Case Name:  Michael Roberts Constr., Inc. v. Winchester Mixed Use Project, LLC, et al.

Case No.:  1-12-CV-238676; 1-13-CV-245295

Winchester Mixed Use Project, LLC (“Winchester”), Russell Mahzoon, Shahla Saadati, Mount, Spelman & Fingerman, P.C., and Daniel S. Mount (collectively, “Moving Parties”) move to consolidate case no. 112CV238676 with case no. 113CV245295 (pending in Dept. 5), on the grounds that there are overlapping questions of law and fact and that consolidation would preserve time and resources for the court and all parties pursuant to California Code of Civil Procedure § 1048.

Winchester, Mahzoon, Saadati, Michael Roberts Construction Inc. (“MRC”) and Largo Concrete (“Largo”) participated in the construction of a mixed-use condominium project in San Jose called Villa Valencia.  Mahzoon and Saadati initially capitalized Winchester.  Because of the downturn in the real estate market during the construction, the project ended up losing millions of dollars.  In 2011, three years after the construction, Winchester was dissolved, leaving no assets and without having issued any dividends to Mahzoon and Saadati.

In connection with the project, Winchester had purchased a wrap-up policy as part of an owner controlled insurance program (“OCIP”).  The policy requires an initial premium and a per-occurrence self-insured retention (“SIR”) of $250,000 each time a claim was made under the policy.  Once the $250,000 SIR is satisfied, the insurer would defend the insured.  Under the OCIP, the general contractor and each subcontractor were required to contribute to the SIR when a claim was made. As agreed to in the construction contract between Winchester and MRC, MRC’s SIR per-claim contribution was $15,000.

In 2012, the Villa Valencia homeowner’s association sued Winchester, Mahzoon, Saadati, and MRC for construction defects.  MRC made its $15,000 contribution.  Largo refused to contribute its proportional share.  Winchester, Mahzoon, and Saadati retained Mount, Spelman & Fingerman, P.C., to defend the construction defect suit.  MRC retained Richard van’t Rood as counsel.

MRC was responsible for recruiting subcontractors and preparing and executing the subcontracts.  MRC failed to include the OCIP requirement in a number of its subcontracts, including the Largo subcontract.  Winchester attempted to collect from subcontractors to satisfy the $250,000 SIR, and on December 31, 2012, sued the remaining subcontractor hold-outs, including Largo, in Santa Clara County Superior Court, Case No. 112CV238676.  On April 24, 2013, in Case No. 113CV245295, MRC sued Moving Parties for breach of contract, conversion, and declaratory relief.  In that action, Moving Parties filed a cross-complaint against MRC for declaratory relief and breach of contract for failure to include the OCIP in the subcontracts.

Winchester argues that Largo’s breach is inextricably intertwined with MRC’s breach, as Largo has taken the position that the absence of OCIP language in the subcontract means that Largo is not obligated to contribute any particular amount to the SIR.  Winchester argues that the breach of contract claims arise out of the same transactions and factual circumstances: the enrollment by MRC of Largo to perform work for the Villa Valencia development and the inclusion (or absence) of provisions relating to the OCIP and SIR.  Largo agrees that there is a substantial relationship between the claims as it filed a notice of related case in the first matter. Winchester also argues that trying the cases separately creates a risk of contradictory findings that could unfairly prejudice the parties: for example, a finding is possible in one case that the subcontract was unambiguous, but in the other case that the subcontract was ambiguous. Also, Winchester argues that consolidation would greatly lessen the inconvenience of the parties and reduce the expenditure of judicial resources.  In addition, the two actions are located in the same court and there is a substantial overlap among the parties and probable witnesses.

MRC’s argument is that the only issue between MRC and Winchester is that Winchester did not adequately defend MRC and therefore MRC is seeking reimbursement of its litigation fees pursuant to contract.  MRC argues that the Mount law firm is continuing to perpetuate this litigation to generate needless legal fees.  However, MRC’s argument does not address the cross-complaint against MRC by Winchester about MRC’s alleged failure to include the OCIP in the subcontracts.

Therefore, the motion to consolidate is GRANTED.