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Seychelles Organics, Inc. v. Rose

United States District Court, D. Arizona

July 8, 2014

Seychelles Organics, Inc., Plaintiff,
v.
John R. Rose, Defendant.

ORDER

FREDERICK J. MARTONE, Senior District Judge.

The court has before it defendant's motion to set aside judgment (doc. 53), and plaintiff's response (doc. 58).

I.

In November 2006, Seychelles paid in excess of $7 million to acquire assets of entities owned and operated by defendant John Rose ("Acquired Business")[1]. In connection with the purchase agreement, Rose executed a non-compete agreement ("NCA"), agreeing not to participate in any business in competition with the Acquired Business. He also entered into an Independent Contractor Agreement under which Rose would continue to provide services to Seychelles and the Acquired Business. Rose later became manager of AnuMed International, LLC, ("AnuMed") which sells health and nutritional supplements, arguably in competition with Seychelles.[2]

When Rose violated the terms of the NCA, Seychelles filed a complaint in Utah state court seeking injunctive relief. Rose stipulated to the entry of a preliminary injunction, ordering Rose to stop violating the terms of the NCA ("Utah Injunction"). Nevertheless Rose continued to violate the agreement. One day before Rose was scheduled to appear before the Utah court to show cause why he should not be held in contempt for violating the Utah Injunction, Rose filed for Chapter 13 bankruptcy protection in the United States Bankruptcy Court for the District of Arizona. Seychelles then filed an adversary proceeding and a $1.7 million proof of claim in Rose's bankruptcy case, and a trade dress infringement and unfair competition action against AnuMed in the United States District Court for the District of Utah ("Utah Litigation").

After a trial to the court in the adversary action, the Bankruptcy Court concluded that Rose had violated the NCA and damaged Seychelles in "an as yet undetermined amount." The parties were ordered to mediation to determine the amount of Seychelles' damages. In re Rose, Adv. No. 2:10-ap-1006-RTB ("Adversary Action") (doc. 96).

Rose and Seychelles, each represented by counsel, participated in a private mediation and ultimately agreed to settle all claims. Seychelles agreed to dismiss the Utah Litigation and withdraw its proof of claim in exchange for Rose's agreement to the immediate entry of judgment against him in the amount of $1 million, and the entry of a permanent injunction, prohibiting him from participating in any business in competition with the Acquired Business ("Settlement Agreement"). Motion, ex. 4. As part of the Settlement Agreement, Seychelles agreed to forbear taking any action to collect upon the $1 million judgment as long as Rose timely complied with his obligation to pay $180, 000 over a 60-month period and "remain in compliance with the terms of the injunction." Id . at 2.

The Bankruptcy Court approved the Settlement Agreement and issued proposed findings of fact and conclusions of law. We adopted the Bankruptcy Court's findings and conclusions and granted the parties' stipulated motion for entry of final judgment and permanent injunction ("Judgment") (doc. 6), and this case was closed. When Rose defaulted on his payment obligations under the Settlement Agreement, and failed to comply with the terms of the injunction, Seychelles sent notice of termination of its forbearance obligation and began efforts to enforce the $1 million Judgment.[3]

In the meantime, on January 15, 2013, AnuMed filed a complaint in this court against Seychelles seeking a declaration that AnuMed was not a party to the Settlement Agreement and therefore not bound by its terms. AnuMed Int'l, LLC v. Seychelles Organics, Inc., No. CV-13-0098-PHX-MHB (D. Ariz. Jan. 15, 2013). The parties stipulated to assignment of the case to a Magistrate Judge and the case was assigned to Judge Michelle Burns ("Burns Case").

AnuMed thereafter amended its complaint to add Rose as a plaintiff to seek a declaratory judgment that neither AnuMed nor Rose is bound by the Settlement Agreement or the Judgment, because the Judgment "is so grossly excessive" that it constitutes an "unenforceable penalty." Burns Case, Amended Compl. ΒΆ 41 (doc. 13). AnuMed subsequently voluntarily dismissed its complaint against Seychelles without prejudice, leaving only Rose's claims pending.

II.

Rose now seeks relief from Judgment under Rule 60(b)(4), (5), and (6), Fed. R. Civ. P., arguing that the Judgment is void, that applying it prospectively is no longer equitable, and for any other reasons that justify relief. A motion brought pursuant to Rule 60(b)(4), (5) or (6) must be brought within a "reasonable time." Fed.R.Civ.P. 60(c)(1). "What qualifies as a reasonable time depends on the facts of each case, " In re Int'l Fibercom, Inc. , 503 F.3d 933, 945 (9th Cir. 2007) (citation omitted), but in all events, relief should be granted only when the movant demonstrates that "circumstances beyond [his] control prevented timely action to protect [his] interests." Id.

A.

Rose did not oppose entry of the Judgment in this case. Instead he waited more than two years after Judgment was entered, and almost two years after Seychelles began its collection efforts, to bring this Motion. He makes no attempt to demonstrate that circumstances beyond his control prevented him from bringing the Motion sooner. See id. Without more, two years is not a reasonable amount of time, and ...


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