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Payrolling.Com Corp v. Wmbe Payrolling

March 20, 2013


The opinion of the court was delivered by: Irma E. GONZALEZUnited States District Judge


Before the Court is Defendants and Counter-Claimants' ("Defendants") motion to enforce settlement agreement or, in the alternative, to compel arbitration. [Doc. No. 63.] Plaintiff and Counter-Defendants ("Plaintiffs") filed no opposition. For the reasons below, Defendants' motion to enforce the settlement agreement is GRANTED.


This case concerns a dispute over website domains and other proprietary information between two brothers who run competing payroll servicing companies. Plaintiff Corp. ("Payroll Corp.") is owned and run by Bassam "Sam" Kholi. His younger brother and former employee, Defendant Samer Khouli,*fn1 owns and runs Defendant WMBE Payrolling, Inc. dba Target CW ("WMBE"). Plaintiff alleges that Defendants, all of whom are former employees of Payroll Corp. who left to work at WMBE, misappropriated confidential proprietary documents, trade secrets, and other information from Payroll Corp. Defendants answer with an array of common law counterclaims based on failure to pay wages and Payroll Corp.'s use of real property allegedly owned by Samer Khouli.

The case commenced in San Diego Superior Court in August 2010 and was removed to this Court in May 2011 upon the filing of the operative Second Amended Complaint, [Doc. No. 1 at 285-310], which was the first pleading to allege federal claims. The parties actively litigated the case until Plaintiff Bassam Kholi's April 24, 2012 deposition, at which time the parties expressed an intention to settle. Over the following weeks, the parties and their counsel negotiated settlement terms, which were reduced to writing and signed by Plaintiffs on May 24 and 25, 2012, and by all parties as of June 25, 2012. [Doc. No. 63-6 at 12-27 (Settlement Agreement).]

In addition to clauses releasing all claims and waiving fees and costs, the written settlement agreement required, upon its execution, specific performance by the parties as follows:

1. the parties were to sequentially dismiss their claims and counterclaims, [Settlement at ¶6];

2. Plaintiffs were to obtain a court order declaring certain real property quitclaim deeds void and record that court order with the San Diego County Recorder, Defendants were to execute and record documents necessary to remove a Lis Pendens on the real property, and thereafter the parties were to enter into a standard commercial lease, [Settlement at ¶9];

3. Plaintiffs were to issue neutral reference termination letters to former employee Defendants, [Settlement at ¶15];

4. the parties were to issue a joint letter to customers rescinding disparaging comments made as to the other, [Settlement at ¶17].

Per its terms, the agreement was fully executed once all parties signed. [Settlement at ¶24.] All parties had signed as of June 25, 2012, [see Settlement at 12-27], and thus the specific performance outlined above was to commence immediately thereafter. Yet, to date, notwithstanding Defendants repeated inquiries and requests, [see, e.g., Doc. No. 63 at 5], Plaintiffs have failed to perform any of the agreed upon terms. Thus, on January 22, 2013, approximately six months after the agreement was fully signed and executed, Defendants filed the present motion requesting that the Court enforce the specific performance under the settlement. [Doc. No. 63.] Plaintiffs filed no opposition brief or other response to Defendants' motion. Defendants filed a reply brief in support on March 7, 2013. [Doc. No. 66.] On March 18, 2013, the Court held a hearing on Defendants' motion. [See Doc. No. 68.]


"It is well settled that a district court has the equitable power to enforce summarily an agreement to settle a case pending before it." Facebook, Inc. v. ConnectU, Inc., 2008 WL 8820476, at *2 (N.D. Cal. June 25, 2008) (quoting Callie v. Near, 829 F.2d 888, 890 (9th Cir. 1987)). "Once a settlement has been reached in a pending action, any party to the agreement may bring a motion to enforce it." Id. at *4(citing Doi v. Halekulani Corp., 276 F.3d 1131, 1135 (9th Cir. 2002)). "[T]he court's enforcement powers include the inherent authority to order a party's specific performance of acts required by the settlement agreement and to award damages or other sanctions for noncompliance." Id. (citing TNT Mktg., Inc. v. Agresti, 796 F.2d 276, 278 9th Cir. 1986)); Makua v. Panetta, 2012 WL 2370620, at *2 (D. Hawai'i Feb. 28, 2012) ("A breach or violation of a settlement agreement entitles the non-breaching party to specific performance or an award of unliquidated damages, as appropriate.").

"The construction of settlement agreements are governed by principles of local law which apply to interpretation of contracts generally." Jeff D. v. Andrus, 899 F.2d 753, 759--60 (9th Cir. 1990). As applicable here, "California has a strong policy in favor of enforcing settlement agreements." Facebook, 2008 WL 8820476, at *4 ...

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