Thursday, December 19, 2013

A Few Choice Words on the Standard of Review

Gaines v. Fidelity National Title Insurance Company, No. B244961 (D2d8 Dec. 12, 2013)

A divided panel upholds a trial court’s dismissal of most of the defendants in an action for failing to bring the case to trial within five years, but reverses as to one defendant who was added later in the case.

Plaintiff is an elderly woman who was behind in her mortgage payments. In the course of her attempts to save her house, she allegedly getting caught up in a scheme where she was tricked into entering a sale/leaseback transaction that went wrong. She sued her original lender, an alleged employee of the lender, the employee’s fiancé—who had purchased housethe escrow agent, two different servicers of the loan the fiancé obtained to purchase the house, and a host of other defendants who were out of the case before this appeal.

The case was filed in late 2006 and wound its way through LA Superior for a number of years. During that time, the case was partially stayed for a number of months while the parties attempted to mediate. The litigation was also slowed by a number of other factors, including the plaintiff’s death and substitution of her heir as new plaintiff, the first servicer’s belated discovery that it had assigned its interest to a different servicer—Lehman—which was then in bankruptcy, and then the time spent getting relief from the Lehman bankruptcy stay from a bankruptcy court in New York. The case—on its fourth judge at the time—was ultimately set for trial in the summer of 2012.

But in May of that year, the escrow company moved to dismiss the case under Code of Civil Procedure §§ 583.310 and 583.360 for failure to bring the case to trial within five years. Plaintiff opposed, arguing that the five-year limit had been tolled by the stay and a number of other events, that under the circumstances of the case trying the case within the limit was impossible, impracticable or futile, and that, in any event, only the escrow company should be dismissed because the other defendants had waived the five-year limit by failing to move. The trial court granted the motion as to all defendants. Plaintiff sought reconsideration, but the court entered judgment in full against plaintiff without deciding the motion. Plaintiff appealed.

Code of Civil Procedure §§ 583.310-360 form what is known by California trial lawyers as the “five-year rule.” Section 583.310 says that a case shall be brought to trial within five years of its commencement against the defendant. Section 583.340 tolls the five-year window during periods when: (a) the trial court has been divested of jurisdiction, (b) the case is stayed or its prosecution enjoined, or (c) bringing the case to trial is impossible, impracticable or futile. And § 583.060 provides that the case can be dismissed on a party’s motion or the court’s own motion and that the five-year limit is mandatory and subject to only the exceptions provided in the statute. 

Back in the day, it was pretty ordinary for a case to run up on the five-year rule—especially in busy courts like Los Angeles Superior. But in more recent years, it has not been all that hard to get a reasonable trial date. Only particularly complicated or badly managed cases have tended to get even close to the five-year rule. That said, given the recent budgetary disarray in the state courts—I just recently given a “first available” date on a demurrer eight months from now in San Diego Superior—people have begun to question whether the five-year rule will again become part of routine trial practice.  Indeed, LA Superior has just rejiggered their entire case management system in the hopes of avoiding that result,

Here, the court of appeal court holds that the five year rule barred the case against the escrow company that brought the motion. The period was not tolled during the mediation stay because, under the California Supreme Court’s recent decision in Bruns v. E-Commerce Exchange, Inc., 51 Cal. 4th 717 (2011), only a complete stay counts to get tolling under § 583.340(b). Because the mediation-related stay in this case had a carve-out requiring the parties to respond to discovery that had already been served, Bruns precluded tolling.

In a section of the opinion that draws a dissent, the court also holds that the trial court did not abuse its discretion in holding that the stay did not render trial the case impracticable under § 583.340(c). The impracticability analysis looks to the plaintiff’s diligence and whether there is a causal relationship between the alleged period of impracticability and the trial delay. Because the stay occurred years before trial, and because the plaintiff apparently let the case lay fallow of significant periods of time, the trial court could permissibly decide not to toll the rule. On this point, the court refused to decide whether periods other than the stay that had not been raised by plaintiff in the trial court or on appeal—such as the significant time between when the first servicer answered and when it amended its answer to reveal that it had long before assigned away its interest in the fiancé’s loan to Lehman—merited tolling for impracticability.

Nor did equitable estoppel did apply create tolling during the stay period. After citing a four element test that doesn’t really apply when equitable estoppel is grounded on a promise—an issue previously addressed in detail here—the court reasons (correctly) that equitable estoppel did not apply because although defendants agreed to the stay, they never agreed or specifically promised to toll the clock on the five year rule. Given that the stay occurred several years before the five-year rule would run, there would be no reason to infer that defendants made such a promise in agreeing a partial stay pending a mediation, so an estoppel on the point would be inappropriate.

Turning to the other defendants, the court rejects both defendants’ argument that the dismissal was jurisdictional and thus warranted automatic dismissal of the whole case as well as plaintiff’s argument that the other defendants waived the five-year rule by failing to move. On the latter point, § 583.360(a) permits the court to dismiss on its own motion, so provided the plaintiff had notice, the other defendants’ failure to move did not preclude the court from dismissing. Thus, the employee, the fiancé and the original services were all properly dismissed.

But when it came to defendant Lehman, the trial court erred. Because § 583.310 refers to “the defendant” in the singular, and relying circumstantially on implications of the rationales of some prior cases, the court holds that the five year rule is defendant-specific. It runs from the appearance of each defendant in the case. And although the five-clock for a defendant substituted in as a Doe runs from the initial Doe pleading, plaintiff in this case added Lehman as Doe # 31. While plaintiff named Does ##1-30 in her original complaint, she did not add Does ##31-50 until an amended complaint filed two years into the case. (Presumably, the the statute of limitations was not tolled for these late-added Does till they were added.) Since Lehman’s representative Doe #31 was not in the case from the outset, the five year rule had not yet run as to Lehman.

Finally, when it came to plaintiff’s motion for reconsideration, the court noted that the trial court lost jurisdiction over it when it entered judgment. But by doing so, the motion was deemed denied, so it could be properly addressed in this appeal. In any event, the motion offered nothing new under the sun, so the trial court properly denied it.

Reversed as to defendant Lehman, otherwise affirmed, and remanded.

Justice Rubin writes an interesting dissent. Although he agrees on most of the legal decisions raised by the majority, he believes that the trial court abused its discretion in finding that plaintiff failed to establish that it was impossible, impracticable, or futile to get the case to trial within five years.

The first half of the dissent focuses on the nuances of abuse of discretion standard of review. Although there are many different expressions of the standard, most are phrased in ways that are sound pejorative of the trial court’s decision-making—such as various standards suggesting that the trial court would not be reversed unless its decision was irrational, whimsical, capricious, arbitrary. Essentially, Justice Rubin believes that an appellate court should be able to reverse under the abuse of discretion standard without suggesting that the trial judge was crazy, irrational, or abdicating all judicial responsibility and that the more hyperbolic expressions of the standard are not particularly helpful to understanding the proper scope of appellate review.

Relying principally on Hurtado v. Statewide Home Loan Co., 167 Cal. App. 3d 1019,1022 (1985), a thirty-year-old opinion written by the estimable Justice Howard Weiner (Ret.), Justice Rubin thinks that the abuse of discretion standard needs to be more contextual and focused on the different ways that a trial court’s decision-making warrants deference on appeal. According to Justice Rubin, deference is warranted when appellate courts perceive an institutional reason to defer. In particular, being closer to the litigation, trial courts have a superior perspective when it comes to: (1) fact-finding and (2) decisions where the trial “judge’s position in the courtroom gives him or her a superior opportunity to get ‘the feel of the case.’” Quoting Hurtado, Justice Rubin suggests that the latter “include a host of trial and pretrial administrative rulings such as those pertaining to continuances, pretrial conferences, many discovery matters, the conduct of counsel, cumulativeness of evidence, the extent of voir dire and the length of the trial day.”

Here, not much deference is warranted. The facts underlying the appeal are essentially undisputed and notably, the judge who dismissed the case was not a personal observer of most of the progress (or lack thereof) in the litigation. So the question at hand: whether, based on “uncontested facts was it impossible, impracticable, or futile to get this case to trial within five years” merited some, although not very much, deference on appeal.

Turning to that question, Justice Rubin takes issue only with the trial court’s finding that meeting the five-year rule was not “impracticable.” He agrees that doing so was not impossible or futile. But turning to the meaning of impracticable, Justice Rubin notes that many things about the case merited finding that it met that standard. He noted that this case involved (1) the kinds of complicated questions about the nature of assignments of servicing relationships that tend to plague mortgage litigation, which in this case, even the original servicer defendant failed to get straight for almost a year; (2) the death of the original plaintiff; (3) the need to obtain relief from the stay in the Lehman bankruptcy, which was pending in a distant court. 

According to Justice Rubin, “[t]hese facts show that the litigation course of this controversy went sideways rather than forward for much of the time, often through no fault of plaintiffs or anyone else for that matter.” Thus
distinguishing the earlier cases in which the trial court found no excuse for a delay beyond five yearshe believes that, because the case was also extensively litigated and the parties did not sit on their hands, relief from the five-year rule was merited under § 583.360(c) and that the trial court abused its discretion in denying it. Indeed, “dismissal of this lawsuit under the circumstances described defeats the substantial ends of justice. Instead, it rewards parties who, it would appear, have played a major and unlawful role in the theft of someone’s home.”

*Note: Review granted April 30, 2014.

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