Barton v. Khan

Filed 7/20/10 Barton v. Khan CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

APPEAL from a judgment of the Superior Court of Los Angeles County.

Andrew Kauffman, Judge. Affirmed.

Ben-Zvi & Associates, Henry Ben-Zvi for Defendants and Appellants.

McGarrigle, Kenney & Zampiello, Patrick C. McGarrigle, Michael J. Kenney for Plaintiff and Respondent.

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Zafar Khan, Terrance Tomkow, and Henri Isenberg (together, the "Defendants") appeal the trial court's order denying their request for attorney fees. They argue that the trial court erred by applying California rather than Bermuda law when deciding whether attorney fees are recoverable. We affirm the order.

FACTUAL AND PROCEDURAL BACKROUND

In 2005, plaintiff Kenneth Barton filed a complaint against RPost International Limited ("RPost"), a Bermuda corporation, and the Defendants, all members of RPost's Board of Directors. The complaint alleged that the Defendants intentionally and negligently breached their fiduciary duties to Barton, a former employee, officer and director of the company.

The complaint was dismissed as to these Defendants when, after being granted leave to amend the complaint following demurrer (Barton v. Khan (2007) 157 Cal.App.4th 1216), Barton's tardy amended complaint was stricken by the trial court.[1] The Defendants then filed a motion for attorney fees, arguing that under Bermuda law they were entitled to an award of $105,237.30. The trial court denied the motion and this appeal followed.

STANDARD OF REVIEW

A ruling on a motion for an award of attorney fees is generally reviewed for an abuse of discretion. (Carver v. Chevron U.S.A., Inc. (2002) 97 Cal.App.4th 132, 142.) However, when the criteria for an award of attorney fees and costs involves statutory interpretation or a question of law, the standard of review is de novo. (Ibid.) On such a review, we are concerned only with the trial court's ruling, not its rationale. (Mendoza v. Town of Ross (2005) 128 Cal.App.4th 625, 631.)

DISCUSSION

The parties agree that, under California law, the Defendants are not entitled to recover attorney fees. (See, e.g., Code Civ. Proc., 1033.5, subd. (a)(10).) The Defendants argue, however, that Bermuda, not California, law applies in this case. In support of this contention, they presented the following argument to the trial court, which they repeat on appeal: 1) the right to attorney fees is governed by the same substantive law that applies to an asserted legal claim; 2) Bermuda law would have applied to Barton's claim against the Defendants pursuant to the "internal affairs doctrine;"[2] 3) Bermuda law provides that a prevailing party is entitled to attorney fees. In support of this last point, the Defendants rely on the following authorities: "Bermuda law is based upon British law. Davis v. Chevy Chase Financial Ltd. (D.C. Cir. 1981) 667 F. 2d. 160, 171 n. 18 (Bermuda law 'is based and to this day draws on English common law precedents'); In re Tyco, supra, 340 F. Supp. 2d. at 96 ('courts in Bermuda would look primarily to English common law to resolve the questions now before me'). [] Under both Bermuda and British law, the prevailing party is entitled to recover its attorneys' fees. SeeFogerty v. Fantasy Inc. (1994) 510 U.S. 517, 533-34 (in Britain, 'counsel fees are regularly awarded to the prevailing party'); Fulfillment Services, Inc. v. United States Parcel Service, Inc. (9th Cir. 2008) 528 F. 3d. 614, 624 (the 'British Rule [is the] "loser pays"'); Frater v. Tigerpack Ltd. (S.D.N.Y. 1999) 1999 WL 4892 at *2 (Bermuda law applies English Rule 'that the costs of litigation, including attorney fees, should be shifted to the loser')."

We note that the Defendants do not cite Bermuda law to support their contention that Bermuda law authorizes attorney fees in a case such as this.Rather, they ask us to draw the inference that they are entitled to such fees in this case because Bermuda law "is based and to this day draws on English common law precedents" and under English common law, the "British Rule [is the] 'loser pays.'" Defendants do not present any authority, however, to establish that Bermuda law follows English common law precedents on the issue of attorney fees specifically.

The Defendants rely heavily on dicta of an unpublished opinion[3] to prove this relationship. However, the opinion states that the involved parties merely agreedwith one another that Bermuda favored the "English rule" on attorney fees. (Frater v. Tigerpack Ltd. (S.D.N.Y. 1999) 1999 WL 4892 at *2.) The case contained no citation to Bermuda law and no statement by the court to support this position. (Ibid.)Additionally, the opinion is an unpublished decision of a federal trial court. As such, it has no precedential value. (Bolanos v. Superior Court (2008) 169 Cal.App.4th 744, 761.)

While the California Rules of Court authorize a court to take judicial notice of "[t]he law of . . . foreign nations" (Evid. Code, 452, subd. (f), 453, subd. (b)), it can only do so if "a party requests it" and "[f]urnishes the court with sufficient information to enable it to take judicial notice of the matter" (Evid. Code, 453). If the law of a foreign nation is applicable but cannot be determined because "the parties have not provided the court with sufficient information to make such determination" (Assem. Com. on Judiciary, com., 29B pt. 1 West's Ann. Evid. Code (1995 ed.) foll. 311, p. 65), the court may either "[a]pply the law of this state if the court can do so consistently with the Constitution of the United States and the Constitution of this state" or "[d]ismiss the action without prejudice." (Evid. Code, 311; see also In re Marriage of Nurie (2009) 176 Cal.App.4th 478, 509 [declining to take judicial notice of Pakistani legal standards for enforcing foreign custody decrees because party had "submitted insufficient evidence to enable [the court] to determine with confidence either the procedure or the substantive rules [that] Pakistan would employ"].) Additionally, "the court is not required to resort to any sources of information not provided by the parties" and "is not required to undertake the necessary research." (Cal. Law Revision Com. com. to Evid. Code, 453.)

Here, Defendants requested the trial court to award attorney fees pursuant to Bermuda law, without first providing the applicable law.Defendants, as the parties seeking attorney fees, had the burden of establishing their entitlement to such an award. (Christian Research Institute v. Alnor (2008) 165 Cal.App.4th 1315, 1320.) At a minimum, this required them to support their contentions with "pertinent legal authority." (Kensington University v. Council for Private Postsecondary etc. Education (1997) 54 Cal.App.4th 27, 44.) Defendants, however, did not cite a single Bermuda law or case and therefore failed to meet this burden.

At oral arguments in this matter, Defendants suggested that we need not concern ourselves with the particulars of Bermuda law concerning a litigant's entitlement to attorney fees, as Barton did not contest the proposition that Bermuda follows the English Rule of "loser pays," but argued only that California law applies to the substantive resolution of this litigation due to a choice of law provision in certain of RPost's contracts. Defendants posit that if, as they maintain, Barton is wrong, then the trial court would "necessarily" have had to apply Bermuda law to Bartons breach of fiduciary duty claims. This argument betrays a basic misunderstanding of the choice of law question presented to the trial court.

Barring a few exceptions,[4] California approaches potential choice of law conflicts with a three step "governmental interest" analysis. (Application Group v. Hunter Group, Inc., supra, 61 Cal.App.4th at p. 896; Havlicek v. Coast-to-Coast Analytical Services, Inc. (1995) 39 Cal.App.4th 1844, 1852.) In step one, the party advocating for foreign law must identify the applicable law of each jurisdiction and show how the foreign law materially differs from that of California. (Washington Mutual Bank, FA v. Superior Court (2001) 24 Cal.4th 906, 919.) "The fact that two or more states are involved does not in itself indicate there is a conflict of laws problem." (Id. at pp. 919-920.) If the relevant laws of each jurisdiction are not shown to differ, there is no conflict, and the trial court may apply California law. (Id. at p. 920.) If the laws do materially differ, however, the court will proceed to step two, which requires a determination of what interest, if any, each jurisdiction has in having its own law applied. (Ibid.) If more than one jurisdiction has such an interest, then the court must proceed to a third step and select the law of the jurisdiction whose interests would be most impaired if its law were not applied. (Ibid.)As a consequence of the foregoing analysis, the substantive law of the foreign jurisdiction, although relevant to a determination of what law applies to a plaintiff's claims, will come into consideration only after a material difference in the laws of the two jurisdiction has been established. (See generally State Farm Mut. Auto. Ins. Co. v. Superior Court (2003) 114 Cal.App.4th 434, 453.)

Here, Defendants did not identify or provide the trial court with the Bermuda law which, they maintain, applied to Barton's claims.[5] They thus necessarily failed to demonstrate any material difference between Bermuda and California substantive law. A choice of law analysis begins, however, with an assessment of whether a material conflict exists between the laws of the two jurisdictions. (See generally Grosset v. Wenaas (2008) 42 Cal.4th 1100, 1107.) Because the Defendants failed to establish that Bermuda law conflicts with California law with respect to claims that a corporations' directors breached their fiduciary duties, the trial court properly applied California law to deny Defendants' motion.

DISPOSITION

The judgment is affirmed.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

ARMSTRONG, J.

We concur:

TURNER, P. J.

KRIEGLER, J.

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[1] That ruling is not challenged on appeal.

[2] The "internal affairs doctrine" posits that only one statemost commonly the state of incorporationshould have the authority to regulate a corporation's internal affairs. (See Edgar v. MITE Corp. (1982) 457 U.S. 624, 645.) Internal affairs involve "the relations inter se of the corporation, its shareholders, directors, officers or agents." (Rest.2d Conf. of Laws, 302, com. a, p. 307.)

[3] Frater v. Tigerpack Ltd. (S.D.N.Y. 1999) 1999 WL 4892 at *2.

[4] An alternative test exists for contract cases that include choice of law provisions.(See Application Group v. Hunter Group, Inc. (1998) 61 Cal.App.4th 881, 896.) Because Defendants argue that Barton's claim does not implicate any of the contracts on the record, we do not address this alternative test.

[5] In fact, in their demurrer, Defendants did not evaluate Barton's claims under Bermuda law to establish the claims' deficiencies, but relied instead on California Corporations Code sections 800 and 309.