Anand v. California Dept. of Developmental Serv., CIV.S-04-1575 LKK/GGH.

• Decision Date: 02 June 2009
• Docket Number: No. CIV.S-04-1575 LKK/GGH.,CIV.S-04-1575 LKK/GGH.
• Parties: Karuna ANAND, M.D., Plaintiff, v. CALIFORNIA DEPARTMENT OF DEVELOPMENTAL SERVICES, et al, Defendants.
• Court: U.S. District Court — Eastern District of California

626 F.Supp.2d 1061

Karuna ANAND, M.D., Plaintiff, v. CALIFORNIA DEPARTMENT OF DEVELOPMENTAL SERVICES, et al, Defendants.

No. CIV.S-04-1575 LKK/GGH.

United States District Court, E.D. California.

June 2, 2009.

Gloria P. Martinez-Senftner, The Martinez-Senftner Law Firm, Roseville, CA, for Plaintiff.

Scott Holmes Wyckoff, State of California, Office of the Attorney General, Sacramento, CA, for Defendants.

ORDER

LAWRENCE K. KARLTON, Senior District Judge.

Plaintiff was a psychiatrist employed by defendant California Department of Developmental Services. In September 2008, the parties, through their respective attorneys, notified the court that they had reached a settlement in the case. In the instant motion, defendants move to enforce the terms of the settlement, which they contend plaintiff has repudiated. The court resolves the motion on the papers and after oral argument.

I. BACKGROUND

Plaintiff filed this suit in propria persona in August 2004. Shortly thereafter, she obtained Lawrence King as counsel. Due to several delays in the parties' completion of discovery, the deadlines in the case were extended several times. In April 2007, defendants moved for summary judgment. In June 2007, the parties through counsel filed a notice of settlement. A few months later, the parties notified the court that the case had not settled and jointly requested a status conference to set a new pretrial schedule. A scheduling conference was held in January 2008 and a new scheduling order was issued.

In September 2008, defendants moved again for summary judgment. Less than a week later, the parties notified the court of having settled. It is this settlement agreement that defendants seek to enforce in the instant motion. Shortly after the filing of defendant's motion, plaintiff retained replacement counsel.

Defendants have tendered evidence of the settlement negotiations between the parties. According to defendants, plaintiff's counsel¹ contacted defense counsel by e-mail in July 2008 and conveyed a settlement offer. Declaration of Scott Wyckoff In Support of Defendants' Motion to Enforce Settlement ("Wyckoff Decl.") ¶ 2, Ex. A. In the e-mail, plaintiff counsel represented that the offer had been authorized by the plaintiff. Id. It also stated the periods for which plaintiff believed she was entitled to back pay. Id. Plaintiff agrees that she authorized this offer. Declaration of Faruna Anand In Opposition to Defendants' Motion to Enforce Settlement ("Anand Decl.") ¶¶ 9-10, 14.

A few days later, plaintiff's counsel sent defendants' counsel another e-mail, specifying the dates for which plaintiff believed she was entitled to back pay. Wyckoff Decl. ¶ 3, Ex. B. Plaintiff agrees that these dates reflect those that she had communicated to her attorney in a prior e-mail. Anand Decl. ¶¶ 11, 15, Ex. 2.

Settlement discussions continued between the parties' counsel in September 2008. Id. ¶ 4. According to defendants' counsel, they had reached an agreement that the settlement award would not include payment for plaintiff's annual leave. Id. The settlement terms were purportedly finalized on September 12, 2008, which specified that plaintiff would receive back pay for a total of twenty-four months and did not include payment for plaintiff's annual leave. Id. ¶ 5. According to defendant's counsel, plaintiff's counsel communicated to him that plaintiff had accepted the offer. Id. This settlement agreement was communicated to the court. Id. ¶ 6.

After doing so, the parties' counsel worked to draft a final settlement agreement. Id. ¶¶ 7-8. In November 2008, defendants' counsel received a fax from plaintiff's counsel of a settlement agreement purporting to bear plaintiff's signature. Supplemental Declaration of Scott Wyckoff In Support of Defendants' Motion to Enforce Settlement ("Supp. Wyckoff Decl.") ¶ 3, Ex. E. The agreement provides that plaintiff would receive back pay for a total of twenty-four months. Id. The typed provisions are amended with handwritten changes initialed by "KA." Id. These changes increased the amount of the settlement award per year of her relevant employment periods. Id. Additionally, where the typed agreement provided that plaintiff would receive a payment of back pay for "salary and pension," there are handwritten amendments to read, "salary, benefits and pension." Id. These amendments are also initialed "KA." Id.

Plaintiff contends that she did not authorize her attorney to enter into the settlement agreement. According to plaintiff, by her calculations she was entitled to thirty months of back pay. Anand Decl. ¶ 16. She also has declared that her attorney informed her on September 10, 2008 that defendants had rejected her offer but had proposed a counteroffer of twenty-three months. Id. ¶¶ 19-20. According to plaintiff, she did not authorize her attorney to accept this offer. Id. ¶ 21. Her attorney then asked her if she would accept an offer of twenty-seven months of back pay, to which plaintiff agreed. Id. ¶¶ 27-28. She has tendered her handwritten notes, purportedly recording this conversation, which she asserts reflect this understanding. Id. ¶ 29, Ex. 3.

Nevertheless, according to plaintiff, on September 11, 2008, her attorney sent her an e-mail "confirming" authorization to settle the case for back pay for twenty-three months. Id. ¶ 30. She has not tendered a copy of this e-mail. The next day, her counsel sent her an e-mail notifying her that defendants had agreed to settle for a payment of back pay for twenty-four months. Id. ¶ 31, Ex. 4. Three days later, she responded that she thought the agreement was for back pay for twenty-seven months. Id. She has declared that she never authorized the twenty-four month back pay settlement. Id. ¶ 36.

II. STANDARD FOR ENFORCEMENT OF A SETTLEMENT AGREEMENT

"It is well settled that a district court has the equitable power to enforce summarily an agreement to settle a case pending before it." Callie v. Near, 829 F.2d 888, 890 (9th Cir.1987), citing Mid-South Towing Co. v. Har-Win, Inc., 733 F.2d 386, 389 (5th Cir.1984); Aro Corp. v. Allied Witan Co., 531 F.2d 1368, 1372 (6th Cir.), cert. denied, 429 U.S. 862, 97 S.Ct. 165, 50 L.Ed.2d 140 (1976); Autera v. Robinson, 419 F.2d 1197, 1200 (D.C.Cir.1969). The district court may only, however, enforce complete settlement agreements. Id., citing Ozyagcilar v. Davis, 701 F.2d 306, 308 (4th Cir.1983); Gardiner v. A.H. Robins Co., 747 F.2d 1180, 1189 (8th Cir. 1984). "Where material facts concerning the existence or terms of an agreement to settle are in dispute, the parties must be allowed an evidentiary hearing." Id. (citations omitted).

III. ANALYSIS

The parties do not dispute that the court has the power to enforce a complete settlement agreement nor that it must hold an evidentiary hearing if there is a material dispute as to the existence or terms of a settlement agreement. See Callie, 829 F.2d at 890; Defs.' Mot. to Enforce Settlement at 4; Pl.'s Opp'n to Defs.' Mot. at 1, 6. The parties' dispute relative to the instant motion centers on the presumption the court should give to the authority of an attorney to bind his client to a settlement. Some courts have applied a rule of federal common law that there is a presumption that an attorney has authority to settle a matter for his client, rebuttable only when the party meets a "heavy burden" to show that the attorney was acting outside the scope of his authority. See, e.g., In re Artha Management, Inc., 91 F.3d 326, 329 (2d Cir. 1996). Under California law, however, this presumption does not exist. Instead, because an attorney must have express authority to settle his client's claims, there is no presumption that settlement agreed to by the attorney binds his client. See Linsk v. Linsk, 70 Cal.2d 272, 74 Cal.Rptr. 544, 449 P.2d 760 (1969); see also Blanton v. Womancare, Inc., 38 Cal.3d 396, 404, 212 Cal.Rptr. 151, 696 P.2d 645 (1985). When the client alleges that her attorney settled a claim without authority to do so, the court should receive evidence to make a factual determination on the issue. See, e.g., Bice v. Stevens, 160 Cal.App.2d 222, 226-33, 325 P.2d 244 (1958).

Whether the court applies federal common law or California law, therefore, determines what showing the plaintiff must make to warrant an evidentiary hearing. The Ninth Circuit has not held directly on this issue and there appears to be a split among the circuits that have. Several circuits apply the rule of federal common law when determining whether an attorney had authority to bind the client, with its presumption favoring the attorney. See, e.g., Michaud v. Michaud, 932 F.2d 77, 79 (1st Cir.1991); Fennell v. TLB Kent Co., 865 F.2d 498, 501 (2d Cir.1989); Garabedian v. Allstates Eng'g Co., 811 F.2d 802, 803 (3rd Cir.1987); Mid-South Towing Co. v. Har-Win, Inc., 733 F.2d 386, 389 (5th Cir.1984)²; Larson v. Heritage Square Assoc., 952 F.2d 1533, 1537 (8th Cir.1992). Courts have explained this use of federal common law on the basis that the parties are appearing in federal court and their "substantive rights and liabilities ... derive from federal law." Mid-South Towing, 733 F.2d at 389.

Several circuits, however, have declined to adopt this rule. See Pohl v. United Airlines, Inc., 213 F.3d 336, 338 (7th Cir. 2000); United States v. McCall, 235 F.3d 1211, 1215 (10th Cir.2000); Hayes v. Nat'l Serv. Indus., 196 F.3d 1252, 1254 (11th Cir.1999); Makins v. District of Columbia, 277 F.3d 544, 547-48 (D.C.Cir.2002). In Makins, 277 F.3d at 547-48, the D.C. Circuit explained that "good reasons" justified application of the forum state's laws in determining the authority of an attorney to settle a claim on his client's behalf. First, the court observed that the creation of a "federal common law" on this issue had not generated uniformity in the federal courts, but instead that there was "national disarray." Id. at 548. Thus one of the principal reasons for the other circuits' approach had not...