Southern Rehab. Grp. v. HHS, 15-6307

Receiver Phillip S. Stenger sued to recover $1.5 million transferred in connection with an alleged Ponzi scheme; funds were invested in entities including C.I. Solar controlled by Dale Toler.
David K. Freeman (escrow agent) and Toler signed a settlement agreement with Stenger providing that $1.5 million “shall be paid, by or on behalf of Defendants” to the Receiver in certified funds.
Toler told parties he would supply the settlement funds, but committed suicide before payment.
Stenger moved to enforce the settlement against Freeman; the magistrate recommended enforcement, the district court adopted that recommendation and entered judgment against Freeman.
Freeman appealed, arguing the payment clause was ambiguous, that mutual or unilateral mistake (or fraud by Toler) excused performance, and that an evidentiary hearing was required.
The Sixth Circuit affirmed, concluding the payment clause was unambiguous, Freeman failed to prove mutual or unilateral mistake or fraud, and no hearing was required.

Issue	Plaintiff's Argument (Stenger)	Defendant's Argument (Freeman)	Held
Whether the district court may summarily enforce the settlement	Court has equitable authority to enforce clear settlement terms	Enforcement improper without hearing if facts disputed	Affirmed: summary enforcement proper where terms are clear and facts not materially disputed
Whether the Payment Clause is ambiguous	Clause plainly obligates "Defendants" to pay $1.5M	Clause ambiguous; extrinsic evidence shows Freeman expected no payment obligation because Toler would pay	Held not ambiguous: language "by or on behalf of Defendants" imposes joint/several obligation; extrinsic evidence insufficient to create latent ambiguity
Whether mutual mistake excuses performance	Settlement is binding as written	Parties mutually (or both) believed Toler would pay, so contract void for mutual mistake	Rejected: no evidence Stenger shared any belief that Freeman had no obligation; mutual mistake not shown
Whether unilateral mistake/fraud by Toler rescinds Freeman's obligation	Toler’s alleged fraud (misrepresenting ability to pay) excuses Freeman	Freeman produced no clear-and-convincing evidence of fraud or that Stenger knew and concealed the truth	Rejected: no clear evidence of fraud or concealment; unilateral mistake doctrine not met; Rule 9(b) concerns noted

Therma-Scan, Inc. v. Thermoscan, Inc., 217 F.3d 414 (6th Cir. 2000) (district court’s equitable authority to enforce settlements)
RE/MAX Int’l, Inc. v. Realty One, Inc., 271 F.3d 633 (6th Cir. 2001) (settlement enforcement requires clear, unambiguous terms and no factual dispute)
Shay v. Aldrich, 790 N.W.2d 629 (Mich. 2010) (latent vs. patent contract ambiguity and use of extrinsic evidence)
Quality Prods. & Concepts Co. v. Nagel Precision, Inc., 666 N.W.2d 251 (Mich. 2003) (interpretation of unambiguous contracts reflects parties’ intent as a matter of law)
Anderson v. City of Bessemer City, 470 U.S. 564 (1985) (standard for clear error review of factual findings)