Stephen Sewalk, et al v. Valpak Direct Marketing Systems, LLC
- Summarized by Taylor King , U.S. Bankruptcy Court, Middle District of Florida
- 2 years 1 day ago
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 22-13819 (11th Circuit, Feb 26,2024) Not Published
- Tag(s):
-
- Ruling:
- The 11th Circuit had jurisdiction because the "motion for leave" was construed as a motion for reconsideration under Rule 59 and therefore, tolled the 30 day deadline for an appeal. As to the merits, the 11th Circuit considered how the Supreme Court of Florida would rule on the issue. The 11th Circuit determined that, under Florida law, the threat of lawful criminal prosecution will not constitute duress. Therefore, the district court did not abuse its discretion in denying the motion to reopen.
- Procedural context:
- Appeal of a district court's denial of Appellant's motion to reopen a closed civil case in the Middle District of Florida. The 11th Circuit reviewed its appellate jurisdiction de novo, reviewed the denial of the motion to reopen for abuse of discretion, and reviewed the district court's interpretation of Florida law de novo.
Florida law applied in this diversity case.
- Facts:
- Sewalk owned SMS, which entered into a franchise agreement with Valpak. When Sewalk filed for Chapter 11 bankruptcy, Valpak terminated the franchise agreement with SMS. Sewalk and SMS filed suit against Valpak in federal district court.
Pursuant to the Middle District of Florida Local Rules, the parties attended a mediation. At the mediation, the parties reached a confidential settlement agreement. Pursuant to the agreement, the suit was dismissed. Thereafter, Sewalk and SMS sought to reopen the case and undo the settlement based on extortion by Valpak. The district court denied the motion to reopen and motion for reconsideration.
On appeal, the 11th Circuit allowed Appellants to file under seal information related to confidential settlement communications. Appellants argued that these communications amounted to criminal extortion and justified rescission of the settlement agreement. The 11th Circuit found rescission for duress was not available where the threat was legally available. In the instant case, the threat related to bankruptcy fraud. When Sewalk filed his Chapter 11, he valued his interest in SMS at $12,000. However, when Sewalk and SMS filed suit against Valpak, they asserted a claim for $1,000,000. This was sufficient for the 11th Circuit to find that Valpak's threat was for "lawful criminal prosecution." As such, there was no duress to warrant rescission of the settlement agreement.
- Judge(s):
- Charles R. Wilson, Jill A. Pryor, Andrew L. Brasher
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