Litigation Update: January 2018

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A monthly publication of the Litigation Section of the California Lawyers Association.

  • Senior Editor, Eileen C. Moore, Associate Justice, California Court of Appeal, Fourth District 
  • Managing Editor, Reuben Ginsburg
  • Editor, Jessica Riggin
Qui Tam Action, Second Time Around.

In 2009, a plaintiff alleged in a qui tam action that a medical device company engaged in a series of wrongful acts, such as promoting unapproved and unnecessary medical devices and paying bribes. The United States investigated that plaintiff’s charges for nearly four years. Finally, on May 14, 2014, the United States intervened in that case and informed the court that it had reached a settlement agreement with defendant. The case was dismissed in June 2014 with prejudice as to that plaintiff.  On March 31, 2010, three months after the first qui tam plaintiff’s complaint was filed, and more than three years before the earlier qui tam plaintiff’s case was dismissed, the current plaintiff filed a qui tam complaint in Nevada federal district court that substantially mirrored the complaint filed earlier. The Ninth Circuit Court of Appeals held the second suit was precluded under 31 U.S.C. § 3730(e)(3), which prohibits bringing a qui tam suit based on allegations or transactions that are the subject of a civil suit in which the government is already a party. The appeals court affirmed the dismissal of the second action. (United States v. Biotronik, Inc. (9th Cir., Dec. 1, 2017) 876 F.3d 1011.)

Domestic Violence Restraining Orders.

A domestic violence restraining order was initially ordered in juvenile court with a three-year term. Several months after it was issued, the juvenile court terminated its jurisdiction over the children. Six months after the juvenile court terminated its jurisdiction, the restrained person violated the order. The protected person petitioned the family court to renew the order before the three years expired. The family court denied the request after concluding it had no jurisdiction, and told the protected person to file for a restraining order in family court. In reversing, the Court of Appeal stated: “In this case, we hold the family court has jurisdiction under Family Code section 6345, subdivision (a) to renew domestic violence restraining orders (DVROs) initially granted by the juvenile court.” (Priscila N. v. Leonardo G. (Cal. App. 2nd Dist., Div. 4, Dec. 1, 2017) 17 Cal.App.5th 1208.)

Libel Per Quod.

Plaintiff wrote a song called “What Was Your Name,” a Christian pro-life song. She created a YouTube account and uploaded a video for her song. Three months later, YouTube removed the video and replaced it with the image of a distressed face and this statement: “This video has been removed because its content violated YouTube’s Terms of Service.” The Internet page with the removal statement did not explain or provide any details as to how or why the video violated YouTube’s terms of service. It also did not refer to plaintiff by name. The removal statement, however, provided a hyperlink to an Internet page entitled “Community Guideline Tips.” That page reads: “Want a little more insight into the limits and exceptions in the Community Guidelines? Here are some helpful examples and tips.” Then follows a list, arranged in column format, of 10 categories: “Sex and Nudity,” “Hate Speech,” Shocking and Disgusting,” Dangerous Illegal Acts,” “Children,” Copyright,” “Privacy,” “Harassment,” “Impersonation,” and “Threats.”Each of these categories in turn has a hyperlink that provides readers with “further elaboration” about each category. Plaintiff filed a complaint alleging libel per quod. The trial court sustained YouTube’s demurrer without leave to amend. There are generally two types of libel recognized in California—libel per se and libel per quod. Defamatory language not libelous on its face is not actionable unless the plaintiff alleges and provesthat she has suffered special damage as a proximate result thereof. In affirming the trial court’s dismissal of the action, the Court of Appeal stated: “[Plaintiff] has provided no theory as to how the generalized statements on the Community Guideline Tips page were ever ascribed in any particular way to her. Instead, she goes in the other direction, asserting that YouTube should not ‘generically defame people like [herself].’” (Bartholomew v. YouTube, LLC (Cal. App. 6th Dist., Dec. 1, 2017) 17 Cal.App.5th 1217.)

“Water, Water, Every Where, Nor Any Drop to Drink,” The Rime of the Ancient Mariner.

The Department of the Interior, the agency that oversees delivery of water from the Colorado River to the Western states, published guidelines in light of the drought and increasing demands for water, after more than a century of litigation over the river’s water.  Although it has no enforceable rights to the water, the Navajo Nation, which has a vast reservation along the Colorado River, partially in Arizona, New Mexico and Utah, mostly on desert land, challenged those guidelines in federal court. One of the guidelines involves banking surplus water, and the Navajo Nation fears it will be disadvantaged when water is labeled surplus, and over the fact that the Navajo Nation’s use of water will be charged to Arizona’s apportionment.  The trial court dismissed the action for failure to show it is “reasonably probable” that the new guidelines threatened the tribe’s water rights or practical needs. In affirming dismissal of the action, the Ninth Circuit Court of Appeals stated: “[T]he challenged Guidelines do not, as far as the Nation has alleged, present a reasonable probability of threat to either the Nation’s unadjudicated water rights or its practical water needs.” (Navajo Nation v. Department of the Interior (9th Cir., Dec. 4, 2017) 876 F.3d 1144.)

Psychologist Loses His License.

Petitioner obtained his license to practice psychology in 1990. In 2011, the Board of Psychology notified him it was investigating complaints concerning his behavior and communications with patients. After he refused to be interviewed, petitioner was served with an investigational subpoena to give testimony. He did not comply with that subpoena, nor with a second one. The board thereafter ordered him to submit to a psychiatric examination within 30 days, but he did not submit to that either. Pursuant to Business and Professions Code §§ 820 and 821, an administrative law judge recommended petitioner’s license be revoked for failure to comply with an order for a mental health examination. The board followed the recommendation and revoked petitioner’s license to practice psychology. The trial court denied petitioner’s request to overturn the board’s decision. On appeal, petitioner argued he should be permitted to challenge the merits underlying the Section 820 order before he is required to comply with that order. He also argued that revocation of his license pursuant to Section 821 for his failure to undergo a Section 820 examination is unlawful. The Court of Appeal, after discussing the board’s interest in the mental health of psychologists, rejected petitioner’s constitutional and other arguments, and denied his petition for extraordinary relief, stating: “We hold that the Board is not required to show good cause for a section 820 order nor is a licensee entitled to challenge the basis for the order before submitting to the required examination.” (Fettgather v. Board of Psychology (Cal. App. 3rd Dist., Dec. 4, 2017) 17 Cal.App.5th 1340.)

Child Custody When Both Parents in the Military.

Mother and father are both active service members in the United States Air Force. They were married in 2009, had two children, and divorced in 2013. At the time of their divorce, both parents were stationed in South Carolina, and the initial custody order was for joint legal and physical custody. After the divorce, father relocated to Washington D.C., returning to South Carolina about once a month to visit the children. Later, the mother relocated to serve in Korea for one year. Then it was the father who was deployed. Family Code § 3047 says custody “shall revert to the order that was in place before the modification, unless the court determines that it is not in the best interest of the child.” At the time he was deployed, the father had physical custody of the children. When he returned, the trial court found that under a “regular” or “straight” best interest analysis, it would be in the children’s best interest to be in mother’s primary physical custody because mother was the parent more likely to facilitate contact. The court did not, however, believe this was sufficient to overcome the section 3047 presumption. Thus, the court ordered custody of the parties’ minor children to be with the father. The Court of Appeal reversed, noting that “when the trial court found it would be in the children’s best interest to remain in mother’s custody because she was the parent most likely to facilitate contact, the section 3047 presumption was overcome.” The appeals court concluded the trial court erred when it placed them with the father after it determined it was in the children’s best interest to be with their mother. The appeals court remanded the matter to the family court with instructions to issue a custody order based on the best interest of the children. (In re Marriage of Vargas & Ross (Cal. App. 3rd Dist., Dec. 4, 2017) 17 Cal.App.5th 1235.)

Motion For Class Certification Denied.

Plaintiff purchased an inflatable pool. On the pool’s packaging was a photograph depicting a group of three adults and two children sitting in the pool. When he got the pool home, however, he discovered it was not large enough to fit that many people. He filed a class action under the Consumer Legal Remedies Act (Civ. Code, § 1750 et seq.), the unfair competition law (Bus. & Prof. Code, § 17200 et seq.), and the false advertising law (Bus. & Prof. Code, § 17500). The trial court declined to certify the matter as a class action because the proposed class—consisting of more than 20,000 potential members—was not ascertainable under Code of Civil Procedure § 382. On appeal, plaintiff argued the class was ascertainable because the class definition was clear and simple: “‘All persons who purchased the Ready Set Pool at a Rite Aid store located in California within the four years preceding the date of the filing of this action.’” In affirming the trial court’s denial of class certification, the Court of Appeal stated that plaintiff “failed to articulate and support with evidence any means of identifying potential class members, as required by case law.” (Noel v. Thrifty Payless, Inc. (Cal. App. 1st Dist., Div. 4, Dec. 4, 2017) 17 Cal.App.5th 1315.)

Preliminary Injunction Affirmed in Part and Reversed in Part on Appeal.

Defendants are minority owners of a production company who served as chief executive officers until the company fired them. The company’s greatest success was the program Duck Dynasty. Defendants do not challenge the decision to fire them. Rather, they contend under the operating agreement that governs the company, they could not be removed from managing its day-to-day operations. The trial court issued a preliminary injunction in favor of defendants, reinstating them as managers of the day-to-day operations and barring the company from impinging on defendants’ rights as members of the board. Because the operating agreement permitted the board of managers to “manage the day-to-day business of the Company,” the Court of Appeal reversed the trial court’s order to the extent it reinstated defendants to their management positions, but affirmed the preliminary injunction barring the company from impinging on their rights as board members. (ITV Gurney Holding v. Gurney (Cal. App. 2nd Dist., Div. 1, Dec. 5, 2017) 18 Cal.App.5th 22.)

Proper Expert Testimony or Legal Conclusion?

Defendant, a medical doctor, appeals from his drug conviction in federal court, arguing the trial court erred in admitting expert testimony. At trial, the government introduced an expert witness, who testified without objection that defendant’s prescriptions were written “outside the usual course of medical practice” and “without a legitimate purpose.” On appeal, defendant contends the opinion testimony was an impermissible legal conclusion. Rule 702(a) of the Federal Rules of Evidence requires that expert testimony “help the trier of fact to understand the evidence or to determine a fact in issue.” Rule 704(a) clarifies that “[a]n opinion is not objectionable just because it embraces an ultimate issue.” The Ninth Circuit Court of Appeals noted, “it is sometimes impossible for an expert to render his or her opinion on a subject without resorting to language that recurs in the applicable legal standard.” In affirming, the appeals court held: “We hold that if the terms used by an expert witness do not have a specialized meaning in law and do not represent an attempt to instruct the jury on the law, or how to apply the law to the facts of the case, the testimony is not an impermissible legal conclusion.” (United States v. Diaz (9th Cir., Dec. 6, 2017) 876 F.3d 1194.)

Judicial Candidates & the First Amendment.

In an effort to keep judicial elections nonpartisan, Montana has restricted judicial campaign speech. Rule 4.1(A)(7) of the Montana Code of Judicial Conduct prohibits candidates from seeking, accepting, or using political endorsements in their campaigns. In 2014, plaintiff ran as a candidate for justice of the peace in Montana. The county Republican Central Committee endorsed his candidacy, and two prominent Republican officeholders were willing to consider doing so if he had asked. Afraid of violating rule 4.1(A)(7), he refrained from seeking or using those endorsements in his campaign. Plaintiff ultimately lost the election, but intends to run again in 2018. Although he would like to seek and use political endorsements during the next election cycle, he understands that he cannot do so as long as rule 4.1(A)(7) remains in place. Plaintiff alleges the rule violates his First Amendment rights. Montana argued the rule is narrowly tailored to ensuring the impartiality and independence of its judiciary. The federal district court granted summary judgment in favor of Montana. The Ninth Circuit Court of Appeals affirmed, citing Williams-Yulee v. Florida Bar (2015)135 S.Ct. 1656, which held Florida’s judicial solicitation provision was a permissible restriction under the First Amendment, and Wolfson v. Concannon (9th Cir. 2016) 811 F.3d 1176, which held a prohibition on contributions and a restriction on political campaigning for judicial candidates did not violate the First Amendment. In the present case, the appeals court stated: “We hold that Montana has compelling interests in an impartial and independent judiciary. Rule 4.1(A)(7) is narrowly tailored to those interests because it strikes an appropriate balance between a candidate’s speech and Montana’s interest in an independent and impartial judiciary.” (French v. Jones (9th Cir., Dec. 7, 2017) 876 F.3d 1228.)

Breach of Spousal Fiduciary Duties (Kept Investment Losses a Secret).

A husband and wife agreed husband would manage and control their Ameritrade account. The family law court ordered husband to pay wife $1,952,056.50 for breach of his spousal fiduciary duties in failing to disclose to her that he risked in options trading $8 million more than the $2.5 million in community assets she agreed he could trade in their investment account. The trial court determined husband’s undisclosed and reckless trading resulted in a loss of almost $4 million, in addition to losing the initial $2.5 million. On appeal, husband argued the purported duty of continuously updating a spouse on changes in investment values, or requiring his or her express permission for each and every transaction, is (1) impractical in today’s fast-moving electronic market, (2) contrary to statutory provisions allowing each spouse to manage community assets, and (3) contrary to the everyday reality of marriage, which includes “an ongoing conglomeration of hundreds, if not thousands of overlapping financial decisions made by one or the other of the spouses.” The appellate court discussed Family Code §§1100, subdivisions (a) and (e) and  Corporations Code § 16403, and affirmed, concluding the law and the evidence amply support the family law court’s order. (In re Marriage of Kamgar (Cal. App. 4th Dist., Div. 3, Dec. 8, 2017) 18 Cal.App.5th 136.)

Violation of Settlement Agreement.

Two neighbors disagreed over use of their common driveway, and one sued the other. Ultimately, they settled with a stipulation to enter judgment. When one neighbor purportedly ignored the agreement, the other filed a postjudgment motion seeking the agreed $1,000 per violation of the agreement, for a total of $12,000. Finding it did not have jurisdiction to hear the motion, the trial court denied the requested relief. On appeal, appellant argued the trial court has continuing jurisdiction to enforce a stipulated judgment. In dismissing the appeal, the Court of Appeal noted the motion did not attempt to enforce the judgment that resulted from the parties’ agreement, but instead sought to determine whether one party had breached the agreement. The appellate court concluded: “Thus, the order denying the motion is not an appealable order after judgment and the appeal must be dismissed.” (Howeth v. Coffelt (Cal. App. 4th Dist., Div. 1, Dec. 8, 2017) 18 Cal.App.5th 126.)

Pleading Demand Futility in a Shareholder Derivative Action.

California law requires the plaintiff who files a shareholder derivative suit to “allege[] in the complaint with particularity plaintiff’s efforts to secure from the board such action as plaintiff desires, or the reasons for not making such effort, and allege further that plaintiff has either informed the corporation or the board in writing of the ultimate facts of each cause of action against each defendant or delivered to the corporation or the board a true copy of the complaint which plaintiff proposes to file.” (Corp. Code, § 800, subd. (b)(2).) Demand futility under section 800, subdivision (b)(2) thus requires a plaintiff who alleges “reasons for not making such effort” to plead with particularity the circumstances excusing her from making a demand. In the instant matter, plaintiff was given leave to amend its complaint, but in the interim between the filing of the initial complaint and the date the amended complaint was due to be filed, the composition of the members of the board of directors had changed. The superior court overruled defendants’ demurrer, finding the amended complaint adequately alleged demand futility as to the board in place when the original action was filed. The Court of Appeal issued granted defendants’ petition for writ of mandate, holding the superior court should have assessed the pleading of demand futility with respect to the board of directors in place at the time the amended complaint was filed.  (Apple Inc. v. Superior Court (Cal. App. 6th Dist., Dec. 11, 2017) 18 Cal.App.5th 222.)

Non-Signatory to Arbitration Agreement.

Plaintiffs contend they suffered damages caused by a negligently maintained rental truck, which blew a tire while one of the plaintiffs was driving. Plaintiff’s employer rented the truck to transport furniture and equipment to the California State Fair, and the arbitration agreement in the trunk rental contract was signed by plaintiff’s supervisor. Defendant appeals from the trial court’s denial of its motion to compel arbitration, arguing plaintiffs are bound by the arbitration agreement in the rental contract, even though neither plaintiff is a party to that contract. Concluding plaintiffs are not ordinarily bound by an agreement entered into by a corporation in which they are employees, plaintiffs are not third-party beneficiaries, and there is no evidence that the supervisor who signed the arbitration agreement had implicit authority to bind plaintiffs, the Court of Appeal affirmed.  (Jensen v. U-Haul Co. of California (Cal. App. 4th Dist., Div. 2, Dec. 11, 2017) 18 Cal.App.5th 295.)

Insurance Coverage For a Surrogacy Agency.

An agency that matches infertile families with surrogates and egg donors applied for professional liability insurance, not disclosing that a lawyer for its former clients, a couple, had notified the agency of their intent to file a complaint alleging professional negligence. When the couple sued the agency, the insurance company denied coverage. The agency sued the insurance company in the instant action for breach of contract and bad faith. The trial court denied the insurance company’s motion for summary judgment, stating there were triable issues of fact created by the wording of the insurance application form.  A question on the form asked whether the applicant was aware of anything that might result in a malpractice claim, and the agency answered “no” because it was not a health care provider that rendered professional medical services. In granting the insurance company’s petition for a writ of mandate, the Court of Appeal stated: “There are no material factual disputes in this case. [The insurance company] was entitled to insist that [the surrogacy agency] disclose all potential claims of which it was, or should have been, aware; it could and did exclude from coverage any such claim that was not disclosed. The superior court therefore erred in failing to grant summary judgment in favor of [the insurance company].” (Admiral Ins. Co. v. Superior Court (Cal. App. 4th Dist., Div. 1, Dec. 12, 2017) 18 Cal.App.5th 383.)

Man Erroneously Detained But Charged With a Crime Nonetheless.

A police officer responded to a dispatch telling him that a bus driver had spotted the suspect in “a 288 case” (sexual assault on a child) on a bus. The officer was aware of the “288 case” because he had seen a report on the news that included a video of the suspect. The officer boarded the bus, and spoke with the driver. The bus driver told the officer that he had seen a picture on a BOLO (“Be on the Lookout”) flier, and the picture “matched” a passenger sleeping on the bus. The officer had not seen the flier himself. The officer awakened defendant, learned he was on parole, and detained him.  Other deputies arrived at the scene. Defendant was subjected to a parole search, which turned up narcotics. About 10 to 15 minutes after the deputies searched defendant, they received clear photos of the suspect on the flier and determined that defendant was not the person depicted on the flier. Defendant was charged with possession of heroin and moved to suppress the narcotics found on him as fruits of an illegal search, arguing the officer had no reasonable suspicion to detain him. The trial judge suppressed the evidence. The Court of Appeal reversed, noting the information provided by the bus driver “was sufficient to reasonably justify a brief stop of defendant to determine if he was actually the suspect sought in the 288 case.” (People v. Stanley(Cal. App. 6th Dist., Dec. 12, 2017) 18 Cal.App.5th 398.)

Worker Did Not Seek Lost Wages in Third Party Action But Must Reimburse Workers’ Comp Insurance Company for Them Anyway.

Plaintiff was injured in a store while she was performing work for her employer. The employer’s insurance company paid plaintiff $152,000 in workers’ compensation benefits, including more than $115,000 in medical expenses and roughly $37,000 for lost wages. Plaintiff sued the store for personal injuries.  The trial court entered judgment finding the store liable for plaintiff’s injuries. Under Labor Code §§ 3852 and 3856, the workers’ compensation insurance company filed a lien on plaintiff’s judgment to obtain reimbursement for the workers’ compensation benefits it paid, including medical expenses and temporary disability payments for lost wages. Although the judgment included compensation for plaintiff’s medical expenses, it did not include compensation for her lost wages because she did not seek those damages at trial. The court granted the insurance company’s lien, but reduced the lien amount to exclude the indemnity payments for lost wages. The Court of Appeal agreed with the insurance company’s argument that the trial court exceeded its authority by reducing the lien amount for any item other than reasonable attorney fees and costs, stating: “We agree because section 3856’s plain language and the case law applying it grant [the insurance company] a first lien on the judgment in the amount it paid [plaintiff] for worker’s compensation benefits. [Plaintiff’s] choice not to seek lost wages at trial does not diminish [the insurance company’s] lien rights under the workers’ compensation statutory scheme. We therefore modify the order granting the lien to include the amount of lost wages [the insurance company] paid [plaintiff] and affirm the postjudgment order as modified.”  (Duncan v. Walmart Stores, Inc. (Cal. App. 4th Dist., Div. 3, Dec. 13, 2017) 2017 Cal. App. LEXIS 1111.)

Assignees Entitled to Contribution, But Not the Full Amount of the Debt.

The real parties in interest in this writ proceeding enforced a writ of execution against shares of stock in a medical group owned by petitioner. Petitioner and real parties were, individually, guarantors on a liability that gave rise to the judgment from which the writ of execution arose. Real parties contend they were legally entitled to take an assignment of the judgment and enforce the full amount of the debt against the principal obligor, the medical group. Petitioner sued real parties for conversion, and the trial court sustained real parties’ demurrer without leave to amend. The Court of Appeal granted the petition for writ of mandate, stating: “[R]eal parties were not entitled to enforce the full amount of the judgment against [petitioner]. As we explain below, real parties had only a right of contribution from [petitioner].” (Duke v. Superior Court (Cal. App. 5th Dist., Dec. 14, 2017) 2017 Cal. App. LEXIS 1116.)

Subrogee Insurance Companies Don’t Count as “Persons” Under Class Action Fairness Act.

This action was filed by 26 insurance companies acting as subrogees of their 145 insureds. The Ninth Circuit Court of Appeals held that the word “persons” in the Class Action Fairness Act’s (28 U.S.C. § 1332(d)(2)) requirement that monetary relief claims of 100 or more persons are to be tried jointly refers to plaintiffs, and plaintiffs means the parties who actually brought the suit. The appeals court stated: “This case presents the narrow question of whether a lawsuit filed by 26 insurance companies (the Plaintiffs), in their capacity as subrogees of 145 insured homeowners, qualifies as a mass action. The district court answered in the negative. For the reasons set forth below, we AFFIRM the judgment of the district court.” (Liberty Mut. Fire Ins. Co. v. EZ-FLO Int’l, Inc. (9th Cir., Dec. 14, 2017) 2017 U.S. App. LEXIS 25306.)

Your Tax Dollars at Work.

A drug store clerk sold a can of Coors Light to an 18-year-old minor decoy working for the Department of Alcoholic Beverage Control.  A regulation based on Business and Professions Code § 25658, subdivision (f) states: “Following any completed sale, but not later than the time a citation, if any, is issued, the peace officer directing the decoy shall make a reasonable attempt to enter the licensed premises and have the minor decoy who purchased alcoholic beverages make a face to face identification of the alleged seller of the alcoholic beverages.” In this case, the peace officer accompanied the decoy back into the store, and the decoy minor identified the clerk standing behind the counter when he was about 10 feet away from her. The department suspended the store’s liquor license for ten days, but the Alcoholic Beverage Control Appeals Board reversed, finding that an in-store identification of the clerk from 10 feet away did not constitute a face-to-face identification. The Court of Appeal annulled the decision of the appeals bard and reinstated the suspension of the liquor license, stating the decoy and the clerk were in reasonable proximity when the identification was made. (Department of Alcoholic Beverage Control v. Alcoholic Beverage Control Appeals Bd. (Cal. App. 3rd Dist., Dec. 15, 2017) 2017 Cal. App. LEXIS 1122.)

Attorney Fees Awarded on Void Contracts.

The parties entered into several contracts to collaborate on a water desalination project.  As part of the arrangement, they agreed the prevailing party in any action or proceeding arising from their agreement would be entitled to attorney fees and costs. After learning that a member of one of the party’s board of directors had a conflict of interest, most of the parties agreed the conflict rendered the contracts void, and years of litigation over the question of voidness ensued. Eventually, the trial court declared the contracts void. The trial court found some of the parties to be prevailing parties and awarded them attorney fees and costs. On appeal, the nonprevailing party argues that Civil Code § 1717 authorizes fees only in cases involving an action on a contract. Relying on Santisas v. Goodin (1998) 17 Cal.4th 599, the Court of Appeal affirmed the trial court’s orders. (California-American Water Co. v. Marina Coast Water Dist. (Cal. App. 1st Dist., Div. 1, Dec. 15, 2017) 2017 Cal. App. LEXIS 1123.)

Seeking Recovery For Purely Economic Loss Under Negligence Theory.

A gas company discovered a natural gas leak at its storage facility. The gas leak spread an oily mist over nearby neighborhoods, damaging real and personal property. Residents and individuals who worked in the vicinity of the facility complained about odors and acute respiratory and central nervous system symptoms.  On behalf of businesses located within a five-mile radius of the leak, seven named plaintiffs filed a class action complaint against the gas company for (1) strict liability for ultrahazardous activity, (2) negligence, (3) negligent interference with prospective economic advantage, and (4) violations of the unfair competition law (Bus. & Prof. Code, § 17200 et seq.).  The business plaintiffs claimed no injury to person or property. Instead, they alleged the gas leak and subsequent relocation of area residents caused crushing economic loss to their businesses. The trial court overruled the gas company’s demurrer and the gas company sought extraordinary relief. In granting the petition for writ of mandate, the Court of Appeal stated: “We conclude as a matter of law [the gas company] did not owe a duty to prevent business plaintiffs’ economic loss based on negligent conduct.” (Southern California Gas Company v. Superior Court (Cal. App. 2nd Dist., Div. 5, Dec. 15, 2017) 2017 Cal. App. LEXIS 1120.)

Previously we Reported: Foiled by One Final Judgment Rule.

Plaintiff ophthalmologist, who lost her license to practice medicine, brought an action against another doctor for breach of fiduciary duty, among other causes of action.  The defendant doctor cross-complained for defamation. The two had previously undertaken a venture to provide medical services to patients of a health maintenance organization and formed a corporation for that purpose. After the loss of plaintiff’s license, defendant and the HMO executed a different agreement. In ruling on a motion in limine, the trial court found “once plaintiff and defendant created a corporation to conduct their business, they owed each other no fiduciary duty.” Plaintiff agreed to dismiss her cause of action for breach of fiduciary duty with prejudice, and the two doctors agreed to dismiss their respective defamation claims without prejudice to “test the issue” of fiduciary duty and “get a ruling” from the appellate court before disposing of their defamation claims. The California Supreme Court did not appreciate their creative plan and ruled the “one final judgment rule” precludes an appeal: “When, as here, the trial court has resolved some causes of action and the others are voluntarily dismissed, but the parties have agreed to preserve the voluntarily dismissed counts for potential litigation upon conclusion of the appeal from the judgment rendered, the judgment is one that ‘fails to complete the disposition of all the causes of action between the parties,’ [] and is therefore not appealable.” (Kurwa v. Kislinger (Cal., Oct. 3, 2013) 57 Cal.4th 1097.)

The Latest:

Since then, plaintiff has made several unsuccessful efforts to secure a final and appealable trial court judgment. The Court of Appeal dismissed plaintiff’s latest appeal, but the California Supreme Court has breathed hope into plaintiff’s quest to obtain an appealable judgment: “We accordingly affirm the judgment of the Court of Appeal and remand to permit the trial court to exercise its authority to vacate its defective 2010 judgment and the parties’ underlying stipulation. The parties may then either proceed to judgment on the outstanding causes of action or dismiss those causes of action with prejudice. Either way, the trial court can and should enter a final judgment from which plaintiff can finally appeal.” (Kurwa v. Kislinger (Cal., Dec. 18, 2017 (407 P.3d 12.)

Student Workers Claim a Right to Compensation.

Plaintiffs are students of cosmetology and hair design at schools operated by defendant. The students claim they are employees within the meaning of the Fair Labor Standards Act (29 U.S.C. § 203(e)(1), (g)) and under California and Nevada state law, on the ground that much of their time is spent in menial and unsupervised work, and they are therefore entitled to compensation. The Ninth Circuit Court of Appeals held the students are not employees entitled to wages. (Benjamin v. B & H Educ., Inc. (9th Cir., Dec. 19, 2017) 2017 U.S. App. LEXIS 25672.)

Play Discovery Games and End Up with a Terminating Sanction for Discovery Abuse.

A self-proclaimed non-profit social advocacy organization filed a petition for writ of mandate and complaint for declaratory and injunction reliefin connection with a real estate development project. The developer, being informed and believing that the non-profit was a sham corporation set up only to collect attorney fees, noticed the deposition of petitioner’s person most qualified (PMQ) to appear for a deposition. Later, after several unsuccessful attempts to agree on a date and place for the deposition, the developer filed a motion to compel the PMQ’s deposition. The trial court ordered petitioner to produce its PMQ for a deposition. Petitioner sought relief from the order, arguing mistake, inadvertence, or excusable neglect, which the trial court denied, ordering a date certain for the deposition. Petitioner challenged the denial by filing a petition for writ of mandate in the Court of Appeal, which was also denied, three days before the date ordered for the deposition. The trial court granted a continuance upon motion by petitioner, whose lawyer said he had to care for a parent. The trial court eventually awarded a terminating sanction, finding petitioner engaged in “a calculated attempt to delay and avoid a deposition.” In affirming the judgment, the appellate court stated: “We conclude the trial court did not abuse its discretion in imposing the terminating sanction.” (Creed-21 v. City of Wildomar (Cal. App. 4th Dist., Div. 2, Dec. 19, 2017) 2017 Cal. App. LEXIS 1131.)

The Limits of the Litigation Privilege.

Plaintiff, on behalf of the People of the State of California, filed this qui tam action against his employer, alleging a violation of the Insurance Frauds Prevention Act (Ins. Code, § 1871 et seq.). Plaintiff alleged his supervisor made false statements in an incident report submitted in response to plaintiff’s claim for workers’ compensation, and the supervisor repeated those false statements in a deposition taken during the investigation into plaintiff’s compensation claim. The supervisor’s statements resulted in plaintiff’s claim being initially denied. The supervisor and the employer filed motions for judgment on the pleadings, alleging that since the supervisor’s statements were made in connection with a workers’ compensation action, this action is barred by the litigation privilege found in Civil Code § 47. The trial court granted the motions without leave to amend.  In reversing, the Court of Appeal stated: “We agree with [plaintiff] that his lawsuit is not barred by the litigation privilege. The litigation privilege is broad, but it has its limits. Like any statute, Civil Code section 47(b) is subject to the rule of statutory construction that a particular provision prevails over a general one.”  (People v. Hebb (Cal. App. 4th Dist., Div. 2, Dec. 19, 2017) 2017 Cal. App. LEXIS 1133.)

No Bifurcation of Plaintiff’s PAGA Claim and Ordering a Portion of Claim to Arbitration.

Plaintiff filed a PAGA claim (Private Attorneys General Act; Lab. Code, § 2698 et seq.) alleging Labor Code violations on his own behalf and on behalf of other employees. The trial court bifurcated the case and ordered the individual portion of plaintiff’s PAGA claim to arbitration. Defendant appealed that order and also filed a petition for writ of mandate challenging the bifurcation.  The appellate court dismissed the appeal because an order to arbitrate is not appealable. The appellate court found that the trial court erred when it bifurcated the underpaid wages portion of plaintiff’s PAGA claim and ordered that issue only into arbitration. The appeals court stated: “Let a peremptory writ of mandate issue commanding the trial court to vacate its order bifurcating Lawson’s claims and ordering a portion of those claims be arbitrated and enter a new order denying [defendant’s] motion to arbitrate.” (Lawson v. ZB, N.A. (Cal. App. 4th Dist., Div. 1, Dec. 19, 2017) 2017 Cal. App. LEXIS 1132.)

“I’ll Have What She’s Having.”

A federal court in the Eastern District of New York severed antitrust claims against various defendants and ordered them to be litigated or arbitrated in separate proceedings. In the Missouri proceeding, certain documents were produced. Later, arbitrators in the Arizona proceeding issued a subpoena directing the same party who produced the documents in Missouri to again produce them for the Arizona proceeding. The party ordered to produce the documents did not respond. The parties seeking the documents filed a petition pursuant to 9 U.S.C. § 7 to enforce the arbitrators’ subpoena in the United States District Court for the District of Arizona. The district court held that the Federal Arbitration Act does not grant arbitrators the power to compel the production of documents from third parties outside of a hearing. In affirming, the Ninth Circuit Court of Appeals stated: “The FAA gives arbitrators two powers that are relevant here. First, arbitrators may compel the attendance of a person ‘to attend before them . . . as a witness,’ and second, arbitrators may compel such person ‘to bring with him or them’ relevant documents. Id. If a person summoned as a witness does not comply, the statute gives the district court in the district in which the arbitrator sits the power to compel the person’s attendance before the arbitrator. Id. [¶] A plain reading of the text of section 7 reveals that an arbitrator’s power to compel the production of documents is limited to production at an arbitration hearing. The phrase ‘bring with them,’ referring to documents or other information, is used in conjunction with language granting an arbitrator the power to ‘summon . . . any person to attend before them.’”  (CVS Health Corp. v. Vividus, LLC (9th Cir., Dec. 21, 2017) 2017 U.S. App. LEXIS 26236.)

Action Against Generic Drug Manufacturer.

Plaintiff’s mother was prescribed terbutaline, a generic form of a brand-name drug, to suppress premature labor during her pregnancy. Plaintiffs T.H. and C.H. were born full term, but were diagnosed with developmental delays at three years of age and autism by the time they turned five.  Through their father as guardian ad litem, the minors allege that those responsible for the terbutaline label knew or should have known — based on studies of the drug’s effects in rats and in humans — that the drug posed a serious risk to fetal brain development. They further allege that the drug’s label unreasonably failed to include a warning about this risk. Under California law, a brand-name drug manufacturer has a duty to warn of the drug’s known or reasonably knowable adverse effects. In this case, the California Supreme Court examined whether — and if so, under what circumstances — a brand name drug manufacturer may be sued under a theory of “warning label” liability when the warning label for its drug was alleged to be deficient, but the plaintiffs were injured by exposure to a generic bioequivalent drug bearing the brand-name drug’s warning label. In affirming the Court of Appeal’s judgment directing the trial court to enter an order sustaining the drug manufacturer’s demurrer with leave to amend, the California Supreme Court stated: “In our view, plaintiffs have indeed shown that they could allege a cause of action against Novartis for warning label liability.”  (T.H. v. Novartis Pharmaceuticals Corp. (Cal., Dec. 21, 2017) 2017 Cal. LEXIS 9636.)

Plaintiff’s Physical Disability is Obesity.

Plaintiff has been obese since childhood, and when she was terminated from her job in May 2012 she was five feet, five inches tall and weighed over 350 pounds. Her weight interferes with several daily life functions, including bathing, walking, and using transportation. She cannot stand for more than an hour, cannot walk more than a mile at a time, and often experiences shortness of breath when engaging in basic activities. She has worked at a tennis club since 1997 and consistently received positive reviews. A new club manager arrived in 2012 and required staff to wear uniforms. The manager asked what size everyone wore, and plaintiff told him she wore a women’s size 5X to 7X. The manager ordered her 2X because that was the largest size available. She felt humiliated because the shirts did not fit. Plaintiff ordered shirts from a specialty shop at her own expense and had them embroidered with the club logo. When various positions opened up and plaintiff pursued them so she could work extra hours, the positions were given to less experienced persons. The manager reduced plaintiff’s work hours when he hired “a small, very petite and thin woman” and paid her more. When the club’s tennis director explained to the manager how upset plaintiff was with the way she was being treated, the manager responded, “Well, just look at her.”  Plaintiff filed a grievance. The manager discovered a recording device at a board meeting and accused plaintiff of planting the device. Plaintiff asked to see the recorder, but the manager said someone had taken it from his bag. Plaintiff was terminated. Plaintiff sued the club for wrongful termination and other claims.  The trial court granted the club’s motion for summary adjudication of each claim. The Court of Appeal reversed the summary adjudication of plaintiff’s Fair Employment and Housing Act (Gov. Code, § 2900 et seq.) claims for discrimination and harassment, a wrongful termination claim, and her defamation claim. But the appellate court affirmed the summary adjudication of plaintiff’s claims for failure to accommodate, retaliation, intentional infliction of emotional distress, and other wrongful termination claims. The appellate court stated: “We conclude that there is sufficient evidence to create a triable issue of material fact as to whether the challenged statements about Cornell planting the recorder were made with actual malice.” (Cornell v. Berkeley Tennis Club (Cal. App. 1st Dist., Div. 1, Dec. 21, 2017) 2017 Cal. App. LEXIS 1147.)

“The Degree of Civilization in a Society Can be Judged by Entering Its Prisons,” Fyodor Dostoyevsky. . . Does this include detention centers?

Detainees at the Tucson Sector of the U.S. Border Patrol brought this action alleging inhumane treatment and overcrowded and unsanitary conditions at eight different stations. A federal district court granted a preliminary injunction requiring the government to provide detainees with mats and blankets when they are detained longer than 12 hours. On appeal, the government argues the order is too rigid and burdensome.  Plaintiffs also appealed, arguing the trial court should have ordered the government to provide detainees with beds and mattresses and allow them access to showers and adequate professional medical care. The Ninth Circuit Court of Appeals found the trial court did not abuse its discretion. (Doe v. Kelly (9th Cir., Dec. 22, 2017) 2017 U.S. App. LEXIS 26960.)

Contradiction Between Declaration and Deposition Must be Clear and Unambiguous to Justify Grant of MSJ.

Defendant moved for summary judgment without any evidence, and plaintiff opposed with a declaration. The court ordered the declarant submit to deposition. After the deposition, defendant fortified its reply with selections of declarant’s deposition. Citing D’Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, and concluding the declarant’s deposition contradicted the declaration, the trial court granted the motion for summary judgment. In reversing, the Court of Appeal stated: “The trial court’s reliance on the few portions from [the] deposition testimony it cited was wrong, as its summary of [the deposition] testimony was neither accurate nor complete. Further, the court’s demand for such specifics is contrary to law.” The appeals court went on to explain that for the evidence to be rejected under D’Amico, the contradiction must be clear and unambiguous. (Turley v. Familian Corp. (Cal. App. 1st Dist., Div. 2, Dec. 22, 2017) 2017 Cal. App. LEXIS 1148.)

Previously we Reported: President Trump’s Second Executive Order (EO-2) Concerning Immigration.

President Trump issued an executive order, which was supposed to go into effect on March 16, stating in relevant part in § 2(c): “. . . the unrestricted entry into the United States of nationals of Iran, Libya, Somalia, Sudan, Syria, and Yemen would be detrimental to the interests of the United States. I therefore direct that the entry into the United States of nationals of those six countries be suspended for 90 days from the effective date of this order . . . Each of these countries is a state sponsor of terrorism, has been significantly compromised by terrorist organizations, or contains active conflict zones. . . .” The State of Hawaii had filed a motion to enjoin the President’s first executive order restricting immigration from the same six countries, and amended its motion to enjoin the second, stating Hawaii’s purpose was “to protect its residents, its employers, its educational institutions, and its sovereignty.” The Imam of the Muslim Association of Hawaii, Dr. Elshikh, joined Hawaii’s challenge, alleging the executive order inflicts great injury on Muslims in Hawaii. A federal trial court in Hawaii granted a temporary restraining order, holding that plaintiffs had shown a likelihood of success on the merits of their establishment clause claim, and entered a nationwide injunction prohibiting enforcement of the executive order. In affirming, the Ninth Circuit Court of Appeals noted that the Immigration and Nationality Act gives the President broad powers to control the entry of aliens and to take actions to protect the American public, but that immigration “even for the President, is not a one-person show.” (Hawaii v. Trump (9th Cir., June 12, 2017) 859 F.3d 741.)

The Previous Latest:

In agreeing to hear the case, the United States Supreme Court narrowed the scope of the injunctions, stating: “The injunctions remain in place only with respect to parties similarly situated to Doe, Dr. Elshikh, and Hawaii. In practical terms, this means that §2(c) may not be en­forced against foreign nationals who have a credible claim of a bona fide relationship with a person or entity in the United States. All other foreign nationals are subject to the provisions of EO–2.” (Trump v. International Refugee Assistance Project (U.S., June 26, 2017) 137 S.Ct. 2080.)

The Present Latest:

The Ninth Circuit Court of Appeals heard this matter for the third time.  The court stated that it had to “consider the statutory and constitutional limits of the President’s power to curtail entry of foreign nationals.” The appeals court pointed out that the President’s proclamation relies on the premise that the Immigration and Nationality Act 8 U.S.C. § 1101 et seq.) vests the President with broad powers to regulate the entry of aliens. The court stated those powers are not without limit, holding the President exceeded the scope of his delegated authority. The Ninth Circuit also stated: “Further, the President did not satisfy the critical prerequisite Congress attached to his suspension authority:  before blocking entry, he must first make a legally sufficient finding that the entry of the specified individuals would be ‘detrimental to the interests of the United States.” Ultimately the appeals court affirmed the district court’s order enjoining enforcement of the proclamation, but limited the scope of the preliminary injunction to foreign nationals who have a bona fide relationship with a person or entity in the United States.”  (Hawaii v. Trump (9th Cir., Dec. 22, 2017) 2017 U.S. App. LEXIS 26513.)

Court Did Not Abuse Its Discretion in Reducing Plaintiff’s Attorney Fees Based on Limited Success at Trial.

Plaintiff sued her employer under the Americans with Disabilities Act (ADA; 42 U.S.C. § 12101), alleging failure to accommodate her disability and disparate treatment due to her disability, bilateral lateral epicondylitis in both elbows. When her workers’ compensation case was closed, her claim had been classified as disabling. One month later, she was fired. A jury returned a verdict in favor of plaintiff on her ADA discrimination claim, awarding her $70,000 in noneconomic damages and $13,200 in backpay damages. The employer appealed the trial judge’s denial of its motion for judgment as a matter of law. The trial court awarded plaintiff fifty percent of the amount of attorney fees she sought, and plaintiff appealed that order. The Ninth Circuit Court of Appeals affirmed both orders, noting there was sufficient evidence for a jury to conclude an accommodation existed that would have enabled plaintiff to perform the essential functions of her job. The Ninth Circuit also held the trial court did not abuse its discretion in reducing the amount of requested attorney fees based on the degree of success plaintiff achieved, in that she succeeded on only one of her five claims. (Dunlap v. Liberty Natural Prods. (9th Cir., Dec. 28, 2017) 2017 U.S. App. LEXIS 27101.)

“Wolde You Bothe Eate Your Cake, and Have Your Cake?” John Davies in 1611.

Plaintiff sued his former employer over wage and hour issues, asserting both individual claims and class claims under the Private Attorneys General Act (PAGA; Lab. Code, § 2698 et seq.). The employer successfully moved for arbitration of the individual claims. The parties settled the individual claims, and the employer moved for summary adjudication of the PAGA claims, which the trial court granted. In affirming, the Court of Appeal stated: “We hold that Kim’s dismissal of his individual Labor Code claims with prejudice foreclosed his standing under PAGA, and therefore affirm.” (Kim v. Reins International, California, Inc. (Cal. App. 2nd Dist., Div. 4, Dec. 29, 2017) 2017 Cal. App. LEXIS 1156.)

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