Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_15-cv-00357/USCOURTS-azd-2_15-cv-00357-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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WO NOT FOR PUBLICATION 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Aleksander Popovic, et al.,

Plaintiffs, 

v. 

Christine Spinogatti, et al., 

Defendants.

No. CV-15-00357-PHX-JJT

ORDER 

 At issue are the following motions: Defendant Bank of America, N.A.’s 1 Motion 

for Summary Judgment (Doc. 77, Mot.), to which Plaintiffs filed a Response (Doc. 89, 

Resp.) and Defendant filed a Reply (Doc. 126, Reply); Defendant’s Motion in Limine 

Pursuant to Rule 37(c)(1) to Preclude Plaintiffs from Introducing or Relying on Damages 

Evidence (Doc. 76, Mot. in Limine 1), to which Plaintiffs filed Responses (Docs. 81, 82); 

and Defendant’s Second Motion in Limine Pursuant to Rule 37(c)(1) to Preclude 

Plaintiffs from Introducing or Relying on Damages Evidence Disclosed for the First Time 

in Plaintiff’s Response to Motion for Summary Judgment (Doc. 121, Mot. in Limine 2), 

to which Plaintiffs filed a Response (Doc. 132). The Court finds this matter appropriate 

for resolution without oral argument. See LRCiv 7.2(f). For the reasons set forth below, 

the Court grants Defendant’s Motions In Limine and Motion for Summary Judgment. 

 

1

 Bank of America, N.A. (BANA) is the only remaining named Defendant in this action. 

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I. BACKGROUND 

 The following facts are undisputed unless otherwise indicated. 

A. Relevant Parties and Entities 

 Plaintiff Aleksander Popovic formed Plaintiff Greyside Group, Inc. (Greyside) in 

2008 and acted as president of the company. (Doc. 1-1, Am. Compl. at 56.) Greyside 

provided privately contracted security forces to protect freightliners against violent 

attacks abroad. (Am. Compl. at 56.) Greyside is the majority owner of Greyside Global, 

LLC, an investment vehicle for third-party investors. (Am. Compl. at 56; Doc. 78, Defs.’ 

Statement of Facts in Supp. of its Mot. for Summ. J. (DSOF), Ex. 1, Popovic Dep. at 

214–15.) 

 Robert Caulfield, through his companies, TrustCommerce and Ciphertronics, 

invested in Greyside. (Popovic Dep. at 47, 149–51.) Christopher Gowins was an 

employee of TrustCommerce and, at the bequest of Mr. Caulfield, became involved in 

Greyside’s business operations. (DSOF, Ex. 23, Gowins Dep. at 14–17.) 

 Kenton Associates Resources Corporation (KARC) is a wholly-owned subsidiary 

of Greyside that was used for payroll. (Popovic Dep. at 199.) 

 Greyside used Defendant BANA for its business banking. Plaintiffs allege that 

Defendant, acting through its employees, including Christine Spinogatti, allowed for the 

unauthorized transfer of funds from Greyside’s ‘4610 Account and improperly relied on 

purported authorization from Mr. Caulfield and Mr. Gowins. 

B. The ‘4610 Account, Investment in Greyside and Related 

 Authorization Documents 

 In 2009, Mr. Popovic, as president of Greyside, opened a business bank operating 

account (“the ‘4610 Account”) at the BANA Glendale, Arizona branch. (Am. Compl. at 

56; DSOF, Ex. 2, Villanueva Decl. at 2, Exs. A, B.) Mr. Popovic signed the Corporate 

Signature Card pertaining to the ‘4610 Account on February 12, 2009, which stated that 

Greyside agreed the ‘4610 Account would be governed by the terms and conditions in the 

Deposit Agreement and Disclosures and other BANA documents. (Villanueva Decl., 

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Ex. A.) Plaintiffs agree that a contract was formed between the parties via the Deposit 

Agreement, but contend it cannot be determined what version of the Deposit Agreement–

whether the 2008 Deposit Agreement as Defendant asserts or some other version–was in 

effect at the time Mr. Popovic signed the Signature Card. (Doc. 90, Pl.’s Statement of 

Facts in Supp. of Their Response and Request to Deny Bank of America N.A.’s Mot. for 

Summ. J. (PSOF)2

 at 2.) Defendant, relying on the deposition of Rosalva Villanueva, a 

Litigation Specialist for Defendant, contends that the November 1, 2008 version of the 

Deposit Agreement and Disclosures was the operative version at the time Mr. Popovic 

opened the ‘4610 Account, and its terms govern. (Villanueva Decl. at 1, 3.) 

 In 2011, Mr. Popovic was in need of capital financing to move forward with his 

developing business. (Popovic Decl. at 45–47.) Mr. Caulfield agreed to invest in 

Greyside, and on May 13, 2011, Mr. Popovic signed a $500,000 promissory note from 

Greyside to the entity Ciphertronics, which Mr. Caulfield owned. (Popovic Decl. at 47, 

149–151.) That same day, Ciphertronics wired $351,962.50 to the ‘4610 Account and the 

remaining funds to a Lloyds of London entity to pay for Greyside’s insurance. (Popovic 

Dep. at 150–152; DSOF, Ex. 3.) In his deposition, Mr. Caulfield testified he was not 

prepared to fund the $500,000 until the Signature Card giving him authorization over the 

‘4610 Account was in effect. (DSOF, Ex. 5, Caulfield Dep. at 64.) 

 Defendant asserts the following regarding the execution of the BANA Signature 

Card, to all of which Plaintiffs object. On May 13, 2011, Mr. Caulfield and Mr. Popovic 

visited the BANA branch office at I-17 and Carefree Highway (the Glendale Branch) to 

authorize Mr. Caulfield as a signer on the ‘4610 Account. (DSOF, Ex. 6, Barnett Decl. at 

2–3, Exs. A–B; Caulfield Dep. at 62–65.) An employee of Defendant, Jerry Barnett, 

 

2

 This document is styled as “Plaintiff’s” (singular) Statement of Facts and states that “Plaintiff Aleksander Popovic” submits the document. (See Doc. 90 at 1.) The 

caption, however, refers to “their response” indicating the Statement of Facts pertains to all Plaintiffs and “their response.” (See Doc. 90 at 1.) Because Defendant’s Motion for 

Summary Judgment is against all Plaintiffs, the same attorney represents all Plaintiffs in this matter, and Plaintiffs are related as those other than Mr. Popovic are his business entities, the Court takes the relevant briefing on the motions before the Court to be on 

behalf of all Plaintiffs in this matter, not just Mr. Popovic. 

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testified that he prepared the Signature Card, and handwrote the names of Mr. Popovic 

and Mr. Caulfield as “President” and “Auth. Signer,” respectively, and the Signature 

Card in evidence bears the signatures of both Mr. Popovic and Mr. Caulfield. (Barnett 

Decl. at 2, Exs. A–B.) It was Defendant’s and Mr. Barnett’s normal practice to look at the 

previous signature card for an account and verify that at least one of the individuals 

present for the purpose of adding or changing an authorized signer on a business 

checking account was an authorized signer on the account. (Barnett Decl. at 2.) Upon 

verification, Mr. Barnett’s normal practice would been to have the corporate 

representative, in this case Mr. Popovic, sign both the Corporate Resolutions and 

Signature Cards, and he would require that each authorized signer present two forms of 

identification. (Barnett Decl. at 2.) The second page of the Signature Card documentation 

has two identification verifications that include Mr. Popovic’s and Mr. Caufield’s driver 

license numbers and Mr. Popovic’s Bank of America Visa Debit Card ending in ‘3318, 

which Mr. Popovic testified was assigned to him. (Barnett Decl. at 2, Ex. B; Popovic 

Dep. at 87–89.) The identification verification information is in Mr. Barnett’s 

handwriting. (Barnett Decl. at 2, Ex. B.) Bank records also show that Mr. Caulfield and 

Mr. Popovic signed a document entitled, “Certified Copy of Corporate Resolution – 

Opening and Maintaining Deposit Account and Services” (Corporate Resolution). 

(Barnett Decl. at 1–2, Ex. A.) 

 Plaintiffs contend Mr. Caulfield was not in Arizona on May 13, 2011, to execute 

the Signature Card.3

 (PSOF at 5–7.) To support this assertion, Plaintiffs point to the 

 3

 The parties spend considerable time addressing whether Mr. Popovic was in Europe on May 13, 2011, as Plaintiffs previously asserted. The Court does not address this issue because Plaintiffs, in their Response, now state Mr. Popovic “may have been incorrect as to his travel dates” (Resp. at 21), and Defendant has provided evidence from U.S. Customs and Border Patrol that contradicts Plaintiffs’ previous assertion (DSOF, Ex. 16). 

Plaintiffs also contend that Mr. Popovic denied that he met Mr. Caulfield at a 

BANA branch in Arizona on May 13, 2011. In support, Plaintiffs cite Exhibit 2 to their Statement of Facts, which they incorrectly identify as Mr. Popovic’s deposition transcript. When the Court located Mr. Popovic’s deposition transcript as Exhibit 3 to Plaintiffs’ Statement of Facts, the page number Plaintiffs cited was not included in the 

pages provided. (PSOF at 7.) There are numerous other mistakes and/or missing exhibits in Plaintiffs’ filing. In addition, many of Plaintiffs’ statements in their Statement of Facts 

are not supported by the record cites. For example, paragraph 33 of their Statement of 

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Promissory Note also executed on May 13, 2011, that states “Newport Beach, California” 

on the first page (PSOF, Doc. 98-1, Ex. 7 at 1; DSOF, Ex. 3) and emails between 

Mr. Popovic and Mr. Caulfield that do not mention they were in each other’s presence 

that day (PSOF, Ex. 104

 at 162–71). 

 As to the Corporate Resolution, Mr. Popovic testified the signature on the 

document “appears to be my signature,” but “I don’t know if it is or it isn’t. It appears to 

be a signature type of my name, but I can’t tell you if it’s my signature or not.” (Popovic 

Dep. at 53.) He then stated, “I can tell you it’s probably not my signature because the way 

the Ps are signed,” and clarified it was not his signature on the document. (Popovic Dep. 

at 53–54.) Defendant’s handwriting expert opined Mr. Popovic signed the Corporate 

Resolution and the Signature Card. (DSOF, Ex. 8, Handwriting Report at 1, 6.) 

 Mr. Caulfield testified regarding an unaltered copy of an email from Mr. Popovic 

to him dated June 3, 2011 concerning his status as signer on the ‘4610 Account. 

(Caulfield Dep. at 70–71; DSOF, Ex. 9.) The email referenced the complete number of 

the ‘4610 Account and stated “Just went to bank,” and, “You and I are the only signers 

on the account. Balance is $100,000.00 USD.” (DSOF, Ex. 9.) Mr. Popovic also 

 Facts provides, “Gowins’ responsibility was, ‘basic bookkeeping’ for GSG [Greyside] however he was not a signor on the 4610 bank account,” citing to Exhibit 11 (Gowins Dep.) at 17:9. That line in Gowins’ deposition, and those around it in the transcript, provide that Mr. Gowins was engaged in conference calls and management meetings – there is no mention of whether or not Mr. Gowins was a signor on the ‘4610 Account. The Court is under no obligation “to scour the record in search of a genuine issue of triable fact,” nor is it obligated to rectify Plaintiffs’ mistakes or give credence to Plaintiffs’ misrepresentations. Simmons v. Navajo Cty., Ariz., 609 F.3d 1011, 1017 (9th 

Cir. 2010). Indeed, the Ninth Circuit Court of Appeals has previously “upheld a district court’s summary judgment where there was a violation of a pertinent local rule expressly indicat[ing] that the [nonmoving party] had an affirmative burden to list genuine issues with appropriate record citations in order to withstand the motion for summary judgment.” Id. (internal citation omitted); see also LRCiv 56.1(b) (requiring reference “to a specific admissible portion of the record”). Defendant also noted its concern with regard to missing exhibits in Plaintiffs’ filings. In their Response to Defendant’s Second Motion in Limine, Plaintiffs state the 

Court’s electronic filing system was rejecting their documents, but Plaintiffs notified Defendant’s counsel of this and delivered a copy of the exhibits to Defendant. (Doc. 132 

at 4.) The Court does not resolve this issue because it is not material to the Court’s 

decision on the Motions. 4

 Plaintiffs’ electronic filing of their exhibits to their Statement of Facts does not 

include Exhibit 10. Plaintiffs provided the Court with the hard copy of their exhibits, which include Exhibit 10, Mr. Caulfield’s deposition transcript. 

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produced the email from his records (DSOF, Ex. 10), and Defendant’s forensic computer 

expert opined the Exhibit 10 email is authentic (DSOF, Ex. 11 at 5, 11). 

C. Mr. Gowins and the Greyside Accounts 

Defendant asserts Mr. Popovic signed various authorization documents allowing 

Mr. Gowins to take actions on the Greyside BANA accounts. Mr. Gowins was an 

employee of TrustCommerce, the entity through which Mr. Caulfield invested in 

Greyside. (Gowins Dep. at 14.) Mr. Caulfield initially asked Mr. Gowins for his 

assistance with Greyside’s financials, and later, Mr. Gowins took responsibility for 

bookkeeping. (Gowins Dep. at 14–17.) Mr. Gowins testified he obtained access to 

Greyside accounts after he, Mr. Popovic, and Mr. Caulfield signed various documents 

and set up a CashPro account, which was attached to the Greyside account and allowed 

for efficient wiring of funds globally. (Gowins Dep. at 17–25.) Mr. Gowins sent 

Mr. Popovic documents via email that with Mr. Popovic’s signature, would allow 

Mr. Gowins to open and manage the CashPro account on behalf of Greyside. (Gowins 

Dep. at 25.) An August 2011 email from Mr. Gowins to Mr. Popovic and BJ Lamb, Chief 

Operating Officer of Greyside, regarding the authorization documents for the CashPro 

account states, “Currently these [documents attached to the email] assign me as the 

administrator and allow me to conduct transactions without a 2nd authorization.” 

(Gowins Dep. at 21–25; DSOF, Ex. 24.) Mr. Gowins also testified that he received the 

signed authorization forms allowing him to open the CashPro account from Mr. Popovic 

via email, and the email from Mr. Popovic to Mr. Gowins indicates the same. (Gowins 

Dep. at 26; Exs. 25–27.) Attached to an email from Mr. Lamb to Mr. Popovic and 

Mr. Gowins is the BANA “Authorization and Agreement for Treasury Services” 

document, which bears the signatures of both Mr. Popovic and Mr. Lamb, and the BANA 

CashPro authorization with Mr. Popovic’s signature. (DSOF, Ex. 27.) 

 Mr. Gowins also testified that Mr. Popovic signed off on additional authorizations. 

In September 2011, Mr. Popovic signed a BANA Deposit Account Documentation 

Signature Card after Mr. Gowins informed Mr. Popovic that he would need additional 

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authorization for other wiring actions for the Greyside account. (Gowins Dep. at 38–41; 

DSOF, Ex. 29.) In an email from Mr. Popovic in response to Mr. Gowins’s authorization 

request, Mr. Popovich states, “Here’s the signed signature card.” (DSOF, Ex. 28.) Mr. 

Popovic also authorized the opening of the KARC account with Defendant (Popovic Dep. 

at 199), and Mr. Popovic executed documents allowing Mr. Gowins access the account in 

August 2011 (Gowins Dep. at 32–35, 37–39; DSOF, Exs. 31–32). 

 Defendant’s forensic computer expert confirmed the accuracy and authenticity of 

the email correspondence described above. (DSOF, Ex. 11 at 5, 11.) 

 For their part, Plaintiffs assert Mr. Gowins was not a signor on the ‘4610 Account, 

but do not cite to any evidence supporting that assertion. Generally, Plaintiffs appear to 

contend that the various authorizations Mr. Gowins’ asserts he obtained from 

Mr. Popovic with regard to Greyside accounts were not in fact obtained and rather, the 

documents only “purported to have Mr. Popovic’s signature.” (PSOF at 9–10.) Plaintiffs 

also spend considerable time reviewing the actions of Ms. Spinogatti, an employee of 

Defendant handling the transfer of funds in the ‘4610 Account, and contend her actions 

were contrary to Defendant’s practices and policies and her training. (PSOF at 14–15.)5

 

 D. Dispute and Breakdown Among the Business Partners 

Mr. Popovic, Mr. Caulfield, and the other business partners had a falling out in 

2011, resulting in Mr. Popovic initiating a suit against Mr. Caulfield and Mr. Gowins, 

among others. (DSOF, Exs. 12–13.) By September 2011, Mr. Caulfield had concerns 

about Mr. Popovic’s conduct and business decisions. (Caulfield Dep. at 109; Ex. 33 at 3.) 

After learning that Mr. Popovic had used Mr. Caulfield’s personal credit card for what 

Mr. Caulfield believed to be personal expenses, he decided to end his involvement with 

Greyside. (Caulfield Dep. at 116–18; DSOF, Ex. 34.) 

 On November 1, 2011, Mr. Gowins requested, via letter, that Ms. Spinogatti 

transfer out all remaining funds in the ‘4610 Account into the Greyside Global operating 

 5

 Plaintiffs’ Statement of Facts includes other statements with regard to Ms. Spinogatti’s failure to comport with proper procedures, but Plaintiffs again misrepresent many of her statements, and the Court does not consider those portions of Plaintiffs’ Statement of Facts. 

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account and close the ‘4610 Account. (Gowins Dep. at 56–57; DSOF, Ex. 35.) 

Ms. Spinogatti stated that upon receipt of Mr. Gowins’ request, she reviewed the 

Corporate Resolution and Signature Cards for the ‘4610 Account, and that while 

Mr. Gowins was authorized to close the account per the Deposit Account Documentation 

Signature Card, it was the policy of her department to require a person authorized under 

the Corporate Resolution to request an account closure. (DSOF, Ex. 36, Spinogatti Decl. 

at 4.) After notifying Mr. Gowins of this, Mr. Caulfield, who was authorized under the 

Corporate Resolution on file with the bank, sent a letter to Ms. Spinogatti requesting the 

bank close the ‘4610 Account. (Spinogatti Decl. at 4, Ex. B.) Ms. Spinogatti consulted 

with her manager, Ted Tragos, who approved closing the ‘4610 Account. (DSOF, Ex. 37, 

Spinogatti Dep. at 137–145; Spinogatti Decl. at 4.) Mr. Gowins also directed 

Ms. Spinogatti to close the KARC Account, and she did so. (DSOF, Exs. 38–39.) 

The Court now considers Defendant’s Motion for Summary Judgment as to 

Plaintiffs’ breach of contract, breach of covenant of good faith and fair dealing, 

negligence, and negligent hiring, training, and retention claims.6

 

II. SUMMARY JUDGMENT LEGAL STANDARD 

 Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is 

appropriate when: (1) the movant shows that there is no genuine dispute as to any 

material fact; and (2) after viewing the evidence most favorably to the non-moving party, 

the movant is entitled to prevail as a matter of law. Fed. R. Civ. P. 56; Celotex Corp. v.

Catrett, 477 U.S. 317, 322–23 (1986); Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 

1288–89 (9th Cir. 1987). Under this standard, “[o]nly disputes over facts that might affect 

the outcome of the suit under governing [substantive] law will properly preclude the 

 6

 In their Amended Complaint, Plaintiffs allege the following claims against Defendant: aiding and abetting tortious conduct (Am. Compl. at 8); breach of fiduciary duty (Am. Compl. at 13); and a claim under the Uniform Commercial Code, A.R.S., Title 

47, Chapters 4 and 4A (Am. Compl. at 12–13). Defendant addresses these claims in its 

Motion for Summary Judgment, but Plaintiffs do not mention or address the claims in 

their Response. Accordingly, Plaintiffs have abandoned those claims. See Jenkins v. Cnty. of Riverside, 398 F.3d 1093, 1095 n.4 (9th Cir. 2005) (stating plaintiff abandoned two of her claims when she did not raise them in opposition to the motion for summary judgment). 

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entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 

A “genuine issue” of material fact arises only “if the evidence is such that a reasonable 

jury could return a verdict for the non-moving party.” Id.

 In considering a motion for summary judgment, the court must regard as true the 

non-moving party’s evidence if it is supported by affidavits or other evidentiary material. 

Celotex, 477 U.S. at 324; Eisenberg, 815 F.2d at 1289. The non-moving party may not 

merely rest on its pleadings; it must produce some significant probative evidence tending 

to contradict the moving party’s allegations, thereby creating a material question of fact. 

Anderson, 477 U.S. at 256–57 (holding that the plaintiff must present affirmative 

evidence in order to defeat a properly supported motion for summary judgment); First 

Nat’l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 289 (1968). 

 “A summary judgment motion cannot be defeated by relying solely on conclusory 

allegations unsupported by factual data.” Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 

1989). “Summary judgment must be entered ‘against a party who fails to make a showing 

sufficient to establish the existence of an element essential to that party’s case, and on 

which that party will bear the burden of proof at trial.’” United States v. Carter, 906 F.2d 

1375, 1376 (9th Cir. 1990) (quoting Celotex, 477 U.S. at 322). 

III. THE PARTIES’ EVIDENTIARY DISPUTES 

Before addressing the merits of Defendant’s Motion for Summary Judgment, the 

Court must resolve evidentiary disputes that bear on the Court’s analysis. 

 A. Mr. Popovic’s 2011 In-Court Testimony and 2015 Deposition 

 Testimony 

 In its Motion for Summary Judgment, Defendant argues Mr. Popovic’s 2015 

deposition testimony that he did not sign the Corporate Signature Card, making 

Mr. Caulfield an authorized signer on the ‘4610 Account, is a sham contradicting his 

previous, sworn testimony in this Court in 2011. (Mot. at 10.) 

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 1. Legal Standard 

 The “general rule in the Ninth Circuit is that a party cannot create an issue of fact 

by an affidavit contradicting his prior deposition testimony.” Kennedy v. Allied Mut. Ins. 

Co., 952 F.2d 262, 266 (9th Cir. 1991) (citing Foster v. Arcata Associates, 772 F.2d 

1453, 1462 (9th Cir. 1985)); Radobenko v. Automated Equipment Corp., 520 F.2d 540, 

543–44 (9th Cir. 1975). This rule is commonly referred to as the “sham affidavit rule.” 

“[I]f a party who has been examined at length on deposition could raise an issue of fact 

simply by submitting an affidavit contradicting his own prior testimony, this would 

greatly diminish the utility of summary judgment as a procedure for screening out sham 

issues of fact.” Foster, 772 F.2d at 1462; Radobenko, 520 F.2d at 544. The principles of 

the sham affidavit rule apply equally to the situation here, where Mr. Popovic’s prior, 

sworn testimony in this Court may be at odds with his later deposition testimony, which, 

like an affidavit, is sworn testimony. 

 The sham affidavit rule should be applied with caution because it is in tension with 

the principle that a court should not make credibility determinations when deciding a 

motion on summary judgment. Van Asdale v. Int’l Game Tech., 577 F.3d 989, 998 (9th 

Cir. 2009). The rule does not automatically dispose of every case in which a 

contradictory affidavit is introduced, but rather, the court must make a factual 

determination that the contradiction was in fact a sham. Id. The court must also find the 

inconsistency between a party’s earlier and subsequent testimony to be clear and 

unambiguous to justify striking the later testimony. Id. at 998–99. 

 2. Analysis 

In November 2011, in his case against Mr. Caulfield and others, Mr. Popovic 

testified at a Temporary Restraining Order hearing in this Court before Judge Wake. The 

testimony was as follows: 

 Q: Who are the signatories on the Global bank accounts? Who’s entitled to 

 access those bank accounts? 

 A: The original account was a Greyside Group, Inc., bank account. 

 Q: Okay. 

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 A: Mr. Caulfield and I, after he invested his money, he was put on as a signer, I mean, he and I were the only two on the bank account as signers. 

 THE COURT: Did you each have the authority to sign or was it joint signature required? And my question is whether he has 

 unilateral authority without your approval? 

 THE WITNESS: I don’t think that’s the case, Your Honor, but I’m not a 

 hundred percent certain. 

(DSOF, Ex. 14 at 70.) At Mr. Popovic’s January 2015 deposition, he testified that while 

he saw a signature that “appears to be [his] signature” on the May 13, 2011 Signature 

Card purportedly giving Mr. Caulfield authorization as a signer to the ‘4610 Account, he 

did not recall signing the document and he did not believe it was his signature. (Popovic 

Dep. at 51–56.) 

 The Court acknowledges whether or not Mr. Popovic’s 2011 and 2015 statements 

contradict each other is a close call, but for several reasons, the Court does not find the 

inconsistency between the statements to be clear and unambiguous. See Van Asdale, 577 

F.3d at 998–99. Because of the compound questions and Mr. Popovic’s unclear 

responses, the 2011 testimony does not make entirely clear what Greyside account 

Mr. Popovich was being asked about, and Mr. Popovic’s responses indicate he was not 

certain whether Mr. Caulfield had the authority to make unilateral actions on any 

Greyside account. Although Mr. Popovic generally states Mr. Caulfield was “put on as a 

signer,” this does not directly contradict the narrower subject of Mr. Popovic’s 2015 

deposition testimony that he did not sign the Signature Card dated May 13, 2011. In 

addition, the transcript from the 2011 hearing does not indicate Mr. Popovic was 

examined “at length,” and the Court is not inclined to find a clear inconsistency based on 

such a small portion of testimony from that time. See Foster, 772 F.2d at 1462. These 

concerns, taken together, persuade the Court that the contradiction between 

Mr. Popovic’s 2011 and 2015 testimony is not clear and unambiguous. See Van Asdale, 

577 F.3d at 998–99. The Court will not discard Mr. Popovic’s 2015 deposition testimony 

as a sham in its resolution of Defendant’s Motion for Summary Judgment. 

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 B. Plaintiffs’ Damages Case 

In its Motions in Limine and Motion for Summary Judgment, Defendant argues 

Plaintiffs should not be able to introduce evidence at summary judgment or trial 

regarding their alleged damages because Plaintiffs never disclosed any damages case or 

expert damages witnesses during discovery. (Mot. at 1; Mot. in Limine 1 at 1–2; Mot. in 

Limine 2 at 1–2.) Specifically, in Defendant’s first Motion in Limine, it seeks to exclude 

damages allegations that it alleged Plaintiffs set out for the first time in a letter from 

Plaintiffs’ counsel dated October 29, 2015, after discovery closed. (See Mot. in Limine 1.) 

In that Motion, Defendant also argued Plaintiffs had never set out any specific Defendant 

bank account transactions they challenged. (Mot. in Limine 1 at 5.) In Defendant’s second 

Motion in Limine, it seeks to exclude new information Plaintiffs included in their 

Response to Defendant’s Motion for Summary Judgment, including the specific 

Defendant bank account transactions Plaintiffs challenge and a declaration from Dave 

Engert, Mr. Popovic’s mentor and a disclosed fact witness, in support of Plaintiffs’ 

damage claim. (See Mot. in Limine 2 at 2.) Defendant also argues because damages are a 

prima facie element of every cause of action, the case should be dismissed. (Mot. at 1.) 

 1. Legal Standard 

 Federal Rule of Civil Procedure 37(c)(1) provides, “[i]f a party fails to provide 

information or identify a witness as required by Rule 26(a) or (e), the party is not allowed 

to use that information or witness to supply evidence on a motion, at a hearing, or at a 

trial, unless the failure was substantially justified or is harmless.” This rule “gives teeth to 

these [Rule 26(a) and (e)] requirements by forbidding the use at trial of any information 

required to be disclosed by Rule 26(a) [and (e)] that is not properly disclosed.” Yeti by 

Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001). Rule 

37(c)(1) is “a recognized broadening of the sanctioning power,” and as the Ninth Circuit 

Court of Appeals noted referring to the Advisory Committee Notes, the rule is a “selfexecuting, automatic sanction to provide[ ] a strong inducement for disclosure of 

material.” Id. (internal quotations omitted). The burden to show that the violation of Rule 

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26(a) or (e) is substantially justified or harmless is on the party facing sanctions. Yeti, 259 

F.3d at 1107. 

The Ninth Circuit and district courts have excluded untimely damages disclosure 

information and witnesses under Rule 37(c)(1) for failure to comply with Rule 26, even 

when such exclusion results in dismissal of a claim. Munchkin, Inc. v. Playtex Products, 

LLC, 600 F. App’x 537 (9th Cir. 2015), as amended (July 31, 2015); Remington v. 

Mathson, 575 F. App’x 808, 809 (9th Cir. 2014); Cable v. City of Phoenix, No. CV-12-

00216-PHX-JAT, 2013 WL 6532023, at *7, 13 (D. Ariz. Dec. 13, 2013), aff’d in part, 

rev’d in part and remanded, No. 14-15037, 2016 WL 1380913 (9th Cir. Apr. 7, 2016); 

HM Hotel Properties v. Peerless Indem. Ins. Co., No. CV-12-0548-PHX-DGC, 2013 WL 

4507602, at *3–4 (D. Ariz. Aug. 23, 2013), aff’d, 624 F. App’x 520 (9th Cir. 2015). 

Where a Rule 37(c)(1) sanction will amount to dismissal of a claim, the Court must 

consider whether the claimed noncompliance involved willfulness, fault, or bad faith, and 

consider the availability of lesser sanctions. R & R Sails, Inc. v. Ins. Co. of Pennsylvania, 

673 F.3d 1240, 1247 (9th Cir. 2012). 

 Federal Rule of Civil Procedure 26(a)(1) requires that a party disclose “a 

computation of each category of damages claimed by the disclosing party--who must also 

make available for inspection and copying as under Rule 34 the documents or other 

evidentiary material, unless privileged or protected from disclosure, on which each 

computation is based, including materials bearing on the nature and extent of injuries 

suffered.”7

 

 Rule 26(a)(2) requires disclosure of expert testimony in accordance with the 

schedule set by the Court. The deadline for disclosure of experts passed in this case and 

 

7

 Arizona Rule of Civil Procedure 26.1(a)(7), which was applicable to this case 

prior to removal, also requires disclosure of “[a] computation and the measure of damage alleged by the disclosing party and the documents or testimony on which such computation and measure are based and the names, addresses, and telephone numbers of all damage witnesses.” To the extent Plaintiffs argue Arizona Rules of Civil Procedure apply in this case after removal, that argument is invalid and the Federal Rules of Civil 

Procedure applied after this case was removed on February 26, 2015 (Doc. 1). Fed. R. Civ. P. 81(c). 

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on August 13, 2015, the Court ordered Plaintiffs were precluded from relying on or 

proffering an expert opinion or report on damages. (Doc. 59; Doc. 88-1 at 30:12–31:19.) 

 When a party has updated or new information, Rule 26(e) requires that a party 

who has made disclosures under Rule 26(a) supplement or correct its response “in a 

timely manner if the party learns that in some material respect the disclosure or response 

is incomplete or incorrect, and if the additional or corrective information has not 

otherwise been made known to the other parties during the discovery process or in 

writing.” 

 2. Analysis 

 Plaintiffs generally allege they are entitled to damages based on the unlawfully 

transferred funds from the ‘4610 Account and related damages arising from the injury 

Greyside suffered, including injury from loss of value of the company and compensable 

damages to Greyside’s reputation. 

 a. Plaintiffs Failed to Comply with Rule 26

 Plaintiffs repeatedly failed to meet their obligation under Rule 26(a)(1) to disclose 

a computation of each category of damages claimed and make available supporting 

materials. Plaintiffs’ initial Rule 26.1 disclosure statement, served in October 2014, did 

not provide a computation and measure of damages. (Mot. in Limine 1, Ex. A at 16.) In 

their initial disclosure, Plaintiffs stated a computation of damages was detailed in the 

description of the legal basis for each claim, but those sections only included general 

descriptions of damages devoid of any detail. (Mot. in Limine 1, Ex. A at 8–14.) In a 

letter dated December 31, 2014, Plaintiffs’ counsel stated she reviewed the financial 

records to determine what documents she would need to provide an accurate computation 

of damages and she was awaiting input from Plaintiffs’ expert, but would send the 

finalized list of requested documents to Defendant by the end of the following week. 

(Mot. in Limine 1, Ex. D at 2.) She also stated she believed damages would be no less 

than $250,000, and that she was awaiting additional expert reports that would further 

inform the claimed loss. (Mot. in Limine 1, Ex. D at 2.) 

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 Plaintiffs also repeatedly stated, through counsel and Mr. Popovic himself, that 

Mr. Popovich would not testify as to any type of damages, but after the close of 

discovery, Plaintiffs attempted to have Mr. Popovic do just that. In Plaintiffs’ counsel’s 

December 31, 2014 letter, she stated, “Mr. Popovic will not testify about losses, our 

disclosed expert will.” (Mot. in Limine 1, Ex. D at 2.) Again, on January 6, 2015, in a 

letter to Defendant’s counsel, Plaintiffs’ counsel stated, “I have made it very clear, that 

Mr. Popovic will not be testifying to damages . . . .” (Mot. in Limine 1, Ex. F at 1.) At his 

deposition on January 7, 2015, Mr. Popovic testified he did not have any independent 

knowledge of the basis for the $250,000 in damages and he could not identify any 

specific, contested bank transactions. (Mot. in Limine 1, Ex. E at 183–86.) He also 

testified he would rely on the expert witness with regard to other damages. (Mot. in 

Limine 1, Ex. E at 178–79.) 

 Plaintiffs’ arguments in response to Defendant’s Motions in Limine are unavailing 

and do not directly address the lack of information and Plaintiffs’ counsel’s failure to 

provide additional information as outlined above. Plaintiffs contend that from other 

materials they provided, such as Plaintiffs’ “in house records, terminated contracts, 

business plan, [and] capital influx,” (Doc. 82 at 9), investment documents that show 

Mr. Caulfield’s investment (Mot. in Limine 1, Ex. H at 8), and corporate documents that 

show Greyside’s outstanding shares (Mot. in Limine 1, Ex. H at 8), Defendant could have 

ascertained the value of Greyside’s business loss damages. They also state that from their 

disclosures, Defendant could have reasonably expected that the result of transferring the 

funds from the ‘4610 Account “would be the demise of Plaintiff’s Company as a whole,” 

and Defendant could have adopted Mr. Caulfield’s investment valuation as a reasonable 

damage. (Mot. in Limine 1, Ex. H at 8–9.) Plaintiffs also point to Defendant’s own 

actions, such as its Notice of Removal that articulated damages exceeding $75,000 (see 

Doc. 82 at 4–5, 10–11), and contend that these show Defendant could ascertain Plaintiffs’ 

asserted damages. 

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 Plaintiffs’ other disclosures and theories as to how Defendant could have 

determined their damages case does not constitute compliance with Rule 26(a)(1)’s 

requirement to disclose a computation of each category of damages claimed. The Court 

finds Plaintiffs were also noncompliant with Rule 26(e)’s requirement to supplement 

disclosures with further evidence or analysis as to damages as discovery progressed. This 

is especially so where Plaintiffs’ counsel led Defendant to believe that specific 

information as to transactions at issue was forthcoming, which implicitly shows Plaintiffs 

were aware of the need to provide or supplement damages disclosure information.

 Plaintiffs also incorporated into their Response to Defendant’s Motion for 

Summary Judgment a declaration from Mr. Engert to support Plaintiffs’ newly asserted 

damages claim of $6.7 million. (Resp. at 17–18.) Defendant asserts Plaintiffs proffered 

Mr. Engert as a “faux expert” to render “faux expert” valuation opinions, and his opinion 

should be excluded because the Court previously ruled Plaintiffs were barred from using 

a damages expert after they missed the applicable discovery deadline. (Mot. in Limine 2 

at 3, 8–9.) Plaintiffs previously disclosed Mr. Engert as a fact witness expected to testify 

as to his “review of company records” and “relevant facts within knowledge.” (Doc. 132 

at 2.) Plaintiffs’ previous disclosure of Mr. Engert with no indication that he would testify 

as to damages has no effect on the Court’s determination that Plaintiffs failed to provide a 

computation of damages as required by Rule 26(a). Accordingly, the Court finds Mr. 

Engert’s testimony as to damages is precluded and it need not reach the parties’ argument 

regarding whether or not Mr. Engert would provide expert testimony or opinion.8

 

 8

 Defendant also argues Mr. Popovic should be barred from providing testimony as to damages based on an expert investment valuation theory because he is a lay witness and investment valuation testimony would constitute expert testimony that Plaintiffs are barred from providing. (Mot. in Limine 1 at 8–9.) Again, under Rule 26(a)(1), Plaintiffs were required to provide a computation as to each type of damages claimed, and Plaintiffs failed to do so prior to the close of discovery, so their untimely assertion regarding damages is precluded. The Court therefore need not address whether or not 

Mr. Popovic was providing expert testimony. 

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 The Court finds Plaintiffs failed to meet their obligations under Rules 26(a)(1) and 

(e) as to damages disclosures, and their efforts to provide damages evidence after 

discovery has closed would prejudice Defendant. 

 b. Rule 37(c)(1) Sanctions Against Plaintiffs are Justified 

 First, Plaintiffs do not meet their burden to show how their violations of Rule 26 

are either substantially justified or harmless. See Yeti, 259 F.3d at 1107. In their 

Responses to Defendant’s Motions in Limine, Plaintiffs do not put forth any argument 

that their violations were substantially justified, but rather assert they complied with Rule 

26. The Court also finds no evidence justifying Plaintiffs’ noncompliance. Defendant 

requested supplemental damages information (see Mot. in Limine 1, Ex. C) and counsel 

for Plaintiffs acknowledged that more detail would be forthcoming, thus implicitly 

acknowledging the necessity of that information (Mot. in Limine 1, Ex. D at 2). Counsel 

for Plaintiffs did not show any justification for failure to provide additional information 

as to damages prior to the close of discovery, and the Court finds Plaintiffs had sufficient 

time to provide Defendant with such information. 

 Plaintiffs’ noncompliance is also not harmless. Defendant is prejudiced by 

Plaintiffs’ noncompliance where only after discovery was closed did Plaintiffs provide 

allegations, theories, and information as to their claim for damages, including notification 

that Mr. Popovic would testify as to damages after repeatedly representing otherwise. 

Defendant has lost its opportunity to challenge Plaintiffs’ late-asserted damages claim. 

For example, Defendant is now precluded from deposing Mr. Popovic regarding damages 

and did not do so earlier based on Plaintiffs’ assertion that Mr. Popovic would not testify 

as to damages. This also applies to Mr. Engert, who Plaintiffs never disclosed would 

testify as to damages. Moreover, this case is now at the summary judgment stage. The 

Court has already considered and denied Plaintiffs’ request to extend the expert discovery 

deadline. (Doc. 59.)While it may be within the Court’s discretion to reopen discovery, the 

Court will not give Plaintiffs such a benefit in the face of their noncompliance. Moreover, 

such an extension would be substantial and costly, causing prejudice to Defendant. 

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Having concluded that Rule 37(c)(1) sanctions are justified, the Court must 

consider whether Plaintiffs’ noncompliance involved willfulness, fault, or bad faith. See 

R & R Sails, 673 F.3d at 1247. The Court does not find any evidence that Plaintiffs 

initially acted in bad faith or that their initial failure to disclose was willful. But Plaintiffs 

continued to fail to provide supplementary damages information and unequivocally 

represented to Defendant that Mr. Popovic would not testify as to damages, only to later 

reverse their position. Further, Plaintiffs told Defendant it was on notice because 

Plaintiffs previously stated Mr. Popovic would testify as to “all matters.” Plaintiffs’ 

continued failure to meet their Rule 26 obligations eventually became willful after 

sufficient time passed. See Montalvo v. Am. Family Mut. Ins. Co., No. CV-12-02297-

PHX-JAT, 2014 WL 2986678, at *8 (D. Ariz. July 2, 2014). Plaintiffs’ actions constitute 

a knowing refusal to attempt to remedy their violation and their noncompliance was 

willful. See R & R Sails, 673 F.3d at 1247. 

 The Court concludes that the exclusion of Plaintiffs’ untimely evidence regarding 

their alleged damages is the appropriate sanction for Plaintiffs’ failure to disclose as 

required under Rule 26(a) and (e) and that no lesser sanction would be sufficient. See 

Fed. R. Civ. P. 37(c)(1). Accordingly, the Court will not consider this evidence in ruling 

on Defendant’s Motion for Summary Judgment. 

IV. PLAINTIFFS’ CONTRACT CLAIMS

A. Breach of Contract 

To prove a breach of contract claim, a plaintiff must prove the existence of a 

contract, its breach, and the resulting damage. Coleman v. Watts, 87 F. Supp. 2d 944, 955 

(D. Ariz. 1998) (citing Clark v. Compania Ganadera de Cananea, S.A., 387 P.2d 235, 

237 (Ariz. 1963)). 

 As stated, Plaintiffs failed to meet their obligation under Rule 26 to disclose a 

computation of damages as to their alleged damages from the ‘4610 Account transfers 

and resulting harm to Greyside’s business. Because the Court does not consider 

Plaintiffs’ untimely presented damages evidence and because proof of damages is 

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required for a breach of contract claim, the Court will therefore grant summary judgment 

on Plaintiffs’ breach of contract claim. 

B. Breach of Covenant of Good Faith and Fair Dealing 

 Arizona law implies a covenant of good faith and fair dealing in every contract. 

Rawlings v. Apodaca, 726 P.2d 565, 569 (Ariz. 1986). Contract damages are commonly 

available for breach of the covenant and are part of the prima facie case. See United 

Dairymen of Ariz. v. Schugg, 128 P.3d 756, 762 (Ariz. Ct. App. 2006). Plaintiffs have 

failed to present a damages case, a prima facie element of this cause of action. 

Accordingly, the Court will grant summary judgment on Plaintiffs’ breach of covenant of 

good faith and fair dealing claim. 

V. PLAINTIFFS’ TORT CLAIMS 

A. Negligence 

 To establish a claim for negligence, a plaintiff must prove four elements: “1) a 

duty requiring the defendant to conform to a certain standard of care; (2) a breach by the 

defendant of that standard; (3) a causal connection between the defendant’s conduct and 

the resulting injury; and (4) actual damages.” Diaz v. Phoenix Lubrication Serv., Inc., 230 

P.3d 718, 721 (Ariz. Ct. App. 2010) (quoting Gipson v. Kasey, 150 P.3d 228, 230 (Ariz. 

2007)). As with Plaintiffs’ contract claims, because Plaintiffs failed to disclose a damages 

case and damages are an element of a negligence claim, the Court will grant summary 

judgment on Plaintiffs’ negligence claim. 

B. Negligent Hiring, Training, and Retention 

In order for an employer to be liable for negligent hiring, training, or retention of 

an employee, the employee must have committed a tort. Kuehn v. Stanley, 91 P.3d 346, 

352 (Ariz. Ct. App. 2004). “If the theory of the employee’s underlying tort fails, an 

employer cannot be negligent as a matter of law for hiring or retaining the employee.” Id. 

Here the underlying tort fails because the Court will not consider Plaintiffs’ damages 

evidence, and damages are an element of an underlying tort claim. The Court will grant 

summary judgment as to Plaintiffs’ negligent hiring, training, or retention tort claim. 

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VI. CONCLUSION 

 The Court finds Plaintiffs repeatedly failed to comply with their obligations under 

Federal Rule of Civil Procedure 26, and an exclusion sanction as to Plaintiffs’ damages 

evidence is justified pursuant to Federal Rule of Civil Procedure 37 because Plaintiffs’ 

noncompliance was willful. Accordingly, the Court did not consider Plaintiffs’ latedisclosed damages evidence in considering Defendant’s Motion for Summary Judgment. 

In the absence of the prima facie element of damages, the Court grants summary 

judgment on Plaintiffs’ two contract claims and two tort claims. 

 IT IS THEREFORE ORDERED granting Defendant Bank of America, N.A.’s 

Motion for Summary Judgment (Doc. 77), Motion in Limine Pursuant to Rule 37(c)(1) to 

Preclude Plaintiffs from Introducing or Relying on Damages Evidence (Doc. 76), and 

Second Motion in Limine Pursuant to Rule 37(c)(1) to Preclude Plaintiffs from 

Introducing or Relying on Damages Evidence Disclosed for the First Time in Plaintiff’s 

Response to Motion for Summary Judgment (Doc. 121). Defendant Bank of America, 

N.A. is entitled to judgment on all of Plaintiffs’ claims against it. 

 IT IS FURTHER ORDERED directing the Clerk of the Court to enter judgment 

accordingly. 

 IT IS FURTHER ORDERED that, because the Court has dismissed all of Plaintiffs’ 

claims against all named Defendants, the Clerk of the Court is directed to close this matter. 

 IT IS FURTHER ORDERED granting Defendant’s request to file a motion for 

attorneys’ fees. Defendant shall file its motion for attorneys’ fees no later than May 20, 2016, 

and Plaintiffs shall file their Response no later than May 27, 2016. The Court will decide 

whether Defendant is entitled to attorneys’ fees upon review of the parties’ briefing. 

 Dated this 17th day of May, 2016. 

Honorable John J. Tuchi

United States District Judge

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