WILLIAM Q. HAYES, District Judge.
The matter before the Court is the Motion to Enforce Settlement filed by Defendants. (ECF No. 53).
On October 10, 2013, Plaintiff Carlos Rios, currently incarcerated at Richard J. Donovan Correctional Facility ("RJD"), commenced this action by filing a Complaint pursuant to 42 U.S.C. Section 1983 (ECF No. 1) and a motion for leave to proceed in forma pauperis (ECF No. 2). The Complaint asserted claims for violations of the First, Eighth, and Fourteenth Amendments. On March 25, 2014, the Court granted the motion for leave to proceed in forma pauperis, dismissed the Complaint for failure to state a claim, and granted Plaintiff forty-five days to file a First Amended Complaint ("FAC"). (ECF No. 5).
On May 12, 2014, Plaintiff filed the FAC, which is the operative complaint in this case. (ECF No. 9). The FAC asserts claims for violations of the First, Sixth, Eighth, and Fourteenth Amendments, and violations of the Americans with Disabilities Act and Rehabilitation Act. Plaintiff alleged that Defendants required him to choose between outdoor exercise and attending the law library. Plaintiff alleged that Defendants refused him the reasonable accommodation of placement in a developmental disability program, which includes legal assistance. Plaintiff alleged that Defendants retaliated against him for complaining about these issues by charging him with a false "128-B general chrono" on August 8, 2013, and that the appeals coordinator did not properly process his inmate appeals. Id. at 9-10.
On January 14, 2015, United States Magistrate Judge Jan M. Adler held a telephonic case management conference. (ECF No. 23). On January 14, 2015, the Magistrate Judge issued an Order Scheduling Telephonic Mandatory Settlement Conference for February 24, 2015, at 9:30 a.m. (ECF No. 24). On January 27, 2015, Plaintiff filed a motion to change the time of the settlement conference in this case from 9:30 a.m. to 10:45 a.m. on the same date because Plaintiff was scheduled to appear at a "court settlement conference at the same date and time in the Superior Court of California, County of San Diego, Hall of Justice for Case No. 37-0036-102-CU-WM-CTL at Dept. C-67 on February 24, 2015, at 9:30 a.m." (ECF No. 26 at 1). On January 29, 2015, the Magistrate Judge issued an order resetting the settlement conference to February 25, 2015, at 9:30 a.m. (ECF No. 27).
On February 2, 2015, Plaintiff filed a "Motion for Extension of Time and Request to be Relieve [sic] from this Court's Order Convening a Case Management Conference. . . ." (ECF No. 29). The motion again requested that the settlement conference be continued to 10:45 a.m. on February 24, 2015, because Plaintiff was scheduled to appear in San Diego Superior Court at 9:30 a.m on February 24, 2015. On February 2, 2015, the Magistrate Judge granted the motion in part and again stated that the settlement conference was continued to February 25, 2015, at 9:30 a.m. (ECF No. 30).
On February 25, 2015, the Magistrate Judge held the telephonic settlement conference. (ECF No. 33). On February 25, 2015, the Magistrate Judge issued an Order stating that the case settled "and the terms of the settlement were placed on the record." (ECF No. 34 at 1). The transcript of the on-the-record portion of the February 25, 2015 settlement conference provides, in pertinent part,
(ECF No. 53-2 at 4-7).
The Magistrate Judge ordered the parties to file a proposed order for dismissal on or before March 27, 2015. (ECF No. 34). On March 9, 2015, Plaintiff attempted to file an opposition to Defendants' proposed settlement agreement and a request for a follow up settlement conference. (ECF No. 35-1). The Magistrate Judge rejected the document for filing on the ground that settlement documents are not to be filed with the Court. (ECF No. 35).
On May 1, 2015, Defendants filed the Motion to Enforce Settlement. (ECF No. 53). Defendants contended that "Plaintiff refused to sign the [settlement agreement] and `opposed' the settlement agreement, claiming that defense counsel and Magistrate Judge Adler misled him into believing he was settling his property claim . . . in another case." (ECF No. 53-1 at 6). In defense counsel's declaration, counsel stated that during the settlement conference,
(ECF No. 53-3 at 2). Defendants requested that the court "issue an order enforcing the terms of the settlement . . . ." (ECF No. 53-1 at 16).
On May 18, 2015, Plaintiff filed a response opposing on grounds that defense counsel had discussed Plaintiff's state court claim prior to going on the record with the intent to mislead Plaintiff. (ECF No. 59 at 6). Plaintiff also opposed on grounds that defense counsel took "unreasonable advantage of a weaker party" and that Plaintiff believed he was only settling his state court property claim when he settled this case on the record. Id. at 6-7. Plaintiff also contended that "no case number was provided" during the settlement conference and that he was "rushed" to enter into an oral settlement agreement on the record. Id. at 5. Plaintiff requested an evidentiary hearing. Id. at 14.
On July 23, 2015, the Court issued an order. (ECF No. 66). The Court concluded that "fraudulent inducement will not preclude enforcement of the settlement agreement." Id. at 8. The Court also concluded "that an alleged unilateral mistake of fact due to the fault of Defendants' counsel will not preclude enforcement of the settlement agreement." Id. at 10. The Court ordered the parties to submit supplemental briefing to address whether the contract could be rescinded on the ground of unilateral mistake of fact under the four Donovan factors. Id. at 11; see Donovan v. RRL Corp., 27 P.3d 702, 716 (Cal. 2014) (describing the four factors that a party must establish to rescind a contract on the ground of unilateral mistake of fact). Specifically, the Court ordered the parties to address the following,
Id. The Court ordered Defendants to file a supplemental brief no later than August 10, 2015 and Plaintiff to file a response no later than August 31, 2015. Id. The Court stated that Defendants may file a reply no later than September 8, 2015. Id.
On August 10, 2015, Defendants filed supplemental briefing in support of Defendants' Motion to Enforce Settlement. (ECF No. 68). On August 19, 2015, Plaintiff notified the Court that he had not received Defendants' supplemental brief. (ECF No. 69). On August 20, 2015, Defendants submitted an amended certificate of service. (ECF No. 70). On August 26, 2015, Plaintiff filed an Ex Parte Motion for Leave to Exceed Page Limit. (ECF No. 73). On August 26, 2015, the Court granted Plaintiff's motion. (ECF No. 74). On August 26, 2015, Plaintiff filed a response to Defendants' Supplemental Brief and Application for Reconsideration Under CivLR 7.1(i)(1). (ECF No. 73). The docket reflects that Defendants have not submitted a reply.
Defendants contend that "Plaintiff cannot establish that the Donovan factors warrant a rescission of the parties' settlement agreement." (ECF No. 68 at 1). Defendants contend that Plaintiff's "mistake of not knowing which case he was appearing on, or which claim he was settling" was not the type of "good faith error that would support rescission." Id. 2-3. Defendants contend that Plaintiff's "alleged confusion" was not "mere negligence." Id. at 2. Rather, Defendants contend that Plaintiff's mistake was caused by the neglect of a legal duty and "resulted from [Plaintiff's] failure to act in accordance with reasonable standard of fair dealing in preparing for the settlement conference." Id. Defendant contends that a
Id. at 4.
Defendants contend that "the mistake does not have a material effect upon the agreed exchange of performances." Id. Defendant contends that "[a]lthough Plaintiff may now allege that his case is worth more than the agreed settlement amount, [Plaintiff] still benefits from the settlement." Id. Defendants contend that "Plaintiff cannot show that the alleged resulting imbalance of enforcing the settlement is so severe that it would be unfair to require him to perform his obligations under the agreement." Id. at 5. Defendants further contend that "Plaintiff's neglect of his legal duty . . . necessarily means that the risk of mistake must be allocated to [Plaintiff]." Id. Defendants contend that it "would not be unconscionable to enforce the settlement agreement because Plaintiff had notice of the settlement conference, he had time to prepare, the parties engaged in an arm's—length negotiation overseen by the Magistrate Judge, and Plaintiff agreed to settle all claims on the record." Id. at 6.
Plaintiff requests that the Court "reconsider [its] previous order (re ECF No. 66)" because "there is a genuine issue of material facts as to whether Plaintiff's agreement to settle this litigation was obtained by undue influence, duress, [or] fraud . . . ." (ECF No. 73 at 14-15). Plaintiff contends that his mistake "was not even mere negligence." Rather, Plaintiff contends that "his lacking of notice was attributed by defendants' subordinates intentional interference with Plaintiff's legal mail from this Court and that such concealment . . . was the cause of his confusion resulting in his reliance on Defendants' counsel[`s] false representation and statement." Id. at 24. Plaintiff contends that the mistake has a material effect upon the agreed exchange of performances because "Plaintiff's complaint (ECF No. 9) [for] relief seeks more than $150,000 in money damages" and therefore, this "exchange is not only less desirable for the plaintiff, but also more advantageous to the defendants' in this matter." Id. at 25. Plaintiff contends that he does not bear the risk of the mistake because he "was not neglect on his legal duty." Id. at 26. Plaintiff contends that it would be unconscionable to enforce the settlement agreement because Plaintiff did not have notice of the settlement conference." Id. at 26.
"It is well settled that a district court has the equitable power to enforce summarily an agreement to settle a case pending before it." Callie v. Near, 829 F.2d 888, 890 (9th Cir. 1987). "The construction and enforcement of settlement agreements are governed by principles of local law which apply to interpretation of contracts generally." Jeff D. v. Andrus, 899 F.2d 753, 759 (9th Cir. 1989). "This is true even though the underlying cause of action is federal." United Commercial Ins. Serv., Inc. v. Paymaster Corp., 962 F.2d 853, 856 (9th Cir. 1992).
A factual mistake by one party-a unilateral mistake-provides grounds for rescission in certain limited circumstances. Donovan v. RRL Corp., 27 P.3d 702, 715 (Cal. 2001). Where a unilateral mistake of fact is not caused by the opposing party, the party claiming mistake of fact must establish the following facts to obtain rescission of the contract.
Id. at 716.
A mistake of fact may support the rescission of an agreement unless the mistake was caused "by the neglect of a legal duty on the part of the person making the mistake." Cal. Civ. Code § 1577. "[O]rdinary negligence does not constitute neglect of a legal duty within the meaning of Civil Code section 1577." Id. at 718.
Id. at 717. Failure to negotiate in accordance with reasonable standards of fair dealing "bars a mistaken party from relief based on a mistake that otherwise would not have been made." Id. at 718. "During the negotiation stage each party is held to a degree of responsibility appropriate to the justifiable expectations of the other." Id.
In this case, Plaintiff had prior notice of the settlement conference. Based on that notice, Plaintiff moved the Court for a continuance of the settlement conference because it interfered with a "court settlement conference at the same date and time in the Superior Court of California, County of San Diego, Hall of Justice for Case No. 37-0036-102-CU-WM-CTL at Dept. C-67." (ECF No. 26 at 1). Pursuant to Plaintiff's request, the Magistrate Judge reset the settlement conference for February 25, the day after Plaintiff's settlement conference in Superior Court. See ECF No. 27. The record reflects that both the Court Clerk and Defendants' counsel read the case number into the record at the settlement conference. See ECF No. 53-2 at 4 ("
Under the circumstances of this case, defense counsel was justified in expecting Plaintiff to know the court Plaintiff was appearing in and the case at issue. Defense counsel stated in counsel's declaration, "I specifically identified Plaintiff's claims in this case. I discussed Defendants' legal and factual argument in support of its defense of those claims." The record reflects that it was only after Plaintiff agreed to the settlement terms that defense counsel mentioned that Plaintiff was willing to settle another lawsuit and that it was Plaintiff who stated that the other lawsuit was a property claim. See id. (
Even if Plaintiff did not bear the risk of the mistake, Plaintiff is unable to establish that the mistake impacts the exchange of performance in a manner adverse to him. To establish such, Plaintiff "must show that the resulting imbalance in the agreed exchange is so severe that it would be unfair to require [Plaintiff] to perform." Donovan, 27 P.3d at 717. A party can satisfy this requirement by showing that the exchange is not only less desirable for the mistaken party, but is also more advantageous to the other party. Rest. 2d Contracts, § 152, com. C. After an arm's-length negotiation in the presence of the Magistrate Judge, Defendants agreed to pay Plaintiff $1,000 in exchange for Plaintiff's dismissal of his civil rights lawsuit. While the benefit of settling the case may now seem less desirable to Plaintiff, Plaintiff still benefits from the settlement by receiving $1,000 from Defendants. Further, the settlement does not unfairly benefit Defendants; Defendants remain responsible for paying Plaintiff.
Similarly, Plaintiff cannot establish that enforcement of the settlement agreement would be unconscionable. "An unconscionable contract ordinarily involves both a procedural and substantive element: (1) oppression or surprise due to unequal bargaining power, and (2) overly harsh or one-sided results." Donovan, 27 P.3d at 723. "A contractual term is substantively suspect if, viewed at the time the contract was formed, it allocates the risks in an unreasonable or unexpected manner." Zullo v. Superior Court, 127 Cal.Rptr.3d 461, 465 (Ct. App. 2011). With respect to the procedural element, Plaintiff initiated this action and participated in the settlement conference. During that conference, Plaintiff had options other than to settle; specifically, Plaintiff could have proceeded with the litigation against defendants or demanded a higher settlement amount. The Magistrate Judge was present during the settlement conference as a neutral party and found that the parties had reached a settlement. (ECF No. 34). There was no oppression or surprise due to unequal bargaining power despite Plaintiff's pro se and incarcerated status. As to the substantive element, the settlement agreement is not "overly harsh" or "one-sided." See Donovan, 27 P.3d at 723. Plaintiff agreed to dismiss his claims against Defendants in exchange for $1,000. Plaintiff stated that he understood and agreed to the settlement announced in open court. The settlement agreement is not unconscionable.
Plaintiff cannot prove all four Donovan factors required to support rescission in the case, therefore, the Court concludes that the settlement agreement should be enforced.
IT IS HEREBY ORDERED that Plaintiff's Application for Reconsideration is denied.
IT IS FURTHER ORDERED that the Motion to Enforce Settlement is granted. (ECF No. 53). No later than fourteen (14) days from the date of this Order, Defendants shall pay Plaintiff the sum of money stated in the Memorandum of Settlement and file a notice with the Court certifying that the money has been paid. Thereafter, the Court will dismiss this action with prejudice.
