Opinion
G044417
11-02-2011
ARTHUR PARTRIDGE, Plaintiff and Appellant, v. EASTWOOD INSURANCE SERVICES, INC., et al., Defendants and Respondents.
Wildish & Nialis, N. Ramsey Barcik, Daniel R. Wildish, Mark A. Nialis; Peterson, Oliver & Poll, Gabriel S. Poll; Law Office of Julia D. Weiner and Julia D. Weiner for Plaintiff and Appellant. Gibson, Dunn & Crutcher, Jeffrey H. Reeves, Bryan E. Smith, Melissa A. Haldorsen and Blaine H. Evanson for Defendants and Appellants.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. 30-2010-00365831)
OPINION
Appeal from an order of the Superior Court of Orange County, Kirk H. Nakamura, Judge. Motion to strike portions of reply brief. Order affirmed; motion denied.
Wildish & Nialis, N. Ramsey Barcik, Daniel R. Wildish, Mark A. Nialis; Peterson, Oliver & Poll, Gabriel S. Poll; Law Office of Julia D. Weiner and Julia D. Weiner for Plaintiff and Appellant.
Gibson, Dunn & Crutcher, Jeffrey H. Reeves, Bryan E. Smith, Melissa A. Haldorsen and Blaine H. Evanson for Defendants and Appellants.
Plaintiff Arthur Partridge, in his capacity as a director, brought a petition for writ of mandate in the trial court seeking to inspect records of defendants Eastwood Insurance Services, Inc., Eastwood Insurance Agency of Nevada, Inc., Eastwood Insurance Agency of Florida, Inc. (collectively the Eastwood entities). The court granted the petition but allowed inspection for a more limited time period than plaintiff requested. In this appeal plaintiff argues the court had no basis for restricting his inspection. We find no error and affirm.
Defendants Eastwood entities and corporate director Judith Partridge (Partridge) filed a motion to strike portions of plaintiff's reply brief wherein he raised objections to certain declarations defendants filed in the trial court on two grounds: Plaintiff waived the issue by failing to properly object in the trial court. Further, it raises a new argument that should have been made in the opening brief. As detailed below, we will not consider plaintiff's arguments regarding inadmissibility of the declarations and thus have no need to grant the motion, which is denied.
We also will not consider the documents attached as appendices to the opening brief. There is no evidence these are in the superior court record. (Hodge v. Kirkpatrick Development, Inc. (2005) 130 Cal.App.4th 540, 546, fn. 1.) Additionally, we decline to take judicial notice of any documents requested by plaintiff in his reply brief. Making a request in a brief is insufficient; a separate motion is required. (Cal. Rules of Court, rule 8.252(a); Canal Ins. Co. v. Tackett (2004) 117 Cal.App.4th 239, 243 [court refused judicial notice where request made in respondent's brief].)
FACTS AND PROCEDURAL HISTORY
Plaintiff and Partridge were married until she filed an action to dissolve their marriage in 2001. At all times relevant to this case, plaintiff and Partridge have been and are the sole directors of the Eastwood entities; Partridge is their president.
As part of the dissolution proceeding and in response to plaintiff's requests, during the years 2002 through January 2006, in addition to documents relevant to the individual parties, defendants produced numerous documents from and concerning the Eastwood entities, including: 1) a list of their assets; 2) financial statements from 1999 through October 2005; 3) balance sheets and income and expense statements; 4) shareholder loan schedules from the inception of the corporations through 2005; 5) general ledgers; 6) shareholder and board of directors' minutes of meetings from 2000 through 2005; 7) bank statements, check registers, and cancelled checks for the same period; 8) credit card statements and expense reports from 2003 through 2005; and 9) compensation records for plaintiff and Judith Partridge for the years 2003 through 2005. In addition, plaintiff's forensic accountants visited the corporate offices several times between August 2005 and January 2006 and reviewed the financial records of Partridge and the Eastwood entities. Plaintiff had inspected all of these documents before a settlement conference in January 2006.
In January 2006 the parties settled the dissolution action and signed an agreement they refer to as the Deal Memo. Among other things it included a waiver of any claims on misappropriation by either party and called for the terms to be memorialized in a judgment to be prepared by Partridge's counsel, which was done. Plaintiff retained new counsel and then refused to sign a final judgment. Partridge then brought a motion to enforce the settlement under Code of Civil Procedure section 664.6 and for sanctions and prevailed, with the court awarding her $52,000 in sanctions.
The judgment on reserved issues was entered in July 2006. In accordance with the parties' agreement in the Deal Memo, the judgment provided, among other things, that the Eastwood entities would be sold and that, pending the sale, Partridge would "have exclusive management and control of them. In connection with a general release using the language of Civil Code section 1542, the parties agreed to waive any further discovery rights.
In 2007 Nationwide Mutual Insurance Agency purchased all of the assets of the Eastwood entities. As a result the Eastwood entities no longer have offices or computers and employ only Partridge, an assistant, and the two adult children of plaintiff and Partridge who do any necessary work at offices of another insurance agency. Defendants provided to plaintiff all documents they had given to Nationwide for its due diligence inspection, including 22 bankers boxes of documents, 30 boxes containing commission information, and a CD. Thereafter, upon a subsequent demand by plaintiff, defendants allowed him to inspect documents from the date of the sale through April 30, 2009 contained in five bankers boxes. The detailed list of the documents comprises 174 single spaced pages.
In 2009 plaintiff filed a motion in the dissolution action to inspect the books and records of the Eastwood entities from 2001 to the present. The court denied it without prejudice on the ground it was not the proper forum. Plaintiff then made written demand on Partridge for those documents. The date he suggested for inspection was the same day as a mediation between the Eastwood entities and Nationwide, of which plaintiff was aware.
In April 2010 plaintiff filed the writ petition at issue, demanding documents from January 2001 to the present pursuant to Corporations Code sections 1602 and 1603 (all further statutory references are to this code unless otherwise stated). He claimed he needed the documents to investigate possible misappropriations by Partridge. In a deposition plaintiff admitted he did not personally know of any such acts but was relying solely on information from his accountant, to whom he had not spoken. The accountant had only talked to plaintiff's lawyer, who had told plaintiff. He also testified he did not know he had waived any further claims of misappropriation in his dissolution judgment.
In response to the petition defendants offered to allow plaintiff to inspect the records from May 1, 2009 when plaintiff had last inspected them, but plaintiff declined. The court granted the order allowing plaintiff access to the books and records for the same time period and set a deadline for the inspection. The parties set a date but the day before plaintiff appeared ex parte to postpone the date so he could attempt to retrieve documents and data stored on electronic media in the possession of third parties. The petition was denied.
DISCUSSION
1. Evidentiary Claims
In his reply brief, plaintiff argues for the first time that we cannot consider certain declarations, not clearly identified, filed by defendants in opposition to the writ petition, claiming they are incompetent. But we question whether plaintiff properly objected to those declarations in the trial court. He made neither written nor oral objections. Rather, in arguing the petition, plaintiff's counsel merely commented that two declarations were hearsay, lacking foundation. He asked for no ruling and did not give the court the opportunity to rule. (Evid. Code, § 353, subd. (a) [no reversal of order based on "erroneous admission of evidence" without timely objection].)
Furthermore, even if the comment in argument were deemed a proper objection, plaintiff failed to make this argument in his opening brief, thereby clearly forfeiting it. (Doe v. Roman Catholic Archbishop of Cashel & Emly (2009) 177 Cal.App.4th 209, 218.) It was not an issue raised in response to the respondent's brief. He had to know defendants would be relying on the declarations. We will not consider plaintiff's arguments on this issue.
2. Right to Inspect Corporate Documents
Plaintiff claims that pursuant to the Corporations Code he has the "absolute right to inspect every corporate document" of the Eastwood entities. (Bold and capitalization omitted.) He asserts this right is "unlimited" and "ongoing." This overstates the case. Further, the argument his repeated requests to inspect were all refused is not substantiated by the record; in fact, clearly the opposite is true.
Section 1602 does provide that "[e]very director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind . . . ." However, despite plaintiff's contrary belief, section 1603, subdivision (a) limits his rights. It states that if a "lawful demand for inspection" is denied, the court "may enforce the right of inspection with just and proper conditions or may, for good cause shown, appoint one or more competent inspectors or accountants to audit the books and records . . . and investigate the property, funds and affairs" of a corporation.
In Havlicek v. Coast-to-Coast Analytical Services, Inc. (1995) 39 Cal.App.4th 1844 the court considered these two statutes together and, while admitting the use of "'absolute'" in section 1602 did "give [it] pause," stated that in some situations "'absolute' cannot mean 'absolute.'" (Havlicek v. Coast-to-Coast Analytical Services, Inc., supra, 39 Cal.App.4th at p. 1855.) "'"'The literal meaning of the words of a statute may be disregarded to avoid absurd results . . . .'" [Citation.]' [Citation.]" (Id. at p. 1856.) Section 1603, when "read in pari materia with section" 1602, gives the court "broad discretion . . . to fashion a protective order imposing just and proper conditions on the inspection." (Havlicek v. Coast-to-Coast Analytical Services, Inc., supra, 39 Cal.App.4th at p. 1856; see also Dandini v. Superior Court (1940) 38 Cal.App.2d 32, 35 [court read former statutes together to determine director's inspection rights].)
This is such a situation. As detailed above, defendants have provided reams of documents to plaintiff over the past several years in response to his multiple demands. Although plaintiff alleged in his petition that defendants had "failed to produce the bulk of the records" he requested, defendants provided evidence to the contrary, which the court plainly believed in limiting plaintiff's access. We do not reweigh evidence or determine the credibility of witnesses. (Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 766.)
Further, despite plaintiff's claims he needs the documents to fulfill his fiduciary duty as a director, the trial court's ruling makes it clear it believed he sought them for other reasons. The breadth of plaintiff's demand, seeking documents from the past 10 years, most or all of which he has already seen, supports that conclusion. We are not persuaded by plaintiff's argument the documents he has already inspected "may take on new meaning." And plaintiff originally asked for these documents in the dissolution action, more evidence that there is good reason not to allow another burdensome inspection and restricted access to the documents is a "just and proper condition[]." The fact plaintiff waived any further claims of misappropriation against Partridge in the dissolution judgment lends even more credence to the ruling.
We are not holding that the agreements in the dissolution judgment are binding in the context of a demand for inspection directed to the corporation, but they do shed light on plaintiff's intent and motive in again demanding the documents. Similarly we are not stating that a director requesting documents must demonstrate a valid intent. (Havlicek v. Coast-to-Coast Analytical Services, Inc., supra, 39 Cal.App.4th at p. 1851.) But the intent legitimately inferred from plaintiff's actions is evidence to support the court's ruling limiting the documents to those not yet produced. We must accept all evidence supporting the successful party, disregard the conflicting evidence, and draw all reasonable inferences to uphold the judgment. (Minelian v. Manzella (1989) 215 Cal.App.3d 457, 463.)
The ruling fairly allowed defendant the right to inspect documents not already produced to him. We see no error in limiting his access to documents to protect the Eastwood entities from being burdened and harassed by another massive document inspection.
Relying on Havlicek and Saline v. Superior Court (2002) 100 Cal.App.4th 909, plaintiff argues the only legitimate limit on production is where there is "a preponderance of the evidence establish[ing] the director's clear intent to use the documents to commit an egregious tort—one that cannot be easily remedied by subsequent monetary damages—against the corporation." (Id. at p. 915.) Saline based this on language in Havlicek, which stated that to obtain a protective order in response to a demand for documents under section 1603, "the corporation must demonstrate, by evidentiary showing, that [the] . . . order is necessary to prevent a tort against the corporation." (Havlicek v. Coast-to-Coast Analytical Services, Inc., supra, 39 Cal.App.4th at p. 1856.) But Havlicek went on to acknowledge this may not be the only basis to justify an order under section 1603, "offer[ing] no opinion" as to "[w]hether there are other situations where a director's inspection rights may be curtailed . . . ." (Havlicek v. Coast-to-Coast Analytical Services, Inc., supra, 39 Cal.App.4th at p. 1856.)
One such curtailment was sanctioned in Tritek Telecom, Inc. v. Superior Court (2009) 169 Cal.App.4th 1385, where a director had filed a shareholder action against the corporation prior to demanding documents. The court determined the plaintiff was not entitled to documents protected by the attorney-client privilege or work product doctrine arising out of defense of the action, stating, "In this situation, a court may properly limit a director's inspection rights because the director's loyalties are divided and documents obtained by a director in his or her capacity as a director could be used to advance the director's personal interest in obtaining damages against the corporation." (Id. at p. 1391.) While Tritek's facts do not completely parallel those here, they illustrate another situation where the right to inspection is not absolute. Further, nothing in the statute restricts imposition of fair and just conditions attached to production merely to prevent an egregious tort. The facts of this case justify the curtailment imposed by the trial court.
DISPOSITION
The order is affirmed. Respondents' motion to strike portions of the reply is denied. Respondents are entitled to costs on appeal.
RYLAARSDAM, ACTING P. J. WE CONCUR: BEDSWORTH, J. O'LEARY, J.