Free Response in Opposition to Motion - District Court of California - California

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Micha Danzig, Esq. (SBN 177923) [email protected] Juan C. Castañeda, Esq. (SBN 240705) [email protected] Mintz Levin Cohn Ferris Glovsky and Popeo, P.C. 5355 Mira Sorrento Place, Suite 600 San Diego, CA 92121 Telephone: 858-320-3000 Facsimile: 858-320-3001 Attorneys for Plaintiff, BOND LABORATORIES, INC. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

BOND LABORATORIES, INC., a California corporation, Plaintiff, v. GEMCO, INC., a New Jersey corporation, and DOES 1-10, inclusive, Defendants.

Case No.: 07CV2400 IEG NLS PLAINTIFF BOND LABORATORIES, INC.'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO GEMCO'S EX PARTE APPLICATION FOR RECONSIDERATION OF THE COURT'S ORDER DENYING ITS MOTION TO COMPEL ARBITRATION, OR ALTERNATIVELY, TO DISMISS FOR IMPROPER VENUE Date: Time: Judge: Crtrm: April 7, 2008 10:30 a.m. The Hon. Irma E. Gonzalez 1

Plaintiff Bond Laboratories, Inc. ("Bond") submits this memorandum of points and authorities in opposition to Defendant Gemco, Inc.'s ("Gemco") Ex Parte Application for Reconsideration of the Court's Order Denying Gemco's Motion to Compel Arbitration or to Dismiss For Improper Venue ("Application"). I. INTRODUCTION. After Gemco failed to provide the factual basis for its Motion to Compel Arbitration, it seeks the extraordinary remedy of reconsideration, which we can only be considered a veiled attempt at two bites of the same apple. However, Gemco's Application fails in two material respects: first, it provides no "new" facts for reconsideration--Mr. Lutes was never "discovered," 1 Case No.: 07CV2400 IEG NLS

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but instead was noted by Bond throughout its Complaint (filed almost 5 months prior to Gemco's Motion to Compel Arbitration) and, frankly, has always been with Gemco as its representative for the past 19 years. Second, the Court properly exercised its discretion in not considering Gemco's new arguments introduced in its Reply (which the Court partially considered and found unpersuasive), given that Gemco failed to show how Bond raised "new matters" in its Opposition. As laid out below in detail, Bond's Opposition simply reiterated what Bond had been stating to Gemco for at least two months before Gemco brought the Motion to Compel Arbitration--that it had not received the terms and conditions document prior to paying for the blender. It would be the height of unfairness and a waste of judicial resources to allow Gemco to reargue a motion it failed to provide factual support for with more "new evidence" that was not in any way "new" to Gemco. As a consequence of all of the above, Gemco's Application must be denied. II. STATEMENT OF FACTS. Gemco's Application provides as fact the claim that "Bond raised new matters in its Opposition . . .(i.e. that no one from Bond was ever told about or saw Gemco's `terms and conditions', which included a provision to arbitrate in Middlesex, New Jersey." [Application 2:1518.] Gemco's Application reiterates that "Bond's Opposition Motion presented new material when it alleged, among other things, that no one from Bond was told about, or shown, Gemco's terms and conditions that included the provision to arbitrate any and all disputes in Middlesex, New Jersey." [Application 5:19-22.] However, as far back as November 13, 2007, Bond, through its attorney, made it clear that it "has no record of ever receiving this letter to Dr. Kay or the attached `terms and conditions.'" [Declaration of Micha Danzig ("Danzig Decl.") ¶ 2, Ex. A, email from Micha Danzig to Michael Kirby dated November 13, 2007.] Further, Bond's attorney asked "Does Gemco have any evidence that this letter was sent before it received payment from Bond for the blender?" [Id.] Three days later on November 16, 2007, Bond's attorney reaffirmed that Bond "never received the terms and conditions with the Arb clause before Bond paid for the blender. Thus, I need to hear from you if your client has any proof that my client received these terms and conditions before Gemco received payment for the blender, before I can discuss this matter further with my client." [Danzig Decl. ¶ 3, 2 Case No.: 07CV2400 IEG NLS

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Ex. B, email from Micha Danzig to Michael Kirby dated November 16, 2007.] In response, Mr. Kirby stated "I doubt any business would keep `proof' of letters mailed" but "I believe Gemco sends a confirming letter for all such orders" and "Gemco's form letter doing so also specifically references `The attached terms and conditions are part of this order' and encloses those terms." [Danzig Decl. ¶ 4, Ex. C, email from Michael Kirby to Micha Danzig dated November 16, 2007.] Almost two and a half weeks later, on December 4, 2007, without any proof from Gemco as requested by Bond's counsel showing that Bond received the terms and conditions, Bond's counsel emailed Mr. Kirby reminding him that "we are still waiting for your response on this, since Bond has no record of receiving these terms and conditions and it would not have knowingly agreed to arbitrate any disputes over the purchase of this blender in New Jersey." [Danzig Decl. ¶ 5, Ex. D, email from Micha Danzig to Michael Kirby dated December 4, 2007.] In response, Mr. Kirby stated, "My client swears it was mailed" but "[t]he letter was not sent certified mail, and thus neither side's position can be established with absolute certainty." [Danzig Decl. ¶ 6, Ex. E, email from Michael Kirby to Micha Danzig dated December 4, 2007.] Rather than provide any proof to support this position, three weeks later, Gemco filed a Notice of Removal of Action to the United States District Court, Southern District of California, on December 21, 2007 and subsequently brought a Motion to Compel Arbitration in New Jersey on January 3, 2008. On January 11, 2008, Bond filed and served its Opposition to Gemco's Motion to Compel Arbitration, which reiterated what it had been saying all along, it never received the terms and conditions prior to Bond's payment for the Blender. Despite this old fact, Gemco's Reply brief filed on February 15, 2008, argues for the first time, that based on new evidence from its representative Mr. Steve Lutes that he allegedly sent the terms and conditions sheet to Bond's consultant on July 13, 2006 that Bond therefore received the terms and conditions and thus these terms and conditions were part of the parties' agreement. [Reply 1: 13-17; 5:1-5.] Gemco's Application now states that "in preparing its reply, Gemco discovered a witness with personal knowledge that Bond did actually receive the terms and conditions which contain the arbitration requirements." [Application 2:22-24 (emphasis added).] In fact, Gemco makes the representation that it "did not even know of the existence of a witness (not a Gemco employee) who 3 Case No.: 07CV2400 IEG NLS

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could provide admissible evidence that Bond did actually receive Gemco's terms and conditions" until it "discovered" Mr. Lutes after filing its motion to compel arbitration. [Application 5:25-6:2.] These self-serving statements are contradicted by Bond's Complaint, filed on August 15, 2007 (almost 5 months prior to Gemco's Motion to Compel Arbitration filed on January 3, 2008) which is replete with clear indications that Mr. Lutes did not need to be "discovered." Bond's Complaint states in six separate paragraphs spanning two pages of the six page Complaint that: (a) it "contacted a California sales representative for Gemco, Steve Lutes ("Mr. Lutes"); (b) "Bond Laboratories representatives had a number of meetings with Mr. Lutes in San Diego, County, California."; (c) "Mr. Lutes repeatedly assured Bond Laboratories that Gemco would timely deliver a high quality Blender that would meet all of Bond Laboratories' manufacturing needs."; (d) "Mr. Lutes was fully apprised in these discussions of Bond Laboratories' needs and its plans for this Blender."; (e) "Mr. Lutes knew that Bond Laboratories was only going to be able to begin manufacturing its nutraceutical products after it received from Gemco a fully functional Blender that met promised specifications."; (f) "Mr. Lutes also knew that Bond Laboratories was going to be delayed in going to market with its products until it received from Gemco the promised Blender"; (g) Mr. Lutes knew that "Bond Laboratories was acquiring other manufacturing equipment that would be useless to Bond Laboratories without the Gemco Blender; (h) "Mr. Lutes was well informed of all the damages Bond Laboratories would incur if Gemco delivered a defective Blender."; (i) "Based on its meetings with Mr. Lutes, on or about August 17, 2006, Bond Laboratories placed a purchase order" (j) "Bond Laboratories contacted Gemco's local sales representative, Steve Lutes, to see if he could remedy the problem."; and (k) "Mr. Lutes again confirmed that Gemco could still not repair the Blender and that it was uncertain when the blender could be operational." [Complaint, ¶¶ 7-11, 16. (emphasis added).] Not only did Mr. Lutes not need to be "discovered" by Gemco but his own declaration attached to Gemco's Reply brief in Support of its Motion to Compel Arbitration makes it remarkable to believe that he was ever "lost." In short, Mr. Lutes states clearly that he has "served as Gemco's Manufacturing Representative for approximately 19 years." [Decl. of Lutes ¶ 4 (emphasis added).] 4 Case No.: 07CV2400 IEG NLS

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III.

ARGUMENT. A. The Court Should Not Reconsider Its Order Since No New Facts Exist Which Didn't Exist At The Time Of Gemco's Motion To Compel Arbitration.

Gemco claims that its Application is appropriate since, the Local Rules for the District of the Southern District 7.1(i) provide that reconsideration of a prior motion refused can be made for the same relief if the party seeking such relief presents "an affidavit of a party or witness or certified statement of an attorney setting forth the material facts and circumstances surrounding each prior application, including . . .what new or different facts and circumstances are claimed to exist which did not exist, or were not shown, upon prior application." The "new" facts which Gemco claims to exist, which did not purportedly exist when it brought its Motion to Compel Arbitration, is that "Bond received the terms and conditions, including the arbitration provision, as part of a quote sent on July 13, 2006." [Application 3:22-24.] Gemco seems to ignore the fact that "[m]ost judges are not receptive to motions to reconsider," reconsideration is an "extraordinary remedy, to be used sparingly" and absent highly unusual circumstances, a motion for reconsideration will not be granted "unless the District Court is presented with newly discovered evidence, committed clear error, or if there is an intervening change in the controlling law." Cal. Prac. Guide Fed. Civ. Pro. Before Trial Ch. 9-D; Kona Enterprises, Inc. v. Estate of Bishop, 229 F3d 877, 890 (9th Cir. 2000) (emphases added; internal quotes omitted). Further, a motion for reconsideration "may not be used to raise arguments or present evidence for the first time when they could reasonably have been raised earlier in the litigation." Id.; see also Northwest Acceptance Corp. v. Lynnwood Equip., 841 F.2d 918, 925-26 (9th Cir.1988); Fay Corp. v. Bat Holdings I, Inc., 651 F.Supp. 307, 309 (W.D.Wash.1987) ("Motions for reconsideration ... are not justified on the basis of new evidence which could have been discovered prior to the Court's ruling."). In Kona, the Court found untenable plaintiffs' contention that they were justified in arguing that defendants' motion for attorneys' fees must be decided under North Carolina law for the first time by a Rule 59(e) motion for reconsideration since plaintiffs had numerous opportunities to

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argue that defendants' motion for attorneys' fees must be decided under North Carolina law before the district court ruled on that motion. The same is true in this case. There is absolutely nothing "new" about the facts presented in Gemco's Reply brief. In fact, they are old facts which have always been within the grasp of Gemco had it attempted the engage in the slightest bit of good faith reasonable inquiry, as was required of it. Fed. R. Civ. Proc. 11 ("By presenting to the court a pleading, written motion, or other paper . . . an attorney or unrepresented party certifies that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances . . . the factual contentions have evidentiary support"). While Gemco might want to paint itself as the surprise victim of a startling new discovery showing that a witness [Mr. Lutes] with personal knowledge that Bond did actually receive the terms and conditions had emerged after filing its Motion to Compel Arbitration, the facts show that no such exclamation of revelation is warranted. The reality is that Mr. Lutes was practically highlighted by Bond in its Complaint, almost 5 months prior to Gemco's Motion to Compel Arbitration filed on January 3, 2008. In at least six paragraphs (outlined in the statement of facts above), Bond's Complaint continuously identified Mr. Lutes as a key representative of Gemco in the purchase of the Blender. Moreover, Mr. Lutes himself makes clear that he has been Gemco's representative for the past 19 years. Despite this, Gemco asks the Court to believe, despite the clear facts and simple logic, that for the first while in the throws of preparing its Reply to the Motion to Compel Arbitration, out of nowhere through some act of good fortune--poof--Mr. Lutes appeared. Had Gemco really wanted to question Mr. Lutes as to his version of the events, they could have and should have done so, rather than rely on the declaration of an administrative assistant in Gemco's New Jersey office. Since they chose not to (for whatever reason), it is unfair to now compel Bond and the Court to expend precious resources and time to reargue a claim which they failed to explore or inquire into it months ago. It is abundantly clear that "Defendants cannot dash onto the playing field after the final score has been posted, shouting `surprise, the loss doesn't count because we're all the same team!'." Fay Corp., 651 F.Supp. at 309. /// 6 Case No.: 07CV2400 IEG NLS

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B.

The Court Has Exercised Its Discretion In Considering Gemco's New Evidence Produced In Its Reply Brief.

Gemco also claims that the Court should have considered "Gemco's newly discovered evidence" because the "Court has discretion to consider new facts or different legal arguments introduced in a reply brief." What Gemco fails to recognize is that the Court did exercise its discretion and stated "In its reply brief, defendant argues plaintiff received the terms and conditions, including the arbitration provision, as part of a quote sent on July 13, 2008. It is improper for a moving party to raise a new factual argument in a reply brief." [Court Order, pg. 4, fn.3 citing Sweet v. Pfizer, 232 F.R.D. 360, 364 n.7 (C.D.Cal. 2005).] Not only did the Court exercise its discretion in considering Gemco's new evidence, but the Court's Order makes it clear that it actually considered Gemco's new evidence, and found it wanting--"defendant has not shown the terms sent in July of 2006 became part of the contract between plaintiff and defendant entered into nearly a month later." [Court's Order pg. 4, fn.3.] Once the Court has exercised its discretion, a motion for reconsideration, absent highly unusual circumstances (which are not found here) should not be granted. C. No New Material Was Raised In Bond's Opposition.

Gemco also relies on an overruled case from the Southern District of New York, Litton Industries, Inc. v. Lehman Bros. Kuhn Loeb, Inc., 767 F. Supp. 1220, 1235 (S.D.N.Y 1991), for its contention that the Court "may properly consider reply pleadings which address new matters raised in opposition papers so as to avoid giving unfair advantage to the answering party." [Application 2:11-14.] The supposed "new matters" raised in Bond's Opposition are "no one from Bond was ever told about or saw Gemco's `terms and conditions,' which included a provision to arbitrate in Middlesex, New Jersey." [Application 2:15-18.] Not only does Gemco rely on a nonmandatory case from an appellate jurisdiction outside of this Court's jurisdiction, but its application is fatally flawed. In Litton, Lehman Brothers failed to raise in its moving summary judgment papers "the efficacy of its procedures to prevent the misuse of nonpublic information by its employees." In Litton's opposition, Litton relied on deposition

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testimony to establish a genuine issue regarding Lehman's in house compliance system. As a result, the court found that Lehman could address Litton's new material issues. Unlike Litton, Gemco did raise the service of the terms and conditions on Bond in its moving papers. Bond simply replied in its opposition with what it had it had been saying as far back as November 13, 2007 (almost two months prior to Gemco's filing of the Motion to Compel Arbitration), namely, that it "has no record of ever receiving this letter to Dr. Kay or the attached `terms and conditions.'" [Danzig Decl. ¶ 2, Ex. A, email from Micha Danzig to Michael Kirby dated November 13, 2007.] Not only had Bond (through its attorney) made this clear, but it had continued to make this point clear. Three days later on November 16, 2007, Bond's attorney reaffirmed that Bond "never received the terms and conditions with the Arb clause before Bond paid for the blender. Thus, I need to hear from you if your client has any proof that my client received these terms and conditions before Gemco received payment for the blender, before I can discuss this matter further with my client." [Danzig Decl. ¶ 3, Ex. B, email from Micha Danzig to Michael Kirby dated November 16, 2007.] Almost two and a half weeks later, on December 4, 2007, without any proof from Gemco as requested by Bond's counsel showing that Bond received the terms and conditions, Bond's counsel emailed Mr. Kirby again reminding him that "we are still waiting for your response on this, since Bond has no record of receiving these terms and conditions and it would not have knowingly agreed to arbitrate any disputes over the purchase of this blender in New Jersey." [Danzig Decl. ¶ 5, Ex. D, email from Micha Danzig to Michael Kirby dated December 4, 2007.] It is clear that Gemco was on notice, at least two months prior to bringing its Motion to Compel Arbitration, that Bond's position was that it had not received the terms and conditions prior to paying for the blender. Yet now, after Bond reiterates what it had been saying for months prior to Gemco's Motion to Compel Arbitration in its Opposition, Gemco cries foul and asks the Court to allow it to introduce "new" evidence to rebut Bond's "new matters." The Court should reject Gemco's request for obvious reasons: (a) no "new matters" were raised by Bond in its Opposition; and (b) practically speaking, such a far reaching request would have the effect of requiring the Court to allow more "new" evidence by the moving party anytime a 8 Case No.: 07CV2400 IEG NLS

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party contradicts the moving party's moving papers in its opposition. Sweet v. Pfizer, makes it clear that this is not proper. D. Allowing Gemco To Continuously Introduce New Evidence Provides It With An Unfair Advantage

Gemco goes as far as to claim that Bond raised "new matters" which if not addressed, would give Bond an "unfair advantage." If anyone is to trying to gain an unfair advantage here it is Gemco. Not only does it want a free pass for its failure to engage in a reasonable inquiry as to the factual basis for its Motion to Compel (despite the ample facts at its disposal, i.e. Mr. Lutes being right in front of them), but it wants to drag Bond back through an unnecessary and expensive reconsideration process and if not, appeal, so as to force them to litigate their California based claim in New Jersey, all without any new facts and based on Bond simply consistently responding (as it has all along) to Gemco's claim that it received the terms and conditions before paying for the blender. It is also incredible and unreasonable for Gemco to seek reconsideration of the Court's ruling when it has not provided any evidence or argument (new or otherwise) that its "new" facts would have any impact on the legal issue of whether the terms and conditions (including the subject arbitration clause) could be enforced against Bond. Specifically, the Court raised the obvious point that "defendant has not shown the terms sent in July of 2006 became part of the contract between plaintiff and defendant entered into nearly a month later." [Court's Order pg. 4, fn.3.]. Further, a review of the exhibits attached to Mr. Lutes declaration in Gemco's Reply brief fails to show any indication that Bond accepted Gemco's terms and conditions, in fact they fail to attach Bond's purchase order. Despite Gemco's failing to provide evidence to support its ever changing story on whether or how the terms and conditions were sent and allegedly received, it wants the Court to allow it to reargue, ad infinitum, an argument it failed to make. The time has passed for Gemco to conduct its mini-discovery process while burdening the Court and Bond with its changing factual pattern and the Court should deny its Application in kind. /// /// 9 Case No.: 07CV2400 IEG NLS

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IV.

CONCLUSION. For the foregoing reasons, Gemco's Application should be denied.

Dated: April 1, 2008

MINTZ LEVIN COHN FERRIS GLOVSKY & POPEO

By: s/ Micha Danzig Micha Danzig Juan C. Castañeda Attorneys for Plaintiff BOND LABORATORIES, INC.

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4292497v.1

CERTIFICATE OF SERVICE I, the undersigned, certify and declare that I am over the age of 18 years, employed in the County of San Diego, State of California, and am not a party to the above-entitled action. On April 1, 2008, I filed a copy of the following document(s): PLAINTIFF BOND LABORATORIES, INC.'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO GEMCO'S EX PARTE APPLICATION FOR RECONSIDERATION OF THE COURT'S ORDER DENYING ITS MOTION TO COMPEL ARBITRATION, OR ALTERNATIVELY, TO DISMISS FOR IMPROPER VENUE by electronically filing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following: Michael L. Kirby, Esq. KIRBY NOONAN LANCE & HOGE LLP 600 W. Broadway, Suite 1100 San Diego, CA 92101-3387 Attorneys for Defendant GEMCO, INC. Email: [email protected] Executed on April 1, 2008, at San Diego, California. s/Micha Danzig Micha Danzig, Esq.

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