Case Name:   The Irvine Company LLC vs. Douglas Ross Construction, Inc.

Case No.:       1-12-CV-234516

 

This is a construction defect case filed by plaintiff The Irvine Company LLC (“Irvine”), the owner of a 439-unit apartment project commonly known as “The Redwoods” located in San Jose, California.[1]  In the operative First Amended Complaint (“FAC”), filed March 27, 2013, Irvine sues defendant Douglas Ross Construction (“DRC”) and Doe defendants for (1) breach of prime contract; (2) breach of express warranty; (3) breach of implied warranty; (4) breach of subcontracts; (5) breach of express indemnity; (6) negligence; and (7) strict liability in tort.

 

On April 4, 2013, DRC filed its Answer and Cross-Complaint for breach of contract, contribution, express and implied indemnity and declaratory relief against Moe defendants.

 

On September 18, 2013, the Court (Hon. J. Kleinberg) issued Case Management Order (“CMO”) No. 1 (Redwoods) setting forth various specialized management matters, appointing William F. Pagano as Special Master and Ross R. Hart as mediator, establishing a Discovery Committee (consisting of counsel for Irvine, Lead Defense Counsel, and one or two cross-defendant parties), staying all discovery not specifically permitted in CMO No. 1, and scheduling destructive testing and submission of cost repair estimates.  The permitted discovery consists of an initial production of non-privileged/protected documents generally related to the development, design, construction, supply of labor and materials or repairs and maintenance of the Redwoods and designation of a document depository.[2]  CMO No. 1 also provides for certain written discovery (special interrogatories, scope of work interrogatories, insurance interrogatories),[3] insurance coverage mediation,[4] and depositions as scheduled by the Discovery Committee (including depositions of PMKs and expert witnesses).[5]

 

On October 17, 2013, DRC filed a Moe Amendment to its Cross-Complaint, substituting cross-defendant Tara Coatings, Inc. (“Tara Coatings”) as Moe 5.  On December 12, 2013, DRC filed a proof of service of Summons and Cross-Complaint on Tara Coatings.

 

On April 29, 2014, the Court (Hon. P. Kirwan) issued CMO No. 2, amending CMO No. 1 to substitute a Summary of Case Events & Deadlines (Exh. A to CMO No. 2).

 

On August 13, 2014, Irvine filed an Amendment to the FAC, substituting Tara Coatings as Doe 20.

 

On August 22, 2014, Tara Coatings filed its Answer to DRC’s Cross-Complaint.

 

Tara Coatings now moves to modify the CMO and/or be exempted from the following provisions of the CMO:  (1) CMO Exhibit A timeline; (2) ¶ 11.b, Stay on Discovery; (3) ¶ 19, Defense Scope of Repair; and (4) ¶ 2.b, Mediator Designation and Mediation.

 

Tara Coatings argues that it timely brings this objection to the CMO within 30 days after its first appearance in the case (Answer to DRC’s Cross-Complaint, filed August 22, 2014).  Tara Coatings’ objections are as follows: (1) the CMO does not improve case management or avoid undue burdens, and instead prevents cross-defendants from investigating the claims against them; (2) the CMO favors Irvine and DRC and hurts cross-defendants by forcing cross-defendants to wait until Irvine has completed its destructive testing and submit a final defect and cost of repair, at which point cross-defendants will have no real opportunity to test Irvine and DRC’s theories of liability and underlying facts about the alleged defects; (3) the CMO Exhibit A timeline of events only gives Tara Coatings 60 days to conduct written discovery, depose lay witnesses, designate experts, and depose experts before discovery cuts off on May 2, 2014 for trial in June 2015, and the timeline fails to allow any opportunity for dispositive motions, motions in limine or discovery motions; (4) the CMO’s discovery stay only allows for an extremely limited narrow amount of discovery and deprives Tara Coatings of any opportunity to depose parties and third party witnesses, propound interrogatories or requests for admissions, or demand documents; (5) section 19 requires Tara Coatings to prepare an alternative scope and cost of repair without discovery or be precluded from presenting such evidence at trial; and (6) the CMO improperly classifies mediations as mandatory settlement conferences rather than voluntary attempts to settle.

 

In opposition, DRC argues the CMO is not unfair or burdensome and is meant to manage the numerous parties and keep costs reasonable.  DRC accuses Tara Coatings of waiting 10 months after being served to join the litigation, thereby missing the initial destructive testing, service of Irvine’s updated Defect Report and presentation of claims, and defense preliminary visual inspections.  DRC argues that Tara Coatings’ complaint about having no opportunity to challenge Irvine’s allegations is disingenuous, as Tara Coatings deliberately decided to attend only one of nine days of Irvine’s destructive testing where alleged evidence of defects was being uncovered.  DRC submits that the Court previously denied a similar motion by cross-defendant Poured Floors, Inc. (“Poured Floors”), finding that CMO No. 1 was a valid exercise of the Court’s discretion to manage this complex matter, and that Poured Floors had the means to seek discovery in spite of the discovery stay through the Special Master.

 

Irvine joins in DRC’s opposition.

 

In reply, Tara Coatings argues it has not been dilatory in handling this case, as its expert attended four days of Irvine’s destructive testing, in addition to the attendance of Tara Coatings’ counsel and owner at the second day of testing.  Tara Coatings argues that it needs discovery to get at the heart of the case.  Tara Coatings accuses DRC of dilatory conduct in waiting six months after the initial Complaint was filed to file a Cross-Complaint, and another half-year to put a CMO in place.  Tara Coatings argues that its motion is different from Poured Floors’ prior motion, which challenged the appointment and use of a special master and the use of a CMO in this case, while here, Tara Coatings only seeks four revisions to the CMO.  Tara Coatings argues that neither Irvine nor DRC demonstrates any prejudice from the proposed modifications to the CMO.

 

Judicial Notice

 

In support of its opposition, DRC requests judicial notice of: (1) California Rules of Court, rule 3.400; (2) California Evidence Code sections 450-460; (3) the Court’s on-line document list for this action; (4) the Court’s March 24, 2014 Order re: Poured Floors’ motion to lift discovery stay; (5) CMO No. 1, filed September 18, 2013; and (6) CMO No. 2, filed April 29, 2014.

 

The California Evidence Code is subject to mandatory judicial notice as the statutory law of the state.  (See Cal. Evid. Code, § 451, subd. (a).)  The Rules of Court and court records filed in this action are subject to permissible judicial notice.  (See Cal. Evid. Code, § 452, subds. (d) [court records], (e)(1) [rules of court].)  All of the items in the request are relevant to the issues raised in this motion.  The request is GRANTED.

 

Objection to Reply

 

Irvine objects to portions of Tara Coatings’ reply brief on the grounds that Tara Coatings has improperly relied on and referred to Irvine’s Statement of Claims, Defects, and Damages and Irvine’s Preliminary Cost of Repair, which are protected by the mediation privilege and work product doctrine.  Irvine cites paragraphs 16 and 18 of the CMO, which state that the Preliminary and any Updated Defect Lists, and the Preliminary Cost of Repair Estimates and Updated Cost of Repair Estimates are “inadmissible for any purpose” and “cannot be used by any party for any purpose… .”

 

Although Irvine argues the reply brief “is littered with references to these protected documents[,]” Irvine only provides two examples of challenged portions of the reply brief in which Tara Coatings refers to Irvine’s Statement of Claims, Defects and Damages, neither of which actually uses the Statement of Claims itself or discloses information from it.  However, Tara Coatings does cite the total dollar amount of Irvine’s damages in this action to argue in favor of lifting the discovery stay, and this amount was obtained from Irvine’s Statement of Claims.[6]  The objection is SUSTAINED as to this portion of the reply.

 

Discussion

 

“A useful tool, employed by many judges managing complex litigation, is the case management order.  [Citation.]  Such an order, preferably made very early in the litigation, lays out a clear path and timetable for the completion of all tasks necessary to ready the case for trial.”  (Lu v. Superior Court (1997) 55 Cal.App.4th 1264, 1267-1268.)  “It is within the spirit of the standard and trial judges should be encouraged to use their inherent powers under Code of Civil Procedure section 187 to manage such complex cases in the most efficient and expeditious manner.  Section 187 provides: ‘When jurisdiction is, . . . conferred on a court or judicial officer, all the means necessary to carry it into effect are also given; and in the exercise of this jurisdiction, if the course of proceeding be not specifically pointed out by this code or the statute, any suitable process or mode of proceeding may be adopted which may appear most conformable to the spirit of this code.’  [¶]  The flexibility afforded courts by Code of Civil Procedure section 187 is particularly apt in cases managed under the complex litigation standard.”  (Id. at p. 1271.)

 

Most of Tara Coatings’ objections pertain to the timeline of events (Exh. A to CMO No. 2), and the CMO’s restrictions on discovery in paragraph 11, including the discovery stay.  However, all of these measures are reasonable attempts to efficiently manage the issues and evidence in the case.  As the Court observed in response to Poured Floors’ similar motion, the CMO allows “any party” to seek discovery not expressly permitted by appealing to the Special Master and to lift the stay.  “For good cause demonstrated by any party after application by noticed motion, the Special Master may grant leave to propound discovery not permitted in this Order, order a party to respond to the discovery permitted in this Order, or otherwise lift the discovery stay early.”[7]  Thus, Tara Coatings’ arguments regarding the need for immediate discovery are appropriately addressed to the Special Master pursuant to the procedures of the CMO.

 

However, Tara Coatings’ objection to the CMO’s mediation terms is well-taken.  Under paragraph 2, the CMO appoints Ross Hart as mediator and allocates the mediator’s fees among the parties (e.g., 1/3 paid by Irvine, 1/3 paid by DRC, and 1/3 paid by the remaining defendants and cross-defendants).[8]  The CMO states, “The parties will participate in mediation for the purpose of attempting to resolve this litigation prior to trial.”[9]  “Trial counsel, parties and persons with full authority to settle the case must personally attend unless excused by the Court. . . . Failure to appear will result in the imposition of sanctions by the Court.”[10]  It further states, “All mediation proceedings in this action are regarded to be the equivalent of Mandatory Settlement Conference (“MSC”) proceedings” and that “[e]ach MSC shall be conducted pursuant to California Rules of Court Rule 3.1380[.]”[11]

 

Under rule 3.1380(d), “[a] court must not: [¶] (1) Appoint a person to conduct a settlement conference under this rule at the same time as that person is serving as a mediator in the same action; or [¶] (2) Appoint a person to conduct a mediation under this rule.”  (Cal. Rules of Court, rule 3.1380(d).)  Here, because the CMO appoints Mr. Hart as mediator and equates mediations with mandatory settlement conference proceedings conducted pursuant to rule 3.1380, the Court would essentially be appointing the same person to conduct both mediation and a mandatory settlement conference in the same action.  The Court would also essentially be appointing Mr. Hart to conduct mediations under the rule for mandatory settlement conferences.  Under Jeld-Wen, Inc. v. Superior Court (2007) 146 Cal.App.4th 536, 543, “a case management conference order requiring that parties in complex cases attend and pay for mediation is not authorized by the statutory scheme [for mediation] and is contrary to the voluntary nature of mediation.”  Jeld-Wen distinguished Lu, where a referee appointed under Code of Civil Procedure section 639 was allowed to conduct a settlement conference.  (See Jeld-Wen, supra, 146 Cal.App.4th at p. 542.)  Here, Mr. Hart is not a referee appointed under section 639, and the parties are being ordered to pay for private mediation.

 

Thus, Tara Coatings’ motion to modify the CMO is GRANTED IN PART as to paragraph 2.b of the CMO.  All mediations shall be voluntary.  The motion is otherwise DENIED.

[1] First Amended Compl. ¶ 2.

[2] Sept. 18, 2013 Case Management Order (“CMO”) No. 1 ¶ 11.c.

[3] Id. ¶ 11.d.

[4] Id. ¶ 11.e.

[5] Id. ¶ 11.f.

[6] See Reply at p. 2:1-7, 16-17.

[7] CMO No. 1 at ¶ 11.b.

[8] CMO No. 1 at ¶ 11.a, c.

[9] CMO No. 1 at ¶ 2.a.

[10] CMO No. 1 at ¶ 2.b, emphasis added.

[11] CMO No. 1 at ¶ 2.b.