Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court No. 37-2009-00085042- CU-BC-CTL of San Diego County, Yuri Hoffman, Judge.
AARON, J.
I.
INTRODUCTION
Roberto Rabanne entered into an agreement with defendant A.V.E.L.A., a company owned by defendant Leo Valencia, for the purpose of licensing certain photographs that Rabanne had taken of the late musician Bob Marley, and other musicians. The agreement provided that A.V.E.L.A. would pay Rabanne an advance and certain royalties based on merchandise sold that contained Rabanne's images. Rabanne filed this action alleging that the defendants failed to pay him the advance and the royalties.
In his complaint, Rabanne alleged that "any purported individuality or separateness between Valencia and [A.V.E.L.A.] did not and does not exist, " and that "the corporate identity of [A.V.E.L.A.] should be disregarded and defendants Valencia and [A.V.E.L.A.] should be found jointly and severally liable to [Rabanne]."
During the pendency of the action, Rabanne filed a motion for a preliminary injunction in which he claimed that he had recently learned that the defendants were improperly using monies that were owed to Rabanne to offset legal fees that the defendants incurred in related litigation with other parties. The trial court granted Rabanne's motion and enjoined the defendants from using monies that the defendants received from sales of merchandise containing Rabanne's images. Defendants appeal the trial court's order granting the preliminary injunction. We affirm the order.
II.
FACTUAL AND PROCEDURAL BACKGROUND
In May 2009, Rabanne filed a 13-count first amended complaint against defendants that included claims for breach of contract, breach of the covenant of good faith and fair dealing, fraud, negligent misrepresentation, conversion, and unfair business practices. Rabanne alleged that he entered into an agreement with defendants in July 2006 to license certain photographs that Rabanne had taken of Bob Marley and other musicians, for commercial purposes (Licensing Agreement). Rabanne alleged that the defendants agreed to pay him an advance as well as royalties based on sales of merchandise derived from his photographs. Rabanne also alleged that the defendants agreed to provide him with accounting statements showing the proceeds on which Rabanne's royalties were to be based. Rabanne claimed that he had provided the defendants with numerous original photographs pursuant to the Licensing Agreement, and that he had fully performed under the Licensing Agreement. Rabanne alleged that the defendants had failed to pay him the required advance, failed to provide him with timely and detail accountings, failed to pay him any royalties due under the Licensing Agreement, and refused to return his original photographs.
In June 2009, Rabanne filed a motion for a preliminary injunction. In his motion, Rabanne requested that the trial court enjoin the defendants from using any monies that defendants received from the use of Rabanne's photographs, pending the trial of this action. Rabanne claimed that defendants had still not paid him any of the money owed to him under the Licensing Agreement. Rabanne further argued that the defendants were dissipating funds that rightfully belonged to Rabanne. Specifically, Rabanne alleged that defendants were using funds that were owed to Rabanne under the Licensing Agreement to pay legal fees that defendants were incurring in other lawsuits, including an action brought by companies representing the estate of Bob Marley (the Marley Action). Rabanne noted that the plaintiffs in the Marley Action claimed that A.V.E.L.A.'s licensing activities using Rabanne's photographs violated certain of the plaintiffs' trademarks and rights of publicity. Rabanne also argued that the defendants had continued to refuse to return to him original transparencies of the Marley photographs, which Rabanne claimed were of considerable value.
Rabanne supported his motion for a preliminary injunction with a number of exhibits, including his declaration, a copy of the Licensing Agreement, a copy of several photographs that Rabanne had provided to the defendants pursuant to the Licensing Agreement, a fourth quarter 2007 royalty statement that purported to show that no royalties were due to Rabanne, and Valencia's January 2008 declaration in the Marley Action in which Valencia stated that approximately $500,000 worth of merchandise produced using Rabanne's photographs was currently on sale in Target stores nationwide. In addition, Rabanne lodged a copy of the transcript of Valencia's March 2009 deposition in the Marley Action, in which Valencia testified that defendants had been using royalties that would otherwise be payable to Rabanne under the Licensing Agreement to offset legal fees that the defendants incurred in the Marley Action.
In the defendants' opposition to Rabanne's motion, defendants argued that there was no probability that Rabanne would prevail on the merits of this action. Among other arguments in support of this claim, the defendants asserted that A.V.E.L.A. had paid Rabanne the advance required under the Licensing Agreement, and that A.V.E.L.A. had provided Rabanne with the accounting statements required under the agreement. The defendants also contended that Rabanne had agreed to contribute to the defendants' defense in the Marley Action by applying whatever royalties were owed to him under the Licensing Agreement to the defendants' defense costs. Defendants argued:
"Although Mr. Rabanne would have earned approximately $23,000 in royalties from July 1, 2008 to the present, [A.V.E.L.A.'s] legal fees in defending the Marley claims are significantly greater, resulting in no royalties that are currently due to Mr. Rabanne."
Defendants also argued that Rabanne had failed to demonstrate the possibility that he would suffer irreparable harm if the injunction were not granted, because all of Rabanne's claims could be satisfied by a money judgment. Finally, defendants argued that any injunction that the trial court might issue should be restricted to limiting the defendants' use of royalties owed to Rabanne under the Licensing Agreement.
Rabanne filed a reply brief and lodged additional excerpts from Valencia's depositions that were taken in the Marley Action.
On August 28, 2009, the trial court entered a tentative ruling granting Rabanne's motion for a preliminary injunction. The tentative ruling states in relevant part:
"Rabanne's motion for a preliminary injunction enjoining Defendants Leo Wayne Valencia and A.V.E.L.A... and their employees, agents, and persons acting with them or on their behalf from utilizing, spending and/or transferring any moneys received by Defendants from any third party retailer (such as Target, Wal-Mart, or Wet Seal), arising out of merchandise that was sold by these retailers containing images from [Rabanne's] photographs of Bob Marley and/or any other musician, pending the trial of this action, is granted... conditioned on [Rabanne] posting a bond... in the sum of $10,000.
"[Rabanne] has shown a reasonable probability of prevailing on the merits, that he will suffer irreparable harm, and a balance of the equities tilts sharply in his favor.
"[Rabanne] has shown a clear breach of the Licensing Agreement as [Defendant's] admit by declaration that they have made in excess of $153,000 yet they do not contest [Rabanne] has not been paid any royalties. [Citations.] The Licensing Agreement does not require [Rabanne] to pay [Defendants'] legal fees and any modification to the Licensing Agreement must be in writing. [Defendants] present no written evidence to support their arguments of a 'set off for legal fee.' [Defendants'] argument that their payment of $4,200 shows they are not in breach is a non-starter because it was a payment to be [used] for a side-venture ─ the purchase of camera equipment to be used for photographing archives of a European museum. [Citations.]
In his declaration offered in support of his opposition to Rabanne's motion for a preliminary injunction, Valencia acknowledged that Rabanne's images had earned approximately $23,000 in royalties, prior to the defendants' offset for defense costs in other litigation. The trial court presumably applied the Licensing Agreement's 15 percent royalty rate and concluded that the defendants had earned in excess of $153,000 from Rabanne's images.
"The irreparable harm [Rabanne] will suffer is the loss of his share of royalties [Defendants] are earning as they divert [Rabanne's] royalties to pay for legal fees incurred in other litigation.
"The 'balancing of equities' favors [Rabanne] as [Rabanne] will suffer much greater injury if the requested injunctive relief is not granted, as monies are admittedly continuing to be dissipated and great contradictions in revenues have already been raised."
That same day, the trial court held a hearing on Rabanne's motion for a preliminary injunction. During the hearing, Rabanne's counsel stated that he had made a few revisions to the language of a proposed injunction so as to make it clear that the injunction covered monies that defendants received from licensees and distributors, as well as from retailers. At the conclusion of the hearing, the court stated that it would adopt its tentative ruling, as modified by the revisions provided by Rabanne's counsel.
The proposed injunction is not in the record on appeal.
On the same date, the court entered an order granting Rabanne's motion for a preliminary injunction. The preliminary injunction states in relevant part:
"Defendants Leo Valencia and A.V.E.L.A. ("Defendants") and their employees, agents, and persons acting with them or on their behalf are enjoined and restrained from utilizing, spending and/or transferring any moneys to be received by Defendants from any third party retailer (such as Target, Wal-Mart, or Wet Seal), distributor or licensee arising out of merchandise that was sold by these retailers containing images from [Rabanne's] photographs of Bob Marley and/or any other musician, pending trial of this action."
In its order granting the preliminary injunction, the trial court required Rabanne to file an undertaking in the amount of $10,000 pending trial of the action.
Defendants filed a timely appeal of the trial court's August 28, 2009 order.
III.
DISCUSSION
The trial court did not abuse its discretion in granting the preliminary injunction
Defendants claim that the trial court erred in granting the August 28, 2009 preliminary injunction.
A. Standard of review
In People ex rel. Gallo v. Acuna (1997) 14 Cal.4th 1090, 1109, the Supreme Court outlined the standard of review to be applied to the review of a trial court's order granting a preliminary injunction:
"At this initial stage in the proceeding, the scope of our inquiry is narrow. We review an order granting a preliminary injunction under an abuse of discretion standard. [Citations.] Review is confined, in other words, to a consideration whether the trial court abused its discretion in '"evaluat[ing] two interrelated factors when deciding whether or not to issue a preliminary injunction. The first is the likelihood that the plaintiff will prevail on the merits at trial. The second is the interim harm that the plaintiff is likely to sustain if the injunction were denied as compared to the harm the defendant is likely to suffer if the preliminary injunction were issued."' [Citation.] And although we will not ordinarily disturb the trial court's ruling absent a showing of abuse, an order granting or denying interlocutory relief reflects nothing more than the superior court's evaluation of the controversy on the record before it at the time of its ruling; it is not an adjudication of the ultimate merits of the dispute. [Citations.]"
B. The preliminary injunction is not impermissibly overbroad
Defendants' first contention is that the injunction is "fatally overbroad" because, according to the defendants, even if Rabanne were to prevail on his claims, he would be entitled only to royalties equal to 15 percent of the amounts earned by A.V.E.L.A. under the Licensing Agreement. The defendants claim that the trial court's injunction thus "improperly restricts [Defendants'] use of 85 [percent] of the monies A.V.E.L.A. rightfully earns under the [Licensing] Agreement and to which Mr. Rabanne has no legal claim."
In support of their contention that the trial court's injunction is impermissibly overbroad, defendants assert, without citation to the record, that "Mr. Rabanne concedes in his complaint that he is only entitled to be paid the royalties which are due." We have found no such concession in Rabanne's complaint, nor elsewhere in the record. In his prayer for relief, Rabanne seeks, among other forms of relief, compensatory, consequential and punitive damages, rescission of the Licensing Agreement (in the alternative to monetary damages), the imposition of a constructive trust, interest, attorney fees, and restitution. Further, in his motion for a preliminary injunction, Rabanne made clear that his claims are not restricted to breach of contract, arguing, "Besides the contractual claims, there is also a 'reasonable probability' that [Rabanne] will prevail on his tort claims." In addition, at the hearing on Rabanne's motion for a preliminary injunction, Rabanne's counsel indicated that Rabanne's claims are not restricted to recovering amounts due to Rabanne under the Licensing Agreement, stating, "[U]ltimately we will be seeking more than 15 percent...."
Rabanne's complaint contains several causes of action in which he seeks damages over and above the amounts due to him under the Licensing Agreement. For example, Rabanne's first amended complaint includes a claim for intentional misrepresentation, for which Rabanne seeks punitive damages. (See Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1241 ["Punitive damages are recoverable in those fraud actions involving intentional... misrepresentations."].) Rabanne also has brought a cause of action for conversion, which he alleges in the alternative to his breach of contract cause of action. "Punitive damages may... be awarded, if appropriate, on... causes of action for conversion." (Hassoldt v. Patrick Media Group, Inc. (2000) 84 Cal.App.4th 153, 168, fn. 13.)
Rabanne also has brought a claim for unfair business practices, and seeks an order of restitution pursuant to Business and Professions Code section 17203 (section 17203). Defendants have not established on appeal that Rabanne will not be able to recover the profits that defendants received as a result of their alleged wrongful exploitation of Rabanne's photographs pursuant to section 17203. (See Juarez v. Arcadia Financial, Ltd. (2007) 152 Cal.App.4th 889, 915, fn. 15 [discussing the scope of restitutionary remedies under section 17203 and stating, "[W]here a person with knowledge of the facts wrongfully disposes of the property of another and makes a profit thereby, he is accountable for the profit and not merely for the value of the property of the other with which he wrongfully dealt, " quoting Restatement on Restitution section 1, comment e, page 14].)
Rabanne also has brought a claim for unjust enrichment. Defendants have not established that Rabanne will not be able recover the profits that the defendants received as a result of their alleged wrongful exploitation of Rabanne's photographs, pursuant to an unjust enrichment theory. (See County of San Bernardino v. Walsh (2007) 158 Cal.App.4th 533, 542-543 [discussing the remedy of unjust enrichment and stating, "In particular, a person acting in conscious disregard of the rights of another should be required to disgorge all profit because disgorgement both benefits the injured parties and deters the perpetrator from committing the same unlawful actions again"].)
Technically speaking, "unjust enrichment is not a cause of action. [Citation.] Rather, it is a general principle underlying various doctrines and remedies...." (Jogani v. Superior Court (2008) 165 Cal.App.4th 901, 911.)
Accordingly, we conclude that defendants have not established that Rabanne's potential damages in this case are restricted to the amounts to which he was entitled under the Licensing Agreement. We therefore conclude that the defendants have not demonstrated that the trial court granted an impermissibly broad injunction, thereby abusing its discretion.
We emphasize that we have not affirmatively concluded that Rabanne would be entitled to damages in the form of the profits that the defendants allegedly made based on their exploitation of Rabanne's photographs if he prevails on the claims in his complaint. We hold only that defendants have not established that Rabanne has no possible claim to such damages.
C. The trial court did not abuse its discretion in determining that there is a possibility that Rabanne would suffer irreparable harm
The defendants contend that the trial court erred in determining that there is a possibility that Rabanne will suffer irreparable harm, and that this possibility supports issuance of a preliminary injunction.
Code of Civil Procedure section 526, subdivision (a) provides in relevant part:
"(a) An injunction may be granted in the following cases:
[¶]... [¶]
"(2) When it appears by the complaint or affidavits that the commission or continuance of some act during the litigation would produce waste, or great or irreparable injury, to a party to the action.
"(3) When it appears, during the litigation, that a party to the action is doing, or threatens, or is about to do, or is procuring or suffering to be done, some act in violation of the rights of another party to the action respecting the subject of the action, and tending to render the judgment ineffectual."
In Heckmann v. Ahmanson (1985) 168 Cal.App.3d 119, 136 (Heckmann), the court noted that under Code of Civil Procedure section 526, subdivision (a)(3), "[a]n injunction against disposing of property is proper if disposal would render the final judgment ineffectual." In Heckmann, the court concluded that a trial court reasonably determined that injunctive relief was necessary to prevent the dissipation of profits stemming from an allegedly improper corporate takeover attempt. (Heckmann, supra, 168 Cal.App.3d at pp. 135-136.)
In Heckmann, the court quoted a former version of Code of Civil Procedure section 526 (former Code Civ. Proc., § 526, subd. (3)) that is, in all material respects, identical to current Code of Civil Procedure section 526, subd. (a)(3). (Heckmann, supra, 168 Cal.App.3d at p. 135.) For ease of reference, we refer to the current statutory provision in the text.
In this case, as the trial court noted in its order granting the preliminary injunction, it is undisputed that the defendants have been using funds payable as royalties to Rabanne under the Licensing Agreement to pay the defendants' legal fees in other litigation. On appeal, the defendants have failed to demonstrate that the trial court erred in concluding that the Licensing Agreement does not authorize the defendants to offset their legal fees in this manner. Based on the defendants' misuse of the royalty funds, the trial court could have reasonably concluded that a preliminary injunction was necessary to restrain the defendants from dissipating assets that rightfully belong to Rabanne.
In addition, in light of the fact that the defendants continue to maintain on appeal that Rabanne has "no legal claim" to any of the profits that the defendants have earned through the use of Rabanne's images, the trial court may have reasonably concluded that defendants are likely to dissipate these funds as well, notwithstanding Rabanne's potential ability to recover such funds, or a portion thereof, in this litigation. (See pt. III.B., ante.)
Finally, the trial court's conclusion that issuance of an injunction was appropriate to prevent a dissipation of assets is strengthened by the fact that Rabanne presented evidence that the defendants maintained questionable accounting practices throughout the time period for which royalties were owed. For example, Rabanne presented evidence that in a deposition taken in the Marley Action, Valencia testified that A.V.E.L.A.'s bookkeeper had not performed services since 2006, and that neither Valencia nor A.V.E.L.A. has filed an income tax return for several years.
Accordingly, we conclude that the trial court did not abuse its discretion in determining that the possibility that Rabanne would suffer irreparable harm supported issuance of the preliminary injunction.
We reject the defendants' argument that Rabanne's alleged delay in seeking a preliminary injunction mandates reversal. The defendants note that Rabanne asserted in January 2008, in an affidavit filed in the Marley Action, that the defendants were in breach of the Licensing Agreement and further note that Rabanne did not file his motion for a preliminary injunction in this case until June 2009. Rabanne stated in a declaration in support of his motion for a preliminary injunction in this case that it was not until March 2009 that he learned that the defendants were improperly using royalties due to Rabanne under the Licensing Agreement to offset their legal fees in the Marley Action. Under these circumstances, the trial court acted well within its discretion in granting the preliminary injunction notwithstanding Rabanne's alleged delay in filing his motion.
D. The trial court did not abuse its discretion in concluding that Rabanne established a reasonable probability of prevailing in the action
Defendants claim that Rabanne failed to make any showing that he is likely to prevail on the merits of his claims. Defendants offer four arguments in support of this claim. None is persuasive.
First, without citation to the record or to any legal authority, defendants claim that "Rabanne may be collaterally estopped from pursuing any claims based on the enforceability of the agreement." This argument is apparently premised on Rabanne's affidavit in the Marley Action in which Rabanne stated that the Licensing Agreement was "void and unenforceable" because the defendants had never performed their obligations under it. (See fn. 7, ante.) Specifically, in the affidavit, Rabanne stated:
"The Proposed Licensing Agreement with Defendants never went into effect, and was in fact void and unenforceable upon execution, as Defendants did not pay me the guaranteed $5,000 minimum advance, nor provide me with any of the guaranteed royalties under Section 6 of the Proposed License Agreement, nor make any payments whatsoever to me pursuant to the terms of the Proposed License Agreement."
Although defendants contend that Rabanne may be "collaterally estopped" from prevailing on his claims in this case based on his affidavit in the other case, it appears from their brief that they intended to refer to the doctrine of judicial estoppel, not collateral estoppel. In Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210, 231, the court outlined the doctrine of judicial estoppel as follows:
To the extent that defendants intended to refer to the doctrine of collateral estoppel, they have failed to carry their burden of establishing any basis for the doctrine's applicability in this case. The court in State Bar of California v. Statile (2008) 168 Cal.App.4th 650, 670, outlined the doctrine of collateral estoppel as follows: "'"Collateral estoppel precludes relitigation of issues argued and decided in prior proceedings." [Citation.] The doctrine applies "only if several threshold requirements are fulfilled. First, the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding. Second, this issue must have been actually litigated in the former proceeding. Third, it must have been necessarily decided in the former proceeding. Fourth, the decision in the former proceeding must be final and on the merits. Finally, the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding. [Citations.] The party asserting collateral estoppel bears the burden of establishing these requirements."' [Citation.]" The defendants fail to put forth any argument as to how these requirements have been met in this case.
"'The conditions for the doctrine's operation have been described as follows: '(1) the same party has taken two positions; (2) the positions were taken in judicial proceedings....; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake.' [Citation.]"
"The inconsistent position generally must be factual in nature." [Citation.]" (ABF Capital Corp. v. Berglass (2005) 130 Cal.App.4th 825, 832.) "Judicial estoppel is an equitable doctrine, and its application is discretionary." (Jhaveri v. Teitelbaum (2009) 176 Cal.App.4th 740, 751.) The doctrine "is intended to protect the integrity of the judicial process by preventing litigants from playing 'fast and loose' with the courts [citation] and, as such, it should be invoked only in egregious cases. [Citations.] For these reasons, judicial estoppel is usually limited to cases where a party misrepresents or conceals material facts. [Citation.]" (California Amplifier, Inc. v. RLI Ins. Co. (2001) 94 Cal.App.4th 102, 118.)
In this case, defendants have not established that Rabanne's position in the Marley Action was "totally inconsistent" with his position in this case (Silvaco Data Systems v. Intel Corp., supra, 184 Cal.App.4th at p. 231), and we see no factual inconsistency between Rabanne's affidavit in the Marley Action and his claims in this case. At most, Rabanne's affidavit presents a different legal argument as to the consequence of defendants' alleged failure to comply with the terms of the Licensing Agreement. Rabanne's affidavit in the Marley Action thus does provide a basis for applying the doctrine of judicial estoppel. (See California Amplifier, Inc. v. RLI Ins. Co., supra, 94 Cal.App.4th at p. 118 ["Appellants' changing legal arguments, which resulted from their different positions in the two lawsuits, is a reasonable litigation tactic and does not undermine the integrity of the judicial process"].) In addition, defendants have not established that Rabanne was successful in the Marley Action in asserting that the Licensing Agreement is void and unenforceable. (Ibid.) For these reasons, we reject defendants' argument that judicial or collateral estoppel will likely bar Rabanne's claims.
Indeed, defendants acknowledge in their brief that the district court in the Marley Action denied the motion for a preliminary injunction for which Rabanne's affidavit was offered.
Defendants also contend that Rabanne "warranted in the [Licensing] [A]greement that he had all the rights necessary to permit [A.V.E.L.A.] to license and exploit the photographs, " and that "[i]t is apparent that it is Mr. Rabanne who has breached the Agreement, not [A.V.E.L.A.]." Assuming for the sake of argument that Rabanne's alleged breach of the Licensing Agreement would provide a defense to all of Rabanne's claims against defendants, defendants have failed to cite the provision in the Licensing Agreement that they claim supports their assertion that Rabanne provided such a warranty. Thus, defendants have not established that Rabanne breached the Licensing Agreement.
Defendants also assert that A.V.E.L.A. paid Rabanne a $2,500 advance as required by the Licensing Agreement. Specifically, defendants maintain that A.V.E.L.A. paid Rabanne $4,200 in order to enable "Mr. Rabanne to purchase camera equipment at a great discount, which could then be sold for as much as $50,000 and a great profit for both parties." The defendants maintain that Rabanne and Valencia agreed that the $4,200 "would cover the entire advance, " under the Licensing Agreement. The trial court rejected this argument, stating "[Defendants'] argument that their payment of $4,200 shows they are not in breach is a non-starter because it was a payment to be [used] for a side-venture...." The defendants offer no reason for overturning the trial court's factual finding. Accordingly, we conclude that the defendants have not demonstrated that A.V.E.L.A. paid Rabanne the advance required by the terms of the Licensing Agreement.
Defendants also contend that "[A.V.E.L.A.] has provided Mr. Rabanne the required [accounting] statements, with an accounting and offset attorney fees." The defendants did not establish that A.V.E.L.A. provided accounting statements to Rabanne in a timely matter. The record contains accounting statements that date to the third quarter of 2006. However, defendants have not provided a certified mail receipt showing that any of the statements were mailed or otherwise provided to Rabanne earlier than February 2008. Further, the trial court could have reasonably questioned the accuracy of the accounting statements in light of the evidence of defendants' questionable accounting practices that Rabanne presented in support of his motion for a preliminary injunction. (See pt. III.C., ante.)
Accordingly, we conclude that the trial court did not abuse its discretion in determining that Rabanne established a reasonable probability of prevailing in the action.
IV.
DISPOSITION
The August 28, 2009 order is affirmed. Defendants are to bear costs on appeal.
I CONCUR: McCONNELL, P. J., O'ROURKE, J.