Moebius v. Pixels Animation Studios, Inc.

PAUL MOEBIUS et al., Plaintiffs and Appellants, v. PIXELS ANIMATION STUDIOS, INC. et al., Defendants and Respondents.

D058396

COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA

Dated: April 19, 2012

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. 37-2008-00091593-CU-MC-CTL)

APPEAL from a judgment of the Superior Court of San Diego County, Jeffrey B. Barton, Judge. Affirmed.

Plaintiffs and appellants Paul Moebius, Kurt Jafay and Daniel Horwitz, all shareholders of Pixels Animation Studios, Inc. (Pixels), appeal from a judgment on the pleadings in favor of defendants and respondents Silicon Color, Inc. (Silicon), and its directors Peter Carton, Roland Wood, Kenn Walker, Teague Cowley and Steve Thompson. Alleging their action was a derivative suit, plaintiffs sought to recover benefits defendants were alleged to have received as a result of the diversion of a Pixelsbusiness opportunity by another Silicon director, Andrew Bryant. The trial court granted judgment on the pleadings in part on grounds plaintiffs failed to state a claim for unjust enrichment; the claim was time-barred; and absent assertion of an alter ego theory, the individual shareholders could not be held personally liable. The court denied plaintiffs' later request for leave to amend.

Plaintiffs contend the complaint states timely causes of action for unjust enrichment as well as conspiracy to breach fiduciary duty, and the alter ego doctrine is not necessary to impose liability on the defendant directors. They argue the court erred in denying them leave to amend to allege the conspiracy cause of action. In addition to disputing these arguments, defendants contend plaintiffs lack standing to bring suit because they failed to comply with Corporations Code section 800.

We find merit in defendants' assertion that plaintiffs lack standing to bring this derivative action for their failure to meet prerequisite demand requirements or demonstrate such a demand would be futile. In reaching this conclusion we reject plaintiffs' assertion that the action may be brought as an individual direct action. Accordingly, we affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

In keeping with the applicable standard of review, we recite the background facts from the properly pleaded or implied factual allegations of plaintiffs' complaint. (See Angelucci v. Century Supper Club (2007) 41 Cal.4th 160, 166; accord, Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 [standard for demurrer].)

Plaintiffs are shareholders of some of the issued and outstanding capital shares of Pixels, and were shareholders of record and/or beneficially at the time of the transactions alleged in the complaint. In early 2003, Bryant was an officer, director, and controlling shareholder of Pixels. During that time, he began developing certain color correction software called Final Touch. Starting in May 2003, Bryant began developing plans to divert the business opportunity of Final Touch from Pixels. Bryant communicated with Carton, Wood and Walker about the formation of a new company to which Bryant would divert Final Touch and through which Bryant, Carton, Wood and Walker would derive that software's profits and benefits. Further to those discussions and communications, Silicon was formed in 2003 with Bryant, Carton, Wood and Walker as its first directors.

In June 2003, Silicon held its organizational meeting of directors, and shares were issued to Bryant, Carton, Wood and Walker. Bryant's shares were issued to him in consideration of his assignment of Final Touch to Silicon.

In October 2006, Silicon sold Final Touch to Apple Computer, Inc. (Apple) for the approximate price of $4,200,000 and other consideration.

As a consequence of the foregoing, in June 2008, an arbitrator entered an interim award finding Bryant had breached his fiduciary duties of loyalty, trust and confidence to Pixels.

As a result of the sale to Apple, Silicon and its shareholders received benefits, and at the time defendants received the benefits, they knew or should have known Final Touch was a Pixels business opportunity.

On September 11, 2008, plaintiffs filed a "complaint for relief based on unjust enrichment" (capitalization omitted), alleging the foregoing facts and demanding an accounting of benefits, restitution, imposition of a constructive trust, and such other relief deemed proper by the court. In part, plaintiffs allege they "have not attempted to secure from the board of Pixels the assertion of the claims alleged in this complaint because . . . Bryant is a majority and controlling shareholder of Pixels with the ability to elect a majority (2 of 3) of Pixels' [sic] board. At any such meeting Bryant would nominate and elect two board members who would not prosecute this action."

Defendants moved for judgment on the pleadings, asking the court to judicially notice the original and first amended complaint in a prior action filed by plaintiffs against Bryant (the Bryant action, Moebius et al. v. Pixels Animation Studios, Inc., et al. (Super. Ct. San Diego County, 2009, No. GIC880278)), as well as the interim and final arbitration awards in that case requiring Bryant to pay plaintiffs $1,960,000 for his breach of fiduciary duty to Pixels. They argued plaintiffs lacked standing for their failure to allege compliance with the prerequisite written notice to filing a derivative suit under Corporations Code section 800 or sufficiently allege the requisite futility under that statute. They further argued the complaint was barred by either the three- or four-year statutes of limitation respectively for conversion or breach of fiduciary duty, and plaintiffs were collaterally estopped from arguing otherwise by the arbitrator's finding in the Bryant action that the statute of limitations began to run on July 9, 2003. Defendants argued plaintiffs' complaint failed as a matter of law because unjust enrichment was a nonexistent cause of action. Finally, defendants argued that having failed to allege anyalter ego liability, plaintiffs could not bring a direct claim against individual shareholders or directors. Plaintiffs opposed the motion, in part arguing the statute of limitations had not run, that collateral estoppel did not apply, and they had adequately alleged a timely cause of action for conspiracy to breach fiduciary duty. They concluded their motion with a request for leave to amend "[i]f the Court is inclined to grant the motion . . . ."

The trial court granted defendants' motion. It ruled plaintiffs could not state a claim for unjust enrichment because they "failed to allege that defendants have done anything wrong, only that they received the benefits from the sale to Apple," nor had they alleged a conspiracy or sought leave to amend to allege that or other causes of action. Reciting findings from the arbitrator's award in the Bryant action and finding Bryant's breach of fiduciary duty was the gravamen of the complaint,¹ the court ruled the breach of that duty commenced the statute of limitations, knowledge of the breach was imputedto Pixels, and plaintiffs were collaterally estopped by the arbitrator's findings to assert otherwise. The court concluded the individual shareholders could not be subjected to personal liability because plaintiffs conceded they had not asserted a theory of alter ego liability.

Plaintiffs applied ex parte to reopen argument for the purpose of pointing out they had sought leave to amend. Their counsel submitted a declaration explaining that if the court granted the request, plaintiffs would allege that before forming Silicon, "certain of the defendants agreed to go into business together and thereby formed a partnership which led to [Silicon's] . . . formation" and that "Bryant's knowledge of the wrongfulness of his conduct should be imputed to the defendants with whom he first met and agreed to go into business with." The court denied the request, citing Code of Civil Procedure section 1008 and ruling plaintiffs had not shown how their new facts would toll the statute of limitations.

Plaintiffs appeal from the ensuing judgment.

DISCUSSION

I. Standard of Review

A judgment on the pleadings should be granted only where, under the facts alleged or properly subject to judicial notice, the plaintiff's complaint fails to state facts sufficient to constitute a cause of action. (Saltarelli & Steponovich v. Douglas (1995) 40 Cal.App.4th 1, 5; Wedemeyer v. Safeco Ins. Co. of America (2008) 160 Cal.App.4th 1297, 1302.) On appeal, we accept as true the complaint's properly pleaded factual allegations and give them a liberal construction. (Angelucci v. Century Supper Club,supra, 41 Cal.4th at p. 166; Bezirdijian v. O'Reilly (2010) 183 Cal.App.4th 316, 321.) Because the trial court's determination is made as a matter of law, we review its ruling de novo. (Angelucci, at p. 166.) We will affirm the court's decision if it is correct on any theory; that is, we review the ruling itself, not its rationale. (Coshow v. City of Escondido (2005) 132 Cal.App.4th 687, 702; Bader v. Anderson (2009) 179 Cal.App.4th 775, 787 [standard on demurrer].)

II. Standing

Our analysis in this case begins and ends with a claim that was raised below but not addressed by the trial court: defendants' assertion that plaintiffs lack standing to maintain this shareholder derivative suit under Corporations Code section 800. The statute imposes a series of procedural prerequisites for bringing a derivative action, including that the plaintiff allege he or she demanded the desired action from the board and the board's wrongful refusal. (Corp. Code, § 800, subd. (b)(2);² see Bader v. Anderson, supra,...