THE HONORABLE JOHN C. COUGHENOUR 1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 WESTERN DISTRICT OF WASHINGTON 8 AT SEATTLE 9 PIROSHKY BAKING COMPANY LLC, a CASE NO. C20-0733-JCC Washington corporation, 10 ORDER 11 Plaintiff, v. 12 SKY HUVARD, an individual, and 13 CYBOTECH LLC, an unincorporated Washington entity, 14 15 Defendants. 16 This matter comes before the Court on Plaintiff’s motion to enforce settlement agreement 17 (Dkt. No. 11). Having thoroughly considered the parties’ briefing and the relevant record, the 18 Court finds oral argument unnecessary and hereby GRANTS in part and DENIES in part the 19 motion for the reasons explained herein. 20 I. BACKGROUND 21 Plaintiff is a Washington corporation which started its business as a bakery in 1992 under 22 the name “Piroshky Piroshky.” (Dkt. No. 1 at 2–3.) Plaintiff has since expanded its activities to 23 include “facility management services; human resources services; accounting and bookkeeping 24 services; PR, marketing, branding, communications, and advertising; storage; security services; 25 customer support; and others.” (Id. at 3.) Plaintiff has accordingly developed certain confidential 26 1 information, and Plaintiff derives independent economic value from keeping that information 2 confidential. (Id. at 3–4.) 3 In 2013, Plaintiff engaged Defendants to provide Plaintiff with technical support, 4 including building and maintaining a website and converting Plaintiff’s confidential information 5 to source code. (Id. at 4–5.) In April 2020, Plaintiff terminated its relationship with Defendants. 6 (Id. at 6–7.) Plaintiff demanded that Defendants return Plaintiff’s purported trade secrets, 7 Plaintiff’s website, and the source code created from Plaintiff’s confidential information. (Id. at 8 7.) In May 2020, Plaintiff filed suit in this Court against Defendants, alleging claims of 9 intellectual property theft and unjust enrichment. (See generally id.; Dkt. No. 11 at 2.) 10 Defendants filed suit against Plaintiff in King County Superior Court, alleging that Plaintiff 11 failed to pay Defendants’ invoices. (See Dkt. No. 11 at 2.) 12 On June 5, 2020, Defendants sent Plaintiff proposed settlement terms. (See Dkt. No. 11-2 13 at 11–16.) On June 7, 2020, Plaintiff responded with a counteroffer. (See id. at 4.) The 14 counteroffer set forth the parties’ duties as to (1) Defendants’ obligation to “return and/or destroy 15 everything of or related to the services performed for [Plaintiff] and to certify to the same”; (2) 16 Defendants’ obligation to “assign all right title and interest copyright, trade secret, patent rights, 17 inchoate IP and all other property rights whatsoever (excepting copyright in the source code, and 18 the source code (proper)”; (3) Plaintiff’s payments to Defendants for Defendants’ intellectual 19 property interests and outstanding bills over a 12-month or a six-month period; (4) executing 20 mutual releases and filing dismissals of their respective actions; and (5) execution of an 21 agreement including a non-disparagement clause. (Id. at 5–8.) Later that day, Defendants 22 selected the six-month payment plan. (Id. at 4.) After Plaintiff rejected Defendants’ request for 23 additional security, Defendants asked, “So the Settlement Agreement is what we see now?” (Id. 24 at 3.) Plaintiff responded, “Are you accepting the 1:13 PM offer below, with the six month 25 option . . . ? If yes, we’re settled. If no, then we’re not settled. Just let me know yes or no in 26 response to this email.” (Id. at 2.) In response, Defendants stated, “Yes.” (Id.) 1 On June 10, 2020, Plaintiff emailed Defendants a draft settlement agreement which 2 memorialized the parties’ agreed terms and added additional provisions. (See Dkt. No. 11-3 at 2– 3 23.) On June 11, Defendants sent Plaintiff a red-line version of the settlement agreement; the 4 suggested changes altered several payment and assignment deadlines, highlighted that the parties 5 had not discussed Defendants’ future participation in domain name transfers or a pending patent 6 prosecution, struck a non-competition covenant, and named a different mediator in the dispute 7 resolution provision. (See Dkt. No. 11-4 at 2–17.) Plaintiff agreed to Defendants’ proposed 8 changes regarding the deadlines, striking the non-competition provision, and the mediator. (See 9 Dkt. No. 11-5 at 2.) With regard to the domain name, Plaintiff stated that “if Network Solutions 10 requires his assistance at all, I would like to have Mr. Huvard obligated to help with it, if what 11 Mr. Huvard says is true, there will be no obligation on his part—and that should make it very 12 easy to accept.” (Id.) Plaintiff also noted that Defendants had already agreed to “assign all right 13 title and interest to [] patent rights [] and all other property rights whatsoever” but proposed 14 additional language regarding Plaintiff’s and Defendant Huvard’s respective interests in the 15 pending patent application. (See id.; Dkt. No. 11 at 8.) Plaintiff asked that the parties discuss the 16 matter further over the phone. (See Dkt. No. 11-5 at 2.) 17 On June 12, 2020, Defendants raised a novel objection to the proposed settlement 18 agreement’s language regarding the return of Plaintiff’s property, arguing that it may require 19 Defendants to print voluminous pages of past emails. (Dkt. No. 11-6 at 3.) In response, Plaintiff 20 pointed out that the provision was intended to require Defendants to “return what is already 21 printed out via a box” and asked Defendants to suggest new language if preferred. (Id.) Rather 22 than suggesting new language, Defendants’ then-counsel stated that Defendants had retained new 23 counsel, that Defendants would substantively respond to the lawsuit, and that “the settlement is 24 not approved and will not be signed by Mr. Huvard.” (Id. at 2.) 25 Plaintiff now moves to enforce the parties’ purported settlement agreement. (Dkt. No. 26 1 11.)1 2 II. DISCUSSION 3 A. Motion to Enforce Settlement Agreement 4 “It is well settled that a district court has the equitable power to enforce summarily an 5 agreement to settle a case pending before it.” Callie v. Near, 829 F.2d 888, 890 (9th Cir. 1987) 6 (collecting cases). “However, the district court may enforce only complete settlement 7 agreements.” Id. 8 In Washington, “[s]ettlements are considered under the common law of contracts.” 9 Condon v. Condon, 298 P.3d 86, 92 (Wash. 2013). Under Washington law, the formation of a 10 contract require a meeting of the minds between the parties to the contract. See Sea-Van Invs. 11 Assocs. v. Hamilton, 881 P.2d 1035, 1038–39 (Wash. 1994); see also Blue Mt. Constr. Co. v. 12 Grant Cty. Sch. Dist. No. 150-204, 306 P.2d 209, 212 (Wash. 1957) (“The acceptance of an offer 13 is always required to be identical with the offer, or there is no meeting of the minds and no 14 contract.”). Washington follows the objective manifestation theory of contracts, which “lays 15 stress on the outward manifestation of assent made by each party to the other. The subjective 16 intention of the parties is irrelevant.” City of Everett v. Sumstad’s Estate, 631 P.2d 366, 367 17 (Wash. 1981) (citing Plumbing Shop, Inc. v. Pitts, 408 P.2d 382, 384 (Wash. 1965)). 18 In addition, for a settlement to be enforceable, the parties must agree to all material terms 19 of the agreement. See P.E. Sys., LLC v.
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THE HONORABLE JOHN C. COUGHENOUR 1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 WESTERN DISTRICT OF WASHINGTON 8 AT SEATTLE 9 PIROSHKY BAKING COMPANY LLC, a CASE NO. C20-0733-JCC Washington corporation, 10 ORDER 11 Plaintiff, v. 12 SKY HUVARD, an individual, and 13 CYBOTECH LLC, an unincorporated Washington entity, 14 15 Defendants. 16 This matter comes before the Court on Plaintiff’s motion to enforce settlement agreement 17 (Dkt. No. 11). Having thoroughly considered the parties’ briefing and the relevant record, the 18 Court finds oral argument unnecessary and hereby GRANTS in part and DENIES in part the 19 motion for the reasons explained herein. 20 I. BACKGROUND 21 Plaintiff is a Washington corporation which started its business as a bakery in 1992 under 22 the name “Piroshky Piroshky.” (Dkt. No. 1 at 2–3.) Plaintiff has since expanded its activities to 23 include “facility management services; human resources services; accounting and bookkeeping 24 services; PR, marketing, branding, communications, and advertising; storage; security services; 25 customer support; and others.” (Id. at 3.) Plaintiff has accordingly developed certain confidential 26 1 information, and Plaintiff derives independent economic value from keeping that information 2 confidential. (Id. at 3–4.) 3 In 2013, Plaintiff engaged Defendants to provide Plaintiff with technical support, 4 including building and maintaining a website and converting Plaintiff’s confidential information 5 to source code. (Id. at 4–5.) In April 2020, Plaintiff terminated its relationship with Defendants. 6 (Id. at 6–7.) Plaintiff demanded that Defendants return Plaintiff’s purported trade secrets, 7 Plaintiff’s website, and the source code created from Plaintiff’s confidential information. (Id. at 8 7.) In May 2020, Plaintiff filed suit in this Court against Defendants, alleging claims of 9 intellectual property theft and unjust enrichment. (See generally id.; Dkt. No. 11 at 2.) 10 Defendants filed suit against Plaintiff in King County Superior Court, alleging that Plaintiff 11 failed to pay Defendants’ invoices. (See Dkt. No. 11 at 2.) 12 On June 5, 2020, Defendants sent Plaintiff proposed settlement terms. (See Dkt. No. 11-2 13 at 11–16.) On June 7, 2020, Plaintiff responded with a counteroffer. (See id. at 4.) The 14 counteroffer set forth the parties’ duties as to (1) Defendants’ obligation to “return and/or destroy 15 everything of or related to the services performed for [Plaintiff] and to certify to the same”; (2) 16 Defendants’ obligation to “assign all right title and interest copyright, trade secret, patent rights, 17 inchoate IP and all other property rights whatsoever (excepting copyright in the source code, and 18 the source code (proper)”; (3) Plaintiff’s payments to Defendants for Defendants’ intellectual 19 property interests and outstanding bills over a 12-month or a six-month period; (4) executing 20 mutual releases and filing dismissals of their respective actions; and (5) execution of an 21 agreement including a non-disparagement clause. (Id. at 5–8.) Later that day, Defendants 22 selected the six-month payment plan. (Id. at 4.) After Plaintiff rejected Defendants’ request for 23 additional security, Defendants asked, “So the Settlement Agreement is what we see now?” (Id. 24 at 3.) Plaintiff responded, “Are you accepting the 1:13 PM offer below, with the six month 25 option . . . ? If yes, we’re settled. If no, then we’re not settled. Just let me know yes or no in 26 response to this email.” (Id. at 2.) In response, Defendants stated, “Yes.” (Id.) 1 On June 10, 2020, Plaintiff emailed Defendants a draft settlement agreement which 2 memorialized the parties’ agreed terms and added additional provisions. (See Dkt. No. 11-3 at 2– 3 23.) On June 11, Defendants sent Plaintiff a red-line version of the settlement agreement; the 4 suggested changes altered several payment and assignment deadlines, highlighted that the parties 5 had not discussed Defendants’ future participation in domain name transfers or a pending patent 6 prosecution, struck a non-competition covenant, and named a different mediator in the dispute 7 resolution provision. (See Dkt. No. 11-4 at 2–17.) Plaintiff agreed to Defendants’ proposed 8 changes regarding the deadlines, striking the non-competition provision, and the mediator. (See 9 Dkt. No. 11-5 at 2.) With regard to the domain name, Plaintiff stated that “if Network Solutions 10 requires his assistance at all, I would like to have Mr. Huvard obligated to help with it, if what 11 Mr. Huvard says is true, there will be no obligation on his part—and that should make it very 12 easy to accept.” (Id.) Plaintiff also noted that Defendants had already agreed to “assign all right 13 title and interest to [] patent rights [] and all other property rights whatsoever” but proposed 14 additional language regarding Plaintiff’s and Defendant Huvard’s respective interests in the 15 pending patent application. (See id.; Dkt. No. 11 at 8.) Plaintiff asked that the parties discuss the 16 matter further over the phone. (See Dkt. No. 11-5 at 2.) 17 On June 12, 2020, Defendants raised a novel objection to the proposed settlement 18 agreement’s language regarding the return of Plaintiff’s property, arguing that it may require 19 Defendants to print voluminous pages of past emails. (Dkt. No. 11-6 at 3.) In response, Plaintiff 20 pointed out that the provision was intended to require Defendants to “return what is already 21 printed out via a box” and asked Defendants to suggest new language if preferred. (Id.) Rather 22 than suggesting new language, Defendants’ then-counsel stated that Defendants had retained new 23 counsel, that Defendants would substantively respond to the lawsuit, and that “the settlement is 24 not approved and will not be signed by Mr. Huvard.” (Id. at 2.) 25 Plaintiff now moves to enforce the parties’ purported settlement agreement. (Dkt. No. 26 1 11.)1 2 II. DISCUSSION 3 A. Motion to Enforce Settlement Agreement 4 “It is well settled that a district court has the equitable power to enforce summarily an 5 agreement to settle a case pending before it.” Callie v. Near, 829 F.2d 888, 890 (9th Cir. 1987) 6 (collecting cases). “However, the district court may enforce only complete settlement 7 agreements.” Id. 8 In Washington, “[s]ettlements are considered under the common law of contracts.” 9 Condon v. Condon, 298 P.3d 86, 92 (Wash. 2013). Under Washington law, the formation of a 10 contract require a meeting of the minds between the parties to the contract. See Sea-Van Invs. 11 Assocs. v. Hamilton, 881 P.2d 1035, 1038–39 (Wash. 1994); see also Blue Mt. Constr. Co. v. 12 Grant Cty. Sch. Dist. No. 150-204, 306 P.2d 209, 212 (Wash. 1957) (“The acceptance of an offer 13 is always required to be identical with the offer, or there is no meeting of the minds and no 14 contract.”). Washington follows the objective manifestation theory of contracts, which “lays 15 stress on the outward manifestation of assent made by each party to the other. The subjective 16 intention of the parties is irrelevant.” City of Everett v. Sumstad’s Estate, 631 P.2d 366, 367 17 (Wash. 1981) (citing Plumbing Shop, Inc. v. Pitts, 408 P.2d 382, 384 (Wash. 1965)). 18 In addition, for a settlement to be enforceable, the parties must agree to all material terms 19 of the agreement. See P.E. Sys., LLC v. CPI Corp., 289 P.3d 638, 644 (Wash. 2012). “Under 20 1 Plaintiff’s motion was noted for the Court’s consideration on July 3, 2020. (See Dkt. 21 No. 11.) On July 1, 2020, Plaintiff notified the Court of Defendants’ failure to file an opposition to the motion and asked that the Court construe Defendants’ non-opposition and an admission of 22 the motion’s merit. (See Dkt. No. 14 at 1) (citing W.D. Wash. Local Civ. R. 7(b)(2)). Later that day, Defendants filed a response in which Defendant’s counsel professes that he “carefully read 23 the local court rules at least three times” and “determined that this response was due on the 24 Wednesday before scheduled hearing date.” (Dkt. No. 15 at 1.) It is unclear how Defendants’ counsel reached his conclusion, as the relevant Local Civil Rule provides that “[a]ny opposition 25 papers shall be filed and served not later than the Monday before the noting date.” W.D. Wash. Local Civ. R. 7(d)(3). Once again, Defendants’ counsel is admonished to comply with the Local 26 Civil Rules when filing future documents with the Court. (See Dkt. No. 23 at 2 n.1.) 1 Washington law, a contract is binding on the parties when the intention of the parties is plain and 2 the parties or their counsel agree on the terms of the contract even if one or both parties 3 contemplated signing a more formal writing in the future.” Daroudi v. Bank of Am., Case No. 4 C13-1561-RSL, Dkt. No. 26 at 2 (W.D. Wash. 2014) (citing Veith v. Xterra Wetsuits, LLC, 183 5 O.3d 334, 337 (Wash. Ct. App. 2008); Morris v. Maks, 850 P.2d 1357, 1359 (Wash. Ct. App. 6 1993)); see Kruger v. Credit Int’l Corp., Case No. C10-1374-RSM, Dkt. No. 35 at 5 (W.D. 7 Wash. 2012) (concluding that “Defendant’s response . . . created a binding contract when 8 Defendant unequivocally accepted Plaintiff’s counteroffer” by stating, “Thank you for your 9 patience, I was finally able to get confirmation today from the client that we have a deal.”). 10 Here, the parties reached an agreement to settle this matter on June 7, 2020. On that day, 11 Plaintiff’s counteroffer to Defendants fixed the parties’ duties as to Defendant’s obligation to 12 return or destroy property related to their work for Plaintiff, Defendants’ obligation to “assign all 13 right title and interest copyright, trade secret, patent rights, inchoate IP and all other property 14 rights whatsoever (excepting copyright in the source code, and the source code (proper),” 15 Plaintiff’s payments to Defendant, the parties’ mutual releases, and the execution of a future 16 agreement with a non-disparagement clause. (See Dkt. No. 11-2 at 5–8.) When Plaintiff 17 subsequently enquired whether Defendants were “accepting the 1:13 PM offer below, with the 18 six month payment option . . . ? If yes, we’re settled,” Defendants simply stated, “Yes.” (Id. at 19 2.) Thus, on June 7, 2020, there was a clear meeting of the minds between the parties and the 20 terms of the parties’ agreement were sufficiently complete and definite to constitute an 21 enforceable settlement agreement. See Keystone Land & Dev. Co. v. Xerox Corp., 94 P.3d 945, 22 949 (Wash. 2004). That agreement is enforceable even though the parties contemplated 23 executing a written agreement that would include a non-disparagement clause. See Daroudi, 24 Case No. C13-1561-RSL, Dkt. No. 26 at 2. 25 Plaintiff also asks that the Court find that the parties agreed to additional terms on June 26 11, 2020. (Dkt. No. 11 at 8–9.) Specifically, Plaintiff argues that in response to Defendants’ red- 1 line version of the parties’ proposed settlement agreement, Plaintiff accepted Defendants’ 2 proposed material changes and proposed immaterial changes that did not rise to the level of a 3 counteroffer. (See id.) (citing Travis v. Tacoma Pub. Sch. Dist., 85 P.3d 959, 964 (Wash. Ct. 4 App. 2004)). But the language of Plaintiff’s June 11, 2020 email shows that Plaintiff was 5 contemplating future negotiations. For example, Plaintiff stated that it was providing its 6 “thoughts” on Defendants’ red-line edits. (Dkt. No. 11-5 at 2.) And Plaintiff asked that 7 Defendants “call [Plaintiff] once you have had a chance to review this.” (Id.) Given that Plaintiff 8 still wanted to discuss its thoughts on Defendants’ edits, the parties could not have reached a 9 meeting of the minds on June 11, 2020. And the record shows that, rather than calling to discuss 10 the matter further, Defendants informed Plaintiff that they had retained new counsel and would 11 be substantively responding to Plaintiff’s complaint. (See Dkt. No. 11-6 at 2.) Therefore, Plaintiff 12 has not established that the parties reached a meeting of the minds on June 11, 2020, sufficient to 13 form an additional binding contract. See Callie, 829 F.2d at 890; Sea-Van Invs. Assocs., 881 P.2d 14 at 1038–39; City of Everett, 631 P.2d at 367. 15 In response to Plaintiff’s motion to enforce the parties’ settlement agreement, Defendants 16 argue that the parties have not reached an agreement on several materials terms. (See Dkt. No. 15 17 at 6–7.) Defendants simply list several alleged terms without accompanying citation to the record 18 or substantive argument. (See id.) Defendant’s arguments are without merit. First, the question of 19 “[w]hether [Plaintiff] has any trade secrets that are protectable” is irrelevant to the question of 20 whether the parties reached an agreement to settle this matter. Second, the parties’ June7, 2020 21 agreement resolves the question of “[w]ho owns the source code that Huvard wrote” because 22 Defendants agreed to “assign all right title and interest” to the intellectual property rights arising 23 from the source code in exchange for enumerated payments. (See Dkt. No. 11-2 at 6–7.) Third, 24 Defendants agreed to “certify under penalty of perjury that everything [of or related to the 25 services performed for Plaintiff] has been returned or deleted within 3 days of execution”; 26 therefore, Defendant Huvard’s insistence “that he does not have any” of Plaintiff’s property is 1 immaterial. (See id. at 5.) Fourth, Defendants agreed to the amounts they would be paid for their 2 work and the transfer of their intellectual property rights and in fact selected Plaintiff’s six- 3 month payment plan, thereby addressing any questions about how much and when they would be 4 paid. (See id. at 2, 4.) Finally, Defendants’ reference to a non-competition clause is unavailing. 5 Such a clause was not discussed with regard to, and accordingly does not exist in, the parties’ 6 June 7, 2020 agreement. (See id. at 5–8.) In fact, Defendants themselves noted that a non- 7 competition clause was “[n]ever discussed” and was “[n]ot part of the settlement or lawsuit” in 8 their red-line edits of the parties’ proposed written settlement agreement. (See Dkt. No. 11-4 at 9 7.) Therefore, Defendants have not identified any material term on which the parties did not 10 agree in their June 7, 2020 agreement.2 11 B. Sealed Docket Entries 12 On July 9, 2020, the Court denied without prejudice Plaintiff’s motion to seal because the 13 parties had not satisfied the meet-and-confer requirement under Western District of Washington 14 Local Civil Rule 5(g). (Dkt. No. 23 at 1–2.) The Court nonetheless directed the Clerk to maintain 15 the relevant docket entries under seal “pending the filing of a renewed motion to seal and the 16 Court’s ruling on such a motion.” (Id. at 2.) Plaintiff has since notified the Court that it does not 17 intended to refile its motion to seal “and welcomes the unsealing” of the docket entries because it 18 “does not believe the Settlement Agreement or attendant briefing should be under seal because 19 the parties’ privacy interests in a $16,000 settlement agreement are far less important than the 20 public’s access to the court’s file.” (Dkt. No. 25 at 1) (quoting Dkt. No. 10 at 1). Defendants 21 have failed to file a motion to seal or otherwise signal whether they intend to do so. Accordingly, 22 Defendants are ORDERED to file a renewed motion to seal that complies with Western District 23 of Washington Local Civil Rule 5(g) within 14 days of the date this order is issued. Failure to do 24 2 Defendants also argue that Plaintiff is estopped from claiming that the parties have 25 reached a settlement agreement. (Dkt. No. 15 at 6.) Defendants do not support their argument with legal authority or citation to the record, and therefore do not establish how the doctrine of 26 estoppel applies to or precludes the instant motion. (See id.) 1 so will result in the unsealing of the relevant docket entries in accordance with the strong 2 presumption of access to the Court’s files. See W.D. Wash. Local Civ. R. 5(g). 3 III. CONCLUSION 4 Therefore, Plaintiff’s motion to enforce settlement agreement (Dkt. No. 11) is 5 GRANTED in part and DENIED in part. The Court finds that the parties entered into an 6 enforceable settlement agreement on June 7, 2020, when Defendants’ then-counsel sent an email 7 at 10:29 p.m. accepting all terms of settlement proposed by Plaintiff’s counsel at 1:13 p.m. The 8 parties are ORDERED to file a stipulation and notice of dismissal pursuant to their settlement 9 agreement within 14 days of the date this order is issued. Defendants are further ORDERED to 10 file a renewed motion to seal in accordance with this order within 14 days of the date this order 11 is issued. 12 DATED this 3rd day of August 2020. A 13 14 15 John C. Coughenour 16 UNITED STATES DISTRICT JUDGE
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