ZF Micro Devices, Inc. v. TAT Capital Partners, Ltd.
5 Cal. App. 5th 69
| Cal. Ct. App. | 2016Background
- ZF Devices (and successor ZF Solutions) sued National Semiconductor and obtained a $20M settlement; venture investor TAT later sued claiming fraudulent transfer of the settlement proceeds. Prior litigation produced judgments for TAT that were affirmed on appeal.
- ZF filed a cross-complaint (filed March 18, 2009 after leave) alleging TAT and its board representatives breached fiduciary duties to ZF Devices for conduct occurring by Feb 28, 2002 (the alleged accrual date).
- TAT argued ZF’s cross-complaint was time-barred by the four-year statute of limitations because it was filed after March 2005; ZF argued the limitations period was tolled by TAT’s February 14, 2005 complaint in the earlier lawsuit.
- The trial court ruled the cross-complaint was permissive (not compulsory) and held the tolling/"relation-back" doctrine applied only to compulsory cross-complaints; it submitted the limitations issue to a bifurcated jury, which found ZF’s claims were time-barred.
- On appeal, the Court of Appeal agreed the cross-complaint was permissive but held controlling California Supreme Court precedent requires the tolling doctrine to apply to any defendant cross-claims against the plaintiff (related or unrelated). The court reversed the judgment as to TAT and remanded.
Issues
| Issue | Plaintiff's Argument (ZF) | Defendant's Argument (TAT) | Held |
|---|---|---|---|
| Whether ZF’s cross-complaint was compulsory or permissive | The trial court previously ruled the cross-complaint was mandatory; collateral/judicial estoppel should bar contrary position | Cross-complaint is permissive because claims arise from different transactions (ZF Devices pre-2002 conduct vs. ZF Solutions/2004 settlement) | Cross-complaint is permissive — claims not logically related to TAT’s complaint |
| Whether filing of TAT’s complaint tolled the statute of limitations for ZF’s permissive cross-complaint | Tolling doctrine suspends limitations for any cross-claims; ZF’s cross-complaint should relate back to Feb 14, 2005 and be timely | Tolling applies only to compulsory (related) cross-complaints; permissive cross-complaints are not tolled | Tolling doctrine applies to both permissive and compulsory cross-complaints; thus ZF’s cross-complaint relates back and was not time-barred |
| Whether the trial court erred by submitting TAT’s statute-of-limitations defense to the jury in a bifurcated trial | The court should not have tried the limitations defense because the cross-complaint was timely once tolling applied | Trial on limitations was proper because cross-complaint was permissive and untolled | Court erred: no bifurcated limitations trial was appropriate as the claim was tolled and timely |
| Effect of prior procedural rulings (severance/consolidation and leave to file) on compulsory/permissive status | Prior order granting leave meant cross-complaint was compulsory | Prior severance and judge’s statements support permissive status | Collateral estoppel / judicial estoppel not established; prior rulings did not conclusively make the cross-complaint compulsory |
Key Cases Cited
- Whittier v. Visscher, 189 Cal. 450 (Cal. 1922) (filing of complaint suspends statute of limitations on defendant’s cross-claims alive when action commenced)
- Jones v. Mortimer, 28 Cal.2d 627 (Cal. 1946) (tolling doctrine applies to counterclaims unrelated to the complaint where limitations had not run at commencement)
- Union Sugar Co. v. Hollister Estate Co., 3 Cal.2d 740 (Cal. 1935) (same tolling principle applied to counterclaims)
- Liberty Mut. Ins. Co. v. Fales, 8 Cal.3d 712 (Cal. 1973) (described tolling doctrine broadly in footnote: cross-complaint not barred if period had not elapsed when complaint filed)
- Trindade v. Superior Court, 29 Cal.App.3d 857 (Cal. Ct. App. 1973) (post-accident cross-claim held timely on related-fact basis; court’s language limiting tolling to related cross-claims treated as dictum here)
- Auto Equity Sales, Inc. v. Superior Court, 57 Cal.2d 450 (Cal. 1962) (principle that appellate courts follow controlling Supreme Court precedent)