EEOC v. Kidman dba RD's Drive In/Exxon, 9th Cir. Reply brief as cross-appellant May 9, 2005 Case Nos. 04-17005, 04-17489 IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff/Appellee/Cross-Appellant, and DORETTA BENALLY, ROXANNE CAHOON, FREDA DOUGLAS, and ELVA JOSLEY BEGAY, Plaintiff-Intervenor-Appellees/Cross-Appellants, v. RICHARD O. KIDMAN and SHAUNA KIDMAN, d/b/a RD's DRIVE IN/EXXON, Defendant/Appellants/Cross-Appellees. On Appeal from the United States District Court for the District of Arizona, No. CV 02-01911-SMM The Honorable Stephen M. McNamee, Presiding REPLY BRIEF OF THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION AS CROSS-APPELLANT ERIC S. DREIBAND SUSAN R. OXFORD General Counsel Attorney EQUAL EMPLOYMENT VINCENT J. BLACKWOOD OPPORTUNITY COMMISSION Acting Associate General Counsel 1801 L Street, N.W., Room 7010 Washington, D.C. 20507 LORRAINE C. DAVIS (202) 663-4791 Assistant General Counsel TABLE OF CONTENTS page Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . i Table of Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . ii ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 CERTIFICATE OF COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . 14 CERTIFICATE OF SERVICE TABLE OF AUTHORITIES page Federal Cases Callie v. Near, 829 F.2d 888 (9th Cir. 1987) . . . . . . . . . . . . . . . . 9 Ciaramella v. Reader's Digest Ass'n, 131 F.3d 320 (2d Cir. 1997) . . . 8, 9, 10 Doi v. Halekulani Corp., 276 F.3d 1131 (9th Cir. 2002) . . . . . . . . . . . . 10 Makins v. Dist. of Columbia, 277 F.3d 544 (D.C. Cir. 2002) . . . . . . . . 6 Reprosystem, B.V. v. SCM Corp., 727 F.2d 257 (2d Cir. 1984) . . . . . . 10, 11 R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69 (2d Cir. 1984) . . 10, 11 Sanchez v. City of Santa Ana, 915 F.2d 424 (9th Cir. 1990) . . . . . . . . 3 Skycom Corp. v. Telstar Corp., 813 F.2d 810 (7th Cir. 1987) . . . . . . . 11 United States v. United States Gypsum Co., 333 U.S. 364 (1948) . . . . 9 Winston v. Mediafare Entm't Corp., 777 F.2d 78 (2d Cir. 1986) . . . . . 8, 9, 10 Federal Rules Fed.R.App.P. 28(a)(9)(A) . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARGUMENT On cross-appeal, the Commission argued that the district court's enforcement order is properly construed to incorporate the details worked out by the parties on September 3, 2003, for each of the provisions enforced. It is the Commission's position that the district court's enforcement of Defendants' agreement to rescind their current English Language policy, ER561, 563, necessarily includes the four pre- conditions for any future re-adoption of an English-only policy, as reflected in handwritten "paragraph 15," drafted jointly by EEOC and Defendants' counsel on September 3, 2003. EEOC's Opening Brf at 48-53. Defendants' Answer Brief ignores completely this first cross-appeal argument. If this Court agrees with the EEOC's interpretation of the order below, then Defendants must concede that the four pre-conditions are part of the district court's enforcement order and judgment. As we explained in our opening brief, see id. at 50-52, the EEOC supported this initial argument by noting that on September 3, 2003, the parties crafted the specific language and details of implementation for several of the provisions the district court later enforced. For instance, before advising the magistrate on September 3rd that they had reached a settlement agreement, the parties worked out the specific language for the general injunctive paragraph, the "joint statement" to be signed by the Kidmans and intervenors, and the "notice" to be posted at RD's. See ER74 (EEOC Regional Attorney Mary Jo O'Neill testified that the parties negotiated the general injunctive paragraph and defense counsel David Selden added an extra sentence; the parties "spent quite a bit of time negotiating the exact words in" the agreed-upon joint statement); ER91-92 (O'Neill testified that Selden suggested substituting a joint statement for proposed letter of apology, and the parties worked together to draft statement's final language); ER181-83 (Selden testified he partially drafted joint statement and all parties agreed to it on September 3rd); ER187 (Selden testified he drafted the agreed-upon notice to be posted). The parties also worked out a detailed payment schedule for the $7,400 RD's agreed to pay the four intervenors. ER89 (O'Neill testified that defendants agreed to pay $1,000 to intervenors within 30 days and $400 a month for the next 16 months totaling $7,400 to be divided among the four women); ER259-60 (Shauna Kidman testified there was agreement to pay the four women $7,400 in specified monthly installments). It was these specific provisions, among others, that the Commission later sought to enforce. See R.130, Exh. A (Decl. of Mary O'Neill appended to EEOC's motion to enforce settlement agreement), ¶¶ 8-10 & Att. 1; ER281 (district court understood EEOC sought to enforce the "11 essential terms" from the September 3rd negotiations). The district court's opinion offers no suggestion that it intended the parties to craft a new injunctive paragraph, "joint statement," "notice," or payment schedule. Although the district court did not expressly reference the language the parties agreed to on September 3rd, see ER563, 570, there can be no serious dispute that the district court's order and judgment enforces these specific terms. As we argued in our opening brief at pp 52-53, the same reasoning dictates that the district court's directive that Defendants rescind their current English Language policy, ER563, 569, is properly construed to include the four pre-conditions for any future re-adoption of an English-only language restriction at RD's as specified by the parties on September 3, 2003, when they drafted "paragraph 15." See ER 401-03. Viewed in this light, moreover, the settlement agreement enforced by the district court does not "fail[] for lack of specificity," as Defendants assert. RD's Reply/Ans Brf at 45-47. Rather, when the district court's order is properly interpreted by reference to the precise language the parties fashioned on September 3rd, the order is sufficiently specific to allow the parties to ascertain their respective obligations.<1> All the district court did here was order the parties to do what the court found, as a matter of fact, they had already agreed to do. It is simply not accurate to state, as Defendants assert, that "[t]he District Court found that the Kidmans agreed only to rescind their current policy whereas the EEOC now insists that the Kidmans agreed to something more." RD's Reply/Ans Brf at 45 (emphasis added). As explained above, the evidence demonstrates that the terms to which the parties agreed on September 3rd include the handwritten "paragraph 15," the wording of which was drafted, in its entirety, jointly by EEOC counsel and Defendants' counsel on that day. See ER85-86, 179-80. The district court acknowledged in its opinion that the Defendants had agreed to these pre-conditions for re-adoption, stating: "[T]he requirements for reinstating an English-only policy [are] separately addressed in both parties' proposed settlement documents." ER559. Nothing in the district court's opinion expressly indicates, or even suggests, that the district court "found" that the Kidmans agreed only to rescind their current policy. Rather, it appears the district court merely used a short-hand means of indicating the terms to which the parties had agreed. At the same time, the district court expressly acknowledged, in its opinion, that the Kidmans had agreed, as part of the settlement, to satisfy certain jointly- crafted pre-conditions before an English-only policy can be reinstituted at RD's. In sum, the EEOC's primary argument, to which RD's makes no answer, is that properly understood, the district court's order incorporates the Kidmans' agreement to satisfy the four pre-conditions in handwritten "paragraph 15" before re-adopting an English-only policy at RD's in the future. The Commission argues, in the alternative, that if this Court does not construe the district court's enforcement order to incorporate the pre-conditions of "paragraph 15," then the district court abused its discretion by not enforcing those agreed-upon preconditions. In addressing this point, Defendants ignore the critical fact that the principal decisionmakers (Richard & Shauna Kidman) were physically present during the entire day of negotiations on September 3rd and admitted in their hearing testimony that their attorney kept them apprised throughout the negotiations. Defendants' assertion that when the parties told the magistrate they had settled the case, the defendants meant only they would "consider draft language" for the various provisions discussed that day, RD's Reply/Ans Brf at 44, is not plausible, given the events that transpired that day. A critical problem with this argument is that for most of the terms the court enforced, including the rescission of RD's English- only policy, the specific language was actually drafted during the settlement negotiations, in the Kidmans' presence. Thus, this is not a situation where counsel negotiated in a client's absence, giving rise later to a factual question as to whether the client actually authorized his or her attorney to settle on those terms. See, e.g., Makins v. Dist. of Columbia, 277 F.3d 544, 549 (D.C. Cir. 2002) (addressing whether to enforce a settlement negotiated by plaintiff's counsel in plaintiff's absence, where counsel did not have actual authority to settle but led opposing counsel to believe that he did). Here, the entire negotiations took place in the presence of, and with the direct involvement of, the principals. Defense counsel Selden conferred with Defendants Richard and Shauna Kidman throughout the day. ER290 (Richard Kidman testified that they "considered lots of different terms," and Selden would talk with plaintiff's counsel "and then he'd come back and we'd talk and then he'd go back. He went back and forth many, many times"). Richard Kidman's testimony that he did not think the parties were agreeing to specific settlement terms that day, see ER291, 295, 306-07, is critically undermined by his testimony that he knew they had "agreed on some things that would . . . stay [in the agreement] when it got into writing," ER305, and if he had been presented on September 4th with a document that accurately reflected the parties' September 3rd agreement, he would have signed it that day. ER307-08. The district court, recognizing these testimonial inconsistencies, did not credit Richard Kidman's testimony that he was unaware his attorney was representing to the magistrate that the parties had settled the case. ER560. This credibility determination is supported by the evidence. Thus, it is not "clearly erroneous" and must be upheld on appeal. EEOC Opening Brf at 23-24. Even if, however, the district court had credited the Kidmans' testimony concerning their alleged subjective beliefs, their objective words and actions (including their failure to tell the magistrate they didn't feel bound by anything until it was in writing, see ER308), would still warrant a finding that they had assented to the settlement on September 3rd. Id. at 22-23, 25-26. It is especially unpersuasive for Defendants to make this argument – that all they agreed to on September 3, 2003, was to consider draft settlement language once it was prepared – with respect to the agreement to rescind RD's English-only policy. RD's Reply/Ans Brf at 44. As noted above, this particular settlement provision ("paragraph 15") was handwritten jointly on September 3, 2003, by several individuals, including defendants' counsel. Defendants were in the room when the pre-conditions for readoption of an English-only policy at RD's were meticulously crafted with the active participation of Selden. There can be no possible confusion over the substance of the parties' agreement on this settlement term. There is no merit, furthermore, to Defendants' argument that the Commission's cross-appeal demonstrates the "complexity" of this settlement and that, based on this "complexity," the EEOC could not have reasonably expected Defendants to bind themselves absent a written agreement signed by the parties. See RD's Reply/Ans Brf at 48-50. Defendants rely on two cases where, based on the particular facts of those cases, the Second Circuit found "clearly erroneous" the district court's conclusion that parties agreed to be bound by an oral agreement to settle a case. See Ciaramella v. Reader's Digest Ass'n, 131 F.3d 320 (2d Cir. 1997); Winston v. Mediafare Entm't Corp., 777 F.2d 78 (2d Cir. 1986). These Second Circuit decisions, however, support the well-grounded determination below to enforce the settlement agreement in this case. First, Ciaramella and Winston reaffirm the fundamental tenet of contract law that the parties' intent governs. See Ciaramella, 131 F.3d at 322; Winston, 777 F.2d at 80. Thus, parties negotiating a settlement agreement are not barred from entering into "complex" agreements orally. "[P]arties are free to bind themselves orally, and the fact that they contemplate later memorializing their agreement in an executed document will not prevent them from being bound by the oral agreement." Ciaramella, 131 F.3d at 322. Parties are equally free to specify that they intend not to be bound until the agreement is reduced to writing and signed. Deciding which intent existed in a given situation "is a question of fact, to be determined by examination of the totality of the circumstances." Id.; Callie v. Near, 829 F.2d 888, 890-91 (9th Cir. 1987) (remanding for evidentiary hearing on factual question of whether parties intended to be bound only upon execution of a written, signed agreement); see also Winston, 777 F.2d at 80 ("To discern [the parties'] intent a court must look to ‘the words and deeds [of the parties] which constitute objective signs in a given set of circumstances.'"). Moreover, on appeal a reviewing court will not reverse a district court's factual determination on this point unless the reviewing court is left with a definite and firm conviction that the district court erred. Ciaramella, 131 F.3d at 323 (citing United States v. United States Gypsum Co., 333 U.S. 364, 395-97 (1948) (finding clear error where trial court's findings conflicted with uncontroverted documentary evidence)). As we explained in our opening brief, the district court here examined the totality of the circumstances, considering 52 documents and the testimony of seven witnesses over the course of a two-day hearing. The district court looked at the parties' objective manifestations of intent and found, as a matter of fact, that the Kidmans had agreed on September 3, 2003, to the nine settlement terms they later sought to disavow. The district court reached this factual finding notwithstanding the Kidmans' testimony that they did not think they were agreeing to a settlement that day. The district court assessed this testimony in light of the Kidmans' demeanor as well as all of the other evidence, and concluded Defendants had agreed to a settlement based on the nine enforced terms. Significantly, neither Ciaramella nor Winston involved a settlement arrived at in the presence of the court, as happened here. See Ciaramella, 131 F.3d at 321 (parties exchanged draft settlement agreements over the course of several days or more, all outside court's presence and without court's involvement); Winston, 777 F.2d at 79 (settlement negotiations occurred over several months, all outside court's presence). When settlement negotiations take place outside the court's presence, it may be more difficult for a court to determine later whether the parties ever actually reached a final agreement to resolve their legal claims. See Doi v. Halekulani Corp., 276 F.3d 1131, 1137-38 (9th Cir. 2002) (distinguishing Ciaramella on grounds that all discussions regarding settlement took place outside of court). In such a situation, the Second Circuit has applied four factors to guide the court's determination, one of which involves the "complexity" of the underlying agreement. See, e.g., Ciaramella, 131 F.3d at 323.<2> As noted above, however, the Second Circuit has not held that a "complex" matter cannot be resolved by oral agreement. Rather, where the parties dispute their intent to be bound by an oral agreement and the court has no first-hand knowledge that a settlement was reached, the complexity of the underlying agreement is one factor to consider in resolving the parties' opposing positions on the enforceability of the agreement. The four Second Circuit factors, although perhaps useful in the contexts in which they were applied in Ciaramella and Winston, are inapposite in cases such as this, where the evidence before the district court includes the fact that the parties negotiated in the magistrate's chambers and then announced to the magistrate, at the end of the day, that they had reached a settlement, and reiterated that announcement to the district court shortly thereafter. The Second Circuit factors are even less useful where parties' subsequent correspondence expressly stated they were working out language to document the settlement agreement reached on September 3, 2003, not continuing to negotiate the terms of the settlement itself. See EEOC Opening Brf at 7-9. The Commission acknowledges that Defendants did not agree to a permanent discontinuation of their English-only policy, and it is unclear why Defendants belabor this point in their Answer Brief. RD's Reply/Ans Brf at 45. In the settlement negotiated on September 3, 2003, Defendants agreed simply to suspend their current English-only policy and to withhold any reinstatement of such a policy during the settlement agreement's two-year duration unless they first undertook four specified pre-conditions: (1) attempt to address any employee difficulties through other means; (2) limit the scope of the policy so it does not ban the use of other languages during breaks and for personal phone calls; (3) discuss the new policy in advance with affected employees; and (4) permit the EEOC to comment on the proposed policy prior to implementation. The Commission never sought to enforce anything more than this.<3> The district court's decision expressly acknowledged that the parties agreed on September 3rd to these four pre-conditions for readoption. That factual finding by the court is amply supported by hearing testimony and documentary evidence. Given this finding, ER559, if this Court does not construe the district court's enforcement order to encompass these pre-conditions, the Commission respectfully urges this Court to hold that the district court's failure to include the pre-conditions in the enforcement order constitutes an abuse of the district court's discretion. CONCLUSION For the reasons stated above and in the Commission's initial brief, we respectfully urge this Court to clarify that the portion of the district court's order enforcing Defendants' rescission of RD's English language policy necessarily incorporates the four pre-conditions to which Defendants agreed on September 3, 2003, for any future re-adoption of an English-only policy. In the alternative, if this Court finds that the four pre-conditions are not part of the district court's enforcement order, we urge this Court to hold that the failure to include the agreed-upon pre- conditions constitutes an abuse of the district court's discretion, and add those conditions to the enforcement order. For the reasons stated in the Commission's initial brief, we respectfully urge this Court to affirm the district court's order and judgment in all other respects.<4> Respectfully submitted, ERIC S. DREIBAND General Counsel VINCENT J. BLACKWOOD Acting Associate General Counsel LORRAINE C. DAVIS Assistant General Counsel SUSAN R. OXFORD, Attorney U.S. Equal Employment Opportunity Commission 1801 L Street, N.W., Room 7010 Washington, D.C. 20507 (202) 663-4791 susan.oxford@eeoc.gov Dated: May 16, 2005 CERTIFICATE OF COMPLIANCE I certify that this brief complies with the type-volume limitation set forth in Fed. R. App. P. 32(a)(7)(B). The brief contains 3,471 words. See Fed. R. App. P. 32(a)(7)(B)(i). The brief was prepared using the WordPerfect 9 word processing system, in 14-point proportionally-spaced type for both text and footnotes. See Fed. R. App. P. 32(a)(5). May 16, 2005 Susan R. Oxford CERTIFICATE OF SERVICE I, Susan R. Oxford, hereby certify that on this 16th day of May, 2005, I caused fifteen (15) copies of the attached Reply Brief to be sent by United States Postal Service regular mail, postage prepaid, to the Clerk of the Court for the U.S. Court of Appeals for the Ninth Circuit, and two copies to be sent by the same means, on the same date, to counsel of record in this case at the following addresses: Joseph F. Becker, Esq. MOUNTAIN STATES LEGAL FOUNDATION 2596 South Lewis Way Lakewood, Colorado 80227 Franklin J. Hoover, Esq. MANGUM WALL STOOPS & WARDEN PLLC 100 N. Elden; P.O. Box 10 Flagstaff, Arizona 86002-0010 Susan R. Oxford Attorney EEOC / Office of General Counsel 1801 L Street, N.W., Room 7010 Washington, D.C. 20507 Tel. (202) 663-4791 Fax. (202) 663-7090 ********************** <1> Defendants argue, in addition, that the entire settlement agreement is unenfor ceable because two other directives in the district court’s enforcement order lack sufficient specificity – (1) the requirement that the parties’ settlement of this matter be reflected in a settlement agreement filed with the district court, not a consent decree as EEOC had sought, ER560, 563, and (2) the requirement that the parties “organize and participate in a community symposium.” ER563. See RD’s Reply/Ans Brf at 47-48. This argument was never asserted in Defendants’ opening brief and is not responsive to the EEOC’s cross-appeal. It is, therefore, not properly asserted for the first time in Defendants’ Joint Reply/Answer Brief. If Defendants had wished, on appeal, to challenge the district court’s enforcement order as unenforceable on the grounds that some of the terms are ambiguous, they were required to raise that argument in their opening brief. See Fed.R.App.P. 28(a)(9)(A) (argument section of opening brief must contain appellant’s contentions and the reasons for them); Sanchez v. City of Santa Ana, 915 F.2d 424, 430 (9th Cir. 1990) (“As a general rule, an appellant may not raise an argument for the first time in a reply brief.”) (citation omitted). There is no reason to deviate from this rule here, and this Court should treat this argument as waived. In any event, the district court’s directives that the parties file a settlement agreement with the court and organize and participate in a community symposium, ER 569-70, are, on their face, clear enough to be reasonably understood and implemented by the parties. Furthermore, it is premature at this point for Defendants to argue that the parties are unable to agree on the content of a settlement agreement or the format for a community forum, since Defendants have not yet even attempted to discuss these items with the Commission and the Intervenors. If the parties run into difficulties implementing these terms because, in the Defendants’ words, the parties “remain at odds,” RD’s Reply/Ans Brf at 47-48, the district court has retained jurisdiction to enforce or clarify any terms that may warrant such assistance from the district court. See R.156 (ER571-72). Thus, even assuming the parties might disagree on how to implement these two points, that potential for disagreement does not warrant reversal of the district court’s enfor cement order. <2> The four factors cited in Ciaramella and Winston derive from New York contract law. See R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69, 75-76 (2d Cir. 1984). Defendants cite R.G. Group and Reprosystem, B.V. v. SCM Corp., 727 F.2d 257 (2d Cir. 1984), as additional support that the parties in the present matter did not intend to bind themselves orally to this settlement agreement given its allegedly “complex” nature. See RD’s Reply/Ans Brf at 49-50. Both R.G. Group and Reprosystem, however, involved disputes arising from oral negotiations of complex business arrangements between two corporate entities, not enforcement of a settlement agreement. See R.G. Group, 751 F.2d at 70-71 (plaintiff sought to enforce alleged oral franchise agreement to operate 20 fast-service restaurants in Texas); Reprosystem, B.V., 727 F.2d at 259-60 (plaintiff sought to enforce alleged oral contract to purchase six foreign subsidiaries of defendant for $9 million). The “complexity” of the disputed business agreements in these two cases is of a vastly different magnitude than the settlement involved here. See, e.g., Skycom Corp. v. Telstar Corp., 813 F.2d 810, 815-16 (7th Cir. 1987) (describing Reprosystem as involving a “large-scale corporate transfer” and noting the qualitative difference in complexity between that and more “simple” business transactions, such as the lease of a computer by one company to another). <3> As we noted in our opening brief on the cross-appeal (at p.49 n.9), the district court misread this provision slightly, erroneously suggesting RD’s future readoption of “any English-only policy was subject to EEOC approval.” Slip op. at 11 (ER560). The parties agreed only to give EEOC an opportunity to comment on the proposed policy five days prior to implementation. <4> Defendants urge this Court to vacate the district court’s decision “with instructions either to dismiss with prejudice or to proceed with a trial on the merits.” RD’s Reply/Ans Brf at 48, 50. Defendants offer no basis, and none exists here, for a dismissal of the EEOC’s lawsuit with prejudice if this Court should reverse the district court’s enforcement order.