Filed 3/5/14 P. v. World Wide Mediacom CA2/3
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
THE PEOPLE et al., B241365
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC432204)
v.
WORLD WIDE MEDIACOM et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los Angeles County,
Gregory W. Alarcon, Judge. Reversed and remanded with directions.
Carmen A. Trutanich and Michael N. Feuer, City Attorneys, Tina Hess and
Jose A. Egurbide, Assistant City Attorneys, and Andrew K. Wong, Deputy City Attorney,
for Plaintiffs and Appellants.
Law Office of Esperanza Cervantes Anderson and Esperanza Cervantes Anderson
for Defendants and Respondents World Wide Mediacom, Mediacom Inc., and Scott
Krantz.
Knight Law Group and Raaqim A. S. Knight for Defendants and Respondents
Mark Denny and MD Graphic Installers, Inc.
Webb & Beecher, Eric L. Webb and Brian G. Beecher for Defendant and
Respondent World Wide Rush.
O’Melveny & Myers, Michael M. Maddigan and Carol Abernathy for Defendant
and Respondent The Davis Group.
_____________________________
INTRODUCTION
In 2010, the California Department of Transportation (Caltrans) settled an
administrative action brought to enforce the Outdoor Advertising Act (OAA). (Bus. &
Prof. Code, § 5200 et seq.)1 That settlement included a release of claims against
defendants and respondents World Wide Rush, LLC; The Davis Group LLC; World
Wide Mediacom LLC; Mediacom, Inc.; Scott Krantz; MD Graphic Installers, Inc.; and
Mark Denny (collectively, defendants). While the administrative action was pending,
plaintiffs and appellants The People of the State of California and the City of Los
Angeles (collectively, appellants) filed a complaint in superior court against defendants
that also alleged violations of the OAA. Unlike the administrative action, however, the
complaint alleged causes of action under section 17200, the Unfair Competition Law
(UCL).
Defendants demurred to the operative complaint on the ground, among others, that
the administrative action was res judicata to the state court action. The trial court
1
All further statutory references are to the Business and Professions Code.
2
sustained the demurrer without leave to amend. Because we conclude that res judicata
does not apply, we reverse the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
I. Factual background.
A. Supergraphic signs and the OAA.
Supergraphic signs are “outdoor advertising displays that are affixed to and cover
all or much of the faces of multi-story buildings.” They are “ ‘enormously large
advertisements, usually on a type of vinyl, that are stretched or pasted across the side of a
building. They are hard to miss. Supergraphics often span the width of a building and
cover over ten floors.’ ”2 Illegal supergraphic signs are serious traffic hazards because
their “size, imagery, placement and prominence” divert motorists’ attention; they detract
from the city’s appearance and reduce surrounding property values by adding to visual
clutter and changing the character of prominent buildings; they endanger tenants’ lives by
impairing firefighters’ ability to conduct rescue operations; they jeopardize the state’s
receipt of federal highway funds and other revenue; and they place competitors who
comply with laws at a competitive disadvantage.
California’s OAA regulates outdoor advertising displays adjacent to or visible
from state highways. (§ 5200 et seq.) The OAA, for example, prohibits advertising
displays within 660 feet of interstate and primary highway right-of-ways, although there
are exceptions. (§ 5405; see also § 5440 [prohibiting advertising displays along
landscaped freeways unless the advertisement is for products or services offered on the
premises].) The OAA also imposes safety measures regulating size, spacing and
location. (§ 5400 et seq.) Outdoor advertisers must be licensed by Caltrans (§ 5301), and
outdoor advertising requires a permit from Caltrans (§ 5350).
Violations of the OAA are punishable as misdemeanors. (§ 5464.) Advertising
that violates the OAA are public nuisances and may be removed. (§ 5461.) Under the
2
Quotation from World Wide Rush LLC v. City of Los Angeles (C.D.Cal. 2009)
605 F.Supp.2d 1088, 1091, reversed (9th Cir. 2010) 606 F.3d 676.
3
OAA, the director may revoke licenses and permits and may move and destroy
advertising displays placed in violation of the OAA. (§ 5463; Cal. Code Regs., tit. 4,
§ 2241.) If illegal advertising displays are not removed after written notice of a violation,
a $10,000 penalty may be imposed plus a $100 fine per each day the advertising is
maintained after written notice is sent. (§ 5485, subd. (b)(2).) Gross revenues from an
unauthorized advertising display shall be disgorged. (§ 5485, subd. (c).)
Cities and counties may also enact ordinances placing restrictions on advertising
displays that are equal to or greater than those imposed by the OAA. (§ 5230.) In 2002,
the Los Angeles City Council banned supergraphic signs, with some exceptions. That
ban was enjoined in August 2008 by an order of the United States District Court, which
found it unconstitutional. (World Wide Rush, LLC v. City of Los Angeles (C.D.Cal. 2008)
579 F.Supp.2d 1311.) But in 2010, the Ninth Circuit reversed the district court. (World
Wide Rush, LLC v. City of Los Angeles (9th Cir. 2010) 606 F.3d 676 [2010 U.S. App.
LEXIS 10797].) By that time, the Los Angeles City Council, in August 2009, had issued
Ordinance No. 180841 banning supergraphic signs.
B. The Caltrans administrative action.
Caltrans administers and enforces the OAA. (§§ 5250, 5252-5254.) In or about
November 2009, Caltrans initiated an administrative action (the “Caltrans action”)
against, among others, World Wide Rush (Rush) contending that it displayed “outdoor
advertising structures” in violation of the OAA; namely, Rush displayed advertising
without first having secured a written permit, that exceeded size limits and was adjacent
to a landscaped freeway.3 The accusation asked that the violations be corrected or the
advertising displays removed, for “all penalties allowed including, but not limited to,
those set forth in section 5485(b)(2) of the Act,” and for any “other and further action as
may be deemed just and proper.”
3
The accusation also named as respondents, CB Richard Ellis, Inc., SMIII
Sepulveda Center LLC, and Barry L. Rush, none of whom are a party to this appeal.
4
On February 2, 2011, the Caltrans action settled. The settlement agreement and
release was entered into and by “the California Department of Transportation,
individually and for and on behalf of the People of the State of California.” Under the
release, “[c]omplainant, the People of the State of California, acting by and through the
California Department of Transportation” released, among others, Rush; World Wide
Mediacom LLC and Mediacom Inc. (collectively, Mediacom); Scott Krantz (Mediacom
Inc.’s president); MD Graphic Installers (Graphic); Mark Denny (Graphic’s president);
and Davis Group Realty (Davis Group),4 even though they had not been specifically
named as respondents in the Caltrans action, from “all claims . . . of every nature and
description, whether known or unknown, contained in or arising out of the Action, or that
could have been alleged based on the facts set forth in the Action or involving the
Released Parties or the Properties, including, without limitation, claims that Respondents
or any other Released Parties violated any provision of the Act, including, without
limitation, claims under California Business and Professions Code §§ 5350, 5408, 5440,
5485(b)(2), 5485(c) and 5485(d), . . . 17200 et seq., claims of public and/or private
nuisance, including claims under . . . Civil Code §§ 3479-80, 3491, California Code of
Civil Procedure § 731, Business and Professions Code § 5461, and any and all other
claims that involve the same or similar facts alleged or that arise or have arisen in
connection with the Action and the Properties, against the Released Parties . . . .”
The terms of the settlement included removal of advertising displays and a
$218,000 payment to Caltrans. The five properties subject to the settlement were:
3415 South Sepulveda Boulevard, Los Angeles, California 90034; 1606 Cotner Avenue,
Los Angeles, California 90025; 3280 North Cahuenga Boulevard, Los Angeles,
California 90068; 15301-15303 Ventura Boulevard, Los Angeles, California 91403; and
10801 National Boulevard, Los Angeles, California 90064.
4 The release named 26 entities.
5
C. The current state court action.
While the Caltrans action was pending and before it was settled, “The People of
the State of California and the City of Los Angeles”5 filed this state court action against
defendants in February 2010 to abate public nuisances and for injunctive relief,
disgorgement of gross revenues and civil penalties, with the operative second amended
complaint filed in June 2011.6 According to the complaint, Rush, Mediacom and Krantz
(the Sign Company defendants) leased wall areas on the faces of buildings to erect
supergraphic signs. Graphic and Denny (the Installer defendants) installed the signs for
the Sign Company defendants. Davis Group leased the face of its office building at
3280 North Cahuenga Boulevard to the Sign Company defendants. The properties on
which illegal supergraphic signs were erected include the five named in the Caltrans
action and thirteen others.
The second amended complaint alleged these causes of action, which are the
subject of this appeal: (1) First Cause of Action—section 17200 against all defendants;
(2) Second Cause of Action—conspiracy to violate the UCL against all defendants except
Davis Group; (3) Eighth Cause of Action—section 5485, subdivisions (b)(2), (c) and (d)
against Rush, Mediacom, and Krantz relating to 4605 North Lankershim Boulevard;
(4) Ninth Cause of Action—section 5485, subdivisions (c) and (d) against Rush,
Mediacom, and Krantz relating to 1818 Oak Street; and (5) Tenth Cause of Action—
section 5485, subdivisions (b)(2), (c) and (d) against Scott Fisher relating to 6081 Center
Drive. 7
5
The Los Angeles City Attorney represents both.
6 The second amended complaint named other defendants who are not a party to this
appeal.
7
Appellants do not appeal the dismissal of the third through seventh causes of
action. Those causes of action concerned the five properties that were the express subject
of the Caltrans action: 3415 South Sepulveda; 10801 National; 1606 Cotner; 3280 North
Cahuenga; and 15301-15303 Ventura.
6
As to the first and second causes of action, the People asked for an order removing
illegal advertising displays and for an injunction against the placement of any advertising
display within the city “without all required permits, approvals and inspections and that
do not otherwise comply fully with all laws.” The People asked for restitution under
sections 17203 and 17204 and for a civil penalty of $2,500 per violation under section
17206. As to the eighth and tenth causes of action, the City asked for civil penalties and
disgorgement of revenue. As to the ninth cause of action, appellants asked for
disgorgement of revenue.
II. Procedural history.
Defendants separately demurred8 to the second amended complaint and asked for
judicial notice of the settlement agreement in the Caltrans action. Appellants opposed the
demurrers. On January 9, 2012, the trial court issued orders sustaining the demurrers to
the second amended complaint on the ground that the Caltrans action was res judicata as
to the second amended complaint. The court took judicial notice of the settlement
agreement.9
The trial court entered judgment. This appeal followed.10 The People appeal the
dismissal of the first and second causes of action, and the City appeals the dismissal of
the eighth, ninth, and tenth causes of action.11 They do not appeal the dismissal of the
third through seventh causes of action.
8
Rush, Mediacom and Krantz, Graphics and Denny, and Davis Group filed separate
demurrers.
9
The trial court denied appellants’ motion for reconsideration.
10
Citywide, a defendant named in the second amended complaint, was a party to the
appeal until it and appellants settled their claims. They therefore do not pursue the appeal
of the April 23, 2012 judgment in Citywide’s favor.
11
Although appellants state that they are appealing dismissal of the tenth cause of
action, it was not alleged against any of the defendants responding to the appeal, and they
did not demur to it. It therefore does not appear to be a proper subject of the appeal.
7
DISCUSSION
I. Standard of review.
To determine whether a plaintiff has properly stated a claim for relief, “our
standard of review is clear: ‘ “We treat the demurrer as admitting all material facts
properly pleaded, but not contentions, deductions or conclusions of fact or law.
[Citation.] We also consider matters which may be judicially noticed.” [Citation.]
Further, we give the complaint a reasonable interpretation, reading it as a whole and its
parts in their context. [Citation.] When a demurrer is sustained, we determine whether
the complaint states facts sufficient to constitute a cause of action. [Citation.] And when
it is sustained without leave to amend, we decide whether there is a reasonable possibility
that the defect can be cured by amendment: if it can be, the trial court has abused its
discretion and we reverse; if not, there has been no abuse of discretion and we affirm.
[Citations.] The burden of proving such reasonable possibility is squarely on the
plaintiff.’ [Citations.]” (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)
Our review is de novo. (Ibid.) Toward this end, we must liberally construe the complaint
with a view to achieving substantial justice between the parties. (Code Civ. Proc., § 452.)
II. The trial court properly took judicial notice of the settlement agreement.
Appellants’ first contention is the trial court improperly took judicial notice of the
truth of the contents of the settlement agreement in the Caltrans action. We disagree.
When deciding the sufficiency of a complaint to withstand a demurrer, a court
may consider any matter subject to judicial notice. (Code Civ. Proc., § 430.30, subd. (a).)
Under Evidence Code section 452, judicial notice may be taken of, for example,
“[o]fficial acts of the legislative, executive, and judicial departments of the United States
and of any state of the United States.” (Evid. Code, § 452, subd. (c); see also Stevens v.
Superior Court (1999) 75 Cal.App.4th 594, 607-608 [judicial notice could be taken of
filings submitted to Department of Insurance, although judicial notice of materials
prepared by private parties that are merely on file with the department are not noticeable
under Evidence Code section 452, subdivision (c)]; Frommhagen v. Board of Supervisors
(1987) 197 Cal.App.3d 1292, 1299 [“If all of the facts necessary to show that an action is
8
barred by res judicata are within the complaint or subject to judicial notice, a trial court
may properly sustain a general demurrer. [Citation.] In ruling on a demurrer based on
res judicata, a court may take judicial notice of the official acts or records of any court in
this state”].)
Appellants acknowledge that the trial court could take judicial notice of the
settlement agreement as an official record in the Caltrans action.12 Appellants argue that
what the trial court could not do, but did, was take judicial notice of the truth of the
settlement’s contents. They are correct that judicial notice may not be taken of the truth
of any factual assertions in the matter to be noticed. (Sosinsky v. Grant (1992) 6
Cal.App.4th 1548, 1569.) Sosinsky summarized the distinction between taking judicial
notice of a matter and the truth of the matter this way: “that [a] judge believed A (i.e.,
that the judge ruled in favor of A on a particular factual dispute) is different from the
taking of judicial notice that A’s testimony must necessarily have been true simply
because the judge believed A and not B.” (Id. at p. 1565.) A court, for example, can
therefore take judicial notice of the existence of a factual finding in a settlement
agreement but not the truth of the finding. (Steed v. Department of Consumer Affairs
(2012) 204 Cal.App.4th 112, 120.)
Sosinksy also discussed the interplay between judicial notice and res judicata:
“Whether a factual finding is true is a different question than whether the truth of that
factual finding may or may not be subsequently litigated a second time. The doctrines of
res judicata and collateral estoppel will, when they apply, serve to bar relitigation of a
factual dispute even in those instances where the factual dispute was erroneously
decided . . . .” (Sosinsky v. Grant, supra, 6 Cal.App.4th at p. 1569.)
There is no indication that the trial court here improperly took judicial notice of
the truth of any facts in the settlement agreement. The court said it was taking judicial
12
Because the trial court could take judicial notice of the settlement agreement under
subdivision (c) of Evidence Code section 452, we need not address whether judicial
notice was proper under any other subdivision, for example, subdivision (d), which
concerns judicial notice of, among others, records of any court of this state.
9
notice of the settlement agreement and, specifically, “of the existence of such facts within
these documents, rather than relying on the truth of such facts.” Because the court was
not judicially noticing the truth of the facts in the settlement agreement, the court
overruled appellant’s hearsay objections. The court thus clearly understood that it could
not take judicial notice of the truth of any hearsay statements merely because they were
in a document constituting an official act. (Sosinsky v. Grant, supra, 6 Cal.App.4th at
p. 1566.) Rather, the trial court could take judicial notice of the settlement agreement and
consider whether it precluded litigation of the claims raised in the superior court action.
III. Res judicata does not bar the superior court action.13
Appellants contend that the settlement of the Caltrans action does not bar the
current action under the doctrine of res judicata. We agree.
“ ‘Res judicata’ describes the preclusive effect of a final judgment on the merits.
Res judicata, or claim preclusion, prevents relitigation of the same cause of action in a
second suit between the same parties or parties in privity with them. Collateral estoppel,
or issue preclusion, ‘precludes relitigation of issues argued and decided in prior
proceedings.’ [Citation.] Under the doctrine of res judicata, if a plaintiff prevails in an
action, the cause is merged into the judgment and may not be asserted in a subsequent
lawsuit; a judgment for the defendant serves as a bar to further litigation of the same
cause of action.” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896-897,
fn. omitted.)
For res judicata to apply, there must have been (1) a final judgment on the
merits;14 (2) the party against whom the principle is invoked was a party or is in privity
with a party to the prior adjudication; and (3) the issue decided in the prior adjudication
must be identical with the one presented in the subsequent litigation. (Boeken v. Philip
Morris USA, Inc. (2010) 48 Cal.4th 788, 797; Bullock v. Philip Morris USA, Inc. (2011)
13
Graphics and Denny join Rush’s arguments regarding res judicata and judicial
notice.
14
The People do not challenge the first element.
10
198 Cal.App.4th 543, 557; Citizens for Open Access etc. Tide, Inc. v. Seadrift Assn.
(1998) 60 Cal.App.4th 1053, 1065 (Citizens for Open Access).) Even if these three
requirements are met, res judicata will not be applied if injustice would result or the
public interest requires that litigation not be foreclosed. (Citizens for Open Access, at
p. 1065.)
The second element of privity refers “ ‘to a relationship between the party to be
estopped and the unsuccessful party in the prior litigation which is “sufficiently close” so
as to justify application of the doctrine of collateral estoppel.’ [Citations.]” (People v.
Sims (1982) 32 Cal.3d 468, 486-487, superseded by statute as stated in Gikas v. Zolin
(1993) 6 Cal.4th 841, 851; see also Citizens for Open Access, supra, 60 Cal.App.4th at
pp. 1069-1070.) Courts have held “that the agents of the same government are in privity
with each other, since they represent not their own rights but the right of the
government.” (Lerner v. Los Angeles City Board of Education (1963) 59 Cal.2d 382,
398; see also Carmel Valley Fire Protection Dist. v. State of California (1987) 190
Cal.App.3d 521, 535.) Still, the State of California is not a single entity (People v. Hy-
Lond Enterprises, Inc. (1979) 93 Cal.App.3d 734, 751-752), and “[t]he acts of one public
agency will bind another public agency only when there is privity, or an identity of
interests between the agencies” (Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976,
995; see also Hudson v. Board of Administration (1997) 59 Cal.App.4th 1310, 1330
[where the interests of public agencies conflict, there is no privity]).
Underlying the third element of the res judicata doctrine is the “primary right
theory.” (Mycogen Corp. v. Monsanto Co., supra, 28 Cal.4th at p. 904; Consumer
Advocacy Group, Inc. v. ExxonMobil Corp. (2008) 168 Cal.App.4th 675, 686.) Under
this theory, the invasion of one “ ‘primary right’ ” gives rise to a single cause of action,
even though there might be several remedies available to protect that primary right and
several legal remedies on which the injury is premised. (Frommhagen v. Board of
Supervisors, supra, 197 Cal.App.3d at pp. 1299-1300; Mycogen, at p. 904.) The doctrine
rests on the “ [‘]ground that the party to be affected, or some other with whom he is in
privity, has litigated, or had an opportunity to litigate the same matter in a former action
11
in a court of competent jurisdiction, and should not be permitted to litigate it again to the
harassment and vexation of his opponent.’ ” (Citizens for Open Access, supra, 60
Cal.App.4th at p. 1065.) Res judicata thus “not only precludes the relitigation of issues
that were actually litigated, but also precludes the litigation of issues that could have been
litigated in the prior proceeding.” (Bullock v. Philip Morris USA, Inc., supra, 198
Cal.App.4th at p. 557; see also Villacres v. ABM Industries Inc. (2010) 189 Cal.App.4th
562, 576-577.)
Even when there might be a “sufficient identity of parties” and the former and
current cases involve the “same cause of action,” res judicata may not apply if the
statutory scheme at issue explicitly or implicitly shows a contrary intent. (People v.
Damon (1996) 51 Cal.App.4th 958, 968, 970 (Damon); Blue Cross of California, Inc. v.
Superior Court (2009) 180 Cal.App.4th 1237.) In Damon, the Department of Consumer
Affairs, represented by the Attorney General, filed an administrative action against
Damon’s auto shop for violations of the Automotive Repair Act. (51 Cal.App.4th at
p. 963.) An administrative decision, among other things, suspended Damon’s
registration. (Id. at p. 964.) Thereafter, the People, represented by the district attorney,
filed a civil complaint alleging claims under sections 17200 and 17500. (Damon, at
p. 964.) The unfair competition claim alleged the same violations of the Automotive
Repair Act that had been the subject of the accusation, and it sought injunctive relief and
civil penalties.
Damon found that res judicata did not bar the civil action. An action to suspend or
revoke an automotive registration could only have been brought before an administrative
officer. (Damon, supra, 51 Cal.App.4th at p. 971.) The administrative tribunal, however,
did not have jurisdiction to award damages or penalties for unfair business practices.
Those claims could only be brought in superior court. (Id. at pp. 971-972; see also
§§ 17204, 17206, 17535, 17536.) “Since the administrative and civil provisions afford
cumulative remedies which cannot all be sought in one proceeding, the statutory scheme
plainly envisions that both an administrative proceeding and a civil action may be
brought.” (Damon, at p. 972.) “[B]ecause the first proceeding was an administrative
12
proceeding at which the second remedy (statutorily decreed to be a cumulative remedy)
could not be sought,” res judicata was inapplicable. (Ibid.; see Le Parc Community Assn.
v. Workers’ Comp. Appeals Bd. (2003) 110 Cal.App.4th 1161, 1170 [“[a]n important
exception to the general rule of indivisibility of a primary right permits a second action
on a different legal theory if the plaintiff was precluded from asserting that theory in the
first action because of limitations on the subject matter jurisdiction of the first forum”].)
Here, the first and second causes of action in the second amended complaint are
under the UCL.15 The complaint alleges that beginning about July 2006 through at least
June 2010, defendants “violated the UCL by having engaged, engaging and proposing to
engage in . . . unlawful business acts and practices, . . . relating to the aforementioned
advertising displays and supergraphic and off-site signs” at 18 sites, five of which were
also the subject of the Caltrans action. The unlawful practices included placing
advertising displays that allegedly violated the OAA and Los Angeles Municipal Code
and ordinances, as well as building, fire and zoning codes.
These UCL claims could not have been brought in the administrative Caltrans
action. Section 17204 of the UCL provides that any action for relief shall be “prosecuted
exclusively in a court of competent jurisdiction.” (See also § 17203 [“Any person who
engages, has engaged, or proposes to engage in unfair competition may be enjoined in
any court of competent jurisdiction”].) Section 17204 thus “authorizes an assortment of
persons to bring enforcement actions but prohibits enforcement of section 17200 in
noncourt proceedings and in courts that lack competent jurisdiction.” (Greenlining
Institute v. Public Utilities Com. (2002) 103 Cal.App.4th 1324, 1330 (Greenlining); see
15
The second cause of action is for conspiracy to violate the UCL. Defendants
argue that conspiracy is a legal theory, not a cause of action. “[A] civil conspiracy does
not give rise to a cause of action unless an independent civil wrong has been committed.”
(Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1062.) Stated another way, “ ‘[t]here is no
separate tort of civil conspiracy, and there is no civil action for conspiracy to commit a
recognized tort unless the wrongful act itself is committed and damage results therefrom.’
[Citations.]” (Richard B. LeVine, Inc. v. Higashi (2005) 131 Cal.App.4th 566, 574.)
Therefore, if appellants can state a claim under section 17200, the civil conspiracy claim
may also go forward.
13
also id. at p. 1329 [“Actions seeking any relief under section 17200 et seq. ‘shall,’ i.e.,
must, be brought in court,” which generally is a superior court].)
To be sure, the Caltrans action and the superior court action concern a similar
“primary right” concerning illegal advertising displays. But, to the extent that res
judicata bars claims that were or could have been brought in the prior action, the UCL
claims could not have been brought in the Caltrans action. “[T]he UCL authorizes
duplicate enforcement by both public prosecutors and administrative agencies—a UCL
action by law enforcement officials does not preclude a later administrative proceeding
against the same defendant concerning the same conduct, and an administrative
proceeding does not preclude a later law enforcement action under the UCL.” (Blue
Cross of California, Inc. v. Superior Court, supra, 180 Cal.App.4th at p. 1250.)
Therefore, so long as no other statute expressly provides to the contrary, the UCL gives
the city attorney the right to raise UCL claims in the superior court. (Id. at p. 1253; see
also § 17205 [“Unless otherwise expressly provided, the remedies or penalties provided
by this chapter are cumulative to each other and to the remedies or penalties available
under all other laws of this state”].)
The OAA itself contemplates that entities other than Caltrans will enforce its
provisions. Section 5230 of the Act, for example, provides that a city or county may
enact ordinances imposing restrictions on advertising displays, and such restrictions may
be “equal to or greater than those imposed by” the OAA. An advertising display
permitted under the OAA must still comply with any city or county ordinance. (§ 5366.)
Nothing in the OAA “prohibits enforcement of any or all of its provisions by persons
designated so to act by appropriate ordinances duly adopted . . . .” (§ 5227.) And, like
the UCL, the OAA provides that the remedies for the removal of illegal advertising
displays “are cumulative and not exclusive of any other remedies provided by law.”
(§ 5465; see also § 17205 [remedies provided under the UCL are cumulative].) While
Caltrans could therefore seek various remedies for violations of the OAA, such as
penalties and removal of the advertising displays, the statutory scheme contemplates that
other public agencies will enforce it in other forums.
14
We therefore disagree with defendants’ argument that the second amended
complaint is really about violations of the OAA and not the UCL. The scope of section
17200 is “broad.” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone
Co. (1999) 20 Cal.4th 163, 180.) It “ ‘ “borrows” violations of other laws and treats them
as unlawful practices’ that the [UCL] makes independently actionable. [Citations.]”
(Ibid.) The People’s UCL claims therefore “borrow” violations of the OAA, as well as
alleged violations of city ordinances and building, zoning, and fire codes. The superior
court action also alleges a more widespread practice of unfair competition, citing
violations at 18 properties, whereas the Caltrans action identified only 5 properties at
which OAA violations occurred.
That Caltrans and defendants purported to settle UCL claims does not curtail
appellants’ ability to purse the state court action. The accusation in the Caltrans action
was brought under the OAA and not the UCL. It alleged violations of the OAA only and
sought penalties under section 5485, subdivision (b)(2),16 of that Act. The settlement
agreement thus described the Caltrans action this way: “Complainant alleged that
Respondents owned and/or operated outdoor advertising displays at the Properties that
violated the [OAA] by (1) having been erected or placed without a written permit;
(2) exceeding 1,200 square feet in size; and/or (3) being placed adjacent to a landscaped
freeway. . . . In the Action, Complainant asserted that Respondents . . . are liable for
more than $400,000 in penalties and disgorgement of gross revenues in connection with
signs at [the] Properties . . . .” Although the accusation did not raise a claim under the
UCL, the settlement agreement contained a broad release of all claims, including ones
16
Subdivision (b) of section 5485 provides: “If a display is placed or maintained
without a valid, unrevoked, and unexpired permit, the following penalties shall be
assessed: [¶] . . . [¶] (2) If the advertising display is placed or maintained in a location
that does not conform to the provisions of this chapter or local ordinances, and is not
removed within thirty days of written notice from the department or the city or the county
with land use jurisdiction over the property upon which the advertising display is located,
a penalty of ten thousand dollars ($10,000) plus one hundred dollars ($100) for each day
the advertising display is placed or maintained after the department sends written notice
shall be assessed.”
15
under section 17200 and of Civil Code section 1542.17 By virtue of this broad release,
defendants contend that section 17200 claims have been settled. But an administrative
agency cannot create jurisdiction over claims where jurisdiction does not exist.
(Greenlining, supra, 103 Cal.App.4th at p. 1332 [“Even if the PUC had adjudicated UCL
claims, the PUC cannot create jurisdiction where it does not otherwise exist”]; see City
and County of San Francisco v. Padilla (1972) 23 Cal.App.3d 388, 400-401 [“when an
administrative agency acts without or in excess of its jurisdiction, or in violation of the
powers conferred upon it, its action thus taken is void”].)18 Caltrans therefore could not
settle the UCL claims, having no jurisdiction over them.19
IV. Defendants’ alternative grounds for sustaining the demurrers.
In addition to res judicata, defendants raise multiple other grounds why the
demurrers were properly sustained.
17
“The above Released Claims provided by this Settlement include claims that
Complainant does not know or suspect to exist in its favor against the Released Parties.
Complainant waives all rights and benefits afforded by section 1542 of the California
Civil Code and any other similar statute in another jurisdiction or forum that may be
applicable as it relates to the Released Claims and does so understanding the significance
of that waiver.”
18
Padilla found that the city board of permit appeals lacked subject matter
jurisdiction to issue a variance, and therefore the board’s decision was not res judicata to
a later state court action.
19
Davis Group also argues that Caltrans could release the UCL claims under
Government Code section 11415.60, subdivision (c). That subdivision states: “A
settlement [of an adjudicative proceeding] is subject to any necessary agency
approval. . . . The terms of a settlement may not be contrary to statute or regulation,
except that the settlement may include sanctions the agency would otherwise lack power
to impose.” (Italics added.) Although, Davis Group relies on the italicized language, the
subdivision did not give Caltrans jurisdiction to settle UCL claims belonging to other
government entities. In any event, releasing the UCL claims was not a sanction imposed
against the settling defendants. It was a benefit.
16
First, by virtue of the broad release and as a matter of contract law,20 defendants
contend that the City may not pursue its claims against properties that were not identified
in the Caltrans action but that are the subject of this state court action in the eighth, ninth
and tenth causes of action. The eighth and tenth causes of action allege violations of the
OAA and seek relief under section 5485, subdivisions (b)(2), (c) and (d), while the ninth
cause of action seeks relief under subdivisions (c) and (d) of the Act.21 Those causes of
action concern three properties not identified in the Caltrans action: 4605 North
Lankershim, 1818 Oak, and 6081 Center. The Caltrans action identified OAA violations
at only five locations: 3415 South Sepulveda; 10801 National; 1606 Cotner; 3280 North
Cahuenga; and 15301-15303 Ventura. The settlement agreement in the Caltrans action
expressly defined the properties as those five locations. Even if the release of claims
extended to properties not identified in the settlement agreement, the OAA expressly
provides that other appropriate government entities may enforce its provisions. (§§ 5227,
5465.)
Second, Rush, Mediacom, and Krantz argue that the advertising displays were not
unlawful.22 They point out that the federal district court enjoined the City from enforcing
its ban on supergraphic signs. (World Wide Rush, LLC v. City of Los Angeles, supra, 579
20
The trial court also sustained the demurrers “as a matter of contract” based on the
release.
21
Subdivision (b)(2) of section 5485 provides for a $10,000 penalty plus a $100 per
day fine each day a display is illegally maintained after written notice is sent.
Subdivision (c) provides for disgorgement of revenues. Subdivision (d) provides that the
“department or a city or a county within the location upon which the advertising is
located may enforce the provisions of this section.”
22
The trial court said that the first and second causes of action for violations of the
UCL and civil conspiracy fail because of res judicata and California’s primary rights
doctrine. The trial court then said, “Because the predicate acts upon which these [c]auses
of [a]ction . . . are not in fact unlawful, Krantz’s [d]emurrer is sustained without leave to
amend.” The trial court’s precise meaning is unclear, but it does not appear that the court
was saying no law had been violated as opposed to saying res judicata simply barred the
matter.
17
F.Supp.2d 1311 [invalidating Los Angeles Municipal Code sections 14.4.4(B)(9), (11)
and 14.4.6 banning offsite and supergraphic signs].) That injunction was in force from
about August 2008 to July 2010. In 2010, the Ninth Circuit reversed the district court
and lifted the injunction. (World Wide Rush, LLC v. City of Los Angeles, supra, 606 F.3d
676.) Whether defendants violated a ban on supergraphic signs, however, is not
dispositive of any issue on appeal. The second amended complaint alleges that the
advertising displays violated a myriad of ordinances, laws, and codes, thereby violating
the UCL. Therefore, even if we assumed that defendants did not violate the injunction,
that does not mean they complied with all other laws.
Third, Graphics and Denny argue that due process mandates dismissal of the
claims against them. They contend that “the only violations alleged in the SAC were
violations of orders that were directed to third parties, orders with which Respondents
had no legal ability to comply, and ordinances that do not apply to them.” The second
amended complaint, however, alleges that Graphics and Denny installed advertising
displays that violated, among other things, building and fire codes. Denny defied a stop-
work-order notice. Therefore, whether any notice Graphics and Denny received or did
not receive violated their due process rights is not an issue properly resolved on a
demurrer based on the totality of the allegations.
Finally, Rush argues that the People have waived their claims by failing to raise
them by compulsory cross-complaint in the United States federal court action, World
Wide Rush, LLC v. City of Los Angeles, supra, 579 F.Supp.2d 1311. (See generally,
Code Civ. Proc., § 426.30, subd. (a) [“Except as otherwise provided by statute, if a party
against whom a complaint has been filed . . . fails to allege in a cross-complaint any
related cause of action which . . . he has against the plaintiff, such party may not
thereafter . . . assert against the plaintiff the related cause of action not pleaded”];
Maldonado v. Harris (2004) 370 F.3d 945, 951.) The UCL claims, however, are pursued
in this action by the People, who were not a party to the federal action. Moreover, the
federal action concerned Rush’s claim that the signage ban was unconstitutional. In
contrast, at issue in this state court action are UCL claims and claims that defendants
18
violated the OAA at specified properties. Thus, both the federal and state actions
generally concerned supergraphic advertising displays, but that does mean that the causes
of action arise out of “ ‘the same transaction, occurrence, or series of transactions or
occurrences.’ ” (Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 960.)
V. The personal liability of Scott Krantz and Mark Denny.
The trial court also sustained without leave to amend the demurrers of Krantz and
Denny.23 Appellants contend that the demurrers should have been overruled because
Krantz and Denny, as officers of their respective companies, personally participated in
the alleged wrongdoing. We find that the second amended complaint alleges facts
sufficient to withstand demurrer as to those individual defendants.
“[C]orporate directors cannot be held vicariously liable for the corporation’s torts
in which they do not participate. Their liability, if any, stems from their own tortious
conduct, not from their status as directors or officers of the enterprise. [Citation.] ‘[A]n
officer or director will not be liable for torts in which he does not personally participate,
of which he has no knowledge, or to which he has not consented. . . . While the
corporation itself may be liable for such acts, the individual officer or director will be
immune unless he authorizes, directs, or in some meaningful sense actively participates in
the wrongful conduct.’ [Citation.]” (Frances T. v. Village Green Owners Assn. (1986)
42 Cal.3d 490, 503-504.) “A corporate director or officer’s participation in tortious
conduct may be shown not solely by direct action but also by knowing consent to or
approval of unlawful acts. . . . [¶] The legal fiction of the corporation as an independent
entity was never intended to insulate officers and directors from liability for their own
tortious conduct.” (PMC, Inc. v. Kadisha (2000) 78 Cal.App.4th 1368, 1380-1381; see
also, id. at pp. 1387-1388 [“Shareholders, officers, and directors of corporations have
[also] been held personally liable for intentional torts when they knew or had reason to
know about but failed to put a stop to tortious conduct”].)
23
Krantz is a defendant on the first, second, eighth, and ninth causes of action.
Denny is a defendant on the first and second causes of action.
19
For an officer or director to be personally liable for violations of section 17200,
the evidence must establish his or her direct participation in the unlawful practices.
(People v. Toomey (1984) 157 Cal.App.3d 1, 15; People v. Conway (1974) 42
Cal.App.3d 875, 884-886.) In Toomey, the defendant owned and was president of a
business that sold discount coupons for use at casinos. Evidence showed that he
“orchestrated all aspects of the business,” including those which were found to violate
sections 17200 and 17500, such as preparing the solicitation of scripts, determining the
content of coupon packages, and directing the company’s refund policy. (Toomey, at
p. 15.) Similarly, in Conway, the president of an automobile dealership could be
criminally liable for false advertising where he was in a position to control the activities
of the dealership and permitted the unlawful practices to continue after being informed of
them on numerous occasions.
Although the facts in Toomey and Conway are more compelling than those alleged
here, those cases involved review after evidence had been received. Toomey involved
review after a hearing for a preliminary injunction at which evidence was received.
Conway was an appeal after trial. In contrast, we review the sufficiency of the
allegations after a demurrer was sustained. Under the standard of review, we must
liberally construe the allegations of the complaint with a view to attaining substantial
justice among the parties. (Yue v. City of Auburn (1992) 3 Cal.App.4th 751, 757.)
Under that standard, we find that although some allegations state nothing more than the
normal relationship an officer might have with his company, other allegations, construed
liberally, show that Krantz and Denny personally participated in the conduct underlying
the UCL claims.
According to the second amended complaint, Krantz is one of two shareholders in
and president of Mediacom.24 He scouted sites for the signs on behalf of Rush and
Mediacom; he was personally involved in negotiating agreements concerning those signs;
24
Krantz formed World Wide Mediacom for the purpose of providing “wallscapes.”
Mediacom Inc. is a member and manager of World Wide Mediacom.
20
he signed the agreements; he was the initial agent for service of process for Medicacom;
and he authorized and ratified the decisions and actions of other defendants that resulted
in the illegal advertising displays. He received 25 percent of profits of World Wide
Mediacom “or some portion thereof.” Beginning in or about August 2007, Krantz
exchanged e-mails and had conversations about placing supergraphic signs at 3415 South
Sepulveda Boulevard, knowing that the requisite permits, inspections, and approvals
were lacking. In or about July 21, 2009, Krantz caused Graphic and Denny to erect
unpermitted, uninspected and prohibited supergraphic, off-site sign at 1818 Oak Street, a
few feet from the Santa Monica Freeway. On or about March 31, 2010, Krantz e-mailed
one of the owners of 8200 Wilshire Boulevard, specifying the gross revenue the owners
could expect to receive under different scenarios from the illegal signs on their buildings.
As to Denny, the complaint alleges he owns and is the president of Graphics,
which constructs, installs, maintains, repairs, replaces and removes supergraphic and off-
site signs throughout the City. Denny personally supervised the construction and
installation of supergraphic signs. He negotiated contracts with the Sign Company
defendants concerning the illegal signs; assembled, trained, and dispatched work crews to
work on the signs; and personally supervised work involving the signs.
On or about December 27, 2008 Denny and Graphic installed “230 of 324 eyebolts
on, and erected and secured the sign material” to 10801 National Boulevard, without
obtaining a building permit. On or about February 15, 2009, Denny committed perjury
by submitting a declaration in federal court making a false statement that work at
10801 National Boulevard was “substantially completed” when it was not. On or about
June 7, 2009, Denny continued to work on an illegal supergraphic sign at 4605 North
Lankershim Boulevard after the Los Angeles Department of Building and Safety served
an order directing all work to stop and to remove the sign.
Liberally construed, the complaint alleges that Denny and Krantz personally
directed work on advertising displays to continue, although they knew that the displays
were not properly permitted or otherwise violated the law. In furtherance of an illegal
scheme, Denny submitted a declaration in federal court stating that work at 10801
21
National was substantially complete when it was not, and he continued to work on a
supergraphic sign at 4605 North Lankershim after a stop-work order had been issued.
These allegations are sufficient to withstand demurrers.
DISPOSITION
The judgment is reversed and remanded with directions to the trial court to vacate
its order sustaining the demurrer to the first, second, eighth, and ninth causes of action
and to enter a new order overruling the demurrer to those counts as to these defendants.
Appellants shall recover their costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
ALDRICH, J.
We concur:
KLEIN, P. J.
KITCHING, J.
22