(originally appeared in the Florida Bar Journal Vol 85, No 7, July/August 2011 [PDF w/ citation notes])
by Fred O. Goldberg
Settlements are a common, favored method to resolve litigation. The benefits of an agreed resolution to a dispute are many. A settlement eliminates the uncertainty of result presented by a trial on the merits. Though it requires the parties to compromise their positions, it eliminates the expense of continuing litigation. From the perspective of judicial economy, a settlement puts an end to the court’s labor and eliminates the case from its docket. In an ideal world, a settlement puts an end to the disputes between the parties. However, as a practical matter, the demands of the business world and economic considerations frequently require settlement agreements to include covenants of future performance, including payments by installment, transfers of property, and promises to undertake or refrain from undertaking particular actions. Settlements to be performed over time present the possibility of future disputes and allegations of default among the parties.
When the provisions of a settlement agreement are not fully performed, the parties often seek to return to court to have the agreement enforced in the same proceeding in which the settlement was reached. Reopening a case for the purpose of enforcing a settlement presents jurisdictional issues that have troubled the courts of Florida and vexed litigants and their attorneys for decades. Recent decisions, most notably the Florida Supreme Court’s decision in Paulucci u. General Dynamics Corporation, 842 So. 2d 797 (Fla. 2003), have generally clarified a trial court’s authority to enforce a settlement in the same proceeding in which the settlement is reached. However, the trial court’s continuing jurisdiction to enforce a settlement depends on the procedures employed by the parties with respect to the case at the time of settlement.
Following an agreed resolution of the parties’ disputes, litigants typically employ one of four options to halt their litigation: 1) a plaintiff may merely file a notice of voluntary dismissal with prejudice pursuant to Rule 1.420(a)(l)(A), Fla.R.Civ.P.; 2) the parties may enter into a stipulation for dismissal with prejudice pursuant to Rule 1.420(a)(l), and the stipulation of dismissal may contemplate entry of an order of dismissal by the court that may or may not include provisions approving the settlement and retaining jurisdiction to enforce the parties’ agreement; 3) the parties may agree to the entry of a judgment that, again, may or may not contain provisions approving the settlement and reserving jurisdiction to enforce the agreement; or 4) the parties may allow the underlying case to remain pending, either via stay of proceedings or by merely allowing the matter to remain dormant, awaiting performance of all obligations owed pursuant to the settlement. This last method, although somewhat rare, is sometimes employed in cases involving commercial or consumer loans, foreclosures or evictions where the parties enter into a forbearance agreement, a restructuring of the indebtedness, or an agreement to allow the obligor to resume payments or cure defaults while reserving to the plaintiff the ability to resume litigation in the event of nonperformance. Which option the parties choose to employ dictates whether the trial cow·t will possess continuing jurisdiction to enforce the settlement. Additionally, even where jurisdiction is reserved, there are circumstances where the trial court will lack authority to enforce such an agreement.
The Legal Principles Governing Settlements
As a general principle, “settlements are highly favored and will be enforced whenever possible.”1A settlement remains a contract subject to the usual rules of contract interpretation.2 As long as a settlement agreement is sufficiently specific and represents the mutual agreement of the parties, it is subject to enforcement.3 The offer and acceptance of the settlement binds the parties to its conditions and terms.4 If the terms and conditions of the settlement are performed, it effects an accord and satisfaction whereby the agreement supersedes and substitutes for the original dispute.5 When a settlement agreement is breached , the non-breaching party is presented with the choice of attempting to re instate the original claims, asserting that there was no valid accord and satisfaction, or enforcing the agreement. By attempting to enforce the settlement, the non-breaching party effectively concedes that the agreement supersedes and substitutes for the original claims that are deemed discharged and extinguished. To en force a settlement is to assert a claim upon a new contract-the settlement agreement – which did not exist at the time the court’s jurisdiction was initially invoked when the complaint was filed. The question of whether enforcement of a settlement agreement required the filing of an independent action, coupled with the effect of dismissal or entry of judgment fol lowing the settlement, gave rise to a jurisdictional quandary.
A Trial Court’s Jurisdiction Following Dismissal or the Entry of Judgment
Following a settlement, litigants most frequently either dismiss the resolved action by notice, stipulation, or motion, or agree to the entry of a judgment. However, both dismissal and judgment have jurisdictional consequences. “When a judgment or decree has once been rendered, the court loses jurisdiction over the subject-matter of the suit, other than to see that proper entry of judgment or decree is made and that the rights de termined and fixed by it are properly enforced.”6 The filing of a voluntary dismissal divests the trial court of jurisdiction over a cause. 7 The same applies to an order of dismissal.8 Following the entry of judgment, the trial court possesses the inherent power to enforce its decree.9 However, after either dismissal or judgment, the trial court lacks jurisdiction to modify the rights of the parties or alter the judgment except as specifically provided by Florida’s rules governing rehearing or relief from judgment.10
A reservation of jurisdiction incorporated into an order of dismissal or judgment now provides a narrow exception to the general rule that a trial court loses jurisdiction over a cause following the termination of the action. It is unclear when reservation of jurisdiction clauses first came into use in Florida. In 1948, the Supreme Court held that a reservation of juris diction provision in a divorce decree only had the effect of permitting the court to issue orders necessary to effectuate or enforce the judgment and did not permit the entry of further orders modifying or expanding the rights set forth in the judgment Y The court noted that to hold other wise “would mean that there would be no end to litigation.”12 Subsequent decisions declined to hold that a reservation of jurisdiction provision in a judgment could be used to reopen a proceeding after jurisdiction had been lost as a result of the entry of judgment. In 1970, a Florida court refused to enforce a reservation of jurisdiction provision in a judgment on jurisdictional grounds.14
The authority of trial courts to reserve jurisdiction to decide mat ters not disposed of in judgments was first approved in 1975.15 A trial court’s power to reserve jurisdiction over specific matters has since been confirmed by the Florida Supreme Court.16 In the absence of a reservation of jurisdiction, a court’s authority post-judgment remains limited to enforcement of the judgments and the determination of post-judgment motions.17
Enforcement of Settlements Pre-Paulucci
Even after Florida courts established the parameters of a court’s jurisdiction following dismissal or diction of a cause after its termination by a dismissal or entry of judgment, courts continued to struggle with the jurisdictional implications of enforcing a settlement agreement within the same action rather than requiring the filing of a separate suit for breach of contract. The decisions of Florida’s appellate courts were widely divergent, and conflict was certified on more than one occasion until the matter was finally addressed by the Florida Supreme Court in Paulucci in 2003. A variety of concerns caused the divergence of opinions. These included whether the underlying action had been terminated by dismissal or judgment or instead remained pending; jurisdiction was reserved to enforce the settlement; the relief provided in the settlement went beyond the relief sought in the pleadings; the agreement was approved by the court; or a settlement agreement constituted a contract separate and independent from the jurisdictional basis for the original suit requiring the filing of a separate proceeding.
The first reported decision to address enforcement of settlements post-dismissal was Buckley Towers Condominium, Inc. u. Buchwald, 321 So. 2d 628 (Fla. 3d DCA 1975), cert. dismissed , 330 So. 2d 15 (Fla. 1976). Buckley Towers addressed the propriety of an order enforcing a settlement agreement following the entry of an order of dismissal by the trial court in which the settlement was approved and jurisdiction was expressly retained. The Third District held “that even without an express reservation thereof, jurisdiction inherently re mains in the trial court to make such orders as may be necessary to enforce its judgment.”18 The court additionally approved the use of a motion brought within the same action to enforce the settlement.19 However, to the extent that Buckley Towers suggested that post-dismissal or post-judgment enforcement of settlements by motion was proper, even in the absence of a reservation of jurisdiction , that decision ran afoul of the general principles that when an action is terminated, the court loses jurisdiction of the cause other than to enforce the judgment or entertain authorized motions for rehearing or relief from judgment.
After the Buckley Towers decision, the Third District issued two opinions approving the enforcement of the settlement agreements by motion in cases involving court approval of the agreements and express retention of jurisdiction to enforce them. 20 The Fourth District, relying upon Buckley Towers , permitted the enforcement of a court-approved settlement in the apparent absence of a reservation of jurisdiction, noting that a court’s authority to entertain such a motion was inherent.21 The Third District also affirmed a decision enforcing a court approved settlement without discussing whether jurisdiction had been retained.22 Two additional decisions permitted enforcement of settlements without expressly discussing whether the settlement had been court-approved or whether jurisdiction had been retained .23 The authority of a trial court to enforce a settlement in an action that remained pending after the agreement was reached was also confirmed, in accord with the general principle that a court only loses jurisdiction of a cause after its termination by a dismissal or judgment.24 In such a circumstance, the First District held that a “trial court’s authority to enter such an order in a pending case is clear.”25
To the contrary, a number of decisions rejected enforcement of settlement by motion brought in the settled action for a variety of reasons. The absence of a reservation of jurisdiction was found to be a basis for refusing to permit enforcement of a settlement.26 Settlements reached post-judgment, and necessarily in the absence of ei ther court approval or a reservation of of jurisdcition, were deemed not subject to enforcement by motion. 27 In MCR Funding u. CMG Funding Corp., 771 So. 2d 32 (Fla. 4th DCA 2000), the Fourth District addressed the circumstance where, following a settlement, the parties simply filed a voluntary dismissal without an order of the court. The Fourth District found that the “voluntary dismissal terminated the trial court’s ‘case’ jurisdiction,” which is the “power of the court over a particular case that is within its subject matter jurisdiction.”28 However, because case jurisdiction differs from subject matter jurisdiction, the Fourth District found that the failure to object to enforcement of the settlement by motion constituted a waiver of such an objection.29 The First District also held that the filing by the parties of a stipulation of dismissal with prejudice precluded any exercise of jurisdiction to enforce the settlement.30
Unlike the Fourth District in MCR Funding , the Fifth District in Wallace u. Townsell, 471 So. 2d 662 (Fla. 5th DCA 1985), addressed the enforce ability of a settlement in terms of subject matter jurisdiction. In Wallace, the plaintiff filed an action to cancel a deed and the defendant contested the action on the basis that improvements had been made to the land at issue.31 The trial court entered a judgment canceling the deed and reserving jurisdiction to determine the value of the improvements.32 Following entry of final judgment, the parties achieved a settlement with terms going well beyond the scope of the pleadings.33 The Fifth District held that the pleadings determined the extent of the court’s subject matter jurisdiction and because the terms of the settlement were not framed by the pleadings, any breach of the settlement must be redressed in a separate action.34 In a similar decision rendered one year later, the Fifth District again rejected enforcement of a settlement by motion where the settlement terms went beyond the issues and claims framed by the pleadings.35 The Fifth District went on to comment that the settlement agreement affected an accord and satisfaction of the original claims, and, therefore, required a separate action to enforce the agreement.36 In a contrary decision, the First District rejected the idea that a settlement granting rights beyond the scope of the pleadings was not enforce able by motion based, in part, upon the trial court’s inherent jurisdiction and authority to enforce a court-approved agreement.37 It was clear by this time that numerous conflicts had arisen between the circuits regarding jurisdiction to enforce a settlement.
Matters came to a head at last in 2001 and 2002 with decisions issued by the First and Fifth districts, both certifying conflict to the Florida Supreme Court.38 In General Dynamics Corp. u. Paulucci , 797 So. 2d 18 (Fla. 5th DCA 2001), the trial court approved a settlement agreement between the parties that was incorporated into a final judgment that reserved jurisdiction to enforce the agreement.39 Relying its prior decision in Wallace , the Fifth District reluctantly “held that a court has only the subject matter jurisdiction which is invoked by the initial pleadings” and that enforcement of the settlement agreement “would have to be brought in a separate action, by complaint and not motion, giving the defendant the opportunity to plead his defenses and request a jury trial if appropriate.”40 However, the Fifth District queried whether “the court approving the settlement is authorized” to determine disputes regarding the agreement which, in effect, amended the pleadings?41 The court certified conflict with Buckley Towers and additionally certified an issue of great public importance: “Does a court which approves a settlement agreement retain jurisdiction to enforce the terms thereof even if the remedy sought is outside the scope of the original pleadings?”42
In Kinser u. Crum, 823 So. 2d 826 (Fla. 1st DCA 2002), the trial court entered an order of dismissal based upon a settlement that specifically retained jurisdiction to enforce its terms. 43 The First District, noting that multiple decisions of the various districts were in disagreement regarding enforcement of settlements by motion, held the trial court possessed jurisdiction over the agreement and also certified conflict to the Supreme Court.44
Paulucci: The Supreme Court Addresses the Conflicts
The Supreme Court granted review of the Fifth District’s decision in General Dynamics Corp. u. Paulucci and, on March 20, 2003, rendered a comprehensive decision that attempted to make sense of the jurisdictional morass that had troubled the district courts for decades.45 As an initial matter, the Supreme Court rephrased the question certified by the Fifth District as: “Does a court have jurisdiction to enforce a settlement agreement where the court has either incorporated the settlement agreement into a final judgment or approved the settlement agreement by order and retained jurisdiction to enforce its terms?”46
The court went on to reaffirm its prior precedent, holding that following the entry of a final judgment or decree, the trial court loses jurisdiction over the cause other than to enforce the judgment.47 Eliminating a concern which had troubled some of the district courts, the Supreme Court clarified that a trial court’s authority to enforce a settlement was not an issue of subject matter jurisdiction that “concerns the power of the trial court to deal with a class of cases to which a particular case belongs,”48 but rather was a question of “continuing jurisdiction.” 49 The court approved the analysis set forth in the Fourth District’s decision in MCR Funding, holding that when an action is voluntarily dismissed without an order of the trial court reserving jurisdiction following the negotiation of settlement, the trial court lacks continuing jurisdiction over the matter. 50 The court held “that when a court incorporates a settlement agreement into a final judgment or approves a settlement agreement by order and retains jurisdiction to enforce its terms, the court has the jurisdiction to enforce the terms ofthe settlement agreement even if the terms are outside the scope of the remedy sought in the original pleadings.”51 However, the court limited the scope of a trial court’s continuing jurisdiction to the circumstances where a party is seeking to enforce specific terms of the settlement agreement and determined that “if a party is claiming a breach of the agreement and is seeking general damages not specified in the agreement, the appropriate action would be to file a separate lawsuit.”52
The Paulucci opinion resolved virtually all of the conflicts that had previously plagued the lower courts. To be enforced via motion in the same proceeding post-judgment or post-dis missal, a settlement must be approved by the trial court or incorporated into an order or judgment and jurisdiction to enforce the agreement must be retained. However, enforcement of such a settlement in the same proceeding is limited to the specified terms set forth in the agreement; a claim for general damages resulting from a breach of the settlement contract requires a separate action. If, after the settlement, the parties merely voluntarily dismiss the case without an order, the trial court is divested of jurisdiction and a separate case is required to enforce the terms of the settlement. These general principles have been diligently followed in various decisions entered subsequent to Paulucci.53
The Supreme Court did not clearly address the circumstance where an action is allowed to remain pending following a settlement, and enforcement of the agreement is later sought in the still-pending action. However, this issue appears to be addressed in a footnote found in Paulucci when the court concluded “that in cases where the approval of the settlement agreement is by order rather than by incorporating the terms into a final judgment, the statement in the order that the trial court expressly retains jurisdiction to enforce its terms makes it clear that all parties and the court contemplated an express retention of jurisdiction rather than the necessity of an independent lawsuit.”54 Such a conclusion conforms to the general principle that a court loses jurisdiction only after entry of a final judgment or the dismissal of the matter. Conversely, if a case remains pending, the court continues to possess jurisdiction to act in that proceeding.
Boca Petroco, Inc. v. Petroleum Realty I, LLC: A Step Backward
The Fourth District revisited the issue of enforcement of settlements by motion in its 2008 opinion in Boca Petraea, Inc. v. Petroleum Realty I, LLC., 993 So. 2d 1092 (Fla. 4th DCA 2008). Boca Petraea involved a commercial landlord-tenant dispute for breach of lease.55 Immediately before trial, the parties achieved a settlement that was read into the record before the trial court that required the tenant to undertake certain financial obligations and permitted the landlord, in the event of default, to obtain an “automatic writ of possession” and judgment based upon an “affidavit prove up of damages.” 56 Although not expressly stated in the Fourth District’s opinion, the settlement did not contemplate dismissal of the action and a judgment was to be entered only following a default on the settlement agreement; the action was to remain pending.
Following tenant’s default, the trial court awarded $14,230,990.47 in damages to the landlord due to the tenant’s failure to perform its financial obligations under the settlement, including payment of”pre- and post-settlement rent, taxes and insurance,” and continued to reserve jurisdiction to enforce the settlement’s provisions.57 Prior to this award of damages, the land lord also gave notice to the tenant of defaults of environmental provisions contained in the underlying leases and the settlement agreement.58 Following an evidentiary hearing on this issue, the trial court awarded an additional $1,901,000 in damages based upon the environmental defaults.59
The Fourth District affirmed the first award of damages based upon defaults on the financial obligations provided in the settlement agreement, but reversed the second award of damages, reasoning that there existed a “distinction between enforcement of the terms of the agreement and a general claim for breach of an agreement” and that the “settlement agreement did not include payment of these damages as one of its terms.”60
In rendering its decision, the Fourth District seemingly sidestepped the fact that the case remained pending post-settlement and chose not to address the dicta found in note five of the Paulucci opinion, which provided that, in the absence of entry of a judgment, a settlement approved by order with jurisdiction retained may be enforced by motion without requiring the filing of a separate action.61 This decision also appears to misapply the general jurisdictional principles holding that a court only loses jurisdiction over a cause following judgment or dismissal.62 However, when a matter remains pending following settlement, the trial court does not lose jurisdiction.63
Conclusion
The Paulucci decision resolved most, but not all, aspects of the jurisdictional quandary presented by the enforcement of settlements by motion within the same proceeding. If the trial court expressly approves or incorporates the settlement and reserves jurisdiction to enforce the agreement in its order of dismissal or judgment, the settlement may be enforced through a motion brought in the same action unless the breach of the settlement gives rise only to a claim for general, unspecified dam ages.64 However, the filing of a stipulation for dismissal without an order expressly reserving jurisdiction to en force the agreement is insufficient and will require the filing of a separate action for breach of settlement.65
Unfortunately, the Supreme Court did not clearly address the circumstance where a matter is permit ted to remain pending following a settlement, although a footnote in the opinion seems to address this situation and approve of enforcement by motion in the same proceeding.66 The Fourth District was the first post-Paulucci court to have an opportunity to address this scenario but declined to permit enforcement of the settlement by motion without directly discussing this issue.67 Nonetheless, where following a settlement a case is not dismissed and no judgment is entered by the trial court, both subject matter jurisdiction and case jurisdiction are present, and a trial court should be permitted not only to enforce the specific terms of the settlement agreement but also award general damages for its breach, rather than requiring the filing of a separate action. This approach would not only better effectuate the intent of the parties but also would be consonant with caselaw holding that a trial court loses jurisdiction only after an unqualified dismissal or entry of a judgment but does not lose jurisdiction if the case remains pending following a settlement.68