Youngevity International, Corp. v. Smith et al

Filing 805

ORDER Granting in Part and Denying in Part Youngevity's Motion for Summary Judgment on Counterclaim Six (ECF No. 667 ). Signed by Judge Barry Ted Moskowitz on 11/5/20. (jmo) Modified on 11/6/2020 to correct text and regenerate NEF (jmo).

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 Youngevity International, et al., Plaintiffs, 12 13 v. 14 Todd Smith, et al., Defendants. 15 16 17 Case No.: 3:16-cv-704-BTM-JLB ORDER GRANTING IN PART AND DENYING IN PART YOUNGEVITY’S MOTION FOR SUMMARY JUDGMENT ON COUNTERCLAIM SIX [ECF NO. 667] Todd Smith, et al., Counterclaim Plaintiffs, 18 19 v. 20 Youngevity International, et al., 21 Counterclaim Defendants. 22 23 Pending before the Court is Plaintiffs’ and Counterclaim Defendants’ 24 (“Youngevity”) motion for summary judgment on Defendants’ and Counterclaim 25 Plaintiffs’ (“Wakaya”) sixth counterclaim asserting tortious interference with 26 existing economic relations. (ECF No. 667 (“Mot.”).) For the reasons discussed 27 below, the Court grants in part and denies in part Youngevity’s motion. 28 1 3:16-cv-704-BTM-JLB 1 BACKGROUND 2 On February 12, 2016, Wakaya entered into a Royalty Agreement with Rick 3 Anson (ECF No. 426-3, 6–14), and a License Agreement with Anson’s company, 4 LiveWell, LLC (collectively, “Anson”). (Id. at 15–30.) The Royalty Agreement 5 required Anson to protect the confidentiality of Wakaya’s proprietary information 6 and trade secrets. (Id. at 8–9 (§ 4).) It also prohibited Anson from engaging in 7 any competing business for one year after termination of the Royalty Agreement. 8 (Id. at 10–11 (§ 8).) The License Agreement provided Wakaya with the 9 exclusive, worldwide right to use LiveWell’s technology in Wakaya’s products 10 “with the eventual goal of acquiring such assets . . . .” (Id. at 16 (¶ 1.4).) 11 On March 23, 2016, Youngevity filed this lawsuit. (ECF No. 1.) 12 On October 19, 2016, Youngevity’s Chief Executive Officer, Steve Wallach, 13 sent Anson contact information for Peter Arhangelsky, Youngevity’s counsel in 14 this lawsuit. (ECF No. 426-3, 32.) On October 24, 2016, Anson emailed Wallach 15 introducing him to Jesse Vyckal, “a key person in the development of the 16 nutritional hydration system with over eight years of product design, specializing 17 in ingredient formulations for [LiveWell’s] tablets.” (Id. at 34.) The email also 18 provided an overview of LiveWell’s financials and technology. (Id. at 34–47.) 19 On November 4, 2016, Anson emailed Wallach and Youngevity’s Chief 20 Financial Officer, David Briskie, stating, “I was told some new information I would 21 like to share with you,” and requesting a telephone conversation. (Id. at 49.) On 22 November 6, Anson again emailed Briskie and Wallach to set up a telephone 23 conversation “for an update.” (Id. at 51.) Briskie stated that he “reviewed this 24 with Steve and we are comfortable that is [sic] arrangement will work well for 25 both of us.” (Id. at 53.) Other portions of the email are redacted for attorney- 26 client privilege. (Id. at 52.) Anson testified that he “frequently” communicated 27 with Wallach in October 2016. (ECF No. 680-1 (“Anson Dep.”), 212:9–12.) 28 On December 16, 2016, Anson sent Todd Smith, Wakaya’s Co-Founder, two 2 3:16-cv-704-BTM-JLB 1 notices of default based on Wakaya’s alleged failure to perform its obligations 2 under the Royalty and Licensing Agreements. (ECF No. 426-3, 62–87.) The 3 notices triggered Wakaya’s 30-day deadline to cure its alleged failures. Id. at 10 4 (Royalty Agreement), 24–25 (Licensing Agreement).) The contracts were 5 apparently terminated after the 30-day period elapsed. 6 On January 2, 2017, Anson emailed Wallach an updated overview of 7 LiveWell’s financials and compensation proposals noting “[t]he thirty day breach 8 period ends on January 16th. I completely agree with you that our endeavors 9 should remain quiet until we launch the system . . . .” (Id. at 167) (underlining in 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 original.) On February 2, 2017, Anson became Youngevity’s Vice President of Global Innovation. (Anson Dep., 244:9–19.) STANDARD OF REVIEW Summary judgment is appropriate under Rule 56 of the Federal Rules of Civil Procedure if the moving party demonstrates the absence of a genuine issue of material fact and entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material when, under the governing substantive law, it could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Nidds v. Schindler Elevator Corp., 113 F.3d 912, 716 (9th Cir. 1996). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Anderson, 477 U.S. at 323. A party seeking summary judgment always bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. The moving party can satisfy this burden in two ways: (1) by presenting evidence that negates an essential element of the nonmoving party’s case; or (2) by demonstrating that the nonmoving party failed to establish an essential 3 3:16-cv-704-BTM-JLB 1 element of the nonmoving party’s case on which the nonmoving party bears the 2 burden of proving at trial. Id. at 322–23. “Disputes over irrelevant or unnecessary 3 facts will not preclude a grant of summary judgment.” T.W. Elec. Serv., Inc. v. 4 Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). 5 Once the moving party establishes the absence of genuine issues of material 6 fact, the burden shifts to the nonmoving party to demonstrate that a genuine 7 issue of disputed fact remains. Celotex, 477 U.S. at 314. The nonmoving party 8 cannot oppose a properly supported summary judgment motion by “rest[ing] on 9 mere allegations or denials of his pleadings.” Anderson, 477 U.S. at 256. 10 Rather, the nonmoving party must “go beyond the pleadings and by her own 11 affidavits, or by ‘the depositions, answers to interrogatories, and admissions on 12 file,’ designate ‘specific facts showing that there is a genuine issue for trial.’” 13 Celotex, 477 U.S. at 324 (quoting Fed. R. Civ. P. 56(e)). 14 The court must view all inferences drawn from the underlying facts in the light 15 most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith 16 Radio Corp., 475 U.S. 574, 587 (1986). “Credibility determinations, the weighing 17 of evidence, and the drawing of legitimate inferences from the facts are jury 18 functions, not those of a judge, [when] he [or she] is ruling on a motion for 19 summary judgment.” Anderson, 477 U.S. at 255. 20 21 22 23 24 25 26 27 28 DISCUSSION Youngevity contends it is entitled to summary judgment because Wakaya has no evidence proving that Youngevity caused Anson to breach his contracts with Wakaya. (Mot., 3:19–4:15.) Further, the only potential interference Wakaya can show — sharing Wakaya’s legal filings with Anson — cannot form the basis of a claim for intentional interference with contractual relations. (Id. at 4:17–5:14.) Wakaya opposes on the ground that there is ample evidence supporting its counterclaim that Youngevity intentionally interfered with its contracts. (ECF No. 4 3:16-cv-704-BTM-JLB 1 680 (Opp’n”).) 2 1. Legal Standard 3 To prevail on a claim of tortious interference with contractual relations, a 4 plaintiff must prove: (1) a valid contract between a plaintiff and a third party; (2) 5 defendant’s knowledge of this contract; (3) defendant’s intentional acts designed 6 to induce a breach or disruption of the contractual relationship; (4) actual breach 7 or disruption of the contractual relationship; and (5) resulting damage. 8 Quelimane Co. v. Stewart Title Guaranty Co., 19 Cal. 4th 26, 55 (1998). 9 “Because interference with an existing contract receives greater solicitude 10 than does interference with prospective economic advantage, it is not necessary 11 that the defendant’s conduct be wrongful apart from the interference with the 12 contract itself.” Id. 13 2. Application 14 There are triable issues of fact with respect to whether Youngevity 15 intentionally induced Anson to breach his contracts with Wakaya. Youngevity contends that the undisputed facts show that it had nothing to do 16 17 with Anson’s decision to terminate his contracts with Wakaya. In support, it 18 points to Wakaya’s earlier alleged breaches of the agreements, allegedly a key 19 factor in Anson’s notices of default, and predated any communications between it 20 and Anson. (ECF No. 427-2, 58 (p. 178:17–21).) Youngevity also points to 21 Anson’s testimony that Youngevity had nothing to do with his decision to 22 terminate his contracts with Wakaya. 1 (ECF No. 427-2, 52 (p. 145:6–25.) 23 This evidence does not indisputably establish that Youngevity did not 24 influence Anson’s decision. It is undisputed that Anson and Wakaya had a 25 26 27 28 1 The Court notes that Youngevity failed to provide the entire quoted portion of Anson’s deposition. The quoted portion of the transcript may have been included elsewhere, but it was not on the page Youngevity cited and it is not enough to merely attach documents as exhibits. See Harkins Amusement Enters., Inc. v. Gen. Cinema Corp., 850 F.2d 477, 482 (9th Cir. 1988) (refusing to consider evidence merely attached as an exhibit to summary judgment motion and not discussed in the party's memorandum.). 5 3:16-cv-704-BTM-JLB 1 contractual relationship and that Wallach knew about it. (ECF No. 426-3, 172 2 (pp. 159:21–160:3) (Wallach: "‘Would you take a call from Rick Anson?’ And I 3 said, ‘He works with Wakaya.’").) The crux of the issue, however, is whether 4 Youngevity acted intentionally to disrupt Anson and Wakaya’s contractual 5 relationship. When viewed in a light most favorable to Wakaya, the Court cannot 6 conclude that there is no genuine dispute of material fact. Anson’s 7 communications with Youngevity about compensation and future product 8 launches while a Wakaya employee create a triable issue as to whether 9 Youngevity intentionally sought to disrupt the Royalty and Licensing Agreements. 10 In its reply, Youngevity contends that it is nevertheless entitled to summary 11 judgment because Wakaya raises a new theory of liability outside of its 12 pleadings. (ECF No. 685, 1:19–26.) In support, Youngevity cited Pickern v. Pier 13 1 Imports (U.S.), Inc., 457 F.3d 963 (9th Cir. 2006). The case is inapposite. 14 In Pickern, the plaintiff asked Pier 1 to construct an Americans with Disabilities 15 Act-compliant access ramp from the store parking lot to the public sidewalk, but 16 Pier 1 refused. Id. at 965. The plaintiff subsequently filed suit and the complaint 17 contained a list of possible architectural barriers, but did not specify which 18 barriers the plaintiff encountered or any that actually existed. Id. The Court 19 granted Pier 1 summary judgment on the issue of the access ramp and other 20 unspecified barriers for lack of evidence. Id. at 966. The Ninth Circuit affirmed 21 summary judgment on, among other things, the unspecified barriers because 22 Pier 1 had no notice of those violations in the complaint or otherwise. Id. at 968– 23 69. The only notice Pier 1 had of the additional barriers was an expert report that 24 was not served until after discovery had closed. Id. at 969. Here, by contrast, 25 Youngevity does not claim that Wakaya did not provide sufficient notice of its 26 basis for counterclaim six. 27 28 Wakaya also contends Youngevity interfered with Anson and Wakaya’s contractual relationship by republishing or republicizing Youngevity’s legal filings. 6 3:16-cv-704-BTM-JLB 1 (ECF No. 404, 29–30 (¶¶ 212–217); see Opp’n, 3:6–17.) There is evidence 2 showing that Wakaya, not Youngevity, made Anson aware of the lawsuits against 3 Wakaya. (ECF No. 667-2, 3 (pp. 106:23–107:3).) Even if that were not the case, 4 California’s litigation privilege applies to communications made in judicial 5 proceedings, see Cal. Civ. Code § 47(b), and extends to communications 6 regarding such judicial proceedings made to people with “a substantial interest in 7 the outcome of the pending litigation.” Youngevity Int’l Corp. v. Andreoli, 749 F. 8 App’x 634, 635 (9th Cir. 2019). For this reason, the republication of the Verified 9 Complaint to Anson (who had such a substantial interest) constitutes protected 10 speech. The Court therefore grants Youngevity summary judgment on this 11 ground. 12 13 Youngevity’s motion for summary judgment on Wakaya’s sixth counterclaim is therefore granted in part and denied in part. 14 15 16 17 18 19 20 21 22 CONCLUSION For the reasons discussed above, the Court GRANTS IN PART AND DENIES IN PART Youngevity’s motion for summary judgment on Wakaya’s sixth counterclaim. Wakaya is prohibited from asserting counterclaim six based on Youngevity’s alleged republishing or republicizing of its legal filings against Wakaya. IT IS SO ORDERED. Dated: November 5, 2020 23 24 25 26 27 28 7 3:16-cv-704-BTM-JLB

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