Judge David S. Cunningham, Case Number: BC544786, Date: 2023-04-26 Tentative Ruling

Opposing Party: Dole Food Company, Inc. (“Dole Food”) and Dole plc (collectively “Dole”)

The hearing on Shell’s motion to add judgment debtor is continued to allow Dole to file supplemental evidence.

“Shell has incurred and continues to incur [costs] to investigate and remediate environmental contamination in the Carousel neighborhood tract in Carson California (the ‘Site’).” [Citation.] “The Regional Water Quality Control Board, Los Angeles Region (‘Water Board’) issued a Cleanup and Abatement Order (‘CAO’) determining that both Shell and Barclay [Hollander Corporation (“Barclay” or “BHCorp”)] are responsible for the contamination and directing them both to ‘assess, monitor, cleanup and abate’ it.” [Citation.]

Shell claims, “[f]or years,” it “has been performing the major environmental remediation in the neighborhood” without Barclay’s help. Accordingly, Shell filed an action for “contribution and indemnity . . . for the cleanup costs, as well as declaratory relief.” [Citation.]

“‘After a three-week trial, the jury returned a unanimous verdict allocating 50% of the cleanup costs to Barclay, resulting in an award in favor of Shell and against Barclay for $133,270,347.50.’ [Citation.]” (Order Re: Motion for Judgment Notwithstanding the Verdict, p. 1.)

Now, Shell moves to add Barclay’s parent, Dole, as a “joint and several judgment debtor on alter ego grounds.” (Notice of Motion to Add Judgment Debtor, p. 1.)

Shell’s motion is brought pursuant to Code of Civil Procedure section 187. (See Notice of Motion, p. 1.) “Under section 187, the trial court is authorized to amend a judgment to add additional judgment debtors.” (Greenspan v. LADT, LLC (2010) 191 Cal.App.4^th 486, 508.) “As a general rule, ‘a court may amend its judgment at any time so that the judgment will properly designate the real defendants.’” (Ibid.)

“Judgments may be amended to add additional judgment debtors on the ground that a person or entity is the alter ego of the original judgment debtor.” (Ibid.) “Amendment of a judgment to add an alter ego ‘is an equitable procedure based on the theory that the court is not amending the judgment to add a new defendant but is merely inserting the correct name of the real defendant.’” (Ibid.) “Such a procedure is an appropriate and complete method by which to bind new . . . defendants where it can be demonstrated that in their capacity as alter ego of the corporation they in fact had control of the previous litigation, and thus were virtually represented in the lawsuit.” (Ibid.)

“The decision to grant an amendment in such circumstances lies in the sound discretion of the trial court.” (Ibid.) “The greatest liberality is to be encouraged in the allowance of such amendments in order to see that justice is done.” (Ibid.)

Dole contends the Court lacks jurisdiction while Barclay’s appeal is pending. (See Opposition to Motion to Add Judgment Debtor, pp. 11-14 [arguing that (1) “the perfecting of an appeal stays proceedings in the trial court upon the judgment or order appealed from or upon the matters embraced therein or affected thereby, including enforcement of the judgment or order, but the trial court may proceed upon any other matter embraced in the action and not affected by the judgment or order[,]” (2) “[a]dding a judgment debtor is not enforcement of the judgment[,]” (3) “[a]dding a judgment debtor is not a collateral proceeding[,]” and (4) “[a]dding a judgment debtor is not correction of a clerical error”], bolding deleted.)

Shell claims “the Court has continuing jurisdiction” because Barclay failed to “post[] an undertaking[.]” (Motion to Add Judgment Debtor, p. 9 [“While an appeal generates a stay under Code of Civil Procedure section 916, that stay does not extend to enforcement when no supersedeas bond is posted, per section 917.1.”]; see also Reply to Motion to Add Judgment Debtor, pp. 2-4 [arguing that (1) section 917.1 “provides that unless an undertaking is given the perfecting of an appeal shall not stay enforcement of a money judgment[,]” (2) California law recognizes that “add[ing] a nonparty alter ego judgment debtor is on possible remedy to enforce the judgment[,]” (3) Dole fails to cite “a single case holding that a judgment debtor’s perfecting of an appeal divests the Court of jurisdiction to enforce by adding an alter ego judgment debtor when no undertaking is given[,]” and (4) “[i]f the Court enters an alter ego judgment against Dole, that will not interfere with the issues that may arise on Barclay’s appeal”], emphasis in original.)

Shell also claims “the section 916 appellate stay does not extend to those who are not parties to the appeal.” (Motion to Add Judgment Debtor, p. 10; see also Reply to Motion to Add Judgment Debtor, p. 4 [asserting that a stay against “one of several appellants does not prevent enforcement of the judgment or order against the others”].)

Section 916 provides that “perfection of an appeal automatically stays further trial court proceedings[,]” except “in situations covered by” sections 917.1-917.9. (Eisenberg, et al., Cal. Practice Guide: Civ. Appeals and Writs (The Rutter Group 2022) ¶¶ 7:70, 7:71, emphasis in original.)

(a) Unless an undertaking is given, the perfecting of an appeal shall not stay enforcement of the judgment or order in the trial court if the judgment or order is for any of the following:

(1) Money or the payment of money, whether consisting of a special fund or not, and whether payable by the appellant or another party to the action. . . .

It is undisputed that the judgment here is for “[m]oney or the payment of money[.]” (Ibid.)

The disputed question is whether moving to add an alter ego judgment debtor qualifies as “enforcement of the judgment[.]” (Ibid.) The answer appears to be no. According to Highland Springs Conference & Training Center v. City of Banning (2019) 42 Cal.App.5^th 416 (“Highland Springs II”), a case cited by Dole, “enforcing a judgment results, at least to some degree, in the satisfaction of the judgment” whereas “a section 187 motion to amend . . . does nothing to satisfy the judgment[.]” (Highland Springs II, supra, 42 Cal.App.5^th at 426, emphasis added.) “Rather, a section 187 motion, if granted, merely allows the judgment creditor to enforce the now-amended judgment against the additional judgment debtor.” (Ibid.) The opinion emphasizes that the Enforcement of Judgments Law – i.e., Code of Civil Procedure sections 680.010-724.260 – “nowhere suggests that the filing and pursuit of an alter ego motion to amend a judgment to add an additional judgment debtor . . . constitutes the enforcement of the judgment[.]” (Id. at 425-426.) The conclusion to be drawn is that moving to add a judgment debtor is a pre-step to enforcement against the added judgment debtor, not enforcement itself.

* Misik v. D’Arco (2011) 197 Cal.App.4^th 1065 includes a footnote that identifies two ways to go about enforcing a prior judgment against an alter ego judgment debtor – bringing a separate action against the judgment debtor or moving pursuant to section 187 to add the judgment debtor to the existing case. (See Misik, supra, 197 Cal.App.4^th at 1072 n.1.) The decision does not hold that filing a section 187 motion constitutes enforcement under section 917.1.

* Innovation Ventures, LLC v. N2G Distributing, Inc. (C.D. Cal., Feb. 18, 2014 No. SACV 12-717 ABC (Ex)) 2014 WL 10384631 just lists general rules pertaining to section 187 motions. (See Innovation Ventures, supra, 2014 WL 10384631, at *3.) Like Misik, it does not address the enforcement issue.

* Hall, Goodhue, Haisley & Barker, Inc. v. Marconi Conference Center Bd. (1996) 41 Cal.App.4^th 1551 (“Hall”) is like Innovation Ventures; it just lists general rules. (See Hall, supra, 41 Cal.App.4^th at 1555.)

* The Blizzard Energy, Inc. v. Schaefers (2021) 71 Cal.App.5^th 832 court expressly declined to consider whether the trial court had jurisdiction to amend the judgment given the defendant’s failure to post an undertaking. In a footnote, the decision notes that Oyakawa v. Gillett (1992) 8 Cal.App.4^th 628 says, “arguably, the amendment adding a judgment debtor is simply a matter of enforcement[.]” (Blizzard Energy, supra, 71 Cal.App.5^th at 845 n.6, emphasis added.) But the footnote also quotes Highland Springs II’s observation that nothing in the Enforcement of Judgments Law “suggests that the filing and pursuit of an alter ego motion to amend . . . constitutes the enforcement of the judgment[.]” (Ibid.)

Regardless, the Court agrees with Shell. “A stay pending appeal does not suspend enforcement of the judgment or order against” nonappealing parties. (Eisenberg, supra, ¶ 7:46, emphasis in original; see also Kentfield v. Kentfield (1935) 4 Cal.2d 585, 587.) Since the stay is inapplicable to Dole, Shell is free to move to add Dole to the case as a joint and several alter ego, and the Court has jurisdiction to decide the motion.[1] This proceeding does not interfere with the Court of Appeal’s review of Barclay’s liability.

“In order to prevail in a motion to add judgment debtors” as alter egos, the moving party “must show”:

* “the parties to be added as judgment debtors had control of the underlying litigation and were virtually represented in that proceeding” (Relentless Air Racing, LLC v. Airborne Turbine Ltd. Partnership (2013) 222 Cal.App.4^th 811, 815-816);

* “there is such a unity of interest and ownership that the separate personalities of the entity and the owners no longer exist” (id. at 816); and

* “an inequitable result will follow if the acts are treated as those of the entity alone.” (Ibid.)

Shell devotes several pages of its brief to the first two elements. (See Motion to Add Judgment Debtor, pp. 4-8, 11-15 [asserting that (1) “Dole controls the litigation[,]” and (2) “Dole and Barclay have a unity of interest and ownership” in that (a) “Barclay does not observe corporate formalities[,]” (b) “[t]he same people who are officers and directors of Dole appoint themselves as officers and directors of Barclay[,]” (c) “Barclay does not have employees[,]” and “[i]ts principal place of business and corporate headquarters are the same as the offices of Dole and its affiliates[,]” (d) “Barclay and Dole share the same legal counsel,” (e) “Barclay claims it has no assets other than insurance[,]” which is “procured by Dole[,]” (f) “Dole has kept Barclay without any reserves: no balance sheets, no income statements, no cash flow statements, no profit and loss statements, and no bank accounts[,]” and (g) “Barclay does no business”], capitalizing, bolding, and italicizing deleted; see also Reply to Motion to Add Judgment Debtor, pp. 5-6 [claiming Dole concedes the first two elements].)

[I]t would be inequitable as a matter of law to preclude Shell from collecting its judgment by treating Barclay as a separate entity from Dole. [Citation.] Barclay and Dole represented to the Water Board in January 2014 that Barclay has assets in the form of insurance, thereby allowing Dole to remain behind Barclay’s corporate veil and use Barclay to litigate discharger liability. Barclay and Dole now seek to avoid satisfying that discharger liability by claiming Barclay is penniless. Justice requires that a judgment declare Dole jointly and severally liable as an alter ego.

(Motion to Add Judgment Debtor, p. 2; see also id. at p. 15; Reply to Motion to Add Judgment Debtor, p. 6 [arguing that (1) “Shell’s inability to collect its judgment is an inequitable result[,]” (2) California law does not “require[e] proof of wrongful intent to establish an inequitable result[,]” and (3) Dole misrepresented to the Water Board that Barclay has assets].)

Dole contends Shell fails to demonstrate that an alter ego relationship existed at the time of the alleged misconduct. (See Opposition to Motion to Add Judgment Debtor, p. 14, bolding deleted; see also id. at pp. 15-16 [arguing that (1) “the relevant inquiry into [alter ego status] focuses on the relationship between the parent and the subsidiary at the time the acts complained of took place[,]” and (2) Barclay “stopped doing business and sold all its remaining real estate assets in 1995; any time period after that is irrelevant”], italicizing in original, bolding deleted.)

Assuming arguendo that Dole and Barclay’s current relationship is relevant, Dole contends the Court must apply North Carolina law and Irish law to the alter ego issue. (See id. at pp. 16-17.)

* Barclay’s insurance is sufficient to “cover the full judgment” (id. at p. 17);

* potential “difficulty in enforcing a judgment cannot satisfy the inequitable result requirement” (id. at p. 18, bolding deleted);

* Shell’s delay is unreasonable (see id. at pp. 19-20 [arguing that Shell waited nine years to try to readd Dole to the case]); and

* Shell is estopped from adding Dole. (See id. at pp. 20-21 [arguing that (1) “the Court allowed Shell to admit evidence of insurance coverage to paint a prejudicial and misleading picture that an insurance company would foot the bill for BHCorp’s share of the remediation costs[,]” (2) “in its closing argument, Shell told the jury it should be aggressive in apportioning fault to BHCorp because BHCorp’s insurance will pay the bill[,]” and (3) “in post-trial proceedings, Shell successfully argued that “evidence of Barclay’s insurance was properly admitted to rebut and correct the misleading impression Barclay gave to the jury that it has no assets”].)

* Dole’s timing argument – the alter ego relationship must be evaluated at the time of the alleged misconduct – is based on nonbinding federal law (see Reply to Motion to Add Judgment Debtor, pp. 7-9);

* “Dole cannot avoid an alter ego judgment by pointing to insurance” (id. at p. 9 [asserting that (1) “Barclay is currently litigating coverage with its insurers[,]” (2) “[t]he insurance litigation between Barclay and its insurers has been stayed[,]” (3) “Barclay has not requested the stay be lifted[,]” and (4) “Barclay has not received any insurance money to cover the judgment”], capitalizing, bolding, and underlining deleted, italicizing in original);

* Dole fails to show that North Carolina law and Irish law govern (see id. at pp. 11-12);

Shell is correct that the first two elements are uncontested. The Court is inclined to find Shell’s showing sufficient to satisfy the first two elements.

At trial, the Court allowed Shell to present evidence that Barclay possesses adequate insurance assets. During the judgment debtor examination on March 14, 2023, Jared Gale – the vice president, general counsel, and corporate secretary of Dole Food and the director, vice president, and secretary of Barclay (see Gale Decl. in Support of Opposition to Motion to Add Judgment Debtor, ¶ 1) – effectively confirmed Shell’s trial evidence, testifying under oath that there is enough insurance to pay the entire judgment. (See Meyer Decl. in Support of Opposition to Motion to Add Judgment Debtor, Ex. 1, pp. 16 [Gale testifying that “there’s plenty of insurance to cover the full judgment”], 17 [Gale testifying that his “understanding is that there’s enough coverage to pay for the verdict” and answering “yes” to whether “there’s more than $133,000,000 in insurance coverage to satisfy the judgment”].) Dole’s opposition brief is congruent, stating: “BHCorp has never claimed it has no insurance or that its insurance will not cover the judgment[;]” “BHCorp has always maintained its insurance does cover this matter[;]” and “the insurance funds [] are just as available now as they were before.” (Opposition to Motion to Add Judgment Debtor, p. 17, emphasis in original.)

These facts and representations indicate that Barclay is able to pay and tend to disprove the third element; however, the Court needs more information. Shell asserts that there is an ongoing coverage dispute between Barclay and its insurers. If true, Barclay cannot pay the judgment unless and until the coverage dispute is resolved in its favor (Barclay does not have other assets to pay the judgment). (See, e.g., Opposition to Motion to Add Judgment Debtor, p. 10.) The Court’s inclination is to continue the hearing to give Dole a chance to submit a supplemental declaration from Gale. The declaration should address whether Barclay is able to access its own insurance or Dole’s insurance now to cover the judgment.

First, the Court agrees with Shell that Dole’s timing argument – the alter ego relationship must be evaluated at the time of the alleged misconduct – is based on nonbinding federal law. (See Reply to Motion to Add Judgment Debtor, pp. 7-9.) Dole fails to cite a California case adopting such a rule.

Second, Dole fails to establish the applicability of North Carolina law and Irish law. (See id. at pp. 11-12 [noting, for example, that Dole fails to address the multiple elements of the governmental interest test].)

Third, Shell’s motion is timely. Judgment was entered on November 28, 2022. Shell noticed the judgment debtor examination less than two months later on January 23, 2023. After granting Barclay’s request to reschedule the examination, the first session of the deposition took place on March 14, 2023. Then Shell filed the motion on April 6, 2023. These facts belie Dole’s claim of delay.

Fourth, Dole’s estoppel argument is unavailing. The Court permitted Shell to present the insurance evidence at trial because Barclay opened the door. It was rebuttal evidence. Shell did not take an inconsistent position on whether Dole is an alter ego.

[1] Joint and several liability means each defendant is independently liable for the full amount of damages. (See, e.g., American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 582.)