Tentative Ruling

Judge Thomas Anderle
Department 3 SB-Anacapa
1100 Anacapa Street P.O. Box 21107 Santa Barbara, CA 93121-1107

CIVIL LAW & MOTION
Smartvest Group LLC v. D. Stephen Sorensen, et al.
Case No: 18CV03406
Hearing Date: Tue Jan 21, 2020 9:30

Nature of Proceedings: Motion Enforce Settlement Agreement as Judgment

Motion for Order Enforcing Settlement Agreement as a Judgment

ATTORNEYS:

William M. Crosby for Plaintiff Smartvest Group, LLC

James F. Scafide for Defendants D. Stephen Sorensen and Pogo Services, Inc.

RULING: Plaintiff’s motion for order enforcing the stipulated settlement agreement as a judgment is denied. The stipulated settlement agreement is ordered vacated. The parties are ordered to appear for a Case Management Conference on February 4, 2020, at 8:30 a.m., in this department, at which time the Court will set a new settlement conference date and trial date.

BACKGROUND

Plaintiff Smartvest Group, LLC (“Smartvest”) filed its original complaint against defendants D. Stephen Sorensen (“Sorensen”) and Pogo Services, Inc. (“Pogo”) on February 21, 2017, in Orange County Superior Court. On October 19, 2017, Smartvest filed its first amended complaint (“FAC”), asserting claims for (1) fraud, (2) unfair competition (Bus. & Prof. Code §17200 et seq.), and (3) imposition of a constructive trust. On June 1, 2018, the Orange County Superior Court ordered the action transferred to this Court. On November 13, 2018, this Court sustained defendants’ demurrer to plaintiff’s first cause of action with leave to amend and its second cause of action without leave to amend, but overruled their demurrer to the third cause of action. On November 28, 2018, Smartvest filed its second amended complaint (“SAC”) for fraud and imposition of a constructive trust.

Smartvest is a personnel staffing company. According to the allegations, on December 3, 2013, Smartvest entered into a consulting agreement with San Diego Personnel & Employment Agency, Inc. (“SDP”), under which Smartvest agreed to sell its book of business to SDP and SDP agreed to hire Smartvest’s principal, Sergio Perez, to serve as SDP’s Vice President of Sales in return for a salary of $150,000.00 per year, plus benefits. Sorensen is the CEO of New Koosharem Corporation (“NKC”), a variable interest company, and negotiated the consulting agreement on behalf of SDP. Smartvest alleges that Sorensen made fraudulent misrepresentations and promises to induce Smartvest to enter into the consulting agreement with SDP. Smartvest further alleges that Sorensen improperly diverted a substantial amount of its client billings to Pogo, a company controlled by Sorensen.

At the Mandatory Settlement Conference on November 1, 2019, Smartvest, Sorensen, and Pogo stipulated to a settlement of the action, pursuant to Code of Civil Procedure Section 664.6. Smartvest now moves the Court for an order enforcing the settlement agreement as a judgment. Sorensen and Pogo do not object to the Court’s entering the settlement agreement as a judgment, but contend that Smartvest is attempting to change the terms of the settlement by providing that the general release shall apply to Sorensen, Pogo, and companies affiliated with them, but not to any other person or company, including SDP and its affiliates.

ANALYSIS:

The trial court has the authority to enforce a written settlement agreement. Code of Civil Procedure Section 664.6 provides:

“If parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of 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.”

Section 664.6 provides a summary procedure by which the trial court can specifically enforce an agreement settling pending litigation without the need for a second lawsuit. Kirby v. Southern California Edison Company (2000) 78 Cal.App.4th 840, 843. Under Section 664.6, the court has the power to determine disputed factual issues that have arisen regarding the settlement agreement. Fiore v. Alvord (1985) 182 Cal.App.3d 561, 566. The court also has the power “to entertain challenges to the actual terms of the stipulation . . . and to interpret the terms and conditions of the settlement agreement.” Ibid. Additionally, the court may adjudicate whether the settlement was authorized by the parties, whether the settlement was intended to cover certain terms, or whether the documents as drafted and upon which the settlement was contingent are consistent with the settlement agreement. Ibid.

At the Mandatory Settlement Conference on November 1, 2019, the parties orally agreed to a settlement whereby Sorensen (and his company, Pogo) would pay the sum of $15,000.00 to Smartvest in return for Smartvest’s executing a general release, including a waiver of Civil Code Section 1542. (Crosby Dec., ¶2, Ex. A, Transcript of Settlement Proceedings before the Hon. Colleen K. Sterne, November 1, 2019.) The transcript of the proceedings reads:

THE COURT: Who will be putting the terms on the record?

MR. CROSBY: Your Honor, we reached a settlement of the claims in this matter whereby defendant Stephen Sorensen will pay the plaintiff Smartvest LLC the sum of $15,000 and that will be paid within 15 days of the final settlement agreement which will be prepared.

* * *

THE COURT: Is there going to be – – are the settlement agreements going to contain a 1542 waiver of all claims known and unknown – –

MR. SCAFIDE: Yes.

MR. CROSBY: Yes.

THE COURT: – – and a general release? Any other provisions? Each party to pay their own fees and costs?

MR. CROSBY: Yes.

MR. SCAFIDE: Yes.

[EXAMINATION OF PLAINTIFF’S PRINCIPAL, SERGIO PEREZ, BY THE COURT]

Q. And Mr. Perez, you heard the terms of the settlement?

A. Yes.

Q. Did you understand them?

A. Yes

Q. And do you likewise understand that this is intended to be a full, complete, and final settlement?

A. Yes.

Q. Have you had the opportunity to discuss the terms with your attorney and has he satisfied all questions and concerns?

A. Yes.

Q. And do you acknowledge also that even though there may be writings to memorialize the settlement that have not yet been completed, the terms of the settlement itself will be binding upon you as soon as you agree on the record. You’re not going to be able to come back and ask for anything different or any different terms or different deal, do you understand that?

A. Yes.

Q. And you’re agreeing to the settlement at this time?

A. Yes.

THE COURT: Very well. It will be considered a court-supervised settlement under 664.6.

(Id., at 1:17-4:12.)

Following the Mandatory Settlement Conference, defendants’ counsel prepared and forwarded to plaintiff’s counsel a standard settlement and release agreement that releases all claims against Sorensen and Pogo, as well as their predecessors, successors, affiliates, and assigns. The proposed release reads:

“Plaintiff . . . hereby releases and forever discharges Defendants, together with [their] predecessors, successors, direct and indirect parent companies, direct and indirect subsidiary companies, companies under common control with any of the foregoing, affiliates, and assigns, and . . . their past, present, and future officers, directors, shareholders, interest holders, members, partners, attorneys, agents, employees, managers, representatives, assigns, and successors in interest, and all persons acting by, through, under or in concert with them, and each of them, from all known and unknown charges, complaints, claims grievances, liabilities, obligations, promises, agreements, controversies, damages, actions, [or] causes of action . . . known or unknown, which Plaintiff has, or may have had, against Defendants, whether or not apparent or yet to be discovered, or which may hereafter develop, for any acts or omissions related to or arising from . . . the Dispute [or] the Litigation . . . .”

(Sprague Dec., ¶3, Ex. 1, Settlement Agreement and Release, ¶5 p. 2.)

In addition, the proposed release states:

“This Agreement resolves any claim for relief that has or could have been alleged by Plaintiff against Defendants, no matter how characterized, including, without limitation, compensatory damages for breach of contract, bad faith damages, reliance damages, liquidated damages, damages for humiliation and embarrassment, punitive damages, costs, and attorneys’ fees related to or arising from the dispute.

“Plaintiff certifies that it has read the provisions of California Civil Code Section 1542 and has consulted its own counsel regarding that section. Plaintiff waives any and all rights under California Civil Code Section 1542, which states:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOW BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.

“Plaintiff agrees and acknowledges that the released claims extend to and include unknown and unsuspected claims.”

(Sprague Dec., ¶3, Ex. 1, Settlement Agreement and Release, ¶5 pp. 2-3.)

On receipt of the proposed Settlement Agreement and Release, plaintiff’s counsel advised defendants’ counsel that the language of the release was too broad as it arguably encompassed certain other entities and persons whom Smartvest still intended to sue. Plaintiff’s counsel stated that his client was ready and willing to execute a general release, including a waiver of Civil Code Section 1542, as to defendants Sorensen and Pogo, as well as their affiliates and assigns, but that the release had to expressly provide that it did “not apply to any action by Smartvest against San Diego Personnel dba Goodpeople or any of its affiliates or successors in interest (except New Koosharem Corporation) or Debby Munoz and Arlita Pursuer.” (Crosby Dec., ¶3, Ex. B.) Defendants’ counsel would not agree to limit the terms of the general release as he had previously represented SDP, Ms. Munoz, and Ms. Purser in litigation brought by Smartvest in the San Diego Superior Court (San Diego Superior Court Case No. 37-2016-00008981). (Crosby Dec., ¶5, Ex. D.)

Defendant contends that Plaintiff has patently mischaracterized Defendants’ position. That Plaintiff states “his counsel refuse to agree to a general release limited only to defendant Sorensen and any entity or person currently affiliated with him.” As shown by the transcript of the November 1 hearing and the Declaration of James F. Scafide (“Scafide Decl.”), Plaintiff and Defendant never agreed to such a limited release and settlement. This new carve-out is not standard for a settlement. Counsel for Plaintiff, who read the terms of the settlement into the record, should have included these terms if counsel for Plaintiff anticipated the need to file suit against these other entities. Plaintiff’s counsel did not. These carve-out terms were not agreed to by the parties, and as such, the Court should enforce the settlement pursuant to the terms of a general release and standard settlement agreement, as reflected in the record and in the Scafide Decl.

In the Reply filed 1/17 Plaintiff’s counsel reiterates the release prepared by defense counsel contained language which was so overbroad as to possibly encompass parties against whom plaintiff wishes to pursue breach of contract and possible other tort claims arising out of the same Consulting Agreement that is the subject of this action; that at the settlement hearing on November 1, 2019, neither defendant Sorensen, nor his counsel, brought to the attention of plaintiff or the Court that defendant Sorensen would also require plaintiff to release all of defendant Sorensen’s “predecessors, successors, direct and indirect parent companies, direct and indirect subsidiary companies, companies under common control with any of the foregoing, affiliates, and assigns, and its and their past, present, and future officers, directors, shareholders, interest holders, members, partners, attorneys, agents, employees, managers, representatives, assigns, and successors in interest, and all persons . . .” Defendant Sorensen cannot now require plaintiff to do so. If plaintiff had known that this requirement was going to be part of the “general release,” plaintiff would not have agreed to such a requirement.

The Court’s Conclusions

There was no actual meeting of the minds at the Mandatory Settlement Conference on November 1, 2019. Smartvest insists that the general release include a “carve out” of specific individuals and entities, while Sorensen and Pogo insist that the release be all encompassing, effectively barring Smartvest from pursuing any further litigation related to the case. Given this dispute, the Court finds that there was no agreement on the terms of the settlement and will vacate the stipulated settlement agreement and order.

The case is ordered returned to the Court’s civil active list. The parties are ordered to appear for a Case Management Conference on February 4, 2020, at 8:30 a.m., in this department, at which time the Court will set a new trial date.