Hansen v. The Coca-Cola Co.

JEANNE E. HANSEN, as Co-trustee, etc. et al., Plaintiffs and Respondents, v. THE COCA-COLA COMPANY et al., Defendants and Appellants.

D077588

California Court of Appeals, Fourth District, First Division

June 17, 2021

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of San Diego County No. 37-2016- 00021046-CU-MC-CTL Timothy B. Taylor, Judge. Reversed; remanded with directions.

Shook Hardy & Bacon, M. Kevin Underhill, Marc P. Miles and Frank C. Rothrock, for Defendants and Appellants.

Higgs Fletcher & Mack, John Morris and Rachel Moffitt Garrard The Hamideh Firm and Bassil A. Hamideh, for Plaintiffs and Respondents.

HUFFMAN, Acting P. J.

This case concerns who has the right to use Hubert Hansen's publicity. In 1935, Hubert^[1] founded a fresh juice company in Los Angeles that bore his last name. After his death in 1951 his children and grandchildren continued to operate and expand Hubert's business. Some forty years later, in a series of transactions, Monster Energy Company (Monster Energy) ultimately purchased the two businesses that were run by Hubert's descendants. After doing so, Monster Energy used Hubert's name and story to market some of its juice lemonade, and soda products.

In 2015, Monster Beverage Company^[2] sold certain brands to the Coca-Cola Company (Coke). Among the brands sold was the Hansen brand Monster had acquired from Hubert's descendants. After the Monster/Coke deal was announced but before it was completed, Hubert's descendants created the Hubert Hansen Intellectual Property Trust (Trust). Various descendants of Hubert who claimed an interest in the right of publicity from Hubert sold or assigned that interest to the Trust.^[3]

The Trust then demanded that Monster Beverage pay it for Monster's use of Hubert's publicity. Monster Beverage refused and filed a registration of claim under Civil Code^[4] section 3344.1 with the California Secretary of State. The Trust then registered a claim with the California Secretary of State as well.

After Monster Beverage would not pay the Trust, the Trust, as well as Jeanne E. Hansen, Timothy M. Hansen, and Maureen T. Todd, in their capacities as co-trustees of the Trust (the Trust and co-trustees are collectively Respondents), sued Coke and Monster Beverage for misappropriation of Hubert's right of publicity and declaratory relief.^[5] In defense of the suit, one of Appellants' arguments was that Monster Energy acquired the right to use Hubert's publicity through two asset transfer agreements that included all intellectual and intangible property owned and used by companies operated by Hubert's descendants. These asset transfers were memorialized in written documents.

The dispute proceeded to a bifurcated trial wherein the first phase was tried to the superior court and the second phase to a jury.

After the first phase, the trial court found that the Trust owned 90 percent of Hubert's right of publicity.^[6] In making this finding, the court determined that the Trust's successor in interest registration filed June 5, 2015 was valid, and Monster's successor in interest registration filed April 8, 2015 was void. The court also interpreted two written asset transfers detailing the purchase of businesses owned by Hubert's descendants. In doing so, the court considered extrinsic evidence and found that the right to use Hubert's publicity was not included in either of the two deals.

The remaining issues were tried before a jury, which found in favor of Respondents and awarded them damages in the amount of $9, 596, 450.98.

Appellants appeal, claiming (1) the trial court abused its discretion by bifurcating the trial; (2) the trial court committed multiple errors in the bifurcated phase of the trial, including resolving conflicts in the extrinsic evidence to interpret the agreements that Appellants contend transferred the right to use Hubert's right of publicity to them; (3) the trial court improperly instructed the jury; (4) substantial evidence did not support the jury's finding that Hubert was a “deceased personality” under section 3344.1; (5) the judgment violated Respondents' right to create transformative works from intellectual property they owned; (6) a new trial is warranted because of juror misconduct; and (7) substantial evidence does not support the damage award.

We agree with Appellants that the trial court erred in resolving conflicts in extrinsic evidence to interpret the two asset transfer agreements, including making credibility determinations. Such determinations are the province of the jury. In addition, in the event the parties retry this matter after remand, we address Appellants' claim that the court erroneously instructed the jury and conclude that we cannot determine whether the subject jury instruction was legally erroneous on the record before us. We do not reach the remaining issues raised by Appellants.

FACTUAL AND PROCEDURAL BACKGROUND

Hubert founded the Hansen Fresh Fruit and Vegetable Juice Company in 1935. He began by making small batches of fresh juice and selling it door to door. As the business expanded, Hansen also set up juice stands near Hollywood studio locations, and his customers included studio workers and actors. He also sold his juices at outdoor vegetable markets.

Hubert was an innovator in the juice industry, making his juices all natural and organic. He started a trade organization and was elected its first president; he received a national award by the Public Health Association of America; and he received an entrepreneur award from a fruit and vegetable food magazine. He was “a legend” in Southern California, known in the industry as the “Juice King.”

Hubert died in 1951. He was survived by his wife, Florence, and their five children. In 1970, the company incorporated and changed its name to Hansen's Juices, Incorporated (Hansen's Juices). Hansen's Juices continued Hubert's goal to market fresh fruit and vegetable juices. Allegedly with permission from family members in addition to those operating the company, Hansen's Juices used Hubert's name and story in marketing its products.^[7]

In 1977, Tim Hansen, Hubert's grandson, left his job at Hansen's Juices and founded a new company, Hansen Foods Incorporated (Hansen Foods). Tim wanted to expand into production of beverages with a longer shelf life. Tim negotiated for permission to use the Hansen's trademark. Hansen Foods also developed a line of natural carbonated drinks sold in cans and marketed as “Hansen's Soda.” Hansen Foods used Hubert's name, his picture, and his story in brochures and commercials. Tim grew Hansen Foods into a profitable business with $50 to $60 million in annual sales.

However, in 1988, Hansen Foods experienced financial difficulties and filed for Chapter 11 bankruptcy. Hansen Foods was unable to successfully reorganize its business and ultimately sold “substantially all assets” to California CoPackers (CoPackers) in July 1989 as part of a bankruptcy order, which included a detailed asset transfer and incorporated various written agreements (1989 Bankruptcy Order). Among other things, CoPackers paid $14 million^[8] to purchase “[a]ll intangible personal property including, but not limited to, labels, patents, trade secrets and proprietary know-how (whether or not in written form), formulas, distribution rights, customer lists, chattel paper, trademark rights and trademark license rights, licenses, contract rights and good will and other general intangibles related to Hansen's business[.]”

In 1992, CoPackers sold its assets to Unipac, a company formed by Rodney Sacks and Hilton Schlosberg. The sale was pursuant to a written asset purchase agreement (1992 Asset Purchase Agreement), calling for the sale of CoPackers's entire business, including “all of [CoPackers's] then existing properties, assets and business as a going concern of every kind and nature, personal or mixed, tangible or intangible, wherever located, and whether on or off the books of [CoPackers] relating to the business of [CoPackers].” Sacks and Schlossberg saw an opportunity to grow a “niche” product into a national brand, given the 60-year history and the authenticity of Hansen's products. As part of that plan, Unipac formed a subsidiary to run the new business it acquired from CoPackers. The subsidiary was named Hansen Beverage Company (Hansen Beverage).^[9]

Although Hansen Foods was no longer in business, Hansen's Juices was continuing to operate during this time. As such, both Hansen's Juices and Hansen Beverage were selling products using the Hansen name. To clarify their respective rights, the two companies agreed to put all their intellectual property relating to the Hansen name into the Hansen's Trust dated July 27, 1992, and then create licensing agreements defining how the intellectual property would be used. At the Hansen's Trust's inception, two of the three trustees, Gary Hansen and Anthony Kane, were members of the Hansen family and Kane was the president of Hansen's Juices. During the time Gary was a trustee, Hansen Beverage was using Hubert's name and the company story on its labels, without objection.

The Hansen's Trust was amended three times. In the first amendment, made in July 1996, Hansen's Juices and Hansen Beverage agreed to assign their respective intellectual property rights to the trust, to the extent they had not already done so, and to change trustees. With this amendment, Gary and Sacks became the trustees.

In December 1996, Hansen's Juices merged into the Fresh Juice Company (Fresh Juice). Nearly three years later, in exchange for $775, 010, Fresh Juice assigned all of its rights, licenses, and other interests to Hansen Beverage. In the subject contract, Fresh Juice represented that it was not aware of any...