Court Opinion

ID: 4688685
Source: CourtListenerOpinion
Date Created: 2021-05-20 18:02:20.542455+00
Date Added: 2024-06-11T08:04:49.184391
License: Public Domain

Filed 5/20/21 Vasquez v. Jameson Management CA4/1
                 NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                 DIVISION ONE

                                         STATE OF CALIFORNIA

 JUAN CARLOS VASQUEZ,                                                 D077598

           Plaintiff and Respondent,

           v.                                                         (Super. Ct. No. 37-2016-
                                                                      00011352-CU-WT-NC)
 JAMESON MANAGEMENT, INC.,

           Defendant and Appellant.

         APPEAL from a judgment of the Superior Court of San Diego County,
Jacqueline M. Stern, Judge. Reversed.
         Law Offices of Price K. Kent and Price K. Kent, for Defendant and
Appellant.
         Pairavi Law, Edwin Pairavi, and Joshua M. Mohrsaz, for Plaintiff and
Respondent.
                              INTRODUCTION
      Juan Carlos Vasquez sued his former employer, Jameson Management,
Inc. (Jameson), for discriminating against him as a disabled employee and for

wrongful termination. Following two lapsed Code of Civil Procedure1
section 998 offers and at least one trial continuance, and faced with
bankruptcy should it lose at trial, Jameson made a preliminary written offer
to settle the matter for $10,000. After several communications back and
forth between the parties’ attorneys, Jameson and Vasquez each signed a
letter indicating they had reached terms of a settlement and would be
drafting a formal settlement agreement that would be subject to
section 664.6. But when Jameson supplied a formal written agreement for
execution a few days later, Vasquez refused to sign it, explaining that it
included an allocation of attorney fees, a term to which Vasquez had not
agreed. Jameson disagreed, claiming its counteroffer was inclusive of
attorney fees, and it asked Vasquez to sign the formal agreement. After
several months passed, Vasquez filed a motion to enforce the letter
agreement pursuant to section 664.6, along with a motion for attorney fees
and costs in the amount of $222,230 and $12,144.45 respectively. The trial
court determined the parties had reached an agreement and entered
judgment in favor of Vasquez, awarding $77,980 in attorney fees and
$12,144.45 in costs.
      Jameson appeals the entry of judgment, contending the court erred by
enforcing an agreement that was inclusive of attorney fees and costs as one
excluding them. Jameson also contends that the attorney fees and costs were
a material term of the agreement to which the parties assented because they

1    Further section references are to the Code of Civil Procedure unless
otherwise specified.
                                       2
were included in the agreement by operation of the release provided for by
the Civil Code section 1542 waiver and that the judgment here erroneously
omits material terms.
      We conclude that the parties did not enter an enforceable contract
because they did not mutually assent to all material terms, and we will
reverse the judgment on that basis. Because we conclude the parties did not
form a contract, we do not reach any conclusion regarding whether the
agreement to include a Civil Code section 1542 waiver precludes a party from
seeking attorney fees separately, and we need not address the remaining
concerns regarding the language of the judgment.
                  BACKGROUND AND PROCEDURAL FACTS
      In April 2016, Vasquez sued Jameson for wrongful termination and
disability discrimination, alleging Jameson failed to provide Vasquez with a
reasonable accommodation or to engage in the interactive process, in
violation of the Fair Employment and Housing Act (FEHA) (Gov. Code,
§ 12940 et seq.).
      Following a settlement conference in September 2017, Jameson’s
attorney, Price K. Kent, notified Vasquez’s attorney, Edwin Pairavi, in the
presence of Jameson’s president and owner, James Brewster, that Jameson
would never make an offer of settlement that did not include attorney fees
and costs. In October 2017, Vasquez made a section 998 settlement offer for
$25,001 that did not mention attorney fees or costs. Jameson allowed the
offer to lapse.
      In November 2018, Vasquez made a second section 998 settlement
offer, this one for $49,001 and inclusive of attorney fees and costs. Jameson
again allowed the offer to lapse.

                                      3
      Trial was scheduled for March 1, 2019. On February 14, 2019,
Jameson made a written offer to settle for $10,000, to be paid in five monthly
installments to Vasquez’s attorney’s trust account, in exchange for a full
release of Vasquez’s claims, including a Civil Code section 1542 waiver,
dismissal with prejudice, and execution of a formal settlement agreement,
which would include confidentiality and tax indemnification provisions.
Pairavi told Kent that Jameson needed to sign the offer before he would
present it to Vasquez. Kent explained she had signed the “preliminary offer”
on behalf of Jameson and would prepare a final settlement agreement upon
its acceptance.
      Later that evening, Kent emailed Pairavi a modified offer letter that
added a statement: “The settlement agreement will be binding and
enforceable pursuant to Code of Civil Procedure section 664.6.”
      On February 20, 2019, Pairavi emailed Kent and explained that
Vasquez insisted on Jameson’s signature on the offer, after which there was a
“great chance” that Vasquez would accept the offer. Kent responded the next
day, explaining that the parties’ signatures on the settlement offer could not
be enforceable under section 664.6 because that code governed only
settlement agreements, not preliminary offers to settle.
      On February 21, 2019, Pairavi emailed a counteroffer which changed
the settlement amount to $14,000 and left the remaining terms unchanged.
Kent replied with a counteroffer for $12,000. In the offer, Kent explained
that, as the two attorneys had discussed the previous evening, Jameson’s
initial $10,000 offer had reached the limits of Jameson’s financial resources,
and it still required a five-month payment plan to be possible. It continued:
“Such a drain on [Jameson]’s already very limited resources cannot
realistically be sustained for an additional two months . . . .” Jameson’s

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president signed the offer letter below the statement, “This offer is presented
and agreed upon.” Vasquez returned the letter the following day with his
signature below the, “This offer is accepted and agreed upon.” Pairavi also
sent an email stating that because there was a valid agreement, he would file
a notice of settlement with the court, and he asked Kent to send the long
form agreement for his review.
      Four days later, Kent sent the long form settlement agreement to
Pairavi. It contained all the terms mentioned in the $12,000 offer to settle.
It provided for payments to be made payable to both Vasquez and Pairavi’s
law firm. It also stated the settlement amount included attorney fees and
costs. Pairavi told Kent the parties had never discussed attorney fees and
costs, the offer presented and accepted was silent as to fees and costs, and it
asked Kent to remove those terms from the settlement agreement. Kent
disagreed, saying Pairavi’s statements were “simply not true” and asking for
Vasquez’s signature on the settlement and release agreement. Pairavi then
accused Kent of not telling the truth. The parties never reached an
agreement regarding attorney fees, and they never signed a formal
settlement agreement.
      On October 31, 2019, Vasquez filed a motion seeking entry of judgment
under terms outlined in the signed letter. Vasquez argued the parties did not
allocate or release attorney fees and costs, and he was statutorily entitled to
recover attorney fees under section 1032 and Government Code
section 12965(b) because he was a prevailing party in a FEHA matter. He
requested $222,230 in attorney fees plus $12,144.45 in costs.
      Jameson opposed the request, arguing, among other things, that there
was no settlement agreement because there was not a “meeting of the minds
on all material points.” Jameson also asked the court to use its discretion to

                                       5
deny attorney fees because the amount Vasquez requested exceeded what
could have been recovered in a limited civil case. At the hearing, Jameson
argued that the parties had made an agreement to enter a settlement
agreement, but they had not agreed to the settlement terms because the
material terms had not all been determined.
      Whether the parties had explicitly discussed allocation of attorney fees
and costs in the context of the most recent settlement negotiation was
disputed. Kent’s declaration stated that the parties had orally discussed
allocation of fees, costs, and wages to each installment payment before they
signed the agreement. Pairavi’s declaration stated that “[a]t no point during
[the] conversation did [they] discuss whether attorney’s fees or costs were
included in the settlement offer. . . . Ms. Kent’s declaration to the contrary is
an outright fabrication.” Similarly, in an email exchange between the two
shortly after the preliminary negotiations concluded, Pairavi wrote to Kent,
“At no time did we ever discuss attorney fees and costs,” and Kent replied,
“As you are fully aware, your statements . . . are simply not true.”
      The court determined a written settlement agreement was entered
based on the offer letter signed by each party, concluding the lack of a formal,
executed agreement did not negate the existence of a settlement that
contained material terms to which the parties had agreed. The court granted
the request for attorney fees in part, awarding $77,980 in attorney fees and
$12,144.45 in costs, significantly less than the $222,230 sought.
      Judgment was entered February 25, 2020, directing Jameson to pay
Vasquez $12,000 in six monthly installments of $2,000 per month, in addition
to the awarded attorney fees and costs. Jameson timely appealed.

                                        6
                                 DISCUSSION
      Jameson frames the main issue before us as one that concerns the
effect of including a Civil Code section 1542 waiver in a preliminary
agreement. It contends the parties’ mutual assent to that term precludes
Vasquez from separately arguing that the parties did not agree to an
allocation of attorney fees. Vasquez argues attorney fees and costs are
incidental to a judgment and therefore not included in a Civil Code
section 1542 waiver. Thus, the judgment’s exclusion of attorney fees and
costs as part of the settlement amount was consistent with the parties’ letter
agreement. Although the parties have framed the issue as one concerning
the Civil Code section 1542 waiver, at bottom, their dispute is over whether
they reached an agreement regarding attorney fees and costs. Accordingly,
we start by considering whether the allocation of attorney fees and costs was
a material term, the mutual assent to which was necessary to form a
contract, and, if so, whether the parties reached an agreement on that issue.
                      A. Applicable Standard of Review
      “In ruling on a motion to enter judgment[,] the trial court acts as a trier
of fact. It must determine whether the parties entered into a valid and
binding settlement.” (Kohn v. Jaymar-Ruby, Inc. (1994) 23 Cal.App.4th 1530,
1533.) As a finder of fact, the court can “determine whether the parties
reached a binding mutual accord as to the material terms.” (In re Marriage
of Assemi (1994) 7 Cal.4th 896, 905.) On appeal, we determine whether there
is substantial evidence to support the trial court’s section 664.6
determination. (Assemi, at p. 911; Chan v. Lund (2010) 188 Cal.App.4th
1159, 1166.) “ ‘Substantial evidence’ is evidence of ‘ “ponderable legal
significance.” ’ ” (Sasco Electric v. Fair Employment & Housing Com. (2009)
176 Cal.App.4th 532, 535.) “ ‘ “It must be reasonable in nature, credible, and

                                        7
of solid value.” ’ ” (Ibid.) In determining whether substantial evidence
supports a factual finding, we do not isolate only evidence that supports that
finding; nor do we disregard or overturn the court’s findings simply because a
contrary finding would have been equally or more reasonable. (Id. at pp. 535-
536.) However, factual findings based on inferences that cannot fairly be
drawn from the evidence are not supported by substantial evidence.
(Insurance Co. of North America v. Workers’ Comp. Appeals Bd. (1981) 122
Cal.App.3d 905, 910-911.) We review the entire record to determine whether
there is substantial evidence. (People v. Semaan (2007) 42 Cal.4th 79, 88;
Bowers v. Bernards (1984) 150 Cal.App.3d 870, 873-874.)
                             B. Legal Principles
      A settlement agreement is interpreted using the same principles as any
written agreement. (Gouvis Engineering v. Superior Court (1995) 37
Cal.App.4th 642, 649.) For contract formation, there must be parties capable
of forming a contract who consent, the contract must have a lawful object,
and there must be sufficient consideration. (Civ. Code, § 1550; Weddington
Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 811 (Weddington).) The
parties’ consent to a contract must be free, mutual, and communicated by one
to the other. (Civ. Code, § 1565.) For there to be mutual assent, or a meeting
of the minds, the parties must agree on all material terms of the contract.
(Elyaoudayan v. Hoffman (2003) 104 Cal.App.4th 1421, 1430 (Elyaoudayan).)
The lack of mutual consent on all material points prevents contract
formation. (Banner Entertainment, Inc. v. Superior Court (1998) 62
Cal.App.4th 348, 359 (Banner Entertainment); Hines v. Lukes (2008) 167
Cal.App.4th 1174, 1182 (Hines) [“A settlement is enforceable under
section 664.6 only if the parties have agreed to all material settlement
terms”].) If a material term is missing from an agreement, the trial court

                                       8
cannot supply the term to complete the agreement and render it enforceable.
(Leeman v. Adams Extract & Spice, LLC (2015) 236 Cal.App.4th 1367, 1374
(Leeman).)
      In the context of mutual assent, a material term is one that is of such a
nature that it “would affect a person’s decision-making; significant;
essential.” (Black’s Law Dict. (11th ed. 2019) p. 1170, col. 1.) “Whether a
term is ‘essential’ depends on its relative importance to the parties and
whether its absence would make enforcing the remainder of the contract
unfair to either party.” (Copeland v. Baskin Robbins U.S.A. (2002) 96
Cal.App.4th 1251, 1256, fn. 3 (Copeland).)
      In evaluating whether the trial court erred in entering judgment in this
case, we look to the enforceability of the settlement agreement allegedly
reached between the parties, and we evaluate whether a contract was
formed. Because the question of whether a particular term is material
depends on its relative importance, which turns on the intention of the
parties, mutual intent is a factual question. (Coleman Engineering Co. v.
North American Aviation, Inc. (1966) 65 Cal.2d 396, 405; Copeland, supra,
96 Cal.App.4th at p. 1256, fn. 3.) Thus, we review the court’s decision to treat
the contract as exclusive of attorney fees as a finding of fact subject to review
for substantial evidence.
      In general, mutual assent is determined by objective criteria.
(Weddington, supra, 60 Cal.App.4th at p. 811; Harshad & Nasir Corp. v.
Global Sign Systems, Inc. (2017) 14 Cal.App.5th 523, 537.) The test is
whether a reasonable person would conclude from the parties’ outward
conduct that they mutually agreed. (Weddington, at p. 811.) “Evidence as to
the parties’ understanding and intent in taking what actions they did take is
admissible to ascertain when or whether a binding agreement was ever

                                        9
reached.” (Banner Entertainment, supra, 62 Cal.App.4th at p. 358.) Further,
“ ‘ “[w]hether a writing constitutes a final agreement or merely an agreement
to make an agreement depends primarily upon the intention of the
parties.” ’ ” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299,
307; Elyaoudayan, supra, 104 Cal.App.4th at p. 1430.)
                                  C. Analysis
      Substantial evidence does not support a conclusion that the allocation
of attorney fees and costs was immaterial, allowing for a settlement
agreement without their allocation. To the contrary, both parties believed
the allocation of attorney fees and costs was material.
      Before Jameson made its original offer to settle for $10,000, its attorney
Kent told Pairavi that the company would not make any settlement amount
that excluded attorney fees, showing attorney fees were essential to it when
it countered Vasquez’s $14,000 offer. Jameson’s explanation for why it was
not accepting that offer also showed the total cost of settlement was material.
The letter explained that Jameson’s original $10,000 offer had already
“reached the limits of [Jameson]’s resources, thereby requiring a five-month
payment plan to even make such an offer.” Thus, Jameson was
counteroffering $12,000 rather than accepting Vasquez’s request for $14,000
because “[s]uch a drain on [Jameson]’s already very limited resources [could
not] realistically be sustained for an additional two months. . . .” Because
Jameson had already told Vasquez explicitly that any settlement it made
would include attorney fees and its financial resources would be strained to
their maximum with a $12,000 payment over six months, Jameson
understood any settlement amount would include attorney fees, and it
authorized the settlement with the understanding that the amount included
fees and costs. There is no evidence in the record that Jameson considered

                                      10
the payment of attorney fees and costs immaterial; to the extent its silence
regarding those terms in the letter could lead to an inference of
immateriality, such an inference here is not credible or reasonable under
these factual circumstances. Given its financial situation and previous
communications with Vasquez, the evidence supports Jameson’s claim that
under these circumstances, attorney fee allocation was a material term.
      Vasquez argues attorney fees are incident to judgment and may always
be awarded absent an express agreement of the parties, and he argues they
cannot be considered a material term to the parties here as a result.
However, substantial evidence does not support a claim that the allocation of
attorney fees and costs was immaterial here. Instead, the evidence
demonstrates that Vasquez, like Jameson, viewed the allocation of attorney
fees as a term material to settling the matter. Vasquez stated in his
declaration that he was only willing to settle the matter if he would have a
separate opportunity to bring a motion for attorney fees and costs. Pairavi
likewise confirmed that Vasquez would have rejected any offer that stated
explicitly that it was inclusive of attorney fees. Further, the disparity in the
amount offered in settlement, $12,000, as compared to the $234,374.45 that
Pairavi sought in attorney fees and costs suggests the allocation of attorney
fees was an essential consideration, as it was the most costly part of the
dispute.
      Even the court perceived the attorney fees as essential, commenting at
the hearing to continue the trial: “[T]his is all about attorneys’ fees. You all
have told me that. So I understand what’s moving this case.” When Pairavi
responded, “It really isn’t,” the court challenged the comment: “Oh, so
nobody’s going to be asking for fees if they win? Okay. Right.” It is not
entirely clear that Jameson or the court were aware that Pairavi’s firm was

                                       11
representing Vasquez on a contingency fee basis before the motion to enter
judgment. However, it is clear that the parties were aware that significant
attorney fees were at stake, and the court viewed it as an issue motivating
their behavior, further suggesting their allocation was essential.
      Vasquez’s main argument is that settlement agreements silent as to
the allocation of attorney fees are enforceable as agreements excluding them.
Vasquez cites to Folsom v. Butte County Assn. of Governments (1982) 32
Cal.3d 668 (Folsom), where the Supreme Court concluded that the agreement
there, which was silent as to costs and fees, did not prevent a party from
bringing an attorney fees motion under section 1021.5 because in that
situation the question of attorney fees could not be considered until after one
party had prevailed, making it a question separate from their settlement.
(Folsom, at p. 679.) However, there the court considered the facts
surrounding the parties’ settlement agreement and noted there were no facts
to suggest the parties intended to waive the costs and fees, and the
defendants conceded that attorney fees were not considered during
settlement negotiations. (Id. at pp. 680-681.) In contrast, here there are
facts to suggest the defendant intended its offer to be global, as well as facts
indicating the parties had previously discussed or included an allocation of
attorney fees in oral or written communications. There is even evidence,
though it is contradicted, that the parties had addressed attorney fees
verbally in the context of the most recent negotiations.
      Vasquez also cites to Rapp v. Spring Valley Gold Co. (1888) 74 Cal. 532
for the proposition that “a fee waiver must be expressly stated within a
settlement agreement.” In Rapp, the court concluded the attorney fees were
a necessary incident of the judgment in a foreclosure action, and they were
not expressly or by necessary implication excluded by the entered stipulation.

                                       12
(Id. at p. 533.) The court there, like in Folsom, considered the context of the
stipulated judgment in reaching its conclusion, and it noted that the parties
had directly addressed attorney fees during their negotiations, and the
plaintiff’s attorney had informed the defendant and his counsel that he did
not understand that attorneys’ fees were cut off by the stipulation. (Id. at
pp. 534-535.) There, unlike here, the defendant did not challenge the
stipulation or otherwise ask to have it set aside. (Ibid.) Thus, the evidence
there does not show the parties considered attorney fees and costs to be
material, like the facts do here.
      Finally, Vasquez cites to caselaw applying section 998 to conclude that
a settlement agreement silent as to attorney fees must be exclusive of those
fees. (See Ritzenthaler v. Fireside Thrift Co. (2001) 93 Cal.App.4th 986, 990-
991 [concluding attorney fees authorized by Civil Code section 1717 are
available to a party who prevails by a section 998 offer that is silent as to
costs and fees]; Lanyi v. Goldblum (1986) 177 Cal.App.3d 181, 187 [same];
Pazderka v. Caballeros Dimas Alang, Inc. (1998) 62 Cal.App.4th 658, 671
(Pazderka) [enforcing section 998 offer silent as to attorney fees to advance
purpose of statute].) We question the applicability of the rules governing
section 998 offers to the general settlement agreement in this matter because
of the ways rules governing section 998 offers can differ from those that
govern contracts more generally. (See Pazderka, at p. 671 [noting § 998 offers
not always governed by general contract law principles].)
      First, section 998 offers are cost-shifting in order to encourage serious
consideration of the financial consequences of losing at trial and having to
pay fees and costs as a result because “ ‘[i]f the party who prevailed at trial
obtained a judgment less favorable than a pretrial settlement offer submitted
by the other party, then the prevailing party may not recover its own

                                       13
postoffer costs and, moreover, must pay its opponent’s postoffer costs,
including, potentially, expert witness costs.’ ” (Ignacio v. Caracciolo (2016) 2
Cal.App.5th 81, 86 (Ignacio); § 998, subd. (c)(1).) The exclusion of attorney
fees from the calculation of costs where the section 998 offer is silent allows
for a clear comparison between the judgment amount at trial and the offer
amount to assess applicability of the provision. (Chen v. Interinsurance
Exchange of the Automobile Club (2008) 164 Cal.App.4th 117, 121 (Chen); see
also Elite Show Services, Inc. v. Staffpro, Inc. (2004) 119 Cal.App.4th 263,
269 [explaining the comparison is not uncertain when the § 998 offer includes
“reasonable” attorney fees and costs rather than a specific amount when
there is a mechanism for determining the amount of attorney fees
allowable].) The parties were acutely aware of the financial consequences of
losing at trial and had contemplated them in negotiating the settlement
because each considered those details material to their decision-making.
      Further, section 998 offers differ from other types of settlement
agreements because section 998 offers limit the release of claims and parties
to those involved in the litigation. (Ignacio, supra, 2 Cal.App.5th at pp. 86-
87, quoting McKenzie v. Ford Motor Co. (2015) 238 Cal.App.4th 695, 706.)
When a settlement offer includes terms or conditions different from those
pending in litigation, it makes it difficult to determine the value of the offer.
(Chen, supra, 164 Cal.App.4th at pp. 121-122.) Thus, an offer under
section 998 that includes any ambiguity regarding the specific claims covered

beyond the present litigation renders the offer invalid.2 (Chen, at p. 122,
fn. 5.) Accordingly, when a Civil Code section 1542 release is included in an

2     We also note that section 998 offers are evaluated under an appellate
court’s independent review, not under a substantial evidence standard.
(Chen, supra, 164 Cal.App.4th at p. 122.)
                                        14
offer to compromise, because it waives claims beyond those that may be at
issue in the lawsuit, it invalidates a section 998 offer. (Ignacio, at p. 88.) The
same rule does not apply to a settlement agreement like the one before us,
where the parties had the flexibility to independently determine the value of
the Civil Code section 1542 waiver.
      We recognize that the allocation of attorney fees is not always a
material term in a settlement agreement, but here the fees and costs were of
significant concern to the parties, and each believed resolution of the issue
was essential to settling the matter. Despite the materiality of the term here,
the trial court determined that a settlement agreement that did not explicitly
include a reference to the allocation of attorney fees demonstrated mutual
assent and was enforceable. However, because the attorney fees were a
material issue, the absence of any reference to them in the letter means the
parties did not form an enforceable agreement, as there was no meeting of
the minds on all material terms. (See Leeman, supra, 236 Cal.App.4th at
p. 1374.) And it was improper for the trial court to supply the missing,
material term in order to enter judgment. (See Banner Entertainment, supra,
62 Cal.App.4th at p. 359; Hines, supra, 167 Cal.App.4th at p. 1182.)
      In reaching our decision here, we do not conclude that silence regarding
attorney fees in a settlement agreement necessarily negates contract
formation. Nor do we conclude that attorney fees are always a material term.
We merely find that under the circumstances before us, the parties
considered the attorney fees a material term, the allocation of which did not
achieve mutual assent. Accordingly, no contract was formed.
      Jameson makes several other arguments for why the judgment should
be reversed. Having concluded that attorney fees and costs were a material

                                       15
term to which the parties did not agree, we do not reach the remaining
issues.
                               DISPOSITION
      We reverse the judgment and remand the matter to its status quo ante.
Parties to bear their own costs on appeal.

                                                    HUFFMAN, Acting P. J.

WE CONCUR:

HALLER, J.

DO, J.

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