Mohebbi v. Khazen et al

Filing 153


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1 2 UNITED STATES DISTRICT COURT 3 NORTHERN DISTRICT OF CALIFORNIA 4 SAN JOSE DIVISION 5 6 SAEID MOHEBBI, Case No. 13-cv-03044-BLF Plaintiff, 7 v. 8 9 MAHNAZ KHAZEN, et al., Defendants. 10 ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S APPLICATION FOR ENTRY OF STIPULATED JUDGMENT [Re: ECF 129-1] United States District Court Northern District of California 11 Before the Court is Plaintiff Saeid Mohebbi’s Application for Entry of Stipulated 12 13 Judgment Pursuant to Comprehensive Settlement, Release and Security Agreement 14 (“Application”). Application, ECF 129-1. Defendants Mahnaz Khazen, Michael Shadman and 15 U.S. Immigration Investment Center, LLC (collectively, “Defendants”) oppose Plaintiff’s 16 Application. Opp’n, ECF 135. The present Application concerns whether Plaintiff is entitled to 17 entry of the stipulated judgment arising out of Defendants’ failure to make timely payment under 18 the parties’ settlement agreement and what monetary award Plaintiff would be entitled. The Court held a hearing (“the Hearing”) on Plaintiff’s Application for Stipulated 19 20 Judgment on December 13, 2018. The Court has considered the arguments presented at the 21 Hearing and in the briefing, as well as the evidence submitted and applicable law. For the reasons 22 that follow and as discussed at the Hearing, the Court hereby GRANTS IN PART and DENIES IN 23 PART Plaintiff’s Application for Stipulated Judgment. 24 I. BACKGROUND 25 A. 26 The underlying facts of this case are well-known1 to the Court and the parties and such General Background 27 28 1 For example, see the Court’s prior orders at ECF 64 and ECF 81. facts not relevant to the present Application for Stipulated Judgment are not restated here. On July 2 11, 2014, Plaintiff Saeid Mohebbi (“Plaintiff” or “Mohebbi”) filed his Second Amended 3 Complaint (“SAC”) against Defendants Mahnaz Khazen, Michael Shadman, Violet Parvarandeh, 4 Pirooz Parvarandah, and Stacey Conti, as well as U.S. Immigration Investment Center LLC 5 (“USIIC”), USIIC LLP, and USIIC I LP, asserting twenty-two causes of action, including claimed 6 violations of federal and state securities laws, fraud, false advertising, conversion, unjust 7 enrichment, and common law torts. SAC, ECF 66. The claims arose out of a contractual 8 investment relationship between the parties. Plaintiff alleged that, in exchange for Defendants’ 9 assistance in applying for a federal EB-5 immigration visa, he invested over $1 million in a 10 partnership. See, e.g., SAC ¶ 38. Plaintiff alleged that Defendants fraudulently induced this 11 United States District Court Northern District of California 1 investment and failed to comply with their obligations pursuant to the contract, and sought 12 rescission of the agreement and damages, including punitive damages, and attorneys’ fees. See 13 generally SAC. 14 B. 15 On December 4, 2014, the Court granted in part Defendants’ motion to compel arbitration Arbitration Award 16 and stayed the remaining claims pending completion of arbitration. See ECF 81. Arbitration 17 subsequently commenced in the International Court of Arbitration of the International Chamber of 18 Commerce before the Hon. James Ware (Ret.). See generally Arbitration Partial Award, Ex. 2 to 19 Holland Decl., ECF 129-3. On February 28, 2018, Judge Ware issued a Partial Award declaring 20 “[Plaintiff] Saeid Mohebbi to be the prevailing party as against [Defendants] Mahnaz Khazen, 21 Michael Shadman and [U.S.] Immigration Investment Center LLC.” Id. ¶ 335. Judge Ware ruled 22 that Defendants Khazen, Shadman, and USIIC were liable and awarded Mohebbi both 23 compensatory and punitive damages. See id. ¶¶ 326–29. Pre-award interest, attorney’s fees and 24 costs were reserved for the Final Award. Id. ¶ 337. Judge Ware’s findings included, inter alia, 25 that Defendant Khazen “made intentionally false representations to Claimant Mohebbi,” created 26 “fake” government documents to illegally receive funds out of Iran, “creat[ed] a false paper trail,” 27 made a variety of “documents [that] were all fictitious . . . to cover up [multiple] 28 misrepresentations,” engaged in a “cover-up” through the creation of a “fictitious investment,” and 2 1 “deliberately concealed from [] Mohebbi her actual use of his EB-5 funds.” See id. ¶¶ 148–49, 2 210, 246, 248. Settlement Agreement and Defendants’ Failure to Pay 3 C. 4 Prior to issuance of any Final Award, the parties2 entered into a Comprehensive 5 Settlement, Release, and Security Agreement (“Settlement Agreement”), effective March 28, 6 2018. See generally Settlement Agreement, Ex. 2 to Holland Decl., ECF 120-1. The Settlement 7 Agreement is governed by California law, see id. § 12, and conditionally resolves all disputes 8 between the parties as alleged in this action or the arbitration proceeding, see id. § A–E, § 1. 9 Pursuant to the agreement, Defendants Khazen, Shadman, and USIIC agreed “to pay or cause to paid to [] Mohebbi . . . by [] September 28, 2018, the discounted sum of Three Million, Six 11 United States District Court Northern District of California 10 Hundred Twenty Five Thousand Dollars and No Cents ($3,625,000.00 U.S.) (the ‘Settlement 12 Amount’).” Id. § 2.1 (emphasis in original). The Settlement Agreement further provides that the 13 Court may “enter the Stipulated Judgment attached as Exhibit F [to the Settlement Agreement]” if 14 the “full Settlement Amount, and all accrued interest, if any, is not paid with[in] the [] period 15 specified.” See id. § 5.1(b). The Settlement Agreement also provides that “[Plaintiff] may 16 immediately foreclose on the security referred to [in the Settlement Agreement], which 17 Defendants shall not oppose, directly or indirectly,” if the full Settlement Amount is not paid 18 within the period specified. See id. § 5.2. 19 Defendants made an initial settlement payment of $500,000 to Plaintiff on June 11, 2018. 20 See Holland Decl. ¶ 54, ECF 129-3. The parties agree that no additional payments were made by 21 the deadline of September 28, 2018, but dispute who is at fault thus what actions should result 22 from Defendants’ failure to pay. See Application at 1, ECF 129-1; Opp’n at 6–7, ECF 135. On 23 October 19, 2018, Defendants made an additional settlement payment of $1,212,350 to Plaintiff. 24 See Benning Decl. ¶ 6, ECF 136. The Settlement Agreement includes terms setting interest rates 25 and accrual on any outstanding amount on or after June 12, 2018. See Settlement Agreement 26 27 28 2 Defendant USIIC LLP is not listed in the Settlement Agreement; however, Plaintiff represents that claims against all parties to this lawsuit are covered by the Settlement Agreement, see Application at 1, ECF 129-1, which Defendant does not dispute. 3 1 § 2.1(c)–(g). The Settlement Agreement also states that if the full Settlement Amount is not paid 2 by the deadline of September 28, 2018, Plaintiff may apply to the Court to enter “the Stipulated 3 Judgment attached [see Exhibit F to the Settlement Agreement] . . . against Defendants [in] the 4 amount of 120% of any unpaid portion of the Settlement Amount that is then due and owing at the 5 time of default.” See Settlement Agreement § 5.1(b). 6 D. 7 On September 29, 2018, the day after the settlement payment deadline, Plaintiff served On-going Litigation 8 Defendants with a Notice of Default and indicated that Plaintiff would file an application for 9 stipulated judgment in accordance with the terms of the Settlement Agreement if Defendants did not “cure the default” within “four court days” as provided by the procedure for entering stipulated 11 United States District Court Northern District of California 10 judgment. See Ex. 54 to Holland Decl., ECF 129-3. Defendants did not make any additional 12 payments within this timeframe, but instead filed an Ex Parte Application for Temporary 13 Restraining Order and Order to Show Cause Re: Preliminary Injunction (“Application for TRO”) 14 on October 3, 2018. See Application for TRO, ECF 112. Defendants’ Application for TRO 15 sought to enjoin Plaintiff from filing an application for stipulated judgment; enjoin Plaintiff from 16 foreclosing on the properties listed as “security” in § 3 of the Settlement Agreement; obtain an 17 order to show cause why a preliminary injunction should not issue; and obtain a finding of 18 damages for breach of contract and breach of the implied covenant of good faith and fair dealing, 19 and judicial declaration that § 5.1 of the Settlement Agreement is void and unenforceable. See 20 generally id. The properties listed as “security” are located at 143 Bay Place and 2332 & 2336 21 Harrison Street, Oakland, California (“The Properties”). See id. § 3. On October 10, 2018, the Court denied Defendants’ Application for TRO in its entirety. 22 23 See Order Denying Defendants’ Application for TRO, ECF 130. Now before the Court is 24 Plaintiff’s Application for Entry of Stipulated Judgment Pursuant to Comprehensive Settlement, 25 Release and Security Agreement (“Application”). Application, ECF 129-1. 26 II. LEGAL STANDARD 27 Under federal law, courts possess inherent power to enforce a settlement agreement 28 pertaining to an action pending before it. See Dacanay v. Mendoza, 573 F.2d 1075, 1078 (9th Cir. 4 1 1978). “The authority of a trial court to enter a judgment enforcing a settlement agreement has as 2 its foundation the policy favoring the amicable adjustment of disputes and the concomitant 3 avoidance of costly and time consuming litigation.” Id. In other words, the district court “ha[s] 4 the authority to approve and enforce [a] settlement [agreement]” in a case pending before it. See 5 Waits v. Weller, 653 F.2d 1288, 1291 n.4 (9th Cir. 1981); see also Sohn v. Wells Fargo Bank, 6 2015 WL 13688050, at *2 (N.D. Cal. Oct. 13, 2015). Courts possess equivalent power under 7 California law. “If parties to pending litigation stipulate, in a writing signed by the parties outside 8 the presence of the court or orally before the court, for settlement of the case, or part thereof, the 9 court, upon motion, may enter judgment pursuant to the terms of the settlement. If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until 11 United States District Court Northern District of California 10 performance in full of the terms of the settlement.” Cal. Civ. Proc. Code § 664.6. Under § 664.6, 12 a court may “entertain challenges to the actual terms of the stipulation, that is, whether there 13 actually was a settlement . . . . [and] interpret the terms and conditions to settlement.” Fiore v. 14 Alvord, 182 Cal. App. 3d 561, 565–66 (1985). 15 III. 16 DISCUSSION The parties do not dispute that settlement occurred and is binding. Instead, the parties 17 dispute whether Plaintiff is entitled to Stipulated Judgment arising out of Defendants’ failure to 18 make timely payment under the Settlement Agreement and to what amount of damages Plaintiff 19 would be entitled. See Application at 1–2, ECF 129-1; Opp’n at 1, ECF 135. Specifically, 20 Plaintiff requests that the Court enter judgment for Plaintiff pursuant to the parties’ Stipulated 21 Judgment form (Ex. F to the Settlement Agreement), which includes confirming Judge Ware’s 22 Arbitration Award and awarding Plaintiff an additional 20% of the amount outstanding. See 23 Application at 1–2; Ex. F to Settlement Agreement at 1. Defendants object to the entry of 24 Stipulated Judgment on three grounds: (1) that Plaintiff’s alleged breaches of the confidentiality 25 clause of the Settlement Agreement caused Defendants to default; (2) that the Arbitration Award 26 should not be confirmed because it was not finalized; and (3) that the additional 20% provided in 27 the Stipulated Judgment form is void and unenforceable as a liquidated damages “penalty 28 provision.” See Opp’n at 1. 5 1 The Court discusses in turn each objection raised by Defendants. For the reasons stated 2 below, the Court finds that Defendants’ first two objections are without merit but agrees that the 3 provision granting Plaintiff an additional 20% of the amount outstanding is void and 4 unenforceable. Accordingly, Plaintiff’s Application for Stipulated Judgment is GRANTED IN 5 PART and DENIED IN PART. Plaintiff’s Alleged Breaches of Confidentiality 6 A. 7 Defendants contend that “Plaintiff breached the confidentiality clause in the [Settlement] Agreement” and that “[c]onsequently, Defendants have been unable to sell The Properties and 9 acquire liquid capital to tender payment to Plaintiff . . . rendering [Defendants] in default under the 10 [Settlement] Agreement.” See Opp’n at 8, 9. Plaintiff argues that “[Plaintiff] has not breached the 11 United States District Court Northern District of California 8 Settlement Agreement’s confidentiality clause and Defendants have offered no evidence of any 12 actual confidentiality breaches” and that regardless “any alleged confidentiality breaches are 13 irrelevant, as Defendants’ performance is not excused.” See Plaintiff’s Memorandum at 10, ECF 14 129-2; see also Reply at 1–6, ECF 144. As discussed below, the Court agrees with Plaintiff. 15 First, Defendants’ obligation under the Settlement Agreement to make timely payment of 16 the Settlement Amount is not contingent upon sale of The Properties. Instead, the Settlement 17 Agreement provides that The Properties are “security until payment [is made] to [Plaintiff] of the 18 full Settlement Amount and all accrued interest [] or [] shall be sold by Defendants . . . to generate 19 funds.” Settlement Agreement § 3 (emphasis added); see also id. § 3.3. Thus, while Defendants 20 may sell The Properties and use the proceeds to cover the Settlement Amount, Defendants are 21 bound by the Settlement Agreement to pay the Settlement Amount irrespective of sale of The 22 Properties. In other words, mere non-sale of The Properties does not relieve Defendants of their 23 duty under the Settlement Agreement to make timely payment. 24 Second, Defendants’ allegation that Plaintiff breached the confidentiality provisions of the 25 Settlement Agreement is based primarily on the declaration of Defendant Khazen, see Opp’n at 6– 26 11 (extensively citing Khazen Decl., ECF 137), which is rife with inadmissible hearsay. For 27 example, Khazen alleges that Plaintiff violated the confidentiality provisions based on what a first 28 individual told a second individual who then told Khazen. See Khazen Decl. ¶ 12. Khazen offers 6 1 numerous additional double hearsay or hearsay statements that are likewise inadmissible. See, 2 e.g., id. ¶¶ 19–21. Thus, the Khazen Declaration is not evidence that Plaintiff breached the 3 confidentiality provisions of the Settlement Agreement or that the alleged breaches caused 4 Defendants to default. 5 Third, even if Plaintiff did breach the confidentiality provisions, the Settlement Agreement provides liquidated damages in the event “a Party breaches th[e] confidentiality provision” and 7 provides for no other damages or relief. See Settlement Agreement § 4.2. Therefore, the 8 exclusive remedy for breach of confidentiality is liquidated damages of “[$37,500.00] per 9 breach . . . if such an impermissible disclosure is proved.” Id. Here, Defendants have not proven 10 that Plaintiff breached the confidentiality provisions of the Settlement Agreement. Other than the 11 United States District Court Northern District of California 6 Khazen Declaration, Defendants point to a “Notice of Conditional Settlement” and “Notice of 12 Lien” disclosed by Plaintiff in a state court action. See Opp’n at 9. However, these documents are 13 simply ECF 105 and ECF 102, respectively, in the instant action. ECF 105 was publicly filed by 14 Plaintiff and Defendants jointly and ECF 102 was publicly filed by a third party and not objected 15 to by Defendants. Regardless, even if Defendants did show that Plaintiff breached the 16 confidentiality provisions, Defendants’ failure to make timely payment would not be excused as a 17 remedy for such breach. Accordingly, Defendants’ objection based on Plaintiff’s alleged breach 18 of the confidentiality provisions fails. Defendants also object to Stipulated Judgment on grounds 19 that Plaintiff breached the implied covenant of good faith and fair dealing; however, this alleged 20 breach is based on Plaintiff’s alleged breach of confidentiality, see Opp’n at 10–11, and thus fails 21 for the same reasons. 22 23 In sum, the Court rejects Defendants’ contention that Plaintiff’s alleged breach of confidentiality precludes Stipulated Judgment for Plaintiff. 24 B. 25 Defendants argue that Plaintiff’s request to confirm Judge Ware’s Arbitration Award 26 should be denied because “[o]n March 16, 2018, Defendants filed [a] Correction, requesting 27 clarification and resolution on several significant portions of the Award, including the Arbitrator’s 28 conflicting findings of fraud and breach of contract.” See Opp’n at 14. This argument is without Confirmation of the Arbitration Award 7 1 merit. As pointed out by Plaintiff, see Reply at 11, Defendants affirmatively withdrew their 2 request for a “Correction” of the Arbitration Award on April 26, 2018, see Ex. 41 to Holland 3 Decl., ECF 129-3. In addition, confirmation of the Arbitration Award is a term of the Stipulated 4 Judgment form (Ex. F to the Settlement Agreement) that Defendants’ approved on March 28, 5 2018, as part of the Settlement Agreement. See Ex. F to Settlement Agreement at 1. Accordingly, 6 the Court grants Plaintiff’s request to confirm the Arbitration Award. 7 C. 8 Defendants contend that § 5.1(b) of the Settlement Agreement providing for “the amount 9 Provision for an additional 20% in Damages of 120% of any unpaid portion of the Settlement Amount that is then due and owing at time of default”3 is a “penalty provision” in violation of California Civil Code § 1671. See Opp’n at 11. 11 United States District Court Northern District of California 10 Plaintiff argues that Civ. Code § 1671 does not void the 120% provision because the Settlement 12 Amount represents a “discounted” amount and that multiplying the “discounted” amount by 1.2 is 13 therefore not an “unenforceable penalty” but instead a reflection of “the undiscounted Settlement 14 Amount.” See Plaintiff’s Memorandum at 19–20. Plaintiff also argues that pursuant to Civ. Code 15 § 1671(b) Defendants have the burden of proving the 1.2 multiplier is “unreasonable under the 16 circumstances existing at the time the contract was made,” see id. at 20 (citing Civ. Code 17 § 1671(b)), and that Defendants have not met their burden, see Reply at 10. As discussed below, 18 the Court finds that under California case law interpreting Civ. Code § 1671, Defendants have met 19 their burden of showing “the provision was unreasonable under the circumstances existing at the 20 time” the Settlement Agreement was entered, see Civ. Code § 1671(b), and therefore holds that the 21 120% provision in the Settlement Agreement is unenforceable. 22 Civil Code § 1671 provides that “a provision in a contract liquidating the damages for the 23 breach of the contract is valid unless the party seeking to invalidate the provision establishes that 24 the provision was unreasonable under the circumstances existing at the time the contract was 25 made.” Civ. Code § 1671(b). The California Supreme Court has held that a “liquidated damages 26 clause will generally be considered unreasonable, and hence unenforceable under section 1671(b), 27 28 3 And corresponding reference to this 1.2 multiplier in the Stipulated Judgment form. 8 1 if it bears no reasonable relationship to the range of actual damages that the parties could have 2 anticipated would flow from a breach.” Ridgley v. Topa Thrift & Loan Ass’n, 17 Cal. 4th 970, 977 3 (1998) (holding that the disputed provision was an unenforceable penalty for late payment of 4 interest). Instead, “[t]he amount set as liquidated damages must represent the result of a 5 reasonable endeavor by the parties to estimate a fair average compensation for any loss that may 6 be sustained.” Id. (internal quotation and citation omitted). Absent such a relationship, “a 7 contractual clause purporting to predetermine damages must be construed as a penalty.” Id. 8 (internal quotation and citation omitted). “The characteristic feature of a penalty is its lack of 9 proportional relation to the damages which may actually flow from failure to perform under a 10 contract.” Id. (internal quotation and citation omitted). United States District Court Northern District of California 11 Defendants argue that the 120% provision does not represent “an actual measure of 12 damages” because “the liquidated damages clause remained at a constant 20%” during settlement 13 negotiations despite fluctuations in proposed settlement amounts. See Opp’n at 13. The Court 14 agrees. During settlement negotiations between the parties, the provision remained static at 120% 15 of the outstanding amount, despite the proposed settlement amount fluctuating from $4,252,397.96 16 on February 28, 2018, to $3,625,000.00 on March 8, 2018. See Ex. 5 to Holland Decl., ECF 129- 17 3; Ex. 7 to Holland Decl., ECF 129-3. This evidence demonstrates that the 120% provision is not 18 in proportion “to the damages which may actually flow” from Defendants’ failure to make timely 19 payment, see Ridgley, 17 Cal. 4th at 977, but that instead the provision is simply a flat rate on top 20 of the Settlement Amount. In other words, the amount of damages provided by the 120% 21 provision varied with the proposed settlement amounts during negotiations, without consideration 22 of “the range of actual damages that the parties could have anticipated would flow from [late 23 payment],” see Ridgley, 17 Cal. 4th at 977. Under the February 28, 2018 proposed settlement amount the 120% provision would 24 25 provide $850,479.594 in liquidated damages for late payment, while under the March 8, 2018 26 proposed settlement amount the provision would provide $725,000.005 for identical breach. As 27 28 4 5 $4,252,397.96 x 0.20 $3,625,000.00 x 0.20 9 1 the Settlement Agreement separately provides for enhanced interest on any outstanding amount in 2 the event of late payment, see Ex. F to Settlement Agreement at 1–2, it is simply not plausible 3 Plaintiff would suffer nearly $125,000 in additional actual damages merely because Plaintiff had 4 obtained a larger settlement amount, see Greentree Financial Group, Inc. v. Execute Sports, Inc., 5 163 Cal. App. 4th 495, 500 (2008) (“Damages for the withholding of money are easily 6 determinable—i.e., interest at prevailing rates.”) (internal quotation and citation omitted) (finding 7 that additional charge for failure to make payment was an unenforceable penalty). 8 As Greentree makes clear, it is impermissible to use a measure of damages based on the 9 entire underlying lawsuit to set liquidated damages for a narrower breach. 163 Cal. App. 4th at 499. The Greentree court explained that “the breach we are analyzing is the breach of the 11 United States District Court Northern District of California 10 stipulation, not the breach of the underlying contract.” Id. (emphasis in original). The Greentree 12 court therefore found that because the measure of damages for breach of the stipulation was based 13 on “damages in the underlying lawsuit,” that measure of damages “bears no reasonable 14 relationship to the range of actual damages the parties could have anticipated from a breach of the 15 stipulation.” Id. Here, like in Greentree, the 120% provision sets liquidated damages for late 16 payment based solely on the outstanding amount due under the Settlement Agreement at the time 17 of breach—the amount of damages in the underlying lawsuit—and likewise bears no reasonable 18 relationship to actual damages the parties could have anticipated from late payment. Thus, the 19 120% provision possesses the “characteristic feature of a penalty.” Ridgley, 17 Cal. 4th at 977. 20 Moreover, on February 28, 2018, Plaintiff referred to the proposed stipulated judgment for 21 120% of any outstanding amount as an “enforcement mechanism[] . . . for enforcement of the 22 settlement agreement if the Settlement Amount is not timely and fully paid.” See Ex. 5 to Holland 23 Decl., ECF 129-3. This evidence supports Defendants’ contention that the provision is a “penalty 24 provision [that] operates to compel performance of an act and [] becomes effective only in the 25 event of default upon which a forfeiture is compelled without regard to the damages sustained by 26 the party aggrieved by the breach.” Ridgley, 17 Cal. 4th at 977. 27 28 In support of his theory that the 120% provision represents a permissible “discounted” amount because multiplying the “discounted” amount by 1.2 reflects “the undiscounted Settlement 10 1 Amount,” see Plaintiff’s Memorandum at 19–20, Plaintiff cites two cases, Jade Fashion & Co. v. 2 Harkham Industries, 229 Cal. App. 4th 635 (2014) and Weber, Lipshie & Co. v. Christian, 52 Cal. 3 App. 4th 645 (1997). Neither is helpful to Plaintiff. Jade Fashion applied Ridgley’s “reasonable 4 relationship to the range of actual damages” test and found that a $17,500 damages provision for 5 late payment was permissible under Civ. Code § 1671 because the amount “was [not] an 6 additional payment over and above any debt that was owed” but instead “the $17,500 was part of 7 the [actual] $341,628.77 debt.” See Jade Fashion, 229 Cal. App. 4th at 646, 649–50. In other 8 words, the damages provision was not a penalty but simply reflected the amount that Jade Fashion 9 “agreed to forebear [sic] on the immediate collection of the [d]ebt . . . on the condition that [Harkham Industries] make installment payments [on schedule].” Id. at 649. The Jade Fashion 11 United States District Court Northern District of California 10 court emphasized that the $17,500 was part of the debt actually owed “in both the Agreement and 12 the continuing guaranty.” Id. Here, unlike in Jade Fashion, the 120% provision in the parties’ Settlement Agreement 13 14 does not reflect forbearance of an amount owed under the Settlement Agreement, but instead an 15 additional payment on top of the debt Defendants already owed Plaintiff. Accordingly, Jade 16 Fashion does not stand for Plaintiff’s proposition. Nor does Weber. Weber provides that if a 17 liquidated damages clause “is otherwise valid, [the court] will uphold it even if the parties have 18 referred to it as a penalty.” 52 Cal. App. 4th at 656. Here, as discussed above, the Court finds that 19 the 120% provision in the Settlement Agreement is not “otherwise valid” and thus Weber has no 20 effect. 21 Finally, at the Hearing, Plaintiff referred to an additional case, Krechuniak v. Noorzoy, 11 22 Cal. App. 5th 713 (2017). The Court has reviewed Krechuniak and does not find it persuasive for 23 Plaintiff. Krechuniak acknowledges Ridgley’s “reasonable relationship to the range of actual 24 damages” test and concerns the appellate standard of review of the trial court’s determination of 25 whether a contract provision is an illegal penalty or an enforceable liquidated damages clause. See 26 Krechuniak, 11 Cal. App. 5th at 714, 722. Krechuniak concluded that appellant was precluded 27 from arguing on appeal that the settlement agreement contained an invalid penalty provision 28 because appellant did not make that argument before the trial court. See id. at 726–27. Thus, 11 1 Krechuniak does not save the day for Plaintiff. In sum, Plaintiff’s Application for Stipulated Judgment is denied to the extent it 2 3 incorporates the 120% provision set forth in § 5.1(b) of the Settlement Agreement. 4 IV. 5 6 CONCLUSION For the foregoing reasons, Plaintiff’s Application for Stipulated Judgment is GRANTED IN PART and DENIED IN PART. It is hereby ordered that: 7 1. The Arbitration Award is confirmed. 8 2. Plaintiff is entitled to Stipulated Judgment (Ex. F to the Settlement Agreement) except 9 10 United States District Court Northern District of California 11 the 120% provision set forth in the Stipulated Judgment form and the Settlement Agreement shall not apply. 3. The parties shall jointly provide a written stipulation and proposed judgment to the 12 Court no later than January 22, 2019, that reflects the total amount owed to Plaintiff 13 up to the date of the proposed judgment, including interest, in accordance with this 14 Order. 15 16 17 18 19 IT IS SO ORDERED. Dated: January 9, 2019 ______________________________________ BETH LABSON FREEMAN United States District Judge 20 21 22 23 24 25 26 27 28 12

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