Friday, February 19, 2021

This Is Not How You Get to Arbitration

Garcia v. Haralambos Bev. Co., No. B296923 (D2d5 Jan 4, 2020)  

At the time this employment class action filed, Defendant knew that it had a policy requiring employees to sign arbitration agreements, we well as a checklist indicating that the individual Plaintiffs had so signed, but did not believe it had the signed agreement itself. Litigation proceeded apace, including a couple CMCs, some discovery, some discovery disputes. 

About two years into the case, Defendant—which claimed to have located a signed arbitration agreement—moved to compel. But the trial court found, and the Court of Appeal agrees, that Defendant waited too long. Moreover, Defendant participated in all kinds of litigation activity that is inconsistent with a right to arbitrate. That activity continued even after the signed agreement had been located. So the trial court was correct to determine that Defendant waived any right to arbitrate.

Affirmed.

Thursday, February 18, 2021

Armendariz Applies to 1099s

Ali v. Daylight Transp., LLC, No. A159104 (D1d2 Dec. 31, 2020)


The California Supreme Court’s decision in Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83, 115 (2000), provides the rule for whether an arbitration clause in an employment agreement is unenforceable because of unconscionability. There’s a dispute here, however, about whether Plaintiff is an employee or an independent contractor. Indeed, that alleged misclassification is the rub of the whole case. 

But the Court of Appeal holds that it doesn’t matter. Regardless of Plaintiff’s status, the disparate degrees of bargaining power that animate Armendariz apply equally to the independent contractor relationship. 

Applying those rules, the arbitration agreement was unconscionable.

It had procedural unconscionability because it was adhesive and because it adopted a set of arbitration rules (AAA Commercial) that are potentially substantively unconscionable in employment cases, without giving Plaintiff an copy of the rules.

And it was substantively unconscionable because (1) the aforementioned rules require the employee/plaintiff to split the arbitrator’s fee, which Armendariz says isn’t ok; (2) the agreement shortened the statute of limitations to 120 days, down from the three years that otherwise would apply to plaintiff’s claims; and (3) the agreement carved out the ability of the employer, but not the plaintiff, to go to court to seek injunctive relief. 

Affirmed.

Wednesday, February 17, 2021

Timing and Fees on Default

Vincent v. Sonkey, No. B293251 (D2d6 Dec. 29, 2020) 

Plaintiff got a default judgment for $123k. Although the underlying contact had a fee provision, Plaintiff didn’t request fees as part of the default. Defendant moved for relief from default, which was granted, but then reversed on reconsideration after it was shown that Defendant’s declaration not entirely candid. 

Plaintiff then filed a motion for attorneys’ fees. Relying on the rule that attorneys’ fees need to be requested with, and awarded in, a default judgment, the trial court denied the motion.

The Court of Appeal agrees, halfway. The fees for work done prior to the default judgment needed to be addressed in the default judgment. But for period during which Defendant was relieved from the default, this was a real live contested case, for which the prevailing party was entitled to fees under the parties’ contract. And since there was no way for Plaintiff to seek those fees in her original motion for default judgment, it would be an unfair forfeiture to preclude her from recovering them after they were incurred.

Reversed in part.

Doxing an Opponent in Litigation Is Not Immunized by Civil Code § 47(b)

Dziubla v. Piazza, No. D076183 (D4d1 Dec. 29, 2020)

A guy who wanted to expand his gun range into some kind of firearms theme park borrowed some money to do so. That deal soured and ended up in litigation in Nevada. Some associates of Gun Guy—claiming to be private investigators—started creeping around the home of Lender. Gun Guy then published a manifesto, which he put on his website and emailed to his 200,000 gun-loving followers. The manifesto solicited funds to defray Gun Guy’s legal bills said lots of bad stuff about Lenders and their litigation. But it also doxed them—published their home address along with pictures of them and their residence.

Lenders sue in California. Gun Guy files an anti-SLAPP motion to the claims aimed at the manifesto. There’s not a lot of dispute that the manifesto was adequately connected to the Nevada litigation to be “protected activity” under Code of Civil Procedure § 425.16(e)(1). (Lenders also make a Flatley illegality argument. But we know that’s doomed, right?

So the crux of the issue is the second prong.

To be sure, litigation-adjacent speech that gets you into (e)(1) is also almost always also protected on the merits by the Civil Code § 47(b) litigation privilege. And that’s true for most of the manifesto. For which the motion was properly granted. But not the doxing. 

As the Court sees it, “[t]here was simply no good reason to include [Lender’s] home address, images of his house and a close-up picture of his face in a communication aimed at explaining the status of ongoing litigation and soliciting financial support.” Said differently, the doxing lacked a sufficient nexus to the litigation to merit protection under § 47(b). So on remand, the trial court needs to apply the Baral v. Schnitt analysis and excise out the parts of the claim that arise from protected activity, but permit the part of the case based on doxing to proceed.

Affirmed in part.

Friday, February 12, 2021

Court Can't Improvise on SJ Ruling.

Lubke v. Automobile Club of S. Cal., No. B302782 (D2d7 Jan 6, 2021)

Plaintiff alleges that the Automobile Club of Southern California was negligent when it failed to send a tow truck he had summoned, leading to his being hit by a car while standing on the shoulder of a freeway. The Club moved for summary judgment, arguing that Plaintiff’s junky responses to written discovery established that he couldn’t show causation. In opposition, Plaintiff argued and submitted some evidence to the contrary. 

The trial court assumed that Plaintiff could fix the discovery to create a fact issue. But it granted summary judgment anyway, finding that Plaintiff could not establish that he and the Club had the kind of special relationship that would give rise to a duty that could be breached by non-feasance. Although Plaintiff argued at the hearing that such a duty could be found or implied in the his contract with the Club, the court rejected that argument because, for among other reasons, the contract wasn’t in the record.

That was error, both procedural and substantive. Procedurally, the trial court should not have reached out and granted summary judgment on some issue not raised in the moving papers. That’s not prohibited per se, but before doing so, the court needed to give Plaintiff notice and an opportunity to respond, including with evidence. Failing to due so is a due process violation.

And as to substance, the law, as reflected in the Restatement of Torts, does recognize that a duty of care can arise from non-feasance when an actor undertakes contractually to render services to another. The scope of that duty will depends on, among other things, the terms of the parties’ contract. So by deciding the issue without letting Plaintiff submit the contract, the trial court potentially deprived plaintiff of a meritorious argument.

Reversed.

Alter Egos on the Contract

347 Grp., Inc. v. Philip Hawkins Architect, Inc., No. C091273 (D3 Dec. 7, 2020)

Plaintiff sued Company and its Principal for breach of contract. Company defaulted. Plaintiff dropped its contact claim against Principal, but proceeded against him on an alter ego theory. But Principal won a defense ruling on that at trial. He then moved for attorneys fees under Civil Code § 1717, because the Plaintiff/Company contract had an attorney fee clause. The trial court denied the motion, finding that the dismissal of the contract clause meant that the case was no longer “on the contract” and thus took the issue out of § 1717.

But that’s not right. Plaintiff was trying to enforce the contract against the principal, using the alter ego doctrine to bind it to Company’s liability. That’s on the contract. And basic estoppel principles say that if a party’s claim is based on binding a non-signatory to a contract under a theory like like alter ego, a prevailing non-signatory gets to raise the contract’s attorney fee provision against the party. 

Reversed.

Trade Secrets Disclosures

Coast Hematology Oncology Assocs. Med. Grp., Inc. v, Long Beach Mem. Med. Cntr., No. B297984 (D2d8 Dec. 15, 2020)

Code of Civil Procedure § 2019.210 requires a plaintiff alleging misappropriation of trade secrets to identify the trade secrets at issue with reasonable particularity. As the Court explains, it is meant to address a problem intrinsic to trade secret litigation. 

Like all intellectual property, trade secrets are intangible. But unlike the other common forms of IP—patents, copyrights, trademarks—the nature of a trade secret is almost never defined in any objective way prior to litigation. Which motivates plaintiffs bringing trade secrets claims to define their secrets expansively. As Justice Wiley puts it: “When you define the proposed boundaries of your own property, and when exclusion is valuable, and when litigation is intense, human nature prompts us to ask for more, not less, and to ask for it in a vague and all-encompassing way.”

So to push back on that temptation, § 2019.210 requires a plaintiff to describe its trade secret with enough particularity to separate it “from matters of general knowledge in the trade or of special knowledge of those persons who are skilled in the trade, and to permit the defendant to ascertain at least the boundaries within which the secret lies.’” This is supposed to happen before discovery. That’s because “[e]xperience has shown that it is easy to allege theft of trade secrets with vagueness, then take discovery into the defendants’ files, and then cleverly specify whatever happens to be there as having been trade secrets stolen from plaintiff.”

In this case, the defendant, a medical practice, allegedly used trade secrets that it gained access to while conducting diligence as part of an unconsummated effort to purchase Plaintiff, also a medical practice. By the time summary judgment came around, the case turned on two alleged trade secrets. One of them dealt with certain codes used for medical billing. The other addressed Plaintiff’s evaluation of its doctors’ productivity using an industry standard scale. The trial court granted SJ on both. The Court of Appeal agrees as to the first, but not the second.

On the codes, Plaintiff’s problem was that it never disclosed them in its § 2019.210 specification. Instead, it referenced them in a single sentence in its summary judgment opposition, where it purported to seek leave to amend its disclosure. That, however, isn’t good enough. First, summary judgment opposition is too late. Were there a reason to amend, it needed to be offered before summary judgment briefing. As the Court puts it, “[w]hat the plaintiff cannot do is to wait until the defense has loosed its arrow at the bullseye, then move the target, and finally claim victory when the defense’s arrow misses the mark.” Second, a one sentence reference in an SJ opposition is not a proper manner to seek amendment. “One may not make an important motion by adding an indefinite sentence to the middle of a summary judgment opposition.” If it wanted to amend, it should have filed an appropriate motion.

One the second secret, however, the Court reverses. It is true that the productivity scale was based on a standardized system. But that doesn’t make each doctor’s productivity score a matter of public knowledge. That information has value in recruiting, and if reasonable means are taken to keep it secret, it could satisfy the definition of a trade secret. That’s particularly the case given that the secret purportedly used was firm-wide productivity data for doctors over two years. Although defendant makes a number of arguments otherwise, the Court makes short shrift in rejecting them.

Affirmed in part.

Discovery and Privileges

Bd. of Registered Nursing v. Superior Court, No. D077440 (D4d1 Jan. 15, 2021)

This is writ taken from some discovery rulings in a big public nuisance litigation that a bunch of DAs brought against some pharmaceutical companies over their marketing of opioids. The defendants subpoenaed several government agencies for data on prescriptions, opioid deaths, and physician and nurse discipline. After a lot of ins and outs, the trial court eventually granted a series of motions to compel. The agencies took a writ on several issues.

First, two of the agencies raise timeliness issues. Code of Civil Procedure § 2025.480(b) requires a motion to compel the enforcement of a third-party subpoena to be filed within 60 days of “the completion of the record of the deposition[.] That applies even to document-only subpoenas because, under the structure of the Discovery Act, all third-party discovery is conducted by deposition, even if there’s not really an actual deposition to be taken. And under a line of prior cases, the Court of Appeal has held that the 60-day clock to file a motion to compel on a documents only subpoena runs from date on which objections are served. See, e.g., Unzipped Apparel, LLC v. Bader, 156 Cal. App. 4th 123, 129 (2007); Rutledge v. Hewlett-Packard Co., 238 Cal. App. 4th 1164, 1192 (2015).

The Defendants argue, however, that this case is different than Unzipped or Rutledge because the Agencies didn’t respond with blanket objections. For some requests, they agreed to produce documents. Defendants say that for those, the clock should run from when the production is complete. But the Court of Appeal doesn’t agree.

As the Court sees it, non-party party discovery is a one-step deal. The recipient of a subpoena either makes the demanded production or it doesn’t. That the Agencies here engaged in a meet and confer process and eventually produced some documents was not enough to toll the deadline. So the 60 days runs from service of objections, regardless of whether there are any ongoing negotiations or productions after that. 

This all seems generally fine, if a technically imprecise and kind of impractical. First, to be technically catty, the court’s reasoning about different rules for non-party discovery has a mistaken premise. Although most of the cases under § 2025.280 address third party subpoenas, the statute is not specific to non-party discovery. It is, instead, generally addressed to motions to compel in connection with depositions. It’s just that all non-party discovery is by deposition, and when you can serve ordinary RFPs on a party, compelling document discovery in connection with a deposition is generally unnecessary. But what happens if, for instance, a party serves a notice of the deposition of a party-affiliated witness containing document demands? The party/witness objects to the demands. But the deposition gets rescheduled a couple times. Does that mean that the motion to compel might need to be filed before the actual deposition occurs? Hard to say. But safest course would be to assume it does.

On a more practical level, notwithstanding the Court’s read of the statutes, what happened here is the norm, at least in complicated cases. The recipient of a subpoena serves objections and doesn’t produce any documents on the compliance date. Then there’s a period of negotiation where the contours of the production get worked out. And then there’s a production. So, given the Court’s ruling that the 60 days starts on objections and runs the whole time, a subpoenaing party really needs to keep a tight watch on the clock.

Generally, one way to deal with that would be to get a stipulation to extend the period while the parties negotiate. In a footnote, the Court notes that such an agreement wasn’t struck here. It, however, rather unhelpfully “express[es] no opinion” on whether an agreement could extend the deadline. But given § 2016.030’s rule that the parties can modify any discovery procedure by stipulation, that really shouldn’t be an issue. 

Aside from the timing issue, there are a few other issues addressed in this writ. Some of the subpoenas sought prescription data that could contain the personal identifying information of individual physicians and surgeons. That implicates § 1985.3, which provides a procedure where consumers can get notice of the subpoena and an opportunity to object. The Court of Appeal finds that the trial court erred by ordering the production of the data without giving notice to the doctors.

But there’s a chicken and egg thing here that appears to go unnoticed. Defendants in the case likely don’t know who many of these doctors are. So how are they supposed to give them notice? There’s procedures for this when it comes to party discovery. For instance, in employment class actions, the absent members of the class can receive a notice giving them the right to opt out or object to the disclosure of their contact information. See Belaire-West Landscape, Inc. v. Superior Court, 149 Cal. App. 4th 554, 562 (2007); Alch v. Superior Court, 165 Cal. App. 4th 1412, 1416 (2008); Pioneer Elecs. (USA), Inc. v. Superior Court, 40 Cal. 4th 360, 366 (2007). But there, the defendant actually has the information. How is that supposed to work with a non-party? The notice ruling seems generally right, but the Court’s failure to explain how that is supposed to work practically is not very helpful.

Finally, the Court addresses the merits of the discoverability of three buckets of information—investigative files, prescription data, and coroner’s reports—finding that the trial court erred in ordering their disclosure. The opinion starts off by setting out legal standards for the various grounds for nondisclosure—there’s a mixture of irrelevance, burden, privacy, and privilege explanations—and then applies them to each category, although not with a very precise analysis. Generally, the overall determination is that the court went too far in granting the motions to compel.

On privilege, the Court makes one good point and one bad one. Ironically, they aren’t really reconcilable. But that seems to have been missed. 

The good point is that statutes that make government data confidential or limit its disclosure do not create discovery or evidentiary privileges unless they specific limit disclosure and use in litigation. That is because privileges in California are supposed to be strictly creatures of statute. See Evid. Code § 911. So, for instance, exceptions to the disclosure requirements in Public Records Act do not create grounds to refuse to produce evidence in litigation. 

But elsewhere, the court suggests that some of the information at issue might be subject to the deliberative process privilege. There is, however, no statute that creates such a privilege. Indeed, the Supreme Court has previously explained that the official information privilege in Evidence Code § 1040 “represents [t]he exclusive means by which a public entity may assert a claim of governmental  privilege based on the necessity for secrecy.” Shepherd v. Superior Court, 17 Cal. 3d 107, 123 (1976); see also Marylander v. Superior Court, 81 Cal. App. 4th 1119, 1128 (2000) (declining to recognize an absolute deliberative process privilege applicable to discovery). Notably, the Court’s discussion of the deliberative process privilege cites two cases. One of them—San Joaquin Cty. Local Agency Formation Commn v. Superior Court, 162 Cal. App. 4th 159, 172 (2008)—is a mandamus case challenging a quasi-legislative decision, effectively an appeal that is supposed to be decided on a limited record. The other—Times Mirror Co. v. Superior Court, 53 Cal. 3d 1325, 1339-1344 & fn.9 (1991)—is a PRA case. Neither fairly stands for the proposition that there is some non-statutory deliberative process privilege that generally applies to discovery in an ordinary civil case. 

Writ granted.

Thursday, February 11, 2021

General Application

Garcia v. KND Dev. 52, LLC, No. B301929 (D2d4 Dec. 15, 2020)

Son and Mom signed some documents in connection with Dad’s admission to two Hospitals. They contained arbitration clauses. After Dad died, Mom sued Hospitals for medmal as his successor in interest. Hospitals sought to compel arbitration. Although Dad was a non-signatory, it ran on the theory that Mom and Son were Dad’s agents. The trial court found that the record didn’t support that theory and denied the motion to compel.

Hospitals claim that the agency ruling discriminated against arbitration, and thus was preempted by the FAA under AT&T v. Concepcion. But the ruling was just an ordinary application of generally applicable state agency law, such as would be applied to any contract that purported to bind a non-signatory. The trial court did not apply some special rule tailor-made for arbitration. The ruling was thus consistent with the FAA.

Affirmed.

Wednesday, February 10, 2021

This Was a Terrible Strategy

Malek Media Grp. v. Axqg Corp., No. B. 299743 (D2d3 Dec. 16, 2020)

After losing an arbitration about the dissolution of a partnership, Loser did a deep Internet dive on the arbitrator’s background. It discovered that, many decades ago, the arbitrator was involved with a prominent gay rights organization. According to Loser, because the case purportedly involved sexual harassment by Loser, who is purportedly Catholic, and because gay rights proponents have some kind of purported relationship to #metoo or to hostility against the Catholic church, Arbitrator should have disclosed the relationship under Code of Civil Procedure § 1281.9(a). And then this failure to disclose is purportedly a basis to vacate the arbitration.

But potential arbitrators are only required to disclose facts that would cause a disinterested, objective observe to have doubts as to the arbitrator’s impartiality. It does not require disclosure of any fact that might concern a “partisan litigant emotionally involved in the controversy.” 

The Court finds Loser’s theory here to be ridiculous. (Or, more precisely, “strained and convoluted to say the least.”) The idea that the arbitrator’s involvement, decades ago, with an organization that supported a cause, which is arguably sympathetic with a different cause espoused by different organizations, whose views, if attributed to the arbitrator, might suggest some favoritism towards sexual harassment claimants or against Catholics, in a partnership dissolution case where Loser’s alleged sexual harassment was a minor and collateral issue and his Catholicism a nonissue is the kind of chain of crazy inferences that a rational disinterested observer would not draw. Were the disclosure standard to require otherwise, it would put a bullseye on every arbitrator for post-hoc allegation of inadequate disclosure by any losing party based on facts that could not possibly be even known to the arbitrator at the time of the disclosures.

Indeed, Loser’s argument is so far off the mark that the Court of Appeal awards sanctions for filing a frivolous appeal under Code of Civil Procedure § 907, which permits a sanction when any reasonable attorney would agree that the appeal is totally and completely without merit. Here, the Court finds Loser’s appeal to be “objectively and subjectively frivolous.” It was based on a series of dots, themselves largely unsupported by the evidence, that couldn’t be connected. 

It certainly did not help that Loser absurdly sought judicial notice of entire “the #MeToo” movement. Or that his whole theory was imbued with a deplorable bigotry. As the Court explains, the “Court of Appeal is not an appropriate forum to peddle far-fetched conspiracy theories, laced with sexism and homophobia, disguised as a legitimate appeal.”

Affirmed and sanctions awarded.

Sunday, February 7, 2021

Fees on a Contract

Waterwood Enters. v. City of Long Beach, No. B296830 (D2d1 Dec. 18, 2020)

Plaintiff in this breach of contract case won $45k in damages. The verdict was roughly of a prior Code of Civil Procedure § 998 offer made by Plaintiff. Relying on that fact, the trial court ruled that defendant, not plaintiff, was the prevailing party. It awarded defendant $170k in attorneys’ fees based on a fee-shifting clause in the contract. 

Section 1717 of the Civil Code addresses recovery under contracts that permit prevailing parties to recover attorneys’ fees. It defines prevailing party as “the party who recovered a greater relief in the action on the contract.” That definition governs regardless of any contrary definition in the contract. There are a few potential outcomes under §1717. When plaintiff or a defendant wins a simple unqualified win—either plaintiffs’ recovery of full damages or a defense verdict—that party prevails. But in any other scenario, the trial court has discretion to decide that one party, or the other, or neither, prevailed. 

Here the trial court made three mistakes. First, it ruled that defendant prevailed because the $45k plaintiff won was for part of damages that was basically uncontested by defendant. That, however, wasn’t supported by the record. The jury’s special verdict form provided an unallocated damages verdict. There was no way to know whether the damages were for the breach arguably conceded by defendant or for something else.

And in any event, the defendant’s “concession” was not a proper consideration. Section 1717(b)(2) specifically provides an avenue for a defendant to concede partial liability—it can tender the disputed amount. Short of that, a defendant is not entitled to credit for not fighting hard on a point during trial.

Finally, the trial court should not have compared the verdict to the § 998 offer. A comparison between what was won and “litigation objectives” is an appropriate consideration in deciding who prevailed. To make that assessment, the Supreme Court has said courts should look to, among other things, pleadings, trial briefs, and opening statements. But settlement offers should not play into that calculus.

It was thus error to determine that defendant prevailed. There was only one contract claim, and plaintiff was the only party that obtained relief. So on remand, the trial court should apply the proper standard to determine whether plaintiff was the prevailing party, or whether nobody was.

Reversed.

Monday, February 1, 2021

The State Doesn’t Arbitrate

Cal. ex rel. Aetna Health of Cal., Inc. v. Pain Mgm’t Specialist Med. Grp., No. B299025 (D2d6 Dec. 21, 2020)

I’ve written probably fifty posts on cases that explain that PAGA claims can’t be compelled to arbitration because, as quasi-qui tam proceedings, the real plaintiff is a state agency that never consented to arbitrate. Well, what’s true of quasi-qui tam cases is equally true of actual qui tam cases. In a False Claims Act case, the real plaintiff is the state, even if the AG has not decided to take over the litigation. So FCA claims aren’t arbitrable even if the relator and the defendant are parties to an agreement to arbitrate.

Affirmed.

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...