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Katz v. Township of Westfall

May 4, 2007


The opinion of the court was delivered by: Magistrate Judge Blewitt


I. Background

On December 24, 2003, Plaintiffs, David H. Katz and Barbara D. Katz, his wife, filed a civil action for breach of contract in the United States District Court for the Middle District of Pennsylvania. This was the Plaintiffs' fourth action which was filed in the Middle District Court of Pennsylvania.*fn1 All of the controversies center around Plaintiffs' purchase of approximately 740 acres of property located in Westfall Township, Pennsylvania, in May of 1986, and their subsequent attempts to subdivide, develop, and sell the property. Phase I was the commercial development of the Plaintiffs, and Phase II was the residential development. The Defendants named in the original action were all adjacent property owners who had formed an association known as the "Concerned Citizens of Old Milford Road."*fn2 These original Defendants opposed Plaintiffs' development of the purchased property, claiming the development contributed to or caused problems, including soil erosion, sewage difficulties, and disruption of streams.

In Katz II, CV No. 94-0383, the Plaintiffs sued Defendant Westfall Township and others, in part, for violating their civil rights pursuant 42 U.S.C. § 1983. In an action brought pursuant to 42 U.S.C. § 1983, the Plaintiff must prove the following two essential elements in order to state a claim: (1) that the conduct complained of was committed by a person acting under color of state law; and (2) that the conduct complained of deprived the Plaintiff of rights, privileges or immunities secured by the law or the Constitution of the United States. Parratt v. Taylor, 451 U.S. 527 (1981); Kost v. Kozakiewicz, 1 F. 3d 176, 184 (3d Cir. 1993).*fn3 At trial, the jury rendered a verdict in favor of Plaintiffs Katz and against the Defendant Township on their § 1983 claim.

After the Plaintiffs prevailed at trial in Katz II, a Judgment of more than $10 million was entered in their favor and against the Defendants, including the Defendant, Westfall Township, named in the above action. The Township's portion of the Judgment was more than $3 million. (Doc. 48, Exhibit 1). Subsequently, the Plaintiffs filed Katz III against the Township. An Equitable Settlement Agreement ("ESA") was entered into between the parties in order to compromise the Judgment which the Plaintiffs had obtained against the Township in Katz II. In the ESA, as described below, the Defendant Township agreed to take certain actions with respect to the Plaintiffs' properties in furtherance of their efforts to develop Phases I & II. In their breach of contract action filed in the above case, Civil No. 03-2377, the Plaintiffs essentially claimed that the Defendant Township had breached the terms of the ESA, which had hindered their ability to develop their properties.

The Plaintiffs filed a Motion for Summary Judgment, which the Court denied without prejudice on February 17, 2005. (Docs. 29 & 64).

Subsequently, the Court set a trial date as to only the Township Defendant for July 18, 2005. (Doc. 67). A jury was selected and sworn in on the designated day of trial. Thereafter, the Court dismissed the jury, since the parties had expressed a desire to discuss settlement. (Doc. 82). Later that day, the Court held a settlement conference, and the parties reported that they had settled the case. The Court issued an Order on July 18, 2005 dismissing this case, but retained jurisdiction over each provision of the Settlement Agreement ("SA"). (Doc. 84). The Court signed the Settlement Order on August 4, 2005. (Doc. 86).

This case remained closed until February 26, 2007. The events which transpired leading to the re-opening of this case were that on February 16, 2007, Plaintiffs filed a Stipulated Judgment, pursuant to Section VI, ¶ I of the August 4, 2005 Order, against Defendant Township. (Doc. 89). On February 23, 2007, Defendant filed a Motion to Set Aside the Judgment pursuant to Fed. R. Civ. P. 60(b). (Doc. 91).*fn4 Defendant's Rule 60(b) Motion is the subject of the present Memorandum.

II. Defendant's Rule 60(b) Motion

Defendant's Motion has been briefed, and upon motion of Defendant, the Court conducted an expedited hearing on March 29, 2007. (Docs. 106 & 107, 93 & 94). Both parties presented exhibits at the hearing. (Docs. 111 & 112).*fn5 At the hearing, counsel for Defendant requested to file supplemental post-hearing briefs, and the Court allowed the parties to do so. Plaintiffs and Defendant have filed their Supplemental Briefs. (Docs. 114 & 115).

Also pending is the Motion of Plaintiffs for Litigation Costs and Expenses, including Attorney Fees, incurred by Plaintiffs to enforce the ESA and the SAR pursuant to the Stipulated Judgment which they filed against Defendant on February 16, 2007. (Doc. 92). Plaintiffs seek the sum of $326, 461.21, as of January 31, 2007, which they claim to have incurred to enforce the stated Contractual Agreement (i.e., ESA/SAR). On March 19, 2007, counsel for Plaintiffs filed an Affidavit in support of Plaintiffs' Motion for Costs and Expenses with exhibits. (Doc. 100). The Motion states that the Defendant is obligated to pay for the litigation costs and expenses incurred by Plaintiffs to enforce the Contractual Agreement. Plaintiffs' Motion for Litigation Costs and Expenses, and for Attorneys Fees, is supported by two Affidavits . (Docs. 97 and 98).

Since we are granting Defendant's Motion to Set Aside the Stipulated Judgment, and shall set aside the Judgment Plaintiffs entered against Defendant, we will deny Plaintiffs' Motion for Litigation Costs and Expenses, and for Attorney Fees, without prejudice to re-file it if they re-file a Stipulated Judgment at a later date, and it is allowed to remain filed against Defendant. Thus, without the Stipulated Judgment remaining in effect, there is no basis for Plaintiffs' Motion for Litigation Costs and Expenses, and for Attorney Fees. (Doc. 92).

Essentially, the August 4, 2005 Order approving the Settlement Agreement of the parities provided that, if Defendant Township did not comply with the terms of ESA/SAR, it stipulated that Judgment would be entered against it by Plaintiffs. The parties agreed to sign a Stipulated Judgment, and Plaintiffs were to hold it until such time as there was a breach of the ESA/SAR. If a breach occurred by Defendant, Plaintiffs would file the Stipulated Judgment with Clerk of Court, and this Court would enter Judgment for Plaintiffs. Plaintiffs claimed that various breaches of the ESA/SAR occurred by the Defendant and thus, on February 16, 2007, they filed the Stipulated Judgment against Defendant. (Doc. 89). Defendant then moved to set aside the Judgment entered against it. (Doc. 91).

Defendant argues that it was not in breach of the Settlement Agreements (ESA/SAR), also hereinafter referred to as "CA" or Contractual Agreement, and that Plaintiffs should not have filed the Stipulated Judgment against it. Therefore, Defendant has moved to set aside the Judgment pursuant to Rule 60(b).

In their Rule 60(b) Motion, Defendant states:

Defendant seeks relief from the Stipulated Judgment because: (a) Plaintiffs are mistaken that there has been any breach of the ESA/SAR and/or the Order; (b) Plaintiffs have acted in bad faith in entering the stipulated judgment without any breach of the ESA/SAR and/or Order; and (c) the Stipulated Judgment is void where there has been no breach of the ESA/SAR and/or the Order.

Thus, Defendant's Motion is based on Rule 60(b)(1), (3) and (4). (Id.). Defendant states that Plaintiffs have mistakenly filed the Stipulated Judgment, since it did not breach any of the settlement documents, that Plaintiffs acted in bad faith, and that the Stipulated Judgment is void.

Defendant's Motion is timely, since it was filed well within one year after the Stipulated Judgment was entered. Defendant argues that, since it committed no breaches of the Settlement Agreements, its Rule 69)b() Motion should be granted to have the Stipulated Judgment stricken from the record.

Plaintiffs argue that Defendant had made numerous breaches of the CA as well as the Court's August 4, 2005 Order, such as with respect to the water and sewer services it was obliged to provide to their commercial and residential developments, and that they properly filed and recorded the Stipulated Judgment against Defendant. Plaintiffs contend that the Defendant's failure to properly perform its obligations under the ESA/SAR constituted a breach of the settlement agreements which entitled it, Under Section VI, ¶ I of the August 4, 2005 Order, to file the Stipulated Judgment. As mentioned, in conjunction with the filing of the Stipulated Judgment, Plaintiffs also moved the Court for litigation expenses and costs, and attorney fees, incurred by them to enforce the CA. (Doc. 92).*fn6

Initially, we find that the Court has subject matter jurisdiction over the Defendant's current Motion and dispute, since the August 4, 2005 Order specifically provided that the "Court shall retain sole, exclusive, complete and ongoing jurisdiction over each and every term, obligation, purpose and duty contained in the ESA/SAR, this Order, and any judgment entered thereto." (Doc. 86, p. 14, ¶ VI. K.). Thus, since the Court's August 4, 2005 Order provided that the Court retained jurisdiction over compliance with the ESA/SAR and the Order itself, we have subject matter jurisdiction over the dispute as to whether Defendant has fully complied with the settlement agreements and settlement Order, and whether Plaintiffs have properly filed the Stipulated Judgment against Defendant. As the Court stated in U.S.A. Skill Construction Co. v Ins. Co. of North America, 1999 WL 305514, * 3 (E.D. Pa.), citing Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 378 (1994), "[e]nforcement of the settlement agreement, [ ] whether through award of damages or decree of specific performance, is more than just a continuation or removal of the dismissed suit, and hence requires its own basis for jurisdiction." Clearly, the August 4, 2005 Order made the parties' ongoing compliance with the ESA/SAR a subject of the Order, and it incorporated the terms and conditions of the ESA/SAR. (Id.). See Williams v. PA Board of Probation & Parole, 160 Fed. Appx. 212, 214-215 (3d Cir. 2005)(Non-Precedential).

We also find that Defendant's Motion is properly filed pursuant to Rule 60(b). See Perry v. Del. River Port Auth., 2006 WL 3690650, *2 (3d Cir.)(Non-Precedential). In Perry, the Court stated that:

Rule 60(b) provides for relief from judgment based on (1) mistake, inadvertence, surprise or excusable neglect; (2) newly discovered evidence; (3) fraud, misrepresentation or other misconduct of an adverse party; (4) a void judgment; (5) the satisfactions, release or discharge of a judgment or inequity in the prospective application of the judgment; or (6) any other reason justifying relief from operation of the judgment. Such a motion must be made "within a reasonable time, and for reasons (1), (2), and (3), not more than one year after the judgment, order or proceeding was entered or taken." Fed.R.Civ.P. 60(b).


Defendant's Rule 60(b) Motion was filed within one year after the Stipulated Judgment was entered, and thus relief is available under all six reasons of the Rule. We find that Defendant's basis for relief under Rule 60(b) is that Plaintiffs have mistakenly asserted that it breached the Settlement Agreement (ESA/SAR), that Plaintiffs improperly filed the Stipulated Judgment against it, and thus, it is void. Specifically, as stated above, we find that Defendant relies upon Rule 60(b)(1), (3) and 4). (Doc. 91, p. 5, ¶ 6).

As the Skill Const. Co. Court stated:

A party seeking relief under Rule 60(b)(3) bears the burden of proving fraud or misrepresentation by clear and convincing evidence. See 11 Charles A. Wright, Arthur R. Miller & Mary K . Kane, Federal Practice and Procedure Civil 2d § 2860 (1995). IN order to justify reopening a settlement agreement on the ground of fraud under Rule 60(b)(3), the fraud must be material, that is the moving party must have been prevented, by the misconduct of the other party, from "fully and fairly presenting its case." Bandai America Inc. v. Bally Midway Mfg. Co., 775 F.2d 70, 73 (3d Cir. 1985). There also must not be "neglect on the part of the moving party in pursuing the facts."

Id. The motion under Rule 60(b)(3) must be made within one year. Fed.R.Civ.P. 60(b).

The Perry Court also noted that the Magistrate Judge did not have authority to grant or deny the Rule 60(b) Motion in that case since the motion was only referred to a Magistrate Judge pursuant to 28 U.S.C. §636(b)(3). Id., n. 3. In our case, we find that the parties have consented to our jurisdiction in this case under §6363(c), and thus, unlike Perry, we have not been referred the present Rule 60(b) Motion for a Report and Recommendation. (Docs. 34 & 38). Therefore, we shall enter an Order with respect to Defendant's Rule 60(b) Motion. See § 6363(c) (3)(consent of parties allows a Magistrate Judge to direct entry of a judgment). As stated, since the August 4, 2005 Order incorporated the terms of the ESA/SAR and specifically retained the Court's jurisdiction as to compliance of the Order and settlement agreements, we have subject matter jurisdiction with respect to Defendant's Rule 60(b) Motion. See Williams, supra.; Skill Const. Co., supra.

II. Discussion

We repeat portions of the material facts in this case as detailed in our February 17, 2005 Memorandum. (Doc. 64).

The ESA is attached to the Plaintiffs' Summary Judgment Motion. (Doc. 29, Exhibits A & B). In July, 2001, during the finalization of the ESA, hand written changes to the ESA were made and read into the Court record. The following statements were made on the record:

The Township will grant, immediately, the Katzes their heirs, successors or assigns the right to use the sewage and water plants lines, roads, property and agree to give easements or right-of-ways for such use, work and development, etc. (Emphases Added).

The understanding being that in the event that the Plaintiffs or their successors construct any water system or sewer system or extensions of existing water or sewer systems, they will be allowed to use those immediately. (Emphases Added). (see Exhibit "A" July 2001 Transcript, p. 15 and 16, lines 23 - 7). (Doc. 29, ¶6. & Doc. 48, ¶ 6.).

Thereafter, the Township Board of Supervisors approved the terms of the ESA. Under the terms of the ESA, the Township agreed to create an Enterprise District ("ED") Zone and a General Commercial ("GC") Zone and that the properties of Plaintiffs were to receive the benefits of the new zones. To date, the Township has not created an ED Zone and a GC Zone. The Township admits that the zoning map has not been changed with respect to creating an ED Zone and GC Zone, but contends that the Plaintiffs' properties, Westfall Acreage (subject to to ED Zone obligation) and ...

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