Monterey Bay Military Housing, LLC v. Pinnacle Monterey LLC (116 F. Supp. 3d 1010, 2015)

United States District Court for the Northern District of California 2015-07-23

Crimes and Criminal Procedure

Citations

Full opinion text

AMENDED ORDER ON MOTIONS FOR SUMMARY JUDGMENT

BETH LABSON FREEMAN, United States District Judge

Before the Court are four motions for summary judgment by parties in this complex contract dispute. Pis.’ Mot.," ECF 151; Pinnacle Mot., ECF 153; Harrelson Mot., ECF 154; Goodman Mot., ECF 147. With leave of court, the defendants in this action also filed a supplemental motion for partial summary judgment.' Defs.’ Supp. Mot., ECF 206. The Court heard oral argument on all motions on May 14, 2015 and thereafter took the matters under submission. For the reasons stated herein, all four motions are GRANTED IN PART and DENIED IN PART. Defendants’ supplemental motion is DENIED.

I. BACKGROUND

A. The Parties

This case concerns a crumbling business relationship that has devolved into years of increasingly acrimonious scorched-earth litigation. At a high level, the parties in this action are, on the one side, entities affiliated with or controlled by Clark Realty Capital, LLC (“Clark Realty”) and, on the other side, entities and individuals affiliated with American Management Services LLC (“AMS”), which does business as “Pinnacle.”

The principal claims in this action are asserted in the Fifth Amended Complaint filed by the following plaintiffs: (1) Monte-rey Bay Military Housing, LLC (“MBMH”), a Delaware limited liability company; (2) Clark Pinnacle Monterey Bay LLC (“CPMB”), a California limited liability company; (3) Clark Monterey Pre-sidio LLC, a Delaware limited liability company; (4) California Military Communities LLC (“CMC”), a Delaware limited liability company; (5) Clark Pinnacle California Military Communities LLC (“CPCMC”), a California limited liability company; and (6) Clark Irwin LLC, a Delaware limited liability company. PL’s Fifth Amended Compl. (“5AC”) ¶¶ 8-13, ECF 186.

The defendants named in the Fifth Amended Complaint are: (1) AMS, a Washington State limited liability company that is the corporate parent of a number of property management “affiliates” including (2) American Management Services California Inc. (“AMSC”), a California corporation. The other defendants are: (3) Pinnacle Monterey LLC, a Washington State limited liability company; (4) Pinnacle Irwin LLC, a Washington State limited liability company; (5) Goodman Real Estate, Inc., a Washington corporation and Goodman Financial Services, Inc. (now doing business as Goodman Real Estate, Inc.) (“GRE”); (6) Stanley Harrelson, the former Chief Executive Officer (“CEO”) for AMS; and -(7) John Goodman, AMS’s founder and Chairman of the Board. Id. ¶¶ 14-21, 25.

Also before the Court are claims that Pinnacle Monterey and Pinnacle Irwin asserted against Clark Realty, CPMB,’ and CPCMC in a Second Amended Complaint filed in state court on October 24, 2013. Pinnacle Second Amended Compl. (“Pinnacle SAC”), ECF 1-18. This Second Amended Complaint also identifies AMS, AMSC, MBMH, CMC, Clark Monterey Presidio, and Clark Irwin. as “interested non-parties.” Id. ¶¶ 15-16, 20-23. Similarly, defendants AMSC and AMS have asserted counterclaims against plaintiffs MBMH and CMC in connection with Plaintiffs’ Fifth Amended Complaint. Counterclaims, ECF 214. Clark, CPMB, CPCMC, Clark Monterey Presidio, Clark Irwin,' Pinnacle Monterey, and Pinnacle Irwin are likewise identified as “interested non-parties.” Id. ¶¶ 13, 15-16, 18-19, 22-23.

Thus, at a high level, Clark Realty, CPMB, CPCMC, Clark Monterey Presidio, Clark Irwin, MBMH,, and CMC, which the Court shall collectively refer to as “Plaintiffs,” are aligned against AMS, AMSC, Pinnacle Monterey, and Pinnacle Irwin (collectively, the “Pinnacle Entities”), as well as John Goodman, GRE, and Stanley Harrelson. The Court shall refer to the Pinnacle Entities, Goodman, GRE, and Stanley Harrelson collectively as “Defendants.”

B. Factual Overview

- In 2001, when this saga began, Clark Realty and AMS joined together to bid for privatization projects in U.S. military housing. After some rejected bids, the partners eventually won contracts to develop and manage residential properties at Monterey Presidio and Fort Ord in California; Fort Belvoir in Virginia; Fort Irwin, Moffett Field and Parks Reserve Training Grounds in California; .and Fort Benning in Georgia. This lawsuit concerns only the Monterey and Fort Irwin projects, though the parties are embroiled in similar litigation in Georgia concerning Fort Benning and Fort Belvoir.

Both of the Monterey and Irwin projects are 50-year projects on land leased from the ■ Army pursuant tó 50-year ground leases. At each location, Clark Realty and AMS set up a series of interrelated limited liability companies to manage, own, and operate the housing projects. Those agreements are at the heart of this disagreement.

i. The Agreements at Issue

The bulk of the parties’ contract dispute concerns Property Management Agreements (“PMAs”) appointing defendant AMSC as the property manager at the Monterey and Irwin projects. See Decl. of Yates M. French, ECF 151-1 Exh. 2 (Monterey PMA); Exh. 3 (Irwin PMA). The Monterey PMA was entered in 2003 between MBMH — the “Owner” of the property — and AMSC as “Manager.” At Fort Irwin, the PMA was entered in 2004 between CMC — the “Owner” — and AMSC as “Manager.” The PMAs set forth AMSC’s responsibilities as property manager for the Owners, which include the authority to enter into residential leases and incur expenses as needed. Monterey PMA §§ 6-9.' It is undisputed that AMS carries out AMSC’s property management responsibilities, as AMSC has no employees. AMSC moreover undertook the responsibility to secure insurance for itself and for the Owners, which took the form of including the Owners and the projects in a Master Insurance Program (“MIP”) administered by AMS and its insurance broker, Denver Series of Lockton LLC (“Lockton”). Id. ¶ 12.1; 5AC ¶ 117. Section 18 of the PMAs provides that each PMA “shall terminate” “upon the occurrence of’ certain “events” including, inter alia, material breach, substantial damage to the project property, default, or sale of the Owners’ interest in the projects. Id. ¶ 18.1. Important to the issues before the Court, “theft, fraud, or other knowing or intentional misconduct by [AMSC] or its employees or agents” is considered an “event of default by the party in respect of which such event occurs” under subpart (C)(6) of this paragraph. Id. ¶ 18.1(C)(6).

MBMH and CMC each act at the direction of their managing members— CPMB and CPCMC respectively. Of course, CPMB and CPCMC, being limited liability companies in their own right, cannot act except within the bounds of them own operating agreements. See French Deck Exh. 13 (CPMB Op. Ag.); Exh. 14 (CPCMC Op. Ag.). The parties’ other contract disputes revolve around the allocation of corporate power under these CPMB and CPCMC operating agreements. CPMB and CPCMC are comprised of groups of member entities affiliated with Clark Realty and AMS, and each group appoints one Manager — the “Clark Manager” for the Clark-affiliated members and the “Pinnacle Manager” for the AMS-affiliated members. See CPMB Op. Ag. ¶ 2.1(a); ¶ 3.1(a). For CPMB, the appointed Clark Manager is Clark Realty, and the Pinnacle Manager is Pinnacle Monterey. Id. For CPCMC, the appointed Clark Manager is also Clark Realty, but the Pinnacle Manager is Pinnacle Irwin. Id. Each operating agreement states that the members consent to MBMH and CMC entering into service contracts with Clark Realty and AMS affiliates. The CPMB operating agreement requires MBMH to enter “into one or more property management agreements ... with Pinnacle Realty Management Company, an Affiliate of the Pinnacle Group” before the effective date of the agreement, id. ¶ 3.15(a)(3), which agreement could be freely transferred, assigned, or subcontracted to AMSC without consent, of the Clark Manager, id. . ¶ 3.15(b). The CPCMC operating agreement simply requires CMC to “enter into one or more property management agreements ,.. with [AMSC]” before the effective date of that agreement. CPCMC Op.. Ag. ¶ 3.15(a)(3).

The CPMB and CPCMC operating agreements delineate what actions each Manager can take without the approval of the other. Notably, the Clark Manager has “acting authority to make all decisions regarding the management of the Company’s business and affairs” except with respect to “Major Decisions.” CPMB Óp. Ag. ¶ 3.1(b)(2). The Pinnacle Manager, as the representative for the minority members, has no authority to “make decisions regarding the management of the Company’s business and affairs or to act on, consent to or approve matters of the Company without the vote or signature of the Clark Manager.” Id. The Pinnacle Manager does have the power, however, to vote on Major Decisions, which require the consent of both Managers. Id ¶ 3.1(b)(3); CPCMC Op. Ag. ¶ 3.1(b)(2). The key Major. Decision in dispute here is defined in the section titled “Management and Rights of Members”, .at paragraph 3.1(b)(2)(E):, “Adjustments to the terms or conditions of the Property Management Agreement (as herein defined), but the decision .to enforce or take any other action with respect to any of the terms or conditions thereof shall not be deemed a Major Decision.” The agreement also provides that should there be a deadlock in the voting on Major Decisions, the Pinnacle Manager shall have the sole discretion to resolve deadlocks in voting “with respect to any matter arising under, relating to, or affecting the terms or conditions of the Property Management Agreement” if the deadlock cannot be resolved within seven days. CPMB Op. Ag. ¶ 3.13(c). Obviously, the Pinnacle Managers cannot exercise this power to resolve deadlocks unless there is a Major Decision that requires a vote by the Managers,

ii. The Relationship Begins to Deteriorate

After securing the Monterey and Irwin projects, the honeymoon ■ was short-lived and' discontent began to brew. In 2005, Clark Realty allegedly decided to deny AMS an equity stake in a new residential project with the Navy. Counterclaims ¶ 59. This blow to AMS was worsened by Clark Realty’s declaration that it no longer saw value in long-term partnerships with property managers. Id. ¶ 61. It didn’t help matters that at this time, two Clark employees departed for Pinnacle. Defs.’ J.A. (“J.A.”), ECF 155, Exhs. K28; K20 (excerpt of T. Guleserian dep.); K63 (excerpt of S. Orrantia dep.). The relationship continued to decline into 2006 and 2007, when Clark began exploring alternatives to the AMS-administered MIP and also directed the cessation of “Clark Pinnacle” co-branding at the projects. Counterclaims ¶¶ 63-64; J.A. Exhs. K53, K54. In 2008, Clark Realty sought a competitive insurance quote from third party RCM & D. Counterclaims ¶ 65. In 2009, Clark -Realty hired litigation -firm Kirkland &■ Ellis (counsel in this case) and later accounting firm Alix Partners, allegedly to build a case for terminating AMS and its affiliates at the parties’ various projects. ■ Id. ¶¶ 66-67.

iii. Allegations of Misconduct Abound

Defendants assert based upon the hiring of outside litigation counsel and auditors"in 2009 that Plaintiffs breached their fiduciary obligations and acted in' bad faith to pursue this and other litigation in order to sever ties with AMS and take over AMSC’s 50-year property management agreements for Clark Realty’s own financial benefit. Id’ ¶¶ 8, 158-67; see also Pinnacle SAC ¶¶ 57-68, 93-116. Defendants believe that Plaintiffs manufactured trumped up charges of misconduct at the projects in order to terminate AMSC for cause. See J.A. Exhs. K9, K42-44, K81.

To hear Plaintiffs tell it, however, Defendants are defalcating .agents and disloyal fiduciaries and Plaintiffs are the victims of that misconduct. Plaintiffs allege that ever since the inception of the Monterey and ' Irwin projects, AMSC, AMS and-AMS’s employees have engaged in rampant fraud and other misconduct-in a calculated scheme to enrich AMS, its CEO Stanley - Harrelson, and its founder and Chairman of the Board John Goodman, Specifically, a substantial portion of AMSC’s compensation .under the PMAs is tied to an incentive plan that takes into consideration objective metrics such as the time to complete a work order and to turn over managed residences in preparation for a new tenant. See Monterey PMA Exh. B. Harrelson allegedly directed AMS and its employees at both projects to falsify work order data stored in a computer system in order to show better response times, which, in turn, would increase AMS’s incentive fee. 5AC ¶¶ 69-101, AMS employees allegedly also received kickbacks from third party vendors in the form of monetary “donations” for resident parties (which were then diverted into the employees’ own pockets) in exchange for authorizing those vendors to charge inflated service fees to the projects. Id. ¶¶ 139-45.

Furthermore, in connection with the AMS MIP, of which MBMH and CMC were a part, Plaintiffs allege that Goodman and Harrelson directed AMS and Lockton to conceal three types of unauthorized overcharges: (1) using an undisclosed and subjective allocation model to overcharge the military projects for insurance; (2) charging an unauthorized Pinnacle risk management fee; and (3) overcharging MIP participants for an undisclosed general liability aggregate loss fund mischarac-terized as a self-insured retention (“SIR”) in order to subsidize Goodman’s and Har-relson’s other real estate projects, which were also a part of the MIP. Id. ¶¶ 102-14. Although Plaintiffs renewed the insurance each year, they allege that their attempts to uncover the hidden fees were rebuffed by affirmative misrepresentations by Defendants and by Lockton at Defendants’ direction. Id. ¶¶ 117-38.

Finally, in 2014, Defendants transacted with Hunt Companies, Inc. (“Hunt”) (operating through Hunt Development Group LLC) to transfer substantially all of AMS’s assets, excepting the military PMAs, to a newly formed entity — Pinnacle Property Management Services LLC. Plaintiffs allege that Defendants made this transfer for substantially less than fair value and then concealed the transaction from Plaintiffs, all as part of a concerted effort to judgment-proof AMS and put into effect Harrelson’s 2010 assertion to the Army that there would be “nothing left to collect” at the end of this lawsuit. Id. ¶¶ 166-84.

iv. The Parties Proceed to Litigation

In May 2010, Clark Realty fired the first shot (litigation-wise) by directing the owner entities at Fort Belvoir and Fort Ben-ning to file suit in Georgia in order to terminate the property management agreements at those projects. The basis for termination was the same as, alleged here: fraud and misconduct by AMS employees. Counterclaims ¶ 68. Immediately thereafter,. Mix conducted a forensic audit of AMS’s records at Fort Benning and Clark Realty removed AMS’s eastern affiliate — AMSE—from its property management position at that project. Id. ¶ 69.

In late 2011, seeing that Clark Realty might soon turn its sights on Monterey and Irwin, defendants Pinnacle Monterey and Pinnacle Irwin sought to “adjust” the default provision of the PMAs pursuant t<3 their contractual rights under the CPMB ■ and CPCMC operating agreements: See. 5AC ¶¶ 58-68; Counterclaims ¶¶ 70-75. Specifically, the Pinnacle Managers proposed that ¶ 18.1(c)(6) of the PMAs be adjusted to permit termination only for fraud “having a material adverse [e]ffeet-on [the project Owners]” and even then only after such fraud is left uncured for 15 _ days. See 5AC ¶63. Representatives of Clark Realty and the Pinnacle Managers corresponded over the course of three weeks regarding these proposed adjustments before the Pinnacle Managers ultimately declared a “deadlock” in voting on June 8, 2011. With declaration of the deadlock, Pinnacle Monterey and Pinnacle Irwin also invoked their respective power under the CPMB and CPCMC operating agreements to resolve deadlocks concem-ing the PMAs in their “sole discretion.” Id. ¶¶ 64-68.

This governance dispute spawned a race to different courthouses on June 15, 2011, as Plaintiffs sought a declaration that the proposed adjustments were not effective and Pinnacle Monterey and Pinnacle Irwin sought a declaration that they were. 5AC ¶¶ 183-200; Counterclaims ¶¶ 84-105; Notice of Removal Exh. M (Pinnacle Second Amended Complaint “SAC”) ¶¶ 83-92, ECF 1. The actions were eventually transferred and consolidated before the Superi- or Court of California for the County of Monterey in December 2011. On December 28, 2011 injunction, the state court entered a status quo injunction precluding either side from taking any actions based on their contentions regarding the disputed adjustments to the PMAs. On December 26, 2012, the state court entered a second preliminary injunction preventing Plaintiffs from exercising a statutory power to revoke AMSC’s agency.

Athough there is ostensibly one action before this Court, the pleadings remain separate and the Court here details the various claims among the parties.

C. The Claims

Plaintiffs assert twelve claims against Defendants. MBMH, CPMB, and Clark Monterey seek declaratory judgment against Pinnacle Monterey, AMSC, and AMS that the 2011 adjustments to the Monterey project PMA are invalid (First Claim); CMC, CPCMC, and Clark Irwin seek a similar declaration against Pinnacle Irwin, AMSC, and AMS concerning the 2011 adjustments to the Irwin project PMA (Second Claim). MBMH and CMC each seek a declaration against AMSC that the PMAs at the Monterey and Irwin projects respectively terminated automatically due to AMSC’s alleged intentional fraud (Third and Fourth Claims). Aside from these declaratory relief claims, MBMH and CMC seek to hold AMSC, AMS, Goodman, and Harrelson liable for breach of fiduciary duty (Fifth Claim) as well as to hold AMS and the Goodman Entities liable for aiding and abetting the breach of fiduciary duty (Sixth Claim). MBMH and CMC also charge AMSC, AMS, Goodman, and Harrelson with common law fraud (Seventh Claim) and AMSC, AMS, Goodman, Harrelson, and the Goodman Entities with conspiracy to commit fraud (Eighth Claim). Plaintiffs MBMH and CMC’s Ninth' Claim is actually two claims for violation of 18 U.S.C. §§ 1961 et seq. (“CM RICO”) against all Defendants: one claim for individual liability under 18 U.S.C. § 1962(c) and one claim for conspiracy to violate the RICO statute under 18 U.S.C. § 1962(d). Finally, MBMH and CMC assert that AMSC, AMS, Goodman, and Harrelson have engaged in deceit in violation of California Civil Code § 1709 (Tenth Claim), that AMSC and AMS have engaged in unfair business practices in violation of California Business and Professions Code §§ 17200 et seq. (“UCL”) (Eleventh Claim), and that AMSC, AMS, Goodman, Harrelson, and the Goodman Entities have been unjustly enriched (Twelfth Claim). See 5AC ¶¶ 183-286.

Defendants’ claims against Plaintiffs comprise counterclaims by AMSC and AMS against MBMH and CMC in connection with Plaintiffs’ Fifth Amended Complaint, as well as a separate set of claims by Pinnacle Monterey and Pinnacle Irwin against Clark Realty, CPMB, and CPCMC. AMSC and ÁMS seek a declaration that there has not been an “event of default” at the Monterey and Irwin projects sufficient to trigger MBMH and CMC’s respective contractual termination rights at those projects (First and Second Counterclaim), as well as a declaration that MBMH and CMC do not have the power to unilaterally terminate the PMAs, do not have a statutory power to revoke the PMAs pursuant to California Civil Code § 2356, and cannot engage a non-Pinnacle affiliate as a property manager at the Monterey and Irwin projects (Third and Fourth Counterclaims). AMSC and AMS seek' damages in connection with MBMH and CMC’s breach of obligations under their respective PMAs 'to pay AMSC certain reimbursable employee expenses at the Monterey and Irwin projects from 2009 through' November 2011' (Fifth and Sixth Counterclaims) and in connection with MBMH and CMC’s breach of further obligations under the PMAs to pay AMSC incentive fees at the Monterey'and Irwin projects since 2011 (Seventh and Eighth Counterclaims). Moreover, they seek a declaration that AMSC’s Incentive Performance Management Plan at the Monte-rey project was validly amended in 2010-(Ninth Counterclaim) and that its Incentive Performance Management Plan at the Irwin project was validly amended in 2008 (Tenth Counterclaim). Finally, AMSC and AMS seek to hold MBMH and CMC liable for breaches of the, implied covenant of good faith and fair dealing in connection with the PMAs at the Monterey and Irwin projects respectively (Eleventh and Twelfth Counterclaims), See Counterclaims ¶¶ 84-167. Pinnacle Monterey and Pinnacle Irwin respectively seek declarations that the PMAs at the Monterey and Irwin projects were validly amended in 2011 to “adjust” the termination provisions (First and Second Claims). Both are also suing Clark Realty for breach of fiduciary duty in connection, with Clark Realty’s actions as the Clark Manager for CPMB and CPCMC (Third and Fourth Claims). Pin-nade Monterey and Pinnacle Irwin seek an equitable accounting from Clark Realty, CPMB, and CPCMC in connection with the CPMB and CPCMC operating agreements (Fifth and Sixth Claims), Finally, Pinnacle Monterey and Pinnacle Irwin seek a declaration that any direction to MBMH and CMC to revoke the PMAs at the Monterey and Irwin projects is a “Major Decision” under the CPMB and CPCMC operating agreements over which Pinnacle Monterey and Pinnacle Irwin can exercise control and that the Pinnacle Managers have the sole discretion'to assign the PMAs to another Pinnacle affiliate (Seventh and Eighth Claims). See Pinnacle SAC ¶¶ 83-156.

D. Procedural History

This consolidated action was removed to federal court on September 2, 2014 after spending three years in state court. At the parties’ request, the Court scheduled a trial date in August 2015, and the parties worked diligently to complete fact discovery in March 2015 and expert discovery in June 2015. On March 24, 2015, the parties submitted four motions for summary judgment: (1) Plaintiffs’ Motion for Partial Summary Judgment, Pis.’ Mot., ECF 151; (2) the Pinnacle Entities’ Motion for Summary Judgment, Pinnacle Mot., ECF 154; (3) Stanley Harrelson’s Motion for Summary Judgment, Harrelson Mot., ECF 153; and (4) John Goodman’s Motion for Summary Judgment, Goodman Mot., ECF 147.

On April 7, 2015, the Court denied a motion by Plaintiffs to dissolve the second preliminary injunction entered by the state court in 2012 preventing any of the plaintiff entities from removing AMSC from its current position as property manager for the Monterey and Irwin projects during the pendency of this case. Corrected Order Denying Mot. to Dissolve Prelim. Inj. (“Inj.Order”), ECF 169. Shortly thereafter, on April 13, 2015, the Court granted in part Plaintiffs’ motion for leave to supplement their complaint with allegations of a new predicate aet — the allegedly fraudulent Hunt transaction — in support of their civil RICO claim. ECF 172. Following that ruling, the Court also allowed- Defendants to file a collective supplemental motion addressing the amended RICO claim. Defs.’ Supp. Mot., ECF 206.

Trial is set to begin on August 3, 2015.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 56 governs motions for summary judgment. Summary judgment.is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the. moving party is entitled to a judgment as a .matter of law.”. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (citing Fed.R.Civ.P. 56(c)).

The moving party seeking summary judgment “bears the burden of showing there is no material factual dispute,” Hill v. R+L Carriers, Inc., 690 F.Supp.2d 1001, 1004 (N.D.Cal.2010), by “identifying for the court the portions of the materials on file that it believes demonstrate the absence of any genuine issue of material fact,” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 626, 630 (9th Cir.1987). A material fact is one that could affect the outcome of suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

Once the moving party has satisfied this initial burden, the non-moving party must then “identify with reasonable particularity the evidence that precludes summary judgment.” Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir.1996); see also Schneider v. TRW, Inc., 938 F.2d 986, 991 (9th Cir.1991). It is not the duty óf the district court to “to scour the record in search of a genuine issue of triable fact.” Keenan, 91 F.3d at 1279 (quoting Richards v. Combined Ins. Co., 55 F.3d 247, 251 (7th Cir.1995)). Moreover, the court makes no credibility determinations and does not weigh the evidence. “The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Anderson, 477 U.S. at 255, 106 S.Ct. 2505; see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). For a court to find that a genuine dispute of material fact exists^ “there must be enough doubt for a reasonable trier of fact to find for the [non-moving party].” Corales v. Bennett, 567 F.3d 554, 562 (9th Cir.2009). “A mere scintilla of evidence will not be sufficient to defeat a properly supported motion for summary- judgment; rather, the nonmoving party must introduce some significant probative evidence tending to support the complaint.” Summers v. Teichert & Son, Inc., 127 F.3d 1150, 1152 (9th Cir.1997) (citation and internal quotation marks- omitted). If the non-moving party fails to make this showing, the moving party is entitled to summary judgment. Celotex, 477 U.S. at 323, 106 S.Ct. 2548.

III. CLARK ENTITIES’ MOTION

The Clark Entities seek partial summary judgment on a number of the claims in this lawsuit. Some of these claims are also the subject of the Pinnacle Entities’ motion for summary judgment. The Court addresses each in turn.

A. Automatic Termination of the PMAs

Plaintiffs seek judgment- in their favor on then- Third and Fourth Claims as well as on AMSC and AMS’s First, Second, Ninth, and Tenth Counterclaims on the ground that the Monterey and Irwin PMAs automatically terminated some time ago due to'AMSC’s fraud and intentional misconduct at the projects. Pis.’ Mot. 13. At issue here is Section 18 of the PMAs, which addresses termination. In pertinent part, Paragraph 18.1 provides that “this Agreement shall terminate ... upon the occurrence of any of the following events: _” (emphasis added). This paragraph has.five subheadings titled “(A) Breach of Agreement,” “(B) Excessive Damage,” “(C) Default,” “(D) Termination of Sublease,” and “(E) Sale.” “[T]heft, fraud, or other knowing or intentional misconduct by [AMSC] or its employees or agents” is an “event of default by the party in respect of which such event occurs” under the “Default” subheading. .Monterey PMA ¶ 18.1(C)(6).

•In Plaintiffs’-view, the use of the word “shall” renders this termination provision self-executing upon the occurrence of any of the enumerated events. Therefore, the PMAs automatically terminated many years ago when AMSC’s employees first engaged in theft, fraud, or intentional misconduct. Pis.’ Mot. 13-15. Defendants argue that the termination provision is not self-executing because subparts (A) and (C) in Paragraph 18.1 should be read together. Subparagraph (A) refers to “defaults” that ripen into breaches if .left uncured. In Defendants’ view, subparagraph (C) thus merely defines “events of default” “amenable to cure under Section 18.1(A).” Defs.’ Opp. 12-13, ECF 178. As such, the PMAs cannot terminate until after the Owners notify AMSC of the default and AMSC fails to cure it within thirty days. Neither of these extreme interpretations is particularly persuasive.

As a preliminary.matter, the Court observes that Plaintiffs do not specify a date or timeframe in which the PMAs supposedly terminated. Their argument, that the 2008 and 2010 incentive plan amendments at issue in AMSC and AMS’s Ninth and Tenth Counterclaims are invalid because the PMAs had already terminated by that time suggests that Plaintiffs believe termination became effective some time before 2008. See Pis.’ Mot, 14. That is a minor issue. The real trouble with Plaintiffs’ interpretation of Paragraph 18.1 is that it permits the absurd situation wherein a PMA would automatically terminate in the ether if an AMSC employee, unbeknownst to any of the contracting parties, steals a pencil that belongs to.the project. Such an outcome cannot have been the intent of the contracting parties. See Cal. Civ.Code § 1638 (“[t]he language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity”). Nor is such an interpretation mandated by any of the cases that Plaintiffs cite, which concerned either conditions precedent to continuing a contract that would otherwise expire by its own terms (Schwerin Estate Beatty Co. v. Slye, 173 Cal. 170, 159 P. 420 (1916); Valer Oil Co. v. Souza, 182 Cal.App.2d 790, 6 Cal.Rptr, 301 (I960)), a contract that simply expired by its own terms (Boogaert v. Occidental Life Ins. Co., 150 Cal.App.3d 875, 198 Cal. Rptr. 357 (1983)), or a contract that became automatically terminable without ad-' vanee notice, which was then terminated by notice or the cessation of performance (Nesbitt Fruit Products, Inc. v. Del Monte Beverage Co., 177 Cal.App.2d 353, 2 Cal.Rptr. 333 (1960); Abrams v. St. John’s Hosp. & Health Ctr., 25 Cal.App.4th 628, 30 Cal.Rptr.2d 603 (1994); United States v. Foster Transfer Co., 183 F.2d 494 (9th Cir.1950)), See Pis.’ Mot. 14; Pis.; Reply 9, ECF 207. None of those cases has any particular applicability here.

The interpretation of Paragraph 18.1 that Defendants advance also holds little water. To be sure, subparagraph (A) does refer to monetary and non-monetary “defaults.” There is nothing to indicate, however, that the use of “defaults” in (A) refers only to defaults defined in (C). While this interpretation is somewhat persuasive if one ignores the headings and subheadings in this section, as required by Section 20 of the PMAs, it is ultimately undercut — as Plaintiffs point out — by the express notice and cure provisions contained in certain portions of subparagraph (C), which would be superfluous' if subpar-agraph (A) provided notice and cure for all events of default in (C). See Monterey PMA ¶ 181(C)(1), (5); see Pis.’ Reply 6. Also superfluous would be the hotly contested' “adjustments” that the Pinnacle Managers introduced in 2011 if indeed the PMAs always required notice and an opportunity to cure theft, fraud, or intentional misconduct.

Neither party has argued that the Paragraph 18.1 is ambiguous and susceptible to interpretation through the use of extrinsic evidence, nor does it appear ambiguous to the Court. As such, and giving effect to the parties’ entire agreement, as the Court is required to do, see Cal. Civ. Code ‘ § 1641, the Court concludes that Paragraph 18.1 as a whole sets forth conditions upon which the PMAs become immediately terminable, but that termination is not self-executing. Several aspects of the clause lead to this conclusion. First, Paragraph 18.1(C) explains that “[e]ach of the following events [including the fraud provision] shall constitute an event of default by the party in respect of which such event occurs.” Monterey PMA ¶ 18.1(C) (emphasis' added). The contracting parties could have simply specified events upon which the PMAs “shall” terminate. In-stead, the emphasized portion of the preamble to subpart (C) indicates that the party whose conduct triggers an “event” of default is considered to be in default. The designation of a defaulting party implies that the .non-defaulting party can choose to terminate or can waive the default. Whitney Inv. Co. v. Westview Dev. Co., 273 Cal.App.2d 594, 602, 78 Cal.Rptr. 302 (1969) (“A breach does not terminate a contract as a matter of course but is a ground for termination at the option of the injured party.”). Second, save for the disputed fraud provision, every other event of default in subparagraph (C) is either triggered after -written notice of non-compli-ancé with a contractual obligation — (C)(1) and (5) — or by objectively verifiable and indisputable circumstances such as the filing of a bankruptcy petition — (C)(2), (3), (4). Subpart (C)(6) is unlike any of these other events because whether theft, fraud, or intentional misconduct has occurred can be vigorously disputed, as it has. been here. That the provision is not phrased in terms of the Owners’ allegation, suspicion, or belief that, theft or fraud has occurred suggests that objective proof is required to trigger termination. Finally, subpara-graphs 18.1(D) and (E) each provide that the PMAs can be terminated “by any party” upon written notice to the other if the sublease on the projects terminates or if the Owners sell their interest in the projects. Although the preamble to Paragraph 18.1 provides that the PMAs “shall” terminate upon the occurrence of the events listed in the ensuing subpara-graphs, clearly “shall” does not mean self-execution in the case of subparagraphs (D) and (E). These other subparts of Paragraph 18.1 thus indicate that the clause, as a whole, contemplates immediate termina-bility — but not self-executing termination-upon the occurrence of “events” set forth in its subparts.

This interpretation of the termination provision of the PMAs is consistent with the principal-agent relationship between Owners and AMSC. Under California law, the Owners have a statutory power to revoke AMSC’s agency at any time, subject to liability - for damages under the PMAs if the revocation is not contractually justified. See Pac. Landmark Hotel, Ltd. v. Marriott Hotels, Inc., 19 Cal.App.4th 615, 626, 23 Cal.Rptr.2d 555 (1993), as modified on denial of reh'g (Nov. 5, 1993). Subparagraph 18.1(C)(6)’ excuses the Owners from their contractual obligations if they validly revoke AMSC’s agency due to theft, fraud or intentional misconduct. Plaintiffs’ interpx*etation that the PMAs terminated a long time ago without either party’s awaréhess throws that relationship into disarray. Moreover, Plaintiffs’ assertion that the Army “insisted on the automatic termination provision,” see Pis.’ Reply 8, bolsters the conclusion that the PMAs can be immediately terminated for fraud but that the termination is not self-executing. Without suggesting that any aspect of the law applicable to government contracts is relevant to the private contractual dispute in this case, the Court observes only that even in the context of government contracts, the government must elect to terminate a contract for default based upon fraud and bears the ultimate burden of proving the existence of a default if the contractor challenges the termination. Daff v. United States, 31 Fed.Cl. 682, 688 (1994) aff'd, 78 F.3d 1566 (Fed.Cir.1996); Joseph Morton Co. v. United States, 757 F.2d 1273, 1279 (Fed.Cir.1985). Thus, had the Army insisted on subparagraph 18.1(C)(6), it is unlikely that the Army would have interpreted the clause to be 'self-expcuting.

In sum, the Court finds that Paragraph 18.1 of the PMAs permits immediate termination of the agreement if AMSC or its employees engage in theft, fraud, or intentional misconduct. Termination is not, however, self-executing upon the first instance in which such misconduct occurs. Rather, the Owners must notify AMSC that the PMAs are terminated for default, as the project owners at Fort Benning and Fort Belvoir did with AMS’s eastern affiliate in 2010 and 2012. 5AC ¶49. No similar notification occurred here before the state court entered its first status quo injunction in 2011. In- any case, the facts underlying the Owners’ purported contractual authority to terminate are sharply disputed because Defendants challenge whether any theft, fraud, or intentional misconduct ever occurred. Defs.’ Qpp. 15-16. Most significantly, the parties dispute the credibility of Plaintiffs’ witnesses to the alleged work order manipulation. Compare French Deck Exh. 31 (deck of D. Frye) with J.A. Exh. K19 (excerpt of D. Frye dep.); French Deck Exh. 33 (Dec. 12, 2011 deck of J. Merrill) with J.A. Exh. J8 (Apr. 14, 2015 deck of J. Merrill); French Deck Exh. 35 (deck of C. Johnson) loith J.A. Exh. K25 (excerpt of C. Johnson dep.); French Deck Exh. 37 (deck of M. Waibel) with J.A. Exh. K68 (excerpt of M. Waibel dep.); French Deck Exh. 39 (Feb. 9, 2015 deck of J. Dunn) with J.A. Exh. J2 (Apr. 8, 2015 deck of J. Dunn). Credibility is a determination better left to the jury and thus precludes summary judgment. Anderson, 477 U.S. at 255, 106 S.Ct. 2505. As such, the Court cannot conclude as a matter of law that the PMAs have terminated due to AMSC’s alleged misconduct.

Plaintiffs’ motion is therefore DENIED with respect to Plaintiffs’ Third and Fourth Claims and AMSC and AMS’s First, Second, Ninth, and Tenth Counterclaims.

B. AMSC and AMS’s Breach of Fiduciary Duties

Plaintiffs seek judgment on theft Fifth Claim that AMSC and AMS breached fiduciary duties owed to MBMH and CMC under the PMAs in connection with the falsification of work order data. • Pis.’ Mot. 15-18. It is undisputed that an agent owes its principal “a fiduciary duty to act loyally for the principal’s benefit in all matters connected with the agency relationship.” Restatement (Third) Of Agency § 8.01 (2006). Defendants oppose Plaintiffs’ motion and seek judgment in theft own favor on -the ground that AMSC and AMS owed no fiduciary. duty because AMSC. .is an independent contractor, that any duty owed was limited to the obligations set forth in the PMAs and does not extend to the misconduct charged in Plaintiffs’ complaint, and that in any ease there are disputes of fact concerning whether any breach occurred. Defs.’ Opp. 17-18; see also Pinnacle Mot. 15-16. ■ The Court agrees with Defendants- only on the last proposition.

As a matter of contract interpretation, AMSC is ihdisputably engaged as MBMH’s and CMC’s agent in connection with the leasing and management of the Monterey and Irwin projects. As the California courts have recognized in the context of property management agreements, “the very nature of a managerial relation is to delegate authority from principal to agent.” Woolley v. Embassy Suites, Inc., 227 Cal.App.3d 1520, 1531, 278 Cal.Rptr. 719 (1991). “An agent is anyone who undertakes to transact some business, or manage some affair, for another, by authority of and on account of the latter, and to render an account of such transactions.” Id. (internal citations and quotation marks omitted). “The chief characteristic of the agency is that of representation, the authority to act for and in the place of the principal for the purpose of bringing him or her into legal relations with third parties.” Id. (quoting McCollum v. Friendly Hills Travel Center, 172 Cal.App.3d 83, 91, 217 Cal.Rptr. 919 (1985) (internal quotation marks omitted)).

Here, the principal-agent relationship between the project Owners (MBMH and CMC) and AMSC as property manager is defined throughout the PMAs. Notably, AMSC is engaged “to lease and manage” the projects for the Owners. Monterey PMA ¶ l.l. In connection with this arrangement, AMSC has broad authority to act on MBMH’s and CMC’s behalf to advertise, lease, manage, maintain, and operate the projects, which further includes the collection of rent and management of finances: Id. §§ 2-4, 6, 7, 9. Indeed, Paragraphs 9.1 and 9.2 respectively contemplate that AMSC can select “national vendors in order to receive volume-pricing discounts for the benefit of the Owners” and that AMSC may perform repairs for reasonable fees. Moreover, AMSC is authorized to obtain insurance, “as an expense of the Project,” for its and the Owners’ mutual benefit. In other words, AMSC is authorized to bind the Owners to its insurance policy and to charge the expense to MBMH and CMC. Id. 1112.1. Overall, the delegation of authority is to such an extent that the Owners agree to limit contact with AMSC and its employees, reposing significant trust in AMSC’s management of the projects. See id. ¶ 18.6. However, AMSC’s actions are still circumscribed by the Owners! delegation of authority, and AMSC may not act beyond that authority without the Owners’ consent. E.g., id. ¶¶ 6.1, 7.4, 9.1, 9.2. AMSC is thus MBMH and CMC’s agent and owes them a fiduciary duty in connection with all of the duties set forth in Sections 2, 3, 4, 6, 7, 9, and 12 of the PMAs.

Defendants’ attempt to cast AMSC in the role of an independent contractor with- no fiduciary duty to MBMH and CMC is unavailing. Defs.’ Opp. 17; Pinnacle Mot. 15. “[Ijndependent contractor and agent are not mutually exclusive legal categories.” APSB Bancorp v. Thornton Grant, 26 Cal.App.4th 926, 930, 31 Cal.Rptr.2d 736 (1994). Rather, the Court must look to whether the independent contractor acts on the principal’s behalf and is subject to the principal’s control. Id. As the Court has already explained, the PMAs delegate significant managerial authority to AMSC but subjects AMSC’s actions to high-level control by the Owners. It is therefore beyond dispute that AMSC is the managerial agent for MBMH and CMC at the Mon-terey and Irwin projects respectively.

Contrary to Defendants’ assertion, Section 10 of the PMAs does not “expressly disclaim[ ] any fiduciary relationship” between the Owners and AMSC. Defs.’ Opp. 17. Section 10 provides that “[AMSC] is engaged independently in the business of property management and acts hereunder as an independent contractor” but further states that “[e]xcept as specifically set forth in this Agreement, Manager shall not act as the agent of Owners; and, except as provided in this Agreement, no Owner shall act as the principal of Manager.” The clear implication of this last sentence is that AMSC is MBMH and CMC’s agent with respect to the delegated authority expressly set forth in the PMAs and thereby owes a fiduciary duty.: The Court is likewise unpersuaded by Defendants’ assertion that the PMAs “do not create an agency”, with respect to the misconduct charged in Plaintiffs’ claims. See Defs.’ Opp. 18; Pinnacle Mot. 16. The authority delegated to AMSC encompasses the management of the projects as well as the obtention of insurance for the Owners. See, e.g., Monterey PMA ¶¶ 1.1 (“Each Owner hereby engages Manager as its sole and exclusive property manager to lease and manage [the project]”), 9.1, 9.2, 12.1. AMSC is responsible for ensuring' that its employees carry out its obligations under the PMAs and AMSC’s compensation, as set forth in Section 15 and Exhibit B, contemplates that AMSC will manage the projects faithfully for the Owners’ benefit. See also Monterey PMA § 8. Such obligations would- certainly not include manipulating work order data to improve AMSC’s incentive compensation, as an agent’s fraud upon its principal is never authorized. Cal. Civ.Code § .2306. As such, the misconduct alleged in Plaintiffs claims — work order data manipulation and self-dealing in connection with the Master Insurance Program — fall within the scope of AMSC’s agency. See 5AC ¶¶ 213-23.

Plaintiffs here only seek judgment that the alleged falsification of work order data breached AMSC’s fiduciary duty to MBMH and CMC. Pis.’ Mot. 17. To the extent AMSC’s employees did manipulate the work order data at the Monterey and Irwin projects in order to artificially inflate AMSC’s incentive compensation, such manipulation would be a breach of AMSC’s fiduciary duties to MBMH and CMC. With that being said, as discussed above, there are factual disputes as to whether there actually was intentional -manipulation of the work order data. Plaintiffs’ motion for summary judgment on their Fifth Claim is therefore DENIED. AMSC and AMS’s motion in their favor on this claim is also DENIED.

C. Validity of the June 2011 “Adjustment” to the PMAs

The Clark and Pinnacle Entities dispute whether the Monterey and Irwin PMAs were validly adjusted in June 2011 by the Pinnacle Manager at each project. Plaintiffs seek a declaration that the adjustments are invalid (Plaintiffs’ First and Second Claims). Defendants assert that the adjustments are valid (Pinnacle Managers’ First and Second Claims). Both sides have moved for summary judgment in their favor on this issue. Pis.’ Mot. 17-18; Pinnacle Mot. 21-23.

The disputed “adjustments” purport to change Paragraph 18.1(C)(6) of the Morite-rey and Irwin PMAs and the circumstances under which ÁMSC defaults on those PMAs if AMSC/AMS or its employees engage in theft, fraud, or, intentional misconduct. If valid, Paragraph 18.1(C)(6) of the projects’ PMAs would be “adjusted” to read:

Theft, fraud, or other knowing or intentional misconduct by [AMSC] or its employees or agents having a material adverse effect on [MBMH or CMC]; provided, however, (1) if [AMSC] takes appropriate measures to correct, and otherwise prevent the recurrence of any such events of default and (2) [AMSC] remedies any confirmed event of default within 15 days of learning of such default (to the extent that such default is susceptible of being cured), then such acts shall be deemed not to have a material adverse effect and the Property Management Agreement shall not be terminated.

Plaintiffs argue that these proposed adjustments are void as a matter of law and as a matter of public policy. They assert that the adjustments impermissibly allow an agent to gain an advantage over its principal, that the exculpatory nature of the provision violates California Civil Code § 1668 and is against public policy, and that in any event the PMAs require all amendments to the PMAs be in writing executed by MBMH, CMC, and AMSC, which did not occur in this instance. Pis.’ Mot. 17-18. This issue narrowly involves corporate power under the CPMB and CPCMC operating agreements and concerns a dispute between the Clark and Pinnacle Managers thereunder. Plaintiffs’ first argument concerning AMSC’s improper' advantage over its principal and their third argument based upon the lack of written agreement between MBMH and CMC and AMSC to amend the PMAs thus concern the wrong parties and the wrong contracts. Those, arguments are therefore largely inapposite to the Court’s consideration of whethér the Pinnacle Managers acted within the scope of their corporate power under the operating agreements to direct CPMB and CPCMC to adjust the PMAs at Monterey and Irwin.

As to Plaintiffs’ second argument that the proposed adjustments exculpate AMSC and AMS from their fraud and therefore violate public policy and California Civil Code § 1668, the Court agrees with Defendants that the addition of notice and an opportunity to cure is not a complete exemption of liability but rather, if valid, a limitation on MBMH’s and CMC’s termination rights. See Defs.’ Opp. 18-19; see CAZA Drilling (California), Inc. v. TEG Oil & Gas U.S.A., Inc., 142 Cal.App.4th 453, 470-75, 48 Cal.Rptr.3d 271 (2006). There is no public policy against a principal providing its agent with additional contractual protections, which would be the effect of the Pinnacle Managers’ adjustments to. the PMAs, if held valid. Thus, while notice and an opportunity to cure defaults based upon an agent’s theft or fraud may not be sound private policy, the law does, not prohibit such provisions in agency agreements.

This does not méan, however, that the disputed adjustments were a valid exercise of the Pinnacle Managers’ deadlock resolution power. Per the CPMB and CPCMC operating agreements, Major Decisions can only be undertaken by vote of both the managing Clark Manager and the minority Pinnacle Manager. CPMB Op. Ag. ¶ 3.1(b)(3). In the event of a deadlock in voting with respect to “any matter arising under, relating to, or affecting the terms' or conditions of the Property Management Agreement,” the Pinnacle Manager can resolve the deadlock “in its sole discretion” if the dispute cannot be resolved within 7 days. Id. ¶ 3.13(c). In order for there to be a deadlock “in voting,” there must have been a vote. Id. The undisputed factual record before the Court establishes that there had been no vote by -the CPMB and CPCMC Managers when the Pinnacle Managers prematurely declared a deadlock on June 8, 2011.

There is no dispute .that the series of letters between Stanley Harrelson on behalf of the Pinnacle Managers and W. Cleveland Johnson on behalf of the Clark Managers from May 13, 2011 to June 14, 2011 constitute the universe of evidence relevant to this issue. There is furthermore no apparent dispute that the changes the Pinnacle Managers attempted to make to the PMAs required a Major Decision vote, under Paragraph -3.1(b)(3)(E) of the CPMB and CPCMC operating agreements. On May 13, 2011, Harrelson sent on behalf of Pinnacle Monterey and Pinnacle Irwin identical- letters titled “Notice of Major Decision” that proposed the disputed adjustments and purported to “vote” on' the proposals pursuant to the Major Decisions provision of the operating agreements. J.A Exh. FI. The letters demanded the following response from the Clark Managers:

If you agree with the proposed adjustments, please sign below and return to me. If we need to discuss or change these adjustments, I welcome your suggestions. If you are inclined to vote against any of the proposed adjustments, please share your analysis and rationale. If you fail to respond to this letter on or before May 20, 2011, Pinnacle shall deem your non-response a deadlock pursuant to Section 3.13(c).

Id. It is clear that the parties had not previously discussed these changes to the PMAs, as Johnson’s May 19, 2011 response on behalf of the Clark Managers contained ten questions regarding the wording and intent behind the proposed adjustments. Notably, Johnson asked:

1. What is meant by “material adverse effect” on the Owners?

2. What is meant by “appropriate measures to correct” fraud?

3. What is meant by a “confirmed event of default”?

4. What types of fraud do you contend ' are or are not “susceptible to being cured”?

J.A. Exh. F2. Moreover, Johnson expressed disagreement with the manner in which Harrelson had attempted to force a Major Decision vote: “We disagree with your interpretation of the Operating Agreement to require a ‘response’ to your letters within seven days of the date of your letters, and believe you have set an arbitrary deadline for us to respond in order to create a deadlock.” Id.

Harrelson responded for the Pinnacle Managers in an undated letter stating: “we appreciate your questions, and we are not ready to declare a deadlock. Quite the contrary — we are happy to discuss with you the adjustments to the Property Management Agreements. ... ” J.A. Exh. F3. Rather than answer Johnson’s targeted questions concerning the wording of the proposed adjustments, Harrelson offered vague platitudes about the Pinnacle Managers’ desire “to keep Monterey and Irwin focused on the goal of our partnership” and their expectation that “the adjustments wé have proposed to Section 18(C) of, both agreements will get Clark and Pinnacle talking again and acting like partners” and suggested a face-to-face meeting with an Army representative to discuss the proposed adjustments. Id. On June 3, 2011, Johnson declined Harrelson’s request for a face-to-face meeting, rioting that because Harrelson had failed to answer any of his questions, “we do not think such a meeting will be productive until we have received ■written responses to .our questions.” J.A. Exh. F4.. Johnson requested written responses to his questions by June 8 and also requested that Harrel-son drop claims against Johnson and .Clark employees Doug Sandor and Larry Nuss-dorf that some Pinnacle entity (it is not clear which) had filed in. Virginia. Id.

On June =8, 2011, Harrelson asserted that it was improper for Johnson to attempt to seek dismissal of claims in Virginia “as a precondition to meeting about our California ‘projects” and noted that by that point it had- been three weeks since the Pinnacle Managers proposed the disputed adjustments. J.A. ‘Exh. F5. The Pinnacle . Managers then declared a “deadlock” “pursuant to Section 313(c) of the Operating Agreements” and signaled commencement of the “7 day period for resolution set forth in the Operating Agreements.” Id. The letter stated that “[a]bsent a meeting, Pinnacle’s proposed adjustments shall become effective on June 16, 2011, pursuant to the terms of the Operating Agreements.” Id. In a June 14, 2011 letter, Johnson sharply disputed the existence of a deadlock because “an actionable ‘deadlock’ must occur ‘in voting”’ and “Pinnacle has not called a vote, either by calling a meeting for that purpose pursuant to California LLC Act (Section 17104(c)(i)) or by obtaining the Clark Managers’ written consent to vote absent such a meeting.” J.A. Exh. F6. Both sides then filed suit on June 15, 2011.

Regrettably, the correspondence between Harrelson and Johnson reads less like amicable communications between business partners and more like posturing in anticipation of litigation. There is no attempt to compromise, to hear the other side, or to address the counterparty’s concerns. In short, the letters demonstrate that the Pinnacle and Clark Managers failed to agree on anything. That breakdown in communication undermines the Pinnacle Managers’ claims to the validity of their proposed adjustments] As Plaintiffs note, the operating agreements require the CPMB and CPCMC Managers to “meet for the transaction of Company business at such places and times as are mutually convenient to them.” CPMB Op. Ag. ¶3.9. The Managers may, however, “transact Company business by written consent without a formal meeting.” Id. Here, there was no formal meeting and there was no written consent to transact business without a formal meeting. Indeed, the record reflects an absence of consent to conduct the vote on the Pinnacle Managers’ proposed Major Decision adjustments.'

After the May 14, 2015 oral argument on the present motions, Defendants requested leave to submit additional evidence showing that the CPMB and CPCMC Managers had, in the past, regularly transacted business without a formal meeting. Defs.’ Admin. Mot. to File Add’l Evid., ECF 239. This request was unorthodox to say the least, as the parties’ summary judgment motions had already been thoroughly and extensively briefed and were submitted following oral argument. In any case, the Court has reviewed Defendants’ proffered evidence and does not find it relevant to the narrow issue of whether the Clark Managers provided written consent to forego a formal meeting in connection with voting' on the proposed adjustments at issue here. For one, it is not clear that the “business” conducted in'writing in each of Defendants’ examples concerned Major Decisions, which are narrowly and expressly defined under the CPMB and CPCMC-operating agreements. See Deck of Alice Y. Chu, ECF 239-1 Exhs. 1-15; CPMB Op. Ag. ¶ 3.1(b)(3). Even if requests for reimbursements of capital expenses are Major Decisions, Defendants’ proffered supplemental evidence shows, at most, that the Managers consented to transact prior business without a formal meeting. There is no evidence that the Clark Managers had waived the requirement of a formal meeting for all of the companies’ future business, especially since they expressly invoked that requirement in connection with the disputed adjustments. J.A. Exh. F6.

Absent compliance with the procedural requirements of the operating agreements, there was no valid vote on the' Pinnacle Managers’ adjustments and therefore no “deadlock ... in voting” sufficient to trigger the Pinnacle Managers’ deadlock resolution power under Paragraph 3.13(c). Defendants do not identify any persuasive authority to the contrary. The cases that Defendants rely on to establish a. deadlock in the face of the Clark Managers’ hesitation stand only for the proposition that where a contract requires the parties to negotiate, a refusal to negotiate constitutes a “deadlock” in negotiation. See Beach Air Conditioning & Heating, Inc. v. Sheet Metal Workers Int’l Ass’n Local Union No. 102, 55 F.3d 474, 477 (9th Cir.1995) (“an employer cannot escape the interest arbitration clause by refusing to negotiate, because the contract imposes not only a duty to accept a settlement imposed by the arbitrators once negotiations fail, but also a duty to negotiate in the first place”); M.R.S. Enterprises, Inc. v. Sheet Metal Workers’ Int’l Ass’n, Local 40, 429 F.Supp.2d 72, 79 (D.D.C.2006) (citing Beach for same proposition). Defendants have identified no similar provision of the operating agreements .requiring the company, managers to vote on a Major Decision such that a failure to do so within a given timeframe could be characterized as a “deadlock ... in voting” under Paragraph 3.13(c). In fact, there could. not have been a meaningful vote when the Pinnacle Managers declared a deadlock .because the Clark Managers’ unanswered questions establish that there was no meeting of the minds concerning the meaning of essential terms in the proposed adjustments.

To be sure, it would be unreasonable (and perhaps a breach of their own fiduciary obligations) for the Clark Managers to withhold their votes indefinitely. Under such instances, however, the Pinnacle Managers have other available remedies such as an action to compel specific performance, as. provided for in Paragraph 6.2(a)(2) of the operating agreements, or invocation of the- California Corporations Code to compel a meeting or vote. See Cal. Corp.Code § 17704.07(f)-(h). The Pinnacle Managers’ declaration of a deadlock would even be tenable had they set-a formal meeting time and date and. the Clark Managers failed to attend. Instead, Johnson’s May 19, 2011 letter proved to be prescient: rather than observe contractual requirements, pursue -available remedies, or attempt to answer the Clark Managers’ questions, Pinnacle Monterey and Pinnacle Irwin simply declared a “deadlock” and crowned themselves the victors. There can be no conclusion from this course of conduct other-than that the Pinnacle‘Managers constructed the entire exchange'for the purpose of declaring and resolving a voting deadlock on adjustments to the PMAs that would prevent termination of their affiliate’s agency. Such conduct was patently unreasonable. Clearly, the operating agreements would not permit the Pinnacle Managers to demand, without prior notice or discussion, a vote on a proposed Major Decision within 24 hours and then declare a deadlock one day later. There is no meaningful distinction between that extreme hypothetical and what occurred here.

In sum, it was premature for the Pinnacle Managers to declare a “deadlock ... in voting” on June 8, 2011 because no valid vote had been taken. As such, the Pinnacle Managers had no occasion to exercise their power to resolve deadlocks in voting and the purported adjustments to the Monterey and Irwin PMAs never became effective. Plaintiffs’ motion for summary judgment is therefore GRANTED on their First and Second Claims and on the Pinnacle Managers’ First and Second Claims. The Pinnacle Monterey’s and Pinnacle Irwin’s motion in them favor on these claims is accordingly DENIED.

D. Statutory and Contractual Rights to Revoke or Terminate the ■ PMAs

Plaintiffs seek judgment on AMSC and AMS’s Third and Fourth Counterclaims concerning MBMH’s and CMC’s statutory power and contractual right to remove AMSC, and Pinnacle Monterey’s and Pinnacle Irwin’s Seventh and Eighth Claims concerning Clark Realty’s ability, as Clark Manager for CPMB and CPCMC, to direct the removal of AMSC without triggering a “Major Decision” vote. Pis.’ Mot. 19. Plaintiffs assert that MBMH and CMC have both