Galinis v. Bayer Corporation ( 2020 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 EUREKA DIVISION 7 8 SUSAN GALINIS, et al., Case No. 09-cv-04980-SI (RMI) 9 Plaintiffs, ORDER ON CROSS MOTIONS TO 10 v. ENFORCE THE SETTLEMENT AGREEMENT 11 BAYER CORPORATION, et al., Re: Dkt. Nos. 193, 201 12 Defendants. 13 14 Now pending before the court are dueling motions to enforce a settlement agreement filed 15 by both parties, as well as a motion for sanctions filed by Plaintiffs. On October 11, 2019, the 16 parties agreed to a settlement of this case, the terms of which were placed on the record. See (dkt. 17 170); see also Transcript (“Tr.”) (dkt. 207 *SEALED*). Later that day, the Parties jointly filed a 18 Statement of Settlement (dkt. 169), through which they confirmed that they had arrived at an 19 agreement as to all material terms for all matters in controversy. Id. at 3. Thereafter, in February of 20 2020, Plaintiffs and Defendants (“Bayer”) both filed motions to enforce the settlement agreement. 21 (dkts. 193, 201). For the reasons described below, Plaintiff’s motion to the enforce the agreement 22 is granted, Plaintiffs’ request for sanctions is denied, and Bayer’s motion to enforce the agreement 23 is granted in part and denied in part. 24 BACKGROUND 25 On October 11, 2019, in the course of a telephonic settlement conference, the parties 26 reached an agreement. See Tr. (dkt. 207 *SEALED*) at 2. Plaintiffs’ counsel then proceeded to 27 enumerate the terms of the agreement for the record as such: (1) Plaintiffs will accept Defendant’s 1 check or wire transfer to counsel for Plaintiffs; (3) Plaintiffs will sign releases containing a general 2 release of all claims and a waiver of all rights under California Civil Code Section 1542; (4) 3 Plaintiffs will agree to satisfy all liens from the settlement proceeds and to indemnify Defendants 4 from any lien claims brought by any lienholder; (5) Plaintiffs will dismiss their complaint with 5 prejudice, with each side bearing its own costs and fees; (6) having agreed to certain 6 confidentiality provisions, the Parties expected to finalize those details later that evening; (7) 7 “[a]nd there are no other terms.” Id. at 2-3. The court then asked whether Bayer agreed with these 8 terms and agreed to be bound by them; counsel for Bayer responded, “Yes. We agree to them . . . 9 [o]ther than the final iteration of the provision we’re still working on.” Id. at 3. The court then 10 asked counsel for Plaintiffs, “having stated the terms for the record and with the authority of 11 Plaintiffs, do you agree to be bound by them as well?” Id. Plaintiffs’ counsel likewise responded 12 in the affirmative. Id. at 4. As to the remaining details pertaining to the confidentiality provision, 13 the court told the parties that they could be “relieved of the deadlines that are due tonight if they’re 14 able to file a notice with the court that they have finalized . . . the remaining portion that the 15 parties were discussing.” Id. at 4. As mentioned, later that day, the parties filed their joint notice of 16 settlement. See (dkt. 169). At the heart of the parties’ current dispute is the nature of the releases 17 that Plaintiffs agreed to execute, as well as what might be an appropriate protocol for the 18 resolution of liens; accordingly, each party has moved for an order that would enforce their 19 interpretation of these terms of the settlement agreement. See generally Pls.’ Mot. (dkt. 193-1), 20 and Def.’s Mot. (dkt. 201). 21 On February 3, 2020, Plaintiffs moved for enforcement and submitted that they have 22 complied with all terms of the parties’ settlement agreement by providing Bayer with the required 23 release, and with their agreement to satisfy all liens, to indemnify Bayer from claims brought by 24 any lienholder, and to dismiss their claims with prejudice. Pls.’ Mot. (dkt. 193-1) at 3. Submitting 25 that although the terms of the settlement agreement did not require it, Plaintiffs also authorized 26 Bayer to deduct the sum for the common benefit award found by Judge Illston to be reasonable 27 (see Order (dkt. 192) at 6) from the settlement proceeds and to pay that amount directly to the 1 Plaintiffs, therefore, suggest that “Bayer’s continued refusal to disburse the funds is not only a 2 breach of the parties’ settlement agreement, it would also appear to be a violation of Judge 3 Illston’s order.” Id. at 4. Lastly, Plaintiffs seek an award of sanctions, including attorney’s fees for 4 bringing the enforcement motion as well as interest on the settlement proceeds from the date of 5 Plaintiffs’ Motion until the time that the settlement funds are disbursed. See id. at 1, 5-6. 6 On February 18, 2020, Bayer filed its own enforcement motion and submitted that 7 Plaintiffs should be made to sign the standard release form that Bayer has used in settlements for 8 other cases that also involve drospirenone-containing oral contraceptives, which includes key 9 elements missing from Plaintiffs’ release, such as warranties that Plaintiffs have capacity, 10 authority, and that they have conferred with their counsel, as well as providing for a particular lien 11 resolution protocol. See Defs.’ Mot. (dkt. 201) at 5-6. At bottom, Bayer contends that “Plaintiffs’ 12 unilateral interpretation of the settlement terms is fundamentally inapplicable in a settlement 13 context, for it does not end the litigation between the parties, as they intended.” Id. at 6. Thus, 14 Bayer adds that “it simply cannot agree to Plaintiff’s purported release . . . [because] it cannot 15 provide closure to either side.” Id. In more than 19,000 other settlements involving the same class 16 of medications, Bayer notes that it has insisted on the use of a standard release form, entitled, 17 “Release, Indemnity, and Assignment” (hereafter, “Yasmin Release”), and that Plaintiffs’ counsel 18 was aware of Bayer’s practice in these other cases due to having been involved “in dozens of such 19 cases.” Id. at 8. According to Bayer, the differences between the release executed by Plaintiffs and 20 the Yasmin Release are “provisions that would guarantee Plaintiffs have not assigned away their 21 claims to others, warrant that Plaintiffs have the capacity to execute the settlement, provide 22 consent and acknowledge that Bayer must report the settlement to Medicare, and outline a lien 23 resolution protocol designed to avoid future litigation between the parties over settlement fund 24 distributions.” Id. at 9. Thus, while Bayer maintains that “[t]he parties agree that a settlement was 25 reached in October 2019 during a telephone call with Judge Illman,” that nevertheless, “[o]nly 26 Bayer’s release permits the parties to move on.” Id. at 11. 27 In this respect, Bayer contends that failure to use the Yasmin Release “leaves the parties in 1 no provision “where the claimants and counsel warrant, among other things, that Plaintiffs actually 2 have the authority to execute the release and that Plaintiffs have not sold or transferred their claims 3 to someone else,” Bayer submits that “there is no release because Bayer secures no assurance that 4 the parties to whom they are paying the settlement funds can actually settle the case.” Id. at 11-12. 5 Likewise, Bayer argues that the same is true due to the fact that Plaintiffs’ release fails to represent 6 or warranty that Plaintiffs have had the opportunity to confer with their counsel to discuss the 7 settlement. Id. at 12. Bayer also submits that, unlike Plaintiffs’ release, the Yasmin Release 8 contains a preferable lien resolution protocol such that Plaintiffs and their counsel identify 9 lienholders and arrive at agreements with those parties about how to resolve the liens, and then to 10 represent to Bayer that they have identified liens and agreed to pay those liens from settlement 11 funds. Id. at 12 n.5. Bayer contends that “[a]bsent such a provision, lienholders will have recourse 12 to sue Bayer (and potentially Plaintiffs’ counsel).” Id. at 12. This sort of uncertainty, Bayer 13 submits, does not “provide the closure that comes with a release, which is why the provision is 14 included in every Yasmin Release. Yet Plaintiffs’ (sic) omit the provision, opening the door to 15 future litigation between the parties.” Id. Bayer further submits that while “Plaintiffs agreed to 16 sign a release,” the Parties dispute whether or not such release should extend not only to Bayer, 17 but also to subsidiaries, suppliers, distributors, and directors, where Plaintiffs contend that such a 18 broad release was not negotiated and not included in the settlement terms placed on the record. Id. 19 at 13. Once again, Bayer submits that the provisions contained in the Yasmin Release should be 20 binding on Plaintiffs in this case because Plaintiffs’ counsel have been “parties to dozens of these 21 settlements and have always used the standard release,” and thus, “[w]here two parties have an 22 extensive course of dealing with one another prior to entering into a contract, the meaning of the 23 contractual terms is informed by that course of dealing.” Id. at 14-16.1 Bayer also contends that 24 25 1 Bayer’s contention here is without merit for a number of reasons. First, Bayer has had no prior course of dealing with the Plaintiffs in this case, and Bayer’s attempt to impute its prior course of dealing with 26 Plaintiffs’ counsel onto Plaintiffs is unavailing. Further, it should be noted that course of dealing, trade usage, course of performance, and other such extrinsic evidence, may be introduced or considered to 27 explain missing or ambiguous terms because, for example, the parties’ past course of dealing with one another could serve as evidence of their intent. See Westlands Water Dist. v. United States, 337 F.3d 1092, 1 Plaintiffs’ waiver of rights under California Civil Code § 1542 is defective because that section of 2 the civil code was amended more than a year ago, but that Plaintiffs’ release quotes the pre- 3 amendment language. Id. at 13. Lastly, Bayer argues that Plaintiffs’ sanctions demand is meritless 4 because Bayer has worked with Plaintiffs in good faith to resolve this dispute, including 5 suggesting that the parties work with the undersigned to that end “mere hours after Plaintiffs sent 6 Bayer a purported release omitting key release provisions bringing finality to the litigation . . .” Id. 7 at 17-18. 8 By the time the Parties filed their reply briefs, the issue concerning the appropriate amount 9 that should be paid to the common benefit fund was resolved when Judge Illston fixed the amount 10 at 6 percent; following which, as Bayer notes, the Plaintiffs’ Steering Committee “has since agreed 11 to release Bayer from the lien upon confirmation that Bayer pays the 6% assessment ordered by 12 Judge Illston.” See Bayer’s Reply Br. (dkt. 211) at 3 n.3; see also Pls.’ Reply Br. (dkt. 203) at 2. 13 As Plaintiffs put it, “[f]or the past three months, Bayer has refused to pay Plaintiffs, citing 14 uncertainty as to the common benefit assessment applicable” to this case, and with that issue now 15 resolved, Plaintiffs contend that Bayer should not be allowed to insert new terms into the 16 agreement such as to provide that Plaintiffs have the capacity to enter into an agreement, that 17 Plaintiffs have conferred with counsel about the agreement, and that Plaintiffs must accept Bayer’s 18 lien resolution protocol. See Pls.’ Reply Br. (dkt. 203) at 3-4. In other respects, Bayer’s reply is 19 largely repetitive. See Bayer’s Reply Br. (dkt. 211) at 2-8, and Bayer’s Mot. (dkt. 201) at 5-16. 20 DISCUSSION 21 At the outset, it should be noted that “[a] settlement agreement is treated as any other 22 contract for purposes of interpretation.” United Commercial Ins. Serv., Inc. v. The Paymaster 23 Corp., 962 F.2d 853, 856 (9th Cir. 1992). In this regard, it should also be noted that an oral 24 settlement agreement is binding on the parties when it is memorialized on the record in court, even 25 if one party has a change of heart after agreeing to its terms but before the terms are reduced to 26 writing. See Doi v. Halekulani Corp., 276 F.3d 1131, 1138 (9th Cir. 2002) (citing Sargent v. HHS, 27 229 F.3d 1088, 1090 (Fed. Cir. 2000)). Further, “[t]he construction and enforcement of settlement 1 generally.” Jeff D. v. Andrus, 899 F.2d 753, 759 (9th. Cir. 1989); Jones v. McDaniel, 717 F.3d 2 1062, 1067 (9th Cir. 2013); United Commercial Ins. Serv., Inc., 962 F.2d at 856; see also Harrop 3 v. West. Airlines, Inc., 550 F.2d 1143, 1145 (9th Cir. 1977). 4 In California, the essential elements for contract formation are as follows: that the parties 5 are capable of contracting; that the parties consent to contracting; that the contract involves a 6 lawful object; and that there exists sufficient cause or consideration. See Lopez v. Charles Schwab 7 & Co., Inc., 118 Cal. App. 4th 1224, 1230 (2004) (citing Cal. Civ. Code § 1550). “Mutual assent 8 usually is manifested by an offer communicated to the offeree and an acceptance communicated to 9 the offeror.” Id. (citing Cal. Civ. Code § 1565). The existence of mutual consent is determined by 10 objective criteria; or, put another way, the “parties’ outward manifestations must show that the 11 parties all agreed ‘upon the same thing in the same sense.’” Weddington Prod., Inc., v. Flick, 60 12 Cal. App. 4th 793, 811 (1998) (quoting Cal. Civ. Code § 1580). As to enforcement, it is well 13 settled that a district court has the equitable power to summarily enforce an agreement to settle a 14 case pending before it. See In re City Equities Anaheim, Ltd., 22 F.3d 954, 957 (9th Cir. 1994); see 15 also Callie v. Near, 829 F.2d 888, 890 (9th Cir. 1987). To be enforced, a settlement agreement 16 must meet two requirements. First, it must be a complete agreement. Maynard v. City of San Jose, 17 37 F.3d 1396, 1401 (9th Cir. 1994); see also Callie, 829 F.2d at 890. Additionally, all parties must 18 have either agreed to the terms of the settlement or authorized their respective counsel to settle the 19 dispute. Harrop, 550 F.2d at 1144-45. 20 If the material facts concerning the existence or terms of the settlement agreement are in 21 dispute, the court must hold an evidentiary hearing. See Bill Poon & Co., Architects, Inc. v. Bafaiz, 22 No. C 07-5566 PJH, 2009 U.S. Dist. LEXIS 24438, at *6-7 (N.D. Cal. Mar. 16, 2009). On the 23 other hand, where the existence of material facts, or the contract’s material terms are not in 24 dispute, and no party disputes their intent to be bound by the agreement, the settlement agreement 25 is enforceable. See Tiger Bay Vill. Corp. v. Yihe Corp., No. CV 13-08837-RSWL-FFM(x), 2014 26 U.S. Dist. LEXIS 100607, at *8-9 (C.D. Cal. July 18, 2014); see also Bill Poon, 2009 U.S. Dist. 27 LEXIS 24438, 2009 WL 688917, at *3, *7 (“In this case, the parties do not dispute the existence 1 is absent or omitted from the Settlement Agreement. Nor did they argue that they did not intend to 2 be bound by the terms of the Settlement Agreement, or raise any factual issues regarding the 3 creation of the Settlement Agreement. Accordingly, the court finds that the parties have entered 4 into an enforceable agreement.). 5 Here, the Parties do not dispute the existence of an agreement, nor do they dispute any 6 material fact underlying any of the essential terms that were placed on the record. As mentioned 7 above, Bayer submits that it was its intention that Plaintiffs execute the Yasmin Release rather 8 than executing a general release of their own formulation. However, when the terms of the parties’ 9 agreement were stated for the record – to the effect that Plaintiffs will sign releases containing a 10 general release of all claims and a waiver of all rights under California Civil Code Section 1542 – 11 Bayer merely noted its agreement with this statement. Plaintiffs’ general release provides that 12 upon payment of the agreed upon sum, Plaintiffs fully, finally and forever release and discharge 13 Defendants in said action and their principals, agents, employers, employees, affiliates, partners, 14 assigns, representatives, corporations and their past and present directors, officers, shareholders 15 and subsidiaries, and all other persons or entities who Plaintiffs claim or may claim are 16 responsible in any way for the injuries alleged in the Action, and from any and all past, present 17 and future claims, demands, obligations, actions, causes of action, rights, damages, costs, 18 attorney’s fees, losses, expenses or compensation of any other nature, whatsoever, and any 19 personal or bodily injury claims arising out of the matters alleged in the Action. See General 20 Release (dkt. 193-2) at 25-26. Despite the clear and unequivocal language of the parties’ 21 agreement as placed on the record, and the clear language of Plaintiffs’ release, Bayer still 22 incorrectly claims that this release does not make it clear which entities or persons are subject to 23 the release. The court disagrees. Further, as to Bayer’s claim that the parties’ agreement called for 24 a specified lien resolution protocol, the court likewise disagrees. The parties’ agreement merely 25 provided that Plaintiffs will agree to satisfy all liens from the settlement proceeds and to 26 indemnify Defendants from any lien claims brought by any lienholder, and Plaintiffs’ General 27 Release memorialized that term. See id. at 26. 1 objective intent, as evidenced by the words of the contract, rather than the subjective intent of one 2 of the parties, that controls interpretation; thus, a party’s undisclosed intent or understanding is 3 irrelevant to contract interpretation. See Founding Members of the Newport Beach Country Club v. 4 Newport Beach Country Club, Inc., 109 Cal. App. 4th 944, 956 (2003). Had the parties intended to 5 specify the use of the Yasmin Release, or the employment of a particular lien resolution protocol, 6 they could have expressly done so; however, this court will not include such terms in the parties’ 7 agreement by implication, as Bayer suggests. See e.g., Safeco Ins. Co. v. Robert S., 26 Cal. 4th 8 758, 763-64 (Cal. 2001) (“Because Safeco chose not to have a criminal act exclusion, instead 9 opting for an illegal act exclusion, we cannot read into the policy what Safeco has omitted. To do 10 so would violate the fundamental principle that in interpreting contracts, including insurance 11 contracts, courts are not to insert what has been omitted.”). In California, the words of a contract, 12 as understood in their ordinary and popular sense, govern the contract’s interpretation if the 13 language is clear. See Nemetona Trading Ltd. v. Kurt Orban Partners, L.L.C., No. 14-cv-03284- 14 SI, 2015 U.S. Dist. LEXIS 32208, at *14-15 (N.D. Cal. Mar. 11, 2015); see also Verinata Health, 15 Inc. v. Ariosa Diagnostics, Inc., 329 F. Supp. 3d 1070, 1085 (N.D. Cal. 2018). In this regard, the 16 court finds that the contractual term pertaining to the general release that Plaintiffs agreed to 17 execute was clear and unambiguous. If it was Bayer’s intention that Plaintiffs should execute the 18 Yasmin Release, this intent was undisclosed and subjective at the time that the terms of this 19 agreement were expressed, agreed upon, and placed on the record. Furthermore, the court finds no 20 cause for Bayer’s concerns, expressed after the fact, regarding whether or not Plaintiffs had 21 conferred with their counsel about the settlement, or whether or not Plaintiffs had the authority to 22 settle their own case, because Plaintiffs’ counsel represented, on the record, that it was “with the 23 authority of Plaintiffs” that he was agreeing to be bound by the terms of the agreement. See Tr. 24 (dkt. 207 *SEALED*) at 3. 25 On the other hand, the court does find some merit to Bayer’s contention that Plaintiffs’ 26 release is defective to the extent that it makes reference to a pre-amendment version of the waiver 27 provision described in Cal. Civ. Code § 1542. In October of 2019, when the terms of the parties’ 1 include a waiver of all rights under § 1542, the objectively viewed understanding of such a term is 2 that reference was being made to the version of § 1542 in effect at the time. Given, that § 1542 3 was amended on January 1, 2019, to include a few grammatical tweaks as well as the adding of 4 || terms such as “releasing party” and “released party” alongside the existing terms of “creditor” and 5 “debtor,” and given that Plaintiffs’ general release contains the pre-amendment language, 6 || Plaintiffs’ general release must be modified to reflect the post-amendment language of § 1542 that 7 || was in effect at the time the parties’ agreement was placed on the record in this case. 8 Accordingly, for the reasons stated above, Plaintiffs’ motion to enforce the settlement 9 || agreement is GRANTED, and Bayer’s motion to enforce the settlement agreement is GRANTED 10 || only to the extent that Plaintiffs are ORDERED modify their General Release to reflect the post- 11 amendment version of Cal. Civ. Code § 1542. Further, Plaintiffs’ request for sanctions is 12 || DENIED because the request contains no argument or authority identifying bad faith conduct for 5 13 || which a sanctions award might be appropriate under the circumstances; instead, Plaintiffs’ Motion 14 || has merely advanced a bare-boned request for sanctions by stating that courts have inherent 3 15 authority to sanction a party for bad faith conduct in executing a settlement agreement. See Pls.’ z 16 || Mot. (dkt. 193-1) at 5-6. 5 7 IT IS SO ORDERED. || Datea: April 14, 2020 19 Mt Z 20 R@BERT M. ILLMAN 21 United States Magistrate Judge 22 23 24 25 26 27 28