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C.A.: Agreement to Pay $225,000 in ‘New Money’ Doesn’t Allow for Crediting Sum Already Paid
By a MetNews Staff Writer
A judge was unreasonable in accepting the representation of a roofing & paving company, sued it for wage and hour violations, that after it voluntarily handed over to five former employees the sum of about $112,000, which it reckoned to be the full amount owed, its later settlement for $225,000 in “new money” contemplated crediting the sum already paid, the Court of Appeal has held.
“New money means new money, not old money, Justice David A. Thompson of the Fourth District’s Div. Three said in an opinion filed Wednesday and not certified for publication.
The opinion reverses a judgment for the plaintiffs in the amount of $113,000 and directs the trial court “to enter a new judgment in favor of plaintiffs in the amount of $225,000 with no credit for the earlier payment.”
Orange Superior Court Judge Theodore Howard saw it differently. He observed in a ruling on Feb. 6, 2020 that the matter before him was the “plaintiffs’ motion to enforce that settlement—or more accurately to enforce it on plaintiffs’ interpretation of the terms.”
He rejected their reading of the agreement and accepted defendant Bishop, Inc.’s version of what was intended.
Reversal Explained
Thompson declared:
“The earlier payment was explicitly no strings attached. It was not part of a settlement agreement; it was simply Bishop’s calculation of what it owed the plaintiffs. The $225,000 ‘new money’ payment, on the other hand, was explicitly in exchange for plaintiffs releasing all their claims. Plaintiffs were entitled to a new $225,000 payment under the settlement agreement.”
In a letter accompanying the $112,000 payment (five checks totaling $112,410.66), Bishop, Inc. had said:
“Bishop is providing these payments in good faith based on its discovery of this inadvertent payroll error in 2016. These payments are not conditioned on any settlement or release proposal.”
The declaration that the $112,000 payment did not resolve the matter was cited by Thompson as conclusive that it was unrelated to the ultimate settlement for $225,000. His opinion rejects Bishop, Inc.’s argument that the payment did not cause an end to the litigation simply because the defendant expressly disavowed liability under causes of action alleging violations of its meal and rest-break obligations, so that those causes of action persisted.
Howard’s 2019n Ruling
Howard initially held, in 2019, that he could not order that the settlement agreement be enforced because there apparently had not been a meeting of minds, crediting a declaration by Bishop’s president that he thought the accord called merely for an additional $113,000 payment. The judge commented: “The cover letter would seem to say it all; however, there is one very curious sentence in the letter that now sits near the heart of the pending dispute. In the letter, defense counsel offered that ‘these payments are not conditioned on any settlement or release proposal.’ On its face, this just means that payments were admittedly owed and defendant was offering the money in good faith without quid pro quo. What the letter should have said was that plaintiffs’ acceptance and deposit of the funds would be treated as an accord and satisfaction for the aforementioned portion of their lawsuit.”
He gave plaintiffs Jacob Lorta and others the choice of accepting $113,000 as total damages or continuing to litigate. The plaintiffs challenged that ruling by way of a petition for a writ of mandate; Div. Three denied it summarily; the California Supreme Court granted review and retransferred the matter to the Court of Appeal with instructions to issue an alternative writ, which it did.
2020 Decision
In response, Howard issued his Feb. 6, 2020 ruling. In the order, noted that there was reference in the settlement agreement to “net payments” and said:
“If there is but one payment of $225,000, why include the word ‘net’ in the payments? The term ‘net’ seems to suggest the whole of all payments made to plaintiffs during the course of litigation, which includes credit for the $112,000.”
He continued: “Based on the whole of the evidence, this Court still believes that the parties did not have the requisite meeting of the minds to form any settlement since the money was the singular term that mattered.
“However, the [Court of Appeal] has ordered this Court to enter and ‘new and different order’ from that previous entered. Although the [Court of Appeal] did not specify what that order should be, this Court concludes that the only other alternative is to GRANT the motion to enforce the settlement but on the terms proposed by defendant….”
He said that $225,000 settles “all six causes of action,” with the $112,000 payment being applied to causes of action not pertaining to meal and rest-break violations, and $113,000, yet to be paid, covering those violations.
That resolution, he said, should “close it down for good.”
Thompson’s Opinion
Thompson was critical of Howard’s approach, saying the trial court “took the unusual step of essentially rewriting” the letter which accompanied the $112,000 payment.
“Describing the disclaimer as a ‘curious sentence, it went on to prescribe what, in its view, the letter should have said (accord and satisfaction), and then treated the letter as though it did say that,” he wrote, going to say:
“There is a distinct logical and legal fallacy in that reasoning: it treats the voluntary payment as though it settled plaintiffs’ wage claims. In other words, it treats Bishop’s letter as though it says what the court thought it should say, which is the opposite of what it actually says. What seems to have been lost on the court is that the payment was Bishop’s calculation of unpaid wages, not plaintiffs. Plaintiffs were still pursuing their wage claims. The subsequent settlement was for all claims, not just the meal and rest break claims. The cover letter accompanying the voluntary payment explicitly stated that acceptance of the payment was not connected to any settlement or release of a claim. That was not a ‘curious sentence’ in that letter—it was the lynchpin! Absent that sentence, the proffered payments potentially take on a completely different effect….
“The other flaw in the court’s reasoning is that it ignores the words of the settlement. Plaintiffs did not simply agree to release their claims in exchange for $225,000. It did so in exchange for $225,000 of new money. We conclude that a layperson would understand those words to unambiguously mean: money not yet paid. Indeed, given the existence of the prior payment, the only reason to include the words ‘new money’ is precisely to distinguish the settlement payment from the prior voluntary payment.”
The case is Lorta v. Bishop, Inc., G059175.
Tustin attorney Richard E. Donahoo joined with Stuart B. Esner of the Pasadena appellate law firm of Esner, Chang & Boyer in representing the plaintiffs. Acting for Bishop were Richard J. Simmons, Robert Mussig and Matthew G. Halgren of the downtown Los Angeles firm of Sheppard, Mullin, Richter & Hampton.
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