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Heinrich P. Hardt, et al v. Direct Invest LLC

February 6, 2013


The opinion of the court was delivered by: M. James Lorenz United States District Court Judge


Pending before the Court is Plaintiffs Heinrich P. Hardt and Araceli Hardt's motion to certify an interlocutory appeal. Plaintiffs request the certification of the January 31, 2012 Order compelling arbitration and staying the case for immediate review by the Ninth Circuit Court of Appeals. Defendants Direct Invest LLC and Direct Invest Manager LLC oppose.

The Court found this motion suitable for determination on the papers submitted and without oral argument. See Civ. L.R. 7.1(d.1). (Doc. 22.) For the following reasons, the Court DENIES Plaintiffs' motion to certify interlocutory appeal.


This action involves two real-estate investments that Plaintiffs purchased in Braintree, Massachusetts ("Braintree Park") and, separately, in Merrimack, New Hampshire ("Heron Cove"). (Compl. ¶¶ 5--7.) The parties completed both transactions through written and signed purchase agreements. Both parties signed the Braintree Park Purchase Agreement ("BPPA") on December 3, 2007, and the Heron Cove Purchase Agreement ("HCPA") on March 4, 2008. (Id.)

Both purchase agreements contain identical arbitration clauses. (BPPA ¶ 8.17, HCPA ¶ 8.17.) The arbitration clauses state, in pertinent part:

Any dispute, claim or controversy arising out of or related to this Agreement, the breach hereof, the termination, enforcement, interpretation or validity hereof, or an investment in the Interests shall be settled by arbitration in New York, New York, in accordance with the rules of The American Arbitration Association, and judgment entered upon the award rendered may be enforced by appropriate judicial action pursuant to New York law. The arbitration panel shall consist of one (1) member, which shall be selected by the Property Manager from the list of pre-approved arbitrators listed in Exhibit "D" hereto. The losing party shall bear any fees and expenses of the arbitrator, other tribunal fees and expenses, reasonable attorney's fees of both parties, any costs of producing witnesses and any other reasonable costs or expenses incurred by him or the prevailing party or such costs shall be allocated by the arbitrator.

On April 26, 2011, Plaintiffs, individually and as trustees of the Hardt Family Trust, commenced this action in San Diego Superior Court, asserting four state-law causes of action:

(1) securities fraud, (2) common-law fraud and deceit, (3) negligence and negligent misrepresentation, and (4) elder abuse. At the heart of these claims are Plaintiffs' allegations that Defendants made false and misleading statements, and omissions of material facts that induced them to purchase these properties, which are "both imploding and on the verge of foreclosure." (Compl. ¶¶ 7--8, 15.) Thereafter, Defendants removed the case to this Court.

On June 21, 2011, Defendants filed a motion to compel arbitration and stay proceedings pending the outcome of the arbitration. (Doc. 10.) The Court granted that motion, finding that Plaintiffs had failed to meet their burden to establish a factual basis for any defense to enforcement. (January 31, 2012 Order 5:17--6:16.) Plaintiffs now move for an order certifying an interlocutory appeal of the January 31, 2012 Order. Defendants oppose.


Under 28 U.S.C. § 1292(b), a party may move a district court to certify an "otherwise unappealable" order for interlocutory review. In order to certify the order, the court must find that "such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation." 28 U.S.C. § 1292(b). The moving party bears the burden demonstrating these prerequisites. Couch v. Telescope Inc., 611 F.3d 629, 633 (9th Cir. 2010).

The burden of showing that these circumstances exist is a heavy one. See Coopers & Lybrand v. Livesay, 437 U.S. 463, 475 (1978). "Section 1292(b) is a departure from the normal rule that only final judgments are appealable, and therefore must be construed narrowly." James v. Price Stern Sloan, Inc., 283 F.3d 1064, 1069 n.6 (9th Cir. 2002). The Ninth Circuit has stressed that ยง 1292(b) is to be applied sparingly and only in exceptional situations in which an interlocutory appeal would help avoid protracted and expensive litigation. In re Cement Antitrust Litig., 673 F.2d 1020, 1026 (9th Cir. 1982); U.S. Rubber Co. v. Wright, 359 F.2d 784, 785 n.2 (9th Cir. 1966) (per curiam). A district court has substantial ...

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