Judge Lynne M. Hobbs, Case Number: 23STCV28672, Date: 2024-07-11 Tentative Ruling

Judge: Lynne M. Hobbs, Case: 23STCV28672, Date: 2024-07-11 Tentative Ruling

Case Number: 23STCV28672 Hearing Date: July 11, 2024 Dept: 61

BUILD GROUP, INC., A CALIFORNIA CORPORATION vs WASHINGTON MOTOR LLC, A DELAWARE LIMITED LIABILITY COMPANY, et al.

TENTATIVE

Defendant Washington Motor, LLC’s Motion for Appointment of Referee is GRANTED. Plaintiff Build Group Construction Company, Inc.’s Motions to Compel Further Responses to Requests for Production, Requests for Admission, and Interrogatories are taken off-calendar.

Moving party to give notice.

DISCUSSION

MOTION TO APPOINT REFEREE

A referee may be appointed upon the agreement of the parties filed with the clerk, or judge, or entered in the minutes, or upon the motion of a party to a written contract or lease that provides that any controversy arising therefrom shall be heard by a referee if the court finds a reference agreement exists between the parties:

(a) To hear and determine any or all of the issues in an action or proceeding, whether of fact or of law, and to report a statement of decision.

(b) To ascertain a fact necessary to enable the court to determine an action or proceeding.

(Code Civ. Proc. § 638, subd. (a), (b).) “In the case of a consensual general reference pursuant to Section 638, the decision of the referee or commissioner upon the whole issue must stand as the decision of the court, and upon filing of the statement of decision with the clerk of the court, judgment may be entered thereon in the same manner as if the action had been tried by the court.” (Code Civ. Proc., § 644, subd. (a).)

Defendant Washington Motor, LLC (Washington) presents the construction contract between itself and Plaintiff Build Group Construction Company, Inc. (Plaintiff), which contains a provision stating, “Any action, proceeding, or counterclaim brought by either party hereto against the other . . . shall be filed in the Los Angeles County Superior Court, Central District on any matters whatsoever arising out of or in any way related claim of injury or damage, and shall be heard and resolved by a referee under the provisions of the California Code of Civil Procedure, sections 638–645.1.” (Simons Decl. Exh. A, § 15.4.) The agreement provides that the referee’s decision shall be binding under Code of Civil Procedure § 644, subd. (a). (Ibid.)

Plaintiff in opposition notes that the permissive language of the statute — stating that a referee “may be appointed” where an agreement states that a dispute “shall be heard by a referee” — indicates that a trial court possesses discretion in whether or not to enforce a referral agreement. (Opposition at pp. 8–10, citing Tarrant Bell Property, LLC v. Superior Court (2011) 51 Cal.4th 538, 545 [holding that “the trial court acted will within its discretion in basing its refusal to appoint a referee on the risk of inconsistent rulings and considerations of judicial economy”].) Plaintiff argues that the court should exercise its discretion here to avoid the risk of conflicting rulings, based on Plaintiff’s claim for enforcement of a stop payment notice against Defendant Principal Life Insurance Company (Principal), and Plaintiff’s pending motion for leave to add Port Key Properties as a Defendant to its cause of action for declaratory relief, based on nuisance allegations leveled by Port Key against Plaintiff and Washington. (Opposition at pp. 10–11.) Plaintiff also argues that it should be permitted to withdraw from the reference agreement under Rule 3.906 of the California Rules of Court, based on allegations of fraud in the inducement which it also intends to add in a proposed Second Amended Complaint. (Opposition at pp. 11–12.) Plaintiff finally argues that the judicial reference provision is unconscionable, based on illegibility of the reference provision, Washington’s superior bargaining power, and the mutual waiver of punitive damages contained therein. (Opposition at pp. 14–15.)

Judicial economy favors the enforcement of the parties’ reference agreement, and the risk of inconsistent rulings is minimal. The reference agreement is between Plaintiff and Washington. There is presently only one other named defendant in this action, Principal, the sole claim against which is the sixth cause of action for enforcement of a stop-payment notice. (FAC ¶¶ 24–28.) Principal has filed a notice of non-opposition to the present motion, and Plaintiff does not articulate the risk of inconsistent rulings that separate adjudication of this claim would pose.

Defendant Port Key, meanwhile, is not actually a defendant to this case. Plaintiff proposes to add Port Key as a defendant to a proposed eighth cause of action for declaratory relief, based on Port Key’s allegations that “noise and fumes from a generator placed and maintained at the Project by Washington made necessary by Washington’s failure to deliver permanent power to the Project constitutes a nuisance” to Port Key’s adjacent property. (6/26/24, Niccoli Decl. Exh. B, ¶ 41.) Yet this proposed amendment is merely an attempt to incorporate Port Key’s as-yet-theoretical nuisance claim into the present construction contract action. Once more, it is unclear what conflicting rulings could result from independent adjudication of the substantiality and unreasonableness of the alleged intrusion of fumes and noise from a generator on Washington’s property. Plaintiff proposes that “the judicial referee could find Build Group liable to Washington Motor for breach of contract, and a jury [in the nuisance action] could find Washington Motor liable to not only Build Group, but also the adjacent landowner for failing to provide permanent power to power the Project, thereby necessitating the need for the use of a generator.” (Opposition at p. 10.) Plaintiff does not explain why the jury in the nuisance action brought by Port Key would hold Washington liable to Plaintiff, particularly when the parties’ respective indemnity obligations are matters covered by the contract and subject to judicial reference. (FAC ¶ 30.) Discretion therefore favors the enforcement of the reference agreement.

Although Plaintiff argues that good cause supports its withdrawal from the reference agreement under Rule 3.906 of the California Rules of Court (CRC), it would be inequitable to permit Plaintiff’s withdrawal here. CRC Rule 3.906 permits a party to bring “[a] motion to withdraw a stipulation for the appointment of a referee . . . supported by a declaration of facts establishing good cause for permitting the party to withdraw the stipulation.” (CRC Rule 3.906, subd. (a).) Here, Plaintiff argues that, as alleged in the proposed SAC, the construction contract at issue was induced by representations that Washington would provide permanent power for the project, while knowing that power would not be provided until March 2025, thus requiring the presence of a generator on the property. (Opposition at pp. 11–12.)

The difficulty with this argument is that Plaintiff continues to assert claims founded upon the very contract that it claims Defendant fraudulently induced. Plaintiff’s proposed SAC maintains claims against Washington for breach of contract, abandonment of contract, and declaratory relief based on the parties’ obligations to defend and indemnify each other under the agreement. (6/26/24, Niccoli Decl. Exh. B, ¶¶ 6–15, 41.) Facing such contractual allegations, Washington could arguably seek to enforce the reference agreement even if it were not itself party to it. (See Pacific Fertility Cases (2022) 85 Cal.App.5th 887, 893 [“[holding that a nonsignatory to an arbitration agreement could enforce it against a signatory through the doctrine of equitable estoppel “when the signatory to a written agreement containing an arbitration clause must rely on the terms of the written agreement in asserting [its] claims”], internal quotation marks omitted.] The fact that Plaintiff’s claims now sound in both fraud and contract provides no basis to absolve Plaintiff of the reference agreement to which it agreed, particularly when those fraud claims are plainly covered by the agreement.

Plaintiff finally argues that the reference agreement is unconscionable. Unconscionability requires a showing of both procedural unconscionability and substantive unconscionability.” (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 795.) “The oppression that creates procedural unconscionability arises from an inequality of bargaining power that results in no real negotiation and an *1348 absence of meaningful choice.” (Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1347–1348.) “Substantive unconscionability is not susceptible of precise definition. It appears the various descriptions—unduly oppressive, overly harsh, so one-sided as to shock the conscience, and unreasonably favorable to the more powerful party—all reflect the same standard. Substantive unconscionability is not concerned with a simple old-fashioned bad bargain.” (Id. at p. 1349, citations omitted.)

Plaintiff presents no evidence of procedural unconscionability. Plaintiff contends that the contract was drafted by Washington, yet the contract itself is a form contract prepared under the auspices of the American Association of Architects. (Simons Decl. Exh. A.) There is no indication that of inequality of bargaining power between the parties, nor any indication that Plaintiff lacked the power to negotiate the terms of the agreement. Given such circumstances, the block-paragraph all-capital letters do no contribute to a finding of procedural unconscionability, as the all-caps reference provision, offered at the conclusion of the agreement, calls attention to the provision. (Simons Decl. Exh. A.) Plaintiff has no grounds for claiming oppression or surprise.

Nor does Plaintiff show substantive unconscionability. Plaintiff identifies only the mutual waiver of punitive damages, which it claims is unconscionable because Washington is guilty of fraud. (Opposition at pp. 14–15.) But if Plaintiff wished to preserve its right to punitive damages, it could have negotiated for their preservation. The agreement is therefore not unconscionable.

The motion is therefore GRANTED.

Plaintiff’s pending motions to compel further responses to requests for production, requests for admission, and interrogatories, from Washington, are properly submitted to the referee, and therefore taken off-calendar.