Carson Industries, Inc. v. American Technology Network, Corp.

Filing 198

ORDER DENYING DEFENDANT'S MOTION TO SET ASIDE JUDGMENT. Re: Dkt. No. 175 . Signed by Judge Nathanael Cousins. (lmh, COURT STAFF) (Filed on 6/10/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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CARSON INDUSTRIES, INC.,
Plaintiff,

United States District Court
Northern District of California

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v.

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AMERICAN TECHNOLOGY
NETWORK, CORP.,

Case No. 14-cv-01769 NC
ORDER DENYING DEFENDANT’S
MOTION TO SET ASIDE
JUDGMENT
Re: Dkt. No. 175

Defendant.
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In this contract dispute, the Court has entered final judgment in plaintiff Carson’s

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favor for $601,153.74. Dkt. No. 153. Defendant American Technology Network (ATN)

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now seeks “relief from, to vacate, or otherwise open” the judgment against it under Federal

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Rule of Civil Procedure 60(b)(3) on the grounds that the judgment was “procured by fraud,

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misrepresentation, and other misconduct of the opposing party and its counsel.” Dkt. No.

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175 at 2. Because ATN has not established a basis to vacate the judgment under Rule

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60(b)(3), its motion is DENIED.

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I.

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HISTORY
This case is about the sale of night vision goggle kits from Carson to ATN. Carson

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shipped 880 goggle kits to ATN in December 2010 and the kits arrived on December 17,

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2010. The price of the kits was $599.45 per unit. ATN paid $50,000 for the goggle kits.

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ATN returned parts of some of the goggle kits to Carson, asserting that the goggles were

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defective. Carson credited $75,778.98 to ATN for returned parts and sued for the balance
Case No. 14-cv-01769 NC

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of the contract.

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The Court granted partial summary judgment to Carson on its sale to ATN of 463

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goggle kits and 10 lenses in the total amount of $280,795.35, “because ATN did not give

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Carson notice of breach.” Dkt. No. 81, 9/25/2015 order. Subsequently, the Court granted

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summary judgment in favor of Carson on ATN’s counterclaim asserting that ATN paid for

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but did not receive 90 goggle kits in September 2010. Dkt. No. 103, 10/6/2015 order.

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In a third and final summary judgment order on December 24, 2015, the Court

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concluded that ATN had not presented facts establishing a material dispute in regards to

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Carson’s claim for the remainder of the contract, or for ATN’s stated counterclaims that it
was entitled to repair costs for 920 goggle and $50,000 that ATN paid to Carson in

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United States District Court
Northern District of California

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February 2012. Dkt. No. 142 at 9. The Court entered judgment in Carson’s favor for

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$401,036.52. Dkt. No. 143.
Thereafter, the Court granted Carson’s motion to amend the judgment to include

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prejudgment interest. Dkt. No. 152. On February 9, 2016, the Court entered an amended

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judgment in Carson’s favor for $601,153.74. Dkt. No. 153.
ATN moved for reconsideration of the amended judgment, claiming that ATN’s due

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process rights were violated. Dkt. No. 155. ATN argued that the Court’s orders were void

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because (1) they gave Carson relief that Carson never requested and (2) they were issued

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with insufficient notice to ATN. Id. at 6. The Court denied ATN’s motion for

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reconsideration because ATN did not identify fraud or misconduct by opposing counsel or

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present any “newly discovered evidence.” Dkt. No. 159.
ATN now moves again to vacate the judgment against it, alleging that the judgment

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was “procured by fraud, misrepresentation, and other misconduct of the opposing party

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and its counsel.” Dkt. No. 175 at 2. Carson has responded, stating that it has not engaged

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in fraud or misconduct and that ATN’s motion should be denied. Dkt. No. 183. The Court

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heard the motion on June 1, 2016.

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II.

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LEGAL STANDARD
ATN moves for relief under Federal Rule of Civil Procedure 60(b)(3). Dkt. No.

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175 at 2. Rule 60(b) states:
On motion and just terms, the court may relieve a party or its
legal representative from a final judgment, order, or proceeding
for the following reasons:
(1) mistake, inadvertence, surprise, or excusable neglect;
(2) newly discovered evidence that, with reasonable diligence,
could not have been discovered in time to move for a new trial
under Rule 59(b);
(3) fraud (whether previously called intrinsic or extrinsic),
misrepresentation, or misconduct by an opposing party;
(4) the judgment is void;
(5) the judgment has been satisfied, released, or discharged; it
is based on an earlier judgment that has been reversed or
vacated; or applying it prospectively is no longer equitable; or
(6) any other reason that justifies relief.
Fed. R. Civ. P. 60(b). “To prevail [on a Rule 60(b)(3) motion], the moving party
must prove by clear and convincing evidence that the verdict was obtained through fraud,

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United States District Court
Northern District of California

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misrepresentation, or other misconduct and the conduct complained of prevented the losing

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party from fully and fairly presenting the defense.” De Saracho v. Custom Food Mach.,

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Inc., 206 F.3d 874, 880 (9th Cir. 2000).

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III. ANALYSIS

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The first question presented is whether ATN has shown “by clear and convincing

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evidence” that Carson has perpetrated a fraud or engaged in misconduct to obtain a verdict.

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ATN argues that Carson (1) withheld information called for in discovery, (2) produced

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fabricated documents in its discovery responses, and (3) misled the Court by

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misrepresenting the content and value of ATN’s returns of goggle kits in Carson’s motion

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for summary judgment. Dkt. No. 175 at 3. ATN asserts that these misrepresentations

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resulted in an incorrect determination of the value of ATN’s returns in the Court’s

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calculation of damages in the judgment awarded to Carson. Id.

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ATN attaches five exhibits to the James Munn declaration as proof of Carson’s

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fraudulent misrepresentations. Exhibit 1 is an email from Carson stating that Carson

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issued a note of credit of $75,778.98 to ATN for returned parts with an attached aging

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report reflecting ATN’s outstanding balance and the credit applied to it. Dkt. No. 175-1 at

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13. Exhibit 2 is a confidential mediation statement by Carson’s attorneys from January

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2015. 1 Dkt. No. 175-1 at 17. Exhibit 3 is an email from Carson employee Mark Foster to

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James Munn at ATN with an accounting of the returned kits and photo attachments of the

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kits in boxes. Id. at 22-29. Exhibit 4 is an untitled document with Bates stamp C0163,

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which is imprinted with the FedEx tracking number and shipping charges for ATN’s return

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of 41 units on or about February 10, 2012. Id. at 31-32. Finally, Exhibit 5 is a spreadsheet

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with Bates stamp C0041, generated by Carson to reflect the goggle kit Bill of Materials.

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Id. at 34.
ATN argues that Carson fabricated the document ATN attaches as Exhibit 4, which

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Carson produced to ATN in discovery. Dkt. No. 175-1 at 31. Munn states in his

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declaration that, “[a]s is evident from the discrepancies in the prices of the goggle

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United States District Court
Northern District of California

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components in the Bill of Materials (‘BOM’) (Exh. 5) and Exhibit 4, it is clearly evident

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that Carson fabricated the document represented by Exhibit 4 in order to back into the

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value of returned components it arbitrarily selected to come up with the amount of ‘credit’

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of $75,778.98 and to mislead the Court into awarding it excessive damages.” Dkt. No.

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175-1 at 11. However, a comparison of Exhibits 4 and 5 does not show that Carson

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perpetrated a fraud or that Exhibit 4 was a fabricated document. ATN provides no

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evidence that Carson has fabricated evidence or that the document it produced attached at

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Exhibit 4 is a fake document.

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ATN’s other proposed evidence of alleged misconduct is that because two return

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shipments from ATN to Carson “were made on Carson’s account(s) with FedEx and/or

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UPS as requested by Carson in writing, Carson’s failure to disclose any statements

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pertaining to its accounts with FedEx and UPS for the time frames corresponding to the

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time frames in which ATN claims to have made those shipments, it is impossible for ATN

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to furnish concrete proof that those shipments were, in fact, made.” Id. at 4. ATN claims

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Federal Rule of Evidence 408 states that “conduct or a statement made during
compromise negotiations about the claim . . . is not admissible—on behalf of any party—
either to prove or disprove the validity or amount of a disputed claim.” ATN’s attempt to
use this confidential mediation statement was improper and the Court will not consider it
for purposes of the present motion.
Case No. 14-cv-01769 NC
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that it has produced evidence of the shipments in the form of a declaration by James Munn,

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an agent of ATN, as well as “evidence of the shipment of 41 units, including but not

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limited to the FedEx tracking number, made on January ???, 2012, which Carson has

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boldly denied while failing and refusing to produce documentary evidence to the contrary

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which can only be accessed through Carson’s disclosure.” Id. at n.1.

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Neither ATN’s motion nor the declaration of James Munn at docket 175-1 with its

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five exhibits proves “by clear and convincing evidence that the verdict was obtained

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through fraud [or] misrepresentation.” De Saracho, 206 F.3d at 880.

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The second question presented is whether ATN shows that it has been “prevented
. . . from fully and fairly presenting [its] defense.” De Saracho, 206 F.3d at 880. A district

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United States District Court
Northern District of California

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court in the central district of California denied a motion under Rule 60(b)(3) because the

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movant failed to show fraud and “[e]ven if plaintiff had presented any evidence of fraud,

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because he makes no allegations relating to the time period between February 5, 2014 and

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April 7, 2014, plaintiff could not show that any of defendants’ conduct unfairly prevented

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him from amending his complaint.” Dupree v. Mortgage Elec. Registration Sys. Inc., 2014

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WL 4756210, at *3 (C.D. Cal. Sept. 24, 2014). Here, ATN must present evidence of fraud

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that came to light after it presented its defense to Carson’s motion for summary judgment

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and thereby unfairly prevented it from presenting its case.

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The five exhibits ATN now puts forward were in ATN’s possession when Carson

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moved for summary judgment. Three of the exhibits are documents ATN received from

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Carson in discovery, one is a document of ATN’s, and one is Carson’s mediation

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statement. See Dkt. No. 175-1 at 13-34. Therefore, ATN does not present any evidence

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that it did not have when it opposed Carson’s motion for summary judgment. The Munn

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declaration argues that Carson failed to provide a statement of damages with a breakdown

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of a $75,778.98 credit, constituting a violation of Federal Rule of Civil Procedure

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26(a)(1)(A)(iii). Dkt. No. 175-1 at 5. Munn also states that Carson “failed to produce any

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shipping records pertaining to the return of the 36 units and 41 units shipped to Carson to

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collect and billed to its account with the carrier(s) specified by Carson.” Id. However,
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these arguments have been made before the Court in opposition to summary judgment, in

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repeated references to motions for sanctions, and in ATN’s pretrial statement. See Dkt.

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Nos. 76, 79, 89. The Court, in responding to these allegations of misconduct throughout

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the litigation, ordered ATN to identify the evidence that support its proposition that it

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returned 419 and not 327 goggle units to Carson. Dkt. No. 142 at 3. ATN failed to do so.

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As in Dupree, ATN does not present evidence that was not available to it during litigation

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before the entry of judgment.

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Likewise, Carson argues in opposition that ATN “took not a single deposition of
Carson during the course of discovery . . . ATN could have pursued the discovery it now
claims it should have had.” Dkt. No. 183 at 4. The Court agrees with Carson. ATN’s

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United States District Court
Northern District of California

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present motion restates its arguments in the case, which was fully and fairly litigated.

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Because ATN has not provided evidence to show that Carson deprived it of its ability to

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present its defense to the Court, it has failed to satisfy the second requirement of Rule

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60(b)(3).

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ATN has not carried its burden of (1) proving fraud or misconduct by clear and

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convincing evidence and (2) showing that it was prevented from fully and fairly presenting

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its defense. De Saracho, 206 F.3d at 880. Therefore, the motion is denied.

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IV. CONCLUSION

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Because ATN’s motion to vacate the judgment under Rule 60(b)(3) fails to present

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proof of fraud or misconduct and does not present evidence that was not available to ATN

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when it opposed Carson’s motion for summary judgment, it is DENIED.

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IT IS SO ORDERED.

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Dated: June 10, 2016

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_____________________________________
NATHANAEL M. COUSINS
United States Magistrate Judge

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