Foufas, Plato v. Dru, Stanley J.

In the
United States Court of Appeals
For the Seventh Circuit
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No. 02-1673
PLATO FOUFAS and PLATO FOUFAS & CO.,
Plaintiffs-Appellees,
v.
STANLEY J. DRU,
Defendant-Appellant.
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Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 95 C 4995—David W. McKeague, Judge.
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ARGUED OCTOBER 15, 2002—DECIDED FEBRUARY 5, 2003
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Before POSNER, RIPPLE, and KANNE, Circuit Judges.
POSNER, Circuit Judge. This appeal requires us to con-
sider the proper interpretation of a release. The parties,
Foufas and Dru (we can ignore Foufas’s corporation), are
engaged in the business of managing Indian casinos. They
joined forces in the management of casinos for two tribes,
the Lummi tribe in Washington and the Sycuan tribe in
California, but then had a falling apart that resulted in
Foufas’s suing Dru in a federal district court in Chicago,
basing federal jurisdiction on diversity of citizenship. The
parties settled the case by means of an agreement, which
2 No. 02-1673
the district court retained jurisdiction to enforce, in two
parts. In the first part, Dru agreed to pay Foufas $275,000
in respect of the management of the Lummi tribe’s casino,
and in the second part he agreed to pay 50 percent of any
money that Dru received in respect of the management
of the Sycuan tribe’s casino, Dru and the tribe being at
odds over what the tribe owed. The settlement was made
in 1998. The following year the parties entered into a fur-
ther settlement agreement, which states that whereas “on
or about January 1, 1999, the Parties have entered into a
resolution of their business differences” and “desire to
terminate any potential liability that may exist between
them pursuant to such business dealings,” the parties
agree to release each other “from and against any and all
claims, rights, debts” etc. “of every nature, character and
description, whether known or unknown, suspected or
unsuspected, which the Parties hereto, or any of them,
now own or hold, or have at any time heretofore owned
or held, or may at any time hereafter own or hold.” The
release was dated January 22, 1999.
The reference to “on or about January 1, 1999” is to the
fact that in December 1998 Dru had advised Foufas that the
Sycuan tribe was prepared to settle the dispute over the
casino management contract, and that the following
month Dru and Foufas had met over the matter and had
agreed that Foufas would obtain a one-half interest in a
piece of real estate owned by Dru, who in addition would
pay Foufas 50 percent of any money that he received in
the future from the Sycuan tribe.
Dru contends that the broad language of the release
extinguished not only part two of the 1998 settlement
agreement, the part related to the Sycuan tribe, which
Foufas concedes was superseded by the “on or about
January 1, 1999” deal and was extinguished by the new
No. 02-1673 3
settlement agreement, the agreement of January 22 that we
are calling the release, but also part one of the 1998 settle-
ment, the part that related to Dru’s agreement to pay Foufas
$275,000 in respect of Foufas’s management of the Lummi
tribe’s casino. Foufas disagreed with Dru’s interpretation
and moved the district judge—who, remember, had re-
tained jurisdiction to enforce the settlement agreement—
to order Dru to pay Foufas the $275,000. The judge agreed,
and Dru appeals.
When a judge is interpreting his own order, such as
a consent decree that he entered, his interpretation is en-
titled to greater weight than when he is interpreting a
contract with the formation of which he had nothing to
do. United States v. Alshabkhoun, 277 F.3d 930, 933-34 (7th
Cir. 2002); In re Weber, 25 F.3d 413, 416 (7th Cir. 1994); In
re Chicago, Rock Island & Pacific R.R., 865 F.2d 807, 810-11
(7th Cir. 1988); United States v. Board of Education of City
of Chicago, 717 F.2d 378, 382 (7th Cir. 1983); Officers for Jus-
tice v. Civil Service Comm’n, 934 F.2d 1092, 1094 (9th Cir.
1991); Brown v. Neeb, 644 F.2d 551, 558 n. 12 (6th Cir. 1981).
Not all courts agree, see County of Suffolk v. Alcorn, 266 F.3d
131, 137 (2d Cir. 2001); Holland v. New Jersey Dept. of Cor-
rections, 246 F.3d 267, 277-78 (3d Cir. 2001), though they
do not explain their disagreement. Support for extending
the principle to a settlement approved by the judge though
not incorporated in a formal consent decree—the logic of
the principle embraces that case—may be found in Meyer
v. Oppenheimer Management Corp., 764 F.2d 76, 80 (2d
Cir. 1985); id. at 88 (concurring opinion), and in Wilkinson
v. FBI, 922 F.2d 555, 559 (9th Cir. 1991), overruled on an-
other ground, Hagestad v. Tragesser, 49 F.3d 1430 (9th Cir.
1995), though a statement denying the extension of the
principle to settlement agreements is found, but without
elaboration, in United States v. Rand Motors, 305 F.3d 770,
774 (7th Cir. 2002).
4 No. 02-1673
The principle is not applicable here, however. Although
the judge’s order that is appealed was an order enforcing
the 1998 settlement agreement that he had approved, the
order is the product of the judge’s interpretation of the 1999
release, which he had not approved, and so we do not
rest decision on the judge’s interpretive discretion. South
v. Rowe, 759 F.2d 610, 613 and n. 4 (7th Cir. 1985); cf.
Amax Land Co. v. Quarterman, 181 F.3d 1356, 1368 (D.C. Cir.
1999). Compare Martin v. Occupational Safety & Health Re-
view Comm’n, 499 U.S. 144, 152-53 (1991); Goluba v. School
District of Ripon, 45 F.3d 1035, 1038 n. 5 (7th Cir. 1995); South
Shore Hospital, Inc. v. Thompson, 308 F.3d 91, 97 (1st Cir.
2002); Lomak Petroleum, Inc. v. FERC, 206 F.3d 1193, 1198
(D.C. Cir. 2000). An author may not be a privileged inter-
preter of his writings, but his interpretation is entitled to
some weight. Judges are rarely the actual authors of the
consent decrees that they sign or the (other) settlements
that they approve, but having been present at the crea-
tion they may have insights into the meaning of the de-
cree or other settlement that are denied to the appellate
judges who review the judge’s decision. (Or may not;
their review may have been cursory, but we trust them
not to claim to remember the circumstances of the forma-
tion of a settlement agreement if they do not.)
In holding that a consent decree is to be interpreted
essentially as a contract, the Supreme Court was explicit
that “the circumstances surrounding the formation of the
consent order [=contract]” were among the aids to inter-
pretation on which the court could rely. United States v.
ITT Continental Baking Co., 420 U.S. 223, 238 (1975). (The
analysis applies with equal force to a setlement agree-
ment.) If those circumstances are known to the judge at
first hand, his interpretation comes to the reviewing
court with added weight. But the rationale for deferential
review fails when as in this case the judge’s decision does
No. 02-1673 5
not turn on his interpretation of the agreement that he
approved.
No matter; it is an easy case. Dru wants us to look only
at the language of the release itself, and not at the “where-
as” clauses that introduce it. We decline the invitation. To
read language acontextually is an almost certain route
to error. AM Int’l, Inc. v. Graphic Management Associates,
Inc., 44 F.3d 572, 575, 577 (7th Cir. 1995); Alliance to End
Repression v. City of Chicago, 742 F.2d 1007, 1013 (7th Cir.
1984) (en banc). Especially when the context is supplied
by the very document that is being interpreted. The
“whereas” clauses indicate that the context of the release
is the parties’ settlement of the second part of their dis-
pute, the part concerning the Sycuan tribe’s casino. Well,
replies Dru, if that’s the case, why didn’t the parties just
insert “except regarding the $275,000” in the release part
of the document? The answer is that this would have
implied that any other dispute the parties might have,
now or in the future, would be subject to the release,
even if it had nothing to do with the Sycuan tribe, be-
cause only the $275,000 issue had been excluded.
Dru misunderstands the architecture of a release. The
releasing language must be very broad so that a party
cannot, by merely refiling his claim or recasting it in
other legal terms or embellishing it with new facts, es-
cape the force of the release. The breadth of the release
language in this case is not uncharacteristic, at least
in releases governed like this one by California law. See,
e.g., Vahle v. Barwick, 113 Cal. Rptr. 2d 793, 794-95 (App.
2001); Wilshire-Doheny Associates, Ltd. v. Shapiro, 100 Cal.
Rptr. 2d 478, 482 (App. 2000); Parsons v. Tickner, 37 Cal.
Rptr. 2d 810, 820 (App. 1995). But then there has to be
something, supplied by other language in the agreement or
sometimes by extrinsic evidence of context, to tie the
6 No. 02-1673
language to the circumstances out of which the parties’
dispute arose. See Neverkovec v. Fredericks, 87 Cal. Rptr. 2d
856, 865-67 (App. 1999); Winet v. Price, 6 Cal. Rptr. 2d 554,
557 (App. 1992); Atalla v. Abdul-Baki, 976 F.2d 189, 193 (4th
Cir. 1992). That something was supplied by the “whereas”
clauses, which made clear that the release concerned
the disputes that had arisen out of the management con-
tract for the Sycuan tribe’s casino.
Any other interpretation would produce absurd results,
which is a good reason for declining an invitation to read
contractual (or statutory, or constitutional) language lit-
erally, as we had occasion to note recently in Future-
Source LLC v. Reuters Ltd., 312 F.3d 281, 284-85 (7th Cir.
2002). At argument we asked Dru’s lawyer whether the
release would prevent Foufas from suing Dru for battery if
Dru punched Foufas in the eye, and to our surprise the
lawyer said that it would. We can imagine the parties
rising from the settlement table and Dru telling Foufas,
“Now that you’ve signed the release, I can do with im-
punity (and immunity) what I’ve been wanting to do for
a long time—and that is punch you in the face.” And
(according to Dru’s lawyer) Foufas couldn’t sue.
Enough said.
AFFIRMED.
No. 02-1673 7
RIPPLE, Circuit Judge, concurring. I join the judgment
and, with the reservation expressed here, the opinion of
the court.
I doubt the prudence of expressing, in what is admit-
tedly dicta, a view on the appropriate degree of defer-
ence owed the interpretation of the trial judge who ap-
proved the settlement agreement. As my colleagues note,
the issue is not entirely free from doubt, and resolution
is not necessary to the decision in this case. All too
often, dicta of this sort is treated as a settled principle
in later cases, a result incompatible with our doctrines
of stare decisis and precedent and often a destructive
force in our collegial deliberations.
Here, my colleagues take the precaution of labeling the
discussion as dicta and noting explicitly that it is not a
controlling element in our decision today. It will be the
responsibility of future panels to heed that cautionary
language.
In all other respects, I join my colleagues’ fine analysis
of the problem before us.
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—2-5-03