Environmental World Watch, Inc. v. the Walt Disney Company;

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ENVIRONMENTAL WORLD WATCH,
INC.,
Plaintiff,
and
DENNIS BECVAR,
Plaintiff - Appellant,
v.
THE WALT DISNEY COMPANY; et al.,
Defendants - Appellees.
No. 13-56534
D.C. No. 2:09-cv-04045-DMG-
PLA
MEMORANDUM*
* This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
FILED
NOV 13 2015
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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ENVIRONMENTAL WORLD WATCH,
INC.,
Plaintiff,
and
WILLIAM P. DUNLAP,
Movant - Appellant,
v.
THE WALT DISNEY COMPANY; et al.,
Defendants - Appellees.
No. 13-56565
D.C. No. 2:09-cv-04045-DMG-
PLA
Appeal from the United States District Court
for the Central District of California
Dolly M. Gee, District Judge, Presiding
Submitted November 5, 2015**
Pasadena, California
Before: FARRIS and FRIEDLAND, Circuit Judges, and CHHABRIA,*** District
Judge.
These appeals arise from litigation filed in 2009 by Environmental World
Watch (“EWW”) and individuals against The Walt Disney Company, Disney
** The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
*** The Honorable Vince G. Chhabria, District Judge for the U.S. District
Court for the Northern District of California, sitting by designation.

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Enterprises, Inc., and Disney Worldwide Services, Inc. (collectively, “Disney”)
alleging violations of the Clean Water Act. During the course of that litigation,
Disney filed a motion for sanctions against nonparties William Dunlap and Dennis
Becvar, who, at various times, were officers of EWW.
In support of its motion for sanctions, Disney alleged that Dunlap had
falsified documents and concealed this misconduct during discovery, and that
Becvar had destroyed potentially discoverable emails while an officer of EWW.
Disney further argued Dunlap and Becvar were alter egos of EWW, and, as such,
were jointly and severally liable for any sanctions imposed against EWW.
The district court referred the sanctions motion to a magistrate judge, who
issued a report and recommendation (“R & R”) recommending that the district
court impose a $10,000 sanction against Becvar and a $20,000 sanction against
Dunlap. The district court issued an order adopting the R & R with minor
revisions, and granted partial summary judgment for Disney, holding that Dunlap
and Becvar were alter egos of EWW, and vice versa.
Dunlap and Becvar timely filed these appeals of the district judge’s order,
but the underlying litigation continued. Dunlap challenges both the district court’s
alter ego determination and its imposition of monetary sanctions on him. Becvar
challenges only the district court’s imposition of monetary sanctions on him.
The district court later dismissed EWW’s claims for lack of Article III

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standing. The district court subsequently entered a final order dismissing the
remaining plaintiffs’ claims pursuant to a settlement with Disney.1
I. Alter Ego.
We are guided by three factors when deciding whether an individual is an
alter ego of an entity: “the amount of respect given to the separate identity of the
corporation by its shareholders, the degree of injustice visited on the litigants by
recognition of the corporate entity, and the fraudulent intent of the incorporators.”
Bd. of Trs. v. Valley Cabinet & Mfg. Co., 877 F.2d 769, 772 (9th Cir. 1989)
(quoting Seymour v. Hull & Moreland Eng’g, 605 F.2d 1105, 1111 (9th Cir.
1979)). In addition to the formation of a corporation with fraudulent intent, “post
incorporation misuse of the corporate form . . . can satisfy the fraudulent intent
element.” Id. at 774. A party seeking to pierce the corporate veil “must prevail on
1 We have jurisdiction over these appeals despite the fact that they were filed
before entry of a final judgment, and despite the district court’s later dismissal for
lack of standing. Because the order appealed here was a sanctions order against
non-parties (or, as to the alter ego ruling, directly related to that order), it was a
collateral order that Dunlap and Becvar were entitled to immediately appeal
without waiting for a final judgment. Riverhead Sav. Bank v. Nat’l Mortg. Equity
Corp., 893 F.2d 1109, 1113 (9th Cir. 1990). Because the district court’s order was
issued for the purpose of “maint[aining] orderly procedure,” and “[did] not signify
[the] district court’s assessment of the legal merits of the complaint,” the order was
unaffected by the district court’s subsequent dismissal of EWW’s claims for lack
of standing. Willy v. Coastal Corp., 503 U.S. 131, 137, 138 (1992) (quoting
Cooter & Gell v. Hartmarz Corp., 496 U.S. 384, 396 (1990)); see also In re Exxon
Valdez, 102 F.3d 429, 431 (9th Cir. 1996).

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the first threshold factor and on one of the other two.” UA Local 343 v. Nor–Cal
Plumbing, Inc., 48 F.3d 1465, 1475 (9th Cir. 1995).
In its order granting partial summary judgment for Disney, the district court
found that there was little, if any, evidence that EWW had maintained corporate
formalities, and further found that Dunlap and Becvar had misrepresented their
status with respect to EWW to avoid discovery responsibilities. These findings are
well-supported by the record.
Dunlap’s briefing fails to identify any evidence in the record tending to
contradict the district court’s findings, and instead provides argument relevant only
to the entirely separate issue of whether EWW had Article III standing to maintain
its claims. We therefore affirm the district court’s grant of partial summary
judgment for Disney.
II. Sanctions Issues.
A district court may sanction a party who has despoiled evidence under: (1)
the power granted by Federal Rule of Civil Procedure 37(b)(2) to sanction “a party
or a party’s officer, director, or managing agent” who “fails to obey an order to
provide or permit discovery”; or (2) the inherent power of federal courts to levy
sanctions in response to abusive litigation practices. Leon v. IDX Sys. Corp., 464
F.3d 951, 958 (9th Cir. 2006). “Before awarding sanctions pursuant to its inherent
power, ‘the court must make an express finding that the sanctioned party’s

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behavior constituted or was tantamount to bad faith.’” Haeger v. Goodyear Tire &
Rubber Co., 793 F.3d 1122, 1132 (9th Cir. 2015) (quoting Leon, 464 F.3d at 961)
(some internal quotation marks omitted).
Here, the magistrate judge’s R & R—which was adopted by the district
court—discussed both sources of sanctioning authority, and it explicitly
recommended sanctioning Dunlap pursuant to the district court’s inherent powers,
after making the necessary finding of bad faith. Dunlap has not shown that the
district court abused its discretion in imposing this sanction, or that any of the
factual findings in support of the sanction were clearly erroneous. We thus affirm
the district court’s order imposing sanctions upon Dunlap.
Neither the district court nor the magistrate judge expressly found that
Becvar’s conduct had violated an existing court order, and it appears from the
record that Becvar’s deletion of emails may have preceded any such order.
Therefore, we cannot affirm Becvar’s sanction as a valid exercise of the district
court’s authority under Rule 37(b)(2). We also cannot affirm Becvar’s sanction as
a valid exercise of the district court’s inherent powers, because the magistrate
judge and the district court made no explicit finding that Becvar’s actions
constituted or were tantamount to bad faith. We therefore vacate the sanction on
Becvar and remand to the district court, which may re-impose its sanction upon
Becvar if it finds that Becvar’s conduct either violated a court order or reflected

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bad faith.
III. Conclusion.
For the reasons discussed above, we (1) AFFIRM the district court’s grant
of partial summary judgment determining Becvar and Dunlap to be EWW’s alter
egos; (2) AFFIRM the district court’s order sanctioning Dunlap; and (3)
VACATE the district court’s order sanctioning Becvar, and REMAND with
instructions to the district court to make factual findings, before re-imposing any
sanction, as to whether Becvar’s conduct violated a court order or amounted to bad
faith.2
Dunlap shall bear his own costs and half of Disney’s costs. Disney shall
bear the other half of its own costs, as well as Becvar’s costs.
2 Because our disposition does not rely on any materials that Disney has
moved to strike, we DENY Disney’s motion to strike as moot.

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