Tagnetics, Inc. Order

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON

TAGNETICS, INC.,

Appellant,

v.

KENNETH KAYSER, et al.,

Appellees.
:
:
: Case No. 3:19-cv-00363
:
: Judge Thomas M. Rose
:
:
:
:

ENTRY AND ORDER AFFIRMING THE BANKRUPTCY COURT’S OCTOBER 25, 2019 ORDER AND TERMINATING CASE

This matter is before the Court on an appeal from the United States Bankruptcy Court for the
Southern District of Ohio (“Bankruptcy Court”) pursuant to 28 U.S.C. § 158(a). The case arose from
the Appellees, Kenneth W. Kayser, Ronald E. Earley, and Jonathan Hager (collectively, the
“Petitioning Creditors”) filing an involuntary bankruptcy petition as to the alleged debtor
corporation, the Appellant, Tagnetics, Inc. (“Tagnetics”). (See Doc. 2-2.) The Petitioning
Creditors allege in the petition that they are owed unpaid wages and salary related to their
employment with Tagnetics. (Id. at PAGEID # 30-31, 33.) However, the issues on appeal only concern
the parties’ settlement negotiations and settlement agreement. Petitioning Creditors are acting in
this appeal pro se.1

1 Tagnetics requests oral argument, while Petitioning Creditors ask that this Court not require
oral argument. (Doc. 12 at PAGEID # 475; Doc. 14 at PAGEID # 745.) Pursuant to Federal Rule of
Bankruptcy Procedure 8019, the Court has examined the briefs and record and determined that oral
argument is unnecessary because “the facts and legal arguments are adequately presented in the
briefs and record, and the decisional process would not be significantly aided by oral argument.”
FED. R. BANKR. P. 8019(b)(3).
1

Tagnetics appeals the Bankruptcy Court’s October 25, 2019 “Order Granting in Part Tagnetics’ Motion
to Enforce Settlement Agreement (Doc. 101) and Ordering Other Matters” (the “October 25 Order”).
(See Doc. 1; Doc. 12.) Petitioning Creditors ask that the Court affirm the October 25 Order. (See
Doc. 14.) For the reasons discussed below, the Court AFFIRMS the Bankruptcy Court’s decision. More
specifically, the release in the parties’ settlement agreement does not extend to related third
parties (related individuals/entities), and the parties’ settlement agreement—formed by an exchange
of emails between the parties on July 26, 2019—is enforceable and does not suffer from a lack of a
meeting of the minds.
I. BACKGROUND

(1) The July 26, 2019 Email Exchanges

The parties commenced settlement discussions in earnest on or about July 19, 2019. (See Doc. 12-1
at PAGEID # 512-13.) After a series of offers, counteroffers, and rejections (see id. at PAGEID
#507-12), Tagnetics and the Petitioning Creditors agreed to a settlement on July 26, 2019, the key
terms of which were documented in an email from Tagnetics’ counsel (Stephen Stern) to the
Petitioning Creditors at 3:27 p.m. that day. That email stated:

Ron, Ken, and Jon:

Below sets forth the terms of the agreement we reached by phone. Each of you please reply confirming agreement to these terms and then I need you to initiate a call with the court to advise of the settlement (it makes no sense for any of us to have to show up at court on Monday now that we have an agreement in place that will be documented more thoroughly in a settlement agreement. We can work on the written settlement agreement over the weekend.

Key terms:

Payment of $90,000 total ($30,000 each) within three days of a fully executed agreement.

The remaining schedule of payments as you proposed below,2 except in 12 and 18 months instead of 6
and 12 months.

Full mutual releases (no carve outs)

Dismissal/withdrawal of claims by each of you to be filed within one day of receiving payment

I believe this captures the key terms we discussed. Please confirm.

Stephen

(Doc. 12-1 at PAGEID # 506.)

In response, one of the Petitioning Creditors (Mr. Hager) sent the following email to Mr.

Stern approximately 30 minutes later: Stephen
Mr. Earley is discussing this with the court at this moment. I am responding for
Kayser, Earley and Hager [i.e., the Petitioning Creditors] saying we agree to the terms put forth
as documented above [i.e., Mr. Stern’s July 26, 2019 at 3:27 p.m. email].

(Id.) Two minutes later, Mr. Hager followed up with another email to Mr. Stern (copying the other
two Petitioning Creditors) in which he stated:
Stephen,

I will clarify that we agree to the terms you set forth in your last email and represented below
[i.e., Mr. Stern’s July 26, 2019 at 3:27 p.m. email].

Key Terms:

Payment of $90,000 total ($30,000 each) within three days of a fully executed agreement.

The remaining schedule of payments as you proposed below, except in 12 and 18 months instead of 6
and 12 months.

2 The “remaining schedule of payments as you proposed below” is a schedule of payments reflected
in an email sent by one of the Petitioning Creditors on July 25, 2019 at 1:25 p m. (See Doc. 12-1
at PAGEID # 507-08.)

3

CasCea3s:e1:93-b:1k9-3-c0v8-202036D3o-TcM1R80DocFi#le:d1604F/2ile7d/2:
004/2E7n/t2e0rePda0g4e/:248/o2f02009:P2A1:G16EIDD#e: s8c00Main Document Page 4 of 20

Full mutual releases (no carve outs)

Dismissal//withdrawal of claims by each of you to be filed within one day of receiving payment

(Id. at PAGEID # 505-06.) Thus, the “Key Terms” listed in Mr. Stern’s email and the “Key Terms”
listed in Mr. Hager’s second response matched. Mr. Stern responded one minute later with an email
that simply states: “Thank you.” (Id. at PAGEID # 505.)
(2) The Draft Agreement

On August 14, 2019, approximately two-and-a-half weeks later, Tagnetics’ counsel sent the
Petitioning Creditors a draft agreement titled “Settlement and Mutual General Release Agreement.”
(Doc. 12-2.) Among other things, the draft agreement contained language in which each Petitioning
Creditor “releases and discharges Tagnetics, as well as its current and former parent companies,
corporate and operating affiliates, subsidiaries, and related entities (including specifically
Compass Marketing, Inc.), as well as each of their current and former directors, officers,
shareholders or other equity holders, agents, employees, accountants, attorneys, and insurers …
from any and all causes of action, claims, debts, costs, liabilities, and demands arising from the
beginning of time until the date of this Agreement … [Each Petitioning Creditor] understands that
this is a GENERAL RELEASE.” (Id. at PAGEID # 517-19.) The draft agreement also contained similar
language in which Tagnetics “releases and discharges [the Petitioning Creditors] from any and all
causes of action, claims, debts, costs, liabilities, and demands arising from the beginning of time
until the date of this Agreement … Tagnetics understands that this is a GENERAL RELEASE.” (Id. at
PAGEID # 519.)
In response, the Petitioning Creditors raised several concerns about the draft agreement and stated
that several changes would need to be addressed. (See Doc. 12-4 at PAGEID # 530.)

4

CasCea3s:e1:93-b:1k9-3-c0v8-202036D3o-TcM1R80DocFi#le:d1604F/2ile7d/2:
004/2E7n/t2e0rePda0g4e/:258/o2f02009:P2A1:G16EIDD#e: s8c01Main Document Page 5 of 20

In turn, Tagnetics’ counsel challenged what he alleged to be mischaracterizations and said that
many of the terms included in the Petitioning Creditors’ response to the draft agreement fell
outside of the scope of what had been agreed to in the parties’ July 26, 2019 email exchanges. (Id.
at PAGEID # 528-29.) The Petitioning Creditors did not sign the draft agreement.
(3) The Bankruptcy Court’s Decision on Tagnetic s’ Motion to Enforce Settlement Agreement

Tagnetics then filed a “Motion to Enforce Settlement Agreement.” (Doc. 2-12.) In its motion,
Tagnetics argued that the parties reached a settlement agreement (with its key terms) by email on
July 26, 2019, but the Petitioning Creditors were seeking to include additional terms that were not
part of the agreement. (See id; see also Doc. 7-3 at PAGEID # 379; Doc. 12-5.) In response to the
motion, the Petitioning Creditors argued that, because terms that they wanted included in the
settlement agreement were mentioned in their initial proposal by email on July 20, 2019 (i.e., six
days before the July 26 email exchanges discussed above), and Tagnetics (allegedly)
did not dispute those terms, such terms were accepted and the parties’ subsequent negotiations only
concerned an acceptable payment schedule. (See Doc. 2-14; see also Doc. 7-3 at PAGEID
# 379; Doc. 12-5.) On October 18, 2019, the Bankruptcy Court held an evidentiary hearing on
Tagnetics’ motion. (See Doc. 12-5 (transcript of evidentiary hearing).)
On October 25, 2019, the Bankruptcy Court rendered an oral decision telephonically that included
its findings of fact and conclusions of law (the “October 25 Oral Decision”). (See Doc. 7-3
(transcript of October 25 Oral Decision).) In line with its subsequent October 25 Order issued
later that day (Doc. 2-21), the Bankruptcy Court determined in its October 25 Oral Decision that
the parties had entered into a settlement agreement on July 26, 2019, the terms of which were
reflected in the parties’ emails from July 26, 2019. (Doc. 7-3 at PAGEID # 386, 388, 392.)
Thus,

5

CasCea3s:e1:93-b:1k9-3-c0v8-202036D3o-TcM1R80DocFi#le:d1604F/2ile7d/2:
004/2E7n/t2e0rePda0g4e/:268/o2f02009:P2A1:G16EIDD#e: s8c02Main Document Page 6 of 20

the Bankruptcy Court rejected Petitioning Creditors’ primary argument in response to the motion.
(See also id. at PAGEID # 385-86.) The Bankruptcy Court determined that “the emails from July 20th
through July 26th … show the numerous rejections and then finally an acceptance and memorialization
in writing of agreed key terms” later on July 26, 2019. (Id. at PAGEID # 386.)
The Bankruptcy Court also specifically addressed the agreement’s “Full mutual releases (no carve
outs)” term. It determined that the Petitioning Creditors and Tagnetics released each other from
all liability and obligations owed or claimed to be owed. (Doc. 7-3 at PAGEID # 389- 90.) However,
the Bankruptcy Court did not construe that term “to include affiliates, parent corporations,
officers, directors or other undisclosed third parties.” (Id. at PAGEID # 390.) The Bankruptcy
Court also stated:
Although the settlement may not have resolved all disputes between Tagnetics and the Remaining
Petitioning Creditors, by an objective standard a meeting of the minds occurred as to the payments
to the Remaining Petitioning Creditors and a mutual release of any other obligations or damages.
The agreement did not address Compass or any affiliates, parent corporation, officers, directors or
third parties. Nor did it cover equity interests of the Remaining Petitioning Creditors, if any.
The parties either by reference to rejected offers which no longer have any legal effect or by
draft settlement agreement proposed after the agreement date of July 26th, have attempted to expand
the agreement beyond the plain meaning of its terms. Thus, the agreement was as the parties agreed
to by email on July 26th, 2019. …

The parties mutually released any obligations to each other as to the salary, benefits, loans or
other similar obligations owed to the Remaining Petitioning Creditors. The agreement does not
address any equity interests of the Remaining Petitioning Creditors. It also does not release any
third party obligations, including but not excluded to Compass Marketing. Absent specific reference
to such matters that had not occurred as of July 26th, the release of a stranger to a settlement is
not ordinary, nor would ownership interest in a corporate entity be finalized by a general release.

(Doc. 7-3 at PAGEID # 391-393.)

Later that day, the Bankruptcy Court issued the October 25 Order, granting, in part,

6

CasCea3s:e1:93-b:1k9-3-c0v8-202036D3o-TcM1R80DocFi#le:d1604F/2ile7d/2:
004/2E7n/t2e0rePda0g4e/:278/o2f02009:P2A1:G16EIDD#e: s8c03Main Document Page 7 of 20

Tagnetics’ motion. (Doc. 2-21.) The October 25 Order states, in relevant part:

Based upon the evidence admitted during the hearing, including the testimony of the witnesses and
the documentary evidence, and the arguments of the parties, and in accordance with the court’s oral
decision rendered telephonically on October 25, 2019 at 11:30 a.m., including its findings of fact
and conclusions of law stated therein, Tagnetics’ Motion to Enforce Settlement Agreement (doc. 101)
is granted in part. Accordingly, IT IS ORDERED that the settlement agreement agreed to by the
parties on July 26, 2019, shall be enforced as follows:

• [payment schedule]
• Excepting the payments required by this Order as defining the terms of the settlement reached by
the parties, the parties are mutually released from any past obligation to each other arising out
of any contract or claim of any nature …

Except as otherwise noted, nothing in this order should be construed as addressing any equity
interest, if any, of the Remaining Petitioning Creditors. It also does not release any obligations
owed to or from third parties, including, but not limited to, Compass Marketing, or any affiliates,
subsidiaries, parent corporation, officers, or directors of Tagnetics, Inc.

….

(Doc. 2-21 (emphasis in original).) This appeal of the October 25 Order followed.

II. STANDARD OF REVIEW

A district court, serving in an appellate capacity, reviews a bankruptcy court’s findings of fact
for clear error and conclusions of law de novo. Wesbanco Bank Barnesville v. Rafoth (In re Baker &
Getty Fin. Servs., Inc.), 106 F.3d 1255, 1259 (6th Cir. 1997); 28 U.S.C. § 158(a). “A factual
finding will only be clearly erroneous when, although there is evidence to support it, the
reviewing court on the entire evidence is left with the definite and firm conviction that a mistake
has been committed.” United States v. Ayen, 997 F.2d 1150, 1152 (6th Cir. 1993).
Issues that were not raised in a bankruptcy court will not be considered by the district court on
appeal. See In re Eagle–Picher Industries, Inc., 963 F.2d 855, 863 (6th Cir. 1992) (“appellate

7

CasCea3s:e1:93-b:1k9-3-c0v8-202036D3o-TcM1R80DocFi#le:d1604F/2ile7d/2:
004/2E7n/t2e0rePda0g4e/:288/o2f02009:P2A1:G16EIDD#e: s8c04Main Document Page 8 of 20

courts are not to address issues not raised for the first time in the trial court”). Additionally,
the district court “is not obligated to search the record for support” of a party’s argument. Nat’l
Credit Union Admin. Bd. v. Zovko, 728 F. App’x 567, 569 (6th Cir. 2018).
III. ANALYSIS

Tagnetics raises two issues in this appeal. First, whether the Bankruptcy Court erred when it held
that the parties’ settlement agreement did not include a release of Tagnetics’ (and the Remaining
Petitioning Creditors’) related individuals/entities. (Doc. 12 at PAGEID # 478.) Second, if the
Bankruptcy Court properly found that the release did not include a release of individuals/entities
related to the parties, whether there was no meeting of the minds and, thus, no settlement
agreement to enforce. (Id.) The Court will now address each of those issues.
(1) Scope of Release

As Tagnetics acknowledges, the first issue on appeal is narrow. (Doc. 12 at PAGEID # 484 (“While
[Tagnetics’] Motion to Enforce the Settlement Agreement concerned several terms of the agreement
between the parties, the only issue on appeal regarding the terms of the agreement is whether the
scope of the release included individuals/entities that are related to the parties, such as parent
companies, subsidiaries, affiliates, officers, directors, heirs, and personal representatives”).)
Tagnetics argues that the Bankruptcy Court erred “when it found that the scope of the release given
by the parties did not extend to related third parties, such as parent companies, subsidiaries,
affiliates, officers, directors, heirs, and personal representatives.” (Id. at PAGEID # 474.)
“A settlement agreement is a type of contract and is governed by reference to state substantive law
governing contracts generally.” Cogent Solutions Grp., LLC v. Hyalogic, LLC,

8

CasCea3s:e1:93-b:1k9-3-c0v8-202036D3o-TcM1R80DocFi#le:d1604F/2ile7d/2:
004/2E7n/t2e0rePda0g4e/:298/o2f02009:P2A1:G16EIDD#e: s8c05Main Document Page 9 of 20

712 F.3d 305, 309 (6th Cir. 2013) (internal quotation marks omitted). Here, there is no dispute
that the substantive law to be applied is Ohio law. (See generally Docs. 12, 14, 15; see also Doc.
7-3 (transcript of October 25 Oral Decision) at PAGEID # 380 (Bankruptcy Court’s analysis to
support application of Ohio law).) Under Ohio law, “[t]he purpose of contract construction is to
effectuate the intent of the parties.” Kelly v. Medical Life Ins. Co., 509 N.E.2d 411, 413, 31 Ohio
St. 3d 130 (Ohio 1987). “The intent of the parties to a contract is presumed to reside in the
language they chose to employ in the agreement.” Id.
“[C]ommon words appearing in a written instrument are to be given their plain and ordinary meaning
unless manifest absurdity results or unless some other meaning is clearly intended from the face or
overall contents of the instrument.” Alexander v. Buckeye Pipe Line Co., 374 N.E.2d 146, 150, 53
Ohio St. 2d 241 (Ohio 1978). “[W]here the terms of a contract are clear and unambiguous, extrinsic
evidence may not be used as an aid in interpretation.” Whitley
v. Canton City Sch. Dist. Bd. of Educ., 528 N.E.2d 167, 168, 38 Ohio St. 3d 300 (Ohio 1988); see
also Kelly, 509 N.E.2d at 413 (“A court will resort to extrinsic evidence in its effort to give
effect to the parties’ intention only where the language is unclear or ambiguous, or where the
circumstances surrounding the agreement invest the language of the contract with a special
meaning”). Thus, “[w]hen the language of a written contract is clear, a court may look no further
than the writing itself to find the intent of the parties.” Transtar Elec. v. A.E.M. Elec. Servs.
Corp., 16 N.E.3d 645, 648, 140 Ohio St. 3d 193 (Ohio 2014). Additionally, “where the terms in an
existing contract are clear and unambiguous, … [a] court cannot in effect create a new contract by
finding an intent not expressed in the clear language employed by the parties.” Alexander, 374
N.E.2d at 150.

9

CasCea3se:1:93-:b1k9–3c0v8-0202363D-oTcM1R80DocF#il:e1d60F4/il2e7d/:2004/2E7n/2te0rePdag0e4:/2180/2
o0f 2009:2P1A:1G6EIDD#e:s8c0M6ain Document Page 10 of 20

As shown above, the parties expressly agreed to “[f]ull mutual releases (no carve outs).” Tagnetics
concedes that “[t]he scope of the release to which the parties agreed is clear and unambiguous,”
and, in fact, all of the parties agree that the terms in the settlement agreement are unambiguous.
(Doc. 12 at PAGEID # 487, 495-96.) The Court likewise agrees and determines that the terms are
clear and unambiguous. The interpretation of an unambiguous contract is a matter of law. Nationwide
Mut. Fire Ins. Co. v. Guman Bros. Farm, 652 N.E.2d 684, 686, 73 Ohio St. 3d 107 (Ohio 1995) (“If a
contract is clear and unambiguous, then its interpretation is a matter of law and there is no issue
of fact to be determined”); see also Latina v. Woodpath Dev. Co., 567 N.E.2d 262, 264, 57 Ohio St.
3d 212 (Ohio 1990) (the construction of written contracts is a matter of law).
In assessing the plain and ordinary meaning of the terms, Tagnetics acknowledges that courts in
Ohio have defined “mutual” to mean “[c]ommon to both parties” or “reciprocal.” (Doc. 12 at PAGEID #
493 (citing Metalworking Machinery Co., Inc. v. Fabco, Inc., 477 N.E.2d 634, 637, 17 Ohio App. 3d
91 (Ohio Ct. App. 1984) (quoting Black’s Law Dictio nary (5th Ed. 1979)).)
Additionally, Black’s Law Dictionary defines “mutual release” as “[a] simultaneous exchange of
releases of legal claims held by two or more parties against each other.” B lack’s Law Dictionary

(11th Ed. 2019) (defining “mutual release” under the definition of “release”). In context, it is
clear that the words “full” and “(no carve outs)” are used to clarify that there are no exceptions
to the “mutual releases,” i.e., to the “simultaneous exchange of releases of legal claims held by
[Tagnetics and the Petitioning Creditors] against each other.” Bla ck’s Law Dictionary (11th Ed.

2019) (definition of “mutual release”); Alexander, 374 N.E.2d at 150 (in interpreting a contract,
courts read terms in conjunction with their surrounding terms).

10

CasCea3se:1:93-:b1k9–3c0v8-0202363D-oTcM1R80DocF#il:e1d60F4/il2e7d/:2004/2E7n/2te0rePdag0e4:/2181/2
o0f 2009:2P1A:1G6EIDD#e:s8c0M7ain Document Page 11 of 20

Therefore, the Court determines that the parties’ settlement agreement does not include or

apply to individuals or entities related to the parties, such as parent companies, subsidiaries,
affiliates, officers, directors, heirs, or personal representatives. “If the parties had intended”
to expand the scope of the mutual releases to also include such individuals or entities then “they
could have easily so stated” in the settlement agreement (the July 26 email exchanges), but they
did not. Alexander, 374 N.E.2d at 150.
Some other meaning is not “clearly intended from the face or overall contents of the

settlement agreement,” and this construction of the phrase does not result in “manifest absurdity.”

Alexander, 374 N.E.2d at 150. In fact, the district court in NRRM, LLC v. Mepco Fin. Corp., Case
No. 10 C 4642, 2015 U.S. Dist. LEXIS 39058, 2015 WL 150 WL 1501897 (N.D. Ill. Mar. 27,
2015) was faced with the essentially same issue presented here and came to the same conclusion.
Like this case, in NRRM, one party (Mepco) moved to enforce its settlement with another party
(NRRM). The district court explained:
NRRM argues that the fourth material term it offered—'[m]utual releases’— included not only NRRM’s
and Mepco’s releasing of claims against each other, but also [third-party] Choice’s releasing its
claims against NRRM. Not so, says Mepco: ‘When two parties agree to enter into a mutual release,
they agree to release their claims against one another, without regard for claims that may be held
by a third party. That is the objective and uniformly understood meaning of the term mutual
release.’ …

The court agrees that Mepco’s is indeed the common and generally accepted definition of ‘mutual
release.’ See Black’s Law Dictionary 1480 (10th ed. 2014) (defining ‘mutual release’ as ‘[a]
simultaneous exchange of releases of legal claims held by two or more parties against each other.’)
(emphasis added); id. at 1178 (defining ‘mutual’ as ‘directed by each toward the other or others;
reciprocal,’ and ‘reciprocally given, received, or exchanged’) …

Accordingly, the settlement agreement is not contingent on [third-party] Choice’s releasing its
claims against NRRM, because the generally accepted meaning of ‘mutual release’ does not include
releases by third parties.

11

CasCea3se:1:93-:b1k9–3c0v8-0202363D-oTcM1R80DocF#il:e1d60F4/il2e7d/:2004/2E7n/2te0rePdag0e4:/2182/2
o0f 2009:2P1A:1G6EIDD#e:s8c0M8ain Document Page 12 of 20

NRRM, 2015 U.S. Dist. LEXIS 39058 at *20-22 (emphasis in original).

Tagnetics makes a number of arguments in support of its position. However, the Court initially
notes a fundamental problem: Tagnetics routinely refers to the draft agreement titled
“Settlement and Mutual General Release Agreement” (Doc. 12-2) that it submitted to the Petitioning
Creditors on August 14, 2019 as the “Settlement Agreement.” Although it is apparent that Tagnetics
wishes that draft document was the parties’ actual settlement agreement, it is not. (See Doc. 12 at
PAGEID # 483-84, 490; Doc. 12-2; Doc. 12-4.) And, Tagnetics concedes that it is not—as it must,
given that the Petitioning Creditors never signed that draft document and specifically objected to
it. (Id.) Some of Tagnetics’ arguments on appeal flow from its flawed understanding of the parties’
agreement.
Tagnetics’ first main argument is that “[i]t is common practice to include in any full release of a
business entity a release of the entity’s parent companies, subsidiaries, and affiliates (as well
as other related individuals, including, but not limited to, officers and directors)” and that “it
is understood that a general release encompasses such entities/individuals that are related to the
business entity that is a party to a settlement.” (Doc. 12 at PAGEID # 487.) In support of this
argument, Tagnetics cites a series of cases from Florida and one federal case from Vermont.
However, the settlement agreement here does not state that contains a “general release,” and the
issue presented arises under Ohio law—not Florida or Vermont.3

3 The cited Florida and Vermont cases are distinguishable for other reasons as well. For
example, Bd. of Trs. of Fla. Atl. Univ. v. Bowman, 853 So. 2d 507 (Fla. Ct. App. 2003) involved a
motion for attorneys’ fees due to an alleged rejection of a settlement proposal in light of
a Florida state statute and rule of civil procedure. Additionally, the settlement proposal
expressly included a “General Release” that specifically provided for a release of related
individuals/entities who were not parties to the lawsuit. As another example, Over & Under Piping
Contrs., Inc. v. Vt. Gas Sys., Case No. 2:15-cv-169, 2019 U.S. Dist. LEXIS 807, 2019 WL 77044 (D.
Vt. Jan. 2, 2019) involved whether the parties had entered into an oral settlement agreement; the
court ordered one party to execute a general release that included the other party’s employees and
agents based on evidence that counsel for both parties understood that their releases would be
broad general releases that are commonplace in Vermont legal practice.

12

CasCea3se:1:93-:b1k9–3c0v8-0202363D-oTcM1R80DocF#il:e1d60F4/il2e7d/:2004/2E7n/2te0rePdag0e4:/2183/2
o0f 2009:2P1A:1G6EIDD#e:s8c0M9ain Document Page 13 of 20

Tagnetics says that it “has found no authority in Ohio or the Sixth Circuit that has addressed the
issue before this Court regarding the scope of the releases.” (Doc. 12 at PAGEID # 488.) The Court
likewise has not found an Ohio case (or federal case applying Ohio law) that specifically deals
with the interpretation of the phrase used in the settlement agreement. However, as shown above,
Ohio caselaw does provide applicable principles for this Court to make its determination on this
issue. And, the NRRM case discussed above is more analogous than any of the cases cited by
Tagnetics.
Moreover, while it is true that extrinsic evidence of a general custom or trade usage is permitted
“to show that the parties to a written agreement employed terms having a special meaning within a
certain geographic location or a particular trade or industry,” such extrinsic evidence “cannot
vary the terms of an express contract.” Alexander, 374 N.E.2d at 151. As the Ohio Supreme Court
determined was the case in Alexander, this Court determines that the cited caselaw from two states
that are not Ohio and the (arguably self-serving) testimony from Tagnetics’ own counsel about his
personal experience in drafting settlement agreements “does not evince a custom or usage so
widespread” in the context of forming settlement agreements “as to support a valid presumption that
the parties, having knowledge of the special usage, must have intended” a more expansive meaning
for the mutual releases when they employed the phrase ‘[f]ull mutual releases (no carve outs)’ in
the settlement agreement.4 Id.

4 Tagnetics argues that the Bankruptcy Court disregarded its counsel’s “unrebutted testimony,
which was improper and in error,” concerning how he personally could not recall a single instance
where a settlement involving a business entity did not include a release of related
individuals/entities. (Doc. 12 at PAGEID # 489.) In support of this argument, Tagnetics cites an
Ohio appellate court opinion that addressed its standard of review of an Ohio trial court’s
decision. As an initial matter, there is no support for the assertion that the Bankruptcy Court
ignored this testimony. In fact, the October 25 Order and transcript of the October 25 Oral
Decision indicate otherwise. (See Doc. 2-21; see also 7-3 at PAGEID # 376 (the Bankruptcy Court’s
judge presided over the October 18 hearing, at which testimony was presented and “[i]n reaching its
determinations the [Bankruptcy] Court considered the demeanor and credibility of the witnesses who
testified … [including] Stephen Stern, counsel for Tagnetics”); id. at

13

CasCea3se:1:93-:b1k9–3c0v8-0202363D-oTcM1R80DocF#il:e1d60F4/il2e7d/:2004/2E7n/2te0rePdag0e4:/2184/2
o0f 2009:2P1A:1G6EIDD#e:s8c1M0ain Document Page 14 of 20

A number of Tagnetics’ other arguments involve consideration of extrinsic evidence. Tagnetics
points to language in the draft agreement that its counsel sent to the Petitioning Creditors
on August 14, 2019, subsequent to the parties’ settlement agreement (the July 26 email exchanges).
Ohio law shows that a subsequent draft document is not to be considered for purposes of determining
the issue presented here. Whitley, 528 N.E.2d at 168 (given that the terms of the parties’ contract
were clear and unambiguous, extrinsic evidence—namely, a prior practice and the language in a
proposed bargaining agreement—could not be used as an aid in interpreting the contract). Thus,
Tagnetics is wrong when it argues that “[t]he scope of the release Tagnetics proposed to give to
the [] Petitioning Creditors also bears consideration.” (Doc. 12 at PAGEID # 491.)
Similarly, Tagnetics argues that one of the three Petitioning Creditors—on behalf of an entity
(Kayser Ventures, Ltd.)—previously signed a settlement agreement that contains the more expansive
release language that is found in the draft document. (See Docs. 12-2 and 12-6.) That
settlement agreement was between Tagnetics, two entities, and one individual (none of the
Petitioning Creditors). Thus, it is not the settlement agreement at issue, and the parties to that
settlement agreement are not the same. Once again, Ohio law provides that “[w]here the terms of a
contract are clear and unambiguous, extrinsic evidence may not be used as an aid in
interpretation.” Whitley, 528 N.E.2d at 168; Transtar Elec., 16 N.E.3d at 648 (“[w]hen the language
of a written contract is clear, a court may look no further than the writing itself to find

PAGEID # 390 (“At the evidentiary hearing Stern stated that releasing affiliates of a company was
common in these types of agreements”).) Additionally, later in its brief, Tagnetics essentially
concedes the irrelevance of the testimony to the issue presented on interpreting clear and
unambiguous terms in an agreement. (See Doc. 12 at PAGEID # 494 (making this same argument in the
context of an alternative scenario that assumes, arguendo, that the Bankruptcy Court “meant to find
the phrase ‘full mutual releases (no carve outs)’ ambiguous”).)

14

CasCea3se:1:93-:b1k9–3c0v8-0202363D-oTcM1R80DocF#il:e1d60F4/il2e7d/:2004/2E7n/2te0rePdag0e4:/2185/2
o0f 2009:2P1A:1G6EIDD#e:s8c1M1ain Document Page 15 of 20

the intent of the parties”); see also Kelly, 509 N.E.2d at 413 (“A court will resort to extrinsic
evidence in its effort to give effect to the parties’ intention only where the language is unclear
or ambiguous, or where the circumstances surrounding the agreement invest the language of the
contract with a special meaning”).5 Given that the terms of the settlement agreement are clear and
unambiguous, the Court does not consider such extrinsic evidence for purposes of this issue.
Similar too is Tagnetics’ argument that the Petitioning Creditors conceded that the scope of the
release applied to related parties in a statement they made by email on August 19, 2019 concerning
language in the draft settlement agreement (therefore, after the July 26 email exchanges that
formed the settlement agreement). As an initial matter, the Court does not find the Petitioning
Creditors’ statement to be a concession regarding the scope of the phrase “[f]ull mutual releases
(no carve outs).” More fundamentally, once again, the Court does not consider such extrinsic
evidence for purposes of this issue. Whitley, 528 N.E.2d at 168. The Court notes that if the
parties want to enter into a subsequent agreement or amendment to the settlement agreement, then
they may do so, but that is not the issue on appeal.
Tagnetics also makes what turns out to be a strawman argument. It argues that the Petitioning
Creditors understood the phrase “full mutual releases (no carve outs)” to mean that any exposure
they may have from Tagnetics would be extinguished, but that they would not be providing Tagnetics
a reciprocal release. (See Doc. 12 at PAGEID # 491-93.) In addition to the fact that such alleged
subjective intent is not to be considered (Transtar Elec., 16 N.E.3d at 648), the allegation is
unsupported. And, as set forth in the “Background” section above, the Bankruptcy Court’s decision
does not align with that alleged understanding by Petitioning

5 As shown above, the Court determines that the circumstances surrounding the parties’ settlement
agreement here do not “invest the language of the contract with a special meaning.” Kelly, 509
N.E.2d at 413.

15

CasCea3se:1:93-:b1k9–3c0v8-0202363D-oTcM1R80DocF#il:e1d60F4/il2e7d/:2004/2E7n/2te0rePdag0e4:/2186/2
o0f 2009:2P1A:1G6EIDD#e:s8c1M2ain Document Page 16 of 20

Creditors anyway; it determined that there were reciprocal releases between Petitioning Creditors
and Tagnetics. (Doc. 2-21; Doc. 7-3 at PAGEID # 390-393.) Moreover, on appeal, the Petitioning
Creditors do not challenge the Bankruptcy Court’s decision and state that they accept it and
believe it was a fair ruling.
Finally, Tagnetics makes several arguments where it “assum[es] arguendo that the Bankruptcy Court
meant to find the phrase ‘full mutual releases (no carve outs)’ ambiguous.” (Doc 12 at PAGEID #
494.) However, the Bankruptcy Court did not find the phrase ambiguous (and Tagnetics cites nothing
to indicate otherwise). Thus, those arguments are irrelevant. Tagnetics concedes that the phrase is
not ambiguous, and, as shown above, this Court determines that the phrase is not ambiguous and
makes its analysis accordingly.
Therefore, the Court comes to the same conclusion as the Bankruptcy Court: the scope of the release
in the parties’ settlement agreement does not include individuals/entities that are related
to the parties, such as parent companies, subsidiaries, affiliates, officers, directors, heirs, and
personal representatives.
(2) Meeting of the Minds

For the second issue on appeal, Tagnetics argues that “there can be no meeting of the minds between
Tagnetics and the … Petitioning Creditors if the phrase ‘full mutual releases (no carve outs)’ is
found to exclude the parties’ related individuals/entities….” (Doc. 12 at PAGEID # 499.) This Court
disagrees.
Under Ohio law, “[e]ssential elements of a contract include an offer, acceptance, contractual
capacity, consideration (the bargained for legal benefit and/or detriment), a manifestation of
mutual assent and legality of object and of consideration.” Williams v. Ormsby,

16

CasCea3se:1:93-:b1k9–3c0v8-0202363D-oTcM1R80DocF#il:e1d60F4/il2e7d/:2004/2E7n/2te0rePdag0e4:/2187/2
o0f 2009:2P1A:1G6EIDD#e:s8c1M3ain Document Page 17 of 20

966 N.E.2d 255, 258, 131 Ohio St. 3d 427 (Ohio 2012). A party seeking to prove the existence of a
contract “must show the elements of mutual assent (generally, offer and acceptance) and
consideration,” that there was a “meeting of the minds,” and “that the contract was definite as to
its essential terms.” Nilavar v. Osborn, 711 N.E.2d 726, 732, 127 Ohio App. 3d 1 (Ohio Ct. App.
1998). Regarding the last requirement (concerning definiteness of essential terms), the Ohio
Supreme Court has held that the terms of an agreement need to be “reasonably certain and clear” and
has acknowledged that “all agreements have some degree of indefiniteness and some degree of
uncertainty.” Kostelnik v. Helper, 770 N.E.2d 58, 61, 96 Ohio St. 3d 1 (Ohio 2002).
“In order for a meeting of the minds to occur, both parties to an agreement must mutually assent to
the substance of the exchange,” with “a definite offer on one side and an acceptance on the other.”
Turoczy Bonding Co. v. Mitchell, 118 N.E.3d 439, 444, 2018-Ohio-3173 (Ohio Ct. App. 2018). “Ohio
law does not require contracting parties to share a subjective meeting of the mind to establish a
valid contract; otherwise, no matter how clearly the parties wrote their contract, one party could
escape its requirements simply by contending that it did not understand them at the time.” 216
Jamaica Ave., LLC v. S&R Playhouse Realty Co., 540 F.3d 433, 440 (6th Cir. 2008). “What it does
require is that the terms of the agreement establish an objective meeting of the mind, which is to
say that the contract was clear and unambiguous.” Id. And, “expressions of assent are generally
sufficient to show a meeting of the minds.” Nilavar, 711 N.E.2d at 733 (courts consider “only
objective manifestations of intent,” and “[s]ecretly held, unexpressed intent is not relevant to
whether a contract is formed”); see also 216 Jamaica Ave., 540 F.3d at 441 (where the relevant
terms of the agreement are clear and unambiguous, a party is not permitted to introduce extrinsic
evidence of its intent in entering into the agreement).

17

CasCea3se:1:93-:b1k9–3c0v8-0202363D-oTcM1R80DocF#il:e1d60F4/il2e7d/:2004/2E7n/2te0rePdag0e4:/2188/2
o0f 2009:2P1A:1G6EIDD#e:s8c1M4ain Document Page 18 of 20

Finally, “[t]he existence of a valid agreement is not diminished by the fact that the parties have
yet to memorialize the agreement.” RE/MAX Int’l, Inc. v. Realty One, Inc., 271 F.3d 633, 646 (6th
Cir. 2001). Courts may look to objective acts of the parties to determine whether an agreement has
been reached. Id.
Here, Tagnetics concedes that the July 26, 2019 email exchange contains the key terms of the
parties’ agreement. (Doc. 12 at PAGEID # 476.) Both sides agreed on those key terms— Tagnetics
offered them and the Petitioning Creditors accepted them—and the agreement includes bargained for
consideration. Williams, 966 N.E.2d at 258; Turoczy Bonding, 118 N.E.3d at 444 (despite the fact
that the parties contemplated a future memorialized agreement, their email communications
established a valid settlement agreement and did not expressly state that the agreement would only
become binding after it was formally executed). The content of the emails exchanged on July 26
between the parties demonstrate that they reached an agreement on the terms in those emails. Id.;
RE/MAX, Int’l, 271 F.3d at 646. The Court determines that the settlement agreement—as evidenced in
the exchange of emails between the parties on July 26, 2019—is clear and unambiguous, contains and
was definite as to its essential terms, and establishes an objective meeting of the mind (including
on the release term at issue). Turoczy Bonding, 118 N.E.3d at 444; Nilavar, 711 N.E.2d at 333; 216
Jamaica Ave, 540 F.3d at 440.
In support of its argument that prior history and the settlement negotiations demonstrates that
there was no meeting of the minds, Tagnetics cites to two Ohio appellate court cases that are
readily distinguishable from this case: Beechwood Villa Apartments v. Nord Bitumi U.S., Inc., Case
No. CA89-08-073, 1990 Ohio App. LEXIS 1561, 1990 WL 50003 (Ohio Ct. App. Apr. 23,
1990)—which is unpublished—and Wilson v. Pride, 2019-Ohio-3513, 2019 Ohio App. LEXIS

18

CasCea3se:1:93-:b1k9–3c0v8-0202363D-oTcM1R80DocF#il:e1d60F4/il2e7d/:2004/2E7n/2te0rePdag0e4:/2189/2
o0f 2009:2P1A:1G6EIDD#e:s8c1M5ain Document Page 19 of 20

3610, 2019 WL 4134011 (Ohio Ct. App. 2019). Both of those cases involved an alleged oral settlement
agreement that was never reduced to writing. Additionally, in Beechwood Villa Apartments, the trial
court had relied on an affidavit in finding that the parties’ oral agreement was enforceable, but
that affidavit was unclear concerning a key term. Beechwood Village Apartments, 1990 Ohio App.
LEXIS 1561, at *4-5. In Wilson, the parties were still negotiating a key term when one attorney
emailed the court claiming that the parties had agreed on a settlement and, approximately 20
minutes later upon receiving that email, opposing counsel phoned the court to inform it that the
parties actually had not reached a settlement. Wilson, 2019 Ohio App. LEXIS
3610, at *2-3, 15-16.

Much of Tagnetics’ argument on the second issue relies on its unfounded assertion that the
Bankruptcy Court reformed the language of the settlement agreement. However, that is incorrect; if
anything, Tagnetics is the one that is attempting to reform the settlement agreement. Tagnetics has
a fundamental misunderstanding of what the Bankruptcy Court did. The Bankruptcy Court determined
that the parties formed a settlement agreement on July 26, 2019 through their email exchanges on
that date, and it enforced that agreement based on what was written (which everyone agrees were
unambiguous terms). (See Doc. 2-21; Doc. 7-3 at PAGEID # 386, 388, 392.) Tagnetics’ related
arguments concerning mutual mistake in the context of the Bankruptcy Court allegedly reforming the
settlement agreement’s terms are inapplicable.
IV. CONCLUSION

The Bankruptcy Court’s October 25, 2019 “Order Granting in Part Tagnetics’ Motion to Enforce
Settlement Agreement (Doc. 101) and Ordering Other Matters” is AFFIRMED. The release in the
parties’ settlement agreement does not extend to, or include, related third parties

19

CasCea3se:1:93-:b1k9–3c0v8-0202363D-oTcM1R80DocF#il:e1d60F4/il2e7d/:2004/2E7n/2te0rePdag0e4:/2280/2
o0f 2009:2P1A:1G6EIDD#e:s8c1M6ain Document Page 20 of 20

(related individuals/entities). Also, the parties’ settlement agreement—formed by an exchange of
emails between the parties on July 26, 2019—is enforceable and does not suffer from a lack of a
meeting of the minds. This case is TERMINATED on the docket of this Court.
DONE and ORDERED in Dayton, Ohio, this Monday, April 27, 2020.

s/Thomas M. Rose

THOMAS M. ROSE UNITED STATES DISTRICT JUDGE

20

Leave a Reply

Your email address will not be published.