United States District Court, E.D. California
In re VILLAGE CONCEPTS, INC., Debtor.
ZENAIDA O. NEWELL a.k.a. ZANDEE NEWELL, MARIANNE NEWELL, and BRIAN R. KATZ, in his capacity as Successor Trustee for the Harold O. Newell Revocable Trust, Defendants. DAVID FLEMMER, in his capacity as Trustee for the Bankruptcy Estate of Village Concepts, Inc., Plaintiff, BRIAN R. KATZ, in his capacity as Successor Trustee for the Harold O. Newell Revocable Trust, Counter-Claimant,
DAVID FLEMMER, in his capacity as Trustee for the Bankruptcy Estate of Village Concepts, Inc., Counter-Defendant. BRIAN R. KATZ, in his capacity as Successor Trustee for the Harold O. Newell Revocable Trust, Third Party Plaintiff/ Cross-Claimant
MARK WEINER, NANCY WEINER, SUSANVILLE VILLAGE LLC, a California Limited Liability Company, Third Party Defendants.
matter is before the court on third-party plaintiff Brian
Katz's motion to dismiss his third-party complaint,
without prejudice. Mot. 2, ECF No. 38. Mark Weiner, Nancy
Weiner, and Susanville Village, LLC (the Weiners), the
third-party defendants in this case, agree that if the court
does not abstain, dismissal of Mr. Katz's third-party
complaint is appropriate, but with prejudice. Opp'n 3,
ECF No. 40. Mr. Katz's motion was submitted without oral
argument. ECF No. 42. For reasons explained below, Mr.
Katz's motion is GRANTED, and the third-party complaint
is DISMISSED WITHOUT PREJUDICE.
The Bankruptcy Petition and This Case
extensive discussion of the background of this case is found
in this court's order denying in part and granting in
part Mr. Katz's motion for summary judgment against
plaintiff David Flemmer. See ECF No. 26. The court
discusses the background here only as relevant to Mr.
Katz's motion to dismiss his third-party complaint
8, 2012, Debtor Village Concepts, Inc. ("Debtor" or
"VCI"), a seller of manufactured homes, filed a
Chapter 11 Bankruptcy petition, which was later converted
into a Chapter 7 case. ECF No. 5 at 2. Mr. Flemmer was
appointed trustee for the estate on May 15, 2013.
10, 2013, Mr. Flemmer filed a first amended complaint,
alleging three claims against Mr. Katz, the successor trustee
for the Harold O. Newell Revocable Trust: (1) recovery of
usurious interest payments under California Constitution
Article XV, section 1; (2) avoidance and recovery of
fraudulent transfer under 11 U.S.C. §§ 548(a)(1)(A)
and 550; and (3) fraudulent transfer as to present creditors
under California Civil Code section 3439.05 and 11 U.S.C.
§§ 544(b) and 550. See ECF No. 1 at 16.
Mr. Katz filed a third party complaint against the Weiners,
alleging the Weiners breached their contractual obligation to
serve as personal guarantor for VCI's debts. Id.
October 1, 2015, Mr. Flemmer and Mr. Katz stipulated to
dismiss the claims in Mr. Flemmer's first amended
complaint. ECF No. 32. The court approved this stipulation,
and Mr. Katz was dismissed from suit in his capacity as
defendant. ECF No. 37. In regard to his capacity as a
third-party plaintiff, the court directed Mr. Katz to file a
separate motion seeking to dismiss the breach-of-contract
claim against the Weiners. Id. at 2. Mr. Katz filed
the pending motion to dismiss its breach-of-contract claim
without prejudice. Mot. at 2. The Weiners filed their
opposition, Opp'n at 3, and Mr. Katz replied, Reply, ECF
State Court Action on Third-party Claim
was a parallel state court action on Mr. Katz's
breach-of-contract claim against the Weiners. Brian Katz
v. Mark Weiner , No. PC20120537 (Cal. Super. Ct. El
Dorado filed Sept. 20, 2012), ECF No. 32-1. The state court
lawsuit went to trial without a jury on June 9, 2015, and the
court entered judgment on August 3, 2015 against the Weiners.
Id. The Weiners appealed the case to the Third
District Court of Appeal on October 16, 2015, but later
abandoned the appeal on April 12, 2016. See Katz v.
Weiner, No. C080533 (Cal.Ct.App. filed Oct. 16,
2015). The state court judgment thus was rendered
final as of April 15, 2016. Id.
Katz argues re-litigation of his breach-of-contract claim is
barred by the doctrine of claim preclusion, and seeks to
dismiss his claim without prejudice. Mot. at 4. The Weiners
argue the case should be dismissed with prejudice. Opp'n
at 3. Alternately, they argue Mr. Katz's claims are not
barred because there was not a final judgment on the merits
in state court. Opp'n at 2. Mr. Katz replies that
dismissal with prejudice would operate as a decision on the
merits, a result barred by virtue of the state court's
having fully litigated the matter. Reply, ECF No. 41 at 2.
party seeking to apply claim preclusion bears the burden of
establishing the following: (1) an identity of claims; (2)
the existence of a final judgment on the merits; and (3)
identity or privity of the parties. See Cell
Therapeutics, Inc. v. Lash Grp., Inc., 586 F.3d
1204, 1212 (9th Cir. 2009); see also Headwaters, Inc. v.
U.S. Forest Serv., 399 F.3d 1047, 1052 (9th Cir. 2005).
In California, a defendant's abandonment of an appeal
constitutes a final judgment on the merits as resolved by the
state court's decision. See L.A. Branch NAACP v. L.A.
Unified Sch. Dist., 750 F.2d 731, 745 (9th Cir. 1984).
both parties agree Mr. Katz's third-party complaint filed
in this court involved the same claims between the same
parties involving the same legal and factual issues as the
state court case. See Mot. at 4; Opp'n at 2.
They disagree on whether the state court issued a final
judgment on the merits.
the Weiners ultimately abandoned their appeal, the state
trial court's judgment in favor of Mr. Katz became final.
Accordingly, Mr. Katz is precluded from litigating his
breach-of-contract claim against the Weiners, and the
third-party complaint should be dismissed ...