Monday, February 29, 2016

Undisclosed Conflicts Prevent Law Firm from Getting Paid

Sheppard, Mullin, Richter & Hampton LLP v. J-M Mfg. Co., Inc., No. B256314 (D2d4, as modified, Feb. 26, 2016)

Law Firm represented Client 1 in as a defendant in a qui tam litigation where the plaintiff/government agency intervenor was also arguably current client, albeit in totally unrelated labor and employment matters. There’s no specific waiver in Client 1
’s retainer letter permitting Law Firm to represent the agency in unrelated cases. And given the current representation of an adverse party at the time the letter was signed, the general advance waiver that was in the letter was potentially inadequate to give the requisite informed consent. 

Wednesday, February 24, 2016

Arb Judgment Survives Illegality Challenge

Epic Medical Mgm’t LLC v. Paquette, No. B261541 (D2d8 Jan. 28, 2016)

A doctor and his practice management company got into a dispute that went to arbitration. The management company won. But the doctor moved to vacate the award on the grounds that the contract, as interpreted by the arbitrator, was an illegal kickback agreement for patient referrals, and thus that it was beyond the arbitrator’s power to award any damages based on it. The doctor also claimed that the arbitrator’s interpretation created a brand new agreement, which was beyond her power, and that she improperly limited the doctor’s testimony. The trial court denied the motion and the Court of Appeal affirms.

So far as the “new agreement” claim goes, arbitrators generally don’t have the power to invent new agreements between the parties. But they can interpret existing agreements, including by finding that the parties orally modified written agreements or that their conduct evidenced implied consent to changes in terms. Which is what happened here. The arbitrator found that the parties implicitly agreed to a payment structure that was different than that in the written agreement. Indeed, they acted in accord with that change for three years. So that’s not a grounds to vacate.

As to the point about illegality, California recognizes an extremely limited exception to the enforceability of arbitration awards when enforcing the award would contravene a strong statutory or public policy to the extent it overcomes the presumption in favor of arbitration of disputes. (E.g., confirming an arbitrator’s injunction to enforce a California non-compete.) The doctor points to Business & Professions Code § 650(a), which prohibits patient referral fees for doctors. But § 650(b) has an exception for fee splits between doctors and management companies commensurate with the value of the services provided. Since that is basically what the award in this case did, it isn’t subject to the exception.

Finally, on the doctor’s testimony, the doctor didn’t provide an offer of proof as to what the excluded testimony would have been and how that would potentially have affected the result. Because the record didn’t reflect that the doctor was prohibited from giving testimony bearing on his liability, vacation of the award isn’t warranted.


Thursday, February 18, 2016

Need to Know Who Messed Up, But Not Why

Martin Posts & Assocs. v. Corsair, LLC, No. B263198 (D2d2 Jan 28, 2016)

Defendant in this case got defaulted for failing to answer. Six weeks after judgment was entered, it filed a motion for mandatory relief from default under Code of Civil Procedure § 473(b), attaching a declaration from its attorney taking the blame for the default. The declaration admitted that the failure to answer was at the feet of the attorney, but did not explain why the attorney neglected to file an answer. The trial court granted relief and the court of appeal here affirms.

Looking to the text of § 473(b), the Court holds that the declaration in support of a mandatory default motion must contain an admission by the attorney of mistake, inadvertence, surprise, or neglect. And based on the case law and purpose of the rule, it must further contain facts sufficient to show that it was the attorney, not the client, who was sufficiently the cause of the default. (There’s split of authority about mixed fault between attorney and client.) But as the court explains, the statute is concerned with “who is to blame, not why.” Unlike discretionary relief from default (also, somewhat confusingly, addressed in § 473(b), mandatory relief applies to both excusable and inexcusable conduct. So—provided the admission of fault and causation elements are satisfied—the attorney need not provide any detail in his or her explanation of why the mistake was made.


Tuesday, February 16, 2016

Transferred Venue Resets Anti-SLAPP Clock

Karnazes v. Ares, No. B246308 (D2d2 Jan. 27, 2016)

The relevant part of this case action involves a pro per suing her opponent’s attorney for acting on behalf of her client. As to those claims, an anti-SLAPP motion was brought and granted. Plaintiff now appeals. She raises five grounds, which the court dispenses with in a short opinion.

Friday, February 12, 2016

Lis This!

Rey Sanchez Investments v. Superior Court, No. E063757 (D4d2 Jan. 26, 2016).

If you are going to put a lis pendens on somebody’s property, you had better comply with the statutory service requirements under Code of Civil Procedure § 405.22, including service on everyone with an interest in the property and everyone in the action. And then you need to provide a proof of service. Under § 405.23, a lis pendens is “void and invalid” and subject to expungement if the service rules are not followed. Plaintiff didn’t follow the service rules in this case
—no proof of service—which merits a peremptory writ requiring the trial court to expunge the lis pendens.

Writ granted.

Nothing Retroactive Here

USS Posco Indus. v. Case, No. A140457 (D1d1 Jan. 26, 2016)

Labor Code § 218.5 permits a prevailing party to recover its fees in certain wage cases. While the case was pending, the Legislature amended § 218.5. Prior to the amendment, it was a pure loser-pays statute—the prevailing party, whether plaintiff or defendant, was simply entitled to a fee award. But under the amendment, the defendant can now recover fees only if the court finds the action was brought in bad faith. Citing retroactivity concerns, the trial court applied the old rule and gave defendant its fees. 

But according to the court here, that was error. While there was no evidence that the Legislature intended the amendment to work retroactively, California courts treat cost- and fee-shifting statutes as procedural, not substantive. Procedural changes are essentially prospectivethey apply only to procedural events as they occur, even if the facts of the case pre-date the change. Since, as the cases reason, the new rules apply only to litigation events occurring after the change, there are no perceived retroactivity concerns. Thus, the court here should have applied the new version of § 218.5, and in the absence of a bad faith finding, it should not have awarded fees to Defendant.


Thursday, February 11, 2016

Know when to Fold 'Em.

Bucur v. Ahmad, No. D068689 (D3d1 Jan. 26, 2016)

Plaintiffs in this case are on their fifth lawsuit over more or less the same operative facts. The court of appeal upholds dismissal on several theories, and also permits an award of sanctions under Code of Civil Procedure § 128.7.


Tuesday, February 9, 2016

Fake Decks up in the Files?

Kim v. Toyota Motor Corp., No. B247672 (D2d7, as modified Feb. 8, 2016)

This is an automotive products liability case mostly about when plaintiffs can admit evidence of industry custom to show a defect under the risk-benefit test. (The answer,
according to the court, is sometimes,  parting ways with other courts that have said always and never.) The court also, however, briefly tackles two points of procedural interest.

Monday, February 8, 2016

(Re) Clearing the Decks

So I just moved, we are expecting a second daughter in May, and I have spent the last month pulling all-nighters in expedited preliminary injunction proceedings. Which is all a way to say that I’ve fallen really behind on posts here.