AARON, J.
Respondents Honorio Castaneda, Julio Posada, HC Restaurant Holdings, LLC (HC) and JPL Mexican Restaurant Holdings, LLC (JPL) filed this action against Santanas Cuisine, Inc. (Cuisine)
Respondents each operated a restaurant pursuant to a franchise agreement with Fresh Mex, LLC. Cuisine provided bookkeeping and accounting services related to the restaurants. The gist of respondents' claim, as pled in the operative first amended complaint, is that Cuisine's sole owner, Claudia Vallarta, negligently sent invoices for Cuisine's financial management services to respondents.
Respondents filed a motion for summary judgment in which they argued that they were entitled to judgment as a matter of law on their claim of negligent interference with prospective economic advantage. In support of this contention, respondents maintained that the trial court should give collateral estoppel effect to certain findings made in a prior arbitration involving claims that respondents brought against Fresh Mex and Vallarta. In that arbitration, the arbitrator determined that Fresh Mex
After briefing and a hearing, the trial court granted respondents' motion for summary judgment. The court ruled that Cuisine had "a duty to exercise due care in the performance of its management fee services contract with [respondents] and breached it by allowing [respondents] to believe the large sums of money on the invoices were due which damaged [respondents] by the loss of their franchise." The court further concluded that respondents had established all of the elements of their negligent interference claim and subsequently entered judgment in favor of Castaneda and HC in the amount of $326,840.38 and in favor of Posada and JPL in the amount of $429,409.43.
On appeal, among numerous contentions, Cuisine claims that the trial court erred in granting summary judgment on the basis of the arbitrator's findings. We agree that the court committed clear error in granting summary judgment for respondents based on the arbitrator's findings. Specifically, we conclude that respondents did not establish that the issue of whether Cuisine had engaged in wrongful conduct by breaching its duty of care in the performance of its management fee services contract was actually litigated and decided in the arbitration, as would be required in order to preclude litigation of that issue in this case pursuant to the doctrine of collateral estoppel. Since the only evidence that respondents offered in support of the wrongful conduct element of their claim consisted of the arbitrator's findings, respondents did not establish this element as a matter of law, as required. Accordingly, we reverse the judgment and the trial court's order granting the respondents' motion for summary judgment.
Castaneda and Posada
Castaneda and Posada also entered into a financial management services contract with Cuisine to provide bookkeeping and accounting services related to the restaurants.
Vallarta is the chief executive officer, chief financial officer, and sole director of Cuisine. In addition, during the relevant time period, Vallarta owned 50 percent of Fresh Mex.
The Fresh Mex franchise agreements provide that Fresh Mex could terminate the agreements if Castaneda or Posada breached any agreement with a related party, including Cuisine.
On August 12, 2011, counsel, who simultaneously represented Fresh Mex, Vallarta, and Cuisine, sent a demand letter to respondents' counsel that stated that Castaneda and HC owed Cuisine $92,000 and that Posada and JPL owed Cuisine $90,000. Attached to the letter were invoices detailing the amounts owed and stating that payment was due in approximately 18 days. Also attached to the letter were invoices from Fresh Mex for payments due to Fresh Mex. The Fresh Mex invoices stated that Castaneda and HC owed a total of $32,600 to Fresh Mex.
On August 25, 2011, Fresh Mex, acting through Vallarta, terminated Castaneda and Posada's restaurant franchise agreements. The termination letters stated that the franchises were being terminated because Castaneda and Posada were insolvent and were unable to pay debts owed to Fresh Mex and other debts related to the franchises.
Cuisine claims that the trial court erred in granting respondents' motion for summary judgment because respondents failed to establish, as a matter of law, all of the elements of their claim for negligent interference with prospective economic advantage. In particular, Cuisine maintains that the court erred in relying on the arbitrator's findings in concluding that respondents established, as a matter of law, that Cuisine had engaged in wrongful conduct sufficient to support respondents' negligent interference claim.
A moving party is entitled to summary judgment when the party establishes that it is entitled to the entry of judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) A group of plaintiffs may meet their burden of showing that there is no defense to a cause of action if they have proved each element of the cause of action entitling plaintiffs to judgment on that cause of action. (Id., subd. (p)(1).) If, as in this case, plaintiffs, who bear the burden of proof on a cause of action by a preponderance of evidence at trial, move for summary judgment, "[they] must present evidence that would require a reasonable trier of fact to find any underlying material fact more likely than not—otherwise, [they] would not be entitled to judgment as a matter of law, but would have to present [their] evidence to a trier of fact." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 851.)
In reviewing a trial court's ruling on a motion for summary judgment, the reviewing court makes "`an independent assessment of the correctness of the trial court's ruling, applying the same legal standard as the trial court in determining whether there are any genuine issues of material fact or whether the moving party is entitled to judgment as a matter of law.'" (Trop v. Sony Pictures Entertainment, Inc. (2005) 129 Cal.App.4th 1133, 1143.)
The elements of the tort of negligent interference with prospective economic advantage are the following:
(See Venhaus v. Shultz (2007) 155 Cal.App.4th 1072, 1077-1078 [applying CACI No. 2204].)
With respect to the wrongful conduct element, plaintiffs "must show [a] defendant[ ] engaged in conduct that was wrongful by some legal measure other than the fact of the interference itself." (Contemporary Services Corp. v. Staff Pro Inc. (2007) 152 Cal.App.4th 1043, 1060; see National Medical Transportation Network v. Deloitte & Touche (1998) 62 Cal.App.4th 412, 440.) The negligent performance of a contractual obligation may constitute "wrongful conduct," sufficient to establish a claim for negligent interference with prospective economic advantage. (North American, supra, 59 Cal.App.4th at p. 787.)
"`[C]ollateral estoppel, or issue preclusion,' . . . `"precludes relitigation of issues argued and decided in prior proceedings."'" (Mills v. U.S. Bank (2008) 166 Cal.App.4th 871, 895 (Mills).) The doctrine may be applied if all of the following requirements are met:
"`The party asserting collateral estoppel bears the burden of establishing these requirements.'" (Id. at p. 896.)
Courts have applied the following test in determining whether an issue has been "actually litigated" (Murphy v. Murphy (2008) 164 Cal.App.4th 376, 400 (Murphy)) for purposes of determining the applicability of the doctrine of collateral estoppel:
"It is . . . appropriate to give collateral estoppel effect to findings made during an arbitration, so long as the arbitration had the elements of an adjudicatory procedure." (Kelly v. Vons Companies, Inc. (1998) 67 Cal.App.4th 1329, 1336.) "Parties to an arbitration . . . are often afforded the opportunity for a hearing before an impartial and qualified officer, at which they may give formal recorded testimony under oath, cross-examine and compel the testimony of witnesses, and obtain a written statement of decision. When an arbitration has these attributes, it is not unjust to bind the parties to determinations made during the proceeding." (Id. at pp. 1336-1337.)
Respondents based their motion for summary judgment in large part on the prior arbitration brought by respondents against Fresh Mex and Vallarta. In their brief in support of their motion, respondents argued that "the arbitration award/judgment applies as collateral estoppel to defendant Cuisine."
In discussing the elements of their claim for negligent interference with prospective economic advantage, respondents argued that, pursuant to North American, supra, 59 Cal.App.4th 764, a party engages in wrongful conduct by failing to exercise due care in the performance of a contract. Respondents stated that Vallarta, "through her and Cuisine's attorney," sent invoices to respondents on August 12, 2011 indicating that HC and Castaneda owed Cuisine $92,000 and that JPL and Posada owed Cuisine $90,000 for past management fees. The invoices stated that payment was due in approximately 18 days. Respondents further argued, "Cuisine breached its duty of care as to the billing of these invoices because Vallarta, who was a party, testified at the arbitration that the Cuisine backdated
Respondents also noted that the arbitrator found that Fresh Mex and Vallarta:
Respondents maintained that "[t]he arbitrator's ruling was that the massive Cuisine backdated management fee invoices were not really owed and due and that the Claimants were not informed of this fact." Respondents contended that the issue had been "actually litigated" and "necessarily decided" in the arbitration because the arbitrator relied on this issue in determining that Fresh Mex had wrongfully terminated respondents' franchises. Respondents argued that Cuisine had, "through its actions and silence regarding the billing of invoices breached its duty of care under its management fee services agreement with [respondents]."
In support of their motion, respondents requested that the trial court take judicial notice of the judgment confirming the arbitration award and the award itself. Respondents also lodged several evidentiary exhibits, including the August 12, 2011 demand letter and accompanying invoices and the August 25, 2011 franchise termination letters.
Cuisine filed an opposition to the motion for summary judgment in which it argued that the arbitrator's opinion did not collaterally estop Cuisine from litigating its liability.
Cuisine further argued:
Cuisine raised numerous objections to the evidence offered by respondents in support of their motion for summary judgment. In particular, Cuisine raised objections to the following two statements contained in respondents' separate statement of facts (both of which respondents had supported by way of citation to the arbitrator's award):
As to both statements, Cuisine raised hearsay and authentication objections and argued that the court could not "take judicial notice of the truth of the arbitrator's findings. Rather, the court in the case at bar must make a new finding of fact of that is of it's [sic] own."
After further briefing, the trial court held a hearing on respondents' summary judgment motion. Although the court overruled the bulk of Cuisine's evidentiary objections at the hearing, the court did sustain six of the objections. Among the objections that the court sustained were Cuisine's objections to respondents' statements considering Vallarta's testimony at the arbitration, quoted above.
The trial court subsequently entered an order granting respondents' motion for summary judgment. The court's order states in relevant part:
The sole evidence that respondents cited in their summary judgment brief in support of their contention that Cuisine had engaged in wrongful conduct by breaching a duty of care consisted of the arbitrator's findings. Thus, it appears that the trial court intended to give collateral estoppel effect to the arbitrator's findings in granting respondents' motion for summary judgment.
In their briefing in the trial court, respondents relied on italicized portions of the following two passages from the arbitrator's final award in contending that the doctrine of collateral estoppel demonstrated that Cuisine had engaged in wrongful conduct sufficient to support its negligent interference claim. The award's factual summary states the following:
In addition, the arbitrator made the following findings in resolving whether Fresh Mex and Vallarta
As noted previously in our discussion of the elements of collateral estoppel (see pt. III.A.1.c, ante), in order for the doctrine of collateral estoppel to apply, "`"`"[i]t must appear . . . that the precise question was raised and determined in the former [proceeding]."'"'" (Shopoff & Cavallo LLP v. Hyon (2008) 167 Cal.App.4th 1489, 1520.) It is clear that the italicized language from the arbitrator's award does not support the trial court's conclusion that the arbitrator found that Cuisine breached its duty of care in the performance of its management fee services contract in a manner sufficient to establish the wrongful conduct element of respondents' negligent interference claim. Most important, there is nothing in the arbitrator's decision discussing Cuisine's obligations under the management fee services contract. Thus, it is clear that the arbitrator did not decide that Cuisine had breached its duty of care in the performance of its management fee services contract. (See Mills, supra, 166 Cal.App.4th at p. 895 [stating that in order for collateral estoppel to preclude litigation of an issue, issue must have been "decided" in former proceeding].) Nor did respondents offer any evidence from the arbitration, such as "pleadings" or other documents, demonstrating that whether Cuisine had negligently performed its obligations under the management fee services had been "submitted for determination, and is determined," in the arbitration. (Murphy, supra, 164 Cal.App.4th at p. 400 [describing the ways in which courts may determine whether an issue has been "actually litigated" for purposes of the doctrine of collateral estoppel].) As is plain from reading the arbitrator's decision, the arbitrator was focused on determining whether Fresh Mex and Vallarta had wrongfully terminated respondents' franchises; there is nothing in the decision that suggests that the arbitrator considered whether Cuisine had breach its duty of care under the management fee services contract.
Certainly, the arbitrator's statement that Vallarta testified that she did not intend for respondents to pay her for her management services, notwithstanding that "invoices were sent" to respondents, does not establish that Cuisine breached its duty of care under the management services contract. Nor does the fact that "the franchisor [i.e., Fresh Mex] sent notices" (italics added) to respondents establish that Cuisine engaged in wrongful conduct sufficient to establish respondents' negligent interference claim. Further, even assuming that the arbitrator had found that Cuisine, rather than Fresh Mex, sent the invoices that the arbitrator relied on in his findings, the arbitrator found that the invoices were "either" for amounts: "not really due," "previously waived," or "already past due, though not invoiced." (Italics added.) Thus, while respondents contend that "[t]he factual issue of [Cuisine's] right to demand payment on its issued and outstanding massive invoices `was at stake' in both proceedings," the arbitrator never determined that Cuisine's invoices were not due, much less that the sending of invoices constituted a breach of Cuisine's duty of care under the management fee services contract.
In sum, respondents failed to establish that whether Cuisine engaged in wrongful conduct by breaching it obligations under the management fee services contract was both "`actually litigated' "and "`decided'" in the arbitration. (Mills, supra, 166 Cal.App.4th at p. 895.) The trial court therefore erred in implicitly giving offensive collateral estoppel effect to the arbitrator's findings in determining that respondents established, as a matter of law, the wrongful conduct element of their negligent interference claim. Further, respondents presented no other evidence, apart from the arbitrator's findings, from which the trial court could have properly concluded that respondents established the wrongful conduct element. Accordingly, because respondents failed to establish all of the elements of their claim of negligent interference with prospective economic advantage as a matter of law, as is required (Code Civ. Proc., § 437c, subd. (p)(1)), we conclude that the trial court erred in granting respondents' motion for summary judgment.
As an alternative ground to affirm the summary judgment, respondents argue that "judicial estoppel is an independent ground . . . to find a breach of duty by [Cuisine]." (Formatting omitted.)
"The doctrine of judicial estoppel, sometimes called the doctrine of `"`preclusion of inconsistent positions'"' [citation], `"`precludes a party from gaining an advantage by taking one position, and then seeking a second advantage by taking an incompatible position. [Citations.] The doctrine's dual goals are to maintain the integrity of the judicial system and to protect parties from opponents' unfair strategies. [Citation.] Application of the doctrine is discretionary.'" [Citation.] The doctrine applies when "(1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake."'" (Blix Street Records, Inc. v. Cassidy (2010) 191 Cal.App.4th 39, 47.)
Respondents did not move for summary judgment on the basis of the doctrine of judicial estoppel and "[a] moving party is not entitled to summary judgment on a ground not raised in its motion." (San Jose Construction, Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528, 1545.) Further, while we may affirm a summary judgment on a ground not raised in a motion for summary judgment where the ground "`involves purely a legal question which rests on an uncontroverted record which could not have been altered by the presentation of additional evidence'" (Noe v. Superior Court (2015) 237 Cal.App.4th 316, 335), whether the doctrine of judicial estoppel applies in this case is not such a ground. Accordingly, we conclude that respondents are not entitled to affirmance of the summary judgment on the basis of the doctrine of judicial estoppel.
The judgment and the order granting respondents' motion for summary judgment are reversed. Respondents are to bear costs on appeal.
HALLER, Acting P. J. and O'ROURKE, J., concurs.
We need not, and do not, address issues numbered 1, 2, 4, and 5 in our opinion. With respect to the judicial estoppel argument, as discussed in part III.B, post, it was respondents who failed to move for summary judgment on this ground in the trial court, and the trial court did not grant the motion for summary judgment on this basis. Thus, Cuisine had no occasion to address this issue in its opening brief on appeal. Accordingly, we deny respondents' motion to strike, and deny respondents' request for leave to file a sur-reply brief.
In light of our reversal of the summary judgment for the reasons stated in the text, we need not consider whether respondents adequately established that the arbitration "had the elements of an adjudicatory procedure" sufficient to give the arbitrator's findings collateral estoppel effect. (Kelly v. Vons Companies, Inc., supra, 67 Cal.App.4th at p. 1336.) Accordingly, we deny respondents' motion for judicial notice. (See Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063 [stating that only relevant material may be judicially noticed].)
