The disentitlement doctrine allows a court of appeal to dismiss an appeal as a sanction for the appellant’s refusal to comply with trial court orders that remain in force while the appeal is pending. The lesson to be learned from today’s decision in Ironridge Global IV, Ltd. v. ScripsAmerica, Inc., case no. B256198 (2d Dist., June 30, 2015) comes from its discussion of how the right kind of appellate challenge to a trial court order — specifically, a jurisdictional challenge — can serve as a defense to the imposition of a dismissal sanction under the disentitlement doctrine. Unfortunately for the defendant-appellant in Ironbridge, calling a challenge a jurisdictional one does not make it so. The Court of Appeal characterizes the defendant’s challenge as a non-jurisdictional one, and dismisses the appeal for the defendant’s violation of the trial court order from which it appealed.
A settlement reached by the parties required defendant to issue plaintiff shares in the defendant corporation, and to issue plaintiff additional shares in the event the value of the shares decreased. The court approved the stipulation and retained jurisdiction to enforce its terms. About six months later, plaintiff applied ex parte for an order compelling the defendant to transfer additional shares to plaintiff and enjoining defendant from issuing shares to anyone else until it until it did so. The court ordered defendant to issue the additional shares within 24 hours and not to issue shares to anyone else until it complied.
In the defendant’s appeal, plaintiff moved to dismiss under the disentitlement doctrine, providing SEC filings showing that defendant had transferred more than 8 million shares to third parties in violation of the injunction. Defendant filed a “paltry” 1-1/2 page opposition to the motion citing “no authority whatsoever,” contending that the order was in excess of the trial court’s authority in that (1) the trial court could not enjoin issuance of shares to third parties because there was no such prohibition in the settlement, and (2) the court could not compel the issuance of shares to plaintiff on an ex parte basis.
The Court of Appeal isn’t buying it. The court acknowledges that “[a] person may refuse to comply with a court and raise as a defense to the imposition of sanctions that the order was beyond the jurisdiction of the court and therefore invalid,” but notes also that a person “may not assert as a defense that the order merely was erroneous.” (Internal quotations and citations omitted.) It finds that the defendant’s challenge falls into the latter category.
First, the court notes that a trial court has continuing power to enforce a stipulated judgment entered in settlement of a case (Code Civ. Proc., § 664.6) and the power to “compel obedience to its judgments, orders, and process” in proceedings before it (Code Civ. Proc. § 128, subd. (a)(4)). Combined, those powers gave the trial court “authority to fashion orders to enforce compliance with a stipulated judgment.” Though the court does not state so explicitly, its point seems to be that the prohibitory injunction against issuance of shares to third parties was was a permissible coercive measure to enforce the settlement regardless of whether the stipulated judgment addressed such transfers.
The defendant’s challenge to the ex parte nature of the order is dispatched more easily. The settlement itself authorized the court to enforce the settlement on an ex parte basis.
Here, the parties requested that the court retain jurisdiction to enforce the settlement. The stipulation also provided that it could be enforced on an ex parte basis. There is no question that the court had jurisdiction over the parties and the subject matter, and that the parties expressly authorized the court to enforce the settlement on an ex parte basis. We find no procedural irregularity or other defect that would support a credible claim that the order was either void or voidable. Defendant’s appeal merely challenges the order as erroneous.
The lesson here, of course, is that if you are unable or unwilling to comply with a trial court order that remains in force pending an appeal from it, you had better be sure that you have a serious jurisdictional challenge to make against it. Do not convince yourself that your challenge on the merits is a jurisdictional one just because you do not want to obey the order, because the Court of Appeal will look beyond the label on your argument. Absent a solid jurisdictional challenge, disobedience of the trial court order can put your entire appeal at risk.
UPDATE: For those interested in reading more about the disentitlement doctrine, see the article referenced at Southern California Appellate News.