Slaugh v. Wagner

          MEMORANDUM DECISION AND ORDER RE: DEFENDANT'S MOTION TO ENFORCE SETTLEMENT AGREEMENT (DOCKET NO. 66)

          Hon. Ronald E. Bush, Chief U.S. Magistrate Judge

         Now pending before this Court is Defendant's Motion to Enforce Settlement Agreement (Docket No. 66). Having fully reviewed the record herein, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, this Motion will be decided on the record before the Court and without oral argument.

         BACKGROUND

         On May 3, 2017, the parties appeared to informally resolve the instant action (along with other state court actions - two in Idaho and one in California), following a settlement conference with U.S. Magistrate Judge Candy W. Dale. See 5/3/17 Minute Entry (Docket No. 60) (“The parties and their representatives met, negotiated in good faith, and have reached a final settlement agreement.”). A status conference followed on May 9, 2017 to discuss additional “settlement details, ” with Judge Dale inviting the parties to contact her “if further assistance is needed.” 5/9/17 Docket Text Minute Entry (Docket No. 65). Unfortunately, the parties reached an impasse when trying to finalize the particulars of their “settlement” agreement. The at-issue Motion followed on May 28, 2017.

         The lawsuits involve disputes related to the estate of Robert Neidigh. Now deceased, Mr. Neidigh is Plaintiff's (the successor trustee of the Neidigh Trust) father and Defendant's husband. Though the facts and circumstances surrounding these actions are both sensitive and contentious, they are not material to resolving the question of whether the parties reached a settlement agreement on May 3, 2017 (except to perhaps foreshadow the current state of affairs) and, if so, what the consequences of that agreement are. Those lynchpin issues turn on the manner in which Mr. Neidigh's estate's assets are to be distributed.

         Relevant here, the parties agreed that Plaintiff would receive $136, 000, and that such amount be funded by (1) the balance of the IBEW retirement account, and (2) such portion of the Fidelity account to bring the monetary distribution to Plaintiff to $136, 000. Compare Def.'s Mem. in Supp. of Mot. to Enforce, p. 4 (Docket No. 66, Att. 1), with Pl.'s Resp. to Mot. to Enforce, p. 3 (Docket No. 71).^[1]

         In correspondence following the May 3, 2017 settlement conference, the issue of taxes (or, more specifically, the tax consequences of any distribution) came up in. For example:

5/6/17 Email from Simpson to Fulgham: “I will try to summarize my question[ ] which is an issue that was not discussed. Your client is to receive all or part of the retirement account and the IRA. It was not discussed that your client intended to take a distribution of the retirement or the IRA account. After the fact, you have indicated that you want Roxanne's portion of these account to go to your trust account. It probably does not make any difference how your client receives the money as long as she discloses where she intends to report it as income and how is the tax being paid. As you are aware when the funds are distributed from either of these account[s], the distribution amount must be reported as income and tax paid. My question is where is the income to be reported and who is going to pay the tax[?] These issues were not raised or discussed in our session. If your client is going to receive the distribution as Trustee of the 2010 trust does she intend to file a trust return and where is the money going to come from to pay the tax[?] An answer to these questions may resolve the necessity for a conference call with the Judge.

As to any portion of the IRA to be allocated to Marianne, she will roll it over into another qualified account so the only portion that would go to your trust account is what Roxanne is to receive.”

5/9/17 (11:54 a.m.) Email from Fulgham to Simpson: “Regarding the $136, 000 payment - Since your settlement offers, which we accepted, agreed to pay Roxanne Slaugh $136, 000 (which we require to be paid c/o Lukins & Annis PS [(Plaintiff's counsel)] trust account) why don't we have the distribution be to the surviving spouse, with direct payment to Roxanne Slaugh c/o Lukins & Annis PS? You wanted Marianne to get the remainder of THE ESTATE anyway (besides the coins and Harley), so I think during the mediation negotiations you wanted to just pay our side the funds of $136, 000, and the Estate then goes to Marianne. She handles the taxes, the roll over, the real estate, etc.”

5/9/17 (12:02 p.m.) Email from Fulgham to Simpson: “To be clear, our side gets $136K, the coins, the Harley, and the remainder of the ESTATE goes to Marianne. She handles the entire Estate so she pays the taxes.”

See Exs. attached to Simpson Decl. (Docket No. 66, Atts. 6 & 8); see also Exs. attached to Fulgham Decl. (Docket No. 73); Exs. attached to Osler Decl. (Docket No. 72). Unable to resolve the matters themselves, the parties proceeded to the May 9, 2017 status conference with Judge Dale. See 5/9/17 Status Conf. Tr. at 2:15-20 (Docket No. 73) (Judge Dale framing issue as: “But in reviewing the emails, it's my sense that you both agree that there is a settlement agreement in principle and the issue that may be interfering, a hurdle at this point is potential tax consequences based on how the property that's at issue is going to be distributed.”). At that time, the parties initially relayed their respective positions as follows:

Mr. Simpson: It's not going to be - it's not going to be Marianne because she's not going to be liable for the tax. If you can figure out a way to transfer those assets to the trust and there's absolutely no potential liability for Marianne, I don't have any real problem with it but I don't see where the trust gets away without paying any tax whatsoever.

Ms. Fulgham: Well, that was part of my proposal in the last round of emails, Brian, was that the agreement is Roxanne gets $136, 000 and we believe the only source for those funds were these two accounts and so Marianne could take distribution of those accounts but the payment would go to Roxanne because -

Mr. Simpson: That would be a taxable event to her. She'd be subject to the tax.

Ms. Fulgham: But she's going to be dealing with everything else in the estate ...