Wagner v. Adickman

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Gary Wagner, et al., No. CV-19-03216-PHX-SMB

10 Plaintiffs, ORDER

11 v.

12 Derek Adickman, et al.,

13 Defendants.

15 Pending before the Court is Defendant/Counterclaimant Derek Adickman’s 16 (“Defendant”) Rule 59 Motion to Set Aside Judgment and Motion for New Trial. (Doc. 17 145.) Plaintiffs/Counterdefendants, Gary Wagner and Giggling Marlin, Inc. (“Plaintiffs”), 18 have filed a response. (Doc. 148.) No reply was filed. The Court has considered the 19 submitted pleadings and relevant case law. For the reasons stated below, the Court denies 20 Defendant’s motion. 21 I. BACKGROUND 22 This case centers around an agreement the parties entered to sell tequila. (Doc. 17, 23 ¶ 19.) The agreement terminated in 2019, and Plaintiffs brought an action against 24 Defendant for Trademark Infringement, Unfair Competition, Breach of Contract, and 25 Conversion. (Doc. 17.) Throughout pre-trial proceedings Defendant made no motions 26 pertaining to whether the fraud claim was well-pled. (Doc. 148 at 3.) Defendant made no 27 motion to challenge the sufficiency of the evidence. (Doc. 148 at 4-5.) Defendant did not 28 1 submit jury instructions concerning the fraud and punitive damages claims. (Doc. 148 at 2 13.) Further, while at the close of Plaintiff’s evidence the Defendant did make a motion to 3 strike some of the claims, the motion did not encompass Plaintiffs’ fraud claim. A jury 4 verdict was entered for Plaintiffs on March 16, 2021. (Doc. 142.) The jury verdict awarded 5 compensatory and punitive damages for Plaintiffs’ fraud claim in addition to nominal 6 damages. (Id.) Defendant did not object to the jury’s verdict prior to the jury being 7 discharged. (Doc. 148 at 14.) Defendant has now filed this motion to set aside the judgment 8 and for a new trial under Fed. R. Civ. P. 59(a). (Doc. 145.) 9 Plaintiffs filed a response to Defendant’s motion, (Doc. 148). Defendant filed no 10 reply to Plaintiffs’ response. 11 II. LEGAL STANDARD 12 Under Federal Rule of Civil Procedure 59(a), the court may grant a new trial, on 13 motion, “after a jury trial, for any reason for which a new trial has heretofore been granted 14 in an action at law in federal court.” A motion for new trial may be granted based on 15 insufficiency of the evidence “only if the verdict is against the ‘great weight’ of the 16 evidence or ‘it is quite clear that the jury has reached a seriously erroneous result.’” 17 Venegas v. Wagner, 831 F.2d 1514, 1519 (9th Cir. 1987) (quoting Digidyne Corp. v. Data 18 General Corp., 734 F.2d 1336, 1347 (9th Cir. 1984)). In considering a Rule 59 motion for 19 new trial, the Court is “not required to view the trial evidence in the light most favorable 20 to the verdict.” Experience Hendrix L.L.C. v. Hendrixlicensing.com Ltd, 762 F.3d 829, 842 21 (9th Cir. 2014). Instead, the Court can weigh the evidence and assess witness credibility. 22 Id. The Court may grant a Rule 59 motion for new trial on any ground “necessary to prevent 23 a miscarriage of justice.” Murphy v. City of Long Beach, 914 F.2d 183, 187 (9th Cir. 1990). 24 However, the Court should not grant a new trial “merely because it might have come to a 25 different result from that reached by the jury.” Wilhelm v. Associated Container 26 Transportation (Australia) Ltd., 648 F.2d 1197, 1198 (9th Cir.1981). The authority to grant 27 a new trial is confided almost entirely in the discretion of the trial court. Dees v. Cty. of 28 San Diego, 960 F.3d 1145, 1151 (9th Cir. 2020). 1 III. DISCUSSION 2 A. Well-Pled Requirement 3 Defendant argues that Plaintiffs’ fraud claim was not well-pled because Plaintiffs 4 only alleged that Defendant “misappropriated tequila without authorization.” (Doc. 145 at 5 4.) However, Defendant’s opportunity to argue about the sufficiency of the allegations in 6 Plaintiffs’ complaint has long passed. This is a motion for new trial, not a motion to 7 dismiss. In fact, Defendant Adickman never filed a motion to dismiss to attack the 8 allegations in Plaintiff’s complaint. Accordingly, the Court rejects his arguments regarding 9 the allegations in Plaintiffs’ complaint. 10 B. Rule 59 Motion after No Rule 50 Motions 11 Plaintiffs argue that Rule 59 does not apply because Defendant failed to file Rule 12 50 motions at trial and now seeks a new trial based on the insufficiency of the evidence. 13 (Doc. 148 at 3-4.) Plaintiffs correctly state that Unitherm and Humetrix require a party to 14 file a motion under Rule 50(b) to challenge the sufficiency of the evidence on appeal. 15 Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 546 U.S. 394, 395-6 (2006); Humetrix Inc. 16 v. Gemplus SCA, 268 F.3d 910, 923 (9th Cir. 2001) (Id.). Based on these holdings, Plaintiffs 17 assert that a party that fails to file Rule 50 motions waives the right to challenge the 18 sufficiency of the evidence “at any stage after the evidence has been presented.” (Doc. at 19 4.) However, denial of a motion to dismiss under Rule 50 would not preclude a motion for 20 new trial under Rule 59. See, Gordon Mailloux Enterprises, Inc. v. Firemen's Ins. Co. of 21 Newark, N. J., 366 F.2d 740 (9th Cir. 1966). Additionally, the standard for granting a 22 motion for judgment as a matter of law is different than that for granting a motion for new 23 trial. Datskow v. Teledyne Cont'l Motors Aircraft Prod., a Div. of Teledyne Indus., Inc., 24 826 F. Supp. 677 (W.D.N.Y. 1993); Markovich v. Bell Helicopter Textron, Inc., 805 F. 25 Supp. 1231 (E.D. Pa.), aff’d, 977 F.2d 568 (3d Cir. 1992). The Court finds that a motion 26 for new trial based on the insufficiency of the evidence is not precluded by the failure to 27 make a Rule 50 motion for judgment as a matter of law. 28 C. The Weight of the Evidence 1 Defendant asserts that the jury’s verdict for Plaintiffs on the fraud and punitive 2 damages claims was against the clear weight of Plaintiffs’ evidence. (Doc. 145 at 2.) 3 Defendant claims the entire case was “predicated on the claim of misappropriated tequila” 4 except fraud. (Doc. 145 at 3.) Defendant states that there was no “fraudulent taking of 5 tequila” and thus that the jury should not have awarded damages to Plaintiffs on the fraud 6 claim. (Id.). The Court disagrees and finds that there was sufficient evidence to support the 7 fraud claim and punitive damages. 8 The jury was correctly instructed of the nine elements to Arizona common law fraud 9 and the requirements to support fraud and punitive damages claims. (Doc. 148 at 5-6.) The 10 elements of common law fraud in Arizona are “(1) a representation; (2) its falsity; (3) its 11 materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) his intent 12 that it should be acted upon by and in the manner reasonably contemplated; (6) the hearer's 13 ignorance of its falsity; (7) his reliance on the truth; (8) his right to rely thereon; and (9) his 14 consequent and proximate injury.” Peery v. Hansen, 585 P.2d 574, 577 (Ct. App. 1978). 15 The Defendant’s argument ignores the evidence Plaintiffs submitted. 16 There was sufficient evidence to support the first, second, and fourth elements 17 because Plaintiffs presented evidence that Defendant knowingly made false representations 18 to Plaintiff Wagner. For example, Defendant testified that he converted the terms of his 19 oral agreement with Plaintiff Wagner to a written agreement. (Doc. 148 at 7.) A provision 20 in the written agreement provided that the agreement does not form a partnership. (Id.) 21 Plaintiff Wagner later signed a different written agreement with the same provision. (Id.) 22 However, Defendant testified at trial that he intended the business relationship to be a 23 partnership from the onset. (Id. at 8.) Defendant received notice of the provision when he 24 converted the terms of the oral agreement himself. Additionally, the jury heard numerous 25 hours of testimony from both Mr. Adickman and Mr. Wagner regarding the terms of their 26 business dealings and the financial state of the venture. A reasonable jury could have found 27 that Mr. Adickman knowingly made false representations during the parties’ business 28 relationship. 1 Plaintiff Wagner relied on this misrepresentation to his detriment. The 2 representation was certainly material because Plaintiff Wagner was led to “invest hundreds 3 of thousands of dollars into the venture, put his federally registered trademark into the 4 venture and [expended] a considerable amount of his time.” (Id.) Plaintiff Wagner intended 5 for Defendant to be a salesperson who would make “thirty percent (30%) of any profits” 6 and would be responsible for “thirty percent (30%) of any losses” rather than a partner. 7 (Id.) It was reasonable for the jury to conclude, as they did, that the Defendant intended for 8 Plaintiff Wagner to continue with the venture because of this misrepresentation. This is 9 especially so given that Defendant decided to continue the charade by knowingly making 10 more misrepresentations so that Plaintiff Wagner would not be aware of the actual 11 arrangement. These misrepresentations included: 12 • Defendant telling Plaintiff Wagner that he was “on the verge of securing a deal 13 or contract” of a major store chain when he had not contacted the buyer; 14 • Defendant claiming a different number of bottles had been given away than what 15 was on the report he provided to Plaintiff Wagner; 16 • Defendant submitting invoices with discrepancies on the date and price for 17 which bottles sold; 18 • Defendant telling Plaintiff Wagner he applied for an internet license to sell 19 tequila when, at trial, he testified that he never completed the application; 20 • Defendant telling Plaintiff Wagner a major store chain was interested in buying 21 the tequila after he had been informed the store was not interested; 22 • Defendant telling Plaintiff Wagner that he was “working to sell and promote” 23 Plaintiff Wagner’s brand of tequila when in reality Defendant was working on 24 forming his own company to sell tequila, a company that used Plaintiff Wagner’s 25 bottles in its advertisements; 26 • Defendant telling Plaintiff Wagner that he was ready to use the company truck 27 to service large accounts when the truck was no longer insured, had no current 28 license plates, and failed to start; 1 • Defendant provided himself with a personal loan and failed to tell Plaintiff 2 Wagner, instead claiming that he had paid an agent to further market Plaintiff 3 Wagner’s brand. 4 (Doc. 148 at 9-11.) 5 Each misrepresentation that followed the initial misrepresentation had the effect of 6 convincing Plaintiff Wagner that the right course of action was to continue supporting the 7 venture. Defendant also provided reassurance via a different provision in the written 8 agreement that in the case of a dispute, mediation would take place and if the mediation 9 were found to be unsuccessful, then the person who conducted the mediation would act as 10 an arbitrator to render a final decision. (Doc. 148 at 7.) Defendant did not honor this 11 provision either. (Doc. 148 at 14.) Therefore, there was sufficient evidence for the jury to 12 find that the third and fifth elements were met. 13 Defendant argues that Plaintiff Wagner cannot claim ignorance because “Wagner 14 and his office managed all the shipping of product, banking, and inventory distribution.” 15 (Doc. 145 at 6.) Defendant also argues that Plaintiffs’ accountant conveyed incomplete 16 information to Plaintiffs. (Doc. 145 at 8.) These arguments still do not pertain to the 17 portions of the operation that Defendant handled. Plaintiff Wagner believed Defendant’s 18 misrepresentation about the business structure and additional misrepresentations so much 19 so that he continued to fund the venture until he finally found out about the 20 misrepresentations. (Doc. 148 at 12.) It is reasonable for Plaintiff Wagner to claim 21 ignorance because Plaintiff Wagner had a right to believe that Defendant would uphold the 22 duty imposed upon him by the signed agreement. There is no question that the written 23 agreement was created and signed with the intent that it would be relied upon by both 24 parties. Thus, there was sufficient evidence for the jury to find that the sixth, seventh, and 25 eighth elements were met. 26 Finally, Plaintiff Wagner’s injury was a direct and proximate result of the fraud 27 because without Defendant’s misrepresentation, Plaintiff Wagner would not have incurred 28 the financial injuries he sustained by continuing to support the venture. (Id.) Plaintiff 1 Wagner also incurred a loss because of missing merchandise as a result of Defendant’s 2 actions. (Doc. 148 at 10). In light of the evidence offered by Plaintiffs, the jury’s 3 determination will not be disturbed. 4 Defendant also argues that the jury cannot award damages on the fraud claim 5 because it did not award damages to Plaintiffs on the conversion and breach of contract 6 claims. (Doc. 145.) A Defendant waives the right to object to inconsistencies in the jury’s 7 findings “if counsel does not raise the issue before the jury is excused.” See Los Angeles 8 Nut House v. Holiday Hardware Corp., 825 F.2d 1351, 1354–55 (9th Cir.1987). Here, 9 Defendant failed to object to the jury verdict prior to the jury’s discharge, and therefore, 10 Defendant has waived this argument. 11 D. Miscarriage of Justice 12 Defendant alleges Plaintiffs’ counsel made prejudicial statements to the jury and 13 that those statements led to the jury awarding punitive damages. (Doc. 145 at 5.) More 14 specifically, Defendant alleges the jury awarded punitive damages because Plaintiffs’ 15 counsel mentioned the amount of attorney’s fees incurred through the proceedings and 16 blamed the Defendant for the proceedings needing to occur. (Id.) However, Defendant 17 could have objected to these statements at trial. The fact that Defendant did not take the 18 opportunity to do so is not grounds for this litigation to continue. “To grant a new trial 19 because of attorney misconduct, ‘the flavor of the misconduct must [have] sufficiently 20 permeate[d][the] entire proceeding to provide conviction that the jury was influenced by 21 passion and prejudice in reaching its verdict.’ ” Larez v. City of Los Angeles, 946 F.2d 630, 22 637 (9th Cir.1991) (quoting McKinley v. City of Eloy, 705 F.2d 1110, 1117 (9th Cir.1983)). 23 It is doubtful that the isolated statements by Plaintiffs’ counsel affected the jury’s decision. 24 Thus, Defendant’s Motion for a New Trial must be denied. 25 /// 26 /// 27 /// 28 /// 1 IV. CONCLUSION 2 Accordingly, 3 IT IS ORDERED that Defendant’s Rule 59 Motion to Set Aside Judgment and 4|| Motion for New Trial, (Doc. 145), is denied. 5 Dated this 2nd day of July, 2021. 6 7 “Ss > fonorable Susan M. Brnovich = 9 United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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