A Default Needs a Number. No Exceptions.

Sass v. Cohen, No. S255262 (Cal. Dec. 24, 2020)

Section 580 of the Code of Civil Procedure limits a default judgment to the amount stated in the complaint. A prior Court of Appeal case—Cassel v. Sullivan, Roche & Johnson, 76 Cal. App. 4th 1157 (1999)—made an exception for cases seeking an accounting because the defendant purportedly already has enough information to calculate its exposure. About two years ago, the Court of Appeal here disagreed with Cassel and took § 580 for its face value.

Given the split, the Supreme Court took review. It agrees with the Court of Appeal. Section 580 limits a default judgment to the amount stated in the complaint. It does not limit a default judgment to some amount that the defendant could figure out, so the fact that a defendant might theoretically have notice isn’t enough.

Court of Appeal affirmed.

Service Clock Runs if Nobody Is Stopping You

California ex rel. Edelweiss Fund, LLC v. JP Morgan Chase & Co., No. A158728 (D1d4 Dec. 22, 2020)

Code of Civil Procedure § 583.210 requires the plaintiff to serve a defendant within three years of filing. This, however is a California False Claims Act case, where the complaint stays sealed for at least 60 days while the AG or a local prosecutor decides to intervene. See Gov. Code § 12652(c)(8)(D). Since the point of sealing is to avoid tipping off the defendant, service of process is not permitted until the complaint is unsealed. Gov. Code § 12652(c)(2).

The AG got a number of extensions (which are permitted) and ultimately declined to intervene about 15 months after the complaint was filed. Unusually, Plaintiff then sought to extend the sealing for another nine months, ostensibly so it could reach out to other local prosecutors to see if they wanted to get involved. And then it extended the extension. And then Plaintiff just let the case sit without seeking an order unsealing for another year. 

Finally, almost four years after filing, Plaintiff asked the court to unseal the case. But it did so in a CMC statement, not by filing a motion. This exacerbated the problem because San Francisco being a master calendar court, the CMC statement went to a different department than the department responsible for unsealing. After that was finally worked out, the complaint was finally unsealed and Plaintiff started serving defendants—nearly four and a half years after the complaint was filed.

Defendants moved to dismiss under § 583.210, and the trial court agreed. The Court of Appeal affirms. The time for service is tolled during any period service is “impossible, impracticable, or futile due to causes beyond the plaintiff’s control.” § 583.240(d). That merited tolling during the window up till when the AG declined to join because service before that is prohibited by statute. 

After that, however, the ongoing sealing of the complaint was under Plaintiff’s control. Plaintiff could have asked the court to unseal—and the court would have agreed—any time after the AG declined to intervene. The fact that it would have taken a motion to lift the sealing does not change that. And since without that tolling, Plaintiff is past three years, the complaint was properly dismissed.

Affirmed.

Making Sense of Anti-SLAPP Sanctions Procedure

Changsa Metro Grp. Co., Ltd. v. Xufeng, No. E073322 (D4d2 Nov. 3, 2020)

A defendant who files a frivolous anti-SLAPP motion is subject to an award of plaintiff’s costs and fees “pursuant to Section 128.5.” Code Civ. Proc. § 425.16(c)(1). The question here is how much of the procedure for sanctions motions set out in § 128.5 applies to a request for sanctions for a frivolous anti-SLAPP motion. In particular, (1) can sanctions under § 425.16(c)(1) be requested in an opposition to an anti-SLAPP motion; and (2) does 21-day the safe harbor provision in § 128.5(f) apply to § 425.16(c)(1) sanctions?

The Court of Appeal here explains, at some length, the various internal inconsistencies within §128.5(a), (c), and (f). In particular, (f) seems to require a finding of frivolity before a sanction can be entered, but also requires the service of a separate motion 21 days before it is filed, with a “safe harbor” to withdraw the offending document during that window. But then (c) suggests that a sanctions demand could be made in an opposition to a motion, which can’t really be reconciled with the separate motion/21 day safe harbor requirement in (f). After examining the legislative history, the court finds that the requirements of (f) should apply whenever practicable, but cannot to circumstances where they would defeat the essential function of the statute.

The upshot of that is that the § 128.5(f) procedures can’t apply to § 425.16(c)(1). An anti-SLAPP motion is supposed to be heard within 30 days of service. But if the motion is frivolous, there’s no practical way the plaintiff could prepare and serve (but not file) a § 128.5(f) motion within that schedule, while also permitting the defendant the 21-day window to withdraw the motion. The Court grants that various continuances could make it technically possible, but they would put a great deal of burden on the parties and the trial judge to deal with the various ex partes needed to handle all that scheduling.

The Court thus concludes that “subdivision (f) does not work with the anti-SLAPP statute.” It follows that a request for §425.16(c)(1) sanctions can be made in an anti-SLAPP opposition brief and that a 21-day safe harbor is not required. So long as the moving defendant has an opportunity to be heard, that procedure is consistent with § 128.5(a) and (c).

Affirmed.

Even Deference to Arbitration Can’t Save a Void Covenant

Brown v. TGS Mgm’t Co., LLC, No. G058323 (D4d3 Nov. 12, 2020)

Arbitration rulings are generally subject to subject to very limited review by courts. One such ground is that the “arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.” Code Civ. Proc. § 1286.2(a)(4). And, as a gloss on that standard, courts will not confirm arbitral awards that are inconsistent with certain statutory rights or legislative expressions of public policy. 

One such public policy is the policy protecting an employee’s right to work in his chose profession. That is embodied by Business and Professions Code § 16600, which invalidates many post-employment restrictive covenants. Here, Plaintiff sought declaratory relief invalidating a number of post-employment anti-competitive covenants in his employment contract. In particular, Plaintiff sought to invalidate certain confidentiality obligations that were so broad as to “operate as a de facto noncompete provision” that would bar Plaintiff “in perpetuity from doing any work in” his chosen field. 

The Arbitrator, however, declined to award declaratory relief. He found the challenge not to be “ripe” because Plaintiff had not yet gone to work for a competitor. And because the evidence showed Plaintiff did, in fact take some confidential material upon his departure, the Arbitrator also denied relief based on unclean hands. 

But, as the Court of Appeal explains, those reasons aren’t good enough. An employee subject to invalid restrictive covenants has the right, under § 16600, to make a facial challenge the covenants are invalid as a matter of law. He needs not violate the covenants to show a ripe controversy. Nor do the factual particulars do not save the enforceability of a facially void provision. The Arbitrator thus exceeded his power by declining to award declaratory relief.

The Arbitrator also ruled that Plaintiff forfeited some deferred compensation due to his violation of the confidentiality provisions. The Employer, for its part, argues that the forfeiture was due to violation of different provisions permitting a retroactive for-cause termination, which provisions don’t implicate § 16600. The Court of Appeal, however, notes that the award specifically referenced the confidentiality breaches and thus vacates the award on that ground too. But on remand, Employer can have an opportunity prove that the forfeiture is justified by the alternative grounds, and Plaintiff can argue that the forfeiture is an invalid form of liquidated damages. 

Reversed.

How Many Contempts?

Moore v. Superior Court, No. G058609 (D4d3 Nov. 11, 2020)

A trustee’s Attorney in a probate case got hit with a civil contempt judgment for misconduct during a settlement conference. Allegedly, he was rude and abusive to the other parties and the settlement officer, he accused opposing counsel of lying without affording any explanation. He refused to discuss settlement. And when the officer threatened to go to the judge, Attorney objected on the grounds that the settlement proceedings were confidential. The trial court found him guilty on these four counts and fined him $900 per violation. It also ordered him to pay the opposing party’s fees for the contempt litigation under Code of Civil Procedure § 1218(a).

An interesting side point—a contempt judgment is both final and nonappealable. See Code Civ. Proc. §§ 904.1(a)(1); 1222. So the judgment gets reviewed though a writ of review, which is not much used in other contexts. 

Attorney raises a number of grounds, but only one gets traction—the unit of prosecution. Attorney says all four alleged contempts arise from a single course of conduct during a fifteen minute settlement conference. Relying on Penal Code § 654, Attorney argues that fining him four times punishes him multiple times for the same act. The Court of Appeal agrees. Although the unit of offense rules are pretty fuzzy, contempt cases seem to limit multiple charges of contempt to separate, discreet acts. When, like here, there’s only one core incident, there’s only one punishable offense. So the Court of Appeal knocks the four counts down to one.

It also strikes the attorneys’ fees. Section 1218(a) permits a fee award for contempts where the contempt consists of violating a court order. That’s not the issue here. Attorney might have earned the contempt by being rude and disrespectful, but he didn’t violate any court order. So a fee award under § 1218(a) was not authorized.

Reversed in part.

The Limits of a Pro Hac

Big Lots Stores, Inc. v. Superior Court, No. D077486 (D4d1 Nov. 20, 2020)

Defendants in this employment case are primarily represented by lawyers from an Ohio firm who are admitted pro hac vice. On several occasions the Ohio lawyers also claimed to represent ten deponents—eight former employees and two current store managers—in the case, for whom they had never been authorized to represent pro hac. When the trial court got word of this, it revoked the Ohio lawyers’ pro hacs. Defendants took a writ.

The Court of Appeal splits the difference. It is true, the Court holds, that a pro hac permits an out of state lawyer to represent only a particular party in a particular case. In a slightly different context, Rule of Professional Conduct 4.2(a) says that a lawyer who represents a company also represents officers, directors, managing agents, and Rule 4.2(b) says that lawyer also represents other current employees whose admissions could be held against the company. But that didn’t apply to former employees. Nor did it apply to current store managers, who could not have made binding admissions given the factual particulars of the case. Thus the Ohio lawyers were not authorized to represent the witnesses.

But that said, the revocation of the pro hacs—an effective disqualification—was too drastic a remedy that deprived Defendants of their choice of counsel. No doubt, the Ohio lawyers misinterpreted the pro hac orders and the relevant rules. But the mistakes were innocent. So a DQ was not warranted.

Writ granted.

From the Dudes Who Brought You San Diegans for Open Goverment...

Spotlight on Coastal Corruption v. Kinsey, No. D074673 (D4d1 Nov. 24, 2020)

This is a private action seeking civil penalties for violations of statutes requiring members of the Coastal Commission to disclose any ex parte communications they might have that bear on matters before them for decision. Plaintiffs are an entirely lawyer-driven outfit that has no actual business before the CCC—they just want a scalp and attorneys’ fees. Ultimately, that’s what they got. Although the trial court found that the Plaintiffs only proved a tiny fraction of the alleged violations, it fined the five Commissioners between $2,600 and $30,300 each and awarded Plaintiffs about $1 million in attorneys’ fees.

There’s an issue, however, with standing. Two of the three counts of the complaint sought direct enforcement of the statutes containing ex parte prohibitions. These statutes, however, do not include any private rights of action. 

Plaintiffs claim “public interest” standing. I.e., that they can sue to enforce statutes that do not contain a private right of action. There is a public interest standing doctrine that applies to claims for a writ of mandate. But notwithstanding some labeling in Plaintiffs’ complaint and prayer, they are not actually seeking a writ. They are not trying to compel the CCC or its commissioners to abide by some non-discretionary duty. They are, instead, trying to get fines assessed for past conduct. That is not the province of mandate. 

Beyond that, even under the relatively broad standing rules that apply in state court, there’s no generalized free-floating grant of standing for anyone who claims to be acting the public interest. Plaintiffs try to warp a rule that says trial courts have discretion to deny public interest standing (in mandamus cases) to suggest they they have the discretion to permit public interest standing in any kind of case. But that’s not what the law says.

There is statutory standing, however, for private citizens to pursue claims for certain civil penalties under the Coastal Act. (An enforcement fund keeps the fines, but Plaintiffs can get attorneys’ fees.) Plaintiffs’ third claim alleges just such claims. As the Court of Appeal sees it, however, the problem is that the provisions for which standing is conveyed are addressed to development violations. They don’t actually provide penalties against the commissioners for violating the ex parte prohibitions. Those violations are addressed by a separate statute, which apparently lacks a private right of action. So this claim gets reversed too.

Reversed.

Still One Strike Per Side

Prescription Opioid Cases, No. B302241 (D2d3 Dec. 1, 2020)

This case deals with the exercise of peremptory challenges under Code of Civil Procedure § 170.6 in Judicial Council Coordination Proceedings under § 404, et seq.

I don’t want to get into the full ins and outs of JCCP procedure here, but the key thing to understand is that there are two important judicial actors in a JCCP case—the “coordination motion judge” and the “coordination trial judge.” The motion judge is the judge who decides, at the outset, whether cases should be coordinated and, on an ongoing basis, whether new cases should get added to the coordination proceedings. The trial judge, on the other hand, is the judge who runs the cases once they are coordinated. 

Here, the original motion judge was in OC Superior. Plaintiffs struck him under § 170.6, resulting in the appointment of a different OC Superior judge as the motion judge. Then, after the AG filed a new case in LA Superior, the motion judge ordered that case coordinated and sent it to an LA Superior judge who was designated as the coordination trial judge. Plaintiffs tried to strike him too. But because § 170.6 only permits one strike per “side,” the trial judge denied the strike and kept the case. Plaintiffs took a writ.

Section 170.6 permits only one strike per “side.” The Legislature, in § 404.7, specifically authorized the Judicial Council to write Rules of Court to deal with § 170.6 strikes in JCCP cases. Rule of Court 3.516 thus further explains that in a JCCP, a “side” is, writ large, plaintiffs or defendants as a group. This rule generally prevents added on parties from exercising new strikes if an existing party on their side already exercised one. 

Plaintiffs argue, however, that a “coordination proceeding,” as defined by the Rules of Court, is somehow a separate action or that § 404.7 abrogates the limit to one strike per side. But the nothing in the Rules of Court is contrary to the one strike per side rule. And indeed, Rule 3.516 limited the ability of new parties to strike judges in JCCP proceedings. It would not make any sense to read the Rules of Court as abrogating the general one strike per side rule in their silence.

Writ denied.