21ST Century Fin. Servs., LLC v. Manchester Fin. Bank

255 F.Supp.3d 1012

21ST CENTURY FINANCIAL SERVICES, LLC, Plaintiff,

v.MANCHESTER FINANCIAL BANK, aka Manchester Financial Bank (In Organization), aka Manchester Financial Bank (Proposed), Defendant.

Case No. 15-cv-01848-BTM-BGS.

United States District Court, S.D. California.

Signed June 7, 2017

Filed June 8, 2017

Mary R. Robberson, Higgs Fletcher and Mack LLP, San Diego, CA, for Plaintiff.

Joseph Samuel Leventhal, Dinsmore & Shohl LLP, San Diego, CA, for Defendant.

ORDER DENYING MOTION TO ADD MANCHESTER FINANCIAL GROUP, INC. AS AN ADDITIONAL JUDGMENT DEBTOR

[ECF No. 56]

Barry Ted Moskowitz, Chief Judge

Before the Court is Plaintiff's motion to add Manchester Financial Group, Inc. ("Manchester, Inc."), as a judgment debtor. (ECF No. 56.) For the reasons below, Plaintiff's motion will be denied.

I. BACKGROUND

This case has a lengthy history that includes an arbitrated contractual dispute, post-arbitration proceedings in Texas federal district court,¹ and an appeal to the United States Court of Appeals for the Fifth Circuit,² culminating in these post-judgment collection proceedings. As the case history is both extensive and familiar to the parties, the Court recites here only those aspects relevant to the current motion.

A group of individuals, including Doug Manchester, Richard Gibbons, and Steve Strauss, sought to charter a bank to be called Manchester Financial Bank, N.A.³ In February 2008, the Bank⁴ entered into an "Agreement for Computer Processing Services" (the "Agreement") with 21st Century Financial Services, LLC (hereafter "Plaintiff" or "21st Century").⁵ The Agreement included an arbitration provision and was signed by Frederick Mandelbaum, a consultant hired to serve as the Bank's CEO.⁶ The Bank was never capitalized.⁷ Its pre-formation expenses were funded by Manchester Financial Group, L.P. ("MFG, LP").⁸ In connection with the Agreement, MFG, LP issued two deposit checks to 21st Century.⁹ The checks were signed by Gibbons, president of Manchester, Inc., the limited partnership's general partner.¹⁰

In October 2008, Mandelbaum advised 21st Century the Bank venture was not going to move forward, apparently as a result of Doug Manchester's decision based on "current economic turmoil."¹¹ 21st Century thereafter issued invoices for amounts it claimed were due under the Agreement.¹² In email exchanges between Mandelbaum, Gibbons, and Doug Manchester, Mandelbaum recommended that payment be issued to 21st Century on behalf of the Bank.¹³

Payment was not forthcoming, and 21st Century, now represented by counsel, sent letters demanding payment and threatening arbitration.¹⁴ Michael Levinson and Steve Strauss, both partners at the law firm Cooley LLP ("Cooley"), the same firm that represents Manchester, Inc. in these proceedings, responded to the letters on behalf of "Manchester Financial Group."¹⁵ The dispute escalated, and 21st Century initiated arbitration proceedings before the American Arbitration Association in Austin, Texas, pursuant to the Agreement's arbitration venue selection clause.¹⁶ Correspondence and notice regarding the arbitration proceedings were served on MFG, LP, as well as Doug Manchester on behalf of the Bank.¹⁷

The arbitration was held in January 2010.¹⁸ Although the Bank did not appear, the arbitrator required 21st Century to present evidence in support of its claims.¹⁹ The arbitrator found in favor of 21st Century and issued an award of $422,036.39, plus post-judgment interest, attorneys' fees and costs.²⁰

21st Century sued in Texas state court to confirm the award and named as defendants the Bank as well as its individual proposed shareholders and Mandelbaum. The Bank removed the action to federal court. The record shows that Cooley represented the individual shareholders, though not the Bank, in the ensuing proceedings.²¹

The District Court for the Western District of Texas dismissed the shareholders, confirmed the arbitration award and entered judgment against the Bank.²² The Fifth Circuit affirmed.²³

On April 25, 2014, 21st Century registered the judgment in this Court and initiated enforcement proceedings.²⁴ Following debtor examinations of Mandelbaum and Gibbons, 21st Century filed a motion to amend the judgment to add MFG, LP, and Manchester, Inc., as judgment debtors. In an order issued May 19, 2016, the Court denied the motion without prejudice on the ground that adding MFG, LP as a judgment debtor would destroy diversity of citizenship, such that it lacked subject matter jurisdiction to grant the motion as to MFG, LP.

On June 22, 2016, 21st Century filed the instant motion seeking to add Manchester, Inc. as a judgment debtor. Manchester, Inc. opposes the motion.

II. DISCUSSION

A. Objections to Evidence

21st Century has submitted 41 exhibits in support of its motion. Manchester, Inc. objects to Exhibit Nos. 3, 9, 11, 12, and 41. Opp. at 25:21–23. 21st Century has offered no response to the objections, see Reply Br., despite the fact that it is the proponent of the exhibits and bears the burden of proof of their admissibility. See Pfingston v. Ronan Eng'g Co., 284 F.3d 999, 1004 (9th Cir. 2002) (declining to address moving party's argument that statements satisfied Rule 801(d)(2)(D) hearsay exception where the exception was not offered as a ground for admissibility in proceedings before district court) (citing Sana v. Hawaiian Cruises, Ltd., 181 F.3d 1041, 1045 (9th Cir. 1999) ; Oki Am., Inc. v. Microtech Int'l, Inc., 872 F.2d 312, 314 (9th Cir. 1989) ). However, since the Court is denying the motion even with consideration of the allegedly objectionable evidence, ruling on the objections is unnecessary.

The Court does note that Manchester, Inc. objects to Exhibit 41, a printout from the "Manchester Financial Group" website, on grounds of relevance, foundation and authentication. Because Exhibit 41 was extensively relied upon by Plaintiff, the Court addresses these objections. "In considering internet print-outs, courts have considered the 'distinctive characteristics' of the website in determining whether a document is sufficiently authenticated." Haines v. Home Depot U.S.A., Inc., No. 1:10-cv-01763-SKO, 2012 WL 1143648 at *7, 2012 U.S. Dist. LEXIS 47967 at *23 (E.D. Cal. Apr. 4, 2012). "For example, courts have considered website print-outs sufficiently authenticated where the proponent declared that they were true and correct copies of pages on the internet and the print-outs included their webpage URL address and the dates printed." Id. (citing Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F.Supp.2d 1146, 1154 (C.D. Cal. 2002) ). At least one district court has determined that the foundational requirement is met where an internet printout is properly authenticated. Premier Nutrition, Inc. v. Organic Food Bar, Inc., No. SACV 06–0827 AG (RNBx), 2008 WL 1913163, at *7, 2008 U.S. Dist. LEXIS 78353, at *19 (C.D. Cal. Mar. 27, 2008). Here, 21st Century's counsel attests that the exhibit consists of true and correct copies of pages she personally printed from the website. Robberson Decl. ¶ 45. The URL address, www.manchesterfinancialgroup.com, appears at the bottom of each page of the printout, and the date "6/8/2016", apparently the print date, is on the top of each page. The Court thus finds the authentication and foundational requirements are sufficiently met with regard to Exhibit 41.

Manchester, Inc.'s relevance objection to Exhibit 41 is not without merit. The website printout is a multi-page document promoting the experience and success of "Manchester Financial Group." See Ex. 41. Although the website does not mention the Bank, 21st Century relies on it to prove the existence of a so-called "Manchester Financial Group single enterprise." Other district courts have rejected attempts to prove unity of interest of affiliated companies on the basis that their website presents them as a single entity. Corcoran v. CVS Health Corporation, 169 F.Supp.3d 970, 984 (N.D. Cal. 2016) ; Payoda, Inc. v. Photon Infotech, Inc., No. 14-cv-04103-BLF, 2015 WL 4593911, at *3 (N.D. Cal. 2015) (calling statements on a company website "marketing puffery" that "carries no weight in establishing whether a parent and its subsidiary are in fact alter egos"). Here, 21st Century is attempting to use Exhibit 41 for precisely that purpose. While the Court finds the reasoning of the Corcoran and Payoda courts persuasive, neither court excluded website printouts from evidence on grounds of relevance. Therefore, rather than exclude Exhibit 41 from evidence, the Court will consider the reasoning of the district courts in Corcoran and Payoda as going to the weight, rather than the admissibility, of Exhibit 41. Accordingly, Manchester, Inc.'s relevance objection to Exhibit 41 is overruled.

B. Motion to Add Manchester, Inc. as Judgment Debtor

21st Century moves to amend the judgment to add Manchester, Inc. as a judgment debtor pursuant to California Code of Civil Procedure § 187 (" Section 187"), which provides:

When jurisdiction is, by the Constitution or this Code, or by any other statute, conferred on a Court or judicial officer, all the means necessary to carry it into effect are also given; and in the exercise of this jurisdiction, if the course of proceeding be not specifically pointed out by this Code or the statute, any suitable process or mode of proceeding may be adopted which may appear most conformable to the spirit of this Code.

Cal. Code Civ. Pro. § 187. Section 187"has been interpreted to grant courts the authority to amend a judgment to add additional judgment debtors." Katzir's Floor and Home Design, Inc. v. M–MLS.com ("Katzir's Floor"), 394 F.3d 1143, 1148 (9th Cir. 2004) (citations and quotation marks omitted). The Ninth Circuit has approved the use of the state procedure pursuant to Federal Rule of Civil Procedure 69(a). Id. (citing In re Levander, 180 F.3d 1114, 1120–21 (9th Cir. 1999) ). California law governs the merits of such a motion. In re Levander, 180 F.3d at 1121.

Modification of a...