Lojy Air Company, Inc. v. Global Financial & Leasing, Inc. et al

Filing 58

ORDER - The Court ADOPTS IN PART the Findings and Recommendation (ECF 54 ). The Court adopts the Findings of Fact. The Court, however, declines to adopt the Conclusions of Law. For the reasons discussed in this Order, the Court DENIES Defendants' Motion to Enforce Settlement (ECF 26 ). Signed on 3/22/2022 by Judge Michael H. Simon. (mja)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

LOJY AIR COMPANY, an Egyptian
Corporation,

Case No. 3:17-cv-920-YY
ORDER

Plaintiff,
v.
GLOBAL FINANCIAL & LEASING, INC.,
an Oregon corporation, and RICHARD
KEITH WARD,
Defendants.

Michael H. Simon, District Judge.
United States Magistrate Judge Youlee Yim You issued Findings and Recommendation
in this case on January 10, 2022. Judge You recommended that this Court grant Defendants’
motion to enforce settlement.
Under the Federal Magistrates Act (Act), the Court may “accept, reject, or modify, in
whole or in part, the findings or recommendations made by the magistrate.” 28 U.S.C.
§ 636(b)(1). If a party objects to a magistrate judge’s findings and recommendations, “the court
shall make a de novo determination of those portions of the report or specified proposed findings
or recommendations to which objection is made.” Id.; Fed. R. Civ. P. 72(b)(3).

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For those portions of a magistrate judge’s findings and recommendations to which neither
party has objected, the Act does not prescribe any standard of review. See Thomas v. Arn, 474
U.S. 140, 152 (1985) (“There is no indication that Congress, in enacting [the Act], intended to
require a district judge to review a magistrate’s report to which no objections are filed.”); United
States. v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) (holding that the court
must review de novo magistrate judge’s findings and recommendations if objection is made, “but
not otherwise”). Although in the absence of objections no review is required, the Act “does not
preclude further review by the district judge[] sua sponte . . . under a de novo or any other
standard.” Thomas, 474 U.S. at 154. Indeed, the Advisory Committee Notes to Fed. R. Civ.
P. 72(b) recommend that “[w]hen no timely objection is filed,” the Court review the magistrate
judge’s recommendations for “clear error on the face of the record.”
Plaintiff timely filed an objection, to which Defendants timely responded. Plaintiff
objects to the portion of the Findings and Recommendation concluding that the parties reached
an enforceable settlement agreement and recommending that the Court grant Defendants’
motion. Plaintiff argues that no meeting of the minds occurred on all material terms of the
purported settlement agreement and that no enforceable settlement agreement was reached. The
Court has reviewed the issue de novo and declines to adopt the legal conclusions of the Findings
and Recommendation.
The Court adopts the Findings of Fact in the Findings and Recommendation. As
described by Judge You, after Plaintiff settled a lawsuit with Defendants, Defendants allegedly
defaulted on the settlement and Plaintiff filed this suit seeking $750,000. Defendants then made
an offer to Plaintiff to settle this dispute for $10,000 “payable within 15 days of execution of a
settlement agreement and release of Defendants.” ECF 47 at 5 (Defs. Ex. 101 at 2) (emphasis

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added). Plaintiff and his attorney discussed Defendants’ settlement offer and precarious financial
situation, and the Court agrees and finds that the evidence supports the conclusion that Plaintiff
eventually agreed on January 9, 2019 to accept $10,000. The evidence, however, does not show
that Plaintiff ever agreed to release Defendants. When Plaintiff’s counsel conveyed Plaintiff’s
agreement to the settlement, counsel conveyed that Plaintiff agreed to accept $10,000 without
mentioning any release. In response, Defendants’ counsel again emphasized the release clause.
As of January 9, 2019, there was no enforceable settlement agreement between the
parties because the parties did not have a meeting of the minds with respect to all of the material
terms. The original offer by Defendants included the key terms of a $10,000 payment and a
release of Defendants. Plaintiff never accepted that offer. At most, Plaintiff accepted the $10,000
but did not accept the release clause. The parties did not discuss the parameters of the release or
come to the same understanding of its meaning and thus did not have a meeting of the minds on
this material term. See, e.g., Kaiser Found. Health Plan of the Nw. v. Doe, 136 Or. App. 566, 575
(1995) (looking at the parties’ objective manifestations to see if they agreed upon the meaning of
a release clause and thus had a meeting of the minds).
Defendants argue in response to Plaintiff’s objections that the release clause was not a
material term, but the contemporaneous correspondence belies that assertion. The release clause
was repeatedly emphasized by Defendants and repeatedly added back into the contract after
Plaintiff removed it. “A term is ‘material’ to an enforceable agreement when it goes to the
substance of the contract and, if breached, defeats the object of the parties in entering into the
agreement.” Johnstone v. Zimmer, 191 Or. App. 26, 34 (2003). “A term may be material in one
situation and immaterial in another, depending on the specific facts and circumstances.” Reed v.
Ezelle Inv. Props. Inc., 353 F. Supp. 3d 1025, 1033 (D. Or. 2018). A key objective for

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Defendants in entering a settlement was getting a release of all claims by Plaintiff. Under the
circumstances of this case, the release clause was material.
The Court next considers whether at any later point the parties entered into an
enforceable settlement agreement. Defendants later sent a written settlement agreement draft that
included a release clause. On February 7, 2019, Plaintiff refused to sign the draft with the release
clause. Plaintiff also instructed his counsel at that time that he refused to settle the entire case for
only $10,000. Plaintiff stated that he would only settle the entire case for $150,000 and for
$10,000 he would “issue the agreement.” The next day, Plaintiff sent his counsel a draft
proposed settlement agreement that removed all clauses except the payment clause and the
clause establishing that Plaintiff will dismiss this lawsuit. The payment clause, however,
included only a $10,000 payment, not a $150,000 payment. Thus, although Plaintiff expressly
instructed counsel to inform Defendants that Plaintiff would only settle for $150,000 and for
$10,000 would enter into the agreement, the draft proposed agreement that Plaintiff provided
included only the $10,000 payment. On February 14, Plaintiff sent his attorney a proposed
revised settlement agreement, which followed the draft that Plaintiff had previously sent and
contained only the $10,000 payment clause and the dismissal clause. Plaintiff stated that it is the
only agreement he would sign, “no more no less.” Plaintiff’s counsel then forwarded this revised
agreement to Defendants and did not say anything regarding a $150,000 settlement.
Defendants accepted the removal of all clauses except the release clause, re-inserted that
clause, and returned a revised settlement agreement to Plaintiff on February 19, 2019. That same
day, Plaintiff sent a “counter settlement” to his attorney to send to Defendants. This proposed
settlement agreement again did not include a release and only included the payment and
dismissal clauses. On February 21, Plaintiff’s attorney sent Plaintiff another revised version that

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again had the release clause re-inserted. Plaintiff refused to accept the revised settlement
agreement. Counsel for Defendants eventually stated on March 12 that Defendants would sign
the settlement agreement without the release clause, as proposed by Plaintiff on February 15,
2019.
Plaintiff’s counsel did not convey Plaintiff’s February 7th refusal to settle the entire case
for $10,000 and apparent offer to settle the case for $150,000, with $10,000 to enter into the
agreement. Defendants continued to believe that Plaintiff was in general agreement to settle the
entire case for only $10,000, albeit the parties were still negotiating the release clause. Even
assuming that Plaintiff’s counsel did not have actual authority as of February 7th to settle for
only $10,000, which is unclear based on Plaintiff’s equivocal correspondence—on February 7th
revoking settlement authority for the $10,000 amount and on February 8th proposing a
settlement agreement for only $10,000—Plaintiff’s counsel may have had apparent authority.
Retaining an attorney, however, is not, by itself, sufficient to create apparent authority to
enter into a binding settlement agreement. See Johnson v. Tesky, 57 Or. App. 133, 137-38
(1982). Authorizing negotiations with an opposing party also does not, on its own, create
apparent authority to approve a settlement agreement. Id. at 136-37. In this case, however,
Plaintiff authorized his attorney to accept the $10,000 and enter into the settlement agreement. In
doing so, that created counsel’s authority with respect to the terms of the settlement agreement.
See Kaiser Found., 136 Or. App. at 574 (“In this case, defendant authorized more than just
negotiations; when Kaplan conveyed the offer to her, she told him to accept it. . . . [A]t the very
least, Kaplan had apparent authority to settle defendant’s claim on her behalf, and Kaplan
accepted the arbitration provision as part of the settlement.”). Thus, even if Plaintiff revoked
counsel’s actual authority to accept $10,000, counsel’s apparent authority remained.

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Because Plaintiff’s counsel had at least apparent authority to settle the case for $10,000,
when he conveyed Plaintiff’s draft of the settlement agreement to Defendants on February 15,
2019, that was a counteroffer. Defendants, however, responded with another counteroffer by
submitting a revised version of the agreement on February 19, which Plaintiff rejected and
further countered. Defendants responded to Plaintiff’s draft agreements with versions that had
releases. No party ever accepted the other party’s version. Thus, no party ever accepted an offer,
or counteroffer, made by the other party. Defendants later, on March 12, 2019, attempted to
accept Plaintiff’s February 15th counteroffer by stating that Defendants now would sign that
version of the settlement agreement. Defendants, however, had the opportunity to accept that
offer and chose not to do so. Instead, Defendants responded with a counteroffer by returning a
revised version of the settlement agreement with a release clause included. Returning a contract
with a term added or deleted is a rejection and counteroffer, not an acceptance and formation of a
contract. See, e.g., Reed, 353 F. Supp. 3d at 1033 (“Ezelle did not accept Reed’s offer, but
instead rejected it and made a counteroffer by returning the Proposed Settlement Agreement with
the confidentiality clause crossed out.”).
Defendants lost the opportunity to accept Plaintiff’s February 15, 2019 counteroffer when
Defendants countered that offer, and Defendants could not later go back and accept that
counteroffer. See, e.g., Collins v. Thompson, 679 F.2d 168, 171 (9th Cir. 1982) (“Generally,
rejection or counteroffer terminates the power to accept the previously-made offer.”);
Restatement (Second) of Contracts § 39 (1981) (“An offeree’s power of acceptance is terminated
by his making of a counter-offer, unless the offeror has manifested a contrary intention or unless
the counter-offer manifests a contrary intention of the offeree.”). On March 12, 2019, there was
no pending counteroffer by Plaintiff for Defendants to accept and Defendants could not go back

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and accept the previous counteroffer of February 15, 2019. Thus, there was no offer and
acceptance, and there was no enforceable settlement contract was made between the parties.
The Court ADOPTS IN PART the Findings and Recommendation (ECF 54). The Court
adopts the Findings of Fact. The Court, however, declines to adopt the Conclusions of Law. For
the reasons discussed in this Order, the Court DENIES Defendants’ Motion to Enforce
Settlement (ECF 26).
IT IS SO ORDERED.
DATED this 22nd day of March, 2022.
/s/ Michael H. Simon
Michael H. Simon
United States District Judge

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