The Lesson Here Is The Importance of Carefully Drafting Collaborative Law Agreements.
How's this for a setup: "Ling and Paul Mueller married in 2009 and separated in 2017. During their marriage, they cultivated cannabis and buried the proceeds on their property." What could possibly go wrong? Plenty.
The Muellers engaged in a collaborative law session, "a non-judicial alternative dispute resolution process commonly used for marriage dissolutions." Ms. Mueller made some harmful admissions during the collaborative law process regarding how much of the buried proceeds she had dug up and what she had done with it. The trial judge "found both parties had 'significant credibility gaps' but that Paul's 'testimony and differences in credibility on different days pales in connection to [Ling], whom I could not believe most of what she said." Ouch.
The trial judge adjusted the division of proceeds in favor of Mr. Mueller. Ms. Mueller argued that her statements in the collaborative law process were confidential and should not have been introduced in evidence. She appealed. Mueller v. Mueller, A166577 (1/5 6/3/24) (Burns, Jackson, Simons). Affirmed.
"We publish this case to highlight the importance of carefully drafting collaborative law agreements. Unlike mediations, our Legislature has not created an evidentiary privilege for collaborative law processes. (Compare Evid. Code, § 1119 with Fam. Code, § 2013.) If parties intend to keep the process confidential, they are responsible for drafting an enforceable contract that so provides."
"Window of the Space Cowboy Smoke Shop, which calls itself 'the highest head shop in the world,' in Breckenridge, Colorado." 2008. Carol M. Highsmith, photographer. Library of Congress.
Liquidated Damages Of $250K Were Reasonable In Proportion To $2.2M Settlement.
After an all-day tele-mediation the parties executed a term sheet providing that defendant/cross-complainant would pay $1.6M to plaintiff, and cross-defendant would pay $600K. Defendant/cross-complainant had second thoughts the next day and reneged on payment. Cross-defendant paid $600K. And plaintiff successfully enforced the settlement in the trial court under CCP § 664.6. Defendant appealed -- unsuccessfully. BTHHM Berkeley, LLC v. Stewart Johnson v. Holda Novelo, A166242 (1/4 3/28/24) (Goldman, Brown, Streeter).
The panel rejected arguments that the settlement agreement lacked enough specificity. Although it contemplated future events, such as execution of a stipulation, releases, and assistance if necessary by the mediator, those aspects did not negate the sufficiency of the agreement, which by its terms was "admissible and enforceable in court" and "a good faith settlement."
Sometimes it is argued that the liquidated damages clause in an agreement amounts to an unreasonable forfeiture and is not enforceable. The argument did not fly here. Civil Code § 1671(b) creates a presumption that liquidated damages are valid unless the party challenging shows the damages are unreasonable. With a non-consumer contract and a $2.2M settlement, Justice Goldman explained that the liquidated damages were not unreasonable.
However, the panel did remove some prejudgment interest. Prejudgment interest is an element of damages, and the settlement agreement set the damages. The panel would not create a new damage term that the parties did not agree to.
COMMENT: What probably weighed in favor of enforcing the settlement? The trial judge found that defendant's declaration seeking to avoid enforcement was "self-serving." The parties were sophisticated, this was a commercial transaction, and they received legal advice. The settlement term sheet included the following language: "Parties agree the Agreement is admissible and enforceable in court pursuant to CCP § 664.6. The parties agree that this is a good faith settlement between adverse parties. . . ." And while defendant did not pay $1.6M toward the settlement, another party did pay its share of $600K.
I've written an article about mediator settlement proposals and it is published in the July 2023 issue of Advocate. For my readers interested in the topic, here is a link to the article: Download Alexander-July23-article
"Does a 998 offer automatically expire when a trial court orally grants the offeror’s summary judgment motion? We hold that that answer is 'yes.' Because the trial court came to the same conclusion, we affirm." Ana Isabel Trujillo v. City of Los Angeles, B314042 (2/2 10/27/22) (Hoffstadt, Lui, Chavez).
COMMENT: Busy practitioners like it when the Court of Appeal states the issue presented and its holding in the first paragraph. Don't bury the lede.
An Offeree's Acceptance Of A Section 998 Offer Must Be "Absolute And Unqualified" To Form A Binding Settlement.
"Absolute and unqualified" did not describe the offeree Says Siri's acceptance of Sutter Home Winery's offer in Says Siri v. Sutter Home Winery [Trinchero Family Estates], A161923 (1/4 8/25/22) (Pollak, Streeter, Goldman). Instead, Siri accepted Trinchero's settlement offer on the condition that the trial court resolve issues relating to how much interest Siri could recover on the judgment. Invoking Section 998 procedure, the trial court ordered judgment be entered pursuant to Section 998, and ultimately denied the claim for prejudgment interest. Because Siri's acceptance was not absolute and unqualified, the Court of Appeal reversed the judgment of dismissal, remanding "for further proceedings consistent with this opinion."
COMMENT: Justice Pollak explains, "Treating Siri’s conditional acceptance as a counteroffer that Trinchero accepted by agreeing to have the court rule on Siri’s motion for an award of interest, the court might find that an enforceable settlement agreement had been reached. . . . Such an issue is not now before us; we hold only that Siri’s conditional acceptance did not create an agreement enforceable under section 998."
Justice Pollak is a very clever judge and this is a clever opinion. But we are a bit puzzled. Did Justice Pollak simply give the trial judge a roadmap to reach the same result as before? Or are there going to be further stumbling blocks that prevent reaching the same result?
“'Duress by a third person' is the legal label for this contract case."
Plaintiff Laura Fettig entered into a settlement agreement, on the record, of her personal injury case. Later, she tried to set aside the settlement agreement, arguing she had only settled under duress caused by her attorney who threatened to abandon her case if she refused the settlement. Defendants did not know about the duress, and entered into the settlement in good faith. "But duress by a third person [i.e., by her lawyer] cannot void a contract when the other contracting party did not know about the duress and relied in good faith." Affirmed. "The court rightly refused to rescind the contract." Fettig v. Hilton Garden Inns Management LLC, No. 307348 (2/8 5/4/22) (Wiley, Grimes, Harutunian).
Section 998 offers belong to the armamentarium of litigators engaged in settling cases, because the potential of such offers to shift costs can be a source of negotiating leverage. Hence, our blog about ADR has a sidebar category "Section 998 (Settlements)".
In Varney Entertainment Group, Inc. v. Avon Plastics, Inc., No. G058903 (4/3 2/23/21) (Goethals, Aronson, Fybel), the court had to decide whether defendant/appellant Avon's second offer to settle extinguished its pending section 998 offer. "Section 998 is silent about the revocability of statutory offers to compromise, but our Supreme Court has held that section 998 offers are fully revocable prior to acceptance." That would seem to make this an easy case to decide (and perhaps it was easy to decide). However, the case had unusual facts that made it a case of first impression.
Plaintiff Varney alleged two causes of action, one for breach of contract, and one alleged in an amended complaint after a year of litigation, for unauthorized use of Varney's name and likeness in violation of Civil Code section 3344. Defendant Avon offered to settle the entire lawsuit for $250,000 for a stipulated judgment pursuant to section 998. Defendant then offered to settle just the contract cause of action for $191,626.03. Plaintiff Varney accepted the offer as to the single contract cause of action, and on the eve of trial, dismissed the section 3344 cause without prejudice, later filing a new complaint for unauthorized commercial use of name, voice, signature, photograph, and likeness in Tennessee.
So now you see the twist: Varney would claim the stipulated judgment on one cause of action completely superseded Avon's 998 offer to settle the entire lawsuit, and thus no cost shifting should be permitted to Avon under section 998. Avon would claim that the voluntary dismissal of Varney's second cause of action meant that Avon had bested its $250,000 998 offer, entitling Avon to attorney fees it incurred after serving its section 998 offer.
Justice Goethals presented the issue: "does a later offer to enter into a stipulated judgment on only one cause of action extinguish an earlier pending section 998 offer covering all causes of action?" The answer is yes, the stipulated judgment did extinguish the earlier 998 offer. A different result would inject uncertainty into the 998 process.
The conventional wisdom that there should be no way to lose a settlement conference is tested in Kevin J. Moore v. Superior Court of Orange County, G058609 (4/3 11/16/20) (Goethals, Bedsworth, Thompson). The facts of the underlying case are of little importance, because it was the conduct of attorney Moore at a mandatory settlement conference in OCSC that was at issue:
"While representing a client at a mandatory settlement conference (MSC) before a temporary judge, petitioner Kevin Moore was rude and unprofessional. Among other things, Moore (1) persistently yelled at and interrupted other participants; (2) accused opposing counsel of lying while providing no evidence to support his accusation; (3) refused to engage in settlement discussions; and (4) effectively prevented the settlement officer from invoking the aid and authority of the supervising judge by asserting this would unlawfully divulge settlement information. To make matters worse, Moore later acknowledged that his contemptuous behavior was the result of a tactical decision he had made to act in such a manner in advance of the MSC. After a hearing, respondent court convicted Moore of four counts of civil contempt, imposed a $900 fine for each count ($3,600 total), and ordered the payment of attorney fees and costs to the opposing party. (See Code Civ. Proc., § 1209 et seq.)"
As Justice Goethals explains, Moore did not get whacked for zealous advocacy. Indeed, a "failure to yield" at a settlement conference does not amount to contempt. Rather, it was rude and obstreperous conduct that got Moore in trouble. Among other things, the Court was not pleased that Moore had called opposing counsel a liar without explanation, and that he had told opposing counsel, "you could be dead," and that he had apparently used his behavior as a tactic: "Moore’s petition for writ of review, which brings the matter to this court, clarified his state of mind at the outset of the MSC: 'At the MSC, [Moore] employed a tactic in representing his client that included raising his voice and accusing [opposing counsel] of making false statements, which [Moore] believed to be true.' (Italics added.)"
In the Court of Appeal, attorney Moore succeeded in eliminating three of the charges, and reducing the fine to $900. Each party had to bear its own fees and costs. The Court consolidated and reduced the four counts into "a single count for Moore’s bad faith participation and obstreperous misconduct at the settlement conference." Perhaps this is a bittersweet victory, for Justice Goethals concludes, "Though Moore’s petition is largely successful, that success should in no way be construed as an endorsement by this court of his behavior." And the clerk of the court is directed to provide a copy of the opinion to the State Bar.
The opinion is well worth reading, because among other things, it describes the steps that must be taken to successfully issue a contempt order, and what was done correctly and incorrectly below.
COMMENT: Note that the conduct that was found to be contemptuous was in front of a temporary judge. Temporary judges in Orange County typically hold the MSCs outside the courtroom, often in the third floor cafeteria. Today, the MSCs are being held remotely via Zoom and other platforms. (And perhaps social distancing may actually be leading to more civil behavior). Therefore, the temporary judge often does not have easy access to a reporter and to a courtroom, where the TJ could make a record of direct contempt and summarily issue a contempt order. Instead, Moore was a case of "indirect contempt" that did not occur in the courtroom. "Although the settlement officer was acting as a temporary judge at the settlement conference," explains Justice Goethals, "he did not pursue summary contempt proceedings (we express no opinion on whether he should or could have done so)." Nevertheless, the case does show that when proper contempt procedures are followed, a temporary judge and the judicial process can be protected from contumacious behavior with an "indirect contempt" proceeding.
