Watchous Enterprises, L.L.C. v. Pacific National Capital et al

Filing 357

MEMORANDUM AND ORDER granting 342 Motion to Clarify. See Order for details. Signed by District Judge J. Thomas Marten on 10/14/2020. Mailed to pro se party Waterfall Mountain USA LLC, Waterfall Mountain, LLC, Waterfall International Holdings Limited, William Mournes by regular mail. (sz)

Case 6:16-cv-01432-JTM Document 357 Filed 10/15/20 Page 1 of 9

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

WATCHOUS ENTERPRISES, LLC,
Plaintiff,
vs.

No. 16-1432-JTM

PACIFIC NATIONAL CAPITAL, et al.,
Defendants.

MEMORANDUM AND ORDER

Plaintiff Watchous has filed a Motion to Clarify (Dkt. 356), which asks the court
under Fed.R.Civ.Pr. 56(g) to deem certain factual findings from the court’s prior
summary judgment ruling (Dkt. 335) to be deemed established for purposes of trial. The
Pacific National defendants (Dkt. 350) and the Waterfall defendants (Dkt. 354 ) oppose
the motion.
Under Rule 56(g), “If the court does not grant all the relief requested by the
motion, it may enter an order stating any material fact … that is not genuinely in
dispute and treating the fact as established in the case.” The Advisory Committee Note
to this subsection observes:
Subdivision (g) applies when the court does not grant all the relief
requested by a motion for summary judgment. It becomes relevant only
after the court has applied the summary-judgment standard carried
forward in subdivision (a) to each claim, defense, or part of a claim or

Case 6:16-cv-01432-JTM Document 357 Filed 10/15/20 Page 2 of 9

defense, identified by the motion. Once that duty is discharged, the court
may decide whether to apply the summary-judgment standard to dispose
of a material fact that is not genuinely in dispute. The court must take care
that this determination does not interfere with a party's ability to accept a
fact for purposes of the motion only. A nonmovant, for example, may feel
confident that a genuine dispute as to one or a few facts will defeat the
motion, and prefer to avoid the cost of detailed response to all facts stated
by the movant. This position should be available without running the risk
that the fact will be taken as established under subdivision (g) or
otherwise found to have been accepted for other purposes.
If it is readily apparent that the court cannot grant all the relief requested
by the motion, it may properly decide that the cost of determining
whether some potential fact disputes may be eliminated by summary
disposition is greater than the cost of resolving those disputes by other
means, including trial. Even if the court believes that a fact is not
genuinely in dispute it may refrain from ordering that the fact be treated
as established. The court may conclude that it is better to leave open for
trial facts and issues that may be better illuminated by the trial of related
facts that must be tried in any event.
In interpreting the rule, the Pacific defendants’ Response largely rests on a
footnote observation from a single decision, Chiron Corp. v. Genentech, Inc., 268 F. Supp.
2d 1139, 1148 (E.D. Cal. 2002). In a patent infringement action, the court denied plaintiff
Chiron’s motion for summary judgment on defendant’s laches defense, which was
added to the case by a late amendment. The court concluded that the laches defense
would be resolved by a separate hearing after the jury trial of the infringement action,
and also noted:
Moreover, the court in its discretion does not choose to narrow issues or
establish facts where doing so does not eliminate a claim or defense. In the
court's experience, such piecemeal resolution of the case makes trial more
difficult and complex as opposed to streamlined.

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268 F.Supp.2d at 1146 n. 6.1
This passage from Chiron does not support the conclusion that as a general
matter requests for rulings under Rule 56(g) should be disfavored. The court stated it
“does not find it [a summary judgment award on the issue of laches] practicable in this
case”—a complex patent case in which the court had scheduled a separate trial on the
issue of infringement. Id. (emphasis added). Unlike Chiron, the summary judgment
motions previously resolved by this court did not address a peripheral defense added
by late amendment, but resolved facts which went to the very heart of the dispute
between the parties, and which resolved plaintiff’s claims for breach of fiduciary duty
and fraud in its favor.2
The defendants otherwise point to passages from the Advisory Committee Note,
set forth above, but these merely again establish that the court under the Rule has
discretion to grant or deny a request that facts be deemed established for purposes of

1

Defendants actually present Chiron second-hand, citing instead Steuben Foods, Inc. v. HP Hood,
LLC, No. 12-CV-00211 A M, 2012 WL 7829014, at *4 (W.D.N.Y. Oct. 3, 2012) quoting Chiron. The
Magistrate Judge’s Report & Recommendation in Steuben (adopted without objection, 2013 WL
1337318 (W.D.N.Y. Mar. 29, 2013) suggested that summary judgment should not be granted
“[s]ince no discovery has yet occurred in this case.” Steuben has no relevance at all for the
present case, where summary judgment was resolved only after the voluminous discovery had
closed, and does not add precedential weight to Chiron.
Some courts have indicated that Rule 56(g) motions are disfavored where the motions do not
seek to “resolve a party’s liability on a claim.” Geico General Insurance v. Otero, 2011 WL
13301951, at *8 (M.D. Fla. 2011). See Selkow v. 7-Eleven, 2012 WL 2054872, *4 (M.D. Fla. 2012)
(noting disfavor and observing that “Rule 56(g) requires a party to first bring a Rule 56(a)
motion”). Here, of course, plaintiff’s motion arises after the resolution of multiple Rule 56(a)
motions.
2

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trial. In terms of that Note, these defendants might have “fe[lt] confident” some of their
facts would preclude relief. But the court’s experience in resolving the competing
motions in plaintiff’s favor convincingly established any such confidence was
unwarranted. Defendants failed to controvert at all many facts, and their attempt to
controvert others failed to rely on competent admissible evidence. Rule 56(g) gives the
court discretion to find certain facts established for trial, and the court, in its discretion,
finds that justice would be advanced, and trial materially shortened, by granting the
relief sought.
Citing Local Rule 56.1(a), defendants also argue that they believed the effect of
their failure to oppose Watchous’s facts would be limited to the summary judgment
ruling itself, and that they should not be prevented from rearguing factual issues at trial
given their “minimal opportunity to conduct discovery and depositions due to their
limited resources and settlement efforts scuttled by the Waterfall Defendants.” (Dkt. 50,
at 3). They suggest many of the plaintiff’s requested factual findings were overly
complex and that many of these were at least partially controverted. They argue that
granting the plaintiff’s motion would not advance judicial economy and would force
the jury into piecemeal resolution of the facts.
Local Rule 56.1(a) does not supersede the court’s discretion under Federal Rule
of Civil Procedure 56(g) to determine that certain facts are established for purposes of
trial. The local rule provides that if a fact is not “specifically controverted” by the
nonmovant,” the fact is “deemed admitted for the purpose of summary judgment.”
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That is, the local rule mandates a factual finding in favor of the movant where the
nonmovant makes no attempt to directly respond to the allegation. But the local rule in
no way diminishes the court’s discretion under Rule 56(g) to determine that a summary
judgment factual finding should carry over to trial.
At the time of the summary judgment motions, the Pretrial Order had been
entered, and discovery had closed. The plaintiff’s motion sought summary judgment on
key issues in the case (and the court in fact granted partial judgment in Watchous’s
favor). All the defendants were highly motivated to oppose the plaintiff’s motion, and
did so, presumably to the best of their ability. Judicial economy is not advanced by
wasting trial days with testimony addressing factual issues upon which the court found
no material controversy.
Rule 56(g) “’serves to salvage some constructive result from the judicial effort
expended in denying a proper summary judgment motion.’” Roberts v. Chesapeake
Operating, Inc., 426 F. Supp. 2d 1203, 1210 (D. Kan. 2006) (addressing predecessor Rule
56(d), quoting City of Wichita v. United States Gypsum, 828 F.Supp. 851, 869 (D.Kan.1993)
(citing 10A C. Wright, A. Miller & M. Kane, FEDERAL PRACTICE AND PROCEDURE § 2737,
at 458–59 (2d ed. 1983)), aff’d in part and rev'd in part on other grounds, 72 F.3d 1491
(10th Cir. 1996)). See also Hotel 71 Mezz Lender v. Nat'l Ret. Fund, 778 F.3d 593, 606 (7th
Cir. 2015) (“partial summary judgment can serve a useful brush-clearing function even
if it does not obviate the need for a trial”).

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Relief is appropriate here, where the plaintiff’s motion requested 369 separate
factual findings, the vast majority of which were not contested by the defendants.3 In
most instances where defendants did attempt to controvert facts,4 they relied on
inadmissible evidence, or rested on legal arguments which did not fairly controvert the
specific fact alleged.
With respect to specific factual issues, Watchous agrees that some facts5 were
controverted by defendants. However, the Plaintiff also urges the court to deem
established the following facts:
•
•
•
•
•

Waterfall’s non-ownership of the bonds,6
Pacific’s failure to reveal Waterfall’s lack of successful funding,7
Zouvas acted or appeared to act as an agent of Waterfall,8
Pacific contracted with clients to act as their agent for obtaining funding,9
Pacific’s represented it had worked with Waterfall,10

Plaintiff’s Fact paragraphs 1-4, 6, 8-10, 12-16, 18-20, 24, 26, 28-40, 42-45, 47, 49, 57, 60-62, 64-68,
72, 74-75, 78-80, 82-83, 90-91, 93-100, 105, 108-124, 126-130, 132, 136-137, 139-142, 149-171, 173174, 177-178, 180, 182, 184-188, 193-194, 197-198, 201-204, 206-210, 212-218, 223, 225-230, 235-249,
252-257, 261, 266-267, 269-274, 276-277, 281-290, 292-300, 302-305, and 309-369.
3

Paragraphs 25, 27, 41, 46, 48, 51-55, 58-59, 63, 69, 70, 71, 76-77, 84, 88-89, 103, 106-107, 133-134,
138, 147-148, 172, 181, 183, 190-191, 195-196, 199-200, 205, 211, 220-222, 250-251, 259-260, 263-265,
268, 278, and 306-308.
4

5

Paragraphs 7 (first two sentences), 21, 92, 131 (last sentence), 135, and 275.

6

Paragraphs 5, 280, and 291.

7

Paragraphs 87, 146, 195, 234.

8

Paragraph 11.

9

Paragraphs 22, 56, 75, 85, 104, 144, 192, 259, and 277.

Paragraphs 17, 21, 23, 50, 73, 81, 86, 101, 125, 143, 145, 175-76, 179, 189, 233-34, 258, 262, and
279.
10

6

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•
•
•
•

Elfsten’s representation Waterfall could repay the deposit,11
Duval’s false representations as to similar joint ventures,12
Representations by Mournes’ and Zovuas about Waterfall,13 and
The failure to repay $5,000 to KRG.14 Plaintiff’s Fact ¶ 301
The Pacific defendants present factual arguments similar to those presented

during the summary judgment briefing, and provide no substantial reason for
departing from the court’s prior factual findings with respect to these issues.
Some of the evidence cited by defendants (for example, the idea that Waterfall
had a “beneficial interest” in the bonds which would allow them to be used as
collateral) might be evidence which defendants could seek introduce at trial, but the
evidence does not controvert the specific facts alleged by plaintiff and found by the
court — that Waterfall did not own the Venezuelan bonds without restriction, and
defendants did not tell Watchous about any limited, restricted interests. (Order, at 59).
With respect to the failure to inform clients Waterfall had never successfully
funded a project, defendants argue (Dkt. 350, at 7) that they “controverted at least some
of these assertions.” Rather, the defendants attempted to controvert these requested
finding, but were unsuccessful. The cited facts were adopted into the court’s March 13,
2020 Order as facts established beyond a reasonable doubt. (Order, at 59-60).

11

Paragraph 232.

12

Paragraph 231.

13

Paragraphs 219 and 224.

14

Paragraph 301.

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The Defendants made no attempt to seek reconsideration of the court’s Order.
Defendants waited until Watchous’s Rule 56(g) motion, and have now only belatedly
filed what is in effect an untimely motion for reconsideration which largely repeats
previously rejected factual arguments.
The court made extensive findings of fact in its prior Order, determining that no
factual controversy existed. (Dkt. 335, at 3-79). Trial is currently scheduled for
December 1, 2020, and is set to run for seventeen days, largely based on the need to
cover ground that is already set out in the court’s prior Order. Judicial economy is not
advanced by ignoring these findings and requiring jurors to spend trial day after trial
day hearing the same evidence.
The Court’s findings in the Order of March 13 provide a valuable and economic
narrative for understanding the facts of the case, and the court in its discretion finds
that in the interests of justice the plaintiff’s Rule 56(g) motion should be granted. The
plaintiff’s motion seeks “an order deeming facts that are not genuinely in dispute as
established for the purpose of trial.” (Dkt. 342, at 1). The plaintiff does not articulate any
particular form for such order, although it does incorporate by reference the “full
treatment of all the facts” in the 129 page Affidavit A to its Summary Judgment Reply.
(Id. at 2). This unwieldy document could confuse rather than illuminate the facts for the
jury.
The court in its discretion finds that plaintiff’s motion should be granted by
issuing an instruction to the jury that it should deem certain facts established, and that
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the instruction shall be taken from the court’s factual findings in the March 13 Order—
modified in certain limited instances15 and to remove the court’s evaluation of
competing factual and legal arguments. This instruction will be provided to the parties
two weeks prior to the scheduled November 25, 2020 in limine conference.
IT IS ACCORDINGLY ORDERED this day of October, 2020, that the plaintiff’s
Motion to Clarify (Dkt. 342) is hereby granted as provided herein.

J. Thomas Marten
J. Thomas Marten, Judge

For example, a controversy exists whether Waterfall in fact owed money to Vern Wilson, one
of the references given by Duval. Similarly, there is a controversy as to whether Zouvas was an
officer of Waterfall. Such specific exceptions do not affect the larger, related factual findings by
the court.
15

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