Science v. Markman, 74774-6-I

CAMBRIDGE DECISION SCIENCE, Respondent, v. JON MARKMAN and ELLEN MARKMAN, andtheir marital community, Appellants.

MARKMAN CAPITAL INSIGHT LLC,a Washington limited liability company, Appellant, v. TREYTON THOMAS, aka TRAY THOMAS,aka TRACY LEE THOMAS, an individual, Third Party Defendant,andCAMBRIDGE DECISION SCIENCE, a foreign entity or

trade name of Treyton Thomas; and TREADSTONE,

a foreign entity or trade name of Treyton Thomas, Respondents.

No. 74774-6-I

COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE

March 20, 2017

UNPUBLISHED

COX, J. — Objective manifestation of mutual assent to all material terms of an agreement is an essential element to the valid formation of a legally enforceable contract.¹ Here, there was no such objective manifestation of mutual assent to the proposed settlement agreement. Moreover, the mutual release, which was conditioned on the existence of a legally enforceable contract, is not effective. We reverse.

This is an action to enforce an alleged settlement agreement and mutual release between Jon Markman, Tray Thomas, and their respective companies. Jon Markman is president of Markman Capital Insight LLC (MCI). Thomas conducted business as Cambridge Decision Science (CDS). Markman, Thomas, and their respective companies, had a business known as Gemini. MCI terminated this business relationship. Thomas and Markman then began settlement negotiations that led to this action.

Thomas transmitted to Markman a proposed settlement agreement dated October 15, 2015 together with a proposed mutual release of the same date. Among the terms of this proposal was paragraph 3 of the proposed settlement agreement regarding certain customer lists. Markman struck a portion of that paragraph 3 and initialed his correction. He then returned the modified document containing his rejection of the terms of paragraph 3 together with an explanatory e-mail containing a counteroffer: the stricken language would remain out of the settlement.

Thomas and Markman exchanged further e-mails over the course of the next few days. These exchanges included Thomas making several counteroffers regarding the customer list described in paragraph 3 of the proposed settlement agreement.

There was also a proposal for arbitration of disputes that both sides never simultaneously agreed to. Specifically, on October 19, 2015, Markman wrote: "Let's go to binding arbitration. . . ."² Thomas responded: [U]pon examining binding arbitration thoroughly, we would not agree to it. . . . We have an existing executed Settlement Agreement and Mutual Release making arbitration pointless. . . ."³

Thereafter, CDS commenced this action for damages against MCI, Jon Markman, his wife, and their marital community. The complaint alleged that the parties entered into a binding settlement agreement, which Markman and his related company had breached. CDS sought $95,000, the payment amount under the terms of the agreement. MCI asserted a counterclaim and commenced a third party action against other parties to the alleged settlement agreement.

CDS then moved to enforce the settlement agreement. The trial court granted the motion without oral argument. It also dismissed MCI's third party claim and counterclaim. The trial court later denied the motion for reconsideration and entered a judgment in favor of CDS.

Jon Markman, Ellen Markman, and MCI appeal.

SETTLEMENT AGREEMENT

Markman, his wife, and MCI argue that the settlement agreement dated October 15, 2015 is not an enforceable contract. Because there is no objective manifestation of mutual assent of the parties to all material terms of the alleged agreement, we agree.

Courts follow summary judgment procedures when a party moving to enforce a settlement agreement relies on affidavits or declarations to show that the agreement is not genuinely disputed.⁴ The moving party must prove "'there is no genuine dispute over the existence and material terms of the agreement.'"⁵ If the moving party satisfies this burden, the nonmoving party must produce evidence to show a genuine issue of material fact.⁶ Courts must read the parties' submissions in the light most favorable to the nonmoving party to determine whether reasonable minds could reach only one conclusion.⁷

We review de novo the trial court's enforcement order because the proceeding is similar to a summary judgment proceeding.⁸ If the nonmoving party raises a genuine issue of material fact, a trial court should not enforce asettlement agreement without first holding an evidentiary hearing to resolve the disputed issues of fact.⁹

Objective Manifestation of Mutual Assent

The threshold question is whether there is objective manifestation of mutual assent by the parties to all material terms between and among them. We conclude there is not.

We apply the common law of contracts to settlement agreements.¹⁰ The parties' objective manifestation of mutual assent to all of an agreement's material terms is an essential element to the valid formation of a contract.¹¹ Generally, manifestations of mutual assent are expressed by an offer and an acceptance of that offer.¹²

Mutual assent is generally a question of fact, but it may be determined as a matter of law if reasonable minds could not differ.¹³ The party asserting the contract's existence bears the burden of proving the existence of a mutual intention.¹⁴

No contract is formed unless acceptance of an offer is identical to the offer.¹⁵ "Acceptance is an expression (communicated by word, sign, or writing to the person making the offer) of the intention to be bound by the offer's terms."¹⁶ A party's expression of assent that changes the offer's terms "'in any material respect'" may be "'a counteroffer; but it is not an acceptance and consummates no contract.'"¹⁷

A material variance is fact dependent.¹⁸ "Material" is defined as significant or essential.¹⁹

Here, the issue is whether Markman and Thomas, on behalf of themselves and others, objectively manifested that they agreed to all material terms of the proposed settlement agreement. We conclude that there was not such objective manifestation of mutual assent.

Thomas proposed a written settlement agreement and mutual release. In relevant part, paragraph 3 of the settlement agreement states:

Markman has previously provided Thomas on May 7, 2015 with a copy of the Gemini customer list that he attests was accurate to the best of his knowledge at the time and will make revisions iferrors are found within 10 days of the wiring of the funds in paragraph [one].²⁰

On October 15, 2015, Markman struck the above emphasized language, initialed the change in the right margin of the document, and signed the agreement. Specifically, the document he returned stated, in relevant part, as follows:

Markman has previously provided Thomas on May 7, 2015 with a copy of the Gemini customer list that he attests was accurate to the best of his knowledge at the time. and will make revisions if errors are found within 10 days of the wiring of the funds in paragraph [one].²¹

He then e-mailed Thomas to point out these changes and attached the signed agreement. The e-mail stated:

I signed and initialed the doc[ument]s attached.

There was one half-sentence change where you will see there are Xs on the pdf.

I am attesting that the customer list was accurate to the best of my knowledge at the time it was sent.

The information came straight out of my database. If there are any errors, the same errors are still in my records.

Furthermore[,] a customer might have changed his . . . information without informing us. I am not going to commit to tracking those down for you, or doing any further research of any kind.

. . . .²²

There can be no reasonable dispute that these actions by Markman constituted a rejection of the Thomas offer embodied in the proposed settlement agreement. Likewise, there can be no reasonable dispute that Markman's return e-mail with the attached and modified document constituted a counteroffer that Thomas was free to accept or reject.

That same day, Thomas replied to Markman's counteroffer, in relevant part:

Are you saying that the email addresses sent are the same email addresses that are being used at present by MCI, and therefore if they contained any errors that would effect a bounce, you would . . . definitely know that by now?

If so, please confirm that back.

. . . .

If you will:

1. Confirm back with a reply to this paragraph 1 is correct, and

2. Confirm back with a reply back to this you agree only to correct any inadvertent typos that cause an email bounce within 10 days of the wire being sent,

Then I will also initial the strikeout and send back the document for your records . . . and we are done except for the wire confirmation.²³

Similarly to the first exchange between the Markman and Thomas, this e-mail evidences a rejection of the Markman counteroffer. That is because it is not an outright acceptance of that counteroffer. Rather, the response is stated in terms of a counteroffer. That is, "if Markman would comply with the two stated conditions, then and only then, would Thomas "initial the strikeout and send backthe document for [Markman's] records."²⁴ This, of course, never occurred. There is no contract.

The record shows this in Markman's reply e-mail, which stated:

1 -- Yes [that paragraph 1 is correct].

2 -- If there are inadvertent typos in the email addresses, your guess as to what's wrong will be as good as mine so there's no point to asking me for help.²⁵

Obviously, this reply does not show acceptance of Thomas's then existing counteroffer. In fact, it is best read as a rejection of that counteroffer. No contract exists.

Thomas replied, in relevant part:

I have to have someone [verify the email addresses] manually . . . . [I]f there are any fails I will ask you to double check the address against your data to see if there was a typo . . . .

If you agree to that today, I will do that and we are done.

If you won't even agree to that, we have no settlement.

. . . .²⁶

This...