United States District Court, N.D. Illinois, Eastern Division
December 2, 2005.
JAMES DILLARD, Plaintiff
STARCON INTERNATIONAL, INC., Defendant.
The opinion of the court was delivered by: ARLANDER KEYS, Magistrate Judge
MEMORANDUM OPINION AND ORDER
Currently before the Court is Defendant Starcon International,
Inc.'s ("Starcon") Motion to Enforce an Oral Settlement Agreement
against Plaintiff, James Dillard. Mr. Dillard filed suit against
Starcon, claiming that he was the victim of racial discrimination
and harassment, in violation of Title VII of the Civil Rights Act
and 42 U.S.C. § 1981 (West 2005). Following discovery, the
parties engaged in settlement negotiations. Starcon contends that
those discussions resulted in an enforceable oral agreement. For
the reasons set forth below, this Court grants Defendant's Motion
to Enforce the Oral Settlement Agreement. BACKGROUND FACTS
Mr. Dillard began working for Starcon on April 18, 1996, as a
mechanic. Mr. Dillard alleges that, during his seven year
employment with Starcon, he was subjected to harassment and
racial epithets. After he was terminated on August 15, 2003, Mr.
Dillard filed a Charge of Discrimination with both the Illinois
Department of Human Rights and the United States Equal Employment
Opportunity Commission ("EEOC"). The EEOC investigated the
Charge, and issued Mr. Dillard a Right to Sue letter in October
of 2003. Mr. Dillard filed suit against Starcon on December 30,
Discovery in the matter was scheduled to conclude on March 31,
2005. Between March 17, 2005 and March 20, 2005, the parties
engaged in oral settlement negotiations. At the conclusion of
these negotiations, both parties agreed that Mr. Dillard would
release Starcon from liability in exchange for a monetary payment
and Starcon's promise to reinstate his employment.
On March 17, 2005, Starcon's counsel initiated settlement
discussions with Mr. Dillard's attorney. (Pl.'s Mem. Opp. Pg. 3).
Starcon offered Mr. Dillard a $40,000 cash payment and
reinstatement of his employment as a "B Welder;" subject to him
passing the B Welder's test. (D.'s Mem. Pg.2). Counsel explained
that Mr. Dillard must respond to the offer by the close of business on Monday, March 21, 2005, in order for Starcon to save
on the costs of further depositions of Starcon witnesses, which
were scheduled for that week. On March 18, 2005, Mr. Dillard
responded with a counter offer, demanding that Starcon reinstate
him as a "C Welder," while allowing him two opportunities to pass
the "B Welder" test. Mr. Dillard also insisted that Starcon: (1)
pay for his training and retesting; (2) pay him $75,000 in
damages; and (3) reinstate him in the Chicagoland area.
Starcon agreed to pay for Mr. Dillard's training, provided that
he maintain a "B" average, and to provide Mr. Dillard with two
opportunities to take and pass the "B Welder" test. In addition,
Starcon would reinstate Mr. Dillard as an "A Mechanic," because
the "C Welder" position no longer existed, and would reinstate
him in the Chicagoland area, provided he remain flexible about
working in other locations as work demanded. But, Starcon agreed
to pay Mr. Dillard only $45,000 in cash.
Mr. Dillard's counsel concedes that she informed defense
counsel that Starcon's reemployment terms, including his
reinstatement as an "A Mechanic," earning $22.35 an
hour,*fn1 were acceptable. See Decl. Of Sallie Smylie. However, Mr. Dillard
rejected Starcon's $45,000 cash offer, and demanded $65,000
instead. Later the same day, Starcon upped its cash offer to
$50,000, and insisted that Mr. Dillard accept or reject its offer
by 10:00 pm an Sunday, March 20, 2005.
On March 20, 2005, Mr. Dillard rejected Starcon's offer of
$50,000, and countered at $65,000 firm. Starcon relented, finally
agreeing to Mr. Dillard's demand for a $65,000 cash payment.
Counsel for Starcon agreed to write the initial draft of the
agreement.(Pl.'s Mem. Opp. Pg. 4).
Written Drafts of the Settlement Agreement
On March 23, 2005, Starcon faxed the first draft of the
settlement agreement to Mr. Dillard. Starcon's draft included a
provision stating that Mr. Dillard would be an at-will employee
and, therefore, subject to termination by Starcon "for any or no
reason, without notice." (D's Mem., Exhibit #2, Pq #2, ¶ 7). Mr.
Dillard's counsel responded on March 25, 2005, calling Starcon's
draft "the most one-sided, overreaching agreements she had ever
seen, and that she could not advise Mr. Dillard to accept the
settlement as drafted." Pl.'s Opp. at p. 6. Mr. Dillard focused
on three areas of critical disagreement: 1) that the release,
nondisparagement, and confidentiality provisions be mutual, and not unilateral, provisions; 2) that Mr. Dillard could be
terminated only for "just cause";*fn2 and 3) that Mr.
Dillard could not agree to various provisions obligating him as
Mr. Dillard sent Starcon two different drafts of his response,
deleting, revising, and adding a number of provisions. First, Mr.
Dillard inserted a provision stating that, upon reinstatement of
his employment, he could be terminated for just cause only, and
he deleted Starcon's "at-will" provision.*fn4 (Pl's Mem.,
Exhibit D, Pg #4, ¶ 5).
Next, Mr. Dillard deleted a portion of provision 11, which
stated that, "In the event that Starcon's Releases are made a
party to, or otherwise involved in, any dispute regarding
Dillard's discharge of that responsibility, Dillard hereby agrees to indemnify, save and hold harmless Starcon's Releases from any
loss or liabilities resulting from his discharge of, or failure
to discharge." (Pl's Mem. Opp., Exhibit D, Pg 5, ¶ 11).
Finally, Mr. Dillard deleted a portion of the provision
regarding his cash payment. Specifically, Mr. Dillard deleted the
following language: "It is understood and agreed to by Dillard
that the Settlement Funds include both: all compensation that
Dillard claimed or claims that he was owed; and, an additional
amount of money in excess of $1.00 that is consideration for
execution of this Agreement. Dillard affirms that he is entitled
to no further relief than the amount specified herein, and that
he would not be entitled to receive the sum specified in this
Agreement except for his execution of this Agreement and his
agreement to fulfill the promises as described therein."
Notably, this same provision provided that "Dillard
specifically confirms and agrees that he is solely responsible
for the state and federal income tax consequences, if any, of the
above, for the payment made to him by Starcon, as they come due."
(D's Mem, Exhibit #2, Pg 4, ¶ 11). Mr. Dillard did not amend this
portion of the language in either of the revisions he submitted
on March 25, 2005.
On March 30, 2005, Starcon sent Mr. Dillard a letter setting
forth its assessment of his March 25th revisions. Starcon deleted Mr. Dillard's "for cause" provision, replacing it with
its original "at-will" employment provision. Starcon noted that
all of Mr. Dillard's Starcon team members are "at-will"
employees, and Mr. Dillard should be similarly situated. (D's
Mem., Exhibit #5, Pg 3 of the letter; D's Mem., Exhibit #5, Pg 4,
¶ 7). Starcon explained that "[t]he just cause standard is not
proper as [Mr. Dillard] is not unionized and the just cause
standard is only applicable to unionized environments in which a
just cause standard has been negotiated between the parties
through the collective bargaining process." (D's Mem., Exhibit
#5, Pg 3 of the letter). Starcon amended the provision to reflect
what it considered to be a comparable "at-will" clause. (D's
Mem., Exhibit #5, Pg 4, ¶ 7).
Next, Starcon responded to Mr. Dillard's deletions by
explaining that Mr. Dillard's deletion of the language in
provision 11 was inappropriate because "the IRS holds that
damages received for non physical injury are taxable and
settlements related to employment are generally assumed to be
wage related." (D's Mem., Exhibit #5, Pg 1-2 of the letter; D's
Mem. Opp., Exhibit #5, Pg 3-4, ¶ 4(b)). Starcon also stated that
a number of other provisions were "to be discussed in a meeting
with Mr. Dillard and Defendant representative." (D's Mem.,
Exhibit #5, Pg 3 of the letter). Unable to resolve their differences, the parties brought their
dispute to this Court for resolution to no avail. On June 15,
2005, Starcon filed a Motion to Enforce the Oral Settlement
Agreement. The Court ordered the parties to brief the subject,
and offered to schedule an evidentiary hearing. The parties,
however, informed the Court that, given the state of the record
and the potential expense involved, they wished to proceed
without the benefit of an evidentiary hearing. The Court
For the reasons outlined below, this Court finds that there was
a meeting of the minds regarding the essential terms of the
parties' oral agreement.
Mr. Dillard argues that, when the parties exchanged written
drafts of the settlement agreement, it became apparent that
neither party agreed on the material terms of the settlement
agreement. Previously, Mr. Dillard asserted that there was not a
meeting of the minds with regard to two terms: (1) whether Mr.
Dillard's employment would be terminable at will or for cause; and (2) whether the agreed upon $65,000 cash payment was
inclusive of taxes.
In its Motion to Enforce, Starcon argues that the parties had
orally agreed to the only material terms of the agreement: (1)
the terms of Mr. Dillard's reinstatement; (2) Mr. Dillard's
$65,000 cash payment for damages; and (3) Mr. Dillard's promise
to release Starcon from liability. Starcon asserts that the issue
of Mr. Dillard's employment status and taxability were never
discussed during the oral negotiation stage and are not material
to the parties' settlement agreement. As such, Starcon argues,
Mr. Dillard's "buyer's remorse" does not invalidate that
agreement. The Court agrees.
Under both federal and Illinois state law, an oral agreement to
settle a lawsuit is enforceable.*fn6 Taylor v. Gordon
Flesch Co., Inc., 793 F.2d 858, 862 (7th Cir. 1986);
Pritchett v. Asbestos Claims Management Corp.,
332 Ill. App. 3d 890, 773 N.E.2d 1277 (2002). Courts apply ordinary contract
construction rules when interpreting settlement agreements. Id. Additionally, 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, No. 93 C 2851, 1994 WL
14635 at * 2 (N.D. Ill. Jan 20, 1994); Dawson v. General Motors
Corp., 977 F.2d 369, 374 (7th Cir. 1999) (illustrating that
anticipation of a more formal future writing does not nullify an
otherwise binding agreement).
An oral agreement to settle a lawsuit is binding and
enforceable if there is an offer, acceptance, and a meeting of
the minds regarding the material or essential terms of the
agreement. McAllister v. Hayes, 165 Ill. App.3d 426, 427,
519 N.E.2d 71 (1988); see also, Abbott Labs v. Alpha Therapeutic
Corp., 164 F.3d 385, 387 (7th Cir. 1999). Without
establishing the existence of these elements, a party cannot
prevail on its motion to enforce the settlement agreement.
Schaap v. Executive Industries, Inc., 760 F. Supp. 725, 726
(N.D. Ill. 1991) ("before a court will enforce a settlement
agreement, the traditional elements of a contract must be
Parties to a contract may or may not require, as a part of
their agreement, that there be a written document setting forth
the terms of their settlement before such a settlement can be
final. See Lambert Corp. v. Evans, 575 F.2d 132 (7th Cir.
1978). And a party cannot avoid performance under an agreement to
agree by withholding its consent in bad faith. Denari v. Genesis
Insurance Co., No. 01 C 2015, 2004 WL 1375735 at *2 (N.D. Ill.
June 17, 2004) (citing Beraha v. Baxter Health Care Corp.,
956 F.2d 1436, 1442 (7th Cir. 1992)).
In this case, the record illustrates that all of the elements
for a valid oral contract existed when the parties entered into
an oral agreement to settle the case on March 20, 2005. Here, the
parties conducted settlement negotiations that resulted in an
offer and acceptance on all material terms. (Pl.'s Mem. Opp. Pg.
4). Mr. Dillard has presented no evidence that his agreement was
conditioned upon acceptance of a written version of their
agreement, Taylor v. Gordon Flesch Co., 793 F.2d 858, 862
(7th Cir. 1986), and the Court disagrees that the additional
terms that remain in dispute are material. Therefore, the Court
finds that the parties reached an oral agreement on March 20,
2005, and no further action was required to render the agreement
enforceable. See Zagone v. Bosques, No. 02 C 6371, 2004 WL
170329 at *2 (N.D. Ill. January 20, 2004) ("If all of the
conditions of a settlement agreement have been met and no further
action is required to enforce such agreement, the settlement
agreement is final for enforcement purposes.) A. The Parties Had a Meeting of the Minds With Regard to All
of the Material Terms.
Mr. Dillard points to a host of terms in arguing that the
parties had not reached a meeting of the minds after the March
20, 2005 meeting. (Pl.'s Mem. Opp. Pg. 4-5). Mr. Dillard
specifically argues that the parties never agreed upon an
essential term regarding whether Mr. Dillard would be reinstated
as an at-will employee.*fn7 (Pl.'s Mem. Opp. Pg. 1).
However, it is undisputed that this term was never discussed
during the oral settlement negotiations. Mr. Dillard had been an
at-will employee during his entire employment history with
Mr. Dillard relies heavily upon the decisions in three federal
cases to support his argument: United States v. Orr Constr.
Co., 560 F.2d 765 (7th Cir 1977); DeFalco v. Oak Lawn Public
Library, No. 99 CV 02137, 2000 WL 263922, at *3 (N.D. Ill. Mar.
1, 2000); and Degerman v. S.C. Johnson & Son Inc.,
875 F. Supp. 560, 562 (E.D. Wis. 1995). The Court finds that these three cases
are distinguishable, as each case involved the vagueness of a
term that the parties had previously negotiated. For example, the Orr Court held that the phrase "proper legal
releases," as called for by the settlement agreement, was not
sufficiently definite and that it could not be determined either
"by virtue of the agreement itself or by commercial practice or
other usage or custom." Orr, 560 F.2d at 769. But it was not
merely that the phrase was indefinite; the court's analysis
hinged on the fact that the phrase was material. Id. at 770-71.
The court specifically noted that the scope of the phrase was
critical to determine whether the settlement would result in the
complete termination of litigation between the parties, and the
inclusion (but not the definition) of the phrase was specifically
negotiated for during negotiations. Id.
Similarly, the Degerman court refused to enforce a purported
settlement agreement because the parties could not agree upon the
terms of a confidentiality clause. 875 F. Supp. at 562. The
Degerman parties had acknowledged that the confidentiality
clause was the subject of extensive negotiations and the parties
consistently argued about its inclusion in the settlement
agreement, Id. Finally, the Court in DeFalco found that the
term "release" and a confidentiality provision were both material
and indefinite. 2000 WL 263922 at *3-4. The court noted that,
while the parties negotiated for a release and even conceded that
the release "was one of the conditions of the settlement," the
parties failed to discuss whether that release would include only the federal claims, or would also include state court claims.
Id. (finding that a negotiated for confidentiality clause was
Each of these cases centered around the parties' failure to
define a term that was negotiated for and considered to be
material to the parties' decision to settle their litigation.
Conversely, Mr. Dillard's at-will employee status was never
discussed during the settlement negotiations, even though other,
more seemingly mundane details (such as how many times he would
be permitted to take the B Welder exam and whether Starcon would
pay for his training) were discussed and ultimately agreed upon.
See Flood v. Ty, Inc., No. 02 C 9497, 2005 U.S. Dist. LEXIS
7974, at *39. (N.D.Ill. April 5, 2005) (stating that
confidentiality and release provisions not discussed in oral
settlement negotiations are not material terms of an oral
settlement agreement.) The Court again notes that, during the
course of his employment with Starcon, Mr. Dillard had always
been an at-will employee, as had all of his non-unionized
coworkers. Thus, even if this term had been material, the
parties' previous relationship and course of dealing would have
enabled the Court to define this term. See Orr,
560 F.2d at 769-71.
The enforcement of this agreement is not affected by the fact
that the parties failed to address other terms regarding Mr.
Dillard's reemployment, such as whether he would be permitted to remain an A Mechanic if he failed to pass the B Welder exams.
"Every feasible contingency that might arise in the future, need
not be provided for in a contract for the agreement to be
enforceable." Pritchett, 773 N.E.2d at 1282; First Nat'l Bank
of Oak Lawn v. Minke, 425 N.E.2d 11, 99 Ill. App. 3d 10, 14
(1981) (holding that the lack of nonessential or non-material
terms will not render a contract unenforceable). The Court cannot
conclude that there was no meeting of the minds with regard to
the terms that were negotiated, simply because Plaintiff failed
to raise other issues until after the agreement had been reached.
B. Mr. Dillard Knowingly Entered into the Agreement.
Mr. Dillard claims that the parties' oral agreement is
unenforceable because "plaintiff never signed anything." Pl's
Opp. at p. 14. To the contrary, the law is clear that "an oral
agreement to settle a Title VII claim is enforceable." Glass v.
Rock Island Refining Corp, 788 F.2d 450, 454 (7th Cir.
1986); see also Pohl v. Unites Airlines, Inc., 213 F.3d 336,
337 (7th Cir. 2000) ("the belief of some litigants in
pursuing settlement of their claims that they can change their
mind at any time before they actually sign the settlement
agreement is often unfounded in law.")
Next, Mr. Dillard claims that neither he nor his attorney
believed that he had reached a final and binding agreement on
March 20, 2005. Mr. Dillard and his counsel have submitted declarations stating as much, but the totality of the evidence
belies this assertion. First, the Court notes that Mr. Dillard's
counsel, Ms. Smylie, concedes that she had communicated to
Starcon Mr. Dillard's acceptance of the terms that had been
negotiated between the parties. Ms. Smylie indicated early on in
the negotiations that the fairly detailed re-employment terms
were adequate, and later negotiations focused only upon Mr.
Dillard's cash payment. When the parties then reached an accord
on the $65,000 cash payment, Ms. Smylie never indicated that
there were additional terms that would need to be negotiated.
In addition, Ms. Smylie repeatedly acknowledges that Starcon
had made clear on more than one occasion that Mr. Dillard would
have only until March 20, 2005 to accept Starcon's settlement
offer; March 20th was Starcon's "drop dead" date, because its
settlement position would change if it would be forced to incur
the expense of the depositions scheduled for the following week
which happened to be the week before the close of discovery.
Given Ms. Smylie's acknowledgment that Starcon was insisting on
an agreement from Mr. Dillard by March 20th, it is difficult
to accept that neither Plaintiff nor counsel understood that the
parties' settlement on that day was final. And given Starcon's
stated position regarding the March 20th cutoff date,
Plaintiff's failure to communicate his desire to make the parties' agreement
contingent upon a finalized written agreement speaks
In short, the evidence shows that the parties engaged in
settlement negotiations covering Mr. Dillard's re-employment, a
cash payment, and his agreement to release Starcon from
liability. Mr. Dillard communicated his acceptance of these terms
to Starcon just as discovery was about to close and knowing that
Starcon was insisting on a settlement right then and there. And
at no time did Mr. Dillard express to Starcon his desire or
belief that the settlement was not final until he had the
opportunity to review a written agreement and/or to hash out
other details and concessions. Therefore, the Court rejects Mr.
Dillard's claim that his settlement was not knowing and
Finally, the Court acknowledges that the parties' written,
competing drafts of the settlement agreement conflict in many
respects. However, those disagreements center upon non-material
terms. As such, the submission of conflicting drafts does not
negate the inference that Mr. Dillard and Starcon achieved a
meeting of the minds with regard to the essential and material terms of the agreement. See Wilson v. Wilson, 46 F.3d 660, 667
(7th Cir. 1995) (upholding the parties' oral settlement
agreement despite the parties' inability to agree on a written
draft of the oral settlement, where the disagreement centered
upon nonessential terms.)
The Court finds that the parties orally agreed to and are bound
by the following terms: (1) Starcon will pay Mr. Dillard $65,000
in damages; (2) Mr. Dillard will be reinstated as an "A
Mechanic," making $22.35 an hour; (3) Starcon will provide and
pay for Mr. Dillard to undergo training for the B Welder
position, provided that Mr. Dillard maintains a "B" average; 4)
Starcon will provide Mr. Dillard with two opportunities to pass
the "B Welder" test; and (6) Mr. Dillard will be reinstated in
the Chicago, Illinois area, as long as work exists in that area,
but will remain flexible to serve in other locations in the
future as the work demands. The Court further finds that these
terms are sufficiently definite and enforceable.
The Court rejects Mr. Dillard's attempt to derail the parties'
negotiated settlement agreement. While it is clear that Mr.
Dillard feels strongly about returning to Starcon as an at-will
employee despite the fact that he has always been an at-will
employee at Starcon his failure to raise the issue during the negotiations culminating in an oral agreement renders the
point immaterial. Rather, for the reasons set forth above, the
Court finds that the parties reached a valid settlement agreement
on March 20, 2005, and that the parties' agreement is enforceable
as outlined above.
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