Gauss v. GAF Corp

In Gauss v. GAF Corp. (2002) 103 Cal. App. 4th 1110, a settlement was reached in an asbestos case between plaintiffs and the representative of an organization formed for the purpose of administering asbestos litigation. The amount due from one defendant was not stated in the terms of the settlement, and when enforcement was sought, that defendant refused to pay. (Gauss, supra, 103 Cal. App. 4th at pp. 1113-1115.) The nonsettling defendant in Gauss repeatedly contested the court's authority to enforce the settlement against it. (Id. at p. 1123.) Division Three of the First Appellate District held that the settlement was not enforceable under section 664.6 because a party had not signed and a material term was missing. (Gauss, supra, at p. 1113.) The defendant expressly authorized a third party entity to act as its exclusive agent in the defense and settlement of asbestos-related claims alleged against it. The Court of Appeal held that a settlement agreement signed by the designated agent on the defendant's behalf could not be enforced under Code of Civil Procedure section 664.6 because it had not been signed by the defendant personally. (Id. at p. 1113.) The Court concluded that "section 664.6, as construed by the Supreme Court in Levy, simply does not permit the use of its summary, expedited procedures to enforce a settlement agreement signed only by a party's agent." (Id. at p. 1121.) The Court refused to enforce a settlement under section 664.6 due to lack of a signature by a proper corporate representative, despite the fact the corporation had specifically designated the signatory as its " 'sole agent' " and given it " 'exclusive authority and discretion' " to settle the case. (Gauss v. GAF Corp., supra, 103 Cal.App.4th at pp. 1118-1119.) The court ruled that "settlements signed only by a 'claims manager,' or other agent of a party" could not be enforced under section 664.6. (Gauss v. GAF Corp., supra, 103 Cal.App.4th at p. 1122.) The appointed signer was an employee of an outside company the defendant had formed and contracted with to handle the multitude of mass tort actions in which it was involved. The signatory was not an officer or employee of the defendant. In Gauss the defendant argued that a signature by its exclusive agent was sufficient because "a corporation can only act through its employees and agents. " (Gauss v. GAF Corp., supra, 103 Cal.App.4th at p. 1118.) The court rejected this argument, noting, " Levy v. Superior Court (1995) 10 Cal.4th 578 made no such distinction." (Ibid.) In Gauss the plaintiff made a similar argument, claiming that refusing to enforce the settlement agreement because signed only by its designated agent would substantially interfere with settlement of mass tort actions. The court rejected this assertion, pointing out that the procedure under section 664.6 was " 'not exclusive' " but " 'merely an expeditious, valid alternative ... . ' " (Gauss v. GAF Corp., supra, 103 Cal.App.4th at p. 1122.) Rather, " 'settlement agreements may also be enforced by motion for summary judgment, by a separate suit in equity or by amendment of the pleadings to raise the settlement as an affirmative defense.' " (Ibid.) In that case, the trial court erred by enforcing mass tort settlement agreements against one defendant in the consolidated proceedings because (1) that defendant did not sign the agreements and (2) the agreements did not contain a material term specifying the defendant's share of the settlements. (Gauss, supra, 103 Cal.App.4th at pp.1116-1124.) As the Gauss court acknowledged, the Code of Civil Procedure section 664.6 motion is supported by a writing signed by the parties that contains the material terms of the agreement, the court "may consider evidence beyond this writing in deciding a section 664.6 motion . . . to determine what settlement terms the parties previously agreed upon." (Gauss, supra, 103 Cal.App.4th at p. 1123.) In sum, in Gauss v. GAF Corp. (2002), the defendant and other corporations expressly authorized another corporation (the agency) to handle the defense of, and settle, claims by asbestosis plaintiffs. That agency settled an action against GAF, but GAF refused to pay when a dispute arose over its settlement obligations. The trial court eventually granted the plaintiff's Code of Civil Procedure section 664.6 motion, but GAF appealed, contending it alone had the authority to settle for purposes of such a motion. The appellate court agreed, holding that despite GAF's express authorization of the agency's right to settle, section 664.6 required an agreement by a corporate officer. The Gauss court noted that the term "party" in section 664.6 means the specific person or entity by or against whom an action was brought. (Gauss, supra, at pp. 1118-1119.)