In a recent decision by the federal court in New Jersey, Brass Smith, LLC v. RPI Industries, Inc., 2011 U.S. Dist. Lexis 141594 (D.N.J., December 8, 2011), Judge Hillman provided helpful guidance to litigators regarding how to persuade a court to retain jurisdiction to enforce settlement agreements. Seventeen years earlier, the U.S. Supreme Court had held: "Enforcement of [a] settlement agreement...is more than just a continuation or renewal of the dismissed suit, and hence requires its own basis for jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 378 (1994). Therefore, in order for a settlement agreement to be enforced in federal court, there must be an independent basis, such as diversity jurisdiction, federal question or ancillary jurisdiction (Id.). A court's decision to exercise ancillary jurisdiction is, however, discretionary, and the lower federal courts have advised counsel to state in the proposed dismissal order itself that the court retains jurisdiction over the settlement agreement and to incorporate the terms of the settlement agreement.

In Brass Smith, the parties specifically provided for the court's retention of jurisdiction and incorporated the terms of a settlement agreement of a patent infringement claim into the court's proposed order of dismissal. Nevertheless, the court declined to approve the proposed dismissal order, because there were "no temporal or other limits to the Court's jurisdiction over the settlement agreement" (at p. 4). The court found no authority for the proposition that ancillary jurisdiction can be exercised indefinitely and therefore directed the parties to revise the terms of their proposed consent order to limit the court's ancillary jurisdiction "under reasonable terms" and "for a reasonable time" (at p. 4).

Litigators seeking to convince a federal court to exercise its discretion to retain jurisdiction over a settlement agreement would be well advised to heed the Brass Smith court's cautions when drafting an order of dismissal. Specifically, the parties should explicitly state in the proposed dismissal order that:

(1) the court is retaining jurisdiction to enforce the settlement agreement; (2) the terms of the settlement agreement are incorporated; and (3) the scope of the court's continuing jurisdiction is limited by reasonable time limits for the parties to invoke the court's review of issues arising from the settlement agreement.

While the New Jersey federal court did not define the "maximum length of time over which a Court may retain ancillary jurisdiction to enforce a settlement agreement," it suggested that the time period could be "greater than the 60-day local rule," and it cited with approval cases where the periods were four and 15 years (at p. 3). But the court commented that the "exercise twenty years removed from the issuance of the consent judgment impermissibly strains the limits of federal court authority" (at p. 4). The court advised only that the time period should be specific and reasonable and "may not be indefinite unless there is clear statutory authority to do so" (Id.).