Judge: Daniel S. Murphy, Case: 22STCV18523, Date: 2023-02-22 Tentative Ruling

Case Number: 22STCV18523    Hearing Date: February 22, 2023    Dept: 32

BACKGROUND

            On June 6, 2022, Plaintiff Fraser Ross filed this action against Defendants Jonny Tucker (“Jonny”) and Carolyn Tucker (“Carolyn”), alleging the following eight causes of action: (1) fraud, (2-3) breach of fiduciary duty, (4) accounting, (5) breach of contract, (6) declaratory relief, (7) conversion, and (8) quantum meruit.  

            Plaintiff alleges that Defendants induced him into a joint business venture and promised him 50% ownership interest. Plaintiff and Jonny formed Los Angeles Trading Company, LLC (“LATC”) to operate the new business. Plaintiff contributed financially to the business and also provided his guidance and expertise, which increased LATC’s success. Jonny allegedly mismanaged the company and used LATC assets to pay for his and Carolyn’s personal expenses. When Defendants became dissatisfied with Plaintiff over Plaintiff’s focus on profits, Jonny repudiated Plaintiff’s ownership stake in LATC, claiming that Plaintiff never formally obtained such an interest. The parties never signed a written contract memorializing their oral agreement, though an unsigned draft was exchanged. Afterwards, Jonny held a vote of the LATC membership to dissolve the company without notifying Plaintiff and then petitioned the court to wind up the company. Plaintiff brought this lawsuit to allege that Defendants improperly deprived him of his rightful 50% ownership interest in LATC and also mismanaged the company.

            On October 20, 2022, Defendants filed a cross-complaint against Plaintiff seeking declaratory relief that they are the rightful owners of LATC.

            On January 25, 2023, Defendants filed the instant motion to bifurcate the trial into two phases. Principally, Defendants seek to first adjudicate the question of whether Plaintiff has any ownership interest in LATC. Defendants argue that if it is determined that Plaintiff does not have any ownership of LATC, many if not all of Plaintiff’s claims will fall away, obviating costly discovery and trial on issues such as LATC’s finances and Defendant’s conduct in managing the company.     

LEGAL STANDARD

“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 . . . .” (Code Civ. Proc., § 598.) “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 . . . .” (Id., § 1048, subd. (b).) “It is within the discretion of the court to bifurcate issues or order separate trials of actions . . . and to determine the order in which those issues are to be decided.” (Royal Surplus Lines Ins. Co. v. Ranger Ins. Co. (2002) 100 Cal.App.4th 193, 205.)

DISCUSSION

            The Court agrees with Defendant that bifurcation in this case serves the interests of judicial economy. The declaratory relief claims in the complaint and cross-complaint identically seek a determination as to the rightful owner(s) of LATC. The primary dispute is whether Plaintiff owns 50% of LATC. An initial determination of this issue would substantially narrow the scope of the litigation if not obviate it entirely. “To further the purpose of providing a rapid means of resolving a dispute or a potential dispute, declaratory actions are given precedence in setting trial dates.” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 898; Code Civ. Proc., § 1062.3.)  

For example, Plaintiff asserts claims against Defendants for mismanaging LATC and thereby breaching their fiduciary duties to him. Plaintiff further alleges that Defendants have failed to provide Plaintiff a proper accounting of LATC assets and have improperly retained Plaintiff’s shares. If Plaintiff is determined not to have any ownership stake in LATC, he would not be owed any fiduciary duties, nor would he be entitled to an accounting. Furthermore, Defendants would not be improperly withholding Plaintiff’s ownership interest or be in breach of contract by failing to provide 50% to Plaintiff. Therefore, a substantial portion of this lawsuit depends on the threshold question of Plaintiff’s ownership of LATC, justifying bifurcation.

In opposition, Plaintiff contends that there is a significant overlap of evidence and issues and therefore bifurcation should be denied to avoid duplication of efforts. Plaintiff contends that there is a common set of facts underlying most of his causes of action. Specifically, Plaintiff plans to prove that Carolyn introduced Plaintiff to Jonny, whereafter Jonny expressed to Plaintiff his vision of starting a fashion company in Los Angeles. Defendants then allegedly encouraged Plaintiff to join in this venture by promising Plaintiff 50% of LATC in exchange for Plaintiff’s contribution of capital and management expertise. Plaintiff argues that “[t]hese facts are common to Plaintiff’s Fraud, Accounting, Breach of Contract, Conversion, Quantum Meruit, and Declaratory Relief Causes of Action, as well as Defendants’ Declaratory Relief Cause of Action.” (Opp. 6:22-24.)

However, these facts relate to whether Plaintiff owns 50% of LATC, which is the question underpinning Plaintiff’s causes of action that Defendants argue should be tried first. A determination of this threshold issue would not overlap with determinations about LATC’s finances, purported mismanagement, and other dealings. Whether Plaintiff is an owner of LATC is distinct from whether Plaintiff’s rights in LATC as an owner were violated. Defendant notes that the alleged promise to give Plaintiff 50% ownership of LATC inherently involves Plaintiff and Defendants only and is unlikely to involve other witnesses, and this issue can be decided by the Court without a jury. By contrast, a trial over the alleged mismanagement of LATC would involve more complex and time-consuming inquiry into LATC’s operations and finances, which would be unnecessary if Plaintiff turns out not to be an owner of LATC.

In sum, bifurcation in this case would serve the interests of justice and judicial economy. Addressing the threshold question of ownership would narrow the scope of litigation and potentially obviate the need for trial at all on a substantial portion of the claims asserted.

CONCLUSION

            Defendants’ motion to bifurcate is GRANTED. Trial on the parties’ declaratory relief claims is to occur within the next 120 days. Discovery is limited to the issue of ownership.