Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-02370/USCOURTS-azd-2_09-cv-02370-2/pdf.json

Parties Involved:
Robert Burkarth
Consol Counter Defendant
Jeff Deboer
Counter Claimant
Householder Group LLLP
Consol Counter Claimant
Charles Van Mason
Counter Claimant

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

THE HOUSEHOLDER GROUP, LLLP,

an Arizona limited liability limited

partnership, 

Plaintiff, 

vs.

CHARLES VAN MASON, an individual;

JEFF DEBOER, an individual, and

ROBERT BURKARTH, an individual,

Defendants. 

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CV 09-2370-PHX-MHM

CV 10-0918-PHX-MHM

 (Consolidated)

ORDER

Currently before the Court is Defendants Charles Van Mason, Jeff Deboer, and Robert

Burkarth’s Partial Motion for Summary Judgment. (Doc. 38). Having carefully considered

the Parties’ pleadings and determined that oral argument is unnecessary, the Court issues the

following Order.

I. BACKGROUND

Plaintiff The Householder Group brought this suit on November 12, 2009, alleging

seven causes of action against Defendants Charles Van Mason and Jeff DeBoer. (Doc. 1).

Numerous of those causes of action stem from separate, but virtually identical, agreements

(“Agreement”) entered into between the Defendants and Plaintiff. (Doc. 1, Complaint). It

appears to be undisputed that the Agreement included a provision which required the

Defendants to pay a sum of money, as liquidated damages, equal to sixty percent of the

Case 2:09-cv-02370-SMM Document 52 Filed 12/08/10 Page 1 of 7
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Defendants’ gross revenues generated for the last full year of their Agreement should they

terminate the Agreement prematurely. (Complaint, Exh. 2 & 3, ¶XI). Plaintiff seeks

recovery of liquidated damages pursuant to the Agreement as part of their breach of contract

claims against Defendants (Claims for Relief 1-5).

 On May 21, 2010, the Court, to promote consistency and judicial economy,

consolidated this case with CV-10-0918-MHM, adding Defendant Robert Burkarth, as it

addressed questions of law and fact common to the instant case. (Doc. 36). Prior to doing

so, however, the Court had authorized Defendants Van Mason and DeBoer to file a motion

for partial summary judgment concerning only the issue of liquidated damages. (Doc. 30).

Shortly thereafter, on June 16, 2010, Defendants filed the Motion for Partial Summary

Judgement that is the subject of this Order. Plaintiff responded on July 16, 2010, (Doc. 44),

and the motion became fully briefed on August 2, 2010, when Defendants filed their reply

memorandum. (Doc. 45). 

In their motion, Defendants argue that partial summary judgement is appropriate based

on the doctrine of collateral estoppel. Specifically, Defendants contend that the doctrine of

collateral estoppel bars Plaintiff from re-litigating the Northern District of California Court’s

finding in The Householder Group LLLP v. Fuss, CV-07-00573-SI, that the liquidated

damages clause in the Agreement is an unenforceable penalty and, therefore, unlawful under

Arizona law. In its response, Plaintiff concedes that there are no material facts in dispute and

does not dispute Defendants’ articulation of the standard for summary judgment or

Defendants’ recitation or application of the elements of collateral estoppel. In other words,

Plaintiff does not deny that the Fuss court previously addressed the legality of the liquidated

damages clause at issue in this case and, therefore, if this Court finds that the Fuss court’s

order has a preclusive effect, it should grant Defendants’ motion for partial summary

judgment. Instead, Plaintiff’s opposition to Defendants’ motion turns on a single and narrow

issue of law: whether the partial summary judgment Order issued in Fuss has preclusive

effect under the doctrine of collateral estoppel.

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II. DISCUSSION

In support of its argument, Plaintiff relies primarily on a single Ninth Circuit case, St.

Paul Fire & Marine Ins. v. F.H., 55 F.3d 1420 (9th Cir.1995). In St. Paul, the Court of

Appeals considered the same legal question at issue in this case: whether an adverse partial

summary judgment ruling in a case that previously settled prior to entry of final judgment

collaterally estopped the plaintiffs from re-litigating the same issue. The St. Paul Court

ultimately decided that it did not, and Plaintiff argues that the Ninth Circuit’s holding

constitutes a firm rule concerning the preclusive effect of partial summary judgment orders

in cases that settle: partial summary judgment orders that are not final, are not sufficiently

firm for the purposes of collateral estoppel. Defendants disagree, citing to a more recent

Northern District of California case in which the district court found preclusive a partial

summary judgment motion in a case that settled. Security People, Inc. v. Medeco Sec. Locks,

Inc., 59 F. Supp. 2d 1040, 1044–45 (N.D. Cal. 1999). They argue that Security

People represents an advancement in this circuit’s law towards relaxing the standards for

collateral estoppel and that its result, not St. Paul’s, should control the outcome of this

motion. 

In Luben Industries, Inc. v. United States, 707 F.2d 1037, 1040 (9th Cir. 1983), the

Ninth Circuit set forth the applicable legal standard for determining if a particular decision

should be given preclusive effect in a future case. Citing to the Restatement (Second) of

Judgements, the Court of Appeals stated that “[a] ‘final judgment’ for purposes of collateral

estoppel can be any prior adjudication of an issue in another action that is determined to be

‘sufficiently firm’ to be accorded conclusive effect. Id. The Luben Industries Court also set

forth a number of factors that are relevant to a court’s determination concerning whether a

prior adjudication is sufficiently firm to be given conclusive effect. Id. In making such a

determination, a court may consider: “(1) whether the decision was not avowedly tentative,

(2) whether the parties were fully heard, (3) whether the court supported its decision with a

reasoned opinion, and (4) whether the decision was subject to an appeal.” Security People,

Inc. v. Medeco Sec. Locks, Inc., 59 F. Supp. 2d 1040, 1045 (N.D. Cal. 1999) (citing Luben

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Indus., 707 F.2d at 1040 (quoting Restatement 2nd of Judgments, § 13, cmt. g)).

The Security People Court applied the Luben Industries factors, finding that the first

three mitigated in favor of giving the partial summary judgment order in question preclusive

effect. In reaching its decision, however, the district court did address the fourth factor;

whether the decision was subject to an appeal. More importantly, however, the district court

neither cited to nor made reference to the Ninth Circuit’s decision in St. Paul. This omission

is important, as the St. Paul decision, while stopping short of articulating a black and white

rule, strongly suggests that partial summary judgment orders by their very nature are not

sufficiently firm to have a preclusive effect on any future proceedings. Indeed, the St. Paul

Court could not say that “the [partial summary judgment at issue] was ‘sufficiently firm to

be accorded conclusive effect,’” based entirely on the fact that: (1) “The partial summary

judgment was not a final judgment,”; (2) “as a partial summary judgment, it could not have

been appealed by [the defendants] when it was entered,”; (3) “[the partial summary

judgment] was subject to reconsideration on proper motion,”; and (4) “[t]he court could, on

its own initiative, revise the [summary judgment] order at any time before judgment.” Id.

In reaching its decision, however, the St. Paul Court made no reference to the Luben

Industries factors, despite applying the sufficiently firm standard.

Given the nearly identical factual posture of St. Paul and Security People, the

discrepancy in both reasoning and results makes this Court’s job difficult. On the one hand,

the three Luben Industries factors on which the Security People Court relied are present in

the Fuss case. The district court’s opinion was not tentative, the parties appear to have been

fully heard, and the Court provided them with a well reasoned and detailed explanation for

its decision, (Doc. 39, Exh. D). On the other hand, the Fuss partial summary judgment

order also embodies three of the four factors the St Paul Court found determinative. The

Fuss order is not a final judgment, it could not have been appealed, and it was subject to

revision by the district court. The only difference between the Fuss order and the one in St.

Paul is that the Fuss plaintiff filed a motion for reconsideration, which the district court

summarily denied. (Doc. 39, Exh. J). While the motion for reconsideration in Fuss

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1

The other Ninth Circuit cases on which Defendants rely to support their position that

the Ninth Circuit has relaxed its collateral estoppel doctrine since St. Paul are inapposite. In

Steen v. John Hancock Life Ins. Co., 106 F.3d 904, 912 (9th Cir. 1997), the Ninth Circuit

stated that “the determination of an issue on a motion for judgment on the pleadings or a

motion for summary judgment is sufficient to satisfy the "litigated" requirement for collateral

estoppel.” This is undoubtedly true, but does not address the issue before this court; the effect

of a summary judgment decision when the case itself does not go to final judgment. In Steen

the summary judgment order at issue appears to have stemmed from a case that had been

fully litigated to a final judgment, not one that settled. See id. at 908–09 (setting forth the

factual and procedural history). Likewise, in Papadakis v. Zelis (In re Zelis), the other case

on which Defendants rely, the Ninth Circuit gave preclusive effect to an issue decided in a

motion to dismiss. 66 F.3d 205, 209 (9th Cir. 1995) The motion to dismiss in In re Zelis,

however, resulted in entry of judgment, distinguishing it from the instant case. Id. at

207–208. Accordingly, in both Steen and In re Zelis, the issues of finality and opportunity

for appeal so heavily relied upon by the St. Paul court were not present. 

2

The paramount importance of the ability to appeal is also suggested in Luben

Industries. Applying the “sufficiently firm” standard, the Luben Industries Court concluded

that the interlocutory opinion in question was not sufficiently firm to give it collateral

estoppel effect because “although the [prior] opinion does not appear to be tentative, it could

not have been the subject of an appeal at the time the instant case was decided in the District

Court.” Luben Industries, 707 F.2d at 1040 Additionally, the Court noted that “the

Government did not have a ‘full and fair opportunity to litigate’ its claim because it could not

appeal the interlocutory memorandum.” Id.; see Parklane Hosiery Co. v. Shore, 439 U.S.

322, 331-33 (1979) (stating that a defendant who has a “full and fair” opportunity to litigate

an issue in one action may be barred from re-litigating the same issue in another action

brought by a different party). 

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distinguishes the instant case somewhat from St. Paul, it does not change the fact that this

Court is bound by the Ninth Circuit, not the decisions of its fellow district courts. This

Court, therefore, cannot simply ignore St. Paul, which presents a nearly identical fact pattern

and is, most importantly, a Ninth Circuit case.1

 The Ninth Circuit’s language concerning the

non-preclusive effect of a the partial summary judgment order is both forceful and general

in nature, and strongly suggests that the opportunity to appeal and the finality of an order are

important, if not the most important, considerations for a district court.2

 See also Weule v.

Nordstrom (In re Nordstrom), 8 Fed. Appx. 823, 828 (9th Cir. Cal. 2001) (“[T]he state court's

earlier order granting Weule's motion for summary adjudication does not preclude the

bankruptcy court's independent consideration of any issue . . . we cannot give collateral

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estoppel effect to this interlocutory order because there was no final judgment on the merits

against Nordstrom.”); RE/MAX Int'l, Inc. v. Equity Max Realty, Inc., 2007 U.S. Dist. LEXIS

24713 (S.D. Cal. Apr. 3, 2007) (finding declaratory judgment not sufficiently firm based on

St. Paul because “it could not be appealed as of the date of this Order, and because it is

subject to reconsideration, it does not constitute a "final judgment" for the purposes of

collateral estoppel.”). It also represents the most recent statement by the Ninth Circuit on the

issue to date; a statement this Court is bound to follow, especially in light of the fact that the

Federal Circuit, not the Ninth Circuit, affirmed Security People, and did so per curiam and

without comment on the estoppel issue. Security People, Inc. v. Medeco Sec. Locks, Inc.,

243 F.3d 555 (Fed. Cir. 2000).

III. CONCLUSION

In short, although Luben Industries counsels this Court to consider a wide range of

factors in determining the preclusive effect of an interlocutory Order, St. Paul, strongly

suggests that in the context of a partial summary judgment motion stemming from a case that

settled, some considerations are more important than others. Absent other persuasive Ninth

Circuit authority, this Court must follow St. Paul. Defendants’ motion is therefore denied;

the Fuss Order is not entitled to any preclusive effect with respect to the issue of the legality

of the liquidated damages in the Agreement.

Accordingly,

IT IS HEREBY ORDERED denying Defendants’ Motion for Partial Summary

Judgment. (Doc. 38).

/ / / 

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IT IS FURTHER ORDERED denying Defendants’ Motion for Oral Argument.

(Doc. 42).

DATED this 7th day of December, 2010.

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