The Ohio Supreme Court clarified a troubling aspect of trial practice last week. In Infinite Security Solutions, LLC v. Karam Properties II, LTD, 2015-Ohio-1101, the court held that a "trial court has jurisdiction to enforce a settlement agreement after a a case has been dismissed only if the dismissal entry incorporated the terms of the agreement or expressly stated that the court retained jurisdiction to enforce the agreement." Before the decision, the Ohio Appellate Districts were all over the map on the jurisdictional issue underlying having to enforce a settlement agreement after the case was dismissed; an important discussion in light of the fact that most cases settle. Some courts would enter "conditional" dismissals, ordering the parties to file a final dismissal entry following an oral notice of dismissal. Other courts would simply state that the "case is settled and dismissed" as soon as the parties indicated a settlement was reached. More often than not, although the parties agreed to settled the dispute, the details were not always hammered out and one side would get cold feet.
Traditionally, there were two options. File a new cause for a breach of contract, based on the breach of the settlement agreement, or file a motion to enforce a settlement agreement in the case that was settled and dismissed. The latter tact requires that the trial court retained jurisdiction; courts lose jurisdiction over the subject matter of the case following a dismissal. Of course, having the original court address the enforcement of the settlement can be economical because the court is aware of the issues and the new filing fees are avoided. In light of that, courts bent the jurisdictional rule for the sake of expediency, to the point where any notation of a case settling was sufficient for the retention of jurisdiction to enforce a settlement agreement. Although in practice, having such a broad rule could lead to expediency, it was not uniform throughout the state. The Ohio Supreme Court ended that broad exception. Importantly, the court clarified that there is no such thing as a "conditional" dismissal. If the parties reach a settlement, but need to finalize the details, the appropriate course of action for the trial court is to order the parties to submit a dismissal entry within a given period of time. If the parties fail to submit the entry, the court can dismiss the action based on the failure to prosecute, if the prior order included the appropriate warning.
Following a dismissal of the action, however, a trial court only retains jurisdiction to enforce a settlement agreement if the dismissal entry either incorporates the terms of the settlement agreement or expressly retains jurisdiction to enforce the settlement. The court allowed the latter in the interest of allowing the parties to keep settlements confidential. Simply stating that the trial court retains jurisdiction to enforce the terms of the settlement agreement reached between the parties, is sufficient. The decision isn't monumental, but goes a long way to unifying the issue of enforcing settlement agreements after the dismissal of the underlying lawsuit. In the absence of the express retention of jurisdiction in the dismissal entry, any party aggrieved by the breach of a settlement agreement must file a separate cause of action for breach of contract. Moving forward, parties will have to request that the specific language be included in any dismissal for which it would be preferable to have that court address any potential disputes in enacting the terms of the settlement. Interestingly, the Ohio Supreme Court was silent as to the effect of the new decision on prior cases. It's a jurisdictional ruling, meaning a trial court is without jurisdiction to enforce a settlement agreement in certain situations. Any prior decision enforcing a settlement agreement after a dismissal without the retention of jurisdiction could be deemed void. For practical purposes, once any settlement was paid, a party looses the ability to collaterally attack any judgment so that issue will likely only affect a small number of cases. Nonetheless, it will be interesting to see if anything falls out following the decision.
