Judge: Michelle C. Kim, Case: 23STCV18554, Date: 2024-11-13 Tentative Ruling
Case Number: 23STCV18554 Hearing Date: November 13, 2024 Dept: 78
Superior Court of California
County of Los Angeles
Department 78
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STICE COMPANY, INC., Plaintiff(s), vs. SKANSKA USA BUILDING, INC., et al., Defendant(s). | Case No.: | 23STCV18554 (R/T 21STCV33416, et al.) |
Hearing Date: | November 13, 2024 | |
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[TENTATIVE] ORDER GRANTING MOTION TO STAY PROCEEDINGS | ||
I. BACKGROUND
Plaintiff Stice Company, Inc. (“Stice”) filed this action against Skanska USA Building, Inc. (“Skanska”), CHA Hollywood Medical Center, LP (“CHA”), and Zurich American Insurance Company (“Zurich”) regarding a construction contract for earthwork that Stice entered with Skanska (the “Subcontract”) as part of the construction of a work of improvement located at 1300 North Vermont Avenue in Los Angeles, California owned by CHA. Stice alleges it performed all of its obligations under the Subcontract, and that Skanska has failed to pay Stice for the value of the work in breach of the contractual agreement. Stice seeks recovery on a payment and performance bond issued by Zurich.
Stice’s action is related to twenty-one other matters, with Case No. 21STCV33416 (the “Herrick Action”) as the lead case. (Min. Order, Jan. 11, 2024.)
On March 26, 2024, the Hon. Jill Feeney ordered Case No. 21STCV33416 and all related cases stayed in their entirety pending a ruling on whether these cases will be deemed complex. (Min. Order, March 26, 2024.)
On October 15, 2024, the stay related to the motion to deem the matters complex was lifted as to all the related cases stayed by the March 26, 2024 Order. (Min. Order, Oct. 15, 2024.)
On October 11, 2024, Skanska filed the instant motion seeking to stay the action pending resolution of the Herrick Action currently pending before the American Arbitration Association. Defendant Zurich joins Skanska’s motion to stay.
On October 31, 2024, Stice filed an opposition to the motion.
On November 5, 2024, Skanska filed a reply.
II. REQUEST FOR JUDICIAL NOTICE
Skanska requests the Court take judicial notice of (1) Skanska’s First Amended Cross-Complaint, filed in LASC Case No. 21STCV33416 on October 9, 2023, (2) Stice’s complaint, (3) the Herrick Complaint in 21STCV33416, (4) Herrick’s Amended Complaint in 21STCV33416, and (5) the Stipulation and Order Staying Action Pending Arbitration, entered in LASC Case No. 21STCV33416 on March 11, 2022.
The request for judicial notice is denied, because it is unnecessary for the Court to take judicial notice of matters on its own docket.
III. DISCUSSION
Parties’ Arguments
Skanska argues that the Subcontract between Skanska and Stice provides that in case of a dispute between the parties, for which the owner CHA may be responsible, then Stice would be bound by the procedure and final determination specified in Skanska’s contract with CHA (the “Prime Contract”), and Stice would stay or suspend any other action or proceeding with respect to its claims and “will pursue no independent litigation with respect thereto, pending final determination of any resolution procedure” between Skanska and CHA. Skanska argues the Prime Contract is pending in arbitration, and that Skanska, Cha and fifteen other subcontractors are currently engaged in arbitration. Skanska asserts that it is passing through and prosecuting each of its subcontractors’ claims, including Stice’s claims, and that the express terms of the Subcontract mandates a stay pending resolution of the arbitration.
In opposition, Stice argues it performed all its obligations under the Subcontract and that after it received notice of the termination of the Prime Contract, Stice served Zurich with its payment bond claim seeking payment. Zurich denied the claim on the grounds that payment by CHA is a condition precedent to Skanska’s obligation to issue payment to Stice, and that Skanska will pay Stice as soon as it receives payment from CHA for Stice’s work. Stice contends the contractual language agreeing to stay the action is unenforceable, because it is an indefinite stay that violates the holdings of Wm. R. Clarke Corp. v Safeco Ins. Co. (1997) 15 Cal.4th 882 and Crosno Constr., Inc.v. Travelers Cos. & Sur. Co. of Am. (2020) 47 Cal.App.5th 940 (Crosno). Additionally, Stice contends the contract provision affecting Stice’s claim is void and unenforceable because Skanska and Zurich have not established that Stice executed a waiver and release of its claim for payment of the bond under Civil Code section 8122. Stice asserts that the purpose of the Payment Bond is to ensure prompt payment, and that no result in arbitration would change Skanska’s or Zurich’s liability to Stice under the Subcontract or Payment Bond.
In reply, Skanska argues Crosno is distinguishable because Crosno dealt with a public works project, and that no appellate court has yet considered the applicability of Crosno to private works when there are additional remedies to the subcontractor. Skanska argues Crosno is also distinguishable because Crosno had a broad pay-when-paid provision, whereas section 13.4.2 of the Subcontract is a liquidating and pass-through agreement.
Discussion
Here, the parties dispute the resolution provision in Paragraph 13.4.2 of the Subcontract. Stice’s arguments against enforcement of this provision is that it is a “pay-when-paid” clause. Paragraph 13.4.2 states, in relevant part:
“In the event any dispute or claim between Contractor and Owner which directly or indirectly involves Work performed or to be performed by Subcontractor, or in the event of any dispute or claim between Contractor and Subcontractor caused by or arising out of conduct for which the Owner may be responsible, Subcontractor agrees to be bound to Contractor and Contractor agrees to be bound to Subcontractor to the same extent the Contractor is bound to Owner by the terms of the Owner Contract and by all procedures and resulting decisions, findings, determinations and/or awards made thereunder by the person or entity so authorized in the Owner Contract, or by an administrative agency, board, court of competent jurisdiction, or arbitration. The Contractor's determination of whether any Subcontractor claim arises out of the Owner Contract or is one for which the Owner may be responsible, shall be final and conclusive. If any dispute or claim of Subcontractor is prosecuted or defended by Contractor together with any of Contractor's disputes or claims, and Subcontractor is not directly a party, Subcontractor agrees to cooperate fully with Contractor and to furnish all documents, statements, witnesses and other information required by the Contractor for such purpose and shall pay or reimburse Contractor for all expenses and costs, including reasonable attorneys' fees incurred in connection therewith, to the extent of Subcontractor's interest in such claim or dispute.
Subcontractor agrees to be bound by the procedure and final determination as specified in the Owner Contract and agrees it will not take, or will stay or suspend, any other action or proceeding with respect to such claims (including, but not limited to, actions or proceedings commenced pursuant to Federal Miller Act, lien statutes or other state stop notice, bond or payment statutes) and will pursue no independent litigation with respect thereto, pending final determination of any resolution procedure between Owner and Contractor. […].”
(Childress Decl. Exh. N.)
The Court has reviewed Crosno Constr., Inc. v. Travelers Cas. & Sur. Co. of Am.¿(2020) 47 Cal. App. 5th 940 &¿Wm. R. Clarke¿Corp. v. Safeco Ins. Co. (1997) 15 Cal. 4th 882. Stice’s restatement of the law that, pursuant to Crosno and Wm. R. Clarke, a pay-when-paid provision is generally void as a matter of public policy appears to be correct. However, this Court’s reading of Paragraph 13.4.2 is that it is pass-through provision, rather than a provision containing a “pay-when-paid” language for Crosno and Wm. R. Clarke to be directly applicable. Notably, Crosno did not address the effect of pass-through provisions nor the application of section 8122 to such provisions, because the effect of pass-through provisions was not before the Crosno court. (Crosno, 47 Cal.App.5th 940 at 331.)
When there is no privity of contract between the owner and subcontractor, "California law protects the interests of the subcontractor by providing that a subcontractor's claim “passes through” the general contractor to the owner." (Sehulster Tunnels/Pre-Con v. Traylor Brothers, Inc./Obayashi Corp. (2003) 111 Cal.App.4th 1328, 1348.) "Consequently, by contract or settlement agreement, a general contractor and a subcontractor can agree that the contractor will pass through the subcontractor's claims against the contractor to the owner." (Ibid.) The Court finds no reason to not stay the action pursuant to the Subcontract. In terms of Stice’s contention of waiver, as pointed out by Skanska, there was a stay on the matter from March 26, 2024 to October 15, 2024. The Court therefore cannot find that Skanska unreasonably delayed in filing the motion. Further, the Court finds no prejudice arising from an “indefinite” stay, because Skanska provides that the arbitration date for the evidentiary hearing to commence is set for September 29, 2025. This is sooner than any date this Court could have potentially set trial for this matter.
IV. CONCLUSION
Skanska’s motion to stay the action is GRANTED.
Moving Party is ordered to give notice.
DATED: November 12, 2024
__________________________
Hon. Michelle C. Kim
Judge of the Superior Court
PLEASE TAKE NOTICE:
• Parties are encouraged to meet and confer after reading this tentative ruling to see if they can reach an agreement.
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