MedCapGroup, LLC v. Mesa Pharmacy, Inc.
2:14-cv-01864
| D. Nev. | Nov 4, 2016Background
- MedCapGroup purchased Mesa Pharmacy accounts receivable in 2012 and later sued Mesa for misrepresentations about those receivables, alleging contract and fraud claims.
- Mesa filed a third-party complaint against Dave Brown, who arranged the sale.
- At a May 5, 2016 settlement conference the parties signed a Court-prepared Memorandum of Settlement Agreement specifying payment schedules: Brown to pay $25,000; Mesa to pay $175,000 in an initial $25,000 plus five $30,000 installments; and provisions addressing assignment/collection of the receivables and filings of dismissals upon payment.
- After the conference, parties circulated draft settlement documents; Mesa requested express language confirming that MedCap had filed liens on the receivables and relied on MedCap’s representation that liens were filed.
- Mesa later discovered MedCap had not timely filed the liens, sought to renegotiate, and MedCap moved to enforce the settlement. Mesa opposed, asserting lien-filing and related representations were material to its agreement.
- The magistrate judge held an evidentiary hearing and found the parties’ post-conference conduct and statements showed lien-filing representations were material and relied upon, rendering the Memorandum unenforceable as to the global settlement; the court also found Brown’s $25,000 term was interrelated and could not be enforced separately.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Memorandum of Settlement Agreement is enforceable despite dispute over lien filings | MedCap: lien filings were not a term of the agreement; settlement is enforceable; any mistake is Mesa's risk | Mesa: MedCap represented liens had been filed and Mesa reasonably relied on that representation; lien-filing was a material term | Court: Lien-filing representation was material and relied upon; cannot enforce the Memorandum as a binding settlement between MedCap and Mesa |
| Whether post-conference statements and conduct can inform contract terms | MedCap: written memorandum controls; absence of lien language shows no condition | Mesa: post-contract communications and MedCap’s comfort with including lien language show mutual understanding | Court: may consider post-contracting conduct; MedCap’s post-conference representations support Mesa’s reliance |
| Whether Brown’s separate $25,000 settlement obligation is severable/enforceable alone | Brown/MedCap: Brown’s terms are clear and not contingent; should be enforced | Mesa: settlement was global and interrelated; Brown’s obligation dependent on full settlement performance | Court: settlement was global; Brown’s payment terms are not severable — cannot enforce Brown-only terms |
| Whether court should grant order to show cause/countermotion | MedCap: sought enforcement | Mesa: opposed; sought show-cause order against enforcement | Court: granted Mesa’s countermotion for order to show cause and recommended denial of MedCap’s motion to enforce |
Key Cases Cited
- May v. Anderson, 119 P.3d 1254 (Nev. 2005) (settlement agreements treated as contracts; material terms and mutual assent required)
- City of Hope Nat'l Med. Ctr. v. Genentech, 181 P.3d 142 (Cal. 2008) (post-contract conduct can inform interpretation of agreement)
- Oceanside 84, Ltd. v. Fidelity Fed. Bank, 56 Cal.App.4th 1441 (Cal. Ct. App. 1997) (parties’ statements and conduct may clarify contract terms)
- Thomas v. Arn, 474 U.S. 140 (U.S. 1985) (requirements for objections to magistrate judge findings and consequences of waiver)
- Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991) (failure to timely object to magistrate findings may waive appellate review)
- Britt v. Simi Valley United Sch. Dist., 708 F.2d 452 (9th Cir. 1983) (same waiver principles for objections to magistrate recommendations)