Covves, LLC v. Target Brands, Inc.

• Court: Court of Appeals for the Ninth Circuit
• Decided: January 21, 2022
• Docket: 21-55077
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JAN 21 2022 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

COVVES, LLC, No. 21-55077

Plaintiff-Appellant, D.C. No. 2:18-cv-08518-RGK-AFM v.

TARGET BRANDS, INC., a Minnesota MEMORANDUM* Corporation; et al.,

Defendants-Appellees,

and

BIGMOUTH INC., an Indiana Corporation; et al.,

Defendants.

Appeal from the United States District Court for the Central District of California R. Gary Klausner, District Judge, Presiding

Submitted January 14, 2022** Pasadena, California

Before: M. SMITH and OWENS, Circuit Judges, and S. MURPHY, III,*** District

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). Judge.

Appellant Covves, LLC sued Appellee Target and other retailers for patent

infringement; two manufacturers indemnified and defended the retailers. Shortly

before trial, all the parties settled the case.

In their settlement agreement, the manufacturers agreed to fully indemnify

the retailers and pay Covves an undisclosed sum to be made in seven payments.

Covves agreed to dismissal of the action without prejudice and to a dismissal with

prejudice after the manufacturers’ final payment. The parties then filed a “Joint

Stipulation of Voluntary Dismissal Without Prejudice” under Federal Rule of Civil

Procedure 41(a)(1)(A)(ii); in it, the parties requested that the district court retain

jurisdiction to enforce the settlement agreement. The district court did not issue

any order subsequent to the filing of stipulation.

Ten months later, Covves moved for relief from the joint stipulation.

Covves wanted to reopen the case under the parties’ settlement agreement and

under Civil Rule 60. Covves believed the manufacturers breached the agreement

by failing to make a timely settlement payment, but the district court denied the

motion. And the district court also denied Covves’s motion for reconsideration.

We review both orders for abuse of discretion. See Keeling v. Sheet Metal

*** The Honorable Stephen Joseph Murphy III, United States District Judge for the Eastern District of Michigan, sitting by designation.

2 Workers Int’l Ass’n, Loc. Union 162, 937 F.2d 408, 410 (9th Cir. 1991) (decision

to vacate a dismissal); Bateman v. U.S. Postal Serv., 231 F.3d 1220, 1223 (9th Cir.

2000) (Rule 60(b) motion denial); Bliesner v. Commc’n Workers of Am., 464 F.3d

910, 915 (9th Cir. 2006) (motion for reconsideration denial). “A district court

abuses its discretion if it does not apply the correct law or if it rests its decision on

a clearly erroneous finding of material fact.” Bateman, 231 F.3d at 1223 (citation

omitted).

The district court did not abuse its discretion when it denied the motion to

reopen. A district court lacks jurisdiction to enforce a settlement agreement that is

the basis for a dismissal unless the court expressly incorporates the terms of the

settlement agreement in an order to dismiss the case. See Kokkonen v. Guardian

Life Ins. Co. of Am., 511 U.S. 375, 378–81 (1994). A district court will therefore

have jurisdiction only if it expressly retains jurisdiction over a case after

settlement, or if a violation of the court’s order arises. “The settlement terms must

be part of the dismissal . . . for violation of the settlement agreement to amount to a

violation of the court’s order.” O’Connor v. Colvin, 70 F.3d 530, 532 (9th Cir.

1995) (citing Kokkonen, 511 U.S. at 381). Because the district court did not issue

an order that reserved jurisdiction over the case or incorporated the settlement

terms, it did not retain jurisdiction after the dismissal. Without a dismissal order

incorporating the settlement terms, “enforcement of the settlement agreement is for

3 state courts, unless there is some independent basis for federal jurisdiction.”

Kokkenon, 511 U.S. at 376, 381–82 (holding that even though the parties to the

principal breach of contract suit were diverse, the district court did not have

“automatic jurisdiction” over the alleged breach of the settlement agreement).

The district court did not abuse its discretion when it refused to vacate the

dismissal under Civil Rule 60(b)(6). “Generally, only ‘extraordinary

circumstances’ justify relief under the rule.” Keeling, 937 F.2d at 410 (citation

omitted). A district court must find that events leading to a settlement agreement’s

repudiation were “sufficiently extraordinary” to reopen a case. Id. (finding that

based on “specific acts,” the repudiation was “perceived as bad faith

noncompliance”). Repudiation alone is not an extraordinary circumstance

warranting Rule 60(b)(6) relief. See id. at 410. Indeed, “[i]n the usual course upon

repudiation of a settlement agreement, the frustrated party may sue anew for

breach of the agreement and may not . . . reopen the underlying litigation after

dismissal.” Id.

The district court did not find that the manufacturers acted in bad faith or

that any other extraordinary circumstances warranted reopening the case. Because

Covves argued only that repudiation triggered Rule 60(b)(6) relief, the district

court did not abuse its discretion when it rejected the argument.

As for the motion for reconsideration, Covves appealed only the district

4 court’s finding that no extraordinary circumstances existed to support Rule

60(b)(6) relief. The district court found that it properly denied Rule 60(b)(6) relief

given that Covves was not prevented from enforcing the settlement in a new

lawsuit. That finding was not an abuse of discretion because no circumstances

were beyond Covves’s control that “prevented or rendered [Covves] unable to

prosecute[ its] case[].” Cmty. Dental Servs. v. Tani, 282 F.3d 1164, 1168 (9th Cir.

2002) (citation omitted).

Last, the district court did not err in finding that Target’s opposition to the

motion to reopen the case was not evidence of bad faith. Target raised meritorious

defenses in a lawsuit against it, and so the district court's finding that Target did

not act in bad faith was not clearly erroneous.

The district court’s orders on appeal are AFFIRMED.