United States District Court, W.D. New York
WILLIAM R. HENDRICKSON and PATRICIA HENDRICKSON, Plaintiffs,
UNITED STATES OF AMERICA, Defendant.
DECISION and ORDER
MICHAEL A. TELESCA, District Judge.
Plaintiffs William R. Hendrickson and Patricia Hendrickson brought this case in 1982 against the defendant United States of America ("United States" or "Government") claiming that William Hendrickson ("Hendrickson") suffered severe and permanent injuries after being struck by a motor vehicle operated by the defendant. The parties agreed to settle the case, and agreed to a structured settlement pursuant to which the defendant paid an initial lump sum to the plaintiffs, and additionally purchased an annuity that would provide for monthly payments to be made to Hendrickson for a period of forty years, with an additional 14 annual payments to be paid at specified intervals over the course of 26 years. A written Settlement Agreement ("Settlement Agreement" or "Agreement") was prepared by the parties and submitted to the Court for approval. On April 29, 1985, I approved the Settlement Agreement and made the Agreement an Order of the Court. The Agreement, inter alia, required the defendant to purchase an annuity through the Executive Life Insurance Company of New York ("ELNY"), and provided that the defendant "shall be the sole owner of the Annuity Contract." See Settlement Agreement at p. 5.
In 2012, the plaintiffs learned that ELNY had become insolvent, and that it would be liquidated by the New York Liquidation Bureau pursuant to New York State law. As a result of the liquidation of ELNY, the plaintiffs' remaining benefits under the annuity were reduced by approximately fifty percent.
Plaintiffs now move to enforce the settlement, contending that the defendant is obligated to pay the total amounts due them as originally provided in the Settlement Agreement and Ordered by this Court. The United States opposes plaintiffs' motion on grounds that this Court lacks jurisdiction to enforce the Settlement Agreement because the Court did not expressly retain jurisdiction over the settlement, and the terms of the Settlement Agreement were not incorporated into the Order of Dismissal issued by this Court. The Government further contends that because the Settlement Agreement constitutes a contract with the Government, and because the amount sought by the plaintiffs from the Government exceeds $10, 000, any action to enforce the Agreement must be brought before the United States Court of Claims, which has exclusive jurisdiction over contract actions against the Government in amounts exceeding $10, 000.
For the reasons set forth below, I find that this Court retained jurisdiction over the effectuation of the Settlement when it approved the terms of the written Settlement Agreement between the parties and made those terms an Order of the Court. I further find that the Court retains ancillary jurisdiction over the enforcement of the Settlement Agreement as part of the Court's inherent authorization to vindicate its authority and effectuate its Orders. Finally, I find that the Government is obligated to ensure that the payments set forth in the Settlement Agreement are to be made as promised to the plaintiffs, and therefore, to the extent that payments from the ELNY annuity have been diminished, the Government is obligated to pay any remaining portions not received by the plaintiffs. Accordingly, I grant plaintiffs' motion to enforce the settlement and Order the Government to pay to the plaintiffs the difference between the benefits plaintiffs are now receiving and the benefits agreed to and promised in the Settlement Agreement.
In 1985, this tort action went to trial before this Court, and following two-and-a-half days of trial testimony, but before the trial was concluded, the parties agreed to settle the case. In open court, the parties spread the terms of the settlement on the record, and thereafter, submitted a written Settlement Agreement to the Court for Court approval dated April 29, 1985. The parties agreed that part of the consideration to be paid by the Government would be paid in cash in an initial lump sum, and the balance would paid in a "structured" settlement, whereby the United States would be obligated to pay Hendrickson $2, 500.00 per month for 40 years (which amount would be increased by 4% annually); an additional $625, 000.00 in 10 lump sum payments over the course of 24 years; and $40, 000.00 in four equal lump sum payments to be applied towards anticipated educational expenses. With respect to the initial lump sum payment, the Government agreed to pay $151, 782.66 to the plaintiffs at the time of the settlement. For the purpose of making the future monthly and annual payments to the plaintiffs, the Government purchased an annuity from ELNY in an amount not exceeding $522, 217.34. The Settlement Agreement specifically provided that the Government would be the sole owner of the annuity contract.
For almost three decades thereafter, the promised payments were made to the plaintiffs as provided. In 2013, however, ELNY was liquidated, and the plaintiffs thereafter received only 50% of the amount of the remaining payments owed to them under the Settlement Agreement. Plaintiffs attempted to recoup the remaining amounts from the defendant, but the Government took the position that it had satisfied its financial obligations by making the lump sum payment upon the settlement of the action, and by purchasing the annuity as agreed to by the parties. The defendant refused to contribute amounts to make plaintiffs whole under the Settlement Agreement, and plaintiffs then brought the instant action seeking enforcement of the Settlement Agreement, and directing the defendant to pay to plaintiffs any remaining amounts owed but not paid to them by ELNY.
I. The Court has Retained Jurisdiction to Enforce the Settlement Agreement.
A. Because the Terms of the Settlement Agreement were incorporated into an Order approved and signed by the Court, the Court retains Jurisdiction to resolve a motion to enforce the settlement
Plaintiffs seek to enforce the Settlement Agreement between the parties, and move the Court to Order defendant to make plaintiffs whole for the amounts that have not been paid to them due to the insolvency of ELNY. The United States asserts that this court lacks jurisdiction to grant the relief requested because the Court did not expressly retain jurisdiction to enforce the settlement, and did not include the terms of the settlement in its Order dismissing the case.
It is a peculiarity of federal jurisdiction that a federal court lacks jurisdiction to enforce a settlement entered before it absent explicit language in the settlement agreement, or from the court itself, indicating that the court retains jurisdiction to effectuate the settlement, or inclusion of the settlement terms in the Order dismissing the action. Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 380-81 (1994); Dahlen Kok Han Wee v. David, 2013 WL 5656084, (S.D.N.Y. Oct. 10, 2013) ("It is settled the Court posses no inherent power to enforce a settlement, in the absence of an express retention of jurisdiction or the entry of the settlement terms as an order of the Court."); Stone v. Credit Solutions Corp., 09-CV-281A F, 2011 WL 2747572 (W.D.N.Y. June 21, 2011) report and recommendation adopted, 09-CV-281, 2011 WL 2731175 (W.D.N.Y. July 13, 2011) ("It is well-settled' that a ...