Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from judgments of the Superior Court of Los Angeles County No. BC311213. Victor H. Person and Michael C. Solner, Judges.
Katten Muchin Rosenman, Harrison J. Dossick and Gregory S. Korman for Plaintiff, Appellant and Respondent.
Murphy, Rosen & Cohen, David E. Rosen and Troy H. Slome for Defendant and Appellant.
Spolin Silverman & Cohen, Scott J. Spolin and C. Brent Parker for Defendant and Respondent.
ARMSTRONG, Acting P. J.
Creatier Interactive, LLC ("Creatier") sued multiple defendants for the misappropriation of Creatier's interactive video technology known as "ClickVision." The trial court entered a settlement on the record, which Creatier subsequently sought to be enforced pursuant to Code of Civil Procedure section 664.6. The trial court entered judgment in favor of Creatier against individual defendants Daniel Bates, Jorge Geaga, Ann Kaesman, and Mort Salkind, as well as corporate defendants Inframe Inc. ("Inframe") and Avant Interactive, Inc. ("Avant") on March 5, 2007.
Further statutory references are to this code.
Kaesman appeals the judgment, claiming that the "on-the-record" settlement did not meet the requirements of section 664.6, and that the trial court therefore erred in entering judgment against her. We agree, and reverse the judgment against her.
Bates and Gaega also filed notices of appeal. Bates's appeal was dismissed at his request. This court stayed Geaga's appeal for 90 days, and ordered him to show why his appeal should not be dismissed for lack of standing due to his pending Chapter 7 bankruptcy proceeding. Having failed to do so, we dismiss Geaga's appeal.
The trial court also entered summary judgment in favor of defendant Carole Salkind, based on its conclusion that the undisputed facts preclude her liability as a co-conspirator or as the alter ego of the corporate defendant Avant. Creatier appeals that judgment, arguing that the trial court erred in that conclusion. We agree, and so reverse the summary judgment in favor of Mrs. Salkind.
FACTUAL AND PROCEDURAL BACKGROUND
Appellant's motion, dated July 7, 2008, for production of additional evidence on appeal is denied.
Mark Gottwald and defendant Bates formed Creatier's predecessor corporation, Creative Frontier, Inc. ("Frontier"), to develop what Creatier describes as "a unique, cutting-edge piece of computer interactive television technology called ClickVision." Gottwald arranged for the financing necessary to start up the business, and Bates ran the day-to-day operations, including hiring personnel.
As Creatier explains, "With ClickVision, dynamic objects within a video frame become active links so that a user can instantly receive or create a log of unlimited information from any object in a video stream by 'clicking' it."
By June 2002, Frontier had expended more than $900,000 in development costs, but had no working prototype of the technology. Gottwald and Bates disagreed about the future course of the company. According to the complaint, Bates resolved the disagreement by firing Frontier's entire staff, shutting down the company, copying all of the computer data and programs relating to the ClickVision technology and erasing those materials from Frontier's computers, and forcing Frontier into involuntary bankruptcy proceedings.
Also in June 2002, Mr. Salkind incorporated defendant Inframe. Bates went to work for Inframe, bringing defendants Kaesman and Geaga with him. In December 2002, Mr. Salkind directed his attorney to incorporate defendant Avant, for the purpose of marketing Inframe's technology under the name "V-Click," which used the interactive technology owned by Frontier and incorporated in ClickVision.
Creatier purchased Frontier's assets in bankruptcy in February 2004. Shortly thereafter, Creatier filed this lawsuit. According to Creatier, Bates and Mr. Salkind, "as part of an overall conspiracy, plan and scheme," conspired to steal Frontier's assets, exploit the technology, and shield the illicit profits reaped from this enterprise from Creatier, the rightful owner of the ClickVision technology. According to the complaint, each of the defendants had an individual part to play in the overall conspiracy.
All of the defendants save Mrs. Salkind participated in a mandatory settlement conference which concluded with a settlement on the record before the court. Creatier moved to enforce that settlement, and judgment was entered against Inframe, Avant, Mr. Salkind, Bates, Geaga and Kaesman in favor of Creatier in the amount of $3.5 million. Kaesman appeals the judgment, contending that the requirements of Code of Civil Procedure section 664.6 were not met, and that the settlement entered on the record did not provide for the joint and several liability of the individual defendants.
Shortly before the settlement conference, Mrs. Salkind successfully moved for summary judgment, contending that the undisputed facts established that she could not be found liable as a co-conspirator or as the alter ego of Avant. Creatier appeals that finding.
DISCUSSION
1. Kaesman's appeal of the judgment entered in favor of Creatier pursuant to section 664.6
Kaesman challenges the judgment on two fronts. First, she maintains that the settlement, whatever its terms, was not enforceable against her pursuant to section 664.6 because she did not affirmatively state on the record that she understood and accepted the terms of the settlement. Kaesman also argues that, even if the settlement satisfied the "orally before the court" requirements of section 664.6, there is no evidence to support the trial court's finding that one of the terms of the settlement was that Kaesman would be jointly and severally liable for the $3.5 million payment to Creatier.
As our Supreme Court explained in In re Marriage of Assemi (1994) 7 Cal.4th 896: "Past cases have established that, in ruling upon a section 664.6 motion for entry of judgment enforcing a settlement agreement, and in determining whether the parties entered into a binding settlement of all or part of a case, a trial court should consider whether (1) the material terms of the settlement were explicitly defined, (2) the supervising judicial officer questioned the parties regarding their understanding of those terms, and (3) the parties expressly acknowledged their understanding of and agreement to be bound by those terms. In making the foregoing determination, the trial court may consider declarations of the parties and their counsel, any transcript of the stipulation orally presented and recorded by a certified reporter, and any additional oral testimony. [Citations.] The standard governing review of such determinations by a trial court is whether the court's ruling is supported by substantial evidence. [Citations.]" (Id. at p. 911.) However, "the determination of whether the statutory requirements were met is a question of law which we review independently: 'We make such a [substantial evidence] determination, however, only after deciding whether the parties meet the statutory conditions of section 664.6. Construction and application of a statute involve questions of law, which require independent review. [Citation.]' [Citations.]" (Conservatorship of McElroy (2002) 104 Cal.App.4th 536, 544.) Thus, we independently review the trial court's determination that Kaesman stipulated to the settlement in open court, and review for substantial evidence the trial court's finding that Kaesman agreed to be jointly and severally liable for the $3.5 million judgment.
Section 664.6 was enacted by the Legislature in order to provide a summary procedure to enforce settlement agreements without the need to file a new lawsuit. (Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 809.) Section 664.6 is applicable, however, only when certain conditions are met. Specifically, "[t]he statute recognizes that a settlement may be summarily enforced in either of two situations: where the settlement was made orally before the trial court or where it was made in writing outside the presence of the court." (Elyaoudayan v. Hoffman (2003) 104 Cal.App.4th 1421, 1428.) Furthermore, "[b]ecause of its summary nature, strict compliance with the requirements of section 664.6 is prerequisite to invoking the power of the court to impose a settlement agreement." (Sully-Miller Contractor Co. v. Gledson/Cashman Construction, Inc. (2002) 103 Cal.App.4th 30, 37.) As our Supreme Court explained, section 664.6 "created a summary, expedited procedure to enforce settlement agreements when certain requirements that decrease the likelihood of misunderstandings are met. Thus the statute requires the 'parties' to stipulate in writing or orally before the court that they have settled the case. The litigants' direct participation tends to ensure that the settlement is the result of their mature reflection and deliberate assent. This protects the parties against hasty and improvident settlement agreements by impressing upon them the seriousness and finality of the decision to settle, and minimizes the possibility of conflicting interpretations of the settlement." (Levy v. Superior Court (1995) 10 Cal.4th 578, 585; see also In re Marriage of Assemi, supra, 7 Cal.4th at p. 906 [the requirement that the parties stipulate to the settlement orally before the court 'helps ensure the parties' understanding of the specific terms of the settlement, and their full appreciation of the finality and binding nature of the stipulation].)
The settlement was placed on the record before the trial court on November 29, 2006. Mr. Salkind was present by telephone; the other parties and all counsel appeared in person. Mr. Rosen, counsel for Bates, stated the terms of the settlement on the record: "Defendants will pay plaintiff the sum of $3.5 million by wire transfer or cashier's check no later than December 27, 2006." Plaintiff's attorney, Mr. Dossick, requested clarification: "Mr. Rosen said as point 1 the defendants will pay the settlement amount. I understand that defendants are tendering the settlement amount, but it's Mr. Salkind who is going to be the person who is paying and is guaranteeing that payment by the 27th." There was additional discussion about the method of payment and the actual payor, after which plaintiff's counsel stated: "I think in substance, that expresses the terms."
Additional terms of the settlement, not at issue here, were stated on the record as well.
"The Court: All right. Mr. Salkind, I know that you are at the airport. You have heard the terms of the settlement agreement by Mr. Rosen and Mr. Dossick in this matter. Do you understand the terms of the settlement?
"Mr. Salkind: Yes, sir, your honor, I do.
"The Court: All right. Do you have any other questions about any of those terms?
"Mr. Salkind: No, Sir. . . .
" . . .
"The Court: All right. Thank you very much, Mr. Salkind. Mr. Gottwald, do you understand the terms of the settlement agreement that have been stated here in open court on the record?
"Mr. Gottwald: I do.
"The Court: And do you have any questions about them?
"Mr. Gottwald: No, I don't.
" . . .
"The Court: Okay. With respect to the other individual defendants that are here, Mr. Bates, Dr. Geaga and . . . Ms. Kaesman. You heard the terms of the settlement agreement that have been put on the record[;] if so respond by saying yes.
"Mr. Bates: Yes.
"Ms. Kaesman: Yes.
"Dr. Gaega: Yes.
"The Court: All right all three have indicated affirmatively that they have. And they understand this will extinguish the matter as far as they're concerned. [¶] Are any other questions that the counsel wish me to ask the parties for purposes of the record? [¶] I don't think it's necessary.
"Mr. Dossick [counsel for plaintiff]: No."
As is clear from the foregoing transcript, and Creatier does not argue otherwise, while Kaesman was asked if she heard the terms of the settlement, she was not asked if she understood and agreed to those terms. Thus, the stipulation in open court fails as to Kaesman because she did not expressly acknowledge her understanding of the settlement agreement nor agree to be bound by its terms, as required by In re Assemi, supra, at page 911.
Kaesman made precisely this argument at the hearing to enforce the settlement. Creatier responded: "I think starting with [Kaesman's counsel] Mr. Karlin's argument, the argument that the court must be governed by the precise language that is embodied in the four corners of the transcript applie[s] to agreements that are reached outside of the courtroom. But this was an agreement that was reached with judicial assistance over a three-day period. The court was intimately involved with fashioning the terms of the settlement. And I will defer to the court and hope that the court will aid in the interpretation of the words that appear on the transcript and not treat this transcript as [a] document that was made outside the presence of the court. And if the court does that, I think everything falls into place. And the argument that Mr. Karlin made certainly can't be sustained."
The problem with this argument is that section 664.6 states, and the cases interpreting it have consistently held, that the settlement must either be in writing or acknowledged and agreed to on the record before the court. Creatier can neither point to Kaesman's written agreement, nor to the transcript of her in-court statements, to establish that she understood and agreed to the settlement. Consequently, the settlement is not enforceable against Kaesman under the summary procedure of section 664.6.
Creatier also points out that Kaesman's counsel "did not request that any additional terms or clarification be added to the record, nor did he state any objection to the terms that had just been placed on the record," suggesting that if Kaesman in fact did not agree to be liable, jointly and severally, for the settlement, her counsel would have said so on the record. However, Kaesman is not arguing that the settlement is enforceable pursuant to section 664.6; Creatier is. If Creatier wished to rely on the transcript of reported court proceedings to enforce the settlement, it was incumbent upon Creatier's counsel to make the record which would entitle it to do so.
In short, Kaesman did not agree, either in writing or orally before the court, to be bound by the settlement put on the record by Mr. Rosen, for purposes of section 664.6 enforcement. Accordingly, the judgment as to Kaesman is reversed.
We need not reach the issue of whether, or on what terms, the agreement was otherwise enforceable.
2. Creatier's appeal of the summary judgment entered in favor of Mrs. Salkind
On appeal, we review a summary judgment motion de novo to determine whether there is a triable issue as to any material fact and whether the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) The trial court's determination is accorded no deference. (Worton v. Worton (1991) 234 Cal.App.3d 1638, 1646.) However, we review the ruling, not its rationale. (Aaitui v. Grande Properties (1994) 29 Cal.App.4th 1369, 1373; Stratton v. First Nat. Life Ins. Co. (1989) 210 Cal.App.3d 1071, 1083.) Accordingly, if the trial court's decision is correct on any legal theory, the judgment will be affirmed.
The trial court entered summary judgment based on its determination that Creatier failed to produce evidence to support its theories of liability based on conspiracy and alter ego, without mention of any evidence in support of Mrs. Salkind's direct liability for misappropriation. As more fully discussed below, we conclude that the undisputed evidence that Mrs. Salkind executed a patent application creates a triable issue of material fact regarding whether she directly misappropriated Creatier's trade secrets and confidential information. We therefore conclude that the summary judgment must be reversed. Given this disposition, we deem unnecessary any discussion of Creatier's alternate theories of liability.
On a defendant's motion for summary judgment, the defendant's burden is to establish a complete defense or to negate each of the plaintiff's theories of recovery, and to thus establish that the action is without merit. A defendant meets this burden by showing that one or more elements of the cause of action cannot be established. "Once the defendant . . . has met that burden, the burden shifts to the plaintiff . . . to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto." (PMC, Inc. v. Kadisha (2000) 78 Cal.App.4th 1368, 1373.) We view the evidence in the light most favorable to the plaintiff as the losing party, liberally construing its evidentiary submissions, strictly scrutinizing defendants' evidence and resolving any evidentiary doubts or ambiguities in plaintiffs' favor. (Wiener v. Southcoast Childcare Centers, Inc. (2004) 32 Cal.4th 1138, 1142.)
Mrs. Salkind argued that she was entitled to summary judgment because Creatier could not establish one or more elements of the causes of action, to wit, that she participated in any tortious conduct: "Mrs. Salkind has no connection to and had no participation in any of the acts alleged in the Complaint." Mrs. Salkind also argues that "Plaintiff has named Mrs. Salkind personally as a defendant in this action solely on the basis of her being an officer of Avant," yet "[t]he only thing Mrs. Salkind has ever done on behalf of the corporation is to execute a few corporate documents in her role as President of Avant; however, none of these documents are even remotely implicated by the Complaint's allegations." In arguing that she is entitled to summary judgment, Mrs. Salkind relies on United States Liab. Ins. Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d 586, 595, Michaelis v. Benavides (1998) 61 Cal.App.4th 681, and Barrett v. Hammer Builders, Inc. (1961) 195 Cal.App.2d 305, which hold that the execution of corporate documents as a corporate agent is an insufficient basis upon which to impose personal liability. Additionally, Mrs. Salkind relies on Creatier's discovery responses to assert that it is undisputed that she never participated in any of Avant's operations.
Notwithstanding her contention that she participated in no tortious conduct upon which liability might be premised, Creatier produced evidence that Mrs. Salkind signed, in her individual capacity as the primary inventor, a patent application covering "clickable" video technology which she did not invent or otherwise have an ownership interest in and which Creatier maintains included its trade secrets and confidential information. Claiming an interest in, and seeking patent protection for, technology based on another's protectable trade secrets and confidential information constitutes misappropriation – a tort – as alleged in the complaint. Creatier also produced evidence that Mrs. Salkind assigned her "patent rights" to Avant. Creatier claims that these acts assisted "in the misappropriation complained of by obtaining the imprimatur of the United States Patent and Trademark Office upon defendant's theft." If Creatier can prove that its trade secrets were incorporated into the technology covered by the patent application verified by Mrs. Salkind, it will establish that Mrs. Salkind is liable to Creatier for damages resulting from her misappropriation of Creatier's intellectual property.
Mrs. Salkind quotes well-established case law to the effect that "Directors or officers of a corporation do not incur personal liability for torts of the corporation merely by reason of their official position." (United States Liab. Ins. Co. v. Haidinger-Hayes, Inc., supra, 1 Cal.3d at p. 595.) That, however, is not the sole basis for Creatier's claim against Mrs. Salkind. Rather, Creatier proffered evidence that Mrs. Salkind, in her individual capacity, took affirmative steps to misappropriate Creatier's intellectual property. "Corporate director or officer status neither immunizes a person from personal liability for tortious conduct nor subjects him or her to vicarious liability for such acts." (Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 504.) "Directors are liable to third persons injured by their own tortious conduct regardless of whether they acted on behalf of the corporation and regardless of whether the corporation is also liable. [Citations.] This liability does not depend on the same grounds as 'piercing the corporate veil,' . . . but rather on the officer or director's personal participation or specific authorization of the tortious act. [Citation.]" (Id. at p. 504.) The evidence in the record, including Mrs. Salkind's conduct in connection with the patent application, also raises a triable issue of fact regarding whether Mrs. Salkind was part of the conspiracy alleged by Creatier.
In sum, the record contains evidence sufficient to raise a triable issue of material fact regarding whether Mrs. Salkind misappropriated, or conspired to misappropriate, Creatier's trade secrets. Consequently, summary judgment was improperly granted.
DISPOSITION
The judgments are reversed. Kaesman is to recover her costs on appeal from Creatier, and Creatier is to recover the costs associated with its appeal of the grant of summary judgment from Mrs. Salkind.
We concur: MOSK, J., KRIEGLER, J.