App. Div. Extravaganza

Wong v. Markarian, No. BV033189 (L.A. Super. App. Div. Jul. 29, 2022)

Arche v. Scallon, No. BV033632 (L.A. Super. App. Div. Aug. 1, 2022)

These are two decisions by the L.A. Superior Appellate Division in limited civil unlawful detainer cases. There isn’t anything of procedural significance to the substance of the opinions. That said, their publication is procedurally significant.

Having done bunch of pro bono UD cases over the course of the pandemic, several things have become clear: 

(1) UD law is both procedurally and substantively complicated. Like as hard as habeas or immigration. Procedurally, the statutory scheme is not the clearest, and everything is designed to work so fast that it’s often tough to get up to speed on how things work. And substantively, landlord tenant law is a jumbled mix of state statutory provisions (seemingly randomly strewn across the codes), (often badly drafted) county or locality ordinances, and common law rules.

(2) It’s gotten even more complicated during the pandemic. At any one time, there were federal, state, county, and city tenant protections. Each of these had its own specific and repeatedly amended eligibility requirements, limitations, and applicable dates. And an added layer of rental assistance law emerged about a year in.   

(3) A significant proportion of UD litigants are pro ses. Those who aren’t are often represented by attorneys working under pressing budgetary constraints, be they legal service organizations, or private landlord or tenant counsel. 

(4) There is very little case law on anything. Basic questions that must by their very nature, have come up all the time remain unanswered. To the extent there is anything, it’s often very old. 

I just tried a case where the issue was the rights of a principal landlord against a known, but potentially not expressly authorized, subtenant, in light of the state and LA City COVID protections and rental assistance rules. Our best case was from 1911. 

Or last year, the Supreme Court decided an important procedural question about motions to quash that touches on almost every case. In doing so, it resolved a split of authority that had been pending for seven years.

(5) There is an enormous volume of this litigation statewide. Like thousands of cases per year.

Which is all a long way of saying that to the extent UD cases get appealed, the courts deciding them, be they a local appellate division in a limited civil or the Court of Appeal in an unlimited, should try hard to publish more. I would be willing to lay odds that essentially any UD case that makes it to an appeal presents at least one legal or procedural issue that satisfies Rule 8.1105(c)’s publication criteria. 

So the fact that the L.A. App. Div. published two cases decided within a week—each addressing a difficult-to-parse local ordinance—is something to be commended.

Get thee to (Federal) Court

Wong v. Restoration Robotics, No. A161489 (D1d2 Apr. 28, 2022).

In Cyan, Inc. v. Beaver County Employees Retirement Fund, 138 S.Ct. 1061 (2018), the U.S. Supreme Court confirmed that claims brought under the federal Securities Act of 1933 can be brought in both state and federal court, and if brought in the former, are not removable. ’33 Act claims are the most common vehicle used for challenging disclosures made in connection with IPOs, so Bay Area courts—San Mateo Superior in particular—see a lot of them.

Companies reacted to Cyan by adding provisions to their articles of incorporation requiring that, notwithstanding Cyan, suits need to be brought in federal, not state, courts. Because a company’s articles are treated like a contract between it and its stockholders, these “federal forum provisions,” which the Court here calls FPP’s, are basically treated like contractual forum selection clauses, which are, in most instances, enforceable under California state law. And notably, in 2020, the Supreme Court of Delaware —where most of IPO’ing companies are incorporated—determined that FPP’s are an appropriate term to include in a corporation’s articles under Delaware state law. See Salzberg v. Sciabacucchi, 227 A.3d 102 (Del. 2020).

The trial court here initially denied a forum nonconveniens motion. But after Salzberg, it granted a renewed motion, finding that the FPP in the defendant’s charter was enforceable. Plaintiff appealed. But the Court of Appeal affirms, rejecting a grab bag of challenges under state law, the ’33 Act, and the commerce clause of the U.S. Constitution. That stuff is mostly outside the scope for me. But this case clearly stands for the proposition that when parties have a legit choice between a state and federal forum, they can enforcibly chose one or the other in a contract. Even a contract that's basically foisted on one of the parties such as a corporation’s articles.

Affirmed.

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 Court’s 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 Williams’ lawsuit, 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 facts—is 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 lawsuit—was 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 District’s 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.