Judge: Michelle C. Kim, Case: 23STCV19796, Date: 2024-11-08 Tentative Ruling

Case Number: 23STCV19796    Hearing Date: November 8, 2024    Dept: 78

Superior Court of California¿ 

County of Los Angeles¿ 

Department 78¿ 

¿ 

The Motion to Stay Action Pending Arbitration filed by Defendant Skanska USA Building Inc. is GRANTED.

Moving party to provide notice. 

FACTUAL BACKGROUND 

This action arises from the construction of the Acute Care Services Replacement Hospital Building on the campus of the Hollywood Presbyterian Medical Center. Plaintiff McKinley Equipment Corporation (“McKinley”) is a contractor and builder who entered into a written agreement with defendant Skanska USA and Does 1 through 25 to supply and install vertical reciprocating lifts and related services at Acute Care Services Replacement Building, Hollywood Presbyterian Medical Center. McKinley now alleges breach of contract, foreclosure of mechanic’s lien, quantum meruit, recovery on contractor’s license bonds, and recovery on payment bond.

PROCEDURAL HISTORY¿ 

On August 17, 2023, McKinley filed its Complaint against defendants CHA Hollywood Medical Center, L.P. (“CHA”), Skanska USA Building Inc. (“Skanska”), Zurich American Insurance Company, Liberty Mutual Insurance Company, Federal Insurance Company, Continental Casualty Company, Berkshire Hathaway Specialty Insurance Company, Fidelity and Deposit Company of Maryland, and Does 1 through 100, asserting fives causes of action: (1) Breach of Contract; (2) Foreclosure of Mechanic’s Lien; (3) Quantum Meruit; (4) Recovery on Contractor’s License Bonds; and (5) Recovery on Payment Bond.

Various cases, including this one, were determined to be related to LASC Case No. 21STCV33416—the Herrick lawsuit. (Declaration of Jaime N. Furst (“Furst Decl.”) ¶ 9.) On March 15, 2022, The Herrick Corporation initiated arbitration with the American Arbitration Association, in the case styled, The Herrick Corporation v. Skanska USA Building Inc., et al., Case No. 01-22-0001-1030 (the “Arbitration”). (Id. at  ¶ 11.) There are currently twenty-three parties in the Arbitration. (Id. at ¶ 12.)

Skanska has sought the voluntary consent of all parties to the related cases to stay their respective actions pending the Arbitration, and, to date, seven of the related cases are stayed. (Id. at ¶¶ 12, 15.) Skanska, however, has not been able to obtain agreement from McKinley despite meet and confer efforts. (Id. at ¶¶ 16-19.)

Skanska now moves for an order staying this action pending the resolution of the Arbitration. Skanska filed its motion on October 10, 2024, to which McKinley opposed on October 18, 2024, and which Skanska replied on November 1, 2024. Defendants Zurich American Insurance Company, Liberty Mutual Insurance Company, Federal Insurance Company, Continental Casualty Company, Berkshire Hathaway Specialty Insurance Company, and Fidelity and Deposit Company of Maryland filed their Joinder to Skanska’s motion.

DISCUSSION¿ 

                          I. Request for Judicial Notice

The Court grant Skanska’s request for judicial notice as to Exhibits 1 through 5 (request numbers 1 through 5) pursuant to Evidence Code section 452, subdivision (d).

                       II. Motion to Stay

“[A] court ordinarily has inherent power, in its discretion, to stay proceedings when such a stay will accommodate the ends of justice.” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 141 [citing People v. Bell (1984) 159 Cal.App.3d 323, 329.]) “[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.” (Landis v. North American Co. (1936) 299 U.S. 248, 254; OTO, L.L.C., supra, at p. 141.)  

Skanska moves to stay this action on the grounds that the written subcontract between McKinley and Skanska requires this action to be stayed while Skanska prosecutes the same claims in McKinley’s Complaint on a passthrough basis in the Arbitration. Specifically, on or about February 13, 2019, Skanska and McKinley entered into subcontract No. 7318001-000BP1402 in which McKinley agreed to supply and install vertical reciprocating lifts for the Acute Care Services Replacement Hospital Building (the “Subcontract”). (Gordon Childress Declaration (“Childress Decl.”) ¶ 4, Ex. 7.) Under Section 13.4.2 of the Subcontract, McKinley and Skanska agreed that Skanska had the right to prosecute any claims McKinley may have related to the construction of when those claims are "caused by or arising out of conduct for which [CHA, the owner] may be responsible." (Id. at ¶ 4, Ex. 7, § 13.4.2.) Overall, Section 13.4.2 provides as follows:

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. The timely presentation, cooperation and participation by Subcontractor, in any determination of a dispute under the Owner Contract, including any and all appeals under the dispute provision(s) of the Owner Contract, shall be conditions precedent to pursuit of any action or proceeding by Subcontractor against Contractor with respect to any such claim or dispute. It is expressly understood and agreed that as to any and all claims asserted by Subcontractor in connection with this Project arising from acts of or fault of the Owner, the Contractor shall not be liable to the Subcontractor for any greater amount than Owner is liable to Contractor, less any mark ups or costs incurred by the Contractor. As to any claims asserted by the Subcontractor for or on account of acts or omissions of the Owner, or its agents or design professionals, at the sole option of Contractor, Subcontractor agrees to prosecute such claims in Contractor's name. Subcontractor shall have full responsibility for the preparation and presentation of such claims and shall bear all expenses thereof, including attorneys' fees.

(Ibid. Emphasis added.)

Based on provisions of Section 13.4.2, Skanska argues that upon its determination that McKinley’s claims may be the responsibility of CHA, and upon Skanska agreeing to prosecute those claims against CHA on McKinley’s behalf, Mckinley must stay any independent litigation. In addition, Skanska argues that its motion should also be granted based on the Court’s inherent authority to stay a lawsuit where it is in the best interest of judicial economy and efficiency to do so.

In opposition, McKinley puts forth eleven reasons why the Court should not stay the action. Specifically, McKinley argues that (1) Section 13.4.2 is inapplicable because no work has been performed and the equipment has not been installed; (2) Skanska waived its right to stay by waiting over a year after the lawsuit was filed to bring its motion; (3) there is an exception to arbitration for mechanic’s liens foreclosure actions; (4) Mckinley’s claim is not a pass-through claim; (5) prejudice to McKinley by further delaying its ability to recover payment for equipment already fabricated but not yet installed; (6) the dispute resolution provision lacks mutuality; (7) judicial resolution would be more efficient than staying the action; (8) Section 13.4.1 does not fully detail the method of dispute resolution for disputes between Contractor and Subcontractor; (9) staying the action would contravene public policy favoring prompt payment to contractors and suppliers; (10) any attempt to stay the action based on "pay when paid" or "pay if paid" provisions in the subcontract is unenforceable; and (11) the sureties on the payment bond and the license bond surety are not subject to  arbitration as there is no agreement with them to arbitrate.

Skanska responded to McKinley’s opposition by addressing each argument in turn. 

The Court finds that staying this action is in the interest of judicial economy and efficiency as seven of the related cases are already stayed pending the Arbitration, and the claims that Skanska is prosecuting and that will be decided in the Arbitration are the same claims that Mckinley is raising in this action. The Court finds that McKinley fails to adequately address why it should not be bound by Section 13.4.2 of the Subcontract, which requires McKinley to stay owner-related disputes upon notice of Skanska’s intent to prosecute McKinley’s claims. McKinley’s argument that Section 13.4.2 is inapplicable because it has yet to perform work, including installation of the equipment, is unpersuasive as McKinley’s cites to the provision in Section 13.4.2 referring to disputes “which directly or indirectly involves Work performed or to be performed by Subcontractor”; however, McKinley overlooks the rest of that provision, which states, “or in the event of any dispute or claim between Contractor and Subcontractor caused by or arising out of conduct for which Owner may be responsible.” As to McKinley’s other arguments, the Court also finds them unpersuasive as boilerplate or unsupported.

Accordingly, the motion to stay is GRANTED.  The Court sets a Status re: Arbitration for _______.

Moving Party to give notice.

DATED: November 8, 2024 

__________________________ 

Hon. Michelle Kim 

Judge of the Superior Court