TRT Transportation, Inc. v. Aksoy
506 F. App'x 511 (2013)
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Rule of Law:
Under Illinois law, an oral settlement agreement is enforceable if there is an offer, acceptance, and a meeting of the minds on all material terms, even if the parties contemplate a subsequent formal written document. The intent to be bound is determined objectively from the parties' words and conduct, not their subjective beliefs.
Facts:
- TRT Transportation, Inc. ('TRT') operates a sightseeing business as the Chicago Trolley Company, using a fleet of trolleys with a distinctive color scheme.
- Yildirim Aksoy, through his company Chicago Trolley Rentals, Inc., offered similar trolley rental services.
- Aksoy's company used the name 'Chicago Trolley Rentals,' a color scheme that TRT alleged was confusingly similar to its own, and the website www.chicagotrolleyrentals.com.
- During a court-facilitated settlement conference, the parties orally agreed to several material terms, which were recited on the record.
- These terms included that Aksoy's company would stop using the words 'Chicago' and 'trolley' together in a confusingly similar manner and would cease using TRT's color scheme.
- Immediately after the terms were recited, TRT's lawyer stated the agreement was 'subject to a negotiation of a formal settlement agreement.'
- The presiding magistrate judge then asked if the orally-stated terms were enforceable, and both parties, including Aksoy, personally affirmed on the record that they were.
- Subsequent negotiations to finalize a written document broke down when Aksoy's company proposed using the phrase 'trolley rentals in Chicago,' which TRT opposed.
Procedural Posture:
- TRT Transportation, Inc. sued Chicago Trolley Rentals, Inc. and Yildirim Aksoy in U.S. District Court for trademark infringement and related claims.
- During a settlement conference before a magistrate judge, the parties recited the terms of an oral agreement on the record.
- After negotiations for a formal written agreement failed, the defendants filed a motion in the district court for a declaration that no enforceable settlement existed.
- TRT Transportation, Inc. filed a cross-motion to enforce the oral settlement agreement.
- The district court granted TRT's motion, found the oral agreement enforceable, and entered a permanent injunction against the defendants.
- Defendant Yildirim Aksoy, the appellant, appealed the district court's judgment to the U.S. Court of Appeals for the Seventh Circuit, with TRT Transportation, Inc. as the appellee.
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Issue:
Does an oral settlement agreement, whose material terms are stated on the record, constitute an enforceable contract under Illinois law, even when one party states it is 'subject to a negotiation of a formal settlement agreement,' if the parties then immediately affirm on the record that the oral terms are 'enforceable'?
Opinions:
Majority - Per Curiam
Yes. An oral settlement agreement is enforceable if the parties objectively manifest an intent to be bound by its terms, even if they contemplate a future written agreement. The court held that while a lawyer's use of the phrase 'subject to' might suggest an intent not to be bound, it is not dispositive. The dispositive factor here was the parties' subsequent conduct: when the magistrate judge sought clarification, both parties, including Aksoy himself, directly and unequivocally affirmed on the record that the oral terms were 'enforceable.' This objective manifestation of intent created a binding contract. Furthermore, the court found the terms were not too vague to be enforced; the prohibition on using 'Chicago' and 'trolley' in a 'confusingly similar' manner provided a sufficiently clear basis for a court to determine compliance.
Analysis:
This case emphasizes the binding nature of on-the-record oral settlement agreements and serves as a strong cautionary tale for litigants and their attorneys. It establishes that a party's direct affirmation to a judge that terms are 'enforceable' can override boilerplate legal language like 'subject to a formal agreement.' The decision reinforces the judiciary's preference for an objective theory of contract formation, where overt words and actions outweigh a party's unstated, subjective intentions. This precedent makes it more difficult for parties to back out of oral settlements by later claiming there was no meeting of the minds or that a written document was a condition precedent to the deal.
