Artists settle for $1.26 million in Little Tokyo fire lawsuit

Eleven up-and-coming artists who lost their completed and in-process works, tools and personal belongings in a 2021 fire at the Little Tokyo Art Complex settled with the landlord for $1.26 million in mid-trial after 18 witnesses had testified.

The case raised issues regarding the legal limits of property damage claims, landlord versus tenant liability, and the need for attorneys to quickly adjust to a federal court decision issued during the Los Angeles County Superior Court trial absolving the landlord's insurer from reimbursing him for the artists' damages.

The likelihood that decision would limit the damages the landlord could pay was one of the issues driving settlement. Another issue involved the location where the fire started, a smoke shop on the first floor, whose owner was not a defendant.

While some of the painters, sculptors and muralists have sold pieces, putting a value on the loss of their work was an issue because they are not yet well-known artists.

"Like a personal injury case, you can never reverse the incident completely and make someone whole," the plaintiffs' attorney, Cyrus E. Shahriari of Pietz & Shahriari LLP, said in an interview Friday. His co-counsel was Morgan E. Pietz.

The trial started April 14 and settled April 28 after nine court days. Emily Dobbs, et al. v. L For Lofts LLC, et al., 22STCV17848 (L.A. Super. Ct., filed May 30, 2022).

"We had quite a few liability experts and were two-thirds of the way through trial when Judge Alison M. Mackenzie referred us to Judge Ruth Kwan, who helped facilitate settlement discussions at the same time as the trial was happening," Shahriari said. "There was a bit of running back and forth between the trial and the settlement proceedings. That made it more exciting and dynamic during trial, but it obviously worked."

The settlement option was offered because "this was a case involving disputed liability and it really is one of those cases where the parties benefit from making a deal because there's risk on both sides," he said. "We had very sympathetic plaintiffs and there were a lot of errors in managing the property. My policy as a plaintiffs' attorneys is the door is always open to that discussion though I don't want it to interfere with the trial prep."

Jack R. Reinholtz and Gopal S. Patel of Prindle, Goetz, Barnes & Reinholtz defended the landlord.

"After testimony and evidentiary rulings, the probable outcome after a verdict was not much different than a trial," Reinholtz wrote in an email explaining the reason for the settlement decision. "The defense had minimal exposure, but if the jury found the defense liable for 1% then the damages were likely in the range of the settlement."

Settlement also "avoids unknown risk of verdicts, punitive damages and achieves finality," he wrote. "After all, the fire was not caused by the defendant and the defendant lost a building."

Both sides had two lawyers "so one was in trial while the other was negotiating," Reinholtz explained.

One key to the deal was that both the plaintiffs' and defense experts' assessments of loss were close, based on comparative market value with other emerging artists' work, attorneys for both sides said

But the works themselves are gone, along with the emotional and creative investment in them. Several of the artists stored all their work in the building so they could someday have a retrospective exhibit.

"The general rule in California is you don't get emotional distress for property loss. You get something that could compensate for damages. But it doesn't cover the true extent of the harm," Shahriari said. "Many of my clients testified they had to seek professional treatment over what they lost," which resonated with the jury, according to interviews with them after the settlement.

"We were able to bring about a resolution that everyone can feel good about and have closure," he said. "Thank God this wasn't a case like the 'Ghost Ship' in Oakland. None of our clients were in the building at the time of the fire and explosion."

A former warehouse converted into an artist collective in Oakland, known as the Ghost Ship, was burned on Dec. 2, 2016, during a concert, killing 36 people. Shahriari noted that the combustible, wooden pallet, space dividers in the Ghost Ship were similar to the dividers the Little Tokyo landlord used.

The fire in Little Tokyo originated early in the morning in a first-floor smoke shop whose owner had failed to provide proof of a business license, in violation of the lease terms. But the landlord ignored red flags and failed to monitor unauthorized renovations and suspicious activity on the property, the plaintiffs argued. Their complaint also stated that when the named plaintiff said she was unable to get fire insurance because of the property conditions, the landlord told her not to worry about it.

Why did his clients stay?

"They are quintessential artists," and the rent was a factor, Shahriari explained. "The Little Tokyo group, despite all the property problems, was like a little community. Even Picasso worked in a similar environment, not a fancy or nice place, but there was a special, creative energy there."