Judge: Kevin C. Brazile, Case: 19STCV35141, Date: 2023-05-23 Tentative Ruling

Hearing Date: May 23, 2023

Case Name: ART Reproductive Center, Inc., et al. v. Hill, et al.

Case No.: 18STCV08895 

Matter: Motion to Trifurcate

Moving Party: Defendants David Hill and Embryonics, Inc.

Responding Party: Plaintiffs/Cross-Defendants ART Reproductive Center, Inc., Advanced 

Reproductive Technologies of Santa Barbara, LLC, and Southern 

California Reproductive Center Medical Group, Inc.

Notice: OK

Ruling: The Motion is granted in part.  

Moving parties to give notice.

If counsel do not submit on the tentative, they are strongly 

encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic. 

On December 18, 2018, Plaintiffs ART Reproductive Center, Inc. and Advanced Reproductive Technologies of Santa Barbara, LLC filed a Complaint against Defendants David Hill and Embryonics, Inc. for (1) aiding and abetting breach of fiduciary duty and (2) intentional interference with contractual relations.  Plaintiffs allege that Defendants helped Plaintiffs’ former member, Alex Steinleitner, M.D., Inc., set up a competing business.

On February 7, 2019, Defendants filed a Cross-Complaint against Plaintiffs and Southern California Reproductive Center Medical Group, Inc. for (1) declaratory relief and (2) common law right of publicity.  

Defendants now seek a trifurcated trial as follows: “(1) A bench trial on the time periods in which Defendants may be liable under the causes of action of the Complaint of Plaintiff Advanced Reproductive Technologies of Santa Barbara, LLC (‘ART SB’) based upon ART SB’s removal of third party Alex Steinleitner, M.D. as a manager and third party Alex Steinleitner, M.D., Inc. as a member, and an interpretation of Section 4.7 of ART SB’s Operating Agreement as requested in the first cause of action of Defendants’ Cross-Complaint; (2) A jury trial on the parties’ causes of action asserted in ART SB’s Complaint and Defendants’ Cross-Complaint, including a determination of issues of liability and damages under ART SB’s Complaint based on the Court’s findings in the first phase; and (3) A jury trial on punitive damages pursuant to California Civil Code § 3295(d), whereby an order is entered precluding the introduction of any evidence of the income and/or financial condition of any party until after the trier of fact has returned a verdict against said party awarding actual damages and finds that said party is guilty of malice, oppression, or fraud by clear and convincing evidence in accordance with Civil Code § 3294.”

Plaintiffs/Cross-Defendants do not oppose bifurcation with respect to punitive damages, but oppose an initial bench trial because, based on the Court’s prior summary judgment ruling, such a bench trial would not obviate the need for a jury trial and would, therefore, be quite inefficient.  Specifically, they contend that “[t]he Art Parties have alleged, and developed evidence to establish, that Dr. Steinleitner started referring patients to the SLO Lab rather than to ART SB in or around October 2017. Thus, even in Defendants’ most optimistic scenario – that in the initial bench trial, the Court enforces Defendants’ earliest proposed liability cut-off date of February 5, 2018 – there would remain a triable issue of fact as to whether ART SB has continuing losses of profits attributable to the breaches occurring before that date. Consequently, there will be a jury trial in this case, even if this motion is granted.”

The Court’s summary judgment ruling was, in relevant part, as follows: “summary judgment nonetheless must be denied for two reasons. First, there is a triable issue of fact as to whether ART SB's continuing losses of profits after the Settlement are attributable to the breaches before the Settlement. It is enough to demonstrate a reasonable probability that profits would have been earned except for the defendant's conduct." (S.C. Anderson, Inc. v. Bank of America (1994) 24 Cal. App. 4th 529,535.) A reasonable trier of fact could conclude greater profits would have been earned after the settlement if not for Defendants' pre-settlement conduct. For example, if doctors that formerly referred patients to ART SB switched to the Lab before the Settlement and continue to refer patients to the Lab--and this pre-settlement conduct could be found to be a cause of continuing post-settlement damages. Second, there is a triable issue of fact based on the competing expert declarations submitted as to whether the $400,000 settlement would set off all damages attributable to Defendants’ pre-settlement conduct.”    

In Reply, Defendants contend, “Defendants request an initial bench trial to determine whether the Steinleitner Parties’ non-compete duties ended months before the Steinleitner Settlement based upon (1) ART SB’s removal of Dr. Steinleitner as a manager on February 5, 2018, (2) expulsion of Steinleitner, Inc. as a member on April 27, 2018, or (3) the Steinleitner Parties’ divestiture of the fertility laboratory in San Luis Obispo at issue in this action (the ‘SLO Lab’) on July 1, 2018.” 

Defendants also argue that the bench trial could obviate a jury trial as follows: “After the completion of the requested initial bench trial establishing temporal limitations, the Court may require a showing of proof that ART SB’s potential damages (resulting from conduct occurring before dates on which the Steinleitner Parties’ non-competition duties ended) exceed the monetary value of the Steinleitner Settlement. This procedure is similar to a procedure followed by the trial court in Sargon Enterprise, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 755.”

“Whether separate actions shall be consolidated for trial, or whether there shall be a severance and separate trials of issues in a single action, is within the discretion of the trial court.”  (Mellone v. Lewis (1965) 233 Cal.App.2d 4, 7, quoting McArther v. Shaffer (1943) 59 Cal.App.2d 724, 727.)  The objectives of bifurcated trials are to “expedite and simplify the presentation of evidence” (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 888), and “avoidance of the waste of time and money caused by the unnecessary trial of damage questions in cases where the liability issue was resolved against the plaintiff.” (Plaza Tulare v. Tradewell Stores, Inc. (1989) 207 Cal.App.3d 522, 524.)

There being no opposition to the request to bifurcate with respect to punitive damages, the Court will order bifurcation accordingly.  

With respect to an initial bench trial, the Court is not convinced that trifurcation would promote efficiency or save judicial resources.  However, the Court will, of course, examine whether certain expert evidence on damages should be admissible.  Therefore, the request for trifurcation is denied; however, as discussed, the Court will order bifurcation with respect to punitive damages.      

Moving parties to give notice.

If counsel do not submit on the tentative, they are strongly encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic.