Metropolitan News-Enterprise


Friday, February 26, 2016


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S.C.: Mediation Stay Did Not Toll Five-Year Period


By a MetNews Staff Writer


A partial stay of proceedings, with the parties allowed to conduct mediation and complete discovery, did not toll the five-year period in which to bring the case to trial, the California Supreme Court ruled yesterday.

The justices, in a 5-2 decision, affirmed a ruling by Div. Eight of this district’s Court of Appeal. That panel upheld Los Angeles Superior Court Judge Rolf Treu’s order of dismissal in a 2-1 decision.

“We conclude that the court’s order did not effect a complete stay of the prosecution of the action, Justice Carol Corrigan wrote for the Court. “Nor did the order create a circumstance of impracticability because plaintiff agreed to it, remained in control of the circumstances, and made meaningful progress towards resolving the case during the stay period.  Accordingly, the period of the ‘mediation stay’ did not toll the five-year period.”

The lawsuit was begun by Fannie Marie Gaines, who in November 2006 filed a complaint against numerous defendants, including Fidelity National Title Insurance Company.

Gaines alleged fraud and violations of statutes relating to home equity sales contracts, in connection with the loss of her Los Angeles home after she fell behind on her payments. By January 2008, Gaines had filed three amended complaints that had included other mortgage and real estate companies as defendants, including Aurora Loan Services, LLC.

In April 2008, at Gaines’ request in order to allow for a mediation attempt, the court stayed the action except to allow for responses to outstanding discovery requests. The mediation proved unsuccessful and the case was assigned to a new judge who terminated the stay in November 2008 and set a trial date for August 2009.

The trial date was vacated after Aurora indicated that it did not hold any legal title to Gaines’ property nor have any legal rights to an outstanding loan connected with it. Aurora alleged that the loan was actually owned by Lehman Brothers Holdings, Inc., which had declared bankruptcy in 2008 and was not a named defendant in the action.

Another delay occurred in November 2009 when the original plaintiff died. By January 2010, the court had granted an application allowing her son, Milton Gaines, to succeed her as plaintiff and file a fifth amended complaint.

Trial had been rescheduled for the end of August of that year, but further delays ensued as the parties disputed who was the proper holder of the loan at issue.

Milton Gaines informed the court that he did not wish to add Lehman Brothers as a defendant or seek relief from its bankruptcy stay since he had no proof that the company was a titleholder to the loan.

Treu, expressing frustration, delayed the trial again and issued a series of continuances in order to allow the parties to resolve the issue concerning Lehman Brothers and the ownership of the loan so that it could be determined if Lehman Brothers should be added as a named defendant.

By November 2011, after acknowledging that it held a deed of trust against the property, Lehman Brothers was added as a defendant and a bankruptcy judge agreed to lift a stay as to the plaintiff’s claims.

Trial was then set for August 2012.

Three months before that, however, Fidelity moved to dismiss the complaint under Code of Civil Procedure §§583.310 and 583.360, arguing that neither the bankruptcy stay nor Fannie Marie Gaines’ death tolled the five-year period that had expired in November 2011.

Treu granted the motion, reasoning that the five-year period had been effectively tolled for 185 days to account for the delay after Fannie Gaines’ death as well as the efforts to obtain relief from the Lehman Brothers bankruptcy stay. However, he determined that the months-long stay for mediation efforts in 2008 did not toll the deadline since it was only a partial stay and not a stay within the meaning of §583.340(b).

Corrigan, in her opinion for the high court yesterday, distinguished cases holding that stays to engage in contractual arbitration toll the five years.

She explained:

“Contractual arbitration and mediation are different.  Contractual arbitration is a remedy distinct from an action at law.  Its assertion constitutes a plea in abatement to the civil suit....A party seeking to enforce contractual arbitration is statutorily entitled to a stay of pending legal actions....

“By contrast, mediation is not an event outside the lawsuit; it is one means by which a settlement of the lawsuit may be reached.”

Chief Justice Tani G. Cantil-Sakauye and Justices Kathryn M. Werdegar, Ming Chin, and Mariano-Florentino Cuéllar joined in Corrigan’s opinion.

Justice Leondra R. Kruger, joined by Justice Goodwin H. Liu, dissented. Kruger argued that mediation and arbitration stays are not that different and should be treated similarly.

“Were we writing on a blank slate, I would consider that 120-day stay to be a stay of the prosecution of the action that is excluded from the computation of the period for trial under section 583.340(b),” she wrote. “But even if a stay is not a ‘stay’ under section 583.340(b) if it allows the court proceedings to continue in any respect, no matter how trivial, the time for bringing the case to trial should still have been tolled because it was impracticable to bring the action to trial during this period under section 583.340(c).”

The case is Gaines v. Fidelity National Title Insurance Company, 16 S.O.S. 1082.  


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