Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_08-cv-01424/USCOURTS-azd-2_08-cv-01424-1/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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Plaintiffs have requested oral argument. That request is denied because the parties

have thoroughly discussed the law and the evidence, and oral argument will not aid the

Court’s decision. See Lake at Las Vegas Investors Group, Inc. v. Pac. Malibu Dev., 933 F.2d

724, 729 (9th Cir. 1991).

WO

NOT FOR PUBLICATION

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

EVA SPERBER-PORTER; MARK D.

SVEJDA, 

Plaintiffs, 

vs.

EDELTRAUD KELL, 

Defendant. 

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No. CV-08-01424-PHX-GMS

ORDER

Pending before the Court is the Motion for Reconsideration of Plaintiffs Eva SperberPorter and Mark D. Svejda. (Dkt. # 21.) For the following reasons, the Court denies the

motion.1

BACKGROUND

In this case, the parties have been engaged in a protracted state court dispute about the

American will of Hermann Viktor Kell, a deceased citizen of Germany, who was the husband

of Defendant Edeltraud Kell. Plaintiff Eva Sperber-Porter claimed $17.5 million under the

will, and Defendant contested that claim. After mediation, the parties entered into a

Case 2:08-cv-01424-GMS Document 26 Filed 06/08/09 Page 1 of 9
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The disputed portion of the agreement provided:

[Plaintiffs] shall execute a Promissory Note (individually and on

behalf of their community) in favor of [Defendant]. The

principal amount of the Note shall be $6,300,000.00. . . . The

Note shall be secured by a pledge [of] (i) the Schedule B assets

distributed to [Sperber-Porter]; and (ii) the assets or interests

acquired (through Mortgages, Ltd.) by [Sperber-Porter] or any

affiliate of [Sperber-Porter] utilizing the proceedings [sic] of any

of the assets of the Estate.

(Dkt. # 17 Ex. 3 at 15 ¶ 15.)

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More specifically, Defendant objected to the note on the grounds that it lacked an

acceleration provision, provided for only a $250 payment penalty, was improperly amortized,

and provided as security “partnership interests that could be liquidated into worthless shells.”

(See Dkt. # 17 at 2.)

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settlement agreement in which Plaintiffs promised to pay Defendant $6.3 million in the form

of a promissory note. A dispute soon arose about the nature of that note, specifically over

whether paragraph fifteen of the agreement required Plaintiffs to securitize the note with

certain affiliate assets.2

Plaintiffs, after receiving the $17.5 million distribution under the will, attempted to

execute a promissory note that was not securitized by the affiliate assets. Defendant refused

to accept the note.3

 At that point, the personal representative of Mr. Kell’s estate filed a

Motion for Equitable Enforcement of the Settlement Agreement in probate court, moving the

court to interpret the settlement agreement and order the parties to comply with it.

The state court granted the motion for equitable enforcement, finding that:

the settlement agreement sets out terms and conditions to

resolve the parties’ good faith claims and denials in this case;

that subsequent to and in conjunction with the agreement, the

parties’ received substantial distributions; [and] that no party

rejected the distributions or raised the issue that the effect of the

agreement was not just and reasonable.

(Dkt. # 17 Ex. 4 at 1.) The court further found that the parties “do have a disagreement as

to the interpretation of paragraph number 15,” but noted that “every party has asked that the

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agreement be enforced.” (Id. at 2.) Thus, the court scheduled a status conference and

ordered the parties to prepare a proposed schedule for resolving the issue.

Defendant subsequently moved the probate court for summary judgment. Plaintiffs

moved to strike Defendant’s motion, arguing that the probate court’s jurisdiction had ended

with approval of final settlement. Plaintiffs also filed an opposition to the motion for

summary judgment, arguing that paragraph fifteen of the settlement agreement does not

require them to securitize the promissory note as Defendant requested, that Defendant

breached the settlement agreement by refusing to accept the note without such security, and

that Defendant’s breach “excuses the necessity for [Plaintiffs] to tender performance,” or at

least that Plaintiffs “have no obligation to pay [Defendant] anything until she cures her

breach.” (Dkt. # 19 Ex. 3 at 16.) Plaintiffs further argued that “Mrs. Kell’s breach of the

Settlement Agreement[] gives rise to a claim for damages in favor of [Plaintiffs].” (Id.)

At the same time that Plaintiffs filed their motion to strike in the probate court, they

also filed the complaint underlying this action in federal court. (Dkt. # 1.) Plaintiffs made

two claims therein: (1) for a declaratory judgment providing that they are not required to

securitize the promissory note as Defendant suggests, and also providing that Defendant’s

rejection of the promissory note discharges Plaintiffs’ obligations to pay Defendant anything

at all (Dkt. # 9 at 5-7); and (2) for breach of contract “by demanding security under the terms

of the Settlement Agreement that she is not entitled to receive and by otherwise disavowing

that Agreement.” (Id. at 7-8.)

At the state level, the probate court denied both Defendant’s motion for summary

judgment and Plaintiffs’ motion to strike. The court then set a pretrial conference and

scheduled an evidentiary hearing pursuant to Taylor v. State Farm Mutual Automobile

Insurance Co., 175 Ariz. 148, 854 P.2d 1134 (1993) (authorizing state courts to hold

evidentiary hearings to determine whether language in a contract is ambiguous and, if so,

whether to proceed to trial). The evidentiary hearing occurred on January 21, 2009.

After the evidentiary hearing, but before the state court issued a ruling, Defendant

filed a motion to dismiss the federal court case. (Dkt. # 17.) Defendant argued that the case

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should be dismissed because it involved a probate matter and also because it was attempting

to collaterally attack the state court’s determination of its own jurisdiction. Defendant further

argued that if the Court did not dismiss the federal case it should at least be stayed pending

resolution of the state court proceeding. This Court denied the motion to dismiss but granted

a stay pursuant to Colorado River Water Conservation District v. United States, 424 U.S. 800

(1976). (Dkt. # 20.)

The state court has since issued its decision, ruling that paragraph fifteen could only

be interpreted as pledging affiliate assets as security on the note: “After considering the

evidence presented, the Court finds that there is no other susceptible meaning to the language

in question except that Eva [Sperber-Porter] agreed to pledge her affiliates’ assets to secure

Mrs. Kell’s $6,300,000.00 promissory note.” (Dkt. # 21 Pt. 2 at 2.) Plaintiffs now asks this

Court to reconsider its Order staying the federal action. (Dkt. # 21.)

DISCUSSION

I. Legal Standard

A district court can “reconsider” final judgments or appealable interlocutory orders

pursuant to Federal Rules of Civil Procedure 59(e) (governing motions to alter or amend

judgments) and 60(b) (governing motions for relief from a final judgment). See Balla v.

Idaho State Bd. of Corr., 869 F.2d 461, 466-67 (9th Cir. 1989). A district court can

“reconsider” non-final judgments pursuant to Federal Rule of Civil Procedure 54(b) and

pursuant to the court’s “inherent power rooted firmly in the common law” to “rescind an

interlocutory order over which it has jurisdiction.” City of Los Angeles v. Santa Monica

Baykeeper, 254 F.3d 882, 887 (9th Cir. 2001).

However, “[m]otions to reconsider are appropriate only in rare circumstances,”

Defenders of Wildlife v. Browner, 909 F. Supp. 1342, 1351 (D. Ariz. 1995), and “[m]ere

disagreement with a previous order is an insufficient basis for reconsideration,” Ross v.

Arpaio, No. CV 05-4177, 2008 WL 1776502, at *2 (D. Ariz. Apr. 15, 2008). Such motions

“are not the place for parties to make new arguments not raised in their original briefs.”

Motorola, Inc. v. J.B. Rodgers Mech. Contractors, 215 F.R.D. 581, 582 (D. Ariz. 2003).

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“There may also be other, highly unusual, circumstances warranting reconsideration.”

ACandS, 5 F.3d at 1263. No such circumstances are articulated here.

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Similarly, “[a] motion for reconsideration should not be used to ask a court to rethink what

the court had already thought through – rightly or wrongly. Arguments that a court was in

error on the issues it considered should be directed to the court of appeals.” Downey v. Gen.

Mills, Inc., No. 04-47-TUC-CKL, 2005 WL 3312766, at *5 (D. Ariz. Dec. 7, 2005) (internal

citations and quotations omitted).

As a general principle, “[r]econsideration is appropriate if the district court (1) is

presented with newly discovered evidence, (2) committed clear error or the initial decision

was manifestly unjust, or (3) if there is an intervening change in controlling law.” Sch. Dist.

No. 1J v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993).4

 However, if a party seeks to base

a motion for reconsideration on newly-discovered evidence, the party must also show that

“at the time of the Court’s decision, the party moving for reconsideration could not have

known of the factual or legal differences through reasonable diligence[.]” Motorola, 215

F.R.D. at 586.

Under the specific rules of this District, “[t]he Court will ordinarily deny a motion for

reconsideration of an Order absent a showing of manifest error or a showing of new facts or

legal authority that could not have been brought to its attention earlier with reasonable

diligence.” LRCiv 7.2(g)(1). “Any such motion shall point out with specificity . . . any new

matters being brought to the Court’s attention for the first time and the reasons they were not

presented earlier . . . .” Id. “Failure to comply with this subsection may be grounds for

denial of the motion.” Id.

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II. Analysis

Although Plaintiffs do not point out the theory under which they seek reconsideration,

the only theory that might apply in this context would be that the Court “committed clear

error.” Sch. Dist. No. 1J, 5 F.3d at 1263. In determining that the federal case should be

stayed pursuant to Colorado River, the Court determined that none of the nine factors it

considered weighed against a stay and that many of the factors, including the desirability of

avoiding piecemeal litigation, the substantial similarity of the cases, and the impropriety of

forum-shopping, weighed strongly in favor of granting a stay. (Dkt. # 20 at 6-12.) Plaintiffs’

motion for reconsideration disputes only one of the nine factors the Court discussed – that

of the substantial similarity of the cases. (Dkt. # 21.) The essence of Plaintiffs’ argument

is that the state and federal cases are not substantially similar because “[t]here is not now

pending any claim in the state probate court by plaintiffs that Mrs. Kell breached the

settlement agreement.” (Id. at 2.) Plaintiffs assert that their arguments in the state court

relating to breach of contract were merely “statements” or “an accusation,” and not a “formal

claim.” (Id. at 3.) Thus, Plaintiffs argue that this case, which does include a formal breach

of contract claim, is not sufficiently similar to the state case to warrant a stay.

Plaintiffs have failed to establish that the Court committed clear error. First, Plaintiffs

have failed to address the import of the other eight factors that, on balance, also weigh in

favor of a stay. This is inconsistent with the rule that the relevant factors in a Colorado River

analysis “are to be applied in a pragmatic and flexible way, as part of a balancing process

rather than as a ‘mechanical checklist.’” Am. Int’l Underwriters, (Philippines), Inc. v. Cont’l

Ins. Co., 843 F.2d 1253, 1257 (9th Cir. 1988) (quoting Moses H. Cone Mem’l Hosp. v.

Mercury Constr. Corp., 460 U.S. 1, 16 (1983)); see also Holder v. Holder, 305 F.3d 854,

870-71 (9th Cir. 2002) (“The factors relevant to a given case are subjected to a flexible

balancing text, in which one factor may be accorded substantially more weight than another

depending on the circumstances of the case . . . .”). Plaintiffs’ argument thus fails to

establish clear error.

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Second, while it is true that the claims before the state and federal courts are not

identical, exact parallelism is not required under Colorado River. See Nakash v. Marciano,

882 F.2d 1411, 1416 (9th Cir. 1989) (“We agree that exact parallelism does not exist, but it

is not required.”). Rather, the question is merely the substantial similarity of the claims,

which is informed by the parties and issues presented in each case. See id. (holding that

exact parallelism is not required, but pointing out that “parallel actions are those involving

the same parties and issues”) (citing RepublicBank Dallas Nat’l Ass’n v. McIntosh, 828 F.2d

1120, 1121 (5th Cir. 1987)); Holder, 305 F.3d at 868 (holding that a state custody claim and

a federal Hague Convention claim were not substantially similar because “[t]he state court’s

custody determination did not resolve several of the issues critical to the disposition of a

Hague Convention petition.”); Silvaco Data Sys., Inc. v. Tech. Modeling Assocs., Inc., 896

F. Supp. 973, 976 (N.D. Cal. 1995) (pointing out that “[t]he mere fact that the claims in state

and federal court are not based on exactly the same laws does not preclude a finding of

substantial similarity” and holding that “[a]lthough the state and federal actions are not

identical, they include extremely similar claims that all arise out of the long-standing

competitive feud between [the parties]”).

Here, as explained in the Court’s previous Order, the parties are the same and the

issues presented in the two cases are virtually identical. Plaintiffs’ declaratory judgment

claim raises two issues: whether Plaintiffs were required to securitize the promissory note

as Defendant requested and whether Defendant’s rejection of the promissory note discharged

Plaintiffs’ obligation to pay. (Dkt. # 9 at 6, 7.) Both of those issues were likewise raised by

Plaintiffs in their opposition to Defendant’s motion for summary judgment in the state court.

(Dkt. # 19 Ex. 3 at 3, 7-8, 16.) Plaintiffs’ breach of contract claim raises the issue of whether

Defendant breached the settlement agreement by demanding that Plaintiffs securitize the

promissory note in a way with which Plaintiffs disagreed. (Dkt. # 9 at 7.) Plaintiffs’ briefing

before the state court raises the same issue (Dkt. # 19 Ex. 3 at 4), and in both cases, Plaintiffs

argue that the breach entitles them to damages (Dkt. # 9 at 8; Dkt. # 19 Ex. 3 at 16). As the

Court previously noted, Plaintiffs are essentially seeking a declaratory or substantive

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This case illustrates the peril inherent in piecemeal litigation that a party may take

one court’s ruling and attempt to mischaracterize it before another court. Defendant has

apparently taken this Court’s previous Order as some sort of “guidance” to the state court on

whether it should issue a breach of contract award against Plaintiffs. Specifically, Defendant

has filed a “notice of district court order” arguing that this Court was suggesting that the state

court “may indeed enter a Judgment against [Plaintiffs Sperber-Porter and Svejda] in the

amount of $6.3 million.” (Dkt. # 21 Pt. 3 at 2.) This Court offered no such “guidance.” The

Court’s Order was limited to a determination of the effect of the pending state case on

Plaintiffs’ breach of contract claim in federal court; this Court offered no opinion related to

any breach of contract claim Defendant may have.

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judgment in this Court affirming that their arguments in the state court are correct. Indeed,

the focus of litigation in both the state and federal actions is the nature of the settlement

agreement and the effect of the parties’ behavior thereon. The Ninth Circuit has held that

such unity of issues establishes substantial similarity. See Nakash, 882 F.2d at 1416 (“After

reviewing the pleadings in these cases, we conclude that the two actions are substantially

similar. All of these disputes concern how the respective parties have conducted themselves

since Nakash purchased a portion of Guess.”) (emphasis added). Thus, Plaintiffs have not

established clear error.

Finally, Plaintiffs do not disagree that the Court’s stay of the declaratory judgment

claim was proper. Plaintiffs confine their motion to arguing that the Court should not have

stayed the breach of contract claim, and Plaintiffs have never disputed that their declaratory

judgment claim regarding the meaning of paragraph fifteen of the settlement agreement is

identical to the issue before (and now decided by) the state court. Thus, there is no dispute

that at least a partial stay was proper. See In re Countrywide Fin. Corp. Derivative Litig.,

542 F. Supp. 2d 1160, 1171-72 (C.D. Cal. 2008) (explaining that partial stays are appropriate

under Colorado River). The state court has now resolved the declaratory judgment issue in

favor of Defendant. Plaintiffs offer no explanation of how they can maintain that Defendant

breached the settlement agreement by refusing to accept a promissory note that, according

to the state court, was deficient. Plaintiffs therefore have not established error warranting

reconsideration of the Court’s Order.5

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CONCLUSION

Plaintiffs have not established any grounds for reconsideration.

IT IS THEREFORE ORDERED that Plaintiffs’ Motion for Reconsideration (Dkt.

# 21) is DENIED.

DATED this 8th day of June, 2009.

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