This case was last updated from Los Angeles County Superior Courts on 11/18/2022 at 06:37:59 (UTC).

BRIAN WILLIAM CORMAN ET AL VS ROGER WILLIAM CORMAN ET AL

Case Summary

On 10/26/2017 BRIAN WILLIAM CORMAN filed a Personal Injury - Other Personal Injury lawsuit against ROGER WILLIAM CORMAN. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judges overseeing this case are SAMANTHA JESSNER and DAVID J. COWAN. The case status is Pending - Other Pending.
Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****1310

  • Filing Date:

    10/26/2017

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Personal Injury - Other Personal Injury

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judges

SAMANTHA JESSNER

DAVID J. COWAN

 

Party Details

Cross Defendants, Plaintiffs and Appellants

CORMAN BRIAN WILLIAM

CORMAN ROGER MARTIN

Defendants and Cross Plaintiffs

CORMAN ROGER WILLIAM

NEW HORIZONS PICTURE CORPPORATION

CORMAN FAMILY INVERSTMENT PARTNERSHIP

CORMAN JULIE

CORMAN CATHERINE A.

CORMAN MARY T.

Defendant, Respondent and Cross Plaintiff

CORMAN JULIE

Attorney/Law Firm Details

Plaintiff Attorneys

BRONSHTEYN YASHA

KATZENSTEIN ANDREW MICHAEL

SMITH ANDREW

Defendant Attorneys

HART ALLISON SUE

JOHNSTON CAROL A. ESQ.

SINGER MARTIN DORI

WARNER JULIAN ROBERT

WASSERSTEIN CHARLOTTE SOPHIA

Cross Plaintiff Attorneys

COHEN JERYLL SUE

CHOW CAROL

WYLE GERALDINE A

Cross Defendant Attorneys

HANLE SEAN PATRICK

RUMMEL BLAKE

WEINGARTEN ALEX M. ESQ.

 

Court Documents

Appeal - Notice Court Reporter to Prepare Appeal Transcript - APPEAL - NOTICE COURT REPORTER TO PREPARE APPEAL TRANSCRIPT B617915; NA12/27/21

11/4/2022: Appeal - Notice Court Reporter to Prepare Appeal Transcript - APPEAL - NOTICE COURT REPORTER TO PREPARE APPEAL TRANSCRIPT B617915; NA12/27/21

Appeal - Notice Vacating Notice of Default - APPEAL - NOTICE VACATING NOTICE OF DEFAULT NOA 12/27/21 B317915

10/7/2022: Appeal - Notice Vacating Notice of Default - APPEAL - NOTICE VACATING NOTICE OF DEFAULT NOA 12/27/21 B317915

Appeal - Notice of Default Issued - APPEAL - NOTICE OF DEFAULT ISSUED RESP RPT FEE NOA 12/27/21 B681310

9/30/2022: Appeal - Notice of Default Issued - APPEAL - NOTICE OF DEFAULT ISSUED RESP RPT FEE NOA 12/27/21 B681310

Declaration - DECLARATION OF MARY CORMAN RE MEDICAL CONDITION IN SUPPORT OF MARY CORMAN'S OPPOSITION TO MOTIONS TO COMPEL THE DEPOSITION AND RELATED DOCUMENT PRODUCTION OF MARY CORMAN

10/16/2018: Declaration - DECLARATION OF MARY CORMAN RE MEDICAL CONDITION IN SUPPORT OF MARY CORMAN'S OPPOSITION TO MOTIONS TO COMPEL THE DEPOSITION AND RELATED DOCUMENT PRODUCTION OF MARY CORMAN

Brief - BRIEF (SUPPLEMENTAL) RE: MOTIONS TO COMPEL DEPOSITION OF MARY CORMAN AND MARY CORMAN'S MOTION FOR PROTECTIVE ORDER

1/28/2019: Brief - BRIEF (SUPPLEMENTAL) RE: MOTIONS TO COMPEL DEPOSITION OF MARY CORMAN AND MARY CORMAN'S MOTION FOR PROTECTIVE ORDER

Notice - NOTICE OF FILING UNDER SEAL PURSUANT TO HIPAA MARY CORMAN'S RESPONSE TO ROGER M. AND BRIAN CORMAN'S SUPPLEMENTAL BRIEF RE MOTION TO COMPEL MAY CORMAN'S DEPOSITION AND MOTION FOR PROTECTIVE OR

1/28/2019: Notice - NOTICE OF FILING UNDER SEAL PURSUANT TO HIPAA MARY CORMAN'S RESPONSE TO ROGER M. AND BRIAN CORMAN'S SUPPLEMENTAL BRIEF RE MOTION TO COMPEL MAY CORMAN'S DEPOSITION AND MOTION FOR PROTECTIVE OR

Opposition - OPPOSITION TO MOTION TO COMPEL CATHERINE CORMAN'S ANSWERS TO DEPOSITION QUESTIONS

4/5/2019: Opposition - OPPOSITION TO MOTION TO COMPEL CATHERINE CORMAN'S ANSWERS TO DEPOSITION QUESTIONS

Motion to Compel - MOTION TO COMPEL CATHERIN A. CORMAN'S ANSWERS TO DEPOSITION QUESTIONS AND FOR SANCTIONS AGAINST CATHERIN A. CORMAN AND HER COUNSEL

4/5/2019: Motion to Compel - MOTION TO COMPEL CATHERIN A. CORMAN'S ANSWERS TO DEPOSITION QUESTIONS AND FOR SANCTIONS AGAINST CATHERIN A. CORMAN AND HER COUNSEL

Minute Order - MINUTE ORDER (HEARING ON MOTION FOR ORDER RE APPROVE SALE OF THE FILM LIBRA...)

7/21/2022: Minute Order - MINUTE ORDER (HEARING ON MOTION FOR ORDER RE APPROVE SALE OF THE FILM LIBRA...)

Order - ORDER RULING ON SPECIAL PURPOSE TRUSTEE'S PETITION FOR INSTRUCTIONS RE: SALE OF FILM LIBRARY

7/21/2022: Order - ORDER RULING ON SPECIAL PURPOSE TRUSTEE'S PETITION FOR INSTRUCTIONS RE: SALE OF FILM LIBRARY

Minute Order - MINUTE ORDER ENTERED: 2018-07-10 00:00:00

7/10/2018: Minute Order - MINUTE ORDER ENTERED: 2018-07-10 00:00:00

Appeal - Ntc Designating Record of Appeal APP-003/010/103

5/4/2022: Appeal - Ntc Designating Record of Appeal APP-003/010/103

Appeal - Ntc Designating Record of Appeal APP-003/010/103 - APPEAL - NTC DESIGNATING RECORD OF APPEAL APP-003/010/103 RESPONDENT'S NOTICE DESIGNATING RECORD

5/11/2022: Appeal - Ntc Designating Record of Appeal APP-003/010/103 - APPEAL - NTC DESIGNATING RECORD OF APPEAL APP-003/010/103 RESPONDENT'S NOTICE DESIGNATING RECORD

Appeal Document - APPEAL DOCUMENT BC318006; NA12/27/21

3/28/2022: Appeal Document - APPEAL DOCUMENT BC318006; NA12/27/21

Appeal Document - APPEAL DOCUMENT BC318006; NA12/27/21

3/28/2022: Appeal Document - APPEAL DOCUMENT BC318006; NA12/27/21

Minute Order - MINUTE ORDER (STATUS CONFERENCE)

4/14/2022: Minute Order - MINUTE ORDER (STATUS CONFERENCE)

Demurrer - with Motion to Strike (CCP 430.10)

6/7/2019: Demurrer - with Motion to Strike (CCP 430.10)

Request for Judicial Notice

6/7/2019: Request for Judicial Notice

612 More Documents Available

 

Docket Entries

  • 12/07/2022
  • Hearing12/07/2022 at 08:30 AM in Department 1 at 111 North Hill Street, Los Angeles, CA 90012; Order to Show Cause Re: Status of Appeal

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  • 11/04/2022
  • DocketAppeal - Notice Court Reporter to Prepare Appeal Transcript (B617915; NA12/27/21); Filed by Clerk

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  • 10/07/2022
  • DocketAppeal - Notice Vacating Notice of Default (NOA 12/27/21 B317915); Filed by Clerk

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  • 09/30/2022
  • DocketAppeal - Notice of Default Issued (RESP RPT FEE NOA 12/27/21 B681310); Filed by Clerk

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  • 07/21/2022
  • Docketat 08:30 AM in Department 1, David J. Cowan, Presiding; Hearing on Motion for Order (Re Approve Sale of the Film Library in case SP007923) - Held - Motion Denied

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  • 07/21/2022
  • DocketOrder (Ruling on Special Purpose Trustee's Petition for Instructions Re: Sale of Film Library); Filed by Clerk

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  • 07/21/2022
  • DocketMinute Order ( (Hearing on Motion for Order Re Approve Sale of the Film Libra...)); Filed by Clerk

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  • 07/15/2022
  • Docketat 08:30 AM in Department 1; Hearing on Motion for Order (Re Approve Sale of the Film Library in case SP007923) - Not Held - Continued - Court's Motion

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  • 05/20/2022
  • DocketAppeal - Reporter Appeal Transcript Process Fee Paid; Filed by Clerk

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  • 05/20/2022
  • DocketAppeal - Reporter Appeal Transcripts Deposit Paid (Paid for Roger W. Corman & Julie Corman); Filed by Clerk

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822 More Docket Entries
  • 12/14/2017
  • Docketat 08:30 AM in Department 74; Unknown Event Type - Held - Motion Granted

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  • 12/14/2017
  • DocketMinute order entered: 2017-12-14 00:00:00; Filed by Clerk

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  • 12/14/2017
  • DocketMinute Order

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  • 12/12/2017
  • DocketNotice of Related Cases

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  • 12/12/2017
  • DocketNotice of Related Case; Filed by Roger William Corman (Defendant)

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  • 11/15/2017
  • DocketNotice of Related Cases

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  • 11/15/2017
  • DocketNotice of Related Case; Filed by Brian William Corman (Plaintiff); Roger Martin Corman (Plaintiff)

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  • 10/26/2017
  • DocketComplaint; Filed by Brian William Corman (Plaintiff); Roger Martin Corman (Plaintiff)

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  • 10/26/2017
  • DocketCOMPLAINT

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  • 10/26/2017
  • DocketSUMMONS

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Tentative Rulings

Case Number: ****1310 Hearing Date: July 21, 2022 Dept: 1

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES

In re:

THE PACIFIC TRUST

Case Nos.: SP007923; related cases ****1310 and 17STPB07675

[TENTATIVE] RULING ON SPECIAL PURPOSE TRUSTEE’S PETITION FOR INSTRUCTIONS RE: SALE OF FILM LIBRARY

Date: July 21, 2022

Time: 8:30 A.M.

Dept.: 1

BACKGROUND

On February 7, 2020, Roger W. Corman and Julie Corman (the "Parents"), Catherine Corman and Mary Corman (the "Daughters"), and Brian W. Corman and Roger M. Corman (the "Sons") entered into a settlement—the Preliminary Deal Point Memorandum ("PDPM”)—to resolve disputes over the parties’ entangled interests in trusts, entities, and properties. Phase One of the PDPM provides for separation of ownership interests of the Parents, Sons and Daughters in three properties and termination of pending litigation. Phase Two of the PDPM addresses the disposition of the Film Library (“the Library”), an asset of La Mesa Films LLC.[1] However, the parties have not agreed on specific terms for the sale or disposition of the Library. The PDPM provides that the undersigned shall “participate as a settlement officer in the negotiation of the final long-form agreement, and . . . have discretion to assist the Parties in reaching the final terms, as necessary.”

On July 29, 2021, the Court issued an OSC Re: Why Special Trustee Goldman Sachs Trust Company N.A. should not be ordered to conduct a private sale of the Library.

On September 3, 2021, the Parents filed a Motion to Enter Judgment Pursuant to the PDPM. The Daughters filed a Joinder to the Parents' Motion to Enter Judgment.

On September 16, 2021, the Daughters filed a Petition to Appoint Special Trustee of the Pacific Trust and Direct Sale of Assets, requesting the Court recognize a vacancy in the position of trustee with respect to management of La Mesa LLC and the Library and appoint a Special Purpose Trustee to administer those assets, including by selling the Library if appropriate.

On October 27, 2021, the Court issued a Final Ruling on Motions to Enter Judgment, OSC Re: Sale by Goldman Sachs, and Petition to Appoint Special Trustee. As relevant here, the Court appointed James W. Sullivan as Special Purpose Trustee (SPT) to administer the assets of La Mesa LLC. The Court also discharged the OSC Re: Sale by Goldman Sachs.

On November 5, 2021, the Sons filed a Motion for Reconsideration of the Final Ruling.

On December 7, 2021, the Court issued a ruling granting in part and denying in part the Motion for Reconsideration and filed an Amended Final Ruling. The Court did not modify its appointment of SPT Sullivan.

On December 28, 2021, the Sons filed a notice of appeal from the Amended Final Ruling.

On December 29, 2021, SPT Sullivan filed an Ex Parte Application for Orders (1) Approving Proposed Plan of Action, (2) Approving Hiring of Consulting Expert Dan Marks, (3) Approving Request for Proposal to Agent Candidates, (4) Directing Turnover of Books and Records to SPT Sullivan, and (5) Directing SPT Sullivan to Act While Appeal is Pending.

On January 20, 2022, the Court issued its Final Ruling on SPT Sullivan’s Ex Parte Application. The Court authorized SPT Sullivan to take “initial steps to market the Library while Roger W. is alive and capable of assisting” in these efforts notwithstanding the Sons’ appeal of the December 7, 2021 Amended Final Ruling.

On June 22, 2022, SPT Sullivan filed a Petition for Instructions Directing Sale of the Film Library seeking authorization to sell the Library notwithstanding the Sons’ appeal.

On June 30, 2022, the Sons filed an Objection to the Petition for Instructions opposing a sale of the Library or LLC pending appeal. The Daughters filed a Response to the Petition for Instructions generally supporting a sale of the Library or LLC pending appeal.

On July 5, 2022, the Parents filed a Response to the Petition for Instructions and Joinder to the Daughters’ Response to the Petition, again generally supporting a sale.

On July 7, 2022, SPT Sullivan filed a Reply to the Sons’ Objection. The Parents filed a separate Reply to the Sons’ Objection.

On July 13, 2022, the Sons filed a Sur-Reply to SPT Sullivan’s Reply.

DISCUSSION

Applicable Law

Ordinarily, “an appeal [under Prob. Code sec. 1300 et seq.] stays the operation and effect of the judgment or order” appealed. (Prob. Code sec. 1310(a).) But the probate court can order a trustee to act notwithstanding the appellate stay in order to "prevent[] injury or loss to a person or property." (Prob. Code sec. 1310(b) (“Notwithstanding that an appeal is taken from the judgment or order, for the purpose of preventing injury or loss to a person or property, the trial court may direct the exercise of the powers of the fiduciary . . . as if no appeal were pending.”)) Moreover, “[a]ll acts of the fiduciary pursuant to the directions of the court made under this subdivision are valid, irrespective of the result of the appeal.” (Prob. Code sec. 1310(b).)

This rule is "narrowly construed to apply only to the exceptional case in which imminent injury or loss to a person or property is clear," but "[m]onetary loss may satisfy this standard" in an appropriate case. (Sterling v. Sterling (2015) 242 Cal.App.4th 185, 199.) Relief under Section 1310(b) may “depriv[e] a litigant of his or her right to appeal” because the trustee’s actions are “valid, irrespective of the result of the appeal.” (East Bay Regional Park Dist. v. Griffin (2016) 2 Cal.App.5th 734, 743-744.) But the Legislature has recognized that “some situations present such an extraordinary risk of injury or loss that they require immediate intervention by the probate court to make orders which can be implemented immediately despite the filing of an appeal, and regardless of the result on appeal." (Kane v. Superior Court (1995) 37 Cal.App.4th 1577, 1586 (interpreting earlier version of Section 1310(b).)) To avoid unduly impacting a litigant’s appeal, Section 1310(b) is applicable only when "clearly justified by a showing of risk of imminent injury or loss.” (Sterling, supra, 242 Cal.App.4th at 199.)

Application to Facts

Prior Authorization to Begin Marketing Library Pending Appeal

On January 20, 2022, the Court authorized SPT Sullivan to take “initial steps to market the Library while Roger W. is alive and capable of assisting” in these efforts pending the Sons’ appeal of the Amended Final Ruling. The Court found “a risk of loss to the Trust if a Plan of Action [to gather information] is stalled pending appeal” due to Roger W.’s advanced age and knowledge of the films comprising the Library. The Court noted that Roger W.’s death “would prevent him from offering advice regarding the Library or offering his assistance in a potential sale or exploitation of films.”

The Sons argued it was unnecessary to immediately sell the Library. The Court rejected this argument because SPT Sullivan was “not seeking an order authorizing the sale of the Library—he [was] seeking permission to . . . provide an informed recommendation regarding La Mesa LLC and the Library” by soliciting “proposals from various agents” and “input from ‘Interested Parties’ regarding La Mesa LLC,” and by obtaining and reviewing “La Mesa LLC’s books and records.” The Court found SPT Sullivan was requesting permission “to gather information and recommendations” concerning La Mesa LLC pending appeal and explained that information gathering would not be “‘permanent’ or irreversible,” unlike a sale of the Library or LLC.

Thus, the Court concluded the “Sons’ arguments regarding whether it is necessary to sell the Library pending appeal are premature” before SPT Sullivan requests permission for a sale. In particular, the Court pointed out that SPT Sullivan “intend[ed] to file a Petition for Instructions with his recommendation for the LLC and Library to which the Sons would be able to respond,” and so the “Court [could] at that time—if the appeal is still pending and Sullivan proposes a sale of the Library or LLC—consider whether an exception to the appellate stay is necessary for a sale to proceed.”

Request for Authorization to Sell Library or LLC Pending Appeal

SPT Sullivan has now filed this Petition for Instructions seeking permission to proceed with a sale of the Library. Hence, the Court can now “consider whether an exception to the appellate stay is necessary for a sale to proceed.”

SPT Sullivan argues the “risk of harm” from a sale is “insignificant in relation to the risk of harm to the estate if the action were not taken” because a sale “is likely to generate considerable proceeds” while delays "will result in loss to the Trust." More specifically, SPT Sullivan asserts the streaming market is strong right now and contends the Trust should exploit the Library while the market is doing well. SPT Sullivan also contends buyers may be interested in input or contributions from Roger W. while he is still alive. The Court considers each argument in turn.

Strength of Streaming Market

First, SPT Sullivan has not made an adequate “showing of risk of imminent injury or loss.” SPT Sullivan asserts the streaming market is currently strong, but has not offered grounds to conclude the market will “imminent[ly]” falter, if not strengthen, in the near future. On the contrary, expediting the sale of the Library could harm the Trust if the streaming market continues to grow pending appeal. Brendan Houlihan, the Sons’ "consulting expert . . . in connection with the potential sale of La Mesa Pictures LLC," alleges the “streaming market continues to expand and improve, and it is equally, or more, likely that the value of assets such as the Library have improved over the last several years and will continue to improve as the streaming industry continues to grow.” (Houlihan Decl., para. 20.)

SPT Sullivan generally does not address Mr. Houlihan’s market analysis. SPT Sullivan instead argues the sale would not be excessively rushed because the agent chosen to market the Library “will not shortcut the process and will take many of the steps described by Mr. Houlihan, as deemed necessary in his or her discretion.” (SPT Reply, p. 9-10.) But it is not necessary to sell the Library pending appeal if (as Mr. Houlihan asserts) the streaming market will stabilize or continue to grow pending appeal, increasing the value of the Library. (Houlihan Decl., para. 20 (“It is equally, or more, likely that the value of assets such as the Library have improved over the last several years and will continue to improve as the streaming industry continues to grow.”))

Strikingly, SPT Sullivan’s consulting expert, Dan Marks, does not contend the streaming market will weaken pending appeal. Mr. Marks asserts the “value and size of the global streaming market has increased very significantly” between 2017 and 2022 and asserts the “market is strong for IP sales enabling re-makes and the development of franchises.” (Marks Decl., para. 4-5.) Mr. Houlihan’s testimony predicting market growth pending appeal is therefore unrebutted, and the Court has no evidence suggesting the streaming market would falter during the Sons’ appeal.[2] Based on the foregoing, the parties have not established an “imminent” risk that the streaming market will weaken pending appeal. The evidence submitted indicates the streaming market could strengthen or stabilize during the Sons’ appeal; in either case, there is no “imminent risk of injury or loss” supporting an expedited sale pending appeal.

Value of Input from Roger W. Corman

Second, SPT Sullivan has not identified potential benefits of Roger W.’s participation in marketing the Library. The Court previously found “substantial risk that the Library will lose value . . . if Roger W. passes away pending appeal without the Trust beginning efforts to market the Library,” referencing “Roger W’s extensive involvement in creating the films in the Library” and selling the New Horizons Film Library in 2018. In selling the New Horizons Film Library, Roger W. agreed to “serve as Executive Producer on any remakes, sequels or prequels of the motion pictures,” “participate in minimum of thirty (30) hours of interview footage for documentary,” and provide a “minimum of thirty (30) hours of promotional services . . . to promote the New Horizons Film Library.” The Court observed that the Trust could not “offer[] promotional services or production work by Roger W. or otherwise leverag[e] his experience with these particular films” if Roger W. passed away pending appeal.

While the Court previously found a risk that Roger W.’s death pending appeal would impact the value or marketability of the Library, and accordingly authorized SPT Sullivan to take initial steps to market it, the Court is unpersuaded this risk supports an order to sell the Library pending appeal. SPT Sullivan, the Daughters, and the Parents have not identified any meaningful contributions Roger W. has made or could make to assist in marketing the Library. SPT Sullivan alleges Roger W. is “available and may be willing to assist in the marketing of the Film Library,” but generally does not indicate how he could assist. (Petition, para. 34.) Roger W. similarly asserts he is “available as a resource for the Special Purpose Trustee” to “provide recommendations . . . to assist with the marketing and sale of the Library,” but it is again unclear what services Roger W. would provide. Moreover, there is no evidence Roger W. has in fact assisted SPT Sullivan in understanding or marketing the Library to date. Willingness to assist SPT Sullivan is not significant without some explanation of the assistance Roger W. is expected to provide.

On this topic, SPT Sullivan’s Petition identifies several tasks he could undertake to “maximize the value of the Film Library,” including (1) “contact[ing] third parties that may be exploiting library films” or “may facilitate that exploitation” to investigate “the basis for the exploitation”; (2) obtaining “information from the former assistant (Germaine Simiens)” regarding the Library; and (3) reviewing LLC documents and “meet[ing] with Roger [W.] to try and develop chain-of-title or leads on chain-of-title documents.” (Petition, para. 40.) Of all these value-increasing tasks, Roger W. is only potentially expected to assist in developing the chain of title for films in the Library.

But the Daughters and Parents are opposed to efforts to reconstruct chains of title for films in the Library. (Parents’ Reply, p. 3 (“To suggest that an interview of Roger W. would lead to the development of a comprehensive chain of title or chain of title documents is ludicrous on its face. . . . Most importantly, . . . the development of a comprehensive chain of title is not necessary to a sale of the Film Library.”); Daughters’ Reply, p. 2-3 (Daughters “believe that any continued effort to develop chain-of-title documents is cost prohibitive and will not return value.”)) Indeed, SPT Sullivan agrees recreating chains of title “does not seem cost-effective” and asserts “[g]aps in the record are almost certain even after diligent work to reconstruct” chains of title. (Petition, para. 37 (“recreating the chain-of-title will be expensive and there is a good possibility it will never result in a comprehensive record.”))

Critically, SPT Sullivan does not identify any other anticipated contribution from Roger W. in marketing the Library. SPT Sullivan instead analogizes the sale of this Library to the 2018 sale of the New Horizons Film Library, asserting Roger W.’s “availability to consult with the purchasers of the New Horizons Film Library ‘was a material point’ in the transaction.” (SPT Reply, p. 8.) SPT Sullivan argues there “is no reason why the same would not be the case for the instant Film Library.” (SPT Reply, p. 8.) As support, Mr. Marks (SPT Sullivan’s consulting expert) alleges Roger W. agreed “to provide promotional footage and services, and potentially to serve as an Executive Producer [as] part of the New Horizons Film Library sale in 2017.” (Marks Decl., para. 9.) “[I]f offered again,” he alleges these services “might also be a selling point for a purchaser of the Film Library.” (Marks Decl., para. 9.)

On the other hand, Mr. Houlihan (the Sons’ consulting expert) asserts prospective buyers’ interest in the Library likely will not depend on Roger W.’s involvement in the sale. Mr. Houlihan alleges “prospective buyers are unlikely to base a decision [to purchase the Library] on the speculative participation of Mr. Corman, and instead will prioritize acquiring the rights to films that they could then market themselves or license to distributors, streaming services, or other third parties.” (Houlihan Decl., para. 20.) “[G]iven Mr. Corman's age,” Mr. Houlihan contends “a reasonable buyer looking to exploit the Film Library long-term is not likely to buy such an asset based on Mr. Corman's availability in the short term." (Houlihan Decl., para. 20.) As a more general observation, Mr. Houlihan alleges film libraries are typically sold “without any contemplated participation of the original creative teams.” (Houlihan Decl., para. 20.) Hence, there is at least conflicting evidence concerning buyers’ potential interest in Roger W.’s promotional materials or service as an executive producer.

Moreover, Mr. Marks merely alleges buyers “might” be interested in these services “if offered again.” (Marks Decl., para. 9.) Roger W. has not actually indicated he is willing to promise to film hours of promotional footage or serve as an executive producer. (Parents’ Reply, p. 2-4.) The Parents state more generally that they are "available as a resource . . . in [SPT Sullivan's] efforts to market and sell" the Library and "can provide recommendations to other individuals . . . to assist with the marketing and sale." (Parents’ Reply, p. 2.) The Court is concerned whether, at the age of 96, Roger W. is still willing to serve as an executive producer or prepare promotional materials, or merely seeks to “assist with the marketing and sale” of the Library in other unidentified ways.

Risk of Imminent Injury or Loss

Based on the foregoing, an order under Section 1310(b) would not be "clearly justified by a showing of risk of imminent injury or loss.” (Sterling, supra, 242 Cal.App.4th at 199.) SPT Sullivan’s Petition and the supporting Replies filed by the Parents and Daughters indicate only that the streaming market is strong and that Roger W. is available to assist in marketing the Library. This does not “clearly” establish a “risk of imminent injury or loss” for two reasons.

First, the Court has not been offered evidence suggesting LLC or Library will lose value pending the Sons’ appeal due to a downturn in the streaming market. Mr. Marks does not contend the streaming market will weaken pending appeal; Mr. Houlihan asserts the streaming market will “continue[] to expand and improve.” The Parents contend the market will weaken as the COVID-19 pandemic fades, but have not provided evidence tying the streaming market to the pandemic (or evidence the pandemic is likely to fade pending appeal). Second, it is not clear just what contributions would be lost if Roger W. passed away pending appeal, and hence unclear how his death would affect the value of the Library or LLC. The parties supporting a sale agree that it would be cost-prohibitive and unproductive for Roger W. to reconstruct chains of title for films in the Library. Moreover, it is unclear whether Roger W. is still willing to film promotional footage or serve as an executive producer at the age of 96, and there is conflicting evidence regarding interest in such services. (Marks Decl., para. 9; Houlihan Decl., para. 20.)

All other cases applying Section 1310(b) involve a clear “risk of imminent injury or loss.” In McElroy, supra, 104 Cal.App.4th at 557, the probate court ordered a conservator to take certain actions set forth in a substituted judgment despite an appeal from that judgment, finding “immediate action was necessary to avoid the tax liabilities the estate would unnecessarily incur if the conservatee died” pending appeal. The Court of Appeal affirmed, finding the “risk of harm . . . in allowing the conservator to take the requested actions” was “insignificant” relative to the “risk of harm to the estate” from “potential tax liability if the conservatee were to die before the actions were to be taken,” noting the age and failing health of the conservatee.” (Id.)

Here, unlike in McElroy, the parties have not shown how Roger W.’s death pending appeal will affect the value of the Library or LLC. In McElroy, there was a “clear need to protect the conservatee's estate and beneficiaries from adverse tax consequences which would flow from the conservatee's death before the litigation ended.” (Id. at 555 fn. 10.) There was a cognizable risk the conservatee would die pending appeal due to her “age and failing health.” (Id. at 557.) Assuming there is a risk that Roger W. will die pending appeal, the parties have not established a concrete risk to the Trust because they have not identified valuable marketing contributions that would be lost upon his death. Moreover, while the conservatee’s death pending appeal in McElroy would impact the value of her own estate, Roger W. no longer has any ownership interest in the Film Library. Hence, Roger W. could not be damaged by depreciation in the value of the Library pending appeal (whether due to his death or market shifts), further distinguishing this case from McElroy.

In Sterling, supra, 242 Cal.App.4th at 199, a “trust owned a $2 billion-asset facing an imminent ‘death spiral’ absent its sale”—specifically, that asset was the Los Angeles Clippers basketball team. (Id.) The “evidence showed the potential loss to be at least $400 million” if the team was not sold promptly because the trust had received an offer to purchase for $2 billion purchase while the “next best offer was $400 million less.” (Id.) Moreover, the “NBA was likely to auction” the team if the trust did not accept the initial offer, and an auction “would not likely produce a high bid.” (Id.)

Unlike in Sterling, the evidence here does not establish a specific, imminent risk to the Trust. The Court was not provided evidence that the streaming market is likely to suffer pending appeal. The Court was not provided sufficient evidence regarding impairment of the value of the Library or LLC from Roger W.’s death. In Sterling, there was a demonstrable risk that the asset would imminently lose “at least” 20% of its value if it was not ordered sold pending appeal, as the trust would be forced to either accept the “next best offer [for] $400 million less” or auction the team. Here, unlike in Sterling, the Library or LLC could meaningfully appreciate in value during the Sons’ appeal if the streaming market continues to grow.

The Court is not now ordering a sale pending appeal, and therefore does not need to determine whether it has authority to order SPT Sullivan to sell the Library or LLC. The Court will return to this issue, if necessary, following resolution of the Sons’ appeal of the Amended Final Ruling appointing SPT Sullivan. If the Sons’ appeal is successful, this in all probability moots the issue of whether SPT Sullivan can be ordered to sell the Library or LLC. If the Sons’ appeal is unsuccessful and SPT Sullivan again seeks permission to sell the Library or LLC, the Court will consider the parties’ arguments at that time. It is unnecessary to resolve the issue now because the parties have not shown an “imminent risk of injury or loss” pending appeal.

CONCLUSION

Special Purpose Trustee Sullivan’s Petition for Instructions is DENIED.

Corman Sons to give notice of this Order.

DATED: July , 2022

DAVID J. COWAN

Judge of the Superior Court


[1] The Sons’ and Daughters’ four respective subtrusts of the Pacific Trust are the members of the La Mesa Films LLC. In effect, the LLC is an asset of the Pacific Trust.

[2] The Parents argue the streaming market will likely weaken as “the pandemic and its consequences wane,” but do not address any other factors potentially affecting the streaming market. Moreover, no competent evidence was provided to support the conclusion that the “pandemic and its consequences” are likely to “wane” pending the Sons’ appeal, or that this “waning” is likely to affect the streaming market. The argument is speculative.



Case Number: ****1310 Hearing Date: January 20, 2022 Dept: 1

Tentative Ruling

Judge David J. Cowan

Department 1


Hearing Date: Thursday, January 20, 2022

Case Name: The Pacific Trust dated June 30, 1978; Brian William Corman, et al. v. Roger William Corman, et al.; The Corman Family Qualified Property Residence Successor Trusts

Case No.: SP007923; ****1310; 17STPB07675

Motions: Disqualify Counsel for Special Purpose Trustee; That part of Ex Parte Application for Order Approving Plan to Proceed Pending Appeal

Moving Party: Corman Sons (Disqualify Counsel);

Special Purpose Trustee Sullivan (Proceed Pending Appeal)

Responding Party: Corman Sons (Proceed Pending Appeal); Corman Daughters (Proceed Pending Appeal); Trustee Sullivan (Disqualify Counsel)

Notice: OK


Ruling: The Motion to Disqualify is DENIED

The Ex Parte Application is GRANTED.

Sullivan to give notice.


BACKGROUND

On February 7, 2020, Roger W. Corman and Julie Corman (the "Parents"), Catherine Corman and Mary Corman (the "Daughters"), and Brian W. Corman and Roger M. Corman (the "Sons") entered into a settlement—the Preliminary Deal Point Memorandum ("PDPM”)—to resolve disputes over the parties’ entangled interests in trusts, entities, and properties. Phase One of the PDPM provides for separation of ownership interests of the Parents, Sons and Daughters in three properties and termination of pending litigation. Phase Two of the PDPM was intended to address the management and disposition of the Film Library (“the Library”), an asset of La Mesa Films LLC, which is itself an asset of the Pacific Trust. The PDPM provides that the undersigned shall “participate as a settlement officer in the negotiation of the final long-form agreement, and . . . have discretion to assist the Parties in reaching the final terms, as necessary.”

On April 30, 2021, in the interest of “assist[ing] the parties in reaching the final terms” for disposition of the Library, the Court issued an OSC Re: Why the Court should not appoint a referee to sell the Library. The Court subsequently discharged this OSC.

On July 29, 2021, the Court discharged the OSC Re: sale by referee. In the interest of addressing non-management of the Library by Special Trustee Goldman Sachs Trust Company N.A., the Court issued an OSC Re: Why Goldman Sachs should not be ordered to conduct a private sale of the Library in its capacity as Special Trustee.

On September 16, 2021, the Daughters filed a Petition to Appoint Special Trustee of the Pacific Trust and Direct Sale of Assets, requesting the Court recognize a vacancy in the position of trustee with respect to La Mesa LLC and the Library and appoint a Special Purpose Trustee to administer those assets, including by selling the Library if appropriate.

On October 27, 2021, the Court issued the Final Ruling on Motions to Enter Judgment, OSC Re: Sale by Goldman Sachs, and Petition to Appoint Special Trustee. As relevant here, the Court found a vacancy in the office of trustee with respect to La Mesa LLC and the Film Library and granted the Daughters’ Petition to Appoint a Special Purpose Trustee (“SPT”) to administer the LLC and Library, appointing James S. Sullivan. The Court also discharged the OSC Re: Sale by Goldman Sachs.

On November 5, 2021, the Sons filed a Motion for Reconsideration of the Final Ruling.

On December 7, 2021, the Court issued a ruling granting in part and denying in part the Motion for Reconsideration and filed an Amended Final Ruling. The Court did not modify its order granting the Petition to Appoint SPT Sullivan.

On December 28, 2021, the Sons filed an appeal from the Amended Final Ruling.

On December 29, 2021, SPT Sullivan filed an Ex Parte Application for Orders (1) Approving Proposed Plan of Action, (2) Approving Hiring of Consulting Expert Dan Marks, (3) Approving Request for Proposal to Agent Candidates, (4) Directing Turnover of Books and Records to SPT Sullivan, and (5) Directing SPT Sullivan to Act While Appeal is Pending.

On January 3, 2022, the Court heard oral argument on the ex parte application. The Court bifurcated the issue of whether the Ex Parte Application could proceed pending the appeal. The Court stated it would consider the other aspects of the application only if it determined the application could proceed. The court expressed reservations about whether the application could proceed pending appeal. The court also set a concurrent expedited briefing schedule on the motion to disqualify that the Sons stated they intended to file.

On January 10, 2022, the Sons filed a Motion to Disqualify Holland & Knight LLP as Counsel for SPT Sullivan. SPT Sullivan filed a Further Brief Re: Ex Parte Application.

On January 11, 2022, the Sons filed an Opposition to the Ex Parte Application.

On January 14, 2022, SPT Sullivan filed an Opposition to the Motion to Disqualify. The Sons filed a Response to SPT Sullivan’s Further Brief. The Daughters filed a Reply in support of the Ex Parte Application. The Parents filed a Joinder to the Daughters' Reply.

DISCUSSION

Motion to Disqualify Counsel for SPT Sullivan

Evidentiary Objections

The Sons filed five evidentiary objections to the Declarations of Vivian L. Thoreen, Robert Barton, and Vito A. Costanzo submitted in support of the Opposition to the Motion to Disqualify (three objections pertain to the Costanzo Declaration, one pertains to the Thoreen Declaration, and one pertains to the Barton Declaration).

All six objections are OVERRULED.

The Sons object to Mr. Costanzo’s allegations that HK’s IT department and “central files department” were unable to locate any files pertaining to, or “any emails involving,” the Sons. The Sons also object to Mr. Costanzo’s allegation that he “communicated by email with all of the attorneys currently working for the Los Angeles office of [HK] to inquire whether any of them have any information regarding [the Sons’] involvement in trust litigation in 2016 or any discussion between them and Bruce Ross in 2016,” but that “[n]o one has indicated any knowledge regarding this matter.” The Sons object that these allegations are speculative, hearsay, lack foundation, and lack support in Mr. Costanzo’s personal knowledge.

These objections are OVERRULED. Mr. Costanzo’s allegations regarding the existence of emails and files are based on Mr. Costanzo's discussions with contacts in the IT department and central files department regarding searches for relevant documents. Sufficient foundation has been laid for Mr. Costanzo to describe the stated results of these searches and the allegations are supported by his personal knowledge of the representations of his contacts in these departments. The allegations regarding the results of searches by HK’s IT department and central files department are not inadmissible hearsay because the allegations do not reflect out-of-court statements by the departments but the results of the searches. The allegation that nobody has yet “indicated any knowledge regarding this matter” does not relay an out-of-court statement for its truth; it relays the absence of out-of-court statements.

The Sons object to Mr. Barton’s allegations regarding a phone call with Mr. Ross on December 30, 2021, asserting the alleged contents of the call are hearsay. Mr. Barton alleges Mr. Ross stated he "has no recollection of the conversations or the substance of the dispute" and "does not believe any substantive discussions were had regarding this case." This objection is SUSTAINED. Mr. Barton presents statements by Mr. Ross from an out-of-court phone call “to prove the truth of the matter stated”—i.e., that Mr. Ross did not recall having confidential information or disclosing it—which is inadmissible hearsay. No hearsay exception is readily applicable here.

Finally, the Sons object to Ms. Thoreen’s allegation that “[t]o the best of [her] knowledge and belief, no information or documents that may have been obtained by Mr. Ross in 2016 has been passed on to any current partner or employee of [HK] or is generally in the possession” of HK. The Sons object that this allegation is speculative, hearsay, lacks foundation, and lack support in Ms. Thoreen’s personal knowledge. These objections are OVERRULED. The allegation plainly is not hearsay. Sufficient foundation has been laid for this allegation where Ms. Thoreen alleges she “was not involved directly or indirectly in any discussions . . . that may have taken place in 2016” between Ross and the Sons, does not “have any knowledge of any such discussions,” and has “never received nor been aware of any information that [she] understood to come from the alleged 2016 communications.” It is not speculative to allege, based on this, that such information has not been passed around HK to Ms. Thoreen’s knowledge.

Analysis

The Sons move to disqualify SPT Sullivan’s counsel, Holland & Knight LLP (“HK”), based on a series of discussions in 2016 between the Sons and “Bruce S. Ross . . . a former partner at HK." The Sons argue they provided Ross confidential and privileged information regarding “multiple trust related litigations pending with their parents and sisters” in “anticipation of retaining HK to represent them” in those matters. Based on this disclosure of confidential information to Ross, at the time a partner at HK, the Sons argue HK as a firm is subject to disqualification as counsel for SPT Sullivan under California Rules of Professional Conduct (CRPC) Rule 1.9.

In his Opposition, SPT Sullivan argues the Sons erred in applying CRPC 1.9 in this case rather than CRPC 1.10, as the latter applies to conflicts imputed to a firm based on a relationship with a former attorney. SPT Sullivan indicates Ross left HK "[i]n early 2018" to join another firm and argues there is no evidence any attorney remaining at HK has or had access to the Sons’ confidential and privileged information provided to Ross. The Sons argue in their Reply that disqualification is regardless required under CRPC 1.10. (Reply, p. 2-4.)

Under Rule 1.9, an attorney “shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client (1) whose interests are materially adverse to that person; and (2) about whom the lawyer had acquired [protected] information . . . that is material to the matter; unless the former client gives informed written consent.” But under Rule 1.10(b), “[w]hen a lawyer has terminated an association with a firm, the firm is not prohibited from thereafter representing a person with interests materially adverse to those of a client represented by the formerly associated lawyer and not currently represented by the firm, unless: (1) the matter is the same or substantially related to that in which the formerly associated lawyer represented the client; and (2) any lawyer remaining in the firm has [protected] information . . . that is material to the matter.”

The Court finds Rule 1.10 applicable here—the Sons indicate they communicated with Mr. Ross regarding the trust litigation in 2016 and Mr. Ross “terminated [his] association” with HK in 2018. Thereafter, SPT Sullivan retained HK. Mr. Ross is not representing SPT Sullivan or any other party in this matter. Hence, this is a case where “a lawyer has terminated an association with a firm” which represents a party adverse to the party previously involved with the firm’s former attorney. Moreover, the Sons’ Reply appears to concede that CRPC 1.10 rather than CRPC 1.9 applies here, arguing disqualification is still required under CRPC 1.10 because SPT Sullivan has not shown that HK does not possess confidential information. (Reply, p. 2-4.)

While the Sons allege they communicated with Ross and provided various information to him, there is conspicuously no allegation that the Sons communicated with any other attorney at HK. (Corman Decl., para. 4-8.) The Sons instead refer to communications with HK as a whole, "including" Ross, without identifying any other attorneys. (Corman Decl., para. 2.) Hence, even assuming arguendo that this matter is “the same or substantially related” to the matter discussed with Ross in 2016, and hence that CRPC 1.10(b)(1) is satisfied, it is unclear that the Sons ever communicated with or provided information to any attorney other than Ross. Under CRPC 1.10(b), disqualification is required only if “the matter is the same or substantially related” to the former matter and “any lawyer remaining in the firm” has material protected information. In other words, disqualification is not be required if no attorney remaining at the firm has material protected information.

The Sons have not provided evidence in the Motion or Reply that any attorney remaining in the firm has protected and material information about this matter, nor is there any evidence that the Sons provided protected information to any HK attorney other than Ross himself. Instead, the Sons’ Reply attempts to shift the burden of proof by arguing SPT Sullivan “failed to present admissible evidence demonstrating that no 'lawyer remaining in the firm has information protected . . . [and] material to the matter.’” (Reply, p. 3.) In connection with this argument, the Sons filed a series of evidentiary objections (ruled on above) to declarations submitted in support of SPT Sullivan’s Opposition. Further, the Sons argue HK erred in limiting its review “to HK's Los Angeles office when HK has 28 offices in the United States and 6 offices internationally," implying that attorneys in other offices may have such information. (Reply, p. 3.)

At the outset, the Sons did not provide authority to support shifting the evidentiary burden to SPT Sullivan to prove there are no grounds for disqualification. The Court is not persuaded that the burden is on SPT Sullivan; the burden in seeking disqualification would more logically be on the party seeking disqualification, particularly where disqualification under CRPC 1.10(b) is available only if “any lawyer remaining in the firm” has protected material information. Relatedly, the Sons argue SPT Sullivan’s evidentiary showing is not sufficient because he failed to obtain a declaration from Mr. Ross himself, pointing out that in Goldberg v. Warner/Chappell Music Inc. (2005) 125 Cal.App.4th 752, the former attorney did provide a declaration stating he did not provide confidential material information to attorneys remaining at the firm. Goldberg merely indicates a declaration by the former attorney regarding disclosure of confidential information would be sufficient to defeat a motion to disqualify—not that it is necessary.

Moreover, the evidence submitted in support of the Opposition is sufficient to demonstrate that attorneys remaining at HK do not have confidential material information. Mr. Barton alleged that “apart from responding to this disqualification motion, the only [HK] attorneys . . . involved in this matter are [himself] and Madeleine Eldred.” (Barton Decl., para. 5.) Four HK attorneys—Mr. Barton, Ms. Eldred, Vito Costanzo, and Vivian Thoreen—each then provided declarations alleging they did not (1) have any direct or indirect involvement in communications between the Sons and Mr. Ross in 2016 or (2) otherwise "received [or] been aware of any information . . . understood to come from the alleged 2016 communications." Moreover, Mr. Costanzo indicated HK’s IT department and central files department conducted searches for documents relating to the Sons with no results.

This evidence, taken together, indicates the attorneys involved in the matter lack any knowledge of the prior communications between Mr. Ross and the Sons and indicates HK has not otherwise retained. The Sons argue the evidence is insufficient because Mr. Costanzo failed to explain “why he limited his search to HK’s Los Angeles office when HK has 28 offices in the United States and 6 internationally” and failed to identify the search terms used by the IT department and the “central files department.” (Reply, p. 3-5.)

Specification of search terms is not necessary here—HK has offered evidence that its internal review did not turn up confidential communications with, or files pertaining to, the Sons, and this evidence is unrebutted. While the declarations could have been more specific, it is nonetheless sufficient to intelligently determine whether confidential information has been disclosed. The Sons’ argument that it was improper to limit the file search to the Los Angeles office is unpersuasive where the Sons offer no reason to conclude “confidential information . . . would normally have been imparted” by Ross to attorneys at other branch offices than the Los Angeles office. “Disqualification based on a conclusive presumption of imputed knowledge derived from a lawyer’s past association with a law firm is out of touch with the present day practice of law. . . . Individual attorneys today can work for a law firm and not even know, let alone have contact with, members of the same firm working in a different department of the same firm across the hall or a different branch across the globe.” (Adams v. Aerojet General Corp. (2001) 86 Cal.App.4th 1324, 1336.) The contention that HK needs to disprove that Ross disclosed information to attorneys at “a different branch across the globe” is rejected.

The Sons argue disqualification is still appropriate because “it is not necessary to establish that confidential information was in fact given, the reasonable possibility is sufficient.” (Trone v. Smith (9th Cir. 1980) 621 F.2d 994, 1000 (“[I]t is not necessary to establish that confidential information was in fact given, the reasonable possibility is sufficient.”)) The Sons argue access to confidential information is presumed "if a substantial relationship is established" between the former and current representation. (Motion, p. 6.) However, in applying this presumption, “the court should examine the time spent by the attorney on the earlier cases, the type of work performed, and the attorney’s possible exposure to formulation of policy or strategy.” (H.F. Ahmanson & Co. (1991) 229 Cal.App.3d 1445, 1455 (emphasis added); see also Adams, supra, at 1329 (reversing order disqualifying attorney based on previous firm’s representation of client where trial court failed to conduct “a fact-based examination of the nature and extent of Lawyer's involvement with and exposure to [the firm’s] earlier representation of Client and specifically whether confidential information material to the current lawsuit would normally have been imparted to Lawyer.”))

This rule is readily applied to cases where one attorney represents a client and the same attorney later represents a new client adverse to the former client—the court can analyze the same attorney’s time, work, and exposure to confidential information in each case. But here, only Ross was involved in the “earlier case[]” and moreover was never ultimately retained to perform work in the matter. There is no allegation that the Sons directly disclosed confidential information to any of the attorneys now working on the matter, nor that Ross disclosed such information. (Adams, supra, at 1336 (conclusive presumption of knowledge is “out of touch with the present day practice of law” where “[i]ndividual attorneys today can work for a law firm and not even know, let alone have contact with, members of the same firm.”)) The Sons have not shown any “possible exposure to formulation of policy or strategy” imputable to an attorney “remaining at the firm.” The Sons described communications with Ross alone. Ross left HK years before HK began its representation of SPT Sullivan and there is no evidence information provided to him may have been provided to attorneys remaining at the firm. (See Adams, supra, 86 Cal.App.4th at 1329 (court should consider “whether confidential information material to the current lawsuit would normally have been imparted” to attorney sought to be disqualified))

Hence, the Sons have not carried their burden to show disqualification is necessary under CRPC 1.10(b)(2). “[A]t some point, it ceases to make sense to apply a presumption of imputed knowledge as a lawyer moves from firm to firm.” (Goldberg, supra, 125 Cal.App.4th 752.) Even if SPT Sullivan bears the burden of demonstrating disqualification is inappropriate here, the evidence submitted is sufficient to carry this burden by showing that no attorney remaining at the firm possesses confidential material information. The evidence submitted by SPT Sullivan is unrebutted by contrary evidence of disclosure to attorneys remaining at HK. Thus, the Motion to Disqualify is DENIED.

Ex Parte Application for Orders Re: Proposed Plan of Action

Evidentiary Objections and Requests for Judicial Notice

The Sons filed six evidentiary objections to the Declaration of Dan Marks in support of Former Trustees’ Ex Parte Application on the grounds that the objected-to passages are conclusory, speculative, and lack foundation, and on the grounds that Marks lacks personal knowledge to support his allegations.

The Objections are SUSTAINED on the grounds that Mr. Marks has not laid any foundation for his analysis of the Library's value. He does not indicate what, if anything, he reviewed in concluding the "current value of the film library . . . may be significantly higher than the estimate of $2,325,000.00." While Mr. Marks refers to a $400 million sale of "remake rights to the Exorcist" and a $173 million deal "to monetize the revenue" from a 46-film library, he does not draw any analogy between these sales and the Library (e.g., that the films in this Library are similar to The Exorcist or the 46 unidentified films in the latter transaction). Similarly, Mr. Marks alleges the Library contains "strong remake opportunities in the horror, sci-fi, and fantasy genres" without identifying any films or indicating what he reviewed in reaching that conclusion. Mr. Marks' conclusions regarding "current market conditions" and the "cyclical" nature of the "demand for remakes, sequels and adaptations" are only vaguely supported by reference to Mr. Marks' prior entertainment experience. While obviously relevant, this is not sufficient foundation for Mr. Marks' marketability opinions with respect to the specific assets of the Library.

SPT Sullivan requests the Court take judicial notice of (1) the Court's December 7, 2021 Order granting in part the Motion for Reconsideration and Amended Final Ruling filed with it; (2) the Sons' Notice of Appeal from that order filed December 27, 2021 in all three Corman cases; (3) the Sons' Notice of Appeal from that order filed December 28, 2021 in probate case SP007923; (4) the parties’ Joint Statement Re: Film Library filed February 25, 2021 in civil case ****1310; and (5) the Sons' Further Brief Re: Appointment of Referee filed June 4, 2021 in civil case ****1310. The Requests for Judicial Notice are GRANTED as to these court orders and court filings. (Evid. Code sec. 452(d).) Further, the Sons request the Court take judicial notice of a copy of their Opposition to the Ex Parte Application filed in civil case ****1310. It is unclear to the Court why the Sons are requesting judicial notice of this document, which appears substantively indistinguishable from the Opposition filed in probate case SP007923, but grants the request regardless. (Evid. Code sec. 452(d).)

Analysis of Application

SPT Sullivan seeks court approval of his Proposed Plan of Action to reach a recommendation regarding La Mesa LLC and permission to proceed with the Proposed Plan of Action pending the Sons’ appeal of the Amended Final Ruling, among other orders. (See Probate Code sec. 1310(b) (“Notwithstanding that an appeal is taken from the judgment or order, for the purpose of preventing injury or loss to a person or property, the trial court may direct the exercise of the powers of the fiduciary . . . as if no appeal were pending.”); Sullivan Decl., Exh. 1 (Proposed Plan of Action))

The Court has bifurcated the issue of whether SPT Sullivan can proceed with the Proposed Plan of Action pending appeal from the issue of approval of the Proposed Plan itself, requesting separate briefing on the former issue. The Sons oppose an order authorizing SPT Sullivan to take these steps to market the Library pending appeal, arguing the Court “has never made a section 1310(b) finding” before and arguing “it would be improper to make such order at this time.” In turn, the Daughters support SPT Sullivan’s application and also argue steps should be taken to market the Library now while Roger W. Corman (“Roger W”), currently 95 years old, is still alive to assist in marketing.

The Sons initially argue the Court should deny the Application because it did not make a finding under 1310(b) in its previous rulings, particularly the Final Ruling appointing Sullivan as SPT, arguing that “any belated section 1310(b) ruling would be unprecedented and constitute prejudicial legal error.” This argument is rejected for two reasons:

First, the Sons did not provide any authority indicating an order under 1310(b) must be made in the appealed order or prior to the filing of a notice of appeal.

Second, no authority supports this position because it is not consistent with Section 1310(b). The 1310(b) appellate stay exception is intended to enable the trial court to “prevent[] injury or loss to a person or property,” which would plainly be frustrated if the trial court were required to make a 1310(b) finding before any notice of appeal is even filed. This would prevent the trial court from responding to new facts showing potential injury or loss. This would also require the trial court to predict whether any party would appeal its decision and predict whether there may be injury or loss pending that appeal in order to make a 1310(b) finding in the original order. There is no indication that the Legislature expected this from trial courts. Rather, after a notice of appeal is filed, it is appropriate to request an exception from the appellate stay. (See Kane v. Superior Court (1995) 37 Cal.App.4th 1577, 1586 (California Legislature “recogni[zed] some situations present such an extraordinary risk of injury or loss that they require immediate intervention by the probate court to make orders which can be implemented immediately despite the filing of an appeal, and regardless of the result on appeal."))

Next, the Sons argue this is not an “exceptional” case where an exception from the appellate stay is necessary to prevent losses to the Trust, distinguishing this case from Sterling v. Sterling (2015) 242 Cal.App.4th 185 and Conservatorship of McElroy (2002) 104 Cal.App.4th 53.[1] The Sons’ Opposition consistently focuses on whether “an immediate sale of the Film Library [is] necessary to avoid an extraordinary loss.” (Opposition, p. 4.) The Sons argue there "is a fundamental difference between the act of selling a unique one-of-a-kind asset which cannot be undone . . . and simply managing the asset and potentially generating revenue stream.” (Opposition, p. 8.) The Sons argue the potential sale is "permanent and unwarranted" where SPT Sullivan "has no books or records to make any sort of intangible determination as to how to proceed." (Opposition, p. 8.)

But SPT Sullivan is not seeking an order authorizing the sale of the Library—he is seeking permission to proceed with his Proposed Plan of Action to provide an informed recommendation regarding La Mesa LLC and the Library. (Sullivan Decl., Exh. 1.) The Proposed Plan of Action consists of (1) solicitation of proposals from various agents "to find the most qualified agent to provide recommendations for La Mesa Pictures," (2) proposal of agent candidates to the parties, including seeking input from the Court if no agreement can be reached, (3) solicitation of input from "Interested Parties" regarding La Mesa LLC, and (4) a final recommendation and Petition for Instructions by SPT Sullivan regarding administration of La Mesa LLC and the Library. (Id.) The purpose of the Proposed Plan is above all to gather information and recommendations so that Sullivan can intelligently make the “determination as to how to proceed,” which he was appointed to provide. Nothing in the Proposed Plan is “permanent” or irreversible. Further, SPT Sullivan is seeking an order directing turnover of La Mesa LLC’s books and records to him—undermining the Sons’ contention that SPT Sullivan will need to determine how to administer La Mesa LLC with “no books or records.”

Hence, the Sons’ arguments regarding prejudice from sale of the Library are not relevant to this Application. SPT Sullivan has not recommended the sale of the Library, much less sought permission to proceed with an “immediate sale.” The Sons’ arguments regarding whether it is necessary to sell the Library pending appeal are premature and not responsive to the Proposed Plan of Action. Moreover, as the Proposed Plan indicates, SPT Sullivan intends to file a Petition for Instructions with his recommendation for the LLC and Library, to which the Sons would be able to respond. The Court can at that time—if the appeal is still pending and Sullivan proposes a sale of the Library or LLC—consider whether an exception to the appellate stay is necessary for a sale to proceed. It would be premature to reach that issue now. SPT Sullivan is seeking permission to gather information pending appeal, which is unlikely to prejudice the Sons and is likely to further the parties’ goal, expressed in the PDPM, of ultimately disposing of the Library.

With that clarification, the Court returns to the issue of whether an order under 1310(b) is appropriate for SPT Sullivan to carry out the Proposed Plan of Action pending the Sons’ appeal. The Court finds there is a substantial risk that the Library will lose value, to the detriment of the Pacific Trust, if Roger W. passes away pending appeal without the Trust beginning efforts to market the Library. The Daughters indicate Roger W. is currently 95 and “will be 96 in April”; the Daughters argue marketing of the Library would be easier and more profitable while he “is currently alive and able to lend his name and endorsement to any future attempt to monetize his films,” noting his substantial "pedigree in the entertainment industry." (Daughters’ Reply, p. 2.)

In this regard, the Court notes (1) Roger W’s extensive involvement in creating the films in the Library and (2) Roger W’s involvement in the 2018 sale of the New Horizons Film Library). “In 2018, the New Horizons Film Library was sold to Shout Factory and Ace Film HK Company Limited for $5,500,000 in exchange for” the rights to the films comprising the Library and Mr. Corman’s agreements to “serve as Executive Producer on any remakes, sequels or prequels of the motion pictures,” “participate in minimum of thirty (30) hours of interview footage for documentary,” and provide a “minimum of thirty (30) hours of promotional services . . . to promote the New Horizons Film Library.” (SPT's RFJN, Exh. D (2/25/21 Joint Statement Re: Film Library in ****1310))

Where the parties agreed that “the price at which the New Horizons Film Library was sold on the open market is the best indicator of the value of the Film Library,” the continuing involvement of Roger W. in marketing the La Mesa Library is plainly relevant. (Id.) In the event Roger W. passes away pending appeal, on the other hand, the Trust would be unable to broker deals relating the Library by offering promotional services or production work by Roger W. or otherwise leveraging his experience with these particular films, potentially impacting the value of the films themselves or impacting the Trust’s options for administering the Library. Where Roger W. is now 95 years old, it is hardly speculative to find a real risk he will pass away pending the Sons’ appeal initiated December 28, 2021.

This case is analogous to Conservatorship of McElroy (2002) 104 Cal.App.4th 53, wherein a conservator filed a petition for substituted judgment in connection with the conservatee’s estate. The probate court granted this petition over the objection of the conservatee’s “companion,” Kravagna, who appealed the probate court’s order granting the petition. (Id. at 541.) The conservator then sought permission to carry out the actions approved in connection with a substituted judgment despite Kravagna’s appeal, arguing an order under Section 1310(b) was appropriate where the conservatee was in poor health and the estate would incur tax liabilities if the conservatee died before implementation of the substituted judgment. (Id. at 543.)

The trial court found “potential harm to the estate [consisting of] potential tax liability if the conservatee were to die before the actions were taken" and concluded "immediate action was necessary to avoid the tax liabilities the estate would unnecessarily incur if the conservatee died before the action was taken." (Id. at 556-557.) Kravagna appealed this order as well, arguing “the trial court abused its discretion in granting relief from the automatic stay under Probate Code section 1310 . . . because the conservator failed to make the requisite showing of imminent injury or loss." (Id. at 544.) The Court of Appeal found the trial court “did not abuse its discretion,” concluding the Section 1310(b) order was appropriate “[i]n view of the age and failing health of the conservatee” and the “insignificant” “risk of harm to [Kravagna] in allowing the conservator to take the requested actions . . . [relative] to the risk of harm to the estate if the action were not taken,” including “the potential tax liability if the conservatee were to die before the actions were taken. (Id. at 556-557.)

In this case, there is “potential harm” to the Trust if Roger W. were to die before actions are taken to begin marketing the Library pursuant to the Proposed Plan of Action. The Trust would be deprived of Roger W’s input regarding the Library or (more importantly) the ability to leverage Roger W’s experience and skills in marketing the films in the Library. Like in McElroy, there is an “insignificant” risk of harm to the Sons “in allowing [SPT Sullivan] to take the requested actions” in the Proposed Plan of Action “in relation to the risk of harm to the [Pacific Trust] if the action[s] were not taken,” including depreciation in the value of the Library if Roger W. “were to die before the actions were taken.” Due to Roger W’s advanced age and the likelihood that the Sons’ appeal will take substantial time to resolve, there is an imminent and real risk that Roger W. will die before actions can be taken to begin marketing the Property. Hence, an order under 1310(b) is appropriate here to permit the Proposed Plan of Action to proceed pending appeal.

Again, the Court is not now ordering the sale of the Library or LLC. Any sale of the Library or LLC would still require a further petition by SPT Sullivan (which is contemplated by Step 4 of the Proposed Plan of Action) and further court order authorizing the sale, which the Sons would be entitled to oppose. The Court has not considered whether a sale could be authorized to proceed pending appeal, which would be premature at this time and can be addressed if SPT Sullivan seeks authorization to sell the Library or LLC while the appeal is pending.

The issue is instead whether any Proposed Plan of Action, once separately approved, should begin now or after the appeal has concluded. For the reasons outlined above, there is a risk of loss to the Trust if the Proposed Plan is stalled pending appeal. In order to prevent losses to the Pacific Trust, the Court authorizes initial steps to market the Library while Roger W is alive and capable of assisting in the same. SPT Sullivan beginning to gather information and recommendations regarding the Library, including initial efforts to assess the market for its films, will prevent loss to the Trust from Roger W’s potential death pending the Sons’ appeal and will further the parties’ goal in the PDPM “to dispose of the Film Library LLC” and effectuate “the complete separation of the Parties.”

Hence, that part of the Application seeking permission to proceed with a plan of action pending appeal is GRANTED. The Court will now hear any other objections the Sons have to the Proposed Plan of Action of SPT Sullivan pending the Sons’ appeal of the Amended Final Ruling. (Probate Code sec. 1310(b).) Those objections shall be filed by February 2, 2022. Any reply shall be filed by February 7, 2022. The continued hearing on that application shall be heard on February 22, 2022 at 8:30 a.m.


[1] While the Sons’ Opposition emphasizes that there is no "theft or conversion of the trust estate" in this case, theft and conversion are not prerequisites for an order under 1310(b). Neither Sterling nor McElroy involved allegations of theft or conversion (or risk of either) to support the 1310(b) orders at issue, and both orders were affirmed on appeal.



b'

Case Number: ****1310 Hearing Date: December 20, 2021 Dept: 1

Ruling: The Ex Parte Application is DENIED.

Sons to give notice.


BACKGROUND

On October 27, 2021, the Court issued the Final Ruling on Motions to Enter Judgment, OSC Re: Sale by Goldman Sachs, and Petition to Appoint Special Trustee (incorporated by reference). The Court discharged the OSC Re: Sale, finding Goldman Sachs was unwilling or unable to administer La Mesa LLC and the Film Library as Special Trustee of the Pacific Trust. Instead, the Court found a vacancy in the office of trustee with respect to La Mesa LLC and the Film Library and granted the Daughters’ Petition to Appoint a Special Purpose Trustee to administer the LLC and Library. Finally, the Court granted in part and denied in part the Motions to Enter Judgment, declining to approve the proposed escrow instructions submitted by the Sons and parents “in their current state.”

On November 5, 2021, the Sons filed a Motion for Reconsideration of the Final Ruling.

On November 16, 2021, the Court issued an Order to Show Cause Re: Bond and Engagement directing (1) the parties to address whether Special Purpose Trustee Sullivan should be required to post bond and (2) Sullivan to provide the terms of his engagement as Special Purpose Trustee.

On December 6, 2021, the Court took the matters under submission after hearing oral argument from the parties.

On December 7, 2021, the Court issued a ruling granting in part and denying in part the Motion for Reconsideration and filed an Amended Final Ruling. The Court only modified its conclusion regarding the effective date of the modifications of the Pacific Trust sub-trusts, and did not modify its order granting the Petition to Appoint Special Purpose Trustee Sullivan.

On December 17, 2021, the Sons filed an Ex Parte Application for Order Nunc Pro Tunc Correcting Amended Final Ruling.

DISCUSSION

The Sons request the Court correct “clerical error” in referring to Goldman Sachs as the Special Trustee of the Pacific Trust throughout the Amended Final Ruling. The Sons argue these "references should be replaced with a reference to Goldman Sachs as \'Successor Trustee\'" rather than Special Trustee. The Sons indicate that the "term \'Special Trustee\' is a defined term in the Pacific Trust" and indicate "the powers of the Special Trustee are limited." While the Sons concede that "Goldman Sachs was also appointed as Special Trustee," the Sons argue any reference to Goldman Sachs as Special Trustee should be corrected because the "broader trust powers were held by Goldman Sachs as Successor Trustee" rather than Special Trustee.

The Ex Parte Application is DENIED for two reasons.

First, there was no clerical error in the Amended Final Ruling. “When a signed judgment does not reflect the express judicial intention of the court, the signing of the judgment involves clerical rather than judicial error.” (Marriage of Kaufman (1980) 101 Cal.App.3d 147, 151.) The references to Goldman Sachs as Special Trustee are accurate and “reflect the express judicial intention of the court.” There is no cognizable dispute that Goldman Sachs is the Special Trustee of the Pacific Trust—Goldman Sachs was “appointed as the successor Trustee and successor Special Trustee of the Trust” on June 25, 2014 in probate case SP007923. (RFJN, Exh. D (6/25/2014 Order, p. 3.) The Order provided that "[a]ll powers, discretions, rights, obligations and duties with respect to the Trust shall inure to and be binding upon Goldman Sachs as successor Trustee and successor Special Trustee." (Id.) It was the Court’s intention to refer to Goldman Sachs as the Special Trustee of the Pacific Trust, and this reference is accurate, such that it is not clerical error.

Second, the Sons have not set forth any practical reasons to correct these references. The Sons briefly indicate that Goldman Sachs’ “broader trust powers were held by Goldman Sachs as Successor Trustee” rather than Special Trustee. But the Sons have not shown why this matters—Goldman Sachs was appointed Special Trustee and has powers in that role as well. If the Sons contend it is misleading to call Goldman Sachs the “Special Trustee” because it is also the “successor Trustee,” it would be equally misleading to refer to Goldman Sachs only as the “successor Trustee.” The Sons have not shown how the indisputably accurate reference to Goldman Sachs as “Special Trustee” could mislead or confuse a reader, or any other basis to adjust these references.

Hence, the Ex Parte Application is DENIED.

Moving party to give notice.'


b'

Case Number: ****1310 Hearing Date: December 6, 2021 Dept: 1

Tentative Ruling

Judge David J. Cowan

Department 1


Hearing Date: Monday, December 6, 2021

Case Name: Brian William Corman, et al. v. Roger William Corman, et al.;

The Pacific Trust dated June 30, 1978

Case No.: ****1310 and SP007923

Motion: Reconsideration

Moving Party: Corman Sons

Responding Party: Corman Parents and Corman Daughters

Notice: OK


Ruling: The Motion for Reconsideration is GRANTED as reflected in the Amended Final Ruling filed alongside this Order.

Sons to give notice.

If the parties do not submit on the tentative, they are encouraged to appear remotely rather than in person.


BACKGROUND

On October 27, 2021, the Court issued the Final Ruling on Motions to Enter Judgment, OSC Re: Sale by Goldman Sachs, and Petition to Appoint Special Trustee (incorporated by reference). The Court discharged the OSC Re: Sale, finding Goldman Sachs was unwilling or unable to administer La Mesa LLC and the Film Library as Special Trustee of the Pacific Trust. Instead, the Court found a vacancy in the office of trustee with respect to La Mesa LLC and the Film Library and granted the Daughters’ Petition to Appoint a Special Purpose Trustee to administer the LLC and Library. Finally, the Court granted in part and denied in part the Motions to Enter Judgment, declining to approve the proposed escrow instructions submitted by the Sons and parents “in their current state.”

On November 5, 2021, the Sons filed a Motion for Reconsideration of the Final Ruling.[1]

On November 17, 2021, the Parents filed an Opposition to the Motion for Reconsideration.[2] The Daughters filed a separate Opposition.

On November 23, 2021, the Sons filed a Reply supporting the Motion for Reconsideration.

DISCUSSION

Applicable Law

Under CCP sec. 1008(a), “[w]hen an application for an order has been . . . refused in whole or in part, or granted, or granted conditionally, or on terms, any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge or court that made the order, to reconsider the matter and modify, amend, or revoke the prior order.”The party seeking reconsideration must provide not just new evidence or different facts, but a satisfactory explanation for the failure to produce it at an earlier time.” (Glade v. Glade (1995) 38 Cal.App.4th 1441, 1457.) Notwithstanding these requirements, the Court has inherent authority to “reconsider its prior interim orders so it may correct its own errors” if errors are apparent. (Le Francois v. Goel (2005) 35 Cal.4th 1094, 1108; see In re Marriage of Barthold (2008) 158 Cal.App.4th 1301, 1312-13 (“a court may reconsider final as well as interim orders on its own motion”); People v. Castello (1998) 65 Cal.App.4th 1242, 1248-49 (a court “could not operate successfully under the requirement of infallibility in its interim rulings.”))

Application to Facts

In the Final Ruling, the Court rejected the Sons’ argument “that the Daughters lack standing to petition to appoint a special trustee of the Sons’ sub-trusts because they are not beneficiaries” of the Sons’ sub-trusts. (Final Ruling, p. 19.) The Court recognized that the “sub-trusts were modified to eliminate the interests of the Daughters in the Sons’ sub-trusts and vice versa,” but found the modifications had not taken effect because the “modifications were to be effective as of the close of escrow, as reflected in the court’s February 11, 2021 Order in Probate Case 17STPB07675.” (Id.) Thus, the Court concluded the Daughters had standing prior to the effective date of the modifications. The Court rejected the argument for a further reason, finding that “even if the modifications were immediately effective, the ‘probate court has the ‘inherent power to decide all incidental issues necessary to carry out its express powers to supervise the administration of the trust’ or ‘‘take any other action necessary or proper to dispose of the matters presented’ by [a] section 17200 petition.’” (Id.) The Court concluded it “has broad inherent powers to ‘take remedial action,’ including by removing and/or suspending a trustee sua sponte and appointing interim trustees,’” and concluded this inherent power would encompass the Daughters’ request to fill a vacancy in management of La Mesa LLC by appointing a Special Purpose Trustee. (Id.)

The Corman Sons seek reconsideration of “the portion of the Final Ruling stating that the modification of the [Pacific] sub-trusts ‘were to be effective as of the close of escrow.’” (Motion, p. 1.) The Sons argue the “‘close of escrow’ effective date was intended to apply to the modifications to the QPRTs, not to the modifications of the [Pacific] sub-trusts.” (Motion, p. 2.) The Motion for Reconsideration was timely filed on November 5, 2021, within ten days of the Court issuing its Final Ruling. (CCP sec. 1008(a) (“any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order . . . make application to the same judge or court that made the order, to reconsider the matter…”))

The Sons rely upon the February 11, 2021 Ruling on Motion to Enforce the PDPM in probate case 17STPB07675 (which was cited in the Final Ruling) and a cluster of rulings dated February 5, 2021 in probate case SP007923 modifying the Sons’ and Daughters’ sub-trusts of the Pacific Trust. Probate case 17STPB07675 concerns the Corman Family Qualified Property Residence Successor Trusts (QPRTs) while probate case SP007923 concerns the Pacific Trust, including the Sons and Daughters\' sub-trusts. The cluster of orders dated February 5, 2021 in SP007923 modifying the Sons’ and Daughters’ sub-trusts do not state the modifications are effective “as of the Close of Escrow.” Indeed, the orders do not mention the close of escrow—they state each sub-trust “is” modified, indicating the modifications are effective immediately rather than as of some future date. (See Order Approving Brian Corman\'s Petition to Modify, p. 2 ("Brian Corman\'s Sub-Trust under the Pacific Trust is modified as follows:") Order Approving Roger Corman\'s Petition to Modify, p. 2 (same); Order Approving Catherine and Mary Corman\'s Petition to Modify, p. 2. (the "Pacific Trust . . . is modified to restate . . . and to modify" relevant provisions); p. 6 (the Sons "shall have no interest in, and shall be deemed to have . . . waived any interest of any kind in Catherine\'s . . . and Mary\'s sub-trust[s]"))

By contrast, the February 11, 2021 Ruling in 17STPB07675 granted the Motion to Enforce the PDPM and the Parents\' Petition to Modify the QPRTs pursuant to the PDPM. The February 11, 2021 Ruling provided the modifications would be "effective as of the Close of Escrow, consistent with the discussion on the record" that day. At that hearing, counsel for the Sons expressed concern that the “modification petitions for the Sons and the Daughters . . . in connection with the Pacific Trust are not effected by the close of escrow” because those petitions had already been granted effective immediately. (Taitelman Decl., Exh. 5 (RT 2/11/2021, p. 12:10-17.)) In response, the undersigned indicated that “the Pacific Trust Petitions [to Modify] are not in front of me,” clarifying that the undersigned was “not going to start putting Pacific Trust issues in a QPRTs order.” (Taitelman Decl., Exh. 5 (RT 2/11/2021, p. 12:20-23.)) Based on the foregoing, the Sons contend the modifications of the Pacific Trust sub-trusts were effective immediately rather than as of the close of escrow, unlike the QPRT modifications, and request the Court correct its Final Ruling accordingly. (Compare Final Ruling, p. 19.)

The Daughters’ Opposition does not dispute the Sons’ interpretation of the previous modification orders and instead argue the issue of whether the orders "are effective as of February 5, 2021 or at the Close of Escrow is immaterial to the Court’s authority to . . . appoint a Special Purpose Trustee to manage the Film Library." (Daughters’ Opposition, p. 3.) The Daughters argue they have standing to seek appointment of a special trustee “[i]rrespective of the effective date of the Orders.” (Daughters’ Opposition, p. 3.) The Parents’ Opposition similarly does not dispute that the “close of escrow” effective date was intended to apply to the QPRTs, not the Pacific sub-trusts. The Parents merely argue the Court should not modify its Final Ruling because the Daughters have standing regardless of the effective date. (Parents’ Opposition, p. 6 (“The effect of the February 5 Orders as interpreted by the Sons, does not eliminate the Daughters’ or Parents’ standing to seek the relief requested, nor does it preclude the Court’s appointment of a Special Purpose Trustee.”)) The Parents and Daughters both argue the Sons have not presented “new” facts, arguing the Sons could have raised the issue earlier and have not “provided any explanation as to why they did not raise the issue of the effective date . . . prior to or at the October 26, 2021 hearing.” (Glade, supra, 38 Cal.App.4th at 1457 (party seeking reconsideration “must provide . . . a satisfactory explanation for the failure to produce [new or different facts] at an earlier time.”))

At the outset, the issue of whether the Sons have presented “new” facts or circumstances is not dispositive of whether reconsideration is appropriate to correct errors in the Final Ruling. (Le Francois, supra, 35 Cal.4th at 1108 (trial court has inherent authority to “reconsider its prior interim orders so it may correct its own errors”); Barthold, supra, 158 Cal.App.4th at 1313.) On the merits, regardless of whether the Sons have presented new or different circumstances or facts, the Court’s Final Ruling appears to be in conflict with preexisting orders (of unchallenged validity) regarding the Pacific Trust. For this reason, the Court has cause to clarify and correct its Final Ruling.

The Motion for Reconsideration is GRANTED as further reflected in the Amended Final Ruling. As discussed above, the Court’s existing orders in probate case SP007923 modifying the Sons’ and Daughters’ sub-trusts do not state the modifications would be effective as of close of escrow. By contrast, the Court’s February 11, 2021 Ruling in probate case 17STPB07675 states the modifications of the QPRTs are effective as of the close of escrow. At the February 11, 2021 hearing, the Court confirmed that its ruling that the modifications would be effective upon close of escrow was not intended to apply to the Pacific Trust. The Court indicated that the “Pacific Trust Petitions [were] not in front of” the Court at that time and that it was “not going to start putting Pacific Trust issues in a QPRTs order.” (Taitelman Decl., Exh. 5 (RT 2/11/2021, p. 12:20-23.)) The Parents and Daughters do not dispute this account of the prior orders in their Oppositions.

The Court maintains its ruling that the Daughters had standing to petition for appointment of a Special Purpose Trustee to administer La Mesa LLC and the Film Library due to the vacancy left by Special Trustee Goldman Sachs. The Court rejected the Sons’ standing argument for two independent reasons. The Sons sought reconsideration of only the first reason (the effective date of the modifications). (Motion, p. 5 (requesting the Court only "strike the portion of the Final Ruling stating that the modification of the sub-trusts ‘were to be effective as of the close of escrow’ and deem the February 5 Orders modifying the sub-trust[s] effective immediately.")) The Sons did not seek reconsideration of the Court’s alternative basis to reject this argument: the probate court’s broad inherent powers to take remedial action as necessary, including removing or suspending trustees sua sponte or appointing interim trustees. (Final Ruling, p. 19.) Thus, the Court would reach the same conclusion regarding the Daughters’ standing to seek this relief. However, in modifying the Final Ruling with respect to the effective date, the Court has further updated its reasoning on the standing issue, finding the Daughters regardless had standing to seek this relief as interested persons under Probate Code sec. 48(b). (Final Ruling, p. 18-19.)

CONCLUSION

The Motion for Reconsideration is GRANTED as reflected in the Amended Final Ruling filed alongside this Order.

Sons to give notice.

If the parties do not submit on the tentative, they are encouraged to appear by LA Court Connect rather than in person.


[1] The Sons filed the Motion for Reconsideration in civil case ****1310 rather than probate case SP007923, where the Pacific Trust is at issue. Given that the Motion for Reconsideration seeks modification of the Final Ruling with respect to the effective date of modifications to the sub-trusts of the Pacific Trust, the Motion would have been properly filed in the probate case. Further, the Final Ruling at issue was filed in both the civil case and probate case. However, the in the interests of justice, including providing clarity regarding the construction of prior orders in this matter in light of the Final Ruling, the Court will overlook this issue and reach the merits. [2] The Court GRANTS the Parents\' Request for Judicial Notice of various court orders and filings by the parties between September 3 and November 16, 2021. (Evid. Code sec. 452(d).)

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES

BRIAN WILLIAM CORMAN and ROGER MARTIN CORMAN, derivatively on behalf of CORMAN FAMILY INVESTMENT PARTNERSHIP,

Plaintiffs,

vs.

ROGER WILLIAM CORMAN, individually and as Trustee of the Roger and Julie Corman Family Trust; JULIE CORMAN, individually and as Trustee of the Roger and Julie Corman Family Trust; NEW HORIZONS PICTURE CORP.; CORMAN FAMILY INVESTMENT PARTNERSHIP (nominally); and Does 1-50,

Defendants.

Case Nos.: ****1310; SP007923; and 17STPB07675

Amended FINAL RULING ON MOTIONS TO ENTER JUDGMENT, OSC RE: SALE BY GOLDMAN SACHS, AND PETITION TO APPOINT SPECIAL PURPOSE TRUSTEE

Date: December 6, 2021

Time: 8:30 A.M.

Dept.: 1

INTRODUCTION

These related cases present ongoing disputes between Roger W. Corman and Julie Corman (the "Parents"), Catherine Corman and Mary Corman (the "Daughters"), and Brian W. Corman and Roger M. Corman (the "Sons") over interpretation and enforcement of a settlement agreement intended to separate the parties’ interests in shared assets and terminate pending litigation. The parties\' settlement, the Preliminary Deal Point Memorandum ("PDPM”) dated February 7, 2020, contains two phases. Phase One provides for the separation of ownership interests of the Parents, Sons and Daughters in three properties and termination of pending litigation. Phase Two of the PDPM was intended to address the management and disposition of the Film Library (“the Library”), an asset of La Mesa Films LLC, which is itself an asset of the Pacific Trust. The PDPM provides that the undersigned shall “participate as a settlement officer in the negotiation of the final long-form agreement, and . . . have discretion to assist the Parties in reaching the final terms, as necessary.”

Despite agreeing in the PDPM to dispose of the Library in order to have a complete separation of interests, the parties were unable to agree to specific terms for the sale of the Library. As a result, in an attempt to “assist the parties in reaching the final terms” of an agreement separating the parties’ interests in the Library, the Court previously issued in the Pacific Trust case (Probate Case no. SP007923) an Order to Show Cause Re: Why the Court should not appoint a referee to sell the Library. After briefing and argument from the parties, the Court discharged the OSC, concluding it lacked authority to direct a sale of the Library by enforcing the PDPM under CCP sec. 664.6 or ordering sale under Probate Code sec. 17200. The Court subsequently developed concerns that Special Trustee of the Pacific Trust, Goldman Sachs Trust Company N.A. (“Goldman Sachs” or “GSTC”), was not taking a sufficiently active role in furthering the parties’ goal of separating their interests and/or permitting the parties to waste assets of the Trust on avoidable litigation. On that basis, the Court issued in the Pacific Trust case a separate OSC Re: Why Goldman Sachs should not be ordered to conduct a private sale of the Library in its capacity as Special Trustee of the Pacific Trust.

The Court has now considered the responses to the OSC filed by Goldman Sachs, the Sons, and the Daughters. Goldman Sachs and the Sons generally opposed the sale of the Library by Goldman Sachs, as discussed below. The Daughters did not offer any arguments in support of a sale by Goldman Sachs, instead separately filing a Petition to Appoint Special Trustee of the Pacific Trust and Direct Sale of Assets. The Daughters requested the Court recognize a vacancy in the position of trustee with respect to La Mesa LLC and the Library due to Goldman Sachs’ refusal to administer those assets, and on that basis requested the Court appoint a Special Purpose Trustee to administer those assets, including by selling the Library if appropriate.

In addition to the foregoing dispute over disposition of the Library, the Parents now seek to reduce the PDPM to an enforceable judgment. To that end, the Parents have filed in Civil Case No. ****1310 and Probate Case Nos. SP007923 and 17STPB07675 identical Motions to Enter Judgment and Proposed Judgment including the terms of the PDPM, “boilerplate” terms, and terms inferred or drawn from prior orders of the Court. The Sons have filed an Opposition to the Motions which appear to support an order establishing a complete agreement between the parties, and the Sons have provided a Proposed Order to this effect. The Parents’ Proposed Judgment and Sons’ Proposed Order conflict on several points, as discussed further below.

The Court considered the briefing submitted by the Parents, Sons, and Daughters and issued a Tentative Ruling ahead of the hearing on October 26, 2020.[1] At the hearing, the Court considered oral arguments of counsel and took and the matters under submission to address these new points. On October 27, 2021, the Court issued its Final Ruling Re: OSC Re: Goldman Sachs, Petition to Appoint Special Trustee, and Motions to Enter Judgment in Civil case ****1310 and Probate cases SP007923 and 17STPB07675. On November 5, 2021, the Sons filed a Motion for Reconsideration of the Court’s Final Ruling, which Motion was opposed by the Parents and Daughters. On December 6, 2021, the Court GRANTED the Motion for Reconsideration for the reasons stated in the accompanying order filed on this date, and filed its Amended Final Ruling as follows:

DISCUSSION

Motions for Entry of Judgment

The Parents\' Proposed Terms of Judgment reflect an agreement between the Sons, the Daughters, the Parents, Corman Family Investment Partnership ("CFIP"), New Horizons Picture Corp. ("New Horizons"), and infant minor and beneficiary Caroline Corman. The Judgment is intended to resolve "the petitions, claims, complaints, demands, and causes of action" in Civil case ****1310 and Probate cases 17STPB07675, SP007923, SP007983, and SP007984. Further, the Judgment is intended to resolve "all disagreements and disputes between and among the Settling Parties with respect to the Family Trust, Pacific Trust, the Tessa Trust, the MG Trust, the QPRTs, CFIP, Corman Associates, San Onofre, the Parents\' assets and estates, the Daughters\' and Sons\' assets and estates, and Pictures." The Judgment indicates it "is the intention of the Settling Parties to put a final end to all litigation between . . . the family members and related entities" by "fully releas[ing] the Settling Parties for claims which arose or may have arisen prior to the effective date of the Judgment . . . whether related to the same operative facts" as the foregoing actions or not. The Judgment also notes a separate "Supplemental Memorandum of Agreement" between the Parents and Daughters.

The Judgment restates several verbatim terms of the PDPM and provides several new terms based on prior court orders. It provides that settlement payments "based on values of property" shall be based on the Court\'s determination of the properties\' values in its order dated November 5, 2020 adopting appraisal values as of February 7, 2020 for the La Mesa Property, San Vicente Property, and 2nd Street Property.

The Judgment expressly recognizes that Goldman Sachs "may have [been] relieved . . . of responsibility for administering [La Mesa] LLC, resulting in a vacancy in the office of Trustee" with respect to the Library. The Judgment provides for the Court to "appoint a Special Trustee . . . to dispose of the Film Library LLC . . . to effectuate the Terms and the complete separation of the Parties." The Judgment declines to provide terms for distribution of film rights in the Tessa Trust, requiring Julie to "bring a Petition for Instructions to resolve the form of disposition." The Judgment requires Julie to "assign the beneficial interests in the Black Scorpion notes in equal shares" to the Sons and Daughters. The Judgment concludes with a series of broad-ranging releases and "[o]ther standard boiler plate provisions."

The Sons\' Proposed Order strikes the clause expressing an "intention . . . to put a final end to all litigation between and among the family members and related entities." The Sons\' Proposed Order strikes out a clause indicating the "exchange of all consideration contemplated by the PDPM would not occur until after all issues (including Phase 2 issues) . . . are resolved." The Sons\' Proposed Order strikes the clause regarding the appraisals of the La Mesa Property, San Vicente Property, and 2nd Street Property and order adopting those appraisals as of February 7, 2020. Instead, the Proposed Order states: "[n]otwithstanding any statement to the contrary . . . all of the Parties agree that all of the dollar amounts [assigned to the Properties] shall be adjusted and shall be based on values of the Properties determined based on the following property appraisal process in Sons\' Proposed Escrow Instructions." Further, the Sons\' Proposed Order states the "appraisal dates . . . are not designated \'current,\' and they should be tied to the close of escrow" because "[a]lmost two years have passed since the appraisal dates." The Proposed Order cites to a Merriam-Webster definition of the word "current" and appears to argue current cannot refer to the "escrow closing date." The Proposed Order notes past comments attributed to the undersigned (without citation) and asserts "standard business practice is to have appraisals done within days or weeks of the opening of escrow."

The Proposed Order omits the Parents’ conclusion that a vacancy exists with respect to management of the assets of La Mesa LLC and states the Daughters\' Petition to Appoint Special Trustee is "simply trying to get someone appointed who is not bound by that Order" appointing Goldman Sachs and restricting its ability to manage La Mesa LLC, stating this is "inappropriate" and must "fail." Further, rather than requiring Julie to file a Petition for Instructions as Trustee of the Tessa Trust "to resolve the form of disposition" of film rights, the Brothers\' Proposed Order provides that "[f]ilms should be divided equally between the siblings."

The Sons’ Proposed Order includes significant modifications with respect to the Black Scorpion Notes, stating that the Parents "defaulted in their obligations under the Black Scorpion Loan Modification Agreement [dated May 1, 2002] by selling the Preferred Shares . . . without requisite prior approval." Based on this default, the Proposed Order requires the Parents to "wire-transfer from the Black Scorpion Notes Funds [to the Brothers, Daughters, the Tessa Trust] current funds in the amount to be confirmed with [the Parents] on or before to [sic] the Closing Date [by the Sons]." If any balance remains, the Parents "are to deliver such remaining balance of the Funds" to the Sons first and then "in equal shares to each of [the Sons and Daughters] pursuant to separate wiring instructions."

Finally, the Proposed Order narrows the scope of the series of releases at the end and expressly declines to "release any claims arising out of the Order Approving Settlement Agreement, dated May 13, 2014, issued in Case no. SP007923 or any PDPM Phase 2 issues, including without limitation, the Film Library and the Black Scorpion note."

Core Disputes

Based on the foregoing, there are five primary points of dispute: (1) the applicable appraisal value dates, (2) the appointment of a Special Trustee to manage La Mesa LLC, (3) the distribution of the Tessa Trust film rights, (4) the Black Scorpion Notes, and (5) the scope of the releases (particularly with respect to claims relating to the approval of the PDPM, the Library, and the Black Scorpion Notes). Further, the parties submitted competing escrow instructions in support of their orders. The Court addresses each issue in turn.

On the first issue, the Sons contend the appraisal values of the properties must be updated, while the Parents contend the Court has already adopted appraisal values as of February 7, 2020. The Sons recognize that the Court has already "determined the values of those properties" at issue in the PDPM, but argue the Court should not continue to use those values. The Sons argue the "properties [should] be reappraised now and brought forward to current values at the close of escrow." On this basis, the Sons\' escrow instructions provide for reappraisal as of a more current date. The Parents argue this is a veiled motion for reconsideration of the Court’s order adopting appraisal values as of February 7, 2020. The Sons further recognize that the Court has already held the reference to "current" in the PDPM for the “current bank value” of San Onofre LLC "means \'as of the date that escrow closes,\'" an interpretation which the Sons dispute.

The Court appointed two appraisers to conduct appraisals of the La Mesa Property, San Vicente Property, and 2nd Street Property as of February 7, 2020 and as of July 20, 2020. At a hearing on August 20, 2020, the Court concluded the valuations of these properties for purposes of the PDPM would use the pre-COVID-19 appraisal values as of February 7, 2020, noting that the parties would not have anticipated subsequent effects of COVID-19 on the property values in entering into the PDPM. (See 8/20/20 Transcript, p. 25-27 (adopting appraisal values as of February 7, 2020 rather than June 22, 2020)) At the same hearing, the Court concluded the reference to the “current bank value” of San Onofre LLC means current at the close of escrow. (See 8/20/20 Transcript, p. 58.)

The Sons had ample opportunity to argue these topics before and at the hearing. Further, on November 5, 2020, the Court issued a written ruling adopting the valuations of the La Mesa and San Vicente Properties as of February 2020. The Sons did not move for reconsideration of this decision or otherwise timely challenge the Court’s determination that the PDPM must be interpreted using pre-COVID-19 appraisal values for the properties identified above and closing date values for the San Onofre LLC bank account. (CCP sec. 1008(e) (“No application to reconsider any order or for the renewal of a previous motion may be considered by any judge or court unless made according to this section.”)) [2]

At the hearing, the Sons argued again that the Court should reconsider these determinations because the parties have taken longer to complete settlement than expected. Assuming arguendo that the passage of time since the appraisals constitutes a new fact, the Sons did not timely move for reconsideration. (CCP sec. 1008(a).) Moreover, the prospect of continued litigation was not unknown to the Court or parties in the appraisal proceedings. The Sons also argued at the hearing that Phases 1 and 2 of the PDPM have effectively “merged” at this point, arguing this supports reconsideration of the order adopting earlier valuation dates. However, the “merger” of Phase 1 and Phase 2 was not a factor in the Court’s adoption of the February date. Any overlap between the phases does not support reconsideration of the appraisals adopted after lengthy litigation.

In adopting these appraisals, the Court used a procedure recommended by the Sons\' counsel, offering the parties an "opportunity to give information to the Court-ordered appraisers," who would then provide a "short supplement" addressing this information, after which the Court would "make[] a determination of value . . . that we put in the settlement agreement" based on briefing from the parties. (8/20/20 Transcript, p. 19:26-20:17; p. 8:4-9:4 (Sons\' counsel proposing this procedure); p. 23:11-24:28 (Sons\' counsel stipulating to said procedure)) Following stipulation to this procedure, the Court indicated it would "just use the February date" for appraisals rather "than the June date," concluding the pre-COVID-19 valuations would be more appropriate. (8/20/20 Transcript, p. 26:5-11.) The Court considered the Sons\' arguments that using the February dates would force them to buy out certain properties at inflated pre-COVID-19 values, but rejected these arguments, noting the flux of the COVID-19 pandemic made it difficult to conclude how long property values would be depressed, finding use of the February date avoided use of a "moving target" date within the course of the pandemic. (8/20/20 Transcript, p. 26:5-11.)

The Sons subsequently litigated the appraisals consistent with this procedure, including by filing objections which did not contest use of the February date. On November 5, 2020, the Court denied those objections and approved the appraisals as of February 7, 2020. The opportunity to contest the use of the February date has long passed and the Court declines to reconsider these fully litigated issues. The Parents’ Proposed Judgment correctly identifies the applicable appraisal values and “current” value of the San Onofre LLC bank account.

On the second issue, the Parents (and Daughters) contend Goldman Sachs has left a vacancy in the position of trustee with respect to La Mesa LLC and the Library. The Parents’ Proposed Judgment provides for appointment of a Special Trustee to manage La Mesa LLC and sell the Library. By contrast, the Sons contend the Petition to Appoint Special Trustee is an end-run around the Operating Agreement of La Mesa LLC, as the Sons contend the Operating Agreement controls the disposition of the Library. The Sons’ Proposed Order does not recognize a vacancy in the position of trustee and does not provide for appointment of a Special Trustee. The Court addresses this issue and the Daughters’ Petition to Appoint Special Trustee infra at p. 10-14.

On the third issue, the parties dispute how to distribute assets of the Tessa Trust. The Parents’ Proposed Judgment requires Julie to file a Petition for Instructions regarding disposition of the film rights in the Tessa Trust. By contrast, the Sons’ Proposed Order provides the “[f]ilms should be divided equally between the siblings.” The Proposed Judgment appropriately provides for later determination of the means for distribution of the Tessa Trust film rights. The PDPM provides that “50% interest in all assets [of the Tessa Trust shall] be distributed to [the Sons], in kind or in cash, to be determined in Phase 2.” It further states that the “implementation of the distribution of the film rights in the Tessa Trust shall be dealt with in Phase 2.” Thus, it is premature for the Sons to propose an equal divide of the film rights during Phase 1. Whether the film rights are directly distributed or distributed as cash is an issue to be determined in Phase 2. The Parents’ Proposed Judgment correctly provides for a subsequent Petition for Instructions at the appropriate time.

On the fourth issue, the Proposed Judgment requires Julie to "assign the beneficial interests in the Black Scorpion notes in equal shares" to the Sons and Daughters. By contrast, the Sons’ Proposed Order provides for wire transfers of “Black Scorpion Notes Funds,” stating the Parents defaulted under the Black Scorpion Loan Modification Agreement by selling Preferred Shares of Concorde New Horizons. The PDPM provides that “[n]othing herein is meant to change or supersede . . . obligations relating to the Black Scorpion loan, which shall be dealt with in Phase 2” and similarly provides the “implementation of the distribution of and issues relating to the Black Scorpion note shall be deal[t] with in Phase 2.”The Court requested supplemental briefing regarding the Black Scorpion loan, which the Sons, Daughters, and Parents provided.[3]

In particular, the Parents’ and Daughters’ supplemental briefing discussed prior litigation relating to the Black Scorpion loan (among other issues). Judge Reva Goetz issued a Statement of Decision on this matter on October 3, 2013. As relevant here, Judge Goetz concluded the "Black Scorpion Loans and their extensions are permitted by the Pacific Trust" and "any payments attributed to repayment of the Black Scorpion Loans . . . shall be applied to the total Black Scorpion Loan Debt owed to the three Trusts and individual beneficiaries." The Statement of Decision notes that Brian disputed "that the Black Scorpion loans are not due until after the death of the second parent," observing that Brian "did not state the basis" for this position. While the Sons appealed the decision, they did not contend on appeal that Judge Goetz erred in finding the Black Scorpion loans “and their extensions . . . permitted” or erred in finding the Black Scorpion loans were due upon the death of thee surviving parent.[4] Judge Goetz’s decision was affirmed in part and reversed in part.

The Sons contend the Parents are immediately responsible for payments under the Black Scorpion Loan Modification Agreement and argue requiring immediate payment would further the goal of complete separation of interests. The Sons again do not offer any argument showing the Parents are immediately responsible for payments, only arguing this would further the separation of interests. By contrast, the Parents contend payments are not due until after both Parents are dead, and this argument is supported by the January 2006 Amendment to the Notes, which Judge Goetz recognized as a “permitted” extension. And here, as in the trial before Judge Goetz, Brian has not explained why payments would be immediately due given the modification of the due date for full payment under the Note. The Sons’ argument that payments are due during the Parents’ lifetime was considered and rejected in this final prior decision, which is collateral estoppel on the issue. (Frommhagen v. Bd. of Supervisors (1987) 197 Cal.App.3d 1292, 1301.) Regardless, the Sons have not raised new grounds showing that payment is due during the Parents’ lifetime.

Critically, if the Parents are not responsible within their lifetime for payments to the Sons, it is not clear that the Court needs to take any further action to achieve separation of the parties’ interests with respect to the Black Scorpion Loan. The Parents’ Proposed Judgment provides for separation of the parties’ interests without accelerating the Black Scorpion Loan in a manner contrary to its terms. The Sons failed to persuade the Court that any further alteration is required to achieve separation of interests during their lifetime given that the Sons have no claim to the funds during the Parents’ lifetime.

On the fifth issue, the Parents’ proposed releases are significantly broader than the Sons’ releases and the Sons do not attempt to explain many of their edits to the proposed releases. The Sons’ edited releases, compared to the Parents’ proposed releases, would fail to release claims against "entities owned in whole or in part or controlled by the Parents” or the parties\' "attorneys, accountants, business managers, representatives, agents, employees, officers, directions, partners, affiliates, affiliated entities, heirs, assigns, and successors-in-interests." Moreover, the Sons’ releases would not release claims accruing between February 10, 2020 and "the effective date of the Judgment effectuating these Terms," or claims "arising out of the Order Approving Settlement Agreement . . . or any PDPM Phase 2 issues, including . . . the Film Library and the Black Scorpion note."

In relevant part, the PDPM provides that the “long form agreement shall include mutual and general releases for all claims . . . for all parties in all capacities.” Specifically, the PDPM provides for “[r]eleases from Pacific Trust and beneficiaries of all irrevocable trusts, New Horizons, [the Parents] individually and in all other capacities, as well as all of [the Parents’] other entities as well as entities of [the Sons and Daughters].” The releases do not “apply to issues of estate, gift, and income taxes, which shall be dealt with in Phase 2.”

Some of the Sons’ proposed edits are facially inconsistent with the PDPM. The PDPM requires releases for “all claims . . . for all parties in all capacities” and encompass the Parents “individually and in all other capacities, as well as all of [their] other entities as well as entities of [the Sons and Daughters].” The Sons’ proposed releases fail to release claims against “entities owned in whole or in part or controlled by the Parents.” The Sons’ proposed releases also expressly omit claims relating to approval of the PDPM, disposition of the Library, the Black Scorpion loan, and generally any claims accruing after February 10, 2020. The purpose of the settlement is to achieve a global resolution and end of litigation, hence why the PDPM anticipates releases for “all claims.” The PDPM lacks any language supporting the omission of claims relating to the Library or Black Scorpion loan.

While the PDPM itself does not provide for a release of agents and employees, such a release is commonplace and consistent with the stated purpose of the PDPM. Without such a release, the parties would be free to pursue litigation against affiliated persons and entities despite the intent to reach a global settlement, thereby frustrating the purpose of releasing claims in the first place. The Sons indicated at the hearing that they oppose releases of these affiliated entities on the grounds that the PDPM does not provide for it, notwithstanding that such releases are consistent with other express terms and purposes of the PDPM. The Court further found this argument unpersuasive given the Sons’ omission of releases for related entities, which are expressly provided for in the PDPM, and the Sons have not offered any practical basis to treat such related persons differently. (See also Fassberg Constr. Co. v. Housing Authority of City of Los Angeles (2008) 152 Cal.App.4th 720, 767 (describing a "release of claims against numerous persons and entities related to the Housing Authority as an attempt to identify any persons and entities whose potential liability may derive from or depend on that of the Housing Authority," noting such a release "is typical of many releases"))The Sons noted at the hearing that the PDPM indicates any “releases that extend to other family members . . . shall be dealt with in Phase 2,” arguing this shows the current releases are overbroad. This argument would, however, apply to only a small portion of the Parents’ releases of related persons (“heirs, assigns, and successors-in-interests”), and the Sons concede (as discussed above in the context of appraisals) that the parties and Court are already addressing certain Phase 2 issues. (See, e.g., Sur-Reply, p. 2-3.)

As discussed above, the Sons’ proposed releases did not sufficiently encompass the broad releases contemplated in the PDPM.[5] The Parents’ proposed releases are more consistent with the PDPM overall. To the extent the Sons oppose the addition of affiliated agents and employees to the releases, they have not articulated any reason to exclude these persons from the releases where failing to release claims against those persons would frustrate a primary purpose of the settlement. The Parents’ proposed releases otherwise hew to the PDPM.

Finally, the parties have submitted conflicting escrow instructions. In particular, the Sons’ instructions provide for close of escrow by November 30, 2021 provided that the escrow (1) “has received all of the Funds . . . and [is] unconditionally and irrevocably prepared to wire or otherwise disburse the same” as necessary and (2) has “received all of the Documents and [is] unconditionally and irrevocably prepared to deliver the Non-Recordable Document[s]” as necessary. Further, the Sons’ instructions provide that each will receive equal 25% shares of 50% of CFIP’s assets. On the other hand, the Parents’ instructions do not provide any specific date for close of escrow and provide for the Sons to each receive equal shares of 49.5% of CFIP’s assets rather than 50% provided in the PDPM.

The Court cannot approve the Sons’ proposed escrow instructions at this time as there is essentially no probability the parties will be able to dispose of the Film Library by November 30, 2021. Further, there is some evidence the Sons may pursue an appeal from this ruling or orders in connection with the PDPM, Black Scorpion Loan, and Library, which would frustrate the intent of the parties to the PDPM to end all litigation.[6] It would frustrate the purpose of the settlement for the Parents to pay consideration and still be subject to significant litigation by the Sons, particularly where the Sons have initiated much of the other litigation which prompted the Parents and Daughters to pursue a global settlement. The escrow instructions must be drafted to ensure, to the extent possible, complete termination of litigation between the parties upon close of escrow.

As a result, the escrow instructions must include a closing date at least thirty days after the Judgment reflecting the PDPM becomes final (i.e., when the time to appeal lapses or when the appellate court issues its remittitur after a timely appeal) in order to ensure an end to litigation. While the Sons’ proposed date is too early at this juncture, the Parents’ proposed escrow instructions do not provide any specific closing date. A closing date linked to finality of the Judgment is necessary to ensure the parties thereafter proceed to effectuate their settlement, particularly as the Sons expressed concerns the settlement will not be promptly implemented without an escrow closing date. The Parents’ proposed escrow instructions therefore equally cannot be approved.

With respect to shares of CFIP, the Sons argue the PDPM provides for 50% of CFIP’s assets. The Parents, in their Reply, claim the “Sons, through counsel, acknowledged the mutual mistake in the PDPM, and previously agreed to accept their 49.5% interest, as detailed in multiple drafts of the Long Form Agreement.” The Court lacks direct evidence on that point at this time. More importantly, the PDPM provides that "[n]o agreement other than an agreement approved by Court order may vary the terms" of the PDPM. The PDPM controls on this issue, and the Sons’ escrow instructions correctly provide for this distribution.

In sum, the Motions to Enter Judgment are each GRANTED IN PART and DENIED IN PART. The Motions are GRANTED with respect to the Parents’ Proposed Judgment, but not as to the proposed escrow instructions. The Court has considered the material points of conflict between the Parents’ Proposed Judgment and Sons’ Proposed Order, including arguments raised at the hearing regarding the Black Scorpion Loan and scope of releases. The Parents’ Proposed Judgment reflects the terms and intent of the PDPM, subsequent orders related to the PDPM, and relevant prior litigation. But neither the Sons’ nor Parents’ proposed escrow instructions can be approved in their current state. Any future proposed escrow instructions must reflect a closing date at least thirty days after the judgment becomes final (which will undoubtedly be later than the Sons’ proposed closing date of November 30, 2021) and the established percentages under the PDPM for CFIP asset transfers (absent any approved modification of the PDPM).

OSC Re: Sale of Film Library by GS

On July 29, 2021, the Court issued an OSC Re: Why Goldman Sachs should not be ordered to conduct a private sale of the Library in its capacity as Special Trustee of the Pacific Trust. The Court indicated continued litigation without separation was leading to avoidable waste of trust assets to pay litigation expenses and expressed the view that Goldman Sachs should take a more active role in curbing this waste.

On August 12, 2021, Goldman Sachs filed a response arguing it has no responsibility to administer the Library as an asset of La Mesa LLC. It argued the order appointing it Special Trustee specifically absolved it of responsibility to manage these assets. (6/25/14 Order ("GSTC shall have no duties . . . with respect to the Special Asset LLCs, and is permanently released from having to administer, manage, oversee, or exercise any discretion over the Special Asset LLCs or the assets to be owned by the Special Assets LLC, except as such duties are expressly identified in the LLC Operating Agreements.")) Goldman Sachs indicated it “would likely . . . request the Court to accept its resignation as Trustee” if ordered to sell the Library. (Rice Decl., para. 10.) Further, Goldman Sachs argued it was not supporting the waste of Trust assets by making distributions because any distributions are preliminarily assessed "to confirm that the distributions do not exceed an amount necessary to preserve Trust assets." (Response, p. 10-11.) It also indicated it "has made o discretionary distributions to [the Sons] for legal fees since March 2020, when GSTC understands the beneficiaries, among others, agreed on a settlement." (Rice Decl., para. 9.)

Goldman Sachs and the Sons both argued any disputes between the Sons and Daughters regarding disposition of the Library were subject to arbitration under Paragraph 8.4 of the Operating Agreement for La Mesa LLC due to the Sons’ and Daughters’ status as members of the LLC.[7] The Court did not find this argument persuasive given that the parties have engaged in significant litigation regarding the sale of the Property and at no point sought to compel arbitration of this known dispute. The parties specifically engaged the Court (through the undersigned) to assist with and enforce the parties’ settlement providing for disposition of the Library. (See Bower v. Inter-Con Security Systems, Inc. (2014) 232 Cal.App.4th 1035, 1042 ("Although participating in the litigation of an arbitrable claim does not by itself waive a party\'s right to later seek to arbitrate the matter, at some point continued litigation of the dispute justifies a finding of waiver," such as where "the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate".))

Relatedly, the Parents and Caroline’s GAL are not parties to the La Mesa Operating Agreement, yet have expressed an interest in the PDPM in separation of interests in the Film Library—the Sons and Goldman Sachs have not shown that these nonparties would be bound by the arbitration clause here. (CCP sec. 1281.2(c) (arbitration may be unavailable if a "party to the arbitration agreement is also a party to a pending court action . . . with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.")) To the extent the litigation over the Library does not constitute waiver, there is also some possibility of conflicting rulings regarding the Library in litigation with non-signatories to the Operating Agreement. Finally, it must be recognized that the dispute over disposition of the Library is not merely a dispute internal to La Mesa LLC, an LLC founded by the Corman family for the purpose of holding the Film Library. The parties’ effort to resolve persistent family litigation by separating their interests in family-owned assets is important context for the disposition of the Library. It is not clear that this dispute is capable of being cleanly severed from the parties’ other interest-separation disputes.

Regardless, it is sufficiently clear that Goldman Sachs is at minimum unwilling to handle the sale and further the order appointing Goldman Sachs expressly absolves it of responsibility for managing La Mesa LLC and its assets. (Rice Decl., para. 10 (expressing intent to resign if ordered to sell the Library); 6/25/14 Order.) Therefore, the Court discharges the OSC Re: Why Goldman Sachs should not be ordered to sell the Library on the grounds that Goldman Sachs lacks authority to sell the Library and, even if ordered to do so, has indicated it would resign.

Petition for Appointment of Special Trustee

The Daughters request the Court appoint James Sullivan the Special Purpose Trustee of the Pacific Trust “to administer the [Trust] with respect to the sale of the Film Library rights/La Mesa Pictures, LLC to a third party on the best available price and terms." Further, the Daughters requested Sullivan be authorized "to retain an agent to conduct the sale.” The Daughters argue there is a vacancy in the position of trustee with respect to La Mesa LLC, which is an asset of the Pacific Trust, where Goldman Sachs has disclaimed responsibility to manage the assets of La Mesa LLC under the terms of its June 25, 2014 appointment order. The Sons oppose the Petition on several grounds.

First, the Sons argue the Daughters lack standing to petition to appoint a Special Trustee here because they are not beneficiaries of the Sons’ sub-trusts, two of four sub-trusts in the Pacific Trust with the other two sub-trusts being for the Daughters’ benefit. The Sons claim the Daughters "assert that they have standing because they are beneficiaries of the Sons’ Pacific Trust," and rebut this by pointing out that the Daughters are not beneficiaries of the Sons\' sub-trusts as of February 5, 2021. (Objections, p. 2-3.) This argument is rejected.

To the extent the Sons argue the Daughters lack standing to petition to appoint a special trustee of the Sons’ sub-trusts because they are not beneficiaries, this argument is rejected. The Sons’ and Daughters’ sub-trusts were modified effective February 5, 2021 to eliminate the interests of the Daughters in the Sons’ sub-trusts and vice versa, as reflected in orders dated February 5, 2021. But the Sons have not shown that the Daughters lack standing as interested persons within the meaning of Probate Code sec. 48(b), a flexible standard under which standing “may vary from time to time and shall be determined according to the particular purposes of . . . any proceeding.” (Prob. Code sec. 48(b).) “[S]tanding for purposes of the Probate Code is a fluid concept dependent on the nature of the proceeding before the trial court and the parties\' relationship to the proceeding, as well as to the trust (or estate).” (Arman v. Bank of America, N.T. & S.A. (1999) 74 Cal.App.4th 697, 702-703.) The standing inquiry “requires [the probate court] to evaluate the underlying policy considerations regarding a specific probate proceeding in determining whether the person or party is sufficiently interested to intervene.” (Estate of Maniscalco (1992) 9 Cal.App.4th 520, 524.)

Here, the circumstances support a finding that the Daughters are interested persons for probate standing purposes with respect to the Sons’ sub-trusts. The Film Library is an asset of the Pacific Trust as a whole and each sub-trust has a proportionate interest in the Library. In the PDPM, the Sons, Daughters, and Parents agreed to separate the parties’ interests with the assistance of the undersigned, expressly including final disposition of the Film Library, an asset of the Pacific Trust. Goldman Sachs, the current Special Trustee of the Pacific Trust, has confirmed it is unwilling to administer the Library or La Mesa LLC under the terms of its appointment order. Thus, as discussed in the Final Ruling, there is a vacancy in the position of trustee with respect to the Library. The Daughters plainly have a sufficient interest in administration of the Library, both as beneficiaries of sub-trusts with proportionate interests in the Library and under the PDPM wherein all parties agreed to final disposition of the Library. (Prob. Code sec. 15660(d) (vacancy in the office of trustee which “is not filled as provided in subdivision (b) or (c)” may be filled “on petition of any interested person…”)) In light of the limited vacancy in the position of trustee, the PDPM, and the Daughters’ interests in the Library through their sub-trusts, the Daughters have standing to seek appointment of a Special Purpose Trustee to administer the Library. Given the Sons’ proportional interests in the Library pursuant to their sub-trusts, the Daughters’ standing to petition for appointment extends to appointment of a Special Purpose Trustee to administer the Sons’ sub-trusts in connection with the Library.

In addition to the foregoing, the “probate court has the ‘inherent power to decide all incidental issues necessary to carry out its express powers to supervise the administration of the trust” or “‘take any other action necessary or proper to dispose of the matters presented’ by [a] section 17200 petition.” (Schwartz v. Lawson (2008) 164 Cal.App.4th 419, 428.) In this regard, the probate court has broad inherent powers to “take remedial action,” including by removing and/or suspending a trustee sua sponte and appointing interim trustees. (Id.)

Next, the Sons claim the Petition is defective because the Daughters "fil[ed] a derivative action on behalf of Corman Family Investment Partnership . . . against the Corman Parents individually and New Horizons Picture Corp.," arguing this was improper because the Film Library "is an asset of La Mesa Pictures, LLC." (Objections, p. 2.) Other than the undisputed fact that the Library is an asset of La Mesa, the Court\'s review of the Daughters\' Petition does not support the Sons\' statements above.

The Sons (and Goldman Sachs, as noted above) argue any dispute with the Daughters relating to the Library is subject to arbitration under the Operating Agreement of La Mesa LLC. This argument was addressed and rejected above. The Sons relatedly argue the Court must respect the Operating Agreement as the “one agreement the parties have reached” regarding the Library, arguing this Agreement (not any trustee) would control disposition of the Film Library. Section 3.3(B)(i) of the Operating Agreement requires at least three of the four Members (the Sons and Daughters) to consent to “extraordinary transactions,” including the “the sale, exchange or other disposition of all, or substantially all, of Company’s assets occurring as part of a single transaction or plan or a series of transactions.” The Library is the principal asset of La Mesa LLC, and so the Sons contend the sale of the Library is an extraordinary transaction which would require at least one of the Sons to consent.

However, the Operating Agreement plainly does not control a potential sale of La Mesa LLC itself, the LLC being an asset of the Pacific Trust. The Petition to Appoint Special Trustee requests the Special Purpose Trustee be afforded authority to “administer the [Trust] with respect to the sale of the Film Library rights/La Mesa Pictures, LLC to a third party.” If necessary, the LLC itself (which is an asset of the Trust) can be sold without breaching the Operating Agreement. There is nothing indicating the Operating Agreement was intended to restrain the trustee’s ability to manage assets of the Trust. On the other hand, the Probate Code specifically provides a trustee authority to “dispose of property, for cash or on credit, at public or private sale, or by exchange.” (Probate Code sec. 16226; see Probate Code sec. 16247 (trustee may retain agent to administer sale))

At the hearing, the Sons argued Section 6.1 of the Operating Agreement would preclude the Trustee from selling the LLC itself.[8] However, Section 6.1 merely provides that a “[m]ember shall not be entitled to assign, convey, sell, encumber or in any way alienate all or any part of its Interest in Company except with the written consent of all other [interested] Members . . . and all of the corresponding Beneficiaries.” But the Special Purpose Trustee is not a member under the Operating Agreement. Section 1.14(P) defines “Members” as Goldman Sachs “or its successor” as trustee of the four sub-trusts “and any other person who may subsequently be a signatory to the Agreement and admitted as a Member in accordance with Paragraph 2.6.” Goldman Sachs is, however, still the Special Trustee of the four sub-trusts. It is unclear to the Court that the appointment of a Special Purpose Trustee would establish a “successor” trustee for purposes of the Operating Agreement. The Special Purpose Trustee is not now becoming a member under Section 2.6 of the Operating Agreement. The Court therefore does not find Section 6.1 an insurmountable obstacle to the Trustee’s sale of (interests in) the LLC.

Regardless, the Court is not at this time passing on whether a sale of the Film Library is reasonable or necessary. The Court is merely appointing a Special Trustee to fill the vacancy in management of assets of La Mesa LLC and to determine whether a sale of the LLC is desirable. To the extent the Special Trustee believes a sale of the Library is desirable, the next step would be for the Special Trustee to file a Petition for Instructions, which the parties would have an opportunity to address.

Finally, the Sons argue the Daughters must post bond to pursue the Petition. The PDPM states that "any party [that] brings any litigation against any other party to this agreement (other than to enforce this agreement) . . . shall post a bond." The Sons fail to explain how the Petition is "litigation against any other party" to the PDPM. The Petition is explicitly intended to fill a vacancy in management of assets of the Trust, a vacancy confirmed by Goldman Sachs\' clarification that it will not manage La Mesa LLC even if ordered to do so.

To the extent the Sons argue the Petition is intended "to enforce an agreement not reached" against them, this argument is rejected. While the Sons repeatedly claim this Court has held "there was no agreement reached to be enforced regarding the disposition of the Film Library," this does not indicate the parties have “not reached” an agreement as the Sons claim. The Court concluded the parties had not agreed to sufficiently specific terms for the Court to order a sale under CCP sec. 664.6. But the Court has consistently taken the view that the PDPM reflects an agreement to dispose of the Library and an agreement for the undersigned to "assist the Parties in reaching the final terms, as necessary”—hence the two OSCs Re: Sale of the Library attempting to facilitate disposition of the Library.

Thus, the Petition does seek to enforce the relevant terms of the parties’ agreement in the PDPM, albeit not under CCP sec. 664.6. (See In re Marriage of Woolsey (2013) 220 Cal.App.4th 881, 898 (the “statutory procedure for enforcing settlement agreements under section 664.6 is not exclusive” but “merely an expeditious, valid alternative statutorily created”)) An agreement may be enforceable even if insufficiently specific to be enforceable under CCP sec. 664.6. Bond is not required under the PDPM for any litigation “to enforce this agreement.” The Petition falls within this exception.

The Petition to Appoint Special Purpose Trustee is GRANTED. The Court finds there is a vacancy in the position of trustee with respect to La Mesa LLC, a significant asset of the Pacific Trust which contains the Library, due to Goldman Sachs’ inability or unwillingness as Special Trustee to manage these specific assets. Thus, the Court appoints James S. Sullivan the Special Purpose Trustee of the Pacific Trust with authority to administer La Mesa LLC as a trust asset, including by disposing of the asset through private sale (with court approval) if appropriate and necessary. (Prob. Code sec. 17200(b)(1); sec. 16226.)

CONCLUSION

The Parents’ three Motions to Enter Judgment in civil case ****1310 and probate cases SP007923 and 17STPB07675 are GRANTED, except with respect to the Parents’ proposed Escrow Instructions. Any future proposed escrow instructions must provide an appropriate closing date and reflect agreed-upon percentages for distribution of CFIP assets.

The OSC Re: Sale by Goldman Sachs is DISCHARGED.

The Petition to Appoint Special Purpose Trustee is GRANTED. James S. Sullivan is appointed Special Purpose Trustee of the Pacific Trust with respect to La Mesa Pictures LLC.


[1] The Parents filed Requests for Judicial Notice of six volumes of exhibits in support of the Motions to Enter Judgment, as well as a Request for Judicial Notice of two exhibits in support of their Brief Re: Black Scorpion Loan. The Court GRANTS the Parents’ requests for judicial notice of Exhibits 1-9, 18-21, 29, 31-39, 42, 45, 47-50, 52, 54-56, 58-63, all of which are court filings. The Court GRANTS the Parents’ requests for judicial notice of Exhibits 10-17, 22-28, 30, 40-41, 43-44, 46, 51, 53, 57, and 64, which are court orders or judgments. The Court DENIES the request for judicial notice of Exhibit 66, Facebook, Inc. v. Pacific Northwest Software, Inc. (9th Cir. 2011) 640 F.3d 1034, which the Court did not find instructive here. The Court also takes judicial notice of Exhibits 1 and 2 in support of the Parents\' Brief Re: Black Scorpion Loan, which are a court order approving the PDPM and the relevant Notice of Ruling.

[2] The Parents have requested sanctions under CCP sec. 128.7 for improperly moving for reconsideration. This request is DENIED. Sanctions are available under Section 128.7 only by means of a “motion for sanctions . . . made separately from other motions or requests,” which the Parents failed to do. (CCP sec. 128.7(c).) The “[n]otice of motion shall be served . . . but shall not be filed with or presented to the court unless, within 21 days after service of the motion, or any other period as the court may prescribe, the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected.” (CCP sec. 128.7.) The Parents moved for sanctions in their Reply to the Sons’ Opposition rather than filing a separate Motion and withholding the Notice of Motion for the required safe harbor period. Sanctions are thus procedurally unavailable. The Court expresses no view as to the merits of a separate Motion for Sanctions at this time.

After recognizing that the "parties ought to be beyond reciting litigation history" and instead should "focus[] on obtaining orders . . . that will resolve their disputes," the Sons summarize the "history of litigation” for the Court. The Sons assert their mother Julie abused Roger W., Catherine, and Mary over the years, leading Roger W. to "beg[ Roger M.] to file [the litigation] to end Julie Corman\'s abuse." (Opposition, p. 5.) The Sons contend this litigation was largely successful and allege Caroline\'s GAL concluded the Parents "comitt[ed] tax fraud." (Opposition, p. 5-6.) The Sons present this as “the context of this litigation. " (Opposition, p. 6.)

The Parents seek to strike the foregoing under CCP sec. 436, which permits the striking of “any irrelevant, false, or improper matter inserted in any pleading.” The request to strike is granted as to the statements of abuse and (later rescinded) allegations of tax fraud by the GAL, which are irrelevant to the issues raised by the Motion to Enter Judgment (primarily interpretation of the PDPM, particularly in light of prior orders interpreting the PDPM). The request to strike is denied as to the Sons’ summary of the procedural history of this litigation, which is not “irrelevant, false, or improper.” The procedural history presented is not “false” or “improper” within the meaning of Section 436, even if the Parents might characterize matters differently.

The Court therefore strikes page 5, lines 8-20 and page 6, lines 2-5. The Parents\' Objections to Exhibits 1, 2, 3, and 4 of the Supplemental Taitelman Declaration are SUSTAINED as irrelevant. The Objections to paragraphs referencing these exhibits are overruled as moot due to the striking of these passages. The Parents’ Objection to Exhibit 5 is SUSTAINED as irrelevant, as while the Court has not reviewed the deposition, the Sons\' representations regarding its contents do not suggest it is relevant. The Parents’ request to strike the Sur-Reply as a whole is DENIED, as the Sur-Reply was warranted by the Parents’ request for sanctions, which was procedurally improper under CCP sec. 128.7(c).

[3] The Court granted the Parents and Daughters ex parte relief permitting them to belatedly file supplemental briefing regarding the Black Scorpion Loan.

[4] On January 1, 2006, the Parents executed a First Amendment to Promissory Note modifying the Note to state that the "entire principal balance of this Note together with interest accrued thereon as of such date shall be paid in full on the date of death of the survivor of the two (2) general partners," the Parents.

[5] The Court also notes that Sons’ proposed releases are not uniform in some respects. The Sons edited their releases to expressly discharge “their issue” but did not release the Daughters\' issue (if the Daughters have any). The Sons struck language purporting to “discharge” their claims against the Parents and Daughters but kept the language providing for "release and discharge" of claims against the Sons. The Sons’ striking of “discharge” in some releases but not others indicates they find the presence of this term significant, and so it is incumbent on the Sons to explain why it is included in some but not all of their proposed releases.

[6] This conclusion is supported by the Sons’ modifications to releases in the Proposed Judgment to expressly exclude these claims. The Court expresses no view as to the timeliness or propriety of any such appeals, but recognizes that such appeals are likely to ensue.

[7] The Sons also argued in passing that the “PDPM contains language [indicating] that the four siblings only can decide on the disposition of the Film Library,” arguing the Trustee lacks authority to dispose of the Library. (OSC Response, p. 3.) Regardless of how the relevant language is interpreted, the Sons concede the language was "stricken." (Id.)

[8] The Court observes as well that the PDPM does appear to contemplate sale of the LLC, expressly referring not to the Film Library but to the “Film Library LLC (held within the Pacific Trust)” and to “disposition of “the Film Library LLC rights.” The proposal to sell interests in the LLC itself rather than the LLC’s interests in the Library thus has some precedent in this matter.

'


b'

Case Number: ****1310 Hearing Date: October 26, 2021 Dept: 1

Tentative Ruling

Judge David J. Cowan

Department 1


Hearing Date: Tuesday, October 26, 2021

Case Name: Brian William Corman, et al. v. Roger W. Corman, et al.

Case No.: ****1310; SP007923, SP007983, SP007984 and 17STPB07675

Matters: Motion to Enter Judgment; OSC Re: Goldman Sachs; Petition to Appoint Special Purpose fTrustee


Ruling: The Motion to Enter Judgment is GRANTED, except with respect to the Parents’ proposed Escrow Instructions.

The OSC Re: Sale by Goldman Sachs is DISCHARGED.

The Petition to Appoint Special Purpose Trustee is GRANTED. James S. Sullivan is appointed Special Purpose Trustee of the Pacific Trust with respect to La Mesa LLC.


INTRODUCTION

These actions present ongoing disputes between Roger W. Corman and Julie Corman (the "Parents"), Catherine Corman and Mary Corman (the "Daughters"), and Brian W. Corman and Roger M. Corman (the "Sons") over interpretation and enforcement of a settlement agreement intended to separate the parties’ interests in shared assets and terminate pending litigation. The parties\' settlement, the Preliminary Deal Point Memorandum ("PDPM”) dated February 7, 2020, contains two phases. Phase One provides for the separation of ownership interests of the Parents, Sons and Daughters in three properties and termination of pending litigation. Phase Two of the PDPM was intended to address the management and disposition of the Film Library, an asset of La Mesa Films LLC, which is itself an asset of the Pacific Trust. The PDPM provides that the undersigned shall “participate as a settlement officer in the negotiation of the final long-form agreement, and . . . have discretion to assist the Parties in reaching the final terms, as necessary.”

Despite agreeing in the PDPM to dispose of the Film Library in order to have a complete separation of interests, the parties were unable to agree to specific terms for the sale of the Library. As a result, in an attempt to “assist the parties in reaching the final terms” of an agreement separating the parties’ interests in the Library, the Court previously issued in the Pacific Trust case (probate case SP007923) an Order to Show Cause Re: Why the Court should not appoint a referee to sell the Library. After briefing and argument from the parties, the Court discharged the OSC, concluding it lacked authority to direct a sale of the Library by enforcing the PDPM under CCP sec. 664.6 or ordering sale under Probate Code sec. 17200. The Court subsequently developed concerns that Special Trustee of the Pacific Trust, Goldman Sachs Trust Company N.A. (“Goldman Sachs” or “GSTC”), was not taking a sufficiently active role in furthering the parties’ goal of separating their interests and/or permitting the parties to waste assets of the Trust on avoidable litigation. On that basis, the Court issued in the Pacific Trust case a separate OSC Re: Why Goldman Sachs should not be ordered to conduct a private sale of the Film Library in its capacity as Special Trustee of the Pacific Trust.

The Court has now considered the responses to the OSC filed by Goldman Sachs, the Sons, and the Daughters. Goldman Sachs and the Sons generally opposed the sale of the Library by Goldman Sachs, as discussed below. The Daughters did not offer any arguments in support of a sale by Goldman Sachs, instead separately filing a Petition to Appoint Special Trustee of the Pacific Trust and Direct Sale of Assets. The Daughters requested the Court recognize a vacancy in the position of trustee with respect to La Mesa LLC and the Library due to Goldman Sachs’ refusal to administer those assets, and on that basis requested the Court appoint a Special Purpose Trustee to administer those assets, including by selling the Library if appropriate.

In addition to the foregoing dispute over disposition of the Library, the Parents now seek to reduce the PDPM to an enforceable judgment. To that end, the Parents have filed in civil case ****1310 and probate case SP007923 a Motion to Enter Judgment and Proposed Judgment including the terms of the PDPM, “boilerplate” terms, and terms inferred or drawn from prior orders of the Court. The Sons have filed an Opposition to this Motion which appears to support an order establishing a complete agreement between the parties, and the Sons have provided a Proposed Order to this effect. The Parents’ Proposed Judgment and Sons’ Proposed Order conflict on several points, as discussed further below.

DISCUSSION

Motion for Entry of Judgment

The Parents\' Proposed Terms of Judgment reflect an agreement between the Sons, the Daughters, the Parents, Corman Family Investment Partnership ("CFIP"), New Horizons Picture Corp. ("New Horizons"), and infant minor Caroline Corman. The Judgment is intended to resolve "the petitions, claims, complaints, demands, and causes of action" in civil case ****1310 and probate case 17STPB07675, SP007923, SP007983, and SP007984. Further, the Judgment is intended to resolve "all disagreements and disputes between and among the Settling Parties with respect to the Family Trust, Pacific Trust, the Tessa Trust, the MG Trust, the QPRTs, CFIP, Corman Associates, San Onofre, the Parents\' assets and estates, the Daughters\' and Sons\' assets and estates, and Pictures." The Judgment indicates it "is the intention of the Settling Parties to put a final end to all litigation between . . . the family members and related entities" by "fully releas[ing] the Settling Parties for claims which arose or may have arisen prior to the effective date of the Judgment . . . whether related to the same operative facts" as the foregoing actions or not. The Judgment also notes a separate "Supplemental Memorandum of Agreement" between the Parents and Daughters.

The Judgment restates several verbatim terms of the PDPM and provides several new terms based on prior court orders. It provides that settlement payments "based on values of property" shall be based on the Court\'s determination of the properties\' values in its order dated November 5, 2020 adopting appraisal values as of February 7, 2020 for the La Mesa Property, San Vicente Property, and 2nd Street Property.

The Judgment expressly recognizes that Goldman Sachs "may have [been] relieved . . . of responsibility for administering [La Mesa] LLC, resulting in a vacancy in the office of Trustee" with respect to the Film Library. The Judgment provides for the Court to "appoint a Special Trustee . . . to dispose of the Film Library LLC . . . to effectuate the Terms and the complete separation of the Parties." The Judgment declines to provide terms for distribution of film rights in the Tessa Trust, requiring Julie to "bring a Petition for Instructions to resolve the form of disposition." The Judgment requires Julie to "assign the beneficial interests in the Black Scorpion notes in equal shares" to the Sons and Daughters. The Judgment concludes with a series of broad-ranging releases and "[o]ther standard boiler plate provisions."

The Sons\' Proposed Order strikes the clause expressing an "intention . . . to put a final end to all litigation between and among the family members and related entities." The Sons\' Proposed Order strikes out a clause indicating the "exchange of all consideration contemplated by the PDPM would not occur until after all issues (including Phase 2 issues) . . . are resolved." The Sons\' Proposed Order strikes the clause regarding the appraisals of the La Mesa Property, San Vicente Property, and 2nd Street Property and order adopting those appraisals as of February 7, 2020. Instead, the Proposed Order states: "[n]otwithstanding any statement to the contrary . . . all of the Parties agree that all of the dollar amounts [assigned to the Properties] shall be adjusted and shall be based on values of the Properties determined based on the following property appraisal process in Sons\' Proposed Escrow Instructions." Further, the Sons\' Proposed Order states the "appraisal dates . . . are not designated \'current,\' and they should be tied to the close of escrow" because "[a]lmost two years have passed since the appraisal dates." The Proposed Order cites to a Merriam-Webster definition of the word "current" and appears to argue current cannot refer to the "escrow closing date." The Proposed Order notes past comments attributed to the undersigned (without citation) and asserts "standard business practice is to have appraisals done within days or weeks of the opening of escrow."

The Proposed Order omits the Parents’ conclusion that a vacancy exists with respect to management of the assets of La Mesa LLC and states the Daughters\' Petition to Appoint Special Trustee is "simply trying to get someone appointed who is not bound by that Order" appointing Goldman Sachs and restricting its ability to manage La Mesa LLC, stating this is "inappropriate" and must "fail." Further, rather than requiring Julie to file a Petition for Instructions as Trustee of the Tessa Trust "to resolve the form of disposition" of film rights, the Brothers\' Proposed Order provides that "[f]ilms should be divided equally between the siblings."

The Sons’ Proposed Order includes significant modifications with respect to the Black Scorpion Notes, stating that the Parents "defaulted in their obligations under the Black Scorpion Loan Modification Agreement [dated May 1, 2002] by selling the Preferred Shares . . . without requisite prior approval." Based on this default, the Proposed Order requires the Parents to "wire-transfer from the Black Scorpion Notes Funds [to the Brothers, Daughters, the Tessa Trust] current funds in the amount to be confirmed with [the Parents] on or before to [sic] the Closing Date [by the Sons]." If any balance remains, the Parents "are to deliver such remaining balance of the Funds" to the Sons first and then "in equal shares to each of [the Sons and Daughters] pursuant to separate wiring instructions."

Finally, the Proposed Order narrows the scope of the series of releases at the end and expressly declines to "release any claims arising out of the Order Approving Settlement Agreement, dated May 13, 2014, issued in Case no. SP007923 or any PDPM Phase 2 issues, including without limitation, the Film Library and the Black Scorpion note."

Core Disputes

Based on the foregoing, there are five primary points of dispute: (1) the applicable appraisal value dates, (2) the appointment of a Special Trustee to manage La Mesa LLC, (3) the distribution of the Tessa Trust film rights, (4) the Black Scorpion Notes, and (5) the scope of the releases (particularly with respect to claims relating to the approval of the PDPM, the Film Library, and the Black Scorpion Notes). Further, the parties submitted competing escrow instructions in support of their orders. The Court addresses each issue in turn.

On the first issue, the Sons contend the appraisal values of the properties must be updated, while the Parents contend the Court has already adopted appraisal values as of February 7, 2020. The Sons recognize that the Court has already "determined the values of those properties" at issue in the PDPM, but argue the Court should not continue to use those values. The Sons argue the "properties [should] be reappraised now and brought forward to current values at the close of escrow." On this basis, the Sons\' escrow instructions provide for reappraisal as of a more current date. The Parents argue this is a veiled motion for reconsideration of the Court’s order adopting appraisal values as of February 7, 2020. The Sons further recognize that the Court has already held the reference to "current" in the PDPM for the “current bank value” of San Onofre LLC "means \'as of the date that escrow closes,\'" an interpretation which the Sons dispute.

The Court appointed two appraisers to conduct appraisals of the La Mesa Property, San Vicente Property, and 2nd Street Property as of February 7, 2020 and as of July 20, 2020. At a hearing on August 20, 2020, the Court concluded the valuations of these properties for purposes of the PDPM would use the pre-COVID-19 appraisal values as of February 7, 2020, noting that the parties would not have anticipated subsequent effects of COVID-19 on the property values in entering into the PDPM. (See 8/20/20 Transcript, p. 25-27 (adopting appraisal values as of February 7, 2020 rather than June 22, 2020)) At the same hearing, the Court concluded the reference to the “current bank value” of San Onofre LLC means current at the close of escrow. (See 8/20/20 Transcript, p. 58.)

The Sons had ample opportunity to argue these topics before and at the hearing. Further, on November 5, 2020, the Court issued a written ruling adopting the valuations of the La Mesa and San Vicente Properties as of February 2020. The Sons did not move for reconsideration of this decision or otherwise timely challenge the Court’s determination that the PDPM must be interpreted using pre-COVID-19 appraisal values for the properties identified above and closing date values for the San Onofre LLC bank account. (CCP sec. 1008(e) (“No application to reconsider any order or for the renewal of a previous motion may be considered by any judge or court unless made according to this section.”)) Even assuming arguendo that the passage of time since the appraisals constitutes a new fact, the Sons did not timely move for reconsideration, nor was the prospect of continued litigation unknown to the Court in adopting the pre-COVID-19 appraisal values.[1] The Court declines to reconsider these fully litigated issues. The Parents’ Proposed Judgment correctly identifies the applicable appraisal values and “current” value of the San Onofre LLC bank account.

On the second issue, the Parents (and Daughters) contend Goldman Sachs has left a vacancy in the position of trustee with respect to La Mesa LLC and the Film Library. The Parents’ Proposed Judgment provides for appointment of a Special Trustee to manage La Mesa LLC and sell the Film Library. By contrast, the Sons contend the Petition to Appoint Special Trustee is an end-run around the Operating Agreement of La Mesa LLC, as the Sons contend the Operating Agreement controls the disposition of the Film Library. The Sons’ Proposed Order does not recognize a vacancy in the position of trustee and does not provide for appointment of a Special Trustee. The Court addresses this issue and the Daughters’ Petition to Appoint Special Trustee infra at p. 10-14.

On the third issue, the parties dispute how to distribute assets of the Tessa Trust. The Parents’ Proposed Judgment requires Julie to file a Petition for Instructions regarding disposition of the film rights in the Tessa Trust. By contrast, the Sons’ Proposed Order provides the “[f]ilms should be divided equally between the siblings.” The Proposed Judgment appropriately provides for later determination of the means for distribution of the Tessa Trust film rights. The PDPM provides that “50% interest in all assets [of the Tessa Trust shall] be distributed to [the Sons], in kind or in cash, to be determined in Phase 2.” It further states that the “implementation of the distribution of the film rights in the Tessa Trust shall be dealt with in Phase 2.” Thus, it is premature for the Sons to propose an equal divide of the film rights during Phase 1. Whether the film rights are directly distributed or distributed as cash is an issue to be determined in Phase 2. The Parents’ Proposed Judgment correctly provides for a subsequent Petition for Instructions at the appropriate time.

On the fourth issue, the Proposed Judgment requires Julie to "assign the beneficial interests in the Black Scorpion notes in equal shares" to the Sons and Daughters. By contrast, the Sons’ Proposed Order provides for wire transfers of “Black Scorpion Notes Funds,” stating the Parents defaulted under the Black Scorpion Loan Modification Agreement by selling Preferred Shares of Concorde New Horizons. The PDPM provides that “[n]othing herein is meant to change or supersede . . . obligations relating to the Black Scorpion loan, which shall be dealt with in Phase 2” and similarly provides the “implementation of the distribution of and issues relating to the Black Scorpion note shall be deal[t] with in Phase 2.”The Court requested supplemental briefing regarding the Black Scorpion loan, which the Sons, Daughters, and Parents provided.[2]

In particular, the Parents’ and Daughters’ supplemental briefing discussed prior litigation relating to Black Scorpion loan (among other issues). Judge Reva Goetz issued a Statement of Decision on this matter on October 3, 2013. As relevant here, Judge Goetz concluded the "Black Scorpion Loans and their extensions are permitted by the Pacific Trust" and "any payments attributed to repayment of the Black Scorpion Loans . . . shall be applied to the total Black Scorpion Loan Debt owed to the three Trusts and individual beneficiaries." The Statement of Decision notes that Brian disputed "that the Black Scorpion loans are not due until after the death of the second parent," observing that Brian "did not state the basis" for this position. While the Sons appealed the decision, they did not contend on appeal that Judge Goetz erred in finding the Black Scorpion loans “and their extensions . . . permitted” or erred in finding the Black Scorpion loans were due upon the death of thee surviving parent.[3] Judge Goetz’s decision was affirmed in part and reversed in part.

The Sons contend the Parents are immediately responsible for payments under the Black Scorpion Loan Modification Agreement and argue requiring immediate payment would further the goal of complete separation of interests. The Sons again do not offer any argument showing the Parents are immediately responsible for payments, only arguing this would further the separation of interests. By contrast, the Parents contend payments are not due until after both Parents are dead, and this argument is supported by the January 2006 Amendment to the Notes, which Judge Goetz recognized as a “permitted” extension. And here, as in the trial before Judge Goetz, Brian has not explained why payments would be immediately due given the modification of the due date for full payment under the Note. Critically, if the Parents are not responsible within their lifetime for payments to the Sons, it is not clear that the Court needs to take any further action to achieve separation of the parties’ interests with respect to the Black Scorpion Loan. The Parents’ Proposed Judgment provides for separation of the parties’ interests without accelerating the Black Scorpion Loan in a manner contrary to its terms.

On the fifth issue, the Parents’ proposed releases are significantly broader than the Sons’ releases and the Sons do not attempt to explain many of their edits to the proposed releases. The Sons’ edited releases, compared to the Parents’ proposed releases, would fail to release claims against "entities owned in whole or in part or controlled by the Parents” or the parties\' "attorneys, accountants, business managers, representatives, agents, employees, officers, directions, partners, affiliates, affiliated entities, heirs, assigns, and successors-in-interests." Moreover, the Sons’ releases would not release claims accruing between February 10, 2020 and "the effective date of the Judgment effectuating these Terms," or claims "arising out of the Order Approving Settlement Agreement . . . or any PDPM Phase 2 issues, including . . . the Film Library and the Black Scorpion note."

In relevant part, the PDPM provides that the “long form agreement shall include mutual and general releases for all claims . . . for all parties in all capacities.” Specifically, the PDPM provides for “[r]eleases from Pacific Trust and beneficiaries of all irrevocable trusts, New Horizons, [the Parents] individually and in all other capacities, as well as all of [the Parents’] other entities as well as entities of [the Sons and Daughters].” The releases do not “apply to issues of estate, gift, and income taxes, which shall be dealt with in Phase 2.”

Some of the Sons’ proposed edits are facially inconsistent with the PDPM. The PDPM requires releases for “all claims . . . for all parties in all capacities” and encompass the Parents “individually and in all other capacities, as well as all of [their] other entities as well as entities of [the Sons and Daughters].” The Sons’ proposed releases fail to release claims against “entities owned in whole or in part or controlled by the Parents.” The Sons’ proposed releases also expressly omit claims relating to approval of the PDPM, disposition of the Library, the Black Scorpion loan, and generally any claims accruing after February 10, 2020. The purpose of the settlement is to achieve a global resolution and end of litigation, hence why the PDPM anticipates releases for “all claims.” The PDPM lacks any language supporting the omission of claims relating to the Library or Black Scorpion loan. Finally, while the PDPM itself does not provide for a release of agents and employees, such a release is commonplace and consistent with the stated purpose of the PDPM. Without such a release, the parties would be free to pursue litigation against affiliated persons and entities despite the intent to reach a global settlement, thereby frustrating the purpose of releasing claims in the first place.

The Sons generally do not explain why they narrowed the releases in the manner discussed above.[4] While the Court is not inferring the edits are baseless, the Court is not in a position to craft an argument for the Sons’ proposed edits in order to justify relief in their favor. The Sons only state that they “oppose broadening releases beyond what was agreed upon in the PDPM.” (Opposition, p. 4.) However, as discussed above, the Sons’ proposed releases did not sufficiently encompass the broad releases contemplated in the PDPM. The Parents’ proposed releases are more consistent with the PDPM overall. To the extent the Sons oppose the addition of affiliated agents and employees to the releases, they have not articulated any reason to exclude these persons from the releases where failing to release claims against those persons would frustrate a primary purpose of the settlement. The Parents’ proposed releases otherwise hew to the PDPM.

Finally, the parties have submitted conflicting escrow instructions. In particular, the Sons’ instructions provide for close of escrow by November 30, 2021 provided that the escrow (1) “has received all of the Funds . . . and [is] unconditionally and irrevocably prepared to wire or otherwise disburse the same” as necessary and (2) has “received all of the Documents and [is] unconditionally and irrevocably prepared to deliver the Non-Recordable Document[s]” as necessary. Further, the Sons’ instructions provide that each will receive equal 25% shares of 50% of CFIP’s assets. On the other hand, the Parents’ instructions do not provide any specific date for close of escrow and provide for the Sons to each receive equal shares of 49.5% of CFIP’s assets rather than 50% provided in the PDPM.

The Court cannot approve the Sons’ proposed escrow instructions at this time as there is essentially no probability the parties will be able to dispose of the Film Library by that time. Moreover, there is a distinct probability the Sons will pursue appeals from orders in connection with the PDPM, Black Scorpion Loan, and Library, which would frustrate the intent of the other parties to the PDPM to end all litigation.[5] It would frustrate the purpose of the settlement for the Parents to pay consideration and still be subject to significant litigation from the Sons, particularly where the Sons have initiated much of the litigation which prompted the Parents and Daughters to pursue a global settlement with the Sons. The escrow instructions must be drafted to ensure, to the extent possible, a complete termination of litigation between the parties upon close of escrow. The Sons’ instructions do not achieve this goal.

With respect to shares of CFIP, the Sons argue the PDPM provides for 50% of CFIP’s assets. The Parents, in their Reply, claim the “Sons, through counsel, acknowledged the mutual mistake in the PDPM, and previously agreed to accept their 49.5% interest, as detailed in multiple drafts of the Long Form Agreement.” The Court lacks direct evidence on that point at this time. More importantly, the PDPM provides that "[n]o agreement other than an agreement approved by Court order may vary the terms" of the PDPM. The PDPM controls on this issue, and the Sons’ escrow instructions correctly provide for this distribution.

In sum, the Motion to Enter Judgment is GRANTED IN FULL. The Court has considered the material points of conflict between the Parents’ Proposed Judgment and Sons’ Proposed Order. The Parents’ Proposed Judgment more accurately and reasonably reflected the terms of the PDPM, subsequent orders related to the PDPM, and relevant prior litigation (e.g., relating to the Black Scorpion Loan). However, neither the Sons’ nor Parents’ proposed escrow instructions can be approved in their current state.

OSC Re: Sale of Film Library by GS

On July 29, 2021, the Court issued an OSC Re: Why Goldman Sachs should not be ordered to conduct a private sale of the Film Library in its capacity as Special Trustee of the Pacific Trust. The Court indicated continued litigation without separation was leading to avoidable waste of trust assets to pay litigation expenses and expressed the view that Goldman Sachs should take a more active role in curbing this waste.

On August 12, 2021, Goldman Sachs filed a response arguing it has no responsibility to administer the Film Library as an asset of La Mesa LLC. It argued the order appointing it Special Trustee specifically absolved it of responsibility to manage these assets. (6/25/14 Order ("GSTC shall have no duties . . . with respect to the Special Asset LLCs, and is permanently released from having to administer, manage, oversee, or exercise any discretion over the Special Asset LLCs or the assets to be owned by the Special Assets LLC, except as such duties are expressly identified in the LLC Operating Agreements.")) Goldman Sachs indicated it “would likely . . . request the Court to accept its resignation as Trustee” if ordered to sell the Library. (Rice Decl., para. 10.) Further, Goldman Sachs argued it was not supporting the waste of Trust assets by making distributions because any distributions are preliminarily assessed "to confirm that the distributions do not exceed an amount necessary to preserve Trust assets." (Response, p. 10-11.) It also indicated it "has made o discretionary distributions to [the Sons] for legal fees since March 2020, when GSTC understands the beneficiaries, among others, agreed on a settlement." (Rice Decl., para. 9.)

Goldman Sachs and the Sons both argued any disputes between the Sons and Daughters regarding disposition of the Film Library were subject to arbitration under Paragraph 8.4 of the Operating Agreement for La Mesa LLC due to the Sons’ and Daughters’ status as members of the LLC.[6] The Court did not find this argument persuasive given that the parties have engaged in significant litigation regarding the sale of the Property and at no point sought to compel arbitration of this known dispute. The parties specifically engaged the Court (through the undersigned) to assist with and enforce the parties’ settlement providing for disposition of the Library. (See Bower v. Inter-Con Security Systems, Inc. (2014) 232 Cal.App.4th 1035, 1042 ("Although participating in the litigation of an arbitrable claim does not by itself waive a party\'s right to later seek to arbitrate the matter, at some point continued litigation of the dispute justifies a finding of waiver," such as where "the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate".))

Relatedly, the Parents and Caroline’s GAL are not parties to the La Mesa Operating Agreement, yet have expressed an interest in the PDPM in separation of interests in the Film Library—the Sons and Goldman Sachs have not shown that these nonparties would be bound by the arbitration clause here. (CCP sec. 1281.2(c) (arbitration may be unavailable if a "party to the arbitration agreement is also a party to a pending court action . . . with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.")) To the extent the litigation over the Library does not constitute waiver, there is also some possibility of conflicting rulings regarding the Library in litigation with nonsignatories to the Operating Agreement. Finally, it must be recognized that the dispute over disposition of the Film Library is not merely a dispute internal to La Mesa LLC, an LLC founded by the Corman family for the purpose of holding the Film Library. The parties’ effort to resolve persistent family litigation by separating their interests in family-owned assets is important context for the disposition of the Film Library. It is not clear that this dispute is capable of being cleanly severed from the parties’ other interest-separation disputes.

Regardless, it is sufficiently clear that Goldman Sachs is at minimum unwilling to handle the sale and further the order appointing Goldman Sachs expressly absolves it of responsibility for managing La Mesa LLC and its assets. (Rice Decl., para. 10 (expressing intent to resign if ordered to sell the Library); 6/25/14 Order.) Therefore, the Court discharges the OSC Re: Why Goldman Sachs should not be ordered to sell the Library on the grounds that Goldman Sachs lacks authority to sell the Library and, even if ordered to do so, has indicated it would resign.

Petition for Appointment of Special Trustee

The Daughters request the Court appoint James Sullivan the Special Purpose Trustee of the Pacific Trust “to administer the [Trust] with respect to the sale of the Film Library rights/La Mesa Pictures, LLC to a third party on the best available price and terms." Further, the Daughters requested Sullivan be authorized "to retain an agent to conduct the sale.” The Daughters argue there is a vacancy in the position of trustee with respect to La Mesa LLC, which is an asset of the Pacific Trust, where Goldman Sachs has disclaimed responsibility to manage the assets of La Mesa LLC under the terms of its June 25, 2014 appointment order. The Sons oppose the Petition on several grounds.

First, the Sons argue the Daughters lack standing to petition to appoint a Special Trustee here because they are not beneficiaries of the Sons’ subtrusts, two of four subtrusts in the Pacific Trust with the other two subtrusts being for the Daughters’ benefit. The Sons claim the Daughters "assert that they have standing because they are beneficiaries of the Sons Pacific Trust," and rebut this by pointing out that the Daughters are not beneficiaries of the Sons\' subtrusts as of February 5, 2021. (Objections, p. 2-3.) This argument is rejected.

At the outset, the Daughters do not claim standing as “beneficiaries of the Sons’ Pacific Trust,” and so the Sons’ argument that the Daughters are not beneficiaries is irrelevant. Further, this argument disregards the existence of the Pacific Trust itself, a trust containing four subtrusts. A beneficiary of a subtrust with a proportionate interest in the Library may petition to appoint a Special Trustee of the Trust itself where there is a vacancy with respect to management of the Library, as is the case here. (Prob. Code sec. 17200(b)(10).) The Sons’ argument would imply that only all four siblings petitioning together would have standing to seek to fill a vacancy in the trustee position. This is an absurd conclusion that would lead to waste and mismanagement of trust assets. The Sons’ position on this point is unsupported by legal argument or reference to supporting authority. On the contrary, the “probate court has the ‘inherent power to decide all incidental issues necessary to carry out its express powers to supervise the administration of the trust” or “‘take any other action necessary or proper to dispose of the matters presented’ by [a] section 17200 petition.” (Schwartz v. Lawson (2008) 164 Cal.App.4th 419, 428.) In this regard, the probate court has broad inherent powers to “take remedial action,” including by removing and/or suspending a trustee sua sponte and appointing interim trustees. (Id.)

Next, the Sons claim the Petition is defective because the Daughters "fil[ed] a derivative action on behalf of Corman Family Investment Partnership . . . against the Corman Parents individually and New Horizons Picture Corp.," arguing this was improper because the Film Library "is an asset of La Mesa Pictures, LLC." (Objections, p. 2.) Other than the undisputed fact that the Library is an asset of La Mesa, the Court\'s review of the Daughters\' Petition does not support the Sons\' statements above.

The Sons (and Goldman Sachs, as noted above) argue any dispute with the Daughters relating to the Film Library is subject to arbitration under the Operating Agreement of La Mesa LLC. This argument was addressed and rejected above. The Sons relatedly argue the Court must respect the Operating Agreement as the “one agreement the parties have reached” regarding the Library, arguing this Agreement (not any trustee) would control disposition of the Film Library. Section 3.3(B)(i) of the Operating Agreement requires at least three of the four Members (the Sons and Daughters) to consent to “extraordinary transactions,” including the “the sale, exchange or other disposition of all, or substantially all, of Company’s assets occurring as part of a single transaction or plan or a series of transactions.” The Library is the principal asset of La Mesa LLC, and so the Sons contend the sale of the Library is an extraordinary transaction which would require at least one of the Sons to consent.

However, the Operating Agreement plainly does not control a potential sale of La Mesa LLC itself, the LLC being an asset of the Pacific Trust. The Petition to Appoint Special Trustee requests the Special Purpose Trustee be afforded authority to “administer the [Trust] with respect to the sale of the Film Library rights/La Mesa Pictures, LLC to a third party.” If necessary, the LLC itself (which is an asset of the Trust) can be sold without breaching the Operating Agreement. There is nothing indicating the Operating Agreement was intended to restrain the trustee’s ability to manage assets of the Trust. On the other hand, the Probate Code specifically provides a trustee authority to “dispose of property, for cash or on credit, at public or private sale, or by exchange.” (Probate Code sec. 16226; see Probate Code sec. 16247 (trustee may retain agent to administer sale)) Regardless, the Court is not at this time passing on whether a sale of the Film Library is reasonable or necessary. The Court is merely appointing a Special Trustee to fill the vacancy in management of assets of La Mesa LLC and to determine whether a sale of the LLC is desirable. To the extent the Special Trustee believes a sale of the Library is desirable, the next step would be for the Special Trustee to file a Petition for Instructions, which the parties would have an opportunity to address.

Finally, the Sons argue the Daughters must post bond to pursue the Petition. The PDPM states that "any party [that] brings any litigation against any other party to this agreement (other than to enforce this agreement) . . . shall post a bond." The Sons fail to explain how the Petition is "litigation against any other party" to the PDPM. The Petition is explicitly intended to fill a vacancy in management of assets of the Trust, a vacancy confirmed by Goldman Sachs\' clarification that it will not manage La Mesa LLC even if ordered to do so.

To the extent the Sons argue the Petition is intended "to enforce an agreement not reached" against them, this argument is rejected While the Sons repeatedly claim this Court has held "there was no agreement reached to be enforced regarding the disposition of the Film Library," this does not indicate the parties have “not reached” an agreement as the Sons claim. The Court concluded the parties had not agreed to sufficiently specific terms for the Court to order a sale under CCP sec. 664.6. But the Court has consistently taken the view that the PDPM reflects an agreement to dispose of the Library and an agreement for the undersigned to "assist the Parties in reaching the final terms, as necessary”—hence the two OSCs Re: Sale of the Library attempting to facilitate disposition of the Library.

Thus, the Petition does seek to enforce the relevant terms of the parties’ agreement in the PDPM, albeit not under CCP sec. 664.6. (See In re Marriage of Woolsey (2013) 220 Cal.App.4th 881, 898 (the “statutory procedure for enforcing settlement agreements under section 664.6 is not exclusive” but “merely an expeditious, valid alternative statutorily created”)) An agreement may be enforceable even if insufficiently specific to be enforceable under CCP sec. 664.6. Bond is not required under the PDPM for any litigation “to enforce this agreement.” The Petition falls within this exception.

The Petition to Appoint Special Purpose Trustee is GRANTED. The Court finds there is a vacancy in the position of trustee with respect to La Mesa LLC, a significant asset of the Pacific Trust which contains the Film Library, due to Goldman Sachs’ inability or unwillingness as Special Trustee to manage these specific assets. Thus, the Court appoints James S. Sullivan the Special Purpose Trustee of the Pacific Trust with authority to administer La Mesa LLC as a trust asset, including by disposing of the asset through private sale (with court approval) if appropriate and necessary. (Prob. Code sec. 17200(b)(1); sec. 16226.)


[1] However, the Parents’ request for sanctions under CCP sec. 128.7 is DENIED. Sanctions are available under Section 128.7 only by means of a “motion for sanctions . . . made separately from other motions or requests,” which the Parents failed to do. (CCP sec. 128.7(c).) The “[n]otice of motion shall be served . . . but shall not be filed with or presented to the court unless, within 21 days after service of the motion, or any other period as the court may prescribe, the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected.” (CCP sec. 128.7.) The Parents moved for sanctions in their Reply to the Sons’ Opposition rather than filing a separate Motion and withholding the Notice of Motion for the required safe harbor period. Sanctions are thus procedurally unavailable. The Court expresses no view as to the merits of a separate Motion for Sanctions at this time.

After recognizing that the "parties ought to be beyond reciting litigation history" and instead should "focus[] on obtaining orders . . . that will resolve their disputes," the Sons summarize the "history of litigation” for the Court. The Sons assert their mother Julie abused Roger W., Catherine, and Mary over the years, leading Roger W. to "beg[ Roger M.] to file [the litigation] to end Julie Corman\'s abuse." (Opposition, p. 5.) The Sons contend this litigation was largely successful and allege Caroline\'s GAL concluded the Parents "comitt[ed] tax fraud." (Opposition, p. 5-6.) The Sons present this as “the context of this litigation. " (Opposition, p. 6.)

The Parents seek to strike the foregoing under CCP sec. 436, which permits the striking of “any irrelevant, false, or improper matter inserted in any pleading.” The request to strike is granted as to the statements of abuse, which are irrelevant to the issues raised by the Motion to Enter Judgment (primarily interpretation of the PDPM, particularly in light of prior orders interpreting the PDPM). The request to strike is denied as to the Sons’ summary of the procedural history of this litigation, which is not “irrelevant, false, or improper.” The Sons’ representations regarding the GAL’s conclusions are sufficiently supported. (Supp. Taitelman Decl., Exh. 4 (7/6/12 GAL Trial Brief in SP007923)) The procedural history presented is not “false” or “improper” within the meaning of Section 436, even if the Parents might characterize matters differently.

[2] The Court granted the Parents and Daughters ex parte relief permitting them to belatedly file supplemental briefing regarding the Black Scorpion Loan.

[3] On January 1, 2006, the Parents executed a First Amendment to Promissory Note modifying the Note to state that the "entire principal balance of this Note together with interest accrued thereon as of such date shall be paid in full on the date of death of the survivor of the two (2) general partners," the Parents.

[4] The Court also notes that Sons’ proposed releases are not uniform in some respects. The Sons edited their releases to expressly discharge “their issue” but did not release the Daughters\' issue (if the Daughters have any). The Sons struck language purporting to “discharge” their claims against the Parents and Daughters but kept the language providing for "release and discharge" of claims against the Sons. The Sons’ striking of “discharge” in some releases but not others indicates they find the presence of this term significant, and so it is incumbent on the Sons to explain why it is included in some but not all of their proposed releases.

[5] This conclusion is supported by the Sons’ modifications to releases in the Proposed Judgment to expressly exclude these claims. The Court expresses no view as to the timeliness or propriety of any such appeals, but recognizes that such appeals are likely to ensue.

[6] The Sons also argued in passing that the “PDPM contains language [indicating] that the four siblings only can decide on the disposition of the Film Library,” arguing the Trustee lacks authority to dispose of the Library. (OSC Response, p. 3.) Regardless of how the relevant language is interpreted, the Sons concede the language was "stricken." (Id.)

'


Case Number: ****1310    Hearing Date: February 11, 2021    Dept: 1

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES

In the matter of:

THE CORMAN FAMILY QUALIFIED PROPERTY RESIDENCE SUCCESSOR TRUSTS

Case No.: 17STPB07675

(Related Cases: ****1310, BC664811, SP007923, SP007983 and SP007984)

RULING ON MOTION TO ENFORCE PRELIMINARY DEAL POINT MEMORANDUM

Date: February 11, 2021

Time: 1:30 P.M.

Dept.: 1

INTRODUCTION

By this motion, Roger W. Corman and Julie Corman (“the Parents”) seek to enforce a settlement agreement to thereby overrule supplemental objections filed by Roger M. Corman and Brian Corman (“the Sons”) in response to the Parents’ Petition to modify the above-referenced qualified property residence trusts (“QPRTS”) (which petition was contemplated in the same settlement agreement.)[1] The Court finds that the basis of the supplemental objections are factually undisputed issues as to interpretation of the settlement agreement and that, for the reasons discussed below, the Court will enforce the agreement and overrule both objections.

STATEMENT OF FACTS

On February 7, 2020, the parties executed the Preliminary Deal Point Memorandum (referred to herein as “PDPM” or the “settlement agreement”); resolving long standing litigation in this case and all the related cases and providing for separation of family members’ interests in various assets and distribution of those assets.

The PDPM provides in part relevant to this motion:

1. QPRTS shall be modified as needed, bearing in mind that retaining the property tax basis is a material term.”

2. Notwithstanding anything else in the agreement, Roger W. and Julie shall each have the right to remain in the La Mesa property for the rest of their respective lives…”

3. “All of the transactions above are to be completed in tax-sensitive manner to all parties, including with regard to gift taxes and estate taxes, and allowing for the preservation of property tax rates (if possible). The facilitation of a 1031 exchange, to the extent reasonably practical, is a material term of this agreement. Maintaining the tax basis of all real property to the extent reasonably practical is a material term of this agreement. All tax-related transactions shall be concluded concurrently with the close of escrow.”

On November 16, 2020, the Parents filed a petition for an order modifying the QPRTS, as provided for by the PDPM. In this way, the various interests in the La Mesa property that was the asset that was owned by the QPRTS, and or pursuant thereto, might be divided and each family member’s interest was not tied up with other family members, consistent with the settlement agreement.

On November 20, 2020, the Sons filed Objections to the petition.

On December 2, 2020, the Parents filed a supplement to their petition.

On December 8, 2020, the Sons filed supplemental objections to the petition – seeking to require that the parties allow for a 1031tax free exchange.

On December 11, 2020, the Court held a hearing on the above-referenced petition and related settlement issues. The Court continued the hearing on the petition given Parents’ stated intent on filing on this motion. At the same time, the Court also scheduled a mandatory settlement conference (“MSC”) to give the parties time and an opportunity to attempt to work out tax savings for all parties based on the multiple transactions provided for by the PDPM.

On December 23, 2020, the Parents filed this motion to enforce the PDPM.

On January 6, 2021, the Sons filed Objections to this motion, arguing in summary that the motion would result in the approval of transactions that are the subject of the petition proceeding without the required consideration of tax considerations beforehand.

On January 12, 2021, the Parents filed a Reply in further support of the motion.

On January 13, 2021, the Court held a remote MSC that was attended by the Parties, as well as litigation and tax counsel for each of the parties, which at the conclusion was continued for further discussion between the parties and counsel and for a further session of the MSC.

On January 29, 2021, the Court held a further session of the MSC attended by all the same persons. Separate tax counsel for each of the Parents, the Sons and the Daughters worked hard to find practical and mutually financially advantageous tax sensitive solutions to the distribution of assets consistent with their respective clients’ instructions and concerns. The parties were ultimately unable to reach agreement related to working out a mutually beneficial tax arrangement and the MSC concluded. Even if counsel could have found a means to accomplish the parties’ financial objectives, it would have required numerous steps that would have depended on trust that did not exist. It was apparent that ongoing friction between the family members made it not possible for them to then reach further agreements consistent with the intent of the parties in the settlement agreement that each wished to then separate their respective interests from one another without further delay.

DISCUSSION

The Parents contend that retaining their property tax basis on La Mesa and the Sons being able to accomplish a 1031 exchange are incompatible. Parents point to Sons’ counsel themselves acknowledging this point in paragraph 7 of their Supplemental Objections. The Court does not need to reach this determination because the issue under the PDPM is merely whether a 1031 exchange is “reasonably practical.”[2]

Even assuming a 1031 exchange and retaining the Parents’ tax basis were both possible (for which proposition the Sons in fact offer no legal support), the Court can nonetheless conclude safely that doing both is not now “reasonably practical” for this family. After two sessions of the MSC and numerous hearings, as well as taking note of the long difficult history of the litigation, of which the undersigned has been involved the last few years to try to bring to an end, it is apparent that a 1031 exchange would require very substantial cooperation and complex legal work requiring numerous intermediate steps, that hinge on cooperation between family members that in turn depends on a level of trust among family members that unfortunately is not now present.

Even with the PDPM in place, there remain significant concerns about how any potential exchange would or could be executed, as well as remaining issues precluding the parties having executed the long form agreement contemplated by the PDPM, including negotiation of “Phase 2” issues related to the management of the film library that the parties are still a long way from resolving. The Court finds that the level of cooperation that would be needed for a 1031 exchange, even if legally possible, which would at the same time maintain the Parents’ same level of tax basis in the La Mesa property, does not now exist.

The Court attempted to fashion a “tax sensitive” approach to effectuating the transactions contemplated by the settlement agreement, including with respect to the La Mesa property that is controlled by the subject QPRTS, by means of continuing this petition in order to allow for two sessions of a MSC, as well as imposing deadlines between the two sessions of the MSC for counsel to exchange financial proposals. It cannot reasonably be disputed that the parties have been unable - after time and effort - to reach further agreement related to implementing these transactions in a “tax sensitive manner.” As the Court previously advised the parties, the Court is itself unable to implement tax strategies for them absent their agreement. The Court cannot “create” terms of an agreement for the parties. The PDPM does not guarantee that the Sons will be able to receive the consideration they are receiving from the QPRTS by way of a 1031 exchange. Therefore, there is no reason not to now enforce the PDPM by way of overruling the objections.[3] As a result, the Court can also grant the petition and thereby allow the distribution set forth therein to proceed.

CONCLUSION

For these reasons, the motion is granted. Pursuant to this order, the Parents’ petition is also granted – as with the other modification petitions contemplated by the PDPM that the Court granted recently, effective as of the Close of Escrow.

DATED: February __, 2021

DAVID J. COWAN

Judge of the Superior Court


[1] This identical motion was also filed in one of the related cases, ****1310 (in order that it could be on the calendar of the undersigned who is now in a Civil courtroom). The undersigned agreed to continue to administer this complex settlement of cases pending for a decade, notwithstanding his re-assignment to Civil from Probate. The motion filed in the Civil case can be denied, without prejudice, as moot since the Court ruled on the motion filed in this case.

[2] Parents argue also that the Sons have only a personal property interest in the QPRTS; not an interest in real property – and that therefore a 1031 exchange is not permissible under the Internal Revenue Code in any event. Again, the Court does not need to reach this issue.

[3] Even if ordinarily the Court would need to hold an evidentiary hearing on a contested petition (see Key v. Tyler (2019) 34 Cal.App.5th 505, 520-521), here where neither the terms of the settlement agreement nor the developments thereafter are in dispute, the Court is authorized under CCP sec. 644.6 to determine in an expedited manner factual issues that might otherwise require a trial. Weddington Prods. v. Flick (1998) 60 Cal.App.4th 793, 809-810



Case Number: ****1310    Hearing Date: June 22, 2020    Dept: 20

Ruling

Judge David J. Cowan

Department 20


Hearing Date: Monday, June 22, 2020

Case Name: Corman v. Corman

Case No.: ****1310

Motion: Motion to Seal

Moving Party: Defendants Roger and Julie Corman

Responding Party: UNOPPOSED

Notice: OK


Ruling: The Motion to Seal is DENIED.Moving party to give notice.


The Court has reviewed the motion. There was no opposition filed. The Court denies the motion for the following reasons:

  1. The two settlement agreements do not contain any trade secrets or proprietary information warranting sealing. The Court was not persuaded by the argument related to moving parties being put in any potential tactical disadvantage by reason of the disclosure of these agreements.
  2. The two agreements do not contain specific values of assets that persons might wish to remain confidential.
  3. No privileged tax records are revealed.
  4. Estate of Gallio
  5. People v. Jackson
  6. In NBC Subsidiary (KNBC -TV) v. Superior Court (1999) 20 Cal.4th 1178,
  7. As noted in Estate of Hearst (1977) 67 Cal.App.3d 777, 783-784, “no statute exempts probate files from the status of public records, and that when individuals employ the public powers of state courts to accomplish private ends, such as the establishment and supervision of long-term testamentary trusts, they do so in full knowledge of the possibly disadvantageous circumstance that the documents and records filed in the trust will be open to public inspection. To some extent they can protect against the disadvantage of publicity by arranging for the service of papers on individual beneficiaries through their attorneys or through post-office-box addresses. Alternatively, they can eschew court-regulated devices for transmission of inherited wealth and rely on private arrangements such as Inter vivos gifts, joint tenancies, and so-called ‘living’ or grantor trusts. But when the parties perceive advantages in obtaining continuing court supervision over their affairs, thereby projecting their wishes beyond the span of their individual lives and securing court protection for the beneficiaries of their testamentary plans, in a sense they take the good with the bad, knowing that with public protection comes public knowledge of the activities, assets, and beneficiaries of the trust. What is more, the public has a legitimate interest in access to public records, such as court documents, which establish and perpetuate long-term testamentary trusts. If public court business is conducted in private, it becomes impossible to expose corruption, incompetence, inefficiency, prejudice, and favoritism. For this reason traditional Anglo-American jurisprudence distrusts secrecy in judicial proceedings and favors a policy of maximum public access to proceedings and records of judicial tribunals. Thus in Sheppard v. Maxwell (1966) 384 U.S. 333, 350, 86 S.Ct. 1507, 16 L.Ed.2d 600, In re Shortridge (1893) 99 Cal. 526, 530, 34 P. 227, 228.)


Case Number: ****1310    Hearing Date: March 17, 2020    Dept: 20

The Motion to Seal is DENIED.Moving party to give notice.All parties shall appear by court call if they do not submit on the tentative. The parties should not attend in person.

If all parties do not agree to argue by Court Call, the hearing will need to be continued for 30 days in view of the Governor’s emergency directives related to Coronavirus epidemic and the need for the Court to mitigate health risks to all persons potentially affected.

The Court has reviewed the motion. There was no opposition filed. The Court denies the motion for the following reasons:

  1. The two settlement agreements do not contain any trade secrets or proprietary information warranting sealing. The Court was not persuaded by the argument related to moving parties being put in any potential tactical disadvantage by reason of the disclosure of these agreements.
  2. The two agreements do not contain specific values of assets that persons might wish to remain confidential.
  3. No privileged tax records are revealed.
  4. Estate of Gallio
  5. People v. Jackson
  6. In NBC Subsidiary (KNBC -TV) v. Superior Court (1999) 20 Cal.4th 1178, 1218, the California Supreme Court concluded that most judicial records are subject to a presumption of openness. When the presumption applies, the public has a qualified right of access. That right may be denied only if the court, after notice and hearing, makes four supported findings: “(i) there exists an overriding ... interest supporting closure and/or sealing; (ii) there is a substantial probability ... that the interest will be prejudiced absent closure and/or sealing; (iii) the proposed closure and/or sealing is narrowly tailored to serve the overriding interest; and (iv) there is no less restrictive means of achieving the overriding interest.” These principles are also codified in California Rules of Court, Rule 2.550. Here, moving parties do not establish how this Court could find this presumption is not applicable or how it could make any of these four findings finding an exception should apply.
  7. As noted in Estate of Hearst (1977) 67 Cal.App.3d 777, 783-784, “no statute exempts probate files from the status of public records, and that when individuals employ the public powers of state courts to accomplish private ends, such as the establishment and supervision of long-term testamentary trusts, they do so in full knowledge of the possibly disadvantageous circumstance that the documents and records filed in the trust will be open to public inspection. To some extent they can protect against the disadvantage of publicity by arranging for the service of papers on individual beneficiaries through their attorneys or through post-office-box addresses. Alternatively, they can eschew court-regulated devices for transmission of inherited wealth and rely on private arrangements such as Inter vivos gifts, joint tenancies, and so-called ‘living’ or grantor trusts. But when the parties perceive advantages in obtaining continuing court supervision over their affairs, thereby projecting their wishes beyond the span of their individual lives and securing court protection for the beneficiaries of their testamentary plans, in a sense they take the good with the bad, knowing that with public protection comes public knowledge of the activities, assets, and beneficiaries of the trust. What is more, the public has a legitimate interest in access to public records, such as court documents, which establish and perpetuate long-term testamentary trusts. If public court business is conducted in private, it becomes impossible to expose corruption, incompetence, inefficiency, prejudice, and favoritism. For this reason traditional Anglo-American jurisprudence distrusts secrecy in judicial proceedings and favors a policy of maximum public access to proceedings and records of judicial tribunals. Thus in Sheppard v. Maxwell (1966) 384 U.S. 333, 350, 86 S.Ct. 1507, 16 L.Ed.2d 600, the court said it is a vital function of the press to subject the judicial process to ‘extensive public scrutiny and criticism.’ And the California Supreme Court has said, ‘it is a first principle that the people have the right to know what is done in their courts.’ (In re Shortridge (1893) 99 Cal. 526, 530, 34 P. 227, 228.) Absent strong countervailing reasons, the public has a legitimate interest and right of general access to court records, one of special importance when probate involves a large estate with on-going long-term trusts which reputedly administer and control a major publishing empire.” No such strong countervailing reasons have been offered here.


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