Outlaw Laboratory, LP v. DG in PB, LLC ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 IN RE OUTLAW LABORATORIES, LP Case No.: 18-cv-840-GPC-BGS LITIGATION 12 ORDER DENYING MOTION FOR 13 (1) PARTIAL RECONSIDERATION AND SUMMARY JUDGMENT; AND 14 (2) SEPARATE TRIAL OF THE 15 REMAINING ISSUES 16 [ECF No. 306] 17 18 Before the Court is Tauler Smith LLP’s (“Tauler Smith”) Motion for Partial 19 Reconsideration of the Court’s Summary Judgment Order, or alternatively, for Separate 20 Trial (the “Motion”). ECF No. 306. The Motion makes two requests. First, it requests 21 that the Court should reconsider its Summary Judgment Order, ECF No. 293, and 22 summarily dismiss Skyline Market, Inc.’s (“Skyline”) counterclaims against Tauler 23 Smith, based on the Settlement Agreement’s written release. Second, it requests a 24 separate trial on the factual disputes concerning the written release, prior to any potential 25 trial regarding Skyline’s RICO (Racketeer Influenced Corrupt Organizations) claims on 26 the merits. Mot. 1, ECF No. 306; Mem. 1–3, ECF No. 306-1. Having considered the 27 1 Parties’ papers and the applicable law, the Court DENIES Tauler Smith’s Motion for the 2 reasons discussed below. 3 BACKGROUND 4 The Court largely adopts the facts as stated in the Summary Judgment Order that 5 was issued on September 16, 2020. ECF No. 293. The Court adds that, as part of the 6 Order, the Court concluded: (1) there is a genuine dispute of material fact as to whether 7 the Settlement Agreement may be void for fraud; and (2) there is a genuine dispute of 8 material fact as to whether the Settlement Agreement released Skyline’s RICO claim. Id. 9 at 35–40. 10 On October 5, 2020, Tauler Smith filed this Motion. ECF No. 306. The “Stores” 11 (consisting of parties Skyline, Roma Mikha, Inc., and NMRM, Inc.) filed a Response on 12 October 30, 2020.1 ECF No. 323. On November 12, 2020, Tauler Smith filed a Reply. 13 ECF No. 331. 14 RECONSIDERATION 15 This Court has discretion to reconsider its summary judgment, but reconsideration 16 is only appropriate if there is (1) newly discovered evidence, (2) an intervening change in 17 the law, or (3) need to prevent manifest injustice due to “clear error.” Nunes v. Ashcroft, 18 375 F.3d 805, 807–08 (9th Cir. 2004) (citation omitted); Navajo Nation v. Confederated 19 Tribes & Bands of the Yakama Indian Nation, 331 F.3d 1041, 1046 (9th Cir. 2003) 20 (citations omitted). 21 Applying the above standard to the facts at-issue, the Court DENIES Tauler 22 Smith’s request for reconsideration since there is nothing that supports a finding of “clear 23 24 1 The Court is aware that the Stores are making an independent request to compel Tauler 25 Smith to obtain leave of court prior to filing additional motions. The Court overrules the 26 Stores’ request to the extent that the Court does not yet find good cause to justify such an order. The Stores’ motion for sanctions will be addressed in a separate order. 27 1 error” (or new evidence or changes in law). Tauler Smith is in effect arguing that Skyline 2 was undisputedly not misled by the Demand Letter because the Settlement Agreement 3 says so. The Court has explained why the Settlement Agreement itself could be 4 fraudulent, so any text contained in the Settlement Agreement cannot be a valid proof of 5 the Settlement Agreement’s legitimacy or implication.2 See generally 1 B.E. Witkin, 6 Summary of Cal. Law, Contracts § 305 (11th ed. 2020) (“A party to a contract who has 7 been guilty of fraud in its inducement cannot absolve himself . . . by any stipulation in the 8 contract, either that no representations have been made, or that any right that might be 9 grounded upon them is waived.”). As appropriately pointed out by the Stores, see Opp’n 10 3, ECF No. 323, a conclusion otherwise would lead to bizarre results, where evidence of 11 a fraudulent contract would be annulled by the text of the fraudulent contract itself. 12 The Court will not entertain new legal authorities that were absent in the summary 13 judgment motions. “A motion for reconsideration ‘may not be used to raise arguments or 14 present evidence for the first time when they could reasonably have been raised earlier in 15 the litigation.’” Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 16 873, 880 (9th Cir. 2009) (quoting Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 17 890 (9th Cir.2000)). This is especially true for Brae Transp., Inc. v. Coopers & Lybrand, 18 790 F.2d 1439, 1444 (9th Cir. 1986) and In re City Equities Anaheim, Ltd., 22 F.3d 954, 19 958 (9th Cir. 1994), cases in which their legal implications have been subsequently 20 questioned, as demonstrated by the Witkin Restatement, supra. 21 / / / 22 23 24 25 2 Relatedly, the so-called “undisputed” facts that Tauler Smith points to, Mem. 4, ECF 26 No. 306-1, are all descriptions of what the Settlement Agreement itself says. Resps. and Objs. to Tauler Smith’s Statement of Undisputed Facts ¶¶ 31–39, ECF No. 272-1. 27 1 Tauler Smith also argues (albeit in passing) that Section 3.1 of the Settlement 2 Agreement is unaffected by California Civil Code § 1542,3 because Section 1542 only 3 governs general releases whereas Section 3.1 considered the “specific basis” of the 4 Demand Letter. Mem. 3–4, ECF No. 306-1. This argument is meritless—borderline 5 frivolous—when Section 3.1 of the Settlement Agreement is labeled: “General Release.” 6 Ex. 7 to Tauler Decl., ECF No. 260-10. A simple reference to the Demand Letter does 7 not make all potential claims relating to it suddenly “specific.” Briefly setting aside the 8 illegitimacy of Brae—both procedurally (new case in a reconsideration motion) and 9 substantively (developments in the law)—Brae is also distinguishable because there the 10 newly found cause of action “stemmed from a specific section of the Stock Purchase 11 Agreement” (an accounting error). 790 F.2d at 1444. Even Brae discussed how 12 “unknown” claims are covered in a general release subject to Section 1542, id., which has 13 implications similar to the Court’s analysis on Skyline’s RICO counterclaims, Order 38– 14 40, ECF No. 293. 15 SEPARATE TRIAL 16 Tauler Smith also requests for a separate trial on the Settlement Agreement’s 17 validity and implication as it pertains to Skyline’s RICO counterclaim. This requested 18 trial would occur prior to the merits of the RICO claims. Mem. 6, ECF No. 306-1. The 19 Court has discretion to do so, especially “[f]or convenience, to avoid prejudice, or to 20 expedite and economize” the trial. Fed. R. Civ. P. 42(b). 21 The Court concludes that a separate trial would not advance the goals identified in 22 Rule 42(b) of the Federal Rules of Civil Procedure, and therefore DENIES Tauler 23 24 25 3 Tauler Smith’s related assertion on the Settlement Agreement’s waiver of Section 1542 26 has already been addressed in part by the potentially fraudulent development of the Settlement Agreement. 27 1 ||Smith’s request. Tauler Smith’s efficiency claim hinges entirely on whether it prevails 2 ||on the validity and reach of the written release. To illustrate, if the jury finds against 3 || Tauler Smith on the issue, it would have been better off to hold one consolidated trial. 4 ||Such contingent benefit is outweighed by the fact that the jury needs to hear Tauler 5 || Smith’s RICO liability regardless, as presented by Roma Mikha, Inc. and NRMR, Inc. 6 which its fact patterns would be similar to that of Skyline). Therefore, a separate 7 || trial presents little benefit, if any. 8 CONCLUSION 9 For the reasons discussed above, the Court DENIES in its entirety Tauler Smith’s 10 || Motion for Partial Reconsideration of the Court’s Summary Judgment Order, or 11 || alternatively, for Separate Trial. 12 IT IS SO ORDERED. 13 14 Dated: December 14, 2020 <= 16 United States District Judge 17 18 19 20 21 22 23 24 25 26 27 ; 28 18-cv-840-GPC-BGS