J. MICHAEL SEABRIGHT, District Judge.
On March 19, 2013, Plaintiff Reading International, Inc. ("Plaintiff" or "Reading") filed this action alleging several breaches of a settlement agreement by Defendant The Malulani Group, Limited ("Defendant" or "TMG"). On April 22, 2014, the court granted in part Defendant's Motion for Summary Judgment (the "April 22, 2014 Order"). See Reading Int'l v. The Malulani Grp., Ltd., 16 F.Supp.3d 1185, 2014 WL 1604344 (D.Haw. Apr. 22, 2014). The April 22, 2014 Order granted summary judgment in favor of Defendant on all but one of Plaintiff's claims, concluding that — on the record then before the court — material questions of fact existed as to Plaintiff's claim that Defendant breached its obligation to allow inspection of records and accounts of MBL Maryland, Inc. and Lahaina C, LLC. Id. at 1200-01, 2014 WL 1604344 at *14. After additional discovery, and rulings on related discovery motions, Defendant was granted leave to file a Renewed Motion for Partial Summary Judgment on the remaining claim. Doc. No. 133. Based on the following, the court GRANTS the renewed Motion.
The parties' disputes stem from a July 2009 settlement that was documented in five agreements. Given the court's conclusions in the April 22, 2014 Order, remaining in this action is whether TMG failed to allow inspection of certain records as required by two agreements: (1) the Shareholder Pledge Agreement dated July 2, 2009, in which TMG granted a security interest in and pledged to Reading all of its right, title, and interest in the shares of MBL Maryland, Inc., whose sole asset is a property known as the West Maui Center ("MBL Pledge Agreement"); and (2) the Collateral Assignment of Membership Interests
In particular, both the MBL Pledge Agreement and Lahaina Pledge Agreement give Reading the right to inspect "such books, records and accounts of [MBL Maryland or Lahaina C] and to make such copies and extracts thereof as [Reading] shall desire, in each case at such reasonable times as may be requested by [Reading]," and to do so "at [TMG's] cost and expense if an Event of Default has occurred." Doc. No. 135-5, Def.'s Ex. 4 § 15.2; Doc. No. 135-6, Def.'s Ex. 5 § 15.2.
As explained and interpreted in the April 22, 2014 Order, the MBL Pledge Agreement and the Lahaina Pledge Agreement include default-related clauses. For example, the MBL Pledge Agreement provides:
Doc. No. 135-5, Def.'s Ex. 4 § 7. 1.
The Lahaina Pledge Agreement and MBL Pledge Agreement also include provisions stating that time is of the essence with respect to the performance of the obligations under these documents. Id. § 23(f); Doc. No. 135-6, Def.'s Ex. 5 § 23(f).
Analyzing Reading's remaining theory of default is best understood by considering the following chronology of events and exchanges of communications between the parties beginning in late 2009 and continuing through 2010 (with additional details set forth when the court analyzes whether there are genuine issues of material fact as to the remaining issue in the case):
On November 13, 2009, Reading delivered to TMG a Notice of Default and Acceleration of Indebtedness ("November 13, 2009 Notice"), invoking several provisions of the settlement agreement and corresponding documents. See Doc. No. 135-7, Def.'s Ex. 6. The November 13, 2009 Notice claimed several distinct Events of Default, and (among other demands) elected under § 15.2 of the MBL Pledge and Lahaina Pledge Agreements to inspect certain "books, records and accounts." Id. at TMG000239. Reading requested that such inspection occur during the week of November 30, 2009, and asked TMG to "confirm by 5:00 PM (Honolulu Local Time), Monday, November 16, 2009, whether you will cooperate with the inspection." Id.
On November 16, 2009, TMG responded to the November 13, 2009 Notice, primarily asserting that there was a misunderstanding regarding when TMG's obligations would begin, explaining that it had believed the obligations would begin on December 31, 2009, and producing certain financial documents. It requested that the November 13, 2009 Notice be withdrawn. It did not, however, specifically mention the request to inspect records under § 15.2. See Doc. No. 40-11, Def.'s Ex. 10 (First Mot. Summ. J.).
On November 19, 2009, Reading (through its counsel, Margery Bronster) responded to TMG's November 16, 2009 letter by demanding mediation, stating "Reading is open to mediate this matter and therefore hereby gives TMG notice that Reading demands mediation. Please let me know by Friday, November 20, 2009, when you will be available for mediation." Doc. No. 135-8, Def.'s Ex. 7 at 2. The letter, however, does not specifically mention the § 15.2 requests for inspection.
TMG responded (through its counsel John ("Jack") Dwyer) on November 20, 2009. It "disagree[d] with [Reading's] conclusions," asserting that "[t]here simply has been no default under the various Settlement documents as alleged by you." Doc. No. 135-9, Def.'s Ex. 8. But TMG agreed that "mediation is appropriate," although its letter also did not specifically mention the § 15.2 inspection requests.
On November 30, 2009, Reading wrote back, noting TMG's disagreement, but stating:
Moreover, we reiterate Reading's demand, as set forth in the [November 13, 2009] Notice, for inspection and copying of the books and records of MBL Maryland, Inc. and Lahaina C, LLC. Reading's rights to access the entities' records is guaranteed by the Closing Documents and is not [dependent] upon whether TMG agrees whether default has occurred. We repeat Reading's request that the records be made available, preferably during the week of December 7, 2009. Please verify by Wednesday, December 2, 2009, whether or not a representative of Reading may access the records.
Doc. No. 135-10, Def.'s Ex. 9.
On December 3, 2009, another of Reading's counsel, Rex Fujichaku, sent an email to Dwyer as follows: "Jack, did you have a chance to follow up with Easton [Manson, President of TMG] on the possible dates for the TMG mediation? They were 12/29, 12/30 or 1/5, with a preference for the December dates." Doe. No. 135-11, Def.'s Ex. 10. On December 4, 2009, Dwyer answered Fujichaku's email, stating:
With respect to you[r] letters of November 19 and 30, 2009, we of course disagree with your position and will defer to the decision of the Mediator regarding the production of documents. Jack.
Id.
On December 4, 2009, Reading confirmed by letter that "the mediation of [Reading's] Notice of Default regarding the Settlement Agreement will be held on December 30, 2009 at 9:00 a.m., in our office. David Fairbanks will preside as the Mediator." Doc. No. 135-12, Def.'s Ex. 11.
Later on December 4, 2009, Reading sent TMG another letter — a new Notice of Default, purportedly based on Dwyer's earlier email of December 4, 2009, wherein he stated that TMG "will defer to the decision of the Mediator regarding the production of documents." Specifically, Reading's counsel wrote:
Doe. No. 135-13, Def.'s Ex. 12. The present Motion centers around this December 4, 2009 Notice of Default.
On December 16, 2009, Reading sent yet another Notice of Default to TMG. This Notice of Default concerned "Kroll documents" and a "Tanoue Order" regarding certification of efforts to destroy certain documents, as described in the April 22, 2014 Order. Doc. No. 144-3, Pl.'s Ex. A. TMG's counsel responded to this latest Notice of Default on December 18, 2009, indicating (after emphasizing good faith
On December 30, 2009, the parties met with the Mediator. The record is unclear as to exactly what was discussed during this mediation session, but the mediation was then recessed or suspended. See, e.g., Doc. No. 135-29, Def.'s Ex. 28 at 6. As for the § 15.2 inspection issues, Easton Manson (President of TMG) attests as follows:
Doc. No. 135-1, Manson Decl. 1115. Dwyer submitted a similar declaration, also attesting that
Doc. No. 135-33, Dwyer Decl. 1112. Both Dwyer and Manson attest that, from December 31, 2009 to February 1, 2010, they did not receive any communication from Reading (or Bronster or Fujichaku) about the inspection. Id. 1113; Doe. No. 135-1, Manson Decl. 1116.
On February 2, 2010, Reading wrote to TMG, declaring another Notice of Default — this one concerning TMG's alleged breach of its obligation to provide certain quarterly financial statements (also analyzed in the April 22, 2014 Order). Doc. No. 135-15, Def.'s Ex. 14. The letter ended by stating (referring to the § 15.2 request for inspection): "[l]astly, please inform us when we may inspect Lahaina and MBL's books and records." Id. That same day, Dwyer's secretary responded with a letter indicating that Dwyer was out of the country in a "beautiful but primitive" area of the Philippines, and "absolutely cannot be reached unless he calls the office." Doc. No. 135-16, Def.'s Ex. 15. She advised that Dwyer would address Reading's
On February 16, 2010, Reading again wrote to TMG, stating "[w]e write to see if any response is forthcoming to our letter to you dated February 2, 2010, regarding the notice of default.... We would also like to proceed with the inspection of the Lahaina C, LLC and MBL Maryland, Inc. records on either February 17 or 18, 2010. Please inform us which date is preferable." Doc. No. 135-17, Def.'s Ex. 16.
TMG responded later that day. In TMG's letter, among other matters, Dwyer reviewed certain events from the December 30, 2009 mediation session, explaining that:
Doc. No. 135-18, Def.'s Ex. 17.
On February 18, 2010, Reading wrote back to TMG, disputing some of its assertions, and reiterating Reading's request to inspect records of MBL Maryland and Lahaina C:
Doe. No. 135-19, Def.'s Ex. 18.
Doc. No. 135-20, Def.'s Ex. 19. Dwyer" then offered February 23, 2010 as a date for the inspection of records. Id. at TMG000349.
On February 22, 2010, Fujichaku and Dwyer exchanged emails regarding the records inspection. In particular, Fujichaku
The inspection occurred on February 23, 2010. According to Manson, TMG produced "all then-existing books and records of MBL Maryland, Inc. (and its sole asset West Maui Center) and Lahaina C, LLC (and its sole asset Kaiser Lahaina)." Doc. No. 135-1, Manson Decl. ¶ 25. Manson attests that he "did not withhold any documents requested by Reading." Id. He also produced for inspection "all then-existing books and records for the Kokua Market," although those documents were not formally requested. Id. He states:
Id. ¶ 26 According to Manson, "Seabolt did not request any additional documents at the inspection, did not [ask] any questions regarding the documents produced at the inspection, and did not request copies of any of the documents[.]" Id. ¶ 27.
In response, Reading contends generally that the documents were deficient. Specifically, Tompkins attests
Doc. No. 144-1, Tompkins Decl. ¶ 10.
After the February 23, 2010 inspection, Reading did not communicate with TMG regarding the documents produced until an April 8, 2010 letter to the Mediator (made available to TMG on June 25, 2010). Doe. No. 135-1, Manson Decl. ¶¶ 28-29. In that letter, Reading wrote "to address the Reading-TMG mediation which has been recessed." Doc. No. 135-22, Def.'s Ex. 21. Among other matters, Reading asserted that "this review [of February 23, 2010] did not answer the many questions raised by the financials produced by TMG. Moreover, the first quarter 2010 financial statements for the three properties we received through your office on April 5, 2010, contain the same deficiencies as the fourth quarter 2009 statements." Id.
The mediation continued from April to October 2010, with the parties exchanging various correspondence with each other, and with the Mediator. See, e.g., Doc. Nos. 135-23 to 135-30, Def.'s Exs. 22-29. Among other exchanges, TMG offered to allow Reading again to review and inspect the books and records of the MBL Maryland and Lahaina C properties (at Reading's expense), and in October 2010, Reading eventually copied the documents for those properties. Doe. No. 135-1, Manson Decl. ¶ 35. Manson attests:
Id.
The Mediator formally terminated the mediation on October 26, 2010. Doc. No. 135-30, Def.'s Ex. 29. Reading instituted this action on March 19, 2013. Doc. No. 1.
After the court's April 22, 2014 Order, Magistrate Judge Chang ordered Plaintiff on May 23, 2014 to supplement (for the second time) its response to Defendant's "interrogatory no. 2" based upon insufficient or conclusory answers. Doc. No. 118, Order at 6. On June 24, 2014, Magistrate Judge Chang granted Defendant's Ex Parte Motion to Further Amend Scheduling Order to Facilitate Renewed Motion for Summary Judgment on Remaining Inspection Breach Issue, Doc. No. 132, which allowed Defendant to file a renewed motion for summary judgment. Accordingly, Defendant filed its "Renewed Motion for Partial Summary Judgment on Plaintiffs Alleged Breach No. 6" on June 27, 2014. Doc. No. 133. Plaintiff filed an Opposition on July 14, 2014, Doc. No. 143, and Defendant filed a Reply on July 12, 2014. Doc. No. 148. A hearing was held on August 4, 2014.
Summary judgment is proper where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). Rule 56(a) mandates summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to the party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see also Broussard v. Univ. of Cal. at Berkeley, 192 F.3d 1252, 1258 (9th Cir.1999).
"A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact." Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir.2007) (citing Celotex, 477 U.S. at 323, 106 S.Ct. 2548); see also Jespersen v. Harrah's Operating Co., 392 F.3d 1076, 1079 (9th Cir.2004). "When the moving party has carried its burden under Rule 56[(a)], its opponent must do more than simply show that there is some metaphysical doubt as to the material facts [and] come forward with specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation and internal quotation signals omitted); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (stating that a party cannot "rest upon the mere allegations or denials of his pleading" in opposing summary judgment).
"An issue is `genuine' only if there is a sufficient evidentiary basis on which a reasonable fact finder could find for the non-moving party, and a dispute is `material' only if it could affect the outcome of the suit under the governing law." In re Barbow, 545 F.3d 702, 707 (9th Cir.2008) (citing Anderson, 477 U.S. at 248, 106 S.Ct. 2505). When considering the evidence on a motion for summary judgment, the court must draw all reasonable inferences on behalf of the nonmoving party. Matsushita Elec. Indus. Co., 475 U.S. at 587, 106 S.Ct. 1348; see also Posey v. Lake Pend
TMG asserts three grounds for granting its Motion. First, it argues that there was no initial breach under § 15.2, and thus the December 4, 2009 Notice of Default was invalid. Second, even if the Notice was warranted, TMG cured the default by allowing a timely inspection. And third, its cure was effective because it produced everything that was required. The court addresses each ground in turn.
TMG seeks summary judgment, arguing that the record is undisputed that it never defaulted on Reading's demand under § 15.2 to inspect the relevant documents of MBL Maryland and Lahaina C. Instead, it contends that the parties agreed to mediate the issue of inspection (among other issues), and that therefore Reading's December 4, 2009 Notice of Default was improper. The court concludes, however, that a genuine dispute of fact exists as to this narrow question.
TMG contends that when Reading demanded mediation on November 19, 2009 (and when TMG agreed on November 20, 2009 that "mediation is appropriate"), it was then undisputed that the parties agreed that the subsequent mediation would concern all of the issues raised in Reading's November 13, 2009 Notice of Default. See Doc. No. 133-1, Mot. at 8. That is, it believes, notwithstanding Reading's November 30, 2009 letter, that "Reading demanded mediation of all claims and rights asserted in its November 13, 2009 `notice of default,' including the inspection demand." Id.
But Reading disagrees. It points out that the November 13, 2009 Notice of Default formally notified TMG of several other defaults, and that the § 15.2 inspection request was a distinct demand based upon the other defaults. See Doc. No. 135-7, Def.'s Ex. 6 at TMG000238-09 ("In addition, please be on notice that Reading hereby makes the following elections and takes the following actions: ... Under Section 15.2 of the MBL Pledge Agreement, Reading hereby elects ...") (emphasis added). It reiterated this distinction in its letter of November 30, 2009. See Doc. No. 135-10, Def.'s Ex. 9 ("Moreover we reiterate Reading's demand for inspection and copying of books and records of MBL Maryland, Inc. and Lahaina C, LLC.") (emphasis added). According to Reading, its "November 19, 2009 letter to TMG demanded mediation related to the events of default discussed in its November 13, 2009 notice. It did not include mediation for Reading's request for inspection, which was still pending." Doc. No. 144-1, Tompkins Decl. ¶ 6. Thus, under Reading's theory, when Dwyer "deferred" the inspection issue to the Mediator, he did so unilaterally. Under its theory, Reading's corresponding December 4, 2009 Notice of Default was a separate issue from the alleged defaults set forth in the November 13, 2009 Notice of Default, and was necessary to trigger time periods under the settlement documents.
Given the evidence before the court, either TMG's or Reading's interpretation is plausible — indeed, it's possible that no meeting of the minds had occurred as to the exact topics of the mediation (at least as of December 4, 2009). A question of fact exists as to whether the parties intended
Nevertheless, even assuming that TMG had defaulted as to the inspection of the MBL Maryland and Lahaina C documents (by not allowing inspection within a reasonable time from November 13, 2009, and refusing inspection by "deferring" to the Mediator on December 4, 2009), it is undisputed that TMG ultimately cured any such default under the terms of the settlement documents.
Under § 7.1(i) of the MBL Pledge Agreement (and under § 7.1(h) of the Lahaina Pledge Agreement), the alleged failure to comply with § 15.2 was a "non monetary default" that was "susceptible of cure." See Doe. Nos. 135-5, Def.'s Ex. 4 at TMG000154-55; 135-6, Def.'s Ex. 5 at TMG000186-87. That is, under the terms of §§ 7.1(h) and (i), the default could not "be cured by the payment of a sum or money." Id. Accordingly, TMG had thirty days after being given written notice to cure. See Reading Int'l, 16 F.Supp.3d at 1194-95, 2014 WL 1604344, at *8.
Sections 7.1(h) and (i) both further provide that the cure period can be extended to ninety days:
Doc. No. 135-5, Def.'s Ex. 4 at TMG000154-55; 1:35-6, Def.'s Ex. 5 at TMG000186-87.
Given the undisputed evidence before the court, TMG "commenced to cure" the default within thirty days from December 4, 2009. As both Manson and Dwyer attest — even if the parties had not previously agreed to mediate the inspection issue — the parties did in fact discuss the issue of records inspection in some manner with the Mediator during or after the mediation session on December 30, 2009. See Doc. No. 135-1, Manson Decl. ¶ 15; Doc. No. 135-33, Dwyer Decl. ¶ 12. It is undisputed that, on December 30, 2009, "Bronster represented she would travel to Los Angeles in January 2010 to meet with Reading's representatives ... to discuss, among other things, the issue of records inspection, and would then instruct either the Mediator or Fujichaku to contact Dwyer and/or [Manson] about arranging a records inspection[.]" Doc. No. 135-1, Manson Decl. ¶ 15.
At that point — shortly prior to expiration of the thirty-day period — it was then
Reading does not provide any evidence contradicting that Bronster represented to TMG on December 30, 2009 that Reading would contact TMG with further information regarding the § 15.2 inspection of books and records.
Reading first argues that Hawaii Revised Statutes ("HRS") § 658H-4 of the Act protects Bronster's December 30, 2009 communications. Section 658H4(a) provides "[e]xcept as provided in section 658H-6 [which does not apply], a mediation communication is privileged as provided in subsection (b) and is not subject to discovery or admissible in evidence in a proceeding unless waived or precluded as provided by section 658H-5."
But the entire Act does not apply to Bronster's communications. It was enacted in 2013, and became effective on July 1, 2013. See 2013 Haw. Sess. L. Act 284, § 2 ("This Act shall take effect on July 1, 2013."). As for the Act's application to existing mediation agreements (agreements made prior to July 1, 2013), the Act provides:
HRS § 658H-13. It is undisputed that the mediation at issue here is based on an agreement to mediate in a July 2009 settlement — thus, § 658H-13(a) bars the Act's application unless another provision applies. And although, under § 658H-13(b), the Act could apply to a mediation between the parties (based on a July 2009 agreement) occurring after January 1, 2014, it is also obvious that the mediation at issue occurred nearly four years ago, in late-2009 and 2010.
Legislative history confirms this conclusion. The Act was based on the Uniform Mediation Act, drafted by the National Conference of Commissioners on Uniform State Laws, and must be interpreted consistently with that uniform law. See, e.g., Sen. Stand. Comm. Rep. No. 548 (S.B. No. 966), 2013 Senate J. ("The purpose and intent of this measure is to adopt the Uniform Mediation Act that provides a comprehensive law for privileges and confidentiality in mediation."); HRS § 1-24 ("All provisions of uniform acts adopted by the State shall be so interpreted and construed as to effectuate their general purpose to make uniform the laws of the states and territories which enact them."). In this regard, HRS § 658H-13 is identical to § 17 of the Uniform Mediation Act. And the drafters' comment to § 17 of the Uniform Mediation Act provides:
Unif. Med. Act § 17 cmt., 7A U.L.A.156 (2006) (emphasis added).
This commentary explains that § 658H-13 concerns the dates of the mediation agreements, describing when the Act's provisions apply to a mediation (based on an older agreement) that occurs after the Act's effective date. Section 658H-13(b)'s reference to "on or after January 1, 2014" does not mean that the Act applies retroactively to all past mediations. This reading is consistent with HRS § 1-3, which mandates that "[n]o law has any retrospective operation, unless otherwise expressed or obviously intended." Cf. United Public Workers v. Dawson Int'l, Inc., 113 Haw. 127, 144, 149 P.3d 495, 512 (2006) (interpreting similar language "after June 30, 2004, this chapter governs an agreement to arbitrate whenever made" in the Hawaii Uniform Arbitration Act, and concluding that "it does not apply to an ongoing arbitration proceeding, but to arbitration proceedings commenced after June 30, 2004").
Reading next invokes FRE 408 in arguing that evidence is inadmissible regarding representation made by Bronster at the December 30, 2009 mediation session. Rule 408(a) provides:
FRE 408(a)(2). Rule 408(b), however, sets forth exceptions "for another purpose, such as proving a witness's bias or prejudice, negating a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution."
The evidence — that Bronster represented that she would travel to Los Angeles in January 2010 to meet with Reading's representatives and then instruct either the Mediator or Fujichaku to contact Dwyer or Manson about arranging a records inspection — fits squarely within Rule 408(b)'s exception of "negating a contention of undue delay." Reading is asserting that TMG improperly delayed complying with its § 15.2 inspection obligations, and the evidence is being offered to negate that contention. See, e.g., Freidus v. First Nat'l Bank of Council Bluffs, 928 F.2d 793, 795 (8th Cir.1991) (applying Rule 408(b)'s exception for negating a contention of undue delay, reasoning that "the letters served to rebut ... testimony that `even up to this date' the bank had failed to give any reasons for the conditions it had imposed on giving its consent, testimony that left unrebutted would have been devastating to the bank's position that it had not unduly delayed giving its consent").
The evidence is also admissible "for another purpose" — to prove estoppel (that is, to show Reading made a representation upon which TMG relied). See Bankcard Am., Inc. v. Universal Bancard Sys., Inc., 203 F.3d 477, 484 (7th Cir.2000) ("[I]t would be an abuse of Rule 408 to let Bankcard lull Universal into breaching the contract and then prevent Universal from explaining its actions because the lulling took place around the settlement table.... To use Rule 408 to block evidence that the violation of the contract was invited would be unfair."); PRL USA Holdings, Inc. v. U.S. Polo Ass'n, Inc., 520 F.3d 109, 115 (2d Cir.2008) ("To construe Rule 408 as barring such evidence would substantially limit the opportunity of defendants to rely on the defense of estoppel[.]").
Accordingly, there is no genuine issue of material fact that TMG complied with 7.1's cure provisions in a timely manner.
Finally, the record is undisputed that TMG fully complied with the § 15.2 request by allowing a complete inspection of the "books, records and accounts of [MBL Maryland and Lahaina C]." Doc. No. 135-6, Def.'s Ex. 5 at TMG000191. In particular, Manson attests several times that he produced a complete set of "all then-existing books and records" of those entities and "did not withhold" any documents requested by Reading (both on February 23, 2010, and later in October 2010). Doc. No. 135-1, Manson Decl. ¶¶ 25, 26, 39. Manson explains that the deficiencies identified by Reading (in its Third Supplemental Response to Interrogatory Number 2) regard documents that were not in existence in July 2009, when the settlement agreement and related documents created the obligation to allow inspection. Id. ¶ 37. He further explains that the properties
Id. ¶ 38. Manson then details the documents that he produced for inspection, including accounting statements, balance sheets, income statements, rent rolls, cash flow statements, rent checks, deposit slips, lease documents, appraisal documents, mortgage documents, title documents, environmental documents, tax documents, and insurance documents. Id. ¶ 39.
Reading offers little, other than argument, to contradict Manson's detailed assertions regarding the inspection. The only evidence it proffers is a declaration of Craig Tompkins stating, in a conclusory fashion, that "TMG did not provide all of the financials and accountings that would have been necessary to form a complete understanding of the Collateralized Properties." Doe. No. 144-1, Tompkins Decl. ¶ 10. But this does not contradict the detailed evidence that TMG timely produced all the financial books and records actually possessed by MBL Maryland and Lahaina C as of February 23, 2010. Similarly, Tompkins' more specific assertion that "the financial statements Reading received from TMG reflected intercompany transfers which could not be fully understood without the related parent company financials to put the subsidiary transfers into context," does not dispute that TMG fulfilled its duties under § 15.2 to produce for inspection the "books, records and accounts" of the two companies.
Reading also argues (again, without proffering any of its own evidence) that TMG failed to produce "QuickBooks" records from TMG regarding the companies, which were then-existing electronic records (and, under Reading's argument, not included in the boxes from the paper files produced by Manson on February 23, 2010). Reading is referring to Manson's statement that, prior to July 2009, "the financial entries for the properties were tracked in QuickBooks on a consolidated basis at the parent company level (TMG). It was not until the settlement with Reading in July 2009 that TMG started to create stand-alone quarterly financial statements for the collateralized properties." Doc. No. 135-1, Manson Decl. ¶ 38. Reading contends that Manson thus admitted that he withheld TMG electronic records that concerned MBL Maryland and Lahaina C, and argued at the August 4, 2014 hearing that this meets its burden to demonstrate a material dispute for trial. Doc. No. 158, Tr. at 49-50.
The court rejects these arguments for several reasons. First, § 15.2 on its face does not require TMG to produce TMG's records such that Reading can "fully understand" or have a "complete understanding" of all of the affairs of the companies, nor does it require TMG to retroactively create new records. Section 15.2 requires "Debtor and Company" to permit inspection of "such books, records and accounts of Company[.]" Doe. No. 135-6, Def.'s Ex. 5 at TMG000191 (emphasis added). The
Second, Reading has no evidence that contradicts Manson's detailed Declaration explaining that he otherwise produced "all Kaiser Lahaina documents that existed in TMG's files as of February 23, 2010" and "all West Maui Center documents that existed in TMG's files as of February 23, 2010." Doc. No. 135-1, Manson Decl. ¶¶ 39[4] & 39[5]. That is, Reading has not produced evidence that any relevant information in the "TMG QuickBooks" was not otherwise produced for inspection.
Third, Reading's theory about the "TMG QuickBooks" — apparently that TMG failed to produce some of its own records for inspection (i.e., records aside from records of MBL Maryland and Lahaina C), and thereby violated § 15.2 — is entirely new. Reading was obligated, as ordered (twice) by Magistrate Judge Chang, to set forth in its response to Defendant's Request for Answers to Interrogatories "all facts that Plaintiff contends makes false or inaccurate any statement in Defendant's response to Plaintiffs interrogatory no. 2." Doe. No. 118, Order at 6. Reading did not respond with any assertion that TMG withheld accounting information in QuickBooks, or in any other TMG accounting system, regarding MBL Maryland or Lahaina C. Rather, by arguing that TMG withheld "QuickBooks" electronic records, Reading appears to be changing its theory once again, and attempting to create a question of fact where there is none. Its argument is consistent with a theme that emerges from even a cursory review of the record — Reading appears to be focused solely on searching for defaults of the July
In any event, given the undisputed evidence in the record before the court, TMG complied with its § 15.2 obligations.
There is no genuine issue of material fact as to the essential aspects of the remaining claim in this action. Even if Reading had some basis to issue the December 4, 2009 Notice of Default as to TMG's obligation under § 15.2 to allow inspection of books and records of MBL Maryland and Lahaina C, it is undisputed that TMG cured any such default by allowing such inspection on February 23, 2010. Accordingly, the court GRANTS Defendant's Renewed Motion for Summary Judgment. There being no other claims, judgment shall issue in favor of Defendant. The pending Motions in this case, Doc. Nos. 139 (Motion to Quash) and 160 (Ex Parte Application for an Order/Sanctions Barring Plaintiff from Admitting Certain Evidence) are MOOT.
IT IS SO ORDERED.
(a) [Defendant] shall keep and maintain or shall cause to be kept and maintained, on a calendar year basis, in accordance with sound accounting principles consistently applied ... books, records and accounts reflecting in reasonable detail all of the financial affairs of Company and all items of income and expense in connection with the operation of the Company Property.
. . . .
(d) [Defendant] shall furnish to [Plaintiff] within ten (10) Business Days after request, such further reasonable information with respect to the Company and the operation of the Company Property as may be requested by [Plaintiff].
Doc. No. 135-5, Def.'s Ex. 4 at TMG000159; Doc. No. 135-6, Def.'s Ex. 5 at 000191.
(Emphasis added).
Section 658H-5(b) is identical to § 5(b) of the Uniform Mediation Act, and in addressing waiver and preclusion, the drafters of the Uniform Mediation Act:
Unif. Med. Act § 5 cmt., 7A U.L.A. 123 (2006) (emphases added).
Here, Reading clearly made several "representation[s] about a mediation communication that prejudices" TMG if it is not allowed to respond. Reading "engage[d] in conduct inconsistent with the assertions of the privilege" and caused prejudice to TMG. See, e.g., Doc. No. 93, Tr. (Apr. 18, 2014) at 38 (Bronster arguing to the court that "[w]e do not believe that there was anything in the cure provision that enabled them to toll curing during the pendency of a mediation. That's not how the mediation was set up, nor was it discussed."); id. at 41 ("So contrary to them waiting for us, we were waiting for them."); id. at 43 ("... so December all the way to January [2010], we're waiting, we get nowhere."); id. at 43-44 (quoting from Dwyer's February 16, 2010 letter and asserting that "while we did attempt to [arrange for inspection], we did not get any response from [TMG]"); id. at 44 ("[Dwyer] simply shuts things down.... He simply rejects my arguments in my February 2, letter out of hand[.]"); Doc. No. 144-1, Tompkins Decl. ¶ 8 ("At no time did Reading agree to extend the time of performance of TMG's obligation to allow the inspection of records."). Similarly, Reading did not object on mediation privilege grounds to other correspondence regarding the mediation, both between themselves and with the Mediator from 2010. See, e.g., Doc. No. 135-22, Def.'s Ex. 21; Doc. No. 135-23, Def.'s Ex. 22; Doc. No. 144-8, Pl.'s Ex. F.
Essentially, Reading has put statements made during the December 30, 2009 mediation session at issue, thus precluding it from asserting a privilege. Cf. Bittaker v. Woodford, 331 F.3d 715, 719 (9th Cir.2003) ("The privilege may be found to have been waived by implication when a party takes a position in litigation that makes it unfair to protect that party's attorney-client communications.") (quoting 3 Weinstein's Federal Evidence § 503.41[1] (2d ed.2003) (en banc)); id. ("[P]arties in litigation may not abuse the privilege by asserting claims the opposing party cannot adequately dispute unless it has access to the privileged materials.").
Separately, the Complaint alleges a violation of § 15.3(b) because TMG allegedly failed to furnish for MBL Maryland and Lahaina C by October 20, 2009 "a statement of operations (profit and loss), a statement of cash flows, a calculation of net operating income, a balance sheet, an aged accounts receivable report and such other information or reports as requested by Reading." Doc. No. 1, Compl. ¶¶ 44, 47. This claim is included in Plaintiff's "Fifth Alleged Breach," which the court has already rejected in the April 22, 2014 Order. See Doc. No. 39-1, Def.'s Mot. at 18-19 (defining the "Fifth Alleged Breach"); Doc. No. 96, Apr. 22, 2014 Order, 16 F.Supp.3d at 1198-1200, 2014 WL 1604344, at *12-13 (rejecting Plaintiff's arguments as to TMG's alleged failure to provide financial information within twenty days following the end of the third quarter of 2009, October 20, 2009). In the previous Motion, the court addressed Plaintiff's specific arguments as to the § 15.3 claim in the Complaint, and Plaintiff did not contend that its § 15.3 claim encompassed the February 23, 2010 inspection. The only remaining claim in this action is TMG's "Sixth Alleged Breach," which is limited to alleged breaches of § 15.2 of the MBL Pledge Agreement and Lahaina Pledge Agreement. See Doc. Nos. 39-1, Def.'s Mot. at 22-23 (defining the "Sixth Alleged Breach"); Doc. No. 133-1, Renewed Mot. at 6 (explaining scope of current Motion as directed at the only remaining claim — the "Sixth Alleged Breach").
