Castel S.A. v. Wilson

Decision Date18 February 2022
Docket Number2:19-cv-09336-ODW (PVCx)
PartiesCastel S.A. (a Luxeumbourg joint stock company), Plaintiffs, v. CHRISTOPHER A. WILSON et al., Defendants.
CourtU.S. District Court — Central District of California

Castel S.A. (a Luxeumbourg joint stock company), Plaintiffs,

CHRISTOPHER A. WILSON et al., Defendants.

No. 2:19-cv-09336-ODW (PVCx)

United States District Court, C.D. California

February 18, 2022




On July 26, 2021, Defendants Steven J. James, Olivia Ho Cheng jointly with ARF Partners, LLC, and Christopher A. Wilson (collectively, “Moving Defendants”), all moved for summary judgment. (ECF Nos. 104, 107, 109, respectively.) For the following reasons, the Court GRANTS James's Motion, GRANTS in PA RT and DENIES in PA R T Cheng and ARF's joint Motion, and DENIES Wilson's Motion.[1]



The following allegations and facts are uncontested, unless otherwise noted. In 2006, Plaintiff Castel S.A. invested in Aurora Imaging Technology, Inc. (“AIT”). (Pl.'s Separate Statement Genuine Issues Material Facts (“First GIMF”) ¶ 2, ECF No. 122-1.) Castel owned 16.7% of Series C and 16.7% Series D stock, or almost 4% overall of AIT. (Id. ¶ 3.)

By 2015, AIT was insolvent and remained so through 2016. (Pl.'s Separate Statement Genuine Issues Material Facts (“Second GIMF”) ¶ 21, ECF No. 124-1.) On or about November 25, 2015, AIT investors, Pharos Capital Partners II-A, L.P. and Pharos Capital Partners II, L.P. (together, “Pharos”), sold their interests in AIT to Defendant ARF (the “Pharos Sale”). (First GIMF ¶ 8.) In 2016, AIT sold or transferred all of its assets. (Id. ¶ 9.) In its Second Amended Complaint, Castel alleges that on October 31, 2016, Aurora Healthcare, SPC bought AIT (the “Transaction”). (Second Am. Compl. (“SAC”) ¶ 119, ECF No. 91.)

Defendant James

In 1999, James, a certified public accountant, joined AIT as its Executive Vice President and Chief Financial Officer (“CFO”). (First GIMF ¶ 1.) In 2014, James resigned from all positions he held at AIT. (Id. ¶¶ 5, 6.) In late 2016, James was the CFO of Aurora Healthcare U.S. Corp. and was also providing consulting services to AIT. (Def.'s Separate Statement Reply ¶ 39; ECF No. 129.) James provided financial consulting services to AIT at the time of the Transaction. (Id. ¶¶ 21, 23.) AIT also paid James to assist in its appraisal for the Transaction. (Id. ¶ 44.)

In its SAC, Castel asserts a fraudulent deceit and concealment claim against James, alleging that he “owed a fiduciary duty to the shareholders of AIT” and therefore should have disclosed certain facts regarding the Pharos Sale and the Transaction. (SAC ¶ 119.) James now seeks summary judgment on that claim, arguing that he did not owe Castel a duty to disclose during the Pharos Sale and the


Transaction because, by then, he had already resigned from AIT. (Def. James Mot. Summ. J. (“James Mot.”), ECF No. 104.)

Defendant Cheng

Cheng was the President and Chief Executive Officer (“CEO”) of AIT until she resigned in 2013. (Second GIMF ¶ 1.) Cheng remained as a minority shareholder of AIT but was not a majority or controlling shareholder. (Id. ¶ 2.)

Sometime in 2013, Defendant Michael Devlin arranged for a loan from Pharos to AIT (the “2013 Loan”) with a requirement that a portion of the loan proceeds be used to purchase Devlin's investment. (Defs.' Separate Statement Reply (“Cheng/ARF Statement”) ¶ 81; ECF No. 127.) Castel asserts Cheng was involved in arranging the 2013 Loan but Cheng disputes this fact. (Id.) The parties agree that in 2016, Cheng was creditor on AIT's (the seller) side of the Transaction. (Id. ¶ 13.)

Castel asserts a claim of fraudulent deceit and concealment against Cheng, alleging Cheng owed Castel a duty to disclose information regarding the Pharos Sale and the Transaction. (SAC ¶¶ 118-30.) Castel also alleges Cheng conspired with Devlin to fraudulently deceive Castel by not disclosing the 2013 Loan. (SAC ¶¶ 158- 66.) In a joint motion with ARF, Cheng seeks summary judgment as to these claims. (Def. Cheng & ARF Mot. Summ. J. (“Cheng/ARF Mot.”), ECF No. 107.)

Defendant ARF

Castel asserts that in 2015, Cheng and Wilson formed Defendant-company ARF for the purpose of raising funds to acquire shares and debt in AIT. (Pl.'s Opp'n Cheng/ARF Mot. (“Opp'n Cheng/ARF Mot.”) 4, ECF No. 124.) The parties agree that ARF was not a majority AIT shareholder and, accordingly, the parties assert ARF did not owe any fiduciary duties to other AIT shareholders such as Castel. (Second GIMF ¶ 11.) Although ARF was not a direct party to the Transaction, it was involved on Aurora Healthcare's (the buyer) side because ARF received an equity interest in Aurora Healthcare in exchange for contributing the senior secured notes that it owned in Pharos to offset the purchase price of the Transaction. (Id. ¶¶ 11, 17, 52.)


Castel alleges against ARF claims of fraudulent deceit and concealment and breach of contract. (SAC ¶¶ 131-41, 167-75.) In its joint Motion with Cheng, ARF seeks summary judgment as to those claims. (Cheng/ARF Mot. 18-23.)

Defendant Wilson

In 2015, at the request of a resigning board of directors, Defendant Wilson agreed to assist with the dissolution and winding up of AIT, which was already insolvent. (Pl.'s Separate Statement Genuine Issues Material Facts (“Third GIMF”) ¶ 78, ECF No. 123-1.) On October 20, 2016, Wilson informed Castel that AIT was going to accept an offer to purchase the company's assets, subject to approval of shareholders, in order to avoid bankruptcy. (Id. ¶ 92.) When Castel complained that it did not have sufficient information to make an informed decision about approval of the asset sale, Wilson offered to make all of the books and records of the company available for inspection. (Id. ¶ 74.)

Wilson notified Castel that payments to unsecured creditors would be limited to 40% of the original principal amount of each obligation, which for Castel amounted to a payment of $100, 000. (Id. ¶ 94.) Wilson informed Castel that if Castel did not accept the offered payment, its $100, 000 share of the proceeds would be allocated to other creditors. (Id. ¶ 96.) Finally, Wilson expressly notified Castel that if it rejected the $100, 000 payment, Castel was free to pursue its claims against AIT, but the company would be dissolved. (Id. ¶ 100.) Castel rejected the offered payment. (Cheng/ARF Statement ¶ 57.)

In its SAC, Castel alleges against Wilson claims of fraudulent deceit and concealment and breach of fiduciary duty. (SAC ¶¶ 107-117, 142-48.) Wilson now moves for summary judgment as to those claims. (See generally Wilson Mot.)

Procedural History

On October 30, 2019, Castel initiated this action asserting claims related to Moving Defendants' fraudulent concealment of certain information from Castel. (Compl., ECF No. 1.) In the operative SAC, Castel asserts causes of action for, in


relevant part: (1) fraudulent deceit and concealment, against each of Moving Defendants; (2) civil conspiracy, against Cheng; (3) breach of contract, against ARF; and (4) breach of fiduciary duties, against Wilson. (See SAC.) In three separate motions, Moving Defendants now seek summary judgment of the claims asserted against them.[2] The Motions are fully briefed.[3]


A court “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The burden of establishing the absence of a genuine issue of material fact lies with the moving party, see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986), and the court must view the facts and draw reasonable inferences in the light most favorable to the nonmoving party, Scott v. Harris, 550 U.S. 372, 378 (2007); Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir. 2000). A disputed fact is “material” where the resolution of that fact might affect the outcome of the suit under the governing law, and the dispute is “genuine” where “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Conclusory or speculative testimony in affidavits is insufficient to raise genuine issues of fact and defeat summary judgment. Thornhill Publ'g Co. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979). Moreover, though the Court may not weigh conflicting evidence or make credibility determinations, there must be more than a mere scintilla of contradictory evidence to survive summary judgment. Addisu, 198 F.3d at 1134.

Once the moving party satisfies its burden, the nonmoving party cannot simply rest on the pleadings or argue that any disagreement or “metaphysical doubt” about a material issue of fact precludes summary judgment. See Celotex, 477 U.S. at 322-23;


Matsushita Elec. Indus. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); Cal. Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987). A “non-moving party must show that there are ‘genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.'” Cal. Architectural Bldg. Prods., 818 F.2d at 1468 (quoting Anderson, 477 U.S. at 250). “[I]f the factual context makes the non-moving party's claim implausible, that party must come forward with more persuasive evidence than would otherwise be necessary to show that there is a genuine issue for trial.” Id. (citing Matsushita Elec. Indus., 475 U.S. at 586-87). “[U]ncorroborated and self-serving” testimony will not create a genuine issue of material fact. Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002). The court should grant summary judgment against a party who fails to demonstrate facts sufficient...

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