Cramton v. Grabbagreen Franchising LLC

Opinion

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Kim Cramton, No. CV-17-04663-PHX-DWL 10 Plaintiff, ORDER 11 v. 12 Grabbagreen Franchising LLC, et al., 13 Defendants. 14 15 Pending before the Court are four motions filed after the Final Pretrial Conference. 16 First, Plaintiff Kim Cramton (“Cramton”) has moved to preclude Defendants Keely 17 Newman (“Keely”), Eat Clean Holdings (“ECH”), and Grabbagreen Franchising, LLC 18 (“GFL”) (collectively, “Defendants”) from presenting certain damages-related evidence 19 and arguments at trial. (Doc. 320). Second, Defendants have filed a dueling motion to 20 preclude Cramton from presenting certain damages-related evidence and arguments at trial. 21 (Doc. 321.) Third, Defendants have moved to strike Cramton’s jury demand. (Doc. 322.) 22 Fourth, Defendants have moved for reconsideration of certain aspects of last year’s 23 summary judgment ruling. (Doc. 339.) For the following reasons, the first three motions 24 will be granted in part and denied in part and the fourth motion will be denied. 25 BACKGROUND 26 From September 2014 through September 25, 2017, Cramton worked in various 27 capacities with Defendants to operate the “Grabbagreen” restaurant franchise, which serves 28 Case 2:17-cv-04663-DWL Document 345 Filed 10/02/20 Page 2 of 42

1 healthy fast food and juice. Cramton also held an 18.6%1 membership interest in ECH, the 2 entity that owned the Grabbagreen brand. Soon after Cramton’s departure, Keely 3 repurchased Cramton’s membership interest for $1, which the ECH Operating Agreement2 4 permitted Keely to do if Cramton resigned voluntarily. 5 One of the key disputed issues in this action is whether Cramton was improperly 6 duped into resigning. Cramton alleges that she resigned because Keely falsely told her, 7 during a telephone call on September 18, 2017, that a planned sale of Grabbagreen to a 8 third-party acquiror, Kahala Brands Ltd. (“Kahala”), had fallen through and that the Kahala 9 deal was dead. Keely denies making these statements and contends that Cramton chose to 10 voluntarily resign for other reasons. 11 As it turns out, the Kahala deal wasn’t dead. Kahala ended up purchasing the 12 Grabbagreen brand from ECH in March 2018 for $2.6 million. Cramton has now asserted 13 a variety of claims against Defendants, but the big-ticket item is her claim for the fair 14 market value of the membership interest that Keely repurchased for $1, which Cramton 15 claims was actually worth around $500,000 (i.e., 18.6% of the Kahala purchase price). 16 I. Procedural History 17 On December 15, 2017, Cramton initiated this action. (Doc. 1.) 18 On November 12, 2018, Cramton filed an amended complaint. (Doc. 88.) 19 On November 29, 2018, Defendants filed an answer to the amended complaint and 20 amended counterclaims. (Doc. 95.) 21 On March 1, 2019, Cramton filed a motion for summary judgment (Doc. 142) and 22 Defendants filed a motion for partial summary judgment (Doc. 143). 23 On April 1, 2019, both parties filed responses to the summary judgment motions. 24 25 1 Defendants contend that Cramton’s membership interest was 18.1% and that Cramton is “being dishonest” by stating otherwise. (Doc. 327 at 14 n.3.) The Court need 26 not resolve this dispute at this time. 27 2 The Operating Agreement, to which Cramton, Keely, and ECH are parties, governs 28 the management, operations, and ownership of, as well as the rights and duties of membership in, ECH. (Doc. 324-2 at 2-50.)

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1 (Docs. 158, 159.) 2 On April 16, 2019, both parties filed replies to the summary judgment motions. 3 (Docs. 171, 172.) 4 On April 30, 2019, the Court, upon motion, authorized Defendants to reopen 5 Cramton’s deposition. (Doc. 175.) 6 On December 23, 2019, the Court issued a 73-page order addressing a variety of 7 motions, including the parties’ cross-motions for summary judgment. (Doc. 247.) That 8 order granted judgment on a number of claims and counterclaims, leaving only the 9 following claims for trial: (1) Cramton’s minimum wage claim (Count Four) against Keely 10 and GFL; (2) Cramton’s claim for breach of the promissory note (Count Five), limited to 11 the issue of damages, against Eat Clean Operations, LLC (“ECO”);3 and (3) Cramton’s 12 claims for breach of the implied covenant of good faith and fair dealing, negligent 13 misrepresentation, and fraud (Counts Seven, Nine, and Ten) against Keely and ECH. 14 On January 2, 2020, Defendants filed a motion for reconsideration as to Counts Nine 15 and Ten. (Doc. 249.) That motion asserted that “Plaintiff has no right to receive payment 16 of any of the proceeds of ECH’s sale of the Grabbagreen Brand to Kahala . . . under the 17 terms of the Operating Agreement.” (Id. at 2.) 18 On January 7, 2020, the Court denied this motion because “Defendants are belatedly 19 attempting to raise an argument they could have raised—but, for whatever reason, chose 20 not to raise—in their summary judgment motion.” (Doc. 251 at 2.) 21 On May 22, 2020, the parties filed the joint proposed final pretrial order. (Doc. 22 303.) 23 On May 27, 2020, the Court held the Final Pretrial Conference. (Doc. 309.) During 24 it, the Court ruled on various motions in limine but declined to resolve, on the merits, 25 Cramton’s motion in limine to exclude portions of Defendants’ damages defense. (Id.) 26 Instead, the Court solicited additional briefing from the parties, “permit[ting] each side to 27 3 28 On January 31, 2020, ECO filed for bankruptcy. (Doc. 254.) On February 3, 2020, the Court noted that the action was automatically stayed as to ECO. (Doc. 255.)

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1 file a motion to exclude the other side’s theories and/or evidence bearing on damages.” 2 (Id. at 2.) 3 On June 17, 2020, the parties filed dueling motions to exclude certain aspects of the 4 other side’s theory of damages. (Docs. 320, 321.) That same day, Defendants filed a 5 motion to strike Cramton’s jury demand. (Doc. 322.) 6 On July 1, 2020, the parties filed responses to those motions. (Docs. 324, 325, 326.) 7 On July 2, 2020, Defendants refiled their response to Cramton’s motion to exclude. 8 (Doc. 327.) 9 On July 10, 2020, Defendants filed replies in support of their two motions. (Docs. 10 330, 331.) 11 On July 14, 2020, Cramton filed a motion to strike Defendants’ damages-related 12 reply. (Doc. 333.) That same day, Defendants filed a response to the motion to strike. 13 (Doc. 334.) 14 On August 27, 2020, the parties participated in a settlement conference before a 15 magistrate judge but were unable to reach a settlement. (Doc. 336.) 16 On September 3, 2020, the Court denied Cramton’s motion to strike and authorized 17 Cramton to file a reply in support of her motion to exclude. (Doc. 327.) 18 On September 10, 2020, Cramton filed a reply. (Doc. 338.) 19 On September 14, 2020, Defendants filed another motion for reconsideration 20 concerning the December 2019 summary judgment ruling. (Doc. 339.) 21 On September 16, 2020, Defendants filed a motion to strike certain portions of 22 Cramton’s damages-related reply. (Doc. 340.) That same day, this motion was denied. 23 (Doc. 341.) 24 On September 17, 2020, the Court issued a tentative ruling addressing the four 25 pending motions. (Doc. 343.) 26 On September 29, 2020, the Court heard oral argument. (Doc. 344.) 27 … 28 …

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1 DISCUSSION 2 I. Motions To Exclude Damages-Related Evidence And Arguments 3 Defendants seek to preclude Cramton from presenting any evidence or argument 4 that she is entitled to (1) proceeds from ECH’s asset sale to Kahala, (2) damages arising 5 from wrongfully taken property, (3) emotional distress damages, and (4) certain minimum 6 wage damages. (Doc. 321.) Defendants also seek to preclude Cramton from presenting 7 any other theories based on “new false and previously undisclosed statements” Cramton 8 made during the Final Pretrial Conference. (Id. at 12.) Cramton, in turn, seeks to “prohibit 9 Defendants from presenting any evidence or argument at trial that: (1) the sale of [ECH] 10 or its assets yielded no proceeds; (2) Plaintiff’s remedy is limited to a return of her 11 membership interest; or (3) that the fair market value of Plaintiff’s membership interest is 12 subject to any offsets or any adjustments from 18.6% of the Kahala purchase price.” (Doc. 13 320 at 15.) 14 A. Legal Standard 15 The District of Arizona’s Mandatory Initial Discovery Pilot Project (“MIDP”), 16 which was in effect at all relevant times in this case, provides that each party must, “[f]or 17 each of your claims or defenses, state the facts relevant to it and the legal theories upon 18 which it is based.” D. Ariz. G.O. 17-08 ¶ B(4). The MIDP also requires each party to 19 “[p]rovide a computation of each category of damages claimed by you, and a description 20 of the documents or other evidentiary material on which it is based, including materials 21 bearing on the nature and extent of the injuries suffered.” Id. ¶ B(5).4 “The discovery 22 obligations [created by the MIDP] supersede the disclosures required by Rule 26(a)(1) and 23 are framed as court-ordered mandatory initial discovery pursuant to the Court’s inherent 24 authority to manage cases.” Id. at 1. Accord id. ¶ A(2) (“The responses are called for by 25 4 26 Similarly, Rule 26(a)(1)(A)(iii) of the Federal Rules of Civil Procedure requires the disclosure of “a computation of each category of damages claimed by the disclosing 27 party—who must also make available for inspection and copying . . . the documents or 28 other evidentiary material, unless privileged or protected from disclosure, on which each computation is based.”

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1 the Court, not by discovery requests actually served by an opposing party.”). 2 Rule 37(c)(1) of the Federal Rules of Civil Procedure provides that “[i]f a party fails 3 to provide information . . . as required by Rule 26(a) or (e), the party is not allowed to use 4 that information . . . to supply evidence on a motion, at a hearing, or at a trial, unless the 5 failure was substantially justified or is harmless.” The purpose of this rule is to “‘give[] 6 teeth’ to Rule 26’s disclosure requirements by forbidding the use at trial of any information 7 that is not properly disclosed.” Goodman v. Staples The Office Superstore, LLC, 644 F.3d 8 817, 827 (9th Cir. 2011). 9 “The party requesting sanctions [under Rule 37] bears the initial burden of 10 establishing that the opposing party failed to comply with the [applicable] disclosure 11 requirements.” Silvagni v. Wal-Mart Stores, Inc., 320 F.R.D. 237, 241 (D. Nev. 2017). If 12 the movant makes this showing, “[t]he party facing sanctions bears the burden of proving 13 that its failure to disclose the required information was substantially justified or is 14 harmless.” R&R Sails, Inc. v. Ins. Co. of Penn., 673 F.3d 1240, 1246 (9th Cir. 2012). 15 When evaluating substantial justification and harmlessness, courts often consider (1) 16 prejudice or surprise to the other party, (2) the ability of that party to cure the prejudice, 17 (3) the likelihood of disruption of trial, and (4) willfulness or bad faith. Silvagni, 320 18 F.R.D. at 242. 19 B. Defendants’ Motion 20 1. Proceeds from Kahala Sale 21 Defendants argue that Cramton failed to timely disclose her theory that she has a 22 right to a portion of the proceeds from Kahala transaction. (Doc. 321 at 5-9.) In response, 23 Cramton argues that her theory is different—she is seeking the fair market value of her 24 membership interest in ECH—and that this theory has been fairly raised throughout the 25 litigation. (Doc. 325.) In a footnote, Cramton clarifies: “[T]he damages theory is not that 26 [Cramton] would have received proceeds . . . [but that] the sales price set the fair market 27 value of her membership interest.” (Id. at 6 n.4.) 28 The parties are talking past each other. Cramton is not seeking to recover a portion

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1 of the sale proceeds—she is seeking the fair market value of her 18.6% membership interest 2 and merely wishes to proffer the Kahala transaction as a measure of that asset’s fair market 3 value. This theory was timely disclosed. Cramton’s MIDP disclosures pertaining to 4 Counts Seven, Nine, and Ten, which Defendants received in April 2018 (i.e., well before 5 the close of discovery), explain that “Cramton has been damaged in the amount of the value 6 of her membership interest (approximately $511,500, based on the sale of the company to 7 Kahala).” (Doc. 320-9 at 43, 45.) This is the same argument Cramton presents in the final 8 pretrial order. Under the heading “Whether Cramton would be entitled to ‘Sale Proceeds’ 9 upon ECH’s asset sale to Kahala,” Cramton states: “Plaintiff is entitled to the fair market 10 value of the membership value of ECH at the time that that it was wrongfully taken away 11 from her . . . . Fair market value is based on what a willing buyer would pay a willing 12 seller. That value is conclusively established by the Kahala sale, which valued ECH at 13 $2.6 million.” (Doc. 310 at 28.) 14 Given this backdrop, one option would be to deny, as moot, Defendants’ request to 15 preclude Cramton from presenting the argument that she is entitled to sale proceeds. As 16 noted, Cramton does not intend to make that argument. Nevertheless, in an abundance of 17 caution and in light of the fact that Cramton has previously described her damages theory 18 in an imprecise manner,5 Defendants’ motion will be granted. The practical effect of this 19 5 In her response to Defendants’ motion for summary judgment, Cramton made 20 various statements that suggest she is seeking a portion of the sale proceeds. (See, e.g., Doc. 159 at 15 [“Cramton was not paid any portion of the sale proceeds, as would be 21 required under the Operating Agreement if she still owned the Units.”].) Although the 22 imprecision of these statements is unfortunate, Cramton clarified beforehand (through her MIDP disclosures) and afterward (through the final pretrial order and her response to 23 Defendants’ motion to exclude) that she is not seeking a portion of the sale proceeds. 24 Additionally, Cramton stated at times in her summary judgment response that she is seeking the fair market value of her lost membership interest, not a portion of the sale 25 proceeds. (Doc. 159 at 14 [“Cramton’s damages are the loss of 18.6% of a company that 26 sold all of its assets months later. The only reasonable value for that loss is 18.6% of the sale price, or approximately $500,000.”). In any event, and as discussed in more detail in 27 Part III infra, the inaccurate references to sale proceeds did not, as Defendants assert, 28 provide the “foundation for the Court’s analysis in its summary judgment order allowing Counts VII, IX, and X to survive.” (Doc. 321 at 7.)

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1 ruling is simply to hold Cramton to the description of her damages theory that she provided 2 in the final pretrial order. United States v. First Nat. Bank of Circle, 652 F.2d 882, 886 3 (9th Cir. 1981) (“Unless pretrial orders are honored and enforced, the objectives of the 4 pretrial conference to simplify issues and avoid unnecessary proof by obtaining admissions 5 of fact will be jeopardized if not entirely nullified.”). 6 2. Wrongfully taken property 7 Defendants argue that Cramton’s statements in the final pretrial order “reference 8 fair market value of wrongfully taken property for the first time in this lawsuit as the basis 9 for Plaintiff’s damages.” (Doc. 321 at 9.) 10 Not so. As noted, Cramton’s April 2018 MIDP disclosures pertaining to Counts 11 Seven, Nine, and Ten explained that her damages theory was that the Kahala sale serves as 12 the benchmark for calculating the fair market value of her membership interest in ECH, 13 which was wrongfully taken from her. (Doc. 320-9 at 43, 45.) Although these disclosures 14 were not free from ambiguity, they were sufficient to place Defendants on notice of 15 Cramton’s theory of damages. 16 The ambiguity stems from the fact that Cramton’s April 2018 MIDP disclosures 17 provided a somewhat different description of her damages theory when discussing Count 18 Six, her now-dismissed claim for breach of the operating agreement. With respect to that 19 claim, Cramton stated that because her departure was not a voluntary resignation, “Section 20 9.3 of the Operating Agreement does not apply” and “[i]nstead, because Cramton was 21 constructively discharged, Section 9.2 of the Operating Agreement applies and Keely 22 Newman must acquire Cramton’s membership interest under the terms of Article 10 and 23 11 of the Operating Agreement. Specifically, Ms. Newman must pay Cramton the fair 24 market value of Cramton’s membership interest . . . [which is] approximately $511,500, 25 based on the sale of the company to Kahala[].” (Doc. 320-9 at 42-43.) Defendants place 26 heavy emphasis on these references to Section 9.2 and Article 10 of the Operating 27 Agreement, which set forth the procedure for buying out the units of a member who had 28 been terminated without cause. Under those provisions, “[t]he purchase price for each Unit

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1 . . . shall be the fair market value of the Units as of the most recent independent, third-party 2 appraisal . . . which shall take into account the lack of control and the inherent lack of 3 liquidity of non-public minority equity interests.” (Doc. 324-2 at 27-28, emphasis added.) 4 According to Defendants, these references to Section 9.2 and Article 10 show that Cramton 5 has always acknowledged the fair market value of her membership interest must be 6 discounted to account for the fact that it is an illiquid, minority interest—and, thus, cannot 7 be based on the price Kahala paid for a liquid, majority interest. 8 Although this is a plausible interpretation of Cramton’s damages theory as to Count 9 Six, Cramton did not repeat these references to Section 9.2 and Article 10 when describing 10 her damages theory as to Counts Seven, Nine, and Ten. Again, with respect to those counts, 11 Cramton simply stated that she was deprived of her membership interest and that the 12 membership interest should be valued as 18.6% of the Kahala purchase price. (Doc. 320- 13 9 at 43-45) Although Defendants appear to have assumed that Cramton’s description of 14 her theory pertaining to Counts Seven, Nine, and Ten was implicitly subject to the same 15 qualifications as her description of her theory pertaining to Count Six (i.e., the calculation 16 of fair market value must account for the illiquid, minority nature of Cramton’s interest), 17 this assumption was misplaced—because Cramton didn’t cross-reference Section 9.2 or 18 Article 10 in the portion of her MIDP disclosures pertaining to Counts Seven, Nine, and 19 Ten, it is plausible to interpret that portion of her disclosures as announcing a different 20 damages theory. Cf. Russello v. United States, 464 U.S. 16, 23 (1983) (“[W]here Congress 21 includes particular language in one section of a statute but omits it in another section of the 22 same Act, it is generally presumed that Congress acts intentionally and purposely in the 23 disparate inclusion or exclusion.”) (quotation omitted); Allen v. Honeywell Ret. Earnings 24 Plan, 382 F. Supp. 2d 1139, 1162 (D. Ariz. 2005) (“It is a fundamental principle of contract 25 interpretation that the expression of one thing is the exclusion of another (‘expressio unius 26 est exlusio alterius’).”). Notably, Counts Nine and Ten are tort claims while Count Six 27 was a contract claim. It makes sense that such claims might give rise to different measures 28 of damages. Valley Nat’l Bank v. Brown, 517 P.2d 1256, 1260 (Ariz. 1974) (“The case at

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1 issue . . . was not based on a contract theory but one of tort, and the elements of damages 2 can be different.”). 3 It is unfortunate that Defendants misperceived the nature of Cramton’s damages 4 theory as to Counts Seven, Nine, and Ten. Cramton bears some of the responsibility for 5 this confusion. Nevertheless, to the extent Defendants were confused about Cramton’s 6 theory due to the ambiguities noted above, it was their responsibility to seek clarification 7 from Cramton by engaging in the meet-and-confer process, by propounding additional 8 discovery requests, or, if necessary, by seeking judicial intervention while the discovery 9 process was still ongoing.6 Because they failed to do so, and because Cramton’s MIDP 10 disclosures pertaining to Counts Seven, Nine, and Ten can plausibly be interpreted as 11 asserting that her lost membership interest should be valued as 18.6% of the Kahala 12 purchase price, Defendants have not met their “initial burden” under Rule 37 “of 13 establishing that the opposing party failed to comply with the [applicable] disclosure 14 requirements.” Silvagni, 320 F.R.D. at 241. Accordingly, Defendants’ request to preclude 15 Cramton from advancing that damages theory at trial, as a sanction under Rule 37 based 16 on untimely disclosure, will be denied. 17 The parties should note, however, that this is only a ruling about the timing and 18 adequacy of Cramton’s disclosure efforts. The parties’ briefs also contain some discussion 19 of a substantive issue—whether the March 2018 Kahala sale may, as a matter of Arizona 20 law, function as a proxy for the fair market value of Cramton’s membership interest at the 21 time she was deprived of it. (Doc. 320 at 9-11 [Cramton: “There is no better evidence of 22 6 Cramton introduced further ambiguity by stating, in the computation-of-damages 23 portion of her April 2018 MIDP disclosures, that she was seeking “[l]ost ownership interest 24 in the Corporate Defendants as a result of Defendants’ constructive discharge of Cramton, approximately $511,500. This figure[] is calculated as 18.6% of the $2.75 million sales 25 price for Grabbagreen announced by [Kahala].” (Doc. 320-9 at 47.) By characterizing 26 these damages as arising from a “constructive discharge,” Cramton seemed to signal that the damages were arising from Count Six. Nevertheless, the bottom line is that other 27 portions of the April 2018 disclosures suggested that Counts Seven, Nine, and Ten weren’t 28 subject to the limitations applicable to Count Six and Defendants failed to obtain clarification when presented with these ambiguities.

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1 the fair market value for the Units than the heavily negotiated sale between Kahala and 2 [ECH]. And, in fact, there is no other evidence of the fair market value of the Units other 3 than what Kahala agreed to pay and what [ECH] agreed to take for substantially all of its 4 assets.”]; Doc. 321 at 13-16 [Defendants: “No credible valuation expert would testify that 5 there is any willing buyer anywhere in the world that would pay nearly $500,000 for a 6 privately held minority interest in ECH units subject to a $1 buyout right [unless the holder 7 continued working through November 2021] . . . . Without an expert, Plaintiff is unable to 8 prove an indispensable element of damages, i.e., the value of the contingent ECH units she 9 held at the time of the purported misrepresentation.”].) 10 Although this briefing may prove useful during later stages of this case, the 11 substantive merit of Cramton’s damages theory is not properly before Court at this time. 12 Neither party moved for summary judgment on Counts Seven, Nine, or Ten based on the 13 adequacy (or inadequacy) of Cramton’s valuation theory and the Court only authorized 14 supplemental briefing on the narrow issue of whether either side should, under Rule 37, be 15 precluded from presenting damages-related evidence and arguments at trial due to untimely 16 disclosure. Because Cramton timely disclosed her theory, she will not be precluded from 17 presenting it. Whether that theory is legally sufficient is a different question for a different 18 time. 19 3. Emotional distress damages 20 Defendants argue that Cramton’s claim for emotional distress damages is improper 21 because (1) this category of damages was not timely disclosed and (2) Arizona law does 22 not recognize this category of damages for economic torts. (Doc. 321 at 10.) 23 Defendants’ disclosure-related objection lacks merit. The amended complaint 24 includes a claim for “damages for Cramton’s emotional distress.” (Doc. 88 at 17.) 25 Cramton also identified her counselor as a witness in her second supplemental MIDP 26 disclosure, which stated that the counselor had “knowledge regarding . . . Ms. Cramton’s 27 emotional distress damages.” (Doc. 325 at 14-15.) Finally, although Cramton didn’t add 28 emotional distress damages to the damage computation set forth in her MIDP disclosures,

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1 many courts in the Ninth Circuit have held that the failure to include emotional distress 2 damages in a damage computation is not grounds for exclusion under Rule 37. See, e.g., 3 Jackson v. United Artists Theatre Cir., Inc., 278 F.R.D. 586, 593 n.1 (D. Nev. 2011) 4 (agreeing that “Rule 26(a)(1)(A)(iii) does not require a computation of general damages 5 for pain and suffering or emotional distress because such damages are subjective and do 6 not lend themselves to computation”); Creswell v. HCAL Corp., 2007 WL 628036, *2 (S.D. 7 Cal. 2007) (same); Maharaj v. Cal. Bank & Tr., 288 F.R.D. 458, 463 (E.D. Cal. 2013) 8 (same, but noting that a failure to request a specific dollar figure prevents a plaintiff from 9 requesting a specific amount of emotional distress damages at trial). See also Williams v. 10 Trader Publ’g Co., 218 F.3d 481, 486 & n.3 (5th Cir. 2000) (declining to resolve “whether 11 assigning a dollar figure to emotional distress damage without previously disclosing the 12 figure is in contradiction to Rule 26” but noting that “[s]ince compensatory damages for 13 emotional distress are necessarily vague and are generally considered a fact issue for the 14 jury, they may not be amenable to the kind of calculation disclosure contemplated by Rule 15 26(a)(1)(C)”). The bottom line is that Defendants have long been on notice that Cramton 16 is seeking emotional distress damages in this case.7 17 As for Defendants’ argument that Cramton’s claim for emotional distress damages 18 fails as a matter of Arizona law, that issue is not properly before the Court. Again, the sole 19 issue on which the Court solicited supplemental briefing was whether either side should be 20 barred from seeking a particular category of damages at trial as a Rule 37 sanction for late 21 disclosure. Defendants cannot use a Rule 37 motion as a backdoor attempt to seek 22 summary judgment on a timely disclosed category of damages. Whether Cramton’s claim 23 for emotional distress damages will survive a motion for directed verdict is, again, a 24 25 7 During oral argument, Defendants stated that, even if Cramton isn’t categorically 26 precluded from seeking emotional distress damages, she should be precluded from asserting any claim for economic damages arising from the cost of her counseling sessions. 27 In response, Cramton acknowledged that she didn’t disclose any of the underlying bills and 28 thus conceded that she won’t be pursuing such economic damages at trial. The Court accepts this concession.

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1 different issue for a different time. 2 4. Minimum wage damages 3 Defendants argue that, because Cramton’s MIDP disclosures did not include an 4 assertion that she worked 60-80 hours per week, she should be precluded from making 5 such a claim at trial for purposes of her minimum wage claim. (Doc. 321 at 11.) Cramton 6 responds that Defendants made the same argument after she submitted her motion for 7 summary judgment, at which point they were allowed to reopen her deposition. (Doc. 325 8 at 8-9.) 9 Here, Defendants are seeking to use Rule 37 as a “procedural weapon” to achieve 10 “a tactical litigation advantage.” Excel Fortress Ltd. v. Wilhelm, 2019 WL 2503684, *4 11 (D. Ariz. 2019). Defendants previously took issue with the timing of Cramton’s assertion 12 that she worked 60-80 hours per week. (Doc. 136 at 5-6.) In an effort to eliminate any 13 prejudice arising from this late disclosure, the Court allowed Defendants to reopen 14 Cramton’s deposition so they could explore the basis for her expanded estimate of hours 15 worked. (Doc. 175 at 2-3.) If the remedy of additional deposition time was insufficient, 16 Defendants had the responsibility to raise a timely objection rather than lying in wait and 17 complaining on the eve of trial. 18 5. “Other” new theories 19 Defendants argue that “all sorts of new false and previously undisclosed statements 20 were made” by Cramton during the Final Pretrial Conference. (Doc. 321 at 12.) However, 21 most of the allegedly false statements, which Defendants have attempted to summarize in 22 a chart attached to their motion (Doc. 321-1 at 135-37), concern Cramton’s “sale proceeds” 23 theory, which Cramton has clarified she will not be pursuing at trial. 24 Defendants also take issue with Cramton’s statement that she was “not aware” of 25 the requirement in the ECH Operating Agreement that she had to work for Defendants for 26 five years. (Doc. 321-1 at 136-37.) The contours of this argument are not entirely clear, 27 but it appears to constitute an objection to the whole of Cramton’s lawsuit and a request 28 for dismissal of all claims. The Court declines to revisit its summary judgment order on

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1 these murky grounds. 2 C. Cramton’s Motion 3 Cramton asks the Court to “prohibit Defendants from presenting any evidence or 4 argument at trial that: (1) the sale of [ECH] or its assets yielded no proceeds; (2) Plaintiff’s 5 remedy is limited to a return of her membership interest; or (3) that the fair market value 6 of Plaintiff’s membership interest is subject to any offsets or any adjustments from 18.6% 7 of the Kahala purchase price.” (Doc. 320 at 15.) 8 1. No Distribution of Kahala Proceeds 9 As for Cramton’s first argument, it’s not clear why the nature of the sale to Kahala, 10 and whether it resulted in the distribution of proceeds to any individuals holding a 11 membership interest in ECH, would be relevant at trial. As discussed above, Cramton is 12 not seeking and cannot seek a portion of the sale proceeds. Instead, Cramton seeks to argue 13 that the sale to Kahala serves as a proxy for the fair market value of her membership interest 14 in ECH at the time it was wrongfully taken from her. 15 To the extent this information still matters, the record paints a complicated picture 16 concerning the adequacy of Defendants’ disclosure efforts. On the one hand, in a letter to 17 Cramton’s counsel dated October 1, 2018, Defendants’ then-counsel stated that Cramton 18 merely “owned her units, not the asset sale proceeds,” that “[u]nder Section 3.6 of the 19 Operating Agreement, Capital Proceeds may be distributed but only in the discretion of the 20 Majority of the Members,” and that “Keely did not consider or make any such distribution.” 21 (Doc. 327-1 at 102, emphasis added.) A few weeks later, Defendants’ then-counsel wrote 22 a follow-up letter to Cramton’s counsel reiterating that “[b]ecause it was an asset sale[,] 23 the 18.6% ownership interest does not evaporate on sale assuming Cramton retained her 24 interest” and “[t]he cash does not go directly to Cramton but to the Company.” (Doc. 327- 25 1 at 105.) As these letters make clear, Defendants did inform Cramton that the sale to 26 Kahala was an asset sale and the resulting proceeds were never distributed to ECH’s 27 members. 28 On the other hand, there is no evidence that Defendants ever reiterated these

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1 assertions in their MIDP disclosures, which is where they were required to identify all of 2 the facts and legal theories underlying their defenses. See D. Ariz. G.O. 17-08 ¶ B(4). 3 Unlike informal letters, MIDP disclosures “must be signed under oath by the party” and 4 must be “signed under Rule 26(g) by the attorney.” Id. ¶ A(3). There is a strong argument 5 that alluding to a fact in a letter exchanged between counsel during the early stages of a 6 case, but never reiterating or verifying that fact in a party’s Rule 26 disclosures, MIDP 7 disclosures, discovery responses, or deposition testimony, is insufficient to satisfy a party’s 8 disclosure obligations under the MIDP.8 9 The facts of this case underscore why this approach was unfortunate. During the 10 summary judgment hearing in December 2019, defense counsel stated that the Kahala sale 11 proceeds had never been distributed to ECH’s members. This announcement caught the 12 Court and Cramton’s counsel by complete surprise, prompting defense counsel to concede 13 that it hadn’t previously been disclosed: 14 Court: Let me understand that better. Because the way I understood the evidence was, in March or somewhere thereabout in 2018, the sale went 15 through for 2.6 odd million dollars. So you’re saying that none of that money 16 has yet been wired? 17 Defense counsel: Absolutely. It has all been – the only payouts, as I understand it – and I’ve gone over this, so the representation I am making 18 based upon the authority that I’ve been given is that the only payout that 19 could possibly have been made which would inure to the benefit of Keely Newman and Miss Cramton is, the company decided to pay the taxes for 20 those people who would show a paper profit and might have to pay taxes as 21 a result of the sale. But because Miss Cramton did not show the paper profits, she did not have to pay taxes. But the sale terms were such that nobody is 22 23 8 Paragraph A(8) of the General Order 17-08, which addresses the supplementation 24 of MIDP disclosures, provides that “[i]f new information is revealed in a written discovery response or a deposition in a manner that reasonably informs all parties of the information, 25 the information need not be presented in a supplemental response.” Although this 26 provision recognizes that some MIDP-complaint disclosures may occur in relatively informal formats, Defendants cannot rely on this provision here—the October 2018 letters 27 were not “written discovery response[s]” or “deposition[s]” and the no-distribution-of- 28 proceeds information was not “new,” as it was presumably known to Defendants at the time they prepared their initial MIDP disclosure in April 2018 (Doc. 48).

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1 allowed to liquidate their shares. No cash payment has been made to 2 members of – Court: Am I just forgetting something in the volume of papers? I’ve never 3 heard this before. Is this in the papers anywhere? 4 Defense counsel: This is not in the papers. . . . 5 Court: . . . I [need] to decide cases based on the things that are briefed to me. 6 And this is – I’ve never heard any of this before. Defense counsel: Well, Your Honor, I was not the person that was around 7 when these were being drafted. 8 (Doc. 256 at 79-80.) Later, defense counsel clarified that “I got this information this 9 morning,” which prompted Cramton’s counsel to express concerns over the untimeliness 10 of the disclosure. (Id. at 83.) 11 As it turns out, defense counsel’s seeming concession of a late disclosure was 12 inaccurate—predecessor counsel had disclosed the absence of a distribution via the two 13 October 2018 letters discussed above. The question, then, is whether this informal 14 disclosure effort was adequate under Rule 26 and the MIDP. 15 In the Court’s view, it was insufficient. One of the MIDP’s purposes is to avoid 16 surprise at trial by providing fair notice to each side of the facts and theories underlying 17 the other side’s claims and defenses. Although the Court is unprepared to say that an 18 informal disclosure of facts, accomplished via correspondence between counsel, can never 19 suffice, it is apparent that the October 2018 letters in this case failed to alert Cramton that 20 Defendants would be relying on the absence of distributions as one of the facts supporting 21 their defense. Cf. Contech Stormwater Sols., Inc. v. Baysaver Techs., Inc., 534 F. Supp. 2d 22 616, 624-25 (D. Md. 2008) (“The defendants’ initial response failed to adequately provide 23 notice of the basis of the claims . . . [and] defendants, quite simply, failed to supplement 24 their bare boned initial response in a timely fashion in order to permit Contech to formulate 25 a proper defense. . . . A party is thus not required to plan a defense based on all possible 26 documents or information presented during depositions, but rather must be adequately 27 informed by the opposing party . . . which facts, theories, and documents will likely be 28 relied upon at trial.”).

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1 This finding of inadequate disclosure means that, under Rule 37(c)(1), Defendants 2 must be precluded from introducing any evidence at trial concerning the non-distribution 3 of the Kahala sale proceeds “unless the failure was substantially justified or is harmless.” 4 As for substantial justification, although Defendants should have done a better job of 5 disclosing to Cramton that the Kahala transaction didn’t result in the distribution of any 6 proceeds to ECH’s members, this fact was disclosed (albeit via an informal letter). As for 7 harmlessness, Cramton’s clarification that she isn’t seeking to collect a portion of the 8 Kahala sale proceeds—instead, she seeks to rely on the Kahala sale as a measure of the fair 9 market value of her membership interest—makes it unclear why it even matters whether 10 the sale proceeds were ultimately distributed to ECH’s members. 11 Given this backdrop, a fair resolution would be to preclude either party from 12 introducing evidence or argument at trial concerning the distribution (or lack thereof) of 13 the Kahala sale proceeds. This information is likely irrelevant, and at a minimum poses 14 significant Rule 403 concerns, in light of Cramton’s clarification that she is not seeking a 15 portion of the sale proceeds. And because this information will be excluded for other 16 reasons, there is no need to reach whether Defendants should be precluded from 17 introducing it as a discovery sanction under Rule 37. 18 2. Return Of Membership Interest 19 Cramton next seeks to preclude Defendants from arguing that her “remedy is limited 20 to a return of her membership interest.” (Doc. 320 at 15.) 21 This argument is unavailing. Defendants not only disclosed this theory in one of 22 the October 2018 letters9 but also repeated it in a supplemental MIDP disclosure provided 23 on January 4, 2019, which was within the discovery period (Doc. 86). In that disclosure, 24 Defendants stated that “[u]nder no circumstances, even wrongful termination, does the 25 Operating Agreement require that the terminated member be bought out,” that “Keely 26 27 9 Specifically, the October 1, 2018 letter stated that “[e]ven assuming you could win 28 under your argument . . . the most [Cramton] would gain would be the right to retain her membership units.” (Doc. 327-1 at 102.)

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1 Newman and ECH did not . . . elect to buy Kim Cramton out,” and, “[t]hus, even if Kim 2 Cramton was constructively discharged, . . . the only potential remedy available to Plaintiff 3 is that Kim Cramton would continue to hold her ownership interest in ECH.” (Doc. 327- 4 1 at 83-84, emphasis added.) Because this theory was timely set forth in an MIDP 5 disclosure, Defendants will not be precluded from advancing it at trial. 6 3. Fair Market Value Is Less Than 18.6% of Kahala Sale Price 7 Last, Cramton seeks to preclude Defendants from presenting any evidence or 8 argument “that the fair market value of Plaintiff’s membership interest is subject to any 9 offsets or any adjustments from 18.6% of the Kahala purchase price.” (Doc. 320 at 15.) 10 This argument presents a close call. On the one hand, Defendants did disclose this 11 theory in the October 2018 letters. In the first letter, Defendants’ then-counsel took issue 12 with Cramton’s valuation methodology, explaining that Cramton’s “pro rata analysis of 13 18.6% of the sale price” was “inaccurate” because it failed to “tak[e] into account a 14 discount for lack of control and a private minority interest,” which “may be as high as 15 70%.” (Doc. 327-1 at 102.) The first letter further stated that “[a] fair market analysis . . . 16 would also [need] to take into account the liabilities and transaction costs left after an asset 17 sale” and “[t]his valuation would [need to be] determined at the time of [Cramton’s] 18 resignation, not based on a sale price occurring six months later.” (Id.) The first letter 19 concluded that, after applying these discounts, the fair market value of Cramton’s 20 membership interest “may be as low as $126,450, less liabilities.” (Id. at 103.) Meanwhile, 21 in the second letter, Defendants reiterated their position that Cramton’s membership 22 interest was subject to “up to a 70% discount on a fair market value appraisal based on a 23 lack of marketability and holding a minority interest,” “leading to the number $126,450 by 24 applying simple math,” and encouraged Cramton to “verify such discounts by contacting a 25 business valuation consultant.” (Id. at 105.) 26 On the other hand, Defendant have not presented any evidence that they reiterated 27 this theory in their MIDP disclosures. Indeed, the materials submitted to the Court suggest 28 that Defendants’ only properly disclosed theory of defense with respect to Counts Seven,

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1 Nine, and Ten was that “the economic loss rule eliminates damages under [those] counts.” 2 (Doc. 327-1 at 85, capitalization omitted.) This is obviously different from the theory that 3 Cramton’s damages under those counts must be discounted to account for the minority, 4 illiquid nature of her ownership interest. Nor have Defendants disclosed any witness who 5 might testify about how to calculate the fair market value of Cramton’s membership 6 interest (or why such a valuation would need to include discounts based on a lack of 7 control, minority interest, and liabilities and transaction costs). As discussed in Part I.C.1 8 above, it is difficult to see how this approach could be deemed compliant with the MIDP’s 9 disclosure requirements. 10 The next step in the Rule 37 analysis is assessing whether the disclosure failure was 11 substantially justified or harmless. Although the tentative ruling stated that neither 12 exception was satisfied, Defendants demonstrated during oral argument that their 13 disclosure failure was, in part, substantially justified. As discussed in Part I.B.2 above, the 14 ambiguities in Cramton’s April 2018 MIDP disclosures led Defendants to assume, 15 mistakenly, that all of Cramton’s damage claims were subject to Section 9.2 and Article 10 16 of the Operating Agreement—provisions that require any fair market value calculation to 17 account for the minority, illiquid nature of Cramton’s interest. Although Defendants 18 should have done more to seek clarification from Cramton, their misinterpretation was 19 understandable and helps explain why they didn’t reiterate, in their MIDP disclosures, their 20 theory that the fair market value of Cramton’s interest had to be discounted. Thus, the 21 Court concludes that Defendants’ failure to disclose this theory of defense was 22 substantially justified. 23 This finding of substantial justification, however, does not extend to all of 24 Defendants’ discovery conduct. Although it is understandable why Defendants didn’t 25 explicitly refer to their discounting theory in their MIDP disclosures, Cramton was still 26 entitled to notice of the witnesses and evidence on which Defendants would rely to prove 27 that theory at trial. Unfortunately, Defendants have not disclosed any witness who might 28 testify about why Cramton’s membership interest should be valued at something less than

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1 18.6% of the Kahala sale price. 2 Cramton argues that, as a sanction for this disclosure failure, Defendants should be 3 precluded from presenting any testimony on this topic at trial. (Doc. 320 at 2 [“Plaintiff 4 Kim Cramton moves in limine to exclude . . . evidence that the fair market value of Eat 5 Clean Holdings is anything other than the value established by the Kahala transaction.”]; 6 Doc. 338 at 6 [“Given that [former defense counsel] has not been disclosed as an expert 7 and Defendants have not disclosed any ‘business valuation consultant’ as an expert witness, 8 these [October 2018] letters are of little import. . . . [T]his type of business valuation 9 analysis involving marketability and minority discounts must be introduced through 10 qualified expert testimony.”]; id. at 9 [“Defendants’ damages theories would require 11 specialized analysis that cannot be introduced by a lay witness.”].) 10 The Court agrees. 12 Defendants have not identified any witnesses who might testify on these topics and the 13 time for disclosure has long expired. 14 This ruling leaves some questions unresolved. Cramton has not disclosed any of 15 her own witnesses, lay or expert, to testify about how to value her ECH membership 16 interest. It appears her plan is simply to introduce evidence concerning the terms of the 17 Kahala sale and then have her attorneys attempt to explain, in closing argument, why those 18 terms are sufficient to establish the fair market value of her membership interest. 19 Defendants argue in their motion papers, with some force, that such evidence will be 20 insufficient as a matter of law to meet Cramton’s burden of proof. Defendants also contend 21 that, irrespective of the adequacy of their disclosure efforts, they retain the right to 22 challenge the sufficiency of Cramton’s evidence. (Doc. 327 at 9 [“Rule 37 does not apply 23 here because . . . the General Order does not require the Defendants to set forth how 24 25 10 During oral argument, Defendants asserted that Cramton’s request for a witness- 26 preclusion sanction was improper because it was made the first time in her reply. This assertion is inaccurate. Cramton’s motion included a request to exclude any “evidence” 27 that “the fair market value of Eat Clean Holdings is anything other than the value 28 established by the Kahala transaction.” (Doc. 320 at 2.) “Evidence” includes witness testimony.

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1 Plaintiff is unable to carry her burden of proof with respect to essential elements of her 2 claims, and . . . Plaintiff’s inability to prove essential elements of her claims is not a 3 defense, it’s a failure by Plaintiff to prove her case.”].) 4 The Court agrees with this argument. Although Cramton seeks to blame Defendants 5 for her decision not to hire a valuation expert (Doc. 338 at 9 [“Cramton has not been able 6 to conduct discovery on these defense theories, nor can she now retain an expert to rebut 7 them . . . .”]), this amounts to impermissible burden-shifting. As the plaintiff, Cramton 8 bears the burden of proving she was damaged by Defendants’ conduct. Notwithstanding 9 that burden, she chose not to retain an expert to explain how to value her ECH membership 10 interest. Thus, although Defendants will not be allowed to call witnesses to testify about 11 why the fair market value of that membership interest must be discounted, they will be 12 allowed to advance it as a defense theory during trial, to the extent such advancement is 13 possible without witnesses. Additionally, Defendants retain the right to challenge the legal 14 sufficiency of Cramton’s evidence. Cramton has not identified any authority suggesting 15 that Rule 37 sanctions may include the forfeiture of a defendant’s ability to seek a directed 16 verdict. 17 II. Motion To Strike Jury Demand 18 Defendants move to strike Cramton’s jury demand because two different 19 agreements—ECH’s Operating Agreement and the promissory note between Cramton and 20 ECO—contain jury waiver provisions. (Doc. 322.) Cramton responds that (1) Defendants 21 “waived” the ability to enforce the jury waivers, (2) the waivers are unenforceable, and (3) 22 the waivers don’t cover all claims or apply to all Defendants. (Doc. 324.) 23 A. Legal Standard 24 Rule 39(a) of the Federal Rules of Civil Procedure provides that when a party has 25 properly made a jury demand, “[t]he trial on all issues so demanded must be by jury unless 26 . . . the court, on motion or on its own, finds that on some or all of those issues there is no 27 federal right to a jury trial.” One way a party may lose its right to a jury trial is through a 28 contractual jury waiver. Under federal law, such waivers are enforceable “as long as each

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1 party waived its rights knowingly and voluntarily.” In re Cnty. of Orange, 784 F.3d 520, 2 523 (9th Cir. 2015).11 As one court has observed: “Agreements waiving the right to trial 3 by jury are neither illegal nor contrary to public policy.” Telum, Inc. v. E.F. Hutton Credit 4 Corp., 859 F.2d 835, 837 (10th Cir. 1988). 5 B. “Waiver” Of The Jury Waivers 6 Cramton argues that Defendants “waived” the right to seek enforcement of the jury 7 waivers because (1) “Defendants never affirmatively moved to strike [her] jury demand or 8 raise the issue until two and a half years into this lawsuit” and (2) Defendants did not 9 contest her demand for a jury trial in their original answer or in the parties’ Rule 26(f) 10 report. (Doc. 324 at 3, 5.) Defendants respond that (1) they have sought to enforce the 11 jury waivers since their answer to Cramton’s amended complaint, (2) there’s no deadline 12 for filing a motion to strike a jury demand, and (3) they should not be held to the 13 representations in the Rule 26(f) report because Cramton’s position has also shifted since 14 the early stages of the case. (Doc. 331 at 1-3.) 15 As an initial matter, although Cramton frames her argument as a “waiver” claim, it 16 also has elements of a claim of forfeiture or estoppel. Courts must take care not to conflate 17 these theories. United States v. Olano, 507 U.S. 725, 733 (1993) (“Waiver is different from 18 forfeiture. Whereas forfeiture is the failure to make the timely assertion of a right, waiver 19 is the intentional relinquishment or abandonment of a known right.”) (quotation omitted); 20 Witt v. Metro. Life Ins. Co., 772 F.3d 1269, 1279 n.6 (11th Cir. 2014) (“It is important to 21 note the difference between three related, but distinct, legal principles: forfeiture, waiver, 22 and estoppel. . . . Estoppel requires detrimental reliance and exists when the conduct of 23 24 11 The Ninth Circuit has clarified that “Erie’s federalism principle requires federal courts sitting in diversity to import, as the federal rule, state law governing jury trial 25 waivers where . . . state law is even more protective than federal law of the jury trial right.” 26 In re Cnty. of Orange, 784 F.3d at 524. This principle doesn’t require the application of a different standard here because Arizona law is not more protective than the federal 27 standard. See, e.g., Vintage Farms, LLC v. Armed Forces Bank NA, 2017 WL 2775027, 28 *2 (D. Ariz. 2017) (“Arizona law . . . is arguably less protective than the federal constitutional minimum. Accordingly, the federal standard governs.”) (citation omitted).

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1 one party has induced the other party to take a position that would result in harm if the first 2 party’s acts were repudiated.”) (quotation omitted). 3 On the merits, the parties have not cited, and the Court’s research has not uncovered, 4 any Ninth Circuit precedent addressing the circumstances under which a party may be said 5 to have forfeited or waived its ability to enforce a contractual jury waiver or be estopped 6 from enforcing such a waiver. Other Circuits have reasoned that because Rule 39(a)(2) 7 permits a court to strike a jury demand sua sponte and provides no deadline for filing a 8 motion to strike, a party may move to strike a jury demand at any time before trial. See, 9 e.g., Tracinda Corp. v. DaimlerChrysler AG, 502 F.3d 212, 226 (3d Cir. 2007) (“Because 10 a party may file a motion to strike a jury demand at any time under Rule 39(a), we conclude 11 that DaimlerChrysler did not commit inexcusable delay by filing its motion to strike after 12 the close of discovery.”); United States v. Schoenborn, 860 F.2d 1448, 1455 (8th Cir. 1988) 13 (affirming grant of motion to strike jury demand where motion was filed “[o]ne week 14 before trial”). See generally Jarod S. Gonzalez, A Tale of Two Waivers: Waiver of the Jury 15 Waiver Defense Under the Federal Rules of Civil Procedure, 87 Neb. L. Rev. 675, 689 16 (2009) (“[T]he prevailing view is that, whatever the ground to strike the jury demand, 17 parties may wait until the eve of trial to move to strike a jury demand.”). Indeed, the First 18 Circuit, although “bothered by the lack of notice to the parties and any discussion with the 19 parties by the court prior to its ruling,” has upheld a district court’s mid-trial decision to 20 refuse to allow a jury to adjudicate some claims. Ed Peters Jewelry Co. v. C & J Jewelry 21 Co., 215 F.3d 182, 185-88 (1st Cir. 2000). 22 Given this backdrop, Defendants did not forfeit their ability to oppose Cramton’s 23 jury demand by waiting too long to seek relief. Although the timing of their request was 24 unfortunate—Defendants did not seek to strike Cramton’s jury demand until May 2020, 16 25 months after the close of discovery, when Defendants raised the issue in the parties’ joint 26 proposed pretrial order (Doc. 303 at 127-29)—the Court had not yet set a trial date at the 27 time of this request and the scheduling order did not set a deadline for filing a motion to 28 strike a jury demand. Because Rule 39 does not create its own deadline for filing such a

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1 motion, Defendants’ request was sufficiently timely. 2 Cramton next contends that Defendants “waived” their ability to oppose her jury 3 demand because they “did not object . . . in their initial Answer.” (Doc. 324 at 5.) This 4 argument lacks merit. Defendants’ answer to the original complaint became, in most 5 respects, a nullity when Cramton filed an amended complaint and Defendants filed a new 6 answer to that pleading. Ferdik v. Bonzelet, 963 F.2d 1258, 1262 (9th Cir. 1992) (“[A]n 7 amended pleading supersedes the original pleading. . . . [A]fter amendment the original 8 pleading no longer performs any function and is treated thereafter as non-existent . . . .”) 9 (quotations omitted). In the new answer, which is Defendants’ operative pleading, 10 Defendants expressly objected to Cramton’s jury demand. (Doc. 95 at 21 ¶ 177.) 11 Cramton also contends that Defendants “waived” their ability to oppose her jury 12 demand because the parties’ Rule 26(f) report, which was filed in April 2018, stated: “The 13 Parties have requested a jury trial and it is uncontested.” (Doc. 50 at 10.) But the Rule 14 26(f) report was filed before Cramton filed her amended complaint (Doc. 88) and 15 Defendants filed their new answer (Doc. 95), which, again, made clear that Defendants 16 were opposing her jury demand. Thus, Cramton had notice during the discovery process 17 of Defendants’ position. Additionally, the point of the Rule 26(f) report was simply to 18 assist the Court in creating a scheduling order. The presence or absence of a jury demand 19 was not discussed during the Rule 16 conference and seemed to have no bearing on the 20 Court’s formulation of a schedule.12 Under these circumstances, it cannot be said that the 21 passing reference to a jury trial in the Rule 26(f) report amounted to a waiver by 22 Defendants. 23 Nor should Defendants be estopped from opposing Cramton’s jury demand. 24 Although Cramton suggests that Defendants’ conduct “effectively preclud[ed]” her from 25 “engaging in discovery” pertaining to the enforceability of the jury waivers (Doc. 324 at 26 6-7), this argument overlooks that Defendants’ operative pleading, which was filed well 27 12 28 This case was assigned to a different judge at the time of the Rule 16 conference. (Doc. 82.)

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1 before the close of discovery, raised an explicit objection to her jury demand. There is no 2 evidence that Defendants did anything after filing this pleading to suggest that Cramton’s 3 jury demand was uncontested. It is regrettable that Cramton may have misapprehended 4 the significance of Defendants’ operative answer, but Defendants did not engage in the sort 5 of affirmative deception required to trigger estoppel. Witt, 772 F.3d at 1279 n.6 (“Estoppel 6 requires detrimental reliance and exists when the conduct of one party has induced the 7 other party to take a position that would result in harm if the first party’s acts were 8 repudiated.”) (quotation omitted). Additionally, Cramton has not identified, with any 9 precision, the additional discovery she would have pursued had she been aware of 10 Defendants’ opposition to her jury demand. This further undermines any claim of 11 detrimental reliance.13 12 C. Enforceability Of The Waiver 13 As noted, contractual jury waivers are enforceable under federal law “as long as 14 each party waived its rights knowingly and voluntarily.” In re Cnty. of Orange, 784 F.3d 15 at 523. District courts in the Ninth Circuit commonly consider the following factors when 16 assessing whether a waiver was knowing and voluntary: “(1) whether there was a gross 17 disparity in bargaining power between the parties; (2) the business or professional 18 experience of the party opposing the waiver; (3) whether the opposing party had an 19 opportunity to negotiate contract terms; and (4) whether the clause containing the waiver 20 13 During oral argument, Cramton raised a slightly different estoppel theory—she 21 argued that the timing of Defendants’ motion resulted in detrimental reliance because it 22 caused her to expend substantial resources preparing proposed jury instructions, motions in limine, and other filings that would be unnecessary in a bench trial. There are several 23 problems with this argument. First, because the Court could have waited until the eve of 24 trial to address the jury-waiver issue sua sponte, the timing of Defendants’ request—which, again, came before a trial date had even been set—was permissible. Second, because 25 Defendants expended their own resources preparing the same filings, this isn’t a situation 26 where expenses were foisted onto Cramton in an unfairly one-sided manner. Third, although the unnecessary expenditure of resources is always regrettable, the preparation of 27 court-ordered joint filings is not the sort of conduct that is typically characterized as 28 “detrimental reliance.” Fourth, as discussed above, Defendants did not engage in any affirmative deception.

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1 was inconspicuous.” Phx. Leasing Inc. v. Sure Broad., Inc., 843 F. Supp. 1379, 1384 (D. 2 Nev. 1994) (citation omitted). Although “[t]here is a split among the circuits regarding 3 which party has the burden of proving these factors,” and the Ninth Circuit has not spoken 4 on this issue, district courts within the Ninth Circuit typically “plac[e] the burden of proof 5 on the party seeking to enforce the waiver” because this approach “is most in keeping with 6 the strong presumption against the waiver of this Seventh Amendment right.” Breham v. 7 Asset Acceptance, LLC, 2010 WL 1735147, *2 (D. Ariz. 2010). See also Phx. Leasing, 8 843 F. Supp. at 1384 (“The [Fourth Circuit] placed the burden on the party seeking 9 enforcement of a prelitigation contractual waiver to prove that consent to the waiver was 10 voluntary and informed. An informal survey indicates the majority of courts having 11 considered this question followed [that] approach . . . .”) (citations omitted). 12 1. Gross disparity in bargaining power 13 Defendants argue that, if anything, the bargaining-power factor cuts in their favor 14 because Cramton had more leverage than Keely when the two of them were negotiating 15 the ECH Operating Agreement. (Doc. 322 at 3-4.) Specifically, Defendants contend that 16 Keely was forced to create the Operating Agreement in the face of difficult personal 17 circumstances (“attending to her spouse’s [terminal] illness and assuming primary care of 18 two 6-year old children”) that were “well known” to Cramton and that the primary purpose 19 of the Operating Agreement was to ensure Cramton’s retention as an employee in light of 20 Keely’s circumstances. (Doc. 322 at 3-4.) Unfortunately, Defendants did not attach any 21 evidence to their motion in an attempt to corroborate these factual assertions.14 22 14 Defendants submitted an array of evidence with their reply, including a declaration 23 from Keely. (Doc. 331-1.) This is improper. “The Ninth Circuit has held that arguments 24 raised for the first time in a reply are waived. District courts have interpreted this rule to apply to evidence as well.” Kruszka v. Toyota Motor Corp., 2011 WL 9820198, *3 (C.D. 25 Cal. 2011) (citation omitted). And although a party “may file ‘rebuttal’ evidence to 26 contravene arguments first raised by the non-moving party in its opposition,” TSI Inc. v. Azbil BioVigilant Inc., 2014 WL 880408, *1 (D. Ariz. 2014), the evidence submitted by 27 Defendants is not rebuttal evidence—it is evidence offered in belated support of the factual 28 assertions raised in their motion. Accordingly, the Court will not consider this evidence for purposes of evaluating Defendants’ motion.

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1 In response, Cramton argues that the documents in question were presented to her 2 in final form without the chance for negotiation, that she did not take Keely’s spouse’s 3 illness into account, and that Defendants have not produced any actual or admissible 4 evidence that she had any bargaining power. (Doc. 324 at 9.) In support of these 5 contentions, Cramton submits various pieces of evidence, including a declaration in which 6 she avers that “[n]either the [ECH Operating Agreement] nor the [ECO promissory note] 7 were jointly created documents. I had no involvement in their creation . . . [and] was also 8 unable to negotiate any aspect of [the two documents]. In fact, with respect to the [ECH 9 Operating Agreement], when presented with the document I was told what my interest in 10 the business would be and the form it would take.” (Doc. 324-4 ¶ 12.) 11 In general, the bargaining-power “factor does not require that the parties stand on 12 precisely equal footing.” Cannon v. Wells Fargo Bank N.A., 917 F. Supp. 2d 1025, 1058 13 (N.D. Cal. 2013) (quotations omitted). Courts have indicated a “gross disparity” may exist 14 where the party seeking to avoid enforcement of the waiver was “compelled to accept . . . 15 whatever terms it was offered” or was in “difficulty or some form of duress.” Phx. Leasing, 16 843 F. Supp. at 1385. Courts are less likely to find a gross disparity when a party “could 17 have walked away from the deal.” Cannon, 917 F. Supp. 2d at 1059. 18 The analysis here is complicated, as an initial matter, by Defendants’ failure to 19 submit evidence in support of their motion. The only evidence properly before the Court 20 with respect to the bargaining-power factor is the material attached to Cramton’s response, 21 which suggests that Cramton was presented with both documents on a take-it-or-leave-it 22 basis. This is not usually the hallmark of negotiation between two parties with relatively 23 equal bargaining power. 24 Nevertheless, the circumstances surrounding the execution of the ECH Operating 25 Agreement and the ECO promissory note aren’t remotely similar to the type of 26 circumstances in which other courts have found a gross disparity of bargaining power. For 27 example, one court found a gross disparity where a multi-national corporation included an 28 inconspicuous waiver in a form contract presented on a take-it-or-leave-it basis to a large

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1 swath of dealers. Dreiling v. Peugeot Motors of Am., Inc., 539 F. Supp. 402, 403 (D. Colo. 2 1982) (“A constitutional guarantee so fundamental as the right to jury trial cannot be 3 waived unknowingly by mere insertion of a waiver provision on the twentieth page of a 4 twenty-two page standardized form contract. . . . The 1978 Agreement appears to be 5 Peugeot’s standardized printed dealer contract, drafted by Peugeot. Obviously, the 6 plaintiffs had little, if any, opportunity to negotiate the provisions.”). Another court found 7 a gross disparity where “a multi-national, publicly traded manufacturing and distribution 8 conglomerate with 2016 revenues approaching one billion dollars” included a one-sided 9 jury waiver in its contract with “a local, family-owned and operated tile retailer” that 10 “remained at all times entirely dependent on continued supply from [the large company] to 11 remain in operation.” Servicios Comerciales Lamosa, S.A. de C.V. v. De la Rosa, 328 F. 12 Supp. 3d 598, 622 (N.D. Tex. 2018) (internal quotation marks omitted). 13 Here, in contrast, Cramton was a highly compensated corporate executive (see Part 14 II.C.2 infra), the purpose of the ECH Operating Agreement was to give her a substantial 15 ownership share in a closely held business, and she was the lender under the ECO 16 promissory note, not the borrower. (Doc. 324-1 at 2 [“Eat Clean Operations, LLC . . . (the 17 ‘Borrower’), promises to pay to the order of Kim Cramton (the ‘Lender’), . . . the principal 18 sum of Sixty Six Thousand Five Hundred Twenty Seven Dollars $66,527.00) (U.S.).”].) 19 These are not the type of arrangements that logically lend themselves to a finding of a gross 20 disparity of bargaining power. See generally Westside-Marrero Jeep Eagle, Inc. v. 21 Chrysler Corp., Inc., 56 F. Supp. 2d 694, 709 (E.D. La. 1999) (“To invalidate a waiver 22 provision, . . . the bargaining differential must be the kind of ‘extreme bargaining 23 disadvantage’ or ‘gross disparity in bargaining position’ that occurs only in certain 24 exceptional situations.”). Tellingly, each jury waiver applies bilaterally, binding all parties 25 equally. 26 The bottom line is that, although Defendants’ evidentiary failures prevent them from 27 showing that the bargaining-power factor cuts in their favor, it does not cut in Cramton’s 28 favor either. Regardless of whether one side had a modest advantage in bargaining power,

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1 the disparity was not “gross.” Accordingly, this factor is neutral. 2 2. Cramton’s business acumen 3 Defendants argue that Cramton was an experienced businesswoman because of her 4 long tenure in the restaurant industry, her high rate of pay, the many contracts she 5 negotiated (some of which contained jury waivers), and the fact she routinely sought the 6 advice of her attorneys when making decisions concerning contracts. (Doc. 322 at 4-5.) 7 Although Defendants again fail to submit any evidence in support of these assertions, they 8 do cross-reference a pair of documents that were filed during earlier stages of the case. The 9 first cross-referenced document is the amended complaint, in which Cramton alleged that 10 she “is experienced in the franchising business, with years of history in opening and starting 11 new franchises,” that she was “successful in [her] role [with Defendants], such that 12 throughout her career with Defendants, she sold approximately 100 new stores and signed 13 174 agreements to develop,” and that she was “eventually promoted . . . to the role of 14 Executive Vice President of Operations & Franchise Development,” which carried an 15 annual salary of $135,000. (Doc. 88 at 4.) The second cross-referenced document is a 16 declaration that Cramton filed at the summary judgment stage. (Doc. 173-2 at 56 ¶ 2.)15 It 17 states that “[p]rior to joining Grabbagreen, I had experience in the franchising industry with 18 Cold Stone Creamery, Subway, and Wendy[’]s.” (Id.) 19 In response, Cramton submits evidence that she did not graduate from college (Doc. 20 324-4 ¶¶ 1-2) and accuses Defendants of overstating her experience with respect to the 21 negotiation of contracts. (Doc. 324 at 9-10.) Additionally, during oral argument, 22 Cramton’s counsel made the somewhat remarkable argument that the Court must disregard 23 the factual assertions in the amended complaint (because Cramton didn’t personally sign it 24 and because allegations in a complaint are not evidence) and the factual assertions in 25 Cramton’s declaration (because those assertions were “puffery”). 26 27 15 This document is identified in Defendants’ motion as “Dkt. 159-3, at 56:1-2,” but 28 that document was stricken from the record. (Doc. 167.) It was later refiled at Doc. 173- 2 at 56.

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1 Jury waivers in business contracts will be enforced against individuals who 2 “lack . . . formal education” but are “shrewd” and experienced in business matters. Leasing 3 Serv. Corp. v. Crane, 804 F.2d 828, 832-33 (4th Cir. 1986). See also Phx. Leasing, 843 F. 4 Supp. at 1385 (finding waiver effective where the party opposing waiver was “not a novice 5 but was in fact experienced, professional and sophisticated in business dealings” and “it 6 [could] not be said that [the party] was anything less than competent, and fully able to look 7 out for its interests”). 8 Here, although Cramton lacks a college degree and Defendants did not submit any 9 evidence showing that she was represented by counsel during the negotiations at issue, the 10 amended complaint establishes that she has decades of experience in restaurant franchising 11 and management and eventually rose to a high-ranking executive position that carried a 12 six-figure salary. Am. Title Ins. Co. v. Lacelaw Corp., 861 F.2d 224, 226 (9th Cir. 1988) 13 (“Factual assertions in pleadings . . . are considered judicial admissions conclusively 14 binding on the party who made them.”). Cramton’s declaration, which she cannot now 15 seek to disavow as “puffery,” confirms this background. (Doc. 173-2 at 59 [“I [Kim 16 Cramton] declare under penalty of perjury that the foregoing is true and correct.”].) It 17 would be bizarre to conclude that such an individual is too unsophisticated to be bound by 18 a contract she signed (particularly a contract granting her a 18.6% ownership interest in a 19 closely held entity or a contract memorializing the terms of a $66,527 loan in which she is 20 the “lender”). This factor weighs strongly in favor of enforcement. 21 3. Opportunity to negotiate 22 Defendants assert, in a portion of their motion lacking any evidentiary citations, that 23 Cramton had the opportunity to negotiate the agreements at issue because she negotiated 24 other agreements with Defendants, often with the aid of counsel. (Doc. 322 at 5-7.) 25 Cramton responds that she did not have the opportunity to negotiate the terms of the ECH 26 Operating Agreement, that Defendants have not presented any evidence of actual 27 negotiation, and that “every attempt made by Plaintiff to negotiate any documents affecting 28 her ownership interest were summarily reject[ed] by Keely.” (Doc. 324 at 9, 11-12.)

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1 Defendants’ failure to submit evidence precludes them from meeting their burden 2 of proof with respect to the opportunity-to-negotiate factor. Their attempt to shift the 3 burden to Cramton—“Plaintiff offers no written evidence that Keely Newman or Kelli 4 Newman refused to negotiate the ECH Operating Agreement, nor any explanation as to 5 why this agreement would be non-negotiable when no others were non-negotiable” (Doc. 6 331 at 5)—is improper because they bear the burden. Accordingly, this factor weighs in 7 Cramton’s favor. 8 4. Conspicuousness of the waiver 9 Defendants argue the jury waivers are conspicuous because each appears in a 10 separate paragraph in all capital letters. (Doc. 322 at 7.) Cramton’s only response is that 11 conspicuousness is not enough to overcome an otherwise inequitable provision. (Doc. 324 12 at 12.) 13 A jury waiver is not considered conspicuous if it is “hidden or buried deep in the 14 contract.” Cannon, 917 F. Supp. 2d at 1058. When assessing conspicuousness, courts look 15 to whether the waiver is clearly labeled under a separate heading, what kind of font was 16 used, and where the waiver was placed within the contract. Id. See also Breham, 2010 17 WL 1735147 at *2. 18 Here, the jury waivers were conspicuous. The provision in the ECH Operating 19 Agreement is written in capital letters and appears under a separate heading. (Doc. 324-2 20 at 38-39.) The provision in the ECO promissory note is separately labeled, is written in 21 capital letters, and is located immediately above the signature block. (Doc. 324-1 at 3.) 22 Cramton doesn’t seem to dispute these provisions are conspicuous. (Doc. 324 at 12.) 23 Accordingly, this factor weighs in Defendants’ favor. 24 5. Conclusion 25 During oral argument, Cramton asserted that all four of the factors described above 26 must be satisfied before a jury waiver may be deemed valid and enforceable. Alternatively, 27 Cramton suggested that, if only two factors weigh in Defendants’ favor, then Defendants 28 have not met their burden of “51%.”

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1 These arguments lack merit. The factors do not form some sort of strict, conjunctive 2 test. See, e.g., Phx. Leasing, 843 F. Supp. at 1384 (“Some of the factors used to determine 3 whether a waiver was knowing and intelligent include . . . .”); Servicios Comerciales 4 Lamosa, 328 F. Supp. 3d at 619 (“In determining whether a jury-trial waiver was made 5 knowingly, voluntarily, and intelligently, courts in the Fifth Circuit generally balance four 6 factors . . . .”) (emphasis added). Instead, they merely provide a non-exclusive list of 7 considerations that courts often consult, and then balance, when deciding the ultimate 8 question of jury-waiver enforceability—whether the decision to sign the waiver was made 9 “knowingly and voluntarily.” In re Cnty. of Orange, 784 F.3d at 523. 10 Here, although Defendants created a relatively weak record by failing to submit 11 much evidence in support of their motion, they still have met their burden of demonstrating 12 that Cramton’s decision to waive her jury-trial rights under the ECH Operating Agreement 13 and the ECO promissory note was knowing and voluntary. Cramton is an experienced, 14 high-achieving business executive, the jury waivers are bilateral and conspicuous, there 15 was no gross disparity in bargaining power, and the contracts at issue are not adhesion- 16 style consumer contracts. Even when “indulg[ing] every reasonable presumption against 17 waiver of the jury trial right,” Lutz v. Glendale Union High Sch., 403 F.3d 1061, 1064 (9th 18 Cir. 2005) (quotations omitted), it cannot be said that Cramton’s choice to sign the jury 19 waivers was unknowing or involuntary. 20 D. Scope Of Waivers 21 1. ECH Operating Agreement 22 The jury waiver provision of the ECH Operating Agreement, to which Cramton, 23 Keely, and ECH are parties, provides as follows: 24 No party to this agreement . . . shall seek a jury trial in any lawsuit, proceeding, counterclaim, or any other litigation procedure based upon or 25 arising out of this agreement or any of the other agreements or the dealings 26 or the relationship between the parties. No party will seek to consolidate any such action, in which a jury trial has been waived, with any other action in 27 which a jury trial cannot or has not been waived. The provisions of this 28 section have been fully discussed by the parties hereto, and these provisions shall be subject to no exceptions. No party hereto has in any way agreed with

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1 or represented to any other party hereto that the provisions of this section will 2 not be fully enforced in all instances.

3 (Doc. 324-2 at 38-39, capitalization omitted.) 4 According to Defendants, this provision covers all of the remaining, non-stayed16 5 claims in this action. (Doc. 322 at 8-9.) Specifically, as for Counts Seven, Nine, and Ten 6 (the claims against Keely and ECH for the fair market value of Cramton’s membership 7 interest), Defendants argue this provision is applicable because (1) each party seeking 8 enforcement is a party to the Operating Agreement and (2) Counts Seven, Nine, and Ten 9 all constitute claims “based upon or arising out of” the Operating Agreement. As for Count 10 Four (the minimum wage claim against Keely and GFL), Defendants argue that Keely may 11 seek enforcement because she is a party to the Operating Agreement and, although Count 12 Four is not “based on or arising out of” the Operating Agreement, the waiver is “very 13 broad” and also includes a different clause that encompasses claims (such as minimum 14 wage claims) arising from “the dealings or the relationships between the parties.” Finally, 15 as for GFL, Defendants argue that (1) GFL may seek direct enforcement of the Operating 16 Agreement’s jury waiver, even though it isn’t a party to the Operating Agreement, because 17 it is “a wholly-owned subsidiary of ECH and an alleged co-employer of Keely,” and 18 alternatively (2) Cramton cannot seek a jury trial on her claim against GFL because she 19 chose to “consolidate” that claim with her claims against Keely and ECH, thereby 20 triggering the provision of the waiver that “[n]o party will seek to consolidate any such 21 action, in which a jury trial has been waived, with any other action in which a jury trial 22 cannot or has not been waived.” (Id.) 23 In response, Cramton argues that, as a matter of law, a contractual jury waiver can 24 only encompass claims “related to the subject matter of the agreement containing the 25 waiver.” (Doc. 324 at 3-4.) Applying this principle, Cramton argues that the minimum 26 27 16 Defendants don’t address whether Cramton has waived her right to a jury trial on 28 Count Five, which is her claim against ECO for breach of the promissory note. That claim has been stayed due to ECO’s bankruptcy.

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1 wage claim in Count Four isn’t covered because it’s a statutory claim unrelated to the 2 Operating Agreement or the promissory note. Cramton also notes that GFL isn’t a party 3 to either contract. As for the remaining claims, Cramton acknowledges that Count Seven 4 (breach of the implied duty of good faith and fair dealing) “is tied to the Operating 5 Agreement” but argues that Counts Nine and Ten (negligent misrepresentation and fraud) 6 are not covered because they are based on misrepresentations and the breach of common 7 law duties, not a breach of the Operating Agreement. 8 Defendants largely have the better side of these arguments. The problem with 9 Cramton’s position is that the legal premise she seeks to invoke—i.e., contractual jury 10 waivers may only encompass claims related to the “subject matter” of the underlying 11 contract—is illusory. Cramton cites two district court decisions in support of this alleged 12 principle but neither supports her position. 13 In Phoenix Leasing, the waiver provision was worded differently than the waiver 14 provision in the ECH Operating Agreement. It covered “any action brought on or with 15 respect to this agreement . . . or any other agreements executed in connection herewith.” 16 843 F. Supp. at 1388. After conducting a careful textual analysis of this provision, the 17 court held that it encompassed any claim that “would require reference to, or . . . relates to 18 or pertains to the loan documents covered by the waiver.” Id. Phoenix Leasing thus 19 undermines Cramton’s position in two different ways. First, it suggests that courts must 20 conduct a careful analysis of a jury waiver’s actual text when assessing the waiver’s scope 21 (instead of inflexibly applying Cramton’s proposed rule that all jury waivers, irrespective 22 of their wording, are limited to claims “related to the subject matter of the agreement 23 containing the waiver”). Second, it confirms that jury waivers need not be construed as 24 having such a subject-matter limitation—as noted, the waiver provision in that case was 25 deemed broad enough to encompass any claim that would “require reference” to the 26 underlying contract. Here, Cramton tacitly acknowledges that Counts Nine and Ten will 27 “require reference” to the Operating Agreement because it provides the foundation for her 28 theory of damages. (Doc. 338 at 2-3 [“It is th[e] undisputed acquisition of Cramton’s

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1 membership interest that will frame the primary damages dispute at trial. Cramton 2 contends that Keely Newman’s September 18, 2017 misrepresentations caused Cramton to 3 resign. That allowed Newman to exercise her option [under the Operating Agreement] and 4 buy Cramton’s membership units in ECH for $1.00.”].) 5 Similarly, in Okura & Co. (America), Inc. v. Careau Group, 783 F. Supp. 482 (C.D. 6 Cal. 1991), the waiver provision was worded differently than the waiver provision in the 7 ECH Operating Agreement. It covered “any action, proceeding or counterclaim arising 8 out of or relating to this Agreement or any of the Operative Agreements or the actions of 9 the Lender in the enforcement thereof.” Id. at 488. After conducting a careful, fact-bound 10 analysis of a bevy of different claims, counterclaims, and third-party claims, the court 11 concluded that “the jury waiver provisions . . . are valid and applicable to most of the causes 12 of action alleged in the first amended complaint and first amended counterclaim.” Id. at 13 491. For example, the court concluded that “while the seventh and twelfth causes of action 14 would appear at first blush to be unrelated the financing agreement, they do in fact derive 15 from duties allegedly created by the financing agreement.” Id. at 490. However, the court 16 also concluded that a handful of claims and counterclaims fell outside the waiver because 17 they were based upon the alleged breach of “an independent contract that does not contain 18 a jury trial waiver.” Id. at 489. Okura, in short, does not support (and, if anything, 19 undermines) Cramton’s claim that all jury waivers, irrespective of their actual wording, 20 must be construed as encompassing only claims that are related to the subject matter of the 21 underlying contract. 22 Cramton’s position also overlooks that the Ninth Circuit has previously upheld, 23 albeit in an unpublished decision, a district court’s determination that a plaintiff “waived 24 its right to a jury trial on all its claims” where the operative provision was “broadly worded, 25 and nothing in its text suggests that it is limited to disputes arising under the contract.” 26 Frontline Processing Corp. v. First State Bank of Eldorado, 389 Fed. App’x 748, 754 (9th 27 Cir. 2010).17 Here, the inference that Keely, ECH, and Cramton intended for their jury 28 17 Similarly, in the somewhat analogous context of forum-selection clauses, courts

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1 waiver to encompasses claims beyond those strictly arising under the Operating Agreement 2 is particularly strong because the waiver draws a distinction between claims “based upon 3 or arising out of this agreement” and claims “based upon or arising out of . . . the dealings 4 or relationships between the parties” and specifies that both categories of claims are 5 covered. It would violate basic principles of contract interpretation to construe the latter 6 category as coextensive with the former. Miller v. Hehlen, 104 P.3d 193, 197 (Ariz. Ct. 7 App. 2005) (“[W]e must interpret a contract in a way that gives meaning to all its material 8 terms and renders none superfluous.”). 9 For these reasons, Cramton has waived her right to a jury trial with respect to Counts 10 Seven, Nine, and Ten. Cramton doesn’t dispute that Keely and ECH, the parties against 11 whom those claims are asserted, have standing to enforce the Operating Agreement’s 12 waiver provision and the Court easily concludes that the broad wording of that provision 13 is capacious enough to encompass Counts Seven, Nine, and Ten. As noted, the waiver 14 covers not only claims “based upon or arising out of this agreement” but also claims “based 15 upon or arising out of . . . the dealings or the relationship between the parties.” Cramton 16 have upheld the validity of clauses that encompass any claim arising from the parties’ 17 “relationship,” irrespective of whether the claim arises from the contract containing the 18 clause. See, e.g., Cascade Promotion Corp. v. AMA Sys., LLC, 2007 WL 1574544, *1 (N.D. Cal. 2007) (enforcing forum-selection clause under which the parties “consent[ed] 19 to the exclusive jurisdiction of the courts of the State of Maryland, USA for any dispute 20 arising out of their relationship”); John F. Coyle, Interpreting Forum Selection Clauses, 104 Iowa L. Rev. 1791, 1804 n.47 (2019) (“The broadest possible version of the forum 21 selection clause is one stipulating the forum for any claim arising out of the parties’ 22 relationship. Such a clause will cover claims that are completely unrelated to the contract so long as they relate in some way to the relationship between the parties—as they almost 23 always will.”). Additionally, although arbitration clauses arguably should be construed as 24 encompassing only claims that “arise from” the underlying contract, see Revitch v. DIRECTV, LLC, __ F.3d __, 2020 WL 5814095, *7-10 (9th Cir. 2020) (O’Scannlain, J., 25 concurring), this limitation is compelled by the text of the Federal Arbitration Act. See 9 26 U.S.C. § 2 (“A written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or 27 transaction . . . shall be valid, irrevocable, and enforceable . . . .”) (emphasis added). 28 Cramton has not identified any comparable statute that limits the permissible scope of contractual jury waivers.

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1 all but concedes this wording is broad enough to encompass Count Seven and the Court 2 concludes it encompasses Counts Nine and Ten, too. There is a strong argument those 3 claims are “based upon or arising out of” the Operating Agreement because it provides the 4 foundation for Cramton’s theory of damages on each claim—she contends that Keely and 5 ECH, through their tortious conduct and their invocation of the Operating Agreement’s $1 6 buyout clause, improperly deprived her of the 18.6% membership interest she possessed 7 under the Operating Agreement. And even those claims aren’t “based upon or arising out 8 of” the Operating Agreement, they are based upon “the dealings or the relationship between 9 the parties.” 10 Cramton has also waived her right to a jury trial on Count Four as it applies to Keely. 11 Again, Keely has standing to enforce the Operating Agreement’s waiver provision and, 12 although the substance of Count Four (minimum wages) doesn’t arise from the subject 13 matter of the Operating Agreement (which was intended “to provide for continuity and 14 harmony in the management and operation of [ECH]” by “set[ting] forth [the parties’] 15 agreements regarding the management of [ECH] and the ownership of the Units,” see Doc. 16 324-2 at 2), the Operating Agreement’s waiver provision doesn’t contain a subject matter 17 limitation—instead, it broadly encompasses all claims “based on or arising out of . . . the 18 dealings or the relationship between the parties.” It is hard to understand how a claim that 19 Keely failed to pay minimum wages to Cramton could be characterized as something other 20 than a claim arising out of those parties’ “dealings” and “relationship.” Cf. Frontline 21 Processing Corp., 389 Fed. App’x at 754. 22 In contrast, Cramton has not waived her right to a jury trial on Count Four as it 23 applies to GFL. GFL is not a party to the Operating Agreement and the waiver provision 24 in that agreement, by its terms, binds only each “party” and that party’s assignee, successor, 25 heir, or personal representative. GFL is not Keely’s or ECH’s assignee, successor, heir, or 26 personal representative. Paracor Fin., Inc. v. Gen. Elec. Cap. Corp., 96 F.3d 1151, 1166 27 (9th Cir. 1996) (“[A] jury waiver is a contractual right and generally may not be invoked 28 by one who is not a party to the contract.”). Finally, although the Operating Agreement’s

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1 waiver includes a clause that prohibits the “consolidation” of an “action” in which a jury 2 trial has been waived with an “action” in which a jury trial has not been waived, no such 3 consolidation occurred here. Defendants’ position seems to be that Cramton violated this 4 clause by asserting her claim against GFL in the same action in which she asserted her 5 claims against ECH and Keely, but “consolidation” is a term of art under the Federal Rules 6 of Civil Procedure. It occurs when a court joins two different “actions” due to the presence 7 of common questions of law or fact in each. See Fed. R. Civ. P. 42(a). That didn’t occur 8 here—Cramton didn’t initially file separate actions against GFL and Keely/ECH and then 9 seek to have those two actions consolidated.18 10 2. ECO Promissory Note 11 The jury waiver provision of the ECO promissory note, to which Cramton and ECO 12 are parties, provides as follows: 13 The parties acknowledge that the right to a trial by jury is a constitutional right, but one that may be waived. After consulting (or having had the 14 opportunity to consult) with counsel of their choice, knowingly and 15 voluntarily, and for their mutual benefit, the parties waive any right to trial by jury in the event of litigation regarding the performance or enforcement 16 of, or in any way related to, this agreement. 17 (Doc. 324-1 at 3, capitalization omitted.) 18 Given the conclusions set forth in Part II.D.1 above, little needs to be said about the 19 scope of this provision. The Court has already concluded that Cramton waived her right 20 to a jury trial as to all non-stayed claims except for the minimum wage claim in Count Four 21 against GFL. The waiver in the ECO promissory note doesn’t cover this claim—GFL is 22 not a party to the ECO promissory note and a contractual jury waiver “generally may not 23 be invoked by one who is not a party to the contract.” Paracor, 96 F.3d at 1166. 24 25 18 To the extent Defendants intended for the term “consolidation” in the Operating 26 Agreement’s waiver provision to have a different and more colloquial meaning, the Court must do its best to assess the plain meaning of the actual contractual language, not some 27 secret interpretation. At a minimum, the term “consolidation” is ambiguous, and “[u]nlike 28 arbitration clauses, courts generally construe jury waivers narrowly.” Paracor, 96 F.3d at 1166 n.21.

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1 E. Conclusion 2 Cramton has waived her right to a jury trial on Counts Seven, Nine, and Ten and on 3 Count Four as to Keely. She retains her right to a jury trial on Count Four as to GFL. 4 Defendants argue that, given this outcome, the Court should “sever Count [Four] 5 against GFL from the rest of the case to seek a jury trial in that instance alone.” (Doc. 322 6 at 8.) Cramton argues the Court should “try the case together and consider any non-jury 7 claims . . . as being submitted to the jury on an advisory basis.” (Doc. 324 at 4.) 8 Although both parties’ suggestions have merit to them, Defendants’ proposal is 9 preferable. This case is already nearly three years old and the COVID-19 pandemic has 10 made it very difficult to schedule civil jury trials. Severing Cramton’s claim against GFL 11 from the remaining claims, and then scheduling the remaining claims for a bench trial as 12 soon as practicable, will ensure that the resolution of the big-ticket claims in this case isn’t 13 delayed any longer than necessary—although Cramton seeks economic damages of nearly 14 $500,000, plus unspecified emotional distress damages, on her claims in Counts Seven, 15 Nine, and Ten, she seeks far less via her minimum wage claim against GFL and Keely in 16 Count Four. 17 The Court also finds it unnecessary, in its discretion, to empanel an advisory jury 18 for purposes of the bench trial. Utilizing an advisory jury would likely result in delay and 19 would not, in any event, be helpful to the Court. See, e.g., Kyei v. Or. Dept. of Trans., 497 20 Fed. App’x 711, 713 (9th Cir. 2012) (“We . . . review for abuse of discretion the district 21 court’s decision to consult an advisory jury.”); Ollier v. Sweetwater Union High Sch. Dist., 22 267 F.R.D. 338, 339 (S.D. Cal. 2010) (denying request for advisory jury “because an 23 advisory jury would add unnecessary expense, time and complexity to a case that has no 24 special factors or extraordinary circumstances present”). Additionally, if Cramton prevails 25 on her minimum wage claim against Keely during the bench trial, this could obviate the 26 need to schedule a later jury trial on the same claim against GFL. 27 … 28 …

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1 III. Motion For Reconsideration 2 Defendants previously filed, and the Court previously denied, a motion for 3 reconsideration of the December 2019 summary judgment order. (Docs. 249, 251.) 4 Undeterred, Defendants have now filed another motion for reconsideration of that order. 5 (Doc. 339.) Their argument, in a nutshell, is that Cramton’s opposition to their summary 6 judgment motion contained “false statements” concerning her entitlement to a portion of 7 the Kahala sale proceeds, which Cramton has since “fully reversed and recanted.” (Id. at 8 2-3.) Defendants argue they were prejudiced by these false statements in two ways: (1) 9 “[t]hese false statements cast Defendants in an unduly harsh and negative light when, in 10 fact, Defendants did nothing wrong and certainly were not the legal cause of any harm” 11 (id. at 4); and (2) the Court applied a “Contrary Analysis” when dismissing their “well- 12 founded counterclaims” (id. at 5). 13 These arguments lack merit. As discussed in the order denying Defendants’ earlier 14 reconsideration motion, Defendants didn’t move for summary judgment on Counts Seven, 15 Nine, or Ten based on the insufficiency of Cramton’s valuation evidence. (Doc. 251 at 2- 16 3.) Indeed, “Defendants seemed to concede at points in their summary judgment briefing 17 that Cramton had sustained financial losses by resigning from the company in September 18 2017 and thus missing out on the subsequent Kahala acquisition.” (Id. at 3.) Thus, 19 Cramton’s unfortunate mischaracterization of her damages theory in her summary 20 judgment response—which she corrected both beforehand (in her MIDP disclosures) and 21 afterward (in the current briefing and in the final pretrial order) had no bearing on 22 Defendants’ affirmative entitlement to summary judgment. 23 In contrast, Cramton did identify the absence of evidence of damages as one of the 24 bases on which she was seeking summary judgment on Defendants’ counterclaims. 25 Accordingly, when Defendants failed to proffer any evidence of damages in response to 26 her motion, the Court ruled in her favor. (Doc. 247 at 62 [“Because Cramton moved for 27 summary judgment on that ground that the Corporate Defendants can’t prove any damages 28 associated with this theory, it was incumbent upon the Corporate Defendants to identify

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1 some damage-related evidence in their response. They failed to do so—although their 2 response asserts they ‘incurred considerable expense in attempting to recover deleted 3 information,’ they cite no evidence in support of this statement.”].) This wasn’t disparate 4 treatment. The Court simply, and properly, limited its ruling to the claims and arguments 5 actually presented by the parties in their moving papers. See generally United States v. 6 Sineneng-Smith, 140 S.Ct. 1575, 1579 (2020) (“In our adversarial system of adjudication, 7 we follow the principle of party presentation. . . . [W]e rely on the parties to frame the 8 issues for decision and assign to courts the role of neutral arbiter of matters the parties 9 present.”) (quotation omitted). 10 *** 11 Accordingly, IT IS ORDERED that: 12 (1) Cramton’s motion to exclude certain damages-related evidence and 13 arguments (Doc. 320) is granted in part and denied in part. 14 (2) Defendants’ motion to exclude certain damages-related evidence and 15 arguments (Doc. 321) is granted in part and denied in part. 16 (3) Defendants’ motion to strike Cramton’s jury demand (Doc. 322) is granted 17 in part and denied in part. 18 (4) Defendants’ motion for reconsideration (Doc. 339) is denied. 19 … 20 … 21 … 22 … 23 … 24 … 25 … 26 … 27 … 28 …

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1 (5) A telephonic status conference is set for October 13, 2020 at 10:00 a.m. In 2 advance of the status conference, the parties are ordered to meet and confer concerning (1) 3 the identification of mutually agreeable dates in the near future on which the bench trial 4 may commence and (2) the extent to which the previous allocation of trial time—“the Court 5 allocates 20 trial hours to each side, which includes counsels’ opening statements, closing 6 arguments and examination of witnesses” (Doc. 309 at 1)—may be reduced now that the 7 trial will be a bench trial. The parties should be prepared to discuss these topics during the 8 status conference. 9 Dated this 2nd day of October, 2020. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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