Shenzhenshi Haitiecheng Science and Technology Co., Ltd. v. Rearden LLC et al

Filing 296

ORDER VACATING HEARING ON MOTION TO AUGMENT THE RECORD AND DENYING MOTIONS TO AUGMENT THE RECORD by Judge Jon S. Tigar denying 266 Motion to Augment the Record; denying 288 Administrative Motion to Augment the Record. (wsn, COURT STAFF) (Filed on 9/21/2016)

1
2
3
4

UNITED STATES DISTRICT COURT

5

NORTHERN DISTRICT OF CALIFORNIA

6
SHENZHENSHI HAITIECHENG
SCIENCE AND TECHNOLOGY CO.,
LTD., et al.,

7
8

Plaintiffs,

9
v.

10

REARDEN LLC, et al.,

United States District Court
Northern District of California

11

Case No.15-cv-00797-JST
ORDER VACATING HEARING ON
MOTION TO AUGMENT THE
RECORD AND DENYING MOTIONS
TO AUGMENT THE RECORD
Re: Dkt. Nos. 266, 288

Defendants.

12
13

Plaintiff Shenzhenshi Haitiecheng Science and Technology (“SHST”) and putative

14
15

intervenor Virtue Global Holdings (“VGH”) have filed two motions to augment the record in

16

support of their motion for de novo determination of Judge Kim’s report and recommendation.1

17

See ECF Nos. 266, 288.2
Federal Rule of Civil Procedure 72(b) allows a party to object to a magistrate judge’s

18
19

recommendation on a dispositive issue, and the district court must review de novo any part of the

20

magistrate judge’s disposition to which a proper objection has been raised. Under Local Rule 72-

21

3(a), the party “must specifically identify the portions of the Magistrate Judge’s findings,

22

recommendation or report to which objection is made and the reasons and authority therefor.” The

23

objecting party may also move to supplement the record after a magistrate judge makes a

24
25
26
27
28

1

Pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7-1(b), the Court finds
the matter suitable for disposition without oral argument. The hearing on this matter, currently set
for September 29, 2016, is hereby VACATED.
2

One of these motions was filed concurrently with the Motion for De Novo Determination and is
currently set for hearing on September 29, 2016. ECF Nos. 266, 290. The other motion was filed
as an administrative motion and is not set for hearing. ECF No. 288.

1

recommendation bearing upon a dispositive issue. Civ. L.R. 72-3(b). In reviewing a magistrate

2

judge’s report and recommendation, “a district court has discretion, but is not required, to consider

3

evidence presented for the first time in a party’s objection to a magistrate judge’s

4

recommendation.” United States v. Howell, 231 F.3d 615, 621-22 (9th Cir. 2000).

5

The discretion to consider new evidence should be exercised rarely, because the purpose of

6

referral to a magistrate judge is to reduce the evidence and issues that must be considered by the

7

district court. See Borden v. Sec'y of Health & Human Servs., 836 F.2d 4, 6 (1st Cir. 1987). “It

8

would defeat this purpose if the district court was required to hear matters anew on issues never

9

presented to the magistrate.” Id. Therefore, “[p]arties must take before the magistrate, not only
their best shot but all of their shots.” Id. (emphasis added) (internal quotation marks and citations

11
United States District Court
Northern District of California

10

omitted).

12

SHST and VGH ask the Court to supplement the record with the following evidence:

13

(1) evidence that on July 29, 2016, VGH paid the monetary sanctions imposed on SHST; (2) an

14

email chain in which Defendant Rearden postponed the deposition of Daniel Seah, the CEO of

15

VGH’s parent company, Digital Domain Holdings Limited (“DDHL”); and (3) a declaration in

16

which Daniel Seah explains that neither DDHL nor VGH hold any ownership interest in SHST.

17

See id. SHST and VGH argue that evidence of VGH’s payment of monetary sanctions imposed

18

against SHST demonstrates that VGH is “fully committed to litigating this case.” ECF No. 266.

19

SHST and VGH further argue that Rearden’s postponement of a deposition shows that any

20

prejudice to Rearden is “partly self-induced.” Id. Finally, they argue that evidence of VGH’s

21

inability to control SHST is necessary to rebut Rearden’s contention that VGH and SHST are in

22

privity. ECF No. 288. In its opposition to the motion for de novo determination, Rearden relies

23

on this alleged privity to argue, for the first time, that “a default judgment against SHST will

24

reasonably bind VGH” and that, as a result, there is no risk of inconsistent judgments if the Court

25

enters default judgment against SHST now. ECF No. 280 at 18.

26

The Court declines to consider the first two pieces of evidence because they are not

27

necessary to the Court’s disposition of the motion for de novo determination. The central issues

28

before this Court are whether SHST’s disappearance prejudiced Rearden’s access to the true facts
2

1

underlying this dispute and, if so, whether the Court may enter a default sanction against SHST

2

now despite VGH’s continued participation in this case. Rearden argues that it is prejudiced

3

because it is unable to question any SHST representative about the May 2013 transaction in which

4

SHST allegedly purchased the MOVA assets from MO2. VGH’s remedial efforts to mitigate the

5

impact of SHST’s disappearance by paying monetary sanctions levied against SHST does not

6

affect the prejudice, if any, that Rearden might have suffered. Nor does Rearden’s decision to

7

postpone the deposition of Daniel Seah have any bearing on this question. In short, this evidence

8

is not relevant to Rearden’s central contention that it is prejudiced because it cannot question any

9

SHST representatives about the May 2013 transaction in which SHST allegedly purchased the

10

MOVA assets.
The Court also refuses to consider the evidence related to VGH’s lack of control over

United States District Court
Northern District of California

11
12

SHST. Although this evidence is relevant to the extent it seeks to rebut Rearden’s argument that

13

VGH would be bound by a default judgment against SHST, Rearden did not raise that legal

14

argument before Judge Kim. See ECF No. 215 at 5 (moving for entry of default judgment solely

15

against SHST); Report and Recommendation, ECF No. 252 at 1 (“Rearden’s motion was directed

16

solely to SHST and not to VGH.”). Nor did Rearden object to Judge Kim’s explicit

17

recommendation that “no action be taken against Plaintiff Virtue Global Holdings, Ltd. (“VGH”).”

18

ECF No. 252 at 1. Although this Court has discretion to consider new legal arguments that were

19

not presented to the magistrate judge, “the ordinary attitude should be to refuse to entertain

20

objections based on legal arguments that were not presented to the magistrate judge.” 12 Fed.

21

Prac. & Proc. Civ. § 3070.2 (2d ed.). The Court declines to exercise its discretion here because

22

Rearden failed to present this argument despite several opportunities to do so. SHST and VGH

23

repeatedly argued before Judge Kim that the Court should delay entry of default judgment against

24

SHST because it would create a risk of inconsistent judgments. See ECF No. 154 at 14; ECF No.

25

224 at 21. Rearden therefore had multiple opportunities to argue that collateral estoppel lessened

26

///

27

///

28

///
3

1

the risk of inconsistent judgments, but failed to do so. Because the Court refuses to consider

2

Rearden’s new legal argument, it need not consider new evidence intended to rebut that argument.

3

The motions are denied.

4

IT IS SO ORDERED.

5
6
7

Dated: September 21, 2016
______________________________________
JON S. TIGAR
United States District Judge

8
9
10

United States District Court
Northern District of California

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
4