Judge: Jon R. Takasugi, Case: BC604859, Date: 2023-03-01 Tentative Ruling

Case Number: BC604859    Hearing Date: March 1, 2023    Dept: 17

Superior Court of California

 

County of Los Angeles

 

DEPARTMENT 17

 

 

TOWER HOTELS FUND, et al.

                          

         vs.

 

KAUAI LAGOONS GRAND AVENUE PARTNERS, LLC, et al.

 

 Case No.: BC604859

 

 

 

 Hearing Date:  March 1, 2023

 

Defendants’ motion for a judgment notwithstanding the verdict is DENIED.

 

Defendants’ motion for a new trial is DENIED. 

 

On 12/22/15, Plaintiff Tower Hotels Fund 2014, LLC, on behalf of Tower Kauai Lagoons, LLC brought suit against Defendants Kauai Lagoons Grand Ave Partners, LLC; Timbers Resort Management, LLC; and Tower Kauai Lagoons, LLC. On 8/19/16, Plaintiff filed an FAC, alleging: (1) breach of contract; (2) breach of fiduciary duty; (3) intentional misrepresentation; (4) negligent misrepresentation; (5) accounting; and (6) declaratory relief.

 

            Now, Plaintiff moves for a new trial. Plaintiff also moves for a judgment notwithstanding the verdict.

 

Legal Standard

 

A verdict may be vacated and any other decision may be modified or vacated, in whole or in part, and a new or further trial granted on all or part of the issues on the application of the party aggrieved, for any of the following causes, materially affecting the substantial rights of such party:¿ 

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(1)¿Irregularity in the proceedings of the court, jury¿or adverse party, or any order of the court or abuse of discretion by which either party was prevented from having a fair trial;¿ 

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(2)¿Misconduct of the jury;¿and whenever any one or more of the jurors have been induced to assent to any general or special verdict, or to a finding on any question submitted to them by the court, by are sort to the determination of chance, such misconduct may be proved by the affidavit of any one of the jurors;¿ 

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(3) Accident or surprise, which ordinary prudence could not have guarded against;¿ 

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(4) Newly discovered evidence, material for the party making the application, which he could not, with reasonable diligence, have discovered and produced at the trial;¿ 

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(5) Excessive or inadequate damages;¿ 

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(6) Insufficiency of the evidence to justify the verdict or other decision, or the verdict or other decision is against law;¿ 

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(7) Error in¿law, occurring at the trial and¿excepted to by the party making the application.¿ 

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(See CCP § 657.)¿ 

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When ruling on an application for a new trial, the court sits as an independent trier of fact.¿(Lane v. Hughes Aircraft Co. (2000) 22 Cal.4th¿405, 412.)¿The court, therefore, has broad discretion to order new trials, limited only by the obligation to state its reasons for granting a new trial and the existence of substantial evidence in the record to support those reasons.¿(Id.)¿¿In assessing¿the need for a new trial,¿the court must rely on its¿view of the overall record,¿taking into account such factors, among others, as the nature and seriousness of the¿alleged¿misconduct, the general¿atmosphere, including the judge’s control, of the trial, the likelihood of prejudicing the jury, and the efficacy of objection or admonition under all the circumstances.¿(Dominguez v. Pantalone¿(1989) 212 Cal.App.3d¿201, 211.)¿ 

 

Discussion: Motion for New Trial

 

            Plaintiff argues that it is entitled to a new trial because: (1) there was insufficient evidence to justify the jury’s single-question verdict; (2) the jury verdict is against the law; (3) Defendants’ counsel engaged in prejudicial misconduct; and (4) there were irregularities and abuses of discretion in the course of trial by this Court which prejudiced Plaintiff.

 

            The Court addresses each contention in turn.

 

            As for the first contention, Plaintiff argues that the verdict cannot be supported by the evidence because the jury answered “No” to the question “1. Did plaintiff Tower Hotels Fund 2014, LLC (“Tower Hotels Fund”) do all, or substantially all, of the significant things that the contract required it to do?” Plaintiff argues that this answer is unsupported by evidence because all that was required of Plaintiff under the Operating Agreement was to provide $7 million in the form of the Initial Capital Contribution, and Plaintiff presented substantial evidence to prove that Plaintiff fully complied with its contractual obligation to pay $7 million dollars. As such, Plaintiff argues that the jury could not have reached this answer with the evidence presented.

 

            However, as noted by Defendants in opposition, substantial evidence was presented that Plaintiff was a joint venture partner, not just a passive investor, and had numerous obligations under the Operating Agreement which it failed to perform.

 

            For example, evidence was presented by Plaintiff itself that it was entitled to a say on the development plan for the project, and had the right to approve every Timbers agreement and all fees paid to Timbers under 7.04 of the agreement. The jury could have concluded from this evidence that Plaintiff was a joint venture partner, not just a passive investor.

 

            Evidence was also presented as to the meaning and purpose of section 2.05 and section 14.01 of the Operating Agreement.

 

Section 2.05 set forth the Purpose of the joint venture and provides in relevant part:

 

(a)   The purpose of the Company shall be, either by itself or through one or more Property Companies:

 

(iii) To acquire, own, entitle, develop, manage, operate, lease, improve, finance, refinance, market, sell, and otherwise deal with and dispose of Company Property [defined to include the real property on Kauai]

 

14.01 FURTHER ASSURANCES

 

Each Member agrees to execute, acknowledge, deliver, file, record and publish instruments and documents, and do all such other acts and things as may be required by law, or as may be required to carry out the intent and purposes of this Agreement.

 

            Testimony was presented at trial that, based on these provisions, the purpose of the agreement was “to form a partnership that’s going to buy the property, that’s going to develop the property, that’s going to plan and figure out the best use of the property, that’s going to ultimately build and construct something on the property, that’s going to operate the property, it’s going to market and sell the property and ultimately, hopefully sell at the end, have nothing left and then terminate the agreement.” (Tr. 9/30/22, 27:15-28: 22.)  Under the Further Assurances clause, Plaintiff had an obligation to execute the agreements necessary to fulfill the purpose of the joint venture. (Tr. 9/30/22, 52:9-53:13.) Testimony was presented that Plaintiff’s conduct breached the purposes clause:

 

Q: Okay. And the Purpose clause basically focuses on buying, owning, managing, leasing, building, financing, refinancing, and selling real estate; right?

 

A: Yes.

 

Q: And if somebody could take the position nine months in after you’ve spent $100 million on what you think is the most profitable de-risk approach, and say, hey, after nine months of everything being hunky-dory, I found this one sentence and I think I can stop all activity and prevent you from building a single thing no matter what you’re [sic] entitlements are, does that make any sense to you at all?

 

A: No.

 

(Tr. 9/30/22, 121:16-28.)

 

Defendants also submitted evidence that Plaintiff was obligated to approve any agreement with Timbers that was on market terms and conditions, that the agreements met this criteria, and thus should have been approved by Plaintiff. (See Tr. 9/29/22, 140:21-144:11; 147:1-150:5; 09/27/22, 165:19- 166:4; Tr. 9/27/22, 134:9-23; 162:21-163:13; Exh. 258.) Defendants submitted substantial evidence that Plaintiff withheld approval as part of a strategy to force Oaktree into a buyout. (See Opp. to JNOV motion, 12: 7- 14: 28)

 

In its motion, Plaintiff contends that Defendants are improperly conflating Plaintiff with the actions of TDI, Miller, and Bushor. However, as noted by Defendants in opposition:

 

TDF is a signatory to the Operating Agreement and was required to live up its obligations thereunder. TDF was the express author of the November 5, 2015 Memorandum that demanded a buy-out and told Oaktree THF would approve no contracts with or payments to Timbers, and appointed Schreiber as the contact person for THF. Exh. 203. THF’s November 20, 2015 buy-out demand was sent by THF and said Forman was “authorized to negotiate on behalf of THF 2014”. Exh. 209. The December 1, 2015 Notice of Default was sent by THF. Exh. 215. All of Bushor’s refusals to agree to Timbers contracts or payments were on behalf of both Members. Exhs. 352, 271, 265. Bushor testified that he was required to approve the Timbers contracts on behalf of THF. Tr. 09/27/22, 105:11-106:17.

 

            (Opp., 19: 1-9.)

 

In its motion, Plaintiff also contends that the jury could not properly consider whether or not it breached any obligations because GAP dismissed its cross-complaint before trial and thus there was no operative breach of contract cause of action against it. However, this ignores the fact that the question was presented in the verdict form proposed by Plaintiff itself, and that a required element of proving a breach of contract is proof of performance by the enforcing party. (See CACI Instruction.)

 

Taken together, there was substantial evidence presented that Plaintiff breached obligations under the Operating Agreement.

 

As for the second contention, Plaintiff argues that the jury’s verdict is “against the law” because the record is entirely devoid of evidence to support the verdict rendered.  However, as set forth above, substantial evidence was presented from which the jury could have concluded that Plaintiff did not fulfill its obligations under the Operating Agreement.

 

As for the third contention, Plaintiff argues that Defendants’ counsel prevented Plaintiff from having a fair trial and irreparably prejudiced the jury by: (1) saying during closing that “a yes verdict, that there’s a breach, is the cost of the jobs to hundreds of people” which would ultimately “bankrupt” the company and all because Plaintiff was merely pursuing litigation to “extort” Defendants; (2) in making these allegations, Defense Counsel introduced alleged “facts” that were not in evidence, not remotely justified by the record, and unequivocally inadmissible; and (3) Defense Counsel continually and purposefully misled the jury as to the identity of Plaintiff, Tower Hotels Fund, a passive investment fund, variously conflating Plaintiff with (i) a separate and distinct non-party entity, Tower Development Inc. (“TDI”), (ii) non-parties Ed Bushor and Stuart Miller, who were TDI officers, and (iii) non-party individuals who invested in Plaintiff in an effort to mislead and confuse the jury as to the true and only Plaintiff that was pursuing a breach of contract claim in this case.

 

In support, Plaintiff cites cases including Jackson v. Park (2021) 66 Cal.App.5th 1196, Russell v. Dopp (1995) 36 Cal. App 4th 765, 779, Velasquez v. Centrome, Inc. (2015) 233 Cal. App. 4th 1191, 1214.

 

In opposition, Defendants argue that the first point was “entirely appropriate” because it was a legitimate inference and emphasized the point that under Plaintiff’s reading of the agreement, “it could stop the entire project with over a hundred million already invested, an obvious financial disaster for everyone involved.” (Opp., 15: 2-7.) As such, the risks outlined by counsel were meant to demonstrate to the jury how unreasonable Plaintiff’s interpretation of the Operating Agreement was. In any event, there is no evidence to suggest that this assertion so prejudiced the jury that a different result would have otherwise been reached.

 

As to the second point, Defendants argue that its contention that Plaintiff had breached its implied covenant of good faith was not improper because, due to the verdict form which specifically asked if Plaintiff had proved it did “all, or substantially all, of the significant things that the contract required it to do,” Plaintiff’s breach was relevant regardless of the cross-complaint.

 

Finally, as to the third point, Defendants note that “[n]umerous times in the trial the jury was told about the different roles the Tower entities played in the project. See e.g., Tr. 09/26/22, 82:7- 84:3 (cross examination of Smith). THF’s counsel presented a chart in his Opening Statement distinguishing between the Tower entities. (Tr. 09/15/22, 23:5-26:8)” (Opp., 15: 21-24.) As such, there is no evidence to show that Plaintiffs intentionally misled the jury as to the differing roles of the Tower entities.

 

The Court agrees with Defendants.

 

A motion for new trial due to misconduct by an opposing counsel can only be granted “if it is reasonably probable that the party moving for a new trial would have obtained a more favorable result absent the misconduct.” (Rayii v. Gatica (2013) 218 Cal. App. 4th 1402, 1411.) This “reasonable probability” requires more than a mere “abstract possibility” of a better result. (See Cassim v. Allstate Ins. Co. (2004) 33 Cal. 4th 780, 800.) Misconduct that constitutes a fractional part of the entire trial will not warrant the granting of a new trial motion. (Ibid.) Further, in arguing his or her client’s case, counsel is granted “wide latitude to discuss the merits…both as to the law and facts, and is entitled to argue his or her case vigorously and to argue all reasonable inferences from the evidence.” (Nishihama v. City & County of San Francisco (2001) 93 Cal. App. 298, 306.)

 

Here, there is no basis to conclude that the jury was intentionally misled as to the differing roles played by the Tower entities, misled as to Plaintiff’s performance under the Operating Agreement, or prejudicially inflamed. Moreover, as noted by Defendants, the cases cited by Plaintiff materially differ from the facts here. For example, In Jackson, supra, 66 Cal. App. 5th at p. 1196 the defense lawyer 1) asked the court to exclude evidence of his client’s blood alcohol level and then told the jury the court found no alcohol was involved, and 2) repeatedly referred to evidence the court told him to not reference, ignored multiple instructions by the court to stop, and argued the issue with the court in the jury’s presence in a deliberate effort to highlight the evidence. (Id. at p. 1214-1216.)

 

Finally, as for the fourth contention, Plaintiff argues a number of irregularities occurred throughout the trial including: (1) a refusal by the Court to order the jury back to “deliberate and answer the remaining verdict questions…”; (2) a refusal by the Court to instruct the jury as to the meaning of section 7.04; (3) a ruling by the Court to allow the parties to reference Waldorf while refusing live testimony or introduction of documents relating to Waldorf; and (4) an inconsistent application of motions in limine throughout the trial.

 

However, as for the first contention, Plaintiff does not identify any authority by which the Court may order the jury that has reached a verdict to return to the jury room to redeliberate.

 

As to the contention that the Court refused to instruct the jury based on language from its summary judgment ruling, “the function of a trial court in ruling on a motion for summary judgment is merely to determine whether [triable] issues of fact exist, and not to decide the merits of the issues themselves.” (Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1107.) At the summary judgment stage, the court was required to draw all factual inferences in Towers favor, as the non-moving party. That ruling cannot be binding at a trial where factual disputes are to be determined.

 

As for the third and fourth contentions, the trial court “is expressly enjoined [by the California Constitution] …from granting a new trial for error of law unless such error is prejudicial.” (Bristow v. Ferguson (1981) 121 Cal. 3d 823, 826.) Here, Plaintiff’s motion is not accompanied by any argument of actual prejudice, rather, as put by Defendants, “[Plaintiff] offers a wholesale, undifferentiated complaint about the in limine motions it lost, accusing the Court of “prejudging” the case.” (Motion, 17:28-18:1.)

 

The only excluded evidence Plaintiff actually identifies concerns Bushor’s efforts to enter into an agreement with the Waldorf hotel brand for a hotel on the project. As the Court noted on the record, its original in limine ruling on this topic was disregarded by both sides (Tr. 09/27/22, 112: 20-113:8) and there was extensive testimony elicited by both sides on the feasibility of a Waldorf hotel on the site, the feasibility study that was done, what negotiations or agreements Bushor had or didn’t have with Waldorf. (See e.g. Tr. 09/29/22, 106:19-116:1; 104:14-23; 26:13-27:5; 30:5-26. All these issues were argued in Closing by both sides. See e.g., THF Closing (Tr. 10/03/22, 105:17- 107:10; 10/04/22, 44:6-45:8); GAP Closing (Tr. 10/03/22, 127:10-23; 132:7-11; 158:7-160:2.)

 

Thus, as articulated by Defendants, “But despite sweeping statements about the supposed exclusion of “critical documentary evidence and witness testimony”, [Plaintiff’s] complaint boils down to its argument about the exclusion of evidence relating to the dismissed fraud claim and unidentified evidence relating to a possible deal with the Waldorf Astoria hotel brand. The former was properly excluded, and both sides offered plenty of both testimony and documents about the Waldorf opportunity removing any possibility of prejudice to [Plaintiff], let alone prejudice rising to the level of a miscarriage of justice.” (Opp., 8: 1-7.)

 

Based on the foregoing, Plaintiff’s motion for new trial is denied.

 

Discussion: JNOV

 

Plaintiff argues that JNOV is required because the jury reached a single-question verdict without substantial evidence and/or inconsistent with the evidence at trial.

 

The trial court’s discretion in granting a motion for judgment notwithstanding the verdict is severely limited.” (ENA North Beach, Inc. v. 524 Union Street (2019) 43 Cal.App.5th 195, 210.) “If there is any substantial evidence, or reasonable inferences to be drawn therefrom, in support of the verdict, the motion should be denied.” (King v. State of California (2015) 242 Cal.App.4th 265, 287 (quotation omitted).) “[T]he standard of review is whether any substantial evidence contradicted or uncontradicted-supports the jury's conclusion.” (Sweatman v. Dept. of Veterans Affairs (2001) 25 Cal.4th 62, 68.)

 

            As set forth above, the Court concluded that there was substantial evidence to support the jury’s verdict.

 

            Based on the foregoing, Defendants’ motion for a judgment notwithstanding the verdict is denied.

 

 

It is so ordered.

 

Dated:  March    , 2023

                                                                                                                                                          

   Hon. Jon R. Takasugi
   Judge of the Superior Court

 

 

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org.  If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative.  If all parties to a motion submit, the court will adopt this tentative as the final order.  If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar. 

 

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