Judge: Mark H. Epstein, Case: 21SMCV00957, Date: 2024-09-03 Tentative Ruling

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Case Number: 21SMCV00957    Hearing Date: September 3, 2024    Dept: I

This is a motion by cross-complainant Srivastava to enforce a settlement agreement against cross-defendants.  This complicated case has its roots in a lease agreement between the Srivastava and the McPhersons.  UMRO was the leasing agent.  The McPhersons leased their property to Srivastava.  The McPhersons allege that Srivastava caused significant damage to the property.  There was a suit between those parties, but it was dismissed without prejudice.  The McPhersons then sued the real estate agent, UMRO.  UMRO brought Srivastava into the case, and he sued the McPhersons, who sued him back.  UMRO has settled out apparently with the McPhersons, leaving only the cross actions.  For a while, it appeared that there was a global settlement.  The parties had apparently agreed on the salient terms (the cross action would be dismissed) with potentially one exception.  Srivastava initially had wanted the matter dismissed, but there was no release and the dismissals were without prejudice.  The McPhersons’ prior counsel wanted a release and a dismissal with prejudice.  Srivastava claims that everyone agreed to that term and everyone was good to go (UMRO also sees it that way).  However, the McPhersons then apparently changed their minds and now insist that the dismissals be without prejudice and without any releases.  Srivastava seeks to enforce the settlement pursuant to CCP section 664.6 on the theory that everyone had agreed to the salient terms—including dismissals with prejudice.  The McPhersons oppose.  It appears that the McPhersons’ view is that because the parties never reached a real agreement, there is no settlement and the case needs to proceed to trial.  

The court easily dismisses one of the McPhersons’ arguments.  The McPhersons contend that a settlement can only be enforced under 664.6 if it is signed by the parties.  That used to be the law, but the law was amended to allow counsel to sign on the party’s behalf.  Further, electronic signatures will do—an actual signature with a pen is not necessary.

The court also notes that the McPhersons claim to have filed evidentiary objections.  The court does not see them in the file.  However, to the extent the objections are based on Evidence Code section 1152, the objections are OVERRULED.  Evidence of settlement negotiations is admissible to prove that a settlement was reached.  The statute only precludes such evidence to prove underlying liability.

There is, though, a problem.  Certain emails were exchanged on April 29 and April 30.  They ought to have been, but were not, attached to the Nelson declaration.  Instead, Nelson simply tells us what they (or some of them) purportedly say.  Of course, that is barred by the secondary evidence rule.  The court cannot tell from these papers whether there is a genuine dispute as to what those emails say.  These emails are important because even though they are not the final exchange, they provide necessary context that the court needs to understand whether there was an agreement or not.  The court will CONTINUE the hearing to allow those emails to be presented.  Given the parties’ arguments, the court really needs to see all of the communications.  That said, the court believes it might be helpful to run through its tentative thinking based on the record thus far.

Section 664.6 is one way to enforce a settlement agreement.  It is the easy way.  Where its strictures are met, it allows any party to bring a motion in court for enforcement.  The court can consider evidence surrounding the settlement and, if a settlement was in fact reached and the statute’s requirements are satisfied, the court can enforce the settlement, even if there is some factual dispute.  But if section 664.6 does not apply, it does not render the settlement a nullity.  Rather, the party seeking to enforce it can amend its pleading—complaint or answer—to allege the agreement and can enforce it as it could any other contract.  It can bring a summary judgment motion to do so if the facts are not in dispute or a trial can be held if the facts are in dispute.  Of course, that is not at issue at this moment.  The court merely points out that denying the motion does not mean that this case proceeds to a trial on the underlying merits of the cross-complaints.

Turning, then, to section 664.6, the court has these views.  Section 664.6 requires that the settlement be in writing and signed by the parties or their counsel (or stated orally before the court).  Although the signatures are usually on the same document, that is not required.  An offer signed by an attorney followed by “we accept” signed by the other is sufficient.  And the signatures can be electronic.  The court believes that there is enough here to meet the requirements of the statute if, but only if, the documents in question reflect a clear actual agreement, not just negotiations.  To find out, the court applies general contract law because, after all, a settlement is just a contract.  So far as the court can tell, the parties largely agreed on a settlement.  On April 26, 2024, the McPhersons’ counsel circulated a draft in which he proposed a release and attached a red line.  It would appear that the McPhersons’ counsel’s email constituted an offer or counter-offer.  On April 29, 2024, Srivastava’s counsel and UMRO’s counsel stated that they accepted the McPhersons’ offer.  Srivastava’s counsel suggested attaching the release, but he also stated that it was a suggestion only and that he was ok either way.  That suggestion is not a counter-offer; it looks like an acceptance.  The McPhersons’ attorney then asked UMRO’s counsel if UMRO accepted the release (because it was obvious that Srivastava did from the email), and UMRO’s counsel confirmed it.  But, on May 7, the McPhersons did an about-face and stated that they wanted to sign the prior draft that did not have a release.  That was reiterated by an email later that day.

Given that history, it is clear that the court needs to see all of the correspondence between April 29 and May 7.  On the face of the record thus far, it looks like an agreement was reached on April 29.  Srivastava and UMRO accepted McPherson’s offer of April 26.  While Srivastava had suggested attaching the release, it was not something upon which the agreement was contingent and that was clear.  It is like saying “If you agree to paint my house, I’ll pay you $1000” with a response “Yes, I agree.  A bonus would be nice, but I agree either way.”  That is a contract.

Here, though, what we have is an exchange of emails back and forth.  There are red lines and comments and questions.  It is far from clear to the court that it is concrete enough to constitute a signed settlement agreement as required by 664.6, although it might be.  Even if it is not, it might still be a contract.  The court will have a better idea when it sees all of the correspondence.

For now, the matter is CONTINUED to allow a joint compendium of the communications to be filed.  This should be all of the communications from the earliest settlement communication referred to in any of the papers through the last.  The court does not expect commentary or briefing.  The court will discuss the new hearing date with counsel.