Thursday, January 8, 2015

Too Late to Dismiss a Related Case

Mesa Shopping Center v. O’Hill, No. G049205 (D4d3 Dec. 23, 2014)

While an arbitration was pending, plaintiff filed this case seeking ancillary declaratory and injunctive relief. It filed a motion for a preliminary injunction, which was denied. Then the case got stayed while the arbitration proceeded. Soon after the arbitrator ruled for defendants, including an award of about $800,000 in fees and costs under a contractual fee provision, plaintiff voluntarily dismissed this case with prejudice. Thereafter, defendants moved to vacate the dismissal and for an award of fees incurred in the court case. The trial court denied the motion.

The court of appeal first addresses a key issue of appealability.  Prior cases have held that a voluntary dismissal is not an appealable judgment and thus that an order on a motion to vacate voluntary dismissal is not an order “made after a judgment” made appealable under Code of Civil Procedure § 904.1(a)(2).  But the court, with considerable candor, explains that it believes the “law has taken a wrong turn to the extent it suggests” that the order denying the motion to vacate in this case is unappealable. While an order granting a motion to vacate a dismissal doesn’t merit treatment of a judgment—because the case will go on—an order denying such a motion is, effectively, the dead end of the case. So looking to the definition of judgment in § 577, and placing substance over the form of the decree, the court holds that a denial of a motion to vacate a voluntary dismissal is appealable as a judgment because nothing about the order is interlocutory in nature.

The court backstops its ruling by noting that it would, in any event, have treated the appeal as a valid writ. Its explanation eschews the more formal analysis of the various writ factors, and pithily explains that writ review would be merited because:

The law is confusing. The briefing and record are sufficient to treat this matter as a writ proceeding. There is nothing to suggest the trial court would actually appear as a party if this matter were to be deemed a writ proceeding. And finally, the O Hill Investors’ contentions in this case have merit; it would be unjust if relief were to be denied by way of a procedural trap.
I expect the last phrase of that—which isn’t quoting anything—will prove a useful quote in all kinds of contexts.  The following cite might be coming soon to a brief near you: See generally Mesa Shopping Ctr. v. O’Hill, --- Cal. App. 4th ---, --- (2014) (when “contentions in th[e] case have merit[,] it would be unjust if relief were to be denied by way of a procedural trap.”)). 

Moving on to the merits, the court finds that the trial court erred by treating the court case and the arbitration as entirely separate proceedings, such that the dismissal of the court case, in effect, resulted in their being no prevailing party as the term is understood in Civil Code § 1717, the statute addressing contractual attorney fee awards. The allegations of the two cases were factually and structurally intertwined. Indeed, the plaintiff admitted that the court case was “ancillary” to the arbitration.

It follows from the conclusion that the cases aren’t really separate, that plaintiff wasn’t actually entitled to voluntarily dismiss without prejudice. It was too late. The statue governing voluntarily dismissals—§ 581—cuts of the right to dismiss at “actual commencement of trial.” But courts have understood that to mean that a plaintiff can’t dismiss a judicial arbitration—see §§ 1141.10–1141.31—without prejudice after an arbitrator makes an unfavorable award.  Cases reach a similar result with respect to decisions by appointed referees. So it isn’t much of a stretch to extend that reasoning to a private arbitration.

As to whether defendant gets fees, there hasn’t yet been a judgment dismissing plaintiff’s claims with prejudice, so the issue isn’t ripe. The trial court should address that on remand.

Reversed and remanded.

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