Opinion
B285796
02-05-2020
DARE 2 CARE, INC., Plaintiff and Appellant, v. LOS ANGELES DEVELOPMENT SERVICES FOUNDATION, Defendant and Appellant.
Daily Aljian, Justin E.D. Daily; Law Office of Bruce Adelstein and Bruce Adelstain for Plaintiff and Appellant. Musick, Peeler & Garrett and Kenneth G. Katel for Defendant and Appellant.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. BC565469) APPEALS from a judgment of the Superior Court of Los Angeles County. Joseph R. Kalin, Judge. (Retired judge of the L.A. Sup. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) Reversed with directions. Daily Aljian, Justin E.D. Daily; Law Office of Bruce Adelstein and Bruce Adelstain for Plaintiff and Appellant. Musick, Peeler & Garrett and Kenneth G. Katel for Defendant and Appellant.
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Both parties appeal from a judgment following a jury trial. Plaintiff Dare 2 Care, Inc. (Dare 2 Care) prevailed at trial on a breach of contract claim against defendant Los Angeles Development Services Foundation (doing business as the Frank D. Lanterman Regional Center (Regional Center)). Dare 2 Care is a residential care facility that contracted with the Regional Center to provide live-in services to developmentally disabled persons. The Regional Center operates under contract from the California Department of Developmental Services (DDS) to coordinate services for persons with developmental disabilities pursuant to the Lanterman Developmental Disabilities Services Act. (Welf. & Inst. Code, § 4500 et seq.)
Dare 2 Care alleged that the Regional Center breached its contract with Dare 2 Care by unilaterally reducing the amount the Regional Center paid Dare 2 Care for its services. Dare 2 Care argues on appeal that the damages the jury awarded were too low, and that the trial court improperly set off the damage award against a malpractice settlement that Dare 2 Care obtained against its former lawyers. Dare 2 Care also asserts a number of trial errors relating to damages. On the other hand, the Regional Center argues in its cross-appeal that Dare 2 Care previously released its breach of contract claim in settling proceedings relating to a prior audit of Dare 2 Care's operations by the Regional Center.
We address only one argument on appeal, which is dispositive of all the others. The release that Dare 2 Care previously executed is unambiguous in stating that Dare 2 Care released all claims "pertaining to the matters which are the subject of" findings concerning the prior audit and subsequent proceedings. Dare 2 Care made breach of contract arguments in those proceedings that are identical to its breach of contract claim in this case. Thus, its breach of contract claim was released as one of the "matters" that were the subject of the prior audit proceedings. No extrinsic evidence points to any other interpretation, and Dare 2 Care's breach of contract claim is therefore barred as a matter of law.
That claim was the only cause of action on which Dare 2 Care prevailed, and it has not appealed the trial court's ruling directing a verdict in favor of the Regional Center on Dare 2 Care's other claims. Judgment must therefore be entered in favor of the Regional Center.
BACKGROUND
1. The Payment Agreement
The Regional Center and Dare 2 Care entered into a contract on September 25, 2003, governing the rates for services Dare 2 Care was to provide (the Payment Agreement). The Payment Agreement stated that the "total monthly reimbursement for specialized residential facility/habilitation services shall not exceed $81,504. The service cost per month per consumer shall be arrived at by dividing the total amount of $81,504, by the total number of placements." The $81,504 figure was based on three residents, and was supported by a line-item monthly cost "projection."
Following the state budget crisis in 2008, the Regional Center implemented various rate cuts. In 2010, the parties discussed various proposals for reductions in payments and services but did not reach an agreement. In February 2011, the Regional Center stated that it intended to reduce the monthly payment per resident from $21,168 to $13,584. Dare 2 Care did not agree to the reduction. In April 2011 the Regional Center began to pay only a reduced rate of $13,047.52 ($13,584 with a mandated 4.25 percent rate reduction).
2. The Audits
The Regional Center audited Dare 2 Care in 2009, resulting in a finding of an overpayment of $59,713.51 for budgeted costs and $8,494.41 for technician hours that were not provided. The DDS affirmed the findings.
The Regional Center conducted another audit in 2012 for the period April 2011 through May 2012. A draft audit report dated September 5, 2012, found overpayments of $107,679.97, consisting of $21,825.37 for failure to provide psychiatric technician hours, $28,299.29 for failing to provide direct care staffing hours, and $57,555.31 for underpayment of the psychiatric technician salary. By separate letter, the Regional Center also informed Dare 2 Care that it was terminating its status as a vendor.
Dare 2 Care objected to the audit findings through its counsel, Gould & Hahn, in a letter dated October 8, 2012. One of the grounds for the objection was that "[f]ollowing [the Regional Center's] breach of contract and notice to Dare to Care that it was reducing its funding in excess of 50%, Dare 2 Care was released from its duty to provide services as defined in its original Program Design."
The Regional Center issued a final report on March 25, 2013, affirming its audit findings (Final Audit Report). Dare 2 Care appealed the audit findings to the DDS. In a letter dated November 15, 2013 (Letter of Findings), the DDS partially upheld the audit findings, concluding that Dare 2 Care was required to reimburse the Regional Center $50,124.66 for the failure to provide staffing hours as required in the program design.
Dare 2 Care exercised its right to appeal the DDS findings through an administrative hearing. Dare 2 Care filed its position statement concerning the appeal with the Office of Administrative Hearings on April 14, 2014. The position statement included a lengthy chronology under the heading "[Regional Center's] Breach of its Payment Agreement with Dare 2 Care." The chronology concluded with the statement that the Regional Center's "unilateral rate reduction [to $13,047.52 per client month] constituted a material breach of [the Regional Center's] obligation to reimburse Dare 2 Care at the agreed rate of $81,504 per month under the Payment Agreement." The argument section of the position statement similarly contained an argument that, as a result of the Regional Center's "material breach of the Payment Agreement, Dare 2 Care's obligation to continue to provide the hours set forth in its original Program Design was excused."
3. The Settlement Agreement and Release
After the administrative hearing had begun, the parties agreed to a settlement. They executed a settlement agreement (Settlement Agreement) with an effective date of April 16, 2014.
As background for the settlement, the recitals in the Settlement Agreement identified the Final Audit Report, the DDS Letter of Findings, and Dare 2 Care's administrative appeal (Appeal). The final recital stated that "[t]he Parties desire to resolve all matters raised in the Final Audit Report, the Letter of Findings, and the Appeal."
The Settlement Agreement contained a mutual release (Release), but did not require the payment of money by either party. The parties agreed to release each other "from liability for any and all claims and causes of action, of every kind and nature whatsoever, whether now known or unknown, suspected or unsuspected, which the [sic] each of the Parties currently have, own, or hold, or has ever had, owned, or held at any time in the past, or may ever have, own, or hold at any time in the future, pertaining to the matters which are the subject of the Final Audit Report, Letter of Findings and the Appeal (the 'Released Claims'); provided, however, that the Released Claims do not include the Parties' obligations under this Agreement, or any other documents executed in connection with this Agreement."
The Settlement Agreement also provided that the parties were to "meet and confer in good faith regarding the hours required to be provided by [Dare 2 Care] under the Payment Agreement with [the Regional Center] within thirty (30) days of the Effective Date, and to reach a mutually-acceptable written agreement regarding the exact number of hours to be provided within sixty (60) days of the Effective Date." The parties did in fact meet following the settlement, but were unable to agree on a new rate. Dare 2 Care ceased operating in April 2015.
4. Dare 2 Care's Lawsuits
Dare 2 Care filed this action against the Regional Center on February 23, 2015. Its operative first amended complaint (FAC) alleged eight causes of action for: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) services rendered; (4) money had and received; (5) open book account; (6) intentional interference with prospective economic advantage; (7) negligent interference with prospective economic advantage; and (8) interference with contract.
The Regional Center filed an answer on August 21, 2015. The answer asserted an affirmative defense of settlement and release, which was based upon the Release in the Settlement Agreement.
On September 24, 2015, Dare 2 Care filed a malpractice action (Malpractice Action) against Gould & Hahn, its counsel in the Appeal, and individual lawyers in the firm who had handled the appeal. The complaint alleged that the defendants had advised Dare 2 Care that its breach of contract claims "were beyond the scope of the release provisions of the Settlement and Release Agreement and, therefore, Plaintiff could prosecute the Breach of Contract Claims against the [Regional Center] at a later date." The complaint noted that the Regional Center had asserted the affirmative defense of settlement and release in its answer in this action. The complaint alleged that "Defendants breached their duty of care to Plaintiff by providing Plaintiff with inaccurate, false, uninformed or otherwise inadequate legal advice and assistance relating to, among other things, the Agreement; the Settlement and Release Agreement; the Breach of Contract Claims; and the Audit."
The Malpractice Action settled in July 2016 for $444,500, which was the "total amount of available insurance coverage" remaining on the firm's insurance policy.
Meanwhile, this action proceeded toward trial. Prior to trial, the Regional Center moved for judgment on the pleadings on the ground of judicial estoppel. The Regional Center argued that Dare 2 Care's position in this action that the Release did not bar its claims was inconsistent with its allegations in the Malpractice Action that it suffered damages based upon its former counsel's incorrect advice concerning the scope of the Release.
After a bench trial on the issue, the trial court denied the Regional Center's judicial estoppel motion, finding that Dare 2 Care's position in the Malpractice Action was not "totally inconsistent" with its position in this case. The court concluded that, in the Malpractice Action, Dare 2 Care alleged that its lawyers provided " 'inaccurate, false, uninformed or otherwise inadequate legal advice and assistance.' " However, Dare 2 Care "did not affirmatively allege that its present claims were barred by the release." Rather, "it alleged that the attorneys were negligent because they did not consider or advise that the terms of the release could be used as a defense against the present claims."
The case was tried to a jury in April 2017. At the conclusion of Dare 2 Care's case the Regional Center moved for a directed verdict. The trial court granted the motion with respect to all of Dare 2 Care's causes of action except for its first cause of action for breach of contract. The trial court rejected the Regional Center's argument that the breach of contract cause of action was barred as a matter of law by the Release, concluding that there were "issues of fact for the jury."
On the special verdict form, the jury found that Dare 2 Care did not release its claims against the Regional Center for breach of contract. The jury found that Dare 2 Care was damaged and awarded damages of $200,000.
Following trial, the Regional Center filed a motion requesting that the damage award be offset by the amount that Dare 2 Care had received in settling the Malpractice Action. The trial court granted the motion, finding that Dare 2 Care "has been fully compensated for its losses" as a result of the $444,500 settlement payment. The court concluded that Dare 2 Care sought recovery for the same injury in the Malpractice Action and in this action, and that the "damages which caused plaintiff to file the malpractice action were the contract damages in this case."
In light of the set-off, the trial court entered a judgment ordering that Dare 2 Care take nothing from the Regional Center and awarding costs to the Regional Center.
DISCUSSION
1. Legal Principles Concerning Interpretation of the Release
A settlement agreement is interpreted under the principles applicable to contracts generally. (Shine v. Williams-Sonoma, Inc. (2018) 23 Cal.App.5th 1070, 1080 (Shine).) "A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful." (Civ. Code, § 1636.) If possible, intent should be determined from the language of the agreement. However, if a contract is ambiguous on its face, or if parol evidence shows that it is reasonably susceptible to two or more interpretations, extrinsic evidence may be considered. (Bill Signs Trucking, LLC v. Signs Family Limited Partnership (2007) 157 Cal.App.4th 1515, 1521 (Bill Signs Trucking).) Extrinsic evidence is admissible if it is "relevant to prove a meaning to which the language of the instrument is reasonably susceptible." (Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33, 37 (PG&E).)
The trial court's threshold determination of whether an ambiguity exists that justifies consideration of extrinsic evidence is a question of law that we review independently on appeal. (San Pasqual Band of Mission Indians v. State of California (2015) 241 Cal.App.4th 746, 756 (San Pasqual).) If the extrinsic evidence is not in conflict, the trial court's interpretation of the contract is also subject to independent review. (Bill Signs Trucking, supra, 157 Cal.App.4th at p. 1521.) However, if the extrinsic evidence conflicts, an appellate court must uphold any reasonable construction that is supported by substantial evidence. (Ibid.)
Here, the trial court allowed the jury to decide whether Dare 2 Care released its breach of contract claim. The court therefore implicitly decided that there was conflicting evidence concerning the scope of the Release that the jury needed to resolve. 2. The Release Applies by Its Terms to Disputed Matters Addressed in the Final Audit Report, Letter of Findings, and the Appeal
We disagree with the trial court's conclusion that there were issues of fact for the jury to decide. At least as is relevant to this case, there is no ambiguity in the scope of the Release, and we therefore interpret it as a matter of law.
The Release expressly applies to "any and all claims and causes of action . . . pertaining to the matters which are the subject of the Final Audit Report Letter of Findings and the Appeal." The "matters" that are the "subject" of the Final Audit Report, Letter of Findings, and the Appeal plainly include at least those disputes at issue that those documents actually addressed.
The Final Audit Report and Letter of Findings are specific documents. The Appeal is defined as a proceeding rather than a document, but the issues in the Appeal are identified in the documents that the parties submitted.
The operative terms in the Release have common meanings that support this conclusion. A "matter" includes "a subject under consideration," a "subject of disagreement or litigation," or "something to be proved in law." (See <https://www.merriam-webster.com/dictionary/matter> [as of Jan. 13, 2020], archived at <https://perma.cc/V8JD-RUDE>.) The term "matters" in the Release is plural, recognizing that there are multiple subjects addressed in the Final Audit Report, Letter of Findings, and the Appeal. And a "subject" in this context is simply "something concerning which something is said or done." (See <https://www.merriam-webster.com/dictionary/subject> [as of Jan. 13, 2020], archived at <https://perma.cc/7V2A-ERD3>.) Thus, the "matters" within the scope of the Release include at least those subjects in dispute that the identified documents discussed.
The Settlement Agreement as a whole also supports this interpretation. "As with any contract, the language of a settlement agreement must be viewed in its entirety, and, if possible, every provision must be given effect." (Shine, supra, 23 Cal.App.5th at p. 1080.) As mentioned, one of the recitals in the Settlement Agreement states that "[t]he Parties desire to resolve all matters raised in the Final Audit Report, the Letter of Findings, and the Appeal." (Italics added.) This comprehensive statement of intent plainly includes matters in dispute between the parties that were actually addressed in the Final Audit Report, the Letter of Findings, and the Appeal.
Dare 2 Care agrees that the language of the Release is unambiguous, but interprets that language differently. Dare 2 Care argues that the phrase "pertaining to" in the Release should be interpreted as "belonging to" and claims that its "breach of contract claim does not 'belong to' the matters covered in the audit." Dare 2 Care's contention is apparently that only those "claims" or "causes of action" that were actually asserted in the audit are within the scope of the Release.
Dare 2 Care's interpretation is untenable for several reasons. First, the parties could easily and directly have stated that the Release applied only to "claims that were asserted in the audit" if that had been their intent. Instead, the Release is drafted much more broadly to include claims and causes of action "pertaining to the matters which are the subject of the 'Final Audit Report, Letter of Findings and the Appeal.' " (Italics added.) Thus, the broad term "matters" here must mean something other than merely claims and causes of action, or its inclusion in the definition would be superfluous. (See Brandwein v. Butler (2013) 218 Cal.App.4th 1485, 1507 [broad release language could not be ignored in favor of a narrower interpretation because a court should avoid contract interpretations that "render any portion superfluous, void or inexplicable"].)
Second, Dare 2 Care's interpretation of "pertaining to" is irrational in light of the surrounding language. Dare 2 Care acknowledges that one meaning of "pertaining to" is "relating to." The common meaning of the term "matter" is broader than "claim" or "cause of action." And, as discussed above, the context here supports the conclusion that a "matter" is something different from a "claim" or a "cause of action." Because the concepts of a "matter" and a "claim" are different, it would be awkward and unnatural to describe a "claim" as "belonging" to a "matter." A far more natural understanding is that the claims and causes of action the parties intended to release are those "relating to" the matters that were the subject of the Final Audit Report, the Letter of Findings, and the Appeal.
Dare 2 Care cites Black's Law Dictionary, which defines "pertain" as "[t]o belong or relate to." (Black's Law Dict. (6th ed. 1990) p. 1145.) One of the definitions of "pertain" in the on-line Merriam-Webster Dictionary is also "to have reference." (See <https://www.merriam-webster.com/dictionary/pertain> [as of Jan. 13, 2020], archived at <https://perma.cc/ZX6Y-P4BY>.)
Third, Dare 2 Care's interpretation is inconsistent with the recital describing the parties' intention to "resolve all matters raised in the Final Audit Report, the Letter of Findings, and the Appeal." (Italics added.) The parties' stated intent to "resolve all matters" is much broader than an intent to release only specific claims that were actually asserted in the audit.
Fourth, Dare 2 Care's interpretation is inconsistent with the broad language in the Release releasing the parties from liability for claims "of every kind and nature whatsoever, whether now known or unknown, suspected or unsuspected, which . . . each of the Parties currently have, own, or hold, or has ever had, owned, or held, at any time in the past, or may ever have, own, or hold at any time in the future." (Italics added.) Such a reference to unknown claims would not have been necessary if the Release were limited only to those claims that were actually asserted in the audit. (See Jefferson v. Department of Youth Authority (2002) 28 Cal.4th 299, 306-307 [waiver of unknown claims in a release established "unambiguously the parties' intent that the release cover possible civil claims"].)
Finally, the mutual nature of the Release is inconsistent with Dare 2 Care's interpretation. Only the Regional Center asserted a claim for money in the audit. Dare 2 Care asserted defenses, but did not itself make any claim for relief. If the parties intended the Release to cover only affirmative claims that were actually asserted in the audit, there would have been no need for Dare 2 Care to release anything.
For the same reasons, as the Regional Center points out, Dare 2 Care co-owner Katina Bland's testimony at trial that she did not believe Dare 2 Care had released any claims against the Regional Center is inconsistent with the language of the Release. In any event, as discussed further below, Bland's testimony about her unilateral, unexpressed interpretation of the Release is irrelevant to interpretation of the document.
Dare 2 Care also argues that the "subject of the audit and related proceedings was whether [Dare 2 Care] incurred improper expenses, not its affirmative defenses." The argument is illogical on its face. Dare 2 Care's affirmative defenses of course were relevant to whether its expenses were "improper." Moreover, the argument fails for many of the same reasons discussed above. It is inconsistent with the parties' stated intent in the recital to "resolve all matters raised in the Final Audit Report, the Letter of Findings, and the Appeal." As discussed below, Dare 2 Care's breach of contract theory was a matter raised in those documents. And Dare 2 Care's argument is inconsistent with the mutual nature of the Release. If the parties did not intend the Release to apply to affirmative defenses, only the Regional Center would have provided a release.
3. No Extrinsic Evidence Supports Dare 2 Care's Interpretation of the Release
Although the language of the Release is unambiguous, it is appropriate to consider whether any extrinsic evidence supports an interpretation to which the language of the Release is reasonably susceptible. (See PG& E, supra, 69 Cal.2d at pp. 39-40 ["rational interpretation requires at least a preliminary consideration of all credible evidence offered to prove the intention of the parties"]; Wolf v. Walt Disney Pictures & Television (2008) 162 Cal.App.4th 1107, 1126 ["If, in light of the extrinsic evidence, the language is reasonably susceptible to the interpretation urged, the extrinsic evidence is then admitted to aid the court in its role in interpreting the contract"].)
Dare 2 Care has identified no extrinsic evidence supporting its interpretation of the Release. The only extrinsic evidence that Dare 2 Care cites is the claimed discrepancy between the value of the Regional Center's audit claims (which Dare 2 Care characterizes as "approximately $0") and the value of Dare 2 Care's breach of contract claim (which it characterizes as "$200,000 by the jury's award, $2.3 million by [Dare 2 Care's] calculations." Dare 2 Care argues that "there is no reason why [Dare 2 Care] would include the latter in a settlement of the former for no compensation."
This evidence cannot be used to interpret the Release, as it identifies only the claimed subjective state of mind of one of the parties. " ' "[E]vidence of the undisclosed subjective intent of the parties is irrelevant to determining the meaning of contractual language." ' " (San Pasqual, supra, 241 Cal.App.4th at p. 757 [testimony by the chairperson of a party that the party did not intend to waive any right to obtain damages in agreeing to a contractual provision was irrelevant to interpretation of the contract], quoting Berman v. Bromberg (1997) 56 Cal.App.4th 936, 948 (Berman); see Iqbal v. Ziadeh (2017) 10 Cal.App.5th 1, 12 [testimony by counsel for a party that his intent in drafting a release was that it would apply to the defendant was irrelevant, as there was "no evidence counsel expressed this intention to anyone"].)
That is because California recognizes the objective theory of contracts. Under that theory, "it is the outward manifestation or expression of assent that is controlling." (Berman, supra, 56 Cal.App.4th at p. 948.) This means that, in interpreting a settlement agreement, " '[t]he true, subjective, but unexpressed intent of a party is immaterial and irrelevant.' " (Ibid., quoting Vaillette v. Fireman's Fund Ins. Co. (1993) 18 Cal.App.4th 680, 690.)
Dare 2 Care does not cite any evidence that it expressed an intent to exclude its breach of contract claim when executing the Release, or even mentioned the possibility of a future claim for damages during settlement discussions. Its lawsuit was not pending at the time; it did not file its complaint in this case until about nine months later. Nor has Dare 2 Care identified any evidence indicating that the Regional Center understood that Dare 2 Care intended to preserve its breach of contract claims when it entered into the Settlement Agreement.
Dare 2 Care relies on the decision in Mitchell v. Union Central Life Ins. Co. (2004) 118 Cal.App.4th 1331 (Mitchell), but that case involved very different facts. The plaintiff in that case filed a civil action and a workers' compensation claim based upon alleged harassment she experienced at work. The plaintiff had separate counsel for the workers' compensation proceeding and the civil action, as did the defendant. While a settlement offer of over $1 million was pending in the civil action, the plaintiff settled her workers' compensation claim for $57,500. Upon settling that claim, she signed a release that purported to release all claims arising from her injuries. (Id. at pp. 1334-1335.) After that release was executed, her former employer made another offer to settle the civil action for $1.1 million. (Id. at p. 1335.) The employer subsequently filed a motion for summary judgment arguing that the release the plaintiff executed in settling the workers' compensation claim barred her claims in the civil action.
The trial court granted the motion, but the Court of Appeal reversed. The appellate court explained that the extrinsic evidence showed that the release "was executed under circumstances where the parties' left hands (the lawyers representing them in the civil action) didn't know what their right hands (the workers' compensation lawyers) were doing, that the compromise and release are ambiguous under the circumstances, and that no one intended to release the civil action." (Mitchell, supra, 118 Cal.App.4th at p. 1342, fn. 2, italics added.) The court concluded that the facts left no doubt "that neither the workers' compensation lawyers nor their clients intended to include the civil action in their settlement of the workers' compensation claim." (Id. at p. 1342.)
Thus, in Mitchell, unlike here, the extrinsic evidence was not limited to the claimed subjective intent of one of the parties. Rather, the facts showed that neither the plaintiff nor the defendant intended that the workers' compensation release would apply to the plaintiff's civil claims. (Mitchell, supra, 118 Cal.App.4th at p. 1342.)
Moreover, in addition to the wide disparity between the amount paid in settlement and the settlement value of the civil claim, the facts in Mitchell involved: (1) a standard form release in a workers' compensation proceeding; (2) separate counsel for the workers' compensation claim and the civil action; (3) a civil action that was already pending at the time the release was executed; and (4) a settlement offer by the defendant in the civil action that was made after the workers' compensation release was executed. None of those facts is present here.
The workers' compensation context is important. After the decision in Mitchell, our Supreme Court adopted a rule specific to workers' compensation cases that "the standard language of the preprinted form used in settling workers' compensation claims releases only those claims that are within the scope of the workers' compensation system, and does not apply to claims asserted in separate civil actions." (Claxton v. Waters (2004) 34 Cal.4th 367, 376.) The court cited the separate and unique nature of the workers' compensation system, and the need for safeguards protecting the injured worker from "entering into unfortunate or improvident releases." (Id. at p. 373.)
In addition, the extrinsic evidence here shows that the one claimed point of similarity between Mitchell and this case is not similar at all. Dare 2 Care argues that, like the plaintiff in Mitchell, Dare 2 Care "had no reason to settle its claim worth over $1.5 million for nothing." But the evidence suggests such a reason. The attorney who represented the Regional Center in the settlement testified that, following the audit, Dare 2 Care expressed interest in a "complete and total resolution of all outstanding issues." That testimony was supported by a letter from Dare 2 Care's counsel dated April 26, 2013, about a year before the Settlement Agreement, expressing an interest in "bringing the current discussions and appeal to a close and to facilitate the purchase of the business by a third party." The letter explained that his client was "willing to withdraw her appeal of the vendorization termination and submit a voluntary surrender of her vendorization to the Regional Center in exchange for a complete and total resolution of all outstanding issues between the parties." (Italics added.)
Thus, the evidence suggests that Dare 2 Care had an interest in resolving all of its issues with the Regional Center to reestablish a business relationship and to facilitate a sale. The Settlement Agreement itself contemplated an ongoing business relationship by incorporating a commitment by both parties to meet and confer in good faith about the service hours that Dare 2 Care would be required to provide going forward. The Regional Center's attorney testified that there was in fact a meeting following the settlement "to attempt to come up with a rate that everybody could live with."
Dare 2 Care's FAC alleged that it "received several written offers to purchase the business from well qualified buyers. However, as a condition of the sale, each of the offers required the ongoing operations of Dare 2 Care."
Moreover, the evidence does not show the disparity that Dare 2 Care argues existed between the value of the audit claims and the value of its breach of contract claim. While the parties dispute the strength of the evidence supporting the Regional Center's audit claim at the time of the settlement, the settlement did release Dare 2 Care from the claimed overpayment of over $50,000 that the DDS had found, along with eliminating the need to further pursue an appeal. In comparison, at least as reflected by the jury's verdict, Dare 2 Care's breach of contract claim was worth only $200,000, not the millions that Dare 2 Care sought, minus the attorney fees that Dare 2 Care had to pay to achieve that result. This is a stark contrast to the disparity in Mitchell of nearly $1 million between the value of the plaintiff's workers' compensation claim and the settlement offer for her civil claim that was pending at the time of the release.
We therefore conclude that the parties' intent in executing the Release was, as reflected in the recital, "to resolve all matters raised in the Final Audit Report, the Letter of Findings, and the Appeal." As discussed below, Dare 2 Care's breach of contract claim was one of the "matters" raised in those proceedings.
4. Dare 2 Care's Breach of Contract Claim Is Included Within the Scope of the Release
Because the Release identifies the scope of the released claims by referring to the contents of the Final Audit Report, Letter of Findings, and the Appeal, we must necessarily consider the documents associated with these events. We do so not to interpret the meaning of the Release itself, but because such examination is necessary to determine whether Dare 2 Care's breach of contract claim falls within the Release's scope.
There is no dispute about the contents of the referenced documents. Therefore, as with other writings, in the absence of conflicting extrinsic evidence we independently analyze the documents as a matter of law. (See Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866; cf. Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, 1670 ["Whether an arbitration agreement applies to a controversy is a question of law to which the appellate court applies its independent judgment where no conflicting extrinsic evidence in aid of interpretation was introduced in the trial court"].)
The relevant documents leave no doubt that Dare 2 Care's breach of contract claim was one of the "matters" raised in the Letter of Findings and the Appeal. Indeed, Dare 2 Care acknowledges that it "raised [the Regional Center's] breach of contract as a defense in the audit."
The alleged breach of contract was not referenced in the Final Audit Report. However, a "matter" need not be addressed in each of the three identified proceedings to be included within the scope of the Release. Dare 2 Care does not argue to the contrary. While it is grammatically possible that the Release's use of the conjunctive "and" in identifying the "Final Audit Report, Letter of Findings and the Appeal" (italics added) could mean that a "matter" must be the "subject" of each of the three designated events to be within the scope of the Release, that is not the most natural reading of the phrase. If that had been the parties' intention, one would expect language stating it directly. That interpretation is also inconsistent with the parties' expressed intent in the recitals to "resolve all matters." (Italics added.) --------
The Letter of Findings stated that "Dare 2 Care's basic argument in relation to the audit findings is that there was never an agreed upon rate reduction and therefore the program design was not modified to account for such a reduction." This referred to Dare 2 Care's breach of contract argument. Dare 2 Care explained that argument in its letter objecting to the audit findings: "Following [the Regional Center's] breach of contract and notice to Dare 2 Care that it was reducing its funding in excess of 50%, Dare 2 Care was released from its duty to provide services as defined in its original Program Design."
Dare 2 Care also made its breach of contract argument in the Appeal. As mentioned, in its position statement for the Appeal, in addition to challenging the audit findings Dare 2 Care argued that it was excused from providing the hours required by the Program Design because the Regional Center materially breached the Payment Agreement. Dare 2 Care argued that the Regional Center "materially breached the Payment Agreement between [the Regional Center] and Dare 2 Care by reducing Dare 2 Care's reimbursement rate from $27,168 to $13,584 per client per month effective April 1, 2011." Dare 2 Care claimed that, "[a]s a result of [the Regional Center's] material breach of the Payment Agreement, Dare 2 Care's obligation to continue to provide the hours set forth in its original Program Design was excused." Therefore, "there is no basis or reason to require Dare 2 Care to refund any amount to [the Regional Center]."
These arguments are identical to the breach of contract theory that Dare 2 Care alleged in this case. Dare 2 Care's FAC alleged that the Regional Center agreed to pay "$81,504 per month ('the Monthly Payment')" but then in or about April 2011 "stopped paying Plaintiff the full Monthly Payment amount due under the Agreement." The breach of contract cause of action alleged that the Regional Center breached the Payment Agreement by "failing to pay Plaintiff the full amount of the Monthly Payment required under the terms of the Agreement."
Dare 2 Care's breach of contract claim was therefore included within the scope of the Release.
5. Conclusion
The unambiguous language of the Release and the undisputed facts concerning the matters addressed in the Letter of Findings and the Appeal show that Dare 2 Care's breach of contract claim was included within the scope of the Release. The trial court therefore should have granted a directed verdict on the breach of contract claim rather than permitting the jury to decide whether Dare 2 Care released that claim.
Dare 2 Care has not appealed from the trial court's ruling granting a directed verdict on all of its other claims. Thus, in light of the trial court's rulings and our holding on the scope of the Release, judgment must be entered in favor of the Regional Center. We therefore need not consider Dare 2 Care's appeal relating to the jury's damage award and its arguments concerning alleged trial errors relating to damages. Nor do we need to consider the trial court's ruling offsetting the jury's damage award against the malpractice settlement, or the Regional Center's judicial estoppel argument.
DISPOSITION
The judgment in favor of Dare 2 Care, Inc., is reversed, and judgment shall be entered in favor of the Los Angeles Development Services Foundation (Regional Center). The Regional Center is entitled to its costs on appeal.
NOT TO BE PUBLISHED.
LUI, P. J. We concur:
CHAVEZ, J.
HOFFSTADT, J.