Fresno Rock Taco, LLC, et al. v. Rodriguez, et al.

Filing 98

ORDER DENYING Plaintiffs' petition for certification of interlocutory appeal 88 ; ORDER VACATING the 8/14/2013, trial. Plaintiffs' motion to certify an interlocutory appeal is DENIED as MOOT; the 8/14/2013, trial date and all other deadlines are VACATED; and a telephonic status conference is set for 8/14/2013, at 08:30 AM in Courtroom 7 (SKO) before Magistrate Judge Sheila K. Oberto. Order signed by Magistrate Judge Sheila K. Oberto on 7/15/2013. (Timken, A)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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ZONE SPORTS CENTER, LLC, et al.,

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Plaintiffs,

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Case No. 1:11-cv-00622-SKO
ORDER DENYING PLAINTIFFS'
PETITION FOR CERTIFICATION OF
INTERLOCUTORY APPEAL

v.
BEN RODRIGUEZ,

(Doc. 88)

Defendant.

ORDER VACATING THE AUGUST 14,
2013, TRIAL

_____________________________________/

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I.

INTRODUCTION

On March 6, 2013, U.S. District Judge Lawrence J. O'Neill granted a motion for summary

19 judgment, upon which judgment was entered pursuant to Federal Rule of Civil Procedure 54(b).
20 (Docs. 64, 65.) On July 1, 2013, Plaintiffs filed a "Petition for Permission to file an interlocutory
21 appeal." (Doc. 88.) The Court permitted all parties to file an opposition to Plaintiffs' motion.
22 Having reviewed the motion and the opposition briefs, the Court finds the matter suitable for
23 decision without oral argument pursuant to Local Rule 230(g).
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For the reasons stated below, the Court DENIES as MOOT Plaintiffs' petition for

25 certification of an interlocutory appeal and VACATES the trial and all remaining deadlines.
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II.

BACKGROUND

This action was filed by Plaintiffs Fresno Rock Taco, LLC ("Rock Taco"); The Fine

1 Irishman, LLC (the "Fine Irishman"); Zone Sports Center, LLC ("Zone Sports"); 1 minor, Claire
2 Barbis through and by her guardian ad litem Heidi Barbis; Heidi Barbis; and Milton Peter Barbis.
3 The complaint named defendants Ben Rodriguez; Brendan Rhames; the City of Fresno; and
4 Georgeanne White and asserted claims pursuant to 42 U.S.C. § 1983. (Doc. 1.)
5 A.

Defendants' Motion to Dismiss the First Amended Complaint

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On May 18, 2011, Plaintiffs filed a First Amended Complaint ("FAC") which omitted

7 Georgeanne White as a defendant. (Doc. 9.) Subsequently, Defendants Rhames, the City of
8 Fresno, and Ben Rodriguez filed motions to dismiss. (Docs. 10, 11.) Among other things,
9 Defendants argued that Plaintiffs' (excluding minor Plaintiff Claire Barbis) filing for Chapter 7
10 bankruptcy protection resulted in their causes of action becoming the property of their bankruptcy
11 estates, and thus only the bankruptcy Trustee had standing to bring the suit on their behalf.

On

12 August 8, 2011, the district court issued a decision denying Defendants' motion to dismiss the
13 FAC, determining that, although Plaintiffs did not inform the Bankruptcy Court of their claims by
14 including them on their schedule of assets, the Trustee did have an opportunity to examine
15 Plaintiffs' claims but then gave notice of his decision to abandon those claims. As such, the claims
16 reverted back to Plaintiffs; because the Bankruptcy Court relied on the Trustee's decision to
17 abandon the claims, judicial estoppel did not bar Plaintiffs from asserting their claims.
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Defendants' Motion for Reconsideration

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On August 31, 2011, Defendants Rhames and the City of Fresno filed a motion for

20 reconsideration asserting that Plaintiffs' counsel misled the district court into erroneously finding
21 that their claims were considered by the Bankruptcy Court.

In ruling on the motion for

22 reconsideration, the district court held, in relevant part, as follows:
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. . . Under Hamilton, Plaintiff were required to disclose the claims to their creditors
and failed to do so. Because of this failure, they are judicially estopped from
pursuing their claims in this court.

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Collectively, Fresno Rock Taco, LLC, The Fine Irishman, LLC, and Zone Sports Center, LLC, are referred to as "the
LLCs."

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One issue remains. Only Milton and Heidi Barbis filed for bankruptcy.
Defendants argue that, like Milton and Heidi Barbis, Fresno Rock Taco, LLC, Zone
Sports Center, LLC, and the Fine Irishman, LLC (the "LLC Plaintiffs") should be
judicially estopped from bringing the present claims in this Court. See Doc. 15 at
5-6. The Bankruptcy Docket indicates Milton Barbis was "doing business as" all
three LLC Plaintiffs. See 1:09-bk-60548 Docket. In addition, Plaintiffs admit that
the Barbis' bankruptcy petition listed the three LLC Plaintiffs as assets of the estate
with "No Cash Value." Doc. 13 at 5. Although Milton and Heidi Barbis would
arguably be judicially estopped from asserting claims on behalf of the LLC
Plaintiffs because the Barbis' failed to amend their own bankruptcy schedules to
indicate that the LLC Plaintiffs possessed a potentially valuable asset (the claims in
this case), Defendants provide no legal authority to support an extension of judicial
estoppel to the LLC Plaintiffs themselves. According to their bankruptcy petition,
see 1:09-bk-60548 Doc. 1 at Schedule B, Milton and Heidi Barbis control only
25% of the stock in each of these LLCs. (Presumably, others hold the remaining
75% interest.) The LLCs, which arguably have independent standing to bring
Section 1983 civil rights claims, see Club Retro, LLC v. Hilton, 568 F.3d 181, 196
(5th Cir. 2009), themselves made no representations in the bankruptcy court and
therefore are not per se judicially estopped from bringing the claims in this case by
virtue of Milton and Heidi Barbis' conduct. This ruling is without prejudice to a
Federal Rule of Civil Procedure 56 challenge to the LLC's standing based on a
more complete record.

14 (Doc. 35, 10:9-11:5.) In light of this discussion, the court dismissed all claims brought by Milton
15 and Heidi Barbis without prejudice to refilling the claims if the failure to disclose the claims to the
16 bankruptcy creditors could be cured. (Doc. 35, 11:7-10.)
17 C.

Defendants' Motion for Summary Judgment

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On January 11, 2013, Defendants City of Fresno and Rhames filed a motion for summary

19 judgment asserting again that the LLCs had no standing to bring claims not disclosed to the
20 bankruptcy Trustee. Defendants Fresno and Rhames argued that Milton Barbis owned 100% of
21 Fresno Rock Taco and John Benjamin owned 100% of The Fine Irishman, but neither had
22 disclosed the incident underlying this lawsuit as a potential claim in post-incident bankruptcy
23 petitions. As such, Defendants Fresno and Rhames argued that Fresno Rock Taco and The Fine
24 Irishman must be dismissed because they lacked standing to pursue these claims.
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With regard to the LLCs and Defendants' assertion that they lacked standing to pursue their

26 claims in this litigation, the court ruled as follows:
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Defendants contend that the LLCs are subject to dismissal under bankruptcy laws
because the owners of the LLCs filed for bankruptcy and failed to list the instant
lawsuit in their bankruptcy petitions.

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...

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Here, Fresno Rock Taco and The Fine Irishman are judicially estopped
from asserting their causes of action in the instant case because the undisputed facts
show that each is wholly owned by individuals that filed for bankruptcy and did not
disclose the causes of action. Mr. Barbis' deposition testimony and a declaration
prepared from a case in the Northern District [footnote omitted] provides that Mr.
Barbis is the sole owner of Fresno Rock Taco. (Doc. 55-4, p. 3, RT p. 16; Doc. 5516, p. 5). Mr. Barbis filed for bankruptcy and did not disclose the causes of action
brought by Fresno Rock Taco in the instant case to his creditors. Thus, Fresno
Rock Taco is judicially estopped from pursuing its claims in this Court. See
Hamilton, 270 F.3d at 783. Mr. Barbis' declaration provides that he did not own
100% of Fresno Rock Taco, he "owned 100% of the equity capital but other
investors owned 90% of the total capital investment." (Doc. 58-6, p. 6 ¶ 39). The
fact that Mr. Barbis owned 100% of the equity in the company shows that he was
the sole owner of the company.

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With regard to The Fine Irishman, the company's response to the City's
interrogatories provide that John Benjamin is the sole owner of the company.
(Doc. 55-5, p. 3:1-6). Mr. Benjamin's bankruptcy petition also lists him as 100%
sole owner of the company. (Doc. 55-17, p. 3). Mr. Benjamin did not disclose the
instant claims in his bankruptcy petition nor is there any evidence to show that he
disclosed the instant claims to his creditors. Thus, The Fine Irishman is judicially
estopped from asserting its claims in this court. See Hamilton, 270 F.3d at 783.
The Fine Irishman argues that the fact Mr. Benjamin did not disclose its current
claims to Mr. Benjamin's creditors is not relevant because Mr. Benjamin filed for
bankruptcy, not The Fine Irishman. (Doc. 58-1, p. 2). It is true that Mr. Benjamin
filed for bankruptcy and not The Fine Irishman however, because Mr. Benjamin is
the sole owner of the company he should have disclosed the fact that The Fine
Irishman possessed a potentially value asset, the claims in this case. Accordingly,
defendants' motion for summary judgment on the claims brought by Fresno Rock
Taco and The Fine Irishman is GRANTED.
With regard to Zone Sports Center, there is a genuine dispute as to whether
it is judicially estopped from bringing its claims. It is undisputed that Sphere
Properties owns 89.79% of Zone Sports Center and that Granite Park Investors
owns the other 10.21%. (Doc. 58-1, p. 3 ¶ 7, 11). It is further undisputed that Mr.
Barbis owns 22% of Sphere Properties and failed to disclose Zone Sports Center's
claims to his creditors when he filed for bankruptcy. It is also undisputed that Mr.
Benjamin owns 16.6% of Granite Park Investors and Howard Young owns 12% of
the company. It is further undisputed that both Mr. Benjamin and Mr. Young failed
to disclose Zone Sports Center's owners failed to disclose Zone Sports Center's
claims to their creditors when they filed for bankruptcy[,] it is unclear as to who the
other investors are and whether they are judicially estopped from brining Zone
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Sports Center's claims. Accordingly, Zone Sports Center is not judicially estopped
from bringing its claims in the instant action.

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On March 6, 2013, the Clerk of the Court, pursuant to Judge O'Neill's order, entered

5 judgment in favor of Defendants Rhames and the City of Fresno and against Fresno Rock Taco,
6 LLC; Zone Sports Center, LLC; The Fine Irishman, LLC, and minor Claire Barbis through her
7 guardian ad litem, Heidi Barbis. (Doc. 65.) On July 15, 2013, Judge O'Neill issued a final
8 judgment pursuant to Rule 54(b) with respect to the March 6, 2013, order.
III.

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DISCUSSION

10 A.

Legal Standard

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In general, appeals of district court rulings must wait until after entry of a final judgment.

12 Coopers & Lybrand v. Livesay, 437 U.S. 463, 474 (1978). Nonetheless, 28 U.S.C. § 1292(b)
13 provides an exception to this general rule:
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When a district judge, in making in a civil action an order not otherwise appealable
under this section, shall be of the opinion that such order involves a controlling
question of law as to which there is substantial ground for difference of opinion and
that an immediate appeal from the order may materially advance the ultimate
termination of the litigation, he shall so state in writing in such order. The Court of
Appeals . . . may thereupon . . . permit an appeal . . . if application is made to it
within ten days . . .

19 28 U.S.C. § 1292(b). Thus, a district court may certify an appeal of an interlocutory order only if
20 three factors are present. First, the issue to be certified must be a "controlling question of law."
21 Id. Establishing that a question of law is controlling requires a showing that the "resolution of the
22 issue on appeal could materially affect the outcome of the litigation in the district court." In re
23 Cement Antitrust Litig., 673 F.2d 1020, 1026 (9th Cir. 1982).
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Second, there must be "substantial ground for difference of opinion" on the issue.

25 28 U.S.C. § 1292(b). This is not established by a party's strong disagreement with the court's
26 ruling; the party seeking an appeal must make a greater showing. Mateo v. M/S Kiso, 805 F.
27 Supp. 792, 800 (N.D. Cal. 1992). Third, an interlocutory appeal must be likely to materially speed
28 the termination of the litigation. Whether an appeal may materially advance termination of the
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1 litigation is linked to whether an issue of law is "controlling" in that the court should consider the
2 effect of a reversal on the management of the case.
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As Section 1292(b) is a departure from the general rule that only final judgments are

4 appealable, it "therefore must be construed narrowly." James v. Price Stern Sloan, Inc., 283 F.3d
5 1064, 1068 n. 6 (9th Cir. 2002). As such, the court should apply the statute's requirements strictly,
6 and should grant a motion for certification only when exceptional circumstances warrant it.
7 Coopers & Lybrand, 437 U.S. at 475. The burden of establishing the existence of exceptional
8 circumstances lies with the party seeking certification of an interlocutory order.

Brown v.

9 Oneonta, 916 F. Supp. 176, 180 (N.D.N.Y. 1996), rev'd in part on other grounds, 106 F.3d 1125
10 (2d Cir. 1997).
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The Court's March 6, 2013, Order is a Final Judgment Pursuant to Rule 54(b)

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On July 15, 2013, Judge O'Neill issued a final judgment under Rule 54(b) as to the March

13 6, 2013, order noting that, while the Clerk of Court had entered judgment on March 6, 2013, as
14 directed, the judgment was not identified by the Court as a final judgment pursuant to Rule 54(b).
15 As a final judgment now has been issued as to the March 6, 2013, order, there is no interlocutory
16 order for the undersigned to certify for appeal. As a result, Plaintiffs' motion for certification of an
17 interlocutory appeal of the March 6, 2013, order is DENIED as MOOT.
18 C.

The August 14, 2013, Trial Date is VACATED to allow Plaintiffs to Pursue Review of
the March 6, 2013, Summary Judgment Order

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In response to Plaintiffs' motion for certification of an interlocutory appeal, Defendant

21 Rodriguez asserts that, "in the interest of judicial economy, it would be best that any challenge to
22 the Court's Order on Defendants Brendan Rhames' and the City of Fresno's Motions for Summary
23 Judgment be resolved before this matter is tried." (Doc. 92, 3:21-23.) As the Court's March 6,
24 2013, judgment has resulted in a final judgment with respect to the claims against Defendant
25 Rhames and the City of Fresno, the order is appealable pursuant to 28 U.S.C. § 1291. The trial in
26 this matter is currently set for August 14, 2013. As Plaintiffs and Defendant Rodriguez contend
27 that any review of the March 6, 2013, order should be taken before the trial is conducted and
28 because Plaintiffs represent that they will attempt to appeal the order, the trial and all existing
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1 deadlines are VACATED. A telephonic status conference will be held in lieu of trial to determine
2 whether a stay of the trial should be imposed to the extent Plaintiffs have elected to exercise their
3 appellate rights.
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IV.

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For the reasons set forth above, IT IS HEREBY ORDERD that:

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1.

Plaintiffs' motion to certify an interlocutory appeal is DENIED as MOOT;

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2.

The August 14, 2013, trial date and all other deadlines are VACATED; and

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3.

A telephonic status conference is set for August 14, 2013, at 8:30 a.m.

CONCLUSION

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IT IS SO ORDERED.
Dated:

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July 15, 2013

/s/ Sheila K. Oberto
UNITED STATES MAGISTRATE JUDGE

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DEAC_Signature-END:

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