Litigation Update: July 2023

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

  • Guest Senior Editor Reuben A. Ginsburg and Julia C. Shear Kushner
  • Managing Editor, Julia C. Shear Kushner
  • Editors, Dean Bochner, Colin P. Cronin, Jonathan Grossman, Jennifer Hansen, Gary A. Watt, Ryan Wu
Unavailability Requirement for Admission of Prior Testimony Does Not Apply to Penal Code § 1172.6 Hearings.

In 2019, the Legislature limited the scope of the felony-murder rule and enacted a provision to challenge prior convictions under the former rule or the natural and probable consequences doctrine. (Cal. Pen. Code, § 1172.6.) The section originally provided that “[t]he prosecutor and the petitioner may rely on the record of conviction or offer new or additional evidence . . . .” In 2022, the Legislature amended the section to instead provide that “[t]he admission of evidence in the hearing shall be governed by the Evidence Code except that the court may consider evidence previously admitted at any prior hearing or trial that is admissible under current law, including witness testimony, stipulated evidence, and matters judicially noticed.” Petitioner here appealed the superior court’s 2021 denial of his § 1172.6 petition, arguing that the lower court erred by relying on the original trial transcripts without a showing that the witnesses were unavailable in violation of Evidence Code § 1291. The Court of Appeal affirmed, concluding that “the trial court fully complied with the statute as currently written.” It explained that petitioner’s suggested interpretation of the statute would require the court to “disregard the statute’s plain language,” the Legislature had “plainly not . . . intended” for “all section 1172.6 evidentiary hearings [to] effectively become new court trials.” (People v. Cody (Cal. App. 4th Dist., Div. 3, May 31, 2023) 92 Cal.App.5th 87.)

Naming Trust Instead of Trustee Not Jurisdictional Error.

In 2017, a trust that owned property subject to a deed of trust and reverse mortgage credit line sued for reformation and to quiet title on the grounds that the line of credit was secured by only one of two parcels of land it owned. In 2019, a mortgage servicer intervened, and moved to dismiss, arguing the court lacked jurisdiction because the trust is not a legal entity and thus was not a proper plaintiff, citing Oliver v. Swiss Club Tell (1963) 222 Cal.App.2d 528. The superior court granted the motion, and denied plaintiff leave to amend to substitute the trustee as plaintiff. The Court of Appeal reversed. Noting that the Oliver court did not address whether to permit amendment to substitute a new party, the appeals court concluded that, contrary to the servicer’s arguments, the case was not a nullity as filed and “the trial court had jurisdiction in the fundamental sense—that is, it was empowered to hear and decide the type of claims alleged. . . . The [lower] court could have, and on this record should have, followed the traditional default rule that amendments to a complaint should be liberally allowed.” (Jo Redland Trust, U.A.D. 4-6-05 v. CIT Bank, N.A. (Cal. App. 1st Dist., Div. 4, May 31, 2023) 92 Cal.App.5th 142.)

Timeliness of Civil Procedure § 170.6 Challenge for Pre-Trial Habeas Proceedings.

A defendant who was in jail awaiting a new trial petitioned for a writ of habeas corpus on the grounds that the jail’s failure to properly deal with his medical condition was cruel and unusual punishment and violated the Americans with Disabilities Act. The case was assigned to the judge from the criminal action, and defendant filed a Code of Civil Procedure § 170.6 challenge. The superior court denied the challenge as untimely, and defendant appealed. Affirming, the Court of Appeal explained that the habeas action here was a continuation of the criminal action because defendant had already made “a series of requests for testing, evaluation, treatment, and preventative measures to deal with” his condition in the criminal action, some of which the lower court had already granted. (Garcia v. Superior Court of Riverside County (Cal. App. 4th Dist., Div. 2, May 30, 2023) 92 Cal.App.5th 47.)

Previously we reported:
School District Not Subject to Treble Damages.

Plaintiff was 14 years old when she began her freshman year. Defendant was an aide in two of her classes. During the first semester of plaintiff’s freshman year, defendant began giving her special attention and showing physical affection towards her at school. During the same period, he targeted other female students, one of whom complained to the school administration that he inappropriately touched her. Despite this report, the school did not terminate defendant’s employment. In November 2014, defendant’s “grooming and manipulation” culminated in his sexual abuse of plaintiff. Due to defendant’s threats and coercion, plaintiff did not disclose the abuse to her parents until March 2016. Plaintiff’s parents immediately reported the abuse to law enforcement. In May 2016, defendant was arrested and charged with criminal offenses stemming from the abuse. Her operative complaint, asserting numerous causes of action against the school district, sought an award of economic and noneconomic damages and an award of treble damages under Code of Civil Procedure § 340.1. The school district moved to strike the request for treble damages. It argued the “discretionary award of treble damages” under § 340.1 is “punitive” and, therefore, prohibited against a public entity under Government Code § 818. Code of Civil Procedure § 340.1 authorizes an award of “up to treble damages” in a tort action for childhood sexual assault where the assault occurred “as the result of a cover up.” Government Code § 818 exempts a public entity from an award of damages “imposed primarily for the sake of example and by way of punishing the defendant.” In this writ proceeding, the Court of Appeal was called upon to determine whether Government Code § 818 precludes an award of treble damages under Code of Civil Procedure § 340.1 against a public entity. The appeals court held: “Because treble damages under section 340.1 are primarily exemplary and punitive, a public entity like LAUSD maintains sovereign immunity from liability for such damages under section 818.” (Los Angeles Unified School District v. Superior Court (Cal. App. 2nd Dist., Div. 3, May 21, 2021) 64 Cal.App.5th 549.)

The latest:

The California Supreme Court affirmed the decision by the Court of Appeal, holding, “the enhanced damages authorized under [Government Code] section 340.1[, subdivision] (b)(1) are ‘imposed primarily for the sake of example and by way of punishing the defendant’ ([Govt. Code,] § 818), and therefore are incapable of being imposed upon a public entity.” (Los Angeles Unified School District v. Superior Court (Cal., June 1, 2023) 14 Cal.5th 758.)

Scienter Under the Federal False Claims Act.

The federal False Claims Act (31 U.S.C. § 3729 et seq.) prohibits “knowingly” presenting “a false or fraudulent” claim to the federal government. Suprevalu and Safeway pharmacies submitted Medicaid and Medicare reimbursement claims allegedly misrepresenting their full prices as “usual and customary” prices, when the majority of their sales were heavily discounted. The Seventh Circuit affirmed summary judgments for defendants, holding they did not act “knowingly” because their conduct was consistent with an objectively reasonable interpretation of the statutory language “usual and customary,” regardless of whether they actually believed their full prices were their “usual and customary” prices. The U.S. Supreme Court reversed in a unanimous opinion by Justice Thomas, holding: “The FCA’s scienter element refers to respondents’ knowledge and subjective beliefs—not to what an objectively reasonable person may have known or believed. And, even though the phrase ‘usual and customary’ may be ambiguous on its face, such facial ambiguity alone is not sufficient to preclude a finding that respondents knew their claims were false.” (United States ex rel. Schutte v. SuperValu Inc. (U.S., June 1, 2023) 143 S.Ct. 1391.)

Opinion Versus Objective Fact Under the Lanham Act.

Plaintiff sued Defendant competitor for false advertising under Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)(1)(B)), “for designating plaintiffs’ products as ‘malicious’, ‘threats’, and ‘potentially unwanted programs’ . . . .” The district court granted defendant’s motion to dismiss on the grounds that the statements were “‘non-actionable statements of opinion.’” The Ninth Circuit disagreed and reversed the dismissal. It explained that “when a company in the computer security business describes a competitor’s software as ‘malicious’ and a ‘threat to a customer’s computer, that is more a statement of objective fact than a non-actionable opinion” and is “potentially actionable under the Lanham Act . . . .” (Enigma Software Group USA, LLC v. Malwarebytes (9th Cir., June 2, 2023) 69 F.4th 665.)

Reasonable Apprehension Standard for Renewal of DVRO Satisfied.

Appellant filed a request to renew a domestic violence restraining order (DVRO) against the father of her children. In support of her request, she cited the incidences of domestic violence and corresponding police reports that formed the basis for the original DVRO; “constant” texts from respondent sent after the issuance of the DVRO and continuing to present, including one containing verbal abuse; evidence respondent had obtained her new confidential home address despite her acceptance into the Safe at Home program; and two emergency room visits after one child reported being hit by respondent and had bruising and tenderness on her knee resulting from an injury while in respondent’s custody. The trial court denied the renewal request because the abuse was in the past; exercised its discretion to conclude that the text message was not “really” a violation of the prior order; and inferred from the timing of mother’s request that her motives were not genuine and retaliatory, and she therefore did not have a genuine claim of fear. Reversing, the Court of Appeal concluded that appellant had satisfied the required showing of a “reasonable apprehension of future abuse,” and the trial court erred by (1) requiring a showing of recent abuse or violation of the DVRO; (2) “treat[ing] an unquestionable violation of the DVRO as if it were not ‘really’ a violation” despite “ha[ving] no ‘discretion’ to” do so; and (3) rejecting mother’s claim of genuine fear based on the inference of a retaliatory motive based only on the timing of the renewal request.(Michael M. v. Robin J. (Cal. App. 4th Dist., Div. 1, June 2, 2023) 92 Cal.App.5th 170.)

Failure to Follow Civil Procedure Basics Leads to Sanctions for Frivolous Appeal.

A projected owner sued a developer for breach of the development services agreement. The developer filed a mechanic’s lien and a cross-complaint. The owner moved for summary judgment as to its own complaint and the cross complaint. Developer failed to file a timely opposition, and instead, one day before the hearing, filed an opposing brief lacking a separate statement and supporting evidence. At the hearing, developer attempted to make an oral request for leave to amend, which the court rejected, granting the motion for summary judgment. The developer filed what the Court of Appeal, affirming, described as “frivolous” and “indisputably” without merit. The appeals court also granted the owner’s request for sanctions. It described the failings of developer’s counsel as follows: “The rules attendant to summary judgment and summary adjudication of issues are not arcane and should be known to a reasonable attorney appearing at a law and motion hearing. The procedure is set out, in detail, by statute. The rules are the subject of hundreds of appellate court opinions. Appellate counsel did not follow any of these rules. To rule in appellant’s favor on appeal, we would have to suspend Code of Civil Procedure section 437(c) and the rules on appeal. In light of these obvious inadequacies, any reasonable attorney would agree that the trial court properly granted summary judgment and that this appeal would not result in a reversal.” (Champlin/GEI Wind Holdings, LLC v. Avery (Cal. App. 2nd Dist., Div. 6, June 2, 2023) 92 Cal.App.5th 218.)

Court of Appeal Second District, Division Five Defines “Reckless Disregard” and “Abdication of Duty” for Corporations Code §204 as Issue of First Impression.

Shareholders brought a derivative action against the board of directors and officers of a California Corporation for breach of duty by acting recklessly or with gross negligence in failing to take steps for adequate inspection, documentation, monitoring, and risk management relating to a leak from the corporation’s natural gas storage facility. The trial court sustained defendant’s demurrer for plaintiffs’ failure to allege, with particularity, that a pre-suit demand was excused by futility. Plaintiffs appealed, and the Court of Appeal affirmed, agreeing that the shareholders failed to allege with particularity a substantial likelihood of director oversight liability. To reach this holding, the appeals court, as a matter of first impression, “conclude[d] that a director acts with ‘reckless disregard’ of his duties within the meaning of [Corporations Code §] 204, subdivision (a)(10)(iv) when the director (1) does an intentional act or intentionally fails to act in accordance with those duties, (2) with knowledge, or with reason to have knowledge, (3) that the director’s conduct creates a substantial risk of serious harm to the corporation or its shareholders.” It also concluded, as an issue of first impression that as set forth in Corporations Code § 204, subdivision (a)(10)(v) “‘Abdication’ is the act of renouncing or abandoning privileges or duties,” and that act “requires an intentional decision because, in order to renounce or abandon it, one must be aware of the duty owed in the first instance.” (Kanter v. Reed (Cal. App. 2nd Dist., Div. 5, June 2, 2023) 92 Cal.App.5th 191.)

Title VII Claim Stated Based on Workplace Music.

Eight of defendant’s former employees (seven women, one man) brought a Title VII hostile work environment claim against defendant for constantly and publicly playing music with sexually graphic and violently misogynistic content throughout the workplace. Defendant moved to dismiss the action, the district court granted the motion, and the employees appealed. Reversing, the Ninth Circuit “recognize[d], as a matter of first impression for this circuit, “‘sexually graphic, violently misogynistic’ music as one form of harassment that can pollute a workplace and give rise to a Title VII claim” and that “even if the ubiquitous music was not (and need not have been) targeted toward any particular woman, female employees allegedly experienced the content in a unique and especially offensive way.” (Sharp v. S&S Activewear (9th Cir., June 7, 2023) 69 F.4th 9742.)

Proportionality of Copyright Class Action Attorney Fees.

The district court awarded $1.7 million in attorney fees for plaintiffs’ counsel in a copyright infringement class action based on the lodestar method. Yet class members claimed and received only $52,841.05 of the funds made available for settlement and obtained no meaningful injunctive or nonmonetary relief. The Ninth Circuit concluded that the fee award was unreasonable in relation to the benefit to the class. “When evaluating reasonableness, a district court must mainly consider the benefit that class counsel obtained for the class. . . . In particular, district courts awarding fees must expressly consider the value that the settlement provided to the class, including the value of nonmonetary relief, and explain how that justifies the fee award.” The Ninth Circuit concluded that in general this rule also applies to fee awards under the Copyright Act, which generally must be proportionate to the class benefit. The Ninth Circuit therefore reversed the fee award with directions to determine the actual settlement value “and then award attorneys’ fees proportional and reasonable to the benefit received by the class.” (Lowery v. Rhapsody International, Inc. (9th Cir., June 7, 2023) 69 F.4th 994.)

Previously we reported:
Voting Rights.

In a redistricting dispute in Alabama, the district court found that Alabama’s congressional map likely violated the federal voting rights law and diluted the power of Black voters, and ordered the congressional districts be completely redrawn within a few weeks. The district court declined to stay the injunction for the 2022 elections even though the primary elections (via absentee voting) were just seven weeks away. The U.S. Supreme Court granted a stay of the court’s injunction to the Alabama Secretary of State, referencing the Purcell principle that federal courts ordinarily should not enjoin a state’s election laws in the period close to an election.  (Purcell v Gonzales (2006) 549 U.S. 1.)  The case will be heard on the merits by the high court sometime in the future, likely after the November 2022 election.  (Alabama Secretary of State v. Milligan (U.S., Feb. 7, 2022) 142 S.Ct. 879.)

The latest:

The U.S. Supreme Court affirmed the district court’s decision that the plaintiffs showed a reasonable likelihood of success on their claim that Alabama’s districting map violates section 2 of the Voting Rights Act of 1965 (52 U.S.C. § 10301). § 2, as amended by Congress in 1982, “prohibits States from imposing any ‘standard, practice, or procedure . . . in a manner which results in a denial or abridgement of the right of any citizen . . . to vote on account of race or color.’ 52 U.S.C. § 10301(a).” The state’s political processes must be “‘equally open’” and must not deny minority voters an equal “‘opportunity . . . to participate in the political process and to elect representatives of their choice.’  52 U.S.C. § 10301(b).” § 2 focuses on discriminatory effects and does not depend on discriminatory intent. Claims under § 2 are evaluated using the three-part framework from Thornburg v. Gingles (1986) 478 U. S. 30. The high court concluded that the district court properly applied that framework and rejected Alabama’s attempt to revise the framework, including the proposed use of a “‘race-neutral benchmark.’” Chief Justice Roberts authored the lead opinion joined in full by three other justices and in part by Justice Kavanaugh. Justices Thomas and Alito filed dissenting opinions. (Allen v. Milligan (U.S., June 8, 2023) 143 S.Ct. 1487.)

Death Penalty Retrial Does Not Violate Double Jeopardy.

Defendant kidnapped, tortured, and killed a man he accused of taking his television, kidnapped the man’s family members, and raped one of them. A jury convicted him of first-degree murder and two counts of rape with firearm enhancements and sentenced him to death. The California Supreme Court reversed his death sentence because a juror was improperly discharged during penalty deliberations, while affirming the judgment of guilt. (People v. Wilson (2008) 44 Cal.4th 758.) Defendant was retried in 2010 and again sentenced to death. On his second appeal, the California Supreme Court held the penalty retrial did not violate his state or federal constitutional protections against double jeopardy. Double jeopardy applies only if the first trial resulted in an acquittal or its equivalent. “When the death penalty has been imposed, reversal of that judgment on appeal generally does not bar retrial unless the reviewing court determines the evidence was ‘legally insufficient to justify imposition of the death penalty.’ (Poland v. Arizona (1986) 476 U.S. 147, 157.)” Because the prior reversal of the penalty judgment was not based on insufficiency of the evidence, double jeopardy did bar the penalty retrial. The high court also rejected a due process challenge, stating, “Like the United States Supreme Court, ‘[w]e decline to use the Due Process Clause as a device for extending the double jeopardy protection to cases where it otherwise would not extend.’ [Citations.]” (People v. Wilson (Cal., June 8, 2023) 14 Cal.5th 839.)

No Percentage Fees for Chapter 13 Trustee Following Pre-Confirmation Dismissal.

Following pre-confirmation, voluntarily dismissal of their Chapter 13 case, the debtors sought an order requiring the trustee to disgorge all the undistributed plan payments she had collected, including the percentage collected as the trustee’s compensation. The bankruptcy court sustained the debtor’s objection, the trustee appealed, and the district court reversed and remanded. The debtors then appealed to the Ninth Circuit, who reversed the district court. The Ninth Circuit concluded, as a matter of first impression that a standing trustee in a Chapter 13 case is not to be paid her percentage fee when the case is dismissed before confirmation. (Evans v. McCallister (9th Cir., June 12, 2023) 69 F.4th 1101.)

Government Code § 19815.8 Statute of Limitations Takes Precedence over that of § 945.6.

An employee of the California Department of Transportation sued the department and the State Merit Board for allegedly denying him cash awards for suggestions that saved the state money. The California Department of Human Resources, on behalf of the board, demurred on the grounds that the action was barred by the one-year statute of limitations in Government Code § 19815.8. The trial court agreed and dismissed the complaint as to the board. The employee appealed, arguing that his action was governed instead by the two-year statute of limitations in Government Code § 945.6, which is part of the Government Claims Act. Affirming, the Court of Appeal held that § 19815.8’s period took precedence over § 945.6, because “[i]t is settled that a specific statute of limitations takes precedence over a more general statute of limitations. . . . [and] “[b]ecause it applies to only a specific and smaller subset of claims against public entities, section 19815.8 is the more specific statute of limitations . . . .” (Shah v. Department of Human Resources (Cal. App. 3rd Dist., May 23, 2023) 92 Cal.App.5th 590.)

Retrial After Reversal Based on Improper Venue and Jury Drawn from the Wrong District Does Not Violate Double Jeopardy.

The double jeopardy clause does not prohibit the retrial of a defendant after a trial in an improper venue before a jury drawn from the wrong district. “When a trial terminates with a finding that the defendant’s ‘criminal culpability had not been established,’ retrial is prohibited. [Citation.] . . . [¶] Conversely, retrial is permissible when a trial terminates ‘on a basis unrelated to factual guilt or innocence of the offence of which [the defendant] is accused.’” A reversal based on improper venue or because the jury was drawn from the wrong district does not resolve criminal culpability and therefore does not trigger double jeopardy. Justice Alito authored the unanimous opinion. (Smith v. United States (U.S., June 15, 2023) 143 S.Ct. 1594.)

U.S. Supreme Court Rejects Constitutional Challenges to the Indian Child Welfare Act.

The Indian Child Welfare Act (ICWA) governs state court adoption and foster care proceedings involving Indian children. Congress enacted ICWA to help preserve Indian communities by keeping Indian children connected to Indian families. Under the act, placement with an Indian family or a foster home approved by an Indian tribe is preferred over other placements. Individuals joined by three states sued the federal government, challenging ICWA as unconstitutional on several grounds. The U.S. Supreme Court concluded that the act does not exceed Congress’s power under article 1 and rejected challenges to several provisions as violative of the Tenth Amendment. The high court declined to address an equal protection challenge and a non-delegation challenge, finding that no party to the proceeding had standing to make those claims. Justice Barrett authored the majority opinion joined by six other justices. Justices Thomas and Alito filed dissenting opinions. (Haaland v. Brackeen (U.S., June 15, 2023) 143 S.Ct. 1609.)

Disability Insurance Action Did Not Accrue Until Actual Withholding of Benefits.

Plaintiff’s disability insurer approved plaintiff’s total disability claim and began paying monthly benefits to him, following an injury sustained when thrown from his horse. About 15 months later, the insurer notified him that it determined his disability was due to a sickness, not an injury, and would cease payment of benefits when he turned 65. The insurer continued to pay until, three years later, plaintiff turned 65. Plaintiff sued for breach of contract and breach of the implied covenant of good faith and fair dealing. The trial court granted defendant’s motion for summary judgment, concluding the claims accrued when defendant sent the notification, and were barred by the applicable statutes of limitation. The Court of Appeal reversed, concluding that plaintiff did not incur damages until defendant began withholding benefits, and that is when the causes of action accrued. Bennett v. Ohio National Life Assurance Corporation (Cal. App. 1st Dist., Div. 3, June 20, 2023) 92 Cal.App.5th 723.)

Previously we reported:
County and Sheriff’s Deputies Immune from Liability.

Plaintiff’s husband was shot and killed by a neighbor in a driveway of a mobile home park. A county sheriff dragged decedent’s body several feet and, while he was being dragged, decedent’s pants fell to his thighs, exposing his genitals for eight hours. Plaintiff sued the county and its deputies for negligent infliction of emotional distress based on their failure to cover the exposed body. The trial court granted summary judgment for the county. Affirming, the Court of Appeal stated: “[T]he deputies are immune from liability to [plaintiff] ([Gov. Code,] § 821.6), and, the county, as the deputies’ public entity employer, is immune from vicarious liability for the deputies’ negligence, if any. (Gov. Code, §§ 815.2, subd. (b), 821.6.)” (Leon v. County of Riverside (Cal. App. 4th Dist., Div. 2, May 27, 2021) 64 Cal.App.5th 837.) 

The latest:

The California Supreme Court reversed, holding the absolute immunity conferred by Government Code § 821.6 is limited to liability for injuries caused by instituting or prosecuting an official proceeding. Plaintiff’s injury was caused by officers leaving decedent’s body uncovered for eight hours while they searched for the shooter and investigated the crime. The high court disapproved numerous Court of Appeal opinions holding § 821.6 confers immunity for injuries caused by an investigation in connection with a prosecution. The court noted that other Government Code provisions confer immunity for various official acts and may apply to investigatory conduct even if § 821.6 does not. (Leon v. County of Riverside (Cal. June 22, 2023) 2023 WL 4112144.)

Mandatory Stay of District Court Proceedings Pending Appeal on Arbitrability.

A Coinbase user filed a class action complaint against the online currency platform alleging that Coinbase failed to replace funds fraudulently taken from users’ accounts. The district court denied Coinbase’s motion to compel arbitration and denied its motion to stay the action pending the resolution of an interlocutory appeal on the issue of arbitrability. The Ninth Circuit also denied a motion to stay the district court proceedings. The U.S. Supreme Court held that a district court must stay its proceedings while an interlocutory appeal on arbitrability is pending. “An appeal, including an interlocutory appeal, ‘divests the district court of its control over those aspects of the case involved in the appeal.’ Griggs v. Provident Consumer Discount Co., 459 U. S. 56, 58 (1982).” The entire case is essentially “‘involved in the appeal’” when the question on appeal is whether the case belongs in arbitration. Continuation of the court proceedings would largely defeat the purpose of the appeal. A stay is therefore mandatory. Four dissenting justices favored a discretionary stay determination by the district court rather than a mandatory stay, stating, “This mandatory-general-stay rule for interlocutory arbi­trability appeals comes out of nowhere.” Justice Kavanaugh authored the majority opinion joined by four other justices. Justice Jackson dissented joined by two other justices in full and by Justice Thomas in part. (Coinbase, Inc. v. Bielski (U.S., June 23, 2023) 2023 WL 4138983.)

Federal Statute Is Not Unconstitutionally Overbroad in Violation of the First Amendment.

A jury convicted defendant of violating a federal law that prohibits “encourag[ing] or induc[ing] an alien to come to, enter, or reside in the United States, knowing or in reckless disregard of the fact that such coming to, entry, or residence is or will be in violation of law” (8 U.S.C. § 1324(a)(1)(A)(iv)). The Ninth Circuit reversed the conviction, concluding the statute criminalizes immigration advocacy and other protected speech and is overbroad in violation of the First Amendment. Reversing the Ninth Circuit, the U.S. Supreme Court concluded that “encourage” and “induce” have specialized legal meanings, and the statute does not prohibit a substantial amount of protected speech, so the statute is not constitutionally overbroad. Justice Barrett authored the majority opinion joined by six other justices. Justice Jackson filed a dissenting opinion joined by one other justice. (United States v. Hansen (U.S., June 23, 2023) 2023 WL 4138994.)

States Lack Standing to Challenge Executive Branch’s Enforcement Discretion.

Texas and Louisiana sued the Department of Homeland Security challenging its immigration enforcement guidelines. The guidelines prioritized the arrest and removal of suspected terrorists or dangerous criminals and immigrants who recently entered the country illegally. The states alleged that the guidelines violated federal statutes requiring the arrest of a broader range of criminal noncitizens. The U.S. Supreme Court concluded that the states lacked standing to sue because they failed to establish an injury redressable in federal court. Federal courts traditionally have not entertained suits challenging the exercise of the executive branch’s prosecutorial discretion when the plaintiff is neither prosecuted nor threatened with prosecution. Justice Kavanaugh authored the majority opinion joined by four other justices. Justices Gorsuch and Barrett filed concurring opinions, and Justice Alito dissented. (United States v. Texas (U.S., June 23, 2023) 2023 WL 4139000.)

Ninth Circuit Instructs Courts to Consider Both Purposeful Direction and Purposeful Availment when Assessing Specific Jurisdiction.

After a plane crash in Indiana, the passengers’ estates (from Louisiana and Indiana) brought an Idaho-law negligence and product liability action in Idaho federal court against an English consulting firm of the plane manufacturer, a Washington State corporation with a principal place of business in Idaho. The consulting firm had helped the manufacturer obtain regulatory certifications for installation of the plane’s load-alleviation system. The district court granted defendant’s motion to dismiss for lack of specific personal jurisdiction, and plaintiffs appealed. On appeal, defendant argued that appellant’s claims could only be reviewed under the “purposeful direction” test for specific jurisdiction. The Ninth Circuit rejected this argument, concluding that “[t]here’s no need to adhere to an iron-clad doctrinal dichotomy to analyze specific jurisdiction. Rather, when considering specific jurisdiction, courts should comprehensively evaluate the extent of the defendant’s contacts with the forum state and those contacts’ relationship to the plaintiffs’ claims—which may mean looking at both purposeful availment and purposeful direction.” Nonetheless, the Ninth Circuit concluded that the court lacked jurisdiction under either test and affirmed. (Davis v. Cranfield Aerospace Solutions, Limited (9th Cir., June 23, 2023) 2023 WL 4141670.)

The 100-day Deadline to Petition to Vacate an Arbitration Award Is Not Jurisdictional.

A petition to vacate an arbitration award or a request to vacate made in response to a petition to confirm an award must be filed within 100 days after service of a signed copy of the award. (Code Civ. Proc., §§ 1288, 1288.2.) The California Supreme Court held that there is no exception allowing a request to vacate to be filed after the 100-day limitations period when the prevailing party files a petition to confirm within the 100-day period. The court also concluded that the 100-day deadline is not jurisdictional but can be extended by equitable tolling and equitable estoppel. The court found no clear legislative intent to limit the courts’ fundamental jurisdiction or to preclude courts from providing equitable relief from the statutory deadlines. The court rejected the argument that an illegal contract can be challenged at any time notwithstanding a statutory deadline, concluding instead that a claim of contract illegality can be forfeited by failure to timely raise the claim. (Law Finance Group, LLC v. Key (Cal., June 26, 2023) 2023 WL 4168752.)

FTCA Waiver of Sovereign Immunity Applies to Transportation Security Officers Conducting Security Screenings at Airport TSA Checkpoints.

An airline traveler sued the United States under the Federal Torts Claims Act (FTCA) based on allegations that a transportation security officer (TSO) sexually assaulted her during a security screening at a Transportation Security Administration (TSA) checkpoint. The district court granted the United States’ motion for summary judgment, after holding that the FTCA’s “law enforcement proviso”, which waives sovereign immunity for intentional torts by investigative or law enforcement officers was not applicable to TSOs. Reversing, as a matter of first impression, the Ninth Circuit concluded that TSO’s are officers of the United States who execute searches for violations of federal law within the meaning of the FTCA law enforcement proviso. Accordingly, the FTCA waiver applied. (Leuthauser v. United States (9th Cir., June 26, 2023) 2023 WL 4169611.)

Court of Appeal Second District, Division 7, Agrees with Division 8 that Non-Signatory Car Manufacturer Cannot Enforce Arbitration Agreement in Dealership Sales Contract.

A purchaser and a car dealership executed a sales contract for a vehicle that contained an arbitration clause. The purchaser sued the dealership and the manufacturer—a non-signatory the sales contract—for various claims arising from alleged defects in the vehicle. The dealer and manufacturer moved to compel arbitration, and the trial court denied the manufacturer’s motion as to all but the purchaser’s claim for breach of the implied warranty of merchantability. The manufacturer appealed. Following the Court of Appeal Second District, Division 8’s holding in Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324, Division 7 of the same court also concluded that the manufacturer could not compel arbitration based on the sales contract where the claims against the manufacturer were founded on the manufacturer’s express warranty for the vehicle, not any obligation of the dealer under the sales contract. (Montemayor v. Ford Motor Company (Cal. App. 2nd Dist., Div. 7, June 26, 2023) 2023 WL 4181909.)

U.S. Supreme Court Rejects Independent State Legislature Theory.

The North Carolina Supreme Court found that the state legislature violated state law by enacting a congressional districting map that gerrymandered in favor of Republicans. The state court rejected the argument that the elections clause (U.S. Const., art. I, § 4, cl. 1) vests exclusive authority in state legislatures to draw congressional maps free from restrictions imposed by state law. The U.S. Supreme Court decided that it had jurisdiction and stated, “The question on the merits is whether the Elections Clause insulates state legislatures from review by state courts for compliance with state law.” This is known as the independent state legislature theory. The high court answered this question, “No,” stating, “The Elections Clause does not insulate state legislatures from the ordinary exercise of state judicial review.” Chief Justice Roberts authored the majority opinion joined by five other justices. Justice Thomas joined by two other justices dissented on grounds of mootness and disagreed on the merits. (Moore v. Harper (U.S., June 27, 2023) 2023 WL 4187750.)

Pennsylvania Did Not Violate Due Process by Requiring Out-of-State Corporation to Consent to Personal Jurisdiction.

A retired railroad worker sued his former employer in Pennsylvania state court alleging he was exposed to carcinogens while working in Ohio and Virginia. The railroad company was incorporated in Virginia and registered to do business in Pennsylvania. Pennsylvania law requires foreign companies that register to do business in the state to submit to personal jurisdiction in Pennsylvania courts. The Pennsylvania Supreme Court concluded that the state law violates the Fourteenth Amendment’s due process clause. The U.S. Supreme Court disagreed, holding consistent with its prior opinion in Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co. (1917) 243 U. S. 93 that an out-of-state corporation that has consented to jurisdiction as a condition of doing business in the state is properly subject to jurisdiction in the state. Justice Gorsuch authored the lead opinion. Justice Barrett filed a dissenting opinion joined by three other justices. (Mallory v. Norfolk Southern R. Co. (U.S., June 27, 2023) 2023 WL 4187749.)

Fifth District Court of Appeal Adopts Majority Abuse of Discretion Standard of Review for Forum Selection Clause Issue.

Plaintiff brought seven causes of action against defendant arising from allegedly unpaid invoices of his own, and of a third-party distributor whose claims plaintiff had been assigned. The trial court granted defendant’s motion to quash service of summons and complaint pursuant to Code of Civil Procedure § 418.10, based upon a forum selection and choice of law clause in the third-party distributor’s invoices designating Illinois for both forum and governing law. On review, the Court of Appeal, Fifth District, noted a split of authority as to the governing standard of review for an order to enforce a forum selection clause between the abuse of discretion (First, Second, and Fourth Districts) and substantial evidence (Third and Sixth District) standards. The Fifth District adopted the majority view, that the abuse of discretion standard applies. Applying that standard, the appeals court concluded the trial court abused its discretion in applying California instead of Illinois law to determine whether to enforce the forum selection provision. Accordingly, it reversed and remanded the judgment of dismissal with instructions.
(Schmidt v. Trinut Farm Management (Cal. App. 5th Dist., June 27, 2023) 2023 WL 4195847.)

Sua Sponte Statements from the Bench Do Not Trigger Adverse Judgment Rule for Anti-SLAPP.

A commercial tenant sued its landlords for malicious prosecution, claiming defendants brought an unlawful detainer action to extort money from the father of tenant’s owner. Defendants moved to strike under Code of Civil Procedure § 425.15 (anti-SLAPP). Their motion invoked the interim adverse judgment rule, relying upon the trial court’s informal oral statements in the underlying action to establish probable cause for the action. The trial court granted the motion and plaintiff appealed. Reversing, the Court of Appeal held that the trial court erroneously “expanded the range of events that trigger the interim adverse judgment rule to include not only actual judgments and rulings on motions, but also, in this case, statements made sua sponte by the unlawful detainer court during examination of a witness. We have found no published decision endorsing such an extension, nor do we think such an extension is warranted either under the specific facts of this case or the law. The triggers for the interim adverse judgment rule are limited to actual judgments and rulings on dispositive motions.” (Divine Food and Catering, LLC v. Western Diocese of the Armenian Church of North America (Cal. App. 2nd Dist., Div. 1, June 28, 2023) 2023 WL 4230978.)

Arbitrator Cannot Excuse Failure to Timely Pay Fees.

A former employee sued his former employer and others, and the former employer moved to compel arbitration. The trial court granted the motion and stayed proceedings. Later, when the employer failed to pay arbitration fees, the court granted the employee’s election to withdraw from arbitration under Code of Civil Procedure § 1281.98, and request for sanctions. The employer appealed, arguing that the arbitration panel had ruled that § 1281.98 “was not in play” because the panel set a new deadline for payment, after the original deadline passed without payment, and the fee was paid by the second deadline. Affirming, the Court of Appeal explained, “[Defendant]’s fees were due June 4, 2021. By July 9th, [defendant] had not paid. [Defendant] was in material breach of the parties’ arbitration agreement. Section 1281.98 entitled [plaintiff] to withdraw from the arbitration. It is that simple. [¶] The statute does not empower an arbitrator to cure a party’s missed payment. There is no escape hatch for companies that may have an arbitrator’s favor. Nor is there a hatch for an arbitrator eager to keep hold of a matter. (Cvejic v. Skyview Capital (Cal. App. 2nd Dist., Div. 8, June 28, 2023) 2023 WL 4230980.)

U.S. Supreme Court Rules on Consideration of Race in College Admissions.

The U.S. Supreme Court in a highly anticipated decision held that the admissions programs used by Harvard College and the University of North Carolina violate the equal protection clause. The high court first concluded that petitioner, a nonprofit corporation, had organizational standing to challenge the admissions programs and then held that the programs violate equal protection. The universities failed to adequately identify compelling interests to justify the consideration of race in admissions, as needed to satisfy strict scrutiny. They also failed to show a meaningful connection between the means employed and their stated goals. The high court also concluded that the universities’ consideration of race impermissibly disadvantaged some groups and stereotyped students based on race, and that the consideration of race lacked a logical endpoint. Chief Justice Roberts authored the majority opinion joined by five other justices. Justices Thomas, Gorsuch, and Kavanaugh each filed a concurring opinion. Justice Jackson filed a dissenting opinion joined by two other justices. (Students for Fair Admissions, Inc. v. President and Fellows of Harvard College (U.S., June 29, 2023) 2023 WL 4239254.)

High Court Clarifies the Meaning of “Undue Hardship” Under Title VII.

A USPS postal worker refused to work on Sundays for religious reasons. He received progressive discipline and eventually resigned. He sued under title VII alleging that the postal service could have accommodated his Sunday Sabbath practice “without undue hardship” on the conduct of its business (42 U.S.C. § 2000e(j)). Clarifying its prior opinion in Trans World Airlines, Inc. v. Hardison (1977) 432 U. S. 63, the U.S. Supreme Court, in a unanimous opinion by Justice Alito, held that the statutory language “‘undue hardship’ . . . means something very different from a burden that is merely more than de minimis.” “[A]n employer must show that the burden of granting an accommodation would result in substantial increased costs in relation to the conduct of its particular business.” “What is most important is that ‘undue hardship’ in Title VII means what it says, and courts should resolve whether a hardship would be substantial in the context of an employer’s business in the commonsense manner that it would use in applying any such test.” (Groff v. DeJoy (U.S., June 29, 2023) 2023 WL 4239256.)

First Amendment Prohibits Compelled Speech Endorsing Same-Sex Marriage.

Colorado law prohibits discrimination in public accommodations, including denial of equal enjoyment of good and services based on the customer’s race, creed, disability, sexual orientation, or other specified trait. A graphic designer sought an injunction to prevent the state from forcing her to provide her website design services to same-sex couples. She argued that the First Amendment’s free speech clause prevented the state from compelling her to speak in a manner contrary to her personal beliefs against same-sex marriage. The Tenth Circuit found for the state government. The U.S. Supreme Court reversed in an opinion by Justice Gorsuch joined by five other justices. The high court held that the wedding websites involved the graphic designer’s “pure speech” protected by the First Amendment and that Colorado cannot compel her to speak in a manner contrary to her personal beliefs by forcing her to create websites endorsing same-sex marriage. Justice Sotomayor joined by two other justices dissented. (303 Creative LLC v. Elenis (U.S., June 30, 2023) 2023 WL 4277208.)

Student Loan Forgiveness Program Exceeds Statutory Authority.

The Secretary of Education established a plan to forgive about $430 billion in student loans, claiming authority under the HEROES Act (Higher Education Relief Opportunities for Students Act of 2003, 29 U.S.C. § 1070 et seq.). Six states sued the federal government challenging the secretary’s authority to forgive the student loans. The district court concluded that the states had no standing and dismissed the lawsuit. The Eighth Circuit disagreed and issued a nationwide preliminary injunction. The U.S. Supreme Court found that at least one of the states had standing. On the merits, the high court concluded that the secretary’s authority under the HEROES Act to “waive or modify” existing statutory or regulatory provisions relating to student loan programs did not authorize the fundamental changes in the secretary’s comprehensive debt cancellation plan. The high court, therefore, reversed the judgment by the district court and remanded the matter for further proceedings. Chief Justice Roberts authored the majority opinion joined by five other justices. Justice Kagan joined by two other justices dissented. (Biden v. Nebraska (U.S., June 30, 2023) 2023 WL 4277210.)