Judge Randolph M. Hammock, Case Number: 22STCV39855, Date: 2023-08-21 Tentative Ruling

Judge: Randolph M. Hammock, Case: 22STCV39855, Date: 2023-08-21 Tentative Ruling

Plaintiff Eggs Unlimited LLC alleges that Defendant Michael Foods, Inc., intentionally induced third party Hen Haven, LLC—one of Plaintiff’s egg suppliers—to breach its contract with Plaintiff. The alleged contract between Plaintiff and Hen Haven required that Hen Haven deliver all eggs produced at its farm to Plaintiff. Plaintiff alleges that Hen Haven, however, has sold some eggs to Defendant Michael Foods. Plaintiff now brings causes of action against Defendant Michael Foods for (1) inducing breach of contract, (2) intentional interference with contractual relations, (3) intentional interference with economic advantage, and (4) negligent interference with economic advantage.

Defendant’s Motion to Stay Proceedings is DENIED based upon the grounds relied upon by the moving papers. However, this Court is willing to hear additional oral argument at the hearing as to why or why not this case should be stayed under this Court’s inherent powers.

This action is premised on Plaintiff Eggs Unlimited’s allegations that Defendant Michael Foods interfered with a contract between Plaintiff and third-party Hen Haven for the procurement of eggs from Hen Haven’s egg farm.

Notably, on October 2, 2023, Plaintiff and third-party Hen Haven will begin arbitration of a dispute regarding the underlying contract. Defendant contends the instant action should be stayed pending completion of that arbitration. Defendant asserts that “[a]bsent an enforceable agreement [between Plaintiff and Hen Haven], there is nothing for Michael Foods to interfere with or induce a breach of.” (Mtn. 3: 13-14.) If Plaintiff loses in arbitration, “this case becomes entirely moot.” (Id. 3: 23-24.)

Defendant first contends the stay is mandatory under Code of Civil Procedure section 1281.4. This section provides: “If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending 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.” (CCP § 1281.4.) This section also requires a stay where a party makes the request while an application to compel arbitration is pending before the court. (Id.)

As Plaintiff correctly argues, section 1281.4 is inapplicable here. This court did not order the arbitration between Plaintiff and third-party Hen Haven. This case is distinguishable from Defendant’s authority, Heritage Provider Network, Inc. v. Superior Ct. (2008) 158 Cal. App. 4th 1146, 1151, because in that case, the trial court first granted a motion to compel arbitration, then later denied a motion to stay the remainder of the litigation pending the outcome of that arbitration. It is likewise distinguishable from Seidman & Seidman v. Wolfson (1975) 50 Cal. App. 3d 826, 834, because there, the stay was based on the “implicit power of the court to stay the legal proceedings while arbitration is proceeding”—not the mandatory stay under section 1281.4.

Defendant then argues this court should exercise its inherent power to stay the proceedings. “’[A] court ordinarily has inherent power, in its discretion, to stay proceedings when such a stay will accommodate the ends of justice.’ (People v. Bell (1984) 159 Cal.App.3d 323, 329.) As the Court in Landis v. North American Co. (1936) 299 U.S. 248, 254, explained, ‘the 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.” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 141; see also Frieberg v. City of Mission Viejo (1995) 33 Cal.App.4th 1481, 1489 [“Trial courts generally have the inherent power to stay proceedings in the interests of justice and to promote judicial efficiency.”].)

Defendant maintains that it might incur “considerable expenses” as the parties’ engage in discovery and motion practice, only to have the case rendered moot if the arbitrator finds no contract existed between Eggs Unlimited and Hen Haven. This argument is unavailing.

That is because even if the arbitrator finds a contract did not exist between Plaintiff and Hen Haven, that does not moot this case. First, “a private arbitration award, even if judicially confirmed, may not have nonmutual collateral estoppel effect under California law unless there was an agreement to that effect in the particular case.” (Vandenberg v. Superior Ct. (1999) 21 Cal. 4th 815, 824.) There is no evidence such an agreement exists here.

Second, even if an arbitrator’s speculative finding that no contract existed could have preclusive effect, Plaintiff’s causes of action for intentional interference with prospective economic relations and negligent interference with prospective economic relations “do[] not require proof of a legally binding contract.” (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.)

For these reasons, there is no evidence a stay would conserve judicial resources or promote judicial efficiency. Rather, a stay would merely delay inevitable discovery and motion practice, but would not meaningfully reduce, consolidate, or conserve the same.

Defendant also moves for the issuance of a protective order to protect certain private and confidential information from disclosure. Courts have considerable discretion in granting and crafting protective orders. (Raymond Handling Concepts Corp. v. Superior Court (1995) 39 Cal.App.4th 584, 588.) The burden of proof is generally on the party seeking the protective order to show good cause for whatever order is sought. (Fairmont Ins. Co. v. Superior Court (2000) 22 Cal.4th 245, 255.)

The Parties agree that a Protective Order is appropriate and should be based on the Los Angeles County Superior Court’s Model Protective Order (the “Model Protective Order”). Plaintiff proposes the parties utilize the Model Protective Order with no substantive changes. Defendant, however, contends Plaintiff’s “unreasonably aggressive stance in written discovery in this action” has led to a “dispute about the terms of a Protective Order.” (Mtn. 3: 17-18.)

Under the Court’s Model Protective Order, if the non-Designating Party objects to confidentiality designations, the Designating Party must move the Court to retain those designations. The burden is on the Designating Party to justify its designations. Defendant, however, believes that paragraph six of the Order should be modified so that the “challenging party should be the one to file and serve a motion to remove the confidentiality designation.” (Mtn. 3: 27-28.) Defendant suggests this change will avoid “inevitable and unnecessary motion practice based on Eggs Unlimited’s aggressive discovery posture.” (Mtn. 4: 1-2.)

Contrary to Defendant’s contention, there is no evidence that Plaintiff’s discovery posture has been overly aggressive. Moreover, Defendant has failed to articulate a persuasive justification to deviate from the Model Protective Order on this issue. Logically, the designating party—whose burden it is to justify the designation—should be the party to file and serve the motion.

Defendant also suggests the term “agents” in Paragraph seven should be removed from the list of persons or entities to which confidential materials may be disclosed, which will “narrow the list of entities and individuals that will have access to Michael Foods’s confidential documents and information.” (Mtn. 4: 3-7.)

Plaintiff has not addressed Defendant’s request to remove the term “agents” from the list of persons or entities in paragraph seven to which confidential materials may be disclosed. The court therefore agrees this modification to the Model Protective Order is warranted.