Judge Thomas D. Long, Case Number: 22STCV38031, Date: 2023-05-23 Tentative Ruling

On March 30, 2023, Plaintiffs Michael J. Kiely and MDMK Ltd. filed a second amended complaint (“SAC”) against Defendants Hyph (USA) Inc., Xhail Inc., Hyph Corporation, Max Renard, Anders Thorsell, Andreas Carlsson, and Alex Dessauer. The SAC alleges (1) breach of fiduciary duty; (2) fraud; (3) violations of Corporations Code section 25401; and (4) declaratory relief.

At the November 21, 2023 hearing, the Court concluded that, based on the limited evidence, it was unclear whether the offer to sell securities was made in California and thus actionable under Corporations Code section 25401. If this claim were viable, then it was unclear whether enforcement of the forum selection clause would diminish Plaintiffs’ unwaivable statutory rights. The Court therefore ordered supplemental briefing and continued the hearing.

On December 19, 2023, the Court granted Defendants’ motion based on both the parties’ forum selection clause and forum non conveniens, and it stayed the entire action pending litigation in Sweden.

On February 1, 2024, Plaintiffs filed a notice of intention to move for new trial, and on February 8, 2024, they filed their memorandum of points and authorities.

In ruling on a motion for a new trial, the Court may change or add to the statement of decision, modify the judgment, vacate the judgment, grant a new trial on all or part of the issues, or vacate and set aside the statement of decision and judgment and reopen the case for further proceedings. (Code Civ. Proc., § 662.) Any judgment entered thereafter is subject to section 657. (Ibid.)

A verdict may be vacated and a new trial ordered due to irregularity in the proceedings that prevented a party from having a fair trial, insufficiency of the evidence to justify the verdict, or an error in law, among other grounds. (Code Civ. Proc., § 657.)

Plaintiffs contend that the order is based on insufficient evidence and the Court prevented Plaintiffs from having a fair trial by improperly giving greater weight to Defendants’ evidence while discounting or ignoring Plaintiffs’ evidence. (See Code Civ. Proc., §§ 657(1), 657(6).)

Plaintiffs contend that the Court also erred by (1) finding that proceedings in Sweden will not diminish the rights and remedies afforded to Plaintiffs by California law; (2) finding that Plaintiffs are not entitled to a jury trial; and (3) granting the motion on forum non conveniens grounds. (See Code Civ. Proc., § 657(7).)

A. Plaintiffs May Move For a New Trial, Despite No Prior Trial Verdict or Final Judgment.

After Plaintiffs filed their motion, the Court set an Order to Show Cause Re: Striking of Notice of Intention to Move for New Trial because there had been no disposition entered as to any party in any cause of action. Plaintiffs filed a brief in response, and the Court discharged the OSC.

“A motion for new trial may be used to challenge an appealable order on a motion as well as a decision or verdict in a conventional civil action [citation] and a motion for new trial may be based on a number of different grounds, including errors of law. [Citation.]” (Blue Mountain Development Co. v. Carville (1982) 132 Cal.App.3d 1005, 1014.) An order granting a motion to stay the action on the ground of inconvenient forum is an appealable order. (Code Civ. Proc., § 904.1, subd. (a)(3).) Accordingly, Plaintiffs’ motion challenging that appealable order here is proper.

A motion for new trial must be filed and served within 15 days of the date of mailing notice of entry of judgment by the clerk of the court or service by any party of written notice of entry of judgment, or within 180 days after the entry of judgment, whichever is earliest. (Code Civ. Proc., § 659, subd. (a)(2).)

“It might seem that the difference between a ‘notice of ruling’ and a ‘notice of entry’ is hypertechnical. In another context it might be. . . . Since the time within which an appeal must be filed is jurisdictional, rules that measure that time must stand by themselves without embroidery.” (20th Century Ins. Co. v. Superior Court (1994) 28 Cal.App.4th 666, 672.)

Defendants filed and served a Notice of Ruling on December 22, 2023. This did not start the clock for filing Plaintiffs’ motion because it was not a Notice of Entry of Judgment and did not include a copy of the Court’s filed order.

Defendants also filed and served a Notice of Entry of Judgment on January 18, 2024, which included a copy of the Court’s minute order. Plaintiffs timely filed their notice of intent to move for new trial 14 days later.

C. Plaintiffs Are Not Entitled to a New Trial Based on Insufficient Evidence.

Plaintiffs are that they were denied fairness based on insufficient evidence. (Motion at p. 2.) According to Plaintiffs, the Court made “findings that were prejudicial to Plaintiffs having a fair determination and rendering the process unfair for Plaintiffs.” (Motion at p. 2.)

“A new trial shall not be granted upon the ground of insufficiency of the evidence to justify the verdict . . . unless after weighing the evidence the court is convinced from the entire record, including reasonable inferences therefrom, that the court or jury clearly should have reached a different verdict or decision.” (Code Civ. Proc., § 657.)

Plaintiffs argue that they were unable to conduct discovery to oppose the motion. (Motion at p. 3.) Defendants moved to quash service of summons for lack of personal jurisdiction and to dismiss or stay for forum non conveniens grounds on February 21, 2023. On March 7, 2023, Plaintiffs served Defendants with 181 requests for production of documents, and Defendants responded to 150 of the requests. (Mircheff Decl. ¶¶ 4, 8.) Plaintiffs filed their opposition on November 7, 2023. Although their motion to compel further was not heard before the motion to dismiss/stay, Plaintiffs did have an opportunity to conduct discovery several months before the relevant motion.

Citing their SAC’s allegations, Plaintiffs argue that “it was fundamentally unfair for the Court to give Defendants more weight to Defendants’ evidence, especially considering the entire premise of Plaintiffs’ case is that Defendants, including Renard and Thorsell, engaged misrepresentations and concealment.” (Motion at pp. 3-4.) Plaintiffs fault the Court for seemingly “giv[ing] great weight to Renard’s declaration” (stating that he “never traveled to California or communicated with anyone in California”) and “inexplicably discount[ing] Kiely’s detailed declaration” (stating that “Renard was located and living in Los Angeles, California”). (Motion at p. 4.) According to Plaintiffs, Kiely’s declaration “is no more or less direct evidence than Renard’s declaration.” (Motion at p. 4.) Plaintiffs attempt to frame Kiely’s declaration as “not an assumption, [but] it is an assertion of fact made on Kiely’s personal knowledge.” (Motion at p. 4.) Although both people submitted declarations under oath, Renard, not Kiely, has the best personal knowledge and is in the best position to factually declare where Renard was living.

Plaintiffs assert that Defendants engaged in “selective storytelling, creative wordplay, and intentional concealments,” and they were “less than forthcoming and truthful.” (Motion at pp. 4-5.) “Defendants were not being totally forthcoming and truthful with the Court, and, unfortunately, the Court was deceived by Defendants’ lack of candor.” (Motion at p. 8.) According to Plaintiffs, “Kiely’s testimony and evidence impeached Renard’s selective storytelling and should have further discredited Renard’s credibility.” (Motion at p. 6.) However, in inherently adversarial litigation, the same could be said in reverse. It is rare that all opposing parties agree on facts and the presentation of the dispute. Parties will regularly argue that their opponent is not credible, especially in fraud-based cases. Here, the Court’s decision was based on the specifics of the evidence. Although Plaintiffs complain that the Court weighed evidence in the opposing parties’ favor, Defendants had met their burden of proof on their motion. Plaintiffs’ evidence did not overcome Defendants’ evidence.

Plaintiffs also argue that “the Court seemingly accepted Defendants’ counsel’s arguments at face value without verifying evidence.” (Motion at p. 9.) Plaintiffs cite the Court’s statement that “many of the documents relevant to the Plaintiffs’ claims, including minutes of the Xhail AB Board of Directors and shareholder meetings and Xhail AB’s share register, are written in Swedish and would require translation into English if offered into evidence in California. (Declaration of Thorsell, ¶¶20 - 23.)” (Motion at p. 9.) Plaintiffs contend that this was merely an argument of counsel, not evidence. But Plaintiffs do acknowledge that Thorsell declared, “Because HYPH AB is a Swedish company, organized under Swedish law, many of its documents, including documents that may be relevant to the allegations in Plaintiffs’ SAC, are written in Swedish.” (04/26/2023 Thorsell Decl. ¶ 23; see Motion at p. 9.) Additionally, Exhibit D is a copy of the Board resolution that is written in Swedish, although it also contains an English translation. (04/26/2023 Thorsell Decl. ¶ 22 & Ex. D.)

Based on the entire record and reasonable inferences therefrom, the Court is not convinced that it clearly should have reached a different result. (See Code Civ. Proc., § 657.) The motion is denied on this ground.

D. Plaintiffs Have Not Identified an Error in Law That Requires a New Trial.

A court may grant a new trial if its original ruling, as a matter of law, was erroneous. (Ramirez v. USAA Casualty Ins. Co. (1991) 234 Cal.App.3d 391, 397.)

Plaintiffs argue that the Court’s ruling that enforcement of the forum selection clause will not diminish Plaintiffs’ unwaivable statutory rights under the Corporations Code was an error in law. (Motion at p. 10.) First, the Court found that Plaintiffs did not have a viable claim under the Corporations Code. (Order at pp. 2-6.) Because of this, Plaintiffs have no unwaivable statutory rights under the Corporations Code. (See Opposition at p. 15.) In the alternative, the Court continued to find that “[e]ven if the sale here did constitute a sale of securities made in California, enforcement of the forum selection clause will not diminish the Plaintiffs’ unwaivable statutory rights.” (Order at p. 6.) The Court carefully considered the parties’ experts’ declarations, finding them in accord as they related to Plaintiffs’ unwaivable statutory rights for the statutory basis for the claim. (Order at pp. 6-8.)

Plaintiffs argue that the ruling that Plaintiffs are not entitled to a jury trial in California was erroneous. (Motion at p. 12.) Noting the damages sought under the Corporations Code, Plaintiffs contend that “it is impossible to conclude that the issues to be tried are exclusively equitable in nature.” (Motion at p. 13.) But the Court did not find that the issues were exclusively equitable. Rather, the Court found that the SAC “involves non-severable legal and equitable aspects,” but “the ‘gist of the action’ is equitable,” so Plaintiffs were not entitled to a jury trial. (Order at pp. 8-19.)

Plaintiffs argue that the Court improperly relied on Baltimore Football Club, Inc. v. Superior Court (1985) 171 Cal.App.3d 352 rather than Stangvik v. Shiley Inc. (1991) 54 Cal.3d 744. (Motion at p. 14.) The Court quoted Baltimore Football Club only in its conclusion: “The Court is being ‘asked to assume jurisdiction and to adjudicate disputes between non-California claimants against out-of-state defendants over causes of action . . . about which California has no interest whatsoever.’ (Baltimore Football Club, Inc. v. Superior Court (1985) 171 Cal.App.3d 352, 364.) Under these circumstances, ‘it would be an abuse of discretion for a trial court to do anything other than dismiss the action[].’ (Ibid.)” (Order at p. 11.) The Court did analyze forum non conveniens based on Stangvik. (See Order at pp. 10-11.)

Plaintiffs argue that “it appears the Court focused more on the purported convenience of proceeding in Sweden instead of the inconvenience of proceeding in California,” and “the Court wrongly punished Plaintiffs for moving out of California.” (Motion at p. 15.) When considering Defendants’ contention that substantially all of the third-party witnesses that may have information relevant to Plaintiffs’ claims are located in Sweden, the Court noted that it would be inconvenient to proceed in California because California cannot compel the attendance of non-resident witnesses. (Order at p. 10; see Order at p. 11 [“Plaintiffs do not address California’s inability to compel the attendance of non-residents.”].) Many of the relevant documents are not in California. (Order at p. 10.) Plaintiffs do not identify any contrary evidence, and they concede that “[a]t best, this issue is neutral.” (Motion at p. 15.) As the Court stated, “[t]o the extent that ‘no single venue predominates’ and ‘someone is going to be inconvenienced no matter where a case is litigated because there is no one forum that is convenient to all parties’ [citation], this is—at best—a neutral argument that does not outweigh the Defendants’ other showings.” (Order at p. 11.)

Plaintiffs have not shown that the original ruling, as a matter of law, was erroneous. The motion is denied on this ground.
CONCLUSION

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. If all parties in the case submit on the tentative ruling, no appearances before the Court are required unless a companion hearing (for example, a Case Management Conference) is also on calendar.

Hon. Thomas D. Long

Judge of the Superior Court