Ablesoft v. Walt Disney Company CA2/2 ( 2021 )

Filed 10/8/21 Ablesoft v. Walt Disney Company CA2/2
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
ABLESOFT, INC., B304155
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC673736)
v.
THE WALT DISNEY
COMPANY et al.,
Defendants and
Respondents.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Dalila C. Lyons, Judge. Reversed and remanded
with directions.
Hamrick & Evans, A. Raymond Hamrick III, Charles
Rainey and Jonathan Dutton for Plaintiff and Appellant.
Mitchell Silberberg & Knupp, Lucia E. Coyoca and
Christopher A. Elliott for Defendants and Respondents.
Ablesoft, Inc. (Ablesoft) was one of several plaintiffs who
sued defendants The Walt Disney Company and Buena Vista
Television, LLC, formerly known as Buena Vista Television, Inc.
(collectively, Buena Vista),1 for breach of contract and related
causes of action. The trial court granted Buena Vista’s motion for
summary adjudication against Ablesoft as to all its causes of
action on the ground that Ablesoft lacked standing to sue. We
reverse.2
BACKGROUND
A. Underlying Facts
On March 31, 1993, William Nye, James McKenna, Erren
Gottlieb, KCTS-TV, and Rabbit Ears Productions, Inc. (Rabbit
Ears) entered into an agreement with Buena Vista (BV
Agreement) for 50 percent of the net profits resulting from the
production and distribution of the television series, Bill Nye the
Science Guy (series).
Millennium Media Group Holdings, Inc. (MMG)
purportedly made a loan to Rabbit Ears in September 1993
secured by a lien on Rabbit Ears’s assets. When Rabbit Ears
apparently defaulted on the loan, MMG foreclosed the lien in
1997 and reportedly sold Rabbit Ears’s assets to Microleague
1Buena Vista Television, LLC is a subsidiary of The Walt
Disney Company.
2 Because we conclude summary adjudication should not
have been granted, we do not reach Ablesoft’s contention the trial
court abused its discretion by denying a second continuance of
the summary adjudication hearing. We do, however, briefly
summarize Ablesoft’s two requests for a continuance to provide a
clear understanding of the proceedings.
2
Multimedia, Inc. (Microleague) in February 1997. The sale was
said to include Rabbit Ears’s rights under the BV Agreement.
Ablesoft purportedly was a wholly owned subsidiary of
Microleague. In December 1997, Microleague declared
bankruptcy. Ablesoft apparently emerged as the surviving
company, owning all of Rabbit Ears’s rights under the BV
Agreement.
On April 29, 1999, Buena Vista drafted an amendment
(1999 Amendment) to the BV Agreement. Rabbit Ears was
replaced as a signatory by “Microleague Multimedia, Inc.,
successor and assignee to the interests of Rabbit Ears
Productions, Inc.” Buena Vista, Microleague, and the other
parties executed the 1999 Amendment.
In 2006, John Herson purchased Ablesoft from the “Penn
Janney” fund. Shortly thereafter, CEO Herson received a check
from Disney in connection with the series. Herson contacted a
Buena Vista (Disney) representative to ask about the payment.
In response, the representative provided Herson with a copy of
the BV Agreement.
From at least 2006 through 2018, Buena Vista issued
accounting statements pursuant to the BV Agreement, replacing
Microleague with Ablesoft as a paid participant for the series. To
date, Buena Vista has paid Ablesoft nearly $1 million under the
BV Agreement.
B. Underlying Proceedings
A lawsuit was filed against Buena Vista following its
purported failure to account for and pay profits from the
exploitation of the series pursuant to the terms and conditions of
the BV Agreement. The operative pleading was the fourth
amended complaint. Plaintiffs were Nye, McKenna, Gottlieb,
3
KCTS-TV, and “Ablesoft, Inc. [formerly known as] Rabbit Ears
Productions Inc.” Plaintiffs alleged that Ablesoft was a successor
in interest to Rabbit Ears. The complaint stated causes of action
for fraudulent concealment, fraudulent misrepresentation,
fraudulent inducement/false promise, breach of contract, breach
of fiduciary duty, accounting, breach of the covenant of good faith
and fair dealing, and monies had and received.
Buena Vista filed two motions for summary adjudication of
plaintiffs’ causes of action.3 In one of the motions, Buena Vista
asserted Ablesoft did not have standing to sue because it was not
a party to the BV Agreement. Nor could Ablesoft show it was a
successor-in-interest to Rabbit Ears’s rights because there was no
admissible evidence of the transfer of assets “from Rabbit Ears to
MMG or from Microleague to Ablesoft.”
Ablesoft filed opposition and evidence to support standing.
The hearing was to occur on August 7, 2019.
Plaintiffs filed an ex parte application to continue the
summary adjudication hearing to obtain additional discovery.
The trial court granted the continuance over Buena Vista’s
objections.
At the continued hearing on October 24, 2019, the trial
court issued a tentative ruling granting Buena Vista’s summary
adjudication against Ablesoft. In response, Ablesoft’s counsel
orally moved for a continuance to obtain further discovery on the
issue of standing and/or to present certain newly discovered
evidence to demonstrate standing. The court agreed to continue
3 Because of the nature of the summary adjudication
proceedings in this case, we merely summarize them here. For
clarity and to avoid repetition, we address them at length in the
next section.
4
the hearing to allow Ablesoft to file a properly noticed motion
pursuant to Code of Civil Procedure section 437c, subdivision
(h).4
At the December 4, 2019 summary adjudication hearing,
the trial court denied Ablesoft’s noticed motion to continue and
granted Buena Vista’s motion for summary adjudication on the
issue of Ablesoft’s standing. The court entered judgment on
January 22, 2020, against Ablesoft and in favor of Buena Vista on
all causes of action. Ablesoft filed a timely notice of appeal.
DISCUSSION
A. Standing
“Every action must be prosecuted in the name of the real
party in interest, except as otherwise provided by statute.”
(§ 367.) “It is elementary that a party asserting a claim must
have standing to do so. In asserting a claim based upon a
contract, this generally requires the party to be a signatory to the
contract, or to be an intended third party beneficiary.” (Berclain
America Latina v. Baan Co. (1999) 74 Cal.App.4th 401, 405.)
B. Summary Adjudication and Standard of Review
“A motion for summary adjudication may be made by
itself or as an alternative to a motion for summary judgment
and shall proceed in all procedural respects as a motion for
summary judgment.” (§ 437c, subd. (f)(2).)
The trial court must grant summary judgment when the
moving and opposition papers demonstrate that there is no
triable issue of material fact and the moving party is entitled to
judgment as a matter of law. (§ 437c, subd. (c).) A defendant
4Undesignated statutory references are to the Code of Civil
Procedure.
5
moving for summary judgment has the initial burden of
producing evidence that a cause of action lacks merit because the
plaintiff cannot establish an element of the cause of action or
there is a complete defense. (§ 437c, subd. (p)(2); Aguilar v.
Atlantic Richfield Co. (2001) 25 Cal.4th 826, 853; Husman v.
Toyota Motor Credit Corp. (2017) 12 Cal.App.5th 1168, 1179–
1180.) If the defendant meets this initial burden, the burden
then shifts to the plaintiff to produce evidence showing there is a
triable issue of material fact. (§ 437c, subd. (p)(2); Aguilar,
supra, at p. 850; Husman, supra, at pp. 1179–1180.)
An appellate court reviews an order granting summary
judgment de novo. (Coral Construction, Inc. v. City and County of
San Francisco (2010) 50 Cal.4th 315, 336.) In determining
whether there are triable issues of material fact, we consider all
the evidence set forth by the parties, except that to which
objections have been made and properly sustained. (§ 437c,
subd. (c); Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317,
334.) We accept as true the facts supported by plaintiff’s
evidence and the reasonable inferences therefrom (Sada v. Robert
F. Kennedy Medical Center (1997) 56 Cal.App.4th 138, 148),
resolving evidentiary doubts or ambiguities in plaintiff's favor
(Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768).
C. Buena Vista Meets Its Initial Burden Showing
Ablesoft Lacks Sufficient Evidence of Standing
In moving for summary adjudication against Ablesoft,
Buena Vista need not conclusively show Ablesoft’s lack of
standing, but could establish that Ablesoft “does not possess, and
cannot reasonably obtain, needed evidence” to support standing.
(Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 854; see
Henderson v. Equilon Enterprises, LLC (2019) 40 Cal.App.5th
6
1111, 1116 [“[t]o meet its initial burden in moving for summary
judgment, a defendant must present evidence that either
‘conclusively negate[s] an element of the plaintiff's cause of
action’ or ‘show[s] that the plaintiff does not possess, and cannot
reasonably obtain,’ evidence necessary to establish at least one
element of the cause of action”].)
In its motion, Buena Vista argued the following evidence
that Ablesoft had produced during discovery was either
insufficient and/or inadmissible to show its standing as a
successor-in-interest to Rabbit Ears: (1) A 1997 press release
announcing Microleague’s acquisition of Rabbit Ears from MMG
and (2) a printout of an uncertified Form 8-K5 from Microleague,
attached to which was an unsigned asset acquisition agreement
between MMG and Microleague. The unsigned agreement
included a “Background” description of MMG’s earlier acquisition
of Rabbit Ears. Buena Vista further argued that Ablesoft’s
current CEO, when deposed by Buena Vista, testified he acquired
Ablesoft in 2006 and had no personal knowledge or
documentation of MMG’s original acquisition of Rabbit Ears’s
assets or of Microleague’s acquisition of Rabbit Ears’s assets from
MMG. Buena Vista maintained because Ablesoft could not and
did not obtain the necessary evidence of its status as a successor-
in-interest under the BV Agreement, Ablesoft did not have
standing to sue.
5 A “Form 8-K is the ‘current report’ companies must file
with the SEC to announce major events that shareholders should
know about.” (Securities and Exchange Com., Form 8-K
[as
of Oct. 1, 2021], archived at ; see
Hawran v. Hixson (2012) 209 Cal.App.4th 256, 281.)
7
The trial court later sustained Buena Vista’s objections to
the evidence Ablesoft had produced during discovery as
inadmissible for foundational and hearsay reasons. Ablesoft does
not challenge this ruling on appeal.
D. The Burden Shifts to Ablesoft, and the Trial Court
Grants Summary Adjudication
The burden shifted to Ablesoft to demonstrate a triable
issue of material fact as to standing. (§437c, subd. (p)(2).)
In its opposition to the summary adjudication motion and
in later filings in conjunction with its second continuance request,
Ablesoft presented the following evidence: (1) CEO Herson’s
declaration describing his understanding of the chain of title;
(2) a copy of the 1999 Amendment, and (3) certified copies of the
Form 8-K and “Articles of Amendment–Domestic Business
Corporation” (Articles of Amendment), which Microleague had
filed in November 1998 with the Pennsylvania Department of
State reflecting its name change to Ablesoft. In a separate
statement, Ablesoft identified three facts unopposed by Buena
Vista: (1) Buena Vista had been issuing annual accounting
statements to Ablesoft from at least 2006 to the present (i.e., for
the last 15 years), (2) during that same period, Disney (Buena
Vista) continued to send Ablesoft profit participation statements
and checks for the series, and (3) when CEO Herson questioned
Ablesoft’s entitlement to a 2006 check, a Disney representative
responded with a copy of the BV Agreement. Ablesoft also asked
the trial court to take judicial notice of the certified copies of the
Form 8-K and the Articles of Amendment.
Following the hearing on December 4, 2019, the trial court
issued a written ruling denying Ablesoft’s motion to continue and
refusing to admit into evidence the newly certified copies of the
8
Form 8-K and the Articles of Amendment. The court granted
Ablesoft’s request for judicial notice of the certified copies of the
Articles of Amendment and Form 8-K, excluding any hearsay
statements they may contain. Thus, as a result of these and
other evidentiary rulings, Ablesoft was left with the three
undisputed facts concerning Buena Vista’s accounting and
payments to Ablesoft, the 1999 Amendment, and the judicially
noticed Articles of Amendment and Form 8-K in opposing Buena
Vista’s motion for summary adjudication.
In a separate written ruling, the trial court granted Buena
Vista summary adjudication against Ablesoft for lack of standing.
The court found Ablesoft had no “competent evidence” it was the
successor-in-interest to signatory Rabbit Ears. The court
reasoned that even if the excluded Form 8-K and Articles of
Amendment were considered, Ablesoft would still be unable to
supply the missing links in the chain of Ablesoft’s title to Rabbit
Ears’s rights: (1) MMG’s acquisition of Rabbit Ears’s rights and
(2) Ablesoft’s acquisition of Rabbit Ears’s rights from
Microleague.
E. Triable Issues of Fact Preclude Summary
Adjudication Regarding Ablesoft’s Standing
The issue on appeal is whether Ablesoft met its burden by
producing sufficient evidence from which a trier of fact could
reasonably infer Ablesoft had standing to pursue this suit.
(Sharufa v. Festival Fun Parks, LLC (2020) 49 Cal.App.5th 493,
497 [to determine whether a “defendant is entitled to summary
[judgment] . . . we review the entire record and ask whether a
reasonable trier of fact could find in plaintiff’s favor”].) Because
our review is de novo, we can independently consider admissible
evidence even though the trial court did not consider it.
9
(Tchorbadjian v. Western Home Ins. Co. (1995) 39 Cal.App.4th
1211, 1217 [court reviewing summary judgment must consider all
evidence presented “except where objections are properly
sustained”].) Accordingly, we consider the 1999 Amendment even
though the trial court disregarded it.
The record reveals Ablesoft’s engaged in a two-fold
approach in opposing Buena Vista’s summary adjudication
motion. To show triable issues relative to standing, Ablesoft
presented evidence (1) supplying the missing evidentiary links in
the chain of title to Rabbit Ears’s rights and (2) demonstrating by
Buena Vista’s express agreement and course of conduct that
Ablesoft was a proper party under the BV Agreement. As the
evidence in support of Ablesoft’s first approach was excluded, we
examine Ablesoft’s evidence in support of the second approach—
the 1999 Amendment, the judicially noticed Articles of
Amendment, and Buena Vista’s 15-year accounting and payment
practices with respect to Ablesoft. From this evidence a
reasonable trier of fact could find in Ablesoft’s favor.6
The identity of the parties to a contract, along with other
contractual terms, are shown by the language of the contract and
admissible parol evidence. (See Zelkin v. Caruso Discount Corp.
(1960) 186 Cal.App.2d 802, 806–807 [identities of real parties in
interest under a contract were “clearly revealed by parol
evidence”].) And the “[a]cts of the parties, subsequent to the
execution of the contract and before any controversy has arisen
as to its effect, may be looked to in determining the meaning.”
(1 Witkin, Summary of Cal. Law (11th ed. 2017) Contracts, § 772,
6We do not consider Evidence Code section 622, which
Ablesoft raised for the first time in its reply brief on appeal. (See
Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764–765.)
10
p. 828; see also Fisher v. Allis-Chalmers Corp. Product Liability
Trust (2002) 95 Cal.App.4th 1182, 1190–1192 [evidence of
successor corporation’s conduct was relevant to determine
whether it agreed to assume liability for the plaintiff’s claim].)
This rule is not limited to joint conduct by parties to a contract,
but applies also to the acts of one party with knowledge of the
contract terms. (Southern Cal. Edison Co. v. Superior Court
(1995) 37 Cal.App.4th 839, 851; see also Sanfran Co. v. Rees Blow
Pipe Mfg. Co. (1959) 168 Cal.App.2d 191, 205 [“knowledge by any
agent of the corporation, whether presently an officer or not, is
the knowledge of the corporation”].)
Buena Vista expressly agreed in the 1999 Amendment that
Microleague was a party to the contract. Buena Vista drafted
and executed that amendment, which stated that Microleague
was the “successor and assignee to the interests of [Rabbit Ears].”
Whether this statement is considered as contractual language in
its own right or simply as a statement by a party to the contract
interpreting the BV Agreement’s terms, it is powerful evidence of
Microleague’s status as the contractual party to which Buena
Vista owed its obligations, and a jury could reasonably so find.
Ablesoft also produced sufficient evidence showing that it
was the same entity as Microleague. The judicially noticed
Articles of Amendment documented Microleague’s name change
to Ablesoft. “ ‘It is the consequence of judicial notice that the
“fact” noticed is, in effect, treated as true for purposes of proof.’
[Citation.] “Thus, ‘[j]udicial notice has been characterized as a
“substitute for formal proof.” ’ ” (People v. Moore (1997) 59
Cal.App.4th 168, 185.)
Moreover, Buena Vista actually paid Ablesoft nearly
$1 million under the BV Agreement for 15 years, for which it also
11
furnished Ablesoft with an annual accounting and regular profit
participation statements, apparently without objection by any
other person or entity. This course of conduct was consistent and
it was evidence that Ablesoft’s status as a party to the contract
was a triable issue.
Buena Vista argues this evidence fails to raise a triable
issue of fact. Buena Vista makes much of Ablesoft’s belated
reliance on the 1999 Amendment as evidence of its standing.7
But, as Buena Vista acknowledges, the trial court did not even
consider this evidence. Buena Vista also makes the rather
surprising assertion that the 1999 Amendment would have been
properly excluded as inadmissible hearsay relative to standing.
This was Buena Vista’s evidence, submitted in support of its
summary adjudication motions. Buena Vista cannot have it both
ways: Buena Vista cannot claim the 1999 Amendment is
admissible when the evidence buttresses its position, but then
claim the evidence is inadmissible when it undermines Buena
Vista’s position.
Additionally, Buena Vista maintains the 1999 Amendment
cannot be viewed as reflecting its intent or agreement that
Microleague is Rabbit Ears’s successor-in-interest, but merely
Buena Vista’s “belief” based on Ablesoft’s representations.
During oral argument before this court, Buena Vista’s appellate
7 Ablesoft did not refer to the 1999 Amendment in its
opposition to Buena Vista’s summary adjudication motion. The
1999 Amendment was first mentioned in counsel’s declaration in
support of Ablesoft’s second request for a continuance. It was
argued for the first time as evidence of standing in Ablesoft’s
reply to Buena Vista’s opposition to the second request for a
continuance.
12
counsel made a similar point when asked about Buena Vista’s 15
years of profit payments to Ablesoft. Counsel explained Buena
Vista made the payments in the mistaken belief that Ablesoft
was a proper party under the BV Agreement as represented by
Ablesoft. Buena Vista’s belief and intent and Ablesoft’s
entitlement to payments under the BV Agreement are triable
issues of fact.
Finally, Buena Vista argues its payment history cannot
prevent it from challenging Ablesoft’s standing because of waiver
or equitable estoppel. We agree that neither applies in this case.8
8For the first time Ablesoft argues the applicability of
Evidence Code section 622 in its reply brief. Under the
circumstances, we will not consider it.
13
DISPOSITION
The judgment is reversed, and the matter is remanded for
further proceedings on Ablesoft’s complaint. Ablesoft is to
recover its costs on appeal.
LUI, P. J.
We concur:
ASHMANN-GERST, J.
CHAVEZ, J.
14