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O'Donoghue v. Superior Court (Performing Arts, LLC)

California Court of Appeals, First District, Fifth Division

August 29, 2013

PARAIC O'DONOGHUE et al., Petitioners
v.
THE SUPERIOR COURT OF THE COUNTY OF SAN FRANCISCO, Respondent, PERFORMING ARTS, LLC, Real Party in Interest.

ORDER FILED DATE September 27, 2013.

Superior Court of the City and County of San Francisco, No. CGC09494591, Ernest H. Goldsmith, Judge

Catherine M. Leon, Futterman Dupree Dodd Croley Maier LLP, Martin H. Dodd, Christopher Flood, in Pro. Per. for Petitioners.

No appearance for Respondent

Steyer Lowenthal Boodrookas Alvarez & Smith LLP, Jeffrey H. Lowenthal and Edward Egan Smith, Law Offices of Gary A. Angel, Gary A. Angel and Frear Stephen Schmid for Real Party in Interest.

ORDER MODIFYING OPINION

THE COURT:

The opinion filed on August 29, 2013, is modified as follows:

On page 3, paragraph two, first sentence, delete the word “defendants” and replace with “Market Associates”

On page 9, third paragraph, the citation to Greenbriar Homes Communities, Inc. v. Superior Court should read: (2004) 117 Cal.App.4th 337, 344

On page 11, the first full paragraph, line 5, the sentence should read: “We reject defendants’ claim that paragraph 5.11 does not waive their right to a jury trial because it does not contain explicit language regarding such waiver.”

The petition for rehearing is denied.

This modification does not change the judgment.

JONES, P.J.

In a commercial real estate transaction, Paraic O’Donoghue, Tony Manning, Enda G. Quigley, Sean Murphy, Daniel Walsh, and Christopher Flood (collectively defendants) each signed a separate personal continuing guaranty in favor of a lender. The guaranty agreements (agreements) contained a provision authorizing dispute resolution through judicial reference. (Code Civ. Proc., § 638.)[1] In its action to enforce the agreements, Performing Arts, LLC (plaintiff) moved for appointment of a referee pursuant to the judicial reference provision (provision or reference provision) in the agreements; the trial court granted the motion and appointed a referee.

Defendants seek writ relief from the order granting plaintiff’s motion to compel judicial reference. They argue: (1) the reference provision does not waive their right to a jury trial because they did not have “actual notice of, and did not engage in meaningful reflection before agreeing to, the purported waiver;” (2) the reference provision is unconscionable, and therefore unenforceable; (3) plaintiff waived its right to reference; and (4) the court abused its discretion by granting the reference motion because reference will result in a duplication of effort and will create a likelihood “of conflicting rulings on a common issue of law or fact.” (Tarrant Bell Property, LLC v. Superior Court (2011) 51 Cal.4th 538, 542 (Tarrant Bell).)

Drawing on cases analyzing contractual arbitration provisions authorized under section 1280 et. seq, we conclude plaintiff did not waive its right to judicial reference. We reject defendants’ remaining arguments and accordingly deny the petition for writ of mandate/prohibition.

FACTUAL AND PROCEDURAL BACKGROUND

This litigation concerns the development of a multi-unit condominium project at 973 Market Street in San Francisco (the property). Plaintiff is a limited liability company formed by Joseph Cassidy. Cassidy is plaintiff’s sole member; he is also the sole principal of Centrix Builders, a construction company. Defendants are members or principals of members of 973 Market Associates, LLC (Market Associates). All defendants except Christopher Flood live in Ireland.

In August 2007, Market Associates obtained a $20 million construction loan from United Commercial Bank (UCB) to develop the property. The loan was documented with a promissory note and secured by a deed of trust recorded against the property. UCB required each defendant to execute an 11-page agreement containing a personal continuing guaranty.

Each agreement contained the following clause:

“5.11 Judicial Reference. It is the desire and intention of the parties to agree upon a mechanism and procedure under which any controversy, breach or dispute arising out of this Guaranty will be resolved in a prompt and expeditious manner. Accordingly, any controversy, breach or dispute arising out of this Guaranty and all loan documents executed by Borrower, or relating to the interpretation of any term or provision of such documents, shall be heard by a single referee by consensual general reference pursuant to the provision of the California Code of Civil Procedure, Sections 638 et. seq. The parties shall agree upon a single referee who shall then try all issues, whether of fact or law, and report a statement of decision which either party may file with the clerk or judge and have judgment entered thereon. If the parties are unable to agree upon a referee within ten (10) days of a written request to do so by any party, then any party may thereafter seek to have a referee appointed pursuant to the Code of Civil Procedure Sections 638 and 640. The parties agree that the referee shall have the power to decide all issues of fact and law and report a statement of decision hereon, and to issue all legal and equitable relief appropriate under the circumstances before him or her. The parties shall promptly and diligently cooperate with one another and the referee, and shall perform such acts as may be necessary to obtain prompt and expeditious resolution of the dispute or controversy in accordance with the terms hereof. The cost of such a judicial reference proceeding shall be borne equally by the parties to the dispute.”

Defendants initialed each page of their respective agreement and signed directly beneath section 5.11.

By April 2009, defendants defaulted on the loan. In June 2009, UCB assigned the promissory note to plaintiff, who later acquired the property in a trustee’s sale.

The Litigation

In 2009, plaintiff sued defendants for breach of the guaranty, seeking approximately $14 million, plus interest.[2] Plaintiff served Flood and Manning in 2009 and 2010; they appeared in 2010. In April and June 2010, plaintiff filed case management statements requesting a jury trial and estimating a five-day jury trial.[3] In 2011, Manning, Market Associates and others sued the real estate agent who represented Market Associates in the purchase and sale of the property (San Francisco Superior Court, case No. CGC11508323). In July 2012, and over plaintiff’s objection, the court consolidated that case with the present action. The remaining defendants — Quigley, Murphy, O’Donoghue, and Walsh — filed answers at various times in 2012; Walsh appeared last and filed an answer in October 2012. In their answers, defendants asserted various affirmative defenses, including unclean hands, estoppel and the illegality and unenforceability of the agreements.

In 2012, defendants and Market Associates cross-complained against Cassidy, Centrix Builders, and others. The cross-complaints alleged claims for, among other things, fraud, breach of fiduciary duty, and interference with prospective economic advantage. As relevant here, defendants claimed Cassidy wrongfully gained confidential and propriety information from them about the loan and the property and used it to purchase the note from UCB for a below-market rate.

Discovery

From September 2010 to August 2012, plaintiff served defendants with form and special interrogatories, requests for admission, and requests for production of documents. Plaintiff’s requests for production to Manning sought 80 categories of documents, including documents related to the loan and the property. In response, defendants produced approximately 25, 000 pages of documents. In 2012, O’Donoghue served plaintiff with special interrogatories, requests for admission, and requests for production of documents. Plaintiff’s responses to the requests for production were deficient; the court granted O’Donoghue’s motion to compel and ordered plaintiff to provide documents by January 2013. In late December 2012, plaintiff responded to O’Donoghue’s special interrogatories and requests for admission.

The Motion for Appointment of a Referee

In early December 2012, plaintiff moved for appointment of a referee pursuant to section 638. Plaintiff argued: (1) the agreements were legally enforceable; (2) removing “this matter from the busy court calendar and alleviating the attendant fiscal costs to the Court” would promote the public interest; and (3) the cross-complaints and consolidated action had “no factual or legal relevance to [its] complaint.” Cassidy — ...


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