Employee's FMLA and Breach of Employment Contract Case Dismissed for Failure to Execute Settlement Agreement 

The Seventh Circuit Court of Appeals recently affirmed the district court's dismissal of a plaintiff-employee's FMLA and breach of employment contract complaint against her employer because, after several orders from the court to do so, plaintiff failed to execute the settlement agreement that she entered with the employer. (Lewis v. School District No. 70).   Plaintiff, a former employee of school district no. 70, filed suit against the school district, the school superintendent and the board of education alleging that her employment was terminated in violation of the FMLA and in violation of the terms of her employment contract.

The parties verbally agreed to the terms of the settlement before the district court judge during a settlement conference. The terms of the settlement agreement included monetary payment provisions, a release of claims, and provisions prohibiting plaintiff from disparaging the school district and from re-applying for employment with the school district.  The court confirmed the parties understanding and acceptance of the terms and directed the parties to commit the terms to writing. The court of appeals found that the parties entered into a valid oral settlement agreement.  Shortly following the settlement conference, the superintendent, one of the defendants, took his own life.  Following the superintendent's death, facts came to light that he had been accused of child molestation and that he was a suspect of a criminal investigation.

After learning of this fact, plaintiff repeatedly refused to memorialize the terms of the oral settlement agreement into a signed writing, as the parties previously agreed and the district had directed.  The remaining defendants requested the court to enforce the terms of the oral settlement agreement.  Plaintiff objected to the motion on the grounds that the oral settlement agreement was not enforceable because her agreement was induced by fraud.  Specifically, plaintiff argued that defendants were aware of the fact that the superintendent was the subject of a criminal investigation and failed to disclose that fact to plaintiff. Plaintiff claimed that had she known of that fact she "could have gotten more from them." To establish fraud in the inducement, a party must show that the representation made by the other party was (1) one of material fact; (2) made for the purpose of inducing the other party to act; (3) known to be false by the maker; and (4) relied upon by the other party to his/her detriment.

Plaintiff argued that the fact that the superintendent committed suicide after it was made known that he was the subject of a criminal investigation for child molestation was evidence of his guilt as to that charge. Plaintiff argued that the superintendent's character and conduct relating to the child molestation were at issue in her wrongful discharge case and the court of appeals disagreed.  The court of appeals stated that "knowledge of the investigation may have given Lewis [plaintiff] better bargaining power is not enough to invalidate a settlement that was entered freely and voluntarily. . . the argument 'I could have gotten more from them if I knew' does not convert an immaterial fact into a material one." Thus, the court upheld the dismissal of plaintiff's suit because she failed to obey the district court's orders to execute the settlement agreement.