Stadtmueller v. Sarkisian

• Court: District Court, S.D. California
• Decided: January 12, 2024
• Docket: 3:22-cv-00994
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 Case No.: 3:22-cv-00994-BEN-SBC In re:

11 RUDOLPH MEDINA aka RUDY ORDER ON PLAINTIFF’S 12 MEDINA, MOTIONS IN LIMINE

13 Debtor.

14 BK Case No. 12-13764-LT7

15 RONALD E. STADTMUELLER, 16 Chapter 7 Trustee

17 Plaintiff,

18 v.

19 BERNADETTE SARKISIAN, an

individual; JOHN SARKISIAN, an 20 [ECF Nos. 24, 25, 26, 27] individual, 21 Defendants. 22 23 This case stems from proceedings in United States Bankruptcy Court. ECF No. 1. 24 The Plaintiff in this case is Chapter 7 Trustee Ronald E. Stadtmueller (“Plaintiff” or 25 “Trustee”) and the Defendants are Bernadette Sarkisian and John Sarkisian 26 (“Defendants”). Id. at 2. Plaintiff’s complaint generally seeks to set aside a certain 27 transaction executed by Defendants as a fraudulent transfer under California’s Uniform 28 Voidable Transactions Act (“UVTA”). Id. at 3. 1 Before the Court are Plaintiff’s motions in limine. ECF Nos. 24-27. The motions 2 are fully briefed. See ECF Nos. 36-39 (responses) and ECF Nos. 40-44 (replies). The 3 motions were submitted on the papers without oral argument pursuant to Civil Local Rule 4 7.1(d) and Rule 78(b) of the Federal Rules of Civil Procedure. ECF No. 45. 5 I. Background 6 1. Factual Background. In 2012, Rudy Medina obtained a 1.4-million-dollar 7 judgment against John Sarkisian. ECF No. 1 at 2. That same year, Medina filed for 8 Chapter 11 bankruptcy.1 Id. In September 2013, the bankruptcy was converted to a 9 Chapter 7 and Mr. Stadtmueller was appointed Trustee. Id. In March 2014, debtor John 10 Sarkisian and his wife Bernadette Sarkisian signed a “transmutation agreement” (“TA”) 11 which converted their assets from community property to separate property. Id. 12 2. Procedural Background-Bankruptcy and Appellate Proceedings. In 2018, 13 Plaintiff filed an adversarial bankruptcy complaint against Defendants seeking to set 14 aside the TA as a fraudulent conveyance.2 Id. Plaintiff maintains the TA attempts to 15 transfer property out of reach of the 2012 judgment in violation of the UVTA. Id. The 16 parties filed cross motions for summary judgment in August 2018. Id. at 3. Defendants 17 argued that the TA was not a “transfer” for the purpose of UVTA. Adversary 18 Proceeding, ECF No. 25. The Bankruptcy Court denied both motions, but explicitly 19 ruled that the TA was a transfer for the purposes of the UVTA. Adversary Proceeding, 20 ECF No. 41 at 13. 21 In September 2019, Defendants filed a second motion for summary judgment 22 arguing harm was an essential element of a UVTA claim and that the Trustee had failed 23 to present any evidence of harm. Adversary Proceedings, ECF No. 57. The Bankruptcy 24 Court agreed with Defendants’ reasoning and granted Defendants’ motion. Adversary 25 26

27 1 S.D. Cal. Bankruptcy Court No. 12-13764-LT7 (“Chapter 7 Proceeding”). 28 2 1 Proceeding, ECF Nos. 61, 70. Plaintiff then appealed this ruling to the Bankruptcy 2 Appellate Panel (“BAP”). Adversary Proceeding, ECF No. 81. 3 In a published opinion, the BAP reversed, ruling, “[n]o statutory language supports 4 a requirement that the plaintiff prove damages or actual injury or that the debtor’s 5 remaining assets after the transfer were insufficient to satisfy the debt without undue 6 burden.” In re Medina, 619 B.R. 236, 241-42 (B.A.P. 9th Cir. 2020). The BAP 7 additionally reasoned while damages or “actual injury” was not an element of an “actual 8 fraudulent transfer claim[,]” insolvency of the transferors could nevertheless be relevant 9 to establishing the requisite intent. Id. at 242-43. 10 Defendants appealed the BAP’s decision to the Ninth Circuit, which affirmed, 11 finding, “[t]he BAP concluded that the only affirmative injury necessary . . . is proof that 12 the debtor, with the intent to hinder, delay, or defraud the creditor, placed property out of 13 the creditor’s reach that could have been used to pay the debt. We agree with the 14 reasoning of the BAP. . . .” In re Medina, No. 20-60045, 2021 WL 3214757 at *2 (9th 15 Cir. July 29, 2021). 16 3. Procedural Background-District Court. On October 18, 2022, the case was 17 removed to this Court after Defendant Bernadette Sarkisian requested a jury trial. ECF 18 No. 4. On May 8, 2023, the parties attended a Final Pretrial Conference, which set the 19 date for a jury trial and deadline for motions in limine. ECF No. 23. 20 II. Legal Standards 21 Rulings on motions in limine fall entirely within the Court’s discretion. United 22 States v. Bensimon, 172 F.3d 1121, 1127 (9th Cir. 1999) (citing Luce v. United States, 23 469 U.S. 38, 41-42 (1984)). Evidence is excluded on a motion in limine only if the 24 evidence is clearly inadmissible for any purpose. Fresenius Med. Care Holdings, Inc. v. 25 Baxter Int’l, Inc., No. C 03-1431 SBA (EDL), 2006 WL 1646113 at *3 (N.D. Cal. June 26 12, 2006). If evidence is not clearly inadmissible, evidentiary rulings should be deferred 27 until trial to allow questions of foundation, relevancy, and prejudice to be resolved in 28 context. See Bensimon, 172 F.3d at 1127 (when ruling on a motion in limine, a trial court 1 lacks access to all the facts from trial testimony). Denial of a motion in limine does not 2 mean that the evidence contemplated by the motion will be admitted at trial. Id. 3 Relevant to the present inquiry is Federal Rule of Civil Procedure (“Rule”) 56(g) 4 and the Law of the Case doctrine. Rule 56(g) provides a Court ruling on a motion for 5 summary judgment, which does not grant all the relief requested, may still “enter an order 6 stating any material fact—including an item of damages or other relief—that is not 7 genuinely in dispute and treating the fact as established in the case.” Fed. R. Civ. P. 8 56(g). The Law of the Case doctrine provides that “a ruling or holding stated in an 9 appellate court opinion is binding on all inferior courts in all subsequent proceedings 10 related to the same parties in the same action.” Morohoshi v. Pacific Home, 34 Cal.4th 11 482, 491 (2004). 12 III. Discussion 13 Plaintiff’s four motions in limine seek to have certain rulings by the Bankruptcy 14 Court, the BAP and the Ninth Circuit effectively bind the parties pursuant to Rule 56(g) 15 and the Law of the Case doctrine. ECF Nos. 24-27. The motions thus seek to exclude 16 Defendants from presenting evidence or making argument contrary to these rulings. Id. 17 Relevant here, the Ninth Circuit characterized the elements of a UVTA claim as: “(1) 18 transfer of an (2) asset [that] was (3) made with actual intent to hinder, delay, or defraud 19 any creditor of the debtor.” In re Medina, 2021 WL 3214757 at *1. Discussed below 20 regarding Plaintiff’s first motion in limine, the Court agrees that the only substantive 21 element remaining to be determined at trial is the Defendants’ requisite intent. 22 1. Motion to Exclude Evidence Regarding “Transfer” Element 23 Plaintiff’s first motion seeks to preclude Defendants from offering evidence or 24 arguments that the TA was not a “transfer” of “assets” under the UVTA. ECF No. 24. 25 Defendants argue they do not object on that ground, but express concern that a blanket 26 exclusion could preclude Defendants from introducing relevant evidence. ECF No. 36. 27 First, despite Defendants’ apparent agreement, Plaintiff accurately points out the 28 Defendants’ have argued that the TA was not a transfer in previous filings with the Court, 1 which belies a potential intent to argue this point at trial. See Defendants’ Memorandum 2 of Contentions of Facts and Law, ECF No. 17 at 2 (“No assets were transferred 3 through the TA.”) (emphasis in original). Second, Defendants do not identify any 4 evidence they seek to present that would be in danger of exclusion by this motion.3 5 The Court agrees the Bankruptcy Court’s finding that the TA represented a 6 “transfer” under the UVTA is binding on parties. This was a legal conclusion made by 7 the Bankruptcy Court in a summary judgment order, which neither party appealed. The 8 Court is also satisfied Plaintiff’s request is sufficiently tailored as to not impact relevant 9 evidence. Accordingly, the Court GRANTS Plaintiff’s first motion in limine. 10 2. Motion to Exclude Evidence Regarding Harm Element 11 Plaintiff’s second motion seeks to preclude the Defendants from “offering 12 evidence regarding the element of harm under the UVTA[,]” arguing the BAP and Ninth 13 Circuit already determined the TA “caused the Trustee harm[.]” ECF No. 25. 14 Defendants respond that the BAP and Ninth Circuit’s ruling was limited to a discussion 15 of what encompasses harm or injury in a UVTA claim, not a finding that the Trustee in 16 this case was harmed. ECF No. 37. 17 The Court must agree with Defendants. The BAP and Ninth Circuit reversed 18 because the Bankruptcy Court erroneously required the Trustee to show additional harm; 19 this is not a finding that the Trustee was harmed. The BAP and Ninth Circuit opinions 20 discuss the nature of the harm or injury element of a UVTA claim (or, more accurately, 21 that there is no “free-floating actual injury element” for a UVTA claim). In re Medina, 22 619 B.R. at 245; In re Medina, 2021 WL 3214757 at *2-3 (“the BAP correctly concluded 23 the bankruptcy court erred by finding that the Trustee’s failure to provide evidence of a 24 specific injury entitled the Sarkisians to summary judgment, since no such evidence was 25 required.”). Indeed, the logic of the BAP and Ninth Circuit’s opinions would preclude 26 27 28 3 1 the Court from finding harm to the Trustee has already been established. Both courts 2 concluded that the injury flows from establishing the elements of the claim. See In re 3 Medina, 2021 WL 3214757 at *2 (“if the debtor transfers something of value, and the 4 creditor proves it was done with the [requisite intent] then the creditor has been injured.”) 5 Under this reading of the statue, the Trustee does not establish injury until the Trustee 6 establishes requisite intent. 7 The Court is not deaf to Plaintiff’s concerns. Again, arguments in Defendants’ 8 filings make it appear that Defendants intend to make arguments at trial which are 9 specifically precluded by the BAP and Ninth Circuit’s rulings. See, e.g., Pretrial Order, 10 ECF No. 73 at 4 (“Defendants assert that Plaintiff cannot show any damages as a result of 11 the [TA]. . . .”). The Defendants are cautioned against making arguments that are 12 foreclosed by the rulings of the Bankruptcy Court, BAP and Ninth Circuit. However, the 13 Court finds carefully crafted jury instructions and objections raised in their full context at 14 trial will be the most appropriate remedy for any potential confusion on this issue. For 15 these reasons, the Court DENIES Plaintiff’s second motion in limine. 16 3. Motion to Exclude Evidence of Defendants’ Financial State and Solvency. 17 Plaintiff’s third motion in limine seeks to exclude any evidence regarding the 18 Defendants’ financial condition and solvency, arguing such evidence is irrelevant and 19 would be unduly confusing to the jury and prejudicial to Plaintiff. ECF No. 26. 20 Defendants argue that solvency or insolvency represents circumstantial evidence relevant 21 to their allegedly fraudulent intent, and this was explicitly noted in the BAP’s Opinion. 22 ECF No. 38. Defendants are correct. As the BAP observed, “[t]he transferor’s 23 insolvency is [not] completely irrelevant to an ‘actual’ fraudulent transfer claim. The 24 creditor must establish that the transfer was made with ‘actual intent to hinder, delay or 25 defraud’ creditors . . . , the UVTA and its ancestors permit the creditor to prove intent 26 using circumstantial evidence . . . includ[ing] . . . whether the debtor was insolvent or 27 became insolvent shortly after the transfer was made.” In re Medina, 619 B.R. at 243 28 (internal citations omitted). The Court cannot agree evidence of Defendants’ financial 1 || condition at the time the TA was executed is completely irrelevant to Defendants’ intent. 2 || Accordingly, the Court DENIES Plaintiff's third motion in limine. 3 4. Motion to Exclude Evidence Regarding Valuation of the Transferred Assets. 4 Plaintiff's final motion in limine seeks exclusion of any evidence or argument 5 regarding the valuation of the assets transferred by the TA, again arguing such evidence 6 || is irrelevant to the Defendants’ purported intent. ECF No. 27. Defendants respond that 7 || the value of the transferred assets is fairly included among circumstantial evidence of 8 || Defendants’ intent. ECF No. 39. These arguments are substantially similar to those 9 ||examined in Plaintiff's third motion in limine. The Court cannot conclude the value of 10 || the transferred assets at the time of the TA’s execution is irrelevant. However, the Court 11 agrees evidence relating to the current or depreciated value of such assets is not relevant 12 Defendants’ intent at the time they executed the TA, and such evidence would only 13 || serve the confuse the jury. Accordingly, the Court GRANTS-IN-PART Plaintiff's 14 || fourth motion in limine. 15 IV. Conclusion 16 For the reasons set forth above, the Court ORDERS as follows: 17 1. Plaintiff’s First Motion in Limine is GRANTED. (ECF No. 24). 18 2. Plaintiff's Second Motion in Limine is DENIED. (ECF No. 25). 19 3. Plaintiff's Third Motion in Limine is DENIED. (ECF No. 26). 20 4. Plaintiff's Fourth Motion in Limine is GRANTED-IN-PART. (ECF No. 27). 21 IT IS SO ORDERED. . 22 Dated: January 11, 2024 23 - ROGER T. BENIT United States District Judge 24 25 26 27 28