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November 8, 2005.

DONNA L. SEYMOUR, Plaintiff,

The opinion of the court was delivered by: JEFFREY COLE, Magistrate Judge



This case has its genesis in Donna L. Seymour's unsuccessful attempt to purchase a home in a suburb of Chicago from realtors, Roger and Carol Hug, Patricia Brown-Wyrick and H&H Realty, Inc. (collectively "Realtor Defendants"), and Cendant Mobility Corp. and Curtis and Carol Castle (collectively "Owner Defendants"). According to Ms. Seymour, although she had successfully negotiated a contract for the purchase of the home, the defendants "sold it out from under her" when they discovered she was African-American. On March 18, 2004, Ms. Seymour filed a complaint alleging unlawful discrimination against her on the basis of race in violation of the Fair Housing Act, 42 U.S.C. §§ 3604, 3605, 3617, and breach of contract under Illinois state law. A week later, she amended her complaint, and she did so again on August 20, 2004. Discovery ensued as did intensive settlement discussions.

  On May 24, 2005, the parties filed a Joint Status Report, stating that they "were in the process of finalizing an agreed settlement," and that they had "agreed in principle to a settlement of all claims. A condition of the settlement is that plaintiff must seek approval from the Surrogate's Court in New York, the state of residence of plaintiff and her children, in order to procure a valid release of any potential claims of her minor children." (Id).*fn2 On June 20, 2005, counsel for certain of the defendants reported at a status hearing that the case was settled, and that the execution of the formal settlement agreement by all parties was imminent. Accordingly, I dismissed the case with leave to reinstate within 60 days in the event of any unanticipated problem and retained jurisdiction to enforce the settlement agreement.*fn3

  Apparently, over the course of the next week, the defendants concluded that they had been had — and rather badly at that — by the plaintiff and her lawyers. They demanded that Ms. Seymour make further application to the Surrogate's Court and provide the Court with the information they insisted she had withheld. The plaintiff's lawyers refused. On June 29, 2005, Ms. Seymour filed this present Motion to Enforce the Settlement Agreement or, in the Alternative, to Vacate Dismissal, Reinstate Case, and Enter Judgment on the Agreement. On July 15, 2005, the defendants filed a Cross Motion to Enforce Settlement and For Fees, in which they contend that Ms. Seymour failed to comply with the terms of the parties' March 14, 2005 settlement agreement. The motion argued that Ms. Seymour and her lawyers had deceived the defendants and the Surrogate's Court in New York into approving the settlement of the instant case and authorizing a release of the claims of Ms. Seymour's children.*fn4 Ms. Seymour's view of the matter is, predictably, quite different. She denies that there was any settlement on March 14th and insists that the settlement is that contained in a document prepared by the defendants on April 28, 2005, which required that she obtain a release of the childrens' claims. For her, form is substance, and having obtained on May 20, 2005 an order of the Surrogate's Court approving the settlement and releasing any claims of her children, her obligations have been fulfilled.

  The difficulty, however, is that form is not substance, and Ms. Seymour's contention that she has complied with the terms of the settlement agreement merely by securing an order of the Surrogate's Court, regardless of the circumstances under which the order was obtained, is plainly mistaken. Under New York law, the Surrogate's Court had to be "fully apprised" of all the relevant facts and circumstances in order to make an informed determination of whether the approval of the settlement was in the children's "best interest." Unless that occurred, the defendants would be subject to precisely the risks of future litigation by Ms. Seymour's children that the settlement agreement was designed to avoid. Only the "latitudinarian attitude of Alice in Wonderland towards language," National Mutual Insurance Co. v. Tidewater Transfer Co., 337 U.S. 582, 654 (1949) (Frankfurter, J., dissenting), could support the plaintiff's contention that the petitions Ms. Seymour filed in New York fully and properly informed the Court of the nature of the children's claims and the allegations made by Ms. Seymour in the underlying action. The disquieting reality is that the Surrogate's Court was ill-served by Ms. Seymour and her legal advisors, and that by failing to comply with New York law in her presentation to the Surrogate's Court, Ms. Seymour breached the settlement agreement she made with the defendants.




  The Complaints, Discovery, And Early Settlement Demands

  All of Ms. Seymour's pleadings repeatedly referred to her "family" and "children." The complaint and amended complaint charged that she "celebrated with her children having successfully negotiated for their new home." (Compl., at ¶ 60; Am. Compl., at ¶ 57). She also alleged that she brought her children to see the home. (Am. Compl., at ¶ 49). All three versions of her complaint alleged that the defendants' actions caused Ms. Seymour "and her family economic injury, consequential damages and personal harm," (Compl., at ¶¶ 77, 80, 82, 84; Am. Compl., at ¶¶ 102, 105, 107, 109; 2nd Am. Compl., at ¶¶ 111, 114, 116, 118) (emphasis supplied), and requested compensatory and punitive damages "for discrimination against her and her children." (Compl., at ¶ 84 Prayer d; Am. Compl., at ¶¶ 102 Prayer (d), 105 Prayer (d), 107 Prayer (d); 2nd Am. Compl., at ¶¶ 111 Prayer (d), 116 Prayer (d)) (emphasis supplied).

  Consistent with these allegations of harm to her children, in the complaints, Ms. Seymour demanded in August 2004 that in addition to payment of $150,000 in damages to her, her two children were entitled to $50,000 "to compensate them for defendants' illegal actions, and the resulting emotional distress." (Defendants' Brief, Ex. B). Ms. Seymour's insistence that her children were harmed by the defendants' actions — and thus had their own claims — continued into discovery. When asked at her deposition in December 2004 to explain what damages were being claimed, Ms. Seymour said that it had been "a very painful experience for myself, for my children," and that she relocated "my family because of this occurrence." (Defendants' Br. Ex. C at 34). When counsel for the owner defendants, asked if Ms. Seymour understood that her children were not party to this lawsuit, Ms. Seymour responded that while her children were not parties, "my children have been affected by the discrimination that this lawsuit is about. . . ." Id. at 35. When asked if she was making a claim on behalf of her children, Ms. Seymour declared: "My children's lives have been forever altered as a result of this lawsuit, which was us having to relocate across the country. I have not chosen at this time to file a lawsuit on their behalf." Id. (Emphasis supplied). There then followed this telling exchange between Ms. Donaldson and Ms. Seymour:
Q: Are you making a claim in this lawsuit for damages that you claim were suffered by your children as a result of this transaction?
A: I'm making a claim in this lawsuit that my children's lives have been affected by what has occurred in this transaction.
Q: And you're making that claim despite the fact that your children are not plaintiffs and this action is not brought on their behalf. A: That's correct.
Id. at 36. (Emphasis supplied).

  It is thus clear that Ms. Seymour was of the view that her children had their own independent, substantial claims, and, although they were not being asserted "in a lawsuit" "at this time," the specter of future litigation by the children loomed like a brooding omnipresence. From any prudent perspective, a settlement with Ms. Seymour had to include the children's unpled claims. That, at least, was the defendants' non-negotiable position.


  The Early Settlement Negotiations

  The unpled claims of Ms. Seymour's children remained a central issue as the settlement negotiations continued into early 2005. On March 11, 2005, Mark Howard, counsel for the realtor defendants, emailed the terms of defendants' settlement offer to William Caruso, one of Ms. Seymour's counsel. (Defendants' Br. Ex. D1). The first two of five terms predictably dealt with the children's claims:
1) Plaintiff to amend complaint to include minors' claims prior to dismissal pursuant to settlement, and to petition [Magistrate Judge] Levin in accordance [with] NY state law Chapter 308, section 1207 (reproduced below) and allocate a reasonable amount to the minor's [sic] claims, and in the event Levin declines to exercise jurisdiction, then plaintiff will institute a special proceeding in NY;
2) $37,500 total offer divided among the plaintiff and her children in the manner approved by the appropriate court, inclusive of any and all attorneys fees and costs . . .
Id. (Parenthesis in original). Mr. Howard sent along a copy of § 1207 of the New York Civil Practice Law and Rules, adding emphasis to the portions he believed pertinent:
1207. Settlement of action or claim by infant, judicially declared incompetent or conservatee, by whom motion made; special proceeding; notice; order of settlement. Upon motion of a guardian of the property or guardian ad litem of an infant or, if there is no such guardian, then of a parent having legal custody of an infant, or if there is no such parent, by another person having legal custody, or if the infant is married, by an adult spouse residing with the infant, or of the committee of the property of a person judicially declared to be incompetent, or of the conservator of the property of a conservatee, the court may order settlement of any action commenced by or on behalf of the infant, incompetent or conservatee. If no action has been commenced, a special proceeding may be commenced upon petition of such a representative for settlement of any claim by the infant, incompetent or conservatee in any court where an action for the amount of the proposed settlement could have been commenced.
Id. (Boldface added by Mr. Howard, underlining in § 1207). Acknowledging the offer on March 13, 2005, Mr. Caruso indicated that he still had not received approval from Ms. Seymour, but that he would be speaking with her that day. Mr. Caruso told Mr. Howard that he thought "it [the final settlement figure] will go at $40,000." (Defendants' Br. Ex. D2).
  On March 14, 2005, Mr. Howard spoke with Leslie Matlaw, Ms. Seymour's co-counsel, regarding settlement negotiations and the defendants' March 11 offer. As a follow-up to their conversation, Mr. Howard faxed to Ms. Matlaw a two-page letter that set forth the defendants' "offer" to settle. (Defendants' Br. Ex. D3). The letter stressed that "all our offers have included court approval of the minor's [sic] claims," and explained that, after his review of New York law, he believed it was necessary to have the matter approved by the court, and cited, in haec verba, the relevant New York statute and provided case authority to support his interpretation. Id. Following his lengthy and reasoned explanation of why approval of settlement of the minors' claims was legally required and the sine qua non of any settlement agreement, Mr. Howard enumerated the five conditions for settlement:
(1) Plaintiff to amend complaint to include minors' claims prior to dismissal pursuant to settlement, and to petition [Magistrate Judge] Levin in accordance [with] NY state law Chapter 308, section 1207, and allocate a reasonable amount to the minor's [sic] claims, and in the event [Magistrate Judge] Levin declines to exercise jurisdiction, then plaintiff with institute a special proceeding in NY;
(2) $40,000 total offer divided among the plaintiff and her children in the manner approved by the appropriate court, inclusive of any and all attorneys fees and costs; In the event that Judge Levin declines jurisdiction over the approval process, we will pay an additional $1,000.00 to defray costs of the approval process in New York.
(3) Plaintiff's acknowledgment in the release that the defendants claim that the settlement is of a disputed claim, and made solely to avoid litigation and that liability is denied.
(4) Confidentiality as to all terms and conditions of settlement, by all parties and counsel;
(5) A release of all claims for legal or equitable relief to be drafted by defendants for execution by plaintiffs, incorporating the above terms.
Id. (Emphasis supplied).

  That same day, Ms. Matlaw responded to this letter. (Defendants' Br. Ex. D4). First, she summarized her conversation with Mr. Howard that morning, conveying "Ms. Seymour's counter-offer to settle . . . for a Confidential $45,000 total offer (or $40,000 with a Gag Order) and her acceptance of all other terms set forth in your fax other than the filing of a [separate] New York action in relation to her children's claims." Id. (Emphasis supplied).*fn5 Ms. Matlaw further reported that she was "very pleased to report that Ms. Seymour has accepted a total offer of $40,000 for all Defendants and will accept the Confidentiality Provision in Full and Final Settlement of all claims with no Defendant acknowledgment of liability." (Boldface by Ms. Matlaw). According to Ms. Matlaw, Ms. Seymour was prepared to execute the defendants' release "subject to our review and approval." Id.

  Ms. Matlaw went on to explain why a new action in New York would not be needed: Ms. Seymour is both Devin and Peter Madkin's parent and their Guardian pursuant to an already-existing Minors' Estate in New York Surrogates' [sic] Court. Thus, rather than filing a separate lawsuit which would show up in a litigation search contrary to Ms. Seymour's wishes, we should be able to get the necessary judicial approval by simply petitioning the New York judge for approval of our Agreed Consent Order.

 Id. (Emphasis supplied). Upon considering the relevant procedure and costs, Ms. Matlaw informed Mr. Howard that Defendants' offer of $1,000 toward "the costs of judicial approval of the minors' claims" was more than adequate. Id. In closing, Ms. Matlaw expressed her belief that "we can resolve all outstanding issues and develop agreed-upon language in the very near future" and that she was "prepared to report to Judge Levin [the following] Wednesday morning that we have settled this case in principle, that Plaintiffs are preparing an Amended Complaint and Draft Agreed Consent Order for production to Defendants, and that we anticipate presenting these for Judge Levin's approval by the end of the month." Id.

  Additional discussions ensued and, later that day, Mr. Howard sent an email to Ms. Matlaw and Mr. Caruso expressing his agreement that "we do not need to amend the complaint if you are going to get the New York court to approve the settlement." (Defendants' Br. Ex. D5). Mr. Howard included a draft affidavit on which he had been working for Ms. Seymour's approval of settlement that he felt comported with the requirements of New York law, CPLR § 1208. Paragraphs 4 and 5 of the draft affidavit made clear that the children had their own claims that the Surrogate's Court was to consider:
4. Plaintiff has claimed that the children's expectations were disappointed when they were unable to obtain a home, and general emotional damages have been claimed. There are no related medical or psychological treatments or bills that have been incurred on behalf of either minor child.
5. For all claims, defendants have proposed a settlement in the total amount of $40,000, $30,000 payable to Donna Seymour to resolve her claims and $5,000 each payable to the estates of Peter Madkin and Devin Madkin. The minors settlement amounts will be reduced by application of a 1/3 attorney fee, resulting in a net payment to each of 3,333.33, which I will hold for them . . . until the respective minor child reaches the age of majority.
Id. Replying to Mr. Howard via email later that evening, Ms. Matlaw said she agreed that they need not amend the complaint, but simply proceed directly to petition the Surrogate's Court, which was overseeing the "already-existing Minors' Estate" for approval of the settlement and release of their claims. (Defendants' Br. Ex. D6). She also reported that she spoke in detail with a clerk in the New York Surrogate's Court and learned that the court could rule in approximately two weeks based upon a statement as to the "nature of the action [and] why it is fair and in the wards' best interests." (Defendants' Br. Ex. D6). Ms. Matlaw also indicated some confusion over whether she could represent the children in New York or whether Seymour will proceed pro se. Id. She concluded with an assurance that "[w]e'll straighten it all out and make sure that a proper New York Petition is on file by the end of the week so that the Order approving the Settlement of the minors' claims can be part of the Petition before Judge Levin." (Emphasis supplied).
  Thus, by the end of the day on March 14, 2005, it is clear that the parties had agreed to the following:
1. Ms. Seymour was to be paid $40,000 in full and final settlement of all claims; She was to allocate a reasonable amount of this sum to her children's claims in the manner approved by the appropriate court;
2. The settlement was to be confidential;
3. There would be a denial of liability by the defendants;
4. The plaintiff would seek approval from the Surrogate's Court in New York of the settlement agreement and the release of the children's claims;
5. The defendants would pay $1,000 to defray the costs of the approval process in New York if New York counsel were used.
  That Ms. Matlaw had agreed on behalf of her client that some portion of the $40,000 was to be allocated to the children is reenforced by the events of March 22, 2005. That day, Mr. Howard followed up with both Ms. Matlaw and Mr. Caruso to request projections on the timing of the Surrogate's Court's approval. (Defendants' Br. Ex. D8). On March 24, 2005, Ms. Matlaw replied that she needed an approved settlement agreement as an exhibit to support the petition that would be filed in New York. Id. Just a few minutes later, Mr. Howard replied via email and asked Ms. Matlaw to provide "the allocations that you will propose to the court for the children" and indicated that he would amend the draft after approval from defendants' other counsel. Id. The next day, March 25, 2005, Ms. Matlaw replied that "[w]e envisioned a pro-rata breakdown similar to that found in the damages statement we provided following our in-chambers discussion with Judge Levin. We've conveyed proposed amounts to [Seymour], but have yet to hear back from her." Id. She then asked for the current draft of the agreement so she could review the other terms and "fill in the blanks" once Ms. Seymour had decided on the breakdown. Id.*fn6
  Thus, by March 25th, the only open issue was the amount Ms. Seymour would allocate to the children. That there was to be an allocation in some amount was agreed upon. On March 29, 2005, Mr. Howard sent the proposed draft release and settlement agreement (the "March 29 Version") and asked both Mr. Caruso and Ms. Matlaw to review and indicate whether it was acceptable. (Defendants' Br. Ex. D9). Consistent with all the parties' prior exchanges, the formal written agreement envisioned some payment to the minors and court approval of the settlement. Thus, paragraph b. provided:
Donna Seymour agrees to obtain approval of the proposed settlement of the claims of the minor children named Peter Madkin and Devin Madkin from a court in New York state where the children reside, and provide a copy of the order authorizing the settlement and directing the amounts to be paid to the minors' estates*fn7
  The next day, March 30th, Ms. Seymour had a change of heart and sent this email to Ms. Matlaw:
I received your fax. There is no aplit[sic] concerning Peter and Devin. I am the one whohas[sic] gone in to [sic] debt and should be reimbursed. I will not ettle [sic] if any of this money is going in to [sic] their trusts and not to me.
(Brief in Support of Plaintiff's Motion To Enforce Settlement ("Pl. Br.") Ex. D). Ms. Seymour's lawyers never told defense counsel of this email or Ms. Seymour's position. Instead, they embarked on what the evidence compellingly suggests is a pattern of deception designed to gull not only the defendants' lawyers, but the Surrogate's Court in New York as well.

  In her brief, plaintiff calls the March 30th fax an "unequivocal rejection" of designating any part of the settlement to her children's trusts. (Pl. Br., at 2). Perhaps it was. The difficulty is that Ms. Seymour's lawyers chose to conceal it from the defendants until the briefing on the present motions, and Ms. Seymour's undisclosed rejection — whether unequivocal or not — is thus analytically meaningless. See infra at 25.


The Plaintiff's Lawyers Changes to the Language Regarding the Children's Claims Following the Receipt of Ms. Seymour's Email of March 30th
  If it be true that honesty of purpose prompts frankness of statement, Crosby v. Buchanan, 90 U.S. 420, 454 (1875), the post-March 30th conduct of Ms. Seymour's lawyers does not fare well. Rather than tell defense counsel of Ms. Seymour's volte face, Mr. Caruso acted as if nothing had occurred and that everything was on track in accordance with the March 14th exchange of emails. On March 31, 2005, he was "revising the settlement agreement and preparing materials to obtain release of claims by minors." (Defendants' Br. Ex. D9). On April 1, 2005, Mr. Howard was sent a revised draft of the settlement agreement for his review. The covering email stated:
We believe the key factors are 1) the releases should be joint and mutual, and 2) Paragraph K in your draft [the Indemnity Paragraph] was stricken because the New York court order will obviate the need for that paragraph. We made other minor changes, which did not amount ...

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