Investors Equity Life holding Co. v. Schmidt CA4/3 ( 2015 )

Filed 1/13/15 Investors Equity Life holding Co. v. Schmidt CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
INVESTORS EQUITY LIFE HOLDING
COMPANY,
G048284
Plaintiff and Appellant,
(Super. Ct. No. 30-2009-00119128)
v.
OPINION
JEFFREY P. SCHMIDT et al.,
Defendants and Respondents.
Appeal from a judgment of the Superior Court of Orange County, Nancy
Wieben Stock, Judge. Reversed and remanded. Request for Judicial Notice denied.
Lewis Brisbois Bisgaard & Smith, Joseph K. Hegedus and Caroline E.
Chan; and Parker Shumaker & Mills, David B. Parker and Theodore W. Frank, for
Plaintiff and Appellant.
Daley & Heft and Lee H. Roistacher; Locke Lord, C. Guerry Collins and
Michelle C. Ferrara; and Lewis Roca Rothgerber, Frank D. O’Loughlin and Cindy C.
Oliver, for Defendants and Respondents.
* * *
Plaintiff Investors Equity Life Holding Company appeals from the
judgment dismissing this case on the ground of forum non conveniens. Plaintiff filed its
complaint in 2009, and the trial court originally ordered the action stayed on the ground
of forum non conveniens. Plaintiff appealed that order and we affirmed in a published
decision. (Investors Equity Life Holding Co. v. Schmidt (2011) 195 Cal.App.4th 1519(Investors Equity I).) In our opinion, we first considered whether Hawaii qualified as a
suitable alternative forum for adjudicating plaintiff’s claims, affirming the trial court’s
assessment that it did. We then rejected plaintiff’s contention that the court had
nonetheless abused its discretion in concluding that the balance of public and private
factors favored Hawaii as a forum over California. In the course of assessing the latter
issue, we also rejected plaintiff’s claim that as a California resident, its choice of forum
was entitled to great weight. Somewhat confusingly, we characterized plaintiff’s claim to
California residency as both “erroneous” and merely “doubtful.” (Id. at pp. 1534-1535.)
In 2012, defendants “renewed” their motions, seeking an order dismissing,
rather than merely staying, the action. In their renewed motions, defendants seized on
statements in our opinion – in particular our rejection of plaintiff’s claim of California
residency – claiming those statements were law of the case, and reflected a material
change in circumstance that warranted an outright dismissal of this case. The trial court
agreed. We conclude the trial court’s order reflected an abuse of its discretion and
reverse.
The lynchpin of any order granting a motion based on forum non
conveniens is a determination that a suitable alternative forum exists. It is only after the
trial court reaches that conclusion that it would even consider whether the benefits of the
proposed alternative forum outweigh the reasons for keeping the litigation in California.
In this case, the trial court’s original assessment of Hawaii’s suitability, as well as our
opinion affirming that assessment, was based in part on the promises and stipulations
entered into by defendants in this forum. Having relied on those representations as a
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basis for our rulings, we have an interest in retaining jurisdiction to ensure plaintiff has a
remedy in the event defendants do not comply with those promises in the alternate forum.
Moreover, our assessment of Hawaii’s suitability as an alternative forum was also based
on our own analysis of Hawaii’s statutes of limitations, which we concluded operated
similarly to California’s. However, because our analysis of Hawaii law is not binding on
any proceeding conducted in Hawaii’s own courts, we also explained that “in the event
our understanding of Hawaii law is incorrect,” the fact that this case was merely stayed,
rather than dismissed, meant “plaintiff will have the opportunity to seek relief in the
courts of this state.” (Investors Equity I, supra, 195 Cal.App.4th at p. 1534.)
The trial court’s subsequent decision to dismiss the action undermined both
of those bases for the original suitability finding. If this case were dismissed, California
would forfeit its power to act in the event the promises made by defendants in this forum
are not complied with, or to offer plaintiff any relief if Hawaii ultimately interprets its
own laws in a manner which materially differs from what we had anticipated. Under
these circumstances, it was error to order this case dismissed before the parties’ dispute is
finally resolved in Hawaii.
Additionally, the trial court erred in treating our rejection of plaintiff’s
residence claim as law of the case. The doctrine of law of the case applies only to legal
principles applied on appeal; it has no application to factual determinations, such as
whether plaintiff provided adequate evidence to support a claim of residence status for
purposes of a forum non conveniens motion. And when defendants renewed their motion
following our remand of the case to the trial court, and sought an outright dismissal of
this case, plaintiff was entitled to rely on new evidence supporting its claim of significant
ties to California. The court erred when it refused to consider that evidence in assessing
whether California had an interest in retaining jurisdiction.
Defendants have requested we take judicial notice of plaintiff’s petition for
rehearing in the earlier appeal, and our denial of that petition. The request is denied.
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FACTS
In our prior opinion, we summarized the dispute and circumstances
surrounding defendants’ initial forum non conveniens motion. We repeat that summary
here.
“The first amended complaint alleges plaintiff is the sole shareholder of
Investors Equity Life Insurance Company of Hawaii, Ltd. (IEL), an insurance company
currently the subject of a liquidation action in the Hawaii Circuit Court for the First
Circuit.” (Investors Equity I, supra, 195 Cal.App.4th at p. 1523.)
“IEL was a life insurance company organized under and regulated by the
State of Hawaii with approximately 99 percent of its policyholders residing in that state.
Plaintiff alleges it is a Delaware Corporation ‘authorized to transact business as a foreign
corporation in . . . California.’ It acquired all of IEL’s shares in 1991.
“According to the amended complaint, in 1993 plaintiff received
authorization from the Hawaii Division of Insurance to enter into what are described as
epurchase transactions”’ and to invest in ‘“hedging transactions.”’ The next year,
defendant Reifurth became Hawaii’s Insurance Commissioner. He filed an action in
Hawaii state court to seize and rehabilitate IEL, claiming the repurchase and hedging
transactions had rendered the insurer insolvent. (Reifurth v. Investors Equity Life Ins. Co.
of Haw., Ltd. (Hawaii Cir.Ct., 1994, S.P. No. 94-0337).) IEL’s president stipulated to
appointing a deputy insurance commissioner as the insurer’s rehabilitator. The amended
complaint alleges defendant McCorriston, a lawyer with the McCorriston law firm, which
represented Reifurth, allegedly told plaintiff ‘if anything is left over in IEL’s estate after
rehabilitation or liquidation . . . , then that remainder will go to [p]laintiff as the sole
shareholder.’
“Reifurth later obtained an order liquidating IEL. Plaintiff appealed that
ruling, but the Hawaii Supreme Court affirmed, holding plaintiff lacked standing to
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oppose the insurance commissioner’s liquidation petition. (Metcalf v. Investors Equity
Life Ins. Co. of Hawai’i, Ltd. (1996) 80 Hawaii 339.) As noted, the liquidation action is
still pending.
“In late 1994, Reifurth, represented by the McCorriston law firm, filed an
action in Hawaii state court against plaintiff and its owner, Gary Vose, alleging fraud and
misuse of IEL’s funds. (Reifurth v. Vose (Hawaii Cir.Ct., 1994, No. 94-4337-11).) The
parties reached a settlement terminating this lawsuit in August 1996. Plaintiff also
alleges that, in 1995, IEL entered into a reinsurance assumption agreement with the then
Hawaii Insurance Commissioner, defendant Association, and Hartford Life [140]
Insurance Company under which IEL ‘transferr[ed] almost all insurance policy-related
liabilities . . . to Hartford.’
“According to the amended complaint, ‘[a]t no time did IEL’s directors
authorize forfeiture and cancellation of IEL’s shares of stock,’ nor has ‘[p]laintiff
surrendered its shares . . . for cancellation and forfeiture.’ ‘Neither Reifurth nor any other
person holding the position of Hawaii Insurance Commissioner, or any person acting on
behalf of a commissioner, has given timely and proper notice for [p]laintiff, or other
person with interest, to cure any impairment that IEL had, and Reifurth and every other
person holding the position of such commissioner have failed to take such other steps as
would authorize him or her to effect cancellation and forfeiture of IEL’s shares.’ But a
declaration submitted by defendant Yamano, a lawyer with the McCorriston law firm,
asserts plaintiff surrendered its IEL stock under the settlement and Vose signed a
document to that effect. Yamano further claims the settlement contained a choice of law
clause applying Hawaii law.
“A focal point of the amended complaint is the purported transfer of IEL’s
stock to a trust controlled by the Association under a stock subscription agreement.
Plaintiff alleges that, in December 1996, Wayne C. Metcalf III, then serving as Hawaii’s
Insurance Commissioner, filed a motion in the liquidation action seeking approval of that
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agreement. According to the amended complaint, ‘[a]lthough [p]laintiff was a party to
the [l]iquidation [a]ction, [it] was not served with a copy of the [s]ubscription
[a]greement at the time the . . . motion was filed . . . .’
“Plaintiff claims the stock subscription agreement is void because, by its
terms, the agreement needed to be submitted to and approved by the court by December
31, 1996, and that was never done. The amended complaint alleges defendants not only
failed to serve plaintiff with a copy of the stock subscription agreement or timely submit
that agreement to the court for approval, but also took other steps ‘to misrepresent,
deceive, and mislead concerning the . . . [a]greement and the purported transactions
relating to that agreement’ by which they ‘defraud[ed plaintiff] and depriv[ed it] of its
right, title, and interest in the monies and assets remaining in IEL’s estate and IEL’s
stock . . . and value of such stock.’ It further alleges ‘[b]y a long series of intertwined,
complex, and in many cases unlawful or improper transactions, . . . defendants have
siphoned, or assisted others to siphon, monies in a variety of ways from IEL’s estate.’
“According to the amended complaint, plaintiff first discovered evidence of
defendants’ wrongful conduct in March 2008. Plaintiff claims it then learned a February
2008 interim report on IEL’s assets contained ‘a materially false and misleading entry . . .
denot[ing] some sort of claim by the . . . Association’ for over $35 million. ‘When the
balance sheet is adjusted to correct that entry alone, IEL has a surplus (positive net worth)
of’ over $21 million that ‘rightfully belongs to [p]laintiff.’
“In February 2009, plaintiff filed the current action. The first amended
complaint alleges 14 counts, including causes of action for unlawful taking, denial of due
process and equal protection, various species of fraud, breach of fiduciary duty,
conversion, and unfair competition in violation of Business and Professions Code section
17200.
“Motions to stay or dismiss the California action for forum non conveniens
were filed by defendants Schmidt, Reifurth, Yamano, McCorriston, the McCorriston law
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firm, Komatsubara, one of IEL’s liquidators, plus Timothy P. Bogan, a former examiner
for Hawaii’s Division of Insurance. Except for Bogan, these defendants claimed they
were residents of or transacted business in Hawaii. Bogan had been a California resident,
but his declaration supporting the forum non conveniens motion stated that as of July
2009 he became a resident of the Commonwealth of Virginia. Defendants McCorriston
and Yamano acknowledged the McCorriston law firm has a Los Angeles office but
denied either of them currently works at that location.
“After a hearing, the trial court ordered the action stayed pending further
order of the court and set the matter for a status review hearing in March 2010. It
acknowledged defendants had only made an informal offer to stipulate to toll the statute
of limitations ‘if necessary,’ and it was still unclear ‘whether all named defendants could
be brought within the jurisdiction of the Hawaii [c]ourts’ or whether they ‘would be
willing to submit to the jurisdiction’ in Hawaii. Nonetheless, the court found Hawaii is a
suitable alternative forum.
“Balancing the respective private and public interest factors, the court
found they favored granting the motion. As for the private interests at stake, it noted ‘the
documentation and recordation of the acts claimed of[] repose in . . . Hawaii, as [d]o
most, if not all[,] of the parties who would have been involved in the activity.’ The court
also gave ‘some weight’ to the fact ‘California would have the most difficulty in securing
personal jurisdiction over percipient witnesses . . . .’
“The court placed ‘[g]reat weight’ on several public interest factors
favoring jurisdiction in Hawaii. These included the Hawaii courts ‘continuing
supervisory jurisdiction over th[e] ongoing insurance company liquidation matter’; ‘court
orders purport[ing] to extend protection to some of the named defendants relative to their
ability to manage and conserve the assets of the distressed [insurer]’; the ‘potential’ for
‘conflicting interpretations by a foreign state of Hawaii’s own orders’; the ‘superior
interest’ of Hawaii citizens in the ‘supervising [and] winding down of [a] distressed
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insurance compan[y]’ that ‘served almost exclusively the insurance needs of Hawaii
residents’; the fact ‘[k]ey named defendants are, or have been,’ employed in state
government departments focused on consumer affairs, particularly with respect to the
‘consumer protection of Hawaii insureds’; plus Hawaii’s ‘substantial interest in
regulating or fixing the conduct’ that the ‘lawsuit . . . intends to cure . . . .’
“Addressing the choice of law issue, the court found that even assuming
Hawaii does not have a restitutionary remedy similar to Business and Professions Code
section 17200, ‘the cases are clear that the existence of a favorable statutory scheme or
litigation-based public policy in one forum is not determinative.’ Also ‘[a]s to any
application of Hawaii law, including the possible direct or indirect application of
principles of sovereign immunity, it has not been established that even if the case
remained in California . . . a California court would not apply principles of comity,
wherein the plaintiff’s fate could be the same as if the case were tried elsewhere.’
“After plaintiff appealed from the stay order, all defendants executed a
stipulation declaring ‘[s]hould [p]laintiff file any such action in Hawaii for the claims
made . . . in this action, [d]efendants agree that any Hawaii statute of limitations was
tolled from the date of the filing of the complaint in this action . . . to the earlier of such
date upon which [p]laintiff may file or re-file any such action in Hawaii or March 3,
2010,’ and ‘[s]hould [p]laintiff file an action in Hawaii . . . , no [d]efendant will contest
personal jurisdiction in Hawaii.’
“The trial court continued the status review hearing based on the pendency
of [the initial] appeal. Defendants [then] asked us to take judicial notice of a second
stipulation filed in the superior court in July 2010. It repeats defendants’ agreement not
to contest personal jurisdiction in Hawaii and to toll ‘any Hawaii statute of limitations . . .
from the date of the filing of the complaint in this action . . . to the earlier of such date
upon which [p]laintiff may file or re-file any such action in Hawaii or . . . 60[] days after
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the Court of Appeal issues its remittitur . . . .’” (Investors Equity I, supra, 195
Cal.App.4th at pp. 1524-1528.)
“The primary issue presented” on appeal in Investors Equity I was “whether
the trial court erred in finding Hawaii to be a suitable alternative forum.” (Investors
Equity I, supra, 195 Cal.App.4th at p. 1528.) We found no error, relying significantly on
the stipulations filed by defendants in the trial court, as well as on our own assessment
that Hawaii’s statutes of limitations operated similarly to our own. However, as to the
latter point, we acknowledged the possibility that Hawaii’s courts might apply its laws
differently than we anticipated, and explained that “[i]n the event our understanding of
Hawaii law is incorrect,” the fact that this case was merely stayed, rather than dismissed,
meant “plaintiff will have the opportunity to seek relief in the courts of this state.” (Id. at
p. 1534.)
We then addressed plaintiff’s secondary contention, which was that the trial
court had also abused its discretion in concluding that the balance of relevant public and
private interests favored Hawaii as the forum for this litigation. Noting our own
obligation to “accord ‘substantial deference’ to the trial court’s exercise of its discretion”
(Investors Equity I, supra, 195 Cal.App.4th at p. 1534), we had little difficulty rejecting
the contention. We pointed out that not only is “documentation relevant to plaintiff’s
claims . . . entirely in Hawaii, nearly all of the percipient witnesses are located there.”
(Ibid.) We also expressly concurred with the trial court’s assessment that “Hawaii has a
greater interest in litigation over the proper winding up of a Hawaii insurer that primarily
did business in that state and even more so concerning whether Hawaii public officials
are properly and honestly carrying out their official duties.” (Id. at p. 1536.)
It was in the context of analyzing this secondary issue that we gave short-
shrift to plaintiff’s assertion that its status as a “California resident” meant its choice of
forum “should be accorded great weight.” (Investors Equity I, supra, 195 Cal.App.4th at
p. 1534.) We characterized plaintiff’s claim of residency at one point as “erroneous,” but
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then supported that characterization with the less-definitive explanation that plaintiff’s
“admission it has been authorized to transact business in California as a ‘foreign
corporation’ undermine[s] its status as a California resident.” (Id. at pp. 1534-1535,
italics added.) We later referred to plaintiff’s residency claim as merely “doubtful.” (Id.
at p. 1535.)
Following remand, defendants’ filed what they called renewed motions to
dismiss the case. Their motions relied entirely upon our prior opinion, arguing we had
“expressly found” that they had “stipulated to personal jurisdiction in Hawaii should
Plaintiff re-file the lawsuit there”; that “the statutes of limitation for Plaintiff’s causes of
action were the same in both California and Hawaii”; and that “Plaintiff is not a
California resident.” (Boldface omitted.) They also claimed that each of these findings
“are now law of the case going forward.”
Plaintiff opposed the motions, asserting that it was a California resident,
and offering additional evidence to support that assertion. It argued that to the extent our
prior opinion concluded otherwise, it was dicta. Plaintiff also contended that a dismissal
of this case would be inconsistent with the fundamental reasoning of our prior opinion,
and in support of that contention it asked the court to take judicial notice of documents
reflecting the status of proceedings in Hawaii. Those documents reflected that even
before we had even issued our opinion, the Hawaii Insurance Commissioner (one of the
defendants herein) had issued a 10-page “Notice of Determination” of plaintiff’s claim as
a creditor in the IEL liquidation proceeding. That document appeared to define plaintiff’s
claim as including all causes of action asserted by plaintiff in this case, and then denied
that claim in its entirety. Among other things, the notice concluded that plaintiff’s core
assertion in this case – that it had been improperly stripped of its shares in IEL – was
untimely, both because it was required to have been asserted no later than December
1995, which was the “claims bar date” set forth in the original order approving IEL’s
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liquidation plan, and because all otherwise applicable statutes of limitations had been
exceeded.
Plaintiff promptly objected to that notice, attempted to reserve its rights
relating to jurisdiction, and challenged the decision in the Hawaii Circuit Court. After
plaintiff’s challenge was denied in the circuit court, it appealed. Plaintiff then applied to
have its appeal transferred from the Hawaii Intermediate Court of Appeal, directly to the
Hawaii Supreme Court. That application was granted in December 2011, and the case
remained pending before the Hawaii Supreme Court.
In their reply, defendants objected to plaintiff’s request for judicial notice
of the status of Hawaii proceedings, arguing those proceedings were irrelevant to their
motion, which had been based solely on the findings contained in our prior opinion.
However, defendants did not dispute either the accuracy of the documents plaintiff
provided, or the fact the parties’ dispute was pending before the Hawaii Supreme Court.
Following the hearing on defendant’s motion, the trial court’s initial
decision was to deny the request for dismissal of the case, and instead set the case for a
further status conference six months hence. However, before the court issued any formal
order denying defendants’ motion, it instead “vacated its prior ruling or, in the
alternative, advanced the [date of the status conference], and issued a ‘Modified Ruling.’”
The court’s modified ruling was to grant the request for dismissal.
The court explained its decision to dismiss as follows: “Plaintiff is not a
California resident. That is the law of the case. The evidence offered by Plaintiff on this
point is therefore, irrelevant. Plaintiff is collaterally estopped from relitigating this issue.
Therefore, the rights and presumptions asserted in Plaintiffs’ Opposition simpl[y] do not
apply. [¶] The Defendants have long ago taken care of the contingencies that lead to the
Court’s entering a stay vs. dismissal. Plaintiff has had many years to pursue his claims in
the State of Hawaii. Evidence offered by both sides suggests that the litigation is ongoing
in the State of Hawaii. That Plaintiff is dissatisfied with the procedures, outcomes and
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current status is not relevant. He is having his day in court, this, without having filed any
affirmative lawsuits since the pendency of this California lawsuit. The interests of justice
are not served by holding the California docket open for years to come, only to merely
review what the Parties are doing in another state.”
DISCUSSION
1. Forum non Conveniens Law
The analysis to be applied in deciding motions based on forum non
conveniens is well settled. “Forum non conveniens is an equitable doctrine invoking the
discretionary power of a court to decline to exercise the jurisdiction it has over a
transitory cause of action when it believes that the action may be more appropriately and
justly tried elsewhere. [Citation.] . . . [¶] In determining whether to grant a motion based
on forum non conveniens, a court must first determine whether the alternate forum is a
‘suitable’ place for trial. If it is, the next step is to consider the private interests of the
litigants and the interests of the public in retaining the action for trial in California. The
private interest factors are those that make trial and the enforceability of the ensuing
judgment expeditious and relatively inexpensive, such as the ease of access to sources of
proof, the cost of obtaining attendance of witnesses, and the availability of compulsory
process for attendance of unwilling witnesses. The public interest factors include
avoidance of overburdening local courts with congested calendars, protecting the
interests of potential jurors so that they are not called upon to decide cases in which the
local community has little concern, and weighing the competing interests of California
and the alternate jurisdiction in the litigation.” (Stangvik v. Shiley Inc. (1991) 54 Cal.3d
744, 751, italics added (Stangvik).)
Key to assessing whether an alternative forum would be suitable is the
determination that the forum would be able to exercise jurisdiction over the defendant,
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and that plaintiff’s claim would not be barred by its statute of limitations. (Stangvik,
supra, 54 Cal.3d at p. 752 [“‘the [California] suit will be entertained, no matter how
inappropriate the forum may be, if the defendant cannot be subjected to jurisdiction in
other states. The same will be true if the plaintiff’s cause of action would elsewhere be
barred by the statute of limitations, unless the court is willing to accept the defendant’s
stipulation that he will not raise this defense in the second state’”].)
Moreover, in determining whether to grant a motion based on forum non
conveniens, “[t]he trial court . . . has considerably wider discretion [when it chooses to
merely stay, rather than dismiss, an action] precisely because under a stay California
retains jurisdiction.” (Century Indemnity Co. v. Bank of America (1997) 58 Cal.App.4th
408, 411.) Thus, as explained by our Supreme Court in Archibald v. Cinerama Hotels
(1976) 15 Cal.3d 853, 860, a case notably similar to this one, when the assessment of the
alternative forum’s suitability is dependent upon factors beyond the control of the
California courts – such as the interpretation of another state’s laws – then a stay of the
California litigation might be justified, when an outright dismissal would not be. In
Archibald, the Supreme Court first acknowledged that assessing how Hawaii’s courts
would interpret its own class action law was inherently “speculative,” but then concluded
that such uncertainty did not preclude the court’s grant of the forum non conveniens
motion: “[T]he existence of unsettled questions of Hawaiian procedure does not compel
the trial court to conclude as a matter of law that Hawaii is not a suitable alternative
forum. Uncertainties such as this concerning the suitability of the foreign forum have
prompted our holding that a court cannot dismiss a suit . . . , but can stay that suit: the
staying court can resume proceedings if the foreign forum proves unsuitable.” (Id. at p.
862, italics added.)
That same analysis would also apply where a California court’s assessment
of an alternative forum’s suitability depends on the defendant’s stipulation – in the
California litigation – to the jurisdiction of the alternate forum and to a tolling of the
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applicable statutes of limitations if a case were litigated there. The California court could
properly rely upon such a stipulation in making its ruling, or as happened in Stangvik
itself, could expressly condition its ruling on the defendants’ compliance with such
requirements. (Stangvik, supra, 54 Cal.3d at p. 750, fn. 2.) However, once the litigation
proceeds to the alternative forum, the California court would have no direct power to
enforce the stipulation in that other forum, or to compel the defendants’ compliance with
its earlier conditional ruling. So by choosing to stay, rather than dismiss, the California
litigation, the court retains at least the indirect power to do so: “[t]he staying court . . .
can compel the foreign [party] to cooperate in bringing about a fair and speedy hearing in
the foreign forum; it can resume proceedings if the foreign action is unreasonably
delayed or fails to reach a resolution on the merits.” (Ferreira v. Ferreira (1973) 9
Cal.3d. 824, 841; see Stangvik, at p. 750 [reflecting the court’s retention of “jurisdiction
to make such further orders as might become appropriate”].)
2. Law of the Case Doctrine
“Under the law of the case doctrine, when an appellate court ‘“states in its
opinion a principle or rule of law necessary to the decision, that principle or rule becomes
the law of the case and must be adhered to throughout [the case’s] subsequent progress,
both in the lower court and upon subsequent appeal . . . .”’ [Citation.] Absent an
applicable exception, the doctrine ‘requir[es] both trial and appellate courts to follow the
rules laid down upon a former appeal whether such rules are right or wrong.’ [Citation.]
As its name suggests, the doctrine applies only to an appellate court’s decision on a
question of law; it does not apply to questions of fact.” (People v. Barragan (2004) 32
Cal.4th 236, 246.)
Hence, “the law of the case doctrine is subject to an important limitation: it
‘applie[s] only to the principles of law laid down by the court as applicable to a retrial of
fact,’ and ‘does not embrace the facts themselves . . . .’ [Citation.] In other words,
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although an appellate court’s legal determination constitutes the law of the case, ‘upon a
retrial . . . that law must be applied by the trial court to the evidence presented upon the
second trial.’ [Citation.] Thus, during subsequent proceedings in the same case, an
appellate court’s binding legal determination ‘controls the outcome only if the evidence
on retrial or rehearing of an issue is substantially the same as that upon which the
appellate ruling was based. [Citations.]’ [Citation.] Where, on remand, ‘there is a
substantial difference in the evidence to which the [announced] principle of law is
applied, . . . the [doctrine] may not be invoked.’” (People v. Barragan, supra, 32 Cal.4th
at p. 246, some italics added.)
Significantly, “nothing in the law of the case doctrine itself limits the
additional evidence that a party may introduce on retrial to that which ‘could not have
been presented at the first trial through the exercise of due diligence.’” (People v.
Barragan, supra, 32 Cal.4th at p. 247.)
3. The Trial Court Erred in Applying the Law of the Case Doctrine to our Earlier
Opinion
Defendants’ “renewed” motion to dismiss this case was based on three
asserted “findings” made by this court in our earlier opinion: (1) the fact they had
“stipulated to personal jurisdiction in Hawaii should Plaintiff re-file the lawsuit there”;
(2) the determination that “the statutes of limitation for Plaintiff’s causes of action were
the same in both California and Hawaii”; and (3) the determination “Plaintiff is not a
California resident.” (Boldface omitted.) Defendants asserted that all of these findings
“are now the law of the case going forward,” and argued the first two were sufficient to
establish Hawaii’s suitability as an alternative forum, while the third demonstrated that
California should have no significant interest in continuing to retain jurisdiction.
However, in the context of this case, none of those asserted findings was entitled to the
significance defendants attributed to them, and none qualified as law of the case.
15
The first “finding” relied upon by defendants – that following the trial
court’s initial order granting the forum non conveniens motion and ordering the case
stayed, they elevated their informal promise to submit to personal jurisdiction in Hawaii
should plaintiff refile its lawsuit there, into a formal stipulation – is just an unadorned
fact. As such, it does not qualify as law of the case. (People v. Barragan, supra, 34
Cal.4th at p. 246 [law of the case applies only to principles of law, and “‘does not
embrace the facts themselves’”].) Moreover, the mere fact defendants formally promised,
in this forum, to submit to the jurisdiction of Hawaii, is not nearly as significant in
deciding whether this court should relinquish jurisdiction as is the determination of
whether those defendants actually followed through on that promise in Hawaii.
Defendants offered no evidence on that latter point.
The second “finding” relied upon by defendants – that “the statutes of
limitation . . . were the same in both California and Hawaii” simply distorts the
conclusion we reached. We certainly never purported to decide Hawaii law; instead, we
expressly acknowledged that “our understanding of Hawaii law [might be] incorrect.”
(Investors Equity I, supra, 195 Cal.App.4th at p. 1534.) And we expressly relied on the
fact this case had been stayed, rather than dismissed, in pointing out that if our
understanding of Hawaii law proved wrong, plaintiff would still “have the opportunity to
seek relief in the courts of this state.” (Ibid.) Thus, a more accurate representation of our
“finding” concerning the effect of Hawaii law is that while it appears to be similar to our
own, we have no authority to make any binding determinations about how it will be
applied by the Hawaii courts. If anything, that amounts to an explicit concession that the
legal principals we have employed in analyzing Hawaii law will not qualify as law of the
case.
The final, and most significant “finding” relied upon by defendants – that
plaintiff’s claim to California residency is “erroneous” – is likewise inappropriate as a
basis for either applying the law of the case doctrine or dismissing this case. This issue
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arose in the context of plaintiff’s assertion that its choice of the California forum was
entitled to significant deference in the trial court’s assessment of whether California or
Hawaii was the more appropriate forum. Plaintiff asserted, in rather conclusory fashion,
that California was its principal place of business, and thus it qualified as a California
“resident” for purposes of applying that rule.
However, plaintiff failed to recognize that the cases requiring significant
deference to the forum choice of a “resident” who files suit in California involved human
plaintiffs. (See, e.g., Archibald v. Cinerama Hotels, supra, 15 Cal.3d at pp. 858-859;
Thomson v. Continental Ins. Co. (1967) 66 Cal.2d 738, 742; Goodwine v. Superior Court
(1965) 63 Cal.2d 481, 485; Beckman v. Thompson (1992) 4 Cal.App.4th 481, 488-489.)
The justification for that deference is two-fold: “(1) if the plaintiff is a resident of the
jurisdiction in which the suit is filed, the plaintiff’s choice of forum is presumed to be
convenient [citations]; and (2) a state has a strong interest in assuring its own residents an
adequate forum for the redress of grievances.” (Stangvik, supra, 54 Cal.3d at pp. 754-
755.)
But neither the rule, nor its underlying justifications, applies in quite the
same way to corporations or other business entities, which do not simply “reside” in one
state or another in quite the same way that people do. A corporation may be large or
small, simple or complex, and it may choose to be formed under (and subject to) the laws
of one state, while conducting its business elsewhere. A large business could have a very
significant presence in multiple states, which might suggest that each of those states
could provide a presumptively convenient forum for litigation involving the corporate
plaintiff, and each might claim varying degrees of interest in assuring that corporation has
an adequate forum for redress of its grievances. (See Ford Motor Co. v. Insurance Co. of
North America (1995) 35 Cal.App.4th 604, 612 [noting that California has some interest
in providing a forum to Ford Motor Company, because it “is a California taxpayer,
employer and property owner”].)
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Thus, in National Football League v. Fireman’s Fund Ins. Co. (2013) 216
Cal.App.4th 902 (NFL), the court rejected the plaintiff’s claim of residency in California
(based on the contention that “as an unincorporated association of member football clubs,
it resides wherever its members are located” (id. at p. 919), concluding instead that in a
forum non conveniens analysis involving a plaintiff business entity, the court should
engage in a “case-by-case examination of the parties, their dispute and the relationship of
each to the state of California” (id. at p. 921), rather than attempting to assess a plaintiff’s
residence.
Moreover, California law does not generally distinguish between
corporations on the basis of whether they are “residents” or “nonresidents” of California
– although that label is often used in cases addressing whether a specific county is a
proper venue for a California lawsuit involving a corporation. (Hale v. Bohannon (1952)
38 Cal.2d 458, 462; Sea World, Inc. v. Superior Court (1970) 13 Cal.App.3d 100, 104;
Walker v. Wells Fargo Bk. & U. T. Co. (1937) 24 Cal.App.2d 220-223; but see Coulston
v. Cooper (1966) 245 Cal.App.2d 866, 868-869 [addressing whether a defendant
presumed to be a foreign corporation, could properly be served with a notice under a
statute applicable only to “nonresident” car owners].) The tendency to equate a
corporation’s principal place of business with its “residence” for venue purposes may
result from reconciling Code of Civil Procedure section 395, which states the general rule
that venue is appropriate in the county where a defendant “reside[s]” with Code of Civil
Procedure section 395.5, which establishes the more specific rule that a corporation can
be sued in the county where it has its “principal place of business.”
Instead of categorizing corporations as “resident” or “nonresident,” our
corporate statutes distinguish between “domestic corporations,” which are defined as
those formed under California law (Corp. Code, § 167) and “foreign corporations” such
as plaintiff, which are not. (Corp. Code, § 171.) Presumably, California would have a
greater interest providing a forum for litigation involving its domestic corporations than it
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would for litigation involving foreign ones. And while foreign corporations can conduct
business within California after obtaining a certificate of qualification from the Secretary
of State to do so – as plaintiff claimed it had done (Corp. Code, § 2105), such
qualification does not suffice to transform the foreign corporation into a de facto
domestic one, nor would it even obligate a foreign corporation to govern itself in
accordance with California law. On the other hand, California law does provide that if a
foreign corporation “transacts more than half of its business (as measured by various
objective criteria) in California, and [] a majority of the voting securities are held by
California residents,” then it would qualify as a “so-called pseudoforeign” corporation.
(Greb v. Diamond Internat. Corp. (2013) 56 Cal.4th 243, 251, italics added.)
Corporations Code section 2115 requires that such a corporation “abide by numerous
specified statutes . . . that govern corporate ‘internal affairs’ and would not otherwise
apply to foreign entities.” (Ibid.) Such a “pseudoforeign” corporation might have a good
claim to whatever forum benefits would be afforded to a similarly situated domestic
corporation.
But none of the foregoing, bearing upon the actual significance of
plaintiff’s ties to this state, was argued by plaintiff in the earlier appeal or addressed in
our opinion. Instead, we simply rejected (or perhaps merely cast doubt on) plaintiff’s
conclusory assertion of “residency” as a basis for claiming an entitlement to deference in
its choice of forum. As a practical matter, all that means is we determined plaintiff had
failed to offer sufficient evidence demonstrating its relationship to California was so
significant – whether referred to as “residency” or some corporate equivalent – that it’s
choice of California as a forum should be accorded significant deference in balancing the
relative interests of the parties and the forums. That essentially factual determination,
involving the assessment of evidence relating to this particular plaintiff, could never be
characterized as a bare “principle[] of law” to which the law of the case doctrine would
apply. (People v. Barragan, supra, 32 Cal.4th at p. 246, italics omitted.) Consequently,
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the trial court erred by concluding, in response to defendants’ “renewed” motion, that it
did.
Further, having erroneously concluded that plaintiff’s nonresident status
qualified as law of the case, the trial court then compounded its error by also refusing to
consider whether the additional evidence offered by plaintiff to demonstrate its
significant ties to California might bear on the analysis of whether this state still has an
interest in retaining jurisdiction over this case. The court simply declared that because
law of the case applied, the additional evidence offered by plaintiff was automatically
rendered irrelevant.
But because law of the case applies only to legal principles, it does not
prevent a party from offering additional evidence when an issue is reconsidered in the
trial court following remand from the appellate court – even where the appellate court has
reversed a trial court’s earlier decision based on the insufficiency of the evidence.
“[W]here the appellate court reverses based on ‘the “sufficiency of the evidence,” the rule
of the law of the case may not be extended to be an estoppel,’” and a party remains free
to “‘present additional evidence at a retrial . . . to’ overcome the appellate court’s
determination that the evidence at the first trial was legally insufficient.” (People v.
Barragan, supra, 32 Cal.4th at pp. 246-247.) Thus, before deciding whether the changed
circumstances relied upon by defendants in their renewed motions warranted an outright
dismissal of this case, the trial court was obligated to consider whatever relevant evidence
plaintiff offered in opposition to that request – including evidence that plaintiff maintains
a significant relationship with this state, such that California would continue to have an
interest in ensuring it has a proper forum in which to litigate its claims.
4. The Trial Court Abused its Discretion in Ordering the Case Dismissed
As we have already explained, the trial court’s discretion to grant a motion
based on forum non conveniens is wider when it merely imposes a stay of the case before
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it, rather than dismissing it outright. (Century Indemnity Co. v Bank of America, supra,
58 Cal.App.4th at p. 411.) In particular, the court can exercise more flexibility in
assessing whether the proposed alternate forum is suitable – such as through reliance on
the defendants’ promises of future conduct in that other forum, or on its own expectations
as to how the case is likely to proceed – if it retains the option of resuming its own
proceedings in the event circumstances in the alternate forum do not develop as expected.
That is what happened initially in this case. And in our opinion affirming
the trial court’s original determination that Hawaii was a suitable alternative forum, we
specifically relied on the promises made by defendants in this forum about how they
would conduct themselves in connection with future proceedings in Hawaii, as well as on
the fact that our trial court would retain the option of resuming proceedings in this case if
our understanding of Hawaii law proved incorrect. Thus, the court’s original decision to
stay, rather than dismiss, this case played a significant role in our opinion.
And contrary to defendants’ (and the trial court’s) apparent belief, nothing
in our earlier opinion did anything to resolve the uncertainties inherent in that suitability
analysis. Thus, the court’s subsequent decision to dismiss the case, rather than maintain
the stay, cannot have been based on our decision. Dismissal might have been justified if
subsequent proceedings in Hawaii demonstrated that our expectations of the Hawaii
forum had been fulfilled, or that they were somehow rendered moot. But defendants
proved neither of those things. Indeed, their renewed motion offered the court no
information at all about the status of proceedings in Hawaii. And when plaintiff sought
to inform the court of those proceedings, and of its pending challenge to an
administrative adjudication that its claims had already been barred by Hawaii’s statutes of
limitations, the court was unmoved, explaining that plaintiff’s “dissatisf[action] with the
procedures, outcomes and current status [in Hawaii] is not relevant. He is having his day
in court . . . .” That assessment is simply inconsistent with our earlier opinion, which
made clear that in the event Hawaii applied its statutes of limitations in a manner
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materially inconsistent with our expectations, plaintiff might still have the option of
returning to this forum. In other words, how Hawaii handles this case is potentially
relevant in reassessing its suitability as an alternative forum.
That being said, however, we certainly do not mean to imply any
determination that the proceedings in Hawaii thus far have provided cause for concern.
That issue is not before us, and we make no such determination.
The other reasons cited by the trial court for dismissing the case are no
more persuasive. As we have already explained, our earlier rejection of plaintiff’s
residency claim had no lingering significance, and the court erred when it refused to even
consider plaintiff’s proffered evidence intended to demonstrate its strong relationship
with California. And we presume the trial court’s statement that “[t]he Defendants have
long ago taken care of the contingencies that lead [sic] to the Court’s entering a stay vs.
dismissal,” refers to the fact defendants later elevated what had been only an informal
promise to submit to jurisdiction in Hawaii when the trial court made its initial ruling,
into a formal stipulation. However, as we have already stated, defendants’ elevation of
their informal promise into a formal stipulation would not support a decision to then
dismiss the very case in which that stipulation is entered. If this case were dismissed, the
significance of that formal stipulation would be seriously diminished, if not sacrificed
completely.
And finally, the trial court’s concern about “holding the California docket
open for years to come, only to merely review what the [p]arties are doing in another
state” does not provide any independent justification for dismissal. That is simply the
nature of a stay.
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DISPOSITION
The judgment dismissing this case is reversed. Defendants’ request for
judicial notice is denied. The case is remanded to the trial court with directions to
reinstitute its prior stay. Plaintiff is to recover its costs on appeal.
RYLAARSDAM, J.
WE CONCUR:
O’LEARY, P. J.
MOORE, J.
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