Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Los Angeles County No. BC367495, Mark V. Mooney, Judge.
Gipson Hoffman & Pancione, Kenneth I. Sidle and Corey J. Spivey for Plaintiffs and Appellants.
Entertainment Law Group and David T. Stowell for Defendant and Respondent.
CROSKEY, Acting P. J.
Plaintiffs Peter M. Hoffman and Cinevisions appeal from a judgment that dismissed their complaint. The dismissal was entered after the trial court determined that a demurrer filed to the complaint should be sustained without leave to amend. The demurrer was filed by defendant Alan Salke and it was based on, among other things, the doctrine of res judicata. The demurrer asserted that the claim alleged by Cinevisions and Hoffman in the instant suit (injurious deceit on the part of Salke) is essentially the same claim that Cinevisions and Hoffman asserted against Salke in an earlier suit where they claimed equitable indemnity and equitable contribution from Salke based on arbitration awards entered against Hoffman, Cinevisions and others. Salke contended that this suit alleges the same facts and is based on the same primary right as were previously alleged and asserted by Cinevisions and Hoffman.
A minute order in a federal court case concerning Peter Hoffman and Cinevisions states that Hoffman owns Cinevisions.
Like the trial court, we find that the doctrine of res judicata precludes Hoffman and Cinevisions from pursuing this case. On that basis we will affirm the judgment. Salke claims that the appeal is frivolous and has requested that we impose sanctions against Hoffman, Cinevisions, and the law firm that represents Cinevisions, Gipson Hoffman and Pancione. We agree that sanctions are warranted. We will remand this case with directions to the trial court to determine an amount of reasonable sanctions and to make an order imposing same.
Under California Rules of Court, rule 8.204, appellants have a duty to provide this court, in their opening brief, with a summary of the significant facts of a case and to both limit that summary to matters in the record, and support their references to matters in the record with appropriate page references to the record. Cinevisions and Hoffman have not done that. Although the background of this case is extensive, the opening brief’s statement of facts is little more than a restatement of the allegations in the complaint and has no record references. We also note that throughout their brief appellants failed to give proper case citations. Fully citing a case once in a brief does not entitle the author to simply cite the name of the case or a portion of the name of a case later in the brief. Instead, the method of citation set out in the California Style Manual that is prepared by California’s Reporter of Decisions for use by California courts and attorneys should be used. Additionally, we note that the sarcastic and belittling tone of the briefs filed by Cinevisions and Hoffman is inappropriate and does nothing to further their appellate positions.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Arbitration Cases
This case arises from arbitrations that stem from an October 15, 1995 written agreement between two companies, NTTS Productions, Ltd. and Jonesfilm. The agreement called for disputes between the contracting parties to be resolved by binding arbitration. The agreement concerned a certain motion picture owned by Jonesfilm, and rights granted to NTTS Productions, Ltd. by Jonesfilm to make sequels thereof. The motion picture was entitled “9 1/2 Weeks.” According to the record, plaintiff Cinevisions is the parent company of NTTS Productions, Ltd., and as noted in footnote one ante, plaintiff Peter Hoffman owns Cinevisions.
In September 2002, NTTS Productions, Ltd. made a request to arbitrate a dispute with Jonesfilm. That request resulted in arbitration case number 02-92. The request was made after Jonesfilm filed a lawsuit when it discovered that a second sequel (actually a prequel) to “9 1/2 Weeks” had been made without Jonesfilm’s knowledge. The prequel was produced by Cinepix Film Properties, Inc., a predecessor-in-interest of Lions Gate Films, Inc., pursuant to a written agreement between NTTS Productions, Ltd. and Cinepix Film Properties, Inc.. Lions Gate Films, Inc. was distributing the prequel.
While NTTS Productions, Ltd./Jonesfilm arbitration (no. 02-92) was pending, arbitration number 03-08 was filed, with Lions Gate Films, Inc. as the claimant and Jonesfilm and NTSS Productions, Ltd. as the respondents. In case no. 03-08, NTTS Productions, Ltd. cross-claimed against Jonesfilm, and Jonesfilm counterclaimed against Lions Gate Films, Inc. and NTTS Productions, Ltd. Jonesfilm responded to the cross-claim filed by NTTS Productions, Ltd. by asserting that the cross-claim “virtually duplicate[d] the complaint in the NTTS/Jonesfilm Arbitration [case 02-92],” and thus was an unlawful attempt by NTTS Productions, Ltd. to consolidate the NTTS/Jonesfilm arbitration with the Lions Gate Films, Inc. arbitration (case no. 03-08). Despite the protest by Jonesfilm, it appears that the cross-claim filed by NTTS Productions, Ltd. against Jonesfilm proceeded in case no. 03-08 to completion. (The record does not appear to indicate, and the parties have not explained in their briefs, how (or if) case 02-92 was concluded.)
An arbitration award in case number 03-08 was issued in July 2004. By minute order dated January 14, 2005, the superior court granted a motion by Jonesfilm to add Hoffman as a judgment debtor to any judgment entered to confirm the arbitration award. That order was based on the court’s finding that Hoffman is the alter ego of NTTS Productions, Ltd. An amended judgment confirming the arbitration award and adding Hoffman as a judgment debtor was filed on March 18, 2005. The amended judgment states that Hoffman is “jointly and severally liable for all of the obligations of NTTS Productions, Ltd. to Jonesfilm under this Judgment.” Hoffman appealed from the order adding him as the alter ego of NTTS Productions, Ltd., but the order was affirmed by Division Eight of this court in a nonpublished opinion filed on May 4, 2006 (B183198).
The arbitrator’s award states that the issues presented in that arbitration concerned the development, production and distribution of the two sequel movies and although the second sequel (prequel) was the primary source of disagreement among the parties, there were also issues relating to the first sequel.
In the meantime, in August 2005, another arbitration was commenced (arbitration case no. 05-56) with Jonesfilm making claims against four respondents—Cinevisions, Seven Arts Pictures, Inc., Seven Arts Filmed Entertainment Limited, and Seven Arts Pictures PLC (the Seven Arts companies). Hoffman appeared during that arbitration and unsuccessfully challenged jurisdiction over Cinevisions and the three Seven Arts companies. The arbitrator found that Hoffman “has been and is the chief executive officer of each Respondent.” The arbitrator found that “NTTS and the successive assignees [the four arbitration respondents] have breached the [October 15, 1995] Jonesfilm/NTTS Agreement and related documents.” The arbitrator further found that Cinevisions is jointly and severally obligated with NTTS Productions, Ltd. for all liabilities and agreements of NTTS Productions, Ltd. under the October 1995 contract between Jonesfilm and NTTS Productions, Ltd., that the three Seven Arts companies assumed the obligations to Jonesfilm under that contract, and that all four respondents (Cinevisions and the Seven Arts companies) are jointly and severally liable to indemnify Jonesfilm for the reasonable attorney’s fees and costs that Jonesfilm incurred by reason of the breach of the contract, including the attorney’s fees and costs awarded to Jonesfilm in both arbitration case numbers 03-08 and 05-56.
A partial award in favor of Jonesfilm was made by the arbitrator in June 2006 in case 05-56. It left for a future hearing the presentation of evidence on a “net receipts” issue concerning the first sequel. The defendant in the instant case, Alan Salke, testified at that future hearing, which was held on September 29 and October 11, 2006. A supplemental and final award was issued by the arbitrator in January 2007. It states that although Jonesfilm is not entitled to an award in connection with the net receipts issue (because the arbitrator found that the cost of producing the first sequel was greater than the gross revenues that were derived from its exploitation) Jonesfilm was entitled to an additional attorney’s fees and cost award of $114,433.97, which was “in addition to the $131,752.56 award and other relief previously awarded to [Jonesfilm] in the [June 2006] Partial Award.”
According to a minute order issued in a federal case, Alan Salke testified as to “services he rendered to Sidney Kimmel Entertainment, Inc., one of two constituent corporations of Jonesfilm” and “testified generally in support of Jonesfilms’s claims.’ A supplemental award issued by the arbitrator in case number 05-56 states there was “testimony by and about the authority and role of Mr. Alan Salke in connection with the exercise of consultation and approval rights.”
2. Hoffman’s Prior Suits
During the pendency of arbitration case number 05-56, Hoffman filed two suits. The first suit, case number CV06-2272DSF, was filed in federal court in April 2006 and alleged a cause of action under the Fourteenth Amendment and 42 U.S.C. §§ 1983 and 1985 for deprivation of constitutional rights, privileges and immunities. Named as defendants were Robert Nau (the arbitrator in arbitration case number 03-08), Laurie May and Barry Goldin (whom defendant Alan Salke states were witnesses in that arbitration), and two other people. May is an executive and attorney for Lions Gate Films, Inc., Goldin and one of the two other people (David Stowell) are attorneys for Jonesfilm. (Stowell has also represented Salke in the instant suit, both in the trial court and in this appeal.)
Hoffman alleged that the defendants in that federal case (other than Robert Nau) gave false statements or made omissions in their testimony in arbitration case number 03-08 and/or in state court proceedings regarding confirmation of the arbitration award and judgment debtor matters. Hoffman also alleged that arbitrator Nau knew that his findings and award in the arbitration case were not justified and were contrary to facts. Hoffman sought declaratory relief, an order directing Nau to delete from the arbitration award findings adverse to Hoffman, Cinevisions, Seven Arts Pictures, Inc. and Seven Arts Filmed Entertainment, Limited, an order barring the other defendants from making false statements based on Nau’s original findings, and compensatory damages. In July 2006, the federal court dismissed the complaint in its entirety, finding that the defendants were not state actors and thus no claim under the Fourteenth Amendment and 42 U.S.C. § 1983 could be stated, and further finding that 42 U.S.C. § 1985 was not applicable because Hoffman had not alleged conspiratory class-based discriminatory animus. The court also found that arbitrator Nau was entitled to arbitral immunity. Dismissal of the complaint was with prejudice because Hoffman elected to stand on the complaint rather than amend it.
Hoffman’s second suit was filed in the superior court in Los Angeles County in August 2006. Cinevisions was also named as a plaintiff in that case. The suit alleges Hoffman and Cinevisions suffered losses in connection with arbitration case numbers 03-08 and 05-56 and they are entitled to equitable indemnity and equitable contribution from the defendants in that second suit, Alan Salke and Laurie May. Specifically, Hoffman and Cinevisions asserted that the fee award in arbitration case number 03-08 was the result of actions by May and not actions by Hoffman; and the fee award in arbitration case number 05-56, as well as the “foreclosure award” (Jonesfilm’s foreclosure on certain rights/interests of NTTS Productions, Ltd.) in case number 03-08, were the result of actions taken by Salke, including making false statements, and not by Hoffman. Cinevisions and Hoffman asserted that Salke and May should have to pay, or contribute to payment of, the arbitration awards.
Salke had the case removed to federal court and it was given case number CV06-06742DSF. A minute order in that federal case notes that when Hoffman and Cinevisions filed their complaint in state court for equitable relief, they “failed to disclose to the state court that an action against Defendant May, based on the same set of operative facts, previously had been dismissed by this Court with prejudice.”
Hoffman moved to have the federal case remanded back to state court. Salke moved for an order dismissing the case against him, and Hoffman and Cinevisions filed no opposition to his motion. Applying California law (because Hoffman and Cinevisions alleged state law claims), the federal court issued a minute order in January 2007 ruling that the causes of action against Salke for equitable indemnity and equitable contribution cannot stand because they require that Salke be a joint tortfeasor, and the complaint filed by Hoffman and Cinevisions against Salke and May does not allege that Salke and Hoffman and Cinevisions are jointly liable to Jonesfilm for any harm. The federal court concluded that because Salke was never found liable to Jonesfilm, the complaint filed by Hoffman and Cinevisions against him could not be amended to state a cause of action against him for equitable indemnity or equitable contribution. The federal court further concluded that Salke had been named as a defendant solely to defeat federal court diversity jurisdiction, and it dismissed the case against him. The court denied the motion to remand the case back to California because there was now diversity jurisdiction in that the remaining defendant, May, is a citizen of Canada and Hoffman and Cinevisions are citizens of California.
In a subsequent minute order, dated March 1, 2007, the federal court also found that Hoffman and Cinevisions’s “Complaint and Motion for Remand were frivolous, not warranted by existing law, and intended to harass” in that the plaintiffs sought to circumvent the federal court’s prior dismissal of plaintiff’s case against defendant May by filing the same case again, only in a California state court and not disclosing the federal case to the state court, and plaintiffs sought to prevent removal of the case to federal court by the ruse of suing Salke to prevent federal jurisdiction. The court found that harassment was also demonstrated by the fact that when Hoffman sent Salke a copy of the complaint in that suit, Hoffman included a transmittal letter to Salke wherein Hoffman indicated that he would probably dismiss the removed case if he liked Salke’s testimony in the upcoming final arbitration hearing in arbitration case number 05-56. Additionally, the court observed that “[i]n the past two years, Hoffman and his companies have brought four actions before this Court” and “some of these actions have been attempts to relitigate final state court decisions.” The court cautioned Hoffman and Cinevisions “that their conduct in this Court provides a solid foundation for an order to show cause why they should not be found to be vexatious litigants. Further similar conduct may lead to such an order to show cause.”
3. The Instant Case
In March 2007, two months after the federal court dismissed the removed case against Salke, and six days after the federal court issued its subsequent minute order wherein it found that both the case and Hoffman and Cinevisions’ motion to remand were “frivolous, not warranted by existing law, and intended to harass,” Hoffman and Cinevisions filed the instant suit against Salke, alleging a cause of action for deceit. The complaint alleges that deceit on the part of Salke proximately caused damages to plaintiffs in the form of the two arbitration awards that were rendered against plaintiffs and in favor of Jonesfilm.
This alleged deceit by Salke was also the basis of the causes of action against Salke for equitable indemnity and equitable contribution in the August 2006 superior court case that Salke had removed to federal court. Both the instant complaint and that prior complaint allege the following: “Salke was an agent representing [Jonesfilm] in the negotiation of the [abovementioned October 1995 written agreement between NTTS Productions, Ltd. and Jonesfilm] and the production of the First Sequel. Defendant Salke approved the ‘no termination’ language in [that contract] and [Cinevisions’s] prior accountings to [Jonesfilm] with respect to the First Sequel, and otherwise agreed that [Cinevisions] and NTTS [Productions, Ltd.] had none of the obligations now claimed by [Jonesfilm] resulting in the Foreclosure Award and the [Jonesfilm] Fee Awards. [Jonesfilm] has asserted under oath in the Second Arbitration that Salke in fact had no authority to act for [Jonesfilm] and had been terminated as an agent prior to the production of the First Sequel.”
The only differences in that quoted language between the two complaints are (1) the first italicized language is in the instant complaint and it replaced the following language in the earlier complaint: “the 1998 Accounting,” and (2) the second italicized language was not in the earlier complaint (and thus it appears that Cinevisions and Hoffman are asserting that it was not until the supplemental arbitration in September 2006 in case number 05-56 that they discovered the alleged false facts).
One other difference between the two complaints is that the instant complaint sets out four “false statements” that Salke is alleged to have made “to Hoffman and to other persons involved in the production of the Picture, in his capacity as an agent of [Jonesfilm] on numerous occasions throughout November, 1996 through April 1997, and to Hoffman and other agents or owners of Seven Arts Pictures, Inc. . . . the successor to [Cinevisions], from October 1, 2002 through September, 2003 in his capacity as an officer of [Seven Arts Pictures, Inc.].”
Based on the nearly identical allegations against Salke in the instant case and the removed case, the trial court determined that the instant case realleges the same primary right that Hoffman and Cinevisions alleged in the removed case. The court also observed that (1) even though Cinevisions and Hoffman appealed the federal trial court’s dismissal of Salke from the removed case, that dismissal would remain effective for purposes of res judicata because under federal rules of civil procedure it is considered a final ruling unless and until modified or overturned, and (2) the federal trial court’s ruling has the same effect in a California state court as it would have in a federal court because state courts have no power to void federal court decisions. The court concluded the instant case is barred by the doctrine of res judicata. Alternatively, the court ruled the case cannot proceed because it is barred by a statute of limitations and because Cinevisions and Hoffman cannot allege facts to support the elements of a cause of action for deceit.
Finding that Cinevisions and Hoffman cannot amend the complaint to overcome the grounds for sustaining Salke’s demurrer, the trial court sustained the demurrer without leave to amend and entered a judgment dismissing the complaint. Thereafter, Hoffman and Cinevisions filed this timely appeal.
DISCUSSION
1. Standard of Review
A demurrer tests the sufficiency of the allegations in a complaint as a matter of law. (Pacifica Homeowners’ Assn. v. Wesley Palms Retirement Community (1986) 178 Cal.App.3d 1147, 1151.) We review the sufficiency of the challenged complaint de novo. (Coopers & Lybrand v. Superior Court (1989) 212 Cal.App.3d 524, 529.) We accept as true the properly pleaded allegations of fact in the complaint, but not the contentions, deductions or conclusions of fact or law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) We also accept as true facts which may be inferred from those expressly alleged. Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403.) We consider matters which may be judicially noticed, and we “give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Blank v. Kirwan, supra, 39 Cal.3d at p. 318.) We do not concern ourselves with whether the plaintiff will be able to prove the facts alleged in the complaint. (Parsons v. Tickner (1995) 31 Cal.App.4th 1513, 1521.) The judgment or order of dismissal must be affirmed if any of the grounds for demurrer raised by the defendant is well taken and disposes of the complaint. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.)
2. The Doctrine of Res Judicata Applies in This Case
The doctrine of res judicata bars a second suit on a cause of action when the first and second suits are between the same parties or parties in privity with them and the judgment in the first suit is rendered on the merits of that suit. (Lucas v. County of Los Angeles (1996) 47 Cal.App.4th 277, 285, Lucas.) “Res judicata precludes piecemeal litigation by splitting a single cause of action or relitigation of the same cause of action on a different legal theory or for different relief.” (Ibid.) In California, “a cause of action consists of 1) a primary right possessed by the plaintiff, 2) a corresponding duty imposed upon the defendant, and 3) a wrong done by the defendant which is a breach of such primary right and duty.” (Id. at pp. 285-286.)
When the first suit was in a federal court, “[u]nder California law, res judicata effect is determined on the basis of whether the prior federal judgment is based on the same primary right as the state action. [Citation.] If there is but one primary right and one wrong done involving that right, the plaintiff has but a single cause of action, no matter how many kinds of relief or theories are relied upon.” (Lucas, supra, 47 Cal.App.4th at p. 286.) “The primary right theory is a theory of code pleading that has long been followed in California. . . . [¶] As far as its content is concerned, the primary right is simply the plaintiff’s right to be free from the particular injury suffered. . . . [¶] . . . [N]umerous cases hold that when there is only one primary right an adverse judgment in the first suit is a bar even though the second suit is based on a different theory . . . or seeks a different remedy . . . . ” (Crowley v. Katleman (1994) 8 Cal.4th 666, 681-682.)
Here, the prior judgment upon which Salke relies in asserting the defense of res judicata was rendered in the case that was removed to federal court. Full faith and credit is given to the final judgments and orders of a federal court. (Levy v. Cohen (1977) 19 Cal.3d 165, 172.) Decisions of lower federal courts are final for purposes of res judicata unless and until reversed on appeal, or modified or set aside by the courts that rendered them, and are entitled to res judicata effect, even when the California court believes the federal court decision is erroneous. (Martin v. Martin (1970) 2 Cal.3d 752, 761, 763; Lumpkin v. Jordan (1996) 49 Cal.App.4th 1223, 1232.)
In the removed case, Hoffman and Cinevisions asserted that Salke should have to pay either all or a portion of the arbitration awards entered against Hoffman and Cinevisions in arbitration cases 03-08 and 05-56. The primary right implicitly asserted by Hoffman and Cinevisions in the removed case was a right to rely on representations that Salke allegedly made (1) in the negotiation of the October 1985 agreement between Jonesfilm and NTTS Productions, Ltd. regarding the making of sequels to “9 1/2 Weeks,” (2) in connection with an accounting, and (3) with respect to whether Hoffman and Cinevisions were obligated to Jonesfilm in the manner claimed by Jonesfilm in the arbitrations. Hoffman and Cinevisions implicitly asserted that Salke had a duty to not make false representations to them regarding these matters. Hoffman and Cinevisions asserted that despite such representations by Salke, Jonesfilm asserted under oath that Salke had no authority to act for Jonesfilm and was even terminated from Jonesfilm employment prior to the production of the first sequel. Thus, Hoffman and Cinevisions implicitly concluded, Salke breached his duty to Hoffman and Cinevisions to tell the truth.
Salke moved to dismiss the complaint in the removed case. The federal court observed that under federal law, “[d]ismissal is appropriate only if the plaintiff fails to assert a cognizable legal theory or to allege sufficient facts under a cognizable legal theory.” The federal court observed that the arbitrators determined that Jonesfilm was the injured party, but the arbitrators did not find that Salke, Hoffman and Cinevisions are all jointly and severally liable to Jonesfilm for its injuries; indeed, the arbitrators did not find that Salke was responsible for any of Jonesfilm’s injuries. Therefore, concluded the court, Hoffman and Cinevisions could not amend their complaint to state a cause of action against Salke for equitable indemnity or equitable contribution.
The federal court’s decision was on the merits of the complaint against Salke. “A judgment is on the merits for purposes of res judicata ‘if the substance of the claim is tried and determined . . . .’ ” (Johnson v. City of Loma Linda (2000) 24 Cal.4th 61, 77.) The federal court determined that given the fact that the arbitrators had never ruled that Salke was responsible for Jonesfilm’s damages, there could be no claim by Hoffman and Cinevisions for equitable indemnity or contribution. That is a decision on the merits. Indeed, even when a prior judgment is based on the sustaining of a demurrer with leave to amend “[i]t is a judgment on the merits to the extent that it adjudicates that the facts alleged do not constitute a cause of action, and will, accordingly be a bar to a subsequent action alleging the same facts.” (Keidatz v. Albany (1952) 39 Cal.2d 826, 828.)
The primary right implicitly asserted by Hoffman and Cinevisions in the removed case is the same primary right asserted by them in the instant case: a right to rely on representations that Salke allegedly made to them (1) in the negotiation of the October 1985 agreement between Jonesfilm and NTTS Productions, Ltd. regarding the making of sequels to “9 1/2 Weeks,” (2) in connection with an accounting, and (3) with respect to whether Hoffman and Cinevisions were obligated to Jonesfilm in the manner claimed by Jonesfilm in the arbitrations. And once again Hoffman and Cinevisions have asserted that Salke had a duty to not make false representations to them regarding these matters and that despite such representations by Salke, in reality Jonesfilm asserted under oath that Salke had no authority to act for Jonesfilm and was even terminated from Jonesfilm’s employment prior to the production of the first sequel; and thus Salke breached his duty to Hoffman and Cinevisions to tell the truth. Thus, Hoffman and Cinevisions are realleging the same primary right-duty-breach of duty that they alleged in the removed case. Only this time they have changed the theory of recovery. The cause of action is now entitled “deceit.” However as stated above, simply changing the type of relief or the theory of one’s case will not defeat a defense of res judicata.
Nor is res judicata defeated by the fact that in the instant suit, Hoffman and Cinevisions (1) set out in their complaint four allegedly deceitful statements made by Salke and (2) asserted that they just discovered in September 2006 the falsity of the statements. These four statements relate to the allegations made by Hoffman and Cinevisions in the abovequoted paragraph that they included in the complaints in both the removed case and the instant case. Thus, had the removed case against Salke proceeded in federal court, the allegedly newly discovered statements would have been pertinent to that case. Moreover, Hoffman knew no later than October 2002, when Jonesfilm filed its response in arbitration case number 02-92, or March 2003, when Jonesfilm filed its response in arbitration case number 03-08, that Jonesfilm was contesting NTTS Productions, Ltd.’s assertions of rights in those arbitrations, and knew no later than January 2004 when Salke submitted his affidavit in arbitration case number 03-08 that Salke claimed that his association with Jonesfilm ended by January 1992. When matter in a subsequent case “ ‘was within the scope of [a prior] action, related to the subject-matter and relevant to the issues, so that it could have been raised, the judgment [in the prior action] is conclusive on it despite the fact that it was not in fact expressly pleaded or otherwise urged.’ ” (Aerojet-General Corp. v. American Excess Ins. Co. (2002) 97 Cal.App.4th 387, 402, italics omitted.)
We reject the argument made by Hoffman and Cinevisions that the removed case was not decided on its merits because it was decided on a jurisdictional issue, to wit, whether Salke was fraudulently named by Cinevisions and Hoffman as a defendant in that case to defeat federal court diversity jurisdiction. (Cinevisions and Salke are both California citizens.) Cinevisions and Hoffman assert that only a jurisdictional decision was made by the federal court in the removed case because federal courts do not have jurisdiction to consider the substantive merits of state law claims between California citizens. However, the whole of this argument ignores the fact that the federal court in the removed case did not simply decide whether the plaintiffs and defendants in that case were from different jurisdictions. Rather, as the federal court itself observed, it had to decide whether Salke could prove he was fraudulently joined by Hoffman and Cinevisions in an attempt to defeat federal diversity jurisdiction; and the federal court further observed that to make such a decision, it had to actually consider the merits of the claims made by Hoffman and Cinevisions against Salke. Thus, the federal court stated that to keep the case in federal court by removing Salke as a defendant, Salke had to prove there was no possibility that Cinevisions and Hoffman would be able to establish their cause of action against Salke in a California state court. Obviously, the only way that the federal court could make such a determination would be to address the substantive merits of Cinevisions’ and Hoffman’s claims for equitable indemnity and contribution. Thus, it is simply not true that the federal court only addressed a jurisdiction issue. The federal court addressed, on its substantive merits, the cause of action against Salke, and it did so by exercising its jurisdiction to address the question whether Salke had been fraudulently joined.
Because we find that the instant case is barred by the doctrine of res judicata, we need not and do not address the other grounds which the trial court determined would also defeat this suit.
3. The Accusation against Salke’s Attorney
Cinevisions and Hoffman assert that Salke’s attorney is violating the California Rules of Professional Conduct by representing Salke in this case because the attorney also represents Jonesfilm in its litigation with Hoffman and Cinevisions (which Cinevisions and Hoffman state is “on-going”), and because Hoffman and Cinevisions “believe that [Jonesfilm] is directly or indirectly paying or defraying Salke’s legal fees.” Hoffman and Cinevisions made those assertions in their written opposition to Salke’s demurrer to their complaint in the instant case, and they invited the trial court to “take whatever action it deems appropriate.” The record does not indicate that they made a motion to disqualify the attorney. We deem this to be a matter for the trial court, and from a review of the judgment in this case, it appears that the trial court saw fit to take no action whatsoever.
4. Sanctions Are Appropriate in This Appeal
“When it appears to the reviewing court that the appeal was frivolous or taken solely for delay, it may add to the costs on appeal such damages as may be just.” (Code Civ. Proc., § 907.) California Rules of Court, rule 8.276 states that “[o]n motion of a party or on its own motion, a Court of Appeal may impose sanctions, including the award or denial of costs under rule 8.278, on a party or an attorney” for, among other things, “[t]aking a frivolous appeal or appealing solely to cause delay.”
Salke describes this case as “the latest attempt of plaintiff Hoffman and his company, plaintiff Cinevisions, to intimidate and punish defendant Salke for testimony at an arbitration hearing, where Salke testified in favor of Jonesfilm and against plaintiffs Hoffman/Cinevisions.” Salke asserts this court should sanction Hoffman for filing and pursuing this appeal because Hoffman was already warned by the federal court that his suit against Salke (the removed suit) was frivolous, intended to harass, and not supported by existing law.
Salke did not file a motion for sanctions. However, we have notified the parties in writing that, on our own motion, the issue of imposing sanctions against Hoffman, Cinevisions and the attorneys representing Cinevisions in this appeal would be addressed at oral argument, and we have directed that written opposition to imposition of sanctions must be filed within the time allotted by the California Rules of Court, rule 8.276. (According to the opening and reply briefs, Hoffman is representing himself in this appeal.)
In In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650, the Supreme Court addressed the question what constitutes frivolous conduct for purposes of section 907. The court held that “an appeal should be held to be frivolous only when it is prosecuted for an improper motive—to harass the respondent or delay the effect of an adverse judgment—or when it indisputably has no merit—when any reasonable attorney would agree that the appeal is totally and completely without merit.” Here, we find that both the subjective standard (the motives of Hoffman, Cinevisions, and its attorneys in filing this appeal) and the objective standard (the merits of the appeal as viewed by the reasonable attorney) support imposition of sanctions against Hoffman, Cinevisions and its attorneys.
Respecting the subjective test, the record substantially supports our conclusion that this appeal was filed for an improper motive. The record discloses that Hoffman and Cinevisions have for years engaged in conduct that is easily classified as abuse of litigation and arbitration, deceitful, fraudulent, contemptible, harassing, vindictive, intimidating, and frivolous. The following is a history of that conduct, and although it restates some of the facts already discussed, we wish to make quite clear why sanctions are appropriately awarded in this appeal.
In arbitration case number 03-08, Hoffman engaged a law firm to file, on behalf of NTTS Productions, Ltd., a denial of the claims made by Lions Gate against it, and a cross-claim against Jonesfilm, yet NTTS Productions, Ltd. failed to submit any evidence in opposition to the claims made against it by Jonesfilm and Lions Gate and indeed, did not even appear at the arbitration. The arbitrator found that NTTS Productions, Ltd. had defaulted. Then Hoffman, the alter ego of the defaulting NTTS Productions, Ltd., filed suit in federal court and made accusations about the honesty of the arbitrator, attorneys and witnesses who did participate in that arbitration, and the sufficiency of the evidence upon which the arbitrator relied to make findings. All of those things could have been challenged at the arbitration by NTTS Productions, Ltd. had Hoffman not allowed it to default.
In arbitration case number 03-08, the arbitrator found that Hoffman’s “misconduct in this case was the active, direct and primary cause of this dispute.” That arbitrator’s “findings and award” provides examples of his deceit and fraud. The arbitrator found that NTTS Productions, Ltd. gave Hoffman a power of attorney but it was only for six months. Nevertheless, both before the power of attorney was given and after it expired, Hoffman represented that he had power to act on behalf of NTTS Productions, Ltd. Hoffman used NTTS Productions, Ltd. as a corporate shell for his own personal benefit and the arbitrator considered them one and the same. NTTS Productions, Ltd. breached the October 1995 agreement it had with Jonesfilm by authorizing the production of the prequel movie without first reaching an agreement with Jonesfilm as to the price it would have to pay Jonesfilm for the right to produce the prequel. Hoffman received a check for $100,000 payable to NTTS Productions, Ltd. and NTTS Productions, Ltd. was supposed to, in turn, pay the money to Jonesfilm as sequel rights payment for the prequel movie, but Hoffman endorsed the check and made it payable to another company for his own benefit, and did so to cover up the fact that he had never secured Jonesfilm’s agreement as to a price for the right to produce the prequel. If he had sent the check to Jonesfilm, Jonesfilm would have had notice that production of the prequel was proceeding. The tactic deceived both Jonesfilm and the company that gave Hoffman the check.
Hoffman and Cinevisions’s contempt for the arbitration process was demonstrated in arbitration case number 05-56 (Jonesfilm as claimant and Cinevisions and the three Seven Arts companies as respondents). Hoffman and the respondents failed to comply with the arbitrator’s discovery subpoena and the arbitrator’s order to produce documents, Hoffman admitted he directed a company to not comply with the arbitrator’s subpoena, and he admitted that in violation of the arbitrator’s preliminary injunction, the respondents granted a security interest in the sequel to a hedge fund.
Examples of vindictiveness, harassment and intimidation abound. Hoffman’s response to the award in arbitration case number 03-08 was to file suit in federal court against the arbitrator, and the attorneys and witnesses involved in the arbitration. He alleged in that federal case that the witness-defendants had all made false statements in the arbitration and in court proceedings and the arbitrator knew his award was not justified. He did that while further arbitration hearings in case number 05-56 were pending, and thus when more witnesses were scheduled to testify. The federal court dismissed that case because it had no legal basis, and warned Hoffman that before bringing any more suits he should consider whether they have any merit because most of the suits he had already filed “ ‘have little or no merit and border on frivolous.’ ” That suit is easily viewed as vindictive and harassing against the persons involved in arbitration case 03-08, and as an intimidation tactic against the persons scheduled to testify in case 05-56.
Moreover, two weeks after that suit was dismissed, Hoffman and Cinevisions filed suit in the superior court against Salke and Laurie May for equitable indemnity and contribution. Both Salke and May were witnesses in arbitration case number 03-08. When the suit was removed by Salke to federal court, the court found that Salke had been fraudulently joined by Hoffman and Cinevisions to destroy federal diversity jurisdiction. The court also found that Hoffman and Cinevisions’s removed suit was “frivolous, not warranted by existing law, and intended to harass” because Cinevisions and Hoffman sought to circumvent the federal court’s prior dismissal of their case against defendant May by filing the same case again, only in a California state court and not disclosing the federal case to the state court, and they sought to prevent removal of the case to federal court by the ruse of suing Salke to prevent federal diversity jurisdiction. Harassment, as well as intimidation, was also demonstrated by Hoffman’s transmittal letter to Salke wherein Hoffman indicated that he would probably dismiss the removed case if he liked Salke’s testimony in the upcoming final arbitration hearing in arbitration case number 05-56. Additionally, the court observed that Hoffman and his companies had brought four actions in federal court in the previous two years and “some of these actions have been attempts to relitigate final state court decisions.” The court described the four suits as being “based on the allegedly unjust outcome of the arbitrations.” The court cautioned Hoffman and Cinevisions “that their conduct in this Court provides a solid foundation for an order to show cause why they should not be found to be vexatious litigants. Further similar conduct may lead to such an order to show cause.”
Less than a week after the federal court made those observations, Hoffman and Cinevisions filed the instant suit. The trial court properly found that their complaint essentially repeats the allegations in their complaint in the removed case, with some cosmetic changes, and thus asserts the same primary right as was asserted in that prior case and merely changes the theory of recovery. The changes have no effect on the res judicata effect of the judgment in the removed case. The earlier complaint had already alleged deceit on the part of Salke going back to the negotiation of the 1995 contract between Jonesfilm and NTTS Productions, Ltd., and resulting damage to Cinevisions and Hoffman. Discovery during that prior suit, had it proceeded, would have fleshed out the parameters of the alleged deceit.
Now, Cinevisions and Hoffman have filed this appeal to challenge the judgment that sustained Salke’s demurrer on res judicata grounds without leave to amend and dismissed the complaint. In doing so, they have presented an opening brief with a mere three-page statement of facts, which by their own admission is essentially only “a recitation of the allegations of the Complaint.” They assert that merely presenting the allegations of their complaint as a statement of facts is reasonable because “[o]bviously there is no evidentiary record in this matter which was disposed of on demurrers by reason of alleged res judicata.” Their briefs care little for restrained temperament and appropriate case citation. Salke notes that in Hoffman’s prior appeal to this court, Division Eight observed that “[m]uch of the evidence on which [Hoffman] supports his claim of insufficiency of the evidence comes either from outside the record or from his motions for reconsideration, which were not before the court when it ruled on the alter ego motion.”
Given this history of inappropriate appellate briefing; not letting arbitration and judicial decisions rest; inappropriate litigation and arbitration tactics, including disobeying a subpoena, discovery order and injunction; and harassing, frivolous, intimidating, and meritless litigation against witnesses, attorneys and even an arbitrator, when we apply the subjective test to determine whether this appeal is frivolous, we conclude that this appeal was filed and prosecuted to harass defendant Salke and delay the finality of the judgment in this case. In that respect, this appeal is simply more of the same from Hoffman and Cinevisions and thus we cannot find that this wrongful appeal is the sole responsibility of Cinevisions’s attorneys. However, given the history involved in this case, we find that the attorneys representing Cinevisions should have recognized that there was no good faith desire on the part of their client, or Hoffman, to pursue an appeal in this case, and thus the attorneys should not have filed the notice of appeal and prosecuted the appeal on behalf of Cinevisions. “Counsel failed to carry out [their] professional responsibilities as an officer of the court. An attorney in a civil case is not a hired gun required to carry out every direction given by the client. [Citation.] As a professional, counsel has a professional responsibility not to pursue an appeal that is taken for the purpose of delay, just because the client instructs him or her to do so. [Citation.]” (Cosenza v. Kramer (1984) 152 Cal.App.3d 1100, 1101-1102 [sanctions imposed against appellant and his attorney on the court’s own motion].)
Further, we find that this appeal is objectively frivolous. Given the established law of res judicata, and the blatant replication in the instant case of the complaint in the removed case with only cosmetic changes made to it, any reasonable attorney in applying the law of res judicata would find that this appeal is without merit, and would refrain from filing and pursuing it.
Therefore, sanctions against Hoffman, Cinevisions and the attorneys representing Cinevisions are appropriately imposed to deter such future unreasonable conduct and redress the burden they have imposed on Salke and on this court. “When we impose sanctions, we are not limited to compensatory considerations; rather, we may also require the payment of sums sufficient to discourage future frivolous litigation.” (People ex rel. Dept. of Transportation v. Outdoor Media Group (1993) 13 Cal.App.4th 1067, 1082.)
We therefore determine that sanctions shall be awarded to Salke in the full amount of the reasonable attorney’s fees and expenses he incurred in having to respond to this unwarranted appeal, and those sanctions are payable jointly and severally by Cinevisions, Hoffman, and the law firm of Gipson Hoffman and Pancione, and are payable jointly to Salke and his attorney, David T. Stowell. The amount of the sanctions awarded to Salke shall be determined by the trial court on remand of this case.
DISPOSITION
The judgment from which Hoffman and Cinevisions have appealed is affirmed. Plaintiff shall recover his costs on appeal.
In addition, and in accordance with our determination that sanctions under Code of Civil Procedure section 907 and California Rules of Court, rule 8.276 are appropriate, the matter is remanded to the trial court with directions to determine the reasonable value of the attorney’s fees incurred by Salke in opposing this appeal, and the trial court shall make an order that the combined total of those reasonable attorney’s fees and plaintiff’s costs on appeal be paid jointly and severally by Hoffman, Cinevisions, and the law firm Gipson, Hoffman and Pancione to plaintiff and his attorney David T. Stowell jointly. The trial court’s order regarding such sanctions shall indicate that the sanctions are imposed pursuant to Code of Civil Procedure section 907. The trial court shall provide such notice to the State Bar of California as may be required by Business and Professions Code, section 6086.7.
We Concur: KITCHING, J., ALDRICH, J.
Under the terms of the arbitration award (except as otherwise indicated in the award), all of NTTS Productions, Ltd.’s right, title and interest in the two sequels were transferred to Jonesfilm (the parties refer to this as the “foreclosure award”), and money that Jonesfilm would derive “from the exploitation of foreclosed rights” in those two films “will be applicable against monies otherwise owing by NTTS to Jonesfilm hereunder.” NTTS Productions, Ltd. was required to pay hundreds of thousands of dollars in damages to Jonesfilm, and hundreds of thousands of dollars to Lions Gate Films, Inc., for breach of contract and attorney’s fees and costs. The arbitrator found that Hoffman’s “misconduct in this case was the active, direct and primary cause of this dispute.”
Although the instant complaint alleges that Hoffman and Cinevisions discovered the falsity of those statement in September 2006, we note that in arbitration case number 03-08, Lions Gate Films, Inc. submitted an affidavit of Alan Salke (dated January 28, 2004) as part of its evidence in which Salke stated that from and after January 1, 1992, he has never been “an officer, employee, director, employee, agent, or other representative of Jonesfilm; of any of Jonesfilm’s constituent corporations, Sidney Kimmell Presentations, Inc. or SKPI Corp; or of any other company owned or controlled by Sidney Kimmel.” (In his affidavit, Salke described Jonesfilm as being Sidney Kimmel’s company.) We also note that the contract between NTTS Productions, Ltd. and Jonesfilm was made in October 1995. Salke went on to say in his affidavit that he was never “authorized by Mr. Kimmel nor by anyone else on behalf of Jonesfilm to enter into or otherwise approve any deal or transaction with Hoffman or any company associated with Hoffman” for a film using the “9 1/2 Weeks” name and that includes never being authorized to, and never in fact negotiating, entering into, or approving any deal or transaction with Hoffman or anyone else for the film entitled “The First 9 1/2 Weeks.” As noted above, NTTS Productions, Ltd. was a party to that arbitration, Cinevisions is the parent company of NTTS Productions, Ltd. and plaintiff Hoffman owns Cinevisions.