Justia.com Opinion Summary: The underlying dispute in this case involved a contract and tort action brought by homeowners in a subdivision against certain homebuilders, including the Kerckhoff defendants. The trial court ordered that the case be referred to mediation. The parties were unable to agree to terms in a written settlement agreement at the conclusion of the mediation. The homeowners and some defendants then filed motions to enforce settlement and motions for sanctions against the Kerckhoffs, alleging the Kerckhoffs acted in bad faith during the mediation. The trial court entered an order denying the motions to enforce settlement but granted the motions for sanctions. The Kerckhoffs filed a motion with the trial court requesting that its order be certified as final and appealable, and the court entered an order finding that its prior ruling imposing sanctions was final for purposes of appeal. The court of appeals dismissed the appeal for lack of a final judgment. The Supreme Court granted transfer and dismissed the appeal, holding that because the trial court's order imposing sanctions did not dispose of a "claim for relief," the trial court certification of its order as final and appealable under Mo. R. Civ. P. 74.01 was ineffectual.
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SUPREME COURT OF MISSOURI
en banc
DENNIS BUEMI, et al.,
Respondents,
vs.
ARTHUR KERCKHOFF, JR., et al.,
Appellants.
)
)
)
)
) No. SC91132
)
)
)
)
Appeal from the Circuit Court of St. Louis County
Honorable Barbara Wallace, Judge
Opinion issued August 2, 2011
Arthur Kerckhoff Jr., Arthur Kerckhoff III, Arthur Kerckhoff IV, and the Arthur
Kerckhoff Trust (Kerckhoff defendants) appeal the trial court’s order imposing
sanctions on them for acting in bad faith in a mediated settlement meeting. Because an
order imposing monetary sanctions does not dispose of a “claim for relief” as required
by Rule 74.01(b) and does not satisfy the requirement in section 512.020(5) 1 that allows
appeals only of final judgments, the trial court certification of its order for immediate
appeal is without effect. Accordingly, the appeal is dismissed.
1
All statutory references are to RSMo Supp. 2010.
Factual and Procedural Background
The underlying dispute involves a contract and tort action brought by Dennis
Buemi and other homeowners in the Pevely Farms subdivision (homeowners) against
certain homebuilders, including the Kerckhoff defendants. PF Development, LLC and
Fischer & Frichtel Inc. also were joined as defendants. In their action, the homeowners
alleged that the subdivision water system did not provide an adequate water supply for
the entire development, despite a representation that there was an adequate supply.
In July 2008, the trial court ordered that the case be referred to mediation.
Thereafter, a representative group of the homeowners, as well as two of the three
individual Kerckhoff defendants, 2 along with the other defendants, met to mediate the
case. During the mediation, certain terms were reduced to writing in papers referred to
as term sheets one and two. At the close of the mediation, all terms had not been agreed
to by the parties present at the meeting. Upon the request of one of the parties, the
mediator obtained a pre-printed form titled “mediated settlement agreement.” In the
space where conditions were to be set out, the mediator wrote, “Case settled in principle
– proposed settlement to be reduced to writing by 12-31-08. . . .
Plaintiffs to
recommend settlement to property owners.” The statement was signed by some, but not
all, of the defendants. 3 After the statement was signed, an additional term sheet was
prepared by some of the plaintiffs. Neither the new term sheet nor the two earlier term
sheets were attached or incorporated into the form.
2
3
Arthur Kerckhoff IV did not attend.
Arthur Kerckhoff IV did not sign the document.
Ultimately, the parties were unable to agree to terms in a written settlement
agreement. In response, the homeowners and PF Development filed motions to enforce
settlement in the underlying action. The trial court scheduled an evidentiary hearing on
the motions. During the hearing, the mediator testified that no settlement was reached
by the parties. At the conclusion of the evidentiary hearing, the trial court indicated that
it would entertain motions for sanctions regarding the costs incurred by the parties
during the mediation and costs associated with responding to the Kerckhoff defendants’
failure to settle the case. The homeowners, PF Development and Fischer & Frichtel
subsequently filed motions for sanctions against the Kerckhoff defendants seeking
awards of attorney’s fees. The motions alleged that the Kerckhoff defendants acted in
bad faith by signing the mediation form and not advising the homeowners and other
defendants that they did not consider themselves legally bound. 4
Thereafter, the trial court entered an order denying the motions to enforce
settlement agreement, but granted the motions for sanctions. The court found that the
parties had reached a settlement in principle but that, due to the failure to attach the
three term sheets to the settlement, the court was unable to enforce the agreement. The
court further ruled that the Kerckhoff defendants had executed the mediated settlement
agreement form with the intent that it was not binding on them; that they concealed that
intent; and that they eventually submitted a settlement proposal that varied significantly
4
The Kerckhoff defendants also filed their own separate motion for sanctions against
the other parties alleging that their motions to enforce settlement were frivolous. The
Kerckhoff defendants’ motion for sanctions was overruled.
3
from the terms agreed to at the mediation. On that basis, the trial court concluded that
the Kerckhoff defendants acted in bad faith and ordered them to pay attorney fees
totaling $122,425 to the various parties as a sanction for their conduct.
Thereafter, the Kerckhoff defendants filed a motion with the trial court
requesting that its order be certified as final and appealable pursuant to Rule 74.01(b).
In response to the motion, the trial court entered an order finding that its prior ruling
imposing sanctions was final for purposes of appeal and that there was no just reason
for delay. The Kerckhoff defendants appealed to the court of appeals, which dismissed
the appeal for lack of a final judgment. This Court granted transfer. MO. CONST. art. V,
sec. 10.
Trial Court Order Imposing Sanctions Not a Final Judgment
Although none of the parties here questions whether the trial court properly
certified its order for immediate appeal pursuant to Rule 74.01(b), this Court is required
to raise that issue sua sponte. Gibson v. Brewer, 952 S.W.2d 239, 244 (Mo. banc 1997).
“‘The right to appeal is purely statutory and, where a statute does not give a right to
appeal, no right exists.’” State ex rel. Coca-Cola Co. v. Nixon, 249 S.W.3d 855, 859
(Mo. banc 2008) (internal citations omitted). Other than statutorily recognized
exceptions not applicable to the present case, section 512.020 requires that there be a
“final judgment” as a prerequisite to appellate review. State ex rel. Hilburn v. Staeden,
62 S.W.3d 58, 60 (Mo. banc 2001). That section states, in relevant part:
Any party to a suit aggrieved by any judgment of any trial court in any civil
cause from which an appeal is not prohibited by the constitution, nor clearly
limited in special statutory proceedings, may take his or her appeal to a court
4
having appellate jurisdiction from any . . . (5) Final judgment in the case or from
any special order after final judgment in the cause . . . .
Section 512.020.
Generally, a final judgment is defined as one that resolves “‘all issues in a case,
leaving nothing for future determination.’” Transit Cas. Co. ex rel. Pulitzer Publishing
Co. v. Transit Cas. Co. ex rel. Intervening Employees, 43 S.W.3d 293, 298 (Mo. banc
2001) (internal citation omitted). The converse of a final judgment is an interlocutory
order, which is an order that is not final and decides some point or matter between the
commencement and the end of a suit but does not resolve the entire controversy. Id.
Here, the trial court’s order imposing sanctions was interlocutory in nature as it is
undisputed that the order decides a matter between the commencement and the end of
the suit and that the homeowners’ underlying claims for damages and injunctive relief
still are pending. Nevertheless, the Kerckhoff defendants assert that Rule 74.01(b)
gives this Court jurisdiction over their appeal of the interlocutory order imposing
sanctions.
Rule 74.01(b) promotes judicial economy by permitting interlocutory appeals in
cases involving multiple claims or parties. The rule authorizes the trial court to enter an
appealable final judgment as to fewer than all claims or parties in the case and to certify
that there is no just reason to delay the appeal of that judgment. Rule 74.01(b) reads, in
relevant part:
When more than one claim for relief is presented in an action, whether as
a claim, counterclaim, cross-claim, or third-party claim, or when multiple
parties are involved, the court may enter a judgment as to one or more but
5
fewer than all of the claims or parties only upon an express determination
that there is no just reason for delay . . . .
(Emphasis added).
This Court is constrained by the language of Rule 74.01(b) when construing it
and may not find a meaning that is not supported by the language of the rule. This
Court interprets its rules by applying the same principles used for interpreting statutes.
State ex. rel. Vee-Jay Contracting Co. v. Neill, 89 S.W.3d 470, 471-72 (Mo. banc 2002).
Consequently, “[t]his Court’s intent is determined by considering the plain and ordinary
meaning of the words in the Rule.” Id. at 472. To determine the plain and ordinary
meaning of a term or phrase, this Court utilizes the definition found in the dictionary.
State ex rel. Proctor v. Messina, 320 S.W.3d 145, 156 (Mo. banc 2010).
As relevant to this case, Rule 74.01(b) is applicable “[w]hen more than one claim
for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or
third-party claim.” Black’s Law Dictionary defines a “claim,” also termed a “claim for
relief,” as “[a] demand for money, property, or a legal remedy to which one asserts a
right; esp., the part of a complaint in a civil action specifying what relief the plaintiff
asks for.” BLACK’S LAW DICTIONARY 281-82 (Bryan A. Garner, 9th ed. 2009). A
“claim” is also defined as “[t]he aggregate of operative facts giving rise to a right
enforceable by a court <the plaintiff’s short, plain statement about the crash established
the claim>.” Id. The above definitions indicate that a “claim for relief” encompasses
only those legal claims asserted in a party’s pleadings. However, even if the above
definitions can be read more broadly, the conclusion that the rule only applies to claims
6
asserted in a party’s pleadings is confirmed by the language in Rule 74.01(b) that
modifies the phrase “claim for relief,” which speaks of those claims being asserted “in
an action” by “a claim, counterclaim, cross-claim, or third-party claim.” The language
in Rule 74.01(b) reflects the Court’s recognition that, under section 512.020.5, only
final judgments may be appealed. The effect of Rule 74.01(b) is to permit severance of
any unrelated substantive claim for relief of the parties and to allow appeal of a final
judgment on those severed claims.
Because a motion for sanctions is not a legal claim filed “in an action” by way of
a petition, counterclaim, cross-claim, or third-party claim, it does not fall within the
definition of a “claim for relief,” as that term is used in Rule 74.01(b). Accordingly, a
trial court’s ruling imposing sanctions cannot be a “distinct judicial unit” subject to
appeal under Rule 74.01(b). 5 This reading of Rule 74.01(b) is consistent with the
5
The dissent justifies ruling contrary to the conclusion that an order imposing sanctions
cannot be certified under Rule 74.01(b) by citing cases stating that a motion to enforce
settlement adds to the underlying case a collateral action, which seeks specific
performance of the settlement agreement. E.g., Eaton v. Mallinckrodt, Inc., 224 S.W.3d
596, 599 (Mo. banc 2007). The dissent incorrectly frames the issue being appealed in
this case as whether the trial court’s ruling on the motions to enforce settlement is
appealable. That is not the issue in this case. Instead, this Court is reviewing
appealability of the trial court’s judgment sustaining the parties’ motions to impose
sanctions. The dissenting opinion incorrectly suggests that the motions for sanctions
were filed with the motions to enforce settlement. Contrary to the dissent’s assertion,
the motions to impose sanctions and the motions to enforce settlement were filed by the
parties as separate documents and at different times. This misconception is the basis of
the dissent’s holding that the trial court’s order is certifiable. By mischaracterizing the
issue, the dissent is able to avoid the true issue involved in this appeal – whether the
motions for sanctions (as opposed to the motions to enforce settlement) are capable of
being appealed under Rule 74.01(b). The dissenting opinion cites no case law to
support the position that a trial court’s ruling on a motion to impose sanctions is a final
appealable judgment. Additionally, even if the trial court’s denial of the motions to
7
seminal case of Committee for Educational Equality v. State and its progeny, which
defined the scope of Rule 74.01(b). 878 S.W.2d 446 (Mo. banc 1994).
In Committee for Educational Equality, the Court held that for a trial court’s
order to be certifiable under Rule 74.01(b), “the minimum unit of disposition is at least
one claim.” Id. at 450. Additionally, the Court held that a judgment that resolves fewer
than all legal issues as to any single “claim for relief” is not final, regardless of the trial
court’s designation. Id. In that case, the plaintiffs asserted multiple claims in their
petition, requesting both declaratory and injunctive relief. Id. at 451. The trial court
entered declaratory judgment as to the plaintiffs’ claims but retained jurisdiction over
the case to enforce the judgment through injunctive relief. Id. at 452. This Court held
that because the trial court’s judgment did not dispose of all remedies as to one single
“claim for relief,” the judgment was not final. Id.
In analyzing the concept of a “claim for relief,” the Court’s opinion sets out the
following discussion of Federal Rule 54(b), from which this Court drew the language
for Rule 74.01(b):
When Rule 74.01(b) was adopted as a rule of this Court in 1988, it was copied
almost verbatim from Federal Rule of Civil Procedure 54(b). The meaning of the
phrase “one claim for relief” was developed in the federal cases prior to the
adoption of our rule. While not binding authority, the federal cases are highly
persuasive. Where a federal rule has been construed by the federal courts and our
Court thereafter adopts a rule on the same subject using identical language, there is
no principled way to ignore the federal cases.
enforce settlement was at issue, the dissent concedes that there is no case holding that an
order denying a motion to enforce settlement is immediately appealable. Instead, it
simply dismisses cases ruling to the contrary as illogical.
8
Under the federal cases construing F.R.C.P. 54(b), in determining whether an
action presents more than one claim for relief, the focus is on the number of legal
rights asserted in the action. If a complaint seeks to enforce only one legal right, it
states a single claim, regardless of the fact that it seeks multiple remedies . . .
Worded somewhat differently, claims are considered separate if they require proof
of different facts and the application of distinguishable law, subject to the
limitation that severing the claims does not run afoul of the doctrine forbidding the
splitting of a cause of action . . . .
Id. at 451.
In Gibson v. Brewer, this Court further defined a single “claim for relief” as a
“distinct judicial unit,” adopting the phrase from prior court of appeals decisions. 952
S.W.2d 239, 244 (Mo. banc 1997) (internal citations omitted). The Court noted that for
a ruling to dispose of a “distinct judicial unit,” there had to be a “final judgment on a
claim, and not a ruling on some of several issues arising out of the same transaction or
occurrence which does not dispose of the claim.” Id. (emphasis added). In Gibson, the
issue was whether the trial court’s dismissal of fewer than all counts in the plaintiffs’
petition could be appealed immediately. Id. This Court held that the counts dismissed
by the trial court arose from the same transactions and occurrences as the counts left
pending in the trial court; therefore, the trial court did not resolve a “distinct judicial
unit.” Id.
Reading Committee for Educational Equality and Gibson together, it is clear that,
when determining if a judgment disposes of a “distinct judicial unit,” the focus is on
whether the trial court’s order disposes of a “claim.” Both cases refer to the language in
Rule 74.01(b) requiring that a “claim for relief” be disposed of before a case can be
appealed. Additionally, both cases dealt with a factual scenario in which the trial court
9
certified its order when it disposed of fewer than all of the claims asserted in the parties’
pleadings. The context of the Court’s use of the terms “claims” and “claims for relief”
make clear that the Court’s discussions reference substantive claims for relief in the
parties’ pleadings. The Court’s discussion in both cases precludes a finding that an
interlocutory ruling imposing sanctions fits the definition a “claim for relief.” 6
Multiple decisions from the court of appeals properly have applied Committee
for Educational Equality and Gibson to find that no appealable judgment exists when a
trial court enters an order as to matters arising during litigation that does not resolve a
claim for relief. See, e.g., Peet v. Carter, 278 S.W.3d 707, 710 (Mo. App. 2009) (order
denying a motion to reconsider not appealable); Bibb v. Title Insurers Agency, Inc., 245
S.W.3d 919, 919 (Mo. App. 2008) (order denying motion for default judgment not
appealable); Ferguson v. Carson, 235 S.W.3d 607, 608 (Mo. App. 2007) (order granting
motion to transfer venue not appealable). Of particular note, in Harting v. Stout, the
court of appeals, applying a predecessor to Rule 74.01(b), 7 held that a trial court’s
6
In reaching the opposite conclusion, the dissent overlooks the plain language of Rule
74.01(b) and, instead, reads language out of context from this Court’s opinion in
Gibson. Specifically, the dissent points to an isolated sentence in Gibson stating, “[I]t is
the content, substance, and effect of the order that determines finality and
appealability.” 952 S.W.2d at 244. However, reading Gibson as a whole undermines
the dissent’s interpretation of that sentence. As noted above, Gibson involved a trial
court’s dismissal of fewer than all counts in the plaintiff’s petition. Id. at 243-44. The
Court held that because the dismissed counts relied on the same facts as the counts still
pending in the case, the trial court’s dismissal did not dispose of a “distinct judicial
unit.” Id. at 244-45. Because Gibson arose in the context of a motion to dismiss claims
asserted in a party’s petition, it cannot be read as endorsing the idea that an interlocutory
order imposing sanctions constitutes a “distinct judicial unit.”
7
The former rule – Rule 81.06 – was construed by this Court to give a trial court
absolute discretion to determine if its orders were final and appealable. Speck v. Union
10
certification of an order imposing monetary sanctions for immediate appeal was invalid
because that rule did not apply to sanction proceedings. 690 S.W.2d 458, 459 (Mo.
App. 1985).
The conclusion that Rule 74.01(b) does not allow for the immediate appeal of a
trial court ruling imposing sanctions is further supported by federal court decisions
interpreting the federal rule governing interlocutory appeals.
As noted above, the
language of Missouri’s Rule 74.01(b) was derived from Federal Rule of Civil Procedure
54(b), which is worded almost identically. 8 While not binding, the Court should give
significant consideration to federal court decisions construing a federal rule when this
Court subsequently adopts a rule on the same subject and uses the same or virtually
identical language. Comm. for Educ. Equal., 878 S.W.2d at 451.
In Mulay Plastics, Inc. v. Grand Trunk W. R.R. Co., the Seventh Circuit
addressed the issue of whether a trial court’s order imposing sanctions is subject to
interlocutory appeal. 742 F.2d 369 (7th Cir. 1984). In that consolidated appeal, the
Elec. Co., 731 S.W.2d 16, 20 (Mo. banc 1987) (abrogated by Rule 74.01(b)). This
Court rejected that view when it later adopted Rule 74.01(b). Comm. for Educ. Equal.,
878 S.W.2d at 451; Gibson, 952 S.W.2d at 244. Unlike Rule 81.06, the new Rule
74.01(b) “conditioned the exercise of discretion by the trial court on the existence of a
judgment that disposed of at least one claim as to one party.” Comm. for Educ. Equal.,
878 S.W.2d at 451.
8
The federal rule states, in relevant part:
When an action presents more than one claim for relief--whether as a claim,
counterclaim, crossclaim, or third-party claim--or when multiple parties are
involved, the court may direct entry of a final judgment as to one or more, but
fewer than all, claims or parties only if the court expressly determines that there
is no just reason for delay . . . .
Fed. R. Civ. P. 54(b).
11
parties were awarded attorney’s fees as sanctions because of the opposing sides’ failure
to produce certain documents. Id. at 370-71. The sanctioned parties appealed and
sought mandamus relief challenging the imposition of sanctions. Id. That court held
that Rule 54(b) does not permit a trial court to certify an order awarding sanctions
because the rule allows only for the immediate appeal of an order disposing of a
separate “claim for relief,” which federal courts have interpreted to mean a substantive
claim. Id. at 371 (internal citations omitted). The court found that because the separate
claim for sanctions was not a “substantive” claim, certification was improper. Id. In
reaching its holding, the Seventh Circuit stated that “[t]he language of Rule 54(b) leaves
little doubt that it indeed is limited to substantive claims.” Id.
Subsequent to this Court’s adoption of Rule 74.01(b), other federal courts have
reached conclusions consistent with Mulay Plastics.
E.g., M.A. Mortenson Co. v.
United States, 877 F.2d 50, 52 (Fed. Cir. 1989) (award of sanctions not appealable
under Rule 54(b) because not a substantive right or cause of action); Heffington v. City
of Saline, 863 F.2d 48 (6th Cir. 1988) (request for sanctions is not a claim within the
meaning of Rule 54(b)). These cases also serve as persuasive authority. Hemme v.
Bharti, 183 S.W.3d 593, 597 (Mo. banc 2006). 9
9
The dissenting opinion suggests that federal cases interpreting Fed. R. Civ. P. 54(b)
are less persuasive because the federal rules allow for a broader range of cases to be
reviewed on an interlocutory basis. While federal courts do allow greater review of
interlocutory orders, they do not undermine the persuasiveness of federal cases
interpreting Rule 54(b). In Mulay Plastics, for example, the Seventh Circuit’s
conclusion that an order imposing sanctions was not appealable was driven by the
language of Rule 54(b), not the fact that the federal rules allow interlocutory appeals in
other contexts. 742 F.2d at 371. Likewise, the dissent’s assertion that federal cases are
12
While section 512.020(5) and Rule 74.01(b) do not permit immediate appeal of a
trial court’s order imposing sanctions, such orders can still be reviewed. Prior cases by
this Court and the court of appeals recognize how review may be obtained.
For
example, an order imposing sanctions can be reviewed after a final judgment is entered
on the underlying claims. See, e.g., Leahy v. Leahy, 858 S.W.2d 221, 228 (Mo. banc
1993) (reviewing imposition of sanctions after judgment entered on parent’s motion
seeking modification of child support); see also D.S.P. v. R.E.P., 800 S.W.2d 766, 771
(Mo. App. 1990) (reviewing impositions of sanctions along with trial court’s order
awarding child custody). Alternatively, if appeal is an inadequate remedy because
irreparable harm will occur if immediate relief is not granted, a writ of prohibition can
be used to obtain interlocutory review in the absence of a final judgment. See Transit
Cas. Co. ex rel. Pulitzer Publ’g Co. v. Transit Cas. Co. ex rel. Intervening Emp., 43
S.W.3d 293, 299 (Mo. banc 2001) (“As a general matter, the proper course for an
aggrieved party without a final judgment is ordinarily by extraordinary writ.”); see, e.g.,
State ex rel. Common v. Darnold, 120 S.W.3d 788, 790-92 (Mo. App. 2003) (writ
issued prohibiting imposition of discovery sanction); Westfall v. Enright, 643 S.W.2d
less persuasive because they no longer follow the “distinct judicial unit” concept is also
an invalid reason for ignoring federal cases. Federal courts have reached the conclusion
that orders imposing sanctions are not immediately appealable due to the language in
federal Rule 54(b), which requires a court order to dispose of a “claim for relief.” Id.
That language is identical to the language used by Rule 74.01(b), and interpretation of
that phrase underlies the conclusion reached in this opinion. The dissent’s assertion that
this opinion has the effect of sub silencio overruling the distinct judicial unit test has no
merit. Nothing in this opinion can or should be read as abrogating the requirement that
a judgment must dispose of a distinct judicial unit before the judgment may be certified
as final and appealable under Rule 74.01(b).
13
839, 840 (Mo. App. 1982) (same). Therefore, a party wishing to challenge a trial
court’s imposition of sanctions can either appeal the trial court’s order after a final
judgment is entered on the underlying claim or claim or, when appropriate, seek a writ
of prohibition before final judgment is entered. 10 The trial court’s certification of its
order as final and appealable under Rule 74.01 has no effect.
Conclusion
Because the trial court’s order imposing sanctions did not dispose of a “claim for
relief,” the trial court certification of its order as final and appealable under Rule 74.01
was ineffectual. Accordingly, the appeal is dismissed for lack of a final judgment as
required by section 512.020(5). 11
_________________________________
PATRICIA BRECKENRIDGE, JUDGE
Russell, Fischer and Price, JJ., concur;
Stith, J., dissents in separate opinion filed;
Teitelman, C.J., and Wolff, J., concur in
opinion of Stith, J.
10
The Court acknowledges that it previously denied the Kerckhoff defendants’ petition
for an extraordinary writ that sought relief from the trial court’s order imposing
sanctions. The denial of their request for an extraordinary writ does not constitute a
ruling on the merits of their challenge to the sanction order. Therefore, such denial does
not preclude the Kerckhoff defendants from filing a new petition if circumstances arise
that would make appeal an inadequate remedy, such as an attempt to collect by the
parties who were awarded monetary sanctions. See State ex rel. Douglas Toyota III,
Inc. v. Keeter, 804 S.W.2d 750, 752 (Mo. banc 1991).
11
In light of the Court’s dismissal of the appeal, the Kerckhoff defendants’ motion for
leave to file newly discovered evidence in support of their brief is overruled as moot.
14
SUPREME COURT OF MISSOURI
en banc
DENNIS BUEMI, et al.,
Respondents,
vs.
ARTHUR KERCKHOFF, JR., et al.,
Appellants.
)
)
)
)
)
)
)
)
)
No. SC91132
DISSENTING OPINION
I respectfully dissent. This Court has jurisdiction over this appeal. The judgment
below, denying Buemi’s motion to enforce settlement but granting its related motion for
sanctions for bad faith in settlement negotiations, properly was certified for interlocutory
review under Rule 74.01(b) because it is a separate claim that constitutes a distinct
judicial unit the resolution of which involves issues entirely separate from those
remaining for trial below. This Court therefore has jurisdiction to review the judgment
under Rule 74.01(b), and determine whether the award of sanctions was proper. It was
not.
I would reverse the trial court’s imposition of sanctions on the Kerckhoff
defendants for allegedly acting in bad faith in signing a settlement agreement that they
did not believe was binding. Rule 17.06 requires a written agreement setting forth the
terms of settlement and executed by the parties. Here, none of the requirements of Rule
17.06 was satisfied by the document in question. Although labeled a mediation form and
containing preprinted boilerplate language that would be included in a settlement
agreement recorded on such a form, the document on its face shows that the mediator
simply used the form to handwrite a statement noting that the parties had agreed in
principle to settle. No terms were included or attached as required by Rule 17.06, nor,
the record shows, had all terms been agreed to orally, and some still were being written
even after the mediator prepared the document. Indeed, no money amount or any other
agreed consideration was stated on or attached to the form, and the handwritten notation
by the mediator stated that the agreement “in principle” still had to be submitted to the
plaintiffs for approval.
While those of the parties who were present, including two of the Kerckhoff
defendants, signed the form believing it was not binding, this does not constitute bad
faith. They were correct; the form was not binding, nor did it purport to be anything
other than a recordation of an agreement “in principle” of those present to try to work out
certain other terms and submit certain issues to those parties not present. Nor did the
Kerckhoffs have an obligation to share with the plaintiffs their personal beliefs as to
whether settlement ultimately would be successful, any more than opposing parties ever
have such an obligation in settlement negotiations.
I.
THIS COURT HAS JURISDICTION UNDER RULE 74.01(b)
This appeal does not concern the merits of the underlying action but rather
involves an appeal from an order denying a motion to enforce settlement but ordering
2
sanctions against defendant for bad faith in refusing to finalize the settlement. Because
the judgment appealed from does not resolve the entire controversy, “this Court, sua
sponte, must determine its own jurisdiction of this appeal.” Comm. for Educ. Equal., 878
S.W.2d at 450 (Mo. banc 1994).
Under both Rule 74.01 and section 512.020, 1 a
“prerequisite to appellate review is that there be a final judgment.” Gibson v. Brewer,
952 S.W.2d 239, 244 (Mo. banc 1997).
While in the usual case a final judgment “resolves all issues in a case, leaving
nothing for future determination,” id., section 512.020 states that appeal may be taken
from “any … final judgment” not simply from “the final judgment.” § 512.020. That is
the premise of Rule 74.01 and its many predecessors, which long have permitted appeals
of judgments that do not finally resolve all issues in a case, so long as the ruling appealed
from finally resolves the issue as to which appeal is sought in a manner permitted by this
Court’s then extant rules. 2
1
All statutory references are to RSMo 2000, unless otherwise indicated. Section 512.020
provides:
Any party to a suit aggrieved by any judgment of any trial court in any civil
cause from which an appeal is not prohibited by the constitution, nor
clearly limited in special statutory proceedings, may take his or her appeal
to a court having appellate jurisdiction from any:
….
(5) Final judgment in the case or from any special order after final
judgment in the cause; but a failure to appeal from any action or decision of
the court before final judgment shall not prejudice the right of the party so
failing to have the action of the trial court reviewed on an appeal taken
from the final judgment of the case.
2
See, e.g., Rule 74.01 (1988); Rule 81.06 (1971); Rule 82.06 (1960); Rule 3.29 (1945).
See also Speck v. Union Elec. Co., 731 S.W.2d 16, 22 (Mo. banc 1987) (superseded by
rule, see below) (for an appeal to lie there must be a judgment or order within the limits
of section 512.020 but if there has been a separate trial before the court of particular
3
At issue here is whether Rule 74.01(b) as currently constituted permits appeal
from a ruling overruling a motion to enforce settlement but imposing sanctions on one of
the parties for bad faith settlement, where the trial judge has designated the judgment as
final for purposes of appeal and has stated that there is no just reason for delay. It does.
Rule 74.01(b) provides:
When more than one claim for relief is presented in an action, whether as a
claim, counterclaim, cross-claim, or third-party claim, or, when multiple
parties are involved, the court may enter a judgment as to one or more but
fewer than all of the claims or parties only upon express determination that
there is no just reason for delay. In the absence of such determination, any
order or other form of decision, however designated … shall not terminate
the action ….
(emphasis added).
Rule 74.01(b) tracks the language of Fed. R. Civ. P. 54(b), and for this reason the
principal opinion erroneously suggests that this Court must interpret it in lockstep with
the federal courts’ interpretation of Rule 54(b). That simply is not the case. This Court
has recognized that when its rules are substantially similar to federal rules on the same
subject, federal cases interpreting such rules are persuasive, not determinative. Comm.
for Educ. Equal. v. State, 878 S.W.2d 446 at 451. To the contrary, “while federal
interpretations of similar procedural rules can provide us illustrative and useful guidance;
they are not controlling, even if the federal rule is nearly identical to Missouri’s.” 3
claims and the court has designated them as final for purposes of appeal then “there is a
final judgment within the limits prescribed by § 512.020”).
3
For instance, the federal courts interpret the language in Fed. R. Civ. P. 41(a)(1)(A)
allowing dismissal of an “action” without court order to allow only dismissal of the entire
action, not merely a count thereof. Richter, 265 S.W.3d at 299. Richter rejects this
approach as inconsistent with Missouri’s historical practice under Rule 67.02(a) of
4
Richter v. Union Pac. R. Co., 265 S.W.3d 294, 299 (Mo. App. 2008). Accord Giddens v.
Kansas City So. Ry. Co., 29 S.W.3d 813, 820 (Mo. banc 2000).
Differences in
interpretation and dissimilarity of application of rules regarding certification for
interlocutory review between state and federal courts are not surprising, for Fed. R. Civ.
P. 54(b) is only one of numerous avenues for interlocutory review of cases in federal
courts. 4
In Missouri, matters not appealable under Rule 74.01(b) are reviewable only by
writ or after final judgment resolving the entire action. See, e.g., Rule 95 (mandamus);
Rule 97 (prohibition); State ex rel. Common v. Darnold, 120 S.W.3d 788, 790-92 (Mo.
App. 2003) (prohibition issued prohibiting imposition of discovery sanction).
The
principal opinion suggests that these rules provide a sufficient avenue for relief here, that
the Kerkhoffs could simply seek a writ rather than appeal. But they tried that avenue for
relief before seeking and obtaining certification for appeal under Rule 74(b). Twice.
Both times this Court refused to issue its preliminary writ even though, as discussed in
detail in Section II below, the trial court clearly had no authority to order sanctions
against them. To suggest that this appeal must be denied and that they again must file a
petition for writ to obtain the relief to which they assuredly are entitled is pointless – and
permitting dismissal of counts or of the entire action prior to either the swearing in of the
jury or the introduction of evidence at a bench trial without court approval. Id.
4
Matters not appealable under that rule may be appealed under 42 U.S.C. § 1292(b),
Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 532 (1995) (on
appeal after district court certified for interlocutory appeal under 28 U.S.C. § 1292(b)), or
under the collateral order doctrine, for instance. See Will v. Hallock, 546 U.S. 345
(2006); Digital Equipment Corp. v. Desktop Direct, Inc., 511 U.S. 863 (1992); Cohen v.
Beneficial Industrial Loan Corp., 337 U.S. 541 (1949).
5
not required by Rule 74(b).
Missouri’s historical treatment of judgments resolving fewer than all claims
parallels the federal approach only in part. Like the federal courts, Missouri cases
historically determined if a matter could be subject to a separate appeal by whether it
involved what Missouri courts then, as now, referred to as “a separate trial of any claim,
cross-claim, counterclaim, or third party claim ….” Weir, 262 S.W.2d at 599.
In 1988, this Court adopted the current Rule 74.01(b), modeling it on Fed. R. Civ.
P. 54(b). Rule 74.01(b) narrowed considerably the claims that could be appealed prior to
resolution of all issues.
5
But this Court continued to define the term “claim” as it long
had done, as a “distinct judicial unit.” Gibson v. Brewer, 952 S.W.2d 239 (Mo. banc
1997). Gibson did not coin the term but rather used it because it long had been a part of
Missouri’s determination of what constitute separately appealable claims. See, e.g.,
Lipton Realty, 655 S.W.2d 792, 793 (Mo. App. 1983) (holding that even under Rule
81.06, the predecessor to Rule 74.01(b), “for a partial disposition to be a proper subject
for appellate review, it must state a distinct judicial unit, that is, a judgment which
terminates the action with respect to the claim adjudged”).
In Gibson, Missouri chose to continue to apply that reasoning without regard to
how the federal courts chose to change their interpretation of what types of claims may
be appealable. Gibson so held even though federal courts no longer used the “judicial
5
The relevant predecessor rule – former Rule 81.06 – had been interpreted in Speck v.
Union Elec. Co., Inc., 731 S.W.2d 16, 20 n.2 (Mo. banc 1987), to permit the trial court to
certify any issue as to which a separate trial had been held before the court. By contrast,
Rule 74.01(b) limited appealable rulings to those involving separate claims.
6
unit” concept in considering certifications for appeal. Instead, federal courts now permit
an interlocutory appeal of, for example, the ruling on a plaintiff’s cause of action, even if
there is a counterclaim or cross-claim arising out of the same facts still pending. Cold
Metal Process, 351 U.S. at 451-52. 6
By contrast, in Missouri, the principle remained what it had been prior to Speck
under Rule 81.06:
although a circuit court may designate its judgment final as to particular
claims, this designation is effective only when the order disposes of a
distinct “judicial unit.” Erslon [v. Cusumano, 691 S.W.2d 310, 312 (Mo.
App. 1985], … The required “judicial unit for appeal” has a settled
meaning: “the final judgment on a claim, and not a ruling on some of
6
Before the adoption of Rule 54(b) in 1939 (when the federal rules of civil
procedure were first promulgated as a whole), federal courts were more restrictive than
they are now in regard to permitting appeals prior to resolution of all issues in a case.
They permitted such appeals only if the judgment appealed from resolved a “single
judicial unit.” As the United States Supreme Court has noted:
Under the single judicial unit theory of finality which was then recognized,
the Court of Appeals would have been without jurisdiction [to consider the
appeal of denial of a claim] until [the party’s] counterclaim also had been
decided by the same District Court. That would have been so even if the
counterclaim did not arise out of the same transaction and occurrence as
Cold Metal’s Claim.
Cold Metal Process Co., v. United Eng’g & Foundry Co., 351 U.S. 445, 451-52 (1956).
As first adopted, Rule 54(b) then permitted appeal of a claim even if a counterclaim
remained if the counterclaim was “permissive.” Id. In 1946, however, Rule 54(b) was
amended to permit appeal of a judgment resolving any single claim, even if a
counterclaim is still pending, and visa versa. Id. See also Sears, Roebuck & Co. v.
Mackey, 351 U.S. 427 (1956); Weir v. Brune, 262 S.W.2d 597, 599-600 (Mo. 1953)
(recognizing federal standard for appeal requires a distinct judicial unit, which is defined
as “the final determination of the issues arising from a set of facts involved in the same
transaction or occurrence”). Rule 54(b) continues to operate in this way. Reiter v.
Cooper, 507 U.S. 258, 264 (1993) (Rule 54(b) “permits a district court to enter a separate
final judgment on any claim or counterclaim”).
7
several issues arising out of the same transaction or occurrence which does
not dispose of a claim.” State ex rel. State Hwy. Comm’n v. Smith, 303
S.W.2d 120, 123 (Mo. 1957).
Gibson, 952 S.W.2d at 244. For this reason, “Although a circuit court may designate its
judgment final as to particular claims, this designation is effective only when the order
disposes of a distinct ‘judicial unit.’” Id. Gibson further clarified that a “judicial unit for
an appeal” means “the final judgment on a claim, and not a ruling on some of several
issues arising out of the same transaction or occurrence which does not dispose of the
claim.” Id. at 244.
The principal opinion sub silencio overrules Gibson, Lipton Realty and similar
cases so it can blindly imitate federal law, ignoring the current and historically different
interpretation of the term “claim” under Rule 74.01(b), namely the “distinct judicial unit”
test by which Missouri courts evaluate a “claim.” The practical result is to eviscerate the
“distinct judicial unit” test, a standard of enduring vintage in Missouri and upon which
courts and practitioners have relied for many years. See e.g., Clay County ex rel. County
Comm’n of Clay County v. Harly & Susie Bogue, Inc., 988 S.W.2d 102, 109 (Mo. App.
1999) (Breckenridge, J.) (applying “distinct judicial unit” test); Sisk v. Union Pacific R.R.
Co., 138 S.W.3d 799, 802 (Mo. App. 2004) (same); Carney v. Yeager, 231 S.W.3d 308,
310 (Mo. App. 2007) (same). Such a change in Missouri procedure is unwarranted, and
unrequested by any party.
The only remaining question – again, not briefed by any party – is whether a
ruling on a motion to enforce a settlement agreement is a ruling on a separate claim or
judicial unit or whether it is simply a ruling on an issue arising out of a transaction or
8
occurrence, which does not fall within Rule 74.01(b).
The principal opinion states that only a claim set out in the pleadings can
constitute a “claim” as that term is used in Rule 74.01(b) and, therefore, a distinct judicial
unit. But Rule 74.01(b) does not state that appeal may be had of a claim for relief
presented in a petition, cross-petition or answer. It says that appeal is permitted when
more than “one claim for relief is presented in an action” (emphasis added).
“It is the content, substance, and effect of the [trial court’s] order that determines
finality and appealability.” Gibson, 952 S.W.2d at 244. Normally, of course, claims for
relief only will be presented in an action by way of the pleadings in the form of a petition,
answer and so forth. But an agreement to settle a pending case by its very nature is not
something that can be pleaded in the petition unless it is a petition to enforce settlement.
While the latter petitions may be entertained, as discussed below, Missouri courts long
have held that if a case is pending when the settlement issue arises, then the matter may
be raised by filing a motion to enforce settlement in the pending action or by filing a
counterclaim or affirmative defense. This Court specifically adopted this reasoning,
noting:
Missouri does not have a specific “process for enforcing an agreement
settling a pending case.” Barton v. Snellson, 735 S.W.2d 160, 161 (Mo.
App. 1987). Settlement may be raised as an affirmative defense or, as here,
via a motion to enforce the settlement agreement. Id. A motion to enforce a
settlement adds to the underlying case a collateral action seeking specific
performance of the agreement. Landmark Bank v. First Nat. Bank in
Madison, 738 S.W.2d 922, 923 (Mo. App. 1987).
Eaton v. Mallinckrodt, Inc., 224 S.W.3d 596, 599 (Mo. banc 2007) (emphasis added). As
noted in Ingram v. Rinehart, 108 S.W.3d 783, 789 (Mo. App. 2003), such a motion to
9
enforce settlement is for resolution by the Court, not the jury, whether presented as an
issue of law or if factual issues exist, for it concerns matters separate from the claims
raised in the underlying petition, not the merits. Id. at 788-89. This means:
Such a motion may be filed in the underlying action and, in effect, adds a
collateral action seeking specific performance of the settlement agreement.
Wenneker v. Frager, 448 S.W.2d 932, 936 (Mo. App. 1969). An action for
specific performance invokes the equity jurisdiction of the court.
Ingram, 108 S.W.3d at 787-88. In Wenneker, 448 S.W.2d at 936, the court had held that a
motion for judgment seeking to enforce settlement filed in a pending action or the filing
of a separate petition for judgment are both acceptable ways to seek to enforce a
settlement agreement. 7
As noted, Rule 74.01(b) permits certification for appeal “when more than one
claim for relief is presented in an action, whether as a claim, counterclaim …” etc. At the
time the petition and answer were filed, only the matters in the petition and answer fell
within this description. Upon the filing of the motion to enforce settlement, however,
that changed. The motion is in the nature of a separate action in equity for the specific
7
Gaunt v. Shelter Mut. Ins. Co., 808 S.W.2d 401, 407 (Mo. App. 1991), approved its
filing as a counterclaim where there was no objection to use of this procedural vehicle.
See also McDowell v. Kearns, 758 S.W.2d 481 (Mo. App. 1988) (separate suit for specific
performance); Leffler v. Bi-State Development Agency, 612 S.W.2d 835 (Mo. App. 1981)
(motion to enforce settlement). Ingram and cases relying on it have assumed that a ruling
granting a motion to enforce settlement would be appealable as a final judgment, but that
a ruling denying such a motion would not be appealable until all other issues in the case
are resolved, and then could be considered along with other issues on appeal of the entire
case. Ingram, 108 S.W.3d at 788. While certainly the ruling would be appealable at the
close of the case, the opinions do not consider or address whether the ruling would be
appropriate for certification under Rule 74.01. Indeed, it is not logical that a refusal to
enforce a settlement would be separately appealable if filed in the form of a counterclaim
or as a petition to enforce settlement, but not if the same relief is sought by motion.
10
performance of the settlement agreement. If no action were then pending, it could be
filed as its own action and relief accorded if merited by the pleadings and the facts, as
noted above.
But, when an action is pending already between the parties, the above cases permit
the matter to be determined by way of motion filed in the underlying action. In either
case, the matter is a separate claim for relief. When presented as part of a larger action
involving multiple claims and parties, it is appealable separately under Rule 74.01(b) if
certified for immediate appeal in the trial court’s discretion. See Pathway Financial v.
Shade, 793 S.W.2d 464, 467 (Mo. App. 1990) (“Arguably the trial court could have made
the denial [of the motion to enforce settlement] final for purpose of appeal under Rule
74.01. We do not reach that issue here.”).
Here, the trial court entered an order ruling on the motion to enforce settlement. It
overruled the motion but granted a motion for sanctions filed therewith by the plaintiffs
and overruled a parallel motion filed by the defendants seeking sanctions for filing a
frivolous motion to enforce settlement.
The trial court’s decision to exercise its
discretion to certify this ruling for immediate appeal was not improper. The “content,
substance and effect” of the judgment arising from the ruling on the motion to enforce
settlement and the Kerckhoff defendants’ purported misconduct in connection with the
settlement are altogether different from the “content, substance, and effect” of any
judgment that ultimately may dispose of the plaintiffs’ claims for damages and injunctive
relief in the underlying action. They bear no relationship to the law that will govern
11
adjudication of the homeowner plaintiffs’ underlying tort and contract claims. 8
The principal opinion would hold that even if the ruling on the motion to enforce
settlement were separately appealable for the reasons noted above, the sanctions ordered
based on the trial judge’s erroneous belief that the Kerckhoff defendants did not act in
good faith in negotiating the failed settlement is not appealable. Yet the two issues can
be considered only together, for the sanctions arose out of the court’s ruling in the course
of denying the order to enforce settlement that bad faith had occurred.
If the law were as the principal opinion suggests, then even if the plaintiffs had
appealed the court’s refusal to enforce the settlement under Rule 74.01(b), the sanctions
imposed on the defendants in the course of that ruling could not have been considered as
a part of that interlocutory review, even though they concerned only the settlement.
Similarly, even were all claims stated in the petition against a party finally
disposed and the order doing so properly (even under the principal opinion’s reading of
the rule) appealed under Rule 74.01(b), any sanctions ordered against that party could not
be included in that appeal because a request for sanctions was not made as a separate
“claim” in the petition. Therefore, it would need to remain pending below until all other
8
While I believe the circumstances of this case present a situation in which a judgment
for sanctions regarding pretrial settlement negotiations satisfied the definition of “a
distinct judicial unit” because a motion to enforce settlement agreement is a distinct
judicial unit, nothing in this opinion should be construed to indicate that I necessarily
would view sanctions rulings in other contexts as “distinct judicial units.” This is
especially true when the sanctions are requested in order to enforce discovery. Such
rulings, of course, may be reviewed by writ in the discretion of the appellate court, see
e.g. Rule 95 (mandamus); Rule 97 (prohibition); State ex rel. Common v. Darnold, 120
S.W.3d 788, 790-92 (Mo. App. 2003) (prohibition issued prohibiting imposition of
discovery sanction), or after final judgment resolving the entire action, see, e.g., Leahy v.
Leahy, 858 S.W.2d 221, 228 (Mo. banc 1993).
12
issues were resolved – rather completely defeating the purpose of allowing a party to be
removed from the case in the trial court once all claims against it are disposed.
In sum, I would hold that the judgment denying the motion to enforce settlement
but imposing sanctions clearly satisfies the definition of “a distinct judicial unit,” and the
trial court did not err in certifying it for appeal under Rule 74.01(b).
II.
SANCTIONS WERE IMPOSED IMPROPERLY
Turning to the merits, I would hold that the trial court abused its discretion in
imposing sanctions on the Kerckhoff defendants. The trial court erred in imposing
sanctions on the Kerckhoff defendants on the basis that they executed the mediated
settlement agreement form that said an agreement was reached in principle despite
believing, and without informing the other parties, that they did not believe it was
binding.
Rule 17.06 provides:
(a) An alternative dispute resolution process undertaken pursuant to this
Rule 17 shall be regarded as settlement negotiations. Any communications
relating to the subject matter of such dispute made during the alternative
dispute resolution process by a participant or any other person present at the
process shall be a confidential communication.
No admission,
representation, statement or other confidential communication made in
setting up or conducting such process shall be admissible as evidence or
subject to discovery, except that, no fact independently discoverable shall
be immune from discovery by virtue of having been disclosed in such
confidential communication.
.…
(c) Settlement shall be by written document setting out the essential terms
of the agreement executed after the termination of the alternative dispute
resolution process.
Rule 17.06 (emphasis added).
13
As the Kerckhoff defendants note, Rule 17.06(a) expressly states that
communications made during a Rule 17 meeting are confidential communications and
that “no admission, representation, statement or other confidential communication” made
during such a meeting “shall be admissible as evidence or subject to discovery.” They
note that the trial court should not have permitted admission of comments made and
evidence of events occurring during the Rule 17 meeting. See Williams v. Kansas City
Title Loan Co., 314 S.W.3d 868, 871 (Mo. App. 2010).
The homeowners recognize the confidential nature of communications during a
Rule 17 meeting but, without citation to supporting authority, question whether that
confidentiality is intended to be limited to a trial on the merits as opposed to a hearing on
sanctions regarding what was said at the settlement meeting and what each party’s state
of mind was while attending the meeting. They say that the Kerckhoff defendants’
statements at the meeting should be admissible to show that there was a settlement and
that the Kerckhoffs acted in bad faith in failing to tell them that the Kerckhoffs did not
believe there was a settlement.
While the parties spend the majority of their briefs on this issue, I believe the key
issue in resolving the dispute is a different one. The trial court premised its imposition of
sanctions on findings that “a settlement in principle was reached at [the] mediation” and
that the Kerckhoff defendants “knew and agreed to those principles as developed on the
term sheets presented at the hearing.”
But Rule 17.06(c) expressly provides what constitutes a settlement. It states,
“Settlement shall be by a written document setting out the essential terms of the
14
agreement executed after the termination of the alternative dispute resolution process.”
These requirements of Rule 17.06(c) are not satisfied here.
The only written document coming out of the settlement meeting was the
mediation form.
Preprinted language on this form said that “[b]y signing this
MEDIATED SETTLEMENT AGREEMENT (MSA), the parties acknowledge that …
any party may seek enforcement of this MSA.” But the form was not filled out. Instead,
the mediator used the form to handwrite language stating that there only was “a
settlement in principle” and that the terms of settlement still had to be submitted to some
of the homeowner plaintiffs. Neither the parties’ “term sheets” 1 and 2, prepared prior to
the time the mediator prepared this document, nor term sheet 3, which was not prepared
until after the mediator wrote his note, were appended to the document or otherwise
incorporated into it. No details or terms of the alleged settlement were set out in the
mediation form. This was not a settlement agreement, for the requirement of Rule
17.06(c) that “the essential terms of the agreement” be set out in the document was not
satisfied. In fact, no term was set out, not even the amount or basis of settlement.
Additionally, Rule 17.06(c) requires that the written document be executed. See
Williams, 314 S.W.3d at 873. Here, only some of the defendants and none of the
plaintiffs signed the mediation form. The lack of execution also precluded a finding of an
enforceable settlement agreement under Rule 17.06(c) even had the terms been specified.
While the trial court correctly concluded that the agreement was not binding, it
believed this to be true only because the term sheets were not attached. It, therefore,
found that the Kerckhoff defendants were acting in bad faith in signing it without telling
15
the other side of this problem and without telling the other side that the incomplete nature
of the agreement and documents caused the Kerckhoffs to believe that the mediated
settlement agreement was not binding. The court’s ruling was based on an incorrect
premise.
What the parties had was a form that contained no agreement terms, that was not
executed by all the parties and that on its face said it set out only settlement principles,
not a settlement. But Rule 17.06 does not recognize a “settlement in principle” as a
settlement binding on parties. Agreeing “in principle” to settle without agreeing on the
essential terms in writing simply is not a settlement under Rule 17.06. In fact, the
mediator correctly told one of the parties before signing that the agreement in principle
would not be binding. While the form did say in pre-printed language that it would be
“enforced,” absent written terms and execution by all parties, there simply was nothing to
enforce.
The legal wrangling in this case shows the reason for the requirement of a written
agreement. If the essential terms of a settlement agreement are set out in an agreement
executed by the parties, then there is a written document that can be taken to the court to
enforce should a disagreement later arise. Rule 17.06 itself provides that the enforcement
is based on the terms agreed to in writing. Rule 17.06(c) (“Settlement shall be by a
written document setting out the essential terms of the agreement executed after the
termination of the alternative dispute resolution process”).
While oral settlement agreements are enforceable in some circumstances at
common law, see, e.g., B-Mall Co. v. Williamson, 977 S.W.2d 74, 77 (Mo. App. 1998),
16
Rule 17 takes a different approach intended to avoid concerns raised by the common law
method. Its requirement of a written and executed settlement agreement setting out all
essential terms avoids the problem of breaching the confidentiality of statements made in
settlement negotiations and the inhibiting effect this would have on open and full
negotiations; it also avoids placing the trial judge in the position of determining whether
there was an unwritten settlement and the nature of its terms. Instead, it sets out a bright
line rule:
Rule 17 means what it says: the essential terms of settlements reached
during court-ordered mediation sessions must be reduced to a writing
signed by the parties in order for such settlements to be enforced.
Williams, 314 S.W.3d at 873.
For these reasons, there could be no bad faith in fewer than all of the Kerckhoff
defendants signing the mediation form believing it would not be binding, for the
mediation form was without essential terms and so, as a matter of law, the requirements
for a binding settlement agreement were not met. Even the mediator hand-wrote a note
on the document that it was not a settlement but a settlement “in principle,” which under
Rule 17.06 means it was not a binding agreement at all. 9 No basis is cited for suggesting
that the Kerckhoff defendants had an obligation to tell the plaintiffs or their counsel that
they agreed with the mediator that the document was not binding and that a document
that on its face was not a settlement agreement did not bind them.
9
As Williams notes, “Rule 17.06(d) provides that the mediator’s confidentiality
obligations do not apply to testimony concerning the circumstances surrounding the
execution of the written settlement agreement itself (or subsequent events), in a
proceeding to enforce that written agreement.” 314 S.W.3d at 872.
17
Similarly, the suggestion that the Kerckhoffs mediated in bad faith because one of
the Kerckhoff defendants was not present proves too much. If it is bad faith whenever
one or more of multiple defendants fails to attend a settlement conference, then the
numbers of parties that will be found to be in bad faith would multiply precipitously.
That is particularly true where, as here, there is no showing that the attending defendants
incorrectly represented that they could settle on behalf of the non-attending defendant,
nor was there any showing that they had the ability to compel his attendance. Indeed,
only three of the 28 plaintiffs attended the settlement conference, and the three that did
attend did not have authority to settle on behalf of those not attending. Yet the trial court
correctly did not infer bad faith from this circumstance.
The later e-mail exchanges among the parties simply confirmed that there had
been no settlement. Both the homeoweners’ and Kerckoffs’ counsels’ e-mails showed
that they were trying to reach agreement on a future settlement but that they were using
different documents as the basis on which to do so, and that neither side was able to
persuade all of its co-parties of the merits of the terms proposed. To the extent that the
trial court’s sanctions are based on its suggestion that the Kerckhoff defendants had an
obligation to reveal to opposing counsel that they did not believe that settlement
ultimately would be achieved, such a ruling is incorrect. It is quite permissible for each
side negotiating a settlement to keep its ultimate settlement numbers or terms confidential
to the extent possible, and neither has a fiduciary or other obligation to reveal its thinking
to the other side.
18
This is not to say that providing intentionally false or incomplete information in a
pleading or motion or in response to discovery requests or otherwise is not sanctionable.
It is. Rule 55.03(d) (authorizing sanctions in the context of pleadings and motions); Rule
61.01 (authorizing sanctions in the context of discovery). But one side not sharing with
its opponent its thoughts as to whether an acceptable agreement ever will be
accomplished is not sanctionable conduct; trial or settlement strategy is inherently a
confidential matter. Whether negotiations would be successful or whether one party was
more committed than another to settlement could no more be assured in this circumstance
than in other settlement negotiations, and the court does not look behind the parties’
actions in such a circumstance. The fact that the homeowners believed the case might yet
settle and that the Kerckhoffs did not believe that terms agreeable to all parties ultimately
could be found, as it is suggested occurred here, does not constitute bad faith.
Finally, the trial court did not err in overruling the Kerckhoffs’ cross-motion for
sanctions against counsel for the homeowners and PF Development for filing the motion
to enforce settlement. While, for the reasons noted above, the motion was without merit,
that does not mean it was frivolous. 10 The trial court clearly took the issue seriously,
undertook days of evidentiary hearings, and erroneously concluded that if three “term
sheets” had been attached to the mediation form, then a settlement agreement would have
10
While, if a pleading or motion is “initiated frivolously or brought in bad faith, the trial
court has the discretion to impose sanctions as a deterrent to similar conduct in the future
and to recompense the other party,” Robin Farms, Inc. v. Beeler, 991 S.W.2d 182, 186
(Mo. App. 1999), the standard of review on a ruling on a motion to impose sanctions for
signing a frivolous motion is abuse of discretion, Camden v. Matthews, 306 S.W.3d 680,
683 (Mo. App. 2010).
19
existed, despite the assurance and written note of the mediator to the contrary and despite
the failure to meet the other requirements of Rule 17.06(c). In these circumstances, I
cannot conclude that the trial court abused its discretion in concluding that the motion to
enforce settlement agreement was not frivolous.
_________________________________
LAURA DENVIR STITH, JUDGE
20
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