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Federal Deposit Insurance Corp. v. Nova Financial and Investment Corp.

United States District Court, D. Arizona

January 10, 2017

Federal Deposit Insurance Corporation, Plaintiff,
v.
Nova Financial and Investment Corporation, Defendant.

          ORDER

          HONORABLE G. MURRAY SNOW UNITED STATES DISTRICT JUDGE.

         Pending before the Court is the Motion to Enforce Settlement of Plaintiff Federal Deposit Insurance Corporation as Receiver for AmTrust Bank (“FDIC-R”). (Doc. 78.) For the following reasons, the Court grants the motion.

         BACKGROUND

         This case arises out of a Loan Purchase Agreement between Defendant Nova Financial and Investment Corporation (“Nova”) and AmTrust Bank. AmTrust Bank was closed by the Office of Thrift Supervision in December 2009, and FDIC-R was appointed as Receiver. FDIC-R brought suit against Nova in the United States District Court for the Northern District of Ohio for breach of the Loan Purchase Agreement. The case was transferred to this district.

         In February 2016, FDIC-R and Nova agreed to private mediation. On February 15, FDIC-R provided Nova and the mediator with a copy of their Confidential Mediation Statement. This document included a provision that “[a]ny settlement at mediation will be subject to the FDIC's customary settlement terms (see Ex. A), and even minor deviations from that form will need the approval of senior management of the FDIC.” (Doc. 78-2 at 3.) Those “customary settlement terms” were attached in the form of a “Settlement and Release Agreement” (“FDIC Form”). The FDIC Form included a release provision, which stated in relevant part that “FDIC-R . . . hereby releases and discharges the Defendant and its respective heirs, executors, administrators, representatives, successors, and assigns, from any and all claims . . . that arise from or relate to the transactions contained within the cause of action alleged in the Action.” (Id. at 7.) The mediator emphasized to FDIC-R, in an e-mail confirming that the FDIC Form had been shared with Nova, the importance of sharing the FDIC Form in advance so that “the language of that document should not become a sticking point if the economics are resolved.” (Doc. 80-2 at 3.)

         Settlement negotiations took place on February 23. After failing to come to an agreement in person, the parties reached an oral settlement in a teleconference with the mediator that same evening. The mediator sent an e-mail to the parties to confirm the settlement. The e-mail summarized the agreement as follows:

1. NOVA will pay FDIC-R as receiver for AmTrust a total of $400, 000.00.
2. NOVA will pay all costs of today's mediation, both its share and FDIC's, and FDIC will have no responsibility for any of the mediation costs.
3. The parties will enter into a settlement agreement for them to put in final form consistent with the form of stipulation FDIC presented with its mediation statement, to include a provision that (a) the two current actions pending against NOVA will be dismissed with prejudice and (b) FDIC-R will file no further claims or actions against NOVA based on any loans NOVA made to any person or entity and underwrote for or sold to AmTrust at any time.

(Doc. 78-3 at 2.) Neither party objected at that time to the mediator's description of the settlement. Neither party now argues that the parties had not reached an agreement, or that the mediator incorrectly summarized the agreement in the e-mail. (Doc. 79 at 2.) But within two days, a number of disagreements arose as the parties sought to reduce the agreement to writing. The parties have resolved all disagreements except one. That disagreement pertains to the scope of the release provision. FDIC-R maintains that the only parties released from liability were those listed in the FDIC Form, which encompassed “Defendant and its respective heirs, executors, administrators, representatives, successors, and assigns.” (Doc. 78-8 at 5.) Nova, on the other hand, argues that the release as agreed to includes not just those people but also Nova's “employees, officers, directors, shareholders, subsidiaries, affiliates, [and] agents.” (Doc. 78-10 at 5).

         FDIC-R filed the pending Motion to Enforce, asking the Court to enforce the settlement agreement in accordance with FDIC-R's interpretation.

         DISCUSSION

         Courts have the power to enforce valid settlement agreements. See In re City Equities Anaheim, Ltd., 22 F.3d 954, 957 (9th Cir. 2014). A court “may enforce only complete settlement agreements.” Callie v. Near, 829 F.2d 888, 890 (9th Cir. 1987). “Where material facts concerning the existence or terms of an agreement to settle are in dispute, the parties must be allowed an evidentiary hearing.” Id. Here, while a material term of the settlement agreement is disputed, it appears that there is no dispute about the facts relevant to that term, and hence there is no need for an evidentiary hearing.

         Whether an enforceable settlement agreement has been entered into is a question of state law. Wilcox v. Arpaio, 753 F.3d 872, 876 (9th Cir. 2014). In Arizona, the construction and enforcement of settlement agreements are governed by general contract principles. Emmons v. Superior Court, 192 Ariz. 509, 512, 968 P.2d 582, 585 (Ct. App. 1998). A valid contract in Arizona consists of “an offer, acceptance, consideration, and sufficient specification of terms so that obligations can be ascertained.” K-Line Builders v. First Fed. Sav. & Loan Ass'n, 139 Ariz. 209, 212, 677 P.2d 1317, 1320 (Ct. App. 1983). “It is well-established that before a binding contract is formed, the parties must mutually consent to all material terms.” ...


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