In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-4790
JAMES DILLARD,
Plaintiff-Appellant,
v.
STARCON INTERNATIONAL,
INCORPORATED,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 03 C 9408—Arlander Keys, Magistrate Judge.
____________
ARGUED SEPTEMBER 22, 2006—DECIDED APRIL 18, 2007
____________
Before EASTERBROOK, Chief Judge, and KANNE and
SYKES, Circuit Judges.
SYKES, Circuit Judge. James Dillard sued his former
employer, Starcon International, Inc., for racial discrimi-
nation. With the discovery deadline looming and scheduled
depositions on the horizon, Starcon initiated settlement
discussions. These talks produced oral agreement on key
terms, including a cash payment and reinstatement. New
points of contention arose, however, when Starcon pro-
vided Dillard with a proposed written agreement. Dillard
objected to certain provisions Starcon now sought to
introduce that had not been previously discussed. Starcon
thought these new disputes did not undo the oral agree-
2 No. 05-4790
ment the parties had already hammered out and moved
to enforce the oral settlement. Dillard denied that any
final agreement had been reached because the parties had
not ironed out several points first raised in the written
agreement. The presiding magistrate judge granted
Starcon’s motion, concluding that the parties had achieved
a meeting of the minds on the material terms of the
settlement. Dillard appeals and we affirm.
I. Background
Dillard began working for Starcon, an Illinois-based
mechanical contracting company, as a “B-Mechanic Ap-
prentice” in 1996. Over the next several years, he worked
in several positions at various work sites and eventually
obtained “B-Welder” status. In July of 2003 at a Citgo
Refinery site in Illinois, Dillard made a welding error
by using the wrong welding rod on a pipe. When Dillard
notified Starcon of his mistake, the company initiated
disciplinary and remedial actions. Starcon removed
Dillard from the job site and revoked his B-Welder certifi-
cation. Starcon also proposed a plan whereby Dillard
would be assigned to a different job site, placed under the
supervision of a mentor, and tested in the future to
reacquire his B-Welder status. When Dillard refused to
be demoted and comply with this corrective plan, Starcon
terminated his employment.
Dillard filed a charge of discrimination with the Illinois
Department of Human Rights. He alleged he had been the
target of racial insults by coworkers and supervisors,
beginning in 2000 while he was at an Exxon Mobil site
and continuing through his transfer in 2002 to the Citgo
Refinery site. He alleged that when he complained to his
supervisors, he was told he would be laid off if he pressed
the matter. He also claimed Starcon assigned him work
inferior to his training. After the Equal Employment
No. 05-4790 3
Opportunity Commission (“EEOC”) issued a right-to-sue
notice, Dillard filed suit against Starcon in federal court,
bringing claims for hostile work environment, retaliation,
retaliatory discharge, and racial discrimination.1 The
district court transferred Dillard’s case to a magistrate
judge.
On March 17, 2005, with discovery soon to close,
Starcon’s attorney initiated settlement discussions.
Starcon first offered Dillard $40,000 and reinstatement
as a B-Welder if he passed the requisite welder’s test. In
return Starcon asked Dillard to dismiss his suit and
release any claims against Starcon. Because it did not
want to waste time or money unnecessarily taking dep-
ositions scheduled for the following week, Starcon asked
Dillard for a response to its offer no later than March 21,
2005.2
One day later, on March 18, 2005, Dillard countered by
asking for $75,000 cash, C-Welder pay while he was
training for his B-Welder test, two opportunities to pass
the B-Welder test, one month of training for the B-Welder
test, and employment at a Chicago-area work site. Later
that same day, Starcon responded with an offer of $45,000,
A-Mechanic pay during Dillard’s training period (because
the C-Welder position no longer existed), payment for
training as long as Dillard maintained a B average in his
course, and reinstatement at least initially at a Chicago-
area site as long as work existed there (with flexibility
to be assigned to other locations in the future). Though
there is a discrepancy in the record on this point, Starcon
1
The presiding magistrate judge subsequently dismissed
Dillard’s retaliatory discharge count as beyond the scope of his
EEOC charge.
2
The parties identify Starcon’s negotiation deadline variously
as March 21 or March 20.
4 No. 05-4790
also apparently agreed to give Dillard two chances to pass
the B-Welder test. That same day, Dillard’s counsel
informed Starcon that its terms were acceptable—except
Dillard wanted a $65,000 cash payment.3 Starcon an-
swered by upping its cash payment offer, now proposing
a $50,000 payment. Again, Starcon gave Dillard until
March 21, 2005, to take or leave this final offer.
More discussion of the cash payment followed. On March
20, 2005, Dillard’s counsel advised Starcon that Dillard
would not accept less than $65,000. Later that day,
Starcon acquiesced on this point. In a telephone call,
Starcon’s counsel confirmed the $65,000 payment and the
other terms the parties had previously agreed to and
offered to prepare a written draft of the agreement.
Up to this point, the parties had orally agreed to the
following terms: (1) Dillard would release Starcon from
liability; (2) Starcon would pay Dillard $65,000; (3) Starcon
would reinstate Dillard as an A-Mechanic; (4) Starcon
would give Dillard an opportunity to train and retest for B-
Welder status; (5) Starcon would provide Dillard with B-
Welder training and pay for this training if Dillard
maintained a B average; (6) Dillard would have two
opportunities to pass the B-Welder test; and (7) Dillard
would be reinstated at a Chicago-area work site, though
he would remain open to future transfers to other loca-
tions.
Between March 23, 2005, and March 31, 2005, the
parties exchanged drafts of a written agreement. Each
draft included various terms that the parties had not
3
Dillard claims his request for $65,000 was made in response
to Starcon’s offer of $45,000. In its briefing Starcon makes no
mention of this offer. Instead, Starcon represents that Dillard’s
request for $65,000 was in response to its original offer of
$40,000.
No. 05-4790 5
previously discussed. Starcon’s first draft included provi-
sions related to: a release of all Dillard’s future claims
against Starcon; a promise by Dillard not to partake in
future investigations against Starcon; a damages provi-
sion if Dillard should breach the agreement; a confiden-
tiality clause; a nondisparagement clause; designation of
Dillard’s employment as at-will; Dillard’s adherence to
all Starcon procedures and policies; and a reservation of
rights by Starcon to discipline or lay off Dillard in the
future.
Dillard found many of these new provisions objection-
able. In particular, Dillard wanted the unilateral release,
nondisparagement, and confidentiality provisions to be
mutual. He rejected the provision specifying that his
employment would be at-will and the provision regarding
compliance with unspecified policies and procedures. In
addition, Dillard would not agree to refrain from assist-
ing in future investigations or to pay liquidated damages
in the event of a breach of the agreement. Dillard also
said he would not sign the document because it repre-
sented that he had been given twenty-one days to con-
sider the settlement when no such time period had been
provided.
Beyond noting these objections, Dillard proposed his own
additions to Starcon’s draft. Dillard wanted Starcon to
reemploy him within seven days of receiving his cash
payment, establish his rate of pay at the level of an A-
Mechanic, give him credit for the time he was unemployed
towards the calculation of his benefits and seniority,
secure an Illinois work site unless no such jobs were
available, increase his compensation when he passed the
B-Welder test, secure the A-Mechanic position if he
failed the B-Welder test at least two times, and make him
terminable only for just cause.
The parties quibbled over these points and others.
Starcon explained to Dillard that his request for termina-
6 No. 05-4790
tion only upon “just cause” was in conflict with the em-
ployment status of every other Starcon employee and
indeed, with Dillard’s own prior employment with the
company. Starcon remained firm in its insistence that
Dillard agree not to assist others in investigations of
Starcon and accept a clause providing for a monetary
penalty in the event of breach. And Starcon claimed it
could not agree to reemploy Dillard within a determinate
period of time given his demand for an A-Mechanic
position in Illinois. Dillard, for his part, now requested a
net settlement payment of $65,000. (Despite the explana-
tions of his counsel, Dillard contended he did not under-
stand that the original offer of a cash payment was a gross
figure.)
At a settlement conference before the magistrate judge
on May 25, 2005, Starcon asserted that the parties had
reached an oral agreement on all material terms of the
settlement and that the disputes over the terms of the
written agreement were immaterial to the enforceability
of the oral settlement. On June 15, 2005, Starcon filed a
motion to enforce the oral settlement. The magistrate
judge granted Starcon’s motion, finding that the parties
orally agreed to the following terms: (1) Starcon would pay
Dillard $65,000; (2) Dillard would be reinstated as an
A-Mechanic; (3) Starcon would pay for Dillard’s B-Welder
training provided he maintained a B average; (4) Starcon
would give Dillard two opportunities to pass the B-Welder
test; and (5) Dillard would be reinstated in the Chicago
area for the time being.
The magistrate judge held that the parties had reached
a meeting of the minds on all material terms of their
agreement. The court pointed to objective, undisputed
evidence to support this conclusion. For one thing, the
parties’ initial oral negotiations whittled matters down
to the parties’ dispute about the cash payment, which
was finally settled at $65,000. At that point Dillard’s
No. 05-4790 7
counsel did not suggest that other important matters
needed to be ironed out. The court also noted the looming
March 21 deadline set by Starcon under which the negoti-
ations were being conducted. The magistrate judge found
that on that date both parties understood their agree-
ment to be final; Dillard did not make his acceptance
contingent on approval of a written instrument. The
court concluded the oral agreement was sufficiently
definite on all material terms and the disputes that
subsequently arose over the written agreement “center[ed]
upon non-material terms.” Accordingly, the court ordered
the oral settlement enforced.
II. Discussion
We review “a district court’s decision to enforce a
settlement agreement for abuse of discretion.” Hakim v.
Payco-Gen. Am. Credits, Inc., 272 F.3d 932, 935 (7th Cir.
2001); see also Carr v. Runyan, 89 F.3d 327, 331 (7th Cir.
1996); Wilson v. Wilson, 46 F.3d 660, 663-64 (7th Cir.
1995). Dillard argues that the case law in this circuit
leaves open the possibility that our review should be de
novo. We have previously considered such an argument
and rejected it. See Hakim, 272 F.3d at 935; Wilson,
46 F.3d at 663-64.
There is some confusion over whether federal or state
law should guide the analysis of the parties’ negotiations
and agreement. In the district court, Dillard argued that
federal law should apply. On appeal, he argues that
state law controls. Starcon has covered its bases by
arguing its position under both federal and Illinois law.
The magistrate judge did not make a choice, noting that
“Illinois and federal law do not differ significantly with
regard to the formulation and enforcement of oral settle-
ment agreements.” This observation is correct as far as
it goes. Lynch, Inc. v. SamataMason Inc., 279 F.3d 487,
8 No. 05-4790
490 (7th Cir. 2002), noted that there has been “uncer-
tainty” in circuit case law “over whether state or fed-
eral law would govern a suit to enforce a settlement of
a federal suit” but that the uncertainty “has been dis-
pelled; it is state law.” Lynch further noted that oral
settlements are enforceable under Illinois law, and this
is “the general rule, not something peculiar to Illinois.” Id.
The holding in Lynch flowed from the Supreme Court’s
decision in Kokkonen v. Guardian Life Insurance Co., 511
U.S. 375, 380-82 (1994), which established that a settle-
ment of a federal claim is enforced “just like any other
contract” under the state law of contracts, “unless it is
embodied in a consent decree or some other judicial order
or unless jurisdiction to enforce the agreement is re-
tained.” Lynch, 279 F.3d at 489 (citing Kokkonen, 511 U.S.
at 380-81). If federal law applied, a suit to enforce the
settlement “would arise under federal law and thus be
within the jurisdiction of the federal court (even if diver-
sity were absent), contrary to Kokkonen.” Id. at 490.
Although Lynch held that the issue of whether parties
have entered into an enforceable settlement of a federal
claim is governed by state law, in the employment dis-
crimination context, a requirement that the settlement
be “knowing and voluntary” has been added as a matter
of federal law because of the important “federal policy
underpinnings” of employment discrimination law.4 Pierce
4
Lynch is in tension with an oft-cited earlier decision of this
court, Taylor v. Gordon Flesch Co., which held that “federal law
governs the enforceability of settlements in Title VII actions.”
793 F.2d 858, 862 (7th Cir. 1986). Lynch was not an employment
discrimination case and did not mention Taylor. However, in
light of Lynch and other circuit case law such as Pierce v.
Atchison, Topeka & Santa Fe Railway Co., 65 F.3d 562, 571 (7th
(continued...)
No. 05-4790 9
v. Atchison, Topeka & Santa Fe Ry. Co., 65 F.3d 562, 571
(7th Cir. 1995). Whether a settlement of an employment
discrimination claim was entered into “knowingly and
voluntarily” is determined by the “totality of the circum-
stances.” See Alexander v. Gardner-Denver Co., 415 U.S.
36 (1974); Pierce, 65 F.3d at 571. Dillard makes only a
superficial claim of involuntariness and does not develop
the argument. He does not claim, for example, that the
oral agreement was the result of mistake or accident or
that he was under duress or coerced to assent to it. See
Riley v. Am. Family Mut. Ins. Co., 881 F.2d 368, 373 (7th
Cir. 1989). His claim of involuntariness simply repeats
his primary argument that the parties never achieved a
meeting of the minds, which is a challenge to the elements
of contract formation and is governed by state law.
Oral settlement agreements are enforceable under
Illinois law if “there is clearly an offer and acceptance of
the compromise and a meeting of the minds as to the
terms of the agreement.” Wilson, 46 F.3d at 666 (quoting
Brewer v. Nat’l R.R. Corp., 628 N.E.2d 331, 335 (Ill. App.
Ct. 1993)). The essential terms must be “definite and
certain” so that a court can ascertain the parties’ agree-
ment from the stated terms and provisions. Quinlan v.
Stouffe, 823 N.E.2d 597, 603 (Ill. App. Ct. 2005). Whether
a “meeting of the minds” occurred depends on the parties’
objective conduct, not their subjective beliefs. Paxton-
4
(...continued)
Cir. 1995), Taylor’s invocation of federal law must be under-
stood as limited to the federal requirement that settlement
agreements in employment discrimination cases must be
knowing and voluntary to be enforced. Read together, Pierce and
Lynch make it clear that the federal law “knowing and voluntary”
requirement in the employment discrimination context is a
prerequisite to be satisfied after the existence of a binding
agreement under state contract principles has been established.
10 No. 05-4790
Buckley-Loda Educ. Ass’n, IEA-NEA v. Ill. Educ. Labor
Relations Bd., 710 N.E.2d 538, 544 (Ill. App. Ct. 1999).
Dillard does not contest that the parties’ oral discussions
resulted in agreement on certain material terms. Instead,
he argues that their oral agreement could not have been
final because there were other material terms that the
parties did not agree to, as evidenced by their conten-
tious exchange of written drafts. The magistrate judge
was not persuaded by this argument and held that the
oral agreement was enforceable.
The magistrate judge especially emphasized Dillard’s
attempt to change his prior at-will employment status
during the dispute over the written agreement. The court
found it telling that this issue was not even mentioned
during the parties’ oral negotiations, though other more
“mundane” details were addressed. The court held the
disagreement over Dillard’s at-will status was not a
dispute about a material term because Dillard had always
been an at-will employee of Starcon’s. This reasoning
is sound. The court did not abuse its discretion in hold-
ing that Dillard’s belated attempt to change his at-will
status was immaterial to the settlement of his case.
The magistrate judge also reasonably concluded that
the other points of contention between the parties were
immaterial. Terms addressing purely contingent matters
are not necessarily material. See Pritchett v. Asbestos
Claims Mgmt. Corp., 773 N.E.2d 1277, 1282 (Ill. App. Ct.
2002) (declaring that “[e]very feasible contingency that
might arise in the future need not be provided for in a
contract for the agreement to be enforceable”). Accordingly,
Dillard’s concern over his A-Mechanic status if he failed
to pass the B-Welder exam, his attempt to permanently
establish a Chicago-area work site, and his effort to
revise the provision penalizing him for breaching the
agreement were disputes over immaterial terms. Starcon’s
No. 05-4790 11
proposal to prohibit Dillard from participating in investi-
gations against Starcon likely would run afoul of public
policy, see 15 CORBIN ON CONTRACTS, Ch. 83, § 83.3 (2003);
Dillard’s objection to this provision was thus understand-
able but not a dispute over a material term that would
defeat the underlying oral agreement.
Dillard raises other arguments that were not specifically
addressed by the magistrate judge. First, he claims the
evidence demonstrates that the parties intended to
continue their negotiations after March 20. Continued
negotiations may indicate a lack of agreement on mate-
rial settlement terms, but not necessarily so. The material-
ity of additional written terms introduced after an oral
agreement is reached is not established simply by one
party’s intransigence or “refusal to budge” on the new
terms. Second, Dillard cites several cases he claims
support the proposition that a dispute over a written
agreement undermines the enforceability of an oral
agreement, but the cases are readily distinguishable
from the circumstances here.
In Quinlan, the parties reached an oral agreement that
included payment for repairs to a mutual driveway,
dismissal of the plaintiff ’s complaint, and a system for
discussing future road repairs. 823 N.E.2d at 601. The
defendant claimed that the plaintiff inserted provisions
in the proposed written settlement inconsistent with the
parties’ oral agreement. The Illinois court determined
that the defendant’s primary concern was having a
workable agreement to settle future repair disputes. Id.
at 604. The parties’ dispute over this term in the written
agreement demonstrated that they had failed to reach an
accord on an essential material term of a settlement, i.e.,
the matter of future repairs and a mechanism for dispute
resolution. Id. at 605. Here, in contrast, the disputed
terms of Starcon’s and Dillard’s written agreement do not
implicate the heart of their settlement; the parties’ actions
12 No. 05-4790
do not suggest the points of dispute over the written
agreement were material.
Dillard’s reliance on Higbee v. Sentry Insurance Co., 253
F.3d 994 (7th Cir. 2001), is also misplaced; he sweeps
away critical factual differences between that case and
this one. Dillard asserts that Higbee expressly held that
confidentiality clauses, nondisparagement clauses, and
release provisions are objectively material terms. Higbee
does not so hold. The plaintiff in Higbee made clear dur-
ing negotiations that she would not settle until the par-
ties hammered out confidentiality and nondisparagement
clauses. 253 F.3d at 998. The materiality of these terms
was never in doubt. This court’s decision in Higbee did
note that many defendants would consider these terms
to be among the most material in a settlement agreement.
Id. at 997. This observation, however, was a generaliza-
tion; Higbee does not stand for the proposition that these
provisions are material as a matter of law.
For the foregoing reasons, the magistrate judge did not
abuse his discretion in holding that Dillard and Starcon
had a meeting of the minds on all material terms essen-
tial to their settlement. The order enforcing the oral
settlement is AFFIRMED.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—4-18-07