Aerlex Corporation

Plain-English summary

Aerlex agreed to withdraw its contest to citations and $58,000 in proposed penalties after an explosion reportedly destroyed its business. The company stated that it had a defense but lacked the income and resources to continue litigating. After counsel reappeared, Aerlex moved to withdraw from the settlement, asserting that it had signed without legal advice, did not understand the consequences, and acted under financial pressure. The judge approved the settlement without ruling on that motion. The Commission set aside the approval and remanded for evidence and factual findings on whether the settlement reflected a genuine agreement and whether Aerlex had sufficient grounds to withdraw.

Decision snapshot

• Cited standard(s): The official release does not identify the standard numbers.
• Outcome: Settlement approval set aside; case remanded for a ruling on the employer's motion to withdraw.
• Key point: Before approving a disputed settlement, the Commission must be satisfied that the parties truly understood and agreed to its terms.

Full text (OSHRC public release)

Docket No. 85-1257

SECRETARY OF LABOR,

Complainant,

v.

AERLEX CORPORATION,

Respondent.

OSHRC Docket No. 85-1257

ORDER

An order of Judge Louis G. LaVecchia approving a
settlement agreement in which Respondent withdrew its notice of contest to citations and
penalties of $58,000 proposed therefor is before the Commission for review.  The
citations were issued following an explosion which, according to the attorney who filed
Respondent's notice of contest, totally destroyed Respondent's business.  In a
subsequent letter filed with the judge, Respondent, then appearing without counsel, stated
that although it had a defense to the citations it was unable to pursue its defense
because it no longer had any income and had exhausted its financial resources. Therefore,
Respondent stated that it entered into the settlement agreement despite its defense.

Thereafter, Respondent, once again appearing through
counsel, filed with the judge a motion to withdraw from the settlement agreement,
restating Respondent's prior reason for entering into the agreement and also asserting
that Respondent assented to the agreement "without benefit of counsel and without
legal advice"[[1]] and that "Respondent was not aware of the ramifications of
entering into the settlement agreement."  The motion also asserted that because
of the "pressures" on Respondent it did not enter into the agreement
"freely and without coercion."  Judge LaVecchia did not rule on this
motion.

In opposition to Respondent's motion, the Secretary
has filed affidavits which indicate that discussions were conducted with Respondent
concerning the effect of a settlement on possible criminal prosecution.   The
Secretary's affidavits do not otherwise address the matters raised in Respondent's motion
to withdraw from the settlement agreement, particularly Respondent's concerns regarding
its financial status.

The Commission encourages voluntary dispositions by
parties to Commission proceedings.  At the same time, however, the Commission must be
assured that a proposed settlement represents a genuine agreement between the parties and
a true meeting of the minds on all provisions thereof.  See Metro
Waterproofing, Inc. , 85 OSAHRC ____, 12 BNA OSHC 1601, 1986 CCH OSHD � 27,535 (Nos.
85-321 & 85-430, 1985) and Wheaton Injection Molding Co ., 82 OSAHRC 26/B11, 10
BNA OSHC 1589, 1982 CCH OSHD � 26,052 (No. 81-1412, 1982).  See also Marshall
v. Sun Petroleum Products Co ., 622 F.2d 1176 (3d Cir. 1980), cert denied , 449
U.S. 1061 (1980) (Secretary allowed to withdraw from settlement agreement under certain
circumstances).

In this case the submissions of the parties raise a
dispute as to whether Respondent fully understood the provisions of the settlement and
intended to enter into an agreement providing for the affirmance of all citations and the
assessment of a substantial penalty therefor.  Accordingly, we set aside the judge's
order and remand this case for a ruling on Respondent's motion to withdraw from the
settlement.  The judge shall conduct a hearing on Respondent's objections to the
settlement agreement or shall otherwise afford the parties an opportunity to submit
evidence in support of their respective positions.[[2]]  The judge shall make factual
findings with respect to the grounds Respondent asserts for withdrawal and shall allow the
parties to submit arguments on the question whether on the facts as found a sufficient
basis exists on which to set aside the settlement agreement.  In the event the judge
grants Respondent's motion to withdraw, he shall conduct further proceedings as
appropriate.

FOR THE COMMISSION

Ray H. Darling, Jr.

Executive Secretary

DATED:  AUG 19 1986

BUCKLEY, Chairman, Dissenting

I dissent because, even if the unsworn
representations of counsel in Respondent's motion to withdraw from the settlement
agreement are taken as true, they do not constitute a legal basis for setting aside the
judge's order approving the settlement agreement.  Respondent claims that it did not
enter into the agreement freely and without coercion, but that conclusion cannot
reasonably be inferred from the factual assertions made.  A body that freely permits pro
se representation should not lightly conclude that failure to consult counsel
prevents an employer from entering into settlement "freely and without
coercion."

As the majority states, the Commission encourages the
parties to disputes before us to reach agreements that voluntarily dispose of the disputed
issues.  In this case, Judge LaVecchia was assured that Respondent wished to settle
as stated in the settlement agreement.  In a letter submitted by Respondent with the
signed settlement agreement, Respondent's president indicated that he wanted to withdraw
the notice of contest in order to terminate the costly litigation despite having a
"complete defense."  Respondent signed the settlement agreement, which
plainly stated that the withdrawal "has been made freely and without coercion";
that the penalties proposed total $58,000; and that "Respondent understands and
agrees that, as a result of its withdrawal of its notice of contest, the citation and
penalties proposed therefore shall become a final order of the Commission."

Nothing that Respondent has submitted to us since
signing the settlement agreement indicates that there was any lack of understanding as to
the terms and effect of the settlement agreement.  In fact, Respondent has simply
repeated what was either told to or evident to the judge when the signed settlement was
submitted to the judge before the judge approved it--that Respondent entered into the
settlement agreement while lacking counsel, during financial difficulties, and despite
having a "complete defense." Respondent's motion does not state how any of the
plain terms of the settlement were misunderstood and, although Respondent said that it was
not aware of the ramifications of the settlement agreement since they were not explained
by counsel, Respondent has not stated what ramifications were not understood.  The
Secretary's affidavits represent that Respondent had been represented by counsel during
discussions of settlement at an informal conference.  From the Secretary's affidavit
it also appears that the possibility of criminal charges even if the civil case was
settled was discussed at that time and again immediately prior to the final settlement
agreement.  In view of this, it appears that Respondent's president was fully aware
of the circumstances surrounding the settlement agreement and had an adequate opportunity
to understand the plainly stated terms of it.

To set aside the judge's order in this case involving
numerous charges of serious and willful violations and a large penalty when Respondent has
not even alleged a sufficient basis for out doing so, will seriously undermine the policy
to encourage settlement.  We have little Commission precedent to guide the judge's
decision on remand.  The proper course of action, in my judgment, would be to permit
both parties to submit briefs and affidavits in support of their position to the
Commission.  Should they convince us that the allegations, if proven, would
constitute a sufficient basis for permitting an employer to withdraw from a settlement
agreement, we can then remand the case for proof of the allegations.

SECRETARY OF LABOR,

Complainant,

v.

AERLEX CORPORATION,

Respondent.

OSHRC Docket No. 85-1257

ORDER

The settlement agreement submitted for approval by the parties is approved.

Incorporated in the agreement is a motion by the
respondent to withdraw its notice of contest to the citation which initiated the
proceeding.

Accordingly, the respondent's motion to withdraw its
notice of contest is granted, and the citation is affirmed in all respects.

A civil penalty of $58,000 is assessed for the
violations affirmed.

So ORDERED.

Louis G. LaVecchia

Judge, OSHRC

DATE:  June 13, 1986

FOOTNOTES:

[[1]] The attorney who had originally represented
Respondent withdrew prior to the execution of the settlement because of a fee dispute with
Respondent.

[[2]] The dissent agrees that this case merits
further proceedings on both the factual and legal issues presented.  The dissent,
however, would require the Commission to rule on a legal issue--the circumstances under
which an employer may withdraw from a settlement agreement--before the nature of, and
factual support for, Respondent's objections has been determined.  We think that the
better procedure is for the judge initially to make the requisite factual findings.  
The judge may decide that Respondent's objections are unsupported and therefore avoid
reaching the legal issue with which the dissent is concerned.  Furthermore, should
the Secretary feel that any error of law has been committed on remand, he may petition the
Commission for review on that issue.