In re Franklin Wireless Corp. Derivative Litigation

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 In re FRANKLIN WIRELESS CORP. Case No.: 21-cv-1837-AJB-MSB DERIVATIVE LITIGATION 12 ORDER DENYING DEFENDANTS’ 13 EX PARTE APPLICATION FOR AN ORDER STRIKING PLAINTIFF 14 MARTIN’S ALLEGATIONS OF 15 “SHORT-SWING” PROFITS AS PRECLUDED BY A PENDING 16 SETTLEMENT 17 (Doc. No. 70) 18 19 Before the Court is Defendants’ ex parte request for an Order Striking Plaintiff 20 Martin’s allegations of “short-swing” profits as precluded by Defendants’ pending 21 settlement in Nosirrah Management, LLC v. Franklin Wireless Corp. et al., Case No. 3:21- 22 cv-01316-RSH (S.D. Cal.). (Doc. No. 70.) Having reviewed the ex parte application, 23 Plaintiffs’ opposition, and Defendants’ reply, the Court DENIES Defendants’ request. 24 I. IMPROPER REQUEST TO STRIKE ALLEGATIONS 25 In their opening brief and reply, Defendants make clear that they request an Order 26 striking Plaintiff Martin’s short-swing profits allegations so they may reach a settlement 27 agreement in the Nosirrah case currently scheduled for trial in a few days before another 28 1 district judge. (Doc. Nos. 70 at 3; 72 at 3.) Regardless of whether the other case is related, 2 the Court finds entirely inappropriate Defendants’ attempt to have the Court intervene to 3 influence resolution of another matter. 4 Notably, Defendants’ motion was made without any legal basis. See generally 5 Golden Eagle Distrib. Corp. v. Burroughs Corp., 801 F.2d 1531, 1536 (9th Cir. 1986) 6 (Counsel has “an affirmative duty of investigation both as to law and as to fact before 7 motions are filed.) While Defendants styled their request as a motion to strike, they made 8 no effort to identify the motion to strike standard or explain how their request would meet 9 it. Nor could they. Their request to strike Plaintiff Martin’s allegations is based solely on a 10 pending settlement in another case. Because there is no actual settlement agreement or 11 release provision before the Court, any motion to strike or collateral estoppel claim based 12 thereon is obviously premature. Simply put, Defendants’ request falls troublingly short of 13 satisfying a motion to strike or collateral estoppel standard, and any such issue is clearly 14 not ripe until—at the earliest—a settlement exists. 15 It is axiomatic that under the United States Constitution, “federal courts can only 16 adjudicate live cases or controversies.” Bishop Paiute Tribe v. Inyo Cnty., 863 F.3d 1144, 17 1153 (9th Cir. 2017); see Thomas v. Anchorage Equal Rights Comm’n, 220 F.3d 1134, 18 1138 (9th Cir. 2000) (“Our role is neither to issue advisory opinions nor to declare rights 19 in hypothetical cases, but to adjudicate live cases or controversies consistent with the 20 powers granted the judiciary in Article III of the Constitution.”). Defendants made no effort 21 to acknowledge this longstanding principle, nor do they argue it is inapplicable or should 22 be modified or reversed. Counsel should have known better. 23 II. INADMISSIBLE SETTLEMENT EMAILS 24 Additionally, the Court finds Defendants’ attempt to use emails containing the 25 parties’ negotiations to gain advantage on the merits of their claim squarely violates Federal 26 Rule of Evidence 408, which renders inadmissible communications made during 27 compromise offers and negotiations “to prove or disprove the validity or amount of a 28 disputed claim.” Fed. R. Evid. 408(a). Defendants appear to argue that Rule 408 applies 1 to discussions about settlement amounts, but their contention is belied by the plain 2 || text of the rule. See id. (evidence of compromise offers or negotiations are inadmissible “to 3 || prove or disprove the validity or amount of a disputed claim”) (emphasis added). Because 4 ||the emails Defendants filed in support of their request to strike allegations contains 5 discussion of and references to settlement of a disputed claim, the Court finds them 6 || inadmissible under Rule 408. See id.; see also Blodgett v. Allstate Ins. Co., No. 2:11-CV- 7 ||02408-MCE, 2012 WL 2377031, at *5 (E.D. Cal. June 22, 2012) (Rule 408 “furthers the 8 ||public policy in favor of maintaining the confidentiality of settlement of disputes by 9 || generally requiring confidentiality of compromise negotiations in order to encourage full 10 open dialogue between the parties.” (citing United States v. Contra Costa County 11 || Water Dist., 678 F.2d 90, 92 (9th Cir. 1982)). Accordingly, the Court sua sponte STRIKES 12 || Doc. No. 70-2. See Fed. R. Civ. P. 12(f). 13 CONCLUSION 14 For the reasons stated herein, the Court DENIES Defendants’ ex parte application 15 || for an order striking Plaintiff Martins’ allegations of short-swing profits based on a pending 16 || settlement and sua sponte STRIKES Doc. No. 70-2. (Doc. No. 70). 17 Lasty, as the Court denies the instant motion, Plaintiffs’ request to issue an Order to 18 || Show Cause upon Defendants regarding Rule 11 sanctions is moot. Nonetheless, the Court 19 notes, as implicated in the above analysis, the obvious deficiencies in Defendants’ filing 20 brought it well under the purview of Rule 11 sanctions. Counsel for Defendants is 21 || ADMONISHED and REMINDED of his obligations under Rule 11, and specifically 22 ||DIRECTS him to investigate both the law and facts before filing any motion before this 23 || Court. See Golden Eagle, 801 F.2d at 1536. 24 IT IS SO ORDERED. 25 || Dated: October 11, 2023 © ¢ 26 Hon. Anthony J.Battaglia 27 United States District Judge 28 91 ax, 1227. □□□ NICD