Vaughn v. Teran

Filing 116

ORDER Directing Parties to Submit Supplemental Briefing, signed by Magistrate Judge Helena M. Barch-Kuchta on 12/14/2023. Filing Deadline: 1/30/2023. (Maldonado, C)

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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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MARK A. VAUGHN,

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Plaintiff,

Case No. 1:17-cv-00966-NODJ-HBK
ORDER DIRECTING PARTIES TO SUBMIT
SUPPLEMENTAL BRIEFING

v.
(Doc. No. 99)
NURSE DURAN and TERAN,
JANUARY 30, 2023 DEADLINE
Defendants.

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Pending before the Court is the Motion to Enforce Settlement Agreement, filed by

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Plaintiff’s Counsel on May 17, 2023. (Doc. No. 99, “Motion”). As the Court advised the Parties

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at the telephonic status conference held on December 7, 2023, the Court intends to address the

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pending Motion by applying standard contract principles to the October 2022 Settlement

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Agreement resolving this litigation. As set forth below, the Court directs the Parties to submit

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supplemental briefing as to (1) whether the manner of payment of the settlement funds was a

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material term of the Settlement Agreement; (2) whether the Settlement Agreement is silent or

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ambiguous as to the manner of payment of the settlement funds, and if so; (3) what extrinsic

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evidence, if any, the Court should consider in supplying a missing term or interpreting the

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settlement agreement’s language regarding payment of those funds.

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LEGAL STANDARD
To guide the Parties in their briefing, the Court sets forth the basic principles it applies in

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interpreting the Settlement Agreement. Because the Settlement Agreement is explicitly governed

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by California law, (Doc. No. 100-1 at 4 ¶ 2), this Court applies California state law in interpreting

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the Agreement.

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An agreement to settle a legal dispute is a contract and its enforceability is governed by

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familiar principles of contract law. Miller v. Fairchild Indus., 797 F.2d 727, 733 (9th Cir. 1986);

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Village of Kaktovik v. Watt, 689 F.2d 222, 230 and n. 62 (D.C.Cir.1982). Each party agrees to

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“extinguish those legal rights it sought to enforce through litigation in exchange for those rights

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secured by the contract.” Village of Kaktovik, 689 F.2d at 230; Protective Closures Co. v. Clover

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Inds., Inc., 394 F.2d 809, 812 (2d Cir. 1968). Since consent decrees and orders have many of the

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attributes of ordinary contracts, they should be construed basically as contracts. Vertex

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Distributing, Inc., 689 F.2d at 892 (quoting United States v. ITT Continental Baking Co., 420

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U.S. 223, 236–37 (1975)). Furthermore, enforceability of these compromise agreements is

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favored in the law.

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The fundamental goal of contract interpretation is to give effect to the mutual intention of

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the parties at the time of contracting. Cal. Civ. Code § 1636; Morey v. Vannucci, 64 Cal.App.4th

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904, 912 (1998). A court must determine what the parties meant by the words used, in light of all

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the circumstances. Pac. Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co., 69 Cal.2d 33,

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38 (1968) (“PG&E”); Cal. Civ. Code § 1638.

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Contract language is ambiguous when it is susceptible to two or more reasonable

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constructions. E.M.M.I. Inc. v. Zurich American Ins. Co. 32 Cal.4th 465, 470 (2004) “‘[W]here

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the language of the contract is ambiguous, it is the duty of the court to resolve the ambiguity by

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taking into account all the facts, circumstances and conditions surrounding the execution of the

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contract.’”) Frankel v. Board of Dental Examiners, 46 Cal.App.4th 534, 544 (1996).

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Contract law allows admission of extrinsic evidence “to resolve an ambiguity,” even when

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the contract is an integrated agreement. WYDA Assocs. v. Merner, 42 Cal.App.4th 1702, 1710

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(1996); see also Cal. Code Civ. Proc § 1856(g); Winet v. Price, 4 Cal.App.4th 1159, 1165 (1992).

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Extrinsic evidence may be offered both to explain an obviously ambiguous term and to reveal a

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latent ambiguity. Pac. Gas & E. Co. v. G.W. Thomas Drayage etc. Co., 69 Cal.2d 33, 37 (1968);
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Emp’rs Reinsurance Co. v. Superior Court, 161 Cal.App.4th 906, 920 (2008).
“An agreement is not ambiguous merely because the parties (or judges) disagree about its

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meaning.” Abers v. Rounsavell, 189 Cal.App.4th 348, 356 (2010). Rather, the determination of

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ambiguity involves two steps. “First, the court provisionally receives (without actually admitting)

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all credible evidence concerning the parties' intentions to determine 'ambiguity,' i.e., whether the

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language is 'reasonably susceptible' to the interpretation urged by a party.” Winet, 4 Cal.App.4th

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at 1165. If the contract is not “‘reasonably susceptible’ to the interpretation urged,” then “the

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case is over.” S. Cal. Edison Co. v. Superior Court, 37 Cal.App.4th 839, 847–48 (1995). But

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“[i]f in light of the extrinsic evidence the court decides the language is ‘reasonably susceptible’ to

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the interpretation urged, the extrinsic evidence is then admitted to aid in the second step—

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interpreting the contract.” Winet, 4 Cal.App.4th at 1165. Because extrinsic evidence must be

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“relevant to prove a meaning to which the language of the contract is reasonably susceptible,” any

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extrinsic evidence must be tethered to specific contract language. Alameda Cnty. Flood Control

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v. Dep’t of Water Res., 213 Cal.App.4th 1163, 1188–89 (2013) (quoting Dore v. Arnold

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Worldwide, Inc., 39 Cal.4th 384, 391 (2006)) (emphasis omitted).

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Admissible extrinsic evidence includes: (1) the circumstances, under which the contract

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was made and the matter to which it relates (Cal. Civ. Code § 1647); (2) the parties’ statements

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during negotiations and communicated intent (Heston v. Farmers Ins. Group, 160 Cal.App.3d

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402, 412 (1984)); (3) the parties’ “course of dealing” and “course of performance,” including pre-

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dispute conduct (Cal. Code Civ. Proc. § 1856(c); City of Hope Nat’l Med. Ctr. v. Genentech, Inc.,

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43 Cal.4th 375, 393 (2008)); and (4) usage of trade (Id.; Midwest Television, Inc. v. Scott,

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Lancaster, Mills & Atha, Inc., 205 Cal.App.3d 442, 451 (1988) (“industry custom binds those

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engaged in the business even though there is no specific proof that the particular party to the

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litigation knew of the custom”) (citation omitted)).

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“Custom and usage of words in a certain trade are admissible to explain the meaning of

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the terms used in a contract” Horsemen’s Benevolent & Protective Assn. v. Valley Racing Assn.

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(1992) 4 Cal.App.4th 1538, 1560, or “to supply a missing term.” Midwest Television, Inc. v.

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Scott, Lancaster, Mills & Atha, Inc. 205 Cal.App.3d 442, 451 (1988); see also Varni Bros. Corp.
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v. Wine World, Inc., 35 Cal.App.4th 880, 889 (1995) [“ ‘Usage or custom may be looked to, both

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to explain the meaning of language and to imply terms . . . ”].) “Custom and usage may not[,

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however,] be used to vary the terms of the contract.” Horsemen’s, 4 Cal.App.4th at p. 1560.

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The use of extrinsic evidence is limited. First, a party’s undisclosed intent or

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understanding is not relevant. Founding Members of the Newport Beach Country Club v.

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Newport Beach Country Club, Inc., 109 Cal.App.4th 944, 956 (2003); Winet v. Price, 4

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Cal.App.4th 1159, 1166 (1992).

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Second, extrinsic evidence and other rules of construction may be used to interpret the
words chosen, but not to add, subtract, or vary the words used in the written agreement. See

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Wagner v. Columbia Pictures Indus., Inc., 146 Cal.App.4th 586, 592 (2007) (extrinsic evidence

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not credible because “it does not explain the contract language, it contradicts it.”); Bionghi v.

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Metro. Water Dist. of S. Cal., 70 Cal.App.4th 1358, 1364–65 (1999) (party cannot “smuggle

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extrinsic evidence to add a term to an integrated contract”); Appling v. State Farm Mut. Auto. Ins.

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Co., 340 F.3d 769, 778 (9th Cir. 2003) (extrinsic evidence cannot be used to graft on a “good

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cause” requirement); Levi Strauss & Co. v. Aetna Cas. & Surety Co., 184 Cal.App.3d 1479, 1486

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(1986) (“[t]he court does not have the power to create for the parties a contract which they did not

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make, and it cannot insert in the contract language which one of the parties now wishes were

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there.”) (citation omitted).

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Third, a written agreement “supersedes all the negotiations or stipulations concerning its

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matter which preceded or accompanied the execution of the instrument” (Cal. Civ. Code § 1625),

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and those terms “may not be contradicted by evidence of any prior agreement or of a

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contemporaneous oral agreement.” Cal. Code Civ. Proc. § 1856(a).

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Fourth, the terms of a writing may be “explained or supplemented by extrinsic evidence of

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consistent additional terms,” but not if “the writing is intended also as a complete and exclusive

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statement of the terms of the agreement.” Cal. Code Civ. Proc. § 1856(b).

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QUESTIONS PRESENTED

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Considering the above principles, the Court directs the Parties to each brief the following
questions:

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1) Is the manner of paying Plaintiff the settlement funds a material term of the October

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2022 Settlement Agreement?

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2) Is the Settlement Agreement silent and/or ambiguous as to the manner of paying the

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stipulated settlement amount?

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3) If so, what extrinsic evidence, including of the types noted above, is relevant to

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interpret any ambiguous terms or supply missing terms in the Settlement Agreement?

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The Parties are invited to attach or otherwise reference any relevant extrinsic evidence

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to their briefing.

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Accordingly, it is ORDERED:

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1.

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the questions set forth above.

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No later than January 30, 2023, Plaintiff is directed to file a brief responding to

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Local Rule 230, as revised March 1, 2022, shall govern the filing of oppositions

and replies.

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Dated:

December 14, 2023
HELENA M. BARCH-KUCHTA
UNITED STATES MAGISTRATE JUDGE

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