ANTHONY W. ISHII, District Judge.
Plaintiff Roberto Garcia, Jr. is a former inmate held at Kern Valley State Prison. Defendant Matthew Juarez, Jr. is a sergeant at that facility. Plaintiff alleges that on May 23, 2011, Defendant handcuffed and kicked him while verbally threatening him, resulting in injuries to both of Plaintiff's shoulders. Plaintiff received treatment for his right shoulder at the time but not for his left shoulder. On May 8, 2012, Plaintiff filed suit under 42 U.S.C. § 1983 alleging that Defendant used excessive force against him. On January 26, 2017, Plaintiff filed a notice of tentative settlement. Doc. 141. Soon thereafter, the parties encountered difficulties in completing/executing their settlement and requested a settlement conference. Doc. 146. A telephonic settlement conference was held on March 15, 2017 but the parties were unable to resolve their problems. Doc. 150. Defendant then filed a motion to enforce the settlement agreement. Doc. 159. Plaintiff opposes the motion and made a motion to strike certain statements in Defendant's motion as scandalous. Docs. 167 and 168.
"[C]ourts have inherent power summarily to enforce a settlement agreement with respect to an action pending before it."
The parties have discussed settlement on multiple occasions. On August 15, 2016, they held a settlement conference before Magistrate Judge Sheila Oberto. Doc. 93. No settlement was reached. Before this hearing, Defendant revealed that Plaintiff owed more than $29,000 in restitution. Doc. 168, 4:15-17. Plaintiff was released from custody on October 24, 2016. Doc. 117. Plaintiff's current pro bono appointed counsel, Brian McComas, entered the case on October 19, 2017. Doc. 113. Plaintiff inquired as to the possibility of additional settlement negotiations on December 29, 2016 and Defendant suggested that any settlement should be communicated initially in written form. Doc. 132, 18:27-19:2.
Plaintiff sent Defendants a demand letter on January 17, 2017. Doc. 168-2. The parties communicated orally concerning the amount of settlement. Doc. 168, 5:16-17. Plaintiff sent a supplemental demand letter on January 23, 2017. Doc. 168-3. The parties agreed upon the terms of a settlement on January 24. Doc. 160, 2:5-6; Doc. 168, 5:19-20. Plaintiff e-mailed Defendant that night, stating "Please call me in the morning to followup on my voice message on behalf of plaintiff agreeing to the defendant's offer of $13,000 for dismissal of all claims with prejudice." Doc. 168-4. On January 26, Plaintiff filed a notice of tentative settlement on January 26, 2017. Doc. 141. On January 27, Plaintiff e-mailed Defendant seeking the release form, stating "I have the opportunity to see Mr. Garcia next weekend and would like to finalize everything then." Doc. 168-5.
On February 1, Defendant sent to Plaintiff a written settlement agreement and payee form ("Written Agreement") to be signed by Plaintiff and Plaintiff's counsel. Doc. 160, 2:8-10. Of note, the Written Agreement included a provision which stated that the settlement amount would have to be used to pay for certain reimbursements, including restitution. Doc. 161-1, Section 5. On February 6, Plaintiff and Defendant had a telephone conversation; Defendant memorialized the conversation in an e-mail in which he wrote "the agreement is fine and approved except you found a typo on the front page where the dollar amount was printed out. We removed the reference to hundred to fix that and otherwise kept everything the same. Please confirm your receipt and approval. I will also convey to my contact at the CDCR that you believe that sums subject to reimbursement under the general order that you expended from court funds need to come to you so that you can pay them back." Doc. 168-6. Plaintiff responded to that e-mail the same day and stated "I agree to the small revision in the agreement, the signed version of which went out today. My specific request is for the entire settlement to be dispersed to my IOLTA account so that I may then properly disperse the funds for attorney expenses, Pro Bono Panel expenses, and my client in accordance with tax requirements, auditing of my account, and my ethical duties." Doc. 168-7. As referenced in the e-mail, Plaintiff returned to Defendant by mail the Written Agreement, signed and dated by both Plaintiff and Plaintiff's attorney on February 4, 2017; included in the mailing was a cover letter ("Feb. 6 Letter") which stated "Dispersal of the settlement needs to be made to IOLTA ACCOUNT — LAW OFFICE OF B.C. McCOMAS so that I can repay expenses and the Pro Bono Panel via General Order 510. Please let me know if this method of payment will be an issue as execution of the agreement is contingent upon it." Doc. 161-1 and 161-2.
On February 7, Defendant e-mailed stating "Just reviewed your email and looked back at the settlement agreement. . . . will pay whatever net sums your client may be entitled to the plaintiff directly. If there is some other payment proves than directly to your client, I believe it will not be honored unless spelled out in the agreement. Do you believe we need to revisit the agreement or go with what we have and you coordinate monies with your client?" Doc. 161-3. On February 8, 2017, Plaintiff e-mailed stating "The letter makes clear that the signing of the release is contingent upon payment to IOLTA ACCOUNT — LAW OFFICE OF B.C. McCOMAS. . . . I would ask that you add the above term concerning my IOLTA account or we reach an agreement that any payment will be made to that account." Doc. 161-4. The same day Defendant responded by e-mail that "I believe I will need to modify the paragraph that says payment to Plaintiff to identify your trust account [] instead and you[r] client will need to approve the change. I will verify and get back to you." Doc. 168-8.
On February 13, Defendant sent by e-mail a revised written settlement agreement ("Revised Agreement") with a cover letter which stated "If the revisions meet you and your client's approval, please email me confirmation of the same and please arrange to send the document executed by yourself and your client along with the stipulation of dismissal with the original executed document set to me for processing along with the fully completed and executed Payee Data Record." Doc. 161-5. The modifications in the Revised Agreement state that $6,202.50 would be paid to the IOLTA account and that the balance of the settlement would be paid to the IOLTA account only after other reimbursements, including restitution, were paid. Doc. 161-5, Section 5. Later that day, Plaintiff responded by e-mail, stating "I do not believe that the additions are consistent with our conversations, or my prior emails setting out exactly what Plaintiff wants included in the settlement agreement. I have repeatedly asked for one thing: that the entire settlement award be dispersed to my IOLTA account without any prior reductions. The additional language only further obfuscates what should be a simple term of agreement . . . . I await CDCR's response to my simple question: Is it willing to disperse the entire settlement of 13,000 to my IOLTA account? If not, we may have a real problem." Doc. 168-12. The same day, Defendant replied by e-mail that based on California Penal Code § 2085.5, "it appears that the CDCR would be appropriately deduct[ing] any applicable restitution amounts." Doc. 161-7. The Revised Agreement was never signed by either party.
On February 15, Plaintiff sent a letter which stated that "Based on our prior discussions, it is plaintiff's understanding that defendant is unwilling to settle unless the CDCR is granted the sole authority to disperse the settlement as it determined for restitution and legal expenses. As outlined above, this requirement violates CDCR's stated procedures and my ethical obligations as counsel, and results in an unenforceable agreement. Worse, the insistence on inclusion of this term has scuttled negotiations by impeding the parties to agree upon material terms. Hopefully, you share my concerns about the development of this stumbling block, which threatens to unravel all of our prior agreements, so late in negotiations." Doc. 168-13. On February 27, Plaintiff sent a letter which stated "Plaintiff intends to move to stay the schedule in the matter and request a settlement conference before Judge Grosjean." Doc. 168-14. On March 2, Plaintiff sent another letter that reiterated "plaintiff's position is that all of the funds should be awarded to his attorney without prior reduction by the CDCR." Doc. 161-8.
A second settlement conference was held on April 24, 2017, before Magistrate Judge Oberto. Doc. 153. The parties were not able to resolve their dispute. On April 26, Defendant sent a letter which stated "I am now taking this opportunity to again assert our position that the case is settled pursuant to the attached [Written Agreement]"; Defendant's counsel had signed but not dated the attached Written Agreement. Doc. 161-9. On May 3, Plaintiff responded by mail that "the defense never asserted this position during settlement negotiations between February 6 and April 25, 2017, during which time it continued to modify the tentative settlement. Plaintiff was first informed of a potential change in defendant's position by Judge Oberto at the settlement conference on April 24, 2017. Your letter is the first memorialization of this shift in position by the defense." Doc. 168-19.
In the present motion to enforce settlement agreement, Defendant asserts that "Plaintiff and Defendant entered into a written Settlement Agreement . . . settling all claims in the instant suit and the Agreement was signed by the Plaintiff and Plaintiff's counsel . . . . Thereafter, Plaintiff's counsel attempted to alter immaterial terms of the Agreement." Doc. 160, 1:18-21. Defendant also stated that "there can be no dispute that the parties reached a settlement agreement and its terms are clear and unambiguous because they were reduced to a writing jointly negotiated by the parties and signed by Plaintiff and his counsel." Doc. 160, 7:1-3. Thus, Defendant appears to be asserting that the agreement became enforceable when Plaintiff sent the signed Written Agreement to Defendant on February 6, 2017; that the Written Agreement came into effect on that date notwithstanding the concurrent e-mail seeking to alter the means of payment or any later dickering over terms.
Defendant does not appear to be asserting that the parties reached an oral agreement at any time that is enforceable apart from the Written Agreement. "An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. The determination of whether a particular communication constitutes an operative offer, rather than an inoperative step in the preliminary negotiation of a contract, depends upon all the surrounding circumstances. The objective manifestation of the party's assent ordinarily controls, and the pertinent inquiry is whether the individual to whom the communication was made had reason to believe that it was intended as an offer."
In evaluating the Written Agreement, "the construction and enforcement of settlement agreements are governed by principles of local law."
"An acceptance must be absolute and unqualified, or must include in itself an acceptance of that character which the proposer can separate from the rest, and which will conclude the person accepting. A qualified acceptance is a new proposal." Cal. Civ. Code § 1585. "Under traditional common law, no contract was reached if the terms of the offer and the acceptance varied."
In this case, Defendant sent Plaintiff the Written Agreement. Plaintiff and Plaintiff's counsel signed the Written Agreement. However, in returning the Written Agreement to Defendant, Plaintiff attached the Feb. 6 Letter which directly stated "Dispersal of the settlement needs to be made to IOLTA ACCOUNT — LAW OFFICE OF B.C. McCOMAS so that I can repay expenses and the Pro Bono Panel via General Order 510. Please let me know if this method of payment will be an issue as execution of the agreement is contingent upon it." Doc. 161-2. In response, Defendant's February 7 e-mail stated "Just reviewed your email and looked back at the settlement agreement . . . . will pay whatever net sums your client may be entitled to the plaintiff directly. If there is some other payment proves than directly to your client, I believe it will not be honored unless spelled out in the agreement. Do you believe we need to revisit the agreement or go with what we have and you coordinate monies with your client?" Doc. 161-3. The Written Agreement was an offer by Defendant. In response, Plaintiff returned it signed with the Feb. 6 Letter. The language used in the Feb. 6. Letter was direct and explicit, conditioning acceptance of Defendant's offer on agreement with the additional term. The package as a whole (the Feb. 6 Letter and signed Written Agreement) was a conditional acceptance which constituted a counteroffer. In response, Defendant did not accept the counteroffer and negotiations continued. After that point, additional concerns over the settlement payment prevented the two sides from coming to an agreement. As with another case in which a tentative settlement was deemed unenforceable, "This give and take reveals that the parties, while close to agreeing to a complete and comprehensive settlement of their dispute, had not passed the threshold where they had finalized and assented to all material terms of such a settlement. Rather, as they attempted to sketch in the finer details of a settlement from the broad outlines contained in the October 19 letter, more and more issues arose upon which they could not reach agreement, resulting in the negotiations falling apart."
In opposing Plaintiff's argument, Defendant states "The Cover Letter Signed By Mr McComas Had No Impact Upon The Enforceability Or The Terms Of The Settlement Agreement." Doc. 169, 8:21-23. Defendant's briefing generally presupposes acceptance and focuses on how the Feb. 6 Letter affects (or does not affect) the terms of the contract given the language of the Written Agreement. Defendant only mentions the issue of acceptance in passing: "Mr. McComas tried to modify a term in an express written, integrated contract signed by his client by way of a cover letter that was not signed by his client. His proposed modification is inconsistent with the Agreement and not a material term for the plaintiff. It does not qualify as a conditional acceptance." Doc. 169, 11:5-8.
Defendant's points do not line up neatly with the issues discussed in this order but they do not change the conclusion that there was no acceptance in this case. The fact that Plaintiff signed the Written Agreement does not, by itself, constitute acceptance. "Consent is deemed to be fully communicated between the parties as soon as the party accepting a proposal has put his acceptance in the course of transmission to the proposer . . ." Cal. Civ. Code § 1583. Any acceptance could only take place through communication with Defendant; in this case, by mailing the signed Written Agreement back to Defendant. However, the response was accompanied by the Feb. 6 Letter, which contained a condition Defendant claimed was inconsistent with the terms of the Written Agreement. That made the response a counteroffer and not an unequivocal acceptance. As for the fact that the letter was signed only be Plaintiff's attorney and not Plaintiff himself, that is of no consequence in settlement negotiations. "Generally, when a client hires an attorney and holds him out as counsel representing him in a matter . . . the third party may rely on the attorney's apparent authority unless he has reason to believe that the attorney has no authority to negotiate a settlement."
Additionally, Defendant cites to two cases in which a settlement agreement was enforced notwithstanding disputes over how restitution was to be paid from a settlement agreement. They are distinguishable as there was no question as to unqualified acceptance in those cases; the courts' analyses focused on the separate issue of whether there was a meeting of the minds on material terms. In
There is an exception to the requirement of unqualified acceptance. When the new condition restates a legal condition which automatically applies, courts have found the conditional acceptance sufficient for enforcing a contract. In one case, "This was a meeting of the minds of the parties upon the same terms and conditions, save and except that the last telegram referred to had in it these words, `subject permission inspection on arrival.' The matter of delay in shipment had been eliminated, the request that the bank guarantee payment had been accepted, and all conditions imposed by defendant had been met, qualified by the added suggestion that the beans would be subject to inspection on arrival. It is the claim of counsel for appellant that it never assented to the plaintiff's request that the beans should be shipped subject to inspection; but, as the learned judge of the trial court observed, the law would have added these words to the contract, even if they had not been inserted in the telegram."
In Defendant's motion to enforce settlement agreement, Defendant included language in the brief stating "the changing of the location where the net settlement proceeds are to go is of no consequence to Defendant, nor does it appear to be a term designed to benefit Plaintiff. Presumably, Plaintiff could have easily assigned or given any monies to his attorney without Defendant's involvement. Rather, the proposed change appears to be more of an afterthought (a couple of days later) by Plaintiff's attorney to benefit or protect him." Doc. 160, 8:6-10. Plaintiff objects to the language used: "The allegation scandalously implies that the dispersal is somehow designed to benefit the undersigned counsel . . . . Defendant either implies that counsel changed the terms of the settlement to protect himself in violation of ethical duties, or that counsel seeks personal benefits over plaintiff's interests in breach of ethical duties." Doc. 167, 2:7-8 and 3:13-15. Plaintiff seeks to have the language stricken under Fed. Rule Civ. Proc. 12(f). Doc. 167, 1:26-27.
"The court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. Rule Civ. Proc. 12(f). A pleading is defined as "(1) a complaint; (2) an answer to a complaint; (3) an answer to a counterclaim designated as a counterclaim; (4) an answer to a crossclaim; (5) a third-party complaint; (6) an answer to a third-party complaint; and (7) if the court orders one, a reply to an answer" in contrast to "Motions and Other Papers." Fed. Rule Civ. Proc. 7(a) and (b). The Ninth Circuit has recognized that Rule 12(f) does not permit striking materials generally: "Under the express language of the rule, only pleadings are subject to motions to strike. The appellees have cited no cases that have construed F.R.Civ.P. 12(f) as allowing a district court to strike material not contained in the pleadings of the case."
Additionally, the language objected to does not directly accuse Plaintiff's counsel of unethical behavior. One of the issues the parties have extensively discussed is the duty to reimburse the Eastern District's Non Appropriated Fund for the services of Plaintiff's pro bono appointed counsel. The applicable rule states "In the event of settlement or other successful resolution of the case which results in a monetary award to the indigent litigant equal to or exceeding the reimbursed costs under this section, the indigent litigant through counsel shall reimburse the Fund for such out-of-pocket expenses allowed and reimbursed under this section. Counsel shall reimburse the Fund within thirty (30) days of settlement or judgment. Counsel shall ensure that such reimbursement occurs prior to any disbursement of judgment or settlement funds to counsel, plaintiff or any other person." Eastern District of California General Order No. 558 Section 3.B. Defendant explains that the objected to language obliquely refers to the affirmative obligation the Eastern District places upon Plaintiff's counsel to take control of the settlement monies to reimburse the Fund. Doc. 170, 1:25-2:2. Plaintiff's counsel has multiple duties he must simultaneously fulfill. While Defendant's tone may be snide and unnecessary, the language is not so inflammatory as to warrant court sanction. To be clear, there is nothing in the record to suggest that Plaintiff's counsel has in any way violated his ethical duty to his client in seeking to have the settlement monies disbursed into his IOLTA account.
Defendant's motion to enforce settlement is DENIED.
Plaintiff's motion to strike is DENIED.
The trial date of August 29, 2017 is VACATED. The parties should be prepared to set a new trial date at the pretrial conference on July 11, 2017.
IT IS SO ORDERED.