Joshua David Mellberg LLC v. Will

1 WO — 2 — — 3 — — 4 — — 5 — 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA — 8 — Joshua David Mellberg, LLC, et al., ) 9 ) Plaintiffs, ) 10 ) No. CIV 14-2025-TUC-CKJ vs. ) 11 ) ORDER Jovan Will, et al., ) 12 ) Defendants. ) 13 ) 14 Pending before the Court are the Motion to Stay Entry of Judgment Re Attorney's 15 Fees (Doc. 598), the Motion for Clarification and Motion for Reconsideration (Doc. 599), 16 the Motion to File Exhibit A Under Seal (Doc. 600), and the Motion to Amend the Order on 17 Fees Pursuant to Rule 59(e) and Motion for Relief from the Order on Fees Pursuant to Rule 18 60(b)(6) (Doc. 605) filed by Joshua David Mellberg, LLC ("JDM, LLC"), and Joshua David 19 Mellberg (collectively "JDM").1 Defendants Jovan Will ("Will"), Tree Fine, Fernando 20 Godinez and Carly Uretz (collectively, "Individual Defendants") and The Impact Partnership 21 ("Impact") have filed responses; JDM has filed replies. 22 Oral argument has been requested. Because the parties have thoroughly presented the 23 facts and briefed the issues, the Court declines to set this matter for oral argument. See 24 LRCiv 7.2(f); 27A Fed.Proc., L. Ed. § 62:361 (March 2021) ("A district court generally is 25 not required to hold a hearing or oral argument before ruling on a motion."). — 26 — 27 1Also pending before the Court are the Motion for Appellate Attorneys' Fees (Doc. 615) filed by Impact and the Motion for Attorneys' Fees on Appeal (Doc. 617) filed by Defendants — 28 — 1 I. Motion to File Exhibit A Under Seal (Doc. 600) 2 JDM seeks to have Exhibit A filed under seal in compliance with the Protective Order 3 issued in this case. The Court will grant the request. — 4 — 5 II. Motion to Stay Entry of Judgment RE Attorney's Fees (Doc. 598) 6 JDM requests the Court stay the entry of any proposed judgment for attorney's fees 7 pending the outcome of Plaintiffs' appeal. As the mandate of the appellate court has issued, 8 see Doc. 613, the Court will deny this motion as moot. — 9 — 10 III. Motion for Clarification Regarding Attorneys' Fee Award Against Mellberg (Doc. 599) 11 Mellberg argues that, to the extent the Court's March 24, 2021, Order (Doc. 597) can 12 be read to impose an attorneys' fee award against Mellberg personally, such an order is 13 manifest error and points out that the Court's Order "purports to award fees in favor of the 14 Defendants against 'JDM,' defined to include both Mr. Mellberg and Joshua David Mellberg 15 LLC." Motion (Doc. 599, p. 4). Because Mellberg was a party to only one claim against 16 Will, JDM argues an award of fees in favor of parties against whom Mellberg did not pursue 17 any claims and was not an unsuccessful party is not appropriate. 18 Although Defendants argue such an award may be appropriate, it was not the intention 19 of the Court to impose an attorneys' fee award against Mellberg personally in favor of any 20 Defendant except Will. The Court will grant the Motion for Clarification as to this issue and 21 clarify its Order. 22 Defendants had sought $61,326.40 in attorneys' fees for services unique to Will. As 23 stated in the Court's March 24, 2021, Order, a reasonable basis exists to reduce the amount 24 of the attorneys' fees award by 30%. See generally Associated Indem. Corp. v. Warner, 143 25 Ariz. 567, 571 (1985); see also Worden v. Klee Bethel, M.D., P.C., No. 1 CA-CV 08-0490, — 26 — 2009 WL 2003321 , at *5 (Ariz. App. July 9, 2009) (reduced fee award affirmed). In light 27 of this, the Court finds an award of attorneys' fees against Mellberg and in favor of Will in — 28 — 1 the amount of $42,928.48 is appropriate. Additionally, the Court will reduce the award of 2 attorneys' fees against JDM/JDM, LLC, by this amount. — 3 — 4 IV. Motion for Reconsideration (Doc. 599) and Motion to Amend the Order of Fees Pursuant to Rule 59(e) and Motion for Relief from the Order on Fees Pursuant to Rule 5 60(b)(6) 6 A motion for reconsideration may be filed under Rule 59(e) or Rule 60(b) of the Federal 7 Rules of Civil Procedure. School Dist. No. 1J, Multnomah County v. ACandS, Inc., 5 F.3d 1255 , 8 1262 (9th Cir. 1993). "Rule 60(b) 'provides for reconsideration only upon a showing of (1) mistake, 9 surprise, or excusable neglect; (2) newly discovered evidence; (3) fraud; (4) a void judgment; (5) a 10 satisfied or discharged judgment; or (6) extraordinary circumstances' which would justify relief.'" 11 Id., quoting Fuller v. M.G. Jewelry, 950 F.2d 1437, 1442 (9th Cir. 1991)); Backlund v. Barnhart, 778 12 F.2d 1386 , 1388 (9th Cir. 1985). Whether it's entitled a motion under Fed.R.Civ.P. 59(e), 13 Fed.R.Civ.P. 60(b) or a motion for reconsideration, JDM is seeking reconsideration by this 14 Court. 15 The Court has discretion to reconsider and vacate an order. Barber v. Hawaii, 42 F.3d 16 1185, 1198 (9th Cir. 1994); United States v. Nutri-cology, Inc., 982 F.2d 394, 396 (9th Cir. 17 1992). "The purpose of a motion for reconsideration is to correct manifest errors of law or 18 fact or to present newly discovered evidence. Harsco Corp. v. Zlotnicki, 779 F.2d 906 , 909 19 (3rd Cir. 1985), cert. denied, 476 U.S. 1171 (1986). However, motions for reconsideration 20 are disfavored. See generally Northwest Acceptance Corp. v. Lynnwood Equipment, Inc., — 21 — 841 F.2d 918, 925-26 (9th Cir. 1988). Indeed, a motion for reconsideration is not to "be used 22 to ask a court to rethink what the court had already thought through – rightly or wrongly." 23 Wilcox v. Hamilton Constr., LLC, 426 F. Supp. 3d 788 , 792 (W.D. Wash. 2019), citation 24 omitted; see also Above the Belt, Inc. v. Mel Bohanan Roofing, Inc., 99 F.R.D. 99 , 101 25 (E.D.Va. 1983) (limiting motions for reconsideration to cases where the court has patently 26 misunderstood a party, where the court has made a decision outside the adversarial issues 27 presented to the court, where the court has made an error not of reasoning but of — 28 — 1 apprehension, or where there has been a controlling or significant change in the law or facts 2 since the submission of the issue to the court); see also United States v. Rezzonico, 32 3 F.Supp.2d 1112, 1116 (D.Ariz. 1998). — 4 — 5 A. Manifest Error as to "Arising out of Contract" 6 JDM asserts it was manifest error for the Court to conclude that the statutory and 7 tortious claims "arose out of contract" because the duty breached in this case was imposed 8 by law and did not depend on the existence of a contract. JDM further argues these claims 9 were not claim inextricably "interwoven" with the contract claim. JDM also asserts the Court 10 did not take into account Impact's unclean hands. 11 JDM asserts Impact had a legal duty not to misappropriate trade secrets without regard 12 to whether a contract existed with Impact. JDM further argues the tort claims involving 13 Individual Defendants do not arise out of contract. While the Court does not disagree with 14 these assertions, the Court recognizes that considerations discussed by the Supreme Court 15 of Arizona lead to a conclusion the "essence" of the action arises out of contract. Barmat v. 16 John & Jane Doe Partners A-D, 747 P.2d 1218, 1222 (1987) (whether an action involves 17 duties imposed by torts requires consideration of "(1) the nature of the defendant's activity 18 such as a builder or a manufacturer-seller of a product; (2) the relationship between the 19 parties, such as occupier of land and business guest; and (3) the type of injury or harm 20 threatened"). Here, Impact was alleged to have launched an internet marketing portal for 21 insurance and annuity agents that competed with JDM, LLC, the former employer of 22 Individual Defendants; i.e., Impact "sold" this product. The relationship between JDM and 23 Impact was based on the employment, at different times, of Individual Defendants who had 24 a contractual relationship with JDM, LLC. The alleged harm was misappropriation of JDM 25 trade secrets in violation of written confidentiality agreements and disclosure agreements 26 between JDM, LLC, and Individual Defendants and in violation of statute. Because the 27 allegation is not simply that the misappropriation was in violation of certain statutes, but also — 28 — 1 a breach of contracts claim, a duty imposed on Impact would not have existed without its 2 relationship with the Individual Defendants and the contracts between those Individual 3 Defendants and JDM, LLC. In other words, the claims arise out of both statute and 4 contract. This leads to a conclusion that claims arose out of contract. Id. 747 P. 2d at 1222 . 5 Indeed, "the evidence offered to prove [the misappropriation in violation of statute] [] also 6 prove[s] a breach of contract." Morris v. Achen Const. Co., 747 P.2d 1211, 1213 (Ariz. 7 1987). 8 Similarly, the tort claims against Individual Defendants were based on agreements 9 with JDM. Indeed, the nature of the claims and that the different claims against different 10 Defendants are interwoven. See Skydive Arizona, Inc. v. Hogue, 238 Ariz. 357, 369 (App. 11 2015) (Fee award is appropriate where contract and tort claims are interwoven. "Claims are 12 interwoven when they are based on the same set of facts and involve common allegations, 13 which require the same factual and legal development."). 14 JDM argues the "claims against one party cannot, by definition, be inextricably 15 interwoven with claims against another party." Motion (Doc. 599, p. 10). JDM cites to 16 Ramsey Air Meds, L.L.C. v. Cutter Aviation, Inc., 6 P.3d 315, 318 (Ariz. App. 2000), for the 17 assertion that, "because Ramsey did not prevail on its contract claim, the 'interwoven' nature 18 of the tort claim cannot support an award of fees." However, the court then clarified this 19 statement by stating, "A tort claim does not come within the attorneys' fee statute by being 20 interwoven with an unsuccessful contract claim." Id. In other words, it was not that a party 21 did not prevail on the contract claim, but that it was an unsuccessful contract claim. In this 22 case, the contract claim was successfully defended against. 23 JDM also asserts the Court failed to consider Impact's unclean hands. As the Court 24 stated in its prior Order, "JDM has failed to establish by a preponderance of the evidence that 25 Impact pursued unreasonable claims, engaged in fraudulent conduct, or conducted this 26 litigation in an unreasonable manner." March 21, 2021, Order (Doc. 597, p. 6). For 27 example, as stated by the magistrate judge and adopted by this Court, there was no evidence — 28 — 1 that Fine was responsible for the destruction of JDM data. Report and Recommendation 2 (Doc. 531, p. 8). Moreover, it was JDM who exhibited a history of violations in the 3 litigation and Mellberg who made an inaccurate representation. Id. at 10-11, 15, 22, 28 n. 4 11. Additionally, no evidence was presented that, "since the closing of Annuity Angel, any 5 Defendant [] used or disclosed JDM’s confidential information or trade secrets. Although 6 some Defendants have worked together in digital marketing, there is no evidence that, in the 7 last five years, any Defendant competed directly against JDM unfairly or solicited an agent 8 he knew to be associated with JDM." Id. at 26. Lastly, no finding of spoliation was made 9 in this case because the requested inferences were not material. Id. at 33. The Court finds 10 there is an insufficient basis to conclude that Impact had unclean hands warranting a denial 11 of attorneys' fees. 12 Additionally, the Court disagrees with JDM's assertion that the collective nature of 13 the award of fees is inappropriate because the tort claims were not interwoven with the 14 contract claims. As previously stated, the Court has concluded the claims were intertwined. 15 Further, Individual Defendants provided a copy of the fee agreement with Defendant Fine 16 and counsel described agreements between counsel and the other clients. See LRCiv 17 54.2(d)(2). Further, counsel averred Individual Defendants were obligated to pay some of 18 the fees. The Court has considered that the work completed by counsel was done collectively 19 for the Individual Defendants and that the adjustment made to the award of attorneys' fees 20 confirms the award was reasonable. 21 The Court confirms its prior finding that Impact and Individual Defendants are 22 entitled to an award of attorneys' fees pursuant to A.R.S. §12-341.01. Additionally, 23 apportioning the hours on a claim-by-claim basis is not practicable because the non-contract 24 claims are so factually connected to the claims "that they require the same work that is 25 already necessary for the defense . . . of the contract claim alone." Bennett v. Baxter Grp., 26 Inc., 224 P.3d 230, 236 (Ariz. Ct. App. 2010); see also Ambat v. City & Cnty. of San 27 Francisco, 757 F.3d 1017, 1032 (9th Cir. 2014). The Court finds reconsideration of this — 28 — 1 issue is not appropriate. — 2 — 3 B. Alleged Manifest Error as to the Award of Fees to Uretz and Will 4 JDM also asserts the claims against Will and Uretz (i.e., interference with contract) 5 arose out of law, not contract. However, in looking at "the nature of the action and the 6 surrounding circumstances[,] Marcus v. Fox, 723 P.2d 682, 684 (1986), it does not appear 7 the claims would have existed if the contracts had not existed. See Barmat, 747 P. 2d at 8 1222. Indeed, the claims against all Individual Defendants, including Uretz and Will, are 9 linked to the underlying contracts. Bar J Bar Cattle Co. v. Pace, 763 P.2d 545, 550 (Ct. App. 10 1988). Moreover, Count 6 of the SAC alleged Will breached duties owed to Mellberg as a 11 member or manager of Alpha Advisors Academy. Further, the non-contract claims against 12 Will and Uretz are inextricably intertwined with the contract claims because they are based 13 on the same set of facts, involving common allegations and requiring the same factual and 14 legal arguments, and it is not practicable to apportion the hours on a claim-by-claim basis 15 because the non-contract claims are so factually connected to the contract claims. Bennett, — 16 — 224 P.3d at 236 . The Court finds reconsideration of this issue is not appropriate. — 17 — 18 C. Additional Arguments by JDM 19 JDM also argues, for example, that the Court's determination that because JDM had 20 been willing to expend significant sums to pursue the litigation, it did not appear an award 21 would be an extreme hardship to JDM and finding no chilling effect was manifest error. The 22 Court finds the Court's conclusions were appropriate and reconsideration is not warranted. — 23 — 24 D. JDM's Lanham Act Fee Request 25 JDM argues the Court erred in its consideration of the totality of circumstances in 26 denying its request for an award of attorneys' fees. However, the Court recognized that 27 Impact and Individual Defendants prevailed in the initial litigation. See Testa v. Village of — 28 — 1 Mundelein, Ill., 89 F.3d 443, 447 (9th Cir.1996) (prevailing party "is the party who prevails 2 as to the substantial part of the litigation); see also Slane v. Mariah Boats, Inc., 164 F.3d 3 1065, 1068 (7th Cir.1999) ("[W]hen one party gets substantial relief it 'prevails' even if it 4 doesn't win on every claim."). Further, the Court determined it could conclude the issues of 5 the countersuit were close and difficult. Additionally, while the Court declined at that time 6 to conclude any party litigated in bad faith for the purposes of determining the prevailing 7 party, see e.g. Christiansburg Garment Co. v. Equal Emp't Opportunity Comm'n, 434 U.S. 8 412, 421-22 (1978) ("It is important that a district court resist the understandable temptation 9 to engage in post hoc reasoning by concluding that, because a plaintiff did not ultimately 10 prevail, his action must have been unreasonable or without foundation. This kind of 11 hindsight bias could discourage all but the most airtight claims, for seldom can a prospective 12 plaintiff be sure of ultimate success."), the Court was aware of the conduct of the parties and 13 concluded an award was not appropriate. See Hashimoto v. Dalton, 118 F.3d 671, 677 (9th 14 Cir. 1997) ("It is enough that [the party] succeeds "on any significant claim affording some 15 of the relief sought."); Ira Green, Inc. v. Military Sales & Service Co., 775 F.3d 12, 29 (1st 16 Cir. 2014) ("Compared to the amount of time, effort, and resources devoted to the 17 [Plaintiffs'] claims. . . the counterclaims. . . were a sideshow."). 18 The Court finds reconsideration of this issue is not appropriate. 19 Accordingly, IT IS ORDERED: 20 1. The Motion to File Exhibit A Under Seal (Doc. 600) is GRANTED. 21 2. The Motion to Stay Entry of Judgment RE Attorney's Fees (Doc. 598) is 22 DENIED AS MOOT. 23 3. The Motion for Clarification Regarding Attorneys' Fee Award Against 24 Mellberg (Doc. 599) is GRANTED IN PART. The Court's ruling is clarified herein. 25 4. The Court's March 24, 2021, Order is Amended as follows: 26 a. Individual Defendants are awarded attorneys' fees and non-taxable costs 27 from JDM, LLC, in the amount of $ 409,179.99 and Defendant Will is — 28 — 1 awarded attorneys’ fees and non-taxable costs from Mellberg in the amount of 2 $ 42,928.48 for a total award of $452,108.47 from JDM, LLC, and Mellberg 3 in favor of Individual Defendants. 4 b. Impact is awarded attorneys’ fees and costs from JDM, LLC, in the 5 amount of $1,394,418.82. 6 5. The Motion for Reconsideration (Doc. 599) and the Motion to Amend the 7 || Order on Fees Pursuant to Rule 59(e) and Motion for Relief from the Order on Fees Pursuant 8 || to Rule 60(b)(6) (Doc. 605) are DENIED. 9 DATED this 31st day of March, 2022. — 10 — Lat, JO saaneooee 12 Cindy K. Jor§€énso United States District Judge — 14 — — 15 — — 16 — — 17 — — 18 — — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — — 26 — — 27 — — 28 — -9-