Friday, January 31, 2020

Equity First

Rincon EV Realty LLC v. CP II Rincon Towers, Inc., No. A138463 (D1d4 Jan. 31, 2017)

So I kinda called this one three years ago.

This is a real estate dispute with both equitable and legal claims. In a prior appeal, the Court of Appeal held that the trial court shouldn’t have enforced a jury trial waiver as to the legal claims. But it left standing a defense judgment on the key equitable claim—a UCL claim that bootstrapped all of the allegations from the legal claims. 

So on remand, defendants moved for summary judgment, arguing that the court’s factual findings on the UCL claim were binding as to the legal claims, and thus that, jury right be damned, the legal claims failed as a matter of law. The trial court granted the motion and the Court of Appeal here affirms. 

Plaintiff tries to argue a bunch of different ways what that shouldn’t be the case, but all to no avail. The Court of Appeal’s prior decision wasn’t an unqualified reversal, so Plaintiff had no right to retry the facts found in the UCL claim. And since those facts did, in fact, doom the legal claims, summary judgment was proper.

Affirmed.

Monday, January 27, 2020

Insulating Fraud in Film Finance

Ojjeh v. Brown, No. A154889 (D1d3 Dec. 31, 2019)

Sigh.

Defendants raised money from plaintiff for the production of a documentary on Syrian refugees. But they never made any progress on making the film. Instead, they allegedly used the money for other reasons. Plaintiff sued them for breach of contract and fraud.

Defendants filed an anti-SLAPP motion, which the trial court denied because the claims did not arise from protected activity. The Court of Appeal, however, reverses, finding that the conduct from which the claims arise—securing alleged financing for a film—falls within the “conduct in furtherance” catchall under Code of Civil Procedure § 425.16(e)(4).

The court seems to recognize that there are three questions here. First, what conduct does the claim “arise from?” Second, is that conduct “in furtherance” of First Amendment activity. And third, does it relate to an issue of public concern? 

Things seem to go hinky on the second element. As the Supreme Court recently explained in Wilson, the (e)(4) “in furtherance” test can’t just ask if, superficially, the conduct at issue is something that “helps” a media defendant produce content. Otherwise, virtually any claim against a media defendant has to navigate an anti-SLAPP motion to proceed. Thus, courts examining (e)(4) arguments based on “in furtherance” conduct need to look at whether the conduct at issue actually plays a substantial role in carrying out or protecting core First Amendment protected activity.

For instance, the bare fact Wilson concerned CNN’s decision to terminate a news producer was not enough on its own to make that decision “in furtherance of protected activity” under (e)(4), even though employing producers “helps” CNN make the news. Laws of general applicability often incidentally affect the ability of media organizations to create content, but the First Amendment does not create some sort of blanket immunity from those laws.

Instead, (e)(4) was implicated in Wilson only because CNN came forward with evidence that the producer was terminated because he committed plagiarism, which was a sufficient threat to the core journalistic function of the CNN to implicate its exercise of its First Amendment rights, and thus for the termination to be “in furtherance” of those rights. 

The nuance demanded by Wilson is not evident from this opinion. Instead, the court just finds that soliciting investment funding was in furtherance of the production of the documentary—it helped the production— and therefore that (e)(4) applies. So apparently you have a protected right to commit fraud, so long as the subject of the fraud is the making of movies. Every huckster fronting as a “movie producer” will be thrilled!

What should have happened here, a la Wilson, is a closer examination of the nexus between the claims and the allegedly First Amendment-implicating activity. A moving defendant bears the burden on this point and in this context, that will usually require it to come forward with evidence extrinsic to the complaint. Which is what happened in Wilson. If the breach of contract and fraud claims are really about creative or political disagreements fundamental to the creation of a documentary, there might well be an (e)(4) issue. But if this was just a straight up promissory fraud ripoff there’s really no reason to be dragging the anti-SLAPP statute into the dispute. 

Reversed.

Tuesday, January 21, 2020

Waive Appeal? No Appeal.

PG&E “San Bruno Fire” Cases, No. A152330 (D1d3 Dec. 18, 2019)

Various groups of stockholder plaintiffs sued members of PG&E management derivatively on behalf of the company for alleged misconduct in connection with  the San Bruno pipeline explosion. Plaintiffs collectively agreed to settle for $90 million and $25 million in attorneys’ fees. The trial court trial later adopted the recommendation of a three-member panel of special masters as to the allocation of the fee award between the various counsel involved. One plaintiff, however, filed a notice of appeal, challenging the award to his counsel.

But the settlement agreement, to which this plaintiff was a signatory, provided that the trial court’s determination on fee allocation would be “final and nonappealable.” California law generally recognizes that parties can waive the right to appeal, provided the waiver is express, sufficiently clear, and not coerced. Which the settlement agreement in this case was. 

Appeal dismissed.

Friday, January 17, 2020

Contacts, Contracts, Indemnities.

Halyard Health v. Kimberly-Clark Corp., No. B294567 (D2d5 Jan. 2, 2020)

Back in the days before he represented Stormy Daniels, and before he got criminally charged with fraud, and long before he got arrested while in the process of getting disbarred, Michael Avenatti popped Kimberly-Clark Corp. and its spinoff Halyard with a $450 mm judgement for fraudulently representing the qualities of certain surgical gowns. The awards were later dialed way back to around $20 million, due to excessive punitive damages. The case is on appeal to the Ninth Circuit. 

This case, however, is a declaratory relief action about whether Halyard needs to indemnify Kimberly-Clark for its share of the punitive damages. That seems to be required under the terms of a “Distribution Agreement” spinning Halyard out as a separate company. But there’s questions about whether an indemnity for punis is valid. The court here doesn’t even reach the merits of that question, however, because the Court of Appeal finds that there isn’t personal jurisdiction over Kimberly-Clark.

There’s no question that personal jurisdiction here needs to be specific—i.e., the defendant’s contacts with the state need to be connected to the facts that give rise to the case. Generally, in California, that invokes a three part test: First, the defendant needs to have purposefully availed itself of California. Second, the controversy needs to arise out of the defendant’s contacts with the forum. Under the test applied in California, that means there needs to be a substantial relationship between the contacts and the claim. And third, the assertion of personal jurisdiction must “comport with fair play and substantial justice.”

The Court here finds that the analysis founders on the second point. It is true that Kimberly-Clark sells lots of stuff in California. (Which is how it got sued here.) But this case doesn’t really arise from those contacts—it arises instead from the general contractual indemnity from the Distribution Agreement, which was not California specific. Nor does the fact that California law might apply to the validity of the indemnity necessarily mean that the case arises from California contacts. The Court of Appeal ultimately holds that the fact that the obligation to be indemnified arose in California is insufficient to conclude that an action in contact over the enforceability of the indemnity agreement is substantially related to Kimberly-Clark's California contacts.

Justice Rubin dissents. His principal point of contention is that although the dispute arises out of the contract, it also arises out of the underlying obligation to be indemnified. As he sees it, “[g]iven the broad ‘substantial connection’ test used for the second prong in California, it is clear to me that a declaratory relief coverage action both arises out of, and relates to, more than the contract itself, but also to the underlying tortious activity.” He cites a number of declaratory relief cases in the insurance context in support.

Affirmed.

Thursday, January 16, 2020

Waitin' on Nebraska

Warwick Cal. Corp. v. Applied Underwriters, Inc., No A155523 (D1d4 Jan. 7, 2020)

This is a multi-party insurance coverage dispute where most of the claims are stayed on non conveniens grounds pending a litigation in Nebraska. But the Court declined to stay the case for two California-based plaintiffs. It held a bench trial on their claims, ultimately issuing a statement of decision against them. But the Court did not enter a judgment.

Plaintiffs appealed anyway. They shouldn’t have done that because a statement of decision is not an appealable order. It is true that the trial court could have entered a partial judgment, notwithstanding the stay of the other plaintiffs’ claims. See Code Civ. Proc. § 578; Cal. R. Ct 3.1591. But it didn’t, apparently because there was a possibility that the Nebraska litigation could have some potential effect on this case.

Appeal dismissed.

A Political Song for (Maybe) Michael Jackson to Sing

Serova v. Sony Music Entm’t, B280526A (D2d2 Jan. 8, 2020)

This is an anti-SLAPP case that I wrote about when the original opinion came out in 2018. The key question is whether Sony’s claims that Michael Jackson is the singer on three vocal tracks on an album issued after his demise are “in connection with a public issue.” If so, the claims are properly subject to a motion to strike under Code of Civil Procedure § 425.16(e)(3) or (4). The Court of Appeal held they were, but then the case got granted and held pending the Supreme Court’s decision in FilmOn, which definitively interpreted the public interest requirement.

Now on remand, the Court of Appeal says it would reach the same result, even in light of FilmOn. It is true that in the FilmOn analysis, a commercial context can weigh against speech being addressed to an issue a public interest. But it’s not necessarily dispositive. Here, the speech at issue addressed whether Michael Jackson was really the singer of those songs. Given Michael Jackson’s prominence as an artist, discussions about whether his final work was really his work are address an issue of public interest, even if they are made in connection with selling the album. This seems reasonable.


But the Court goes on, in an analysis that
s basically identical to the prior appeal, to find that Plaintiff can’t prevail on the merits because the statements are non-commercial speech that is absolutely protected by the First Amendment. As I said in my prior post, I’m a bit skeptical on this point. But we’re already only a hairs breadth from giving First Amendment protection to stone cold bribery, and it seems like fraud is just next in the hopper.

Reversed.


In any event, I implore you, again, to listen to this.

Wednesday, January 15, 2020

Losing a Trial in Absentia Is Not a Default

Shayan v. Spine Care Orthopedic Physicians, No. B293857 (D2d8 Jan. 8, 2020)

Under Code of Civil Procedure § 473(b)’s mandatory relief provision, a Court is required to relive a moving party from a default or dismissal if its attorney files a declaration owning up to a mistake. But mandatory relief under § 473(b) is limited to relief from “defaults” and “dismissals,” which the more modern case law reads somewhat literally. A loss that is not a default or dismissal is not subject to mandatory relief.

Which is what happened here. Defendants failed to show up at trial. But instead of putting them into default, the trial court held a bench trial in their absence ultimately awarded relief to plaintiffs. That’s not a default, so no mandatory § 473(b) relief.

Affirmed.

Collateral Attack on Kansas Judgment Fails

Blizzard Energy, Inc. v. Schaefers, No. B290492 (D2d6 Jan. 13, 2020)

Defendant got hit with a $3.825 million judgment in Kansas. He didn’t post a bond to stay enforcement on appeal. Plaintiff domesticated the judgment in San Luis Obispo Superior Court under the Sister State Money Judgment Act, Code Civ. Proc. § 1710.10, et seq. Defendant moved to vacate the California judgment, which the trial court denied. The trial court ordered that Defendant needed to post a bond of 150 percent of the judgment to stay execution in California. Defendant appealed, without posting the bond. While this appeal was pending, the Kansas Court of Appeals affirmed, and the Kansas Supreme Court denied review.
 

The finality of the Kansas case is res judicata in California. Under full faith and credit, a judgment debtor can’t collaterally attack a judgment of another state’s courts because it’s wrong, or it’s inconsistent with state policy. He can only challenge it on grounds under which he can challenge an in-state judgment. Like non-finality, lack of jurisdiction, prior satisfaction, or extrinsic fraud. Once the Kansas judgment was final, none of those grounds even potentially exist in this case.
 

Affirmed.

Monday, January 13, 2020

When Serving by Mail, Use a Stamp!

Dalessandro v. Mitchell, No. B293472, D2d8 (Jan. 3, 2020)

This is a discovery dispute in a judgment collections case. The underlying dispute isn’t super clear, but it appears that Creditor engaged in some sketchy stuff in judgment debtor discovery. Stuff like filing a phony proof of service and a false declaration in support of a motion to compel. Creditor’s counsel got sanctioned, for about $3,500.

There’s a question of appealability under the long-standing Fox Johns / Macaluso split regarding when post-judgment discovery orders are appealable under Code of Civil Procedure § 904.1. The Court of Appeal takes the Fox Johns side of the ledger and finds the order isn’t appealable, but takes the case as a writ anyway.

On the merits, the Court finds that debtor was never properly served with the discovery at issue. Among other things, there’s no evidence that the purportedly mailed discovery had a stamp on it. Since you can’t properly compel responses to improperly served document demands, the court was authorized to issue a sanction under Code of Civil Procedure § 2031.300(c). The fact that the court didn’t make an express finding of a lack of substantial justification did not render the sanction flawed. Instead, the statute requires the court to find substantial justification if it does not issue the sanction. In the absence of such a finding, the statute makes the sanction mandatory—“the court shall impose a monetary sanction . . . .”


Affirmed.

Wednesday, January 8, 2020

Policy, Practice, and Class Certification

Cacho v. Eurostar, Inc., No. BC558689 (D2d7 Dec. 23, 2019)

This is an appeal of a denied class cert motion in a class action over meal and rest breaks for shoe store employees. As typical with these cases, it comes down to whether the plaintiffs could show that the employer had a uniform policy or practice that violated the wage and hour laws. If “plaintiff’s theory is based on a common unlawful policy, evidence that some employees were treated differently does not defeat certification; rather, class members may individually have to prove their damages.” But the question often arises, as it does here, whether the employers’ policy was “uniform” enough to meet that test. If not, no class cert.


This is often a matter of a degree. If the employer has a clearly unlawful policy, evidence of a few contrary incidents won’t merit class certification. On the other hand, evidence that a clearly lawful policy was generally ignored won’t defeat class certification. And in the middle, if a policy isn’t perfectly clear on everything, whether or not class cert is appropriate might depend on whether it was implemented in a uniformly lawful or unlawful manner.


Here, the employer’s written meal break policy was generally compliant with California law. At best, it was a little ambiguous on certain details about how it would be implemented. For instance, it said that an employee who works at least five hours is entitled to a 30 minute unpaid meal break. That is a correct statement of the law. It did not, however, spell out that, when an employee worked a shift longer than five hours, the first break needed to commence within that five-hour window, or that if the employee was on the clock for ten hours, a second meal-break was permitted. The company put in evidence, however, that it was its practice to give the first break within the first five hours and to give a second break for a ten hour shift. Plaintiff, on the other hand, put in statistical evidence that a meal break was missed, short, or late on about 12 percent of shifts.


The Court of Appeal holds that wasn’t enough to meet certification under the prevailing Brinker standard. An employer’s policy doesn’t not need to “embody every aspect of the Labor Code” to be compliant. And the evidence of violations in the aspects of the policy that weren’t written out was too uneven to permit proof on a classwide basis. 


The rest break policy was basically the opposite. It incorrectly stated that paid rest breaks needed to be offered on a four hour shift, while the wage order at issue says three-and-a-half. But Plaintiffs offered no evidence at all that anyone who worked between three and a half and four hours was ever denied a break. Indeed, the evidence showed that the company generally did not schedule shifts shorter than four hours. Under the circumstances, even with a technically deficient policy, Plaintiffs couldn’t show that the violations were subject to common proof.


Plaintiffs also alleged a off-the-clock- work claim, notwithstanding the employer’s unequivocally clear policy that all work was required to be paid. That’s not bullet proof. Evidence of systematic managerial pressure for off the clock work in the face of a written policy might still merit class cert. But there was no such evidence here. 


Finally, the Court of Appeal also affirms the trial court’s findings that these Plaintiff’s weren’t typical. Among other things, their evidence was largely anecdotal and limited to themselves—they failed to obtain evidence from other employees.


Affirmed.

Monday, January 6, 2020

Bad Facts Open up a Split on Whether Indemnification Claims are SLAPPs

Long Beach Unified Sch. Dist. v Williams, No. B290069 (D2d4, as modified Dec. 31, 2019)

Wong v. Wong, No. A154286 (D1d1 Dec. 13, 2019)

C.W. Howe Partners v. Moordian, No. B290665 (D2d7 Dec. 19, 2019)

Within the course of a few weeks, the Court of Appeal (a panel of the First District, and two Different panels of the Second) decided three cases addressed to whether the anti-SLAPP statute applies to a claim demanding a litigation based indemnity. That is, an equitable or contractual right to obtain compensation for defense costs or judgements from another party, sometimes even a counterparty in the underlying litigation. 

Despite coming up different factual contexts, Wong and C.W. Howe basically come out the same door. Of course an indemnity requires something to indemnify against and a litigation indemnity requires a litigation. So, in a very superficial way, a litigation indemnity claim would not exist “but for” a litigation. That, however, does not mean the claim arises from the litigation. (The are some cases, including a case called Lennar Homes, that suggest otherwise, but the Court in C.W. Howe refers to the logic applied in those cases as “facile.”) Applying the framework in the Supreme Courts decision in Park, the arising from test is met only when protected conduct forms an essential element of the claim. If that’s not the case, other protected-type conduct can show up in the case as evidence, without the arising from test being satisfied. 

Looking at the elements, Wong and C.W. Howe say this is an evidence, not an elements, situation. A contractual indemnity is just based on a contract and a refusal to pay. And an equitable indemnity claim arises from being a co-tortfeasor in partial proportionate fault. Neither of those elements requires a litigation, so the fact that the costs or results of litigation are the subject of the  compensation for is just evidence and not a fundamental element. 

Williams comes out the other door. Mind you, the facts of Williams are pretty bad. She’s a contract environmental consultant for the Long Beach School District, helping with the development and environmental compliance with a school construction site, in which she discovered a contractor was dumping materials contaminated with arsenic. After Williams came down with arsenic poisoning, the District cut off her contract. Williams and her company sued for retaliation and for causing the poisoning. The District counterclaimed, arguing that Williams had an obligation to cover both defense costs and any judgment under an indemnification provision in her contract. Williams moved to strike the claim under the anti-SLAPP statute.

Unlike C.W. Howe and Wong, however, the Williams court found the analysis in Lennar to be persuasive, because without her underlying claim, the indemnification claim would have “no basis.” But the court hedges a little and also finds that even if the case did not arise from Williamslawsuit, it arose from Williams’ unwillingness to fund the District’s lawsuit. According to the Court, a refusal to fund the defense of ones own litigation—and the defense of a co-plaintiff’s claims arising from the same factsis conduct in furtherance of the litigation” under Code of Civil Procedure § 425.16(e)(4). And since the litigation is about arsenic contamination at a school site, the Court finds that it was a matter of public interest.

Moreover, since the indemnification agreement—requiring Williams to pay for the defense and any judgment arising from her own lawsuitwas unconscionable, the district had no probability of prevailing.

* * *

This feels like another one where bad facts make bad law. C.W. Howe and Wong pretty clearly have the better side of the Lannar argument. If an indemnity

“arises from” the litigation to be indemnified, every insurance coverage dispute is a SLAPP. 

So far as the (e)(4) issue goes, the cases are clear that funding litigation can be “in furtherance.” But refusing to advance or indemnify under a commercial indemnification contract doesn’t seem very expressive. Do corporations really have a first amendment right not to advance litigation expenses in D&O claims? The public interest analysis here also seems a little short shrift and inconsistent with the structure set up in the Supreme Court's FilmOn analysis. Is the expression at issue about arsenic contamination in public schools? Or about whether Williams needed to fund the Districts defense in such a litigation? 

Mind you, the Court is certainly right that the indemnification provision in Williams’ contract is unenforceable, for any number of reasons—unconscionability, public policy, illegality, etc. But that doesn’t necessarily make the District’s cross-claim a SLAPP.

The Jurisprudence of Signification

Wood v. Superior Court , No. A168463 (D1d2 Mar. 14, 2024). Yes. You can change your legal name to Candi Bimbo Doll if you want to. See Cod...