United States District Court, N.D. Illinois, Eastern Division
June 17, 2004.
STEPHEN J. DENARI, Plaintiff,
GENESIS INSURANCE CO., et al. Defendants.
The opinion of the court was delivered by: ARLANDER KEYS, Magistrate Judge
REPORT AND RECOMMENDATION
TO: THE HONORABLE AMY J. ST. EVE UNITED STATES DISTRICT COURT
Currently before the Court is pro se Plaintiff Stephen J.
Denari's Motion to Enforce Putative Settlement against Genesis
Insurance Company ("Genesis") and Federal Insurance Company
("Federal") (collectively, the "Insurance Companies"). Mr. Denari
sued the Insurance Companies when they refused to pay legal fees
that Mr. Denari incurred as a result of claims brought against
him as an employee and officer of Navigant Consulting, Inc.
("Navigant"), Mr. Denari's former employer. The parties engaged
in settlement negotiations and Mr. Denari contends that those
negotiations resulted in a settlement agreement. Mr. Denari now
seeks to have the Court enforce the terms of that agreement. For
the reasons set forth below, this Court recommends granting
Plaintiff's Motion. BACKGROUND FACTS
Mr. Denari served as Vice President of Navigant from 1997 until
1999, when Navigant terminated his employment. In late 1999,
Navigant shareholders filed several securities fraud class action
lawsuits against Navigant, Mr. Denari, and several other officers
and directors of the company. These lawsuits were consolidated
into a single action, which proceeded before Judge Ruben Castillo
in the Northern District of Illinois. See Stearns v. Navigant,
et al., No. 99 C 7617.
The Stearns suit was eventually settled over Mr. Denari's
objections. Mr. Denari filed a "Petition for Fees and Costs,"
seeking reimbursement for legal fees incurred in the underlying
litigation and in challenging the fairness of the settlement
agreement. Judge Castillo ruled that Mr. Denari was barred from
recouping fees "incurred in resisting settlement and/or pursuing
a later-filed insurance coverage lawsuit." In re Navigant
Consulting Secs. Litig., No. 99 C 7617 (N.D.Ill. May 20, 2003)
(J. Castillo). However, Judge Castillo's May 20th Order did
not address the propriety of Mr. Denari's fee request as it
pertained to the attorney fees he incurred in defending the
underlying litigation. Mr. Denari then filed a three count Complaint against the
Insurance Companies seeking: 1) a declaratory judgment that he is
entitled to his defense costs under the relevant insurance
policies; 2) breach of contract damages; and 3) damages arising
from an alleged conspiracy between Genesis and Navigant. Denari
v. Genesis Ins. Co., No. 01 C 2015 (Judge St. Eve). On December
15, 2003, Judge St. Eve granted in part and denied in part
Genesis' Motion for Summary Judgment. Denari v. Genesis Ins.
Co., No. 01 C 2015, 2003 WL 22964371 (N.D. Ill. Dec. 15, 2003).
Judge St. Eve instructed the parties to attempt to mediate the
surviving claims. On February 2, 2004, the parties participated
in settlement negotiations before this Court.
In addition to Mr. Denari and counsel for the Insurance
Companies, counsel for Navigant which was not named a party in
Mr. Denari's suit participated in the settlement negotiations.
After several hours, the parties agreed that the Insurance
Companies would pay Mr. Denari $29,000 in exchange for his
agreement to dismiss his federal lawsuit. The parties agreed to
set forth the terms of the settlement in open court, but noted
that the agreement was merely tentative, because Mr. Schoon,
counsel for Navigant, was unable to reach his client for
approval. This Court explained that, "rather than sit around
waiting [for Mr. Schoon to] get in touch with the client, we're going to have the
terms of the proposed settlement stated for the record. . . ."
Trans. of 2/2/04 at p. 2.
On the record, Mr. Denari agreed to dismiss the federal lawsuit
against the Insurance Companies, in exchange for the payment of
$29,000. Mr. Schoon stated that he would convey the terms of the
settlement to his client and get back to Mr. Denari before the
end of the day. Tr. of 2/2/04 at p. 5. Later that evening, Mr.
Schoon called Mr. Denari's cellphone and left a voicemail message
stating that Navigant "can agree to the total payment as
represented in Court." Pl.'s Reply, Ex. 1. The next morning,
Defendants informed Judge St. Eve that the case had been settled.
Tr. of 2/3/04 at p. 2.
In March of 2004, Mr. Denari received a draft of the settlement
agreement, which contained a myriad of new terms, including the
requirement that Mr. Denari dismiss his state court suit against
the Insurance Companies and Navigant a term explicitly
discussed and rejected during the 2/2/04 settlement negotiations.
Mr. Denari subsequently filed this Motion to enforce the terms of
the settlement, as stated in open court. DISCUSSION
An oral settlement agreement reached during mediation is fully
enforceable by the court presiding over the underlying
litigation. Carr v. Runyan, 89 F.3d 327, 329-33 (7th Cir.
1996). "[A] contract can be formed before there is an official
document memorializing the deal." Fidelity Mut. Life Ins. Co.,
v. American Nat'l Bank and Trust Co. of Chicago, 1994 WL 14635
at *2 (N.D. Ill. Jan. 20, 1994). In order to establish the
existence of an agreement, the parties must demonstrate that
there was an offer, acceptance, and a meeting of the minds as to
the terms of the agreement. The terms of the agreement must be
sufficiently definite for the court to enforce the settlement.
Defalco v. Oak Lawn Public Library, No. 99 CV 02137, 2000 WL
263922, at *3-4 (Mar. 1, 2000) (noting that courts may look to
the ordinary linguistic meaning of a term to define the terms of
Although an oral settlement must set forth the terms of the
agreement with sufficient definiteness, the settlement may be
contingent upon a subsequent agreement. "[T]he fact that a
settlement agreement calls for the parties to reach another
agreement in the future in other words, an `agreement to agree'
will not prevent the settlement from being enforced." Thermos
Co. v. Starbucks Corp., No. 96 C3833, 1998 WL 299469, at *4 (N.D. Ill. May 29, 1998) (quoting S
and T Mfg. Co., Inc. v. County of Hillsborough, 815 F.2d 676,
678-79 (Fed. Cir. 1987)). A party cannot avoid performance under
an agreement to agree by withholding its consent, in bad faith,
to the unresolved term. See generally, Beraha v. Baxter Health
Care Corp., 956 F.2d 1436, 1443 (7th Cir. 1992).
In the instant case, Mr. Denari's offer to settle the lawsuit
was made on the record. Mr. Denari agreed to dismiss his federal
lawsuit in exchange for $29,000, and the parties further agreed
that a portion of those proceeds would be paid directly to Mr.
Denari's counsel. Defendants stated that they would accept these
terms if and when Navigant agreed. Mr. Schoon did, in fact,
contact Mr. Denari later that evening, and stated that Navigant
was on board and that "we have an agreement." Pl.'s Reply, Ex. 1.
The next morning, Defendants informed Judge St. Eve that the
parties had settled the case the night before. Tr. of 2/3/04 at
Under these circumstances, Defendants' claim that the
settlement was merely tentative and lacked finality is without
merit. It is clear from the record that the only impediment to a
final, "on the record" settlement agreement was Navigant's
approval. Mr. Denari has presented uncontradicted evidence that Navigant approved the terms of the
settlement, thereby finalizing the parties' agreement.
Defendants next argue that the scope of Mr. Denari's release is
vague, rendering the oral agreement too indefinite to enforce.
The Court acknowledges that the transcript of the 2/2/04 hearing
permits either a narrow ("in return for the payment of $29,000,
[Mr. Denari] would dismiss this case, this particular case with
prejudice") or broad ("That's a dismissal with prejudice, a
release of all claims known or unknown under both the policies at
issue") interpretation of the release. Compare Tr. of 2/2/04 at
pp. 3-4, lines 25 and 1, with p. 4, lines 7-9.
However, this Court's very clear recollection is that, during
settlement negotiations, Mr. Denari adamantly refused to drop his
state court claims in exchange for $29,000, and that both the
Insurance Companies and Mr. Schoon acknowledged Mr. Denari's
refusal to accept such a broad release. The parties clearly
agreed in chambers that Mr. Denari would be relinquishing only
his federal claims under the insurance policies. Indeed,
throughout the settlement negotiations, Mr. Denari made it clear
to the Court and to Defendants and Mr. Schoon that, if they
wanted to include the State Court claims in the settlement
agreement, they would have to pay much more than $29,000. All
parties at the settlement conference knew of the existence of the State
Court action and how important it was to Mr. Denari.*fn1
Therefore, the fact that it was not mentioned on the record
because it would have been a deal breaker clearly shows that it
was not included in the settlement agreement.
Genesis' final attempt to distance itself from its acceptance
of Mr. Denari's settlement offer is equally unavailing and
particularly disingenuous. Genesis contends that this Court lacks
jurisdiction to enforce the settlement agreement, because
Navigant is not a party to the lawsuit.*fn2 The settlement
agreement does not require this Court to exercise its
jurisdiction over Navigant only over the Insurance Companies.
The Insurance Companies agreed to accept Mr. Denari's settlement
demand once it received the green light from Navigant ie, there
was an "agreement to agree." Once Mr. Schoon contacted Mr. Denari
and communicated Navigant's approval of the settlement terms, and
once the Insurance Companies revealed their knowledge of
Navigant's approval by explaining to Judge St. Eve that the parties had reached an agreement, the settlement agreement was
complete. The Insurance Companies were bound by their previous
agreement to agree, and thereby accepted Mr. Denari's settlement
Finally, Mr. Denari requests that the Court sanction Defendants
for "their misrepresentations and continued misuse of the Court's
. . . time in a now unveiled attempt to tie up the Plaintiff at
the behest of its funding source: Navigant." Pl.'s Reply at 3.
Rule 11*fn3 prohibits parties from presenting any
pleading, motion or other document for "any improper purpose,
such as to harass or to cause unnecessary delay or needless
increase in the cost of litigation." Fed.R.Civ.P. 11(b)(1). In
determining whether sanctions are warranted, the Court evaluates
the parties' conduct for "reasonableness under the
circumstances." Indianapolis Colts v. Mayor and City Council,
775 F.2d 177, 181 (7th Cir. 1985).
This Court is inclined to agree that Defendants' conduct is
likely sanctionable. Defendants selectively refer to portions of
the 2/2/04 transcript to bolster their claim that the oral
settlement was only tentative and not yet final. In doing so,
Defendants conveniently ignore the fact that their acceptance of Mr. Denari's demand was contingent only
upon Navigant's approval of the settlement terms, and that Mr.
Schoon contacted Mr. Denari confirming Navigant's approval of the
Equally troubling is Defendants' attempt to broaden the agreed
upon release to include Mr. Denari's state court claims. Although
the 2/2/04 transcript does not expressly contradict such an
interpretation, the parties' settlement discussions before this
Court clearly revealed each parties' understanding that the
release was limited to Mr. Denari's federal claims.
However, Rule 11(c)(1)(A) requires that a sanctions motion
"shall be made separately from other motions or requests and
shall describe the specific conduct alleged to violate" the Rule.
Rule 11 further requires parties seeking sanctions to provide a
21 day safe harbor to the allegedly offending party. Neither
procedure was followed in this case. And while the Court retains
the inherent authority to sanction Defendants, see Methode
Electronics, Inc. v. Adam Tech., Inc., ___ F.3d ___, No.
03-3252, 2004 WL 1301852, at *4-5 (7th Cir. June 14, 2004),
Defendants have not been given the opportunity to respond to Mr.
Denari's charges. Therefore, the Court finds that sanctions would be inappropriate at this
In conclusion, this Court is of the opinion that a settlement
agreement was reached in this case on February 2, 2004. Mr.
Denari set forth the terms of his demand in open court, and
Defendants agreed to accept those terms once Mr. Schoon's client,
Navigant, communicated its approval. Therefore, this Court
recommends that Mr. Denari's Motion be GRANTED.