Opinion
B313835
01-26-2024
DRAKE KENNEDY, Plaintiff and Respondent, v. BRIAN KENNEDY et al., Defendants and Appellants; DAVID SEYDE, Movant and Appellant; WILLIAM P. HOWELL, Receiver and Respondent.
Kaedian, Nannina L. Angioni and Sarah A. Swanson for Defendants and Appellants Brian Kennedy and Regency Outdoor Advertising, Inc. Ervin Cohen &Jessup, Michael D. Murphy and Amy S. Russell for Movant and Appellant David Seyde. O'Melveny &Myers, Daniel M. Petrocelli, Molly M. Lens and David L. Kirman for Plaintiff and Respondent Drake Kennedy. Perkins Coie, Ronald A. McIntire, Carrie Akinaka and Taylor Russell for Receiver and Respondent William P. Howell.
NOT TO BE PUBLISHED
APPEALS from orders of the Superior Court of Los Angeles County, No. 18STCP02617 James C. Chalfant, Judge. Reversed in part with directions and dismissed in part.
Kaedian, Nannina L. Angioni and Sarah A. Swanson for Defendants and Appellants Brian Kennedy and Regency Outdoor Advertising, Inc. Ervin Cohen &Jessup, Michael D. Murphy and Amy S. Russell for Movant and Appellant David Seyde.
O'Melveny &Myers, Daniel M. Petrocelli, Molly M. Lens and David L. Kirman for Plaintiff and Respondent Drake Kennedy.
Perkins Coie, Ronald A. McIntire, Carrie Akinaka and Taylor Russell for Receiver and Respondent William P. Howell.
WEINGART, J.
INTRODUCTION
The appeals in this matter arise from a receivership over an outdoor advertising business almost exclusively owned by brothers Drake and Brian Kennedy. Attempting to end the internecine strife between the brothers over their billboard business, at Drake's request, and over Brian's objection, the trial court appointed a receiver to sell the assets of the business. Eventually, after both brothers had submitted competing bids to the receiver, and just as the court was set to consider which bid to approve, the brothers filed a stipulation and proposed order under which Drake agreed Brian would have a chance to close Brian's proposed transaction. The receiver did not sign the stipulation itself, but because the receiver held the assets pursuant to court order, he was to execute deal documents as the seller if the court approved the brothers' stipulation. The court approved the stipulation, and Brian was eventually able to close. However, the court did not terminate the receivership.
For purposes of clarity and not out of any disrespect, we refer to the Kennedy brothers by their first names.
David Seyde, a long-time employee of the business and part owner of one of its entities, objected to the transaction based on a binding term sheet signed by himself and the brothers before the receiver was appointed. Pursuant to that term sheet, Seyde claimed entitlement to some of the sale proceeds and asserted the receiver should have paid them to him. The court did not consider the merits of Seyde's objection, concluding that the asset sale was accomplished outside of the receivership and that it would not interfere with the Kennedy brothers' settlement.
Seyde later sought leave to sue the receiver for interfering with his rights under the term sheet, which the trial court granted in part and denied in part. At the same time, the trial court granted the receiver's request for approval of his fees and expenses over Brian's objections.
Seyde appeals the trial court's approval of the stipulation and the resulting sale to Brian. We conclude that, due to the receiver's involvement in the transaction, the sale was accomplished through the receivership and thus the trial court was required to consider Seyde's objections. Accordingly, we reverse the court's order approving the stipulation for sale and remand for the trial court to consider Seyde's objections and determine the fairness of the transaction before approving any sale. This renders the remainder of Seyde's appeal moot.
Brian appeals the trial court's approval of the receiver's expenses. Given that the receivership was not terminated, and that we are remanding for further proceedings which will continue to involve the receiver, we conclude that Brian's appeal is premature and must be dismissed.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Billboard Business
Brian and Drake worked together for many years in the outdoor advertising business. Seyde became a key employee. The brothers operated the business through several corporate entities: Regency Outdoor Advertising, Inc., Corona Outdoor Advertising, Inc., Westminster Outdoor, Inc., Virtual Media Group, Inc., West Hollywood Properties, LLC, and Skyline Outdoor Media, LLC (collectively, the Regency Companies or Regency). Brian and Drake each owned 50 percent of the corporate entities, except for Skyline Outdoor Media, LLC (Skyline), which was owned 40 percent by Brian, 40 percent by Drake, and 20 percent by Seyde. In 2012, Brian took control over managing the corporate entities and their employees after Drake took a less active role in the business due to health issues.
Given the different issues involved in the appeals by Seyde and Brian, we discuss the facts relevant to their appeals separately.
B. Seyde's Appeal Concerning Amounts Allegedly Owed to Him Under the Term Sheet
1. Brian, Drake, and Seyde Settle a Prior Lawsuit by Entering a Term Sheet
Drake, Brian and Seyde settled a prior lawsuit amongst them over Regency through mediation with the Honorable Dickran Tevrizian (Ret.), and memorialized the settlement terms in a binding term sheet (Term Sheet) dated April 1, 2017. In the Term Sheet, Brian and Drake agreed to sell the assets owned by the Regency Companies, and all real properties the brothers owned as joint tenants in common, and to approve the best offer for the companies' assets, provided the offer met a specified minimum amount; three specified real properties were to be auctioned to the brothers instead of being sold. Seyde was to receive between 1 and 1.6 percent of the sale price for the companies' assets, with the specific percentage tied to the total sale price on a sliding scale (so Seyde's share would increase as the sale price increased). The Term Sheet included a due date by which the sale transaction had to be executed.
Stephanie Kennedy was also a signatory to the Term Sheet but is not involved in this appeal.
Seyde's percentage of the sale price for the assets of the Regency Companies was subject to exclusions for the real properties jointly owned by Brian and Drake and the sales price for the three properties subject to auction between the brothers.
The Term Sheet provided that Brian and Seyde would receive salaries; Seyde was to receive $12,500 per month until the assets were sold. "On closing" of the sale transaction, all cash balances and receivables of the Regency Companies would be divided evenly between Brian and Drake, except for Skyline's cash and receivables, which would be divided 40 percent to Brian, 40 percent to Drake, and 20 percent to Seyde, consistent with their respective stakes in that company.
All disputes related to the agreement were to be decided by binding arbitration before Judge Tevrizian.
Seyde later requested a bonus of up to 2 percent of the sale price to compensate for his efforts to sell the assets. In an October 9, 2017 order, Judge Tevrizian indicated Brian and Drake had agreed that, "upon the sale of the assets" by a specified date, Judge Tevrizian would determine whether Seyde should be paid a bonus "based solely on his work to effectuate the sale."
2. Some Regency Assets are Sold to Netflix and the Term Sheet Is Amended
In June 2018, a portion of the assets were sold to Netflix, and the Term Sheet was amended effective June 14, 2018 to conduct the sale of the remaining company assets and real property in phases, rescind the auction between the brothers for the three specified properties, set a new minimum price (which now included the properties that had previously been subject to the auction), and extend the due date for the sale of the remaining assets. Seyde received one percent of the sale price paid by Netflix.
In about September 2018, Brian caused the Regency Companies to stop paying Seyde's monthly salary. Brian averred that Seyde had signed an agreement with Netflix to renew leases and perform other work related to the billboards being sold to Netflix, and was double-dipping by getting paid by the Regency Companies to do the same work. Seyde disputed this, and claimed his efforts benefitted not only Netflix but also the Regency Companies by increasing the final sales price of the billboards to Netflix.
3. Brian Obstructs the Sale of the Regency Companies' Remaining Assets and the Trial Court Appoints a Receiver
Drake sued Brian on October 22, 2018, alleging that Brian was obstructing efforts to sell the remaining company assets and had been mismanaging the companies. Drake asserted causes of action on his own behalf for breach of fiduciary duty, breach of contract, fraudulent concealment, elder financial abuse and conversion, and derivative claims on behalf of the companies, and sought various types of relief, including the appointment of a receiver pursuant to Code of Civil Procedure section 564, subdivision (b)(1) and (9). Seyde was not a named party but supported Drake's application to appoint a receiver.
All unspecified statutory references are to the Code of Civil Procedure.
On December 7, 2018, the court issued an order (Receivership Order) appointing William Howell (the Receiver) to sell the Regency Companies' assets. The receivership was limited, and Brian was left in charge of the Regency Companies for all other purposes. The order directed the Receiver to sell the Regency Companies' assets and the real properties jointly owned by Brian and Drake "as per the Term Sheet." The sale was subject to the court's "approval and confirmation" and had to be for at least the minimum price set forth in the Term Sheet. The Receiver was "not required to comply with" sections 568.5 and 701.510 et seq., which set forth notice requirements for certain sales of property. The order provided, "Upon sale of the [assets of the Regency Companies and the real properties held jointly by Brian and Drake], the Receiver shall disburse all remaining funds pursuant to the terms of the . . . Term Sheet, less any funds that the Receiver reasonably determines should be withheld from distribution to pay remaining Receivership obligations."
In conjunction with the Receivership Order, the court issued an injunction prohibiting the companies' shareholders, boards of directors, and officers, among others, from interfering with the Receiver's efforts to sell the assets and engaging in any transactions outside of "the ordinary course of the [Regency Companies'] business." The injunction provided, however, that it did "not prevent Brian from conducting the ordinary course of business and day-to-day operations of the [Regency Companies]."
Brian appealed the Receivership Order and we affirmed. (Kennedy v. Kennedy (July 26, 2019, B294398) [nonpub. opn.].)
4. The Receiver Considers Selling the Regency Companies' Assets to Brian or Drake
On November 21, 2019, Brian sent a letter to the Receiver expressing interest in submitting a bid to purchase Drake's share of the Regency Companies and the real estate jointly held by Brian and Drake. This prompted the Receiver to request guidance from the court whether it could sell the assets to one of the brothers. On December 5, 2019, the trial court issued an order approving such an approach, stating, "If . . . one of the parties offers the better price, the Receiver can accept it."
5. Seyde Seeks to Compel Arbitration of His Claims Under the Term Sheet
On December 13, 2019, Seyde filed an ex parte application for leave to intervene in the action to compel arbitration of his claims under the Term Sheet. Seyde contended that he did not have time to file a noticed motion to intervene because he "learn[ed] that the Receiver intends to sell and distribute the [Regency] Company[ies'] assets without accounting for any of Mr. Seyde's rights under the Term Sheet, and that the Receiver is presently entertaining bids for the assets of the Regency Compan[ies]." Brian and Drake opposed the application on various grounds, including that Seyde should file a noticed motion. The trial court treated the application as a motion and set it for hearing on January 10, 2020. On December 20, 2019, Seyde withdrew the motion. He later filed a separate petition to compel arbitration (Los Angeles County Superior Court case No. 19STCP05613).
6. The Kennedy Brothers Both Submit Bids
On December 20, 2019, the Receiver informed Brian and Drake of the procedure he would follow in evaluating bids submitted by the brothers. Brian and Drake then both submitted bids.
The Receiver's consideration of the bids was delayed due to concerns that Regency employees had not provided sufficient financial information to the Receiver and his accounting firm, FTI Consulting, Inc. (FTI). In July 2020, after FTI had set up a virtual data room (VDR) to provide financial information about the Regency Companies to potential bidders, the Receiver solicited new bids from Brian and Drake.
7. Seyde Seeks Leave to Intervene to Restrict the Sale of the Assets
On August 26, 2020, Seyde filed an ex parte application seeking leave to intervene to assert claims against the Receiver and place conditions on the expected asset sale. Seyde specifically asserted that the Term Sheet precluded a sale of the Regency Companies in return for stock, that the Receiver could not exclude Seyde and other third parties from submitting bids, that a specific asset referred to as the Luxe billboard was required to be included in the asset sale, and that the Receiver was obligated to provide Seyde with access to financial documents relating to Skyline. Seyde complained about the Receiver's approach to marketing the assets, including that the Receiver had failed to pursue deals with third parties which had expressed interest and had failed to seek Seyde's assistance.
The Receiver opposed Seyde's application, arguing in part that allowing Seyde to intervene would delay the bidding process and increase the expense of the receivership.
The court denied the application on August 28, 2020, but stated in its minute order that the Receiver was to provide third parties access to the companies' financial disclosures and other materials necessary to submit bids, and "[the] Receiver agrees not to accept [a] stock sale."
8. The Brothers Submit Competing Bids and Seyde Files Objections
Brian and Drake each submitted a revised bid on September 11, 2020. At a hearing on October 29, 2020, the Receiver recommended Drake's bid; according to the Receiver, Drake's bid exceeded the minimum price, identified a funding source, and contained no funding contingencies. The Receiver indicated that Brian had submitted a bid that was higher than Drake's, but it contained several contingencies and "unknowns," including no identification of the source of funds to consummate the purchase. The trial court instructed the Receiver to negotiate a purchase agreement with Drake and request a hearing to have the agreement confirmed; it also informed the parties that Brian could submit his own bid, and the court would decide which to select. The court later set a hearing for January 19, 2021, for approval of the purchase agreement. Drake submitted his proposed asset purchase agreement to the court on December 8, 2020. Brian submitted a competing bid on December 28, 2020.
On January 4, 2021, Seyde filed a document in which he sought confirmation from the court that his percentage of the sale price under the Term Sheet would be paid from the sale proceeds, and indicated he would seek to intervene unless his rights were protected. Seyde submitted email correspondence from the Receiver's counsel stating, in relevant part, "The Receiver intends to seek guidance from the [c]ourt as to the timing and amounts of any post-sale distributions, including any to Mr. Seyde, after getting input from the litigants and Mr[.] Seyde." He also submitted email correspondence from Drake's counsel suggesting that Drake disputed the amount Seyde was entitled to under the Term Sheet and stating, "The Receiver is not the arbitrator of disputes regarding the . . . Term Sheet."
Seyde indicated that he had accomplished the goal of his prior application to intervene when the court instructed the Receiver not to entertain a bid for the Regency Companies in return for equity.
The following day, after a hearing on an unrelated matter, the court stated in its minute order, "Counsel bring up the issue of 'unclean hands' in regard to the percentage of sale price received by Mr. Seyde, which this court notes is an issue for another court. [¶] The court will not modify the [T]erm [S]heet based on misconduct."
The January 19, 2021 hearing was continued at the request of Brian and Drake.
On January 20, 2021, Seyde filed an objection to Brian's proposed purchase agreement on the ground that it put Brian in charge of administering the funds of the transaction, which would harm Seyde. Seyde contended that Brian and Drake had each partnered with a third party, which had the effect of depressing the sale price, and he requested the court order additional bidding to increase the sale price. Seyde also requested the court order revised purchase agreements that would require Seyde be paid from the sale proceeds and for the escrow instructions to address payment to Seyde as well.
9. Brian and Drake Submit a Stipulation Giving Brian an Opportunity to Purchase the Regency Companies' Assets
On January 25, 2021, the brothers filed under seal a "Joint Stipulation Regarding Sale," which was "subject to approval of the [c]ourt"; the court issued an order approving the stipulation that day. The stipulation and order provided that Brian would have the opportunity to close on his proposed purchase of the Regency Companies' assets within eight business days of the court's approval, and if Brian was unable to do so by that deadline, then Drake would have the opportunity to close his proposed deal. However, Brian was allowed to apply to the court ex parte for a "limited extension" for specified good cause. Drake waived any rights "to challenge th[e c]ourt's approval of Brian's [purchase agreement]," and likewise Brian waived any rights "to challenge th[e c]ourt's approval of Drake's [purchase agreement]."
If Brian's proposed transaction did not close, then it would "cease[ ] to have [c]ourt approval" and Drake's proposed agreement would be "approved by th[e c]ourt in its place."
Brian's proposed transaction was summarized in the under seal stipulation and a copy was attached as an exhibit to the stipulation; it was an amended form of the transaction he had sought approval for from the Receiver. The proposed agreement described the assets to be acquired as "the assets subject to the Receivership Order, and all of such assets ordered to be sold by the judge in the [c]ase." Under the transaction, KBS Holdco, LLC (KBS Holdco) would buy the Regency Companies' assets (including those of Skyline) for $222 million, with each brother receiving half, or $111 million. In addition, Drake would receive a $4 million cash distribution from the Regency Companies' bank accounts (again, including those of Skyline) at closing, Brian would receive a $7 million cash distribution within six months, and at that time the remaining funds in the accounts would be distributed equally to Brian and Drake. KBS Holdco, or another company on its behalf, would wire Drake's share of the purchase price directly to Drake's account, although the agreement stated "that such payment shall be treated as if it had been paid by [KBS Holdco] to [the Regency Companies] and concurrently distributed by [the Regency Companies] to [Drake]." In addition to the purchase price, Drake would receive seven specified real property assets of the Regency Companies.
Brian's share of the purchase price was to be "credited" to Brian, "it being understood that such amount shall be treated as if it had been paid by [KBS Holdco] to [the Regency Companies] and concurrently distributed by [the Regency Companies] to [Brian]."
Seyde was not a signatory to the stipulation and not contemporaneously provided a copy as it was filed under seal. There was no provision for any payment to Seyde or regarding the disposition of his interest in the Skyline portion of the Regency Companies' assets or other interests covered by the Term Sheet, either in connection with the transaction closing or at any point thereafter.
The Receiver was to sign Brian's asset purchase agreement on behalf of the Regency Companies (including Skyline), and the purchase agreement provided that "[Drake], [Brian], and [the] Receiver on behalf of the [Regency Companies] (in accordance with the Receivership Order and subsequent instructions from the [c]ourt) each . . . hereby agrees to sell" the assets to KBS Holdco. The Receiver, "in accordance with the Receivership Order and subsequent instructions from the [c]ourt," would deliver the grant deeds for the properties to be transferred to KBS Holdco and Drake. At closing, Drake's shares in the companies would be "deemed redeemed."
Upon closing of either Brian's or Drake's purchase agreement, the Receiver was "directed to incur no further expenses on behalf of [the] Regency [Companies]," and was only permitted to seek compensation for winding up his affairs as receiver, producing a final report and account, conducting related litigation, "and any other action necessary to discharge the Receiver and/or terminate the [r]eceivership." The injunction issued by the court along with the Receivership Order was to remain in effect until the closing.
In connection with signing the stipulation, the court set a status conference "Re: Conclusion of Brian's [asset purchase agreement], or alternatively Drake's [asset purchase agreement]," for February 16, 2021.
10. Seyde Pursues a Separate Lawsuit Against Brian, Drake, and Two of the Regency Companies, and Also Seeks to Unwind Brian's Purchase Transaction
On February 8, 2021, Seyde filed an amended verified petition against Brian, Drake, Regency Outdoor Advertising, Inc. and Skyline in a separate case (Seyde v. Kennedy et. al., Los Angeles County Superior Court case No. 20STCP04920). Seyde alleged that Brian, Drake and Regency breached their obligations to him by causing the sale of assets to be less than the best offer that could have been obtained, failing to pay his monthly salary of $12,500 since September 2018, repudiating his portion of the sale proceeds (apparently including both Seyde's percentage of the purchase funds and his share of Skyline's cash and receivables), and repudiating his bonus for assisting in sales efforts.
On February 9, 2021, Seyde filed an ex parte application in the receivership proceeding for a temporary restraining order (TRO), a preliminary injunction, and leave to sue the Receiver. Seyde sought a TRO and injunction that would prohibit the Receiver from delegating his obligation to pay Seyde his share of the sales proceeds, refusing to provide Seyde with unredacted copies of the transaction documents, dissipating the Regency Companies' cash, distributing cash held by Skyline without paying Seyde his 20 percent share, and taking action to dissolve the companies. Brian filed an opposition to Seyde's application, objecting that it was filed too late for the specified hearing date, and that Seyde was neither a party nor intervenor in the action. Brian asserted that the transaction transferring the assets to his company had closed.
The trial court denied Seyde's application the next day, concluding the sale was the result of a settlement, and was not accomplished through the receivership. It ordered that the joint stipulation and order regarding the sale (without exhibits) be unsealed, and a copy mailed to Seyde's counsel; it also indicated that Seyde's request to sue the Receiver could be submitted as a noticed motion.
The court stated, "So, here's what happened in this case. I appointed a receiver to sell the assets of Regency . . . pursuant to the Term Sheet. The Term Sheet required payment of David Seyde some percentage-I think it's 1 percent-of some assets and not others. I said in a status conference that I was going to follow the Term Sheet, meaning payment of David Seyde through the receiver. Brian and Drake, as I understand it, have settled the receivership issues and are in the process of settling the entire case. David Seyde is not a party. In other words, they have cut him out by settling around him. I had nothing to do with that. The receiver isn't paying anybody. The-Brian and Drake are paying-I guess, it's Brian paying Drake and Brian [is] getting the asset. So, the parties to this lawsuit have obviated the need for the receivership and obviated my-the need for me to order the sale of the asset. I haven't ordered or approved anybody's purchase agreement; they have settled, which they can do. And they have cut Mr. Seyde out. And Mr. Seyde has a lawsuit pending against both Brian and-I think it's against both Brian and Drake-presumably for payment of these monies."
11. Seyde Files a Motion Seeking Relief from the Receiver; the Trial Court Grants Seyde Leave to Sue the Receiver
On April 19, 2021, Seyde filed a motion seeking four alternative forms of relief: (a) an order directing the Receiver to pay Seyde from receivership assets in accordance with the Term Sheet, (b) an order disgorging funds paid to the Receiver and his counsel (up to the amount owed to Seyde under the Term Sheet), (c) an order granting Seyde leave to sue the Receiver, or (d) an order rescinding the sale of assets of the Regency Companies effected by the January 25, 2021 stipulation and order. Seyde submitted a proposed complaint against the Receiver asserting causes of action for breach of fiduciary duty, intentional interference with contractual relations, fraud, negligence, and aiding and abetting; the proposed complaint was not a complaintin-intervention.
Seyde sought a total of $5,362,550.63, based on three components.
First, he averred that, under the Term Sheet, his share of the purchase funds was $4,814,425.76, calculated as follows: "(i) by adding the sale price of the Netflix asset sale in 2018 plus the value of the assets purchased by Brian Kennedy plus the value of the seven assets transferred to Drake Kennedy plus Regency's cash; and then (ii) multiplying that amount by the applicable percentage contained in Section 2(H), which, in this case is 1.6 [percent]; and then (iii) subtracting that amount that Mr. Seyde received as a down payment in 2018." Seyde included cash held by the Regency Companies in his calculation of the purchase price because Drake's interest in the companies was redeemed, and he utilized the companies' cash as stated in the Receiver's December 2020 report. Seyde also included the value of the property acquired by Drake in the transaction; Seyde assumed that three specific properties were among the seven properties acquired by Drake and estimated the value of these properties based on his experience.
Second, Seyde claimed that he was owed $375,000 in unpaid monthly salary.
Third, Seyde claimed he was owed 20 percent of Skyline's cash; he did not know how much cash Skyline had at the time of the transaction, but assumed it was at least as much as the Receiver had reported in December 2020, and based on that amount his share was $173,124.87.
On May 11, 2021, the trial court denied Seyde's claims to unwind the asset sale and for payment of the amounts he claimed under the Term Sheet. The court denied Seyde relief based on its conclusion that the sale was not accomplished through the receivership, stating, "Brian and Drake settled the lawsuit, thereby mooting the [r]eceivership, without the Receiver's involvement. Completion of the sale required the Receiver's involvement only for clerical action of commenting on the form of the proposed [s]ale [o]rder and the ministerial action of signing Brian's [asset purchase agreement] and cooperating to close the sale through a signature escrow as required by the [s]ale [o]rder."
The court granted Seyde leave to sue the Receiver, but held that "any recovery by Seyde would be limited to the Receiver's $100,000 bond because the Receiver was acting at all times within the subject matter of the Receivership." The court ordered further briefing on whether Seyde had a right to a jury trial, which would determine whether Seyde could sue the Receiver in the receivership court (a court trial) or a separate lawsuit (a jury trial).
12. The Trial Court Rules that Seyde's Claims Are Equitable
On June 8, 2021, the trial court ruled that Seyde had no right to a jury trial in his claims against the Receiver, and thus the claims would be heard by the receivership court sitting in equity. The court concluded that all of Seyde's claims-for breach of fiduciary duty, intentional interference with contractual relations, fraud (concealment), negligence, and aiding and abetting-were premised on the Receiver owing Seyde a fiduciary duty based on his role as receiver. The court granted Seyde leave to file a supplemental complaint-in-intervention to incorporate facts Seyde had learned from being given access to previously sealed documents.
13. The Trial Court Strikes Seyde's Complaint-In-Intervention, and Seyde Files a Revised Supplemental Complaint-In-Intervention
On June 16, 2021, Seyde filed a supplemental complaint-in-intervention, which alleged additional facts and also asserted new causes of action for breach of contract, breach of the covenant of good faith, and conversion.
On June 18, 2021, at a hearing on another matter, the court sua sponte struck Seyde's supplemental complaint-in-intervention because it asserted new causes of action, and gave Seyde until June 24, 2021 to "file a supplemental complaint alleging new facts only, no new legal theories."
Seyde filed a revised version of his supplemental complaint-in-intervention on June 24, 2021. Seyde asserted the same five causes of action as he had in his original complaint-in-intervention: breach of fiduciary duty, intentional interference with contractual relations, fraud-concealment, negligence, and aiding and abetting. Seyde alleged the Receiver had breached his fiduciary duties to Seyde by (a) helping to effectuate Brian's purchase agreement which violated the court's orders that the sale adhere to the Term Sheet, (b) breaching his contractual duties to Seyde under the Term Sheet, (c) interfering with Seyde's contractual rights under the Term Sheet, and (d) conspiring to keep the sale secret.
Seyde appealed on July 9, 2021. The appealed orders were (1) the January 25, 2021 order approving the brothers' joint stipulation regarding sale, and (2) the May 11, June 8, and June 18, 2021 orders holding that Seyde could sue the Receiver only in the receivership court and did not have a right to a jury trial on his complaint against the Receiver, and striking Seyde's supplemental complaint-in-intervention against the Receiver.
C. Brian's Appeal Concerning Fees and Costs Incurred by the Receiver
1. The Receiver Suspends Efforts to Sell Assets During Brian's Appeal of the Receivership Order
The Receiver did not take any action during the pendency of Brian's appeal of the Receivership Order. The Receiver began his work in early October 2019, when the California Supreme Court denied review of our opinion affirming his appointment.
2. The Receiver Retains the Cozen O'Connor Law Firm
In October 2019, the Receiver retained the Cozen O'Connor law firm to represent him in connection with his receivership duties. Cozen O'Connor worked for the Receiver from October 2019 through February 2020.
One of the Cozen O'Connor attorneys who worked on receivership matters, Henry Herrman, left the firm during Cozen O'Connor's retention and the Receiver continued to utilize Mr. Herrman's services in January and February 2020.
3. The Receiver Retains FTI to Assist in the Asset Marketing and Sale Process
In November 2019, the Receiver retained an accounting firm, FTI, to review the Regency Companies' financial records, prepare financial statements for use in the marketing of the assets, provide financial and operational information to the Receiver, and provide data services. FTI was to be paid a flat fee of $600,000 for these in-scope services.
FTI Director Karthik Rao worked on the project. In a declaration filed later in the action, Rao averred that, soon after FTI began its work, it discovered that the Regency Companies' bank accounts had not been reconciled for many months, in some instances since January 2017. FTI also learned that Regency employees had not been utilizing the companies' accounting system, and had created financial records that did not reconcile and could not be relied upon. FTI worked to reconcile the bank accounts; this work was outside the scope of FTI's retention and delayed FTI's preparation of financial statements.
Rao further averred that, in early February 2020, after FTI had reconciled the Regency Companies' bank accounts, he discovered that Regency employees had made changes to the companies' general ledger, such that the companies' bank accounts no longer reconciled. Rao asked Imelda Ramer (the Regency controller) and Brian for an explanation of the changes, but they did not provide one.
On February 11, 2020, Brian filed an ex parte application for the trial court to order the Receiver to quickly determine whether each of the brothers' bids were qualified and, if so, to select the winning bid. The Receiver opposed Brian's application, contending that FTI's accounting work had been delayed due to the poor condition of the Regency Companies' financial and operational records, and that a proper accounting was necessary to obtain the highest possible price for the assets. On February 18, 2020, the court denied the application, stating, "The court restates its previous order from [December 5, 2019], that the receiver's purpose is to maximize the sale price for the business and doing so within a reasonable period of time."
On February 20 and 21, 2020, FTI submitted requests for specific information to Regency employees, namely Ramer and chief operating officer Philip Berardi. However, according to Rao, Ramer and Berardi failed to provide the information.
4. The Receiver Substitutes Counsel, and Continues to Attempt to Obtain Financial Information; Brian Serves Subpoenas on the Receiver, the Receiver's Counsel, and FTI
In March 2020, the Receiver substituted Perkins Coie in place of Cozen O'Connor, indicating he did so because Perkins Coie was better equipped to assist him in obtaining cooperation from Brian and the Regency employees. Perkins Coie thereafter worked for the Receiver throughout the receivership. Perkins Coie attorneys handled both transactional matters for the receivership as well as the Receiver's litigation with Brian, Drake, and Seyde in this action.
Soon after substituting into the case, Perkins Coie served deposition subpoenas on Ramer and Berardi to obtain the financial information being sought by FTI. The Regency Companies retained counsel for Ramer and Berardi, who objected to being deposed. Ultimately, Ramer and Berardi participated in a conference call with FTI, the Receiver, and all counsel on April 10, 2020. According to Rao, the call did not produce much useful information.
In April and July 2020, Brian's counsel served subpoenas on FTI, the Receiver's counsel, the Receiver's company HAI Advisors, and the Receiver himself. Perkins Coie moved to quash the subpoenas served on the Receiver, his counsel, and FTI. The Receiver retained the Soffer Law Firm to object to the subpoenas served on HAI Advisors. The trial court quashed the subpoenas, finding they were "interfering with the sale process."
5. FTI Works to Obtain Financial Information to Provide to Potential Bidders; Brian and Drake Submit New Bids; the Trial Court Finds that Brian Continued to Refuse to Cooperate in the Sale Process; the Brothers Submit their Joint Stipulation Regarding Sale
Jason Abbott, a senior managing director at FTI, averred that, as a result of the lack of information provided by Regency employees, FTI was forced to rely on source documentation to prepare reliable financial records. By July 10, 2020, FTI was able to set up a VDR. According to Abbott, although the VDR was operational it lacked some important information. Nevertheless, in July 2020, the Receiver solicited new bids from Brian and Drake.
On August 5, 2020, the Receiver filed a motion for an order to show cause why Brian should not be held in contempt of the Receivership Order by failing to provide the Receiver and FTI with access to the Regency Companies' books and records and failing to cooperate in the collection of information requested by the Receiver and FTI. The Receiver also sought an order granting him additional powers, such as the power to operate the Regency Companies or hire and fire company employees. In relevant part, the Receiver relied on evidence that Brian and the Regency employees under his control had failed to provide FTI with access to the companies' books and records, and had failed to respond to FTI's requests for financial information and explanations about discrepancies in the companies' bank records.
The Receiver had filed a similar motion on May 8, 2020, which had not been heard or ruled on by the court. The Receiver informed the court that its August 5, 2020 motion replaced its May 8, 2020 motion.
Brian opposed the Receiver's motion, disputing any interference with the Receiver's sale efforts, and arguing there were no grounds to find Brian in contempt. He acknowledged that the Regency Companies' "books and records were not . . . up to date" when FTI began work, but contended this was because he "had run the business 'out of his head' to some extent . . . and because the company had lost its previous in-house [certified public accountant] and had not yet hired a new one," and not due to any" 'stonewalling' or 'interference.' "
Brian submitted a declaration from Berardi, who disputed FTI's claims that he and Ramer had withheld financial information. Berardi averred that he complied with FTI's requests for information to the best of his ability, that the Regency Companies had provided substantial information and documents to FTI, and that Brian never told Berardi not to cooperate with FTI. Berardi acknowledged that the Regency Companies' books had not been reconciled since mid-2018 and the companies had not had a certified public accountant during that time. Berardi also acknowledged that there were changes made to the Regency Companies' balance sheet, but stated that they resulted from "differences between the two different integrated software platforms" utilized by the companies, and not due to any "interference" by Brian.
Brian also relied on two expert declarations: one from a receivership expert, who opined, in relevant part, that the Receiver's fees were excessive, and that the Receiver should have obtained the court's approval to retain FTI and counsel; the other was from a billboard industry expert who opined that the full accounting performed by FTI was not necessary to market and sell the Regency Companies' assets.
The trial court ruled on the Receiver's motion on August 27, 2020. The court declined to initiate a contempt proceeding but found that Brian had failed to cooperate with FTI and the Receiver, stating, "For three years, Brian has stalled the sale to which he had agreed, both when Judge Tevrizian was the arbitrator/director and for the two years this case has been pending. It is time for those actions to stop." The court ordered that, in the event the Receiver did not accept a bid from Brian or Drake by September 15, 2020, the limited receivership would be converted into a "capital receivership in which the Receiver has exclusive authority to operate the [Regency] Compan[ies]." The court explained, "If the Receiver believes that FTI's due diligence process is sufficient and complete despite Brian's interference, then there is no need to convert to a capital receivership.... If the Receiver accepts either Brian's or Drake's bid, then no expansion of the Receivership to a capital receivership is necessary."
Although the Receiver had not accepted a bid from Brian or Drake by September 15, 2020, on that date the court stayed its earlier order that the receivership convert to a "capital receivership."
As we discussed in more detail above, after the Receiver announced its intention to recommend approval of Drake's bid, the brothers filed a stipulation pursuant to which Brian would purchase assets from the Receiver. On February 9, 2021, Seyde filed an ex parte application for an injunction to halt or unwind the sale and served it on Brian, Drake, and the Receiver. The trial court denied Seyde's application on February 10, 2021.
6. The Trial Court Approves the Receiver's Account and Report, but Leaves the Receivership Open
On April 2, 2021, the Receiver filed a motion for approval of his report and accounting. The accounting disclosed that FTI had billed $1,315,585.50, the Receiver had billed $1,176,455.90, Cozen O'Connor had billed $250,027.95, Herrman Law Firm had billed $45,660, Perkins Coie LLP had billed $1,349,232.14, and the Soffer Law Firm had billed $4,367.40. The Receiver blamed Brian's efforts to resist the asset sale for the high cost of the receivership. The Receiver also claimed that the delay caused by Brian's appeal, the COVID-19 pandemic, and the state of the Regency Companies' financial records all increased expenses. The Receiver noted that Brian had failed to object to the Receiver's first five monthly reports (for October 2019 through February 2020), as required by California Rules of Court, rule 3.1183(b), and had therefore forfeited any objections to the expenses accounted for in those reports.
The Receiver indicated that he had retained FTI "to assemble fresh, accurate, complete, and reliable financial records, due diligence materials (such as leases, contracts, and permits), and financial analyses and summaries," because the market was "wary" of the Regency Companies and aware of the "bitter litigation" between Brian and Drake. According to the Receiver, the VDR put in place by FTI would have benefitted third party bidders and, even with respect to the bidding process involving Brian and Drake, the VDR was necessary "to address the information disparity between Brian and Drake" and for the financial backers/partners Brian and Drake enlisted for their bids.
Drake filed a statement of "no position" on the Receiver's motion.
Brian opposed the motion, contending that the court should surcharge the Receiver because his fees and expenses were excessive and unnecessary. Brian argued the Receiver needlessly prolonged the receivership by not accepting Brian's or Drake's bid in late 2019/early 2020. Brian also contended that FTI's "fullblown forensic accounting" was not needed to market the assets, especially given that the assets were eventually sold to Brian who was knowledgeable about the Regency Companies' finances. Brian submitted an expert declaration opining that the Receiver needed only information regarding income and expenses related to the billboards to market the assets. Another expert opined that a local accounting firm could have accomplished what FTI did for $250,000 or less. Brian also accused the Receiver of generally favoring Drake.
In addition, Brian raised several procedural objections to the Receiver's accounting. He asserted: FTI's billing statements failed to itemize its services as required by California Rules of Court, rule 3.1182(a)(3) (rule 3.1182(a)(3)); the Receiver's own invoices failed to break down tasks into 1/10-hour increments as required by rule 3.1182(a)(3); and the Receiver had not obtained court approval to retain FTI or counsel. Brian also identified for the trial court a handful of specific billing entries he contended were excessive or unnecessary. Brian contended that, even if he did not timely object to the Receiver's monthly reports, he should not be deemed to have forfeited his objections because the Receiver was not prejudiced. He also contended that the Receiver's monthly reports were not "complete" because the Receiver redacted descriptions of tasks in the attorney's fees invoices.
Brian requested that the Receiver be surcharged approximately $3.49 million, comprised of the amount FTI billed in excess of $250,000, all of the attorney's fees incurred by the Receiver's counsel, and half of the Receiver's fees.
In his reply brief, the Receiver acknowledged that the accounting had failed to include $200,000 as part of the retainer paid to FTI (as pointed out by Brian), and had double-paid a $12,600 charge by attorney Henry Herrman, which Herrman had agreed to pay back (and which was paid back the following day). The Receiver submitted an amended accounting which included the $200,000 payment to FTI as well as the fees incurred by the Receiver and Perkins Coie in April 2021; the amended accounting calculated the Receiver's total fees and expenses were $4,477,525.98.
On May 11, 2021, after a hearing, the court approved the Receiver's report and accounting. The court stated in its order "that much of the [r]eceivership cost lies at Brian's feet.... Virtually all the delay in the sale of Regency's assets was the result of Brian's footdragging, obstruction, and interference." The court found that Brian had forfeited many of his challenges by not filing objections to the Receiver's first five monthly reports, and observed that the Receivership Order authorized the Receiver to retain counsel.
The court found persuasive the Receiver's argument that FTI's accounting work was necessary because "no buyer's financial backer would support an offer without due diligence." The court also noted that the Receiver did not know that one of the brothers would end up buying the assets; by having FTI prepare the financial records and due diligence materials the Receiver avoided the expense of an investment banker, and "the poor state of the Company's records and Regency's interference and non-cooperation drove up FTI's cost."
At the same hearing, the court granted Seyde leave to sue the Receiver, and in light of this development the court ordered that the Receiver was not discharged, the receivership was not terminated, and the Receiver's bond was not exonerated. The court approved the Receiver's accounting "as may be supplemented by an accounting concerning his defense of Mr. Seyde's claim."
7. The Trial Court Orders that the Receiver Can Seek Reimbursement of Costs to Defend Against Seyde's Claims
At the May 11, 2021 hearing, the court brought up the issue whether the Receiver's fees incurred to defend against Seyde's claims would be paid by the receivership estate. The Receiver's counsel argued that they should be paid from the receivership estate "[b]ecause the claims are within the receivership." Brian's counsel stated, "Brian Kennedy would object to the Receiver getting any more money. He filed a final accounting." The court expressed skepticism about Brian's position, but stated, "If you want to brief that, you can brief it . . ., but tentatively I think it's probably pretty clear that the receivership estate has to pay his attorneys fees." The court later stated, "The estate has to pay and if any party who disagrees-I guess that would be Brian-may file an opening brief . . . and you can oppose that"; the court ordered briefing for a June 8, 2021 hearing.
Neither Brian nor Drake submitted any briefing on the issue, and at the June 8, 2021 hearing the court ruled that the receivership estate was required to reimburse the Receiver's defense costs.
Brian filed a notice of appeal on July 9, 2021. The appealed orders were the May 11, 2021 order approving the Receiver's report and accounting, and the June 8, 2021 order that the costs incurred by the Receiver to defend against Seyde's claims would be reimbursed by the receivership estate.
DISCUSSION
A. Seyde's Appeal
1. The January 25, 2021 Order Approving the Joint Stipulation Regarding the Asset Sale
a. Appellate Jurisdiction
Before we address Seyde's appeal of the January 25, 2021 order, we must first assess our jurisdiction to do so." 'Appellate courts have jurisdiction over a direct appeal, like the present one, only where there is an appealable order or judgment.' [Citation.]" (Levinson Arshonsky &Kurtz LLP v. Kim (2019) 35 Cal.App.5th 896, 903.)
Seyde contends that the January 25, 2021 order is a "receiver's sale order" which is appealable under the collateral order doctrine. The collateral order doctrine "holds that an appeal is allowed if the order is essentially a final judgment against a party growing out of a matter collateral to the main proceeding, which either directs the appellant to pay money or directs some action be taken by or against the appellant." (Drum v. Superior Court (2006) 139 Cal.App.4th 845, 850.)
Brian contends that Seyde lacks standing to appeal because Seyde was not a party to the lawsuit. Brian also disputes that the January 25, 2021 order was a "receivership sale" subject to appeal.
Drake contends that Seyde cannot appeal the January 25, 2021 order because the basis for Seyde's appeal-that the order was a "receivership sale"-was adjudicated against Seyde by the trial court in a later May 11, 2021 order, and Seyde did not appeal that aspect of the May 11, 2021 order.
The Receiver argues the January 25, 2021 order is not appealable as a final judgment because it left several issues for the court to adjudicate, including approval of the Receiver's final accounting, termination of the receivership, and the Receiver's discharge. The Receiver also argues that the order is not appealable under the collateral order doctrine for similar nonfinality reasons and because the order addressed an issue-the sale of the Regency Companies' assets-that was central, not "collateral," to the lawsuit.
As these various arguments highlight, our appellate jurisdiction largely turns on the merits of the underlying issue. If, as Brian contends, the January 25, 2021 order simply processed a settlement between the Kennedy brothers and the sale was handled outside of the receivership, then the order was not a final adjudication by way of a receivership sale and Seyde would lack standing to appeal.
On the other hand, if Brian's purchase was a receivership sale, then the Receiver's protestations notwithstanding we would have jurisdiction under the collateral order doctrine. At a minimum, the January 25, 2021 order, to use the trial court's words, "cut Mr. Seyde out" of the disposition of his 20 percent interest in Skyline. As far as the receivership proceeding was concerned, if the January 25, 2021 order involved a receivership sale it was essentially a final and adverse judgment as to Seyde's interests in Skyline and Regency more generally, and therefore appealable. (Fish v. Fish (1932) 216 Cal. 14, 16 [order directing the sale of property held by the marital estate to pay the receivership fees of a receiver appealable as a collateral order]; California etc. Assn. v. Superior Court (1908) 8 Cal.App. 711, 713 [order authorizing receiver to sell some of the receivership estate's property is "a final decree for the purpose of an appeal"].)
We reject Drake's argument that Seyde cannot appeal the January 25, 2021 order because he failed to appeal a later order, namely, the trial court's May 11, 2021 ruling that the asset sale was not a receivership sale. Putting aside that it post-dates the January 25, 2021 order at issue, Drake does not explain how the May 11, 2021 order was appealable, and cites no authority suggesting a party forfeits an issue on appeal by failing to appeal a later non-appealable order.
Further, if the sale to Brian was conducted through the receivership, then Seyde has standing to challenge the order approving the transaction. "[A]ll creditors, whether their status is contingent or fixed, have a right to be heard concerning distribution and apportionment of receivership funds." (Vitug v. Griffin (1989) 214 Cal.App.3d 488, 496.) And when a party has a right to be heard on a particular matter, it has standing for purposes of appeal on that matter. (See Marsh v. Mountain Zephyr, Inc. (1996) 43 Cal.App.4th 289, 296-297.) For example, in People v. Stark (2005) 131 Cal.App.4th 184, the court concluded that a non-party had standing to appeal the denial of the receiver's motion to approve an asset sale because the non-party's "contractual right was [adversely] adjudicated in the trial court." (Id. at p. 191.) If the January 25, 2021 order approved the asset sale as part of the receivership, Seyde's contractual rights in the Term Sheet and in Skyline were adversely determined, and Seyde meets the criteria to be deemed an aggrieved party as the order affected his claimed interests in the asset sale in "an '" 'immediate, pecuniary, and substantial'"' way." (Id. at p. 201.)
b. The Asset Transaction Was a Sale by the Receiver
Accordingly, we turn to the question of whether the transaction that was the subject of the January 25, 2021 order was conducted through or outside of the receivership. We conclude that the transaction was a receivership sale (which also means we have appellate jurisdiction) for the following reasons.
First, the Receiver signed the purchase agreement and other closing documents on behalf of the Regency Companies, as "SELLER" and "Court Appointed Receiver," and the purchase agreement provided that "[Drake], [Brian], and [the] Receiver on behalf of the [Regency Companies] (in accordance with the Receivership Order and subsequent instructions from the [c]ourt) each . . . hereby agrees to sell" the assets to KBS Holdco. (Italics added.)
Second, the receivership was expressly still in effect during the sale process. No order terminated it or repatriated the assets from the Receiver to someone else. Instead, the stipulation expressly left the injunction issued by the court along with the Receivership Order in place until after the closing. The stipulation also provided that the Receiver was to produce a final accounting and report and proceed towards discharge only after the closing of the transaction.
Third, court approval was required for the sale because under the terms of the Receivership Order, Brian was prohibited from making the cash distributions to Drake and himself from the Regency Companies' bank accounts provided for in the stipulation and purchase agreement, because those payments were outside of "the ordinary course of [the Regency Companies'] business."
Fourth, the stipulation states that Brian's purchase agreement was approved by the court, as it provided that if Brian's proposed transaction did not close by the deadline then it would "cease[ ] to have [c]ourt approval" and Drake's proposed agreement would be "approved by th[e c]ourt in its place."
Brian contends that, despite these facts, the January 25, 2021 order was not a receivership sale because it was the result of a settlement and stipulation which the Receiver was not involved in negotiating. It is true that the order was the result of the Kennedy brothers' joint stipulation and settlement, but the terms of the stipulation provided for the Receiver's involvement described above and, thus, made it a receivership sale. Brian also argues that the Receiver "had ownership of the Regency [Companies' a]ssets via the Receivership Order," and "could only relinquish [that] ownership through a [c]ourt [o]rder, which occurred on January 25, 2021"-in other words, suggesting that the Receiver's involvement in the sale was nothing more than a technicality. What this argument ignores is that, under the stipulation and resulting order, the Receiver did not simply relinquish the assets back to the Regency Companies; pursuant to the deal documents he sold the assets to a third party (KBS Holdco) as part of a transaction agreement.
Brian also argues that the sale was not conducted through the receivership because the Receiver never held any of the purchase funds in escrow as they were paid directly to Drake. However, this was accomplished only through an artifice under which the purchase funds did not flow through the Regency Companies' bank accounts but were to be "treated" as if they had been paid to the companies and distributed to Drake. Furthermore, Brian's argument ignores that the cash distributions to Drake and Brian were paid directly from the Regency Companies' bank accounts (including any account(s) of Skyline) as part of the transaction.
c. The Trial Court Erred in Approving the Sale Without Holding a Hearing to Determine Its Fairness to Interested Individuals
Because the asset transaction was conducted through the receivership, the trial court was required to approve (or disapprove) of the transaction. (People v. Stark, supra, 131 Cal.App.4th at p. 202.) As noted above, a creditor such as Seyde "ha[s] a right to be heard concerning distribution and apportionment of receivership funds." (Vitug v. Griffin, supra, 214 Cal.App.3d at p. 496.) After hearing from concerned parties, "a trial court has broad discretion in determining whether to approve or disapprove a receiver's sale of assets. In exercising its discretion, the trial court must balance the need to maximize the price to the receivership against the rights or reasonable expectations of all other interested persons, on a case-by-case basis." (People v. Stark, supra, at p. 202.) The trial court must exercise that discretion" 'in view of all the surrounding facts and circumstances and in the interest of fairness, justice and rights of the respective parties.'" (People v. Riverside University (1973) 35 Cal.App.3d 572, 582, quoting 2 Clark, Law of Receivers (3d ed. 1959) § 517; accord, Cal-American Income Property Fund VII v. Brown Development Corp. (1982) 138 Cal.App.3d 268, 274.)
We review a trial court's confirmation of a receiver's sale for abuse of discretion. (Cal-American Income Property Fund VII v. Brown Development Corp., supra, 138 Cal.App.3d at p. 274.) "[A] failure to exercise discretion is an abuse of discretion." (Riskin v. Downtown Los Angeles Property Owners Assn. (2022) 76 Cal.App.5th 438, 446.) Here, the trial court signed off on the stipulation without considering the fairness or propriety of the proposed asset purchase transaction in light of the rights and reasonable expectations of all interested persons. It instead approved the transaction via an under seal filing without giving Seyde an opportunity to be heard, under the mistaken view that the court had no role in evaluating the proposed transaction because it was not a receivership sale but a settlement.
The Receiver contends that even if this was a receivership sale, the trial court "confirmed" the sale by approving the transaction through its January 25, 2021 order, such that no further court action would be required. But it is clear from the record that the court did not evaluate the proposed transaction for conformance with the requirements applicable to receivership sales because it did not consider the transaction to be such a sale. Instead, the court accepted the transaction for the sole reason that Brian and Drake had agreed to its terms, explaining, "I haven't ordered or approved anybody's purchase agreement; [Brian and Drake] have settled, which they can do." Moreover, other statements by the trial court indicate that, had it reviewed the transaction as a receivership sale, it might have refused to approve the proposed transaction without assurances that it protected Seyde's interests in the assets being sold, including statements such as "If the Receiver sold the property, he had to follow the Term Sheet," and, "If the sale was made by the Receiver, then [Seyde's counsel] has got a very good argument- more than good argument, he's probably correct that David Seyde would have to be given his percentage."
Accordingly, we reverse the January 25, 2021 order approving Brian's and Drake's stipulation, and remand for the court to exercise its discretion whether to approve or disapprove the proposed sale of assets by the Receiver. We disagree with Seyde that the Receiver acted outside his role or in bad faith without court approval. The issue is not the Receiver acting without court approval, as the court did approve the stipulation before the Receiver sold the assets. The issue instead is that the court's approval was based on a prejudicial misunderstanding of its role in permitting the transaction to move forward.
To be clear, we are not saying that the court has no choice but to unwind the transaction and start afresh. If the court finds the deal is fair to all concerned based on additional information regarding how Seyde's interests in Skyline and otherwise are to be compensated-even if those amounts are not to be paid by the Receiver-it can approve the deal. The quantification of Seyde's claims under the Term Sheet is disputed by Brian and Drake, and the full quantification of Seyde's interests involve complex questions that need not necessarily be resolved in the receivership proceeding. The court enjoys broad discretion in determining how to best resolve Seyde's claims and any defenses thereto. "[T]he main function of the court is to manage or dispose of the estate in the best manner possible and for the best interest of the parties concerned. To effectually perform that duty necessarily requires some flexibility ...." (Lesser v. Seymour (1950) 35 Cal.2d 494, 499.)
We deny Seyde's motion for judicial notice of statements by Brian and Drake in pleadings, and a statement by Brian's attorney in a hearing, from Seyde's separate lawsuit regarding the characterization of Brian's purchase. We "may decline to take judicial notice of matters that are not relevant to dispositive issues on appeal." (Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 482.) We decline to take the requested judicial notice because Seyde fails to show the statements are relevant to any issue in this appeal. Seyde contends that the statements show Brian and Drake took positions that are "inconsistent with the position taken by the [s]uperior [c]ourt in this action when it explained that it did not approve [Brian's purchase agreement]." However, Seyde fails to explain how this makes the statements relevant to this appeal.
2. Seyde's Appeal from the May 11, June 8, and June 18, 2021 Orders Regarding His Complaint Against the Receiver
Seyde also appeals the trial court's orders on May 11, June 8, and June 18, 2021, in which the court ruled that Seyde could sue the Receiver only in the receivership court and did not have a right to a jury trial on his complaint against the Receiver, and which struck Seyde's supplemental complaint-in-intervention against the Receiver.
Seyde's appeal from these orders is moot given our resolution of his appeal from the January 25, 2021 order. Seyde's complaint against the Receiver was premised on claims that the Receiver was involved in a sale of the Regency Companies' assets outside of the receivership. As we conclude the proposed asset sale was to be conducted through the receivership, and was not appropriately approved by the court, any claim that the sale occurred outside of the receivership is no longer a tenable theory. Accordingly, we dismiss Seyde's appeal from the May 11, June 8, and June 18, 2021 orders.
B. Brian's Appeal
1. The Trial Court's Order Approving the Receiver's Accounting Is Not Presently Appealable
The Receiver moves to dismiss Brian's appeal of the trial court's May 11, 2021 order approving the Receiver's report and accounting. The Receiver contends that, because the court expressly allowed the Receiver to submit additional reports and accountings regarding its defense against the Seyde claims, the May 11, 2021 order did not approve a final accounting and report.
We agree the May 11, 2021 order is not yet appealable. In Raff v. Raff (1964) 61 Cal.2d 514, our high court stated, "If an order approving the account of a receiver shows on its face that the account is not final and that the receiver is to continue to . . . act as receiver under orders of the court, it is not an appealable order." (Id. at p. 519.) Here, the accounting is not yet final, and the Receiver continues to act as Receiver (including as discussed above in connection with court review of the proposed asset sale on remand). Accordingly, the May 11, 2021 order providing for interim payment of the Receiver, his attorneys, and his accounting firm is not yet an appealable order.
Brian attempts to distinguish Raff by contending it held that an approval order may be considered "interim" only if "the receiver is to continue to hold the assets." (Raff v. Raff, supra, 61 Cal.2d at p. 519.) As discussed above, this matter must be remanded for the court to approve or disapprove of the sale of assets held by the Receiver to Brian. Until that happens, the Receiver remains in constructive possession of the assets.
Brian also contends that any supplemental accountings filed by the Receiver regarding his defense against the Seyde claims are separable from his accountings regarding the asset sale. Even if this were true, a point we do not decide, the asset sale is not yet final either.
Here, there has been no final accounting of the matter, including any final accounting related to the sale and thus no final appealable order. (Raff v. Raff, supra, 61 Cal.2d at p. 519.) Nor does the collateral order doctrine apply because the May 11, 2021 order is not akin to a final judgment given our conclusion that the proposed disposition of the assets was a receivership sale that the trial court must review for fairness to all interested parties in view of their rights and reasonable expectations under all the surrounding facts and circumstances. (E.g., Drum v. Superior Court, supra, 139 Cal.App.4th at p. 850.) We therefore dismiss Brian's appeal of the May 11, 2021 order as premature, without prejudice to a further appeal (should one be necessary) at the conclusion of the receivership.
2. Brian's Appeal of the Trial Court's June 8, 2021 Order Is Dismissed as Moot
Brian and Regency Outdoor Advertising, Inc. only appeal the trial court's June 8, 2021 order "In the event [we] grant[ ] Seyde's appeal and determine[ ] Seyde is not limited to [the Receiver]'s bond and/or permit[ ] Seyde to expand his [c]omplaint against [the Receiver]." As is discussed above, we have not ruled on Seyde's appeal in this manner, and have instead dismissed Seyde's appeal regarding his claims against the Receiver.
Therefore, Brian's and Regency Outdoor Advertising, Inc.'s appeal of the June 8, 2021 order is moot.
DISPOSITION
The January 25, 2021 order approving the stipulation regarding the sale of assets is reversed with directions to hold a hearing to assess its fairness as a sale by the Receiver, including consideration of David Seyde's rights, and for any necessary further proceedings following that hearing. David Seyde's appeal from the May 11, June 8, and June 18, 2021 orders is dismissed as moot. Brian Kennedy's appeal from the court's May 11, 2021 order approving the Receiver's account and report is dismissed as premature; his appeal from the June 8, 2021 order is dismissed as moot. David Seyde is awarded costs on his appeal. The Receiver is awarded costs on Brian Kennedy's cross-appeal.
We concur: ROTHSCHILD, P. J. BENDIX, J.