Roadrunner Intermodal Services, LLC v. T.G.S. Transportation, Inc.

• Court: District Court, E.D. California
• Decided: February 7, 2022
• Docket: 1:17-cv-01056
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 ROADRUNNER INTERMODAL No. 1:17-cv-01207-DAD-BAM, 1:17-cv- SERVICES, LLC, a Delaware limited 01056-DAD-BAM (consolidated) 12 liability company,

13 Plaintiff, ORDER DENYING JEFFREY COX’S 14 v. MOTION TO MODIFY SCHEDULING ORDER 15 T.G.S. TRANSPORATION, INC., a California corporation, and DOES 1-10, (Doc. No. 258) 16 Defendants. 17

19 JEFFREY COX, 20 Plaintiff, 21 v. 22 ROADRUNNER INTERMODAL SERVICES, LLC, a Delaware limited 23 liability company, CENTRAL CAL TRANSPORTATION, LLC, a Delaware 24 limited liability company, and DOES 1 through 50, 25 Defendants. 26

28 1 ROADRUNNER INTERMODAL SERVICES, LLC, a Delaware limited 2 liability company, 3 Counter-Plaintiff and Defendant, 4 v. 5 JEFFREY COX, 6 Counter-Defendant and 7 Plaintiff. 8

9 10 11 Before the court is plaintiff and counter-defendant Jeffrey Cox’s motion to modify the 12 court’s scheduling order. (Doc. No. 258.) Pursuant to General Order No. 617 addressing the 13 public health emergency posed by the COVID-19 pandemic, Cox’s motion was taken under 14 submission on the papers. (Doc. No. 259.) For the reasons explained below, the court will deny 15 the motion. 16 BACKGROUND 17 The facts of this case have been outlined extensively in the court’s prior orders. As 18 relevant to this motion, all that is necessary is a brief outline. In summary, Roadrunner 19 Intermodal Services, LLC (“Roadrunner”), Central Cal Transportation (“Central Cal”), and Cox, 20 among other parties, entered into a stock purchase agreement (“SPA”) on November 2, 2012, 21 pursuant to which Roadrunner purchased all the stock and assets of Central Cal and Double C 22 Transportation, another trucking company, for approximately $3.8 million. (See Doc. Nos. 90 at 23 2–4.) The SPA also included an earn-out payment to Cox if certain parameters regarding Central 24 Cal’s earnings before interest, taxes, depreciation, and amortization (“EBITDA”) were met. (Id. 25 at 3.) 26 Cox continued working for Central Cal after it was sold to Roadrunner. While working 27 for Central Cal, Cox noticed irregularities in Roadrunner and Central Cal’s accounting, which 28 affected the way the company’s EBITDA was being calculated. Cox was concerned that the 1 accounting irregularities were due to intentional fraud in violation of federal securities laws and 2 by September of 2016, communicated these concerns to executives at Roadrunner. (See Doc. No. 3 98 at ¶¶ 22–28.) 4 On or about January 30, 2017, Roadrunner publicly stated that it had become aware of 5 various accounting discrepancies within the company, and that the public should not rely on 6 various financial statements and associated reports previously filed by Roadrunner with the SEC. 7 (Id. at ¶ 37.) In January 2017, Cox’s role was changed from Vice-President of Operations at 8 Central Cal to a sales role at Roadrunner. (Id. at ¶ 39.) On February 17, 2017, Cox and David 9 Chidester, another prior owner of Central Cal, initiated a lawsuit against Roadrunner over issues 10 related to the earn-out payment, which was not resolved through a mediation. (See Doc. No. 113- 11 1 at 5–6.) Roadrunner terminated Cox on May 31, 2017. (Id. at 6.) On July 25, 2017, Cox filed 12 a complaint in Fresno County Superior Court asserting causes of action relating to his termination 13 which he alleged was wrongful. (Id.) Cox accepted employment with T.G.S Transportation, Inc. 14 (“TGS”) beginning in July 2017. (Doc. No. 90 at 3.) Roadrunner filed its action against TGS in 15 this court on August 7, 2017, alleging claims arising from the SPA’s non-competition provisions, 16 among other things. (Doc. No. 1.) 17 On February 7, 2018, the undersigned denied Roadrunner’s motion for a preliminary 18 injunction, granted TGS’ motion to consolidate this case with Cox v. Roadrunner Intermodal 19 Services, LLC, et al., No. 1:17-cv-01207-DAD-BAM (E.D. Cal.), and granted Cox’s motion to 20 intervene. (Doc. No. 90.) On March 28, 2019, the court issued an order denying Cox’s motion 21 for partial summary judgment, which had sought a declaratory judgment that the non-competition 22 provisions of the parties’ SPA were unlawful and unenforceable. (Doc. No. 199.) Then, on 23 August 21, 2019, the court issued an order denying Cox’s motion for reconsideration of the 24 March 28, 2019 order denying his motion for partial summary judgment. (Doc. No. 243.) 25 Finally, the court ruled on the last pending dispositive motion in this case on May 28, 2021, when 26 the court granted in part and denied in part TGS’ motion for summary judgment. (Doc. No. 249.) 27 This case was subsequently scheduled for a telephonic pretrial conference to take place on 28 ///// 1 February 28, 2022 and set for a jury trial before the undersigned commencing on April 26, 2022. 2 (Doc. No. 251.) 3 On October 19, 2021, Cox filed a motion to modify the court’s previous scheduling order, 4 seeking to file a new motion for summary judgment in light of allegedly new facts. (Doc. No. 5 258.) Roadrunner filed an opposition to Cox’s motion on November 2, 2021, and Cox filed a 6 reply thereto on November 9, 2021. (Doc. Nos. 260, 263.) 7 LEGAL STANDARD 8 In moving for the court to amend its scheduling order, a party must satisfy the “good 9 cause” showing required under Rule 16, which governs the modification of scheduling orders. 10 Johnson v. Mammoth Recreations, Inc, 975 F.2d 604, 609 (9th Cir. 1992); Aaron & Andrew, Inc. 11 v. Sears Holdings Mgmt. Corp., No. 14-cv-1196-SS, 2017 WL 3449597, at *2 (C.D. Cal. Feb 7, 12 2017); Taylor Morrison of Cal., LLC v. First Specialty Ins. Corp., No. 15-cv-1711-JVS-JCGx, 13 2016 WL 7626138, at *1 (C.D. Cal. Nov. 10, 2016). “Unlike Rule 15(a)’s liberal amendment 14 policy, which focuses on the bad faith of the party seeking to interpose an amendment and the 15 prejudice to the opposing party, Rule 16(b)’s ‘good cause’ standard primarily considers the 16 diligence of the party seeking the amendment.” Johnson, 975 F.2d at 609. Judges of this district 17 have adhered to a three-step inquiry in determining whether good cause under Rule 16 has been 18 satisfied: 19 To demonstrate diligence under Rule 16’s “good cause” standard, the movant may be required to show the following: (1) that she was 20 diligent in assisting the Court in creating a workable Rule 16 order; (2) that her noncompliance with a Rule 16 deadline occurred or will 21 occur, notwithstanding her diligent efforts to comply, because of the development of matters which could not have been reasonably 22 foreseen or anticipated at the time of the Rule 16 scheduling conference; and (3) that she was diligent in seeking amendment of 23 the Rule 16 order, once it became apparent that she could not comply with the order. 24 25 Wake Forest Acquisitions, L.P. v. Vanderbilt Commercial Lending, Inc., No. 2:15-cv-02167- 26 KJM-DB, 2018 WL 1586362, at *3 (E.D. Cal. Apr. 2, 2018) (brackets omitted); Grant v. United 27 States, No. 2:11-cv-00360-LKK, 2011 WL 5554878, at *4 (E.D. Cal. Nov. 15, 2011), report and 28 recommendation adopted, 2012 WL 218959 (E.D. Cal. Jan. 23, 2012); Kuschner v. Nationwide 1 Credit, Inc., 256 F.R.D. 684, 687 (E.D. Cal. 2009); Jackson v. Laureate, Inc., 186 F.R.D. 605, 2 608 (E.D. Cal. 1999). “Although the existence or degree of prejudice to the party opposing the 3 modification might supply additional reasons to deny a motion, the focus of the inquiry is upon 4 the moving party’s reasons for seeking modification.” Johnson, 975 F.2d at 609. 5 DISCUSSION 6 The court’s previous scheduling order set a June 7, 2019 filing deadline for all pre-trial 7 motions, both dispositive and non-dispositive. (Doc. No. 195.) Cox now argues that in the time 8 since that deadline passed, “the Department of Justice indicted Roadrunner’s Chief Financial 9 Officer, Peter Armbruster . . . [and] Armbruster’s criminal case moved forward to trial on July 13, 10 2021.” (Doc. No. 258-1 at 4.) Cox asserts that the jury in that criminal prosecution returned a 11 guilty verdict against Armbruster, finding that he took actions to mislead Roadrunner’s 12 accountant while Roadrunner was reviewing its own financial statements and that he falsified the 13 books, records, or accounts of Roadrunner. (Id.) According to Cox, this guilty verdict presents 14 “new facts that directly affect Roadrunner’s cross-claim against Cox for breach of contract 15 because it shows that Roadrunner materially breached the SPA long before June 1, 2017, which is 16 the date Roadrunner alleges Cox breached the SPA.” (Id.) Specifically, Cox avers, “Roadrunner 17 materially breached the agreement by fraudulently manipulating and concealing its financial 18 statements and accounts, which directly affected the SPA’s provisions regarding earn-out 19 payments to Cox[.]” (Id. at 5.) 20 In opposition, Roadrunner argues that Cox’s motion seeking modification of the court’s 21 scheduling order so as to authorize his filing of a new motion for summary judgment should be 22 denied because Cox sought the modification more than two years after the court’s established 23 deadline for the filing of motions had passed and because the new fact Cox bases the motion upon 24 “does not in and of itself establish that Roadrunner materially breached the SPA as a matter of 25 law.” (Doc. No. 260.) 26 The court finds Roadrunner’s argument to be persuasive. Although Armbruster’s criminal 27 conviction itself is a new fact, it does not appear to be material with respect to the court’s 28 previous denial of Cox’s motion for summary judgment. In his motion for reconsideration of the 1 order denying summary judgment in his favor, Cox argued that Roadrunner breached the SPA 2 based on the alleged wrongdoing of former Roadrunner employees. (Doc. No. 202-1 at 14.) 3 Specifically, Cox pointed out that an arbitrator had already determined that Roadrunner owed 4 Cox earn-out payments. (Id. at 12.) This court considered whether Roadrunner’s failure to pay 5 Cox constituted a material breach, i.e., one that would discharge Cox from performing his duty 6 under the SPA. (Doc. No. 243 at 11.) While the undersigned agreed that Roadrunner’s actions 7 could constitute a breach, it did not definitely conclude that this potential breach was material. 8 (Doc. No. 243 at 12.) As the court pointed out in denying Cox’s motion for reconsideration, 9 “‘[n]ormally the question of whether a breach of an obligation is a material breach, so as to 10 excuse performance by the other party, is a question of fact.’” (Id.) (quoting Brown v. Grimes, 11 192 Cal. App. 4th 265, 277 (2011)). The court therefore declined to resolve on summary 12 judgment whether Roadrunner materially breached the SPA, noting that “at the trial of this action, 13 Cox will be allowed to present evidence and argue that Roadrunner’s breach was ‘a material 14 breach [that] excuses further performance by the innocent party.’” (Id. at 12) (quoting Plotnik v. 15 Meihaus, 208 Cal. App. 4th 1590, 1602 (2012)). 16 As in his previous motions, Cox has not now presented any authority which persuades the 17 court that this new evidence––Armbruster’s conviction at his criminal trial––excuses Cox’s 18 performance under the SPA’s non-competition provisions. “Rather, at most, Cox has established 19 [another] issue of triable fact for a jury to resolve in this regard.” (Id. at 13.) Although Cox 20 contends that Roadrunner materially breached the SPA by manipulating its financial records to 21 withhold Cox’s contractual payments, this contention covers the same ground as Cox’s previous 22 arguments with respect to the arbitrator’s decision concluding that Roadrunner owed Cox 23 $1,050,000.00 in earn-out payments. (See Doc. No. 243 at 11.) Additional evidence that one of 24 Roadrunner’s officers was subsequently found guilty of defrauding Roadrunner’s accountant is 25 simply not dispositive as to the alleged material breach of the SPA. Cox provides no authority in 26 his motion stating otherwise. The verdict in Armbruster’s criminal case, at most, merely provides 27 a basis for one more argument that Cox may make to the jury in support of his claim. 28 ///// 1 This case is finally set for trial. Moreover, the court has already entertained too many 2 | motions that, in the undersigned’s view, have served only to delay the ultimate resolution of this 3 | action. Cox’s motion to amend the scheduling order will therefore be denied. 4 CONCLUSION 5 For these reasons, Cox’s motion to amend the court’s scheduling order (Doc. No. 258) is 6 | denied and that scheduling order remains in full force and effect. 7 | ORDERED. a 8 Li. wh F Dated: _ February 4, 2022 wea rE = 9 UNITED STATES DISTRICT JUDGE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28