How not to address summary judgment

My free subscription to Law360 expired, so I can’t easily read the whole article there. However, it reminds me to examine the Altonaga decision, which at the time struck me as woefully uninformed.

My guess is that Altonaga did not read and consider the evidence and arguments, but, instead, simply took the word of one (or both) parties that the alleged facts were “disputed.” She was overwhelmed by verbiage, claiming “dispute,” where the underlying facts were not, in fact, disputed. Rather, the disputes actually alleged were over possible interpretations or implications of the facts, and by taking a dispute as being “factual,” she was left with nothing to judge.

The case was far more complex, I suspect, than she realized. There were attempts to allow more time, even agreed to by all parties, that she rejected. She was putting the cart before the horse, placing her own convenience and apparent desire to avoid heavy lifting, above of equity and the law. The “heavy lifting” could have been done by a law clerk or intern. I had done much of the necessary analysis here, but, of course, any work that she would rely upon would have to be done under her full supervision. What was factual dispute and what was empty claims of “disputed,” was quickly obvious to me when I began studying the Motions for Summary Judgement: there were alleged disputes that were not actually disputed, and in considering a Motion for Summary Judgment, that a party simply claims a dispute would not be enough; where there is admissible evidence on one side, showing fact not a matter of dispute, it is not enough for a party to “dispute” it with no basis. If it were, no Motion for Summary Judgment could prevail unless a party simply did not oppose and defend.

The introduction to the Law360 article:

Energy Cos. Denied Quick Wins In $89M IP Licensing Dispute

By Nicole Narea
Law360, New York (May 17, 2017, 5:06 PM EDT) — A Florida judge shot down two energy companies’ dueling petitions for quick wins Wednesday in an $89 million licensing suit concerning an energy catalyzer patent, deferring to a jury to evaluate the remaining factual inconsistencies in their competing accounts.

U.S. District Judge Cecilia Altonaga said in her order that it was not the court’s prerogative to review disputes of fact in determining whether to grant summary judgment in the suit brought by Florida-based Leonardo Corp. against its cold fusion nuclear reactor licensees, Cherokee Investment Partners LLC…

As is all too common, reporting is shallow. Rossi v. Darden is not a licensing suit concerning a … patent. The core is a breach of contract suit, not a patent challenge.

As well, Cherokee Investment Partners was not a party to the Agreement and the breach of contract claim was over alleged oral assurances that, because of the “entire agreement” claims of the Agreement would be legally irrelevant, even if true. In originally denying the Motion to Dismiss claims with regard to Cherokee, Altonaga assumed that Cherokee was the sole owner of Industrial Heat, based on Rossi representations that she may have misinterpreted. As sole owner, including Cherokee could have been possible. However, the evidence that developed in discovery showed that Cherokee was not an investor in Industrial Heat, much less an owner.

This is the Altonaga decision on the Motions for Summary Judgment.

Summary judgment may only be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show “there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a), (c). An issue of fact is “material” if it might affect the outcome of the case under the governing law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). It is “genuine” if the evidence could lead a reasonable jury to find for the non-moving party. See id.; see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

At summary judgment, the moving party bears the initial burden of identifying “those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue
of material fact.” Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir. 1993) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (alterations and internal quotation marks omitted)). If “the moving party fails to demonstrate the absence of a genuine issue of material fact, the motion should be denied.” Kernel Records Oy v. Mosley, 694 F.3d 1294, 1300 (11th Cir. 2012) (citations omitted). The filing of cross-motions for summary judgment does not change the standard of review. See LSQ Funding Group, L.C. v. EDS Field Servs., 879 F. Supp. 2d 1320, 1325 (M.D. Fla. 2012) (citation omitted).

The parties’ voluminous, competing briefing and submissions plainly show the record is brimming over with disputed issues of material fact. Indeed, the Court is hard-pressed to locate any material facts on which the parties agree. Disputed factual issues are for the jury to determine. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (“Credibility
determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge . . . .” (alteration added)).

The judge has set up an artificial standard that allows her to disregard the actual motions, evidence, and arguments, i.e., the idea that the parties must “agree.” I studied the defendant’s motion for summary judgment, statement of material fact, here.  Again and again, Jones Day asserts a fact, and Rossi disputes it without showing any contrary evidence; often the evidence asserted to support the dispute actually confirms the alleged fact; in some cases the reasons for even considering the “contrary evidence” as material is obscure. Mostly it appears to have to do with some implication rather than an actual factual dispute, and Rossi uses the occasion to make irrelevant propaganda points.

This, then, has created a huge list of “disputes,” as can be seen in the Joint Pretrial Stipulation. Many of the allegedly disputed facts are supported by evidence and direct sworn testimony, without any contrary evidence other than conclusory statements.

I also studied the Rossi Partial Motion for Summary Judgment on one narrow issue, “replication.” 

The Judge avoided any detailed examination of arguments and evidence, but made a blanket conclusion, based on personal impressions and not such an examination, that there wasn’t sufficient evidence for any aspect of the motions. She disregarded all the legal arguments, did not given them any consideration.

It can be argued that the attorneys did not sufficiently narrow the issues; as a complex case involving multiple defendants and counterclaim defendants, that may have been difficult with the constraints that the Judge placed on the parties, out of her desire to keep the trial schedule.

However, that decision stands as poorly based.

I will examine one issue only at this point, perhaps others will follow.

In the Motion to Dismiss filed by the defendants, the issue of treating Cherokee as a defendant was raised. In her dismissal on this point, Altonaga wrote, stating “fact” as alleged in the Complaint (which is what she would do, properly):

On October 26, 2012, Rossi arrived at Cherokee’s office to execute a License Agreement (“License Agreement”) [ECF No. 1-2]. (See id.). At this time, Darden and Vaughn told Rossi they had formed a new business entity, Defendant, Industrial Heat, LLC (“IH”), a branch of Cherokee designed to serve as the holding company for the E-Cat license. (See id. ¶ 41).3

Darden and Vaughn represented to Rossi that Cherokee entirely owned and funded IH. (See id. ¶ 43).

Then, as to arguments:

F. Count VI: Fraud and Deceit

In Count VI, Plaintiffs allege Defendants misrepresented material facts — such as that IH controlled and directly managed IPH; and IH and Cherokee had sufficient funds to pay Plaintiffs pursuant to the License Agreement — which Plaintiffs relied upon by entering into the License Agreement. (See Compl. ¶¶ 111–17; see also Resp. 14). Defendants argue this claim fails because: (1) the damages arising from the alleged fraud are not separate or distinguishable from the damages arising from the breach of contract; and (2) to the extent Plaintiffs are, in essence, claiming fraudulent inducement, such a claim is not actionable against entities not parties to the License Agreement. (See Reply 7–8)

In her discussions, Altonaga has this underlying idea (my emphasis):

Here, the relevant Defendants include Cherokee, IH, IPH, Darden, and Vaughn. (See generally Compl.). Cherokee entirely owns and funds IH, one of its holding companies. (See id. ¶¶ 41–43). IPH is a wholly owned subsidiary and holding entity of IH. (See id. ¶ 51). Furthermore, Darden is the CEO of Cherokee and president of IH; and Vaughn is the manager of Cherokee and vice-president of IH. (See id. ¶¶ 9–10). Thus, while Cherokee, IH, and IPH may have separate corporate structures, it is clear they are either subsidiaries or wholly owned holding companies of each other. (See id. ¶¶ 41–51). As such, neither they, nor their individual employees — Darden and Vaughn — may be said to conspire with each other. See Copperweld, 467 U.S. at 770–71 (“[T]here can be little doubt that the operations of a corporate enterprise organized into divisions must be judged as the conduct of a single actor. . . . For similar reasons, the coordinated activity of a parent and its wholly owned subsidiary must be viewed as that of a single enterprise . . . .” (alterations added)).6

Here, Altonaga was dismissing a conspiracy count. However, the idea that Cherokee owned IH, as “one of its holding companies” made the claims about alleged misrepresentations and the liability of Cherokee more plausible, more toward some possible set of facts that would support the claim. We now know more definitively that these claims were false.

From the Joint Pretrial Stipulation, we have as accepted facts:

3. Darden is the CEO of Cherokee, and Vaughn is the Venture Investment Manager of Cherokee.
4. Cherokee Investment Partners, LLC is one of several entities that fall under the “Cherokee” brand, which describes a body of work that Tom Darden and John Mazzarino have accumulated over 30 years.
5. On its website, Cherokee represented to the public that it had raised $2.2 billion in five institutional private equity funds and invested that $2.2 billion in the acquisition, cleanup, development and sale of more than 550 properties in the US, Canada and Europe.
6. Cherokee Investment Services provides administrative services to Industrial Heat, LLC (“IH”).
7. Cherokee Investment Partners, LLC has never owned IH.
8. Cherokee Investment Services does not make any profit as a result of providing such services.
9. At a certain point in time, John Vaughn was working for IH, while being paid by Cherokee Investment Services.
10. IH was formed on October 24, 2012, two days before the License Agreement at issue was executed. Industrial Heat and its affiliates, including IPH, are involved in developing and investing in “low energy nuclear reaction” (or LENR) technologies that have the potential to
provide clean, reliable, efficient, and safe sources of energy.

The License Agreement has an Entire Agreement clause, ¶ 16.8. 

Looking back at the IH Motion to Dismiss, I find no reference to that clause, so this issue may have been inadequately pled. That clause de-legitimates the entire basis for the Rossi claim of fraud, i.e., alleged oral representations prior to the execution of the Agreement. In addition, Rossi had about a year in which he could have, without harm, cancelled the Agreement, if counsel had informed him that these alleged representations were not reliable (as any sane attorney would have told him). However, what was actually said to Rossi has not been established. It is easy to imagine true assurances that might have been given to Rossi that he remembered and understood as he claimed. Darden and Vaughn had a proven track record in raising massive funding for risky projects. They may have assured him that “we” could pay the money if it came due, being confident.

But none of this would actually obligate Cherokee. IH was clearly formed to separate the activity from Cherokee; taking on a $100 million contingent liability for Cherokee could have been malfeasance. In addition, Entire Agreement clauses exist to eliminate later controversies, about what was said. Memories of what was said four years later can be weak, and sometimes self-serving. One can present a written agreement to an attorney for review: a description of conversations would be fuzzy.

I do not see in the IH Motion for Summary Judgment SOMF a reference to the Entire Agreement clause, ¶ 16.8  However, it is referenced in the actual motion.

B. Plaintiffs’ Fraud Claim Cannot Be Proven Because Evidence of Defendants’ Alleged Misrepresentations Is Barred by the Parol Evidence Rule. 

Second, Plaintiffs’ fraud claim cannot be proven at trial as a matter of law because any evidence of Defendants’ alleged misrepresentations regarding the true party in interest under the License Agreement is barred by the parol evidence rule. 

Plaintiffs’ fraudulent inducement claim is predicated on them allegedly being falsely told that Cherokee would be a party to or guarantor of the License Agreement to ensure that Plaintiffs were paid. Compl. ¶ 112. Of course, no such guarantee can be found anywhere in the License Agreement itself, which conspicuously fails to mention Cherokee or any Cherokee-named entity
in its eighteen pages of dense, single spaced text. See License Agreement (SOMF Ex. 1). Thus, the License Agreement is the beginning and end of the matter here.

Florida law makes clear that the parol evidence rule “forbids a party from providing evidence of prior or contemporaneous representations to vary or contradict the clear and unambiguous terms of a contract” because “the effect of introducing such promises . . . would be to vary the terms of the parties’ Agreement.” Eclipse Med., Inc. v. Am. Hydro-Surgical Instruments, Inc., 262 F. Supp. 2d 1334, 1343 (S.D. Fla. 1999). In other words, there is “no relief for oral misrepresentation where specific points [are] covered in contract.” Id. (citing Typographical Serv., Inc. v. Itek Corp., 721 F.2d 1317, 1320 (11th Cir. 1983)). Plaintiffs argue here that Defendants orally represented that a Cherokee entity would guarantee Industrial Heat’s obligations under the License Agreement. By its terms, however, the License Agreement was between Plaintiffs and Industrial Heat. SOMF ¶¶ 1-2. Moreover, it contains an integration clause. License Agreement (SOMF Ex. 1) § 16.8. As “the Agreement’s provisions . . . are clear and unambiguous, therefore[,] any claims based on . . . alleged misrepresentations of a different [nature] simply cannot, as a matter of law, be considered.” Eclipse Med., Inc., 262 F. Supp. 2d at 1343. Accordingly, because Plaintiffs as a matter of law cannot introduce evidence of the alleged promise that a Cherokee entity was the true party in interest—assuming for the sake of argument that such evidence even exists, which it does not—the Court must enter summary judgment for Defendants on Count VI.

Rossi’s opposition argues legal technicalities as distinct from substance. From the alleged facts regarding representations re Cherokee, it is possible that some kind of fraudulent inducement on the part of Darden and Vaughn could be established, but this would not create a liability for Cherokee, the Rossi arguments confuse distinct issues, and completely ignore the Entire Agreement (integration”) clause of the Agreement. While Rossi could argue he was presented with a “bait and switch” situation, that is not fraud if the realities are disclosed or apparent upon a reading of the Agreement. Cherokee and Darden and Vaughn and Industrial Heat are legally distinct, and as individuals may not obligate the others without a formal agreement. Later behavior could establish estoppel on this, i.e., a behavioral exception, but there was no later behavior by Cherokee alleged.

It is a separate matter as to whether the representation was material or not. Rossi goes on to claim that Darden and Vaughn misrepresented their financial condition, and that Rossi suffered harm from this, but it is quite clear that (1) Industrial Heat arranged funding sufficient to pay all obligations, and (2) did not collect that funding because the occasion for it did not arise. This was a contract dispute, and Rossi claims that they never intended to pay are not supported by the evidence that Rossi alleged.

The Judge clearly erred in dismissing this aspect of the IH Motion for Summary Judgment. What the best IH strategy is at this point is not clear to me. As far as I know, they are planning to go to trial. A quick search turned up indications that the Order cannot be at this point appealed. However, IH may still argue at trial that the prohibited evidence may not be adduced, and if it is allowed, that could be appealable error.

(IH presented clear factual and legal arguments, and if they were incorrect and improper, I’d have hoped that the Judge would address the errors. But she did not.)

What comes to my mind here is that the apparent Rossi strategy of introducing massive irrelevant arguments, as well as misrepresenting evidence, so visible in the pleadings on the Motions for Summary Judgment (leading to many “disputes” where the asserted fact is not at all in dispute), worked to confuse the Judge.


Author: Abd ulRahman Lomax


4 thoughts on “How not to address summary judgment”

  1. Abd. I admire your analysis of these issues, You have done a good non-trivial job. I agree Altonaga has not done it, and it is a great shame she has not.

    Where I’m less certain is whether, as a point of law, she should have done it. When disputes about facts are so complex maybe it is legally correct for the matter to go to trial, even though a careful analysis of one side’s argument shows it is not sound.

    1. Thanks, Thomas. My concern is not so much with the result, but with the lack of examination of the arguments. What you have stated is that “disputes about facts” are “complex.” In fact, they are not. (or they are only complex if there is conflict of evidence).

      Facts are facts. What establishes fact at law is relatively simple, fact is established by admissible evidence. The question is not the unsoundness of “one side’s argument,” but rather the soundness of the motion for summary judgment and what is necessary for it. I only looked at one issue, the inclusion of Cherokee as a defendant, which probably should have been dumped initially. At this point, with what is now formally agreed, there is no basis left for including Cherokee. It was only kept because of Rossi claims that had no basis in fact, only in Rossi’s interpretations and imaginations — as I explained.

      There are other issues. The 2nd Amendment was simply not valid, and this is from basic legal principles, not from disputed fact. It’s not truly relevant now, but this was deceptively presented in the Complaint. It can be argued, though, that there was some kind of agreement that took the place of the 2nd amendment, but, then, what were the terms of this agreement? Nothing is established that looks like what Rossi claimed and needs to claim to have a case. If Rossi wins this, it would establish a whole series of quite ugly precedents. For that reason, I’m sure that should the trial go against, say, Cherokee, this would be appealed to the end, with strong arguments. Almost as much with IH.

      IH alleged grounds for summary judgment on at least some issues, with clear factual and legal arguments. The necessary facts were not actually disputed, but smoke was emitted, a kind of Yes, But, though it was No, But, with irrelevancies then being asserted. The legal arguments made by Annesser and Chaiken don’t apply if there is a clear integration clause. Because this is all so clear, I’m fairly sure that Altonaga simply did not look, and, then, we are faced with clear evidence and argument that went nowhere, and that is less than thrilling. Altonaga rewarded obfuscation.

      And if I’m wrong and if Jones Day was wrong, would we not deserve an actual explanation? Altonaga did much more work with the Motions for Dismissal, explaining the reasons for her decisions, and it was all reasonably clear.

      I just booked an AirBnB room about seven blocks from the courthouse, and bought my bus ticket.

        1. As far as I know, yes. However, there can be issues, such as available seating. As far as I can tell, ordinary visitors are not allowed to take a cell phone into the courtroom. Members of the press can, but must sign a promise not to use the phone outside the rules (which don’t allow photography or audio recording in the courtroom, nor cell phone use in the courtroom itself).

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