Cambridge Decision Science v. Markman Capital Insight Llc ( 2017 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
)
CAMBRIDGE DECISION SCIENCE, ) No. 74774-6-1 CI)
)
Respondent, ) DIVISION ONE Z.rt,
) 1"V '---.
v. ) .
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) CJ: "
: >
4
JON MARKMAN and ELLEN ) c?? „7.
Cr;
MARKMAN, and their marital )
community, ) t.40
)
Appellants. )
)
)
MARKMAN CAPITAL INSIGHT LLC., a ) UNPUBLISHED
Washington limited liability company, )
) FILED: March 20, 2017
Appellant, )
)
v. )
)
TREYTON THOMAS,aka TRAY )
THOMAS,aka TRACY LEE THOMAS, )
an individual, )
)
Third Party )
Defendant, )
)
and )
)
CAMBRIDGE DECISION SCIENCE, a )
foreign entity or trade name of Treyton )
Thomas; and TREADSTONE, a foreign )
entity or trade name of Treyton Thomas, )
)
Respondents. )
)
No. 74774-6-1/2
Cox, J. — Objective manifestation of mutual assent to all material terms of
an agreement is an essential element to the valid formation of a legally
enforceable contract) Here, there was no such objective manifestation of mutual
assent to the proposed settlement agreement. Moreover, the mutual release,
which was conditioned on the existence of a legally enforceable contract, is not
effective. We reverse.
This is an action to enforce an alleged settlement agreement and mutual
release between Jon Markman, Tray Thomas, and their respective companies.
Jon Markman is president of Markman Capital Insight LLC (MCI). Thomas
conducted business as Cambridge Decision Science (CDS). Markman, Thomas,
and their respective companies, had a business known as Gemini. MCI
terminated this business relationship. Thomas and Markman then began
settlement negotiations that led to this action.
Thomas transmitted to Markman a proposed settlement agreement dated
October 15, 2015 together with a proposed mutual release of the same date.
Among the terms of this proposal was paragraph 3 of the proposed settlement
agreement regarding certain customer lists. Markman struck a portion of that
paragraph 3 and initialed his correction. He then returned the modified document
containing his rejection of the terms of paragraph 3 together with an explanatory
e-mail containing a counteroffer: the stricken language would remain out of the
settlement.
1 P.E. Sys., LLC v. CPI Corp., 176 Wash. 2d 198, 209, 289 P.3d 638(2012).
2
No. 74774-6-1/3
Thomas and Markman exchanged further e-mails over the course of the
next few days. These exchanges included Thomas making several counteroffers
regarding the customer list described in paragraph 3 of the proposed settlement
agreement.
There was also a proposal for arbitration of disputes that both sides never
simultaneously agreed to. Specifically, on October 19, 2015, Markman wrote:
"Let's go to binding arbitration. . . ."2 Thomas responded: [U]pon examining
binding arbitration thoroughly, we would not agree to it. .. . We have an existing
executed Settlement Agreement and Mutual Release making arbitration
pointless. . .
Thereafter, CDS commenced this action for damages against MCI, Jon
Markman, his wife, and their marital community. The complaint alleged that the
parties entered into a binding settlement agreement, which Markman and his
related company had breached. CDS sought $95,000, the payment amount
under the terms of the agreement. MCI asserted a counterclaim and
commenced a third party action against other parties to the alleged settlement
agreement.
CDS then moved to enforce the settlement agreement. The trial court
granted the motion without oral argument. It also dismissed MCI's third party
claim and counterclaim. The trial court later denied the motion for
reconsideration and entered a judgment in favor of CDS.
2 Clerk's Papers at 171, 194.
3 Id. at 197.
3
No. 74774-6-1/4
Jon Markman, Ellen Markman, and MCI appeal.
SETTLEMENT AGREEMENT
Markman, his wife, and MCI argue that the settlement agreement dated
October 15, 2015 is not an enforceable contract. Because there is no objective
manifestation of mutual assent of the parties to all material terms of the alleged
agreement, we agree.
Courts follow summary judgment procedures when a party moving to
enforce a settlement agreement relies on affidavits or declarations to show that
the agreement is not genuinely disputed.4 The moving party must prove "'there
is no genuine dispute over the existence and material terms of the agreement.'"5
If the moving party satisfies this burden, the nonmoving party must produce
evidence to show a genuine issue of material fact.6 Courts must read the parties'
submissions in the light most favorable to the nonmoving party to determine
whether reasonable minds could reach only one conclusion.7
We review de novo the trial court's enforcement order because the
proceeding is similar to a summary judgment proceeding.5 If the nonmoving
party raises a genuine issue of material fact, a trial court should not enforce a
4 Condon v. Condon, 177 Wash. 2d 150, 161, 298 P.3d 86(2013).
Id. at 162(quoting Brinkerhoff v. Campbell, 99 Wash. App. 692, 696-97,
5
994 P.2d 911 (2000)).
6 See id. at 161-62 n.4.
7 Id. at 162.
8 Id.
4
No. 74774-6-1/5
settlement agreement without first holding an evidentiary hearing to resolve the
disputed issues of fact.9
Objective Manifestation of Mutual Assent
The threshold question is whether there is objective manifestation of
mutual assent by the parties to all material terms between and among them. We
conclude there is not.
We apply the common law of contracts to settlement agreements.19 The
parties' objective manifestation of mutual assent to all of an agreement's material
terms is an essential element to the valid formation of a contract." Generally,
manifestations of mutual assent are expressed by an offer and an acceptance of
that offer.12
Mutual assent is generally a question of fact, but it may be determined as
a matter of law if reasonable minds could not differ.13 The party asserting the
contract's existence bears the burden of proving the existence of a mutual
intention.14
9 Id. at 161-62 n.4.
19 See id. at 162.
11 CPI Corp., 176 Wash. 2d at 209.
Keystone Land & Dev. Co. v. Xerox Corp., 152 Wash. 2d 171, 178, 94
12
P.3d 945(2004).
13 CPI Corp., 176 Wash. 2d at 207.
14 Becker v. Wash. State Univ., 165 Wash. App. 235, 246, 266 P.3d 893
(2011).
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No. 74774-6-1/6
No contract is formed unless acceptance of an offer is identical to the
offer.15 "Acceptance is an expression (communicated by word, sign, or writing to
the person making the offer) of the intention to be bound by the offer's terms."16
A party's expression of assent that changes the offer's terms "in any material
respect" may be "a counteroffer; but it is not an acceptance and consummates
no contract."17
A material variance is fact dependent.15 "Material" is defined as significant
or essentia1.19
Here, the issue is whether Markman and Thomas, on behalf of
themselves and others, objectively manifested that they agreed to all material
terms of the proposed settlement agreement. We conclude that there was not
such objective manifestation of mutual assent.
Thomas proposed a written settlement agreement and mutual release. In
relevant part, paragraph 3 of the settlement agreement states:
Markman has previously provided Thomas on May 7, 2015
with a copy of the Gemini customer list that he attests was accurate
to the best of his knowledge at the time and will make revisions if
15 Johnson v. Safeco Ins. Co. of Am., 178 Wash. App. 828, 840, 316 P.3d
1054 (2013).
16 Veith v. Xterra Wetsuits, LLC, 144 Wash. App. 362, 366, 183 P.3d 334
(2008).
Rorvig v. Douglas, 123 Wash. 2d 854, 858, 873 P.2d 492(1994)(quoting
17
Blue Mountain Constr. Co. v. Grant County Sch. Dist. 150-204,49 Wn.2d 685,
688, 306 P.2d 209 (1957)).
18 Sea-Van Invs. Assocs. v. Hamilton, 125 Wash. 2d 120, 126, 881 P.2d 1035
(1994).
19 BLACK'S LAW DICTIONARY 1124 (10th ed. 2014).
6
No. 74774-6-1/7
errors are found within 10 days of the wiring of the funds in
paragraph(one).[201
On October 15, 2015, Markman struck the above emphasized language,
initialed the change in the right margin of the document, and signed the
agreement. Specifically, the document he returned stated, in relevant part, as
follows:
Markman has previously provided Thomas on May 7, 2015
with a copy of the Gemini customer list that he attests was accurate
to the best of his knowledge at the time. and-will-make-revisiens4f
!: e
ParagraPh-foneli21]
He then e-mailed Thomas to point out these changes and attached the
signed agreement. The e-mail stated:
I signed and initialed the doc[ument]s attached.
There was one half-sentence change where you will see there are
Xs on the pdf.
I am attesting that the customer list was accurate to the best of my
knowledge at the time it was sent.
The information came straight out of my database. If there are any
errors, the same errors are still in my records.
Furthermore, a customer might have changed his. . . information
without informing us. I am not going to commit to tracking those
down for you, or doing any further research of any kind.
[22]
20 Clerk's Papers at 35, 167, 175(emphasis added).
21 Id.
22 Id. at 182(emphasis added).
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No. 74774-6-1/8
There can be no reasonable dispute that these actions by Markman
constituted a rejection of the Thomas offer embodied in the proposed settlement
agreement. Likewise, there can be no reasonable dispute that Markman's return
e-mail with the attached and modified document constituted a counteroffer that
Thomas was free to accept or reject.
That same day, Thomas replied to Markman's counteroffer, in relevant
part:
Are you saying that the email addresses sent are the same email
addresses that are being used at present by MCI, and therefore if
they contained any errors that would effect a bounce, you would. . .
definitely know that by now?
If so, please confirm that back.
If you will:
1. Confirm back with a reply to this paragraph 1 is correct,
and
2. Confirm back with a reply back to this you agree only to
correct any inadvertent typos that cause an email bounce
within 10 days of the wire being sent,
Then I will also initial the strikeout and send back the
document for your records...and we are done except for the
wire confirmation.[23]
Similarly to the first exchange between the Markman and Thomas, this e-
mail evidences a rejection of the Markman counteroffer. That is because it is not
an outright acceptance of that counteroffer. Rather, the response is stated in
terms of a counteroffer. That is, "if" Markman would comply with the two stated
conditions, then and only then, would Thomas "initial the strikeout and send back
23 Id. at 181 (emphasis added).
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No. 74774-6-1/9
the document for [Markman's] records."24 This, of course, never occurred. There
is no contract.
The record shows this in Markman's reply e-mail, which stated:
1 — Yes [that paragraph 1 is correct].
2 -- If there are inadvertent typos in the email addresses, your
guess as to what's wrong will be as good as mine so there's no
point to asking me for he/p.(25]
Obviously, this reply does not show acceptance of Thomas's
then existing counteroffer. In fact, it is best read as a rejection of that
counteroffer. No contract exists.
Thomas replied, in relevant part:
I have to have someone(verify the email addresses]manually.
. . . [']f there are any fails I will ask you to double check the
address against your data to see if there was a typo. . . .
If you agree to that today, I will do that and we are done.
If you won't even agree to that, we have no settlement.
[26]
This communication shows that verification of the e-mail addresses that
were first referenced in paragraph 3 of the proposed settlement agreement was
material to Thomas. He says so. Moreover, this exchange further shows that
this unsettled term was important enough to Thomas that in the absence of
24 Id.
25 Id. at 180(emphasis added).
26 Id. at 168, 180(emphasis added).
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No. 74774-6-1/10
agreement, there was no settlement: "If you won't even agree to that, we have
no settlemen t."27
There is nothing in the record to suggest that Markman accepted this
counteroffer at any time. To the contrary, he denies ever doing so. There still is
no contract.
Unsettled by the lack of agreement on this material term, Thomas then
sent Markman another e-mail stating:
Confirm with a reply back today you agree to double check against
the list you email[ed]from any email addresses from the customer
list you sent. . . that may fail a verification test completed in the
morning.
I will then also initial the strikeout on the mutual release
memorializing the revision.
Barring that, we do not have a settlement and will proceed
accordingly.
[28]
Markman did not reply to this e-mail.29 There still is no contract.
The next day, Thomas sent another e-mail stating:
The email verification is complete.
The below addresses got a complete fail and need your cross
check to your mailing list upon receipt....
Assuming you will do that, the Settlement Agreement and Mutual
Release with the strikeout co-initialed is attached.
The 2 email cross checks and the wire transfer confirmation will
conclude this and there will be no further communication. If
27 Id. at 180(emphasis added).
28 Id. at 168-69, 179(emphasis added).
29 Id. at 169.
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No. 74774-6-1/11
[you] are not going to do the 2 email cross checks as asked please
reply that.mi
Markman did not reply.31 There is no contract.
Later, Thomas e-mailed Markman again, stating:"We are going to
conclude this on this end at 4:30 Eastern Standard Time."32 Markman did not
reply to this e-mail, did not "cross check" the e-mails, and did not validate the
customer list.33 There is no contract.
On October 18, 2015, Thomas sent another e-mail stating:
So there can be no misunderstanding between CDS and MCI
before next week:
1. You returned an executed Settlement Agreement and Mutual
Release on October 15, 2015 with "and will make revisions if errors
are found within 10 days of the wiring of the funds in paragraph 1"
struck out and initialed.
2. You were asked to verify 2 email addresses from the Gemini
customer list against your mailing list the next morning, Friday
October 16, 201[5], at 11:42 ET, or asked to say you would not do
it, and after the verification send a wire confirmation of the
settlement figure to conclude the private settlement option.
3. You neither gave verification, or notice of a good faith attempt to
do so, of the 2 email verification requests, nor did you reply you
were not going to do it, nor did you send a wire confirmation . . . .
4. On October 14, 2015 you stated you would win this dispute in
binding arbitration.
5. If you believe that, agree to it before Tuesday.
30 Id. at 169-70, 186(emphasis added).
31 Id. at 170.
32 Id. at 170, 185.
33 Id. at 170.
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No. 74774-6-1/12
6. Otherwise, double check the 2 email addresses as a courtesy, or
state you are not going to do it, and send the wire confirmation. . ..
If you have no response to any of the above Monday by 1:00 pm
ET we will assume you will not agree to binding arbitration, nor are
opting for the private settlement option.E34]
This document evidences that no contract existed as of its date. The
emphasized language in the above quotation shows this. Moreover, it further
evidences another counteroffer by Thomas to Markman. There is no contract.
The next day, Markman responded: "Let's go to binding arbitration. Let
me know what you propose for place and forum."35 At best, this evidences a
willingness to explore arbitration of the disputes between the parties. Given that
Thomas raised this option in his October 18, 2015 e-mail, it further illustrates that
he did not believe there was a binding contract between the parties. We agree
with this assessment.
Thomas replied that day, stating he would contact the American
Arbitration Association.36 Thomas's later e-mail to Markman stated:
[U]pon examining binding arbitration thoroughly, we would not
agree to it. ... We have an existing executed Settlement
Agreement and Mutual Release making arbitration pointless. I
initialed your change and sent it back in good faith, and the
electronic transmission of such is binding. You can consent to
cross-check the 2 email addresses by your own volition as a
courtesy, but that action is not covered under the agreement and
release.
[37]
34 Id. at 170, 191-92(emphasis added).
35 Id. at 171, 194.
36 Id.
37 Id. at 171-72, 197(emphasis added).
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No. 74774-6-1/13
This reply is curious in that it first raises the claim that an enforceable
settlement agreement then existed. That conflicts with his prior statement
seeking to pursue arbitration. There is no contract.
Markman responded:
You declared the settlement void at 4:30 pm on Friday afternoon,
and then again at 1 pm today.
So there is no settlement as far as I am concerned. You cancelled
it. Twice, actually.
[38]
To summarize, the record shows that Thomas first proposed the terms of
the written settlement agreement when he sent the proposed document to
Markman on October 15, 2015. Markman deleted the portion of paragraph 3
dealing with customer lists. He initialed the change and returned the proposed
document with his counteroffer to Thomas.
The string of e-mails that follows shows that Thomas never agreed to the
counteroffer. In fact, he made several counteroffers of his own. Markman did
not accept them. There never was any objective manifestation of mutual assent
to the material term regarding customer lists. Thus, there never was a contract.
The trial court improperly concluded that the parties had "entered into a
final, complete[,] and signed settlement agreement on October 15, 2015."39
There was no agreement either as of that date or thereafter.
38 Id.
39 Id. at 236.
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No. 74774-6-1/14
CDS unconvincingly asserts in its briefing that the term regarding
customer e-mail addresses was not material to the settlement. But Thomas and
Markman's conduct, as evidenced in their exchange of e-mails, demonstrates the
materiality of this modification to paragraph 3 of the proposed settlement.
Equally unconvincing is the assertion that Florida law requires that the
integration clause in the proposed settlement agreement is "a highly persuasive
statement that the parties intended the agreement to be totally integrated
This argument presupposes a contract, and there is none.
CDS further contends that its acceptance of Markman's modification of the
settlement agreement "concluded the matter." But Thomas never accepted
Markman's counteroffer. Thomas rejected the counteroffer when he responded
with counteroffers of his own, which Markman either never accepted or rejected.
Thus, this argument is without merit.
Finally, for this first time at oral argument of this case in this court, CDS
asserted that there was an abandonment of the term in paragraph 3 of the
proposed settlement agreement regarding customer e-mail addresses. We need
not consider arguments made for the first time at oral argument.41 We decline to
do so in this case.
40 Brief of Respondent at 12-13(quoting Envtl. Servs., Inc. v. Carter, 9 So.
3d 1258, 1265(Fla. Dist. Ct. App. 2009)).
41See Anderson v. Dussault, 181 Wash. 2d 360, 373, 333 P.3d 395 (2014);
RAP 12.1(a).
14
No. 74774-6-1/15
MUTUAL RELEASE
Markman argues that the trial court improperly dismissed MCI's claims.
We agree.
In addition to the settlement agreement, Markman and Thomas signed a
mutual release. The release provided that the parties:
hereby release, and by signing this document hereby discharge,
each other from any and all claims, demands, and causes of action,
whether at law or in equity, known or unknown, which either Party
has against the other as of the date hereof or arising in the future
based upon, arising out of, or related to the Gemini business,
excepting only claims arising from a breach of the Settlement
Agreement executed contemporaneously with this Mutual
Release.421
The settlement agreement dated the same date as the mutual release
also stated: "This document, together with the attached Mutual Release, is the
entire Agreement of the Parties relating to the termination of the Gemini
business. All prior negotiations are merged into this Agreement."43
Below, MCI asserted a breach of contract counterclaim and a third party
claim against CDS,Thomas, and Treadstone for contract breach. It appears the
trial court dismissed these claims on the mistaken basis that the settlement and
release were both valid. They are not. The plain language of the documents
show that the release is only effective if the settlement agreement is valid.
Because the settlement agreement is not an enforceable contract, the release is
not effective. Accordingly, we vacate the decision dismissing MCI's claims.
42 Clerk's Papers at 37(emphasis added).
43 Id. at 36(emphasis added).
15
No. 74774-6-1/16
OTHER MATTERS
We need not address whether the trial court abused its discretion by not
conducting an evidentiary hearing before granting the motion to enforce the
settlement agreement. The argument that the trial court improperly entered the
judgment in favor of CDS because it lacked the capacity to commence this suit is
also unnecessary to decide. We need not address whether the trial court
improperly entered a judgment against Ellen Markman, Markman's wife. Lastly,
we also need not address whether the trial court improperly awarded
prejudgment interest, costs, and attorney fees to CDS. These issues are now
moot.
We reverse the Judgment, the Order Granting Plaintiff's Motion to Enforce
Settlement, and the Order Denying the Motion for Reconsideration. Although it is
not in the record on appeal, we also vacate the decision dismissing MCI's
counterclaim and third party complaint.
Zgx ,
WE CONCUR:
16