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Flagship West, LLC, A California Limited Liability Company v. Excel Realty Partners

July 5, 2011

FLAGSHIP WEST, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY,
MARVIN G. REICHE, AND KATHLEEN REICHE, PLAINTIFFS,
v.
EXCEL REALTY PARTNERS, L.P., A DELAWARE LIMITED LIABILITY PARTNERSHIP, AND NEW PLAN EXCEL REALTY TRUST, INC., A MARYLAND CORPORATION, ET AL. , DEFENDANTS.



The opinion of the court was delivered by: Oliver W. Wanger United States District Judge

MEMORANDUM DECISION AND ORDER

RE DEFENDANT‟S MOTION TO STRIKE AND PLAINTIFF‟S REQUEST FOR ENTRY OF JUDGMENT OF RESCISSION AND FOR PREJUDGMENT INTEREST (DOC. 523, 518)

I. INTRODUCTION

Before the court are (1) Flagship West, LLC, Marvin G. Reiche, and Kathleen Reiche‟s (together, "Plaintiffs") request for entry of judgment of rescission and for prejudgment interest (Doc. 518) and (2) Excel Realty Partners, L.P. and New Plan Excel Realty Trust, Inc.‟s (together, "Defendants") motion to strike Plaintiffs‟ request for entry of judgment of rescission and request for prejudgment interest (Doc. 523). Both motions are opposed, and were heard May 23, 2011.

II.BACKGROUND

On July 16, 1998, Defendants, owner of the Briggsmore Plaza in Modesto, executed a 15-year lease with Flagship West, LLC ("Flagship"), whose only members are Marvin and Kathleen Reiche, for the "exclusive right to operate a self service buffet style family restaurant" in the Briggsmore Plaza. To construct the restaurant, Plaintiffs secured a 25-year, $2 million loan from The Money Store. Plaintiffs‟ restaurant, a Golden Corral franchise, opened on June 10, 1999. Approximately one year later, Defendant leased a space to another buffet style restaurant, Four Seasons, which opened in the Briggsmore Plaza directly across from Plaintiffs‟ restaurant. Plaintiffs contended that Four Seasons‟ location and operation in the Briggsmore Plaza breached the exclusivity provision in their lease, caused their restaurant to become unprofitable, and led to its failure and closure on April 1, 2001.

Plaintiffs sued Defendants for breach of contract, fraud, negligent misrepresentation, contract damages, and rescission. The case was tried before a jury beginning on November 12, 2003. Judgment as a matter of law was granted in favor of Defendant New Plan Excel Realty Trust, Inc. ("New Plan") and against Plaintiffs on November 23, 2003 on all Plaintiffs‟ claims against New Plan.

On December 3, 2003, the jury returned a verdict against Excel and in Plaintiffs‟ favor based on its determination that Excel materially breached an "exclusive use" provision of the lease, and awarded Plaintiffs $1,480,740 in contract damages. Entry of judgment was deferred to permit Flagship to elect (1) rescission and rescission damages or (2) damages for breach of contract. The court invoked judicial estoppel to prevent Excel from asserting that § 4.5 of the lease barred rescission. Plaintiffs elected to rescind the lease. By order dated November 14, 2006, Plaintiffs were awarded $2,142,175 in rescission damages and denied prejudgment interest. Doc. 387, 28. Judgment was entered December 14, 2006 (Doc. 390), and amended June 15, 2007 (Doc. 426).

Excel appealed the judgment to the Ninth Circuit. Plaintiffs filed a cross-appeal to reverse the judgment as to New Plan and modify the calculation of rescission damages. The Ninth Circuit held:

Consequently, we vacate the district court's judgment awarding rescission damages to Flagship and remand so that the district court may determine in the first instance whether the contract, in its entirety, allows for rescission and whether California law would give effect to the lease's limitations on remedies in these circumstances. We do not reach either party's claims related to the calculation of rescission damages and express no opinion on those claims.

Flagship West, LLC v. Excel Realty Partners LP , 337 Fed.Appx. 679, *681, 2009 WL 2015770 (9th Cir. 2009).

On remand, the primary issue was the interpretation of § 4.5 of the lease. Doc. 517. A memorandum decision and order dated December 20, 2010 concluded that the lease, in its entirety, allows for rescission and California law gives effect to rescission of the lease under the totality of the circumstances of the action. Doc. 517, 96.

III. DISCUSSION

A.Motion to Strike

Excel moves to strike Plaintiffs‟ request for entry of judgment of rescission and request for prejudgment interest. Excel contends that Plaintiffs‟ request for entry of judgment is a defective application for reconsideration and must be stricken. Plaintiffs rejoin that the rules regarding reconsideration are inapplicable because the prior judgment was vacated.

Rule 12(f) provides that the court "may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f) (emphasis added). Plaintiffs‟ request for entry of judgment is not a pleading. See Fed. R. Civ. P. 7(a) (defining a pleading as "(1) a complaint; (2) an answer to a complaint; (3) an answer to a counterclaim designated as a counterclaim; (4) an answer to a cross-claim; (5) a third-party complaint; (6) an answer to a third-party complaint; and (7) if the court orders one, a reply to an answer."). Defendants‟ motion to strike is improper; the proper means to challenge Plaintiffs‟ motion is an opposition.

Even if Defendants‟ motion to strike was proper, it is meritless. "When a judgment has been rendered and later set aside or vacated, the matter stands precisely as if there had been no judgment. The vacated judgment lacks force or effect and places the parties in the position they occupied before entry of judgment." Ditto v. McCurdy , 510 F.3d 1070, 1077 and n.4 (9th Cir. 2007). The Ninth Circuit vacated the court‟s prior judgment, rendering it without "force or effect." Id. Plaintiffs may move for entry of judgment.

Excel‟s motion to strike is DENIED.

B.Plaintiffs‟ Request for Entry of Judgment of Rescission and for Prejudgment Interest

1.Propriety of Request

Excel contends that Plaintiffs‟ request for prejudgment interest and reconsideration of its prior orders exceeds the Ninth Circuit‟s mandate:

Consequently, we vacate the district court's judgment awarding rescission damages to Flagship and remand so that the district court may determine in the first instance whether the contract, in its entirety, allows for rescission and whether California law would give effect to the lease's limitations on remedies in these circumstances. We do not reach either party's claims related to the calculation of rescission damages and express no opinion on those claims.

Flagship West, LLC v. Excel Realty Partners LP , 337 Fed.Appx. 679, *681, 2009 WL 2015770 (9th Cir. 2009).

Excel asserts that the Ninth Circuit‟s instructions limit the court‟s review to two specified issues: (1) whether the contract, in its entirety, allows for rescission, and (2) whether California law would give effect to the lease‟s limitations on remedies in these circumstances. Plaintiffs rejoin that the Ninth Circuit expressly declined to address the parties‟ dispute regarding the calculation of damages, and neither the law nor mandate forecloses further determinations regarding damages, including prejudgment interest.

Generally, "[a]lthough lower courts are obliged to execute the terms of a mandate, they are free as to anything not foreclosed by the mandate . . .." Cassett v. Stewart , 406 F.3d 614, 621 (9th Cir. 2005) (quoting United States v. Kellington , 217 F.3d 1084, 1092-93 (9th Cir. 2000). "The mandate is controlling as to all matters within its compass; however, any issue not expressly or impliedly disposed of on appeal may be considered by the trial court on remand." Kearns v. Field , 453 F.2d 349, 350 (9th Cir. 1972) (citations omitted). Federal Rule of Civil Procedure 37(b), however, requires that "[i]f the court modifies or reverses a judgment with a direction that a money judgment be entered in the district court, the mandate must contain instructions about the allowance of interest." Fed. R. Civ. P. 37(b).

Defendants cite Planned Parenthood of the Columbia/ Williamette Inc. v. American Coalition of Life Activists , 518 F.3d 1013 (9th Cir. 2008). In Planned Parenthood , the Ninth Circuit held that under Rule 37, when the Court of Appeals modifies or reverses judgment with the direction that a particular money judgment be entered on remand, and the mandate does not contain instructions about allowance of interest, the district court cannot enter judgment for a different amount or grant interest. Id. at 1018. The Planned Parenthood court stressed that Rule 37 "governs only when our mandate "modifies or reverses a judgment with a direction that a money judgment be entered in the district court.‟" Planned Parenthood , 518 F.3d at 1019. It is inapplicable.

Defendants also cite Newhouse v. Robert‟s Ilima Tours, Inc. , 708 F.2d 436 (9th Cir. 1983). In Newhouse , the Ninth Circuit reversed the district court‟s award of costs plus interest on remand as beyond the scope of the Court of Appeal‟s mandate. Id. at 441-442 Newhouse is distinguishable because the Ninth Circuit asked the district court to clarify the basis of its damages award and to reconsider the attorney‟s fees award in light of another case. See id. Its mandate specifically discussed a money judgment and did not specify interest. Id.

Here, the Ninth Circuit vacated the original money judgment and remanded the case for consideration of two issues, but did not direct the entry of a money judgment. Rule 37(b) is inapplicable. See Guam Soc‟y of Obstetricians & Gynecologists v. Ada , 100 F.3d 691, 703 (9th Cir. 1996) ("Rule 37 is inapposite because we never directed that a money judgment be entered in the district court. To the contrary, we vacated the money judgment so the district court could reconsider its ruling."); see also Westinghouse Credit Corp. v. D‟Urso , 371 F.3d 96, 103-104 (2nd Cir. 2004) (holding that for Rule 37(b) to apply, there must be some indication that the mandate is directing entry of a particular money judgment; Rule 37(b) did not apply to a mandate simply vacating the district court‟s judgment and remanding "for further proceedings in accordance with the opinion of this Court"). "When the court of appeals remands to the district court to determine the amount of a damages award, then the mandate does not direct the entry of a money judgment." Planned Parenthood , 518 F.3d at 1019. Here, ...

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