United States District Court, N.D. California
THOMAS A. SPITZER, et al., Plaintiffs,
TRISHA A. ALJOE, et al., Defendants.
ORDER RE: MOTION TO RESCIND AND MOTION TO ENFORCE
SETTLEMENT AGREEMENT Re: Dkt. Nos. 183, 187
MARIA-ELENA JAMES UNITED STATES MAGISTRATE JUDGE
Thomas "Leroy" Spitzer and Craig J. Spitzer
("Plaintiffs") filed this 42 U.S.C. § 1983
action against a number of Defendants, including the City of
Pleasanton (the "City"), Trisha A. Aljoe, Jonathan
P. Lowell, George Thomas, Walter Wickboldt, Sergeant Robert
Leong, and Officer Ryan Tujague ("City
Defendants"). On September 1, 2015, Plaintiffs and the
City Defendants filed a "Stipulation For Application For
Good Faith Settlement" in which they notified the Court
they had reach a settlement through private mediation.
Stipulation for Appl. for Good Faith Settlement
("Stip."), Dkt. No. 136; see also id, Ex.
A ("Settl. Terms"). The Court granted the
Application for Good Faith Settlement on November 6, 2015.
Dkt. No. 152. In doing so, the Court ordered the parties to
file a stipulation for dismissal of the City Defendants by
December 4, 2015 or file a status report as to why they had
not been dismissed. Id. The parties timely filed a
stipulation dismissing Defendants George Thomas, Walter
Wickboldt, Ryan Tujague, and Robert Leong. Dkt. No. 157.
However, they filed a status report explaining that "[a]
stipulation to dismiss Aljoe, Lowell, and the City of
Pleasanton [was not] filed because Plaintiffs and Defendants
disagree as to the dismissal.]" Dkt. No. 158.
Order now considers the parties' disagreements over the
settlement. The Court has ordered Plaintiffs and the City,
Aljoe, and Lowell (referred to as "Defendants" for
purposes of this Order) to attempt to resolve their disputes
informally, and they have filed several status reports on
this issue. See Dkt. Nos. 172, 173, 178. Ultimately,
however, they have been unable to resolve this matter and now
have filed cross motions to enforce and rescind the
settlement agreement. See Pls.' Mot., Dkt. Nos.
187-88; Defs.' Mot., Dkt. No. 183. Having
considered the parties' motions, the record in this
matter, and the relevant legal authority, the Court GRANTS
Defendants' Motion to Enforce and DENIES Plaintiff's
Motion to Rescind as set forth below.
brought this action for violations of their constitutional
rights related to, among other things, the abatement of their
residence located at 4719 Orangewood Court in Pleasanton,
California (the "Property"). Third Am. Compl.
("TAC") ¶ 5, Dkt. No. 98. As part of the
abatement, the City began a state-court abatement action, and
the Alameda County Superior Court appointed J. Benjamin
McGrew as receiver of the Property. Id. ¶ 117.
McGrew initially allowed Plaintiffs to enter the Property,
remove their personal property, and make necessary repairs,
but he later barred them from entering and instead contracted
with a company to remove their remaining personal property.
Id. ¶¶ 119, 123-24. McGrew also recorded a
deed of trust granting title to the Property to lenders as
security for a loan. Id. ¶¶ 131(d),
138-39. Plaintiffs allege McGrew took these actions without
the Superior Court's approval. Id. ¶ 131.
Among other things, Plaintiffs allege they lost the use of
their house and possession of personal property due to the
Property's abatement as well as subsequent threats of
arrest upon entry of the Property by certain of the City
Defendants. Id. ¶¶ 37, 48-61, 70-77.
bring claims against under 42 U.S.C. §
1983. Originally, they named only the City,
Aljoe, Lowell, Thomas, and Wickboldt as Defendants. Dkt. No.
1. They later added McGrew as a Defendant in their First
Amended Complaint (Dkt. No. 9), and subsequently filed a
Second Amended Complaint on April 20, 2014 (Dkt. No. 27). The
Court dismissed McGrew for lack of subject matter
jurisdiction on June 30, 2014. Dkt. No. 44 at 6-7. Plaintiffs
later filed a Motion for Leave to File a Proposed Third
Amended Complaint, in which they sought to (1) name as
defendants Police Officer Ryan Tujague and Sergeant Robert
Leong of the City, and (2) reassert claims against McGrew.
Dkt. No. 72. The Court allowed Plaintiffs to amend and name
Officer Tujague and Sergeant Leong, but denied leave to add
claims against McGrew. Dkt. No. 96. Plaintiffs filed the
operative TAC on April 13, 2015. Dkt. No. 98.
City Defendants and Plaintiffs engaged in private mediation
with mediator Simon Frankel and settled the case on August 7,
2015. See Stip.; Certification of Mediation, Dkt.
No. 149. Under the terms of the settlement, the City
Defendants agree to (1) pay Plaintiffs $50, 000; (2) sign a
stipulation for McGrew's removal as receiver in the
state-court abatement action, request the appointment of a
qualified receiver, and consider Plaintiffs' proposed
receiver; (3) submit an attorneys' fee recovery request
in the state court abatement action for hours worked at no
greater than $150 per hour; (4) look for any non-privileged
communications regarding McGrew and to either provide
Plaintiffs' counsel with additional documents or inform
him that no such documents exist; and (5) prepare and submit
a Release for Plaintiffs' notarized signature and to
issue the settlement check within 14 days of receipt of the
notarized release. See Settl. Terms. Specifically
Term No. 2 provides that:
Defendants will sign a stipulation prepared by Plaintiffs and
acceptable to Defendants for McGrew's removal as receiver
in the state-court abatement action, and request the state
court appoint a qualified receiver. Defendants will consider
Plaintiffs' proposed receiver (Edwin Heath). If
Defendants consider him materially unqualified, they will
notify the Court. If the Court asks the parties for potential
receivers, Defendants will submit named for reconsideration.
The parties will leave it to the Court's discretion to
appoint the new receiver[.]
Id. Term No. 4 provides that:
Defendants will look again for any non-privileged
communications regarding Receiver McGrew. Upon conclusions of
Defendants' review, they will contact Plaintiffs'
counsel and either: (1) provide him additional documents; or
(2) inform him no such documents exist. Plaintiffs preserve
the right to make a Public Records Act Request under
California law upon dismissal of the settling defendants
September 1, 2015, the City Defendants filed an Application
seeking the Court's determination of a good faith
settlement, and Plaintiffs stipulated that the settlement is
a good faith settlement for purposes of California Code of
Civil Procedure sections 877 and 877.6. Stip. ¶ 1. The
Court found the settlement was made in good faith for
purposes of California Code of Civil Procedure sections 877
and 877.6. Dkt. No. 152.
series of unfortunate events have led to the parties'
current dispute. The essential facts are as follows. The
parties' settlement agreement put the onus on Plaintiffs
to "prepare" a stipulation for McGrew's
removal, which Defendants would then sign and "request
the state court appoint a qualified receiver." Settl.
Term No. 2. After the settlement agreement was formed-but
before preparing the stipulation to remove McGrew-Plaintiffs
filed a motion with the state court to terminate the
receivership in its entirety or alternatively, to remove
McGrew and replace him. Defs.' Req. for Judicial Notice
("RJN"), Ex. A (Pls.' Mot. to Terminate
Receivership), Dkt. No. 185. In the motion, Plaintiffs
informed the state court that "[a]ll of the City of
Pleasanton defendants in the federal case have stipulated to
remove McGrew as receiver" and further proposed Edwin
Heath as the new receiver. Id., Ex. A at 3.
Defendants reacted to Plaintiffs' filing, opposing
termination of the receivership. Id., Ex. B;
Schwartz Decl., Ex. 4 (Defs.' Opp'n to Pls.' Mot.
to Terminate Receivership), Dkt. No. 189. They also stressed
that they had not stipulated to appointing Heath.
Id. (both) at 2. Additionally, while indicating they
had agreed to a stipulation to have McGrew replaced, they
informed the Court that Plaintiffs had "failed to
prepare and present such stipulation for the City's
signature" at that point-a true statement by all
accounts. Id. (both) at 8. But there is no
indication Defendants provided the state court with the
language from the parties' settlement agreement, and
Defendants' opposition indicated they had only agreed
"not to object" to McGrew's removal.
Id. (both) at 8, 10. Defendants also proceeded to
propose another receiver, who it appears Plaintiffs did not
know about in advance, and there is no indication the state
court asked Defendants for proposed alternative receivers at
that point. Id. (both) at 10. With their opposition,
Defendants also submitted a proposed Order, in which they
specifically proposed McGrew be terminated "good cause
appearing" and that their proposed receiver, Mark S.
Adams, be appointed. Id. (both) (see
attachment, Proposed Order).
after Defendants filed their opposition, Plaintiffs prepared
a stipulation, which was a modified version of Settlement
Term No. 2. Schwartz Decl., Ex. 3 (proposed stipulation and
email exchange). Defendants informed Plaintiffs they were
reviewing the language and would exchange "any proposed
revisions." Id., Ex. 3. In the meantime, the
state court held a hearing on the matter in which Defendant
Aljoe told the court the parties "have no
stipulation" and that Plaintiffs "waited to the
eleventh hour and now we're where they are trying to
force us to sign something that's not acceptible
[sic]." Id., Ex. 5 at 21:2-19. When
Plaintiffs' counsel apparently attempted to tell the
state court that their proposed stipulation was similar to
the settlement term itself, the court stated "I
don't really care. The point is you don't have an
agreed upon stipulation right now." Id., Ex. 5
at 21:22-24. Elsewhere, however, the court acknowledged that
"[t]here's clearly a settlement here. [¶] And
pursuant to that settlement, they are required to sign a
stipulation to remove Mr. McGrew as the State Court, you
know, appointed Receiver." Id., Ex. 5 at
26:5-8. Aljoe then stated "I explained to our Counsel
and to the City Attorney, I don't believe that a
stipulation in a Federal Court is controlling on this court.
And that Receiver belongs to you. [¶] We can't tell
you whether you should replace that Receiver or not."
Id., Ex. 5 at 26:18-23. Before concluding the
hearing, the court asked "[i]s there any reason that I
shouldn't continue this for a short period of time so
that the stipulation between the parties can actually get
finalized and I can actually consider it?" Second
Schwartz Decl., Ex. 1 at 35:8-13, Dkt. No. 201. Aljoe
responded, "Your Honor, I wouldn't have any problem
right now saying that we stipulate that we agreed to have Mr.
McGrew removed, and I still have the same position. [¶]
It has no legal authority with this court because the
Receiver belongs to this court." Id., Ex. 1 at
35:14-19. Although Plaintiffs requested a continuance so they
could get the stipulation "in place, " it appears
the court rejected that request, immediately stating
afterward that the matter was submitted. Id., Ex. 1
state court did not grant either Plaintiffs' motion or
Defendants' proposed order; McGrew remains the receiver.
RJN, Ex. D (Order denying McGrew's removal and
acknowledging "[t]he City did agree to sign a
stipulation to remove McGrew as receiver and to replace him
with another qualified receiver" but further noting
"[t]he agreement between the parties . . . to enter into
this stipulation is in no way binding on this Court").
now seek their freedom from this case, urging the Court to
enforce the settlement agreement because (1) "the
parties entered into a valid, enforceable contract, "
and (2) "Defendants have fulfilled all material terms of
the contract[.]" Defs.' Mot. at i. Plaintiffs, for
their part, do not seek to enforce the settlement agreement.
Rather, they seek rescission of the agreement in part and the
ability to continue to pursue their claims against Defendants
in this Court.
is well settled that a district court has the equitable power
to enforce summarily an agreement to settle a case pending
before it." Callie v. Near, 829 F.2d 888, 890
(9th Cir. 1987) (citations omitted); TNT Mktg., Inc. v.
Agresti, 796 F.2d 276, 278 (9th Cir. 1986) (district
court has "inherent power" to enforce agreement in
settlement of litigation before it). "California law
also provides for summary enforcement of settlement
agreements." Aki v. Univ. of Cal. Lawrence Berkeley
Nat’l Lab., 2015 WL 1778481, at *3 (N.D. Cal. Apr.
17, 2015) (citing Cal. Civ. Proc. Code § 664.6;
additional citation and internal quotation marks omitted).
Court to enforce a settlement agreement, two requirements
must be met. First, the settlement must constitute a
"complete" agreement. Maynard v. City of San
Jose, 37 F.3d 1396, 1401 (9th Cir. 1994) (quoting
Callie, 829 F.2d at 890). Second, both parties must
have agreed to the terms of the settlement or authorized
their respective counsel to settle. Harrop v. W.
Airlines, Inc., 550 F.2d 1143, 1144-45 (9th Cir. 1977).
settlement agreement is a contract, and thus its
enforceability is governed state law. Jeff D. v.
Andrus, 899 F.2d 753, 759 (9th Cir. 1989) (further
noting "[e]ach party agrees to ‗extinguish those
legal rights it sought to enforce through litigation in
exchange for those rights secured by the contract.'"
(quotation omitted)); see, e.g., Kirkland v. Legion Ins.
Co., 343 F.3d 1135, 1140 (9th Cir. 2003) (applying state
law to action to enforce settlement agreement). This is true
even if the underlying claims are federal. United
Commercial Ins. Serv., Inc. v. Paymaster Corp., 962 F.2d
853, 856 (9th Cir. 1992); see also Cal. Civ. Code
§ 1646 ("contract is to be interpreted according to
the law and usage of the place where it is to be performed;
or, if it does not indicate a place of performance, according
to the law and usage of the place where it is made.").
California law, contract formation requires (1) parties
capable of contracting; (2) the parties' consent; (3) a
lawful object; and, (4) sufficient cause or consideration.
Lopez v. Charles Schwab & Co., 118 Cal.App.4th
1224, 1230 (2004). "Mutual assent usually is manifested
by an offer communicated to the offeree and an acceptance
communicated to the offeror." Id. (generally
citing Cal. Civ. Code §§ 1550, 1565). Under
California law, the intent of the parties determines the
meaning of the contract. Cal. Civ. Code §§ 1636,
1638. The existence of mutual consent is determined by
objective criteria; "[t]he parties' outward
manifestations must show that the parties all agreed
‗upon the same thing in the same sense.'"
Weddington Prods., Inc. v. Flick, 60 Cal.App.4th
793, 811 (1998) (quoting Cal. Civ. Code § 1580);
Paymaster Corp., 962 F.2d at 856 ("The relevant
intent is ‗objective'-that is, the intent
manifested in the agreement and by surrounding conduct-rather
than the subjective beliefs of the parties. . . .
For this reason, the true intent of a party is irrelevant if
it is unexpressed." (citations omitted)).
respect to interpreting the terms of a contract, the primary
goal of contract interpretation is to give effect to the
mutual intention of the parties. See Bank of the W. v.
Superior Ct., 2 Cal.4th 1254, 1264 (1992). The
parties' mutual intent is determined by examining a
number of factors, including: (1) the words used in the
written agreement; (2) the surrounding circumstances under
which the parties negotiated or entered into the contract;
and, (3) the subsequent conduct of the parties. See Morey
v. Vannucci, 64 Cal.App.4th 904, 912 (1998). In
California, the words of a contract, as understood in their
ordinary and popular sense, govern the contract's
interpretation if the language is clear. See Cal.
Civ. Code §§ 1638, 1641. While the Court must
interpret a contract so as to give effect to the mutual
intention of the parties, "the intention of the parties
is to be ascertained from the writing alone, if
possible[.]" Id. § 1639; see also
Titan Grp., Inc. v. Sonoma Valley Cty. Sanitation Dist.,
164 Cal.App.3d 1122, 1127 (1985) ("It is the objective
intent, as evidenced by the words of the contract, rather
than the subjective intent of one of the parties, that
controls interpretation."). "The parties'
undisclosed intent or understanding is irrelevant to contract
interpretation." Founding Members of the Newport
Beach Country Club v. Newport Beach Country Club, Inc.,
109 Cal.App.4th 944, 956 (2003) (citation omitted).
if a party enters into a settlement agreement knowingly and
voluntarily, the agreement is treated as a binding contract
and the party is precluded from raising the underlying
claims." Arnold v. United States, 816 F.2d
1306, 1309 (9th Cir. 1987) (citation omitted); Folsom v.
Butte Cty. Assn. of Gov’ts, 32 Cal.3d 668, 677
(1982) ("Compromise has long been favored. . . . [A]
valid compromise agreement has many attributes of a judgment,
and in the absence of a showing of fraud or undue influence
is decisive of the rights of the parties thereto and operates
as a bar to the reopening of the original controversy."
(quotations omitted)). "However, if one party breaches a
settlement, the other has the option of enforcing the terms
of the settlement or rescinding the settlement and suing on
the original claims." Arnold, 816 F.2d at 1309
(citation omitted) (noting "for example, that the
government could reinstate its case against a defendant if
the defendant breached a settlement agreement."
Civil Code section 1689 provides in pertinent part that a
contract may be rescinded where (1) consent was "given
by mistake, or obtained through duress, menace, fraud, or
undue influence, exercised by or with the connivance of the
party as to whom he rescinds . . . ."; (2) consideration
fails through the fault of the party as to whom he rescinds;
(3) consideration "becomes entirely void from any
cause"; or (4) consideration, before it is rendered to
the rescinding party, "fails in a material respect from
any cause"; (5) "the contract is unlawful for
causes which do not appear in its terms or conditions, and
the parties are not equally at fault"; and (6) "the
public interest will be prejudiced by permitting the contract
to stand." Cal. Civ. Code § 1689(b).
argue the settlement agreement should be rescinded because:
(1) "City Defendants materially violated Settlement Term
No. 2, and did so in bad faith, resulting in Plaintiffs not
receiving the vital consideration of removal of
McGrew[;]" (2) Plaintiffs were "prejudiced during
settlement negotiations" because (i) "City
Defendants failed to produce documents material to
settlement before the Settlement Agreement was reached";
(ii) Plaintiffs were "ignorant of newly discovered facts
material to settlement"; and (iii) McGrew and City
Defendants were "fraudulent[ly] silen[t] on facts
material to settlement[;]" (3) "Plaintiffs agreed
to the settlement terms under the duress of
circumstances[;]" and (4) "The public interest will
be damaged by permitting the agreement to stand."
Pls.' Mot. at 2. Meanwhile, in opposing Defendants'
Motion to Enforce, Plaintiffs also claim, among other things,
that the agreement as to Term No. 2 is void, involving an
agreement to agree in the future. Pls.' Opp'n at 6-7,
Dkt. No. 200. The Court addresses these arguments below.