First City Pacific, Inc. v. Home Depot USA, Inc.

• Court: Court of Appeals for the Ninth Circuit
• Decided: April 17, 2018
• Docket: 16-56274
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION APR 17 2018 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

FIRST CITY PACIFIC, INC., No. 16-56274

Plaintiff-Appellant, D.C. No. 2:12-cv-09401-FMO-MRW v.

HOME DEPOT USA, INC.; DOES, 1-50, MEMORANDUM* inclusive,

Defendants-Appellees.

Appeal from the United States District Court for the Central District of California Fernando M. Olguin, District Judge, Presiding

Argued and Submitted February 16, 2018 Pasadena, California

Before: BERZON and BYBEE, Circuit Judges, and WOODCOCK,** District Judge.

First City is the landlord and Home Depot the tenant on a commercial lease

(the “Lease”) in Van Nuys, California. Rent under the Lease follows a formula

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable John A. Woodcock, Jr., United States District Judge for the district of Maine, sitting by designation. that provides for periodic increases to reflect, among other things, changes in the

Consumer Price Index (“CPI”). The Lease also provides that rent was, in 2009, to

“reset” to a fraction of the then-prevailing fair market rent.

The parties disputed how to calculate fair market rent, so they agreed to a

series of arbitrations aimed at explaining the meaning of the term and providing a

dollar figure for it. As to the meaning of fair market rent, the arbitrator sided with

Home Depot, declaring that fair market rent should “be appraised[] by taking into

consideration, inter alia, all economic terms of the [Lease] and of all comparable

properties.” As to the exact figure for fair market rent, the arbitrator sided with

neither party, but arrived at an amount slightly closer to Home Depot’s estimate.1

First City did not challenge in court any aspect of the arbitral awards relevant to

this appeal.

In 2012, First City brought the present action for declaratory relief, seeking

to clarify that although rent “reset” in 2009, accumulated rent increases related to

CPI did not; they instead rolled over while the rest of the rent reset. Home Depot

moved for summary judgment on various grounds, including claim preclusion and

1 These separate arbitrations were governed by separate arbitration agreements. The second arbitration agreement was reached after the issuance of the first arbitral award — that is, after the arbitrator explained the meaning of fair market rent. 2 equitable estoppel based on the earlier arbitrations. The district court rejected the

argument for claim preclusion, reasoning that the arbitrations were in the nature of

declaratory actions, to which California applies an exception to the ordinary rules

of claim preclusion. See Cal. Civ. Pro. Code § 1062. The district court granted

summary judgment on equitable estoppel, however, concluding that First City

should have raised its interpretation of the Lease at arbitration, as its interpretation

was relevant to the calculation of market rent. First City filed a timely appeal.

We review a grant of summary judgment de novo. Fontana v. Haskin, 262

F.3d 871, 876 (9th Cir. 2001). We may affirm “on any ground supported by the

record.” Atel Fin. Corp. v. Quaker Coal Co., 321 F.3d 924, 926 (9th Cir. 2003).

We affirm on the ground of claim preclusion.2

California’s Declaratory Relief Act provides that declaratory judgments do

not “preclude any party from obtaining additional relief based upon the same

facts.” Cal. Civ. Pro. Code § 1062. This exception to the ordinary rules of claim

preclusion reflects a central purpose of the Declaratory Relief Act, “to provide

parties with a quick way of resolving disputes without the need to assert all claims

based on the same cause of action.” Mycogen Corp. v. Monsanto Co., 28 Cal. 4th

2 First City’s request for judicial notice of the transcript of the first arbitration, Dkt. No. 39, is granted. 3 888, 902 (2002). Accordingly, although “a declaratory judgment is conclusive as

to the matters declared,” it is “not res judicata under the merger doctrine with

respect to matters not covered in the judgment that could have been raised.”

Aerojet-Gen. Corp. v. Am. Excess Ins. Co., 97 Cal. App. 4th 387, 410 n.6 (2002),

as modified on denial of reh’g (Apr. 2, 2002).

The present action does not fall within this exception to the ordinary rules of

claim preclusion. First City is not seeking “additional relief,” Cal. Civ. Pro. Code

§ 1062, in the sense of relief beyond that which it was already awarded. It is

attempting to relitigate “matters declared” at arbitration — namely, the meaning

and value of fair market rent — that it opted not to appeal directly after receiving

unfavorable arbitral awards. The Declaratory Relief Act does not so permit.

First City frames its argument for “rollover” CPI as an issue unaddressed at

arbitration and thus amenable to a new declaratory judgment. But the first arbitral

award made clear that fair market rent included all “economic terms” of the

Lease — a category of which CPI adjustments, designed to capture the natural

inflation in rental values over time, are a paradigmatic example. Had First City

objected to this definition of fair market rent, it could have challenged the first

arbitral award after it was issued. See Cal. Civ. Pro. Code §§ 1285, 1288. Instead,

having received a definition of fair market rent, First City agreed to a further

4 arbitration designed to calculate an exact figure for it. First City then allowed the

figure the arbitrator reached to go unchallenged as well. The role of CPI

adjustments in calculating fair market rent has therefore been fully litigated and

conclusively resolved. That First City neglected to make the arguments it now

wishes to make in support of rollover CPI is not a valid basis for avoiding the

application of res judicata.

AFFIRMED.