FILED
NOT FOR PUBLICATION MAR 06 2014
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
PAUL R. ALANIS, an individual; JESS No. 11-56659
M. RAVICH, an individual,
D.C. No. 2:11-cv-02583-JEM
Plaintiffs-counter-defendants
- Appellees,
MEMORANDUM*
v.
ERIC NELSON, an individual;
DYNASTY DEVELOPMENT GROUP,
LLC, a Nevada limited liability company,
Defendants-counter-
claimants - Appellants.,
_________________________________,
DDJ CAPITAL, MANAGEMENT, LLC,
Counter-defendant,
And
LYNITA SUE NELSON,
Movant.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
PAUL R. ALANIS, an individual; JESS No. 12-55046
M. RAVICH, an individual,
D.C. No. 2:11-cv-02583-JEM
Plaintiffs-counter-defendants
- Appellees,
v.
DYNASTY DEVELOPMENT GROUP,
LLC, a Nevada limited liability company,
Defendant-counter-claimant -
Appellant.
Appeal from the United States District Court
for the Central District of California
John E. McDermott, Magistrate Judge, Presiding
Submitted March 3, 2014**
Pasadena, California
Before: PREGERSON, PAEZ, and HURWITZ, Circuit Judges.
Dynasty Development Group, LLC, a Nevada limited liability company
(“Dynasty”), appeals a summary judgment entered in favor of Paul R. Alanis and Jess
M. Ravich (“Plaintiffs”). Plaintiffs and Dynasty were members of a Delaware limited
liability company (“Company”) that operates a casino; the underlying dispute is over
the sale of Dynasty’s interest in the Company pursuant to the buy/sell provision of its
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
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operating agreement.
We affirm.
A. Rule 56(d) Motion
Dynasty’s primary argument is that the district court erred in denying its motion
under Federal Rule of Civil Procedure 56(d) to continue the motion for summary
judgment to allow discovery. To justify a continuance Dynasty was required to show:
“(1) it has set forth in affidavit form the specific facts it hopes to elicit from further
discovery; (2) the facts sought exist; and (3) the sought-after facts are essential to
oppose summary judgment.” Family Home & Fin. Ctr. Inc. v. Fed. Home Loan
Mortg. Corp., 525 F.3d 822, 827 (9th Cir. 2008).1
We review the district court’s decision to deny Rule 56(d) relief for abuse of
discretion. Getz v. Boeing Co., 654 F.3d 852, 867-68 (9th Cir. 2011). Although
Dynasty offers no less than eight arguments why the district court abused its
discretion, none is persuasive.
1. Lack of any period of discovery.
Dynasty argues it did not have “the opportunity to conduct any discovery”
during a bankruptcy stay, and “the case had only been ‘active’ for discovery and free
1
Subdivision (d) of Rule 56 “carries forward without substantial change the
provisions of former subdivision (f).” Fed. R. Civ. P. 56 advisory committee’s note.
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from the bankruptcy stay for nine days” when Plaintiffs’ first motion for summary
judgment was filed. But, as the district court noted, the stay was lifted because the
bankruptcy court found that Dynasty’s Chapter 11 petition was filed in bad faith, and
Dynasty entirely failed to pursue discovery in the five months between the filing of
the first summary judgment motion and the district court’s ruling on Plaintiffs’ second
summary judgment motion.
2. Plaintiffs’ acquisition of Company debt.
Dynasty posits that the evidence it “contends is available in discovery, and what
was not presented to the district court, is that [Plaintiffs] acquired a financial interest
in the debts of the Company.” It was uncontested, however, that all members of the
Company, including Dynasty, were offered the right to purchase Company debt;
Dynasty also approved the transaction that restated the terms of that debt. Plaintiffs
chose to buy the debt, but Dynasty did not. The district court considered evidence of
Plaintiffs’ financial interest and appropriately found the evidence had no weight.
3. Plaintiffs’ alleged unwaivable conflict of interest.
Dynasty argues that discovery would support its position that “Plaintiffs had an
unwaivable conflict of interest” when they “acquired their interest in the Company’s
debts.” Dynasty cites no authority for its argument that Plaintiffs were under an
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unwaivable conflict, and Delaware law is to the contrary.2
4. Plaintiffs’ alleged breach of a January 2009 letter.
Dynasty contends that Plaintiffs breached a January 2009 letter agreement “not
to vote to approve a sale of the Casino at a price of less than $80 million.” Dynasty
does not, however, dispute the district court’s finding that any breach could not have
injured Dynasty, because the Company was unable to complete a sale at any price.
5. Accountants’ alleged errors.
Dynasty claims “discovery was necessary to show” that the Company’s
accountants “never independently verified the Company’s debt” and that their
calculation was “based upon unaudited, non-certified balance sheets.” Nothing in the
operating agreement, however, requires the accountants to verify the Company’s debt
or use audited, certified balance sheets.
Dynasty also argues the accountants failed to consider the Company’s cash in
calculating the purchase price of Dynasty’s Company interest. The district court
2
Delaware law permits members and managers to “lend money to” a limited
liability company. Del. Code Ann. tit. 6, § 18-107. The operating agreement here
specifically permits such loans. Also, Delaware law permits an operating agreement
to “provide for the limitation or elimination of any and all liabilities for breach of
contract and breach of duties (including fiduciary duties) of a member, manager or
other person.” Del. Code Ann. tit. 6, § 18-1101(e). The operating agreement waives
liabilities for actions, other than those “committed in bad faith or []as the result of
willful misconduct or gross negligence.”
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correctly held that Dynasty’s method of calculation improperly double counts that
cash, by first using it in establishing the Stated Value (as defined in the operating
agreement) and then using it again to set the Company interest purchase price.
6. Plaintiffs’ alleged failure to timely comply with operating
agreement.
Next, Dynasty argues that “Plaintiffs did not timely comply with Section 7.5
of the Agreement.” The district court correctly determined that the notice was timely
under Delaware law. See Del. Code Ann. tit. 5, § 1302.
7. Plaintiffs’ alleged failure to rely on the operating agreement.
Dynasty asserts that “Plaintiffs rely on a ‘forbearance agreement’ or MOU to
support their breach of the Agreement claims.” The complaint, however, clearly
alleged breaches of the Company’s operating agreement, not an MOU.
8. Alleged “other key issues.”
Finally, Dynasty contends that “discovery is necessary for several other key
issues that would defeat summary judgment.” Each of these “other key issues,”
however, is simply a re-statement of one of the prior arguments.
B. Summary Judgment
Dynasty’s arguments challenging the grant of summary judgment to Plaintiffs
are, by its own admission, “the same” as its Rule 56(d) arguments. For the reasons
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above, those arguments fail.
AFFIRMED.
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