Vikas WSP v. Econ Mud Products, 23 F.4th 442

Background:

Vikas WSP (Indian guar-gum producer) and Economy Mud Products (Texas buyer) settled a multimillion-dollar breach suit for $80M; the district court dismissed the original suit with prejudice but retained jurisdiction to enforce the settlement.
The settlement required Vikas to ensure all guar suppliers were “paid in full” and to disclose supplier contracts; Economy’s obligation was contingent on Vikas’s compliance and certain defaults carried a 15‑day cure period.
Two suppliers ("NM") swore Vikas had not been paid; Economy stopped settlement payments after receiving those affidavits; Vikas produced an NM ‘‘accord’’ and financial records within the cure period, and later NM’s representative recanted earlier testimony, admitting payment.
The district court then entered three post‑settlement rulings: (1) declared Vikas breached the settlement; (2) struck Vikas’s pleadings as a sanction (and denied post‑settlement motions); and (3) granted summary judgment for fraud against Vikas and awarded $40M.
The Fifth Circuit vacated the fraud summary judgment for lack of subject‑matter jurisdiction, vacated the sanctions order (partly for lack of jurisdiction and partly for abuse of discretion), and vacated and remanded the breach finding for insufficient factual findings and legal analysis.

Issues:

Issue	Plaintiff's Argument (Vikas)	Defendant's Argument (Economy)	Held
Whether the district court had jurisdiction to enter summary judgment on Economy’s fraud claim arising from the settlement	The court retained jurisdiction to enforce the settlement and could adjudicate related claims	Fraud is a separate tort; retained enforcement jurisdiction does not authorize deciding independent tort claims	Court lacked power to grant fraud SJ; vacated SJ for lack of subject‑matter jurisdiction
Whether the district court properly sanctioned Vikas by striking pleadings / denying post‑settlement motions	The order is procedurally and substantively inadequate; motions (not pleadings) were before the court and lesser sanctions were available	Economy argued serious discovery and credibility failures justified severe sanctions	Vacated sanctions: insofar as it struck pleadings (no jurisdiction) and insofar as it denied motions (abuse of discretion for sparse unsupported findings)
Whether Vikas breached the settlement (interpretation of “paid in full” and whether NM was paid)	“Paid in full” can include in‑kind payments; Vikas produced accord and records within cure period showing payment	“Paid in full” required cash and Vikas’s accord/records are unreliable or fabricated; Vikas failed disclosure deadlines	Breach ruling vacated and remanded for detailed factual findings and analysis of contract meaning and whether NM was paid
Effect of dismissal with prejudice and the court’s retained jurisdiction to enforce settlement	Dismissal left only enforcement jurisdiction; court could decide breach and regulate post‑settlement conduct	Economy relied on retained jurisdiction to pursue broader relief including tort claims and sanctions	Court reconfirmed dismissal limits: enforcement jurisdiction is narrow and does not permit resolution of new tort claims absent an independent basis

Key Cases Cited

Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (1994) (ancillary/retained jurisdiction to enforce settlements is limited)
Arbaugh v. Y & H Corp., 546 U.S. 500 (2006) (courts may raise jurisdictional defects sua sponte)
Def. Distributed v. U.S. Dep’t of State, 947 F.3d 870 (5th Cir. 2020) (dismissal generally strips district court of power over the case)
Wise v. Wilkie, 955 F.3d 430 (5th Cir. 2020) (court may decide whether a settlement was breached when enforcing it)
In re Corrugated Container Antitrust Litig., 752 F.2d 137 (5th Cir. 1985) (bench decides facts when enforcing settlements)
Qureshi v. United States, 600 F.3d 523 (5th Cir. 2010) (courts retain power to manage proceedings and sanction even after dismissal)
Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, 960 S.W.2d 41 (Tex. 1998) (fraud is an independent legal duty distinct from contractual duties)
Montano v. Texas, 867 F.3d 540 (5th Cir. 2017) (appellate court reviews district findings; cannot affirm on inadequate factual findings)