Covves, LLC v. Target Brands, Inc.

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS JAN 21 2022
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
COVVES, LLC, No. 21-55077
Plaintiff-Appellant, D.C. No.
2:18-cv-08518-RGK-AFM
v.
TARGET BRANDS, INC., a Minnesota MEMORANDUM*
Corporation; et al.,
Defendants-Appellees,
and
BIGMOUTH INC., an Indiana Corporation;
et al.,
Defendants.
Appeal from the United States District Court
for the Central District of California
R. Gary Klausner, District Judge, Presiding
Submitted January 14, 2022**
Pasadena, California
Before: M. SMITH and OWENS, Circuit Judges, and S. MURPHY, III,*** District
*
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).
Judge.
Appellant Covves, LLC sued Appellee Target and other retailers for patent
infringement; two manufacturers indemnified and defended the retailers. Shortly
before trial, all the parties settled the case.
In their settlement agreement, the manufacturers agreed to fully indemnify
the retailers and pay Covves an undisclosed sum to be made in seven payments.
Covves agreed to dismissal of the action without prejudice and to a dismissal with
prejudice after the manufacturers’ final payment. The parties then filed a “Joint
Stipulation of Voluntary Dismissal Without Prejudice” under Federal Rule of Civil
Procedure 41(a)(1)(A)(ii); in it, the parties requested that the district court retain
jurisdiction to enforce the settlement agreement. The district court did not issue
any order subsequent to the filing of stipulation.
Ten months later, Covves moved for relief from the joint stipulation.
Covves wanted to reopen the case under the parties’ settlement agreement and
under Civil Rule 60. Covves believed the manufacturers breached the agreement
by failing to make a timely settlement payment, but the district court denied the
motion. And the district court also denied Covves’s motion for reconsideration.
We review both orders for abuse of discretion. See Keeling v. Sheet Metal
***
The Honorable Stephen Joseph Murphy III, United States District
Judge for the Eastern District of Michigan, sitting by designation.
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Workers Int’l Ass’n, Loc. Union 162, 937 F.2d 408, 410 (9th Cir. 1991) (decision
to vacate a dismissal); Bateman v. U.S. Postal Serv., 231 F.3d 1220, 1223 (9th Cir.
2000) (Rule 60(b) motion denial); Bliesner v. Commc’n Workers of Am., 464 F.3d
910, 915 (9th Cir. 2006) (motion for reconsideration denial). “A district court
abuses its discretion if it does not apply the correct law or if it rests its decision on
a clearly erroneous finding of material fact.” Bateman, 231 F.3d at 1223 (citation
omitted).
The district court did not abuse its discretion when it denied the motion to
reopen. A district court lacks jurisdiction to enforce a settlement agreement that is
the basis for a dismissal unless the court expressly incorporates the terms of the
settlement agreement in an order to dismiss the case. See Kokkonen v. Guardian
Life Ins. Co. of Am., 511 U.S. 375, 378–81 (1994). A district court will therefore
have jurisdiction only if it expressly retains jurisdiction over a case after
settlement, or if a violation of the court’s order arises. “The settlement terms must
be part of the dismissal . . . for violation of the settlement agreement to amount to a
violation of the court’s order.” O’Connor v. Colvin, 70 F.3d 530, 532 (9th Cir.
1995) (citing Kokkonen, 511 U.S. at 381). Because the district court did not issue
an order that reserved jurisdiction over the case or incorporated the settlement
terms, it did not retain jurisdiction after the dismissal. Without a dismissal order
incorporating the settlement terms, “enforcement of the settlement agreement is for
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state courts, unless there is some independent basis for federal jurisdiction.”
Kokkenon, 511 U.S. at 376, 381–82 (holding that even though the parties to the
principal breach of contract suit were diverse, the district court did not have
“automatic jurisdiction” over the alleged breach of the settlement agreement).
The district court did not abuse its discretion when it refused to vacate the
dismissal under Civil Rule 60(b)(6). “Generally, only ‘extraordinary
circumstances’ justify relief under the rule.” Keeling, 937 F.2d at 410 (citation
omitted). A district court must find that events leading to a settlement agreement’s
repudiation were “sufficiently extraordinary” to reopen a case. Id. (finding that
based on “specific acts,” the repudiation was “perceived as bad faith
noncompliance”). Repudiation alone is not an extraordinary circumstance
warranting Rule 60(b)(6) relief. See id. at 410. Indeed, “[i]n the usual course upon
repudiation of a settlement agreement, the frustrated party may sue anew for
breach of the agreement and may not . . . reopen the underlying litigation after
dismissal.” Id.The district court did not find that the manufacturers acted in bad faith or
that any other extraordinary circumstances warranted reopening the case. Because
Covves argued only that repudiation triggered Rule 60(b)(6) relief, the district
court did not abuse its discretion when it rejected the argument.
As for the motion for reconsideration, Covves appealed only the district
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court’s finding that no extraordinary circumstances existed to support Rule
60(b)(6) relief. The district court found that it properly denied Rule 60(b)(6) relief
given that Covves was not prevented from enforcing the settlement in a new
lawsuit. That finding was not an abuse of discretion because no circumstances
were beyond Covves’s control that “prevented or rendered [Covves] unable to
prosecute[ its] case[].” Cmty. Dental Servs. v. Tani, 282 F.3d 1164, 1168 (9th Cir.
2002) (citation omitted).
Last, the district court did not err in finding that Target’s opposition to the
motion to reopen the case was not evidence of bad faith. Target raised meritorious
defenses in a lawsuit against it, and so the district court's finding that Target did
not act in bad faith was not clearly erroneous.
The district court’s orders on appeal are AFFIRMED.
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