Monday, July 16, 2007
C.A. Takes Broad View of Law on Venue in Local Agency Suits
Out-ot-County Plaintiff Sued on Cross-Complaint Is Entitled to Have Case Transferred, Panel Rules
By Kenneth Ofgang, Staff Writer
A plaintiff who becomes the subject of a cross-complaint by a defendant that is a local government entity may invoke the right to trial in a neutral county, the Fourth District Court of Appeal ruled Friday.
Div. One denied a petition by the Metropolitan Transit System, which is responsible for construction of a portion of the San Diego trolley system and sought to block San Diego Superior Court Judge Yuri Hoffman’s order granting a change of venue.
Balfour Beaty/Ortiz Enterprises, Inc., a principal contractor on the La Mesa extension of the trolley’s Mission Valley Line, sued for $16 million it said it was owed as a result of design deficiencies and other failures of the agency. The MTS responded with a $4 million cross-complaint, saying it had overpaid the contractor.
New Venue Sought
Balfour Beaty/Ortiz, a joint venture of two corporations based in Solano and Orange counties, then moved for a change of venue under Code of Civil Procedure Sec. 394. The statute generally requires that a change be granted upon timely motion of a “defendant” if the plaintiff is a local agency situated in the county where the suit is filed and the defendant does not reside or do business in that county.
Justice Patricia Benke, writing for the Court of Appeal, explained that it “issued an order to show cause because there is a conflict in the cases as to whether cross-defendants may bring a motion under section 394 and there is no authority discussing the applicability of the statute when, as here, a local agency has brought a compulsory cross-complaint against a plaintiff.”
Given the purpose of the statute, which is to protect defendants against the possibility of local bias, the better rule is that any cross-defendant, including a plaintiff who is the subject of compulsory cross-complaint, may invoke Sec. 394, the justice concluded.
Supreme Court Ruling
Benke explained that under a 1976 California Supreme Court decision, a corporation that is headquartered in another county, but which has a substantial presence in the county where suit is filed, is not deemed to be doing business in the latter county if that presence is related to the work which is the subject of the lawsuit.
The high court held that the defendant, a corporation that was headquartered in San Diego County but did work in Alameda County for the Bay Area Transit District, was entitled to a change of venue when BART sued it in Alameda Superior Court. Sec. 394, the justices said, should be interpreted so as to “promote rather than frustrate the policy behind the law.”
Under that standard, Benke wrote, the motion by Balfour Beaty/Ortiz was correctly granted. The fact that it brought the action, she said, “does not provide any rationale for excluding it from the scope of section 394.”
Such a plaintiff/cross-defendant, the justice said, is not “required to forego asserting [a valid] claim in order to avoid trial of the local agency’s cross-complaints in a biased venue.”
The jurist went on to reject the claim that Balfour Beaty/Ortiz had done enough business in San Diego County to be deemed a resident of the county for purposes of the statute.
She noted that the joint venture had no business operations in the county outside of the MTS contract; that neither the joint venture nor the corporations that comprised it were headquartered in the county, and that one of the joint venture companies did no other business in the county and the other had performed only two other contracts in the county in the previous 10 years, accounting for less than 5 percent of the company’s revenues over that period.
The case is Metropolitan Transit System v. Superior Court (Balfour Beaty/Ortiz Enterprises, Inc.), 07 S.O.S. 4502.
Copyright 2007, Metropolitan News Company