Free Report and Recommendations - District Court of Colorado - Colorado

Case 1:01-cv-00693-LTB-BNB

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Magistrate Judge Boyd N. Boland Civil Action No. 01-cv-00693-LTB-BNB TY REX, LLC, Plaintiff, v. MARK NEWMAN; JAPHETH B. BOYCE, individually and d/b/a RJB ROCK SHOP; TRANS UNION GEN & MINERAL, INC.; KAREN NEWMAN; JOHN C. BOLAN; ROBERT L. STODDARD; and GAIL L. STODDARD, Defendants, MARK NEWMAN and JAPHETH B. BOYCE, Defendants and Third Party Plaintiffs, v. JEFFREY S. MILLER,
Third Party Defendant.

______________________________________________________________________________ RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE AND ORDER ______________________________________________________________________________ This matter is before me on the Defendants'Motion for Clarification and Enforcement of Terms of Stipulation of Settlement (the " Motion" filed December 22, 2004. I respectfully ), RECOMMEND that the Motion be DENIED, and that the case be reopened for the completion of pretrial proceedings and for trial.

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I.

FACTUAL BACKGROUND A. The Claims Among the Parties1 The plaintiff in this action (" Rex" is a Colorado limited liability company. Jeffrey S. Ty )

Miller (" Miller" is the general manager of Ty Rex. ) In its Amended Complaint, Ty Rex asserted claims against Mark Newman (" Newman" ) and Japheth Boyce (" Boyce" for alleged misrepresentations made by them in connection with the ) sale by Newman and the purchase by Miller of the fossilized skeletal remains of a Tyrannosaurus Rex.2 The parties have referred to the fossil by the name of Barnum. The misrepresentations alleged include a failure by Newman and Boyce to disclose facts concerning the ownership of Barnum and misrepresentations concerning the quality and value of parts of the fossil. Amended Complaint, filed February 6, 2002, at ¶¶66, 73. Ty Rex also asserted a " constructive fraud"claim against Newman, his wife, and his company, alleging that Karen Newman " spoke on numerous occasions with Miller about the difficulties [Miller] was experiencing in obtaining the ownership and excavation records from Mark Newman and [Karen Newman] made several specific promises to Miller to get the documentation to him." Amended Complaint, ¶99. Ty Rex sought damages resulting from the misrepresentations and fraud; significantly, Ty Rex did not seek to rescind the purchase of Barnum based on the alleged fraud. Ty Rex also asserted a claim for breach of contract against Newman, Boyce, and their companies, among others, in connection with the sale of Barnum. The alleged breach of contract

The claims against defendant John C. Bolan were dismissed by order entered June 12, 2003. In addition, there are other claims asserted against other parties not specifically discussed here but which remain pending. Miller purchased the fossil from Newman on March 15, 2000. Amended Complaint at ¶20. On the same day, Newman assigned all of his rights in the purchase to Ty Rex. Id. at ¶22. 2
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included the defendants'failures to " provide a complete and accurate ownership record and a complete and accurate record of the excavation of [Barnum]. . . ." Amended Complaint, ¶81. Ty Rex also asserted a claim against Newman for tortious interference with contract, alleging that Newman interfered with a potential auction of Barnum by telling the auction house that " Rex LLC was not the owner of and had no right to try to sell [Barnum]." Amended Ty Complaint, ¶90. Newman and Boyce filed counterclaims against Ty Rex and third party claims against Miller alleging that Miller and Ty Rex failed to pay the purchase price for Barnum and failed to pay for certain services provided to them in connection with the purchase and sale of Barnum. Amended Answer and Counterclaims and Third Party Complaint (the " Answer" filed October ), 12, 2001, at pp.10-12. Newman and Boyce sought payment of the amounts due but not paid; Newman did not seek to foreclose his security interest in Barnum or to replevy it. B. The Stipulation of Settlement On June 10, 2003, the parties executed an agreement (the " Stipulation of Settlement" ) settling the claims among them. Motion, at Exh.A. The Stipulation of Settlement provides, among other things: All parties herein, on behalf of themselves together with their heirs, successors, assigns, officers, directors, owners, members, shareholders, affiliates, agents, and representatives, agree upon execution of this Stipulation of Settlement to mutually release all claims and waive the right to assert any further or additional claims, known or unknown, which were asserted or could have been asserted against one another on account of the actions comprising the subject matter of this lawsuit. * * * The parties agree that the action herein should be dismissed, subject to being reopened for purposes of enforcing the terms of this Stipulation of Settlement or resolving any disputes that may arise between the parties in carrying out the terms of this Stipulation of

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Settlement, for which purpose this Court shall retain exclusive jurisdiction over the subject matter and persons involved in this lawsuit. Stipulation of Settlement at ¶¶ II.1 and 3.3 The parties agreed to settle their dispute by selling Barnum and dividing the proceeds of the sale. One of the principal purposes of the Stipulation of Settlement was to specify how Barnum would be sold and how the proceeds would be divided. Ty Rex was afforded the first opportunity to find a buyer for Barnum. Stipulation of Settlement at ¶I.A. If Ty Rex was not successful, then the defendants had an opportunity to find a buyer. Id. at ¶I.B.1. If neither side could find a buyer, Barnum was to be sold at public auction. Id. at ¶I.B.2. Neither side was able to sell Barnum, and the fossil was consigned to Bonhams & Butterfields (" Butterfields" for ) auction.4 C. The Auction and Subsequent Events The auction occurred on May 16, 2004. Response to Defendants'Motion for Clarification [etc.] (the " Response" filed January 10, 2005, at ¶1. Although Barnum had been valued by the ), auction house at between $400,000 and $900,000, the high bid (and the only bid) was $80,000. Response at ¶1. In the words of the defendants, " [t]he results of the Butterfields auction were, to state it conservatively, extremely disappointing to all parties." Motion at ¶4. Following the auction, the parties discussed the possibility of rescinding the sale of Barnum, with the following events leading to the parties'present dispute:

The Stipulation of Settlement was filed on June 11, 2003. On June 12, 2003, the district judge entered an order vacating the trial and dismissing the case Ty Rex alone entered into the Butterfields'consignment agreement as a selling party. Surprisingly, neither Newman, nor any other defendant, is a party to the consignment agreement. 4
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Notwithstanding a high degree of acrimony and finger-pointing back and forth between the Ty Rex parties and the . . . defendants concerning the circumstances surrounding the auction, all parties concurred that it would be in all of their best interests to seek a rescission of at least the portion of the auction sale dealing with the fossils themselves (as distinguished from the . . . cast that was separately sold) and renew alternative efforts to dispose of the fossils under the terms of the Stipulation. From preliminary discussions, it appeared that both Butterfields and the auction purchaser were amenable to a rescission of the sale in exchange for minimal consideration and releases. In the wake of these preliminary discussions, the Ty Rex parties have apparently proceeded unilaterally with negotiations, and perhaps documentation, involving both Butterfields and the auction purchaser. The . . . defendants have been effectively excluded from these negotiations, and they have minimal information regarding the status of the negotiations, the status of the fossils, or the Ty Rex parties'intentions with regard to further disposition of the fossils. Motion at ¶¶4-5. Ty Rex has confirmed that it has entered into a purported agreement of rescission with the winning bidder and the auction house, but without the consent of the defendants, stating: [T]he May 16, 2004 sale has been rescinded: the auction house, the buyer and Ty Rex all executed a rescission agreement; Ty Rex paid the auction house and the buyer a total of $15,500 as consideration for their agreement to rescind and Ty Rex has possession of the fossils. It is neither possible nor desirable to attempt to revive this ill-fated transaction. * * * As non-parties to the rescission agreement, the . . . [d]efendants are not automatically entitled to know its exact terms. Furthermore, the rescission agreement contains a confidentiality clause that prohibits Ty Rex from divulging its details. Ty Rex would be willing to explore the possibility of producing the agreement under some sort of protective order or making an in camera showing of it to the Court, if deemed necessary. Response at ¶¶3, 7.

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D. The Relief Sought By the Parties The defendants in their Motion sought relief in three forms. First, the defendants requested that " auction conducted on May 16, 2004, by Butterfields . . . be honored and treated by the the parties as the final disposition of the ` Fossil Package'under the terms of the Stipulation. . . ." Motion at p.2. Ty Rex opposed this relief, stating that " is neither possible nor desirable to it attempt to revive this ill-fated transaction." Response at ¶3. The defendants ultimately agreed, stating in their Reply that " reinstatement of the May 2004 auction sale . . . would be a foolish resolution for all parties." Defendants'Reply In Support of Their Motion for Clarification and Enforcement [etc.] (the " Reply" filed January 13, 2005, at ¶3. ), Second, the defendants requested a settlement conference " assist the parties and their to counsel (who are in dire need of such assistance) in moving toward a final resolution of their extended and unpleasant relationship." Reply at ¶¶5-6; Motion at ¶9. Ty Rex appeared to agree, stating in response that " seems to Ty Rex that the parties would need to completely re-work [i]t the Stipulation and, in some instances, renegotiate its terms in order to cure some of the proven faults. . . ." Response at ¶16. Consequently, I held a supplemental settlement conference on March 3, 2005, but it was unsuccessful. Third, the defendants have requested a " do-over,"as follows: To address the concerns outlined above, the . . . defendants request that--should the May 2004 auction sale of the fossils be rescinded-the parties be deemed again to be operating under and bound by the provisions of Section I.B.2 of their Stipulation of Settlement, with the deadline for completion of a new auction to be extended through [an appropriate date]. Motion at ¶8.

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Ty Rex, by contrast, suggests that the appropriate escape from the parties'imbroglio is for the defendants to " relinquish any further involvement with the fossils, allow Ty Rex full and unrestricted ownership and control of the fossils, and that all parties to the Stipulation be fully released by one another from any further involvement or responsibility and that this case be dismissed with prejudice." Response at ¶19. The defendants oppose Ty Rex' suggestion that s they surrender all of their claimed rights, stating: Respectfully, it was a fear of precisely this sort of disingenuous approach that led the [d]efendants to file this Motion. . .--to assure that any disposition of the fossils has some at least remote relationship to the parties'settlement and bears the Court' s imprimatur and/or all parties'consent. The [d]efendants, certainly to no-one' surprise, object to (and are frankly offended by) [Ty s Rex' proposal. s] Reply at ¶4. II. LEGAL STANDARD A trial court has the power, while a case is pending before it, summarily to enforce the settlement of the parties. United States v. Hardage, 982 F.2d 1491, 1496 (10th Cir. 1993). The court must apply state contract law to issues involving the formation, construction, and enforcement of a settlement agreement. United States v. McCall, 235 F.3d 1211, 1215 (10th Cir. 2000). Where there are disputed issues of fact concerning enforcement of the settlement, the court must hold an evidentiary hearing to resolve the disputed facts. Hardage, 982 F.2d at 1496. In this case, however, there are no disputed facts material to a resolution of the Motion. III. DISCUSSION The Stipulation of Settlement requires, in the event of an auction as occurred here, the following:

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2. Auction of the Fossil Package a. In the event that parties are not able to produce a completed sale of the Fossil Package on or before September 30, 2003, pursuant to the terms set for above, the parties agree that the Fossil Package shall be consigned to auction, subject to the following conditions: i. The auction venue must be acceptable to both Ty Rex LLC and the . . . defendants. If an agreement cannot be reached, the auction venue will be designated by the Court; ii. There will be no reserve price, unless an amount is agreed to by both Ty Rex LLC and . . . defendants. iii. The auction must be completed by December 31, 2004. b. Upon sale at auction, the distribution of proceeds shall be as follows: i. Ty Rex LLC will receive the first $250,000; ii. The . . . defendants will receive the next $400,000 in proceeds of sale; iii. All proceeds in excess of $650,000 shall be shared equally by Ty Rex LLC on the one hand and the . . . defendants on the other hand. iv. The . . . defendants assume all responsibility for the Ty Rex parties'contract with Mark Zimmerman. Stipulation of Settlement at ¶I.B.2. The parties followed the auction procedure outlined in the Stipulation of Settlement. They agreed to use Butterfields as the auction house, and Ty Rex entered into a Master Consignment Agreement with Butterfields. There is no indication that there was a reserve price. The auction occurred in May 2004. Because the winning bid was less than $250,000, Ty Rex was entitled to the entire purchase price and the defendants were to receive no money in connection with the sale. To this point, the parties had complied with the Stipulation of Settlement.

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At some later point, however, and for reasons which are not explained, Ty Rex entered into an agreement of rescission of the auction sale with the purchaser and the auction house. It is not clear to me that Ty Rex had the authority, unilaterally and without the agreement of the defendants, to enter into an agreement rescinding the auction sale. The parties, however, do not address this issue. It also is not clear to me what harm such an agreement of rescission caused the defendants, since they were not entitled to any of the sale proceeds from the auction because the winning bid was below the $250,000 initial threshold. What is clear is that at this point no party seeks enforcement of the Stipulation of Settlement. Ty Rex and Miller purportedly entered into an agreement of rescission of the auction sale required by the Stipulation of Settlement; expressly state that " is neither possible nor it desirable to attempt to revive this ill-fated transaction" Response at ¶3; and seek instead to have the defendants relinquish any further rights in Barnum, allow Ty Rex full and unrestricted ownership and control of it, and " all parties to the Stipulation be fully released by one another that from any further involvement or responsibility and that this case be dismissed with prejudice." Response at ¶19. The defendants similarly disclaim any interest in enforcement of the auction sale which occurred in performance of the Stipulation of Settlement, calling such enforcement " a foolish resolution for all parties." Reply at ¶3. They seek instead either a second auction, Motion at ¶8, which the Stipulation of Settlement neither contemplates nor calls for, or to negotiate a new settlement. Reply at ¶¶5-6; Motion at ¶9. Under Colorado law, a contract may be modified, waived, or abrogated by the mutual agreement of the parties. Southern Colorado MRI, Ltd. v. Med-Alliance, Inc., 166 F.3d 1094, 1099 (10th Cir. 1999)(" [p]arties to an initial agreement may modify or waive it in part or in whole by subsequent words or actions" Carlock v. National Co-Operative Refinery Ass' 424 F.2d ); n,

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148, 150 (10th Cir. 1970)(parties are " to alter, modify, abrogate or rescind [a] contract" free ); United States v. Santa Fe Engineers, Inc., 515 F. Supp. 512, 515 (D. Colo. 1981)(holding that modification or amendment of a contract may be accomplished by the mutual agreement of the parties); Atchison v. City of Englewood, 568 P.2d 13, 19 (Colo. 1977)(same); Western Air Lines Inc. v. Hollenbeck, 235 P.2d 792, 796 (Colo. 1951)(same). Mutual consent to a modification, waiver, or abrogation may be either explicitly given or inferred from the parties'conduct. See, e.g., Sante Fe Engineers, 515 F. Supp. at 515. In this case the parties have clearly and unequivocally given up their rights under the Stipulation of Settlement. Under these circumstances, there is no settlement to be enforced or clarified, and the parties should be returned to their previous status before they entered into the Stipulation of Settlement. I respectfully RECOMMEND that the Motion is DENIED. I further RECOMMEND that the case be reopened for the completion of pretrial proceedings and for trial. FURTHER, IT IS ORDERED that a supplemental scheduling conference is set for September 16, 2005, at 8:30 a.m., in Courtroom 401, 4th floor, Alfred A. Arraj United States

Courthouse, 901 19th Street, Denver, Colorado, at which time all remaining pretrial proceedings
will be scheduled and the parties will be directed to the chambers of the district judge to obtain a trial date. IT IS FURTHER ORDERED that pursuant to 28 U.S.C. § 636(b)(1)(C) and Fed. R. Civ. P. 72(b), the parties have 10 days after service of this recommendation to serve and file specific, written objections. A party' failure to serve and file specific, written objections waives de novo s review of the recommendation by the district judge, Fed. R. Civ. P. 72(b); Thomas v. Arn, 474

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U.S. 140, 147-48 (1985), and also waives appellate review of both factual and legal questions. In re Key Energy Resources Inc., 230 F.3d 1197, 1199-1200 (10th Cir 2000). A party' objections to s this recommendation must be both timely and specific to preserve an issue for de novo review by the district court or for appellate review. United States v. One Parcel of Real Property, 73 F.3d 1057, 1060 (10th Cir. 1996).

Dated August 23, 2005. BY THE COURT: /s/ Boyd N. Boland United States Magistrate Judge

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