Judge: Helen Zukin, Case: 21SMCV00498, Date: 2022-07-27 Tentative Ruling

Case Number: 21SMCV00498    Hearing Date: July 27, 2022    Dept: 207

Background

This case involves the alleged breach of a right of first negotiation and last refusal for worldwide distribution rights to subsequent productions of the horror movie franchise, Jeepers Creepers.

Cross-Defendant Myriad Pictures, Inc. (“Cross-Defendant” or “Plaintiff”) alleges it has a contractual right of first negotiation and last refusal for worldwide distribution rights to subsequent productions. Cross-Defendant further alleges that defendants produced and filmed Jeepers Creepers IV without Cross-Defendant’s knowledge or involvement, even though Cross-Defendant had been working with defendants to develop the sequels throughout 2018 and 2019.

Once the film was shot, Defendants purported to extend to Cross-Defendant a right of “last negotiation” which was illusory because defendants had already granted distribution rights to Cross-Defendant’s competitor Screen Media.

Cross-Complainants JC4 IP, LLC, Jake Seal, PVS Studios, LLC, Orwo Film Studios, LLC, And Orwo Film Distribution, LLC (“Cross-Complainants”) filed a Second Amended Cross-Complaint (“SACC”) against Cross-Defendant and others. Cross-Complainants Orwo Film Distribution, LLC, PVS Studios, LLC, and Jake Seal are also named as Defendants in Plaintiff’s First Amended Complaint. Cross-Complainant Orwo Film Studios, LLC (“OFS”) is not.

Cross-Defendant brings this motion under Code Civ. Proc. § 1030 to require OFS to post security as a nonresident ‘plaintiff’ on the SACC. Cross-Defendant originally brought this motion as to Cross-Complainants Orwo Film Distribution, LLC, PVS Studios, LLC, and Jake Seal as well, but in its reply, Cross-Defendant withdrew its motion as to those parties. (Reply at 4.)

Legal Standard

In an action brought by a nonresident plaintiff, the defendant may at any time move for an order requiring the plaintiff to post security. (C.C.P. § 1030(a).) The stated grounds for the motion are that the plaintiff resides out of state or is a foreign corporation, and there is a reasonable possibility that the moving defendant will obtain a favorable judgment. (C.C.P. § 1030(b).) The motion can be brought at any time. (C.C.P. § 1030(a).) The trial court has no authority to deny the motion on the ground that it is untimely. (Heffron v. Los Angeles Transit Lines (1959) 170 Cal.App.2d 709.) The motion must be accompanied by a supporting affidavit or declaration which establishes the stated grounds for the motion and sets forth the nature and amount of the costs and attorney fees the defendant has incurred and expects to incur until the action is concluded. (C.C.P. § 1030(b).) It must also be accompanied by a memorandum of points and authorities. (C.C.P. § 1030(b), CRC rule 313(a).)

The plaintiff may pursue a number of tactics in opposing a motion for security. These may include:

(1)        proof that the plaintiff is not a nonresident;

(2)        showing the plaintiff's indigency (CCP §995.240); and

(3)        arguing the defendant's failure to make an adequate prima facie showing of a reasonable possibility of success in the action.

A plaintiff can also challenge the amount of the costs and attorney fees requested by the defendant. The security can be ordered only for “reasonable” costs, and the defendant must be otherwise entitled to recover those fees by contract or by another statutory provision. (C.C.P. § 1030(a).)

To succeed on its motion, a defendant is not required to show there is no possibility the plaintiff can win at trial, or that it is reasonably likely that the defendant will prevail, only that it is reasonably possible that the defendant will win. The court must determine whether there is substantial evidence to support such a determination. (Baltayan v. Estate of Getemyan (2001) 90 Cal.App.4th 1427, 1432-33.)

Analysis

OFS argues Cross-Defendant’s motion must fail as a matter of law because the Court of Appeal in Yao v. Superior Court (2002) 104 Cal.App.4th 327 determined Code Civ. Proc. § 1030 applies only to plaintiffs, not cross-complainants. The Court agrees. In Yao, a California resident sued an out-of-state defendant for breach of contract. Defendant filed a cross-complaint against plaintiff which included causes of action arising out of the same facts alleged in plaintiff’s complaint. Plaintiff brought a motion under Code Civ. Proc. § 1030 seeking to require defendant to post security to prosecute her cross-complaint. The trial court granted plaintiff’s motion and the Court of Appeal reversed the trial court’s ruling, issuing a writ of mandate to set aside the trial court’s order.

The Yao Court turned first to the plain language of section 1030, which “refers only to an out-of-state plaintiff but makes no similar reference to an out-of-state cross-complainant.” (Yao, supra, 104 Cal.App.4th at 332.) The Court surveyed other code provisions and noted “This is in marked contrast to many other statutes that reference both a plaintiff and a cross-complainant. Such a dual reference clearly demonstrates a legislative intent to have the specific statutory provision apply both to a plaintiff and a cross-complainant... Section 1030, on the other hand, contains no similar reference to a cross-complainant.” (Id.) The Court reasoned “the Legislature clearly knows how to indicate when it wants a statutory provision to apply to both a plaintiff and a cross-complainant. It also clearly knows how to indicate that a reference to ‘plaintiff’ must be construed as including a cross-complainant. The Legislature chose not to adopt either option in this case. We therefore decline plaintiff's invitation to rewrite section 1030 to provide that ‘plaintiff’ includes cross-complainant.” (Id. at 332-333.)

The Yao Court then proceeded to find plaintiff’s proposed interpretation of section 1030 would not promote the policy served by the statute, finding “The purpose of section 1030 is to protect California residents who are sued by out-of-state plaintiffs when there is no reasonable possibility the out-of-state plaintiff will prevail. … This purpose is attenuated when, as here, a California resident has initiated a lawsuit against an out-of-state defendant and that defendant has responded, in part, by filing a cross-complaint. In that circumstance, requiring the posting of security by an out-of-state defendant does not further the statute's salutary goal.” (Id. at 333-334.)

Cross-Defendant attempts to distinguish Yao and points out the cross-complainant there had been named as a defendant in plaintiff’s complaint, whereas OFS here was never named as a Defendant. Thus, Cross-Defendant argues, OFS should be treated as akin to a plaintiff for purposes of Code Civ. Proc. § 1030. Cross-Defendant provides no authority supporting this interpretation of section 1030, and the Court has been unable to locate any. Further, Cross-Defendant has not shown how this distinction is material to the Court’s reasoning in Yao. As set forth above, the Court in Yao put very little import on cross-complainant having been named as a direct defendant in plaintiff’s action. Rather, the Court interpreted the language of the statute and found the Legislature had made a deliberate choice to refer only to make section 1030 apply only to plaintiffs and not cross-complainants. Nothing in this reasoning turns on the question of whether the cross-complainant has been named as a defendant or not.

Further, as in Yao, the Court finds the purpose of section 1030 is attenuated here as Cross-Complainants appear to be a group of related entities, most of which were named as Defendants in Cross-Defendant’s First Amended Complaint, and only one of which, OFS, was not. As in Yao, the SACC brought by OFS and the other Cross-Complainants asserts causes of action arising from the same facts alleged in Cross-Defendant’s First Amended Complaint. Such facts do not implicate the concerns which section 1030 was designed to address.

The Court finds Yao is on point and Code Civ. Proc. § 1030 does not apply to OFS. Accordingly, Cross-Defendant’s motion for an undertaking pursuant to Code Civ. Proc. § 1030 is DENIED.

Conclusion

Plaintiff and Cross-Defendant Myriad Pictures, Inc.’s Motion for Undertaking Pursuant to Code Civ. Proc. § 1030 is DENIED.