Judge Mark A. Young, Case SS0271276 2023-04-27 Tentative Ruling

Judge: Mark A. Young, Case: SS0271276, Date: 2023-04-27 Tentative Ruling

Case Number: SS0271276 Hearing Date: April 27, 2023 Dept: M

CASE NAME: Mangelsdorf, et al., v. Stephan, et al.

CASE NO.: SS0271276

MOTION: Motion to Bifurcate

HEARING DATE: 4/27/2023

Legal Standard

The court may, when the convenience of witnesses, the ends of justice, or the economy and efficiency of handling the litigation would be promoted thereby [. . .] make an order [. . .] that the trial of any issue or any part thereof shall precede the trial of any other issue or any part thereof in the case [. . .]¿ The court, on its own motion, may make such an order at any time. [. . .]”¿ (CCP § 598.)

“The court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial of any cause of action, including a cause of action asserted in a cross-complaint, or of any separate issue or of any number of causes of action or issues, preserving the right of trial by jury required by the Constitution or a statute of this state or of the United States.”¿ (CCP § 1048(b).)

Analysis

Defendant Luis Celestino, Konstantin Chernomorskiy, Leo Teplitsky and Advanced Funding Solutions Inc. (hereinafter, the “Moving Defendants”) move for an order bifurcating all derivative claims against them from the claims asserted against defendant Nu Find Homes LLC. Nu Find joins the motion. Plaintiffs oppose.

Moving Defendants claim that the only theory of liability against them is an alter ego theory. They assert that the only connection Celestino, Chernomorskiy and Teplitsky have is that they were members of Nu Find during the time of the subject construction project. Advanced Funding refinanced a loan on the subject property after this litigation had already begun. The construction project was directly undertaken by Nu Find.

Moving Defendants reason that bifurcation would promote judicial economy, because alter ego is the only theory of liability against Moving Defendants. At trial, Moving Defendants will not be defending the underlying claims against Nu Find/Stephan, but simply contesting the issue of alter ego liability. Thus, Moving Defendants argue that their presence at the jury trial for those issues is not strictly necessary. Moreover, if the jury finds against Plaintiffs, the derivative claims directed at Moving Defendants would be moot. Furthermore, even if Plaintiffs prevail, the Court, and not the jury, will decide the alter ego issue.

Here, the current pleading, the Second Amended Complaint (SAC), does not direct any specific allegations against the Moving Defendants. Moving Defendants were added as does, and thus the general allegations against the Defendants apply to them. In their opposition, Plaintiffs appear to concede that liability against Moving Defendants stems from their roles as managing members of Nu Find. (See Opp. at 3-4.)

Critically, any evidence of liability based on an alter ego theory of liability would be distinct from any evidence of a violation of the CC&R. The CC&R/easement violations arise out of the new construction on the subject property which failed to abide by the set-back requirements set forth in the CC&Rs. (See SAC ¶¶ 108-111, 114-116, 129-141, 145-147, 162-164, 173-174.) Neither the SAC nor Plaintiffs present any information that the Moving Defendants directly participated in such matters beyond their role as managing members of Nu Find. Plaintiffs also do not explain what evidence would overlap between the substantive liability issues (regarding the violations) and the derivative claims (regarding the alter ego factors against the managing members of Nu Find). The evidence supporting liability would be distinct from any trial on the CC&R and easement violations.

Notably, courts have recognized that parties are not entitled as a matter of right to a jury trial on the issue of alter ego liability. “As a general proposition, the jury trial is a matter of right in a civil action at law, but not in equity.” (C & K Engineering Contractors v. Amber Steel Co., Inc. (1978) 23 Cal.3d 1, 8.) “Both historically and functionally, the task of weighing … equitable considerations is to be performed by the trial court, not the jury.” (Id. at 11) Only a court of equity can ignore the corporate form and pierce its veil. (Dow Jones Co., Inc. v. Avenel (1984) 151 Cal.App.3d 144, 147-148.) Thus, bifurcation of such an issue would be appropriate here. Furthermore, separating the presentation of alter ego evidence from the underlying CC&R/easement violations would prevent confusion of the issues. Thus, bifurcation would also avoid potential prejudice against Defendants and confusion of the issues at trial.

Plaintiffs request that any hearing and determination on this motion be continued and heard with their motion for leave to file a third amended complaint. They assert that they will present new theories of direct liability against Moving Defendants. However, Plaintiffs have not filed their motion or provided a proposed copy of their Third Amended Complaint. Plaintiffs do not explain which direct theories they will pursue against Moving Defendants. Plaintiffs present facts regarding the funding of the project, and misrepresentations made to local officials regarding the project. (See Staser Decl., ¶¶ 6-27.) However, Plaintiffs do not explain how the presented facts would show direct liability against the individual defendants. Without such an explanation, the Court can only conclude that the presented evidence would either be irrelevant to the current action, or might bolster the currently-pled claims of alter ego. While Plaintiffs couch their contemplated pleading in terms of misrepresentations, Plaintiffs do not allege any fraudulent activity against them, as opposed to the City/County. Thus, Plaintiffs have not demonstrated good cause for this motion to be continued to be heard contemporaneously with their motion for leave to amend.

The Court, having reviewed the submitted papers and arguments, finds that judicial economy would be served by a separate and first trial on the issues of substantive liability against Stephan and Nu Find. Bifurcation would promote judicial economy, since it would not require duplicative testimony concerning facts relevant to the underlying dispute.

Accordingly, the motion is GRANTED.