Judge: Michael Shultz, Case: 22CMCV00064, Date: 2024-02-22 Tentative Ruling

INSTRUCTIONS: If the parties wish to submit on the tentative ruling and avoid a court appearance on the matter, the moving party must:

1. Contact the opposing party and all other parties who have appeared in the action and confirm that each will submit on the tentative ruling.

2. No later than 4:00 p.m. on the court day before the hearing, call the Courtroom (310-761-4302) advising that all parties will submit on the tentative ruling and waive hearing; and

3. Serve notice of the Court's ruling on all parties entitled to receive service.

If this procedure is followed, when the case is called the Court will enter its ruling on the motion in accordance with its tentative ruling. If any party declines to submit on the tentative ruling, then no telephone call is necessary, and all parties should appear at the hearing. If there is neither a telephone call nor an appearance, then the matter may either be taken off calendar or ruled on. 

TENTATIVE RULINGS -- http://www.lacourt.org/tentativeRulingNet/ui/main.aspx?casetype=civil



Case Number: 22CMCV00064    Hearing Date: February 22, 2024    Dept: A

22CMCV00064 Compton Unified School District v. Marvin Liddell, et al.

Thursday, February 22, 2024, at 8:30 a.m.

 

[TENTATIVE] ORDER DENYING PLAINTIFF’S MOTION FOR SUMMARY ADJUDICATION

 

I.        BACKGROUND

       The first amended complaint (“FAC”) alleges Defendant, Marvin Liddell, previously employed by Plaintiff, Compton Unified School District (“District”), as an Assistant Director of Maintenance (“AD Liddell”) violated conflict-of-interest laws by directing public contracts to Defendants, James Burnett doing business as BP Builders (collectively “Burnett”). AD Liddell allegedly had had a financial interest in BP Builders, presenting a conflict interest with respect to those contracts AD Liddell awarded to BP Builders. Plaintiff alleges claims for various violations of conflict-of-interest laws and for declaratory relief against Burnett dba BP Builders

       On July 12, 2023, the clerk entered default against Defendant AD Liddell.

 

II.      ARGUMENTS

       The District argues it is entitled to adjudication of the claims alleged against Burnett on grounds Burnett’s contracts were solicited, negotiated, and approved by AD Liddell, who was a partner with Burnett in Liddell Development and Construction, a Partnership (“LDCP.”) Because of this conflict-in-interest, the contracts are void. The District argues it is entitled to an order requiring Burnett to disgorge any profits made from the void contracts and to make restitution in the sum of $608,470.31.

       In opposition, Burnett argues that for the District to prevail, the District must show that the contracts were made by a governmental officer or employee in their official capacity and that the person had a cognizable financial interest in the contracts. The motion should be denied because triable issues of fact remain.

       In reply, the District argues that Liddell’s declaration in support of the opposition should be stricken because the court entered default against him. The opposition improperly relies on Liddell’s declaration. The District has otherwise satisfied all statutory obligations to warrant voiding the contract and requiring Liddell to provide restitution and disgorgement.

 

III.    LEGAL STANDARDS

       A party can move for summary adjudication “as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, [or] that there is no merit to a claim for [punitive] damages.” (Code Civ. Proc., § 437c subd. (f)(1).) A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty. (Code Civ. Proc., § 437c. subd.(f)(1).)

       The court applies the three-step analysis to motions for summary judgment or adjudication: (1) identify the issues framed by the pleading, (2) determine whether the moving party established facts which negate the opponents’ claim, (3) if the moving party meets its threshold burden of persuasion and the burden shifts, determine whether the opposing party has controverted those facts with admissible evidence. (Torres v. Reardon (1992) 3 Cal.App.4th 831, 836.)

IV.    DISCUSSION

A.      The undisputed facts

       Since approximately 2012, Burnett, doing business as BP Builders, was selected as a contractor for the District to perform maintenance and repair work (UF 2.) On August 24, 2015, AD Liddell was appointed as the District’s Assistant Director of Maintenance. On April 4, 2018, AD Liddell formed LDCP holding License No. 1037711 (UF 7.)  Burnett was a qualifying partner in LDCP with a 10 percent interest (UD 8.) Burnett used his contractor’s license to allow an unlicensed contractor, AD Liddell, to perform work as a contractor under LDCP (UF 10). Burnett does not dispute that he was a co-signatory on LDCP’s business bank account (UF 11.)

       There is no dispute that LDCP was paid $1,000 on December 6, 2019, from “Ms. Washington;” $1,000 from Blue Sky Escrow, Inc. for a roofing project on December 23, 2019; another $11,200 from Blue Sky Escrow, Inc. as payment for the roofing project; and on August 10, 2020, Burnett transferred $500 from Burnett’s business bank account to LDCP’s business bank account (UF 16, 17, 18.)

 

 

B.      The alleged statutory violations

       All three causes of action are based on the allegation that AD Liddell’s conduct violated Gov Code section 1090 which bars county officers or employees from having financial interests in any contract made by them in their official capacity, nor can they be purchasers at any sale or vendors at any purchase made them in their official capacity. (Gov. Code, § 1090.) Contracts and purchase orders and approval of payment made in violation of section 1090 may be avoided at the request of any party other than the financially interested official (Gov. Code, § 1092.) Payments made by a public entity pursuant to a contract tainted by a conflict must be refunded to the public entity. (Id.)

       Thus, in determining whether a violation of the conflict-of-interest statute has occurred, “a court must identify (1) whether the defendant government officials or employees (AD Liddell) participated in the making of a contract in their official capacities and (2) whether the defendants had a cognizable financial interest in that contract.” (People v. Dawson (2021) 69 Cal.App.5th 583, 590. Any exceptions for remote or minimal interests must be raised as an affirmative defense. (Id.)

C.      The evidence

1)      District’s request for judicial notice

       The Court grants the District’s request for judicial notice of court records filed in this action such as the complaint, Burnett’s answer, the notice of entry of default against AD Liddell, and the order granting Plaintiff leave to amend to correct a mistake in the name and designation of Defendants. (Evid. Code, § 452(d).) The Court also grants the District’s request for judicial notice of the Certification of Records of the Contractors State License Board for Shelby Development and LDCP. (Evid. Code, § 452(c).

2)      Plaintiff’s objections to the declaration of AD Liddell

       The District argues that as a defendant in default, AD Liddell is “out of court” and may not further participate in this litigation without making a motion to vacate the default against him. The District contends that AD Liddell’s declaration is contrary to his sworn testimony, which precludes his declaration as evidence in opposition to the motion.  

       The District cites Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc. (1984) 155 Cal.App.3d 381 which is inapposite. The plaintiffs in that action obtained default against Kearney Mesa, a car dealer, for fraudulent misrepresentation. The trial court correctly precluded Kearney Mesa from participating in further proceedings to contest the default judgment against it, given it was in default.  A defaulting defendant is not entitled to take any further steps in the cause affecting plaintiff's right of action and “would not be heard for the purpose of interposing any denial or affirmative defense.” (Devlin at 385–386). Here, AD Liddell is participating as a witness in the action against Burnett and is not asserting his own denials or affirmative defenses.

       The District’s reliance on Harbour Vista, LLC v. HSBC Mortgage Services Inc. (2011) 201 Cal.App.4th 1496 is similarly misplaced. The action arose from Harbour Vista’s quiet title action to establish its ownership interest in a condominium that it purchased at a foreclosure sale. (Harbour Vista at 1500.) Harbour Vista obtained default against HSBC Mortgage Services who failed to answer the complaint. (Id.) The trial court erroneously precluded HSBC from participating in the default prove-up hearing because the quiet title statute required the court  "in all cases [to] require evidence of plaintiff's title and hear such evidence as may be offered respecting the claims of any of the defendants, other than claims the validity of which is admitted by the plaintiff in the complaint. (Harbour Vista at 1501–1502.) Thus, HSBC was statutorily permitted to participate at the prove-up hearing although it was in default. (Harbour Vista at 1504.)

       Finally, Sass v. Cohen (2020) 10 Cal.5th 861 on which the District also relies affirms the general proposition that in an ordinary default, a defaulting defendant has no right to participate in the judgment hearing. (Sass v. Cohen (2020) 10 Cal.5th 861, 882.) The case does not bear on AD Liddell’s capacity to serve as a witness in Burnett’s defense of claims asserted by the District. Accordingly, the District’s objection to AD Liddell’s declaration as a whole is OVERRULED.

       While the District correctly argues that a witness may not submit a declaration contrary to sworn deposition testimony, the District did not identify any deposition testimony by AD Liddell that contradicted his declaration.  (D’Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 20).

       The District is generally correct that that a defaulting defendant is deemed to have admitted the allegations in the complaint, however, more specifically, “the defendant who fails to answer admits only facts which are well pleaded.” (Vasey v. California Dance Co. (1977) 70 Cal.App.3d 742, 749.) The cases on which the District relies do not broadly preclude AD Liddell’s evidentiary testimony that is not well pleaded in the complaint. The District did not identify specific material allegations presumably admitted that contradict AD Liddell’s declaration.

#1. Overruled. AD Liddell’s knowledge of Burnett’s background is supported by his assertion that he has known Burnett since high school.

#2-5. Overruled. AD Liddell’s knowledge of Nathan Holt’s (“Chief Holt”) changes in department procedure once he became the Chief Facilities Officer in September 2017 and Chief Holt’s selection of Burnett as one of the vendors assigned to an Open Purchase Order for construction is supported by adequate foundation as this occurred during AD Liddell’s tenure. He was appointed in 2015.

#6. Sustained. What Chief Holt told AD Liddell is hearsay.

#7- 18. Overruled. AD Liddell’s familiarity with the process regarding the payment of invoices, necessary approvals, selection of vendors, and his lack of authority to approve invoices, are supported by adequate foundation given his role as Assistant Director. AD Liddell affirms that the job description submitted by the District as Ex. 3 supports his familiarity with the methods and procedures of the maintenance program, including “initiating requisitions” and placing orders in accordance with department policy. (Notably, the job description does not expressly or explicitly address AD Liddell’s authority (or lack thereof) to approve invoices for payment, but rather to plan, schedule, coordinate, and control financial management “within authorized budget allocations.” Plaintiff’s Evidence, Exhibit 3.)

#19-32. Overruled. AD Liddell’s denials of the assertions made by Chief Holt are adequately supported by his job description.

3)      The District’s objections to the declaration of James Burnett

#1-2. Overruled. Burnett incorporated Shelby Development Company on February 25, 2015, and shares were issued only to him and his wife. He has personal knowledge of who had a financial interest in his own company.

#3. Sustained. Hearsay as to what AD Liddell told him.

#4, 5, 6. (Not identified)

#7, 11. Overruled. Burnett can testify as to the limits of his awareness.

#8-9. Sustained. Hearsay and no foundation for Burnett’s knowledge of the work AD Liddell performed under Liddell Development’s contractor’s license, or AD Liddell’s use of the company checking account.  

#10. Sustained. Lacks foundation for Burnett’s knowledge of Liddell’s involvement in the process for approving BP as a COVID-19 Sanitizer. He avers he is not aware of the internal processes that occur in connection with processing and paying his invoices. (Burnett decl. ¶ 14.)

#12, 15, 17 Sustained. Lacks foundation for Burnett’s knowledge disputing Chief Holt’s assertions. He avers he is not aware of the District’s internal payment process. He states he was not a District employee.

#13-14, 16. Overruled. Burnett states his recollection of being assigned a job by Chief Holt and AD Liddell’s leave of absence.

       The relevance of Shelby’s involvement in Burnett’s company, which was authorized to conduct business in California as of November 30, 2017, is unclear. (Burnett Declaration, ¶ 31.) AD Liddell’s involvement as a named officer is irrelevant unless Liddell directed contracts to Shelby, which is not a material fact. (Facts 12-13.)

       The District has not explained the relevance of roof repair work done by AD Liddell’s company, LDCP, for Lakeyshua Washington’s roof. (Fact 13-17.) Ms. Washington’s connection with the District, or whether AD Liddell directed that particular contract as a representative of the District to LDCP or Burnett, is not evident. Burnett testified that she was a principal at Compton Unified School District. (Plaintiff’s Ex. 55, 244:10-14.) This was Lidell’s “insurance job.” Burnett had nothing to do with that job. (Id. 245:18-20.)

       Burnett’s transfer of $500 from BP Builder’s business account to LDCP’s business account or the payment’s relationship with the District is not clearly relevant.

       The District asserts that AD Liddell authorized District maintenance repairs by Burnett. (Fact 20.) This fact appears to be material to the District’s allegations; however, the assertion is flatly denied by Burnett. The assertion that AD Liddell requested and obtained the issuance of an open purchase order for carpentry repairs throughout the district for work to be performed by Burnett in the amount of $75,000 is not supported. The invoices supplied by the District are directed to BP Builders and identifies “Mr. Martin Liddell CUSD” in the “customer information;” however, this does not establish that the work was negotiated, approved, solicited, negotiated, and authorized by AD Liddell. His declaration denies he had any authority to authorize payments. (Plaintiff’s Evidence, Ex. 54.) The evidence in support of Facts 21- 51, does not establish that AD Liddell engaged in such conduct.

 

 

V.      CONCLUSION

       Based on the numerous material issues of fact that remain in dispute, Plaintiff’s motion for summary adjudication is DENIED.  Plaintiff has not met its burden of establishing it is entitled to adjudication of the issues that Burnett violated conflicts-of-interest provisions and is required to disgorge or pay restitution. (Code Civ. Proc., § 437c(p)(1).)