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O’Donoghue v. Superior Court, A137996 (D1d5 as modified Sept. 27, 2013)

The court of appeal denied a writ asking to overturn a superior court’s reference of a case to a referee under Code of Civil Procedure § 638.

Section 638 permits parties to agree to have their case heard by a referee, and permits a trail judge to specifically enforce that agreement. Section 638(a) permits a “general reference” where the referee determines all issues of fact and law and issues a statement of decision. Section 638(b) permits a specific reference to “ascertain a fact necessary to enable the court to determine an action or proceeding.” Cases decided under a general reference are afforded all of the procedural rights applicable in a superior court case, including the full panoply of discovery and the right to appeal.

This case is a real estate dispute in which the parties’ contract included their consent to resolve any disputes through a general reference. When some of the defendants defaulted, plaintiff sued in San Francisco Superior Court in 2009. The case then proceeded in superior court for almost three years, during which plaintiff attempted to serve various Irish defendants under the Hague Convention. Three years in—and after defendants had filed a cross-complaint—plaintiff moved to appoint a referee under § 638, explaining in its declaration that it promptly moved to do so after all of the foreign defendants were served. The court granted the request and the defendants sought writ review.

Defendants’ writ raised various objections to the enforceability of the agreement’s reference provision. They claimed that it was ineffective because it did not specifically say that it waived their jury trial right and that the underlying agreements were unenforceable adhesion contracts. The court of appeal rejected these arguments, largely out of hand.

Defendants further argued that that plaintiff had waived its right to have a referee appointed by litigating the case for three years before seeking an appointment. The court—analogizing to arbitration cases—found that a waiver decision was a determination of fact, and thus reviewable only for substantial evidence. The trial court had some evidentiary basis to find that plaintiff had not waived arbitration because it had not yet invoked any procedures inconsistent with having a dispute resolved by a referee, such as filing for summary judgment. Further, unlike in most arbitrations, starting discovery in court was not inconsistent with a reference because a general referral provides for the full scope of the discovery procedures permitted under the Discovery Act and is fully subject to the right of appeal. Thus, defendants could show no prejudice due to the delay, since the ongoing discovery in court would have inevitably proceeded apace before the referee.

Finally, defendants said the court should have refused the reference under the Supreme Court’s decision in Tarrant Bell Property, LLC v. Superior Court, 51 Cal. 4th 538, 542 (2011), which holds that a trial court maintains discretion to decline to appoint a referee based on a “risk of inconsistent rulings and considerations of judicial economy.” According to defendants, having the case decided by a reference risked a conflict and duplicated efforts with its cross-claims, which were not referable under the parties’ agreement. After suggesting that the defendants waived this argument by raising it only in its reply brief, the court nonetheless decided to reach the merits and held that the trial court did not abuse its discretion. Although there were “sound reasons to deny the reference motion,” because the trial court’s decision nonetheless had a reasonable or fairly debatable justification, it would not be upset on writ review as an abuse of discretion.

Writ denied.