Jurisdiction to Enforce Settlement Agreement

Major v. Coleman, No. 2 CA-CV 2020-0081 (App. Div. II, May 5, 2021) (J. Eppich) https://www.appeals2.az.gov/decisions/CV20200081Opinion.pdf

TRIAL COURT HAS JURISDICTION TO DISMISS AN ACTION WITH PREJUDICE UPON SETTLEMENT WHILE RETAINING AUTHORITY TO ENFORCE THE SETTLEMENT

After reaching a settlement agreement in this case the parties submitted a stipulation  and order of dismissal with prejudice to the trial court which specifically stated the trial court retained jurisdiction to enforce the settlement agreement in the event of a future default in payment.  The trial court refused to sign the order on the basis that the attempt to preserve jurisdiction in the court to enforce the settlement was inconsistent with the Rules of Civil Procedure.  The defendant appealed and the Arizona Court of Appeals reversed and remanded.

First this is not a subject matter jurisdiction issue (authority to act created by the constitution or statute) but rather an ancillary jurisdiction issue (authority to act on issue potentially outside court's subject matter jurisdiction but substantially related to an issue or claim within the court's subject matter jurisdiction).

Permitting [the trial court to retain ancillary jurisdiction to enforce a settlement agreement especially when] the parties have stipulated to it encourages settlement by providing parties certainty about the terms of an agreement and a mechanism to easily enforce performance of the agreement.

Furthermore, this practice promotes judicial efficiency by enabling a trial court to clear the case from its docket until the time arises, if ever, to enforce the terms of the agreement. (retaining jurisdiction provides most efficient means of enforcing agreement by keeping it in court most familiar with parties' settlement positions and keeping parties from having to file another action). Consistent with other jurisdictions that have adopted this rule, we conclude that retaining jurisdiction to enforce a settlement agreement upon stipulation of the parties can be accomplished through an express provision retaining jurisdiction over the settlement agreement but it is discretionary; trial courts are not obligated to do so.