of the Class Action

The defendants point to the plaintiffs' continued efforts

to pursue class certification and join putative class members in

the federal court actions as alleged material breaches. However,

both parties on appeal acknowledge that the settlement agreement

pertained to individual claims, not class action claims.

Therefore, taking the necessary means to pursue the class action --

seeking certification and attempting to join new parties to act as

class representatives -- cannot constitute material breaches of the

agreement.9 The settlement agreement did not affect those claims.

8
The defendants had appealed the decision of the
Massachusetts Superior Court that there was in fact a valid
settlement agreement. The magistrate judge rightly pointed out
that said appeal did not in and of itself constitute a breach of
the agreement. A contrary rule would allow parties to invalidate
an agreement simply by disputing its validity.
9
To the extent that the defendants argue that attempting to
add new parties violated the spirit of the agreement because it

-6-
 Furthermore, because the settlement of all the

plaintiffs' individual claims would potentially result in a

dismissal of the entire federal case (including the potential class

action claims), the district court could not approve the settlement

without first determining whether it was fair to other potential

claimants. As the magistrate judge explained, to approve the

settlement the court had to conclude

that either the proposed class failed to
satisfy the requirements of Rule 23, or . . .
that the individual plaintiffs were not
'selling out the class as a result of
settling' only their individual claims. The
Plaintiffs’ pursuit of class certification did
not materially breach the settlement
agreement. One way or another, the Court had
to have a hearing and reach a determination
related to the class.

The class certification motion filed by the plaintiffs accomplished

this end. When the court determined that it could not certify a

class, it effectively decided the fairness issue by foreclosing the

possibility of class-based relief. Whether that relief was

potentially available would have been at the heart of any fairness

determination, and thus a necessary question to resolve before

finalizing the settlement and dismissing the case. Accordingly, we

would enlarge the litigation, they may have a legitimate complaint.
However, the fact of the matter is that no new parties were
ultimately permitted to intervene and the litigation was not
enlarged. Under such circumstances, the attempted intervention of
potential plaintiffs cannot fairly be classified as a material
breach of the settlement agreement, which was silent on the matter.

-7-
agree with the district court that the plaintiffs did not

materially breach the settlement agreement by pursuing class

certification and attempting to join new class members.

3. Litigation of the Chapter 93A Claims

The defendants argue that the filing of the breach of

contract and Chapter 93A action was a material breach of the

settlement agreement, and, even if it was not, the filing of a new

action foreclosed the plaintiffs from seeking enforcement of the

settlement by motion in the Shanley and Martel actions due to the

election of remedies doctrine. As to the former point, as already

noted, it would be nonsensical to find that the terms of a

settlement agreement prevent either party from litigating its

enforcement. Cf. United States v. Baus, 834 F.2d 1114, 1127 (1st

Cir. 1987) ("In order to ensure that settlement agreements are an

effective form of dispute resolution, district courts who enter

judgment pursuant to such an agreement necessarily have the power

to mandate compliance with it."); Warner v. Rossignol, 513 F.2d

678, 683 (1st Cir. 1975) ("[A] settlement agreement, however

labeled, will not bar recourse to the original cause of action in

the event that defendant repudiates or commits a breach of the

terms of the agreement."). As to the latter, as the magistrate

judge correctly observed, "the election of remedies doctrine . . .

is designed to prevent a double recovery for the same wrong, not to

prevent the pursuit of inconsistent alternative theories of

-8-
recovery prior to entry of judgment." Accordingly, the plaintiffs

did not materially breach the settlement agreement by filing the

breach of contract and Chapter 93A action.

4. Statements Made to the Judge

Finally, the defendants point to the plaintiffs'

attorney's statements in a status conference conducted on October

29, 2010, that the plaintiffs no longer wanted to enforce the

settlement agreement on its terms. Specifically, the relevant part

of the exchange, for the defendants' purposes, proceeded as

follows:

THE COURT: I'm only asking . . . --yes or no,
either on the terms of the agreement you would
do it today or you wouldn’t. You might maybe
--

MR. BROWN [plaintiffs' counsel]: On the terms
of the agreement, no.

THE COURT: Okay.

MR. BROWN: We’re seeking additional damages at
this point.

The defendants argue that these statements amounted to repudiation

of the agreement.

Under different circumstances that might well be true,

but here it is undisputed that the statements were made as part of

negotiations in which responses to the court's inquiries were non-

binding. Indeed, immediately prior to the quoted exchange, the

court made clear to the attorneys that their statements had no

legal effect. The court stated explicitly,

-9-
 . . . I’m about to ask a question and that,
but the answer to that question is not conduct
that’s attributable to either the plaintiffs
or the defendants, right. Therefore neither
defendants can assert that the plaintiffs'
answer is a basis for breach of the agreement
nor can the plaintiffs assert that the
defendants' answer is evidence of breach of
the agreement. So are we understood?

All attorneys present acknowledged that they understood.

Accordingly, we cannot now attach legal significance to the

plaintiffs' attorney's response to find that the plaintiffs

repudiated the settlement agreement.

Final Consideration

In addition to these considerations, there exists one

overarching rationale for the district court's decision. As the

magistrate judge acknowledged, as a remedy for the plaintiffs'

alleged material breach, the defendants seek one-sided enforcement

of the settlement agreement -- they want the plaintiffs to dismiss

all of their individual claims, and, relying on the above actions

of the plaintiffs, they want to pay nothing in return for those

releases. As the magistrate judge explained, and we have just

reaffirmed, none of the plaintiffs' actions have risen to the level

of material breach or repudiation. Furthermore, even if they had

materially breached the agreement, it is far from clear that the

proper remedy would be one-sided enforcement of the agreement.

Having found the defendants' arguments wanting for the

reasons articulated here and carefully laid out by the magistrate

-10-
judge, we affirm the entry of judgment and the order for both

parties to perform their obligations decreed therein. We also deny

the appellants' request for sanctions.

So ordered.

-11-