Outlaw Laboratory, LP v. DG in PB, LLC

District Court, S.D. California·Decided September 15, 2020·No. 3:18-cv-00840·Unknown

Opinion

1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 SOUTHERN DISTRICT OF CALIFORNIA 9 IN RE OUTLAW LABORATORY, LP Case No.: 18-cv-840-GPC-BGS

10 LITIGATION. ORDER DENYING MOTION FOR 11 PERMANENT INJUNCTION AND ORDERING PRODUCTION OF 12 SETTLEMENT AGREEMENT. 13 (ECF No. 249.) 14

15 Before the Court is a joint request for entry of a stipulated permanent injunction 16 filed by Defendant Roma Mikha, Inc., Third-Party Plaintiff NMRM, Inc., Third-Party 17 Plaintiff Skyline Market, Inc. (collectively, the “Stores”), Outlaw Laboratory, LLP 18 (“Outlaw”), Michael Wear, and Shawn Lynch (collectively, “Outlaw Defendants”). ECF 19 No. 249. The request was filed along with a joint notice of settlement of the Stores’ 20 claims against Outlaw Laboratory, Michael Wear, and Shawn Lynch on July 7, 2020. Id. 21 After considering the arguments and applicable law, the Court DENIES the motion for 22 permanent injunction as premature, beyond the scope of RICO, and overbroad. 23 Also, before the Court is Third-Party Defendant Tauler Smith’s objection to the 24 above-listed Parties’ settlement. ECF No. 250. The Court ORDERS that the Stores 25 provide a copy of the settlement agreement to the Court and to all Parties who do not 26 have it on or before September 18, 2020 to permit review under Diaz v. Trust Territory of 27 1 Pac. Islands, 876 F.2d 1401, 1408–11 (9th Cir. 1989). Tauler Smith may file a seven- 2 page supplement in support of their objection on or before October 2, 2020. The Stores 3 and Outlaw Defendants may file seven-page supplemental responses on or before 4 October 16, 2020. The matter will thereafter be taken under submission. 5 I. Background 6 On July 7, 2020, the Stores, Outlaw, Mr. Wear, and Mr. Lynch jointly notified the 7 Court that they reached a settlement of the Stores’ claims against them. ECF No. 249. 8 The Parties noted that, pursuant to their agreement, Outlaw would: 9 cease bringing any litigation or demand against any retail store in the United States regarding the alleged false advertising of any “sexual enhancement 10 products;” that it will cease receiving money from any retail stores related to 11 such claims that have already been asserted; that it will instruct all counsel acting on its behalf to cease any and all collection efforts with respect to 12 previously asserted claims against retail stores nationwide; and that Mr. Wear 13 and Mr. Lynch will agree to make themselves available to testify at trial. 14 Id. at 2. The Parties further moved the Court to enter a permanent injunction and retain 15 jurisdiction over this case according to the terms of the attached “Stipulated Consent 16 Judgment and Request for Entry of Stipulated Permanent Injunction.” ECF No. 249-1. 17 On July 7, 2020, Tauler Smith filed an objection to the Notice of Settlement, 18 arguing that the Court should reject it for three reasons. ECF No. 250. First, Tauler Smith 19 argued that the Settlement was improper for failing to abide by the Court’s Civil Rules on 20 class settlements and for failing to convey how the Stores were remunerated. Id. at 4–7. 21 Second, Tauler Smith argued that, to the extent the settlement provided only for 22 injunctive relief, that remedy is not permitted under RICO. Id. at 7. Lastly, Tauler Smith 23 argued that the settlement signals improper collusion between the Outlaw Defendants and 24 the Stores’ counsel. Id. at 7–11. 25 On July 8, 2020, the Stores replied, arguing that Tauler Smith lacked standing to 26 contest the settlement of another defendant to the counterclaims, and that Tauler Smith’s 27 1 arguments were premised on the erroneous assumption that the settlement extended to the 2 class. ECF No. 252 at 6. The Stores explained that the “Settlement here involves the 3 Stores’ individual claims only—it does not purport to settle any class claims.” ECF No. 4 252 at 3. The Stores emphasized that Court’s approval is only required when a class 5 action plaintiff reaches a settlement on behalf of the class. Id. 6 On July 9, 2020, Outlaw Defendants filed a joint response to Tauler Smith’s 7 objection to the settlement. ECF No. 253. In the filing, Outlaw explains in detail its 8 souring relationship with Tauler Smith, joins in the Stores’ contention that Tauler Smith 9 lacks standing to object, and provides additional arguments to rebut Tauler Smith’s 10 assertion that the settlement evinces collusion. Id. 11 On July 9, 2020, Tauler Smith filed an additional brief to notify the Court that the 12 proposed settlement applied not only to the Stores – i.e., to Roma Mikha, Skyline Market, 13 Inc., and NMRM, Inc. – but also to Mr. Poe’s other store clients in this action. ECF No. 14 254 at 2. Tauler Smith argues that this undermines the notion that the settlement covers 15 only individual claims, and not the class claims. Id. at 5. Tauler Smith also argues that 16 this creates a conflict of interest for Gaw | Poe between the class’s interests and those of 17 its immediate clients because it appears Gaw | Poe has agreed not to pursue the class 18 claims against the Outlaw Defendants to the detriment of the class and in exchange for 19 Mr. Wear and Mr. Lynch’s agreement to testify against Tauler Smith. Id. at 8–9. Lastly, 20 Tauler Smith argues that Gaw | Poe’s conduct requires disqualification.1 Id. at 10–11. 21 On July 17, 2020, the Court held a hearing on the Stores’ motion for class 22 certification. ECF Nos. 179, 257. The Court ordered the “parties file further briefings on 23 the issue by” July 24, 2020 with the view that the issues regarding the settlement had to 24 be resolved prior to proceeding on the motion for class certification. Id. 25

26 1 The Court will not take up requests for disqualification in this manner. To request disqualification, a 27 separately filed motion would be required. 1 On July 24, 2020, the Stores filed a supplemental brief as ordered by the Court. 2 ECF No. 261. The Stores make four points: (1) that the Parties can agree to relief of their 3 choice in a stipulated injunction, regardless of the available remedies provided by law; 4 (2) that Tauler Smith lacks standing to oppose the settlement; (3) that the Court has no 5 role in reviewing the settlement because the settlement applies only to the stores in this 6 matter; and (4) that, even if the Court reviewed the settlement under the pre-certification 7 rubric of Diaz, there would be no need to require notice. ECF No. 261 at 2–7. 8 On July 24, 2020, Tauler Smith also filed a supplemental brief as ordered by the 9 Court. ECF No. 262. There, Tauler Smith argues that it has standing because the 10 settlement compromises an affirmative defense. Id. at 7–11. Tauler Smith also contends 11 that the Court should review the settlement as a class settlement or, alternatively, for 12 whether notice is appropriate under Diaz. Id. at 11–17. Tauler Smith makes additional 13 arguments which go to how the partial settlement with Outlaw Defendants affects the 14 Stores’ motion for class certification. Id. at 17–28. 15 II. Legal Standard 16 A district court has “broad discretion in fashioning a remedy” through injunctive 17 relief. Melendres v. Arpaio, 784 F.3d 1254, 1265 (9th Cir. 2015) (quoting Sharp v. 18 Weston, 233 F.3d 1166, 1173 (9th Cir. 2000)). In granting a permanent injunction, the 19 Court considers four factors: 20 A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate 21 to compensate for that injury; (3) that, considering the balance of hardships 22 between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. 23 24 eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006).

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