After the arbitration was complete, Cal Sierra proceeded with its lawsuit against Reed and Basic Resources for trespass, intentional inference with contract, and negligent interference with economic relations. After a trial on the affirmative defenses of res judicata (claim preclusion) and collateral estoppel (issue preclusion), the court found res judicata applied and entered judgment for defendants. Cal Sierra appeals, contending defendants failed to establish the elements of res judicata and that the application of res judicata in this case is inequitable.
FACTUAL AND PROCEDURAL BACKGROUND
The Yuba Goldfields is a 10,000-acre valley on both sides of the Yuba River near Marysville. Cal Sierra mines for gold in the Yuba Goldfields using a dredge. The dredge is part ship and part machine and the length of a football field; it moves along the surface of the water at three to six miles an hour, digging up the material in front of it to a depth of 100 feet. The material is sorted and tailings or aggregate are ejected behind the dredge. The path of the dredge is planned well in advance.
In 1992, Cal Sierra's predecessor entered into the MOA with Western Aggregates governing operations on the Yuba Goldfields. Under the MOA and associated deeds, Cal Sierra had the priority right to mine for precious metals and, subject to that priority right, Western Aggregates had the rights to the surface. There were
In 2009, Western Aggregates entered into a license agreement with Reed, an asphalt paving contractor. Pursuant to the license agreement, Reed installed an asphalt plant on the property known as the Deep Reserve on a site
In late 2009, it became clear that the path of Cal Sierra's dredge would eventually encounter Reed's asphalt plant. In a series of correspondence, the parties disputed whether the site of the asphalt plant had been excluded from Cal Sierra's priority mining rights. The dispute was not resolved, but Cal Sierra altered the path of the dredge to avoid the asphalt plant and demanded arbitration under the provisions of the MOA. Reed wanted to participate in the arbitration but pulled out due to a scheduling conflict.
In the arbitration, Cal Sierra claimed "that its gold operation within the Yuba County Goldfields [ ] has been severely damaged as a result of the unauthorized presence of a George Reed, Inc. [ ] asphalt plant upon an area (rich with provable gold reserves) where Cal Sierra has predominant rights to mine." Cal Sierra sought damages under theories of breach of contract, trespass, nuisance, and conversion.
The scope of the arbitration was limited to "the parties' respective rights and obligations related to the current location of the [Reed] asphalt plant." The arbitration was conducted in two phases, merits and attorney fees. Due to time constraints, the arbitration panel did not produce a decision on the first phase, only a "check-the-box" form, similar to a special verdict. The three-member panel, with one dissent, found for Cal Sierra on breach of contract and awarded $6,209,781 in lost profits and $644,052 in mitigation costs (related to changing the dredge course). The panel found Cal Sierra had not proven trespass, nuisance, or conversion. In the second phase of the arbitration, the panel awarded Cal Sierra $991,119 in attorney fees and costs. Western Aggregates promptly paid the award.
Shortly after the demand for arbitration, Cal Sierra filed a complaint against Reed, its parent Basic Resources, and Western Aggregates' parent Eagle Materials, Inc. An amended complaint added Western Aggregates as a
Cal Sierra filed a second amended complaint, the operative pleading at issue here, against Reed and Basic Resources, with claims for trespass, intentional interference with contract, and negligent interference with economic relations. The second amended complaint alleged that Reed was the alter ego of Basic Resources. It further alleged that at least one executive of Basic Resources knew of and acknowledged the
Reed and Basic Resources filed a cross-complaint against Western Aggregates for breach of contract, negligent misrepresentation, and implied equitable indemnity. The cross-complaint alleged that Reed had inquired whether Cal Sierra's mining operations would interfere with the asphalt plant; Western Aggregates said no and that Reed "had nothing to worry about."
The trial court bifurcated the trial and in the first phase addressed defendants' affirmative defenses of res judicata and collateral estoppel. Over Cal Sierra's objection, Western Aggregates participated in the trial. Cal Sierra introduced evidence that Western Aggregates and Reed were separate companies. Western Aggregates did not receive revenue from the asphalt plant and did not provide insurance, workers compensation insurance, or trucking services for Reed; the two companies had separate entrances to the property.
The trial court ruled that res judicata (claim preclusion) applied to bar the action. It found the same claim (trespass) was involved in both the arbitration and the lawsuit; thus the final arbitration award served as a final judgment. The court found the same party or privity requirement (which we discuss post ) applied only to the party against whom the defense of res judicata was asserted-in this case, Cal Sierra. As to the interference claims, which had not been raised in the arbitration, the court found the case involved derivative liability based on a single act-locating the asphalt plant-which had been addressed in the arbitration.
After the trial had ended, the California Supreme Court clarified that for the claim preclusion aspect of res judicata, a complete identity of parties was
Cal Sierra appealed. Both Western Aggregates and Reed filed respondents' briefs.
DISCUSSION
I
Res Judicata
" 'Res judicata' describes the preclusive effect of a final judgment on the merits. Res judicata, or claim preclusion, prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them. Collateral estoppel, or issue preclusion, 'precludes relitigation of issues argued and
Courts have at times used "res judicata" as an umbrella term, encompassing both the primary aspect of claim preclusion and the secondary aspect of issue preclusion. We will follow the current practice to use the term "claim preclusion" to describe the primary aspect of the res judicata doctrine and the term "issue preclusion" to denote collateral estoppel. (See DKN Holdings, supra, 61 Cal.4th at pp. 823-824,
"Claim preclusion 'prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them.' [Citation.] Claim preclusion arises if a second suit involves (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit. [Citations.] If claim preclusion is established, it operates to bar relitigation of the claim altogether. [¶] Issue preclusion
Here we are concerned only with claim preclusion; we next examine whether defendants established each of the requirements to assert it as a bar to the instant action.
II
Privity
A. The Law
"Since [claim preclusion] bars a subsequent action on the same claim between, not only parties to the first action, but also their privies, we must determine who qualifies as a privy to a prior action. In Bernhard v. Bank of America (1942)
"[T]o maintain the stability of judgments, insure expeditious trials," prevent vexatious litigation, and "to serve the ends of justice," courts are expanding the
" 'This requirement of identity of parties or privity is a requirement of due process of law.' [Citation.] 'Due process requires that the nonparty have had an identity or community of interest with, and adequate representation by, the losing party in the first action. [Citations.] The circumstances must also have been such that the nonparty should reasonably have expected to be bound by the prior adjudication. ... [¶] A nonparty should reasonably be expected to be bound if he had in reality contested the prior action even if he did not make a formal appearance,' for example, by controlling it. [Citations.] Furthermore, privity appertains 'against one who did not actually appear in the prior action ... where the unsuccessful party in the first action might fairly be treated as acting in a representative capacity for a nonparty.' [Citation.]" ( Victa v. Merle Norman Cosmetics, Inc . (1993)
DKN Holdings explained that derivative liability establishes privity. "When a defendant's liability is entirely derivative from that of a party in an earlier action, claim preclusion bars the second action because the second defendant stands in privity with the earlier one. [Citations.] The nature of derivative liability so closely aligns the separate defendants' interests that they are treated as identical parties. [Citation.] Derivative liability supporting preclusion has been found between a corporation and its employees [citations], a general contractor and subcontractors [citation], an association of securities dealers and member agents [citation], and among alleged coconspirators [citation]." ( DKN Holdings, supra, 61 Cal.4th at pp. 827-828,
B. Analysis
Cal Sierra first contends there is no privity between Western Aggregates on the one hand and Reed and Basic Resources on the other because the latter two corporations are completely separate companies from Western Aggregates, as shown by the evidence at trial. Cal Sierra next contends the license agreements expressly preclude a finding of privity, because both agreements limited the relationship to that of licensor and licensee, disclaiming any other relationship. Cal Sierra argues privity requires the power to bind the other, such as principal and agent, and that power is missing in a licensor-licensee relationship.
First, the licensor-licensee relationship does not preclude a finding of privity. The parties have not cited to, and we have not found, any California
That defendants Reed and its parent Basic Resources are separate companies from Western Aggregates is not determinative of the issue of privity. " 'Privity' as used in the context of res judicata or collateral estoppel, does not embrace relationships between persons or entities, but rather it deals with a person's relationship to the subject matter of the litigation. [Citation.]" ( Manning v. South Carolina Dep't of Highway & Public Transp . (4th Cir. 1990)
The trial court found this case involved derivative liability and DKN Holdings teaches that derivative liability is a form of privity. ( DKN Holdings, supra, 61 Cal.4th at pp. 827-828,
The cases cited by DKN Holdings in its discussion of derivative liability do not support Cal Sierra's position that claim preclusion applies only where the first action is against the direct actor. For example, in Lippert v. Bailey (1966)
To the extent Cal Sierra is arguing that Reed committed independent torts outside the scope of the license agreement such that its liability is not derivative, we next consider that argument in the context of the requirement that the claims be identical.
III
Identity of Claim
A. Primary Right
"Whenever a judgment in one action is raised as a bar to a later action under [claim preclusion], the key issue is whether the same cause of action is involved in both suits. California law approaches the issue by focusing on the 'primary right' at stake: if two actions involve the same injury to the plaintiff and the same wrong by the defendant then the same primary right is at stake even if in the second suit the plaintiff pleads different theories of recovery, seeks different forms of relief and/or adds new facts supporting recovery." ( Eichman v. Fotomat Corp . (1983)
Under the "primary rights" theory adhered to in California, there is only a single cause of action for the invasion of one primary right and the harm suffered is the significant factor. ( Agarwal v. Johnson (1979)
The arbitration panel found that Cal Sierra's claims of trespass and nuisance were not proven. Nuisance and trespass address the same legal wrong and injury-interference with unimpaired ownership and undisturbed enjoyment of property-and thus were simply alternative legal theories for the invasion of a single primary right. ( Rancho Viejo v. Tres Amigos Viejos (2002)
B. Trespass
Cal Sierra contends a different primary right is involved in this case. "Cal Sierra had the right to not have its contractual rights or publically recorded property interests in the Deep Reserve interfered with or wrongly occupied by [Reed and Basic Resources]." Cal Sierra contends more "complex mutual duties" were involved in the arbitration, and defendants had "separate duties" not to interfere with Cal Sierra's contractual and property rights. Cal Sierra contends Reed had a separate duty not to interfere with Cal Sierra's mining rights because it was a stranger to the MOA. Our affirmance of
Cal Sierra next contends a different primary right is involved because defendants' trespass was a continuing trespass that continued after the arbitration. A continuing trespass, however, requires an initial trespass. "The 'continuing nuisance' or 'continuing trespass' theory states that the injury caused by an abatable nuisance or trespass takes place at every continuation of the nuisance or trespass, each of which gives rise to a separate claim for damages." ( Chevron U.S.A. Inc. v. Superior Court (1994)
C. Interference Claims
The second amended complaint alleged Reed and Basic Resources knew of Cal Sierra's contractual relationship with Western Aggregates relating to Cal Sierra's precious metal rights, and that defendants intended to disrupt Western Aggregates' full performance of its contractual obligations by inducing Western Aggregates to intentionally breach the agreement by allowing the asphalt plant. The complaint further alleged Reed and Basic Resources knew or should have known about Cal Sierra's superior right to mine within the Deep Reserve before installing the asphalt plant and placing asphalt waste within the Deep Reserve. Defendants failed to act with reasonable care by failing to inspect and analyze Cal Sierra's recorded precious metal rights and refusing to remove the asphalt plant and incidental materials, substantially disrupting Cal Sierra's contractual relationship with Western Aggregates. We refer to these claims as the interference claims.
Cal Sierra contends these interference claims are different causes of action than those resolved in the arbitration. Cal Sierra argues they were not and could not have been presented to the arbitration panel because Western Aggregates could not interfere with its own contract. ( Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994)
Respondents contend the interference claims involve the same primary right as the trespass claim. The arbitration resolved whether Cal Sierra's mining rights were infringed by the location of the asphalt plant. The arbitration panel concluded Western Aggregates did not trespass by allowing Reed to install and operate the asphalt plant. The interference claims were premised on Reed's purported trespassing by installing and operating the
IV
Final Judgment
The third requirement of claim preclusion is a final judgment on the merits in the first action. ( DKN Holdings , supra ,
"For purposes of res judicata, even an unconfirmed arbitral award is the equivalent to a final judgment." ( Bucur v. Ahmad (2016)
Cal Sierra relies on Kahn v. Pelissetti (1968)
The Kahn court framed the issue as "whether an unconfirmed award should be treated as though it were a final judgment." ( Kahn v. Pelissetti , supra ,
In Thibodeau v. Crum, supra,
The difference between Kahn and Thibodeau is that in Thibodeau the party asserting the unconfirmed arbitration as issue preclusion was in privity, based on derivative liability, with a party to the arbitration. ( DKN Holdings , supra ,
Further, Western Aggregates has satisfied the arbitration award. By accepting the benefits of the award, Cal Sierra is precluded from challenging its finality. (See Trollope v. Jeffries (1976)
The trial court did not err in finding all the requirements of claim preclusion were met. Because we determine the trial court correctly applied claim preclusion, we need not address the alternate argument that the judgment can be affirmed by the application of issue preclusion.
V
Equities of Applying Claim Preclusion
Cal Sierra contends that claim preclusion is an equitable doctrine and "it will not be applied so rigidly as to defeat the ends of justice or
While Greenfield has not been overruled, our Supreme Court has considered it of "doubtful validity" and has noted "it has been severely criticized." ( Slater v. Blackwood, supra,
In any event, we do not find the application of claim preclusion in this case to be inequitable. The issue of whether the installation and operation of Reed's asphalt plant constituted a trespass upon Cal Sierra's mining rights was arbitrated. There, Cal Sierra sought to recover the benefits obtained by Reed due to the alleged trespass. Thus, Cal Sierra had the opportunity and the incentive to fully litigate its claims
DISPOSITION
The judgment is affirmed. Respondents shall recover their costs on appeal. ( Cal. Rules of Court, rule 8.278(a).)
We concur:
Robie, Acting P.J.
Butz, J.
Notes
The separate entrances were necessary because Western Aggregates was a union company and Reed was not.
Cal Sierra incorrectly quotes Rice's definition of a party as the definition of a privy.
Respondents cite to Kerr Land & Timber Co. v. Em m erson (1965)
The identity of interest between Western Aggregates and Reed in the dispute with Cal Sierra and Western Aggregates' virtual representation of Reed in the arbitration is further illustrated by the fact that Western Aggregates filed a brief in support of Reed's interests in this appeal and asserts nearly identical arguments.
Judgment should have been entered on the order. "An order confirming an award is to be reduced to a judgment." (Rubin v. Western Mutual Ins. Co. (1999)
The Legislature subsequently codified this holding in Insurance Code section 11580.5.