It's My Seat, Inc. v. Hartford Capital LLC

• Court: District Court, C.D. California
• Decided: July 1, 2022
• Docket: 2:22-cv-02192
• Status: Unknown

Opinion

Case 2:22-cv-02192-ODW-AFM Document 28 Filed 07/01/22 Page 1 of 8 Page ID #:423

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8 United States District Court 9 Central District of California

11 IT’S MY SEAT, INC, et al., Case № 2:22-cv-02192-ODW (AFMx)

12 Plaintiffs, ORDER DENYING MOTION TO 13 v. STAY [11]; AND 14 HARTFORD CAPITAL, LLC, et al., ORDER TO SHOW CAUSE RE: 15 CONSOLIDATION Defendants.

16 17 I. INTRODUCTION 18 Plaintiffs It’s My Seat, Inc. and Vahe Shahinian brought this suit against 19 Defendants Hartford Capital, LLC; EIN Cap, Inc.; Russell Naftali; Kevin Woodley; 20 and Gene Slavin, alleging that in 2019, Defendants fraudulently induced Plaintiffs into 21 taking out a high-interest loan. (Notice of Removal (“NOR”) Ex. 1 (“Compl.”) ¶ 37, 22 ECF No. 1.) Plaintiffs are also pursuing a concurrent action in this Court, It’s My 23 Seat, Inc. v. Hartford Capital, LLC, No. 2:20-cv-06378-ODW (AFMx) (C.D. Cal. 24 filed July 17, 2020) (hereinafter, “It’s My Seat I”). It’s My Seat I arises from the same 25 transaction and currently involves only one defendant, Bryan Stein, whom Plaintiffs 26 allege is a managing partner of Hartford. (Compl. ¶ 26); NOR Ex. 1 ¶ 26, It’s My 27 Seat I, ECF No. 1 (identical allegation). 28 Case 2:22-cv-02192-ODW-AFM Document 28 Filed 07/01/22 Page 2 of 8 Page ID #:424

1 Defendant EIN now moves to stay this case pending the resolution of It’s My 2 Seat I, a motion which Plaintiffs do not oppose but which Defendant Hartford does. 3 (See generally Mot. Stay (“Motion” or “Mot.”), ECF No. 11; Opp’n, ECF No. 12.) 4 The Motion is fully briefed. (Reply, ECF No. 13.) For the reasons discussed below, 5 the Court DENIES EIN’s Motion and ORDERS all parties TO SHOW CAUSE why 6 the Court should not consolidate this case with It’s My Seat I under Federal Rule of 7 Civil Procedure (“Rule”) 42(a).1 8 II. BACKGROUND 9 It’s My Seat is a ticket sales agency that Shahinian owns. (Compl. ¶ 22.) 10 Plaintiffs produce and promote various events that exclusively make use of their own 11 ticketing system, a business model that requires Plaintiffs to pay for required services 12 upfront. (Id.) Plaintiffs allege that Hartford and EIN are New York companies that 13 are alter egos of Naftali, Woodley, Slavin, and non-party Craig Walters.2 (Id. ¶ 16.) 14 Plaintiffs allege that Hartford approached them in January 2019, offering a 15 $750,000.00 line of credit (the “Term Loan”) at an interest rate of 8.89%, with the 16 condition that Plaintiffs first take a $250,000 loan (the “Bridge Loan”) for thirty days. 17 (Id. ¶¶ 23, 26.) Plaintiffs understood that EIN would fund the Bridge Loan at an 18 interest rate of 15%, to be paid on the initial principle, and Hartford would roll the 19 Bridge Loan over to the Term Loan before Plaintiffs had to pay the higher interest 20 rate. (Id. ¶ 26.) According to Plaintiffs, Defendants conspired to force Plaintiffs to 21 take this Bridge Loan while Defendants had no intention of transitioning it into a 22 Term Loan. (Id. ¶¶ 37–38.) Specifically, Plaintiffs allege that Hartford intentionally 23 stalled on transitioning the Bridge Loan to the Term Loan in the hopes of forcing 24 Plaintiffs to violate the loan agreement. (Id. ¶ 38.) 25 1 Having carefully considered the papers filed in connection with the Motion, the Court deemed the 26 matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. 2 In the initial complaint for It’s My Seat I, Plaintiffs alleged that Hartford is also an alter ego for 27 Stein and Craig Leszczak, both nonparties in this action. NOR Ex. 1 ¶ 19, It’s My Seat I. Although 28 Plaintiffs do not identify them in the Complaint in this action as alter egos, their names appear throughout the Complaint. (See generally Compl.)

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1 A. It’s My Seat I 2 On October 28, 2019, Plaintiffs sued Defendants and three other individuals 3 (Stein, Walters, and Leszczak) in It’s My Seat I, alleging promissory estoppel, fraud, 4 intentional misrepresentation, negligent representation, and breach of contract. (See 5 Mot. 3–5.) After the defendants in that action removed the case to this Court, on 6 November 30, 2020, the Court dismissed all the defendants except Stein, without 7 prejudice, based on Plaintiffs’ failure to timely serve the summons and complaint. (Id. 8 at 3.) The Court then set November 15, 2021, as the deadline for joining additional 9 parties in It’s My Seat I. Scheduling & Case Management Order 21, It’s My Seat I, 10 ECF No. 32. The deadline passed without action from Plaintiffs. (Mot. 4.) On 11 March 18, 2022, the Court granted the parties’ stipulation to continue the trial, with 12 the condition that “[n]o deadlines already expired under the original [Scheduling 13 Order] shall be reopened or extended, including . . . the 11-15-2021 deadline to hear 14 any Motion to Amend Pleadings or Add Parties.” Order Granting Stip. Continue 15 Trial 3, It’s My Seat I, ECF No. 46. Thus, in It’s My Seat I, Plaintiffs’ claims proceed 16 against only Stein, with a court trial set for February 17, 2023. (Mot. 4.) 17 B. This Action 18 On March 4, 2022, unbeknownst to Stein and Defendants, Plaintiffs initiated 19 the instant action in Los Angeles Superior Court. (See Compl.) Plaintiffs excluded 20 Stein, Walters, and Leszczak from the list of named defendants, and replaced the 21 breach of contract claim with a RICO charge. (See id.) Otherwise, this action arises 22 out of the same transaction as that in It’s My Seat I and Plaintiffs allege the same facts 23 and claims against largely the same defendants. (See id.) EIN removed and now 24 moves to stay this action pending the resolution of It’s My Seat I. (See generally 25 Mot.) 26 III. LEGAL STANDARD 27 The power to stay proceedings “is incidental to the power inherent in every 28 court to control the disposition of the causes on its docket with economy of time and

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1 effort for itself, for counsel, and for litigants.” Peck v. County of Orange, 528 F. 2 Supp. 3d 1100, 1105 (C.D. Cal. 2021) (quoting Landis v. N. Am. Co., 299 U.S. 248, 3 254 (1936)). The court “may, with propriety, find it is efficient for its own docket and 4 the fairest course for the parties to enter a stay of an action before it, pending 5 resolution of independent proceedings which bear upon the case.” Leyva v. Certified 6 Grocers of Cal., Ltd., 593 F.2d 857, 863 (9th Cir. 1979). 7 “The proponent of a stay bears the burden of establishing its need.” Clinton v. 8 Jones, 520 U.S. 681, 708 (1997) (citing Landis, 299 U.S. at 255). Among the factors 9 courts weigh in deciding whether to stay a pending proceeding are (1) “the possible 10 damage which may result from the granting of a stay,” (2) “the hardship or inequity 11 which a party may suffer in being required to go forward,” and (3) “the orderly course 12 of justice measured in terms of the simplifying or complicating of issues, proof, and 13 questions of law which could be expected to result from a stay.” CMAX, Inc. v. Hall, 14 300 F.2d 265, 268 (9th Cir. 1962) (citing Landis, 299 U.S. at 255); see also Peck, 15 528 F. Supp. 3d at 1105–06 (observing that this test, which originated with Landis, 16 continues to apply to decisions to stay proceedings). 17 IV. DISCUSSION 18 EIN moves to stay this action on the ground that it will suffer hardship due to 19 multiplicative discovery and the potential for inconsistent pretrial rulings. (Mot. 7.) It 20 also argues that Plaintiffs will suffer no prejudice and a stay would conserve judicial 21 resources. (Id.) Hartford opposes EIN’s Motion and contends a stay would prejudice 22 it, as findings against Stein in It’s My Seat I could bind Hartford here under preclusion 23 principles. (Opp’n 4–5.) Hartford also argues that resolution of its motion to dismiss 24 in this action would save judicial resources more effectively than a stay. (Id. at 5.) 25 Finally, Hartford argues that a stay will delay proceedings and make it more difficult 26 to conduct discovery, depose witnesses, and gather evidence. (Id.) 27 28

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1 A. Hardship or Inequity to EIN Absent a Stay 2 EIN cites only two burdens it will suffer absent a stay: multiplicative discovery 3 and potentially inconsistent pretrial rulings. (Mot. 7.) EIN fails to explain, and the 4 Court cannot see, how EIN would be burdened by multiplicative discovery and 5 inconsistent pretrial rulings when EIN is no longer a party to the related case. EIN is 6 not required to conduct discovery in It’s My Seat I, nor is EIN bound by pretrial 7 rulings in that case. Indeed, EIN identifies no instance where “multiplicative 8 discovery” or “inconsistent trial rulings” sufficiently burdened a movant to warrant a 9 stay, where the movant was not a party to the related case. 10 EIN also flatly states that “[e]quity dictates a stay in this action.” (Id.) 11 However, in support of this claim, EIN merely describes the procedural postures of It’s 12 My Seat I and this action, and then concludes: “Clearly by the acts of the Plaintiffs, 13 they want to try the case with Stein they try the 2022 Case.” (Id. at 7–8.) The Court 14 finds EIN’s statement indecipherable. To the extent EIN is arguing that it is 15 inequitable to require EIN to litigate this case—which is substantially similar to It’s 16 My Seat I, from which the Court previously dismissed EIN—such an argument fails. 17 The Court dismissed EIN from It’s My Seat I without prejudice. Min. Order at 2, It’s 18 My Seat I, ECF No. 23. Thus, that dismissal did not bar Plaintiffs “from returning 19 later, to the same court, with the same underlying claim.” Semtek Int’l Inc. v. 20 Lockheed Martin Corp., 531 U.S. 497, 505 (2001). Although the propriety of 21 Plaintiffs’ actions is questionable given the case schedule in It’s My Seat I and the 22 parties’ stipulation there, case law is clear that requiring EIN to “defend a suit, without 23 more, does not constitute a ‘clear case of hardship or inequity.’” Lockyer v. Mirant 24 Corp., 398 F.3d 1098, 1112 (9th Cir. 2005) (quoting Landis, 299 U.S. at 255). 25 As EIN fails to make out a clear case of hardship or inequity, the Court 26 DENIES EIN’s Motion to Stay. See Landis, 299 U.S. at 255 (“[T]he suppliant for a 27 stay must make out a clear case of hardship or inequity in being required to go 28 forward . . . .”); see, e.g., Montez v. Chase Home Fin. LLC, No. 11-CV-530 JLS

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1 (WMC), 2011 WL 2729445, at *1–2 (S.D. Cal. July 13, 2011) (denying a motion to 2 stay because the movant failed to make out a clear case of hardship in being required 3 to proceed with the litigation). 4 In light of the foregoing, the Court need not consider the remaining Landis 5 factors to determine that a stay of this action is not warranted. However, significant 6 judicial economy concerns regarding this case’s relationship to It’s My Seat I require 7 further discussion. 8 B. Judicial Economy 9 EIN argues that a stay “would conserve judicial resources by preventing the 10 Court from doing any work that would ultimately be unnecessary” if Stein is found 11 not liable. (Mot. 7.) However, EIN does not cite to any authority, or otherwise 12 explain how Stein’s liability (or lack thereof) affects Defendants’ liability in this 13 action. The Court will neither construct arguments for parties, nor will it “address 14 perfunctory and undeveloped arguments.” Khademi v. S. Orange Cnty. Cmty. Coll. 15 Dist., 194 F. Supp. 2d 1011, 1027 (C.D. Cal 2002) (quoting Williams v. Eastside 16 Lumberyard & Supply Co., 190 F. Supp. 2d 1104, 1114 (S.D. Ill. 2001)). 17 Hartford has moved to dismiss the claims asserted against it in this action and 18 argues that resolving that motion would save judicial resources more effectively than a 19 stay. (See Opp’n 5; Mot. Dismiss, ECF No. 18.) According to Hartford, this would 20 “[trim] down the complaint, [weed] out time-barred claims, . . . dismiss claimants 21 lacking standing and, in general, . . . pare down the pleadings and scope of this 22 action.” (Id.) This argument is unavailing. Whether the Court resolves Hartford’s 23 motion to dismiss now or later does not change the calculus of judicial economy one 24 whit. 25 Thus, the Court is not persuaded that a stay will impact judicial economy at all. 26 27 28

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1 C. Consolidation 2 Rather than stay this action—which would leave Hartford’s preclusion concerns 3 unsolved, delay resolution, and duplicate resources expended—the Court finds the 4 present circumstances ripe for consolidation. 5 A district court may consolidate common questions of law or fact. Fed. R. Civ. 6 P. 42(a)(2); see Invs. Rsch. Co. v. U.S. Dist. Ct. for the Cent. Dist. of Cal., 877 F.2d 7 777, 777 (9th Cir. 1989). The court’s power to consolidate is broad, and controls even 8 over a party’s objection. See In re Air Crash Disaster at Fla. Everglades on Dec. 29, 9 1972, 549 F.2d 1006, 1013 (5th Cir. 1977) (citing Mut. Life Ins. Co. of N.Y. v. Hillmon, 10 145 U.S. 285, 293 (1892)). Here, It’s My Seat I and this case involve identical facts, 11 substantially identical parties, and arise out of the same transaction. (See Mot. 4–6). 12 Consolidating the cases would relieve parties of the burden of litigating twice, and 13 would also render Hartford’s nonparty preclusion concerns moot, as Hartford and 14 Stein would once-again be co-defendants. Indeed, but for Plaintiffs’ failure to timely 15 complete service or move to add parties there, Defendants would still be parties to It’s 16 My Seat I. 17 Judicial economy factors also support consolidation. The facts underlying both 18 cases are identical, meaning the relevant witnesses and evidence will also be largely 19 identical. The claims in both actions are substantially the same, save a separate breach 20 of contract claim in It’s My Seat I and a separate RICO claim here, meaning the law in 21 both cases is also largely the same. Absent consolidation, Plaintiffs will essentially try 22 the same case twice against different defendants. 23 Consolidating It’s My Seat I and this action would allow the Court to address 24 Plaintiffs’ claims against all named Defendants with a unified presentation of evidence 25 and application of law. Consolidation would also allow the Court to address 26 Plaintiffs’ strategic procedural conduct in bringing two substantively identical suits, 27 despite an agreement not to add parties to the original suit, and will permit all the 28 defendants, in this case and in It’s My Seat I, the opportunity to respond to that issue.

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1 || Accordingly, the Court ORDERS the parties to SHOW CAUSE why the Court 2 || should not consolidate this case with /ts My SeatI under Rule 42(a)(2), and the 3 || consolidated actions proceed under the current case schedule in /t's My Seat I. 4 Vv. CONCLUSION 5 For the reasons discussed above, the Court DENIES EIN’s Motion to Stay, 6 || (ECF No. 11), and ORDERS all parties to SHOW CAUSE why the Court should not 7 || consolidate this case with /t's My Seat I, as discussed above. The parties must submit 8 | their responses by no later than seven (7) days from the date of this Order. 10 IT IS SO ORDERED. 1] 12 July 1, 2022 ee 13 A a 14 GEU | en 15 OTIS D. GHT, II 6 UNITED STATES DISTRICT JUDGE

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