Judge: David Sotelo, Case: 20STCV24454, Date: 2022-10-03 Tentative Ruling
Case Number: 20STCV24454 Hearing Date: October 3, 2022 Dept: 40
MOVING PARTY: Plaintiffs
Plaintiffs allege
five causes of action: (1) tortious breach of the warranty of habitability; (2)
negligence; (3) nuisance; (4) violation of Los Angeles Rent Stabilization
Ordinance; and (5) violation of Civil Code § 789.3 (disrupting utilities with
the intent to evict), and now bring this Motion for an Order to Permit the Discovery of Profits and Financial Condition
of US Bank for the purposes of determining punitive damages.
After review, the Court DENIES the Motion
because Plaintiffs have not shown a substantial probability they will prevail
on their claims for punitive damages.
Plaintiffs reside in a building located at 1421-1425 ½
Courtland Ave., Los Angeles, California (the “Property”). The Property used to
be owned by Defendant Miguel Castaneda. However, Mr. Castaneda lost the
property in foreclosure on or about May 2019. Since that time, Responding
Defendant U.S. Bank—as trustee for trusts composed of mortgage-backed
securities—has been the owner in trust and landlord by operation of law. (FAC,
¶ 4.)
Defendants failed to maintain the habitability of the
Property. The Property contains a host of problems, including but not limited
to, failed plumbing and electrical systems, a rat and cockroach infestation, a
lack of functioning heating, no smoke or carbon monoxide detectors, and mold.
As landlord, U.S. Bank neglected the Property as part of a conscious strategy
to drive Plaintiffs from their homes. Due to rent control laws, vacant
properties are more valuable than properties with existing tenants. (FAC, ¶¶
5-6.)
The condition of the Property has seriously affected
Plaintiffs’ physical and mental health. Among other problems, Plaintiffs have
suffered from insect bites, allergies, asthma, sleep problems, and other health
problems directly related to the conditions in their homes. Plaintiffs have
also suffered from anxiety, depression, fear, and anger. Plaintiffs now seek
compensation for these injuries from U.S. Bank including punitive damages.
(FAC, ¶ 8; Prayer for Relief.)
Defendant’s
Objections
Declaration of Eric Post: OVERRULED
Plaintiffs
Objections
Declaration of Timothy Schneider.
Nos. 1-10, 12-22: OVERRULED
No. 11: SUSTAINED
Nos. 23-29: SUSTAINED
Plaintiffs seek a court order permitting them to discover
the profits and financial condition of
US Bank for the purposes of determining punitive damages.
Legal
Standard: “The
court may, for good cause, grant any defendant a protective order requiring the
plaintiff to produce evidence of a prima facie case of liability for damages
pursuant to Section 3294, prior to the introduction of evidence of: (1) The
profits the defendant has gained by virtue of the wrongful course of conduct of
the nature and type shown by the evidence. (2) The financial condition of the
defendant.” (Civ. Code § 3295(a).)
“No
pretrial discovery by the plaintiff shall be permitted with respect to the
evidence referred to in paragraphs (1) and (2) of subdivision (a) unless the
court enters an order permitting such discovery pursuant to this subdivision.
However, the plaintiff may subpoena documents or witnesses to be available at
the trial for the purpose of establishing the profits or financial condition
referred to in subdivision (a), and the defendant may be required to identify
documents in the defendant’s possession which are relevant and admissible for
that purpose and the witnesses employed by or related to the defendant who
would be most competent to testify to those facts. Upon motion by the plaintiff
supported by appropriate affidavits and after a hearing, if the court deems a
hearing to be necessary, the court may at any time enter an order permitting
the discovery otherwise prohibited by this subdivision if the court finds, on
the basis of the supporting and opposing affidavits presented, that the
plaintiff has established that there is a substantial probability that the
plaintiff will prevail on the claim pursuant to Section 3294. Such order shall
not be considered to be a determination on the merits of the claim or any
defense thereto and shall not be given in evidence or referred to at the trial.”
(Civ. Code § 3295(c).)
“[B]efore
a court may enter an order permitting discovery of a defendant's financial
condition, it must (1) weigh the evidence submitted in favor of and in
opposition to motion for discovery, and (2) make a finding that it is very
likely the plaintiff will prevail on his claim for punitive damages.” (Jabro
v. Superior Court (2002) 95 Cal.App.4th 754, 758.)
To prevail on a claim for punitive damages, plaintiff must
prove “by clear and convincing evidence that the defendant has been guilty of
oppression, fraud, or malice.” (Civ. Code § 3294 (a).)
Analysis: Plaintiffs seek to discover the
profits and financial condition of Responding Defendant US Bank. Therefore,
Plaintiffs must show that they are likely to prevail on a claim for punitive
damages, not against Defendants in general, but against US Bank in particular.
In other words, Plaintiffs must show that they are very likely to prove
Responding Defendant is liable for tortious breach of the warranty of
habitability, nuisance, or violation of Civil Code § 789.3 and that they are
very likely to prove by clear and convincing evidence that Responding Defendant
acted with oppression, fraud, or malice. (See Civ. Code § 3294 (a); Jabro, supra, 95 Cal.App.4th at 758.)
Liability: Both sides acknowledge that
Plaintiffs bring three causes of action which allow for the recovery of
punitive damages: (1) tortious breach of the warranty of habitability; (2)
nuisance; and (3) violation of Civil Code § 789.3.
The Court
need not go through each cause of action brought by Plaintiffs. At this stage
in the proceedings, there are significant questions regarding the nature of the
landlord-tenant relationship between Plaintiffs and Responding Defendant. For
example, a few of the Plaintiffs admit to never paying rent to US Bank.
(Schneider Dec. Exhibit 1, 22:5-13; Exhibit 2, 38:8-13; Exhibit 3, 24:7-9; 27,
Exhibit 4, 19:11-16.). Likewise, some of the Plaintiffs admit to moving out of
the Property shortly after US Bank assumed title as trustee in 2019. (E.g., Schneider
Dec. Exhibit 1, 11:0-12:5; Exhibit 5, 13:21-24.) As a threshold matter, this
alone is enough to doubt whether Plaintiffs are very likely to prevail on their
claims against Responding Defendant.
Plaintiffs
argue that Responding Defendant is attempting to avoid liability by pointing to
a lack of written leases between Plaintiffs and Responding Defendant. The Court
acknowledges Plaintiffs may be able to prevail at trial without offering
written leases as evidence. But the inquiry here is not whether Plaintiffs can
possibly prove their claims against any Defendant—its whether Plaintiffs are
very likely to prove their claims against the Responding Defendant US Bank. The
Court is unable to make such a finding given the current questions regarding
which Plaintiffs were actually paying rent and/or living on the Property when
it was held in trust by Responding Defendant.
Oppression,
Fraud, or Malice: For
the Court to grant this motion, Plaintiffs must also show they are very likely
to prove Responding Defendant acted with oppression, fraud, or malice.
Plaintiffs
argue Responding Defendant neglected the Property as part of a conscious
strategy to drive Plaintiffs from their homes since vacant properties are more
valuable than properties with existing tenants. Put simply, Plaintiffs accuse
Responding Defendants of putting profits before the rights of poor tenants. Plaintiffs
offer many notices from the Los Angeles Housing Department and local public
utility companies indicating Responding Defendant knew or should have known
about the deteriorated state of the Property. (Post Decl., Exhibits B-H.) However,
Responding Defendants offer evidence indicating they were attempting to rehabilitate
the Property. (Schneider Decl. ¶¶ 2-22 [only statements surviving Plaintiffs’
sustained objections considered].) Whether Responding Defendant’s efforts were
sufficient is a question for the jury. For the purposes of the instant Motion, Plaintiffs
fail to offer concrete evidence backing their contentions that Responding
Defendant intended to constructively evict Plaintiffs by allowing
substandard living conditions to persist.
Plaintiffs
argue that Defendant was found liable for similar conduct in other cases, therefore
knowingly disregarded Plaintiffs’ rights here, and therefore should be punished
for its repeated disregard of tenant’s rights. Responding Defendants counter
that any prior settlement agreements or litigation involved separate entities
from US Bank as the Trustee for the C-Bass Mortgage Loan Asset-Backed
Certificates, Series 2007-CB1. Notwithstanding Responding Defendant’s ability
to deflect liability between its various legal entities, the Court does not
have the statutory or common law authority to impose punitive damages based on
determinations of liability in other trial courts.
Plaintiffs fail to show they are very likely to prove
liability and that Responding Defendant acted with oppression, fraud, or malice
by clear and convincing evidence. (See Civ. Code § 3295(c); Jabro, supra, 95 Cal.App.4th at 758.)
If Plaintiffs prevail on their punitive damages claim at
trial, the Court will order US Bank to provide evidence of the mortgage-backed
securitized trust’s financial condition at that time so that Plaintiffs can
proceed with the punitive damages phase. And pursuant to Civil Code § 3295(c), the Court
reserves the right to issue an order permitting discovery of US Bank’s profits
and financial condition before trial should Plaintiffs show they are very
likely to prevail on their punitive damages claims. However, at this stage of
the proceedings, Plaintiffs have not offered enough evidence
demonstrating why they need evidence of US Bank’s financial condition before a determination
of liability and malice, oppression, or fraud is made by the jury.
Plaintiffs’ Motion for a court order permitting discovery of
the profits and financial condition of Responding Defendant US Bank as Trustee
is DENIED.
The Motion for Order to
Permit the Discovery of Profits and Financial Condition is DENIED.
Moving Party is ordered to give notice.