This case was last updated from Los Angeles County Superior Courts on 08/15/2019 at 09:23:42 (UTC).

ESOS RINGS INC VS JOSEPH PRENCIPE ET AL

Case Summary

On 02/27/2017 ESOS RINGS INC filed a Contract - Other Contract lawsuit against JOSEPH PRENCIPE. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judges overseeing this case are MEL RED RECANA and MALCOLM MACKEY. The case status is Pending - Other Pending.
Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****2020

  • Filing Date:

    02/27/2017

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Contract - Other Contract

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judges

MEL RED RECANA

MALCOLM MACKEY

 

Party Details

Plaintiffs and Cross Defendants

ESOS RINGS INC.

MCLEAR LTD.

SILVERSTEIN MICHELLE

Defendants and Cross Plaintiffs

PRENCIPE JOSEPH

MCLEAR & CO.

MTG CO.

MTG CO. A JAPANESE JOINT STOCK CORPORATION

Not Classified By Court and Plaintiffs

ANNA AFANASYEVA

MCLEAR LTD.

Attorney/Law Firm Details

Plaintiff Attorneys

SKALE ANDREW DAVID

WAGNER BENJAMIN LEWIS

NAHAMA JUSTIN

Defendant Attorneys

HARFORD DAVID LOUIS

DUERINGER CHRISTOPHER L.

Cross Plaintiff Attorneys

FISET RACHEL L.

LARSON STEPHEN G.

Cross Defendant Attorney

HRUTKAY MATTHEW

 

Court Documents

STIPULATED PROTECTIVE ORDER RE THE DISCLOSURE AND USE OF DISCOVERY MATERIALS

9/7/2018: STIPULATED PROTECTIVE ORDER RE THE DISCLOSURE AND USE OF DISCOVERY MATERIALS

DECLARATION OF HEATHER .J. SILVER JN SUPPORT OF PLAINTIFF AND CROSS-DEFENDANTS' MOTION FOR ATTORNEYS' FEES AND COSTS PURSUANT TO CAL. CODE CIV. PROC. ? 425.16(C)

9/28/2018: DECLARATION OF HEATHER .J. SILVER JN SUPPORT OF PLAINTIFF AND CROSS-DEFENDANTS' MOTION FOR ATTORNEYS' FEES AND COSTS PURSUANT TO CAL. CODE CIV. PROC. ? 425.16(C)

PLAINTIFF AND CROSS-DEFENDANTS' NOTICE OF MOTION AND MOTJON FOR ATTORNEYS' FEES AND COSTS PURSUANT TO CAL. CODE CIV. PROC. ? 425.16(C)

9/28/2018: PLAINTIFF AND CROSS-DEFENDANTS' NOTICE OF MOTION AND MOTJON FOR ATTORNEYS' FEES AND COSTS PURSUANT TO CAL. CODE CIV. PROC. ? 425.16(C)

REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF PLAINTIFF AND CROSS- DEFENDANTS' MOTION FOR ATTORNEYS' FEES AND COSTS PURSUANT TO CAL. CODE CIV. PROC. ? 425.16(C)

9/28/2018: REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF PLAINTIFF AND CROSS- DEFENDANTS' MOTION FOR ATTORNEYS' FEES AND COSTS PURSUANT TO CAL. CODE CIV. PROC. ? 425.16(C)

PLAINTIFF AND CROSS-DEFENDANTS' MEMORANDUM OF POINTS & AUTHORITIES IN SUPPORT OF MOTION FOR ATTORNEYS' FEES AND COSTS PURSUANT TO CAL. CODE CIV. PROC. ? 425.16(C)

9/28/2018: PLAINTIFF AND CROSS-DEFENDANTS' MEMORANDUM OF POINTS & AUTHORITIES IN SUPPORT OF MOTION FOR ATTORNEYS' FEES AND COSTS PURSUANT TO CAL. CODE CIV. PROC. ? 425.16(C)

Motion for Leave to Amend

10/3/2018: Motion for Leave to Amend

Declaration

10/3/2018: Declaration

Memorandum of Points & Authorities

10/3/2018: Memorandum of Points & Authorities

Declaration

10/15/2018: Declaration

Opposition

10/15/2018: Opposition

Substitution of Attorney

10/17/2018: Substitution of Attorney

Reply

10/19/2018: Reply

Order Appointing Court Approved Reporter as Official Reporter Pro Tempore

10/26/2018: Order Appointing Court Approved Reporter as Official Reporter Pro Tempore

Complaint

10/26/2018: Complaint

Minute Order

10/26/2018: Minute Order

Opposition

10/30/2018: Opposition

Minute Order

10/30/2018: Minute Order

Declaration

10/30/2018: Declaration

352 More Documents Available

 

Docket Entries

  • 10/11/2019
  • Hearingat 08:30 AM in Department 45 at 111 North Hill Street, Los Angeles, CA 90012; Hearing on Motion to Seal (name extension)

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  • 10/10/2019
  • Hearingat 08:30 AM in Department 45 at 111 North Hill Street, Los Angeles, CA 90012; Hearing on Motion to Quash (name extension)

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  • 10/10/2019
  • Hearingat 08:30 AM in Department 45 at 111 North Hill Street, Los Angeles, CA 90012; Hearing on Motion to Quash (name extension)

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  • 10/10/2019
  • Hearingat 08:30 AM in Department 45 at 111 North Hill Street, Los Angeles, CA 90012; Hearing on Motion to Quash (name extension)

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  • 10/09/2019
  • Hearingat 08:30 AM in Department 45 at 111 North Hill Street, Los Angeles, CA 90012; Hearing on Motion to Quash (name extension)

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  • 10/08/2019
  • Hearingat 08:30 AM in Department 45 at 111 North Hill Street, Los Angeles, CA 90012; Hearing on Motion to Quash (name extension)

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  • 10/08/2019
  • Hearingat 08:30 AM in Department 45 at 111 North Hill Street, Los Angeles, CA 90012; Hearing on Motion - Other (name extension)

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  • 10/08/2019
  • Hearingat 08:30 AM in Department 45 at 111 North Hill Street, Los Angeles, CA 90012; Hearing on Motion to Quash (name extension)

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  • 10/08/2019
  • Hearingat 08:30 AM in Department 45 at 111 North Hill Street, Los Angeles, CA 90012; Hearing on Motion to Quash (name extension)

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  • 09/27/2019
  • Hearingat 08:30 AM in Department 45 at 111 North Hill Street, Los Angeles, CA 90012; Case Management Conference

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600 More Docket Entries
  • 02/28/2017
  • DocketDECLARATION OF MICHELLE SILVERSTEIN IN SUPPORT OF EX PARTE APPLICATION FOR (1) TEMPORARY RESTRAINING ORDER PREVENTING UNLAWFUL USE OF AND DIMINISHING VALUE OF PATENT RIGHTS AND (2) FOR AN ORDER TO SHOW CAUSE WHY PRELIMINARY INJUNCTION SHOULD NOT ISSUE

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  • 02/28/2017
  • DocketDECLARATION OF BEN L. WAGNER IN SUPPORT OF EX PARTE APPLICATION FOR (1) TEMPORARY RESTRAINING ORDER PREVENTING UNLAWFUL USE OF AND DIMINISHING VALUE OF PATENT RIGHTS AND (2) FOR AN ORDER TO SHOW CAUSE WHY PRELIMINARY INJUNCTION SHOULD NOT ISSUE

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  • 02/28/2017
  • DocketMinute order entered: 2017-02-28 00:00:00; Filed by Clerk

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  • 02/28/2017
  • DocketEX PARTE APPLICATION FOR (1) TEMPORARY RESTRAINING ORDER PREVENTING UNLAWFUL USE OF AND DIMINISHING VALUE OF PATENT RIGHTS AND (2) FOR AN ORDER TO SHOW CAUSE WHY PRELIMINARY INJUNCTION SHOULD NOT ISSUE

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  • 02/28/2017
  • DocketDEFENDANTS' OPPOSITION TO EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND REQUEST FOR ORDER TO SHOW CAUSE FOR PRELIMINARY INJUNCTION

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  • 02/28/2017
  • DocketDECLARATION OF TIMOTHY FOX IN SUPPORT OF DEFENDANTS' OPPOSITION TO EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER

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  • 02/28/2017
  • DocketMinute Order

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  • 02/27/2017
  • DocketPLAIRFLIFF ESOS RINGS, INC.'S COMPLAINT FOR BREACH OF CONTRACT, DECLARATORY RELIEF, QUIET TITLE, FRAUDULENT TRANSFER, FRAUD, BREACH OF FIDUCIARY DUTY, AND INTENTIONAL INTERFERENCE WITH PROSPECTIVE ECONOMIC RELATIONS

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  • 02/27/2017
  • DocketSUMMONS

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  • 02/27/2017
  • DocketComplaint; Filed by Esos Rings, Inc. (Plaintiff)

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Tentative Rulings

Case Number: ****2020 Hearing Date: September 1, 2022 Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

ESOS RINGS, INC.,

vs.

JOSEPH PRENCIPE, et al.

Case No.: ****2020

Hearing Date: September 1, 2022

McLear’s motion for attorneys’ fees against Esos and Silverstein is granted in the reduced total amount of $153,909. The request to stay the enforcement of the fee award for 70 days is granted.

Prencipe’s motion for attorneys’ fees against Esos and Silverstein is granted in the reduced total amount of $69,788. The request to stay the enforcement of the fee award for 70 days is granted.

Two motions for attorneys’ fees are presently before the Court. McLear & Co., Inc. (“McLear US”) and McLear, Ltd. (“McLear UK”) (collectively, “McLear”) move for an order granting them attorneys’ fees in the amount of $297,664.80 against Plaintiff Esos Rings, Inc. (“Esos Rings”) and Cross-Defendant Michelle Silverstein (“Silverstein”) (collectively, “Esos Parties”) based on the Court’s November 9, 2021 ruling on the motion for terminating sanctions brought by McLear and joined by Defendant Joseph Prencipe (“Prencipe”). (Notice of Motion, pgs. 1-3.) Prencipe separately moves for an award of attorneys’ fees against Esos Parties in the total amount of $73,006 reflecting $58,789 incurred in connection with the terminating sanctions motion and $14,217 incurred in connection with the instant motion. (Notice of Motion, pgs. 1-2; Motion, pg. 1.)

  1. McLear’s Motion for Attorneys’ Fees

    McLear moves for an award of attorneys’ fees in the amount of $297,664.80 against Esos Parties, jointly and severally, pursuant to C.C.P. 2023.030 and the Court’s November 9, 2021 ruling on the Motion for Terminating Sanctions brought by McLear and joined by Prencipe (“Sanctions Motion”).

    McLear’s 4/1/22 evidentiary objections to the Declaration of Jacqueline S. Vinaccia (“Vinaccia”) in its entirety are overruled. McLear’s individual evidentiary objections to the Declaration of Vinaccia are overruled as to Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42 and sustained as to Nos. 13, and 14. [The Court notes the evidentiary objections are misnumbered, and Nos. 41 and 42 reflect the last two objections, which are numbered as 26 and 26 in McLear’s filing.]

    Background

    This case involves a dispute between two separate groups of parties over the rights to U.S. Pat. No. 9,313,609 (“the 609 Patent”), which was invented and owned by Prencipe. On February 27, 2017, Plaintiff filed its initial complaint against Prencipe and McLear US (collectively, “McLear Parties”) alleging they exploited the ‘609 patent and denied its assignment to Plaintiff, diminishing its value and preventing Esos from exploiting its rights. On April 18, 2017, McLear Parties filed their initial cross-complaint against Esos Parties. On October 26, 2018, Plaintiff filed the operative SAC, in which McLear UK was also named as a defendant.

    On November 9, 2021, the Court granted McLear Entities’ motion for evidence sanctions, in part, joined by Prencipe. Specifically, the Court ruled that McLear Entities and Prencipe were entitled to an evidence sanction prohibiting Esos Parties from introducing evidence supporting their claim that Exhibit D to the SAC is a true and correct copy of the Executed Second Assignment but denied their other evidentiary sanctions requests. The Court also denied McLear’s request for terminating sanctions. Finally, the Court found Silverstein’s deletion of documents that were subject to a pending subpoena and motion to quash warranted an award of monetary sanctions against Esos. Specifically, the Court ruled McLear was entitled to an award of monetary sanctions for reasonable attorneys’ fees McLear incurred in bringing its motion for terminating sanctions and ordered Esos to pay for fees McLear incurred in bringing its Sanctions motion. McLear filed the instant fee motion on January 5, 2022. On March 25, 2022, Counsel for Esos Parties filed an opposition on Esos’s behalf only; however, the opposition raises arguments on behalf of Silverstein as well.

    The Court notes McLear cites to “this” Court’s December 21, 2018 reduced award of $100,000 in attorneys’ fees and costs to Esos for prevailing on its Anti-SLAPP motion, fees the Court deemed were reasonable. (Motion, pg. 1, fn. 1.) The Court clarifies that in December 2018, this case was assigned to Department 55, not Department 71, and Judge Mackey awarded $100,000 of the $142,211.20 in requested fees. (12/21/18 Minute Order.) McLear also notes it paid Esos an additional $82,500 in attorneys’ fees Esos asserted having incurred on McLear’s appeal of the Anti-SLAPP ruling given Esos intended to file a motion for an additional $120,000 in fees. (Motion, pg. 1, fn. 1.) McLear asserts Esos’s claim of having incurred $202,000 in connection with its Anti-SLAPP motion and related appeal demonstrates the fees requested by McLear are reasonable. (Motion, pg. 2, fn. 1 (cont.).)

    Attorneys’ Fees Motion

    The calculation of attorneys’ fees is based on the lodestar method, which multiplies the number of hours reasonably expended by a reasonable hourly rate. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1064, 1094-95; Lealao v. Beneficial California, Inc. (2000) 82 Cal.App.4th 19, 26.) “The lodestar is the basic fee for comparable legal services in the community; it may be adjusted by the court based on factors including, as relevant herein, (1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, (4) the contingent nature of the fee award. (Graciano v. Robinson Ford Sales (2006) 144 Cal.App.4th 140, 154.) “The purpose of such adjustment is to fix a fee at the fair market value for the particular action.” (Ibid.) “In effect, the court determines, retrospectively, whether the litigation involved a contingent risk or required extraordinary legal skill justifying augmentation of the unadorned lodestar in order to approximate the fair market rate for such services.” (Ibid.) An attorney’s time spent and hourly rate are presumed to be reasonable. (Mandel v. Lackner (1979) 92 Cal.App.3d 747, 761.)

    McLear argues the award of monetary sanctions against Esos should also be imposed against Silverstein, jointly and severally, given her role in the deletion of files at issue in the Sanctions Motion. (Motion, pg. 1.) McLear also asserts it is entitled to recover the attorneys’ fees incurred in uncovering Silverstein’s deletions of evidence in addition to the fees incurred in bringing the Sanctions Motion. (Motion, pg. 1.) In support of the fee request, McLear submitted the Declaration of David Harford (“Harford”) of McLear’s counsel Bryan Cave Leighton Paisner LLP, (“Bryan Cave”), which attaches copies attorneys’ fee spreadsheets in this matter as Exhibit 1 and sets forth his experience and $625 hourly rate as well as the experience and hourly rates of other Bryan Cave attorneys who worked on the matter including Christopher Dueringer (“Dueringer”) at $780, Kristin Webb (“Webb”) at $525, Christian Bromley (“Bromley”) at $485, and Makaela O’Connell (“O’Connell”) at $390. (Decl. of Harford 2-8, Exh. 1 [Billing Invoice].)

    The Harford Declaration includes a chart summarizing the total approximate fees for each task purportedly associated with the Sanctions motion including: (1) $29,266.50 in connection with the airSlate subpoena; (2) $6,197.50 in connection with opposing the motion to quash the airSlate subpoena; (3) $4,690 in opposing Esos Parties’ objections to the denial of the motion to quash; (4) $9,985 in opposing Esos Parties’ motion to block use of pdfFiller documents; (5) $5,736 in opposing Esos Parties’ objection to the discovery referee’s order; (6) $21,379 to oppose Esos’s motion for protective order; (7) $25,032.50 to depose Silverstein; (8) $154,277.50 for the Sanctions Motion; (9) $19,630.50 in drafting the instant fee motion; and (10) $21,470.30 in total costs associated with the deposition ($5,682.75), prior motion filing fees ($501.64), discovery referee costs ($13,041), and filing fees and court reporter costs for the Sanctions Motion and instant fee motion ($2,244.91). (Decl. of Harford 15, 17-24, 27.) Based on the above amounts, Harford declares McLear incurred $92,275.39 to uncover Silverstein’s spoilation of evidence, while McLear incurred $205,419.41 in fees and costs in connection with the Sanctions Motion and the instant fee motion. (Decl. of Harford 29-31.) In support of these fees, McLear attaches Exhibit 1, a 24-page invoice billing statement for fees incurred from 6/23/20 to 11/11/21, which color codes certain entries based on subject matter. Exhibit 1 includes color coding to indicate the following categories of fees: (1) Orange: Motion to Quash PdfFiller Subpoena, (2) Yellow: Objections to 8/30/20 Order, (3) Green: 12/15/20 Motion for Protective Order Re: Esos PMK Depo, (4) Blue: 1/21/21 Motion and Hearing on 7/16/21, and (5) Non-Highlighted/White: Sanctions Motion. As such, any non-highlighted sections of Exhibit 1 are presumed to be included in McLear’s fee request for the Sanctions Motion. The Court notes page 21 of Exhibit 1, which is blue highlighted, appears to involve fees for the instant fee motion. Finally, pages 23-24 of Exhibit 1 set forth costs McLear asserts it incurred in connection with the Sanctions Motion and underlying discovery matters.

    In opposition, Esos argues McLear’s requested fees exceed the scope of the Court’s order, by seeking fees not incurred in connection with bringing the Sanctions Motion, by seeking fees individually against Silverstein, and by seeking costs and other non-attorney’s fees. Esos asserts McLear is at most entitled an attorneys’ fees award of $78,597.50, reflecting the sum of what Esos asserts are supported fees in the amounts of $65,299.50 for the Sanctions Motion, $13,298 for the fee motion, based on 132.55 total hours incurred at the claimed hourly rates (except for O’Connell, which Vinaccia mistakenly reduced on the belief she was a paralegal). (Opposition, pgs. 5, 9, 18; Decl. of Vinaccia 98, 101.) While Esos disputes costs should be awarded, it argues that the only applicable costs would be those incurred in connection with the Sanctions Motion, which it asserts should be reduced to $1,425.69. (Opposition, pg. 9; Decl. of Vinaccia 98, Exh. E.)

    McLear is entitled to an award of reasonable attorneys’ fees incurred in bringing its Sanctions Motion against Esos Parties. However, the Court declines to award McLear all fees requested in the instant motion. As a preliminary matter, the Court limits the award to attorneys’ fees incurred in bringing the Sanctions Motion and declines to award fees and costs for work to uncover the evidence McLear submitted in support of its Sanctions Motion including underlying motion practice in this Court and before the discovery referee, as well as fees and/or costs incurred in connection with enforcing subpoenas and taking depositions. The Court also declines to award costs. The Court finds monetary sanctions may be imposed against Silverstein as well as Esos. In the underlying Sanctions Motion, McLear moved for monetary sanctions against both Silverstein and Esos and the Court ruled that “Esos,” the Ruling’s collective term for Silverstein and Esos, is to pay for fees McLear incurred in bringing the motion. Accordingly, only the issue of the reasonableness of the attorneys’ fees for the Sanctions Motion ($154,277.50) and the instant fee motion ($19,630), totaling $173,909, remains.

    Reasonableness of Hours for Work Performed on the Sanctions Motion and Fee Motion

    Although detailed time records are not required, California Courts have expressed a preference for contemporaneous billing and an explanation of work. (Raining Data Corp. v. Barrenechea (2009) 175 Cal.App.4th 1363, 1375.) “Of course, the attorney's testimony must be based on the attorney's personal knowledge of the time spent and fees incurred. (Evid. Code, 702, subd. (a) [‘the testimony of a witness concerning a particular matter is inadmissible unless he has personal knowledge of the matter’].) Here, McLear asserts it incurred 291.7 hours in preparing and arguing the Sanctions motion, including time incurred in connection with communicating with pdfFiller and preparing its declaration in support of the motion, and that McLear incurred 31.2 hours (reflecting $19,630.50 in fees) in connection with the instant motion, with an anticipated additional $6,500 to review the opposition, prepare a reply, and appear at the hearing. (Decl. of Harford 26-27, Exh. 1.)

    In opposition, Esos argues the fees requested for the Sanctions Motion are unreasonable, excessive, and not properly supported, and the Court should either deny the request in its entirety or reduce the fees incurred based on the following: (1) fees incurred in connection with litigation of the case at large as opposed to preparing the Sanctions Motion should be removed including 21.3 hours (reflecting $15,096 in fees) incurred in January 2021 for the airSlate deposition [Decl. of Vinaccia 81-84], (2) fees for duplicate and excessive preparation time for the hearing should be reduced by 50% (from 35.5 hours [reflecting $16,881] to 17.75 hours [reflecting $8,440.50]) [Decl. of Vinaccia 88-90], (3) Sanctions Motions fees that are vague, unsupported, obfuscated, and redacted should be struck because they could not be properly allocated (15.30 hours reflecting $8,630 in fees); [Decl. of Vinaccia 92-93], and (4) 149 hours (reflecting $93,062) in Sanctions Motion fees should be reduced by 50% (to 74.5 hours and $46,531) for being “excessive, duplicative…, and out of proportion to the very limited success of the motion” [Decl. of Vinaccia 91-94]. (Opposition, pgs. 17-18.) Esos also argues the fees for the instant fee motion are excessive given fees were necessarily incurred in drafting parts of the motion that focus on requesting more fees than awarded in the Sanctions Motion as opposed to allocating incurred fees and accordingly, the Court should reduce the award by 6.6 hours reflecting $3,711 in fees for an award of $13,298. (Opposition, pg. 18; Decl. of Vinaccia 64-68.) Finally, Esos notes that costs were not awarded in the Sanctions Motion ruling, but the isolated costs relating to the Sanctions Motion should be reduced from $2,244.91 to $1,425.69. (Opposition, pg. 9; Decl. of Vinaccia 98.)

    In reply, McLear disputes the admissibility of the expert declaration of Vinaccia to support Esos’s assertion that fees should be reduced in any amount. (Reply, pgs. 5-6.) McLear also asserts monetary sanctions should be imposed against Silverstein as well as Esos given her role in deletion of documents and accordingly her misuse of the discovery process. (Reply, pgs. 6-7.) McLear does not specifically address the six categories of reductions proposed by Esos based on the Declaration of Vinaccia based on (1) improper inclusion of general litigation fees, (2) excessive hearing fees, (3) reduction for redacted and/or vague time entries, (4) excessive Sanctions Motion preparation fees, (5) excessive fee motion preparation fees, and (6) excessive costs, and whether the claimed fees and hours were reasonably incurred and supported.

    The Court finds McLear’s inclusion of fees incurred in matters that exceed the scope of the Sanctions Motion in its attorneys’ fees request and appear to be incurred with general litigation including the deposition of PdfFiller is unreasonable, and a reduction is warranted. The final award reflects this reduction.

    As for Esos’s assertion that fees incurred to prepare for the Sanctions Motion hearing and to draft and prepare the Sanctions Motion itself should be reduced by 50% for being excessive and/or duplicative, the Court finds such a broad reduction is unsupported. The Court finds the billing entries are not so excessive and/or duplicative to warrant a 50% reduction. However, there does appear to have been some duplicative work in connection with preparing for the hearing and drafting the Sanctions Motion, with multiple attorneys billing multiple hours to prepare for the initial and continued hearings as well as the many hours incurred in revising, reviewing, and editing the terminating sanctions motion. As such, some reduction of fees is warranted, and the final award reflects this reduction.

    As for the fees Esos identified as too obscured by redactions to allocate to the Sanctions or fee motions, the Court finds the Declaration of Vinaccia is not consistent in the amount she contends should be reduced from McLear’s billings for this purpose. Notably, she declares she found 10.3 hours of entries, reflecting $4,987.50 in fees, for which redactions have made allocation impossible, while she also declares there were 15.3 hours reflecting $8,630 in Sanctions Motion fees that were also redacted. (Decl. of Vinaccia 55, 91.) The Court notes the chart summarizing Vinaccia’s proposed reductions for fees includes a line item for “Redactions” in the amount of 10.3 hours or $4,987.50. (Decl. of Vinaccia 99.) In addition, a review of Exhibit 1 demonstrates that while many entries are redacted, this does not warrant entirely striking fees incurred in redacted entries. Esos submits no evidence suggesting these redacted fees were not incurred in connection with the Sanctions Motion and/or fee motion to warrant striking them entirely. Accordingly, a reduction for these fees is not warranted.

    As to Esos’s assertion that the fees incurred in connection with the instant fee motion are unreasonable, the Court finds the requested fees are somewhat excessive and a reduction is warranted; however, not in the amount proposed by Esos. The final award reflects this reduction.

    Request to Stay Fee Award Over $5,000 Based on Intent to Appeal

    Esos asserts it intends to exercise its right of immediate appeal within 60 days of the fee award from the instant motion and accordingly requests that any fee order be stayed from execution for 70 days from the date of this ruling. (Opposition, pg. 19; C.C.P. 904.1(a)(12), 918; CRC Rule 8.14.) Specifically, Esos argues that unrestrained enforcement by its competitor company will disrupt its orderly appeal and business operations, interfere with a potential right of offset by the upcoming jury trial, and given Esos is a small company it will need more time to secure a bond. (Opposition, pg. 19; citing Drum v. Bleue (2003) 107 Cal.App.4th 1009, 1014.) In reply, McLear asserts the Court should deny Esos Parties’ request to stay the fee award as improper and not sufficiently supported. (Reply, pgs. 7-8.) The Court, in its discretion, grants Esos’s request to stay the enforcement of the fee award for 70 days.

    Total Reduction & Final Lodestar Determination

    Accordingly, McLear’s motion for attorneys’ fees is granted in the reduced total amount of $153,909, payable after 70 days.

  2. Prencipe’s Motion for Attorneys’ Fees

    Prencipe moves for an award attorneys’ fees in the total amount of $73,006, reflecting the sum of $58,789 incurred in connection with the Sanctions Motion and $14,217 incurred in connection with the instant fee motion, based on the Court’s ruling on the Sanctions Motion. In reply, Prencipe revises his attorneys’ fees request to the increased amount of $84,788 based on increased actual and anticipated costs of preparing the reply in the amount of $11,782. (Reply, pg. 2; Reply-Decl. of Coleman 6.)

    The Court incorporates by reference the above discussion of the background of the action and the Sanctions Motion.

    Prencipe’s 4/1/22 evidentiary objections to the Declaration of Vinaccia in its entirety is overruled. Prencipe’s individual evidentiary objections to the Declaration of Vinaccia are overruled as to Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, and 32.

    Prencipe’s 4/1/22 request for judicial is denied as to the documents in the instant case file, for which there is no need to take judicial notice because the Court can always review the file for the case at hand. (RJN, Exhs. A, B, C.)

    Attorneys’ Fees Motion

    Prencipe argues he is entitled to recover the attorneys’ fees he incurred in connection with his joinder to McLear’s Sanctions Motion, including fees incurred in connection with an underlying deposition of Silverstein, as well as fees incurred in preparing the instant motion. (Motion, pgs. 3-6.) In support of the fee request, Prencipe submitted the Declaration of Erin Coleman (“Coleman”) of Prencipe’s counsel Zweiback, Fiset & Coleman LLP (“ZFC”), which sets forth her experience and $495 hourly rate and the hours she incurred in the instant matter that are part of the fee request, totaling $31,185 for the Sanctions Motion and $8,959.50 for the instant fee motion. (Decl. of Coleman 2, 26-32.) Prencipe also submitted the Declaration of attorney Rachel Fiset (“Fiset”), which sets forth her experience and $495 hourly rate, as well as the hours she incurred in the instant matter that are part of the fee request totaling $23,364 for the Sanctions Motion and $3,217.50 on the instant fee motion. (Decl. of Fiset 2, 3-10.) In addition, Fiset attaches ZFC’s redacted invoice as Exhibit A to her declaration in support of the fees incurred. Finally, Prencipe submitted the declaration of paralegal Ann Taylor (“Taylor”) in which she sets forth her experience, $200 hourly rate, and sets forth the hours she incurred that are part of the fee request totaling $4,240 for the Sanctions Motion and $2,040 for the instant fee motion. (Decl. of Taylor 2-9.)

    In opposition, Esos argues Prencipe’s requested fees exceed the scope of the Court’s order, by seeking fees not incurred in connection with filing his Notice of Joinder to the Sanctions Motion and by seeking fees individually against Silverstein. (Opposition, pg. 4.) Esos asserts Prencipe is at most entitled an attorneys’ fees award of $25,107.25, reflecting the sum of what Esos contends are supported fees in the amounts of $9,934 for the Sanctions Motion, $7,965.50 for the fee motion, $400 for the joinder, and $6,807.75 for hearing preparation, based on 58.35 total hours incurred at the claimed hourly rates. (Opposition, pgs. 4, 8; Decl. of Vinaccia 50, 101.)

    Prencipe is entitled to an award of reasonable attorneys’ fees he incurred in his joinder to McLear’s Sanctions Motion against Esos Parties. However, the Court declines to award Prencipe all fees requested in the instant motion. As a preliminary matter, the Court limits the award to attorneys’ fees incurred in bringing the Sanctions Motion and declines to award fees incurred in underlying matters, including the deposition of Silverstein. The Court finds monetary sanctions may be imposed against Silverstein as well as Esos. In the underlying Sanctions Motion, McLear moved for monetary sanctions against both Silverstein and Esos and the Court ruled that “Esos,” the Ruling’s collective term for Silverstein and Esos, is to pay for fees Prencipe incurred in bringing the motion. Accordingly, only the issue of the reasonableness of the attorneys’ fees for the Sanctions Motion joinder and the instant fee motion remains.

    Reasonableness of Hours for Work Performed on the Sanctions Motion Joinder and Fee Motion

    Esos argues the fees requested are unreasonable, excessive, and not properly supported, and the Court should either deny the request in its entirety or reduce the fees incurred based on the following: (1) fees incurred for the instant fee motion should be reduced to $7,965.50, which is the amount actually invoiced with 27.8 additional hours submitted in declaration and 12 additional hours anticipated unsupported by the invoices [Decl. of Vinaccia 29-31], (2) while 4.0 hours in fees for the Notice of Joinder are permissible, fees for the Sanctions Motion should be reduced as duplicative given Prencipe requests 48.2 hours for his attorneys to review the motion prepared by McLear, 5.5 hours of which Esos contends are valid, warranting a 50% reduction of 42.7 hours, resulting in an award of $9,934 for the Sanctions Motion and $400 for the joinder [Decl. of Vinaccia 40, 41, 44, 56], (3) fees incurred in preparing for the Sanctions Motion hearing are excessive and duplicative and warrant a 50% reduction of the fees requested from 28.4 hours to 14.2 hours, at $6,805.75 [Decl. of Vinaccia 45, 46], (4) Taylor’s paralegal fees for clerical tasks are not recoverable and should be reduced by 7.5 hours ($1,500) [Decl. of Vinaccia 37-39], (5) 12.1 hours, reflecting $5,989.50 in “counsel communications” should be excluded given they are overly redacted and excessive, (6) fees relating to the Silverstein deposition should be excluded or reduced by 50% (or $2,000) as not a cost of bringing or joining in the motion, and (7) other reductions including removing unsupported redacted entries and Taylor’s billings at an attorney rate [Decl. of Vinaccia 26, 28]. (Opposition, pgs. 10-12.)

    In reply, Prencipe disputes the admissibility of the expert declaration of Vinaccia to support Esos’s assertion that fees should be reduced in any amount. (Reply, pgs. 1-2.) Prencipe also asserts the requested fees are reasonable and argues Esos has not submitted competent evidence establishing that the fees claimed are duplicative to warrant a reduction by 50% or 100%. (Reply, pg. 3.) Prencipe disputes that the requested fees struck by Vinaccia relating to the deposition of Silverstein were unnecessary to the Sanctions Motion and/or are not recoverable given the deposition was set for the purpose of addressing the pdfFiller documents. (Reply, pgs. 4-5.) Prencipe also argues that paralegal fees are permissible, and not clerical as asserted by Esos. (Reply, pg. 5.) Finally, Prencipe asserts the anticipated fees for the instant motion are reasonable and in fact higher than the amounts originally quoted. (Reply, pg. 6.) The Court notes the initially filed declarations anticipated incurring 12 hours in connection with the reply; however, in reply, Prencipe asserts his counsel has already incurred 27.1 hours, with even more hours anticipated. (Reply, pg. 6.)

    The Court finds Prencipe’s inclusion of fees incurred in connection with Silverstein’s deposition of are not reasonable, and a reduction is warranted. Specifically, based on their declarations, Fiset and Coleman billed 11.4 hours at $495 per hour, or $5,643 in connection with the deposition and the fee award should be reduced by this amount. The final award includes this reduction.

    Next, Esos asserts that fees incurred for the instant fee motion should be reduced based on an assertion that hours quoted in the declarations are not supported by the invoices. The Court finds such a broad reduction is not warranted. However, the Court finds billing over 34 hours for the instant fee motion, a nine-page motion with three supporting declarations, is excessive. In addition, billing over 30 total hours in connection with preparation of the reply alone is excessive. (Reply-Decl. of Coleman 2-5.) While the instant motion and Declaration of Vinaccia was involved, over 60 hours of fees is unreasonable, and the Court finds a reduction is warranted. The final award reflects this reduction.

    As for Esos’s assertion that some of the fees incurred to assist in preparing the Sanctions Motion and in preparing for the hearing on the Sanctions Motion should be reduced by 50% for being excessive and/or duplicative, the Court finds such a broad reduction is unsupported. The Court finds the billing entries are not so excessive and/or duplicative to warrant a 50% reduction to 42.7 hours of the requested fees. However, there does appear to have been some duplicative work in connection with preparing for the hearing and drafting the Sanctions Motion, with multiple attorneys billing multiple hours to prepare for the initial and continued hearings as well as the many hours incurred in revising, reviewing, and editing the terminating sanctions motion. As such, some reduction of fees is warranted, and the final award reflects this reduction.

    As for Taylor’s paralegal fees for purported clerical tasks, the Court finds the reduction imposed by Esos is overbroad; however, a reduction is warranted. A review of Taylor’s declaration and the invoice demonstrates that her billing entries include time billed for filing documents with the Court and preparing binders for a hearing, which are clerical tasks. (Decl. of Taylor 4, 6.) The Court finds a reduction is warranted and the final award reflects this reduction.

    As for the fees related to “client communications” that Esos contends are too obscured by redactions to allocate to the Sanctions or fee motions and are excessive, the Court finds a reduction on the basis that they are redacted is not warranted. Redactions in invoice descriptions does not warrant entirely striking fees incurred. Esos submits no evidence suggesting these redacted fees were not incurred in connection with communications regarding the Sanctions Motion and/or fee motion to warrant striking them entirely. In addition, the Court does not find these fees so excessive to warrant a reduction. Accordingly, a reduction for these fees is not warranted.

    Finally, Esos proposes other reductions based on removing redacted entries and based on Taylor once billing at an attorney rate. (Motion, pg. 12.) However, the Court finds striking redacted entries is not supported. In addition, the Declaration of Vinaccia acknowledges that the error in the invoice is not repeated in the Declaration of Taylor, and that the fees requested in the motion correspond to the correct paralegal rate. (Decl. of Vinaccia 28.) As such, a reduction on these grounds is not warranted.

    Request to Stay Fee Award Over $5,000 Based on Intent to Appeal

    As in its opposition to Prencipe’s attorneys’ fees motion, Esos asserts it intends to exercise its right of immediate appeal within 60 days of the fee award from the instant motion and accordingly requests that any fee order be stayed from execution for 70 days from the date of this ruling. (Opposition, pg. 13; C.C.P. 904.1(a)(12), 918 [Regardless of whether or not an appeal has been filed, “If the enforcement of the judgment… would be stayed on appeal only by the giving of an undertaking, a trial court shall not have power, without the consent of the adverse party, to stay the enforcement thereof pursuant to this section for a period which extends for more than 10 days beyond the last date on which a notice of appeal could be filed.”]; CRC Rule 8.14.) Specifically, Esos argues that unrestrained enforcement by its competitor company will disrupt its orderly appeal and business operations, interfere with a potential right of offset by the upcoming jury trial, and given Esos is a small company it will need more time to secure a bond. (Opposition, pg. 13; citing Drum v. Bleue (2003) 107 Cal.App.4th 1009, 1014.) In reply, Prencipe asserts the Court should deny Esos Parties’ request to stay the fee award, because such a stay of enforcement of monetary sanctions requires a bond or undertaking to be submitted to the Court, and Esos Parties have submitted no evidence they have secured a bond or undertaking to effectuate the stay. (Reply, pgs. 9-10; C.C.P. 917.1 [Unless an undertaking is given, the perfecting of an appeal shall not stay enforcement of the judgment or order in the trial court if the judgment or order is for… [m]oney or the payment of money…”]; Banks v. Manos (1991) 232 Cal.App.3d 123, 129.) However, the cases and authority cited by Prencipe address a different situation than Esos Parties’ request—namely, whether execution of the judgment can be stayed pending the appeal. Here, Esos Parties request a stay of only 70 days. Indeed, once that stay expires, any stay pending appeal would require a bond or undertaking. The Court, in its discretion, grants Esos’s request to stay the enforcement of the fee award for 70 days.

    Total Reduction & Final Lodestar Determination

    Accordingly, given the revised request for attorneys’ fees in the amount of $84,788, Prencipe’s motion for attorneys’ fees is granted in the reduced total amount of $69,788, payable after 70 days.

    Dated: September , 2022

    Hon. Monica Bachner

    Judge of the Superior Court



Case Number: ****2020 Hearing Date: July 29, 2022 Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

ESOS RINGS, INC.,

vs.

JOSEPH PRENCIPE, et al.

Case No.: ****2020

Hearing Date: July 29, 2022

Defendant McLear US’s motion for leave to file a first amended answer to the second amended complaint is granted.

Defendant Joseph Prencipe’s motion for judgment is denied.

  1. Motion for Leave to File Amended Answer

    Defendant McLear & Co., Inc. (“Defendant” or “McLear US”) moves for leave to file an amended answer to the second amended complaint (“SAC”) of Plaintiff Esos Rings, Inc. (“Plaintiff” or “Esos Rings”). McLear US moves to amend its answer to assert an additional affirmative defense of “a good faith transferee pursuant to C.C.P. 3439.08” to Plaintiff’s fraudulent transfer claim.

    Defendant filed the instant motion on March 29, 2022. On June 8, 2022, Defendant filed a Notice of Non-Opposition to the motion indicating that counsel for Plaintiff had informed Defendant’s counsel that Plaintiff would not be opposing the motion.

    C.C.P. 473(a)(1) provides, as follows:

    The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading or proceeding by adding or striking out the name of any party, or by correcting a mistake in the name of a party, or a mistake in any other respect; and may, upon like terms, enlarge the time for answer or demurrer. The court may likewise, in its discretion, after notice to the adverse party, allow, upon any terms as may be just, an amendment to any pleading or proceeding in other particulars; and may upon like terms allow an answer to be made after the time limited by this code.

    “Trial courts are vested with the discretion to allow amendments to pleadings ‘in furtherance of justice.’” (Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 488.) Moreover, such amendments must be liberally permitted “at any stage of the proceeding.” (Id. at 488-489.)

    A motion for leave to amend may be denied upon a showing that the moving party inexcusably delayed in bringing the motion and that the opposing party would be prejudiced by the amendment. (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 487.)

    Defendant’s original answer asserted a general denial and affirmative defenses for failure to state sufficient facts to constitute the causes of action, unclean hands, estoppel, waiver, unjust enrichment, material breach, failure/lack of consideration, offset, failure to mitigate damages, failure to fulfill condition precedent, consent/ratification, lack of standing, and privilege. Defendant’s counsel, David Harford (“Harford”) declared that the Amended Answer was necessary as it will specially assert the fraudulent transfer defense that McLear was a good faith transferee for value under C.C.P. 3439.09, which had not been asserted in the November 26, 2018 Answer to the SAC prepared and filed by Defendant’s former counsel. (Decl. of Harford 6-7.) Defendant’s present counsel substituted into this action on February 7, 2020, after Defendant’s answer to the SAC had already been filed. (Decl. of Harford 3.) Defendant asserts Plaintiff will suffer no prejudice from the amendment because it only presents a single additional defense based on a legal theory and facts that have been known to all parties for years. (Motion, pgs. 1-2, 10-11.)

    The Court finds Plaintiff will not be unduly prejudiced by the Amended Answer. Plaintiff has informed Defendant it does not intend to oppose the motion. The trial date is set for October 24, 2022, and on July 26, 2022, Plaintiff filed a motion for leave to amend its SAC and file a proposed third amended complaint (“TAC”), which is currently set for February 23, 2022. As discussed above, amendments must be liberally permitted “at any stage of the proceeding.” (Id. at 488-489.)

    Based on the foregoing, Defendant’s unopposed motion for leave to file an amended answer is granted.

  2. Motion for Judgment

    Defendant Joseph Prencipe (“Prencipe”) moves for judgment in his favor and against Plaintiff on all remaining causes of action asserted against him in the SAC pursuant to C.C.P. 631.8 and Orange County Water District v. Alcoa Global Fasteners (2017) 12 Cal.App.5th 252, 353-62 (“Orange County Water District”). (Notice of Motion, pg. 1.) Specifically, Defendant asserts the Court’s findings in the bench trial on the equitable claims that McLear US asserted against Plaintiff foreclose Prencipe’s liability on the 4th (fraud), 5th (actual fraudulent transfer), and 6th (breach of fiduciary duty) causes of action asserted against Prencipe in Plaintiff’s SAC. (Motion, pgs. 1-2.)

    Background

    This case involves a dispute between two separate groups of parties over the rights to U.S. Pat. No. 9,313,609 (“the 609 Patent”), which was invented and owned by Prencipe. On February 27, 2017, Plaintiff filed its initial complaint against Prencipe and McLear US (collectively, “McLear Parties”) alleging they exploited the ‘609 patent and denied its assignment to Plaintiff, diminishing its value and preventing Esos from exploiting its rights. On April 18, 2017, McLear Parties filed their initial cross-complaint against Plaintiff and Michelle Silverstein (“Silverstein”) (collectively, “Esos Parties”). On October 26, 2018, Plaintiff filed the operative SAC, in which McLear, Ltd. (“McLear UK”) was also named as a defendant.

    On February 5, 2021, McLear US filed a first amended cross-complaint (“FACC”) against Esos Parties, and on June 30, 2021, McLear US filed its second amended cross-complaint (“SACC”). On December 2, 2021, the Court overruled Esos Parties’ demurrer to the SACC’s 2nd (conversion) and 6th (breach of fiduciary duty) causes of action. [The Court notes while Prencipe was initially a cross-complainant in McLear US’s cross-complaint, he was removed when McLear US filed its FACC, and is no longer a cross-complainant in the action.] On April 5, 2021, the Court bifurcated the trial of this matter and set a bench trial of the parties’ non-jury claims for January 31, 2022.

    On November 9, 2021, the Court granted McLear Entities’ motion for evidence sanctions, joined by Prencipe. Specifically, the Court ruled that McLear Entities and Prencipe were entitled to an evidence sanction prohibiting Esos Parties from introducing evidence supporting their claim that Exhibit D to the SAC is a true and correct copy of the Executed Second Assignment.

    On December 17, 2022, the Court denied McLear Entities’ motion for summary judgment as to the SAC, but granted their motion for summary adjudication, in the alternative, as to all causes of action asserted against McLear Entities except the 5th (actual fraudulent transfer) cause of action. In the same ruling, the Court denied Plaintiff’s motion for summary adjudication of its own 2nd (declaratory relief) and 3rd (quiet title in 609 Patent) causes of action in its SAC which were asserted against McLear Entities, Prencipe, and MTG. On January 6, 2022, the Court denied Prencipe’s motion for summary adjudication of the 4th (fraud) and 6th (breach of fiduciary duty) causes of action asserted against him in the SAC of Plaintiff. On January 6, 2022, the Court also granted Prencipe’s oral motion for judgment on the pleadings as to the SAC’s 1st (breach of contract), 2nd (declaratory relief), 3rd (quiet title), and 7th (intentional interference with prospective economic relations) causes of action asserted against him. Accordingly, the operative SAC asserts causes of action for fraud and breach of fiduciary duty against Prencipe as well as a cause of action for actual fraudulent transfer against Prencipe and McLear Entities.

    On January 31, 2022, McLear Entities proceeded to trial on the equitable claims asserted in their SACC against Esos Parties on the 3rd (cancellation of instruments), 4th (quiet title), and 5th (declaratory relief) causes of action as well as Esos Parties’ defenses to these equitable claims including the 8th (unclean hands), 9th (estoppel) and 26th (quitclaim assignment) affirmative defenses. A Court trial was held on January 1, February 2, 3, 4, and 8, 2022. After issuing a Tentative Statement of Decision and considering objections thereto, on June 9, 2022, the Court issued its Final Statement of Decision. The Court ruled that McLear Entities prevailed on the three causes of action asserted against Esos Parties and that Esos Parties did not establish their affirmative defenses barred the equitable claims asserted against them. While the Statement of Decision discussed Prencipe and considered evidence relating to him in determining whether McLear Parties prevailed on their causes of action, he was not a party to the FACC itself and the Statement of Decision resolves equitable claims brought by McLear Entities and Esos Parties’ affirmative defenses to those claims.

    Jury trial for the remaining legal claims in the operative SAC is set for October 24, 2022. Specifically, the jury trial is to address the 4th (fraud) and 6th (breach of fiduciary duty) causes of action against Prencipe only as well as the 5th (actual fraudulent transfer) against Prencipe and McLear Entities. The trial will also address McLear Parties’ remaining 1st (breach of contract), 2nd (conversion), and 6th (breach of fiduciary duties) causes of action asserted against Esos Parties in the FACC.

    On July 7, 2022, Prencipe filed the instant motion for judgment. On July 19, 2022, Esos Parties filed an opposition, and on July 22, 2022, Prencipe filed his reply thereto. On July 26, 2022, Plaintiff filed a motion for leave to file a third amended complaint (“TAC”), which is currently set for hearing on February 23, 2023. Plaintiff moves for leave to add a claim for indemnification and contribution against Prencipe to be asserted by both Plaintiff and Silverstein as the Cross-Defendants subject to remaining FACC claims asserted by McLear US against Plaintiff and Silverstein.

    The Court notes, in opposition, Esos Parties acknowledge that unless the Statement of Decision, summary judgment, and/or evidentiary sanctions entered by the Court are appealed and reversed, Plaintiff’s claims for fraud (4th COA) and fraudulent transfer (5th COA) against Prencipe cannot be pursued at a jury trial due to the currently binding factual findings in the Statement of Decision. (Opposition, pg. 2.) However, Esos Parties argue that the motion should be denied as procedurally improper. (Opposition, pg. 3.)

    Motion for Judgment

    C.C.P. 631.8(a)-(b) provide as follows:

    After a party has completed [its] presentation of evidence in a trial by the court, the other party, without waiving [its] right to offer evidence in support of [its] defense or in rebuttal in the event the motion is not granted, may move for a judgment. The court as trier of the facts shall weigh the evidence and may render a judgment in favor of the moving party, in which case the court shall make a statement of decision as provided in Sections 632 and 634, or may decline to render any judgment until the close of all the evidence. The court may consider all evidence received, provided, however, that the party against whom the motion for judgment has been made shall have had an opportunity to present additional evidence to rebut evidence received during the presentation of evidence deemed by the presenting party to have been adverse to [it], and to rehabilitate the testimony of a witness whose credibility has been attacked by the moving party. Such motion may also be made and granted as to any cross-complaint.

    If it appears that the evidence presented supports the granting of the motion as to some but not all the issues involved in the action, the court shall grant the motion as to those issues and the action shall proceed as to the issues remaining. Despite the granting of such a motion, no final judgment shall be entered prior to the termination of the action, but the final judgment in such action shall, in addition to any matters determined in the trial, award judgment as determined by the motion herein provided for.

    (Emphasis added.)

    C.C.P. 631.8(c) provides that if the motion is granted, unless the court in its order for judgment otherwise specifies, such judgment operates as an adjudication upon the merits.

    Prencipe is not entitled to move for judgment pursuant to C.C.P. 631.8. Based on the procedural posture of the case, discussed above, Prencipe was neither a cross-complainant nor cross-defendant in the FACC as to which the Court issued its Statement of Decision following the bench trial, and as such, he does not qualify as “the other party” for purposes of moving for judgment pursuant to this statute.

    Based on the foregoing, Prencipe’s motion for judgment pursuant to C.C.P. 631.8 is denied.

    In the alternative to moving for judgment pursuant to C.C.P. 631.8, Prencipe relies on California common law authority established in Orange County Water District, based on the Court’s inherent authority to consider and grant a motion for judgment as to pending jury trial claims based on findings the Court reached in a bench trial involving the same parties. (Motion, pgs. 9-10; Reply, pgs. 3-4, citing Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1582, 1595 [“[The Court has] inherent power, separate from any statutory authority to control the litigation before [it] and to adopt any suitable method of practice, even if the method is not specified by statute or by the Rules of Court.”].) While Prencipe discusses Orange County Water District in his Notice of Motion and Motion, not until his reply does he argue it is a sufficient independent basis for moving for judgment based on the Court’s inherent powers, even if C.C.P. 631.8 is inapplicable. (Reply, pgs. 2-3.)

    Prencipe is not entitled to an order entering judgment in his favor on the SAC filed by Plaintiff. While Orange County Water District involved a bifurcated action in which statutory claims were addressed first in a bench trial, where remaining common law claims were to be asserted in a subsequent jury trial, it does is not analogous to the instant action so as to support the relief requested by Prencipe in the instant motion. In Orange County Water District, the district (plaintiff) brought action against certain industrial sites’ owners and operators (defendants) for statutory claims (under the HSAA and County Water District Act) and common law claims (for negligence, nuisance, and trespass) relating to recovery of costs for a groundwater protection project (“Project”) at those industrial sites. (Orange County Water Dist. v. Alcoa Global Fasteners, Inc., supra, 12 Cal.App.5th at 252.) Following the initial bench trial on the district’s bifurcated statutory claims, the trial court found in favor of the owners and operators, declared that they were not responsible for costs for the Project, and subsequently granted a motion for judgment in favor of those owners and operators on the remaining common law claims asserted against them. (Id.) In ruling on the district’s appeal, the Court of Appeal held that the trial court’s decision to bifurcate trial and treat findings on equitable claims as binding on legal claims did not violate the district’s right to a trial by jury on its legal claims. (Id. at 353-359.) Notably, the motion for judgment at issue in Orange County Water District was filed by the owners and operators of the sites, the defendants for both the equitable claims addressed in the bench trial and the legal claims yet to be addressed in the jury trial. Prencipe’s discussion of the Orange County Water District omits the relationships of the various parties subject to the Court’s ruling therein. Here, while the Statement of Decision considered evidence relating to Prencipe, he was not a named cross-complainant or cross-defendant in the addressed equitable claims, and as such, the Court declines to enter judgment in his favor on the claims asserted against him in the SAC.

    Based on the foregoing, Prencipe’s motion for judgment is denied.

    Dated: July , 2022

    Hon. Monica Bachner

    Judge of the Superior Court



Case Number: ****2020 Hearing Date: January 6, 2022 Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

ESOS RINGS, INC.,

vs.

JOSEPH PRENCIPE, et al.

Case No.: ****2020

Hearing Date: January 6, 2022

Defendant Joseph Prencipe’s motion for summary adjudication of the 4th and 6th causes of action is denied.

The Court instructs the Clerk to turn over Prencipe’s documents lodged conditionally under seal to Prencipe and Prencipe is ordered to properly lodge the exhibits by lodging only the individual exhibits subject to the protective order. The Court’s September 23, 2021 ruling on Plaintiff’s motion to seal applies to Exhibit 42 to the Declaration of Erin Coleman conditionally lodged under seal as it is the same Declaration of Gorelick and attached exhibits which the Court has determined is entitled to sealing in part and that sealing order applies to Exhibit 42. To the extent Plaintiff seeks to have the remaining redacted exhibits sealed, it shall present argument in support of sealing at the hearing on the instant motion and the Court shall determine the issue of the sealing order at that time.

Defendant Joseph Prencipe (“Prencipe”) moves for summary adjudication of the 4th (fraud) and 6th (breach of fiduciary duty) causes of action in the second amended complaint (“SAC”) of Plaintiff Esos Rings, Inc. (“Plaintiff” or “Esos Rings”). Prencipe also moves for summary adjudication of his 2nd (unclean hands) affirmative defense, which Plaintiff asserts constitutes a complete defense to the 4th and 6th causes of action. Specifically, Prencipe moves for summary adjudication of the 4th cause of action on the grounds: (1) Plaintiff cannot establish it detrimentally relied on Defendant’s fraudulent representations; (2) Plaintiff cannot establish damages; and (3) the cause of action is barred by the doctrine of unclean hands. Prencipe moves for summary adjudication of the 6th cause of action on the grounds: (1) Plaintiff cannot establish the existence of a duty; (2) Plaintiff cannot establish that it suffered damages as a result of Defendant’s breach of fiduciary duty; and (3) the cause of action is barred by the doctrine of unclean hands. (Notice of Motion, pgs. 1-2.)

Prencipe does not move for summary adjudication of the 1st, 2nd, 3rd, 5th, and 7th causes of action, which are also asserted against him.

Lack of Court Order Sealing Exhibits

Prencipe’s motion is accompanied by a Notice of Lodgment indicating that certain exhibits filed in support of the motion were lodged conditionally under seal in accordance with Rule 2.551 and the Stipulated Protective Order entered into on September 7, 2018. However, these exhibits were lodged without a sealing order. The Protective Order sets forth the parties’ agreement that there is no entitlement to file confidential information under seal, and a party seeking to file under seal any protected material must comply with CRC Rule 3.932, which in turn requires that a motion or application to seal records in a case must be filed and that CRC Rules 2.550 and 2.551 apply to such a motion or application to seal records.

The Court notes Prencipe did not file redacted versions of these exhibits as indicated in the Notice, rather, the entire exhibits are omitted from the electronic filing, with a single page indicating the subject exhibit is lodged conditionally under seal. Specifically, Prencipe asserts he lodged the following exhibits to the Declaration of Erin Coleman (“Coleman”) under seal: (1) Exhibit 8 [Excerpts from Rex Scates’ November 10, 2020 deposition]; (2) Exhibit 18 [Exhibit No. 94 to a deposition]; (3) Exhibit 21 [Exhibit No. 134 to a deposition]; (3) Exhibit 25 [Exhibit No. 96 to a deposition]; (4) Exhibit 32 [Excerpts from Defendant’s April 30, 2021 deposition]; (5) Exhibit 34 [Excerpts from Rex Scates’ September 14, 2018 deposition]; (6) Exhibit 42 [7/30/21 Declaration of Yevgeniy Gorelik (“Gorelick”)]; and (7) Exhibit 50 [Exhibit No. 131 to a deposition].

As a preliminary matter, Exhibit 42, the Gorelick Declaration and exhibits thereto, was already addressed in the Court’s September 23, 2021 Ruling on Plaintiff’s motion to seal in which the Court ordered that the redacted portions of the Declaration and Exhibits 1, 2, and 3 would remain sealed, but not the Declaration in its entirety. The Court finds this ruling sufficiently addresses the Gorelick Declaration filed by Prencipe and orders Exhibit 42 sealed in the same manner.

The Court notes that instead of separately lodging the eight at-issue exhibits under seal, Prencipe lodged the entire Declaration of Coleman and its accompanying exhibits under seal. This is improper, given the Declaration of Coleman includes 50 exhibits, only eight of which would be subject to any sealing order. Prencipe is ordered to re-file the conditionally sealed, unredacted Exhibits 8, 18, 21, 25, 32, 34, and 50.

Under CRC Rule 2.550(c), Court records are presumed to be open. CRC Rule 2.551(a) states that a record must not be filed under seal without a Court order. Further, section 2.551(a) states that the Court must not permit a record to be filed under seal based solely on the agreement or stipulation of the parties. In addition, while exceptions to this rule exist, a declaration in support of an opposition to a motion for summary adjudication, and the opposition and response separate statement themselves, do not fall within the possible exceptions. (See CRC Rule 2.550(a)(2)-(3) [“These rules do not apply to [(1)] records that are required to be kept confidential by law… [or (2)] discovery motions and records filed or lodged in connection with discovery motions or proceedings. However, the rules do apply to discovery materials that are used at trial or submitted as a basis for adjudication of matters other than discovery motions or proceedings.” (Emphasis Added.)].)

Prencipe appears to rely on CRC Rule 2.551(b)(3), pursuant to which a party not intending to file a motion or application to seal must, “[l]odge the unredacted records subject to the… protective order… in the manner stated in [CRC Rule 2.551(d)][,]” give written notice to the party that produced the records that they will be placed in the public court file unless a timely motion to seal is filed. However, there is no indication Prencipe gave Esos Rings this notice. Given the August 20, 2021 Notice of Lodgment was served on all parties, any party that produced the documents and sought to have them sealed instead of becoming a part of the public record was required to file a motion to seal within 10 days of that Notice; however, no application has been filed, and as such it seems the Court should instruct the clerk to transfer all lodged documents to the public file.

To the extent Plaintiff seeks to have the remaining redacted exhibits sealed, it shall present argument in support of sealing at the hearing on the instant motion. The Court will determine the issue of the sealing order at the hearing on the motion.

Requests for Judicial Notice

Prencipe’s 8/20/21 request for judicial notice is granted as to Nos. 1, 2, and 3. However, the Court does not take judicial notice of the truth of the matters asserted within the documents. (RJN, Nos. 1, 2, 3.)

Procedural Issues

Prencipe moves for summary adjudication of his 2nd (unclean hands) affirmative defense as a defense to all causes of action asserted against him. (Motion, pgs. 19-20.) However, the Notice of Motion only raises the affirmative defense of unclean hands in the context of Prencipe’s motion for summary adjudication of the 4th and 6th causes of action. Prencipe did not give notice that he was moving for summary adjudication of any other causes of action, and as such, the Court declines to consider Prencipe’s argument that the unclean hands affirmative defense bars all causes of action asserted against Prencipe.

Plaintiff’s 10/21/21 evidentiary objections are procedurally improper and fail to comply with CRC Rule 3.1354(b). Plaintiff objects to individual facts asserted by Prencipe in his Separate Statement of Facts (“SSF”) and the evidence underlying such SSFs. (See Objections, pg. 2 [“All objections to testimony including an exhibit citation are intended as objections to the exhibit itself as well.”].) However, the SSFs are not evidence subject to an evidentiary objection.

Plaintiff’s Response Separate Statement includes improper responses in which Plaintiff indicates a fact is “undisputed,” however, Plaintiff also asserts an objection to the undisputed fact. (See e.g., Responses to SSFs Nos. 7, 8, 10, 11, 12.) However, the content of a Separate Statement of Fact is not evidence subject to objection.

Plaintiff’s Response Separate Statement includes responses that are “undisputed” but then proceed to dispute part of the stated fact without citing to evidence in support of the position that the fact is controverted in violation of CRC Rule 3.1350(f)(2).

Evidentiary Objections

Esos Rings’ 10/21/21 evidentiary objections are procedurally improper. Esos Rings objects to individual facts asserted by Prencipe in his SSF and the evidence underlying the SSFs. However, the AMFs are not evidence subject to an evidentiary objection. The Court notes the objection refers to a Declaration of Prencipe; however, there is no record of a declaration of Prencipe submitted in support of the instant motion, and the objections themselves do not cite to the declaration. (Objection, pg. 1; Response to Objection, pg. 2.) To the extent Prencipe objects to the underlying evidence, the objections violate CRC Rule 3.1354(b)(3) in that they fail to quote or set forth the objectionable statement or material. Given multiple SSFs cite to the multiple sources of evidence, the evidentiary objections to the SSF as whole are uncertain. Plaintiff is not entitled to a ruling on these objections.

Prencipe’s 11/1/21 evidentiary objections to the Declaration of Matthew Hrutkay (“Hrutkay”) are overruled as to Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, and 13.

Background of Allegations in SAC

This case involves a dispute between two separate groups of parties over the rights to U.S. Pat. No. 9,313,609 (“the 609 Patent”), which was invented and owned by Prencipe. On April 12, 2016, the United States Patent and Trademark Office (“USPTO”) issued the 609 Patent to Prencipe as its inventor. (SAC 13, Exh. A.) On May 1, 2016, Prencipe incorporated McLear US with bylaws that listed Prencipe as its Executive Director, Secretary, and Treasurer and gave Prencipe, as Executive Director, the “power and authority to execute and deliver in the name and on behalf of [McLear US] any and all duly authorized agreements, documents, and instruments.” (SAC 14, emphasis added.) On October 10, 2016, Prencipe executed a document assigning his interests in the 609 Patent to McLear US, which was recorded by the USPTO on October 20, 2016 (“McLear Assignment”). (SAC 15, Exh. B.) [The Court notes Prencipe’s briefings refer to this assignment as the “First Assignment” and Plaintiff’s briefings refer to this assignment as the “10/10 Assignment”; however, the Court refers to it as the “McLear Assignment.”]

Plaintiff alleges Silverstein had personally paid legal fees to pursue infringers and forewent compensation and accordingly agreed to short-term loans in the amount of over $75,000, which were to be repaid but were never repaid. (SAC 16.) Plaintiff alleges Prencipe agreed to sell the 609 Patent to Silverstein and her business partner Rex Scates (“Scates”) to form a company and transfer ownership of the patent to that new company which Silverstein and Scates would run, and accordingly, Prencipe voided any McLear Assignment and told Silverstein that any such assignment was not a valid assignment because McLear US was not a valid entity that could receive the assignment. (SAC 16-18.) Plaintiff alleges Prencipe was responsible for forming the two entities to effectuate this agreed-to sale/assignment: first, the Delaware corporation PIL, Inc. (“PIL”), which Prencipe referred to as an “IP Holding Company” for which “Chris Trehan” was listed as the authorized signatory, and second, the Delaware corporation “Esos, Inc.” for which Silverstein was said to be CFO and the authorized signatory. (SAC 22.) Plaintiff alleges that on October 26, 2016, Prencipe emailed Silverstein with corporate formation documents and two draft assignments: (1) an assignment dated November 1, 2016, that contemplated assigning the 609 Patent from Prencipe individually to PIL for $20,000 (“Draft First Assignment”) [the Court notes Defendant’s briefing refers to this assignment as the “Prencipe Assignment”; however, the Court refers to it as the Draft First Assignment]; and (2) an assignment dated November 23, 2016, that contemplated assigning the 609 Patent from PIL to “Esos Inc.” (“Draft Second Assignment”) [the Court notes Defendant’s briefing refers to this assignment as the “PIL Assignment”; however, the Court refers to it as the Draft Second Assignment]. (SAC 17, 23.) Together, the Court refers to these Draft First and Second Assignments as the “Draft Esos Assignments,” given Plaintiff alleges their ultimate collective purpose was to transfer ownership rights in the 609 Patent to Plaintiff.

Plaintiff alleges on November 1, 2016, by way of further emails including from his personal Gmail account, Prencipe provided Silverstein with fully executed final copies of the Draft Assignments. (SAC 24, Exhs. C, D.) The Court refers to these signed versions of the Draft Assignments as the “Executed First Assignment” and “Executed Second Assignment” and, collectively, as the “Executed Esos Assignments.” [The Court notes Plaintiff’s briefings refer to the Executed First Assignment as the “11/1 Assignment” and the Executed Second Assignment as the “11/23 Assignment,” based on the date of the assignment. Prencipe’s briefings refer to Executed First and Executed Second Assignments as the Prencipe Assignment and the PIL Assignment, respectively, based on the identity of the assignor.] Plaintiff alleges that Exhibits C and D to the SAC, the Executed Esos Assignments, together constitute a single assignment contract and unitary transaction, despite being multiple transfer documents, that involve the same subject matter, the 609 Patent, executed around the same time and the two-step assignment merely inserts strawmen Chris Trehan and PIL to create the transfer of the 609 Patent. (SAC 25.) Plaintiff alleges Prencipe failed to file for the incorporation of the two nascent corporations, PIL and “Esos Inc.,” and weeks later advised Silverstein he was waiting for the Delaware Secretary of State to confirm the entities had been successfully formed. (SAC 26.) Plaintiff alleges Silverstein did not learn about the McLear Assignment until after, “Prencipe transferred the 609 Patent and related rights as part of the [Executed] Esos Assignments.” (SAC 15.) Plaintiff alleges that as a result of the Executed Esos Assignments and Prencipe’s failure to incorporate the nascent corporations, title to the 609 Patent “devolved” to Chris Trehan and Silverstein, as the signatories for PIL and “Esos Inc.,” and neither Trehan nor Silverstein dispute this. (SAC 27.) Plaintiff alleges that when Prencipe failed to form “Esos Inc.,” Silverstein instead formed Plaintiff and all duties owed to the nascent “Esos Inc.” and all its rights, interests, and causes of action devolved by operation of law on Silverstein. (SAC 27.) Plaintiff alleges Silverstein subsequently quitclaimed in writing all her interests in the 609 Patent to Plaintiff via a January 27, 2017 assignment (“Silverstein Assignment”). (SAC 27-28, Exh. E.) Plaintiff alleges Silverstein also executed a confirmatory assignment on September 22, 2017, which confirmed the assignment of any rights in the 609 Patent from Silverstein to Plaintiff. (SAC 28, Exh. F.)

Plaintiff alleges that in reliance on its rights under the 609 Patent, it negotiated prototyping agreements for NFC rings with large companies only to lose those clients as a result of Prencipe’s false representations. (SAC 29.) Plaintiff alleges it entered into an agreement providing its “business partner” with distribution rights. (SAC 30.)

On November 9, 2021, the Court granted McLear Entities’ motion for evidence sanctions, joined by Prencipe. Specifically, the Court ruled that McLear Entities and Prencipe were entitled to an evidence sanction prohibiting Plaintiff and Silverstein (collectively, “Esos”) from introducing evidence supporting their claim that Exhibit D to the SAC is a true and correct copy of the Executed Second Assignment.

Fraud (4th COA)

The elements of fraud are: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.)

Plaintiff’s fraud cause of action is based on the following allegations: (1) in October and November 2016, Prencipe sold to Plaintiff the rights to the 609 Patent and Plaintiff stands ready, willing, and able to pay under the assignments; (2) in connection with the sale, Prencipe made representations, both by email and orally, to Silverstein [nascent Plaintiff’s representative], that a previous assignment of the 609 Patent to McLear US was invalid, and that corrected and effective assignments would issue to give Plaintiff the rights to the 609 Patent; (3) Prencipe represented to Silverstein that the Executed Esos Assignments (Exhibits C and D to the SAC) conveyed valid and unencumbered title and all rights of nascent Esos, Inc. and Silverstein were subsequently assigned in writing to Esos Rings; (4) at the time of the McLear Assignment, Prencipe had fraudulent intent to hinder, delay and defraud creditors, specifically, Silverstein, Scates, and related entities; (5) the Esos Assignments and all beneficial interests of nascent Esos, Inc. (Exhibits C and D to SAC) “devolved” to Silverstein as the signatory and representative of nascent Esos, Inc.; (6) Prencipe now maintains Esos Assignments are invalid; (7) Plaintiff reasonably believed Prencipe’s representations regarding the invalidity of the McLear Assignment were true and reasonably relied on them in agreeing to purchase the 609 Patent and in negotiating licensing agreements with third parties for use of the rights pursuant to the 609 Patent; (8) Prencipe acted with fraudulent intent in representing that the McLear Assignment was invalid; (9) to the extent the Esos Assignments were invalid or ineffective, Plaintiff pleads in the alternative that Prencipe knew and believed at the time of making representations that they were false and that he made them with the intent to fraudulently induce Plaintiff to buy the 609 Patent and attempt to exploit it; (10) as a result of Prencipe’s fraud, Plaintiff has been damaged. (SAC 74-83.)

Prencipe argues Plaintiff cannot establish it detrimentally relied on his alleged fraudulent statements about the invalidity of the McLear Assignment and/or that the Esos Assignments would and/or did give Plaintiff rights to the 609 Patent because Plaintiff knew those statements were false at the time they were made for the following reasons: (1) Plaintiff had notice of the McLear Assignment since 2016; (2) the Executed Esos Assignments are forged and Plaintiff had knowledge of (and likely participated in) the forgery; (3) the parties never reached an agreement to execute the Executed Second Assignment; (4) no consideration was given for the Executed Second Assignment; and (5) there is no record Prencipe transmitted the Executed Second Assignment. (Motion, pgs. 13-17.) Prencipe also argues Plaintiff cannot establish damages for purposes of the cause of action given Plaintiff had knowledge that it did not successfully obtain rights in the 609 Patent. (Motion, pg. 17.)

As a preliminary matter, the Court notes Plaintiff’s fraud cause of action is pled in the alternative to its breach of contract/quiet title claim and is premised on the invalidity of the Executed Esos Assignments and that Prencipe did not successfully transfer and/or assign ownership rights in the 609 Patent to Plaintiff. As such, Plaintiff alleges that representations Prencipe made in the context of purportedly transferring and/or assigning ownership rights in the 609 Patent to Plaintiff were false and were made for the purpose of inducing Plaintiff, by way of Silverstein, to engage with both Prencipe and third-party vendors in a manner that assumed Plaintiff had ownership rights in the 609 Patent. Given the fraud cause of action is pled in the alternative, Silverstein’s testimony that Prencipe failed to defraud Plaintiff for purposes of establishing the quite title cause of action does not qualify as an admission that Prencipe did not engage in fraud for the purposes of the fraud cause of action. (Motion, pg. 13, citing USSF No. 138 [Decl. of Coleman, Exh. 39, 360:10-11; 364:23-24; 365:9-10; 369:9-10; 392:23-25; Silverstein’s testimony that Prencipe, “attempted to defraud [Plaintiff] but was not successful…”].) Notably, the testimony is a legal conclusion as to Prencipe’s conduct premised on Silverstein’s belief that Plaintiff has valid title in the 609 Patent, and as such, is not relevant as to whether Plaintiff can establish its alternative theory that Prencipe did engage in fraud.

Prencipe does not attack the other elements of the fraud cause of action, namely, that Prencipe made false representations, that Prencipe knew those representations were false at the time he made them, and that Prencipe made those representations with the intent to defraud Plaintiff. In addition, Prencipe only argues Plaintiff cannot establish its justifiable reliance on his misrepresentations because Plaintiff knew, or constructively knew, the representations were false. However, Prencipe does not submit evidence to meet his burden of showing Plaintiff knew the falsity of the representations at the time Prencipe made them and/or at the time Plaintiff would have reasonably relied on them. As such, Prencipe does not meet his burden on summary adjudication on the ground Plaintiff cannot establish justifiable reliance.

Given Prencipe’s argument that Plaintiff’s knowledge of the falsity of the misrepresentations is based on separate grounds and supporting evidence for each, the Court addresses each in turn.

  1. Detrimental Reliance: Whether Plaintiff had Knowledge of the McLear Assignment at the time of Plaintiff’s Reliance on Prencipe’s Misrepresentations such that such Knowledge Would Preclude Reliance

    In support of his assertion that Silverstein (and Plaintiff) had knowledge of the McLear Assignment and that they accordingly had knowledge the 609 Patent had been validly assigned, Prencipe submits the following evidence: (1) on February 27, 2017, Silverstein acknowledged the USPTO October 20, 2016 recordation of the McLear Assignment [USSF No. 5 (“USSF” refers to undisputed facts)]; (2) Silverstein paid legal fees to Sterling Kerr (“Kerr”) in connection with his work in representing Prencipe in a patent infringement action filed against Kerv Wearables Ltd. (“Kerv”) in the U.S. District Court for the District of Nevada, Case No. 2:16-cv-02441-GMN-GWF based on Kerv’s alleged infringement of the 609 Patent (“Kerv Action”) [USSF No. 23]; (3) Prencipe and McLear US were the named plaintiffs in Kerv Action’s October 26, 2016 first amended complaint which asserts, “[McLear US] is a Delaware corporation and the patent assignee of [the 60 Patent] and does business under the trade name NFC” [USSF Nos. 18, 19]; (4) on December 5, 2016, Silverstein executed a declaration in the Kerv Action in which she stated she was familiar with the facts and circumstances giving rise to the litigation against Kerv [USSF Nos. 26-28]; and (5) on December 2, 2016, Kerv’s representative Philip Campbell (“Campbell”) emailed Silverstein stating, “Based on publicly available documents, all rights to the [609 Patent] were assigned to [McLear US]” (USSF No. 27). (Motion, pgs. 14-15.) The evidence suggests Silverstein was made aware of the existence of the McLear Assignment and in signing her declaration, admitted knowledge of the basis of the Kerv Action, which included allegations that the 609 Patent had been assigned to McLear US.

    Based on the foregoing, Prencipe met his burden on summary adjudication. Therefore, the burden shifts to Plaintiff to create a triable issue of fact. As discussed below, Plaintiff met its burden.

    Plaintiff submitted evidence creating a triable issue of fact as to whether it had knowledge of McLear Assignment at the time Prencipe made misrepresentations to Silverstein such that Silverstein would have known his representations were false. Moreover, Plaintiff’s evidence suggests that even to the extent Plaintiff was aware Prencipe had previously assigned the 609 Patent interests to McLear US, Prencipe’s representations and conduct toward Silverstein suggested that assignment was without merit and/or he had the authority to reverse the assignment. While Plaintiff does not dispute the material facts submitted by Prencipe, Plaintiff submits evidence demonstrating that Prencipe’s facts and supporting evidence are incomplete as to establish Silverstein’s knowledge of the McLear Assignment. (See Response Separate Statement of Fact (“R-SSF”) Nos. 18, 19, 26, 27, 28, 29, 30.)

    First, Plaintiff submitted evidence the original named plaintiff in the Kerv Action was NFC Ring, Inc., and that Prencipe and McLear US were first named plaintiffs in the action in the first amended complaint, filed on October 26, 2016, the same day Silverstein was terminated from McLear US, and her access to McLear US emails and dropbox were removed. (R-SSF Nos. 18, 19, 21; [Additional Material Fact (“AMF”) Nos. 26, 27, 28, 32] Decl. of Hrutkay, Exh. H, I.) Plaintiff also submitted evidence that on October 19, 2016, even though Prencipe had already executed the McLear Assignment which he asserts validly assigned rights to McLear US, he sent Kerr a May 30, 2016 draft assignment as the basis for the Kerv Action, which Prencipe indicated had not yet been recorded, but asked whether this assignment would need to be recorded for the lawsuit to be brought. ([AMF No. 20] Decl. of Hrutkay, Exh. G.) Plaintiff submitted evidence that immediately after Prencipe emailed Kerr, he emailed Silverstein in which he attached the same May 30, 2016 draft assignment instructing Silverstein to be “VERY CAREFUL that Kerr answer “these questions” before he files the Kerv Action. ([AMF No. 21] Decl. of Hrutkay, Exh. G.) Plaintiff submitted evidence Prencipe had previously sent this May 30, 2016 draft assignment to Silverstein in a September 25, 2016 email, in which he stated, “we agreed this isn’t effective though” and that it was the “old” assignment, and he had not yet done the McLear UK one yet, but needed to talk to John McLear about it. ([AMF Nos. 14-18] Decl. of Hrutkay, Exh. E.) Plaintiff submitted evidence that at no point during this correspondence, did Prencipe refer to the executed McLear Assignment. ([AMF Nos. 16, 17, 18, 21, 22, 23] Decl. of Hrutkay, Exh. E, G.) This evidence creates a triable issue of fact as to whether Silverstein had knowledge that the 609 Patent rights had been validly assigned to McLear US at the time Prencipe made alleged misrepresentations.

    While Plaintiff does not dispute Silverstein signed her December 5, 2016 Declaration in the Kerv Action, Plaintiff submitted evidence the Declaration was drafted by Kerr and primarily concerned Silverstein’s verification of her purchase of an infringing product, not familiarity with the underlying allegations of the recently filed first amended complaint, including that all interests in the 609 Patent had been assigned to McLear US. ([AMF No. 56] Decl. of Hrutkay, Exh. W, No. 17.) In addition, Plaintiff submitted evidence the 12/5/16 Declaration was executed after Prencipe had begun his misrepresentations in dealing with Silverstein, and accordingly Plaintiff, and at a time when Prencipe was still actively advising Plaintiff in its business dealings with partners such as SAP. ([AMF Nos. 45, 46, 47, 48, 49] Decl. of Hrutkay, Exhs. Q, R.) Similarly, while Plaintiff does not dispute receiving Campbell’s December 2, 2016 email in which he stated public records indicated rights had been assigned to McLear US, this email occurred in the midst of Prencipe’s reassurances to Silverstein and Plaintiff that the assignments to Plaintiff would be effectuated. (Opposition, pg. 18.) For these same reasons, to the extent Plaintiff had record notice of the McLear Assignment via its recordation with the USPTO, Prencipe misled Silverstein into believing no effective assignment to McLear US was in place and continued actively advising Plaintiff on its business dealings in a manner suggesting he had authority to assign the 609 Patent rights to Plaintiff. Accordingly, triable issues of fact exist as to whether Plaintiff had sufficient knowledge of the McLear Assignment at the time of Prencipe’s misrepresentations so as to know the falsity of Prencipe’s misrepresentations.

  2. Detrimental Reliance: Whether Plaintiff had Knowledge the Executed Esos Assignments were Forged and Whether Such Knowledge Precludes Plaintiff from Relying on Prencipe’s Misrepresentations

    Prencipe submitted evidence suggesting he forged Trehan’s signature on the Executed First Assignment by affixing Trehan’s signature there himself. (USSF Nos. 77, 78.) Prencipe submitted evidence suggesting Trehan had no knowledge of PIL Inc. and that he had never seen and/or signed the Executed Esos Assignments. ([D-SSF No. 79] Coleman Decl., Ex. 33 at 18:8-9, 50:2-19; 50:16-17, 51: 3-17; 52:12-19; 53:9-24; Coleman Decl., Ex. 16; Ex. 5 at 383:11- 24; Ex. 17 at Esos_0000329-0000330; Ex. 8 at 104:23-105:1 [The Court notes Plaintiff objects to this SSF without stating whether the fact is disputed]; USSF Nos. 95, 96, 97, 98.) Prencipe submitted testimony from Silverstein and Scates in which each admits Trehan had nothing to do with PIL and that they had no knowledge of Trehan signing the Assignments himself. (USSF Nos. 83, 86, 87, 88, 89, 100, 101.) Prencipe also submitted evidence from which he argues that Silverstein knew the signature on the Executed First Assignment was not her own signature, rendering the assignment a forgery. Specifically, Silverstein admitted in her testimony that Prencipe was putting signatures all over everything, she had no reason to rely on Prencipe’s “assignments” as valid. (Motion, pg. 16; USSF Nos. 71, 90; [D-SSF No. 92] Decl. of Coleman, (Exh. 22 at 501:16-504:10; [D-SSF No. 107] Coleman Decl., Ex. 39 at 352:24-353:6, 379:2-16; Ex. 22 at 486:15-489:11, 490:2- 494:13.) However, the Court does not find Prencipe meets his burden of summary adjudication on the issue of whether Plaintiff can establish detrimental reliance on this ground. Notably, Silverstein’s testimony does not reflect her knowledge of Prencipe’s practices of affixing signatures in November and December 2016 (at the time of the misrepresentations), as opposed to Silverstein’s understanding of Prencipe’s practices as of the date of her deposition in 2020. Silverstein’s testimony regarding Trehan is subject to a similar defect—the testimony does not reflect Silverstein’s knowledge at the time of the alleged misrepresentations, and whether it was reasonable for her to rely on Prencipe’s statements and omissions suggesting he was moving forward with assigning the 609 Patent to Plaintiff. Whether PIL, Inc. was ever formed or existed is not relevant as to whether at the time of the Draft/Executed Esos Assignments, Silverstein believed Prencipe would form PIL, Inc. to effectuate the assignment of the 609 Patent.

    While Prencipe’s evidence suggests Silverstein, and accordingly Plaintiff, may have had knowledge that Prencipe affixed certain signatures to the Executed and/or Draft Esos Assignments, Prencipe does not meet his burden of establishing that based on such knowledge, Plaintiff could not have reasonably relied on Prencipe’s misrepresentations regarding his intent to assign Plaintiff the 609 Patent and that the Patent had not been assigned elsewhere. As such, Prencipe does not meet his burden. Even assuming, arguendo, Prencipe had met his burden, Plaintiff submitted evidence suggesting triable issues of fact exist as to whether it can establish it detrimentally relied on Prencipe’s misrepresentations notwithstanding Prencipe’s application of signatures to the Esos Assignments.

    Plaintiff submitted evidence that Prencipe sent the Executed First Assignment, which he drafted, to Silverstein on November 1, 2016, and that on November 2, 2016, Plaintiff informed Scates the Executed First Assignment was not “to anyone else” and that the 609 Patent was just, “in an IP holding company that we’ll own.” ([AMF Nos. 39-41] Decl. of Hrutkay, Exh. L 367:19-374:1, 354:13-355:2, 368:7-369:9, 371:19-372:7; Exh. M; Exh. N.) While Prencipe does not specify who he is referring to in stating “we,” it can be inferred he is at least referring to Scates, as well as Silverstein, given they are the three parties to the Partnership Agreement, discussed below. Plaintiff submitted evidence that on November 4, 2016, a few days after Prencipe sent Silverstein the Executed First Assignment, he sent her a schematic depicting physical and technical specifications and capabilities of a smart ring, plainly to advance Plaintiff’s venture. ([AMF No. 42] Decl. of Hrutkay, Exh. O.) This evidence suggests that even after affixing signatures to the Executed First Assignment, Prencipe was making representations to Silverstein indicating his intent to proceed with assigning patent rights to Plaintiff. Plaintiff submitted evidence that on November 28, 2016, Prencipe emailed Silverstein and Scates acknowledging their being on edge about Prencipe’s involvement, in which Prencipe addressed their concerns, and affirmed he Prencipe was committed to moving forward by attaching the “agreement requested by [Scates],” a “Partnership Agreement” between Prencipe, Silverstein, and Scates, which was already signed by Prencipe. ([AMF No. 43] Decl. of Hrutkay, Exh. P.) The attached Partnership Agreement drafted by Prencipe contained recitals stating, “The parties intend to operate and are operating a smart ring wearables company named Esos Inc” and “Each party seeks a firm commitment from the other that on certain events the parties will end all other commitments to any other company in relation to the smart ring wearables space.” ([AMF No. 44] Decl. of Hrutkay, Exh. P.) Plaintiff submitted evidence that in December, Prencipe reviewed the draft Non-Disclosure Agreements (“NDAs”) for Plaintiff’s negotiations with a potential customer SAP, advising Plaintiff to use the NDAs Prencipe had sent before. ([AMF Nos. 45, 46, 47, 49] Decl. of Hrutkay, Exhs. Q, R.) During these communications regarding the NDA, and in response to Silverstein’s comment that Esos, Inc. had not yet been registered in Delaware, Prencipe misrepresented that the registration should have been up by that point and that he would check the website. ([AMF No. 48] Decl. of Hrutkay; Exh.Q.) Taken together, this evidence creates a triable issue of fact as to whether Plaintiff can establish its detrimental reliance on Prencipe’s misrepresentations notwithstanding any knowledge it may have had that Prencipe affixed certain signatures to certain assignments.

  3. Detrimental Reliance: Whether: (1) the Parties Reached an Agreement to Execute the Executed Second Assignment, (2) Plaintiff Gave Consideration for the Executed Second Assignment; and/or (3) Prencipe Transmitted the Executed Second Assignment, and if Failure to Reach an Agreement, Give Consideration, or Prove Transmission Precluded Plaintiff from Relying on Prencipe’s Misrepresentations

    Prencipe submitted evidence suggesting Plaintiff cannot establish: (1) the parties reached an agreement to execute the Executed Second Assignment; (2) consideration was given in exchange for the Executed Second Assignment; and/or (3) that Prencipe transmitted the Executed Second Assignment to Silverstein. Prencipe argues Plaintiff’s failure to establish the existence, consideration for, and/or transmission of the Executed Second Assignment means Plaintiff cannot establish its detrimental reliance on Prencipe’s misrepresentations. Prencipe asserts that because the parties were still negotiating from December 12, 2016 to January 8, 2017, they had not yet reached a deal based on which Plaintiff could reasonably believe the 609 Patent had been assigned to Plaintiff. (Motion, pg. 16; USSF Nos. 49-52, 54, 55, 63, 64, 65, 66, 67, 68, 73, 74, 75, 76; [D-SSF No. 53] Coleman Decl., Ex. 4 at 242:16-25; [D-SSF No. 69] Coleman Decl., Ex. 8 at 246:9-12; [D-SSF No. 70] Coleman Decl., Ex. 4 at 194:1-5, 204:22- 24, 220:8-13; [D-SSF No. 71] Coleman Decl., Ex. 27, Ex. 28; [D-SSF No. 72] Coleman Decl., Ex. 29.) However, this argument is based on a misunderstanding and/or misstatement of the allegations underlying the fraud cause of action. Plaintiff alleges Prencipe’s misrepresentations included his assertion that the 609 Patent would be assigned to Plaintiff and that any assignment(s) of the Patent to McLear US, which would include the McLear Assignment, were ineffective, and that in reliance on these misrepresentations, Plaintiff negotiated deals with third parties based on Prencipe’s affirmation that it had or would have uninhibited rights to exploit the 609 Patent. Plaintiff alleges it expended effort and resources on a Patent that Prencipe had promised would be assigned to Plaintiff and that Prencipe indicated did not have any valid assignments to other parties, namely, McLear. As such, Plaintiff does not need to establish the parties actually finalized the assignment of the 609 Patent to Plaintiff for the purposes of establishing it detrimentally relied on Plaintiff’s misrepresentations. The alleged misrepresentations are not limited to representations that Prencipe had successfully assigned rights in the 609 Patent to Plaintiff, but on his intent to do so and on his representations that the Patent had not been validly assigned elsewhere. Accordingly, Prencipe has not met his burden on summary adjudication.

    Even assuming, arguendo, Prencipe met his burden, Plaintiff submitted evidence creating a triable issue of material fact as to whether it can establish detrimental reliance. As discussed above, Plaintiff submitted evidence that Prencipe continued to make representations to Silverstein affirming his commitment to assigning the Patent to Plaintiff and that Plaintiff’s reliance on Prencipe’s representations was reasonable. (See AMF Nos. 39, 40, 41, 42, 43, 45, 46, 47, 48, 49, discussed above.) This evidence taken together creates a triable issue of fact as to whether Plaintiff detrimentally relied on Prencipe’s misrepresentations for the purposes of establishing fraud.

    Based on the foregoing, Prencipe’s motion for summary adjudication of the fraud cause of action on the grounds Plaintiff cannot establish detrimental reliance is denied.

  4. Damages: Whether Plaintiff’s Failure to Establish that Final Agreement to Assign Patent Rights Precludes Establishing Damages

    Prencipe also argues Plaintiff cannot establish the element of damages because Plaintiff knew it had not successfully obtained rights in the 609 Patent. Prencipe asserts that, based on the above arguments (i.e., knowledge of the McLear Assignment, knowledge the Draft/Executed Esos Assignments were forged, and knowledge the Executed Second Assignment was never fully executed, transmitted by Prencipe and/or obtained in exchange for consideration) Plaintiff entered the smart ring market knowing it did not have ownership rights in the 609 Patent given it never successfully obtained an interest in it. (Motion, pg. 18.) However, the alleged fraud is based on Prencipe’s promise that any prior assignment of patent rights to McLear US was invalid and/or would be invalidated to effectuate the assignment to Plaintiff, and that Plaintiff was and would be the proper recipient of the 609 Patent rights. The fraud cause of action is based on Prencipe’s knowledge these promises were false, his failure to properly follow through with them, and, accordingly, Plaintiff’s reliance on these promises as a basis for believing it already was (or would be) the rightful owner of the 609 Patent, and acting in accordance with such ownership rights, regardless of whether that was actually the case. As such, Prencipe does not meet his burden on summary adjudication based on whether Plaintiff can establish damages.

    Based on the foregoing, Defendant’s motion for summary adjudication of the fraud cause of action on the grounds Plaintiff cannot establish damages is denied.

    Breach of Fiduciary Duty (6th COA)

    “[A] breach of fiduciary duty is a species of tort distinct from a cause of action for professional negligence [legal malpractice]… The elements of a cause of action for breach of fiduciary duty are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach. The scope of an attorney’s fiduciary duty may be determined as a matter of law based on the Rules of Professional Conduct which, ‘together with statutes and general principles relating to other fiduciary relationships, all help define the duty component of the fiduciary duty which an attorney owes to his [or her] client.’” (Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086.)

    In addition to the above allegations, Plaintiff’s breach of fiduciary duty cause of action is based on the following allegations: (1) Prencipe was the attorney for Plaintiff and its predecessors-in-interest for corporate matters, including designing a lawful way for Prencipe to assign the rights to the 609 Patent; (2) as Plaintiff’s attorney, Prencipe owed it a fiduciary duty of loyalty in protecting its interests; (3) Prencipe knowingly took on a duty to act on behalf of Plaintiff and its predecessors-in-interest based on his attorney-client relationship; (4) Prencipe violated his fiduciary duty by (i) failing to form PIL, Inc. and Esos, Inc., (ii) misrepresenting the status of the 609 Patent with respect to McLear US and failing to take all actions required for the valid assignment of the 609 Patent, and (iii) by entering into agreements relating to the 609 Patent after assigning those rights to Plaintiff; (4) as a result of Prencipe’s breach of fiduciary duty, Esos has been damaged. (SAC 96-100.)

    Prencipe argues Plaintiff cannot establish the existence of an attorney-client relationship for the purposes of establishing a duty. (Motion, pg. 19.) Prencipe submitted evidence suggesting Plaintiff did not execute an engagement letter for Prencipe’s legal services. ([D-SSF No. 141] Coleman Decl., Ex. 8 at 104:23-105:1; Ex. 4 at 62:21-63:1; Ex. 43 at No. 152; Ex. 5 at 363:4-6.) The parties do not dispute Plaintiff did not pay Prencipe a retainer or any other fees for his legal services. (USSF No. 142.) Prencipe submitted evidence suggesting Prencipe never received Plaintiff’s confidential information. ([D-SSF No. 143] Coleman Decl., Ex. 43 at No. 152; Ex. 5 at 363:4-6.) Prencipe argues that his preparation of draft formation documents for Plaintiff is insufficient evidence of an attorney-client relationship to establish a fiduciary duty. (Motion, pg. 19.)

    Based on the foregoing, Prencipe met his burden on summary adjudication. Therefore, the burden shifts to Plaintiff to create a triable issue of fact. As discussed below, Plaintiff its burden.

    Plaintiff submitted evidence creating a triable issue of fact as to whether an attorney-client relationship existed between Plaintiff and Prencipe for the purposes of the existence of a fiduciary duty. Plaintiff submitted evidence suggesting that because it was relying on Prencipe’s guidance as an attorney and business partner in forming and bringing the 609 Patent to market, Prencipe obtained confidential information prior to drafting the Draft Esos assignments and Esos Formation Documents, and that Prencipe provided legal advice to Plaintiff. (Opposition, pgs. 13-14.) Plaintiff argues that prior to drafting the assignment and formation documents, Prencipe knew the plan to form Plaintiff, understood its confidentiality, and told Silverstein he would file Plaintiff’s formation papers. Plaintiff submitted evidence that on October 26, 2016, Prencipe sent Silverstein an email with the subject line “Legal documents for new company,” in which he stated, “I’m going to file this tomorrow,” and attached the following documents relating to formation of Plaintiff: (i) a capitalization table; (ii) certificate of incorporation; (iii) bylaws; (iv) certificate approving adoption of bylaws; (v) initial board of directors’ consent; (vi) Silverstein stock certificate; (vii) Prencipe stock certificate; (viii) Scates stock certificate; (ix) LK stock certificate; (x) assignment of ‘609 Patent to PIL [Draft First Assignment]; (xi) assignment of ‘609 Patent from PIL to Esos [Draft Second Assignment], and which included two attachments entitled “Intellectual Property Assignment Agreement,” one of which referred to the First Assignment and the other which referred to the Second Assignment. ([AMF Nos. 33, 34, 35, 36] Hrutkay Decl., Ex. K.) Plaintiff submitted evidence Prencipe’s October 26, 2016 email also stated that the patent grant to PIL, Inc. [referred to in the email as “IP HoldCo”] [i.e., the First Assignment] would be recorded [by stating, “will record”], while the patent grant from PIL, Inc. to Esos, Inc. [i.e., the Second Assignment] would not be recorded until the, “right timing.” ([AMF No. 37] Decl. of Hrutkay, Exh. K.) Plaintiff submitted evidence Prencipe drafted all the attachments to his October 26, 2016 email. ([AMF No. 38] Decl. of Hrutkay, Exh. L.) Prencipe also stated in the email that he was almost finished drafting other documents: “employment agreements, stock purchase agreements, option plan for new employees, etc.” (Decl. of Hrutkay, Exh. K.) Plaintiff submitted evidence suggesting Prencipe advised Plaintiff on its NDAs with business partners by even advising Plaintiff to not describe itself in a particular way [i.e., to not sign anything in the name of McLear US and/or to not reference the patent in the NDA for SAP] in its external contracts. ([AMF Nos. 45, 46, 47, 48, 49] Decl. of Hrutkay, Exhs. Q, R.) The evidence, taken together, creates a triable issue of fact as to whether Prencipe was acting as counsel for Plaintiff at the time he made misrepresentations and failed to file formation documents as he promised, in breach of those duties.

    Based on the foregoing, Prencipe’s motion for summary adjudication of the 6th causes of action on the grounds Plaintiff cannot establish the existence of a fiduciary relationship is denied.

    Unclean Hands (4th and 6th COAs)

    “‘The [unclean hands] doctrine demands that a plaintiff act fairly in the matter for which he seeks a remedy. He must come into court with clean hands, and keep them clean, or he will be denied relief, regardless of the merits of his claim.’ The doctrine of unclean hands requires unconscionable, bad faith, or inequitable conduct by the plaintiff in connection with the matter in controversy. Unclean hands applies when it would be inequitable to provide the plaintiff any relief, and provides a complete defense to both legal and equitable causes of action. ‘Whether the defense applies in particular circumstances depends on the analogous case law, the nature of the misconduct, and the relationship of the misconduct to the claimed injuries.’” (Fladeboe v. American Isuzu Motors, Inc. (2007) 150 Cal.App.4th 42, 56 (Citations Omitted).)

    “‘The doctrine of unclean hands does not deny relief to a plaintiff guilty of any past misconduct; only misconduct directly related to the matter in which he seeks relief triggers the defense.’ ‘The misconduct that brings the unclean hands doctrine into play must relate directly to the transaction concerning which the complaint is made. It must infect the cause of action involved and affect the equitable relations between the litigants.’” (Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031, 1044 (Citations Omitted).)

    Prencipe did not meet his burden on summary adjudication. Prencipe argues Plaintiff’s conduct before and after filing the instant lawsuit amount to unclean hands and bar all causes of action. In support of this assertion, Prencipe cites to the following evidence: (1) PIL was never formed and accordingly never existed [D-SSF No. 93: Coleman Decl., Ex. 1 at 26; Ex. 5 at 386:23:25, 387:3 -388: 13, 388:19-389:2; Ex. 14 at No.14; Ex. 15 at No. 5]; (2) Plaintiff has known PIL does not exist since prior to the lawsuit and attempted to form PIL on January 24, 2017 [D-SSF No. 81: Coleman Decl., Ex. 50]; (3) Trehan, the alleged signatory for PIL testified he never signed the documents and had not connection to the transactions [USSF Nos. 95-97]; (4) Plaintiff knew the Draft/Executed Esos Assignments were forged [SSFs Nos. 34-107]; (5) the parties were still negotiating from December 12, 2016, to January 8, 2017, without having finalized a deal for the PIL Assignment [SSFs 49-55, 63-76]; (6) the first instance of the Executed Second Assignment is in an email from Silverstein to her investor on December 30, 2016, but Prencipe did not send a fully executed PIL Assignment to Silverstein or anyone else at Esos at any time [SSFs 56-57]; (7) Plaintiff did not pay any money in consideration for assignment of the 609 Patent [SSFs Nos. 59-62]; (9) during litigation, Plaintiff acquired a quitclaim deed from Trehan for any interest he may have held in the 609 Patent by way of the Esos Assignments [SSFs Nos. 104-105], and (10) Plaintiff [Silverstein] deleted key patent assignment documents during the litigation and continuously acted to hide those deletions [SSFs Nos. 120, 122, 123-137]. (Motion, pg. 20.)

    Prencipe argues Plaintiff accordingly has brought this action knowing it is alleging damages on a forged assignment and invalid quitclaim deed (from Trehan), which amounts to an affirmative defense to any claims brought in the litigation. (Motion, pg. 20.) However, Prencipe fails to address how Plaintiff’s (and/or Silverstein’s) alleged wrongful conduct is connected to the causes of action for fraud and/or breach of fiduciary duty. First, as to the claim of Plaintiff’s knowledge of the forged assignment and/or the “invalid” quitclaim deed to Trehan, as discussed above, Plaintiff submitted evidence creating a triable issue of fact as to whether it had knowledge that Prencipe’s application of signatures to certain documents rendered them invalid per se for the purposes of establishing detrimental reliance for the fraud cause of action. In addition, whether the quitclaim deed to Trehan is valid is not at issue in the fraud and breach of fiduciary duty causes of action, which are based on Prencipe’s conduct and misrepresentations in November and December 2016. The evidence of the quitclaim deed instead suggests Plaintiff’s attempt to validate the claim to title in the 609 Patent it believed it had rightfully received from Prencipe, but which Prencipe was contesting. In addition, while Prencipe submits evidence he contends questions the validity of the Executed Second Assignment, including evidence Silverstein deleted documents from her pdfFiller account, Prencipe fails to address how this evidence relates to Plaintiff’s fraud and/or breach of fiduciary duty claims, which are based on more than the validity of the Executed Second Assignment. Notably, Plaintiff is precluded from submitting evidence that Exhibit C to the SAC is the Executed Second Assignment, and consistent with this restriction, the fraud and fiduciary duty causes of action are not based on the Court finding that the Executed Second Assignment was fully executed and/or the assignment of the 609 Patent from PIL to Esos, Inc. was accomplished through it. As discussed above, Plaintiff can establish reasonable reliance on Prencipe’s misrepresentations without necessarily establishing the 609 Patent assignment to Plaintiff was finalized. Notably, Plaintiff alleges Prencipe’s fraud prevented the finalization of the assignment of the 609 Patent to Plaintiff.

    Based on the foregoing, Prencipe’s motion for summary adjudication of the 4th and 6th causes of action on the grounds they are barred by the affirmative defense of unclean hands is denied.

    Conclusion

    Prencipe’s motion for summary adjudication of the 4th (fraud) and 6th (breach of fiduciary duty) causes of action is denied.

    Dated: January , 2022

    Hon. Monica Bachner

    Judge of the Superior Court



b"

Case Number: ****2020 Hearing Date: December 2, 2021 Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

ESOS RINGS, INC.,

vs.

JOSEPH PRENCIPE, et al.

Case No.: ****2020

Hearing Date: December 2, 2021

Esos Parties’ demurrer to 2nd and 6th causes of action in the second amended cross-complaint is overruled.

Cross-Defendant Esos Rings, Inc. (“Esos”) and Cross-Defendant Michelle Silverstein (“Silverstein”) (collectively, “Esos Parties”) demur to the 2nd (conversion) and 6th (breach of fiduciary duty) causes of action in the second amended cross-complaint (“SACC”) of Cross-Complainant McLear & Co. (“McLear US”). (Notice of Demurrer, pg. 3.) Esos Parties demur on the grounds McLear US failed to allege sufficient facts to constitute the causes of action pursuant to C.C.P. ;430.10(e). The Court notes the 6th cause of action is only asserted against Silverstein and not Esos.

The Court notes the demurrer refers to a “motion to strike” in the alternative; however, no argument supporting a purported motion to strike is submitted, and the demurrer does not address what allegations Esos Parties argue should be stricken.

Background

This case involves a dispute over the rights to U.S. Pat. No. 9,313,609 (“the ‘609 Patent”), which was invented and owned by Prencipe. (SACC ¶17.) On February 27, 2017, Esos filed a complaint against McLear and Prencipe (collectively, “McLear Parties”) alleging they exploited the ‘609 Patent and denied its assignment to Esos, diminishing its value and preventing Esos from exploiting its rights. On April 18, 2017, McLear Parties filed their initial cross-complaint alleging Esos Parties breached an agreement by using and disclosing confidential and proprietary information and by trying to sabotage McLear Parties’ business relationships. On October 5, 2017, the Court granted Esos Parties’ special motion to strike the conversion cause of action, while granting and denying the motion as to other causes of action, not relevant to the instant demurrer. After the Court denied McLear Parties’ motion to reconsider, they appealed the ruling on the conversion cause of action in the Special Motion to Strike, and on February 2, 2020, the Court of Appeal issued its remittitur reversing the Court’s order striking the cause of action, and ordered the Court reinstate the conversion cause of action. Specifically, the Court of Appeal found the Court erred in concluding the gravamen of the conversion cause of action qualified as protected activity under the Anti-SLAPP statute, since, while filing of patent paperwork may constitute protected activity, that conduct was not the gravamen of the cause of action, but only provide context for the cause of action. (2/2/20 Remittitur, pgs. 12-13.) Accordingly, on February 25, 2020, the Court reversed its order granting Esos Parties’ Anti-SLAPP motion to strike the conversion cause of action and in all other respects affirmed the order.

On February 2, 2021, the Court granted McLear US’s motion for leave to file its first amended cross-complaint (“FACC”), which was filed on February 5, 2021. [Prencipe was a cross-complainant on the original cross-complaint; however, he is not a named cross-complainant on the FACC or SACC.] The FACC alleged causes of action for (1) breach of contract, (2) conversion, (3) cancellation, (4) quiet title, (5) declaratory judgment, and (6) breach of fiduciary duties. In its June 10, 2021 Ruling on Submitted Matter, the Court sustained Esos Parties’ demurrer to the 2nd and 6th causes of action with 20 days leave to amend. The Court ruled the demurrer as to alter ego was improper and denied the alternative motion to strike allegations of alter ego. On June 30, 2021, McLear US filed its SACC asserting the same six causes of action, and on July 30, 2021, Esos Parties filed the instant demurrer.

McLear US alleges in March 2016, Silverstein joined NFC Rings, Inc. (the trade name for McLear US) as a contractor with the title of Chief Operating Officer (“COO”) via a contractor agreement (“Contractor Agreement”) between herself and McLear US. (SACC ¶21, Exh. 3.) McLear US alleges that while Silverstein was serving as McLear US’s COO, she actively engaged in conduct to establish a new company, Esos Inc., to sell wearable smart rings using technology covered by the ‘609 Patent in competition with McLear US and, at the same time and at least as early as October 26, 2021, attempted to assign all rights in the ‘609 Patent Family from McLear US to either herself and/or the to-be-formed company that she would own, Esos Inc., and Silverstein accordingly executed documents (“Purported Silverstein Assignments”) purporting to effectuate this transfer of rights in the ‘609 Patent Family from Prencipe to herself and/or Esos Inc. through an intermediary company PIL, Inc. (SACC ¶39.) [The Court notes the language relating to October 26, 2021 was newly added to the pleading and appears to refer to 2021 in error and likely intended to refer to 2016.] The term “’609 Patent Family” refers to the ’609 Patent and all current or future domestic and foreign patents or applications that claim priority to or are continuations, continuations in part, or divisionals of the ‘609 Patent. (SACC ¶17.) McLear US alleges, on information and belief, that Silverstein forged the signature of Chris Trehan (“Trehan”) on behalf of PIL, Inc. on the Purported Silverstein Assignments and that Silverstein sought to assign rights in the ‘609 Patent Family to herself, or a company she owned, without the knowledge of McLear US or McLear UK. (SACC ¶39.)

The SACC adds new allegations supporting McLear US’s assertion that Silverstein was more than an independent contractor. (See SACC ¶¶26-32.) Specifically, McLear US alleges that after Silverstein entered the Contractor Agreement, she demanded to be appointed as COO with powers and fiduciary duties that came with her role, and with Silverstein’s assistance, McLear US adopted May 30, 2016 bylaws specifically providing that McLear US would have a COO corporate officer to supervise company operations and directly oversee all non-engineering presidents and vice presidents. (SACC ¶26.) McLear US alleges it provided Silverstein with discretionary authority to supervise operations and participate in the company’s management, which Silverstein did by the following acts: (1) she opened a bank account on behalf of McLear US (“Bank Account”); (2) she conducted business development activities on behalf of McLear US with third parties at which she held herself out as McLear US’s COO with authority to bind the company; (3) she retained counsel on behalf of McLear US to represent it in a patent infringement lawsuit to enforce ownership rights in the ‘609 Patent; (4) she actively participated in McLear US’s incorporation by obtaining an Employer Identification Number from the IRS; and (5) she identified herself as McLear US’s COO in communications with third parties. (SACC ¶¶26-32, Exhs. 5, 6.) McLear US also alleges Silverstein began planning and taking steps to form a company compete with McLear US at least as early as August 2016 and did so while acting as McLear US’s COO. (SACC ¶36.)

Conversion (2nd COA) – against Esos Parties

“‘A cause of action for conversion requires allegations of plaintiff’s ownership or right to possession of property; defendant’s wrongful act toward or disposition of the property, interfering with plaintiff’s possession; and damage to plaintiff. [Citation.] Money cannot be the subject of a cause of action for conversion unless there is a specific, identifiable sum involved, such as where an agent accepts a sum of money to be paid to another and fails to make the payment.’ [Citations]” (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 395.)

McLear US’s conversion cause of action is based on allegations that Esos Parties utilized the Purported Silverstein Assignments in an attempt to claim ownership of the ‘609 Patent Family by recording the Purported Silverstein Assignments with the U.S. Patent and Trademark Office (“USPTO”) and causing the USPTO to incorrectly record the Purported Silverstein Assignments in the ‘609 Patent Family’s chain of title. (SACC ¶60.) McLear US makes a new allegation that Esos Parties have relied on their improper claims of ownership to use the ‘609 Patent Family for their own business purposes and accordingly converting McLear US’s rights granted in the ‘609 Patent Family. (SACC ¶60.) McLear US also newly alleges that “Cross-Defendants” have claimed ownership of and have prevented McLear US from gaining access to the Bank Account, thereby converting it. (SACC ¶60.) McLear US alleges Esos Parties thereby intentionally and substantially interfered with McLear US’s ownership of the ‘609 Patent Family and since the Purported Silverstein Assignments were forged or are invalid, all right, title and interest in the ‘609 Patent Family should vest in McLear US. (SACC ¶¶61-63.) McLear US alleges it has been harmed as a result. (SACC ¶64.) The Court notes the SACC also cites to Fremont Indemnity Co. v Fremont General Corp. (2007) 148 Cal.App.4th 97 (“Fremont”) to support the allegation that an interference with ownership rights in intangible property constitutes conversion. (SACC ¶62.) The SACC also cites to HIF Bio, Inc. v. Yung Shin Pharmaceuticals Indus. Co., Ltd., 600 F.3d 1347 (Fed. Cir. 2010) (“HIF Bio”) to support the allegation that the conversion claim is not preempted because it involves no dispute regarding inventorship, patentability of the rights of dispute, or infringement of the 609 Patent itself. (SACC ¶62.)

Esos Parties argue the amended conversion claim fails as a matter of law because it is preempted by federal patent law, which preempts claims dependent on determination of patent ownership, and Esos Parties assert the ownership of the 609 Patent is directly at issue. (Demurrer, pgs. 13-14, citing General Elec. Co. v. Wilkins (E.D. Cal., July 26, 2011, No. 1:10-CV-00674-OWW) 2011 WL 3163348, at *9; 270 Cal.Rptr. 594 [not reported] (“Wilkins”); also citing Gerawan Farming, Inc. v. Rehrig Pacific Co. (E.D. Cal., Mar. 2, 2012, No. 1:11-CV-01273 LJO) 2012 WL 691758, at *6, aff'd (Fed. Cir. 2014) 587 Fed.Appx. 654 (“Gerawan”).) Second, Esos Parties argue the cause of action fails because a conversion claim only involves tangible property and McLear US’s conversion claim involves Esos Parties’ alleged conversion of the 609 Patent and access to the Bank Account, which are intangible and not properly the subject of conversion. (Demurrer, pgs. 15-16.) Finally, Esos Parties assert that to the extent the conversion claim is based on the Bank Account, the cause of action may only be asserted against Silverstein and fails as to Esos Rings, which had no role in opening or failing to give access to the Bank Account. (Reply, pg. 3.)

McLear US alleged sufficient facts to state a conversion cause of action against Esos Parties. McLear US’s conversion cause of action is not incompatible with the patent law system, and is not preempted by federal patent law. The allegations make clear the parties do not dispute Prencipe invented the 609 Patent, and the conversion claim is based on Silverstein’s alleged attempts to assign the 609 Patent to herself and/or Esos Rings, not whether Silverstein was the true creator and accordingly owner of the patent. While Esos Parties cite Gerawan Farming for its position that “[c]laims that are dependent on a determination of patent inventorship or ownership… are generally preempted by federal patent law,” the case itself only concludes preemption applies because inventorship of the patent was directly at issue. (Demurrer, pg. 14; See Gerawan, at *7 [“Gerawan alleges that ‘[Rehrig] substantially interfered with Gerawan's rightful property by omitting Ray Gerawan as an inventor’ and as such, ‘wrongfully exercised control over Gerawan's rights in… [the patent].’ In other words, Gerawan claims that Rehrig misappropriated Gerawan’s patent rights. Such a claim is preempted by federal patent law.”].) Similarly, Wilkins, also cited by Esos Parties, involved a counter claimant’s ownership interest as an inventor in certain patents. As such, while these cases involved an ownership interest, determining such an interest involved issues relating the patent itself, including who invented it. In the instant action, inventorship, ownership of the 609 Patent based on who invented it, patentability, nor infringement are at issue. Accordingly, McLear US’s conversion claim is not barred by federal preemption. (See Caldera Pharmaceuticals, Inc. v. Regents of University of California (2012) 205 Cal.App. 4th 338, 356 [“ ‘a state court has authority to adjudicate patent questions so long as the action itself does not arise under the patent laws. [Citations.] This analysis remains unchanged regardless of whether the state law claim is grounded in contract or tort.’ [Citations.]”; see also HIF Bio, Inc. v. Yung Shin Pharmaceuticals Indus. Co., Ltd. (2010) 600 F.3d 1347, 1354 [cases arise under the patent laws “if plaintiffs' ‘right to relief necessarily depends on the resolution of a substantial question of federal patent law, in that patent law is a necessary element of the well-pleaded claims.’ [Citation omitted.]”.])

The intangible nature of the 609 Patent and access to the Bank Account are not a basis for sustaining the demurrer to the conversion cause of action. In Fremont, the Court held intangible property may be the subject of a conversion cause of action where the owner’s rights of possession and exclusive use in such property are sufficiently definite and certain. (Fremont Indemnity Co. v. Fremont General Corp., supra, 148 Cal.App.4th at 125 [“A net operating loss is a definite amount… that can be recorded in tax and accounting records. The significance of this… is not that the intangible right is somehow merged or reflected in a document, but that both the property and the owner’s rights of possession and exclusive use are sufficiently definite and certain. [(Civ. Code ;654.]) The misappropriation of a net operating loss without compensation in the manner alleged in the complaint, causing damage to [plaintiff] as alleged, is comparable to the misappropriation of tangible personal property or shares of stock for purposes relevant here. We see no sound basis in reason to allow recovery in tort for one but not the other.”].) Esos Parties assert Fremont only held the net operating loss cold be converted because there was a “definite amount that could be recorded in tax and accounting records,” which is not the case here. (Demurrer, pg. 16.) However, the definite amount of the loss was only support for the Fremont court’s conclusion that the property and exclusive ownership of the loss itself was sufficiently definite for it to be the subject of conversion. Here, the allegations suggest both the “property” of the 609 Patent and McLear US’s asserted ownership and exclusive use of the 609 Patent are definite and certain to qualify as the subject matter of the conversion action. McLear US’s allegations that Esos Parties misappropriated the 609 Patent without compensation causing McLear US damage are sufficient for the purposes of a demurrer.

In light of the sufficiency of the allegations relating to the 609 Patent, the Court need not reach and does not address whether the alleged conversion of access to the Bank Account is sufficient to state a cause of action against either Silverstein or Esos Rings given the intangible nature of such “access.”

Based on the foregoing, Esos Parties’ demurrer to the 2nd cause of action is overruled.

Breach of Fiduciary Duty (6th COA) – against Silverstein

“To establish a cause of action for breach of fiduciary duty, a plaintiff must demonstrate the existence of a fiduciary relationship, breach of that duty and damages. [Citations]” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 182.)

McLear US’s breach of fiduciary duty cause of action is based on the following allegations: (1) Silverstein owed fiduciary duties of loyalty and confidentiality to McLear US; (2) Silverstein’s duties arose by virtue of her position as COO of McLear US; (3) after Silverstein entered the Contractor Agreement, she demanded she be appointed McLear US’s COO, to which position she was appointed, and the company bylaws gave her discretionary authority to supervise operations and participate in company management; (4) Silverstein demanded she be given responsibilities and duties of an executive agent of McLear US, and McLear US agreed she could act on its behalf subject to direction of McLear US’s board, and accordingly McLear US reposed confidence and trust in Silverstein and Silverstein accepted McLear US’s confidence and trust thereby creating a fiduciary relationship, giving rise to a fiduciary duty independent of her title as McLear US’s COO; (5) Silverstein’s demand to undertake responsibilities and exercise of discretion in fulfilling such responsibilities disavowed her alleged status as McLear US’s independent contractor pursuant to the Contract Agreement given she engaged in words and conduct antithetical to the limited duties imposed by the Agreement; (6) Silverstein repeatedly affirmed her role as McLear US’s COO throughout 2016 through correspondence to third parties, in negotiations for drafting agreements between McLear US and third parties, and in declarations she signed and filed; (7) Silverstein breached the fiduciary duties she owed McLear US while serving as its officer when she attempted to effectuate the Purported Silverstein Assignments to assign the ‘609 Patent Family to herself and/or her company, began forming a company [which ultimately became Esos Rings] to compete with McLear US, and attempted to negotiate and/or execute agreements relating to the 609 Patent Family with third parties that had already entered and/or were negotiating agreements with McLear US related to the 609 Patent Family, and attempted to use, disclose, or obtain McLear US’s confidential and proprietary information to produce or license wearable smart rings using technology covered by the ‘609 Patent Family owned by McLear US; (8) these breaches have damaged McLear US. (SACC ¶¶79-84.) With respect to Silverstein’s role in McLear US, McLear US alleges in March 2016, Silverstein joined NFC Rings, Inc. (a trade name of McLear US) as a contractor with the title of COO and attached the Contractor Agreement to the SACC as Exhibit 3. (SACC ¶21, Exh. 3.)

For the purposes of a demurrer, McLear US alleged sufficient facts to state a cause of action for breach of fiduciary duty against Silverstein. Esos Parties argue McLear US cannot allege the existence of a fiduciary relationship because the Contractor Agreement that governed the parties’ relationship disavows a fiduciary relationship in favor of an independent contractor relationship. (Demurrer, pgs. 16-19; SACC ¶72, Exh. 3; citing City of Hope Nat’l Med. Ctr. v. Genentech, Inc. (2008) 43 Cal.4th 375, 386 (“City of Hope”).) However, McLear US alleged facts suggesting Silverstein engaged in conduct, after entering the Contractor Agreement, that conflicted with her role as an independent contractor and instead suggested she was acting as an officer of McLear US and/or had taken on responsibilities consistent with owing McLear US fiduciary duties. While Esos Parties dispute the existence of a fiduciary duty owed by Silverstein to McLear US, for the purposes of a demurrer, McLear US has alleged facts suggesting Silverstein may have owed it fiduciary duties.

As in their previous demurrer, Esos Parties again argue the breach of fiduciary duty claim also fails because it is preempted by California’s Uniform Trade Secret Act (“CUTSA”) Civil Code ;;3426, et seq., which includes a provision preempting common law claims based on the same nucleus of facts as the misappropriation of trade secrets claim for relief. (Demurrer, pgs. 20-23; citing Civil Code ;3426.7, citing K.C. Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc. (2009) 171 Cal.App.4th 939, 958.) However, this argument improperly raises a demurrer on grounds already overruled by the Court, given the Court previously declined to sustain the demurrer on these grounds. (6/10/21 Ruling on Submitted Matter, pgs. 6-7.)

Based on the foregoing, Esos Parties’ demurrer to the 6th cause of action is overruled.

Dated: December _____, 2021

Hon. Monica Bachner

Judge of the Superior Court

"


b'

Case Number: ****2020 Hearing Date: November 22, 2021 Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

ESOS RINGS, INC.,

vs.

JOSEPH PRENCIPE, et al.

Case No.: ****2020

Hearing Date: November 22, 2021

McLear Entities’ motion for summary judgment is granted. McLear Entities’ motion for summary adjudication is granted as to Issues Nos. 1, 2, 3, 4, 5, 6, 7, 8 and accordingly as to the 1st, 2nd, 3rd, 5th, 7th, 8th, 9th and 10th causes of action.

Esos Rings’ motion for summary adjudication is denied.

  1. McLear’s Motion for Summary Judgment/Adjudication

    Defendants McLear & Co., Inc. (“McLear US”) and McLear, Ltd. (“McLear UK”) (collectively, “McLear” or “McLear Entities”) move for summary judgment on the second amended complaint (“SAC”) of Plaintiff Esos Rings, Inc. (“Esos Rings”) on the grounds McLear US has been the exclusive holder of the 609 Patent. (Notice of Motion, pg. 1.) In the alternative, McLear Entities move for summary adjudication of the 1st (breach of contract) [Issue No. 1], 2nd (declaratory relief) [Issue No. 2], 3rd (quiet title in the 609 Patent) [Issue No. 3], 5th (actual fraudulent transfer) [Issue No. 4], 7th (intentional interference with prospective economic relations) [Issue No. 5], 8th (reformation) [Issue No. 6], 9th (principal/agent) [Issue No. 7], 10th (alter ego/single enterprise liability) [Issue No. 8] causes of action in the SAC. [The SAC improperly includes two “Ninth Claim[s] for Relief”; for clarity, the Court will refer to the 9th (alter ego/single enterprise liability) claim for relief as the 10th cause of action. (SAC ¶¶123-130.)]

    The Court notes the 4th (fraud) and 6th (breach of fiduciary duty) causes of action are only asserted against Defendant Joseph Prencipe (“Prencipe”), and as such, McLear Entities do not move for summary adjudication as to these causes of action. In addition, not all causes of action are asserted against all defendants and certain causes of action are asserted only against McLear US and/or McLear UK along with other named defendants. As such, McLear Entities move for summary adjudication of the 2nd, 3rd, 5th, 7th, and 10th causes of action, while only McLear US moves for summary adjudication of the 1st and 8th causes of action and only McLear UK moves for summary adjudication of the 9th cause of action. Finally, the Court notes Defendant MTG Co. Limited (“MTG”), has not appeared in the instant action and does not move for summary judgment/adjudication in the instant motion.

    The Court notes McLear Entities’ Separate Statement of Material Facts sets forth the same 109 facts and supporting evidence in support of each of the Issues and SSFs Nos. 1-109, regardless of issue, refer to the same fact and underlying evidence. The Court notes while Issues Nos. 1-7 rely on SSFs Nos. 1-109, Issue No. 8, only relies on SSFs Nos. 14-46 and Nos. 102-109.

    Requests for Judicial Notice

    McLear Entities’ 2/19/21 request for judicial notice is granted as to Nos. 1, 2, and 3. However, the Court does not take judicial notice of the truth of the matters asserted within RJN Nos. 1 and 2. (M-RJN, Nos. 1, 2, 3.)

    Evidentiary Objections

    Esos Rings’ 9/9/21 evidentiary objections to the Declaration of Christian Bromley are overruled as to Nos. 1, 2, 3, 4, 5, 8, 9, 10, 11, 12, 13, 14, 15, and 16, and sustained as to 6 and 7 (cited page not attached).

    McLear Entities’ 9/17/21 evidentiary objections to the 9/13/19 Declaration of Ben L. Wagner (“Wagner”) are overruled as to Nos. 1, 2, and 4 and sustained as to No. 3.

    McLear Entities’ evidentiary objections to the 4/2/21 Declaration of Wagner are overruled as to Nos. 5, 6, 7, 8, 9, 10, and 11.

    McLear Entities’ evidentiary objections to the 8/11/21 Declaration of Matthew Hrutkay (“Hrutkay”) are overruled as to Nos. 12 and 13.

    McLear Entities’ evidentiary objections to the 9/9/21 Supplemental Declaration of Wagner are overruled as to Nos. 14, 17, 18, 19, 20, 21, and sustained as to Nos. 15, 16.

    McLear Entities’ evidentiary objections to the 9/9/21 Declaration of Silverstein are sustained as to Nos. 22, 23, and 24.

    McLear Entities’ evidentiary objection to the 9/9/21 Declaration of Scates is overruled as to No. 25.

    The Court notes it is not in possession of a fully unredacted version of the 9/9/19 Declaration of David Nolte [Exhibit 35 to the Supp-Decl. of Wagner] which was also the subject of Esos Rings’ motion to seal. In the Court’s 9/23/21 Ruling on Esos Rings’ motion to seal, the Court noted that while the parties had filed a 9/20/21 Stipulation seeking to seal Exhibit 35, they had not filed a notice of lodgment indicating an unredacted version of the declaration had been lodged with the Court, that the Court was unable to review its contents to affirm the sealing order, and accordingly, found the parties had not established entitlement to a sealing order. The ruling also provided that McLear may, within 10 days [i.e., by October 3, 2021] file a motion to seal the Nolte Declaration or file an unredacted version. No filing was made by October 3, 2021. On October 12, 2021, Esos Rings filed a “Notice of Errata RE Exhibit 35…” attaching a revised-redacted Exhibit 35 which set forth the Nolte Declaration in partially redacted form. It appears no party has moved to seal Exhibit 35 since the Court’s 9/23/21 ruling denying Esos Ring’s motion to seal as to Exhibit 35 given the parties’ failure to lodge an unredacted version with the Court.

    Background of Allegations in SAC

    This case involves a dispute between two separate groups of parties over the rights to U.S. Pat. No. 9,313,609 (“the 609 Patent”), which was invented and owned by Prencipe. On April 12, 2016, the United States Patent and Trademark Office (“USPTO”) issued the 609 Patent to Prencipe as its inventor. (SAC ¶13, Exh. A.) On May 1, 2016, Prencipe incorporated McLear US with bylaws that listed Prencipe as its Executive Director, Secretary, and Treasurer and gave Prencipe as Executive Director the, “power and authority to execute and deliver in the name and on behalf of [McLear US] any and all duly authorized agreements, documents, and instruments.” (SAC ¶14, emphasis added.) On October 10, 2016, Prencipe executed a document assigning his interests in the 609 Patent to McLear US, which was recorded by the USPTO on October 20, 2016 (“McLear Assignment”). (SAC ¶15, Exh. B.) [The Court notes Esos Rings’ briefings refer to this assignment as the “First Assignment”; however, the Court refers to it as the McLear Assignment.]

    Esos Rings alleges Silverstein had personally paid legal fees to pursue infringers and forewent compensation and accordingly agreed to short-term loans in the amount of over $75,000, which were to be repaid but were never repaid. (SAC ¶16.) Esos Rings alleges Prencipe agreed to sell the 609 Patent to Silverstein and her business partner Rex Scates (“Scates”) to form a company and transfer ownership of the patent to that new company which Silverstein and Scates would run, and accordingly, Prencipe voided any McLear Assignment and told Silverstein that any such assignment was not a valid assignment because McLear US was not a valid entity that could receive the assignment. (SAC ¶¶16-18.) Esos Rings alleges Prencipe was responsible for forming the two entities to effectuate this agreed-to sale/assignment: first, the Delaware corporation PIL, Inc. (“PIL”), which Prencipe referred to as an “IP Holding Company” for which “Chris Trehan” was listed as the authorized signatory, and second, the Delaware corporation “Esos, Inc.” for which Silverstein was said to be CFO and the authorized signatory. (SAC ¶22.) Esos Rings alleges that on October 26, 2016, Prencipe emailed Silverstein with corporate formation documents and two draft assignments he had drafted: (1) an assignment dated November 1, 2016, that contemplated assigning the 609 Patent from Prencipe individually to PIL for $20,000 (“Draft First Assignment”); and (2) an assignment dated November 23, 2016, that contemplated assigning the 609 Patent from PIL to “Esos Inc.” (“Draft Second Assignment”). (SAC ¶¶17, 23.) Together, the Court refers to these Draft First and Second Assignments as the “Draft Esos Assignments,” given Esos Rings alleges their ultimate collective purpose was to transfer ownership rights in the 609 Patent to Esos Rings.

    Esos Rings alleges on November 1, 2016, by way of further emails including from his personal Gmail account, Prencipe provided Silverstein with fully executed final copies of the Draft Assignments. (SAC ¶24, Exhs. C, D.) The Court refers to these signed versions of the Draft Assignments as the “Executed First Assignment” and “Executed Second Assignment” and, collectively, as the “Executed Esos Assignments.” [The Court notes Esos Rings’ briefings refer to the Executed First Assignment and the Executed Second Assignment as the Second Assignment and Third Assignment, respectively. In addition, McLear Entities’ briefings refer to these assignments as the PIL Assignment and the Esos Assignment, respectively.] Esos Rings alleges that Exhibits C and D to the SAC, the Executed Esos Assignments, together constitute a single assignment contract and unitary transaction, despite being multiple transfer documents, that involve the same subject matter, the 609 Patent, executed around the same time and the two-step assignment merely inserts strawmen Chris Trehan and PIL to create the transfer of the 609 Patent. (SAC ¶25.) Esos Rings alleges Prencipe failed to file for the incorporation of the two nascent corporations, PIL and “Esos Inc.,” and weeks later advised Silverstein he was waiting for the Delaware Secretary of State to confirm the entities had been successfully formed. (SAC ¶26.) Esos Rings alleges Silverstein did not learn about the McLear Assignment until after, “Prencipe transferred the 609 Patent and related rights as part of the [Executed] Esos Assignments.” (SAC ¶15.) Esos Rings alleges that as a result of the Executed Esos Assignments and Prencipe’s failure to incorporate the nascent corporations, title to the 609 Patent “devolved” to Chris Trehan and Silverstein, as the signatories for PIL and “Esos Inc.,” and neither Trahan nor Silverstein dispute this. (SAC ¶27.) Esos Rings alleges that when Prencipe failed to form “Esos Inc.,” Silverstein instead formed Esos Rings and all duties owed to the nascent “Esos Inc.” and all its rights, interests, and causes of action devolved by operation of law on Silverstein. (SAC ¶27.) Esos Rings alleges Silverstein subsequently quitclaimed in writing all her interests in the 609 Patent to Esos Rings via a January 27, 2017 assignment (“Silverstein Assignment”). (SAC ¶¶27-28, Exh. E.) Esos Rings alleges Silverstein also executed a confirmatory assignment on September 22, 2017, which confirmed the assignment of any rights in the 609 Patent from Silverstein to Esos Rings. (SAC ¶28, Exh. F.)

    Esos Rings alleges that in reliance on its rights under the 609 Patent, it negotiated prototyping agreements for NFC rings with large companies only to lose those clients as a result of Prencipe’s false representations. (SAC ¶29.) Esos Rings alleges it entered into an agreement providing its “business partner” with distribution rights. (SAC ¶30.)

    On November 9, 2021, the Court granted McLear Entities’ motion for evidence sanctions, joined by Prencipe. Specifically, the Court found McLear Entities and Prencipe were entitled to an evidence sanction prohibiting Esos Rings and Silverstein (collectively, “Esos”) from introducing evidence supporting their claim that Exhibit D to the SAC is a true and correct copy of the Executed Second Assignment.

    Procedural Issues

    Esos Rings’ Response Separate Statement includes improper responses in which Esos Rings indicates a fact is “undisputed” for the purposes of a certain document containing the quoted language but “disputed” as to the legal effect of that language in violation of CRC Rule 3.1350(f). The Court finds these amount to undisputed facts. Moreover, to the extent Esos Rings disputes the legal effect of any language, Esos Rings fails to cite to evidence supporting this purported dispute of fact in violation of CRC Rule 3.1350(f)(2).

    Esos Rings’ Response Separate Statement includes responses that dispute a material fact without citing to evidence in support of the position that the fact is controverted in violation of CRC Rule 3.1350(f)(2). (R-SSF No. 56.)

    Breach of Contract (1st COA) [McLear US] [Issue No. 1]

    “To state a cause of action for breach of contract, a party must plead the existence of a contract, his or her performance of the contract or excuse for nonperformance, the defendant’s breach and resulting damage. [Citation]” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.)

    Esos Rings’ breach of contract cause of action is based on the following allegations: (1) the Executed Esos Assignments, and the Silverstein Assignment are valid and binding on Esos Rings, Prencipe, and McLear US; (2) to the extent Prencipe did not hold title to the 609 Patent at the time he entered the Executed Esos Assignments, he was acting as the agent for the undisclosed principal McLear US as the true Assignor since he represented in the Executed First Assignment that the Assignor “personally owns a patent that covers smart ring technology[,]… has not validly assigned the Patent to any other entity[,]… [and] seeks to assign” the 609 Patent by way of the assignment, representations which Esos Rings alleges make clear the current owner of the 609 Patent is the intended assignor in the Executed First Assignment; (2) Esos Rings alleges Prencipe had full signatory authority for McLear US at the time of signing and to the extent McLear US is held to be the owner at the time of the Executed First Assignment [November 1, 2016], rather than Prencipe individually, Prencipe acted as an agent that bound both himself and McLear US as the undisclosed principal as Assignor; (3) Esos Rings performed all obligations required of it under the Assignments and are excused from any non-performance; (4) the Executed First Assignment contained representations of valid and unencumbered title by Prencipe as the current owner of the 609 Patent; (5) Silverstein and Esos Rings made multiple offers of payment to Prencipe pursuant to the Executed Esos Assignments, but he refused; (6) the Executed First Assignment included “further assurances” by Prencipe that he would use all reasonable endeavors to procure that any necessary third party shall promptly execute and deliver documents and perform such acts as may be reasonably required for the purposes of giving full effect to the Executed First Assignment; (7) if and to the extent Prencipe did not hold title of the 609 Patent, he was acting as agent for the undisclosed principal McLear US, McLear US and Prencipe breached their obligation of further assurance by denying the Assignment to Esos Rings was effective and made representations to the business community designated to undermine any claim of right title and interest assigned; (8) McLear US breached its duty of good faith and fair dealing by undermining Esos Rings’ interest in the 609 Patent; and (9) Esos Rings has been damaged as a result. (SAC ¶¶49-61.)

    McLear Entities argue Esos Rings cannot establish the existence of a valid contract for the purposes of its breach of contract cause of action. Specifically, McLear Entities argue the cause is based on the validity of the Executed Esos Assignments, which are invalid for the following reasons: (1) Prencipe did not own the 609 Patent at the time of the Executed Esos Assignments, so he could not have assigned it; (2) Esos cannot establish the McLear Assignment had ever been rescinded for purposes of establishing Prencipe did own and therefore could assign the 609 Patent; (3) the forgery of signatures in the Executed Esos Assignments renders them void ab initio; (4) no consideration was given for the Executed Esos Assignments; and (5) Esos Rings had notice of the McLear Assignment. (Motion, pgs. 8-13; 13-14.)

    The parties do not dispute Prencipe is the sole inventor of the 609 Patent, which was issued to Prencipe by the USPTO on April 12, 2016. (USSF Nos. 1, 2 (“USSF” refers to undisputed facts).) McLear submitted evidence that Prencipe executed the McLear Assignment [Exh. B to FAC] on October 10, 2016 [recorded by the USPTO on October 21, 2016] in which Prencipe, as assignor, assigned all right, title, and interest in the 609 Patent to McLear US, as assignee. ([Disputed Separate Statement of Fact (“D-SSF”) No. 4] Brom. Decl., Ex. A at ¶¶ 15 and 87, Ex. B; Ex. L at ¶ 4, Ex. 2; Ex. N at Ex. 2; USSF Nos. 6, 7, 13.) The following facts relating to the McLear Assignment are undisputed: (1) it provides that, “No variation of the agreement shall be effective unless it is in writing and signed by both parties”; and (2) it includes signature lines for Prencipe and McLear US, both of which lines were signed by Prencipe. (USSF Nos. 8, 9, 10, 11.) It is undisputed Prencipe incorporated McLear US in Delaware on May 1, 2016, McLear’s bylaws identified Silverstein as its Chief Operating Officer (“COO”), Prencipe as its Executive Director, and John McLear as its Chairman of the Board and Chief Executive Officer, and that in May 2016, Silverstein registered McLear US with the IRS and obtained an Employer Identification Number (USSF Nos. 15, 18, 20, 21, 22.)

    It is undisputed that on October 26, 2016, Prencipe emailed Silverstein the Draft Esos Assignments in which the Draft First Assignment was between Assignors Prencipe, an individual residing in California, and Rex Scates, an individual residing in California, and Assignee PIL, a corporation registered in Delaware, and the Second Draft Assignment was between Assignor PIL and Assignee “Esos Inc.” (USSF No. 48.) The Draft First Assignment identified “Chris Trehan” [a misspelling of “Chris Trahan”] as the Director of PIL and its authorized signatory to receive the assignment and also included signatures on the lines above the names of Prencipe and Scates on page 3, with no signature on the line above Trehan’s name. (USSF Nos. 50, 51, 52, 53, fn. 2; Decl. of Brom, Exh. B.) [The Court notes “Chris Trehan” is a misspelling of the actual individual “Chris Trahan”; however, for clarity and consistency the ruling refers to this individual as “Trehan” throughout.] Similarly, the Draft Second Assignment identifies Trehan as PIL’s “Director” and authorized signatory to grant the assignment and includes no signature for Trehan. (USSF Nos. 55, 56.) The Draft Second Assignment identifies “Michelle Bisnoff” as “Chairwoman & COO” with authority to sign on behalf of “Esos Inc.” and included a signature on the line above her name. (USSF No. 57; [D-SSF No. 58] Brom. Decl., Ex. F at 354:7-12, 360:6-9 & Ex. 122 at p. 7.) On November 1, 2016, Prencipe sent Silverstein an email attaching the Executed First Assignment [Exh. C to FAC], in which there is a signature for Trehan as Director for PIL, as well as signatures for Prencipe and Scates, each of whom did not sign on behalf of any entity. (USSF Nos. 59, 60, 72.)

    McLear submitted evidence that prior to his September 2018 deposition, Trehan had never seen the Draft/Executed First Assignment, did not recognize the names of Scates, Silverstein, PIL, or Esos Inc., had no knowledge of the 609 Patent, and did not sign, or authorize anyone to sign, the Draft First or Second Assignments on his behalf. (USSF Nos. 63, 64, 65, 66, 67; [D-SSF No. 68] Brom. Decl., Ex. B at 59:23-25, 60:1-3 & Exs. 9-10.) McLear submitted Prencipe’s testimony that he affixed the signature appearing above PIL and Trehan’s name on the Executed First Assignment. (USSF No. 69.) McLear submitted Scates’ testimony that Prencipe affixed Scates’s signature to the Executed First Assignment. (USSF No. 71.) Scates testified he never had any personal ownership interest in the 609 Patent. (USSF No. 73.) Prencipe testified he never authorized Scates to sign any assignment of the 609 Patent on behalf of an entity called PIL. (USSF No. 75.) McLear submitted evidence Prencipe understood the assignment of the 609 Patent to Silverstein was not fully effectuated because: (1) it required McLear US’s consent, which it had not obtained, and Prencipe had already assigned all rights to McLear US; (2) the purported assignments were not fully executed by their signatories; and (3) no consideration was paid to Prencipe under the assignment. (USSF No. 80.)

    McLear submitted evidence McLear US did not authorize, consent, or ratify Prencipe’s signing of the Executed First Assignment. ([D-SSF Nos. 85, 86, 87] Brom. Decl., Ex. F at 374:25, 375:1-8; Ex. T at No. 17.1.) McLear submitted evidence McLear US never authorized Prencipe to assign the 609 Patent to PIL Inc, Trehan, Scates, Silverstein, “Esos Inc.”, or Esos Rings. ([D-SSF Nos. 88, 89, 90, 91, 92, 93] Brom. Decl., Ex. F at 375:9-376:4; Ex. T at No. 17.1.) McLear submitted Prencipe’s testimony that he did not sign the Executed First Assignment on behalf of McLear US and that he had already assigned his rights in the 609 Patent to McLear US as of November 1, 2016, and accordingly had no ownership interests in the 609 Patent as of that date. ([D-SSF Nos. 94, 95, 96] Brom. Decl., Ex. F at 376:9-23.)

    McLear submitted evidence PIL was never formed as a company in the United States and that Prencipe never actually filed for formation of PIL and/or incorporated PIL in Delaware or in any state. ([D-SSF Nos. 97, 98, 101] Brom. Decl., Ex. A at ¶ 26; Ex. F at 387:15-25, 388:1-10; Ex. R at p. 29, No. 14; Ex. S at p. 5, No. 5.) McLear submitted evidence that Esos Rings admitted PIL was a nascent, to-be-formed corporation. ([D-SSF Nos. 99, 100] Brom. Decl., Ex. S at p. 5, No. 5; Ex. F at 387:15-17.)

    McLear submitted evidence that in its 7/28/20 discovery responses, Esos Rings asserted that it obtained title to the 609 Patent, “through some combination of the two [Executed Esos Assignments] with Chris [Trahan], the assignments of Silverstein to [Esos Rings] and the confirmatory assignment of [Trahan] to Esos Rings…” (USSF No. 47.) McLear’s evidence suggests Esos Rings cannot establish the existence of valid contracts in the form of the Executed Esos Assignments for the purposes of establishing its breach of contract cause of action against McLear. Notably, the breach of contract cause of action is based on McLear’s breach of the Executed Esos Assignments by failing to actually assign interest in the 609 Patent as agreed to in the Assignments. However, a threshold element of the cause of action is whether Esos Rings can establish the existence of a valid, binding agreement between the parties.

    [The Court notes McLear also submitted evidence relating to Silverstein’s alleged notice of the existence of the McLear Assignment at the time of the Executed Esos Assignments (SSFs Nos. 5, 19, 24-45) as well as evidence relating to whether consideration was provided for the Executed Esos Assignments (SSFs Nos. 76-79); however, the Court need not reach these issues and evidence in light of being able to adjudicate the motion on other issues.]

    Based on the foregoing, McLear Entities met their burden on summary judgment/adjudication. Therefore, the burden shifts to Esos Rings to create a triable issue of fact. As discussed below, Esos Rings did not meet its burden.

    Esos Rings failed to submit evidence creating a triable issue of fact as to whether it can establish the existence of a valid contract for the purposes the cause of action. As a preliminary matter, Esos Rings does not submit evidence creating a triable issue of fact as to whether both Executed Esos Assignments support its contract theory. Notably, in light of the Court’s ruling on McLear’s Evidence Sanctions Motion, Esos Rings is barred from submitting evidence supporting its theory that Exhibit D to the SAC is a true and correct copy of the Executed Second Assignment by which Esos Rings alleged it obtained title to the 609 Patent and, in the same sense, entered a contract with McLear US to obtain such title. In apparent anticipation of this ruling, in opposition, Esos Rings no longer relies on the Executed Second Assignment to establish the existence of an agreement (or chain of title) to the 609 Patent, and instead argues a new theory of contract formation to establish entitlement to the 609 Patent and, correspondingly, McLear’s purported breach of an agreement to assign it.

    Esos Rings argues triable issues of fact exist as to the following: (1) whether McLear US was a party to the Executed First Assignment as a result of agency law on the theory Prencipe acted as McLear US’s agent in signing the Executed First Assignment thereby assigning McLear US’s rights to the 609 Patent [Opposition, pgs. 9-11]; (2) whether the Executed First Assignment’s assignee, PIL, received rights in the 609 Patent as a nascent corporation and Trehan, on PIL’s behalf, subsequently assigned those rights to Esos Rings [Opposition, pgs. 11-12]; (3) whether the Executed First Assignment’s assignee PIL was created as a de facto partnership between Scates and Prencipe, and Scates subsequently assigned rights on PIL’s behalf, regardless of alleged forgery of signatures on the Executed First Assignment [Opposition, pgs. 12-14]; (4) whether Esos Rings’ chain of title can be established by reformation of the Executed First Assignment and/or rescission/abandonment of the McLear Assignment [Opposition, pgs. 14-15]; and (5) whether triable issues exist as to Esos Rings’ affirmative defenses of unclean hands and estoppel as to Prencipe which can be imputed on McLear US [Opposition, pg. 15]. Esos Rings also argues McLear’s assertions as to whether consideration was provided for the Esos Assignments and/or Silverstein had notice of the McLear Assignment are without merit or triable issues of fact remain. (Opposition, pgs. 15-17.)

    Esos Rings’ arguments in opposition improperly rely on theories not alleged in the pleadings and accordingly the evidence in support, fails to create a triable issue of fact. Specifically, whether the Executed First Assignment’s assignee PIL transferred its purportedly assigned 609 Patent rights via Trehan under the theory PIL was a nascent corporation or via Scates under the theory PIL was a de facto partnership [Opposition, pgs. 11-14] are not theories Esos Rings alleged as a basis for relief under any cause of action in its SAC and are improperly raised for the first time in opposition since the pleadings frame the issues to be decided on summary judgment. (See S.M. v. Los Angeles Unified School Dist. (2010) 184 Cal.App.4th 712, 716–717 [“Our first task [on a motion for summary judgment] is to identify the issues framed by the pleadings. (Citation) The moving party need address only those theories actually pled and an opposition which raises new issues is no substitute for an amended pleading.”].) As noted above, Esos Rings’ breach of contract cause of action is based on allegations that both Executed Esos Assignments were binding on McLear US. (SAC ¶49.) However, given the evidence sanction, Esos Rings cannot establish Exhibit D to the SAC is a valid Executed Second Assignment. In addition, Esos Rings submits no evidence suggesting another fully executed “Second Assignment” reflects the true and correct Executed Second Assignment upon which Esos Rings based its claims of breach of contract and title. As such, even if Esos Rings submitted evidence suggesting triable issues of fact existed as to any of the other issues discussed above, namely whether McLear US can be bound to the Executed First Assignment by way of its agent Prencipe, it still will have not met its burden because McLear’s undisputed evidence suggests Esos Rings cannot establish a valid claim of title beyond the Executed First Assignment, which itself only assigned the 609 Patent to PIL, not Esos Rings. Esos Rings’ arguments and evidence as to whether Scates or Trehan subsequentially assigned any interest they, on behalf of PIL, held in the 609 Patent go beyond the issues framed by the pleadings and do not create a triable issue as to whether a valid contract existed for the purposes of the cause of action.

    Based on the foregoing, McLear Entities motion for summary adjudication of Issue No. 1 and the 1st cause of action is granted.

    Declaratory Relief & Quiet Title in the 609 Patent (2nd & 3rd COAs) [Issues Nos. 2 & 3]

    A cause of action for declaratory relief requires the following elements: (1) person interested under a written instrument or a contract; or (2) a declaration of his or her rights or duties (a) with respect to another or (b) in respect to, in, over or upon property; and (3) an actual controversy. (C.C.P. ;1060.)

    A complaint to quiet title must be verified and include the following: (1) description of the property; (2) plaintiff’s title or interest and the basis; (3) defendant’s asserting adverse claim or antagonistic property interest; (4) date as of which the determination is sought; and (5) prayer for determination of title. (C.C.P. ;761.020.)

    Esos Rings’ declaratory relief cause of action is based on the following allegations: (1) an actual controversy has arisen between Esos Rings and Defendants [McLear Entities, Prencipe, and MTG] concerning their respective rights to the 609 Patent, since Esos Rings and Defendants each claim rights in the 609 Patent; (2) Esos Rings seeks a declaration it the owner of the 609 Patent; (3) such a declaration is necessary at this time and Esos Rings has been harmed by Defendants’ continued exploitation of the 609 Patent; (4) Defendants have relinquished all rights in and to the 609 Patent through the Executed Assignments and the subsequent Silverstein Assignment and other assignments and are estopped from relying on a claim of title based on the McLear Assignment because Defendants intentionally led Esos Rings to believe the McLear Assignment was invalid and that corrected and effective assignments [the Executed Esos Assignments] would give Esos Rings the rights to the 609 Patent. (SAC ¶¶63-67.)

    Esos Rings’ quiet title cause of action is based on the following allegations: (1) there is an actual controversy and Esos Rings requires a declaration it has clear title and an order quieting title against all other asserted interest in the 609 Patent; (2) Esos Rings claims it is the rightful owner of all title and interest in the 609 Patent while Defendants continue to assert they hold conflicting rights; (3) Esos Rings seeks an order quieting title providing that the true titleholder in the 609 Patent is Esos Rings, that the McLear Assignment is void, invalid, superseded or otherwise erroneous, and that no other person or entities have any right, title, or interest in the 609 Patent except to the extent that Esos Rings has granted them such rights. (SAC ¶¶69-71.)

    McLear entities argue Esos Rings cannot establish its quiet title and declaratory relief causes of action on the same grounds as the breach of contract action—that McLear US owns and has owned the 609 Patent since it was assigned, and Esos Rings cannot establish McLear US’s rights therein were validly assigned away and to Esos Rings. (Motion, pgs. 2, 15.)

    McLear Entities rely on the same evidence in support of Issues Nos. 2 and 3 as they submitted in support of Issue No. 1, discussed above. (See Response Separate Statement, pgs. 42-72 [SSFs Nos. 1-109]; 88-115 [SSFs Nos. 1-109].) McLear’s evidence suggests Esos Rings cannot establish a claim of title to the 609 Patents via the Executed Esos Assignments for the purposes of establishing its quiet title and declaratory relief cause of action. Notably, the quiet title cause of action, together with the derivative declaratory relief cause of action, are based on Esos Rings’ claimed interest in the 609 Patent via the Executed Esos Assignments which were valid as a result of Prencipe voiding the previously executed McLear Assignment and validly entering the Executed Esos Assignments. (SAC ¶17-25.) However, McLear Entities submitted evidence suggesting Prencipe did not void the McLear Assignment and that Esos Rings cannot establish a valid claim of title to the 609 Patents by way of the Executed Esos Assignments which McLear Entities contend were never fully executed.

    Based on the foregoing, McLear Entities met their burden on summary judgment/adjudication. Therefore, the burden shifts to Esos Rings to create a triable issue of fact. As discussed below, Esos Rings did not meet its burden.

    Esos Rings failed to submit evidence creating a triable issue of fact as to whether it can establish a valid interest in the 609 Patent. In opposition, Esos Rings relies on the same five separate reasons, discussed above, as to why triable issues of fact exist with the breach of contract and declaratory relief causes of action. (Opposition, pg. 17, referring to Opposition pgs. 11-17.) As discussed above, Esos Rings’ arguments relating to whether PIL transferred its purportedly assigned 609 Patent rights as either a nascent corporation or de facto partnership [Opposition, pgs. 11-14] are not theories Esos Rings alleged as a basis for relief in its SAC and are improperly raised for the first time in opposition. However, this is the only evidence Esos Rings submits supporting its claimed interest in the 609 Patent, as it no longer relies on the Executed Second Assignment attached as Exhibit D to the SAC. As such, Esos Rings does not submit evidence creating a triable issue.

    The Court notes that in reply, McLear Entities contend Esos Rings improperly alleges a new theory from the SAC by abandoning its previously alleged theory that Prencipe voided the McLear Assignment and instead arguing that in entering the Executed First Assignment, Prencipe was acting as the agent of McLear US and accordingly McLear US transferred its rights to the 609 Patent by way of the assignment. (Reply, pg. 2.) While McLear Entities are correct that the quiet title and declaratory relief causes of action did not allege an interest in the 609 Patent on the grounds McLear US assigned its interest by way of the Executed First Assignment, the breach of contract cause of action does contain allegations suggesting this theory of recovery; as such, it is not argued for the first time in opposition. However, this does not cure the issue, discussed above, that Esos Rings improperly raises a new theory of interest in the 609 Patent beyond the Second Executed Assignment which was not alleged in the SAC and goes beyond the scope of the pleadings.

    Based on the foregoing, McLear Entities’ motion for summary adjudication is granted as to Issues Nos. 2 and 3 and the 2nd and 3rd causes of action.

    Actual Fraudulent Transfer (5th COA) [Issue No. 4]

    “A fraudulent conveyance claim is set forth in the Uniform Fraudulent Transfer Act (UFTA), which is codified in Civil Code section 3439 et seq. ‘A fraudulent conveyance is a transfer by the debtor of property to a third person undertaken with the intent to prevent a creditor from reaching that interest to satisfy its claim.’ [Citation] A transfer under the UFTA is defined as ‘every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset…, and includes payment of money, release, lease, and creation of a lien or other encumbrance.’ [Citation] ‘A transfer of assets made by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer, if the debtor made the transfer (1) with an actual intent to hinder, delay or defraud any creditor [actual fraudulent transfer], or (2) without receiving reasonably equivalent value in return [constructive fraudulent transfer], and either (a) was engaged in or about to engage in a business or transaction for which the debtor’s assets were unreasonably small, or (b) intended to, or reasonably believed, or reasonably should have believed, that he or she would incur debts beyond his or her ability to pay as they became due. [Citations.]’ [Citations]” (Kirkeby v. Superior Court (2004) 33 Cal.4th 642, 648.) (See also Civil Code ;;3439.01, 3439.04, 3439.05.)

    Esos Rings’ fraudulent transfer cause of action is based on the following allegations: (1) on October 10, 2016, Prencipe signed the McLear Assignment on behalf of himself as an individual and as CEO of McLear US, which assigned Prencipe’s rights in the 609 Patent to McLear US; (2) On November 1, 2016, Prencipe signed the Executed First Assignment which also assigned rights in the 609 Patent to PIL, which assignment “devolved” to Esos Rings by virtue of “subsequent assignments” [the Executed Second Assignment and the Silverstein Assignment]; (3) the McLear Assignment was an actual fraudulent transfer made with the intent to hinder, delay, or defraud Silverstein, the nascent Esos, Inc. and Esos Rings; (4) if it is shown Prencipe did not void the McLear Assignment or McLear US is not otherwise bound by the Executed Esos Assignments, Prencipe entered the McLear Assignment with the intent of making the anticipated Executed First Assignment (and subsequent assignments to “Esos Inc.”) invalid and at the time of the McLear Assignment, Prencipe intended that in its making, he would make the Executed Second Assignment an ineffective transfer by removing title from his name and, as such, Prencipe made the McLear Assignment with the intent to hinder, delay, or defraud the ultimate transferee under the Executed First Assignment (Silverstein and nascent Esos Inc.) out of the benefit of their bargain; (5) Prencipe had fraudulent intent; (6) Esos Rings was damaged; (7) Prencipe’s representations conveyed the false fact that he had taken all steps necessary to perfect his title as to the 609 Patent, including with respect to cancelling, rescinding, or otherwise overriding any prior assignments and licenses to McLear US. (SAC ¶¶87-92.)

    In support of its allegations of a fraudulent intent, Esos Rings alleges the following: (1) Prencipe’s knowledge he was “the attorney” upon whom Silverstein and all parties involved in the Executed First Assignment were relying upon to provide title in the 609 Patent and accordingly owed Silverstein and nascent Esos Inc. fiduciary duties; (2) Prencipe’s assertion in the Executed First Assignment that, “Assignor has not validly assigned the Patent to any other entity”; (3) Prencipe negotiated assigning the 609 Patent to Esos Inc. (through PIL) while also negotiating with other parties for McLear US; (4) Prencipe drafted (Esos Inc.) assignment documents and told Silverstein the McLear Assignment was invalid/fraudulent; (5) Prencipe did not advise Visa, Inc. of the Executed First Assignment, but instead executed a Strategic Alliance Agreement that was ineffective as a result of the purported Executed First Assignment; (6) Prencipe recorded the McLear Assignment with the USPTO during his negotiations with Silverstein and six days before circulating the Draft Esos Assignments; (7) the relative value of the McLear Assignment ($500) compared to the Draft Esos Assignments ($20,000); (8) Prencipe’s lack of money at the time which required him to borrow funds from Silverstein’s business partner to pay rent; (9) upon learning Silverstein had negotiated substantial business for a product based on the 609 Patent, Prencipe demanded $250,000, ongoing royalties, and an executive position salary (without performing duties); and (10) Prencipe concealed his participation in the Esos Assignments by denying the series of transfers ever existed, a claim he repeated to business community members, notwithstanding the fact Prencipe emailed drafts of the assignments, and later executed copies. (SAC ¶90.)

    McLear Entities argue Esos Rings cannot establish the transfer of the 609 Patent to McLear US was concealed from Esos Rings given the evidence shows Silverstein, and accordingly Esos Rings, had notice of the McLear Assignment. (Motion, pgs. 2, 15-16.) Specifically, McLear Entities argue: (1) the transfer was disclosed by being recorded with the USPTO prior to the purported Esos Assignments; and (2) Silverstein participated in third-party litigation after the purported Esos Assignments in which she acknowledged McLear US’s status as the patent assignee of the 609 Patent. (Motion, pgs. 2, 15-16.)

    It is undisputed that the USPTO recorded the McLear Assignment on October 20, 2016. (USSF No. 13.) McLear submitted evidence Prencipe and McLear US were named plaintiffs in a patent infringement action against Kerv Wearables Ltd. (“Kerv”) filed in the U.S. District Court for the District of Nevada, Case No. 2:16-cv-02441- GMN-GWF (“Kerv Action”), in which the complaint asserted “[McLear US] is a Delaware corporation and the patent assignee of [the 609 Patent] and does nosiness under the trade name NFC RING” and that “[McLear US] is the assignee and successor in interest to all of Prencipe’s right title and interest to the Patent.” (USSF Nos. 29, 31; [D-SSF Nos. 30, 32] Brom. Decl., Ex. G at ¶¶4, 13.) McLear submitted evidence Silverstein executed a 12/5/16 Declaration (“Kerv Declaration”) filed in the Kerv Action in which she stated: (1) she was “familiar with the facts and circumstances giving rise to the litigation against [Kerv]”; and (2) she had retained counsel for McLear US to attempt to prohibit Kerv from attending the Money 20/20 Show and competing against McLear US’s NFC Ring with the Kerv Ring. (USSF Nos. 36, 40, 41.) Accordingly, McLear submitted evidence suggesting Esos Rings cannot establish it did not have notice of the existence of the McLear Assignment for the purposes of claiming the McLear Assignment amounted to a fraudulent transfer of Esos Rings’ rights to the 609 Patent.

    In addition, in light of Esos Rings’ failure to meet its burden as to whether it can establish the existence of a valid contract pursuant to which Prencipe and/or McLear assigned rights in the 609 Patent to Esos Rings, as discussed above, Esos Rings cannot establish it is a “creditor” of McLear US or Prencipe based on the theory it is entitled to rights in the 609 Patent. For this additional reason, the Court finds McLear has met its burden on summary adjudication because McLear has submitted evidence suggesting Esos Rings cannot establish it was a “creditor” for purposes of the cause of action.

    Based on the foregoing, McLear Entities met their burden on summary judgment/adjudication. Therefore, the burden shifts to Esos Rings to create a triable issue of fact. As discussed below, Esos Rings did not meet its burden.

    Esos Rings failed to submit evidence creating a triable issue of fact as to whether it can establish its fraudulent transfer cause of action. As a threshold matter, Esos Rings submits no evidence suggesting it can prove it is a creditor entitled to certain rights in the 609 Patent given any such claimed rights are based on a chain of title which it cannot support—namely, the Executed Esos Assignments and/or the newly alleged theories relating to subsequent assignments by Scates and/or Trehan, improperly raised in opposition. In opposition, Esos Rings argues the Executed First Assignment was valid “notwithstanding Prencipe’s trickery” and the McLear Assignment has been used to hinder, delay, or defraud Silverstein, including since it was the basis for McLear Entities ongoing smear campaign and false narrative used to cut off Esos Rings’ partners. (Opposition, pg. 17, citing Additional Material Fact (“AMF”) No. 68.) Specifically, Esos Rings submitted evidence that McLear Entities, through Prencipe, sent letters to Esos Rings’ business partners and bank [Sunrise Bank, Esos Rings’ bank in 2017, at the time of the letters] containing representations that Esos Rings does not own the 609 Patent and that Esos Rings was under an investigation by the FBI. ([AMF No. 68] 2019-09-13 Wagner Decl. in Opposition to McLear UK Mtn. to Quash, Ex. J.) However, Esos Rings’ assertion McLear Entities have used the McLear Assignment to “defraud Silverstein” is based on an underlying premise that Silverstein (and Esos Rings) have and/or can establish a valid interest in the 609 Patent. As discussed above, Esos Rings has not met its burden in submitting evidence to create a triable issue as to whether it can establish a valid interest in the 609 Patent by way of the Executed Esos Assignments. As such, Esos Rings cannot submit evidence it is a creditor with a valid claim to the 609 Patent for purposes of establishing the fraudulent conveyance cause of action.

    In opposition, Esos Rings also argues lack of notice is only a factor for establishing fraud and not an element of the cause of action and triable issues exist as to whether Silverstein had actual notice notwithstanding the USPTO recording and her participation in the Kerv Action. (Opposition, pg. 17.) However, regardless of whether Esos Rings (by Silverstein) had notice of the existence of the McLear Assignment, Esos Rings has not submitted evidence suggesting it can establish it was a creditor.

    Based on the foregoing, McLear Entities’ motion for summary adjudication is granted as to Issue No. 4 and the 5th causes of action.

    Intentional Interference with Prospective Economic Relations (7th COA) [Issue No. 5]

    “The elements of the tort of interference with prospective economic advantage are ‘(1) a relationship between the plaintiff and some third party with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) a wrongful act, apart from the interference itself, by the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.’” (Salma v. Capon (2008) 161 Cal.App.4th 1275, 1290 (Citations Omitted).)

    “With respect to the third element, a plaintiff must show that the defendant engaged in an independently wrongful act. It is not necessary to prove that the defendant acted with the specific intent, or purpose, of disrupting the plaintiff’s prospective economic advantage. Instead, ‘it is sufficient for the plaintiff to plead that the defendant “[knew] that the interference is certain or substantially certain to occur as a result of his action.” ’ ‘[A]n act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.’ ‘[A]n act must be wrongful by some legal measure, rather than merely a product of an improper, but lawful, purpose or motive.’ ” (San Jose Construction, Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528, 1544–1545.)

    Esos Rings’ intentional interference cause of action is based on the following allegations: (1) in reliance on its ownership rights in the 609 Patent, Esos Rings and its predecessors in interest were negotiating prototype agreements with companies including SAP; (2) Silverstein advised Prencipe of these negotiations; (3) McLear Entities and Prencipe intended to disrupt Esos Rings’ relationship with SAP by misrepresenting that Esos Rings had no rights in the 609 Patent; (4) McLear US and Prencipe claimed Esos Rings’ social media name “Elyssi” as their own, confusing customers into believing Esos and McLear US were affiliated; (5) as a result of McLear Entities and Prencipe’s acts, Esos Rings’ business relationships with entities including SAP were damaged. (SAC ¶¶104-108.)

    McLear Entities argue this cause of action fails because Esos Rings cannot establish ownership interest in 609 Patent, and accordingly cannot establish interference into economic relations that were based on Esos Rings’ ownership of the 609 Patent. (Motion, pg. 17.)

    As discussed above, McLear Entities submitted evidence suggesting Esos Rings cannot establish an ownership interest in the 609 Patent. Accordingly, McLear Entities met their burden on summary judgment/adjudication, shifting the burden to Esos Rings to submit evidence to create a triable issue of fact. Esos Rings did not meet its burden.

    In opposition, Esos Rings argues McLear Entities failed to demonstrate their claim Esos Rings did not own the 609 Patent was true as a matter of law. (Opposition, pg. 17.) However, this argument is derivative of Esos Rings’ claim to valid title in the 609 Patent, which it has not established, and as such this argument fails. Esos Rings also argues McLear Entities engaged in the wrongful act of falsely representing to Esos Rings’ business partners that Silverstein was under investigation by the FBI, which is defamatory per se. (Opposition, pgs. 17-18, citing to AMF No. 68.) However, Silverstein is not a plaintiff in the SAC and there are no allegations or evidence supporting a claim that McLear Entities made false or defamatory per se claims about Esos Rings to support the “wrongful act” of the cause of action.

    Based on the foregoing, McLear Entities motion for summary adjudication of Issue No. 5 and the 7th COA is granted.

    Reformation (8th COA) [McLear US] [Issue No. 6]

    Generally, reformation lies when, through the parties’ fraud or mistake, or one party’s unilateral mistake which the other party at the time knew or suspected, the written contract does not truly express the parties’ mutual intent. (Civil Code ; 3399; Jones v. First American Title Ins. Co. (2003) 107 Cal.App.4th 381, 389 [essential purpose of reformation is to reflect parties’ intent].) Accordingly, the elements of a cause of action for reformation are: (1) fraud, or mutual mistake of the parties, or a mistake of one party known or suspected by the other; (2) form of agreement pled verbatim or generally according to legal effect; and (3) contract does not express parties’ actual intent.

    Esos Rings’ reformation cause of action, alleged in the alternative, is based on the following allegations: (1) in the event McLear US and Prencipe are found to not be bound by the transfer to PIL and/or the 609 Patent did not result in ultimate title in Esos Rings as presently written, Esos Rings seeks reformation so as to accomplish this intended result, including the inclusion of both McLear US and Prencipe as the initial assignors and, to the extent Prencipe is found to have not owned the 609 Patent at the time of the transfer to PIL [via the Executed First Assignment] and McLear US is not treated as a party by way of undisclosed agency or other bases, then McLear US was only not included as a party due to the mistaken belief of both parties or of Silverstein; (2) Prencipe and McLear US knew or suspected Silverstein, Esos and/or PIL believed Prencipe owned the 609 Patent at the time of the Executed First Assignment and took advantage of this mistaken belief; (3) the true intention of “the parties” and McLear US was to include the actual current patent owner as the assignor, consistent with the representation of ownership in the Executed First Assignment so as to assign all rights and interest in the 609 Patent through the PIL/Trehan strawman to the nascent Esos Inc. (which devolved upon Silverstein by operation of law upon Prencipe’s failure to incorporate the nascent corporation); and (4) Silverstein’s rights and interests in the assignment apply to reform the assignment so as to include McLear US and Prencipe, or Prencipe on behalf of McLear US as assigning parties [in the Executed First Assignment]. (SAC ¶¶113-117.)

    McLear Entities argue Esos Rings’ reformation cause of action fails because: (1) Esos Rings cannot establish the existence of a legal contract for the Court to reform; and (2) Esos Rings requests the Court create a contract where none existed to establish ownership of the 609 Patent; however, since reformation cannot provide a judicially created contract, the cause of action fails.

    As discussed above, McLear Entities submitted evidence suggesting Esos Rings cannot establish a valid contract entitling it to rights in the 609 Patent based on the Executed Second Assignment and/or evidence supporting Esos Rings’ contention that rights in the 609 Patent were assigned to Esos Rings via the Executed Esos Assignments. As such, even if the Court were to reform the Executed First Assignment in the manner sought, this would not cure would the remaining defect of Esos Rings’ inability to establish that any rights purportedly assigned to PIL in that Assignment were thereafter assigned to Esos Rings to establish a valid chain of title.

    Based on the foregoing, McLear Entities met their burden on summary judgment/adjudication. Therefore, the burden shifts to Esos Rings to create a triable issue of fact. Esos Rings did not meet its burden.

    In opposition, Esos Rings fails to submit evidence creating a triable issue of fact as to why it would be entitled to an order reforming any contract alleged in the SAC pursuant to which Esos Rings claims entitlement to rights in the 609 Patent.

    Based on the foregoing, McLear Entities motion for summary adjudication is granted as to Issue No. 6 and the 8th cause of action.

    Principal / Agent Liability (9th COA) [McLear UK] [Issue No. 7]

    McLear UK argues Esos Rings cannot establish its principal/agent liability cause of action because is not a valid cause of action. (Motion, pgs. 17-18; citing Cano v. Tyrrell (1967) 256 Cal. App. 2d 824, 830 [“agency is evidentiary matter to be proved by competent evidence”].) “Agency” is not a cause of action in its own right, but a theory of liability to hold a party liable for a wrongful act, which itself is the cause of action. As such, while Esos Rings may be entitled to allege McLear UK is liable for another asserted cause of action on the basis of agency, there is no standalone cause of action for agency to be asserted against McLear UK. [The Court notes McLear UK also argues the cause of action is derivative of the interference claim; however, in light of McLear UK meeting its burden as to whether Esos Rings can establish “agency” is a cause of action, the Court need not address this argument.]

    McLear UK met its burden on summary adjudication/judgment. Therefore, the burden shifts to Esos Rings to create a triable issue of fact. Esos Rings did not meet its burden.

    Esos Rings fails to cite to authority supporting its contention that “agency” is a separate cause of action. Instead, Esos Rings claims McLear UK’s failure to cite to a case in which a court summarily adjudicated an agency cause of action because it is a legal theory and not a separate cause of action somehow supports Esos Rings’ claim that it is a free-standing cause of action. (Opposition, pg. 18.) This argument is without merit, and Esos Rings has not met its burden.

    Based on the foregoing, McLear UK’s motion for summary adjudication is granted as to Issue No. 7 and the 9th cause of action.

    Alter Ego / Single Enterprise Liability (10th COA) [Issue No. 8]

    McLear Entities argue Esos Rings cannot establish its alter ego cause of action because there is no such cause of action as “alter ego.” (Motion, pg. 19, citing ” Shaoxing Cty. Huayue Imp. & Exp. v. Bhaumik (2011) 191 Cal.App.4th 1189, 119 [“A claim against a defendant, based on the alter ego theory, is not itself a claim for substantive relief…”].) Alter ego is not an independent cause of action but a legal theory of disregarding the corporate entity to hold its alter ego individual liable for certain claims, which must be properly asserted. As such, like agency, alter ego is not a cause of action but a theory of liability.

    [The Court notes McLear Entities also argue the alter ego claim is derivative of other failed claims and Esos Rings is estopped from asserting McLear US is the alter ego of Prencipe or McLear UK since Esos Rings [by way of Silverstein] participated in the formation of McLear US, served as its COO, and funded representation of McLear US in the Kerv Action; however, in light of McLear Entities meeting their burden as to whether Esos Rings can establish “agency” is a cause of action, the Court need not address this argument. (Motion, pg. 19, fn. 7.)]

    McLear Entities met their burden on summary adjudication/judgment. Therefore, the burden shifts to Esos Rings to create a triable issue of fact. Esos Rings did not meet its burden.

    In opposition, Esos Rings asserts that whether a claim or legal theory, Esos Rings properly pled agency as both. (Opposition, pg. 18.) However, the instant motion is only as to the cause of action for agency, not a theory of agency to hold certain parties accountable for the acts of others. As to whether a separate cause of action for agency can be alleged, Esos Rings does not meet its burden. Moreover, in light of the Court’s ruling summarily adjudicating the remaining causes of action, there are no causes of action alleged against McLear Entities as to which allegations of alter ego liability would apply.

    Based on the foregoing, McLear Entities’ motion for summary adjudication is granted as to Issue No. 8 and the 10th cause of action. Accordingly, McLear Entities’ motion for summary judgment is granted.

    Conclusion

    McLear Entities’ motion for summary judgment is granted. McLear Entities’ motion for summary adjudication is granted as to Issues Nos. 1, 2, 3, 4, 5, 6, 7, 8 and accordingly as to the 1st, 2nd, 3rd, 5th, 7th, 8th, 9th and 10th causes of action.

  2. Esos Rings’ Motion for Summary Adjudication

    Esos Rings moves for summary adjudication of its 2nd (declaratory relief) and 3rd (quiet title in 609 Patent) causes of action in its SAC which are asserted against McLear Entities, Prencipe, and MTG. (Notice of Motion, pg. 2; C.C.P. ;437c(a)(1).)

    The Court notes the Notice of Motion improperly indicates Esos Rings moves for summary judgment; however, Esos Rings only moves for adjudication of two of the ten causes of action in its SAC, and accordingly, the motion is a motion for summary adjudication. The Notice of Motion also improperly indicates the instant motion is brought by Esos Rings and Silverstein; however, Silverstein is not a plaintiff in the SAC and is only a Cross-Defendant in the action, and as such, she does not have standing to move for summary adjudication of causes of action asserted by Esos Rings in its SAC. McLear Entities filed an opposition to the instant motion. Prencipe has not filed an opposition to the motion.

    Procedural Issues

    McLear Entities’ Response Separate Statement does not comply with CRC Rule 3.1350(f)(2), which requires that the response to each Separate Statement of Material Fact (“SSF”) indicate whether the fact is “undisputed” or “disputed.” However, many of McLear Entities responses assert objections to the SSFs without stating whether the SSF is disputed. The Court construes this response as an assertion the SSF is disputed.

    Esos Rings’ 10/18/21 evidentiary objections are procedurally improper and fail to comply with CRC Rule 3.1354(b). Esos Rings objects to individual facts asserted by McLear Entities in their Statement of Additional Material Facts (“AMF”) and the evidence underlying such AMFs. (See Objections, pg. 2 [“All objections to testimony including an exhibit citation are intended as objections to the exhibit itself as well.”].) Specifically, Esos Rings objects to AMFs Nos. 7, 8, 12, However, the AMFs are not evidence subject to an evidentiary objection.

    Requests for Judicial Notice

    McLear Entities’ 10/7/21 request for judicial notice is denied as to the documents in the instant case file, namely, Esos Rings’ 9/9 21 Response Separate Statement to McLear Entities’ Motion for Summary Judgment [Exh. W], for which there is no need to take judicial notice because the Court can always review the file for the case at hand. McLear Entities’ request for judicial notice of Exhibits X and Y is granted; however, the Court does not take judicial notice of the truth of the matters asserted in the documents. (M-RJN, Exhs. X, Y.)

    Evidentiary Objections

    McLear Entities’ 10/7/21 evidentiary objections to the Declaration of Ben L. Wagner (“Wagner”) are overruled as to Nos. 1, 2, 3, 4, 5, 6, and 7.

    Esos Rings’ 10/18/21 evidentiary objections are procedurally improper. Esos Rings objects to individual facts asserted by McLear Entities in their Statement of Additional Material Facts (“AMF”) and the evidence underlying such AMFs. However, the AMFs are not evidence subject to an evidentiary objection.

    Analysis

    In light of the Court’s ruling granting McLear Entities’ motion for summary judgment as to Esos Rings’ SAC, the Court has already adjudicated the 2nd and 3rd causes of action in McLear Entities’ favor. As such, Esos Rings’ motion for summary adjudication of these causes of action as to McLear Entities is moot.

    Conclusion

    Based on the foregoing, Esos Rings’ motion for summary adjudication is denied.

    Dated: November _____, 2021

    Hon. Monica Bachner

    Judge of the Superior Court

'


b'

Case Number: ****2020 Hearing Date: October 26, 2021 Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

ESOS RINGS, INC.,

vs.

JOSEPH PRENCIPE, et al.

Case No.: ****2020

Hearing Date: October 26, 2021

McLear’s motion for terminating sanctions, joined by Prencipe, is denied. McLear’s motion for evidence sanctions, joined by Prencipe, is granted in part and denied in part. McLear’s request for monetary sanctions is granted.

Esos’s motion for terminating sanctions is denied. Esos’s motion for evidence sanctions is denied. Esos’s request for monetary sanctions is denied. McLear and Prencipe’s requests for monetary sanctions are denied.

Two motions for terminating sanctions are presently before the Court. McLear & Co., Inc. (“McLear US”) and McLear, Ltd. (“McLear UK”) (collectively, “McLear”), joined by Joseph Prencipe (“Prencipe”), move for terminating sanctions dismissing the second amended complaint (“SAC”) of Plaintiff Esos Rings, Inc. (“Esos Rings”). Esos Rings and Michelle Silverstein (“Silverstein”) (collectively, “Esos”) move for terminating sanctions against McLear US, McLear UK, and Prencipe (collectively, “Defendants”).

  1. McLear’s Motion for Terminating Sanctions and/or Evidentiary Sanctions and Request for Monetary Sanctions

    McLear, joined by Prencipe, moves for terminating sanctions dismissing Esos Rings’ SAC with prejudice based on the fraud, discovery abuse, and spoilation of evidence by Silverstein, Esos Rings’ CEO. (Notice of Motion, pg. 1; C.C.P. ;2023.030.) In the alternative, McLear seeks an order for evidentiary sanctions prohibiting Esos from offering or introducing any evidence including witnesses and documents, and making any arguments concerning, referencing or in any way supporting Esos Rings’ claims that: (1) “Prencipe provided Silverstein with executed final copies of. . . [the assignment of U.S. Patent No. 9,313,609 (“’609 Patent”)] from PIL, Inc. to Esos, Inc.”; (2) Exhibit D to the SAC is a “true and correct” copy “of the fully-executed assignment” of the ‘609 Patent from PIL, Inc. to Esos Rings; and/or (3) The ‘609 Patent was assigned from PIL, Inc. to Esos Rings [SAC ¶ 24]. In addition, McLear seeks an award of monetary sanctions against Esos in an amount subject to proof following a regularly noticed motion.

    McLear filed the instant motion on July 30, 2021, and on August 4, 2021, Prencipe filed a Notice of Joinder and Joinder to the motion, in which Prencipe requests the same relief requested by McLear as to him, for the same grounds. On August 16, 2021, Esos filed an objection to Prencipe’s Notice of Joinder as procedurally improper. On August 16, 2021, Prencipe filed a response to the objection. The Court finds Prencipe’s joinder to the instant motion is proper, and Esos’s objection to the joinder is overruled.

    Procedural Issues

    Esos’s opposition is 20 pages long in violation of CRC Rule 3.1113 which limits opposition briefs to 15 pages. The Court in its discretion elects to consider the opposition. In the future, the Court will not consider pleadings in excess of the rules of court.

    Requests for Judicial Notice

    Esos Rings’ 8/10/21 request for judicial notice is denied as to the documents in the instant case file, namely, (1) Esos Rings’ 8/11/21 Motion for Terminating Sanctions [No. 1], (2) Esos’s 4/2/21 Motion for Summary Adjudication and filings in support thereof [Nos. 3-5], and (3) Declaration of Ben L. Wagner (“Wagner”) filed 2/23/21, for which there is no need to take judicial notice because the Court can always review the file for the case at hand.

    In light of the Court’s ruling on the request for judicial notice, McLear’s 8/16/21 opposition to Esos Rings’ request for judicial notice is moot.

    Evidentiary Objections

    McLear’s 8/16/21 evidentiary objections to the Declaration of Silverstein are overruled as to Nos. 1, 4, 5, 6, 7, 8, 9, and 11 and sustained as to Nos. 2, 3, 10, and 12.

    McLear’s 8/16/21 evidentiary objections to the Declaration of Wagner are overruled as to Nos. 13, 14 (sustained to the extent Wagner suggests the contents of the two files match; overruled as to Wagner’s declaration that the file names match), 15, 16, 17 (sustained to the extent Wagner suggests the same document described in Line 408 was produced in discovery; overruled to the extent Wagner declares a document with this file name was produced in discovery), 18, 19, and 21, and sustained as to Nos. 20, 22, 23, 24, and 25.

    Esos Rings’ 8/16/21 evidentiary objection to the Reply Declaration of David Harford (“Harford”) No. 1 [Exh. 1] is overruled.

    Esos Rings’ 8/16/21 evidentiary objections to the Declaration of Yevgeniy Gorelik (“Gorelik”) are sustained as to Nos. 2 and 3.

    Background

    This case involves a dispute between two separate groups of parties over the rights to U.S. Pat. No. 9,313,609 (“the 609 Patent”), which was invented and owned by Prencipe. On April 12, 2016, the United States Patent and Trademark Office (“USPTO”) issued the 609 Patent to Prencipe as its inventor. (SAC ¶13, Exh. A.) On October 10, 2016, Prencipe executed a document assigning his interests in the 609 Patent to McLear US, which was recorded by the USPTO on October 20, 2016. (SAC ¶14, Exh. B; 2/28/17 Decl. of Silverstein, Exh. 2.) In its second amended complaint (“SAC”), Esos Rings alleges Prencipe agreed to sell the 609 Patent to Silverstein and Scates to form a company and transfer ownership of the patent to that new company which Silverstein and Scates would run, and accordingly, Prencipe voided any assignment of the 609 Patent to McLear US and told Silverstein that any such assignment was not a valid assignment. (SAC ¶¶16-18.) Esos Rings alleges that, accordingly, on October 26, 2016, Prencipe emailed Silverstein two draft assignments: (1) an assignment dated November 1, 2016, that contemplated assigning the 609 Patent from Prencipe individually to PIL, Inc. for $20,000 (“First Assignment”); and (2) an assignment dated November 23, 2016, that contemplated assigning the 609 Patent from PIL, Inc. to “Esos Inc.” (“Second Assignment”). (SAC ¶¶17, 23, Exhs. C, D.) Esos Rings alleges that on November 1, 2016, Prencipe provided Silverstein with executed final copies of the First and Second Assignments. (SAC ¶24, Exhs. C, D.) Esos Rings’ claims hinge on the assertion that the Second Assignment is valid and binding for Esos Rings, Prencipe, and McLear US. (SAC ¶¶49, 88, 104.)

    Terminating Sanctions

    The Court, “after notice to any affected party…and after opportunity for hearing,” may impose terminating and/or monetary sanctions for misuses of the discovery process. (C.C.P. ;2023.030(a) and (d).) Misuses of the discovery process include failing to respond or to submit to an authorized method of discovery and disobeying a court order to provide discovery. (C.C.P. ;;2023.010(d) and (g).) Destruction of evidence in response to, or in anticipation of, a discovery request is a misuse of the discovery process. (Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 11.)

    “Spoliation of evidence means the destruction or significant alteration of evidence or the failure to preserve evidence for another’s use in pending or future litigation. Such conduct is condemned because it ‘can destroy fairness and justice, for it increases the risk of an erroneous decision on the merits of the underlying cause of action. Destroying evidence can also increase the costs of litigation as parties attempt to reconstruct the destroyed evidence or to develop other evidence, which may be less accessible, less persuasive, or both.’ While there is no tort cause of action for the intentional destruction of evidence after litigation has commenced, it is a misuse of the discovery process that is subject to a broad range of punishment, including monetary, issue, evidentiary, and terminating sanctions. A terminating sanction is appropriate in the first instance without a violation of prior court orders in egregious cases of intentional spoliation of evidence.” (Williams v. Russ (2008) 167 Cal.App.4th 1215, 1223 (Citations Omitted)(Emphasis Added).) “Discovery sanctions are intended to remedy discovery abuse, not to punish the offending party. Accordingly, sanctions should be tailored to serve that remedial purpose, should not put the moving party in a better position than he would otherwise have been had he obtained the requested discovery, and should be proportionate to the offending party’s misconduct.” (Id.)

    McLear moves for terminating sanctions on the grounds Silverstein has engaged in spoilation of evidence by deliberately deleting relevant documents concerning ownership and assignment of the 609 Patent from her pdfFiller account. (Motion, pg. 1.) Specifically, McLear submitted evidence suggesting Silverstein deleted a document titled “PIL IP Assignment” from her pdfFiller account on February 9, 2017, shortly before filing her complaint in the instant action on February 27, 2017. McLear also submitted evidence suggesting Silverstein deleted over 80 documents from her pdfFiller account on November 12, 2017, twenty-three days after receiving Prencipe’s Requests for Production (Set One) which sought documents in their native format, retaining metadata, concerning the 609 Patent. (Decl. of Gorelick Exh. 1 at pdfFiller_00996-1013; Harford Decl. Ex. 16 at 511:17-512:25.) McLear asserts Silverstein’s September 5, 2018 responses to the Prencipe’s RFPs and Silverstein’s responses to McLear’s March 5, 2020 RFPs did not include any pdfFiller documents. (Motion, pgs. 5-6; Harford Decl. ¶17, Exh. 11, 5:16-24.)

    McLear also submitted evidence that on May 28, 2020, Prencipe served a Notice to Consumer of a subpoena on pdf Filler that sought documents in Silverstein’s pdfFiller account relating to PIL, Esos, and logs reflecting her activities and that on that same day, Silverstein contacted a pdfFiller representative inquiring whether pdFiller maintained copies of permanently deleted documents [to which the representative confirmed such documents would be permanently deleted] and also inquiring how to view metadata on her pdfFiller account documents. (Decl. of Harford, Exh. 1; Decl. of Gorelik ¶28, at pdfFiller_00055-7.) Esos Rings moved to quash the pdfFiller subpoena on June 23, 2020 and on June 25, 2020, Silverstein asked a pdfFiller representative what metadata for documents in her account would show, and during this conversation, Silverstein stated the original document had been permanently deleted two years ago. (Decl. of Gorelik, Exh. 2 at pdfFiller_00037- 39.) On August 3, 2020, the Discovery Referee denied Esos Rings’ motion to quash the pdfFiller subpoena. On August 6, 2020, Silverstein permanently deleted numerous documents from her pdfFiller account including a document titled “PIL IP Assignment-Rex Scate_gmail_com.docx” which she had discussed with the pdfFiller representative. (Decl. of Gorelik, Exh. 1 at pdfFiller_00682.)

    McLear asserts the executed versions of the First and Second Assignments provided by Silverstein are forgeries, and the parties never actually finalized any purported assignment deal. (Motion, pg. 3.) First, McLear argues Chris Trehan, who purportedly signed the Assignments testified to never having signed the Assignments or even seeing them prior to his deposition. (Motion, pg. 3; Decl. of Harford Exh. 22, pg. 18, 50-60.) McLear also asserts that correspondence between Prencipe, Silverstein, and Scates in December 2016 and January 2017 indicate no deal to effectuate an assignment of the 609 Patent had been reached between the parties. (Motion, pg. 3; Decl. of Harford, Exhs. 13 [at Exh. 21], 23 [at Exh. 127 and 97].) McLear argues Silverstein’s inconsistent allegations as to how Prencipe transmitted the executed Assignments further demonstrate the forged nature of the Assignments and Silverstein’s efforts at destroying evidence of their origin. (Motion, pg. 9.)

    In opposition, Esos asserts Silverstein’s deletions of the pdfFiller documents were part of her course and practice in using pdfFiller and that she only deleted documents she believed to be duplicates of documents that existed elsewhere. (Opposition, pgs. 8-9.) Esos argues Silverstein used pdfFiller to open, convert, and on occasion sign documents, but not for editing them, and the documents created in Silverstein’s pdfFiller account were online versions of documents that existed elsewhere. (Opposition, pg. 9.) Esos asserts Silverstein’s usual practice was to delete pdfFiller documents on the same day she viewed them; however, at a certain point she neglected promptly removing files and would catch up by moving a large number of files to the trash bin and emptying the trash bin, as she did on November 12, 2017. Esos argues Silverstein sought to delete documents from her pdfFiller account based on the belief Prencipe was attempting to gain access to this account to access her documents. (Opposition, pgs. 12-13.) [The Court notes while Esos has not submitted admissible evidence that Prencipe had actually hacked into Silverstein’s accounts, the evidence shows Silverstein believed this to be the case at the time she carried out the August 2020 pdfFiller deletions.] Esos argues Defendants cannot show they were prejudiced as a result of Silverstein’s deletions of pdfFiller documents because the subject documents were already turned over in discovery. (Opposition, pgs. 15-16.) However, Esos does not submit admissible evidence establishing that the documents Silverstein deleted are in fact the same documents (containing the same metadata) as documents turned over in discovery as opposed to documents that simply share a file name.

    Esos contends that the issue of whether Prencipe applied Chris Trehan’s signature on behalf of PIL to the Second Assignment is immaterial given Esos Rings can establish it was assigned rights from the Second Assignment because Scates signed the Second Assignment and because Chris Trehan quit claimed all rights making Prencipe’s signature for him immaterial. (Opposition, pgs. 6, 20, 21.) However, this argument is premature and based on Esos’s motion for summary adjudication and supporting evidence, as to which a ruling has not been issued and, as such, whether Esos Rings was assigned rights from the Second Assignment has not been established as argued by Esos. Esos also argues that any prejudice resulting from Silverstein’s removal of pdfFiller documents loaded after the latest execution date for the Second Assignment is outweighed by Prencipe’s misconduct, namely, his alleged deletion of all versions of any assignment and communications attaching them from October 26, 2016. (Opposition, pgs. 20-21, citing to Esos’s Motion for Terminating Sanctions.) However, whether Prencipe also engaged in misconduct is not relevant to the instant motion for terminating sanctions based on Silverstein’s alleged spoilation of evidence. (Reply, pgs. 7-8.) Finally, Esos argues the misconduct of Silverstein and Prencipe at most warrant competing inference instructions from which the trier of fact can weigh the evidence to determine whether to impose an adverse inference. (Opposition, pgs. 6, 20, 21, 22, citing CACI 204, Ev. Code ;413.)

    Silverstein failed to preserve evidence. The evidence submitted suggests Silverstein permanently deleted numerous files from her pdfFiller account shortly before litigation, while litigation was pending, and well after having received a document preservation notice from her attorneys early in the litigation instructing her to preserve all relevant evidence. (Decl. of Harford, Exh. 15 at 101:7-102:18.) Most notable is Silverstein’s August 6, 2020 deletion of documents from her pdfFiller account after the Discovery Referee’s August 3, 2020 ruling denying her motion to quash McLear’s subpoena on pdfFiller for documents relevant to the instant action and before pdfFiller was able to assemble and turn over responsive documents.

    The Court finds McLear is not entitled to an order granting terminating sanctions against Esos. Notwithstanding evidence that Silverstein deleted documents from her pdfFiller account, McLear has not conclusively established that such deletions were done to intentionally deprive McLear of evidence it did not already possess given Silverstein’s belief that pdfFiller only retained copies of files opened using its program but created elsewhere. As such, while the deletions were intentional, McLear has not established such intent was directed at preventing McLear from accessing the documents. In addition, Silverstein believed Prencipe was gaining unauthorized access to her accounts and files at the time she deleted certain pdfFiller documents. [The Court notes this argument is weaker with respect to the August 6, 2020 deletions, since as a result of the Court’s upholding of the pdfFiller subpoena, Prencipe would have had access to these same files when pdfFiller turned them over in the course of discovery. However, access to documents properly turned over in the course of discovery differs from the type of illicit access Silverstein feared Prencipe had gained to her files, especially considering the scope of the subpoena would be narrower than potential access a hacker would have to Silverstein’s pdfFiller account files.]

    Based on the foregoing, McLear’s motion for terminating sanctions is denied.

    Evidence Sanctions

    The Court, after notice to any affected party and after opportunity for hearing, may impose an evidence sanction by issuing an order prohibiting any party engaging in the misuse of the discovery process from introducing designated matters in evidence. (C.C.P. ;2023.030(c).) Destruction of evidence is a misuse of the discovery process.

    In the alternative, McLear seeks evidence sanctions prohibiting Esos from introducing evidence supporting the following claims: (1) Prencipe provided Silverstein with an executed final Second Assignment (“Request No. 1”); (2) Exhibit D to the SAC is a true and correct copy of the fully executed Second Assignment (“Request No. 2”); and/or (3) the 609 Patent was assigned from PIL, Inc. to Esos Rings (“Request No. 3”).

    In opposition, Esos asserts the requested evidence sanctions are not warranted because McLear has produced no evidence that: (1) Silverstein used pdfFiller for anything beyond opening, converting, and “rarely sign[ing]” documents; (2) Silverstein used pdfFiller to edit files; and/or (3) any of the deleted documents have any bearing on determining the authenticity of the Second Assignment. (Opposition, pg. 22.) However, evidence Silverstein used pdfFiller for purposes other than opening, converting and signing documents, such as editing files, is not necessary to entitle McLear to the requested evidence sanctions which are based on Silverstein’s admitted deletions of pdfFiller documents while litigation was ongoing and pending the resolution of a disputed discovery request directed at those same documents. Similarly, Esos’s assertion that McLear should produce evidence that the deleted documents would demonstrate the authenticity of the executed Second Assignment to be entitled to evidence sanctions is misplaced. McLear was precluded from obtaining any evidence of as much by Silverstein’s permanent deletions of the documents, and accordingly, what their contents or metadata would have revealed about the authenticity of the Second Assignment.

    McLear is entitled to an evidence sanction prohibiting Esos from introducing evidence supporting their claim that Exhibit D to the SAC is a true and correct copy of the fully executed Second Assignment [Request No. 2]. Whether Exhibit D is a true and correct copy of the Second Assignment is disputed by McLear, which asserts Silverstein forged the executed version of this document, and McLear sought discovery of Silverstein’s pdfFiller account files to prove this contention. By deleting her pdfFiller account files, Silverstein has deprived McLear of potentially relevant evidence of Exhibit D’s authenticity. In opposition, Esos asserts barring it from contending Exhibit D is a true copy of the fully executed assignment is not warranted given Exhibit D’s metadata shows it was last modified on December 30, 2016, and emailed that same day to a third party in its final form and McLear submitted no evidence pdfFiller contained a copy of the assignment that predates this copy. (Opposition, pgs. 23, 15-16; citing Decl. of Wagner Exhs. 10 [ESOS_0000476 (not separately labeled exhibit in Declaration, but included with Exh. 11)], 11 [ESOS_0000500, an attachment to the email bates-stamped ESOS_0000476 (not Exhibit D to SAC, but a version of the Second Assignment only signed by Silverstein)], 12 [metadata for ESOS_0000500], 13 [ESOS_0007477: version of Second Assignment in which there are no signatures along with metadata in Exh. 14 showing it was last modified at 4:42 AM on 12/30/16], 15 [ESOS_0006534, a version of the First Assignment signed only by Prencipe and Scates], 16 [ESOS_0006534 Metadata].) However, Esos’s cited evidence does not support its assertion, as Esos does not submit or cite to any metadata for a Second Assignment that is fully signed as is Exhibit D to the SAC. Moreover, McLear was precluded from submitting evidence that any version of a Second Assignment that existed as a pdfFiller document predated the version submitted by Esos as a result of Silverstein’s permanent deletions of documents from her pdfFiller account. Accordingly, McLear is entitled to an evidence sanction.

    The Court finds McLear is not entitled to the other requested evidence sanctions [Requests Nos. 1 and 3]. While the evidence deleted from pdfFiller could have demonstrated Prencipe did not provide Silverstein with an executed final Second Assignment, to the extent Esos is able to obtain evidence that Prencipe did provide her with the assignment, it should be permitted to submit it. Second, a sanction barring Esos from submitting any evidence the 609 Patent was assigned from PIL, Inc. to Esos Rings is too broad in scope. The Court finds the granted evidence sanction is sufficient.

    Based on the foregoing, McLear’s request for an evidence sanction is granted as to Request No. 2 and denied as to Requests Nos. 1 and 3.

    Monetary Sanctions

    In the alternative and in addition, McLear seeks an award of monetary sanctions against Esos in an amount subject to proof following a regularly noticed motion. In opposition, Esos argues monetary sanctions are unwarranted and asserts only an adverse inference instruction is warranted. (Opposition, pg. 23.) However, the Court finds Silverstein’s deletion of documents from her pdfFiller account that were subject to a pending subpoena and motion to quash warrants an award of monetary sanctions. Specifically, McLear is entitled to an award of monetary sanctions for reasonable attorneys’ fees incurred in bringing the instant motion. Silverstein’s misuse of discovery warranted the instant motion, and accordingly, Esos is to pay for fees McLear incurred in bringing it.

    Based on the foregoing, McLear’s request for a monetary sanction is granted. McLear is to submit a noticed motion setting forth the amount of sanctions requested.

  2. Esos’s Motion for Terminating Sanctions

    Esos moves for terminating sanctions against Defendants for their misuse of the discovery process. Specifically, Esos asserts Prencipe deleted key material evidence, while acting as the agent for McLear, and has engaged in other litigation misconduct. Esos accordingly moves for an order dismissing Defendants’ operative cross-compliant and striking Defendants’ answer to the SAC. (Notice of Motion, pgs. 1-2.) In opposition, Prencipe requests an award of monetary sanctions against Esos in the amount of $7,600. (P-Opposition, pg. 15; C.C.P. ;2023.030(a).) In opposition, McLear requests an award of monetary sanctions against Esos for fees incurred in opposing the motion in the amount of $23,745. (M-Opposition, pg. 12; Decl. of Harford ¶¶29-32.)

    Requests for Judicial Notice

    Esos’s 8/12/21 request for judicial is denied as to the documents in the instant case file, for which there is no need to take judicial notice because the Court can always review the file for the case at hand. (RJN, Nos. 1, 2, 4; Exhs. A, V, BB.) Esos’s request for judicial notice is granted as to Exhibits AA and CC; however, the Court does not take judicial notice of the truth of the matters asserted in the documents.

    The Court notes Prencipe and McLear filed separate oppositions to the instant motion. In addition, McLear joins in, adopts, and incorporates by reference the entirety of Prencipe’s opposition while also raising its own arguments. (M-Opposition, pg. 1.)

    Evidentiary Objections

    The Court notes Prencipe and McLear filed separate evidentiary objections in support of their separately filed oppositions; however, the objections are substantively the same and the Court accordingly rules on them together.

    Prencipe and McLear’s 8/20/21 evidentiary objections to the Declaration of Silverstein are overruled as to Nos. 1 and 2, and sustained as to Nos. 3, 4, 5, 6, 7, 8.

    Prencipe and McLear’s 8/20/21 evidentiary objections to the Declaration of Scates are sustained as to Nos. 9, 10, 11, 12, 13.

    Prencipe and McLear’s 8/20/21 evidentiary objections to the Declaration of Hrutkay are sustained as to Nos. 14, 15, 16, 17 (sustained as to the truth of the matters asserted therein, overruled as to the existence of the document), 18 (sustained as to the truth of the matters asserted therein, overruled as to the existence of the document).

    Procedural Issues

    Esos’s motion was untimely pursuant to C.C.P. ;1005(b), which requires a motion to be filed and served at least 16 court days before the hearing. The hearing on the motion was originally scheduled for September 2, 2021; however, Esos did not file the motion until August 12, 2021, which was only 15 court days before the hearing. McLear and Prencipe argue the motion should be denied as untimely. (P-Opposition, pgs. 5-6; M-Opposition, pg. 3.) However, in light of the Court’s continuance of the hearing on the motion and Defendants’ opportunity to substantively reply, the Court declines to deny the motion for its untimeliness.

    McLear asserts the instant motion is a thinly disguised motion for reconsideration based on the Court’s denial of Esos’s previous motion for terminating sanctions. (M-Opposition, pgs. 4-6.) However, the Court finds the instant motion is based on new and different facts that developed after the ruling on the prior terminating sanctions motion, as well as facts asserted in that motion, and as such the instant motion not a motion for reconsideration. Moreover, the Court denied Esos’s prior motion without prejudice while noting that to the extent Esos could submit evidence supporting the claim of Prencipe’s misconduct, the motion may have merit. As such, the Court considers Esos’s motion.

    Background

    On December 27, 2018, Esos previously moved for terminating sanctions against Defendants for reasons including but not limited to the following: (1) Defendants hired professional hitmen to kill Silverstein; (2) Defendants misled the Court about the existence of Chris Trahan (“Trahan”) [i.e., denying his existence]; and (3) Defendants suppressed and withheld evidence. (Decl. of Hrutkay, Exh. BB [4/8/19 Ruling, pg. 8].) On April 8, 2019, the Court denied Esos’s motion for terminating sanctions without prejudice. First, the Court ruled Esos failed to submit admissible evidence supporting the claim Prencipe had hired hitmen to kill Silverstein given Esos relied on out of court statements made by Prencipe’s wife for which no hearsay exception was sufficiently established. The Court noted that if Esos were to later obtain admissible evidence substantiating its argument that Prencipe attempted to bodily harm Silverstein, then Esos’s motion may be proper. Second, the Court found Defendants’ misleading of Esos as to the existence of Trahan was not a proper subject for a terminating sanctions motion, namely, Esos failed to establish that such conduct qualified as a misuse of the discovery process under C.C.P. ;2023.010 to warrant sanctions. Finally, the Court found Esos did not establish any delay in producing evidence was in violation of a Court order or amounted to a misuse of the discovery process to warrant sanctions.

    On April 22, 2019, Silverstein filed a Request for Civil Harassment Restraining Orders (“TRO Request”) against Prencipe in the Family Division, Case No. 19STRO02600 (“Harassment Action”). (Decl. of Hrutkay, Exh. AA.) The TRO Request was based on the following allegations: (1) in August 2017, Prencipe had hired hitmen to threaten and/or kill Silverstein; (2) on June 16, 2017, Prencipe hacked into Silverstein’s LinkedIn account from Japan and more recently on April 4, 2019, Prencipe had hacked into Silverstein’s LinkedIn and Gmail accounts; and (3) Silverstein believed Prencipe purchased a firearm in August 2018 based on a Lexis Nexis People Search that indicated he made a submission with the California Hunting, Trapping, and Game Service at that time. The Court notes the TRO Request was accordingly based on, at least in part, the same facts and evidence Silverstein submitted in support of her terminating sanctions motion based on Prencipe’s hiring of hitmen. On June 25, 2019, Judge Cochran held a hearing on Silverstein’s TRO Request in the Harassment Action at which Prencipe did not appear. (Decl. of Hrutkay, Exh. EE [Transcript of Hearing].) The Court found that while Prencipe had not been served in the Harassment Action, he had actual knowledge and an apparent endeavor to evade service and accordingly, the Court granted alternative means of service by posting. (Decl. of Hrutkay, Exh. EE.) After obtaining Silverstein’s sworn testimony that the truth of the contents of her petition, Judge Cochran specifically noted that because it was a civil harassment restraining order request, he was allowed to consider hearsay evidence, and he did consider hearsay evidence, and thereafter granted the restraining order. (Decl. of Hrutkay, Exh. EE.) On June 25, 2019, the Court in the Harassment Action issued a five-year Civil Harassment Restraining Order After Hearing (“Restraining Order”) pursuant to which Prencipe was ordered to not contact Silverstein (or her immediate family members), to stay away from Silverstein (and her immediate family members), and to turn in and/or sell his firearm. (Decl. of Hrutkay, Exh. CC.)

    Terminating Sanctions

    Esos moves for terminating sanctions on the grounds Prencipe, as a principal and agent of McLear deliberately destroyed material evidence warranting terminating sanctions and engaged in other acts of “litigation misconduct” warranting terminating sanctions.

  1. Prencipe’s Alleged Deletion of Material Evidence

    Esos asserts that from the outset of the litigation, and specifically in his March 17, 2017 and June 15, 2017 declarations, Prencipe falsely denied having sent the October 26, 2016 and November 1, 2016 emails to Silverstein until he ultimately admitted having sent them during his December 1, 2020 deposition. (Motion, pgs. 4, 7, 9; Decl. of Hrutkay, Exh. A [3/17/17 Declaration ¶¶33-34, 39], Exh. V [6/15/17 Declaration ¶¶41-42]; Exh. L [Prencipe Depo at 353:2-354:12 (testimony acknowledging having sent the 10/26/16 email containing the draft assignments)].) The Court notes the October 26, 2016 email allegedly contained drafts of the First and Second Assignments and the November 1, 2016 email allegedly contained fully executed versions of the First and Second Assignments. (SAC ¶¶23-24; Exhs. C, D.) The Court notes, in its motion, Esos contends the November 1, 2016 email, which Prencipe admitted sending, contained a fully executed copy of the First Assignment. (Motion, pg. 3; Decl. of Hrutkay, Exh. R at ESOS_0001093 [11/1/16 email and attachment (same as Exhibit D to SAC)]; Exh. S at 56:15-25 [Trahan Depo; Trahan’s testimony that he did not put the signature above his name on the Second Assignment].) The Court notes Prencipe testifies as to Exhibit 122, a native version of the October 26, 2016 email containing the draft assignments produced by Silverstein. (Decl. of Hrutkay, Exh. L [Prencipe Depo at 353:2-7].) Prencipe testified he sent Silverstein the November 1, 2016 email and the fully executed First Assignment attached thereto. (Decl. of Hrutkay, Exh. L [Prencipe Depo at 367:12-368:25].) Esos asserts Defendants have never produced original versions of October 26th or November 1st emails from Prencipe’s Gmail account or the attachments to those emails he drafted on his computer and that Prencipe instead admits they are gone. (Motion, pg. 3; Decl. of Hrutkay ¶5, Exh. N [Prencipe Depo at 637:18-651:9].)

    Esos contends that the only plausible explanation for Prencipe’s initial denial of having sent the emails and years-late admission to sending them together with his failure to turn them over is that he deleted, or directed someone to delete, this evidence to assist in litigation. (Motion, pg. 9, fn. 8.) Esos asserts Prencipe must have deleted pre-December 30 2016 emails and assignment documents prior to submitting his March 2017 declaration (in which he denied sending such emails) and this leaves a suspicion that similarly important documents were deleted. (Motion, pg. 8.) However, Esos’s assertion that Prencipe deliberately deleted emails is based on speculation, and Esos does not submit evidence demonstrating Prencipe actually deleted emails, when he deleted them, or that he did so intentionally in a manner that would have amounted to a misuse of the discovery process. Esos argues that Prencipe’s perjury as to whether he sent the at-issue emails is evidence of spoilation and demonstrates Defendants’ efforts to “distract from the deletion of this evidence” at a time when Prencipe would have been the only party with both motive and access to delete the materials. (Motion, pg. 9.) However, although Prencipe’s purported misrepresentations may relate to his credibility as a witness, they do not conclusively establish Prencipe deleted material evidence or that any alleged deletions occurred while the parties were contemplating litigation.

    Esos argues Prencipe deleted the October 26 and November 1 emails (and related unidentified emails and documents) because they were material to Esos’s claims, there is no reasonable basis to believe Prencipe forgot he had drafted or accidentally deleted them, and the only reasonable explanation is that he intentionally deleted them because he understood they were material to Esos’s claims. (Motion, pg. 10.) However, this argument is speculative and is unsupported by evidence demonstrating Prencipe willfully destroyed evidence. Esos’s argument that, “there is ample evidence that Prencipe acted intentionally to delete these items” does not cite to this evidence and instead appears to rely on the same speculation as Esos’s other arguments. (Motion, pg. 11.) Esos also fails to submit authority supporting its position that Prencipe’s misrepresentations alone amount to a misuse of the discovery process warranting terminating sanctions.

    Esos also argues Defendants, through Prencipe deleted “online repositories” at critical times. (Motion, pg. 5.) Specifically, Esos asserts Prencipe closed the accounts associated with “esosinc.com” emails, resulting in the loss of all emails stored on the server. (Motion, pg. 5, citing to Decl. of Silverstein, Exhs. 2-4.) However, Silverstein’s declaration as to the esosinc.com email account and her inability to access it is not evidence that Prencipe willfully destroyed evidence that may have existed in the account. (Decl. of Silverstein ¶¶9-13.) Esos also asserts that by withdrawing from over a dozen Skype chat conversations with Scates and/or Silverstein on March 22, 2019, Prencipe effectively deleted all content from those conversations. (Motion, pg. 5.) However, Esos does not submit admissible evidence supporting its contention that by exiting the chats Prencipe deliberately deleted their contents, as it is based on speculation by Scates. As such there is no evidence Prencipe deliberately deleted evidence contained in the Skype messeges, or even that evidence existed in the Skype messages. Accordingly, Esos has not established Prencipe engaged in the willful destruction of evidence to warrant an order imposing terminating sanctions.

  2. Litigation Misconduct

    Esos argues that Prencipe engaged in litigation misconduct by hiring two men to harm Silverstein and by repeatedly hacking into Silverstein’s online accounts containing sensitive information and communications. (Motion, pg. 11.) The Court notes its ruling on Esos’s previous terminating sanctions motion also addressed Esos’s claim Prencipe had hired hitmen to harm Silverstein. Silverstein’s TRO Request was likewise based on this claim; however, Silverstein submitted the same evidence as in support of the previous terminating sanctions motion, which is also submitted in support of the instant motion. Aside from the Harassment Action’s grant of the Restraining Order itself, Esos submits no new admissible evidence supporting the underlying claim. The Court notes the previous terminating sanctions motion did not involve Prencipe’s alleged hacking into Silverstein’s accounts in 2019.

    Esos’s argument that Judge Cochran’s order in the Harassment Action, “establish[ed] th[e] facts [contained in Attachment 7 to the TRO Request] for the purposes of this action” and “establishes as a matter of fact the issues that were necessarily determined in that proceeding” is without merit. (Motion, pgs. 7, 11.) In the Harassment Action, Judge Cochran specifically noted he was considering hearsay evidence for the purpose of determining Silverstein’s entitlement to a harassment restraining order against Prencipe. As such, the Harassment Action was employing a different evidentiary standard than the instant action. In addition, the Harassment Action used this evidence to determine a different issue from the instant motion; here, Esos seeks to establish Prencipe engaged in the alleged conduct underlying Silverstein’s restraining order request, and that such conduct necessarily amounted to litigation misconduct warranting terminating sanctions. However, entitlement to a civil restraining order obtained by considering hearsay evidence against a respondent who did not appear is not equivalent to establishing the occurrence of litigation misconduct in a civil action, and Esos fails to cite to authority supporting as much. Moreover, Silverstein still relies on inadmissible evidence to support her contention that Prencipe hired hitmen to harm her. The Court previously found such evidence insufficient to support the requested sanctions, and the Court finds so here as well. To the extent Esos argues the Restraining Order issued in the Harassment Action amounts to issue preclusion of all of Silverstein’s allegations therein for the purposes of the instant motion, the argument is without merit. Moreover, aside from the Harassment Action Restraining Order, Esos submits no new admissible evidence supporting its claim that Prencipe engaged in litigation misconduct by hiring hitmen to harm Silverstein. In addition, Esos does not submit admissible evidence supporting its contention that Prencipe hacked into Silverstein’s Gmail or LinkedIn accounts. The declarations submitted by Silverstein and Rex Scates are speculative and there is no expert testimony supporting Silverstein’s belief that Prencipe hacked into her accounts. Accordingly, Esos has not established Prencipe engaged in litigation misconduct to warrant an imposition of terminating sanctions.

    [In light of Esos’s failure to meet its burden in establishing Prencipe destroyed evidence and/or engaged in litigation misconduct, the Court does not reach the issue of whether Prencipe’s conduct can be imputed to McLear for the purposes of imposing terminating sanctions.]

    Based on the foregoing, Esos’s motion for terminating sanctions is denied.

    Evidence Sanctions

    Esos argues, in the alternative, evidence sanctions should be issued against Defendants. Specifically, Esos requests the Court issue the following evidence sanctions: (1) The jury must infer any documents relevant to the October 26 and November 1 emails were destroyed or otherwise made unavailable to Esos because they were and would be unfavorable to Defendants; and (2) The jury may infer the documents relevant to the October 26 and November 1 emails were destroyed or otherwise made unavailable to Esos because they were and would be unfavorable to Defendants. (Motion, pg. 15.) However, this sanctions request is still based on Esos’s assertion that Prencipe deliberately deleted evidence and engaged in litigation misconduct. However, Esos has not submitted admissible evidence supporting these contentions. Accordingly, Esos’s request for evidentiary sanctions is denied.

    Monetary Sanctions

    The Court finds Esos is not entitled to monetary sanctions against Defendants.

    C.C.P. ;2023.030(a) provides in pertinent part as follows: “The court may also impose this sanction on one unsuccessfully asserting that another has engaged in the misuse of the discovery process, or on any attorney who advised that assertion, or on both. If a monetary sanction is authorized by any provision of this title, the court shall impose that sanction unless it finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.”

    McLear and Prencipe each request monetary sanctions against Esos for fees incurred in opposing the instant motion. However, Defendants are not entitled to an award of monetary sanctions for opposing this motion. The Court finds while Esos failed to submit admissible evidence supporting its request for terminating sanctions, the record suggests Esos acted with substantial justification in bringing the instant motion.

    Based on the foregoing, Defendants’ requests for monetary sanctions are denied.

    Dated: October _____, 2021

    Hon. Monica Bachner

    Judge of the Superior Court

'


b"

Case Number: ****2020 Hearing Date: October 18, 2021 Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

ESOS RINGS, INC.,

vs.

JOSEPH PRENCIPE, et al.

Case No.: ****2020

Hearing Date: October 18, 2021

Defendants McLear & Co., Inc., McLear, Ltd. And Joseph Prencipe’s motion to terminate the reference to the Discovery Referee of all discovery matters in this action is denied.

Defendants McLear & Co., Inc. (“McLear US”), McLear, Ltd. (“McLear UK”) (collectively, “McLear”), and Joseph Prencipe (“Prencipe”) (collectively, “Defendants”) move for an order terminating the reference to the Honorable William McCurine Jr. (Ret.) of Judicate West (the “Referee”) of all discovery matters in this action pursuant to C.C.P. ;643(c). (Notice of Motion, pgs. 1-2.)

The Court notes the opposition filed by Plaintiff Esos Rings, Inc. (“Esos Rings”) on October 6, 2021, is untimely pursuant to C.C.P. ;1005(b). The Court in its discretion considers the untimely opposition.

Background

On July 17, 2019, Plaintiff filed a motion to appoint a discovery referee in this action, which Defendants opposed. On December 26, 2019, the Discovery Referee was appointed as in this action to “hear and determine any and all discovery motions and disputes relevant to discovery in the action and to report findings and make a recommendation.” (C.C.P. ;639; Notice of Motion, pg. 1.) From 2020 to 2021, Esos Rings and Cross-Defendant Michelle Silverstein (“Silverstein”) (collectively, “Esos”) filed objections to certain aspects of various rulings issued by the Referee, which were ultimately set for hearing on July 16, 2021, and July 30, 2021. McLear also objected to one of the Referee’s rulings. The Court overruled Esos’s objections and sustained McLear’s objection, as modified. [Defendants filed the instant motion on May 28, 2021, prior to the Court’s ruling on these objections.]

Motion to Terminate Judicial Reference

C.C.P. ;643(c) provides as follows: “A referee appointed pursuant to Section 639 shall file with the court a report that includes a recommendation on the merits of any disputed issue… Any party may file an objection to the referee’s report or recommendations within 10 days after the referee serves and files the report, or within another time as the court may direct. The objection shall be served on the referee and all other parties. Responses to the objections shall be filed with the court and served on the referee and all other parties within 10 days after the objection is served. The court shall review any objections to the report and any responses submitted to those objections and shall thereafter enter appropriate orders. Nothing in this section is intended to deprive the court of its power to change the terms of the referee's appointment or to modify or disregard the referee's recommendations, and this overriding power may be exercised at any time, either on the motion of any party for good cause shown or on the court's own motion.” (Emphasis added.)

Defendants’ motion to terminate the appointment of the Referee is denied. Notwithstanding the Court’s power to change the terms of the Referee’s appointment, Defendants have not established good cause for terminating the Referee.

Defendants argue termination of the Referee is required because Esos has burdened the Court with discovery issues by objection to many of the Referee’s rulings, thereby compelling the parties to relitigate issues already presented to the Referee. (Motion, pgs. 4-5.) However, Esos is entitled to object to rulings and contrary to Defendants’ argument, Esos did not object to rulings in their entirety, but only certain issues addressed in each. In addition, the Court’s delay in ruling on the objections was a result of its calendar and securing hearing dates following the case’s reassignment from Department 45. Moreover, aside from the backlog of objections to the Referee’s rulings, which the Court addressed, discovery disputes have been resolved by the Referee. Defendants offer no support for their assertion that the Court’s termination of the reference will abate Esos’s alleged discovery abuses. (Motion, pg. 9.) Rather, terminating the reference will require any discovery dispute that arises to be resolved by the Court instead of the Referee, such that Esos would be able to continue any alleged discovery abuses before the Court. Defendants also argue the reference is economically burdensome to Defendants in both fees incurred to pay Judicate West and the Referee as well as fees resulting from responding to Esos’s challenges to the Referee’s rulings. (Motion, pgs. 7-8.) However, notwithstanding Defendants’ evidence relating to fees they have incurred in discovery, Defendants do not establish the judicial reference is more economically burdensome than if the discovery disputes were to be handled by the Court. (Decl. of Harford ¶13; Decl. of Coleman ¶14.) The Court finds the purpose of the reference has not been so frustrated to warrant termination.

Based on the foregoing, Defendants’ motion is denied.

Dated: October _____, 2021

Hon. Monica Bachner

Judge of the Superior Court

"


b'

Case Number: ****2020 Hearing Date: September 23, 2021 Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

ESOS RINGS, INC.,

vs.

JOSEPH PRENCIPE, et al.

Case No.: ****2020

Hearing Date: September 23, 2021

Esos Rings’ unopposed motion to seal is granted in part and denied in part as described in the ruling.

McLear and Esos’s motions for terminating sanctions are continued to October 21, 2021. McLear’s motion for summary judgment is continued to November 4, 2021.

Esos’s motion for summary judgment currently scheduled for October 21, 2021, is continued to November 9, 2021. Prencipe’s motion for summary judgment currently scheduled for November 4, 2021, is continued to November 12, 2021. The parties are ordered to file oppositions and replies based on the original hearing dates.

Four motions are presently before the Court. First, McLear & Co., Inc. (“McLear US”) and McLear, Ltd. (“McLear UK”) (collectively, “McLear”), joined by Joseph Prencipe (“Prencipe”) move for terminating sanctions dismissing the second amended complaint (“SAC”) of Plaintiff Esos Rings, Inc. (“Esos Rings”). Second, Esos Rings and Michelle Silverstein (“Silverstein”) (collectively, “Esos”) move for terminating sanctions against McLear US, McLear UK, and Prencipe (collectively, “Defendants”). Third, Esos Rings moves for an order sealing portions of McLear’s motion for terminating sanctions and accompanying declarations as well as portions of Esos’s opposition and supporting documentation. Fourth, McLear moves for summary judgment, or in the alternative, summary adjudication, in their favor against the SAC of Esos Rings. This Order only addresses the sealing motion.

  1. Esos’s Motion to Seal

    Esos applies for an order sealing: (1) portions of McLear’s Motion for Terminating Sanctions [4:20-28; 5:1-2, 5-6; 5:14-19; 6:7-27; 7:1-2; 7:4-17 [redacted]; 7:25-28; 8:10-16; 11:16-28; 12:1-2; and 12:17-23; (2) Exhibits 15 [redacted (Deposition transcript of Silverstein)], 16 [redacted (Deposition transcript of Silverstein)], 17 [not redacted], 18 [not redacted], 19 [not redacted], 20 [not redacted], and 21 [redacted (partially executed assignment)] to the Declaration of David Harford (“Harford”); and (3) the entirety of the Declaration of Yevgeniy Gorelik (“Gorelik”) [note: only portions of the declaration are redacted] and Exhibits 1 [redacted], 2 [redacted], and 3 [redacted] attached thereto (collectively, “Subject Briefing”). (Notice of Motion, pgs. 2-3.) Esos also seeks an order that information contained in its Opposition and supporting documents submitted in response, lodged conditionally under seal, remain sealed. [The Court notes this includes Esos’s Opposition to McLear’s Motion for Terminating Sanctions, Exhibits 8, 19, 20, 21, 22, and 23 to the Declaration of Ben Wagner (“Wagner”) in support of the Opposition, which were lodged with the Court.]

    As a preliminary matter, the sealing motion is broader in scope than the lodged and filed versions of McLear’s motion and supporting declarations. Notably, only page 7, lines 4-17 of the motion were redacted, with the remainder of the motion publicly filed. Similarly, while Esos moves to seal the entire declaration of Gorelik, the publicly filed version only has certain terms redacted. Finally, the sealing motion does not address Exhibit F to the Declaration of Matthew Hrutkay (“Hrutkay”) submitted in support of Esos’s own motion for terminating sanctions, which is redacted in the public filing, and for which an unredacted version has been lodged with the Court.

    The Court is in possession of the parties’ September 20, 2021 Stipulation Regarding Filing Esos’s Summary Judgment Opposition Exhibit 35 Under Seal Pursuant to Prior Order of This Court. Specifically, the parties seek to stipulate that the entirety of Exhibit 35, a nine-page Declaration of David Nolte executed on September 9, 2019 in support of Esos’s opposition to a motion to quash service of summons, be sealed, on the grounds the Court previously ordered the Declaration sealed on November 5, 2019. (Stipulation, Exh. A.) However, the parties have not filed a notice of lodgment indicating that a copy of an unredacted version of Exhibit 35 [the Nolte Declaration] has been lodged with the Court. As such, the Court is unable to review the content of the Nolte Declaration either to affirm that the sealing order remain in place and/or consider it in ruling on McLear’s motion for summary judgment. Notwithstanding the Court’s November 5, 2019 order granting the motion to seal, the parties have not established that they are entitled to an order sealing the declaration in its entirety at this time.

    CRC Rule 2.551(a) provides, as follows: “A record must not be filed under seal without a court order. The court must not permit a record to be filed under seal based solely on the agreement or stipulation of the parties.”

    CRC Rule 2.551(b)(1) provides, as follows: “A party requesting that a record be filed under seal must file a motion or an application for an order sealing the record. The motion or application must be accompanied by a memorandum and a declaration containing facts sufficient to justify the sealing.”

    CRC Rule 2.551(b)(3)(A) provides that if a party files records produced in discovery that are subject to a confidentiality agreement or protective order, and does not intend to request to have the records sealed, that party must: (i) Lodge the unredacted records subject to the confidentiality agreement or protective order and any pleadings, memorandums, declarations, and other documents that disclose the contents of the records with the Court; (ii) File redacted copies of the lodged documents so that they do not disclose the contents of the records that are subject to the confidentiality agreement or protective order; and (iii) Give written notice to the party that produced the records that the lodged documents will be placed in the public court file unless that party files a timely motion or application to seal the records under this rule. CRC Rule 2.551(b)(3)(B) provides that the party served with the notice must file an application to seal the records within 10 days, and if so the documents will remain conditionally sealed until the Court rules on the merits of the motion.

    The Court notes that Plaintiffs’ motion is timely under CRC Rules 2.551(b)(3)(A)-(B) since, pursuant to the parties’ September 7, 2018 Stipulated Protective Order, McLear filed a Notice of Lodging on August 6, 2021, and Esos filed the instant Motion to Seal on August 10, 2021, less than ten days later.

    CRC Rule 2.550(d) provides, as follows: “The court may order that a record be filed under seal only if it expressly finds facts that establish: (1) There exists an overriding interest that overcomes the right of public access to the record; (2) The overriding interest supports sealing the record; (3) A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; (4) The proposed sealing is narrowly tailored; and (5) No less restrictive means exist to achieve the overriding interest.”

    Esos moves to seal on the grounds the sealed information is private, confidential, and closely guarded and is the sort of information that would allow a competitor to harm Esos’s business interests and compete more effectively. McLear does not oppose Esos’s motion to seal the records.

    Gorelick Declaration and Exhibits Thereto

    Esos sufficiently demonstrated that the redacted information contained in the Exhibits amounts to confidential information (Silverstein’s private email addresses, descriptions of protected exhibits, a log of documents viewed with pdfFiller, and a conversation history between Silverstein’s accounts and pdfFiller), such that there exists an overriding interest that overcomes the right of the public access to the records; the overriding interest supports sealing the record, a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed, the proposed sealing is narrowly tailored and no less restrictive means exist to achieve the overriding interest.

    However, Esos does not support its request that sealing the entire declaration is narrowly tailored. Rather, the Court finds the redacted version of the declaration is sufficiently narrowly tailored to only the portions of the declaration containing private identifying information and business details and maintaining this information under seal is the least restrictive means to protect Esos’s confidential business information including Silverstein’s personal contact information.

    Accordingly, the motion to seal the Gorelick Declaration and attached exhibits is granted as to the redacted portions of the Declaration and Exhibits 1, 2, and 3. The motion to seal the declaration in its entirety is denied.

    Exhibits to Harford Declaration

    Esos argues Exhibits 15 and 16, which contain portions of the July 26, 2021 Deposition Transcript of Silverstein as well as Exhibit 21, an exhibit to the deposition, all of which have been lodged under seal, be sealed on the grounds that under the Protective Order, these documents are to be treated as “Highly Confidential – Attorneys’ Eyes Only” for 30 days after receipt, and McLear’s attempt to preempt the agreed procedures of the Protective Order should not be accepted and Esos should be afforded the allowed 30 days to make its confidentiality designations with respect to the July 26, 2021 transcript. Esos asserts the same argument in support of its assertion that Exhibits 17-29 should also remain under seal. (Motion, pg. 7.)

    Esos failed to demonstrate that the Exhibits contain information such that there exists an overriding interest that overcomes the right of the public access to the records; that such an overriding interest supports sealing the record, a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed, the proposed sealing is narrowly tailored and no less restrictive means exist to achieve the overriding interest.

    Accordingly, Esos’s motion to seal the Exhibits to the Declaration of Harford is denied.

    McLear’s Motion for Terminating Sanctions

    Esos bases its request to seal portions of McLear’s motion for terminating sanctions based on its request to seal the Gorelik and Harford Declarations and their exhibits, since the requested portion disclose the same protected information contained in the confidential portions of the Declarations and Exhibits.

    However, Esos did not establish that the lines of the motion it seeks to redact contain information for which there is an overriding interest that overcomes the right of public access. Rather, the Court finds the redactions made by McLear in filing a redacted version with the Court is narrowly tailored.

    Based on the foregoing, Esos’s motion to seal is granted in part and denied in part. The motion is granted as to pg. 7, lines 4-17, and is otherwise denied.

    Esos’s Opposition and Declaration of Wagner

    Esos submits no argument relating to the grounds for sealing its opposition to the motion for terminating sanctions and/or the exhibits to the Declaration of Wagner. However, a review of the redacted versions and unredacted versions of the documents suggests the material Esos seeks to have sealed is confidential and the sealing is narrowly tailored.

    Based on the foregoing, Esos’s motion to seal its opposition and certain exhibits to the Declaration of Wagner is granted.

    Declaration of Nolte: Exhibit 35 to Esos’s Opposition to McLear’s MSJ

    The Court declines to enter the parties’ stipulation that the Declaration of Nolte [Exhibit 35 to Esos’s Opposition to McLear’s Motion for Summary Judgment] be sealed at this time. The Court requests the parties lodge an unredacted version of the declaration with the Court as well as support for their assertion that the declaration should be sealed in its entirety as opposed to more narrow sealing.

  2. McLear’s Motion for Terminating Sanctions, Esos’s Motion for Terminating Sanctions, McLear’s Motion for Summary Judgment

    The parties’ motions for terminating sanctions and summary judgment are to be continued. To maintain the order of hearings, the motions are continued as follows:

    McLear and Esos’s motions for terminating sanctions are continued to October 21, 2021. McLear’s motion for summary judgment is continued to November 4, 2021.

    Esos’s motion for summary judgment currently scheduled for October 21, 2021, is continued to November 9, 2021. Based upon the number of exhibits, and objections, the filing deadlines for the opposition and reply are based on the original hearing date, such that the opposition is due on October 7, 2021 and the reply is due on October 18, 2021. (C.C.P. ;437c(b)(2), (4); CRC Rule 1.10(c).)

    Prencipe’s motion for summary judgment currently scheduled for November 4, 2021, is continued to November 12, 2021. Based upon the number of exhibits, and potential objections, the filing deadlines for the opposition and reply are based on the original hearing date, such that the opposition is due on October 21, 2021 [14 days prior] and the reply is due on November 1, 2021. (C.C.P. ;437c(b)(2), (4); CRC Rule 1.10(b).)

    Dated: September _____, 2021

    Hon. Monica Bachner

    Judge of the Superior Court

'


b'

Case Number: ****2020 Hearing Date: July 30, 2021 Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

ESOS RINGS, INC.,

vs.

JOSEPH PRENCIPE, et al.

Case No.: ****2020

Hearing Date: July 30, 2021

Esos’s objection to the Referee’s Revised Ruling on McLear UK’s Request that Esos Answer 9 Additional RFPs (Objection No. 5) is overruled.

McLear UK’s objection to the Referee’s Revised Ruling on its Request that Esos Answer 9 Additional RFPs (Objection No. 5) is sustained, as modified.

Esos’s objection to the Referee’s Ruling on McLear US’s Motion to Quash and Stay Compliance with Third-Party Subpoenas (Objection No. 6) is overruled.

Plaintiff and Cross-Defendant Esos Rings, Inc. (“Esos Rings”) and Cross-Defendant Michelle Silverstein (“Silverstein”) (collectively, “Esos”) move for an order ruling on the remaining two objections to the Discovery Referee’s rulings on the following underlying discovery motions: (1) the Motion that Esos Answer Nine Additional RFPs filed by McLear Ltd. (“McLear UK”) [Esos’s 9/4/20 objections & McLear UK’s 9/14/20 objections (“Objection No. 5”)] and (2) the Motion to Quash and Stay Compliance with Third-Party Subpoenas [Hyatt, NHL, Caesars, Sands] and on Sundry Matters argued on February 16, 2021 [3/1/21 Objection (“Objection No. 6”)]. (Notice of Motion, pg. 2; C.C.P. ;643(c); 3/1/21 Objection, pg. 2; 2/19/21 Notice of Ruling, Exh. A.) [The Court notes that given McLear UK also objected to the Revised Ruling on the Motion that Esos Answer Additional RFPs, there are actually three objections to two underlying Discovery Referee Rulings at issue in this ruling.] On July 16, 2021, the Court overruled Esos Parties’ Objections Nos. 1, 2, 3, and 4 to the Referee’s rulings on the underlying discovery motions. The Court incorporates its discussion in the July 16, 2021 ruling regarding the background of these disputes and the relevant law.

Ruling on Objections to Discovery Referee’s Recommendations

  1. Objection No. 5: Esos’s 9/4/20 Objection and McLear UK’s 9/14/20 Objection to the 9/1/20 Revised Ruling on McLear UK’s Motion that Esos Answer Nine Additional RFPs

On September 4, 2020, Esos Parties filed an objection to the Referee’s September 1, 2020 revised ruling, filed September 2, 2020, granting McLear UK’s request Esos Rings answer additional requests for production (“RFPs”), titled “Revised Ruling RE McLear UK’s Request that Esos Answer 9 Additional” (the “Order”). On September 14, 2020, McLear filed its own objection to the Order as well as a response to Esos’s objection. On September 23, 2020, Esos filed a response to McLear UK’s objection and response.

[The Court notes the nine additional RFPs of McLear UK, and not McLear US, are at issue in the underlying Order, and that McLaer UK has filed its own objection to the Order and a response to Esos’s objection; however, for ease of reference, this section will refer to McLear UK as “McLear.”]

While McLear’s objection to the Order is not presently before the Court on the motion brought by Esos, the Court in its discretion, will address McLear’s objection together with Esos’s objection such that that a finalized version of the Order on the underlying discovery motion may be issued.

The underlying discovery motion involved nine RFPs that McLear asserts were directed at discovering whether Esos Rings can show a reasonable probability that McLear’s alleged tortious interference caused Esos Rings to lose $29 million in profits. (M-Response, pg. 1.)

In the Order, the Referee ruled that while the parties’ Stipulation precluding McLear’s discovery was correct at the time, it impeded fair and reasonable discovery and, therefore, did not preclude McLear’s additional RFPs. The Referee ordered certain discovery should be allowed, and accordingly granted McLear UK’s request to serve nine additional RFPs as modified in such a way to not call for the production of documents covered by attorney-client or work product privileges.

RFPs Nos. 1-6

In the Order, the Referee modified RFPs Nos. 1-6, ordering Esos to produce responsive documents to the requests as follows:

For the period from May 1, 2016, through December 31, 2019, Esos is ordered to produce all contracts it entered into or attempted to enter into, together with any emails or correspondence discussing such contracts:

  1. Providing for the manufacturing of any (a) silicon components or silicon chips, (b) flexible printed circuit boards, and/or (c) capacitors that may be used by Esos in a product covered by the ‘609 Patent;

  2. Providing for the acquisition of antennae that may be used by Esos in a product covered by the ‘609 Patent;

  3. Providing for (a) any third-party entities to assemble silicon components or silicon chips and flexible printed circuit boards, and/or (b) the assembly of silicon components, silicon chips, or flexible printed circuit boards with capacitors or antenna that may be used by Esos in a product covered by the ‘609 Patent

    The Order modified the RFPs as drafted to limit the time frame, which was not limited in the original requests, and limited the types of documents related to the contracts and/or attempted contracts to emails and/or correspondence as opposed to any documents.

    Esos objects to the Order on the following grounds: (1) the time frame for production is overbroad and should be narrowed; and (2) any records constituting confidential or Attorneys’ Eyes Only (“AEO”) records under the existing Protective Order should be permitted to be redacted for non-responsiveness and irrelevance. (E-Objection, pgs. 3-4.) As to the assertion that the time frame is overbroad, Esos argues that since the requests are aimed at seeking evidence of lost opportunities based on Prencipe’s June 2017 defamatory statements, any contracts Esos entered into in 2018 and 2019 are irrelevant to establish alleged lost opportunities, and as such, the time frame should be further limited to only through December 31, 2018 for RFPs Nos. 1-5, and only through June 1, 2018 for RFP No. 6, for which time frame Esos has already produced responsive documents. (E-Objection, pgs. 3-4.) Esos argues records outside these time frames also would not lead to evidence of mitigation, since Esos’s obtaining of opportunities elsewhere in 2019 would not reduce McLear’s liability for lost opportunities in 2017. (E-Objection, pgs. 3-4.) In response, McLear argues Esos has inappropriately taken inconsistent positions on the relevant time frame of discovery given Esos discovery requests have defined the relevant period from January 1, 2012 to present. (M-Objection/Response, pgs. 8-9.) McLear also argues the time frame ordered by the Referee should stand because it is easy to imagine that communications between Esos and its manufacturing vendors during 2018 or 2019 might reflect upon the feasibility that Esos could have made a payment ring in 2017. (M-Objection/Response, pg. 9.)

    The Court finds the time frame for RFPs Nos. 1-6 as set forth in the Order is not overly broad, and Esos’ objection on this ground is overruled. Whether production is directly relevant or admissible is not the test for discoverability, rather, McLear is entitled to discovery of information likely to lead to the discovery of admissible evidence. Here, McLear is entitled to discovery of the time frame set forth by the Referee, which is likely to lead to the discovery of admissible evidence.

    Esos asserts that if production is permitted for the time frame set forth in the Order, given the sensitivity concerns of the information in the documents, the Order should be modified to allow for redactions of irrelevant/non-responsive information. (E-Objection, pg. 4.) Specifically, Esos argues its more recent manufacturing activity should not be “open for perusal” by McLear and/or its counsel given the companies are competitors and Esos has serious concerns McLear’s discovery practice will create an added layer to Esos’s ongoing relationships. However, Esos has not sufficiently justified its privacy objections entitling it to unilaterally redact documents responsive to the discovery requests. Esos has not submitted evidence it seeks to redact trade secrets and/or personal identifying information. Moreover, the protective order addresses claimed privacy concerns and Esos is entitled to designate its sensitive information as AEO to prevent McLear’s alleged improper use to compete with Esos.

    Based on the foregoing, Esos’s objection to the Order as to RFPs Nos. 1-6 is overruled.

    RFPs Nos. 7-9

    The Referee modified RFPs Nos. 7-9, ordering Esos to produce responsive documents to the requests as follows:

    For the period prior to December 31, 2019, Esos is ordered to produce all contracts it entered into or attempted to enter into, together with any emails or correspondence discussing any certifications from Visa, MasterCard, and/or Discover for NFC rings that are capable of making contactless payments. These requests include any emails or correspondence between Esos and Visa, MasterCard, and/or Discover discussing such certification. Production is limited to documents sufficient to show: (1) certification through MasterCard, Visa, or Discover for its NFC Ring before December 31, 2019; or (2) a functioning NFC Ring before December 31, 2019.

    The Order modified the RFPs as drafted to limit the time frame to before December 31, 2019. The Order also specified production of contracts entered or attempted to be entered into, as well as emails discussing certifications for NFC rings capable of making contactless payments. (See Original RFPs Nos. 7-9 [“Please produce all communications and documents related to any certifications from [Visa, MasterCard, and/or Discover] for NFC rings that are capable of making contactless payments.”].) The Court notes the limitation on production of “certification” suggests the modified requests are limited to documents showing certifications Esos obtained, as opposed to those it attempted to obtain.

    Esos objects to the Order on the grounds that it should be permitted to redact for non-responsiveness/irrelevance within responsive documents prior to their production. (E-Objection, pg. 5.) Esos argues that only the certification and whether Esos had a functioning NFC device is “what is important” and other peripheral facts to this would give insight into Esos’s ongoing business that would allow Defendants to interfere with litigation privilege impunity or acquire market intelligence and advantage that they do not currently have. (E-Objection, pg. 5.) As discussed above, this objection is without merit. The protective order addresses claimed privacy concerns and Esos has otherwise failed to justify its privacy objections. Accordingly, Esos’s objection to the Order as to Nos. 7-9 is overruled.

    McLear objects to the Order to the extent it excludes documents reflecting any of Esos’s attempts to obtain certifications, as opposed to only documents related to certifications Esos actually obtained. (M-Objection, pgs. 7-8.) Specifically, McLear asserts the Order should be modified and Esos should be required to produce, “all contracts [it] entered into or attempted to enter into, together with any emails or correspondence discussing certifications from [Visa, MasterCard, and/or Discover] for NFC rings that are capable of making contactless payments during the period from May 1, 2016, through December 31, 2019.” (M-Objection/Response, pg. 8.) McLear asserts it is entitled to discover if Esos has ever obtained a certification and, regardless of whether if it has obtained certifications, it is also entitled to discover the obstacles, prior rejections, and terms and conditions upon which Plaintiff obtained that certification which may reflect on Plaintiff’s inability to make a profit despite McLear’s alleged interference. (M-Objection/Response, pgs. 6-7.) In response, Esos asserts the discovery is directed at determining whether Esos would have had a working product to sell if not for the interference. As such, proof of a working product, i.e., a certification by a major credit card company, should end McLear’s inquiry, and McLear is not entitled to obtain all documents and communications relating to certification. (E-Response, pgs. 2-3.) However, proof of a working product/certification does not fully address the requested discovery—determining whether Esos would have had a working product if not for the interference. Arguably, Esos’s inability to obtain a certification for reasons beyond Prencipe/McLear’s alleged interference would be relevant to defending against allegations that such interference resulted in millions of dollars in damages.

The Court notes the original RFPs did not specify whether “documents related to any certifications from [vendors]” applied to only certifications Esos actually obtained as opposed to documents related to any certifications—attempts, obtained, denials, etc. In addition, the language of the Order does refer to contracts Esos “entered into or attempted to enter into” together with “any emails or correspondence discussing any certifications” while also limiting production to documents sufficient to show certification.

McLear’s objection to the Order is sustained in part. The Court finds McLear is entitled to discovery of attempted certifications; however, the Court does not adopt the proposed language for the RFPs. The Court modifies the Order as to RFPs Nos. 7-9 as follows:

For the period prior to December 31, 2019, Esos is ordered to produce all contracts it entered into or attempted to enter into, together with any emails or correspondence discussing any certifications and/or attempted certifications from Visa, MasterCard, and/or Discover for NFC rings that are capable of making contactless payments. These requests include any emails or correspondence between Esos and Visa, MasterCard, and/or Discover discussing such certification and/or attempted certification. Production is limited to documents sufficient to show: (1) certifications and/or attempted certifications through MasterCard, Visa, or Discover for its NFC Ring before December 31, 2019; or (2) a functioning NFC Ring before December 31, 2019.

Based on the foregoing, Esos’s objections to the Order are overruled. McLear’s objection is sustained in part.

  1. Objection No. 6: 3/1/21 Objection to the Ruling on Motion to Quash and Stay Compliance with Third-Party Subpoenas [Hyatt, NHL, Caesars, Sands] and on Sundry Matters argued on February 16, 2021

    On March 3, 2021, Esos filed an objection to the Referee’s February 18, 2021 ruling on Esos’s Motion to Quash, filed February 19, 2021, titled “Ruling Re [Esos]’s Motion to Quash and Stay Compliance with Third-Party Subpoenas and on Sundry Matters Argued on February 16, 2021” (the “Order”). On April 14, 2021, McLear US filed an opposition to the objection. On April 20, 2021, Esos filed a reply to McLear’s opposition.

    [The Court notes McLear US, and not McLear UK, issued the underlying subpoenas and has filed the opposition to Esos’s objection to the Order; however, for ease of reference, this section will refer to McLear US as “McLear.”]

    McLear’s opposition to the objection is untimely. Esos’s objection was served on March 1, 2021, making the deadline for a response March 11, 2021, pursuant to C.C.P. ;641(c). However, McLear filed its opposition on April 14, 2021. In reply, Esos requests the Court strike and not consider the opposition in light of its untimeliness. (Reply, pgs. 1-2.) However, Esos does not cite to authority suggesting the Court may not consider an untimely response. The Court in its discretion considers McLear’s opposition.

    The underlying motion to quash sought orders quashing and staying compliance with subpoenas duces tecum for records only served by McLear on non-parties Hyatt Hotels Corporation (“Hyatt”), National Hockey League Foundation (“NHL”), Caesars Entertainment Corporation (“Caesars”), and Las Vegas Sands Corporation (“Sands”) (collectively, “Deponents”). (Order, pg. 1.) The deponents were former customers of Esos. Esos moved to quash the subpoenas on the grounds that McLear did not serve Esos with notice as required by C.C.P. ;;2025.220 and 2025.240 and on the grounds that the subpoenas were overbroad and not relevant.

    In the Order, the Referee ruled that while it is undisputed McLear failed to serve proper notice of the subpoenas on Esos, the evidence establishes the omission was inadvertent, and there was no evidence Esos was prejudiced by the lack of notice. The Order notes that once McLear was notified of its mistake in failing to provide notice, it ceased efforts to take possession of the subpoenaed documents, which remain with the Deponents. (Order, pg. 2.) The Referee concluded that while Esos claimed its relationships with subpoenaed business partners would be adversely affected by the subpoenas, it produced no evidence supporting this assertion. (Order, pg. 3.) Turning to the substantive objections to the requests as overbroad, the Referee found the time frame of requests was not overbroad given the time frame set forth in the contested subpoenas has been consistently used throughout litigation, and given the information sought via the subpoenas is relevant and likely to lead to the discovery of admissible evidence. (Order, pg. 3.) The motion was therefore granted in part [as to the requests as drafted] and denied in part [as to the requests as modified by Referee/Order]. Accordingly, the Order denies the motion to quash as to the modified requests, which request Deponents to turn over, from the period of March 1 2016, through January 1, 2019, all documents which contain the terms: (1) Esos, Prencipe, McLear or NFC Rings [Nos. 1-4]; (2) Prencipe [No. 5]; (3) McLear UK [No. 6]; (4) McLear US [No. 7]; and/or (5) NFC Rings [No 8] in connection with any contract, agreement, purchase order, or patent. The Order also requires Deponents to turn over, from the period of March 1 2016, through January 1, 2019, all documents and communications that refer to or comprise any: (1) contracts, agreements, or purchase orders [No. 9]; and/or (2) negotiations concerning contract or potential contracts [No. 10] between Company and Esos Rings Inc., Silverstein, and/or Scates.

    Esos objects to the Order on two separate grounds: (1) procedurally, the subpoenas’ lack of proper notice renders them void, unenforceable, and subject to a motion to quash; and (2) substantively, the subpoena as to NHL should be quashed and/or modified as to the time period; specifically, the subpoena should be limited to the end of 2017. (Objection, pgs. 1-4.)

    Esos’s objection to the Order on the grounds the subpoenas are void due to lack of notice is overruled. The Referee properly concluded that while McLear had not properly provided Esos with notice of the subpoenas, there was no evidence of prejudice to Esos as a result. Esos does not cite to applicable authority supporting its position that a non-party business records subpoena must be quashed for failure to comply with notice requirements where no prejudice has been established and where the subpoena seeks relevant information likely to lead to the discovery of admissible evidence. Here, McLear subpoenaed deponents based on Esos’s assertion that it lost business opportunities with these companies as a result of McLear’s alleged interference. Moreover, McLear has since complied with the notice requirements as it has served notice of the subpoenas on all parties. (Decl. of Pettis ¶5; Decl. of Hrutkay, Exhs. F, G [at pgs. 5, 16-18].) In addition, as of the filing of the opposition, McLear had not received any documents in response to any of the subpoenas.

    Esos’s substantive objection to time period for responsive records set forth in the Order as to NHL is overruled. Esos argues the time period is overbroad and asserts that discovery as to interfered relationships should not extend past the end of 2017 given the alleged interference had occurred prior to the end of 2017. (Objection, pgs. 3-4.) Esos argues that any discovery into 2018 and beyond for evidence of interference is not reasonably calculated to lead to the discovery of admissible evidence, invades Esos’s privacy and trade secret rights in a litigation against its direct competitor, and is overbroad and unduly burdensome. (Objection, pg. 4.) However, the Court finds the time period is reasonably calculated to lead to the discovery of admissible evidence. While the interference occurred in 2017, to the extent Esos claims its business relationships with these entities were damaged as a result of the interference, communications from 2018 could shed light on as much. Moreover, Esos does not address how discovery from non-party Deponents would invade Esos’s privacy and trade secret rights in litigation. Since Esos is not producing documents responsive to the requests, it is not in a position to argue whether the scope of time requests are unduly burdensome. As noted by the Referee, the scope of time set forth in the modified requests is consistent with the scope of time used throughout litigation. The Court finds Esos’s substantive objection to the Order is not sufficiently supported.

    Based on the foregoing, Esos’s objections to the Order are overruled.

    Dated: July _____, 2021

    Hon. Monica Bachner

    Judge of the Superior Court

'


b"

Case Number: ****2020 Hearing Date: July 16, 2021 Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

ESOS RINGS, INC.,

vs.

JOSEPH PRENCIPE, et al.

Case No.: ****2020

Hearing Date: July 16, 2021

Esos Parties’ objection to the Referee’s Ruling on Afanasyeva’s Motion to Quash Subpoena (Objection No. 1) is overruled.

Esos Parties’ objection and supplemental objection to the Referee’s Ruling on McLear Ltd.’s Motion to Compel First Requests for Production (Objections Nos. 2-3) are overruled.

McLear Ltd.’s request for monetary sanctions is denied.

Esos Parties’ objection to the Ruling on Esos’s Motions to Quash Three Subpoenas Issued to Hyperloop and AirSlate (Objection No. 4) are overruled.

Prencipe’s request for monetary sanctions is denied.

Plaintiff and Cross-Defendant Esos Rings, Inc. (“Esos”) and Cross-Defendant Michelle Silverstein (“Silverstein”) (collectively, “Esos Parties” or “Esos”) move for an order ruling on six objections to the Discovery Referee’s rulings on the following five discovery motions: (1) the Motion to Quash Subpoena filed by Anna Afanasyeva (“Afanasyeva”) [6/5/20 objection (“Objection No. 1”)]; (2) the Motion to Compel First Request for Production (“RFP”) (re: alter ego discovery) as to Esos filed by McLear Ltd. (“McLear UK”) [7/28/20 objection (“Objection No. 2”) and 8/3/20 supplemental objection to 6/10/20 Final Ruling (“Objection No. 3”)]; (3) Esos’s Motions to Quash three subpoenas issued to Hyperloop Technologies, Inc. (“Hyperloop”) by Defendant Joseph Prencipe (“Prencipe”), AirSlate, Inc. (“AirSlate”) by Prencipe, and Sunrise Banks by Defendant McLear & Co. [8/17/20 objections (“Objection No. 4”)]; (4) the Motion that Esos Answer Nine Additional RFPs filed by McLear UK [9/4/20 objections (“Objection No. 5”)] and (5) Motion to Quash and Stay Compliance with Third-Party Subpoenas [Hyatt, NHL, Caesars, Sands] and on Sundry Matters argued on February 16, 2021 [3/1/21 Objection (“Objection No. 6”)]. (Notice of Motion, pg. 2; C.C.P. ;643(c); 3/1/21 Objection, pg. 2; 2/19/21 Notice of Ruling, Exh. A.)

The instant ruling addresses Objections Nos. 1, 2, 3, and 4. The Court will address Objections Nos. 5 and 6 at the hearing on July 30, 2021. The Court acknowledges it previously indicated Objection No. 3 would be addressed at the July 30, 2021 hearing; however, in light of the overlapping issues between Nos. 2 and 3, including the joint opposition filed by McLear Ltd. to the Objection and Supplemental Objections, the Court addresses No. 3 in the instant ruling.

Background

On December 26, 2019, Hon. William McCurine (Ret.) was appointed as a discovery referee (“Referee”) in this action to “hear and determine any and all discovery motions and disputes relevant to discovery in the action and to report findings and make a recommendation.” (C.C.P. ;639; Decl. of Wagner, Exh. A.) The Referee issued several rulings on various discovery motions throughout 2020. [The Court notes these are sometimes referred to as “recommendations,” however, for clarity the instant ruling will refer to the Referee’s recommendations on underlying discovery motions as “rulings.”] Starting on June 5, 2020, Esos Parties timely filed six objections to five of the Referee’s rulings, referenced above. (Decl. of Wagner, Exhs. B, E, F, H, K; 3/1/21 Objection.) Defendants filed timely responses to the first five objections and an untimely opposition to the sixth objection. (Decl. of Wagner, Exhs. C, G, I, L; 4/14/21 Opposition.) As of October 6, 2020, the Court had not yet issued rulings addressing the pending objections. Esos asserts that during the October 6, 2020 Status Conference to determine the procedural posture of the objections, the Court ordered that a formal motion would be necessary to decide all pending objections. [The Court notes this is not reflected in the 10/6/20 Minute Order.] In opposition, McLear asserts that at the October 6, 2020 hearing, the Court indicated its tentative order was to deny all of Esos’s objections; however, because Esos Parties’ counsel failed to appear, no substantive argument was heard, and later in the day the Court issued minutes stating that any party requesting adjudication of objections to Referee rulings must make a formal motion. (M-Opposition, pg. 6.) [Here too, the Court notes the Minute Order does not reflect that the Court was inclined to overrule the objections.]

The instant motion was filed on January 21, 2021, with a March 2, 2021 hearing date in Department 45. Defendants McLear Ltd. (“McLear UK”) and McLear & Co., Inc. (“McLear US”) (collectively, “McLear”) filed their opposition to the motion on February 16, 2021, as to which Prencipe filed a Joinder on February 17, 2021. On February 17, 2021, Afanasyeva filed an opposition. On February 23, 2021, Esos Parties filed a reply. On March 1, 2021, the case was reassigned from Department 45 to Department 71, and all matters on calendar were ordered advanced and vacated to be rescheduled. At the April 5, 2021 Case Management Conference (“CMC”) the Court continued the hearing on the instant motion to April 27, 2021. On April 27, 2021, the Court continued the hearing on the instant motion to June 1, 2021, and allowed the sixth objection filed by Esos on March 1, 2021, to be considered along with the five objections in the original motion. The Court requested the parties to jointly organize and file with the Court courtesy copies of the current motion and objection, oppositions, and replies, and each of the underlying Discovery Referee rulings that are in dispute as well as the motions, oppositions, replies, and supporting declarations considered by the Discovery Referee in ruling on the underlying motions to which Esos Parties have objected. On May 11, 2021, the courtesy copies were received by the Court. The Court thereafter continued the hearing to have it take place over two days.

In its April 27, 2021 ruling, the Court denied McLear’s request in opposition that the Court order the deposition of Silverstein as premature.

Ruling on Objections to Discovery Referee’s Recommendations

C.C.P. ;643(c) provides as follows: “A referee appointed pursuant to Section 639 shall file with the court a report that includes a recommendation on the merits of any disputed issue… Any party may file an objection to the referee’s report or recommendations within 10 days after the referee serves and files the report, or within another time as the court may direct. The objection shall be served on the referee and all other parties. Responses to the objections shall be filed with the court and served on the referee and all other parties within 10 days after the objection is served. The court shall review any objections to the report and any responses submitted to those objections and shall thereafter enter appropriate orders. Nothing in this section is intended to deprive the court of its power to change the terms of the referee's appointment or to modify or disregard the referee's recommendations, and this overriding power may be exercised at any time, either on the motion of any party for good cause shown or on the court's own motion.” (Emphasis added.)

Under C.C.P. ;644(b), which applies to discovery referees appointed pursuant to C.C.P. ;639, “the decision of the referee… is only advisory. The court may adopt the referee’s recommendations, in whole or in part, after independently considering the referee's findings and any objections and responses thereto filed with the court.”

  1. Objection No. 1: 6/5/20 Objection to 3/11/20 Ruling on Afanasyeva’s 4/24/20 Motion to Quash Subpoena

    On June 5, 2020, Esos filed an objection to the Referee’s ruling granting Afanasyeva’s motion to quash the deposition subpoena issued to her without prejudice, titled “Revised Order Following the March 11, 2020 Discovery Hearing” (the “Order”), which addressed multiple discovery motions. On June 15, 2020, Afanasyeva filed a response to the objection, and on that same date Prencipe filed a Joinder to Afanasyeva’s response. The Court notes that in its reply to the instant motion, Esos addresses arguments raised by Prencipe and Afanasyeva in their responses. (Reply, pgs. 3-4.)

    Esos objects on the grounds the Order failed to give appropriate weight to Hand v. Superior Court (1982) 134 Cal.App.3d 436 (“Hand”) in concluding that the marital privilege protected Afanasyeva from testifying regarding communications with her husband Prencipe pursuant to Duggan v. Superior Court (1981) 127 Cal.App.3d 267 (“Duggan”) and Evidence Code ;980. (Decl. of Wagner, Exh. B, Objection, pg. 1 [Supp-Briefing ;I(a)].) Specifically, Esos argues that because Afanasyeva’s community property will benefit or be liable for any judgment, under Evidence Code ;973(b), she has waived any marital privilege because the instant civil proceeding is brought and defended for her immediate benefit in light of the cross-complaint her husband Prencipe has filed against Esos Parties. (Objection, pg. 2.)

    As a preliminary matter, Esos’s objection is not untimely pursuant to C.C.P. ;643(c). On March 27, 2020, the Referee circulated the Order to all parties and on April 10, 2020, Esos was served with notice of the filing of the Referee’s Order; however, it does not appear the Referee filed the order and/or the Court had directed another time within which Esos could serve its objection. Prencipe and Afanasyeva assert the deadline for filing an objection was at latest, April 20, 2020, based on the filing of the Order with the Court ten days prior, making Esos’s June 5, 2020 objection untimely. The Court notes the responses of Afanasyeva and Prencipe were timely filed within 10 days of the objection pursuant to C.C.P. ;643(c).

    Esos’s Objection is overruled. The general rule that married person may not be called to involuntarily testify against their spouse is not waived by the fact a spouse has community property in the outcome of a case for the purposes of the exception set forth in Evidence Code ;973. The Court agrees that there is a split in authority between Duggan and Hand and agrees with the Referee’s conclusion that any interest non-party Afanasyeva may have in the outcome of the pending litigation based on its effect on the value of her community property shared with Prencipe is not a “direct benefit” for the purposes of Section 973.

    Based on the foregoing, Esos Parties’ objection is overruled.

  2. Objection Nos. 2-3: 7/28/20 Objection to 6/10/20 Ruling and 8/3/20 Supplemental Objection to 6/10/20 Final Ruling on McLear Ltd.’s Motion to Compel First RFP re: Alter Ego as to Esos

On July 28, 2020, Esos filed an objection (“Objection”) to the Referee’s June 10, 2020 ruling granting in part and denying in part McLear’s motion to compel RFPs on Esos, titled “Final Ruling on [McLear UK’s] Motion to Compel re: First Request for Production as to Esos” (the “Order”), specifically objecting to the Order issued as to RFPs Nos. 122, 123, 127, 128, 130, 131, 136, 137, 138, 139 (collectively, “Alter Ego RFPs”). On August 3, 2020, Esos filed a supplemental objection (“Supp-Objection”) to the Order, specifically objecting to the Order as to RFP No. 65. The Referee’s Order was filed on July 24, 2020. On August 7, 2020, McLear UK filed an opposition to the Objection and Supp-Objection. In its opposition, McLear UK requests the Court issue monetary sanctions against Esos Parties in the amount of $21,223 for their misuse of the discovery process. (Opposition, pgs. 2, 9-10; Decl. of Brom ¶18; C.C.P. ;2023.030.)

The underlying discovery motion involved RFPs McLear UK served on Esos, to which Esos objected, and McLear UK accordingly moved to compel responses. The Court notes that at the time the Referee issued his ruling on the discovery motion, the operative cross-complaint in the action was the original cross-complaint filed by McLear US on April 18, 2017. Since then, McLear US filed a first amended cross-complaint (“FACC”) on February 5, 2021. On June 10, 2021, the Court issued its Ruling on Submitted Matter addressing the demurrer and motion to strike filed by Esos Parties. The Court sustained the demurrer with 20 days leave to amend as to the 2nd and 6th causes of action and ruled the demurrer to the claim of alter ego was improper. The Court denied Esos Parties’ alternative motion to strike the allegations of alter ego. On June 30, 2021, McLear US filed its second amended cross-complaint (“SACC”). The Court notes McLear UK’s former CEO Prencipe formed McLear US as a wholly owned subsidiary of McLear UK in May 2016, after he obtained the 609 Patent, and that, according to McLear, Prencipe assigned the 609 Patent to McLear US, contrary to Esos Parties’ allegations that Prencipe agreed to sell the 609 Patent to them and void its assignment to McLear US. (Objection, pg. 2; Joint Statement, pgs. 1-2.) Accordingly, McLear UK is not a cross-complainant in the SACC, which is brought against Esos Parties only by McLear US.

In the Order, the Referee ruled that for every RFP where further production is ordered, the Referee found the information is relevant and reasonably likely to lead to the discovery of admissible evidence, and where further production has not been required, that legal standard has not been satisfied. (Order, pg. 2.) As to the Alter Ego RFPs, the motion was granted in part and denied in part as follows: (Nos. 112 & 113) Esos must produce a chart identifying all owners and their percentage of ownership under the Protective Order for “attorneys’ eyes only” and Defendants must obtain leave of the Referee before subpoenaing owners identified in the Chart; (No. 127) Esos must produce a chart showing the names of accounts, names of institutions, and types of accounts since January 1, 2017; (Nos. 128, 130, 131) Esos must produce documents showing any and all capital Silverstein provided and/or loans Silverstein and/or Scates provided to it since January 1, 2017; (No. 136) Esos must produce its board minutes since January 1, 2017; (Nos. 137 & 138) Esos must produce a chart showing all its and Silverstein’s office locations and addresses since January 1, 2017 [past addresses, not current addresses]; and (No. 139) Esos must produce list of past and present addresses of Scates’ offices. (Order, pgs. 3-5.)

As to RFP No. 65, the motion was denied in part and sustained in part. The Referee ruled Esos has identified six “lost opportunities” to explain its damages allegedly because of Defendants’ actions and asserts it has already produced responsive documents evidencing the loss, and McLear has not identified any deficiencies in that production. The Referee ruled Esos would therefore be prohibited from identifying any other lost opportunities or seeking to introduce at trial evidence of such. Esos was ordered to produce documents regarding the six lost opportunities regardless of whether they prove or disprove any lost opportunity or damages attributable to Defendants in connection therewith, and the Court prohibited Esos from offering into evidence any documents not provided in response to this RFP to sustain its damages on this issue. (Order, pg. 2.)

Esos objects to the Referee’s ruling on the Alter Ego RFPs on the following grounds: (1) the RFPs seek to conduct alter ego discovery despite there being no alter ego “claim” against Silverstein and the cross-complaint’s only allegation of alter ego at Paragraph 7 is boilerplate, conclusory, and insufficiently alleged; (2) even if alter ego discovery is allowed the “superior approach” would be to permit a handful of questions at the depositions of Silverstein and Esos’s CTO Rex Scates (“Scates”); (3) the RFPs are unduly burdensome in impinging upon privileged and private financial information; (4) the RFPs even as granted in the limited fashion are too broad and the requests should be narrowed. (Objection, pgs. 4-7.)

Esos objects to the Referee’s ruling on RFP No. 65 on the grounds it remains overbroad in requiring Esos to produce documents “regarding” the six lost opportunities. Esos asserts the objection should be sustained in full, or at a minimum, the objection should be sustained by providing for redaction of non-responsive information (with a redaction reading “non-responsive”), given the Order provides for production of entire documents where much of the content is non-responsive. (Supp-Objection, pgs. 4-7.)

In opposition, McLear UK asserts Esos Parties’ objections to Order as to the Alter Ego Requests lack merit for the following reasons: (1) the requests are proper because the issue of alter ego is directly relevant to McLear UK’s defenses (including a defense of unclean hands against Esos based on conduct of Silverstein, where, if alter ego is established, Esos would itself have unclean hands); (2) objections based on separate identities of McLear UK (server of discovery requests) and McLear US (cross-complainant) are contradictory and disingenuous given Esos Parties’ assertion that McLear Companies are closely affiliated, have the same counsel, and were both run by Prencipe, as well as allegations that they are alter egos of each other; (3) objections contradict Esos Parties’ prior conduct of compelling McLear UK to respond to 200 RFPs related to alter ego theories; (4) privacy interests do not outweigh the discovery requested given the parties’ confidentiality protective order and Esos Parties have not met their burden of justifying any privacy objections; and (5) Esos Parties failed to support any justification for narrowing the requests. (Opposition, pgs. 5-7.) In opposition, McLear UK asserts the Supp-Objection to RFP No. 65 is without merit because Esos Parties’ assertion that McLear UK already has “plenty concerning each of the lost opportunities” based on Esos Parties’ prior production is unsupported. (Opposition, pg. 8, citing Supp-Objection, pg. 4.) McLear also argues that given the Referee determined information to be produced in response to RFP No. 65 was relevant and reasonably likely to lead to the discovery of admissible evidence, Esos Parties have not and cannot argue such information would not be relevant, as it is the basis for their claimed millions of dollars in damages. (Opposition, pg. 8.) McLear UK also notes Esos Parties admit they have uncovered additional responsive documents but due to those documents including information Esos considers “non-responsive” Esos Parties chose to not produce those documents and reasserted their objections to the Order requiring their production. (Opposition, pg. 9, citing Supp-Objection, pg. 5.) McLear asserts that Esos Parties’ argument is self-contradictory given they contend McLear has enough from prior productions, while also acknowledging a certain category of documents have been withheld on the sole grounds that the documents include information Esos has deemed “non-responsive.” (Opposition, pg. 9.)

The Objection and Supplemental Objection to the Order are overruled. The Court finds the Referee’s ruling as to the Alter Ego Requests is proper and Esos Parties should produce documents as ordered. In addition, RFP No. 65 seeks relevant information since it involves Esos Parties’ claimed damages based on alleged lost opportunities. Esos Parties are ordered to produce documents responsive to the request as set forth in the Order, notwithstanding any prior production that Esos Parties contends qualifies as responsive documents. Esos Parties’ request it redact non-responsive information is denied. The protective order addresses claimed privacy concerns and Esos Parties have otherwise failed to justify their privacy objections.

Request for Sanctions

McLear UK requests the Court award monetary sanctions against Esos Parties for misusing the discovery process by first opposing the motion to compel before the Referee and for pursuing its Objections to the Order to avoid the Referee’s Order. (Opposition, pg. 10.)

McLear UK has not established Esos Parties’ conduct amounts to a misuse of the discovery process to warrant sanctions. First, Esos Parties were justified in opposing the underlying motion to compel production as demonstrated by the Referee’s Order granting in part and denying in part and placed limitations on discovery Esos Parties would be required to turn over. In addition, Esos Parties were entitled to object to the Referee’s ruling. While the Court has overruled the Objection and Supp-Objections, McLear UK has not established the were not made with substantial justification or amount to a misuse of the discovery process.

Based on the foregoing, McLear UK’s request for monetary sanctions is denied.

  1. Objection No. 4: 8/17/20 Objections to 8/3/20 Ruling on Esos’s 6/23/20 Motions to Quash Three Subpoenas Issued to Hyperloop (by Prencipe), AirSlate (by Prencipe), and Sunrise Banks (by McLear & Co).

On August 17, 2020, Esos Parties filed an objection (“Objection”) to the Referee’s August 3, 2020 ruling granting in part and denying in part Esos Parties’ three motions to quash subpoenas duces tecum issued to Hyperloop, AirSlate, and Sunrise Banks, titled “Ruling Re Three Motions to Quash Brought by Esos and Argued on July 21, 2020” (the “Order”). Esos Parties specifically object to the Order as to their Motion to Quash Prencipe’s subpoena on Hyperloop and AirSlate. (Objection, pgs. 2-3, 8-9.) On August 27, 2020, Prencipe filed a response to the objection (“Response”) and on August 28, 2020, McLear Companies filed a Notice of Joinder in Prencipe’s Response. In response, Prencipe requests the Court award monetary sanctions against Esos and its counsel in the amount of $1,485. (Response, pgs. 2, 15; Decl. of Coleman ¶7.)

In the Order, the Referee ruled that where the motion to quash was denied, he determined the information sought is relevant or likely to lead to the discovery of admissible evidence, and where the motion was granted in part and denied in part, he determined the request needed to be modified in some way to satisfy the discovery statute. The Referee also ruled that to the extent production requires disclosure of information protected by attorney client or attorney work product privilege, a privilege log shall be provided for withheld documents and if the request calls for production of confidential information, it shall be produced pursuant to the protective order. (Order, pgs. 2-3.)

As a preliminary matter, the Court notes that in their February 16, 2021 opposition to the motion for a ruling on the discovery objections, McLear Entities assert Silverstein engaged in the destruction of evidence by deleting documents from her PDFfiller account. (Opposition, pgs. 1-4.) However, in reply, Esos Parties assert McLear Entities have improperly used AirSlate documents they received in opposing the instant motion in violation of the Referee’s Sequestration Order. (Reply, pg. 3.) The Court agrees the arguments raised by McLear Entities based on any purported records of Silverstein deleting documents are not properly before the Court in ruling on the instant motion in light of the sequestration order. The Court does not consider this evidence, or the arguments based thereon in ruling on the objections.

Hyperloop Motion to Quash

The Referee’s ruling on the Motion to Quash as to Hyperloop is based on the underlying subpoena Prencipe issued to Hyperloop on May 28, 2020, which a Request for Production of Documents setting forth four separate requests, RFPs Nos. 1-4. The motion to quash subpoena on Hyperloop was granted in part and denied in part. Specifically, the Referee: (No. 1) granted the motion to quash as to Silverstein’s personally identifiable information, payroll records, medical information, and salary in any production of “all documents and correspondences in Silverstein’s personnel file,” and otherwise denied the motion to quash; (Nos. 2, 3, & 5) denied the motion to quash as to all documents and correspondences relating to any potential lawsuit against Hyperloop by Silverstein, any settlement by Hyperloop to Silverstein, and/or any complaints and/or allegations made by Silverstein against Hyperloop; and (No. 4) granted the motion to quash in part, limiting production responding to “correspondences relating to any complaints and/or allegations made against Silverstein” to complaints or allegations Hyperloop actually made against Silverstein.

Esos Parties argue the Hyperloop Subpoena should be quashed entirely and not denied and/or granted in the limited manner as set forth above because Hyperloop is a brief, prior, unrelated employer, working in a different industry than the instant action, and the subpoena only seeks evidence of dishonesty to show Silverstein is likely to be dishonest again which is inadmissible propensity evidence. (Objection, pgs. 3-4.) Esos Parties argue the Subpoena, even as modified by the Referee, is still extremely broad and will enable Prencipe to obtain Silverstein’s personal information that is outside the bounds of discoverable information, since her Hyperloop personnel file, complaints made against her, and potential lawsuits and/or settlements are not relevant to the instant action. (Objection, pg. 4.) Esos Parties argue the Subpoena seeks inadmissible character evidence against Silverstein. (Objection, pg. 5.)

In response, Prencipe asserts the narrowed Hyperloop Subpoena limits production to complaints or allegations made by or against Silverstein and any potential claims or settlements relating to her employment with Hyperloop seeks information relevant to Prencipe’s defense since the nature of Silverstein’s accusations against Hyperloop call her credibility into question and reveal intent and motive to lie for the purpose of financial gain. (Response, pg. 1.) Prencipe argues the subpoenaed records likewise fit within admissible character evidence to prove facts, such as motive and intent to lie, and test Silverstein’s credibility, and as such, they do not seek the type of evidence rendered inadmissible under Evidence Code ;1101. (Response, pgs. 1, 5.) Prencipe asserts the subpoenaed documents are sought to evaluate Silverstein’s credibility as a witness and to establish she has motive and intent to lie for her own economic benefit, as allowed under Evidence Code ;1101(b)-(c). (Response, pg. 5.) Prencipe argues the subpoenaed records likewise seek proper impeachment evidence pursuant to Evidence Code ;780, and the requested documents are therefore discoverable. (Response, pg. 6.) Finally, Prencipe argues the subpoenaed records do not violate Silverstein’s privacy rights because privacy rights are not absolute and may be abridged to accommodate a compelling interest including the interest in ascertaining the truth in connection with legal proceeding and here, the need for discovery into Silverstein’s prior employment records for Prencipe’s defenses outweighs any privacy concerns. (Response, pgs. 1, 6.) Prencipe argues Silverstein has no privacy rights in the documents because she placed her credibility at issue by initiating this litigation and here, Prencipe’s need for the records is essential to a fair analysis of Silverstein’s allegations and credibility as a witness. (Response, pg. 7.) Finally, Prencipe argues the subpoena is reasonably particularized and is the best means for obtaining the information sought. (Response, pg. 7.)

In their joinder to Prencipe’s response, the McLear Entities assert the documents sought are directly relevant to Silverstein’s credibility, and McLear Entities anticipate the documents will show the instant action is not the first time Silverstein has made similar accusations against former employers for financial gain. (Joinder, pg. 3.)

Esos Parties’ objection to the Order on the Motion to Quash the subpoena issued to Hyperloop is overruled. The Hyperloop subpoena, as limited by the Referee’s order, seeks information likely to lead to the production of admissible evidence. Specifically, Prencipe seeks evidence supporting his assertion that the instant action is not the first instance Silverstein has made what Prencipe asserts are false accusations against a former employer, and Silverstein’s personnel records and discovery related to her claims made against her or claims she made against Hyperloop will demonstrate this. Moreover, the Order limited the scope discovery into Silverstein’s personnel records, excluding personally identifiable information, payroll records, medical information, and salary. To the extent Silverstein asserts such production violates privacy concerns, these interests are outweighed by the state’s interest in ascertaining the truth in legal proceedings.

AirSlate Motion to Quash

The Referee’s ruling on the Motion to Quash as to AirSlate, Inc. involved an underlying subpoena Prencipe issued to AirSlate on May 28, 2020, which included a Request for Production of Documents setting forth twelve RFPs Nos. 1-12. The Court notes AirSlate manages the program PDFfiller, which allows users to upload, edit, sign and export PDF forms online, and the at-issue subpoena involves documents in Silverstein’s PDFfiller account. The motion was granted in part and denied in part, and the Order accordingly denied the motion to quash as to the requests as modified in a manner to address overbreadth of the requests in scope of time. The Court notes the Referee did not otherwise modify the requests. As such, the motion to quash was denied to Requests Nos. 1-12, modified to be limited to the period from January 1, 2016, to January 1, 2019, where the requests initially did not include a time limitation. (Ruling, pgs. 2-4.) The Requests seek the following: (Nos. 1, 2, 4, 5, 7, 8) documents in and/or deleted from Silverstein’s PDFfiller account (“the Account”) relating to the 609 Patent PIL, and/or Esos, including, but not limited to, creating, editing, signing, storing, or viewing a document relating to the 609 Patent, PIL, and/or Esos; (Nos. 10, 11) documents in and/or deleted from the Account relating to McLear US, McLear UK, and/or NFC Ring including but not limited to creating, editing, signing, storing, or viewing a bank loan application; and (Nos. 3, 6, 9, 12) a list of activity performed in relation to all documents in and/or deleted from the Account relating to the 609 Patent, PIL, Esos, McLear US, McLear UK, and/or NFC Ring, including but not limited to the document title, author, date of creation, date(s) of modification, names of modifiers, and names and emails of any share recipient.

Esos Parties object to the Order’s modifications to the requests on the grounds that, as modified, the requests remain overly broad. Esos Asserts the Order fails to limit the Requests to the relevant time period ending, at the latest, on January 31, 2017, given Prencipe’s indication it is seeking forged and false loan applications and forged assignments with the USPTO and by February 2017, litigation had been filed and assignments had been recorded. (Objection, pg. 13.) Esos also asserts the Order fails to limit subpoena definitions, exposing unrelated family members and personal accounts to search. (Objection, pg. 13.) Esos parties also claim the subpoena’s definition of the “Silverstein’s PDFfiller Account” term should be limited to exclude certain email addresses Esos Parties claim Prencipe has provided no evidence were used in connection with PDFfiller for Esos or McLear related business. (Objection, pg. 14.) Esos Parties request any production be made to Esos Parties’ counsel first for responsiveness and privilege review, with any disputed responsiveness-withheld documents withheld on that basis being reviewed by the Referee to resolve en camera. (Objection, pg. 14.) Lastly, Esos Parties object to Requests Nos. 7, 8, and 9 given they simply request AirSlate turn over an entire repository of Esos’s business files simply because they are business filed by Silverstein, Esos’s CEO who used PDFfiller for Esos Business. (Objection, pgs. 14-15.)

Consistent with their objections to the Order, Esos Parties propose the Requests should be narrowed further and that Nos. 1, 2, 4, 5, and 7 provide only for document production of documents in and/or deleted from the Account, “containing the term ‘PIL, Inc.’” and “refer” to the 609 Patent, PIL, and/or Esos during a more limited time frame, July 1, 2016 to December 31, 2016, as opposed to documents “relating” to the 609 Patent, PIL, and/or Esos. Esos asserts Nos. 8 and 9 are overly broad and the motion to quash should be granted to them and no revision is proposed. Esos proposes Nos. 10 and 11 should be narrowed to only provide for production of bank loan applications from July 1, 2016, to December 31, 2016, with the applicant listed as McLear US, McLear UK, and/or NFC Ring. Esos proposes Nos. 3, 6, and 12 should be likewise narrowed as to the activity surrounding documents identified in modified RFP Nos. 1, 2, 4, 5, 7, 10, and 11, without date-limiting such logs. (Objection, pgs. 9-13 [Chart].)

In response, Prencipe argues the subpoena seeks documents within the scope of permissible discovery because whether Silverstein used her PDFfiller Account to forge signatures on the assignment of the 609 Patent goes to the heart Silverstein’s litigation, and it is undisputed Silverstein used the Account to create, edit, sign, and store documents. (Response, pgs. 11-12.) Prencipe argues that documents revealing Silverstein forged loan documents “on behalf of” NFC Rings or the McLear Entities is central to her credibility. (Response, pg. 12.) Prencipe argues that, contrary to Esos Parties’ assertion, the defined term “Silverstein PDFfiller Account” should not exclude the email addresses suggested by Esos given Silverstein maintained multiple email addresses and potentially used multiple email addresses to log into her PDFfiller Account. (Response, pg. 13.) Prencipe also asserts Esos’s proposed further narrowing of the date range could limit production of responsive, relevant documents of Silverstein’s misconduct given Prencipe seeks documents not limited to the 609 Patent assignment, but also of Silverstein’s bad acts to test her credibility as a witness. (Response, pgs. 13-14.) Prencipe argues the subpoenaed records do not violate Silverstein’s privacy rights, which are not absolute and may be abridged to accommodate a compelling public interest including ascertaining the truth in connection with legal proceedings. (Response, pg. 14.) Specifically, Prencipe argues that the Order does not permit production of all documents in the PDFfiller accounts, but rather, is limited to documents relating to the 609 Patent, PIL, Esos, NFC Ring, and McLear, and Silverstein has not identified what information, if any, is protected for production of responsive documents on privacy grounds. (Response, pg. 14.) Prencipe also asserts the protective order in place addresses any risk that private information regarding Silverstein or her family will be available for others to review. (Response, pg. 14.) Finally, Prencipe disputes Esos Parties’ contention that he did not object to Esos receiving production first for “responsiveness and privilege review”; rather, Prencipe only permitted Esos to review for privileged documents, upon production of a privilege log, and accordingly objects to Esos’s request to make a substantive review of documents prior to production. (Response, pg. 15.)

In their joinder to Prencipe’s response, the McLear Entities assert the AirSlate subpoena seeks documents bearing on multiple claims and defenses in the litigation, specifically, the assignments allegedly transferring the 609 Patent away from McLear US to a new never-formed company Silverstein would own and use to compete against the McLear Entities. (Joinder, pg. 1.) McLear entities argue that if the supposed assignments were executed by Silverstein and/or Scates using PDFfiller in January 2017, they are ineffective to transfer title in the 609 Patent and their execution constitutes fraudulent conduct by Silverstein. (Joinder, pg. 2.) McLear Entities argue the subpoena properly seeks records related to loan and financing applications Silverstein prepared both on behalf of McLear and their shared tradename, NFC Rings, given Silverstein’s false claims relating to what these documents contain. (Joinder, pgs. 1-2.) McLear argues these documents also contain relevant information refuting Silverstein’s assertion that McLear US, McLear UK, and Prencipe are alter egos of each other. (Joinder, pg. 2.) McLear argues the subpoenaed documents contain discoverable information because Silverstein executed at least two NDAs on behalf of McLear US as its COO in 2016 using PDFfiller, and Esos now claims at least $15 million in damages from alleged lost opportunities with third-party companies named in these NDAs, and as such, these NDAs are relevant to show that McLear US had existing relationships with these named companies before Silverstein formed Esos as a competitor to McLear US. (Joinder, pg. 2.) McLear Entities accordingly assert they are entitled to discover documents Silverstein prepared and/or executed allegedly on their behalf or in their name using her PDFfiller account, including documents relating to the assignments of the 609 Patent and Esos’s damage claims against McLear Entities. (Joinder, pg. 2.)

Esos Parties’ objection to the Order on the Motion to Quash the subpoena issued to AirSlate is overruled. The Court finds the AirSlate subpoena, as modified by the Referee, is sufficiently limited in scope, and is directed at seeking documents within the scope of permissible discovery. The Court is not persuaded that the relevant time period would end “at latest, on January 31, 2017,” as argued by Esos Parties given the subpoena is not limited to the assignment itself, but also to Silverstein’s alleged bad acts surrounding the assignment and conduct thereafter. The Court finds the Referee’s limitation is appropriate. In addition, Esos Parties’ assertion that the subpoena’s definition should not include certain emails Silverstein is known to use is not supported. To the extent she did use other personal email accounts for such purposes, the subpoena seeking documents relating to those purposes in those accounts will produce responsive documents. Esos Parties’ request any production be made to it first for responsiveness review is not well-taken; consistent with overruling the objection, the Court denies this request. As Prencipe agreed, Esos Parties are entitled to review for privileged information and, if necessary, produce a privilege log. Esos Parties’ assertion that Requests Nos. 7, 8, and 9 simply request AirSlate turn over an entire repository of Esos’s business filings is without merit. The subpoena does not seek all of Esos’s business filings, rather, those Silverstein stored on her AirSlate account, which are relevant to the instant action given allegations Esos was formed by Silverstein in January 2017, to compete with McLear Entities. (SACC ¶¶36, 39.) Accordingly, the objection is overruled.

Request for Sanctions

Prencipe requests the Court award monetary sanctions against Esos and its counsel of record in the amount of $1,845, for bringing the instant objection to Order on the motion to quash the subpoena without substantial justification. (Response, pg. 15; C.C.P. ;1987.2(a).)

C.C.P. ;1987.2(a) allows for the Court to, in its discretion, award the amount of reasonable expenses incurred in opposing the motion, including attorney’s fees if the court finds the motion was made in bad faith or without substantial justification. Here, while the Court has overruled Esos Parties’ objection to the Order, Prencipe has not established the motion was made with bad faith or without substantial justification.

Based on the foregoing, Prencipe’s request for monetary sanctions is denied.

Dated: July _____, 2021

Hon. Monica Bachner

Judge of the Superior Court

"


Case Number: ****2020    Hearing Date: April 27, 2021    Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

ESOS RINGS, INC.,

vs.

JOSEPH PRENCIPE, et al.

Case No.: ****2020

Hearing Date: April 27, 2021

Plaintiff and Cross-Defendant Esos Rings, Inc. and Cross-Defendant Michelle Silverstein’s motion for ruling on objections is continued to June 4, 2021. The parties are ordered to lodge courtesy copies in Department 71 as set forth in the ruling by May 10, 2021.

McLear’s request that the Court order the deposition of Silverstein is premature.

Plaintiff and Cross-Defendant Esos Rings, Inc. (“Esos”) and Cross-Defendant Michelle Silverstein (“Silverstein”) (collectively, “Esos Parties”) move for an order ruling on five previously filed objections to the Discovery Referee’s rulings on the following four discovery motions: (1) the Motion to Quash Subpoena filed by Anna Afanasyeva (“Afanasyeva”) [6/5/20 objection]; (2) the Motion to Compel First Request for Production (“RFP”) (re: alter ego discovery) as to Esos filed by McLear Ltd. [7/28/20 objection and 8/3/20 supplemental objection to 6/10/20 Final Ruling]; (3) Esos’s Motions to Quash three subpoenas issued to Hyperloop Technologies, Inc. (“Hyperloop”) by Defendant Joseph Prencipe (“Prencipe”), AirSlate, Inc. (“AirSlate”) by Prencipe, and Sunrise Banks by Defendant McLear & Co. [8/17/20 objections]; and (4) the Motion that Esos Answer Nine Additional RFPs filed by McLear UK [9/4/20 objections]. (Notice of Motion, pg. 2; C.C.P. ;643(c).) In opposition, McLear requests the Court overrule Plaintiff’s objections, enter each of the Referee’s rulings as formal orders of the Court, and order Silverstein to sit for subsequent deposition. (Opposition, pg. 11.)

The instant motion was filed on January 21, 2021, with a hearing date set for March 2, 2021, in Department 45. On February 16, 2021, Defendants McLear Ltd. and McLear & Co., Inc. (collectively, “McLear”) filed an opposition to the motion. On February 17, 2021, Prencipe filed a Notice of Joinder and Joinder in McLear’s opposition. On February 17, 2021, Afanasyeva filed an opposition. On February 23, 2021, Esos Parties filed a reply. However, on March 1, 2021, prior to the March 2, 2021 hearing date, the case was reassigned from Department 45 to Department 71, and all matters on calendar in the case were ordered advanced to March 1, 2021, vacated, and to be rescheduled in the newly assigned Department 71. It appears the instant motion was scheduled for April 14, 2021; however, on March 18, 2021, the Court noted the motion would be rescheduled by the Court. At the April 5, 2021 Case Management Conference (“CMC”) the Court continued the hearing on the instant motion to April 27, 2021.

The Court notes that on March 1, 2021, Esos filed a sixth objection to a Discovery Referee ruling. Specifically, Esos filed an objection to the Discovery Referee’s February 18, 2021 Ruling on the Motion to Quash and Stay Compliance with Third-Party Subpoenas [Hyatt, NHL, Caesars, Sands] and on Sundry Matters argued on February 16, 2021. (Objection, pg. 2; 2/19/21 Notice of Ruling, Exh. A.) This objection did not have an associated motion for ruling, reservation number, or hearing date, and Esos has not filed a new motion in connection with this objection. It appears no response to the objection was filed within 10 days of its filing. However, on April 14, 2021, McLear & Co. filed an opposition to the objection, and on April 20, 2021, Esos Parties filed a reply to the opposition, in which Esos Parties list April 27, 2021 as the hearing date. The Court will consider this sixth objection along with the five objections that are subject to the instant motion on the date of the continued hearing.

Esos Parties’ motion for a ruling on the objections is continued. In support of their motion, Esos Parties filed the Declaration of Ben Wagner (“Wagner”), which attaches copies of: (1) objections by Esos and/or Esos Parties to the Discovery Referee rulings; and (2) responses, oppositions, and/or joinders thereto to the objections to the rulings. (Decl. of Wagner ¶¶3-14, Exhs. B-M.) However, Esos Parties have not submitted the underlying Discovery Referee rulings to which the objections are asserted, or the papers filed in connection with those motions that were considered by the Discovery Referee.

The Court orders the parties to jointly organize and file with the Court courtesy copies of the current motion and objection, oppositions and replies, and each of the underlying Discovery Referee rulings that are in dispute as well as the motions, oppositions, replies, and supporting declarations considered by the Discovery Referee in ruling on the underlying motions to which Esos Parties have objected. Given the voluminous number of documents involved by reference in this motion, for the Court to assemble and review all the documents electronically would require an undue consumption of time and resources. As such, for each of the six objections for which Esos Parties move for the Court to issue a ruling, the parties are directed to jointly prepare and provide the Court with courtesy copies of: (1) the current filings (the motion, the objection), any responses and replies; (3) the underlying rulings; and (4) the motions, oppositions, replies, and any supporting papers considered by the Discovery Referee in issuing the underlying rulings. The materials should be organized in a reasonable manner, indexed, and tabbed.

The Court notes in opposition, McLear argues it is appropriate for the Court to order Silverstein to immediately testify regarding her alleged destruction of evidence. (Opposition, pg. 10.) However, this request is premature, as the issue of whether Silverstein should be compelled to testify must first be addressed by the Discovery Referee.

Dated: April _____, 2021

Hon. Monica Bachner

Judge of the Superior Court



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