ZF Micro Devices v. TAT Capital Partners
H040776M
| Cal. Ct. App. | Nov 30, 2016Background
- ZF Micro Devices (ZF Devices) failed in 2002; its successor ZF Micro Solutions (ZF Solutions) sued National Semiconductor and recovered $20M in 2004.
- Venture investors including TAT sued ZF Solutions in 2005 claiming fraudulent transfer of the NSC settlement proceeds; TAT prevailed and judgment was affirmed on appeal.
- ZF (later as cross-complainant) sued TAT and its board representative Putney for breach of fiduciary duty based on conduct at ZF Devices from 1998–2001; that cross-complaint was filed in March 2009 after leave was granted.
- The trial court treated ZF’s cross-complaint as permissive (not compulsory) and held the filing of TAT’s 2005 complaint did not toll the statute of limitations for ZF’s cross-claim; the jury found ZF’s claims time-barred.
- On appeal the court agreed the cross-complaint was permissive but held the tolling doctrine applies to both compulsory and permissive cross-complaints, so ZF’s cross-complaint related back to TAT’s 2005 complaint and was timely.
- The appellate court reversed the judgment as to TAT (but affirmed the verdict for Putney) and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was ZF’s cross-complaint compulsory or permissive? | Cross-complaint was compulsory because it arose from transactions at issue and a prior court granted leave calling it mandatory. | It was permissive because claims arose from different transactions and related to different entities (ZF Devices v. ZF Solutions). | Permissive. The claims were not logically related under §426.30(a). |
| Does filing the plaintiff’s complaint toll the statute of limitations for a permissive cross-complaint? | Filing a complaint tolls limitations for any defendant cross-claim not time‑barred when suit began, so ZF’s cross-complaint relates back to 2005. | Tolling applies only to compulsory (related) cross-complaints; permissive cross-complaints are treated as independent actions. | Tolling applies to both compulsory and permissive cross-complaints; ZF’s cross-complaint deemed filed in 2005 and was timely. |
| Do earlier rulings (severance/leave) estop defendants from arguing permissive status? | ZF argued collateral/judicial estoppel: prior leave and related-case notices preclude TAT from denying compulsory status. | TAT argued prior orders did not necessarily decide compulsory vs. permissive; it disputed that identical, litigated, necessary, final elements for collateral estoppel exist. | Estoppel doctrines not established; neither party met burden to invoke collateral or judicial estoppel. |
| Was the bifurcated pretrial determination (trial of statute defense first) proper? | ZF argued no; if tolling applied, statute defense was improperly submitted. | TAT proceeded to try statute defense based on view tolling inapplicable. | Trial court erred to bifurcate and submit the statute defense because tolling applied; reversal required as to judgment against TAT. |
Key Cases Cited
- Whittier v. Visscher, 189 Cal. 450 (Cal. 1922) (early enunciation that filing the complaint suspends limitations on defendant’s cross-claim)
- Jones v. Mortimer, 28 Cal.2d 627 (Cal. 1946) (statute of limitations does not bar defendant’s counterclaim if period had not run when original action commenced)
- Union Sugar Co. v. Hollister Estate Co., 3 Cal.2d 740 (Cal. 1935) (filing complaint suspends running of limitations as to counterclaims)
- Liberty Mutual Insurance Co. v. Fales, 8 Cal.3d 712 (Cal. 1973) (describes tolling doctrine broadly: cross-complaint not barred if period hadn’t elapsed when complaint filed)
- Trindade v. Superior Court, 29 Cal.App.3d 857 (Cal. Ct. App. 1973) (discussed relation-back for cross-claims under pre-1971 law; treated as supporting tolling for related claims)
- Currie Medical Specialties, Inc. v. Bowen, 136 Cal.App.3d 774 (Cal. Ct. App. 1982) (adopts "logical relationship" test for compulsory cross-claims)