Ajman Stud v. David Cains ( 2021 )


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  •                            NOT FOR PUBLICATION                           FILED
    UNITED STATES COURT OF APPEALS                        SEP 16 2021
    MOLLY C. DWYER, CLERK
    U.S. COURT OF APPEALS
    FOR THE NINTH CIRCUIT
    AJMAN STUD, a business entity organized         Nos. 19-16779
    and existing under the laws of the United            20-16648
    Arab Emirates, Ajman Emirate; SHEIKH
    AMMAR BIN HUMAID AL NUAIMI,                     D.C. No. 2:15-cv-01045-DJH
    Plaintiffs-Appellees,
    MEMORANDUM*
    v.
    DAVID CAINS; et al.,
    Defendants-Appellants,
    and
    UNKNOWN PARTIES, 1 through 30,
    inclusive,
    Defendant.
    Appeal from the United States District Court
    for the District of Arizona
    Diane J. Humetewa, District Judge, Presiding
    Argued and Submitted July 8, 2021
    Portland, Oregon
    Before: M. MURPHY,** PAEZ, and BENNETT, Circuit Judges.
    *
    This disposition is not appropriate for publication and is not precedent
    except as provided by Ninth Circuit Rule 36-3.
    **
    The Honorable Michael R. Murphy, United States Circuit Judge for
    In 2012, Plaintiff-Appellee, Ajman Stud, purchased a mare named La
    Bella Versace (the “Mare”) from Defendant, Stonewall Farms Arabians,
    LLC (“Stonewall”). Defendant-Appellant, David Cains, negotiated the sale
    on behalf of Stonewall. According to Ajman Stud’s agent, Elisa Grassi,
    Cains told her the Mare had not been bred and he failed to disclose the Mare
    was subject to reserved embryo rights. Stonewall received payment for the
    Mare on February 28, 2012, but did not deliver her to Appellees until May
    2012. While the Mare was in Stonewall’s care, she was artificially
    inseminated and two embryos were extracted. Appellees did not learn the
    Mare was bred while at Stonewall Farms until June 2013.
    In 2015, Appellees brought an action in Arizona state court raising the
    following claims: (1) breach of contract, (2) breach of the covenant of good
    faith and fair dealing, (3) fraud, (4) conversion of property rights, (5) breach
    of fiduciary duty, and (6) breach of bailment duties. Appellees also sought
    declaratory relief. Appellants removed the case to federal district court.
    After a six-day bench trial, judgment was entered in favor of Appellees on
    all claims except the breach of contract claim. Appellees were awarded
    $975,000 in compensatory damages and $100,000 in punitive damages.
    the U.S. Court of Appeals for the Tenth Circuit, sitting by designation.
    2
    Thereafter, the district court awarded Appellees their attorneys’ fees, exper t
    witness fees, and non-taxable costs in the amount of $743,356.93.
    Our jurisdiction over these consolidated appeals arises under
    
    28 U.S.C. § 1291
    . We affirm in part, reverse in part, and remand for
    further proceedings.
    Appeal No. 19-16779
    1. Appellants seek a new trial, arguing the district court’s written
    Order contains numerous clearly erroneous findings of fact and miscitations
    to the record, thereby undermining confidence in the court’s judgment. 1
    Conspicuously missing from Appellants’ briefs, however, are examples
    illustrating how the district court’s alleged errors and miscitations actually
    affected any aspect of the court’s judgment. All of Appellants’ arguments
    are based on mere speculation. Further, Appellants have failed to identify
    any precedent in this court, or any other, supporting the proposition that a
    party is entitled to a new trial when a district court makes erroneous
    nonmaterial findings. Accordingly, the request for a new trial is denied.
    1
    Related to this claim, Appellants have moved this court to take
    judicial notice of a four-page, single-spaced Exhibit appended to their
    opening appellate brief. Because the Exhibit contains argument, not
    materials amenable to judicial notice pursuant to Fed. R. Evid. 201(b), the
    motion is denied.
    3
    2. Before trial, Appellants moved to dismiss Appellees’ claims as a
    sanction for alleged improprieties that occurred during the deposition of
    Plaintiff, Sheikh Ammar bin Humaid al Nuaimi, the Crown Prince of the
    Emirate of Ajman (“Sh. Ammar”). Appellants’ belief that Grassi coached
    Sh. Ammar during his deposition by sending text messages to his phone is
    not supported by any evidence. To the contrary, Grassi testified she did not
    text Sh. Ammar 2 and the district court found her credible on this point.
    Further, Appellants have not shown Appellees were responsible for any
    malfunction of the video-conference equipment or loss of the data
    connection during Sh. Ammar’s deposition. Because Appellants cannot
    show Appellees engaged in the conduct of which they are accused, the
    district court did not abuse its discretion in refusing to dismiss Appellees’
    claims as a sanction.
    3. Prior to trial, Appellants sought to exclude evidence of three
    separate instances in which Cains was accused of business improprieties,
    2
    Appellants’ Motion to Transmit to the Court a Flashdrive of Sh.
    Ammar’s Deposition is denied. According to Appellants, the video
    recording shows Sh. Ammar repeatedly monitoring his cell phone during the
    deposition. Even if true, the video would not provide the necessary
    evidence to support Appellants’ assertion that Sh. Ammar was receiving text
    messages from Grassi.
    4
    including failing to disclose reserved breeding rights and fabricating a
    contract to conceal the nondisclosure; selling a horse he did not own at the
    time of the sale; and filing paperwork with the American Horse Association
    falsely representing Stonewall was the owner of a horse at the time embryos
    were extracted. The district court denied Appellants’ pre-trial motion,
    concluding the evidence of prior bad acts was probative of lack of mistake
    and the probative value was outweighed by any prejudice. See Fed. R. Evid.
    404(b)(2). Appellants’ opening brief attacks this ruling generally, but
    contains only one citation to the record 3 and no citations to caselaw, making
    it impossible for this court to conduct any meaningful review of the alleged
    errors in the district court’s analysis. Further, Appellants have wholly
    failed to show they were “substantially prejudiced” by the introduction of
    the evidence, a necessary component of their appellate challenge to the
    district court’s evidentiary ruling. Harper v. City of L.A., 
    533 F.3d 1010
    ,
    1030 (9th Cir. 2008). Accordingly, we affirm the district court’s ruling on
    the introduction of Cains’s prior bad acts.
    4. The district court granted Appellees’ pretrial motion to exclude
    evidence underlying a civil lawsuit Cains, Bailey, and Stonewall filed
    3
    Appellants’ argument does not even contain a record citation to
    the district court’s ruling on their motion.
    5
    against Grassi and Frank Spönle in Arizona state court (the “Cains/Grassi
    suit”). The court ruled, inter alia, that permitting the introduction of the
    proposed evidence would confuse the trier of fact because the evidence
    touched on unresolved issues in a completely separate transaction. The
    district court’s ruling comports with Fed. R. Evid. 403 which provides that
    even relevant evidence may be excluded “if its probative value is
    substantially outweighed by a danger of . . . unfair prejudice, confusing the
    issues, misleading the jury, undue delay, wasting time, or needlessly
    presenting cumulative.” Appellants have not shown the district court
    clearly erred in finding that confusion would result from the introduction of
    disputed evidence 4 involving an unrelated transaction that occurred two
    years after the Mare was purchased by Ajman Stud. Thus, the district court
    did not abuse its discretion in excluding the evidence.
    5. We next conclude the district court did not err in ruling that Bailey
    was liable for any judgment in favor of Appellees under an alter ego theory.
    Under Arizona law, the proponent of the alter ego theory of liability must
    show (1) unity of interest and (2) that observance of the corporate form
    would sanction a fraud or promote injustice. Dietel v. Day, 
    492 P.2d 455
    ,
    4
    Judgment was entered in favor of the defendants in the
    Cains/Grassi suit, but no findings of fact were made.
    6
    457 (Ariz. Ct. App. 1972). The district court concluded Cains and Bailey
    “had a unity of interests in Stonewall Farms making them indistinguishable
    from the corporation.” In support of this conclusion, the district court
    referenced ample evidence showing Stonewall’s assets were intermingled
    with Cain’s and Bailey’s personal assets.
    According to Appellants, however, there is no evidence showing
    Stonewall was formed to perpetrate a fraud or was used for fraudulent
    purposes. Arizona law does not require such evidence to support alter ego
    liability. The law requires that observance of the corporate form would
    either “sanction a fraud” or “promote injustice.” 
    Id. at 457-58
    . Here, the
    same evidence that shows unity of interest also supports the conclusion that
    observance of the corporate form would promote injustice. In addition to
    evidence showing Appellants’ assets were intermingled, there was evidence
    that Stonewall paid approximately $200,000 to repair and maintain real
    property owned by Bailey. 5 Because this evidence shows Stonewall’s assets
    were used to enrich Bailey—leaving fewer assets in Stonewall’s coffers to
    satisfy the judgment in favor of Appellees—it would promote injustice to
    observe corporate formalities.
    5
    Bailey testified he could not recall what, if anything, he did to
    reimburse Stonewall for these payments.
    7
    6. Appellants challenge the judgments entered against them on four of
    Appellees’ claims: (1) fraud, (2) breach of the covenant of good faith and
    fair dealing, (3) breach of bailment agreement, and (4) breach of a fiduciary
    duty. We conclude Appellants are only entitled to relief from the judgment
    in favor of Appellees on the breach of fiduciary duty claim.
    There was no clear error in the district court’s finding that Appellants
    engaged in fraud. The supporting evidence is fully set out in the court’s
    Order and includes testimony showing that material misrepresentations were
    made by Appellants in their efforts to sell the Mare. Appellants point to
    controverting evidence, but conflicting evidence is common in civil trials
    and its existence does not show the district court’s judgment is unsupported
    by clear and convincing evidence. See Ridgeway v. Walmart Inc., 
    946 F.3d 1066
    , 1083 (9th Cir. 2020).
    There was, likewise, no error in the district court’s finding that
    Appellants breached the implied covenant of good faith and fair dealing.
    Appellants allege, generally, there was no evidence supporting the court’s
    finding on this claim. The district court’s Order, however, cites ample
    evidence, none of which Appellants even reference in their opening brief.
    As to Appellees’ bailment claim, Appellants argue there was no
    bailment because Ajman Stud never delivered the Mare to Stonewall.
    8
    Instead, they assert, Stonewall had possession of the Mare at the time of the
    sale and she simply remained on Stonewall’s property until she was
    delivered to Gallun Farms. We reject this argument because Appellants
    have cited no Arizona precedent for the proposition that a bailment cannot
    exist unless the bailor takes physical possession of an item after purchasing
    it from the bailee. Here, the district court found Appellants agreed to board
    and transport the Mare after ownership transferred to Ajman Stud. This
    evidence is sufficient to support the court’s conclusion that a bailment
    existed.
    In contrast to the other issues raised by Appellants, their challenge to
    the district court’s judgment in favor of Appellees on the breach of fiduciary
    duty claim is well-taken. The district court’s finding that a fiduciary
    relationship existed between the parties is not supported by the record.
    Under Arizona law, whether a fiduciary relationship exists as a matter of
    fact is governed by an analysis of multiple factors, including health, age,
    relative sophistication of the parties, the length and nature of the
    relationship between the parties, and the degree of influence by one party
    over the other. See, e.g., Eagerton v. Fleming, 
    700 P.2d 1389
    , 1392 (Ariz.
    Ct. App. 1985). The evidence on which the district court relied showed
    only that Appellants and Appellees had a long-standing relationship that
    9
    was a mix of personal and professional. There was no evidence one party
    had any degree of influence over the other; or evidence that Appellants were
    more sophisticated than Appellees; or evidence showing “any of the
    hallmarks of a fiduciary association: intimacy, secrets, or the entrusting of
    power.” Cook v. Orkin Exterminating Co., 
    258 P.3d 149
    , 152 (Ariz. Ct.
    App. 2011). Accordingly, we reverse the judgment against Appellants on
    the breach of fiduciary duty claim. 6
    7. The district court awarded Appellees $975,000 in compensatory
    damages and $100,000 in punitive damages. A significant portion of the
    compensatory damages award was based on the district court’s finding that
    Appellants’ wrongful conduct deprived Appellees of the opportunity to
    breed the Mare in April and May 2012. Appellants argue that damages are
    generally not recoverable for the value of unborn livestock because such
    damages are speculative. They further argue the district court’s finding that
    four viable embryos could have been flushed from the Mare in April and
    May is not supported by the evidence. The record, however, shows the
    6
    Reversal of this portion of the district court’s judgment has no
    effect on the award of compensatory or punitive damages in favor of
    Appellees.
    10
    compensatory damages are not speculative and supports the amount of the
    award. 7
    Grassi testified that Ajman Stud purchased the Mare for a specific
    purpose—to breed her to a stallion it owned named Vervaldee. Grassi
    further testified she told Cains that Ajman Stud wanted the Mare transported
    to Gallun Farms as soon as Stonewall received payment. According to
    Grassi, “[t]here was never a moment where [Appellees] said we are not in a
    hurry in bringing [the Mare]” to Gallun Farms. This testimony supports the
    proposition that Appellees had a concrete, specific intention to breed the
    Mare to Vervaldee at Gallun Farms as soon as possible. Their intention was
    not uncertain or equivocal.
    Appellees’ expert, Nancy Gallun, testified that if the Mare had been
    bred with Vervaldee in April and May of 2012, four embryos could have
    been extracted. Appellants challenge this testimony, contending that
    Vervaldee had “impotent semen” and any attempt at breeding him with the
    Mare in April or May would not have been successful. Appellants,
    however, do not direct this court to any finding—let alone any evidence—
    7
    Appellants’ briefs are riddled with assertions unaccompanied by
    citations to the record. Their argument on compensatory damages is no
    exception.
    11
    that Vervaldee was impotent or that his semen was not available for
    artificial insemination procedures at Gallun Farms in April or May 2012.
    Instead, the evidence undermines Appellants’ contention.
    Grassi testified that the breeding program for Vervaldee was managed
    by Gallun Farms. Gregory Gallun, who operated Gallun Farms with his
    wife Nancy Gallun, testified that the quality of Vervaldee’s sperm
    “fluctuate[d].” But, he further testified that Gallun Farms got Vervaldee “to
    a fairly reliable 1eve1 where we were able to at least breed mares on
    premises” even though it was more difficult to “create a pregnancy” with his
    frozen semen. Nancy Gallun testified that Vervaldee’s semen was not
    amenable to being frozen so all breedings had to occur at Gallun Farms.
    Grassi testified that because of Vervaldee’s medical condition, Gallun
    Farms could not collect his semen every day but it was never more than a
    week between collections. All of this testimony supports the proposition
    that Vervaldee could be successfully bred with mares, like the Mare,
    physically located at Gallun Farms—not the proposition advanced by
    Appellants that his semen was not viable during April and May of 2012.
    Having reviewed the record, we conclude the district court’s finding
    that breedings between the Mare and Vervaldee at Gallun Farms in April
    and May 2012 would have produced four viable embryos is amply
    12
    supported. The compensatory damages awarded by the district court were
    not based on speculation.
    The district court’s award of punitive damages to Appellees was based
    on the court’s finding that Appellants acted with the requisite “evil mind”
    required under Arizona law. See Rawlings v. Apodaca, 
    726 P.2d 565
    , 578
    (Ariz. 1986) (en banc). This finding is not clearly erroneous in light of the
    evidence referenced by the district court showing Appellants “purposely
    created an after-the-fact false contract,” filed documents with the American
    Horse Association falsely claiming they owned the Mare, and engaged in
    prior acts similar to those involving the Mare.
    8. Appellants raise two issues we do not consider. The first involves
    Appellants’ assertion that Appellees’ conversion claim is barred by the
    applicable statute of limitations. The district court ruled this affirmative
    defense was waived because it was not adequately raised in Appellants’
    Answer or in their motion for summary judgment. Appellate review of this
    issue has been waived by Appellants’ inadequate briefing. See United
    States v. Alonso, 
    48 F.3d 1536
    , 1544 (9th Cir. 1995).
    Appellants also seek review of the district court’s denial of their
    request for a jury trial. Appellants raised this issue for the first time in their
    corrected opening brief—a brief they were ordered to file by this court
    13
    because their original opening brief did not comply with Ninth Circuit Rule
    28-2.8. Because this issue was not set out in Appellants’ original
    nonconforming brief, it was not properly included in the corrected brief.
    Accordingly, we grant Appellees’ motion to strike the argument.
    Appeal No. 20-16648
    In Appeal No. 20-16648, Appellants challenge the award of attorneys’
    fees to Appellees. Under Arizona law, a court may award attorneys’ fees to
    “the successful party” in “any contested action arising out of a contract,
    express or implied.” 
    Ariz. Rev. Stat. § 12-341.01
    . Appellants argue
    attorneys’ fees are not permissible here as a matter of law because
    Appellees did not prevail on their breach of contract claim. In Marcus v.
    Fox, 
    723 P.2d 682
    , 684-85 (Ariz. 1986) (en banc), the Arizona Supreme
    Court framed the appropriate test as whether a cause of action for tort could
    not have existed but for the existence of a contract. Under that test, the
    award of attorneys’ fees in this matter was legally appropriate because
    Appellees’ claims arose from the parties’ contractual relationship even
    though Appellants did not breach the terms of the written contract. We
    further conclude there was no abuse of discretion in the district court’s
    decision to award fees in this matter because there was no reversible error in
    the court’s analysis of the relevant factors. See Associated Indem. Corp. v.
    14
    Warner, 
    694 P.2d 1181
    , 1184 (Ariz. 1985) (en banc). Nor have Appellants
    shown any reversible error in the amount of fees awarded except as
    discussed below.
    According to Appellants, a portion of the attorneys’ fee award
    included fees sought by Appellees’ attorney Michael Carroll for work he
    performed in the Cains/Grassi suit. 8 Appellees do not dispute this assertion
    despite the presence of the following statement in the written declaration
    Mr. Carroll filed with the district court: “Those hours, fees and costs
    itemized and sought in this action do not include any fees (or costs) incurred
    in [the Cains/Grassi suit].” (emphasis in original). We remand this issue to
    the district court for a determination of whether there is any basis to award
    fees to Appellees for work performed by Mr. Carroll, or any other person, in
    the Cains/Grassi suit.
    Conclusion
    The judgment in favor of Appellees in No. 19-16779 is affirmed with
    the exception of the judgment against Appellants for breach of fiduciary
    duty which is reversed. The award of compensatory and punitive damages
    to Appellees is affirmed. The award of attorneys’ fees in No. 20-16648 is
    8
    Appellants’ Motion to take Judicial Notice of the docket in the
    Cains/Grassi suit is granted.
    15
    affirmed with the exception of fees awarded for work performed by any
    person in the Cains/Grassi suit. As to those fees, the matter is remanded
    for further proceedings. Appellees shall recover their costs in both appeals.
    16