Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-03201/USCOURTS-cand-3_04-cv-03201-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

CANAL PROPERTIES LLC, a California limited

liability company,

Plaintiff,

 v.

ALLIANT TAX CREDIT V, Inc., a Florida

corporation; ALLIANT TAX CREDIT FUND V

LIMITED PARTNERSHIP, a Massachusetts

limited partnership; and DOES 1-50, inclusive,

Defendants.

 /

No. C 04-03201 SI

ORDER GRANTING DEFENDANTS’

MOTION FOR STAY, DENYING

MOTION FOR JUDGMENT ON THE

PLEADINGS, AND VACATING

HEARING

On May 27, 2005, defendants filed a motion for judgment on the pleadings and for a stay of

proceedings in this case pending resolution of the appeal in a related case, C 02-1871 SI. The Court has

deemed this motion suitable for decisionwithoutoralargument pursuant to LocalRule 7-1(b). Having carefully

considered the papers submitted, the Court hereby GRANTS defendants’ request for a stay and DENIES the

motion for judgment on the pleadings without prejudice to refiling upon resolution of the appeal. The July 1,

2005 hearing date is hereby VACATED.

BACKGROUND

This lawsuit arises out of a partnership formed by the parties for the ownership of a low-income

apartment complex (Sommerhill Townhomes) in San Rafael, California. On January 1, 1999, the parties, with

others, entered into an Amended and Restated Agreement ofLimited Partnership ofSommerhill Townhomes,

L.P (“Partnership Agreement”). PlaintiffCanalProperties LLC was the partnership’s Administrative General

Partner until its removal on March 3, 2001. Defendant Alliant Tax Credit V, Inc., is the partnership’s

Administrative Limited Partner. In a case filed in 2002 and removed to this Court on April 18, 2002 (“Canal

Case 3:04-cv-03201-SI Document 27 Filed 06/29/05 Page 1 of 6
United States District Court

For the Northern District of California

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1 Alliant has also filed a Request forJudicialNotice (“RJN”), whichCanalapparently does notoppose,

and which the Court GRANTS.

2

I ”), Canalasserted four claims against Alliant TaxCredit V and Alliant TaxCredit Fund V Limited Partnership

(collectively “Alliant”) in its complaint: (1) Declaratory Relief; (2) Specific Performance; (3) Breach of

Contract; and (4) Injunction. Compl. ¶¶ 37-51. In their counterclaim, defendants asserted three claims: (1)

Breach of Contract; (2) Breach of Fiduciary Duty; and (3) Declaratory Relief. Answer ¶¶ 11-22. 

Canal I was set for trial on June 8, 2004. Just prior to trial, Canal’s counsel moved to withdraw. The

Court permitted new counsel to take over and continued the trial to August 30, 2004. On July 8, 2004,

Canal’s new counselfiled a motion to amend the complaint to add six new causes of action:(1) Rescission, (2)

Breach of Fiduciary Duty, (3) Breach of Covenant of Good Faith and Fair Dealing, (4) Fraud, (5) a second

claim for Fraud, and (6) Constructive Trust. The Court denied this motion as untimely. 

On August 5, 2004, Canalfiled the complaint in this case (“CanalII ”). CanalII, in which both plaintiff

and defendants are the same as in Canal I, includes claims for: (1) Dissolution of Partnership, (2)

Accounting/Injunction, (3) Rescission, (4) Breach of Fiduciary Duty, (5) Breach of the Implied Covenant of

Good Faith and Fair Dealing, (6) Fraud, (7) a second claim for Fraud, and (8) Constructive Trust. It filed a

Notice of Related Case, and the Court related the two matters.

Canal I was tried to a jury from August 30, 2004 to September 8, 2004. Canal’s claim for Breach

ofContract and Alliant’s claim forBreach ofContract were submitted to the jury. Alliant voluntarily dismissed

its claim forBreach of Fiduciary Duty before the case went to the jury. The jury found that Canal committed

a “Major Default” under the Partnership Agreement and awarded Alliantdamages of$102,194.00. The Court

subsequently denied Canal’s post-trial motions, conditionally remitted the damage amount to $42,500, and

ruled in favor of Alliant on the equitable claims. 

On February 2, 2005, the Court entered an Amended Judgment on all claims in Canal I, and Canal’s

appealofthat judgment is now pending. Currently before the Court is a motion by Alliant for judgment on the

pleadings and to stay Canal II pending the resolution of the appeal in Canal I.

1

 

LEGAL STANDARDS

Case 3:04-cv-03201-SI Document 27 Filed 06/29/05 Page 2 of 6
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2

 By contrast, under federal procedure, the judgment would be final for purposes of preclusion when

entered by the Court. Tripati v. Henman, 857 F.2d 1366, 1367 (9th Cir. 1988). 

3

“After the pleadings are closed but within such time as not to delay the trial, any party may move for

judgment on the pleadings.” Fed. R. Civ. P. 12(c). Rules 12(b)(6) and 12(c) are substantially identical. See

William W. Schwarzer, A. Wallace Tashima & James M. Wagstaffe, Federal Civil Procedure Before Trial §

9:319 (1997). “Judgment on the pleadings is proper when the moving party clearly establishes on the face of

the pleadings that no material issue of fact remains to be resolved and that it is entitled to judgment as a matter

oflaw.” HalRoach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1550 (9thCir. 1989) (citation

omitted). “For purposes of the motion, the allegations of the non-moving party must be accepted as true, while

the allegations of the moving party which have been denied are assumed to be false.” Id. (citation omitted).

DISCUSSION

1. Motion for judgment on the pleadings

Alliant asks the Court to enter judgment on the pleadings in favor of Alliant after the CanalI appealis

resolved. Essentially, Alliant seeks a present order fromthis Court stating that it will enter judgment on Canal

II at some future time. According to Alliant, this motion is appropriate because once the Canal I appeal is

decided, all ofthe claims in the CanalII complaint will be barred by both claim preclusion and issue preclusion.

Canal contends that such a motion is premature, and in any event Canal II is not precluded under these

doctrines.

The parties agree that California preclusion rules govern CanalI because Canal I was a diversity case

and California was the forum state. Semtek International, Inc. v. Lockheed Martin Corp., 531 U.S. 497, 507-

09 (2001). Under California procedure, a judgment is final for purposes of claim and issue preclusion only after

an appeal is no longer pending.2 Under California law, issue preclusion, or collateral estoppel, bars relitigation

of an issue decided at a previous proceeding if (1) the issue necessarily decided at the previous proceeding is

identical to the one which is sought to be relitigated; (2) the previous proceeding resulted in a final judgment

on the merits; and (3) the party against whom collateral estoppel is asserted was a party or in privity with a

party at the prior proceeding. People v. Sims, 32 Cal. 3d 468, 484 (1982). Res judicata or claim preclusion

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precludes parties from litigating the same "cause of action" that already has been finally determined between

the parties. Mycogen Corp. v. Monsanto Co., 28 Cal.4th 888, 896-97 (2002). "[T]he firmly settled rule in

California for determining a cause of action is the primary rights theory." Brenelli Amedeo, S.P.A. v. Bakara

Furniture, Inc., 29 Cal. App. 4th 1828, 1835 (1994). "Under this theory, the underlying right sought to be

enforced determines the cause of action. In determining the primary right, the significant factor is the harm

suffered." Id. (citations and internalquotations omitted). Arguments and legal theories on the same “cause of

action” that were or could have been raised in the prior state proceedings cannot be raised in a subsequent

federal action. 

Here, one of the requirements for claim and issue preclusion has clearly been met. Canal, the party

against whomboth preclusion doctrines are asserted, is the plaintiff in both cases. The parties dispute whether

both lawsuits involve violations of the same “primary right,” as required for claim preclusion, and whether the

issues presented in Canal II are “identical” to the issues actually litigated and decided in the prior action.

However, the Court does not decide these issues at this time, because it is undisputed that there has been no

final judgment under California law. A final judgment in Canal I is required before either preclusion doctrine

can have effect. 

Accordingly, the Court finds that Alliant’s motion for judgment on the pleadings is premature. The

motion is DENIED without prejudice to reconsideration when the judgment in Canal I becomes final. 

2. Request for stay

Alliant asks the Court to stay Canal II during the Canal I appeal, citing California authorities for a

defendant’s right to stay a second actionwhen the judgment in a related first case is on appeal. Canalcontends

that Alliant has offered no authority for its request for a stay, but it concedes that a district court possesses

inherent power to manage the cases on its docket. The Court finds that there is ample authority under both

California law and federal procedure to support defendant’s request. 

Cal. Code Civ. Proc. § 430.10(c) allows a defendant to raise a defense and file a demurrer based on

the fact that there is another action pending between the same parties on the same cause of action. See 7

Witkin, California Procedure, Judgment § 307 (4th ed. 1997) (“when an appealis pending . . . the appropriate

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defense during the interim period is a plea in abatement (other action pending)”). Cal. Code Civ. Proc. § 597

provides that, where the defense of “another action pending” or a demurrer has been sustained, “an

interlocutory judgmentshall be entered in favor of the defendant pleading the same to the effect that no trialof

other issues shall be had until the final determination ofthat other action.” While these provisions assume that

a state court will sustain a demurrer before an interlocutory judgment is entered staying the action, they make

clear thatsuch a judgment is mandatory, not discretionary. See Leadford v. Leadford, 6 Cal. App. 4th 571,

574 (1992) (“[a]batement of the second action is a matter of right. The court has no discretion to allow the

second action to proceed if it finds that the first involves substantially the same controversy between the

parties.”). Here, the Court is not bound to stay the action because Alliant’s motion for judgment on the

pleadings cannot be granted in the absence of a final judgment, but the Court concludes that it possesses

discretion to grant a stay.

Under federal law, the Court retains inherent power to stay duplicative litigation in the interests of

judicial economy. See Alltrade, Inc. v. Uniweld Products, Inc., 946 F.2d 622, 625 (9th Cir. 1991); Walton

v. Eaton Corp., 563 F.2d 66, 70 (3d Cir. 1977). According to Alliant, the Ninth Circuit “has advised the

parties that the appeal process in this case may not be complete for another year or more.” Defs.’ Reply at

6:17-19. Given this likely time frame, substantial litigation would take place in Canal II during the pendency

ofthe CanalI appeal. The Court finds that, given the similarity of issues in the two cases, and the potentialfor

Canal I’s preclusive effect, it would be a poor use of judicial resources to proceed with the Canal II litigation

at this point. Accordingly, Alliant’s motion for stay pending resolution of the Canal I appeal is GRANTED.

///

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CONCLUSION

For the foregoing reasons and forgood cause shown, the Court hereby GRANTS defendants’ request

for a stay and DENIES defendants’ motion for judgment on the pleadings without prejudice. [Docket # 22]

IT IS SO ORDERED.

Dated: June 28, 2005 S/Susan Illston 

SUSAN ILLSTON

United States District Judge

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