United States District Court, D. Kansas
MEMORANDUM AND ORDER
KATHRYN H. VRATIL United States District Judge.
matter comes before the Court on Plaintiffs' Motion
To Enforce Settlement And To Clarify That The Court's
6/23/15 Order Was “On The Merits, ” With
Plaintiffs' Request To Establish Briefing Schedule On
Motion (Doc. #216) filed September 19, 2016. Defendant
Union One has not responded to plaintiffs motion and the
Court finds on the merits that the motion should be sustained
And Factual Background
2007, Kendall State Bank loaned Union One $2, 924, 125.00
under a loan agreement. Plaintiff Kendall State
Bank's Memorandum In Support Of Its Motion For An
Interpretation Of, And To Enforce, Settlement
Agreement (Doc. #201) filed September 9, 2014 at 4. In
January of 2009, The Harris Agency LLC, an affiliate of Union
One and co-obligor on the loan, filed a voluntary petition
for relief under Chapter 11 in the United States Bankruptcy
Court for the Eastern District of Pennsylvania. Id.
On May 5, 2009, as part of the bankruptcy case, Kendall State
Bank and Union One entered into a Stipulated Agreement, which
states that Kendall State Bank holds “a valid, properly
perfected first priority security interest” in Union
One assets. Doc. #201-1 at 2.
November 12, 2010, Kendall State Bank, along with other
interested parties, (collectively the Banks) filed a claim
for breach of loan agreements against Union One and others in
this Court. On December 14, 2012, during the
trial of this action, the parties entered into a settlement
agreement on the record. Consent Judgment (Doc.
#169) at 2. On January 8, 2013, pursuant to the settlement
agreement the Court entered a consent judgment in favor of
plaintiffs. Id. The parties agreed to execute a
written settlement agreement to further memorialize their
verbal settlement agreement. Id. On February 11,
2013, the parties entered into a settlement agreement in
which Union One agreed to (1) pay plaintiffs $2, 000, 000.00
in monthly payments of $2, 000; (2) take no action to
transfer, assign or pledge any of its assets without the
written, signed approval of the Banks; and (3) not divert
revenue to any other entity. See Doc. #201-6 at 7-8.
February 20, 2013, Alliance National Insurance Company
(“Alliance”) sued Union One in the Court of
Common Pleas of Montgomery County, Pennsylvania seeking to
collect funds allegedly owed under a lease. Doc. #201-9.
Alliance secured an ex parte judgment of $264, 977.92 against
Union One. See Docs. #201-9, #201-11. Alliance then
commenced garnishment proceedings against agencies that owed
commissions to Union One. In April of 2013, Kendall State
Bank notified those agencies of the Consent Judgment in this
Court, along with its security interest in Union One assets.
Doc. #201-6 at 25-26. The agencies then interpled the
disputed funds in the Alliance lawsuit. Doc. #201-14. Kendall
State Bank filed a petition in the Alliance suit to set aside
the writs of execution, vacate the Alliance judgment against
Union One and re-open the suit. Doc. #201-13. In response,
Alliance claimed that the Settlement Agreement between
Kendall State Bank and Union One superseded Kendall State
Bank's security interest in Union One assets and
effectively extinguished that security interest. Doc. #201-15
September 9, 2014, Kendall State Bank filed a Motion For
An Interpretation Of, And To Enforce, Settlement
Agreement (Doc. #200). Specifically, Kendall State Bank
asked this Court to (1) find that Union One had breached the
Settlement Agreement and Consent Judgment; (2) find that the
Settlement Agreement did not supersede Kendall State
Bank's security interest in Union One assets; (3) award
Kendall State Bank damages; and (4) order Union One to pay
Kendall State Bank attorney's fees related to the
Alliance lawsuit and the motion to interpret and enforce.
Union One did not respond to the motion or the Court's
subsequent order to show cause why it should not sustain the
Kendall State Bank motion. Id. at 4.
23, 2015, the Court issued an order sustaining the bank's
motion to interpret and enforce. Order (Doc. #215).
The Court noted Union One's lack of response.
Id. at 1, 2, 5. The Court treated as uncontested the
fact that commissions owed to Union One were subject to the
bank's security interest, consent judgment and settlement
agreement. Id. at 3. The Court found that (1) Union
One had breached the Settlement Agreement and Consent
Judgment; (2) Kendall State Bank was entitled to the funds
interpled in the Alliance lawsuit; and (3) Kendall State Bank
was entitled to attorney's fees incurred in the Alliance
lawsuit and the subsequent motions in this Court.
Id. at 5.
State Bank presented this Court's order to the
Pennsylvania Court of Common Pleas, which then entered an
order in the Alliance lawsuit stating in part as follows:
Kendall claims this issue was decided by the United States
District Court for the District of Kansas in its order dated
June 22, 2015, which granted Kendall's Motion for an
Interpretation Of, And To Enforce, Settlement Agreement'
[sic] and Kendall's Request That The Court Decide Its
Motion For An Interpretation Of, And To Enforce, Settlement
Agreement. At first glance, the June 22, 2015 order appears
to decide the question in Kendall's favor that the
Security Agreement is not superseded by the Settlement
Agreement. However after further review, it is unclear to
this court whether the motions were granted upon Union
One's failure to respond or based upon the merits of said
Doc. #216-1 at 3. The Pennsylvania Court then stayed the
Alliance lawsuit pending this Court's clarification of
that issue. Kendall State Bank's motion to clarify this
Court's order followed. Plaintiff's Motion To
Clarify That The Court's 6/23/15 Order Was “On The
Merits” (Doc. #216).
motion is uncontested. Union One has had a full and fair
opportunity to respond to it, but has chosen not to dispute
the factual or legal issues that it presents.
23, 2015, this Court found on the merits that Kendall State
Bank is entitled to the funds interpled in the Alliance
lawsuit. In the Settlement Agreement, Kendall State Bank and
Union One agreed as follows: “Union One shall cooperate
in good faith and use its best efforts regarding any sale of
Union One or any of its assets, and Union One, hereby agrees
that it shall take no action to transfer, assign or pledge
any of its assets without the Banks' written, signed