Friday, September 29, 2017

Court Can't Refuse to Consider Docs Already in the Record

Roth v. Plikaytas, No. D070484 (D4d1 Sept. 13, 2017)

After a trial on liability, a prevailing Defendant in a contract case sought her attorneys’ fees under Civil Code § 1717. The trial court denied the motion as premature because certain equitable claims remained to be tried. So after Defendant won the equitable trial, she filed a second motion. For substantiation of her fees through the first trial, however, she sought to incorporate by reference a declaration filed with her first motion, a courtesy copy of which she gave to the court, but which she did not formally refile. The trial court refused to consider the prior-filed materials because it was unfamiliar with incorporating prior materials in a fee motion, because the prior motion had been denied, and because the the record was voluminous.

That was error. Rule of Court 3.1110(d)—which governs the form of motions—permits reference to other materials already in the trial record by date of execution and title. While Rule 3.1110(j) says that supporting materials should to the extent practicable be attached to the notice of motion, it does not set out a hard and fast requirement. So incorporating the material by reference was not improper. And if the courtesy copy Defendant gave to the court wasn’t good enough, it always had the option to order Defendant to re-file the docs. But it was an abuse of discretion to just ignore them.

Reversed.

Wednesday, September 27, 2017

Privilege Log Necessary, Regardless of Burden

Riddell, Inc. v. Superior Court, No. B275482 (D2d7 Aug. 23, 2017)

Insurers filed a declaratory relief action regarding a coverage dispute with an Insured that manufactures football helmets. The rule is pretty well settled that, to the extent that there are factual questions in the DJ that overlap the underlying litigation, the DJ case must get stayed to avoid prejudice to the insured in having to litigate the merits as part of the coverage dispute. That said, the issue doesn’t come up very often because usually a coverage DJ action can be resolved as a matter of law based just on the policy language and the underlying complaint.

Tuesday, September 26, 2017

Repose Never Goes

PGA W. Residential Assoc. v. Hulven Int’l, Inc., No. E064270 (D5 Aug. 23, 2017)

Debt collection action where the Debtor alleges that a fraudulent transfer claim is time-barred under the Uniform Fraudulent Transfer Act. But while Debtor raised the issue on a demurrer, he did not address it at trial. According to the Court, that doesn’t matter. 

As the substantive discussion in the case explains, the UTFA doesn’t just have a statute of limitations; it has a statute of repose. Once the period has run, any unfiled cause of action ceases to exist. As such it isn’t subject to tolling. Moreover, although it’s a question of first impression in California, the Court follows the majority rule to hold that the benefits of a statute of repose can’t be forfeited. So the failure to raise the defense at trial doesn’t preclude the court from holding that the trial court erred by not granting Debtor’s demurrer on timeliness grounds.

Reversed.

Monday, September 25, 2017

Some Tricky Stuff About Privity

Cal. Sierra Dev., Inc. v. George Reed, Inc., No. C080397 (D3 Aug. 22, 2017)

MineCo and SurfaceCo share rights to some land. Under their agreement, MineCo has the right to mine for gold and SurfaceCo has the right to the surface. SurfaceCo licenses its right to OppCo to build a plant on the surface. Problem is, that interferes with MineCo’s operations. 

Friday, September 22, 2017

Don't Call It a Berman

Otto, LLC v. Kho, No. A147564 (D1d1 Aug. 21, 2017)

In Sonic-Calabasas A, Inc. v. Moreno, 57 Cal. 4th 1109 (2013)—aka Sonic II—the California Supreme Court held that an arbitration agreement is unconscionable if it deprives an employee of the procedural advantages provided in the Labor Code wage claim procedures known as Berman hearings. The Berman procedures permit an employee to litigate claims for back wages in an informal administrative proceeding, with limited pleading, no formal rules of evidence, no discovery, fee shifting, and where the hearing officer has the power to assist the parties in cross examinations and to explain concepts and issues that the (often unrepresented) parties do not understand. If the employee is successful, the Labor Commissioner is tasked with enforcing the award and can defend it on appeal.

Thursday, September 21, 2017

Wednesday, September 20, 2017

Objective Lack of Merit Shifts Fees Under CCP § 1038

Ponte v. County of Calaveras, No. C079180 (D3 Aug. 15, 2017)

Plaintiff here brought a sketchy oral contract/promissory estoppel claim against a small County in NorCal. After a bunch of demurrers sustained with leave to amend, the trial court granted SJ for the County. The trial court ultimately found that the claims had been brought in both objective and subjective bad faith, and awarded fees to the County under Code of Civil Procedure § 1038.

Tuesday, September 19, 2017

So Much for Expedient, Efficient, and Cost Effective

Harshad & Nasir Corp. v. Global Sign Systems, No. B269429 (D2d1 Aug. 15, 2107)

The posture here is pretty odd. SignCo sued BurgerCo over $100k in unpaid invoices. The case went all the way through discovery, but three weeks before trial, the parties agreed to arbitrate whatever amounts BurgerCo owed SignCo for services rendered, with the arbitrator to act as if he were a superior court judge subject to the Code, and that the arbitrator’s award would be reviewed just as if it were the judgment of the superior court. Basically, they agreed to an arbitration that had all of the characteristics of a judicial reference.

Monday, September 18, 2017

§ 998 Shifts Costs in FEHA and POBRA Cases

Sviridov v. City of San Diego, No. D069785 (D4d3 Aug. 15, 2017)

The general rule in California is that a prevailing defendant can recover its costs. See Cal. Code Civ. Proc. § 1032(a). But there are various statutes that create an exception to that rule, permitting cost-shifting only when the claim is objectively devoid of merit. Two such statutes implicated here: The Fair Employment and Housing Act and the Public Safety Officers Procedural Bill of Rights Act. But in this case, costs weren’t awarded just because Defendant prevailed. They were awarded because Plaintiff rejected several offers of judgment under Code of Civil Procedure § 998 and failed to best the offers at trial. In a terse analysis, the Court of Appeal holds here that the FEHA and POBRA do not create exceptions to cost-shifting when it is imposed under § 998(c)(1), as opposed to § 1032.

Affirmed.

Friday, September 15, 2017

Reverse Veil Piercing for Alternative Entities

Curci Inv., LLC v. Baldwin, No. G052764 (D4d3 Aug. 10, 2017)

As we’ve discussed (on one occasion at very great length), under California law, a creditor can “pierce the corporate veil” of a corporate debtor to get at the assets of its “alter ego” owners. The creditor can do so when the company and the owners share a unity of ownership and interest and when the ends of justice require ignoring the separation between the company and the owners. 

But what about when the owners are the debtors? Can a creditor use veil piercing in a downward direction to get at the assets of a company owned by a debtor? This is generally called “reverse piercing” and one California court rejected it, at least for corporations. Postal Instant Press, Inc. v. Kaswa Corp., 162 Cal. App. 4th 1510 (2008). The court there reasoned that ordinary creditors’ remedies permit creditors to seize shares of corporate stock directly from the debtor. So the creditor does that, and then assumes whatever position the debtor had vis-a-vis the company. Viz., it gets dividends, votes at meetings, has the right to initiate derivative litigation, and can presumably sell the stock to someone else. Maintaining that separation protects other innocent stockholders from an attack on corporate assets due to the malfeasance of some other stockholder.

But here, the company is an LLC, and very closely held one at that. It’s 99 percent owned by debtor and 1 percent by his wife. That, in the courts view, is a crucial difference, because creditors’ remedies don’t permit seizure of an LLC member’s equity in the entity. The best a creditor can get is a charging order redirecting any distributions out of the LLC to the creditor. But if the LLC is still owned and controlled by the debtor, the debtor can avoid the charging order by simply causing the LLC to stop making distributions. 

That’s what happened here. Debtors’ LLC paid out $178 million in the six years before the judgment. But since the $7.2 million judgment in this case issued, no distributions have been made. (Presumably the debtors aren’t having too hard of a time living off their $178 mil.)

The court here finds the corporate/LLC distinction significant in way that can make reverse piercing equitable for LLCs in a way it is not for corporations. The court isnt saying that the veil should be reverse pierced in this case, just that it can be. So it reverses and remands for the trial court to conduct a full blown alter ego analysis.

Reversed.

Thursday, September 14, 2017

Bad Faith ≠ No PC

Parrish v. Latham & Watkins, LLP, No. S228277 (Cal. Aug. 10, 2017)

In order to bring a claim of malicious prosecution, a plaintiff needs to show that the underlying claim was brought without probable cause. Under the so-called interim adverse judgment rule, if the defendant prevailed on a hearing on the merits in the underlying case, probable cause exists, even if that ruling is later contradicted by a later trial court ruling or overturned on appeal, unless it was obtained by fraud or perjury. The point of the rule is that if the case was good enough to convince someone to rule favorable on the merits, there must be some merit in the claim. Generally ruling denying a motion for summary judgment, a non-suit, or a directed verdict counts.

This case—a trade secrets case—has a bit of twist. The trial court in the underlying case denied a summary judgment motion. But after trial, it ruled that the case had been brought in “bad faith,” for the purpose of awarding defendant attorneys’ fees under the CUTSA. According to the Supreme Court, in a unanimous opinion by Justice Kruger, that doesn’t merit an exception to the application of the interim adverse judgment rule to summary judgment denials.

That’s because objective component of the bad faith analysis applies a somewhat lower standard than lack of probable cause. One can, it appears, show objective bad faith by “objective speciousness,” which does not require that any reasonable attorney would agree that the case is totally and completely without merit. But one can only prove lack of probable cause by showing just that.

So in the absence of a showing that the summary judgment denial was procured through fraud or perjury, the interim adverse judgment rule applied. As there was no such showing here, plaintiff could not establish a lack of probable cause.

Court of Appeal affirmed.

Wednesday, September 13, 2017

Sounds More Like Garth Knight to Me

Cross v. Facebook, Inc., No. A148623 (D1d2 Aug. 9, 2017) 

Plaintiff here is Jason Cross, aka, Mikel Knight. No, not Michael Knight—a young loner on a crusade to champion the cause of the innocent, the helpless, the powerless, in a world of criminals who operate above the law. It’s Mikel Knight, a performer of really awful Country/Rap music, who (if one believes the internets) goes around the country with his “Maverick Dirt Road Street Team,” using aggressive and sometimes violent tactics to peddle his merch, harass women, and get in all kinds of traffic accidents.

Tuesday, September 12, 2017

Iskanian Applies Only to the Man's Bread

Esparza v. KS Indus., LP, No. F072597 (D5 Aug. 2, 2017)

In the Iskanian case, the California Supreme Court held that claims brought under the Labor Code Private Attorney General Act are not arbitrable because, although they are litigated by private parties, the relief sought in them—civil penalties—belongs to the state, which never agreed to arbitrate. That includes PAGA “representative actions,” where an employee can seek penalties arising from her employer’s violations involving other employees. Given the US Supreme Court’s upholding of arbitration clause class action waivers in the Concepcion case, Iskanian has had the effect of pushing a lot of formerly class action employment litigation into the PAGA realm. 

Monday, September 11, 2017

Where's Your Interim Award Now, Flanders...

Kaiser Foundation Heath Plan v. Superior Court, No. B272284 (D2d7 Jul. 31, 2017) 

This is a very complicated-seeming healthcare reimbursement litigation between some Hospitals and an Insurer. The parties ultimately agreed to arbitrate the dispute. A big issue in the arbitration was whether some of Hospital’s claims were preempted by provisions of the Medicare Act. The arbitrator found they were not and issued a “Partial Final Award” saying so.

Insurer asked the superior court to vacate the award. But instead, the superior court confirmed it. Insurer now appeals.

But thats dead end.

Friday, September 8, 2017

Dead Plaintiffs Have Already Cooled Off

Baker v. Italian Maple Holdings, LLC, No. D069797 (D4d1 Jul. 31, 2017)

Code of Civil Procedure § 1295 requires a medical services contract with an arbitration provision to expressly afford a 30-day “cooling off” period, during which the elder can rescind the agreement. Section 1295(c) says the agreement is enforceable “until or unless rescinded by written notice within 30 days of signature.” Here, the patient—a nursing home patient—signed the contract but died before the 30 days ran. But she never rescinded. So the issue is can her estate—suing for wrongful death—be bound to arbitrate.

Based on the plain language of the statue, the court’s majority—Justice Aaron, joined by Justice O’Rourke—says it can. The text of the statute doesn’t require the 30 days to run as a condition precedent of enforceability. It requires an affirmative act of rescission to create an exception to it. And since that act never occurred, the contract was enforceable. In reaching it conclusion, the court parts ways with Rodriguez v. Superior Court, 176 Cal. App. 4th 1461 (2009), which goes the other way.

Justice Huffman dissents. Frankly, I find it a little hard to follow. He says that he does “not quibble with the majority’s interpretation of” § 1295(c), but then he says they interpreted it incorrectly because they failed to consider the case in light of the fact that the arbitration agreement waives the right to jury trial. Because that waiver must be knowing and voluntary, the party seeking to compel arbitration bears the burden of showing that an agreement to arbitrate, did in fact occur. While that is generally true, the tone here seems somewhat in tension with the strong pro-arbitration public policy and interpretive canons. In any event, although Plaintiffs don’t actually argue a lack of consent, undue influence, or stuff like that, Justice Huffman would follow Rodriguez to say that when a signatory dies during the 30-day cool-off, arbitration can’t be compelled unless the defendant proves that the decedent would not have exercised the right to rescind.

Reversed.

Thursday, September 7, 2017

Because Because

Mountain Air Enters, LLC v. Sundowner Towers, LLC, No. S223536 (Cal. Jul. 31, 2017)

This Supreme Court case came up recently in the Monster case. Like Montser, it deals with whether a prevailing party can get attorneys’ fees when the contract with the fee provision in it was the basis of an affirmative defense.

Tuesday, September 5, 2017

Someone Else's Decision

Aanderud v. Superior Court, No. F073277 (D5 Jul. 27, 2017).

Trial court here granted a motion to compel arbitration where the agreement contained a class action waiver. In the process of doing so, the court found that that agreement was not unconscionable, the class action waiver valid, and the claims arbitrable. 


Problem is, the agreement contained a clause that specifically and expressly delegated all questions of validity or arbitrability to the arbitrator. Those are generally enforceable. So the trial court shouldn’t have predetermined those issues is granting the motion to compel. And while a granted motion to compel arbitration isn’t generally an appealable order, the court exercises its discretion to treat the appeal as a writ petition and issues a writ directing the trial court to vacate its order.

Writ granted.

Arguably Unauthorized Settlement Is Voidable, Not Void, under Code of Civil Procedure § 437(d).

W. Bradley Electric, Inc. v. Mitchell Engineering , No. A167137 (D1d5 Feb. 28, 2024) Fatal traffic accident case where the Decedent’s family...