Opinion
D068354
12-29-2016
HONORIO CASTANEDA et al., Plaintiffs and Respondents, v. SANTANAS CUISINE, INC., Defendant and Appellant.
Ramey & Perry, Ramey Litigation Group, Christopher L. Ramey; Law Offices of Michael Jason Lee, Michael Jason Lee; Dillon Gerardi Hershberger Miller & Ahuja and Sunjina K. Ahuja for Defendant and Appellant. Law Office of Mitch Wallis, Mitch C. Wallis and Alexander T. Sliheet for Plaintiffs and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 37-2014-00028581-CU-BT-CTL) APPEAL from a judgment of the Superior Court of San Diego County, Eddie C. Sturgeon, Judge. Reversed. Ramey & Perry, Ramey Litigation Group, Christopher L. Ramey; Law Offices of Michael Jason Lee, Michael Jason Lee; Dillon Gerardi Hershberger Miller & Ahuja and Sunjina K. Ahuja for Defendant and Appellant. Law Office of Mitch Wallis, Mitch C. Wallis and Alexander T. Sliheet for Plaintiffs and Respondents.
I.
INTRODUCTION
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) alleging a single cause of action for negligent interference with prospective economic advantage. Among other elements, a plaintiff seeking to prove such claim must demonstrate that the defendant committed some conduct that "was independently wrongful apart from the interference itself." (Lange v. TIG Ins. Co. (1998) 68 Cal.App.4th 1179, 1187.) A defendant's negligent performance of a contractual obligation owed to the plaintiff that interferes with the plaintiff's prospective economic relationship with a third party may constitute such "wrongful conduct." (North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 787 (North American).)
While it is not entirely clear from the record whether the proper first name of the entity is Santanas, rather than Santana's, the operative complaint and the judgment refer to the entity as Santanas Cuisine, Inc.
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 alleged that they were unable to pay the invoices and that, as a result, Fresh Mex terminated respondents' franchise agreements. Respondents alleged that Cuisine was negligent in sending the invoices because the invoices "were not due and owing," and, despite demanding payment, Cuisine did not actually intend for respondents to pay the invoices.
The first amended complaint alleges that HC is an entity created by Castaneda and that JPL is an entity created by Posada. In addition, the first amended complaint alleges that Cuisine sent HC and Castaneda an invoice and that Cuisine sent Posada and JPL a second invoice.
At the time of the relevant events, Vallarta also owned 50 percent of Fresh Mex.
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 was required to pay Castaneda and HC a total of $326,840.38 and to pay Posada and JPL a total of $429,409.43, for Fresh Mex's wrongful termination of respondents' franchises. In particular, respondents contended that the arbitrator's findings demonstrated that they had established as a matter of law that Cuisine had engaged in wrongful conduct that interfered with respondents' prospective economic interest in their franchise agreements with Fresh Mex. Respondents maintained that they had proven such wrongful conduct by demonstrating that Cuisine had breached its duty of care owed to respondents pursuant to their financial management services contract, as demonstrated by the arbitrator's findings that Fresh Mex and Vallarta had sent invoices to respondents that were not "really due."
The arbitrator found that "Claudia Vallarta is not subject to liability because the Claimants did not establish an 'alter ego' theory of liability against her."
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.
In light of our reversal on the ground that the trial court erred in concluding that respondents had established the wrongful conduct element of its claim as a matter of law, we need not address any of Cuisine's other contentions in support of reversal. Our reversal of the summary judgment on the grounds stated in the text should not be interpreted as a rejection of any of the other arguments that Cuisine raises on appeal.
II.
FACTUAL BACKGROUND
We base our factual background primarily on the undisputed facts that the parties set forth in their separate statements of facts filed in the trial court, and the evidence cited therein. We provide additional factual background pertaining to the arbitration in our discussion of Cuisine's contention that the trial court erred in granting judgment as a matter of law in favor of respondents on their negligent interference claim. (See pt. III.A.2, post.)
Castaneda and Posada each entered into a restaurant franchise agreement with Fresh Mex's predecessor to operate a Fresh Mex restaurant. Castaneda and Posada also each entered into a lease agreement with Cuisine with respect to the properties on which their respective Fresh Mex franchises were located. The lease agreements required Castaneda and Posada to operate only a Fresh Mex franchise in each location.
While all respondents were listed as moving parties on respondents' motion for summary judgment, and the trial court granted summary judgment in favor of all of the respondents, respondents' summary judgment briefing and separate statement of facts referred only to 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.
III.
DISCUSSION
A. The trial court erred in granting judgment as a matter of law in favor of respondents on their claim of negligent interference with prospective economic advantage
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.
While this appeal was pending, respondents filed a motion to strike Cuisine's reply brief or, in the alternative, for leave to file a sur-reply brief. In support of their motion, respondents contend that Cuisine's reply brief contains the following purported "new arguments":
"1) A new argument as to tort versus contract damages. [ARB, pp. 11-14]
"2) A new argument that the record is devoid of evidence of the judicial character of the arbitration. [ARB, pp. 3-5]
"3) A new argument against Judicial Estoppel [ARB, pp. 29-31]
"4) A new argument that the damages at the arbitration were not actually litigated. [ARB pp. 11-14]
"5) A new argument as to the lack of the element of privity as to collateral estoppel. [ARB, pp. 14-17]"
1. Governing law
a. Applicable principles of law governing a motion for summary judgment and the standard of review
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.)
b. The tort of negligent interference with prospective economic advantage
The elements of the tort of negligent interference with prospective economic advantage are the following:
1. Plaintiffs and a third party were in an economic relationship that probably would have resulted in a future economic benefit to plaintiffs;(See Venhaus v. Shultz (2007) 155 Cal.App.4th 1072, 1077-1078 [applying CACI No. 2204].)
2. Defendant knew or should have known of this relationship;
3. Defendant knew or should have known that this relationship would be disrupted if it failed to act with reasonable care;
4. Defendant failed to act with reasonable care;
5. Defendant engaged in wrongful conduct;
6. Plaintiffs' relationship with the third party was disrupted;
7. Plaintiffs were harmed; and
8. Defendant's wrongful conduct was a substantial factor in causing plaintiffs' harm.
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. Collateral estoppel
" '[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:
" 'First, the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding. Second, this issue must have been actually litigated in the former proceeding. Third, it must have been necessarily decided in the former proceeding. Fourth, the decision in the former proceeding must be final and on the merits. Finally, the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding.' " (Id. at pp. 895-896.)" '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:
When an issue is properly raised, by the pleadings or otherwise, and is submitted for determination, and is determined, the issue is actually litigated . . . ." [Citations.]' [Citation.] A party urging collateral estoppel must prove that the issue was actually litigated and that the evidence was not restricted, but need not establish that oral testimony, or any particular type of
evidence was presented. (Ibid.) The entire record in the prior proceeding may be admitted for the purpose of determining whether the issue was raised by the pleadings or otherwise and was decided by the judgment." (Id. at pp. 400-401.)
" '[W]here collateral estoppel is applied "offensively" to preclude a defendant from relitigating an issue the defendant [or its privy] previously litigated and lost, the courts consider whether the [defendant or its privy] against whom the earlier decision is asserted had a "full and fair" opportunity to litigate the issue.' " (Dailey v. City of San Diego (2013) 223 Cal.App.4th 237, 256; see Tennison v. California Victim Comp. & Government Claims Bd. (2007) 152 Cal.App.4th 1164, 1180 [" '[T]he offensive use of collateral estoppel is more closely scrutinized than the defensive use of the doctrine' "].)
"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.)
While this appeal was pending, respondents filed a motion requesting that this court take judicial notice of the Commercial Arbitration Rules of the American Arbitration Association effective October 1, 2013 for the purpose of responding to Cuisine's contention that respondents failed to establish the "judicial character of the arbitration" between respondents and Fresh Mex and Vallarta.
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].)
2. Factual and procedural background
a. Respondents' motion for summary judgment
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." (Formatting omitted.)
Respondents acknowledged that Cuisine was not a party to the arbitration, but argued that Cuisine "was in privity with both arbitration parties, Vallarta and [Fresh Mex]."
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[] management fee invoices were not meant to be paid and were not owed and due." In support of this contention, respondents noted that the arbitrator stated in his decision:
Respondents repeatedly referred to the fees as being "backdated." It appears that respondents intended for "backdated" to refer to fees incurred long in the past and not previously invoiced.
" 'Notably, Ms. Vallarta testified that she never intended for the Claimants[] to pay her for the bookkeeping services she had provided them dating back to 2001 and 2002, although invoices were sent [to] the Claimants totaling 92,000 for Castenada [sic] and $90,000.00 for Posada. Ms. Vallarta testified the demands were merely intended to let them know what they had received at no charge.' "
Respondents were referred to as "Claimants" in the arbitrator's award.
Respondents also noted that the arbitrator found that Fresh Mex and Vallarta:
" 'sent notices to both Claimants requiring that they pay amounts which were . . . not really due . . . the Claimants were provided substantial invoices making it seemingly impossible for them to pay . . . [Fresh Mex and Vallarta] . . . did not take care to fully inform the Claimants of what was being demanded." (Italics omitted.)
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.
b. Cuisine's opposition
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. In particular, Cuisine argued that respondents had not presented evidence demonstrating that Cuisine had engaged in wrongful conduct sufficient to support a cause of action for negligent interference with prospective economic advantage. Cuisine maintained that "[w]hether the invoices were in fact due was not at issue in the arbitration," (formatting altered) and that "[w]hether the invoices were due was not decided by the arbitrator." (Italics added.) Cuisine argued in relevant part:
Cuisine also raised numerous other arguments, including that "[e]ven if the court were to infer the arbitrator's award has collateral estoppel effect in the case at bar, the arbitrator determined that [Fresh Mex] was solely responsible for termination of the franchises, not Ms. Vallarata - and in turn not [Cuisine]."
"The arbitrator's award states that 'the franchisor sent notices to both Claimants requiring that they pay amounts which were either not really due, charged for amounts the franchisor had previously waived and sent invoices for amounts already past due, though not invoiced previously.' [Citation.] The key words are 'either'
and 'franchisor sent notices.' The award does not state that [Cuisine] sent invoices. Assessing 'either' as meaning different alternatives, the arbitrator suggested two potential functions of the invoices. His ultimate conclusion is that 'no clear notices of what was owed . . . [was] provided to the Claimants.' Nowhere in the opinion does the arbitrator determine whether the invoices were in fact due. Indeed, that issue was not dispositive to the arbitrator's holding because the arbitrator was merely resolving whether the facts 'clearly establish[ed] defaults on the part of the [. . .] franchisees.' "
Cuisine further argued:
"Because [respondents] have not made any factual showing in support of the element [of] breach, they have not demonstrated that there is no triable issue of material fact. . . . [Respondents], in support of their contention that [Cuisine] breached it's [sic] duty of care rely solely on the arbitrator's findings of fact from the above arbitration.[ ] In doing so, [respondents] assert the arbitrator's findings as objectively accurate and are thus seeking judicial notice of the truth of those facts."
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):
"13. Vallarta testified at the arbitration that the backdated Cuisine invoices were never meant to be paid . . . .
"14. During August of 2011, [Cuisine] did not inform the [respondents] or their counsel that the backdated Cuisine management fee invoices that Cuisine had sent out on August 12, 2011 were not meant to [be] paid."
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."
c. The trial court's rulings
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. (See pt. III.A.2.b, ante.) Despite having sustained Cuisine's objections to these statements, which were based entirely on the arbitrator's findings, the court appeared to indicate that it would take judicial notice of the truth of these same findings, stating, "[T]here is a big disagreement of whether the Court can look at the effect of the facts in the arbitration. The Court feels that it can and you can see that based on my rulings." However, the court did not expressly rule on respondents' request for judicial notice of the judgment confirming the arbitration award and the arbitration award.
The court did not specify the ground on which it was sustaining the objections, stating, only, "The Court will sustain [Cuisine's] objections to 11, 12, 13, 14, 15, 16. All other objections are overruled."
The trial court subsequently entered an order granting respondents' motion for summary judgment. The court's order states in relevant part:
"The evidence establishes the elements of negligent interference with prospective business advantage. . . . [Cuisine] had a duty to exercise due care in the performance of its management fee services contract with [respondents]. Breach of the duty of care
constitutes the required element of an independent wrongful act (i.e., common law negligence) necessary for the negligent interference claim. [(North American, supra, 59 Cal.App.4th at p. 786.)] The evidence establishes [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 loss of the franchises by [respondents] constitutes damages."
3. Application
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. However, the court sustained Cuisine's objections to key portions of this evidence. Even assuming that the trial court did not intend to sustain Cuisine's objections to the only evidence that provided potential support for the court's order granting summary judgment, it is clear that the court erred in implicitly giving collateral estoppel effect to the arbitrator's findings.
However, the trial court neither referred to the doctrine nor discussed any of the requirements for its applicability in its order with respect to this issue.
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:
"[C]ounsel for Cast[a]neda and Posada sent a letter to [Fresh Mex and Vallarta] claiming that their clients had not received the 2009 Franchise Agreements and that the rent being charged the Claimants was exorbitant, leading to an assertion that the Claimants had been fraudulently induced to enter into the 2009 Franchise Agreements. In response, [Fresh Mex and Vallarta] sent the Claimants a demand letter claiming entitlement to a variety of long standing and past due charges, the majority of which the Respondents had not before that time charged the Claimants for. Notably, Ms. Vallarta testified that she never intended for the Claimants to pay her for the bookkeeping services she had provided them dating back to 2001 and 2002, although invoices were sent the Claimants totaling $92,000 for Cast[a]neda and $90,000 for Posada. Ms. Vallarta testified the demands were merely intended to let them know what they had received at no charge."
In addition, the arbitrator made the following findings in resolving whether Fresh Mex and Vallarta had wrongfully terminated respondents' franchises:
Although the arbitrator found that the franchise agreements had been "wrongfully terminated by [Fresh Mex and Vallarta]," as discussed previously (see fn. 4, ante), the arbitrator concluded that Vallarta was not subject to liability because respondents had failed to demonstrate that she should be held liable as Fresh Mex's alter ego.
"A determination as to whether the two Franchise Agreements had been wrongfully terminated is a close call. Franchisors must be careful to only terminate franchisees leading to a forfeiture of substantial rights based on facts which clearly establish defaults on the part of their franchisees. In this instance, the evidence indicates [Fresh Mex and Vallarta] fell short in this regard in two principal ways. First, the franchisor sent notices to both Claimants requiring that they pay amounts which were either not really due, charged for amounts the franchisor had previously waived and sent invoices for amounts already past due, though not invoiced previously. No clear notices of what was owed and
[Fresh Mex and Vallarta's] intention to terminate the Midway and the San Marcos locations, if those amounts were not paid were provided to the Claimants. Rather, the Claimants were provided substantial invoices making it seemingly impossible for them to pay, even though they were admittedly overstated."
Any grammatical errors are in the original. --------
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. B. The summary judgment may not be affirmed on the alternative ground that the doctrine of judicial estoppel applies
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.
IV.
DISPOSITION
The judgment and the order granting respondents' motion for summary judgment are reversed. Respondents are to bear costs on appeal.
AARON, J. WE CONCUR: HALLER, Acting P. J. O'ROURKE, J.
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.