1 2 3 4 5 UNITED STATES DISTRICT COURT 6 EASTERN DISTRICT OF CALIFORNIA 7 8 EL CORTE INGLES, S.A., a Spanish CASE NO. 1:19-cv-00213-AWI-JLT Corporation, 9 Plaintiff, ORDER ON PLAINTIFF’S MOTION 10 v. FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY ADJUDICATION 11 CITY LIGHTS, LLC, a California LLC; and MARKCHRIS INVESTMENTS, LLC, a 12 California LLC, (Doc. No. 20)
13 Defendants.
14 15 16 17 INTRODUCTION 18 Plaintiff El Corte Ingles, S.A. (“ECI”) filed this action on February 12, 2019 alleging 19 breach of contract against City Lights, LLC (“City Lights”) and MarkChris Investments, LLC 20 (“MarkChris” and with City Lights, “Defendants”) in connection with a real estate transaction in 21 Bakersfield, California. MarkChris alleged affirmative defenses in its Answer to the Complaint 22 (the “MarkChris Answer”). City Lights did not do so. 23 ECI now moves for summary judgment on its claim for breach of contract and on the 24 affirmative defenses set forth in the MarkChris Answer. For the reasons set forth below, the Court 25 will grant the motion in part and deny the motion in part, in addition to striking two of 26 MarkChris’s affirmative defenses. 27 FACTUAL BACKGROUND 28 ECI has set forth sworn statements and documentary evidence in support of this Motion 1 that show the following: 2 On or about December 23, 2016, ECI sold real property located in a mall in Bakersfield, 3 California to City Lights and MarkChris. Doc. No. 22 ¶ 2. The acquisition price for the property 4 included a promissory note (the “Note”) issued by Defendants to ECI in the principal amount of 5 $208,823.50. Id. ¶ 2; Doc. No. 22-1. The Note provides for interest at 5% per annum and contains 6 the following provisions regarding late payments: 7 The undersigned and Lender agree that it is extremely difficult and impracticable to fix actual damages for failure to make payments when due; therefore, the 8 undersigned agrees to pay as liquidated damages a late charge of four percent (4%) of any installment which does not reach Lender within five (5) business days after 9 the due date. The late charges that accrue shall be payable on the next installment due date. Anything herein to the contrary notwithstanding, if a late charge is 10 assessed hereunder, such amount shall not exceed the maximum amount permitted by law. Additionally, the amount of any interest payment that is not paid on or 11 before the date which is five (5) business days after the date on which it becomes due, as set forth above, shall bear interest from said date until paid at the rate 12 charged from time to time on the principal owing hereunder.1 13 Doc. No. 22-1. 14 The “Maturity Date” for the Note is defined as the date on which “[t]he full amount of all 15 interest and principal then remaining unpaid, and any other amounts then owing [under the Note], 16 shall be due and payable.” Doc No. 22-1. The original Maturity Date for the Note was December 17 23, 2017, but the Note contained a provision stating that Defendants could extend the Maturity 18 Date to June 23, 2018 by making a principal paydown of at least $25,000 on or before December 19 23, 2017. Doc. No. 22 ¶ 3; Doc. No. 22-1. 20 Defendants made a $25,000 principal payment on December 20, 2017, thereby extending 21 the Maturity Date to June 23, 2018. Doc. No. 22 ¶ 4; Doc. No. 22-2. This $25,000 payment— 22 which is the only payment of principal that has been made on the Note—reduced the principal 23 balance of the Note to $183,823.50. Doc. No. 23 ¶4. At the request of Defendants, ECI later 24 agreed to extend the Maturity Date for the Note from June 23, 2018 to December 23, 2018, as 25 confirmed in a letter from MarkChris to ECI’s attorney, Thomas McPeters. Doc. No. 22 ¶5; Doc. 26 No. 22-3. 27 Defendants made monthly interest payments, as required by the Note, on the principal 28 1 balance through October 28, 2018, but have not made payments on the Note of any kind since 2 October 2018. Doc. No 22 ¶ 6; Doc. No. 22-4. 3 ECI calculates that the amount owed on the Note following the December 23, 2018 4 Maturity Date was $193,444.46, including the principal balance of $183,823.50, unpaid interest 5 through December 23, 2018 in the amount of $2,119.38, and liquidated damages for late payments 6 (i.e., late fees) in the amount of $7,440.17. Doc. No. 22 ¶ 8; Doc. No. 22-5. Further, ECI contends 7 that interest on that $193,444.46 balance accrues at a rate of 5% per annum—which, according to 8 ECI, comes to $26.50 per day—until paid. Doc. No. 22 ¶ 8. As such, ECI contends that as of 9 October 1, 2019, the amount payable on the Note was $200,890.75. Doc. No. 22 ¶ 8; Doc. 22-5. 10 ECI brings a claim for breach of contract and damages based on the foregoing allegations. 11 Doc. No. 2 ¶¶ 8-16. 12 City Lights admits in its Answer (the “City Lights Answer”) that Defendants issued the 13 Note, as described by ECI, and made a single $25,000 principal payment on the Note, extending 14 the Maturity Date to June 23, 2018 and reducing the principal balance from $208,823.50 to 15 $183,823.50. Doc. No. 6 ¶¶ 9-10 & 15; see also Doc. No. 26 at 2:20-22 (stating that “Defendant, 16 City Lights, admits the core facts of the complaint”). City Lights did not allege any affirmative 17 defenses in its Answer, see Doc. No. 6, and did not file an opposition to this Motion. 18 MarkChris, for its part, admits that a principal payment of $25,000 was made, which 19 extended the Maturity Date to June 23, 2018.2 Doc. No. 19 ¶ 8. MarkChris also admits that ECI 20 later agreed to extend the Maturity Date from June 23, 2018 to December 23, 2018 and that 21 MarkChris sent a letter to ECI confirming that agreement. Id. ¶ 11. Further, MarkChris admits that 22 “Defendants made monthly interest payments based on the outstanding principal balance [of the 23 Note] until 2018, when the interest payments stopped.” Id. ¶ 12. MarkChris purports to allege 24 eleven affirmative defenses in its Answer, including uncertainty, failure to state a claim, excuse, 25 waiver, estoppel, release, accord and satisfaction, modification of contract, acts or omissions of 26
27 2 The reference to “June 23, 2017” in paragraph 8 of the MarkChris Answer, Doc. No. 19 ¶ 8, appears to be a typographical error based on an identical error—stating “June 23, 2017” instead of “June 23, 2018”—in the 28 Complaint. Doc. No. 2 ¶ 10. In any event, none of this Order depends in any part on whether June 23, 2018 was 1 third parties, failure to mitigate damages, and setoff. Doc. No. 19 at 3:5-5:5. Unlike City Lights, 2 MarkChris filed an Opposition to ECI’s Motion for Summary Judgment, but the Opposition is not 3 supported by sworn statements or documentary evidence. See Doc. No. 25. 4 PLAINTIFF’S MOTION 5 ECI contends that the undisputed facts in this case show, as a matter of law, that the 6 Defendants breached the terms of the Note and that ECI is entitled to recover damages equaling 7 the total amount payable on the Note (in principal, interest and liquidated damages for late 8 payments) as of December 23, 2018 (the final Maturity Date), plus all interest accruing on that 9 amount through the date of payment. Doc. No. 21, Part III.B. Further, ECI asserts that the eleven 10 affirmative defenses set forth in the MarkChris Answer are unsupported by evidence and should 11 therefore be “summarily adjudicated and dismissed.” Id., Part III.C. 12 Opposition to Plaintiff’s Motion 13 MarkChris filed an Opposition to ECI’s Motion. City Lights did not. MarkChris asserts in 14 its Opposition that the declaration submitted by ECI’s attorney (the “McPeters Declaration”) is the 15 “sole evidentiary support” for the Motion and that “[n]o further, material evidence is given in 16 support of the [Motion], either by [ECI’s attorney] or by anyone else.” Doc. No. 25 at 2:25-3:2. 17 Further, MarkChris argues that the Motion must be denied as to the affirmative defenses set forth 18 in the MarkChris Answer because ECI failed “to satisfy its threshold burden of presenting 19 evidence which negates the[] affirmative defenses, or which shows that MarkChris lacks 20 evidentiary support for [its] affirmative defenses.” Doc. No. 25 at 3:6-9 & Part II. MarkChris did 21 not file a declaration or any other form of evidence in connection with its Opposition. 22 SUMMARY JUDGMENT FRAMEWORK 23 Summary judgment is proper when it is demonstrated “that there is no genuine issue as to 24 any material fact and that the moving party is entitled to a judgment as a matter of law.” 25 Fed.R.Civ.P. 56(c); Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970); Fortyune v. 26 American Multi-Cinema, Inc., 364 F.3d 1075, 1080 (9th Cir.2004). The party seeking summary 27 judgment bears the initial burden of informing the court of the basis for its motion and of 28 identifying the portions of the declarations (if any), pleadings, and discovery that demonstrate an 1 absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); 2 Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir.2007). A fact is “material” if it 3 might affect the outcome of the suit under the governing law. See Anderson v. Liberty Lobby, 4 Inc., 477 U.S. 242, 248-49 (1986); United States v. Kapp, 564 F.3d 1103, 1114 (9th Cir.2009). A 5 dispute is “genuine” as to a material fact if there is sufficient evidence for a reasonable jury to 6 return a verdict for the non-moving party. Anderson, 477 U.S. at 248; Freecycle Sunnyvale v. 7 Freecycle Network, 626 F.3d 509, 514 (9th Cir.2010). 8 Where the moving party will have the burden of proof on an issue at trial, the movant must 9 affirmatively demonstrate that no reasonable trier of fact could find other than for the movant. 10 Soremekun, 509 F.3d at 984. Where the non-moving party will have the burden of proof on an 11 issue at trial, the movant may prevail by presenting evidence that negates an essential element of 12 the non-moving party’s claim or by showing that there is an absence of evidence to support an 13 essential element of the non-moving party’s claim. See James River Ins. Co. v. Herbert Schenk, 14 P.C., 523 F.3d 915, 923 (9th Cir.2008); Soremekun, 509 F.3d at 984. If the moving party meets 15 that burden, the burden then shifts to the non-moving party to designate specific facts 16 demonstrating the existence of genuine issues for trial. Coomes v. Edmonds Sch. Dist. No. 15, 816 17 F.3d 1255, 1259 n.2 (9th Cir.2016) (quoting In re Oracle Corp. Sec. Litig., 627 F.3d 376, 387 (9th 18 Cir.2010)); see also, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). 19 The opposing party cannot “‘rest upon the mere allegations or denials of [its] pleading’ but must 20 instead produce evidence that ‘sets forth specific facts showing that there is a genuine issue for 21 trial.’” Estate of Tucker v. Interscope Records, 515 F.3d 1019, 1030 (9th Cir.2008) (citation and 22 internal alterations omitted). Where, however, a moving party fails to carry its initial burden, then 23 “the nonmoving party has no obligation to produce anything, even if the non-moving party would 24 have the ultimate burden of persuasion at trial.” Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 25 F.3d 1099, 1102-03 (9th Cir.2000). 26 In all events, the opposing party’s evidence is to be believed, and all justifiable inferences 27 that may be drawn from the facts placed before the court must be drawn in favor of the opposing 28 party. See Anderson, 477 U.S. at 255; Matsushita, 475 U.S. at 587; Narayan v. EGL, Inc., 616 1 F.3d 895, 899 (9th Cir.2010). While a “justifiable inference” need not be the most likely or the 2 most persuasive inference, a “justifiable inference” must still be rational or reasonable. See 3 Narayan, 616 F.3d at 899. Summary judgment may not be granted “where divergent ultimate 4 inferences may reasonably be drawn from the undisputed facts.” Fresno Motors, LLC v. Mercedes 5 Benz USA, LLC, 771 F.3d 1119, 1125 (9th Cir.2015); see also Holly D. v. Cal. Inst. of Tech., 339 6 F.3d 1158, 1175 (9th Cir.2003). 7 ANALYSIS 8 The Court first decides the Motion as to ECI’s claim for breach of contract and damages, 9 and then evaluates issues relating to the affirmative defenses set forth in the MarkChris Answer. 10 I. ECI’s Claim for Breach of Contract 11 As set forth below, the Court finds that ECI has shown that Defendants are liable for 12 breach of contract under the Note, but that ECI has not established that it is entitled to judgment as 13 a matter of law with respect to damages from said breach. 14 a. Liability for Breach of Contract 15 To be entitled to recover for breach of contract under California law, a plaintiff must plead 16 and prove the following elements: (1) the existence of a contract, (2) plaintiff’s performance or 17 excuse for nonperformance, (3) defendant’s breach, and (4) resulting damage to the plaintiff. 18 Oasis West Realty, LLC v. Goldman, 51 Cal.4th 811, 821 (2011) (citing Reichert v. General Ins. 19 Co., 68 Cal.2d 822, 830 (1968)). 20 Here, ECI presents sworn statements and documents showing the existence of a contract 21 between ECI, on the one hand, and each of the Defendants, on the other, in the form of the Note. 22 Doc. No. 23, Undisputed Material Fact (“UFM”) 1. In addition to setting forth the terms and 23 payment history of the Note, ECI presents evidence showing that ECI performed its obligations 24 under the Note, by selling real property to Defendants, but that the Defendants breached the 25 agreement by failing to make certain payments as to principal, interest and liquidated damages 26 required under the Note. Doc. No. 22 ¶ 2; Doc. No. 23, UFM Nos. 1-8. Further, ECI shows that it 27 suffered economic damages as a result of Defendants’ breach in the form of these lost payments. 28 Doc. No. 23, UMF No. 9. 1 City Lights filed no opposition to ECI’s Motion and the City Lights Answer expressly 2 admits that Defendants issued the Note to ECI. See Doc. No. 6 ¶ 9. Further, City Lights makes 3 various admissions as to the terms, principal balances and maturity dates under the Note, including 4 admissions that the original principal balance due under the Note was $208,823.50 and that the 5 Note provided for interest at a rate of 5% per annum, as well as a 4% charge on late installment 6 payments. Doc. No. 2 ¶¶ 9, 10, 15. 7 MarkChris, for its part, did file an Opposition to ECI’s Motion, but it is not supported by 8 evidence of any kind and makes no showing whatsoever as to why the Court should not credit 9 evidence set forth by ECI. See Doc. No. 25. Further, MarkChris admits to making a principal 10 payment in the amount of $25,000 on the Note and to making “monthly interest payments based 11 on the outstanding principal balance until October 2018,” in addition to admitting that interest 12 payments under the Note stopped in October 2018 and that the Maturity Date of the Note was 13 extended December 23, 2018. Doc. No. 19 ¶¶ 7-10. 14 In light of the evidence set forth by ECI, the admissions in Defendants’ Answers, and the 15 Defendants’ failure to call any of ECI’s evidence into question, the Court finds that ECI has 16 satisfied its burden to demonstrate that there is no genuine dispute that the Note constitutes a 17 contract between ECI and the Defendants; that ECI performed under the Note; that Defendants 18 breached the Note by failing to make required payments; and that ECI suffered economic damages 19 as a result of Defendants’ breach. See Celotex, 477 U.S. at 323; Soremekun, 509 F.3d at 984. 20 The Court, therefore, GRANTS summary judgment in ECI’s favor on the issue of liability 21 on ECI’s claim for breach of contract as to each of the Defendants. See Fed.R.Civ.P 56(a) 22 (permitting summary judgment on “part of” a claim or defense); see also, Pacific Fruit Exp. Co. v. 23 Akron, Canton & Youngstown R. Co., 524 F.2d 1025 (9th Cir.1975) (affirming summary 24 judgment on issue of liability); KMLA Broad. Corp. v. Twentieth Century Cigarette Vendors 25 Corp., 264 F.Supp. 35, 37 (C.D.Cal. 1967) (finding case appropriate for “partial summary 26 judgment on the question of liability”). 27 b. Damages for Breach of Contract 28 As to the amount of damages ECI suffered as a result of the Defendants’ breach of the 1 Note, the Court finds that the original principal balance on the Note was $208,823.50 and that 2 Defendants made a single $25,000 principal payment on the Note on December 20, 2017, reducing 3 the principal balance to $183,823.50. Doc. No. 23, UMF Nos. 1-4. Further, the Court finds that all 4 interest payments due on the Note were made through October 2018, and that no payments of any 5 kind have been made on the Note since October 2018. Id., UMF Nos. 6-7. Thus, the Court finds, 6 as a matter of law pursuant to Rule 56(g) of the Federal Rules of Civil Procedure, that as of 7 November 1, 2018, the principal balance on the Note was $183,823.50. See Fed.R.Civ.P. 56(g); 8 id., 2010 Advisory Committee Notes (stating that “the court may decide whether to apply the 9 summary-judgment standard to dispose of a material fact that is not genuinely in dispute”). That 10 fact is therefore established in this case. See Campbell v. Lockheed Martin Corp., 2016 WL 11 10654049, at *1-*2 (S.D.Cal. Mar. 28, 2016), amended on reconsideration in part, 2016 WL 12 1667960 (S.D.Cal. Apr. 27, 2016) (stating that Rule 56(g) allows district courts to enter an order 13 establishing facts in a case and that such facts are not subject to trial). 14 As to other amounts due under the Note, the Note provides for interest on “unpaid 15 principal … at the annual rate of five percent (5.0%) per annum” and that “[a]ll interest shall be 16 calculated based upon a 365 day year and charged on the basis of actual days elapsed.” Doc. No. 17 22-1. The Note also provides for “a late charge of four percent (4%) of any installment payment 18 which does not reach Lender within five (5) business days after the due date” and states that “[t]he 19 late charges that accrue shall be payable on the next installment due date.” Id. Finally, the Note 20 states that the “amount of any interest that is not paid on or before the date which is five (5) 21 business days after the date on which it becomes due … shall bear interest from said date until 22 paid at the rate charged from time to time on the principal owing hereunder.” Id. 23 ECI explains its damages calculations as follows: 24 Defendants’ breach of the [] Note has caused [ECI] damages, which, based on the calculations and data at Exhibit 5 [to the McPeters Declaration, Doc. No. 22], 25 incorporated by this reference, is made up of the principal balance, $183,823.50, plus unpaid interest through the Maturity Date, December 23, 2018, $2,119.38, plus 26 liquidated damages of $7,440.17, resulting in a Maturity Date debt owed of $193,444.46. Since the Maturity Date, interest at 5% per annum on that 27 $193,444.46 continues to accrue until paid at the rate of $26.50 per day. Through September 30, 2019, an additional $7,446.29 will have accrued, bringing the total 28 outstanding balance on October 1, 2019 to $200,890.75. Interest shall continue to 1 accrue at the rate of $26.50 per day until paid. Doc. No. 22 4 8.
3 Exhibit 5 to the McPeters Declaration, as referenced in the preceding paragraph, sets forth 4 | the following table purporting to illustrate ECI’s damages calculations: 5 Calculation of Money Judgment Sought 6 Month Beg. Bal. Interest Liquid. Dmg. — End. Bal. 7 Nov.1,2018 $ 183,823.50 S$ 765.93 § 30.64 $ 184,620.07 Dec.1,2018 $ 184,620.07 S 769.25 $ 30.77 S$ 185,420.09 8 23-Dec-18 $ 185,420.09 S 584.20 5S 7,440.17 § 193,444.46 9 1-Oct-19 $ 193,444.46 S$ 7,446.29 5$ - 10 Per day Interest: $193.444.46 x.05/365
12 Doc. No. 22-5. 13 The line items in this table appear to show the amounts that ECI contends were due—in 14 | principal, interest and liquidated damages (late fees)—at various points in time, including 15 November 1, 2018 (the first payment due date after the final interest payment on the Note was 16 | made in October 2018); December 1, 2018 (the second payment due date after Defendants’ final 17 | interest payment); December 23, 2018 (the operative Maturity Date of the Note on which all 18 |amounts owing on the Note came due); and October 1, 2019 (approximately the date initially set 19 | for hearing on this motion). 20 The first line item—pertaining to amounts due on November 1, 2018—appears to assume a 21 | principal balance of $183,823.50 in the month of October and indicates that the interest due on 22 | November 1, 2018 for the month of October (on $183,823.50 at a rate of 5% per annum) was 23 |$765.93. That November 2018 interest payment was not made, so the table assesses a late fee of 24 | $30.64 (4% of the $765.93 in interest due on November 1, 2018, as calculated by ECI). ECI then 25 | adds both of these amounts—the $765.93 interest payment that ECI calculated and the late fee of 26 | $30.64 for that missed payment—to the principal balance on the Note as of November 1, 2018 and 27 | uses that new balance ($184,620.07) in calculating the interest payment due on December 1, 2018 28 | for the month of November (which, according to ECI, was $769.25). The December 1, 2018
OQ
1 interest payment was not made, so the table assesses a late fee for the December 1, 2018 payment 2 in the amount of $30.77 (4% of the $769.25 interest payment, as calculated by ECI).3 The 3 December 1, 2018 interest payment ($769.25) and late fee ($30.77) are then added to the balance 4 as of December 1, 2018 ($184,620.07) to get a new balance—comprising principal, interest and 5 late fees—of $185,420.09. 6 As the operative Maturity Date under the Note (following two extensions), December 23, 7 2018 was the date on which “[t]he full amount of all interest and principal then remaining unpaid, 8 and any other amounts owing” under the Note came due, Doc. No. 22-1, but it is undisputed that 9 no payments of any kind were made. The entries for December 23, 2018 in the table above appear 10 to include $584.20 in interest on a balance of $185,420.09 for the period from December 1, 2018 11 through December 23, 2018. Further, it appears that ECI charges a 4% late fee of $23.37 on the 12 $584.20 interest payment, as well as a late fee of $7,416.80 on the balance as of December 23, 13 2018 ($185,420.09) (including principal as well as cumulative interest payments and late fees), for 14 a total late fee for the missed December 23, 2018 payment of $7,440.17. All of that then gets 15 added together to get a new balance of $193,444.46 following December 23, 2018. From that 16 point forward, ECI calculates simple interest on that $193,444.46 balance in the amount of $26,50 17 per day, applying an interest rate of 5% per annum. 18 As set forth above, the Note provides for “interest on [] unpaid principal … at the annual 19 rate of five percent (5.0%) per annum” and states that “the amount of any interest payment that is 20 not paid on or before the date which is five (5) business days after the date on which it becomes 21 due … shall bear interest from said date until paid at the rate charged” on principal under the Note. 22 The Note also states: “All interest shall be calculated based upon a 365 day year and charged on 23 the basis of actual days elapsed.” Further, the Note states that the Defendants agreed “to pay as 24 liquidated damages a late charge of four percent (4%) of any installment which does not reach 25
26 3 Put a slightly different way, the $30.97 late fee for December 1, 2018 is calculated on the $769.25 interest payment supposedly due on December 1, 2018. That interest payment, in turn, was calculated on a balance of $184,620.07, 27 which includes not only the principal balance of the Note as of November 1, 2018, but also the interest due, by ECI’s calculations, on November 1, 2018, as well as the late fee assessed for missing that November 1, 2018 payment. ECI 28 appears to use that methodology for all of its subsequent calculations. Thus, ECI’s interest and late fee calculations 1 [ECI] within five (5) business days after the due date” and that “late charges that accrue shall be 2 payable on the next installment due date.” 3 It is not clear, however, to what extent ECI has taken these provisions into account in its 4 damages calculations. For example, ECI appears to charge interest on late fees starting from the 5 due date of the missed interest payments on which they are based (“the first day of each month,” 6 per the Note), but the Note states that late fees are not incurred until five business days after a 7 payment is due and that once incurred, late fees are not payable until the first day of the following 8 month. Further, the Note expressly provides for charging interest on unpaid principal and on 9 interest that is not paid on time, but it does not squarely address the question of whether interest 10 can be charged on late fees. Similarly, ECI’s calculations do not appear to take the 5-business-day 11 grace period for interest payments into account when calculating interest on interest, and ECI 12 appears to charge multiple late fees on the same missed interest and late fee payments, month after 13 month. Moreover, ECI assumes, without explanation, that the Note permits it to charge a 4% late 14 fee on all amounts due on the Maturity Date, including not only interest, but also late fees and 15 principal. And, finally, ECI provides no authority or argument justifying its approach to 16 calculating interest on principal, accrued interest and accrued late fees in the period following the 17 December 23, 2018 Maturity Date. 18 The Court expresses no view on these issues here, but cannot find that ECI’s damages 19 calculations are correct, as a matter of law, based on the minimal briefing and summary 20 tabulations filed with its Motion. As stated above, the fact that $183,823.50 in principal was due 21 on the Note as of November 1, 2018 is established in this case. Additional briefing and a far more 22 detailed explication of ECI’s damages calculations, expressly addressing the terms of the Note and 23 applicable law, is required for an award in excess of that amount. ECI’s Motion is therefore 24 DENIED WITHOUT PREJUDICE as to damages (aside from the Court’s finding that 25 $183,823.50 in principal was due on the Note as of November 1, 2018). 26 II. MarkChris’s Affirmative Defenses 27 As stated above, City Lights did not allege any affirmative defenses, but the MarkChris 28 Answer purports to state eleven affirmative defenses: (1) uncertainty; (2) failure to state a claim; 1 (3) excuse; (4) waiver; (5) estoppel; (6) release; (7) accord and satisfaction; (8) modification of 2 contract; (9) acts or omissions of third parties; (10) failure to mitigate damages; and (11) setoff. 3 Doc. No. 19 at 3:5-5:3. 4 ECI acknowledges these as “affirmative defenses,” but categorically asserts in its moving 5 papers that they “should be summarily adjudicated and dismissed” because they are unsupported 6 by evidence. Doc. No. 21 at 9:15-19. ECI also argues that MarkChris’s waiver defense is 7 precluded by a provision in the Note stating that any waiver “must be made in writing,” but ECI 8 does not cite evidence—or provide argument—in its moving papers specific to any of 9 MarkChris’s other purported defenses. See Doc. No. 21, Part III.C. 10 MarkChris provides no evidence in support of its affirmative defenses but argues in its 11 Opposition that ECI’s Motion must be denied because ECI failed to show “that MarkChris is 12 without evidence to support its affirmative defenses” and, thus, failed to shift the burden of 13 production to MarkChris. Doc. No. 25 at 4:6-9. 14 On reply, ECI argues that it “met its initial burden of production”—and thereby shifted the 15 burden to MarkChris to adduce facts in support of its affirmative defenses—in its moving papers 16 merely by “argu[ing] in its Memorandum of Points and Authorities … that MarkChris’ affirmative 17 defenses lacked explanation and would be unsupported by evidence.” Doc. No. 27, Part II.A. ECI 18 also offers new argument on reply specific to each of MarkChris’s affirmative defenses. 19 As explained below, the Court agrees with MarkChris in the main, but also finds that the 20 putative affirmative defenses of “uncertainty” and “failure to state a claim” should be stricken 21 because they are not proper affirmative defenses and are negated by the Court’s findings with 22 respect to ECI’s claim for breach of contract. 23 a. Burden of Production 24 As discussed above, “a moving party without the ultimate burden of persuasion at trial [] 25 may carry its initial burden of production by either of two methods” on a motion for summary 26 judgment. Nissan, 210 F.3d at 1106; see also Celotex, 477 U.S. at 325. “The moving party may 27 produce evidence negating an essential element of the nonmoving party’s case, or, after suitable 28 discovery, the moving party may show that the nonmoving party does not have enough evidence 1 of an essential element of its claim or defense to carry its ultimate burden of persuasion at trial.” 2 Nissan, 210 F.3d at 1106. 3 Where the moving party meets that burden, the burden then shifts to the non-moving party 4 to designate specific facts demonstrating the existence of genuine issues for trial. Coomes, 816 5 F.3d at 1259 n.2. “If a moving party fails to carry its initial burden of production,” however, “the 6 nonmoving party has no obligation to produce anything, even if the nonmoving party would have 7 the ultimate burden of persuasion as trial.” Nissan, 210 F.3d at 1102-03. “In such a case, the 8 nonmoving party may defeat the motion for summary judgment without producing anything.” Id. 9 at 1103; see also, Henry v. Gill Indus., Inc., 983 F.2d 943, 950 (9th Cir.1993) (“The party 10 opposing [a motion for summary judgment] is under no obligation to offer affidavits or any other 11 materials in support of its opposition. Summary judgment may be resisted and must be denied on 12 no other grounds than that the movant has failed to meet its burden of demonstrating the absence 13 of triable issues.”) 14 ECI’s contention that it “met its initial burden of production” as to MarkChris’s affirmative 15 defenses is predicated entirely on a cluster of cases stating, in one form or another, that the party 16 moving for summary judgment “need only point out” that there is an absence of evidence to 17 support the nonmoving party’s case in order to shift the burden of production to the nonmoving 18 party where the nonmoving party has the burden of persuasion at trial. Doc. No. 27 at 3:25-4:12. 19 In other words, ECI maintains that a mere assertion on its part that MarkChris lacks evidence to 20 support its affirmative defenses is sufficient to meet its burden and shift the burden of production 21 to MarkChris. 22 In this context, however, the term “point out” does not mean what ECI wants it to mean. 23 As the Eleventh Circuit found in a case cited with approval by the Ninth Circuit on the question of 24 burden-shifting in summary judgment motions, “it is never enough [for the moving party] simply 25 to state that the non-moving party cannot meet its burden at trial.” Clark v. Coats & Clark, Inc., 26 929 F.2d 604, 608 (11th Cir.1991); see Nissan, 210 F.3d at 1105 (“A moving party may not 27 require the nonmoving party to produce evidence supporting its claim or defense simply by saying 28 that the nonmoving party has no such evidence.”). Rather, the moving party must make 1 “reasonable efforts, using the normal tools of discovery, to discover whether the nonmoving party 2 has enough evidence to carry its burden of persuasion at trial” and “point to materials on file 3 which demonstrate that a party will not be able to meet that burden.”4 Nissan, 210 F.3d at 1105 4 (quoting Clark, 929 F.2d at 608) (emphasis added); see also, Diodem, LLC v. Lumenis Inc., 2005 5 WL 6220667, at *21 (C.D.Cal. Jan. 10, 2005). 6 Here, ECI makes a bald assertion in its moving papers that all eleven of MarkChris’s 7 affirmative defenses should be “summarily adjudicated and dismissed” because they are 8 unsupported by evidence, in addition to arguing that MarkChris’s waiver defense is precluded by a 9 provision in the Note stating that any waiver relating to the Note must be in writing. Doc. No. 21, 10 Part III.C. ECI’s argument as to waiver, however, fails because the mere fact that the Note 11 requires that waivers be in writing neither negates the waiver defense nor precludes the possibility 12 that a written waiver exists. And ECI’s argument (if it can be called that) as to the eleven 13 affirmative defenses collectively fails because it is unsupported by any reference to the record in 14 this case. See Baker v. Varitalk, Inc., 2009 WL 10654600, at *9 (C.D.Cal. Mar. 31, 2009) (finding 15 that “general argument”—as opposed to “pointing to specific portions of the record in th[e] 16 case”—was insufficient to meet the moving party’s burden of production as to claims on which 17 the nonmoving party had the burden of persuasion at trial). 18 ECI attempts to remedy the conspicuous deficiencies in its moving papers with argument 19 specific to each of MarkChris’s defenses in its Reply. Courts, however, generally will not consider 20 new argument raised for the first time in a reply brief, see Lerma v. Arends, 2011 WL 2516173, at 21 *5 (E.D.Cal. Jun. 22, 2011), and, in the Court’s view, it would be particularly improper to do so 22 here, given the burden-shifting framework applicable to summary judgment motions. Cf. United 23 States v. Sierra Pac. Indus., 2012 WL 2571274, at *1–2 (E.D.Cal. July 2, 2012) (granting 24 reconsideration where summary judgment was granted in moving party’s favor based on argument 25 raised for the first time on reply). 26 Thus, the Court finds that ECI failed to carry its burden of production in its moving papers 27 and ECI’s Motion is therefore DENIED as to the affirmative defenses in the MarkChris Answer. 28 1 Since discovery in this action does not close for several months and it is, thus, still possible for 2 ECI to collect and adduce the evidence required to meet its burden as the moving party, the denial 3 of the Motion as to MarkChris’s affirmative defenses is WITHOUT PREJUDICE. 4 b. Non-Affirmative Defenses 5 “Affirmative defenses plead matters extraneous to the plaintiff’s prima facie case, which 6 deny plaintiff’s right to recover, even if the allegations of the complaint are true.” Fed. Deposit 7 Ins. Corp. v. Main Hurdman, 655 F. Supp. 259, 262 (E.D.Cal. 1987) (citing Gomez v. Toledo, 446 8 U.S. 635, 640–41 (1980)). In other words, an affirmative defense “is a defense that does not 9 negate the elements of the plaintiff’s claim, but instead precludes liability even if all of the 10 elements of the plaintiff’s claim are proven.” Roberge v. Hannah Marine Corp., 1997 WL 468330, 11 at *3 (6th Cir.1997). “Defenses challenging elements of a plaintiff’s prima facie case,” by contrast, 12 “are not appropriately characterized as affirmative defenses….” San Diego Unified Port Dist. v. 13 Monsanto Co., 309 F.Supp.3d 854, 861 (S.D.Cal. 2018) (citations omitted); cf. Zivkovic v. S. 14 California Edison Co., 302 F.3d 1080, 1088 (9th Cir.2002) (“A defense which demonstrates that 15 plaintiff has not met its burden of proof is not an affirmative defense.”). 16 Two of the affirmative defenses set forth in the MarkChris Answer—“uncertainty” and 17 “failure to state a claim”—merely assert defects in ECI’s claim for breach of contract and, thus, 18 are not proper affirmative defenses.5 Moreover, the Court’s findings as to ECI’s claim for breach 19 of contract obviously affirm ECI’s prima facie case and moot any dispute as to the adequacy of 20 ECI’s pleading. The Court, therefore finds that MarkChris’s putative “uncertainty” and “failure to 21 22 5 J & J Sports Prods., Inc. v. Barwick, 2013 WL 2083123, at *4 (N.D.Cal. May 14, 2013) (“Defendant’s first 23 affirmative defense, which alleges that Plaintiff has failed to state a claim … is a denial that Plaintiff has sufficiently alleged each of the elements of Plaintiff’s claim. Accordingly, Defendant’s first affirmative defense is not an 24 affirmative defense.”); Innovation Ventures, LLC v. Pittsburg Wholesale Grocers, Inc., 2013 WL 2009681, at *3 (N.D.Cal. May 13, 2013) (finding that affirmative defense alleging that “plaintiff’s claims, as pled, [were] uncertain, 25 ambiguous and unintelligible” was “not a true affirmative defense” and striking it on that basis); Barnes v. AT & T Pension Ben. Plan-Nonbargained Program, 718 F.Supp.2d 1167, 1174 (N.D.Cal. 2010) (“Failure to state a claim is not 26 a proper affirmative defense but, rather, asserts a defect in [plaintiff’s] prima facie case.”); G & G Closed Circuit Events, LLC v. Nguyen, 2010 WL 3749284, at *5 (N.D.Cal. Sept. 23, 2010) (finding that an “allegation … that the 27 Complaint [was] vague, ambitious, uncertain, and unintelligible [was] not an affirmative defense” and granting motion to strike on that basis); Sec. People, Inc. v. Classic Woodworking, LLC, 2005 WL 645592, at *4 (N.D.Cal. Mar. 4, 28 2005) (agreeing with plaintiff “that ‘uncertainty’ is not an affirmative defense” and granting motion to strike on that 1 state a claim” defenses should be STRICKEN from the MarkChris Answer.6 See Fed.R.Civ.P. 2 12(f)(1) (stating that a court “may act ... on its own” to strike affirmative defenses); see also, Perez 3 v. Gordon & Wong Law Grp., P.C., 2012 WL 1029425, at *11 (N.D.Cal. Mar. 26, 2012) (striking 4 defense of “failure to state a claim” on the grounds that it was “better understood as a denial of 5 Plaintiff’s allegations rather than as an affirmative defense”). Furthermore, since it is not possible 6 for MarkChris to plead a valid affirmative defense of either “uncertainty” or “failure to state a 7 claim,” these putative defenses are stricken WITH PREJUDICE. See Rutherford v. Evans Hotels, 8 LLC, 2019 WL 1900889, at *3 (S.D.Cal. Apr. 29, 2019). 9 III. CONCLUSION 10 For the foregoing reasons, the Court GRANTS summary judgment in ECI’s favor on the 11 question of liability on ECI’s breach of contract claim and finds that each of the Defendants is 12 liable to ECI for breach of the Note. Further, the Court DENIES WITHOUT PREJUDICE 13 summary judgment as to the amount of damages arising from Defendants’ breach of the Note but 14 establishes as a fact in this case that the principal balance on the Note as of November 1, 2018 was 15 $183,823.50. Summary judgment as to the affirmative defenses in the MarkChris Answer is 16 DENIED WITHOUT PREJUDICE, but the Court STRIKES WITH PREJUDICE the First 17 Affirmative Defense (Uncertainty) and the Second Affirmative Defense (Failure to State a Claim) 18 in the MarkChris Answer. 19 ORDER 20 Accordingly, IT IS HEREBY ORDERED that: 21 1. Defendants’ Motion for Summary Judgment, and in the Alternative, Motion for Partial 22 Summary Judgment (Doc. No. 20) is GRANTED IN PART and DENIED IN PART; 23 2. The First Affirmative Defense and Second Affirmative Defense in the Answer of 24 Defendant MarkChris Investments, LLC to Complaint (Doc. No. 19) are STRICKEN 25 WITH PREJUDICE; and 26
27 6 ECI also states in its moving papers that all eleven of MarkChris’s affirmative defenses are “unsupported by factual allegations.” Doc. No. 21 at 9:15-19. The Court notes that MarkChris has failed to allege facts in connection with the 28 affirmative defenses set forth in its Answer but declines to assess the adequacy of MarkChris’s allegations in the 1 3. This matter is referred to the magistrate judge for further proceedings consistent with this 2 Order. 3 4 IT IS SO ORDERED. 5 | Dated: _ December 19, 2019 ZS : Cb ¢ _-SENIOR DISTRICT JUDGE 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28