Michael Reid v. I.C. System Incorporated

• Court: Court of Appeals for the Ninth Circuit
• Decided: December 24, 2019
• Docket: 18-16618
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS DEC 24 2019 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

MICHAEL REID, on behalf of himself and No. 18-16618 all others similarly situated D.C. No. 2:12-cv-02661-ROS Plaintiffs-Appellees,

v. MEMORANDUM*

I.C. SYSTEM INCORPORATED,

Defendant-Appellant.

Appeal from the United States District Court for the District of Arizona Roslyn O. Silver, District Judge, Presiding

Submitted October 15, 2019** Pasadena, California

Before: WARDLAW and COLLINS, Circuit Judges, and SETTLE,*** District Judge.

I.C. System appeals from an order granting final approval of the agreement

* 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). *** The Honorable Benjamin H. Settle, United States District Judge for the Western District of Washington, sitting by designation. settling the Reid class members’ claims that I.C. System violated the Telephone

Consumer Protection Act of 1990. See 47 U.S.C. § 227(b)(1)(A)(iii). We have

jurisdiction under 28 U.S.C. § 1291. Although we generally review a district

court’s decision to grant final approval of a class action settlement for abuse of

discretion, Hanlon v. Chrysler Corp., 150 F.3d 1011, 1027 (9th Cir. 1998),

overruled on other grounds by Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338

(2011), we review a district court’s interpretation of a settlement agreement de

novo, Jeff D. v. Andrus, 899 F.2d 753, 759 (9th Cir. 1989).

1. At the heart of this dispute lies the question whether the district court

lacked the authority to grant final approval of the settlement agreement after I.C.

System purported to terminate it. The district court had that authority under

Federal Rule of Civil Procedure 23 if it determined that the settlement agreement

had not in fact been terminated according to its terms. See In re Syncor ERISA

Litig., 516 F.3d 1095, 1100 (9th Cir. 2008); Collins v. Thompson, 679 F.2d 168,

172 (9th Cir. 1982). Moreover, Section 20.05 of the then-binding settlement

agreement requires the court to resolve any disputes between the parties. Thus, the

district court had authority under both the federal rules and the plain terms of the

settlement agreement to construe the agreement in accordance with Arizona law

and, if it concluded that the agreement had not been validly terminated, to approve

the settlement in the manner it did.

2 2. I.C. System contends that Section 17.02 of the settlement agreement gave

I.C. System “broad discretion to determine what constitutes a Section 17.02 opt-

out,” and that the district court therefore materially modified the settlement

agreement by ordering the parties to submit briefing as to the meaning of Section

17.02 of the agreement and by requiring I.C. System to provide evidence to

support its determination that more than 100 class members had opted out. The

district court did not err. The settlement agreement required the district court to

apply Arizona principles of contract interpretation. Under Arizona law, the district

court was required to interpret a contract according to the parties’ intent. See

Taylor v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148, 152 (1993). By its terms,

Section 17.02 grants I.C. System discretion to terminate the settlement agreement

only “if”100 class members have, in fact, indicated an intent to opt out of the

settlement; it did not grant I.C. System discretion to decide what constitutes an opt-

out. See Grubb & Ellis Mgmt. Serv., Inc. v. 407417 B.C., L.L.C., 138 P.3d 1210,

1213 (Ariz. Ct. App. 2006) (where contractual terms “are clear and unambiguous,

a court must give effect to the contract as written”). The district court therefore

properly imposed on I.C. System the burden to show that 100 class members had

indicated an intent to opt out. Cf. Clark v. Compania Gandera de Cananea, S.A.,

387 P.2d 235, 238 (Ariz. 1963) (party seeking to avoid contingent obligation had

the burden “to prove affirmatively the existence of conditions which would excuse

3 their nonperformance”). Under both Federal Rule of Civil Procedure 23 and

Section 20.05 of the settlement agreement, the district court was authorized to

interpret the settlement agreement to determine whether 100 class members

indicated an intent to opt out. Thus, far from modifying the settlement agreement,

the district court’s order requesting briefing was a valid exercise of its authority to

interpret the settlement agreement.

3. I.C. System argues that 100 class members have indicated an intent to opt

out. Both parties agree that five class members opted out of the settlement

agreement via the procedures outlined in Section 12.01. I.C. System points to

three additional groups of potential opt-outs that it claims, in aggregate, constitute

well over 100 opt-outs in this case. But I.C. System’s math simply does not add

up. Even though “the communication” from a class member did not necessarily

have to be “in compliance with Section 12.01,” the communication still had to

indicate an intent to “opt-out,” meaning that the relevant class members formed

and expressed an intention to remove themselves from the settlement. The district

court properly held that I.C. System failed to show that more than 100 persons had

communicated such an intent. First, I.C. System points to a category of 349

individual class members that it claims have opted out by either filing a lawsuit

against I.C. System or sending a prelitigation demand letter to I.C. System. But as

the district court noted, the mere fact that a person had participated in another suit

4 or made a demand for payment, without more, does not satisfy I.C. System’s

burden to show that the person indicated an intent to opt-out of this settlement.

I.C. System’s failure of proof was particularly stark as to those class members who

made a demand, or participated in a suit, before the class notice was first

published: as the district court held, I.C. System had failed to show how such

persons “could have intended to opt-out of something of which they were most

likely unaware.” And to the extent that such an intent to opt out arguably might be

inferred with respect to those class members who filed a lawsuit or made a pre-

litigation demand after notice of the settlement was published, the district court

correctly found that only 15 such persons did so. Furthermore, I.C. System

contends that Reid class members’ participation in two additional class actions in

the Eastern District of New York indicates their intent to opt out of settlement.

However, the district court also correctly found that those two lawsuits have no

relationship to this one.

Costs shall be awarded to the Plaintiffs-Appellees.

AFFIRMED.