jeopardize the settlement negotiations with the United States. (See id.) Mr. Gallagher also warned defendants of his prediction that any attempt to litigate the retroactivity issue would likely be met with hostility by this court. (See id.) Mr. Gallagher nonetheless agreed to a two week delay in finalizing the Consent Decree, in order to permit the defendants to decide whether to take any action based upon the Olin decision. (See id. at P 4.)
On June 10, 1996, Stepan Company replaced Mr. Matthews of McKenna & Cuneo with John M. Scagnelli, Esquire, and Eric S. Aronson Esquire, of Whitman, Breed, Abbott & Morgan. The next day, Robert Matthews and the firm of McKenna & Cuneo filed a notice of withdrawal of its representation of Stepan and indicated that Stepan would now be represented by Whitman, Breed, Abbott & Morgan. Around July 23, 1996, Eric Aronson, new counsel for Stepan, orally advised a member of the JDG that Stepan was considering backing out of the settlement with the United States. (See JDG's Reply to Stepan's Objections at 5.) On September 12, 1996, new counsel for Stepan Company abruptly advised the United States, the JDG and the court that Stepan would no longer participate in the settlement by consent decree with the United States. (See id. at P 30.)
By letter dated September 13, 1996, the United States withdrew, as to Stepan only, the offer upon which the proposed settlement was based. (See Certification of Eric Aronson P 3 (hereafter "Aronson Certif.").) The United States subsequently reconsidered its position, however, and reiterated its willingness to settle with Stepan and the JDG under the settlement terms already agreed upon, subject to approval of the Assistant Attorney General and the Court. (See United States' Response to JDG's Motion to Enforce Settlement, at 5.)
B. JDG's Motion to Enforce the Stepan Agreement
The JDG then brought a motion in November 1996 to enforce what it alleges was a binding agreement between Stepan and the JDG to jointly negotiate and fund the Partial Consent Decree, and the United States joined this motion. The JDG argued that an enforceable agreement was reached when Mr. Matthews, in a letter dated January 17, 1996, set forth the fundamental terms of the proposed funding agreement between Stepan and the JDG. Specifically, the JDG suggested that an agreement was reached concerning what portions of the Government's past costs demand should be paid initially by both Stepan and the JDG, and how the short-fall was to be funded. The JDG pointed to the fact that throughout the subsequent negotiations between the parties, the principal terms of the agreement never changed. Further, the JDG pointed to the fact that the provisions were formalized in an agreement between Stepan and the JDG, which was to be signed after execution of the Partial Consent Decree, as evidence that there was a meeting of the minds between the JDG and Stepan, as well as between the government and Stepan. The JDG also sought costs for the filing of this motion. Additionally, the JDG urged that, even assuming arguendo that there is no enforceable settlement agreement, Stepan should be required to pay fees and costs that will be incurred by the JDG as a result of the government's re-entry into the litigation and the possibility that the government may have to redepose and otherwise seek discovery.
In response to the motion, Stepan argued that regardless of whether the major components of a settlement had been agreed to, there is not and never has been an enforceable agreement between Stepan and the JDG to jointly negotiate and fund a settlement with the United States. Stepan argued that throughout the negotiation process it was understood by all defendants that the proposed funding agreement would not be binding and enforceable unless all parties individually signed it. In support of this argument, Stepan pointed to specific language in the draft funding agreement, which specifically requires the signature of all parties in order for the document to take effect.
Stepan also pointed to language in the proposed agreement which provides that the agreement between the defendants would not take effect until the consent decree with the United States is entered and lodged.
Stepan further argued that former counsel for Stepan, Robert Matthews, Esquire, never had authority to finalize the agreement. Finally, Stepan argued that Mr. Matthews, by his own testimony, had indicated that there were still issues outstanding with regard to the funding agreement between the parties, such that no party to the negotiations could have believed that the proposed agreement had been adopted and become binding.
This motion to enforce the settlement was referred to Magistrate Judge Rosen on a report and recommendation basis. Judge Rosen supervised discovery related to this motion, and depositions of Mr. Gladstone and Mr. Matthews were convened on December 4, 1996, which transcripts have been reviewed.
Judge Rosen conducted a hearing on December 6, 1996, hearing arguments on behalf of the JDG, Stepan Company and the United States, and receiving the evidence developed by the parties.
Magistrate Judge Rosen prepared an excellent Report and Recommendation for this Court, which was filed January 27, 1997. In his thorough and well reasoned Report, Judge Rosen found the following. First, he found that Mr. Matthews, counsel for Stepan Company during the settlement negotiations, had the authority -- either implied actual authority or apparent authority -- to enter into a binding settlement agreement. (See Report at 10.) Next, Judge Rosen found that Stepan did enter a binding agreement with the JDG because (a) Stepan's course of conduct throughout the litigation clearly manifested an intent to be bound, and (b) substantial acts were performed under the agreement by both sides, and (c) the JDG, the Government, and the court acted in reliance upon Stepan's indications that an agreement was in place. (See id. at 15.) Finally, Judge Rosen found that even assuming arguendo that the agreement was not enforceable, Stepan is equitably estopped from attacking the settlement, because Stepan engaged in voluntary conduct that was detrimentally relied upon by the government, the JDG, and the court. (See id. at 18.) With regard to the JDG's application for fees and costs, Judge Rosen recommended, without explanation, that the application be denied. (See id. at 21.)
Stepan company objects to a number of Judge Rosen's findings of fact
and conclusions of law.
The JDG, while agreeing with all other findings in the Report and Recommendation, objects to the recommendation that attorney's fees and costs not be assessed against Stepan Company. Although Stepan Company seeks de novo review of Magistrate Judge Rosen's findings, no party has suggested that this court reconvene a hearing for receiving new evidence, nor has any party argued that the factual record is incomplete. To the contrary, as discussed below, the record developed before Judge Rosen contains all necessary facts for determining whether the JDG's motion to enforce settlement should be granted.
A. Standard of Review
Pursuant to 28 U.S.C. § 636(b)(1), Rule 72(b) of the Federal Rules of Civil Procedure and Local Civil Rule 72.1(a)(2) of the New Jersey Federal Practice Rules ("Local Rules") (formerly General Rule 40A.2), a United States Magistrate Judge may hear "dispositive" motions assigned by the district court. As to dispositive motions which are addressed in a Magistrate Judge's report and recommendation, the statute provides that the district court may "accept, reject or modify, in whole or in part, the findings or recommendations made by the magistrate. The judge may also receive further evidence or recommit the matter to the magistrate with instructions." 28 U.S.C. § 636(b)(1). Moreover, when conducting a de novo determination, the district judge is not required to rehear contested testimony. See United States v. Raddatz, 447 U.S. 667, 674, 65 L. Ed. 2d 424, 100 S. Ct. 2406 (1980).
The standard of review of a magistrate's judge's determination depends upon whether the motion is dispositive or nondispositive. With regard to nondispositive motions, the "district court may modify the magistrate's order only if the district court finds that the magistrate's ruling was clearly erroneous or contrary to law." Cipollone v. Liggett Group, Inc., 785 F.2d 1108, 1113 (3d Cir. 1986). With respect to dispositive motions, the district court must make a de novo determination of those portions of the magistrate's Report to which a litigant has filed an objection. See 28 U.S.C. § 636(b)(1)(C); Fed. R. Civ. P. 72(a); Local Civil Rule 72.1(c)(2). The district court, consistent with congressional intent in Section 636(b)(1), may place reliance upon a magistrate judge's proposed findings and recommendations consistent with "the exercise of sound judicial discretion." Raddatz, 447 U.S. at 676. The de novo standard of review is applicable here because the enforcement of a funding agreement between the defendants is determinative of the parties' rights as expressed in their agreement. Since virtually all relevant findings in Magistrate Judge Rosen's Report have been objected to, this court will not address each objection individually, but rather will conduct a de novo analysis of all relevant legal and factual issues.
B. Applicable Law
Neither party has objected to the choice of law in Judge Rosen's Report. Accordingly, the question of whether Stepan company entered into an enforceable agreement with the JDG is governed by federal common law, which shall be determined primarily by reliance upon New Jersey contract law. In addition, all issues related to agency law (including the scope of Mr. Matthews' authority to bind his client) will be determined under New Jersey law. See Fisher Development Co. v. Boise Cascade Corp., 37 F.3d 104, 108-09 (3d Cir. 1994)(where CERCLA is silent, enforcement of contract can be through incorporating state law or through developing federal common law after considering whether a nationally uniform body of law is required, whether application of state law would frustrate specific objectives of the federal programs, and whether application of a federal rule would disrupt commercial relationships predicated on state law).
C. Enforcement of a Settlement Under Contract Law
A contract is formed where there is offer and acceptance and terms sufficiently definite that the performance to be rendered by each party can be ascertained with reasonable certainty. See Weichert Co. Realtors v. Ryan, 128 N.J. 427, 435, 608 A.2d 280 (1992). That contract is enforceable if the parties agree on essential terms, and manifest an intention to be bound by those terms. See id. Where the parties do not agree on one or more essential terms, however, courts generally hold that the agreement is unenforceable. See id.
The JDG, as the party seeking to enforce the alleged settlement agreement, has the burden of proving the existence of the agreement under contract law. See Amatuzzo v. Kozmiuk, 305 N.J. Super. 469, 473, 703 A.2d 9 (App. Div. 1997); see also Nolan v. Lee Ho, 120 N.J. 465, 472, 577 A.2d 143 (1990). For the reasons now discussed, this court finds that the JDG has met its burden and proved that Stepan and the JDG reached an agreement-in-principle for all material terms of the JDG/Stepan funding agreement (by which all potentially responsible parties agreed to fund their respective shares in amounts necessary to satisfy the United States' settlement demand for past costs, preserving all defendants' rights to allocate final liability for these sums by trial if necessary). The court further finds that Stepan Company has come forward with no compelling circumstance justifying its later withdrawal from the agreement with the JDG. Accordingly, the agreement must be enforced. See Nolan, 120 N.J. at 472 (stating that "in general, settlements will be honored "absent a demonstration of fraud or other compelling circumstances").
1. The Elements of a Binding Contract are Present
The first element of an enforceable contract, an offer, is present in this case. Stepan Company made an offer to the JDG, memorialized in the letters and attachments thereto of Stepan counsel Robert Matthews dated January 17 and February 15, 1996. (See supra at 5-9.) This offer contained very specific terms regarding issues such as the amounts Stepan would contribute in an initial payment to the United States, the amounts to be contributed by the other defendants (each of which is a member of the JDG), the proportion of interest to be paid by each defendant on the deferred balance, the method to be used for reallocating the payment burden among the defendants upon final disposition of the contribution claims between the defendants, and the deadline for final payment of the deferred balance. (See supra at 6, n.3.) Furthermore, although this proposal was not initially held out as a firm offer by Stepan, it became a firm offer when Matthews consulted with his client, Bartlett, during the week following the February 15th letter, and Bartlett assented to going forward with Matthews' proposal on behalf of Stepan, as discussed above. Matthews continued to regard this position as Stepan's funding agreement with the JDG, and he unmistakably conducted further discussion with the JDG using this Stepan offer as the touchstone of the agreement.
The record also supports the finding that there was effective acceptance by JDG of Stepan's offer. The JDG manifested a clear intent to accept Stepan's offer when, on March 9, 1996, counsel for the JDG sent to Mr. Matthews a revised draft of Stepan's proposal, which incorporated refinements to the language of the proposal without making any changes to the fundamental terms of the settlement, as discussed above. That the JDG had accepted Stepan's offer was further evidenced by the conduct of counsel for the JDG over the subsequent two months, as counsel for the JDG continued to negotiate with Stepan regarding refinements to the language of the funding agreement, without ever taking issue with the fundamental terms described in Stepan's proposals. (See supra at 10-11.) Internal correspondence between members of the JDG reflects the understanding of the JDG that it had accepted Stepan's offer and that an agreement-in-principle was therefore in place. For example, in an internal memorandum dated April 3, 1996 from Arthur Vogel, Treasurer of the JDG, to the members of the JDG, Mr. Vogel stated:
We are still making progress, as I understand it, toward settling the Government's past cost claim at the D'Imperio Site for $ 7.1 Million. I thought it would be helpful to demonstrate how this money will be raised among the members of the Joint Defense Group.
Under the proposed settlement, the Government expects an initial payment of $ 6,106,000. . . . Of the $ 6,106,000 to be raised immediately, Stepan has agreed to a payment of $ . That leaves a total of $ to be raised among members of the Joint Defense Group.