NOT FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

JOHN T. HARDISTY,

Plaintiff-counterdefendant-Appellee,

v. MELANIE MOORE, in her capacity as the executrix and the party representative of the estate of Hal Moore; ELAINE K. MOORE; STATE INSULATION, INC., an Arizona lim ited liability com pany; THE 1998 HAROLD M. MOORE REVOCABLE TRUST; MARK PELUSO; STATE INSULATION, LLC, a Nevada lim ited liability company; STATE INSULATION, LLC, an Arizona lim ited liability company,

Defendants-counterclaim ants-Appellants. Nos. 15-56797 16-55538 D.C. No. 3:11-cv-01591-BAS-BLM

MEMORANDUM *

JOHN T. HARDISTY,

Plaintiff-counterdefendant-Appellant, No. 15-56806 D.C. No. 3:11-cv-01591-BAS-BLM



# FILED

SEP 07 2018 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.v.

MELANIE MOORE, in her capacity as the executrix and the party representative of the estate of Hal Moore; ELAINE K. MOORE; THE 1998 HAROLD M. MOORE REVOCABLE TRUST; MARK PELUSO; STATE INSULATION, LLC, a Nevada lim ited liability company; STATE INSULATION, LLC, an Arizona lim ited liability company,

Defendants-counterclaim ants-Appellees. Appeal fromthe United States District Court for the Southern District of California Cynthia A. Bashant, District Judge, Presiding Argued and Subm itted June 5, 2018 Pasadena, California Before: WARDLAW and PAEZ, Circuit Judges, and CHHABRIA, * * District Judge. Elaine K. Moore and others (collectively “the Moores”) appeal the district court’s judgm ent and denial of attorney’s fees following a bench trial in this statelaw fraud case. John T. Hardisty cross-appeals the judgm e nt and denial of attorney’s fees. For the following reasons, we affirm

.

* * The Honorable Vince Chhabria, United States District Judge for the Northern District of California, sitting by designation. 21. The district court did not err in basing its fraud finding on three

m isrepresentations that contradicted the text of the Purchase and Sale Agreem ent. The case on which the Moores rely to assert otherwise, C obbs v. Cobbs , 53 Cal. App. 2d 780, 785 (1943), has been overruled by the California Suprem e Court. Riverisland Cold Storage, Inc. v. Fresno-Madera Prod. Credit Ass’n , 55 Cal. 4th 1169, 1180–82 (2013). The other m isrepresentation found by the district court was not clearly erroneous even if, as the Moores assert, they always intended to subm it the costs to HUD for paym e nt as a change order. The district court’s finding was based on the Moores’ representation that costs not paid by HUD would be reim bursed by Legacy Pointe rather than through a claim on the bond. The Moores do not challenge that aspect of the district court’s finding on appeal. 2. The district court did not err in concluding that Hardisty justifiably relied on the Moores’ representations for purposes of its fraud in the execution finding. Hardisty’s failure to read the final draft of the contract, coupled with his reasonable opportunity to do so, would ordinarily render his reliance unjustifiable. Rosenthal v. Great W. Fin. Sec. Corp. , 14 Cal. 4th 394, 423 (1996). But that rule does not apply because the district court did not clearly err in finding that Hardisty read an earlier draft of the contract and that the Moores concealed the fact that they had edited it. Restatem ent (Second) of Contracts § 163 cm t. b, illus. 2. Nor is the

3district court’s finding that Hardisty’s reliance was reasonable otherwise clearly

erroneous. For sim ilar reasons, the district court did not err in awarding fraud dam ages. Chapman v. Skype, Inc. , 220 Cal. App. 4th 217, 233 n.6 (2013) (noting that a lower standard of justifiable reliance applies to tort claim s than to fraud in the execution). 3. The district court did not err in finding that the Incentive Agreem ent was valid. Although the Incentive Agreem ent is titled “Letter of Intent,” Hardisty testified that he understood it to be a binding, standalone contract and his counsel argued to the district court that it could be affirm ed, at least in part, even if the Purchase and Sale Agreem ent were declared void or rescinded. The district court’s factual finding that the Moores intended to perform in accordance with the Incentive Agreem ent when they signed it was not internally inconsistent or otherwise clearly erroneous. See Miller v. Thane Int’l , 615 F.3d 1095, 1104 (9th Cir. 2010) (“[W] e are extrem ely deferential to credibility determ inations.”). Hardisty waived any claim for rescission of the Incentive Agreem ent based on total failure of consideration by not raising it below. Smith v. Marsh , 194 F.3d 1045, 1052 (9th Cir. 1999). That HUD’s approval of the transfer was prem ised on the void Purchase and Sale Agreem ent m ay m ake the transfer voidable at HUD’s option, but it does not m ake it autom a tically void. Hardisty waived his argum ent

4that the Incentive Agreem ent was never a valid contract based on Hal Moore’s

failure to sign it, because he did not raise it either below or in his opening brief. Brown v. Rawson-Neal Psychiatric Hosp. , 840 F.3d 1146, 1148 (9th Cir. 2016); Smith , 194 F.3d at 1052. We therefore affirm the district court’s refusal to rescind the full transaction and its judgm ent for the Moores on the conversion and securities fraud claim s. 1 4. The district court did not err in finding that there was no confidential relationship at the relevant tim e and entering judgm ent for the Moores on the constructive fraud claim

. The district court properly interpreted Odorizzi v. Bloomfield Sch. Dist. , 246 Cal. App. 2d 123, 129 (1966), to stand for the proposition that a negotiation “to bring about a term ination of [the] relationship” is generally strong evidence (but not dispositive evidence) that a confidential relationship has ended. Any continued control over Hardisty’s finances by the Moores is relevant only to the existence of a fiduciary relationship, not to the existence of a confidential relationship. 2 See Vai v. Bank of Am. Nat’l Tr. & Sav. Ass’n , 56 Cal. 2d 329, 338 (1961); Hayutin v. Weintraub , 207 Cal. App. 2d 497,

1 W e need not, and do not, decide whether the district court’s alternative holding that the LLC interests were not securities was correct.

2 Hardisty waived any challenge to the district court’s finding that there was no fiduciary relationship by not addressing it in his opening brief. B rown , 840 F.3d at 1148. 5513-14 (1962); Sime v. Malouf , 95 Cal. App. 2d 82, 97 (1949). The district court’s factual finding that any confidential relationship had deteriorated was not otherwise clearly erroneous in light of the evidence in the record that the negotiations over the Incentive Agreem ent and the Purchase and Sale Agreem ent were acrim onious and based on threats rather than trust and confidence. 5. The Moores waived their challenge to the district court’s reopening of the case to perm it new evidence by failing to explain what prejudice they suffered from the reopening—that is, what evidence introduced after reopening the district court relied on to support its judgm ent. See Fed. R. App. P. 28(a)(8)(A); United Nurses Ass’ns of Cal. v. Nat’l Labor Relations Bd. , 871 F.3d 767, 780 (9th Cir. 2017). Even if we were to reach this issue, we would affirm . On two separate occasions, the district court explained that it was reopening the case “solely because . . . I feel like I short circuited both sides with the tim e crunch” and that its “only reason for reopening was m y concern that I had not given both sides sufficient tim e.” The district court properly ensured that it did “not adhere so

6rigidly to tim e lim its as to sacrifice justice in the nam e of efficiency.” N avellier v. Sletten , 262 F.3d 923, 941 (9th Cir. 2001). 3 6. We need not decide whether the district court properly adm itted the testim ony of Hardisty’s expert witness because the Moores concede that the district court did not rely on that testim ony, so there could be no prejudice. See Estate of Barabin v. AstenJohnson, Inc. , 740 F.3d 457, 462 (9th Cir. 2014). 7. Hardisty’s claim s were, in part, “on a contract” because they sought rescission of the Purchase and Sale Agreem ent. Super 7 Motel Assocs. v. Wang , 16 Cal. App. 4th 541, 549 (1993); see also Cal. Civ. Code § 1717(a). But Hardisty also sought consequential dam ages, which sound in tort rather than contract. Id. at 549–50. The district court should have focused solely on the contract portion of the claim s to determ ine the prevailing party under § 1717(a). We nevertheless affirm because “under the correct legal standard it would have been an abuse of discretion” to find either party to be the prevailing party. United States v. Davis ,

3 In connection with its decision to reopen, the district court m ay have m isstated the burden of proof as to dam ages under California law. But these statem ents were m erely in further defense of the decision to reopen in response to objections by counsel. The district court twice stated clearly that it m ade the decision to alleviate the harm caused by unduly strict tim e lim its. And even if the district court’s explanation of its rationale for the reopening could be considered am biguous, we would resolve that am biguity in favor of the conclusion that the district court properly exercised its discretion. In the crim inal sentencing context, we have resolved am biguities about whether the district court exercised its discretion or instead based a decision on an erroneous legal conclusion in favor of rem and. See United States v. Brown , 985 F.2d 478, 480–81 (9th Cir. 1993). That context is very different from this one, which involves m erely the reopening of the evidence in a civil bench trial. 7428 F.3d 802, 808 (9th Cir. 2005). The Moores are not the prevailing party on the

rescission claim s because the Purchase and Sale Agreem ent was declared void based on the fraud they com m itted against Hardisty. Hardisty is also not the prevailing party because he sought rescission of the Purchase and Sale Agreem ent solely for the purpose of getting his shares in Legacy Pointe back, which he failed to do. See Hsu v. Abbara , 9 Cal. 4th 863, 877 (1995) (“[I] n determ ining litigation success, courts should respect substance m ore than form .”). The district court’s judgm e nt thus was “good news and bad news to each of the parties.” K ytasty v. Godwin , 102 Cal. App. 3d 762, 774 (1980). 8. The district court did not abuse its discretion in denying costs to Hardisty. Considering “the overall action,” this case involved “a m ixed judgm ent.” Amarel v. Connell , 102 F.3d 1494, 1523 (9th Cir. 1996). AFFIRMED. Each party shall bear its own costs on appeal in all three

cases.

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