Franklin & Franklin v. 7-Eleven Owners

Decision Date29 December 2000
Docket NumberNo. A085722.,A085722.
Citation85 Cal.App.4th 1168,102 Cal.Rptr.2d 770
CourtCalifornia Court of Appeals Court of Appeals
PartiesFRANKLIN & FRANKLIN et al., Plaintiffs and Appellants, v. 7-ELEVEN OWNERS FOR FAIR FRANCHISING et al., Defendants and Respondents.

Anthony A. Ferrigno, Law Offices of Anthony A. Ferrigno, San Clemente, J. David Franklin, Franklin & Franklin, La Jolla, Counsel for Appellants.

Charles E. Rowe, Rowe & Allen, Inc., San Diego, John F. Wells, Stark, Wells, Rahl, Schwartz & Schieffer, Oakland, Daniel J. Sheehan, Jr., Daniel Sheehan & Assoc., LLP, Marc S. Culp, Thomas & Culp, Dallas, TX, Counsel for Respondents.

SEPULVEDA, J.

Appellants, several lawyers and law firms, appeal from an injunction entered by the Alameda Superior Court restraining them from prosecuting two civil actions for damages and declaratory relief filed in the San Diego Superior Court. The San Diego proceedings arose out of class action litigation that had been pending before the Alameda Superior Court for over four years and, at the time the injunction issued, was (and is) pending in this court on appeal from a judgment approving the settlement of the class action and an award of $4.75 million in attorney fees to appellants and other class counsel.

The class action litigation was brought against the Southland Corporation, the franchiser of the 7-Eleven stores, by a subsequently certified national class consisting of present and former 7-Eleven franchisees. In brief, the class of plaintiff-franchisees in the Alameda litigation alleged Southland had breached its franchise agreements with them by failing to share ratably in certain rebates, discounts, and allowances provided the company by vendors of products and services sold at retail by the franchisees. Following extensive discovery and class certification by the trial court, the suit against Southland was settled for $37 million. The settlement agreement included an award of fees to class counsel, subject to court approval, allocated as follows: $2.35 million to current class counsel and $2.30 million to appellants. In the course of the litigation, the class representatives discharged appellants as class counsel. The remaining attorneys representing the class carried on, bringing the settlement negotiations with Southland to a successful conclusion. Appellants moved to have the class representatives and remaining class counsel discharged, alleging fraud, self-dealing, and conflicts of interest, and to have themselves named as class counsel. In light of these events, the trial court designated appellants as litigation class counsel, co-counsel as class counsel for settlement negotiations, and held several days of evidentiary hearings to explore the misconduct allegations as well as the fairness of the proposed settlement agreement. After the hearings and extended briefing, it approved the settlement agreement, entered a final judgment upholding it, and awarded attorneys' fees. A handful of class members who objected to the settlement agreement, along with former class counsel who had been discharged, perfected appeals from the judgment entered by the trial court on the settlement agreement. Those appeals, having been briefed and argued, we also decide today. (7-Eleven Owners for Fair Franchising et al. v. The Southland Corporation et al. (2000) 85 Cal. App.4th 1135,102 Cal.Rptr.2d 777.

After the appeal from the judgment entered on the class action settlement agreement had been perfected, succeeding class counsel sought injunctive relief from the Alameda Superior Court restraining former class counselappellants here—from continuing to prosecute the two civil damage suits in the San Diego Superior Court against them and the class representatives.1 In brief, in those suits appellants pleaded claims for breach of contract against their former clients and breach of fiduciary duties by their former cocounsel. The complaint sought recovery from the clients in quantum meruit and from cocounsel in tort for wrongful interference with contractual relations, alleging in substance that the conduct of their former clients and cocounsel prevented appellants from recovering fair and reasonable fees for their legal work in the class action litigation. Following briefing and argument, the trial court granted the equitable relief sought, preliminarily enjoining appellants from further pursuing the San Diego litigation. Appellants appeal from the order granting injunctive relief. We affirm.

DISCUSSION

Appellants argue the injunction entered against them by the Alameda Superior Court must be vacated for three reasons. First, the superior court lacked subject matter jurisdiction to grant any post-judgment relief because, when it did so, the judgment approving the settlement agreement was pending on appeal before this court. That being the case, they reason, in light of Code of Civil Procedure section 916, the superior court had lost subject matter jurisdiction, including jurisdiction to enter postjudgment injunctive relief. Second, to the extent the San Diego lawsuits might have led to the relitigation of matters already settled in the Alameda class action, principles of res judicata would not apply to conclude appellants because the class action litigation, being the subject of a pending appeal, is not final for preclusive purposes. Finally, appellants argue that rules developed under the doctrine of "exclusive concurrent jurisdiction" have no application to the facts of this case. We consider these claims in order.

I.
A. Was the trial court's postjudgment jurisdiction to enter injunctive relief ousted by the pendency of the class action appeal?

Appellants rely on the language of Code of Civil Procedure section 916, subdivision (a), arguing it deprived the trial court of jurisdiction to grant the injunction against the San Diego proceedings. As pertinent here, that statute provides "an appeal stays proceedings in the trial court upon the judgment . . . appealed from or upon the matters embraced therein or affected thereby, including enforcement of the judgment or order, but the trial court may proceed upon any other matter embraced in the action and not affected by the judgment or order." (Code Civ. Proc, § 916, subd. (a).) Because the trial court's judgment approving the settlement agreement was on appeal at the time the injunction against the San Diego suits was entered, appellants argue, section 916 deprived the trial court of jurisdiction to enter any postjudgment relief; the injunction was therefore a void judicial act and without effect.

We disagree. As this court has explained the rationale behind section 916, the "purpose of the rule depriving the trial court of jurisdiction during the pending appeal is to protect the appellate court's jurisdiction by preserving the status quo until the appeal is decided. The rule prevents the trial court from rendering the appeal futile by altering the appealed judgment or order by conducting other proceedings that may affect it. [Citation.] Accordingly, whether a matter is `embraced' in or `affected' by a judgment within the meaning of section 916 depends upon whether postjudgment trial court proceedings on the particular matter would have any impact on the `effectiveness' of the appeal. If so, the proceedings are stayed; if not, the proceedings are permitted." (Elsea v. Saberi (1992) 4 Cal. App.4th 625, 629, 5 Cal.Rptr.2d 742, italics added; see also In re Marriage of Horowitz (1984) 159 Cal.App.3d 377, 381, 205 Cal.Rptr. 880; People v. Schulz (1992) 5 Cal.App.4th 563, 571, 7 Cal.Rptr.2d 269; Betz v. Pankow (1993) 16 Cal.App.4th 931, 20 Cal.Rptr.2d 841.)

Here, it is plain the injunction issued by the trial court barring a continuation of the San Diego litigation was not granted in derogation of our jurisdiction to decide the pending appeals from the judgment entered on the class action settlement agreement. On the contrary, a review of the record and the circumstances under which the injunction issued make it clear the trial court granted the relief sought for reasons that are entirely consistent with the policy underlying the jurisdictional limitations imposed on trial courts by section 916. Specifically, the trial court was concerned that, if allowed to continue, the San Diego litigation would have compromised the attorneys' fee award made as part of the class action settlement and the judgment entered on it. A revision of the award in the settlement agreement and judgment, if made as a result of the San Diego litigation, would threaten to render the pending appeal from the Alameda County judgment futile. It was thus to preserve the status quo pending the appeal—the identical objective secured by section 916, subdivision (a)-that equitable relief was granted by the trial court against appellants.

Moreover, even on a facial analysis of the text of section 916, subdivision (a), it is clear the relief granted does not fall within the statutory proscription. While an argument might be made that the injunction falls within the "matters embraced [by the appeal] or affected thereby"—on the theory that the appeal involves the class settlement attorney fee award—to adopt such a view would contradict the evident policy furthered by subdivision (a). The standard by which jurisdictional divestiture under section 916 pending an appeal is evaluated was succinctly framed by this court in Betz v. Pankow, supra, 16 Cal. App.4th 931, 20 Cal.Rptr.2d 841, in terms of the "impact" the exercise of postjudgment jurisdiction by the trial court would have on the "effectiveness" of the pending appeal. (Id. at p. 938, 20 Cal. Rptr.2d 841; see also Elsea v. Saberi, supra, 4 Cal.App.4th at p. 629, 5 Cal. Rptr.2d 742.) Evaluated in those terms, it is clear the postjudgment injunction against appellants in this case will have no impact on the "effectiveness" of the pending appeal; indeed, the opposite is true. Again, the basis for that conclusion lies in the fact...

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