Morillo Construction v. L.A. Community College Dist. CA2/2 ( 2022 )

Filed 5/18/22 Morillo Construction v. L.A. Community College Dist. CA2/2
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has
not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
MORILLO CONSTRUCTION, B313361
INC.,
(Los Angeles County
Plaintiff and Respondent, Super. Ct. No. 20STCV01263)
v.
LOS ANGELES COMMUNITY
COLLEGE DISTRICT,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Michael L. Stern, Judge. Reversed and
remanded.
Musick, Peeler & Garrett, Cheryl A. Orr, Richard S. Conn
and Peter J. Diedrich for Defendant and Appellant.
Richards, Watson & Gershon, Saskia T. Asamura and
T. Peter Pierce for Plaintiff and Respondent.
Appellant Los Angeles Community College District
(LACCD) appeals from a judgment entered after the trial court
granted summary judgment in favor of Morillo Construction, Inc.
(Morillo), on Morillo’s claims against LACCD for contractual
indemnity, breach of contract, and declaratory relief. We find
that the indemnity provision in the contract at issue—a
settlement agreement between the parties—does not encompass
the qui tam lawsuit filed against Morillo by third party Newt
Kellam under the California False Claims Act, Government Code
section 12650 et seq. (CFCA). The trial court erred as a matter of
law in interpreting the settlement agreement to create a duty on
the part of LACCD to defend Morillo against the qui tam lawsuit.
We reverse the judgment and remand for entry of judgment
in favor of LACCD on Morillo’s complaint.
FACTUAL BACKGROUND
The project and Sigma case
LACCD is a California public agency, which operates nine
community colleges throughout Los Angeles County. In 2007,
Morillo entered into a contract with LACCD to serve as the
general contractor on a project at East Los Angeles College
(project). Morillo subsequently entered into subcontracts with
various subcontractors, including McKinney Drywall, Inc.
(McKinney). Morillo began work on the project in 2008.
On April 15, 2009, before the project was complete, LACCD
terminated the contract for convenience. As a result, several
subcontractors, including McKinney, sued Morillo for damages
arising from the project’s termination. The cases were
consolidated, and the consolidated cases became known as the
“Sigma case.” Morillo cross-complained against LACCD and
2
others in the Sigma case. Morillo alleged claims for defamation
and intentional interference with prospective economic
advantage against LACCD.
LACCD and Morillo commenced arbitration. The
arbitration led to competing petitions to confirm and vacate the
arbitration award, resulting in an order remanding the matter to
the arbitrator. Eventually, LACCD and Morillo entered into a
settlement agreement (settlement agreement or agreement).
The settlement agreement
LACCD and Morillo are the only parties to the settlement
agreement. The agreement, effective January 6, 2014, resulted in
a $3.4 million payment from LACCD to Morillo in exchange for
dismissal of Morillo’s cross-complaint in the Sigma case and
dismissal of the litigation arising out of the arbitration.
Paragraph 5 of the settlement agreement provided, in part:
“The Parties mutually, fully, finally and forever
release, waive, discharge and exonerate each other
and their respective principals, owners, partners,
attorneys, guarantors, subsidiaries, successors,
indemnitors, predecessors, affiliates, assigns, officers,
directors, employees, agents, architects, inspectors,
program managers, project managers, completion
and follow on contractors, subcontractors, insurance
companies, reinsurance companies, and surety
companies, from any and all existing or past claims,
obligations, costs, fees, expenses, damages,
compensation, liens, promises, demands, rights,
actions, causes of action, litigation and/or liability, of
any kind whatsoever, whether known or unknown,
relating to the Project and/or the Dispute.”
Paragraph 7 provided:
“With respect to matters within the scope of the
Dispute, the Parties mutually waive their respective
3
rights under the provisions of Section 1542 of the
California Civil Code, which reads as follows:
“‘A general release does not extend to claims
which the creditor does not know or suspect to exist
in his or her favor at the time of executing the
release, which if known by him or her must have
materially affected his or her settlement with the
debtor.’
“In so agreeing, the Parties declare that they
understand the full nature, extent and import of their
waiver of their rights under Section 1542 of the
California Civil Code and have been so advised by
their attorneys.”
Paragraph 8 provided:
“In the event that either Party institutes an
action against any other person or entity (‘Released
Party’) on a claim that is released by that Party
pursuant to Section 5 of this Agreement, such
instituting Party shall indemnify, hold harmless and
defend the other Party of and from any claim, action
or demand for indemnification or contribution made
or brought by such Released Party, including for all
damages, costs, expenses and attorney’s fees incurred
by the other Party.”
Paragraph 9 provided:
“Each Party shall defend and indemnify the
other Party against any and all claims, obligations,
costs, fees, expenses, damages, compensation,
promises, demands, rights, actions, causes of action,
litigation and/or liability, of any kind whatsoever,
relating to, resulting from or arising out of a breach
of a warranty, representation or promise contained in
this Agreement.”
4
Subsequent developments in the Sigma case
After the settlement agreement was finalized between
LACCD and Morillo, LACCD was dismissed from the Sigma case.
The claims between the subcontractors and Morillo continued to
be litigated. Subcontractor McKinney was represented by
Attorney Newt Kellam.
In May 2015, counsel for Morillo submitted a request to the
Contractors State Licensing Board for a certified license history
for McKinney. Upon review of the licensing history, Morillo
discovered that McKinney had multiple license suspensions, with
two such suspensions during the time that McKinney worked on
the project. Morillo brought a motion to bifurcate the trial of
McKinney’s claims, in order to first determine whether McKinney
was unlicensed and therefore ineligible to pursue claims against
Morillo. On June 15, 2016, the Sigma case trial court entered
judgment in favor of Morillo against McKinney because
McKinney had not been adequately licensed during the time it
performed work on the project. Morillo obtained a judgment
against McKinney for more than $1.6 million, representing a
refund of the money it paid McKinney under the subcontract for
McKinney’s work on the project. McKinney failed to pay Morillo
any part of the judgment.
The qui tam lawsuit
On August 13, 2018, McKinney’s former attorney, Kellam,
filed the qui tam lawsuit in propria persona, acting as a relator
under the CFCA on behalf of LACCD. The action, captioned Los
Angeles Community College District ex rel. Newt Kellam v.
Morillo Construction, Inc., et al. (Super. Ct. L.A. County,
No. BC717712) (the qui tam lawsuit), alleged 40 violations of the
5
CFCA against Morillo. As provided in the CFCA, the complaint
in the qui tam lawsuit was filed under seal.
The qui tam lawsuit alleged, inter alia, that Morillo’s
submission of payment applications to LACCD for work on the
project by Morillo constituted false claims under the CFCA
because Morillo certified in each of those applications that all
subcontractors’ state licenses were current and valid, without
having taken steps to ensure that was true. Kellam alleged that
Morillo had obtained a nearly $3 million windfall from its false
statements to LACCD.1 LACCD had no knowledge of the action
before it was filed.
LACCD received notice of the qui tam lawsuit on
August 27, 2018, and received a copy on or about October 3, 2018.
Pursuant to the CFCA, LACCD was required to notify the
court of its intention to intervene in the qui tam lawsuit or not.
On October 12, 2018, LACCD filed a notice of election to decline
intervention in the qui tam lawsuit. LACCD objected to Kellam’s
position as qui tam plaintiff due to a conflict of interest, as
Kellam was simultaneously representing a contractor in a
different matter against LACCD. Later, another attorney, Erik
McLain, was substituted as counsel in the qui tam lawsuit.
Morillo was served with the summons and complaint in the
qui tam lawsuit on January 15, 2019. On the same day Morillo
tendered to LACCD the defense and indemnity of the qui tam
lawsuit, taking the position that defense and indemnity were
required by the terms of the settlement agreement. LACCD
1 Kellam further alleged: “For nearly five years, Kellam
invested substantial time and money in the Sigma case but,
having lost, would receive no compensation at all. Kellam was
not happy.” (Some capitalization omitted.)
6
interpreted the settlement agreement and applicable law as not
requiring it to defend and indemnify Morillo in the qui tam
lawsuit, and therefore rejected Morillo’s tender.
PROCEDURAL HISTORY
On January 9, 2020, Morillo filed its complaint in this
matter against LACCD, alleging three causes of action: (1)
contractual indemnity, (2) breach of contract, and (3) declaratory
relief. Morillo took the position that the qui tam lawsuit was an
action by LACCD. Morillo alleged that “Kellam, as qui tam
plaintiff, brought or instituted the CFCA lawsuit on behalf of
LACCD as LACCD’s de facto agent, standing in LACCD’s shoes.”
Morillo asserted that LACCD breached the settlement agreement
when the qui tam lawsuit was filed on its behalf and through its
refusal to intervene and attempt to have the matter dismissed.
Morillo’s claim for declaratory relief sought a declaration that
LACCD had a duty to indemnify and defend Morillo from the qui
tam lawsuit.
LACCD denied the allegations of the complaint. The
parties filed competing motions for summary judgment on
June 1, 2020.
On March 1, 2021, the two motions for summary judgment
were heard in the trial court. A minute order issued granting
Morillo’s motion for summary judgment and denying LACCD’s
motion for summary judgment. The court later entered a revised
proposed judgment in a form to which LACCD stipulated. The
court entered judgment for $0 for Morillo but ordered that
LACCD immediately assume paying for Morillo’s defense in the
qui tam action and ordered LACCD to indemnify any judgment or
settlement against Morillo in the qui tam lawsuit. The trial court
7
interlineated the revised proposed judgment, adding the word
“partial” before the word “judgment.”2
LACCD timely filed and served its notice of appeal on
May 5, 2021.
DISCUSSION
I. Applicable law and standard of review
Our review of the grant of a motion for summary judgment
is de novo. (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317,
334.) Where there are cross-motions for summary judgment, the
denial of summary judgment is also reviewed de novo. (Doe v.
Becerra (2018) 20 Cal.App.5th 330, 336.)
If the trial court has construed contractual provisions
without the aid of extrinsic evidence, interpretation of those
provisions is a question of law for this court. (Heppler v. J.M.
Peters Co. (1999) 73 Cal.App.4th 1265, 1275.) A contract
providing for indemnity is generally construed under the same
rules as govern the interpretation of other contracts. (Crawford
v. Weather Shield Mfg., Inc. (2008) 44 Cal.4th 541, 552
(Crawford).) However, language providing indemnification
beyond the doctrines of implied or equitable indemnity must use
“clear and explicit” language and “will be construed strictly
against the indemnitee.” (Ibid.)
2 Although the trial court interlineated the word “partial”
before the word “judgment,” the judgment adjudicated all three
causes of action and ordered LACCD to immediately commence
paying all of Morillo’s expenses and indemnify Morillo for any
settlement or judgment in the qui tam action. Therefore, we
treat this as an appeal from a final judgment.
8
When interpreting a contract, it must be interpreted “to
give effect to the mutual intention of the parties as it existed at
the time of contracting, so far as the same is ascertainable and
lawful.” (Civ. Code, § 1636.) The rules provided in the Civil Code
should be applied when ascertaining the intention of the parties
to a contract. (Civ. Code, § 1637.) “The language of a contract is
to govern its interpretation, if the language is clear and explicit,
and does not involve an absurdity.” (Civ. Code, § 1638.) If the
contract is in writing, “the intention of the parties is to be
ascertained from the writing alone, if possible . . . .” (Civ. Code,
§ 1639.) “The whole of a contract is to be taken together, so as to
give effect to every part, if reasonably practicable, each clause
helping to interpret the other.” (Civ. Code, § 1641.) Finally, the
words of a contract generally must “be understood in their
ordinary and popular sense, rather than according to their strict
legal meaning.” (Civ. Code, § 1644.)
To the extent that we must undertake statutory
interpretation of the CFCA, the standard for statutory
construction is similar. We review the plain language of the
statute to ascertain and effectuate legislative intent, giving the
words their usual and ordinary meaning. (Hsu v. Abbara (1995)
9 Cal.4th 863, 871.) We harmonize various parts of a statute by
considering them in the context of the statutory framework as a
whole. (Cummins, Inc. v. Superior Court (2005) 36 Cal.4th 478,
487.)
II. The CFCA
The CFCA “is designed to supplement governmental efforts
to identify and prosecute fraudulent claims made against state
and local governmental entities by authorizing private parties
(referred to as qui tams or relators) to bring suit on behalf of the
9
government. [Citation.] The ultimate purpose of the Act is to
protect the public fisc.” (City of Hawthorne ex rel. Wohlner v.
H&C Disposal Co. (2003) 109 Cal.App.4th 1668, 1677.) It is
patterned after the federal False Claims Act, title 31 United
States Code section 3729 et seq. (City of Hawthorne, at pp. 1676-
1677.) Given the close similarity of the CFCA to the False
Claims Act, it is appropriate to consider federal cases for
guidance in interpreting the CFCA. (San Francisco Unified
School Dist. ex rel. Contreras v. First Student, Inc. (2014) 224
Cal.App.4th 627, 638.)
A lawsuit under the CFCA may be initiated by the Attorney
General (Gov. Code, § 12652, subd. (a)(1)); the “prosecuting
authority of a political subdivision” (id., subd. (b)(1)); or a private
person, acting as a qui tam plaintiff (id., subd. (c)(1)).
Governmental entities may not sue as qui tam relators. (State ex
rel. Harris v. PricewaterhouseCoopers, LLP (2006) 39 Cal.4th
1220, 1230.) When an individual qui tam plaintiff initiates an
action pursuant to Government Code section 12652, subdivision
(c)(1), the qui tam plaintiff brings the action “for the person
and . . . for a political subdivision in the name of the political
subdivision.” Thus, the individual brings the action on behalf of
the individual and the government entity, although the
government entity is only a nominal plaintiff at the time of
filing.3
3 Qui tam plaintiffs are exempt from the requirements of the
Tort Claims Act, Government Code section 900 et seq. (Wells v.
One2One Learning Foundation (2006) 39 Cal.4th 1164, 1214.)
The Wells court concluded that qui tam lawsuits under the CFCA
are “brought, not only for the qui tam plaintiff, but ‘for the State
of California in the name of the state, if any state funds are
involved, or for a political subdivision in the name of the political
10
When a private party initiates a qui tam lawsuit on behalf
of a political subdivision, the political subdivision must advise the
court whether it wishes to proceed with the action. (Gov. Code,
§ 12652, subd. (c)(7)(D).) “The governmental entity on behalf of
which a qui tam plaintiff sues under the CFCA does not become a
party to the suit unless and until the entity intervenes in the
action.” (Armenta ex rel. City of Burbank v. Mueller Co. (2006)
142 Cal.App.4th 636, 641.) If the political subdivision declines to
proceed with the action, “the qui tam plaintiff shall have the
right to conduct the action.” (Gov. Code, § 12652, subd.
(c)(7)(D)(ii).) Once the political subdivision declines to proceed
with the action, it is not considered to be the prosecuting party.4
Instead, the qui tam plaintiff is the prosecuting party. This is
illustrated through one of the attorney’s fees provisions, which
allows a prevailing defendant in such an action to “award to the
defendant its reasonable attorney’s fees and expenses against the
party that proceeded with the action.” (Gov. Code, § 12652, subd.
(g)(9)(A).)
subdivision, if political subdivision funds are exclusively
involved.’” (Wells, at p. 1214, original italics.) The Tort Claims
Act “expressly excludes from the claim presentment requirement
‘[c]laims by the [s]tate or by a state department or agency or by
another local public entity.’” (Wells, at p. 1214, quoting Gov.
Code, § 905, subd. (i).) Because a qui tam plaintiff “stands in the
shoes” of the state or political subdivision, the qui tam plaintiff is
“within the [Tort Claims Act] exemption for claims by the state or
a local public entity.” (Wells, at p. 1214.)
4 Due to the nature of the qui tam lawsuit, the political
subdivision remains a nominal party, as the qui tam plaintiff
continues to prosecute the matter on behalf of the government
entity.
11
If the political subdivision chooses to proceed with the
action, it “shall have the primary responsibility for prosecuting
the action.” (Gov. Code, § 12652, subd. (e)(1).) However, the qui
tam plaintiff retains “the right to continue as a full party to the
action.” (Ibid.) The prosecuting party “may seek to dismiss the
action for good cause notwithstanding the objections of the qui
tam plaintiff” (Gov. Code, § 12652, subd. (e)(2)(A)), however the
court must allow the qui tam plaintiff to oppose the motion to
dismiss, and the court alone has the authority to determine
whether the prosecuting party has shown the requisite good
cause for dismissal of the action.
Even if the state or political subdivision declines to
intervene in the qui tam action, any civil penalty or damages
recovered in the qui tam lawsuit will inure in part to the
governmental entity. However, the qui tam plaintiff is entitled to
“an amount that the court decides is reasonable for collecting the
civil penalty and damages on behalf of the government . . . not
less than 25 percent and not more than 50 percent of the
proceeds of the action or settlement.” (Gov. Code, § 12652, subd.
(g)(3).)
III. The settlement agreement does not create an
obligation on LACCD to defend or indemnify Morillo
in the qui tam lawsuit
In determining whether the settlement agreement created
an obligation on the part of LACCD to defend or indemnify
Morillo against the qui tam lawsuit, we must first look to the
language of the settlement agreement. (Smoketree-Lake Murray,
Ltd. v. Mills Concrete Construction Co. (1991) 234 Cal.App.3d
1724, 1737 [“the courts look first to the words of the contract to
determine the intended scope of the indemnity agreement”].) We
12
consider each applicable paragraph below and conclude that
under the plain language of the settlement agreement LACCD
owes no obligation to indemnify or defend Morillo against the qui
tam lawsuit.
A. Paragraph 5 releases
Through the settlement agreement, “The Parties” released
each other “and their respective principals, owners, partners,
attorneys, guarantors, subsidiaries, successors, indemnitors,
predecessors, affiliates, assigns, officers, directors, employees,
[and] agents,” among others, “from any and all existing or past
claims . . . relating to the Project and/or the Dispute.” The
agreement does not purport to release the claims of third
parties.5
While the trial court held that the qui tam lawsuit “falls
squarely within the scope of the Settlement Agreement’s releases
of claims ‘known or unknown’ relating to the Project and the
Dispute, defined therein, and the waiver of Civil Code § 1542,”
the trial court neglected to note that these broad releases applied
only to claims between the parties to the agreement—LACCD
and Morillo—and each party’s respective agents and assigns.
Kellam, the instigator of the qui tam lawsuit, was not a party to
the settlement agreement and did not release his right to file the
qui tam lawsuit.
The qui tam lawsuit was not within the scope of paragraph
5 of the settlement agreement.
5 Morillo does not attempt to argue that Kellam was the
“agent” of LACCD or held any of the other relationships with
LACCD specified in paragraph 5.
13
B. Paragraph 7 waiver
Paragraph 7 provides that “With respect to matters within
the scope the Dispute, the Parties mutually waive their
respective rights under the provisions of Section 1542 of the
California Civil Code . . . .” The parties further attested that they
understood “the full nature, extent and import of their waiver
of . . . rights under Section 1542.”
Paragraph 7 made no mention of lawsuits filed by third
parties. Nor does Morillo suggest that LACCD had the authority
to waive any third party’s right to unknown claims. Kellam, the
instigator of the qui tam lawsuit, was not a party to the
settlement agreement and did not release any rights thereunder.
The qui tam lawsuit was not within the scope of the waiver
found in paragraph 7 of the settlement agreement.
Belasco v. Wells (2015) 234 Cal.App.4th 409, relied upon by
Morillo, does not suggest otherwise. While the Belasco court
confirmed the unequivocal nature of the express Civil Code
section 1542 waiver in the contract between the parties in that
case, it is distinguishable from the present matter because it
involved a lawsuit filed by a party bound by the release and
section 1542 waiver. (Belasco, at pp. 417-418.)6 In contrast, in
the matter before us, the qui tam lawsuit was filed by a third
party who was not a party to the settlement agreement or the
release. Releases generally do not bind nonparties to a
6 Winet v. Price (1992) 4 Cal.App.4th 1159 and San Diego
Hospice v. County of San Diego (1995) 31 Cal.App.4th 1048 are
distinguishable for the same reason: both involve subsequent
lawsuits filed by parties bound by the section 1542 waiver. The
release at issue in this matter only binds Morillo and LACCD, not
Kellam.
14
settlement agreement. (St. Paul Mercury Ins. Co. v. Mountain
West Farm Bureau Mutual Ins. Co. (2012) 210 Cal.App.4th 645,
657.) Kellam’s filing of the qui tam lawsuit did not constitute a
breach of the release by LACCD.
C. Paragraph 8 indemnity clause
Paragraph 8 of the settlement agreement contains an
indemnity provision. It provides that “[i]n the event that either
Party institutes an action against any other person or entity
(‘Released Party’) on a claim that is released by that Party
pursuant to Section 5 of this Agreement, such instituting Party
shall indemnify, hold harmless and defend the other Party” for
all “damages, costs, expenses and attorney’s fees incurred by the
other Party.”
The plain language of paragraph 8 limits its applicability to
the parties to the settlement agreement and only applies if one of
the parties “institutes” an action. LACCD did not institute the
qui tam lawsuit. The qui tam lawsuit was initiated solely by
Kellam. LACCD was required by statute to notify the court of its
intention to intervene, or not, in the qui tam lawsuit. LACCD
declined to intervene and become a party to the lawsuit. As the
qui tam lawsuit was solely instituted by Kellam, not LACCD, the
indemnity language of paragraph 8 is inapplicable.
Further, the remaining language of the indemnity
provision shows that the provision is applicable only when one of
the parties to the settlement agreement—i.e., either LACCD or
Morillo—initiates an action against a party “released by that
Party pursuant to Section 5 of this Agreement.” Thus, by its
express language, the indemnity provision applies only when one
of the parties to the agreement initiates a lawsuit against one of
the entities released in paragraph 5 (released party). Morillo
15
would only be entitled to indemnity if LACCD filed suit against a
released party, and that released party sought indemnification or
contribution from Morillo.
LACCD did not file a lawsuit against a released party.
Kellam did. As emphasized above, Kellam was not a party to the
settlement agreement and was not bound by its covenants.
Kellam is a third party to the settlement agreement who brought
an action under the CFCA. The indemnification provisions of
paragraph 8 do not apply to the qui tam lawsuit.
D. Paragraph 9 indemnity provision
Paragraph 9 creates another indemnity obligation in the
settlement agreement. Under paragraph 9, the parties agreed
that “[e]ach Party shall defend and indemnify the other Party
against any and all claims, obligations, costs, fees, . . . relating to,
resulting from or arising out of a breach of a warranty,
representation or promise contained in this Agreement.”
Paragraph 9 does not apply because Morillo has not alleged
any breach of the settlement agreement by LACCD. LACCD did
not institute the qui tam lawsuit, thus LACCD did not breach its
promise under paragraph 5 to release all claims against Morillo.
Nor did LACCD breach its waiver of unknown claims under
paragraph 7. There was no obligation on the part of LACCD to
indemnify or defend Morillo against the qui tam lawsuit.
Kellam’s act of filing the qui tam lawsuit was not an act that can
be attributed to LACCD. Thus, LACCD has not breached any
“warranty, representation or promise” contained in the
settlement agreement.
Morillo implies that LACCD is guilty of breaching the
agreement because LACCD failed to intervene in, and request
16
dismissal of, the qui tam lawsuit.7 Morillo points out that under
Government Code section 12652, subdivision (e)(2)(A), a
government entity that intervenes in a qui tam lawsuit “may
seek to dismiss the action for good cause notwithstanding the
objections of the qui tam plaintiff.” However, LACCD did not
have the power to unilaterally dismiss the qui tam lawsuit.
LACCD would have had to make a motion to dismiss the lawsuit,
to which Kellam had the right to object. Ultimately it would be
the trial court’s decision, not LACCD’s, to grant any dismissal.
(Gov. Code, § 12652, subd. (e)(2)(A).)
Further, nothing in the settlement agreement requires
LACCD to intervene in, or seek to dismiss, a qui tam lawsuit. In
the absence of clear and explicit language in the indemnity
agreement, we must construe it “strictly against the indemnitee.”
(Crawford, supra, 44 Cal.4th at p. 552.) Morillo’s argument that
LACCD breached the settlement agreement by failing to
intervene in, and seek dismissal of, the qui tam lawsuit must
fail.8
IV. LACCD has no obligation to indemnify or defend
Morillo given its status as a potential beneficiary of
the qui tam lawsuit
As set forth above, the settlement agreement does not
apply to lawsuits instituted by third parties, nor does it require
7 Morillo claims that by its actions, LACCD “allow[ed],” or
“deliberately greenlighted,” the qui tam lawsuit.
8 Because we determine that the plain language of the
settlement agreement does not require LACCD to indemnify and
defend Morillo in the qui tam lawsuit, we decline to address the
parties’ competing arguments about public policy and the
applicability of Civil Code section 1668.
17
LACCD to intervene in any such lawsuits. Therefore, LACCD
was not required to indemnify or defend Morillo in the qui tam
lawsuit.
Morillo argues that due to the nature of qui tam lawsuits
under the CFCA, LACCD should be considered a plaintiff in that
lawsuit and should not be relieved of its obligations under the
settlement agreement. Preliminarily, we note that the language
of the settlement agreement does not prohibit LACCD from
benefiting from third party litigation. The settlement agreement
only requires indemnification or defense where LACCD institutes
an action, which it has not done.9
Morillo makes much of the language that LACCD used in
its notice to the court declining to intervene in the lawsuit.
Morillo points out that LACCD stated the following:
“Since [LACCD] has elected not to intervene in
this action, the Relator now has authority to pursue
this action in the name of [LACCD]. Government
Code Sections 12652 (c)(1) and (f)(1).) In essence, the
Relator ‘stands in the shoes’ of [LACCD] in
prosecuting this action.” (Original underscoring and
italics.)
Morillo claims that LACCD “punctuated its keen interests
in the process and outcome” of the qui tam lawsuit by objecting
that Kellam might have a conflict of interest that interfered in its
ability to represent LACCD’s interests in the qui tam lawsuit.
9 We acknowledge the parties’ competing claims regarding
the public policy considerations at issue in the matter. However,
because the plain language of the settlement agreement dictates
the outcome in this case, we need not discuss the parties’ public
policy arguments.
18
Morillo cites no authority for its position that LACCD’s
statements above rendered LACCD somehow responsible for
initiating or prosecuting the action. LACCD’s statements appear
to be an accurate representation of the law regarding Kellam’s
right to bring the case, and LACCD’s objection to Kellam as qui
tam plaintiff for valid reasons does not render LACCD
responsible for filing the lawsuit.
Morillo emphasizes that if LACCD, instead of Kellam, had
filed the qui tam lawsuit, there is no question that LACCD would
be in violation of the settlement agreement. This is true. Morillo
argues that just because Kellam is the “nominal plaintiff,”
LACCD should not be relieved of its duties. However, Kellam’s
status as instigator of the qui tam lawsuit is precisely the reason
that the qui tam lawsuit does not fall under the scope of the
settlement agreement. Kellam was not a party to the settlement
agreement. Kellam had a statutory right to file the qui tam
lawsuit. (Gov. Code, § 12652, subd. (c)(1).) LACCD had no
control over Kellam’s actions and had no right to prohibit him
from filing the qui tam lawsuit. Contrary to Morillo’s arguments,
LACCD cannot be described as having constructively filed the qui
tam lawsuit. LACCD cannot be held responsible for actions of
third parties over whom LACCD has no control.10
10 Morillo cites Civil Code section 3519, which provides, “He
who can and does not forbid that which is done on his behalf, is
deemed to have bidden it.” Because LACCD had no power to
“forbid” Kellam from filing the qui tam lawsuit, the statute is
irrelevant.
19
DISPOSITION
The judgment in favor of Morillo is reversed, and the
superior court is directed to enter judgment in favor of LACCD.
LACCD is awarded its costs on appeal.
________________________
CHAVEZ, J.
We concur:
________________________
LUI, P. J.
________________________
ASHMANN-GERST, J.
20