Prospect Mortgage, LLC v. Shumard		CASE NO. 112CV231227
DATE: 15 August 2014	TIME: 9:00	LINE NUMBER: 2

This matter will be heard by the Honorable Judge Socrates Peter Manoukian in Department 19 in the Old Courthouse, 2nd Floor, 161 North First Street, San Jose. Any party opposing the tentative ruling must call Department 19 at 408.808.6856 and the opposing party no later than 4:00 PM Thursday 14 August 2014.  Please specify the issue to be contested when calling the Court and counsel.

On 15 August 2014, the motion of Plaintiff, Prospect Mortgage, LLC to appoint the Honorable Jack Komar (Retired) of JAMS as a discovery referee was argued and submitted.

Defendants did not file formal opposition to the motion.[1]

Statement of Facts

This action arises from an employment dispute between David and Prospect, a residential retail lender. From January 2010 to November 2011, David served as Prospect’s Branch Manager for its San Jose office, then as District Manager for its San Jose, Salinas and Fresno offices. As a term and condition of his employment, David agreed that for a period of 18 months after the termination of his employment he would not engage in the solicitation of Propsect’s employees. In addition, David agreed that he would not disclose any of Prospect’s confidential information both during and after his employment.

On 15 November 2011, David resigned from his employment with Prospect and joined AFN, one of Prospect’s direct competitors. Prospect alleges that David has solicited at least 18 Prospect employees to leave their employment, disclosed its confidential information, and disparaged it in a public forum.

In its operative first amended complaint, Prospect asserts six causes of action against David and AFN for (1) breach of contract, (2) breach of the duty of loyalty, (3) breach of fiduciary duty, (4) interference with contractual relations, (5) interference with economic advantage, and (6) violation of Business and Professions Code section 17200.

David, Jerry and Telesco filed a cross-complaint against Prospect. They allege that, while employed at Prospect, they discovered that Prospect was intentionally violating a number of federal and state laws. Despite voicing their objections to these practices to management and the human resources department, the practices continued.

To avoid complicity in Prospect’s unlawful conduct, on 15 November 2014, David and Telesco resigned from Prospect. David, Jerry and Telesco allege that, on that same day, Prospect terminated Jerry due to David’s complaints about its unlawful conduct. They assert two causes of action against Prospect for wrongful termination and constructive discharge in violation of public policy and unlawful business practices.

 

Discovery Dispute

Plaintiff points to the long history of discovery motions in this case and points out that at least four more motions are scheduled or contemplated.  Plaintiffs suggest that a discovery referee would be appropriate and asks this Court to appoint Judge Komar as a discovery referee.

Analysis

Code of Civil Procedure, § 639 provides statutory authority for the appointment of a referee.  When the parties do not consent, the court may appoint a referee when … “the court in any pending action determines that it is necessary for the court to appoint a referee to hear and determine any and all discovery motions and disputes relevant to discovery in the action and to report findings and make a recommendation thereon.”  “Appointment of a discover referee is authorized, however, only where ‘necessary’ to hear and determine such motions or disputes.”  Weil & Brown, CAL. PRAC. GUIDE: CIV. PROC. BEFORE TRIAL (The Rutter Group 2002) §8:1804.1, p. 8K-9 citing CCP §639(a)(5).  “There is no ‘necessity’ for appointment of discovery referees in routine, pro forma, uncomplicated matters.”  Id. at §8:1804.6, p. 8K-10 (citing Taggares v. Superior Court (1998) 62 Cal.App.4th 94, 104; See also Hood v. Superior Court (1999) 72 Cal.App.4th 446, 449.)

In Taggares v. Superior Court (1998) 62 Cal.App.4th 94, 104, the Court stated, “… there is no suggestion the Legislature intended these powers to be used over the parties’ objection in routine, pro forma, uncomplicated matters simply for expediency or distaste for discovery resolution.”  Similarly, in Hood v. Superior Court (1999) 72 Cal.App.4th 446, 449, the court held, “Implicit in the statutory requirement that the reference be ‘necessary’ is … notion that there ought to be a finding of something out of the ordinary before the services of a referee are forced upon a nonconsenting party,” and there is no need for a referee if the dispute can be resolved by a judge in about five minutes.

Furthermore, in Solorzano v. Superior Court (1993) 18 Cal.App.4th 603, 615, the Court noted “[t]he trial court also must avoid the appearance of delegating judicial functions to referees. In Aetna Life Ins. Co. v. Superior Court (1986) 182 Cal.App.3d 431, 227 the trial court made an order assigning all law and motion summary judgment proceedings to a referee. . . the Aetna court observed, “[e]fficiency is not more important than preserving the constitutional integrity of the judicial process.” (Id., at p. 437.)

In 2001, the California Legislature enacted Code of Civil Procedure, § 640.5 which states:

“It is the intent of the Legislature that the practice and cost of referring discovery disputes to outside referees be thoroughly reviewed. Therefore, in addition to the requirements of subdivision (e) of Section 639, the Judicial Council shall collect information from the trial courts on the use of referees in discovery matters pursuant to either Sections 638 and 639. The collected data shall include information on the number of referees, the cost to the parties, and the time spent by the discovery referee. The Judicial Council shall report thereon to the Legislature by July 1, 2003.”

Factors to be considered are: (1) there are multiple issues to be resolved; (2) there are multiple motions to be heard simultaneously; (3) the present motion is only one in a continuum of many; (4) the number of documents to be reviewed (especially in issues based on privilege) make the inquiry inordinately time-consuming.  Id. Taggares 62 Cal.App.4th at 105.

As both Code of Civil Procedure section 644, subdivision (b) and California Rules of Court, rule 3.920(a) make plain, a discovery referee does not have the authority to issue court orders. Instead “the decision of the referee or commissioner is only advisory. The court may adopt the referee’s recommendations, in whole or in part, after independently considering the referee’s findings and any objections and responses thereto filed with the court.” (Code Civ. Proc., § 644, subd. (b); see also Cal. Rules of Court, rule 3.920(a), italics added.) After the referee has submitted his or her report to the superior court, the parties may make objections to the referee’s findings, recommendations and proposed orders and request a hearing in the superior court on these objections.

The only logical conclusion which can be drawn from the rule and the statute is that a referee can only propose or recommend orders. The superior court must decide whether to accept or reject the referee’s recommendations. In this case, the special master purported to issue an “order” compelling Doyle to submit to a mental examination. Doyle filed a motion in the superior court objecting to the special master’s “orders” and asking the superior court to “overrule” the special master’s “orders.” Both the special master and the parties proceeded improperly. The special master should have submitted his findings and recommendations to the superior court along with his proposed orders. Doyle would then have had the opportunity to object to the special master’s findings, recommendations and proposed orders before the superior court decided whether to accept or reject the special master’s proposed orders. If the superior court rejected Doyle’s objections, it would then issue the proposed orders.

As pointed out to the parties when they were present for discovery motions on 25 July 2014, referring the matter to a discovery referee could actually increase the workload of this Court since this Court would have to review not only the motion but any report generated by the referee.

In this case, (1) the discovery motions are plain, (2) there are only two motions being heard (besides the motion for a referee), (3) Defendants have responded to Plaintiff’s discovery and these are evidently the only issues remaining for Plaintiff, and (4) there are no objections on the basis of privilege and there are not many documents.

This case involves allegations that the parties involved in the same business have become hostile towards each other.  There is animus between these parties, and possibly their counsel.  However, Plaintiff shows nothing “out of the ordinary” here.  By its very nature, litigation will involve disputes not only between parties, but also their counsel.  Plaintiff admits there may be more discovery disputes in the future, but Plaintiff does not assume the disputes will require the need for adjudication

While there have been quite a few motions in this case, with apparently more coming, Plaintiff does not show that appointment of a discovery referee is “necessary.” 

Order

The motion of Plaintiff to appoint a discovery referee over the Defendants’ objection is DENIED.

 

 

________________­­­____________ DATED:

_________________________­­­________________________ HON. SOCRATES PETER MANOUKIAN Judge of the Superior Court County of Santa Clara

 

[1] “The failure to file a written opposition or to appear at a hearing or the voluntary provision of discovery shall not be deemed an admission that the motion was proper or that sanctions should be awarded.”  Rule of Court 3.1348(b).