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When a federal court upholds an arbitration award, it may not later require the award winner to sign a release that includes a confidentiality clause as a condition of receiving payment, the 3rd U.S. Circuit Court of Appeals has ruled. “A district court has inherent authority to ensure that prevailing parties are able to enforce prior judgments. … However, this authority cannot extend to the imposition of substantive conditions on enforcement not previously encompassed in the earlier judgment,” U.S. Circuit Judge Dolores K. Sloviter wrote in Pfizer Inc. v. Uprichard. Sloviter’s opinion was joined by U.S. Circuit Judge D. Michael Fisher and visiting Senior U.S. District Judge Louis H. Pollak of the Eastern District of Pennsylvania. According to court papers, Margaret Uprichard was working for Warner-Lambert Co. as a director of clinical research when Warner-Lambert merged with Pfizer Inc. in early 2000. After the merger, Uprichard’s job title was changed to “local clinical leader.” Dissatisfied with the new position, Uprichard submitted a “constructive termination eligibility form,” claiming a substantive change in job duties, and a request for severance benefits under Warner-Lambert’s enhanced severance plan. When the company refused, the dispute went to arbitration and a panel of three arbitrators ruled in favor of Uprichard, finding that she had suffered constructive termination and ordering Pfizer to pay her more than $244,000 in severance benefits. Pfizer then filed suit in federal court seeking to have the arbitration award vacated. It argued that the arbitrators had exceeded their authority and showed a “manifest disregard for the law” in their interpretation of the enhanced severance plan. Uprichard’s lawyers, in response, moved for confirmation of the award and demanded attorney fees. In September 2003, U.S. District Judge Joseph A. Greenaway of the District of New Jersey ruled mostly in favor of Uprichard. He denied Pfizer’s motion to vacate the award; granted Uprichard’s motion to confirm it; but rejected Uprichard’s petition for attorney fees. Soon after, the parties appeared to have struck a settlement. They stipulated that Uprichard was entitled to $11,353 in pre-judgment interest. Uprichard also informed Pfizer that she would not appeal the denial of her request for attorney fees and would sign an agreement that said judgment had been satisfied as soon as she was paid. Then things got complicated. Pfizer’s lawyers sent Uprichard a “settlement and release agreement” which included confidentiality and nondisparagement requirements. The proposed release agreement also stated that if Uprichard violated either of the provisions, she would be required to repay to Pfizer, as “liquidated damages,” all the money paid to her in the arbitration award. Uprichard’s lawyers, Joseph F. Hardcastle and Cintra S. Shober of Hardcastle & Shober in Boston, objected. In a letter, they told Pfizer that Uprichard was willing to “execute a release of any and all remaining claims she may have against Pfizer in order to expedite payment of the judgment she obtained.” But they said she was not willing to sign the specific release proposed by Pfizer because it contained a number of provisions that went well beyond a general release. The letter also noted that Uprichard was not obligated to provide any release whatsoever and could, if she so chose, simply execute on the court’s judgment in her favor. Uprichard then went back to court and asked for an amendment to her judgment that added the pre-judgment interest she had been already awarded. Pfizer’s lawyers didn’t dispute her right to pre-judgment interest, but raised a new issue of their own, asking for a ruling that Uprichard was required to sign a standard release form that was acceptable to Pfizer as a condition of receiving payment. Both sides agreed to have the issue heard by U.S. Magistrate Judge G. Donald Haneke. Haneke granted both motions, issuing an order that increased Uprichard’s judgment to more than $255,000, and imposed the requirement that Uprichard sign Pfizer’s settlement and release agreement as a condition to receiving her money judgment. In his order, Haneke wrote: “The court finds the release form required by [Pfizer] prior to the payout of monies to [Uprichard] is objectively reasonable. [Pfizer] shall not be required to pay over any monies to [Uprichard] until such time as that release has been signed.” On appeal, Uprichard’s lawyers argued that Haneke had exceeded his authority by adding new provisions to the existing judgment. Now the 3rd Circuit has agreed, finding that the motion before Haneke was brought under Rule 60(a) of the Federal Rules of Civil Procedure which is designed only to allow courts to correct “clerical mistakes.” Adding pre-judgment interest is a typical task under Rule 60(a), the court said, but the rule does not empower a court “to impose additional substantive requirements.” “Thus the magistrate judge had ample authority to amend the underlying judgment to reflect the stipulated amount of pre-judgment interest owed to Uprichard,” Sloviter wrote. “We conclude, however, that the magistrate judge overstepped his authority under Rule 60(a), and changed the substantive rights of the parties, by requiring that Uprichard sign Pfizer’s settlement agreement as a condition to receiving her arbitration award,” Sloviter wrote. Even if Pfizer were correct in saying that its enhanced severance plan contains such a release requirement, Sloviter found that “a Rule 60(a) motion is not the appropriate context to impose this requirement for the first time.” In a footnote, Sloviter said that if Pfizer wanted to seek a substantive amendment to the judgment, its motion should have been made under Rule 59(e). Sloviter found that the issue of the release had never been raised in several prior stages of litigation. “Neither the panel of arbitrators nor the district court … imposed the substantive requirement that Uprichard sign a settlement and release agreement prepared by Pfizer,” Sloviter noted. “Although Pfizer sought to vacate the arbitration award in the district court under the Federal Arbitration Act, it made no attempt to have the award modified to include a settlement or release requirement,” Sloviter wrote. As a result, Sloviter concluded that “the settlement agreement requirement imposed by the magistrate judge was a new substantive condition never before contemplated by the district court.” In the opinion, Sloviter quoted Haneke’s response when he was asked during a hearing for his basis for imposing such a requirement.” “To tell you the truth,” Haneke said, “when you ask me to cite you a case or a proposition, I respectfully suggest to you that I don’t have one because I don’t need one. It’s commonplace. … Any litigant who pays any money ever, under any circumstances, without getting a piece of paper in exchange that basically says: ‘This is it,’ is an imbecile.” Pfizer in-house attorney James P. Flynn argued that even if Haneke had exceeded the scope of his authority under Rule 60(a), he nonetheless acted within his “inherent authority” to enter “appropriate orders” to ensure that the district court’s judgments and prior orders would be properly enforced. But Sloviter found that Pfizer was asking the court to stretch the concept of “inherent authority” too far. While Haneke had the power to enforce the judgment, Sloviter said, he had no power to add new, substantive conditions to it.

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