STAN LEE MEDIA, INC. v. CONAN SALES CO. LLC

• Court: Court of Appeals for the Ninth Circuit
• Decided: October 21, 2013
• Docket: 19-10027
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION OCT 21 2013

MOLLY C. DWYER, CLERK UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

STAN LEE MEDIA, INC., a Colorado No. 12-55405 corporation, D.C. No. 2:11-cv-06861-SVW-SS Plaintiff - Appellant,

v. MEMORANDUM*

CONAN SALES CO. LLC, a Delaware limited liability company; CONAN PROPERTIES INTERNATIONAL LLC, a Delaware limited liability company; PARADOX ENTERTAINMENT INC., a Delaware corporation; PARADOX ENTERTAINMENT AB, a Sweden corporation; FREDRIK MALMBERG; LUKE LIEBERMAN, personal representative of the Estate of Arthur M. Lieberman; JUNKO KOBAYASHI; GILL CHAMPION,

Defendants - Appellees.

Appeal from the United States District Court for the Central District of California Stephen V. Wilson, District Judge, Presiding

Argued and Submitted October 9, 2013

* This disposition is not appropriate for publication and is not precedent except as provided by 9th Circuit Rule 36-3. Pasadena, California

Before: PREGERSON, WARDLAW, and TALLMAN, Circuit Judges.

Stan Lee Media, Inc. (SLMI) appeals from an order dismissing its action

seeking to set aside a decade-old settlement approval order (Settlement Order)

entered by the U.S. Bankruptcy Court in conjunction with SLMI’s prior

bankruptcy proceeding. Pursuant to the Settlement Order, SLMI transferred

ownership of intellectual property rights associated with the fictional character

“Conan the Barbarian” to Conan Sales Co., LLC (CSC). In the current litigation,

SLMI seeks to recoup those intellectual property rights through Federal Rule of

Civil Procedure 60 relief. We have jurisdiction under 28 U.S.C. § 1291, and we

affirm.

We review de novo the district court’s denial of a motion to set aside an

order as void under Rule 60(b)(4). Export Grp. v. Reef Indus., Inc., 54 F.3d 1466,

1469 (9th Cir. 1995). The settlement order is not void. SLMI presented

insufficient evidence that Kobayashi or Lieberman adversely dominated SLMI, or

that any such adverse domination influenced an otherwise arms-length negotiation

between CSC and the unsecured creditors’ committee, both of which were

represented by independent legal counsel. And despite SLMI’s argument to the

contrary, the record demonstrates that Kobayashi was duly authorized to act on

2 SLMI’s behalf. We also agree with the district court that notice of the settlement

was proper under Federal Rule of Bankruptcy Procedure 2002(a)(3). The

settlement was not a disguised sale, and thus SLMI’s shareholders were not

entitled to notice. SLMI’s remaining arguments do not raise any of the

jurisdictional or due process concerns that alone permit Rule 60(b)(4) relief. See

U.S. Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 271 (2010) (“Rule 60(b)(4) applies

only in the rare instance where a judgment is premised either on a certain type of

jurisdictional error or on a violation of due process[.]”). No such violation

occurred here.

The district court did not abuse its discretion in denying relief under Rule

60(b)(6). See United States v. Holtzman, 762 F.2d 720, 725 (9th Cir. 1985). Rule

60(b)(6) is a catch-all provision that should be used “sparingly as an equitable

remedy to prevent manifest injustice.” United States v. Alpine Land & Reservoir

Co., 984 F.2d 1047, 1049 (9th Cir. 1993). SLMI’s allegations on this issue are

largely repetitive of its unpersuasive allegations in support of its request for Rule

60(b)(4) relief. Furthermore, Kobayashi, as an SLMI officer of the debtor in

possession, had no duty to seek 11 U.S.C. § 327 authorization for her continued

employment. See 3 Collier on Bankruptcy ¶ 327.02[6][c] (Alan N. Resnick &

Henry J. Sommer, eds., 16th ed. 2013) (“The general view is that officers of the

3 debtor are not professionals whose employment must be approved by the court.”).

There was also no violation of 11 U.S.C. § 510(b)’s mandatory subordination

requirement because CSC was a secured creditor properly seeking to foreclose on

the asset securing the debt in default. Nor has SLMI demonstrated manifest

injustice. See Alpine Land & Reservoir Co., 984 F.2d at 1049.

Nor did the district court abuse its discretion in denying Rule 60(d)(3) relief

based on fraud on the court. See Appling v. State Farm Mut. Auto. Ins. Co., 340

F.3d 769, 780 (9th Cir. 2003). To establish fraud on the court, a party must

demonstrate by clear and convincing evidence the existence of an “unconscionable

plan or scheme . . . designed to improperly influence the court in its decision.”

England v. Doyle, 281 F.2d 304, 309 (9th Cir. 1960). All of SLMI’s fraud

allegations are based on non-disclosures, which are generally insufficient to

support a claim of fraud on the court. See Appling, 340 F.3d at 780. Moreover,

SLMI failed to present clear and convincing evidence of an “unconscionable plan

or scheme.” See England, 281 F.2d at 309. Even if SLMI had demonstrated a

“colorable” claim of fraud, which it did not, it was not automatically entitled to

discovery. See Pearson v. First NH Mortg. Corp., 200 F.3d 30, 35 (1st Cir. 1999)

(“[O]nce the record evidence demonstrates a ‘colorable’ claim of fraud, the court

4 may exercise its discretion to permit preliminary discovery.”). The district court

did not abuse its discretion in denying discovery. See id.

Finally, the district court properly dismissed SLMI’s remaining counts in the

complaint. Even assuming that SLMI could have proceeded on its additional

claims without first setting aside the Settlement Order, which we think unlikely, it

unequivocally acquiesced on the record, on several occasions, to the district court’s

decision to convert SLMI’s complaint into a Rule 60 motion for relief. See

Mendoza v. Block, 27 F.3d 1357, 1360 (9th Cir. 1994) (refusing to reverse the

district court’s decision to resolve questions of fact without a jury where appellant

had “stated unequivocally that he had no objection to the suggested procedure”).

SLMI has thus failed to preserve any argument to the contrary. See id. Once the

district court properly denied the motion to set aside the ten-year-old Settlement

Order, that was the end of the case.

AFFIRMED.