Judge: Kenneth J. Medel, Case: 37-2020-00047637-CU-PN-CTL, Date: 2023-11-17 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

DEPT.:

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HALL OF JUSTICE

TENTATIVE RULINGS - November 16, 2023

11/17/2023  09:30:00 AM  C-66 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Kenneth J Medel

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Civil - Unlimited  Professional Negligence Summary Judgment / Summary Adjudication (Civil) 37-2020-00047637-CU-PN-CTL 1081 CAMINO LLC VS JDA ASSOCIATES INC [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion for Summary Judgment and/or Adjudication, 09/01/2023

Procedural Matters JDA ASSOCIATES, INC.'S Request for Judicial Notice is GRANTED.

Objections by Plaintiff are OVERRULED as they are not compliant with CRC 3.1354.

Defendant ANDREW HERNANDEZ dba RAH ARCHITECTURE's Objections to Evidence are SUSTAINED as to Nos. 2,3,7; OVERRULED as to remainder JDA Associates Inc.'s Objections are SUSTAINED as to No. 1, 3; OVERRULED as to remainder JDA Associates, Inc.'s Motion for Summary Judgment is GRANTED. ANDREW HERNANDEZ dba RAH ARCHITECTURE is GRANTED.

JDA moves for summary judgment on the basis of res judicata. RAH moves on the basis of both 'res judicata' and 'collateral estoppel.' Because the issues overlap, the Court rules on both motions together.

Plaintiffs 1081 Camino LLC and Solute Inc. filed a Complaint on December 24, 2020 alleging three causes of action against defendants JDA ASSOCIATES, INC.; ANDREW HERNANDEZ – two architectural firms involved in the design o a remodel of property located at 1081 Camino. (John Lyons is the owner of the companies.) The Complaint alleges three causes of action: (1) Breach of Contract (Third Party Beneficiary); (2) Professional Negligence and Breach of the Covenant of Good Faith and Fair Dealing. (The Court recently denied plaintiffs leave to amend to add a Fraud cause of action.) Based on the allegations in the Complaint, on or about July 25, 2019, Plaintiff Solute entered into a Construction Contract with Online Builders for the development of real property to be located at 1081 Camino Del Rio South. The Complaint alleges various errors by the architects – the plans were repeatedly inconsistent with applicable building codes and regulations nor were the plans consistent with plaintiff's expressly stated vision of the project. Prior to submitting the architectural plans for the Project to the City, the Architects failed to obtain Plaintiff's approval for the architectural plans being submitted.

After the Architects' submitted the plans to the City, Plaintiff highlighted the numerous deficiencies in the plans submitted and items that Plaintiff never requested or approved, including, but not limited to, a big support beam in the reception area and certain windows on the downstairs floor were covered, a ceiling type was not what plaintiff wanted. Plaintiff told the Architects it wanted an open floor plan, industrial look. Yet time and time again, the Architects plans for the Project did not reflect this.

Misidentifications and errors caused the City to delay approval of the plans. Additional errors were found in late January, 2020, well after the plans had been submitted to the City for approval.

Permit fees were miscalculated.

Although approved by the City in February, 2020, Plaintiff continued to find errors in the architectural plans submitted to the City for items that were not compliant with applicable building laws, codes, and regulations. These required the Architects to submit new, revised architectural plans to the City for plan check and approval. Work continued on the plans well after construction began to correct numerous Calendar No.: Event ID:  TENTATIVE RULINGS

2991884  49 CASE NUMBER: CASE TITLE:  1081 CAMINO LLC VS JDA ASSOCIATES INC [IMAGED]  37-2020-00047637-CU-PN-CTL specific errors identified in the pleading. Plans were still in flux as late as July, 2020. Plaintiff alleges damages for the delay and contends that Plaintiff paid the construction contractor hundreds of thousands of dollars for change order work to address design errors and omissions during the course of construction and to extend the time for construction to perform such corrective work. Plaintiff also incurred costs of escalation, acceleration, additional Construction Management fees, and other administrative expenses associated with delay.

Separately, Online Builders filed a demand for arbitration before the American Arbitration Association on or about September 9, 2020, alleging breach of contract, and in response on or about October 22, 2020, Plaintiff requested a counterclaim against Online Builders and joinder/consolidation against JDA and RAH for: 1. Breach of contract; 2. Breach of third-party beneficiary contract (against JDA and RAH only); 3. Breach of express warranty; 4. Breach of implied warranty; 5. Negligence; and 6. Violation of Bus. & Prof. Code § 17200, et seq. (PUMF # 1.) In response to Plaintiff's request for joinder of JDA and RAH, on or about November 17, 2020, JDA and RAH sent a joint letter to the AAA declining to participate in the Arbitration and so could not be compelled by the AAA to become parties to the Arbitration. (PUMF # 1.) As a result, on December 15, 2020, Plaintiff's attorney dismissed JDA and RAH from the CounterClaim.

After evidentiary hearings in January, 2022, The arbitrator issued a Final Award on June 1, 2022, the AAA panel ordered Plaintiff to pay the General Contractor (a) $53,634.63 in damages, (b) $125,443.29 in costs, (c) $445,000 in attorney's fees, (d) $7,500.00 in administrative fees, and (e) $67,898.75 in arbitrators' fees.

The three-person AAA Arbitration panel concluded that there is 'no evidence that the work performed by Mr. Hernandez or Mr. De Frenza violated the standard of care for an architect or in any way caused financial harm to Respondent'. According to the Final Award issued in the Arbitration, 1081 CAMINO LLC not only 'failed to prove a delay showing causation and impact', but 'failed to prove any direct damage (e.g., resulting from defective design or construction)'.

Defendant ANDREW HERNANDEZ dba RAH ARCHITECTURE and Defendant, JDA Associates, Inc.

each separately move for Summary Judgment based on the doctrine of res judicata.

Where a lawsuit or arbitration proceeding has previously adjudicated the merits of a position asserted in a second lawsuit or arbitration, and certain necessary elements are met, the results of the first proceeding will bar the second action. This is known as the doctrine of res judicata or claim preclusion (as distinct from 'issue preclusion'/collateral estoppel). Claim preclusion 'prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them.' Claim preclusion arises if a second suit involves: (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit. [Citations Omitted]. If claim preclusion is established, it operates to bar relitigation of the claim altogether. DKN Holdings, LLC v. Ferber (2015) 61 Cal.4th 813.

Issue preclusion prohibits the relitigation of issues argued and decided in a previous case, even if the second suit raises different causes of action. Issue preclusion operates 'as a shield against one who was a party to the prior action to prevent' that party from relitigating an issue already resolved in the previous case. DKN Holdings LLC v. Faerber, 61 Cal. 4th 813, 827 (2015) The Court ruled that collateral estoppel (issue preclusion) applies: '(1) after final adjudication (2) of an identical issue (3) actually litigated and necessarily decided in the first suit and (4) asserted against one who was a party in the first suit or one in privity with that party.' (Grande, supra, at p. 323.) Even when the threshold requirements of collateral estoppel are satisfied, 'courts may not apply issue preclusion if considerations of policy or fairness outweigh the doctrine's purpose in a particular case' holding 'a court must balance the need to limit litigation against the right of a fair adversary proceeding in which a party may fully present his case.' (Bullock v. City of Antioch (2022) 78 Cal.App.5th 407, 416, citing Lucido v. Superior Court (1990) 51 Cal.3d 335, 343 and People v. Vogel (2007) 148 Cal.App.4th 131, 136.) Final Adjudication Plaintiff concedes the Arbitration Final Award was a final judgment. Plaintiff also concedes that the judgment made statements regarding JDA and RAH regarding the standard of care in finding no liability for Online Builders. (See Plaintiff's Response to JDA's SSUMF No. 29) Identical Issues and Actually Litigated Online Builders sued plaintiff in arbitration for recovery of fees for services. Plaintiff's operative first-amended CounterClaim in arbitration was only against Online Builders and for six causes of action: 1. Breach of contract; 2. Negligence (ordinary not professional); 3. Breach of the covenant of good faith Calendar No.: Event ID:  TENTATIVE RULINGS

2991884  49 CASE NUMBER: CASE TITLE:  1081 CAMINO LLC VS JDA ASSOCIATES INC [IMAGED]  37-2020-00047637-CU-PN-CTL and fair dealing; 4. Breach of express warranty; 5. Breach of implied warranty; and 6. Violation of Bus. & Prof. Code § 7120. (Ibid.) Plaintiff's Complaint in this case is for: 1. Breach of third-party beneficiary contract; 2. Professional negligence; and 3. Breach of implied covenant to perform work in good and competent manner. There was no claim for professional negligence in the Arbitration - the term was not mentioned in Plaintiff's CounterClaim. (PUMF # 4.) While claims are titled differently, Plaintiff's Arbitration Counter-Claim against Online Builders was expressly based on its contention the Online Builder, as the 'Design-Build' contractor, (1) was liable for any defects in Andrew Hernandez's design, (2) the claim that Mr. Hernandez's design was in fact defective and (3) the contention that such caused Plaintiff damages. That appears to be the gravamen of the Plaintiff's entire Counter-Claim.

Plaintiff states the following in their Response to JDA's SSUMF No. 31.: 'The allegations of the Complaint are identical to the allegations of the CounterClaim, and almost verbatim. UNDISPUTED.' Further: 28. Importantly, the Arbitration Panel heard argument on the standard of care for an architect and the work that JDA did on the project. The panel ruled that 'There was no evidence that the work performed by Mr. Hernandez or Mr. De Frenza violated the standard of care for an architect or in any way caused financial harm to (1081 Camino).' NOL Exhibit 10; AAA Final Award dated June 1, 2022, at p.3:9-18; see also RFJN ⁋ 7 UNDISPUTED.

As to RAH's Separate Statement No. 16, plaintiff states UNDISPUTED that design claims relating to Andrew Hernandez's work were expressly and exhaustively alleged throughout the Arbitration and against Online Builders and SS Nos. 17-19 states UNDISPUTED that each side retained architectural and other experts on design issues and viewed them as central to the case. Again, Plaintiff stated UNDISPUTED that the design claims asserted in this case are largely word-for-word identical to those asserted against Online Builders in the Arbitration, with the language in the Complaint simply lifted from the Counter Claim [See Response to SSMF No. 20].

Despite this, JDA and RHA argue 'it is also undisputed the two actions did not involve the same issues, which must be 'identical' to be precluded. (See Grande, supra, at p. 323; PUMF # 4.) The issues litigated in the Arbitration were entirely based on the Construction Contract between General Contractor Online Builders and Plaintiff. (PUMF # 4.) Online Builders took issue with an alleged past-due balance per the Construction Contract, and Plaintiff alleged issues of faulty contractor work that caused costly delays.' According to plaintiffs, professional liability claims and related issues against architects require specific procedural requirements, including a certificate of merit as to sufficient grounds for such a claim, and also involve additional specific statutes and other guiding documents and policies, such as the Bus. & Prof. Code, the California Architect's Board, the California Architect's Practice Act, and City of San Diego Municipal Code, which were not all litigated in the Arbitration. (See CCP § 411.35; PUMF # 15.) Despite the distinction between 'ordinary negligence' vs. 'professional negligence', that distinction appears to be without a difference in this case considering what was litigated in the arbitration. Both causes of action require a showing of negligence in the provision of Andrew Hernandez's design services. That Andrew Hernandez work was the core of the case was recognized by the Arbitrators, when they clearly set forth findings addressing his compliance with the standard of care and lack of causation of any damages alleged.

JDA has provided evidence that plaintiff John Lyons testified in arbitration that he was critical of the work of the Architects on the project. (UMF 23). Plaintiff John Lyons filed a declaration that stated he was aware of and being 'taken advantage of' during the project by JDA. (UMF 32-37.) William Rendler, the principal of Online Builders, provided evidence and established the contractual relationship on the project, including the retention of RAH and JDA under the Construction Contract and the General Services Agreement. (UMF 24). Andrew Hernandez, RAH, testified in the Arbitration as to the nature and quality of the services he provided under the Construction Contract and General Services Agreement, including his work with JDA. (UMF 25).

Regardless of Plaintiffs argument that its expert did not perform a standard of care review, the nature and scope of his testimony was to attack the services performed by the Architects. 1081 Camino retained and had an Architect expert provide evidence to support the allegations of professional negligence against RAH and JDA. (UMF 26). In rebuttal, Online Builders retained an Architect expert who provided evidence that RAH and JDA met the applicable standard of care in the Architectural Calendar No.: Event ID:  TENTATIVE RULINGS

2991884  49 CASE NUMBER: CASE TITLE:  1081 CAMINO LLC VS JDA ASSOCIATES INC [IMAGED]  37-2020-00047637-CU-PN-CTL services provided on this Project. (UMF 27).

Actually Litigated and Necessarily Decided JDA and RAH argue they did not contest any claims in the Arbitration, did not control any claims in the Arbitration, and are therefore not privities and have no derivative liability under California law. (See Victa v. Merle Norman Cosmetics, Inc. (1993) 19 Cal.App.4th 454, 464.) JDA and RAH were also not subcontractors in that Online Builders had no ability to control or direct the conduct of the architects, which is established in the General Services Agreement between Online Builders and RAH. (PUMF # 10.) Further, even if the threshold requirements of collateral estoppel are satisfied, plaintiff argues 'the doctrine will not be applied if such application would not serve its underlying fundamental principles.' (Rodgers v. Sargent Controls & Aerospace, supra at p. 91 quoting Gikas v. Zolin, (1993) 6 Cal.4th 841, 849.) Courts may not apply issue preclusion if considerations of policy or fairness outweigh the doctrine's purpose in a particular case' holding 'a court must balance the need to limit litigation against the right of a fair adversary proceeding in which a party may fully present his case.' (Bullock v. City of Antioch (2022) 78 Cal.App.5th 407, 416, citing Lucido v. Superior Court (1990) 51 Cal.3d 335, 343 and People v. Vogel (2007) 148 Cal.App.4th 131, 136.) In addition to the elements of res judicata and collateral estoppel 'the courts consider whether the party against whom the earlier decision is asserted had a 'full and fair' opportunity to litigate the issue.' (Roos v. Red (2005) 130 Cal.App.4th 870, 880, 30 Cal.Rptr.3d 446.) Collateral estoppel will not be applied 'if injustice would result or if the public interest requires that relitigation not be foreclosed.' (Consumers Lobby Against Monopolies v. Public Utilities Com. (1979) 25 Cal.3d 891, 902. In certain circumstances, res judicata and collateral estoppel will not be applied where the party against whom collateral estoppel is asserted offered evidence in the subsequent proceeding that he or she did not have the opportunity to present in the prior action. (See Rodgers v. Sargent Controls & Aerospace, supra at p. 95.) Plaintiff focuses the fact that their expert Brian Grill did not opine on an architect's standard of care, he explicitly testified at his January 5, 2022 deposition that he never reviewed any discovery responses and he did not review any of the architectural plans for the Project as to the applicable standard of care, e.g. that he had 'not done a review to establish whether or not those plans [Delta 2] fell below the standard of care for an architect. That was not my – the scope of my retention in this matter' and 'I did not do a plan review . . . [t]hat was not the scope of my retention.' (PUMF # 6.) He further testified at the Arbitration proceeding that he didn't have an opinion as to 'whether or not the standard of care was breached by the architect . . . because [he] didn't perform a detailed review of delta 2 plans or delta 3 plans' because it was 'not an issue and was not party of my retention.' (Ibid.) Plaintiff's delay damages expert Mike Tomeo of JS Held's 11/4/2021 Expert Report was solely to 'address defects in the work of Online [Builders] that were not addressed in our original report' and concerning '[t]he Delta 2 plans . . .

that were prepared by Online.' (Ibid.) Mike Tomeo of JS Held did not opine on the standard of care for an architect. (Ibid.) However, the plaintiff provides no evidence to counter the defendants' evidence that the architectural issues were actually litigated in this case. The fact that a particular expert did not testify does not necessarily indicate that the issues were not actually litigated. But the evidence is that Mr. Grill did testify at the arbitration on issues related to licensure and issues related to various statutory provision.

(Matteson Declaration 11/9/23 at paragraph 4) The declaration of counsel Thomas R. Matteson (counsel for Andrew Hernandez dba RAH Architecture) submitted on November 9, 2023 indicates the extent to which Hernandez was questioned by Plaintiff's then counsel on issues relating to his licensure, the responsible control exercised over him by another architect during the brief time when he was providing services on this project, but had not yet been licensed, and other matters.

Asserted by one who was in privity with a party to the previous lawsuit The parties in the Arbitration and this case are different. Only Plaintiff and Online Builders were parties.

(PUMF ## 2 and 3.) The question becomes whether RAH and JDA are in sufficient privity such that the judgment can bind them. The architects argue that Online Builders, JDA, and RAH were privities, had derivative liability, and 'reasonably [] expected to be bound' by the Arbitration Final Award. (See generally Motion at pp. 11-13.) 'Privity requires the sharing of 'an identity or community of interest,' with 'adequate representation' of that interest in the first suit.' DKN Holdings LLC v. Faerber, 61 Cal. 4th 813, 826 (2015) (quoting Calendar No.: Event ID:  TENTATIVE RULINGS

2991884  49 CASE NUMBER: CASE TITLE:  1081 CAMINO LLC VS JDA ASSOCIATES INC [IMAGED]  37-2020-00047637-CU-PN-CTL Clemmer v. Hartford Ins. Co., 22 Cal. 3d 865, 875 (1978)). 'When a defendant's liability is entirely derivative from that of a party in an earlier action, claim preclusion bars the second action because the second defendant stands in privity with the earlier one.' Id. at 827-28. Stated otherwise, if the interests of a party and a non-party are so closely aligned that the party participant to the first proceeding acted as a virtual representative of the non-party in the second action, they will be deemed one and the same; similarly, if their interests are closely intertwined, this element will have also been met. Cal Sierra Development, Inc. v. George Reed, Inc. (2017) 14 Cal.App. 5th 663, at 671-672.

Here, JDA and RAH argue that liability is derivative of Online because they acted only with respect to contracts with Online Builders in performing the design on the project.

RAH relies on Thibodeau v. Crum (1992) 6 Cal.App.4th 749 where plaintiff homeowners and a general contractor arbitrated claims against each other. One of the homeowner's claims involved alleged defective construction of a driveway by a subcontractor [Id. at 753]. The arbitration resulted in a net award in the general contractor's favor [Id.]. After arbitration, the driveway's conditioned worsened [Id. at 753-754]. The homeowners then filed a lawsuit against the driveway subcontractor; held, because the general contractor was alleged to have been liable for the subcontractor's acts and omissions, the general contractor and subcontractor were deemed to be the same party for claim preclusion/res judicata purposes [Id. at 755]. While this case did not deal directly with the privity issue in its holding, it illustrates that cases have held subcontractors as derivative to general contractors.

Plaintiffs rely on cases by the Supreme Court holding that to assert the defense of res judicata on a non-party, privity 'requires the sharing of 'an identity or community of interest,' with 'adequate representation' of that interest in the first suit, and circumstances such that the nonparty 'should reasonably have expected to be bound' by the first suit.' (Grande v. Eisenhower Medical 22 Center (2022) 13 Cal.5th 313, 324; DKN Holdings LLC v. Faerber 26 (2015) 61 Cal.4th 813, 826. The Court held it was 'clear that privity does not exist merely because two entities are allegedly liable for the same wrong to the same plaintiff. Likewise, then, privity does not exist merely because two entities share an interest in establishing that no wrong occurred.' (Ibid.) Similarly, '[t]he concept of privity for the purposes of . . . collateral estoppel refers 'to a mutual or successive relationship to the same rights of property, or to such an identification in interest of one person with another as to represent the same legal rights [citations] and, more recently, to a relationship between the party to be estopped and the unsuccessful party in the prior litigation which is 'sufficiently close' so as to justify application of the doctrine of collateral estoppel.' (Rodgers v. Sargent Controls & Aerospace (2006) 136 Cal.App.4th 82, at p. 90 quoting Citizens for Open Access etc. Tide, Inc. v. Seadrift Assn., (1998) 60 Cal.App.4th 1053, 1069–1070; see also Dawson v. Toledano (2003) 109 Cal.App.4th 387, 399, 134 Cal.Rptr.2d 689.) In this case, there appears to be a community of interest. For Online Builders to prevail in arbitration, it had to establish that the architect's work met the standard of care and did not cause Plaintiff any damages. The issue of Andrew Henandez's fault, and JDA's responsibility for it, was the core of the entire arbitration. The causes of action were virtually identical, and the facts upon which they were premised were identical.

Further plaintiff argues that res judicata 'restricts the set of litigants who can benefit from a prior judgment to those who could have had the judgment used against them.' (Grande, supra, at p. 324.) This is known as the 'mutuality requirement' where litigants can 'only take advantage of an earlier judgment if that judgment would have bound them, had it been decided differently.' (Ibid., emphasis in original; see also DKN Holdings, LLC v. Faerber, (2015) 61 Cal.4th 813, 827.) 'Allowing nonmutual claim preclusion would thus exert pressure akin to a mandatory joinder rule. If claims against nonparties would be extinguished by a judgment in an initial action - regardless of who wins that initial action - then a plaintiff would be required to either join the nonparties in the initial action or lose its claims against them.' (Grande, at p. 324.) For the same reason nonparties JDA and RAH would vigorously dispute the binding effect of the Arbitration Final Award on them if the AAA instead found a breach of the architect standard of care, they are not able to rely on it now as both a sword and shield. If Plaintiff won there would be no legal basis to enforce the Arbitration Final Award against JDA and RAH, because of the lack of an explicit professional negligence finding. (See Grande, supra, at p. 324; PUMF # 13.) There exists no mutuality and thus no claim preclusion.

However, plaintiff's argument would apply only as a 'claim preclusion'. Only claim preclusion contains a 'between the same parties [or their privies]' ' inquiry, which restricts the set of litigants who can benefit from a prior judgment to those who could have had the judgment used against them. Grande v. Calendar No.: Event ID:  TENTATIVE RULINGS

2991884  49 CASE NUMBER: CASE TITLE:  1081 CAMINO LLC VS JDA ASSOCIATES INC [IMAGED]  37-2020-00047637-CU-PN-CTL Eisenhower Med. Ctr., 13 Cal. 5th 313, 324 (2022) Issue preclusion does not have a mutuality requirement. Id. The only question is whether – was the issue decided in the prior adjudication identical with the one presented in the action in question? Was there a final judgment on the merits? Was the party against whom the plea is asserted a party or in privity with a party to the prior adjudication? Bernhard v. Bank of Am. Nat. Tr. & Sav. Ass'n, 19 Cal. 2d 807, 813 (1942) Calendar No.: Event ID:  TENTATIVE RULINGS

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