Judge: Laura A. Seigle, Case: 19STCV40228, Date: 2023-04-07 Tentative Ruling
Case Number: 19STCV40228 Hearing Date: April 7, 2023 Dept: 15
[TENTATIVE] ORDER RE MOTION FOR SUMMARY JUDGMENT
Defendant
Bristol-Myers Squibb Company moves for summary judgment of the claims of
Plaintiffs Scott A. Wilson and Alisa Tokushima that Defendant’s Jean Nate body powders
exposed Leslie Tokushima Wilson to asbestos.
(Undisputed Material Fact (“UMF”) 1.)
A defendant seeking
summary judgment must “conclusively negate[] a necessary element of the
plaintiff’s case, or . . . demonstrate[] that under no hypothesis is there a
material issue of fact that requires the process of trial.” (Guz v. Bechtel Nat. Inc. (2000) 24
Cal.4th 317, 334.) To show that a
plaintiff cannot establish an element of a cause of action, a defendant must
make the initial showing “that the plaintiff does not possess, and cannot
reasonably obtain, needed evidence.” (Aguilar
v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854.) “The defendant may, but need not, present
evidence that conclusively negates an element of the plaintiff’s cause of action. The defendant may also present evidence that
the plaintiff does not possess, and cannot reasonably obtain, needed evidence –
as through admissions by the plaintiff following extensive discovery to the
effect that he has discovered nothing.”
(Id. at p. 855.)
Defendant takes the
option of attempting to conclusively negate a necessary element of Plaintiffs’
case, arguing it has no liability for the Jean Nate products that alleged
exposed Leslie Tokushima Wilson to asbestos.
Defendant makes three arguments about why it is not liable: (1) Its
predecessor owned the stock of Charles of the Ritz, which sold Jean Nate
products, and stock ownership is not enough to establish liability. (UMF 4.)
(2) Its predecessor and Charles of the Ritz were not alter egos. (3) Charles of the Ritz’s dissolution bars any
claims against Defendant.
Plaintiffs do not dispute
that mere stock ownership is not enough.
Instead, they argue that Defendant “is liable to Plaintiffs under the
product line exception, alter ego theory, and joint venture theory.” (Plaintiffs’ Response to UMF 3.) Plaintiffs also argue Defendant previously
admitted it was the successor to Charles of the Ritz. (Opposition at p. 6.)
Each of these arguments
is discussed below.
1.
Objections
Plaintiffs’ Objection Nos.
1, 3, 5, 6, 8, 9, 10, 11, 12, 13, 15, 16, 18, 20: Sustained, except not to Exhibits A and E.
Plaintiffs’ Objection
Nos. 2, 7, 14, 17, 19, 21: Overruled.
Defendant’s Objection
Nos. 1-6, 8, 13-23, 25, 27, 29, 31, 32, 33:
Overruled.
Defendant’s Objection
Nos. 7, 9, 10, 11, 12, 24, 26, 28, 30: Sustained.
2. Alter Ego Theory
“In California, two
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.) “ ‘Among the factors to be considered in
applying the doctrine are commingling of funds and other assets of the two
entities, the holding out by one entity that it is liable for the debts of the
other, identical equitable ownership in the two entities, use of the same
offices and employees, and use of one as a mere shell or conduit for the
affairs of the other.’ [Citation.]” (Id. at pp. 538-539.) Other factors “include inadequate
capitalization, disregard of corporate formalities, lack of segregation of
corporate records, and identical directors and officers.” (Id. at p. 539.)
Defendant submitted
evidence that: Defendant’s predecessor acquired
the stock of Charles of the Ritz by merging one of its subsidiaries (SBN, Inc.)
with Charles of the Ritz. (Scott Decl., Ex.
A at p. 2, Ex. B at p. 4.) Charles of
the Ritz owned and operated its facility, which operated under the Charles of
the Ritz name and manufactured products under the Charles of the Ritz name. (Scott Decl., Ex. E at § 5.9(b); Ambrosio
Decl., ¶ 5.) The two companies had
offices in the same building but on separate floors. (Ambrosio Decl., ¶ 7.) Charles of the Ritz employees ran the Charles
of the Ritz facility, were paid by Charles of the Ritz, and had their own
benefit plans. (Ambrosio Decl., ¶¶ 5, 6;
Scott Decl., Ex. E at Exhibit A (Employee Benefit Plan Agreement) at Schedule 1.) Charles of the Ritz owned trademarks for the
products it produced. (Scott Decl., Ex.
E at § 5.6.) In sum, Defendant submitted
evidence that Charles of the Ritz was operating as its own company before
Defendant’s predecessor purchased its stock, and it continued to operate as a
separate company when its stock was owned by Defendant’s predecessor. (UMF 4, 10, 11; Scott Decl., Ex. B at pp. 24-28,
Ex. B at Annex 2 p.1.) This was
sufficient to shift the burden.
Plaintiffs argue that the
companies shared executives and offices.
(Opposition at p. 14.) The
evidence shows that they were in the same building, Charles of the Ritz’s
honorary chairman was on the board of directors of Defendant’s predecessor, and
Charles of the Ritz’s President was a group vice president of Defendant’s
predecessor. (Plaintiff’s Separate
Statement of Disputed Facts (“DMF”) 8, 11, 12; Index, Ex. 12 at pp. 39-40; Ex.
10 at p.2) Plaintiffs argue that
Defendant’s predecessor invested in Charles of the Ritz and paid for Charles of
the Ritz’ offices. (Opposition at p.
14.)
Plaintiffs cite no legal
authority that have two over lapping officers or directors and making
investments in a subsidiary establishes 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. To the contrary, “[i]t is considered a normal
attribute of ownership that officers and directors of the parent serve as officers
and directors of the subsidiary. (Sonora
Diamond, supra, 83 Cal.App.4th at pp. 548-549.) Likewise, ongoing financial support of a
subsidiary is expected. (Id. at pp.
546-547.)
Defendant argues that a
subsidy’s lack of funds to pay a judgment is not an inequity sufficient to
establish the existence of an alter ego.
(Motion at p. 14.) “The alter ego
doctrine does not guard every unsatisfied creditor of a corporation but instead
affords protection where some conduct amounting to bad faith makes it
inequitable for the corporate owner to hide behind the corporate form. Difficulty in enforcing a judgment or
collecting a debt does not satisfy this standard.” (Sonora Diamond, supra, 83 Cal.App.4th
at p. 539.)
Defendant submitted
evidence described above that Charles of the Ritz as a subsidiary, run as a
subsidiary typically is. Plaintiffs submitted
no evidence of bad faith and cited no law to counter the holding in Sonora
Diamond, which Plaintiffs did not discuss or cite. Plaintiffs’ only citation is dicta in Mesler
v. Bragg Management Co. (1985) 39 Cal. 3d 290, which held that when a judgment
is obtained against a corporation and against its alter ego, the judgment may
be enforced against both separately, such that when the subsidiary settles, the
parent company’s liability continues. (Id.
at p. 301.) But that holding assumed alter
ego liability had already been established.
The case does not hold that a subsidiary’s inability to pay its debts is
an inequity.
Plaintiffs failed to show
the existence of disputed material facts concerning its alter ego theory.
3. Dissolution and Product Line Exception
Defendant argues the
dissolution of Charles of the Ritz bars Plaintiffs’ claims because Defendant
did not carry on the subsidiary’s business after dissolution. (Motion at pp. 14-15.) “When a corporation has been duly and
lawfully dissolved, its shareholders are not liable for the debts of the
corporation [citation], nor is the rule changed on account of the fact that the
shareholder happens to be another corporation, that is, that the dissolved
corporation was a wholly owned subsidiary of another corporation.” (Potlatch Corp. v. Superior Court
(1984) 154 Cal.App.3d 1144, 1151.) Charles
of the Ritz dissolved in 1992. (UMF
15.)
Plaintiffs argue that the
product line exception rule in Ray v. Alad (1977) 19 Cal.3d 22 undermines
Defendant’s position. (Opposition at p.
18 n.2.) Plaintiffs contend when
Defendant’s predecessor acquired Charles of the Ritz in 1971, it “destroyed
Plaintiffs’ remedy against [Charles of the Ritz]” because Charles of the Ritz
“no longer existed as a separate corporate entity.” (Opposition at p. 12.) That is not correct. Charles of the Ritz existed as a corporation with
its stock owned by Defendant’s predecessor (Scott Decl., Ex. A) and could have
been sued as such.
In any event, according
to that logic every parent company would be liable for their subsidiaries’
debts, which is not what Ray held.
The court in Ray analyzed the successor liability of a purchaser
of the assets of a corporation. (Ray,
supra, 19 Cal.3d at p. 28.) Generally,
“the purchaser does not assume the seller’s liabilities unless: (1) there is an express or implied agreement
of assumption, (2) the transaction amounts to a consolidation or merger of the
two corporations, (3) the purchasing corporation is a mere continuation of the
seller, or (4) the transfer of assets to the purchaser is for the fraudulent purpose
of escaping liability for the seller’s debts.”
(Ibid.) Plaintiffs
presented no evidence of an express or implied agreement of assumption whereby
Defendant or its predecessor assumed Charles of the Ritz’ liabilities. As described above, when Defendant’s
predecessor bought Charles of the Ritz’s stock, it did not consolidate or merge
the two corporations. Rather Charles of
the Ritz continued to exist, operating as a subsidiary. Nor did Plaintiff show that Defendant’s
predecessor was a mere continuation of Charles of the Ritz. It was a publicly traded company with several
operating subsidiaries, one of which was Charles of the Ritz. (UMF 10.)
And, there was not a transfer of assets to Defendant’s predecessor. Rather as discussed above, the predecessor
bought the stock of Charles of the Ritz by merging a subsidiary with Charles of
the Ritz. Plaintiff did not submit
evidence showing a disputed issue of material fact regarding the exceptions in Ray.
4. Joint Venture
Plaintiffs also argue
that Defendant is liable for Charles of the Ritz’s debts because it had a joint
venture with Charles of the Ritz.
(Motion at p. 16.) According to
Plaintiffs, “[t]he same evidence that shows that [Defendant] is the alter ego
of [Charles of the Ritz] also shows that [Defendant] and [Charles of the Ritz]
were a joint venture.” (Id. at p.
17.)
“ ‘There are three basic
elements of a joint venture: The members
must have joint control over the venture (even though they may delegate it),
they must share the profits of the undertaking, and the members must each have
an ownership interest in the enterprise.’
[Citation.]” (Cochrum v. Costa
Victoria Healthcare, LLC (2018) 25 Cal.App.5th 1034, 1053.) Plaintiffs did not show that Defendant and
Charles of the Ritz shared in the profits and each had an ownership interest in
the enterprise. Rather Defendant owned
the stock of Charles of the Ritz.
5. Admissions
Plaintiffs argue that
Defendant admitted in prior cases it is liable for Charles of the Ritz’
liabilities. (Opposition at pp. 5-7.)
Plaintiffs cite to
deposition testimony from Defendant’s corporate representative in another case
in 2016. (Opposition at p. 6.) He testified that Charles of the Ritz became
a division of Defendant’s predecessor although he did not know if it was a
result of a merger or purchase, that the predecessor and Charles of the Ritz
merged, and the predecessor sold Charles of the Ritz to a third party in 1986. (Index, Ex. 23 at pp. 81-81, 96105.) The questioner said she was going to refer to
Defendant, Defendant’s predecessor, and Charles of the Ritz altogether as
“Bristol-Myers,” and the questioner called them “all of one entity.” (Id. at pp. 135-136, 207.) Thus, when Plaintiffs contend the witness
called the companies “all one entity” (Opposition at p. 6), they are
wrong. The plaintiff’s counsel referred
to “all one entity.” (Index, Ex. 23 at
p. 207.) Likewise, when Plaintiffs
contend the witness testified that “ ‘the entire Squibb entity which included
its divisions’ manufactured, sold or distributed Jean Nate” (Opposition at p.
6), they are wrong. The plaintiff’s
counsel used the phrase “ formulated, manufactured, distributed and/or sold by
this entire Squibb entity which includes its divisions.” (Index, Ex. 23 at p. 110.) None of this testimony is an admission the Defendant
is a successor to the liability of Charles of the Ritz. Further, the witness’s loose use of
“division” to describe Charles of the Ritz does not change the fact that the
deal documents described and cited above clearly state that Charles of the Ritz
was a subsidiary of Defendant’s predecessor, which owed Charles of the Ritz’s
stock.
Plaintiffs cite to Defendant’s
responses to interrogatories in another case in 2016. (DMF 42.)
Those responses asked for “Any other name under which YOU have done business
in the State of California,” and Defendant responded “Charles of the Ritz Group
Ltd.” The responses also state that Defendant’s
predecessor had owned Charles of the Ritz and “Jean Nate products were
distributed, marketed and sold by Charles of the Ritz Group Ltd.” (Index, Ex. 20 at pp. 6-7, 11-12.) The interrogatories define “YOU” as
“Responding Party and all of Responding Party’s . . . subsidiaries . . .
.” (Id. at p. 3.) Thus the interrogatory asked whether
Defendant or any of its subsidiaries had done business in California. By identifying Charles of the Ritz in
response, Defendant identified the subsidiary doing business in
California. The response does not admit
that Defendant and Charles of the Ritz were one and the same or that Defendant is
a successor to Charles of the Ritz’s liability.
Plaintiffs also cite to an
email from one of Defendant’s attorneys in another case (Jolcuvar v. Ares
Management, Case No. 21STCV23802), stating Charles of the Ritz was a
subsidiary of Defendant’s predecessor, and Defendant “is absolutely the proper
party here (no disputing that) for the allegations and testimony, but Revlon is
not.” (DMF 43; Index, Ex. 21 at pp.
1-2.) “Although statements of counsel may
be treated as judicial admissions if they were intended to be such or
reasonably construed by the court or the other party as such, such admissions
must be clear and unambiguous.” (Gordon
v. Nissan Motor Co. Ltd. (2009) 170 Cal.App.4th 1103, 1112.) Here the statement is not clear and
unambiguous. While it very well may have
been an admission for the Jolcuvar case, it is not a clear admission for
other cases. Rather the statement
specifies that Defendant was the proper party “here,” which
indicates the statement was limited to that case. Also, the attorney sending the email was
counsel for both Defendant and Revlon in the Jolcuvar case. In past cases, Revlon indemnified Defendant. The could have been the situation in Jolcuvar,
and therefore, the defense counsel could have had a strategic reason for
wanting Revlon dismissed, with Defendant remaining to litigate the claims. An attorney making a strategic decision in
one case does not bind the client to that strategy in later cases.
In sum, Plaintiffs did
not show a disputed issue of material fact regarding Defendant’s liability for
Jean Nate products sold by Charles of the Ritz.
The motion is GRANTED. Defendant is to file a proposed judgment
within five days.
The moving party is to
give notice.