Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-03875/USCOURTS-cand-3_04-cv-03875-6/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

TRAVELERS CASUALTY & SURETY

COMPANY, formerly known as THE AETNA

CASUALTY AND SURETY COMPANY,

Plaintiff,

 v.

INSURANCE COMPANY OF THE STATE

OF PENNSYLVANIA, NATIONAL UNION

FIRE INSURANCE COMPANY OF

PITTSBURGH, PA., and DOES 1 through 10,

Defendants. /

No. C 04-03875 WHA

ORDER DENYING MOTION 

FOR RECONSIDERATION

INTRODUCTION

In this dispute between insurance carriers defendants Insurance Company of the State of

Pennsylvania (“ISOP”) and National Union Fire Insurance Company of Pittsburgh, PA move

for reconsideration of this Court’s order denying defendants’ motion to enforce a settlement

agreement under FRCP 60(b)(1) and 60(b)(6). Because defendants’ motion is both procedurally

and substantively inadequate, their motion is DENIED.

STATEMENT

This matter revolves around a previous settlement in a construction lawsuit in San

Francisco Superior Court, entitled Board of Trustees of the California State University v. Perini

Case 3:04-cv-03875-WHA Document 87 Filed 01/19/06 Page 1 of 4
United States District Court

For the Northern District of California

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Building Company, et. al., Case No. 304093. The parties to the above-captioned action are

insurers that together contributed $16.25 million to that settlement, with plaintiff Travelers

Casualty & Surety Company paying $12 million and National Union paying $4.25 million. 

On September 23, 2005, the Court denied the parties’ cross-motions to enforce a

proposed settlement agreement. The parties had participated in a mediation session at JAMS in

Los Angeles, California, at which time this “settlement” was reached. Immediately following

the mediation session, a hand-written memorandum was prepared by counsel for Travelers. The

memorandum was signed by representatives of each side. The parties agreed to prepare a typewritten agreement based on the terms of this memorandum.

One of the six terms in the memorandum was that defendants had “to provide

confirmation of payment of 4,250,000.00 towards the underlying action settlement” (Llaneta

Decl. Exh. 1). A disagreement about this term arose, however, after Travelers provided

defendants with a typed draft codifying the memorandum. The parties became aware that they

differed as to what defendants had to do to “provide confirmation” that they already paid $4.25

million pursuant to the settlement of the state-court action. Defendants argued that the

confirmation term simply required them to provide plaintiff with a receipt for payment. 

Plaintiff, on the other hand, maintained that the term required defendants to provide proof of

their net payment toward the state-court settlement. Plaintiffs thus contended that, in addition

to a check receipt, defendants needed to produce reports demonstrating that no other policies

had contributed to defendants’ $4.25 million payment. 

Both sides moved to have the Court enforce the settlement memorandum consistently

with their respective views of the confirmation term. The September order denied the parties’

cross-motions, declining to enforce an incomplete settlement agreement. The September order

did, however, allow plaintiff to dismiss with prejudice its first two causes of action, in exchange

for the right to retain the funds in a trust containing accrued fees and costs totaling $519,502.69. 

Defendants seek reconsideration of the September order. 

Case 3:04-cv-03875-WHA Document 87 Filed 01/19/06 Page 2 of 4
United States District Court

For the Northern District of California

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ANALYSIS

FRCP 60(b)(1) provides that a court may relieve a party from an order for “mistake,

inadvertence, surprise, or excusable neglect.” FRCP 60(b)(6) allows such relief for “any other

reason justifying relief from the operation of the judgment.” This latter catch-all provision “has

been used sparingly as an equitable remedy to prevent manifest injustice.” United States v.

Alpine Land & Reservoir Co., 984 F.2d 1047, 1049 (9th Cir. 1993). “The rule is to be utilized

only where extraordinary circumstances prevented a party from taking timely action to prevent

or correct an erroneous judgment.” Ibid.

As an initial matter, defendants’ motion fails for non-compliance with Local Rule 7-

9(a). This rule dictates that “[n]o party may notice a motion for reconsideration without first

obtaining leave of Court to file the motion.” Defendants did not do so.

Even overlooking this deficiency, defendants’ motion is insufficient. Defendants have

not identified any mistake, inadvertence, surprise, or excusable neglect in the September order. 

Instead defendants cite the same case law from their initial motion to enforce, articulating

principles of contract law in California. Re-reading this case law does not provide further

rationale for enforcing an illusory agreement lacking in mutual assent to material terms and

lacking in intent to constitute final agreement. As explained in the September order, courts may

enforce only complete settlement agreements. See Callie v. Near, 829 F.2d 888, 890–91 (9th

Cir. 1987).

Defendants also argue that the Court erred in failing to grant an evidentiary hearing to

resolve the initial cross-motions, relying on Callie, supra. Defendants argue that the distinction

between enforcing a settlement agreement where a material dispute in terms exists, as happened

in Callie, and denying enforcement because a material dispute exists, as happened here, lacks

analytical significance. This order disagrees. The fact that no meeting of the minds occurred

was a sufficient ground to deny enforcement. Callie does stand for the proposition that courts

must conduct evidentiary hearings to help parties settle cases, but rather “for the unremarkable

proposition that ‘the district court may enforce only complete settlement agreements.’” Doi v.

Halekulani Corp., 276 F.3d 1131, 1138 (9th Cir. 2002)(quoting Callie, 829 F.2d at 890).

Case 3:04-cv-03875-WHA Document 87 Filed 01/19/06 Page 3 of 4
United States District Court

For the Northern District of California

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Defendants also argue that the Court should not have permitted plaintiff to retain

$519,502.69 in fees and costs from the trust account. Plaintiff retained this amount in exchange

for dismissal with prejudice of plaintiff’s first two causes of action pursuant to agreement of the

two parties. As to this contention, however, defendants provide no authority that the Court

could not affirm an unambiguous portion of the parties’ agreement while finding that the overall

agreement lacked effect. 

 Defendants also have not demonstrated any manifest injustice warranting relief under

FRCP 60(b)(6). Defendants contend that following the September order, they complied with

the terms of the “agreement” as interpreted by plaintiff. Defendants allegedly so complied by

providing reports indicating that no contribution for the $4.25 million payment was received. 

According to defendants, plaintiff should be estopped from not living by the terms of the

agreement as interpreted by plaintiff in its earlier cross-motion to enforce. Defendants’

argument is akin to crying over spilled milk. Plaintiffs are not estopped from backing out of a

proposed settlement that was never effectuated. Settlement is the byproduct of a compromise

by the parties. If a proposed settlement falls through, as it did here, both parties may return to

their pre-compromise postures. 

CONCLUSION

For the foregoing reasons, defendants’ motion for reconsideration is DENIED.

IT IS SO ORDERED.

Dated: January 19, 2006 WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

Case 3:04-cv-03875-WHA Document 87 Filed 01/19/06 Page 4 of 4