Judge: Christopher K. Lui, Case: 22STCV40226, Date: 2023-05-16 Tentative Ruling

Case Number: 22STCV40226    Hearing Date: May 16, 2023    Dept: 76

Pursuant to California Rule of Court 3.1308(a)(1), the Court does not desire oral argument on the motion addressed herein.  Counsel must contact the staff in Department 76 to inform the Court whether they wish to submit on the tentative, or to argue the matter.  As required by Rule 3.1308(a)(2), any party seeking oral argument must notify ALL OTHER PARTIES and the staff of Department 76 of their intent to appear and argue.

Notice to Department 76 may be sent by email to smcdept76@lacourt.org or telephonically at 213-830-0776.

Per Rule of Court 3.1308, if notice of intention to appear is not given, the Court may adopt the tentative ruling as the final ruling.

            Plaintiff is a contractor which alleges that Defendant City of Long Beach caused delays and additional work outside the contractual scope regarding construction at Defendant’s property. Defendant allegedly declared Plaintiff to be in default and terminated Plaintiff from the project without paying Plaintiff for all work performed on the project.

            Prospective Intervenor Nationwide Mutual Insurance Company brings a motion for leave to file a complaint in intervention.

TENTATIVE RULING

            Prospective Intervenor Nationwide Mutual Insurance Company’s motion for leave to intervene is GRANTED. Nationwide is to file a stand-alone copy of the Complaint in Intervention today, which is deemed to be served upon the parties as of the date of this order.

Motion For Leave To Intervene

            Prospective Intervenor Nationwide Mutual Insurance Company brings a motion for leave to file a complaint in intervention. This basis for this motion is that Nationwide is the real party in interest in this litigation and has an interest related to any recovery by Plaintiff Klassic Engineering & Construction, Inc. Nationwide argues that Klassic entered into an indemnity agreement with Nationwide, whereby Klassic assigned all of its rights and interests in the subject litigation to Nationwide. Nationwide argues that disposition of this action without Nationwide will impair or impede its ability to protect its rights and interests.

            Nationwide provided construction surety bonds on behalf of Klassic for construction of the project. On August 27,2021, Klassic defaulted on the project and was terminated by the City, requiring Nationwide to complete the remaining scope of work under the contract pursuant to Nationwide’s obligations under the Performance Bond and to pay unpaid subcontractors and supplies under the Payment Bond. Nationwide argues that this default by Klassic on the contract constituted a default of the General Agreement of Indemnity (“GAI”). Nationwide argues that, given the assignment of rights by Klassic to Nationwide under the terms of the indemnity agreement, Nationwide is the real party in interest and should be allowed to intervene.

            Further, collateral demands pursuant to the terms of the GAI were made by Nationwide on November 17, 2021 and January 6, 2022, and were not responded to by Klassic, also putting Klassic in breach of the GAI. To date, Nationwide has suffered actual losses in excess of $3,229,634.58 on the project initially undertaken by Klassic for which Nationwide provided bonds, which is the subject of the instant litigation, in which Klassic is seeking an affirmative recovery from the City.

            Given that Klassic assigned to Nationwide all of its rights and claims in connection with the instant action under the GAI, the City, Nationwide, and Klassic (through a power of attorney granted to Nationwide) entered into a settlement agreement, dated March 8, 2023, under which the City agreed to pay Nationwide $550,000.00 out of the remaining contract funds being held by the City, to forever and fully resolve all issues arising out of the Project, the Contract, the Bonds, and the instant Complaint (“Project Settlement”). On April 6, 2023, the City issued the final payment under the Contract pursuant to the Project Settlement, in the amount of $550,000.00, to Nationwide. In consideration of the funds to be received by Nationwide in the amount of $550,000.00 under the Project Settlement, the amount of damages now sought by Nationwide is reduced by the $550,000.00 payment to a new total of $2,975,018.44.

            Nationwide argues that it claims an interest in the property that is the subject of this litigation and adjudication of the parties’ claims in its absence will impair or impede its ability to protect that interest.  Nationwide argues that it must intervene to enforce the Project Settlement, and protect its interests which are not adequately protected by the current parties. As of this date, Klassic has failed to honor its indemnity obligations to Nationwide. Therefore, Nationwide should be granted leave to file a Complaint in intervention in this case. 

(b) An intervention takes place when a nonparty, deemed an intervenor, becomes a party to an action or proceeding between other persons by doing any of the following:

(1) Joining a plaintiff in claiming what is sought by the complaint.

(2) Uniting with a defendant in resisting the claims of a plaintiff.

(3) Demanding anything adverse to both a plaintiff and a defendant.

(c) A nonparty shall petition the court for leave to intervene by noticed motion or ex parte application. The petition shall include a copy of the proposed complaint in intervention or answer in intervention and set forth the grounds upon which intervention rests.

(d)

(1) The court shall, upon timely application, permit a nonparty to intervene in the action or proceeding if either of the following conditions is satisfied:

(A) A provision of law confers an unconditional right to intervene.

(B) The person seeking intervention claims an interest relating to the property or transaction that is the subject of the action and that person is so situated that the disposition of the action may impair or impede that person’s ability to protect that interest, unless that person’s interest is adequately represented by one or more of the existing parties.

(2) The court may, upon timely application, permit a nonparty to intervene in the action or proceeding if the person has an interest in the matter in litigation, or in the success of either of the parties, or an interest against both.

(Code Civ. Proc., § 387 [bold emphasis added].)

“When the proper procedures are followed, the trial court has the discretion to permit a nonparty to intervene in litigation pending between others, provided that (1) the nonparty has a direct and immediate interest in the action; (2) the intervention will not enlarge the issues in the litigation; and (3) the reasons for intervention outweigh any opposition by the parties presently in the action.” (Noya v. A.W. Coulter Trucking (2006) 143 Cal.App.4th 838, 842 [49 Cal.Rptr.3d 584].)

(Gray v. Begley (2010) 182 Cal.App.4th 1509, 1521.)

            Here, proposed Intervenor Nationwide has an interest in the matter in the litigation, or in the success of either of the parties, pursuant to the Settlement Agreement (Saffris Decl., Exh. F) which was entered into on March 8, 2023, with express reference to this lawsuit, which was filed on December 27, 2022. Pursuant to the Settlement Agreement, Nationwide owes a contractual obligation to The City of Long Beach to seek to intervene in this action and to move for a dismissal of this action. (Settlement Agreement, ¶¶ 6, 7.) The obvious basis for such dismissal is that Klassic released the claims being asserted in this lawsuit against the City, as follows:

Klassic’s General Release of the City: For good and valuable consideration, the receipt of which is acknowledged by the Parties, Klassic hereby releases and forever discharges[1] the City of Long Beach, its boards and commissions, and their officials, employees and agents, from any and all claims, demands and causes of action existing as of the date of this Agreement and arising out of, connected with, or incidental to the Project and/or the Contract and/or the State Court Action.  

(Settlement Agreement, ¶ 9.)

            This is sufficient to justify the Court’s exercise, at least in its discretion under Civ. Proc. Code, § 387(d)(2), to grant Nationwide’s request to intervene.

            Klassic’s arguments in opposition do not defeat Nationwide’s contractual obligation to seek intervene in this action and attempt to obtain a dismissal of Klassic’s claims based upon Klassic’s waiver of such claims against the City. To the extent Klassic disputes that it authorized Nationwide to settle these claims, that is an issue which should obviously be litigated between all purported parties to the Settlement Agreement—Nationwide, Klassic and the City of Long Beach.

            Moreover, as Nationwide argues, Klassic assigned these claims to Nationwide by virtue of the GAI, pursuant to Section VI. Assignment, and thereby Nationwide is the real party in interest as to such claims:

VI. ASSIGNMENT

The Indemnitors do hereby presently assign, transfer, pledge and convey to Surety, subject to the trust herein created and effective as of the date of the Bonds, as additional security to secure the obligations of the Indemnitors, under the Bonds and this Agreement

and with respect to any other liability or indebtedness of Indemnitors to Surety whether heretofore or hereafter incurred all, jointly and severally, all Property as herein defined, including without limitation:

A. All monies due or to become due to the Principal or Indemnitors as a result of the Contract(s), including but not limited to, progress payments, advances, deferred payments, retained percentages, causes of action against any other party, payment

for extra work and proceeds of any delay or other damage claims.

     (Safris Decl., Exh. A, Section VI.A [bold emphasis added].)

            Klassic’s objections to the claims set forth in the proposed Complaint in Intervention, including the pending federal action, may be asserted by way of an appropriate motion.

            The Court finds that Klassic does not adequately represent Nationwide’s interests here as: (1) Klassic is assert claims it assigned to Nationwide; and (2) Klassic is asserting claims which trigger Nationwide’s obligation under the Settlement Agreement to seek to have such claims against the City dismissed.

            As such, the motion for leave to intervene is GRANTED. Nationwide is to file a stand-alone copy of the Complaint in Intervention today, which is deemed to be served upon the parties as of the date of this order.