Handal & Associates, Inc. v. Sandler

Filing 31

ORDER Denying Defendant's Motion to Stay. Signed by Judge M. James Lorenz on 9/17/2019. (lrf)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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HANDAL & ASSOCIATES, INC.,

Case No.: 3:18-cv-00169-L-AGS

Plaintiff,

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v.

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ORDER DENYING DEFENDANT'S
MOTION TO STAY

JONATHAN BRUCE SANDLER
(A.K.A. JONTY SANDLER),

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Defendant.

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Pending before the Court is Defendant Jonathan Bruce Sandler’s (“Sandler”)

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motion to stay this action pending the resolution of another action pending in state court.

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Plaintiff Handal & Associates, Inc. (“Handal”) opposed, and Sandler replied. The Court

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decides this matter on the briefs without oral argument. See Civ. L. R. 7.1.d.1. For the

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reasons stated below, Defendant’s motion is denied.
According to the operative First Amended Complaint, Handal entered into a

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written retainer agreement. (First Am. Compl. (doc. no. 10, “FAC”); FAC Ex. A (doc.

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no. 10-1, “Agreement”)). The purpose of the Agreement was to represent several clients

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as "Plaintiffs in the African Wireless, Inc., Derivative Action" ("Derivative Action").

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(Agreement at 2;1 see also FAC ¶¶ 1, 6.) Among other things, the Agreement provides

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for a 15% contingency fee of up to $5 million. (Agreement at 3.) Handal claims it

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litigated the Derivative Action to judgment that exceeded $93 million and contends this

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entitles it to the maximum fee of $5 million. (FAC ¶ 9.)

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Sandler was a representative of one of Handal's clients, Wymont Services, Ltd.

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("Wymont"). (Agreement at 2, 7.) Handal claims that Sandler, acting for his personal

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financial gain, falsely told Handal's clients that Handal was negligent and committed

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malpractice in the Derivative Action. (FAC ¶ 10.) Sandler allegedly offered to assist

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Handal's clients to avoid paying Handal in exchange for a percentage of the money they

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would save. (Id. ¶11.) Specifically, Sandler told the clients that by suing Handal for

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malpractice, he "would get [Handal's] malpractice carrier to pay an amount to offset the

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fees owed to [Handal]." (Id.)

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Handal alleges that based on Sandler's statements the clients refused to pay the $5

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million contingency fee. (Id. ¶ 13). On May 17, 2017, the clients filed a malpractice

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action against Handal, Wymont Servs. Ltd. et al. v. Handal & Assocs. et al., Cal. Super.

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Ct., Orange County case no. 30-217-00920613 ("Malpractice Action"). (Def.'s Req. for

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Judicial Notice Ex. D (doc. no. 12-4, "Def.'s Ex. D") at 2.) Handal filed a cross-

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complaint against them alleging breach of contract and anticipatory breach. (Id. at 4; see

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also Mtn to Stay (doc. no. 23-1) at 3-4.) In addition, Handal filed this action for

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intentional interference with contract, intentional interference with prospective economic

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advantage, and defamation against Sandler, who is not a party to the Malpractice Action.

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On January 18, 2019, the California Court of Appeal affirmed the judgment in the

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Derivative Action. (Doc. no. 18-1.) The Malpractice Action was stayed during the

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appeal of the Derivative Action and is now set for trial in December 2019. (Mtn to Stay

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at 2-3, 4.)

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All page references are assigned by the Electronic Case Management System.
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3:18-cv-00169-L-AGS

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Sandler moves to stay this action pending the conclusion of the Malpractice Action

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pending in state court, arguing that a stay will prevent inconsistent rulings and conserve

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resources. He invokes both, the first-to-file rule (Reply (doc. no. 29) at 6), and the

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Court's discretionary power to control its docket (Mtn to Stay at 4-5). Neither argument

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is persuasive.

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In the area of concurrent state and federal actions, as a general rule, "federal courts

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lack the authority to abstain from the exercise of jurisdiction that has been conferred."

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New Orleans Public Serv., Inc. v. Council of City of New Orleans, 491 U.S. 350, 358

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(1989). "[T]he courts of the United States are bound to proceed to judgment and to

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afford redress to suitors before them in every case to which their jurisdiction extends."

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Id. (internal quotation marks and citation omitted, brackets in original). Sandler does not

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question that the pending case falls within federal jurisdiction.

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The first-to-file rule is "a judicially created doctrine of federal comity, which

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applies when two cases involving substantially similar issues and parties have been filed

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in different districts." In re Bozic, 888 F.3d 1048, 1051 (9th Cir. 2018) (internal quotation

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marks and citations omitted). The doctrine applies to concurrent federal actions and is

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therefore not applicable here. Moreover, the pending action and the Malpractice Action

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involve different parties and different legal claims. Even if the actions were concurrently

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pending in federal courts, the doctrine would not apply.

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Alternatively, Sandler requests a stay under the Court's inherent power to "control

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the disposition of the causes on its docket with economy of time and effort for itself, for

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counsel, and for litigants." Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). In this

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regard, the movant

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must make out a clear case of hardship or inequity in being required to go
forward, if there is even a fair possibility that the stay for which he prays will
work damage to someone else. Only in rare circumstances will a litigant in
one cause be compelled to stand aside while a litigant in another settles the
rule of law that will define the rights of both.

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Id. at 255. Even where the other action in all likelihood will settle many issues of law or

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fact and simplify the action sought to be stayed, the "burden of making out the justice and

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wisdom of a departure from the beaten track lay[s] heavily on the . . . suppliants for

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relief, and discretion [is] abused if the stay [is] not kept within the bounds of

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moderation." Id. at 256. Accordingly, to warrant a stay of even modest duration, the

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moving party must "make out a clear case of hardship or inequity." Id. at 255.

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Handal claims it would be prejudiced by a stay, even a stay of short duration,

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because of potential loss of evidence, including the fact that one of the witnesses it wants

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to depose is elderly and in poor health. (Opp'n (doc. no. 28) at 12.) Accordingly, to

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warrant a stay of any length, Sandler must show a clear case of hardship or inequity.

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Sandler claims he will be prejudiced if this action proceeds because of the overlap

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between the actions, which will force him to duplicate his efforts in discovery and may

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result in conflicting rulings.

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Sandler overstates the extent of the overlap between this action and the

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Malpractice Action. He is not a party in the Malpractice Action, and the claims alleged

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are different. There is some overlap between Handal's former clients' malpractice claim

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against Handal and Handal's claim for defamation against Sandler. Handal's defamation

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claim will require proof that Sandler's statement that Handal committed malpractice was

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false. Whether Handal committed malpractice is an issue in the Malpractice Action.

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However, Handal's claims for intentional interference with contract and intentional

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interference with prospective economic advantage against Sandler are not presented in

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the Malpractice Action.

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Overlap in the legal and factual issues regarding malpractice does not mandate a

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stay in the absence of a clear case of hardship or inequity. See Landis, 299 U.S. at 255.

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In this regard, Sandler points to the potential overlap in discovery. That discovery in

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both actions may cover some of the same information is not a sufficient ground to stay

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this action. Sandler presents no reason why discovery obtained in one action could not be

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used in the other to avoid duplication.

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For the foregoing reasons, Sandler's motion to stay is denied.

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IT IS SO ORDERED.

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Dated: September 17, 2019

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