2020 Processing LLC v. True Auto LLC et al

Filing 71

ORDER denying 65 Plaintiff's Motion to Enforce Settlement. Signed by Senior Judge James A Teilborg on 11/25/2014.(TLB)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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2020 Processing LLC,

No. 14-CV-00950-JAT

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Plaintiff,

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v.

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ORDER

True Auto LLC, et al.,

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Defendants.

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Pending before the Court is Plaintiff 2020 Processing LLC’s Motion to Enforce

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Settlement (Doc. 65). The Motion is fully briefed, including a Response by Defendant

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True Auto LLC (“True Auto”) to the Motion to Enforce (Doc. 69), and a Reply by

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Plaintiff to that Response (Doc. 70). The Court now rules on this Motion.

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I.

MOTION TO ENFORCE

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A.

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This case arises out of a trademark and copyright dispute. Eventually, the parties

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began negotiating a settlement, and this Motion seeks enforcement of an alleged

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agreement to settle pursuant to LRCiv 83.7.

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Background

During negotiations, Defendant drafted and made a settlement proposal to Plaintiff
on June 21, 2014. (Doc. 69, Ex. A). The draft proposed:
2) Within 30 days from the date of the Stipulation, True Auto will immediately
remove the term TRUE AUTO PROTECTION from its website and from all
marketing and advertising, including any electronic links on the web. The

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foregoing promise is limited to the term TRUE AUTO PROTECTION and is not
applicable to the term TRUE AUTO VEHICLE BREAKDOWN PROTECTION
and True Auto may use the term TRUE AUTO VEHICLE BREAKDOWN
PROTECTION in association with its goods and services.

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(Doc. 69-3, ¶ 2). According to one of Defendant’s attorneys, Mr. Bumgardner, the June

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21 proposal’s only contemplated change was “to change the banner on the website

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(www.trueautoprotection.com) from ‘TRUE AUTO PROTECTION’ to ‘TRUE AUTO

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VEHICLE BREAKDOWN PROTECTION.’” (Doc. 69-2, ¶ 4). On June 23, 2014,

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counsel for Plaintiff responded with proposed revisions to the June 21 proposal. (Doc.

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69-4). The proposed revisions by Plaintiff’s counsel were as follows:

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2) Within 30 days from the date of the Stipulation, True Auto will immediately
remove the term TRUE AUTO PROTECTION from its website and from all
marketing and advertising, including any electronic links on the web. The
foregoing promise is limited to the term TRUE AUTO PROTECTION and is not
applicable to the term TRUE AUTO VEHICLE BREAKDOWN PROTECTION
and True Auto may use the term TRUE AUTO VEHICLE BREAKDOWN
PROTECTION in association with its goods and services. True Auto may
continue to use the URL address/domain of “trueautoprotection.com” and
associated emails for forwarding purposes only for a period of six months from the
date of this Stipulation, after which the URL address shall no longer be utilized. In
no event shall the URL address/domain “trueautoprotection.com” be transferred or
assigned to any other individual or entity.

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(Doc. 69-4, ¶ 2). Mr. Bumgardner claims that during a phone call with Plaintiff’s counsel

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on June 27, 2014, he stated “True Auto will never accept any restrictions on the use of its

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domain name or email address.” (Doc. 69-2, ¶ 6). Mr. Bumgardner also alleges that he

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made Plaintiff’s counsel aware that Defendant rejected the June 23 counter proposal, and

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that Defendant would continue preparing for the impending preliminary injunction

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hearing if the domain name language was not removed. (Doc. 69-2, ¶ 6).

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Another of Defendant’s attorneys, Mr. Rastegar, alleges that during a July 22,

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2014, phone call with Plaintiff’s counsel he asked whether the “case would go away” if

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Defendant “[went] back to the old website banner”, to which Plaintiff’s counsel

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responded that it would “go a long way.” (Doc. 69-1, ¶ 3).

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On July 22, 2014, after the phone call, Defendant emailed Plaintiff a proposed

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settlement agreement as follows:

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1) Defendants will agree to remove the term TRUE AUTO PROTECTION from
its website and from all marketing and advertising, including any electronic links
on the web. Defendants may, however, use the term TRUE AUTO VEHICLE
BREAKDOWN PROTECTION.
2) Defendants will not provide any service contracts or administration services for
any program associated with or marketed under the term TRUE AUTO
PROTECTION.

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(Doc. 65, Ex. A). On July 23, 2014, Plaintiff’s counsel responded by asking Mr. Rastegar

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to inquire whether Defendant would be willing to reimburse a portion of Plaintiff’s

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attorneys’ fees as part of the settlement. (Doc. 65 at 11). On July 28, 2014, Rastegar

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responded, saying “[True Auto] is not willing to make any payments to [Plaintiff]. He is

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willing to do items 1 and 2 listed below.” (Doc. 65 at 10) (“items 1 and 2” referring to the

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paragraphs in the July 22 proposal). On July 29, 2014, Plaintiff’s counsel responded,

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“[m]y client has accepted the proposed settlement offer, which I have incorporated into

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the attached stipulation and order for filing with the Court.” (Doc. 65 at 10).

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The stipulation attached to Plaintiff’s July 29 email included the provisions from
the July 28th offer, and further provided:

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1) No later than ten business days following the entry of an Order approving this
Stipulation, Defendants agree to remove the term/phrase TRUE AUTO
PROTECTION from any website owned or utilized by Defendants and from all
marketing and advertising, including any electronic links on the web. Defendants
may, however, use the term TRUE AUTO VEHICLE BREAKDOWN
PROTECTION; and
2) Defendants agree not to provide any service contracts or administration services
for any program associated with or marketed under the term TRUE AUTO
PROTECTION.

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(Doc. 65, Ex. B). On July 31, 2014, in response to the July 29 stipulation, Defendant

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submitted a modified version of the stipulation. The modified stipulation provided:

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a) No later than ten business thirty calendar days following the entry of an Order
approving this Stipulation, Defendants agree to remove the term/phrase TRUE
AUTO PROTECTION from any website owned or utilized controlled by
Defendants and from all marketing and advertising, including any electronic links
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on the web (provided Defendants control such marketing and advertising).
Defendants may, however, use the term/phrase TRUE AUTO VEHICLE
BREAKDOWN PROTECTION; and
b) Defendants agree not to provide any service contracts or administration services
for any program associated with or marketed under the term/phrase TRUE AUTO
PROTECTION; and
c) Notwithstanding anything in this Stipulation to the contrary 1) Defendants may
use the term/phrase TRUE AUTO VEHICLE BREAKDOWN PROTECTION,
and 2) Defendants may continue to use the domain truautoprotection.com. Such
use may include a website at this domain, sending and receiving emails from this
domain, and using this domain in its marketing and advertising.

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(Doc. 65, Ex. C). Following this modified stipulation, in an email dated August 4, 2014,

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Plaintiff’s attorney rejected paragraph c.2 concerning use of the domain name

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trueautoprotection.com. (Doc. 65, Ex. A). However, Plaintiff’s attorney stated that

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Plaintiff was agreeable to the other changes Defendant made. (Id.)

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Plaintiff filed a Motion to Enforce Settlement based on its belief that a binding and
enforceable settlement exists and should be enforced. (Doc. 65 at 6)

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B.

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“No agreement between parties or attorneys is binding, if disputed, unless it is in

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writing signed by the attorney of record or by the unrepresented party . . . [however] in

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the interests of justice the Court shall have the discretion to reject any such agreement.”

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LRCiv 83.7.

Legal Standard

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A federal district court’s inherent authority allows it to enforce agreements that

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settle litigation before it. See In re City Equities Anaheim, Ltd., 22 F.3d 954, 957 (9th Cir.

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1994) (“This circuit also recognizes a trial court's inherent enforcement power.”); Calli v.

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Near, 829 F.2d 888, 890 (9th Cir. 1987). State contract law governs whether the parties

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“reached an enforceable agreement settling the federal and state law claims.” Wilcox v.

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Arpaio, 753 F.3d 872, 876 (9th Cir. 2014); see Botefur v. City of Eagle Point, Or., 7 F.3d

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152, 156 (9th Cir. 1993) (“a settlement agreement is governed by principles of state

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contract law . . . even where a federal cause of action is ‘settled’”).

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In Arizona, “settlement agreements, including determinations as to the validity and

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scope of release terms, are governed by general contract principles.” Emmons v. Superior

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Court, 192 Ariz. 509, 512 (Ariz. Ct. App. 1998) (citing Hisel v. Upchurch, 797 F.Supp.

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1509, 1517 (D. Ariz. 1992)). General contract principles require, at a minimum, an offer,

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an acceptance, consideration, and adequate specification of terms so that obligations can

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be ascertained to have an enforceable contract. Rogus v. Lords, 804 P.2d 133, 135 (Ariz.

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Ct. App. 1991). Arizona law requires a mirror image acceptance of an offer to

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consummate an agreement. See Clark v. Compania Ganadera de Cananea, S.A., 385 P.2d

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691, 697 (Ariz. 1963). Thus, the addition of materially different terms to an agreement

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results in a purported acceptance instead being treated as a counteroffer containing the

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additional terms. See United Cal. Bank v. Prudential Ins. Co. of Am., 681 P.2d 390, 422–

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“It is well-established that before a binding contract is formed, the parties must

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mutually consent to all material terms. A distinct intent common to both parties must

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exist without doubt or difference, and until all understand alike there can be no assent.”

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Hill–Shafer P’ship v. Chilson Family Trust, 799 P.2d 810, 814 (Ariz. 1990) (en banc). “A

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manifestation of assent sufficient to conclude a contract is not prevented from doing so

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because the parties manifest an intention to memorialize their already made agreement in

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writing.” Rennick v. O.P.T.I.O.N. Care Inc., 77 F.3d 309, 313–14 (9th Cir. 1996) (citing

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Restatement (Second) of Contracts § 27 (1981)). However, “if a party knows that the

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other intends no obligation to exist until the written agreement is made, the earlier

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manifestation does not constitute a contract.” Rennick, 77 F.3d at 314 (citing Restatement

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(Second) of Contracts § 27 comment b). For a court to enforce the non-executed contract,

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the court must be able to determine that there was a manifestation of mutual assent.

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Johnson, 967 P.2d at 612. Thus, the Court must look to the surrounding circumstances to

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determine whether the parties intended their non-executed agreement to be immediately

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effective. Rennick, 77 F.3d at 314; see also Johnson, 967 P.2d at 612.

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C.

Analysis

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Plaintiff moves to enforce an alleged settlement agreement it entered with

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Defendant. Particularly, Plaintiff asserts that it entered into a binding contract with

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Defendant based on an email exchange from July 22, 2014 to August 4, 2014.

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Plaintiff asserts that all of the required elements of a binding settlement are

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present. (Doc. 65 at 5). Plaintiff claims that the email dated July 28, 2014 constituted an

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offer by Defendant. (Id.) Furthermore, Plaintiff claims that it “accepted the offer . . . and

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incorporated the terms into a proposed stipulation.” (Id.) Thus, Plaintiff argues that an

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offer, acceptance, and consideration were present making the agreement, which was

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signed by attorneys of record, binding pursuant to LRCiv 83.7. (Id.)

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Defendant does not dispute that the July 28 email was an offer. However,

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Defendant contends that Plaintiff did not accept the offer as tendered. (Doc. 69 at 10).

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Instead, Defendant argues that the stipulation attached to Plaintiff’s July 29 email

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contained material changes to the July 28 offer, making it a counteroffer. (Doc. 69 at 11).

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In the stipulation however, Plaintiff made two notable changes to the original

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terms as set forth in the July 22 email. First, Plaintiff included a ten day deadline in

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which Defendant would have to remove the term TRUE AUTO PROTECTION from its

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website. Second, it expanded the set of websites from which Defendant was to remove

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the term/phrase TRUE AUTO PROTECTION (originally it was just the website

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Defendant owned, but the stipulation included websites Defendant “utilized”). (Doc. 65

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at 15). Defendant rejected both of these alterations.

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Plaintiff’s addition to the stipulation, which would require Defendant remove the

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term/phrase TRUE AUTO PROTECTION from websites it utilized, materially altered

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the scope of the proposed agreement. Based on the correspondences, it appears

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Defendant’s intentions in negotiation were limited to potential changes to its website. For

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example, Defendant’s “only contemplated change was to change the banner on the

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website (www.trueautoprotection.com).” Also, Defendant’s counsel asked whether the

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case would go away if Defendant’s website went back to the old banner. Furthermore,

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Defendant expressly rejected the added language, replacing “utilized by [True Auto]”

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with “controlled by [True Auto].”

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By introducing the “utilized by” language, Plaintiff enlarged the scope of the

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agreement to websites which are not owned or controlled by Defendant. For example, a

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website utilized by the Defendant could potentially include a search engine not under

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Defendant’s control. If such a website contained the term/phrase TRUE AUTO

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PROTECTION, Defendant would be in violation of the alleged agreement. Based on

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Defendant’s actions throughout negotiation leading up to the proposed stipulation and its

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response to the stipulation, it is evident that Defendant did not intend to expand the

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agreement to cover any websites it did not own or control. Thus, the Court finds that the

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stipulation attached to plaintiff’s July 29 email was not a mirror image acceptance of the

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offer. Therefore, the Court finds that the stipulation attached to the July 29 email was a

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counteroffer.

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In response to the July 29 counteroffer, Defendant reviewed and modified the

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stipulation. (Doc. 65, Ex. C). Defendant added a third provision which preserved its use

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of the domain trueautoprotection.com. (Id.) In the June 21 proposal, Plaintiff made clear

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that it did not intend to allow continued use of said domain name beyond some relocation

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period, in this case six months. (Doc. 69-4, ¶ 2). Thus, the addition of the third provision

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by Defendant was a material alteration to the agreement and not a mirror image

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acceptance. Therefore, the modified stipulation attached to Defendant’s July 31 email

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rejected the July 29 counteroffer and constituted a new counteroffer. In response to this

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counteroffer, Plaintiff conceded some of the modifications, such as changing the ten

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business day requirement to a thirty calendar day requirement and changing the word

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“utilized” to “controlled.” (Doc. 65, Ex. A). However, in the same email, Plaintiff’s

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counsel explicitly rejected language in the third provision. (Id.) Plaintiff’s response was

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therefore another counteroffer, which was never accepted.

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Based on the foregoing, the Court finds that no binding agreement was created at

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any point during the correspondences at issue, nor was there a clear mutual assent

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between the parties as to the terms of settlement. The Court recognizes a series of

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counteroffers and rejections resulting in no enforceable settlement agreement. Therefore,

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the Court denies Plaintiff’s Motion to Enforce Settlement.

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II.

CONCLUSION

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Based on the foregoing,

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IT IS ORDERED that Plaintiff’s Motion to Enforce Settlement (Doc. 65) is

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DENIED.
Dated this 25th day of November, 2014.

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