S&G Labs Hawaii, LLC v. Graves

District Court, D. Hawaii·Decided June 21, 2024·No. 1:19-cv-00310·Unknown

Opinion

UNITED STATES DISTRICT COURT

DISTRICT OF HAWAII

S&G LABS HAWAII, LLC, A HAWAII CIV. NO. 19-00310 LEK-WRP LIMITED LIABILITY COMPANY,

Plaintiff and Counterclaim Defendant,

vs.

DARREN GRAVES,

Defendant and Counterclaim Plaintiff.

ORDER: DENYING DARREN GRAVES’S MOTION TO CERTIFY THE JUDGMENT AND FOR PERMISSION TO REGISTER THE JUDGMENT IN OTHER DISTRICTS; AND GRANTING IN PART AND DENYING IN PART THE JUDGMENT DEBTORS’ REQUEST FOR A STAY OF THE EXECUTION OF THE JUDGMENT

The Judgment in a Civil Case (“Judgment”) was filed on September 25, 2023. [Dkt. no. 282.] The Judgment included several monetary awards: Judgment is entered in favor of Defendant/Counterclaim Plaintiff Darren Graves and against Plaintiff/Counterclaim Defendant S&G Labs Hawaii, LLC in the following amounts: $19,531.14 as to Counterclaim Counts I and II (trade secret claims), collectively, pursuant to the 2/17/21 Order and the 9/25/23 Order;[1] $3,500,000.00 as to Counterclaim Count III (breach of contract), pursuant to the jury’s

1 The 2/17/21 Order is this Court’s February 17, 2021 Order Granting Defendant’s Motion for Summary Judgment, [dkt. no. 121,] and the 9/25/23 Order is this Court’s September 25, 2023 Order Ruling on the Remaining Claims in this Case, [dkt. no. 281]. Verdict;[2] $793,297.81 as to Counterclaim Count VI (Chapter 388 unpaid wages claim), consisting of the amount reflected in the jury’s Verdict ($354,333.33) and the civil penalty determined in the 9/25/23 Order ($438,964.48); and $250,000.00 in general damages and $1,000,000.00 in punitive damages as to Counterclaim Counts X and XI (wrongful termination claims), pursuant to the jury’s Verdict.

Judgment is entered in favor of Third-Party Plaintiff Darren Graves and against Third-Party Defendant Dr. Lynn Puana (now known as Dr. Lynn Welch), in the following amounts: $500,000.00 in general damages as to Third-Party Counts II and III (defamation claims), collectively, pursuant to the jury’s Verdict; and $2,000,000.00 in punitive damages as to Third-Party Counts II and III collectively, pursuant to the jury’s Verdict.

[Judgment at 2.] Thus, the total amount of the Judgment is $5,562,828.95 in favor of Defendant/Counterclaim Plaintiff/Third-Party Plaintiff Darren Graves (“Graves”) and against Plaintiff/Counterclaim Defendant S&G Labs Hawaii, LLC (“S&G Labs”) and $2,500,000.00 against Third-Party Defendant Lynn Puana, M.D., now known as Dr. Lynn Welch (“Dr. Welch”). On April 9, 2024, Graves filed a Motion to Certify the Judgment and for Permission to Register the Judgment in Other Districts (“Motion”). [Dkt. no. 303.] On April 19, 2024, S&G Labs and Dr. Welch (“Judgment Debtors”) filed their memorandum in opposition on April 19, 2024. [Dkt. no. 305.] This Court

2 The Special Jury Verdict Form (“Verdict”) was filed on April 5, 2023. [Dkt. no. 274.] finds the Motion suitable for disposition without a hearing pursuant to Rule LR7.1(c) of the Local Rules of Practice for the United States District Court for the District of Hawaii (“Local Rules”). Graves’s Motion is hereby denied for the reasons set forth below. The Judgment Debtors’ request for a stay of the

execution of the Judgment pending appeal is granted, provided that the Judgment Debtors post a supersedeas bond. DISCUSSION Graves has investigated the Judgment Debtors’ current assets and has not identified any assets, such as real property, in the District of Hawai`i, but Graves has determined that Dr. Welch and/or S&G Labs have substantial asses in Colorado. [Motion, Declaration of Counsel (“Hara Decl.”) at ¶¶ 4-7.] A title search revealed that Dr. Welch acquired certain real property in Colorado on or about April 29, 2021 for $3,875,000.00. [Id. at ¶¶ 8-9.] Title to the Colorado Property is held by the Lynn Welch Puana Living Trust, and Graves

believes that Dr. Welch is the trustee. [Id. at ¶ 10.] Pursuant to Title 28 United States Code Section 1963, Graves requests an order that: 1) directs the Clerk’s Office to certify the Judgment; and 2) grants Graves permission to register the Judgment in other districts, including, but not limited to, the District of Colorado. [Motion, Mem. in Supp. at 2.] Section 1963 states, in relevant part: A judgment in an action for the recovery of money or property entered in any . . . district court, bankruptcy court . . . may be registered by filing a certified copy of the judgment in any other district or, with respect to the Court of International Trade, in any judicial district, when the judgment has become final by appeal or expiration of the time for appeal or when ordered by the court that entered the judgment for good cause shown. Such a judgment entered in favor of the United States may be so registered any time after judgment is entered. A judgment so registered shall have the same effect as a judgment of the district court of the district where registered and may be enforced in like manner.

A certified copy of the satisfaction of any judgment in whole or in part may be registered in like manner in any district in which the judgment is a lien.

The procedure prescribed under this section is in addition to other procedures provided by law for the enforcement of judgments.

(Emphasis added.) The Judgment in this case has not become final by appeal. S&G Labs, Dr. Welch, and Third-Party Defendant Stephanie Bade-Castro (collectively “S&G Parties”) filed their Notice of Appeal on February 14, 2024. [Dkt. no. 293.] The S&G Parties’ appeal is still pending before the Ninth Circuit Court of Appeals (“Ninth Circuit”). Graves argues there is good cause for this Court to permit the registration of the Judgment, even though the appeal is still pending, because the S&G Parties have not obtained a stay of the Judgment pending appeal, and the Judgment Debtors do not have sufficient assets in the District of Hawai`i to satisfy the Judgment. [Motion, Mem. in Supp. at 5-6.] The Ninth Circuit has noted that “the courts that have found good cause [for purposes of Section 1693] have generally based their decisions on an absence of assets in the judgment forum, coupled with the

presence of substantial assets in the registration forum.” Columbia Pictures Television, Inc. v. Krypton Broad. of Birmingham, Inc., 259 F.3d 1186, 1197–98 (9th Cir. 2001) (quotation marks omitted) (citing Dyll v. Adams, 1998 WL 60541 at *1 (N.D. Tex. 1998); Johns v. Rozet, 143 F.R.D. 11, (D.D.C. 1992); Chicago Downs Ass’n v. Chase, 944 F.2d 366, 372 (7th Cir. 1991); Graco Children’s Prods., Inc. v. Century Prods. Co., 1996 WL 421966, at *36 (E.D. Pa. 1996); Bingham v. Zolt, 823 F. Supp. 1126, 1136 (S.D.N.Y. 1993), aff’d, 66 F.3d 553 (2d Cir. 1995)). Graves has established that the Judgment Debtors do not have sufficient assets in the District of Hawai`i to satisfy the Judgment, but they have substantial assets in the District of

Colorado. As of the filing of the Motion, there was no stay of the Judgment in place pending the resolution of the S&G Parties’ appeal. However, in their memorandum in opposition to the Motion, the Judgment Debtors “move this Court to stay the enforcement of the judgment pursuant to Rule 62 of Federal Rules of Civil Procedure while this matter is pending appeal in the United States Court of Appeals for the Ninth Circuit.” [Mem. in Opp. at PageID.5104.] The Judgment Debtors also argue enforcement of the Judgment should be stayed without the requirement of a supersedeas bond because they argue the appeal will likely be resolved within a short period of time. [Id.] If

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