Judge: Daniel S. Murphy, Case: 18STCV04896, Date: 2022-08-19 Tentative Ruling

Case Number: 18STCV04896    Hearing Date: August 19, 2022    Dept: 32

BACKGROUND

            This action was initially brought in November 2018 by Plaintiff Akira Kokubu against various Defendants. The operative Second Amended Complaint was filed on January 15, 2020. Various cross-complaints and amended cross-complaints have also been filed from June 2019 through November 2019. The dispute involves joint ownership of a commercial real estate office building. The investment was made by investors from Japan, including Plaintiff (“Japanese Investors”) and investors from the United States (“US Investors”).

            Defendants presently move for relief from a waiver of jury trial. Defendants did not post jury fees as planned prior to the initial August 15, 2019 Case Management Conference (“CMC”). Plaintiff timely posted jury fees on July 31, 2019. A subsequent CMC took place on January 15, 2020, where the Court set a jury trial for January 5, 2021 and ordered the parties to post fees within 10 days. Defendants erroneously believed that they had posted jury fees prior to the August 15, 2019 CMC and did not subsequently post fees within 10 days of the January 15, 2020 Case Management Order. The case was stayed after the Court denied a motion to compel arbitration which was then appealed. At a status conference on June 3, 2022, the Court lifted the stay and ordered a bench trial due to Defendants’ failure to post jury fees. Defendants filed the instant motion for relief on June 21, 2022.

LEGAL STANDARD

            The right to a jury trial is guaranteed by the California Constitution. (Cal. Const., Art. I, § 16.) Because the right is inviolate, it may only be waived in limited circumstances, including the failure to timely pay fees. (Code Civ. Proc., § 631, subd. (a), (f).) The Court has discretion to allow a jury trial even though there has been a waiver. (Id., subd. (g).) “A trial court abuses its discretion as a matter of law when relief has been denied where there has been no prejudice to the other party or to the court from an inadvertent waiver.” (Tesoro del Valle Master Homeowners Assn. v. Griffin (2011) 200 Cal.App.4th 619, 638.) “Where the right to jury is threatened, the crucial focus is whether any prejudice will be suffered by any party or the court if a motion for relief from waiver is granted.” (Ibid.) Courts are required “to resolve doubts in interpreting the waiver provisions of section 631 in favor of a litigant's right to jury trial.” (Ibid.)

DISCUSSION

            It is undisputed that Plaintiff timely posted jury fees while Defendants did not. However, Defendants aver that their failure was inadvertent because defense counsel’s paralegal was involved in an accident in May 2019 and required surgery on August 16, 2019. (Lundy Decl. ¶ 3.) The paralegal typically handled jury fees, which defense counsel normally posts based on the date of the first CMC. (Id., ¶ 4.) Here, the CMC was initially set for August 15, 2019. Thus, it is reasonable that the paralegal’s accident around that time caused defense counsel to inadvertently miss the payment of jury fees. Defense counsel further avers that they were not alerted to their failure to pay fees because the Court subsequently set a jury trial at the January 15, 2020 CMC. (Id., ¶ 5.) Defense counsel realized their mistake at the June 3, 2022 Status Conference, when the Court set the matter for a bench trial. (Ibid.)

            In opposition, Plaintiff points out that the Court ordered fees to be posted within 10 days of the January 15, 2020 CMC, which was months after the paralegal’s purported accident. (Opp. 3:21-25.) Plaintiff thus argues that the paralegal’s accident could not have caused Defendants’ failure to post fees. (Ibid.) However, defense counsel averred that they normally post fees based on the date of the initial CMC, which in this case was August 15, 2019. (See also Code Civ. Proc., § 631, subd. (c) [requiring fees to be posted on or before the date of the initial CMC].) In fact, Plaintiff himself posted jury fees on July 31, 2019. Thus, Plaintiff had no reason to pay jury fees after the Court’s order on January 15, 2020 even though the Court ordered fees to be posted within 10 days. Defendants reasonably believed that they were in the same position because their paralegal normally posted fees based on the date of the initial CMC as well. Defendants have thus presented a reasonable explanation for their failure to timely post fees, and any doubts must be resolved in favor of relief. (See Tesoro del Valle, supra, 200 Cal.App.4th at p. 638.)

            Plaintiff also argues that Defendants confirmed their decision to waive their right to a jury trial by demanding arbitration. (Opp. 5:2-15.) However, the fact that Defendants moved to compel arbitration does not mean they intended to waive a jury trial in the event their motion is denied. Plaintiff has no evidence for the proposition that Defendants simply changed their mind and now want a jury trial. The record shows that Defendants have always desired a jury trial.

            Lastly, Plaintiff does not articulate any prejudice if relief were to be granted. Instead, Plaintiff argues that “the issue of prejudice is not a consideration in deciding this motion.” (Opp. 7:25-27.) However, “[w]here the right to jury is threatened, the crucial focus is whether any prejudice will be suffered by any party or the court if a motion for relief from waiver is granted.” (Tesoro del Valle, supra, 200 Cal.App.4th at p. 638.) It is an abuse of discretion to deny relief where no prejudice is shown. (Ibid.) Again, there is no indication that the motion for relief resulted from a change of tactic as opposed to a genuine mistake. Doubts are resolved in Defendants’ favor.

CONCLUSION

            Defendants’ motion for relief from waiver of jury trial is GRANTED.

BACKGROUND

            This action was initially brought in November 2018 by Plaintiff Akira Kokubu against various Defendants. The operative Second Amended Complaint was filed on January 15, 2020. Various cross-complaints and amended cross-complaints have also been filed from June 2019 through November 2019. The dispute involves joint ownership of a commercial real estate office building. The investment was made by investors from Japan, including Plaintiff (“Japanese Investors”) and investors from the United States (“US Investors”).

            On January 8, 2021, the Court denied the US Investors’ motion to compel arbitration, and the US Investors appealed. The Court of Appeal affirmed this Court’s decision, meaning the arbitration was denied, and the case is proceeding in this Court. On June 17, 2022, the Japanese Investors filed the instant motion for attorneys’ fees under Civil Code section 1717 on the basis that they prevailed on the arbitration issue, and the parties’ contract contains an attorneys’ fees provision in the event of any proceeding to enforce the provisions of the agreement.

LEGAL STANDARD

“Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties . . . .” (Code Civ. Proc., § 1021.) “In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.” (Civ. Code, § 1717, subd. (a).)

DISCUSSION

            The Japanese Investors move for attorneys’ fees pursuant to Civil Code section 1717, arguing that “‘where a written contract expressly provides for the award of attorney fees, the prevailing party in an action under or relating to the contract is entitled to recover its fees, whether incurred at trial or on appeal.’” (Mtn. 6:13-17, quoting Starpoint Properties, LLC v. Namvar (2011) 201 Cal.App.4th 1101, 1110.) The parties’ agreement, under which the US Investors moved to compel arbitration, contains a provision stating that in the event of an action or proceeding relating to the provisions of the lease, the non-prevailing party agrees to reimburse the prevailing party for reasonable attorneys’ fees. (Master Lease Agreement (“MLA”) § 32(f).) The Japanese Investors argue that because they prevailed on the appeal of the arbitration issue, they are entitled to attorneys’ fees. (Mtn. 7:8-12.)

            However, Civil Code section 1717, subdivision (b)(1) defines a “prevailing party” as “the party who recovered a greater relief in the action on the contract.” This means that when “there [is] no ‘reckoning of the net success’ of the parties, there [is] no prevailing party under the parties' agreements nor pursuant to Civil Code section 1717.” (Frog Creek Partners, LLC v. Vance Brown, Inc. (2012) 206 Cal.App.4th 515, 532.) “[D]efeating a petition to compel arbitration filed in a pending contract action does not justify a grant of fees under Civil Code section 1717 where the merits of the contract claims remain pending in that action.” (Id. at p. 535.) Although the Japanese Investors prevailed on the intermediate issue of arbitration, the party who recovers a greater relief in the action cannot be determined until final resolution of the action.

            The Japanese Investors rely primarily on Acosta v. Kerrigan (2007) 150 Cal.App.4th 1124 for the proposition that a proceeding to resolve the issue of arbitration can be considered an independent proceeding apart from the underlying action, thus justifying an interlocutory award of attorneys’ fees. The court in Acosta stated its reasoning as follows:

Here, the contractual provision at issue states a party who is forced to file a petition to

compel arbitration of a dispute arising under the Occupancy Agreement may recover his attorney fees incurred in making the successful petition. Acosta states no valid reason why Kerrigan should have to wait until the end of the case to recover fees he is entitled to by virtue of prevailing on a specific motion. Kerrigan is not attempting to recover attorney fees under a provision permitting an award of fees to the party prevailing on the merits of a claim arising under the Occupancy Agreement. Rather, he is seeking fees incurred while enforcing an independent provision of the contract, fees to which he is entitled even if he loses the case on the merits in the arbitration. A party who is entitled to recover attorney fees he or she incurred in making a successful discovery motion need not wait until the end of the case before filing the claim for fees. A fortiori, Kerrigan is entitled to an interim attorney fee award in this case where he already has prevailed on an independent proceeding contemplated in the contract.”

(Acosta, supra, 150 Cal.App.4th at p. 1132.)

However, the court in Frog Creek disapproved of the holding in Acosta for going against the rule that “within a given lawsuit, there can be only one prevailing party entitled to attorney fees as ‘the party prevailing on the contract.’” (See Frog Creek, supra, 206 Cal.App.4th at p. 539.) According to Frog Creek, the logic in Acosta could be read to mean that “a party who succeeded on any dispute related to a contract's enforcement could claim fees, even if that party was not the prevailing party at trial,” as long as the parties so specify in their contract. (Id. at pp. 544-46.) Section 1717 does not allow such a result: “A holding that in contract actions there is still a separate contractual right to recover fees that is not governed by [Civil Code] section 1717 would be contrary to [the] legislative intent” to “establish uniform treatment of fee recoveries in actions on contracts containing attorney fee provisions.” (Id. at p. 545.) Parties cannot contract to expand entitlement to attorneys’ fees beyond that permitted by Section 1717. (Ibid.)

Nonetheless, the court in Frog Creek recognized that in limited circumstances, a party could be considered the prevailing party on a contract after succeeding in a petition to compel arbitration. Specifically, “[w]here an action is brought solely to compel arbitration of contractual disputes between the parties, … a party who succeeds in obtaining an order denying the petition to compel arbitration is a prevailing party in the action on the contract even though the merits of the parties' underlying contractual disputes have not yet been resolved.” (Frog Creek, supra, 206 Cal.App.4th at p. 533-34.) This is because a party prevailing in this manner would have “defeated the only contract claim before the trial court in this discrete special proceeding.” (Id. at p. 533.)

More recent caselaw has affirmed this distinction. For example, the court in Domestic Linen Supply Co., Inc. v. L J T Flowers, Inc. (2020) 58 Cal.App.5th 180, 187 acknowledged that “[w]here there is an existing lawsuit, the lawsuit continues if the petition [to compel arbitration] is defeated.” However, the court held that the appellant was entitled to attorneys’ fees in that particular case because the appellant “brought an independent petition to compel arbitration. The defeat of the petition terminated the action, leaving LJT as the prevailing party entitled to an award of fees.” (Ibid.) The court in Patterson v. Superior Court (2021) 70 Cal.App.5th 473, 486 also recognized that “fees under section 1717 are awarded to the party who prevailed on the contract overall, not to a party who prevailed only at an interim procedural step.” The court in Patterson then made the distinction that if “[t]he only contract dispute was the enforceability of the arbitration agreement,” the party prevailing on that sole contract dispute would be entitled to attorneys’ fees. (Ibid.)

Taken together, the above caselaw stands for the proposition that where there are contract disputes remaining in an ongoing lawsuit, there cannot be a prevailing party on the contract under Section 1717 until final resolution of the lawsuit. However, where the arbitration agreement is the only contractual dispute in an action, the party succeeding on that issue can be considered the prevailing party on the contract notwithstanding the fact that the parties’ underlying claims remain unadjudicated. Here, the action on a contract remains unresolved because there are contract claims beyond the arbitration provision. Therefore, the Japanese Investors are not entitled to attorneys’ fees even though they prevailed on the arbitration issue.

The Japanese Investors also rely on Mustachio v. Great Western Bank (1996) 48 Cal.App.4th 1145. (See Reply 3:20-24.) However, Mustachio actually supports the US Investors’ position. The court in Mustachio held that “a party who prevails on appeal is not entitled under a section 1717 fee provision to the fees he incurs on appeal where the appellate decision does not decide who wins the lawsuit but instead contemplates further proceedings in the trial court.” (Id. at p. 1149-50.) The court also recognized the “well settled rule excluding attorney fees from the costs a party winning an appeal may recover under section 1034.” (Id. at p. 1150.) Most notably, the court stated, “[t]he prevailing party determination is to be made only upon final resolution of the contract claims and only by a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions.” (Ibid.)

CONCLUSION

            The motion for attorneys’ fees filed by Akira Kokubu, Takashi Sudo, Tomoko Hamamoto, and Japan Investments, LLC (“Japanese Investors”) is DENIED.

BACKGROUND

            This action was initially brought in November 2018 by Plaintiff Akira Kokubu against various Defendants. The operative Second Amended Complaint was filed on January 15, 2020. Various cross-complaints and amended cross-complaints have also been filed from June 2019 through November 2019. The dispute involves joint ownership of a commercial real estate office building. The investment was made by investors from Japan, including Plaintiff (“Japanese Investors”) and investors from the United States (“US Investors”).

            The present motions to compel relate to discovery propounded by Cross-Complainant Beach Front Properties, LLC to the Japanese Investors prior to the case being stayed due to the US Investors’ motion to compel arbitration and subsequent appeal. Beach Front filed these motions on June 24, 2022. The Japanese Investors did not respond to Form Interrogatories and asserted identical objections to Special Interrogatories, Requests for Admission, and Requests for Production. The Japanese Investors served supplemental responses in July 2022.

LEGAL STANDARD

“Within 30 days after service of interrogatories, the party to whom the interrogatories are propounded shall serve the original of the response to them on the propounding party, unless on motion of the propounding party the court has shortened the time for response, or unless on motion of the responding party the court has extended the time for response.” (Code Civ. Proc., § 2030.260, subd. (a).) If a party fails to timely respond to interrogatories, the propounding party may move for an order compelling a response. (Id., § 2030.290, subd. (b).)

On receipt of a response to interrogatories, the propounding party may move for an order compelling a further response if the propounding party deems that any of the following apply: (1) An answer to a particular interrogatory is evasive or incomplete; (2) An exercise of the option to produce documents under Section 2030.230 is unwarranted or the required specification of those documents is inadequate; (3) An objection to an interrogatory is without merit or too general. (Code Civ. Proc., § 2030.300, subd. (a).)  

On receipt of a response to a request for inspection, the demanding party may move for an order compelling further responses to the demand if the demanding party deems that (1) a statement of compliance with the demand is incomplete, (2) a representation of inability to comply is inadequate, incomplete, or evasive, or (3) an objection in the response is without merit or too general. (Code Civ. Proc., § 2031.310, subd. (a).)

On receipt of a response to requests for admissions, the party requesting admissions may move for an order compelling a further response if that party deems that an answer to a particular request is evasive or incomplete or an objection to a particular request is without merit or too general. (Code Civ. Proc., § 2033.290, subd. (a).)  

MEET AND CONFER

Motions to compel further responses must be accompanied by a meet and confer declaration demonstrating an attempt to resolve the issue informally. (Code Civ. Proc., §§ 2030.300(b)(1), 2031.310(b)(2), 2033.290(b)(1).) The Court finds that Beach Front has satisfied the meet and confer requirement. (See Koch Decl. ¶¶ 4-5, 12.)

DISCUSSION

 It is undisputed that the Japanese Investors did not respond to the FROGs within the 30-day deadline and that they asserted the exact same objection to the remaining discovery:

“Overbroad, burdensome, harassing and oppressive; vague, ambiguous and unintelligible;

irrelevant and not reasonably calculated to lead to the discovery of admissible evidence; calls for speculation; calls for a narrative; invades the attorney client privilege; violates the attorney work product doctrine; violates the right to privacy; violates trade secrets; calls for a legal conclusion; calls for an expert opinion; seeks documents that are equally available to propounding party; fails to describe the documents to be produced with particularity as required by C.C.P. Section 2031.030(c)(1).”

(See Beach Front’s Separate Statement.)

            No substantial justification is provided for the Japanese Investors’ failure to provide responses to FROGs, nor for the boilerplate objections asserted in response to the other requests. It is improper to copy and paste the exact same response to every single discovery request. (See, e.g., Code Civ. Proc., § 2030.220(a) [answer must be as complete and straightforward as possible]; § 2030.240(a) [if interrogatory is only partially objectionable, the remainder must be answered].)

            The Japanese Investors argue that “[t]he objections stated in the Japanese Investors’ responses might have been the same to each matter in dispute, but each question and request propounded by BFP varies, requiring BFP to inform the Court of the reasons that each objection lacks merit as it pertains to each interrogatory or request.” (Opp. 8:1-6.) The Japanese Investors cite no authority for this proposition. If this argument were true, then a responding party could dodge discovery by simply asserting the same boilerplate objections to every discovery request and then place the burden on the propounding party to reject each objection as it relates to each request. No statute or caselaw imposes such a burden on the propounding party. Instead, the burden is on the responding party to answer as completely as possible. (See Code Civ. Proc., § 2030.220(a).)

The Japanese Investors clearly made no attempt to substantively respond, as shown by the fact that their boilerplate objection cannot apply to many of the requests and was not tailored to each request. For example, RFP No. 4 asked Kokubu to produce documents reflecting communications between himself and Sudo regarding the subject property. This cannot be irrelevant in an action about the subject property, cannot invade the attorney-client privilege because it does not seek any attorney-client communications, does not call for a legal conclusion, and does not call for an expert opinion. Additionally, the Japanese Investors insist that the motion is moot because they have since provided substantive responses, further confirming that they could have provided actual responses rather than boilerplate, unsubstantiated objections.

The motion is not moot simply because some responses have been served. It appears the Japanese Investors did not provide substantive responses to many of the requests. (See Reply 2:7-20.) Moreover, the Japanese Investors’ failure to substantively answer any of the discovery earlier still necessitated the instant motions, and their failure to provide substantial justification warrants sanctions.

However, Beach Front did not request sanctions in the notice of motion or provide any substantiation for attorneys’ fees (i.e., hourly rate and hours spent). Therefore, the Court cannot impose sanctions.   

CONCLUSION

            Cross-Complainant Beach Front Properties, LLC’s motions to compel are GRANTED. Akira Kokuba, Takashi Sudo, Tomoko Hamamoto, and Japan Investments, LLC are to produce responses within 10 days of this order.