Johnson et al v. City of Atwater et al

Filing 72

FINDINGS and RECOMMENDATIONS recommending that Plaintiffs motion to enforce the settlement agreement should be DENIED; re 66 MOTION to ENFORCE JUDGMENT ; Plaintiffs Motion for Attorneys Fees and Costs in the amount of $2,000 for enforcing the settlement should be DENIED; referred to Judge Ishii,signed by Magistrate Judge Barbara A. McAuliffe on 08/16/2018. Objections to F&R due 14-Day Deadline (Martin-Gill, S)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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RICHARD DEAN JOHNSON and LORI
JOHNSON,
Plaintiffs,

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v.

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Case No. 1:16-cv-1636-AWI-SAB
FINDINGS AND RECOMMENDATIONS
DENYING PLAINTIFFS’ MOTION TO
ENFORCE SETTLEMENT AGREEMENT
AND FOR ATTORNEYS FEES AND COSTS

CITY OF ATWATER, et al.,
Defendants.

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I.

INTRODUCTION

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Plaintiffs Richard and Lori Johnson (“Plaintiffs”) move to enforce a settlement agreement

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with Defendants City of Atwater, Frank Pietro, David Walker, Robert Vargas, Dayton Snyder,

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and Fabian Velasquez (“Defendants”) negotiated before Magistrate Judge Barbara A. McAuliffe

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and subsequently placed on the record in open court on March 27, 2018.1 (Doc. 66). On July 13,

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2018, Defendants filed an opposition to the motion. (Doc. 69). Finding the matter suitable for

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disposition without oral argument, the Court took the matter under submission on July 24, 2018.

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(Doc. 70). For the reasons discussed below, the Court RECOMMENDS that Plaintiffs’ Motion

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be DENIED.

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The remaining defendants are David Walker and Fabian Velazquez.

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II.

BACKGROUND

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This action arises out of a longstanding dispute between the Johnsons and the City of

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Atwater over the non-payment of the Johnsons’ water bill. Plaintiffs filed this action in the

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Superior Court for the County of Merced on September 20, 2016, alleging various constitutional

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and state law violations. On October 28, 2016, this action was removed by Defendants to the

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Eastern District of California. Defendants’ moved dismiss on March 17, 2017, and Plaintiffs’

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filed a second amended complaint on May 15, 2017. (Doc. 27). Defendants moved for partial

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summary judgment on November 29, 2017 and District Judge Anthony W. Ishii ruled on the

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motion January 24, 2018. (Doc. 45). Counsel for the parties attended a pretrial conference with

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Judge Ishii on February 8, 2018. At the pretrial conference, Plaintiffs’ requested leave to

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supplement their complaint based on events occurring in September and October of 2017,

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approximately a year after Plaintiffs filed their initial complaint. Judge Ishii suggested Plaintiffs

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apply for a continuance. (Doc. 50). On February 15, 2018, the parties stipulated to a short

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continuance of the trial date “so that the parties may attempt to take advantage of a settlement

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conference” with the Court. (Doc. 50).

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On March 27, 2018, the parties participated in a settlement conference before Magistrate

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Judge Barbara A. McAuliffe.

After conducting a morning session, the parties reached an

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agreement and the settlement agreement was placed on the record in open court. Before the terms

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of the settlement were read on the record, the Court admonished the parties and counsel about the

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importance of putting a settlement on the record. The Court placed the following relevant

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settlement terms on the record as follows:

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Defendants to pay to Plaintiffs a sum total of $75,000. (Doc. 66-1 at 4:10)

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2.

The $75,000 represents settlement of all claims involved in Case No. 1:16-cv-

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01636 against Defendants Walker and Velazquez. (Doc. 66-1 at 4:13-14.)
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The $75,000 also represents settlement of all claims arising from the October 9,

2017, incident. (Doc. 66-1 at 4:15.)
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The $75,000 also represents settlement of all claims arising from an incident in

September 2017 regarding payment of a water bill. (Doc. 66-1 at 5:4-21.)
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The Court specifically retains jurisdiction over the terms of the settlement. (Doc.

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66-1 at 11:9- 9.)

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The parties agree that a standard settlement agreement will be executed, with a

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release of all claims, including the standard release of all claims, knowing and unknown, arising

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from the incidents of October 9, 2017, and the incidents arising in this case, Case No. 16-1636.

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At the conclusion of the morning session, the Court found that “the parties have entered in

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a knowing, intelligent, and voluntary settlement of the claims in this case as well as the other

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incidences that the Court has explained here on the record and, therefore,…the settlement has

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been entered into.” The parties were excused.

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After the morning session, Defendants contacted the Courtroom Deputy by phone

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requesting that the Court allow the parties to appear again on the record in the afternoon to clear

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up misunderstandings that came to light during the lunch hour. (Doc. 60-1 at 14).

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approximately 2:55 p.m. the parties returned to the courtroom, stated their appearances on the

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record, and counsel for Defendants explained that he recently became aware that Plaintiffs were

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considering pursuing additional and potentially related claims against the City of Atwater and its

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employees. Counsel for Defendants argued that these additional claims would be inappropriate

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based upon his understanding that the settlement “wiped the slate clean;” resolving all of

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Plaintiffs’ currently existing claims and/or causes of action against the named Defendants

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remaining in this case as well as against the City of Atwater and all of its employees. (Doc. 66-1

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at 13). Having learned that Plaintiffs intend to bring previously undisclosed claims, Defendants

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argued that the settlement agreement did not reflect a true meeting of the minds regarding the

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settlement terms.

At

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Counsel for Plaintiffs, Kerry Margason, responded that she was unaware that there might

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be potential other claims while she was negotiating the morning settlement, however she never

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intended “to do some global wipe the slate clean.”

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stated:

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MS. MARGASON:

(Doc. 66-1 at 14). Counsel for Plaintiffs

After speaking, after this issue was brought up and speaking with
my clients, Your Honor, there appear to be some potential to—I
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have to tell you. I have not vetted any claims. It’s the first time I've

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heard about them, so I don’t have details and I don’t have specific

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facts. But there may be some potential claims regarding defamation

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and some illegal entry and arrests against the City and the police

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force.

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THE COURT:

Arrests unrelated to the ones that we talked about?

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MS. MARGASON:

Unrelated to what we talked about and what we’ve been talking

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about for the last—yes, completely unrelated.

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After hearing arguments, the Court took a recess to give Plaintiffs’ counsel an opportunity

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to speak to her clients about the nature of their proposed claims. The hearing resumed and

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Plaintiffs’ counsel stated “we, do not want to make a global settlement. My clients are not in

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agreement on that. So we, we would want to not to be held to the settlement agreement if it

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includes those other items.” (Doc. 66-1 at 20). The Court advised Defendants that they would

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have until April 16, 2018, to decide whether to agree that there was no meeting of the minds with

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respect to the settlement agreement or file a motion to enforce the settlement agreement as read

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on the record. (Doc. 66-1 at 20).

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On April 4, 2018, Defendants filed a “Notice of No Meeting of the Minds.” (Doc. 57).

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On July 8, 2018, Plaintiffs filed Johnson v. City of Atwater alleging constitutional and state law

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claims related to the “longstanding and ongoing dispute” with the City of Atwater over Plaintiffs’

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“water service.” See Johnson v. City of Atwater, United States District Court, Eastern District of

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California, Case No. 1:18-cv-00920-DAD-SAB, Doc. No. 1 (“Johnson II”). Plaintiffs’ complaint

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in Johnson II states that following the filing of the underlying case, “additional events have taken

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place that are ‘closely related’ to the underlying action. Plaintiffs’ Compl. Johnson II, No. 18-cv-

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920, Doc. 1.

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On May 14, 2018, Plaintiffs filed the instant motion to enforce the settlement agreement.

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(Doc. 66). The parties now dispute whether the settlement’s release of claims was intended to

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include all claims which could be asserted and/or had been asserted by Plaintiffs at the time of

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settlement.
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III.

LEGAL STANDARD

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“[I]t is [] well settled in the usual litigation context that courts have inherent power

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summarily to enforce a settlement agreement with respect to an action pending before it.”

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Dacanay v. Mendoza, 573 F.2d 1075, 1078 (9th Cir. 1978) (citations omitted). “[A] motion to

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enforce [a] settlement agreement essentially is an action to specifically enforce a contract,” and

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“[a]n action for specific performance without a claim for damages is purely equitable and

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historically has always been tried to the court.” Adams v. Johns-Manville Corp., 876 F.2d 702,

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709 (9th Cir. 1989) (internal citations omitted).

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“Under California law, the intent of the parties determines the meaning of the contract.”

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United Commercial Ins. Serv., Inc. v. Paymaster Corp., 962 F.2d 853, 856 (9th Cir. 1992) (citing

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Cal. Civ. Code §§ 1636, 1638). The proper inquiry is the parties’ objective intent, “that is, the

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intent manifested in the agreement and by surrounding conduct—rather than the subjective beliefs

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of the parties.” Id. Therefore, if a party does not express his or her true intent as to the meaning of

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a material term of a settlement agreement, that subjective intent is irrelevant. Id. Moreover, when

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parties intend that an agreement be binding, the fact that a more formal agreement must be

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prepared and executed does not alter the validity of the agreement. Blix Street Records, Inc. v.

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Cassidy, 191 Cal.App.4th 39, 48 (2010).

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California has a strong policy in favor of enforcing settlement agreements. Osumi v.

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Sutton, 151 Cal. App. 4th 1355, 1357 (2007). A settlement agreement “must be interpreted as to

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give effect to the mutual intention of the parties as it existed at the time of contracting.” Roden v.

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Bergen Brunswig Corp., 107 Cal.App.4th 620, 625 (2003); see Cal. Civ. Code § 1636. “[C]ourts

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will not set aside contracts for mere subjective misinterpretation.” Hedging Concepts, Inc. v. First

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Alliance Mortg. Co., 41 Cal.App.4th 1410, 1421 (1996).” A settlement agreement, like any other

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contract, is unenforceable if the parties fail to agree on a material term or if a material term is not

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reasonably certain.” Lindsay v. Lewandowski, 139 Cal.App.4th 1618, 1622 (2006).

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An essential element of any contract is “consent” to — or a “meeting of the minds” on —

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the agreement’s material terms. See Weddington Prods., Inc. v. Flick, 60 Cal. App. 4th 793, 810-

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14, 71 Cal. Rptr. 2d 265 (1998). To be enforced, a settlement must also meet two specific
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requirements: (1) it must be a complete agreement; and (2) the settling parties must have either

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agreed to the terms of the settlement or authorized their respective counsel to settle the dispute.

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Callie v. Near, 829 F.2d 888, 890 (9th Cir. 1987); Harrop v. W. Airlines, Inc., 550 F.2d 1143,

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1144-45 (9th Cir. 1977); Hamilton v. Willms, No. CV F 02-6583 AWI SMS, 2007 U.S. Dist.

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LEXIS 21336, 2007 WL 707518, at *9 (E.D. Cal. Mar. 6, 2007). “Under California law,”

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moreover, “the intent of the parties determines the meaning of the contract.” United Commercial,

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962 F.2d at 856 (citing Cal. Civ. Code §§ 1636, 1638). “The relevant intent is ‘objective’—that

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is, the intent manifested in the agreement and by surrounding conduct — rather than the

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subjective beliefs of the parties.” Id. Therefore, if a party does not express its true intent as to the

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meaning of a material term of a settlement agreement, that subjective intent is “irrelevant.” See id.

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IV.

ANALYSIS

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In the instant case, the Court finds that there was no meeting of the minds as to the

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material terms of the settlement agreement. As preserved on the record, it is obvious that the

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parties failed to reach an agreement on the essential terms of the contract. While Plaintiffs’

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objective intent during the negotiations was to wipe the slate clean and “be done” with

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defendants, and defendants too wished to wipe the slate clean, each party was negotiating to settle

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different claims. Plaintiffs intended to settle only some of the claims they alleged against

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Defendants, while preserving other undisclosed, but related claims.

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Plaintiffs’ counsels statement that at the time of settlement, she was unsure of the details

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regarding the new claims sought by Plaintiffs. “Some of the [new] issues, I can’t even give you

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dates. I, I’m not even sure. I don’t know if timely claims have been made to the City. I, I don’t

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know. I have had no opportunity to review or vet the issues.” (Doc. 66-1 at 19).

This is evidenced by

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Defendants, on the other hand, intended to settle all existing claims in addition to the

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claims asserted in the underlying complaint. Counsel for Defendants stated that “we were under

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the, I believe, the same understanding as the Court, that that was everything that was out there

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and that’s why we raised the number in our discussion to settle any and all outstanding claims.”

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(Doc. 66-1 at 17).

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Similarly, the Court was unaware of any other outstanding claims not incorporated in the
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intended settlement agreement or encompassed by the negotiations. The Court stated on the

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record, “I didn’t understand it to be from October to the present because I wasn’t made aware of

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anything and I certainly made it clear that you would be waiving any and all claims related to

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these incidences and anything that arose out of it.” (Doc. 66-1 at 19).

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The Court is therefore not convinced that the parties entered into an enforceable

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agreement because there was not a meeting of the minds on Plaintiffs desire to retain the right to

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bring additional related claims against Defendants. Plaintiffs have failed to meet their burden in

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this respect, and the Court cannot enforce an agreement to which both parties did not mutually

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assent. “The whole concept of a settlement is that it is a voluntary agreement between the parties

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to resolve a lawsuit on mutually acceptable terms. That concept is defeated when the court

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imposes terms on one of the parties which that party did not intend to accept. Here, it appears that

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the parties never had a meeting of the minds. If they cannot agree on what their purported

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settlement covered then they do not have a settlement agreement.” See Wallis v. Centennial Ins.

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Co., 2010 U.S. Dist. LEXIS 63200 (E.D. Cal. June 24, 2010). Without a clear meeting of the

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minds on an essential term, the settlement agreement is not an enforceable contract.2

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V.

CONCLUSION and RECOMMENDATIONS

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For the reasons stated above, IT IS HEREBY RECOMMENDED that

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Plaintiffs’ motion to enforce the settlement agreement should be DENIED;

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Plaintiffs’ Motion for Attorneys’ Fees and Costs in the amount of $2,000 for

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enforcing the settlement should be DENIED.

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These findings and recommendations are submitted to the district judge assigned to this

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action, pursuant to Title 28 of the United States Code section 636(b)(1)(B) and this Court’s Local

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Rule 304. Within fourteen (14) days of service of this recommendation, any party may file

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written objections to these findings and recommendations with the Court and serve a copy on all

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parties. Such a document should be captioned “Objections to Magistrate Judge’s Findings and

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Recommendations.”

The district judge will review the magistrate judge’s findings and

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The Court also considers that it would be manifestly unfair to enforce an agreement which left some related
claims pending against defendants where defendants were negotiating from a position of settling any and all claims.

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recommendations pursuant to Title 28 of the United States Code section 636(b)(1)(C). The

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parties are advised that failure to file objections within the specified time may waive the right to

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appeal the district judge’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

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IT IS SO ORDERED.

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Dated:

/s/ Barbara

August 16, 2018

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A. McAuliffe

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UNITED STATES MAGISTRATE JUDGE

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