Litigation Update: March 2021

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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, Division Three
  • Managing Editor, Julia C. Shear Kushner
  • Editors, Dean Bochner, Reuben Ginsburg, Jessica Riggin, David Williams, Ryan H. Wu, and Greg Wolff.
Clever Franchise Structure to Be Tested.

Class-action plaintiffs contend defendant, a major international janitorial cleaning business, had developed a sophisticated “three-tier” franchising model to avoid paying its janitors minimum wages and overtime compensation by misclassifying them as independent contractors. Defendant contracts with intermediary master franchisees or master owners who, in turn, sell business plans to unit franchisees. Defendant acts as franchisor to the master owner, while the master owner acts as franchisor to the unit franchisee. The district court granted summary judgment for defendant. While the case pended in the Ninth Circuit, the California Supreme Court decided Dynamex Operations West Inc. v. Superior Court (2018) 4 Cal.5th 903. The Ninth Circuit asked the California Supreme Court whether its holding in Dynamex applies retroactively. On January 14, 2021, California’s high court held in Vazquez v. Jan-Pro Franchising International, Inc. (2021) 10 Cal.5th 944 that Dynamex does apply retroactively to all nonfinal cases. Consequently, the Ninth Circuit remanded this case to the district court with instructions to consider all three prongs of Dynamex’s ABC test. (Vazquez v. Jan-Pro Franchising International, Inc. (9th Cir., Feb. 2, 2021) 986 F.3d 1106.)

Copyright Infringement of Fabric.

Plaintiff sued defendants for copyright infringement of a fabric that plaintiff purchased and registered. The fabric had an original image that was imported into Photoshop and edited. A jury returned a verdict for plaintiff, who elected to claim statutory damages in lieu of actual damages. The district court assessed five statutory damages awards totaling $480,000. The Ninth Circuit affirmed the district court’s ruling that the design is original because it was independently created but reversed the award of multiple statutory damages, holding that only one award of statutory damages is permitted under 17 U.S.C. § 504(c)(1). (Desire, LLC v. Manna Textiles, Inc. (9th Cir., Feb. 2, 2021) 986 F.3d 1253.)

Previously we reported:
California Supreme Court Answers Ninth Circuit’s Wage and Hour Question.

Plaintiffs are pilots and flight attendants for a global airline based outside California. Plaintiffs reside in California but perform most of their work outside of California. They are not paid according to California wage law, but instead are paid according to the terms of a collective bargaining agreement under federal law. The Ninth Circuit asked the California Supreme Court to decide whether, given these circumstances, the airline is required to provide plaintiffs with wage statements that meet the various requirements of California law. California’s high court held: “We conclude that whether plaintiffs are entitled to California-compliant wage statements depends on whether their principal place of work is in California. For pilots, flight attendants, and other interstate transportation workers who do not perform a majority of their work in any one state, this test is satisfied when California serves as their base of operations, regardless of their place of residence or whether a collective bargaining agreement governs their pay.” (Ward v. United Airlines, Inc. (Cal., June 29, 2020) 9 Cal.5th 723.)

The latest: 

The Ninth Circuit reversed the summary judgment for United Airlines, concluding that Labor Code § 226 applies to the class members provided they meet the requirements of the Ward test, and that applying Labor Code § 226 in accordance with the Ward test does not violate the dormant Commerce Clause, the Airline Deregulation Act, or the Railway Labor Act. The appellate court remanded the matter with instructions to the district courts “to consider in the first instance whether United’s wage statements violate § 226, to modify the class definitions in both cases to conform to the California Supreme Court’s definition of § 226’s permissible reach, and to modify the class period in the Ward case to extend to the date of judgment.” (Ward v. United Airlines, Inc. (9th Cir., Feb. 2, 2021) 986 F.3d 1234.)

Management Company May Operate a Skilled Nursing Home When It Is Not the License Holder.

 California law requires a license from the California Department of Public Health (CDPH) in order to operate or manage a skilled nursing facility (SNF). A licensee, however, may hire a management company to operate or manage the licensee’s SNF. The management company does not itself hold the license to operate the SNF, but is subject to an application and approval process with CDPH to manage the SNF. The trial court held that CDPH’s approval of unlicensed management companies to operate licensed SNFs does not violate state or federal law. Affirming, the Court of Appeal stated: “It is clear that, even if management companies are running the day-to-day operations, the licensee is still ultimately responsible for those operations.” (California Advocates for Nursing Home Reform v. ArĂĄgon (Cal. App. 1st Dist., Div. 3, Jan. 29, 2021) 60 Cal.App.5th 500.)

Early Days.

Since 1894, a bronze sculpture stood in the San Francisco Civic Center commemorating the era in which the State of California was founded. The sculpture, known as “Early Days,” depicts a Native American reclining and a Catholic priest standing over him endeavoring to convey religious knowledge. The native’s face appears to display “the struggle of dawning intelligence.” For several decades, critics have complained the sculpture is racist and offensive, and the city ultimately removed the sculpture in September 2018. Two taxpayers brought this action seeking an order requiring that the sculpture be returned to the Civic Center. The trial court sustained the city’s demurrer and dismissed the case. Affirming, the Court of Appeal stated that the city “decided as a policy matter that one aspect of the pioneers’ founding story—the stain of nativist racism—is no longer worthy of celebration. If [plaintiffs] wish to change that policy judgment (it is reversible, after all, because â€˜Early Days’ was placed in storage, not shattered to pieces), nothing stops them from utilizing the electoral process as a means to continue advocating for their point of view.” (Schmid v. City and County of San Francisco (Cal. App. 1st Dist., Div. 4, Feb. 1, 2021) 60 Cal.App.5th 470.)

Fired Employee Lost Suit Against His Former Employer.

Plaintiff sued his former employer, alleging causes of action under the Fair Employment and Housing Act, the California Family Rights Act, and wrongful termination in violation of public policy. The trial court granted summary adjudication for defendant on most of the claims. The case proceeded to jury trial on the remaining claims and the jury returned a defense verdict. On appeal, plaintiff contended that the trial court erred by granting summary adjudication; by criticizing his theory of pretext in front of the jury; by allowing defendant to use evidence at trial that he claimed was improperly withheld during discovery; and by calendaring the hearing on his motion for new trial beyond the statutory deadline to hear the motion. Affirming, the Court of Appeal concluded that plaintiff had not submitted sufficient evidence to establish a triable issue of fact on the claims that were summarily adjudicated. As to the trial court’s failure to timely rule on the motion for new trial, the appeals court said: “Put simply, the claims raised in the motion for new trial are the same issues raised in the appeal before us. We have evaluated those claims on their merits, and concluded [plaintiff] has shown no error.” (Choochagi v. Barracuda Networks, Inc. (Cal. App. 6th Dist., Jan. 28, 2021) 60 Cal.App.5th 444.)

Art Taken By the Nazis.

Plaintiffs allege that Hermann Goering, Adolf Hitler’s deputy and the Prime Minister of Prussia, became interested in medieval relics owned by a Jewish consortium. Goering allegedly employed a combination of political persecution and physical threats to coerce the consortium into selling the relics to Prussia in 1935 for approximately one-third of their value. Two of the consortium members fled the country following the sale, and the third died in Germany shortly thereafter. At the end of the war, the United States took possession of the relics, eventually turning them over to the Federal Republic of Germany. They are now displayed in a Berlin museum. Three descendants of the consortium members informed the museum the 1935 sale was unlawful, but the museum contended the transaction occurred at a fair market price without coercion. The descendants filed suit in Washington, D.C. district court, seeking $250 million in compensation. The Foreign Sovereign Immunities Act (FSIA) provides that foreign nations are presumptively immune from the jurisdiction of U.S. courts. The statute, however, sets forth several specific exceptions—including that a sovereign does not enjoy immunity in any case “in which rights in property taken in violation of international law are in issue.” (28 U.S.C. § 1605(a)(3).) The question presented is whether a country’s alleged taking of property from its own nationals falls within this exception. The district court denied Germany’s motion to dismiss the case and the D.C. Circuit affirmed. Vacating the denial of the motion to dismiss and remanding to the district court, the U.S. Supreme Court stated: “The heirs have not shown that the FSIA allows them to bring their claims against Germany.” The nation’s highest court noted that other arguments had not been considered and ordered the appeals court to direct the trial court to do so. The high court noted: “As a Nation, we would be surprised—and might even initiate reciprocal action—if a court in Germany adjudicated claims by Americans that they were entitled to hundreds of millions of dollars because of human rights violations committed by the United States Government years ago. There is no reason to anticipate that Germany’s reaction would be any different were American courts to exercise the jurisdiction claimed in this case.” (Federal Republic of Germany v. Philipp (U.S., Feb. 3, 2021) 141 S.Ct. 703.)

Hungarian Holocaust.

Plaintiffs are fourteen Jewish survivors of the Hungarian Holocaust who bring various causes of action against the Republic of Hungary and the Hungarian state-owned railway arising from the defendants’ participation in, and perpetration of, the Holocaust. The district court dismissed the suit, holding that the Foreign Sovereign Immunities Act’s treaty exception grants the Hungarian defendants immunity. (28 U.S.C. §§ 1603 et seq.; FSIA.) The lower court concluded that the 1947 Peace Treaty between the Allied Powers and Hungary set forth an exclusive mechanism for Hungarian Holocaust victims to obtain recovery for their property losses, and that permitting the plaintiffs’ lawsuit to proceed under the FSIA would conflict with the peace treaty’s terms. The D.C. Circuit held that the peace treaty posed no bar to the plaintiffs’ lawsuit, stating: “While the treaty secures an obligation by Hungary to provide compensation for property interests confiscated from Hungarian Jews during the War, that obligation is not exclusive of other, extra-treaty means of recovery like the causes of action asserted in this case. As a result, the FSIA’s treaty exception does not preclude this action. ” (See Simon v. Republic of Hungary (D.C. Cir., 2016) 812 F.3d 127, 132.) The entire U.S. Supreme Court opinion reads: “PER CURIAM. The judgment of the United States Court of Appeals for the D. C. Circuit is vacated, and the case is remanded for further proceedings consistent with the decision in Federal Republic of Germany v. Philipp, ante, p. ___. It is so ordered.” (Republic of Hungary v. Simon (U.S., Feb. 3, 2021) 141 S.Ct. 691)

Trial Court Abused Its Discretion in Appointing a Receiver.

 Plaintiff obtained a money judgment against defendants. After filing a writ of execution, plaintiff thereafter served levies on financial institutions regarding accounts associated with defendants and on businesses with whom defendants conducted business. Plaintiff obtained a charging order against one defendant’s interest in a limited liability company owned by her husband. Plaintiff did not serve any interrogatories requesting information to aid in the collection of the judgment pursuant to Code of Civil Procedure § 708.020; did not place liens on any of defendants’ property pursuant to Code of Civil Procedure § 695.010 et seq.; and did not seek to compel appearance at debtors’ examinations pursuant to Code of Civil Procedure § 708.110. When the fruits of plaintiff’s collection efforts dwindled, plaintiff moved the court to appoint a receiver, which the court did. Reversing, the Court of Appeal stated: “The trial court in this case abused its discretion in appointing a receiver to enforce [plaintiff’s] money judgment because there was no evidence—let alone the substantial evidence necessary to sustain a proper exercise of discretion [Citation.] — that [defendants] had engaged in obfuscation or other obstreperous conduct to the degree that the other collection mechanisms available under the Enforcement of Judgments Law were ineffective.” (Medipro Med. Staffing LLC v. Certified Nursing Registry, Inc. (Cal. App. 2nd Dist., Div. 2, Feb. 4, 2021) 60 Cal.App.5th 622.)

Beneficiary’s Writ of Mandate in Action to Claim Rights to Pension Granted.

Plaintiff’s mother—a former employee of defendant, a public entity—had earned a pension under rules permitting her to designate a beneficiary to receive specified monthly pension benefits upon her death. Before the mother died, she had prepared a required work sheet that stated plaintiff was her designated beneficiary, but the work sheet did not have a signature line, so it was unsigned. The pension administrator reviewed the work sheet and sent the mother a formal document for her to sign. But the mother died without signing the formal document. When plaintiff claimed her rights as the designated beneficiary, defendant denied her claim, finding plaintiff’s mother did not properly identify plaintiff as the contingent beneficiary before her death. Thus, none of these earned pension benefits were paid, and were instead retained by defendant. Plaintiff sued defendant alleging breach of contract and seeking a writ of mandate to overturn defendant’s decision. The trial court sustained defendant’s demurrer to the breach of contract claim and denied the writ petition. On appeal, the Court of Appeal noted that under Code of Civil Procedure § 1085 and the defendant’s internal rules, the trial court was required to apply a substantial evidence test to the Plan Administrator’s factual findings. Affirming in part and reversing in part, the Court of Appeal stated: “We determine the court properly sustained the demurrer on the contract claim without leave to amend. But we conclude the court erred in denying the mandate petition. The undisputed evidence establishes Mother substantially complied with the Regents’ pension rules and the Regents abused its discretion in failing to consider and apply the substantial compliance doctrine in evaluating Manderson-Saleh’s claim. We reverse and remand with directions for the superior court to grant the mandamus petition and to issue a writ ordering the Regents to grant Manderson-Saleh’s contingent-annuitant pension claim.” (Manderson-Saleh v. Regents of University of California (Cal. App. 4th Dist., Div. 1, Feb. 5, 2021) 60 Cal.App.5th 674.)

Crime Doesn’t Pay.

A county employee decided to retire, and in December 2012, he submitted his application for retirement to the county’s retirement authority. On January 1, 2013, the California Public Employees’ Pension Reform Act of 2013 (Gov. Code, § 7522.72(b)(l)) took effect. Included in that measure is a provision that mandates the forfeiture of pension benefits/payments if a public employee is convicted of “any felony under state or federal law for conduct arising out of or in the performance of his or her official duties.” In February 2013, the employee was indicted for stealing county property. In April 2013, the county pension authority approved the employee’s retirement application, fixing the employee’s actual retirement on the day he submitted that application in December 2012. Also in April 2013, the employee began receiving monthly pension checks starting from December 2012. In December 2015, the employee pled guilty to embezzling county property over a 13-year period ending in December 2012. Thereafter, the county pension authority reduced the employee’s monthly check in accordance with the forfeiture provision. The former county employee filed a petition for writ of mandate, and the trial court denied it. The Court of Appeal held: “We conclude the provision does apply to the employee because, as a matter of statutory construction, the employee had merely initiated the process of retiring. We also conclude that even if the employee was retired, and the forfeiture provision was applied to him, there would be no violation of the California Constitution’s provision against the undue impairment of the employee’s contract with his governmental employer, nor would that application constitute an ex post facto law.” (Wilmot v. Contra Costa County Employees’ Retirement Association (Cal. App. 1st Dist., Div. 2, Feb. 5, 2021) 60 Cal.App.5th 631.)

Wages Versus Expenses in Calculating Overtime Pay.

Plaintiff travelling clinicians are former employees of defendant healthcare staffing company. A number of non-traveling clinicians also worked for the company, which paid both hourly wages and weekly “per diem benefits” to the two groups of employees. However, while “per diem benefits” were excluded from the regular rate of pay for traveling clinicians, they were included in the regular rate of pay for non-traveling clinicians. Plaintiffs alleged that their per diem benefits were improperly excluded from their regular rate of pay under the Fair Labor Standards Act, thereby decreasing their wage rate for overtime hours. The district court granted summary judgment in defendant’s favor. Reversing, the Ninth Circuit held, “the record establishes that the contested benefits functioned as compensation for work rather than as reimbursement for expenses incurred, and that the per diem benefits were thus improperly excluded from Plaintiffs’ regular rate of pay for purposes of calculating overtime pay.” (Clarke v. AMN Services, LLC (9th Cir., Feb. 8, 2021) 987 F.3d 848.)

Attorney Fees Incurred in Enforcing a Judgment.

Pursuant to Code of Civil Procedure § 685.040, judgment creditors are entitled to the reasonable and necessary costs of enforcing a judgment. The judgment here awarded reasonable attorney fees. But it did not set a particular amount to be recovered, and the trial court denied postjudgment fees. The Court of Appeal reversed, ordered a new hearing on postjudgment attorney fees, and stated, “because the underlying judgment awarded reasonable attorney fees, the court’s failure to include a specific amount of fees in the judgment does not defeat section 685.040.” (Guo v. Moorpark Recovery Service, LLC (Cal. App. 1st Dist., Div. 5, Feb. 8, 2021) 60 Cal.App.5th 745.)

Arbitration Agreement Versus Vehicle Code.

Plaintiff operated a service-only dealership for defendant automobile manufacturer. The parties had an arbitration agreement. After the manufacturer refused to either approve a relocation of the dealership or renew its agreement with the dealer, plaintiff filed two administrative protests with the New Motor Vehicle Board. Defendant filed a petition to compel arbitration, and the arbitrator issued an award for defendant. The trial court confirmed the award and entered judgment. On appeal, plaintiff argued the arbitration was illegal under the Vehicle Code. Affirming, the Court of Appeal held that the Motor Vehicle Franchise Contract Arbitration Fairness Act (15 U.S.C. § 1226), which could ordinarily preclude arbitration arising out of dealership agreements, did not apply to service-only agreements. It also held that the New Motor Vehicle Board Act (Veh. Code, § 3000 et seq.) expressly permits arbitration agreements, and that the parties’ agreement controlled over the remaining contested provisions of the Vehicle Code. (Subaru of America, Inc. v. Putnam Automotive, Inc. (Cal. App. 1st Dist., Div. 2, Feb. 10, 2021) 2021 WL 485439.)

Level of Due Process Required Before a College May Place a Written Reprimand in a Student’s Record.

Two female students at a community college complained that plaintiff was following them, taking photos of one of them on his phone, and touching them. Plaintiff has multiple disabilities, including cerebral palsy and autism, which have complicated his experience at college. Plaintiff then received a letter from the college, stating that he was “suspended”—that is, barred from classes and campus activities. However, he was allowed to attend classes while he contested the suspension. Eventually the suspension was dropped, and a written disciplinary reprimand was placed in his student record instead. Plaintiff sought a writ of mandamus, contending the college did not afford him due process before issuing the suspension. The trial court agreed and issued the writ. Reversing, the Court of Appeal stated: “By due process, [plaintiff] did not mean notice and an opportunity to be heard, both of which he had. He meant a hearing during which he or his counsel could confront and cross-examine witnesses. The trial court granted the writ petition on that basis. Unquestionably, a student is entitled to some form of hearing and witness confrontation before he or she can be suspended or expelled. The question before us is whether [plaintiff] was entitled to the same level of due process before a written reprimand could be placed in his student record, if he suffered no other official detriment. We conclude that he was not entitled to this level of due process.” (Knight v. South Orange Community College District (Cal. App., 4th Dist., Div. 3, Feb. 10, 2021) 2021 WL 486518.)

Officer Without a Gun.

A California Department of Corrections officer was convicted of misdemeanor domestic violence after choking his girlfriend. He was then fired because federal law prohibited him from carrying a firearm, which he needed for the job. He petitioned for a writ of administrative mandate, which the trial court denied. Affirming, the Court of Appeal stated: “[F]ederal law makes it a felony to possess a firearm after being convicted in any court of misdemeanor domestic violence, which is defined in part as the use of physical force by ‘a person similarly situated to a spouse’ of a victim. Disputed here is whether [plaintiff] was ‘similarly situated to a spouse’ of his girlfriend, given that he had been dating her five or six months and did not share a permanent residence with her. We hold, in line with the federal case law, that the evidence is sufficient to support the Department’s determination that [plaintiff] was ‘similarly situated to a spouse’ of his victim under these circumstances. Accordingly, the Department acted reasonably in terminating him . . . .” (Hernandez v. State Personnel Board (Cal. App., 4th Dist., Div. 2, Feb. 10, 2021) 2021 WL 487886.)

Parties Cannot Contract Away California’s Statutory Protections Regarding Arbitrator Disqualification.

In 2012, the parties signed an arbitration agreement and agreed not to contest the appointment of Judge John P. Shook as the arbitrator for any future disputes. In 2017, plaintiffs filed a petition in the trial court to compel arbitration of a business dispute. The petition was granted. But in the intervening years, Judge Shook had served as an arbitrator for two other matters involving the parties. Defendant then served a notice of disqualification, contending the arbitrator’s prior rulings and relationships could affect his neutrality. The arbitrator refused to disqualify himself, and the trial court subsequently affirmed an award in favor of plaintiffs. Reversing and directing the trial court to vacate the award, the Court of Appeal stated that, at the time of the 2012 agreement, “the arbitrator was still a ‘proposed neutral arbitrator’ . . . under Code of Civil Procedure sections 1281.9 and 1281.91,” and required under those sections to disqualify himself upon service of a notice of disqualification. Parties “cannot contract away California’s statutory protections for parties to an arbitration, including mandatory disqualification of a proposed arbitrator upon a timely demand.” (Roussos v. Roussos (Cal. App., 2nd Dist., Div. 7, Feb. 16, 2021) 2021 WL 567366.)

Ninth Circuit Applies Abuse of Discretion Standard for Review of a Finding of Unclean Hands.

In a trademark infringement case, the district court granted defendant’s motion for summary judgment based on plaintiff’s unclean hands. Plaintiff had initially obtained the  “METAL” trademark through a false representation, which the trademark office later canceled. Plaintiff, through his corporate entity, then reapplied and obtained the trademark. On appeal, the Ninth Circuit held that “the appropriate standard of review of a district court’s determination to grant summary judgment on the affirmative defense of unclean hands is abuse of discretion.” (Metal Jeans, Inc. v. Metal Sport, Inc. (9th Cir., Feb. 16, 2021) 987 F.3d 1242.)

People Who Appear to Be Under the Influence Are Sometimes Sick Instead.

Responding to a call, police arrived at an apartment to find the slurring, impaired plaintiff who had called the police. Another resident told the police that plaintiff was drinking all week and may have been imagining people who weren’t there. Later that evening, plaintiff fell, but police interrupted the paramedics who responded and arrested plaintiff for public intoxication. The following morning, bleeding from his head, plaintiff was taken to a hospital where he was diagnosed with severely low sodium and a brain bleed to his frontal lobe. He had no drugs or alcohol in his system. Following a long stay in the hospital, plaintiff sued the police officers and medical professionals, asserting various causes of action, including wrongful arrest and negligence. After the hospital and its doctors settled with plaintiff for $2,750,000, the case proceeded to trial against two sheriff’s deputies and two nurses, who were defended by the county. The jury concluded that the deputies and nurses were negligent and their negligence was a substantial factor in causing harm, awarding $12,617,674. The court granted the unopposed motion for a reduction in damages based on the Medical Injury Compensation Reform Act of 1975, and reduced the noneconomic damage award with a setoff from the settlement, awarding plaintiff total damages of $6,261,174. The Court of Appeal found no merit to defendants’ many contentions on appeal. The Court of Appeal upheld the jury’s verdict despite the jury also rejecting the false arrest claim: it found there was no contradiction between: (1) the determination that the deputies could reasonably conclude that plaintiff was intoxicated and therefore had probable cause to arrest him; and (2) its conclusion that the deputies negligently interfered with the paramedics’ assessment of plaintiff, which would have resulted in immediate medical treatment. The appellate court also found that Government Code § 845.6, which immunizes employees of public entities for failing to furnish medical care to a prisoner, did not apply because plaintiff was not a prisoner when denied medical treatments. (Collins v. County of San Diego (Cal. App. 4th Dist., Div. 1, Feb. 17, 2021) 2021 WL 612570.)

Electromagnetic Hypersensitivity Is an Actionable Physical Disability Under California Law.

A school district installed an updated Wi-Fi system to accommodate iPads, Chromebooks, and tablets. A teacher soon began experiencing migraine headaches and nausea, and believed them to be caused electromagnetic frequency of the system. She requested various accommodations, and ultimately sued the school district for discriminating against her based on her “electromagnetic hypersensitivity.” The trial court sustained the school district’s demurrer to the teacher’s complaint, brought under the California Fair Employment and Housing Act (Gov. Code, § 12900 et seq.; FEHA). The Court of Appeal affirmed in part, finding that plaintiff failed to state causes of action for discrimination and employment discrimination. But it reversed regarding the teacher’s cause of action for failure to provide reasonable accommodation for her electromagnetic hypersensitivity, which falls within FEHA’s broadly construed definition of disability. (Brown v. Los Angeles Unified School District (Cal. App. 2nd Dist., Div. 8, Feb. 18, 2021) 2021 WL 631030.)

$15 Million Dollar Punitive Damages Award in Asbestos Verdict Reversed.

A man diagnosed with mesothelioma from asbestos exposure at construction jobsites and his wife sued several manufacturers of cement pipes that contained asbestos. By the time of trial, only one defendant remained in the action. The jury awarded plaintiffs a total of $15,270,501 in compensatory damages, finding defendant 45 percent responsible. The jury also concluded that defendant had acted with malice, oppression, or fraud, and awarded an additional $15,000,000 in punitive damages. Based on that apportionment of fault, the trial court entered judgment for plaintiffs for $22,213,704.39. Agreeing with defendant that substantial evidence did not support the punitive damages award, the Court of Appeal reversed that portion of the judgment. Specifically, the Court of Appeal emphasized that, while plaintiffs need not identify any specific officer, director, or managing agent of defendant who acted with malice, they needed to “provide evidence at trial that ‘piec[e] together knowledge and acts of [defendant’s] multitude of managing agents’ ” to establish a corporate policy engaging in acts of malice. Because plaintiffs failed to provide any such evidence, they could not establish the requisite state of mind for a punitive damages award. (Morgan v. J-M Manufacturing Company, Inc. (Cal. App. 2nd Dist., Div. 1, Jan. 27, 2021) 2021 WL 632939.)

No Separate Finding of Bad Faith Required for Finding Financial Elder Abuse.

After a bench trial, the court entered judgment against a man for committing financial elder abuse against his ailing father. The Court of Appeal affirmed, reciting substantial evidence supporting the trial court’s finding of elder abuse, including evidence showing the transfer of real and personal property from father to son, and that the father’s emotional and physical health were deteriorating, making him vulnerable to undue influence. The Court of Appeal also held that the text of Probate Code § 859 authorizes an award of double damages for the commission of elder financial abuse without a separate finding of bad faith. (Keading v. Keading (Cal. App. 1st Dist., Div. 3, Feb. 18, 2021) 2021 WL 631635.)

Plaintiff Is Permitted to Pursue Public Injunctive Relief in Arbitration Without Serving as a Private Attorney General.

 Plaintiff brought a class action, contending defendant violated various California consumer statutes. The district court compelled the matter to individual arbitration based on the parties’ agreement and dismissed the complaint. Among other things, the agreement authorized the arbitrator to “award all [injunctive] remedies available in an individual lawsuit under [California] law.” On appeal, plaintiff contended the arbitration agreement was invalid because it violated California law by prohibiting public injunctive relief. Affirming the order compelling arbitration and dismissing the complaint, the Ninth Circuit concluded that the arbitration agreement authorized the arbitrator to award public injunctive relief in a bilateral arbitration, stating: “Must [plaintiff] act as a private attorney general to seek public injunctive relief? The evolution of the [unfair competition law and false advertising law], along with the California Supreme Court’s treatment of them, convinces us that the answer is no. Public injunctive relief is available under California law in individual lawsuits—not just in private-attorney-general suits. It follows that [plaintiff] may secure that relief in arbitration under the Agreement.” (DiCarlo v. MoneyLion, Inc. (9th Cir., Feb. 19, 2021) 2021 WL 647502.)

Nice Try. Now Hand Over Your Driver’s License.

After he crashed into the back of a car, plaintiff was arrested for driving under the influence of alcohol. Blood tests showed a blood-alcohol concentration (BAC) of 0.25 percent. At a DMV proceeding, plaintiff objected to the lab report. Plaintiff’s counsel called an employee of Specimen Specialists of America, Inc., who testified the technician who drew plaintiff’s blood failed to comply with state regulations governing blood test procedures. The hearing officer admitted the report and ruled that plaintiff drove with a BAC at or above 0.08 percent. On appeal from the denial of plaintiff’s petition for an administrative writ in the superior court, the Court of Appeal ruled: “When the Department of Motor Vehicles (DMV) holds an administrative hearing to consider whether to suspend a driver’s license, certain relaxed evidentiary standards govern. The DMV can usually support its case by relying on an Evidence Code presumption that chemical blood tests were properly conducted, and the results are thus reliable. As a matter of first impression, we conclude that licensees rebut that presumption only when they cast doubt on the integrity of the test. It is not enough to show a violation of governing regulations that has only a tenuous connection to the accuracy of the results. Here, because plaintiff proved a regulatory violation with only an indirect and speculative relationship to the manner in which the blood test was conducted, and thus the reliability of the test results, we affirm.” (Gerwig v. Gordon (Cal. App. 4th Dist., Div. 1, Feb. 19, 2021) 2021 WL 650274.)

California Provides Compensation to Persons Wrongfully Incarcerated, but Good Luck Collecting it.

A person who was incarcerated for a crime he or she did not commit may present a claim for compensation pursuant to Penal Code § 4900. If the Victim Compensation Board finds the person was factually innocent, the board will recommend that the legislature pay the claim. Ruling on a federal habeas corpus petition, a magistrate judge and then the district court held that plaintiff was actually innocent, applying the test set forth in Schlup v. Delo (1995) 513 U.S. 298. But the Victim Compensation Board denied his compensation claim. Plaintiff petitioned for  an administrative writ in the superior court. The court found the Schlup finding did not constitute a finding of factual innocence under the Penal Code. Affirming the denial of plaintiff’s writ petition, the Court of Appeal stated: “In short, the trial court did not err in ruling that the Board is bound by the factual findings and credibility determinations that established the basis for the federal district court’s grant of Souliotes’s habeas petition, but that the Board is not bound by the factual findings and credibility determinations from the district court’s order allowing Souliotes to pass through the Schlup gateway.” (Souliotes v. California Victim Compensation Board (Cal. App. 2nd Dist., Div. 4, Feb. 19, 2021) 2021 WL 650351.)

Timing of Property Damage Under “Occurrence” Insurance Policy Found to Be a Question of Fact.

A subcontractor built a retaining wall that collapsed years later, causing damage to a nearby residential lot. The homeowner sued the subcontractor, obtained a default judgment, and then sued the subcontractor’s insurance company on the default judgment pursuant to Insurance Code § 11580, subdivision (b)(2). The insurance company filed a motion for summary judgment arguing the homeowner’s damages occurred long after the insurance policy had expired, so the insurance company had no duty to pay the default judgment. The trial court agreed and granted the motion. Reversing, the Court of Appeal stated: “A trial court properly grants a motion for summary judgment when there are no triable issues of material fact. But where an insurance policy provides coverage based on the timing of an ‘occurrence,’ the determination of when the occurrence took place may itself be a question of fact. (See Rest., Liability Insurance, § 33, com. (1).) Here, the homeowner alleges ‘continuous and progressive’ damage began to occur shortly after the subcontractor built the retaining wall during the coverage period of the insurance policy. The insurance company disagrees. This is a triable issue of material fact. Thus, we reverse the trial court’s order granting summary judgment.” (Guastello v. AIG Specialty Ins. Co. (Cal. App. 4th Dist., Feb. 19, 2021) 2021 WL 650878.)

California Labor Code Applies to Interstate Transportation Company.

Plaintiffs are California-based flight attendants who were employees of defendant. The district court certified a class and granted summary judgment for plaintiffs on almost all of their claims under the California Labor Code. The Ninth Circuit concluded the dormant commerce clause did not preclude application of California labor laws.  The appeals court affirmed in part and reversed in part, stating: “In sum, we affirm the district court’s summary judgment to Plaintiffs on their claims for overtime (§ 510); for violation of meal and rest break requirements (§§ 226.7, 512); for wage statement deficiencies (§ 226); and for waiting time penalties (§§ 201 and 202). We also affirm the district court’s decision on class certification. We reverse the district court’s summary judgment to Plaintiffs on their claims for minimum wage (§ 1182.12); for payment for each hour worked (§ 204); and for heightened penalties for subsequent violations under PAGA. We vacate the district court’s order granting attorney’s fees and costs to Plaintiffs, and we remand for further proceedings consistent with this opinion.” (Bernstein v. Virgin America, Inc. (9th Cir., Feb. 23, 2021) 2021 WL 686281.)

No Duty to Engage in an Interactive Process Under the FHAA.

When a landlord agreed to extend a lease, but with a rent increase, the tenants sought to remain in the residence under the existing terms until one of the tenant’s health stabilized. The landlord sent a notice to quit, and the tenants sued the landlord for failure to engage in an interactive process under the Fair Housing Amendments Act (42 U.S.C. § 3604(f)(3)(B); FHAA). The district court granted summary judgment for the landlord. Affirming, the Ninth Circuit stated: “In sum, the FHAA does not refer to an interactive process or base liability on a landlord’s failure to interact, so there is no such liability under the FHAA. No other circuit has found that failing to engage in an interactive process provides an independent basis for liability under the FHAA. And even our own precedent rejects an independent basis of liability for the failure to engage in the interactive process in the context of other statutes involving disability. Thus, the district court properly granted summary judgment to Defendants on Glenn’s interactive process FHAA claim.” (Howard v. HMK Holdings, LLC (9th Cir., Feb. 23, 2021) 2021 WL 686277.)

“Always natural, always fresh,” Foster Farms Ad.

The American Humane Association created a farm animal welfare program that certifies farm-based food producers who comply with its animal welfare standards, allowing a producer to use its “American Humane Certified” logo on its food. Defendant participates in the program and uses the logo on all of its chicken products sold in California. Defendant must obtain federal approval for the labels of its chicken products and has obtained that approval for the labels that include the logo. Defendant charges more for its chicken than other producers whose chicken does not bear the logo. Plaintiff purchased some of defendant’s chicken in reliance on the logo on the label. She believed that the certification meant that the chickens were treated humanely, but now believes the chickens are treated inhumanely. Plaintiff brought suit against Foster Farms for its allegedly misleading labels and against the American Humane Association for its allegedly negligent certification. The trial court granted summary judgment in favor of defendant. Affirming, the Court of Appeal stated: “We affirm, on the basis that Leining has not pleaded a viable cause of action against either defendant. The claims against Foster Farms are barred by federal preemption, and the negligent certification claim against American Humane is not viable in the absence of physical injury.” (Leining v. Foster Poultry Farms, Inc. (Cal. App. 2nd Dist., Div. 5, Feb. 23, 2021) 2021 WL 687941.)

Offer to Enter into a Stipulated Judgment Extinguished Prior Code of Civil Procedure § 998 Offer.

Plaintiff alleged claims for breach of contract and unauthorized commercial use of name or likeness in violation of Civil Code § 3344. Defendant served a statutory offer to compromise under Code of Civil Procedure § 998, offering plaintiff a $250,000 judgment on both claims, plus attorney fees and costs through the date of the offer. Less than a week later, while its § 998 offer was still pending, defendant offered to enter into a stipulated judgment for $191,626.03 on the contract claim only, and further offered that the plaintiff would be the prevailing party on that claim for purposes of awarding attorney fees and costs. Plaintiff accepted the second offer and never responded to the § 998 offer. Two months later, at the beginning of trial, plaintiff dismissed its remaining § 3344 claim without prejudice so it could refile that claim in a different jurisdiction. Defendant moved for attorney fees and costs based on § 3344’s fee shifting provision and the unaccepted § 998 offer. The trial court denied the motion. Affirming, the Court of Appeal stated: “Section 3344 does not provide a basis for awarding the defendant its fees or costs here because the defendant was not the prevailing party on that claim within the meaning of section 3344. And section 998 does not provide a basis for shifting fees or costs to the defendant because the defendant’s offer to enter into a stipulated judgment extinguished its prior section 998 offer.” (Varney Entertainment Group, Inc. v. Avon Plastics, Inc. (Cal. App. 4th Dist., Div. 3, Feb. 23, 2021) 2021 WL 689277.)

Sex Workers Entitled to Expectation of Privacy.

A criminal defendant secretly videotaped sexual relations he had with prostitutes at his residence. The women were not aware that they were being recorded and never gave defendant permission to do so. A jury found him guilty of six counts of eavesdropping on or recording confidential communications (Pen. Code, § 632, subd. (a)) and two counts of disorderly conduct (§ 647, subd. (j)(3)(A)). He was a repeat offender; in his previous offense, the trial court had suspended his sentence. This time, he was sentenced to six years and four months in prison. On appeal, defendant contended that prostitutes, as a matter of law, have no reasonable expectation of privacy in their communications during sexual encounters at a client’s residence. Affirming the judgment, the Court of Appeal stated: “Generally speaking, a person’s residence is a private setting and intimate acts that occur in that setting are inherently personal acts, which supports a reasonable expectation of privacy in those acts. This expectation of privacy is not relinquished or forfeited simply because a prostitute is involved.” (People v. Lyon (Cal. App. 3rd Dist., Feb. 24, 2021) 2021 WL 716696.)

Judgment Bar Under the Federal Tort Claims Act.

Plaintiff sued the United States, alleging torts committed against him by officers of a federal task force who mistook him for a fugitive. Finding the officers had not acted with malice and that the government was immune under Michigan state law, the district court dismissed the action. The district court also dismissed the claims against the individual officers. The claims against the individual officers reached the U.S. Supreme Court. Justice Thomas provided a history lesson in the opinion:

Before the Federal Tort Claims Act was enacted in 1946, waiving sovereign immunity for certain torts (28 U. S. C. §2674;FTCA), a plaintiff could sue a federal employee directly for damages, but sovereign immunity barred suits against the United States, even if a similarly situated private employer would be liable under principles of vicarious liability. Despite that immunity, the government often would provide counsel to defendant employees or indemnify them. After 1946, plaintiffs were, and still are, required to bring claims under the FTCA in district court. Federal courts have jurisdiction over these claims if they are actionable under 28 U.S.C. § 1346(b). A claim is actionable if it alleges the six elements of §1346(b), which are that the claim be:

1) against the United States;

2) for money damages;

3) for injury or loss of property, or personal injury or death;

4) caused by the negligent or wrongful act or omission of any employee of the government;

5) while acting within the  scope of his [this was prior to the Women’s Liberation movement] office or employment; and

6) under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.

But once the FTCA was enacted, one could sue the government, but it was more difficult to sue its employees. Accordingly, a judgment in an action under the FTCA acted as a complete bar to an action against the employee whose acts gave rise to the claim. This concept is known as the judgment bar. 

The Supreme Court held that dismissal of the case against the government acted as a judgment bar to the suit against the individual officers. (Brownback v. King (U.S., Feb. 25, 2021) 2021 WL 726222.)

California Supreme Court on Meal Breaks: 30 Minutes Means 30 Minutes.

Under California law, employers must generally provide employees with one 30-minute meal period that begins no later than the end of the fifth hour of work and another 30-minute meal period that begins no later than the end of the tenth hour of work. (Lab. Code, § 512, subd. (a).) If an employer does not provide an employee with a compliant meal period, then “the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal . . . period is not provided.” (Lab. Code, § 226.7, subd. (c).) The court decided two questions of law relating to meal periods: “First, we hold that employers cannot engage in the practice of rounding time punches — that is, adjusting the hours that an employee has actually worked to the nearest preset time increment — in the meal period context. The meal period provisions are designed to prevent even minor infringements on meal period requirements, and rounding is incompatible with that objective. Second, we hold that time records showing noncompliant meal periods raise a rebuttable presumption of meal period violations, including at the summary judgment stage.” (Donohue v. AMN Services, LLC (Cal., Feb. 25, 2021) 2021 WL 728871.)

No Kids Under 16 in Prison.

 Proposition 57, passed in the November 2016 general election, requires prosecutors to commence all cases involving a minor in juvenile court. As enacted, Proposition 57 allowed prosecutors to move to transfer some minors as young as 14 from juvenile court to adult criminal court. The law was amended in 2018 to prohibit minors under the age of 16 from being transferred to adult criminal court. (Welf. & Inst. Code, § 707, subd. (a)(1)–(2).) The Court of Appeal held the 2018 amendment was invalid. The California Supreme Court ruled the amendment was constitutional, stating: “The amendment is fully consistent with and furthers Proposition 57’s fundamental purposes of promoting rehabilitation of youthful offenders and reducing the prison population.” (O.G. v. Superior Court of Ventura County (Cal., Feb. 25, 2021) 2021 WL 728368.)

Been There, Done That.

Every lawyer in Oregon must join the Oregon State Bar and pay annual membership fees. Plaintiffs claimed these compulsions violated their freedoms of speech and association as guaranteed by the First Amendment. At the heart of the complaint were two 2018 published statements by Oregon Bar officers. The first was titled “Statement on White Nationalism and Normalization of Violence” and condemned what happened in Charlottesville. The second was a joint statement of the Oregon Specialty Bar Associations that supported the first statement. The district court concluded the Oregon Bar was immune from suit under the Eleventh Amendment and dismissed the actions. Guess what case is sprinkled throughout the opinion of the Ninth Circuit?  Keller v. State Bar of California (1990) 496 U.S. 1, where the U.S. Supreme Court held that the California State Bar’s use of compulsory dues to finance political and ideological activities with which members disagreed violated the members’ First Amendment right of free speech when such expenditures were not necessary to regulate the legal profession or improve the quality of legal services. Affirming in part and reversing in part, the appeals court noted that the Oregon State Bar has a refund policy, and found the Bar is not an arm of the state, so it is not entitled to immunity. The court concluded that plaintiffs’ freedom of association claims were viable and remanded for further proceedings. (Crowe v. Oregon State Bar (9th Cir., Feb. 26, 2021) 2021 WL 748511.)


Plaintiff bought a used 2011 Jeep Patriot a few months before the three-year warranty was set to expire. The month before the sale, the first owner had brought the car to the dealer “because the throttle warning light was on and ‘no power felt.’ â€ The dealer replaced the throttle body. More than two and one-half years later, plaintiff was on the freeway when the car began shaking and suddenly lost power, dropping from 65 to 10 miles an hour. This is known as “safe mode” or “limp-in mode.” The dealer replaced the throttle body again. When the problem recurred four months later, the dealer replaced the throttle body once more, but the problem happened again two days later. This time the dealer replaced the throttle connector. Plaintiff filed a lemon law case pursuant to Civil Code § 1790 et seq. Over defendant’s objection, the trial court instructed the jury that if a defect existed within the warranty period, the warranty would not expire until the defect was fixed. The court entered judgment for plaintiff in the amount of $45,378.99, plus costs and attorney fees. Reversing, the Court of Appeal stated: “That instruction misstated the law and conflicted with another instruction given to the jury, CACI No. 3231, which correctly explains the continuation of warranties during repairs.” (Nunez v. FCA US LLC (Cal. App. 2d Dist., Div. 8, Feb. 26, 2021) 2021 WL 752644.)

Church Gotta Pay.

A city imposed a tax on property to defray the cost of paramedic services in the city. Plaintiff church claimed the tax could not be imposed on a place of worship, contending it is exempted from all property taxes under article XIII, section 3(f) of the California Constitution. The Court of Appeal held that the religious exemption authorized by article XIII, section 3(f) does not extend to non ad valorem special property taxes such as the paramedic tax. (Valley Baptist Church v. City of San Rafael (Cal. App. 1st Dist., Div. 1, Feb. 26, 2021) 2021 WL 753726.)

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