Court Opinion

ID: 4553699
Source: CourtListenerOpinion
Date Created: 2020-08-06 20:00:36.836622+00
Date Added: 2024-06-11T09:25:52.120234
License: Public Domain

NOT FOR PUBLICATION                            FILED
                    UNITED STATES COURT OF APPEALS                         AUG 6 2020
                                                                       MOLLY C. DWYER, CLERK
                                                                        U.S. COURT OF APPEALS
                            FOR THE NINTH CIRCUIT

    VACC, INC.,                                  No. 19-15928

                     Plaintiff-Appellant,        D.C. No. 3:18-cv-03454

          v.

    JON DAVIS,                                   MEMORANDUM*

                     Defendant-Appellee.

                   Appeal from the United States District Court
                      for the Northern District of California
                   Joseph C. Spero, Magistrate Judge, Presiding

                        Submitted and Argued July 16, 2020
                            San Francisco, California

Before: LEE and BUMATAY, Circuit Judges, and SILVER,** District Judge.

      VACC, Inc. appeals the district court’s order granting Jon Davis’s motion to

dismiss. We review de novo and affirm.

      VACC sued Davis for claims related to patent violations and trade secrets

theft. After a series of negotiations, the parties agreed that they would meet at a

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The Honorable Roslyn O. Silver, United States District Judge for the
District of Arizona, sitting by designation.
final settlement conference, “read the settlement terms into the record,” and “then

enter into a formal written settlement agreement,” to be drafted by Davis for

VACC’s review.

      Prior to the final settlement conference, Ahmad Bayat, VACC’s President,

repeatedly asked VACC’s attorneys to make sure that Davis represented in the

agreement that he had not taken VACC’s proprietary information (“representation

clause”). VACC’s attorneys assured Bayat that the representation clause would be

included in the eventual written agreement, but VACC’s attorneys never notified

Davis about this term.

      At the telephonic settlement conference before the magistrate judge, the

parties agreed to the following:

      THE COURT: Okay, I'm going to go through the terms. [The Court
      read the confidential terms of the parties’ settlement into the record,
      which did not include the representation clause.] And so let me start
      with plaintiff. We’ll start with plaintiff’s counsel. Is that your
      understanding of the settlement terms?1

      [VACC’S COUNSEL]: [. . .] [Y]es, it is.

      THE COURT: Thank you, and plaintiff himself, can you also state that
      you approve of this?

      MR. BAYAT: Yes.

      THE COURT: Thank you, and how about for defense counsel?

      1
          To the extent this paragraph incorporates sealed material, we unseal it.

                                            2
      [DAVIS’S COUNSEL]: Yes, we agree those are the terms of the
      settlement. I will note we also agreed that you would retain jurisdiction
      and the Northern District would retain jurisdiction over this dispute
      . . . and [ ] would moderate the terms of the written agreement.

      THE COURT: Yeah, let me go back to that, then. So on plaintiff’s side,
      do you agree that this Court will retain jurisdiction over this settlement
      agreement as stated?

      MR. BAYAT: Yes.

      [VACC’S COUNSEL]: Yes[.]

      Shortly after the conference, the parties entered a joint stipulation stating

that they had settled the matter and that the parties would “prepare a written

settlement agreement, which shall be moderated by [the magistrate judge] in the

event of unresolvable disagreements on its terms.” Based on the stipulation, the

court dismissed the case with prejudice.

      When Davis’s counsel emailed a draft settlement agreement to VACC—

which was no longer represented by counsel—Bayat refused to sign, insisting that

the agreement include the representation clause. Davis’s counsel informed VACC

that they did not believe this term was part of the parties’ settlement, but

nonetheless reiterated that the parties needed to “formalize the terms of the

settlement” in writing as “a required term of settlement that we all read onto the

record.” Further negotiations broke down, and VACC sued again. The district

court dismissed VACC’s suit in full. This appeal followed.

      1. VACC contends that the oral settlement was an unenforceable “agreement

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to agree” because its terms were only “preliminary” and a written settlement was

required to finalize the agreement. We disagree.

      Under California law, contract formation requires the “mutual consent” of

the parties. Bustamante v. Intuit, Inc., 45 Cal. Rptr. 3d 692, 698–99 (Ct. App.

2006). “Mutual consent is determined under an objective standard applied to the

outward manifestations or expressions of the parties, i.e., the reasonable meaning

of their words and acts, and not their unexpressed intentions or understandings.”

Bustamante, 45 Cal. Rptr. 3d at 699.

      California permits an oral agreement to give rise to a binding contract.

Kreling v. Walsh, 176 P.2d 965, 973 (Cal. Dist. Ct. App. 1947). “[I]f the

respective parties orally agreed upon all of the terms and conditions of a proposed

written agreement with the mutual intention that the oral agreement should

thereupon become binding, the mere fact that a formal written agreement to the

same effect has not yet been signed does not alter the binding validity of the oral

agreement.” Banner Entm’t, Inc. v. Superior Court, 72 Cal. Rptr. 2d 598, 604 (Ct.

App. 1998). On the other hand, no binding oral agreement exists if “the parties

understood that the proposed agreement [was] not complete until reduced to formal

writing and signed.” Khajavi v. Feather River Anesthesia Med. Grp., 100 Cal.

Rptr. 2d 627, 648 (Ct. App. 2000) (quoting Louis Lesser Enters., Ltd. v. Roeder, 25
Cal. Rptr. 917, 919 (Dist. Ct. App. 1962)).

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      Here, all of VACC’s outward manifestations indicated assent to the terms of

the oral settlement as expressed in open court. Bayat, as VACC’s representative,

first affirmed that the “terms” read by the court into the record were his

“understanding of the settlement terms,” and then he indicated he “approve[d]” of

those terms. Finally, Bayat “agree[d] that [the] Court will retain jurisdiction over

th[e] settlement agreement as stated.”

      Even if Bayat subjectively (and reasonably) believed—based on the advice

of counsel—that additional terms could be inserted into the settlement agreement

at a later time, Bayat’s objective words and actions at the settlement conference

demonstrate that a binding agreement was made at that time. Nothing in Bayat’s

outward manifestations suggests an understanding that the oral settlement

agreement would be contingent on the reduction of the agreement to writing. Nor

has VACC alleged that Davis or his attorneys knew of Bayat’s request to add the

representation clause in a follow-up written agreement. Accordingly, no allegation

supports VACC’s contention that the settlement conference was an unenforceable

“agreement to agree.”

      The parties’ statements and actions outside the settlement conference

confirm their intention to be bound by the oral settlement’s terms. Prior to the

conference, the parties agreed to “read the settlement terms into the record,” and

“then enter into a formal written settlement agreement.” The parties’ post-

                                          5
conference stipulation of dismissal states, with apparent finality, that “the Parties

have settled this case pursuant to a confidential settlement agreement.”

Accordingly, we hold that the oral settlement is enforceable notwithstanding the

parties’ subjective beliefs regarding additional terms.2

      Our holding in Doi v. Halekulani Corp., further bolsters our conclusion. 276
F.3d 1131 (9th Cir. 2002). There, the plaintiff agreed to a settlement on the record,

in open court, then later sought to introduce additional terms to the written

document memorializing the settlement. On appeal, we found the settlement

enforceable, id. at 1139, explaining that “[a]ny question as to [plaintiff’s] intent to

be bound was answered when she appeared in open court, listened to the terms of

the agreement placed on the record, and when pressed as to whether she agreed

with the terms, said ‘yeah.’” Id. at 1138. Like here, the parties’ anticipation in Doi

of a future written agreement did not negate the binding nature of the oral

agreement. Id. at 1135.

       Whether Bayat reasonably believed he would have an opportunity to insert

the representation clause in a written agreement based on his attorney’s advice is

not before us today. We only review whether his outward expressions at the

      2
         Although Davis’s lawyers stated that the court would “retain jurisdiction
over this dispute . . . and would moderate the terms of the written agreement,” this
fact, standing alone, indicates only that Davis anticipated a memorialization of the
settlement agreement—not an entirely new settlement.

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settlement conference show that he orally agreed to the settlement’s terms. As in

Doi, we hold that Bayat’s statements in court were sufficient to bind VACC.

While the magistrate judge could have made clearer that the terms as read into the

record were the only terms of the settlement agreement, we hold that the settlement

agreement is enforceable.

      2. VACC also contends that even if the parties entered into an enforceable

agreement, it is entitled to rescission because of a mistake of fact. A party seeking

rescission on a mistake of fact must establish, among other things, that “the effect

of the mistake is such that enforcement of the contract would be unconscionable.”

Donovan v. RRL Corp., 27 P.3d 702, 716 (Cal. 2001) (quoting Restatement

(Second) of Contracts § 153(a) (1981)). Unconscionability involves both

procedural and substantive elements. OTO, L.L.C. v. Kho, 447 P.3d 680, 689–90

(Cal. 2019).

      VACC cannot show either element of unconscionability here. While VACC

claims it was “surprised” by the absence of the representation clause in the

agreement, it does not claim that the term was surreptitiously withheld by Davis or

buried in a footnote, as California law has required to show procedural

unconscionability. See Pinnacle Museum Tower Ass’n. v. Pinnacle Mkt. Dev.

(US), LLC, 282 P.3d 1217, 1232 (Cal. 2012). Substantively, VACC has made no

plausible allegations that the oral settlement’s terms are “unreasonably favorable”

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or that it is the weaker party. See Sonic-Calabasas A, Inc. v. Moreno, 311 P.3d
184, 202 (Cal. 2013). This is, at worst, a “bad bargain,” not an unconscionable

one. Id. Accordingly, we deny VACC’s claim for rescission.

      3. VACC’s final claims seek relief from the settlement order under Federal

Rule of Civil Procedure 60(b)(1) and 60(b)(6). We have previously declined relief

under these provisions where a party’s injury results from erroneous or negligent

legal advice. See Latshaw v. Trainer Wortham & Co., Inc., 452 F.3d 1097, 1101,

1103 (9th Cir. 2006). Bayat’s mistake, if any, was related to the advice of his

attorneys. Accordingly, Bayat’s alleged injury, though possibly actionable under a

malpractice suit, does not warrant Rule 60 relief.

                                        * * *

      VACC made a deal with Davis in open court. VACC had every opportunity

to communicate any unexpressed terms to Davis at that time. Having failed to do

so, we decline to disturb the bargain the parties struck.

      AFFIRMED.

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