1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 METALLICUS, INC., Case No. 21-cv-09562-HSG
8 Plaintiff, ORDER DENYING MOTION TO ENFORCE SETTLEMENT 9 v. AGREEMENT OR DISMISS DECLARATORY JUDGMENT 10 PROTON TECHNOLOGIES AG, COMPLAINT 11 Defendant. Re: Dkt. No. 27
12 13 Before the Court is Defendant Proton AG’s (“Proton”) motion for an order enforcing the 14 parties’ settlement agreement, or in the alternative, dismissing Plaintiff Metallicus, Inc.’s 15 (“Metallicus”) complaint for declaratory judgment. Dkt. No. 27 (“Mot.”). The motion is fully 16 briefed. See Dkt Nos. 29 (“Opp.”) and 30 (“Reply”). For the reasons provided below, the motion 17 is DENIED. 18 This a trademark infringement dispute spanning two related lawsuits. The first lawsuit is a 19 declaratory judgment action of non-infringement filed by Metallicus (Metallicus, Inc. v. Proton 20 Technologies AG, 4:21-cv-09562-HSG) (“DJ Action”). The second is an infringement action filed 21 by Proton (Proton AG v. Metallicus, Inc., 4:21-cv-09714-HSG) (“Infringement Action”). During 22 the March 15 Case Management Conference, the Court asked the parties to meet and confer about 23 the duplicative lawsuits to avoid wasteful litigation. The parties accordingly spent the following 24 week negotiating the dismissal of the DJ Action in conjunction with other issues relating to the 25 Infringement Action. See Dkt. No. 27-2, Declaration of Patrick C. Justman ISO Proton’s Motion 26 (“Justman Decl.”), Ex. A. 27 Proton’s lawyer, Patrick Justman, emailed an offer to Metallicus’s lawyer, Michael 1 mediate before Metallicus’s preferred mediator; (iii) Metallicus would forego motion practice and 2 discovery as to its new, unpled affirmative defense; and (iv) the parties would reserve all rights as 3 to several other issues. Id. On Tuesday, March 22, Mr. Dergosits responded that the parties were 4 “in substantial agreement” with Mr. Justman’s proposal, except that Metallicus would not agree to 5 forego discovery on its unpled affirmative defense. Id. Mr. Dergosits made clear in his response 6 that Metallicus agreed to withdraw the DJ Action by stating: “[i]f and when you confirm that we 7 have an agreement, we will prepare the Rule 41 document for your review and comment before 8 filing.” Id. On Thursday, March 24, Mr. Justman thanked Mr. Dergosits for his cooperation and 9 wrote: “as it appears we have reached an agreement here, please send the notice for our 10 consideration.” Id. 11 But then the next day, on March 25, Mr. Dergosits wrote that “[t]here was a 12 miscommunication” on Metallicus’s side and that Metallicus was unwilling to dismiss the DJ 13 action. Id. Mr. Dergosits now claims that an executive assistant at Metallicus erroneously 14 communicated that Metallicus’s Chief Executive and Financial Officers had chosen to dismiss the 15 DJ action, when they actually did not want to do so. See Opp. at 2-3. 16 Proton filed the pending motion, which asks the Court to either enforce the agreement or 17 decline to exercise jurisdiction over Metallicus’s single declaratory judgment claim on the ground 18 that it is duplicative of the Infringement Action. See Mot. In response, Metallicus argues that its 19 miscommunication with Mr. Dergosits negates the existence of an agreement enforceable against 20 Metallicus because Mr. Dergosits did not have express authority to settle the DJ action. See Opp. 21 at 3. The Court agrees with Metallicus and declines to enforce the settlement agreement. 22 There is no question that this Court has the inherent power to enforce a settlement 23 agreement in a case pending before it. See TNT Marketing, Inc. v. Aaresti, 796 F.2d 276, 278 (9th 24 Cir. 1986). But before it may do so, the moving party, here Proton, must meet its burden of 25 showing that the parties formed a “legally enforceable settlement agreement.” Madani v. Cnty. of 26 Santa Clara, No. 16-CV-07026-LHK, 2019 WL 402362, at *6 (N.D. Cal. Jan. 31, 2019). State 27 contract law governs the construction and enforceability of settlement agreements. Wilcox v. 1 essential elements of a contract are: parties capable of contracting; the parties’ consent; a lawful 2 object; and sufficient cause or consideration.” Lopez v. Charles Schwab & Co., Inc., 118 Cal. 3 App. 4th 1224, 1230 (2004) (citing Cal. Civil Code § 1550)). An enforceable settlement 4 agreement must be a “complete agreement,” which means that the parties agreed on all material 5 terms. See Maynard v. City of San Jose, 37 F.3d 1396, 1401 (9th Cir. 1994); Callie v. Near, 829 6 F.2d 888, 890 (9th Cir. 1987). And lastly, both parties must have either directly agreed to the 7 settlement terms or authorized their respective counsel to settle the dispute. See Harrop v. 8 Western Airlines, Inc., 550 F.2d 1143, 1144-45 (9th Cir. 1977); see also Goldie v. Caliber Home 9 Loans, Inc., No. 2:16-CV-00962-KJM-DB, 2018 WL 4659576, at *4 (E.D. Cal. Sept. 28, 2018). 10 The last element is dispositive here. Proton has not met its burden of showing that the 11 parties formed a legally enforceable settlement agreement because it has not presented evidence 12 that Metallicus either directly agreed to settle the DJ Action or authorized Mr. Dergosits to do so. 13 There is no claim that one of Metallicus’s principals directly agreed to the proposed 14 settlement of the DJ Action. Proton instead argues that Mr. Dergosits had actual authority to 15 engage in such negotiations and to bind Metallicus to the proposed settlement. See Reply at 4. As 16 evidence, Proton cites Mr. Dergosits’ decades of litigation experience, his role as Metallicus’s 17 representative at the pretrial conference, his role in negotiating other aspects of the settlement 18 agreement, and his negotiation and consummation of a prior agreement affecting Metallicus’s 19 substantive rights in the DJ Action. Id. at 5. 20 Under California law, an attorney does not have implied authority to settle a case through 21 his representative role in pending litigation. See Madani, 2019 WL 402362, at *9 (citing Blanton 22 v. Womancare, Inc., 38 Cal. 3d 396, 404 (1985)). Rather, “specific authorization” from the client 23 is required to bind a client to a compromise settlement. Id. (citing Bice v. Stevens, 160 Cal. App. 24 2d 222, 231-32 (1958)). 25 Here, there is no evidence that anyone at Metallicus with the authority to enter a settlement 26 agreement gave Mr. Dergosits “specific authorization” to do so. Irina Berkon, Metallicus’s Chief 27 Financial Officer, declares as follows under penalty of perjury: “At no time did I intend to or 1 counterprosal (sic) email that Mr. Dergosits sent to Proton AG’s counsel was based upon a 2 ||} misunderstanding and miscommunication between Mr. Dergosits and Metallicus.” See Dkt. No. 3 || 29-2, Declaration Irina Berkon ISO Metallicus’ Opposition §f] 2-3. The CEO’s executive assistant 4 || has also sworn that he erroneously told Mr. Dergosits to accept the settlement even though 5 Metallicus’s CEO and CFO had not decided to do so. See Dkt. No. 29-3, Declaration Nick 6 || Jimenez ISO Metallicus’ Opposition Jf 2-3. Based on this record, the Court finds no basis to 7 || conclude that Mr. Dergosits had “specific authorization” from Metallicus to bind it to a 8 compromise settlement. 9 That does not necessarily end the matter. A client may still bind itself by ratifying the 10 || unauthorized acts of its attorney. Blanton, 38 Cal. 3d at 408.
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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 METALLICUS, INC., Case No. 21-cv-09562-HSG
8 Plaintiff, ORDER DENYING MOTION TO ENFORCE SETTLEMENT 9 v. AGREEMENT OR DISMISS DECLARATORY JUDGMENT 10 PROTON TECHNOLOGIES AG, COMPLAINT 11 Defendant. Re: Dkt. No. 27
12 13 Before the Court is Defendant Proton AG’s (“Proton”) motion for an order enforcing the 14 parties’ settlement agreement, or in the alternative, dismissing Plaintiff Metallicus, Inc.’s 15 (“Metallicus”) complaint for declaratory judgment. Dkt. No. 27 (“Mot.”). The motion is fully 16 briefed. See Dkt Nos. 29 (“Opp.”) and 30 (“Reply”). For the reasons provided below, the motion 17 is DENIED. 18 This a trademark infringement dispute spanning two related lawsuits. The first lawsuit is a 19 declaratory judgment action of non-infringement filed by Metallicus (Metallicus, Inc. v. Proton 20 Technologies AG, 4:21-cv-09562-HSG) (“DJ Action”). The second is an infringement action filed 21 by Proton (Proton AG v. Metallicus, Inc., 4:21-cv-09714-HSG) (“Infringement Action”). During 22 the March 15 Case Management Conference, the Court asked the parties to meet and confer about 23 the duplicative lawsuits to avoid wasteful litigation. The parties accordingly spent the following 24 week negotiating the dismissal of the DJ Action in conjunction with other issues relating to the 25 Infringement Action. See Dkt. No. 27-2, Declaration of Patrick C. Justman ISO Proton’s Motion 26 (“Justman Decl.”), Ex. A. 27 Proton’s lawyer, Patrick Justman, emailed an offer to Metallicus’s lawyer, Michael 1 mediate before Metallicus’s preferred mediator; (iii) Metallicus would forego motion practice and 2 discovery as to its new, unpled affirmative defense; and (iv) the parties would reserve all rights as 3 to several other issues. Id. On Tuesday, March 22, Mr. Dergosits responded that the parties were 4 “in substantial agreement” with Mr. Justman’s proposal, except that Metallicus would not agree to 5 forego discovery on its unpled affirmative defense. Id. Mr. Dergosits made clear in his response 6 that Metallicus agreed to withdraw the DJ Action by stating: “[i]f and when you confirm that we 7 have an agreement, we will prepare the Rule 41 document for your review and comment before 8 filing.” Id. On Thursday, March 24, Mr. Justman thanked Mr. Dergosits for his cooperation and 9 wrote: “as it appears we have reached an agreement here, please send the notice for our 10 consideration.” Id. 11 But then the next day, on March 25, Mr. Dergosits wrote that “[t]here was a 12 miscommunication” on Metallicus’s side and that Metallicus was unwilling to dismiss the DJ 13 action. Id. Mr. Dergosits now claims that an executive assistant at Metallicus erroneously 14 communicated that Metallicus’s Chief Executive and Financial Officers had chosen to dismiss the 15 DJ action, when they actually did not want to do so. See Opp. at 2-3. 16 Proton filed the pending motion, which asks the Court to either enforce the agreement or 17 decline to exercise jurisdiction over Metallicus’s single declaratory judgment claim on the ground 18 that it is duplicative of the Infringement Action. See Mot. In response, Metallicus argues that its 19 miscommunication with Mr. Dergosits negates the existence of an agreement enforceable against 20 Metallicus because Mr. Dergosits did not have express authority to settle the DJ action. See Opp. 21 at 3. The Court agrees with Metallicus and declines to enforce the settlement agreement. 22 There is no question that this Court has the inherent power to enforce a settlement 23 agreement in a case pending before it. See TNT Marketing, Inc. v. Aaresti, 796 F.2d 276, 278 (9th 24 Cir. 1986). But before it may do so, the moving party, here Proton, must meet its burden of 25 showing that the parties formed a “legally enforceable settlement agreement.” Madani v. Cnty. of 26 Santa Clara, No. 16-CV-07026-LHK, 2019 WL 402362, at *6 (N.D. Cal. Jan. 31, 2019). State 27 contract law governs the construction and enforceability of settlement agreements. Wilcox v. 1 essential elements of a contract are: parties capable of contracting; the parties’ consent; a lawful 2 object; and sufficient cause or consideration.” Lopez v. Charles Schwab & Co., Inc., 118 Cal. 3 App. 4th 1224, 1230 (2004) (citing Cal. Civil Code § 1550)). An enforceable settlement 4 agreement must be a “complete agreement,” which means that the parties agreed on all material 5 terms. See Maynard v. City of San Jose, 37 F.3d 1396, 1401 (9th Cir. 1994); Callie v. Near, 829 6 F.2d 888, 890 (9th Cir. 1987). And lastly, both parties must have either directly agreed to the 7 settlement terms or authorized their respective counsel to settle the dispute. See Harrop v. 8 Western Airlines, Inc., 550 F.2d 1143, 1144-45 (9th Cir. 1977); see also Goldie v. Caliber Home 9 Loans, Inc., No. 2:16-CV-00962-KJM-DB, 2018 WL 4659576, at *4 (E.D. Cal. Sept. 28, 2018). 10 The last element is dispositive here. Proton has not met its burden of showing that the 11 parties formed a legally enforceable settlement agreement because it has not presented evidence 12 that Metallicus either directly agreed to settle the DJ Action or authorized Mr. Dergosits to do so. 13 There is no claim that one of Metallicus’s principals directly agreed to the proposed 14 settlement of the DJ Action. Proton instead argues that Mr. Dergosits had actual authority to 15 engage in such negotiations and to bind Metallicus to the proposed settlement. See Reply at 4. As 16 evidence, Proton cites Mr. Dergosits’ decades of litigation experience, his role as Metallicus’s 17 representative at the pretrial conference, his role in negotiating other aspects of the settlement 18 agreement, and his negotiation and consummation of a prior agreement affecting Metallicus’s 19 substantive rights in the DJ Action. Id. at 5. 20 Under California law, an attorney does not have implied authority to settle a case through 21 his representative role in pending litigation. See Madani, 2019 WL 402362, at *9 (citing Blanton 22 v. Womancare, Inc., 38 Cal. 3d 396, 404 (1985)). Rather, “specific authorization” from the client 23 is required to bind a client to a compromise settlement. Id. (citing Bice v. Stevens, 160 Cal. App. 24 2d 222, 231-32 (1958)). 25 Here, there is no evidence that anyone at Metallicus with the authority to enter a settlement 26 agreement gave Mr. Dergosits “specific authorization” to do so. Irina Berkon, Metallicus’s Chief 27 Financial Officer, declares as follows under penalty of perjury: “At no time did I intend to or 1 counterprosal (sic) email that Mr. Dergosits sent to Proton AG’s counsel was based upon a 2 ||} misunderstanding and miscommunication between Mr. Dergosits and Metallicus.” See Dkt. No. 3 || 29-2, Declaration Irina Berkon ISO Metallicus’ Opposition §f] 2-3. The CEO’s executive assistant 4 || has also sworn that he erroneously told Mr. Dergosits to accept the settlement even though 5 Metallicus’s CEO and CFO had not decided to do so. See Dkt. No. 29-3, Declaration Nick 6 || Jimenez ISO Metallicus’ Opposition Jf 2-3. Based on this record, the Court finds no basis to 7 || conclude that Mr. Dergosits had “specific authorization” from Metallicus to bind it to a 8 compromise settlement. 9 That does not necessarily end the matter. A client may still bind itself by ratifying the 10 || unauthorized acts of its attorney. Blanton, 38 Cal. 3d at 408. And a client’s failure to “promptly 11 disaffirm” its agent’s conduct on its behalf could amount to an implied ratification. NORCAL 12 Mut. Ins. Co. v. Newton, 84 Cal. App. 4th 64, 79, 100 Cal. Rptr. 2d 683, 695 (2000). But here, 13 Proton has not presented any direct evidence of ratification. And the Court finds that Metallicus 14 || promptly disaffirmed Mr. Dergosits’s counterproposal by communicating within days that 15 Metallicus in fact had not decided to settle the DJ action. See Dkt. No. 27-2 at 3 (“There was a 16 || miscommunication on our side about the counterproposal that I sent to you on Tuesday. Metallicus 3 17 is not willing to dismiss the declaratory judgment action 09562 HSG.”). 18 Since Proton has not presented compelling evidence that Mr. Dergosits had either “specific 19 authorization” from Metallicus to bind it to the settlement agreement, or that Metallicus ratified 20 || his conduct, the Court finds no basis to enforce the agreement. And while this Court has the 21 discretion to dismiss an action for declaratory judgment, it declines to do so at this time. See 22 || Leadsinger, Inc. v. BMG Music Pub., 512 F.3d 522, 533 (9th Cir. 2008). Proton’s motion is 23 accordingly DENIED, but the parties are again encouraged to cooperate with respect to the 24 || duplicative lawsuits to avoid wasteful litigation. 25 IT IS SO ORDERED. 26 || Dated: 7/26/2022 27 Abppured 3 Sb) HAYWOOD S. GILLIAM, JR. 28 United States District Judge