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United National Maintenance, Inc., A Nevada Corporation v. San Diego Convention Center Corporation

September 5, 2012

UNITED NATIONAL MAINTENANCE, INC., A NEVADA CORPORATION, PLAINTIFF,
v.
SAN DIEGO CONVENTION CENTER CORPORATION, INC., A CALIFORNIA CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Hon. Anthony J. BattagliaU.S. District Judge

ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR NEW TRIAL AND JUDGMENT FOR THE DEFENDANT AS A MATTER OF LAW

[Doc. No. 239-1]

Defendant, San Diego Convention Center Corporation, Inc., (hereinafter "SDC"), filed a Motion for New Trial, (Doc. No. 239-1). Plaintiff, United National Maintenance, Inc., (hereinafter "United"), filed an opposition, (Doc. No. 2540, and SDC filed a reply, (Doc. No. 252). The initial hearing on the motion was held on July 1, 2011, and a supplemental hearing was held on August 1, 2012 before Judge Battaglia. Appearing on behalf of the Plaintiff was James Lance and Jacob Slania. John L'Estrange, Joseph Ergastolo and Andrew Schouten appeared on behalf of Defendants. Based upon the parties moving papers, arguments made during the hearings and for the reasons set forth below, the Defendant's motion is hereby GRANTED IN PART AND DENIED IN PART as set forth below.

Relevant Procedural Background

The complaint in this case was filed on November 13, 2007. (Doc. No. 1.) United pled four antitrust violations under the Sherman Act and three state law claims, including one under the California Business and Professions Code. The action arose in response to a July 1, 2007 policy by SDC that required all cleaning services at trade shows at the San Diego Convention Center (hereinafter "Convention Center") be performed exclusively by SDC's in-house cleaning staff. Prior to July 1, 2007, these services were either performed by SDC who used its in-house cleaning staff or, at the trade show decorator's option, outsourced to vendors like United, who used their own staff.

The case proceeded to trial on March 21, 2011. At trial, United's case was paired down to four claims, Actual Monopolization under § 2 of the Sherman Act; Attempted Monopolization under § 2 of the Sherman Act (the "essential facilities claim"); Intentional Interference with Contract, and Intentional Interference With Prospective Economic Relations. United sought both economic damages and injunctive relief. The Defendants denied all of the alleged antitrust violations and contract claims, and asserted the affirmative defenses of United's failure to mitigate damages, business justification and immunity from liability for the antitrust claims under the Local Government Antitrust Act and the State Action Doctrines.

After a lengthy trial, on May 4, 2011, the jury returned a verdict for United on the Intentional Interference with Contract Claim. In the special verdict form, (Doc. No. 219), the jury found:

(A) There was a contract between United and GES/Champion (Id., at ¶33 ),

(B) SDC knew of the contacts between United and GES/Champion (Id., at ¶ 34),

(C) SDC intended to disrupt performance of the contracts between United and GES/Champion (Id., at ¶ 35),

(D) SDC's conduct actually prevented performance or made performance of said contracts more expensive or difficult (Id., at ¶ 36 ),

(E) SDC's conduct with respect to GES and Champion was a substantial factor in causing harm to United (Id., at ¶ 37) ; and

(F) SDC's interference with United's contracts was not justified (Doc. No. 219, at ¶ 38 ). On these findings, the Jury awarded United $668,905. The jury did not reach a verdict on the Plaintiff's remaining claims. This motion followed seeking a new trial claiming Defendants were prejudiced by various legal, instructional and evidentiary errors by the Court regarding United's Intentional Interference with Contract Claim.

Legal Standard

Rule 59(a) states, "A new trial may be granted . . . in an action in which there has been a trial by jury, for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States." Fed. R. Civ. P. 59(a)(1). Rule 59 does not specify the grounds on which a motion for a new trial may be granted, instead, the court is "bound by those grounds that have been historically recognized." Zhang v. Am. Gem Seafoods, Inc., 339 F.3d 1020, 1035 (9th Cir.2003). Historically recognized grounds include, but are not limited to, claims "that the verdict is against the weight of the evidence, that the damages are excessive, or that, for other reasons, the trial was not fair to the party moving." Montgomery Ward & Co. v. Duncan, 311 U.S. 243, 251, 61 S.Ct. 189, 85 L.Ed. 147 (1940). The Ninth Circuit has held that "[t]he trial court may grant a new trial only if the verdict is contrary to the clear weight of the evidence, is based upon false or perjurious evidence, or to prevent a miscarriage of justice." Passantino v. Johnson & Johnson Consumer Prods., 212 F.3d 493, 510 n. 15 (9th Cir.2000).

It is within the sole discretion of the trial judge whether to grant a new trial under Rule 59. Boston Scientific Corp. v. Johnson & Johnson, 550 F.Supp.2d 1102, 1110 (N.D. Cal. 2008). A new trial may be ordered to correct manifest errors of law or fact. Id. A court should not simply disregard a verdict reached by the jury or decide the case as though there had been no jury. A court may grant a motion for new trial only if the verdict is against the clear weight of the evidence. Landes Canst. Co., Inc. v. Royal Bank of Canada, 833 F.2d 1365, 1371 (9th Cir. 1987). A verdict should only be set aside where, after giving full respect to the jury's findings, the judge "is left with the definite and firm conviction that a mistake has been committed by the jury." Id.

In a motion for new trial, the moving party bears the burden of establishing prejudice. Boston Scientific, 550 F .Supp.2d at 1110. A motion for a new trial should not be granted on the basis of asserted errors which were not prejudicial. Anglo-American General Agents v. Jackson Nat. Life Ins. , 83 F.R.D. 41, 43 (N.D. Cal. 1979); Boston Scientific, 550 F. Supp.2d at 1110.

Discussion

SDC argues that it is entitled to a new trial on United's intentional interference with contract claim as a result of: 1) alleged instructional errors; 2) the alleged evidentiary errors regarding exclusion of evidence of other venues and policies; and 3) alleged legal errors by the Court concerning the issue of

III. Alleged Error Concerning the Legal Issue of Duty

Defendants argue that they were prejudiced by errors concerning the Court's ruling on the legal issue of duty. Specifically, Defendants argue: 1) the Court erred by determining that SDC's legal duty not to interfere with United's contracts was a factual question for the jury; 2) the Court erred by finding that SDC owed a duty to United because SDC was not a stranger to the contract; and 3) that the jury's verdict is against the clear weight of the evidence because SDC is not a stranger to United's subcontracts under the applicable legal standards.

A. Whether SDC's Legal Duty Not to Interfere with UNM's Contracts

Was a Factual Question for the Jury

As a preliminary matter, whether a defendant owes a duty is a question of law.*fn1 In order to be legally capable of committing the tort, the defendant must owe a duty to the plaintiff recognized by law and be subject to liability for breach of that duty. Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 869 P.2d 454 Cal.,1994. A duty in tort owing from a defendant to a plaintiff can be created by law, by a defendant's assumption of that duty, or by a pre-existing relationship between the plaintiff and the defendant.*fn2 The Court finds that upon further consideration of the parties arguments and cases cited, that the question of whether a defendant owes a tort duty to a plaintiff is a question of law to be decided by the Court. Jacobsen v. Marin Gen. Hosp., 192 F.3d 881, 885 (9th Cir. 1999) (citing Marlene F. v. Affiliated Psychiatric Med. Clinic, Inc., 48 Cal.3d 583, 588-590 (1989)). Submitting the case to the jury in the absence of a legal duty is prejudicial legal error because "[w]ithout such a duty, any injury is . . . [an] injury without wrong." Moore v. Regents of the University of California, 51 Cal.3d 120, 135 n.16 (1990).

During the supplemental hearing on August 1, 2012, United raised two arguments. First, United argued that SDC waived the right to raise the issue of whether the Court erroneously submitted to the jury the question of whether SDC owed a duty to United. Second, United argues that the question of whether or not SDC owed United a duty was a mixed question of fact and law. As a preliminary matter, the Court notes that United failed to raise its waiver argument in its opposition to SDC's motion. As SDC so clearly articulated during the supplemental hearing on August 1, 2012, United waived its waiver argument by failing to make it in response to SDC's motion for new trial. With regard to United's second argument that the question of duty was a mixed question of fact and law, the Court finds that the authority cited by the Plaintiff in support of this argument to be distinguishable because questions of fact remained regarding the issue of duty in the City of Monterey. See City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687, 720-21 (1999). In the instant case, the Plaintiff has failed to cite to any unresolved questions of fact on the issue of duty and upon review of the record, the Court was unable to find any referenced by the parties. As such, the Court finds United's argument to be unpersuasive. Based upon the foregoing, the Court finds the question of whether SDC owed a duty to be a question of

B. United's Intentional Interference with Contract Claims and Relevant State and Federal Case Law

Having found the question of whether SDC owed United a duty to be a question of law for the Court to decide, the Court now turns to the relevant state and federal cases on claims of intentional interference with contract and SDC's contention that it was not a stranger to United's contracts and therefore cannot be liable to United for intentional interference with the contract.

1. Relevant Case Law On Claims of Intentional Interference With Contract and the "Not A Stranger Exception"

The parties were asked to provide further argument during the supplemental hearing on August 1, 2012 on the relevant case law on claims of intentional interference and the "not a stranger exception" as set forth in Marin Tug and Applied Equipment. Marin Tug & Barge, Inc. v. Westport Petroleum, Inc., 271 F.3d 825 (9th Cir.2001); Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 28 Cal.Rptr.2d 475, 869 P.2d 454 (1994)). Specifically, the Court asked the parties to present further argument on whether or not SDC is not a stranger to United's subcontracts under the applicable legal standards.

a. Relevant California Case Law on Tortious Interference Claims

Review of the case law on tortious interference claims begins with the ruling by the California Supreme Court in Applied Equipment. Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 28 Cal.Rptr.2d 475, 869 P.2d 454 (1994)). In Applied Equipment, the California Supreme Court addressed the issue of whether a party to a contract could be liable in tort for conspiracy to interfere with its own contract, holding that a claim for tortious interference*fn3 does not lie against a party to the contract. Applied Equip., 7 Cal.4th at 508--510, 28 Cal.Rptr.2d 475, 869 P.2d 454. The California Supreme Court based its decision, in part, on precedent and longstanding policy, including the "underlying policy of protecting the expectations of contracting parties against frustration by outsiders who have no legitimate social or economic interest in the contractual relationship" and the principle that "[t]he tort duty not to interfere with the contract falls only on strangers-interlopers who have no legitimate interest in the scope or course of the contract's performance." Id. at 514, 28 Cal.Rptr.2d 475, 869 P.2d 454.

Applied Equipment was revisited by the California Appellate Court in Woods v. Fox Broadcasting Sub., Inc., 129 Cal.App.4th 344 (2005). In Woods, the plaintiffs, officers and employees of Fox Family Worldwide, Inc. ("Fox Family"), brought suit against the company's major shareholder in connection with the sale of the company. Woods, 129 Cal.App.4th at 348. The plaintiffs claimed that the major shareholder engineered the Fox Family--Disney deal in such a way as to cut its losses and unload undesirable obligations, with knowledge of the plaintiffs' stock option rights and with the intent to interfere with those rights. Id. Based on these allegations, the plaintiffs brought tortious interference claims against the major shareholder. Id. The shareholder later demurred to these claims on the basis that, as a holder of just under half of Fox Family stock, it was not a stranger to the plaintiffs' contracts with the company and therefore could not, as a matter of law, be liable for interfering with those contracts. Id. at 349, 28 Cal.Rptr.3d 463. The trial court sustained the demurrer and found that the major shareholder was not a stranger under Applied Equipment. Id. at 349, 28 Cal.Rptr.3d 463.

The California Court of Appeal, Second District reversed the trial court's decision, finding "it highly unlikely that Applied Equipment intended to hold, or should be construed as holding, that persons or entities with an ownership interest in a corporation are automatically immune from liability for interfering with their corporation's contractual obligations." Id. at 353, 28 Cal.Rptr.3d 463. In reaching its decision, the appellate court focused on Applied Equipment's use of the phrase "outsiders who have no legitimate social or economic interest in the contractual relationship," as being only dicta and a "mystery," with no apparent connection to the issue before the appellate court. Id. at 352, 353, 28 Cal.Rptr.3d 463. The Woods court concluded that when the Applied Equipment court used the term "stranger to a contract," it did so interchangeably with the terms "noncontracting parties." Id. at 353, 28 Cal.Rptr.3d 463. The appellate court also rejected the interpretation that the quoted language meant that "not only were contracting parties immune from interference claims, so too were another class of defendants who, although not parties to a contract, were not true 'strangers' to the contract because they had some general interest in the contractual relationship." Id. at 352, 28 Cal.Rptr.3d 463. However, the Court in Woods ...


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