Since the vast majority of civil cases end in settlement, litigants must remain mindful of ensuring judicial enforcement of a settlement agreement.
If you thought all that was necessary to provide for continuing judicial supervision is a clause in your settlement agreement or stipulation of dismissal stating that the federal court shall retain jurisdiction to enforce its provisions, please think again. As District Judge Noel L. Hillman recently emphasized in Brass Smith, LLC v. RPI Industries, Inc., federal courts are courts of limited jurisdiction and jurisdiction cannot be created by the private agreement of the parties. Nor do district courts have “inherent power” to enforce settlements. Unless you have taken the proper steps or there is an independent basis for jurisdiction (such as diversity of citizenship or a federal question), you will probably be obliged to bring a new action in state court to enforce your settlement agreement.
Notwithstanding its limited jurisdiction, a federal court may retain jurisdiction to enforce a settlement agreement under the doctrine of ancillary jurisdiction. To give rise to such jurisdiction, the parties’ obligation to comply with the settlement agreement must expressly be made part of the order of dismissal, either by a separate provision ‘retaining jurisdiction’ over the settlement agreement or by expressly incorporating the terms of the settlement agreement in the order of dismissal.
Even when the parties have submitted such an order, the court has discretion to refuse, limit or condition its retention of jurisdiction. Federal courts often look with particular disfavor on dismissal orders that would require them to retain jurisdiction for an indefinite or unlimited period of time. As Judge Hillman stated, “[t]he exercise of ancillary jurisdiction may exist over a number of years following a dismissal order or consent decree, but may not be indefinite unless there is clear statutory authority to do so.” In the case before him, Judge Hillman refused to sign such an order retaining jurisdiction indefinitely, but stated that, “…if the parties wish the Court to retain ancillary jurisdiction under reasonable terms and for a reasonable time, they are directed to file an amended stipulation and order within 30 days…” Counsel should heed that advice and provide in the order either a reasonable time when the requested retention of jurisdiction shall end or a statutory or other persuasive basis for an extended period.