Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment and order of the Superior Court of Los Angeles County. Warren L. Ettinger, Judge. Los Angeles County Super. Ct. No. BC287658.
Christopher Wilson & Associates and Christopher F. Wilson for Plaintiff, Cross-defendant and Appellant.
The Corona Firm, Richard D. Corona and Richard J. Messer; Marks, Golia & Finch, Robert J. Marks and Rachel F. Tait for Defendant, Cross-Complainant and Respondent Steiny and Company, Inc.
Raymond J. Fortner Jr., County Counsel, and Nedra Jenkins, Principal Deputy County Counsel, for Cross-Defendant, Cross-Complainant and Respondent Los Angeles County Metropolitan Transportation Authority.
WOODS, J.
INTRODUCTION
The inception of this appeal generally stems from facts surrounding the claims of the Los Angeles County Metropolitan Transportation Authority (MTA) that false claims were presented by hired contractors, specifically including appellant Reno Metal Products, Inc. (“Reno”), in violation of the California False Claims Act (FCA) for bills submitted for its work as a subcontractor in connection with the construction of the MTA’s “Red Line.” Steiny and Company, Inc. (“Steiny”) was awarded a contract from the MTA to have Steiny complete and close out construction of segment 3 of the Red Line. The MTA hired Steiny to do miscellaneous construction to finish segment 3 of the Red Line so that passengers could begin using segment 3. Steiny in turn hired Reno to do the sheet metal portion of the work assigned to Steiny by the MTA. By way of further introduction, the sheet metal work that this case pertains to was work done by Reno partly in the Reno shop in North Hollywood where Reno employed devices that used pressure to cut and break and bend steel. Additionally, Reno accomplished work “in the field” which Reno describes as being in the subway station under construction. After a jury trial, judgment was entered by the trial court which included Reno, among others, as hereafter described.
FACTUAL AND PROCEDURAL SYNOPSIS
Reno’s complaint.
On December 23, 2002, Reno filed a complaint against Steiny and 30 fictitious defendants for breach of contract and for quantum meruit. A summary of the most relevant portion of the Reno complaint is as follows: Reno signed a written subcontract with Steiny on September 17, 1999; Steiny was the prime contractor for the MTA; Steiny’s prime contract with the MTA was for ancillary construction and maintenance; Steiny’s contract was designated as C0390 and was commonly referred to by this designation; Reno was to furnish, fabricate and install handrails, hoistway roof enclosures and platform beam side panels and install owner-furnished stainless steel assemblies which included guard rails, railings, kick plates, angle terminations and paving; Reno was to be paid a total sum of $232,500; during the course of the project Steiny asked Reno to provide additional work based on task orders which exceeded 110 in an extended period for performance for over one year; the additional value added by the task orders exceeded $750,000; as of December 2000 the amount still owed by Steiny was $93,961.93 consisting of the retention held by Steiny; Reno claimed interest on the retained amount under section 7101 of the Public Contract Code in the amount of 2 percent per month, which accrued at the rate of $1,879.30 per month for a total of $43,223.90 as of December 2002; although Reno demanded payment of the amounts owing, Steiny refused to pay; Reno’s complaint was based upon breach of contract and quantum meruit and included a prayer for actual damages, incidental and consequential damages, interest, attorney’s fees, costs, and other relief that the court deemed proper and just.
Steiny’s answer.
On February 14, 2003, Steiny filed an answer to Reno’s complaint, denying generally and specifically all of the allegations of the complaint and alleging 21 affirmative defenses and praying that Reno take nothing on its complaint, Steiny be awarded costs of suit, attorney’s fees and such other relief the court deemed proper and just. Delineation of the 21 affirmative defenses set forth in Steiny’s answer is postponed until further in this opinion and only if they may become relevant to the analysis set forth herein.
Steiny’s cross-complaint.
Steiny’s cross-complaint was not included in the record on appeal in the first instance and the clerk of this court made inquiry following oral argument on April 11, 2008, the reason for this incomplete record by Steiny who provided the following information by letter dated April 21, 2008: “After Reno filed the original complaint against Steiny in this action, Steiny filed a cross-complaint against Reno only on February 14, 2003. That cross-complaint was not included in the record as it was superseded by later pleadings. On April 25, 2003, Steiny filed and served a first amended cross-complaint, against Reno, and adding the MTA as a cross-defendant for the first time. The first amended cross-complaint was not included in the record as it was superseded by the second amended cross-complaint, which was filed on October 3, 2003. Although neither Steiny’s original nor first amended cross-complaints were included in Steiny’s Appendix, they are attached here as Exhibits ‘1’ and ‘2’ for the Court’s reference. . . .”
Steiny’s Second Amended Cross-Complaint (SACC) alleged causes of action for breach of contract and declaratory relief against RENO and MTA as well as a third cause of action for RENO’s failure to defend STEINY, per the Steiny/Reno Subcontract terms, from the MTA First Amended Cross-Complaint (FACC). Reno maintains that it never sued the MTA, but a reasonable inference from the record is that Steiney’s cross-complaint not only escalated the litigation but directly triggered the filing of a cross-complaint by the MTA as hereafter explained and set forth.
MTA’s first amended cross complaint.
On August 4, 2003, MTA filed its cross-complaint in its capacity as a public entity and on behalf of the State of California as a qui tam plaintiff, alleging eight causes of action against cross-defendants Steiny, Liberty Mutual Insurance Company (Liberty), Reno and 100 fictitious defendants. The cross-complaint sought damages, penalties and injunctive relief based upon (1) breach of contract; (2) breach of third party beneficiary contract; (3) violations of the False Claims Act pursuant to Government Code section 12650, et seq.; (4) conspiracy pursuant to Government Code section 12651, subdivision (a)(3); (5) violations of the Unfair Business Practices Act pursuant to Business and Professions Code section 17200; (6) to enforce public works performance bond; (7) revocation or suspension of license pursuant to Business and Professions Code section 7106; and (8) declaratory relief.
MTA’s cross-complaint is extensive, consisting of 33 pages of allegations, most of which are supported by exhibits attached to and incorporated into the main body of the cross-complaint by reference. For purposes of this appeal, it is instructive and informative to set forth verbatim the factual allegations of the MTA in the beginning paragraphs of its cross-complaint which are common to all of the allegations supporting its eight causes of action. Those allegations are as follows:
“7. On or about August 9, 1999, the MTA and STEINY entered into a written contract known as contract CO390 ANCILLARY CONSTRUCTION AND MAINTENANCE (‘CO390’) whereby STEINY was engaged as the General Contractor to perform ancillary structural, architectural, electrical, mechanical, utility, and other construction, repair and maintenance required to complete unfinished work or enhanced modifications necessary within the three Segment 3 stations and associated line Sections on an ‘as-needed’ basis. On or about September 17, 1999, STEINY entered into a subcontract with RENO for performance of certain work under contract CO390. The September 17, 1999 contract was made for the MTA’s benefit in that it encompassed portions of the work to be performed for the MTA under contract CO390. General condition 6-D(3)(C) (Flow-down Requirements) which is applicable to STEINY and RENO, states ‘[t]he Contractor and Subcontractor agree that the AUTHORITY is the third-party beneficiary of the Subcontract and shall have the right to enforce all of the terms of the Subcontract for its own benefit.’ General Condition 6-D(3)(b) provides that ‘[t]he Subcontractor agrees that it shall have the same duties and obligations to the Contractor with respect to its performance of its own Work as the Contractor has to the Authority under its Contract.’ . . . In the Subcontract between RENO and STEINY . . ., the ‘Flow-down Requirements’ of contract CO390, General Conditions 6-D were incorporated by reference. . . .
“8. The MTA paid STEINY for Task Orders. The payment to STEINY for those Task Orders included payments for Bills of Sale submitted by RENO, as well as Time and Materials sheets which included RENO.
“9. The terms of contract CO390 required STEINY and RENO to comply with all applicable codes, ordinances, rules, regulations, orders and other legal requirements of governmental bodies and public agencies including the MTA.
“10. Within four (4) years of the filing of the cross-complaint in this action, it was discovered that STEINY and RENO breached contract CO390, including, but not limited to the following particulars:
“(a) STEINY and RENO failed to comply with the terms and conditions of contract CO390 that require there be specific documents to support the pay requests, which includes but is not limited to labor cost invoicing, material cost invoicing, construction equipment cost invoicing and other supporting documents.
“(b) STEINY failed to properly review the payment requests from RENO to determine them to be in compliance with contract CO390, including but is not limited to ensuring that RENO provided labor cost invoicing, material cost invoicing and construction equipment cost invoicing, and providing those documents to the MTA.
“(c) The MTA made repeated requests to STEINY throughout the course of the contract for the requisite supporting documentation for the Bills of Sale submitted by RENO but STEINY refused to provide the supporting documentation despite these repeated requests. Although payments were made to STEINY for the Bills of Sale submitted by RENO, the MTA continuously noticed STEINY that in the event that STEINY failed to provide the supporting invoices and other documentation, these payments would be subject to an audit and any payment improperly made would be subject to a refund back to the MTA. The MTA did conduct an audit into the payments made to STEINY for Bills of Sale submitted by RENO, and other work purportedly performed by RENO and determined that money is owed and is due back to the MTA. Reimbursement by STEINY to the MTA for payments made related to RENO is still outstanding.
“(d) STEINY sought and received payment for Task Order #115 for RENO in the amount of $76,391.33, plus mark-up. The invoicing for RENO for work performed under Task Order #115 reflects that the cost requested amounted to $51,713.61. STEINY was overpaid in the amount of $24,677.72, plus mark-up. The MTA alerted STEINY about the overpayment and made repeated requests to STEINY for a refund but STEINY has refused to make the MTA whole. STEINY knew or should have known at the time that it requested payment in the amount of $76,391.33 that this amount was not owed and the costs had been inflated by $24,677.72.
“(e) RENO also knew or should have known that it was not entitled to payment in the amount of $76,391.33 for work invoiced under Task Order #115. Additionally, STEINY and RENO knew or should have known that STEINY and RENO were not entitled to payments for Bills of Sale that were estimated costs. RENO was [sic] also knew or should known [sic] that it had a contractual duty to provide invoices to support material costs, labor costs and construction equipment costs for the Bills of Sale.
“(f) Further, STEINY failed to obtain and require RENO to provide Time and Material Sheets for the Bills of Sale submitted by RENO that were the subject of the audit performed by the MTA.
“(g) STEINY and RENO knew or should have known that they were not entitled to separate payment under contract CO390 for work billed for RENO’s General Foreman because that work was already paid for under the mark-up provisions set forth in the contract.
“(h) By RENO’s own admission, it was ‘aware and certain, before [RENO] received the subcontract from STEINY on August 19, 1999, that the CO321 interface work, which was on going under the B710 contract, was not going to be performed under [sic] CO390 contract.’ . . . In or around January 2001, the MTA deleted worked [sic] from contract CO390 valued at $52,000.00 because RENO had already performed that work under contract B710 for $48,915.75. . . . On or about March 12, 2001, STEINY submitted a claim for payment under contract CO390 in the amount of $72,424.99, plus administrative processing, interest and mark-up for STEINY, on behalf of RENO. In this claim, STEINY sought payment on behalf of RENO for work that RENO performed for the MTA and was paid approximately $48,915.75 under contract B710. Both STEINY and RENO knew or should have known that RENO was not entitled to payment for work that (1) RENO did not perform under contract CO390 and (2) RENO had performed the work under contract B710 almost two years earlier for which the MTA had fully compensated RENO. STEINY knew or should have known that RENO did not perform the work identified in the claim for contract CO390 and as such, STEINY was not entitled to a mark-up.
“(i) STEINY and RENO also knew or should have known that contract CO390 expressly did not permit RENO to recover administrative costs in the amount of $4,800.00; claim preparation, presentation and meet and confer costs in the amount of $10,000.00, or interest in the amount of $15,000.00 for work not performed when RENO asked STEINY to submit the claim to the MTA and when STEINY submitted the claim on behalf of RENO to the MTA.
“(j) For the purpose of inflating the claim, RENO re-valued the cost to perform the deleted work to the lower amount of $7,375.01 as set forth in Appendix C-Cost Summary of the claim. However, RENO knew or should have known that the value of the deleted work was approximately $48,914.75 and not $7,375.01 because RENO charged the MTA $48,914.75 when RENO performed the work that was deleted from contract CO390 on contract B710.”
Answer of Steiny and Liberty Mutual Insurance Company to MTA’s Cross-Complaint.
On September 2, 2003, Steiny and Liberty filed their answer to MTA’s cross-complaint denying generally all of the allegations thereof and in addition pleading 27 affirmative defenses to be delineated hereafter in this opinion if relevancy so dictates.
Second amended cross-complaint of Steiny.
On October 3, 2003, Steiny filed its second amended cross-complaint against Reno and MTA setting forth causes of action for (1) breach of contract; (2) declaratory relief; (3) failure to defend against Reno and requesting indemnification. On its breach of contract action, Steiny in capsule format alleged that to the extent MTA is successful on its cross-complaint then Reno will have been overpaid leading to a breach of contract entitling Steiny to a valid claim for damages and reimbursement. In the alternative, Steiny alleged should Reno prevail then MTA has violated contract provisions which result in Steiny and Reno being entitled to relief from MTA. Steiny’s cause of action for declaratory relief merely asks the court for a declaration of rights and duties among Steiny, Reno and the MTA. Steiny’s third cause of action seeks relief against Reno for its failure to defend Steiny as demanded and a request for indemnification according to proof of damages at time of trial.
Reno’s answer to Steiny’s second amended cross-complaint.
On January 16, 2004, Reno filed its answer to the second amended cross-complaint of Steiny denying generally the allegations and alleging 11 affirmative defenses to be hereafter delineated to the extent any of them become relevant to the discussions contained in this opinion.
MTA’s answer to Steiny’s second amended cross-complaint is not part of the record on appeal, but MTA’s answer to Steiny’s first amended cross-complaint serves as its operative answer.
A search of the record failed to reveal the MTA’s answer to Steiny’s second amended cross-complaint. Following oral argument on April 11, 2008, an inquiry was made by the clerk of the court via letter dated April 15, 2008, pertaining to the MTA’s deficient record on appeal. By written response from Steiny’s counsel (presumably with authority) the MTA responded in Steiny’s letter dated April 21, 2008, as follows: “The MTA never filed an answer or response to Steiny’s second amended cross-complaint as the pleading made no new allegations regarding the MTA (but only as to Reno) [citations omitted]. Accordingly, the MTA’s answer to the first amended cross-complaint is the operative answer. That answer was not included in the record as there are no Steiny-MTA appellate issues, but is attached here as Exhibit ‘3’. . . .”
Trial Court Proceedings.
As respondent MTA relates in its opening briefs on appeal, this matter was heard by three different judges of the Los Angeles County Superior Court, namely Judges James R. Dunn, Elizabeth A. Grimes and ultimately Warren L. Ettinger. We now examine the proceedings before each of the three judges assigned to hear differing aspects of the case.
Proceedings before Judge James R. Dunn.
The full extent of the participation of Judge James R. Dunn is not at all clear from the record on appeal. The minute order from Department 30 of the Los Angeles County Superior Court dated July 7, 2005, indicates that Judge Dunn was involved with making various rulings in limine before he recused himself. The reason for the recusal is left mostly for speculation. At oral argument on April 11, 2008, counsel represented to this court that Judge Dunn recused himself after having engaged counsel in settlement negotiations in the case.
Proceedings before Judge Elizabeth A. Grimes.
The matter was then transferred to the second judge in the case, Judge Elizabeth A. Grimes, who was confronted with MTA’s motion for reconsideration of various rulings made by Judge Dunn before his recusal. The minute order originating from Department 30 dated July 7, 2005, indicates that the nature of the proceedings before her was for a “jury trial.” The trial had resumed from the previous day. In an extensive minute order, Judge Grimes made the following relevant orders:
“On June 16, 2005, the court heard MTA’s motion for reconsideration of various rulings on motions in limine by Judge Dunn before he recused himself in this matter. This court agreed to reconsider Judge Dunn’s ruling on motion in limine no. 2 brought by Steiny and its surety, Liberty Mutual, to the extent that the court ordered a trial pursuant to Code of Civil Procedure section 597 of Steiny’s affirmative defense no. 27 that MTA’s cross-complaint is barred by the release in Change Order 42.01 signed by Steiny and MTA in February 2003. On June 16, 2005, this court ordered a bifurcated trial to the court before the jury is selected on the question whether Change Order 42.01 is an integrated contract that bars MTA’s claims against Steiny and whether parol evidence is admissible to construe Change Order 42.01. This court has the power pursuant to C.C.P. section 597 to decide whether MTA’s cross-complaint is barred by a settlement agreement and mutual release. Kreling v. Walsh (1947) 77 Cal.App.2d 821, 835-836. The exercise of the court’s power in this case is appropriate because ‘[i]ssues of contract interpretation are questions of law for the trial court.’ De Guere v. Universal City Studios, Inc. (1997) 56 Cal.App.4th 482, 501. ‘It is therefore solely a judicial function to interpret a written instrument unless the interpretation turns upon the credibility of extrinsic evidence.’ Id.
“On July 5 and 6, 2005, the court held the trial of Steiny’s affirmative defense no. 27 to MTA’s cross-complaint. The court heard the testimony of Bill Hadley, Steiny’s Vice President; David Walker, MTA’s construction manager; and portions of the deposition testimony of Larry Lyon. The parties offered various exhibits found in binders submitted to the court and relied primarily on exhibits no. 141, 119, 92, 100, 536, and 498. The matter was submitted to the court for decision on July 6, 2005.
“Steiny’s position is that Change Order 42.01 is unambiguous on its face and includes a release by MTA of all claims against Steiny under Contract Number CO390, except for rights and obligations expressly reserved or set forth in Change Order 42.01, and that nothing in Change Order 42.01 reserves to MTA the right to assert any of the claims in its cross-complaint. MTA’s position is that the language underneath the signature lines in Change Order 42.01, which appears at the bottom of exhibits 141-5 and states, ‘Except as provided herein all terms and conditions of the Contract remain unchanged,’ reserves to MTA the right to sue Steiny for any breach of Contract Number CO390 related to Reno. MTA also asserts that, before Change Order 42.01 was executed, its representatives told Steiny that if Reno were ‘carved out’ of the global settlement of the final payments due under Contract Number CO390, then ‘any issues with Reno would be open.’ MTA urges that the jury should hear this testimony and decide the credibility question whether the parties intended Change Order 42.01 to reserve MTA’s right to prosecute its cross-complaint in this action.
“The court finds that Change Order 42.01 (exhibit 141) is an integrated contract that the parties intended to close out Contract Number CO390 and to be a settlement of all issues between them arising out of Contract Number CO390, except for the claim of Reno against Steiny in this lawsuit. The terms of Change Order 42.01 found in articles 2 and 4 are not reasonably susceptible of the meaning urged by MTA. MTA has offered no parol evidence that is relevant to prove the meaning it ascribes to Change Order 42.01. To the extent that MTA offered parol evidence at all (as opposed to the arguments of counsel), the evidence flatly contradicts the plain meaning of the mutual release in Change Order 42.01; language that this court finds to be a routine, run-of-the-mill, plain vanilla release of all claims, with not a breath or a whisper of a reservation of any right in MTA to assert any cross-complaint against Steiny in this lawsuit by Reno. Accordingly, the court will enter judgment for Steiny and its surety, Liberty Mutual, and against MTA on the cross-complaint.
“Plaintiff’s Motion for Partial Non-Suit filed 7-01-05 is heard and argued.
“The Non-Suit motion is argued only this date as the motion won’t be officially made until after defendant’s opening statement. The court offers counsel a tentative based on authority cited this date that the Non-Suit motion will likely be denied.
“Counsel waive jury and stipulate to a bifurcated Court Trial on the Cross-Complaint of Steiny against Reno. . . .”
Proceedings before Judge Warren L. Ettinger.
After Judge Grimes conducted part of the trial pertaining to Steiny’s affirmative defense to the cross-complaint of MTA based upon the alleged settlement agreement and release of Steiny, as above indicated, the matter was transferred to the third judge to hear portions of the trial, namely Judge Warren L. Ettinger.
Trial by jury began on January 18, 2006, with Judge Ettinger presiding. A verdict was returned by the jury on February 23, 2006, summarized by respondent MTA in its respondent’s brief on appeal as follows: (1) in favor of Reno in its complaint against Steiny; (2) in favor of the MTA and Reno in Steiny’s cross-complaint; and (3) in favor of the MTA against Reno for 57 violations of the FCA and in favor of Reno on breach of third party beneficiary contract. On March 21, 2006, the trial court further determined that the MTA was entitled to mandatory treble damages under the FCA and statutory penalties as a result of the jury verdict and Reno’s egregious conduct. Pursuant to Government Code section 12651, subdivision (a), the trial court awarded the MTA $308,589 in treble damages and $261,411 in penalties (57 false claims x $4,586.15). The trial court expressly determined that “[t]he MTA is the prevailing party in the cross-action against Reno because the jury found that Reno submitted $102,863.00 in false claims on the CO390 contract and awarded treble damages in the amount of $307,758.”
Judge Ettinger elected to present the jury panel with questions and to return a special verdict on the questions presented. The jury returned its Special Verdict which was included in the judgment of the trial court entered on September 12, 2006, in pertinent part as follows: “On January 18, 2006, the remaining matters came regularly for trial in Department 19 and thereafter, Department 4 of the Los Angeles Superior Court before the Honorable Warren L. Ettinger. Plaintiff and cross-defendant Reno Metal Products, Inc. (‘Reno’) was represented by Christopher Wilson, Esq. Defendant and cross-complainant MTA was represented by Nedra Jenkins, Esq. A jury of twelve (12) people and four (4) alternates were regularly impaneled and sworn. Witnesses were sworn and testified. After hearing the evidence and arguments of counsel, the jury was duly instructed to return a special verdict. The jury deliberated and thereafter returned into court with its special verdict as follows:
“‘We, the jury in the above-entitled case, find the following special verdict on the following questions submitted to us:
“PART I. STEINY AND RENO BREACH OF CONTRACT ISSUES.
“ Question No. 1 : Did RENO breach the contract between RENO and STEINY as to those issues submitted to you for decision? [¶] Answer ‘yes’ or ‘no’.
“Answer: NO. . . . [If No proceed to Question 3.]
“ Question No. 3 : Did STEINY breach the contract between RENO and STEINY? Answer ‘yes’ or ‘no’.
“Answer: YES. . . . [If Yes proceed to Question 4.]
“ Question No. 4 : If you answered Question No. 3 ‘yes’, did the breach of contract by STEINY proximately cause damage to RENO? [¶] Answer ‘yes’ or ‘no’.
“Answer: YES. . . . [If Yes, enter the amount of damages and proceed to Question 5.]
“Amount of Damages: $66,283.93 + interest
“PART II. STEINY AND MTA BREACH OF CONTRACT ISSUES.
“Question No. 5: Did MTA breach the contract between MTA and STEINY? [¶] Answer ‘yes’ or ‘no’.
“Answer: NO. . . . [If No proceed to Question 7.]
“PART III. MTA’S THIRD PARTY BENEFICIARY BREACH OF CONTRACT CLAIM AGAINST RENO
“Question No. 7: Did RENO breach the third [party] beneficiary contract with MTA? [¶] Answer ‘yes’ or ‘no’.
“Answer: NO. . . . [If No proceed to Question 9.]
“PART IV. MTA’S VIOLATION OF THE CALIFORNIA FALSE CLAIMS ACT AGAINST RENO
“Question No. 1 (sic) [9]: Do you find that knowingly Reno presented or caused to be presented to MTA one or more false claims for payment or approval? Answer ‘yes’ or ‘no’: YES
“Do you find that Reno knowingly used one or more false records or statements to get false claims paid or approved by MTA? Answer ‘yes’ or ‘no’: NO
“Do you find that Reno conspired to defraud MTA by getting false claims allowed or paid by MTA? Answer ‘yes’ or ‘no’: NO
“Do you find that Reno knowingly made, used or caused to be made or used a false record or statement to conceal, avoid or decrease its obligation to repay money that would go to the MTA? Answer ‘yes’ or ‘no’: YES
“Do you find that Reno was a beneficiary of an inadvertent submission of false claim to MTA but subsequently discovered the falsity of the claim and failed to disclose the false claim to MTA within a reasonable time after discovery of the false claim? Answer ‘yes’ or ‘no’: NO [If you answer yes to any of the questions, then answer Question No. 2.
“Question No. 2: [¶] How many false records do you find that Reno caused to be submitted for payment or approval ___0___?
“Question No. 3: [¶] How many false claims do you find that Reno caused to be submitted to the MTA ___57___
“Question No. 4: [¶] Identify which Bills of Sale you find constitute a false claim and the amount of the false claim. [Chart identifies these items.]
“Date: February 22, 2006
Maureen Keane Jury Foreperson’
“NOW, THEREFORE, IT IS ORDERED, ADJUDGED AND DECREED that
“Judgment is entered in favor of defendant and cross-complainant, Steiny and Company, Inc. and against plaintiff and cross-defendant, Reno Metal Products, Inc. in the amount of $593,773.78 for attorney fees and costs pursuant to the statement of decision as signed by the Honorable Warren Ettinger on 5/31/06. Steiny to recover costs per Memorandum of Costs in the amount of $_____. Steiny is to recover attorney’s fees in the amount of $_____.
“Judgment is entered in favor of cross-defendant Los Angeles County Metropolitan Transportation Authority against cross-complainant Steiny and Company, Inc. with respect to Steiny and Company, Inc.’s second amended cross-complaint. Cross-defendant Los Angeles County Metropolitan Transportation Authority is to recover costs per Memorandum of Costs in the amount of $_____. Los Angeles County Metropolitan Transportation Authority is to recover attorney’s fees in the amount of $____.
“Judgment is entered in favor of cross-defendant Liberty Mutual Insurance Company against cross-complainant pursuant to July 7, 2005 ruling by the Honorable Elizabeth Grimes. Cross-defendant Liberty Mutual Insurance Company is to recover costs per Memorandum of Costs to be filed in the amount of $______. Los Angeles County Metropolitan Transportation Authority is to recover attorney’s fees in the amount of $______.
“Judgment shall be entered in favor of cross-defendant, Steiny and Company, Inc. against cross-complainant Los Angeles County Metropolitan Transportation Authority and Los Angeles County Metropolitan Transportation Authority as a Qui Tam Plaintiff on behalf of the State of California and the State of California with respect to the first amended cross-complaint pursuant to the July 7, 2005 ruling by the Honorable Elizabeth Grimes. Cross-defendant Steiny and Company, Inc. is to recover costs per Memorandum of Costs in the amount of $_____. Liberty Mutual Insurance Company is to recover attorney’s fees in the amount of $_____.
“Judgment shall be entered in favor of cross-complainant the Los Angeles County Metropolitan Transportation Authority, and Los Angeles County Metropolitan Transportation Authority as a Qui Tam Plaintiff on behalf of the State of California against cross-defendant Reno Metal Products, Inc. in the first amended cross-complaint for violations of the California False Claims Act in the amount of $570,000, together with interest thereon at the rate of ten percent (10%) from the date of entry of this judgment until paid. Los Angeles County Metropolitan Transportation Authority is to recover costs and fees per Memorandum of Costs in the amount of $______. Los Angeles County Metropolitan Transportation Authority is to recover attorney’s fees in the amount of $____.
“Dated: SEP 12 2006
WARREN L. ETTINGER “JUDGE OF THE SUPERIOR COURT”
The judgment of the trial court is buttressed in this instance with two statements of decision. The first was signed on May 3, 2006, and the notice pertaining thereto was entitled “Notice of entry/Signing of Statement of Decision Re Issues Involving Steiny and Company, Inc. and Reno Metal Products, Inc.” The second was signed also on May 3, 2006, and the notice pertaining thereto was entitled “Notice of Entry/Signing of Statement of Decision Re Issues Involving Los Angeles County Metropolitan Transporation Authority and Reno Metal Products, Inc.”
Reno’s Notices of Appeal.
Reno filed a notice of appeal on December 22, 2006, wherein Reno appealed from (1) the judgment entered on or about September 12, 2006; (2) all orders, rulings and decisions made final thereby; and (3) all appealable orders made after judgment, including (a) any order made on December 13, 2006, or thereafter concerning attorneys fees and costs requested by Steiny, and (b) any order made on December 22, 2006, or thereafter concerning fees or costs requested by MTA, and (c) any order made on or after November 28, 2006, declining to rule on Reno’s new trial motions set for hearing by the court on November 28, 2006. (Italics added.)
On March 7, 2007, Reno filed its notice of appeal from “(1) Order Granting Motion for Attorney’s Fees and Costs by Defendant and Cross-Complainant, Steiny and Company, Inc., Against Plaintiff and Cross-Defendant, Reno Metal Products, Inc., entered January 5, 2007, . . .; and (2) All other appealable post-judgment rulings and decisions. . . .”
CONTENTIONS
Summary of appellate contentions by Reno
Reno has presented this court with a veritable cornucopia of issues to resolve in this appeal. Taken verbatim from the table of contents in its opening brief on appeal, they appear to be as follows: (1) “Reno’s Operating and Billing Procedures for Shop Work Task Orders Were Proper, Required, and In Accord With MTA Custom and Practice”; (2) “MTA Theories of Contract Breach by Unallowed Bill of Sale Use Were Properly Rejected”; (3) “Reno’s Contract Position Properly Prevailed at Trial and Requires Reversal of the Judge’s Finding of False Claims Act Violations”; (4) “The Judge Erred in Allowing Defective Proof of Supposed Damages to the MTA. [¶] Undesignated Auditors’ Opinions from the MTA Were Improperly Allowed as Supposed Proof of $306,006 of Actual Damages. [¶] Opinions as to MTA ‘Over-Payment’ of $102,349 from Non-Appraiser and Non-CPA Al Lee (a Business/Economics Consultant) Were Improperly Allowed”; (5) “Jury Findings Favored Reno in the Reno/Steiny/MTA Contract Disputes”; (6) “Erroneous Prevailing Party Findings Were Made”; (7) “An Inconsistent Verdict and Judgment for $570,000 for the MTA Requires Reversal”; (8) “Inadmissible Damages Evidence for $306,006 or $102,349 of Supposed Bill of Sale Impropriety Requires Reversal”; (9) “Insufficient Evidence of Supposed Damages of $102,349 or $306,006 Requires Reversal”; (10) “Lack of Sufficient Evidence of Supposed Falsity of Open Use of Lump Sum Bills of Sale Requires Reversal”; (11) “Lack of Evidence of Any Supposed False Claim to the State Requires Reversal of Judgment for $570,000 for the State”; (12) “Lack of Evidence of Any Right to $593,773.78 of Defense Costs in Favor of Steiny Compels Reversal Here”; (13) “Improper Refusal of Leave to Amend for Reno, After Granting the MTA Leave to Amend to Allege $102,349 of Actual False Claims Act Damages, Requires Reversal”; (14) “Lack of Any Unreleased Claim for $306,006 or $102,349 of Supposed MTA Actual Damages Bars Retrial of MTA Contract Claims Against Reno”; (15) “The Incomplete and Inadequate Instructions and Improper Verdict Form Used Require Reversal of the $102,857 Special Verdict Provision Favoring the MTA”; (16) “Lack of Any Contractual Basis for Less Than $66,283.93 of Damages In Favor of Reno as a Matter of Law Bars Retrial of Steiny/Reno Contract Claims”; (17) “Improper Findings for the MTA for $1,156,155.20 of Fees and Costs as Supposed Reno/MTA Prevailing Party Requires Reversal”; and (18) “The MTA Is Not a ‘Political Subdivision’ With ‘Jurisdictional Boundaries’ and So Lacked Standing to Sue Under the False Claims Act.”
Before reaching the merits of the issues raised by Reno, as summarized above, this court became concerned with the failure of the trial court to hear and decide Reno’s motion for new trial.
Special hearing on April 11, 2008, pertaining to trial court’s failure to consider Reno’s motion for new trial.
By clerk’s letter dated March 28, 2008, counsel were advised that the court had scheduled oral argument on a single issue in the case pertaining to the failure of the trial court to rule on Reno’s motion for new trial. The clerk’s letter made it clear that the only issue to be addressed on April 11, 2008, was the ruling of the trial court which stated “The Court has determined that the Notice of Entry of Judgment was filed with the Court on 10/02/06. The 60th day on which the Court’s power to rule was 12/01/06. The Court believes it no long has jurisdiction. Therefore, the Court cannot rule on Reno’s request [for a new trial] at this time.” Simultaneous letter briefs addressing this issue were permitted to be filed with the court on or before April 8, 2008.
All three counsel filed letter briefs in preparation for the hearing on April 11, 2008, but counter to the request of this court to limit argument to the question of the jurisdiction of the trial court to hear Reno’s motion for new trial, counsel went further and addressed the merits of Reno’s motion. All counsel conceded that the trial court acted free of error in determining that it did not have jurisdiction to hear Reno’s motion. Counsel advised this court that because December 1, 2006, was after the expiration of the 60 day jurisdictional period, the court was without jurisdiction to hear the matter. The heart of counsel’s concession was unanimously represented to be found in the statute itself, namely Code of Civil Procedure section 660 which provides in pertinent part: “Except as otherwise provided in Section 12a of this code, the power of the court to rule on a motion for a new trial shall expire . . . 60 days from and after service on the moving party by any party of the written notice of the entry of the judgment, . . . or if such notice has not theretofore been given, then 60 days after filing of the first notice of intention to move for a new trial. If such motion is not determined within said period of 60 days, or within said period as thus extended, the effect shall be a denial of the motion without further order of the court.” Citing Dodge v. Superior Court (2000) 77 Cal.App.4th 513, 517-518 and 524 for the proposition that section 660 is mandatory and jurisdictional and Meskell v. Culver City Unified School District (1970) 12 Cal.App.3d 815, 823, that the 60 day expiration date is not extended by Code of Civil Procedure section 1013 for service by mail, counsel concludes that the trial court properly found it was without jurisdiction to hear the new trial motion.
This court concludes that the uniform position taken by counsel on this issue is correct and the trial court was without jurisdiction to hear the matter “at this time.” It is unfortunate that many of the issues raised on appeal that could have been addressed initially by the trial court were not simply done because of what appears to be a minor infraction by Reno in paying an additional filing fee of $40 for the filing of a second declaration in support of the motion. Any unfairness to Reno, however, seems to be ameliorated by Reno’s failure to file its notice of intention to move for new trial until late in the day and in what appears to be close to the expiration of time to do so.
Reno divides and categorizes its contentions on appeal into three parts, namely “Reno v. State” issues; “Reno v. MTA” issues; and “Reno v. Steiny” issues. The contentions and issues are each addressed separately as this court understands them.
Reno v. State issues.
Reno contends that it is entitled to have a new trial, or at the very least, have the court enter a new judgment under Code of Civil Procedure section 662 which provides in relevant part: “the court may, on such terms as may be just, change or add to the statement of decision, modify the judgment, in whole or in part, vacate the judgment, in whole or in part, and grant a new trial on all or part of the issues, or, in lieu of granting a new trial, may vacate and set aside the statement of decision and judgment and reopen the case for further proceedings and the introduction of additional evidence with the same effect as if the case had been reopened after the submission thereof and before a decision had been filed or judgment rendered.”
In its supplemental letter brief filed with this court on April 4, 2008, Reno raised for the first time the applicability of Code of Civil Procedure section 662 in these proceedings, although no request had been made by this court for counsel to brief the issue.
In the subsequent letter briefs of counsel for Steiny and the MTA no objection was made to the application of Code of Civil Procedure section 662 to these proceedings.
This court notes that Code of Civil Procedure section 662 relates to a bench trial. Because the proceedings in this case involve a jury verdict, we see no application of section 622 to this case.
Reno maintains the proceedings were irregular in that the jury did not return a verdict in favor of the MTA against it but in truth in fact found that Reno had not breached the contract with the MTA. Reno maintains that it never had a contract with the MTA. This court observes that Reno’s contention is correct that the MTA did not prevail against it on a contractual theory, but we further observe that Reno is incorrect in its contention that the MTA had no contractual basis for proceeding against it in contract. In attempting to understand this contention, we note that the contract between the MTA and Steiny clearly provides that the MTA is a third party beneficiary to any contract that Steiny enters into with other contractors and subcontractors. In submitting question No. 7 to the jury, this court further notes that Reno did not object to the question and indeed was the recipient of a favorable special verdict from the jury when it found that Reno had not breached the third party beneficiary contract with the MTA.
Reno further contends that the ultimate damages award in favor of the MTA and the State through the qui tam status of the MTA on behalf of the State in the sum of $570,000 plus interest, fees and costs are excessive, particularly in view of the fact that the jury returned its special verdict in favor of Reno in response to question number 7. Reno contends further that the State has erroneously received a judgment as a qui tam party, through the MTA. However, we note that the record does not contain any effort by Reno to challenge the qui tam status of the State in the trial proceedings.
Reno v. MTA issues.
Reno now focuses on the judgment against it under the False Claims Act (“FCA”). Setting aside for the moment the contentions of Reno about inconsistent verdicts, Reno maintains that there was irregularity in the proceedings which should entitle it to a new trial. Reno complains that error occurred when the court allowed the MTA to amend its pleadings which triggered limitations issues but not allowing Reno to amend its pleadings to assert an indisputably meritorious limitations defense and in proceeding against the law when the use of lump sum bills of sale was not actionable under the FCA, and error in law based on the release, lack of standing, inadmissible expert evidence, no damages under the case of Fassberg Construction Co. v. Housing Authority of the City of Los Angeles (2007) 152 Cal.App.4th 720, statute of limitations, defective verdict form and incomplete instructions as well as lack of sufficient evidence to support the verdict.
As hereafter discussed, we find it necessary to only address Reno’s assertion of lack of damages under the FCA and the decision in Fassberg.
Reno v. Steiny issues.
In addition to contending that the special verdict and judgment were inconsistent, Reno further maintains that there were no grounds for indemnity in view of the fact that the jury returned a verdict for Reno and against Steiny on the breach of contract cause of action for $66,283.93 plus interest. Reno maintains there is no basis for contract indemnity and the court made an error of law in light of decisions and applicable statutes pertaining to indemnity. In addition, Reno claims that Steiny should be estopped from contesting Reno’s billing practices.
DISCUSSION
Qui Tam status of MTA on behalf of the State of California.
Reno challenges the status of the State of California to appear in these proceedings through the MTA on the grounds there was no evidence that any State funds were provided for the project which were purportedly paid to Reno through the MTA and Steiny. Reno maintains that in the absence of such proof, the MTA is in no legal position to act as “some sort of white knight for the State in this proceeding.” We note that considerable law and motion proceedings were undertaken in this case by all parties. We do not discern any serious attempt, if any, by Reno to challenge the appearance of the State through the MTA as a qui tam plaintiff.
This court is unpersuaded by Reno’s argument that the State is not entitled to the status of a qui tam plaintiff. From the record on appeal we are unable to resolve this contention because the record does not reveal what state funds, if any, were provided by the State. Assuming State funds were committed to the project, as long as there is no double recovery involved in the award then the award should be confirmed. In the event that the MTA and the State have competing interests in the award, then it would eventually be up to the trial court to apportion the award in accordance with the respective interests of the two governmental entities. However, this issue is moot in view of our decision hereafter that no qui tam party is entitled to a damages award because of lack of proof of an element under the FCA in this instance, namely proof of damages.
Inconsistent verdicts.
A summation of the jury verdicts in this case leading to the judgment of the Superior Court is as follows:
Steiny breached the contract with Reno resulting in damages for $66,283.93 plus interest;
Reno did not breach the third party beneficiary contract with the MTA;
Reno violated the FCA entitling MTA to an award under the act;
Reno submitted 57 false claims to the MTA;
Steiny recovered $593,773.78 on its cross-complaint against Reno for attorney fees and costs for failure of Reno to defend Steiny in the litigation;
The MTA prevailed in Steiny’s cross-complaint against the MTA and Reno;
Liberty Mutual prevailed over the MTA in its cross-complaint; The MTA prevailed in its qui tam lawsuit on behalf of State against Reno under the FCA for $570,000.
A capsule synopsis of the resulting litigation as to Reno reveals: Reno got a judgment against Steiny for $66,283.93; Reno violated the FCA and was ordered to pay $570,000 to qui tam plaintiffs; Reno was ordered to pay $593,773.78 for failure to defend Steiny.
The question to be resolved therefore is whether the synopsis above mentioned reveals an inconsistency. We believe that it does. The first inconsistency is obvious. How can you resolve the fact that Reno prevailed over Steiny for $66,283.93 and in turn decide that Reno is obligated to pay Steiny $593,773.78 for failure to defend Steiny when the jury found that Reno was the winner?
Paragraph 5a of the indemnity agreement states as follows: “a. Comparative. Any claims or damages arising by reason of bodily injury, property damage, defective work, delay or otherwise resulting from CONTRACTOR’s or SUBCONTRACTOR’s acts or omissions shall be apportioned between the parties on a comparative basis.” Of course an argument could be advanced that the defense and indemnity agreement made by Reno in favor of Steiny was a “stand alone agreement” entitled to separate enforcement divorced from the rest of the contract. We find as hereafter discussed, the judgment must be reversed as a matter of law. We note further that Reno was not adjudged at fault on any contract claim. These findings by the jury are broad enough to encompass both the liability and damages claims asserted against Reno. Our high court recently addressed the issues of indemnity and obligation to defend principles in Crawford v. Weather Shield (2008) 44 Cal.4th 541, in the context of a non-insurance situation. The case involved a contract between a contractor and a subcontractor which contained a defense and indemnity clause obligating the subcontractor to defend and indemnify for claims arising out of negligent failures of the “sub” which perpetrated claims against the contractor. Crawford exhaustively discussed the pertinent statutory and decisional law and came to the conclusion that under the provisions of the defense and indemnity provisions in the construction contract, there was indeed an obligation on the part of the “sub” to pay the cost of defense regardless of the ultimate outcome of the underlying action against the contractor. This case is distinguishable in that Reno recovered a verdict against Steiny in the amount of $66,283.93. We have not located a case involving an indemnitor which won a judgment against the indemnitee its own right. To allow defense costs in a situation such as this appears to be incompatable. We now look more extensively into the holding of the Supreme Court in Crawford.
In Crawford, the Supreme Court explained that the subcontract at issue in that case “imposed two distinct obligations on Weather Shield. First, Weather Shield agreed to ‘indemnify and save [JMP] harmless against all claims for damages to persons or to property and claims for loss, damage and/or theft . . . growing out of the execution of [Weather Shield’s] work.” Second Weather Shield made a separate and specific promise “at [its] own expense to defend any suit or action brought against [JMP] founded upon the claim of such damage . . . loss, . . . or theft.’” (Crawford v. Weather Shield, supra, 44 Cal.4th at p. 553, italics in original.) The Court then explained, “A duty to defend another, stated in that way, is thus different from a duty expressed simply as an obligation to pay another, after the fact, for defense costs the other has incurred in defending itself. Section 2778, the statute governing the construction of all indemnity agreements, makes the distinction clear. On the one hand, as noted above, the section specifies that a basic contractual indemnity against particular claims, demands, or liabilities ‘embraces the costs of defense’ against such claims, demands, or liabilities. (Id., subd. 3.) On the other hand, the statute separately specifies the indemnitor’s duty actually ‘to defend,’ upon the indemnitee’s request, proceedings against the latter ‘in respect to the matters embraced by the indemnity,’ though ‘the person indemnified has the right to conduct such defenses if he chooses to do so.’ (Id., subd. 4.)” (Crawford v. Weather Shield, supra, 44 Cal.4th at p. 554, italics in original.) A bit later, the Court reiterated, “The indemnitor’s failure to assume the duty to defend the indemnitee upon request (§ 2778, subd. 4) may give rise to damages in the form of reimbursement of defense costs the indemnitee was thereby forced to incur. But this duty is nonetheless distinct and separate from the contractual obligation to pay an indemnitee’s defense costs, after the fact, as part of any indemnity owed under the agreement. (Id., subd. 3.)” (Crawford v. Weather Shield, supra, 44 Cal.4th at pp. 557-558.)
We believe all we have in the contracts in this case, is an agreement by Reno to indemnify Steiny, including after-the-fact for defense costs, not two agreements, one to indemnify and a distinct or separate agreement to defend Steiny. While in some cases a duty to defend can possibly be implied from the duty to indemnify, as the Court also explains in Crawford v. Weather Shield, we do not think that is the most reasonable interpretation of the parties’ agreement in this case. Accordingly, we believe Reno is correct that an award of defense costs can be made, if at all, only under the indemnity obligation, not for breach of a duty to defend. And because Reno was without fault, then there should be no indemnity owed using comparative fault principles.
Addressing the issue of the award of $570,000 to the qui tam claimants, State and/or the MTA, pursuant to the FCA, we note that the jury was only asked to and in fact only determined that Reno had presented false claims for approval numbering 57, but not by the vehicle of submitting false records. The jury was not asked to and made no assessment of damages against Reno. That step was taken by the trial judge in the amount of $570,000. This award appears to be at odds with the jury verdicts. Reno cites Fassberg Construction Co. v. Housing Authority of the City of Los Angeles, supra, 152 Cal.App.4th 720 in support of its contention that an award of damages, without substantial evidence of damages, under the FCA, was erroneous. In a lengthy opinion, Division 3 of this court held that an award under the FCA was not justified and reversed the trial court on the basis substantial evidence did not support such an award, among other reasons not here relevant. In other words, damages is an essential element under the FCA. We agree with our colleagues in Division 3 on the issue. We also note that pursuant to the ruling of Judge Grimes in her findings on the scope of the MTA/Steiny release, there appears to be no damages to the MTA regardless of the submission of false claims by Reno. Without the existence of evidence from which damages can be established as proven, we find an essential element under the Act is missing thereby leading this court to the conclusion that the damages award under the FCA must be reversed.
After weighing the evidence we are convinced from the entire record that the judge or jury should have reached a different result which resolved the patently inconsistent verdicts to Reno’s detriment.
Any other points of contention raised by Reno in this appeal go unaddressed and we express no opinion on the merits of the many contentions.
DISPOSITION
The judgment is reversed. The trial court is directed to enter a judgment for Reno consistent with the opinions expressed herein. Appellant to recover costs of appeal.
We concur: PERLUSS, P.J. ZELON, J.