Mary Wilcox v. County of Maricopa , 753 F.3d 872 ( 2014 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MARY ROSE WILCOX, wife; EARL No. 12-16418
WILCOX, husband,
Plaintiffs-Appellees, DC No.
2:11 cv-0473
v. NVW
JOSEPH M. ARPAIO; AVA ARPAIO;
ANDREW P. THOMAS; ANNE OPINION
THOMAS; LISA AUBUCHON; PETER R.
PESTALOZZI; DAVID HENDERSHOTT;
ANNA HENDERSHOTT,
Defendants,
and
MARICOPA COUNTY, a governmental
entity,
Defendant-Appellant.
Appeal from the United States District Court
for the District of Arizona
Neil V. Wake, District Judge, Presiding
Argued and Submitted
March 11, 2014—San Francisco, California
Filed June 2, 2014
2 WILCOX V. ARPAIO
Before: Jerome Farris, Stephen Reinhardt,
and A. Wallace Tashima, Circuit Judges.
Opinion by Judge Tashima
SUMMARY*
Mediation
The panel affirmed a district court order granting
plaintiffs’ motion to enforce a settlement agreement reached
during mediation in an action brought under 42 U.S.C. § 1983
and state law against Maricopa County and certain present
and former County officials.
The panel held that federal privilege law governs the
admissibility of evidence of an alleged settlement reached
during the mediation of federal and state law claims. The
panel determined, however, that in this case the County
waived any available privilege and therefore that the district
court did not err in admitting and considering allegedly
privileged documents and testimony. The panel concluded
that the district court did not clearly err in finding that the
County authorized the County Manager to settle plaintiffs’
claims and therefore did not err in enforcing the settlement
agreement.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
WILCOX V. ARPAIO 3
COUNSEL
Jeffrey S. Leonard (argued), James W. Armstrong, and Helen
R. Holden, Sacks Tierney P.A., Scottsdale, Arizona, for
Defendant-Appellant.
Colin F. Campbell (argued) and Kathleen Brody O’Meara,
Osborn Maledon, P.A., Phoenix, Arizona, for Plaintiffs-
Appellees.
OPINION
TASHIMA, Circuit Judge:
We are asked to decide whether federal or state privilege
law governs the admissibility of evidence of an alleged
settlement reached during mediation of federal and state law
claims. We conclude that federal privilege law governs, but
that the County waived any available privilege; therefore, we
affirm the district court’s enforcement of the settlement
agreement reached in mediation.
I.
Plaintiffs Mary Rose Wilcox, a Maricopa County
Supervisor, and Earl Wilcox, her husband, filed suit against
Maricopa County (the “County”) and certain present and
former County officials. Plaintiffs alleged that these officials
wrongfully investigated, prosecuted, and harassed Plaintiffs
in retaliation for Plaintiffs’ opposition to the actions of the
County Sheriff, County Attorney, and their deputies.
Plaintiffs pleaded federal claims under 42 U.S.C. § 1983 and
supplemental state law claims.
4 WILCOX V. ARPAIO
Plaintiffs were not the only ones to file suit. Many other
claimants, including other County Supervisors, pursued
similar claims against the County. County advisors predicted
that a hundred or more people might pursue such claims,
potentially costing the County millions of dollars. County
advisors also warned that these claims might create conflicts
of interest for County Supervisors, who were both fiscal
stewards for the County and actual or potential claimants
against the County.
Concerned about the propriety, cost, and pace of
litigation, the County adopted a resolution directing County
Manager David Smith to establish an alternative dispute
resolution program to resolve these claims. The resolution
“directed and authorized [Smith] to take all actions necessary
to . . . adjudicate the claims included in the alternative dispute
resolution process,” including by “entering into binding
arbitration/mediation agreements with claimants” and
“entering into contracts as needed.” Smith, in turn, appointed
mediator Christopher Skelly, a retired judge, to help resolve
these claims. Through Judge Skelly, Smith settled multiple
claims.
Plaintiffs assert that their claims were among those that
were settled. They alleged that the County agreed to a
$975,000 settlement, and filed a motion to enforce the alleged
settlement. In support of their motion to enforce, Plaintiffs
submitted an e-mail from Judge Skelly to Plaintiffs’ counsel,
dated April 9, 2012, stating that Skelly wrote to confirm a
settlement in the amount of $975,000. Plaintiffs also
submitted e-mails from Judge Skelly to counsel for two other
claimants, also dated April 9, 2012. These e-mails were
identical to Skelly’s e-mail to Plaintiffs’ counsel in every
material respect (except for the identity of counsel and
WILCOX V. ARPAIO 5
claimants, and the respective settlement amounts), except
one: The e-mail to Plaintiffs’ counsel included the sentence
“This settlement is subject to any further approvals deemed
necessary by the parties.” Judge Skelly’s e-mails to the other
claimants did not include this sentence. Plaintiffs also
submitted e-mails from Plaintiffs’ counsel and from counsel
for the other claimants, accepting the terms of settlement.
The district court set an evidentiary hearing on Plaintiffs’
motion to enforce, and ordered the County to produce Smith
and Judge Skelly for the hearing. Judge Skelly, however, did
not appear and only Smith appeared as a witness. At the
hearing, Smith testified that the two other April 9 e-mails sent
by Skelly to claimants’ counsel resulted in settlements paid
to those claimants in accordance with the e-mails, in the
amounts of $500,000 each. He further testified that he
believed that he had authority to settle Plaintiffs’ claims; that
he had authorized Judge Skelly to communicate the County’s
$975,000 settlement offer to Plaintiffs’ counsel; that he was
aware that Judge Skelly in fact communicated the offer; that
he understood the “further approvals” sentence in Skelly’s e-
mail to Plaintiffs’ counsel to refer only to possible
compliance with Ariz. Rev. Stat. § 11-626;1 and that he
believed that a binding settlement was entered into, subject
only to the “further approvals” sentence. Plaintiffs’ counsel
testified that he, too, believed that the “further approvals”
sentence referred only to compliance with § 11-626. The
County then explicitly took the position “for the record, on
1
Ariz. Rev. Stat. § 11-626 states: “A claim against the county presented
by a member of the board of supervisors shall be verified as other claims,
and shall bear the written approval of at least one member of the board
other than the claimant, and of the county treasurer.”
6 WILCOX V. ARPAIO
behalf of Maricopa County . . . that [§ 11-626] does not
apply.”
At the close of the hearing, the district court found Smith
had the authority to settle Plaintiffs’ claims without further
action: it discredited the two affidavits to the contrary
submitted by the County and, instead, found Smith’s
testimony “credible in every respect.” The district court also
found that the “further approvals” sentence referred only to
compliance with § 11-626, but that no further approvals were
necessary, because of the County’s concession that § 11-626
did not apply. It therefore granted Plaintiffs’ motion to
enforce the settlement agreement. See Donahoe v. Arpaio,
872 F. Supp. 2d 900 (D. Ariz. 2012).
The County now appeals. It contends that Smith’s
testimony and the April 9 e-mails were privileged under
Arizona’s mediation privilege, and thus inadmissible in the
district court. The County further contends that, even if this
evidence was admissible, the district court abused its
discretion in enforcing the settlement agreement.
II.
The district court had subject matter jurisdiction under 28
U.S.C. §§ 1331, 1367(a). We have appellate jurisdiction
under 28 U.S.C. § 1291.
III.
“We review de novo the ruling of a district court on the
scope of a privilege.” United States v. Chase, 340 F.3d 978,
981 (9th Cir. 2003) (en banc). “We also review de novo the
WILCOX V. ARPAIO 7
question of when state law applies to proceedings in federal
court.” Zamani v. Carnes, 491 F.3d 990, 994 (9th Cir. 2007).
“We review a district court’s decision regarding the
enforceability of a settlement agreement for an abuse of
discretion.” Maynard v. City of San Jose, 37 F.3d 1396, 1401
(9th Cir. 1994). We will reverse only if the district court
based its decision “‘on an error of law or clearly erroneous
findings of fact.’” Id. (quoting United States v. Oregon,
913 F.2d 576, 580 (9th Cir. 1990)). Under Arizona law, a
district court’s interpretation of an ambiguous agreement is a
finding of fact, see Leo Eisenberg & Co. v. Payson, 785 P.2d
49, 51–52 (Ariz. 1989), as is its determination that a disputed
agency relationship exists, see Salvation Army v. Bryson,
273 P.3d 656, 663 (Ariz. Ct. App. 2012). We review such
findings of fact for clear error. See Smith v. Salish Kootenai
Coll., 434 F.3d 1127, 1130 (9th Cir. 2006) (en banc).
IV.
The parties rightly agree that state contract law governs
whether they reached an enforceable agreement settling the
federal and state law claims alleged in Plaintiffs’ complaint.
See Botefur v. City of Eagle Point, Or., 7 F.3d 152, 156 (9th
Cir. 1993) (recognizing that “a settlement agreement is
governed by principles of state contract law . . . even where
a federal cause of action is ‘settled’”). They dispute,
however, whether state or federal privilege law governs the
admissibility of evidence in support of that determination.
The County contends that state privilege law governs because
state contract law determines whether the parties reached an
enforceable settlement agreement. Plaintiffs contend that
federal privilege law governs because any settlement
8 WILCOX V. ARPAIO
agreement concerns both Plaintiffs’ federal and state law
claims.
Under Federal Rule of Evidence 501, federal common
law generally governs claims of privilege. “But in a civil
case, state law governs privilege regarding a claim or defense
for which state law supplies the rule of decision.” Fed. R.
Evid. 501 (emphasis added). Here, as noted, Plaintiffs allege
both federal and state law claims in their complaint. The
contested evidence (Smith’s testimony and the April 9 e-
mails) concerns all of these claims for relief – federal and
state law claims alike. Where, as here, the same evidence
relates to both federal and state law claims, “we are not bound
by Arizona law” on privilege.2 Agster v. Maricopa Cnty., 422
2
Even if Arizona privilege law applied to the evidence at issue here –
which it does not – we agree with the district court’s conclusion (although
on a different basis) that the contested evidence would still be admissible.
See Donahoe, 872 F. Supp. 2d at 909–11 (analyzing issue under state
law).
Arizona’s mediation privilege statute, Ariz. Rev. Stat. § 12-2238,
protects “[c]ommunications made . . . during a mediation.” The statute
specifically provides, however, that the privilege does not apply to “the
terms of an agreement that is evidenced by a record that is signed by the
parties.” Ariz. Rev. Stat. § 12-2238(D).
The statute’s exception fits this case exactly. Here, Judge Skelly e-
mailed Plaintiffs’ counsel on behalf of the County, as authorized by Smith,
offering to settle, and Plaintiffs’ counsel e-mailed back accepting the offer.
These e-mails constituted facial evidence of “an agreement that is
evidenced by a record that is signed by the parties.” Id. Upon receipt of
this evidence, the district court had an obligation to consider all relevant
evidence to determine whether the parties reached an agreement within the
meaning of § 12-2238(D). See Taylor v. State Farm Mut. Auto. Ins. Co.,
854 P.2d 1134, 1139–41 (Ariz. 1993); Firchau v. Barringer Crater Co.,
344 P.2d 486, 490 (Ariz. 1959) (determining “whether there had been a
WILCOX V. ARPAIO 9
F.3d 836, 839 (9th Cir. 2005). Rather, federal privilege law
governs.3 Id.; Religious Tech. Ctr. v. Wollersheim, 971 F.2d
364, 367 n.10 (9th Cir. 1992) (per curiam); see Facebook,
Inc. v. Pac. Nw. Software, Inc., 640 F.3d 1034, 1041, 1038
(9th Cir. 2011) (applying state contract law to determine
whether in mediation the parties reached an enforceable
settlement of plaintiffs’ federal and state law claims, but
applying federal privilege law to determine what evidence
from mediation was admissible in support of that
determination).
We further conclude that the County waived any
argument that the contested evidence should be privileged
under federal law. See Babasa v. LensCrafters, Inc., 498 F.3d
972, 975 n.1 (9th Cir. 2007). Before the district court, the
County specifically distinguished its position from cases in
which a party urged the court to recognize a federal mediation
privilege, and disavowed any intent to urge the same. In its
opening brief on appeal, the County again assumed that
Arizona privilege law governed, and failed to argue that the
evidence admitted should be privileged under federal law.
meeting of the minds” based “on all of the evidence submitted”); see also
Callie v. Near, 829 F.2d 888, 890 (9th Cir. 1987) (“Where material facts
concerning the existence or terms of an agreement to settle are in dispute,
. . . the district court abuse[s] its discretion by not conducting an
evidentiary hearing.”).
Thus, both the e-mails themselves (as facial evidence of an agreement
under § 12-2238(D)) and Smith’s testimony (as evidence of whether a
§ 12-2238(D) agreement was in fact reached) fall clearly within the
exception from the mediation privilege under § 12-2238(D).
3
We do not decide whether, in federal question cases, state or federal
privilege law governs the admissibility of evidence that relates exclusively
to state law claims.
10 WILCOX V. ARPAIO
We thus need not determine whether a mediation privilege
should be recognized under federal common law and, if so,
the scope of such a privilege. See id. (finding no need to
“consider whether a federal mediation privilege exists”).
The district court did not err in admitting and considering
the allegedly privileged documents and testimony.
V.
A district court “may enforce only complete settlement
agreements.” Callie, 829 F.2d at 890. The County argues
that even when Smith’s testimony and the April 9 e-mails are
considered, the district court abused its discretion in
enforcing an incomplete settlement agreement, and clearly
erred in finding that the parties had a meeting of the minds
and that Smith had the authority to settle Plaintiffs’ claims
through Judge Skelly. We disagree.
The district court did not clearly err in finding that the
County authorized Smith to settle Plaintiffs’ claims. The
district court’s finding was based on the text and purposes of
the resolution, Smith’s testimony, and the County’s reliance
on Smith to settle other claimants’ claims with essentially
identical e-mails. Likewise, the district court’s finding that
Smith authorized Judge Skelly to convey the County’s
settlement offer to Plaintiffs’ counsel was based on Smith’s
testimony, Judge Skelly’s actions, and the County’s course of
performance. The district court’s finding was far from
clearly erroneous.
Nor did the district court clearly err in finding that the
parties intended the “further approvals” sentence to refer only
to compliance with Ariz. Rev. Stat. § 11-626. Smith testified
WILCOX V. ARPAIO 11
that he understood the “further approvals” sentence to refer
only to possible compliance with § 11-626, and the district
court found Smith’s testimony “credible in every respect.”
Plaintiffs’ counsel testified that he, too, understood the
“further approvals” sentence to refer only to § 11-626. There
was thus ample support for the district court’s finding that the
parties understood the “further approvals” sentence (the only
sentence that differentiated Skelly’s e-mail to Plaintiffs’
counsel from his e-mails to other claimants’ counsel) to refer
only to § 11-626.
Having made these findings of fact, which are amply
supported by the record, the district court did not err in
concluding that compliance with § 11-626 was unnecessary
because the County conceded that § 11-626 did not apply.
The district court did not abuse its discretion in enforcing the
settlement agreement.
••!••
For the reasons set forth above, the judgment of the
district court is
AFFIRMED.