Michael Baskin v. Ec Paia LLC

• Court: Court of Appeals for the Ninth Circuit
• Decided: October 26, 2023
• Docket: 22-15883
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS OCT 26 2023 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

MICHAEL S. BASKIN; PAIA No. 22-15883 PROPERTIES, LLC; SEASHORE PROPERTIES LLC; PAIA BAY D.C. No. 1:20-cv-00216-WRP PROPERTIES LLC; PAIA PARK, LLC,

Plaintiffs-Appellees, MEMORANDUM*

v.

EC PAIA LLC, a Delaware limited liability company,

Defendant-Appellant,

and

JOHN DOES, 1-100; JANE DOES, 1-100; DOE PARTNERSHIPS, 1-100; DOE CORPORATIONS, 1-100; DOE ENTITIES, 1-100,

Defendants.

MICHAEL S. BASKIN; PAIA No. 22-16006 PROPERTIES, LLC; SEASHORE 22-16588 PROPERTIES LLC; PAIA BAY 22-16699 PROPERTIES LLC; PAIA PARK, LLC, D.C. No. 1:20-cv-00216-WRP Plaintiffs-Appellants,

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. v.

Defendant-Appellee,

JOHN DOES, 1-100; JANE DOES, 1-100; DOE PARTNERSHIPS, 1-100; DOE CORPORATIONS, 1-100; DOE ENTITIES, 1-100,

Appeal from the United States District Court for the District of Hawaii Wes R. Porter, Magistrate Judge, Presiding

Argued and Submitted October 3, 2023 Honolulu, Hawaii

Before: BERZON, MILLER, and VANDYKE, Circuit Judges.

In this cross-appeal, Plaintiffs-Appellants Michael Baskin and his companies

(“Plaintiffs”) appeal the district court’s amended judgment clarifying the grant of

judgment on partial findings to Defendant-Appellant EC Paia LLC (“EC Paia”), as

well as the district court’s grant of costs to EC Paia and the district court’s denial

of reconsideration for attorneys’ fees. EC Paia appeals the district court’s grant of

summary judgment to Plaintiffs on EC Paia’s counterclaims. We affirm in part

and reverse in part.

2 1. Plaintiffs challenge federal jurisdiction over this case. Diversity

jurisdiction exists where “an action is between citizens of different States and the

matter in controversy exceeds the sum or value of $75,000.” Demarest v. HSBC

Bank USA, 920 F.3d 1223, 1226 (9th Cir. 2019) (internal quotation marks omitted).

The matter in controversy here, rights to and ownership of commercial and

residential property in Maui, exceeds $75,000.

Plaintiffs maintain that federal courts must use the “nerve center” test or the

“place of operations test,” applicable to determine a corporation’s principal place

of business, to determine EC Paia’s citizenship. But EC Paia is a limited liability

company (“LLC”). Although “LLCs resemble both partnerships and

corporations,” it has long been settled that we treat them “like partnerships for the

purposes of diversity jurisdiction.” Johnson v. Columbia Props. Anchorage, LP

437 F.3d 894, 899 (9th Cir. 2006). So the principal place of business criterion, and

therefore the “nerve center” test, is inapplicable in determining the citizenship of

EC Paia.

Sam Hirbod is the sole member of Eagle Canyon Capital, LLC, which is the

sole member and manager of EC Paia. Sam Hirbod is a citizen of California. EC

Paia is therefore a citizen of California. It is uncontested that Plaintiffs are

Hawaiian citizens. Complete diversity exists here, and the district court had

diversity jurisdiction over this case.

3 2. The district court properly granted judgment on partial findings to EC

Paia. This Court “reviews the district court’s findings of fact for clear error and its

legal conclusions de novo.” Lee v. West Coast Life Ins. Co., 688 F.3d 1004, 1009

(9th Cir. 2012) (internal quotation marks omitted). Additionally, “[a] trial judge

has wide latitude in the admission or exclusion of evidence where the question is

one of materiality or relevancy . . . and a decision to exclude evidence will not be

disturbed unless there has been an abuse of discretion.” Lies v. Farrell Lines, Inc.,

641 F.2d 765, 773 (9th Cir. 1981).

Plaintiffs maintain that because the district court excluded some evidence

concerning the Parking Lot Agreement, they were denied a full opportunity to

demonstrate EC Paia’s bad faith arising from the Land Agreement. The district

court held that because the Plaintiffs did not raise a breach of contract claim arising

from the Parking Lot Agreement, the relevance of the Parking Lot Agreement was

marginal in a trial concerning only a breach of the Land Agreement. This

reasoning, along with the fact that the district court allowed in evidence pertaining

to the Parking Lot Agreement on numerous occasions (including, most

importantly, the entirety of the Parking Lot Agreement itself), demonstrates that

the district court did not abuse its discretion in excluding some evidence

concerning the Parking Lot Agreement. See id.

The district court also did not err in concluding that EC Paia did not violate

4 the implied covenant of good faith and fair dealing or the time-is-of-the-essence

clause. The district court found that “EC Paia’s progress on the development of

The Property, while delayed, is reasonable and in good faith” (emphasis added).

We agree.

The Land Agreement states, “EC Paia shall, at its sole discretion (including

as to time and location), transfer to [Plaintiffs] . . . one residential lot . . . and

one . . . commercial lot.” After signing the Land Agreement, EC Paia (1) hired a

project manager, (2) created an advisory team, (3) held meetings with varying state

entities to discuss strategy and development, and (4) sought and obtained

preliminary subdivision approval. At the time of the trial, EC Paia was still

waiting for approval and feedback from government departments and agencies.

EC Paia’s actions did not have “the effect of injuring the right of [Plaintiffs] to

receive the fruits of [the Land Agreement.]” Universal Sales Corp. v. Cal. Press

Mfg. Co., 20 Cal. 2d 751, 771 (1942). In fact, the opposite is true: EC Paia’s

actions demonstrated its intent to develop the Property pursuant to the Land

Agreement within a reasonable time frame. It did not breach the implied covenant

of good faith and fair dealing or violate the time-is-of-the-essence clause.

Plaintiffs also assert that EC Paia breached the Land Agreement by implied

anticipatory repudiation. “A party anticipatorily breaches a contract . . . impliedly

by conduct where the promisor puts it out of his power to perform so as to make

5 substantial performance of his promise impossible.” Cnty. of Solano v. Vallejo

Redev. Agency, 75 Cal. App. 4th 1262, 1276 (1999) (internal quotation marks

omitted). EC Paia did not “put[] it out of [its] power to perform;” rather, it took

steps towards substantial performance. Id. Because it remained possible for EC

Paia to perform its contractual obligations, it did not breach the Land Agreement

by implied anticipatory repudiation.

3. Plaintiffs appeal the district court’s grant of costs to EC Paia. We

review a district court’s award of costs for abuse of discretion. Spirit of Aloha

Temple v. County of Maui, 49 F.4th 1180, 1195 (9th Cir. 2022). We affirm.

“Unless a federal statute, these rules, or a court order provides otherwise,

costs—other than attorney’s fees—should be allowed to the prevailing party.” Fed.

R. Civ. P. 54(d)(1). EC Paia sought only the costs related to litigating and

resolving Plaintiffs’ claims, not the costs related to EC Paia’s counterclaims. The

district court awarded EC Paia $7,401 in taxable costs after conducting a reasoned

review of EC Paia’s request for $13,132. The court did not abuse its discretion in

awarding these costs to EC Paia. See Dawson v. City of Seattle, 435 F.3d 1054,

1070 (9th Cir. 2006).

4. Finally, Plaintiffs appeal the district court’s denial of reconsideration

as to entitlement to attorneys’ fees. Plaintiffs did not appeal the district court’s

order partially granting EC Paia’s motion for attorneys’ fees. “Where no notice of

6 appeal from a post-judgment order awarding attorneys’ fees is filed, the court of

appeals lacks jurisdiction to review the order.” Culinary and Serv. Empls. Union,

AFL-CIO Local 555 v. Haw. Emp. Ben. Admin., Inc., 688 F.2d 1228, 1232 (9th Cir.

1982). Because “[w]e do not have jurisdiction to review the propriety of this

order,” we do not decide whether EC Paia is entitled to attorneys’ fees or whether

the district court abused its discretion in determining the amount of attorneys’ fees

to which EC Paia is entitled. Id.

5. EC Paia appeals the district court’s grant of summary judgment to

Plaintiffs on EC Paia’s counterclaims. This Court reviews the district court’s

summary judgment decision de novo, and, viewing the evidence in the light most

favorable to the nonmoving party, determines if there is a genuine issue of material

fact and “whether the substantive law has been applied correctly.” Miller v.

Fairchild Indus., Inc., 797 F.2d 727, 730 (9th Cir. 1986). We reverse.

The district court erred in granting summary judgment to Plaintiffs on EC

Paia’s counterclaims. First, the district court erroneously found EC Paia’s

negligent misrepresentation claim barred by the general release of claims and

waiver clauses in the Land Agreement. California Civil Code Section 1668

provides that “[a]ll contracts which have for their object, directly or indirectly, to

exempt anyone from responsibility for his own fraud, or willful injury to the

person or property of another, or violation of law, whether willful or negligent, are

7 against the policy of the law.” Cal. Civ. Code § 1668. California “case law has

long held that negligent misrepresentation is included within the definition of

fraud.” Blankenheim v. E.F. Hutton & Co., 217 Cal. App. 3d 1463, 1472–73

(1990). See also, e.g., Gagne v. Bertran, 43 Cal. 2d 481, 487–88 (1954); Balfour,

Guthrie & Co. v. Hansen, 227 Cal App. 2d 173, 192 (1964). Section 1668

therefore applies to EC Paia’s negligent misrepresentation claim. The general

release and waiver clauses of the Land Agreement are not enforceable with respect

to EC Paia’s negligent misrepresentation claim.

Second, the district court incorrectly found that EC Paia’s intentional

misrepresentation tort claim (governed by Hawaii law) was rooted only in “future

events and predictions” and so could “not constitute material statements of fact.”

Baskin v. EC Paia LLC, No. CV 20-00216 WRP, 2022 WL 2155200, at *6 (D.

Haw. Apr. 13, 2022). See also Stahl v. Balsara, 60 Haw. 144, 149 (1978) (applying

the rule that “an actionable representation cannot consist of mere broken promises,

unfulfilled predictions or expectations, or erroneous conjectures as to future

events” (internal quotation marks omitted)). The district court correctly noted that

EC Paia’s counterclaim alleged that Plaintiffs “misrepresented the prospective

value of the property, his ability to get permits and entitlements approved by the

County and its Planning Department, and the speed at which these permits and

entitlements could be secured.” Baskin, 2022 WL 2155200, at *6. But EC Paia’s

8 counterclaim also alleged that Plaintiffs made other misrepresentations, not

forward-looking in nature. EC Paia alleged Plaintiffs misrepresented that there

was a backup offer; that Plaintiffs had already spent more than one million dollars

on due diligence; and that there was a then-current state of “existing entitlement

rights.” Each of these allegations, if substantiated, referred to “material fact[s]

which [were allegedly] actually false.” Peine v. Murphy, 46 Haw. 233, 238 (1962).

EC Paia therefore alleged an actionable intentional misrepresentation claim.

Finally, the district court erred in concluding that there was no genuine issue

of material fact as to whether EC Paia “actually relied on Baskin’s

representations . . . when entering into the Land Agreement.” Baskin, 2022 WL

2155200, at *7. “A genuine issue of material fact arises if the evidence is such that

a reasonable jury could return a verdict for the nonmoving party.” Thrifty Oil

Co. v. Bank of Am. Nat’l Trust & Sav. Ass’n, 322 F.3d 1039, 1046 (9th Cir. 2003)

(internal quotation marks omitted). Under Hawaii law, “relevant circumstantial

considerations” in determining whether one party justifiably relied on another

party’s alleged misrepresentation include “the parties’ (1) relative knowledge of

the facts available, (2) opportunity to investigate the facts, and (3) prior business

experience.” Honolulu Disposal Serv. Inc. v. Am. Ben. Plan Adm’rs, Inc., 433

F.Supp. 2d 1181, 1191 (D. Haw. 2006) (internal quotation marks omitted). In his

declaration, Sam Hirbod stated that the “Investor Letter included several

9 representations that I found compelling and on which I relied.” EC Paia asserts

that it relied on Plaintiffs’ representations because of Baskin’s expressed

specialized knowledge of and access to property development expertise on Maui,

as well as the short time frame that EC Paia had to conduct its own due diligence.

These assertions, if substantiated, are “such that a reasonable jury could return a

verdict for [EC Paia].” Thrifty Oil, 322 F.3d at 1046. Summary judgment was not

appropriate on the issue of justifiable reliance.

For these reasons, the district court erred in granting summary judgment to

Plaintiffs on EC Paia’s counterclaims. Fed. R. Civ. P. 56(a).

AFFIRMED in part; REVERSED in part; and REMANDED.