3500 Sepulveda, LLC v. Rreef Am. Reit II Corp. BBB

• Docket Number: 2:17-cv-08537-AFM
• Decision Date: 06 June 2023
• Parties: 3500 SEPULVEDA, LLC, a Delaware limited liability company; and 13th & CREST ASSOCIATES, LLC, a California limited liability company, Plaintiff, v. RREEF AMERICA REIT II CORPORATION BBB, a Maryland corporation; MACY'S WEST STORES, INC., et al., Defendants. RREEF AMERICA REIT II CORPORATION BBB, a Maryland corporation Counter-Claimant, 3500 SEPULVEDA, LLC, a Delaware limited liability company; 13th & CREST ASSOCIATES, LLC, a California limited liability company; 6220 SPRING ASSOCIATES, LLC, a California limited liability company, Counter-Defendants.
• Court: U.S. District Court — Central District of California

1

3500 SEPULVEDA, LLC, a Delaware limited liability company; and 13th & CREST ASSOCIATES, LLC, a California limited liability company, Plaintiff, v. RREEF AMERICA REIT II CORPORATION BBB, a Maryland corporation; MACY'S WEST STORES, INC., et al., Defendants.

RREEF AMERICA REIT II CORPORATION BBB, a Maryland corporation Counter-Claimant, 3500 SEPULVEDA, LLC, a Delaware limited liability company; 13th & CREST ASSOCIATES, LLC, a California limited liability company; 6220 SPRING ASSOCIATES, LLC, a California limited liability company, Counter-Defendants.

No. 2:17-cv-08537-AFM

United States District Court, C.D. California

June 6, 2023

DECISION WITH FINDINGS OF FACT AND CONCLUSIONS OF LAW

ALEXANDER F. MACKINNON UNITED STATES MAGISTRATE JUDGE

INTRODUCTION

The facts of this case have been set forth in other decisions during this lengthy litigation. See, e.g., 3500 Sepulveda, LLC v. Macy's W. Stores, Inc., 980 F.3d 1317 (9th Cir. 2020). The parties' claims center around a construction project to expand Manhattan Village Shopping Center (the “Shopping Center”) in Manhattan Beach, California. The forty-four acre Shopping Center includes multiple parcels of land. Plaintiffs and Counterdefendants 3500 Sepulveda, LLC, 13th & Crest Associates, and 6220 Spring Associates (“the Hacienda Parties”) own one parcel and the commercial building located thereon (“the Hacienda Building”). Macy's owns another single parcel of land, and RREEF America REIT II Corporation BBB (“RREEF”) owns the remaining parcels. As summarized by the Ninth Circuit:

In 2006, RREEF applied to the City of Manhattan Beach (the “City”) for approval to renovate and expand the Shopping Center. Around the same time, Hacienda was attempting to convert parts of its building from office space to restaurants. RREEF and Hacienda vigorously opposed each other's plans for renovation, and various legal disputes arose.

3500 Sepulveda, LLC, 980 F.3d at 1321.

The remaining issues in the case are counterclaims brought by RREEF against the Hacienda Parties. In February 2023, the Court conducted a bench trial on RREEF's counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief. RREEF called as witnesses Joshua Lenhert, Philip Friedl, Patrick Gibson, David Bones, and Mark English, and lodged excerpted transcripts of the depositions of Mark Neumann, Sally Stocks and Philip Pearson. (ECF 255.) The Hacienda Parties called two witnesses at trial - Mark Neumann and Christian Tregillis - and designated additional excerpts of depositions of Sally Stocks, Mark Neumann, and Philip Pearson. (ECF 255.) The parties filed post-trial briefs, proposed findings of fact and conclusions of law, and rebuttals. (ECF 273 through ECF 278.)

After reviewing the evidence from the trial and considering the parties' filings and arguments, the Court renders its decision and makes the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a).^[1]

RELEVANT LEGAL PRINCIPLES/CONCLUSIONS OF LAW

1. To establish a breach of contract under California law,^[2] a plaintiff must show: (1) the existence of a contract, (2) the plaintiff's performance or excuse for nonperformance (3) the defendant's breach, and (4) that the plaintiff suffered damages as a result of the breach. Alpha GRP Inc. v. Subaru of Am., Inc., 2018 WL 5986989, at *10 (C.D. Cal. June 8, 2018); CDF Firefighters v Maldonado, 158 Cal.App.4th 1226, 1239 (2008).

2. In an action for breach of contract, the burden of proof on factual issues is preponderance of the evidence. See Cal. Evid. Code § 115. The party with the burden of proof must convince the trier of fact that its version of a fact is more likely to be true than not. See Weiner v. Fleischman, 54 Cal.3d 476, 483 (1991); Beck Development Co. v. Southern Pacific Transportation Co., 44 Cal.App.4th 1160, 1205 (1996); Cal. Evid. Code § 115.

3. “Under California law, contract interpretation is a question of law.” Malave v. City of Los Angeles, 2018 WL 5816095, at *5 (C.D. Cal. Mar. 29, 2018) (quoting S. California Stroke Rehab Ass'n., Inc., v. Nautilus, Inc., 782 F.Supp.2d 1096, 1110 (S.D. Cal. 2011)). A contract must be interpreted “as to give effect to the mutual intention of the parties as it existed at the time of contracting[.]” Cal. Civ. Code § 1636. Where a contract is reduced to writing, “the intention of the parties is to be ascertained from the writing alone, if possible.” Cal. Civ. Code § 1639; see also RealPro, Inc. v. Smith Residual Co., LLC, 203 Cal.App.4th 1215, 1221 (2012) (“the mutual intention of the parties at the time the contract is formed governs interpretation. Such intent is to be inferred, if possible, solely from the written provisions of the contract.”) (citations omitted).

4. “Under California law, contracts are interpreted as to give meaning to each word and phrase of the contract.” See City of Colton v. Am. Promotional Events, Inc., 2010 WL 5392761, at *6 (C.D. Cal. Dec. 21, 2010); see Cal. Civ. Code § 1641 (“The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.”).

5. The plaintiff must show that its damages were caused by the defendant's breach. Tribeca Cos. v. First Am. Title Ins. Co., 239 Cal.App.4th 1088, 1103 (2015).

6. “The test for causation in a breach of contract ... action is whether the breach was a substantial factor in causing the damages.” US Ecology, Inc. v. California, 129 Cal.App.4th 887, 909 (2005); Bruckman v. Parliament Escrow Corp., 190 Cal.App.3d 1051, 1063 (1987) (applying the “substantial factor” test in a breach of contract action); Great Am. Ins. Co. v. Wexler Ins. Agency, Inc., 2000 WL 290380, at *16 (C.D. Cal. Feb. 18, 2000) (same).

7. Under the substantial factor test, a defendant's conduct is a cause of a plaintiff's injury if: (1) the plaintiff would not have suffered the injury but for the defendant's conduct, or (2) the defendant's conduct was one of multiple causes sufficient to cause the alleged harm. Mitchell v. Gonzales, 54 Cal.3d 1041, 1049 (1991) (the “but for” test “should not be used when two ‘causes concur to bring about an event and either one of them operating alone could have been sufficient to cause the result'”); Rutherford v. Owens-Illinois, Inc., 16 Cal.4th 953, 969 (1997) (“The substantial factor standard ... subsumes the ‘but for' test while reaching beyond it to satisfactorily address other situations, such as those involving independent or concurrent causes in fact”); Union Pac. R.R. Co. v. Ameron Pole Prod. LLC, 43 Cal.App. 5th 974, 981 (2019).

8. A defendant's breach of contract need not be the sole cause of the plaintiff's damages. See Judicial Council of California Civil Jury Instructions (CACI) (2022) No. 430 (“A substantial factor in causing harm is a factor that a reasonable person would consider to have contributed to the harm. It must be more than a remote or trivial factor. It does not have to be the only cause of the harm.”); see also Bruckman v. Parliament Escrow Corp., 190 Cal.App.3d 1051, 1063 (1987) (a defendant generally must “pay damages equivalent to the total harm suffered” even though “the plaintiff's total injury may have been the result of many factors in addition to the defendant's tort or breach of contract”) (citations omitted); Britz Fertilizers, Inc. v. Bayer Corp., 665 F.Supp.2d 1142, 1167-1168 (E.D. Cal. Oct. 16, 2009) (“For a breach to be a substantial factor in causing the damages, it need not be the ‘sole' or exclusive cause of the damages.”). A substantial factor must be more than “negligible or theoretical.” Rutherford. 16 Cal.4th at 978.

9. “Conduct is not a substantial factor in causing harm if the same harm would have occurred without that conduct.” Michaels v. Greenberg Traurig, LLP, 62 Cal.App. 5th 512, 531 (2021) (quoting CACI No. 430). There is an exception to this “but for” requirement: Where there are “concurrent [independent] causes” the “proper rule for such situations is that the defendant's conduct is a cause of the event because it is a material element and a substantial factor in bringing it about.” Mitchell, 54 Cal.3d at 1049 (citations omitted).

10. Concurrent independent causes are multiple forces operating at the same time and independently, each of which would have been sufficient by itself to bring about the same harm. Viner v. Sweet, 30 Cal.4th 1232, 1240 (2003); Major v. R.J. Reynolds Tobacco Co., 14 Cal.App. 5th 1179, 1198 (2017).

11. Whether or not a defendant's act is a substantial factor in bringing about a plaintiff's injury is a question of fact for the factfinder. See T.H. v. Novartis Pharmaceuticals Corp., 4 Cal. 5th 145, 198 (2017).

12. “For the breach of an obligation arising from contract, the measure of damages, except where otherwise expressly provided by this Code, is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom.” Cal. Civ. Code § 3300.

13. “[D]amages for the loss of prospective profits are recoverable where the evidence makes reasonably certain their occurrence and extent, ... albeit not with ‘mathematical precision.'” Sargon Enterprises, Inc. v. Univ. of S. Cal., 55 Cal.4th 747 773-774 (2012) (quoting Grupe v. Glick, 26 Cal. 2d 680, 693 (1945)). “[W]here the operation of an established business is prevented or interrupted” by a breach of contract, lost profits damages “are generally recoverable ... that their occurrence and extent may be ascertained with reasonable certainty” from, for example, “the past volume of business.” Id. at 774 (quoting Grupe, 26 Cal. 2d at 692). Generally, in the case of...