Broad. Music, Inc. v. Structured Asset Sales, LLC

75 Cal.App.5th 596

290 Cal.Rptr.3d 590

BROADCAST MUSIC, INC., Plaintiff,

v.STRUCTURED ASSET SALES, LLC, Defendant and Appellant;

Currency Corporation, Defendant and Respondent;

Broadcast Music, Inc., Plaintiff,

v.Currency Corporation, Defendant and Appellant;

Structured Asset Sales, LLC, Defendant and Respondent.

B304809, B306245

Court of Appeal, Second District, Division 2, California.

Filed February 24, 2022

Law Offices of F. Jay Rahimi, F. Jay Rahimi, Woodland Hills; Matthew D. Kanin, Los Angeles; AlvaradoSmith and William M. Hensley for Defendant and Appellant Structured Asset Sales, LLC.

Krane & Smith, Jeremy D. Smith and Daniel L. Reback, Encino, for Defendant and Appellant Currency Corporation.

ASHMANN-GERST, J.

This interpleader action arises out of a lengthy legal battle between Structured Asset Sales, Inc. (Structured) and Currency Corporation (Currency) over royalties and rights related to two sets of musical compositions. Years of litigation and multiple appeals later, the trial court determined that Currency is entitled to the royalties as well as the rights to one set of musical compositions (Named Songs), that it has a security interest in the other set of musical compositions (Remainder Songs), and that Structured has no rights. All that remains is litigation over attorney fees and sanctions.

Presently, Currency appeals from the denial of its motion to recover the attorney fees it incurred litigating consolidated appeals resolved in 2019. Structured appeals from the denial of its motion for sanctions pursuant to Code of Civil Procedure section 128.7.¹ In that motion, Structured contended that Currency's motion for attorney fees was frivolous because it was barred by law of the case.

We find no error and affirm.

In part I of the Discussion, we conclude that the law of the case doctrine barred Currency's motion. In part II of the Discussion, we hold that a party is not entitled to sanctions pursuant to section 128.7 unless the target of the motion has had a full 21 days to withdraw the allegedly offending paper, claim, defense, contention, allegation, or denial. Thus, a moving party cannot file a motion for sanctions until the 22nd day after the motion was served. Nor can the moving party file a motion for sanctions if the objectionable document has been resolved during the 21-day safe harbor period. When calculating the earliest possible day that a motion for sanctions can be filed, section 12 applies such that the day the motion was served is excluded and the last day is included. The trial court properly denied the motion for sanctions because it had resolved the attorney fees motion on the 21st day after service of the motion for sanctions, the last day of the safe harbor period.

FACTS²

"First Interpleader Action "In a limited jurisdiction action, Broadcast Music, Inc. (BMI) filed an interpleader complaint against Currency, Music Royalty Consulting, Inc. (Music Royalty), [Adeniyi Jacob Paris [(Paris)] and Structured alleging: BMI was in the business of licensing the public performance rights of copyrighted musical compositions. Paris's works have been licensed by BMI since 1970. In September 2006, $889.92 in royalties became payable due to the performance of Paris's works.

"Structured claimed a right to the royalties due to a January 10, 2006 assignment (January 10 Assignment). Currency, Music Royalty, and Paris, in contrast, averred that Currency had a perfected security interest in Paris's works, Currency foreclosed on the Named Songs because Paris defaulted on loans from Currency, and Music Royalty purchased the Named Songs at a public sale. They further averred that the portion of the royalties ‘attributable to [the Named Songs, i.e.,] those compositions of [Paris] entitled "Lulu," "Sooner or Later," and "I've Just Got a Feeling Something" (alternate title "Something Good Is Coming My Way") ... should be distributed by BMI to [Music Royalty],’ and the portion of the royalties as to the rest of Paris's works [, i.e., the Remainder Songs,] should be distributed to Currency.

"The two main parties—Structured and Currency—sought to undermine the other's position with BMI. Structured claimed that Currency and Music Royalty did not have a claim to the royalties because Currency's loans to Paris were invalid due to violations of the Financial Code, and because the public sale was invalid. Currency, on the other hand, asserted that the January 10 Assignment was rescinded by Paris or was otherwise unenforceable.

"BMI requested a legal determination regarding how it should distribute the royalties. The complaint incorporated documentation of the public sale to Music Royalty, the transfer of title to Music Royalty, and Paris's assignment to Structured.

"Paris defaulted. Structured defaulted, too, because it determined that $889.92 was not worth the cost of litigation. While the case was pending, Music Royalty assigned its interest in the Named Songs to Currency. Music Royalty was later dismissed.

"The judgment (2007 Judgment) awarded the interpleaded royalties to Currency." ( Broadcast Music III, B272418, supra , at pp. 3–4, fn. omitted.)

"Second Interpleader Action

"In an unlimited jurisdiction action, BMI filed a complaint for interpleader and declaratory relief against Currency, Music Royalty, Paris and Structured.

The complaint alleged that BMI was in possession of $771.94 in royalties and indicated, essentially, that Structured claimed ownership of all rights to the works through the January 10 Assignment and Currency claimed it was entitled to all of Paris's works due to the collateral estoppel effect of the first interpleader action. BMI requested a legal determination as to who should receive the royalties and a declaration of the parties’ rights.

"Currency moved for summary judgment based on the collateral estoppel effect of the 2007 Judgment.^{[3 ]} The evidence established that the Named Songs were the only songs to ever generate royalties. In its papers, Currency disavowed any claim to the Remainder Songs. Structured filed a cross-motion for summary judgment and claimed ownership of all the works based on the January 10 Assignment.

"The trial court granted Currency's motion and denied Structured's motion based on collateral estoppel and Structured's failure to establish a triable issue as to whether it obtained a valid assignment. Also, the trial court deemed the motions to be ‘motions for declaratory relief[,] and in that respect[ ] a declaration [was] made as to the relief sought by [the] parties in their cross-motions and in their [a]nswers[.]’ The judgment stated Currency was entitled to recover the interpleaded funds. It declared that Structured had no rights to any of the songs, Currency was the owner of the Named Songs, and Paris was the owner of the Remainder Songs subject to Currency's security interest.

"Structured appealed the judgment.

"On June 13, 2016, Currency filed and served a notice and notice of motion for $176,869.09 in attorney fees and costs. It sought relief alternatively under Civil Code section 1717 or former section 128.5. Structured filed a motion to tax costs. On August 23, 2016, the trial court granted Currency's motion under former section 128.5 and denied Structured's motion.

"Structured appealed the sanctions order." ( Broadcast Music III , B272418, supra , at pp. 4–6, fn. omitted.)

Broadcast Music III

In Broadcast Music III , we affirmed the judgment "because collateral estoppel establishes that Currency owns the Named Songs, and because Structured failed to establish that it has a valid assignment of the Remainder Songs." ( Broadcast Music III , B272418, supra , at p. 2.) We reversed the sanctions "because Currency's motion violated section 128.7, subdivision (c)(1) by failing to comply with the 21-day safe harbor provision, and by combining a sanctions motion with a motion for attorney fees under Civil Code section 1717." ( Broadcast Music III , supra , at pp. 2–3.) We concluded that the denial of the motion to tax costs was moot. ( Id . at p. 3.)

At the end of Broadcast Music III , we stated: "Currency requests an award of attorney fees on appeal based on Civil Code section 1717. But an award of such fees on appeal is only warranted when they were previously granted at the trial level. ( Butler-Rupp v. Lourdeaux (2007) 154 Cal.App.4th 918, 923, 65 Cal.Rptr.3d 242 [‘Where a [Civil Code] section 1717 fee award is made at the trial level, the prevailing party may, at the appropriate time, request fees attributable to a subsequent appeal’].) Here, the trial court did not award attorney fees based on Civil Code section 1717. [¶] Currency requests that we award it attorney fees for ‘the prior two appeals.’ We are not aware of any authority permitting [the] Court of Appeal to reach back in time and make an award in an appeal that is final. [¶] We decline these requests." ( Broadcast Music III , B272418, supra , at p. 17.)

The disposition directed the parties to bear their own costs on appeal. ( Broadcast Music III , B272418, supra , at p. 18.)

Currency's Motion for Attorney Fees

On November 8, 2019, Currency filed a motion pursuant to Civil Code section 1717 for $209,385 in attorney fees incurred on appeal in Broadcast Music III . The hearing date was identified as December 11, 2019.

Safe Harbor Notice of Structured's Motion for Sanctions

On November 20, 2019, Structured served but did not file a section 128.7 motion for $19,145.15 in sanctions in which it argued that Currency's motion for attorney fees incurred on appeal was frivolous because it was foreclosed by law of the case in Broadcast Music III .

Denial of Currency's Motion for Attorney Fees

The parties convened for a hearing on Currency's motion for attorney fees on December 11, 2019.

Prior to hearing argument, the trial court stated: "This is ... [Currency's] motion for attorneys’ fees on appeal.... And the tentative is to deny it. [¶] The Court of Appeal has clearly spoken in this case and indicated in two portions ... of the...