Wednesday, January 21, 2015

Nobody's Home but the Address Is Fine

Murray & Murray v. Raissi Real Estate Development Co., No. H039036 (D6 Jan. 20, 2015)

The plaintiffs in this case are lawyers who obtained a default judgment against a former client for unpaid fees. The client moved for relief from default, arguing, among other things, that plaintiff didnt comply with Code of Civil Procedure § 587, which requires an application for entry of default to be mailed to the defendant’s last known address. To establish compliance, plaintiff must file an affidavit attesting to the mailing service or explaining that the address is unknown. Plaintiff had previously tried and failed to personally serve defendant at what it believed to be the last known address—a vacant commercial building. Based on this failure, it concluded that the defendants address was unknown, and attested to that fact. The trial court found that § 587 had been complied with and declined to relieve defendant from default.

The court here finds, however, that it was error for the trial court to deny relief from default on that basis. Just because personal service can’t be effected at a particular address does not necessarily mean that the defendant won’t receive mail there. This was particularly true of the circumstances here. While a person might not be present at a vacant commercial building to let a process server in, it does not automatically follow that mail sent there would be returned as undeliverable. Plaintiff never attempted to mail the application to defendant at the address. It thus could not be said that, had it done so, defendant wouldn’t have received the notice. That makes this case distinguishable from prior authority holding that an address can be considered unknown when a defendant tries but fails to have mail delivered to that address, thus showing that further mailing would be be futile.


Philanthropy as Protected Activity

Save Westwood Village v. Luskin, No. B253013 (D2d2 Jan. 15, 2015).

Plaintiffs here are some kind of NIMBY group that is trying to stop UCLA from building a conference center. Their objection seems to be that the center will include what they characterize as a commercial hotel, which violates some statutory mandate on the UC Regents to not engage in commercial development. But they didnt just sue the Regents. They also sued a charitable foundation that raises money for UCLA and some of its big donors, one of whom also heads the foundation, for donating funds to UCLA in support of the project. That draws a anti-SLAPP motion, to which the plaintiffs responded by voluntarily dismissing these defendants. The trial court granted the motion and plaintiffs appealed.

The court holds that the plaintiffs claim arose from the charitable contributions and some letters these defendants wrote in support of the project. Unsurprisingly, that kind of stuff is conduct in furtherance of a free speech on an issue of public interest and thus protected activity under Code of Civil Procedure § 425.16(e)(4). And plaintiffs werent entitled to the protection of the public interest exception in § 425.17. While plaintiffs might have a public interest argument against the Regents, there really is no public benefit to be had by restraining philanthropists from donating to a charitable foundation that supports UCLA. And since plaintiffs dismissed the relevant defendants before the motion was heard, they effectively conceded that they had no likelihood of success.


Tuesday, January 20, 2015

Right to Jury Trial Applies to Dispute over Standing to Bring Construction Defect Claim

Stoffer v. Shappel Indus., Inc., No. A139385 (D1d5 Jan. 15, 2015)

Construction defect law has this rule that practitioners in the field sometimes call “standing, but which is really more of a claim accrual issue. Whoever owns a property when an injury due to a latent defect becomes manifest owns the claim. Later owners take the property subject to the defect and have no claim, unless there’s an assignment

Here, the facts about when the defect became known were disputed. The court resolved the dispute, in defendant’s favor, at a bench trial. But that was error. Although the ultimate determination of accrual might be a legal call for the judge to make, when disputed, the underlying fact issues are subject to the right to jury trial. 


RFA Denials Are Not Fair Game for Cross-Exam

Gonsalves v. Li, No. A140284 (D1d5 Jan. 13, 2015).

Defendant in this case crashed a BMW M3 during a test drive, injuring the car salesman who was riding along. Most of the opinion—which addresses various evidentiary, jury misconduct, and attorney misconduct issues—is unpublished. But the court does publish on two related issues: Are denials of requests for admission admissible evidence at trial and it is permissible to question a party about these denials during examination? The court says no to both.

During trial, plaintiff called defendant as an adverse witness under Evidence Code § 776. Plaintiffs lawyer aggressively questioned defendant about various lawyerly non-admissions contained in his RFA responses. And then plaintiff stridently argued at closing that the mealy denials called defendant's credibility into question, suggesting that the jury needed to make defendant take responsibility. The judge let the denials come into evidence, over objections, permitted the examination, and denied a new trial motion arguing improper argument.

Under the Discovery Act, any part of a deposition or interrogatory response is generally admissible as trial evidence. Cal. Code Civ. Proc. §§ 2025.620, 2030.410. But that’s not true when it comes to RFAs, for which only admissions are admissible. § 2033.410.

And as to questioning witnesses about denials, the court agrees that the situation is generally analogous to Rifkind v. Superior Court, 22 Cal. App. 4th 1255 (1994)—a key case that every California lawyer defending a depo should know. Rifkind says that you can’t ask a party-deponent (even the person most qualified testifying for an organization) questions about the nature of and evidence in support of that party’s legal contentions. Such questioning is unfair in that it addresses application of law to fact issues generally in the sole purview of counsel. That information is thus properly obtained through interrogatory, where counsel have the ability to participate and the time to contemplate to avoid a “gotcha” response to a complicated question with legal implications. 

RFA responses are similar. An RFA denial is not a statement of fact. It is merely a failure to admit, which potentially has consequences independent of discovery. See § 2033.420(a) (permitting fee awards as sanction for unreasonable denial of RFA). To permit cross-examination of a party witness about the basis for a denial entails questioning about the application of law to fact that, much like contention questioning, is similarly unfair to a lay witness.

Reversed and remanded.

No Fees for Farm Without Actual Damages

Belle Terre Ranch, Inc, v. Wilson, No. A137217 (D1d5 Jan. 13, 2015)

In a boundary dispute, plaintiff was awarded nominal damages for trespasses on the disputed property that, while annoying, did not cause any real property damage. Under these circumstances, it was not entitled to an award of attorneys’ fees under Code of Civil Procedure § 1021.9, which permits a fee award in an action to recover damages to agricultural property. It gives farmers a meaningful remedy when trespassers break through fences and drive motor vehicles onto private farm property. In contrast, this case is primarily a boundary dispute. Although plaintiff’s property—a vineyard—was agricultural, no damages had been proven as a result of the trespass, which made a fee award improper.


Tuesday, January 13, 2015

Collecting on a Big Foreign Judgment

Hyundai Securities Ltd. v. Lee, No. B257276 (D2d5, as modified Jan. 14, 2015)

Mr. Lee, a former officer of Hyundai, got tagged with a $24 million judgment, based in part on a Korean court's ordering him to indemnify the company for certain criminal fines it paid due to his conduct. The judgment carries post-judgment interest at the rate of 20 percent—the statutory rate for Korea. About $5 million in principal and $3 million in interest remain, and Hyundai is now trying to collect in California.

So Hyundai filed an action to have the judgment recognized under the Uniform Foreign Country Money Judgments Recognition Act, Code of Civil Procedure § 1713–24. In a prior appeal, the court held that, procedure-wise, a foreign country judgment can’t be domesticated by a simple petition; its validity needs to be recognized through trial or on summary judgment. So on remand, Hyundai did just that. The trial court found the judgment enforceable, including the accrued Korean interest, plus 20 percent interest going forward.

Lee raises three issues. First, he says that a California court should not have enforced the judgment under § 1715(b)(2), which excludes fines or other penalties from the scope of the Act. The gist of the provision is that the judiciary generally isn’t in the business of enforcing the public law, and in particular, the penal law, of other countries. So Lee says that since Hyundai's underlying liability that he is stuck with indemnifying was a criminal fine levied by the Korean government, a California court shouldn’t enforce that against him.

But the court here doesnt agree. Although the judgment might be requiring Lee to compensate Hyundai for damage it incurred by being fined, it was nonetheless a civil damage award in favor of a private party. Nothing in the case law or legislative of either the California Act, the promulgated Uniform Act, or in other states’ enactment of the Act says otherwise. Indeed, the weight of the authority suggests that the rule is meant to address situations where the sovererign itself is the judgment creditor.

Second, Lee says that the accrued Korean interest should not have been awarded. Generally, a party attempting to enforce a foreign judgment gets the same kind of post-judgment interest that a party enforcing a sister-state judgment would, § 1715, and for prior to the recognition of the judgment by a California court, that means the rate of interest under the law of that state, § 1710.25(a)(2). But Lee says 20 percent is “repugnant to the public policy of this state or United States,” and thus unenforceable under §1716(c)(3). In particular, Lee points to the 10 percent cap on post-judgment interest in Article 15 § 1 of the state constitution. But the fact that the Korean statutory rate is twice the state cap is not so offensive to public policy to make it repugnant under the standard of the Act. Repugnancy is a high bar, reserved for practices such as those that are injurious to public health, offensive to individual rights, or that undermine the administration of law. Double interest just isnt enough.

Finally, Lee argues that the court should not have awarded prospective 20 percent interest on the now-domesticated judgment. This one bears fruit. As noted, § 1715 adopts the sister state standard for foreign judgments. Under § 1710.25, once a sister state is domesticated, the court applies Californias 10 percent interest rate to the domesticated judgment going forward. The idea is that the new interest wasn’t part of the original Korean judgment, but a new merged California judgment that should carry California interest.

Which brings up a point. If you have a foreign or sister state judgment that carries interest over 10 percent, it probably doesn't make sense to domesticate it until you are on the verge of being able to collect. Otherwise, you are giving money away.

Reversed in part and remanded.

Monday, January 12, 2015

PAGA Again ...

Montano v. The Wet Seal Retail, Inc., No. B244107 (D2d4, as modified Jan. 13, 2015)

The court here holds that, following the California Supreme Court’s recent decision in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014), Labor Code Private Attorney General Act claims aren’t arbitrable. And given that the agreement contained an anti-severance provision, the other claims plaintiff brought in the case aren’t arbitrable either.


The Policy Needs to Be a Policy for Class Cert

Koval v. Pac. Bell Tel. Co., No. A139570 (D1d1 Dec. 31, 2014)

If you have been reading court of appeal cases for the past couple of years, you probably know that the key to getting a wage and hour class certified is to allege that the employer had an illegal meal and rest break policy (or that it had no policy at all to ensure compliance). The problem for the plaintiffs in this case is that the defendant had a compliant policy. So the plaintiff alleged that the policies led to unlawful results as they were applied. But, for the purposes of class certification, common interests only predominate when a policy is consistently applied.* If the theory is that a facially lawful policy is applied in an inconsistent matter that violates the wage and hour laws, the illegality of the employer’s conduct is not really susceptible to class treatment. So class cert was properly denied.


*Don't know what would have happened if the plaintiff argued that the defendant's policy was to have a paper policy, but then to leave its enforcement up to individual managers so much that the policy was effectively no policy at all. Which is basically what happened in the Walgreen case, decided last November, although the plaintiff there also lost because the evidence didn't substantiate the theory.  

Friday, January 9, 2015

Employer Waives Right to Arbitrate by Participating in Discovery

Bower v. Inter-Con Security Sys., Inc., No. A135940 (D1d3 Dec. 31, 2014)

This is a wage and hour class action where the plaintiff signed an employment agreement containing an arbitration provision with a class action waiver. But the employer didn’t immediately move to compel. Instead, it both responded to and propounded discovery, including discovery on class issues. Only after plaintiff tried to expand the class and efforts to settle the case on a class-wide basis failed did it move to compel the case to arbitration. But the trial court ruled that, by that time, it had waived the right to compel. The court of appeal affirms. Although the evidence on the issue was mixed there was substantial evidence to support the trial court’s decision that defendant was aware of its right to arbitrate, that it acted inconsistently with that right, and that plaintiff was prejudiced.


Clarifications Don't Implicate Retroactivity

Satyadi v. W. Contra Costa Healthcare Dist., No. A138948 (D1d5 Dec. 31, 2014)

The state legislature recently amended the Labor Code to make clear that a plaintiff bringing an action under its provisions needs not exhaust any administrative remedies available before the labor commissioner before filing suit. This case addresses the question of whether that amendment applies to cases pending at the time it was passed. The court here holds that it does. 

While statutes are generally presumed not to be retroactive, a legislative clarification of a statute that has received inconsistent treatment by the courts applies to pending cases. That was the case here. A Supreme Court case suggested that exhaustion was required, but did not actually decide the issue. A court of appeal case held that exhaustion was not required. And the federal courts were split on the issue. Since the statutory change was consistent with some of the prior interpretation, it was merely a clarification and thus applied to plaintiff’s pending case.


Does Save Plaintiff's Day

Pierce v. San Mateo Cnty. Sheriff’s Dept., No. A138278 (D1d1 Dec. 31, 2014)

In an interesting opinion that explores the subtle distinctions between the Eleventh Amendment, the nebulous state sovereign immunity doctrine that is somehow atextually baked into the constitution, and the meaning of the word “person” in 42 U.S.C. § 1983, the court also addresses an interesting issue about doe defendants. Doe pleading is, of course, an established practice in California state court. See Cal. Code Civ. Proc. § 474. Here, the plaintiff sued a sheriff’s department. According to the California Supreme Court—which disagrees with the Ninth Circuit on the issue—a sheriff is an instrumentality of the state, not local government, and thus can’t be sued under § 1983 in an official capacity. But plaintiff also sued a bunch of individual deputies—whose names he didn’t know—as does. While the sheriff had a legit argument on demurrer that he should be dismissed as an arm of the state, that reasoning didn’t apply to the doe deputies. It was thus erroneous for the trial court to dismiss the case against the does based on the sheriff’s state actor arguments.


Electronic Signaures Degree Zero

J.B.B. Inv. Partners, Ltd. v. Fair, No. A140232 (D1d2 Dec. 30, 2014)

This is that weird case from a few weeks ago that was ordered depublished by the panel only a few hours after it was issued. Now, following a publication request under Rule of Court 8.1120 and some minor modifications, the court re-orders the opinion published in the official reports.

Cops Don't Have Standing to Challege Orders

L.A. Police Protective League v. City of L.A., No. B251796 (D2d8 Dec. 26, 2014)

So the police trade association and some random citizen are challenging an LAPD directive that limits the cops’ discretion to impound vehicles driven by unlicensed drivers. They argued that the directive conflicted with some provisions in the state vehicle code. The trial court—after finding that the association and the citizen had taxpayer standing under Code of Civil Procedure § 526a—agreed. But the court here reverses.

Section 526a can be used to enjoin a facially illegal or unconstitutional expenditure of pubic funds. But it cannot impinge executive or legislative direction. While the statute speaks to “waste” it does not provide an avenue for taxpayers to second guess the manner a government body has chosen to address a problem, so long as it does not violate a clear legal standard.

The directive in this case did not create new law—it afforded instructions how police officers were to exercise discretion under the state statutory impoundment scheme. That is a decision well within the discretion of the chief of the LAPD.  Thus, because the directive was not facially unlawful, neither the citizen nor the association had taxpayer standing under § 526a.


It Must Have Been Some Other Ernesto Zamora Ruiz ...

Ruiz v. Moss Bros. Auto Group, No. E057529 (D4d2 Dec. 23, 2014) 

The issue here is whether plaintiff electronically signed an arbitration clause in an employment agreement that contained a class action waiver. The file copy of the contract said (in print) “Ernesto Zamora Ruiz (Electronic Signature)” under the signature line. Plaintiff argued, and the trial court agreed, that the printing was insufficient to show that the signature was a “act attributable” to him under the Uniform Electronic Transactions Act, Civil Code § 1633.9(a).

Thursday, January 8, 2015

Too Late to Dismiss a Related Case

Mesa Shopping Center v. O’Hill, No. G049205 (D4d3 Dec. 23, 2014)

While an arbitration was pending, plaintiff filed this case seeking ancillary declaratory and injunctive relief. It filed a motion for a preliminary injunction, which was denied. Then the case got stayed while the arbitration proceeded. Soon after the arbitrator ruled for defendants, including an award of about $800,000 in fees and costs under a contractual fee provision, plaintiff voluntarily dismissed this case with prejudice. Thereafter, defendants moved to vacate the dismissal and for an award of fees incurred in the court case. The trial court denied the motion.

On the Merits...

Hardy v. America’s Best Home Loans, No. F067389 (D5 Dec. 22, 2014)

Plaintiff filed a pro se federal case against defendant, which was ultimately dismissed
“on the merits” under Federal Rule of Civil Procedure 41(b) because he failed to file an amended complaint after a motion to dismiss with leave to amend was granted by the federal district court. Plaintiff re-filed his claims in state court, based on the same factual allegations. On the eve of trial, defendant moved for judgment on the pleadings, on the grounds that the claims were barred by the collateral estoppel effect of the prior dismissal. The trial court granted the motion.

On appeal, the parties agree that a dismissal for failure to prosecute is has no preclusive effect under California law because they are not “on the merits.” But defendant argues that federal common law—the law of the venue entering the prior dismissal—controls the preclusivity of the order. It says that the court’s designation of the Rule 41(b) dismissal as “on the merits” means that the dismissal did have preclusive effect.

That is about one-third right. As the Supreme Court explained in Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 503 (2001), federal law does control the preclusive effect of a prior federal judgment. But Rule 41(b)’s designation of a dismissal as “on the merits” does not control the issue, federal common law does.  And when the judgment is a state law claim brought in diversity, the federal rule generally borrows the state rule of decision, absent some incompatibility with federal interests.  Because the claims at issue here were state law claims, there would be no preclusion because California law would not interpret the state equivalent of a Rule 41(b) dismissal for failure to prosecute as having a preclusive effect.

The court goes on to say that even if the federal rule applies, there would nonetheless be no collateral estoppel because plaintiff’s claims were not actually litigated in the prior case—a requirement for federal issue preclusion.  Even if a dismissal under Rule 41(b) as a penalty for failure to prosecute could give rise to preclusion under res judicata, since it does not actually litigate the merits of the claims, dismissing them based on collateral estoppel would have been inappropriate. (Which begs the question -- Why didn’t defendant move for judgment on the pleadings on res judiciata too?).


This Ain't No PAGA

McGill v. Citibank, N.A., No. G047838 (Dec. 18, 2014)

The trial court in this case partially granted a petition to to compel arbitration, but denied it with respect to the plaintiff’s Unfair Competition Law, Consumer Legal Remedies Act and False Advertising Law claims seeking injunctive relief. The denial was based on a line of old California cases holding that those claims aren’t arbitrable because they benefit the public. But those cases are preempted by AT&T Mobility v. Concepcion, which says states can’t make rules that discriminate against arbitration. In Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014), the California Supreme Court recently distinguished Concepcion with respect to claims brought under the Labor Code’s Private Attorney General Act. According to the Court, PAGA claims belong to the state government, even if they are prosecuted by an individual on the state’s behalf. Because the state didn’t agree to arbitrate the claims, a defendant can’t compel arbitration of PAGA claims.  But that logic does not apply to UCL, CLRA, or FAL claims, which—while sometimes touching on the public interest—are nonetheless claims belonging to individuals, not the state’s claims that are pursued by an individual on its behalf.


Classic Minutemen, should you care. 

Update: Review granted, April 2, 2015. 

Not So Fast, Partner ...

Danko v. O’Reilly, No. A138784 (D1d2 Dec. 18, 2014)

A lawyer won a big judgment against his former firm, but lost on a nonsuit his individual capacity claims against the lead partner. Before the judgment could be executed upon, however, the partner diverted the all firm’s assets to himself, his family and elsewhere, and then caused the firm to dissolve. It was eventually pushed into bankruptcy. The issue is whether the trial court properly amended the judgment under Code of Civil Procedure § 187 to add the partner as a judgment debtor. The partner contends that the amendment order was barred by the bankruptcy stay, and that, in any event, the amendment was precluded by res judicata or collateral estoppel. The court of appeal rejects each argument.

On the bankruptcy point, in settling with the plaintiff, the firm’s bankruptcy trustee agreed—and a bankruptcy court approved and a federal district court affirmed—that the order amending the judgment would be outside of the stay. Amending the judgment to go after the partner individually was not an action against the bankruptcy estate, so the partner should not be able to avoid collections based on the stay. Even if the stay covered this case during the time in which the judgment was amended—which occurred before the settlement was entered—the bankruptcy court had the authority to retroactively rule that this case was outside of the stay.

As to the preclusion arguments, the issue of whether the partner and firm were alter egos—the key issue in whether the judgment should be amended—had not been litigated in a prior proceeding when the individual capacity claims against the partner were nonsuited. Indeed, the parties expressly agreed to defer any alter ego issues until after the trial. Moreover, the claims were not the same. The original claim alleged the partner alleged that he was individually liable as a principal. The fact that this claim failed did not and should not preclude an amendment of the judgment to hold the partner derivatively liable as an alter ego for the liabilities of the firm, so long as plaintiff could established that the partner and firm shared a unity of ownership and interest and the injustice would result from honoring the corporate form. Which he did.


Wednesday, January 7, 2015

A Class Action Is Community Property

Lennar Homes of Cal. v. Stella Stephens, E057280 (D4d2 Dec. 18, 2014)

Defendants in this case are a husband and wife who bought a house from the plaintiff, Lennar Homes. The husband was the named plaintiff in an unsuccessful federal class action alleging illegality in the transaction. Lennar sued both husband and wife for express contractual indemnification for the costs incurred in defending the class action, based on an indemnity clause in the purchase agreement.  Defendants brought an anti-SLAPP motion, which the trial court granted. Lennar appealed.

The court applies the familiar two-part analysis. First, it finds that the trial court correctly found that the suit arose from protected activity. That was conceded as to husband—since he is, in effect, being sued for filing a lawsuit—but not as to wife. Lennar asserts that because wife was not a party to the federal case, its claim her does not arise from her protected activity. The court doesn’t buy it. In a case where husband is asserting rights that are tied up with the family’s community property, the petitioning entailed is as much hers as it is his, notwithstanding the name on the caption. Moreover, Lennar couldn’t show a likely success on the merits because the indemnification provision was, in fact, unconscionable and thus could not be enforced.


Arbitration Appeals Fail for Lack of Jurisdiction

Judge v. Nijjar Realty, No. B248533 (D2d7 Dec. 17, 2014)

When an arbitration has not yet proceeded to an award on the merits, a superior court’s order vacating an interim ruling construing the scope of the arbitration clause is not an order vacating a final arbitration award appealable under Code of Civil Procedure 1294(c). This appeal was thus premature and merited dismissal. That’s the case even though the interim award might have been appealable under the FAA, because the procedural rules under the federal act don’t preempt state procedures that govern arbitration and because state procedure applies absent an express agreement otherwise. Nor did the fact that the interim award was made under the AAA’s rules make the order appealable. The right to appeal is governed by statute, not the rules of an arbitral body or the parties’ agreement.

Appeal dismissed.

Wells Fargo Bank, N.A. v. The Best Service Co., Inc., No B253861 (D2d5 Dec. 17, 2014)

The defendant unsuccessfully moved to stay this case in connection with an arbitration that it demanded. But—for some tactical reason not apparent from the opinion—it did affirmatively not move to compel the arbitration, which throws a wrench in the appeal. That’s because Code of Civil Procedure § 1294(a) affords appellate jurisdiction over the denial of a petition to compel arbitration, but not from an order denying a stay in favor of an uncommenced arbitration.  No jurisdiction, no appeal.

Appeal dismissed.