Brown v. Stroud et al
Filing
642
ORDER REGARDING MOTION TO AMEND JUDGMENT. Signed by Judge JEFFREY S. WHITE on 10/21/14. (jjoS, COURT STAFF) (Filed on 10/21/2014)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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STEVEN AMES BROWN, et al.,
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For the Northern District of California
United States District Court
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Plaintiffs,
No. C 08-02348 JSW
v.
ORDER REGARDING MOTION
TO AMEND JUDGMENT
ANDREW B. STROUD, et al.,
Defendants
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Now before the Court is the motion to amend judgment filed by the Estate of Nina
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Simone (“Simone Estate”). The Court determines that this matter is appropriate for disposition
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without oral argument and is deemed submitted. See Civ. L.R. 7-1(b). Accordingly, the
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hearing set for October 31, 2014 is HEREBY VACATED. The Simone Estate seeks to amend
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the judgment against Scarlett P. Stroud (“Ms. Stroud”) as the representative for the Estate of
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Andrew B. Stroud Estate (“Stroud Estate”) and Stroud Productions and Enterprises, Inc.
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(“SPE”) to include Andy Stroud, Inc. (“ASI”), to include an award of monetary damages, and to
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amend the caption and street address of the Simone Estate.
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Pursuant to Federal Rule of Civil Procedure 69(a), district courts are authorized to
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amend a judgment to add additional judgment debtors in accordance with California Code of
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Civil Procedure section 187. See In re Levander, 180 F.3d 1114, 1121 (9th Cir. 1999); Cigna
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Property & Cas. Ins. Co. v. Polaris Pictures, Corp., 159 F.3d 412, 421 (9th Cir. 1998). “To
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amend a judgment under § 187, two requirements must usually be met: “(1) that the new party
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be the alter ego of the old party and (2) that the new party had controlled the litigation, thereby
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having had the opportunity to litigate, in order to satisfy due process concerns.” In re Levander,
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180 F.3d at 1121 (citing Triplett v. Farmers Ins. Exchange, 24 Cal. App. 4th 1415, 1421 (1994))
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(emphasis in original). The judgment creditor bears the burden to satisfy both requirements by
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a preponderance of evidence. See Wollersheim v. Church of Scientology, 69 Cal. App. 4th
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1012, 1017-18 (1999).
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“Ordinarily, a corporation is regarded as a legal entity, separate and distinct from its
Sonora Diamond Corp. v. Superior Court, 83 Cal. App. 4th 523, 538 (2000). Under California
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law, a corporate identity may be disregarded “where an abuse of the corporate privilege justifies
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For the Northern District of California
stockholders, officers and directors, with separate and distinct liabilities and obligations.”
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United States District Court
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holding the equitable ownership of a corporation liable for the actions of the corporation. . . .
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Under the alter ego doctrine, then, when the corporate form is used to penetrate a fraud,
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circumvent a statute, or accomplish some other wrongful or inequitable purpose, the courts will
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ignore the corporate entity and deem the corporation’s acts to be those of the persons or
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organizations actually controlling the corporation. . . .” Id. (citations omitted). As explained by
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the court in Sonora Diamond, “[t]he alter ego doctrine prevents individuals or other
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corporations from misusing the corporate laws by the device of a sham corporate entity formed
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for the purpose of committing fraud or other misdeeds.” Id.
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To invoke the alter ego doctrine, the Simone Estate must show: (1) that there is such a
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unity of interest and ownership that the separate personalities of the Stroud Estate and ASI no
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longer exist; and (2) that if the acts are treated as those of only the Stroud Estate, an inequitable
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result will follow. See Wady v. Provident Life and Accident Ins. Co. of America, 216 F. Supp.
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2d 1060, 1066 (C.D. Cal. 2002); see also Sonora Diamond, 83 Cal. App. 4th at 538 (“In
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California, two conditions must be met before the alter ego doctrine will be invoked. First,
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there must be such a unity of interest and ownership between the corporation and its equitable
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owner that the separate personalities of the corporation and the shareholder do not in reality
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exist. Second, there must be an inequitable result if the acts in question are treated as those of
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the corporation alone.”). “Among the factors to be considered in applying the doctrine are
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commingling of funds and other assets of the two entities, the holding out by one entity that it is
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liable for the debts of the other, identical equitable ownership in the two entities, use of the
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same offices and employees, and use of one as a mere shell or conduit for the affairs of the
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other.” Roman Catholic Archbishop v. Superior Court, 15 Cal. App. 3d 405, 411 (1971).
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Conclusory allegations of alter ego status are insufficient. See Hokama v. E.F. Hutton & Co.,
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Inc., 566 F. Supp. 636, 647 (C.D. Cal. 1983).
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Additionally, due process requires that a party added to a judgment had “control of the
liability that was involved.” NEC Elecs. Inc. v. Hurt, 208 Cal. App. 3d 772, 781 (1989). As a
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general matter, “[c]ontrol of the litigation sufficient to overcome due process objections may
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For the Northern District of California
litigation and occasion to conduct it with a diligence corresponding to the risk of personal
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United States District Court
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consist of a combination of factors, usually including the financing of the litigation, the hiring
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of attorneys, and control over the course of the litigation.” Id. In addition to control over the
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litigation, the party sought to be added must have had occasion to conduct the litigation “with a
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diligence corresponding to the risk of personal liability that was involved.” Id. at 778-79.
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Moreover, courts have considered an important factor whether the proposed new defendant had
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a duty to appear and defend herself in the earlier litigation. Id. at 778 (citing Motores De
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Mexicali v. Superior Court, 51 Cal. 2d 172, 331 (1958); Katzir’s Floor & Home Design, Inc. v.
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M-MLS.com, 394 F.3d 1143, 1150 (9th Cir. 2004) (defendant was improperly added post-
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judgment in part because he had “no personal duty to defend the underlying lawsuit.”)).
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Here, the Simone Estate has not made a sufficient showing of either that ASI is the alter
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ego of the Stroud Estate or that ASI had control over the litigation in this action. The only
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evidence the Simone Estate cites to in an effort to demonstrate alter ego is a document showing
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that Mr. Stroud transferred all assets of his Nina Simone archives to ASI in 2004 and that ASI
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did not object to Mr. Roker’s failure to pay ASI for the conveyance of the Nina Simone
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archives from ASI to Mr. Roker. Although this evidence may demonstrate some bad faith, but
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it is insufficient to demonstrate that ASI is or was the alter ego of Mr. Stroud.
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In order to demonstrate ASI had control over the litigation in this action, sufficient to
satisfy due process concerns, the Simone Estate argues that ASI was a co-plaintiff in a New
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York case in which the same counterclaims Mr. Stroud and ASI filed in this case were asserted
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in the New York case and the same attorneys represented both parties in both actions. Such
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evidence is not sufficient to demonstrate that ASI had control over the litigation in this action,
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including control over the defense of the claims that were not asserted against ASI. Therefore,
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the Court DENIES the motion to amend to add ASI as a judgment debtor. However, in light of
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the evidence that ASI was listed as owning the copyright over a Nina Simone recording offered
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for sale on Amazon after the Court issued judgment in this case (see Declaration of Steven
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Ames Brown, ¶ 15, Ex. 5), this Order is without prejudice to the Simone Estate moving again to
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add ASI as a judgment debtor with more supporting evidence.
Next, the Simone Estate seeks to amend the judgment to receive an award of monetary
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For the Northern District of California
United States District Court
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damages. The Simone Estate requested in its motion for default judgment, and Magistrate
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Judge Nathanael M. Cousins recommended, that the Court retain jurisdiction to amend
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judgment to award compensatory damages in the event that the Stroud Defendants fail to
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produce the Nina Simone Materials as required by the judgment. The Simone Estate has
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provided proof of damages, but it has not stated that it is relinquishing its right to obtain
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physical possession of the Nina Simone Materials, or that it would return the compensatory
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damages it recovers in the event that they obtain physical possession of the Nina Simone
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materials. The Nina Simone Estate cannot recover the physical possession of the Nina Simone
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materials and monetary damages incurred due to the lack of physical possession. Therefore, the
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Court RESERVES RULING on this portion of the motion to amend and Court DIRECTS the
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Simone Estate to clarify in writing by no later than November 14, 2014, whether it is
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relinquishing the right to obtain physical possession of any Nina Simone recordings for which it
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is awarded monetary damages. If the Simone Estate is not relinquishing any rights, the Simone
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Estate shall provide authority in support of its request for double recovery.
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With respect to the Simone Estate’s request to amend judgment to reflect the accurate
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representative of the Simone Estate and address of the Simone Estate’s counsel, the motion is
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GRANTED.
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IT IS SO ORDERED.
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Dated: October 21, 2014
JEFFREY S. WHITE
UNITED STATES DISTRICT JUDGE
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For the Northern District of California
United States District Court
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