Opinion
A159168
06-18-2020
RONALD C. SILBERSTEIN, Plaintiff and Appellant, v. HAROLD BRANDEL et al., Defendants and Respondents; THIRSTY BEAR BREWING COMPANY, LLC, Cross-defendant and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Francisco County Super. Ct. No. CPF-19-516675)
The parties jointly move under Code of Civil Procedure section 128, subdivision (a)(8), for an order reversing the judgment and remanding the case to the trial court with directions to dismiss the case with prejudice. We grant the motion.
All further statutory references are to the Code of Civil Procedure.
I.
FACTUAL AND PROCEDURAL
BACKGROUND
Plaintiff Ronald C. Silberstein and defendants Harold Brandel, Ted Vinther, Walter Wright, and Gabriel Stern as trustee for the Yasmin Bardor Trust (collectively, defendants), are co-owners of cross-defendant Thirsty Bear Brewing Company, LLC (Thirsty Bear), and their business relationship is governed by an operating agreement. Silberstein is the founder of Thirsty Bear. He has a 33.31 percent ownership interest in the business, and defendants collectively have a 24.69 percent interest.
Believing that Silberstein had engaged self-dealing, defendants filed an arbitration action against him as authorized under the operating agreement. They alleged claims for breach of contract, breach of the covenant of good faith and fair dealing, and breach of fiduciary duty. The arbitrator entered a final award in favor of defendants. The award ordered Silberstein to pay compensatory damages to Thirsty Bear and to reimburse defendants' attorney fees and arbitration expenses, limited Silberstein's management fee, and enjoined Silberstein from expensing business costs without proper documentation.
Silberstein filed a petition in the trial court to vacate the arbitration award, and defendants responded by filing a petition to confirm it. The petitions were consolidated. The trial court mostly affirmed the arbitration award and entered judgment. Silberstein and defendants all appealed, initiating the matter before us.
The trial court vacated a portion of the final award that declared a sublease between Thirsty Bear and another entity of Silberstein's, California Craft Maltings, LLC, to be "of no force and effect." The court did so on the basis that the arbitrator lacked the power to bind nonparties such as California Craft Maltings.
As the litigation giving rise to this appeal progressed, defendants commenced a separate action. In that action, defendants, on behalf of Thirsty Bear, sued 661 Howard Street LLC (661 LLC) for breach of contract and unjust enrichment (the 661 LLC action). 661 LLC owns the building that houses Thirsty Bear's restaurant, and Silberstein holds an interest in the corporation. In the 661 LLC action, defendants alleged that 661 LLC overcharged Thirsty Bear for rent. 661 LLC filed a motion to compel arbitration in the trial court, and it was granted.
The parties in this appeal entered into a settlement and agreed to seek a stipulated reversal of the trial court's judgment. The settlement's terms include a monetary payment to defendants, changes in the parties' interests in Thirsty Bear, and dismissal of the 661 LLC action. The parties sought judicial approval of the settlement in both the case giving rise to this appeal and the 661 LLC action. The trial court approved the settlement for both cases.
II.
DISCUSSION
A. General Legal Standards
Under section 128, subdivision (a)(8) (section 128(a)(8)), an appellate court "shall not reverse or vacate a duly entered judgment upon an agreement or stipulation of the parties unless the court finds both of the following: [¶] (A) There is no reasonable possibility that the interests of nonparties or the public will be adversely affected by the reversal. [¶] (B) The reasons of the parties for requesting reversal outweigh the erosion of public trust that may result from the nullification of a judgment and the risk that the availability of stipulated reversal will reduce the incentive for pretrial settlement." Courts must fully consider and weigh these factors on a case-by- case basis before reversing or vacating a judgment by stipulation. (Hardisty v. Hinton & Alfert (2004) 124 Cal.App.4th 999, 1005 (Hardisty).)
In addition to satisfying the requirements of section 128(a)(8), a stipulated motion to reverse or vacate a judgment must comply with Rule 10 of this court's local rules. (Ct. App., First Dist., Local Rules, rule 10 (rule 10).) Rule 10 requires such a motion to include "a copy of the judgment and a joint declaration by the parties or their counsel that: [¶] (a) describes the parties and the factual and legal issues presented at trial; [¶] (b) indicates whether the judgment involves important public rights or unfair, illegal or corrupt practices, or torts affecting a significant number of people, or otherwise affects a significant number of people who are not parties to the litigation; [¶] (c) discloses whether the judgment exposes any person who is a state licensee to a possible disciplinary proceeding; and [¶] (d) discloses whether the judgment may have collateral estoppel or other effects in potential future litigation and, if so, whether third parties who might be prejudiced by stipulated reversal of the judgment have received notice of the motion."
Applying the factors enumerated in section 128(a)(8) and rule 10 to the circumstances here, we conclude that a stipulated reversal is warranted.
B. There Is No Reasonable Possibility that the Interests of Nonparties or the Public Will Be Adversely Affected by Reversing the Judgment.
The settlement here governs the contractual relationships and duties between the parties. Thus, the settlement is not likely to adversely affect the interests of nonparties or the public, as the parties' disputes do not involve "important public rights or unfair, illegal or corrupt practices, or torts affecting a significant number of people." (Rule 10.) Decisions denying motions under section 128(a)(8) generally involve judgments that affect issues of public interest. (See, e.g., In re B.D. (2019) 35 Cal.App.5th 803, 809 [parental rights]; City of Palmdale v. Board of Equalization (2012) 206 Cal.App.4th 329, 331 [state agency's decision making affecting public fisc]; Hardisty, supra, 124 Cal.App.4th at pp. 1010-1011 [attorneys' professional conduct]; Muccianti v. Willow Creek Care Center (2003) 108 Cal.App.4th 13, 15 [negligence of nursing facility].) The judgment here has no such effect.
The parties have also certified that the judgment does not expose any person who is a state licensee to a possible disciplinary proceeding. (See rule 10(c).) While the judgment may have res judicata consequences in future litigation between the parties, no prejudice to the parties or anyone else has been identified that would justify a denial of the parties' joint motion.
C. The Parties' Reasons for Requesting Reversal Outweigh the Risk of an Erosion of Public Trust or a Reduced Incentive for Pretrial Settlement.
The parties have sufficiently explained their reasons for seeking to reverse the judgment. The settlement resolves all outstanding disputes between the parties in this case and in the 661 LLC action. The parties represent that the terms of the settlement are broader than the terms of the judgment and provide better conditions for the management of Thirsty Bear. Their desire to avoid conflict between the terms of the settlement and the terms of the judgment is reasonable.
The parties' reasons for seeking reversal outweigh any risk that reversal will erode the public trust. An " 'erosion of public trust [is] likely to result from an appearance that the nullification of a judgment can be purchased.' " (Hardisty, supra, 124 Cal.App.4th at p. 1006; see Neary v. Regents of University of California (1992) 3 Cal.4th 273, 287 [dis. opn. of Kennard, J.].) No such appearance will arise here if the parties' joint motion is granted. Silberstein sent a letter to all co-owners of Thirsty Bear detailing the terms of the settlement and explaining why its terms are fair. He stated he was not capable of discharging all of the terms of the judgment, and he believed the settlement would allow him to focus on Thirsty Bear's business. Thirsty Bear's co-owners unanimously accepted the settlement. Since the settlement provides tangible benefits to all of the parties, no appearance of a purchased judgment will arise by granting the parties' joint motion.
When section 128(a)(8) was amended in 1999 to its current form, the revision was "designed to supersede the opinion of the California Supreme Court" in Neary, a decision establishing a presumption in favor of stipulated reversals, and "[i]n effect . . . adopted Justice Kennard's dissent." (Hardisty, supra, 124 Cal.App.4th at pp. 1005-1006.) --------
Moreover, the trial court approved the settlement. In doing so, it was required to conclude " ' " 'that the agreement [was] not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, [was] fair, reasonable and adequate to all concerned.' " ' " (Robbins v. Alibrandi (2005) 127 Cal.App.4th 438, 449.) The court found that the settlement was not the product of suspect dealings.
The joint motion also need not be denied because of any "risk that the availability of stipulated reversal will reduce the incentive for pretrial settlement." This risk cannot be discounted "unless it is shown that the parties seriously pursued settlement prior to trial." (Hardisty, supra, 124 Cal.App.4th at p. 1008.) Here, the parties represent that serious discussion occurred regarding settlement both before the arbitration proceeding and throughout the litigation process.
Finally, the state has a well-established public policy of encouraging settlements. (See, e.g., Kaufman v. Goldman (2011) 195 Cal.App.4th 734, 745; Zhou v. Unisource Worldwide (2007) 157 Cal.App.4th 1471, 1475.) "[P]rompt resolution of [an] appeal without the considerable expense to the parties of briefing and taxpayer incurred costs of the internal decision making process within the court certainly serves the public interest." (Union Bank of California v. Braille Inst. of America, Inc. (2001) 92 Cal.App.4th 1324, 1330.)
Because the joint motion satisfies the factors and considerations of section 128(a)(8) and rule 10, we grant the parties' joint motion to reverse the judgment.
III.
DISPOSITION
The judgment is reversed and remanded to the trial court with instructions to dismiss the case with prejudice.
/s/_________
Humes, P.J. WE CONCUR: /s/_________
Margulies, J. /s/_________
Sanchez, J.