The Eclipse Group LLP v. Target Corporation

• Court: Court of Appeals for the Ninth Circuit
• Decided: August 20, 2021
• Docket: 20-55206
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS AUG 20 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

THE ECLIPSE GROUP LLP, a California No. 20-55206 limited-liability partnership, D.C. No. Plaintiff-Appellant, 3:15-cv-01411-JLS-BLM

and MEMORANDUM* STEPHEN MICHAEL LOBBIN,

Intervenor-Plaintiff,

v.

TARGET CORPORATION, a Minnesota corporation,

Defendant-Appellee,

and

AMAZON.COM, INC., a Delaware corporation; et al.,

Defendants.

Appeal from the United States District Court for the Southern District of California Janis L. Sammartino, District Judge, Presiding

Argued and Submitted March 5, 2021

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Submission Vacated March 9, 2021 Resubmitted August 19, 2021 Pasadena, California

Before: KLEINFELD, CALLAHAN, and HIGGINSON,** Circuit Judges. Dissent by Judge KLEINFELD

The Eclipse Law Group LLP (“Eclipse”) appeals the district court’s denial

of Eclipse’s motion to enforce a settlement agreement against Target Corporation,

and the district court’s subsequent denial of Eclipse’s motion for reconsideration.

We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

1. Eclipse claims that the settlement agreement unambiguously imposes

joint and several liability on Target and Kmart for the full $425,000 settlement

payment. “Contract interpretation is a question of law that we review de novo.”

Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 681 (9th Cir. 2009).

Section 3 of the settlement agreement establishes the payment terms. That

section provides in relevant part that

Target and Kmart agree to cause Eclipse and [intervenor plaintiff Stephen] Lobbin to be paid a collective sum of $425,000.00. . . . Eclipse and Lobbin recognize that Target and Kmart will each pay a portion of the Settlement Payment and Eclipse and Lobbin may receive their payments in one or more checks/wire payments from Target and/or Kmart. Eclipse contends that this language makes it clear that Target and Kmart agreed to

** The Honorable Stephen A. Higginson, United States Circuit Judge for the U.S. Court of Appeals for the Fifth Circuit, sitting by designation.

2 be jointly liable for the collective settlement payment and that Target and Kmart

would independently work out their respective contributions.

We disagree that this language plainly imposes joint liability on the retailers.

While the provision stating that “Target and Kmart agree to cause Eclipse and

Lobbin to be paid a collective $425,000.00” is susceptible to that interpretation, the

subsequent provision recognizing that the retailers would “each pay a portion of”

that amount suggests a contrary intent to create several liability. We find that the

language of the agreement is ambiguous on this point.

The context of the litigation, in which Target and Kmart were sued to

recover unpaid legal fees that they incurred in separate cases in which they were

not co-defendants, supports the district court’s resolution of this ambiguity in

Target’s favor. According to Eclipse’s complaint, approximately 30 percent of the

unpaid fees were accrued defending Kmart in a suit in which Target was not a

party. Eclipse cites nothing in the record suggesting that Target had any reason to

assume liability for Kmart’s legal fees in that case.

We reject the argument that, given the contract’s lack of a clear statement

regarding Target’s and Kmart’s respective liabilities, the background presumption

of joint liability provided by California Civil Code sections 1659 and 1660

controls. Cal. Civ. Code § 1660 (“A promise, made in the singular number, but

executed by several persons, is presumed to be joint and several.”); see also id.

3 § 1659 (“Where all the parties who unite in a promise receive some benefit from

the consideration, whether past or present, their promise is presumed to be joint

and several.”). This presumption is rebuttable and has been described as “the

weakest and least satisfactory character of evidence.” Douglas v. Bergere, 94 Cal.

App. 2d 267, 271 (1949) (describing Civil Code section 1659). The agreement’s

statement that Target and Kmart would “each pay a portion of” the settlement

amount, plus Eclipse’s admission in the complaint that Target and Kmart were not

jointly liable for the payment of the legal fees which were the subject of the

litigation, are sufficient to overcome this presumption here.

2. Eclipse next argues that the district court erred by using extrinsic

evidence of the parties’ negotiations to vary the terms of the settlement agreement.

The district court’s application of the parol evidence rule is reviewed de novo.

Jinro Am. Inc. v. Secure Investments, Inc., 266 F.3d 993, 998–99, opinion amended

on denial of reh’g, 272 F.3d 1289 (9th Cir. 2001). “When a district court makes

factual findings derived from extrinsic evidence used to interpret a contract, we

review for clear error.” Int’l Bhd. of Teamsters v. NASA Servs., Inc., 957 F.3d

1038, 1041 (9th Cir. 2020).

The parol evidence rule “provides that when parties enter an integrated

written agreement, extrinsic evidence may not be relied upon to alter or add to the

terms of the writing.” Riverisland Cold Storage, Inc. v. Fresno-Madera Prod.

4 Credit Assn., 55 Cal. 4th 1169, 1174 (2013); Cal. Civ. Proc. Code § 1856; Cal.

Civ. Code § 1625. “Extrinsic evidence is admissible, however to explain what the

parties meant by the language they used.” Aragon-Haas v. Family Sec. Ins. Servs.,

Inc., 231 Cal. App. 3d 232, 240 (1991).

Eclipse contends that even if the settlement agreement was ambiguous as to

whether Target and Kmart are jointly liable for the settlement payment, the

agreement was integrated and the district court improperly used extrinsic evidence

to effectively add terms liquidating each company’s liability for the payment to the

agreement. We disagree. The settlement agreement’s ambiguous language

regarding Target’s and Kmart’s respective liability was reasonably susceptible to

the interpretation that the retailers intended to split their payment consistent with

the complaint’s allegations regarding their respective liabilities for unpaid legal

fees incurred in different lawsuits. This interpretation was supported by counsel

for the retailers’ communications to Eclipse during settlement negotiations that

Target contemplated a two-thirds/one-third payment split with Kmart, with Target

being willing to pay no more than $300,000. The district court did not clearly err

in finding that this extrinsic evidence supported Target’s interpretation of the

contract.

Further, even if Eclipse were correct that the district court erroneously

applied the parol evidence rule, it is unclear what relief Eclipse seeks on this point.

5 For the reasons set forth above, we disagree that the absence of language precisely

allocating Target’s and Kmart’s respective liabilities necessarily means that the

parties intended that the retailers be jointly liable. Eclipse’s opening brief

opaquely suggests that if the settlement agreement does not clearly impose jointly

liability, the agreement may be unenforceable for lack of mutuality. But at oral

argument, counsel for Eclipse explicitly stated that Eclipse was not arguing that the

settlement agreement should be declared void. We thus find any argument that the

contract should be voided for lack of mutuality to be waived. See Greenwood v.

F.A.A., 28 F.3d 971, 977 (9th Cir. 1994).

Ultimately, the district court interpreted a poorly-worded contract in a

reasonable way that gave effect to the parties’ realistic expectations given its

unchallenged evidentiary conclusions. Accordingly, we affirm the district court’s

denial of Eclipse’s motions.

3. Finally, Target’s motion to strike the Lobbin’s brief (ECF No. 29) is

granted. Lobbin did not file a notice of appeal, and Eclipse raised no arguments

that were adverse to Lobbin in its briefing. Lobbin’s request for sanctions for

having to defend Target’s motion to strike (ECF No. 30) is thus denied.

AFFIRMED.

6 FILED The Eclipse Group LLP v. Target Corp., No. 20-55206 AUG 20 2021 MOLLY C. DWYER, CLERK KLEINFELD, Senior Circuit Judge, dissenting: U.S. COURT OF APPEALS

Under California law, “[w]here all the parties who unite in a promise receive

some benefit from the consideration, whether past or present, their promise is

presumed to be joint and several.”1 And “[a] promise, made in the singular

number, but executed by several persons, is presumed to be joint and several.”2

The parties signed the settlement agreement against the background of these

statutes, so the starting point for interpreting this contract is a presumption of joint

and several liability. This presumption is rebuttable, but it controls in the absence

of evidence to the contrary.3

The terms of the contract do not rebut the presumption. The settlement

agreement requires Target and Kmart “to cause Eclipse and Lobbin to be paid a

1 Cal. Civ. Code § 1659. 2 Cal. Civ. Code § 1660. 3 See Kaneko v. Okuda, 15 Cal. Rptr. 792, 798 (Dist. Ct. App. 1961); see also Vons Companies, Inc. v. U.S. Fire Ins. Co., 92 Cal. Rptr. 2d 597, 606 (Ct. App. 2000), as modified (Mar. 6, 2000). collective sum of $425,000.00.” These words straightforwardly impose joint and

several liability. If the parties meant to impose only several liability, they would

have specified that each was liable for some smaller portion of the $425,000. But

they did not. The contract plainly requires Target and Kmart to ensure that Eclipse

and Lobbin are paid the full “collective sum.”

On the next page of the agreement, it says, “Eclipse and Lobbin recognize

that Target and Kmart will each pay a portion of the Settlement Payment and

Eclipse and Lobbin may receive their payments in one or more checks/wire

payments from Target and/or Kmart.” This recognition that Target and Kmart will

each wire a payment or send a check for a portion of the settlement is perfectly

compatible with each being on the hook for the rest if the other refuses to pay.

Again, if the parties meant to impose several liability, this would have been the

perfect place for them to specify the amounts that Target and Kmart were each

liable for. The contract is clear and the majority finds ambiguity where there is

none. The extrinsic evidence in the record, even if it is admissible, also does not

rebut the presumption of joint and several liability. Target’s attorney claims that,

during settlement negotiations, he expressed that his client wished to be liable for

only a portion of the settlement amount. But nothing in the record indicates that

Eclipse ever agreed to this. The goal of contract interpretation is to identify the

parties’ mutual intent.4 That Target proposed several liability for only a portion of

the collective sum, but no such term made it into the contract, suggests that the

parties ultimately did not agree on several liability.

The majority emphasizes the context of the lawsuit that gave rise to this

settlement agreement. Eclipse sued Target and Kmart for unpaid legal fees that

each allegedly incurred when Eclipse represented them in separate lawsuits. The

majority reasons that Target would only have agreed to settle if its liability were

capped at the amount in legal fees that it allegedly owed. But Eclipse sued Target

and Kmart together, and co-defendants might have any number of reasons to

4 See Cnty. of San Diego v. Ace Prop. & Cas. Ins. Co., 118 P.3d 607, 612 (Cal. 2005) (citing Bank of the West v. Super. Ct., 833 P.2d 545, 552 (Cal. 1992)). accept joint and several liability in a joint settlement agreement, including their

assessment of the strength of the complaint, their desire for a quick and efficient

resolution of the case, their confidence that the other party will pay up, and private

agreements between the co-defendants as to how the payment will be allocated

between them. In fact, the settlement agreement’s description of the settlement

payment as a “collective sum,” together with its provision that Target and Kmart

will each pay Eclipse an unspecified portion of the settlement, may suggest that

Target and Kmart privately agreed on how much each party would pay. But that is

of no concern to Eclipse, nor should it be to us. Our speculation on this point does

not rebut the presumption of joint and several liability and cannot overcome the

clear words of the contract. Whatever understanding Kmart and Target may have

had with each other did not make it into their contract with Eclipse.

Extrinsic evidence, when it is admissible, may only be used to interpret an

integrated contract, not to add to its terms.5 By holding Target liable for an amount

that appears nowhere in the contract, the majority impermissibly uses extrinsic

5 Casa Herrera, Inc. v. Beydoun, 83 P.3d 497, 501–02 (Cal. 2004). evidence to add a term to this integrated contract instead of interpreting it.6 Neither

the words of the contract nor the extrinsic evidence rebuts the presumption of joint

and several liability.

I respectfully dissent.

6 See id. (citing Alling v. Universal Mfg. Corp., 7 Cal. Rptr. 2d 718, 731 (Ct. App. 1992)).