TrustLabs, Inc. v. An

Background

Defendant Daniel Jaiyong An moved for leave to file a motion for reconsideration of the Court’s earlier order denying his motion for leave to file counterclaims. The motion was filed while the case was on appeal, but the Ninth Circuit later dismissed the appeal. The Court stated that it therefore had jurisdiction to consider An’s motion.

An relied on Local Rule 7-9(b)(2) and (3). Those provisions allow a party to seek permission to file a reconsideration motion based on new material facts that arose after the earlier order or a manifest failure by the Court to consider material facts or dispositive legal arguments previously presented.

The Court’s analysis

The Court held that An satisfied neither standard.

First, An repeated his argument that the proposed counterclaims related back to TrustLabs’s claims. The Court disagreed, referring to its earlier conclusion that the counterclaims did not arise from the same transaction or occurrence as TrustLabs’s claims. The fact that the events occurred close in time was not enough. The Court also found that An’s statement that multiple law firms had told him the counterclaims related back did not identify any material facts or dispositive legal arguments that the Court had failed to consider.

Second, An argued that the delayed-discovery rule made his wrongful-termination claims timely. He said that, when he was terminated, he did not know and had no reason to know that TrustLabs was defrauding investors and intended to retaliate against him for objecting to the fraud. The Court explained that California courts do not apply the delayed-discovery rule when a plaintiff knows of actual and appreciable harm at termination but later learns more about the extent of the alleged wrongdoing. Because An alleged that he reported securities-law violations to TrustLabs’s Board of Directors and was then terminated, the Court found that he suffered actual and appreciable harm when he was terminated. The Court therefore treated termination as the latest point when the limitations period began for his retaliation and wrongful-termination claims.

The Court also rejected An’s remaining arguments. It found that his assertions that the counterclaims were adequately pleaded were largely conclusory. His claimed new evidence did not change the conclusion that one claim was time barred. Documents concerning transfers to a newly created Cayman entity did not identify a problem with a counterclaim and repeated facts already alleged. Records concerning unpaid founder stock and token compensation did not identify a contract provision supporting a breach-of-contract claim. Finally, possible future statements from investors were speculative, were not shown to be newly obtained evidence, and still did not specifically allege why an alleged failure to disclose information was material.

Ruling

The Court denied Defendant’s motion for leave to file a motion for reconsideration. The ruling did not grant permission to file the reconsideration motion and left the earlier order denying leave to file counterclaims in effect.