Order After Hearing POSCal. Super. - 6th Dist.February 4, 2019SUPERIOR COURT, STATE OF CALIFORNIA COUNTY OF SANTA CLARA DEPARTMENT 20 161 North First Street, San Jose, CA 95113 408.882.2320 ' 408.882.2296 (fax) smanoukian©scscourtorg Supafier 89W EFF ' 999”" 91 san‘sg'au'% httpflwwwscscourtorg WW w-J" "‘- ;V " Osuna, et a1. v. Brager, et a1. CASE NO. 19CV342439 DATE: 02 July 2020 TIME: 9:00 am LINE NUMBER: 5, 6 This matter will be heard by the Honorable Judge Socrates Peter Manoukian in Department 20 in the Old Courthouse, 2nd Floor, 161 Nonh First Street, San Jose. Any party opposing the tentative ruling must call Department 20 at 408.808.6856 and the opposing party no laterthan 4:00 PM on 20 May 2020. Please specify the issue to be contested when calling the Court and Counsel. ORDER 0N MOTIONS TO ENFORCE SETTLEMENT AGREEMENT l. Statement of Facts. Plaintiffs Danie] Osuna and Krystal Summers, individually and doing business as OS Design and Consulting filed a Complaint on February 4, 20201 against Defendants Brian Brager-in his individual capacity and doing business as New Technology Specialists, New Technology Specialists, Inc. (“NTS")-a California Corporation, American Contractors Indemnity Company-a California Corporation, and Does 1-20, forthe foflowing eleven causes of action: Breach of Contract, Breach ofthe Implied Covenant of Good Faith and Fair Dealing, Common Count- Services Rendered, Common Count-Money Had and Received, Account Stated, Open Book Account, Action Against Surety 0n Contractor’s License Bond, Defamation, Intentional Interference with Prospective Economic Advantage, Wage Claim, and Accounting. Prior to June 11, 2019, Plaintiffs Osuna and Summers along with Defendants Bragerand NTS were collectively partners in a construction joint venture. (March 27, 2020 Summers Decl., 112) The parties dissolved their business relationship which lead to the filed Complaint. (Id) On June 11, 201 9, Plaintiffs Daniel Osuna, Krystal Summers, and OS Design and Consulting signed a Settlement Agreement with Defendants New Technology Services, Inc. and Bn'an Eager that followed a mediation that same day before Judge Jamie Jacobs-May (Ret.) in San Jose concerning the disputes from the Complaint. (April 9, 2020 Zink Decl., Ex. A; March 27, 2020 Summers Decl., Ex. 1.) (“Settlement Agreement") This Settlement Agreement included the following provision under paragraph 4: “NTS shall pay 2% late payment penalty on each payment that Is not timely paid." (Id) On March 17, 2020, Plaintiffs and Defendants (Brager and NTS) dually and separately moved to enforce the Settlement Agreement per Code Civ. Proc. § 664.6, which Is the subject of this Orderz. Both parties' moving papers 1 This Department intends to comply with the time requirements of the Trial Court Delay Reduction Act (Government Code, §§ 68600-68620). The California Rules of Court state that the goal 0f each trial court should be t0 manage limited and unlimited civil cases from filing so that 100 percent are disposed ofwlthin 24 months. (Ca. St. Civil Rules of Court, Rule 3.714(b)(1)(C) and(b)(2)(C) 2 The Court's Order consolidates the arguments and requests for relief from the respective parties' moving papers. 21 May 2020 ORDER ON MOTIONS TO Page 1 of 1 ENFORCE SETTLEMENT AGREEMENT seek the Court to enter a judgment to enforce the terms of the Settlement Agreement, but also for relief based on the parties‘ pen‘onnance after the Settlement Agreement‘s signing, as well as seek jurisdiction to enforce the settlement. ll. Analysis. Code 0f Civ. Proc. § 664.6 states in full: If parties to pending litigation stipulate, in a writing signed by the parties outside the presence 0f the court 0r orally before the court, for settlement 0f the case, 0r pan thereof, the court, upon motion, may enterjudgment pursuant t0 the terms 0f the settlement. If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement. When ruling on a Code Civ. Proc. § 664.6 motion forentry ofjudgment based 0n the parties' stipulation for settlement 0f the case, the Court must determine whether the parties entered into a valid and binding settlement. (Bowers v Raymond J. Lucia C08,, Inc. (2012) 206 Ca].App.4th 724, 732.) Tn'al judges may consider oral testimony or may determine the motion upon declarations alone. (Fiore v. Alvord (1985) 182 Cai. App. 3d 561, 563.) A settlement agreement is a contract, and the legal principles applicable to contracts generally apply to settlement agreements. (Monster Energy Co. v Schechter (2019) T GaLSth 781, 789 [ruiing that the in the absence 0f fraud, mistake, or any other vItiating factor, a party's signature on a written agreement is the party‘s objective manifestation of assent to the terms set forth In the agreement1.) Whether 0r not to enter ajudgment based on the panies' settlement agreement is within the judge's discretion. (Califomia State Auto. Ass'n Inter-Ins. Bureau v Superior Court (1990) 50 Cal.3d 658, 663-664 [“the court cannot surrender its duty to see that thejudgment to be entered is a just one, nor i5 the court to act as a mere puppet in the mattef‘]. The court may resolve reasonable disputes over terms of settlement agreement but may not modify terms from what was agreed to by parties. (Machado v. Myers (2019) 39 Cal.App.5th 779, 795-796.) The Court may reject a stipulation that contravenes public policy orthat incorporates an erroneous rule of law. (Id. at 664.) The Court may also not enforce an illegal liquidated damages provision in a settlement agreement. (Red & White Distribution, LLC v. Osferoid Enters., LLC (2019) 38 Cal.App.5th 582, 588-590 [ruling that a liquidated damages provision will generally be considered unreasonable and therefore unenforceable under Civ. Code§ 1671 when it does not bear a reasonable relationship to range 0f actual damages that panies coUId have anticipated would result from a breach“ While the Court does find that the parties entered into a binding settlement agreement, the Court exercises its judgment not to enterjudgment pursuant to the settlement agreement under Code Civ. Proc. § 664.6 because the Court has no power t0 modify the terms of the agreement that contravenes public policy 0r incorporates an erroneous rule of law, which here specifically concerns the provision requiring a 2% late fee penalty that the Court concludes is unenforceable underthe briefed circumstances. A. Court has Discretion to Enter Judgment Because Parties’ Signatures Manifested an Intent to be Bound by the Outside-of-Court Written Settlement Agreement. Based on declarations from Defendants' counsel and Plaintiff Summers, the Court finds that the Parties entered into a binding agreement memorialized in writing by the Settlement Agreement t0 settle the disputes raised by allegations in the Complaint. Actual parties Daniel Osuna, Krystal Summers, OS Design and Consulting. New Technology Services, 1nc., and Brian Bager signed the SefllementAgreement outside the presence of this Court foilowing a mediation with the Honorable Jamie Jacobs-May (Ret) in San Jose. The underlying Complaint of this matter has not yet been dismissed, meaning litigation is still pending. The Court ruies that it has the discretion pursuant to Code. Civ. Proc. § 664.6 to enterjudgment pursuant t0 the terms of the settlement. 21 May 2020 ORDER ON MOTIONS TO Page 1 of 1 ENFORCE SETTLEMENT AGREEMENT B. Because Plaintiffs Do Not Refute Defendants' Argument that the Late Fee Penalty is an Unenforceable Under the Law, the Court Will Apply its Discretion to Deny Both Motions Because the Court Cannot Modify the Terms ofthe Agreement. Citing Ridgley v. Topa Thn‘fz‘ & Loan Assn. (1998) 17 Cal.4th 970 and Grand Prospect Partners, LP v. Ross Dress for Less, inc. (2015) 232 Cal.App.4th 1332, Defendant argues that the 2% late fee penalty from the Settlement Agreement is an unenforceable penalty under law because it bears no reasonable relationship to the range of ham suffered by Plaintiffs. Plaintiffs do not refute this argument in their moving papers, and otherwise provide no legal authority or extrinsic evidence to support the validity of the provision. Accordingly, the Court is unable t0 make a finding that this provision was contemplated by the Parties at the time of contracting t0 have a reasonable relationship 0f the range of actual damages that parties couid have anticipated woutd result from a breach. Defendant argues that the amount 0f and the timing of the payments received, which obligated a timely response to account for and submit payment t0 Plaintiffs, was unknown at the time of contracting, thus making it impossible t0 quantify or qualify how 2% would be applicabIe under circumstances. Defendants also argue under the specific application of these facts is that the three-day detay constituted a flat percentage 0f the total payment amount not proportional to the harm received by the Plaintiffs. Additionally, Defendants argue that the delay was excused because they followed the protocol established by the Parties to use a neutral accountant before making payment, and thus alleges Plaintiffs opportunistically raises untimeliness to support the application of the 2% late payment penalty. In their moving papers, Plaintiffs only reference that a late fee applies under the Settlement Agreement. Taken literally, the provision is understood by both parties as a penalty, which, if unreasonable, is void by California law3. Arguments 0f performance based on facts presented d0 raise concems that the 2% late payment penalty does not bear a reasonable relationship to range of actual damages that parties could have anticipated would result from a breach. Assuming that a payment had been made timely to Plaintiffs but was disputed as incorrect before being approved by the neutral accountant within the five-day grace period, one could effectively argue under the language of the Settlement Agreement that 2% applies to the entire payment amount rather than the difference after applying the pn'ncipal payment. The Court does not suggest this is what Plaintiffs would do, but merely finds an interpretation 0f the contract language to support a finding of vagueness. Thus, given the vague application 0f the 2% late fee penalty underthe text 0f the Settlement Agreement, and the lack 0f extrinsic evidence, the Court is unable to conclude from the moving papers and declarations submitted that the provision is enforceable under law. The Court notes that the traditional applicable of legal interest would represent a reasonable relationship to untimely payments. Although Defendant cites the opportunity t0 sever the 2% late fee penalty provision from the agreement t0 effectuate enforcement, the Court is unable t0 modify the terms from what was agreed t0 by the parties. (See Machado v. Myers, supra.) As a result, the Court will exercise its discretion to deny entering judgment pursuant to the terms of the Settlement Agreement. Since the underiying Settlement Agreement is central to both Motions, the Court accordingly denies both Motionsfi C. The Request to Retain Jurisdiction is Denied Because It is Not Code-Compliant. The request for retention ofjun'sdict'lon must conform t0 the same three requirements that the legislature and the courts have deemed necessary for Code Civ. Proc. § 664.6 enforcement of the settlement itself. (Wackeen v. Mail's (2002) 97 Cal.App.4th 429, 440.) The request must be made: (1) during the pendency of the case and not after 3 Ridgfey v. Topa Thn’ft & Loan Ass’n (1998) 17 Cal.4th 970, 982‘ 4The statutory procedure for enforcing settlement agreements under § 664.6 is not exclusive. Alternative procedures are a motion for summaryjudgment. a separate suit in equity, or an amendment to the pleadings in this action. (Levy v. Superior Court (1995) 10 Ca|.4th 578, 586, fn.5.) 21 May 2020 ORDER ON MOTIONS TO Page 1 of 1 ENFORCE SETTLEMENT AGREEMENT the case has been dismissed in Its entirety, (2) by the parties themselves, and (3) either in a writing the parties have signed or orally before the court. (Id) The Court is unable t0 retainjun'sdiction under Code Civ. Proc. §664.6 because the Parties' counsel, and notthe parties themselves, have requested such jurisdiction through their moving papers, which itself is also an inappropriate mechanism. The Parties themselves must request the appropfiatejurisdiction in writing ororally before the court5 Ill. The Tentative Ruling. This Coun posted the following tentative ruling: The Court DENIES Plaintiffs' Motion to Enforce Judgment because the Court cannot enforce an illegal liquidated damages provision in a settlement agreement and lacks the power to modify the terms of the Settlement Agreement. The Court DENIES Defendants” Motion to Enforce Judgment because the Court cannot enforce an illegal liquidated damages provision in a settlement agreement and lacks the power to modify the terms of the Settlement Agreement. The Court DENIES both Panies' respective request to retain jurisdiction t0 enforce the Settlement Agreement because these requests were not code-compliant. The Court is amenable to setting a future hearing date for the parties to submit additional briefing regarding evidentiary issues orto modify the terms of the Settlement Agreement on the record, as weEl as to effectuate a code- compliant stipulation t0 maintain jun'sdiction accordingly. The Court believes that parties would be served well by an additional mediation with a neutral on the factual issues before funher court proceedings. IV. Hearing on the Motion. Ms. Cannistraci appeared at the hearing 0n this motion via Court Call and advise that the matter had been resolved. She asked for a date out'In 60 days. The Coun set 3 September 2020 at 9:00 AM -- Q. minis: ‘9 DAT D (‘ flfifi‘ik (I 1 5The parties can file“a stipulation and proposed order either attaching a copy of the settlement Cg menmnWvuém that the trial court retain jurisdiction under section 664.6 or a stipulation and proposed order signed by the pa noting the settlement and requesting that the trial court retain jurisdiction under section 664 6.“ (Mesa RHF Paduers, L.P v City ofLos Angeles (2019) 33 Cal.App.5th 913, 916-919 [“The process need not be complex. But strict compliance demands that the process be followed"].) 21 May 2020 ORDER ON MOTIONS TO Page 1 of 1 ENFORCE SETTLEMENT AGREEMENT SUPERIOR COURT OF CALIFORNIA COUNTY 0F SANTA CLARA DOWNTOWN COURTHOUSE I91 NORTH FIRST STREET SANJOSE, CALIFORNLA 95113 CIVIL DIVISION RE: Daniel Osuna et al vs Brian Brager et a1 r- mnéfciéfldiof Case Number: 1QCV342439 or ‘ PROOF 0F SERVICE ORDER ON MOTION TO ENFORCE SETTLEMENT AGREEMENT was delivered to the pames listed below the above entitled case as set forth in the sworn declaration below. II you. a party represented by you, or a witness to be called on behalf of that party need an accommodation under the American with Disabilities Act. please contact the Court Administrator's office at (408) 882-2700. or use the Court’s TDD line (408) 882-2690 or the Voice/‘TDD California Relay Service (800) 735-2922. DECLARATION OF SERVICE BY MAIL: l declare that | served this notice by enclosing a true copy in a sealed envelope, addressed to each person whose name is shown below, and by depositing the envelope with postage fully prepaid. in the United States Mail at San Jose. CA on July 02, 2020. CLERK OF THE COURT, by Hientrang Tramhien. Deputy. cc: Sharonrose Cannistraci Cannistraci Law Firm 236 N Santa Cruz Ave Ste 217 LOS GATOS CA 95030-7261 Trevor Joseph Zink Omni Law Group LLP 1940 Hamilton Avenue San Jose CA Q5125 cw-9027 REV 12/08/16 PROOF 0F SERVICE
