Judge Bruce G. Iwasaki, Case Number: 23STCV15232, Date: 2025-03-25 Tentative Ruling

On November 22, 2023, Defendant Marshall and Partanna filed a Cross-Complaint against Plaintiff Webster, alleging causes of action for (1.) breach of fiduciary duty, (2.) breach of fiduciary duty, (3.) rescission, (4.) violation of Bus. & Prof. Code, § 17200, and (5.) breach of contract.

Defendant Marshall now moves to bifurcate trial. Defendant Partanna joins the motion. Plaintiff opposes the motion.

Code of Civil Procedure section 598 grants the trial court the power to sever issues: “The court may, when the convenience of witnesses, the ends of justice, or the economy and efficiency of handling the litigation would be promoted thereby, on motion of a party, after notice and hearing, make an order ... that the trial of any issue or any part thereof shall precede the trial of any other issue or any part thereof in the case, except for special defenses which may be tried first pursuant to Sections 597 and 597.5.” (Ibid.) It is within the trial court's discretion to order a severance and conduct separate trials. (Omaha Indemnity Co. v. Superior Court (1989) 209 Cal.App.3d 1266, 1271.)

Code of Civil Procedure section 1048, subdivision (b) also grants the trial court the power to order a separate trial of a cause of action or issue: “The court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial of any cause of action, including a cause of action asserted in a cross-complaint, or of any separate issue or of any number of causes of action or issues, preserving the right of trial by jury required by the Constitution or a statute of this state or of the United States.” (Ibid. [italics added].)

When a case presents both issues of law and fact, issues of law must be decided first: “In actions for the recovery of specific, real, or personal property, with or without damages, or for money claimed as due upon contract, or as damages for breach of contract, or for injuries, an issue of fact must be tried by a jury, unless a jury trial is waived, or a reference is ordered, as provided in this code. Where in these cases there are issues both of law and fact, the issue of law must be first disposed of. In other cases, issues of fact must be tried by the court, subject to its power to order any such issue to be tried by a jury, or to be referred to a referee, as provided in this code.” (Code Civ. Proc., § 592 [italics added].)

Defendants move to bifurcate trial into the two following phases: Phase I, consisting of the Court’s determination of the following three legal issues: (1) whether as a matter of law Plaintiff James Webster is entitled to the equitable remedy of specific performance of the alleged agreement that he and Defendant Sam Marshall signed on March 6, 2023 (the “March 6 Agreement”); (2) whether Plaintiff may pursue a measure of damages that is based on a projected, post-judgment hypothetical valuation of Defendant Partanna Global, Inc.; and (3) whether Plaintiff owed Defendants fiduciary duties; and Phase II, consisting of the remaining issues to be decided by the trier of fact.[1]

Defendants argue the Court should try first the issue of Plaintiff’s entitlement to specific performance because it is an equitable issue.

Specific performance is an equitable remedy for breach of contract. (Byrne v. Laura (1997) 52 Cal.App.4th 1054, 1073.)

As a general proposition, a jury trial is a matter of right in a “civil action at law but not in equity.” (C & K Engineering Contractors v. Amber Steel Co. (1978) 23 Cal.3d 1, 8.) Code of Civil Procedure section 592 does not entitle a party to a jury trial where the plaintiff seeks equitable relief by specific performance. (Price v. McConnell (1960) 184 Cal.App.2d 660, 667.)

There is no dispute that specific performance is an equitable remedy that must be decided by the Court.

However, a trial court retains discretion regarding the order in which the issues should be tried, although the governing California cases express a preference that the equitable issues be tried first. (See, e.g., Orange County Water Dist. v. Alcoa Global Fasteners, Inc. (2017) 12 Cal.App.5th 252, 355, [citing cases].) This general “equity first preference” is a long-standing feature of California law and has always been viewed as fully compatible with the right to jury trial embodied in the California Constitution. (See, e.g., Raedeke v. Gibraltar Sav. & Loan Assn. (1974) 10 Cal.3d 665, 670-671;[2] Connell v. Bowes (1942) 19 Cal.2d 870, 872.)

In fact, “[t]rial courts are encouraged to apply this ‘equity first’ rule because it promotes judicial economy by potentially obviating the need for a jury trial.” (Darbun Enterprises, Inc. v. San Fernando Community Hospital (2015) 239 Cal.App.4th 399, 409; Hoopes v. Dolan (2008) 168 Cal.App.4th 146, 157-158 [“[T]here are solid policy reasons for giving one fact finder's determinations binding effect in a mixed trial of legal and equitable issues. The rule minimizes inconsistencies, and avoids giving one side two bites of the apple. [Citation.] The rule also prevents duplication of effort.”]; Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1238.)

In support of the motion to bifurcate this issue, Defendant rely on Darbun Enterprises, Inc. v. San Fernando Community Hospital (2015) 239 Cal.App.4th 399. (Mot., 14.)

In Darbun, a tenant sued its landlord for breach of a commercial lease agreement, seeking damages and specific performance. The trial court elected to conduct an initial phase of trial in order to determine whether the equitable remedy of specific performance was appropriate, but made clear that this first phase was not being held to adjudicate the issue of breach. (Id. at p. 405.) After hearing some testimony, however, the court indicated it could not yet make a ruling on the availability of specific performance as a remedy, and instead said the case would continue to the jury to decide whether the landlord improperly terminated the lease. (Id. at p. 406.)

At the close of the tenant's case in chief, the landlord moved for a nonsuit. The court granted nonsuit on specific performance only and allowed the issue of damages to go to the jury. The jury returned a verdict for the tenant, making special findings that the tenant did all or substantially all of the things the lease required it to do; the conditions required for the landlord's continued performance under the lease had been satisfied; the landlord was not excused from its obligations under the lease; and the tenant had been harmed by the landlord’s breach. (Darbun, supra, 239 Cal.App.4th. at pp. 407–408.)

The trial court then granted the landlord's motion for judgment notwithstanding the verdict. The court stated that, in ruling on the nonsuit motion, it had made findings that the tenant had breached the lease by failing to perform its obligations within a reasonable amount of time and had proceeded in a manner that was not contemplated by the contract, rendering the lease unenforceable. The trial court concluded that these findings, made in the context of its findings on the equitable action, were binding on the jury. The court additionally found that the jury verdict was not supported by substantial evidence because, once the court had made its equitable findings, “ ‘nothing further remained to be tried by the jury.’ ” (Darbun, supra, 239 Cal.App.4th. at p. 408.)

The Court of Appeal reversed. It explained that the trial court improperly made findings concerning the tenant's breach and the unenforceability of the lease “in the context of a nonsuit motion, after the court weighed evidence and made credibility determinations.” (Darbun, supra, 239 Cal.App.4th at p. 410.) This was error, because for purposes of a nonsuit motion, the court may not weigh the evidence or consider the credibility of witnesses. (Ibid.) The lower court then compounded the error by relying on its own weighing of evidence and credibility determinations to grant the JNOV motion, thus depriving the tenant of its right to a jury trial. The reviewing court explained: “[The tenant] had a right to jury trial on its breach of contract claim, and it never waived that right. (Code Civ. Proc., § 592 [‘In actions for ... breach of contract, ... an issue of fact must be tried by a jury, unless a jury trial is waived ....’].) The parties proceeded through the first phase of trial, then to jury trial, under the court's assurances that the jury would decide the issue of breach. The court's finding of breach, if it was an actual ruling of the court, improperly usurped an issue that was reserved for the jury.” (Darbun, at p. 411.)

The reviewing court continued: “Had the trial court properly informed the parties of an intention to decide the issue of breach, [the tenant] would have had the opportunity to preserve its right to a jury trial by abandoning its request for equitable relief and seeking only damages. The absence of equitable claims to be tried would have eliminated the court's right to act as the equitable fact finder, leaving the jury to decide [the tenant's] legal claims. [Citation.] As [tenant] was under the impression that the jury, not the court, was the fact finder on breach, it did not have the opportunity to make an ‘election of remedies in order to secure a trial by jury.’ [Citation.]” (Darbun, supra, 239 Cal.App.4th at pp. 411–412.)

It strikes the Court that Darbun offers a cautionary tale that trial courts should think through well-intended efforts focused on efficiency. In any case, Darbun is unhelpful on the issue here. While Darbun involved bifurcation of the specific performance issue, the ruling did not focus on the propriety of that bifurcation. Rather, the Court of Appeal focused on the fact that the trial court -- in applying the “equity first” rule -- made “ ‘inconsistent and misleading statements’ regarding, among other things, which issues would be decided during the first-phase bench trial.” (Orange County Water Dist., supra, 12 Cal.App.5th at p. 358; Darbun, supra, 239 Cal.App.4th at pp. 409-410.) That is, in Darbun, the first phase was to determine whether the equitable remedy of specific performance was available. (Darbun, supra, at pp. 409-410.) The trial court assured the parties that the issues of breach of contract and damages were reserved for the jury phase. (Id. at p. 411.) However, the trial court ended up deciding these issues, to the prejudice of the plaintiff, which lost the opportunity to abandon the equitable remedy and preserve the right to jury trial on breach of contract. (Ibid.) The Court of Appeal held that in cases involving mixed issues of equity and law the trial court may not act as a fact finder on issues specifically reserved for the jury. (Id. at p. 402.)

Here, bifurcating the issue of specific performance is not required under Section 592 and 598, and the goals of these statutes are not furthered by bifurcation.

Here, Plaintiff is seeking either legal or equitable relief but Plaintiff, ultimately cannot, obtain both—e.g., a suit for specific performance of a contract or damages for its breach.

As Defendants only seek bifurcation of entitlement to the specific performance remedy, not the entire breach of contract claim itself, the bifurcation will not be dispositive of the claim as a whole. The motion suggests that “depending on the Court’s determination, resolving Webster’s claim for specific performance may obviate the need to address Plaintiff’s other five causes of action,” but provide no analysis to how it would have this impact on the remaining claims. (Mot., 13:12-15:1.)

Moreover, while the law does not require that the issue bifurcated be dispositive, the bifurcation of this issue would not conserve judicial resources, either.

In seeking specific performance, a plaintiff must prove a breach of contract, adequate consideration, a just and reasonable contract, and an inadequate legal remedy. (Byrne v. Laura (1997) 52 Cal.App.4th 1054, 1073.)

Given the relatedness of the claims, there is likely to be an overlap of evidence and witness in the related claims of interference with contractual relations, inducing a breach of contract, interference with prospective economic advantage, and implied in fact contract. That is, there will likely be a duplication of evidence, and testimony.

Lastly, Plaintiff is not required to elect his remedy prior to trial. “[E]lection of remedies is the act of choosing between two or more concurrent but inconsistent remedies based upon the same state of facts. Ordinarily a plaintiff need not elect, and cannot be compelled to elect, between inconsistent remedies during the course of trial prior to judgment.” (Roam v. Koop (1974) 41 Cal.App.3d 1035, 1039.)

Thus, the more efficient use of resources is to allow the evidence and trial on the breach of contract to proceed without bifurcation – where both the jury and judge can consider all the evidence at the same time. Then, where an election is made the Court can make a determination on the remedy issue with all the evidence. In this way, the Court may never need to reach the question of whether Plaintiff can seek specific performance if Plaintiff cannot prevail on the other breach of contract elements or if Plaintiff elects contract damages instead of specific performance.

In sum, although courts usually try equitable or legal issues first and jury issues second, they are not required to do so. Courts may instead try the jury issues first (Darbun, at p. 409, fn. 4; Estate of Fincher (1981) 119 Cal.App.3d 343, 351), or, most pertinent here, may try the legal and jury issues simultaneously (Forty–Niner Truck Plaza, Inc. v. Union Oil Co. (1997) 58 Cal.App.4th 1261, 1268). (See generally Evid. Code, § 320 [noting court's “discretion [to] regulate the order of proof”]; Code Civ. Proc., § 597 [noting court's power to regulate the order of issues at trial].)

It is within the Court’s discretion to try all elements simultaneously. Indeed, a contrary decision risks the possibility of two back-to-back trials with overlapping evidence – a result inimical to the efficient use of limited judicial resources. (Code Civ. Proc., § 1048, subd. (b) [court should bifurcate “when separate trials will be conducive to expedition and economy”].)

Next, Defendants argue the Court should -- in Phase I -- adjudicate the appropriate measure of Plaintiff’s damages. Defendants contend that all six of causes of action rely on the same measure of damages.

Defendants argue that -- as its gate-keeping function -- the Court must determine as a matter of law which party is correct about how to value 2% of Partanna: Plaintiff, who asserts the correct valuation of Partanna’s 2% share must be based on a future value of Partanna; or Defendants, who assert the correct valuation of Partana’s 2% share is tied to, at the latest, the value of the Partanna at the time of trial. The reply makes clear that Defendant is not seeking bifurcation for the Court to conduct a valuation of the company under either theory during this Phase I stage of trial.

As argued by Defendants, deciding the appropriate measure of damages is the Court’s responsibility, not the jury’s. (Yaffee v. Skeen (2024) 106 Cal. App. 5th 1281, 1294 [“Whether a plaintiff is entitled to a particular measure of damages is a question of law . . . .”]; Shah v. Skillz Inc. (2024) 101 Cal. App. 5th 285, 312 (2024) [“[T]he measure of damages was a question of law to be decided by the court.”].) Relatedly, the Court must decide if damages are too speculative to be awarded. (Ramsey v. Penry (1942) 53 Cal. App. 2d 773, 780 [holding plaintiff not entitled to damages based on speculative future sales of stock].)

The Court agrees that whether Plaintiff or Defendants are correct about the proper methodology is an issue of law that cannot be decided by the jury at trial. (Shah v. Skillz Inc. (2024) 101 Cal.App.5th 285, 312.) Nonetheless, the law does not require that all legal questions be decided separately, in a bifurcated manner. None of the cases cited by Defendants discuss adjudicating discrete question of law on the measure of damages. (Mot., 15:2-17:22.)

Further, Defendants have failed to convince this Court that bifurcation serves the interest of judicial economy.

Defendants argue that “[d]oing so early while the parties are still engaged in discovery and while the potential for settlement is optimal because the parties have not yet incurred the cost of depositions and expert discovery would further judicial economy.” (Mot., 17:3-5.)

It is unclear to the Court how Defendant will benefit from reduced discovery by bifurcating this issue in Phase I for trial. Presumably, the parties would need to prepare for trial first, which includes taking all discovery.

Defendants also suggest that resolving this issue will increase the likelihood of settlement. (Mot., 17:12-22.) This argument is speculative. Perhaps the chances of settlement would be increased somewhat by narrowing the issues for a Phase II trial with respect to damages, but this uncertain outcome is an insufficiently compelling justification for bifurcation. The potential increased prospects of settlement would as likely arise if this issue were resolved though a motion in limine, as argued by Plaintiff, while avoiding the duplicative expenditure of judicial resources of trial.

Further, it would not further judicial economy where the adjudication of this issue is not dispositive to any specific claim.

Finally, Defendants seek to bifurcate the issue of whether Plaintiff owed any fiduciary duties to Defendants in Phase I of trial. Specifically, Defendants, citing Code of Civil Procedure section 592, seek to first adjudicate whether Plaintiff owed Defendants any fiduciary duties as a threshold question of law that the Court should resolve before permitting the jury to determine whether Plaintiff breached that fiduciary duty.

The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach. (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 483.)

Here, Defendants allege that Plaintiff owed fiduciary duties to Defendants. (Cross-Complaint ¶¶ 68–77 [as to Defendant Partanna], 78–84 [as to Defendant Marshall].)

A fiduciary or confidential relationship is “any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party. Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidence is reposed, if he [or she] voluntarily accepts or assumes to accept the confidence, can take no advantage from his [or her] acts relating to the interest of the other party without the latter's knowledge or consent.” (Herbert v. Lankershim (1937) 9 Cal.2d 409, 483.) A fiduciary relationship is established by agreement or by law and relates to a specific subject matter (res); such a relationship arises between spouses, a guardian and his ward, a conservator and a conservatee and a trustee and the trust beneficiary. (See Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 271.) Traditional examples of fiduciary relationships in the commercial context arise between business partners, joint venturers, officers or directors of a corporation and the corporation, a principal and its agent and an attorney and his or her client. (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 30.)

It is true that “[w]hether a fiduciary duty exists is generally a question of law.” (Marzec v. California Public Employees Retirement System (2015) 236 Cal.App.4th 889, 915.)

As with the measure of damages, Defendants cite no cases on bifurcating trial on the discrete issue of the existence of a fiduciary duty. Unlike the issue of the measure of damages, however, this issue would be dispositive to this specific cause of action.

Nonetheless, bifurcation is not appropriate given “the convenience of witnesses, the ends of justice, or the economy and efficiency of handling the litigation.” As argued by Plaintiff, the issue of whether or not Plaintiff was a fiduciary, and to whom, requires factual review that overlaps with other legal claims. For example, Plaintiff contends that the question of whether Plaintiff owed fiduciary duties to Defendants as their attorney and potentially an executive involves developing facts that overlap with the background to the implied contract claim, which is based on the work that Plaintiff performed for Defendants, and also overlaps with the legal claim stated for quantum meruit. (Opp., 8:7-9:8.) As such, bifurcation would not promote judicial economy and efficiency in the handling of this litigation.

In sum, the Court is unpersuaded that the bifurcation Defendants propose will result in increased efficiency. The Motion to Bifurcate trial is denied.

[1] Defendants propose proceeding in Phase I – in part -- through law and motion practice, with papers supported by declarations and or deposition testimony. In Phase II, Defendants contend the Court need only instruct the jury as to its factual findings from Phase I. (Reply, 8-9.)

[2] In Raedeke itself, the court, after confirming the existence and validity of the “equity first preference,” held that a plaintiff who brings an action presenting both legal and equitable issues can avoid the potential loss of a jury trial on common issues by electing to forgo the equitable claim and thus removing the equitable issues from the case. (See Raedeke, supra, 10 Cal.3d at pp. 671-672.)