Preview
FILED
Ei oir Gout of Caltorna
1 ate Se OMISION
SEP 06 2019
CLERK QF THE/COURT
BY: sry Clerk
SUPERIOR COURT OF CALIFORNIA |
COUNTY OF SAN FRANCISCO
APPELLATE DIVISION
ENTREPENEUR MEDIA INC, ) App. No. CGC-13-530730
) .
Plaintiff/Appellant, ) Court No. CGC-13-530730
vs.
AMENDED REMITTITUR
SCOTT SMITH, :
Defendant/Respondent.
eee re revewv
Respondent to recover costs.
ISSUED ON: July 19,2019
DATE: September 6, 2019
Dora Louie, Deputy Clerk\
SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN FRANCISCO
APPELLATE DIVISION
ENTREPRENEUR MEDIA INC., App. No, CGC-13-530730
)
Plaintiff/A ppellant, } CourtNo. CGC-13-530730
' vs, , . }
SCOTT SMITH, , } JUDGMENT ON APPEAL
Defendant/Respondent.
_)
This matter was heard on June 7, 2019. The parties appeared for oral argument, After
considering the record, arguments and applicable law, the judgment is AFFIRMED.
. BACKGROUND
In February 2012 and after years of litigation, plaintiff/appellant Entrepreneur Media, Inc.
(“EMI”) obtained from the United States District Court for the Central District of California an
unsecured money judgment against defendant/respondent Scott Smith based on claims that
respondent had infringed appellant’s trademark rights. Under the federal judgment, respondent
owes appellant approximately $1.4 million. In April 2013, appellant filed the instant state-court
unlimited civil action against respondent for fraudulent conveyance based on allegations that
respondent had fraudulently transferred to a third party two domain names: “brand-larceny.com”
1_ and “bizstarz.com.” The domain narhes never had a value greater than $0 to $2,500.
Nevertheless, years of tortured litigation ensued. Through August 2017, the trial court docket
reflects over 800 entries. Appellant drove much of the litigation and it acknowledged that its
tactics and practices were “over the top.”
In August 4017 and after appellant disclosed its expert’s opinion that the domain names
had minimal value, respondent moved to reclassify the action as a limited civil case and the trial
court granted that request.! The day after the action was set for trial, appellant dismissed its / ,
claim against respondent. ,
As the prevailing party, respondent timely filed a memorandum of costs seeking to
recover $13,806.09. After multiple hearings, the court awarded respondent costs of $13,109.75.
Appellant moved for an order that would allow EMI to offset any costs awarded in this case
against the balance owed by respondent on the federal judgment. Respondent opposed any
offset. At the hearing on the motion, the trial court expressly acknowledged that “it would be an
extremely unusual and rare circumstance not to allow set-off of costs against the [federal] ,
judgment.” But based on its experience with EMIs tactics and practices, the trial court judged
that the circumstances of this case rendered it one of those rare cases in which offset should be .
disallowed.
Ultimately, the trial court denied appellant’s motion, explaining that the equities weighed
overwhelmingly against offset:
[T]he court exercises its discretion to require [EMI] to pay the full amount of the
costs awarded to [Smith] directly to him rather than as [an] offset against the debt
that [Smith] owes to it. Equitable principles — including but not limited to those
underlying such concepts as unclean hands, abuse of process and avoidance of
bullying — demand that [EMI] be required to pay out of its pocket all of [Smith’s]
' The Appellate Division has jurisdiction over all rulings made after the case was
reclassified.as limited. (See Code Civ. Proc. § 904.2.)
f
2allowable costs rather than use those costs to reduce a debt that will likely never
be paid in full where, as here, [EMI] engaged in abusive and objectively irrational
over-litigation of near-worthless claims for the sole apparent purpose of causing
[Smith] to incur costs and suffer burdens.
Appellant’s timely appeal of this ruling followed.
DISCUSSION —
Appellant claims that the trial court erred when it denied the offset request. A trial
court’s decision to grant or deny a party's motion to offset is reviewed for abuse of discretion.
(Brown v. Super. Ct. (2004) 116 Cal.App.4th 320, 335) :
Citing Lozada v. City and County of San Francisco (2006) 145 Cal.App.4th 1139, 1148,
appellant contends that de novo review is the standard that applies to “review for the”
* enforcement of lien rights under [Code of Civil Procedure] §708.470(a) wee based on the
interpretation of the statute and its application on the basis that the court rendered immune from
enforcement the Cost Bill.” Lozada is a summary judgment casé that has nothing to say about
“review for the enforcement of lien rights.” To the extent it stands for the uncontroversial
proposition that legal questions are reviewed de riovo, Lozada is inapt. Here, as explained
below, the proper interpretation of section 708.470(a) is not seriously in doubt. The question is
whether the trial court properly exercised the equitable authority conveyed by the legislature. .
Exercises of equitable powers are reviewed for abuse of discretion.
The trial court denied appellant’s motion to offset costs pursuant to its discretionary
authority outlined in Code of Civil Procedure section 708.470(a). That statute provides as
follows:
If the judgment debtor is entitled to money or property under the judgment in the
action or special proceeding! and a lien created under this article exists, upon
application of any party to the action or special proceeding, the court may order
that the judgment debtor's rights to money or property under the judgment be
applied to the satisfaction of the lien created under this article as ordered by the
court.(Code Civ. Proc., § 708.470(a) [emphasis added].) “Although it is commonly stated that the trial
court has discretion in enforcing the right of offset, the discretion must be exercised within legal
limits. Thus, unless the judgment creditor establishes the existence of facts supporting some
equitable principle precluding. it, offset is a matter of right. . at least where the judgment
creditor is insolvent.” (Margott v. Gem Properties, Inc. (1973) 34 Cal.App.3d 849, 854, citations
omitted.)
Much in this case is undisputed. At stake in the litigation was property of minimal value.
The docket contains well over 800 entries. And appellants litigation tactics and practices were
“over the top.” Respondent incurred more than $13,000 in recoverable costs alone. And as
between appellant and respondent, respondent prevailed and earned a right to recover his out-of-
pocket costs.
The trial court considered the record as a whole and found that it implicated equitable
principles underlying such doctrines as uriclean hands, abuse of process and avoidance of
bullying. In other words, acting in bad faith and motivated by interests other than obtaining a
fair and just result, appellant used the court for sport, to bully and harass respondent. (See Salas
y. Sierra Chemical Co. (2014) 59 Cal.4th 407, 432 [Generally, the equitable doctrine of unclean
hands applies when a plaintiff has acted unconscionably, in bad faith, or inequitably in the matter
in which the plaintiff seeks relief.”]; Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056 [“The
common law tort of abuse of process arises when one uses the court's process for a purpose other
than that for which the process was designed.”].) The trial court further recognized that the
equities have to weigh strongly against offset in order for the judgment creditor to lose his offset
rights. It found, however, that this was such a case. The finding is reasonable.To be sure, a judgment creditor is entitled to pursue the debtor’s assets and, when
appropriate, judicial process must be available to aid in that pursuit. Additionally, ajudgment .
creditor who loses a new case to the creditor has aright to have the new judgment offset against
the existing judgment. But neither of these rights is absolute. A judgment creditor who ‘engages
in abusive litigation cannot reasonably expect that the court will necessarily respond by
exercising its equitable powers to accommodate that party’s interest, however legitimate the
interest in collecting on the existing judgment standing alone may be.
Margott is instructive. There, the trial court denied a judgment creditor’s motion to have
the new judgment in favor of the debtor offset against the existing (and apparently uncollectible) .
earlier judgment. (Margott, 34 Cal.App.3d at 853-854.) The appellate court reversed, rejected
the respondents essentially legal arguments against offset, including a claim that a punitive
damages award could never be offset. (Jd. at 854-855.) “Tt is conceivable,” explained the court,
“that unconscionable conduct leading to a judgment of punitive damages may be so related to the
offset transaction as to raise an equitable defense to offset such as unclean hands.” (Margott, 34 -
Cal.App.3d at 856.) ,
While this case does not involve a punitive damages award it is one in which the equities
weigh overwhelmingly against offset, Appellant, the judgment creditor, engaged in abusive
conduct closely related to the initial judgment. The record demonstrates that animus—
necessarily rooted in the federal litigation—drove the litigation. Appellant’s demonstration of
animus taxed and exhausted respondent, and that was the very purpose of the exercise. It also
unreasonably taxed and exhausted the trial court. But for the hostility towards respondent rooted
in the federal judgment, this case would not have been litigated in the manner it was litigated.
Ds 7 :Appellant asks that we dissect the record and assess each aspect without regard to the
whole. Appellants decision to file the case as an unlimited matter did not on its own trigger fee-
shifting sanctions; its discovery. tactics were not on their own outrageous and, ultimately; its case
had some merit as evidenced by the (default) judgment against a co-defendant; thus, the
argument goes, offset must be allowed. But section 708.470(a) is not a sanctions statute, nor is it
a discovery statute. It is a statute that allows the trial court to consider the record as a whole to
determine whether by its own conduct a judgment creditor essentially forfeited its right to offset.
Here, the trial court found the protracted litigation over nearly worthless assets was ‘
unconscionable such that appellant forfeited any right to offset. The trial court’s analysis was -
entirely consistent with section 708.470(a).
Appellant focuses on the case’s jurisdictional classification (unlimited or limited) and
contends that any over-litigation is on respondent because respondent should have moved to
reclassify the case sooner. Appellant ignores the fact that it made the decision to classify the
case as unlimited, it represented that the amount in controversy exceeded the jurisdictional limit ,
and it decided not to disclose its expert’s valuation until four years into the litigation. Appellant
may point its finger at respondent, but it may properly be held accountable for its own tactics and
practices in this case.
Appellant criticizes the trial court for not combing the record to “pin point, identify, or ,
describe any filing, motion paper, pleading, hearing, or anything else that would qualify as
‘abuse of process.”” At the hearing, the trial court discussed the case at length with appellant’s
counsel, made clear its judgment that the case was overlitigated and that appellant used the case
to “hammer against Mr. Smith,” and explained that the equities weighed heavily against offset.
Appellant never asked the trial court to “pin point” specifics, nor were pinpoint citationsnecessary, The trial court was in the best position to balance the equities and we give its
determination deference. We have also reviewed the record and find the trial court’s conclusion
well supported.
Appellant argues that the challenged order “declar[es] immune from enforcement a non
exempt asset” and such declaration violates the Enforcement of Judgments Law (Code Civil
Procedure §§ 680.010 et seq.). “A party forfeits the right to claim error as grounds for reversal
on appeal when he or she fails to raise the objection in the trial court.” (Jn re Dakota H. (2005)
132 Cal.App.4th 212, 221-222.) Here, appellant did not argue in its offset motion that any order’
denying offset would violate the EJL. Thus, appellant has forfeited this argument.
Appellant’s belated due process arguments suffer the same fate. Appellant delayed
raising these arguments until its reply brief on appeal. “ ‘ “Obvious considerations of fairness in
argument demand that the appellant present all of [its] points in the opening brief. To withhold a
point until the closing brief would deprive the respondent of his opportunity to answer it or
require the effort and delay of an additional brief by permission. Hence the rule is that points
raised in the reply brief for the first time will not be considered, unless good reason is shown for
failure to present them before.” ’” (Doe » California Dept. of Justice (2009) 173 Cal.App.4th
1095, 1115.) ‘Appellant does not explain why it could not have raised its due process arguments
in its opening brief, and thus we deem them abandoned. .
Hl ,
W
i
HtDISPOSITION
For the forgoing reasons, the judgment is AFFIRMED.
IT IS SO ORDERED.
DATE: June 14,2019
Mt dB ter fl
Richard BxUlmer Jr., Presiding Judge
Sopher C. Hite, AsSociate Judge
[oer (ee
CT" Quinn, eye JudgeCERTIFICATE OF SERVICE BY MAIL
(Code of Civil Procedure § 1013a(4))
I, Dora Louie, deputy clerk of the Superior Court of California, County of San
Francisco, certify that I am not a party to this action.
On September 6, 2019, I served the attached AMENDED REMITTITUR
(CGC-13-530730) by placing a copy thereof in a sealed envelope addressed to each of the
following:
Scott Smith Hon. Harold E. Kahn (Inter-Office)
5716 Folsom Blvd, Ste. 140 Judge of the Superior Court
Sacramento, CA 95819 400 McAllister Street
San Francisco, CA 94102
David J. Cook
Cook Collection Attorneys, PLC Appeals Clerk
P.O. Box 270 400 McAllister Street
San Francisco, CA. 94104-0270 San Francisco, CA 94102
and, I then placed the sealed envelope(s) in the outgoing mail at 400 McAllister Street,
San Francisco, CA 94102, on the date indicated above for collection with the postage
thereon fully prepaid, and mailed on that date following standard court practices.
DATE: September 6, 2019
CLERK OF THE COURT
Arn “4
Dora Létiie, Deputy Clerk