Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-01191/USCOURTS-casd-3_11-cv-01191-1/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1441 Petition for Removal- Fraud

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

HEINRICH P. HARDT, et al.,

Plaintiffs,

v.

DIRECT INVEST LLC, et al.,

Defendants.

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Case No. 11-cv-1191-L(WVG)

ORDER DENYING PLAINTIFFS’

MOTION TO CERTIFY

INTERLOCUTORY APPEAL

[DOC. 20]

Pending before the Court is Plaintiffs Heinrich P. Hardt and Araceli Hardt’s motion to

certify an interlocutory appeal. Plaintiffs request the certification of the January 31, 2012 Order

compelling arbitration and staying the case for immediate review by the Ninth Circuit Court of

Appeals. Defendants Direct Invest LLC and Direct Invest Manager LLC oppose. 

The Court found this motion suitable for determination on the papers submitted and

without oral argument. See Civ. L.R. 7.1(d.1). (Doc. 22.) For the following reasons, the Court

DENIES Plaintiffs’ motion to certify interlocutory appeal.

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I. BACKGROUND

This action involves two real-estate investments that Plaintiffs purchased in Braintree,

Massachusetts (“Braintree Park”) and, separately, in Merrimack, New Hampshire (“Heron

Cove”). (Compl. ¶¶ 5–7.) The parties completed both transactions through written and signed

purchase agreements. Both parties signed the Braintree Park Purchase Agreement (“BPPA”) on

December 3, 2007, and the Heron Cove Purchase Agreement (“HCPA”) on March 4, 2008. (Id.)

Both purchase agreements contain identical arbitration clauses. (BPPA ¶ 8.17, HCPA ¶

8.17.) The arbitration clauses state, in pertinent part:

Any dispute, claim or controversy arising out of or related to this

Agreement, the breach hereof, the termination, enforcement,

interpretation or validity hereof, or an investment in the Interests shall

be settled by arbitration in New York, New York, in accordance with

the rules of The American Arbitration Association, and judgment

entered upon the award rendered may be enforced by appropriate

judicial action pursuant to New York law. The arbitration panel shall

consist of one (1) member, which shall be selected by the Property

Manager from the list of pre-approved arbitrators listed in Exhibit “D”

hereto. The losing party shall bear any fees and expenses of the

arbitrator, other tribunal fees and expenses, reasonable attorney’s fees

of both parties, any costs of producing witnesses and any other

reasonable costs or expenses incurred by him or the prevailing party or

such costs shall be allocated by the arbitrator.

(Id.)

On April 26, 2011, Plaintiffs, individually and as trustees of the Hardt Family Trust,

commenced this action in San Diego Superior Court, asserting four state-law causes of action:

(1) securities fraud, (2) common-law fraud and deceit, (3) negligence and negligent

misrepresentation, and (4) elder abuse. At the heart of these claims are Plaintiffs’ allegations

that Defendants made false and misleading statements, and omissions of material facts that

induced them to purchase these properties, which are “both imploding and on the verge of

foreclosure.” (Compl. ¶¶ 7–8, 15.) Thereafter, Defendants removed the case to this Court.

On June 21, 2011, Defendants filed a motion to compel arbitration and stay proceedings

pending the outcome of the arbitration. (Doc. 10.) The Court granted that motion, finding that

Plaintiffs had failed to meet their burden to establish a factual basis for any defense to

enforcement. (January 31, 2012 Order 5:17–6:16.) Plaintiffs now move for an order certifying

an interlocutory appeal of the January 31, 2012 Order. Defendants oppose.

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II. LEGAL STANDARD

Under 28 U.S.C. § 1292(b), a party may move a district court to certify an “otherwise

unappealable” order for interlocutory review. In order to certify the order, the court must find

that “such order involves a controlling question of law as to which there is substantial ground for

difference of opinion and that an immediate appeal from the order may materially advance the

ultimate termination of the litigation.” 28 U.S.C. § 1292(b). The moving party bears the burden

of demonstrating these prerequisites. Couch v. Telescope Inc., 611 F.3d 629, 633 (9th Cir.

2010). 

The burden of showing that these circumstances exist is a heavy one. See Coopers &

Lybrand v. Livesay, 437 U.S. 463, 475 (1978). “Section 1292(b) is a departure from the normal

rule that only final judgments are appealable, and therefore must be construed narrowly.” James

v. Price Stern Sloan, Inc., 283 F.3d 1064, 1069 n.6 (9th Cir. 2002). The Ninth Circuit has

stressed that § 1292(b) is to be applied sparingly and only in exceptional situations in which an

interlocutory appeal would help avoid protracted and expensive litigation. In re Cement

Antitrust Litig., 673 F.2d 1020, 1026 (9th Cir. 1982); U.S. Rubber Co. v. Wright, 359 F.2d 784,

785 n.2 (9th Cir. 1966) (per curiam). A district court has substantial discretion in deciding

whether to grant a party’s motion for certification. Brown v. Oneonta, 916 F. Supp. 176, 180

(N.D.N.Y. 1996), rev’d in part on other grounds, 106 F.3d 1125 (2d Cir. 1997).

III. DISCUSSION

In light of the legislative policy underlying § 1292 that the statute be used only in

exceptional circumstances, an interlocutory appeal should be certified only when doing so

“would avoid protracted and expensive litigation.” In re Cement, 673 F.2d at 1026. If, by

contrast, an interlocutory appeal would delay resolution of the litigation, it should not be

certified. See Shurance v. Planning Control Int’l, Inc., 839 F.2d 1347, 1348 (9th Cir. 1988).

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Plaintiffs argue that “[p]ractical considerations dictate an interlocutory appeal at a time

when the file is thin and the controlling issue of law over which there are substantial grounds for

difference of opinion will further the resolution of the dispute.” (Pls.’ Mot. 13:6–9.) No further

explanation is given in Plaintiffs’ motion. Furthermore, at this point, the parties both agree that

arbitration is appropriate, but they disagree as to where the arbitration proceedings should take

place. If arbitration will occur regardless of the outcome of the appeal, then resolution of this

litigation would only be delayed by an interlocutory appeal. Consequently, the Court concludes

that an immediate appeal will likely delay, rather than advance, the end of this action. Therefore,

Plaintiffs fail to meet their burden under § 1292 to show that it is likely that an appeal will

materially advance the ultimate termination of this litigation. See Couch, 611 F.3d at 633.

In addition to Plaintiffs’ failure to meet their burden, the Court also notes that certifying

an interlocutory appeal for the order compelling arbitration also “would frustrate the decidedly

pro-arbitration tilt of the Federal Arbitration Act, with its concomitant policy of avoiding

unnecessary delays in prosecuting arbitrations in part through the discouragement of immediate

appellate review of orders compelling arbitration.” Owner-Operator Indep. Drivers Ass’n, Inc.

v. Swift Transp. Co., Inc. (AZ), No. CV 02-1059-PHX-PGR, 2004 WL 5376210, at *1 (D. Ariz.

July 28, 2004) (citing 9 U.S.C. § 16(b) (barring an immediate appeal of an order compelling

arbitration absent a § 1292(b) certification)); Salim Oleochemicals v. M/V Shropshire, 278 F.3d

90, 93 (2d Cir. 2002) (“Unnecessary delay of the arbitral process through appellate review is

disfavored.” (citations omitted)). Although an order compelling arbitration may under some

circumstances appropriately be a subject for certification, in this context and on this record, the

Court finds that certification would not be appropriate. See Kuehner v. Dickinson & Co., 84

F.3d 316, 319 (9th Cir. 1996).

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IV. CONCLUSION & ORDER

In light of the foregoing, the Court DENIES Plaintiffs’ motion to certify an interlocutory

appeal. (Doc. 20.)

IT IS SO ORDERED.

DATED: February 6, 2013

M. James Lorenz

United States District Court Judge

COPY TO: 

HON. WILLIAM V. GALLO

UNITED STATES MAGISTRATE JUDGE

ALL PARTIES/COUNSEL

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