The trial court erred in dismissing and sanctioning plaintiff and her counsel for filing a complaint against a corporation for fraud, and its insiders on alter ego and conspiracy allegations. The trial court thought the suit was barred by the dismissal of plaintiff’s adversary complaints against an individual bankrupt who was not named as a defendant in this suit. Claim preclusion did not properly apply because none of the current defendants had been parties to the bankruptcy proceedings and they were not in privity with the bankrupt individual since they were not allegedly liable in this action solely based on his acts, but also on their own participation in the fraudulent scheme. Issue preclusion did not apply either because of the same lack of privity and also because the record before the trial court did not show the ground on which the bankruptcy complaints had been dismissed. They might have been dismissed for pleading defects which the current complaint cured.
California Court of Appeal, Fourth District, Division 3 (Aronson, J.); March 30, 2016 (published April 29, 2016); 2016 WL 2338619