You Settled Your Case And The Other Party Is Breaching The Settlement Agreement Now What?

Article by Ian D. Meklinsky and Student Author Rachel Karamessinis

In most instances, litigations end with the parties executing a settlement agreement and a stipulation to dismiss the case. Ideally, the execution of these documents brings the matter to full and final closure. However, a second round of disputes may inevitably arise as a result of settlement agreement breaches.

Settlement agreements are contracts in which the parties agree to be bound by certain obligations or refrain from certain actions in exchange for the settlement of the parties' claims. For example, in the employment context, a settlement agreement may require an employer to provide the employee with settlement monies and continuation of benefits, and may conversely require the employee to refrain from working with or soliciting the employer's clients and staff.

Not surprisingly, situations arise where a party fails to abide by its obligations as set forth in the settlement agreement. The non-breaching party is typically faced with two choices: 1) initiate a civil cause of action in connection with the breach (often a time-consuming and expensive process), or 2) seek intervention by the court that had jurisdiction over the original dispute. In order to avail oneself of the latter option, however, the parties must engage in pre-settlement planning and purposeful drafting, and include a provision in the settlement agreement that the court will retain jurisdiction over any disputes that arise regarding the settlement agreement. Where the court of original jurisdiction is a federal court, the parties may be able to consent to such a court retaining jurisdiction, at least for a reasonable time period.

The United States District Court for the District of New Jersey recently weighed in on this option in Brass Smith, LLC v. RPI Industries, Inc.,1 a patent infringement case where, according to the terms of the parties' settlement agreement, the defendant was required to cease "making, selling, offering to sell, or importing" an allegedly infringing device by June 1, 2012, and to stop shipments by Aug. 15, 2012. The settlement agreement called for the district court to retain "subject matter and personal jurisdiction to enforce the agreement and resolve any disputes pertaining to it," including compliance with its terms. In accordance with the settlement agreement, the parties moved for an order of dismissal under F.R.C.P. 41(a)(2). They requested the court incorporate into the...