Northwest Hunter Tv, Llc v. Rivers West Apparel, Inc. ( 2014 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION ONE
NORTHWEST HUNTER TV, LLC, a No. 71668-9-
Washington limited liability company
Appellant,
x». com-
RIVERS WEST APPAREL, INC., a
Washington corporation, UNPUBLISHED OPINION
Respondent. FILED: June 30, 2014
Verellen, J. —A trial court has the authority to revise a partial summary
judgment at any time before the entry of final judgment as to all claims and all parties,
and may do so by approving a settlement that contemplates the continued existence
of a limited liability company, despite a prior partial summary judgment that the
company is dissolved.
A member of Northwest Hunter TV, LLC (NWH) obtained a partial summary
judgment that the limited liability company be dissolved. Prior to any final judgment
in that litigation, the parties agreed to and the trial court approved a settlement of all
claims. There is some evidence that the settlement included NWH's continued
existence.
In the lawsuit on appeal, Rivers West Apparel, Inc. (Rivers West) relied upon
that partial summary judgment to argue that NWH is dissolved and therefore lacks
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standing to pursue its claims against Rivers West. There is a genuine issue of
material fact whether the approved settlement included NWH's continued existence
rather than its dissolution.
Because there is a genuine issue of material fact, we reverse and remand to
the trial court for further proceedings.
FACTS
In 2004, Rick Young and Sundance Magnetics, Inc. formed NWH. NWH films,
edits, and produces weekly television shows and videos for hunting and outdoor
enthusiasts. Young owned 35 percent of NWH and Sundance Magnetics owned 65
percent. Patrick Boyer is both the president of Sundance Magnetics and the manager
of NWH.
Also in 2004, NWH entered into a contract with Rivers West that required
NWH to provide television advertisements from September 2004 through September
2007. Under the contract, Rivers West would pay NWH $15,000 in November 2004,
$15,000 in April 2005, $30,000 in November 2005, and $30,000 in November 2006.
On January 10, 2006, Young informed Boyer that he no longer intended to
perform certain video editing, video production, and hosting of the show that he had
previously agreed to perform. Young also stated that he intended to resign from
NWH and effectuate a dissolution of the limited liability company unless NWH agreed
to his demands. The next day, NWH sued Young for alleged misconduct and other
claims (the Young lawsuit). Young counterclaimed and filed a third party complaint
against Boyer, his wife, and other companies owned by the Boyers.
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In June 2006, NWH sued Rivers West alleging breach of the advertising
contract (the Rivers West lawsuit), which is the lawsuit before us in this appeal.
Almost a year later, in May 2007, Young tendered notice to NWH of his
resignation and withdrawal as a member. In his letter, Young recited that the
operating agreement requires that the limited liability company must be dissolved and
terminated with his resignation. He requested that winding up commence pursuant to
the operating agreement.
Young filed a motion for partial summary judgment. In August 2007, the trial
court granted partial summary judgment for Young, ordering that NWH is dissolved
per the operating agreement and that winding up must begin "immediately."1
In December 2007, the trial court in the Young lawsuit entered an order setting
timeline and deadlines for the sale of assets as part of the winding up of NWH. Per
the order, if the assets were not sold by January 27, 2008, they would be publicly
auctioned off by March 27, 2008. In February 2008, Boyer signed a bill of sale for his
purchase of all of the assets of NWH, except cash and accounts receivable.
Then the parties to the Young lawsuit reached a settlement. In May 2008,
Young moved to enter a stipulation and settlement agreement between Young and
NWH. In July 2008, the trial court approved the stipulation and settlement agreement
and entered the following dismissal with prejudice in the Young lawsuit:
ORDERED and adjudged that all causes herein including all
claims, counterclaims, and third party Complaints and all related
matters and claims of whatever kind be and the same are hereby
1 Clerk's Papers at 80.
No. 71668-9-1/4
dismissed with prejudice and without attorney fees, reasonable or
statutory, or costs to any party.121
The record contains a one-page settlement agreement that includes a typewritten list
of items and several handwritten interlineations. Although the exact terms of the
parties' settlement agreement are not clear, in a declaration filed by Boyer in the
Rivers West lawsuit, he explained that NWH bought out Young's membership interest
in NWH, leaving Sundance Magnetics as the only member. Boyer also stated that
the parties intended that NWH continue to conduct business after the settlement
agreement, that NWH did continue to do business, and that dissolution was no longer
required or demanded.
Four and one half years later, in January 2013, Rivers West moved for
summary judgment against NWH in the Rivers West lawsuit. It argued that NWH
was dissolved in the Young lawsuit and, as a result, had no standing to pursue its
claim against Rivers West. It also argued that NWH could not perform its part of the
contract with Rivers West because it had no legal authority to conduct business while
winding up. NWH opposed summary judgment, arguing that it was not dissolved and
could pursue the claim.
In a decision granting defendant's motion for summary judgment, the trial court
explained that the partial summary judgment order in the Young lawsuit was
sufficiently final to collaterally estop NWH from arguing that it was not dissolved. The
trial court concluded that, as a dissolved company, NWH was required to proceed
with collection activities within a reasonable time and that "seven years is not a
2 Id. at 125.
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reasonable time for winding up a LLC."3 The trial court then entered an order
granting summary judgment to Rivers West.
The trial court denied NWH's motion reconsideration. NWH appeals.
DISCUSSION
NWH argues that the trial court erred when it granted Rivers West's motion for
summary judgment. We agree.
We review a superior court's summary judgment order de novo.4 Summary
judgment is appropriate only if the pleadings, affidavits, depositions, and admissions
on file demonstrate the absence of any genuine issues of material fact, and the
moving party is entitled to judgment as a matter of law.5 "A material fact is one upon
which the outcome of the litigation depends in whole or in part."6
Absent a proper CR 54(b) certification of finality, "an order which adjudicates
fewer than all claims or the rights and liabilities of fewer than all parties is subject to
revision at any time before entry of final judgment as to all claims and the rights and
liabilities of all parties."7 Rivers West acknowledges that a trial court can revisit a
partial summary judgment if properly raised before the trial court. In addition to a
motion to vacate or for reconsideration, a trial court has the flexibility to approve a
3 Id at 248.
4 Torqerson v. One Lincoln Tower, LLC, 166 Wash. 2d 510, 517, 210 P.3d 318
(2009).
5 CR 56(c).
6 Atherton Condo. Apartment-Owners Ass'n Bd. of Dirs. v. Blume Dev. Co.,
115 Wash. 2d 506, 516, 799 P.2d 250 (1990).
7 Washburn v. Beatt Equip. Co., 120 Wash. 2d 246, 300, 840 P.2d 860 (1992).
No. 71668-9-1/6
settlement that deals with all claims between the parties.8 Rivers West provides no
compelling authority that a trial court is precluded from approving a settlement that
contemplates that a business entity is not dissolved, especially when the settlement is
arrived at and approved prior to any final judgment.
Rivers West relies upon the Young lawsuit partial summary judgment that
NWH was dissolved, but that order was subject to revision at any time before the
entry of final judgment. Taken in the light most favorable to NWH, the settlement
agreement arguably incorporated an agreement between Young and Sundance
Magnetics that NWH would continue in business and not be dissolved. Boyer's
declaration expressly recites that continuance of NWH was part of the settlement
agreed to by the parties and approved by the trial court. Rivers West argues that
Boyer's declaration is self-serving, but he was the manager of NWH and the
president of Sundance Magnetics at the time the settlement was reached. If the
settlement agreement allowed NWH to continue its operations, notwithstanding the
prior partial summary judgment of dissolution, then the trial court's approval of the
settlement necessarily revises the partial summary judgment, which would no longer
be a final and binding adjudication.9 Because a genuine issue of material fact exists
8 See generally Shepherd v. Cont'l Bank, 28 Wash. App. 346, 350, 622 P.2d
1310 (1981) (a CR 41(a)(1)(A) voluntary dismissal pursuant to agreement of the
parties constitutes a decision adjudicating all the claims, rights, and liabilities of all
the parties).
9 See Washburn, 120 Wash. 2d at 300 ("Absent a proper certification, an order
which adjudicates fewer than all claims or the rights and liabilities of fewer than all
parties is subject to revision at any time before entry of final judgment as to all claims
and the rights and liabilities of all parties."); Simmons v. Brier Bros. Co., 258 U.S. 82,
42 S. Ct. 196, 66 L. Ed. 475 (1922) (a court has complete power over interlocutory
No. 71668-9-1/7
as to whether the approved settlement included NWH's continued existence,
summary judgment in favor of Rivers West was improper.
Rivers West argues that NWH is collaterally estopped from arguing that it was
not dissolved under the partial summary judgment order because the order resulted
in a final adjudication on the merits. But under Cunningham v. State, whether a
partial summary judgment order is sufficiently final for purposes of collateral estoppel,
even after a settlement, "turns on the circumstances of each case."10 Here, under
the facts of this case, there is a genuine issue of material fact as to whether the
approved settlement included NWH's continued existence. No such issue existed in
Cunningham. Because it is unresolved whether the partial summary judgment
ordering dissolution was modified by the trial court's approval of the settlement,
collateral estoppel does not bar NWH's argument.
Rivers West also contends that summary judgment was proper because NWH
automatically dissolved under its operating agreement. But according to NWH's
operating agreement, the members of NWH may elect to continue the business
despite the occurrence of an event triggering dissolution. The operating agreement
states that NWH "shall dissolve and wind up its affairs, upon the first to occur of the
following events, unless the Members unanimously agree to continue the
business."u Although there is evidence in the record that Young resigned and NWH
signed a bill of sale of most of its assets, both events potentially triggering
orders made therein and has authority to revise them when it is "consonant with
equity" to do so).
10 61 Wash. App. 562, 567-68, 811 P.2d 225 (1991).
11 Clerk's Papers at 52 (emphasis added).
No. 71668-9-1/8
dissolution, Boyer's declaration states that the parties agreed to continue the
business. Therefore, taking this evidence in the light most favorable to NWH, the
company was not automatically dissolved under its operating agreement.
We do not rely upon NWH's argument that a dismissal with prejudice
automatically renders all prior proceedings a nullity. The cases relied upon by NWH
deal with dismissals without prejudice and Land Use Petition Act appeals.12 NWH
has not demonstrated that the cases it cites apply here. And NWH's "always a
nullity" argument is inconsistent with Cunningham, which clearly contemplates the
possibility that even after a settlement, a partial summary judgment may be
sufficiently final for purposes of collateral estoppel, depending on the circumstances.
Cunningham also rejected the argument now advanced by NWH that the test for
determining whether a judgment is final for collateral estoppel purposes is the same
as the test for determining appealability under CR 54.13 Therefore, reversal is not
warranted on either of these bases.
12 See Beckman v. Wilcox, 96 Wash. App. 355, 359, 979 P.2d 890 (1999) (citing
federal case law that a voluntary dismissal renders all proceedings a nullity but
holding that attorney fees may be available to a party after a voluntary dismissal
without prejudice depending upon the language of the statute authorizing attorney
fees); Wachovia SBA Lending v. Kraft, 138 Wash. App. 854, 862, 158 P.3d 1271 (2007)
(attorney fees not available under RCW 4.84.330 because voluntary dismissal
without prejudice is not a "final judgment" because plaintiff free to file a new action
against the defendant); Spice v. Pierce County, 149 Wash. App. 461, 467, 204 P.3d
254 (2009) (court could not address appellant's motion to vacate a voluntary
dismissal of a LUPA petition because petitioners failed to refile petition within 21 days
after hearing examiner's decision and voluntary dismissal resulted in prior petition
becoming a nullity).
13 Cunningham, 61 Wash. App. at 566 ("such a rigorous finality requirement does
not implement the purposes of collateral estoppel: to protect prevailing parties from
relitigating issues already decided in their favor, and to promote judicial economy").
8
No. 71668-9-1/9
Ifthe parties agreed to settle the Young litigation on the basis that NWH would
continue in existence rather than be dissolved, then the trial court had the authority to
approve that settlement and allow NWH to continue in existence. A genuine issue of
fact exists. We reverse the trial court and remand for proceedings consistent with
this opinion.
WE CONCUR:
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