Judge: Joseph Lipner, Case: 23STCV18279, Date: 2023-12-21 Tentative Ruling

Case Number: 23STCV18279    Hearing Date: February 22, 2024    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Defendant Miller Miller Gerber LLP (“MMG”) moves for an order granting interpleader of funds, dismissing it from this case, and discharging it of all liability.

The Court CONTINUES this motion and orders Jupiter and Lai to show cause why this action should not be stayed pending the resolution of Case No. 23STCV08242 or, alternatively, why a notice of related case should not be filed in Case No. 23STCV08242.

Background

This action (the “Jupiter Action”) arises out of allegations by Plaintiff Jupiter Warehouse and Distribution, Inc. (“Jupiter”) that Defendant Billy Lai (“Lai”) improperly used Jupiter’s funds to satisfy the settlement of a lawsuit (the “Harbor Action”).

On February 4, 2019, Defendant Harbor filed the Harbor Action against Defendants B & O Express (“B&O”) and Lai alleging a series of contract claims. MMG represented Harbor in the Harbor Lawsuit.

The Harbor Action reached a settlement under which B&O and Lai have paid $141,000.00. MMG still holds $131,253.67 of that amount in trust for Harbor because the prior owner of Harbor, who was MMG’s contact, passed away and MMG has been unable to establish further contact with Harbor. (Miller Decl. ¶ 5.)

Jupiter filed this action, the Jupiter Action, on August 1, 2023, raising claims for (1) declaratory relief; and (2) claim and delivery. Jupiter alleges that Lai improperly used Jupiter’s funds to pay the settlement in the Harbor Action. Jupiter joined MMG in this action as a stakeholder and necessary party only. (Complaint at p. 2:8.)

MMG filed this motion for interpleader on November 8, 2023. The Court continued the motion to February 22, 2024 so that MMG could make further attempts to give notice to Harbor of this action and of MMG’s interpleader motion.

On November 14, 2023, MMG was relieved as counsel for Harbor in the Harbor action. (RFJN, Exh. A at p. 52.) On January 5, 2024, Judge Wasserman set an Order to Show Cause Re: Sanctions Including Dismissal for Plaintiff’s Failure to Appear and Prosecute for February 23, 2024 in the Harbor Action. (RFJN, Exh. B.)

On February 7, 2024, Defendant Billy Lai filed an opposition to the motion. MMG filed a reply.

Request for Judicial Notice

The Court grants Lai’s request for judicial notice and takes notice of the Court records in question.

Legal Standard

“Any person, firm, corporation, association or other entity against whom double or multiple claims are made, or may be made, by two or more persons which are such that they may give rise to double or multiple liability, may bring an action against the claimants to compel them to interplead and litigate their several claims.” (Code Civ. Proc., § 386, subd. (b).)

“An interpleader action is traditionally viewed as two suits: one between the stakeholder and the claimants to determine the stakeholder's right to interplead, and the other among the claimants to determine who shall receive the funds interpleaded ... As against the stakeholder, claimants may raise only matters which go to whether the suit is properly one for interpleader; i.e., whether the elements of an interpleader action are present.”  (State Farm Fire & Cas. Co. v. Pietak (2001) 90 Cal.App.4th 600, 612.) 

If the stakeholder claims no interest in the funds or property held, he or she need not file an interpleader cross-complaint.¿He or she may simply apply to the court for permission to deposit the money or property with the court clerk, and for an order discharging him or her from further liability to the adverse claimants. Such an order will also substitute the adverse claimants as parties to the action; or, if only money is involved, simply dismiss the stakeholder.¿ (Code Civ. Proc., §§ 386(a), 386.5.) 

The motion must be supported by an affidavit by the stakeholder establishing the ground for interpleader. (Code Civ. Proc., § 386, subd. (a).) The supporting affidavit must also state that the moving party is “a mere stakeholder with no interest in the amount or any portion thereof and that conflicting demands have been made upon him for the amount by parties to the action…”  (Code Civ. Proc., § 386.5.) Notice of the motion must be served on each of the adverse claimants to the funds or property. (Code Civ. Proc., §§ 386, subd. (a), 386.5.)   

“Where a deposit has been made pursuant to Section 386, the court shall, upon the application of any party to the action, order such deposit to be invested in an insured interest-bearing account.” (Code Civ. Proc., § 386.1.) 

Discussion

Service

Notice of the motion was served on Jupiter and Lai. B&O does not appear to make any claim to the funds.

Because MMG represents Harbor, formal service on Harbor is not necessary. However, MMG reports that it is unable to contact Harbor (and furthermore, Harbor appears not to have been served in this action at all). The Court previously requested that MMG make further efforts to contact Harbor and notify it of this action and the instant motion before the Court rules on the motion.

          Following the Court’s request, MMG hired a process server to serve Harbor with the motion. On January 18, 2024, the process server attempted to serve Harbor at its principal mailing address at 13181 Crossroads Parkway North, Suite 200, City of Industry, CA 91746, which is also the address for service of process. The process server was unable to effectuate service and reported that a different business is currently at the address. MGG has been unable to locate any other address or contact for Harbor. (See Peterson Decl. ¶¶ 4-7.)

          The Court finds that MMG has made a diligent effort to locate and serve Harbor. As Harbor is a named, but un-served, defendant in this case, Jupiter will still ultimately need to effectuate service of process on Harbor for any judgment in this case to be valid as against Harbor.

Grounds for Interpleader

MMG seeks leave to interplead funds and deposit the amount of $131,253.67 with the Court pursuant to Civil Code, sections 386, 386.5, and 386.6 on the grounds that multiple parties claim conflicting interests in the funds.

The affidavit of Adam Miller filed with the initial motion lays out the grounds for interpleader as set forth in the background above. Miller avers that MMG is a mere stakeholder with no interest in any portion of the funds. (Miller Decl. ¶ 7.) Miller further declares that MMG is holding the funds in trust for Harbor and that Jupiter has claimed an interest in the funds. (Miller Decl. at ¶¶ 4, 6.)

Conflicting Claims

Lai argues that there are no conflicting claims for the funds in MMG’s possession because JWD is the only party who has claimed entitlement to those funds. Lai does not claim any entitlement to the funds that were paid to MMG (notwithstanding his position that JWD is not entitled to recover money from Lai in compensation for Lai’s use of those funds to settle the Harbor action).

However, because MMG took the funds at issue into its possession as part of a settlement that its former client Harbor consented to, Harbor de facto must claim an interest in those funds, and the Court cannot simply rule otherwise on the basis that Harbor has not yet been successfully served.

Jupiter’s Separate Action

Lai argues that the motion is only necessary because MMG lost contact with its former client, resulting in the money being in limbo. Lai contends that, but for the loss of contact, the money would be in Harbor’s hands, and Jupiter’s only – and appropriate – remedy would be to sue Lai for the money instead.

In fact, it appears that Jupiter has filed a separate action, Case No. 23STCV08242 (the “Lai Action”) against Lai and a number of other Defendants, apparently seeking repayment for the funds used in settlement of the Harbor Action.  The Lai Action is the earlier-filed, lower-numbered case.  Lai brings this case to the Court’s attention in his opposition. Although both the current case and the Lai Action involve the same primary right of Jupiter, no notice of related case has been filed in either this action or the Lai Action. This state of affairs raises concerns that Jupiter may obtain a double recovery.

The Court therefore continues this motion and orders Jupiter and Lai to show cause why this action should not be stayed pending the resolution of the Lai Action or, alternatively, why a notice of related case should not be filed in the Lai Action.