California Civil Litigation

Big Change in the Parol Evidence Rule

2013-01-15T23:21:00.000-08:00

The California Supreme Court Discards the State's Idiosyncratic Interpretation of the Fraud Exception

Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Association (No. S190581, January 14, 2013)

The California Supreme Court has unanimously overruled the often-criticized decision that for decades significantly restricted the use of the fraud exception to the parol evidence rule in California Courts. The new decision brings California law into harmony with the low of the majority of other states and the Restatement of Contracts.

In 1935 in Bank of America, etc. Assn v. Pendergrass 4 Cal.2d 258 (Pendergrass) held that to be admissible under the fraud exception to the parol evidence rule, evidence had to tend to establish an independent fact or representation, an action probative of intent to defraud that was more than a promise which conflicted with the contents of the document.

The Riverisland decision examines Pendergrass for flaws and finds many. Pendergrass has kept California out of step with other jurisdictions and authorities. The rule it establishes has the potential to be used to shield fraudulent conduct, the very thing the fraud exception is intended to protect people against. In the decades since Pendergrass the efforts of the Courts of Appeal to reconcile Pendergrass with the language of the statute it was interpreting have led to conflicting results and the creation of distinctions between types of evidence that cause confusion rather than enlightenment.

Ultimately, however, the Riverisland decision rests on a finding that Pendergrass was an incorrect statement of California law when it was written. Pendergrass was inconsistent with both the language of the statute it was applying and earlier decisions of the California Supreme Court. Upon examination the Court found the authorities cited in Pendergrass did not support its novel interpretation and the reasoning it used was unpersuasive.

The Riverisland decision overrules a seventy-seven year line of cases and greatly simplifies the use of the fraud exception to the parol evidence rule in California.

A Judgment Without Previous Notice of Lawsuit

2009-10-27T14:46:00.000-07:00

I Was Informed There's a Judgment Against Me But I Never Heard of Any Lawsuit

It's relatively unusual for a person who had no notice that they had been named as a defendant in a civil action to be informed that there is a civil judgment against them. Recently I prepared a general description of what a person who got that startling information might want to know. I have decided to share it here.

There are general rules that apply to every civil lawsuit. The general rule is that a person must be given notice of a civil lawsuit that has been filed against them by being served with a summons and a copy of the complaint. If the plaintiff can prove to the court that despite making significant efforts to locate a defendant he has been unable to do so the court can approve service by publication of a notice in a newspaper. Service by publication is relatively rare. If a person has a stable home or work address it is very unlikely that a court would give permission for service by publication. If a lawsuit names a person who does not live or work in California there is a complex rule that determines whether a California court can have jurisdiction over that person. A very similar rule applies to determining whether an out-of-state court can have jurisdiction over a person who lives in California. How that rule applies can only be determined by an attorney who has been consulted by the person and is providing legal advice based upon the specific facts of the situation. If the suit was filed in another state the person may need to consult an attorney who is licensed to practice law in that state. The rules for serving the summons and complaints upon corporations and other business entities, such as partnerships, are different from the rules for individuals.

If a person has been informed that there is a California civil judgment against him the most important information which that person needs is the name of County in which the lawsuit was filed. The California court system operates on a county basis and each county has the files for civil lawsuits which have been brought in that county. County court clerks' offices do not have the files for civil lawsuits that were filed in other counties. It is extremely helpful to also have the case number assigned to that case. Each County uses a separate numbering system. If a person has been informed of a judgment against them through a document from the court or a document from an attorney representing a party in the lawsuit, both the name of the County and the Case Number should be on that document. Any document from the court or from an attorney representing a party in the lawsuit should have the County and Case Number on it.

If a person has learned of an alleged judgment against them by being told orally about it, the person should ask whoever told them for the name of the County and the Case Number. Even if the individual does not have the case number he or she may know the name of the County which is the most important piece of information. There is an exception to this rule. If for ANY reason a person believes that the individual who told them of the judgment might be potentially dangerous to them, they should avoid all contact with that individual and consult an attorney about how to get information about the alleged judgment. In addition, if the person believes that there is ANY possibility that someone poses a threat to them they should get advice about how to handle that situation. The fastest way to do this may be to call a domestic violence hotline (a local one if possible). Even if the potential threat does not arise from a domestic situation but from a business relationship or even a stranger the hotline may be able to suggest some helpful precautions and refer the person to a source of information about how to handle their specific situation. If any specific threats have been made or if the person believes that violence is likely, he or she should contact the police. It is very, very, very, very rare for a civil lawsuit all by itself to lead to any violence. Becoming involved in a civil lawsuit is not by itself a reason to seek advice about possible violence. However a person knows more about their contacts and communications with another party than an outsider does, and they should rely upon their own judgment based upon all of the other party's conduct and communications, not just those related to the lawsuit. If the feeling of possible danger arises after the person has hired an attorney, he or she should consult their attorney about it as soon as possible.

A person who has been told that there is a California civil judgment against them even though they were not aware that anyone had sued them and had not been served with any notice should consult an attorney about the situation. This should be done as soon as possible because the first six months after a judgment is entered are the best time to address the situation. Although California attorneys are licensed by the state bar, the counties have voluntary bar associations. Some of those bar associations will provide referrals to members of the public who are seeking legal advice. In addition quite a few attorneys offer a free initial consultation. This consultation will often be enough to allow a person to learn whether or not they need to hire an attorney to represent them. Having the County and the Case Number of the lawsuit will very helpful for the consultation. Any documents that are connected with the alleged lawsuit and judgment, or with the event or contract that the lawsuit is based on, should be brought to the consultation.

Whether or not information about civil lawsuits filed in that county is available online varies from county to county. It may be possible to look at a list of the documents that have been filed in a lawsuit or even the actual documents themselves through the individual court's website. Court files can also be read in person at the court clerk's office. Having copies of some or all of the documents in the court file will be helpful when consulting an attorney. Reading the court file will usually help a person figure out who sued them and what event the lawsuit is based on. The facts that the person knows about that person and that event will permit an attorney to provide specific legal advice. However someone who is not an attorney should not rely upon their interpretation of the documents for an understanding of the legal situation. Legal documents, especially in lawsuits, use very specific legal terms and phrasing that can easily be misunderstood by non-lawyers.

Hospital's Suit For Reimbursement Is Not Preempted by ERISA

2009-05-11T13:20:00.000-07:00

Court of Appeal Reverses a Judgment Sustaining a Demurrer by Blue Cross
Coast Plaza Doctors Hospital v. Blue Cross of California (2009) 173 Cal.App.4th 1179
11 p.

According to the allegations in the complaint, a patient checked into an out-of-network hospital for previously scheduled surgery. Because the Hospital was out-of-network the patient made an advance cash payment for the surgery. The surgery went smoothly and is not at dispute in this litigation. However, a few days after the surgery the patient suffered a life threatening respiratory distress which required her to be put on a ventilator and moved to the Hospital's ICU. (This was emergency treatment.)

Once the patient was stabilized the Hospital contacted the Independent Practice Association (IPA) that Blue Cross had contracted with to provide medical care for the patient, in order to arrange for the transfer of the patient to an in-network provider. The IPA refused to approve the transfer or to be involved in any decisions regarding the patient's medical care. The patient spent two months in the Hospital's ICU before being transferred.

The Hospital sued Blue Cross for slightly under $600,000 for the emergency care that it provided to the patient.

Blue Cross successfully demurred on the ground that because the patient's health insurance was an employee benefit, the Hospital's action against it was preempted by ERISA. The Hospital elected not to amend its complaint and appealed from the judgment that followed.

The Court of Appeal held that the Hospital's action was based on Health and Safety Code section 1371.4, and that section 1371.4 falls within ERISA's saving clause (ERISA section 514(b)(2)(A)) as state law regulating insurance. It reversed the judgment and remanded for further proceedings.

Life Insurance is Not Covered by the Consumer Legal Remedies Act

2009-04-20T15:56:00.000-07:00

Supreme Court Affirms Decision But Narrows the Holding From All Insurance to Just Life Insurance

Fairbanks v. Superior Court (2009) 46 Cal.4th 56
10 p.

At the time that the Court of Appeal decision in Fairbanks came out I praised it for its thoroughness and suggested that the issue would not have to be revisited by the California courts anytime soon. I was completely wrong because the California Supreme Court granted review of the decision. Today the Supreme Court issued its opinion.

A unanimous Supreme Court affirmed the Court of Appeal decision but narrowed its holding from all insurance to just life insurance. In the decision's only footnote the court explained that although the parties, the trial court and the Court of Appeal all took the broad view that the issue was whether insurance is a service for the purpose of the CLRA, the Supreme Court had "narrowed the issue to focus only on life insurance."

Like the Court of Appeal, the Supreme Court found the statutory language determinative and held that life insurance is not covered by the CLRA.

California Supreme Court Hears Hughes v. Pair

2009-04-15T15:01:00.000-07:00

Oral Argument in Sexual Harassment Case Was Heard on April 7

During its April 7th Oral Argument session the California Supreme Court heard arguments in the sexual harassment action Hughes v. Pair. In that action Suzan Hughes, the mother of a minor child whose trust was administered by Christopher Pair, sued Pair for sexual harassment under Civil Code section 51.9. The Court of Appeal had held that the words "pervasive and severe" have the same meaning in 51.9 as they do in FEHA and Title VII.

Section 51.9 applies specifically to a relationship with a professional when the plaintiff is unable to easily terminate the relationship. It thus always refers to a first party sexual harassment claim rather than the employer-ratification argument that is usually made in FEHA and Title VII actions.

The Supreme Court's discussion is sure to be interesting to those who follow sexual harassment law.

California Supreme Court Reverses Patel Decision

2009-01-27T15:04:00.000-08:00

Contract Was Enforceable Because Settled Law Provided a Time for Payment

Patel v. Liebermensch (December 22, 2008, S156797)
9 p. decision

The California Supreme Court unanimously reversed the Court of Appeal decision in Patel v. Liebermensch, agreeing with the trial court that the parties had entered into an enforceable contract. The absence of terms specifying the time and manner of payment did not make a real estate contract too uncertain to enforce.

The Court pointed out that the manner of payment was not actually in dispute, that the only missing term was the time of payment. It is settled law that if a contract for the sale of real property specifies no time of payment, a reasonable time is allowed.

The Court of Appeal had improperly relied on the parties' conduct after the dispute arose to conclude that an agreement had not been reached when the contract was signed. When the contract was executed it contained easily ascertainable essential terms. Neither party could render it unenforceable by seeking to change those terms.

Note: This was an action for specific performance of a real estate option contract for a condominium unit in San Diego. When Patel exercised the option in July, 2004 one of his reasons was because he wanted to take advantage of the mortgage interest rates available at that time. It would be interesting to know how the parties feel about this transaction now given the dramatic changes in real estate values and mortgage availability since the time that this suit was filed.

Family Court to Remain Open in Riverside County

2008-08-19T23:32:00.000-07:00

Dismissal of Misdemeanors Because No Courtroom Was Available is Upheld

People v. Cole, Appellate Division, Riverside County (July 25, 2008, APP-004096)

Civil procedure, in the form of civil trials, has been the intermittent collateral damage in the court congestion crisis in Riverside County. The crisis itself arises out of the backlog of criminal cases in the county and has led to some conflict between the District Attorney and the Superior Court Judges. Now, in a development that brings no comfort to those engaged in traditional civil actions, but that may well be in the best interests of the people of Riverside County, a three judge panel has upheld the decision of a trial court judge not to give precedence to criminal cases in the family, probate, traffic, small claims and juvenile courts.

Because these were appeals from misdemeanor charges the decision was made by the Appellate Division. The three judge panel was made up of specially assigned Orange County Superior Court Judges because all of the Riverside County judges had disqualified themselves on the grounds that the issue was one of their court's policy.

Late in the afternoon on Friday, January 26, 2007 two misdemeanor prosecutions came before the court on the last day that they could be brought to trial. During an extended discussion with the deputy district attorney about possible available courtrooms, the trial judge pointed out that because of the backlog in criminal cases, the court had completely eliminated all civil trials.

Since January, 2007 that backlog has been significantly reduced by a strike team of judges sent to Riverside by Chief Justice George. However the strike team is now gone and the funding for seven new judgeships has been postponed for a year because of the state budget crisis. In July, 2008 twenty-two criminal cases were dismissed because there was no judge available to hear them. For those seeking civil trials, the situation remains bleak.

What Do You Do If Opposing Counsel Inadvertently Produces a Privileged Document?

2007-12-13T14:17:00.000-08:00

As Soon As You Realize What It Is - Stop Reading. Then Give It Back. Right Away.

Rico v. Mitsubishi Motors Corporation (Dec. 13, 2007, S123808)
16 p. opinion

42 Cal.4th 807

The rule that the Supreme Court sets forth in this decision is not a complicated one. If a lawyer receives a document that clearly appears to be privileged and it is "reasonably apparent that the materials were provided or made available through inadvertence," he or she should examine the document no further than is essential to determine that the document is privileged. Then he or she should immediately notify the sender of the situation so that the parties can either resolve it by agreement or turn to the court for any justified judicial intervention.

This approach protects the attorney-client privilege and the work product doctrine, prevents large document productions from becoming slower and more laborious than they already are, and fulfills the attorney's obligations to the bar, the judiciary and the administration of justice.

What shouldn't the lawyer do if he realizes after a minute or two that he is reading a work product document? He shouldn't make multiple copies of it and give them to his co-counsel and experts. He shouldn't discuss the contents of the document with each of his experts. He shouldn't use the document to impeach one of the opposing parties' experts during that expert's deposition.

What happens if he does? In this case the attorney showing such poor judgment represented the plaintiffs. As a result of his unethical behavior, the plaintiffs' attorneys and experts were disqualified.

(The plaintiffs, because they had not been told the contents of the document, were given time to obtain new counsel. This contrasts with the result for the plaintiffs in Stephen Slesinger, Inc. v. The Walt Disney Company whose intimate knowledge of the contents of illegally obtained documents tainted their case beyond repair.)

What if the lawyer is slow to realize that the document is privileged? That's a shame but not an excuse. The rule establishes an objective standard under which the court must decide when reasonably competent counsel would have realized the document was privileged.

Justice Corrigan wrote the opinion for a unanimous court.

Review Roundup III

2007-12-10T23:38:00.000-08:00

Patel v. Liebermensch (S156797)

I did not go out on any limbs when writing about this decision so you will have to take my word for it that I thought it was a close call. The Supreme Court will be addressing the question of whether the time and manner of payment are essential terms for a real estate purchase option contract. If so, then if they are absent no contract has been formed.

This is an important legal issue, but this case is not one that has potential to cause any noticeable effect in the way that real estate transactions are handled in California. The vast majority of such transactions are already conducted much more formally than the transaction that led to this lawsuit.

Review Roundup II

2007-12-06T22:41:00.000-08:00

Fairbanks v. Superior Court (S157001)

When I wrote about this decision I praised it for its thoroughness. It was an issue of first impression but I found the Court of Appeal's four-part statutory interpretation very persuasive. I predicted that the Court of Appeal had resolved forever the question of whether insurance is covered by the Consumer Legal Remedies Act (CLRA). I was wrong.

On Nov. 14, the Supreme Court granted review on that very question.

Review Roundup I

2007-12-06T22:05:00.000-08:00

Hughes v. Pair (S157197)

The Supreme Court has granted review in three of the cases that I have written about on this blawg. Its acceptance of Hughes v. Pair on November 28th is the one that I find satisfying.

In a previous post I promised to explain why FEHA and Title VII case law should not be used to make decisions under Civil Code section 51.9. It turns out that a vastly more qualified authority will address the question of whether FEHA's standards and definitions should be used to evaluate a claim for sexual harassment under Civil Code section 51.9. Obviously, I have already picked a side in this one.

Petitioning Activity Can Be the Essence of a Contract

2007-11-28T19:42:00.000-08:00

Anti-SLAPP Motion Fails When Plaintiff Makes a Showing That the Petitioning Activity Was a Breach of Contract

Midland Pacific Building Corp. v. King (11/28/07, 2d Civil No. B192017, Second Dist.)
12 p. opinion
Rehearing Opinion

157 Cal.App.4th 264

A developer brought suit against a landowner for breach of contract and fraud. The contract had provided that the landowner would obtain City approval of a draft tract map.

After the landowner presented a different, higher density tract map for approval at a planning commission hearing, the developer sued for breach of contract and fraud. The landowner brought an anti-SLAPP motion, arguing the suit was brought in response to the landowner's statements at an official proceeding in furtherance of his right of petition and free speech.

The Court of Appeal found that the breach of contract cause of action arose out of the petitioning activity. Indeed, the petitioning activity was the primary obligation of the landowner under the contract. However, it also found that the developer had shown a probability of prevailing.

The fraud cause of action was based upon private communications between the parties and therefore not based upon protected activity.

The anti-SLAPP motion had been correctly denied.

Presiding Justice Gilbert wrote the opinion. Justices Yegan and Coffee concurred.

Sad Song

2007-10-29T23:08:00.000-07:00

Illegal and Legal Provisions of a Contract Are Too Intertwined to Sever

Chiba v. Greenwald (Oct. 16, 2007, B193173, Second Dist.)
23 p. opinion (11 p. majority, 12 p. dissent)

This case stands out primarily because it concerns the estate of singer-songwriter Elliott Smith. While never a major commercial success he had, and despite his death on Oct. 21, 2003, continues to have, a devoted fan base. Outside of the world of indie music, he is probably best know for his Oscar-nominated song Miss Misery from the movie Good Will Hunting.

In this action Smith's live-in girlfriend sued the administrator of his estate for breach of an oral contract containing a provision that she would manage his music career in exchange for a 15% commission, and a Marvin agreement to provide household services in exchange for support. The provision that she would manage his career in exchange for compensation was illegal because the plaintiff was not a licensed talent agent as required by the Talent Agencies Act. (Labor Code section 1700 et seq.)

The question then became whether the legal Marvin agreement could be severed from the illegal management provision. The trial court concluded that the provisions were too intertwined to be severed and therefore the entire contract was void. A majority of the Court of Appeal agreed. Justice Johnson dissented, arguing that the complaint clearly alleged two separate promises made for two separate considerations.

Justice Zelon wrote the opinion. Justice Woods concurred. Acting Presiding Judge Johnson wrote a dissenting opinion.

California Trial Courts Have Inherent Power to Dismiss an Action

2007-10-29T17:56:00.000-07:00

When a Plaintiff's Deliberate, Egregious Misconduct Has Made a Fair Trial Impossible, The Trial Court Has the Power to Impose a Terminating Sanction

Stephen Slesinger, Inc. v. The Walt Disney Company (Sept. 25, 2007, B178340, Second Dist.)
54 p. opinion

In this case the Court of Appeal holds that "when a plaintiff's deliberate and egregious misconduct makes any sanction other than dismissal inadequate to ensure a fair trial, the trial court has inherent power to impose a terminating sanction." (p. 1) The essential requirement is to calibrate the sanction to the wrong. The decision requires consideration of all relevant circumstances, including the nature of the misconduct, (which must be deliberate and egregious), the strong preference for adjudicating claims on the merits, the integrity of the court as an institution of justice, the effect of the misconduct on a fair resolution of the case, and the availability of other sanctions to cure the harm. (pp. 35-36)

This is the general rule. Much of the 54 page opinion is a detailed recounting of the misconduct that made a terminating sanction appropriate in this action. That description will be invaluable to any attorney who wants to determine whether such a sanction would be appropriate in a case where he represents the defendant. However, for the purpose of gaining a general understanding of this inherent authority, a shorter summary is adequate.

Plaintiff Steven Slesinger, Inc., after filing this action in 1991, engaged an investigator who over a period of years took thousands of pages belonging to Disney and turned them over to the principals of SSI. The investigator obtained the pages by repeatedly breaking into Disney office buildings and secure trash receptacles, and by trespassing onto the secure facility of the company with which Disney had contracted to destroy its confidential documents. The investigator stole documents from 1992 until 1995, and perhaps longer. On two occasions, in 1997 and 1998, SSI's attorneys turned over a highly confidential document to Disney, but SSI claimed that it did not know how it had obtained the document and/or that Disney had produced the document during discovery. SSI altered Disney documents to remove markings identified they as confidential.

It wasn't until 2002 that SSI revealed its employment of the investigator, and turned over more than 6,000 pages of Disney documents. SSI could not say how many total pages it had received because it had kept no record of either the documents that it had received or the documents that it had destroyed. This behavior provides the example of the deliberate and egregious misconduct that can justify a terminating sanction.

Most crucially, because SSI's principals had personally reviewed the stolen documents there was no way to prevent the use of the improperly obtained confidential information during the course of a trial. No change of counsel could prevent the principals from using this information, either consciously or unconsciously during trial. The forbidden knowledge could not be erased from the brains of the SSI principals.

As appalling as this behavior was, it is rather heartening to note that there is no indication that SSI had any attorneys who countenanced its behavior. SSI was represented by at least ten different law firms during the course of this lawsuit. Given the information in this opinion, it is not difficult to guess the reason for those many changes.

Acting Presiding Justice Willhite wrote the opinion. Justices Manella and Suzukawa concurred.

Reliance Upon Statements by the DFEH Justify Equitable Relief From an Untimely Administrative Filing

2007-10-29T17:10:00.000-07:00

Description of Conversations With DFEH Representatives Were Not Hearsay Because They Were Offered to Prove the Plaintiff's State of Mind

Holland v. Union Pacific Railroad Co. (July 30, 2007, certified for publication 8, 29, 2007, C052833, Third District)

This post was on hold for quite a while for a reason that is now moot, this is as good a time as any to post it. None of the other out of chronological order cases will go back any later than late September.

This decision raises interesting procedural and jurisdictional questions. I am also happy to announce that it is the first team blog for the California Civil Litigation blog. On the California Blog of Appeal, Greg May is blogging about the Court of Appeal's resolution of the plaintiff's claim that the court commissioner who ruled on the summary judgment motion did not have jurisdiction over the matter. This post will address the substantive question of the plaintiff's untimely filing of an administrative complaint.

In this action for employment disability discrimination, plaintiff Holland alleges that his employer, Union Pacific Railroad Company, failed to make proper accommodations for his disability when it placed him on medical leave from July 2, 2002 to October, 2002.

Holland filed an administrative complaint with the DFEH on July 15, 2003, and later filed this lawsuit. UPRR brought a motion for summary judgment on the grounds that Holland's administrative complaint was not filed within the one year deadline in Government Code section 12960. UPRR argued that because Holland missed the deadline for his mandatory administrative complaint, he could not maintain an action at law.

Holland argued that his untimely filing should be excused because he had relied upon the assurances of a DEFH representative that by completing a pre-complaint questionnaire he had met the administrative deadline. Holland supported this argument with a declaration in which he described his conversations with DEFH representatives. UPRR objected to Holland's declaration on the grounds that it was inadmissible hearsay. The trial court agreed, and granted UPRR summary judgment.

Failure to exhaust an administrative remedy does not deprive a court of subject matter jurisdiction. Therefore equitable relief for missing the deadline can be granted when appropriate. One basis for equitable relief is if inaccurate advice from the DEFH reasonably misled the complainant through no fault of his own. If Holland's declaration was admissible, it would be inequitable to fault him.

The Court of Appeal held that the trial court had erred in ruling that the Holland declaration was inadmissible hearsay. The declaration was not being offered for proof of the facts it contained but for proof of Holland's state of mind. It was Holland's reaction to statements by the DFEH representatives that was at issue. An extrajudicial statement that is offered to prove the hearer's state of mind is not hearsay. Holland's declaration should have been admitted and he should have been given an equitable excuse for his untimely administrative complaint.
Presiding Justice Davis wrote the opinion. Justices Nicholson and Hull concurred.

Comment: I can't help wondering why this case is being litigated. Based upon the limited description of the allegations, Holland's complaint is that he lost four months pay because of disability discrimination. While the loss of four month's wages is a substantial blow to almost anyone, it is rarely a loss big enough to justify litigation. Under Government Code section 12965(b) a court may, at its discretion, award a prevailing party reasonable attorney fees and expert witness costs, but no one can count on that. However, the Court of Appeal specifically stated that it was not providing a detailed summary of the plaintiff's allegations, so other allegations in the complaint may explain the decision to litigate.

Back Again

2007-10-29T16:55:00.000-07:00

The hiatus is over. In order to make sure that this blawg stays current and useful, I will be picking up with new cases. However, I will also be sprinkling in interesting cases that were published during the hiatus. This means that the cases will not be in strict chronological order for the next little while. However, the most recent cases will be getting priority, so please don't let a summary of a case that is a few weeks old create the illusion that it will be a while before you see summaries of more recent cases.

As promised, I will be making some additional posts on the Hughes v. Pair case. Those will reflect my opinion about the opinion, rather than keeping you up-to-date on the state of the law, so they are not especially urgent.

It's great to be back.

Hughes v. Pair - Part I

2007-09-30T22:23:00.000-07:00

The Facts and The Holding

Hughes v. Pair (Sept. 10, 2007, B194307, Second District)
23 p. opinion (19 p. majority, 4 p. dissent)

UPDATE: REVIEW GRANTED (The Supreme Court granted review on Nov. 28, 2007) (S157197)

This is a problematic decision. I don't like to criticize the Court of Appeal, but in this decision I think that it missed a crucial distinction between employment sexual harassment actions under the FEHA and Title VII and the action created by Civil Code section 51.9. It appears that the strongest argument against using the FEHA interpretation of sexual harassment for 51.9 actions slipped past everyone (although there is a glimpse of it in the dissent). As the title of this post suggests, I am going to make this case the subject of more than one post. (I do not intend to post serially on this case but to intersperse additional posts on this case with posts on other cases) Right now I'm just going to recap the facts and the holding.

Plaintiff Suzan Hughes's minor son is the beneficiary of a huge trust containing the estate of his deceased father. Suzan (who is neither a trustee nor a beneficiary) has an extremely bad relationship with the three trustees. Suzan has brought seven lawsuits against the trust, including unsuccessful attempts to remove the trustees.

In this action, Suzan sued trustee Chrisopher Pair for sexual harassment under 51.9 and for intentional infliction of emotional distress. Pair brought a successful motion for summary judgment and Suzan appealed.

Civil Code 51.9 permits a plaintiff to bring an action for sexual harassment against a professional if the plaintiff is unable to easily terminate the relationship and the defendant professional has made sexual advances or engaged in conduct of a sexual nature that was unwelcome, and pervasive or severe. (The plaintiff must prove damages.)

The undisputed facts for the summary judgment motion were that on June 16, 2005 the trustees considered a request from Suzan for reimbursement for two month's rental of a vacation home and decided to reimburse Suzan for only one month's rent. Suzan learned of the trustees' unanimous decision before June 27, 2005.

On June 27, two things happened. The first was a telephone call from Pair to Suzan, to whom he had not spoken in three years. Pair invited Suzan and her son to join him and his son at a King Tut exhibit that evening. When Suzan complained about the trustees' decision to only reimburse her for one month's rent Pair said "you know how much I love Alex and you in that special way." About the rental he said that could be persuaded to "give more time if you would be nice to me." In response to Suzan's comment that talking that way was crazy Pair said "how crazy do you want to get?" Pair gave Suzan his home number and told her to call him if she changed her mind. She did not accept the King Tut invitation.

The second thing was a brief encounter at the King Tut exhibit. Suzan and her son went to the exhibit independently of Pair. They encountered Pair and his son in the hallway leading to the exhibit. Pair told Suzan "I'm going to get you on your knees and f*** you one way or another." He said this in earshot of Suzan's son (14) and his own son (9), he then said "hi" to Suzan's son and walked away.

The legal issue on appeal was whether the term "pervasive or severe" has the same meaning in section 51.9 as it does in the FEHA and Title VII. The Court of Appeal held that it did. Having reached that holding the Court of Appeal concluded that cases deciding whether or not behavior was severe enough to constitute sexual harassment under the FEHA or Title VII could be used to decide if behavior was severe enough to constitute sexual harassment under section 51.9. The Court reviewed decisions that had determined whether or not behavior was severe enough to support a sexual harassment action under the FEHA or Title VII. The behavior alleged by Suzan did not meet the standard of severe set by those cases. As a result, the Court affirmed the judgment.
Justice Kriegler wrote the decision. Justice Mosk concurred. Justice Armstrong wrote a dissenting opinion.

Next time on Hughes v. Pair: Why FEHA and Title VII case law should not be used to make decisions under section 51.9

A Minor Who Made a Statement to the Police that She Had Been Abused Was Protected by Absolute Litigation Privilege

2007-09-30T00:23:00.000-07:00

Penal Code Section 11172 Liability for False or Reckless Reports of Child Abuse Applies Only to Third Parties and Not to the Alleged Victim

Chabak v. Monroy (Sept. 10, 2007, F049069, Fifth District)
19 p. opinion

A person cannot sue a minor for telling the police that the person had abused her. The statements that the minor made to the police are absolutely protected under the litigation privilege in Civil Code section 47(b).

The plaintiff here had argued that the controlling statute was Penal Code section 11172(a) which provides that someone who is not a mandated reporter is immune from suit "unless it can be proven that a false report was made and the person knew that the report was false or was made with reckless disregard of the truth or falsity of the report, and any person who makes a report of child abuse or neglect known to be false or with reckless disregard of the truth or falsity of the report is liable for any damages caused."

The Court of Appeal concluded that section 11172(a) was intended by the legislature to apply only to reports made by third parties. It would run completely contrary to the purpose of the Legislature's statutory scheme to increase reporting of child abuse to impose civil liability upon victims of child abuse.

The defendant in this action was 17 at the time of the alleged abuse. She made a statement to the police and, at the suggestion of the police, to her parents. She also spoke to a paralegal who was assisting her in filing a motion in court about the plaintiff's conduct. All of these conversations were covered by the litigation privilege.

As a result she had a complete affirmative defense to the plaintiff's action for false report of child abuse and slander. As a matter of law the plaintiff could not prevail. The defendant's anti-SLAPP motion to strike the complaint should have been granted.
Justice Cornell wrote the opinion. Acting Presiding Justice Vartabedian and Justice Wiseman concurred.

Restitution Under UCL Is Not Limited to Direct Purchases

2007-09-29T19:25:00.000-07:00

A Plaintiff Can Seek Restitution of Money That He Spent Because of Alleged Unlawful Practice

Shersher v. Superior Court (Sept. 10, 2007, B195317, Second District)
11 p. opinion

Plaintiff Shersher brought a consumer action against Microsoft. He sought restitution. Shersher alleged that he, and many others, had paid money to purchase Microsoft wireless products because false or misleading statements on the product packages described the products as 11 Mbps or 54 Mbps. But, the plaintiff alleged, the products were not able to transmit consumer data at these speeds.

The plaintiff had purchased Microsoft's product from a retailer. Microsoft brought a motion to strike the plaintiff's claim for restitution on the grounds that, under the UCL, restitution was limited to purchasers who had bought the product directly from Microsoft. Microsoft argued that this requirement could be found in Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134. The trial court agreed with Microsoft's interpretation and granted the motion. That ruling came before the Court of Appeal on plaintiff's petition for a writ of mandate.

Microsoft's authority for the limitation to direct purchasers was a single sentence in Korea Supply (29 Cal.4th at 1149). However, in Korea Supply one competitor had sued another alleging that the defendant company had used illegal bribes to obtain a contract for which the plaintiff company had submitted the lowest bid.

The Court of Appeal rejected the alleged "direct purchase" requirement. Plaintiffs in UCL actions are not permitted to obtain "restitution" of money in which they never had an ownership interest (such as the money paid to a competitor by a third party). But Shersher could seek restitution of money that he had owned and had paid to the retailer in order to purchase the Microsoft product. The crucial requirement for restitution was that the plaintiff had at one time owned the money.
Justice Kriegler wrote the opinion. Presiding Justice Turner and Justice Armstrong concurred.

Comment: This opinion is the source of the quote of the week for the week of September 10th on the Civil Litigation Quote of the Week blog.

Broad Definition of Joint Tortfeaser Used to Allocate Settlement Funds in Multiparty Construction Defect Cases

2007-09-29T15:46:00.000-07:00

Nuisance Cannot Be Stated as a Separate Action If It Relies Upon the Same Facts as a Negligence Cause of Action

El Escorial Owners' Association v. DLC Plastering, Inc. (Sept. 6, 2007, B173829, Second District)
32 p. opinion

The El Escorial opinion provides an overview of the complexity of allocating settlement amounts as credits against damage awards in multiparty construction defect cases. In a typical multiparty construction defect case, many of the subcontractors settle out of the action and obtain rulings that their settlements were made in good faith. This always raises the issue of the extent to which those settlement amounts should be credited as offsets to damages for which the nonsettling defendants have been found liable at trial.

El Escorial affirms the judgment in a case where the trial court, with advance notice to the remaining parties, re-examined and altered the allocation of settlement funds in response to the evidence presented at trial. As the Court of Appeal noted: "In a complex multiparty construction defect case the court may have to use 'rough categories' to initially determine good faith settlement allocations for the various types of construction defects."

The Court of Appeal rejected the plaintiff's assumption that the defendants could not be joint tortfeasors with many of the settling defendants. At least in construction defect cases, the term joint tortfeasor is broad. If multiple defendants do not act in concert but the damage caused by their acts is indivisible, each defendant is liable for the whole amount of damage. It does not matter whether the defendant's acts were successive or contemporaneous.

On a different issue, the Court of Appeal rejected the plaintiff's contention that it could state a cause of action for nuisance. Where negligence and nuisance causes of action rely upon the same facts about lack of due care, the nuisance claim is a negligence claim.
Presding Justice Gilbert wrote the opinion. Justices Yegan and Perren concurred.

Comment: The Court declined to apply Kaufman & Broad Communities, Inc. v. Performance Plastering, Inc. (2006) 136 Cal.App.4th 212 retroactively, but that case is something for practitioners to keep in mind for current and future cases. It held that when the insured was a suspended corporation (and thus unable to prosecute or defend an action) its insurance company had a duty to intervene in the lawsuit.

To Be a SLAPP Suit an Action Must Be Based On Protected Activity

2007-09-29T13:08:00.001-07:00

The Intent Use of Protected Speech or Activity As Evidence Does Not Mean that a Cause of Action is a SLAPP Cause of Action

Department of Fair Employment & Housing v. 1105 Alta Loma Road Apartments, LLC (Sept. 5, 2007, B194891, Second District)
18 p. opinion

An action is a SLAPP action only if it is based on the defendant's protected free speech or petitioning activity. The act of "speaking" or the act of petitioning must itself be the alleged wrong. If written correspondence and the filing of an action for unlawful detainer are going to be used as evidence to support a cause of action for alleged disability discrimination, then the lawsuit is not a SLAPP action. The plaintiff is not complaining about the correspondence or the legal filing but rather about the alleged motivation behind them. The gravamem of the complaint is disability discrimination, it is not the defendant's use of its speech or petitioning rights.

In this case the defendant decided to take a building off the rental market. One of the tenants responded to the required legal notice by notifying the defendant that she was disabled and therefore entitled to the longer relocation period that the statute provides for people with disabilities. The defendant asked the tenant to provide a letter from her physician indicating the nature of the tenant's disability.

After receiving a physician's letter stating that the tenant was totally disabled, the defendant asked for additional information. The defendant wanted a physician's letter that provided enough information to permit the defendant to determine that the tenant's disability was a qualifying disability under Government Code section 12926. The tenant declined to provide further information, citing her privacy rights. Following a lengthy correspondence the defendant brought an action for unlawful detainer against the tenant and evicted her. The DFEH then brought this action on behalf of the tenant alleging disability discrimination. The Court of Appeal affirmed the trial court's denial of the defendant's anti-SLAPP motion on the grounds that the action for disability discrimination was not based on the defendant's letters and unlawful detainer action.
Justice Johnson wrote the opinion. Presiding Justice Perluss and Justice Zelon concurred.

An Insurance Clause Requiring Proration of an Unisured Motorist Claim Prevails Over A Policy With a Conflicting Clause

2007-09-24T14:51:00.000-07:00

A Proration Clause Based Upon Insurance Code Section 11580.2(d) Prevents the Application Of An Excess Insurance Clause in Another Applicable Policy

Allstate Insurance Company v. Mercury Insurance Company (Sept. 5, 2007, B189977, Second District)
7 p. opinion

It's always nice to see an insurance coverage case in which an insurance company (or in this case, two insurance companies) have acted appropriately. When the opinion is also brief and clear, that's even nicer.

A boy who was driving his parents car had a girl passenger. An uninsured motorist ran a red light and hit the car, injuring the girl. Two insurance policies applied, the Mercury policy issued to the boy's parents and the Allstate policy issued to the girl's parents. The girl filed claims under the uninsured motorist provisions of both policies. The Mercury policy had an uninsured motorist limitation of $30,000 per person and the Allstate policy had an uninsured motorist limitation of $250,000 per person.

The Mercury policy had a clause that provided for proration of uninsured motorist coverage damages based upon the coverage limits of the applicable policies. The language of this clause tracked Insurance Code section 115080.2(d) which permits such clauses. The Allstate policy had a clause providing that it was excess to the coverage of the uninsured motorist coverage covering a vehicle that the Allstate insured did not own.

The insurance companies appropriately settled the girl's claim for personal injuries jointly for $52,200, agreeing to litigate their dispute about the amount each was required to pay afterward, in this action.

The trial court's decision, affirmed by the Court of Appeal was that language of the Mercury policy was controlling. When an uninsured motorist insurance policy contains the statutory proration clause of section 11580.2(d) it must be given deference. To decide otherwise would nullify the statute.
Presiding Justice Gilbert wrote the opinion. Justices Yegan and Coffee concurred.

Comment: Allstate clearly wanted to know how section 11580.2(d) affected all the policies that it wrote in California rather than being concerned with this single claim. The amount in dispute, just under $25,000, wasn't worth litigating, much less taking up on appeal. The good faith behavior of these insurance companies, shown by their decision not to let the conflict between them delay the insured's settlement, is a contrast to the bad faith behavior of the insurance company in Baron v. Fire Insurance Exchange.

Receiver Can Recover Punitive Damages on Behalf of Recivership Estate in Insurance Bad Faith Action

2007-09-23T15:34:00.001-07:00

Brant Attorney Fees Can Be Recovered For Defending a Judgment on Appeal

Baron v. Fire Insurance Exchange (Sept. 4, 2007, H029830, Sixth Appellate District)
18 p. opinion

While an arbitration was in process between the two owners of a property, the property was extensively damaged by a fire. After issuing his decision, the arbitrator, on the stipulation of the two owners, appointed respondent Baron to be the receiver of the property. Baron was authorized to take possession of the property and all fire insurance proceeds. He was also empowered to restore or sell the property and to engage in any legal proceedings that he thought necessary to care for the property. For these services he was to be compensated at an hourly rate.

Fire Insurance Exchange, which had issued a policy that included fire insurance for the property, then engaged in a series of actions that provide a perfect example of insurer bad faith. Baron sued Fire Ins. for breach of the insurance contract, bad-faith refusal to pay policy benefits, declaratory relief, negligence, fraudulent misrepresentation and negligent misrepresentation. At trial the jury found in favor of Baron on all issues and awarded compensatory damages of $96,462 and punitive damages of $1.5 million.

In its appeal Fire Ins. argued that the receiver's appointment was void because the arbitrator had no jurisdiction to appoint him. Fire Ins. had not sought dismissal of the lawsuit in the trial court and the Court of Appeal held that Fire had waived this argument. Because the statute of limitations had run on any bad faith action by the insured, invalidating the appointment of the receiver would work a substantial injustice.

What Fire Ins. had argued in the trial court was that the receiver was not authorized to pursue the purely personal tort causes of action. The trial court had rejected this upon equitable grounds (the insured's statute had already run). In addition the arbitrator's appointment of the receiver had been explicitly confirmed when the arbitration award had been confirmed by the superior court. The superior court had statutory authority to appoint a receiver.

Fire Ins.' second contention on appeal was that the receiver lacked standing to pursue the tort causes of action and therefore could not obtain an award of punitive damages because punitive damages could only be awarded in a tort action. (Fire Ins. did not raise the issue of whether the receiver had the authority to bring the actual tort claims of bad faith and fraud, just whether he could obtain an award of punitive damages on them.) Fire Ins. argued that the turning over of the insurance claims to the receiver was in essence an assignment of them to him. The personal tort causes of action associated with insurance bad faith cannot be assigned.

The Court of Appeal disagreed with this characterization of the receiver's role. The respondent was not acting as an assignee. He had been explicitly authorized by the arbitrator's appointment (confirmed as an order of the court) to pursue the tort claims. The damages recovered on them would go to the receivership estate. The receiver would be permitted to retain his contractual compensation, not the full recovery on the cause of action, the way an assignee would.

Finally the Court of Appeal addressed the respondent's request for Brandt attorney fees for defending the judgment on appeal. After strongly implying that it would have declined to address this issue if Fire Ins. had objected to the extreme lateness of the respondent's papers on it, the Court found for the respondent on the merits. The pupose of the Brandt rule is to see to it that an insured gets the full benefits of his insurance policy. This does not occur if the insured is out-of-pocket for the attorney fees expended to get those benefits. This reasoning logically extends to the attorney fees spent to defend a judgment on appeal.
Justice Elia wrote the opinion. Presiding Justice Rushing and Justice Premo concurred.

Comment: This opinion is the source of the quote of the week for the week of September 3rd on the Civil Litigation Quote of the Week blog.

Primary Assumption of the Risk Doctrine Applies to Noncontact Sports

2007-09-22T12:15:00.000-07:00

A Golfer has No Duty to Protect Another Player From Ordinary Negligence

Shin v. Ahn (Aug. 30, 2007, S146114, Supreme Court)
24 p. opinion

In Shin the California Supreme Court addresses a question that it explicitly left open in its seminal primary assumption of the risk decision Knight v. Jewett (1992) 4 Cal.4th 296. Does the doctrine of primary assumption of the risk apply to noncontact sports such as golfing? The Supreme Court holds that it does.

The primary assumption of the risk doctrine states that a participant in a sport has assumed the particular risks inherent in a sport by choosing to participate. The test is not a subjective one, but an objective one. It does not matter what the plaintiff knows about the risks of the sport. The question is, what is the fundamental nature of the sport? The defendant's actions are examined in relationship to the sport to determine whether or not the defendant owes a duty to protect a plaintiff from the particular risk of harm.

A defendant who is participating in a sport with a plaintiff has no liability for ordinary negligence. The defendant is only liable for intentionally injuring the plaintiff or engaging in conduct that is so reckless as to be totally outside the range of the ordinary activity involved in the sport.

The Shin decision, a 6-1 decision, is a strong reaffirmation of the primary assumption of the risk doctrine. It is also a solid, unequivocal holding that the doctrine applies to noncontact sports. The decision cites a number of sister state decision concerning golf injuries to demonstrate the wide acceptance of this principle.

The decision also explains the relationship between primary assumption of the risk and secondary assumption of the risk. Primary assumption of the risk determines whether or not the defendant had a duty to the plaintiff. Secondary assumption of the risk is merely an alternative phrase that can be used to describe comparative negligence. It affects the determination of the amount of damages a plaintiff is entitled to recover by allocating fault between the plaintiff and the defendant.

The Supreme Court upheld the Court of Appeal's decision that this action could not be determined upon summary judgment although it reached that conclusion through a different line of reasoning. The evidence submitted in support of the defendant's motion for summary judgment left open a triable fact of whether the defendant had acted recklessly or not. The case was remanded with directions that it should proceeded under the primary assumption of the risk doctrine.
Justice Corrigan wrote the opinion. Chief Justice George and Justices Baxter, Werdegar, Chin and Moreno concurred.

Justice Kennard dissented.
In her dissent Justice Kennard referred to the primary assumption of the risk doctrine as the "so-called 'no-duty-for-sports rule.'" She has disagreed with the doctrine ever since it was adopted in Knight and continues to do so.

Comment: If an individual has been injured badly enough, while engaging in a sport or recreational activity, to warrant consideration of a personal injury action, the first step in the analysis should be a determination of whether or not the primary assumption of the risk doctrine will apply. The doctrine, when it does apply, acts as an absolute bar to recovery and makes any further analysis unnecessary.

Residential Treatment Facility For Inmates Has No Duty to General Public

2007-09-20T13:09:00.000-07:00

Public Policy of Encouraging Innovative Criminal Offender Release and Rehabilitation Programs Outweighs Public Interest in Safety From Violent Assault

Rice v. Center Point, Inc. (Aug. 29, 2007, A114953, First District)
11 p. opinion

Rice addresses the first element in a cause of action for negligence - duty. The general rule is that one owes no duty to control the conduct of another, nor to warn those endangered by such conduct. There is an exception where a special relationship exists between the defendant and either the person whose conduct needs to be controlled or the foreseeable victim of the third party's conduct. In this action the plaintiffs argued that they fell within that exception when they were ordinary citizens in a public park who were attacked and stabbed by four inmates of the California Department of Corrections who were living in the the defendant's residential substance abuse treatment facility. The inmates were in the facility under the terms of a contract between the defendant and the CDC. The trial court disagreed with the plaintiff's argument and granted the defendant judgment on the pleadings on the ground that the defendant did not owe the plaintiffs a legal duty of care to control the criminal behavior of the residents of their treatment facility. The plaintiffs appealed.

The Court of Appeal held that there was no special relationship between the defendant and the plaintiffs. The duty to warn the foreseeable victims of a possible future criminal attack is imposed only where the duty is foreseeable and the intended victim is identifiable. The plaintiffs were not identifiable just because they were in a park near the treatment facility.

In addressing the question of whether a special relationship existed between the defendant and their residents that imposed upon the defendants a duty owed to the public to exercise reasonable care to control the criminal conduct of their residents, the Court of Appeal was guided by two previous cases, Baeuchene v. Synanon Foundation, Inc. (1979) 88 Cal.App.3d 342 and Cardenas v. Eggleston Youth Center (1987) 193 Cal.App.3d 331. In both those cases the court held that the public's interest in safety from violent assault was outweighed by the public policy favoring innovative criminal offender release and rehabilitation programs. Imposing a duty upon residential facilities would hinder the implementation of that public policy, therefore, both courts held that there was no such duty.

The Court of Appeal followed that reasoning and upheld the judgment on the pleadings. The plaintiffs' argument that the defendant had failed to follow its own operational policies and procedures could only demonstrate a lack of reasonable care. When there is no duty that issue is irrelevant. Reasonable care presumes the existence of a duty. With no duty, there can be no requirement of reasonable care.
Presiding Justice Pollack wrote the opinion. Justices Siggins and Justice Horner (Assigned Judge of the Alameda County Superior Court) concurred.