Refusal to settle leads to dismissal

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Suppose you represent a plaintiff and have reached a settlement with the defendant, but your client reneges and refuses to go forward with the deal.

A June 1 opinion from the 7th Circuit should provide all the incentive necessary to convince the client to go through with the deal. The court affirmed the district court’s decision to dismiss the case in its entirety.

As a result, the plaintiff lost out on a $200,000 settlement.

Judge William Bauer wrote for the court, “When a district judge is unable to dispose of a matter because a recalcitrant plaintiff systematically refuses to obey the court’s orders, dismissal is justified.”

Debra Lewis, an employee of School District #70 in Illinois, filed suit against the district and other defendants in Illinois federal court after her employment was terminated, alleging a violation of the Family and Medical Leave Act.

A settlement agreement was reached, with the school district admitting liability under the FMLA. Shortly afterward, the district’s superintendent committed suicide.

Lewis then refused to go through with the settlement, claiming that the circumstances of the suicide were relevant to her case.

The district court disagreed, and after months of refusals on Lewis’ part to sign the necessary documents to go forward with the settlement, the court dismissed the case with prejudice.

Lewis appealed, but the 7th Circuit affirmed.

The court first held, applying Illinois substantive law, that the oral settlement agreement was enforceable, and that the superintendent’s suicide (and the criminal investigation of him that led to it) had no bearing on the enforceability of the settlement.

Second, applying federal procedural law, the court held that the district court had authority under Federal Rule of Civil Procedure 41(b) to dismiss the case.

“Repeated orders directing Lewis to proceed on the basis of a valid settlement should have been sufficient to convince her that her position had not gained any traction with the court,” Bauer wrote. “Instead, the court’s orders were consistently met with disregard by the plaintiff, leaving (District Court) Judge (William) Stiehl with little recourse but to dismiss the lawsuit.”

The court added that it did not render its decision lightly, noting that the settlement agreement provided for a significant recovery and the defendants’ admission of liability, while the dismissal leaves Lewis with nothing.

But it affirmed, nonetheless: “Though we think it unfortunate that Lewis’ actions have caused her to lose a substantial settlement, we can find no abuse of discretion on Judge Stiehl’s part.”

David Ziemer can be reached at [email protected].

What the court held

Case: Lewis v. School District #70, No. 10-1453

Issues: Can a district court dismiss a case as a sanction when the plaintiff refuses to go forward with a valid settlement agreement?

Holdings: Yes. When a plaintiff refuses to obey court orders, dismissal is justified.