Henry et al v. Rizzolo et al
Filing
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ORDER Granting 455 Motion for Voluntary Dismissal. Counts 1 and 2 of Plaintiffs' Second Amended Complaint are hereby dismisses as to all defendants. 483 Defendant Lisa Rizzolo's Objections to 480 are hereby OVERRULED. Signed by Judge Philip M. Pro on 7/19/2011. (Copies have been distributed pursuant to the NEF - SLR)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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KIRK and AMY HENRY,
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Plaintiffs,
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vs.
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FREDRICK RIZZOLO aka
RICK RIZZOLO, an individual,
LISA RIZZOLO, an individual,
THE RICK AND LISA RIZZOLO
FAMILY TRUST,
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Defendants.
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2:08-CV-00635-PMP-GWF
ORDER
Presently before the Court is Plaintiffs’ Motion for Voluntary Dismissal of the
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First and Second Causes of Action Under Fed. R. Civ. P. 41(a)(2) (Doc. #455), filed on
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September 7, 2010. Defendants Lisa Rizzolo, the Lisa Rizzolo Separate Property Trust, and
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the LMR Trust (“Lisa Rizzolo”) filed an Opposition (Doc. #466) on September 24, 2010.
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Plaintiffs filed a Reply (Doc. #479), filed on October 4, 2010.
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Also before the Court is Defendant Lisa Rizzolo’s Objections to the Magistrate
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Judge’s Order (#480) (Doc. #483), filed on October 18, 2010. Plaintiffs Kirk and Amy
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Henry filed a Response (Doc. #496) on November 1, 2010.
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Plaintiffs Kirk and Amy Henry (“the Henrys”) allege that Defendant Rick
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Rizzolo owned and operated a strip club, the Crazy Horse Too, through a closely held
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corporation. (Compl. [Doc. #1] at 2-3.) The Henrys allege Rick and Lisa Rizzolo operated,
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or acquiesced in the operation of, the Crazy Horse Too in a criminal manner such that the
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Crazy Horse Too was a racketeering enterprise. (Id. at 3.) According to the Henrys, as a
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result of the criminal operation of the Crazy Horse Too, Kirk Henry was attacked at the club
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and rendered a quadriplegic. (Id.) Following Kirk Henry’s injury, the Henrys sued Rick
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Rizzolo in 2001. (Id.)
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The Henrys allege that based on this personal injury lawsuit, in which Rick
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Rizzolo faced liability in excess of ten million dollars, Defendants Rick and Lisa Rizzolo
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thereafter engaged in a concerted effort to conceal assets to avoid paying the Henrys. (Id.)
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Specifically, the Henrys contend Defendants formed a family trust and transferred assets
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into the trust to hide and shield assets, and Defendants engaged in a series of transactions,
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including an allegedly collusive divorce, in which Lisa Rizzolo obtained all assets of value
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while Rick Rizzolo acquired only the Crazy Horse Too, which Defendants knew or
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expected would be forfeited due to criminal activity at the club. (Id. at 3-4.) Plaintiffs also
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contend Defendants engaged in other transactions, such as loans, gambling debts, and other
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third party transactions, all of which were designed to conceal assets from the Henrys. (Id.
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Based on these allegations, Plaintiffs brought this action against Defendants Lisa and Rick
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Rizzolo and the Rick and Lisa Rizzolo Family Trust (“Trust”), asserting claims for
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conspiracy to defraud (count one), common law fraud (count two), and violation of the
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Nevada Uniform Fraudulent Transfer Act (“NUFTA”). Plaintiffs later amended the
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Complaint to add as Defendants several other trusts owned or controlled by Lisa and/or
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Rick Rizzolo. (Second Am. Compl. [Doc. #200].)
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During discovery, Defendant Lisa Rizzolo brought a motion to compel Plaintiffs
to answer certain interrogatories directed at Plaintiffs’ fraud allegations, particularly with
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respect to the Henrys’ knowledge and due diligence regarding Lisa and Rick Rizzolo’s
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assets, divorce, and transfers of assets at the time Plaintiffs entered into a settlement
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agreement with Defendant Rick Rizzolo with respect to the personal injury lawsuit. (Def.
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Lisa Rizzolo’s Am. Mot. to Compel Answers & Responses to Def.’s First Set of Interrog. &
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Request for Prod. [Doc. #401].) Plaintiffs responded that this information was irrelevant
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because Plaintiffs were not relying on a specific misrepresentation by either Lisa or Rick
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Rizzolo as the basis for their fraud claims. (Pls.’ Opp’n to Def. Lisa Rizzolo’s Am. Mot. to
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Compel [Doc. #419].) Rather, they were relying on the covenant of good faith and fair
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dealing in the settlement agreement, and Plaintiffs conceded they were aware of
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Defendants’ sham divorce, thus any further discovery on these issues was irrelevant. (Id.)
In ruling on this motion, the Magistrate Judge expressed doubt regarding the
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viability of fraud claims based on no affirmative representations, and particularly with
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respect to Lisa Rizzolo, who was not a party to the underlying lawsuit or the settlement
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agreement with the Henrys. (Order [Doc. #449] at 5.) However, the Magistrate Judge ruled
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that to the extent the fraud claims were viable, Lisa Rizzolo was entitled to conduct
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discovery regarding the circumstances surrounding the settlement agreement’s execution,
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including Plaintiffs’ knowledge about asset transfers prior to executing the settlement
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agreement. (Id.)
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The Henrys now move to voluntarily dismiss their conspiracy to defraud and
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common law fraud claims. (Pls.’ Mot. for Voluntary Dismissal of the First & Second
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Causes of Action Under Fed. R. Civ. P. 41(a)(2) [Doc. #455].) Lisa Rizzolo does not
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oppose the motion for voluntary dismissal of the two claims, but Lisa Rizzolo notes that the
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Henrys do not purport to dismiss the general allegations supporting those two claims. Lisa
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Rizzolo thus requests the Court “identify the general allegations for purposes of
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clarification” so that Lisa Rizzolo will know which allegations she must defend against at
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trial. (Resp. to Pls.’ Mot. for Voluntary Dismissal of the First & Second Causes of Action
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Under Fed. R. Civ. P. 41(a)(2) [Doc. #466] at 3.) Defendant Rick Rizzolo likewise does
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not oppose dismissal of the claims, but does oppose retention of the general allegations.
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(Def. Rick Rizzolo’s Qualified Opp’n to Pls.’ Mot. for Voluntary Dismissal of the First &
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Second Causes of Action Under Fed. R. Civ. P. 41(a)(2) [Doc. #468].) In reply, the Henrys
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clarified that paragraphs 1-30 and 30-33 and the prayer for relief are the allegations which
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should remain following their voluntary dismissal. (Pls.’ Reply in Support of Mot. for
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Voluntary Dismissal of the First & Second Causes of Action Under Fed. R. Civ. P. 41(a)(2)
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[Doc. #479].)
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At the same time the Henrys moved to voluntarily dismiss their first two claims,
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they simultaneously requested the Magistrate Judge reconsider his order compelling the
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Henrys’ response to certain interrogatories, arguing that because the Henrys were
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voluntarily dismissing the fraud claims, the requested discovery no longer was relevant.
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(Pls.’ Mot. for Recons. of Order (#449) on Def. Lisa Rizzolo’s Am. Mot. to Compl. [Doc.
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#456].) Lisa Rizzolo opposed the motion for reconsideration, arguing that because the
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Henrys did not seek to dismiss the general allegations, those allegations remained relevant,
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particularly where intent to defraud remains an issue in the NUFTA claim. (Def. Lisa
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Rizzolo’s Opp’n to Pls.’ Mot. for Recons. of Order (#449) on Def. Lisa Rizzolo’s Am. Mot.
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to Compel (#401) [Doc. #467].) Lisa Rizzolo thus requested the Court condition any
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dismissal on production of the requested discovery materials.
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The Magistrate Judge granted Plaintiffs’ motion for reconsideration of the
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Magistrate Judge’s prior Order on Lisa Rizzolo’s motion to compel. (Order [Doc. #480].)
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The Magistrate Judge anticipated the undersigned would grant the Henrys’ motion for
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voluntary dismissal, as the motion is unopposed. (Id. at 2.) The Magistrate Judge also
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noted that because there is no requirement under the NUFTA that the plaintiff prove he was
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deceived or relied upon the defendant’s misrepresentation, the discovery into the parties’
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settlement negotiations or Plaintiffs’ reliance on the implied covenant of good faith and fair
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dealing therein became irrelevant. (Id.) The Magistrate Judge therefore ruled that the
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Henrys need not respond to the disputed discovery requests. (Id. at 2-3.)
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Lisa Rizzolo now objects to the Magistrate Judge’s Order granting
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reconsideration and relieving Plaintiffs of the obligation of responding to the discovery
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requests. Lisa Rizzolo argues that because the Henrys seek to dismiss the two causes of
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action, but want to retain the general allegations contained therein, the factual
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circumstances surrounding the settlement agreement remain relevant for discovery
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purposes. Lisa Rizzolo argues the requested materials are relevant to whether the Henrys
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are contingent creditors under the settlement agreement; whether Defendants acted with
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actual intent to hinder, delay, or defraud the Henrys; and whether it was foreseeable that the
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sale of the Crazy Horse Too would not generate sufficient proceeds to pay off the Henrys.
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Plaintiffs respond that the question of whether Plaintiffs are contingent creditors
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already has been resolved by this Court, and thus does not remain a question in this case.
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Plaintiffs also argue that they concede that everyone thought the sale of the Crazy Horse
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Too would satisfy Rick Rizzolo’s obligations to the Henrys, and thus foreseeability no
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longer is an issue in this case either. Finally, the Henrys argue that nothing about their
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discussions with counsel are relevant to Lisa Rizzolo’s own knowledge and intent.
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No party objects to the voluntary dismissal of Plaintiffs’ conspiracy to defraud
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and common law fraud claims, and Plaintiffs have clarified what general allegations
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continue to support their remaining NUFTA claim. The Court therefore will grant
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Plaintiffs’ motion for voluntary dismissal of counts one and two of the Second Amended
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Complaint.
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That leads to Defendant Lisa Rizzolo’s objection to the Magistrate Judge’s Order
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which relieved Plaintiffs of the obligation of responding to Lisa Rizzolo’s requested
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discovery surrounding the circumstances of the parties entering the settlement agreement,
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and Plaintiffs’ knowledge or reliance. Magistrate judges statutorily are authorized to
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resolve non-dispositive pretrial matters subject to review by district judges under a clearly
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erroneous or contrary to law standard. 28 U.S.C. § 636(b)(1)(A); United States v.
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Rivera-Guerrero, 377 F.3d 1064, 1068 (9th Cir. 2004). The determination of whether
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certain materials are relevant for discovery purposes is non-dispositive of any claim or
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defense at issue in this action. The Court therefore will review the Magistrate Judge’s
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Order under the clearly erroneous or contrary to law standard.
The Magistrate Judge’s Order granting reconsideration and relieving Plaintiffs of
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the obligation to turn over the requested discovery materials was not clearly erroneous or
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contrary to law. The requested discovery material was not relevant once Plaintiffs
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voluntarily dismissed their fraud claims, as the issue of Plaintiffs’ reasonable reliance
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became irrelevant to the remaining cause of action. Under NUFTA, Plaintiffs need not
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establish they reasonably relied on any representation by Defendants, as NUFTA does not
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require reasonable reliance as an element. The only questions will be whether Defendants
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made certain transfers, and if so, whether they did so with the actual intent to hinder, delay,
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or defraud the Henrys. Nev. Rev. Stat. § 112.180(1)(a). None of the requested discovery
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material would bear on either of these questions. The question of whether the Henrys are
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contingent creditors under the settlement agreement already has been determined. (Order
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[Doc. #117].) Lisa Rizzolo has not explained how the Henrys’ discussions with their own
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counsel or with other third parties would be relevant to determining whether Defendants
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acted with actual intent to hinder, delay, or defraud the Henrys. Finally, the Henrys have
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conceded that at the time they entered into the settlement agreement, everyone thought the
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sale of the Crazy Horse Too would satisfy Rick Rizzolo’s obligations to the Henrys, and
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thus foreseeability at the time the parties entered into the settlement agreement no longer is
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an issue. The Court therefore will deny Lisa Rizzolo’s objections to the Magistrate Judge’s
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Order.
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///
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IT IS THEREFORE ORDERED that Plaintiffs’ Motion for Voluntary Dismissal
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of the First and Second Causes of Action Under Fed. R. Civ. P. 41(a)(2) (Doc. #455) is
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hereby GRANTED. Counts one and two of Plaintiffs’ Second Amended Complaint (Doc.
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#200) are hereby dismissed as to all Defendants.
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IT IS FURTHER ORDERED that Defendant Lisa Rizzolo’s Objections to the
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Magistrate Judge’s Order (#480) (Doc. #483) are hereby OVERRULED and the Magistrate
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Judge’s Order (Doc. #480) is hereby AFFIRMED.
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DATED: July 19, 2011
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PHILIP M. PRO
United States District Judge
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