Beware: In a Settlement Silence on Fees is Not Golden

Businessman offering you to sign a document with focus to the teIn DeSaulles v. Community Hospital (March 10, 2016) case no. S219236, the Supreme Court has weighed in with what it calls a “default” rule regarding which party may be entitled to costs when an action is dismissed by way of settlement.  Such a “default” rule in effect overturns the prior holding in Chinn v. KMR Property Management (2008) 166 Cal. App.4th 175, at 185–190.

The settlement in Desaulles was made and put on the record during trial as a result of rulings by the Court and included a monetary payment plus the Defendant to prepare a Judgment of Dismissal with prejudice with respect to certain adverse rulings that Plaintiff wanted to appeal.  The settlement preserved the right to seek costs after the appeal was complete:  “The Parties shall defer seeking any recovery of costs and fees on this Judgment coming final after the time for all appeals.”  Plaintiff filed an appeal and lost.  Upon remand, Plaintiff filed for costs as prevailing party and the Supreme Court reversed the trial court’s ruling that Plaintiff was not the “prevailing party” under CCP 1032(a)(4), holding that under the statute, the monetary payment was a “net monetary recovery” which made the Plaintiff the prevailing party entitled to costs.

By referring to this as a “default” rule, the Court’s opinion applies to cases where the parties have not addressed “costs” in the settlement agreement or in a CCP 998 offer.

The  Supreme Court indicated this “default” may be altered by express agreement of the parties and that trial courts may look to such agreement of the parties when considering the issue of who is the prevailing party for purposes of costs when there has been a settlement. The Court stated:  “. . . settling parties are free to make their own arrangements regarding costs,”  and “Section 1032 merely establishes a default rule, and a settling defendant is in a far better position to calibrate the terms of a settlement, including allocations of costs, with appropriate provisions in the settlement.”

Costs, including defense fees as costs pursuant to a statute or contract, should be addressed in a written Settlement and Release Agreement which expressly provides either that costs are included in the settlement amount and/or that each side is waiving and releasing all claims, including costs. If there is an attorney fees provision at issue in the case, then a 998 offer should either include or exclude recoverable costs (which can include attorney fees).  If costs are excluded and Plaintiff accepts the 998 offer of money, plaintiff can then file a motion for recovery of fees as costs.  The same is true if a defendant accepts a Plaintiff’s 998 offer that is silent on the issue of costs.

For more information contact:

MICHAEL_GEIBEL_0309

Michael B. Geibel, Esq.

Gibbs Giden Locher Turner Senet & Wittbrodt LLP

1880 Century Park East 12th Floor

Los Angeles, CA 90067

email: mgeibel@gibbsgiden.com

The content contained herein is published online by Gibbs Giden Locher Turner Senet & Wittbrodt LLP (“Gibbs Giden”) for informational purposes only, may not reflect the most current legal developments, verdicts or settlements, and does not constitute legal advice. Do not act on the information contained herein without seeking the advice of licensed counsel.

Copyright 2016 Gibbs Giden Locher Turner Senet & Wittbrodt LLP ©

When an E-Mail Signature is an Electronic Signature is a Settlement Signature

An e-mail signature can be a thoughtful closing to a mundane correspondence, or a mindless addendum to an otherwise critical message. Some are automatically placed at the foot of every message we send, while others are customized for a particular recipient. Does an e-mail signature constitute a legally binding signature? And if so, is this e-mail signature sufficient to bind parties to a settlement agreement?
The California State Court of Appeal addressed the issue of when an e-mail signature amounts to an electronic signature, and when an electronic signature is sufficient to enforce a settlement agreement in J.B.B. Investment Partners, Ltd., et al., v. R. Thomas Fair, et al. No. A140232, 2014 WL 6852097 (Cal. Ct. App. Dec. 5, 2014). The case concerned a series of e-mails and text messages, a voicemail, a round of golf, and a week-long communication delay – a perfect recipe for a dispute concerning when, how and where a contract was made. Ultimately, the Court found that merely signing one’s name at the bottom of an e-mail is far from sufficient to bind that person in contract, let alone to a settlement agreement. Under California’s Uniform Electronic Transactions Act (“UETA”), the party looking to enforce the e-mail as an electronic signature must show that 1) the parties agreed to conduct an electronic transaction and 2) the signing party wrote his or her name on the email with the intent to formalize an electronic transaction.

Background

This case involved a dispute between two real estate investors on the one hand, and the owner of two apartment units on the other. After Plaintiffs had invested $250,000 in Defendant Hand’s apartments, they allegedly discovered several fraudulent misstatements and omissions made by the Defendant. Before commencing the litigation, the parties engaged in settlement discussions, and on July 4, 2013, Plaintiffs’ counsel sent Hand an e-mail (“July 4 Offer”) laying out the terms of the proposed $350,000 settlement, included in which were the following statements:

• “All litigation would be stayed pending full payments”
• “The Settlement paperwork would be drafted in parallel with your full disclosure of all documents and all information…”
• We require a YES or NO on this proposal; you need to say I ACCEPT … Anything less shifts all focus to the litigation and to the Court Orders we will seek…”
• “Let me know your decision.”

The July 4 Offer did not contain a signature line or signature block, nor was the e-mail signed by any of the Plaintiffs.

The following day, Fair responded to the offer with a seemingly ambiguous e-mail from his cell phone (“July 5 Response”) at 10:17 a.m., which read:
“[Plaintiffs’ counsel], the facts will not in any way support the theory in your e-mail. I believe in [the apartment complex]. So I agree. Tom fair[.]”

Counsel for the Plaintiffs responded soon thereafter, asking Hand to clarify his response. Before receiving such response, Plaintiffs filed the instant lawsuit, which complaint was then sent to Defendant at 12:25 p.m. During the next two hours, Fair sent three text messages and left one voicemail, in which he apologized for being on a golf course that prohibited cell phone use, reiterating his acceptance of the terms presented in the July 4 Offer. At 1:53, Plaintiffs’ counsel sent a confirmatory e-mail acknowledging receipt of Fair’s acceptance, and noting that “I will work on the formal settlement paperwork” and “will seek to get that settlement paperwork to you for review by Monday.”

On July 11, 2013, the written settlement agreement, complete with signature blocks for all parties and a clause explicitly permitting the document to be electronically signed, was sent to Defendant. Defendant did not sign that written settlement offer, and the parties proceeded to trial. Upon a motion to enforce the settlement agreement pursuant to California Code of Civil Procedure § 664.6, the trial court ruled that the central issue was whether the two parties had a meeting of the minds as to the terms of the settlement, and that the July 4 Offer was accepted by Fair’s July 5 Response. This conclusion was supported by the court’s interpretation of the surrounding circumstances and communications. The trial court entered judgment for the Plaintiffs and Defendants timely appealed.

Discussion

On appeal, the Court found that, as a preliminary matter, in order to determine whether the settlement agreement could be enforced under CCP § 664.6, there must first be a determination of whether the settlement was signed as required by the statute. Where the alleged signature is electronic in form, party seeking enforcement of the signature must show that A) the parties agree to conduct a transaction by electronic means pursuant to UETA § 1633.5(b), and that B)it amounts to an electronic signature under UETA §1633.2(h). Neither of these conditions was address by the trial court, yet they were determinative on appeal.

A) Parties agree to conduct electronic transaction

The question of whether the parties agreed to conduct a transaction by electronic means is determined by examining the context and surrounding circumstances of the transaction. While an explicit agreement to allow electronic signatures is not required, it is a relevant factor. Furthermore, evidence that a signature was requested or permitted in electronic form in past or future agreements will be relevant.

Here, there was no signature requested in the July 4 Offer, nor did the offer invite a signature with a signature block. Instead, the offer merely requested a “YES,” “NO,” or “I ACCEPT” in return. Furthermore, the July 11 written proposal included signature blocks, as well as explicit language permitting electronic signatures. And Plaintiffs’ counsel wrote a follow-up e-mail on July 19 to Fair stating, “It’s a good thing we have a settlement, then; let’s put pen to paper and close it…We are not going to stay anything until we have a signed deal.” All these communications would indicate that both parties agreed that any settlement would only be enforceable as a written, signed document.

B) Electronic Signature

In order to fulfill the requirement of § 1633.2(h), a party must show more than merely proof that the signature in question was made by the person against whom enforcement of the contract is sought, and that the signature was electronic. The party must also show that the signature was “executed or adopted by a person with the intent to sign the electronic record.” Id. Furthermore, the court may value evidence of whether both sides intended for a document or signature to be binding as an electronic signature.

Here, the Court found that there was substantial evidence to support Defendant’s argument that Fair did not intend for his signature to formalize an electronic transaction. First, Defendant’s July 5 voicemail and text messages did not indicate that he intended his prior e-mail signature to act as a binding legal signature, but merely that he agreed with the negotiated terms. Second, the July 4 Offer indicated that further paperwork would be prepared, which paperwork would serve as the final settlement agreement. Third, Plaintiffs’ July 5 filing of this instant complaint – which by the terms of the July 4 Offer would seem to terminate the offer prior to acceptance – and subsequent drafting a written settlement agreement negate any argument that the Plaintiff believed the July 5 Response to be a binding signature.

Conclusion

The rules governing electronic transactions and signatures under the UETA are well established and informative: it must be clear that both parties agreed to conduct an electronic transaction, and that the signing party intends for that electronic signature to act as a binding signature. However, the J.B.B. Court seemed to add even heightened scrutiny to this analysis when a part seeks to enforce a settlement agreement with an electronic signature. Agreements of such legal import and consequence should be unequivocal in their terms, and the parties forthright in their intent.

For more information contact:
Sumner D. Widdoes, Esq.
Gibbs Giden Locher Turner Senet & Wittbrodt LLP
1880 Century Park East, 12th Floor
Los Angeles, California 90067
Phone: (310) 552-3400
email: swiddoes@gibbsgiden.com

The content contained herein is for informational purposes only, may not reflect the most current legal developments and does not constitute legal advice. The transmission of information in this post (or any transmission or exchange of information over the Internet), or by any of the included links, is not intended to create and does not constitute an attorney-client relationship. The opinions expressed in this post are the opinions of the author only and may not reflect the opinions of the author’s law firm. No representations are made as to the completeness, accuracy or validity of any information contained in this post.

Attorney Advertisement
Copyright 2014 Gibbs Giden ©

California Law to Fine Websites Nationally

Amidst the increasing public frustration over the use and leaking of private personally identifying information (“PII”) by government and private entities, California Attorney General Kamala Harris recently issued guidelines to help companies comply with the California Online Privacy Protection Act of 2003 (“CalOPPA”).

Kamala Harris has been particularly active in this area of Online Privacy since she took the California Attorney General office in 2011. The recent amendment, effective January 1, 2014, is the first major activity on CalOPPA since it went into effect in 2004. Harris is also making special efforts to enforce CalOPPA, which does not itself have an enforcement provision, under California’s Unfair Competition Law, which permits penalties of up to $2,500 per violation. In 2013, Harris brought suit against Delta Airlines to enforce these penalties for violations to CalOPPA, but the suit was dismissed on other grounds. Thus, while it generally remains to be seen how the courts will interpret CalOPPA and this method of enforcement, it is clear that Harris is determined to take action in order to enforce the CalOPPA provisions

With its recent amendment, the CalOPPA impacts all individuals and companies considered to be operators that collect PII of California residents, which in the “borderless world of online commerce” may extend to even individuals living and companies formed in other jurisdictions. Any company or individual who may be impacted should seriously consider evaluating whether their current privacy policy complies with all of the new CalOPPA requirements in order to avoid potential fines of up to $2,500 per violation with respect to each individual consumer using their Web site or service (e.g., mobile application).

The aggregate of each potential penalty assessed could grow exponentially and very quickly. The CalOPPA does provide each operator with a 30-day grace period to post a compliant privacy policy after being notified that its current policy fails to comply with CalOPPA requirements. However, every potential operator should take action immediately in order to avoid being subject to this effective 30-day deadline with its consequence of potential, substantial penalties.

To read the full text of this article download in pdf.

For more information contact
Luke N. Eaton, Esq.
and
Matthew Robinson, Esq.
Gibbs Giden Locher Turner Senet & Wittbrodt LLP
1880 Century Park East, 12th Floor
Los Angeles, California 90067
Phone: (310) 552-3400
email: lneaton@ggltsw.comThe content contained herein is published online by Gibbs Giden Locher Turner Senet & Wittbrodt LLP (“Gibbs Giden”) for informational purposes only, may not reflect the most current legal developments, verdicts or settlements, and does not constitute legal advice. Do not act on the information contained herein without seeking the advice of licensed counsel. For specific questions about any of the content discussed herein or any of the content posted to this website please contact the article attorney author or send an email to info@ggltsw.com. The transmission of information on this, the Gibbs Giden website, or any transmission or exchange of information over the Internet, or by any of the included links is not intended to create and does not constitute an attorney-client relationship. For a complete description of the terms of use of this website please see the Legal Disclaimer section at http://www.ggltsw.com/ggltsw-legal. This publication may not be reproduced or used in whole or in part without written consent of the firm.
Copyright 2014 Gibbs Giden Locher Turner Senet & Wittbrodt LLP