Anton Toutov v. Curative Labs Inc. et al

Filing 267

ORDER DENYING MOTION TO VACATE JURY VERDICT 257 AND DENYING EX PARTE APPLICATION TO INTERVENE 258 by Judge Otis D. Wright, II: The Court DENIES Defendants' Motion to Vacate the Verdict, (ECF No. 257), and DENIES AS MOOT Curatives Ex Parte A pplication to Intervene and Oppose, (ECF No. 258). Further, in light of the parties' full and final settlement of all claims, the Court DISMISSES this action and VACATES all remaining dates and deadlines. The Clerk of Court shall close the case. (Made JS-6. Case Terminated.) (lc)

O
JS-6

1
2
3
4
5
6
7
8

United States District Court
Central District of California

9
10
11

ANTON TOUTOV,

12
13

Plaintiff,
v.

14

CURATIVE LABS INC. et al.,

15

Defendants.

Case № 2:20-cv-11284-ODW (ASx)
ORDER DENYING
MOTION TO VACATE JURY
VERDICT [257] AND DENYING
EX PARTE APPLICATION TO
INTERVENE [258]

16
17

I.INTRODUCTION

18

Defendants Jonathan Martin and Paul Scott move to vacate the jury verdict in

19

light of their post-verdict, pre-judgment settlement with Plaintiff Anton Toutov. (Mot.

20

Vacate (“Motion” or “Mot.”), ECF No. 257.) Former Defendant Curative Inc., now

21

dismissed, applies ex parte to intervene in this action for the limited purpose of opposing

22

the Motion. (Ex Parte Appl. Intervene (“Appl.”), ECF No. 258.) Having considered

23

the Motion, Ex Parte Application, and Martin and Scott’s Opposition to the Ex Parte

24

Application, (Opp’n Appl., ECF No. 263), the Court finds that oral argument would not

25

be helpful in this matter and VACATES the April 1, 2024 hearing, Fed. R. Civ. P. 78;

26

L.R. 7-15. For the reasons discussed below, the Court DENIES the Motion and

27

DENIES AS MOOT the Ex Parte Application. (ECF Nos. 257, 258.)

28

1

II.BACKGROUND

2

Toutov initiated this business dispute litigation against Martin, Scott, Curative,

3

and Curative Labs Inc., claiming that Martin and Scott deprived Toutov of his

4

ownership interest in the company they co-founded, KorvaLabs, and then forced Toutov

5

out before selling the company to Curative and Curative Labs for $27.5 million. (Order

6

Den. Defs.’ Mots. Summ. J. 2, ECF No. 148.)

7

In June 2023, before trial, Curative and Curative Labs settled with Toutov and

8

Toutov dismissed them with prejudice. (Order Granting Dismiss, ECF No. 174.) In

9

September 2023, Toutov, Martin, and Scott proceeded to a four-day jury trial. (See

10

Mins. Jury Trial, ECF No. 217.) The jury returned a unanimous verdict for Toutov.

11

(Jury Verdict, ECF No. 227.) The jury specifically found that Toutov was a shareholder

12

of KorvaLabs, Martin and Scott breached their fiduciary duties to Toutov, and their

13

breach caused Toutov harm in the amount of $6,860,241. (Id. at 2–3.) The jury also

14

specifically found that Martin and Scott acted with malice, oppression, or fraud,

15

warranting punitive damages in the amount of $500,000 each. (Id. at 3; Jury Note

16

No. 2, ECF No. 222.) In December 2023, prior to the Court resolving the remaining

17

equitable issues and entering judgment, Martin, Scott, and Toutov reached a settlement.

18

(Am. Notice, ECF No. 251.) The parties requested, and the Court permitted them, until

19

March 22, 2024, to finalize the agreement, perform its terms, and file the appropriate

20

dismissal. (Id. at 2; Stip. Extend Time, ECF No. 255.)

21

On March 4, 2024, Martin and Scott (“Defendants”) filed a motion pursuant to

22

Federal Rule of Civil Procedure (“Rule”) 60(b)(5) and (b)(6), requesting that the Court

23

vacate the jury verdict in light of the parties’ settlement. (Mot. 1.) Toutov does not

24

oppose. (Pl. Statement 2, ECF No. 262.)

25

On March 19, 2024, Curative applied ex parte to intervene for the limited purpose

26

of opposing the Motion. (Appl. 1.) Toutov takes no position on Curative’s request to

27

intervene and “leaves the matter to the Court’s discretion.”

28

Defendants oppose intervention. (See generally Opp’n Appl.)

2

(Pl. Statement 2.)

III.DISCUSSION

1
2

Rule 60(b) authorizes a court to vacate a final judgment, order, or proceeding for

3

certain reasons, including when “(5) the judgment has been satisfied, released, or

4

discharged, or a prior judgment upon which it is based has been reversed or otherwise

5

vacated, or it is no longer equitable that the judgment should have prospective

6

application” and for “(6) any other reason justifying relief from the operation of the

7

judgment.” Am. Games, Inc. v. Trade Prods., Inc., 142 F.3d 1164, 1168 (9th Cir. 1998)

8

(quoting Fed. R. Civ. P. 60(b)(5)–(6)).1 A court may vacate an earlier order based on

9

the parties’ settlement, but it is not required to do so. Id. at 1170; Bates v. Union Oil

10

Co., 944 F.2d 647, 650 (9th Cir. 1991).

11

“Like court orders, jury verdicts ‘are not merely the property of private litigants’

12

to be used as bargaining chips in settlement negotiations, but exist in part for public

13

benefit and ‘should stand unless a court concludes that’ vacatur is in the public interest.”

14

Embotteladora Electropura S.A. de C.V. v. Accutek Packaging Equip. Co., No. 3:16-cv-

15

00724-GPC-MSB, 2020 WL 5656578, at *1 (S.D. Cal. Sept. 23, 2020) (quoting U.S.

16

Bancorp Mortg. Co. v. Bonner Mall P’ship, 513 U.S. 18, 26–27 (1994)). Otherwise,

17

“any litigant dissatisfied with a trial court’s findings would be able to have them wiped

18

from the books.” Ringsby Truck Lines, Inc. v. W. Conf. of Teamsters, 686 F.2d 720, 721

19

(9th Cir. 1982). Indeed, “[s]ome litigants, at least, may think it worthwhile to roll the

20

dice rather than settle in the district court, or in the court of appeals, if, but only if, an

21

unfavorable outcome can be washed away by a settlement-related vacatur.” Bonner

22

Mall, 513 U.S. at 28.

23

Thus, district courts must decide whether to vacate “in light of ‘the consequences

24

and attendant hardships of dismissal or refusal to dismiss’ and ‘the competing values of

25

finality of judgment and right to relitigation of unreviewed disputes.’” Am. Games,

26

142 F.3d at 1168 (quoting Dilley v. Gunn, 64 F.3d 1365, 1370–71 (9th Cir. 1995)). The

27

1

28

Although Defendants move to vacate the jury verdict, the Court also finds case law regarding motions
to vacate court orders pursuant to settlement instructive. Id. at 1169–70 (finding that district courts
should weigh the equities when determining whether to vacate a prior judgment).

3

1

burden rests with the party seeking relief to demonstrate equitable entitlement to

2

vacatur. See Bonner Mall, 513 U.S. at 27 (noting the analogous petitioner’s burden on

3

appeal, as the party seeking vacatur of an appellate judgment).

4

Here, Defendants’ sparse Motion does not justify vacatur. Defendants assert that

5

the parties agreed to settle all claims between them so the jury verdict should be set

6

aside, and since the verdict is not a substantive court ruling it “does not affect the

7

precedential value of the case.” (Mot. 1.) This is not enough. Defendants fail to

8

establish any hardship from leaving the verdict in place. See Embotteladora, 2020 WL

9

5656578, at *2 (finding the parties “failed to make a showing that the public interest

10

warrants striking the jury verdict” on the basis of the parties’ settlement). Further, to

11

the extent the verdict has potentially preclusive effects,2 Defendants “should not be able

12

to avoid those effects through settlement and dismissal.” Nat’l Union Fire Ins. Co. v.

13

Seafirst Corp., 891 F.2d 762, 769 (9th Cir. 1989).

14

Defendants contend that vacating the verdict “preserves judicial resources.”

15

(Mot. 3.) However, Curative highlights several currently ongoing legal actions between

16

Defendants and Curative, all based on the events of this case.

17

(describing Defendants’ current litigation against Curative regarding the sale of

18

KorvaLabs, Curative’s cross-complaint against Defendants concerning Defendants’

19

fraudulent concealment of Toutov’s ownership share, and Curative’s arbitration

20

demand seeking indemnity for Curative’s settlement with Toutov).) Defendants do not

21

dispute the existence of these separate legal actions. (See generally Opp’n Appl.)

22

Vacating the verdict in this case will not preserve the substantial judicial resources being

23

expended in those actions, and therefore does not tip the balance of equities in

24

Defendants’ favor. Cf Jacobs v. Alexander, No. 1:05-cv-01625-SAB (PC), 2017 WL

25

2081080, at *2 (E.D. Cal. May 15, 2017) (finding the equities swayed in favor of

26

vacatur only because the settlement resolved four other pending federal cases).

27
28

2

The Court takes no position as to whether the verdict has preclusive effect.

4

(See Appl. 6–7

1

Our legal system demands “a decent respect for the collective wisdom of the jury,

2

and for the function entrusted to it.” Madrigal v. Allstate Ins. Co., 215 F. Supp. 3d 870,

3

907 (C.D. Cal. 2016) (quoting Landes Const. Co., Inc. v. Royal Bank of Can., 833 F.2d

4

1365, 1371 (9th Cir. 1987)), aff’d sub nom. Madrigal v. Allstate Indem. Co.,

5

697 F. App’x 905 (9th Cir. 2017). The Court will not endorse Defendants’ attempt to

6

“buy an eraser for the public record” through settlement. Ayotte v. Am. Econ. Ins. Co.,

7

578 F. App’x 657, 658 (9th Cir. 2014) (quoting Am. Games, 142 F.3d at 1170).

8

Given the third-party interests in this case, the potentially preclusive effects of

9

the verdict, and the social value of the jury’s findings, the Court concludes that the

10

equities do not weigh in favor of vacatur. See Nat’l Union, 891 F.2d at 769 (“[T]he

11

social value of precedent, created at cost to the public and other litigants, should not

12

become a bargaining chip in the process of settlement.” (cleaned up)). In light of this

13

conclusion, the Court finds it unnecessary to reach the substance of Curative’s request

14

to intervene for the purpose of opposing and denies Curative’s Application as moot.

15

At the parties’ request, the Court provided them more than three months, to

16

March 22, 2024, to finalize the settlement and file a dismissal that complies with

17

Rule 41.

18

No. 256.) Nothing in the Motion suggests that vacating the verdict was a condition

19

precedent to the settlement between Defendants and Toutov, and Defendants do not

20

attach the settlement agreement for the Court’s review.

21

Defendants note only that the parties “have reached an agreement to settle all claims

22

between them.” (Id. at 1.) Toutov notes only that the settlement has been “finalized.”

23

(Pl. Statement 2.) Accordingly, as the March 22, 2024 deadline to dismiss pursuant to

24

the settlement has elapsed, and the parties have fully and finally settled all remaining

25

claims between them, the Court finds dismissal of this action appropriate.

26

(Order re Notice Settlement, ECF No. 253; Order Extend Time, ECF

IV.

(See generally Mot.)

CONCLUSION

27

For the reasons discussed above, the Court DENIES Defendants’ Motion to

28

Vacate the Verdict, (ECF No. 257), and DENIES AS MOOT Curative’s Ex Parte

5

1

Application to Intervene and Oppose, (ECF No. 258). Further, in light of the parties’

2

full and final settlement of all claims, the Court DISMISSES this action and

3

VACATES all remaining dates and deadlines. The Clerk of Court shall close the case.

4
5

IT IS SO ORDERED.

6
7

March 28, 2024

8
9
10
11

____________________________________
OTIS D. WRIGHT, II
UNITED STATES DISTRICT JUDGE

12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

6