Dalrada Precision Corp. v. Cox

[7] 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA [10] 11 DALRADA PRECISION CORP., Case No.: 23-CV-1064 JLS (DEB) a California corporation, wholly owned [12] subsidiary of DALRADA FINANCIAL ORDER DISMISSING ACTION 13 CORPORATION, a Wyoming WITHOUT PREJUDICE PURSUANT corporation, TO FEBRUARY 9, 2024 ORDER [14] Plaintiffs, [15] v. [16] STUART COX, an individual, [17] Defendant. [18] 19 This case has been pending for more than one year. Despite warnings from the 20 Court, Plaintiffs Dalrada Precision Corporation and Dalrada Financial Corporation 21 (collectively, “Plaintiffs”) have failed to either (1) serve Defendant Stuart Cox or (2) 22 provide an update on their progress on that front as required by this Court’s February 9, 23 2024 Order (“Order,” ECF No. 12). For the reasons that follow, the Court DISMISSES 24 this action WITHOUT PREJUDICE for failure to prosecute. 25 BACKGROUND 26 The instant case involves a dispute stemming from Plaintiffs’ acquisition of Likido 27 Limited, a company then owned by Defendant Stuart Cox. See ECF No. 7 at 2. As part of 28 the acquisition, Plaintiffs (1) transferred to Defendant 6,118,000 of Dalrada Financial’s 1 common equity shares and (2) agreed to pay Defendant a guaranteed salary of $5,000 per 2 month for thirty-six months. Id. 3 Approximately 1.5 years post-acquisition, a third-party company (MAPtech) filed a 4 Notice of Arbitration against Likido for alleged misconduct perpetrated by Defendant. Id. 5 MAPtech would ultimately be awarded $429,987.98 plus interest out of Plaintiffs’ coffers. 6 Id. at 2–3. 7 Approximately one year after arbitration commenced, Plaintiffs terminated their 8 relationship with Defendant after, in their view, paying him more than they were obligated 9 to pay under the acquisition agreement. Id. at 3. Unhappy with this result, Defendant 10 threatened to use his equity holdings to harm Plaintiffs unless the payments continued. Id. 11 Per Plaintiffs, he also defamed them in messages to their employees. Id. 12 Plaintiffs commenced this lawsuit on June 8, 2023, raising claims for fraud, breach 13 of contract, unjust enrichment, defamation, and unfair competition. Id. Shortly thereafter, 14 they filed a Motion for Temporary Restraining Order and Preliminary Injunction, followed 15 ten days later by an Ex Parte Application for Temporary Restraining Order. ECF Nos. 4, 16 6. The Court denied both on June 29, 2023, concluding that Plaintiffs had failed to show 17 likely irreparable harm. ECF No. 7 at 9. 18 In the six months following this denial, no action occurred in the case.1 On January 19 9, 2024, therefore, the Court noticed a February 9, 2024 hearing pursuant to Civil Local 20 Rule 41.1, which allows the Court to dismiss an action pending for six months or more 21 without action for want of prosecution. See ECF No. 8. 22 Plaintiffs responded with two filings on February 5, 2024. See ECF Nos. 9, 10. In 23 the second filing, Plaintiffs indicated that they had not yet served Defendant because they 24 possessed only the following information about his whereabouts: an email address, a cell 25 number, and an approximate region of residence in the Philippines. ECF No. 10 at 4. They [26] 27 1 Ordinarily, a plaintiff must serve the defendant(s) in her lawsuit within 90 days or face dismissal. Fed. 28 R. Civ. P. 4(m). That rule, however, does not apply to service on defendants who reside outside of the 1 argued that they had “employed every reasonable means of locating Defendant.” Id. These 2 “reasonable means,” however, included only “an exhaustive internet search such as 3 Google, Linkdin, etc. [sic]” and an email exchange with an investigation company. Id. In 4 this email exchange, the investigation company stated on September 19, 2023, that it could 5 complete a “skip trace” within ten to twelve days of receiving payment. ECF No. 10-1 at 6 2. Plaintiffs’ counsel did not respond to this statement, however, until January 25, 2024— 7 16 days after the Court informed Plaintiffs it was considering dismissing this action for 8 want of prosecution. Id. at 1–2. 9 Separately, perhaps seeking to avoid the expense of this company’s services, 10 Plaintiffs moved to serve Defendant through publication. ECF No. 9 at 4.2 11 In the Order, the Court denied without prejudice Plaintiffs’ request to serve via 12 publication, reasoning (1) Plaintiffs cited the incorrect legal standard and (2) given 13 Plaintiffs paltry efforts to that point, the Court was unconvinced Plaintiffs had shown 14 diligent efforts to effectuate service through means reasonably calculated to reach 15 Defendant. Order at 2–3 & n.1. The Court nevertheless granted Plaintiffs a ninety-day 16 extension to serve Defendant in compliance with Federal Rule of Civil Procedure 4(f). Id. 17 The Court ordered Plaintiffs to file a status report describing their efforts to serve 18 Defendant at the conclusion of this ninety-day period. Id. If Plaintiffs failed to demonstrate 19 reasonable diligence, the Court warned, they risked “dismissal of this action.” Id. More 20 than 120 days have since passed, and the Court has heard nothing from Plaintiffs. 21 LEGAL STANDARD 22 “Because district courts need to be able to control their dockets, . . . the amount of 23 time allowed for foreign service is not unlimited.” Nylok Corp. v. Fastener World Inc., [24] 396 F.3d 805, 807 (7th Cir. 2005). Indeed, courts may “set[] a reasonable time limit for 25 service in a foreign country to properly manage a civil case.” Inst. of Cetacean Rsch. v. [26] 27 2 In this motion, Plaintiffs indicated they had “requested that [the investigation company” perform a skip 28 trace. Id. at 2. Plaintiffs provide no evidence of such a request, however, and the email exchange 1 Sea Shepherd Conservation Soc’y, 153 F. Supp. 3d 1291, 1320 (W.D. Wash. 2015) 2 (quoting Baja Devs. LLC v. TSD Loreto Partners, NO. CV–09–756–PHX–LOA, 2009 WL 3 2762050, at *1 (D. Ariz. Aug. 26, 2009)). And when a plaintiff disregards such a timeline, 4 a court may enforce it through sanctions, including dismissal.3 5 Before dismissing an action for failure to serve in compliance with a court order, 6 however, a court must consider five factors: “(1) the public’s interest in expeditious 7 resolution of litigation; (2) the court’s need to manage its docket; (3) the risk of prejudice 8 to defendants/respondents; (4) the availability of less drastic alternatives; and (5) the public 9 policy favoring disposition of cases on their merits.” Pagtalunan v. Galaza, 291 F.3d 639 , 10 642 (9th Cir. 2002). 11 DISCUSSION 12 Here, the balance of the Pagtalunan factors weigh in favor of dismissal. The first 13 and fifth factors cut in opposite directions. See Yourish v. Cal. Amplifier, 191 F.3d 983 , 14 990 (9th Cir. 1999) (“[T]he public’s interest in expeditious resolution of litigation always 15 favors dismissal.”); Hernandez v. City of El Monte, 138 F.3d 393, 401 (9th Cir. 1998) 16 (noting the fifth factor counsels against dismissal). The Court thus focuses on factors two, 17 three, and five. 18 Factor two—the Court’s need to manage its docket—here weighs in favor of 19 dismissal. This case has dragged on for more than a year without service. After the Court 20 denied Plaintiffs’ requests for interlocutory injunctive relief in this case’s first month, this 21 case has advanced only because the Court—through a Local Rule 41.1 hearing—forced 22 Plaintiffs’ hand. Thereafter, Plaintiffs ignored an Order explicitly requiring them to [24] 3 See, e.g., Int’l Metaphysical Ministry, Inc. v. Schaefer, No. C 18-4524 SBA, 2018 WL 10560778 , at *1– 25 8 (N.D. Cal. Nov. 21, 2018) (dismissing claims against unserved, foreign defendant with prejudice where the plaintiff (1) failed to serve the defendant within 11 months of commencement of suit and (2) failed to 26 comply with a 90-day service deadline set by the court); City Drinker, Inc. v. Kodali, No. CV 13-9223 PA (PLAX), 2014 WL 12608565 , at *1–2 (C.D. Cal. Dec. 10, 2014) (dismissing foreign defendants without [27] prejudice after the plaintiff failed to serve them within one year); United States ex rel. Lesnik v. Eisenmann 28 SE, No. 16-CV-01120-LHK, 2021 WL 2073814 , at *2 (N.D. Cal. Apr. 20, 2021) (dismissing foreign 1 demonstrate diligence in their efforts to serve Defendant. The Court cannot prosecute this 2 case for Plaintiffs. And, by requiring the Court to push the case forward in their stead, 3 Plaintiffs consume “valuable time that [the Court] could . . . devote[] to other major and 4 serious criminal and civil cases on its docket. Ferdik v. Bonzelet, 963 F.2d 1258, 1261 (9th 5 Cir. 1992). Courts faced with a similar lack of diligence have weighed factor two against 6 plaintiffs. See, e.g., Yourish, 191 F.3d at 990–91; Armenian v. Baliacas, No. 7 220CV08289FWSMRW, 2022 WL 3356525 , at *4 (C.D. Cal. Aug. 15, 2022). So too here. 8 Regarding factor three, as the delay associated with Plaintiffs’ inaction stretches on, 9 a presumption of prejudice to Defendant arises. See In re Eisen, 31 F.3d 1447 , 1452–53 10 (9th Cir. 1994). Though Plaintiffs could rebut this presumption by providing a reason for 11 their delay, id., Plaintiffs, by ignoring this Court’s Order, have declined to do so. And the 12 evidence before the Court—most notably, Plaintiffs’ months-long delay in investigating 13 Defendant’s whereabouts, see ECF No. 10-1 at 2—suggests the delay in this case is due 14 not to any difficulty associated with serving an international defendant, but instead 15 Plaintiffs’ reluctance to engage in the necessary steps. In such circumstances, factor three 16 weighs in favor of dismissal. See Schaefer, 2018 WL 10560778 , at *5; Armenian, 2022 17 WL 3356525 , at *4. 18 Finally, where a court has previously implemented less drastic alternatives—e.g., by 19 warning a plaintiff that further failure to serve may result in dismissal—factor four weighs 20 in favor of dismissal. Schaefer, 2018 WL 10560778 , at *6 (citing Ferdik, 963 F.2d at 21 1262). Here, the Court has twice—once through a notice of Local Rule 41.1 hearing and 22 again through the Order—warned Plaintiffs that continued lack of diligence could lead to 23 dismissal of this action. Factor four thus does not save Plaintiffs. 24 CONCLUSION 25 Because the balance of the Pagtalunan factors weighs in favor of dismissal, the 26 Court would be justified in dismissing this action with prejudice. See id. In line with most 27 courts facing similar situations, however, the Court instead elects to DISMISS this action 28 WITHOUT PREJUDICE. See Armenian, 2022 WL 3356525 , at *5; Lesnik, 2021 WL 1 || 2073814, at *2; cf S.D. Cal. Civ.L.R. 41.1 (stating that, unless otherwise ordered, a 2 ||dismissal for want of prosecution will be without prejudice); Fed. R. Civ. P. 4(m) 3 || Gndicating the response to a plaintiff's failure to timely serve should be dismissal without 4 prejudice). As this concludes the litigation in this matter, the Clerk of the Court SHALL 5 || CLOSE the file. 6 IT IS SO ORDERED. 7 Dated: June 21, 2024 jae L. Lo memeaiteg on. Janis L. Sammartino 9 United States District Judge