California Court of Appeals, Second District, Eighth Division
June 30, 2015
IRONRIDGE GLOBAL IV, LTD., Plaintiff and Respondent,
SCRIPSAMERICA, INC., Defendant and Appellant.
APPEAL from an order of the Superior Court of Los
Angeles County No. BC524230. Rolf M. Treu, Judge.
[Copyrighted Material Omitted]
Needham Law Firm and Carlos E. Needham for Defendant
Horvitz & Levy, David S.
Ettinger, Steven S. Fleischman; Incite Law Group and Mark A. Vegas for
Plaintiff and Respondent.
Plaintiff Ironridge Global IV, Ltd., sued defendant
ScripsAmerica, Inc., to recover a debt. The parties were able to reach a
settlement, by which defendant agreed to give plaintiff shares of defendants
stock in satisfaction of the debt. The agreement also provided a mechanism
whereby plaintiff would receive additional shares if the value of defendants
stock decreased. The parties petitioned the court to enter judgment on their
stipulated settlement, and to retain jurisdiction under Code of Civil Procedure
section 664.6 to enforce the settlement. The trial court entered judgment as
requested. Plaintiff later moved ex parte to enforce the settlement, because
defendant had failed to complete a stock transfer required by its falling stock
prices. The trial court entered an order compelling defendant to issue stock to
plaintiff, and prohibiting defendant from transferring stock to any third
parties until the outstanding shares were transferred to plaintiff.
Defendant appealed, arguing that the trial court
lacked authority to restrain it from transferring shares to third parties, and
that the court could not provide injunctive relief on an ex parte basis. Since
entry of the order,
defendant has transferred millions of shares of stock to third parties and
has not issued any shares to plaintiff. Based on defendant's repeated
violations of the trial courts order, plaintiff has moved to dismiss the
appeal under the disentitlement doctrine. We agree that dismissal is the
appropriate remedy for defendants flagrant disregard for the order which is
the subject of this appeal.
On October 11, 2013, plaintiff sued defendant to
collect a debt. On November 8, 2013, the parties filed a stipulation for
settlement of plaintiffs claim, setting forth the terms of the parties
settlement, and asking the court to enter judgment in accordance with their
stipulation. The parties stipulation provided that plaintiff owned a
legitimate claim against defendant, valued at $686, 962.08, plus interest and
attorney fees. To satisfy this claim, defendant would initially issue plaintiff
8, 690, 000 shares of unrestricted and freely [tradeable] exempted common
stock in its company. The
agreement contemplated additional stock transfers to plaintiff upon plaintiffs
demand, in the event defendants stock prices fell below a threshold amount
(the value of the claim, plus an allowance for costs and attorney fees).
The agreement also provided that Defendant has
reserved and will continue to reserve all shares of Common Stock that could be
issued to Plaintiff pursuant to the terms of the Order. . . ." "Defendant will
not reserve, issue or transfer any shares of Common Stock to any other person
unless and until sufficient shares have been irrevocably reserved for
Plaintiff.. . ."
At the time the parties entered into the agreement,
defendant had 150, 000, 000 shares of common stock of which 78, 238, 653 were
issued and outstanding, and 34, 265, 051 were unissued and unreserved.
The agreement also provided that [u]pon entry of the
Order approving this Stipulation, the Action shall be dismissed in its
entirety, with the Court retaining jurisdiction to enforce the terms of the
Stipulation and Order by ex parte application, judgment, motion or other
proceeding under Section 664.6 of the California Code of Civil Procedure.
On November 8, 2013, the parties jointly sought entry of the judgment on an
ex parte basis. In support of the ex parte application, defendants CEO, Mark
Schneiderman, submitted a declaration averring that ex parte relief was
necessary given the volatility of the marketplace and the significant
fluctuations in the value of defendants stock. Mr. Schneiderman averred that
any delay in entry of judgment may effectively preclude effectuation of a
settlement, because of the likely continual variation in the companys stock
On November 8, 2013, the court entered judgment,
signing the parties proposed order which included the terms of the settlement.
On May 6, 2014, plaintiff moved, ex parte, for an
order enforcing the settlement, and ordering defendant to issue to plaintiff 1,
646, 008 additional shares of stock owed under the adjustment mechanism of the
stipulation, due to the poor performance of defendants stock. Specifically,
plaintiff sought an order requiring transfer of the stock, and restraining
defendant from issuing... any shares to any other person until the
outstanding shares were issued to plaintiff. Plaintiff was owed a total of 11,
951, 558 shares of stock under the adjustment mechanism, of which 10, 305, 550
had already been issued. Despite repeated demands for the outstanding shares,
defendant had not issued them to plaintiff. Plaintiffs application urged that
good cause existed to resolve the matter on an ex parte basis given the
volatility of defendants stock, and the congestion of the courts calendar.
The application also set forth the calculations supporting the requested stock
In support of the application, counsel submitted a
declaration stating that it gave defendant notice on May 1, 2014, of its intent
to seek ex parte relief in the event the outstanding shares were not
transferred. The parties were unable to reach a resolution, so plaintiff
noticed the ex parte hearing for May 6.
Counsels declaration also authenticated an April 29,
2014 e-mail from plaintiffs counsel to defendant, providing that [a]s of
today, you owe Ironridge 1, 646, 550 additional shares. Based on todays 10
cent closing price, that equals $164, 655.00. Please immediately issue the
shares, or wire us the money. Counsels May 5, 2014 ex parte notice to
defendant indicated that plaintiff would ask the court to order issuance of the
outstanding shares, or payment of $164, 655.
Plaintiff also submitted a declaration by a certified
financial analyst, averring that defendants common stock was volatile, and
that the price had fluctuated significantly. The declaration also set forth
calculations for the stock plaintiff was owed under the adjustment mechanism.
In opposition to the application, defendant argued
that plaintiff had violated federal securities law and engaged in manipulative
trading activity designed to artificially depress the value of Defendants
stock and thereby yield grossly
unfair levels of issuance of stock to Plaintiff.
The opposition opined that further issuances could be in violation of
securities law. The conclusion portion of the opposition argued that
Plaintiff has not, and cannot, make a sufficient showing of a need for an
immediate order compelling issuance of shares. Plaintiffs request should be
adjudicated on a normal timetable that permits a responsible and careful
consideration (and development) of relevant facts and law in the complex area
of securities subterfuge and manipulation. Also, there is no need for any TRO
in the interim to safeguard the shares. The shares are reserved and Plaintiff
has, in effect, acknowledge that money damages would suffice in any event. The
opposition did not dispute the correctness of the calculated shares plaintiff
claimed it was owed.
No declarations or admissible evidence were submitted
in support of the opposition. Rather, defendants evidence consisted of a
hearsay online article accusing plaintiff of manipulative trading activity, and
an unauthenticated November 8, 2013 letter to defendants transfer agent,
instructing it to issue 8, 690, 000 shares to plaintiff (the initial issuance)
and to reserve an additional 8, 260, 000 shares for plaintiff.
Also included was an unauthenticated letter from defendants securities
counsel, advising that the unregistered distribution of shares to plaintiff
might violate federal securities law. The opposition also included press
releases by the Securities and Exchange Commission (SEC) concerning settlements
it made for civil proceedings commenced against entities who had abused the
exemption provided for by title 15 of United States Code section 77c(a)(10).
The trial court signed the proposed order, ordering
defendant, within 24 hours of issuance of the order, "to issue... Plaintiff
1,646,008 shares" of common stock. The order also restrained and enjoined
[Defendant] from issuing or transferring any shares to any other person or
entity until Defendant is in complete compliance with this Order. The order
recited that the ex parte application came on for hearing on May 6, 2014 ...
." No reporters transcript is part of the record on appeal.
Defendant immediately filed a notice of appeal.
Plaintiff has moved to dismiss this appeal under the
disentitlement doctrine, arguing that defendant has repeatedly violated the
trial courts order restraining it from transferring shares of stock to third
parties until it complied with its obligation to issue to plaintiff the
1,646,008 shares ordered by the court.
In support of its motion, plaintiff has submitted defendants SEC filings
indicating that defendant has transferred a total of 8,745,184 shares to third
parties since the court entered its May 6, 2014 order.
Under the disentitlement doctrine, a reviewing court
has inherent power to dismiss an appeal when the appealing party has refused to
comply with the orders of the trial court. (Stoltenberg v. Ampton
Investments, Inc. (2013) 215 Cal.App.4th 1225, 1229 [159 Cal.Rptr.3d 1].) "
'Appellate disentitlement is not a jurisdictional doctrine, but a
discretionary tool that may be applied when the balance of the equitable
concerns make it a proper sanction. [Citation.] [Citation.]" (Id. at
p. 1230.) The rule applies even if there is no formal adjudication of contempt.
(TMS, Inc. v. Aihara (1999) 71 Cal.App.4th 377, 379 [83 Cal.Rptr.2d
834].) The disentitlement doctrine is particularly likely to be invoked where
the appeal arises out of the very order (or orders) the party has disobeyed.
(Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter
Group 2014) ¶ 2:340, p. 2-203.) Moreover, the merits of the appeal are
irrelevant to the application of the doctrine. (See Stone v. Bach (1978)
80 Cal.App.3d 442, 448 [145 Cal.Rptr. 599] [rejecting defendants claim that
dismissal was not warranted because the orders he violated were invalid].)
The power to dismiss an appeal for refusal to comply
with a trial court order has been exercised in a variety of circumstances,
including: where a parent had taken and kept children out of the state in
violation of a divorce decree (MacPherson v. MacPherson [(1939)]
13 Cal.2d [271,] 272-273 [89 P.2d 382]; Knoob v. Knoob [(1923)]
192 Cal. [95, 96] [218 P. 568]);
where a husband had failed to pay alimony as ordered in an interlocutory
judgment of divorce (Kottemann v. Kottemann [(1957)] 150
Cal.App.2d [483,] 484 [310 P.2d 49]); where a party in a civil action was a
fugitive from justice and in contempt of the superior court for failure to
appear on criminal charges after being released on bail (Estate of Scott
[(1957)] 150 Cal.App.2d [590,] 591-592 [310 P.2d 46]); and where defendants
willfully failed to comply with trial court orders regarding a receivership. (Alioto
Fish Co. v. Alioto [(1994)] 27 Cal.App.4th [1669,] 1682-1685 [34
Cal.Rptr.2d 244].) Moreover, the inherent power to dismiss an appeal has been
exercised in several cases where a party failed or refused to appear for a
judgment debtor examination. (Say & Say v. Castellano [(1994)] 22
Cal.App.4th [88,] 94 [27 Cal.Rptr.2d 270]; Stone v. Bach, supra,
80 Cal.App.3d at pp. 443-444; Tobin v. Casaus [(1954)] 128 Cal.App.2d
[588,] 589, 593 [275 P.2d 792].)" (TMS, Inc. v. Aihara, supra, 71
Cal.App.4th at pp. 379-380.)
The doctrine was recently applied in Gwartz
v. Weilert (2014) 231 Cal.App.4th 750 [180 Cal.Rptr.3d 809], to dismiss the
appeal of judgment debtors who repeatedly violated the trial courts
postjudgment orders enjoining them from selling, transferring, or dissipating
their assets. (Id. at pp. 755-758.) Defendants opposition to the motion
to dismiss did not deny the transfers, but urged the transfers were made in
good faith." (Id. at p. 761.) The appellate court found there was no
factual basis for the claim the violation of the orders was made in good faith,
and that [t]he record shows that defendants are seeking the benefits of an
appeal while willfully disobeying the trial courts valid orders and thereby
frustrating defendants legitimate efforts to enforce the judgment. Therefore,
we conclude the equitable considerations relevant to the disentitlement
doctrine favor dismissal of this appeal. (Ibid.)
Here, defendant does not deny that it violated the
courts order by transferring stock to third parties. Defendants paltry
opposition to the motion to dismiss this appeal is one and a half pages long,
and cites no authority whatsoever.
The opposition argues that the parties settlement did not restrict its ability
to transfer shares of stock to third parties, and therefore the trial court
exceeded its authority with its enforcement order. The opposition also argues
that the mandatory portions of the injunction are invalid because the relief
was granted on an ex parte basis, with no undertaking and no finding of
irreparable harm. Essentially, the opposition contends defendant was not
required to comply with the trial courts invalid order. However, we will not
consider defendants arguments on the merits of the injunction because
arguments as to the merits are irrelevant to the application of the
disentitlement doctrine. (Stone v. Bach, supra, 80 Cal.App.3d at
And, in any event, defendants claims are plainly
without merit. A judgment is void when there is a lack of jurisdiction over the
subject matter or the person. (People v. American Contractors Indemnity Co.
(2004) 33 Cal.4th 653, 660 [16 Cal.Rptr.3d 76, 93 P.3d 1020].) Additionally, a
judgment may be voidable when the trial court has subject matter and
personal jurisdiction, but exceeds its jurisdiction because it " ' "has no
jurisdiction (or power) to act except in a particular manner, or to give
certain kinds of relief, or to act without the occurrence of certain procedural
prerequisites." ' [Citation.]" (Conservatorship of OConnor
(1996) 48 Cal.App.4th 1076, 1088 [56 Cal.Rptr.2d 386]; see Jovine
v. FHP, Inc. (1998) 64 Cal.App.4th 1506, 1527, fn. 26 [76 Cal.Rptr.2d
322].) An act that is in excess of jurisdiction, and merely voidable, is
presumed valid until it is set aside, and a party may be precluded from setting
it aside by waiver, estoppel, or the passage of time. (People v. Ruiz
(1990) 217 Cal.App.3d 574, 584 [265 Cal.Rptr. 886].) Nevertheless, "[a] person
may refuse to comply with a court order and raise as a defense to the
imposition of sanctions that the order was beyond the jurisdiction of the court
and therefore invalid.. . ." (In re Marriage of Niklas (1989) 211 Cal.App.3d 28, 35 [258 Cal.Rptr. 921] [addressing contempt].) However, a person
"may not assert as a defense that the order merely was erroneous. (Ibid.)
Code of Civil Procedure section 664.6 allows the
court to enter a stipulated judgment in settlement of a case, and to retain
jurisdiction to enforce the settlement. Moreover, Code of Civil Procedure
section 128, subdivision (a)(4) provides that the court has the power to
compel obedience to its judgments, orders, and process, and to the orders of a
judge out of court, in an action or proceeding pending therein. These
provisions, together, give the court authority to fashion orders to enforce
compliance with a stipulated judgment. (See Blueberry Properties, LLC v.
Chow (2014) 230 Cal.App.4th 1017, 1020-1021 [179 Cal.Rptr.3d 145] [Trial
court had authority under §§ 664.6 and 128 to appoint an elisor to execute a
deed when a party refused to do so in violation of the parties stipulation.].)
Here, the parties requested that the court retain jurisdiction to enforce
the settlement. The stipulation also provided that it could be enforced on an
ex parte basis. There is no question that the court had jurisdiction over the
parties and the subject matter, and that the parties expressly authorized the
court to enforce the settlement on an ex parte basis. We find no procedural
irregularity or other defect that would support a credible claim that the order
was either void or voidable. Defendants appeal merely challenges the order as
erroneous. (See Signal Oil & Gas Co. v. Ashland Oil & Refining Co.
(1958) 49 Cal.2d 764, 776 [322 P.2d 1].) Defendant had no cause to disobey the
courts order, but did so, repeatedly. Defendant could have sought a stay of
the order, but failed to do so. (See In re Christy L. (1986) 187 Cal.App.3d 753, 758-759 [232 Cal.Rptr. 184].) Defendant also could have sought
a writ of
supersedeas in this court. (Cal. Rules of Court, rule 8.824; see Code Civ.
Proc., § 923; Food & Grocery Bureau v. Garfield (1941) 18 Cal.2d 174,
177 [114 P.2d 579].) Finding that a balance of the equities weighs in favor of
dismissal, we grant plaintiffs motion.
The appeal is dismissed. Respondent is awarded its
costs on appeal.
Bigelow, P. J., and
Flier, J., concurred.