Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_04-cv-05513/USCOURTS-caed-1_04-cv-05513-4/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

FOSTER POULTRY FARMS, INC. )

and FRESNO FARMING, LLC, )

)

)

)

)

Plaintiff, )

)

vs. )

)

)

SUNTRUST BANK, )

)

)

Defendant. )

)

)

No. CV-F-04-5513 OWW/SMS

ORDER DENYING SUNTRUST'S

MOTION FOR LEAVE TO FILE

SUPPLEMENTAL MEMORANDUM

(Doc. 133) AND DENYING

PLAINTIFFS’ MOTION FOR

SANCTIONS

Defendant SunTrust Bank moves for leave to file a

supplemental memorandum and declarations in connection with the

cross-motions for summary judgment heard on November 14, 2005. 

Plaintiffs oppose the motion and move for sanctions in the

form of the attorneys’ fees. 

A. Procedural Background.

Plaintiffs Foster Poultry Farms, Inc. and Fresno Farming LLC

have sued SunTrust for breach of contract and declaratory relief

arising out of financial documents between Plaintiffs, Defendant

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and Zacky Farms whereby Plaintiffs purchased Zacky Farms. In

pertinent part, Plaintiffs allege that Defendant, during a

subsequent “monetization” of two promissory notes secured by

Letters of Credit, breached a “single-party” provision in the

Letters of Credit by failing to re-issue the Letters of Credit as

required by Paragraph 6 of the Letters of Credit.

In moving for partial summary judgment, Plaintiffs submitted

as Undisputed Fact No. 54: “SunTrust failed to then re-issue the

Letters of Credit to itself, although it is required by Paragraph

6 of the Letters of Credit [sic].” Fact No. 54 is supported by 

the following testimony by Marcy Lyons given at Defendant’s Rule

30(b)(6) corporate deposition:

Q. Has Sun Trust [sic] Bank reissued this

letter of credit and substituted itself as

the nominal beneficiary?

A. I do not believe they have. 

...

Q. Did you make any effort prior to coming

here today to find out the answer to my

question; my question being, what was the

basis for the decision not to reissue the

letter of credit, per the instructions?

A. Yes, we did.

Q. And you couldn’t find an answer within

your company, is that right?

A. That’s correct.

Q. So the answers you’re giving me as to why

this letter of credit in Exhibit No. 4 was

not reissued are the best answers the bank

can give me in this deposition?

A. I believe so.

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Q. Is all of your testimony as to Exhibit 4

the same as to Exhibit 3, which is the letter

of credit that is issued in May of 2002 to

the Zackys?

A. Yes, I believe so.

Q. On that letter of credit, you also

received instructions from the Zackys in

writing to transfer it to SunTrust Bank,

right?

A. That’s correct.

Q. And as far as you could tell over there

at SunTrust Bank, no one ever reissued the

letter of credit naming SunTrust Bank as the

beneficiary?

A. That’s correct.

Q. Even though the letter of credit say

that’s what you’re supposed to do when you

get an instruction to transfer, right?

A. That is correct.

Q. And you made an inquiry as best you can

do as the corporate representative of

SunTrust Bank and you can’t come up with any

more information on that subject than you

provided me here today, is that right, Ms.

Lyons?

A. I believe that’s the case.

Defendant responded that Fact No. 54 is undisputed. 

However, at the hearing on the motions for summary judgment,

in response to the Court’s inquiry whether the failure to reissue the Letters of Credit was intentional in order to protect

the tax-deferred status of the sale of Zacky Farms to Plaintiffs, 

counsel for Defendant requested an opportunity to present

evidence that the failure to re-issue the Letters of Credit was

due to mistake. Plaintiffs objected that Defendant had made no

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showing required by Rule 56(f), Federal Rules of Civil Procedure,

for the belated submission of evidence on summary judgment and

that Defendant is precluded by case law from creating an issue of

fact by contradicting previously provided evidence. After

advising Defendant’s counsel of the requirements of Rule 56(f), 

Defendant was allowed to make an offer of proof supported by a

declaration within five days with Plaintiffs to respond by

December 1, 2005 with any objections.

On November 17, 2005, Defendant moved for an extension of

time to which Plaintiffs filed a Statement of Non-Opposition. By

Order filed on December 2, 2005, Defendant’s deadline to submit

the additional evidence was extended to December 12, 2005, with

Plaintiffs’ reply to be filed on December 19, 2005. On December

12, 2005, Defendant again moved for an extension of time, seeking

an extension to December 15, 2005. Plaintiffs filed an

opposition to this request. No Order with respect to Defendant’s

second motion for extension of time was issued. On December 12,

2005, Defendant filed a Supplemental Submittal supported by the

Declaration of James H. Cox, counsel for Defendant, in which Mr.

Cox averred that Defendant could show through testimony of Angela

Batterson, an attorney with the law firm of King & Spaulding, and

of Douglas O’Bryan of Defendant’s Commercial and Investment

Banking Department, that the failure to re-issue the Letters of

Credit was not intentional, but due to mistake. After Plaintiffs

filed Objections to the Supplemental Submittal, on March 21,

2006, Defendant filed a Motion for Leave to File Defendant’s

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Supplemental Memorandum, to which was attached declarations

executed by Marcy Lyons, Angela Batterson, and Douglas O’Bryan. 

This motion was briefed and heard on May 1, 2006.

B. Proposed Supplemental Evidence.

The supplemental declarations sought to be submitted by

Defendant in connection with the cross-motions for summary

judgment are executed by Marcy Lyons, Angela Batterson and

Douglas O’Bryan. 

Marcy Lyons avers that she was employed by Defendant in 2002

and was the representative of Defendant in charge of the 2002

monetization. Ms. Lyons avers:

4. It was my expectation that once the

Instructions to Transfer with respect to the

letters of credit that backed the Notes were

forwarded to SunTrust Bank in Atlanta that

the letters of credit would be reissued in

the name of SunTrust Bank. I was surprised

when I later learned that the letters of

credit had not been reissued. There was no

agreement or understanding of any kind

between the Zacky Trust, or the Brand Family

Trust or any representative thereof and

SunTrust Bank that the letters of credit

would not be reissued by SunTrust Bank

following the monetization as provided in the

instructions to Transfer and in the letters

of credit themselves.

Angela Batterson was an associate in the Banking Department of 

the law firm of King & Spaulding and was one of the attorneys

representing Defendant in the 2002 monetization transaction. Ms.

Batterson avers in pertinent part:

4. After the Monetization was closed, my

legal assistant, at my direction, sent a set

of the closing documents to Doug O’Bryan in

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SunTrust Bank’s Commercial and Investment

Banking Department in Atlanta for processing

and filing.

5. Although no express reminder or

instruction to do so was sent Mr. O’Bryan

along with the cover letter for the closing

documents, it was my expectation that the

Instructions to Transfer would be forwarded

to SunTrust Bank’s Letter of Credit

Department. I did not learn until later that

this had not been done.

Douglas O’Bryan, employed in Defendant’s Commercial and

Investment Banking Department, avers in pertinent part:

4. In 2002, I received a package of closing

documents from the legal assistant to Angela

Batterson, Esq., an attorney with King and

Spaulding, which related to the 2002

transaction with the Zacky Trust and the

Brand Family Trust (the ‘Monetization’) in

which SunTrust Bank monetized the Long-Term

Purchase Notes (the ‘Notes’) of Fresno

Farming, LLC.

5. Upon receipt of the documents, I

forwarded them on to SunTrust Bank’s CCSC

department for processing and storage. I did

not understand at the time that the documents

included original Instructions to Transfer

the Letters of Credit that backed the Notes

to SunTrust Bank which I was supposed to in

turn deliver to SunTrust Bank’s Letter of

Credit Department. I therefore forwarded the

entire package of closing documents on to

CCSC.

C. Merits of Defendant’s Motion.

Rule 56(f), Federal Rules of Civil Procedure, provides:

Should it appear from the affidavits of a

party opposing the motion that the party

cannot for reasons stated present by

affidavit facts essential to justify the

party’s opposition, the court may refuse the

application for judgment or may order a

continuance to permit affidavits to be

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Plaintiffs argue that the belated affidavits are irrelevant 1

to resolution of the cross-motions for summary judgment because

“[t]he wrongful, i.e., the unjustified or unexcused, failure to

perform a contract, is a breach.” 1 Witkin, Summary of California

Law, Contracts, § 847 (10 Ed.). It is not an abuse of discretion th

to deny relief pursuant to Rule 56(f) when the evidence is

irrelevant to the issues to be adjudicated. Wright, Miller & Kane,

supra, § 2741 at p.438. No opinion is expressed herein regarding

the relevance of these belated declarations or their subsequent

admissibility in later proceedings in this action. 

7

obtained or depositions to be taken or

discovery to be had or may make such order

order as is just.

A Rule 56(f) motion must be made prior to the summary

judgment hearing. Ashton-Tate Corporation v. Ross, 916 F.2d 516,

520 (9 Cir.1990). Here, Defendant did not request leave to th

file supplemental evidence before the hearing on the crossmotions for summary judgment and, even then, did not timely

comply after being granted additional time.

Defendant provides no affidavit stating any reason why these

supplemental declarations could not have been provided in

opposition to Plaintiffs’ motion for partial summary judgment. 

See Claar v. Burlington Northern R. Co., 29 F.3d 499, 504 (9th

Cir.1994); 10B Wright, Miller & Kane, Federal Practice and

Procedure: Civil 3d § 2740. Two of the affiants, Marcy Lyons and

Douglas O’Bryan, are Defendant’s employees, and Ms. Batterson is

one of Defendant’s attorneys who worked on the monetization

transaction. The means of proof have been within Defendant’s

control from the outset. The issue was not one that was newly 1

discovered. Any explanation for apparent noncompliance with the

reissuance of the letters of credit was obvious from the

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Plaintiffs’ allegation of noncompliance.

Furthermore, In Foster v. Arenta Assocs., Inc., 772 F.2d

1453, 1462 (9 Cir. 1985) and Radobenko v. Automated Equipment th

Corp., 520 F.2d 540, 544 (9 Cir. 1973), the Ninth Circuit held th

that a party should not be able to substitute an affidavit

alleging helpful facts for earlier deposition testimony harmful

to its case in order to avoid summary judgment. This rule

applies to conflicts between affidavits and interrogatory

responses, School Dist. No. IJ, Multnomah County v. ACandS, Inc.,

5 F.3d 1255, 1264 (9 Cir, 1993), and to Rule 30(e) corrections th

which contradict deposition testimony to create a factual dispute

in order to avoid summary judgment. Hambleton Bros. Lumber Co.

v. Balkin Enterprises, 397 F.3d 1217, 1224-1226 (9 Cir.2005) th

However, in Kennedy v. Allied Mut. Ins. Co. 952 F.2d 262, 266-267

(9 Cir. 1991), the Ninth Circuit held: th

We conclude that the Foster-Radobenko rule

does not automatically dispose of every case

in which a contradictory affidavit is

introduced to explain portions of earlier

deposition testimony. Rather, the Radobenko

court was concerned with ‘sham’ testimony

that flatly contradicts earlier testimony in

an attempt to ‘create’ an issue of fact and

avoid summary judgment. Therefore, before

applying the Radobenko sanction, the district

court must make a factual determination that

the contradiction was actually a ‘sham.’

Here, Marcy Lyons testified at the Rule 30(b)(6) deposition

that she could not find any explanation within SunTrust Bank for

its failure to re-issue the Letters of Credit. Now, Defendant

attempts to belatedly present affidavits, especially the

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affidavit of Douglas O’Bryan, to establish that the reason the

Letters of Credit were not re-issued was due to his mistake. 

These affidavits do more than explain Ms. Lyons prior testimony -

they flatly contradict it. This is the type of post affidavit

contradiction that invokes application of the Foster-Radobenko

rule. As the person most knowledgeable about the transaction,

Ms. Lyons should have inquired within SunTrust if there was any

explanation why the reissuance was not effectuated. Such an

inquiry would have identified Mr. O’Bryan’s explanation. 

D. Plaintiffs’ Request for Sanctions.

Plaintiffs’ move for attorneys’ fees in the amount of

$3,370.00 as a sanction pursuant to Rule 56(g), Federal Rules of

Civil Procedure and 28 U.S.C. § 1927.

Rule 56(g) provides:

Should it appear to the satisfaction of the

court at any time that any of the affidavits

presented pursuant to this rule are presented

in bad faith or solely for the purpose of

delay, the court shall forthwith order the

party employing them to pay to the other

party the amount of the reasonable expenses

which the filing of the affidavits caused the

other party to incur, including reasonable

attorney’s fees, and any offending party or

attorney may be adjudged guilty of contempt.

Plaintiffs argue that sanctions under Rule 56(g) are

appropriate because the supplemental affidavits were not timely

filed, even after the first requested extension was granted, and

because of the failure to comply with Rule 56(f)’s requirements.

28 U.S.C. § 1927 provides:

Any attorney or other person admitted to

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conduct cases in any court of the United

States ... who so multiplies the proceedings

in any case unreasonably and vexatiously may

be required by the court to satisfy

personally the excess costs, expenses, and

attorneys’ fees reasonably incurred because

of such conduct.

As explained in B.K.B. v. Maui Police Department, 276 F.3d 1091,

1107 (9 Cir.2002), “‘section 1927 sanctions must be supported th

by a finding of subjective bad faith,’ which ‘is present when an

attorney knowingly or recklessly raises a frivolous argument, or

argues a meritorious claim for the purpose of harassing an

opponent.’” 

Plaintiffs have not established that the requested sanctions

should be ordered here. Defendant requested leave to file the

belated declarations in response to questioning by the Court at

the hearing on the cross-motions for summary judgment related to

a possible motive for the failure to reissue. Defendant was not

responding to a claim made by Plaintiffs. Defendant was granted

leave to submit the belated declarations, subject to compliance

with the requirements of Rule 56(f). Although Defendant did not

timely comply and did not satisfy the requirements of Rule 56(f),

there is no indication that Defendant’s failures were result of

bad faith or were intended to harass Plaintiffs. It appears

Defendant in good faith attempted to address the court’s

question. 

CONCLUSION

For the reasons set forth above, Defendant’s motion for

leave to file supplemental memorandum is DENIED. Plaintiffs’

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request for sanctions is DENIED.

SO ORDERED.

IT IS SO ORDERED.

Dated: April 12, 2007 /s/ Oliver W. Wanger 

668554 UNITED STATES DISTRICT JUDGE

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