Sayta v. Chu (2017) – Parties Must Obtain Court Order To Retain Jurisdiction To Enforce After Dismissal

“Sayta subsequently brought a motion to enforce the settlement pursuant to section 664.6, alleging breach of a confidentiality provision and seeking liquidated damages. The trial court denied the motion on the merits and Sayta appeals Because the parties failed to request, before dismissal, that the trial court retain jurisdiction to enforce the settlement, or alternatively seek to set aside the dismissals, we find the court lacked jurisdiction to entertain the motion. We therefore reverse on that basis and do not reach the merits.”

Sayta v. Chu represents the importance of understanding civil procedure in crafting effective and enforceable settlement agreements.

Very few cases actually go to trial. Through all the posturing, law and motion, discovery and settlement discussions, attorneys are generally able to anticipate likely outcomes to obtain “good enough” results, without their clients paying for an answer to the question “who was right?”. (Or, put another way, settlement allows the parties to determine the outcome, while trial gives control over the outcome to the judge and jury.)

A “settlement agreement” is essentially a contract and is generally interpreted and enforced like a contract. This could create a problem of regression: settling a claim (like one for “breach of contract”) results in a “settlement contract”. The settlement contract could also be breached and enforced with a lawsuit, which can be settled with a settlement contract, which can be breached, etc., etc. Lawsuits could never be settled because the claim would only be deferred to the next lawsuit.

The California Code of Civil Procedure provides a solution. Section 664.6 says, “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 allows parties to craft their remedy and retain jurisdiction of the court to enter a judgment for that remedy. No new lawsuit, no trial, only judgment. For example, a landlord can settle with a defaulting/holdover tenant for possession of the rental unit, and the tenant’s failure to vacate results in a judgment for possession, just as if the parties had gone to trial. (This is important, because otherwise a “settlement agreement to vacate” is essentially a written contract seeking to avoid the “just cause for eviction” provisions of the Rent Ordinance through the “no waiver of tenants’ rights” provision. Case law wisely appreciates the distinction of a settlement agreement in this context.)

That said, such settlement agreements must be entered during actual litigation, and the court must retain jurisdiction conferred by litigation, or else it has no power over enforcement of the agreement. Or, in the words of longstanding authority: “Since subject matter jurisdiction cannot be conferred by consent, waiver, or estoppel, the court cannot ‘retain’ jurisdiction it has lost.” Wackeen v. Malis (2002) 97 Cal. App. 4th 429, 438.

The First District added, however, that “Wackeen does not stand for the proposition that parties may confer jurisdiction on trial courts by including language in a settlement agreement but not asking the court to retain jurisdiction.” Wackeen interpreted Section 664.6 to require that the request to retain jurisdiction “either in a writing signed by the parties or orally before the court”, and the court in Sayta found “before the court” to modify both “writing” and “orally”. (Although, a fair reading might have been “orally before the court or in writing.)

Settling parties generally dismiss the lawsuit(s) to end litigation. This interpretation means that parties seeking to retain jurisdiction before dismissing must actually get an order from the court to retain jurisdiction. As the court noted, “Although section 664.6 provides a valuable tool in aid of enforcing settlements, it does not float in the ether to be drawn upon whenever a party seeks enforcement”. Nonetheless, the court did send the moving party a lifeboat. “We express no view on whether remedies remain available to the parties under section 473”. (In other words, they can ask the court to excuse their mistake in dismissing the case so that the court never lost jurisdiction in the first place.)