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Maksoud v. Hopkins

United States District Court, S.D. California

July 17, 2019

DR. CHARBEL MAKSOUD, Plaintiff,
v.
HOPKINS et al., Defendants.

          REPORT AND RECOMMENDATION RE: SUMMARILY ENFORCING SETTLEMENT AGREEMENT AND ENTERING JUDGMENT

          WILLIAM V. GALLO, UNITED STATES MAGISTRATE JUDGE

         Having reached agreement to settle this case and placed the material terms on the record before this Court, Defendant Guelton thereafter purportedly remembered he had signed a release agreement that critically relates to one of those settlement terms. This release agreement was previously undisclosed to Plaintiff. Guelton now declines to sign a written settlement agreement with the original terms he agreed to on the record unless an additional term is included that requires Plaintiff to indemnify him in the event he is sued for breach of the recently-disclosed release agreement down the road. In the alternative, Guelton wishes to set aside the settlement and proceed to trial. For his part, Plaintiff wishes to have the original terms enforced without an indemnity provision that he never agreed to. Accordingly, the Court must now determine whether to enforce the original settlement terms placed on the record without any additional terms and accordingly enter judgment in this case; whether to enforce the original settlement terms but include Guelton's additional indemnity term; or whether to set aside the settlement in toto and proceed to trial. After careful consideration, this Court RECOMMENDS the first option: that the original terms placed on the record be enforced without any indemnification provision, final judgment be entered, and the case be closed.

         I. Background

         The tortured history of the settlement at issue is not surprising given the broader history of this contentious case. For purposes of this R&R, however, the Court picks up that history only with the most recent settlement proceedings that began in March of this year.

         The Court convened an in-person Mandatory Settlement Conference on March 25, 2019, but settlement was not reached that day. (Doc. No. 155.) However, the parties[1] were amenable to another settlement conference after exchanging some additional information and documentation. Specifically, Guelton had agreed to provide Plaintiff any information that could help Plaintiff determine the value of a proposed assignment of Guelton's legal claims against insurance carriers had-if any claims even existed. (Tr. (Apr. 10, 2019), [2]Doc. No. 182 at 6:7-7:7.) The Court set the next settlement conference for March 28, 2019. (Doc. No. 156.)

         When attorneys Lazo and Adli and their respective clients participated in the March 28, 2019 telephonic settlement conference, it came to light that the parties had not communicated at all since the original Mandatory Settlement Conference as they had agreed to do. (Tr. (Apr. 10, 2019), Doc. No. 182 at 6:21-7:16) Moreover, Guelton had not provided any documents or information to Plaintiff which would allow Plaintiff to determine the value of any assignable claims. (Id.) In light of the parties' complete failure of action and communication, the Court concluded the settlement conference and advised the parties to contact the Court if they needed further assistance after they had engaged in further settlement efforts.

         Then, on April 2, 2019, with trial scheduled for April 18, 2019, the parties reached a settlement of this case. On that date, this Court convened a teleconference with the parties and their counsel to memorialize the terms of the settlement on the record. (See generally Tr. (Apr. 2, 2019), Doc. No. 183 at 2-11.)[3] Attorney Marc Lazo appeared for Plaintiff Maksoud, who also participated in the teleconference. (Id. at 2.) Attorney Dariush Adli appeared for Defendant Guelton, who also participated. (Id.) Lazo recited the terms of the settlement, and all parties and counsel confirmed on the record that his recitation was accurate. (Id. at 7-9.) The following were the essential terms of the settlement that Lazo recited:

1. A lump sum payment of $17, 500 to Maksoud by Guelton within 10 days of execution of the settlement agreement.
2. Guelton would execute a written assignment of rights to Maksoud, assigning “rights to prosecute any and all claims against any and all insurance companies who could potentially have afforded coverage for Mr. Guelton's defense in this case.” This assignment would be “incorporated into the settlement agreement.”
3. A waiver of attorneys' fees and costs by both Maksoud and Guelton.

(Id. at 8.) The parties also agreed to “execute any additional documentation necessary to consummate the settlement.” (Id.) After confirming that the above terms were accurate, both Maksoud and Guelton stated they understood the terms and agreed to be bound by these terms. (Id. at 9.)

         Having memorialized the essential terms of the settlement, this Court then set a schedule for exchanging drafts of the settlement agreement, its execution, payment, and a deadline for filing a joint motion to dismiss. (Id. at 9-10.) Because the parties had resolved the case, the Court vacated the trial date and reminded the parties of their obligation to comply with this Court's Order setting the schedule for completing the settlement process. (Doc. No. 169.)

         The Court became aware of a problem with the settlement on or about April 9, 2019 and held a status conference on April 10, 2019. (Doc. Nos. 170 & 171.) Attorneys Lazo, Adli, and Ferrari participated on behalf of their respective clients. Lazo revealed that after the parties exchanged drafts of the settlement agreement, Defendant Guelton produced to Plaintiff a release agreement that had not been discussed or disclosed ever before.[4] (Doc. No. 182 at 2-3.) Executed by Guelton, this document was a release of all claims that Guelton may have held against his former employer and former defendant in this case, SheKnows Media. (Id.) The release further covered any bad faith claims that SheKnows may have had against its insurers. (Doc. No. 178-1 at 35.) Adli explained that he had not been aware that the release agreement existed until after he sent the written settlement agreement to Guelton for his review. (Doc. No. 182 at 3-4.)[5] It was only then that Guelton informed Adli that he had found the release agreement, which Guelton claims was one of several documents he had signed upon leaving SheKnows's employment and had apparently forgotten about. (Id.)

         After the release agreement came to light, Guelton requested that the settlement include a term whereby Plaintiff would indemnify Guelton in the event he is ever sued for breach of the SheKnows release agreement. (Id. at 3:6-12.) Plaintiff rejected this request and demanded that the settlement be upheld without any indemnity requirement. (Id. at 4-5.) Plaintiff wished to proceed with the settlement that was placed on the record notwithstanding the existence of the release agreement. (Id. at 4:15-21, 5:5) The Court suggested Plaintiff could file a motion to enforce the settlement and granted him leave to do so. (Doc. No. 182 at 9:24-25.) The Court accordingly directed the parties to further meet and confer about the settlement dispute and also agreed to accept a motion to enforce the settlement if the meet and confer efforts did not resolve the dispute. (Id. at 18:19-19:16; Doc. No. 172 at ¶ 1-3.) Accordingly, the Court issued a formal briefing schedule, requiring meet and confer efforts and setting a hearing date for a possible forthcoming motion. (Doc. No. 172.) If the meet and confer efforts were fruitless, Plaintiff was to file his motion no later than April 23, 2019, Guelton's opposition would have been due on May 1, 2019, and the “in-person” hearing would be held on May 31, 2019. (Id. at ¶ 3(a)-(d).)

         The deadline for filing a motion came and went without a motion being filed by Plaintiff or any further communication from the parties. However, after the deadline expired, the Court became aware that Plaintiff wished to file an untimely motion and convened a telephonic status conference, at which attorneys Lazo and Ferrari appeared to discuss the matter. (Tr. (Apr. 29, 2019), Doc. No. 180.) On that conference, the Court expressly denied Plaintiff leave to file the untimely motion but stated that the May 31 hearing would remain on calendar to allow the parties to appear and argue as they wished. Nonetheless, despite the Court's multiple and clear denials of leave, Plaintiff filed the motion anyway on May 3, 2019. (Doc. No. 177.) However, the Court declined to accept the untimely motion and struck it from the docket. (Doc. No. 178; see also Tr. (Apr. 29, 2019), Doc. No. 180 at 12:8-11.)[6]

         On May 31, 2019, as scheduled, the Court convened a hearing to allow the parties to be heard. Attorney Ferrari appeared for Guelton. However, despite the clear language in the Order setting the hearing and the Court's multiple references to the hearing being in person, Plaintiff's counsel failed to appear. (Doc. No. 172 at 2 (“If a motion is filed, an in-person attorneys-only hearing will be held before the undersigned on May 31, 2019 at 9:00 a.m. in Courtroom 2B of the Edward J. Schwartz United States Courthouse.”) (emphasis added); Tr. (Apr. 10, 2019), Doc. No. 182 at 20 (“We'll do that in person, in court, on the record. May 31st, 9 a.m. for the hearing.”) (emphasis added); Tr. (Apr. 29, 2019), Doc. No. 180 at 5 (“You can come in and argue on May 31st.”) (emphasis added), 6-7 (You all can come in on . . . May 31st. You can argue.”) (emphasis added), 7 (“Well, I'll let you come in and argue. I'll let you come in and make an argument.”) (emphasis added).)[7] The Court memorialized the purpose of that day's hearing and granted attorney Ferrari an opportunity to briefly speak, though the Court cautioned that it did not wish to turn the proceedings into an ex parte hearing given Plaintiff's failure to appear. The Court terminated the proceedings once Ferrari began to substantively argue that the settlement should be set aside in part due to a mistake of fact. (Doc. No. 181 at 5.) The Court concluded the hearing and continued to ponder how to proceed in this case resulting in the instant sua sponte Report and Recommendation.

         II. Legal Standard

         A district court retains the inherent power to summarily enforce settlement agreements entered into by the parties in cases pending before it. In re City Equities Anaheim, Ltd., 22 F.3d 954, 957 (9th Cir. 1994); Marks-Foreman v. Reporter Publ'g Co., 12 F.Supp.2d 1089, 1092 (S.D. Cal. 1998). This inherent authority applies to settlement agreements entered on the record but later reneged on by one party. See Henderson v. Yard House Glendale, LLC, 456 Fed.Appx. 701, 702 (9th Cir. 2011) (“The district court did not abuse its discretion in enforcing the settlement agreement after [Plaintiff] entered into it on the record in open court, but later refused to execute a formal agreement to dismiss the action. . . .”); Ewing v. K2 Prop. Dev., LLC, No. 16CV678-LAB(AGS), 2018 U.S. Dist. LEXIS 172810, at *6 (S.D. Cal. Oct. 4, 2018).

         To enforce a settlement agreement, two elements must be satisfied. Marks-Foreman, 12 F.Supp.2d at 1092. First, the settlement agreement must be complete. Id. (citing Maynard v. City of San Jose, 37 F.3d 1396, 1401 (9th Cir. 1994); Doi v. Halekulani Corp., 276 F.3d 1131, 1137 (9th Cir. 2002). Second, the settlement agreement must be the result of an agreement of the parties or their authorized representatives concerning the terms of the settlement. Marks-Foreman, 12 F.Supp.2d at 1092 (citing Harrop v. Western Airlines, Inc., 550 F.2d 1143, 1144-45 (9th Cir. 1977), Doi, 276 F.3d at 1137-38). Where parties raise objections after the parties agree to a settlement, the court may rightfully deny such objections. Harrop, 550 F.2d at 1144.

         “Assessing the validity of a settlement agreement . . . is a question of state contract law.” Golden v. Cal. Emergency Physicians Med. Grp., 782 F.3d 1083, 1087 (9th Cir. 2015) (“Typically, the construction and enforcement of settlement agreements are governed by principles of local law which apply to interpretation of contracts generally.” (internal quotation marks and citation omitted)). Under California law, a valid contract requires parties capable of contracting, consent, a lawful object, and consideration. Cal. Civ. Code § 1550; Lopez v. Charles Schwab & Co., Inc., 118 Cal.App.4th 1224, 1230 (Cal.Ct.App. 2004). “[U]nless a writing is required by the statute of frauds, oral settlement agreements are enforceable in the same manner as oral agreements in general.”[8] Nicholson v. Barab, 233 Cal.App.3d 1671, 1681 (Cal.Ct.App. 1991); see Id. at 1682 (listing California cases in which out-of-court oral settlement agreements were found to be enforceable).

         III. Discussion

         The question before this Court is whether the Court should enforce the original settlement terms placed on the record without any additional terms and accordingly enter judgment in this case, enforce the original settlement terms but include Guelton's additional indemnity term, or set aside the settlement in toto and proceed to trial. After careful consideration, this Court RECOMMENDS the first option: that the original terms placed on the record be enforced without any indemnification provision.

         A. The Terms of the April 2, 2019 Settlement on the Record Should Be Enforced and Judgment Should be Entered

          The key issues at play here include whether there was a meeting of the minds as to the terms placed on the record before the Court, whether the settlement is complete, and whether-as Guelton seems to contend-there was a mistake of fact that allows him to void the agreement. As explained below, the settlement agreement was complete and there was a meeting of the minds when the essential terms were placed on the record before this Court. Moreover, there was no mistake of fact. Assuming, for the sake of argument, that there was a mistake, any risk should be allocated to Guelton alone. Judgment should therefore be entered based on the terms placed on the record on April 2, 2019.

         The Court now addresses each of the elements of a binding contract under California Civil Code section 1550, which requires a valid contract to have parties capable of contracting, consent, a lawful object, and consideration.

         1. Parties Capable of Contracting

         Pursuant to California Civil Code section 1556, all persons are capable of contracting “except minors, persons of unsound mind, and persons deprived of civil ...


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