Jurisdictional Mumbo Jumbo

Drink Tank Ventures LLC v. Real Soda in Real Bottles, Ltd., No. B298881 (D2d2 Nov. 11, 2021)

A and B are parties to a merger diligence NDA that does not result in a transaction. Later, A and B are competitively bidding on C. B wins and acquires C. A sues B for tortious interference with A’s prospective economic advantage with C. A's theory is that B breached the NDA in connection with buying C, and that B’s breach was the kind of independently wrongful conduct that can substantiate a claim for tortious interference with prospective advantage.

As a matter of substance, the Court here holds it is not. To be independently wrongful, some thing must be tortious on its own or otherwise violate some positive law like a statute or regulation. With limited exceptions that don’t apply here, a breach of contract is not tortious. So a breach of contract that interferes with someone else’s pre-contract economic expectancy is not sufficient to support a claim of tortious interference with prospective advantage. 

That all makes sense, and it clears up a somewhat open question. This comes up a lot because plaintiffs like to use this theory to turn what should be claim for consequential damages for breach of contract into a tort claim that is easier to prove with better remedies. Although there are some prior cases from which the rule can be gleaned, this case has a nice clean holding that “[b]ecause a bare breach of contract, without more, is not tortious, such a breach cannot constitute independently wrongful conduct capable of giving rise to the tort of intentional interference with a prospective economic advantage.”

But then there’s the procedure. The case was tried to a jury on the breach-of-contract-as-independent-wrong theory. The jury was instructed that, to satisfy the independent wrong element, it needed to find that B breached the NDA. The jury found that A proved that breach, along with the other elements, and awarded $350k to A. The first time Defendant raised the flaw in the theory was in a post-judgment JNOV. The trial court denied that and B appealed.

The court perceives a procedural quandary here in that everyone acquiesced in trying the case on the breach as wrong theory and instructing the jury on it. No doubt, a new trial motion can raise unpreserved or even invited legal error in jury instructions. See McCarty v. Cal. Dep’t of Transp., 164 Cal. App. 4th 955, 984 (2008). But nobody actually wants a new trial here because the choice is binary. If the theory is valid A wins. If not B wins. Can we even do that with a JNOV—a motion that is fundamentally directed to the adequacy of the evidence? Code Civ. Proc. § 629(a).

se

McCarty v. State of California Dep't of Transp., 164 Cal. App. 4th 955, 984 (2008)

And with that, we are in the wacky funhouse of California post-judgment procedure. 

There are, frankly, lots of ways to get to a reversal here.

#1. Generally where a jury “instruction is erroneous on material elements of the law, the giving of the instruction is deemed excepted to, even in the absence of objection.” Manguso v. Oceanside Unified Sch. Dist., 153 Cal. App. 3d 574, 581–82 (1984); see also Code Civ. Proc. § 647. The Court cites cases here that suggest forfeiture is possible. But they generally entail invited error, estoppel, or something more than mere failure to object, or instructional errors that do not rise to the level of failure to include an essential element. So, if the instruction was erroneous and prejudicial, it seemingly can be attacked in a direct appeal of the judgment, so the post-trial motion question is not relevant. This seems like the most straightforward approach. 

#2. There is also, however, a whole other statute that expressly deals with a post-judgment claim that the judgment cant be supported by a special verdict—Code of Civil Procedure § 663(2). That statute says, in relevant part, that a judgment “based upon . . . the special verdict of the jury, may, upon motion of the  a party aggrieved, be set aside and vacated  by the same court, and another and different judgment entered, for either of the following causes, materially affecting the substantial rights of the party and entitling the party to a different judgment: . . . (2) A judgment or decree not consistent with or not supported by the special verdict.” So a § 663(2) motion—which is admittedly somewhat obscure—was probably the most applicable way to attack the judgment prior to appeal. But that doesn’t seem to have occurred to anyone.

#3. There is also some authority to support the proposition that the “proper way to remedy [a] defective verdict was to grant [a] motion for JNOV on [the defectively defined] claim[.]” Saxena v. Goffney, 159 Cal. App. 4th 316, 329 (2008). But the fact that there’s authority for something in Calfiornia post-trial practice doesn’t mean that authority makes any sense, and I have a hunch that if I took the time trace back the citations in Sexena, it winds up being turtles all the way down. 

But the Court here does not even rely on that weak authority. It accepts the fact that failure to object to the instruction forfeited an appeal. And it dodges the JNOV issue. Indeed, the court rejects that idea that this is an issue of instructional error. It characterizes the error as the trial court’s erroneous legal decision that the breach/wrong theory was a valid way to prove the interference claim. (This seems a little too formalistic, given that the way the error was manifest was in the trial court’s telling the jury it could find a breach of contract as way to establish the independent wrong element.)

Then, to get out of the cage it built for itself, Court of Appeal holds that the trial court did not have subject matter jurisdiction to enter judgment for A when the element of independently wrongful conduct hadn’t been tried or proven. And since subject matter can’t be waived, the court can reach the issue and vacate the judgment. 

That, as Malcolm Gladwell might say, is bananas. Taken at face value, it is a claim that the trial court doesn’t have subject matter jurisdiction to be wrong on the law. But subject matter jurisdiction in California state court is not about what judgment a court can enter. Otherwise, the court could have subject matter jurisdiction throughout the whole case but then lose it by making a legal error. So every wrong judgment would be a void judgment, which gives rise to all kinds of downstream problems, like leaving judgments vulnerable to collateral attack. That does not make any sense. 

Part of the issue is terminology. As the Supreme Court has noted, “the term ‘jurisdiction’ . . . carries two distinct meanings[.]” People v. Chavez, 4 Cal. 5th 771, 780 (2018). “One refers to ordinary acts in excess of jurisdiction. The other concerns so-called ‘fundamental’ jurisdiction, the quality that dictates whether a court has any power at all to resolve a case.” “Fundamental jurisdiction is, at its core, authority over both the subject matter and the parties.” Subject matter jurisdiction is about what kinds of cases a court can even hear.* State court limits on subject matter jurisdiction are rare because “California’s superior courts are courts of general jurisdiction, which means they are generally empowered to resolve the legal disputes that are brought to them.”  Quigley v. Garden Valley Fire Prot. Dist., 7 Cal. 5th 798, 808 (2019). Generally, the limits on state court subject matter jurisdiction occur when some body other than state courts is authorized to adjudicate a dispute. Id. at 808-09 (using as examples the Public Utilities Commission and the State Bar).

But “[e]ven when there's no question that a court's action is well within the scope of its fundamental jurisdiction, the court may still exceed constraints placed on it by statutes, the constitution, or common law. When a trial court fails to act within the manner prescribed by such sources of law, it is said to have taken an ordinary act in excess of jurisdiction.” Chavez, 4 Cal. 5th at 780.

Here, there is no question that the trial court had the authority to adjudicate a claim over whether B tortiously interfered with A’s prospective economic advantage. The Court even straight out comes out and says that. So how it could it fundamentally lose jurisdiction by making an erroneous legal ruling about one of the elements of the claim?

Notably, the cases cited by the court, taken together or apart, do not stand for the proposition that a court, vested with jurisdiction to hear a kind of case, nonetheless lacked fundamental subject matter jurisdiction to enter a judgment because it mae a legal error about the elements of a common law tort claim. 

In People ex rel. Allstate Ins. Co. v. Weitzman, 107 Cal. App. 4th 534, 546 (2003), a statute specifically afforded superior court jurisdiction only over claims brought by certain types of qui tam plaintiffs. That appears to be excess of jurisdiction type of jurisdiction, and the only reference to subject matter jurisdiction is to the trial court ruling being overturned.

In Vaughn v. Condon, 52 Cal. App. 713, 716 (1921), the court held that a court could not afford garnishment against a public entity because that would exceed the scope of a statute permitting garnishment. There’s admittedly some discussion of jurisdiction in an Alabama case that is quoted for the point that the argument could not be forfeited. But Vaughn is an old case, and it likely doesnt square with the Supreme Courts more recent discussion of fundamental jurisdiction in Quigley, which similarly addresses statutory limits on remedies against public defendants.

A third case,  Dollenmayer v. Pryor, 150 Cal. 1, 4 (1906), is the kind of case where limits on subject matter jursidiction have been found—the question was whether the state surveyor general had authority to hear certain kinds of claims.

Finally, People v. Vasilyan, 174 Cal. App. 4th 443, 450 (2009) permitted a convicted defendant to collaterally attack his conviction, because the statute he was convicted of violating was later adjudged not to have defined a criminal offense. That could only occur if the confiction was void, which required a defect in fundamental jurisdiction. 

I’ll concede that Vasilyan is probably the closest case on point. But the analyis is pretty strained. The court appears to be going out of its way to get to a remedy, because, although being convicted for a noncrime is pretty unfair, and it had pretty unfair collateral effects on the defendant, the factual particularities of the case made relief by writ of habeas corpus or coram nobis unavailble. 

Also, the opinion relies on statutory constraints on subject matter jurisidiction in the criminal context that don’t exist with regards to the superior courts’ jurisidciton over common law claims.

Finally, there’s a pretty strong dissent that makes the points about the different kinds of jurisdiction that I reference above. 

But even if Vasilyan is right, and even if it could be ported into the civil context, it takes another big step to get to the restult here. This case would be the equivalent of saying that a criminal court lacks subject matter jurisdiction—and thus that its convictions are void—if it erroenously interprets a statute and instructs that an element of a crime was less strict than the appellate court ultimately found it to be. (For instance, if it said that a willful mens rea didn’t require a defendant’s knowlege that his conduct was illegal, even if a higher court later found that it did. See, e.g., Ratzlaf v. United States, 510 U.S. 135, 141 (1994).) A jurisdictional rule like that would have enormous and destabalizing effects on the finality of judgments.

Don’t get me wrong. Post-jugment remedies in California are a wreck that demands reform. I spend a non-minisclue amount of time tring to explain how they work to out-of-state lawyers at my firm. When I do, they react like I am explaining Joseph K’s appellate options. Our Legislature should replace the various overlapping and confusing statutory remedies, each of confusing scope and with its own procedural mousetraps, with a single raitional procedural vehicle to challenge a judgment after it is entered but prior to appeal. If someone wants, I’ll even write the statute. But injecting a layer of jurisdictional mumbo-jumbo into the process is not going to fix anything. 

Reversed. 

*Due to the interpretation of Article III’s case or controversy requirement as cabining the jurisdiction of the federal courts, standing, ripeness, and mootness are treated as jurisdictional and sometimes as addressing subject matter jurisdiction in federal cases. See Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010); Bland v. Fessler, 88 F.3d 729, 732 n. 4 (9th Cir. 1996). But California does have a limitation akin to Article III, so it tends to treat these doctrines as prudential, not jurisdictional. Wilson & Wilson v. City Council of Redwood City, 191 Cal. App. 4th 1559, 1575 n.8 (2011).

cil, 940 F.2d 1239, 1242 (9th Cir. 1991)

The proper way to remedy the defective verdict was to grant Goffney's motion for JNOV on plaintiffs' battery claim, not to order a new trial

Saxena v. Goffney, 159 Cal. App. 4th 316, 329 (2008)

The Mind of a Jury

Guernsey v. City of Salinas, No. H043283 (D6 Dec. 17, 2018)

The Court of Appeal reverses and remands a defense verdict for one defendant because some jury instructions suggested a government immunity that wasn’t really in play. 

To show prejudice, plaintiff submitted a bunch of juror affidavits, which suggested that the jury relied on the instruction in answering “no” on two liability questions and that they “agreed” the instruction precluded liability. The Court holds that those statements are inadmissible under Evidence Code § 1150, which bars evidence of jurors’ subjective mental impressions. 

In doing so, it rejects a statement in dicta in Harb v. City of Bakersfield, 233 Cal. App. 4th 606 (2015), which suggested in passing that evidence of a jury’s “verbal agreement” was objective enough to admit under § 1150. As the Court explains, the statements of jurors during deliberation are admissible under § 1150 only when the statements themselves are juror misconduct. (E.g., an admission that the juror consulted an outside attorney for advice on the law.)  

The Court finds prejudice nonetheless. It finds persuasive (and admissible) the fact that the jury had made written annotations on its copy of the incorrect instruction, as well as on the verdict form. Moreover, some of the questions asked by the jury suggested confusion, and the evidence overall suggested that, if the jury weren’t confused about the immunity, it would have found the defendant liable.

Reversed.

Pick Three...

Eng v. Brown, No. D071773 (D4d1 Mar. 22, 2018)

Appellant in this case violated a rule of thumb that applies to appealing an adverse civil judgment in California: It does not matter how many times the trial court messed up, absent extraordinary circumstances, an appellant should pick, at most, the three best issues to raise on appeal and concentrate on them. If a reversal isn’t in the cards on your top three issues, the chances that it could be on issues six or seven are fleetingly slim. Plus, when too many issues are raised, the word limits on the briefs lead to underdeveloped arguments that aren’t very convincing.

On the Elements of Equitable Estoppel

J.P. v. Carlsbad Unified School District, No. D062912 (D4d1 Dec. 12, 2014)

This is a case against a school for failing to stop one of its teachers from sexually abusing several students. During the investigation of the incident, school officials and the DA told the victim and her family that they shouldn’t talk to anyone concerning the incident, lest it endanger the criminal prosecution of the teacher. The parents scrupulously followed that advice, which—arguably as the school sees it—led to them never hiring a lawyer and thus blowing their deadline to file a Government Code claim against the school.

In Limines ...

Scott v. C.R. Bard, Inc., No F066039 (D5 Nov. 19, 2014)

Defendant appeals a plaintiff verdict in a medical device defect case. Defendant moved in limine to keep out evidence regardling certain actions that the FDA took related to its product that occurred after plaintiff was injured. The trial court granted the motion. But then during opening statement, defense counsel made a big deal of the fact the FDA continued to monitor and regulate the product and had taken no action to recall it. The trial court decided that defendant had opened the door and let the post-injury FDA evidence come in. 

According to the court of appeal, the trial court didn’t abuse its discretion in doing so. Defendant’s own acts made the evidence relevant. It also was not excludable as a subsequent remedial measure under Evidence Code § 1151 because it did not concern acts by the defendant, to which the subsequent remedial measures rule is limited. Nor did § 352 merit exclusion. Plenty of context regarding the FDA’s actions was admitted, minimizing any risk of prejudice or confusion. And the court did not err by reversing its in limine ruling. In limine rulings are always provisional and subject to reconsiseration during trial.

The court also rejects a cross appeal by plaintiff on an asserted instructional error. The jury found that plaintiff’s doctor—who was not joined as a party—was forty percent at fault. But the jury wasn't actually instructed on the med-mal standard of care. Problem is, plaintiffs never requested such an instruction. Because properly instructing the jury on scope of the doctor’s duty of care was in the interest of plaintiffs, by failing to propose the instruction, plaintiffs invited the error and are estopped from asserting it on appeal.

Affirmed. 

And I Get Upset when My Broadband Is Slow ....

Holguin v. Dish Network, No. D059983 (D4d1 Sept. 22, 2014)

A technician drilled through a sewer pipe while installing satellite television in plaintiffs’ home. He didn’t realize it. By the time the mistake was uncovered more than a year later, plaintiffs’ house has become a mold mine. Defendants (various AT&T-owned companies) agreed to pay for the remediation. But that didn’t go very well, and the matter winds up in litigation. A jury awarded plaintiffs $109,000. The court followed by awarding $180,000 in attorneys’ fees, —about a third of what plaintiffs’ asked for. Defendants appeal on three somewhat related issues, plus in the court’s award of legal fees. Plaintiffs cross-appeal on the amount of the fee.

Defendants first say that the trial court erroneously instructed the jury on plaintiffs’ contract claims. The evidence showed that there were a series of different form agreements between the plaintiffs and the various defendant entities, signed by plaintiffs at various stages of the installation process. The instructions, however, all referred to “contract,” in the singular. The court here rejects the argument. First, defendants didn’t propose any instruction that used the plural, so the argument was forfeited. And even if it weren’t, the evidence showed that each of the agreements was part of single transaction—the plaintiffs’ signing up telecommunications services. The agreements were replete with cross-references. Under the circumstances, there was no error in treating the various instruments as a series of contracts that “are to be taken together” under Civil Code § 1642, and thus effectively treated as a single contract.

Second, defendants appeal the court’s instruction that the contracts contained an implied term requiring Defendants to properly install the equipment they were providing. They argue that because the contract didn’t contain any such term, it was error for the trial court to tell the jury to imply it. But that argument runs into the law. Every contract includes an implied duty to perform with reasonable care. If you contract to do X, and you do X negligently, you have breached the contract.

Third, defendants appeal the superior court's denials of JNOV and new trial motions that raised the above points as well as the insufficiency of the evidence. The contract points fail for the same reason as above. And as to the adequacy of the evidence, defendants failed to carry their burden on appeal of showing that there was no substantial evidence in favor of the verdict.

Finally, defendants appeal, and Plaintiffs cross-appeal, on the attorneys’ fee award. Defendants first claim that fees aren’t awardable under Civil Code § 1717 because the jury verdict appeared to award damages on negligence, not contract claims.  The court first clarifies that the standard of review is that applicable to determining the prevailing party (abuse of discretion) as opposed to the standard that applies to a determination of the legal basis of an award (de novo). Deciding whether the fee award sufficiently arose from the contract, as opposed to tort, claims was a determination of prevailing party (and claim) status. On the merits, the trial court did not abuse its discretion.  Although the verdict form did not specifically award contract damages, it found that the four elements of breach of contract had been proven and the part of the special verdict that calculated damages was separate from the individual counts on which the jury was polled.

As to the amount of fees, when it calculated the lodestar, the trial court did not abuse its discretion in declining to include about 150 hours of duplicative work a replacement attorney had to do when their first lawyer fell ill. The court’s authority to award reasonable fees permitted it to disallow this time.  Nor did the court err in apportioning fees between contract and tort claims—most of which were nonsuited.  The court employed a reasonable methodology to accomplish the apportionment so it did not abuse its discretion.  Finally, the trial court also did not abuse its discretion in declining to apply an enhancement.  The lodestar itself was a reasonable fee.  Particularly when compared to what the attorneys would obtain under their retainer agreement had there been no § 1717 provision—less than $40 grand—the un-enhanced $180,000 awarded by the court was within the realm of reason.

Affirmed.

Why Write Fifty Pages but Decline to Publish?

Asahi Kasei Pharma Corp. v. Actelion Ltd., No. A133927 (D1d5, as modifed Jan. 16, 2013)

This is a very long and detailed opinion that is well worth reading if you litigate business torts. It addresses, among other things: instructional sanctions for failure to timely produce discovery; what to do when an expert relies on materials that are not produced because he is no longer able to obtain them; the requirement that hearsay evidence submitted for non-hearsay must be relevant as to those specific issues; hearsay exceptions for the effect on the listener, lay opinion in issues of law; and the sufficiency of the evidence on several damages issues. Unfortunately, the discussion on all of these issues (more than 50 pages of it) is contained in sections of the opinion that the court declines to publish. The only published section affirms the trial court—in a cogent discussion that comprehensively reviews the case law—on some instructional issues regarding the elements of intentional interference with contract, the Applied Equipment rule that a defendant can’t interfere with its own contract, and the justification defense.

Affirmed.

Postscript: On a publication request by a nonparty under Rule of Court 8.1120, the court published two subsections on the sufficiency of the evidence of lost profits. The rest of the opinion, however, remains unpublished.

There Goes My (Smoking) Gun ...

Nevarrez v. San Marino Skilled Nursing & Wellness Centre, No. B235372 (D2d4 Nov. 4, 2013)

This is an appeal after a jury trial that awarded plaintiff almost $4.4 million in damages stemming from allegations of negligence, elder abuse, and statutory violations at a nursing home. As relevant here, the court of appeal upheld challenges to two jury instructions, but reversed on two theories of liability because the trial court abused its discretion in admitting prejudicial evidence regarding prior regulatory violations at the facility. In doing so, it missed an opportunity to clarify the law of evidence.

Victory for the First Amendment, Just a Little Too Late

Steiner v. Superior Court, No. B235347 (D2d6 as modified, Nov. 26, 2013)

The plaintiffs’ lawyer in an asbestos case has some pages on her website trumpeting her multi-million victories in automobile brake exposure cases. The jury was instructed, per CACI 100, that they should not use the Internet to find out about the case or the attorneys. But the defendant was nonetheless concerned that jurors might Google the attorney and see these pages. So it asked the trial court to order her to take the pages down. The court agreed, and the plaintiffs sought a writ. Although the trial ended while the writ was pending, the court of appeal reached the issue under the public interest exception to the mootness doctrine. The court, applying the commercial speech standard set out in the Supreme Court’s Central Hudson decision, found that the trial court violated the lawyer’s first amendment rights by ordering a prior restraint. Since there were less restrictive methods to protect the interest in a fair trial—namely, instructing the jury under CACI 100—the restraint was unconstitutional. So if the case wasn’t moot, the writ would have been granted.

Writ denied as moot.

It's Really Malice, Fraud "and/or" Oppression...

Nickerson v. Stonebridge Life Ins. Co., No. B234271 (D2d3 Aug. 29, 2013)
 
In a case seeking punitive damages, the majority and dissent agree that the superior court should instruct on malice fraud or oppression as a single disjunctive concept instead of asking for separate special interrogatories.