When a Stay Is Not a Stay: Cal. Supreme Court’s Decision in Gaines v. Fidelity Insurance

In Gaines v. Fidelity National Title Insurance Co., a majority of the California Supreme Court found that an agreement entered into by the parties to stay a case pending mediation did not toll the five-year time period within which an action must be brought to trial under California Code of Civil Procedure section 583.310. No. S215990 (Feb. 25, 2016) (slip op. available here). Section 583.340(b) provides that courts must automatically exclude from the five-year period any time there is a “complete stay,” when the “[p]rosecution or trial of the action was stayed or enjoined.” Section 583.340(c) also mandates exclusion of any time there is a “partial stay,” where it was “impossible, impracticable, or futile” to bring the case to trial. California Code of Civil Procedure section 583.330 further permits tolling by a written stipulation or express oral agreement in court between the plaintiff and the defendant. Notwithstanding these provisions, the trial court held that the case was due to be dismissed for violation of the five-year time period. The Court of Appeal affirmed, as did the California Supreme Court, each over vigorous dissenting opinions.

Plaintiff Gaines filed a lawsuit in 2006, alleging that the defendant mortgage company defrauded her and her (deceased) husband into selling their home to an unscrupulous property manager—who turned out to be the fiancé of the lender’s employee—to “help” them avoid foreclosure. See slip op. at 2-3. The case encountered numerous procedural hurdles; Mrs. Gaines had to amend the complaint four times during the first 14 months to add various defendants. Gaines v. Fidelity Nat’l Title ins. Co., 165 Cal. Rptr. 3d 544, at 570 (Cal. App. 2013). In 2008, the plaintiff and defendant Aurora stipulated to a 120-day stay to attempt mediation. Slip op. at 4. The court vacated the trial date, ordered mediation, and stayed the litigation, except that parties were to respond to previously-served discovery; however, the mediation ultimately failed. Id. Additionally, Aurora initially admitted to owning the loan in January 2009, but then claimed 11 months later that Lehman Brothers was the owner; the parties then struggled to bring Lehman, which was by then in bankruptcy, into the lawsuit, further compounding delays. Slip op. at 3. That same month (November 2009), the plaintiff passed away, and her son, Milton Howard Gaines, became the plaintiff as her successor in interest. Id.

Remarkably, the California Supreme Court found that the trial court’s stay order—to which the plaintiff agreed at the defendants’ request—did not toll the five-year time limit. A complete stay under section 583.340(b) will operate to automatically toll the five-year period, while a partial stay under section 583.340(c) will not do so unless it results in a circumstance of impossibility, impracticability, or futility. See slip op. at 2. The court first found that the stay was not a “complete” stay under Section 583.340(b) because limited discovery and mediation were allowed to proceed, and because the “stay” was not due to an “extrinsic” event such as contractual arbitration. Slip op. at 10-13. Yet, as Justice Kruger, joined by Justice Liu, asserted in her dissent, the majority’s opinion wrongly relied upon Bruns v. E-Commerce Exchange, Inc., 51 Cal. 4th 717 (2011), which found that a stay of discovery did not toll the five-year time limit. Slip op., Kruger dissenting op. at 5-6. Gaines involved the opposite of a stay of discovery—it was stayed for all purposes except certain limited discovery. Id., Kruger dissenting op. at 7.

Second, the California Supreme Court found no tolling under section 583.340(c), because that section required a “period of impossibility, impracticability or futility, over which plaintiff had no control.” Slip op. at 23. And, because the parties chose to attempt mediation, the plaintiff had control over the progress of the case. Id. Notably, as Justice Kruger pointed out in her dissent, the “beyond the plaintiff’s control” language does not appear in section 583.340(c). Slip op., Kruger dissenting op. at 12. Further, the dissent observed, the majority made no allowance for Aurora’s mistake in claiming ownership, which stalled the case for 11 months. 165 Cal. Rptr. 3d at 572. Consequently, the decision “reward[s] plaintiff for working cooperatively with an opposing party by depriving her of her day in court.” Slip op., Kruger dissenting op. at 1.

After Gaines, plaintiffs’ counsel should take note: the majority gave weight to the plaintiff’s failure to secure an express stipulation pursuant to section 583.330 to toll the five-year limit. Slip op. at 10. Justice Kruger countered that, before the majority’s opinion, a plaintiff “would have had no reason to believe such a stipulated extension would be necessary.” Slip op., Kruger dissenting op. at 14. However, in the future, plaintiffs embroiled in protracted litigation in California courts should heed Gaines, and stipulate or move for the tolling of section 583.310.

Authored By:
Jennifer Bagosy, Senior Counsel
CAPSTONE LAW APC