Pruco Life Insurance Company v. California Energy Development, Inc. ( 2021 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 PRUCO LIFE INSURANCE Case No.: 3:18-cv-02280-DMS-AHG COMPANY, 12 REPORT AND Plaintiff, RECOMMENDATION FOR ORDER: 13 v. 14 (1) DISMISSING PROCEEDINGS CALIFORNIA ENERGY RELATED TO LIFE ADVANCE, 15 DEVELOPMENT INC., et al., LLC’S MOTION TO ENFORCE 16 SETTLEMENT AGREEMENT Defendants. [ECF No. 191] and 17 18 (2) DISMISSING PROCEEDINGS AND RELATED CROSS-ACTIONS. RELATED TO MOTION OF JOHN 19 WALSH FOR ORDER TO SHOW 20 CAUSE [ECF No. 215] 21 22 23 24 25 26 27 28 1 Before the Court are (1) Life Advance, LLC’s (“Life Advance”) Motion to Enforce 2 Settlement Agreement, for Injunctive Relief and Award of Attorney’s Fees and (2) the 3 Motion of John Walsh for Order to Show Cause Why Life Advance, Craig Stack and 4 Russell De Phillips Should Not be Held in Contempt; or Alternatively an Injunction to 5 Prevent Further Harassment. ECF Nos. 191, 215. For the reasons set forth below, the Court 6 recommends that the proceedings related to both motions be dismissed for lack of 7 jurisdiction. 8 I. BACKGROUND 9 On March 5, 2020, the Court held an Early Neutral Evaluation (“ENE”) in this 10 interpleader action, at which time the case between Life Advance and John J. Walsh settled. 11 ECF No. 125. The parties handwrote a settlement agreement at the ENE (ECF No. 191-2, 12 Ex. A) and then entered into a more comprehensive written settlement agreement and 13 mutual release (“Settlement Agreement”) on May 18, 2020 (ECF No. 191-2, Ex. B). The 14 Settlement Agreement, among other terms, included John Walsh’s “acknowledg[ment] that 15 Life Advance is the sole and absolute owner of the entire Policy and all of the proceeds of 16 the Policy”1 and provided that Life Advance would pay Mr. Walsh $50,000 within thirty 17 days of his execution of the Settlement Agreement in exchange for Mr. Walsh assigning 18 and transferring to Life Advance “any and all claims and rights Walsh has or may have 19 against California Energy, Pruco and any other person or entity based upon the allegations 20 made by Walsh in the Action.”2 Additionally, Mr. Walsh agreed to “cooperate with Life 21 Advance in their prosecution of its claim to ownership of the Policy and the Policy proceeds 22 23 24 1 The “Policy” is defined as “the Pruco Life Insurance Company (‘Pruco’) Term Elite life 25 insurance Policy number L9 301 242 [], which insured the life of James Roberts.” ECF No. 191-2, Ex. B ¶ 1. 26 27 2 The “Action” referenced is the instant lawsuit, Pruco Life Insurance Company v. California Energy Development, Inc., et al., Case No. 3:19-cv-2280-DMS-AHG. ECF No. 28 1 in the Action, including but not limited to providing written declarations regarding Life 2 Advance’s ownership of all rights to the Policy and the Policy proceeds.” Id. ¶¶ 4(A), 8. 3 On or about September 14, 2020, Life Advance sought Mr. Walsh’s cooperation in 4 the prosecution of its ownership claims. ECF No. 191-1 at 2; Decl. of Russell M. 5 De Phillips, ECF No. 191-2 ¶ 6. A call was arranged between counsel for Life Advance 6 and Mr. Walsh on October 6, 2020, but Life Advance asserts that Mr. Walsh refused to 7 cooperate and hung up. Id. ¶ 7. After trying again (unsuccessfully) to obtain Mr. Walsh’s 8 cooperation, Mr. De Phillips, who is counsel for Life Advance, notified this Court 9 regarding the dispute. Id. ¶ 8. In response, the Court held a telephonic settlement 10 conference on October 19, 2020. ECF No. 180. Mr. Walsh continued to assert his refusal 11 to cooperate with Life Advance in the ways it requested, so the Court gave Life Advance 12 a hearing date to file the instant motion.3 13 II. LEGAL STANDARD 14 “Federal courts are courts of limited jurisdiction” and when a suit is dismissed, 15 subject matter jurisdiction terminates. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 16 375, 377, 381-81 (1994). “A motion to enforce the settlement agreement, then, is a separate 17 contract dispute requiring its own independent basis for jurisdiction.” O'Connor v. Colvin, 18 70 F.3d 530, 532 (9th Cir. 1995). Under certain circumstances, district courts may retain 19 ancillary jurisdiction over a case in order to enable the court to “manage its proceedings, 20 vindicate its authority, and effectuate its decrees.” Kokkonen, 511 U.S. at 379-80. Where 21 the parties to a settlement make their obligations to comply with the terms of the settlement 22 agreement part of the dismissal order—“either by separate provision (such as a provision 23 ‘retaining jurisdiction’ over the settlement agreement) or by incorporating the terms of the 24 25 26 3 In briefing this motion, Mr. Walsh filed an affidavit in response to Life Advance’s reply 27 brief. ECF No. 221. Life Advance then filed an objection to Mr. Walsh’s affidavit. ECF No. 224. Because the Court did not authorize the filing of either of these supplemental 28 1 settlement agreement in the order”—breach of the settlement agreement is a violation of 2 the order, and ancillary jurisdiction to enforce the agreement exists. Id. at 381; see also In 3 re Valdez Fisheries Dev. Ass'n, Inc., 439 F.3d 545, 549 (9th Cir. 2006) (explaining that if 4 a district court’s dismissal order does not explicitly retain jurisdiction or incorporate the 5 settlement terms, “enforcement of the settlement agreement is for state courts”). A party 6 also must allege a breach of the settlement agreement before a district court may exercise 7 ancillary jurisdiction over a motion to enforce said agreement. In re Volkswagen "Clean 8 Diesel" Mktg., Sales Practices, & Prod. Liab. Litig., 975 F.3d 770, 775 (9th Cir. 2020). 9 III. DISCUSSION 10 A. Life Advance’s Motion to Enforce the Settlement Agreement 11 As a threshold matter, the Court must evaluate whether it has subject matter 12 jurisdiction over the instant dispute. Once an action has been dismissed, a proceeding to 13 enforce a settlement agreement requires an independent basis for jurisdiction. Kokkonen, 14 511 U.S. at 378. If the district court expressly retains jurisdiction over the settlement 15 agreement or incorporates the terms of the settlement agreement into the dismissal order, 16 then the Court may exercise ancillary jurisdiction over a motion to enforce the agreement. 17 Id. at 382. If not, the party seeking enforcement of the settlement agreement must look to 18 the appropriate state court for resolution of their contract dispute. See In re Valdez Fisheries 19 Dev. Ass'n, Inc., 439 F.3d at 549. Here, the handwritten settlement agreement drafted 20 during the ENE states in paragraph 5 that “Magistrate Judge Goddard will resolve all 21 disputes regarding the terms of the formal settlement agreement.” ECF No. 191-2, Ex. A 22 at 2. Likewise, the Settlement Agreement signed by Mr. Walsh on May 18, 2020, states in 23 paragraph 4(G) (in the Recitals of Fact section) that “Magistrate Judge Allison H. Goddard 24 will resolve all disputes between the Parties regarding the terms of the Settlement 25 Agreement.” ECF No. 191-2, Ex. B at 2. Paragraph 30 of the Settlement Agreement asserts 26 that “[t]he sole and exclusive jurisdiction and venue to enforce or interpret this Agreement 27 shall be in the United States District Court for the Southern District of California.” Id., Ex. 28 B at 9. Thus, the parties’ intention clearly was that this Court would retain jurisdiction over 1 the settlement. However, “the mere fact that the parties agree that the court should exercise 2 continuing jurisdiction is not binding on the court.” Arata v. Nu Skin Int'l, Inc., 96 F.3d 3 1265, 1269 (9th Cir. 1996). 4 The disposition of the case is what guides this Court’s analysis. In Life Advance and 5 Mr. Walsh’s joint motion for an order dismissing Mr. Walsh, there is no reference to this 6 Court retaining jurisdiction and the only mention of the settlement is the following: “[a]t 7 the March 5, 2020 Early Neutral Evaluation Conference conducted by Magistrate Judge 8 Allison H. Goddard, this case settled between Life Advance and Walsh, which settlement 9 included, among other things, an agreement for the dismissal of Walsh as a party to this 10 action, with Life Advance and Walsh each to bear their own attorney fees and costs with 11 respect to each other.” ECF No. 156 ¶ 5. District Judge Sabraw’s order granting the joint 12 motion also does not mention the retention of jurisdiction or the Settlement Agreement, 13 stating only that the Second Amended Complaint of Pruco Life Insurance Company and 14 the Crossclaim of Life Advance, LLC were dismissed against John J. Walsh and each party 15 was to bear its own attorney fees and costs. ECF No. 157. Neither of these documents 16 appears to satisfy the requirements of Kokkonen. 17 While the Court is sympathetic to the parties and was willing to resolve any disputes 18 arising from the settlement agreement, the requirements of Kokkonen have been strictly 19 construed and even this Court’s willingness will not overcome the lack of reference to 20 retention of jurisdiction in the dismissal order. In Hagestad v. Tragesser, 49 F.3d 1430 (9th 21 Cir. 1995), the presiding judge stated: 22 I will act as a czar with regard to the drafting of the settlement papers and the construction of this settlement and the execution of this settlement. And that 23 means that if there is any dispute that is brought to me by counsel, I will decide 24 the matter according to proceedings which I designate in the manner that I designate, and that decision will be final without any opportunity to appeal. 25 26 Hagestad, 49 F.3d at 1433. In a subsequent order, the judge stated, “[t]he parties further 27 agreed that all questions relating to their rights and duties under the agreement would be 28 determined exclusively by the undersigned.” Id. Nonetheless, because the dismissal order 1 itself “neither expressly reserve[d] jurisdiction nor incorporate[d] the terms of the 2 settlement agreement,” the appellate court vacated the district court’s order enforcing the 3 settlement agreement and dismissed all enforcement proceedings. Id. (explaining that 4 “[t]he judge’s mere awareness and approval of the terms of the settlement agreement do 5 not suffice to make them part of his order”). 6 Similarly, in O'Connor v. Colvin, the court supervised the settlement negotiations 7 and the parties filed the settlement agreement with the court.4 O’Connor, 70 F.3d at 532. 8 The stipulation for dismissal of the case did not recite the terms of the settlement and the 9 court’s order appended to the bottom of the stipulation stated only: 10 Based on the Settlement Agreement amongst the parties, this Stipulation for dismissal amongst the parties, and for good cause: 11 12 IT IS HEREBY ORDERED that the Action including all cross-claims and counterclaims is dismissed in its entirety with prejudice. 13 14 Id. Though the plaintiff argued the court retained jurisdiction because the dismissal was 15 “based on” the settlement agreement, the appellate court concluded that “an order ‘based 16 on’ the settlement agreement, without more, does not ‘embody the settlement contract,’ 17 and is insufficient to create ancillary jurisdiction.” Id. (quoting Kokkonen, 511 U.S. at 381); 18 c.f. Kelly v. Wengler, 822 F.3d 1085, 1091, 1095 (9th Cir. 2016) (finding ancillary 19 jurisdiction existed where the stipulation for dismissal incorporated the settlement 20 agreement, the settlement agreement was attached to the stipulation as an exhibit, and the 21 district judge’s order dismissing the case explicitly incorporated the parties’ stipulation). 22 The appellate court, therefore, vacated the district court’s order compelling compliance 23 with the settlement agreement for want of jurisdiction. Id. at 533. 24 In light of this precedent, the Court is compelled to find jurisdiction lacking in this 25 26 27 4 There is no indication the settlement agreement contained an express reservation of jurisdiction. Instead, it appears to have required arbitration of any disputes. O’Connor, 70 28 1 case. Though the joint motion to dismiss mentions the settlement, it does not reference 2 paragraph 4(G) regarding this Court resolving any disputes or paragraph 30, which asserts 3 that this district court shall retain jurisdiction. Likewise, Judge Sabraw’s order dismissing 4 Mr. Walsh neither “embod[ies] the settlement contract” nor “retain[s] jurisdiction over the 5 settlement contract.” Kokkonen, 511 U.S. at 381–82. Absent such language, the Court 6 cannot say that an action to enforce the settlement will vindicate Judge Sabraw’s authority 7 or effectuate his decrees. See id. at 379-80. Accordingly, the Court cannot exercise 8 ancillary jurisdiction over Life Advance’s motion to enforce the Settlement Agreement.5 9 The Court, therefore, RECOMMENDS that the proceedings related to Life Advance’s 10 motion to enforce the Settlement Agreement be dismissed for lack of jurisdiction.6 11 B. John Walsh’s Motion for Order to Show Cause 12 On a related note, Mr. Walsh filed a motion asking the Court to issue an order to 13 show cause as to why Life Advance, Craig Stack, and Russell De Phillips7 should not be 14 held in contempt. ECF No. 215. Alternatively, he seeks an injunction to prevent Life 15 16 5 It also does not appear that any other basis for jurisdiction exists, and the parties have not 17 claimed that it does. The Second Amended Complaint relies upon diversity of citizenship between the parties under 28 U.S.C. § 1332 and Life Advance’s cross-claim relies on the 18 jurisdictional basis asserted in the underlying litigation (via Rule 13). ECF Nos. 15, 102. 19 Mr. Walsh is a resident and citizen of California and Life Advance is a Nevada limited liability company with its principal place of business in La Jolla, California, so these parties 20 are not diverse. 21 6 In its reply brief, Life Advance requests that, if the Court finds that it lacks jurisdiction, 22 the Court continue the hearing to allow Life Advance to obtain an amended dismissal order. 23 ECF No. 217 at 3-4. Mr. Walsh has not yet had a formal opportunity to respond to this request. If Life Advance seeks to amend the judgment, it should raise that request as an 24 objection to this report and recommendation. This will allow Judge Sabraw an opportunity 25 to review this Court’s jurisdictional analysis before considering whether it is appropriate to amend the judgment, and give Mr. Walsh the opportunity to respond to any such request. 26 27 7 Mr. Stack is the manager of Life Advance and, as previously noted, Mr. De Phillips is 28 1 Advance and these same individuals from harassing him. Id. Mr. Walsh contends that, after 2 paying him $50,000 pursuant to the Settlement Agreement, Mr. Stack and Mr. De Phillips 3 contacted him to ask him to sign declarations. Id. at 3. Mr. Walsh asserts that the 4 declarations contained information that was blatantly false and were an attempt by Life 5 Advance to suborn perjury by Mr. Walsh. Id. He further submits that he remains willing to 6 comply with the Settlement Agreement, and has not refused to be deposed, accept a 7 subpoena, respond to discovery, be called as a witness, or sign a declaration. Id. at 7. 8 Mr. Walsh simply claims that he will not lie and so he asks the Court to enjoin Life 9 Advance and its representatives from asking him to do so. Id. at 5, 8. Alternatively, he asks 10 the Court to hold that the settlement is unenforceable. Id. at 8. 11 Here again, the relief sought pertains to interpretation and enforcement of the 12 Settlement Agreement. “So far as the application of the Kokkonen principle is concerned, 13 we find no relevant difference between a proceeding to enforce a settlement agreement and 14 one to interpret it.” In re Valdez Fisheries Dev. Ass'n, Inc., 439 F.3d at 550. As explained 15 above, the Court lacks jurisdiction to enforce the settlement contract between the parties 16 and thus, also lacks jurisdiction to interpret it. The Court, therefore, RECOMMENDS that 17 the proceedings related to Mr. Walsh’s motion be dismissed for lack of jurisdiction. 18 IV. CONCLUSION 19 For the foregoing reasons, the Court concludes that it lacks jurisdiction to address 20 (1) Life Advance’s Motion to Enforce Settlement Agreement, for Injunctive Relief and 21 Award of Attorney’s Fees (ECF No. 191) and (2) the Motion of John Walsh for Order to 22 Show Cause Why Life Advance, Craig Stack and Russell De Phillips Should Not be Held 23 in Contempt; or Alternatively an Injunction to Prevent Further Harassment (ECF No. 215). 24 The undersigned, therefore, RECOMMENDS that the district judge DISMISS the 25 proceedings related to both motions. 26 IT IS HEREBY ORDERED that any party to this action may file written objections 27 with the Court and serve a copy on all parties no later than February 5, 2021. The 28 document should be captioned “Objections to Report and Recommendation.” l IT IS FURTHER ORDERED that any Reply to the Objections shall be filed with 2 ||the Court and served on all parties no later than February 19, 2021. 3 IT IS SO ORDERED. 4 ||Dated: January 22, 2021 JpwornH. Xho Honorable Allison H. Goddard 6 United States Magistrate Judge 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28