1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 JASON BROOKS, Case No.: 3:18-cv-02290-GPC-KSC
12 Plaintiff, REPORT AND 13 v. RECOMMENDATION RE TARSADIA DEFENDANTS’ AND 14 TARSADIA HOTELS, 5th ROCK, LLC, PLAYGROUND’S MOTION TO MKP ONE, LLP, TUSHAR PATEL, B.U. 15 ENFORCE SETTLEMENT PATEL, GREGORY CASSERLY, AGREEMENT [Doc. No. 77] 16 PLAYGROUND DESTINATION
PROPERTIES, INC. and DOES 1-50, 17 REDACTED COPY – ORIGINAL Defendants. FILED UNDER SEAL 18
19 Before the Court is defendants’ Tarsadia Hotels, 5th Rock, LLC, MKP One, LLP, 20 and Gaslamp Holdings, LLC (collectively, the “Tarsadia Defendants”) Motion to Enforce 21 Settlement (the “Motion” or “Mot.”). Doc. No. 77 (redacted, public version); 84 (sealed 22 version). Defendant Playground Destination Properties, Inc. (“Playground,” and, 23 together with the Tarsadia Defendants, “defendants”) joins the Motion. Doc. No. 75. 24 Plaintiff Jason Brooks (“plaintiff” or “Mr. Brooks”) opposes the Motion (the 25 “Opposition” or “Opp.”). Doc. No. 81. 26 On August 4, 2020, the Honorable Gonzalo P. Curiel, United States District Judge, 27 referred the matter to the undersigned to prepare a report and recommendation pursuant 28 to 28 U.S.C. § 636(b)(l), and conduct an evidentiary hearing if necessary. See Doc. No. 1 86. For the reasons that follow, this Court RECOMMENDS that defendants’ Motion be 2 GRANTED. 3 I. BACKGROUND 4 This case arises out of plaintiff’s purchase of a residential condominium in San 5 Diego. Doc. No. 47, ¶5. Plaintiff is the sole opt-out of a class action against defendants 6 related to the sale of similar condominium units, which settled in 2017. See Beaver v. 7 Tarsadia Hotels, No. 11cv1842-GPC(KSC), 2017 WL 4310707, at *15 (S.D. Cal. Sept. 8 28, 2017). On December 5, 2019, the District Court granted in part and denied in part 9 defendants’ Motions to Dismiss plaintiff’s second amended complaint in this case. See 10 Doc. No. 56. 11 On April 22, 2020, the parties participated over the course of several hours in an 12 Early Neutral Evaluation (“ENE”) conference, during which they reached an agreement 13 in principle to settle the case. Doc. No. 72. Following the ENE conference, defendants 14 sent plaintiff a draft settlement agreement and joint motion for dismissal. Plaintiff 15 refused to sign the documents. On May 21, 2020, the Court held a follow up conference 16 with the parties (the “Status Conference”) to discuss the settlement reached, and the bases 17 for plaintiff’s refusal to sign the documents which set forth the agreed-upon terms. On 18 June 5, 2020, defendants filed the instant Motion. 19 II. THE SETTLEMENT 20 A. ENE Conference 21 The Court met telephonically with all parties at the outset of the ENE conference.1 22 The Court next spoke individually with plaintiff, and then with the defendants. At the 23 request of the Court, plaintiff made an initial settlement demand, which the Court then 24 communicated to defendants. Defendants then conferred, and relayed to the Court a 25 26 1 Due to the COVID-19 public health emergency, the ENE Conference was held telephonically. See 27 Order of the Chief Judge No. 18, “Suspension of Jury Trials and Other Proceedings During the COVID- 19 Public Emergency,” dated March 17, 2020 (available at www.casd.uscourts.gov); Doc. No. 69 28 1 counter-proposal, which was thereafter communicated to plaintiff. As is typical in ENE 2 conferences, the afternoon continued with back to back consultations in this fashion as 3 the Court conferred with each party and discussed the strengths and weaknesses of the 4 claims and defenses advanced. 2 5 After several hours of individual and joint sessions with the Court, the parties 6 reached a settlement. 7 ,3 8 9 10 11 12 .4 13 The following agreement was then reached between the parties, which was 14 verbally repeated by the undersigned Magistrate Judge in the presence of all parties in 15 joint session at close of the ENE conference: 16
18 19 ; 20 21 22 2 The parties’ communications with the Court during an ENE conference are confidential under Local 23 Rule 16.1(c)(1)(b). The undersigned has endeavored herein to preserve the confidentiality of that proceeding by relying on the transcript of the May 21, 2020 Status Conference and the information 24 disclosed in the parties’ filings. 25 3 Plaintiff pled guilty to securities fraud and has been incarcerated in Colorado since May 24, 2009. Doc. No. 47 (Second Amended Complaint), ¶¶105, 115-16. As plaintiff acknowledges in his Second 26 Amended Complaint, he was also ordered to pay over $5,000,000 in restitution. See id., ¶ 117. 27 4
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18 19 . 20 21 See Amended Declaration of Cathy T. Moses (“Moses Dec.”), Doc. No. 77-1 (redacted), 22 84-1 (sealed), ¶5; see also Doc. No. 72. After the undersigned recited these terms in joint 23 session with all parties on the line, she asked each party and counsel to verbally confirm 24 that the stated terms accurately represented the settlement reached. All parties and 25 counsel, including Mr. Brooks, confirmed that they accurately reflected the settlement 26 reached. Importantly, Mr. Brooks stated no objections to any of the settlement terms. 27 After the ENE conference, the Court issued an Order confirming the parties’ 28 agreement in principle (the “ENE Order”). Doc. No. 72 at 1. As agreed, plaintiff was to 1 file his motion “delineat[ing] how he believe[d] the settlement funds should be 2 distributed based on applicable law and in consideration of any restitution order entered 3 against him in connection with his conviction” on or before June 5, 2020. Id. Consistent 4 with the above terms to which the parties agreed in the Court’s presence, the Court 5 ordered counsel for the Tarsadia Defendants to circulate a draft settlement and release 6 agreement and joint motion for dismissal to plaintiff within one week of the conference.5 7 Id. Plaintiff was ordered to review the settlement agreement and related documents and 8 respond within three business days of receipt. Id. at 2. To monitor the parties’ progress 9 in finalizing their settlement, the Court set a follow-up telephonic status conference for 10 May 21, 2020. Doc. No. 71. 11 As ordered, counsel for the Tarsadia Defendants thereafter circulated a draft 12 settlement and release agreement to plaintiff which set forth the terms of the agreement 13 reached, and a joint dismissal motion. The settlement documents provided to plaintiff 14 accurately reflect the terms of the settlement reached between the parties at the ENE 15 Conference on April 22, 2020. Plaintiff refused to sign and return the settlement papers 16 as ordered by the Court. Instead, he stated in correspondence to Tarsadia Defendants’ 17 counsel that he wanted the settlement funds to be sent to his sister and not deposited with 18 the Clerk of Court as was discussed and agreed to at the ENE Conference. See Moses 19 Dec., ¶8. 6 20 B. May 21, 2020 Status Conference 21 Upon being advised that plaintiff would not sign the settlement documents, the 22 Court proceeded with the previously-scheduled a telephonic status conference on May 23 24 5 During the ENE, the Court requested that the Tarsadia Defendants’ counsel lodge a copy of all 25 documents sent to plaintiff at the undersigned’s chambers email address. Moses Dec., ¶7. On April 29, 2020, the Tarsadia defendants lodged a copy of a letter to plaintiff of the same date, a document titled 26 “Settlement Agreement and Release of Claims,” and a document titled “Joint Stipulation Dismissing 27 Entire Action With Prejudice [F.R.C.P. 41(a)(1)(A)(ii)].” Id., ¶8.
6 This information is corroborated by the April 29, 2020 letter from the Tarsadia Defendants’ counsel to 28 1 21, 2020 (the “Status Conference”), which was recorded. Doc. No. 73; see generally 2 5/21/20 Tr. (sealed). The purpose of the Status Conference was to discuss the settlement 3 reached, and the bases for plaintiff’s refusal to sign the documents which set forth the 4 agreed-upon terms. 5 The Court reiterated during the Status Conference that the parties had indeed 6 reached an agreement to settle the case at the ENE conference. 5/21/20 Tr. at 1, 5, 12, 7 21, 22 (sealed). After discussing the terms of the settlement, the Court advised plaintiff 8 “[y]ou have already agreed to those [settlement] terms. What you are doing is reneging 9 on the terms.” Id. at 1-2, 12. 10 In response, plaintiff argued that his agreement to settle was premised on the 11 determination that if the settlement funds did not go to him, they would go to charity. Id. 12 at 3, 5-6. Further, he stated he was under the “incorrect belief that the Prison Litigation 13 Reform Act” applied to him, as a prisoner, but he had since determined it did not. Id. at 14 3-4, 10. Although plaintiff’s manner of explanation suggested that these considerations 15 came to him after he had already agreed to the settlement terms,7 the Court reiterated that 16 the agreement reached between the parties included that the agreed-upon monetary sum 17 was to be paid into a trust fund with the Clerk of Court, and that plaintiff would brief for 18 the District Court how the funds were to be distributed. Id. at 6. This did not appease 19 plaintiff, as he stated he wanted the ability to appeal any determination that Judge Curiel 20 might make, which would be precluded by proceeding with the agreed upon settlement 21 terms. Id. at 17-18, 19, 17. Plaintiff was offered additional time to submit his motion to 22 the Court given his stated limited access to the law library, he declined this opportunity. 23 Id. at 13. Without advance assurances that Judge Curiel would order the funds to be paid 24 / / 25 26 27 7 As he stated, “[b]ut then, after we ended the conversation that day, I thought, ‘Well, wait a minute. If the diversion of the damages can be given to charity, then they … could go to me.” 5/21/20 Tr. at 2 28 1 directly to him or his sister, plaintiff refused to go forward with the settlement previously 2 reached. Id. at 18, 21. 3 The undersigned then advised the parties that “…[I]n my judgment, a settlement 4 was reached and our discussion today is, in essence, just an effort by Mr. Brooks to back 5 out of a settlement which was already reached.” 5/21/20 Tr. at 21-22 (sealed). 6 Defendants concurred, and the Court inquired whether defendants wished to proceed with 7 filing a motion to enforce the settlement. Responding affirmatively, defendants were 8 ordered to file their motion within two weeks. Id. at 22-23; see also Doc. No 80 (setting 9 briefing schedule for plaintiff’s motion). 10 III. LEGAL STANDARD 11 A District Court has the authority to “ enforce on motion a settlement agreement 12 entered into by the litigants while the litigation is pending before it.’” In re City Equities 13 Anaheim, Ltd., 22 F.3d 954, 957 (9th Cir. 1995) (citations omitted); see also Callie v. 14 Near, 829 F.2d 888, 890 (9th Cir. 1987) (same); TNT Mktg., Inc. v. Agresti, 796 F.2d 15 276, 278 (9th Cir. 1986) (recognizing the Court’s “inherent power to enforce [an] 16 agreement in settlement of litigation before it”). This authority extends to oral 17 agreements. Doi v. Halekulani Corp., 276 F.3d 1131, 1138 (9th Cir. 2002); see also 18 Woods v. Carey, No. 2:04-cv-1225 MCE AC P, 2015 WL 7282749, at *4 (E.D. Cal. Nov. 19 18, 2015), report and recommendation adopted, 2016 WL 11440086 (E.D. Cal. Jan. 15, 20 2016), aff’d, 715 Fed. App’x 694 (9th Cir. 2018). Indeed, the Court is “bound to 21 enforce” agreements reached in its presence because such agreements are “not only 22 between the parties, but also between them and the court.” Winn v. Potter, No. 07cv630- 23 NLS, 2008 WL 11338406, at *2 (S.D. Cal. Oct. 22, 2007) (further noting that “[i]t is 24 boilerplate law that oral agreements and stipulations made in the presence of the court are 25 enforceable”) (citing 7 A.L.R.3d 1394). The moving party has the burden of 26 demonstrating that the parties formed a legally enforceable settlement agreement. See 27 Olam v. Congress Mortg. Co., 68 F. Supp. 2d 1110, 1137 n. 19, 1140 (N.D. Cal. 1999). 28 / / 1 Under federal law, two requirements must be met for the Court to enforce a 2 settlement agreement. First, the agreement must be complete. Callie, 829 F.2d at 890. 3 Second, all parties must have directly agreed to be bound by the terms of the settlement 4 or have authorized their respective representatives to settle the dispute. Harrop v. 5 Western Airlines, Inc., 550 F.2d 1143, 1144-45 (9th Cir. 1977). In addition to these 6 requirements, the Court applies California law in determining whether a legally 7 enforceable settlement agreement was reached, even where the underlying cause of action 8 arises under federal law. See Jeff D. v. Andrus, 899 F.2d 753, 759 (9th 1989); United 9 Commercial Ins. Serv. v. Paymaster Corp., 962 F.2d 853, 857 (9th Cir. 1992). 10 Under California law, contract formation requires (1) parties capable of 11 contracting; (2) the parties’ consent; (3) a lawful object; and, (4) sufficient cause or 12 consideration. Lopez v. Charles Schwab & Co., 118 Cal. App. 4th 1224, 1230 (Cal. Ct. 13 App. 2004) (citing Cal. Civ. Code § 1550). Because the facts of this case do not bring 14 into question the issues of capacity, lawfulness, or the sufficiency of consideration, this 15 Court will focus on the parties’ consent, or the element of mutual assent. “Mutual assent 16 usually is manifested by an offer communicated to the offeree and an acceptance 17 communicated to the offeror.” Lopez, 118 Cal. App. 4th at 1230 (citing Cal. Civ. Code 18 §§ 1550, 1565). The existence of mutual consent is determined by objective criteria; the 19 “parties’ outward manifestations must show that the parties all agreed upon the same 20 thing in the same sense.” Weddington Prod., Inc., v. Flick, 60 Cal. 4th 793, 811 (Cal. 21 1998). Furthermore, California Code of Civil Procedure, section 664.6, provides that 22 “[i]f parties to pending litigation stipulate … orally before the court, for settlement of the 23 case … the court, upon motion, may enter judgment pursuant to the terms of the 24 settlement.” Cal. Civ. Proc. Code §664.6. 25 IV. DISCUSSION 26 Plaintiff acknowledges that he “did agree in principal [sic] to settle this case” at the 27 ENE conference. Opp. at 2. In opposition to defendants’ Motion, he advances several 28 arguments to support his position that he should not be held to the agreement. For the 1 reasons discussed below, the Court finds none of plaintiff’s arguments provide a basis to 2 deny defendants’ Motion.8 3 A. The Court Has Jurisdiction to Enforce the Settlement 4 Plaintiff asserts that the Court lacks jurisdiction to enforce the parties’ oral 5 settlement agreement, citing Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 6 (1994). Opp. at 5-6. Plaintiff’s reliance on Kokkonen is misplaced. Kokkonen stands for 7 the proposition that since a federal court’s jurisdiction terminates upon dismissal of an 8 action, the court has no inherent jurisdiction to enforce a settlement post-dismissal. As 9 the Ninth Circuit has explained, “When a district court dismisses an action with 10 prejudice, federal jurisdiction usually ends … [citation] [and] a dispute arising under a 11 settlement agreement is ‘a separate contract dispute that requires its own independent 12 basis for jurisdiction.’” Kelly v. Wengler, 822 F.3d 1085, 1094 (9th Cir. 2016) (citing 13 and quoting O’Connor v. Colvin, 70 F.3d 530, 532 (9th Cir. 1995)) (emphasis added). 14 This action has not been dismissed, and therefore Kokkonen is not controlling. As noted, 15 the Court’s jurisdiction to enforce settlement agreements between parties in pending 16 cases is well-settled in this Circuit. See, e.g., Doi, 276 F. 3d at 1136; In re City Equities 17 Anaheim, Ltd., 22 F.3d at 957; accord Wilcox v. Arpaio, 753 F.3d 872 (9th Cir. 2014) 18 (finding no error in district court’s enforcement of settlement agreement reached during 19 mediation); Woods, 2015 WL 7282749, at *5 (enforcing oral settlement agreement 20 reached with assistance of Magistrate Judge). 21 22 23 8 The Court is aware that plaintiff objects to defendants’ Motion having been referred to the undersigned due to what he perceives as the undersigned’s “conflict of interest” and bias in favor of 24 defendants. Doc. No. 88 at 2. Plaintiff’s allegations appear to be based on “nothing more than the 25 undersigned’s ruling in this case,” which are rarely a “valid basis for a bias or partiality motion.” Woods, 2015 WL 7282749, at *2. Plaintiff has not articulated any objective, non-speculative basis to question 26 the undersigned’s impartiality. Id. (citations omitted). Furthermore, as discussed more fully below and as recognized by the District Court, as the judge who presided over the ENE conference, it is appropriate 27 for the undersigned to “act as the trier of fact [in] determining whether the parties entered into a valid and binding settlement agreement” and to “consult her memory” in doing so. Terry v. Conlan, 131 Cal. 28 1 Further, plaintiff’s pro se status does not alter the scope of the Court’s jurisdiction 2 or permit him to “chang[e] his mind about going through with [the] settlement.” Opp. at 3 6-7. See Henderson v. Yard House Glendale, LLC, 456 Fed. App’x 701, 702 (9th Cir. 4 2011) (affirming enforcement of a settlement agreement with pro se litigant); see also 5 Phillips v. Pilgrim Creek Estates Homeowners Ass’n, No. 19-CV-102-AJB(WVG), 2020 6 WL 995862, at *4 (S.D. Cal. Mar. 2, 2020) (finding oral settlement agreement 7 enforceable against pro se litigant). Nor is it significant that “no written agreement was 8 signed” at the ENE conference. Opp. at 6. See Doi, 276 F.3d at 1138 (“An agreement 9 announced on the record becomes binding even if a party has a change of heart after he 10 agreed to its terms but before the terms are reduced to writing.”) (citation omitted); see 11 also Woods, 2015 WL 7282749, at *5 (“…parties may not escape their obligations by 12 refusing to sign a written agreement that conforms to the oral terms.”) (citations omitted). 13 Thus, contrary to plaintiff’s suggestion, this Court has jurisdiction and the authority to 14 enforce an oral settlement agreement that plaintiff “entered into … on the record in open 15 court, but later refused to execute.” Henderson, 456 Fed. App’x at 702.9 16 B. The Parties Entered into an Enforceable Settlement Agreement 17 1. The Written Agreement Is Consistent with This Court’s Order 18 Following the ENE 19 In support of his claim that he “did not agree” to the above-specified settlement 20 terms, plaintiff argues that “extreme contradictions exist” between the agreement reached 21 and the ENE Order, and defendants’ written settlement agreement. The Court disagrees. 22 As set forth above, 23 24 25 26 27 9 “It is well settled that an oral settlement recited to a judge in the course of a settlement conference supervised by that judge satisfies the ‘before the court’ requirement.” Murphy v. Padilla, 42 28 1 2 , this Court ordered plaintiff to file a motion “delineat[ing] how 3 plaintiff believes the settlement funds should be distributed based on applicable law and 4 in consideration of any restitution order entered against him in connection with his 5 conviction.” Doc. No. 72 (ENE Order) at 2. The ENE Order also reflects 6 7 Id. (providing that 8 “[t]he settlement funds will be distributed by the Clerk of Court in accordance with the 9 Court’s determination”). 10 Plaintiff claims the written settlement agreement drafted by defendants “excludes” 11 the provision that allows him to brief the District Court regarding the recipient of the 12 settlement funds. Opp. at 4-5. 13 : 14
19 20
21 22 The Court finds the foregoing provisions are entirely consistent with the agreement 23 reached between the parties at the ENE Conference, as referenced in the ENE Order, and 24 are not, as plaintiff claims, “diametrically opposed” to the settlement reached. Doc. 81, 25 Opp. at 5. Plaintiff apparently misunderstands the foregoing language to mean he is “not 26 entitle[d] to brief the Court on where the settlement damages would go ….” Id. 27 (emphasis added). That is not the case. 28 1 2 3 4 5 In sum, the written settlement agreement accurately reflects the discussion that 6 took place during the ENE Conference and the terms upon which the parties ultimately 7 agreed. 8 The court in Woods, supra, addressed the enforceability of an oral settlement 9 agreement on similar facts. Therein, the parties participated a settlement conference with 10 a Magistrate Judge during which a settlement was reached. Woods, 2015 WL 7282749 at 11 *1. As in the present case, the defendant thereafter filed a motion to enforce the 12 settlement because plaintiff refused to sign the settlement agreement which memorialized 13 the agreed-upon terms of the oral settlement agreement. Id. The Magistrate Judge 14 thereafter held two further telephonic conferences at which the plaintiff articulated, inter 15 alia, that he no longer believed the terms of the agreement were in his best interests. Id. 16 at *5. The Court rejected plaintiff’s arguments and found that he had entered into a 17 binding agreement and had done so knowingly and voluntarily. As stated: 18 The undersigned finds that the material terms of the settlement 19 agreement, as placed on the record … were consented to by both parties with the intent that the oral agreement was binding and the 20 written agreement was merely for the purpose of memorializing the 21 oral agreement. 22 Id. at *6. 23 Similarly, in Richardson v. Richardson, 180 Cal.App. 3d 91 (Cal. Ct. App. 1986), 24 a judge presided over a settlement conference without a court reporter. Id. at 94. A 25 settlement offer was communicated, and the opposing party was afforded 48 hours to 26 accept. Id. After the offer was timely accepted, the offering party endeavored to change 27 the terms of the offer. Id. The settlement judge held a hearing to address the settlement, 28 which was recorded, and thereafter granted the motion to enforce the oral settlement. Id. 1 at 95. The opposing party challenged the ruling, arguing, inter alia, there was 2 insufficient evidence to show that he made an oral settlement offer or that an agreement 3 to settle was reached. Id. at 97. 4 Applying California law, the Court held that an agreement to settle a lawsuit which 5 is reached at a judicially supervised settlement conference is enforceable if substantial 6 evidence that a settlement was reached is found by the settlement judge, even if it was to 7 be memorialized later by a formal writing. Id. “When parties orally agree upon all of the 8 terms and conditions of an agreement with the mutual intention that it shall thereupon 9 become binding, the mere fact that a formal written agreement to the same effect is to be 10 prepared and signed does not alter the binding validity of the oral agreement.” Id. at 97 11 (citations omitted). 12 As applied herein, the parties reached a binding oral agreement with respect to all 13 material terms at the ENE Conference, as accurately documented in the settlement 14 agreement provided to the defendant. See Moses Dec., ¶5; see also ENE Order. The 15 parties confirmed at that time that they were entering into the settlement agreement 16 knowingly and voluntarily. The fact that the agreement reached was to be later reduced 17 to writing does not change the enforceability of the agreement reached. The settlement 18 agreement is therefore binding and enforceable. 19 2. An Evidentiary Hearing Is Unnecessary 20 Where the material terms of the settlement agreement are stated on the record and 21 the parties confirm their understanding and acceptance of those terms, it is not necessary 22 for the Court to conduct an evidentiary hearing regarding the existence of an agreement. 23 See Doi, 276 F.3d at 1139-40; see also Phillips, 2020 WL 995862, at *8 (“When both the 24 terms of the settlement and the parties’ mutual assent thereto is clear, an evidentiary 25 hearing is not required.”). Instead, a party’s statement that he agrees to the terms recited 26 and understands them to be correct is “the beginning and the end of the inquiry.” VACC, 27 Inc. v. Davis, No. 18-cv-03454-JCS, 2019 WL 1460201, at *5 (N.D. Cal. Apr. 2, 2019). 28 “The recollection of the judge conducting the settlement conference can also support a 1 finding of an enforceable agreement without an evidentiary hearing.” Woods 2015 WL 2 7282749, at *2. As one California court explained, the Court in this instance “acts as a 3 trier of fact” to “determine whether the parties entered into a valid and binding 4 settlement,” and if the same judge making this determination presided over the settlement 5 conference “he may avail himself of the benefit of his own recollection.” Kohn v. 6 Jaymar-Ruby, Inc., 23 Cal. App. 4th 1530, 1533 (Cal. Ct. App. 1994). 7 As set forth above, and consistent with the undersigned’s recollection, the material 8 terms of the settlement agreement and the parties’ mutual assent to those terms were 9 confirmed before the Court at the conclusion of the ENE conference. Accordingly, the 10 undersigned finds that an evidentiary hearing is unnecessary. 11 C. Plaintiff’s Further Objections to the Settlement Agreement Are Without Merit 12 In his Opposition, plaintiff asserts the parties’ settlement agreement is 13 unenforceable for several additional reasons. Plaintiff’s remaining arguments stem from 14 his insistence that he should be able to direct the District Court to distribute the 15 settlement funds consistent with his interpretation of the law and the restitution order. 16 Specifically, he claims that the PLRA does not apply to this case, and that as such, he is 17 entitled to require that the settlement proceeds be paid directly to him. Opp. at 9. 18 Plaintiff claims he did not understand that he had this purported authority until after the 19 ENE conference. Opp. at 3. Plaintiff also argues that the restitution order entered by the 20 Colorado District Court is unconstitutional. Opp. at 9-13. The undersigned considers 21 these arguments in the context of whether they render the settlement unenforceable and 22 finds they do not, for the reasons discussed below. 23 1. The Settlement Agreement Cannot Be Rescinded Due to Plaintiff’s Alleged 24 “Misconception” 25 While acknowledging he agreed at the ENE Conference to settle his claims, 26 plaintiff asserts that he was operating at the time “under a misconception that the [PLRA] 27 applied to this case.” Opp. at 2. Because of this alleged “misconception,” plaintiff states 28 he agreed to settle with the caveat that the settlement proceeds be given to charity, 1 because he would “‘rather die’” than have any settlement proceeds distributed pursuant to 2 his “illegal restitution order.” Id. at 2-3. According to plaintiff, “only after the ENE 3 conference did [he] come to understand” that the PLRA does not apply to this case, and 4 that as such he could direct payment of the settlement proceeds as he saw fit – namely, to 5 himself. Id. As plaintiff explains it, he “realized [after the ENE conference] there would 6 be no logic in agreeing to a settlement he would not possibly benefit from ….”10 Id. 7 Plaintiff also addressed his supposed “misconceptions” during the May 21, 2020 8 Status Conference. When pressed by the Court about why he had not signed the 9 settlement agreement, plaintiff responded: 10 MR. BROOKS: Yeah. Okay. So, first off, Your Honor, my agreement was premised upon if I did brief Judge Curiel and the money wasn’t 11 going to go to me, it would go to charity. That was my -- the main 12 thing. So, after I agreed, that’s – that’s what I made clear. Under no circumstance, if the money is not going to me, I want it going -- I 13 wanted it going to charity. 14 But then, after we ended that conversation that day, I thought, 15 “Well, wait a minute. If the diversion of the damages can be given to 16 charity, then they don’t -- then they could go to me.” 17 So, it was basically like there’s no way that I could say, “Oh, contingent upon if the determination is made that it doesn’t go to 18 me, it goes to charity,” because then I am still determining where 19 the money would go. 20 That was the first premise -- 21 THE COURT: Okay. 22 MR. BROOKS: -- of the settlement. 23 24 25 10 Federal Rule of Civil Procedure 11 provides that by making representations to the Court in pleadings, 26 motions, or other documents, the litigant certifies that the facts therein (or denials of facts) are warranted on the evidence or reasonably based on belief or lack of information. Fed. R. Civ. P. 11(b). Plaintiff is 27 reminded that this obligation applies equally to both attorneys and unrepresented parties. Id.; see also Civ. L.R. 83.1 (addressing consequences of a party’s failure to comply with the Federal Rules of Civil 28 1 The second was my incorrect belief that the Prison Litigation Reform Act still applied to me, because I am a prisoner, which meant I 2 believed that it still may have applied to this proceeding, but it 3 doesn’t. So there is no private settlement mandate of “any diversion of damage awards go to payment of my restitution.” There’s not a single 4 case that I have found that says that. 5 And it basically erodes the whole basis of private settlement because 6 now I am going to brief this with Judge Curiel; that ruling is going to 7 be made.… The main concern is there is no – there’s no reason for me to settle the case if I am not going to get a benefit of the 8 settlement. 9 Doc. 5/21/20 Tr. at 3-4 (sealed) (emphasis added). 10 There was no “misconception” as plaintiff asserts. Rather, as he acknowledged 11 during the Status Conference, he changed his mind. The Court and the parties engaged in 12 lengthy discussions during the ENE conference regarding the distribution of the 13 settlement proceeds. The undersigned informed plaintiff that he could not dictate how 14 the settlement proceeds were to be distributed, and that the matter would instead be 15 decided by the District Court after full briefing. See 5/21/20 Tr. at 7 (sealed). It was an 16 unambiguous term of the settlement that the District Court – not plaintiff (or defendants 17 for that matter) – would determine the proper payee of the settlement funds. 18 19 20 As this Court 21 confirmed during the Status Conference: 22 THE COURT: [U]nderstand that we can’t dictate how Judge Curiel 23 may rule on any briefing that you submit regarding who the money should go to. 24 So the settlement has to be final. The only determination that would 25 be left up in the air would be where the moneys go as based on a 26 determination by Judge Curiel. That’s what you agreed to. 27 MR. BROOKS: Yeah. Yeah. Yeah. I agree -- 28 See id. at 10. 1 Regardless of plaintiff’s assertions about his “misconceptions” or mistakes, under 2 California law, a party may rescind a contract even when that party’s consent to the 3 contract was given by mistake. Cal. Civ. Code § 1689(b)(1); see also Grenall v. United 4 of Omaha Life Ins. Co., 165 Cal. App. 4th 188, 193 (Cal. Ct. App. 2008). However, “the 5 kind of mistake which renders a contract voidable does not include ‘mistakes as to 6 matters which the contracting parties had in mind as possibilities and as to the existence 7 of which they took the risk.” Stermer v. Bd. of Dental Exam’rs, 95 Cal. App. 4th 128, 8 134 (Cal. Ct. App. 2002) (citation omitted); see also Amin v. Sup. Ct., 237 Cal. App. 4th 9 1392, 1403 (Cal. Ct. App. 2015) (noting that “rescission is warranted only when ‘the 10 subject of uncertainty has not been a concern of the parties’”) (citation omitted). 11 12 13 . Stermer, 95 Cal. App. 4th at 134. As one California appellate 14 court explained, “[e]very time parties enter a contract, they act with incomplete 15 information” and “make judgments about the desirability of acquiring (and waiting for) 16 additional information, and of creating specific contractual provisions to handle particular 17 eventualities.” Amin, 237 Cal. App. 4th at 1403 (citation omitted). That is exactly what 18 happened here. Under California law, the settlement agreement is not voidable. Stermer, 19 95 Cal. App. 4th at 134 (parties’ “knowledge of the existence of doubtful matter” at the 20 time of contracting does not “render[] a contract voidable”). 21 For the same reason, the parties’ settlement agreement is not voidable due to 22 plaintiff’s alleged “misconception” at the time of the ENE Conference that any proceeds 23 from the settlement of his case would be subject to the PLRA. Doc. 81; Opp. at 2; see 24 also 5/21/20 Tr. at 10 (sealed) (plaintiff stating that when he agreed to the settlement he 25 “was under the presumption that the PLRA still applied to the case”). Plaintiff, citing his 26 inability to conduct legal research, states he “realized” after the ENE conference that this 27 presumption was incorrect and that no “reasonable person [would] agree to settle a 28 / / 1 winning case for nothing, without knowing the relevant law.” Doc. 81, Opp. at 2, 3. 2 Even assuming, as plaintiff states, that he was “unprepared” on the issue of whether 3 defendants should “pay[] out any agreed-to settlement to plaintiff directly” at the ENE 4 Conference (Opp. at 2), that does not justify his reneging on the agreement because 5 plaintiff was at a minimum “aware when he made the contract that his knowledge” of the 6 very issue he now claims to have been mistaken about was “limited.” Amin, 237 Cal. 7 App. 4th at 1403 (quoting Restatement (Second) of Contracts, § 154). Plaintiff entered 8 into the agreement “in the face of that awareness,” so he “bears the risk” of his mistake 9 and the contract will not be voided. Id.; see also Spitzer v. Aljoe, No. 13-cv-05442-MEJ, 10 2016 WL 3279167, at *11 (N.D. Cal. June 15, 2016), aff’d, 734 Fed. App’x 457 (9th Cir. 11 2018) (enforcing settlement agreement where party “treated [its] knowledge as sufficient” 12 when it agreed to settlement terms). 13 In short, plaintiff appears to have “chang[ed] his mind about going through with 14 the settlement.” Opp. at 6. But, “[o]nce a party enters into a binding settlement 15 agreement” – as plaintiff did here – “that party cannot unilaterally decide to back out of 16 the agreement.” Bland v. Badger, No. 1:19-cv-00702-DAD-EPG (PC), 2020 WL 17 508874, at *3 (E.D. Cal. Jan. 31, 2020) (citing Doi, 276 F.3d at 1131). Plaintiff’s alleged 18 “misconceptions” do not provide a basis for the Court to depart from the rule that “if a 19 party enters into a settlement agreement knowingly and voluntarily, the agreement is 20 treated as a binding contract….” Arnold v. United States, 816 F.2d 1306, 1309 (9th Cir. 21 1987) (citation omitted). 22 / / 23 24 25 11 Plaintiff asserts that during the Status Conference he expressed “concerns” about his ability to research the law with respect to the distribution of the settlement proceeds so that he would “know[] 26 exactly what he was agreeing to.” Opp. at 7. Plaintiff’s concern at the Status Conference, however, 27 primarily related to his inability to research and brief the motion to the District Court given his limited access to the prison law library during the pandemic. See 5/21/20 Tr. at 12-14 (sealed). The undersigned 28 offered plaintiff additional time to complete his briefing, but he declined. Id. 1 2. The Settlement Is Enforceable Regardless of the Applicability of the PLRA or the Constitutionality of Plaintiff’s Criminal Restitution Order 2 3 In his Opposition to the Motion, plaintiff addresses the issue of how the settlement 4 proceeds should be distributed, asserting that the settlement should not be enforced 5 because his case is not subject to the PLRA and that in any event the criminal restitution 6 order to which the settlement proceeds may be subject is unconstitutional.12 Opp. at 7- 7 13. According to plaintiff, these facts warrant the Court directing payment of the 8 settlement proceeds directly to him, “as he has requested.” Id. at 7. 9 This Court need not address plaintiff’s arguments concerning the applicability of 10 the PLRA or “whether he has made a prima facie showing that his current restitution 11 obligation is invalid …” in the context of the instant Motion. Id. at 8-9. Instead, the 12 issue is subject to determination by Judge Curiel upon the filing of a motion by plaintiff 13 in which plaintiff can articulate his arguments regarding the lawful distribution of the 14 settlement funds. 15 16 . 17 In a similar case, after reaching an agreement during a court-facilitated settlement 18 conference, an incarcerated litigant refused to sign the written settlement agreement 19 unless a provision was made to allow the funds “to be delivered directly to a third party 20 without any amount being applied” to the inmate’s restitution obligations pursuant to 21 Section 2085.5 of the California Penal Code. See Davenport v. Korik, No. 2:14-cv- 22 00325-TLN-DB (PC), 2016 WL 6039027, at *5 (E.D. Cal. Oct. 14, 2016). The inmate 23 argued both that the statute was “ambiguous” and that he “disagree[d]” with it. Id. The 24 court in Davenport found, however, that “the agreement set forth on the record clearly 25 informed [the inmate] that any restitution … would be deducted from the settlement 26 27 28 12 Defendants take no position on plaintiff’s arguments. See Doc. No. 82 at 5. 1 amount and [he] would only receive money in his inmate account if any of the settlement 2 remained ….” Id. The court accordingly found that the inmate “knowingly and 3 voluntarily entered into the settlement agreement” and that the settlement was 4 enforceable. Id. at *6. 5 Here, plaintiff reasons that without knowing how the District Court will rule, he is 6 unable to ascertain whether he will benefit from the settlement and therefore there is “no 7 logic” in agreeing to the settlement. Opp. at 3. As in Davenport, however, plaintiff 8 “knowingly and voluntarily” entered into the settlement which left the question of how 9 the settlement proceeds would be distributed for future resolution by the District Court. 10 Davenport, 2016 WL 6039027, at *6. This Court will not indulge plaintiff in his attempt 11 to do an end-run around the parties’ explicit settlement agreement. 12 V. CONCLUSION 13 Based on the parties’ moving and opposing papers, the undersigned’s involvement 14 in and knowledge of the settlement reached the April 22, 2020 Early Neutral Evaluation 15 Conference, discussions at the May 21, 2020 Status Conference, and review of its files 16 and transcript of the Status Conference, this Court finds that plaintiff and defendants 17 formed a legally binding settlement agreement at the ENE Conference, that plaintiff 18 understood and accepted the terms thereof, and that he knowingly and voluntarily entered 19 into the agreement. As ordered by the Court, the Tarsadia Defendants’ counsel prepared 20 a written agreement and release which accurately reflects the terms of the settlement 21 agreement reached during the ENE Conference. Plaintiff has not provided any legitimate 22 basis to justify his refusal to sign the written settlement agreement. Accordingly, and for 23 the reasons set forth above the Court RECOMMENDS that defendants’ Motion to 24 Enforce Settlement Agreement [Doc. No. 77] be GRANTED. 25 IT IS HEREBY ORDERED that no later than thirty (30) days from the date of 26 this Order, any party to this action may file written objections with the Court and serve a 27 copy on all parties. The document should be captioned “Objections to Report and 28 Recommendation of Magistrate Judge.” 1 IT IS HEREBY FURTHER ORDERED that if any such objections are filed, any 2 ||reply to those objections shall be filed with the Court and served on all parties no later 3 ten (10) days after the date the objections are served. 4 The parties are advised that failure to file objections within the specified time may 5 ||result in waiver of the right to raise those objections on appeal of the Court’s order. See 6 || Loher v. Thomas, 825 F.3d 1003, 1121 (9th Cir. 2016). 7 \| IT ISSO ORDERED. 8 ||Dated: October 1, 2020 / jy Wo 9 Mfc SS 10 Hori. Karen S. Crawford United States Magistrate Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28