Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
APPEALS from a judgment and an order of the Superior Court of Los Angeles County, Ct. No. BC336543, Soussan G. Bruguera, Judge.
Hillel Chodos and Jonathan P. Chodos for Plaintiffs and Appellants.
Quinn Emanuel Urquhart & Sullivan, Richard A. Shirtzer and Anthony P. Alden for Defendants and Respondents Dial Communications Global Media Inc. and Excelsior Radio Networks, Inc.
Buehler & Kassabian and Mark M. Kassabian for Defendant and Respondent Patient Safety Technologies, Inc.
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
I. INTRODUCTION
Plaintiffs, Jeffrey A. Leve and Jeffrey Leve Family Partnership, L.P., appeal from a September 30, 2009 judgment entered against them in favor of defendants, Patient Safety Technologies, Inc. (formerly known as Franklin Capital Corporation), Excelsior Radio Networks, Inc. (“Excelsior”), and Dial Communications Global Media, Inc. (“Dial”) after a bench trial. Plaintiffs contend the trial court improperly denied them the right to a jury trial on their de factomerger claim. In addition, plaintiffs challenge the trial court’s ruling that there was no de facto merger. Defendants Dial and Excelsior separately appeal from a February 19, 2010 order denying their motion for costs of proof and granting plaintiffs’ motion to tax costs. We affirm the judgment and the order denying the motion for costs of proof. Because the trial court applied the wrong burden of proof in ruling on the motion to tax costs, the order granting the corresponding motion is reversed and the matter is remanded to allow the trial court to conduct a new hearing.
II. BACKGROUND
A. Plaintiffs Sell Their Company
On November 1, 2000, plaintiffs sold their company, On the Radio Broadcasting (“On the Radio”) to Winstar Radio Networks, Inc. (“Winstar Radio”) stock purchase agreement for a minimum purchase price of just over $1 million with an initial payment of $500,000 and the balance in monthly installments. Plaintiffs were entitled to a maximum purchase price of $4.5 million if they could verify additional audience for their radio programs. When On the Radio was sold, the assets of Winstar Radio were pledged to guarantee $1.15 billion in revolving credit and term loans extended to its ultimate parent, Winstar Communications, Inc. by a syndicate of banks. Winstar Radio only paid plaintiffs $586,000 of the purchase price.
On December 27, 2000, Winstar Radio merged with its immediate parent, Winstar New Media Company, Inc. (“Winstar New Media”), and its assets and obligations were transferred to Winstar Radio Productions LLC. On April 18, 2001, Winstar New Media, its parent, Winstar Communications, Inc. and some other Winstar entities filed for Chapter 11 bankruptcy. Winstar Radio Productions LLC and Winstar Global Media, Inc. (“Winstar Global”) did not file for bankruptcy. At the time of the bankruptcy filing, Winstar Radio, Winstar New Media and Winstar Global’s assets remained pledged to support the loan guarantee.
On August 8, 2001, Winstar Global, Winstar Radio Networks LLC and Winstar Radio Productions LLC agreed to sell some of their assets — including On the Radio assets — to Franklin Capital Corporation (“Franklin Capital”) under an asset purchase agreement for $6.25 million; $5.25 million in cash and the remaining $1 million in the form of a promissory note. Because the assets of Winstar Global and other Winstar entities were pledged to secure the $1.15 billion bank syndicate loan, on August 27, 2001, the banks released liens only on the Winstar assets that would be sold to Franklin Capital. Winstar’s asset sale to Franklin Capital closed on August 28, 2001.
Franklin Capital assigned its interests and liabilities under the asset purchase agreement to its subsidiary, eCom Capital, Inc., which later changed its name to Excelsior Radio Networks, Inc. In April 2002, Franklin Capital acquired Dial Communications. The Winstar Global and Dial Communication assets were placed into an Excelsior subsidiary, Dial Communications Global Media, Inc. (“Dial”) which was incorporated on March 28, 2002. On March 30, 2005, Franklin Capital changed its name to Patient Safety Technologies, Inc. (“Patient Safety”). By 2005, Patient Safety no longer owned Excelsior or Dial.
B. The Federal Lawsuits
On October 15, 2001, plaintiffs sued Franklin Capital and several Winstar companies and executives including Winstar Global for breach of fiduciary duty and fraud. The action was removed and transferred to federal court in New York. On February 25, 2003, the district court granted Franklin Capital’s motion to dismiss. On June 24, 2004, the district court granted summary judgment in favor of most of the remaining defendants. The district court’s rulings were affirmed by the Second Circuit. On September 17, 2004, the district court entered a default judgment against Winstar Global Media, Inc. and Winstar Radio Networks LLC in the amount of $5,014,000 plus interest.
Dial and Excelsior’s request for judicial notice of the docket sheet in Leve v. Franklin Capital Corp. et al. (S.D.N.Y.), No. 1:02-cv-02116-DC, is granted pursuant to California Evidence Code section 452, subdivision(d).
On February 3, 2006, Winstar Global sued Patient Safety (as Franklin Capital was then known) in New York federal court. Winstar Global sought to collect under the $1 million promissory note executed by Franklin Capital in connection with the August 2001 sale. Patient Safety later settled with Winstar Global for $750,000.
C. The California Lawsuit
On July 14, 2005, plaintiffs sued Patient Safety and its former subsidiaries, Excelsior and Dial, to enforce the default judgment. Plaintiffs alleged one or more of the defendants were liable for the default judgment because of a de facto merger with Winstar Global. In support of the de factomerger claim, plaintiffs alleged Franklin Capital acquired the Winstar Global assets for approximately $2.5 million, which was a small fraction of their actual value. Defendants Excelsior and Dial moved to strike plaintiffs’ jury demand which was granted over plaintiffs’ objections.
During the bench trial, plaintiffs submitted the July 31, 2001 balance sheets of the Winstar assets purchased by Franklin Capital. The assets included Baby Love Productions, Winstar Radio Services, On the Radio Broadcasting, Global Media, and Winstar Radio Networks, Corp. Plaintiffs’ position was the balance sheets demonstrated Franklin Capital’s purchase of these assets was for inadequate consideration. The balance sheets showed a net worth of $4,974,575 for Baby Love Productions; $9,377,207 for Winstar Radio Services; $225,572 for On the Radio Broadcasting; $7,257,367 for Winstar Global; and a loss of $568,083 for Winstar Radio Networks, Corp.
Defendants’ expert testified that it was not appropriate to value assets based on a balance sheet because it is prepared on a historical cost basis, which does not reflect fair-market value. Defendants’ expert opined that using the “income approach, ” the fair market value of the Winstar Global assets sold in August 2001 was $1,631,254.
The trial court ruled plaintiffs had failed to prove by a preponderance of the evidence that any of the defendants de facto merged with Winstar Global and ordered judgment for defendants. On October 8, 2009, the trial court entered judgment in favor of defendants.
On February 4, 2010, the trial court held a hearing on plaintiffs’ motion to tax costs and defendants’ motion for costs of proof. On February 19, 2010, the trial court granted plaintiffs’ motion to tax costs and denied defendants’ motion for award of costs of proof.
Defendants Dial and Excelsior’s motion to augment the record on appeal to include transcripts of the February 4, 2010 hearing and the March 3, 2009 hearing is granted pursuant to rule 8.155 of the California Rules of Court.
III. DISCUSSION
A. Motion to Strike Appendix and Dismiss Appeal
Before we discuss the issues raised by plaintiffs and defendants Dial and Excelsior on appeal, we first address defendants Dial and Excelsior’s motion to strike plaintiffs’ appendix and dismiss the appeal. Dial and Excelsior argue plaintiffs’ appendix should be stricken because plaintiffs have improperly included “rough” trial transcript excerpts. We reject this argument for two reasons. First, because the trial court’s statement of decision referenced these excerpts, they are properly part of the appendix. (See, e.g., Martin Bros. Const., Inc. v. Thompson Pacific Const., Inc. (2009) 179 Cal.App.4th 1401, 1405, fn. 1.) Second, the motion is moot because we have not considered the excerpts in addressing the appellate claims. (See Mocek v. Alfa Leisure, Inc. (2003) 114 Cal.App.4th 402, 409.)
Defendants Dial and Excelsior further contend plaintiffs’ appeal should be dismissed because plaintiffs failed to provide this court with the reporter’s transcript. After defendants Dial and Excelsior filed their motion to dismiss the appeal on July 19, 2010, plaintiffs remedied the deficiency in the record by providing us with the reporter’s transcript. The reporter’s transcript was filed with the court on October 25, 2010. Because there was no harm to defendants, we deny the motion to dismiss the appeal. (Demkowski v. Lee (1991) 233 Cal.App.3d 1251, 1256 [denying respondent’s request for court to decline consideration of issues on appeal because of “the strong public policy in favor of hearing appeals on their merits and in not depriving a party of the right because of technical noncompliance where he or she appears to have attempted to comply with the rules”]; Winkler v. Southern Cal. Permanente Medical Group (1955) 136 Cal.App.2d 356, 357 [failure to provide clerk’s and reporter’s transcripts did not warrant dismissal of appeal where respondents furnished these transcripts]; Jarkieh v. Badagliacco (1945) 68 Cal.App.2d 426, 431.)
B. The Right to Have a Jury Decide a De Facto Merger Claim
Plaintiffs contend they were entitled to a jury trial on their de facto merger claim. They argue the trial court erred in striking their jury demand and trying the case without a jury because the action is legal rather than equitable. Plaintiffs assert that although a de factomerger may be found on equitable principles, the action is legal and triable to a jury because the relief they sought was the enforcement of the default judgment and payment of money. We disagree.
1. Standard of Review
On appeal, questions of law not involving disputed facts are reviewed de novo. (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799; Silvers v. State Bd. of Equalization (2010) 188 Cal.App.4th 1215, 1219.) Whether a party in a civil case is constitutionally entitled to a jury trial “is a pure question of law that we review de novo.” (DiPirro v. Bondo Corp. (2007) 153 Cal.App.4th 150, 179; quoting Caira v. Offner (2005) 126 Cal.App.4th 12, 23; see also Rubalcava v. Martinez (2007) 158 Cal.App.4th 563, 570 [questions concerning interpretation of California Constitution are reviewed de novo].) Under de novo review, “an appellate court may independently examine the legal issues in the case and is not bound by the ruling of the trial court.” (California Country Club Homes Assn. v. City of Los Angeles (1993) 18 Cal.App.4th 1425, 1438; see also Twain Harte Homeowners Assn. v. County of Tuolumne (1982) 138 Cal.App.3d 664, 674.)
2. There Is No Right to a Jury Trail on Claims of Equity
The right to a jury trial is guaranteed by the California Constitution under Article I, section 16, which provides in pertinent part: “Trial by jury is an inviolate right and shall be secured by all....” “‘“In determining whether the action was one triable by a jury at common law, the court is not bound by the form of the action but rather by the nature of the rights involved and the facts of the particular case — the gist of the action. A jury trial must be granted where the gist of the action is legal, where the action is in reality cognizable at law.”’ [Citation.] On the other hand, if the action is essentially one in equity and the relief sought ‘depends upon the application of equitable doctrines, ’ the parties are not entitled to a jury trial.” (C & K Engineering Contractors v. Amber Steel Co. (1978) 23 Cal.3d 1, 9; see also Baugh v. Garl (2006) 137 Cal.App.4th 737, 740.)
While the relief sought is an important factor in determining whether the action is legal or equitable, it is not determinative. (Caira v. Offner, supra, 126 Cal.App.4th at p. 24; C & K Engineering Contractors, supra, 23 Cal.3d at p. 9.) “Although [the California Supreme Court has] said that ‘the legal or equitable nature of a cause of action ordinarily is determined by the mode of relief to be afforded’ [citation], the prayer for relief in a particular case is not conclusive. [Citations.] Thus, ‘[t]he fact that damages is one of a full range of possible remedies does not guarantee... the right to a jury....’ [Citation.]” (C & K Engineering Contractors, supra, 23 Cal.3d at p. 9.)
3. A De Facto Merger Claim is an Equitable Claim
In the present case, the complaint seeks to enforce a default judgment against defendants based on a de facto merger claim. Liability may be imposed on a successor corporation where there has been a de factomerger. (CenterPoint Energy, Inc. v. Superior Court (2007) 157 Cal.App.4th 1101, 1120; Ray v. Alad Corp. (1977) 19 Cal.3d 22, 28.) “[W]here one corporation sells or transfers all of its assets to another corporation, the latter is not liable for the debts and liabilities of the former unless (1) the purchaser expressly or impliedly agrees to such assumption, (2) the transaction amounts to a consolidation or merger of the two corporations, (3) the purchasing corporation is merely a continuation of the selling corporation, or (4) the transaction is entered into fraudulently to escape liability for debts.” (Franklin v. USX Corp. (2001) 87 Cal.App.4th 615, 621.) Liability based on consolidation or merger arises where “one corporation takes all of another’s assets without providing any consideration that could be made available to meet the claims of the other’s creditors or where the consideration consists wholly of shares of the purchaser’s stock which are promptly distributed to the seller’s shareholders in conjunction with the seller’s liquidation.” (Ray v. Alad Corp., supra, 19 Cal.3d at pp. 28-29; Franklin v. USX Corp., supra, 87 Cal.App.4th at p. 626.)
To determine whether a de facto merger claim is triable by a jury or the court, we look at whether the claim is legal or equitable in nature. (C & K Engineering Contractors, supra, 23 Cal.3d at p. 9; see also Baugh v. Garl, supra, 137 Cal.App.4th at p. 740.) “[W]here a corporation reorganizes under a new name but with particularly the same stockholders and directors and continues to carry on the same business, a court of equity will regard the new corporation as a continuation of the former corporation, and will hold it liable for the debts of the former corporation.” (Stanford Hotel Co. v. M. Schwind Co. (1919) 180 Cal. 348, 354, italics added.) While successor liability in Stanford Hotel was based on mere continuation of the selling corporation rather than de facto merger, these two bases of successor liability are similar because a de facto merger theory is a subset of the mere continuation theory. (Franklin v. USX Corp., supra, 87 Cal.App.4th at p. 625 & fn. 6.)
Because successor liability is based on equitable principles, there is no right to a jury trial. (Rosales v. Thermex-Thermatron, Inc. (1998) 67 Cal.App.4th 187, 196; see also Ed Peters Jewelry Co. v. C & J Jewelry Co. (1st Cir. 2000) 215 F.3d 182, 186 [no right to jury trial because successor liability is equitable and action is for recovery of amounts already reduced to judgment].) “The determination whether it is fair to impose successor liability involves... broad equitable considerations” and “is exclusively for the trial court.” (Rosales v. Thermex-Thermatron, Inc., supra, 67 Cal.App.4th at p. 196.)
Although the court in Malone v. Red Top Cab Co. (1936) 16 Cal.App.2d 268, 274, stated that the merger question was properly submitted to jury, the question of whether plaintiff was entitled to a jury trial was not before that court; thus, the case is not directly on point. (See People v. Alvarez (2002) 27 Cal.4th 1161, 1176 [“[I]t is axiomatic that cases are not authority for propositions not considered”].)
Although plaintiffs sought monetary relief, enforcement of the Winstar Global judgment against defendants is only available by the application of the equitable doctrine of a de facto merger; thus, the action is equitable. While the general rule is that monetary relief is a legal remedy, “‘“[a]n action is one in equity where the only manner in which the legal remedy of damages is available is by application of equitable principles.” [Citation.]’” (DiPirro v. Bondo Corp., supra, 153 Cal.App.4th at p. 182; see also Interactive Multimedia Artists, Inc. v. Superior Court (1998) 62 Cal.App.4th 1546, 1555.) Thus, a de facto merger claim is not subject to a jury trial.
C. The Trial Court Properly Found There Was No De Facto Merger
When findings of fact are challenged on appeal, we apply the highly deferential substantial evidence standard of review, which calls for review of the entire record to determine whether there is any substantial evidence, contradicted or not contradicted, to support the findings below. (Hub City Solid Waste Services, Inc. v. City of Compton (2010) 186 Cal.App.4th 1114, 1128-1129; People ex rel. Brown v. Tri-Union Seafoods, LLC (2009) 171 Cal.App.4th 1549, 1567.) “The presumption on appellate review favors the correctness of the judgment, and where there is a conflict in the evidence and the inferences to be drawn therefrom, an appellate court is bound to accept as true the evidence and inferences in accordance with the findings of the lower court.” (Estate of Falco (1987) 188 Cal.App.3d 1004, 1018; see also Denham v. Superior Court (1970) 2 Cal.3d 557, 564 [“‘A judgment or order of the lower court is presumed correct. All intendments and presumptions are indulged to support it on matters as to which the record is silent, and error must be affirmatively shown’”].)
There are five factors pertinent to a determination of whether an asset sale achieves the same practical result as a merger: “(1) was consideration paid for the assets solely stock of the purchaser or its parent; (2) did the purchaser continue the same enterprise after the sale; (3) did the shareholders of the seller become shareholders of the purchaser; (4) did the seller liquidate; and (5) did the buyer assume the liabilities necessary to carry on the business of the seller?” (Marks v. Minnesota Mining and Manufacturing Co. (1986) 187 Cal.App.3d 1429, 1436.) “The crucial factor in determining whether a corporate acquisition constitutes either a de facto merger or a mere continuation is the same: whether adequate cash consideration was paid for the predecessor corporation’s assets.” (Franklin v. USX Corp., supra, 87 Cal.App.4th at p. 625; CenterPoint Energy, Inc. v. Superior Court, supra, 157 Cal.App.4th at p. 1121.)
We do not address defendants’ assertion that New York de facto merger law applies because the trial court decided the de facto merger claim under California law. We also decline to address defendants’ res judicata argument, which was rejected by the trial court in its order overruling demurrers to the second amended complaint.
There was substantial evidence to support the trial court’s ruling that there was no de factomerger. The record supported the trial court’s finding that there was adequate consideration. The balance sheets of Baby Love Productions, Winstar Radio Services, On the Radio Broadcasting, Global Media and Winstar Radio Networks, Corp. were received into evidence and there was testimony about them from various witnesses including defendants’ expert. The trial court was entitled to credit the testimony of defendant’s expert, who opined that it was inappropriate to value assets based on the Winstar Global balance sheet because it was prepared on a historical cost basis, which does not reflect fair-market value. Defendants’ expert opined that using the preferred “income approach, ” the fair market value of the Winstar Global assets sold in August 2001 was $1,631,254. This fair market value was less than the $2.5 million that the complaint alleged was paid for the Winstar Global assets. It is also far less than the $6.25 million that Franklin Capital paid for the Winstar assets, including the Winstar Global assets.
We discuss only the de facto merger findings that plaintiffs challenge on appeal.
Furthermore, even if we accept plaintiffs’ claim that they were tort creditors to Winstar Global at the time of the Winstar asset purchase August 2001, there is no evidence that plaintiffs as unsecured creditors would have received any of the proceeds from the Winstar asset sale because the banks had priority as secured creditors under the a $1.15 billion loan agreement. The banks released liens only on the Winstar assets that would be sold to Franklin Capital, not on the balance of the pledged collateral.
Finally, the 2006 Winstar Global lawsuit against defendant Patient Safety is probative evidence that the seller did not liquidate, a de facto merger consideration under Marks v. Minnesota Mining and Manufacturing Co., supra, 187 Cal.App.3d at page 1436. Plaintiffs’ assertion that the 2006 Winstar Global litigation is irrelevant because de facto merger liability was predicated on, and fixed by, the August 2001 asset purchase is not persuasive because there could not have been a merger between Winstar Global and any of the defendants if Winstar Global sued Patient Safety in 2006. Moreover, if Winstar Global had merged with any of the defendants, one would assume defendant Patient Safety would not have settled with Winstar Global (i.e., a company that no longer existed).
D. Attorneys’ Fees and Expert Fees
1. Attorneys’ Fees
Defendants Dial and Excelsior contend that the trial court erred in denying their motion for costs of proof including attorneys’ fees. We review the trial court’s ruling on a motion for costs of proof under Code of Civil Procedure section 2033.420 for abuse of discretion. (Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1275-1276; Miller v. American Greetings Corp. (2008) 161 Cal.App.4th 1055, 1066.)
All further statutory references are to the Code of Civil Procedure.
Under section 2033.420, a party whose request for admission is denied and who thereafter proves the truth of the matter, “may move the court for an order requiring the party to whom the request was directed to pay reasonable expenses incurred in making that proof, including reasonable attorney’s fees.” (§ 2033.420, subd. (a).) “The court shall make this order unless it finds any of the following: [¶] (1) an objection to the request was sustained or a response to it was waived under [s]ection 2033.290; (2) the admission sought was of no substantial importance; (3) the party failing to make the admission had reasonable ground to believe that that party would prevail on the matter; (4) there was other good reason for failure to admit.” (§ 2033.420, subd. (b).) “[A] court may properly consider whether at the time the denial was made the party making the denial held a reasonably entertained good faith belief that [it] would prevail on the issue at trial.” (Brooks v. American Broadcasting Co. (1986) 179 Cal.App.3d 500, 511; Miller v. American Greetings Corp., supra, 161 Cal.App.4th at 1066.)
Defendants Dial and Excelsior contend that the trial court’s denial of their motion for costs of proof was an abuse of discretion because it contradicted the court’s finding that plaintiffs failed to satisfy their burden of proof on their de factomerger claim. Defendants argue that the court cannot find a total failure of proof at trial and yet also find that plaintiffs held a reasonable belief they would prevail on the key issues in the case — whether a fair price was paid for Winstair Global assets and whether defendants merged with Winstar Global.
In denying defendants’ motion for costs of proof, the trial court stated, “ In light of the time when the requests for admissions were made, as well as the [c]ourt’s subsequent rulings on the parties’ motions, the [c]ourt finds that plaintiffs had reasonable grounds to believe that they would prevail in this matter.” The trial court could have concluded that at the time plaintiffs denied the requests for admission, plaintiffs had reasonable grounds to believe they would prevail at trial because the balance sheets, which were admitted in evidence at trial, suggested inadequate consideration and supported their de facto merger claim. Furthermore, the court’s denial of defendants’ demurrers and motions for summary judgment provided plaintiffs reasonable grounds for believing that they would prevail on the de factomerger claim at trial. Therefore, the court did not abuse its discretion in denying defendants’ motion for costs of proof.
2. Expert Fees Under Section 998
Defendants Dial and Excelsior argue that the trial court improperly granted plaintiffs’ motion to tax the expert fees. “Whether a section 998 offer was reasonable and made in good faith is left to the sound discretion of the trial court.” (Ritter & Ritter, Inc. Pension & Profit Plan v. The Churchill Condominium Assn., (2008) 166 Cal.App.4th 103, 128; Jones v. Dumrichob (1998) 63 Cal.App.4th 1258, 1262.)
Section 998, subsection (c)(1) provides in pertinent part: “If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant’s costs from the time of the offer. In addition... the court... in its discretion, may require the plaintiff to pay a reasonable sum to cover costs of the services of expert witnesses....” A section 998 offer must be made in good faith; it “‘must be realistically reasonable under the circumstances of the particular case.’” (Elrod v. Oregon Cummins Diesel, Inc. (1987) 195 Cal.App.3d 692, 698, quoting Wear v. Calderon (1981) 121 Cal.App.3d 818, 821; Jones v. Dumrichob (1998) 63 Cal.App.4th 1258, 1262.)
“Where the validity of a section 998 offer is challenged, the offering party has the burden of demonstrating that its offer is valid and further such an offer is strictly construed in favor of the party against whom it would operate.” (Thomas v. Duggins Construction Co. (2006) 139 Cal.App.4th 1105, 1113; Barella v. Exchange Bank (2000) 84 Cal.App.4th 793, 799.) However, “[w]here... the offeror obtains a judgment more favorable than its offer, the judgment constitutes prima facie evidence showing the offer was reasonable and the offeror is eligible for costs as specified in section 998. The burden is therefore properly on plaintiff, as offeree, to prove otherwise.” (Elrod v. Oregon Cummins Diesel, Inc., supra, 195 Cal.App.3d at p. 700; Jones v. Dumrichob, supra, 63 Cal.App.4th at p. 1264; Essex Insurance Co. v. Heck (2010) 186 Cal.App.4th 1513, 1528 [“[W]hen a party obtains a judgment more favorable than its pretrial offer, [the offer] is presumed to have been reasonable and the opposing party bears the burden of showing otherwise”].)
Defendants Dial and Excelsior contend the trial court abused its discretion in denying an award of expert witness fees. In granting plaintiffs’ motion to tax costs, the trial court stated, “Although on appeal, ‘the trial result itself constitutes prima facie evidence that the offer was reasonable... (Jones v. Dumrichob [, supra, ] 63 Cal.App.4th [at p. 1264]), the court finds defendants failed to carry their initial burden to establish the reasonableness of their 998 offers by way of reference to information that was known or reasonably should have been known at the time the 998 offers were made.” We agree the trial court abused its discretion by failing to shift the burden to plaintiffs to prove that the offer was unreasonable. Accordingly, we reverse the trial court’s order taxing Dial and Excelsior’s costs and remand the case for a hearing that addresses this issue in light of the proper burden of proof.
IV. DISPOSITION
The judgment is affirmed. The February 19, 2010 order is affirmed as to the denial of defendants’ Dial and Exelsior’s motion for award of costs of proof, and reversed and remanded for proceedings to determine whether defendants Dial and Excelsior are entitled to expert witness fees.
Defendant Patient Safety Technologies is to recover its costs on appeal. The remaining parties are to bear their own costs on appeal.
I concur: ARMSTRONG, Acting P. J., MOSK, J., Concurring
I concur.
The issue of whether a plaintiff seeking a damage remedy based on successor liability is entitled to a jury trial is one that has not been decided in California and is subject to differing views in other jurisdictions. In Ed Peters Jewelry Co. v. C & J Jewelry Co. (1st Cir. 2000) 215 F.3d 182, 186 (Ed Peters), the plaintiff obtained state court judgments for specified funds and then filed a federal action against the defendant and its successors. The district court held that successor liability is equitable in nature, and therefore the plaintiff had no right to a jury trial. The Court of Appeals affirmed, but noted that “this case does not involve the computation of damages [because of the state court judgment], which is often considered a determination to be made by a jury.” (Id. at p. 186.) The reasoning would apply to the instant case. (See also California Employees Health & Welfare Trust Fund v. Advance Building Maintenance, Inc. (N.D. Cal. 2010) [2010 WL 3448512] [Unpublished].)
Nevertheless, a later federal case rejected the reasoning in Ed Peters, supra, 215 F.3d 182. In G-I Holdings, Inc. v. Bennet (D.N.J. 2005) 380 F.Supp.2d 469 (G-I), the court said that the most important element of the analysis set forth in Granfinanciera, S.A. v. Nordberg (1989) 492 U.S. 33, 42 for determining if a party is entitled to a jury trial is ascertaining whether the remedy sought is legal or equitable. The court said that if the plaintiff had sued the original obligor for a judgment it “would be seeking a determination of liability and money damages. Therefore, the remedy sought is legal.” (G-I, supra, 380 F.Supp.2d at p. 474.)
Although recognizing that this is a difficult case of first impression, I am concurring on the basis that here, as in Ed Peters, supra, 215 F.3d at page 184, the trial court did not have to determine the amount of damages. Rather, it only had to decide the equitable issue of successor liability. The issue of whether a claim based on successor liability must, upon a demand, be tried to a jury, is an important one that can have significant ramifications in this day of failing businesses.