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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

CALEB AVERY T’BEAR,

Plaintiff,

v.

BARRY FORMAN,

Defendant.

Case No.17-cv-00796-JSC 

ORDER RE: DEFENDANT’S MOTION 

FOR SUMMARY JUDGMENT ON 

COUNTERCLAIMS

Re: Dkt. No. 99

Plaintiff Caleb Avery t’Bear sued Defendant Barry Forman in California state court for 

breach of fiduciary duty, declaratory relief, and an accounting arising out of a failed business 

venture.1 (Dkt. No. 1-1.)2 Defendant removed the action to this Court pursuant to 28 U.S.C. § 

1441(b), based on diversity jurisdiction under 28 U.S.C. § 1332. (Dkt. No. 1 at ¶ 4.) Defendant 

subsequently brought counterclaims for breach of loan agreements, rescission, and in the 

alternative, equitable relief. (Dkt. No. 84.) On February 6, 2019, this Court granted Defendant’s 

motion for summary judgment on Plaintiff’s complaint, denied in part and deferred in part pending 

supplemental briefing Defendant’s motion for summary judgment on Defendant’s counterclaims, 

denied Plaintiff’s cross motion for summary judgment on Defendant’s counterclaims, denied 

Defendant’s motion for sanctions, and denied Plaintiff’s motion for leave to amend. (Dkt. No. 

142.) Now pending before the Court is the deferred part of Defendant’s motion for summary 

judgment on Defendant’s counterclaims. (Dkt. No. 99.) After consideration of Defendant’s 

supplemental briefing, the Court GRANTS Defendant’s motion. 

The factual background of this case is discussed in detail in the Court’s February 6, 2019 

 

1 Both parties have consented to the jurisdiction of a magistrate judge pursuant to 28 U.S.C. §

636(c). (Dkt. Nos. 4 & 8.) 

2 Record citations are to material in the Electronic Case File (“ECF”); pinpoint citations are to the 

ECF-generated page numbers at the top of the documents. 
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order. (See Dkt. No. 142 at 2-12.) The Court incorporates that background here. 

DISCUSSION

Defendant moves for summary judgment on his counterclaims for: (1) breach of 33 

promissory notes and loan agreements; and (2) declaratory relief (rescission). Defendant also 

seeks injunctive relief prohibiting Plaintiff from conveying his interest in any FairWay-related 

entity, the FairWay IP, and his general assets until Plaintiff “has satisfied in full the judgment 

entered against him” on these claims.3(Dkt. No. 99 at 31-32.) 

The Court’s previous order concluded that Defendant had satisfied his burden of 

demonstrating the absence of a genuine dispute of material fact on the essential elements of his 

breach of contract counterclaim. (See Dkt. No. 142 at 23-24 (citing Anderson v. Liberty Lobby, 

Inc., 477 U.S. 242, 256 (1986); First Pac. Networks, Inc. v. Atl. Mut. Ins. Co., 891 F. Supp. 510, 

513 (N.D. Cal. 1995) (“‘Where the moving party has the burden of [proof at trial,] his showing 

must be sufficient for the court to hold that no reasonable trier of fact could find other than for the 

moving party.’”) (quoting Schwarzer, Summary Judgment Under the Federal Rules: Defining 

Genuine Issues of Material Fact, 99 F.R.D. 465, 487-88 (1984))).) The Court further disposed of 

all argument and issues raised in Defendant’s motion and Plaintiff’s opposition to same, (see Dkt. 

No. 142 at 22-38), except one issue related to Plaintiff’s affirmative defense based on the 

California Financing Law (“CFL”), because of evidence cited by Plaintiff at oral argument, (see 

id. at 29-32). 

Plaintiff’s CFL defense asserts that the promissory notes at issue are void because 

Defendant failed to register as a financial lender as required under the CFL, California Financial 

Code § 22000 et seq. Plaintiff contends that by failing to register, Defendant violated California 

Financial Code §§ 22750 and 22752(a), and thus Defendant is prohibited from collecting on the 

loans, or at least collecting any interest on the loans. Defendant counters that Plaintiff’s argument 

fails because the notes at issue are “commercial loans,” and Sections 22750 and 22752(a) of the 

 

3 The Court’s February 6, 2019 order addressed the parties’ cross motions for summary judgment 

on Defendant’s counterclaims in detail, (see Dkt. No. 142 at 22-40), and the Court incorporates 

that discussion here. 
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United States District Court

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CFL apply only to “consumer loans.” 

The Court’s previous order concluded that the CFL applies only to consumer and not 

commercial loans. (See Dkt. No. 142 at 29-30). The Court further noted that Plaintiff’s defense 

could thus succeed only if a reasonable trier of fact could find that the loans qualify as consumer 

loans, that is, that they were intended for “primarily for personal, family, or household purposes,” 

(see id. at 30). The Court’s order addressed the written evidence of record and concluded that 

Plaintiff failed to identify any evidence from which a reasonable trier of fact could so find. (Id. at 

30-31.) At oral argument, however, Plaintiff cited deposition testimony from Defendant in which 

he testified:

[The equity] was tied to a single operating company[,] namely 

Fairway Financial US and I grew increasingly uncomfortable that I’d 

advanced a tremendous amount of money. That money was being 

used in part to going [sic] to provide [Plaintiff’s] living expenses, 

housing, food, health needs, and the balance to develop and evolve[ ] 

his international patent portfolio and since these patents were 

international, and since it was anticipated that there were operating 

companies to be set up in jurisdictions around the world, I grew 

increasingly concerned about having all my eggs in one basket. 

(Id. at 31-32 (citing Dkt. No. 115-5 at 91 (211:16-212:2) (emphasis added).) With regard to this 

evidence, the Court’s order states:

Plaintiff did not cite to this testimony in any of his pleadings in 

connection with the summary judgment motions; thus, the Court need 

not consider it. See Fed. R. Civ. P. 56(c)(3). However, because 

Plaintiff is unrepresented, and he seeks to have the testimony 

considered in defense to Defendant’s counterclaims rather than on his 

affirmative claims, the Court will consider the late-identified 

deposition testimony. See id.; see also Carmen v. San Francisco 

Unified Sch. Dist., 237 F.3d 1026, 1031 (9th Cir. 2001) (noting that 

the trial court has discretion on summary judgment to consider 

materials in the record even if not cited to in the papers). Defendant, 

however, must be given an opportunity to respond, especially since 

Plaintiff did not claim that the loans qualify as consumer loans until 

his reply brief. Accordingly, Defendant may file a supplemental brief, 

not to exceed five pages, on whether, drawing all inferences in 

Plaintiff’s favor, a reasonable trier of fact could find any of the loans 

at issue on Defendant’s motion for summary judgment were made 

primarily for personal, family, or household purposes. The Court will 

take the issue under submission upon the filing of Defendant’s 

supplemental brief. No further briefing or evidence is permitted.
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(Id. at 32.) On February 21, 2019, Defendant filed his supplemental brief.

4

 The gravamen of 

Defendant’s argument is that the deposition testimony indicates only that part of the loan proceeds 

were being used to compensate Plaintiff for his work on FairWay, and that fact does not turn the 

“loans into ‘consumer loans’” given the other evidence of record indicating a primarily 

commercial purpose. (Dkt. No. 147 at 6.) The Court agrees. 

Plaintiff’s complaint alleges that the loans were commercial in nature: “Defendant, as part 

of his agreed upon support for the partnership/joint venture, provided funding for the 

partnership/joint venture which funds were characterized as Promissory Notes.” (Dkt. No. 1-1 at 

¶ 9 (emphasis added).) The complaint then lists 45 promissory notes, including the 33 at issue, 

identifying Defendant as the “Lender” and Plaintiff as the “Borrower.” (Id.) Plaintiff admitted 

that allegation in his answers to Defendant’s first amended counterclaims, (Dkt. No. 37 at ¶ 17), 

and second amended counterclaims, (Dkt. No. 112 at ¶ 17). 

The Ninth Circuit has recognized that “[a] statement in a complaint, answer or pretrial 

order is a judicial admission, as is a failure in an answer to deny an allegation.” Am. Title Ins. Co. 

v. Lacelaw Corp., 861 F.2d 224, 226 (9th Cir. 1988). A judicial admission has “the effect of 

withdrawing a fact from issue and dispensing wholly with the need for proof of the fact,” and is 

“conclusively binding on the party” who makes it. Id. (internal quotation marks and citation 

omitted). Thus, Plaintiff’s allegations in the complaint and statements in his answers that the 

loans were used to fund FairWay (the “partnership/joint venture”) constitute binding judicial 

admissions. 

Plaintiff’s allegations that the loans were used to fund FairWay are consistent with other 

documentary evidence of record. The terms of the first two promissory notes state that the 

primary, or even exclusive, purpose of the loans is to fund FairWay. (See Dkt. No. 99-2, Ex. 1 at 

12 (“Proceeds of Note (a) Use the proceeds of the Note for working capital, legal fees, and other 

[short-term] general corporate purposes.”); Ex. 2 at 28 (“Proceeds of Note (a) Use the proceeds of 

 

4 Defendant’s brief includes exhibits not previously submitted as evidence. (See Dkt. Nos. 147-2--

147-11.) Pursuant to the Court’s order, it will not consider the newly submitted exhibits, and will 

instead consider only the arguments contained in Defendant’s brief and citations therein to 

evidence previously submitted. 
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United States District Court

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the Note exclusively for patent-related expenses (e.g., legal fees and the related general costs) 

related to a contemplated international business.”). The parties subsequently used a “Secured 

Promissory Note” form for the loans at issue on Defendant’s motion (except the loan to FairWay 

International Kft) that does not specify what the proceeds of the loans could be used for. (See Dkt. 

No. 99-2, Exs. 3-24; 26-33.) However, based on the terms of the first two loans, which show that 

Defendant made the loans to further an exclusively commercial purpose—the development of 

FairWay—that omission does not give rise to a reasonable inference that the subsequent loans 

were intended primarily for consumer purposes. (See Dkt. No. 99-2, Exs. 3-24; 26-33.) The 

commercial purpose of the loans is further evinced by the “Rolling Project Budget[s]” for FairWay 

that Plaintiff sent to Defendant in connection with some “Loan Managers”5itemizing how the loan 

proceeds were being utilized toward FairWay “Project Item[s]”6and “Legal/Acct.” (See Dkt. Nos. 

99-3, Ex. 34 at 4, Ex. 35 at 23-24, Ex. 40 at 69, Ex. 41 at 73; 99-4, Ex. 43 at 4, Ex. 45 at 13, Ex. 

46 at 17, Ex. 47 at 22.) 

In sum, the documentary evidence of record and Plaintiff’s judicial admissions support 

Defendant’s declaration in support of his motion for summary judgment that he “made more than 

45 loans to [Plaintiff] to assist his efforts to build his patent portfolio and FairWay.” (See Dkt. 

No. 99-1 at ¶ 4 (emphasis added).) Plaintiff’s reference to a single acknowledgment by Defendant 

in his deposition testimony that the proceeds of the loans were “being used in part . . . to provide 

Plaintiff’s living expenses” is insufficient to raise a genuine dispute of material fact as to whether 

the loans were intended primarily for Plaintiff’s personal, family or household purposes. 

***

To defeat Defendant’s motion, Plaintiff—who has the ultimate burden of proof on the CFL 

affirmative defense—must identify evidence sufficient to support a genuine dispute that the loans 

 

5 The Court’s February 6, 2019 order includes a detailed description of the Loan Managers. (See

Dkt. No. 142 at 4-5.) 

6 The parties do not dispute that Plaintiff used portions of the loan proceeds to compensate himself 

for his work on FairWay. Indeed, Plaintiff’s Rolling Project Budgets include a line item for 

“Caleb” under the budget’s “Project Item” heading. Plaintiff testified that “all the work that [he’s] 

been doing since [2003, 2004] has been related to the FairWay project.” (Dkt. No. 99-8, Ex. C at 

36 (13:18-21).) 
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were not intended to be used primarily for other than personal, family or household purposes, that 

is, a finding that the loans were intended primarily for personal, family or household purposes. 

Plaintiff fails to do so. 

Accordingly, the Court grants Defendant’s motion for summary judgment on his 

counterclaim for breach of contract. Defendant has satisfied his burden of demonstrating the 

absence of a genuine issue of material fact as to the essential elements of his claim, and Plaintiff 

fails to carry his burden of demonstrating a genuine dispute of material fact as to his CFL defense. 

CONCLUSION

The Court grants summary judgment in Defendant’s favor on his counterclaim for breach 

of contract. The Court will hold a case management conference on the remaining issues in the 

case on April 4, 2019 at 1:30 p.m. An updated joint case management conference statement is due 

March 28, 2019. 

IT IS SO ORDERED.

Dated:

JACQUELINE SCOTT CORLEY

United States Magistrate Judge

February 26, 2019