Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_02-cv-05200/USCOURTS-caed-1_02-cv-05200-5/pdf.json

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

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

FLAGSHIP WEST, LLC, et al., )

)

)

)

Plaintiff, )

)

vs. )

)

)

EXCEL REALTY PARTNERS, L.P., )

et al., )

)

)

Defendant. )

)

)

No. CV-F-02-5200 OWW/DLB

ORDER GRANTING IN PART AND

DENYING IN PART EXCEL REALTY

PARTNERS, L.P.'S RENEWED

MOTION FOR JUDGMENT AS A

MATTER OF LAW AND TO ALTER

OR AMEND JUDGMENT (Doc. 397)

AND AMENDING PARAGRAPH 2 OF

JUDGMENT ENTERED ON DECEMBER

14, 2006

Before the Court is the Renewed Motion for Judgment as a

Matter of Law and To Alter or Amend Judgment filed by Defendant

Excel Realty Partners, L.P. (Excel).

A. Background.

On December 14, 2006, Judgment was entered. The Judgment

states in pertinent part as follows:

On December 3, 2003, a jury returned verdicts

in favor of Plaintiffs, awarding Plaintiffs

$1,480,740 in contract damages. Plaintiffs

then elected the remedy of rescission and

consequential damages. The district court

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determined in its Memorandum Decision and

Order Re: Post-Trial Election of Remedies,

dated September 30, 2005, that Plaintiffs

were entitled to rescission and consequential

damages, the amount of which is set forth in

the district court’s Memorandum Decision Re:

Rescission Damages and Availability of

Prejudgment Interest, dated November 14,

2006, and previous orders.

JUDGMENT IS ENTERED AS FOLLOWS:

1. The Ground Lease (“Lease”) entered into

between Plaintiffs and Defendant, EXCEL

REALTY PARTNERS L.P., (attached as Exhibit B

to Plaintiffs’ Second Amended Complaint),

signed by the individual Plaintiffs as

guarantors in their individual capacities to

pay rent and perform all covenants is

rescinded from its date of execution, and

such Lease shall have no future force and

effect, as if all Plaintiffs and Defendants

had not entered into and executed the Lease;

2. Plaintiffs FLAGSHIP WEST LLC, MARVIN G.

REICHE, and KATHLEEN REICHE, and each of

them, are awarded $2,598,151 for damages in

rescission and consequential damages

resulting from Defendants’ breach of

contract, minus credits due Defendants in the

amount of $455,976, and therefore shall

recover from Defendants, EXCEL REALTY

PARTNERS L.P., in the amount of $2,142,175;

3. Judgment as a matter of law was entered in

favor of defendant NEW PLAN EXCEL REALTY

TRUST, INC., and against Plaintiffs, on

November 23, 2003;

....

On December 21, 2006, Excel filed an Ex Parte Application

for an extension of time from December 29, 2006 until January 29,

2007 “to prepare, file and serve its pleadings in support of its

post-trial motions pursuant to Federal Rules of Civil Procedure,

Rule 59.” By Order filed on December 22, 2006, Excel’s Ex Parte

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Application was granted, the Order stating in pertinent part:

2. EXCEL shall have until January 15,

2007(OWW), within which to serve and file its

pleadings in support of any post-trial

motions filed by EXCEL pursuant to Rule 59 of

the Federal Rules of Civil Procedure,

including but not limited to citations to the

record, supporting affidavits and supporting

briefs. NO FURTHER EXTENSIONS WILL BE

GRANTED (OWW). 

On December 29, 2006, Excel filed a three-page pleading

captioned “Excel Realty Partners, L.P.’s “Notice of Motion and

Renewed Motion for Judgment as a Matter of Law and To Alter or

Amend Judgment”. This pleading states in its entirety:

Defendant, EXCEL REALTY PARTNERS, L.P.,

(hereafter “Excel”), through counsel and

pursuant to Fed.R.Civ.P. 50(b) and 59(e),

moves this Court for judgment as a matter of

law and to alter or amend the Judgment

entered December 14, 2006 (docket #392), for

the reasons set forth herein and for the

further reasons and authorities to be filed

on or before January 15, 2007 in accordance

with the Court’s Order dated December 22,

2006 (docket #395) and asserts as follows:

1. There was no legally sufficient basis for

the jury to find that the Four Seasons

restaurant caused the Golden Corral

restaurant to close or caused damages to

Plaintiffs;

2. There was no legally sufficient basis for

the jury to find that Plaintiffs were

constructively evicted from the demised

premises;

3. There was no legally sufficient basis to

support the jury’s finding of a material

breach of the Ground Lease;

4. The Court erred in granting Plaintiffs’

claim for rescission of the Ground Lease;

5. The Court erred in holding that the jury’s

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finding of a material breach of the Ground

Lease constituted a finding of a material

failure of consideration or otherwise

properly supported Plaintiffs’ claim for

rescission;

6. The Court erred in holding that the breach

of §6.3 of the Ground Lease, an independent

covenant, constituted a material failure of

consideration, sufficient to justify

rescission;

7. The Court erred in holding that Excel is

estopped to assert §4.5 of the Ground Lease

as a bar to rescission;

8. The Court erred in holding that §22.25 of

the Ground Lease does not survive rescission;

9. The Court’s award of consequential damages

in connection with Plaintiffs’ rescission

claim violated the Seventh Amendment of the

Unites States Constitution;

10. The Court erred in holding that

restitution for improvements to the demised

premises should be based on cost, not fair

market value, where fraud was not alleged or

proved;

11. The Court erred in holding that the

“[Ground] Lease is prima facie evidence of

the fair rental value of the leasehold with

improvements” (Memorandum Decision and Order

dated Sept. 30, 2005, docket #362, p. 30:24-

26) in calculating the credit to which Excel

was entitled;

12. The Court erred in holding that Excel was

not entitled to an equitable adjustment for

the reasonable rental value of the demised

premises, as improved;

13. The Court erred in holding that

Plaintiffs were entitled to recover as

consequential damages the original cost of

Plaintiff’s used equipment in the amount of

$589,271, which Plaintiff disposed of for

$11,260;

14. The Court erred in failing to hold that,

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in rescission, the cost of Plaintiffs’ used

equipment was an unrecoverable business loss;

15. The Court erred in holding that there was

legally sufficient evidence to award

$1,239,030 for construction cost[.]

On January 17, 2007 at 10:32 a.m., Excel filed its

Memorandum in Support of Renewed Motion for Judgment as a Matter

of Law and Motion to Alter or Amend Judgment, with supporting

exhibits. 

Rule 50(b), Federal Rules of Civil Procedure, pertains to

renewing a motion for judgment as a matter of law. Rule 50(b)

provides in pertinent part:

If the court does not grant a motion for

judgment as a matter of law made under

subdivision (a), the court is considered to

have submitted the action to the jury subject

to the court’s later deciding the legal

questions raised by the motion. The movant

may renew its request for judgment as a

matter of law by filing a motion no later

than 10 days after the entry of judgment or -

if the motion addresses a jury issue not

decided by a verdict - no later than 10 days

after the jury was discharged. 

Rule 59(e), Federal Rules of Civil Procedure, provides that

“[a]ny motion to alter or amend a judgment shall be filed no

later than 10 days after entry of judgment.”

A. Plaintiffs’ Objection to Timeliness of Excel’s Motion.

Plaintiffs’ object to consideration of Excel’s motion,

contending that it is untimely filed. 

1. Violation of Particularity Requirement of Rule

7(b)(1). 

Plaintiffs contend that Excel’s Notice of Motion filed on

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December 29, 2006 is “skeletal” and does not meet the

requirements of a motion under the Federal Rules of Civil

Procedure.

Rule 7(b)(1), Federal Rules of Civil Procedure, provides in

pertinent part:

An application to the court for an order

shall be by motion which ... shall be made in

writing, shall state the grounds therefor,

and shall set forth the relief or order

sought. 

Plaintiffs, citing Clipper Exxpress v. Rocky Mountain Motor

Tariff Bureau, 690 F.2d 1240 (9 Cir.1982), cert. denied, 459 th

U.S. 1227 (1983), contend that the Ninth Circuit held that a Rule

59(e) motion supported by a memorandum of points and authorities

“was more than sufficient to satisfy the particularity

requirement of Rule 7(b)”, id. at 1248, notwithstanding the

failure to contemporaneously file supporting affidavits. 

Plaintiffs argue that a Rule 59(e) motion unaccompanied by points

and authorities are not considered complete and, therefore, are

not timely filed.

Plaintiffs also cite Martinez v. Trainor, 556 F.2d 818, 819-

820 (7 Cir.1977), wherein the Seventh Circuit held: th

In its entirety, the motion served and filed

on November 22, 1976 stated:

‘NOW COMES the Defendant James L.

Trainor, Director, ILLINOIS

DEPARTMENT OF PUBLIC ID, by and

through his attorney ..., requests

this Honorable Court, pursuant to

Rule 59(e) FRCP, to alter, amend,

or vacate the Declaratory Judgment

entered November 11, 1976.’ ...

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Appellees claim that this motion with its

skeleton declaration was not a proper motion

and therefore was not adequate to suspend the

finality of the judgment.

...

The defendant-appellant suggests that the

motion on its face is sufficient in that it

informed the plaintiffs that the State wanted

the court to reconsider its prior ruling. 

While this may be true, it is irrelevant to

the ‘particularity’ requirement but instead

satisfies the ‘relief or order sought’

criteria of Rule 7(b)(1). Looking at the

motion, it is apparent that the defendant

failed to state even one ground for granting

the motion and thus failed to meet the

minimal standard of ‘reasonable

specification.’

In the alternative, defendant suggests that

the supporting brief filed one week later

detailed the reasons for the motion and that

this later filing satisfies the

‘particularity’ requirement. In effect,

defendant wants this Court to view the

Memorandum as amending the November 22

motion. Were we to accept this view we would

be in effect permitting an extension of time

under Rule 6(b) of the Federal Rules of Civil

Procedure. This we cannot do for two

reasons. First, amendments are not allowed

unless they consist of an elaboration of a

ground already set out in the original

motion. Secondly, if a party could file a

skeleton motion and later fill it in, the

purpose of the time limitation would be

defeated. ‘Casting this substantial doubt on

the finality of judgment would increase the

burdens on an already overloaded federal

judiciary.’ ....

See also Lac Du Flambeau Band of Lake Superior Chippewa Indians

v. Wisconsin, 957 F.2d 515, 516-517 (7 Cir.), cert. denied, 506 th

U.S. 829 (1992)(“An empty motion cannot reserve time to file an

explanation after the ten days allowed by Rule 59(b), see

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Martinez, but a brief contemporaneous with the motion fulfills

the requirement of Fed.R.Civ.P. 7(b)(1) that motion papers ‘state

with particularity the grounds’ for the relief demanded.”); Riley

v. Northwestern Bell Telephone Co., 1 F.3d 725, 726-727 (8th

Cir.1993). 

Plaintiffs’ contention is without merit. Although Excel’s

Notice of Motion was not accompanied by a memorandum of points

and authorities, the Notice of Motion is not skeletal as was the

case in the decisions cited above. The Notice of Motion

describes the relief sought and details 15 separate grounds for

that relief. Plaintiffs’ attempt to extrapolate from Clipper

Exxpress the requirement that the notice of motion must be

accompanied by the memorandum of points and authorities in order

to satisfy Rule 7(b) is unavailing; the issue in Clipper Exxpress

was the failure to submit supporting affidavits. 

Further, in Cambridge Plating Co., Inc. v. Napco, Inc., 85

F.3d 752 (1 Cir.1996), on February 9, the day after judgment st

was entered, Napco moved for an extension of time for filing its

memorandum in support of its post-judgment motions, stating:

Plaintiff has prevailed on four separate and

distinct legal claims. Therefore, in order

to obtain postjudgment relief, Napco must

challenge all four bases for the judgment. 

This will require Napco to argue several

substantial legal and factual issues

including, for example, the recoverability of

lost profits for negligent misrepresentation,

the sufficiency of evidence of intentional

misrepresentation and of repudiation of

warranty, the statute of limitations (threeyear and four-year), as well as issues

relating to Chapter 83A and damages.

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Id. at 760. On February 14, the district court granted Napco’s

request for extension of time, giving Napco until March 1 to file

the post-judgment memoranda. On February 17, six days before the

10-day limit for filing post-judgment motions expired, Napco

filed a motion pursuant to Rule 50(b) and 59. In summary

fashion, the motion outlined the subject matter and said the

grounds would be set forth in the March 1 memorandum to be filed

later in accord with the district court’s extension. Also on

February 17, Napco filed a motion under Rule 52(b) and 59 seeking

either to amend the district court’s findings of fact and

conclusions of law or to have a new trial on the Chapter 93A

claim, the motion also stated that the grounds for the motion

would be set forth in the March 1 memorandum. On February 24,

one day after the 10-day period expired, Plaintiff moved to

strike Napco’s post-judgment motions, arguing that they lacked

“particularity” under Rule 7(b)(1) and that, accordingly, no

motion had been filed within the 10-day period prescribed by

Rules 50(b), 52(b) and 59. The district court granted

Plaintiff’s motion, refusing to take into consideration Napco’s

extension motion or any of the other surrounding circumstances. 

Id. The First Circuit reversed, holding in pertinent part:

Rule 7(b)(1) requires that motions ‘state

with particularity the grounds therefore.’

... Napco’s post-judgment motions are subject

to the requirements of Rule 7(b)(1). The

particularity requirement, however, is to be

read flexibly in ‘recognition of the peculiar

circumstances of the case.’ ... This is

because Rule 7 is designed ‘to afford notice

of the grounds and prayer of the motion to

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both the court and the opposing party,

providing that party with a meaningful

opportunity to respond and the court with

enough information to process the motion

correctly.’ ... When a motion is challenged

for lack of particularity the question is

‘whether any party is prejudiced by a lack of

particularity or “whether the court can

comprehend the basis for the motion and deal

with it fairly.’ ....

While Napco’s motion was at best sloppy

practice, we believe that it was sufficiently

particular when read in conjunction with the

extension motion and prior filings. Although

the extension motion was not filed

simultaneously with the Rule 50(b), 59 and

52(b) motions, it was filed only a week

before, within the ten-day period, and was

obviously closely related to the Rule 50(b)

motion ... The extension motion specified the

bases of the judgment that Napco ‘must

challenge,’ including the sufficiency of the

evidence on the intentional misrepresentation

claim and the willful repudiation of warranty

claim, as well as issues relating to Chapter

93A and damages. Napco thus represented to

both the court and Cambridge Plating the

grounds for its post-judgment motions. No

claim is made that there was any intervening

event that would have made the

representations in the extension motion

unreliable. 

Cambridge Plating makes a passing argument in

its brief that it was unable to respond to,

or the district court to process, Napco’s

motions. If the Rule 50(b), 59 and 52(b)

motions are viewed in isolation, Cambridge

Plating has a point. But the motions cannot

be viewed in isolation. In addition to the

closely filed extension motion, significant

briefing on the Chapter 93A issues had just

been completed and Napco had earlier made

quite a detailed Rule 50(a) motion, of which

the Rule 50(b) motion was a ‘renewal.’ In

short, the record shows that Napco was taking

steps specifically to make evidentiary

challenges to the verdict on all of the major

issues litigated at trial. The grounds Napco

would press in its post-judgment motions were

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sufficiently known. The motions under Rules

50(b), 59 and 52(b) were adequate, although

barely, under the circumstances.

The district court premised its decision on

the belief that the law prevented it from

looking beyond the four corners of the motion

to determine whether the motion had stated

its grounds with sufficient particularity. 

While understandable, such a view of Rule

7(b)(1) is, in our view, disfavored. ‘Overly

technical’ evaluations of particularity are

disfavored ... Courts routinely take into

consideration other closely filed pleadings

to determine whether sufficient notice of the

grounds for the motion are given and the

opposing party has a fair opportunity to

respond. ....

Id. at 760-761. 

2. Court’s Lack of Authority to Extend 10-Day Period.

Citing Rule 6(b), Federal Rules of Civil Procedure,

Plaintiffs contend that the Court lacked authority to extend the

10-day period applicable to the filing of post-judgment motions.

Rule 6(b) provides in pertinent part that the court “may not

extend the time for taking any action under Rules 50(b) and ...

59 ...(e) ..., except to the extent and under the conditions

stated in them.” 

However, Excel timely filed its “Notice of Motion and

Renewed Motion for Judgment as a Matter of Law and To Alter or

Amend Judgment”. The only pleading that was filed after the

expiration of the 10-day period was its memorandum. This is the

same situation discussed by the First Circuit in Cambridge

Plating Co., Inc. v. Napco, Inc. Because Excel’s Notice of

Motion satisfies the particularity requirement of Rule 7(b),

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Plaintiffs contend that the computation process set forth in 1

Rule 6 has no application because of the date certain stated in the

Order and also contend that the fact that January 15 was a Federal

holiday is irrelevant because of electronic filing. These issues

are not relevant given the discrepancy between the date in the

Order and the date on the docket entry describing the Order.

12

Plaintiffs’ contention that Excel’s motion is untimely is without

merit. 

3. Untimely Filed Memorandum.

The December 22, 2006 Order granting Excel’s application for

extension of time stated that “EXCEL shall have until January 15,

2007(OWW), within which to serve and file its pleadings in

support of any post-trial motions filed by EXCEL pursuant to Rule

59 of the Federal Rules of Civil Procedure” and that “NO FURTHER

EXTENSIONS WILL BE GRANTED”.

Because Excel’s memorandum was not filed until January 17,

2007, Plaintiffs argue that Excel’s memorandum should not be

considered.1

Excel responds that its failure to file the memorandum on

January 15 as required by the Order was the result of excusable

neglect. Excel notes that the docket entry states:

ORDER on 392 Ex Parte Application/motion for

enlargement of time filed by Excel Realty

Partners. Pleadings due by 1/16/2007. Order

signed by Judge Oliver W. Wanger on

12/21/2006. (Timken, A.)(Entered:

12/22/2006).

Because of this docket entry, Excel contends that it attempted,

unsuccessfully, to file the memorandum on January 16, 2007.

Excel provides no declaration why it ignored the date stated

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in the actual Order and instead refers to the date stated in the

docket entry. However, there is no explanation on the docket

entry why the date in the Order was changed on the docket entry,

i.e., typographical error or deliberate revision because January

15 was Martin Luther King’s birthday, a Federal holiday.

With regard to the failure to file the memorandum on January

16, 2007, Excel submits the Declaration of Christopher N. Jones,

one of Excel’s attorneys located in Philadelphia, Pennsylvania. 

Mr. Jones avers in pertinent part:

3. I was primarily responsible for preparing

and filing Excel’s Memorandum in Support

(docket #414).

4. At or about 8:27 p.m. (EST) on January 16,

2007, the final version of Excel’s Memorandum

in Support was completed and I converted the

Microsoft Word version of the Memorandum in

Support to an Adobe Acrobat document, titled

“Rules 50-59 Motion - FINAL.” 

5. Shortly thereafter, I logged on to the

Eastern District of California’s ECF website,

using my login name and password.

6. In the process of filing Excel’s

Memorandum in Support, I experienced

difficulty attaching a copy of the Ground

Lease at issue in this matter, apparently

because of the file size. Attaching the Lease

was the seventh step in a fourteen step

process to file the Memorandum in Support.

7. Because of this difficulty, I had to log

off of the ECF website several times and

restart the process of filing the Memorandum

in Support. On my fourth or fifth attempt, I

successfully attached a copy of the Lease as

exhibit “A.” Each of my attempts took several

minutes and each time I allowed approximately

five (5) minutes for my computer to complete

attaching the Ground Lease.

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8. During the time that I waited for my

computer to attach the ground lease and at

other times when processing the filing of the

Memorandum in Support was taking place, I

proceeded to review other work-related

matters.

9. When my computer successfully attached the

Ground Lease as an exhibit to the Memorandum

in Support, I proceeded to finish the steps

necessary to file, including reviewing

carefully the screen reflecting the name

under which Excel’s Memorandum in Support

would be filed, which is the next to last

screen.

10. Upon clicking the computer button that

committed me to filing the Memorandum in

Support under the name generated by the ECF

system, I believed that the transaction was

complete, and I shifted to another window on

my computer as I waited to receive the email

confirmation of filing.

11. A couple of minutes passed and I prepared

to leave my office as the time approached

9:30 p.m. (EST). In my experience, the email

confirmation is used in lieu of a certificate

of service because it contains the names of

all persons who received email notification

of service and who are able to access the

electronic document through PACER for free.

12. After gathering my things to leave, I

checked my email and saw several emails from

“caed_cmecf_helpdesk@caed.uscourts.gov”,

which signifies receipt of notice of filing,

and assumed that one of those notices was

Excels’ Memorandum in Support. Those emails

turned out to be notice of filing Excel’s

Motion for Attorneys Fees, Memorandum in

Support, and the Declarations of Mark Kogan,

Esq. and Steven Carroll, Esq., all of which

were filed by Mr. Carroll. I received those

emails between 7:54 p.m. and 8:13 p.m. and I

had not previously reviewed them or noticed

that I had received them.

13. The following day, January 17, 2004,

during my lunch break, I clicked on a

Microsoft Internet Explorer window that was

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on the bottom of my computer screen. That

screen revealed the last screen necessary to

commit the transaction I thought I had

completed the night before. I attempted to

hit the “next” button on that screen, but

because of the passage of time was unable to

do so. I immediately checked the docket

online and my emails to discover that I had

not successfully filed Excel’s Memorandum in

Support.

14. I then contacted the Court’s Courtroom

Deputy, Greg Lucas and explained the above

and we discussed filing Excel’s Memorandum in

Support and notifying Plaintiffs’ counsel of

my error.

15. I then successfully filed Excel’s

Memorandum in Support and, contemporaneously

therewith, notified Plaintiffs’ counsel of my

error and requested that they contact me if

they had any concerns, which they did not do.

16. In between the time I thought I had filed

Excel’s Memorandum in Support on January 16,

2007 and when I actually did so on January

17, 2007, neither I nor anyone else modified

the Memorandum in Support or the exhibits

thereto. The document that was filed on

January 17, 2007 was exactly the same at the

document I attempted to file on January 16,

2007.

Plaintiffs argue that Mr. Jones’ declaration does not

demonstrate excusable neglect. Plaintiffs refer to Rule 5-

134(c)(3), Local Rules of Practice:

Problems at the filer’s end, such as phone

line problems, problems with the filer’s

Internet Service Provider (ISP), or hardware

or software problems, will not constitute a

technical failure under these procedures nor

excuse an untimely filing. A filer subject

to mandatory electronic filing who cannot

directly file a document electronically

because of a technical problem on the filer’s

end must file the document electronically

from another computer or in portable

electronic format at the Clerk’s Office. If

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electronic filing is not possible in any

form, the party may file a paper document

with the Clerk, shall annotate on the cover

page that electronic filing was not possible

because of technical reasons, and shall file

electronically as soon as possible. 

Plaintiffs refer to an email from Mr. Jones to counsel for

Plaintiffs on January 17 where Mr. Jones states that he

“apparently neglected to hit the submit button on the last

screen” in explaining the failure to actually file the Memorandum

on January 16. Plaintiffs contend that Mr. Jones’ excuse “rings

hollow, especially since it would be difficult to ignore or

‘neglect’ the submit button given the fact that the final page

for the electronic filing submission protocol contains the word

‘Attention’ in red letters”. Finally, Plaintiffs argue that the

failure to timely file the Memorandum is not excusable, given

that Plaintiffs had ample time to do so.

The determination of whether neglect is “excusable” is “an

equitable one, taking account of all relevant circumstances

surrounding the party’s omission.” Pioneer Inv. Servs. Co. v.

Brunswick Assocs., Ltd. P’ship, 507 U.S. 380, 395 (1993). Such

circumstances include “the danger of prejudice to the debtor, the

length of the delay and its potential impact on judicial

proceedings, the reason for the delay ... and whether the movant

acted in good faith.” Id. This list is not exhaustive. Id.

Here, the failure to file the Memorandum was the result of

excusable neglect. Although Excel’s attorneys should have

reviewed the actual text of the December 22, 2006 Order rather

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than relying on a docket entry describing the Order, it

nonetheless is the case that the docket entry was misleading and

inaccurate. Further, Mr. Jones’ declaration establishes that he

attempted to comply with what he thought was the filing date of

January 16, 2007 and only missed the date because he failed to

complete the technical steps required for electronic filing of

documents. There is no evidence that Excel’s attorneys

deliberately ignored the briefing schedule set forth in the

December 22, 2006 Order and there is no suggestion of prejudice

to Plaintiffs or the Court because of the untimely filing of the

Memorandum by Excel.

Plaintiffs’ objections to consideration of the Excel’s

motion and its supporting memorandum are OVERRULED.

B. Renewed Motion for Judgment as a Matter of Law and To

Alter or Amend Judgment.

1. Governing Standards.

The standards governing a motion for judgment as a matter of

law pursuant to Rule 50, Federal Rules of Civil Procedure, are

reiterated in Gibson v. City of Cranston, 37 F.3d 731, 735 (9th

Cir.1994):

When confronted with a motion for judgment as

a matter of law, whether at the end of the

plaintiff’s case or at the close of all the

evidence, a trial court must scrutinize the

proof and the inferences reasonably to be

drawn therefrom in the light most amiable to

the nonmovant ... In the process, the court

may not consider the credibility of

witnesses, resolve conflicts in testimony, or

evaluate the weight of evidence ... A

judgment as a matter of law may be granted

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only if the evidence, viewed from the

perspective most favorable to the nonmovant,

is so one-sided that the movant is plainly

entitled to judgment, for reasonable minds

could not differ in the outcome ....

Further, a party cannot raise arguments in a post-trial motion

for judgment as a matter of law that it did not raise in its preverdict motion. Freund v. Nycomed Amersham, 347 F.3d 752, 761

(9 Cir.2003). th

With regard to a motion to alter or amend judgment pursuant

to Rule 59(e), Federal Rules of Civil Procedure, Wright, Miller &

Kane, Federal Practice and Procedure: Civil 2 § 2810.1, nd

explains:

Since specific grounds for a motion to amend

or alter are not listed in the rule, the

district court enjoys considerable discretion

in granting or denying the motion. However,

reconsideration of a judgment after its entry

is an extraordinary remedy which should be

used sparingly. There are four basic grounds

upon which a Rule 59(e) motion may be

granted. First, the movant may demonstrate

that the motion is necessary to correct

manifest errors of law or fact upon which the

judgment is based. Second, the motion may be

granted so that the movant may present newly

discovered or previously unavailable

evidence. Third, the motion will be granted

if necessary to prevent manifest injustice. 

Serious misconduct of counsel may justify

relief under this theory. Fourth, a Rule

59(e) motion may be justified by an

intervening change in controlling law.

The Rule 59(e) motion may not be used to

relitigate old matters, or to raise arguments

or present evidence that could have been

raised prior to the entry of judgment. Also,

amendment of the judgment will be denied if

it would serve no useful purpose. [Footnotes

omitted]

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2. Procedural Background.

With the exception of Excel’s contention that the court

erred in awarding to Plaintiffs the cost of equipment, opening

inventory, training, and interest because all of these amounts

are unrecoverable business losses, every ground asserted in

Excel’s motion for judgment as a matter of law or to alter or

amend the judgment has been previously raised by Excel and ruled

on in numerous post-jury trial proceedings. The procedural

background to these proceedings and the rulings on the various

issues are set forth in: (a) “Order Re: Post Trial Election of

Remedies; Defendants’ Claimed Rescission Waiver Clause;

Defendants’ Claimed Damage Limitation Clause” filed on November

19, 2004 (hereafter November 19, 2004 Order)(Doc. 353); (b)

“Memorandum Decision and Order Re Post-Trial Election of

Remedies” filed on September 30, 2005 (hereafter September 30,

2005 Order)(Doc. 362); and (c) “Memorandum Decision Re Rescission

Damages and Availability of Prejudgment Interest” filed on

November 14, 2006 (hereafter November 14, 2006 Order)(Doc. 387). 

3. No Useful Purpose/Advisory Opinions.

Plaintiffs oppose Excel’s motion to the extent that it

complains that the jury’s findings that the Four Seasons

restaurant caused the Golden Corral restaurant to close or caused

damages to Plaintiffs; that there was a material breach of the

Ground Lease; and that Plaintiffs were constructively evicted

from the demised premises. Plaintiffs argue that these grounds

for relief are “no longer of any moment in this case in light of

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Plaintiffs’ election of the remedy of rescission.” Plaintiffs

argue that these issues are moot in the Article III sense because

there is no longer any case or controversy and that Excel is

requesting advisory opinions with respect to these issues.

Excel opposes Plaintiffs’ position, contending that these

issues are not moot. Excel refers to the ruling in the September

30, 2005 Order that the right to rescission was established by

the jury’s finding that the Ground Lease had been materially

breached. (Doc. 362, pp. 7-15). Excel further contends that “if

the Court grants judgment to Excel on Plaintiffs’ rescission

claim (or the Court of Appeals overturns the award of

rescission), the jury’s verdict respecting constructive eviction

may be a focal point of this case.” Excel argues that there is

no reason to fragment review of these issues by this Court or the

Court of Appeals.

For the reasons stated by Excel, resolution of these issues

is not moot in the sense that advisory opinions will be issued in

resolving Excel’s motion. 

4. No Legally Sufficient Basis for Jury to Find that

the Four Seasons Restaurant Caused the Golden Corral Restaurant

to Close or Caused Damages to Plaintiffs; and No Legally

Sufficient Basis for Jury to Find Material Breach of Ground

Lease.

Assuming that these issues are properly raised in Excel’s

motion, see discussion supra, Excel argues that the damages

claimed by Plaintiffs for the closure of the Golden Corral

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restaurant and lost future profits were not caused by Excel’s

breach of the ground lease. Excel contends that Plaintiffs’

damages were caused by their decision to cease their business in

furtherance of their own business agenda. Excel argues that

there was no proof that any damages flowed from the breach

alleged and that the only evidence Plaintiffs presented was that

“as many as 20 customers ... had tried the Four Seasons ....”

(Tr. 1403:9-10). Excel, referring to its Motion in Limine to

Exclude the Expert Report and Testimony of Robert G. Wallace,

Doc. 204), asserts that there was no evidence that any loss of

business was caused by the Four Seasons restaurant and no proof

that the Four Seasons restaurant caused the Golden Corral to

close. Excel asserts: “The flimsy and indefinite evidence

adduced by Plaintiffs is entirely insufficient to support the

jury finding of material breach, and certainly provides no basis

for a finding of a material failure of consideration justifying

rescission.” Excel further refers to the hearing on its preverdict Rule 50 motion wherein Excel contends that the Court

observed that Plaintiffs had failed to establish causation and

proof of damages:

THE COURT: ... I will grant you that what I

had expected to see, and it’s like, to use

the fast food analogy, where’s the beef? I

kept waiting to hear somebody give a - some

kind of analysis of the Fours [sic] Seasons

sales, and then plug that, if you will,

diversion, if you could say that 95 percent

of it or whatever percentage of it was

attributable to its existence there and would

have taken Golden Corral sales, and then plug

that into - in other words, add that income

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back to the profit and loss and say, now,

with that income over the 20-month period,

this would have made the difference in Golden

Corral Modesto.

MR. CARROLL: That causal link isn’t there.

THE COURT: We didn’t hear it.

(Tr. 1407:19-1408:6). Excel refers to Postal Instant Press, Inc.

v. Sealy, 43 Cal.App.4th 1704 (1996), in arguing that the absence

of causation evidence is fatal to Plaintiffs’ claims:

In Postal, it was the franchisor’s own

decision to terminate that caused the losses

complained of, not the breach by the

franchisee. Likewise, here, it was Mr.

Reiche’s decision to close the Golden Corral,

not the operation of the Four Seasons that

caused the losses complained of.

Plaintiffs argue that Excel’s pre-verdict Rule 50 motion did

not assert insufficiency of the evidence that the breach was

material.

However, as Excel responds, it explicitly “moved for

judgment because of the absence of adequate evidence to support

causation and damages, the sufficiency of which is at the heart

of materiality.” 

Plaintiffs further respond that substantial evidence

supports the jury’s finding that Excel’s breach of the exclusive

use provision was a material breach. Plaintiffs refer to the

testimony of Marvin Reiche that the exclusive use provision was

material in deciding to enter into the Lease; to evidence that

Plaintiffs were not willing to obtain a loan, invest over $2

million to build the restaurant, and enter into a 15-year lease

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without the exclusive use provision; and to Bi Wen Liu’s

testimony that the Four Seasons was a buffet restaurant. 

Citing Kulawitz v. Pacific Etc. Paper Co., 25 Cal.2d 664,

672 (1944)(“A covenant not to let other premises in the lessor’s

property or permit their use for certain purposes during the

existence of the lease with the covenantee is binding and a

breach thereof entitles the lessee to terminate the lease”),

Plaintiffs assert that the jury’s finding that Excel’s breach of

the exclusive use provision was a material breach is supported by

the evidence and the law.

Plaintiffs also contend that they offered evidence at trial

that the breach of the exclusive use provision caused Plaintiffs’

damages. They refer to evidence that, with the opening of the

Four Seasons, sales dropped at the Golden Corral; the testimony

of Brad Reiche that at least five of the Golden Corral’s

customers went to the Four Seasons and that he had talked to 20

or more customers who had tried the Four Seasons; and the

testimony of Excel’s expert, Mr. Fletcher, that the Four Seasons

did about $400,000 in sales and that the opening of the Four

Seasons had an adverse impact on the Golden Corral. Plaintiffs

contend that there should not have been even one lost sale to a

competing restaurant in the shopping center and that every lost

sale arising from the diversion of business to the Four Seasons

caused damage to the Plaintiffs. 

Plaintiffs further argue that Excel misconstrues the

Plaintiffs’ burden where the Plaintiffs have elected rescission:

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Rather than focusing on the breach and the

causal effect of the breach, rescission

damages are awarded only after a basis for

rescinding the contract has been established. 

Damages for rescission are not awarded based

upon a finding of a causal relationship to

the breach which justified rescission. 

Rather, damages for rescission are awarded by

unwinding the contract and by reimbursing the

aggrieved party for expenses incurred in

reliance on the rescinded contract. Thus,

the inquiry is not the causal relationship

between Defendant’s breach, and Plaintiffs’

damages associated with the closure of the

restaurant. The inquiry, rather, is the

relationship between the Plaintiffs’

expenditures, and its reliance on the

rescinded contract. 

Plaintiffs further note that Excel argued at trial that its

breach did not result in the damages claimed by Plaintiffs and,

therefore, it is likely that the jury substantially reduced the

amount of damages awarded to Plaintiffs.

Excel responds that Plaintiffs’ evidence demonstrates that

approximately twenty-five people who had eaten at the Golden

Corral also ate at the Four Seasons on a separate occasion and

contend that Plaintiffs presented no evidence that anyone ate at

the Four Seasons instead of the Golden Corral. Excel argues 

that, viewing the evidence in the light most favorable to

Plaintiffs and assuming a 100% diversion of the twenty-five

customers from the Golden Corral to the Four Seasons, Plaintiffs’

evidence of damages would amount to $250 to $500, and contends:

“Such a small impact cannot support a finding of material breach

or an entitlement to rescission.” 

This argument was made at trial to the jury, for judgment as

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a matter of law and in post-trial proceedings. In the September

30, 2005 Order, the Court addressed whether rescission is

warranted based on the jury’s finding of a material breach and 

ruled in pertinent part:

Plaintiffs argue rescission of the Lease is

warranted because the jury found Defendant’s

breach of the exclusive-use provision (§ 6.3)

was a material breach. (See Doc. 280,

Verdict, Interrogatories 2, 3) Defendant

argues rescission of the Lease is not

warranted because the exclusive-use provision

is an independent covenant, and that, as a

matter of law, breach of an independent

covenant does not warrant rescission. 

Defendant impliedly argues that the jury’s

finding that the breach was material is

insufficient grounds to entitle Plaintiffs to

the remedy of rescission or is not supported

by substantial evidence. 

The Lease was for a site that would be

exclusively used for a buffet restaurant at

Defendants’ [sic] shopping center. 

Plaintiffs established they were not willing

to invest two million dollars to build a

restaurant and to commit to a fifteen (15)

year term lease without an exclusive use

lease contract. Plaintiffs bargained to be

the sole and exclusive buffet restaurant in

the center. Defendant’s position abdicates

that jury’s materiality finding. Defendant’s

argument is reasonably construed as another

argument to support a Rule 50(b) renewed

motion for judgment as a matter of law. 

Defendant has made no such motion. Even if

Defendant had properly brought such a motion,

Defendant’s argument still fails.

The essence of the lease was to have an exclusive site for a

buffet restaurant. Excel wrongfully denied Plaintiffs this

benefit of the lease. Pursuant to the standards governing

resolution of Excel’s motion, the motion on this ground is

DENIED.

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5. Court Erred (a) In Granting Plaintiffs’ Claim for

Rescission of the Ground Lease; (b) In Holding that the Jury’s

Finding of a Material Breach of the Ground Lease Constituted a

Finding of a Material Failure of Consideration or Otherwise

Properly Supported Plaintiffs’ Claims for Rescission; and (c) In

Holding that the Breach of § 6.3 of the Ground Lease, an

Independent Covenant, Constituted a Material Failure of

Consideration, Sufficient to Justify Rescission.

In this section of Excel’s motion, Excel contends that for

the reasons set forth in the instant Memorandum “and in Excel’s

memoranda filed March 12, 2004 (docket # 314, pp.6-7) and April

4, 2005 (docket # 360, pp. 3-8), Excel respectfully submits that

the Court should not have granted rescission of the Ground Lease

to Plaintiffs.” Once a material breach was found by the jury,

Plaintiff was entitled to elect the remedy of rescission.

All of these grounds have been argued unsuccessfully and

fully treated in prior proceedings. See September 30, 2005

Order, pp. 7-15. Consequently, Excel’s motion on these grounds

is DENIED.

6. Court Erred in Holding that Doctrine of Judicial

Estoppel Applies to Estop Excel from Asserting § 4.5 of the

Ground Lease as a Bar to Rescission.

The November 19, 2004 Order, pages 51-53, ruled that Excel

was judicially estopped from raising § 4.5 of the Ground Lease as

a bar to a rescission remedy. In the September 30, 2005 Order,

pages 15-19, Excel argued unsuccessfully that the application of

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judicial estoppel to bar Excel from raising § 4.5 as a bar to a

rescission remedy was “prejudicial error”. 

Excel again argues that the Court erred in holding that the

doctrine of judicial estoppel precluded Excel from asserting §

4.5 of the Ground Lease as a bar to rescission. Excel

incorporates all of its prior arguments and asserts that “the

following is intended to summarize the principal components of

Excel’s arguments rather than to restate them in extensio.”

No new facts or law are provided. The issue was fully

analyzed. The ruling remains the same and Excel’s motion on this

ground is DENIED.

7. No Legally Sufficient Basis for the Jury’s Finding

That Plaintiffs’ Were Constructively Evicted from Demised

Premises.

On November 26, 2003, at the close of Plaintiffs’ case

during the jury trial, Excel moved for judgment as a matter of

law with regard to Plaintiffs’ claim of constructive eviction and

argument was held on that motion. Doc. 335, Tr., pp. 1415-1417,

1419-1431, 1437-1439. At the close of that hearing, Plaintiffs

were given the opportunity to submit additional authorities on

the issue of constructive eviction. Id. at 1451. However, there

is no indication on the docket that Plaintiffs filed any

additional authorities. On December 2, 2003, in the context of

discussing jury instructions, the parties and the court again

addressed the issue of constructive eviction. Doc. 313, Tr., pp.

52-61. The Court then took the motion for judgment as a matter

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of law on the issue of constructive eviction under submission,

pending the jury’s verdicts. Id., pp. 61-62, 83. However, there

is no record that the Court actually ruled on Excel’s Rule 50

motion on the issue of constructive eviction. The jury was

instructed on constructive eviction. Id., pp. 94-95. During

deliberations, the jury asked a question about the term

“surrender” in the constructive eviction instructions. Doc. 337,

Tr., pp. 1669-1670, 1672-1674. In the jury verdict, the jury

found in pertinent part as follows:

Did defendant’s material breach of the lease

agreement constitute a constructive eviction? 

Yes.

Did plaintiff, upon any material breach of

the lease that constituted a constructive

eviction, surrender the premises to the

defendant lessor? Yes.

Id., p. 1677. In practical effect, it is not necessary to upset

the jury’s verdict on constructive eviction, as it did not 

result in any damages to Plaintiffs and, they elected to pursue

rescission, which was fully justified on separate and independent

grounds.

Excel’s motion on this ground is DENIED.

8. Court’s Award of Consequential Damages in

Connection with Plaintiffs’ Rescission Claim Violated Seventh

Amendment.

Excel refers to the portion of the November 19, 2004 Order,

page 26, which ruled in pertinent part:

Chauffeurs makes it clear that there are two

exceptions to the rule that the recovery of

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money damages is legal for which a right to

jury trial exists; restitution and an award

incidental or intertwined with injunctive

relief. Chauffeurs, Teamsters & Helpers,

Local No. 391 v. Terry, 494 U.S. 558, 570-571

(1990). Plaintiffs have failed to present

any convincing case law supporting their

assertion that the consequential damages

sought in this case fall under this category.

However, Excel contends, the Court in the “Memorandum Decision Re

Rescission Damages and Availability of Prejudgment Interest”

filed on November 14, 2006 (hereafter the November 14, 2006

Order), (Doc. 387), awarded consequential damages to Plaintiffs

in the following amounts:

Equipment Expenditures - $589,271

Opening Inventory for Restaurant - $30,000

Franchise Fee - $30,000

Training of Modesto Staff - $18,749

Construction Interest - $27,956

Interest Paid After Opening - $186,394.

Excel contends that “[f]or the reasons set forth above and in

Excel’s memoranda filed January 26, 2004 (docket #301, pp.16-18),

March 12, 2004 (docket #314, pp. 4-6), June 17, 2004 (docket #

342, pp. 1-7), June 30, 2004 (docket #344, pp.17-20), and April

4, 2005 (docket #360, 13-21 [sic]), Excel respectfully submits

that the Court should not have determined the amount of

consequential damages and awarded such damages to Plaintiffs

....”

The September 30, 2005 Order, in the context of addressing

the types of rescission damages that may be recovered, noted at

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pages 21-22 n.5 in pertinent part: 

The analysis of ‘consequential’ versus

‘incidental’ damages in the November [14,]

2004 Order was related to the question

whether Defendants had a Seventh Amendment

right to a jury trial on the issue of

rescission damages. The Seventh Amendment

right to a jury trial, unlike the measure of

damages, is a question of federal law. In

diversity cases, when a party’s Seventh

Amendment right to a jury trial is contingent

upon whether the relief to be awarded is

legal or equitable in nature, the court turns

to federal law to characterize the remedy as

one or the other. Simler v. Conner, 372 U.S.

221, 222 (1963); Granite State Ins. Co. v.

Smart Modular Techs., Inc., 76 F.3d 1023,

1026-7 (9 Cir.1996). The November [14,] th

2004 Order therefore looked to federal law to

determine whether the remedy sought was legal

or equitable in nature.

The Seventh Amendment right to a jury is no

longer at issue. The distinction between

damages defined as ‘consequential’ or

‘incidental’ under federal law is not

relevant to the issue of the measure of

damages based on rescission under California

law. [California Civil Code S]ection 1692

governs and Section 1692 provides for

‘consequential’ damages as interpreted by

California case law. In a diversity case,

the issue of measure of damages is one of

substantive law as governed by the law of the

forum state. Clausen v. M/V NEW CARISSA, 339

F.3d 1049, 1064-65 (9 Cir.2003)(citing th

Browning-Ferris Indus. v. Kelco Disposal,

Inc., 492 U.S. 257, 278 ... (1989) (‘In a

diversity action, or in any other lawsuit

where state law provides the basis of

decision, the propriety of an award of ...

damages for the conduct in question ... [is

a] question [] of state law.’)).

The September 30, 2005 Order further examined the California

law of rescission damages and determined that California law

governs the restitutionary remedy of consequential rescission

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damages.

Pursuant to the standards governing resolution of Excel’s

motion, Excel’s motion on this ground is DENIED.

9. Court Erred (a) In Holding that Ground Lease Is

Prima Facie Evidence of Fair Rental Value of the Leasehold with

Improvements; (b) In Calculating Credit to Which Excel Was

Entitled; and (c) In Holding that Excel Was Not Entitled to

Equitable Adjustment for Reasonable Rental Value of Demised

Premises, As Improved.

In the September 30, 2005 Order, pages 29-30, the Court

addressed Excel’s contention that it is entitled to an equitable

adjustment of the monthly rent based on the fair market value of

the building. Excel argued that it was entitled to an off-set

for the reasonable rental value of the land while it was in

Plaintiffs’ possession, taking into account the increased value

of the property with the restaurant that Plaintiffs’ built,

relying on Kent v. Clark, 20 Cal.2d 779, 785 (1942), and Runyon

v. Pacific Air Indus., Inc., 2 Cal.3d 304, 315 (1970). The Court

ruled in pertinent part:

The more equitable result here is to prevent

Defendant from benefitting from Plaintiffs’

efforts and expenditures in improving the

land. Plaintiffs invested over two million

dollars to build their Restaurant [sic] in

reliance on the Lease that Defendants [sic]

later breached. Defendants [sic] should not

benefit from their breach by an enhanced offset for the rental value of improvements that

Plaintiffs funded. The Lease is prima facie

evidence of the fair rental value of the

leasehold with improvements. 

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In the instant motion, Excel, incorporating “portions of its

memorandum filed April 4, 2005 (docket #360, pp.22-24), 

essentially argues that the conclusion in the September 30, 2005

Order is wrong, based on Kent and Runyon. 

Excel further contends that the Court awarded Plaintiffs the

cost of constructing the building and improvements and asserts:

The effect of the Court’s award is to

eliminate the cost of the improvements from

Flagship’s side of the economic ledger. 

However, Flagship is not also entitled to use

the improved premises at a ground lease

rental which presupposed that Flagship had in

fact paid for the improvements. Accordingly,

establishing the rental credit by reference

to the ground lease rental is, [sic]

inequitable and results in an unfair windfall

to Plaintiffs. Instead, Excel should receive

a credit to reflect the fair rent for the

premises as improved. 

All of these grounds have been previously considered or

could have been raised previously. Excel’s motion on this ground

is DENIED.

10. The Court Erred in Holding Plaintiffs Were

Entitled to Recover as Consequential Damages the Original Cost of

Plaintiffs’ Used Equipment in the Amount of $589,271, Which

Plaintiffs Disposed Of For $11,260.

In the November 14, 2006 Order, pages 9, 24, the Court ruled

in pertinent part:

Plaintiffs seek $589,782 for expenditures on

restaurant equipment. Defendants assert only

$581,526 is documented in the record, leaving

$17,256 unaccounted for.

An invoice from the Coastal Equipment Company

indicates a total balance due of $589,272 for

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equipment. (JTE 181 0133.) Although the

invoice reflects that only $581,526 had been

paid as of the invoice date, there was

testimony from Ms. Meyers that all bills were

paid in full (Tr. at 1491), and no evidence

to the contrary.

Plaintiffs’ higher $589,782 figure is based

on Wallace’s testimony. (Tr. at 924:16)

Wallace testified he reached this number by

examining the financial records of the

company. His calculation was not challenged

in substance during the trial. However,

again, under Federal Rule of Evidence 1006,

underlying records were not provided to

support the higher figure. (See JTE 181.) 

It is most reasonable to award Plaintiffs the

lower, but better-documented $589,271 in

rescission damages for equipment, less any

offset for salvage. See Part III.E

...

It also appears undisputed that Excel is

entitled to a $11,260 credit to account for

the funds collected after Flagship’s

equipment was sold at auction. Excel seeks

an additional credit for the full cost of the

equipment, asserting that The Money Store

forced Plaintiffs to sell the equipment at a

‘commercially unreasonable firesale.’ Excel,

however, cites absolutely no legal authority

to support this assertion.

Excel shall receive only a $11,260 credit for

the funds collected after the auction.

Excel, incorporating “its memoranda filed June 30, 2004

(docket #344, pp. 21-24) and April 4, 2005 (docket #360, p.19),

argues that the only evidence of the equipment’s value is that

established at the auction, i.e., $11,260. Excel further argues

that, because the equipment was sold pursuant to Plaintiffs’

agreement with the lender, “any loss or sacrifice occasioned by

that transaction has nothing to do with Excel.”

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Excel’s motion is GRANTED to the extent the November 14,

2006 Order states: “It is most reasonable to award Plaintiffs the

lower, but better-documented $589,271 in rescission damages for

equipment, less any offset for salvage.” The Court intended to

award $581,526 in rescission damages for equipment, less any

offset [the $11,260.00] for salvage.” The November 14, 2004

Order should have stated: “It is most reasonable to award

Plaintiffs the lower, but better-documented $581,526 in

rescission damages for equipment, less any offset for salvage.” 

However, in all other respects, Excel’s motion is DENIED. 

All of Excel’s arguments have been previously considered and

rejected.

11. The Court Erred In Failing to Hold That, in

Rescission, the Cost of Plaintiffs’ Used Equipment, Opening

Inventory, Training, and Interest Were Unrecoverable Business

Losses.

In the November 14, 2006 Order, pages 21-23, the Court held

that Plaintiffs were not entitled to recover $186,903 in

“business losses”. Excel has no quarrel with this ruling.

However, Excel contends that the court erred in awarding to

Plaintiffs the cost of equipment, opening inventory, training

expenses, and interest because all of these amounts are

unrecoverable business losses:

The costs of the equipment, and the cost to

use it, are properly regarded as the costs of

doing business that resulted in unrecoverable

business losses. Pursuant to well-recognized

accounting rules, equipment is depreciated

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over time to reflect the loss of value of the

equipment and to reflect that loss as an

expense in the business’s operations. 

Therefore, the $570,266 difference between

the equipment cost ($581,526) and its

eventual resale value ($11,260) is a business

loss, which not [sic] properly awardable in

rescission.

Likewise, the other elements of consequential

damages awarded by the Court are part of

Plaintiffs’ business losses, which are

inappropriate in rescission. The opening

inventory ($30,000), franchise fee ($30,000),

training of Modesto staff ($18,749), and

interest expense ($27,956 construction and

$186,394 paid after opening) are costs of

doing business. Such business losses are not

consequent to the Ground Lease. (See also,

Excel’s memorandum filed February 13, 2006,

docket #371, pp. 8-10). As the Court

correctly noted, ‘Plaintiffs expectation of

recouping their operating losses over time is

a benefit of the bargain that can only be

classified as a form of contract damages.’ 

(11/14/06 Order, p. 23:6-9). This rule

should be applied uniformly to all components

of Plaintiffs’ claimed business operating

expense.

Plaintiffs object to this ground for relief. 

First, Plaintiffs note that the Notice of Motion filed on

December 29, 2006 only states in pertinent part:

14. The Court erred in failing to hold that,

in rescission, the cost of Plaintiffs’ used

equipment was an unrecoverable business loss

....

Plaintiffs complain that Excel’s Memorandum, asserted by

Plaintiffs to be untimely, now expands this ground by including

the other items noted above.

However, because of the conclusion that Excel’s motion and

memorandum are timely, see discussion supra, this objection is

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overruled.

Secondly, Plaintiffs object that Excel’s contentions have

not been previously raised and could have been raised prior to

the hearing on March 14, 2006 on the amount of rescission and

consequential damages to be awarded or in the post-hearing

briefing ordered by the court. 

Excel’s motion to alter or amend the judgment on this ground

is DENIED, because the Court ultimately found that these expenses

were a necessary consequence of entering into the lease and would

not have been incurred but for the material breach by Excel. See

Kona Enterprises, Inc. v. Estate of Bishop, 229 F.3d 877, 890

(9 Cir.2000)(“A Rule 59(e) motion may not be used to raise th

arguments or present evidence for the first time when they could

reasonably have been raised earlier in the litigation.”). 

12. The Court Erred in Holding that There Was Legally

Sufficient Evidence to Award $1,239,030 for Construction Cost.

Excel contends that the award to Plaintiffs of $1,239,030

for construction costs is error on several grounds:

(a) To the extent there was evidence of

these costs, the construction costs totaled

no more than $1,096,978; JT 181 is hearsay

and, even if considered, establishes only

that $1,096,978 was paid;

(b) The testimony of Plaintiffs’ expert, Mr.

Wallace, and his pie charts are no substitute

for actual evidence that monies were in fact

paid; 

(c) The testimony of Plaintiffs’ bookkeeper, Ms. Myers,

is legally insufficient because it related to payment

of vendors and Ms. Myers did not testify regarding JT

157. 

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In addition to the arguments presented in the Memorandum in

support of this motion, Excel incorporates “the pertinent parts

of its memorandum filed with this Court on February 13, 2006

(docket #371, pp.1-3).

In the November 14, 2006 Order, pages 5-8 the award of

construction costs to Plaintiffs was analyzed:

Plaintiffs seek $1,270,252 for the cost of

construction. Defendants asserts that only

$1,096,978 of this is reflected in the trial

record. 

To support the higher figure, Plaintiffs cite

the testimony of expert Rob Wallace (Trial

Transcript (“Tr.”) at 924) and Joint Trial

Exhibit (“JTE”) 157. Defendants assert that

JTE 181 is also relevant.

Defendants make three objections to the

evidence offered by Plaintiffs. First,

Defendants object to the consideration of Mr.

Wallace’s testimony as evidence on the issue

of damages. Mr. Wallace, who was called as

an expert on financial matters, examined

Flagship’s financial records and testified,

using a series of pie charts, as to the total

investment made by Plaintiffs in the Golden

Corral restaurant, including his estimate

that $1,270,252 was spent on construction. 

The pie charts were admitted into evidence as

Plaintiffs’ Exhibit (“PE”) 58. Defendants

object that Wallace’s testimony is hearsay on

the issue of damages, because Wallace had no

firsthand knowledge of any of the alleged

construction expenses to which he testified. 

Defendants point to statements Plaintiffs’

counsel, Mr. Fairbrook, made during the trial

that, at first glance, appear to have

disclaimed any right to cite Wallace’s

testimony pie charts as evidence of damages:

MR. FAIRBROOK: I might be able to

shortcut this a little bit because

I think what Mr. Carroll is

concerned about is those pie charts

that showed the total investment of

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about $3.5 million. I will not

argue that that is a measure of

damage. I will not argue that that

is the amount that should be

recovered. 

That is evidence in the case. It

shows a compilation of various

expenses, it shows the investment.

It serves to test some of the

reasonableness of some of the other

calculations.

With respect to our special damages

and the recoupment of our losses

and investments, those will be done

specifically item by item, cost by

cost, and it does not equal that

total number of those pie charts,

so I will not be arguing that that

equates to our damages.

(Tr. at 1517:1-15.) However, Defendants

quote Plaintiffs’ counsel out of context. 

The above-quoted statement was made in the

context of crafting the jury instructions

regarding contract damages. There was a

lengthy discussion between the parties and

the district court concerning the appropriate

measure for contract damages and whether Mr.

Wallace’s various analyses could be

referenced as evidence of contract damages. 

(Tr. at 1462-1472.) In fact, counsel for

Defendants specifically argued that one of

Wallace’s assertions was that “every single

dime that has ever been inserted into this

business should somehow be given back because

there has been a purported breach of

contract.” (Tr. at 1470:14-15.) This,

Defendants asserted, was relevant only to

“rescission.” (Id.; Tr. at 1516.) In

response, Plaintiffs’ counsel eventually

conceded that he would not argue that

Wallace’s estimates were evidence of contract

damages. Now, however, it is entirely proper

for Plaintiffs to utilize Wallace’s estimates

as evidence of rescission damages. 

Defendants themselves acknowledged as much. 

Wallace specifically testified that

$1,270,252 was spent on construction. (Tr.

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at 924:15.) Defendants present no directly

contrary evidence. He is both a CPA and a

financial analyst. He was entitled and

qualified to review and prepare a

compilation, summary, or abstract of

construction and business expenses from

Flagship’s underlying accounting and business

records.

Even if Wallace’s testimony was inadmissible,

JTE 157 enumerates that $1,239,030 was spent

on the “building.” Defendants object to

reliance on JTE 157, a one-page summary

document that explains that $1,239,030 was

spent on the “building.” Mr. Reiche

testified that JTE 157 was prepared by

Flagship’s bookkeeper Lynn Myers. (Tr. at

599.) Defendants object that Mr. Reiche was

not qualified to provide any foundation as to

payments described in JTE 157. Ms. Myers,

the author of the document, testified at

trial, but she did not provide any foundation

for JTE 157. However, the exhibit was

admitted into evidence without objection

through Mr. Reiche (Tr. at 599), who was

consulted whenever bills were paid, so it may

be relied upon.

JTE 181 provides further support for

Wallace’s estimate. Page 124 of JTE 181 is

an invoice from Flagship’s general

contractor, indicating the total cost of

construction of the restaurant as of June 24,

1999 was $1,239,030. Defendants point out

that the invoice indicates that only

$1,096,978 was paid by Flagship as of the

date of that invoice (i.e., a balance of just

over $142,000 was due). However, there was

general testimony from Ms. Meyers suggesting

that, with the exception of interest due on

the Money Store loan after Flagship defaulted

on the loan, Flagship paid all of its bills

that were actually due (i.e., those bills

that were not disputed or disputable in some

way). (Tr. at 1491:19-20; 1494-96.) 

Defendants present no evidence to the

contrary.3

There is an unexplained discrepancy between

Wallace’s estimate that $1,270,252 was spent

on construction and the $1,239,030 figure

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provided on both JTE 157 and JTE 181. 

Although Wallace explained that his estimate

was based upon his review of the company’s

financial records and his calculation was not

challenged in substance during the trial, JTE

157 was prepared by Lynn Meyers, Flagship’s

own bookkeeper, based upon Flagship’s records

of which she had personal knowledge. There

is no specific evidence to support Wallace’s

higher damages figure. Plaintiffs will be

awarded $1,239,030 in rescission damages for

construction costs incurred, as documented on

Flagship’s own summary and confirmed by the

contractor invoice. 

...

Defendants also argue that the invoices 3

contained within JTE are hearsay. But, it

does not appear that Defendants raised this

objection (at least not successfully) during

trial. The exhibit was admitted in to

evidence and is part of the record and is

appropriately referenced in calculating

rescission damages. It was a business record

of Flagship’s and Defendants did not dispute

its authenticity as a contractor invoice. 

Excel’s motion merely seeks to re-argue issues that have

already been briefed and fully considered in the November 14,

2006 Order and is DENIED

CONCLUSION

For the reasons set forth above,

1. Excel Realty Partners, L.P.’s Renewed Motion for

Judgment as a Matter of Law and Motion to Alter or Amend Judgment

is GRANTED IN PART AND DENIED IN PART.

2. Paragraph 2 of the Judgment entered on December 14, 2006

is AMENDED as follows:

2. Plaintiffs FLAGSHIP WEST LLC, MARVIN G.

REICHE, and KATHLEEN REICHE, and each of

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them, are awarded $2,590,406 for damages in

rescission and consequential damages

resulting from Defendants’ breach of

contract, minus credits due Defendants in the

amount of $455,976, and therefore shall

recover from Defendants, EXCEL REALTY

PARTNERS L.P., in the amount of $2,134,430.

IT IS SO ORDERED.

Dated: May 29, 2007 /s/ Oliver W. Wanger 

668554 UNITED STATES DISTRICT JUDGE

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