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Muruga, LLC v. City of Rio Rancho

United States District Court, D. New Mexico

November 4, 2019

MURUGA, LLC. ET AL., Plaintiff,
v.
CITY OF RIO RANCHO, ET AL., Defendants.

          MEMORANDUM OPINION AND ORDER

         On August 26, 2019, Plaintiffs Muruga, LLC and Dr. Senthil Ramasamy, M.D. (“Plaintiffs”) filed a MOTION TO ENFORCE SETTLEMENT AGREEMENT (Doc. No. 57) (“Motion”). Plaintiffs seek enforcement of their May 18, 2017, Settlement Agreement and Release of All Claims (“SARAC”). See id., Ex. 1. Defendants City of Rio Rancho and Mayor Greggory D. Hull (“Defendants”) argue that the Court no longer has jurisdiction to hear this case. See DEFENDANTS' RESPONSE IN OPPOSITION TO THE MOTION TO ENFORCE SETTLEMENT AGREEMENT (Doc. No. 58) at 2. Having reviewed the briefing and controlling law, the Court will deny Plaintiffs' Motion for lack of subject matter jurisdiction.

         Background

         On April 25, 2016, Plaintiffs sued Defendants for civil rights violations under 42 U.S.C. § 1981. See COMPLAINT FOR DAMAGES AND DECLARATORY JUDGMENT FOR VIOLATION OF CIVIL RIGHTS (Doc. No. 1). Plaintiffs alleged that Defendants deprived them of due process and equal protection under the law in their handling of a building permit of an office building in Rio Rancho, New Mexico. Id. at 2-3. On May 11, 2017, United States Magistrate Judge Kirtan Khalsa held a settlement conference with the Plaintiffs and Defendants (collectively, “Parties”). See CLERK'S MINUTES REGARDING RULE 16 SETTLEMENT CONFERENCE (“Settlement Minutes”) (Doc. No. 51). At this conference, Parties settled the case and agreed that “[t]he parties may, if necessary, seek leave to reopen this case within six months and twenty days of today's date for the sole and limited purpose of enforcing that part of the settlement agreement to be satisfied within six months and ten days.” Id. On May 18, 2017, Plaintiffs signed the SARAC. See Motion, Ex. 1. On May 24, 2017, Parties dismissed this case with prejudice by stipulation under Federal Rule of Civil Procedure (“Rule”) 41(a)(1)(ii).[1] Two years later, Plaintiffs filed their Motion, asserting that Defendants have not complied with the terms of the settlement agreement. See Motion at 2-3.

         Motion to Enforce Settlement Agreement

         Plaintiffs seek “a Court Order enforcing the SARAC, to monetarily sanction the City of Rio Rancho for its unlawful conduct in amount significant enough to send the appropriate message, and for reimbursement of their attorney's fees in having to bring this enforcement action.” Motion at 4. Plaintiffs argue that the Court is duty-bound under New Mexico law to enforce the settlement agreement. See Id. (citing Envtl. Control, Inc. v. City of Santa Fe, 2002-NMCA-003, ¶ 19, 131 N.M. 450, 38 P.3d 891). While the Court does not disagree that New Mexico courts have such a duty, as courts of limited jurisdiction, federal district courts do not share in this duty. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 378 (1994).

         Federal district courts “have an independent obligation to determine whether subject-matter jurisdiction exists” and may raise the issue sua sponte or upon party suggestion. See 1mage Software, Inc. v. Reynolds & Reynolds Co., 459 F.3d 1044, 1048 (10th Cir. 2006) (quoting Arbaugh v. Y & H Corp., 546 U.S. 500 (2006)). Defendants assert that the Court lacks jurisdiction to enforce the SARAC because Plaintiffs' claims sound in state contract law and there is no independent federal basis for the suit. See DEFENDANTS' RESPONSE IN OPPOSITION TO THE MOTION TO ENFORCE SETTLEMENT AGREEMENT (Doc. No. 58) at 2. The Court agrees. Parties dismissed this case under Rule. 41(a)(1)(ii). See supra, n. 1. Rule 41(a)(1)(ii):

“provides for dismissal by filing a stipulation . . . signed by all parties who have appeared in the action, and causes that dismissal to be with prejudice if . . . the stipulation so specifies. Neither the Rule nor any provision of law provides for jurisdiction of the court over disputes arising out of an agreement that produces the stipulation.” Kokkonen, 511 U.S. at 378.

         “Enforcement of a settlement agreement . . . whether through award of damages or decree of specific performance, is more than just a continuation or renewal of the dismissed suit, and hence requires its own basis for jurisdiction.” Id.

         Retained Jurisdiction

         Courts may retain jurisdiction to enforce settlement agreements by party stipulation under Rule (41)(a)(1)(ii), or by an order incorporating a settlement agreement that includes a retained-jurisdiction clause under Rule 41(a)(2). Id. at 381. Plaintiffs contend that the six-month timeframe to challenge the settlement evinces an intent by the Court to retain jurisdiction over the SARAC indefinitely. See REPLY TO RESPONSE [DOC 58] TO MOTION TO ENFORCE SETTLEMENT AGREEMENT (Doc. No. 59) at 5-6. Plaintiffs' argument fails for two reasons. First, the agreement of a six-month deadline to challenge the settlement preceded execution of the SARAC and was not incorporated into the terms of the SARAC. A court's “mere awareness and approval of the terms of the settlement agreement” does not suffice to incorporate the settlement agreement, let alone negotiation terms, into the dismissal. See Kokkonen, 511 U.S. at 381. Further, neither stipulated dismissal contains any reference to the six-month deadline or to the SARAC itself. Under Kokkonen, the Court cannot exercise retained jurisdiction that was not reflected in either the ultimate settlement agreement or the stipulated dismissals.[2]

         Second, even if the terms had been incorporated, the settlement agreement allowed an enforcement suit ten days after the time to comply with the SARAC terms. See Settlement Minutes (“The parties may, if necessary, seek leave to reopen this case within six months and twenty days of today's date for the sole and limited purpose of enforcing that part of the settlement agreement to be satisfied within six months and ten days.”) (emphasis added). Plaintiffs had ten days after the six-month and ten-day compliance period to sue for non-compliance and failed to do so.

         Independent Federal Jurisdiction

         Plaintiffs alternatively argue that the Court has jurisdiction to enforce settlement agreements where “the rights of the litigants and the operative legal policies derive from a federal source.” REPLY TO RESPONSE [DOC 58] TO MOTION TO ENFORCE SETTLEMENT AGREEMENT (Doc. No. 59) at 5. Plaintiffs cite Snider v. Circle K Corp., 923 F.2d 1404 (10th Cir. 1991) in support of their argument. The plaintiff in Snider sought enforcement of an employment discrimination settlement agreement for claims under Title VII of the Civil Rights Act, 42 U.S.C. § 2000 et seq. (“Title VII”) and requested a jury trial on the issue of breach of the settlement agreement. Snider, 923 F.2d at 1407. Despite the enforcement claim sounding in contract, the Snider Court reasoned that as a claim derivative of Title VII, where “rights of the litigants and the operative legal policies derive from a federal source[, ]” federal common law applies. Id. The Snider Court concluded that the plaintiff was not entitled to a jury trial on the issue of breach under federal common law. Id. On the jurisdictional issue, the Snider Court simply reiterated that the Tenth Circuit had previously “affirmed a district court's award of damages for breach of a Title VII settlement agreement without discussing the jurisdictional issue.” Id.

         Snider stands for the proposition that federal common law guides the interpretation of breach of settlement claims under Title VII. Id.; accord, Chavez v. New Mexico, 397 F.3d 826, 830 (10th Cir. 2005). The Tenth Circuit has, however, limited the scope of Snider in the wake of the Supreme Court's Kokkonen opinion. See Morris v. City of Hobart, 39 F.3d 1105, 1110 (10th Cir. 1994). In Morris, the plaintiff sought post-dismissal enforcement of a Title VII settlement agreement. Id. at 1108. The district court determined it had jurisdiction under Snider. Id. at 1110. The Tenth Circuit reversed, concluding that because the settlement agreement did not retain federal jurisdiction, as Kokkonen required, the court would need an independent federal basis for jurisdiction. Id. at 1110-11. After finding no basis for diversity jurisdiction, the Morris Court turned to federal question jurisdiction, acknowledging that “federal jurisdiction can be found in state-law created causes of action if the right to relief turns on the construction of a federal law.” Morris, 39 F.3d at 1111 (citing Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 199-200 (1921)). “Nevertheless, the ‘mere presence of a federal issue in a state cause of action does not automatically confer federal-question jurisdiction.'” Morris, 39 F.3d at 1111 (quoting Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 813 (1986)). “A court examining whether a case turns on a question of federal law should focus on whether Congress evidenced an intent to provide a federal forum.”[3]Id. The Morris Court determined that Congress did ...


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