Judge Ralph C. Hofer, Case Number: EC067583, Date: 2023-11-17 Tentative Ruling

Plaintiff Pointe Assets, LLC, the successor in interest to Catalina Media Development, LLC (CMD), alleges that CMD owns real property in Burbank, commonly referred to as “The Pointe,” an office building and parking garage. Plaintiff alleges that in early 2006, plaintiff entered into an agreement with Krismar Construction Co. concerning construction of the Pointe, which, in turn, for the benefit of CMD, entered into a subcontract with defendant Benson Industries, Inc. (Benson) to design and build an exterior curtain wall glazing system. Benson then hired for the benefit of CMD, defendant Viracon, Inc. (Viracon) which manufactured and supplied certain IG Units for the curtain wall glazing system. Plaintiff alleges that a sealant for the system, PIB, was manufactured and supplied to Viracon by defendants Quanex I.G. Systems, Inc. (Quanex) and/or Truseal Technologies, Inc. (Truseal).

Plaintiff alleges that the project was substantially complete in April of 2009, but in April of 2016 a tenant notified CMD’s property manager of a dirty window. It was then discovered that the problem was not dirt, but film formation comprised of PID forming between the panes of glass in the sealed IG units, so that there is no way to clean the film formation or repair the PIB without damaging the IG Units, and the exterior curtain wall glazing system.

The pleading alleges that Benson acknowledged in the subcontract that CMD is a third-party beneficiary of that contract, and plaintiff alleges breaches of the warranties of that subcontract, as well as various theories of product liability, negligence, and breach of warranty against defendants.

On April 13, 2018, the court heard a motion to compel arbitration brought by defendant Benson. There were two “joinder” documents filed, one by defendants Quanex and Truseal, and second one by defendant Viracon.

At the hearing, the court was informed of the dismissal, and plaintiff argued that the motion to compel arbitration was accordingly moot, as defendant Benson had been dismissed and the only two defendants with an arbitration agreement were no longer in the case.

The court informed counsel that several defendants had joined in the motion to compel arbitration, and the court would continue the motion to compel arbitration from the other defendants concerning whether the motion was moot or was to go forward.

Ultimately, on July 20, 2018, defendant Viracon filed a motion to compel arbitration, which was set for hearing on November 30, 2018. On July 23, 2018, defendants Quanex and Truseal filed a motion to compel arbitration and joinder in Viracon’s motion, which was also set for hearing on November 30, 2018.

The matters were continued to December 14, 2018, and heard. The court granted the motion by defendant Viracon, and ordered: “Plaintiff Pointe Assets, LLC and Defendant Viracon, Inc. are ordered to arbitrate this matter according to the Agreement set forth in the subject Subcontract.”

The matter was submitted to arbitration, and the arbitration panel issued and served its award on December 8, 2022. The award was in favor of claimant Pointe Assets and against Viracon in the amount of $20,018,729.63, plus interest from the date of the award until the award was entered as judgment.

Plaintiff filed a petition to confirm the arbitration award. After several continuances and proceedings with respect to defendant Viracon’s efforts to file documents in opposition to the motion under seal, the motion was heard on its merits on March 24, 2023.

The petition to confirm the arbitration award was granted, and the court ordered judgment to be entered in conformance with the Final Award in the Arbitration Matter of Pointe Assets, LLC v. Viracon, Inc., Executed December 7, 2022, and dated December 8, 2022.

2. Prejudgment interest of 10% per annum (simple) from December 9, 2022 to 24 March 24, 2023, the date of the Court's confirmation of the award (106 days), at a daily rate 25 of$3,748.72 for a total of $397,364.32; and

On July 28, 2023, the court heard a motion brought by defendant Viracon for an order striking plaintiff’s memorandum of costs, which was granted in part. In connection with that motion, the court’s tentative ruling ordered:

“The Court orders the stay of this matter lifted from the filing of the Motion for Order Striking Plaintiff’s Memorandum of Costs on May 31, 2023 through and including the date on which the Motion is resolved, which the Court anticipates will be decided the hearing date of July 28, 2023. Once the Motion is decided, the total stay of this action as between plaintiff Pointe Assets, LLC and defendant Viracon, Inc. is ordered immediately reinstated.”

Plaintiff Pointe Assets seeks to lift the total stay ordered in this action, arguing that, pursuant to the court’s inherent power, the court should lift the stay in the interests of justice because the stay has served its purpose and while the stay continues in place, evidence that plaintiff needs to prosecute the case against defendants Quanex and Truseal continues to spoliate.

"shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.”

As noted above, while an arbitration has been conducted in accordance with the order to arbitrate, the court’s order confirming the arbitration award issued in the arbitration is currently on appeal.

The court has extended the stay in this matter while the appeal concerning the arbitration award is pending due to the circumstance that the arbitration award against defendant Viracon appears to encompass all damages suffered by plaintiff as the result of the alleged problems which occurred during the course of the construction project involving all named defendants, and that certain potential outcomes on appeal would impact the scope of this action going further, if at all.

Under CCP section 128 (a), “Every court shall have the power to do all of the following:…(3) To provide for the orderly conduct of proceedings before it…(8) To…control its process and orders so as to make them conform to law and justice.”

As argued in the opposition filed by Viracon, there is a strong argument that the resolution of the appeal in this case will obviate the need for any further trial court proceedings in this matter because if the court’s order confirming the arbitration award is affirmed, as discussed above, plaintiff would have no uncompensated damages, and, if the court’s order is reversed on the ground plaintiff lacks standing to pursue the subject claims, such a ruling would require a dismissal of the case against all defendants.

Plaintiff argues that this case is not subject to the automatic stay on appeal under CCP § 916 (a) (“…the perfecting of an appeal stays proceedings in the trial court upon the judgment or order appealed from or upon the matters embraced therein or affected thereby, including enforcement of the judgment or order, but the trial court may proceed upon any other matter embraced in the action and not affected by the judgment or order.”)

However, this argument is somewhat limited, as defendant Viracon in its opposition to the motion argues that the stay imposed by section 916 would apply to any further court proceedings involving Viracon, such as plaintiff’s proposed depositions of current and former Viracon employees.

It does appear that to the extent plaintiff seeks to prosecute the action in a manner which would involve Viracon, rather than in a manner limited to the involvement of the non-arbitrating, non-appealing defendants Quanex and Truseal, such further proceedings would run the risk of violating the automatic stay on appeal.

Viracon relies on Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, in which the California Supreme Court addressed the issue of whether an appeal from the denial of a special motion to strike under the anti-SLAPP statute effects an automatic stay of the trial court proceedings. The Court concluded that the automatic stay applied to stay all further trial court proceedings on causes of action affected by the anti-SLAPP motion, and that the trial court had accordingly lacked subject matter jurisdiction during the pendency of appeal, so that a judgment for plaintiffs was void. As noted above, Viracon relies on its assessment of the possible outcomes on appeal and relies on the Court’s observations in Varian, that:

“In determining whether a proceeding is embraced in or affected by the appeal, we must consider the appeal and its possible outcomes in relation to the proceeding and its possible results….A trial court proceeding also affects the effectiveness of an appeal if the possible outcomes on appeal and the actual or possible results of the proceeding are irreconcilable.”

Here, Viracon makes a strong argument that Viracon’s further participation in the action is subject to a stay on any theory. It appears that what is specifically proposed by plaintiff with respect to the fading memories of witnesses, are depositions of six current or former Viracon employees, Rick Voelker, Eric Stein, Keith Firstenberg, Charles Boyer, Matt Bergers, and Mark Cassen. Viracon indicates that the first three of these witnesses have testified extensively about the issues in the arbitration, and the last three have testified about the matter in prior litigation. In any case, it is not clearly established by plaintiff what testimony these Viracon witnesses will give which would be necessary to prove plaintiff’s theories of liability against Quanex or Truseal. Plaintiff also does not appear to propose that Viracon in fact be excluded from further involvement in discovery while the appeal is pending.

Plaintiff primarily argues that the court should exercise its discretion to lift the stay because evidence plaintiff needs to pursue its case against Quanex and Truseal is growing stale.

Plaintiff argues that the memories and locations of critical witnesses employed by, or formerly employed by, Quanex, Truseal and Viracon continue to dissipate, and that physical evidence is deteriorating as the Insulated Glass Units (IGUs) which are the subject of this case are removed from the Pointe building for Quantex’s destructive testing.

With respect to the witnesses from whom plaintiff seeks to obtain discovery, plaintiff argues that four key witnesses and former Quanex and Viracon employees have either retired or otherwise ceased their employment with these defendants, including during the course of the stay in this action. Plaintiff lists a total of ten witnesses. As noted above, six of these witnesses are Viracon employees or former employees. Defendants indicate that any purported retirements occurred prior to the current extension of the stay, so no urgency is established.

Plaintiff submits no evidence with this motion explaining why the memories of any particular witness, fading or how access to that witness has become more difficult. The only evidence submitted in support of the motion, in fact, is a declaration of counsel, which merely attaches various documents from the file in this action, and correspondence from opposing counsel. [Allayee Decl., paras. 1-9]

Defendants Quanex and Truseal also argue in their opposition that plaintiff here has suggested no other pressing reason to begin depositions other than the passage of time, and also emphasizes that plaintiff has already deposed the majority of these individuals in the arbitration or other litigation, giving plaintiff access to prior testimony on the topics at issue and reducing the risk that critical knowledge will be lost in the time remaining for Viracon to complete its appeal. Defendants argue that plaintiff has at its disposal all the means it needs to rebut, impeach, and refresh the recollections of the witnesses based on the prior depositions and the significant discovery in the arbitration proceeding, so that lifting the stay to conduct further discovery at this point in this litigation is not necessary.

The court is not persuaded from plaintiff’s showing and the overall circumstances that there is any established risk of plaintiff being unable to appropriately depose any particular witness in this matter based purely on speculative argument concerning the passage of time.

With respect to the IGUs, plaintiff also fails to submit evidence supporting its argument that this physical evidence is further deteriorating while the appeal is pending. There is no evidence submitted concerning the condition of the IGUs, and no declaration of a witness with expertise indicating the processes by which such purported deterioration is occurring. While plaintiff cites to case law concerning appropriate remedies in circumstances where intentional spoliation of evidence has occurred, there is no evidence which would support a finding that defendants in this case have engaged in such intentional misconduct.

In addition, defendants in opposition have pointed out circumstances entirely overlooked in the moving papers concerning the steps taken in this litigation to preserve evidence, plaintiff’s role in the necessary destruction of evidence, and this court’s orders pursuant to which plaintiff has waived any argument that defendants have engaged in spoliation of evidence.

As defendants argue, plaintiff, as the building owner, made the decision to proceed with the reglaze of the Pointe building, and was in the best position to select and preserve its own IGUs for testing and evidence in their case against defendants.

Defendants submit the detailed order in this matter entered by the court on September 2, 2020 with respect to the obligations of the parties with respect to the preservation of evidence in this matter. [Fisher Decl., Ex. 2]. This order describes in detail the obligations of each party with respect to the preservation of evidence, and specifically the transportation, storage and testing of the IGUs.

“Plaintiff was given the opportunity to share in the costs of transporting and storing the above-described IGUs. Plaintiff rejected this opportunity. Accordingly: (i) Defendants, without any input from Plaintiff, shall work with one another to arrange for transportation and storage of the IGUs; (ii) all costs of transportation and storage shall be borne by Defendants, and; (iii) Plaintiff has now waived any spoliation argument, chain of custody argument, and potential sanctions, including in the form of adverse rulings, resulting from Defendants' transportation and storage of IGUs.”

Plaintiff accordingly has waived any argument that it is entitled to a ruling in its favor based on its argument that there has been spoliation of evidence in connection with the IGUs.

The order also describes the testing to be conducted, including the obligation to notify other parties, and the obligation to video record all testing. [Fisher Decl., Ex. 2, Order, p. 2:13-23].

4. Pursuant to the September 2, 2020 Order, Quanex selected units for destructive testing and storage, which units were transported to Summit Glass’s facility in Anaheim, California, and which remain in storage.

5. On June 1, 2021, my partner, Alexandra French, notified counsel for all parties by email of Quanex’s intention to commence its destructive testing during the week of July 21, 2021. A true and accurate copy of Ms. French’s email is attached hereto as Exhibit 3.

The opposition indicates that all required information, video tapes, and evidence have been preserved and remains available for examination by plaintiff as soon as the stay in this matter is lifted.

Given the placement of these safeguards concerning this specific evidence, and the parties’ apparent compliance with them and this court’s orders, the court does not find that there has been shown any reason to lift the stay based on a speculative argument that physical evidence is deteriorating during the stay.

Overall, the court continues to find that the stay is appropriate to accommodate the ends of justice in this matter, given the potential outcomes of the appeal and the absence of any persuasive evidence that there will be any prejudice to plaintiff while the stay is pending.

The TOTAL STAY of this action is ORDERED TO REMAIN IN FULL EFFECT. No further motions to lift the stay while the stay is in effect may be filed without advance leave of court based on a showing of good cause.

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