It is no secret that most civil lawsuits end in settlement and a stipulated or voluntary dismissal. While the entry of dismissal typically (and preferably) marks the final resolution of the case, this is not always so. Often cases are dismissed before settlement terms have been satisfied, and sometimes even before formal terms have been finalized. Practitioners often submit short, pro forma notices of dismissal without giving the terms much thought. However, the terms of dismissal will have important ramifications on the court’s jurisdiction to enforce settlement terms.
In a recent opinion captioned Infinite Security Solutions, L.L.C. v. Karam Properties, II, Ltd., --- N.E.3d ----, 2015-Ohio-1101, the Supreme Court of Ohio made clear that courts are divested of authority to handle post-dismissal settlement disputes absent specific language preserving jurisdiction in the dismissal entry. If a trial court unconditionally dismisses a case, a party may seek a writ of prohibition to prevent the exercise of post-dismissal jurisdiction. See State ex rel. Benbow v. Runyan, 99 Ohio St. 3d 410, 2003-Ohio-4127, 792 N.E.2d 1124 (2003)
The Infinite Security case arose from a dispute about security services provided at an apartment complex and insurance claims associated with fire loss at the property. The parties reached a settlement in principal at a pretrial conference, with the details to be worked out by the parties. One week later, the trial court sua sponte filed a dismissal entry, which read: “Parties having represented to the court that their differences have been resolved, this case is dismissed without prejudice, with the parties reserving the right to file an entry of dismissal within thirty (30) days of this order.”
Predictably, the parties could not come to a consensus with respect to certain aspects of the settlement. One party sought to vacate the dismissal entry and reopen the case to decide settlement-related issues. Over objections from other parties, the trial court ruled that its dismissal entry was conditional and that it retained jurisdiction to address settlement issues without vacating the entry.
On appeal, the Sixth District determined that the trial court was divested of jurisdiction once it unequivocally dismissed the action. The Sixth District certified its judgment as in conflict with Eighth and Eleventh District precedent on the following question: “[Is] a dismissal entry that does not either embody the terms of a settlement agreement or expressly reserve jurisdiction to the trial court to enforce the terms of a settlement agreement * * * an unconditional dismissal?” Infinite Sec. Solutions, 2015-Ohio-1101, ¶14.
The Supreme Court agreed with the Sixth District, finding that the trial court was divested of jurisdiction to take further action upon dismissal of the case. The Court first reviewed the typical procedure for dismissing a civil case after settlement: “Many of the local rules, including the Lucas County rule [at issue], operate in the same manner; with minor variations, they provide counsel a stated period of time following a notification of settlement to submit a final dismissal entry and state that if counsel fails to do so, the trial court may file its own dismissal entry, generally for want of prosecution. In our view, that is the best and preferred procedural practice for concluding a civil case following an agreement among the parties to settle.” Id. at ¶17.
The Court then rejected the notion of “conditional dismissals”—which are not provided for under the Civil Rules of Procedure. Even so, the Court stated that “as a general principle, a trial court may retain jurisdiction to enforce a settlement agreement when it dismisses a civil case.” Id. at ¶25. However, in order to do so, the journal entry “must reflect the trial court’s action in clear and succinct terms.” Id. at ¶29. In other words, the trial court must expressly retain jurisdiction for the specific purpose of enforcing the settlement agreement.
As a practical matter, courts often enter short dismissal entries that do not contemplate enforcement of settlement terms. If a party wishes to preserve jurisdiction to enforce settlement, that party should take affirmative steps to do so, such as making those wishes known to the judge, staff attorney, and opposing counsel, and submitting a dismissal entry with necessary language. The Supreme Court provided an example of language that would suffice: “The court hereby retains jurisdiction to enforce the settlement agreement reached between the parties.” Note, however, that even if requested, a court does not have to agree to retain jurisdiction.
If you would like a full copy of the Infinite Security opinion, or if you have any other questions regarding the general liability risks, please contact one of our General Liability / Excess and Surplus Risks Practice Group members.
This has been prepared for informational purposes only. It does not contain legal advice or legal opinion and should not be relied upon for individual situations. Nothing herein creates an attorney-client relationship between the Reader and Reminger. The information in this document is subject to change and the Reader should not rely on the statements in this document without first consulting legal counsel.
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