Judge: Douglas W. Stern, Case: 23STCV10421, Date: 2023-07-20 Tentative Ruling

Case Number: 23STCV10421    Hearing Date: October 26, 2023    Dept: 68

Motion to Bifurcate Trial and Limit Discovery

Kelly Soojin Kim vs. Jason Bin Lee, 23STCV10421

Moving Party: Plaintiff Kelly Soojin Kim

Background

Plaintiff Kelly Soojin Kim (Plaintiff or Kim) filed this motion to bifurcate and limit discovery pursuant to CCP §§ 128, 598, 1048(b), and 2019.020.

This lawsuit was initiated on May 9, 2023 by Plaintiff Kim.  The dispute arises out of a business relationship to own and operate a restaurant between Plaintiff Kim and Defendant Jason Bin Lee (Defendant or Lee).  Both parties were involved in the restaurant business.  In March 2021 they entered into a written agreement which serves as the main focus of their disputes.  The Agreement provides that Plaintiff would own 51% of the shares of the restaurant corporation, B&K Enterprise, Inc. (B&K), while Defendant would own 49% of the shares of the corporation.  Plaintiff has filed the Complaint alleging causes of action for breach of contract, breach of fiduciary duty, fraud, unfair competition, rescission of a written instrument based upon fraud, declaratory relief and injunctive relief.  All claims relate to that March 2021 Agreement.  Plaintiff contends that Defendant was to provide certain consideration in order to obtain his 49% of the shares of the corporation.  Plaintiff contends that Defendant did not provide the consideration, and never became a shareholder.

Defendant Lee filed a Cross-Complaint alleging causes of action for involuntary dissolution of corporation, accounting, breach of fiduciary duty, breach of contract, breach of implied covenant of good faith and fair dealing, constructive wrongful discharge, unjust enrichment and theft by false pretense.  Many of Defendant’s claims are dependent upon his status as an alleged shareholder in the corporation.

Plaintiff filed this motion on the grounds that bifurcation of trial and limiting discovery to the issue of whether Defendant Lee has an ownership interest in Cross-Defendant B&K is in the interest of economy and efficiency because it is a threshold issue.  Plaintiff argues that numerous claims would become moot and irrelevant if it is determined that Defendant does not have an ownership interest in B&K.  Further, Plaintiff claims that once the question of the status of Defendant as a shareholder is resolved, the case may be substantially resolved thereafter as Plaintiff would seek to invoke Plaintiff’s right to acquire the shares of Defendant under Corporations Code if Defendant is found to be a shareholder.  Plaintiff claims that if Lee is not a shareholder, then Defendant has no right to seek to dissolve B&K or obtain an accounting.  Plaintiff also asserts that once the issue of shareholder status is resolved, it may be possible to resolve the other issues, even if they do not hinge on Defendant’s status as a shareholder.

Defendant claims in his opposition that he is a shareholder because of the Agreement that was executed between the parties that provided for him to become a 49% shareholder in B&K.  Next, Defendant argues that the shareholder issue is only an element of several of the causes of action and is not its own special issue or defense.  Finally, Defendant argues that bifurcation would delay the proceedings and prejudice Defendant.

Plaintiff repeats his arguments in his reply.

Analysis

Bifurcation of proceedings into phases based on separate, distinct issues is a tool often used by trial courts to streamline litigation.  (See, e.g., Du Jardin v. City of Oxnard (1995) 38 Cal.App.4th 174; Ford v. Miller Meat Co. (1994) 28 Cal.App.4th 1196, 1199.)  Pursuant to CCP § 1048(b), the Court may bifurcate issues or claims “in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy.”  Under CCP § 598, a party may move the Court to order trial of any issue before trial of any other “when the convenience of witnesses, the ends of justice, or the economy and efficiency of handling the litigation would be promoted thereby.”  The Court also retains inherent powers to control, order, and regulate the proceedings before it. (Cottle v. Super. Ct. (1992) 3 Cal.App.4th 1367, 1377-78.)

A trial court has express authority to bifurcate issues where, as is the case here, subsequent issues are dependent upon a first issue which, when resolved, will obviate or lessen the need for subsequent litigation because to do so prevents inefficiency from having both issues tried at the same time.  (Regents of Univ. of California v. Sheily (2004) 122 Cal.App.4th 824, 833.)  When deciding whether to bifurcate, courts will consider the complexity of the issues, the risk of jury confusion, judicial economy, and whether the claims present separate and independent issues.  (Downey S&L v. Ohio Cos. Ins. (1987) 189 Cal.App.3d 1072, 1086.)

The Court agrees with Plaintiff that it is appropriate and beneficial to bifurcate the trial of this matter and first resolve the question of the shareholder status of Defendant Lee.  Doing so shall impact the validity of many of the claims asserted by Defendant that are dependent upon his status as a shareholder.  As Plaintiff notes, a determination that Defendant Lee is not a shareholder of B&K will impact his ability to assert claims that are dependent upon Lee having shareholder status.  Importantly, a determination that Defendant Lee is a shareholder will allow Plaintiff to invoke Plaintiff’s claimed rights under the Corporations Code to require the shares held by Defendant and preclude an involuntary dissolution of the corporation.  Additionally, the court perceives that the resolution of this important issue may lead to the settlement of other (or all) claims asserted in this lawsuit.

Conducting a bifurcated trial to determine the shareholder status of Defendant can be scheduled on a rather expedited basis, thereby assisting the parties in reaching resolution sooner, rather than later.

With respect to request to limit discovery, the Court recognizes that in order to determine the shareholder status of Defendant Lee, it is necessary to conduct discovery surrounding the conduct leading to the Agreement, the terms of the Agreement, and the performance of the Agreement.  This discovery also implicates facts that are relevant to the other claims.  There does appear to be significant overlap on the evidence that would be relevant under the various claims.  The Court does not see that there is any meaningful way to limit the discovery given the significant overlap between the facts that may be germane to the shareholder status of Lee and the other claims.  Therefore the Court shall not limit discovery to the issue of shareholder status as it would simply lead to unnecessary discovery disputes.  Indeed, it is probably that such a limitation might actually delay the matter and lead to extensive discovery disputes regarding the scope of such a limitation.  The Court desires to reduce discovery disputes, not multiply them.

Order

Plaintiff’s motion for bifurcation is GRANTED.

The Court shall schedule a trial in the near term for trial of the issue of whether Defendant Lee is a shareholder in B&K.