Rob Thomas v. John Skipper "Skip" Woods et al

Filing 59

MEMORANDUM OPINION AND ORDER granting in part and denying in part 53 MOTION to Enforce SETTLEMENT AGREEMENT. (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

ROB THOMAS,

§
§

Plaintiff,

§
§

v.

§
§

JOHN SKIPPER "SKIP" WOODS,
BLIND SQUIRREL, LLC,
OUTLAW ENTERTAINMENT GROUP LLC,
and WARMONGER MEDIA, INC.,

§
§
§
§
§

Defendants.

CIVIL ACTION NO. H-14-2487

§
§

MEMORANDUM OPINION AND ORDER

Plaintiff Rob Thomas ("Plaintiff" or "Thomas") sued Defendant
John Skipper Woods and several affiliated entities (collectively,
"Defendants").
of 2014.

The parties filed a notice of settlement in August

Pending before the court is Plaintiff's Notice of Motion

and Motion to Enforce Settlement Agreement
(Docket Entry No. 53).

("Motion to Enforce")

For the reasons stated below, Plaintiff's

Motion to Enforce will be granted in part and denied in part.
I .

Thomas

originally

Superior Court,

filed

Background

this

case

in

Los

Angeles

County

and Defendants removed it to the United States

District Court for the Central District of California, invoking the
court's diversity jurisdiction. 1

lSee Notice of Removal,

Defendants then filed a motion to

Docket Entry No.1,

pp. 2-4.
Page
(continued ... )

dismiss for lack of personal jurisdiction. 2

Defendants also filed

a motion to transfer the case to the United States District Court
for
§

the

Southern

1404(a).3

District

of

Texas

pursuant

to

28

U.S.C.

While both motions were pending the parties mediated

the case before a retired superior court judge in Los Angeles. 4 On
August 26, 2014, the parties filed a notice of settlement, which
stated that the parties had "reached an agreement in principle for
the settlement of the case," and that they were "in the process of
obtaining and exchanging signatures on a settlement agreement that
will

resolve

their

dispute

in

its

entirety."s

The

parties

requested that the court retain jurisdiction to enforce the parties
obligations if necessary. 6

That same day the court entered an

1 ( • • • cont inued)
citations are to the pagination imprinted by the federal court's
electronic filing system at the top and right of the document.

2Notice of Motion and Motion of Defendants John Skipper
("Skip") Woods; Blind Squirrel, LLC; Outlaw Entertainment, LLC; and
Warmonger Media, Inc., to Dismiss for Lack of Personal Jurisdiction
and Insufficient Service of Process, Docket Entry No.7.
3Notice of Motion and Motion of Defendants John Skipper
("Skip") Woods; Bl ind Squirrel, LLC; Outlaw Entertainment, LLC; and
Warmonger Media, Inc. for Discretionary Transfer Pursuant to 28
U.S.C. § 1404(a), Docket Entry No. 36.
4Declaration of Brandon M. Tesser,
Enforce, Docket Entry No. 53-1, p. 2 ~6.

Exhibit 1 to Motion to

SNotice of Settlement, Docket Entry No. 45.
6Id.
-2-

order granting Defendants'
transferred

to

the

motion to

Southern

District

assigned to the undersigned judge.

The

transfer. 7
of

Texas,

where

case was
it

was

On September 12 and 17, 2014,

the parties exchanged signed copies of a "proposal," "intended to
be

binding

and

enforceable,"

which

laid

out

the

terms

of

a

settlement (the "Settlement Agreement") . a The Settlement Agreement
reads in relevant part:
1.

$175,000 payable as follows:
a)
$100k on the earlier of 12/1/14, or 90 days
from the date we have a signed agreement.
b)
$75k on the earlier of 4/1/14 (sic) or 210 days
from the date we have a signed agreement.

2.

Settlement payment to be secured by stipulated
judgment with penalty provision of $43k in the event
of default (25% of the settlement amount) .

3.

Beginning with residuals received October I, 2014,
Thomas to receive 20% of residuals paid to Woods (or
any of his loan out companies) for a term of 6 years
on the following projects only, except those marked
by an asterisk.
Thomas's share of residuals on
asterisked items will be for a total term of 8
years: [list of titles] .

11.

In the event of any disputes regarding the
settlement agreement, including enforcement,

the

70 r der Granting Defendants' Motion to Transfer Venue, Docket
Entry No. 46.

aS ee Exhibit H to Declaration of Rob Thomas, Docket Entry No.
56, pp. 4-11 (signed by Rob Thomas); Exhibit A to Declaration of
Brandon M. Tesser, Docket Entry No. 53-I, pp. 8-10 (signed by John
Skipper Woods as an individual and on behalf of Blind Squirrel,
LLC, Outlaw Entertainment, LLC, and Warmonger Media, Inc.).
-3-

prevailing party shall be entitled
his/its attorneys' fees and costs.

14.

recover

This proposal, when signatures have been exchanged,
is intended to be binding and enforceable pursuant
to section 664.6 of the California Code of Civil
Procedure or analogous federal law. 9

As of December 17,
payment,

to

and

2014,

Plaintiffs

settlement agreement. 10

Defendants had not
filed

their

made

Motion

their

to

Enforce

first
the

Defendants do not dispute that they failed

to make payments as required by the Agreement.
II.
A.

Analysis

The Settlement Agreement is Enforceable

"It is well established that courts retain the inherent power
to enforce agreements entered into in settlement of litigation
pending before them."
Cir.

1994)

(internal

Bell v. Schexnayder, 36 F.3d 447, 449 (5th
quotation

marks

and

citation

omitted).

"A settlement agreement, once entered into, cannot be repudiated by
either party and will be summarily enforced."
City of New Orleans, 731 F.3d 434, 439
Callie v. Near,

829 F.2d 888,

890

United States v.

(5th Cir. 2013); see also

(9th Cir.

1987)

("It is well

settled that a district court has the equitable power to enforce
summarily an agreement

to settle a

case pending before it.").

9S e ttlement Agreement, Exhibit A to Declaration of Brandon M.
Tesser, Docket Entry No. 53-I, pp. 8-9.
lOMotion to Enforce, Docket Entry No. 53.
-4-

"The authority of a trial court to enter a judgment enforcing a
settlement agreement has as its foundation the policy favoring the
amicable adjustment of disputes and the concomitant avoidance of
costly

and

time

consuming

573 F.2d 1075,

1078

power

authority

includes

No.

(9th Cir.
to

14-CV-03284-SI,

Mar. 11, 2015)

Dacanay

v.

Mendoza,

"The court's enforcement

1978)
award

either

Nemetona Trading Limited v.

performance."
L.L.C.,

litigation."

damages

or

specific

Kurt Orban Partners.

2015 WL 1065032,

at *5,

(N.D.

Cal.

{citing T.N.T. Mktg .. Inc. v. Agresti, 796 F.2d 276,

278 (9th Cir. 1986)).
While
set tlement

federal

courts

agreements,

possess

inherent

in di versi ty

cases

power

the

to

enforce

enforcement

and

construction of such agreements is governed by state contract law.
See Sundown Energy. L.P. v. Haller,
2014) i

Federal

Lefevre
courts

v.

Keaty,

sitting

191
in

F.3d

Texas

773 F.3d 606,
596,
apply

598
Texas

611

(5th

(5th Cir.

Cir.

Rule

of

1999).
Civil

Procedure 11 to settlement agreements, even though it is arguably
a procedural rule.

See Anderegg v. High Standard. Inc., 825 F.2d

77, 80 (5th Cir. 1987).

However, this case was transferred from

the Central District of California, and the parties appear to agree
that California contract law applies to the Agreement itself.11

11See Motion to Enforce, Docket Entry No. 53, pp. 19-21 (citing
to
California
authorities
regarding
liquidated
damages) i
Defendant's Memorandum of Law in Response to Plaintiff's Motion to
Enforce Settlement Agreement and Objections Thereto ("Defendants'
Response"), Docket Entry No. 54, pp. 7-9 (same).
-5-

"After a transfer pursuant to 28 U.S.C.

§

district

the

court

generally

must

apply

1404(a), the transferee
state

law

that

the

transferor district court would have applied had the case not been
transferred."
(9th

Cir.

Shannon-Vail Five Inc. v. Bunch, 270 F.3d 1207, 1210

2001).

Federal

courts

in

California

have

applied

California Code of Civil Procedure Section 664.6 to the enforcement
of settlement agreements,
Yihe Corp.,

No.

see,

e.g.,

Tiger Bay Village Corp. v.

CV 13-08837-RSWL-FFM(x) ,

2014 WL 3662259,

at *3

(C.D. Cal. July 18, 2014), especially where, as here, the parties
stipulate that the agreement is enforceable pursuant to

§

664.6,

see Cranshire Capital, L.P. v. CBTV-Star, LW, Inc., 70 Fed. Appx.
434,

436-37

(9th Cir.

2003) .12

pending litigation stipulate,

Under

§

664.6,

"[i] f parties to

in a writing signed by the parties

outside the presence of the court or orally before the court, for
settlement of the case, or part thereof, the court, upon motion,
may enter judgment pursuant to the terms of the settlement."
Here,

Plaintiff has provided a written settlement agreement

signed by the parties.

However, Defendants appear to argue that

the Agreement is not enforceable without a

separate stipulated

12Two unpublished opinions of the Ninth Circuit seem to confirm
that § 664.6 governs settlement agreements in federal court. See
Jarrow Formulas, Inc. v. Nature's Way Products, Inc., 942 F.2d 791
(9th Cir.
1991)
(citing § 664.6 for the proposition that
"California law clearly allows litigants to settle lawsuits
personally without the presence or consent of counsel.") i Malzahn
v. Allstate Ins., 923 F.2d 862 (9th Cir. 1991) (citing § 664.6 for
the proposition that " [u]nder California law, a stipulation between
the parties settling their lawsuit does not become a judgment until
it has been approved by the court and entered on the docket.")
-6-

judgment consented to by both parties. l3
state that "payment [is]

While the Agreement does

to be secured by stipulated judgment, ,,14

Defendants cite no authority for the proposition that the Agreement
itself

is

unenforceable

absent

Defendants argue that the final

such

a

stipulated

judgment. 15

clause of the Agreement,

which

states that the Agreement is "binding and enforceable" pursuant to
§

664.6 or analogous federal law,

is "a throwaway clause.,,16

The

court is not persuaded.
Defendants argue that the versions of the agreement signed by
Plaintiff and Defendants differ materially. 17

They do not. 18

The

material terms of the two agreements are entirely consistent . . To
the extent that there are nonmaterial differences,

they do not

l3See Defendants' Response, Docket Entry No. 54, pp. 6-11.
14Exhibit A to Declaration of Brandon M. Tesser, Docket Entry
No. 53-1, p. 8, ~2.
15The only case cited by defendants, United States v. Katy
Indep. Sch. Dist., 333 F. Supp. 1325 (S.D. Tex. 1971), is readily
distinguishable on the facts.
Furthermore, it supports the
proposition that no formal stipulated judgment is required:
"[Settlement]
agreements need not be written nor formally
submitted, so long as the record reflects that mutual assent to
settle the litigation has been orally expressed."
Id. at 1330.
The parties' signed Agreement more than meets this requirement.
16See Defendants' Response, Docket Entry No. 54, p. 7.
17See id. at 2.
18Compare Exhibit A to Declaration of
Brandon M. Tesser,
Docket Entry No. 53-1, pp. 8-9, with Exhibit H to Declaration of
Rob Thomas, Docket Entry No. 56, pp. 4-11.
See also Reply in
Opposition to Motion to Enforce Settlement Agreement ("Plaintiff's
Reply"), Docket Entry No. 55, p. 4 (listing the differences) .
-7-

preclude

See

enforcement.

App. 4th 1421, 1429

Elyaoudayan

(Cal. Ct. App.

v.

2d Dist.

Hoffman,
2003)

104

Cal.

(holding that

material terms of multiparty settlement agreement were enforceable
under

§

664.6

as

to

all

parties

despite

nonmaterial

variance

between agreements) .19
Defendants also argue that the agreement was no more than an
"agreement to agree," and therefore is unenforceable. 2o

California

courts of appeals have addressed this issue:
Whether a writing constitutes a final agreement or merely
an agreement to make an agreement depends primarily upon
the intention of the parties.
In the absence of
ambiguity this must be determined by a construction of
the instrument taken as a whole. The objective intent as
evidenced by the words of the instrument, not the
parties' subjective intent, governs our interpretation.
Where the writing at issue shows no more than an intent
to further reduce the informal writing to a more formal
one the failure to follow it with a more formal writing
does not negate the existence of the prior contract.
However, where the writing shows it was not intended to
be binding until a formal written contract is executed,
there is no contract.
Harris v. Rudin, Richman & Appel, 87 Cal. Rptr. 2d 822, 828 (Cal.
Ct. App.
omitted).

2d Dist.

1999)

(internal quotation marks and citations

Here there is no ambiguity as to whether the settlement

agreement, as written, is enforceable.

Paragraph 14 states that

19Defendants also object that the Agreement as attached to
Plaintiff's attorney's declaration was unauthenticated hearsay.
See Defendants' Response, Docket Entry No. 54, pp. 1, 4-5. Since
Plaintiff himself has filed a declaration authenticating the
agreement, this objection is moot. See Declaration of Rob Thomas,
Docket Entry No. 56. Defendants have not renewed their objection.
2°Defendants' Response, Docket Entry No. 54, pp. 1, 5-7.
-8-

"[t]his proposal, when signatures have been exchanged, is intended
to be binding and enforceable."
"contract

to

make

a

The settlement agreement is not a

contract,"

as

defendants

contend,

but

an

agreement enforceable on its face.
Defendants nevertheless argue that key terms of the agreement
were left to be decided at a later date.

The Agreement states that

plaintiff Thomas and defendant Woods would each prepare a list of
films of which they claimed original authorship, and that Thomas
would relinquish all past, present, and future claims of authorship
to

the works

Plaintiff

submitted by Woods. 21

"sued

over

royalties

and

Defendants
residuals

emphasize
from

that

claims

of

authorship," and thus "[a] seemingly crucial[] term of the writing
of the 'settlement'

is left to be determined.,,22

Defendants

argue that the court cannot enter judgment in the face of such
unresolved terms.
The court is not persuaded by Defendants' argument.
when

a

court

exercises

its

inherent

authority

to

First,

enforce

a

settlement agreement, '" the actual merits of the controversy become
inconsequential.'"

Bd. of Trustees v. Brisbin, No. C 13-01866 LB,

2014 WL 2916491, at *4 (N.D. Cal. June 26, 2014)
573

F.2d

at

1078).

Second,

Plaintiff

is

(quoting Dacanay,

seeking

neither

a

declaration of who authored specific works nor enforcement of any

2lSee Exhibit A to Declaration of Brandon M.
Entry No. 53-1, p. 9 ~10.

Tesser, Docket

22Defendants' Response, Docket Entry No. 54, p. 5.
-9-

Even if Plaintiff

agreement as to the authorship of any works.

it appears from documents filed with Plaintiff's Response

were,
that

the

Agreement

the

referred

to

in

request,

lists

in

the

in

were,

fact,

exchanged. 23
Defendants
hearing.

~Where

an

evidentiary

(emphasis in original).
the

Agreement

at

829

F.2d

at

890

Defendants do not dispute that they signed

issue,

agreement is enforceable.
B.

the parties must be

Callie,

hearing."

and

the

terms

There are no material

unambiguous.

evidentiary

material facts concerning the existence or terms

of an agreement to settle are in dispute,
allowed

an

alternative,

of

facts

the

Agreement

in dispute,

are

and the

An evidentiary hearing is not necessary.

The liquidated damages provision is an imper.missible penalty.

The settlement agreement provides that

~payment

[is]

to be

secured by a stipulated judgment with penalty provision of $43k in
the event of default (25% of the settlement amount) . ,,24
argue

that

this

California law.

is

an

impermissible

penalty

Defendants

provision

under

Plaintiff argues that it is a valid liquidated

damages clause.
California Civil Code Section 1671 (b) states that
in

a

contract

liquidating

the

damages

for

the

23See Supplemental Declaration of Brandon M.
Entry No. 57.

~a

provision

breach

Tesser,

of

the

Docket

24Exhibit A to Declaration of Brandon M. Tesser, Docket Entry
No. 53-1, p. 8 ~2.
-10-

contract

is

valid unless

the

party seeking

to

invalidate

the

provision establishes that the provision was unreasonable under the
circumstances

existing

at

the

time

the

contract

was

made."

California courts of appeals have further clarified the standard
applicable under

§

1671(b):

[A] liquidated damages clause becomes an unenforceable
penalty if it bears no reasonable relationship to the
range of actual damages that the parties could have
anticipated would flow from a breach. The amount set as
liquidated damages must represent the result of a
reasonable endeavor by the parties to estimate a fair
average compensation for any loss that may be sustained.
Absent a relationship between the liquidated damages and
the damages the parties anticipated would result from a
breach, a liquidated damages clause will be construed as
an unenforceable penalty.
Purcell v. Schweitzer, 169 Cal. Rptr. 3d 90, 94-95 (Cal. Ct. App.
4th Dist. 2014)

(internal quotation marks and citations omitted) .

When the contract at issue is a settlement agreement providing for
payment

in

installments,

the

liquidated

reasonable relationship to the damages
failure to make payments.
Sports.
2008) .

Inc.,

determinable -

i. e.,

for

the

3d 24,

26

must

bear

a

that would flow from a

Greentree Fin. Grp ..

78 Cal. Rptr.

"'Damages

damages

(Cal.

withholding

of

Inc. v. Execute

Ct. App.
money

interest at prevailing rates.'"

4th Dist.
are

easily

Id. at 28

(quoting Sybron Corp. v. Clark Hosp. Supply Corp., 143 Cal. Rptr.
306,

308

(Cal.

Ct. App.

2nd Dist.

1978).

A liquidated damages

provision in a stipulated judgment is enforceable if it is designed
to encourage a party to make its settlement payments on time, and
to compensate the other party for its loss of the use of the money
-11-

plus reasonable costs in pursuing payment.

Id.

However, if the

specified amount is designed to exceed substantially the damages
suffered,

the additional sum is an invalid attempt to impose a

penalty.

Id.

Defendants, who have the burden of showing that the penalty
provision is unreasonable, argue that "[Plaintiff's] own facts show
the unlawfulness

of

the penalty. ,,25

Plaintiff

states that

the

parties "came up with the $43,000 figure during their negotiations
as a spur to have Defendants pay the principal on time. ,,26

He also

asserts that a contemplated "more complete long-form Agreement,"
which the parties did not prepare,
$43,000,

"would have explained that the

consistent with Cal. Civ. C.

§

1671(b), were liquidated

damages and were intended to compensate Plaintiff for the losses he
would suffer if Defendants did not pay the principal on time.,,27
While,

as Plaintiff argues,

the amount at issue here is a mere

"fraction of the settlement amount, ,,28 unlike the 200% penalty at
issue in Greentree, Plaintiff makes no effort to tie that sum to an
actual measure of damages.

Plaintiff states that "[t]he amount was

intended to reflect Plaintiff's acceptance of a lesser amount in
settlement, on deferred payment terms, in exchange for certainty of

25Defendants' Response, Docket Entry No. 54, p. 7.
26Motion to Enforce, Docket Entry No. 53, p. 18.
27Id. at 19.
28Id. at 20.
-12-

payment and easy collection. ,,29
specified amount bears a
Plaintiff

might

This does not explain how the

reasonable relationship to any losses
The

sustain.

agreement

already provides

for

attorneys' fees and costs in the event of default,30 and Plaintiff
has offered no reason why 25% is a reasonable amount to compensate
him for loss of the use of the money should Defendants fail to pay
on

time.

The

court

is

persuaded

that

the

$43,000

~penalty

provision" is just that, a penalty provision, and will not enforce
it. 31
III.

Conclusions and Order

For the reasons stated above,

the court concludes that the

Settlement Agreement entered into by the parties is enforceable,
with the exception of the penalty provision in Paragraph 2,

and

that Defendants have breached that agreement by failing to make
payments as required.

Therefore, Plaintiff's Notice of Motion and

Motion to Enforce Settlement Agreement (Docket Entry No. 53) is

29rd.

30See Exhibit A to Declaration of Brandon M. Tesser, Docket
Entry No. 53-1, p. 9 ~11.
31Because § 1671 pertains to the validity of a liquidated
damages provision, and not the validity of a contract pertaining
such a provision, the court may enforce the remainder of the
contract despite the impermissible penalty provision. Greentree,
78 Cal. Rptr. 3d at 29-30.
-13-

GRANTED IN PART and DENIED IN PART,

and the court will enter a

final judgement enforcing the settlement agreement. 32

SIGNED at Houston, Texas, this 2nd day of April, 2015.

SIM LAKE
UNITED STATES DISTRICT JUDGE

32Plaintiff's counsel has submitted an estimate of attorneys'
fees incurred in pursuing enforcement of the settlement agreement.
See Declaration of Brandon M. Tesser, Docket Entry No. 53-1, pp. 5,
39-40. Defendants have not objected. The court finds the rate and
estimated time reasonable, with the exception of estimated time and
expenses for attending a hearing on Plaintiff's motion, since no
hearing was held. The court will enter judgment for the estimated
amount of fees exclusive of travel and participation in a hearing.
-14-