Siegfried Herrnreiter v. Chicago Housing Authority

In the
United States Court of Appeals
For the Seventh Circuit
No. 01-3202
Siegfried Herrnreiter,
Plaintiff-Appellant,
v.
Chicago Housing Authority,
Defendant-Appellee.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 98 C 5209--Rebecca R. Pallmeyer, Judge.
Submitted January 18, 2002--Decided February 13, 2002
Before Easterbrook, Manion, and Rovner,
Circuit Judges.
Easterbrook, Circuit Judge. A district
judge granted summary judgment to the
Chicago Housing Authority, the defendant
in this employment-discrimination suit,
see 2001 U.S. Dist. Lexis 11071 (N.D. Ill.
July 30, 2001), and the plaintiff
appealed. This court’s Settlement
Conference Office invited the parties to
try to resolve their differences, and at
a meeting hosted by one of our settlement
attorneys the parties reached an oral
agreement. Unfortunately, they do not
agree on the contents of this agreement,
and we must decide the consequences.
Both sides agree that Herrnreiter
undertook to dismiss the appeal and sign
a release, in exchange for which the cha
would pay a sum of money within 21 days.
They also agreed that their deal would
remain confidential--but they disagree
about what "confidential" means.
According to Herrnreiter, this means only
that he cannot disclose how much the cha
paid. He believes that he is entitled to
tell the world that a monetary settlement
occurred. According to the cha, it means
that Herrnreiter is obliged to say
precisely (and only) these words if
anyone inquires: "all such matters have
been resolved amicably and to the
satisfaction of all concerned." Behind

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the disagreement about the meaning of
confidentiality is a disagreement about
how the agreement would be concluded.
According to the cha, the agreement was
binding when the parties shook hands, and
the subsequent writings (including the
cha’s language with respect to
confidentiality) just memorialized that
agreement. According to Herrnreiter, the
agreement was to become binding only when
the parties signed a mutually
satisfactory written contract. The cha’s
version of the oral agreement puts it in
the driver’s seat, for it was free to
draft the confidentiality clause (and
related terms) to its own satisfaction,
and Herrnreiter lacked any power to
disagree in an effort to achieve
something more favorable.
We have been asked by the cha to
"implement" its version of the settlement
by dismissing Herrnreiter’s appeal. For
his part, Herrnreiter contends that he
need not dismiss the appeal until the cha
relents on the confidentiality provision
(after which he would sign the settlement
agreement), and that if he does not file
a notice under Fed. R. App. P. 42(b) then
the court must proceed to decide the case
on the merits. It is not clear to us that
much turns on this dispute, for by asking
us to enforce the agreement the cha has
relinquished any claim to
confidentiality.
A settlement agreement is a contract,
and when parties to a contract ask a
court to interpret and enforce their
agreement, the contract enters the record
of the case and thus becomes available to
the public, unless it contains
information such as trade secrets that
may legitimately be kept confidential.
See Union Oil Co. v. Leavell, 220 F.3d
562, 567-68 (7th Cir. 2000); Jessup v.
Luther, No. 01-1523 (7th Cir. Jan. 17,
2002). The cha’s desire to keep the amount
of its payment quiet (perhaps to avoid
looking like an easy mark, and thus
drawing more suits) is not nearly on a
par with national security and trade
secret information. Now that the
agreement itself has become a subject of
litigation, it must be opened to the
public just like other information (such
as the wages paid to an employee, or the
price for an architect’s services) that
becomes the subject of litigation. So we
held in Union Oil v. Leavell--with the

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proviso, equally applicable here, that if
initiating litigation about the agreement
(or causing such litigation to be
initiated) amounts to a breach of the
confidentiality clause, then any party
who can demonstrate damages because of
the disclosure may obtain them in a
separate action. Thus the request to seal
the cha’s draft agreement and the
appellate papers is denied. Everything
that has been filed in this court will be
placed in the public record.
Although this may lead Herrnreiter to
dismiss his appeal and take the money, we
add for completeness that the motion to
implement the settlement must be denied.
A court of appeals has the authority to
implement a settlement reached while the
case is on appeal. See Fed. R. App. P.
33. But first the court must know the
settlement’s terms. When the parties do
not agree on what their deal entails, an
appellate court is placed in an untenable
position. In a district court, a judicial
officer oversees any negotiations, and an
oral agreement may be put on the record
before a court reporter. If the parties
fail to preserve their agreement in this
way, the district judge or magistrate
judge may remember the terms and thus
readily enforce the agreement. See Lynch,
Inc. v. SamataMason Inc., No. 00-1491
(7th Cir. Jan. 29, 2002). The settlement
process in this court, by contrast, does
not occur before a judicial officer; it
is handled by a settlement conference
attorney under a promise to both sides
that what occurs during the negotiations
will not be revealed to the judges. The
conference is never transcribed. A motion
to implement a settlement easily could be
a strategy to pierce the confidentiality
of the negotiations and inform the judges
of the parties’ positions, rather than to
carry out an agreement actually reached.
Even if it were appropriate to open the
negotiations to the court by, for
example, taking the testimony of a
settlement attorney, a court of appeals
lacks factfinding apparatus. What happens
if the recollections of the three
participants (the two litigants plus the
settlement conference attorney) differ?
Perhaps we could appoint a special master
to take testimony and propose a
resolution, but using a master in this
fashion (followed by review by three
appellate judges) would dissipate any
savings from appellate settlement.

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A simple rule is the best rule: An
appeal continues until either (a) the
litigants sign a mutually satisfactory
written agreement that entails the
dismissal of the appeal under Rule 42(b),
or (b) the appellant actually files a
notice of dismissal under Rule 42(b). If
a written agreement calling for dismissal
of the appeal is reached, but the
appellant refuses to carry out that
promise, then the court will implement
the agreement under Rule 33 by dismissing
the appeal. Any other approach would
compromise the confidentiality of the
negotiations, require the settlement
attorneys to become witnesses in
appellate factfinding proceedings, and
substantially complicate the disposition
of litigation.
To say that the appeal is live is to
foreclose specific performance, not
necessarily to preclude a suit for
damages on an oral agreement. As we
observed in Lynch, oral settlement
agreements are enforceable (subject to
the statute of frauds) and may form the
basis for recovery--but because
settlement agreements are contracts, and
thus governed by state law, those suits
must occur in state court unless the
parties are of diverse citizenship and
the stakes exceed $75,000. See Kokkonen
v. Guardian Life Insurance Co., 511 U.S.
375 (1994). (In principle, a settlement
agreement could be enforced in federal
court if the court enters it as a
judgment or explicitly retains
jurisdiction to enforce the agreement.
But this court does neither; an appellate
settlement leads to the dismissal of the
appeal, not to a judgment incorporating
the settlement’s terms. Cf. U.S. Bancorp
Mortgage Co. v. Bonner Mall Partnership,
513 U.S. 18 (1994).)
The cha’s motion to implement the
settlement by dismissing the appeal is
denied. The motion to file documents
under seal is denied, and all of the
appellate papers will be placed in the
public record. Because this opinion
adopts a rule of practice for the
circuit, it was circulated before release
under Circuit Rule 40(e). No judge
favored a hearing en banc.

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