Monfort v. Adomani

[7] 8 UNITED STATES DISTRICT COURT [9] NORTHERN DISTRICT OF CALIFORNIA [10] SAN JOSE DIVISION [11] 12 EDWARD R. MONFORT, Case No. 18-CV-05211-LHK 13 Plaintiff, ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY 14 v. JUDGMENT 15 ADOMANI, et al., Re: Dkt. No. 82 16 Defendants. [17] 18 Plaintiff Edward Monfort brings the instant lawsuit against Defendants ADOMANI, INC. 19 (“Adomani”); its President and Chief Executive Officer, James L. Reynolds; its Chief Financial 20 Officer, Michael K. Menerey; its Vice President, Robert E. Williams; its former Chief Operating 21 Officer and Secretary, Kevin G. Kanning; and its former consultant, Dennis Di Ricco 22 (collectively, “Defendants”). 23 Before the Court is Defendants’ motion for summary judgment. ECF No. 82. Having 24 considered the submissions of the parties, the relevant law, and the record in this case, the Court 25 GRANTS Defendants’ motion for summary judgment as to all of Monfort’s claims. 26 I. BACKGROUND [27] A. Factual Background [1] Monfort is a resident of Florida and is a co-founder and former Chief Executive Officer of [2] Adomani. ECF No. 79, First Amended Complaint (“FAC”)1, at ¶¶ 1, 5. Adomani is a publicly [3] traded Delaware corporation with its principal executive offices in California. Id. ¶ 11. At various [4] points throughout Monfort’s tenure with Adomani, Monfort claims to have received significant [5] amounts of Adomani common stock and stock options, which are at the heart of this dispute. The [6] record suggests an increasingly contentious relationship between Monfort and Adomani’s other [7] executives, up to and including Monfort’s termination in March 2018. Notwithstanding the [8] voluminous exhibits detailing the minutiae of the parties’ disagreements, the Court will focus on [9] those facts which are relevant to this motion. [10] 1. Monfort and Di Ricco Found Adomani [11] Monfort, an inventor, partnered with Dennis Di Ricco, a tax advisor, to establish a business [12] commercializing Monfort’s patent for an electric drivetrain. ECF No. 82–1 (“Wolf Decl.”), Ex. K [13] (“Di Ricco Dep.”) at 32:19–34:15. In 2012, they incorporated the business in Florida as [14] ADOMANI, INC. Id. at 34:10–21; ECF No. 82-5 (“Di Ricco Decl.”), Ex. A. As between [15] Monfort and Di Ricco, the two initially agreed that Monfort and Di Ricco would divide any shares [16] of Adomani between them at a ratio of 60% to 40%, respectively. Di Ricco Dep. 33:25–34:9. [17] Throughout 2012, Di Ricco raised capital for Adomani, and, during this time, the company [18] received investments from Kanning, Williams, and the Acaccia Family Trust (“Acaccia”), for [19] which Di Ricco was the trustee. Di Ricco Dep. 35:25–37:4, 51:15–19. [20] In 2012, Monfort and Adomani entered into a number of stock subscription agreements [21] whereby Adomani agreed to sell Monfort over 30 million shares of Adomani stock for $0.002 per [22] share (the “Disputed Agreements”). See ECF No.86 (“Monfort Decl.”) ¶ 9, Ex. H. Although the [24] 25 1 The First Amended Complaint was originally filed on March 26, 2019, at ECF No. 44. However, the Court subsequently granted the parties’ stipulated request to replace this document 26 and other filings because they inadvertently contained confidential information. ECF No. 81. For example, ECF No. 79 replaces the First Amended Complaint that was originally filed as ECF No. 27 44. Where applicable, the Court’s citations throughout this Order will be to the corrected, publicly available filings on the docket. 1 parties agree that Monfort assigned a patent to Adomani in consideration for some of the stock, the 2 parties dispute whether Monfort ever provided sufficient consideration to purchase the stock 3 pursuant to the subscription agreements. Mot. at 4, 6 n.5; Opp’n at 3. Some of the subscription 4 agreements themselves contain annotations on the signature pages: “Patent Value,” “Shares Issued 5 for Patents,” and “For Patents After 2012.” Monfort Decl., Ex. H. Finally, the parties also dispute 6 whether Adomani’s board followed the proper procedure under Florida corporate law to issue the 7 disputed shares of stock. Mot. at 5–6; Opp’n at 11–12. Nonetheless, the parties agree that 8 Monfort did eventually receive at least 4 million shares of common stock. Mot. at 1; Opp’n at 17 9 n.103. Moreover, despite Monfort’s argument that he paid for shares through assignments of his 10 patents, see Opp’n at 10, Monfort also stated that Di Ricco, on behalf of Acaccia Trust, paid for 11 the shares. Monfort Dep., Ex 12 (“I didn’t have to pay for them because Dennis paid for them for 12 me . . . .”); see also Wolf Decl., Ex. B (“Menerey Dep.”) 60:24–61:10; Di Ricco Dep. 188:25– 13 189:9; Wolf Decl., Ex. H (“2d 30(b)(6) Dep.”) 44:12–45:3. Monfort testified that he did not 14 receive copies of the Disputed Agreements at that time. Monfort Dep. 72:1–5. 15 Additionally, Adomani and Monfort entered into separate agreements granting Monfort the 16 option to purchase 15 million shares of Adomani common stock (collectively, the “Option 17 Agreements”). Specifically, Adomani granted Monfort an option to purchase 12 million shares of 18 common stock in November 2012, and an option to purchase 3 million shares of preferred stock in 19 June 2014.2 Monfort Decl., Ex. H. The Option Agreements incorporate the terms set forth in 20 Adomani’s 2012 Common Stock Option Plan and 2012 Preferred Stock Option Plan, respectively. 21 Id; see Di Ricco Decl., Ex. C (the “2012 Common Stock Option Plan”). The parties agree that, 22 pursuant to the 2012 Common Stock Option Plan, Adomani could terminate Monfort’s stock 23 options in the event of his termination of employment “for cause.” Mot. at 21; Opp’n at 4; see [25] 2 Later, upon reincorporation in Delaware, the new Adomani Delaware entity assumed the 26 obligations of these stock plans, ECF No. 82–2 (“Menerey Decl.”), Ex. P at 8, and converted all options to purchase preferred stock into options to purchase common stock, Menerey Decl., Ex. N. 27 Accordingly, the parties refer collectively to Monfort’s option to purchase 15 million shares of common stock, and the Court will do the same. 1 2012 Common Stock Option Plan. 2 2. Disputes Over Monfort’s Stock Ownership 3 In the years that followed, prior to Adomani’s initial public offering (“IPO”), Adomani’s 4 record-keeping of its stock ownership was “sloppy” and “a mess.” Wolf Decl., Ex. E (“Raymond 5 Dep.”) 38:9–39:3; 2d 30(b)(6) Dep. 35:12–15. Adomani’s internal records and public filings were 6 inconsistent and, at times, reflected Monfort’s ownership of up to 34,280,000 shares of Adomani 7 common stock. See, e.g, ECF No. 83, Ex. D. However, in 2014, Adomani hired James Reynolds 8 and Michael Menerey to join the executive team, in part to reconcile Adomani’s stock records to 9 prepare for the IPO. Wolf Decl., Ex. J (“Reynolds Dep.”) 22:7–18, 26:6–12, 160:6; Menerey Dep. 10 15:14–16. 11 During this process, a dispute arose between Monfort and the rest of Adomani’s 12 management regarding Monfort’s ownership and entitlement to stock. Monfort hired a lawyer, J. 13 Paul Raymond and called an emergency board meeting on May 4, 2016. Monfort Dep. 72:1-9. 14 During the meeting, Monfort argued with the rest of the board over his stock position; however, 15 the board insisted that Acaccia purchased the disputed shares and that any agreement between 16 Monfort and Acaccia would need to be addressed with Di Ricco. ECF No. 82-3 (“Kanning 17 Decl.”), Ex. D at 3–5. The board then voted to allow Acaccia to rescind its purchase of 36 million 18 shares of stock (later corrected to 34 million), in connection with the IPO, where Monfort was the 19 sole dissenting vote. Id. In that same meeting, the board also unanimously voted to approve 20 issuance of all purchased shares of common stock to the purchasers, and to affirm that Monfort 21 had only 900,000 shares of stock, against Monfort’s dissenting vote. Wolf Decl., Ex. A (“Kanning 22 Dep.”), Ex. 4. Menerey later clarified that, because neither he nor Di Ricco had been invited to 23 the meeting, the 900,000 number discussed by the board had not been verified, and that the 24 number of Monfort’s shares “should have been 4 million, 2 million of which had been issued.” 25 Menerey Decl., Ex. L. Di Ricco, as trustee for Acaccia, subsequently proceeded to rescind his 26 agreement with Acaccia to purchase of over 30 million shares. Menerey Decl., Ex. C; but see 27 Opp’n at 7 n.43 (noting discrepancies in total number of shares rescinded). 3. Negotiation of 2016 Employment Agreement and Release [1] Monfort, represented by Raymond, continued to dispute ownership of the company’s stock [2] with Adomani’s management. Raymond Dep. 53:20–54:13. Reynolds testified that he had [3] recurring issues with Monfort’s job performance, see, e.g., Reynolds Dep. 114:25–115:15, and [4] Monfort had already expressed his desire for a new employment agreement, Kanning Dep., Ex. 4. [5] The parties dispute exactly what was communicated during the negotiation process and what [6] documents Monfort already had in his possession at the time. Monfort testified, “I knew I was [7] giving up the 34, 38 million shares, but it was—it was not an informed decision when I signed [the [8] agreement], and I was deceived by Adomani.” Monfort Dep. 70:17–20. He explained, “Adomani [9] and the Counsel told me and my attorney that the fully executed subscription agreements that I [10] had from 2012 did not exist . . . .” Id. at 70:23–25. However, Monfort was unable to identify [11] anyone specifically who had told him that the subscription agreements did not exist. Id. 72:15– [12] 73:8. His then-attorney, Raymond, testified that it was Adomani’s attorney, Conrad Lysiak, who [13] stated that the Disputed Agreements did not exist. Raymond Dep. 56:22–57:4, Ex. 38. However, [14] Raymond testified that he did have “evidence in [his] possession that [Monfort] owned a [15] substantial number of shares.” Id. 17:17–17:25. [16] On June 23, 2016, Monfort and Adomani executed the 2016 Employment Agreement, [17] which included as an attachment a general release of all claims existing prior to execution of the [18] 2016 Employment Agreement (the “Release”). Monfort Dep., Ex. 10. The agreement set forth [19] Monfort’s employment as “Chief Technology Officer” with an annual salary of $120,000. Id. at 1. [20] The Employment Agreement contained a separate clause “Other Consideration,” whereby the [21] parties agreed: [22] In consideration for Executive’s execution of a general release in the form attached 23 hereto as Exhibit A, the Company will pay Executive the sum of $200,000.00 to ELO, LLC [(Monfort’s separate corporate entity)]. . . . In addition, Company agrees to pay 24 to ELO, LLC for two years, commencing June 1, 2016 through May 31, 2018, up to $7,000.00 per month for invoiced expenses. [25] Id. at 2. The Release itself specifies that Monfort “generally releases and forever discharges [26] [Adomani] . . . and their respective officers, directors, employees . . . from any and all claims, [27] 1 liabilities, demands, causes of action . . . of every kind and nature, whether known or unknown, 2 arising at any time prior to the date Executive signs this Employment Agreement.” Id. at 6. 3 Monfort subsequently received copies of the Disputed Agreements in a July 19, 2016 4 email from Menerey that asked Monfort to void or cancel all four subscription agreements “in 5 order to clean up our files before the IPO.” Monfort Dep., Ex. 11. Monfort was unable to recall 6 how he responded when he received the Disputed Agreements in Menerey’s email, other than that 7 “it jarred [his] memory.” Monfort Dep. 78:5–83:23. 8 4. Adomani’s IPO and Monfort’s Termination 9 Thereafter, Monfort and the parties proceeded under the terms of the 2016 Employment 10 Agreement and Release. For example, Monfort completed a number of forms in which he 11 represented that he owned only 4 million shares of stock and 15 million stock options. See, e.g., 12 Monfort Dep., Ex. 13 at 15; Menerey Decl, Exs. I–K, M, X. Monfort further helped to facilitate 13 Adomani’s reincorporation in Delaware and its IPO. See, e.g., Kanning Decl., Ex. F. 14 In June 2017, Monfort was suspended without pay. Reynolds Dep. 243:1–3. Adomani 15 hired EXTTI, Inc. (“EXTTI”), a third-party firm, to investigate suspicions of Monfort’s 16 workplace misconduct. Wolf Decl. Ex I (“Sniderman Dep.”) 8:10–17, 11:11–24. Monfort 17 declined to directly participate in the investigation at the advice of counsel despite orders to the 18 contrary, although his counsel acted on his behalf throughout. Sniderman Dep. 28:23–32–7; see, 19 e.g., ECF No. 82-4 (“Hamer Decl.”), Ex. A. EXTTI delivered its principal conclusions to the 20 board verbally around February 2018, Menerey Decl. ¶ 27, ultimately finding that “more likely 21 than not, Monfort did participate in the activities of misconduct stated in six of the seven 22 allegations.” Sniderman Dep., Ex. 1, at 4 (footnote omitted). Accordingly, the board of directors 23 determined that cause existed to terminate Monfort’s employment, and Monfort was officially 24 terminated in March 2018. Monfort Decl. ¶ 16. Monfort had attempted to exercise his options 25 just two days before his termination. Id. ¶ 15. This suit followed. 26 B. Procedural History 27 On August 2, 2018, Monfort filed his initial complaint in Superior Court for the County of 1 Santa Clara, alleging claims for (1) breach of contract, (2) fraud, (3) fraudulent inducement, and 2 (4) declaratory relief. ECF No. 74. On August 24, 2018, Defendants removed Monfort’s case to 3 this Court on the basis of diversity jurisdiction. ECF No. 1. On September 24, 2019, Monfort 4 moved to remand the case to state court, ECF No. 9, which the Court denied on January 8, 2019, 5 ECF No. 30. 6 On March 26, 2019, Monfort filed his First Amended Complaint. ECF No. 79. 7 Defendants (with the exception of Di Ricco) filed an answer and asserted counterclaims against 8 Monfort for (1) breach of the 2016 Employment Agreement and Release, (2) declaratory 9 judgment, (3) breach of fiduciary duty, (4) wrongful dilution of equity, and (5) conversion. ECF 10 No. 37. On May 15, 2019, Monfort answered Defendants’ counterclaims. These counterclaims 11 are not raised in any motion for summary judgment before the Court. ECF No. 58. On June 4, 12 2019, Di Ricco separately filed his answer. ECF No. 59. 13 Defendants jointly filed the instant motion for summary judgment on September 12, 2019. 14 ECF No. 82 (“Mot.”). Monfort opposed the motion for summary judgment on September 26, 15 2019, ECF No. 85 (“Opp’n”)3, and Defendants replied on October 3, 2019, ECF No. 85 16 (“Reply”).4 17 II. LEGAL STANDARD 18 Summary judgment is proper where the pleadings, discovery, and affidavits show that 19 there is “no genuine dispute as to any material fact and [that] the movant is entitled to judgment as 20 a matter of law.” Fed. R. Civ. P. 56(a). Material facts are those which may affect the outcome of [21] 22 3 Monfort’s opposition includes 129 footnotes, some of which extend up to 13 lines. Monfort’s 129 footnotes fail to comply with Local Rule 3-4(c)(2), which requires that footnotes be the same 23 font size as the text. In addition, Monfort filed a declaration that, in essence, appends his legal argument, including a chart that spans over nine pages and that purports to identify fraudulent 24 statements and why each statement was false when made. See Monfort Decl. 3–11. These tactics circumvent the page limits set forth in the Civil Local Rules. The Court will strike any such future 25 filings. 4 Both parties request that the Court judicially notice certain publicly available documents, see 26 ECF Nos. 83, 88, and neither side opposes. A court may take judicial notice of the existence of matters of public record but not the truth of the disputed facts cited therein. Lee v. City of Los 27 Angeles, 250 F.3d 668, 689-90 (9th Cir. 2001). Accordingly, the Court GRANTS the parties’ requests for judicial notice. 1 the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a 2 material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for 3 the nonmoving party. See id. 4 The party moving for summary judgment bears the initial burden of identifying those 5 portions of the pleadings, discovery and affidavits that demonstrate the absence of a genuine issue 6 of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party 7 meets its initial burden, the nonmoving party must go beyond the pleadings and, by its own 8 affidavits or discovery, “set forth specific facts showing that there is a genuine issue for trial.” 9 Fed. R. Civ. P. 56(e). If the nonmoving party fails to make this showing, “the moving party is 10 entitled to judgment as a matter of law.” Celotex Corp., 477 U.S. at 323 . 11 At the summary judgment stage, the Court must view the evidence in the light most 12 favorable to the nonmoving party: if evidence produced by the moving party conflicts with 13 evidence produced by the nonmoving party, the judge must assume the truth of the evidence set 14 forth by the nonmoving party with respect to that fact. See Leslie v. Grupo ICA, 198 F.3d 1152 , 15 1158 (9th Cir. 1999). 16 III. DISCUSSION 17 Monfort asserts four claims in his First Amended Complaint. Count One alleges breach of 18 Monfort’s 2012 stock subscription agreements (the “Disputed Agreements”) and two agreements 19 granting Monfort 15 million options to purchase stock (the “Option Agreements”). Count Two 20 alleges fraud with respect to a number of purported misrepresentations about Monfort’s ownership 21 of stock and options. Count Three alleges fraudulent inducement into signing the 2016 22 Employment Agreement, which included as an attachment a general release of all claims existing 23 prior to execution of the 2016 Employment Agreement (the “Release”). Count Four seeks 24 declaratory relief as to Monfort’s ownership of stock and options. 25 Defendants move for summary judgment as to Counts One, Two, and Three, and ask the 26 Court to dismiss Count Four. Specifically, Defendants argue that the Release bars all of Monfort’s 27 claims, with the exception of Monfort’s allegation in Count One that Adomani breached the 1 Option Agreements. Mot. at 11 n.13. Defendants further argue that there is no genuine dispute of 2 material fact as to breach of the Option Agreements because the agreements allowed Adomani to 3 terminate Monfort’s options upon termination for cause. Mot. at 23–25. Finally, Defendants 4 argue that the Court should exercise its discretion to dismiss Count Four in its entirety because 5 declaratory relief would be “superfluous.” Mot. at 25. 6 Monfort argues that the Release does not bar any of his claims because he was fraudulently 7 induced into signing the Release and because the terms of the Release do not reach Monfort’s 8 claims against the individual defendants. Opp’n 16–25. Defendants counter that, even if Monfort 9 had a claim of fraudulent inducement, his conduct in the two years following his discovery of the 10 alleged fraud amount to ratification of the Release as a matter of law. Mot. at 11–16. Defendants 11 also contend that the Release unambiguously extends to claims against the individual defendants. 12 Reply at 9–10. 13 Monfort also argues that summary judgment as to his allegation in Count One that 14 Adomani breached the Option Agreements would be inappropriate because whether his 15 termination was for cause is a “classic jury question.” Opp’n at 12–14. Finally, Monfort argues 16 that the existence of genuine disputes of material fact as to his ownership of stock and options 17 precludes summary judgment for Count Four, his claim for declaratory relief. Opp’n at 11 n.79. 18 The Court first addresses whether Monfort ratified the Release. After finding that Monfort 19 ratified the Release, the Court addresses whether the Release extends to Monfort’s claims against 20 the individual defendants. Finally, the Court addresses each of Monfort’s claims in turn. 21 A. Monfort Ratified the Release 22 Defendants argue that Monfort ratified the Release through his conduct for about two years 23 after discovering the alleged deceit, and this delay impermissibly prejudiced the rights of 24 Defendants and other parties. Mot. at 11, 14. Monfort argues that he did not ratify the Release 25 because his conduct was without “full knowledge” of Defendants’ bad conduct. Opp’n at 20–23. 26 Here, the Court finds Monfort’s delay and subsequent conduct, as well as the resulting prejudice, 27 to be so substantial as to give rise to ratification of the Release as a matter of law. 1 The 2016 Employment Agreement explicitly provides consideration (including, most 2 substantially, $200,000) in exchange for Monfort’s execution of the Release on June 23, 2016. 3 Monfort Dep., Ex. 10, at 2. The Release provides that Monfort “generally releases and forever 4 discharges the Company, its parent, subsidiary, affiliated and related entities, and its and their 5 respective officers, directors, employees . . . from any and all claims, liabilities, demands . . . 6 whether known or unknown, arising at any time prior.” Id. at 5. The Release specifies that the 7 general release includes “claims related to breach of contract, tort, wrongful termination, 8 discrimination, wages or benefits, or claims for any form of compensation, benefits, equity or 9 other ownership.” Id. Finally, the Release states: “[Monfort] acknowledges and represents that, 10 with the consideration set forth in this Agreement, the Company has paid or provided all salary, 11 wages, bonuses, accrued vacation/paid time off . . . stock, stock options, vesting, and any and all 12 other benefits and compensations due to [Monfort].” Id. 13 The 2016 Employment Agreement includes a choice of law provision stipulating that 14 California law governs claims arising out of the agreement. See Monfort Dep., Ex. 10, at 5. The 15 parties apply California law to ascertain whether Monfort ratified the agreement, and the Court 16 does the same. 17 A fraudulently induced contract is voidable, not void. See Vill. Northridge Homeowners 18 Ass’n v. State Farm Fire & Cas. Co., 237 P.3d 598, 602 (Cal. 2010). In California, a party 19 seeking rescission must “promptly upon discovering the facts which entitle him to rescind” give 20 notice of rescission to the other party and offer to restore the other party’s consideration under the 21 contract. Vill. Northridge, 237 P.3d at 602 (citing Cal. Civ. Code § 1691 ). California further 22 provides that, where notice of rescission and an offer to restore contract benefits has not otherwise 23 been made, “the service of a pleading in an action . . . shall be deemed to be such notice or offer or 24 both.” Cal. Civ. Code § 1691 . 25 Even where a contract is voidable, a party may act to ratify the contract, and thus “waive[] 26 the right to assert the invalidity of the release.” Aikins v. Tosco Ref. Co., No. C-98-00755-CRB, [27] 1999 WL 179686 , at *4 (N.D. Cal. Mar. 26, 1999). Ratification occurs when the defrauded party, 1 “with full knowledge of the material facts permitting rescission, has engaged in some unequivocal 2 conduct giving rise to a reasonable inference that he or she intended the conduct to amount to a 3 ratification.” Id. (citing Union Pac. R.R. Co. v. Zimmer, 87 Cal. App. 2d 524, 532 (1948)). 4 “Whether the releasor has [knowledge of the facts permitting rescission], and whether retention 5 has been for an unreasonable length of time, are normally questions for the trier of fact.” Zimmer, [6] 87 Cal. App. 2d at 532 . However, California courts have taken the question away from the jury 7 where the delay and resulting prejudice are so substantial as to be unreasonable as a matter of law. 8 See, e.g., Saret-Cook v. Gilbert, Kelly, Crowley & Jennett, 74 Cal. App. 4th 1211 , 1225–26 (1999) 9 (five-month delay); Eustace v. Lynch, 43 Cal. App. 2d 486 , 487–89 (1941) (two-month delay). 10 1. Monfort’s knowledge of his right to rescind 11 As an initial matter, the parties dispute exactly what alleged fraud Monfort claims induced 12 his agreement to the Release, and exactly when Monfort “first discovered facts which entitle him 13 to rescind.” See Vill. Northridge, 237 P.3d at 602 . Monfort raises in his opposition to summary 14 judgment an additional theory of fraudulent inducement: that he was induced into signing the 15 Release because Defendants had always intended to terminate him to cancel his stock options. 16 Opp’n at 21–22; Monfort Decl. ¶¶ 14, 17. Monfort argues that, because he did not have 17 knowledge of this purported fraud until he was terminated in March 2018, his conduct beforehand 18 does not support ratification of the Release. Opp’n at 22–23. Defendants allege that this new 19 theory of fraudulent inducement contradicts Monfort’s prior representations, and Defendants urge 20 the Court to disregard this theory. Id. The Court holds that Monfort’s untimely and contradicted 21 theory does not preclude a finding that he ratified the Release. 22 Specifically, Monfort first alleged in his First Amended Complaint that he was 23 fraudulently induced into signing the Release by Defendants’ misrepresentations that the Disputed 24 Agreements did not exist. FAC ¶ 74–78. Nonetheless, in his opposition, Monfort raises some 25 additional background facts of which he claims to have been unaware at the time he signed the 26 Release. Opp’n at 22–23. For example, Monfort claims that he “did not know, and could [not] 27 know, that . . . [n]o other shareholder . . . [was] required to rescind or pay cash for their shares.” 1 Id. at 23. But Monfort does not argue that these allegations induced his agreement to the Release, 2 see id., which makes his lack of knowledge of these allegations immaterial to the analysis at hand. 3 See Zimmer, 87 Cal. App. 2d at 532 (explaining that the “fundamental test of ratification by 4 conduct” requires an assessment of whether the party acted “with full knowledge of the material 5 facts entitling him to rescind” (emphasis added)). However, Monfort also claims in his 6 opposition, “If I had known Adomani was planning on firing me after the IPO and cancel my 7 stock options, I would have never signed the Employment Agreement . . . .” Monfort Decl. ¶ 14; 8 see Opp’n at 21–22. Thus, the Court must first consider whether Monfort may now assert a theory 9 that he was fraudulently induced into signing the Release because Defendants’ had intended to 10 cancel his stock options by terminating him. 11 First, the Court holds that this new theory of fraudulent inducement is untimely. Monfort’s 12 opposition appears to be the first time in the record that Monfort ever claimed that he would not 13 have signed the release had he known that the company would terminate him and cancel his stock 14 options. See Opp’n at 21–22. In fact, Monfort’s sole evidentiary support for his newly asserted 15 theory is a September 25, 2019 declaration in support of his opposition to summary judgment, in 16 which Monfort stated, “If I had known Adomani was planning on firing me after the IPO and 17 cancel my stock options, I would have never signed the Employment Agreement and would not 18 have stayed under Adomani’s employ.” Monfort Decl. ¶ 14. A plaintiff’s “adding a new theory 19 of liability at the summary judgment stage would prejudice the defendant,” and courts may decline 20 to consider new theories during summary judgment. Coleman v. Quaker Oats Co., 232 F.3d 1271 , 21 1292 (9th Cir. 2000). The Court finds that Monfort’s new theory of fraudulent inducement is not 22 properly before the Court because it is untimely. 23 Additionally, even if Monfort’s new theory were timely, it is flatly contradicted by his 24 prior representations and thus fails to raise any genuine dispute of material fact as to his 25 ratification of the Release. Monfort’s only allegation of fraudulent inducement in the First 26 Amended Complaint was the alleged misrepresentation about the existence of the Disputed 27 Agreements. FAC ¶¶ 74–76. In his deposition, Monfort makes no mention of any other 1 representation inducing his signing of the Release, other than, “I would have never signed [the 2 Release] if I knew my subscription agreements were fully executed.” ECF No. 82–1, Wolf Decl., 3 Ex. D (“Monfort Dep.”), at 70:21–25. Most tellingly, in response to an interrogatory directly 4 asking Monfort to “identify every representation that allegedly fraudulently induced” his signing 5 of the Release, Monfort identified only Defendants’ representations “that no documentation 6 existed evidencing Plaintiff’s ownership of more than 30 million shares of common stock.” Wolf 7 Decl. 2d Ex. L, at 11.5 Courts need not consider a new affidavit that contradicts sworn testimony 8 or interrogatory answers. See Sch. Dist. No. 1J, Multnomah Cty., Or. v. ACandS, Inc., 5 F.3d 9 1255, 1264 (9th Cir. 1993). Thus, because Monfort’s untimely theory of fraudulent inducement 10 also contradicts his prior representations, the Court need not consider it. 11 Because Monfort’s only properly alleged theory of fraudulent inducement is that 12 Defendants misrepresented that the Disputed Agreements did not exist, the Court finds that 13 Monfort knew by July 19, 2016 all of the facts giving rise to his right to rescind. Monfort claims 14 that he was repeatedly told in May and June 2016, prior to signing the Release on June 23, 2016, 15 that “the [Disputed Agreements] did not exist.” See, e.g., Monfort Decl. ¶ 13. He states that, as a 16 result, “I became convinced that they had either been misplaced or destroyed, or that my memory 17 of the agreements being memorialized in writing was inaccurate.” Id. As discussed above, 18 Monfort has consistently stated that he would not have signed the Release on June 23, 2016 had he 19 known that Defendants had copies of the Disputed Agreements. FAC ¶¶ 74–76; Wolf Decl. 2d 20 Ex. L, at 11; Monfort Dep. 70:21–250. However, Monfort admitted that he received the Disputed 21 Agreements from Defendants in an email sent by Menerey dated July 19, 2016. Monfort Dep. 22 77:18–78:12, Ex. 11. Under Monfort’s own theory of fraudulent inducement, his receipt of the 23 Disputed Agreements revealed that Defendants’ representation that the Disputed Agreements did 24 not exist was false. See FAC ¶ 74–76. This discovery would have been sufficient grounds for him [25] 26 5 Monfort objects to Defendants’ submission of Wolf Decl. 2d Ex. L on the grounds that it violates the rule of completeness. ECF No. 104. However, Monfort acknowledges that the “missing page” 27 was previously submitted to the Court, at ECF No. 82-1. Accordingly, the Court overrules Monfort’s objection. 1 to rescind the 2016 Employment Agreement and the Release. Accordingly, there is no genuine 2 dispute that Monfort had “full knowledge” of his right to rescind by no later than his receipt of the 3 July 19, 2016 email, and that the Court may therefore consider Monfort’s conduct thereafter until 4 the filing of the instant lawsuit on August 2, 2018 to determine whether they gave rise to “a 5 reasonable inference” of ratification. See Zimmer, 87 Cal. App. 2d at 532 . 6 Monfort cites Warfield v. Richey, 167 Cal. App. 2d 93 (1959), to argue that, because 7 Monfort had only “piecemeal indicia of Defendants’ fraud in July 2016,” he did not need to 8 rescind the Release at that time. The Court finds Warfield inapposite. In Warfield, the plaintiffs 9 and the defendant entered into a lease agreement for a hotel and motel, based in part upon the 10 defendant’s misrepresentation about the prior year’s income. Id. at 95–96. The plaintiffs delayed 11 rescinding the agreement for months while they requested that the defendant disclose their records 12 of the prior year’s income. Id. at 98 . However, the plaintiff did not learn the truth about the prior 13 year’s income until the trial, and the truth about the other fraudulent acts “were coming to the 14 plaintiff’s piecemeal.” Id. Thus, because the plaintiffs never had any full knowledge that would 15 give rise to their right to rescind during the delay, the court found that the plaintiffs could still seek 16 rescission at trial. Id. Here, there is no dispute that, by July 19, 2016, Monfort fully knew of the 17 falsity of Defendants’ purported representations about the existence of the Disputed Agreements. 18 See Monfort Dep., Ex. 12 at 1 (“[H]ere are the original agreements that they told me didn’t exist. 19 LOL !!!”). Thus, unlike in Warfield, Monfort indisputably had “full knowledge” of his right to 20 rescind as of July 19, 2016, long before he first attempted to do so by filing the instant suit on 21 August 2, 2018. See Warfield, 167 Cal. App. 2d at 98 . 22 In sum, because the Court need not consider Monfort’s new theory of fraudulent 23 inducement, the Court finds that there is no genuine dispute that Monfort had “full knowledge of 24 the material facts permitting rescission” by no later than July 19, 2016. See Zimmer, 87 Cal. App. 25 2d at 532. 26 2. Monfort’s actions after learning of his right to rescind 27 After Monfort’s July 19, 2016 discovery of the alleged fraud, Monfort’s conduct 1 unequivocally demonstrates that he intended to ratify the Release. There is no genuine dispute 2 that Monfort continued to reap the benefits of the Release even after he learned the truth about the 3 Disputed Agreements. Monfort received the $200,000 payment earmarked as “consideration for 4 . . . execution of [the] general release,” and has not returned it. See Monfort Dep., Ex. 10, at 2; 5 Kanning Decl., Ex. E. Monfort also continued to bill for and receive $7,000 monthly payments as 6 further consideration for the Release. See, e.g., Menerey Decl., Ex. V (March 2017 and April 7 2017 invoices). 8 Even more significantly, Monfort repeatedly induced Defendants’ and other parties’ 9 reliance on the Release by facilitating the company’s reincorporation and initial public offering. 10 From August 2016 to March 2017, Monfort signed and approved numerous documents that 11 reaffirmed his ownership of only 4 million shares of stock, such as in his pre-IPO questionnaire, 12 where he crossed out his ownership of 34 million shares of common stock and wrote in that he 13 owned 4 million. Monfort Dep., Ex. 13 at 15; see also Menerey Decl, Exs. I–K, M, X. Monfort 14 voted to reincorporate Adomani in Delaware, Menerey Decl. Exs. N–O, and approved a Merger 15 Agreement in which the Disputed Agreements were not assumed by the new Delaware entity, see 16 Menerey Decl., Ex. P at 19–20, 26. The company successfully reincorporated and went public, 17 and Monfort again represented in August 2017 his ownership of only 4 million shares of stock in 18 public filings with the SEC. Monfort Dep., Ex. 16 at 2. For years after he learned that the 19 Disputed Agreements existed, Monfort took actions consistent with the Release, which ultimately 20 formed the basis of decisions taken by countless third parties, including IPO underwriters, 21 NASDAQ, and public investors. See, e.g., Monfort Dep., Ex. 13 at 6 (“The information supplied 22 by you in this Questionnaire will be used to help [Adomani] prepare correct and complete 23 disclosures and to verify that we are in compliance with Nasdaq . . . listing standards.”). After 24 over two years have passed and countless parties have relied on Monfort’s release of his claims to 25 over 30 million shares of stock, the Court finds as a matter of law that it would be inequitable to 26 now allow him to rescind the Release. See Gill v. Rich, 128 Cal. App. 4th 1254, 1265 (2005) 27 (“[T]here can be no rescission where the rights of third parties would be prejudiced.”) (quoting 1 Angle v. United States Fid. & Guar. Co., 201 Cal. App. 2d 758, 763 (2001)). 2 Given the more than two years that passed after Monfort first learned of his right to 3 rescind, and considering his course of conduct in the interim facilitating Adomani’s 4 reincorporation and initial public offering, the Court finds that Monfort ratified the Release as a 5 matter of law. 6 B. The Release Extends to the Individual Defendants 7 Monfort argues that the Release does not extend to the individual defendants because “the 8 intended scope of the [R]elease is ambiguous” and extrinsic evidence signals that the Release was 9 not intended to cover non-signatories. Opp’n at 18. Defendants argue that Monfort cannot escape 10 the explicit terms of the Release, which plainly covers the individual defendants. Reply at 9–10. 11 The Court agrees with Defendants. 12 The Release is attached to the 2016 Employment Agreement as Attachment A. See 13 Monfort Dep., Ex. 10, at 2–3. By its terms, the Release covers “claims related to breach of 14 contract, tort, wrongful termination . . . or claims for any form of compensation, benefits, equity, 15 or other ownership.” Id. The Release explicitly states that Monfort “generally releases and 16 forever discharges the Company, its parent, subsidiary, affiliated and related entities, and its and 17 their respective officers, directors, employees, shareholders, contractors, consultants. . . from any 18 and all claims, liabilities, demands . . . whether known or unknown, arising at any time prior.” Id. 19 at 5 (emphasis added). The Court finds the Release to be unambiguous as to its application to 20 third parties, including the individual defendants. 21 Monfort cites Epic Communications to argue that, even where a release clause 22 unambiguously extends to third parties, the contract read as a whole may signify a narrower 23 meaning. Opp’n at 18–19 (citing Epic Commc’ns, Inc. v. Richwave Tech., Inc., 237 Cal. App. 4th 24 1342 (2015)). In Epic, the court rejected a broad interpretation of the release clause because 25 “several other provisions of the settlement agreement containing the release clause are not easily 26 reconciled with its seemingly broad language.” Id. at 1345 . For example, the court observed that 27 the introductory recitals to the settlement agreement described a particular dispute and pending 1 arbitration. Id. at 1350 . The court further identified a “smoking gun”: “This Agreement shall be 2 binding upon, inure to the benefit of and be enforceable by [the parties to the agreement], and their 3 respective successors and assigns . . . . No other person or entity other than the Parties hereto shall 4 be entitled to claim any right or benefit under this.” Id. at 1350–51 (emphasis omitted). The Epic 5 court found a facial ambiguity in the agreement because those provisions were clearly at odds with 6 a broad release. Id. at 1349 . 7 Here, by contrast, Monfort is unable to identify any language in the Release whatsoever 8 that contradicts the explicit intent of the Release. At best, Monfort argues that the purpose of the 9 agreement was narrow because it pertained to his “continuing employment with the Company.” 10 Opp’n at 18–19; Monfort Dep., Ex. 10, at 1. This falls far short of the type of contradictory 11 language in Epic that suggested a narrow intention to settle specific claims. See Epic, 237 Cal. 12 App. 4th at 1350–51. Absent any “cogent reason . . . to question [the Release’s] literal accuracy as 13 an expression of the parties’ intent,” the Court may not search beyond the four corners of the 14 Release. See id. at 1345 . Accordingly, the Court finds that the Release covers claims against the 15 individual defendants. 16 In sum, because Monfort ratified the Release, the Court finds that it remains operative and 17 that it covers any claims against both Adomani and the individual defendants that arose prior to 18 Monfort’s execution of the Release on June 23, 2016. See Monfort Dep., Ex. 10, at 5. 19 C. Monfort’s Claims 20 Defendants move for summary judgment as to Counts One, Two, and Three, and ask the 21 Court to dismiss Count Four. Specifically, as to Counts One, Two, and Three, Defendants argue 22 that the Release bars almost all of Monfort’s claims, and that there are no genuine disputes of 23 material fact as to any claims that survive the Release. Mot. at 11–25. As to Count Four, 24 Defendants argue that the Court should dismiss Count Four in its entirety because declaratory 25 relief would be “superfluous.” Mot. at 25. The Court addresses each of Monfort’s claims in turn. 26 1. Count One: Breach of Contract 27 In Count 1, Monfort’s breach of contract claim against Adomani, Monfort alleges breach 1 of the Disputed Agreements (agreements (1)–(5) below) and the Option Agreements (agreements 2 (6) and (7) below): 3 (1) August 6, 2012 stock subscription agreement for 2,000,000 shares of common stock; 4 (2) August 7, 2012 stock subscription agreement for 9,500,000 shares of common stock; 5 (3) August 7, 2012 stock subscription agreement for 9,000,000 shares of common stock; 6 (4) August 22, 2012 stock subscription agreement for 10,000,000 shares of common stock; 7 (5) September 11, 2012 stock subscription agreement for 7,500,000 shares of common stock; 8 (6) November 1, 2012 option agreement to purchase 7,500,000 shares of common stock; and 9 (7) June 1, 2014 option agreement to purchase 3,000,000 shares of preferred6 stock. 10 FAC ¶¶ 52–58. Collectively, Monfort claims that these agreements awarded him over 30 million 11 shares of common stock and 15 million stock options, but that he received only 4,000,000 shares 12 of common stock and was never able to exercise any of his stock options. Id. ¶¶ 52–61. 13 Defendants claim that the Release bars Monfort’s allegations that Adomani breached the Disputed 14 Agreements, and that no triable issue exists as to breach of the Option Agreements. Mot. at 11 15 n.13, 21–25. The Court first considers Defendants’ arguments about the Disputed Agreements, 16 before turning to Defendants’ arguments about the Option Agreements. 17 First, the Court agrees that the Release bars Monfort’s allegations that Adomani breached 18 the Disputed Agreements. Defendants explain that the Disputed Agreements, which are the stock 19 subscriptions for up to 38 million shares of stock, were the very subject of the parties’ negotiation 20 that led to the 2016 Employment Agreement and the Release. Mot. at 20. Monfort does not argue 21 otherwise. Indeed, the terms of the Release explicitly include breach of contract claims arising 22 prior to June 23, 2016, when the Release was signed. See Monfort Dep., Ex. 10, at 5. 23 Accordingly, because Monfort released any claims to ownership of stock under the Disputed 24 Agreements, there is no triable issue as to breach of the Disputed Agreements. 25 Additionally, the Court finds that no genuine dispute exists as to Monfort’s allegations that [26] 27 6 As the Court noted supra note 2, Adomani later converted these options to purchase preferred stock into options to purchase common stock. 1 Adomani breached the Option Agreements. Defendants concede that the Release does not apply 2 because the Release predates the purported breach of the Option Agreements when Adomani 3 cancelled Monfort’s stock options upon his termination in March 2018. Mot. at 11 n.13; see 4 Opp’n at 12–14. However, Defendants argue that summary judgment on this claim is appropriate 5 because no triable issue of fact exists as to whether Monfort was terminated “for cause” as defined 6 by the Option Agreement. Mot. at 23–25. Monfort responds that whether Adomani terminated 7 his employment for cause, which allowed Adomani to cancel his stock options, is a “classic jury 8 question” that cannot be resolved on a motion for summary judgment. Opp’n at 12–14. The 9 Court agrees with Defendants. 10 At the time of his termination, Monfort had been awarded a stock option for the purchase 11 of 15 million shares of the company’s common stock. Menerey Decl., Ex. A–B, Ex. N at 4–11. 12 The Option Agreements incorporate the terms set forth in the 2012 Common Stock Option Plan, 13 which contains a clause terminating an employee’s options “if a Participant’s employment or other 14 relationship with the Company is terminated for “Cause.’” Di Ricco Decl., Ex. C. at 12. 15 Specifically, the 2012 Common Stock Option Plan states: 16 For purposes of the Plan, “Cause” is conduct, as determined by the Board, involving one or more of the following: (i) willful misconduct by the Participant which is 17 injurious to the Company; or (ii) the commission of an act of embezzlement, fraud or deliberate disregard of the rules or policies of the Company which results in economic 18 loss, damage or injury to the Company; . . . or (vi) the failure of the Participant to perform in any material respect his or her employment or engagement obligations [19] without proper cause therefor. 20 Id. at 12–13. Monfort argues that California law implies a covenant of good faith in the board’s 21 determination of whether “Cause” existed, and that a jury should decide whether Adomani acted 22 in good faith. Opp’n at 12. 23 As an initial matter, the Court applies Florida law to this claim. The 2012 Common Stock 24 Option Plan clearly specifies that Florida law governs the “provisions of the Plan and all Awards 25 made” thereunder. Di Ricco Decl., Ex. C. at 18. Quizzically, both parties cite, without 26 explanation, to California law for the substantive contract law governing this claim. See Mot. at 27 23–25; Opp’n at 12–14. However, Florida law would apply to this claim if the choice of law 1 provision is enforceable. To determine the “enforceability of a choice of law provision in a 2 diversity action, a federal court applies the choice of law rules of the forum state, in this case 3 California.” Hatfield v. Halifax PLC, 564 F.3d 1177, 1182 (9th Cir. 2009). “Such choice of law 4 provisions are usually respected by California courts.” Nedlloyd Lines B.V. v. Superior Court, 3 5 Cal. 4th 459 , 464 (1992). Thus, the Court will apply Florida law to Monfort’s claim that Adomani 6 breached the Option Agreements.7 7 “Florida's implied covenant of good faith and fair dealing is a gap-filling default rule. It is 8 usually raised when a question is not resolved by the terms of the contract or when one party has 9 the power to make a discretionary decision without defined standards.” Overseas Inv. Grp. V. 10 Wall St. Electronica, Inc., 181 So. 3d 1288, 1291 (Fla. Dist. Ct. App. 2016) (quoting Publix Super 11 Mkts., Inc. v. Wilder Corp. of Del., 876 So. 2d 652, 654 (Fla. Dist. Ct. App. 2004)). Where no 12 standards exist in the contract to govern a party’s exercise of discretion, a Florida court will likely 13 uphold the party’s exercise of its discretion “[u]nless no reasonable party in the [party’s position] 14 would have made the same discretionary decision.” Publix Super Mkts., 876 So. 2d at 654 . 15 Accordingly, if the Option Agreements include standards to govern the board’s determination that 16 Monfort was terminated for “Cause,” then the Court need not imply a covenant of good faith into 17 the Option Agreements. 18 The Court finds that the Option Agreements in fact contain standards to restrict the board’s 19 discretion as to what constitutes “Cause,” and that the implied covenant of good faith and fair 20 dealing therefore does not apply under Florida law. Unlike other contracts where Florida courts 21 have found the implied covenant of good faith to be dispositive, the Option Agreements in this 22 case list several grounds constituting “Cause,” which clearly restrain Adomani’s board from 23 unbridled exercise of its discretion. Compare Di Ricco Decl., Ex. C at 12–13 (listing seven 24 different grounds that constitute “Cause”) with Publix Super Mkts., 876 So. 2d at 653–54 (holding [26] 7 The Court notes that, even if California law applied, the Court would still grant Defendants’ 27 motion for summary judgment on Monfort’s claim that Adomani breached the Option Agreements. 1 that implied covenant of good faith applied to contract giving party absolute discretion to withhold 2 consent for new construction). Given the explicit terms of the Option Agreements, the Court finds 3 that no gap-filling is required and the implied covenant of good faith does not apply. 4 Because the board’s exercise of discretion was governed by the standards in the Option 5 Agreements rather than any implied covenant of good faith, the Court finds that there is no triable 6 issue as to whether Adomani breached the Option Agreements with Monfort. At best, Monfort 7 attempts to relitigate the circumstances of his termination. Opp’n at 13. He calls into question the 8 motivations for the independent party’s investigation and flags the suspicious timing of the 9 investigation. Id. But, ultimately, Monfort does not dispute that Adomani’s offered reasons for 10 his termination meet the standards for “Cause” as set forth in the 2012 Common Stock Option 11 Plan, nor that such termination would terminate his stock options. See Di Ricco Decl., Ex. C at 12 12. For example, Monfort does not contend that the investigation’s conclusion that he had failed 13 to “provide appropriate delivery of services,” including “cost overruns, missed deadlines, very late 14 delivery, poor quality of work, and poor customer service,” Sniderman Dep., Ex. 1, at 5, would 15 not constitute “Cause” as defined by the Option Agreements, Di Ricco Decl., Ex. C at 12. 16 Because Monfort does not otherwise raise any facts to show how Adomani’s termination of his 17 options failed to comply with the express terms of the Option Agreements, Monfort has failed to 18 raise a triable issue as to breach of these agreements. 19 Because no genuine dispute of material fact exists as to Monfort’s breach of either the 20 Disputed Agreements or the Option Agreements, the Court GRANTS Defendants’ motion for 21 summary judgment as to Count One. 22 2. Count Two: Fraud 23 In Count 2, Monfort’s fraud claim against the individual defendants, Monfort alleges a 24 number of purported misrepresentations regarding Monfort’s ownership of common stock and 25 stock options, most of which he alleges occurred before the Release was signed on June 23, 2016. 26 FAC ¶¶ 65–72; see, e.g., id. ¶ 66(i) (alleging “oral representations beginning in 2014 through early 27 2016 . . . that Monfort was and would remain the majority shareholder in Adomani”). The terms 1 of the Release bar allegations of fraud that occurred before the Release was signed. Monfort Dep., 2 Ex. 10, at 5 (releasing Adomani and its employees from “claims related to breach of contract [or] 3 tort,” regardless of “whether [the claims are] known or unknown, arising at any time prior”). 4 Accordingly, the Court GRANTS Defendants’ motion for summary judgment as to Monfort’s 5 allegations of fraud occurring prior to his execution of the Release on June 23, 2016. 6 However, Monfort’s First Amended Complaint identifies three allegations of fraud that 7 occurred after the Release was signed: 8 (1) “by oral representations in March of 2014 through 2017 . . . Williams and Kanning 9 [represented] that Monfort would continue as the largest shareholder, that he would ‘hold 10 [Reynolds’] hand,’ and that Monfort would not lose his stock position or ‘power;’” 11 (2) “by Option Agreement on 6/1/14 through 2017, [Defendants represented] that Monfort 12 was the owner of an option to purchase 3 million shares of preferred stock at $0.10;” and 13 (3) “by Option Agreement on 11/28/16, signed by Menerey[, Defendants represented] that 14 Monfort was the owner of an option to purchase 3 million shares of common stock at 15 $0.10.” 16 Id. ¶ 66(ix), (x), (xiv). Because these three misrepresentations purportedly occurred after the 17 Release was signed, the Court finds that they are not barred by the Release. Thus, the Court must 18 determine whether these alleged misrepresentations raise triable issues as to Monfort’s claim of 19 fraud. 20 First, Monfort alleges that “Williams and Kanning [represented] that Monfort would 21 continue as the largest shareholder, that he would “hold [Reynolds’] hand,” and that Monfort 22 would not lose his stock position or “power.” FAC ¶ 66(ix). However, in his opposition and 23 supporting declaration, Monfort drops these purported misrepresentations without further 24 explanation. Accordingly, the Court considers them abandoned. See Ramirez v. City of Buena 25 Park, 560 F.3d 1012, 1026 (9th Cir.2009) (affirming that claim was abandoned when party failed 26 to address them in either his opposition or his own motion for summary judgment). 27 The other two post-Release allegations merely amount to reiterations of his claims that 1 Adomani breached the Option Agreements. Specifically, Monfort alleges that Defendants 2 misrepresented “by Option Agreement on 6/1/14 through 2017, that Monfort was the owner of an 3 option to purchase 3 million shares of preferred stock at $0.10;” and misrepresented “by Option 4 Agreement on 11/28/16, signed by Menerey that Monfort was the owner of an option to purchase 5 3 million shares of common stock at $0.10.” Id. ¶ 66(x), (xiv); see Opp’n at 14–15. Defendants 6 argue that summary judgment is appropriate because the economic loss doctrine precludes 7 Monfort from raising these breach of contract allegations as tort claims. Mot. at 20. The Court 8 agrees. 9 The economic loss rule provides that a party must generally “recover in contract for purely 10 economic loss due to disappointed expectations, unless he can demonstrate harm above and 11 beyond a broken contractual promise.” Food Safety Net Servs. V. Eco Safe Sys. USA, Inc., 209 12 Cal. App. 4th 1118, 1130 (2012).8 The California Supreme Court has explained that “conduct 13 amounting to a breach of contract becomes tortious only when it also violates a duty independent 14 of the contract arising from principles of tort law.” Erlich v. Menezes, 981 P.2d 978, 983 (Cal. 15 1999). “Quite simply, the economic loss rule ‘prevent[s] the law of contract and the law of tort 16 from dissolving one into the other.’” Robinson Helicopter Co. v. Dana Corp., 102 P.3d 268 , 273 17 (2004) (quoting Rich Prods. Corp. v. Kemutec, Inc., 66 F. Supp. 2d 937, 969 (E.D. Wis. 1999)). 18 California thus proscribes tort claims unless the asserted duty “is either completely independent of 19 the contract or arises from conduct which is both intentional and intended to harm.” Id. 20 Here, the Court finds that the economic loss rule precludes Monfort from bringing his 21 surviving allegations of fraud. He fails to show how that breach violates some “independent” duty 22 arising outside of the context of those contracts. See Erlich, 981 P.2d at 983 . Similarly, Monfort 23 fails to “demonstrate harm above and beyond a broken contractual promise.” See Food Safety, 24 209 Cal. App. 4th at 1130. Monfort explicitly references the Option Agreements as the source of [26] 8 Unlike Monfort’s breach of contract claim, for which the Court applied Florida law pursuant to a 27 choice of law provision, see supra Section III.B.1, no choice of law provision covers Monfort’s tort claims. The parties apply California law, and the Court does the same. 1 the misrepresentations. See, e.g., FAC ¶ 66(x) (“By Option Agreement on 6/14/14 through 2017, 2 that Monfort was the owner of an option to purchase 3 million shares of preferred stock at $0.10” 3 (emphasis added)). Thus, Monfort cannot assert these breaches as freestanding fraud allegations. 4 Moreover, even under a generous reading of Monfort’s opposition,9 the Court identifies 5 only two other alleged misrepresentations that occurred after the Release was signed on June 23, 6 2016 and that would therefore survive the Release: (1) Reynolds’s November 23, 2016 email 7 stating that “no one in this company [] has 19,000,000 shares either owned or optioned except you, 8 and (2) Menerey’s November 6, 2016 email, which Monfort claims misrepresents that Monfort 9 “would ‘of course’ be able to sell his stock and exercise his options after the IPO in November 10 2016.” Opp’n at 15 (citing ECF No. 87, (“O’Connor Decl.”), Exs. R, S). As above, these 11 purported misrepresentations speak directly to Monfort’s ownership of the common stock and 12 options, and “there is no fraud without the contractual breaches he alleges.” Reply at 10. Monfort 13 does not show how these purported misrepresentations “violate[d] a duty independent of the 14 contract.” See Erlich, 981 P.2d at 983 . Accordingly, the Court finds that the economic loss rule 15 applies and that Monfort’s cannot assert independent tort claim for any of his remaining 16 allegations of fraud. The Court GRANTS Defendants’ motion for summary judgment as to the 17 remainder of Count Two, Monfort’s fraud claim. 18 3. Count Three: Fraudulent Inducement 19 As to Count 3, Monfort’s fraudulent inducement claim, Monfort’s ratification of the 20 Release as a matter of law precludes him from now asserting a fraudulent inducement claim. 21 “Under California law, in order to bring a claim released by a settlement agreement, a plaintiff 22 must rescind the agreement.” Kennedy v. Columbus Mfg., Inc., No. 17-CV-03379-EMC, 2018 23 WL 1911808 , at *4 (N.D. Cal. Apr. 23, 2018) (citing Vill. Northridge, 50 Cal. 4th at 917–18)). [24] 25 9 Throughout his opposition, Monfort’s myriad footnote citations fail to include pincites and instead refer the Court to voluminous exhibits. As Defendants point out, Reply at 1, the Court 26 needs not “comb through the record to find some reason to deny a motion for summary judgment.” Gordon v. Virtumondo, Inc., 575 F.3d 1040, 1058 (9th Cir. 2009) (quoting Carmen v. San 27 Francisco Unified Sch. Dist., 237 F.3d 1026 , 1029 (9th Cir. 2001)). 1 The California Supreme Court reasoned that allowing a party to “sign a release, keep the money, 2 and then sue . . . for alleged fraud without rescinding the release . . . would violate the terms of the 3 bargain and frustrate its purpose.” Id. at 931. Here, because the Court found that Monfort ratified 4 the Release and may no longer pursue rescission, the Release effectively bars his claim for 5 fraudulent inducement.10 Accordingly, the Court GRANTS Defendants’ motion for summary 6 judgment as to Monfort’s claim of fraudulent inducement. 7 4. Count Four: Declaratory Relief 8 In Count Four, Monfort’s claim for declaratory relief as against all defendants, Monfort 9 seeks declaratory relief regarding his “contractual entitlement to, and/or ownership of, 40,000,000 10 shares of common stock and options to purchase 15,000,000 shares of common stock.” FAC ¶ 83. 11 The parties acknowledge that Monfort’s entitlement to declaratory relief rises and falls 12 with his other claims for relief under the common stock and option agreements. Specifically, 13 Defendants argue that “[a]djudicating Defendants’ Motion for Summary Judgment will dispose of 14 all the issues raised in Monfort’s request for declaratory judgment.” Mot. at 25. Plaintiff’s only 15 response is that “because an actual controversy exists between Adomani and Plaintiff relating to 16 their respective rights and obligations under the Disputed Agreements, Defendants are not entitled 17 to summary judgment on Plaintiff’s Count [Four] for declaratory relief.” Opp’n at 11 n.79. 18 Because Defendants essentially argue that no genuine dispute exists as to Monfort’s entitlement to 19 declaratory relief, the Court construes their request for dismissal as a request for summary 20 judgment. 21 The Court concludes that summary judgment is appropriate as to Monfort’s claim for 22 declaratory relief. The Court already granted summary judgment in favor of Defendants as to 23 Counts One, Two, and Three of Monfort’s First Amended Complaint. See supra Sections III.B.1– [25] 10 For the same reason, Monfort’s citation to Persson is unavailing. Opp’n at 16–17 (citing 26 Persson v. Smart Inventions, Inc., 125 Cal. App. 4th 1141, 1153 (2005)). In Persson, the trial court awarded damages by partially rescinding the release provision. 125 Cal. App. 4th at 1153– 27 54. There was no argument in that case that the plaintiff had ratified the release as the Court found here, which renders any rescission-based remedy unavailable to Monfort. 1 3. In light of these holdings, there is no genuine dispute remaining as to Monfort’s entitlement to 2 40,000,000 shares of common stock and 15,000,000 stock options. The Court accordingly 3 GRANTS summary judgment in favor of Defendants as to Count Four. 4 ||} IV. CONCLUSION 5 For the foregoing reasons, the Court GRANTS Defendants’ motion for summary judgment 6 as to Count One (breach of contract), Count Two (fraud), Count Three (fraudulent inducement), 7 and Count Four (declaratory relief). 8 || ITISSO ORDERED. [9] 10 Dated: November 25, 2019 11 Ke ‘ é L LUCY H. KOH 12 United States District Judge [16] = 17 Z 18 [27] 28 26 Case No. 18-CV-05211-LHK