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DKN Holdings LLC v. Faerber

Supreme Court of California

July 13, 2015

DKN HOLDINGS LLC, Plaintiff and Appellant,
v.
WADE FAERBER, Defendant and Respondent

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Superior Court of Riverside County, No. RIC1109512, John W. Vineyard, Judge. Court of Appeal, Fourth Appellate District, Division Two, No. E055732, No. E056294.

Prenovost, Normandin, Bergh & Dawe, Michael G. Dawe, Kristin F. Godeke and Paula M. Harrelson for Plaintiff and Appellant.

Callahan & Blaine, Daniel J. Callahan, Edward Susolik, Michael S. LeBoff and Jill A. Thomas for Defendant and Respondent.

Opinion by Corrigan, J., with Cantil-Sakauye, C. J., Werdegar, Chin, Liu, Cuéllar, and Kruger, JJ., concurring.

OPINION

Page 818

[189 Cal.Rptr.3d 813] [352 P.3d 382] CORRIGAN, J.

We granted review to clarify a bedrock principle of contract law: Parties who are jointly and severally liable on an obligation may be sued in separate actions. Although long-standing case law has found separate actions permissible, the Court of Appeal here held that a second suit is barred after entry of judgment against one of the contracting parties. The court reasoned that a breach of contract invades a single primary right, and plaintiff could not split its breach of contract cause of action into multiple claims. This reasoning was erroneous because joint and several liability does not implicate the " primary rights" doctrine. [1] Moreover, the facts here do not support preclusion. Although a breach of contract may constitute a single wrong, plaintiff has separate breach of contract claims against each of the defendants alleged to be jointly and severally liable.

I. BACKGROUND

Acting on behalf of a company called Evolution Fitness, Roy Caputo, Wade Faerber, and Matthew Neel leased commercial space in a shopping center to operate a fitness club. [2] Their 10-year lease with DKN Holdings LLC (DKN) provided that multiple parties who signed as lessors or lessees " shall have joint and several responsibility" to comply with the lease terms. (Italics added.) The parties do not dispute that Caputo, Faerber, and Neel were jointly and severally liable on this contract.

Caputo later sued DKN for fraud, breach of contract, unfair business practices, and breach of fiduciary duty (the Caputo action). Among other things, he alleged DKN had failed to disclose that construction on a driveway into the shopping center would not begin for over a year and that state regulations prohibited cutting back vegetation that made the gym less visible. Caputo sought damages and rescission of the lease. DKN cross-complained for rent and other monies due. Although the cross-complaint named all three lessees, it was served on Caputo alone. Faerber and Neel were subsequently dismissed as cross-defendants. [3] After a bench trial, the court rejected all of

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Caputo's claims and awarded over $ 2.8 million on DKN's cross-complaint. Judgment [189 Cal.Rptr.3d 814] was entered on June 20, 2011. [4]

[352 P.3d 383] Shortly before the statement of decision in the Caputo action was filed, DKN sued Faerber and Neel for breach of the lease. [5] Faerber demurred, arguing that, because DKN's rights under the lease had been adjudicated in the Caputo action, suit against Faerber was barred by the rule against splitting a cause of action. (See Wulfjen v. Dolton (1944) 24 Cal.2d 891, 894 [151 P.2d 846].) In opposition, DKN argued California law permits separate actions against parties who are jointly and severally ...


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