W. EUGENE DAVIS, Circuit Judge:
Defendants-Appellants BP Exploration & Production, Inc., BP Products North America, Inc., and BP Corporation North America, Inc. (collectively "BP") appeal the district court's judgment in favor of Intervenor/Plaintiff-Appellee Elton Johnson ("Johnson"). The district court, over BP's objection, enforced a putative $2.7 million settlement agreement against BP in Johnson's favor. On appeal, BP asserts that the parties never formed a binding settlement agreement. In the alternative, BP argues that Johnson fraudulently induced BP into entering the settlement agreement, and that Johnson did not satisfy a condition precedent to recovery because he never signed a release. BP also claims that the district court awarded an unreasonable rate of prejudgment interest.
We hold that the parties formed a binding settlement agreement. We also hold that the district court correctly excused Johnson's failure to sign the release document. However, the district court should have held an evidentiary hearing to determine whether Johnson fraudulently induced BP into entering the settlement agreement. We therefore affirm the district court's order in part, but vacate the judgment and remand for further proceedings.
In the wake of the April 2010 Deepwater Horizon explosion,
Although BP authorized the GCCF to settle claims on its behalf, BP does not control the GCCF and cannot prevent it from extending settlement offers. However, if the GCCF sends a claimant a determination letter offering the claimant more than $500,000 to settle his or her claims, BP may appeal that offer within fourteen days from the date of the determination letter.
Intervenor/Plaintiff-Appellee Elton Johnson was a crew member aboard the M/V DAMON BANKSTON, a supply vessel operated by Tidewater Marine, LLC ("Tidewater"). The vessel was mud-roped to the Deepwater Horizon and was off-loading drilling mud on the night of the blowout. Johnson claims that he sustained physical injuries when the explosion rocked the vessel and threw him against a bulkhead. Johnson further claims that the stress from both the explosion and his attempts to save other seamen endangered by the casualty caused him emotional injury, including post-traumatic stress disorder.
Johnson sued BP for negligence in Louisiana state court in May 2010.
While Johnson's case remained pending before the district court, he submitted his claim to the GCCF. His submission included voluminous medical records from a number of healthcare providers. Those records suggested that, as a result of the explosion, Johnson suffered back and shoulder pain; reduced range of motion; popping or crunching in the shoulderblade; headaches; hearing problems; a cerebral concussion or other brain injury; anxiety; irritability; depression; hallucinations; nightmares and sleeping problems; memory problems; temporary hearing loss; tinnitus; and post-traumatic stress disorder. Those medical records also indicated that Johnson was taking a number of prescription medications both for his physical pain and his psychological conditions. Johnson's submission to the GCCF also contained a report from a rehabilitation/vocational specialist indicating that Johnson was vocationally disabled and therefore unable to work for the indefinite future. Johnson also submitted his past medical expense records, estimates of his future medical costs, and an economic appraisal quantifying how his injury affected his earning capacity.
The GCCF analyzed Johnson's submission and calculated his damages as follows:
The GCCF therefore concluded that Johnson was entitled to receive a total of $2,698,095 as a result of his alleged injuries.
On September 23, 2011, the GCCF sent Johnson a Determination Letter containing the following language:
The Determination Letter instructed Johnson:
Johnson signed the Final Payment Election Form the day after he received the Determination Letter. He checked the box on the Form indicating that he "elect[ed] to be paid the Final Payment Offer" and understood that "the GCCF
On October 3, 2011, after Johnson submitted the Final Payment Election Form to the GCCF, but before BP's fourteen-day appeal period expired, BP sent Tidewater a letter explaining that the GCCF had offered to settle Johnson's claim, and that BP expected Tidewater to indemnify it for the entire settlement amount.
Tidewater strenuously objected. On October 5, 2011, Tidewater responded with a letter stating that, "[b]ased on the file materials we have, the settlement offered by the GCCF in the amount of nearly $2.7 million is excessive and unreasonable given the defenses to Johnson's claim that are available to Tidewater and BP, and the medical records Tidewater has been provided." Notably, however, Tidewater's letter does not state that it had any reason to believe that Johnson fabricated his injury claims — the letter merely expressed Tidewater's belief that the Final Payment Amount was "excessive and unreasonable." Tidewater "request[ed] in the strongest terms that BP appeal the settlement."
BP responded that it "w[ould] not appeal the GCCF's settlement with Mr. Johnson." As a result, the fourteen-day appeal window closed without BP appealing the Final Payment Offer.
On October 20, 2011, after BP's appeal period expired, Tidewater's counsel sent the GCCF a letter, complete with documentary exhibits, explaining that it had investigated Johnson's personal injury claims and had reason to believe they were fabricated.
Tidewater first pointed out that the sworn statements of other crew members on the vessel at the time of the explosion directly contradicted Johnson's version of events. One crewman maintained "that Johnson was not thrown, did not fall, did not lose consciousness or make any statement or complaint that he had been struck" at the time of the explosion. "Because of the drilling mud on the deck" of the vessel, Johnson "would have been covered in the mud" if he had fallen, yet two crewmen "reported that Johnson was not covered with any mud" after the explosion.
Another crewman stated that, on the morning after the explosion, he asked Johnson
Tidewater further stated that, "[h]ad Johnson been injured or involved in any incident, it is standard Tidewater policy to prepare an accident report. No such report was prepared," and Johnson in fact "specifically denied that he had been injured."
Tidewater also opined that Johnson told several physicians inconsistent versions of the events leading to his alleged injuries. According to Tidewater, Johnson's various accounts differed with respect to (1) whether the explosion threw him against a door or merely caused him to fall down; (2) the distance he was thrown; (3) whether or not he lost consciousness; (4) whether
A week after the GCCF received Tidewater's letter, it retained Guidepost Solutions LLC ("Guidepost") to investigate Johnson's case. On January 24, 2012, Guidepost issued a report concluding that Johnson's claim was unsubstantiated. Guidepost concluded that there was "no credible evidence Johnson suffered injuries as a result of the incident, and multiple fellow crew members, one of whom was standing alongside Johnson at the time of the explosion, disputed the events and injuries Johnson later reported."
Guidepost's investigation corroborated the evidence that Tidewater set forth in its letter to the GCCF. Guidepost found that
Additionally, Guidepost's report recounts the following exchange Johnson allegedly had with Bill Wayne Marsh, a seaman on the vessel, shortly after the explosion:
Guidepost also interviewed Johnson:
As a result of its investigation, Guidepost concluded that "Johnson's claims of physical injury as a result of the Deepwater Horizon explosion appear to be fabricated." Nevertheless, Guidepost also concluded that "Johnson did not submit any overtly fraudulent document," so "a Finding of Potetnial [sic] Fraud is not supported by this investigation."
After reviewing Guidepost's investigative report, the GCCF issued a denial letter to Johnson (the "Denial Letter") on February 22, 2012. The Denial Letter informed Johnson that the GCCF "has terminated its process with respect to Mr. Johnson's claim, will not send Mr. Johnson a Release and Covenant Not to Sue for his signature, and, accordingly, will not issue to Mr. Johnson a Final Payment for his submitted claim."
BP never sent Johnson a Release to sign, and it has refused to pay Johnson the Final Payment Amount. Johnson insists he would have signed the Release if the GCCF had sent it to him.
Displeased with BP's refusal to consummate the settlement, Johnson intervened in Young et al. v. BP Exploration & Production Inc. et al., a Texas state court suit filed by another injured seaman represented by the same plaintiff's attorney.
BP removed Young to the United States District Court for the Southern District of Texas on March 30, 2012. Before the Judicial Panel on Multidistrict Litigation could decide whether to transfer Young to the Eastern District of Louisiana with the other Deepwater Horizon cases, the district court granted summary judgment in BP's favor. The court concluded that the parties never formed a valid settlement agreement because "the lack of a signed release prevented the formation of a contract." The court therefore ruled that "Johnson will take nothing from BP."
Johnson appealed the district court's summary judgment order. A panel of this Court ruled
With the case back before the Eastern District of Louisiana, Johnson moved the court to summarily enforce the putative settlement agreement with BP. BP opposed Johnson's motion and filed its own motion for summary judgment.
On March 10, 2014, the district court granted Johnson's motion and denied BP's motion.
The court therefore entered a judgment enforcing the settlement and awarding "costs and interest at a rate of 5% per annum from October 10, 2011 until paid."
BP now appeals that judgment. BP asks the Court to
The parties first dispute the applicable standard of review, as well as the proper way to characterize the procedural posture of the case. Johnson argues that the district court granted a motion to enforce a
Neither party is fully correct. A district court may summarily enforce a settlement agreement if no material facts are in dispute,
Because BP challenges the validity of its putative settlement agreement with Johnson, we will "treat [BP's] assertions as true, and will affirm the district court only if [Johnson] is entitled to enforcement of the agreement[] as a matter of law."
Because Johnson alleged causes of action under general maritime law and the Jones Act against BP, federal contract law governs the validity and enforceability of Johnson's putative settlement agreement with BP.
BP argues that, for numerous reasons, the parties never formed a binding settlement agreement. As explained below, none of BP's arguments have merit.
The parties first contest whether an offer and acceptance occurred in this case. Johnson argues that the Determination Letter constituted a valid offer to settle Johnson's claims, and he accepted that offer by submitting the Final Payment Election Form. Because BP did not appeal the GCCF's offer within the fourteen day window, Johnson insists that the parties formed an enforceable settlement agreement. BP responds that the Determination Letter was merely "a potential settlement
We agree with Johnson. An offer is judged by the parties' overt acts and words, not by the subjective or secret intent of the offeror.
Furthermore, "[a] settlement is valid and enforceable even if it contemplates the parties signing a release at a later date"
BP insists that, even if the language in the Determination Letter would create an offer in the context of a typical settlement reached on the courthouse steps, it cannot create an offer in the context of proceedings before the GCCF. BP maintains that it, along with the White House, established the GCCF as a "sui generis" exception to the ordinary rules of contract formation. Thus, claims BP, only a signed release could constitute an offer and acceptance, notwithstanding the Determination Letter's repeated use of the words "offer" and "accept."
We disagree. Claims resolution facilities like the GCCF are far from "sui generis" — they are routinely established in large mass tort cases.
BP also argues that, if the GCCF offered to settle Johnson's claim without first sending him a release, it would be acting outside of its authorization. In support of its argument, it points to language in the GCCF's governing protocol and rules that, in its view, demonstrates that "the execution of a release is not just a condition on payment but on acceptance itself." BP argues that, because that these protocols and rules were publicly available to claimants, and because Johnson agreed to be bound by those rules by voluntarily submitting his personal injury claim to the GCCF, an objective person in Johnson's position would not consider the Determination Letter an offer.
Again, we disagree. The language BP cites from the protocol and rules only confirms our interpretation that a signed release is a condition precedent to payment, not to contract formation.
Thus, because Johnson accepted the offer in the Determination Letter by its own terms by timely submitting the Final Payment Election Form and agreeing to subsequently sign the Release, and because BP declined to appeal that offer within the fourteen-day period, both an offer and acceptance occurred.
BP next argues that the Determination Letter could not create a valid contract because it lacked material terms: namely, the exact terms of the Release. According to BP, the personal injury release
A putative contract is unenforceable if it lacks material or essential
Here, the Determination Letter contained the following description of the release that the GCCF promised to send Johnson if he accepted the offer:
The cases BP cites in support of its argument are readily distinguishable. In Nascimento v. Wells Fargo Bank, NA,
BP nevertheless maintains that the parties could not have reached a meeting of the minds because the GCCF's formal release document contains terms that go far beyond those described in the thumbnail description in the Determination Letter. According to BP, the Determination Letter did not inform Johnson that (1) the Release applies to emotional injury as well as bodily injury claims; (2) the Release "extends to claims held by the releasing party's spouse, parents, heirs, estate, and other beneficiaries;" and (3) the Release contains a two-page list of released parties that are not explicitly mentioned in the Determination Letter, including Johnson's employer, Tidewater.
We disagree. The description of the Release in the Determination Letter is particularly broad; it informs Johnson that
BP also argues, and the dissent agrees, that the settlement agreement fails for lack of mutual consideration. BP claims that, if the parties' roles were reversed, and BP was trying to enforce the putative settlement agreement against Johnson, no court would force Johnson to sign a release he had never seen, given the law's solicitude for seamen as wards of admiralty. Thus, argues BP, if BP could not force Johnson to release his claims under the facts of this case, then Johnson should not be able to force BP to give him the Final Payment Amount.
In support of its argument, BP relies on the following language in the GCCF's internal protocols: "A claimant has a right to consult with an attorney of his or her choosing prior to ... signing a release of legal rights." According to BP, this language necessarily means that a claimant could permissibly decline to sign the release after accepting a final payment offer if he or she so chose. Thus, claims BP, an enforceable settlement agreement cannot arise under the GCCF's rules until the claimant actually signs a release.
Johnson has no quarrel with any of the Release's terms, and there is no question that he is willing and ready to sign the Release in its current form and settle all of his claims against all potentially responsible parties. But even if the roles were reversed, we reject BP's premise that it would be unable to require Johnson to sign the Release. A settlement will be enforced against a seaman if he "relinquished his rights with an informed understanding of his rights and a full appreciation of the consequences when he executed a release."
We have no doubt that these factors would favor enforcement of the settlement agreement against Johnson if the parties' roles were reversed.
BP claims, and the dissent agrees, that the language in the GCCF's protocols advising the claimant to seek legal counsel before signing the Release necessarily implies that a seaman could freely refuse to execute a release after submitting the Final Payment Election Form. We disagree. Even if a claimant could not refuse to sign the Release after accepting a settlement offer, that does not mean that an attorney's advice would necessarily be valueless. For instance, the attorney could review the Release to make sure it comports with the description in the Determination Letter upon which the parties agreed. In this case, the release language follows from the thumbnail description in the Determination Letter, so BP could require Johnson to sign it if the parties' roles were reversed.
In support of its argument that BP could not have forced Johnson to sign the Release if he declined to do so after submitting the Final Payment Election Form, the dissent cites the following language from the Release:
If that language was present in the offer letter, the dissent's argument would have significantly more force. But it is not; the language comes from the Release itself, which the GCCF never sent to Johnson, and Johnson never saw. Again, an offer is judged by the parties' overt acts and words, not by the subjective or secret intent of the offeror.
In sum, each of the aforementioned challenges to contract formation fail.
BP argues in the alternative that, even if a signed release was not a condition precedent to formation of a settlement agreement, it is at least a condition precedent to payment under the contract. Because Johnson never signed the Release, BP argues that Johnson may not recover the Final Payment Amount. Johnson responds that, because BP refused to mail the Release to Johnson, the doctrine of prevention excuses Johnson's failure to sign the Release.
"A condition precedent is either an act of a party that must be performed or a certain event that must happen before a contractual right accrues or a contractual duty arises."
However, "[f]ulfillment of a contract promise ... is not excused by failure of a condition ... which the promisor himself causes to happen."
The Determination Letter that BP sent to Johnson states: "The amount of the Final Payment Offer ... is $2,698,095.00, which is the amount that can be paid now if you decide to accept the Final Payment Offer and you sign a Release and Covenant Not to Sue (the "Release")." Thus, BP is correct that a signed release is a condition precedent to payment under the contract that has gone unfulfilled.
Nevertheless, BP's refusal to send Johnson the Release excuses his failure to sign it. The Determination Letter states that, if the claimant timely submits the Final Payment Election Form, and if BP opts not to appeal the settlement within fourteen days of the date of the Determination Letter, "[w]e then will send you a Release to be signed and returned to be paid the Final Payment Amount." Johnson submitted the Final Payment Election Form, BP did not exercise its appellate rights, and the GCCF never mailed the Release as promised. Johnson would have signed the release if the GCCF sent it to him. Thus, the GCCF — and, by extension, BP — prevented Johnson from signing the Release, which excuses his failure to do so.
BP responds that an exception to the doctrine of prevention exists when the party does not "improperly" prevent the condition precedent from occurring. According to BP, its refusal to send Johnson the Release was not "improper," so the doctrine of prevention does not excuse his failure to sign the Release. We need not decide whether this exception exists as a general matter. BP has not identified, and we have not found, any authority that would render the doctrine of prevention
BP also argues that the GCCF's rules and protocols, to which Johnson agreed to be bound when he voluntarily submitted his personal injury claim to the GCCF, authorized the GCCF to withhold the Release from Johnson once it uncovered evidence that Johnson submitted a fraudulent claim. We have reviewed the GCCF's protocols and conclude that, although the GCCF is authorized to investigate fraud prior to extending a settlement offer, and the GCCF is empowered to "refer all evidence of false or fraudulent claims to appropriate law enforcement authorities," the GCCF rules contain no provision allowing the GCCF to repudiate an otherwise binding contract after BP's appeals period has expired merely because it later develops reason to believe that the claimant has submitted a false claim. Nor does the Determination Letter authorize the GCCF to refuse to mail the Release to the claimant after the claimant has accepted a Final Payment Offer.
BP insists that, if we rule in Johnson's favor on this issue, then BP has no remedy if a claimant submits a fraudulent claim that goes undiscovered until after the fourteen-day appeal window has expired. As BP persuasively argues, "[f]iling claims to a settlement facility ... is not a game of beat-the-clock that allows unscrupulous claimants maintaining a deception until time runs out to keep their ill-gotten gains." This concern is well-taken, and we address it in the following section.
BP's final argument is that, even if BP and Johnson formed an otherwise valid contract, the settlement agreement is nonetheless unenforceable because Johnson fraudulently induced BP to enter the settlement. Specifically, BP claims that Tidewater's letter to the GCCF and Guidepost's investigation report demonstrate that Johnson fabricated his personal injury claims and thereby submitted a fraudulent claim to the GCCF.
A court may set aside a settlement agreement induced by fraud.
As a general matter, a party may not challenge a settlement agreement on the basis of an alleged fraud that "relates to the underlying merits of the claim that was settled."
Thus, "[a] settlement will not be set aside... merely because one party's case becomes stronger after the settlement is concluded."
There is, however, a narrow exception to this general rule. Where the defendant subsequently uncovers previously unavailable evidence that the plaintiff was in fact not injured at all, or sustained only de minimis injuries, the defendant may argue that the plaintiff fraudulently induced it to enter into a settlement agreement.
The Ninth Circuit's opinion in Russell v. Puget Sound Tug & Barge Co.
Here, too, BP has produced evidence suggesting that Johnson did not sustain any injury on the date of the Deepwater Horizon blowout. As described in greater detail above, Johnson's co-workers stated that the force of the blast never caused him to fall, stumble, or lose consciousness. To the contrary, the seamen on duty maintained that Johnson performed his duties capably and did not exhibit any signs of injury whatsoever. BP also produced evidence that Johnson repeatedly denied being injured on the date of the incident. Because BP's evidence suggests that Johnson may have submitted a wholly fabricated claim to the GCCF, BP may raise fraudulent inducement as a defense to enforcement of the settlement.
The district court therefore erred by discounting BP's substantial evidence of fraud without holding an evidentiary hearing.
BP argues that the district court erred by granting prejudgment interest at a rate of 5%. Because we have vacated the district court's judgment, we need not address this issue. If the district court again rules in Johnson's favor on remand, BP may address the issue with the district court at that time.
In sum, we affirm the district court's order in part. We agree with the district court that Johnson and BP entered into a binding settlement agreement. Although Johnson's failure to sign a release might ordinarily bar him from recovering under the settlement agreement, BP's refusal to send Johnson the release excuses that failure here.
AFFIRMED in part, VACATED, and REMANDED for further proceedings.
PRISCILLA R. OWEN, Circuit Judge, dissenting:
I disagree with the panel majority's conclusion that a contract was formed. Mutuality is lacking,
The Determination Letter that the GCCF sent to Johnson provided that "[t]he amount of the Final Payment Offer... is $2,698,095.00, which is the amount that can be paid now if you decide to accept the Final Payment Offer and you sign a Release and Covenant Not to Sue (the "Release")." It is clear from these terms that accepting the Final Payment Offer and signing the Release are both necessary components of a settlement agreement. Importantly, the Determination Letter, in bold and italicized text, also informed Johnson that he had "the right to consult with an attorney of [his] own choosing prior to accepting any settlement or signing a release of legal rights." This statement unquestionably permitted Johnson to consult with an attorney "prior to accepting any settlement" or "signing a release of legal rights." If checking the box on the Final Payment Form indicating an "elect[ion] to be paid the Final Payment Offer" constituted the formation of a settlement agreement, then the statement that Johnson had the right to consult with an attorney of his own choosing before accepting a settlement or signing a release would have conflicted with the Form, would have been virtually meaningless, and would have been misleading.
Consistent with the provisions in the Determination Letter regarding the right to consult counsel, the box Johnson checked on the Final Payment Election Form read: "I elect to be paid the Final Payment Offer described in my Determination Letter.... The GCCF will send you a Release and Covenant not to Sue that you must sign and return to be paid." This language informed Johnson that he could choose not to sign the Release, with the obvious consequence of not being paid. Johnson's ability to decline signing the Release demonstrates that BP could not enforce any agreement with Johnson until the Release was signed.
The panel majority opinion asserts that "language in the GCCF's protocols advising the claimant to seek legal counsel before signing the Release" does not mean that Johnson could refuse to sign the Release.
The panel majority opinion concedes that the argument that there was no binding agreement "would have significantly more force"
The documents are consistent throughout. Johnson had the right to walk away from the GCCF process even after he sent the Final Payment Election Form to the GCCF. Since Johnson had the right to walk away, the GCCF did as well. There was no binding settlement agreement at the time that the GCCF sent the letter denying Johnson's claims.
For the foregoing reasons, I dissent.
BP argues that Louisiana rather than federal law applies because the Release, which BP never mailed to Johnson and Johnson never signed, contains a choice of law clause. We need not decide whether that choice of law clause binds us here. BP does not argue that the result of the case would differ under Louisiana law, and in any event BP relies heavily on cases from outside Louisiana.
Without contending that the Release included any material terms that Johnson could not have reasonably expected, the dissent suggests that the requirement that Johnson sign a release before BP and the GCCF disclosed the terms of that release prevented the formation of a contract. As the cases cited above demonstrate, however, even where the parties have not yet agreed to the precise terms and language of the release, they may nonetheless form a binding settlement agreement by agreeing to both the existence of a release and the amount of payment. Indeed, in the real world of tort litigation, it would be difficult to operate any differently; when an attorney, with his or her client's consent, agrees to settle a case for a sum certain, the plaintiff inevitably realizes that the defendant has bought its peace, and will expect to sign a release that will discharge the defendant in the broadest terms.
We are also persuaded that the district court erred by concluding, at least on the record then before it, that BP could not prove justifiable reliance. The district court reasoned that Tidewater's October 20, 2011 letter to BP alerted BP to "Tidewater's suspicions about whether Johnson's accident had occurred as he alleged or whether he had exaggerated his injuries" before BP's appeal period expired. As BP correctly notes, however, Tidewater's letter merely advises BP of Tidewater's belief that the Final Payment Offer was "excessive and unreasonable;" it contains no indication that Tidewater had any reason at that time to believe that Johnson fabricated his claims entirely. Even if Tidewater did believe Johnson submitted a false claim to the GCCF, the letter does not express that belief to BP. Moreover, Tidewater and Guidepost did not complete their investigations of Johnson's claim until after BP's appeal period had already expired. Thus, as we read the record, BP, Guidepost, and Tidewater only became aware of the full extent of Johnson's alleged fraud after BP's opportunity to appeal had elapsed. In sum, what BP should have known — and when it should have known it — are genuine issues of material fact for the district court to resolve after an evidentiary hearing.