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Sierra Petroleum Company, Inc. v. Pat's 66, Inc.: US District Court : CIVIL PROCEEDURE - no federal. jurisdiction over parties' 'side deal' outside approved settlement

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Sierra Petroleum Company, Inc., Civil No. 07-1112 (DWF/AJB)
an Illinois corporation,
Plaintiff,
v. ORDER ADOPTING REPORT
AND RECOMMENDATION
Pat’s 66, Inc., d/b/a Pat’s Shell; and Patrick D. AND MEMORANDUM
Meyer and Cindy D. Meyer, individuals,
Defendants.
___________________________________________
Sierra Petroleum Company, Inc., Civil No. 07-1501 (DWF/AJB)
an Illinois corporation,
Plaintiff,
v.
CD Petro Marketing LLC and First American
Enterprises, LLC,
Defendants.
Mark Blumstein, Esq., Moises Melendez, Esq., and Paula J. Phillips, Esq., Gordon
Hargrove & James; and Russell S. Ponessa, Esq., Hinshaw & Culbertson LLP, counsel
for Plaintiff.
Ansis V. Viksnins, Esq., Lindquist & Vennum PLLP, counsel for Defendants Pat’s 66,
Inc., Patrick D. Meyer, and Cindy D. Meyer.
Kirsten J. Libby, Esq., and Teresa K. Patton, Esq., Strusinski, Libby & Associates, PA,
counsel for Defendants CD Petro Marketing LLC and First American Enterprises, LLC.
2
This matter is before the Court on the objections of Defendants Pat’s 66, Inc.,
Patrick D. Meyer, and Cynthia D. Meyer (collectively “Pat’s 66”) (Civ. No. 07-1112
(DWF/AJB), Doc. No. 93) and the objections of Defendants CD Petro Marketing LLC,
and First American Enterprises, LLC (collectively “CD Petro”) to Magistrate Judge
Arthur J. Boylan’s Report and Recommendation (“R&R”) dated November 6, 2007 (Civ.
No. 07-1112 (DWF/AJB), Doc. No. 92; Civ. No. 07-1501 (DWF/AJB), Doc. No. 35). In
that R&R, Magistrate Judge Boylan recommended that the District Court grant Sierra
Petroleum’s Motion to Enforce Settlement Agreement and enter an Order for Judgment in
favor of Plaintiff Sierra Petroleum and against Defendants Sierra Petroleum, Pat’s 66,
Patrick Meyer, Cindy Meyer, CD Petro, and First American jointly in the amount of
0,000 plus 5% simple interest accruing from August 2, 2007, as well as damages for
reasonable attorney fees, costs, and disbursements incurred by Sierra Petroleum in
moving to enforce the settlement agreement. Additionally, it was recommended that the
District Court deny Pat’s 66's Motion to Enforce Settlement Agreement against CD Petro
as this issue should be resolved by the state courts because the federal court lacks subject
matter jurisdiction to enforce the side agreement made out of court between CD Petro and
Pat’s 66.
Plaintiff Sierra Petroleum Company, Inc., by and through their counsel, on
November 26, 2007, filed a Response to Objections of Defendants Pat’s 66 (Civ.
No. 07-1112 (DWF/AJB), Doc. No. 96) and a Response to Objections of Defendants CD
Petro (Civ. No. 07-1501, Doc. No. 39). Defendants CD Petro, by and through their
3
counsel, on November 26, 2007, filed a Response to Objections of Defendants Pat’s 66
(Civ. No. 07-1501 (DWF/AJB), Doc. No. 40).
The Court has conducted a de novo review of the record, including a review of the
arguments and submissions of counsel, as well as the procedural history of the case,
pursuant to 28 U.S.C. § 636(b)(1) and Local Rule 72.1(c). The factual background for the
above-entitled matter is clearly and precisely set forth in the R&R and is incorporated by
reference for purposes of Defendants’ objections.
Based upon the de novo review of the record and all of the arguments and
submissions of the parties and the Court being otherwise duly advised in the premises, the
Court hereby enters the following:
ORDER
1. Defendants Pat’s 66, Inc., Patrick D. Meyer, and Cynthia D. Meyer’s
objections (Civ. No. 07-1112 (DWF/AJB), Doc. No. 93) to Magistrate Judge Arthur J.
Boylan’s Report and Recommendation dated November 6, 2007, are DENIED.
2. Defendants CD Petro Marketing, LLC, and First American Enterprises,
LLC’s objections (Civ. No. 07-1501 (DWF/AJB), Doc. No. 36) to Magistrate Judge
Arthur J. Boylan’s Report and Recommendation dated November 6, 2007, are DENIED.
3. Magistrate Judge Arthur J. Boylan’s Report and Recommendation dated
November 6, 2007 (Civ. No. 07-1112 (DWF/AJB), Doc. No. 92; Civ. No. 07-1501
(DWF/AJB), Doc. No. 35), is ADOPTED.
4
4. Plaintiff’s Motion to Enforce Settlement Agreement (Civ. No. 07-1112
(DWF/AJB), Doc. No. 75; Civ. No. 07-1501 (DWF/AJB), Doc. No. 22) is GRANTED
and Defendant Pat’s 66, Inc.’s Motion to Enforce Settlement Agreement (Civ.
No. 07-1112 (DWF/AJB), Doc. No. 84) is DENIED.
5. An order for judgment is entered in favor of Plaintiff and jointly against
Defendants as follows:
a. Damages are awarded in favor of Plaintiff Sierra Petroleum
Company, Inc., and against Defendants Pat’s 66, Inc., Patrick D. Meyer,
Cindy D. Meyer, CD Petro Marketing LLC, and First American Enterprises,
LLC, in the amount of 0,000 plus five percent (5%) simple interest
accruing from August 2, 2007;
b. Damages are awarded in favor of Plaintiff Sierra Petroleum
Company, Inc., against Defendants Pat’s 66, Inc., Patrick D. Meyer,
Cindy D. Meyer, CD Petro Marketing LLC, and First American Enterprises,
LLC, for reasonable attorney fees, costs, and disbursements in the amount
of ,981 incurred by Plaintiff in moving to enforce the settlement
agreement.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: January 11, 2008 s/Donovan W. Frank
DONOVAN W. FRANK
Judge of United States District Court
5
MEMORANDUM
There is no question that a settlement agreement is enforceable upon agreement by
the parties on all essential terms. Ryan v. Ryan, 193 N.W.2d 295, 297 (1971). The facts
germane to the issue before the Court as to what occurred on August 1 and 2, 2007, are
not in dispute. A settlement conference was conducted by Magistrate Judge Arthur J.
Boylan on August 1 and 2, 2007. The Defendants in the two cases before the Court
agreed to pay 0,000, plus interest, to Plaintiff Sierra Petroleum Company. Magistrate
Judge Boylan made that clear in open court by stating, “It’s a joint agreement and each of
the Defendants are liable, as we’ve said.” (Hr'g Tr. 11, Aug. 2, 2007.)
Pat’s 66 acknowledges that after the terms of the settlement were stated on the
record, all Defendants and their lawyers met in a conference room at the courthouse and,
in a separate agreement that has appropriately been referred to as a side deal reached in a
conference room outside the presence of the Magistrate Judge or the courtroom, agreed
that Defendant CD Petro Marketing LLC would make the 0,000 payment to Sierra
Petroleum that was due on or before October 1, 2007, and that Pat’s 66 would then cause
Pat’s Fast Lube Inc. to convey a business known as the Tire and Lube Company to
Defendant CD Petro as consideration for CD Petro making a 0,000 payment. Pat’s 66
would then be responsible for the remaining ,000 over a period of three years. This
“off the record side deal” with Defendant CD Petrol Marketing LLC and First American
Enterprises, LLC, was never incorporated by the Court and the parties into the settlement
reached in the courtroom on August 2, 2007.
6
Federal courts are courts of limited jurisdiction. There is no dispute that they
possess only that power authorized by Constitution and statute. Kokkonen v. Guardian
Life Ins. Co. of America, 511 U.S. 375, 377 (1994). The fact that this Court has not
dismissed the matter is not determinative because this Court never possessed original
jurisdiction over the Defendants’ subsequent side agreement reached in the conference
room after the formal settlement reached in the courtroom before Magistrate Judge
Boylan. No federal statute creates a basis for federal court jurisdiction over a contract
dispute. Moreover, as observed in Kokkonen, the doctrine of ancillary jurisdiction does
not apply because this was a side agreement reached subsequent to the settlement
announced in the courtroom on August 2, 2007, that was not incorporated into that
settlement. Id. at 379. Consequently, no independent basis exists for federal jurisdiction.
Admittedly, the result reached may well be different in state court in the State of
Minnesota in part because it is a court of general jurisdiction. However, as noted above,
federal courts are courts of limited jurisdiction. Any finding by this Court of inherent
authority to enforce what has been referred to as a side agreement or side deal made,
subsequent to the formal settlement in this case, would be contrary to the holding in
Kokkonen. That is precisely the reason why Magistrate Judge Boylan concluded his R&R
by recommending that the remedy for Pat’s 66 is to file a breach of contract action in the
state court.
It is noteworthy that it is now early January 2008, more than 45 days after the
briefing by the parties on the issue before the Court. Given the silence of all parties, the
7
Court assumes that no one, as of the date of this Order, has complied with the settlement
agreement of the parties, notwithstanding the fact that all parties asserted in November of
2007 that no one had repudiated the agreement. Whether the parties can once and for all
comply with the existing settlement agreement as ordered by the Court or settle all issues
in the context of this Court’s decision, is up to them.
For the reasons stated, the Court has adopted the R&R of Magistrate Judge
Arthur J. Boylan, including an award of reasonable attorney fees.
D.W.F.
 

 
 
 

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