Case Number: BC408322 Hearing Date: May 23, 2014 Dept: 32

CASE NAME: Ehrlichman v. Signalife, Inc. et al.
CASE NO.: BC408322
HEARING DATE: 05/23/14
DEPARTMENT: 32
SUBJECT: Motion to Amend Judgment
MOVING PARTY: Plaintiff Lee Ehrlichman
RESP. PARTY: Non-Parties J. Rowland Perkins and James Fiedler

TENTATIVE RULING

Motion to Amend Judgment DENIED.

ANALYSIS

Plaintiff’s Request for Judicial Notice

Exhibits 1-3 – DENIED. Plaintiff requests judicial notice of these bankruptcy filings for the truth of factual matters stated therein. The court cannot judicially notice hearsay from other court files and actions. (Day v. Sharp (1975) 50 Cal.App.3d 904, 914.)

Exhibit 4 – GRANTED. The Court may judicially notice trial testimony from the instant action.

Plaintiff’s Objections to J. Rowland Perkins’ Declaration

(1) OVERRULED.
(2) OVERRULED.
(3) OVERRULED
(4) OVERRULED.
(5) OVERRULED.

Plaintiff’s Objections to James Fiedler’s Declaration

(1) OVERRULED.
(2) OVERRULED.
(3) OVERRULED.
(4) OVERRULED.
(5) OVERRULED.
(6) OVERRULED.
(7) OVERRULED.

Late Filed Opposition

James Fiedler’s opposition brief was not timely filed or served pursuant to CCP § 1005(b). However, as Plaintiff has responded on the merits, the Court considers Fiedler’s opposition.

Motion to Amend Judgment

“Section 187 of the Code of Civil Procedure grants to every court the power to use all means to carry its jurisdiction into effect, even if those means are not set out in the code. [Citation.] Under section 187, the court has the authority to amend a judgment to add additional judgment debtors. [Citation.]” (NEC Electronics Inc. v. Hurt (1989) 208 Cal.App.3d 772, 778.) The Court also has the power to modify or correct the name of the defendant. (Id.)

“The ability under section 187 to amend a judgment to add a defendant, thereby imposing liability on the new defendant without trial, requires both (1) that the new party be the alter ego of the old party and (2) that the new party had controlled the litigation, thereby having had the opportunity to litigate, in order to satisfy due process concerns. The due process considerations are in addition to, not in lieu of, the threshold alter ego issues.” (Triplett v. Farmers Ins. Exchange (1994) 24 Cal.App.4th 1415, 1421.)

Stay Pursuant to CCP § 916(a)

Fiedler contends that the proposed amendment to add two judgment debtors is not a minor clerical error which may be made pursuant to CCP § 916 during Defendant Signalife’s appeal. “Except as provided in Section 917.1 … the perfecting of an appeal stays proceedings in the trial court upon the judgment … or upon the matters embraced therein or affected thereby….” (CCP § 916(a).) “Unless an undertaking is given, the perfecting of an appeal shall not stay enforcement of the judgment or order in the trial court if the judgment or order is for any of the following: (1) Money or the payment of money, whether consisting of a special fund or not, and whether payable by the appellant or another party to the action.” (CCP § 917.1) In reply, Plaintiff represents that Signalife has not filed an undertaking in conjunction with the appeal so that enforcement of the money judgment is not stayed. (See Reply to Fiedler’s Oppo. 2, citing CCP § 917.1.) Fiedler did not show in the opposition papers that Signalife filed an undertaking as required to obtain a stay pursuant to § 916 and § 917.1. Accordingly, as the instant motion concerns the enforcement of a money judgment, § 916(a) does not mandate a stay.

Alter Ego

“[T]wo conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone.” (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538.) Courts consider various factors to show unity of interest, including commingling of funds, disregard of corporate formalities, diversion of funds or assets, and under-capitalization. (Ibid.) Alter ego will not be applied absent evidence that an injustice would result from the recognition of separate corporate identities, and “[d]ifficulty in enforcing a judgment or collecting a debt does not satisfy this standard.” (Id. at 539.)

Plaintiff has not submitted sufficient evidence to establish that Perkins or Fiedler is an alter ego of judgment debtor Signalife. In support of the motion, Plaintiff relies on the declaration of Lisa Maki, a request for judicial notice of bankruptcy filings of Signalife, and the deposition testimony of Rowland Perkins from the trial in the instant action. Maki’s declaration contains no facts pertinent to alter ego. The Court denies the request for judicial notice of the bankruptcy filings (see Exhibits 1-3 of Plaintiff’s RJN) because Plaintiff relies on these filings for the truth of hearsay statements made therein. (See Day v. Sharp (1975) 50 Cal.App.3d 904, 914.)

Moreover, even considering all facts as represented by Plaintiff in his moving brief (seed Mot. 6-7), there is insufficient evidence of unity of interest or an inequitable result. Plaintiff contends, without citing specific pages in the record, that Fiedler and Perkins are majority shareholders of Signalife; that Perkins admitted at deposition that Signalife’s corporate records were in storage and he refused to produce them; that Fiedler is Signalife’s attorney; that Signalife has no bank account or money; that Perkins invested his own money in Signalife; and that Signalife has not had board meetings since 2006 or 2007.

Although some of this evidence might be consistent with an alter ego theory, it does not rise to the level sufficient to establish that the separate personalities of the individuals and corporation no longer exist. “Courts are less likely to apply the alter ego doctrine where the party seeking to invoke it … voluntarily transacted business with the corporate entity.” (Cambridge Electronics Corp. v. MGA Electronics, Inc. (C.D. Cal. 2004) 227 F.R.D. 313, 330 fn. 50.) Here, the evidence at trial reflected that Plaintiff voluntarily contracted to do business with Signalife after a lengthy period of diligence. As discussed in Perkins’ opposition brief, the fact that Perkins may have invested money in Signalife or served as CEO does not establish improper commingling or siphoning of corporate funds. (Perkins Oppo. 6-7.) Also, contrary to Plaintiff’s assertion, Perkins testimony suggests that Signalife held telephonic board meetings after 2007. (See RJN Exh. 4 at 19; see also Perkins Decl. ¶ 4; Fiedler Decl. Exh. 4.) Finally, Signalife’s lack of a bank account or money is not sufficient to establish improper siphoning of funds where there is evidence that the company does not have current operations and faces various lawsuits. (See RJN Tab 4 at 110.)

As to the inequitable result prong, Plaintiff has not shown that any abuse of the corporate form has caused Plaintiff harm. Plaintiff has not submitted evidence that Perkins or Fiedler have taken bad faith advantage of the corporate form to avoid debts to Plaintiff or to undermine Plaintiff’s discovery efforts in this case.

Plaintiff has not shown that Perkins actually exercised control over the litigation so that he had “occasion to conduct it with a diligence correspondent to the risk of personal liability that was involved.” (NEC Electronics Inc. v. Hurt (1989) 208 Cal.App.3d 772, 778.) Perkins testified that, after Plaintiff
effectively resigned, he turned over the dispute to the Company’s attorneys and COO for handling from then on. (RJN, Ex. 4, Perkins Depo. 45:9-46:5; Perkins Decl. ¶ 7.) Plaintiff offers no evidence that Mr. Perkins financed the litigation, hired the outside attorneys, was the primary contact for the attorneys, was kept fully advised of the litigation, was fully aware of the issues being tried and documents used in the litigation, was an active participant, or otherwise had control over the course of the litigation. Indeed, Plaintiff concedes that Perkins did not even know that Signalife had filed a cross-complaint against Plaintiff in this matter. (Mot. 7:3-4.)

As to Fiedler, the issue of control is a closer call because Perkins testified that Fiedler was an attorney for Signalife and Perkins turned this lawsuit over to him. (RJN Exh. 4 at 45.) Nevertheless, in balance, there is insufficient evidence that he controlled the litigation to the degree required by the case law to name him as a judgment debtor without trial. Fiedler presents evidence that attorney Eric Wittenberg was in full control of the litigation and was the only attorney to appear at trial. (Fiedler Decl. ¶ 8.) He indicates that he provided only limited testimony at trial as a representative of Signalife and as its custodian of records. (Id. ¶ 9.) Plaintiff points to no portions of Perkins’ trial testimony establishing by a preponderance of evidence that Fiedler exercised sufficient control over the litigation to satisfy due process. (Mot. 6-7.)

The motion to amend judgment is DENIED.