Flemmer v. Newell, et al.

Filing 43

ORDER signed by District Judge Kimberly J. Mueller on 6/23/2016 ORDERING the court's dismissal of Mr. Katz's third-party complaint, following the court's approval of Mr. Flemmer's and Mr. Katz's stipulation to dismiss the claims between them, resolves all claims in this suit. CASE CLOSED. (cc BK Clerk)(Donati, J)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

FOR THE EASTERN DISTRICT OF CALIFORNIA

10
11

In re VILLAGE CONCEPTS, INC.,

12

Debtor.
___________________________________
DAVID FLEMMER, in his capacity as
Trustee for the Bankruptcy Estate of
Village Concepts, Inc.,

13
14
15

Plaintiff,
16
17
18
19

v.
ZENAIDA O. NEWELL a.k.a. ZANDEE
NEWELL, MARIANNE NEWELL, and
BRIAN R. KATZ, in his capacity as
Successor Trustee for the Harold O. Newell
Revocable Trust,

No. 2:14-cv-00021-KJM-EFB

ORDER

20
21
22
23

Defendants.
___________________________________
BRIAN R. KATZ, in his capacity as
Successor Trustee for the Harold O.
Newell Revocable Trust,

24
25
26
27
28

Counter-Claimant,
v.
DAVID FLEMMER, in his capacity as
Chapter 7 Trustee for the Bankruptcy
Estate of Village Concepts, Inc.,
Counter-Defendant.
1

1
2

BRIAN R. KATZ, in his capacity as
Successor Trustee for the Harold O.
Newell Revocable Trust,

3

Third Party Plaintiff/
Cross-Claimant

4
v.

5
6
7

MARK WEINER, NANCY WEINER,
SUSANVILLE VILLAGE LLC, a
California Limited Liability Company,
Third Party Defendants.

8
9
10
11
12

This matter is before the court on third-party plaintiff Brian Katz’s motion to

13

dismiss his third-party complaint, without prejudice. Mot. 2, ECF No. 38. Mark Weiner, Nancy

14

Weiner, and Susanville Village, LLC (the Weiners), the third-party defendants in this case, agree

15

that if the court does not abstain, dismissal of Mr. Katz’s third-party complaint is appropriate, but

16

with prejudice. Opp’n 3, ECF No. 40. Mr. Katz’s motion was submitted without oral argument.

17

ECF No. 42. For reasons explained below, Mr. Katz’s motion is GRANTED, and the third-party

18

complaint is DISMISSED WITHOUT PREJUDICE.

19

I.

20
21

BACKGROUND
A.

The Bankruptcy Petition and This Case
A more extensive discussion of the background of this case is found in this court’s

22

order denying in part and granting in part Mr. Katz’s motion for summary judgment against

23

plaintiff David Flemmer. See ECF No. 26. The court discusses the background here only as

24

relevant to Mr. Katz’s motion to dismiss his third-party complaint without prejudice.

25

On June 8, 2012, Debtor Village Concepts, Inc. (“Debtor” or “VCI”), a seller of

26

manufactured homes, filed a Chapter 11 Bankruptcy petition, which was later converted into a

27
28
2

1

Chapter 7 case. ECF No. 5 at 2. Mr. Flemmer was appointed trustee for the estate on May 15,

2

2013. Id.

3

On July 10, 2013, Mr. Flemmer filed a first amended complaint, alleging three

4

claims against Mr. Katz, the successor trustee for the Harold O. Newell Revocable Trust:

5

(1) recovery of usurious interest payments under California Constitution Article XV, section 1;

6

(2) avoidance and recovery of fraudulent transfer under 11 U.S.C. §§ 548(a)(1)(A) and 550; and

7

(3) fraudulent transfer as to present creditors under California Civil Code section 3439.05 and

8

11 U.S.C. §§ 544(b) and 550. See ECF No. 1 at 16. Mr. Katz filed a third party complaint

9

against the Weiners, alleging the Weiners breached their contractual obligation to serve as

10

personal guarantor for VCI’s debts. Id. at 24–25.

11

On October 1, 2015, Mr. Flemmer and Mr. Katz stipulated to dismiss the claims in

12

Mr. Flemmer’s first amended complaint. ECF No. 32. The court approved this stipulation, and

13

Mr. Katz was dismissed from suit in his capacity as defendant. ECF No. 37. In regard to his

14

capacity as a third-party plaintiff, the court directed Mr. Katz to file a separate motion seeking to

15

dismiss the breach-of-contract claim against the Weiners. Id. at 2. Mr. Katz filed the pending

16

motion to dismiss its breach-of-contract claim without prejudice. Mot. at 2. The Weiners filed

17

their opposition, Opp’n at 3, and Mr. Katz replied, Reply, ECF No. 41.

18

B.

19

State Court Action on Third-party Claim
There was a parallel state court action on Mr. Katz’s breach-of-contract claim

20

against the Weiners. Brian Katz v. Mark Weiner et al., No. PC20120537 (Cal. Super. Ct.

21

El Dorado filed Sept. 20, 2012), ECF No. 32-1. The state court lawsuit went to trial without a

22

jury on June 9, 2015, and the court entered judgment on August 3, 2015 against the Weiners. Id.

23

The Weiners appealed the case to the Third District Court of Appeal on October 16, 2015, but

24

later abandoned the appeal on April 12, 2016. See Katz v. Weiner, No. C080533 (Cal. Ct. App.

25

filed Oct. 16, 2015).1 The state court judgment thus was rendered final as of April 15, 2016. Id.

26
27
28

1

The court takes judicial notice of the Third Appellate District Docket for Katz v. Weiner,
No. C080533.
3

1

II.

2

DISCUSSION
Mr. Katz argues re-litigation of his breach-of-contract claim is barred by the

3

doctrine of claim preclusion, and seeks to dismiss his claim without prejudice. Mot. at 4. The

4

Weiners argue the case should be dismissed with prejudice. Opp’n at 3. Alternately, they argue

5

Mr. Katz’s claims are not barred because there was not a final judgment on the merits in state

6

court. Opp’n at 2. Mr. Katz replies that dismissal with prejudice would operate as a decision on

7

the merits, a result barred by virtue of the state court’s having fully litigated the matter. Reply,

8

ECF No. 41 at 2.

9

The party seeking to apply claim preclusion bears the burden of establishing the

10

following: (1) an identity of claims; (2) the existence of a final judgment on the merits; and

11

(3) identity or privity of the parties. See Cell Therapeutics, Inc. v. Lash Grp., Inc., 586 F.3d

12

1204, 1212 (9th Cir. 2009); see also Headwaters, Inc. v. U.S. Forest Serv., 399 F.3d 1047, 1052

13

(9th Cir. 2005). In California, a defendant’s abandonment of an appeal constitutes a final

14

judgment on the merits as resolved by the state court’s decision. See L.A. Branch NAACP v. L.A.

15

Unified Sch. Dist., 750 F.2d 731, 745 (9th Cir. 1984).

16

Here, both parties agree Mr. Katz’s third-party complaint filed in this court

17

involved the same claims between the same parties involving the same legal and factual issues as

18

the state court case. See Mot. at 4; Opp’n at 2. They disagree on whether the state court issued a

19

final judgment on the merits.

20

Because the Weiners ultimately abandoned their appeal, the state trial court’s

21

judgment in favor of Mr. Katz became final. Accordingly, Mr. Katz is precluded from litigating

22

his breach-of-contract claim against the Weiners, and the third-party complaint should be

23

dismissed without prejudice as Mr. Katz argues correctly, to avoid a decision on the merits.

24

/////

25

/////

26

/////

27

/////

28

/////
4

1
2

III.

CONCLUSION
This court’s dismissal of Mr. Katz’s third-party complaint, following the court’s

3

approval of Mr. Flemmer’s and Mr. Katz’s stipulation to dismiss the claims between them,

4

resolves all claims in this suit. Because the entire case is resolved, the case is CLOSED.

5
6

IT IS SO ORDERED.
DATED: June 23, 2016.

7
8

UNITED STATES DISTRICT JUDGE

9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
5