Dunkin' Donuts Inc v. Lavani ( 1996 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
DUNKIN' DONUTS, INCORPORATED;
VIRGINIA DONUTS, INCORPORATED,
Plaintiffs-Appellants,
v. No. 95-2072
ARVIND S. LAVANI; MOHAN H.
SUTARIYA,
Defendants-Appellees.
Appeal from the United States District Court
for the Eastern District of Virginia, at Richmond.
Robert E. Payne, District Judge.
(CA-94-312-3)
Argued: March 7, 1996
Decided: May 24, 1996
Before MURNAGHAN and ERVIN, Circuit Judges, and
BUTZNER, Senior Circuit Judge.
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Affirmed by unpublished per curiam opinion.
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COUNSEL
ARGUED: Sandy Thomas Tucker, WILLIAMS, MULLEN, CHRIS-
TIAN & DOBBINS, Richmond, Virginia, for Appellants. Thomas E.
Lacheney, DEAL, WELLS & LACHENEY, P.C., Richmond, Vir-
ginia, for Appellees.
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Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
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OPINION
PER CURIAM:
Appellant Dunkin' Donuts argues that the district court wrongly
found that Dunkin' Donuts and appellees, Arvind S. Lavani and
Mohan H. Sutariya, entered into a binding settlement agreement.
Although all parties acted at times as though they had settled, and at
other times inconsistently with any such settlement, we find that the
parties in fact entered into a binding settlement contract. Therefore,
we affirm the district court's decision, which granted Lavani's motion
to enforce the settlement agreement and dismissed with prejudice all
remaining claims between the parties.
I.
Lavani and Sutariya [referred to in this opinion as "Lavani" for
simplicity's sake] were franchisees of Dunkin' Donuts. Dunkin'
believed Lavani to be in default of the franchise agreement and, after
Lavani failed to cure the default, attempted to terminate the agree-
ment. At a pre-trial conference during the ensuing litigation, the dis-
trict court strongly urged the parties to settle. In pursuit of an
acceptable settlement, the parties' attorneys exchanged numerous let-
ters and telephone calls, which we will not detail here. There is no
question that the lawyers were authorized to enter a binding agree-
ment on behalf of their clients. In effect, Dunkin' agreed to purchase
substantially all of the franchise's business assets for $46,000,
although the parties dickered over some of the particulars. On Decem-
ber 1, 1994, Dunkin' and Lavani apparently agreed to a February 1,
1995, closing date.
On December 9, Dunkin's counsel offered draft documents memo-
rializing the settlement agreement, and later that month sent amended
documents reflecting negotiated changes. On January 4, 1995,
Dunkin' wrote Lavani, stating that "Dunkin' agrees to all of the items
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listed in your December 29, 1994 letter. Therefore, I have amended
the [documents] again . . . ."
Sometime between January 4 and January 12, the lawyers had a
telephone settlement conference with the district court, during which
Lavani's counsel reported that Lavani had "buyer's remorse," and
would not sign the settlement documents. Nevertheless, on January
12, the district judge dismissed the civil action with prejudice,
"[u]pon representation of the parties that[it] has been settled." Shortly
after this dismissal, Lavani's counsel sought to withdraw from repre-
sentation and explained to Dunkin's counsel that Lavani would not
sign the settlement documents. On January 27, Lavani's counsel
wrote to the district court:
I sincerely apologize for my apparent misrepresentation that
this matter was settled. I believed it was. My client's view
is different. I have therefore filed motions requesting a
reversal of the dismissal order and releasing me as counsel
of record. I believe that new counsel will be necessary to
complete the transaction.
In early February, Dunkin' notified Lavani that Dunkin' considered
the previously-discussed settlement agreement to have been "repudi-
ated and rejected." On February 16, Lavani's counsel reported to
Dunkin' that Lavani had signed the documents on advice from other
counsel, and asked whether Dunkin' would settle on those terms.
Dunkin' was unwilling to settle under the formerly agreed terms. On
March 6, 1995, in a conference call with the court, Lavani's counsel
asserted for the first time his clients' position that the parties had set-
tled their dispute and that Lavani was entitled to enforcement of an
agreement reached on December 1, 1994.
On April 4, 1994, the district court held a hearing on Lavani's
Motion to Enforce Settlement Agreement and made his ruling from
the bench. The court found that as of January 4, 1995, the parties had
reached an agreement on all terms, and the court issued an order to
enforce the agreement. Dunkin' sought reconsideration, and the court
vacated its April 4 order, but again granted Lavani's Motion to
Enforce Settlement Agreement "to the extent that it seeks a determi-
nation that an enforceable settlement agreement was reached by Janu-
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ary 4, 1995." The court modified the settlement document to include
a full accounting, and specified that the closing date was "to be a rea-
sonable time after the entry of this Order." The court also dismissed
the entire action with prejudice.
II.
The district court's finding that the parties entered a settlement
agreement was a mixed question of fact and law. On review, factual
findings are reversible only if clearly erroneous. Fed. R. Civ. P. 52(a).
A finding of fact is "clearly erroneous when, although there is evi-
dence to support it, the reviewing court on the entire evidence is left
with the definite and firm conviction that a mistake has been commit-
ted." United States v. United States Gypsum Co., 333 U.S. 364, 395
(1948), cited in Faulconer v. Commissioner, 748 F.2d 890, 895 (4th
Cir. 1984). Legal conclusions are reviewed de novo. Bose Corp. v.
Consumers Union of the U.S., Inc., 466 U.S. 485, 501 (1984).
General contract formation principles apply, of course, to settle-
ment agreements. See Bangor-Punta Operations, Inc. v. Atlantic
Leasing, Ltd., 207 S.E.2d 858, 860 (Va. 1974). The Supreme Court
of Virginia has explained that "[r]easonable certainty as to the con-
tractual obligations is all that is required" to find a binding settlement
agreement. Allen v. Aetna Cas. & Sur. Co., 281 S.E.2d 818, 819 (Va.
1981). By January 4, the parties had mutually assented to the material
contractual provisions, and Dunkin' has failed to point to any contrac-
tual term on which the parties had not agreed as of that date. The dis-
trict court found that Lavani refused to sign the document because he
felt that it did not accurately reflect the terms of the agreement
reached between the parties. This factual finding was not clearly erro-
neous. Moreover, none of the correspondence between the parties'
counsel expressed any intent that a binding agreement depended on
formal execution of the written documents.
The events subsequent to January 4 are irrelevant to determination
of the parties' intent to be bound as of January 4. We are troubled by
Lacheney's January 27 letter to the district court, in which he repre-
sented that the matter had not been settled, but the letter and accom-
panying motion were evidently the result of the district court's
premature entry of a motion to dismiss before the settlement was
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signed, sealed, and delivered. Moreover, Lacheney wrote in that let-
ter, "I believe that new counsel will be necessary to complete the
transaction." The district court found that the January 27 letter
"evince[s] a desire, or a statement, that the Defendant Lavani, and his
counsel, new counsel, would go forward with the settlement transac-
tion, not with the litigation . . . ." Again, we cannot find this conclu-
sion to be clearly erroneous.
Dunkin' next argues that the district court should have applied the
presumption under Virginia law that no contract is formed until the
written document is executed. The Virginia Supreme Court explained
in Boisseau v. Fuller that the parties' intentions are key to determin-
ing when a contract has been formed:
If, though fully agreed on the terms of their contract, they
do not intend to be bound until a formal contract is prepared,
there is no contract, and the circumstance that the parties do
intend a formal contract to be drawn up is strong evidence
to show that they did not intend the previous negotiations to
amount to an agreement.
30 S.E. 457, 457 (Va. 1898). Later, that court recognized that this
presumption--"that the purpose to reduce such a contract to writing
and failure to do so is `strong evidence' against its finality"--is "cer-
tain and well established." Atlantic Coast Realty Co. v. Robertson's
Executor, 116 S.E. 476, 478 (Va. 1923). But we find no evidence of
the parties' intent to require execution of a written contract. Applica-
tion of the presumption does not arise "when there is no understand-
ing that the agreement will be reduced to writing as a prerequisite to
the formation of a contract." Richardson v. Richardson, 392 S.E.2d
688, 690 (Va. App. 1990). In this instance, the parties simply agreed
to memorialize their settlement with a formal document, but did not
make the contract subject to that condition. See Agostini v. Consolvo,
153 S.E. 676, 678-79 (Va. 1930) ("Where the minds of the parties
have met and they are fully agreed and they intend to be bound there
is a binding contract, even though a formal contract is later to be pre-
pared and signed.").
Dunkin' argues that the district court's failure to find that a Febru-
ary 1, 1995, closing date was a condition precedent to the settlement
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agreement was an error of law. The Supreme Court of Virginia has
explained,
A condition precedent calls for the performance of some act,
or the happening of some event after the terms of the con-
tract have been agreed upon, before the contract shall take
effect. In other words, the contract is made in form, but does
not become operative as a contract until some future speci-
fied act is performed, or some subsequent event occurs.
Smith v. McGregor, 376 S.E.2d 60, 65 (Va. 1989) (citations omitted).
Dunkin' contends that the December 1 correspondence makes a Feb-
ruary 1 closing a condition precedent. Dunkin' argues that the failure
of this condition precedent rendered the settlement void and unen-
forceable.
This argument fails because neither party ever expressed an inten-
tion that a February 1 closing date was a condition precedent or that
time would be of the essence in closing. In fact, the closing date was
left blank on the draft agreements. As a general rule, time is not of
the essence unless the contract specifically makes it so. Dziarnowski
v. Dziarnowski, 418 S.E.2d 724, 726 (Va. Ct. App. 1992). The pro-
posed settlement agreement simply states that closing shall occur at
a particular--though unspecified in the draft documents--time; it
does not include any conditional language or explain that time was of
the essence.
Finally, Dunkin' argues that the district court erred as a matter of
law in failing to conclude that Lavani was estopped from asserting
that a settlement had been reached based on his January 27 represen-
tation to the court that the case was not settled.* Virginia courts have
recognized the general rule by which "[a] litigant is estopped from
taking a position which is inconsistent with one previously assumed
. . . in the course of litigation for the same cause of action." Leech v.
Beasley, 128 S.E.2d 293, 297 (Va. 1962) (citations omitted). Judicial
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*The fact that the January 4, 1995, contract was entered did not pre-
clude a determination that a later agreement of the parties voided it.
However, that possible determination was not raised or opposed by either
party.
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estoppel is regarded "in the nature of a positive rule of procedure
based upon manifest justice and to a greater or lesser degree on con-
siderations of orderliness, regularity and expedition in litigation."
Rohanna v. Vazzana, 84 S.E.2d 440, 442 (Va. 1954). The rule is
intended to "deny[ ] litigants the right to play fast and loose with
courts." Id.; see also United Va. Bank v. B.F. Saul Real Estate, 641
F.2d 185, 190 (4th Cir. 1981) (explaining that judicial estoppel is
"preclusion against inconsistent position, [which] is designed to pro-
tect the integrity of the courts and the judicial process") (citation
omitted).
Lavani made an express, unequivocal representation to the district
court that the matter was not settled, and has since argued that the par-
ties had entered a binding settlement agreement. However, the district
court must share some responsibility for Lavani's apparently inconsis-
tent positions; as the court recognized, the dismissal had been granted
"prematurely," and it became necessary to"restore[ ] the status quo,"
so that the court could handle disputes that might arise in the course
of finalizing the agreement. Though we do not condone the rather
loose representations made to the district court, we do not believe
they compel reversal of the lower court's decision.
III.
We regret that both Dunkin' Donuts and Lavani have chosen to
recognize a settlement agreement when it seemed to be to their advan-
tage and disclaim it when they hoped for a better deal. Nonetheless,
the evidence demonstrates and the district court found that as of Janu-
ary 4, 1995, the parties had agreed on all terms material to the bar-
gain, to which they freely assented through their counsel. There is no
evidence that the validity of the bargain depended on formally exe-
cuted documents, nor that the parties agreed that a February 1 closing
date was a condition precedent to the agreement. While we might
have reached different conclusions had the case been before us ini-
tially, the Supreme Court has reminded us that we may not reverse a
district court's factual findings if "the district court's account of the
evidence is plausible in light of the record viewed in its entirety."
Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 574 (1985).
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IV.
Finding no error in the decision below, we
AFFIRM.
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