Klug v. Dee CA2/3 ( 2022 )

Filed 8/16/22 Klug v. Dee CA2/3
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
RAYMOND A. KLUG, B302164
Plaintiff and Appellant, Los Angeles County
Super. Ct. No.
v. NC060795
DEREK T. DEE et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Mark C. Kim, Judge. Affirmed.
Tredway, Lumsdaine & Doyle, Roy J. Jimenez and
Brandon L. Fieldsted for Plaintiff and Appellant.
Andrade Gonzalez, Sean A. Andrade and Henry H.
Gonzalez for Defendant and Respondent Derek T. Dee, M.D., a
Professional Corporation.
Diem Law and Robin L. Diem for Defendant and
Respondent Edward Green III, a Medical Corporation.
INTRODUCTION
Plaintiff and appellant Raymond A. Klug, M.D., a
Corporation (Klug Corporation) appeals from a judgment
following a jury trial on breach of contract and breach of fiduciary
duty claims. The defendants and respondents are Derek T. Dee,
M.D., a Professional Corporation (Dee Corporation) and Edward
Green III, a Medical Corporation (Green Corporation) (together,
defendants).
Klug Corporation’s appeal relates in part to an erroneous
pretrial ruling by the trial court. Specifically, the court
summarily adjudicated a portion1 of the breach of fiduciary duty
cause of action in favor of Dee Corporation. This was error. (Code
Civ. Proc., § 437c, subd. (f)(1).) But the court denied Green
Corporation’s request for summary adjudication of the breach of
fiduciary duty claim in its entirety. The breach of fiduciary duty
and breach of contract claims then proceeded to trial against
defendants. Klug Corporation prevailed and recovered
approximately $100,000 in damages and costs.
Klug Corporation appeals, contending the court erred—
substantively, not procedurally—to the extent it granted Dee
Corporation’s motion for summary adjudication on the breach of
fiduciary duty claim. The record provided, however, is inadequate
to facilitate our review of this argument. The judgment states
that the breach of fiduciary duty claim was tried against both
defendants and decided in favor of Klug Corporation. Because we
have not been provided with a trial transcript or an appropriate
substitute or any other relevant evidence, we are unable to
1The court adjudicated two of the handful of theories of liability for
breach of fiduciary duty set forth in the complaint.
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determine what aspects of the fiduciary duty claim—if any—Klug
Corporation was prohibited from litigating at trial. In other
words, Klug Corporation has failed to establish prejudice as to
any error made by the court in summarily adjudicating the
breach of fiduciary cause of action in part.
We reach a similar conclusion regarding Klug Corporation’s
remaining argument. Klug Corporation requested an accounting
in its complaint and alleged, as to the cause of action for breach
of fiduciary duty, that defendants blocked Klug Corporation’s
access to partnership financial information near the time of the
partnership dissolution. The court summarily adjudicated that
claim in favor of defendants. Because Klug Corporation’s
substantive claims were tried and damages were awarded, there
is no indication that an accounting is a proper remedy at this
point.
We affirm the judgment.
FACTS AND PROCEDURAL BACKGROUND
1. The Parties
Physicians Raymond A. Klug (Dr. Klug), Derek T. Dee (Dr.
Dee), and Edward Green III (Dr. Green) all practiced in the
Greater Long Beach Orthopaedic Surgical and Medical Group.
The medical group was a partnership and the partners were
corporations owned by each of the physicians practicing in the
group. The corporate partners included, as pertinent here, Klug
Corporation, Dee Corporation, and Green Corporation. The
partnership was dissolved in late 2016 amid financial difficulties.
2. The Partnership
The partnership was governed by an amended partnership
agreement dated October 1, 1980. As pertinent here, the
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partnership agreement provided for payments to totally disabled
partners for 270 days based on a percentage of the physician’s
average income during the 12 months preceding the disability.
In May 2016, Dr. Klug informed the partnership that he
had been diagnosed with lymphoma and was temporarily totally
disabled within the meaning of the partnership agreement.
3. The Primary Dispute
The partnership made several payments to Klug
Corporation between June and August of 2016. The parties did
not agree, however, on whether the payments were properly
characterized as disability payments or partnership distributions.
Also around this time, Dr. Klug objected to the redistribution of
overhead expenses in a manner benefitting certain partners, the
manner in which partnership meetings were being held, and the
withholding of partnership financial information.
4. The Complaint
On September 2, 2016, Dr. Klug and Klug Corporation filed
the present suit against the partnership, the other corporate
partners, and the other physicians who practiced in the group. A
few weeks later, the corporate partners voted to dissolve the
partnership, effective September 30, 2016.
The complaint sets forth four causes of action: breach of
contract (i.e., the partnership agreement), breach of fiduciary
duty, dissolution of the partnership, and accounting. The
complaint alleges that each of the defendants breached the
partnership agreement and fiduciary duties by failing to pay the
full amount of disability payments required under the
partnership agreement, reallocating the partnership overhead in
a manner detrimental to some of the partners, and refusing to
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disclose partnership financial information upon request. The
complaint also seeks to dissolve the partnership and requests an
accounting of the partnership’s finances. Finally, the complaint
alleges that each of the individual physician defendants is the
alter ego of his corporation.
5. Summary Adjudication
Dr. Dee and Dr. Green, together with their corporations,
brought separate motions for summary judgment or, in the
alternative, summary adjudication on each of the four causes of
action.
As to Dr. Dee and Dr. Green, the court concluded they
could not be liable on any of the causes of action because they
were not members of the partnership. The court entered
summary judgment in their favor. In a prior appeal, we reversed
that judgment to the extent it purported to resolve the alter ego
issue in the physicians’ favor. (Klug et al. v. Green et al.
(Jan. 26, 2021, B296904) [nonpub. opn.].)
As to the corporate defendants, the court summarily
adjudicated the requests for dissolution and accounting in their
favor but concluded that triable issues of material fact existed on
the breach of contract claim. And as to Green Corporation, the
court concluded triable issues of material fact also existed as to
the breach of fiduciary duty cause of action. Dee Corporation,
however, requested summary adjudication of three distinct
theories of liability asserted by plaintiffs in the breach of
fiduciary duty cause of action: withholding of disability
payments, reorganization of overhead calculations, and denial of
access to financial information. The court granted summary
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adjudication on the second and third theories but denied the
motion concerning the withholding of disability payments.2
6. Jury Trial, Judgment, and Appeal
The breach of contract and breach of fiduciary duty claims
against Dee Corporation and Green Corporation were
subsequently tried to a jury over six days. Klug Corporation3
prevailed on both causes of action and recovered $35,049 for
unpaid disability payments and $34,388 for unpaid distributions.
The court awarded $36,551.17 in costs.
Klug Corporation timely appeals.4
DISCUSSION
Klug Corporation contends the court erred in summarily
adjudicating two theories of liability on the breach of fiduciary
claim and in denying its request for an accounting. Defendants
respond that by omitting the trial proceedings from the appellate
2 As noted, the court’s ruling was improper. (See Code Civ. Proc.,
§ 437c, subd. (f)(1) [“A motion for summary adjudication shall be
granted only if it completely disposes of a cause of action, an
affirmative defense, a claim for damages, or an issue of duty.”].) It
appears that Klug Corporation did not object and it does not raise the
issue on appeal.
3Although Dr. Klug was also a plaintiff, the judgment is only in favor
of Klug Corporation. We presume the court ruled at some point that
Dr. Klug, individually, could not recover on the breach of contract and
breach of fiduciary duty claims because he was not a member of the
medical group partnership.
4Although Dee Corporation and Green Corporation each filed notices
of cross-appeal, they did not pursue their cross-appeals.
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record, Klug Corporation has failed to provide an adequate record
for review. We agree with defendants.
1. The Appellant’s Burden on Appeal
The most fundamental rule of appellate review is that the
judgment or order challenged on appeal is presumed to be correct,
and “it is the appellant’s burden to affirmatively demonstrate
error.” (People v. Sanghera (2006) 139 Cal.App.4th 1567, 1573.)
“ ‘All intendments and presumptions are indulged to support it on
matters as to which the record is silent, and error must be
affirmatively shown.’ ” (Denham v. Superior Court (1970) 2
Cal.3d 557, 564 (Denham).)
In addition, parties must provide citations to the appellate
record directing the court to the supporting evidence for each
factual assertion contained in that party’s briefs. When an
opening brief fails to make appropriate references to the record in
connection with points urged on appeal, the appellate court may
treat those points as waived or forfeited. (See, e.g., Lonely Maiden
Productions, LLC v. GoldenTree Asset Management, LP (2011)
201 Cal.App.4th 368, 384; Dietz v. Meisenheimer & Herron (2009)
177 Cal.App.4th 771, 779–801 [several contentions on appeal
“forfeited” because appellant failed to provide a single record
citation demonstrating it raised those contentions at trial].)
Further, “an appellant must present argument and authorities on
each point to which error is asserted or else the issue is waived.”
(Kurinij v. Hanna & Morton (1997) 55 Cal.App.4th 853, 867.)
Matters not properly raised or that lack adequate legal discussion
will be deemed forfeited. (Keyes v. Bowen (2010) 189 Cal.App.4th
647, 655–656.)
An appellant has the burden not only to show error but
prejudice from that error. (Cal. Const., art. VI, § 13.) If an
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appellant fails to satisfy that burden, his argument will be
rejected on appeal. (Century Surety Co. v. Polisso (2006) 139
Cal.App.4th 922, 963 (Century Surety Co.).) “[W]e cannot
presume prejudice and will not reverse the judgment in the
absence of an affirmative showing there was a miscarriage of
justice. [Citations.]” (Ibid.)
2. The record is inadequate for review of the issues on
the merits.
Klug Corporation challenges the court’s summary
adjudication ruling on the breach of fiduciary duty cause of action
to the extent it granted Dee Corporation’s motion. As noted, Dee
Corporation moved for summary adjudication as to three theories
of liability included in the complaint relating to the withholding
of disability payments, reorganization of overhead calculations,
and denial of access to financial information. The court granted
summary adjudication on the second and third theories but
denied the motion concerning the withholding of disability
payments.
Klug Corporation appears to contend that it was prohibited
from litigating issues relating to the reallocation of overhead
calculations. But as defendants note, the appellate record does
not clearly support that contention because the record does not
include the trial proceedings. The absence of critical portions of
the record precludes us from evaluating Klug Corporation’s
arguments on the merits because it is unclear whether, and to
what extent, Klug Corporation was prohibited from litigating
issues stated in its complaint.
First, Klug Corporation provided only one motion in limine
in the record. In that motion, defendants moved to exclude
evidence or argument relating to the calculation of overhead
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expenses—one of the issues summarily adjudicated in Dee
Corporation’s favor. Specifically, defendants cited the following
categories of evidence as irrelevant pursuant to the court’s
summary adjudication ruling: “1. Any evidence or argument
regarding the reorganization of the overhead calculations. 2. Any
evidence or argument that the application of overhead calculation
to distributions was not properly approved. 3. Any evidence or
argument that Plaintiffs were damaged as a result of the
application of overhead calculations to partner distributions.
4. Any evidence or argument that Dr. Klug’s disability payments
were lower as a result of the reorganization of the overhead
calculations. 5. Any evidence or argument that Dr. Klug’s average
monthly income for purposes of calculating disability payments
was lower because the overhead calculations were not properly
approved by the Group’s partners.” Defendants attached to their
motion in limine a copy of the expert report prepared by Klug
Corporation’s expert accountant. In that report, the expert
summarized and calculated the damages purportedly incurred by
Klug Corporation as a result of the reallocation of overhead
expenses. And in opposition to the motion, Klug Corporation
argued that “the manner and means in which distribution and
disability payments, if any, were paid to Plaintiffs by GLBO and
its Partnership including the process of determining deductions
such as overhead is wholly relevant to Plaintiffs’ damages.”
If the court had granted this motion in limine, that fact
would tend to support Klug Corporation’s contention that it was
precluded from litigating issues relating to the reallocation of
overhead expenses. The limited record we do have, however,
indicates that the court did not grant the motion. After allowing
both sides to argue the motion in limine, the court stated, “I’m
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not going to make a ruling at this point. I’m going to see where
the evidence goes. I’m not going to make a rul[ing] in a vacuum
based on that. The moving party can raise an objection at any
point if you believe there is an objectionable question.” Because
we do not have the trial transcript or the minute orders from the
subsequent period of the trial, we cannot determine whether
evidence regarding the reallocation of overhead calculations was,
in fact, excluded during the trial.
Second, the court denied Green Corporation’s motion for
summary adjudication on the cause of action for breach of
fiduciary duty in its entirety, and the judgment reflects that the
claim was tried to a jury in a single trial against both corporate
defendants. If the judgment had awarded different measures of
damages as between the two corporate defendants, we might
infer that Klug Corporation was prohibited from litigating all
theories of liability on the breach of fiduciary duty claim against
Dee Corporation pursuant to the court’s prior summary
adjudication ruling. But that is not the case. The judgment
imposes damages against both Green Corporation and Dee
Corporation without distinguishing between them.
Third, the judgment states that Klug Corporation recovered
damages for both disability payments and partnership
distributions, i.e., both categories of damages potentially
impacted by the reallocation of overhead expenses. Thus, nothing
on the face of the judgment indicates that any portion of the
breach of contract or breach of fiduciary causes of action remains
to be litigated.
As to the request for an accounting, we are similarly unable
to evaluate Klug Corporation’s contention that an accounting has
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not been provided and is still necessary.5 It appears from the
judgment that Klug Corporation’s damages claims have been
resolved. It may be that the damages are incomplete due to the
absence of a proper and thorough accounting. But we have no
basis to make such a determination. Moreover, the report
prepared by Klug Corporation’s expert accountant with regard to
damages includes damages calculations for the period at issue.
Thus, the minimal record we have contains no indication that the
court erred.6
5 We also note that the judgment does not mention the accounting
cause of action and Klug Corporation did not argue that the judgment
fails to dispose of all causes of action.
6 Green Corporation’s request for sanctions is denied.
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DISPOSITION
The judgment is affirmed. Derek T. Dee M.D., a
Professional Corporation and Edward Green III, a Medical
Corporation shall recover their costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
LAVIN, J.
WE CONCUR:
EDMON, P. J.
ADAMS, J.*
*Judge of the Los Angeles Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.
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