Judge: Dennis J. Keough, Case: 2020-01132611, Date: 2023-05-25 Tentative Ruling

1)   Motion for an Order Enforcing the Memorandum of Understanding

2)   Order to Show Cause re: Dismissal on Settled Case

Plaintiffs Michael A. Clem and John R. Clem and Cross-Defendants Maya Clem and Jennifer Smoot’s (Moving Parties) Motion to Enforce Memorandum of Understanding (Motion) is DENIED without prejudice.

Pursuant to Code of Civil Procedure, section 664.6, “if parties to pending litigation stipulate, 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.  If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement.”  (Code Civ. Proc., § 664.6.)  The court must determine whether the settlement agreement is valid and binding.  (Kohn v. Jaymar-Ruby (1994) 23 Cal. App. 4th 1530, 1533.)  “In order to be enforceable pursuant to the summary procedures of section 664.6, a settlement agreement must either be entered into orally before a court … or must be in writing and signed by the parties.”  (Weddington Prods., Inc. v. Flick (1998) 60 Cal.App.4th 793, 810.)  Courts will not set aside a valid settlement agreement absent fraud, undue influence, or excusable neglect.  (Zamora v. Clayborn Contracting Group, Inc. (2002) 28 Cal.4th 249, 260; see also Hulsey v. Elsinore Parachute Center (1985) 168 Cal.App.3d 333, 339; Fraters Glass & Paint Co. v. Southwestern Const. Co. (1930) 107 Cal.App.1, 6.)

Moving Parties’ Motion seeks to enforce the Memorandum of Understanding between all parties on the grounds that Defendants Layrite LLC (Layrite) and Donnie Hawley (Hawley) have not a settlement agreement to date which complies with the requirements of the MOU as to Cross-Defendants Maya Clem and Jennifer Smoot. Specifically, Moving Parties argue that the draft settlement agreement does not comply with Paragraph 5(f) of the MOU because it does not provide that Cross-Defendants would be granted mutual releases and Code of Civil Procedure section 1542 waivers from the other releasing parties.

On 5-8-23, Moving Parties filed a complete copy of the MOU.

Moving Parties’ Standing to Enforce MOU

Page 1 of the MOU provides:

Background. This Memorandum of Understanding (“Memorandum”) is entered into by and between Michael A. Clem, an individual, and John R. Clem, and individual, on the one hand (collectively, the “Clems”) and Donnie A. Hawley, an individual (“Hawley”), and Layrite LLC, a California limited liability company (“Layrite LLC”, collectively with Hawley, “Layrite”) on the other with additional consent by Maya Clem, an individual (“M. Clem”), Jennifer Smoot (“Smoot”) and Robert Dietrich (“Dietrich”) (with the Clems, Layrite, M. Clem, Smoot and Dietrich collectively, “the parties”), in the action entitled Michael A. Clem, et al. v. Donnie A. Hawley, et al., Orange County Superior Court Case No. 30-2020-01132611-CU-BC-CJC including all cross-actions (“Action”). This Memorandum memorializes the agreement between the parties to the principal terms of a settlement of all disputes between them. The parties intend this Memorandum to be binding and fully enforceable by the Court upon motion of any party, but pledge their good faith and fair dealing in providing assent to a final, more detailed Settlement Agreement (“Settlement Agreement”) as set forth below.

Thus, based on this section, the court finds that all Moving Parties are “parties” with standing to enforce the MOU because the MOU explicitly states that “the parties” is defined as “clems, Layrite, M.Clem, Smooth and Dietrich.” Additionally, the MOU explicitly states that “the parties intend this Memorandum to be binding and fully enforceable the Court upon motion of any party.”

Mediation as Condition Precedent

Further, paragraph 5 of the MOU provides:

5. Long Form Settlement Agreement.

In order to memorialize additional material terms of the parties’ agreement, counsel for Layrite shall prepare a long form Settlement Agreement which shall include, but not be limited to, the following required terms (the following terms also to be binding in this Memorandum):

(a) Non-compete by the Clems (worldwide scope and with regard to all men’s grooming products);

(b) No admission of liability;

(c) Mutual releases and 1542 waiver;

(d) Confidentiality and non-disparagement;

 (e) Cooperation in the preparation and execution of all documentation necessary to effectuate the terms of parties’ agreement and this Memorandum including Purchase Agreement;

 (f) Dismissals with prejudice by all parties upon execution of the Purchase Agreement and consummation of the Closing;

 (g) Disputes shall be first be resolved by attempted resolution through mediator Tom Oesterreich, Esq. first and this Memorandum shall subsequently be enforceable pursuant to California Code of Civil Procedure section 664.6.

Responding Parties argue that Moving Parties’ Motion is premature because Moving Parties have not demonstrated that they attempted resolution of their disagreement through mediation as required by paragraph 5(g) of the MOU.

In reply, Moving Parties assert that they have attempted resolution through substantial negotiations with the mediator. However, the meet and confer emails attached to the Jenkins Declaration in Support of Opposition and the Clark Declaration in support of Reply demonstrate that any resolution was attempted through the mediator. Instead, both counsel attach meet and confer emails amongst themselves which reference discussions with a mediator, but it is not clear that this constitutes attempted resolution.

Based on the foregoing, the court finds that Moving Parties have not satisfied the MOU at paragraph 5(g), which states that attempted resolution through mediator is a condition precedent to enforcement through the court by Motion. Therefore, the Motion is DENIED without prejudice

The parties are ordered to engaged in mediation with Tom Osterreich, Esq. or otherwise demonstrate that they have attempted resolution of their disputes.

The court sets an Order to Show Cause re: Mediation for ___ at ____ in Dept C33.

Defendants are to give notice.