Interactive Multimedia Artists, Inc. v. Superior Court (Allstate Ins. Co.)

• Decision Date: 14 April 1998
• Docket Number: No. B116328,B116328
• Citation: 73 Cal.Rptr.2d 462,62 Cal.App.4th 1546
• Parties: , 98 Cal. Daily Op. Serv. 2769, 98 Daily Journal D.A.R. 3789 INTERACTIVE MULTIMEDIA ARTISTS, INC., Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent; ALLSTATE INSURANCE COMPANY et al., Real Parties in Interest.
• Court: California Court of Appeals Court of Appeals

Page 462

73 Cal.Rptr.2d 462

62 Cal.App.4th 1546, 98 Cal. Daily Op. Serv. 2769,

98 Daily Journal D.A.R. 3789

INTERACTIVE MULTIMEDIA ARTISTS, INC., Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent ALLSTATE INSURANCE COMPANY et al., Real Parties in Interest.

No. B116328.

Court of Appeal, Second District, Division 4, California.

April 14, 1998.

Troop Meisinger Steuber & Pasich, John M. Genga, David A. Householder and Mehran Arjomand, Los Angeles, for Petitioner.

No appearance on behalf of Respondent.

Jeffer, Mangels, Butler & Marmaro, Paul L. Warner, San Francisco, Dan P. Sedor, Los Angeles, and Kenneth W. Muller, San Fancisco, for Real Parties in Interest.

EPSTEIN, Associate Justice.

Petitioner, Interactive Multimedia Artists, Inc. (IMA), entered into a subscription and stockholders agreement (Agreement) which included a choice of law provision selecting Delaware law. The trial court found the choice of law provision enforceable, and applying

Delaware law, struck IMA's request for a jury trial on a breach of fiduciary claim by which IMA sought monetary damages. Petitioner sought our intervention on the jury trial issue. We granted an alternative writ and stayed trial court proceedings, in order to consider whether IMA is entitled to a jury trial. We conclude that the Delaware action for breach of a fiduciary duty is an equitable action under both Delaware law and California law and hence that IMA is not entitled to a jury trial. We therefore deny IMA's petition for a writ of mandate/prohibition.

FACTUAL AND PROCEDURAL SUMMARY

IMA is a California corporation with its principal place of business in California. In February of 1995, IMA entered into an Agreement with Allstate Insurance Company, Sylvan Learning Systems Inc., Management Alliance Corporation, Douglas Becker, and Michael Curran (collectively real parties). Management Alliance Corporation is also incorporated in California, with its principal place of business in this state. Under the Agreement a new entity, Advanced Drivers Education Products and Training Inc. (Adept), was incorporated in Delaware under the General Corporation Law of that state. Adept's principal place of business is in California.

The Agreement contained a choice-of-law provision: "Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements between Delaware residents entered into and to be performed entirely within Delaware."

Adept's business was to develop, produce, and market a drivers education product. IMA was a 15 percent shareholder of Adept. IMA developed a product, but the Adept board of directors decided not to pursue it. The board also decided to merge Adept into a new company to be called Adept Merger Inc., which it then renamed Adept (new Adept). The terms of the merger designated an amount to be given to IMA for its 15 percent share. IMA contends this amount is less than the fair value of its interest in the original Adept corporation (old Adept).

On January 16, 1996, IMA delivered to new Adept its demand for appraisal pursuant to 8 Delaware Code section 262(d). ¹ On January 19, 1996, IMA filed suit in California but did not serve real parties. On March 26, 1996, real parties filed an action in the Chancery Court of Delaware for an appraisal of IMA's shares. Three days later, IMA served real parties with the complaint in the California action. IMA moved to stay the Delaware action, and the Delaware court granted a stay based on "principles of comity and efficiency."

IMA's amended complaint alleges causes of action for breach of fiduciary duty, breach of contract, and breach of confidence. The trial court granted judgment on the pleadings for the breach of contract claim and denied a motion for judgment on IMA's breach of fiduciary duty claims. IMA dismissed its breach of confidence claim. The remaining cause of action is for breach of fiduciary duty.

In its breach of fiduciary duty claim, IMA alleges that Allstate, Sylvan, and Management Alliance Corporation owed fiduciary duties to IMA as a minority shareholder. IMA also asserts a separate cause of action for breach of fiduciary duty against the directors of old Adept, Mr. Curran and Mr. Becker. It seeks exemplary damages and costs of suit.

IMA moved in limine that the trial court apply Delaware law. Real parties argued that California law applies to this proceeding. The trial court concluded that the choice of law provision is enforceable and that Delaware law applies. For that reason, the trial court denied IMA's request for jury trial.

IMA petitioned for a writ of mandate/prohibition. Writ relief is appropriate to secure the right to a jury trial. (Byram v In its petition, IMA explains that its contention that California law applies to the jury trial question is consistent with its previous position that Delaware law governs because the law of the chosen state applies to the validity of the claims at issue, and the law of the forum state to the manner those claims will be decided. Real parties no longer argue that California law applies. They argue, instead, that if Delaware law applies, it applies in its entirety, including the jury trial issue. We granted an alternative writ and temporarily stayed the proceedings in order to decide the jury trial issue. We now deny the writ.

Superior Court (1977) 74 Cal.App.3d 648, 654, 141 Cal.Rptr. 604.)

DISCUSSION

The parties accept, in this proceeding, the trial court's determination that Delaware law governs IMA's cause of action. ² According to IMA, its claim for breach of fiduciary duty brought under Delaware law should be characterized, under California law, as an action at law rather than in equity because IMA seeks a legal remedy, damages. (See Asare v. Hartford Fire Ins. Co. (1991) 1 Cal.App.4th 856, 867, 2 Cal.Rptr.2d 452 ["Determining whether the gist of a claim is in law or equity 'depends in large measure upon the mode of relief to be afforded.' "].)

IMA further argues that it is entitled to a jury trial, under California Constitution, article I, section 16. ³ IMA relies on the Restatement Second of Conflict of Laws section 122, which provides: "A court usually applies its own local law rules prescribing how litigation shall be conducted even when it applies the local law rules of another state to resolve other issues in the case." The Restatement comments that "in matters of judicial administration, it would often be disruptive or difficult for the forum to apply the local law rules of another state." (§ 122, com. a, p. 350; see Hambrecht & Quist Venture Partners v. American Medical Internat., Inc. (1995) 38 Cal.App.4th 1532, 1542-1543, fn. 8, 46 Cal.Rptr.2d 33.) Under the Restatement, matters of judicial administration include the "form of the action"--whether a claim is at law or in equity--and the "mode of trial"--whether an action is tried to a jury or to a judge. (§§ 122, com. a, p. 351, 124, 129.) IMA also directs our attention to federal diversity cases in which federal courts have applied federal law to determine whether an action is characterized at law or in equity. (See, e.g., Simler v. Conner (1963) 372 U.S. 221, 222, 83 S.Ct. 609, 610, 9 L.Ed.2d 691.)

IMA correctly points out that a jury trial is a fundamental right under California's system of jurisprudence. (Cal. Const., art. I, § 16; Byram v. Superior Court, supra, 74 Cal.App.3d 648, 654, 141 Cal.Rptr. 604.) "As such, it should be zealously guarded by the courts [citations]. In case of doubt ... the issue should be resolved in favor of preserving a litigant's right to trial by jury. [Citations.]" (74 Cal.App.3d at p. 654, 141 Cal.Rptr. 604.) Waiver of a jury trial, to be enforceable, "must be unambiguous and unequivocal, leaving no room for doubt as to the intention of the parties." (Trizec Properties, Inc. v. Superior Court (1991) 229 Cal.App.3d 1616, 1619, 280 Cal.Rptr. 885.)

A

Under both Delaware law and California law, entitlement to jury trial depends on whether an action is legal or equitable. (Park Oil, Inc. v. Getty Refining & Marketing (Del.Supr.1979) 407 A.2d 533, 535; Southern Pac. Transportation Co. v. Superior Court (1976) 58 Cal.App.3d 433, 435, 129 Cal.Rptr. 912.) In Delaware, the equity jurisdiction of the Court of Chancery as it existed prior to the separation of the colonies determines whether an action is legal or equitable. ⁴ (Du Pont v. Du Pont (Del.Supr.1951) To ascertain whether IMA is entitled to a jury trial we must first classify its action--a claim for breach of fiduciary duty brought under Delaware law in which the plaintiff seeks damages--as legal or equitable. We begin with a description and analysis of the claim, then return to the issue of its classification as legal or equitable.

                85 A.2d 724, 727.)   In California, the right to a jury trial is coextensive with that right as it existed in 1850 under English common law.  (C & K Engineering Contractors v. Amber Steel Co.  (1978) 23 Cal.3d 1, 8, 151 Cal.Rptr. 323, 587 P.2d 1136.)
                

Under Delaware law, a board of directors of a corporation owes its shareholders duties of good faith, loyalty, and due care. (Cinerama, Inc. v. Technicolor, Inc. (Del.Supr.1995) 663 A.2d 1156, 1164.) Those duties are derived from "[a] public policy, existing through the years [which] has established a rule that demands of a corporate officer or director, peremptorily and inexorably, the most scrupulous observance of his duty, not only affirmatively to protect the interests of the corporation committed to his charge, but also to refrain from doing anything that would work injury to the corporation, ... " (Weinberger v. UOP, Inc. (Del.Supr.1983) 457 A.2d 701, 710.) Violation of one of those tripartite duties constitutes grounds for an action for breach of fiduciary duty. (Cinerama, Inc. v. Technicolor, Inc., supra, 663 A.2d at p. 1164.)

The parties agree that in Delaware, analysis of a breach of fiduciary duty...