Michael Reid v. I.C. System Incorporated ( 2019 )

NOT FOR PUBLICATION FILED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.
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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
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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
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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.
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