Litigation Update: June 2023

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

  • Guest Senior Editor, Managing Editor, Julia C. Shear Kushner
  • Editors, Dean Bochner, Colin P. Cronin, Jonathan Grossman, Jennifer Hansen, Gary A. Watt, Ryan Wu
Senator’s Public Letter to Booksellers Did Not Cross Line Between Permissible Persuasion and Unlawful Government Censorship.

Senator Elizabeth Warren sent a letter to Amazon’s Chief Executive Officer, which she also posted via a press release on her website, asking Amazon to modify its search and “Best Seller” algorithms so that they would not direct consumers to a book she asserted was “peddling misinformation about COVID-19 vaccines and treatments.” She noted that one of the book’s authors was instructed by the FDA to stop selling the “ineffective and unauthorized” treatments described in the book on his website and “he had been the subject of multiple federal investigations, including a false-advertising investigation” leading to a $2.95 million settlement. The book’s authors and publisher sued the senator, “alleging that her letter violated their First Amendment rights by attempting to intimidate Amazon and other booksellers into suppressing their publication.” The district court denied plaintiffs’ request for a preliminary injunction requiring the senator to remove the letter from her website, issue a public retraction, and refrain from sending similar letters in the future. Agreeing with the district court that plaintiffs failed to raise a serious First Amendment Question, the Ninth Circuit affirmed the denial as within the lower court’s discretion. The appeals court “conclude[d] that Senator Warren’s letter falls safely on the persuasion side” of the “constitutional line dividing persuasion from intimidation.” (Kennedy v. Warren (9th Cir., May 4, 2023) 66 F.4th 1199.)

Two First Impression Holdings on Liability Standard Under Rosenthal Fair Debt Collection Practices Act (FDCPA).

A consumer alleged that a purported debt collector and its affiliate violated the FDCPA by falsely and deceptively representing they effected substituted service of process on her to obtain a default judgment. The superior court granted defendants’ motion to strike under the anti-SLAPP statute, entered judgment accordingly, and awarded defendants fees and costs. The consumer appealed and the Court of Appeal reversed, concluding the consumer had made a prima facie case. To reach that conclusion, the Court of Appeal reached two issues of first impression: (1) prima facie liability under the FDCPA may be based on unknowingly false representations as means to collect a debt; and (2) the strict liability standard in the FDCPA section incorporating the federal prohibition against any false representations by a debt collector controls to the extent it conflicts with the knowledge standard in the section of the FDCPA prohibiting a debt collector’s use of a legal proceeding knowing service has not been effected. (Young v. Midland Funding LLC (Cal. App. 1st Dist., Div. 4, May 3, 2023) 91 Cal.App.5th 63.)

Welfare and Institutions Code § 702 Wobbler Offense Express Declaration Error Requires Remand Unless Record Shows Court Was Aware of and Actually Exercised Designation Discretion.

A “wobbler offense” is a crime punishable as a misdemeanor or felony at the discretion of the sentencing court. When a minor is found to have committed a wobbler offense, Welfare and Institutions Code § 702 as interpreted by the California Supreme Court mandates that the sentencing make an express declaration of its designation at a hearing before or at disposition. (In re G.C. (2020) 8 Cal.5th 1119.) The state’s highest court explained the “requirement exists partly to ‘ensur[e] that the juvenile court is aware of and actually exercises, its discretion.’” (In re Manzy W. (1997) 14 Cal.4th 1199.) Here, the juvenile court sentencing F.M. failed to comply with the mandate; did not discuss the discretion afforded on the record; and did not include a statement in the minute order indicating any consideration of the designation discretion. But the Court of Appeal nonetheless declined to remand to the lower court because it concluded the following instances in the record made clear the lower court intended to designate the offenses as felonies: (1) noting on the record that F.M.’s assault charge was considered a serious violent felony and could be counted as a strike offense in an adult case; (2) declining to reinstate probation for a prior petition; and (3) contemplating committing F.M. to the Division of Juvenile Justice, which could only have been imposed for certain felonies. The California Supreme Court granted review and reversed and remanded. The state’s highest court held that a § 702 error requires remand unless the record demonstrates the juvenile court “‘was aware of and exercised its discretion’ as to wobblers.” The high court concluded that the portions of the record cited were equally consistent with lack of understanding of the wobbler discretion they were with the presence of such understanding and, as such, “d[id] not demonstrate the awareness required by Manzy W.” (In re F.M. (Cal., May 4, 2023) 14 Cal.5th 701.)

Previously we reported:
No Qualified Immunity Because of Conflicting Evidence Over a Warning Before Use of Deadly Force.

A police officer shot and killed a man during a failed arrest in the men’s locker room of a gym. Before the trial court, the officer maintained that he killed the man because he was pummeling the officer’s partner, and the officer feared the man’s next blow would kill her. The officer also claimed that he yelled “stop” before shooting, but no such warning could be heard on the officers’ body-cam recordings. The decedent’s mother sued the officer for his allegedly unreasonable use of deadly force. The district court denied the officer’s motion for summary judgment on qualified immunity grounds. Affirming, the Ninth Circuit stated: “First, the district court recognized that a reasonable jury could reject the officers’ account of the shooting because there were significant discrepancies between their versions of events and other evidence in the record. Second, we have long held that the Fourth Amendment requires officers to warn before using deadly force when practicable. [Citation.] The defense cannot argue that it was not possible for Agdeppa to give Dorsey a deadly force warning because Agdeppa’s sworn statements show that he had time to tell Dorsey to ‘stop.’ The encounter lasted approximately four minutes after the officers first attempted to handcuff Dorsey, and the officers tased Dorsey at least five times during that interval. Agdeppa never claimed that he warned Dorsey that he would switch from using his taser to using his firearm if Dorsey did not submit to being handcuffed, nor did he argue that it was impracticable to do so. The district court correctly ruled that a jury could decide Agdeppa’s use of deadly force violated clearly established law.” (Smith v. Agdeppa (9th Cir., Dec. 30, 2022) 56 F.4th 1193.)

The latest:

Following the resignation from judicial service of a member of the original panel (a district court judge sitting by designation), a majority of the new three-judge panel granted a petition for panel rehearing and denied as moot a petition for rehearing en banc. The panel also ordered that the prior opinion and dissent be withdrawn, and the case be resubmitted. (Smith v. Agdeppa (9th Cir., May 4, 2023) 66 F.4th 1199.)

Previously we reported:
Subject Matter Jurisdiction in Easement Case.

Plaintiffs live along Robbins Gulch Road in rural Montana. The United States has an easement for use of the road, which the government interprets to include making the road available for public use. Plaintiffs allege that the road’s public use has intruded upon their private lives, with strangers trespassing, stealing, and even shooting a cat. They sued over the scope of the easement under the Quiet Title Act (28 U.S.C. § 2409a(g)), which allows challenges to the United States’ rights in real property. Invoking the act’s 12-year time limit, the government maintained that the suit was jurisdictionally barred. The district court dismissed the case for lack of subject matter jurisdiction. The Ninth Circuit affirmed. Reversing the judgment of the appeals court, the U.S. Supreme Court stated: “All told, neither this Court’s precedents nor Congress’ actions established that §2409a(g) is jurisdictional.” (Wilkins v. United States (U.S., Mar. 28, 2023) 143 S.Ct. 870.)

The latest:

Based upon the U.S. Supreme Court’s reversal and remand, the Ninth Circuit remanded the matter to the district court for further proceedings consistent with the high court’s decision. (Wilkins v. United States (9th Cir., May 8, 2023) 66 F.4th 1223.)

No Standing for Roscoe’s Chicken & Waffles Creditor who Had No Actual Beef with Bankruptcy Trustee Fee Award.

Plaintiff chaired an official committee of unsecured creditors appointed by the Office of the U.S. Trustee to monitor a Chapter 11 debtor’s (the corporation managing Roscoe’s House of Chicken & Waffles) activities. Plaintiff objected to the Chapter 11 trustee’s fee application. The bankruptcy court awarded the statutory maximum enhancement, over $1 million. Plaintiff appealed to the district court, which concluded plaintiff had standing because “there was insufficient capital in the estate to pay all creditors,” and remanded. The bankruptcy court again awarded the maximum and plaintiff again appealed. The district court affirmed. Plaintiff then appealed to the Ninth Circuit. The appeals court—while also recounting the history and cultural significance of the famed restaurant chain—concluded that the district court erred when it concluded plaintiff had standing. Accordingly, it reversed the district court’s order finding standing and remanded with instructions to dismiss the appeal for lack of Article III standing. The panel explained that the Ninth Circuit historically bypassed the Article III inquiry in bankruptcy proceedings, focusing instead on prudential standing. But, following the U.S. Supreme Court’s decision questioning prudential standing in Susan B. Anthony List v. Driehaus (2014) 573 U.S. 149, the circuit court has returned emphasis to Article III standing. Applying that emphasis, the Ninth Circuit concluded that plaintiff here lacked Article III standing to challenge the trustee fee award “because it failed to show that the enhanced fee award would diminish its payment” and thus did not demonstrate an “injury in fact.” (Matter of East Coast Foods, Inc. (9th Cir., May 8, 2023) 66 F.4th 1214.)

Court of Appeal, Fourth District, Division Three, Weighs in on Authority Split Regarding Effect of Disqualification on Judge’s Prior Orders.

A conservatee’s wife petitioned to vacate the orders creating the conservatorship and appointing the conservator for, among other reasons, the later disqualification of the judge who issued the orders. The Court of Appeal, Fourth District, Division Three noted a split in authority on “whether a disqualified judge’s prior rulings are void or voidable.” The appeals court concluded that such rulings are “voidable rather than void,” choosing to follow Urias v. Harris Farms, Inc. (1991) 234 Cal.App.3d 415, and Betz v. Pankow (1993) 16 Cal.App.4th 931, over Hayward v. Superior Court (2016) 2 Cal.App.5th 10, and Christie v. City of El Centro (2006) 135 Cal.App.4th 767. (Conservatorship of Tedesco (Cal. App. 4th Dist., Div. 3; May 8, 2023) 91 Cal.App.5th 285.)

No Property Interest in Easement Over Road that Was Private at Time of Condemnation.

In the 1950s, the United States seized land by eminent domain to build the Ortega Reservoir, including land owned by plaintiff’s predecessors in interest, including a maintenance road. In 1989, the federal Bureau of Reclamation granted the County of Santa Barbara an easement over the road. The county installed locked gates across the road and blocked public entry. In 2020, plaintiff sued, asserting that as “owners of property abutting the road” his predecessors in interest had an easement over the road under two California Supreme Court cases: Bacich v. Board of Control of California (1943) 144 P.2d 818, and Breidert v. Southern Pacific Co. (1964) 394 P.2d 719. The district court rejected his claims and dismissed the suit in its entirety and the Ninth Circuit affirmed. The appeals court explained that both Bacich and Breidert established property rights in easements for owners of property abutting public streets. Plaintiff failed to allege or establish the road in question was a public street when it was condemned. (In re United States (9th Cir., May 10, 2023) 67 F.4th 1006.)

Employer’s Request for Release of Claims by Employee Does not Make Statements Made at Termination Protected by Anti-SLAPP Law.

A nanny sued her former employer, raising wage-and-hour claims and a defamation claim based on statements made to the nanny’s placement agency during severance negotiations. The employer filed an anti-SLAPP special motion to strike against all claims, which the superior court denied. The employer appealed. The Court of Appeal affirmed and remanded the action. The appeals court concluded that the defamation claim did not allege protected pre-litigation activity and there was no basis in law for the motion to strike the non-defamation claims, rendering the motion frivolous as to those claims. It explained, rejecting the employer’s argument to the contrary, that an employer’s request for the employee to sign a release of claims does not make statements made at termination protected by anti-SLAPP law. (Nirschl v. Schiller (Cal. App. 2nd Dist., Div. 4; May 10, 2023) 2023 WL 3334959.)

Retroactive Statutory Exception to ABC Test for Securities Broker-Dealers and Investment Advisors Is Constitutional.

Plaintiffs are registered securities broker-dealers and investment advisors. They sued their brokerage firm for misclassifying them as independent contractors instead of employees, for failing to reimburse them for business expenses, and for making unlawful wage deductions. They argued that the ABC test set forth in Dynamex Operations West, Inc v. Superior Court (2018) 4 Cal.5th 903, because: (1) the exceptions to that test created by the California Legislature violated the equal protection clause of the U.S. Constitution; and (2) retroactive application of the statute violated due process. The superior court concluded that the statutory exception and retroactive application were constitutional and granted summary judgment for defendant. Affirming, the Court of Appeal explained that the exception passed the rational basis test, because “[a] legislature rationally could believe professionals like [plaintiffs], who ask people to trust them with wealth and finances, have more skill and bargaining power than the average worker, and therefore are less vulnerable to exploitation by misclassification as independent contractors.” (Quinn v. LPL Financial LLC (Cal. App. 2nd Dist., Div. 8, May 10, 2023) 91 Cal.App.5th 370.)

Unconscionability and Severability in Arbitration Agreements.

A former employee sued her employer, alleging wage-and-hour claims and an “aggrieved employee” claim under California’s Private Attorneys General Act (PAGA). The superior court denied employer’s petition to compel arbitration as having unconscionable terms inseverable from the agreement and the employer appealed. The Court of Appeal agreed and affirmed, explaining that the arbitration agreement was required to be “read together . . . with other contracts signed as part of [plaintiff’s] hiring.” The appeals court agreed that the terms were unconscionable and the superior court acted within its discretion when it refused to sever the terms. It explained that provisions permitting employers to seek a preliminary injunction outside of arbitration for breach of confidentiality agreement are not, alone, unconscionable. But the addition of provisions waiving employer’s need to obtain a bond or show irreparable harm, along with requiring an employee to consent to immediate injunction are unconscionable. (Alberto v. Cambrian Homecare (Cal. App. 2nd Dist., Div. 4, May 10, 2023) 91 Cal.App.5th 482.)

SCOTUS Rejects Second Circuit’s Right-to-Control Theory of Wire Fraud.

A federal jury convicted petitioner of federal wire fraud in violation of 18 U.S.C. § 1343. In the indictment and at trial, the government relied solely on the Second Circuit’s right-to-control theory—that a “defendant schemed to deprive a victim of potentially valuable economic information necessary to make discretionary economic decisions.” Accordingly, the district court instructed the jury that “property” under § 1343 “includes intangible interests such as the right to control the use of one’s assets,” and that such interests could be harmed by the deprivation of potentially valuable economic information.” Petitioner appealed to the Second Circuit on the grounds that the right to control assets is not “property” for purposes of § 1343. Citing its longstanding right-to-control precedents, the Second Circuit affirmed. The U.S. Supreme Court reversed the Second Circuit, having previously held, in Cleveland v. United States (2000) 531 U. S. 12, that “federal fraud statutes criminalize only schemes to deprive people of traditional property interests.” The nation’s highest court concluded that potentially valuable information is not a traditional property interest and, as such, “h[e]ld that the right-to control theory is not a valid basis for liability under §1343.” (Ciminelli v. United States (U.S., May 11, 2023) 143 S.Ct. 1121.)

SCOTUS Rejects Second Circuit’s Margiotta Test for Criminal Liability for Honest-Services Fraud as Unconstitutionally Vague under Skilling.

Petitioner, who served as Executive Deputy Secretary to New York Governor Andrew Cuomo from 2011–2016, was indicted, charged, and convicted of—among other things— conspiracy to commit honest-services wire fraud under 18 U.S.C. §§ 1343, 1346, and 1349. During an eight-month hiatus when he resigned as executive deputy secretary in 2014, petitioner allegedly accepted payments from a real-estate development company to assist in dealings with a state development agency. In exchange, petitioner allegedly “urged” a senior agency official to drop a requirement that the developer enter a “peace agreement” with local labor unions as a precondition for state funding. Over petitioner’s objections and arguments, district court instructed the jury based on the standard set forth by the Second Circuit in United States v. Margiotta (1982) 688 F.2d 108. The court instructed the jury that petitioner could be found to have had a duty to provide honest services to the public—even during a period in which he was not serving as a public official—if the jury concluded that: (1) “he dominated and controlled any governmental business;” and, (2) “people working in the government actually relied on him because of a special relationship he had with the government.” On appeal, the Second Circuit affirmed based on Margiotta. The U.S. Supreme Court granted certiorari and reversed the Second Circuit, finding the Margiotta test to be too vague. Relying its prior opinion in Skilling v. United States (2010) 561 U. S. 358, the high court explained that “‘[T]he intangible right of honest services’ must be defined with the clarity typical of criminal statutes and should not be held to reach an ill-defined category of circumstances simply because of a smattering of cases” that predated its own proscription of the application of honest services fraud to private persons in McNally v. United States (1987) 483 U.S. 350, and Congress’s invalidation of that complete ban by enacting §1346. The high court held that the Margiotta test failed the requirements of Skilling because, “without further constraint, Margiotta does not . . . define ‘the intangible right of honest services’ ‘“with sufficient definiteness that ordinary people can understand what conduct is prohibited,”’ or ‘“in a manner that does not encourage arbitrary and discriminatory enforcement.”’” (Percoco v. United States (U.S., May 11, 2023) 143 S.Ct. 1130.)

Previously we reported:
Dormant Commerce Clause.

In 2018, California voters passed Proposition 12, which bans the sale of whole pork meat from animals confined in a manner inconsistent with California standards. Plaintiffs, pork and farmers associations, filed an action for declaratory and injunctive relief in federal court on the ground that Proposition 12 violates the dormant commerce clause. (The dormant commerce clause denies the states the power unjustifiably to discriminate against or burden the interstate flow of articles of commerce.) The district court dismissed the action for failure to state a claim. Affirming, the Ninth Circuit stated: “Taking the plausible allegations in the complaint as true and making all reasonable inferences in the Council’s favor, we conclude that these alleged cost increases to market participants and customers do not qualify as a substantial burden to interstate commerce for purposes of the dormant Commerce Clause.” (National Pork Producers Council v. Ross (9th Cir., July 28, 2021) 6 F.4th 1021.)

The latest:

Pork Producers’ Dormant Commerce Clause Theory Fails to Bring Home the Bacon.

The U.S. Supreme Court affirmed the decisions of the Ninth Circuit and district court, agreeing that petitioners failed to state a viable dormant Commerce Clause claim. Petitioners, who conceded the absence of a discrimination-based claim, instead argued that the prior relevant cases: (1) suggest an additional “almost per se” rule forbidding enforcement of state laws that have the practical effect of controlling out-of-state commerce; and/or (2) require a court to prevent enforcement of a state law if the law’s burdens are “‘clearly excessive in relation to the putative local benefits.’” The high court rejected these arguments and “declined [the] invitation” “to fashion two new and more aggressive constitutional restrictions on the ability of States to regulate goods sold within their borders.” (National Pork Producers Council v. Ross (U.S., May 11, 2023) 143 S.Ct. 1142.)

SCOTUS Holds 8 U.S.C. § 1252’s Exhaustion Requirement Is Not Jurisdictional.

The Fifth Circuit dismissed the petition for review of a noncitizen in removal proceedings brought under 8 U.S.C. § 1252 for a failure to satisfy the exhaustion requirement of § 1252(d)(1). The circuit court raised this issue sua sponte because it characterized the requirement as jurisdictional. Reversing, the U.S. Supreme Court held that § 1252(d)(1)’s exhaustion requirement is not jurisdictional. (Santos-Zacaria v. Garland (U.S., May 11, 2023) 143 S.Ct. 1103.)

California Cannot Impose Different Labeling Requirements for Dietary Supplements than Those Set by FDA Regulation.

Plaintiff consumers alleged that Walmart Inc. and International Vitamin Corporation misbranded the dietary supplement Spring Valley Glucosamine Sulfate. Instead of having the required substances bonded to form a single crystal, it contained a blend of separate glucosamine hydrochloride and potassium sulfate crystals. Plaintiffs premised their class action on claimed violations of California, not federal, law—seeking to have the state impose a rule the blended formulation cannot be labeled with the name used for the single-bonded crystal formulation based upon their expert’s unvalidated, unpublished, unreviewed testing methods. Plaintiffs’ own expert conceded that federal law and accepted testing methods—specifically set forth in regulations promulgated by the Food and Drug Administration (FDA) under the authority delegated to it by Congress in the Federal Food Drug and Cosmetic Act (21 U.S.C. §§ 301–399i; FDCA)—allows the blend to be labeled glucosamine sulfate. The district court granted summary judgment for defendants on grounds of federal preemption. The Ninth Circuit agreed and affirmed, explaining that plaintiffs’ “claims [we]re preempted because they seek to impose state labeling requirements that are not identical to the requirements of the applicable federal regulations.” (Hollins v. Walmart Inc. (9th Cir., May 11, 2023) 67 F.4th 1011.)

Restricting Government Employee Accused of Misconduct from Speaking to Potential Witnesses and Employees During Investigation Does Not Violate First Amendment.

Plaintiff, a former employee of the Springfield Utility Board (SUB), was accused of misconduct. While its internal investigation pended, the SUB restricted plaintiff from speaking to potential witnesses and other employees about the subject of the investigation. Plaintiff sued under 42 U.S.C. § 1983, claiming the restrictions violated his First Amendment rights. The district court granted summary judgment for defendants and plaintiff appealed. Affirming, the Ninth Circuit held “that the communication restriction complained of . . . does not violate the First Amendment because it did not limit [plaintiff’s] ability to speak about a matter of public concern. Rather, it merely barred him personally from discussing his own alleged violation of SUB policies—a matter of private, personal concern—with potential witnesses or fellow SUB employees.” (Roberts v. Springfield Utility Board (9th Cir., May 12, 2023) 2023 WL 3402213.)

Retail Price Evidence Serves Nonhearsay Purpose in Assessing Fair Market Value of Stolen Items.

Defendants appealed their grand theft conviction for stealing 15 boxes of adjustable dumbbells and appealed. They argued, among other things, that the superior court erred when it failed to exclude allegedly hearsay testimony by the manager of the warehouse where the theft occurred as to the prices of the dumbbells listed on three retailers’ websites. Affirming, the Court of Appeal explained that “evidence of a retail price for a stolen item, whether based on an online listing or a brick-and-mortar store price tag, is admissible for the nonhearsay purpose of showing that a retailer is advertising the item for a specified price in the marketplace.” (People v. Portillo (Cal. App. 2nd Dist., Div. 7, May 15, 2023) 91 Cal.App.5th 577.)

Letter of Credit Is Not Security Interest for Purposes of Attachment.

A commercial lessor brought an unlawful detainer action against a lessee who had secured the lease with an approximately $11.4 million letter of credit as collateral. The lessor applied for, and received, a prejudgment writ of attachment to secure nearly $2 million for daily rent and charges as well as attorneys’ fees and costs. The lessee appealed, arguing, among other things, that the lessor did not show that the amount to be secured was greater than zero, as required under Code of Civil Procedure § 484.090, because § 483.015, subdivision (b)(4) of the same code required that the amount to be attached be reduced by the amount remaining on the letter of credit serving as collateral—which was greater than $2 million. Affirming, the Court of Appeal held—as a matter of first impression—that the lessor, as beneficiary of the letter of credit did not hold a security interest in the lessee’s property. Accordingly, the lessor’s “interest in the letter of credit d[id] not fall within the scope of section 483.015, subdivision (b)(4).” (Rreef America Reit II Corp, YYYY v. Samsara, Inc. (Cal. App. 1st Dist., Div. 1, May 15, 2023) 91 Cal.App.5th 609.)

Arbitrator Has No Duty to Disclose Results of Other Cases Pending During Proceedings.

An employee sued her employer’s health care service plan for negligence and fraud for failure to timely diagnose and treat her daughter’s cancer. The superior court granted the plan’s motion to compel arbitration. The employee moved to vacate the arbitration award for the plan, which the superior court denied. The employee appealed, arguing that the arbitrator had a continuing duty to disclose the results of other cases involving the plan that resolved during this arbitration. Affirming, the Court of Appeal explained “[b]y definition, prior cases — rather than pending cases — are the only types of cases that are resolved prior to the date of appointment” and must be disclosed “under the plain terms of the statute.” (Perez v. Kaiser Foundation Health Plan, Inc. (Cal. App. 1st Dist., Div. 3, May 16, 2023) 91 Cal.App.5th 645.)

DNA Link Established Through Investigative Genealogy Supports Probable Cause Determination for Search.

Appellant challenged his conviction for a murder that took place in 1980 based on, among other things, a lack of probable cause for the search warrant issued in 2021 to recover DNA from bottles in an outside trash can next to his current home in New Mexico. In 2002, a forensic scientist extracted male DNA from the victim’s rape kit. In 2021, police identified appellant as a person of interest through DNA “Investigative Genealogy.” In 1973, appellant’s address was three apartment complexes away from the crime location. In 1982, appellant’s mother died in a car accident and her address was in the same apartment complex where the victim was killed. Affirming, the Court of Appeal concluded that the magistrate judge issuing the warrant correctly found probable cause to issue the warrant based upon: (1) the genealogical investigation establishing a possible DNA connection between appellant and the murder; (2) corroborating evidence that appellant may have been near the crime location at about the time of the murder; and (3) a fair probability that a search of his outside trash can would uncover circumstantial DNA evidence linking appellant to the murder. (People v. Lepere (Cal. App. 4th Dist., Div. 3, May 16, 2023) 91 Cal.App.5th 727.)

Personal Federal Tax Liability for Estate Property Received Either on or After Date of Death.

Decedent passed with an estate of almost $200 million, most of which was placed in a living trust. Over the years, the estate was distributed amongst his heirs. The estate paid a portion of its tax liability with its tax return and opted to pay the balance on a 15-year installment plan. The estate missed some of the payments and the Internal Revenue Service (IRS) ended the installment plan, issued a notice of final determination, and recorded notice of federal tax liens against the estate. The beneficiaries settled their disputes and claimed that the living trust had been completely depleted. The government sued several heirs, claiming that among other things, as trustees of the trust or recipients of estate property as transferees or beneficiaries, they were personally liable for estate taxes under 26 U.S.C. § 6324(a)(2). The district court held that the beneficiaries were not liable for taxes on the § 6324(a)(2) claim because they were not in possession of estate property at the time of decedent’s death. Reversing, the Ninth Circuit held that § 6324(a)(2) imposes personal liability on the categories of persons listed who have or receive estate property either on the date of death or at any time thereafter, subject to the statute of limitations. (United States v. Paulson (9th Cir., May 17, 2023) 2023 WL 3489050.)

“Nothing Compares 2 [Fair] U[se]” Prince.

“Orange Prince” is one of 16 works in Andy Warhol’s Prince series, which was derived from a copyrighted photograph taken by respondent Lynn Goldsmith, which she’d licensed to Vanity Fair for “one time” only for $400—for a purple image created by Andy Warhol to go with a cover feature on Prince in 1984. In 2016 petitioner Andy Warhol Foundation for the Visual Arts, Inc. (AWF) licensed “Orange Prince” to Condé Nast for the cover of a Prince commemorative magazine for $10,000. Goldsmith first learned about the Prince series based on her image when she saw “Orange Prince” on the cover of the Condé Nast magazine in 2016. She notified AWF that she believed that it infringed her copyright, and AWF sued Goldsmith for a declaratory judgment of noninfringement or, in the alternative, fair use. The district court granted summary judgement for AWF based on the fair use defense. The Second Circuit reversed, finding all four fair use factors favored Goldsmith. The sole question presented to the U.S. Supreme Court was whether the first factor—“the purpose and character of the use, including whether such use is of a commercial nature is for nonprofit educational purposes”—weighs in favor of AWF. Affirming the Second Circuit, nation’s highest court answered, “No.” The high court explained that, because both uses are portraits of Prince used to depict him in magazine stories about him, they share substantially the same purpose, and AWF’s use is of a commercial nature. These two facts outweighed any new expression added by Warhol to Goldsmith’s image. (Andy Warhol Foundation for Visual Arts, Inc. v. Goldsmith (U.S., May 18, 2023) 143 S.Ct. 1258.)

Previously we reported:
Suing for Damages Resulting from Terrorism.

Three appeals arose from three separate acts of terrorism—one in Paris, one in Istanbul, and one in San Bernardino. Plaintiffs sought damages pursuant to the Anti-Terrorism Act (18 U.S.C., § 2333; ATA). The ATA allows U.S. nationals to recover damages for injuries suffered by reason of an act of international terrorism. Plaintiffs sought damages from social media platforms, alleging that Google, Twitter and Facebook were liable by permitting terrorists to post videos and other content and to communicate with each other and radicalize recruits. Plaintiffs also claimed that Google placed paid advertisements in proximity to ISIS-created content and shared the resulting ad revenue with ISIS. The district court dismissed all three actions. With regard to the Paris and San Bernardino attacks, the Ninth Circuit affirmed the dismissal of the cases, agreeing with the lower court that plaintiffs failed to state a claim, mainly because the Communications Decency Act (47 U.S.C. § 230) immunizes those who publish content created by third parties. As to the Istanbul attack, the Ninth Circuit reversed, finding the lower court erred by ruling that plaintiffs failed to state a claim for aiding-and-abetting liability under the ATA. (Gonzalez v. Google LLC (9th Cir., June 22, 2021) 2 F.4th 871.)

The latest:

A unanimous U.S. Supreme Court reversed the Ninth Circuit, finding that plaintiffs failed to state a claim under § 2333. The high court explained that satisfied only two of the three required elements of the claim: (1) that ISIS committed a wrong, and (2) that defendants knew they were playing some role in ISIS’s enterprise. But plaintiffs failed to allege that, as required by the statute, that defendants “gave such knowing and substantial assistance to ISIS that they culpably participated in” the terrorist attack. (Twitter v. Taamneh (U.S., May 18, 2023) 143 S.Ct. 1206; Gonzalez v. Google LLC (U.S., May 18, 2023) 143 S.Ct. 1191.)

Tolling Provision of 28 U.S.C. §1367(d) Applies Only to Appeal from Judgment, Not “[C]atchall [P]rovision” Motion for Relief from Judgment.

After unsuccessful litigation in federal court against the County of Orange for both federal and state claims, the guardian ad litem for the daughter of an inmate who died by suicide in county jail sued the county in state court for wrongful death and related claims. The county demurred, and the state superior court sustained the demurrer and dismissed the claims as time barred. The guardian ad litem appealed. As an issue of first impression, the Court of Appeal concluded that 28 U.S.C. §1367(d)’s tolling provision applies only to an appeal from a district court judgment. It does not apply to an attempt to vacate the judgment under Federal Rules of Civil Procedure, rule 60(b)(6). Accordingly, the appeals court affirmed the dismissal. (Feliz v. County of Orange (Cal. App. 4th Dist., Div. 3, May 19, 2023) 2023 WL 3557392.)

Report of Unlawful Activities Already Known to Employer or Agency Is Protected Disclosure Under Labor Code § 1102.5.

A nightclub employee complained to the club’s owner about unpaid wages owed. Her employer, who already new about these undisputed Labor Code violations, fired her, threatened to report her to immigration authorities, and told her never to return to the club. The employee filed a complaint with the Division of Labor Standards Enforcement (DLSE). The DLSE investigated the complaint and determined that the immigration-based threats and termination violated California Law and notified the employer of proposed remedies—payment of lost wages, reinstatement, and civil penalties to the employee and DLSE)—which the employer declined to accept. Consequently, the Labor Commissioner sued the employer for violations of the Labor Code, including retaliation under § 1102.5, subdivision (b). The employer defaulted, and the trial court granted default judgment in part. But the trial court concluded the commissioner failed to state a valid § 1102.5, subdivision (b) claim because the employee reported her complaints to her employer rather than to a government agency. The commissioner appealed and, despite noting the trial court’s erroneous reliance on an outdated version of the statute, the Court of Appeal affirmed on the ground that the employee’s report of unlawful activity was not a protected disclosure under the statute because she reported it directly to the “wrongdoing employer” and, it reasoned that the term “disclose” “require[d] ‘the revelation of something new or believed by the discloser to be new, to the person or agency to whom the disclosure is made.’” The California Supreme Court disagreed and reversed the Court of Appeal, holding that a report of unlawful activities to an employer or agency is a protected disclosure within the meaning of the statute, even if the employer or agency already knew about the violation and/or is the entity that committed the violation being reported. (People v. Kolla’s, Inc. (Cal., May 22, 2023) 2023 WL 3575254.)

Prejudicial Instructional Error Based on Retroactively Applicable Change to Penal Code Gang Enhancement Requirements.

A jury convicted defendant of first-degree murder with, among other enhancements, a gang enhancement under Penal Code § 186.22, subdivision (b)(1)(C). After trial, while the appeal pended, the California Legislature changed the gang enhancement provision of the code to require the prosecution to show that the two predicate offenses needed to establish a pattern of criminal gang activity “commonly benefitted a criminal street gang” in a manner that was “more than reputational.” The parties and the Court of Appeal all agreed: (1) The jury was instructed under the prior law; (2) under In re Estrada (1965) 63 Cal.2d 740, the new requirement applied retroactively to defendant’s appeal; and (3) that prejudice for an instructional error was to be assessed under Chapman v. California (1967) 386 U.S. 18. Applying the Chapman standard, the California Supreme Court concluded the error “was not harmless beyond a reasonable doubt” because “the record contains evidence that could rationally lead to a contrary finding regarding whether the gang as a whole (as opposed to the predicate offenders themselves) benefited from the offenses in a nonreputational manner.” Accordingly, the high court reversed and remanded the gang enhancement, and the firearm enhancement that was contingent upon the gang enhancement. (People v. Cooper (Cal., May 25, 2023) 2023 WL 3637806.)

Penal Code Full, Separate, and Consecutive Terms Requirement for Separate Sex Crimes Complies with Sixth Amendment.

California criminal courts must impose “full, separate, and consecutive term[s] for certain sex crimes if the offenses were committed “on separate occasions.” (Pen. Code, § 667.6, subd. (d).) The California Supreme Court was asked to consider whether that rule ran afoul of the Sixth Amendment because: (1) under Apprendi v. New Jersey (2000) 530 U.S. 466, any fact increasing the penalty for a crime beyond the prescribed maximum must be proved beyond a reasonable doubt to a jury; (2) under Alleyne v. United States (2013) 570 U.S. 99, the Apprendi rule applies “‘with equal force to facts increasing the mandatory minimum.’” The state’s highest court concluded that § 6676.6, subdivision (d) is constitutional, because, in Oregon v. Ice (2008) 555 U.S. 160, the U.S. Supreme Court held that “the Apprendi rule does not apply to facts deemed necessary to the imposition of consecutive as opposed to concurrent sentences, ‘a sentencing function in which the jury traditionally played no part.’” (People v. Catarino (Cal., May 25, 2023) 2023 WL 3637242.)

Federal Post-Trial Motion Not Required to Preserve Purely Legal Issue Resolved at Summary Judgment.

Respondent, a Maryland state prison inmate, sued petitioner, a correctional officer lieutenant, under 42 U.S.C. § 1983. Petitioner moved for summary judgment under Federal Rule of Civil Procedure 56(a) on the ground that respondent raised failure to exhaust administrative remedies. The district court denied the motion, concluding the exhaustion requirement was satisfied. At trial, petitioner did not raise the exhaustion defense and, after a verdict for respondent, did not file a renewed motion for summary judgment under Federal Rule of Civil Procedure 50(b). Instead, he appealed the purely legal exhaustion issue to the Fourth District, which dismissed the appeal for failure to preserve the issue by renewing it in a post-trial motion. Reversing, the U.S. Supreme Court held that a Rule 50 post trial motion is not required to preserve a purely legal issue resolved at summary judgment. (Dupree v. Younger (U.S., May 25, 2023) 2023 WL 3632755.)

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