Judge: Bruce G. Iwasaki, Case: 22STCV26607, Date: 2023-01-03 Tentative Ruling

Case Number: 22STCV26607    Hearing Date: January 3, 2023    Dept: 58

Judge Bruce G. Iwasaki

Department 58

Hearing Date:             January 3, 2023

Case Name:                 Erin Weiler v. Benjamin Donel, et al.

Case No.:                    22STCV26607

Motion:                       Demurrer (x4)

Moving Party:             Defendants Benjamin Donel; Law Offices of Benjamin Donel Inc.; Sunset Equity Partners, LLC; Easy Financial LLC

Tentative Ruling:      The Demurrer is overruled.  As offered by Plaintiff, she shall file and serve an amended Complaint removing references to communications by the mediator.  Defendants shall file and serve their Answer within 20 days thereafter.

Background

            This is a single-count complaint for breach of contract.  Erin Weiler (Plaintiff) alleges that she asserted employment-related claims against Benjamin Donel, Law Offices of Benjamin Donel Inc., Sunset Equity Partners, LLC, and Easy Financial LLC (collectively Defendants).  The parties participated in a mediation which allegedly resulted in a settlement.  Plaintiff alleged several back-and-forth communications between counsel on the final terms of the agreement, such as typographical errors and required tax forms.  Two months after the alleged settlement, Defendants ultimately informed Plaintiff’s counsel that they would not be signing the agreement.  Plaintiff alleges that Defendants breached the agreement of settlement.

            Defendants demurred to the Complaint, arguing that Plaintiff failed to allege an executed contract, and the allegations are inadmissible statements relating to a confidential mediation.  Plaintiff filed an opposition that whether the settlement is binding is a factual question and that the allegations relate to statements that occurred after the mediation concluded.  Defendants replied that the parties never communicated directly with each other, and attorneys cannot orally bind their clients to a settlement.  Counsel’s declaration satisfies the meet-and-confer requirement.  (Lowe Decl., ¶ 2.)

Legal Standard

            A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice.  (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)  The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.”  (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.)  “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.”  (Code Civ. Proc., § 452.)  The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . ..” ’ ” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) 

Discussion

Cause of action for breach of contract

            To state a claim for breach of contract, a plaintiff must allege sufficient facts to establish: (1) a contract between the parties; (2) plaintiff's performance or excuse for nonperformance; (3) defendant's breach; and (4) damages to plaintiff from the breach. (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.)

            Here, the allegations are sufficient: Plaintiff alleged that the parties agreed to settle the case.  (Complaint,  ¶ 12.)  Plaintiff signed the agreement and returned it for Defendants to execute.  (Id. at ¶ 16.)  Defendants breached the agreement by refusing to sign.  (Id. at ¶¶ 26-28.)

            Defendants first argue that the allegations are insufficient because they are inadmissible under Evidence Code sections 1119 and 1123.  Section 1119 precludes the admission of statements made “for the purpose of, in the course of, or pursuant to a mediation or a mediation consultation” in discovery or otherwise compelled.  (Evid. Code, § 1119, subds. (a)-(b).)  Section 1123 creates an exception for the admissibility of “written settlement agreement[s]” if certain conditions are met, such as the agreement itself providing for its admissibility.  (Id. at § 1123, subds. (a)–(d).)  

Both these statutes deal with the admissibility of evidence.  To the extent that Defendants contend that the privileges bar Plaintiff’s claims, the argument is unpersuasive.  “At the demurrer stage, however, we evaluate only whether the allegations of the complaint state a valid cause of action. That evidentiary privileges might affect presentation of defense [or plaintiff’s] evidence at trial is not a basis for sustaining a demurrer. We cannot speculate on what evidence JAMS and Bates will seek to introduce, and what effect, if any, the cited privileges will have on that evidence.”[1]  (Morgan Phillips, Inc. v. JAMS/Endispute, L.L.C. (2006) 140 Cal.App.4th 795, 803-804 [reversing sustaining of demurrer of breach of contract suit against arbitrator].)

            Defendants next argue that the contract is unenforceable because it is unsigned.  However, the lack of signatures is not dispositive as to a contract’s formation or enforceability.[2]  (See, e.g., Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 358 [“Whether it was the parties’ mutual intention that their oral agreement to the terms contained in a proposed written agreement should be binding immediately is to be determined from the surrounding facts and circumstances of a particular case and is a question of fact for the trial court”]; Unilab Corp. v. Angeles-IPA (2016) 244 Cal.App.4th 622, 636 [implied-in-fact contract is based on parties’ conduct and requires an “ascertained agreement of the parties”].)  The legal effect of Defendants’ lack of signatures on the alleged settlement agreement is a factual question that will require consideration of evidence, which is not properly resolved on demurrer.  (Beck v. American Health Group Internat., Inc. (1989) 211 Cal.App.3d 1555, 1562 [trial court weighs evidence to determine parties’ intent as to manner of assent to contract].)  

            Plaintiff’s citation to Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299 (Harris) is persuasive here.  In that case, the plaintiff sued his prior law firm for legal malpractice; the two sides reached a settlement, and the terms were set forth in a letter from the law firm to plaintiff.  However, plaintiff and some of the defendants did not sign the letter.  (74 Cal.App.4th at p. 303.)  After a change in the law, the law firm reneged on the agreement and plaintiff sued for breach of written contract.[3]  The law firm demurred on that cause of action, arguing that the letter merely demonstrated a “manifest intention not to enter a contract until a formal settlement agreement is executed.” (Id. at p. 308.)  The trial court sustained the demurrer. The Court of Appeal reversed, finding that the complaint “alleges facts evidencing an oral agreement . . . [the parties] engaged in several communications, ‘both written and telephonic’ which ‘culminated in a settlement agreement.’ ”  (Id. at p. 308.)  Thus, “[w]hether the parties intended their communications to be a binding settlement agreement or an agreement to further negotiate after a formal draft was prepared is a factual question not properly the subject of a demurrer.”  (Id. at pp. 308-309.)

            Here, Plaintiff alleges that the parties engaged in e-mail communications with the mediator, which resulted in an agreement to settle.  (Complaint, ¶¶ 12-13.)  The mediator informed the parties to “ ‘deal directly with each other on the terms for the final agreement,’ ” which led to multiple e-mails relating to typographical errors and tax issues.  (Id. at ¶¶ 12, 14-24.)  As in Harris, whether those communications were intended to be a binding agreement is a question of fact.  Plaintiff alleges that the parties agreed to a settlement, but merely needed to work out “terms for the final agreement.”  (Id. at  ¶ 12.)  This statement could reasonably be interpreted to show the parties’ intent to “reduce the informal writing to a more formal one,” in which case “the failure to follow it with a more formal writing does not negate the existence of the prior contract.”  (Harris, supra, 74 Cal.App.4th at p. 307, italics added.)  

            Defendants’ reliance on Fair v. Bakhtiari (2006) 40 Cal.4th 189 (Fair) is misplaced.  In Fair, plaintiff initially sued the defendants and the parties then attended mediation.  (40 Cal.4th at p. 192.)  The parties reached an agreement and circulated a “handwritten memorandum recording settlement terms,” which included an arbitration provision.  (Id. at n.2.)  After the parties were unable to finalize the settlement, the plaintiff moved to compel arbitration based upon that “handwritten memorandum.”  (Id. at p. 193.)  The issue before our Supreme Court was whether that memorandum was admissible under Evidence Code section 1123, subdivision (b), in deciding a motion to compel arbitration.  (Id. at p. 192.)  Under such a motion, the burden is on the party seeking arbitration to submit sufficient evidence.  (See Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842-846.)  In contrast, on a demurrer, the Court only evaluates the sufficiency of the pleadings and does not consider the admissibility of evidence.  (See Blank v. Kirwan, supra, 39 Cal.3d at p. 318.) 

Because the evidence-based arguments raised by Defendants cannot be considered in this attack on the pleadings, the demurrer is overruled.

In her opposition, Plaintiff offered to amend her Complaint to eliminate references and attachments reflecting communications made by the mediator.  While Defendants did not move to strike such material, their arguments in support of the demurrer sufficiently preserve the issue.  The Court orders Plaintiff to file and serve an amended complaint within 20 days that excises references to communications, statements, or proposals by the mediator in connection with the effort to settle the parties’ dispute.  Thereafter, unless otherwise stipulated, Defendants shall have 20 days leave to file and serve their Answers to the Amended Complaint.