Court Opinion

ID: 866298
Source: CourtListenerOpinion
Date Created: 2013-04-30 20:29:39.919864+00
Date Added: 2024-06-11T09:06:43.918952
License: Public Domain

FILED
                               NOT FOR PUBLICATION                          APR 30 2013

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS

                           FOR THE NINTH CIRCUIT

EINSTEIN COSMETICS, LLC,                )      No. 11-56147
                                        )
      Plaintiff – Appellant,            )      D.C. No. 2:10-cv-00640-AHM-AGR
                                        )
      v.                                )      MEMORANDUM *
                                        )
CVS CAREMARK CORP.;                     )
CVS PHARMACY, INC.,                     )
                                        )
      Defendants – Appellees.           )
                                        )

                    Appeal from the United States District Court
                        for the Central District of California
                     A. Howard Matz, District Judge, Presiding

                               Submitted April 8, 2013 **
                                 Pasadena, California

Before:      FERNANDEZ, RAWLINSON, and BYBEE, Circuit Judges.

      Einstein Cosmetics, LLC (“Einstein”) appeals the district court’s grant of

summary judgment and terminating sanctions in favor of CVS Pharmacy, Inc. and

      *
       This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
      **
      The panel unanimously finds this case suitable for decision without oral
argument. Fed. R. App. P. 34(a)(2).
CVS Caremark Corp. (collectively “CVS”). We affirm.

      (1)      Einstein first asserts that the district court erred when it determined

that Einstein’s complaint must be dismissed because the person who purported to

file and pursue the action had no authority to do so on Einstein’s behalf. We

disagree. The evidence before the court made it plain that Einstein was an LLC so

structured that sole “management [was] vested in only one manager,” 1 a

requirement that could not be changed absent an amendment to the articles of

organization.2 The evidence showed that Shalant was not that manager,3 and had

no authority to bring an action on behalf of Einstein. In short, he was not an agent

of Einstein for that purpose. See S. Sacramento Drayage Co. v. Campbell Soup

Co., 220 Cal. App. 2d 851, 856, 34 Cal. Rptr. 137, 139–40 (1963). On appeal it is

suggested that this was a stockholder’s derivative4 action on behalf of Einstein.

However, that issue was not raised before the district court and is waived. See

Crawford v. Lungren, 96 F.3d 380, 389 n.6 (9th Cir. 1996). Moreover, we note

that the prerequisites to filing a derivative action were never pled. See Cal. Corp.

      1
          Cal. Corp. Code § 17151(b).
      2
          Id. § 17054(c)(2).
      3
          Nor was he the Chief Executive Officer.
      4
       See Cal. Corp. Code § 17501; see also Paclink Commc’ns Int’l, Inc. v.
Superior Court, 90 Cal. App. 4th 958, 963–64, 109 Cal. Rptr. 2d 436, 439 (2001).

                                             2
Code § 17501(a)(2); see also Cal. Corp. Code § 800(b); Potter v. Hughes, 546 F.3d

1051, 1055 (9th Cir. 2008); Bader v. Anderson, 179 Cal. App. 4th 775, 782–83,

101 Cal. Rptr. 3d 821, 826–27 (2009).

       (2)    Einstein then argues that the district court erred when it granted

terminating sanctions as to CVS’s counterclaim because of Einstein’s discovery

violations. See Fed. R. Civ. P. 37(d)(1)(A)(i), (b)(2)(A)(vi); see also Leon v. IDX

Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006).5 Again, we disagree.6 While the

district court did not expressly find bad faith on Einstein’s part,7 the apparent

refusal of Einstein to produce its manager and CEO — the most important

witnesses to the arrangement with CVS — for their depositions and its failure to

otherwise comply with its discovery obligations were redolent of bad faith.8

Especially in light of the lack of opposition at the district court and the whole

flavor and course of the litigation before it, we cannot say that the district court

       5
        While the district court referred to its inherent power, it is not clear that it
relied upon that power separately.
       6
       We note that Einstein did not oppose the motion for terminating sanctions,
but now, surprisingly, appeals their grant.
       7
       See Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 482 F.3d
1091, 1096 (9th Cir. 2007).
       8
       See Virtual Vision, Inc. v. Praegitzer Indus., Inc., 124 F.3d 1140, 1143–44
(9th Cir. 1997).

                                             3
abused its discretion 9 when it applied the five-factor test that the district courts

must use in determining whether a terminating sanction is appropriate.10

Moreover, the district court’s determination that lesser sanctions would not be

effective is not specifically disputed on appeal,11 and it cannot be doubted that the

inability to obtain discovery would be prejudicial to CVS’s presentation of its case.

On this record, we are unable to hold that the district court erred.

       AFFIRMED.

       9
       See Leon, 464 F.3d at 957–58; Anheuser-Busch, Inc. v. Natural Beverage
Distribs., 69 F.3d 337, 348 (9th Cir. 1995).
       10
       See Conn. Gen., 482 F.3d at 1096; Valley Eng’rs Inc. v. Elec. Eng’g Co.,
158 F.3d 1051, 1057 (9th Cir. 1998).
       11
        Einstein’s general comment that none of the five factors applies is not “a
viable argument on appeal.” Alcock v. Small Bus. Admin. (In re Alcock), 50 F.3d
1456, 1461 n.9 (9th Cir. 1995); see also Brooks v. City of San Mateo, 229 F.3d
917, 922 n.1 (9th Cir. 2000).

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