In reaching a voluntary settlement, parties to federal litigation often want the court to retain jurisdiction for purposes of enforcing the settlement. Unless the court expressly retains jurisdiction, however, federal subject matter jurisdiction may not exist if judicial intervention is needed to enforce the settlement. A dispute arising from settlement of a federal case will not itself confer federal subject matter jurisdiction, unless diversity jurisdiction is present and the parties start a new action.
But will an order retaining jurisdiction effectively transform the settlement into a consent decree, exposing the parties to potential contempt sanctions for any future breach of the agreement? Or can the parties structure the settlement and dismissal to avoid such exposure?
