California Appellate Law Blog : California Appellate Lawyer & Attorney: Archer Norris Law Firm: Trial, Business, Torts: Sacramento, Bay Area, Los Angeles, California

The California Supreme Court is reviewing the following question: "Is a party who obtains the dismissal of a contract action entirely on procedural grounds entitled to an award of attorney fees under Civil Code section 1717 as the prevailing party in an action on a contract?"  The case being reviewed is Kandy Kiss of California v. Tex-Ellent (2012) 209 Cal.App.4th 604.  Kandy Kiss follows other appellate court decisions awarding contractual attorney fees for procedural wins.  How much longer will such decisions be good law?

In Kandy Kiss, the defendant obtained dismissal of Kandy Kiss's suit for lack of subject matter jurisdiction.  Even though the battle would shift to federal court, the trial court awarded defendant $129,000 in contractual attorney fees.  Kandy Kiss appealed, arguing that since the merits of the dispute would proceed in federal court, there was no contract action winner yet.  But the Second District Court of Appeal concluded that "[defendant] should not be deprived of compensation for the fees it expended in defeating a separate action brought in an independent and separate forum."

Now the Supreme Court has granted review. 

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Ordinarily, an order or judgment imposing sanctions in an amount of $5,000 or less is not appealable until entry of a final judgment in the action. (CCP §904.1(b).) But what if the sanctions arise from a discovery dispute between a party and her counsel and nonparty witness and his counsel at deposition?

That was the backdrop for a decision recently published by the First District Court of Appeal. In Diepenbrock v. Brown, 2012 Cal. App. LEXIS 896 (August 20, 2012), the court reversed a judgment imposing $5,000 in sanctions against plaintiff Claire Louise Diepenbrock and her attorney for unsuccessfully opposing a motion for protective order by a nonparty deponent – defendant Kyle Brown’s husband, Derek.

Diepenbrock’s attorney took the deposition of Derek Brown and asked questions that could have resulted in him testifying against his wife. Derek asserted the marital privilege under Evidence Code section 970 and refused to answer such questions. The deposition adjourned after the attorneys could not agree on the scope and applicability of the privilege.

Diepenbrock brought a motion to compel Derek to answer the questions. Derek responded by filing a motion for a protective order to preclude further questioning into such areas. Diepenbrock opposed the motion, contending an exception to the marital privilege applied. Both motions sought sanctions. (CCP §§2025.480(f), 2025.420(d), 2023.030(a).)    

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"Some appeals are filed to delay the inevitable.  This is such an appeal.  It is frivolous and was dead on arrival at the appellate courthouse." 

So begins the recent decision in Brown v. Wells Fargo Bank, NA (2012) 204 Cal.App.4th 1353.  There's no mistaking the reproach in those words, or these:  "After [the oral argument] calendar notice was sent . . . appellate counsel . . . asked that we dismiss the appeal.  We will deny the request.  We will affirm the judgment and refer the matter to the California State Bar for consideration of discipline."

As appellate counsel, we work hard at scrutinizing cases for that single strand that can turn trial court loss into victory.  We apply the forensic skills and appellate knowledge we've accumulated to the record.  And if we find the right thread and pull it, sometimes our efforts are rewarded with a reversal.  But what sets that kind of effort apart from the appeal in Brown?  

Brown provides some insights into a valid appeal and the line between vigorous advocacy and sanctionable conduct.  Although there are various terms of art involved, perhaps one way to describe the irreducible minimum is a "viable issue."  If you have that, then whether you win or lose, your appeal should fall on the proper side of the line.

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In my recent blog entry, 998 Update: Avoiding the Wreckage, I mentioned that the CCP 998 decisions keep on coming.  Little did I know that even more were on the way.  Each new decision covers a wrinkle that could affect the outcome of a case in dramatic ways.  And so as lawyers, we have to constantly update our understanding of how the statute works.  It's actually not that easy -- the more one ponders the operation of the statute -- the more one sees additional potential complications.  All of which can make evaluating a 998 offer a stressful process, after all, our clients are relying upon our expertise, right?

In an attempt to share some accumulated knowledge and reduce that stress, Don Willenburg of Gordon & Rees and I are taking our 998 MCLE presentation on the road.  We are presenting in San Jose on April 4 in conjunction with the Santa Clara County Bar Association.  You can find the details here:  m360.sccba.com/event.aspx  And then on May 17, we will be presenting at the Contra Costa County Bar Association in Martinez: http://www.cccba.org/attorney/calendar/event.php?id=1457

Both programs are two hours long and will cover a spate of recent 998 decisions.  I hope you can join us and share some insights and war stories of your own.  In the meantime, here is a list of the more recent decisions that may cause you some, well, "excitement."

998 Decision Summaries

Hope to see you in San Jose or later, in Martinez.

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Evaluating Code of Civil Procedure section 998 offers brings to mind the partner that every associate meets – the one that ends the assignment with, “It shouldn’t take long – it’s a no-brainer.” Of course, that assignment is always anything but a “no-brainer.” The same can be said about analyzing 998 offers. While the statute’s principles are easily understood, its operation can be devilish. In reality, analyzing 998 offers is complex, key details are easily overlooked and mistakes, costly.

Quite often, multiple offers are made during the course of litigation. This is deep water, strewn with the wreckage of parties making erroneous conclusions about the viability of prior offers. A recent decision, Martinez v. Brownco Construction Company, Inc. 2012 Cal.App. LEXIS 122, drives home the risk of being wrong on the law.

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By Limor Lehavi

Default judgments can be appealed for failure to state a cause of action and excessive damages.  That is the holding of a recent opinion written by Justice Bedsworth for the California Court of Appeal, Fourth Appellate District, in which the court overturned a default judgment, and entered judgment for the defendants instead.  (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267.)

The complaint was filed by a creditor for payment on promissory notes.  The creditor attached seven promissory notes to the complaint.  The creditor also alleged that the debtors complied with the loan obligations until approximately one year before the complaint was filed.  Six of the notes had maturity dates that were much earlier, and the creditor did not allege any extensions had been given.  The seventh note required payment only when the business had cash available, and the complaint did not allege that cash was available.  Although the complaint failed to state a cause of action, the court entered a default judgment for $30 million.

But the default judgment would not stand.

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A recent decision by the Third Appellate District is a reminder of the opportunity and the limits of a motion for judgment on the pleadings.  The case is Collins v. eMachines, Inc. 

In Collins, the plaintiffs brought a putative class-action against eMachines for defects in its computers.  eMachines moved for judgment on the pleadings.  As set forth in Code of Civil Procedure section 438, judgment on the pleadings allows a plaintiff to assert that the answer does not state facts sufficient to constitute a defense.  And as is more commonly used, judgment on the pleadings allows a defendant to allege jurisdictional defects or that the complaint/cross-complaint fails to state a cause of action.  Judgment on the pleadings can be used if the opportunity to demur has passed.

The trial court, in a two-sentence order, granted judgment on the pleadings as to plaintiffs' Consumer Legal Remedies Act (CLRA), Unfair Competition Law (UCL), common law fraud and unjust enrichment causes of action, then dismissed the complaint with prejudice.  The court stated that plaintiffs did not and could not allege any facts to support their claims. 

The plaintiffs appealed.

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Every now and again an appellate decision comes down the pike with the banner, "they didn't, did they!?"  A recent decision, Kimes v. Grosser, 2011 Cal.App. LEXIS 671, is a notorious example.  Cat lovers, stop reading now.  But those annoyed by a neighbor's cat, dog, or even the neighbors themselves, here's your chance to take a deep breath.

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The United States Supreme Court heard oral argument last week in a case further exploring the contours of the Miranda warning, J.D.B. v. North Carolina.  The issue is whether an interrogator should, or must, consider the suspect's age in determining whether to give the warning.  The facts involved a 13 year old student corralled in a school office with two police officers and an assistant principal.  The dispute is whether, under the Court's latest Miranda jurisprudence, a court should presume the student felt free to leave--the upshot of the North Carolina supreme court's holding that no Miranda warning was necessary because the boy was not in custody.

Like the Court's prior decisions revisiting Miranda, the ideological divide is wide and judicial temperature, well, a little heated.  Counsel for the student argued that "The empirical data demonstrates to us that the older a child is to an adult, the more adult-like they are."  Justice Scalia immediately fired back, asking if she really needed data to reach that conclusion.  Ouch.

Of course, the gallery broke up.

And when Justice Breyer asked North Carolina Attorney General Roy Cooper, "You know the sentence I'm referring to in my dissent, presumably,?"  Scalia broke in with "Some people don't read dissents.  He may not have read it."  To which Breyer parried, "I live always in hope."  Hope, and on a Supreme Court with Justice Scalia, a thick skin. 

Here's a little taste of Scalia at his bitter best, dissenting in Dickerson v. United States, 530 U.S. 428, 465 (2000), back in the bad-old-days when Miranda revision wasn't going his way:

Today's judgment converts Miranda from a milestone of judicial overreaching into the very Cheops' Pyramid (or perhaps the Sphinx would be a better analogue) of judicial arrogance. In imposing its Court-made code upon the States, the original opinion at least asserted that it was demanded by the Constitution. Today's decision does not pretend that it is -- and yet still asserts the right to impose it against the will of the people's representatives in Congress.

Tell us how you really feel, Antonin.

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An ongoing and unresolved question in California is whether Labor Code section 2750.5 applies to homeowners and makes them the "employer" of an unlicensed contractor and the unlicensed contractor's employees.  Think about that one.  You hire a contractor to spruce up the bathroom or remodel the kitchen.  One of the workers is injured.  And the contractor turns out to be unlicensed. 

So?  So the Privette doctrine does not apply.  So myriad Cal-OSHA and other regulations may be used by the plaintiff to create a presumption of negligence under Evidence Code section 669.  (Elsner v. Uveges (2004) 34 Cal.4th 915, 928.)  So being deemed plaintiff’s employer can also expose you to civil and criminal penalties, not just tort liability.  (See, e.g., Labor Code § 6423 et seq.)  And depending on the language in your homeowners’ policy, being deemed an “employer” could trigger the “business pursuits” coverage exclusion.  These are only some of the ways that being deemed an employer can carry potentially devastating consequences.

As the California Supreme Court recently put it, "whether unlicensed contractors or their workers may or must be deemed the homeowners’ employees under [Labor Code] section 2750.5, either for purposes of tort liability generally or with regard to Cal-OSHA specifically, are difficult and unsettled questions in this court.”  (Cortez v. Abich (2011) 51 Cal.4th 285, 291.)  And unfortunately, the Court missed a golden opportunity in Cortez to resolve these issues, leaving in place instead an alternative approach that is bound to create inconsistent results in the trial and appellate courts.

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Code of Civil Procedure section 998 offers rest upon a simple concept.  As one Court of Appeal put it, 998 offers "encourage settlement by providing a strong financial disincentive to a party--whether it be a plaintiff or a defendant--who fails to achieve a better result than that party could have achieved by accepting [a 998] settlement offer. (This is the stick. The carrot is that by awarding costs to the putative settler the statute provides a financial incentive to make reasonable settlement offers.)"  (Bank of San Pedro v. Superior Court (1992) 3 Cal. 4th 797, 804.)  But if the carrot and stick is a simple concept, it's the actual business that can be complicated. 

The starting point is a valid offer that a trial court finds to be "reasonable and made in good faith."  (See, e.g., Nelson v. Anderson (1992) 72 Cal.App.4th 111, 134.)  A recent Court of Appeal decision aptly demonstrates a wrinkle--the tricky business of serving a 998 offer with a complaint.  Wait a minute, can you do that?  The answer is, "it depends."

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I've been preparing for my 12th consecutive year teaching moot court class at Hastings.  This time, I'm using United States v. Pineda-Moreno.  That's the Ninth Circuit case holding that the Fourth Amendment is not violated when police officers sneak on to your driveway in the wee hours of the morning and attach a GPS tracking device to the underside of the car.  Have you looked under there lately?  Maybe that rattling noise is not just a loose muffler.  Anyway, as I've previously noted, some of the most entertaining judicial opinions are dissents.  Pineda-Moreno is no exception:

In the controlling opinion, Circuit Judge O'Scannlain writes that given the lack of a fence, gate or other obstruction, "If a neighborhood child had walked up Pineda-Moreno's driveway and crawled under his Jeep to retrieve a lost ball or runaway cat, Pineda-Moreno would have no grounds to complain."  (U.S. v. Pineda-Moreno, 593 F.3d 1212, 1215.)

In the subsequent dissent from the denial of the petition for rehearing en banc, Chief Judge Kozinski writes: "The panel authorizes police to do not only what invited strangers could, but also uninvited children--in this case crawl under the car to retrieve a ball and tinker with the undercarriage. But there's no limit to what neighborhood kids will do, given half a chance: They'll jump the fence, crawl under the porch, pick fruit from the trees, set fire to the cat and micturate on the azaleas. To say that the police may do on your property what urchins might do spells the end of Fourth Amendment protections for most people's curtilage."  (U.S. v. Pineda-Moreno, 617 F.3d 1120, 1123.)

Touche!

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So the client is on the wrong end of a judgment.  And at the very end of the judgment, the court says the other side "shall recover . . . attorney fees and costs of suit."  The judgment is entered and notice of entry is served.  Counsel timely appeals.  The notice of appeal states that the appeal is a challenge to the fee award. 

Counsel chooses to use an appellant's appendix, saving client some record preparation costs, and starts drafting the opening brief.  In the meantime, at the trial court, the issue of fees is resolved after the usual briefing and a hearing.  An order stating the amount of fees client has to pay is entered.  Counsel makes sure to include that order in the appendix.  The opening brief is filed.  Confident in getting the fee award undone, counsel waits for the response brief.

But what arrives is a motion to dismiss the appeal.  A bead of sweat emerges on counsel's forehead.  Counsel grabs the appendix, checks the notice of entry date, compares the notice of appeal date, it's well within 60 days.  Everything will be okay.

Or will it?

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The California Supreme Court heard oral argument today in a case that could result in a chilling effect on attorney-client communications.  The questions presented are 1) Are the private conversations of an attorney and client for the purpose of mediation entitled to confidentiality under Evidence Code sections 1115 through 1128; and, 2) Is an attorney a "participant" in a mediation such that communications between the attorney and his or her client for purposes of mediation must remain confidential under Evidence Code section 1119, subdivision (c) and 1122, subdivision (a) (2)?  As to third-parties, the answers would seem obvious.

But this is not about third-parties.  It's about a subsequent malpractice claim.

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California’s economic downturn means that public works projects are fewer in number and smaller in scale as local and state agencies grapple with reduced funding. As a result, public works bidding is more fiercely contested than ever. A recent decision provides a good example. (Schram Construction Inc. v. The Regents of the University of California (2010) 187 Cal.App.4th 1040.)

In Schram, the University sought bids for the design and construction of the mechanical, electrical and plumbing work for UCSF Medical Center at Mission Bay. The bidding was structured around multiple packages and trades. The University used the “best value” method, a modified approach awarding the bid to the bidder with the best ratio between bid price and best-value-questionnaire score. (See Public Contracts Code § 10506.5(g).) The idea is that this method incorporates and weighs factors other than the bid price, resulting in the best contractor being selected from among the lowest bidders. 

After the first set of bids were received and reviewed, the University decided that the bidding should be redone. In addition to the original six bid packages, the University invited bids on three alternative packages. It also changed the weights given to various factors used to calculate the best value scores. Schram Construction Inc. (SCI) initially bid on just two independent bid packages. Later, SCI did not bid on any of the new, alternative packages, choosing instead to bid on three of the separate bid packages. Two of its separate bids, if combined, covered one of the alternative bid packages: the HVAC (heating, ventilating and air conditioning) and plumbing for the Energy Center and Outpatient Building. But the University awarded that work to another bidder on the grounds that SCI did not bid the alternative package. As a result, SCI was not even considered for that work.

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“It doesn't take Hamlet to figure out that something rotten happened in this case.” So begins Great West Contractors, Inc. v. Irvine Unified School District 2010 Cal.App. LEXIS 1521. And when the author is the Fourth District’s Justice David Sills, a little entertainment is bound to be included with the enlightenment. But if you are involved in public works contracting, Great West is far from comedy. It’s a dramatic reminder of the perils and pitfalls facing contractors and counsel. With fewer private projects underway, more firms are bidding on public work. And it’s not like there’s a lot of public projects to bid on either. To the qualified low bidder, goes the rare and coveted work. That’s the theory anyway. Great West exemplifies how ephemeral the phrase “winning bid” can be.

"Responsible bidder” means “a bidder who has demonstrated the attribute of trustworthiness, as well as quality, fitness, capacity and experience …” (Public Contracts Code § 1103.) If the low bidder is found to be nonresponsible, it is entitled to a hearing before the bid can be awarded to another bidder.  (D.H. Williams Construction Co. v. Clovis Unified School Dist. (2007) 146 Cal.App.4th 757, 772.) In contrast, “a bid is responsive if it promises to do what the bidding instructions demand.” (Taylor Bus Service, Inc. v. San Diego Bd. of Educ. (1987) 195 Cal.App.3d 1331, 1341.) Responsiveness is “readily ascertainable on the face of the bid.” (Great West Contractors, 2010 Cal.App. LEXIS 1521 at p. *65.) Examples of nonresponsiveness include the low bidder proffering an “insurance trust” instead of the requested CGL policy, proposing to lease a phone system instead of selling it as the bid package required, failure to include requested documentation of compliance with an outreach program, and failure to list the required “class A” license.  

So what happened in Great West? 

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Whether prelitigation proceedings under the Calderon Act, Civil Code section 1375 et seq., come within a carrier's duty to defend any "suit" is apparently an issue of first impression.  Or at least, it was.  Such proceedings are covered.  In Clarendon America Insurance Co. v. StarNet Insurance Co. (2010) 186 Cal.App.4th 1397, the Fourth District holds that prelitigation proceedings are "civil proceedings" as that term is used to define a "suit" under the policy.

The Calderon Act requires common interest development associations (of projects greater than 20 units), to give notice to a builder, developer, or general contractor of construction or design defects before suing.  Calderon sets forth a litany of prelitigation steps aimed toward settlement.  (See Civil Code section 1375 subd. (a) - (s).)  If the dispute is not resolved via the Calderon process, then suit may be filed.  The complaint is deemed to have been filed on the date the Calderon notice was served.  (See Civil Code section 1375.05  subd. (b).)

In Clarendon, Centex homes developed a residential development covered by Calderon.  As Calderon requires, the homeowners association served a notice of commencement of legal proceedings prior to filing suit against Centex.  The notice contained the requisite list of alleged construction defects.

Centex was an additional insured on a subcontractor's policy with StarNet Insurance Company.  As is typical, the policy's defense agreement stated that StarNet had the "duty to defend the insured against any 'suit' seeking [ ] damages."  The term "suit" was further defined as "a civil proceeding in which damages . . . to which this insurance applies are alleged."  Centex sued carrier Clarendon, which cross-complained against StarNet, seeking a declaration that StarNet was obligated to defend Centex.

So what happened? 

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Being an appellate lawyer is having the luxury (generally speaking) of time to delve into the slightest nuances in the case law in vigorous detail.  And one of the side benefits of reading so many cases is encounters with colorful dissents.  As lawyers know, there's nothing like bitterness to give a fine edge to judicial opinions.  Read any of Justice Scalia's dissents and you immediately become aware of being in the presence of a great writer, not just legal writer.  You also cannot help but wonder which parts got left on the cutting room floor as just a little too inflammatory.  

One of the greatest examples of this art form is Justice Scalia's dissent in Dickerson v. Arizona, 530 U.S. 428 (2004).  Some snippets to whet your appetite:

"Those to whom judicial decisions are an unconnected series of judgments that produce either favored or disfavored results will doubtless greet today's decision as a paragon of moderation, since it declines to overrule Miranda v. Arizona . . . Those who understand the judicial process will appreciate that today's decision is not a reaffirmation of Miranda, but a radical revision of the most significant element of Miranda . . ." 

"And so, to justify today's agreed-upon result, the Court must adopt a significant new, if not entirely comprehensible, principle of constitutional law."

"Today's judgment converts Miranda from a milestone of judicial overreaching into the very Cheops' Pyramid (or perhaps the Sphinx would be a better analogue) of judicial arrogance."

Ah.

Ninth Circuit Chief Judge Alex Kozinski is no slouch either when it comes to pen as sword.  Just a week ago Judge Kozinski dissented from the denial of a petition for rehearing en banc in United States of America v. Pineda-Moreno, 2010 U.S. App. LEXIS 16708.  Here's a taste:

"Having previously decimated the protections the Fourth Amendment accords to the home itself . . . our court now proceeds to dismantle the zone of privacy we enjoy in the home's curtilage and in public."

Oh, the bitterness!  And that's just the opening sentence!  There's more, but why spoil it for you?

Word wars.  Enjoy.

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Here's the first post written by the new addition to Archer Norris' appellate team, Gary A. Watt.

 

As you have probably heard by now, Chief Justice Ronald George made a surprise announcement last week; he is retiring. And now Governor Schwarzenegger has nominated Third District Justice Tani Cantil-Sakauye for chief justice. Cantil-Sakauye, 50 years old and wife of a police officer, has been a justice on the Court of Appeal for the past 5 years. If confirmed, she would give the Supreme Court some firsts. She would be the first Asian-American chief justice (Cantil-Sakauye is of Filipino descent) and the court would have its first ever female majority.

 

Since the announcement, Cantil-Sakauye has gained the public support of Chief Justice Ronald George as well as Third District Presiding Justice, Arthur Scotland. Known as a moderate republican or a law and order republican, Cantil-Sakauye's resume includes stints as a prosecutor, municipal/superior court judge (14 years), and deputy legal affairs secretary and deputy legislative secretary under Governor George Deukmejian. The daughter of farm workers, Schwarzenegger called Cantil-Sakauye "a living example of the American Dream."

 

Of course, intense scrutiny will follow the nomination. For those of you interested in her judicial opinions, you might start with the following from among her nearly 75 published opinions: People v. Memory (2010) 182 Cal.App.4th 835 (reversing murder convictions due to admission of irrelevant, improper character, and prejudicial evidence of defendants' relationship to notorious motorcycle gang); Bledsoe v. Biggs (2008) 170 Cal.App.4th 127 (upholding teacher layoffs despite less-qualified teachers remaining on the job as permitted by the Education Code); and Shaw v. People ex rel Chiang (2009) 175 Cal.App.4th 577 (striking down Legislature's appropriation of $1.2 billion from California's gas tax in attempt to service bond debts).

 

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On April 17, 2009, the California Court of Appeal for the Fourth Appellate District, Division Three, issued its opinion in Century 21 Chamberlain & Associates v. Haberman, 09 C.D.O.S. 4609.

Century 21 filed an action against Haberman and Pacific West Association of Realtors (PWAR), arising from the sale of Haberman’s house. Century 21 asserted two causes of action: (1) account stated, arising from Haberman’s failure to pay on a loan secured by a deed of trust; and (2) declaratory relief, arising from Haberman and PWAR’s insistence that the parties arbitrate Century 21’s claims.

In response to Century 21’s complaint, Haberman filed an anti-SLAPP motion to strike the complaint, arguing that Century 21’s causes of action arose from Haberman’s constitutionally protected activity. The trial court denied Haberman’s motion, and the Court of Appeal affirmed.

The Court found that Century 21’s cause of action for account stated could not arise from protected activity, because it necessarily arose from Haberman’s failure to repay the loan as agreed. It also found that the cause of action for declaratory relief did not arise from protected activity. Although the cause of action arose from Haberman’s arbitration demand – arguably an exercise of free speech – the arbitration demand itself did not fit any of the four categories of protected activity enumerated in Code of Civil Procedure section 425.16. Private arbitration is not a judicial proceeding, but an alternative to it. It is also not an “official proceeding authorized by law”, because it is not subject to administrative mandate nor is it required by statute.  Finally, a demand for private arbitration is neither a public issue nor an issue of public interest.

As the Court noted, “It would be anomalous if the anti-SLAPP statute could be used to strike a declaratory relief cause of action seeking to avoid arbitration. Generally, the court must determine whether a dispute is subject to contractual arbitration, unless the parties clearly and unmistakably agree otherwise. [Citations.] It would provide cold comfort to parties resisting arbitration to recognize their right to a judicial determination of arbitrability, yet strike their means for obtaining that determination before arbitration.”

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The Court of Appeal for the Second Appellate District, Division Seven, issued an interesting decision this week regarding the importance of insurance adjusters attending mandatory settlement conferences and other court-ordered alternative dispute resolution dates.

Vidrio v. Hernandez 09 C.D.O.S. 4465 concerned a personal injury action by Vidrio against Hernandez (insured by Mercury) arising out of an automobile accident. The matter was mediated without resolution, and Hernandez’s counsel subsequently served Vidrio and another plaintiff with Code of Civil Procedure section 998 offers of $1,000 each.

The court then ordered the parties to participate in a mandatory settlement conference. Local court rules required that an adjuster with “full authority” to settle the case also attend. Mercury complied. However, in response to Vidrio’s offer to settle for $30,000, Hernandez and Mercury refused to increase their offer from the section 998 offers previously served.

The trial judge was incensed, and at a subsequent order to show cause hearing found that Mercury had failed to participate in the mandatory settlement conference in good faith. It sanctioned Mercury $1,500 payable to the court and $357.50 payable to Vidrio’s counsel.

The Court of Appeal overturned the sanctions award. It found that the only authority for the imposition of sanctions against a non-party insurance carrier came from Local Rule 2.30, allowing the court to sanction a party or non-party required to attend a mandatory settlement conference for an unexcused failure to do so. However, the Court of Appeal noted that nothing in that rule or any other applicable statute provided a proper basis for awarding sanctions for the failure to “participate meaningfully in settlement negotiations.” The Court of Appeal observed that “Hernandez filed an appropriate settlement conference statement; her lawyer and Mercury attended the conference and participated in it. While the trial court’s frustration at the parties’ lack of movement is understandable, no more was required.”

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 The Court of Appeal for the First Appellate District, Division Three, recently published its decision in Gundogdu v. King Mai, Inc. (2009) 171 Cal.App.4th 310. King Mai, Inc. was represented on appeal by Archer Norris's Ric Blumhardt and Allan Isbell and Lorber, Greenfield & Polito, LLP's Ron U. Lunski. Together, they successfully convinced the Court of Appeal to affirm summary judgment for King Mai, Inc. on the grounds that the Gundogdus’ claims were barred by the ten-year statute of limitation in Code of Civil Procedure section 337.15 as applied to a claim for defective construction of residential property.

In 1995, King Mai constructed a home, which it sold to the Gundogdus in 1997, sixteen months after completion of construction. The Gundogdus subsequently brought an action against King Mai for negligence and breach of implied warranty arising from alleged defects in the home’s original construction. The action was brought more than ten years after construction of the home, but less than ten years after it was sold to the Gundogdus by King Mai. King Mai successfully moved for summary judgment on the ground that the Gundogdus’ action was completely barred by section 337.15. 

On appeal, the Gundogdus argued that the ten-year statute of limitation had been equitably tolled pursuant to section 337.15, subdivision (e), during the sixteen-month period of King Mai’s passive ownership of the property and completion of construction.

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In Compulink Managements Center, Inc. v. St. Paul Fire and Marine Ins. Co., et al California’s Second District ruled that, regardless of Compulink’s claims for bad-faith, the parties’ dispute over the reasonableness of independent counsel’s fees must be arbitrated pursuant to Cal. Civil Code Section 2860.

Not a very glamorous subject, I know, but an important decision for many litigators wanting to get paid by their client’s insurers. 

Civil Code Section 2860 mandates arbitration of any dispute over the reasonableness of independent counsel’s attorney’s fees that must be paid by an insurer. Here, the court clarifies whether, when a coverage action is brought alleging numerous and various claims against the carrier, only one of which happens to be a dispute over the reasonable of independent counsel’s fees, the arbitration of the fee issue is still required. Their answer was “yes”.

The trial court had denied St. Paul’s petition to compel arbitration, stating that Compulink’s bad faith claims took the action beyond the purview of Section 2860. The Second District disagreed, finding that the plain language of the statute required arbitration of any fee dispute and did not provide for an exception in cases where bad-faith allegations were made by the insured.

The opinion is pretty straightforward. What the opinion fails to address, however, are the practical implications of such a ruling. For instance, what about where the insured claims that not only is he owed fees paid to independent counsel, which haven’t been paid by the insurer at all, but that the insurer is also liable for bad-faith.

Can you try such a case without bifurcating the duty to defend and the bad-faith claims? Can the arbitrator determine the reasonableness of the fees before the court determines whether the insurer had a duty to defend in the first place? Why would you want him/her to? And to throw another kink into the process, the court made clear that the mandatory arbitration of Section 2860 applies only to attorney’s fees, not all defense fees and costs (e.g. expert fees).

The legislature intended the mandatory arbitration provision of Civil Code 2860 to prevent the state’s judicial system from bearing the cost of fights over the reasonable of attorneys’ fees -- An understandable and prudent motive. Yet, as in many things, the practical implications may achieve quite the opposite effect.

 

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This week the California Supreme Court dealt a blow to the holiday spirit of "do unto others" with its decision in Van Horn v. Watson, ruling that a woman who pulled her friend from the car following an accident and caused her paralysis could be tried for causing the injuries.

Relying on the principle, "that one who assumes to act, even though gratuitously, may thereby become subject to a duty of acting carefully, if he acts at all." Artiglio v. Corning, Inc. (1998) 18 Cal.4th 604, 613, the Court held that there was no immunity for a Good Samaritan not performing emergency medical services.

 

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Yesterday, the First District issued a published opinion in Madden v. Summit View clarifying the state of existing law regarding the Privette/Toland doctrine and the level of affirmative conduct necessary to impose liability on a general contractor for injuries to an employee of an subcontractor.  

Bill Staples of Archer Norris represented Summit View, Inc. at the trial court level and successfully argued in favor of summary judgment (against a tentative ruling) that Madden had no claim against Summit View as the general contractor pursuant to the Privette/Toland line of cases.

Madden appealed and we represented respondent Summit View on appeal. Yesterday, the First District issued its decision in the case, affirming summary judgment in favor of our client in full.

The opinion was published and clarifies the state of existing law regarding the Privette/Toland doctrine, and the level of conduct necessary to qualify as affirmative conduct under Hooker v. Department of Transportation (2002) 27 Cal.4th 198 and Millard v. Biosources, Inc. (2007) 156 Cal.App.4th 1338. 

The court also held that the decisions in Elsner v. Uveges (2004) 34 Cal.4th 915 and Evard v. Southern California Edison (2007) 153 Cal.App.4th 137 regarding the admissibility of Cal-OSHA regulations, did not abrogate the Privette/Toland line of decisions, nor did they hold that such regulations expand a general contractor's duty of care to the injured employee of a subcontractor.  Instead, the court held that safety regulations are only admissible in actions by employees of subcontractors brought against general contractors where other evidence establishes that the general contractor affirmatively contributed to the employee's injuries.

 

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On a more serious note than clapping jurors (see previous post), the Supreme Court published its ruling in Crawford v. Weather Shield Mfg., Inc. yesterday, explaining that, in the context of indemnity agreements, a contractual duty to defend may be separate and distinct from the duty to indemnify.

Previously, in Regan Roofing Co. v. Superior Court (2004) 24 Cal.App.4th 425, the court held that a contractor’s duty to defend pursuant to an indemnity agreement only arose if the indemnity obligation was triggered. So, for example, if the indemnity agreement required that a subcontractor be found negligent in order for its indemnity obligation to be triggered – its defense duty was not triggered either until such showing.

Not so says the Supreme Court. Where an indemnity agreement provides a “duty to defend” rather than a mere promise to pay defense costs as part and parcel of its indemnity obligation, the duty is triggered upon the making of allegations that fall within the indemnity obligation. More importantly, the Court held that this duty to defend is implied in every indemnity agreement pursuant to Civil Code Section 2778. So if parties do not intend to be liable for providing a defense before their own indemnity obligation is triggered, the contract must specifically state as much.

Now, I am not an expert in construction defect litigation by any means. However, it seems to me that the indemnity cross-complaints that begin to fly as soon as a construction defect action is filed against a general contractor may be better suited to separate claims for declaratory relief on the duty to defend in light of this ruling. Moreover, who gets to control the defense? What if there are fifty subs who all owe a duty to defend the general and they can’t agree on a lawyer? Through years of trial and error (and a lot of litigation), liability insurers have had lots of practice nailing down the boundaries of their defense obligations. Contractors, at least in my limited experience, have paid less attention to the terms of the indemnity agreements in a standard construction contract. Looks like that may need to change, and quick.

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Yesterday in Bandana Trading Co., Inc. v. Quality Infusion Care, Inc., the Second District held that a juror's clapping during closing argument in response to counsel's reminder that the jury could disregard testimony by a witness it believed was not credible did not prejudice appellant's case.  

Apparently, Juror No. 2 thought someone was lying and exuberantly expressed her opinion in court.  The Second District didn't believe it was prejudicial since the case was nearly over and the other jurors, when polled, couldn't remember what had prompted the applause.

I am sure respondent's counsel just felt lovely after that little show of enthusiasm......

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Yesterday, the Third District determined that the time for filing an appeal was triggered by the court's alternative decree regarding dissolution of the parties' limited liability company, rather than from the final judgment on plaintiff's dissolution complaint.

Sometimes the timing for filing a notice of appeal is trickier than one might think.

In Dickson v. Rehmke, one partner of a Limited Liability Company brought suit for dissolution of the company. Pursuant to California Corporations Code Section 17351 the court had three appraisers value the company and each partner's interest, then issued an alternative decree ordering plaintiff to either pay defendant for his share or the process of winding up the business and dissolution would commence. It's not entirely clear from the court's opinion how explicit the trial court's order was, yet, the court comments that the order should have been specifically worded as an alternative decree, but it wasn't. Regardless, the import of the order was that - if plaintiff paid defendant his share, the court would issue a judgment in favor of defendants on plaintiff's dissolution complaint -- Should plaintiff decided to forego payment and permit the process of dissolution and winding up to move forward, judgment on the complaint would issue at the conclusion of that process.

Plaintiff paid defendant for his interest and judgment was entered in favor of defendant. Plaintiff appealed from the judgment.

The court, however, ruled that the appeal was untimely -- That the order plaintiff should have appealed from was the order of decree itself pursuant to the language of Section 17351. According to the court, the issue of the valuation of the business (which was the subject of plaintiff's appeal) was decided by the alternative decree, not the judgment. The judgment was merely a way to "terminate the proceedings" following the court's valuation:

That a judgment will follow the alternative decree upon a tender does not mean the party making or accepting the tender who is dissatisfied with the valuation may await its entry to appeal that issue. This later entered judgment is on the underlying dissolution complaint for the purpose of terminating that proceeding through denying the requested relief. This judgment is not a vehicle for raising the issues of valuation on appeal, because the dissolution proceeding itself never embraced them.

The timing of an appeal from valuation of a company pursuant to Section 17351 may not arise very often in your day-to-day practice. Yet, time and again, appeals are dismissed because attorneys automatically assume they can always appeal from the judgment, rather than from an interlocutory order. As the Dickson case illustrates, this is not always the case. Check and double check those rules. And, if your instincts tell you that an order issued by the court is irrevocable and finally decides a case against your client, check again. Your instincts are probably right that the time for an appeal is from the order, not from the judgment.

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This article was submitted by Jonathan W. Thames at Archer Norris.

The US Supreme Court today released a very significant decision on maritime punitive damages in the Exxon Valdez case, Baker v. Exxon Shipping. The Court granted certiorari to address three issues: (1) whether the general maritime law allows corporate liability for punitive damages on the basis of unratified acts of managerial employees; (2) whether the federal Clean Water Act forecloses an award of punitive damages because the statute provides for civil penalties and thus preempt any punitive damages award; and (3) whether the $2.5 billion punitive damages award confirmed by the federal appellate court (the Ninth Circuit) was excessive as a matter of the general maritime law.

Under the general maritime law can an employer be liable for punitive damages for the reckless acts of its managerial employees?

As we all know, the law in most every state for land-side cases is that employers are responsible for punitive damages for the acts of their employees that merit punitive damages. This is consistent with both the majority of states' common law (punitive damages available for acts of any employees) and the Restatement (Second) of Torts § 909(c) (1977) (punitive damages okay for acts of only managerial employees). The Ninth Circuit allowed punitive damages against Exxon directly for the acts of its managerial employee, Captain Hazelwood.

Exxon argued, though, that the general maritime law is different, and has been for over a century. Based on two very august cases from the 19th century (, Exxon argued that a vessel owner is not liable for the reckless acts of the master. It conceded that a vessel owner would be liable for the negligent acts of the master through the theory of respondeat superior, certainly, but not for reckless acts which were not "directed, countenanced or participated in by the owners." This relates to punitive damages because punitive damages cannot be awarded for merely negligent conduct, and thus vessel owner could not be on the hook for punitive damages for the reckless acts of the vessel's master or any of its employees. Baker argued, though, that the Ninth Circuit's decision should be affirmed, and the Supreme Court should bring the general maritime law in line with state common law and the Restatement. 

This could have been a very important ruling, but the Supreme Court for once exercised judicial restraint and punted. The justices were equally divided on the question, and so they left the Ninth Circuit's decision undisturbed-no reversal, no remand, no affirmation. The rule in this situation is that the appellate court's decision stands, but the Supreme Court's not reversing the decision has no precedential effect--it is not tantamount to an affirmation. Accordingly, the law in the Ninth Circuit will stand, and vessel owners can be liable directly for punitive damages for the reckless acts of their employees. However, this may or may not be the law in the various other circuits-they remain able to reach their own decisions, since the Supreme Court did not provide any certainty.

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Congratulations to Jon Tonsing on his most recent success in front of the First District in Lambert v. Carneghie (2008) 158 Cal.App.4th 1120!

Carneghi was a party appointed appraiser for plaintiffs in a fire insurance arbitration. The plaintiffs were disappointed with the result of that arbitration, having been awarded $1.2 million against their fire insurance carrier, rather than the $3 million they sought. They then sued their attorneys, their experts, and Carneghi.  The trial court found that Carneghi was protected by arbitral immunity, and was hence not subject to suit. The Court of Appeal affirmed, and the California Supreme Court declined to review.

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Legal Pad reports on a stiff reminder about verifying your declarations and evidence before the Ninth Circuit.  A Special Master recommends sanctions and attorneys fees and costs against plaintiff attorneys for submitting knowingly unverified and questionable translations of a writ of judgment issued by a Nicaraguan Court in an attempt to enforce a judgment against Shell Oil Company and Dole Food Company here in the U.S.  According to the Special Master's report and recommendations (.pdf), the attorneys knew that the "translation" provided to them by a third party was not an accurate representation of the actual judgment and yet they failed to bring it to the attention of the Ninth Circuit. 

Another interesting tidbit -- The Second District decided to rehear their February decision in In re Rachel L., 08 C.D.O.S. 2453 (more commonly known as the case that took down home schooling). 

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Ever find yourself questioning a victory as the verdict is read?

In Zagami, Inc. v. James A. Crone, Inc., Case no. D049563 (4th Dist. Mar. 10, 2008), the Fourth District remanded a case for a rehearing on damages finding that the jury’s verdict was hopelessly ambiguous and refusing to choose between two internally inconsistent verdicts. 

Zagami sued James A. Crone, Inc. seeking compensation after equipment disappeared following delivery.  Zagami claimed an agent of Crone signed for receipt of the equipment upon delivery.  Crone argued it never received the equipment and were therefore not liable for its disappearance.

The special verdict form requested damages on (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) good and services rendered; and (4) an open book accounting. The jury returned a verdict in favor of plaintiff in the amount of $15,500 on issues 1, 2, and 4.  On the value of goods and services rendered, however, the jury found that the lost equipment was worth $30,000.

The attorneys made a tactical decision in not asking for clarification of the verdict from the jury.  Instead, they argued before the trial court as to which amount --  $15,500 or $30,000 – was the proper judgment.  The trial court entered judgment in the amount of $15,500.  Plaintiff appealed.

The Fourth District reiterated that, on appeal, the correctness of the trial court’s interpretation of a special verdict is reviewed de novo.  There can be no inference in favor of the prevailing party and there is no preference for upholding a special verdict where the confusion is caused by two questions within that verdict.  Nor can the court choose between inconsistent answers.  Therefore, unless the court of appeal can interpret the verdict intended by the jury from its language in light of the pleadings and evidence, the case will be reversed and remanded for another trial on the issue of damages – which is exactly what they did here.

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Yesterday, the Second District issued an unfortunate reminder that CCP §§ 425.16, subd. (i), and 904.1, subd. (a)(13) make an order either granting or denying a Special Motion to Strike (Anti-SLAPP) immediately appealable.  Waiting until entry of final judgment after the grant of a Special Motion to Strike that disposes of all of the issues in a case could mean waiving your right to appeal the decision at all.  Russell v. Foglio (February 28, 2008) 73 Cal.Rptr.3d 87.

Plaintiff was successful on its Special Motion to Strike.  Defendant mistakenly waited until the entry of final judgment in the case to appeal the court's order.  The Second District found that it was too late and that the court no longer had jurisdiction to hear the appeal on that issue. 

Interestingly, Justice Rubin's concurrence includes a request to the Legislature that amendment may be needed to protect the unwary.  He argues that a more workable solution may be to have a denial of a Special Motion to Strike to be immediately appealable, but not necessarily the granting of such an order.

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Fourth District decision seems obvious -- if you want to hold your employees to an arbitration agreement -- having them actually sign an agreement is necessary.   But having run a small business myself, I know all too well how often this does not happen.

So, here is your friendly reminder that those employee handbooks, while necessary and useful, are not the end all be all of your HR Departments.  Is it time to review those employee agreements?

Mitri v. Arnel Management Company (Dec. 12, 2007) :  Employees sued management company for sexual discrimination and harassment.  The employer tried to enforce an arbitration agreement based solely on the language of the employee handbook requiring arbitration.  Court says "not happening" without an agreement to arbitrate signed by each employee.

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In two separate decisions yesterday, the Second District issued a strong reminder of the difference between raising a triable issue of fact and proving elements of a cause of action on summary judgment.

In Nielsen v. Beck (Los Angeles County Super. Ct. No. BC339322) the found that there remained a triable issue of fact as to whether an attorney continued to represent his client beyond a substitution of attorneys.  The trial court ruled that continued conversation between counsel and his former client did not establish a triable issue of fact sufficient to defeat defendants’ claim that the cause of action was barred by the statute of limitations.  The court disagreed, finding triable issues of fact as to the scope of the attorney’s continuing relationship with his client and regarding the actual date of termination of that relationship.  

In Raven v. Gamette (Los Angeles County Super. Ct. No. BC337558), a tenant sued her landowner for negligent failure to secure the rental premises in light of previous criminal activity.  The landlord brought a motion for summary judgment arguing that his tenant could not prove a causal link between her injuries and his failure to take safety precautions.  The trial court agreed, ruling that plaintiff had “failed to submit admissible evidence establishing a causal link between her injuries . . . and . . . decedent’s alleged breach of duty [and t]hus, plaintiff failed to establish the element of causation in her cause of action for negligence.”  

The Second District overturned the decision admonishing, “In order to defeat defendant’s summary judgment motion, plaintiff only needed to raise a triable issue of material fact as to the issue of causation; she did not need to establish that element of her negligence cause of action.” (Emphasis added).
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While most attorneys strive to write well-argued briefs on substantially justified legal theories (yes, I am an optimist), I don’t believe even the most conscientious of us realized that years ago, the Ninth Circuit created the “Slubby Mass” rule regarding the filings of appellate briefs:

"In order to give fair consideration to those who call upon us for justice, we must insist that parties do not clog the system by presenting us with a slubby mass of words rather than a true brief."  N/S Corp v. Liberty Mutual Ins. Co. (9^th. Cir 1997) 127 F.3d 1145, 1146. (Emphasis added.)

Have Opinion Will Travel does a great job of summarizing this esteemed line of jurisprudence here, and bears no repeating. However, the First District has apparently adopted the Ninth Circuit’s impatience with frivolous appeals.

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