This case was last updated from Los Angeles County Superior Courts on 06/06/2019 at 21:47:14 (UTC).

MICHAEL PUCCI VS DEBORAH L UNDERWOOD ET AL

Case Summary

On 05/03/2016 MICHAEL PUCCI filed a Contract - Business Governance lawsuit against DEBORAH L UNDERWOOD. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****9281

  • Filing Date:

    05/03/2016

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Contract - Business Governance

  • County, State:

    Los Angeles, California

 

Party Details

Plaintiff and Petitioner

PUCCI MICHAEL

Defendants and Respondents

DOES 1 - 10

GLOVEBRUSH CORPORATION NOMINAL DEFENDANT

STONE J. LAWRENCE

DAZZLE INC.

UNDERWOOD DEBORAH L.

GLOVEBRUSH CORPORATION

GEIGER BROS.

Attorney/Law Firm Details

Plaintiff and Petitioner Attorneys

HARSHMAN DANIEL D.

ROGNLIEN CARRIE JILL

FISHERBROYLES LLP [REDONDO BEACH]

MILLER ADAM D

FISHERBROYLES LLP [SAN FRANCISCO]

Defendant Attorneys

HOBART LINZER LLP

APC ROGNLIEN LAW FIRM

TUCKER ELLIS LLP

HUNTER SALCIDO & TOMS LLP

 

Court Documents

DISSOLUTION OF GLOVEBRUSH CORPORATION; DERIVATIVE PLAINTIFF MICHAEL PUCCI'S STATUS CONFERENCE STATEMENT

12/12/2017: DISSOLUTION OF GLOVEBRUSH CORPORATION; DERIVATIVE PLAINTIFF MICHAEL PUCCI'S STATUS CONFERENCE STATEMENT

NOTICE OF PUBLICATION OF NOTICE TO CREDITORS OF GLOVEBRUSH CORPORATION

12/12/2017: NOTICE OF PUBLICATION OF NOTICE TO CREDITORS OF GLOVEBRUSH CORPORATION

NOTICE OF ENTRY AND RULING

12/18/2017: NOTICE OF ENTRY AND RULING

Minute Order

12/20/2017: Minute Order

DERIVATIVE PLAINTIFF'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEMURRER OF DEFENDANTS UNDERWOOD, STONE AND DAZZLE, INC.

12/26/2017: DERIVATIVE PLAINTIFF'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEMURRER OF DEFENDANTS UNDERWOOD, STONE AND DAZZLE, INC.

DERIVATIVE PLAINTIFF'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO STRIKE

12/26/2017: DERIVATIVE PLAINTIFF'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO STRIKE

DECLARATION OF MARYLIN JENKINS ON SUPPORT OF DEREVATIVE PLAINTIFF'S OPPOSITION TO MOTION TO STRIKE AND DEMURRER TO FIRST AMENDED COMPLAINT

12/26/2017: DECLARATION OF MARYLIN JENKINS ON SUPPORT OF DEREVATIVE PLAINTIFF'S OPPOSITION TO MOTION TO STRIKE AND DEMURRER TO FIRST AMENDED COMPLAINT

REPLY IN SUPPORT OF DEMURRER OF DEFENDANTS DEBORAH L. UNDERWOOD, J. LAWRENCE STONE AND DAZZLE INC. TO FIRST AMENDED CAMPLAINT

1/3/2018: REPLY IN SUPPORT OF DEMURRER OF DEFENDANTS DEBORAH L. UNDERWOOD, J. LAWRENCE STONE AND DAZZLE INC. TO FIRST AMENDED CAMPLAINT

NOTICE OF INTENT TO APPEAR BY TELEPHONE

1/5/2018: NOTICE OF INTENT TO APPEAR BY TELEPHONE

NOTICE OF MOTION AND MOTION FOR ORDER COMPELLING FURTHER PRODUCTION OF DOCUMENTS SOUGHT BY DEFENDANT UNDERWOOD'S FIRST INSPECTION DEMAND AND FOR MONETARY SANCTIONS; ETC

1/5/2018: NOTICE OF MOTION AND MOTION FOR ORDER COMPELLING FURTHER PRODUCTION OF DOCUMENTS SOUGHT BY DEFENDANT UNDERWOOD'S FIRST INSPECTION DEMAND AND FOR MONETARY SANCTIONS; ETC

DEFENDANT UNDERWOOD'S SEPARATE STATEMENT RE MOTION TO COMPEL PRODUCTION OF DOCUMENTS SOUGHT BY DEFENDANT UNDERWOOD'S FIRST INSPECTION DEMAND AND FOR MONETARY SANCTIONS

1/5/2018: DEFENDANT UNDERWOOD'S SEPARATE STATEMENT RE MOTION TO COMPEL PRODUCTION OF DOCUMENTS SOUGHT BY DEFENDANT UNDERWOOD'S FIRST INSPECTION DEMAND AND FOR MONETARY SANCTIONS

Minute Order

1/9/2018: Minute Order

GLOVEBRUSH, INC'S EX PARTE APPLICATION SEEKING EXTENSION OF TIME TO RESPOND TO TECHMATE INC'S COUNTER CROSS-COMPLAINT; ETC

1/9/2018: GLOVEBRUSH, INC'S EX PARTE APPLICATION SEEKING EXTENSION OF TIME TO RESPOND TO TECHMATE INC'S COUNTER CROSS-COMPLAINT; ETC

NOTICE OF RULING RE GLOVEBRUSH, INC.'S EX PARTE APPLICATION SEEKING EXTENSION OF TIME TO RESPOND TO TECHMATE INC.'S COUNTER CROSS-COMPLAINT

1/17/2018: NOTICE OF RULING RE GLOVEBRUSH, INC.'S EX PARTE APPLICATION SEEKING EXTENSION OF TIME TO RESPOND TO TECHMATE INC.'S COUNTER CROSS-COMPLAINT

DERIVATIVE PLAINTIFF'S OBJECTION TO GEIGER BROS CLAIIM IN DISSOLUTION

1/19/2018: DERIVATIVE PLAINTIFF'S OBJECTION TO GEIGER BROS CLAIIM IN DISSOLUTION

DEBORAH L. UNDERWOOD AND LARRY STONE OBJECTIONS TO CLAIMS AGAINST GLOVEBRUSH CORPORATION

1/19/2018: DEBORAH L. UNDERWOOD AND LARRY STONE OBJECTIONS TO CLAIMS AGAINST GLOVEBRUSH CORPORATION

Minute Order

1/30/2018: Minute Order

VERIFIED ANSWER OF J. LAWRENCE STONE TO PLAINTIFF'S VERIFIED FIRST AMENDED COMPLAINT

1/30/2018: VERIFIED ANSWER OF J. LAWRENCE STONE TO PLAINTIFF'S VERIFIED FIRST AMENDED COMPLAINT

335 More Documents Available

 

Docket Entries

  • 06/04/2019
  • Opposition (DEFENDANTS AND CROSS-COMPLAINANTS DEBRA L. UNDERWOOD AND J. LAWRENCE STONE AND DEFENDANT DAZZLE, INC.?S OPPOSITION TO PLAINTIFFS' MOTION IN LIMINE NO. 1 TO PRECLUDE DEFENDANT FROM OFFERING ANY EVIDENCE ON ANY BUY/SELL OR OTHER SHAREHOLDER AGREEMENT AND T); Filed by Dazzle, Inc. (Defendant); J. Lawrence Stone (Defendant); Deborah L. Underwood (Defendant)

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  • 06/03/2019
  • at 08:30 AM in Department 56; Final Status Conference - Not Held - Advanced and Continued - by Court

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  • 05/21/2019
  • Motion in Limine (NO. 1 TO PRECLUDE DEFENDANT FROM OFFERING ANY EVIDENCE ON ANY BUY/SELL OR OTHER SHAREHOLDER AGREEMENT AND THE PLAINTIFFS' BREACH OF ANY SAID AGREEMENT; DECLARATION OF ADAM D. MILLER); Filed by Michael Pucci (Plaintiff)

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  • 05/15/2019
  • at 09:30 AM in Department 86; Further Status Conference - Held - Continued

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  • 05/15/2019
  • Minute Order ( (Further Status Conference)); Filed by Clerk

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  • 05/07/2019
  • Notice of Intent to Appear by Telephone; Filed by Dazzle, Inc. (Defendant); J. Lawrence Stone (Defendant); Deborah L. Underwood (Defendant)

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  • 05/03/2019
  • Notice of Ruling; Filed by Dazzle, Inc. (Defendant); J. Lawrence Stone (Defendant); Deborah L. Underwood (Defendant)

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  • 05/02/2019
  • at 08:30 AM in Department 56; Hearing on Ex Parte Application (to shorten time for notice and hearing on plaintiffs motion to modify) - Held

    Read MoreRead Less
  • 05/02/2019
  • Minute Order ( (Hearing on Ex Parte Application to shorten time for notice an...)); Filed by Clerk

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  • 05/02/2019
  • Ex Parte Application (to Shorten Time for Notice of Hearing); Filed by Michael Pucci (Plaintiff)

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680 More Docket Entries
  • 06/01/2016
  • Proof-Service/Summons; Filed by Michael Pucci (Plaintiff)

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  • 06/01/2016
  • PROOF OF SERVICE OF SUMMONS AND COMPLAINT ON DEFENDANT DAZZLE, INC.

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  • 06/01/2016
  • PROOF OF SERVICE OF SUMMONS AND COMPLAINT ON DEFENDANT GLOVEBRUSH CORPORATLON

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  • 06/01/2016
  • PROOF OF SERVICE OF SUMMONS AND COMPLAINT ON DEFENDANT J. LAWRENCE STONE

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  • 06/01/2016
  • PROOF OF SERVICE OF SUMMONS AND COMPLAINT ON DEFENDANT DEBORAH L. UNDERWOOD

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  • 05/17/2016
  • ORDER TO SHOW CAUSE HEARING

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  • 05/17/2016
  • OSC-Failure to File Proof of Serv; Filed by Clerk

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  • 05/03/2016
  • SUMMONS

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  • 05/03/2016
  • Complaint; Filed by null

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  • 05/03/2016
  • VERIFIED COMPLAINT FOR: (1) BREACH OF FIDUCIARY DUTY; ETC

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Tentative Rulings

Case Number: BC619281    Hearing Date: March 19, 2021    Dept: 86

PUCCI v. UNDERWOOD et al.

Case No. BC619281

Trial Date: March 19, 2021

[TENTATIVE] ORDER ON DISSOLUTION OF ISSUES AFTER TRIAL

This matter is before the court for trial of issues remaining in the dissolution of nominal defendant, Glovebrush Corporation. The Corporation’s shareholders are Michael Pucci (50 percent), Debra Underwood (40 percent) and J. Lawrence Stone (10 percent).[1] In an effort to bring this matter to conclusion, given COVID-19 restrictions in the courthouse and courtrooms, the parties have agreed to try this matter on the papers.

Tech-Mate, Inc., a creditor of the Corporation, is also defending its claim in this trial. There is a dispute concerning the allowable amount of the claim.

Pucci’s request for judicial notice (RJN) is granted.

Underwood’s evidentiary objections to the Declaration of Michael Pucci in support of his response to Underwood’s trial brief are all sustained in their entirety. As for the email messages attached as Exhibit 1, the court notes the emails do not seem to have been taken from the Corporation’s email server. Certainly, there is insufficient foundation to find they were.

Documents Submitted by the Parties and Considered by the Court for this Trial:

Applicable Law:

The parties acknowledge once a decree for a corporation’s dissolution has been entered, the court “may makes such orders and decrees and issue such injunctions in the case as justice and equity may require.” (Corp. Code § 1804.) The parties also recognize in a corporate dissolution proceeding the shareholders are entitled to equal treatment.

Evidence Code section 500 provides: “Except as otherwise provided by law, a party has the burden of proof as to each fact the existence or nonexistence of which is essential to the claim for relief or defense that he is asserting.”

Based on the admissible evidence presented at the time of trial, the court finds and orders as follows:

Undisputed Issues:

Unpaid Judgments

There is no dispute the Corporation holds an unpaid judgment against Abbiamo (owned and controlled by Pucci) in the amount of $12,154.84. There is also no dispute the Corporation holds an unpaid judgment against Dazzle (owned and controlled by Underwood) in the amount of $1,000. Accordingly, the judgment against Abbiamo should be distributed to Pucci, and the judgment against Dazzle should be distributed to Underwood. Such distribution is fair and equitable under the circumstances.

Unpaid Shareholder Loans

There is no dispute the Corporation’s shareholders owe the Corporation the following amounts for loans made: Pucci $12,351; Underwood $59,410; and Stone $20,512.

Two Wells Fargo Bank Accounts

The parties agree on the balances in two Wells Fargo Bank accounts. The balance in the account ending 5356 contains $2,351.77. The balance in the account ending 3405 contains $8,785.06.

[The remaining three accounts are discussed below under disputed assets as the court is unable to determine whether a dispute concerning those accounts exists.]

Settlement Proceeds

There is no dispute $225,000 is being held in a attorney-client trust account held by Fisher Broyles, LLP. The settlement proceeds are a Corporate asset. The proceeds resulted from a settlement with a third-party Defendant, Geiger Bros.

[The dispute concerning distribution of same is discussed below.]

Disputed Issues:

Bank Accounts

It appears there may be three bank accounts holding a total of $217.36 owned by the Corporation. The accounts may be held at Wells Fargo Bank, Community Bank and Plaza/Premier Bank. The parties should address whether there is a dispute concerning the existence of this asset. To the extent such accounts exist, after the single creditor’s claim is paid, the funds in the accounts would be distributed to the shareholders according to their ownership interests.

Inventory: Watches and Tape

The Corporation holds inventory in the form of watches and tape with a book value of $51,358.38. Pucci took control of the inventory on behalf of the Corporation. Over the years, Pucci has engaged in efforts to sell the inventory with minimal success. Pucci contends despite its book value, the inventory has no value. Pucci explains the watches are more than 10 years old and were inexpensive. He also explains the tape is old and past its shelf life. (The tape may nonetheless still have a useful life.) Pucci has stored the bulky inventory at about $400 per month since the Corporation terminated its lease.

Other than book value and Pucci’s view the inventory has no value, the court has no competent evidence upon which to determine value. Underwood has requested the court award the inventory to Pucci at its book value. Pucci has offered to allow Underwood to take the inventory without cost to her.

The court orders in kind distribution of the inventory. The parties may separate the inventory in bulk (50-40-10). (The court assumes bulk separation of the tape will require the parties to cut the tape or apportion if it has already been cut.) If bulk distribution is inappropriate, the parties may separate the inventory through an alternating selection process (i.e., one-by-one selection).

The court finds such distribution is fair and equitable under the circumstances. The inventory is a corporate asset regardless of which shareholder may have had more involvement with the inventory for the Corporation. In kind distribution allows each shareholder to determine how best to dispose of the inventory, and the fairness is apparent.

Given the ongoing storage charges, the court is inclined to order the parties to make the distribution within 10 days of entry of the order.

Tech-Mate’s Claim

Tech-Mate filed a proof of claim based on loans it provided to the Corporation. Tech-Mate seeks allowance of $54,375.88 as of December 2020. Interest continues to accrue under the terms of a $150,000 promissory note at 3.5 percent interest.

The evidence provided by the parties on the issue is not particularly compelling.

The court finds Underwood’s “accounting” of the payments made by the Corporation on the $150,000 loan unreliable and untrustworthy. (See Underwood Decl., Ex. R.) The promissory note required 36 monthly payments of principal and interest of $4,395.31 beginning on August 1, 2008. The note specified all payments were first applied to interest with the remaining balance applied to principal. (Mark Pucci Decl., Ex. A.) Of particular importance to Underwood’s flawed accounting is the Corporation’s failure to ever make a full interest and principal payment on the note. The court located one $355 interest payment on the loan on January 23, 2009. Other than that, the court cannot locate a full principal and interest payment made by the Corporation. Thus, the court cannot possible conclude the Corporation’s calculation of the amount due on the note is accurate. Moreover, it appears Underwood has failed to make any allowance for the accruing interest on the note.

Tech-Mate’s accountant’s declaration hardly fares better. (Quagliano Decl.) The foundation for the accountant’s statements is unclear. (This is especially true given Mark Pucci attached part of the same schedule to his declaration. [Mark Pucci Proof of Claim Decl., 2.]) While the accountant attests he has personal knowledge of the facts contained it the declaration, the court cannot determine based on the second paragraph of the declaration whether he was responsible for accounting for the note payments. The information provided directly contradicts that of Underwood in the Corporation’s favor.

Neither Underwood nor Tech-Mate has provided foundation documents for the accounting. Neither addresses why the other’s accounting is incorrect.

Underwood concedes the Corporation owes Tech-Mate $16,632.33 as of May 2016.

Tech-Mate has the burden of proof on its claim. The parties indicate a balance difference as of May 2016 of $981. Based on the burden of proof and the Corporation’s concession through Underwood as of May 2016, the court is inclined to find the balance due on the $150,000 promissory note as of May 2016 was $16,632, a reduction to Tech-Mate’s claim by $981.[2] That said, Tech-Mate is entitled to interest at 3.5 percent on the balance from May 2016 through the date of payment on the promissory note.

Interest on $16,632.33 accruing at 3.5 percent from June 1, 2016 to today is $2,794.23. Thus, on the $150,000 note, the court is inclined to find the Corporation owes Tech-Mate $19,426.56.

Based on the evidence, the court finds the Corporation also owes Tech-Mate $4,443.26 for a no interest loan evidenced by a note signed by Underwood. Additionally, while there is no note evidencing the debt, the evidence demonstrates Tech-Mate made three non-interest loans (checks) totaling $8,521.88. That Tech-Mate made the loans is consistent with the Corporation’s course of dealing with Tech-Mate. The court finds Mark Pucci credible on the issue. Moreover, nothing proffered by the Corporation suggests the Corporation paid the $4,443.26 loan or the $8,521.88 total loan. Thus, Tech-Mate met its burden on those sums due.

Accordingly, Tech-Mate has met its burden on its claim and demonstrated the Corporation owes it at least $32,291.70.

The court, however, cannot resolve the remaining alleged loan of $20,000. The loan is evidenced by a note signed by Underwood. Tech-Mate concedes at least $3,115.67 toward that interest-free loan has been paid. The evidence concerning the alleged remaining balance of $16,884.33 does not make sense. The court is not persuaded the $17,182.34 wire transfer had anything to do with the loan. Certainly, the wire transferred funds did not come from Tech-Mate as only Underwood authorized the wire transfer. The court needs additional assistance from the parties on this issue.

Tech-Mate’s claim should be paid before any shareholder claims.

Underwood’s Reimbursement Claim

Underwood claims she is entitled to “reimbursements” of $78,397.49 from the Corporation. The amount claimed for reimbursements represents $2,084.99 for expenses incurred on behalf of the Corporation while $76,312.50 “is the invoiced amount for services rendered to [the Corporation] in winding up the affairs in 2016 and 2017.”

There is no dispute Underwood is entitled to reimbursement of $2,084.99 for the expenses paid on behalf of the Corporation. (Underwood has provided evidence to support her claims.)

With regard to the services rendered, Underwood argues:[3]

“Ms. Underwood invoiced $76,312.50 for the time she spent winding down the [Corporation] operation in 2016 and 2017 (Exhibit K [Underwood Decl.]). As explained in her declaration, Ms. Underwood kept track of her time and billed it at an hourly rate of $68.75 which rate was derived from her annual income at [the Corporation]. From January of 1026 through December 31, 2016, she expended 970 hours on [Corporation] business to effect the wind-up and eventual closure of the company. This time is reflected on her June 26, 2017, invoice. From January 1, 2017, through July 14, 2017, she expended another 140 hours of time devoted to closing the affairs of [the Corporation]. The actual hours expended far exceed the amount which was charged to [the Corporation] to wind up its operations and resulted in a net benefit to the company by avoidance of continuing lease obligations, full payment of the $100,000 line of credit, full payment of all creditors outstanding (except for Tech-Mate), and some modest resulting cash in the company.” (Underwood Opening Brief 7:26-8:9.)

The testimonial support—that is, evidence—provided by Underwood largely tracks her argument. In three paragraphs she attests:

“Starting in January 2016, I undertook to wind up the financial and other business affairs of [the Corporation]. I collected the accounts receivable which were sufficient to retire the accounts payable, and to retire the $100,000 line of credit at Community Bank which was secured by collateral posted by Mark Pucci and [Stone] in the amount of $50,000 each. I also negotiated termination of the lease without consequence to [the Corporation], thereby eliminating a future and continuing liability on the order of $120,000. I also took other requisite action necessary to wind up the financial affairs of [the Corporation] in order that third-party creditors were paid and customer orders were fulfilled and paid for.

I devoted substantial time and effort without which the company would not have recovered the outstanding accounts receivable or been able to make payment for goods and services rendered to the company by its vendors. As a result of my efforts and services, [the] Corporation has fulfilled its obligations to the bank, customers and creditors. Through my efforts, the company was able to collect the cash necessary to pay off the $100,000 line of credit and retire it before it expired. The collateral in the amount of $100,000 was returned to Mark Pucci and to [Stone] by Community Bank.

I did not draw a salary for the time spent winding down the operations of the company. I invoiced the company for my time. I kept track of my time and billed it at an hourly rate of $68.75 which rate was derived from my annual income at [the Corporation]. From January of 2016 through December 31, 2016, I expended 970 hours on [corporate] business winding up and closing the company. This time is reflected on the June 26, 2017 invoice . . . .

From January 1, 2017, through July 14, 2017, I expended another 140 hours of time devoted to [the Corporation]. The hours expended in actuality far exceed the amount which was charged to [the Corporation] in the course of the dissolution. This time is also reflected on the June 26, 2017 invoice. The two entries total $76,312.50.” (Underwood Decl., ¶¶ 2-5.)

The invoices Underwood submits in support of her claim provide:

“970 Hours from January 1, 2016 – December 31, 2016 @ $68.75/hour”

“140 hours from January 1, 2017 – July 14, 2017 @ $68.75/hour”

Pucci objects to Underwood’s reimbursement claim. He contends Underwood is seeking a “huge salary for unspecified work . . . .” (Pucci Response Brief 2:5.) He asserts she failed to “provide any accounting . . . .” (Pucci Response Brief 2:8.) He also argues Underwood’s claim is “unsupported by sufficient evidence to credibly evaluate said wage request.” (Pucci Response Brief 2:10-11.)

Pucci specifies Underwood should be “required to submit a detailed accounting of what tasks were done and when, and how long it took, in a time/billing statement itemizing this work.”[4] (Pucci Response Brief 2:14-15.) He believes an average of 20 hours allegedly expended by Underwood is undermined by the evidence before the court. (Pucci Response 2:19.)

The court agrees with Pucci. Underwood has the burden of demonstrating her entitlement to “reimbursement” for the effort she expended on the Corporation’s behalf. Underwood’s evidence is generalized and vague. On this record, the court cannot determine the tasks undertaken by Underwood (other than her generalized statement) and the need for the significant amount of time expended on such tasks were required for winding up the affairs of the Corporation. Despite having indicated in her declaration that she took “track of her time,” she has not submitted any documentary evidence to support the substantial number of hours expended. Without question, no corporation would pay a claim of $76,312.50 as presented here.

While Underwood provided some level of services on behalf of the Corporation, at trial, Underwood has failed to demonstrate an entitlement to $76,312.50. The court cannot determine the hourly rate claimed or the hours expended are reasonable as a charge to the Corporation. Moreover, the paucity of evidence does not allow the court to modify the claim to allow it to some extent. That is, on this evidence, it would be arbitrary to determine through Underwood’s general narrative she is entitled to any particular level of compensation for her services. The court cannot assign some random value to the services that are not sufficiently described with any particularity; the claim fails for a lack of sufficient evidence.

That Underwood chose to describe her claim with generalities supports Pucci’s objection. For example, it appears Underwood’s effort to pay off the $100,000 line of credit (after collecting sufficient receivables) consisted of a four-sentence letter submitted with the amount due. (Rognlien Decl. in Response to Underwood Brief, Ex. 6.) (The court sustained Underwood’s objection to Pucci’s attempt to submit into evidence several emails on the lease negotiations. Therefore, such evidence is not before the court.)

The court denies $76,312.50 of reimbursement claimed by Underwood. The court finds Underwood has not met her burden of demonstrating entitlement to the reimbursement. (See Evid. Code § 412.)

Pucci’s Reimbursement Claim

Pucci has requested reimbursement “for the $18,131.65 expenses Pucci personally incurred in selling” the watches and tape on behalf of the Corporation. (Pucci Opening Brief 8:8-9.)

The parties agreed through counsel on February 12, 2016—in advance of Pucci incurring any expenses—Pucci would be reimbursed for expenses he incurred on behalf of the Corporation by taking possession of the inventory and fulfilling orders for the product. Pucci specifically identified several categories of expenses he would incur such as storage, shipping materials, a part-time “person to handle phone calls, emails and shipping (including Taxes weekly),” shipping costs and an alarm. (Harshman Decl., Ex. 1.) Absent from Pucci’s request for reimbursement is a claim for services he may have provided. (It is clear Pucci did provide some services to the Corporation from the accounting of sales he presented.)

Underwood agreed to Pucci’s proposal concerning expenses incurred so long as “the expenses are properly accounted for by your client and timely reported.” (Harshman Decl., Ex. 1.)

On August 22, 2017, Pucci filed and served on Underwood and Stone his Declaration of Michael Pucci re Accounting of Glovebrush Corporation Inventory (the Accounting). (RJN, Ex. 5, Ex. C, p. 5-7, 15-16.) The Accounting disclosed Pucci’s $18,131.65 reimbursement request and the detailed description of the cost incurred, a description of the expense and the date Pucci incurred the expense. The back up provided reflects Pucci paid $18,131.65. (RJN, Ex. 5, Ex. C, p. 7, 16.) [8,635.13 plus 9,499.52 equals 18,131.65.]

Underwood does not specifically object to any particular item for which Pucci claims he is entitled to reimbursement. She argues the sales Pucci made were minimal compared to the expenses. Underwood also blames Pucci for the Corporation having assets Pucci asserts are “useless and valueless.” (Underwood Closing Brief 8:28.) Underwood concludes: “If Michael Pucci is entitled to be reimbursed for costs, Debra Underwood is entitled to expenses that she has incurred as well as her time and efforts.” (Underwood Closing Brief 9:1-2.)

The court is not persuaded by Underwood’s position on Pucci’s reimbursement. First, Underwood agreed to reimburse Pucci for the specific categories of expenses on February 12, 2016. Underwood has not identified any expense for which she did not agree to reimburse Pucci. Second, that the inventory is now valueless has more to do with the passage of time, the parties’ litigation tactics, and the parties’ inability to resolve matters without judicial resources. As with the settlement proceeds, the inventory belongs to the Corporation. The Corporation allowed the inventory to age; the fault of the aged inventory does not all fall on Pucci. Third, there is no dispute the expenses incurred for sales of both watches and tape resulted in a net gain to the Corporation.

Finally, the circumstances of Pucci’s reimbursement are entirely different than those of Underwood. Pucci did not charge for his time—he seeks reimbursement for actual out-of-pocket expenses. Moreover, while the court recognizes Underwood provided services to the Corporation, Underwood failed to meet her burden of demonstrating any entitlement to reimbursement on the evidence she submitted in the face of an objection by Pucci. The same cannot be said of Pucci. His claim is documented and specific.

Settlement Proceeds

The parties dispute how the $225,000 settlement proceeds obtained from Defendant Geiger Bros. should be distributed among shareholders. Pucci, focusing solely on Underwood’s wrongful acts, contends, “Justice dictates that Underwood not be able to share in the proceeds of the Geiger settlement.”[5] (Pucci Opening Brief 13:19.) The court disagrees.

Underwood and Pucci both have unclean hands. Underwood and Pucci both breached their fiduciary duties to the Corporation—they “are equally guilty of bad actions . . . .” (Statement of Decision, Pucci RJN, Ex. 1 p. 29.) In fact, as found by Judge Fujie:

“Here, the fact that all of the shareholders of [the Corporation] caused equal amounts of damage to [the Corporation] by breaching their fiduciary duties to the corporation and acting with unclean hands, which actions are attributable to [the Corporation], cancels out any claims [the Corporation]—which is equally owned by [Pucci] on the one hand and [Underwood and Stone] on the other—would otherwise have for said breaches.” (Statement of Decision, Pucci RJN, Ex. 1 p. 33.)

That Pucci managed to assert liability against Defendant Geiger Bros. (for which there was no admission of fault by Defendant Geiger Bros. in its settlement) for aiding and abetting Underwood’s breach is of no moment. Both Pucci and Underwood violated their obligations to the Corporation. Both Pucci and Underwood harmed the Corporation. The settlement proceeds belong to the Corporation; an entity injured at the hands of both Pucci and Underwood.

The court finds under the circumstances here with Pucci and Underwood “equally guilty of bad actions,” it would be fair and equitable to share the $225,000 settlement proceeds in proportion to the parties’ percentage shares in the Corporation.[6]

Attorneys’ Fees Related to Settlement

Pucci has requested reimbursement from the Corporation for attorneys’ fees he actually paid to secure a $225,000 benefit for the Corporation. There is no question the Corporation benefitted from the settlement. In fact, the settlement proceeds are the only cash asset available for the payment of creditors. Absent the settlement funds, the Corporation would have insufficient cash assets to meet its obligations.

Remarkably, Pucci spent $265,000 to recover $225,000.[7] It is curious to the court that Pucci settled the Corporation’s claim against Defendant Geiger Bros. for less than the amount he had spent in litigation. Perhaps, Pucci seeks “some portion of his attorney’s fees to achieve this fund.” (Pucci Response Brief 12:13.) Pucci makes no suggestion of what would be reasonable under the circumstances. Certainly, the benefit received by the Corporation is reduced to the extent it pays Pucci’s legal fees.

The court finds Pucci is entitled to reimbursement of “some portion of his attorney’s fees to achieve” the substantial benefit to the Corporation. Whether the settlement proceeds constitute a common fund for or a substantial benefit to the Corporation, one shareholder secured the proceeds for the benefit of all. Pucci obtained the settlement proceeds to

“ ‘prevent[] an abuse which would be prejudicial to the rights and interests of the

corporation. . . .’ ” (Cziraki v. Thunder Cats, Inc. (2003) 111 Cal.App.4th 552, 558 [quoting Fletcher v. A. J. Industries (1968) 266 Cal.App.2d 313, 324].) Pucci vindicated the Corporation’s right to be free from Defendant Geiger Bros.’ tortious conduct.

To disallow “some portion of his attorney’s fees” would be to secure a benefit to the Corporation and the other shareholders at Pucci’s expense. It would result in a windfall—or unjust enrichment—to those shareholders who paid nothing to secure the corporate benefit. (See Cziraki v. Thunder Cats, Inc., supra, 111 Cal.App.4th at 558.)

The court acknowledges “when a shareholder brings a derivative suit for the true purpose of advancing his or her ‘personal adverse interests,’ neither equitable doctrine [common fund or substantial benefit theory] allows an award of attorney fees.” (Ibid.) Given that the settlement funds came from a third-party Defendant, the court finds Pucci did not advance his personal adverse interests in the litigation.[8] The Corporation received a substantial benefit based on Pucci’s derivative lawsuit. The settlement proceeds “confer[red] upon [Pucci] no individual benefit separate from that received by all of the shareholders.” (See id. at 559.)

The court does not find Baker v. Pratt (1986) 176 Cal.App.3d 370 precludes an award of “some portion of his attorney’s fees” to Pucci here. That the settlement proceeds came from a third-party Defendant distinguishes the facts here.[9] Pucci did not obtain any benefit from Underwood for the Corporation during a dissolution proceeding. Pucci obtained a substantial benefit for the Corporation that will pay corporate obligations and then, to the extent funds remain, will be ratably distributed to shareholders.

The court is not persuaded, as argued by Underwood, Judge Bryant-Deason’s order of December 5, 2016 precludes an award of fees to Pucci here. The relevant portion of the order provides:

“The board of directors of Glovebrush Corporation shall not, directly or indirectly, authorize or pay indemnity of legal fees or expenses incurred by any officer, director or shareholder of Glovebrush Corporation to defend or prosecute this lawsuit, or any claims or cross-claims asserted in this lawsuit, absent a further Order of the Court authorizing such legal fees or expenses.” (Hunter Decl., Ex. D.)

Pucci did not violate the court’s order. He did not cause the Corporation to pay or authorize any legal fees to prosecute the derivative lawsuit against Defendant Geiger Bros. Instead, Pucci is seeking an “Order of the Court authorizing such legal fees or expenses.” (Hunter Decl., Ex. D.) While Pucci could have obtained the court’s authority to pay the legal fees he incurred in litigating the derivative claim against Defendant Geiger Bros. during the pendency of the litigation, he was not required to do so. The court order merely required that before any attorneys’ fees be paid by the Corporation, a court must authorize the payment. Pucci is now seeking that court authorization.

Given that the court finds Pucci is entitled to “some portion of his attorney’s fees,” the court request the parties address the reasonable amount of any attorneys’ fees award under the circumstances here. Should the amount of any award be calculated after all other corporate obligations have been resolved?

CONCLUSION

Based on the court’s resolution of the remaining contested issues in this dissolution, the court orders the parties to meet and confer to draft an appropriate post-judgment order. The court recognizes the parties may agree some reserve funds should be held.

The court sets an OSC re entry of the order for April 9, 2021 at 9:30 a.m. If the parties have submitted a proposed order no later than April 8, 2021 at noon, they need not appear. To the extent the parties are unable to agree on particular provisions for the order, the parties shall provide a form of order with each party’s proposed language and the court will determine the language for its order and interlineate the order as appropriate.

IT IS SO ORDERED.

March 19, 2021

Mitchell L. Beckloff

Superior Court Judge


[1] During the pendency of these proceedings J. Lawrence Stone died. His estate has purported to substitute into these proceedings. The court is unable to locate any order allowing substitution. Underwood’s attorney represents the decedent’s interests are represented through his son, Bruce Stone. (Hunter Decl., 2.) No probate proceeding is identified by the parties. Bruce Stone has not filed any declaration pursuant to Code of Civil Procedure section 377.32, subdivision (a). The parties shall address Bruce Stone’s authority to proceed in this matter on this record at the time of hearing. As Underwood is and Stone was represented by the same attorney, the court generally refers to Underwood and Stone collectively as Underwood.

[2] The $981 difference does not include Tech-Mate mistakenly providing credit to the Corporation for a payment of $3,115.67 in December 2014. Thus, in actuality, the difference in the parties’ positions is just over $4,000. Nonetheless, Tech-Mate has the burden of proof on the claim.

[3] Underwood’s argument in her Closing Trial Brief merely restates the information in her Opening Brief. (Underwood Closing Brief 7:17-8:12.)

[4] As the parties are at trial, the court has considered all of the evidence submitted by the parties on all of their claims.

[5] Of course, Pucci’s position is completely contradictory to his position the Corporation should reimburse him for attorneys’ fees paid in securing the settlement on a common fund or substantial benefit theory.

[6] Of course, a ratable distribution of settlement proceeds completely contradicts Underwood’s position on reimbursement to Pucci of his attorneys’ fees for securing a substantial benefit for the Corporation.

[7] The court agrees with Underwood about such a settlement lacking economic reason. That said, Underwood’s claim if Pucci “[h]ad abided by the order of this Court in the first place, he would have saved $265,000 and he would not have cost Stone and Underwood untold additional defense costs” disregards the benefit Pucci obtained for the Corporation. (Underwood Closing Brief 10:14-16.) Given Underwood’s concession the lawsuits were identical, the notion Underwood and Stone incurred “untold additional defense costs” rings hollow. Moreover, Underwood ignores the only reason the Corporation has any funds to pay its creditors and shareholders is because of the $225,000 settlement proceeds.

[8] While Underwood argues Pucci was advancing his own interests in litigation against Defendant Geiger Bros., she does not otherwise explain her position. (Underwood Opening Brief 12:24; Underwood Closing Brief 10:4-5, 11:12-14.)

[9] As the claims against Underwood were duplicative in the ultimately consolidated action against Underwood and Geiger, the court fails to understand how Underwood incurred additional fees in litigating the original derivative action against her. (Underwood Opening Brief 12:20-23.) Underwood concedes the Geiger Bros. lawsuit was “substantially identical to the first.” (Underwood Opening Brief 13:4.) Accordingly, Underwood’s fees would have been substantially similar to those she would have incurred without the Geiger Bros.’ lawsuit.

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