Opinion
The primary issue on this appeal involves an entertainment industry ADR (alternative dispute resolution) procedure gone seriously awry. The ADR procedure took place in two phases. After a preliminary injunction and related contempt proceeding, the parties stipulated to a voluntary mediation. The mediation yielded a one-page memorandum covering many material terms, but also providing that the parties would “formalize” additional material terms later. Anticipating possible dispute over these additional terms, the parties also agreed to “reserve jurisdiction” in the mediator “to resolve any dispute” over the “documentation” of their settlement and to “administer any process, including fact-finding, for a full implementation of the settlement.”
When the parties attempted to “formalize” the additional terms, numerous disputes became apparent. Respondents then filed a “Motion to Specifically Enforce Settlement” pursuant to Code of Civil Procedure section 664.6 (section 664.6) This “motion” was filed not with the court, but rather with the mediator (hereafter private judge). The second ADR phase then followed pursuant to the clause quoted above. The exact nature of this second phase was disputed. Appellants regarded it as a continuation of mediation. Respondent and the private judge regarded it as a binding dispute resolution process authorized by section 664.6. No one contended that the further ADR proceedings were a form of arbitration, and no one has made that contention on appeal.
The second ADR phase took place in several lengthy sessions. Most of these sessions were recorded by a court reporter, and transcripts are in the record. The transcripts clearly show lack of agreement on many material terms. Appellants—who regarded the process as a continuation of voluntary mediation—then declined to participate further. Respondent and the private judge, relying upon section 664.6 as authority, then continued the process in appellants’ absence. The private judge then signed a 33-page “Order Enforcing Settlement Agreement, etc. and Awarding Attorneys’
Respondent then moved in the superior court to enforce the “order” as a settlement agreement, again relying on section 664.6. The superior court granted the motion. By this method, a one-page memorandum which appellants signed after the initial mediation session became a thirty-five page judgment containing numerous material terms to which appellant had never agreed.
Section 664.6 authorizes none of this. Neither a mediator nor a judge may select and impose settlement terms on the authority of section 664.6. Section 664.6 creates only a summary procedure for specifically enforcing certain types of settlement agreements by converting them into judgments. It provides that “the court, upon motion, may enter judgment pursuant to the terms of the settlement.” (§ 664.6, end of first sentence.) Before judgment can be entered, two key prerequisites must be satisfied, both of which were missing in this case. First, there must be contract formation. The litigants must first agree to the material terms of a settlement contract before a judgment can be entered “pursuant to the terms of the settlement.” If no meeting of the minds has occurred on the material terms of a contract, basic contract law provides that no contract formation has occurred. If no contract formation has occurred, there is no settlement agreement to enforce pursuant to section 664.6 or otherwise. Second, there must be a “writing signed by the parties” that contains the material terms. Here there was no writing signed by the parties containing the material terms, which the private judge placed into his order and which later appeared in the judgment. Section 664.6 therefore provided no basis for the judgment entered. Moreover, a section 664.6 motion must be made to “the court.” (§ 664.6, first sentence.) The “motion” made by respondent before the private judge did not constitute a “motion” to “the court” within the meaning of section 664.6, and hence adds nothing to the section 664.6 analysis.
Appellants appeal from this judgment. In the published portion of this opinion, we reverse it. Appellants also appeal from the issuance of the preliminary injunction, and from the denial of a motion seeking to modify it. In the unpublished portion of this opinion, we affirm the issuance of the preliminary injunction and the denial of the motion to modify, but order an interim modification ourselves in view of the passage of time and possible changed circumstances, and remand with instructions for further proceedings.
a. The parties; the business breakup.
Appellants are Stephen Flick, a corporation formed by Mr. Flick named Creative Cafe, and an employee of Creative Cafe (collectively the Flick Parties). Mr. Flick has long been in the business of editing sound effects for motion pictures, television, and related media. He has won Academy Awards for his sound effect editing on the movies Speed (20th Century Fox 1994) and Robocop (Orion Pictures Corp. 1987), and has been nominated for Academy Awards on three other occasions. In 1987, Mr. Flick joined with colleagues Mark Mangini and Richard Anderson to form respondent Weddington Productions, Inc., as a vehicle for conducting the business of sound effect editing. Each owned one-third of the stock of Weddington.
In 1994, disputes arose, and in July of 1995, Mr. Flick left Weddington and formed Creative Cafe.
b. The business of sound editing and Weddington’s sound library.
The business of sound editing is performed by using a “library” of recorded sounds, such as guns firing, doors slamming, helicopters hovering, etc. These sounds are then mixed or modified as appropriate for a given production. Weddington had such a library. This library was jointly assembled by Messrs. Flick, Mangini and Anderson, as well as by employees of Weddington. While working as part of Weddington, Mr. Flick used this library. When Mr. Flick left Weddington and formed Creative Cafe, he took a copy of the library with him and continued to use it.
c. The preliminary injunction proceedings.
In December of 1995, Weddington obtained an injunction prohibiting the Flick Parties from using the library. In May of 1996, the superior court issued an order to show cause why the Flick Parties should not be held in contempt for violating the injunction by using the library to create sound effects for the movie Twister (Universal Pictures 1996). In June of 1996, evidence was presented at a contempt trial. Following the taking of evidence, but before the filing of closing briefs, the Flick Parties and Wedding-ton agreed to mediate. The contempt proceeding was then abated pending the outcome of mediation. 1
The mediation took place in August of 1996. At the end of a 12-hour session, both sides signed a 1-page document commonly referred to as the “Deal Point Memorandum.” The Deal Point Memorandum began by reciting: “This Settlement Memorandum notes the significant ‘deal points’ with respect to all litigation now pending” between Weddington and the Flick Parties. It continued that “[a]ll parties agree to settle and dismiss on the following terms: . . .” The document then specified sums that Weddington would pay to the Flick Parties, a schedule for such payments, and the agreed allocation of these sums and other sums previously paid. The document also provided that the Flick Parties would transfer to Weddington title to certain real property and also specified other terms.
The Deal Point Memorandum also contained a “Licensing Agreement” clause and an ADR clause, both discussed next below. The Deal Point Memorandum ended by stating: “There are no other significant terms.”
e. The Licensing Agreement clause and the ADR clause.
(1) The Licensing Agreement clause.
The Licensing Agreement clause provided: “[t]he parties will formalize a Licensing Agreement recognizing the Weddington Library to remain the property of. . . Weddington, but with a fully paid up license to Flick for use in sound editing services by Flick or by his corporation, or any corporation owned together with family, to use, or to devise to family members as the library existed on July 31, 1995.” Neither the term “Licensing Agreement” nor “fully paid up license” was further defined. The only other terms in the Deal Point Memorandum relating to the sound library were that the parties would “cooperate to number and index” the library, that Mr. Flick would “return all masters,” that Weddington would give Mr. Flick access “to replace any copy predating 7/31/95,” and that “[a]ll parties will respect 3rd party restrictions (e.g., Disney).” Nothing further was said about the library and no other details of the proposed Licensing Agreement were stated in the Deal Point Memorandum.
(2) The materiality of the Licensing Agreement.
The record clearly shows that the Licensing Agreement was centrally material to both sides. The Flick Parties relied upon access to the sound
The Licensing Agreement was also material to Weddington, as was conceded at oral argument. In seeking the injunction, Weddington contended: “The sound effects library ... is Weddington’s most valuable asset.” According to Weddington, “rights of access to and use of the sound effects library owned by Weddington” was one of four issues “that needed to be resolved” in connection with Mr. Flick’s withdrawal from Weddington. According to Weddington, a sound library “is an indispensable tool to anyone in the sound editing business .... One cannot conduct a sound editing business . . . without a high quality and well catalogued sound library.” Weddington sought and obtained injunctive relief by alleging that Weddington would suffer irreparable injury if the Flick Parties were permitted uncontrolled use of the sound library.
The proposed Licensing Agreement was therefore of central material importance to both sides. Agreement on the material terms of the Licensing Agreement was hence essential to contract formation, as will be further developed in the legal discussion below. As subsequent events were to prove, there had been no meeting of the minds on the meaning of the terms “Licensing Agreement” or “fully paid up license” as of the time the Deal Point Memorandum was signed.
(3) The ADR clause.
The Deal Point Memorandum also contained an ADR clause providing: “All parties agree this settlement is enforceable under CCP 664.6, and reserve jurisdiction in [the private judge] to resolve any dispute that may occur in the documentation of a full Settlement Agreement or the Licensing Agreement, and in the implementation of the settlement. [The private judge] may administer any process, including fact-finding if necessary, for a full implementation of the settlement.”
The reference to enforceability pursuant to section 664.6 suggests that the parties subjectively thought they had formed a settlement contract. Nevertheless, subsequent events illustrate quite vividly that they had never agreed
The meaning of the balance of the clause is debatable. The Flick Parties contend that it “reserved” only the “jurisdiction” the private judge already had: to conduct a mediation. Weddington contends that the references to section 664.6 empowered the private judge to select licensing agreement terms and to impose those terms on the parties. It has not been disputed that parties theoretically could confer wide-ranging arbitration authority on an arbitrator, even to the extent of allowing an arbitrator to write a licensing agreement for them. However, Weddington has never argued that the clause calls for some sort of arbitration process, and neither the private judge nor the superior court judge treated the clause as an arbitration clause. Moreover, no motion to compel arbitration or to confirm an arbitration award was ever filed. Any possible claim that the ADR clause is an arbitration agreement has therefore been waived, and the validity of the judgment must stand or fall on section 664.6. 2
f. The post-Deal Point Memorandum ADR proceedings.
(1) Numerous disagreements surface over material terms.
Following the signing of the Deal Point Memorandum, the parties commenced efforts to “formalize a Licensing Agreement” and to prepare a “full Settlement Agreement” as provided in the Deal Point Memorandum. Letters and drafts were exchanged and red-lined, and discussions took place. Disagreements soon became obvious regarding numerous material terms of the proposed licensing agreement. For example, disputes involved material issues such as how the library should be defined and exactly what it encompassed; the scope of the uses permitted to the Flick Parties; the scope of the Flick Parties’ permitted access to the master tapes; whether different Flick
Although the record suggests continuing dispute over subjects other than the Licensing Agreement, the ADR proceedings which followed the Deal Point Memorandum focused on the Licensing Agreement. We also focus on the Licensing Agreement here, since examination of the Licensing Agreement issue alone is enough to show quite clearly that the parties neither reached, nor objectively manifested, a meeting of the minds on the material terms of a settlement.
(2) The post-Deal Point Memorandum ADR proceedings commence.
When the Flick Parties and Weddington could not agree on the terms of a Licensing Agreement, Weddington filed a “Motion to Specifically Enforce Settlement” with the private judge, styling it a motion pursuant to section 664.6. The parties and the private judge then engaged in a series of lengthy meetings which will here be termed collectively the “post-Deal Point Memorandum ADR proceedings.” The Flick Parties were apparently apprehensive about the nature and effect of these proceedings and consequently arranged for them (except for the first one) to be recorded by a court reporter. We thus have transcripts of four such sessions (including the last one which took place in the Flick Parties’ absence).
(3) Disputes emerge regarding the nature of the post-Deal Point Memorandum ADR proceedings.
The precise nature of the post-Deal Point Memorandum ADR proceedings was in dispute from the outset. Early in these proceedings, the private judge stated that the goal was to produce a document that would “go around the table for signature” and suggested that participation was voluntary, thus implying a continuing mediation. Weddington, however, insisted from the outset that the proceedings were “an enforcement motion pursuant to 664.6”
The Rick Parties consistently contended that the proceedings were only a continuation of mediation, and insisted that their participation was not a concession that the private judge had any power to select and impose Licensing Agreement terms. The Rick Parties repeatedly stated their contention that the ADR clause, by which the parties agreed to “reserve jurisdiction” in the private judge, “reserved” only that “jurisdiction” which had previously been bestowed upon the private judge to conduct a mediation. For example, counsel for the Rick Parties stated “. . . as I understand the reservation of jurisdiction, that is a reservation of that jurisdiction that you possessed at the outset of these proceedings, to wit, mediation,” and “Your Honor, I want to say because I’m participating in these discussions does not mean that on behalf of the Flicks I’m agreeing to this. Ultimately we’re going to reserve our right to agree or not agree to the agreement. I’m trying to make it as positive an agreement as possible for the Ricks in the hope that they will believe they can live with it and sign it.”
(4) Impasse is averted; agreement is reached to continue discussions.
After the private judge unequivocally stated his view that section 664.6 and the ADR clause of the Deal Point Memorandum authorized him to select the terms of a Licensing Agreement and to impose those terms upon the Rick Parties, the Flick Parties stated that they would proceed with a mediation and nothing more. The proceedings then teetered on the brink of termination during extended discussion about the nature of the proceedings. At the urging of the private judge, all parties eventually agreed that the Rick Parties could continue to participate without waiving their contention that only a voluntary mediation, and not a procedure by which the private judge could select and impose a resolution, was in progress.
(5) No agreement on licensing terms is ever reached.
The transcripts, together with related documents filed by the parties with the private judge and later with the superior court, show that many different Licensing Agreement terms were proposed and discussed. Two facts emerge quite clearly. First, at the time of the Deal Point Memorandum, no meeting
The private judge noted near the outset of the post-Deal Point Memorandum ADR proceedings that none of the settlement terms could reasonably be implemented “when we can’t even come to a basic understanding of the document format that’s going to serve as the basis for the license agreement.” Weddington then cited “practice in the community” as authority for the license terms it proposed, and presented examples of licenses from treatises and elsewhere illustrating various possible clauses. After counsel for the Flick Parties objected to the private judge’s approval of a particular indemnity provision, the private judge told him that he had “the burden of going forward if you think that there are texts or cases that would demonstrate that an indemnification provision is not a feature—an appropriate feature or a usual feature I should say in custom and practice in licensing agreements.” At one point the private judge suggested that no settlement could be implemented when “there is still significant dispute about the library.” The subject of termination terms also generated significant controversy. Responding to protestations from counsel for the Flick Parties that no agreement had been reached during negotiation of the Deal Point Memorandum on a termination clause for the licensing agreement, the private judge stated “You said that a termination provision was not negotiated in the [Deal Point Memorandum] and I’m agreeing that we did not spend my time discussing a termination provision because many provisions are implied or would become a matter of further meet-and-confer and discussion between counsel.” Numerous other material issues were also hotly contested, for example concerning whether the Licensing Agreement would contain an arbitration clause, issues of indemnity and scope of use, etc.
(6) The private judge applies a “consistent with” or “not inconsistent with” test.
The private judge regularly stated his belief that he was authorized to choose Licensing Agreement terms which, in his opinion, were either “consistent with” or “not inconsistent with” the Deal Point Memorandum. The private judge thus often inquired whether certain terms were “customary” or “true to the settlement discussions.” On one occasion the private judge acknowledged unfamiliarity with what types of terms were “customary” on a particular point, and entertained argument on the point and asked for reference to “a text” on the subject. In discussing a proposed provision regarding
Assuming that a private judge were given the authority, as theoretically might be done in an arbitration agreement, to select and impose the terms of a licensing agreement, a private judge who proceeded as the private judge did here can be considered to have proceeded in a reasonable and skillful manner. However, the issue we consider is whether the decisions of the private judge here can be enforced pursuant to section 664.6. Counsel for the Flick Parties continually objected, stating at one point: “it was not my clients’ understanding that some agreement would be hammered out based upon a view of what would be consistent with what the . . . deal point memorandum said.”
The private judge eventually refined the “consistent or not inconsistent” test by inquiring whether a proposed Licensing Agreement term did or did not create a “substantive right.” For example, the private judge stated “Again, my focus is going to be to determine whether the document [the Licensing Agreement] is consistent with the settlement. . . . One way of measuring that is whether it creates any substantive rights that are not implied in the agreement . . . .” After the private judge declared what termination provision the Licensing Agreement would contain, stating that the provision “does not in my opinion create a substantive right,” counsel for the Flick Parties objected: “Shouldn’t the test be whether that appears in the deal point memorandum and not whether it creates a substantive right . . . ?” The private judge replied: “No. That’s the whole reason we’re going through this process is because the deal point memorandum was not designed to include every provision of the licensing agreement.” Counsel for the Flick Parties then responded: “I must say for the record that my clients never envisioned this process. I don’t believe they agreed to anything more than what they agreed to in that deal point memorandum and this process of making up an agreement that’s 10 to 20 times as long as that deal point memorandum is one that I just can’t find any basis for.”
The transcripts thus show clearly that both Weddington and the private judge fully understood that they were not involved in an effort to identify
(7) The post-Deal Point Memorandum ADR proceedings collapse; Weddington and the private judge proceed alone.
Disputes continually boiled to the surface regarding the nature of the proceedings and the authority of the private judge, leading the private judge to state at one point: “It will still be my effort because I think it’s my responsibility and partly because the parties charged me with that responsibility and partly because that’s the way it’s supposed to work under 664.6 that I should forge ahead to work out a licensing agreement and the matters that still need to be resolved. . . . I’ll move ahead to flush [sic] out the document we will call the licensing agreement.” By the time of the third post-Deal Point Memorandum ADR session, the volume of proposed licensing agreement terms and related correspondence that had passed among the parties and the private judge had become quite large. Commenting on this, the private judge noted “The post-settlement paper has now reached the same volume as the pre-settlement paper in this particular matter. . . . But moving forward I think our task is to work forward in the licensing agreement . . . .” The private judge then suggested the creation of an agenda of “the items that need discussion,” noting that he had received “samples” of proposed provisions from both sides. Referring to the continuing protestations from the Flick Parties, the private judge stated, “ . . .1 made reference to the fact that [the Flick Parties] might choose not to sign, [but] that doesn’t mean that there won’t be an enforceable settlement. They can withhold their signature but that may have no effect on whether or not there’s an enforceable settlement.”
When the Flick Parties concluded that further discussions were not likely to produce an acceptable licensing agreement, they declined to participate further. By letter dated three days before the final scheduled ADR session, the Flick Parties explained that they “no longer believe that participation in the mediation is likely to lead to a mutually-acceptable license agreement with respect to the ‘library.’ ”
When the Flick Parties did not appear for the final ADR session, Weddington and the private judge continued discussions in their absence. Weddington and the private judge finalized a 14-page “Settlement Agreement and Mutual General Release of Known and Unknown Claims” and a 14-page (including exhibits) “License Agreement.” These documents were appended
Weddington then questioned whether the payments to the Flick Parties specified in the Deal Point Memorandum would really have to be made according to the agreed schedule. Weddington argued that the Flick Parties should not be entitled to the payments as scheduled because they had refused to agree to the Licensing Agreement terms “approved” by the private judge. The private judge responded: “You authorized me to make fact findings in connection with the resolution of this settlement and the documentation of it and I’m now prepared to make a fact finding that Mr. Flick is not acting in good faith in connection with the settlement and that in the absence of good faith I could not see that he could expect” payment according to the schedule in the Deal Point Memorandum. Expanding on this comment, the private judge stated “let me simply say that with the finding of lack of good faith on the part of Mr. Flick I could not find it appropriate to—that Mr. Rick could expect a payment of $100,000 five days from today [as the Deal Point Memorandum provided] and in the event that he does approve the licensing agreement and settlement agreement and signs it within 30 days of today, then it would seem appropriate and reasonable that Weddington . . . have 15 business days within which to make the payment called for on November 30.” The judgment later entered by the superior court altered the payment schedule specified in the Deal Point Memorandum to allow Weddington to delay payment of the agreed amounts. While the record is not completely clear as to how this occurred, the superior court’s alteration of the payment schedule agreed to in the Deal Point Memorandum was apparently based on the private judge’s finding that the Rick Parties were not acting in “good faith.”
g. The motions in the superior court.
(1) The Flick Parties’ motion.
Following these events, the Rick Parties were the first to make a motion in the superior court. They moved to enforce the Deal Point Memorandum alone as a settlement pursuant to section 664.6. The Flick Parties’ moving
While both Weddington and the Flick Parties clearly agreed to the words “Licensing Agreement” and “fully paid up license” in the Deal Point Memorandum, the record summarized and highlighted above graphically shows that there was never any meeting of the minds, either subjectively or objectively, as to exactly what these words meant. Hence, as will be apparent from the legal discussion below, there is substantial evidence supporting the proposition that the Deal Point Memorandum did not constitute an enforceable contract. The superior court therefore did not err in denying the Flick Parties’ motion to specifically enforce the Deal Point Memorandum as a judgment. The Flick Parties have appealed from that denial, but we will affirm it.
(2) Weddington’s motion.
Shortly after the Flick Parties filed their motion to enforce the Deal Point Memorandum pursuant to section 664.6, Weddington filed its own motion. Weddington’s motion did not seek to enforce just the Deal Point Memorandum, but instead sought to enforce the private judge’s “Order Enforcing Settlement Agreement, etc. and Awarding Attorneys’ Fees.” Weddington thus sought to specifically enforce not merely the Deal Point Memorandum, but also the Licensing Agreement written by the private judge. The Flick Parties opposed on numerous grounds.
The superior court recognized that the Flick Parties had never agreed to the terms contained in the private judge’s “order,” and had never signed any
II. Discussion as to Section 664.6.
a. The terms of section 664.6.
Prior to the enactment of section 664.6, a party seeking to enforce a settlement agreement had to file a new action alleging breach of contract and seeking either contract damages or specific performance of the settlement terms, or alternatively had to supplement the pleadings in a pending case. (See, e.g., Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial,
supra,
¶ 12:951, p. 12(II)-70;
Viejo Bancorp, Inc.
v.
Wood
(1989)
Section 664.6 was enacted to provide a summary procedure for specifically enforcing a settlement contract without the need for a new lawsuit. (Cf.
Viejo Bancorp, Inc.
v.
Wood, supra,
In order to be enforceable pursuant to the summary procedures of section 664.6, a settlement agreement must either be entered into orally before a court (a possibility not involved here) or must be in writing and signed by the parties. The reason for the party-signature requirement is that “settlement is such a serious step that it requires the client’s knowledge and express consent. (1 Witkin, Cal. Procedure (3d ed. 1985) Attorneys, § 194, pp. 221-222.)”
(Levy
v.
Superior Court
(1995)
Thus in the circumstances of the instant case, no settlement can be specifically enforced against the Flick Parties pursuant to section 664.6 unless it can be found that the Flick Parties expressly consented in writing to the material terms of that settlement.
b. The controlling principles of contract law.
A settlement agreement is a contract, and the legal principles which apply to contracts generally apply to settlement contracts. (See, e.g.,
Gorman
“The existence of mutual consent is determined by objective rather than subjective criteria, the test being what the outward manifestations of consent would lead a reasonable person to believe.” (Meyer v. Benko, supra, 55 Cal.App.3d 937, 942-943.) Outward manifestations thus govern the finding of mutual consent required by Civil Code sections 1550, 1565 and 1580 for contract formation. (See also 1 Witkin, Summary of Cal. Law, supra, Contracts, § 119, p. 144 [“. . . the outward manifestation or expression of assent is controlling. Mutual assent is gathered from the reasonable meaning of the words and acts of the parties, and not from their unexpressed intentions or understanding.”].) The parties’ outward manifestations must show that the parties all agreed “upon the same thing in the same sense.” (Civ. Code, § 1580.) If there is no evidence establishing a manifestation of assent to the “same thing” by both parties, then there is no mutual consent to contract and no contract formation. (Civ. Code, §§ 1550, 1565 & 1580.)
In order for acceptance of a proposal to result in the formation of a contract, the proposal “must be sufficiently definite, or must call for such definite terms in the acceptance, that the performance promised is reasonably certain.” (1 Witkin, Summary of Cal. Law,
supra,
Contracts, § 145, p. 169.) A proposal “ ‘cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain. [*][]... The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.’ ”
(Ibid.,
quoting from Rest.2d Contracts, § 33.) If, by contrast, a supposed “contract” does not provide a basis for determining what obligations the parties have agreed to, and hence does not make possible a determination of whether those agreed obligations have been breached, there is no contract. (See, e.g., 1 Williston on Contracts (4th ed. 1990) § 4:18, p. 414 [“It is a necessary requirement that an agreement, in order to be binding, must be sufficiently definite to enable the courts to give it an exact meaning.”]; see also Civ. Code, § 3390, subd. 5 [a contract is not specifically enforceable unless the terms are
Ladas
v.
California State Auto. Assn.
(1993)
Peterson Development Co.
v.
Torrery Pines Bank
(1991)
Goldberg
v.
City of Santa Clara
(1971)
A related situation is distinguishable. There are occasions in which “minor matters” in elaborate contracts are left for future agreement. When this occurs, it does not necessarily mean that the entire contract is unenforceable. “The Restatement suggests as an illustration of this a building contract which is definite in all particulars except for a provision that the form of window fastening shall be afterwards be agreed upon .... This would not make the entire building contract unenforceable; by contrast, if the nature of the window fastenings was fixed by the agreement while the dimensions of the building were left to future agreement, there would be no enforceable obligation. Obviously, the question is one of degree; the question is whether the indefinite promise is so essential to the bargain that inability to enforce that promise strictly . . . makes it also unfair to enforce the remainder of the agreement. The more important the subject matter to be agreed upon, the more likely it is that the uncertainty will prevent or hinder enforcement. If the contract cannot be performed without settlement of the undetermined point ... the entire contract may fail.” (1 Williston on Contracts, supra, § 4:28, pp. 602-605, fns. omitted.) The “minor matter” situation is not presented in the instant case. If this “minor matter” body of law applied here, it might justify enforcement of the other provisions of the Deal Point Memorandum, with the issue of right to use the library reserved for trial. However, neither party has asked for that remedy, and Weddington specifically declined it when suggested during oral argument. Moreover, the record in the instant case makes clear that the Licensing Agreement is centrally material, and not a “minor matter.”
In
Chan
v.
Drexel Burnham Lambert, Inc.
(1986)
The purported settlement in the instant case, supposedly memorialized in the Deal Point Memorandum, thus might be enforcable even though all terms of the Licensing Agreement were not expressly stated in the Deal Point Memorandum. However, this could be true only if the parties had objectively manifested a “meeting of the minds” as to “all material portions” of the licensing agreement, perhaps by reference to a standardized document, so that their use of the terms “Licensing Agreement” and “fully paid-up license” could be found to have a specific, understood and agreed meaning.
Factual determinations made by a trial court on a section 664.6 motion to enforce a settlement must be affirmed if the trial court’s factual findings are supported by substantial evidence.
(In re Marriage of Assemi
(1994)
d. Application of the law to the facts of this case.
(1) The Licensing Agreement was material.
As the factual recitation above shows, the issue of the use of the sound library was a material issue to both sides. This is clearly not a case in which the terms of the Licensing Agreement can be regarded as a minor, immaterial or separable issue, and both parties acknowledge that. Therefore, if there was no licensing contract, there was no contract at all.
(2) The question is whether contract formation took place.
The analysis in the post-Deal Point Memorandum ADR proceedings and in the trial court seems to have been deflected off course by the settlement context and a fervor that ADR be successful. The fact that the context was one of settlement negotiation, however, has no analytical impact on the question of whether an enforceable contract was ever formed. Section 664.6 provides only for enforcement of settlement
contracts.
Contracts are formed in the same way in both the settlement and the nonsettlement context. (See, e.g., Civ. Code, § 1550 et seq. and discussion,
ante.)
The analysis necessary here may therefore be brought into sharper focus by parsing out and disregarding the settlement context. The ultimate issue here is simply whether the parties formed an enforceable licensing contract. The question can thus be stated as whether the record here would support a judgment that Weddington and the Flick Parties had agreed upon an enforceable license agreement. Clearly the answer is no. The facts clearly show that “mutual consent” to the “same thing” never occurred. Moreover, if the section 664.6 context is taken into account, the additional requirement of a signed writing must be satisfied. The evidence is uncontradicted that the parties never objectively manifested agreement, and certainly not in writing, to such material terms as the scope of the license, permitted uses, grounds and procedures for termination, indemnity provisions, whether the license would contain an arbitration clause or whether the right to jury trial would be preserved, etc. It is
(3) The White Point case.
White Point Co.
v.
Harrington
(1968)
The Court of Appeal reversed. “It is well established,” stated the Court of Appeal, that “ ‘[a]n agreement cannot be specifically enforced unless the terms are “sufficiently certain to make the precise act which is to be done clearly ascertainable.” (Civ. Code, § 3390, subd. 5.) It must not only contain all the material terms but also express each in a reasonably definite manner. [Citations.]’
(Spellman
v.
Dixon,
The Court of Appeal then turned to the trial judge’s efforts to create “a new agreement” for the parties, an effort similar to the one undertaken by the private judge in the instant case. These efforts were found invalid: “The court’s attempt to decree in the alternative that respondents pay cash for the property, or the parties negotiate in good faith acceptable terms for the release clause failed and the court was ultimately forced to its third alternative whereby the court supervised the drafting of the release clause. The court in this role in fact constructed, on the basis of judicial notice taken of legal custom and usage, a new agreement between the parties. ‘[I]t is a well-established principle that although custom is admissible for the purpose of interpreting the contract or agreement of the parties, or for furnishing details not expressly covered thereby, it is not admissible to
establish
a contract. [Citations.]’
(Magna Development Co.
v.
Reed, supra,
[
White Point
and the instant case are closely analogous. Both instances involve an attempt to conclude a contract, but a failure to agree on material terms. In
White Point,
the missing material terms were created by a superior
(4) The superior court’s order enforcing the private judge’s “order” was an error.
The superior court focused on what the private judge had considered and had “ordered.” To the extent that the superior court’s judgment was based simply on the proposition that the superior court should accept what the private judge had done, there is no legal basis for it, and it must be reversed. The private judge gained no authority from section 664.6 to select and impose the terms of a settlement agreement. There was no complaint for specific performance of a contract calling for some other form of ADR. 4 There was no complaint for declaratory relief regarding the effect of the ADR clause. The private judge could theoretically have been empowered to do what he did by an arbitration agreement, and the parties could hence have invoked the summary specific enforcement procedures of the Code of Civil Procedure relating to arbitration agreements, but both sides agree that they never did that. 5 The private judge himself hinted at the dubious validity of the post-Deal Point Memorandum ADR proceedings by commenting: “we’re treading on some new territory here in terms of the enforcement of a settlement and I’m perfectly comfortable going there because I know that that’s where our legal system is going . . . .” It thus appears hat the post-Deal Point Memorandum ADR proceedings were an attempt to “push the envelope” of section 664.6 into “new territory.” As the analysis above shows, these proceedings did push far beyond the boundaries of any existing legal authority.
To the extent that the superior court’s judgment may have been based upon a factual finding that the parties had reached an agreement as to license terms, it must be reversed since such a conclusion must be supported by substantial evidence. Moreover, it is undisputed that there was no “writing signed by the parties” setting forth the terms of the licensing agreement. Hence the only possible basis on which the judgment here could properly have been entered would be a theory that the Deal Point Memorandum incorporated the terms of a licensing agreement by reference. However, no one has ever made that argument in the trial court or on appeal, and neither
III. Discussion as to the Preliminary Injunction. *
IV. Disposition.
The judgment entered pursuant to section 664.6 is reversed, including the award of attorney’s fees to Weddington. The denial of the Flick Parties’ motion to enter the terms of the Deal Point Memorandum as a judgment pursuant to section 664.6 is affirmed. The preliminary injunction and the motion denying modification of the injunction are affirmed. In view of developments, the preliminary injunction is modified as stated in (unpublished) part HI, ante. Appellants to recover costs on appeal. The matter is remanded for further proceedings not inconsistent with this opinion.
Boren, P. J., and Nott, J., concurred.
Petitions for a rehearing were denied January 26, 1998, and January 28, 1998, and respondent’s petition for review by the Supreme Court was denied April 22, 1998.
Notes
Because the parties did not resolve their conflict quickly enough to satisfy the superior court judge hearing the contempt proceeding, that judge later recalendared the proceedings
Even if the ADR clause were interpreted as an arbitration clause, it would not appear to be self-executing inasmuch as the clause does not expressly authorize ex parte arbitration proceedings nor does it incorporate any body of established arbitral rules, let alone any that provide for ex parte proceedings. (See, e.g., 6 Witkin, Cal. Procedure, supra, Proceedings Without Trial, § 495, p. 924 [discussing the type of arbitration agreement that is effective without court order]; Knight et al., Cal. Practice Guide: Alternative Dispute Resolution (The Rutter Group 1997) ¶¶ 5:291 & 5:414.1 et seq., pp. 5-93, 5-128 to 5-175.) Since the ADR clause was not of the self-executing variety, and since no motion to compel arbitration was ever made, there is no legitimate issue of arbitration which could be raised by Weddington on appeal.
The only restrictions expressly stated in the Deal Point Memorandum were that Mr. Flick would return the “masters” and that all parties would “respect 3rd party restrictions (e.g. Disney).”
It seems doubtful that this ADR clause, given its ambiguities, would be specifically enforceable according to the general law of specific performance.
Nor was there a reference (see Code Civ. Proc., §§ 638 & 639), nor a temporary judge appointment (see Cal. Const., art. VI, § 21).
The Hick Parties also raise Evidence Code section 1152.5, which restricts the admissibility of “evidence of anything said or of any admission made in the course of [a] mediation.” The Hick Parties regard the post-Deal Point Memorandum ADR proceedings as a continuing mediation. They further contend that the Deal Point Memorandum should be specifically enforced without embellishment. They hence quite consistently contend that the transcripts of the post-Deal Point Memorandum ADR proceedings are not admissible in evidence. However, regardless of what the post-Deal Point Memorandum ADR proceedings should have been, they were not treated as a mediation by either Weddington, the private judge, or the superior court. If they had been so treated, the judgment now being reversed would never have been entered. In view of this fact and our disposition reversing the judgment, we need not entertain the Evidence Code section 1152.5 issue further.
See footnote, ante, page 793.