4th Circuit: City breached settlement agreement

Where the city of Charlotte resolved an employment discrimination suit with a firefighter but it failed to treat the employee’s payment as pension-eligible wages, it breached the agreement. The payment was compensation, and the city is mandated by the Charlotte Firefighters Retirement System Act to make retirement deductions for all “compensation.”

Background

Sylivia Smith-Phifer and Lance Patterson sued the city of Charlotte for employment discrimination they allegedly suffered as long-term members of the Charlotte Fire Department. Both lawsuits were settled. However, both Smith-Phifer and Patterson then filed motions to have the District Court enforce the purported terms of the purported settlement agreements. The District Court order granted both motions to enforce their settlement agreements without an evidentiary hearing.

The city argues that the District Court’s order was erroneous for three reasons: (1) the District Court was required to hold evidentiary hearings on both motions; (2) Patterson and the city never reached a complete agreement; and (3) the terms of Smith-Phifer’s complete agreement did not require the city to classify its payment to her as pension-eligible wages.

Patterson

Patterson contended below, and insists on appeal, that the parties reached a complete settlement agreement on Nov. 23, 2022, when the mediator sent his email and the parties responded. In contrast, the city maintains that the parties never reached a complete agreement; the agreement referenced by the mediator was merely an unenforceable preliminary agreement; and the email exchange that followed constituted multiple offers and counteroffers on material terms, none of which were ever accepted.

Whether acceptance occurred and an enforceable agreement was reached are questions of fact. And the parties’ “factual dispute over the existence of an agreement” required the District Court to hold an evidentiary hearing. The court thus vacates its order granting Patterson’s motion and remands for it to do so.

Smith-Phifer

The city hasn’t argued that it didn’t reach a complete agreement with Smith-Phifer. And it would be hard for it to do so — the parties’ mutual assent to be bound was evinced by the two executed releases and by their performance thereunder, namely the city’s payment to Smith-Phifer and Smith-Phifer’s retirement.

Rather, what the city and Smith-Phifer disagreed about below, and what they continue to disagree about here, is whether the city breached the contract that both parties concede exists. Smith-Phifer says that it did, because the contract required it to not only pay her but also treat that payment as pension-eligible wages. The city disagrees, arguing first that it was entitled to a hearing on the question and second that the payment was not pension eligible.

On the first issue, the city is mistaken. This contract-interpretation dispute does not require an evidentiary hearing. Because the court can determine the meaning of all material terms in the settlement agreement between Smith-Phifer and the city, no evidentiary hearing is required.

On the second issue, the city is also mistaken. The payment appears to have been meant to compensate Smith-Phifer for alleged economic harms by giving her “wages,” i.e., back pay and severance. By giving her wages, the city gave her remuneration for services performed as an employee.

That, in turns, means that the payment was “Compensation” under the Charlotte Firefighters Retirement System Act. The city is mandated by law under the Act to make retirement deductions for all “Compensation.” So the retirement deduction was an “applicable deduction” that the city promised to make when it signed the settlement agreement. And because the city did not do so, it breached the agreement, and the District Court was right to grant Smith-Phifer’s motion insofar as it asked the city to reissue her a check that complied with that obligation.

The city argues that it was not required to treat its payment to Smith-Phifer as pension eligible — i.e., make the retirement deduction — because the payment was not “intended to be pension eligible compensation.” Second, it argues that, even if the Act does apply, this payment is not “Compensation.” The court rejects both arguments.

Vacated in part, affirmed in part and remanded.

Smith-Phifer v. City of Charlotte, Case No. 23-2031, Sept. 25, 2024. 4th Cir. (Richardson), from WDNC at Charlotte (Conrad Jr.). Tory Ian Summey for Appellant. Edward Theodore Hinson Jr. for Appellees. 36 pp.