Federal Court: Now Is Not the Best Time to Ask Courts to Resolve "Minor Differences"

"The court will turn its attention back to this case and others of similar magnitude in due but likely distant course. In the interim, the parties may wish to set aside their minor differences over implementing a reasonable settlement agreement in deference to the public interest in permitting the court system to function without unnecessary distraction."

|The Volokh Conspiracy |

In Harnois v. Univ. of Mass. at Dartmouth (D. Mass.), plaintiff sued alleging wrongful Title IX discipline, and largely defeated a motion to dismiss. He eventually agreed to settle for $50,000 in damages plus $20,000 for attorney fees, but is trying to revisit the settlement on the grounds that the agreement left him responsible for tax payments, which he thought would not be part of the deal. Here is Judge Richard G. Stearns' order on Monday:

The court regrets what apparently is a misunderstanding grounded in the tax consequences of the settlement agreement in this case. Tax consequences are not ordinarily a matter in which the court involves itself given the unique personal circumstances that typically attach in matters of tax liability.

As the parties are no doubt aware, the court is presently engaged by a public health emergency statewide and national in scope related to the spread of the coronavirus. As a result, all civil and criminal cases have been stayed for at least 60 days by order of the Chief Judge with only criminal matters involving urgent liberty interests being heard.

The court will turn its attention back to this case and others of similar magnitude in due but likely distant course. In the interim, the parties may wish to set aside their minor differences over implementing a reasonable settlement agreement in deference to the public interest in permitting the court system to function without unnecessary distraction.

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  1. This is a clear case, concededly, but we seem to be edging perilously close to the “when the civilian courts are open and functioning” line of Milligan.

    Mr. D.

    1. Exactly.

      With one more aspect — what if (hypothetically) the $50K is what he is required to immediately repay the US Dept of Education because he was kicked out. That’s what a lot of people don’t understand — not only does the university get to keep all the money a student paid for the semester when a student is kicked out, but the student has to immediately refund all that semester’s financial aid (in addition to begin repaying earlier student loans).

      They can’t, they go into default — and amongst other things, they then are not able to get financial aid for anywhere else…

      So can Stearn’s order be used as a precedent supporting an injunction ordering ED to not put him into default for nonrepayment? Milligan didn’t affect potential third party litigation the way that this case could.

      1. There may be another issue here — HOW UMD paid the awarded $50K. While a court award is not taxable, a creditor’s waiver of a bill *is* — and I would not put it past UMass to be slimy enough to retroactively waive $50K of his bill (i.e. refund $50K of his FinAid to ED themselves) knowing that would cause the $50K award to be considered taxable income — which assuming he had other income would definitely push him into the 22% Federal Tax bracket. Add the Mass 5.05% state income tax for a 27.05% marginal rate and this can become a significant amount of money.

        UMass is slimy enough to do something like this — and a lot of lawyers in Massachusetts slimy enough to let them do it. If this is the case, I hope he pursues malpractice.

        1. Why do you hate Massachusetts?

          1. I don’t hate Massachusetts — now as to umASS, I definitely have my reasons…

  2. Most times I am skeptical of a judge’s attempts to pressure parties to settle. This time seems reasonable.

    It is, however, completely unnecessary. If judges would enforce a workable loser-pays system, the parties would have an incentive to keep quibbles like this out of the court in the first place.

    1. I assume you are meaning, “If the legislature would enact a workable loser-pays system and if judges would then enforce it….” I think it was implied (for lawyers) that judges are generally powerless to impose those sorts of costs on the average case, unless laws are in effect that permit or mandate it…but since so many non-lawyers read this site now, I suspect that a lot of these readers probably blame the judges for not doing this.

      1. The legislature already enacted a loser-pays system. Judges then “interpreted” those rules so tightly that they eviscerated it.

        Granted, I blame the legislature for writing rules so ambiguously that the gutting could happen. And for not fixing it once the judiciary’s meddling was evident. But I blame the judiciary more for doing so in the first place.

        1. Rossami: What legislation exactly did you have in mind here?

      2. The loser did pay here — $20K was awarded, and that is probably what the court would consider “reasonable” under any context.
        HOWEVER, there likely is a contingency fee agreement on the $50K as well and hence he well may wind up paying taxes on money he never receives. In theory, this could exceed what he received.

        IMHO, this is a malpractice case against his own attorney….

  3. to revisit the settlement on the grounds that the agreement left him responsible for tax payments, which he thought would not be part of the deal.

    I don’t understand what happened or why it’s the court’s business in any event.

    Did he not ask that question before agreeing to the settlement? Seems obvious to do that.

    Did his lawyer misinform him?

  4. As a result, all civil and criminal cases have been stayed for at least 60 days by order of the Chief Judge with only criminal matters involving urgent liberty interests being heard.

    Is it not possible that even in the current situation that there would be “urgent” issues raised by civil cases? This distinction seems too pat to me. (But granting that the vast majority of civil matters are not urgent.)

    1. If, hypothetically, he were to owe the full $50K for a child support payment, and if he doesn’t have the full $50K because of taxes, then he very much has a “liberty interest” at stake — the Commonwealth will toss him in jail, indefinitely, for unpaid child support….

      There were guys coming back from Iraq and getting arrested for unpaid child support even though they had paid their ENTIRE military pay (which was less than their civilian pay) in child support. This happened….

      1. Did you ever notice how many of your arguments involve vague anecdotes regarding things you think you read about somewhere?

  5. De minimis non curat lex. See also Husain v. Springer, 494 F.3d 108, 135 (2007) (Dennis, C.J., concurring in part and dissenting in part) (“I concede that this short opinion of mine does not consider or take into account the majority opinion. So I should disclose at the outset that I have not read it…. [T]his is not a case that should occupy the mind of a person who has anything consequential to do.”).

  6. Ach! — apologies to the dissenting judge, whose forename is “Dennis” and whose surname is “Jacobs.”

  7. Aaaand … missing from my citation is the circuit designation — 2d Cir.

  8. And I muffed the link to the case. Where’s that edit feature when I need it?

  9. If the court is permitting renegotiation, good luck with that. Counsel is on the hook for malpractice if he failed to advise the client about the tax consequences of the award or failed to advise the client to seek tax advice before the award.

  10. Okay, I’m going to be a lone dissenter her. Not because the Plaintiff has a valid gripe (he doesn’t; he should have known of the tax consequences or addressed them in the agreement). Nor because this isn’t a serious crisis (it most assuredly is). Nor because many times civil cases shouldn’t be pushed off (it is not realistic for courts to hold in-person hearings, which are sometimes necessary).

    But the judge’s suggestion that he is just too busy dealing with the crisis is ludicrous. For most judges with a civil docket (or even a decent number of civil cases), life should have become considerably easier. They don’t have any trials, they don’t have any motion hearings, and they should be seeing far fewer substantive motions (particularly those over discovery). They’re not at hospitals treating people; they’re generally at home like the rest of us.

    The “unicorn decision” making the rounds last week makes sense. That was someone who wanted an in-person hearing involving lots of different parties on an emergency basis. There is no reason why this judge is suddenly too busy to address this motion (frivolous as it may be).

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