Judge: David S. Cunningham, Case: JCCP5322, Date: 2024-06-17 Tentative Ruling

Case Number: JCCP5322    Hearing Date: June 17, 2024    Dept: 11

Shangri-La Cases (JCCP 5322)

Tentative Ruling Re: Petition for Coordination

Date:                                       6/17/24

Time:                                      1:45 pm

Moving Party:                       World Mechanical Inc., et al. (collectively “Petitioners” or “Shangri-La”)

Opposing Party:                    PMF CA REIT, LLC (“PMF”), Qualifax, Inc. (“Qualifax”), Medalist Partners Asset-Based Private Credit Fund III, et al. (collectively “Medalist”), Fairview Loan 123 LLC (“Fairview”), PPRF REIT, LLC (“PPRF”), City of King City (“King City”), Arixa Institutional Lending Partners, LLC (“Arixa”), BMO Bank N.A. (“BMO”), Johnson Engineered Systems, Inc. (“Johnson”), PDG Wallcoverings (“PDG”), and Northstar Development and Construction, Inc. (“Northstar”)

Department:                          11

Judge:                                     David S. Cunningham III

________________________________________________________________________

TENTATIVE RULING

The hearing is continued to provide the parties an opportunity to submit courtesy copies of all oppositions and replies.

On the current record, the Court finds the petition for coordination unavailing.

BACKGROUND

Petitioners submitted a petition to the Chairperson of the Judicial Council for pretrial coordination of 16 cases (the “Included Actions”):

* California Department of Housing and Community Development v. Shangri-La Industries LLC, Case No. 24STCV00629 (Los Angeles Superior Court);

* World Mechanical Inc. v. Holmes, Case No. 24STCV02847 (Los Angeles Superior Court);

* Pace Supply Corp. v. World Mechanical, Inc., Case No. 23CV001198 (Monterey Superior Court);

* Johnson Engineered Systems, Inc. v. Northstar Development and Construction, Inc., Case No. 23CV002530 (Monterey Superior Court);

* Medalist Partners Asset-Based Private Credit Fund III CRE LLC v. 545 Work Street, LP, Case No. 23CV003666 (Monterey Superior Court);

* BMO Bank N.A. v. Shangri-La Construction, L.P., Case No. 23CV004040 (Monterey Superior Court);

* Medalist Partners Asset-Based Private Credit Fund III CRE LLC v. 1130 Broadway Street, LP, Case No. 23CV004173 (Monterey Superior Court);

* PPRF REIT, LLC v. 180 Sanborn, LP, Case No. 24CV000322 (Monterey Superior Court);

* Safeway Building Systems, Inc. v. Northstar Development and Construction, Inc., Case No. CIVSB215629 (San Bernardino Superior Court);

* Carpet U.S.A., Ltd. V. Shangri-La Construction, LP, Case No. CIVSB2313670 (San Bernardino Superior Court);

* PDG Wallcoverings v. Northstar Development and Construction, Inc., Case No. CIVSB2314707 (San Bernardino Superior Court);

* Walters Wholesale Electric Co. v. Lynx Electrical & Telecommunications, Inc., Case No. CIVSB2320081 (San Bernardino Superior Court);[1]

* Arixa Institutional Lending Partners, LLC v. 1675 Industrial Park, LP, Case No. CIVSB2325438 (San Bernardino Superior Court);

* Northstar Development and Construction, Inc. v. Shangri-La Construction, L.P., Case No. CIVSB2326433 (San Bernardino Superior Court);

* Northstar Development and Construction, Inc. v. Shangri-LA Construction, L.P., Case No. CIVSB2329169 (San Bernardino Superior Court); and

* F. Roberts Construction Inc. v. Shangri-La Industries, LLC, Case No. 2023CUBC018021 (Ventura Superior Court).

The Included Actions generally concern “Shangri-La’s participation in California’s Project Homekey, a state program which offers public funds to developers building affordable housing” for homeless people.  (Petitioners’ Memorandum of Points and Authorities (“MP&A”), p. 1.)  There are seven Homekey properties at issue.  According to the complaints, the seven properties “have faced numerous financing and construction issues, leading the State Attorney General’s Office (‘AG’), multiple private lenders, and several contractors to file separate lawsuits seeking to adjudicate their property rights[.]”  (Ibid.)

The Chief Justice and Chair of the Judicial Council issued an order assigning this Court to sit as the coordination motion judge to determine whether the Included Actions are complex and, if so, whether coordination is appropriate.

DISCUSSION

I.          Continuance

The Court is inclined to continue the hearing.  The Court received courtesy copies of oppositions filed by PMF and Qualifax, Medalist, Fairview, and PPRF, King City, Arixa, BMO, Johnson, PDG, and Northstar.  It is unclear whether these comprise all of the oppositions that were filed.  No oppositions appear to have been filed under the JCCP number.  Four oppositions were filed in one of the Los Angeles cases (24STCV00629).  The Court is able to view them because they are posted on eCourt under the individual Los Angeles case number.  However, the Court is unable to determine whether oppositions were filed properly in the Monterey, San Bernardino Superior, and Ventura cases (assuming the Los Angeles case is representative, it is likely that many oppositions were filed under the Monterey, San Bernardino, and Ventura case numbers).  The Court needs to be sure that it sees all oppositions and replies before the petition can be decided.

The June 17^th hearing remains on calendar.  The Court expects all counsel to appear in person or via LA Court Connect.  Although a final decision on the petition will not be made at that time, the Court will hold a general discussion with counsel regarding the coordination issues.

As a matter of guidance, the Court offers the following initial analysis.

II.        Complex Determination

Only “complex” cases may be coordinated. (Edmon & Karnow, Cal. Practice Guide: Civ. Procedure Before Trial (The Rutter Group June 2023 Update) ¶ 12:374.5.)  A “complex” case requires “exceptional judicial management to avoid placing unnecessary burdens on the court or the litigants and to expedite the case, keep costs reasonable, and promote effective decision making by the court, the parties, and counsel.”  (Cal. Rules of Court, rule 3.400(a).) 

[T]he Court must consider, among other things, whether the action is likely to involve:

(1) Numerous pretrial motions raising difficult or novel legal issues that will be time-consuming to resolve;

(2) Management of a large number of witnesses or a substantial amount of documentary evidence;

(3) Management of a large number of separately represented parties;

(4) Coordination with related actions pending in one or more courts in other counties, states, or countries, or in a federal court; or

(5) Substantial postjudgment judicial supervision.

(Id. at rule 3.400(b).)

[A]n action is provisionally a complex case if it involves one or more of the following types of claims:

(1) Antitrust or trade regulation claims;

(2) Construction defect claims involving many parties or structures;

(3) Securities claims or investment losses involving many parties;

(4) Environmental or toxic tort claims involving many parties;

(5) Claims involving mass torts;

(6) Claims involving class actions; or

(7) Insurance coverage claims arising out of any of the claims[.]

(Id. at rule 3.400(c).)

The two Los Angeles cases have already been deemed complex.  They are pending in Judge Elihu Berle’s courtroom.

Petitioners contend the other cases qualify as complex because they “require ‘coordination with related actions pending in or more courts in other counties.’”  (Petitioners’ MP&A, p. 13.)  Petitioners claim the actions “need to be coordinated to prevent inconsistent” adjudications over the seven Homekey properties.  (Ibid.; see also, e.g., id. at pp. 1-2 [claiming “the AG is seeking to quiet title [on] each [of] the Shangri-La Homekey Properties and perfect a priority encumbrance requiring the Properties to conform with the Project Homekey regulations” whereas “private lenders who claim they have the priority interest in the properties have filed seven different lawsuits seeking to sell the properties in non-judicial foreclosures”], emphasis in original.)

The Court disagrees.  On their faces, the Monterey, San Bernardino, and Ventura cases are not complex.  They fall into two categories – routine, noncomplex lender suits for foreclosure and routine, noncomplex contractor suits to record mechanic’s liens.  (See id. at p. 2; see also PMF and Qualifax’s Opposition, pp. 4-6; Northstar’s Opposition, p. 4.)  There is nothing out of the ordinary about competing property interests of this sort being asserted in different cases, even in different counties, especially where each case involves just one piece of property instead of all seven.  Moreover, the AG is aware of the Monterey, San Bernardino, and Ventura cases and is more than capable of seeking to intervene – or to otherwise provide notice and assert the State’s interests – there without needing the Court to engage in fiction (treating noncomplex actions as complex ones) and without the need for coordination.  Bottom line, rule 3.400 is unsatisfied.

III.       Code of Civil Procedure Section 404.1

Section 404.1 states that a petition for coordination should be granted if doing so will “promote the ends of justice,” taking into account seven factors:

whether the common question of fact or law is predominating and significant to the litigation; the convenience of parties, witnesses and counsel; the relative development of the actions and the work product of counsel; the efficient utilization of judicial facilities and manpower; the calendar of the courts; the disadvantages of duplicative and inconsistent rulings, orders, or judgments; and the likelihood of settlement of the actions without further litigation should coordination be denied.

(Code Civ. Proc. § 404.1.)

A.        Predominating Common Questions

Petitioners assert that common questions predominate regarding property rights, remedies, causation, and Shangri-La’s and Cody Holmes’s responsibility for the alleged financing and construction delays.  (See Petitioners’ MP&A, pp. 8-10; see also Petitioners’ Reply, pp. 2-4, 6.)

The Court disagrees.  This factor favors denials.  As the following chart demonstrates, the cases involve different properties in different counties and different causes of action:

Furthermore, the cases involve different Plaintiffs, different loans and contracts, different property interests, and different Defendant combinations.  (See King City’s Opposition, p. 12; see also Arixa’s Opposition, p. 8; BMO’s Opposition, p. 4; Johnson’s Opposition, p. 3; PDG Opposition, pp. 3-4; Northstar Opposition, p. 3)  The overlap is minimal, so individual issues predominate.

Notably, one case has already been dismissed, and five of the properties have already been sold.  As a result, four more cases are expected to be dismissed soon.  (See Medalist, Fairview, and PPRF’s Opposition, pp. 3-4.)  This adds to the conclusion that individual issues predominate, and it reduces the alleged risk of inconsistent rulings.[5]   

B.        Convenience of the Parties, Witnesses, and Counsel

This factor favors denial.  Deciding common issues in one forum typically conveniences the parties, witnesses, and counsel, but the current situation is different.  The overlap is minimal at best, the properties differ, the Plaintiffs differ, the loans and contracts differ, and the property interests differ.  While it may be convenient for Shangri-La’s counsel to have all cases heard in one courtroom, the same cannot be said for the Plaintiffs, their counsel, and the witnesses.  For the most party, they are only connected to one property in Monterey or one property in San Bernardino or one property in Ventura.  It would be inconvenient for them to have to litigate somewhere else in the state, potentially hundreds of miles away from where their properties and evidence are located.  (See Arixa’s Opposition, p. 9; see also King City’s Opposition, pp. 12-13; Medalist, Fairview, and PPRF’s Opposition, pp. 4-5; Johnson’s Opposition, pp. 3-4; Northstar Opposition, pp. 3-4.)[6]

C.        Development of the Cases and the Work Product of Counsel

Petitioners state:

None of the cases . . . are in advanced stages of litigation.  Most cases do not have a responsive pleading.  Substantial discovery has not taken place in any matter.  [Citation.]  There have been no dispositive motions filed or heard in any action.  Given the stage of each litigation, coordination will permit discovery . . . to go forward on a cooperative basis, and will benefit the courts, all parties, and counsel.

(Petitioners’ MP&A, p. 11; see also Petitioners’ Reply, pp. 4-6.)

This factor favors denial.  The cases are not at the same stage.  Receivers have been appointed and foreclosure sales have taken place in many cases.  (See BMO’s Opposition, p. 5; see also King City’s Opposition, p. 13; Arixa’s Opposition, p. 8.)  Indeed, to repeat, at least five properties have been sold so far, and it is expected that four more cases will be dismissed soon.  (See Medalist, Fairview, and PPRF’s Opposition, pp. 3-4.)  Under these circumstances, it is doubtful that coordinating discovery and motion practice would provide the usual benefits and efficiencies.

D.        Efficient Use of Judicial Resources and Manpower

This factor favors denial.  For the reasons stated in sections II.A. and II.B, the threat of separate courts duplicating case efforts on the same issues and claims is low.  (See also King City’s Opposition, pp. 13-14; Medalist, Fairview, and PPRF’s Opposition, pp. 4-5; Northstar’s Opposition, p. 4.)

E.        Calendars of the Courts

This factor is neutral.  Petitioners’ brief fails to address the individual court calendars.  (See PMF and Qualifax’s Opposition, p. 10.) 

F.         Duplicative and Inconsistent Rulings

This factor favors denial. The analysis is the same as sections II.A., II.B., and II.D.  (See ibid.; see also King City’s Opposition, p. 14; Arixa’s Opposition, p. 10; Johnson’s Opposition, p. 4; Northstar’s Opposition, p. 4.)

G.        Likelihood of Settlement in the Absence of Coordination

Petitioners contend:

Coordination will likely promote settlement . . . because it will put all the players in one forum.  As it stands now, all interested parties are scattered across 15 different litigations, making it nearly impossible to come to a global resolution.  Coordination will better facilitate global and structured settlement discussions.  Coordination will also allow the public’s interests, which involves the completion of these projects into affordable housing structures, to have a prominent and global role in the litigation and any settlement discussions.

(Petitioners’ MP&A, p. 12.)

This factor is neutral or favors denial.  The inquiry is whether settlement is anticipated “without further litigation should coordination be denied.” (Code Civ. Proc. § 404.1.)  Once again, multiple properties have already been sold, and multiple cases will soon be dismissed.  These actions are happening without coordination.  (See, e.g., Northstar Opposition, pp. 4-5.)  Considering the predominating individual issues and minimal overlap, the Court believes coordination would have either no impact or a negative impact on settlement.

H.        Summary

On balance, the coordination factors support denial.  The petition for coordination fails.

IV.       Site for the Coordinated Proceedings

Rule of Court 3.530(b) sets forth the factors that the coordination motion judge may consider in making a recommendation for the site of the coordination proceedings. The factors include: the number of included actions in particular locations; whether the litigation is at an advanced stage in a particular court; the efficient use of court facilities and judicial resources; the locations of witnesses and evidence; the convenience of the parties and witnesses; the parties' principal places of business; the office locations of counsel for the parties; and the ease of travel to and availability of accommodations in particular locations.  (Cal. Rules of Court, rule 3.530(b).) 

Petitioners request the Los Angeles Superior Court.

In light of the preceding analysis, this issue is moot.

If the Court were inclined to grant coordination, the Court probably would pick Monterey or San Bernardino, the locus of most of the properties.  Monterey is better than Los Angeles because the first-filed case is pending there, it is tied for the most total active cases, and the AG is willing to go there.  (See AG’s Response, p. 1.)  San Bernardino is better than Los Angeles because it is tied for the most total active cases, and it will have the most total active cases as soon as the four soon-to-be-dismissed cases get dismissed.

V.        Stay Request

Petitioners do not request a stay.