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Azure Limited v. I-Flow Corporation

June 21, 2012


Appeal from a judgment and postjudgment order of the Superior Court of Orange County, Kirk H. Nakamura, Judge. (Super. Ct. No. 06CC07434)

The opinion of the court was delivered by: Ikola, J.




Plaintiff Azure Limited (Azure) appeals the trial court's denial of its pre-and postjudgment motions for attorney fees pursuant to Code of Civil Procedure section 1021.5.*fn1 We affirm. In essence, this was a private dispute between two corporate parties over hundreds of thousands of dollars in economic losses. Because the resolution of the case happened to turn in part on the interpretation of the Unclaimed Property Law (UPL) (§ 1500 et seq.), Azure's tenacious pursuit of its interests resulted in a Supreme Court opinion bearing on the rights of all property owners whose property has been wrongfully transferred to the state by another private party. (See Azure Limited v. I-Flow Corp. (2009) 46 Cal.4th 1323 (Azure I).) But merely advancing the state of the law does not transform a private dispute over substantial economic losses into a section 1021.5 case in which fees may be awarded to attorneys for serving the public interest as private attorneys general. Defendant I-Flow Corporation (I-Flow) "has done nothing to curtail a public right other than raise an issue [involving a public right] in the context of private litigation that results in important legal precedent." (Adoption of Joshua S. (2008) 42 Cal.4th 945, 956 (Joshua).)


Initial Complaint and Appellate Proceedings

We quote liberally from the Azure I opinion for factual information about the initial stages of this litigation. Azure sued I-Flow "for breach of fiduciary duty. The complaint alleged the following: Azure acquired nearly 95,000 shares of I-Flow stock in 1990 and exchanged those shares in 1993 for nearly 19,000 shares in a reverse stock split. In 2003, Azure learned that I-Flow had transferred these shares to the state as escheated property. In October 2003, Azure requested the state to return its stock. The state responded that Azure might not be able to receive the stock itself, and that it might instead receive proceeds from the sale of the stock. In November 2004, when I-Flow's common stock was selling for $17.72 per share, Azure learned that the state had sold the stock in June 2003 for $4.62 per share." (Azure I, supra, 46 Cal.4th at p. 1327.)

"The complaint alleged that I-Flow breached its fiduciary duty to Azure by treating Azure's stock as abandoned property even though it knew Azure's location at all relevant times, by transferring the stock to the state without legal justification, and by failing to give Azure notice of the transfer. It sought to recover as damages the difference between the proceeds from the June 2003 sale and the value of the stock as of November 2004." (Azure I, supra, 46 Cal.4th at pp. 1327-1328.)

"The superior court granted judgment on the pleadings in favor of I-Flow, finding that section 1532 immunized I-Flow's actions, and entered judgment accordingly. Azure appealed. The Court of Appeal reversed the judgment. It held that the 'UPL immunizes corporations from civil liability only when they transfer escheated shares to the state in compliance with the provisions of the UPL. The UPL does not immunize corporations like [I-Flow] who allegedly transfer nonescheated shares to the state without giving the required notice.'" (Azure I, supra, 46 Cal.4th at p. 1328.) The Supreme Court granted review of this court's previously published opinion to resolve a conflict between our opinion and Harris v. Verizon Communications (2006) 141 Cal.App.4th 573, which was relied upon by I-Flow in its motion for judgment on the pleadings and in appellate proceedings. (Azure I, at pp. 1327-1328, 1333.)

Azure's position was vindicated by the Supreme Court on July 16, 2009, in Azure I: "We conclude that a corporation is entitled to section 1532's immunity only if it complies with other provisions in the UPL." (Azure I, supra, 46 Cal.4th at p. 1327.) The judgment of this court was affirmed (id. at p. 1336) and, accordingly, the matter was remanded to the trial court "with directions to vacate [the] order granting judgment on the pleadings and instead to deny the motion" (id. at p. 1328).

Proceedings Following Remand

Nearly two years passed between the Azure I opinion and the settlement of the merits of this lawsuit. I-Flow aggressively litigated the case by, among other things: (1) filing a second motion for judgment on the pleadings (which resulted in Azure voluntarily amending its complaint); (2) filing two successive demurrers to Azure's amended complaints; (3) filing a cross-complaint for indemnity against Azure; and (4) making repeated attempts to compel Azure representatives to appear in California for depositions.

Azure alleged in its operative complaint that it suffered actual damages of at least $239,641.76 as a result of I-Flow's tortious conduct. Azure's prayer for relief requested general and special damages, costs of suit including attorney fees to the ...

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