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ADT, LLC v. Alder Holdings, LLC

United States District Court, S.D. Florida

January 10, 2018

ADT, LLC, Plaintiff,
ALDER HOLDINGS, LLC, et al., Defendants.



         This matter is before the Court on Defendants' Motion to Dismiss at docket entry 18 in case 17-CV-81237 (“ADT III”) and Plaintiff's Motion to Dismiss at docket entry 432 in case 15-CV-80073 (“ADT II”). Upon review of the Motions and Plaintiff's Complaint, the Court concludes that the central issue in contention between the parties is whether Plaintiff's Complaint in ADT III falls within the scope of a prior settlement agreement between the parties in ADT II.

         In the Complaint in ADT III, Plaintiff alleges that although the parties entered into a settlement agreement on May 24, 2017 in ADT II, Defendants damaged Plaintiff between May 24, 2017 and the date the Court entered an injunction (in connection with the settlement agreement) on October 20, 2017, also in ADT II. The Court previously has addressed the settlement agreement, and any disagreements arising under the agreement, in ADT II: “If the parties disagree over which Defendants are obligated to pay Plaintiffs pursuant to the settlement agreement, the parties may file a separate motion in connection therewith which the undersigned shall refer to Magistrate Judge Hopkins.” DE 430 at 3, 15-CV-80073.

         The Settlement Agreement between the Parties

         The settlement agreement in ADT II was read into the record at a settlement conference before Judge Hopkins on May 24, 2017. The germane portion of the transcript reads as follows:

Defendants: All right. Essentially, the first term is that the parties agree to the entry of an injunction that would preclude Alder and its affiliates, subsidiaries, agents, et cetera, from a list of conduct.
So, number one, the enjoined parties shall not make any false statement and shall not train any other agents to make any false statements regarding the function, performance, capabilities, specifications, features, requirements, reliability, availability, or design of any ADT customers' equipment, security systems, or services, or to falsely represent to any ADT customer any characteristics about such customers' ADT system.
And, then, the second part of the agreement the next essential term, is if ADT believes there has been a violation of the injunction, the parties have agreed to a dispute resolution process that has to be followed prior to filing a motion for contempt with the Court, which includes just generally speaking, written notice and production of the recordings and other facts relating to the alleged violation And a timeframe of 14 days to resolve the dispute. If it is not done it will go to mediation within 45 days and if it is not resolved in mediation, then, ADT may seek appropriate relief with the Court.

DE 414 at 4-6. The parties, thus, agreed at the settlement conference to the entry of an injunction prohibiting certain behavior and agreed on the precise behavior that was to be enjoined; the parties also agreed that if either party believed that the injunction had been violated, they would resolve that disagreement through mediation before filing a motion to compel. The undersigned was not made aware of the parties' need for an entry of an injunction until a review of a Report and Recommendation that was filed in connection with a Motion to Enforce Settlement as no motion for entry of an injunction was ever filed until after the parties began to litigate their post-settlement conduct. That Motion to Enforce Settlement was filed on July 29, 2017, and, in a confusing manner, sought for the Court to declare the effective date of the parties' settlement agreement. The Court ruled that a settlement agreement did exist and was effective as of May 24, 2017. The Motion also requested that the Court enter the injunction agreed-to at the settlement conference and, after a Report and Recommendation and objections were filed, the Court entered the parties' agreed-upon injunction on October 20, 2017.

         Plaintiff argues that because Defendants caused damages to the Plaintiff during the period of time prior to the entry of the injunction, the injunction cannot strictly be used as a basis for Plaintiff to seek relief. The Court is unaware of any authority for the proposition that the injunction entered on October 20, 2017, could have or can now be backdated to an earlier date. See, e.g., Edelman v. Jordan, 415 U.S. 651 (1974). Nonetheless, this does not necessarily mean that the Court is without the power to apply the terms contained in the injunction to the parties' behavior during the period running from May 24, 2017, to October 20, 2017. The Court has the power to judicially estop each party from arguing that the injunction cannot be applied to their conduct during this period of time. The Court may invoke this power because: the parties expressly agreed that the activities that are the subject of the injunction are the same activities that the parties agreed would be enjoined beginning on May 24, 2017; the injunction could have been entered as soon as May 24, 2017; and a review of the settlement agreement and settlement conference shows that the parties intended for their conduct to prospectively be governed by the agreed-upon injunction. The parties agreed on May 24, 2017, that the Defendants would be enjoined from the very behavior that ultimately was encompassed within the agreed-upon injunction entered on October 20, 2017.

         The Doctrine of Judicial Estoppel

         “[W]here a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him.” Davis v. Wakelee, 156 U.S. 680, 689 (1895). This rule, known as judicial estoppel, “generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase.” Pegram v. Herdrich, 530 U.S. 211, 227 n.8 (2000); see 18 Moore's Federal Practice § 134.30, p. 134-62 (3d ed. 2000) (“The doctrine of judicial estoppel prevents a party from asserting a claim in a legal proceeding that is inconsistent with a claim taken by that party in a previous proceeding”); 18 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 4477, p. 782 (1981) (“absent any good explanation, a party should not be allowed to gain an advantage by litigation on one theory, and then seek an inconsistent advantage by pursuing an incompatible theory”).

         Courts have uniformly recognized that the purpose of judicial estoppel is “to protect the integrity of the judicial process, ” Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 598 (6th Cir. 1982), by “prohibiting parties from deliberately changing positions according to the exigencies of the moment, ” States v. McCaskey, 9 F.3d 368, 378 (5th Cir. 1993). See In re Cassidy, 892 F.2d 637, 641 (7th Cir. 1990) (“Judicial estoppel is a doctrine intended to prevent the perversion of the judicial process.”); Allen v. Zurich Ins. Co., 667 F.2d 1162, 1166 (4th Cir. 1982) (judicial estoppel “protect[s] the essential integrity of the judicial process”); Scarano v. Central R. Co., 203 F.2d 510, 513 (3d Cir. 1953) (judicial estoppel prevents parties from “playing ‘fast and loose with the courts' ” (quoting Stretch v. Watson, 69 A.2d 596, 603 ( N.J.Super. 1949)). Because the rule is intended to prevent “improper use of judicial machinery, ” Konstantinidis v. Chen, 626 F.2d 933, 938 (D.C. Cir. 1980), judicial estoppel “is an equitable doctrine invoked by a court at its discretion, ” Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990) (internal quotation marks and citation omitted).

         Courts have observed that “[t]he circumstances under which judicial estoppel may appropriately be invoked are probably not reducible to any general formulation of principle, ” Allen, 667 F.2d, at 1166. Nevertheless, several factors typically inform the decision whether to apply the doctrine in a particular case: First, a party's later position must be “clearly inconsistent” with its earlier position. E.g., United States v. Hook, 195 F.3d 299, 306 (7th Cir. 1999). Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party's earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create “the perception that either the first or the second court was misled, ” Edwards, 690 F.2d at 599. ...

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