Opinion
A159370
04-28-2021
LAWRENCE B. LANDMAN, Plaintiff and Appellant, v. AKKUSER OY, Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. HG17887152)
This appeal arises out of a long-running dispute between Lawrence B. Landman, a United States citizen and resident of Denmark who does business in California, and Akkuser Oy (Akkuser), a Finnish battery recycling company.
In a first lawsuit, Landman and Clean Battery Recycling (CBR), a California company Landman cofounded with Akkuser and its chief executive Jarmo Pudas, sued Akkuser and Pudas. The case was ordered to arbitration, where Akkuser prevailed and Pudas was dismissed. Upon returning to court, Akkuser secured a judgment on the arbitration award, and we affirmed. (Clean Battery Recycling, Inc v. Akkuser Oy (March 16, 2017, A148862) [nonpub. opn.] (Clean Battery).)
Following our opinion in Clean Battery, Landman sued Akkuser again, seeking recovery for the same alleged harm—failure to compensate him for services he rendered in connection with the failed effort to start CBR—but this time on a different theory of recovery. He lost again, and now appeals the trial court's order granting Akkuser's motion for judgment on the pleadings.
We affirm.
I.
A.
Landman once was a coventurer with Akkuser in CBR, a joint enterprise they started in 2008 pursuant to the terms of a shareholders agreement and two license agreements (collectively, the Agreements). According to the arbitration award that Akkuser and Pudas eventually obtained, "Mr Pudas and Mr Landman created a structure, common in business, which provided compensation for Mr Landman which would be delayed, contingent on his success (or more accurately the success of his joint efforts with Mr Pudas and Akkuser), and proportional to that success." The shareholders agreement provided that Landman and Akkuser would each own one-half of the company and that Pudas and Landman would share board and management positions.
The relationship soured when sufficient funds to support the startup of CBR failed to materialize. According to the arbitration award, the parties decided to pursue an arrangement in which Landman rendered services directly to Akkuser, rather than through a joint enterprise under the contractual structure established by the Agreements. "In effect, . . . [they] shifted to a different business model . . . that involved promoting Akkuser's Finnish operations directly to interested third parties in other countries," with Landman's compensation governed outside the scope of the contractual structure they established for CBR.
During the years 2008 through 2012, the arbitrator found, Landman devoted considerable time to developing business opportunities with various companies, including a German company called GRS Batteries (GRS). Landman came to believe that Pudas had wrongfully diverted these opportunities from CBR to Akkuser, and demanded that Akkuser make license royalty payments to CBR. Pudas, on behalf of Akkuser, took the position that none of the Agreements remained "in force and effect" and proposed a commission-based arrangement to compensate Landman directly for his services.
B.
Landman apparently found Pudas's proposal unsatisfactory because, in 2012, he and CBR sued Akkuser and Pudas in Alameda County Superior Court seeking to enforce the Agreements. The arbitration came about because all of the Agreements had an arbitration clause, and, invoking that clause, Akkuser successfully petitioned to compel arbitration. The arbitration proceedings took place in Helsinki subject to a choice-of-law clause calling for interpretation of the Agreements in accordance with Finnish law. Through his sole proprietorship, Interagan Technology Group, Landman represented himself and CBR in the arbitration, handling the proceeding for himself in propria persona and representing CBR as its counsel.
Though not a member of the California bar, Landman holds a J.D. from the University of California, Berkeley. Landman represented at oral argument that he is a member of the New York bar and was the general counsel of CBR.
Central to the claims adjudicated in the arbitration was whether Akkuser committed a breach of contract by doing business directly with business partners Landman developed, rather than through CBR. Akkuser sought declaratory relief that it was not in breach of contract, and CBR and Landman asserted counterclaims for fraud, breach of fiduciary duty, and usurpation of corporate opportunity. Additionally, in one of six causes of action, Landman alleged a shareholder's derivative theory under section 800 of the California Corporations Code, seeking recovery in his capacity as a shareholder of CBR.
The arbitrator ruled for Akkuser in all respects. As pertinent here, his detailed, 52-page award made two principal findings. First, he sustained Akkuser's legal position that the Agreements were unenforceable. Finding that the Agreements were proposed and drafted by Landman and that Pudas had a "relatively weak command of English," the arbitrator decided not to take "an overly formalistic approach" to interpreting their meaning. Instead, he accepted Pudas's explanation that the Agreements were simply a mode of attracting investors to the planned joint enterprise. When that plan failed, the arbitrator found, the Agreements failed with it. As the arbitrator explained his reasoning, "attracting investors" and thereby "enabling [CBR's] intended business, . . . [was] a fundamental, underlying condition for the initial, or at least the continued, force and effect of the Agreements," and when that condition was not fulfilled, the Agreements became unenforceable.
Second, subject to the caveat that he was not addressing whether Landman may have a right to compensation "outside of" the Agreements, the arbitrator determined there was no basis to conclude "Akkuser had committed any prior breach of the Agreements by entering into the arrangement with GRS for the recycling of German batteries at Akkuser's plant in Finland." To the contrary, the arbitrator found, "the evidence indicates that Mr Landman not only consented to, but actively promoted the contract for battery recycling between GRS and Akkuser." Having found no breach by Akkuser, the arbitrator declined to award damages to Landman or CBR "based on alleged breach of the Agreements."
On this point, the arbitrator said: "As regards Mr Landman's efforts to bring business directly to Akkuser in Finland, I have found those efforts to fall outside of the Agreements. As a consequence, the compensation, or lack thereof, for those efforts by Mr Landman is not relevant for me to consider in relation to the Agreements, but is a separate matter between Mr Landman and Akkuser."
Accordingly, in the absence of any underlying breach of contract—or any enforceable contractual duties at all after the parties abandoned their original business model—the arbitrator found no fraud, no breach of fiduciary duty, and no violation of California Corporations Code section 800. The arbitrator also granted attorney fees and costs to Akkuser as the prevailing party, albeit less than the "unreasonably high" amount Akkuser claimed, and only for the arbitration, not for the court proceedings that preceded it.
C.
In 2014, Akkuser and Pudas sought confirmation of the arbitration award and entry of judgment in Alameda County Superior Court. CBR responded with a motion to vacate the award. The petition to confirm was granted, CBR's motion to vacate was denied, and we affirmed the judgment as to Akkuser in Clean Battery, supra, A148862.
In December 2017, Landman, still proceeding in propria persona but without CBR, returned to Alameda County Superior Court with a second lawsuit against Akkuser, this time attempting to assert claims for compensation under a different theory of recovery and making no claims against Pudas. Having failed to recover on theories of fraud, breach of fiduciary duty, and usurpation of corporate opportunity, Landman's second suit against Akkuser sought recovery on breach of contract and quantum meruit theories.
Akkuser has filed an action against Landman in Denmark seeking to recover the attorney fees and costs awarded by the arbitrator. As an offset to the fees and costs Akkuser seeks to recover there, Landman appears to be asserting by way of counterclaim the same claim he pursues in this action.
Ruling on statute of limitations grounds, the trial court granted a motion for judgment on the pleadings under Code of Civil Procedure sections 438, subdivision (c)(1)(B), and 337, dismissing Landman's first amended complaint with prejudice. We affirm, but for a different reason. Under the doctrine of claim preclusion, we conclude Landman is barred from suing Akkuser again because the theories he now seeks to pursue are barred by the judgment we affirmed in Clean Battery, supra, A148862.
Leaving open the issue presented by this appeal, our opinion affirming the judgment in Clean Battery declined to address "[w]hether Landman can pursue a compensation claim against Akkuser in a separate proceeding" (Clean Battery, supra, A148862), consistent with the same limitation noted by the arbitrator. We now address this open issue and hold that, no matter how it is characterized, any such claim arises out of the same cause of action Landman and CBR pursued in their 2012 suit against Akkuser and Pudas.
Landman argues he did not realize he had a claim against Akkuser for recovery of the value of his services until the arbitrator's decision issued, but as we explain below that is of no moment. Claim preclusion bars all claims arising out of a prior cause of action, not just claims the claimant knowingly withholds.
II.
"We review a trial court's ruling on demurrer de novo [citation], giving 'the complaint a reasonable interpretation, reading it as a whole and viewing its parts in context. [Citations.] We deem to be true all material facts properly pled. [Citation.] We must also accept as true those facts that may be implied or inferred from those expressly alleged.' " (Mahan v. Charles W. Chan Ins. Agency, Inc. (2017) 14 Cal.App.5th 841, 847.)
An additional vehicle for attacking the legal sufficiency of a complaint is a motion for judgment on the pleadings. (Code Civ. Proc., § 438, subd. (c)(1)(B)(ii).) A motion for judgment on the pleadings " 'is equivalent to a demurrer and is governed by the same de novo standard of review.' " (Templo v. State (2018) 24 Cal.App.5th 730, 735.) We conduct our review under the same standards that apply to our review of a ruling on demurrer. Leave to amend " 'is properly denied if the facts and nature of plaintiffs' claims are clear and under the substantive law, no liability exists.' " (Ibid.)
We are not limited to the reasoning adopted by the trial court and may affirm on any available ground, regardless of the rationale adopted by the trial court. (Boschetti v. Pacific Bay Investments Inc. (2019) 32 Cal.App.5th 1059, 1065.) That is how we will resolve this appeal. While the trial court found Landman's suit to be untimely, we focus on res judicata—meaning "a thing adjudicated"—which describes the preclusive effect of a final judgment. (Guerrero v. Department of Corrections & Rehabilitation (2018) 28 Cal.App.5th 1091, 1098.)
In modern parlance, res judicata has two branches, one known as issue preclusion and the other as claim preclusion. (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824-829.) Under the claim preclusion branch of res judicata, a final judgment on the merits bars parties or parties in privity from " ' "successive litigation of the very same claim . . . as the earlier [action]." ' " (Guerrero v. Department of Corrections & Rehabilitation, supra, 28 Cal.App.5th at p. 1098.) This preclusive bar blocks relitigation of the "issues that were actually litigated" as well as issues that "could have been litigated" in prior proceedings. (Ibid.)
Thus, unlike issue preclusion, claim preclusion applies not just to what was actually adjudicated in a prior case that went to judgment, but more broadly to issues that were eligible to be pursued in that case. "[U]nder what is sometimes known as the rule against 'claim splitting,' the doctrines of bar and merger do the work. (See Rest.2d Judgments, § 24 (Second Restatement).) 'Merger' expresses the idea that, for a winning plaintiff, all claims the plaintiff did raise or could have raised merge into the judgment in his favor. (See id., § 18.) If the plaintiff attempts to litigate any of those claims again, the judgment itself serves as a defense. 'Bar,' on the other hand, refers to the related idea that a judgment for a winning defendant bars the plaintiff from litigating any claims he brought or could have brought in the prior suit. (See id., § 19.)" (Guerrero v. Department of Corrections & Rehabilitation, supra, 28 Cal.App.5th at p. 1098.)
In practical effect, the doctrines of merger and bar require that "all claims based on the same cause of action must be decided in a single suit." (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 897.) "[I]f not brought initially, they may not be raised at a later date," and " ' "relitigation of the same cause of action on a different legal theory or for different relief" ' " is either merged into the resulting judgment or barred by it. (Ibid.) Thus, a claimant may not recharacterize a cause of action in the guise of a different legal theory and sue a second time, having suffered an adverse judgment on the same cause of action in a first suit.
To determine the scope of a cause of action for claim preclusion purposes, we look beyond the labels in a plaintiff's complaint. A cause of action is the right to obtain redress for a harm suffered. (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 798.) The touchstone is the "primary right" at stake. (Id. at p. 792.) "The most salient characteristic of a primary right is that it is indivisible: the violation of a single primary right gives rise to but a single cause of action." (Crowley v. Katleman (1994) 8 Cal.4th 666, 681.) If two actions involve the same injury to the plaintiff and the same wrong by the defendant, then the same primary right is at stake even if in the second suit the plaintiff pleads different theories of recovery, seeks different forms of relief or adds new facts supporting recovery. (Eichman v. Fotomat Corp. (1983) 147 Cal.App.3d 1170, 1174.)
III.
There is no question that the parties to this lawsuit were also involved in the prior lawsuit, that the prior case was decided on the merits, and that the prior case reached final judgment. The applicability of claim preclusion in this case therefore turns on whether the claims Landman seeks to assert were litigable in the prior case and are thus barred by the judgment entered there.
It is immaterial whether Landman's new claims were actually litigated in the prior case, or whether he realized they could be litigated in that context. "A party cannot by negligence or design withhold issues and litigate them in consecutive actions. Hence the rule is that the prior judgment is res judicata on matters which were raised or could have been raised, on matters litigated or litigable." (Sutphin v. Speik (1940) 15 Cal.2d 195, 202.)
In his first lawsuit against Akkuser, Landman asserted claims rooted in the alleged breach of duties owed directly to him. At oral argument, Landman represented to the court that in Clean Battery he and CBR named Akkuser as a defendant only for the purpose of securing a ruling that would allow CBR to retain its intellectual property. Landman also represented to the court that, to the extent various tort claims in Clean Battery sought other forms of recovery, those claims were directed solely against Pudas. But when asked to identify exactly what his causes of action were in Clean Battery, Landman could not tell us. In fact, the record shows that each and every one of Landman's six claims in Clean Battery is pleaded specifically against Akkuser, and the prayer for relief seeks damages recovery specifically from Akkuser. Landman's suggestion that Akkuser was only peripherally involved as a defendant in Clean Battery in order to secure CBR's ownership of intellectual property is simply not true.
More fundamentally, regardless of the labels placed on the claims as pleaded in the operative Clean Battery complaint, we see no reason why Landman could not have included a claim for recovery on behalf of himself personally, pleaded in the alternative in the event Akkuser's position that the Agreements were no longer in effect prevailed (which it eventually did). That is the stumbling block Landman faces here, and at oral argument, despite our issuance of a fully reasoned tentative opinion, Landman provided no satisfactory answer.
The gravamen of the case pleaded in the operative Clean Battery complaint and referred to arbitration was alleged breach of contract by Akkuser and damages recovery against both Akkuser and Pudas for alleged torts related to that breach. Breach of contract was put directly in issue via Akkuser's declaratory relief claim, and was the premise of Landman's breach of fiduciary, fraud, and usurpation claims, each of which turned on Akkuser's failure to honor the alleged obligations it owed to Landman under the Agreements. In essence, Landman alleged wrongful diversion of business opportunities produced under a contractual arrangement, and his claimed measure of damages was 50 percent of the profits he alleged CBR should have earned had Akkuser abided by that arrangement. Akkuser eventually defeated these claims in arbitration, and then reduced the resulting arbitration award to a judgment which has since become final.
The arbitrator found that CBR was not a party to the Agreements, but rather was an intended third-party beneficiary.
As noted above, the arbitrator declined to address the compensability of Landman's efforts to bring business to Akkuser "outside of" the Agreements. Pointing to this qualification in the arbitrator's reasoning, Landman contends that until he received the arbitration award he did not realize he had a claim against Akkuser for the value of his services. Akkuser disputes this, and the parties devote much attention in their briefs to whether Landman knew enough about such a claim to trigger the discovery rule for statute of limitations purposes. Our view is that that debate is beside the point. Landman was personally a party to the arbitration, suing Akkuser for individual recovery, as he does once again in this case. Ignorance of all possible legal bases for a cause of action does not excuse failure to plead every available theory in a lawsuit asserting that cause of action.
If the sole claim asserted by Landman in his first lawsuit against Akkuser had been the shareholders derivative claim he alleged in his 2012 complaint, the claim preclusion analysis here might be different. In that scenario, it could be said that the prior lawsuit and the subsequent lawsuit involved different primary rights. (See Favila v. Katten Muchin Rosenman LLP (2010) 188 Cal.App.4th 189, 222-223 [direct claim by shareholder against attorneys to corporation alleging civil conspiracy to defraud shareholder did not bar separate shareholders derivative claim alleging legal malpractice against same attorneys, for the same harm, because civil conspiracy claim involved a different primary right].) But that is not this case. The scenario we have here is not one in which Landman initially sued only in his capacity as a shareholder, on behalf of CBR, and then sued later in his individual capacity. Not only were five of the six claims pursued in the first lawsuit asserted by Landman in his individual capacity, seeking recovery for himself, but those claims were founded on duties owed directly to him by Akkuser, by contract and otherwise.
In Landman's first case, and in this one, he alleges the same injury—Akkuser's failure to pay for his services. Both actions rest on the same primary right—alleged contractual entitlement to compensation for work Landman carried out in pursuit of business opportunities he brought to Akkuser. It does not matter that Landman failed to appreciate he might have asserted claims against Akkuser for the value of his services as an alternative to the theories he chose to pursue based on the express terms of the Agreements. What matters is that any theory of recovery Landman wished to pursue in support of a demand for individual recovery could have been brought in the prior action, whether founded on express contract, implied contract, or quantum meruit.
At oral argument, Landman contended that the arbitrator's decision to refrain from addressing the compensability of his efforts to bring business to Akkuser "outside of" the Agreements was a determination that he did not have jurisdiction. It was not. Those statements concern the scope of the claims pleaded by Landman and referred to arbitration. Jurisdiction is addressed elsewhere in the award. Had the claims Landman now wishes to pursue been pleaded in Clean Battery, we see nothing in the record suggesting that the arbitrator would have lacked jurisdictional capacity to entertain them. It is also notable that, as we observed in Clean Battery, even after the arbitrator rendered his award and the focus of litigation activity returned to California when Akkuser sought to confirm the award, "Landman made no attempt to amend his complaint . . . to add a claim seeking compensation for work performed for Akkuser outside the scope of the Agreements." (Clean Battery, supra, A148862.)
In his reply brief, Landman's only response to the argument from Akkuser that his claims in this case are barred under the doctrine of claim preclusion is that he is "seeking to enforce the arbitration award," that Akkuser asks "this court [to] enforce the arbitration award," and that enforcement of the arbitration award "is exactly what [he] seeks" as well. This contention fails to address the claim preclusion issue Akkuser raises. Enforcing the finality of the judgment we affirmed in Clean Battery does not pave the way for Landman's second lawsuit. Quite the opposite, the preclusive effect of the judgment in Clean Battery bars his subsequent lawsuit.
To the extent Landman contends he is simply taking the next logical step suggested by the arbitrator's reasoning and pursuing recovery on grounds the arbitrator noted but declined to reach—which is a reservation we noted in Clean Battery as well—we now reach that reserved issue and hold that Landman's current claims are barred.
Landman's motion filed April 5, 2021, asking us to take judicial notice of the judgment entered by the trial court in Clean Battery on April 21, 2016, is denied. The language in the Clean Battery judgment stating that judgment was being entered in conformity with the arbitration award is immaterial to our analysis. The judgment—which is accurately described in our opinion affirming the Clean Battery judgment, though not quoted verbatim—defines the scope of what was actually adjudicated in Clean Battery, not what could have been litigated. --------
Anticipating that this could be our inclination, Landman argues in the alternative that we should remand and allow him an opportunity to amend. He has already been given one opportunity to amend, in connection with a demurrer. We see no abuse of discretion in denying further leave to amend. Landman offers nothing that convinces us there is any reasonable possibility he may be able to overcome the claim preclusion bar he created, wittingly or not, by splitting his claims against Akkuser.
DISPOSITION
The judgment is affirmed. Akkuser shall recover its costs on appeal.
STREETER, J. WE CONCUR: POLLAK, P. J.
TUCHER, J.