Carolyn A Dye Liquidating Trus v. Rasmus et al

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UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
LOS ANGELES DIVISION
In re
FLASHCOM, INC.,
Debtor.
Case No. 2:12-bk-16351-RK
Chapter 11
Adv. No. 2:12-ap-01339-RK
CAROLYN A. DYE, Liquidating Trustee,
Plaintiff,
vs.
ANDRA SACHS; COMMUNICATIONS
VENTURES III, L.P., COMMUNICATIONS
VENTURES III CEO & ENTERPRENEURS
FUND L.P.; MAYFIELD IX; MAYFIELD
ASSOCIATES FUNDS IV; DAVID
HELRICH; ESTATE OF TODD BROOKS;
BRADFORD SACHS; RICHARD RASMUS;
KEVIN FONG,
Defendants.
MEMORANDUM DECISION AND ORDER
GRANTING MOTION TO STRIKE
DECLARATION OF JAMES BASTIAN
FILED IN OPPOSITION TO PLAINTIFF’S
MOTION FOR ENTRY OF JUDGMENT
The Motion of Plaintiff Carolyn Dye, Liquidating Trustee (“Trustee”) to Strike the
Declaration of James Bastian Filed in Opposition to Plaintiff's Motion for Entry of
Judgment (filed as Docket No. 551, hereinafter the "Motion to Strike") came on for
hearing before the undersigned United States Bankruptcy Judge on May 30, 2012, June
FILED & ENTERED
MAR 04 2013
CLERK U.S. BANKRUPTCY COURT
Central District of California
BY DEPUTY CLERK	gae
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28, 2012 and October 31, 2012 in conjunction with Plaintiff's Motion for Entry of
Judgment and Defendants’ Motion for Relief from Orders and Judgments Pursuant to
Rule 60 of the Federal Rules of Civil Procedure. Appearances have been made as noted
on the record. Having considered the moving and opposing papers, including the
supplemental briefing requested by the court, the written and oral arguments of the
parties, and the other papers and pleadings filed in this case, the court issues this
separate memorandum decision and order granting the Motion to Strike.
The court first disagrees with Trustee’s argument that the Bastian Declaration is
inadmissible parol evidence. In Riverisland Cold Storage, Inc. v. Fresno-Madera Prod.
Credit Assn., 55 Cal. 4th 1169 (2013), the California Supreme Court overruled its long
standing case precedent in Bank of America etc. Assn. v. Pendergrass, 4 Cal. 2d 258,
263 (1935), in holding that the “fraud exception” to the parol evidence rule broadly
permits evidence of promissory fraud. Paragraph 6 of the Bastian Declaration is
evidence that Andra Sachs was induced to sign the Global Settlement Agreement
through fraud. Indeed, “although a written instrument may supersede prior negotiations
and understandings leading up to it, fraud may always be shown to defeat the effect of an
agreement.” Riverisland, 55 Cal. 4th at 333, citing, Fleury v. Ramacciotti, 8 Cal. 2d 660,
662 (1937).
However, the court ultimately agrees with Trustee’s argument that the Bastian
Declaration, specifically paragraph 6, is inadmissible as confidential settlement
communications pursuant to Federal Rule of Evidence 408. Rule 408 states, "Evidence
of the following is not admissible--on behalf of any party--either to prove or disprove the
validity or amount of a disputed claim or to impeach by a prior inconsistent statement or a
contradiction: . . . conduct or a statement made during compromise negotiations about
the claim . . . ." The Andra Sachs Defendants offer numerous other purposes for the
Bastian Declaration, including intent on the part of Trustee not to enforce the entire $9
million judgment against Andra Sachs. Although the Andra Sachs Defendants are
correct that such evidence is indeed admissible for other purposes, "such as proving bias
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or prejudice of a witness, negativing a contention of undue delay, or proving an effort to
obstruct a criminal investigation or prosecution," (see Fed. R. Evid. 408(b)), considering
the plain language of Rule 408, as argued by Trustee, by offering the Bastian
Declaration, the Andra Sachs Defendants are attempting to "dispute the validity" of the
Trustee’s claim to have the judgment entered pursuant to the terms of the Global
Settlement Agreement. The Andra Sachs Defendants have offered the Bastian
Declaration to essentially demonstrate why they should not be liable for the $9 million
liability judgment as was contemplated in the Global Settlement Agreement.
Rule 408 exemplifies a “well-recognized public policy in favor of non-litigious
solutions to disputes . . . .” Southwest Nurseries, LLC v. Florists Mutual Insurance, Inc.,
266 F. Supp. 2d 1253, 1257 (D. Colo. 2003), citing, Olin Corp. v. Insurance Co. of North
America, 603 F. Supp. 445, 449-450 (S.D.N.Y. 1985). Evidence of settlement
communications may be admissible to challenge a claim of undue delay, to prove
knowledge and intent, or for purposes of impeachment or rebuttal. See Bankcard
America, Inc. v. Universal Bancard Systems, Inc., 203 F.3d 477, 484 (7th Cir. 2000).
Whenever the issue of admissibility is doubtful, however, the better practice is to exclude
such evidence. Southwest Nurseries, LLC, 226 F. Supp. 2d at 1258, citing, Bradbury v.
Phillips Petroleum Co., 815 F.2d 1356, 1364 (10th Cir. 1987). Although the Bastian
Declaration may be evidence of Trustee’s intent at the time of signing the Global
Settlement Agreement, this court cannot separate such a challenge to Trustee’s intent
from the validity of Trustee’s claim against the Andra Sachs Defendants. Indeed,
paragraph 6 of the Bastian Declaration begins, “During negotiations pertaining to the
Settlement Agreement and Liability Judgment . . . [David Weinstein] told [James Bastian]
that the Trusteee did not intend to use the Liability Judgment to hold Sachs liable for
damages in the full principal amount of $9,000,000 . . . .” Admitting the evidence to show
Trustee’s intent necessarily affects Trustee’s claim under the Global Settlement at this
point in the litigation because Trustee is currently attempting to collect the full judgment
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against Andra Sachs. For these reasons, the court concludes that the Bastian
Declaration is inadmissible evidence of settlement communications.
Accordingly, IT IS HEREBY ORDERED that the Motion to Strike is granted and
that the Bastian Declaration is stricken from consideration with respect to Plaintiff’s
Motion for Entry of Judgment.
IT IS FURTHER ORDERED that the further hearing on the Motion to Strike
currently set for March 5, 2013 at 3:30 p.m. is hereby vacated and that no further
appearances are necessary.
IT IS SO ORDERED.
###
Date: March 4, 2013
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This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the C entral District of
California
January 2009 F 9021.1
NOTICE OF ENTERED ORDER AND SERVICE LIST
Notice is given by the court that a judgment or order entitled (specify) MEMORANDUM DECISION AND
ORDER GRANTING MOTION TO STRIKE DECLARATION OF JAMES BASTIAN FILED IN
OPPOSITION TO PLAINTIFF’S MOTION FOR ENTRY OF DEFAULT JUDGMENT was entered on the
date indicated as “Entered” on the first page of this judgment or order and will be served in the manner
indicated below:
I. SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (“NEF”) – Pursuant to controlling
General Order(s) and Local Bankruptcy Rule(s), the foregoing document was served on the following
person(s) by the court via NEF and hyperlink to the judgment or order. As of March 4, 2013, the following
person(s) are currently on the Electronic Mail Notice List for this bankruptcy case or adversary proceeding
to receive NEF transmission at the email address(es) indicated below:
Natalie C Boyajian natalie.daghbandan@bryancave.com,
raul.morales@bryancave.com;trish.penn@bryancave.com;ashley.burt@bryancave.com
Allen Chiu allen.chiu@lw.com
Jacquelyn H Choi jchoi@wwolawyers.com
Robert A Franklin rfranklin@murraylaw.com
Andy Kong Kong.Andy@ArentFox.com
Nhung Le nle@luce.com
Elan S Levey elan.levey@usdoj.gov, louisa.lin@usdoj.gov
Ronald E Michelman ronaldmichelman@sbcglobal.net
Kimberly A Posin kim.posin@lw.com
Amy Quartarolo amy.quartarolo@lw.com, laura.pumerville@lw.com
Shelly Rothschild rothschildlaw@yahoo.com
David R Weinstein david.weinstein@bryancave.com,
raul.morales@bryancave.com;trish.penn@bryancave.com
II. SERVED BY THE COURT VIA U.S. MAIL: A copy of this notice and a true copy of this judgment or
order was sent by U.S. Mail, first class, postage prepaid, to the following person(s) and/or entity(ies) at the
address(es) indicated below:
III. TO BE SERVED BY THE LODGING PARTY: Within 72 hours after receipt of a copy of this judgment or
order which bears an “Entered” stamp, the party lodging the judgment or order will serve a complete copy
bearing an “Entered” stamp by U.S. Mail, overnight mail, facsimile transmission or email and file a proof of
service of the entered order on the following person(s) and/or entity(ies) at the address(es), facsimile
transmission number(s) and/or email address(es) indicated below:
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