February 10, 2016 Article

Claim and Issue Preclusion Do Not Protect Tenants from Joint and Several Liability

A recent case left the California Supreme Court wondering: Was this really necessary?

by Kenneth R. Van Vleck

In a “was this really necessary?” decision, the California Supreme Court “granted review to clarify a bedrock principle of contract law: Parties who are jointly and severally liable on an obligation may be sued in separate actions.” DKN Holdings LLC v. Faerber, 61 Cal. 4th 813 (2015). A landlord’s recovery from one tenant does not bar suit against other joint and several tenants.

In DKN Holdings, three tenants agreed to “joint and several responsibility” when they leased commercial space to operate a fitness club. One of the tenants, Caputo, sued the landlord on the lease, alleging DKN “failed to disclose that construction on a driveway into the shopping center would not begin for over a year and that state regulations prohibited cutting back vegetation that made the gym less visible.” The landlord cross-complained for unpaid rent and other moneys due. The trial court ruled against Caputo and awarded over $2.8 million on the landlord’s cross-complaint.

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