The opinion of the court was delivered by: Henry S. Perkin, United States Magistrate Judge
In this diversity case, Plaintiffs were the exclusive operators of the Coplay Quarry ("the Quarry") located in Coplay, Whitehall Township, Pennsylvania, under an Option Agreement ("Option Agreement") entered into between Plaintiff James Sanford ("Sanford") and Defendants Michael Ciccone ("Mr. Ciccone") and Steven Kolbe ("Mr. Kolbe") in early 2006.*fn1 A dispute arose between the parties concerning the Option Agreement, and Defendants locked Plaintiffs out of the Quarry. Litigation then ensued concerning the parties' rights and obligations under the Option Agreement. Presently before this Court is Plaintiffs' Emergency Motion to Enforce Settlement Agreement and to Reinstate Litigation Pursuant to Local Rule 41.1(b) and for Temporary, Preliminary and Permanent Restraints Against Defendants filed on September 3, 2008 (Dkt. No. 40),*fn2 the Response and Memorandum in Opposition (Dkt. Nos. 44, 45), Plaintiffs' Supplemental Brief in Support of their Motion to Enforce the Amended Settlement Agreement (Dkt. No. 50), a September 12, 2008 letter from Susan Ellis Wild, Esquire supplementing Defendants' arguments (Dkt. No. 51), and a second September 12, 2008 letter from Ms. Wild in response to Plaintiffs' Supplemental Brief (Dkt. No. 52). To resolve this matter, I must determine whether the parties reached an enforceable agreement as a result of settlement discussions reached before me on July 17, 2008.
A. The Relationship Between the Parties
Under the early 2006 Option Agreement, in consideration for payments of $200,000, Defendants Mr. Ciccone and Mr. Kolbe granted Mr. Sanford an option to acquire a 50% interest in the Quarry. Mr. Sanford was provided the assignable and exclusive rights to operate the Quarry and to dump "clean fill" into the Quarry. Following execution of the Option Agreement in 2006, Mr. Sanford undertook operation of the Quarry and arranged for various customers of Mr. Sanford to dump "clean fill." In or around late 2007, Mr. Sanford sent a letter of intent to Messrs. Ciccone and Kolbe expressing his desire to exercise his rights under the Option Agreement to purchase the 50% interest in the Quarry and, in addition, to purchase the remaining 50% interest in the Quarry not covered by the Option Agreement. Messrs. Ciccone and Kolbe responded by insisting that the Option Agreement was no longer in force or effect, and provided a notice of default on December 10, 2007, asserting that Mr. Sanford was in default of the Option Agreement by failing to provide the required performance bond and/or insurance in accordance with the Option Agreement. On January 10, 2008, Messrs. Ciccone and Kolbe sent Mr. Sanford a purported notice of termination.
Although Mr. Sanford disagreed that he was not in compliance with the insurance requirements of the Option Agreement, he continued his negotiations with Messrs. Ciccone and Kolbe, and Plaintiffs continued to operate the Quarry in accordance with the terms of the Option Agreement without protest by Defendants. In early 2008, Messrs. Sanford, Ciccone and Kolbe entered into an agreement that, among other things, Mr. Sanford would pay Messrs. Ciccone and Kolbe $5,000,000 as the net purchase price, without offsets, for 100% fee ownership of the Quarry.
In or around May 16, 2008, Messrs. Ciccone and Kolbe demanded significantly higher sums to purchase the Quarry and maintained that the Option Agreement was no longer in force or effect. After rejecting Mr. Sanford's offer to continue to make payments under the Option Agreement, Defendants agreed to place into an escrow account, pending resolution of the parties' dispute, a $1.00 per ton credit to be applied towards the purchase price upon exercise of the option. Defendants barred Plaintiffs' entry into the Quarry.
Thereafter, Plaintiffs proposed a stand-still agreement which would allow Plaintiffs access to the Quarry in accordance with the Option Agreement, pending Court resolution of the parties' dispute. Defendants rejected this proposal.
On June 18, 2008, as a result of Defendants' rejection of Plaintiffs' stand-still proposal, Plaintiffs filed their Complaint alleging that Defendants were in breach of the Option Agreement. In addition to seeking monetary damages, the Complaint sought preliminary and permanent injunctive relief to compel Defendants to abide by the terms of the Option Agreement.*fn3
On June 24, 2008, Plaintiffs filed a Motion for Temporary Restraining Order and Preliminary Injunction Against Defendants. On June 30, July 1, July 2 and July 10, 2008, the Honorable James Knoll Gardner held four days of hearings on Plaintiffs' request for an injunction.
B. Settlement Discussions and Agreement
Settlement conferences were held by me on July 14 and 17, 2008. Late in the day on July 17, 2008, the parties agreed to settle their disputes. On July 18, 2008, the parties placed the terms of the Settlement Agreement on the record before me in the Courtroom. Under the terms of settlement, Plaintiffs continue to be the exclusive operators of the Quarry and hold an option to purchase the Quarry. I directed my Deputy Clerk to enter an order on July 18, 2008 dismissing the action pursuant to Local Civil Rule 41.1(b), specifically stating, "[t]he Court intends to retain jurisdiction for 90 days from now, and any settlement agreement is approved and made a part of the record and this Order for enforcement purposes."
Defendants were represented during the settlement negotiations by Susan Ellis Wild, Esquire and Anne Manley, Esquire, of Gross McGinley, LLP. James L. Reich, Esquire of Karess, Reich & Furst who also represented Defendants, attended part of the hearings held before the Honorable James Knoll Gardner, and was called by the Defendants as a fact witness during the hearing before Judge Gardner. Mr. Reich was present for part of the July 14, 2007 settlement conference, but he did not participate at all during the July 17, 2008 conference, at the end of which the parties agreed to settle their disputes.
Mr. Reich was not present on July 18, 2008 when the settlement terms were placed on the record. Mr. Reich's partner, Martin Karess, Esquire, did not participate in any phase of the settlement negotiations on July 14 and 17, 2008, and was also not present on July 18, 2008.
At the July 18, 2008 hearing, the following terms of settlement were placed on the record by Ms. Ellis Wild:
This settlement contemplates a full resolution of all matters raised in the complaint, as well as in the plaintiff's motion for a TRO and preliminary injunction. As part of this settlement, the plaintiff agrees to dismiss a Lis Pendens which has been filed both in the Federal Court and in the Court of Common Pleas of Lehigh County.
From this point forward, the option agreement between the parties which is referenced in the complaint in this matter and which had been executed by the parties in or around February of 2006 shall be declared null and void. The parties will forthwith enter into a new written agreement which shall embody the terms of their agreement as reached orally yesterday, July 17th, 2008, and as set forth on this record.
And, for purposes of putting this on the record only, I will refer to that written agreement as the license agreement, although the actual title may be changed, amplified, or otherwise when we actually create the document itself.
The parties agree that James Sanford shall have an exclusive license to dump Pennsylvania DEP approved clean fill in the licensed area and otherwise use the licensed area subject only to any limitations set forth herein. The owners, Ciccone, and Kolbe, and Coplay Quarry, LLC, shall retain the right and duty to approve all materials coming onto the site during the period of the license.
The licensed area will be defined as two quarry holes which are outlined on an--on a document which is a map, Your Honor, that the parties have both reviewed and approved and which I will mark as Exhibit A to this settlement proceeding.
The quarry owners will provide Sanford with access to the licensed area of the quarry as that is shown on Exhibit A. But, Sanford will provide dust control for all operations inside and outside the licensed area. Areas other than the licensed area of the quarry shall remain in the control of the owners. However, during the period of the license, the owners agree not to process soils under the Quonset hut without the written permission of Sanford.
The existing rights of the owners' current tenant, Orica, O-R-I-C-A, will not be changed, and Orica remains the tenants of the owners.
The owners give permission for the licensee to pursue permits with the Pennsylvania DEP for the placement of C&D (phonetic) fines, F-I-N-E-S, and regulated fill at the quarry. Permits and application for permits will be assigned to Coplay Quarry, LLC in the event of a default or termination or upon the expiration of the option if it is--if the property is not purchased by Mr. Sanford.
Sanford may, without any prior approval by Ciccone or Kolbe, subcontract his rights under the license of Corsan Technologies and/or Elite Management. However, the owners' relationship under this agreement is only with Sanford.
And, all activities conducted by his affiliated companies do not remove, modify, or alleviate Sanford's responsibilities or duties under this agreement.
Sanford has the exclusive right to dump within the licensed area and must, at all times, conform to the Pennsylvania DEP management of clean fill policy and the consent order and agreement dated September 13, 2005. And, that document, Your Honor, has previously been marked in this litigation as plaintiff's Exhibit number 7.
And, Sanford will otherwise comply with all other applicable Pennsylvania DEP and other governing body regulations. Failure to do so will be a material default under this agreement. In the event of the death of any party, that party's interest under the license agreement shall pass to his estate.
In connection with Sanford's exclusive rights to dump clean fill, the parties agree as follows: There shall be a minimum annual quota of 125,000 tons prorated as necessary in the event of an extension under the terms of the license agreement.
Sanford shall pay the sum of $3 per ton, except as otherwise set forth herein when I talk about the insurance provisions, with no credits given from those payments to meet any other obligation hereunder, for example, against the ultimate purchase price.
The quarry shall invoice Sanford weekly for the actual total tonage [sic] dumped the previous week, but in no event less than the minimum weekly tonage [sic] calculated as follows:
125,000 tons, which is the annual quota, divided by 52 weeks, would equal 2,404 tons weekly, times $3 per ton, results in a weekly minimum invoice of $7,212.
Invoice payment terms shall be 45 days with 5 additional days to cure in the event of nonpayment within the 45-day period. After 45 days, Sanford shall pay a penalty of $250 per day until full payment is received. In the event payment is not made by the end of the 5-day cure period in any--in any period of time, including the appropriate penalty, Sanford shall be in material default under the license agreement.
Past due payments for invoices already submitted under the parties' former option agreement, approximately $115,000, shall be paid on the effective date of the license agreement. Sanford shall not have access to the quarry until the payment of those past due invoices is made.
In connection with the license agreement and no later than 30 days after the effective date of the parties' agreement, Sanford shall secure an insurance policy as follows: An owner's pollution liability insurance policy with limits of $1M per occurrence, $2M in the aggregate site specific to Coplay Quarry.
The following shall be named insureds under the policy: Steven Kolbe, Michael Ciccone, James Sanford, and Coplay Quarry, LLC. All parties will sign the application for insurance. The cash amount of any deductible under the policy shall be paid by Sanford upon issuance of the policy and shall be held in escrow by my law firm, Gross, McGinley, LLP, said escrow to be governed by the terms of an escrow agreement which would become an exhibit to the written license agreement.
The policy shall be issued by a company rated A or better by Best's. A 2-year tail to the policy must be quoted at the time of issuance of the policy and must be purchased by Sanford at the end of the term of the license agreement if the quarry is not purchased by him.
A complete copy of the policy and the application for the policy shall be provided to Steven Kolbe and Michael Ciccone within 30 days of the effective date of this agreement.
Failure to secure insurance in accordance with the foregoing terms within 30 days shall constitute a material default under the parties' agreement.
During the period that Sanford is awaiting issuance of the insurance policy and until the insurance policy is provided in accordance with the foregoing terms, Sanford shall pay $5 per ton for all dumping rights. And, that is a modification to the earlier provision, Your Honor, of the price being $3 per ton. This is intended only to apply during the period until suitable insurance is secured in accordance with the terms hereof.
For a period of one year from the effective date, Sanford shall have the option to purchase 100 percent of the quarry, except four acres as specifically set forth in the license agreement, for the sum of $6.5M. The one-year term may be extended only as follows:
It may be extended for a maximum of three additional 90-day terms, for a total of 270 days, each such extension to require a separate $100,000 payment from Sanford to the owners prior to the extension commencing. Any payment for an extension shall be credited against the purchase price of $6.5M only if closing occurs. All payments for extensions are otherwise non-refundable.
The parties hereby acknowledge and agree that they have not settled a material dispute between them which has to do with the costs of cleanup of the quarry as set forth in paragraph 2F of the original option agreement. And, they hereby agree that that dispute may be submitted by either party to binding arbitration by a single arbitrator who shall be selected by counsel of the parties based upon Your Honor's recommendations as to the identity of that arbitrator.
In the event of such arbitration, each side shall bear his own costs of arbitration and shall not recover any costs from the other side. Any arbitration award must be paid within five days of the award, and failure to pay it shall constitute a material default under this agreement.
The license agreement shall be governed by Pennsylvania law. And, any disputes thereunder shall be submitted to binding arbitration to be conducted by three attorney arbitrators, one selected by each of the parties and the third selected by the two chosen arbitrators.
There shall be a fee shifting provision for the prevailing party in the event of any disputes that are submitted to binding arbitration, other than this dispute relating to the cleanup costs in paragraph 2F which I've already addressed.
In the event Sanford or the quarry receives DEP approval or permits for the disposal of regulated fill or C&D fines, Sanford shall exercise his option to purchase under this agreement within 90 days of the grant of such approval or permits, said 90 days not to be subject to any extension.
Failure to purchase within 90 days after permits or approval are given by DEP shall constitute a material default.
Sanford shall execute an indemnification agreement as further security for his obligations under this agreement. And, that indemnification agreement shall also be attached as an exhibit to the license agreement.
Sanford shall have immediate access to the quarry as of the effective date of the agreement. And, all time sensitive events under this agreement shall be triggered as of that effective date, including but not limited to securing insurance and the payment of past invoices.
The effective date shall be the date the written agreement is signed or the date Sanford commences dumping at the quarry, which ever first occurs. All obligations hereunder commence with that effective date.
Kolbe and Ciccone shall not interview [sic] with any relationships that Sanford may have with his employees, truckers, or customers. Sanford shall have the right to represent to his customers that the quarry is under new management.
The owners agree that the quarry will be renamed to a mutually acceptable new trade name within a reasonable period of time after execution of the license agreement. No formal corporate or other filings shall be required of the owners at this time. The idea there being that, if Sanford purchases the quarry, he's obviously free to name it anything he wishes and to make the appropriate corporate filings and so forth. But, the owners wish to be able to continue to use their current corporate information and filings.
Any material default under this agreement shall constitute a default of the entire agreement, and the agreement shall be immediately terminated with no further rights accruing to either party.
Tr. 7/18/08, pp. 4-12. In addition to these terms, Mr. Kirchner added the following, with responses by Ms. Ellis Wild:
I just have a few things to add. I have no dispute or issue with anything that Ms. Wild just put on the record. I would add that--a couple of things. In addition to the right of James Sanford to apply to the Pennsylvania DEP for permits for C&D fine and regulated fill, James Sanford shall also have the right to apply to the DEP for any other general permits related to the quarry, subject to the approval of the owners who--who must sign off on any such application.
MR. KIRCHNER: There is a--an ongoing right of first refusal of an entity, and I forget the name of the entity. But, I think we ought to put that on the record that--
THE COURT: Can we--can we come up with the name of the entity?
MS. WILD: Eastern Industries.
MR. KIRCHNER: Eastern Industries, Your Honor. This agreement--the owners' rights in the quarry are subject--I believe--I believe 50 percent of the quarry is subject to a right of first refusal by Eastern Industries.
This agreement is contingent upon the owners' ability to secure either a waiver, release, or some other form of discharge of that obligation, which the owners agree to do immediat--to seek immediately. And, I believe it takes 30 days to accomplish that. So, this--this agreement will remain contingent upon that event being satisfied, which we expect will happen within 30 days. The agreement is also subject to or contingent upon the owners' ability to resolve a law suit that is pending brought by Holbeth (phonetic) Industries, LLC. That law suit is pending in the Superior Court of New Jersey, Atlantic City. And, I can report to the Court that it--I believe it is settled, but it has not yet been documented.
And, so, again, that should not be a--an impediment to the settlement. But, since Holbeth industries, in its law suit, claims it's entitled to certain rights, ownership rights in the quarry, that is a potential cloud on title to the quarry and could affect this settlement. So, I think we should indicate that--that the settlement is also contingent upon the successful resolution of that law suit. Do you have any objection to that?
MR. KIRCHNER: Thank you. I want to make it clear on the record that there will be no penalty and this will not be a default under the agreement if either the Eastern Industries claim or the Holbeth--Holbeth, LLC claim is not resolved successfully. However, the agreement is contingent upon the successful resolution of both of those claims.
But, I want to make it clear that, in the event that either one of them or both of them are not resolved successfully, this settlement will become null and void. But, there will be no right of action by either party against each other.
MS. WILD: This agreement will become null and void, not the settlement.
MR. KIRCHNER: The agreement will become null and void, yes. I also want to add that the indemnification agreement that counsel referred to will be either identical to or similar to the indemnification agreement that was attached as an exhibit to the option agreement.
My client informs me that the parties have agreed that James Sanford shall have the right to put a trailer on the site at a site to be approved by the owners. And, then fin---I don't know, did you cover the four acre parcel, Susan and the--
MR. KIRCHNER: Okay. There was reference to a four acre parcel which has actually been subdivided and separated from the quarry property, but which is located contingent to and as part of the quarry property. That--that parcel will be controlled by the owners of the Coplay Quarry.
But, there's a hole on that site. And, the parties have agreed, as part of this settlement, that, if that hole is to be filled, it would be filled by material brought in by James Sanford at the same prices that the parties have agreed to in this agreement. I think that's all I have, Your Honor.
MS. WILD: Oh, excuse me. As to that four-acre parcel, that last provision applies only so long as it remains under the ownership of the current owners.
MR. KIRCHNER: Or an entity controlled by them.
MS. WILD: That's correct.
MR. KIRCHNER: Understood.
C. Conduct of the Parties After July 18, 2008.
Plaintiffs commenced dumping at the Quarry on July 29, 2008, therefore the effective date of the Settlement Agreement became July 29, 2008. This effective date triggered Plaintiffs' duty to obtain insurance, and pursuant to the Settlement Agreement terms, Plaintiffs were obligated to secure insurance on or before August 28, 2008. Id. at 8-9. It is undisputed that no insurance policy was in place by midnight, August 28, 2008. Tr., 9/9/08, p. 8. Thus, Defendants barred Plaintiffs from operating at the Quarry for the second time on August 28, 2008.
On September 3, 2008, Plaintiffs filed the instant Emergency Motion to Enforce Settlement Agreement and to Reinstate Litigation Pursuant to Local Rule 41.1(b) and for Temporary, Preliminary and Permanent Restraints Against Defendants.
Defendants again retained Susan Ellis Wild, Esquire, and Anne Manley, Esquire, both of whom have remained Defendants' counsel in this action.*fn4
By agreement of the parties and by Order of the Honorable James Knoll Gardner dated September 5, 2008, Plaintiffs' Motion was withdrawn to the extent it sought temporary, preliminary and permanent restraints against Defendants. Accordingly, the Motion remains operative only to the extent that the Motion seeks to reinstate litigation and enforce the settlement agreement.
I conducted a two-day hearing on the Motion on September 9 and 10, 2008. At the hearing, counsel argued their respective positions on the Motion and the Response to the Motion. Testimony was presented from Mr. Kolbe and Donna Pantaleo, Vice-President of Financial Operations for Corsan Technologies and Elite Management. Ms. Pantaleo is responsible for the insurance coverage of both entities. Tr., 9/10/08, p. 5.
On October 8, 2008, Judge Gardner entered an Order, based upon the parties' consent, for me to conduct all proceedings and enter an adjudication in accordance with 28 U.S.C. § 636(c), Rule 73 of the Federal Rules of Civil Procedure and Rule 72.1(III)(b) of the Rules of Civil Procedure for the United States District Court for the Eastern District of Pennsylvania with regard to Plaintiffs' Motion to Reinstate Litigation Pursuant to Local Rule 41.1(b) and to Enforce the Settlement Agreement.
An agreement to settle a lawsuit, which is voluntarily entered, is binding upon the parties, whether or not made in the presence of the court, and even in the absence of a writing. Green v. John H. Lewis & Co., 436 F.2d 389, 390 (3d Cir. 1970); Ferranti International, PLC v. Jasin, No. CIV.A. 98-CV-5412, 2000 WL 632994, at *6 (E.D. Pa. May 5, 2000)(noting Pennsylvania courts have held even oral settlement agreements enforceable without a written document). Such a settlement is enforceable summarily, upon ...