(photo, a member of the Warlocks)

Yesterday's ruling in Levitz v. the Warlocks is important to practitioners primarily as a reminder that an "agreement in principle" may not be an agreement at all; and, if the parties do reach a "conditional settlement" whose terms won't be performed within 45 days after agreement is reached: 

1. they must file a notice of conditional settlement with the Court;
2. the notice must specify the date by which dismissal is to be filed; and,
3. the plaintiff must serve and file a request for dismissal within 45 days after the date that the notice specifies for performance.

If the plaintiff does not file the required request for dismissal within the 45 day period, the Court "must dismiss the entire case unless good cause is shown why the case should not be dismissed.” Id. citing Cal. Rules of Court, rule 225(c) -- now Rule 3.185.

We do not expect to see many cases similar to Levitz where both plaintiff and defendants sought to re-schedule the matter for trial after they failed to reach an agreement "relating to complex rights relating to royalties and publishing in the music business," despite everyone's best efforts to do so. 

The lesson here is more for judges than for lawyers.  The record (detailed in the extended entry below) chronicles the events causing the trial court's justifiable frustration with predictions by counsel that settlement was "only a day away."     

Nevertheless, the Court of Appeal stressed that the trial court is not authorized by any Rule of Court or other authority, to dismiss an action as a sanction for the parties' failure to explain why their settlement negotiations failed to bear fruit.   

The appellate court explained its reversal of the trial court's dismissal as follows:    

 In their first communication with the court about their tentative settlement, the parties notified it they had a settlement “in principle,” meaning they had yet to fix its exact terms. A settlement with open material terms is not a “conditional settlement” [and therefore not subject to Rule 225 - now 3.185].  

To the contrary, it is not a settlement at all because, like all contracts, it is not binding until the settling parties agree on all its material terms. (citation omitted).  . . . A “conditional settlement” . . . involves a complete meeting of the minds but with some portion of it requiring more than 45 days for its performance.

Because the parties never entered into a binding settlement, rule 225 [now 3.185] did not apply. The court thus acted beyond its authority when it relied on [that rule] and we therefore reverse the dismissal and order the action’s reinstatement. "

Id. (emphasis added).  

The appellate court concludes its opinion by warning that a dismissal could never be ordered as a sanction against both parties because it harms only one -- the plaintiff.    

For the full text of the case, see Levitz v. The Warlocks - 2007 SOS 1195 and for the case chronology leading to the trial court's decision, see the extended entry below.  

The Court's frustration with the parties is understandable given the following chronology:

1. In early May 2005, appellant’s counsel filed with the court notice of a tentative settlement, telling the court that the parties had "ageed in principle to a settlement of this action in its entirety."
2. At that same time, appellant's counsel asked the trial court to set an OSC re: Dismissal for forty-five (45) days from the date of the notice to permit the parties to fully memorialize their agreement.
3. The court agreed, and set a hearing on an order to show cause for late June.
4. Before the hearing date, all parties requested a 30- day continuance, necessary to "overcome a 'few remaining hurdles' to a final settlement."
5. The court permitted the delay but ordered “no further continuances will be granted. If a dismissal is not filed by 7-19, all parties to file detailed declarations on 7-20-05.”
6. On the court-imposed deadline of July 20, 2005, respondents filed a declaration with the court reciting their failure to reach a final settlement despite everyone’s best efforts.
7. Respondents asked the court to set the matter for trial.

Hearing and the reversed dismissal followed.