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Craftwood Lumber Co. v. Interline Brands, Inc.

United States District Court, N.D. Illinois, Eastern Division

September 23, 2014

CRAFTWOOD LUMBER COMPANY, Plaintiff,
v.
INTERLINE BRANDS, INC., a Delaware corporation, and INTERLINE BRANDS, INC., a New Jersey corporation, Defendants.

MEMORANDUM OPINION

AMY J. ST. EVE, District Judge.

The issue before the court is whether the parties have entered into an enforceable agreement to settle this putative class action. For the reasons explained below, the court holds that there is no enforceable settlement agreement.

BACKGROUND

Plaintiff, Craftwood Lumber Company ("Craftwood"), brought this putative class action alleging that Interline[1] violated the Telephone Consumer Protection Act of 1991 (the "TCPA"), 47 U.S.C. § 227, by sending at least 1, 500 advertisements in at least 735, 000 facsimile transmissions, some of which were received by Craftwood. The faxes advertised Interline's products.

On August 29, 2013, the court entered an order granting Craftwood's motion for discovery sanctions pursuant to Federal Rule of Civil Procedure 37(b)(2)(A)(ii) and precluding Interline from asserting and introducing evidence concerning "prior express invitation or permission" and "established business relationship" defenses. Pursuant to Federal Rule of Civil Procedure 37(b)(2)(C), the court further ordered that Interline and its counsel pay the reasonable expenses, including reasonable attorneys' fees, incurred by Craftwood in filing and briefing the motion for sanctions.

The parties then attempted to settle the case through mediation. On October 11, 2013, the parties participated in a one-day session in California with a private mediator, Antonio Piazza. Before mediation began, the parties and counsel signed a written Confidentiality Agreement. At the end of the session, the parties and counsel signed a one-page document titled "Term Sheet, " which is quoted below. In the weeks thereafter, the parties attempted to negotiate a written settlement agreement. Their efforts were unsuccessful.

On November 20, 2013, the court held a status hearing at which Interline's counsel stated that the parties had entered into a settlement agreement and attempted to show the court a copy of the Term Sheet. Craftwood's counsel objected on the ground that it would be a violation of the Confidentiality Agreement to show the court the Term Sheet. The court gave Craftwood leave to file, and took briefs on, a motion to bar Interline from introducing evidence in violation of the Confidentiality Agreement. In a memorandum opinion dated April 9, 2014, the court denied the motion. The parties then filed briefs on the issue currently before the court: whether there is sufficient evidence of an enforceable settlement agreement.[2]

DISCUSSION

A. Facts

1. The Mediation Session and Term Sheet

The parties have submitted a number of declarations describing what occurred during their mediation session. Craftwood has submitted the declarations of its outside counsel C. Darryl Cordero and Scott Z. Zimmermann. Interline has submitted the declarations of its outside counsel, Bart T. Murphy; its former outside counsel, David K. Callahan; and its Chairman and CEO, Michael J. Grebe. All of the declarants were present for the mediation.[3] Several aspects of what occurred and what the participants discussed that day remain in dispute (and are ultimately immaterial to this ruling), but the following facts are not disputed except where noted.

The mediation began at about 9:00 a.m. on October 11, 2013 with a two-hour joint session, during which each side presented its view of liability and damages. After the joint session, the parties were divided into separate conference rooms, where each side alternatively met with the mediator. The parties' "teams" spent most of the remainder of the day in separate sessions with the mediator discussing the possible structure and terms of settlement. In one instance, [4] around noon, the parties' outside counsel met jointly with the mediator to discuss Interline's argument that it had mooted the case by making a "pick-off" settlement offer to Craftwood individually and the likelihood that this argument would be successful.

For most of the day, the parties made little progress. According to Mr. Callahan, shortly after 6:00 p.m., the mediator, Mr. Piazza, "made a mediator's proposal" to Interline "based on the parties' discussions to date, whereby the parties would resolve the case with a total potential class award of $60 million, but on a claims-made' (rather than common fund') basis." (Def.'s Resp., Ex. A, First Decl. of David K. Callahan ¶ 22.)[5] Mr. Piazza also suggested that class counsel receive $8 million in fees and Interline bear the costs of settlement administration. Interline "agreed in concept" to Mr. Piazza's oral proposal but wanted to add a few terms of its own, such as a "blow-out" provision. (Id. ¶ 23.) The purpose of that provision, from Mr. Callahan's perspective, was "to protect [Interline] from an actual award approaching anywhere near $60 million, an amount which far exceeded Interline's valuation of this litigation." (Id. ¶ 22.)

Mr. Callahan handwrote the initial version of the Term Sheet. The mediator did not write anything on the sheet at that time. (Id. ¶ 24.) He took it to Craftwood's team to discuss it with them separately. According to Mr. Cordero, Mr. Piazza stated that "he had drafted the sheet and would work hard to persuade [Interline] to accept it, " but before doing so, "wanted Craftwood to buy in' to the sheet." (Pl.'s Br., Ex. 1, Decl. of C. Darryl Cordero ¶ 11.) Craftwood's team suggested a few changes and additions, which were written onto the Term Sheet. Mr. Piazza then took the Term Sheet back to Interline's team. Mr. Grebe initialed Craftwood's changes and signed the Term Sheet on behalf of Interline. Mr. Piazza took the Term Sheet to Craftwood. Mr. Brunjes and Craftwood's counsel initialed Craftwood's changes; Mr. Brunjes signed it on behalf of Craftwood; and counsel for Craftwood also signed it and added the phrase "as counsel." The mediator provided the parties with copies of the signed Term Sheet.

The Term Sheet states as follows, with Craftwood's additions and modifications in bold:

TERM SHEET

1. Claims made structure for all fax recipients within statute of limitations.
2. Total class award: $60 million
3. Blow-out provision @ 20% of ...

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