Litigation Update: May 2018

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

  • Senior Editor, Eileen C. Moore, Associate Justice, California Court of Appeal, Fourth District
  • Managing Editor, Reuben Ginsburg
  • Editor, Jessica Riggin
U.S. Supreme Court Engages in Statutory Construction.

Automobile service advisors sued their employer for backpay, alleging violation of the Fair Labor Standards Act (FLSA; 29 U.S.C. § 201 et seq.), which requires employers to pay overtime compensation to covered employees. The FLSA exempts from the overtime pay requirement “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” at a covered dealership. After the Ninth Circuit Court of Appeals held that the service advisors are not exempt, the U.S. Supreme Court granted certiorari. In concluding that service advisors are exempt, the Supreme Court stated: “[C]ontext favors the ordinary disjunctive meaning of ‘or’ for at least three reasons. First, the distributive canon has the most force when the statute allows for one-to-one matching. But here, the distributive canon would mix and match some of three nouns—‘salesman, partsman, or mechanic’—with one of two gerunds—‘selling or servicing.’ . . . Second, the distributive canon has the most force when an ordinary, disjunctive reading is linguistically impossible… . Third, a narrow distributive phrasing is an unnatural fit here because the entire exemption bespeaks breadth. It begins with the word ‘any.’” (Encino Motorcars, LLC v. Navarro (U.S., Apr. 2, 2018) 138 S.Ct. 1134.)

U.S. Supreme Court Holds Officer Entitled to Immunity in Excessive Force Case.

The U.S. Supreme Court decided a case in which a police officer in Arizona shot a woman upon arriving at a scene after hearing a police radio report that a woman was engaging in erratic behavior with a knife. When the police officer fired, the woman was holding a large kitchen knife and had taken steps toward another woman standing nearby, stopping about six feet away from the other woman. The woman with the knife refused to drop the knife after at least two commands to do so. It was later learned the two women were roommates. The woman with the knife had a history of mental illness and was upset over a $20 debt. The roommate had gone outside to get $20 from her car, which is when the three officers first saw her from across a fence. The woman with the knife filed the instant action, alleging the officer who shot her used excessive force in violation of the Fourth Amendment and 42 U.S.C. § 1983. During the action, the officer who fired the shot acknowledged that no officer was in apparent danger, but stated he believed the roommate was in danger and he “had mere seconds to assess the potential danger to [the roommate].” The nation’s highest court overruled the Ninth Circuit Court of Appeals, which had relied on a number of cases, including Harris v. Roderick (9th Cir. 1997) 126 F. 3d 1189). In Harris, the court determined that an FBI sniper who was positioned safely on a hilltop used excessive force when he shot a man in the back while the man was retreating to a cabin during the Ruby Ridge standoff. The U.S. Supreme Court stated the Ninth Circuit’s “reliance on Harrisdoes not pass the straight-face test,” and that in the instant action, the police officer was entitled to qualified immunity. (Kisela v. Hughes (U.S., Apr. 2, 2018) 138 S.Ct. 1148.)

Dormant Commerce Clause.

Nineteen hospitals located outside of the State of California but near the California border brought this action against the California Department of Health Services alleging that when the department adopted certain Medi-Cal policies related to reimbursement to out-of-state hospitals it violated the commerce clause of the U.S. Constitution. A federal trial court held that the Department violated the dormant (or negative) commerce clause. The commerce clause provides that Congress shall have the power “[t]o regulate Commerce . . . among the several States.” (U.S. Const., art. I, § 8, cl. 3.) The clause denies the states the power to unjustifiably discriminate against or burden the interstate flow of articles of commerce. Thus, if a statute discriminates against out-of-state entities on its face, in its purpose, or in its practical effect, it is unconstitutional unless it serves a legitimate local purpose, and this purpose could not be served as well by available nondiscriminatory means. The Ninth Circuit Court of Appeals noted: “However, states are not merely regulators, they are also economic actors that participate in the marketplace. When a state is acting as a market participant, rather than a market regulator, its decisions are exempted from the dormant Commerce Clause.” In reversing the trial court, the appeals court held the department was acting as a market participant rather than a regulator when it set its rates of reimbursement to hospitals, and therefore was exempt from dormant commerce clause requirements. (Asante v. Cal. Dep’t of Health Care Servs. (9th Cir., Apr. 2, 2018) 2018 U.S. App. LEXIS 8237.)

DNA Sample When Arrested, Prior to Conviction.

Defendant was arrested for arson and related felonies and transported to jail. At booking, a jail official informed him that he was required to provide a DNA sample by swabbing the inside of his cheek. He refused. A jury later convicted him of both the arson-related felonies and the misdemeanor offense of refusing to provide a specimen required by the DNA Act. (Pen. Code, § 298.1 . (a).) The Court of Appeal reversed defendant’s misdemeanor refusal conviction, holding that the DNA Act violated defendant’s rights under the Fourth Amendment to the U.S. Constitution. While the case was pending on appeal, the U.S. Supreme Court addressed a similar issue in Maryland v. King(2013) 569 U.S. 435 and reached a different conclusion. The high court held that “[w]hen officers make an arrest supported by probable cause to hold for a serious offense and they bring the suspect to the station to be detained in custody, taking and analyzing a cheek swab of the arrestee’s DNA is, like fingerprinting and photographing, a legitimate police booking procedure that is reasonable under the Fourth Amendment.” Following the high court’s decision in King, this case returned to the Court of Appeal, which again reversed defendant’s misdemeanor refusal conviction, this time on the ground that the DNA Act violates the California Constitution’s prohibition on unreasonable searches and seizures (Cal. Const., art. I, § 13). In reversing the Court of Appeal and upholding defendant’s conviction for refusing to submit to a DNA sample, the California Supreme Court stated: “Under the circumstances before us, we conclude the requirement is valid under both the federal and state Constitutions.”(People v. Buza (Cal., Apr. 2, 2018) 4 Cal.5th 658.)

Class Action On Robo-Calling.

Plaintiffs brought a class action alleging violation of the Telephone Consumer Protection Act (47 U.S.C. § 227). The named plaintiff’s cell phone number was registered on the national do-not-call registry. The persons who automatically telephoned plaintiffs were employed by one defendant, a telemarketing company. Another defendant sells vehicle service contracts (VSC’s) through marketing vendors. The defendant who sold VSC’s and the telemarketing company entered into a marketing contract, whereby the telemarketers would sell VSC’s, but “expressly excluded . . . any act or omission that violates applicable state or Federal law, including but not limited to ‘robo-calling.’” A federal trial court granted summary judgment to the company that hired the telemarketing company. The Ninth Circuit Court of Appeals affirmed, finding the telemarketers did not have actual authority to place the unlawful calls and the VSC company “exercised insufficient control over the manner and means of the work to establish vicarious liability.” (Jones v. Royal Admin. Servs. (9th Cir., Apr. 4, 2018) 2018 U.S. App. LEXIS 8587.)

No Attorney Fees After Suing Automobile Manufacturer Over Dealer Add-Ons.

The engine of a brand new Mercedes-Benz died. The automobile manufacturer offered to repurchase the car for the full purchase price, minus the dealer add-ons. The buyer sued the manufacturer for breach of the implied warranty of merchantability under Civil Code § 1790 et seq. (Song-Beverly Consumer Warranty Act). The parties settled all but attorney fees and costs issues. The trial court denied plaintiff’s motion for attorney fees and costs. The Court of Appeal affirmed, stating: “This appeal chiefly presents the question: Is a buyer a prevailing party entitled to recover attorney’s fees under the Act if, through settlement with the manufacturer, all she obtains by litigating is the payment of dealer add-ons for which the manufacturer is not responsible and the payment of attorney’s fees? We conclude the answer is ‘no.’ For these reasons and others, we affirm the denial of attorney’s fees but modify the judgment to award costs because the buyer obtained a net monetary recovery by virtue of the settlement.” (Garcia v. Mercedes-Benz USA, LLC (Cal. App. 2nd Dist., Div. 2, Apr. 5, 2018) 21 Cal.App.5th 1259.)

Is Time Really Up???
Previously we reported: It’s Apparently Still Permissible to Pay Women Less For the Same Work.

Plaintiff is a school district employee. She discovered her male counterparts are paid more than she is paid for doing the same work. Plaintiff sued under the federal Equal Pay Act (29 U.S.C. § 206(d)), title VII of the Civil Rights Act of 1964 (42 USC § 2000e-5) and the California Fair Employment and Housing Act (Gov. Code, § 12940). The county argued it is true that the woman makes less money than her male counterparts who do the same work, but that’s because one’s salary is based upon one’s past salary, and the woman made less in the past than the men did. The federal trial court denied the county’s motion for summary judgment. The Ninth Circuit Court of Appeals reversed, citing Kouba v. Allstate Ins. Co. (9th Cir. 1982) 691 F.2d 873. In Kouba, the Ninth Circuit held the law does not strictly prohibit the use of prior salary as a basis for current salary, despite the fact an employer is able to “manipulate its use of prior salary to underpay female employees.” (Rizo v. Yovino (9th Cir., Apr. 27, 2017) 854 F.3d 1161.)

The latest:

The Ninth Circuit Court of Appeals, sitting en banc, agreed with the district court’s denial of summary judgment and overruled Kouba v. Allstate Ins. Co. (9th Cir. 1982) 691 F.2d 873. Time may really be up when it comes to one’s gender and equal pay. (Rizo v. Yovino (9th Cir., Apr. 9, 2018) 2018 U.S. App. LEXIS 8882.)

No Duty.

At a “Boxing Club/Athletic Club,” a user of the facility suffered a fatal heart attack. The decedent’s survivors and estate sued the owner of the property (the landlord) for not having a defibrillator on the premises. Health & Safety Code § 104113 requires health/fitness facilities to maintain a defibrillator on the premises. The trial court granted summary judgment to the property owner/landlord. In affirming, the Court of Appeal analyzed the situation under the factors in Rowland v. Christian (1968) 69 Cal.2d 108, noted the landlord has never had any ownership or other interest in the club, and concluded the property owner/landlord did not owe a duty to plaintiffs. (Day v. Lupo Vine Street, L.P. (Cal. App. 2nd Dist., Div. 4, Apr. 11, 2018) 22 Cal.App.5th 62.)

Judge Shopping.

Shortly after a trial judge ruled on several pretrial motions in a criminal case, the district attorney moved to dismiss the case for insufficient evidence, and the motion was granted. The following day, the district attorney refiled the case under a new case number. The refiled case was assigned to the same trial judge as before, and the district attorney immediately moved to disqualify him under Code of Civil Procedure § 170.6. The motion was granted. In the Court of Appeal, the criminal defendant sought writ relief, arguing the district attorney’s peremptory challenge in the refiled case was an abuse of the judicial process in violation of his due process rights. In issuing a writ of mandate, the appellate court stated: “We agree that the peremptory challenge should have been denied, but for a different reason. Because the record before us discloses a clear effort by the District Attorney to avoid the effect of the trial judge’s orders in the dismissed case, we conclude the second action was a mere continuation of the first, and thus, the peremptory challenge was untimely. Accordingly, we shall grant the petition and direct issuance of a peremptory writ of mandate directing respondent superior court to vacate its order granting the section 170.6 motion and to issue a new order denying the motion.” (Birts v. Superior Court (Cal. App. 1st Dist., Div. 3, Apr. 11, 2018) 22 Cal.App.5th 53.)

The Ninth Circuit Refers to a Member of the California Bar as “a major tax delinquent.”

Despite being a member of the bar for many years, plaintiff failed to file any California state income tax returns between 1995 and 2012 and failed to pay any state income taxes, penalties, or interest for those years, contending that he owed none. For each of those years, the Franchise Tax Board gave written notice of proposed deficiency assessments of taxes, interest and penalties. In this action, plaintiff challenges the constitutionality of Revenue & Taxation Code, § 19195 (establishes a list of the top 500 delinquent tax payers in California) and Business & Professions Code § 494.5 (provides for driver’s license suspension of persons on the tax delinquent list). Plaintiff received notice his name would be placed on the delinquent list. Plaintiff also sought a preliminary injunction seeking to prohibit the publication of his name on the Top 500 List and the suspension of his driver’s license. A federal trial court denied his request for injunctive relief, held the statutes were constitutional, and dismissed plaintiff’s lawsuit. In affirming, the Ninth Circuit Court of Appeals noted that “license suspension as a result of Sections 19195 and 494.5 turns on the continuing fact of nonpayment, something which a delinquent taxpayer can rectify.” (Franceschi v. Yee (9th Cir., Apr. 11, 2018) 2018 U.S. App. LEXIS 9038.)

Previously we reported: Review Report Prepared After Police Shooting Will Be Publicly Disclosed.

In 2012, police officers responded to a 911 caller who reported being robbed by two men at gunpoint. As they approached the area, a 19-year-old African-American male began running. Two officers each fired four shots, killing the unarmed teenager. The city retained an independent consultant to review departmental policies. After the review was completed, various persons and entities requested a copy of the review report under California’s Public Records Act (Gov. Code, § 6250 et seq.). The city’s police officers association sought to enjoin disclosure of the report. The trial court ordered a heavily redacted copy of the report to be given to each requester. The police officers’ association petitioned the Court of Appeal to issue a writ of mandate, contending the report is confidential and exempt from public disclosure. The appellate court denied the writ, and, while agreeing that some portions of the report were properly redacted because it contains confidential private information about police officers, other portions should not have been redacted. (Pasadena Police Officers Assn. v. Superior Court (Cal. App. 2d Dist., Div. 1, Sept. 10, 2015) 240 Cal.App.4th 268.)

The Latest:

On remand, the trial court ordered some of the redacted portions of the report to be released and also ordered that the newspaper recover attorney fees under the Public Records Act (PRA; Gov. Code, § 6259, subd. (d)), and this appeal challenges the court’s order of fees to the newspaper. The Court of Appeal upheld the trial court’s fee award under the PRA, but ordered the trial court to also award fees to the newspaper under the private attorney general statute (Code Civ. Proc., § 1021.5) against two police officers and the police officers association. (Pasadena Police Officers Assn. v. City of Pasadena (Cal. App. 2nd Dist., Div. 1, Apr. 12, 2018) 2018 Cal. App. LEXIS 324.)

Mrs. Palsgrafin the 21st Century.

Decedent was seriously injured when the car in which he was a passenger suffered a tire blowout and collided with a power pole. As a result of his injuries, he was required to use a motorized scooter as a mobility aid. Six years after the tire blowout, he was run over by a car making a right turn while he was in a crosswalk and died eight days later. Decedent’s survivors sued the tire manufacturer, contending the tire blowout was causally linked with the accident years later: first, the failure to warn about the dangers of rubber degradation in old tires caused the tire blowout in 2005; second, the blowout caused a collision; third, the collision caused disabling injuries to decedent; fourth, the injuries caused decedent to use a scooter; fifth, use of the scooter caused decedent to have less maneuverability than a pedestrian; sixth, decedent’s impaired maneuverability caused the 2011 collision between his scooter and a vehicle; and, seventh, the scooter collision caused decedent’s death. The trial court granted summary judgment in favor of the tire manufacturer, and the Court of Appeal affirmed after concluding the motorist who failed to yield to defendant in a crosswalk was the superseding cause of the death. (Novak v. Continental Tire North America (Cal. App. 1st Dist., Div. 3, Apr. 12, 2018) 2018 Cal. App. LEXIS 319.)

Previously we reported: Alleged Retaliation Against Police Officer Who Reported Other Officers for Filing False Police Reports.

According to the complaint filed by a police officer, in 2008, while working as a detective-I in a narcotics enforcement division, plaintiff reported two of his fellow officers for filing false police reports and testified against the officers at an administrative hearing that ultimately resulted in their termination. Afterward, plaintiff’s colleagues referred to him as a “snitch” and refused to work with him. At times they even ignored plaintiff’s requests for assistance in the field. Fearing for his safety, plaintiff transferred to another division. Between 2011 and 2013 he applied for 14 highly desirable detective-I and detective-II positions. Notwithstanding his superior qualifications, his applications were denied each time in favor of less experienced or less qualified persons. Plaintiff sued the police department for unlawful retaliation. Plaintiff filed a discovery motion pursuant to Evidence Code §§ 1043 and 1045, which establish procedures for the disclosure of confidential personnel records of peace officers, to obtain certain records of the officers selected for the positions to which he had applied, arguing the documents he sought were necessary to show the city’s stated business reason for its promotion decisions—the successful candidates were more qualified than plaintiff—was pretext for retaliation. The city opposed the motion, claiming the officers’ personnel records were not subject to discovery because the officers were innocent third parties who had not witnessed or caused plaintiff’s injury. The superior court agreed and denied plaintiff’s motion. The Court of Appeal granted plaintiff’s petition for extraordinary relief, stating the superior court should look at those officers’ personnel records and order production of those records that are relevant and not otherwise protected from disclosure. (Riske v. Superior Court (Cal. App. 2d Dist., Div. 7, Dec. 12, 2016) 6 Cal.App.5th 647.)

The Latest:

Upon remand, the trial court conducted an in camera hearing, ordering the requested personnel records to be produced. However, pursuant to Evidence Code, § 1045, subdivision (b), the court ordered redaction of all items in those reports concerning conduct that occurred more than five years before plaintiff filed his complaint. Once again, plaintiff petitioned the Court of Appeal for a writ of mandate. In the reviewing court, plaintiff argued the trial court measured the five years incorrectly, and that the five-year limitation on disclosure, if applicable, is measured from the date each officer was promoted. The Court of Appeal agreed with plaintiff and once again granted extraordinary relief. . (Riske v. Superior Court (Cal. App. 2nd Dist., Div. 7, Apr. 16, 2018) 2018 Cal. App. LEXIS 334.)

Five-Year Rule is Unforgiving.

Plaintiff brought an action against defendant for various Labor Code violations. She filed the action in August 2007. In 2008, she amended to allege a class action. In 2011, another plaintiff was added to the action. At first, the trial court ordered the matter to arbitration, but vacated that order in 2012. Numerous other procedural events occurred over the years, and trial was set for early 2014. In late 2013, defendant moved to dismiss for failure to bring the matter to trial within five years as required by Code of Civil Procedure § 583.310. Plaintiff argued the period of time when the arbitration order was in effect, 842 days, should be excluded from the five years. The court granted the motion to dismiss. The Court of Appeal found the trial court did not abuse its discretion in dismissing the action, stating: “We conclude that [plaintiff] waived her tolling contentions . . . by failing to raise them properly in the trial court.” (Tanguilig v. Neiman Marcus Group, Inc. (Cal. App. 1st Dist., Div. 4, Apr. 16, 2018) 2018 Cal. App. LEXIS 335.)

Shareholder Derivative Action.

Some tech companies agreed not to cold call each other’s employees for purposes of recruiting. The U.S. Department of Justice (DOJ) filed a civil antitrust action against several companies that participated in the no-cold-call agreements. The action resolved the same day it was filed. The tech companies stipulated to a judgment in which they admitted no liability but agreed to be bound by an injunction prohibiting cold call arrangements. Thereafter, employees filed several class action lawsuits against Google and other companies named in the DOJ action, alleging that the cold calling restrictions were illegal and had caused them wage losses. The cases were moved to federal court and consolidated; together more than 100,000 plaintiffs sought over $3 billion in damages. In this current action, Google shareholders allege that Google was harmed by executives who agreed to refrain from recruiting employees working for competitors. The trial court granted summary judgment in favor of defendants based on the statute of limitations. The Court of Appeal affirmed, stating facts were available to plaintiffs at the time of the DOJ action and the filing of the class actions, even though some of the relevant facts were unavailable. (The Police Retirement System of St. Louis v. Page (Cal. App. 6th Dist., Apr. 16, 2018) 2018 Cal. App. LEXIS 340.)

Wage and Hour Class Action.

The heart of the issue is explained in the opinion’s first two sentences: “In a joint employer arrangement, can a class of workers bring a lawsuit against a staffing company, settle that lawsuit, and then bring identical claims against the company where they had been placed to work. We answer no.” (Castillo v. Glenair, Inc. (Cal. App. 2nd Dist., Div. 2, Apr. 16, 2018) 2018 Cal. App. LEXIS 338.)

Contempt Against Microsoft Vacated.

Microsoft operates a web-based email service for public use. Much of the data is saved on centers located throughout the world. In December 2013, federal law enforcement agents served Microsoft with a warrant for emails associated with a certain case. Microsoft determined the requested emails were stored in Dublin, Ireland, and moved to quash the warrant. A federal magistrate in New York denied the motion. The district court affirmed the magistrate’s ruling, and held Microsoft in contempt. The Second Circuit Court of Appeals reversed the denial of the motion to quash and vacated the contempt finding, concluding that requiring compliance with the warrant would amount to an unauthorized extraterritorial application of the Stored Communications Act (18 U.S.C. § 2701 et seq.]. On March 23, 2018, Congress passed The Cloud Act (Pub. L. 114-141), which amends the Stored Communications Act to require email providers to disclose emails even if they are stored outside the U.S. The government thereafter obtained a new warrant. The United States Supreme Court held the case before it is now moot. (United States v. Microsoft Corp. (U.S., Apr. 17, 2018) 200 L.Ed.2d 610.)

Deportation Is No Easy Task.

The Immigration and Nationality Act renders deportable any alien convicted of an aggravated felony after entering the United States (8 U.S.C. § 1227(a)(2)(A)(iii)). Immigration judges determined that a lawful permanent resident of the United States was deportable as an aggravated felon after he was twice convicted of first degree burglary in California. Citing an analogous ruling by the U.S. Supreme Court, the Ninth Circuit Court of Appeals held that the federal definition of “violent felony” as “any felony that otherwise involves conduct that presents a serious risk of physical injury to another” is void for vagueness, and overturned the ruling of the immigration court. In affirming the Ninth Circuit’s decision, the U.S. Supreme Court stated: “The void-for-vagueness doctrine, as we have called it, guarantees that ordinary people have ‘fair notice’ of the conduct a statute proscribes.” (Sessions v. Dimaya (U.S., Apr. 17, 2018) 200 L.Ed.2d 549.)

No Duty to Defend.

A group of medical doctors building an x-ray facility hired an electrical company to perform electrical work. After construction was finished, the equipment did not work, and the doctors hired an electromagnetic field expert who determined a loose bolt installed by the electricians was the problem. When the bolt was tightened, the magnetic field instantly disappeared. The doctors sued the electrical company for their damages. The electrical company tendered its defense to its insurer under policies covering liability for bodily injury and property damage. The insurer refused to defend, and the present action ensued. The trial court granted the insurer’s motion for summary judgment, concluding the doctors’ allegations fell under a coverage exclusion for loss of use of property caused by a deficiency in the electrical company’s work, so the insurer had no duty to defend. In affirming, the Court of Appeal stated that to defeat summary judgment, plaintiff’s theory must be based on allegations in the complaint of extrinsic facts known to the insurer at the start of the underlying lawsuit, and plaintiff may not manufacture hypothetical scenarios beyond those encompassed by pleadings or known facts. (All Green Electric, Inc. v. Security National Ins. Co. (Cal. App. 2nd Dist., Div. 8, Apr. 17, 2018) 2018 Cal. App. LEXIS 344.)

Special Prosecutor Appointed in Sheriff Joe’s Case.

On August 19, 2017, the United States prosecuted Sheriff Joe Arpaio and obtained a criminal conviction of contempt. Six days later, President Donald J. Trump pardoned Arpaio. The next day, Arpaio moved to dismiss the matter with prejudice and vacate the verdict. A federal district court granted the request for dismissal of the action for criminal contempt, but denied vacatur. Arpaio appealed. The Ninth Circuit Court of Appeals ordered the United States to file a statement indicating whether it intended to enter an appearance and it responded it “does not intend to defend the district court’s order.”Under Federal Rule of Civil Procedure, rule 42, the Ninth Circuit ordered a special prosecutor to defend the decision of the district court. (United States v. Arpaio (9th Cir., Apr. 17, 2018) 2018 U.S. App. LEXIS 9609.)

Delayed Discovery.

Plaintiff employed defendant as a money manager and asked him to purchase uninsured/underinsured automobile insurance with policy limits of $5 million. Instead, defendant purchased a policy with limits of $1.5 million. Shortly after plaintiff’s son was seriously injured in an accident in 2010, she discovered the limits on the insurance. In 2012, the other driver’s insurance company tendered the policy limits of $15,000, and thereafter plaintiff’s insurer tendered its limits of $1.5 million. In 2013, plaintiff sued defendant, and the trial court granted summary judgment in favor of the insurer based on the statute of limitations. In reversing, the Court of Appeal stated: “This is one of those unusual cases, which distinguishes it from the more common ‘delayed discovery’ scenario in which a plaintiff suffers damages and later discovers the damages were caused by wrongdoing. Here, although plaintiffs were aware of [defendant’s] alleged negligence shortly after the accident, [the son] did not suffer actual damages as a result of that negligence until he received a payment of insurance benefits that was less than he would have received in the absence of [defendant’s] s negligence. Plaintiffs therefore did not incur actual damages until [the son] became entitled to the benefits of the underinsured motorist policy in June 2012.” (Lederer v. Gursey Schneider LLP (Cal. App. 2nd Dist., Div. 4, Apr. 19, 2018) 2018 Cal. App. LEXIS 351.)

You Can Lead a Kid to School, but You Can’t Make Her Go Inside.

A 17-year-old chronic truant was driven to school by a deputy sheriff but refused to go inside when ordered. Later, the juvenile court sustained allegations she violated Penal Code § 148 by resisting, delaying or obstructing a peace officer. The Court of Appeal reversed, stating: “R.M. did not violate Penal Code section 148, because the arresting officer was not performing a legal duty when he ordered her to class. Since he had no legal duty to do that, R.M. could not be charged criminally for disobeying his order. However well-intentioned the officer no doubt was, and despite the difficult predicament in which school authorities were placed by R.M.’s defiance and belligerent attitude, the proper recourse was for school officials to pursue appropriate channels for seeking a declaration of wardship under [Welf. & Inst. Code] section 601, subsection (b) for habitual truancy (which in fact they eventually did).Not resort to the criminal law.” (In re R.M. (Cal. App. 1st Dist., Div. 2, Apr. 19, 2018) 2018 Cal. App. LEXIS 353.)

Amount-in-Controversy Requirement for Federal Diversity Jurisdiction.

An employee sued her employer in state court, and the employer removed the case to federal court. The federal trial court granted the employer’s motion for summary judgment. The employee contends in this appeal that subject matter jurisdiction is lacking because 28 U.S.C. § 1332’s requirement was not met when the case was removed. This is what the Ninth Circuit Court of Appeals stated: “Specifically, we write to clarify what it means to say that the amount in controversy is determined as of ‘the time of removal.’ [] We conclude that the amount in controversy is not limited to damages incurred prior to removal—for example, it is not limited to wages a plaintiff employee would have earned before removal (as opposed to after removal). Rather, the amount in controversy is determined by the complaint operative at the time of removal and encompasses all relief a court may grant on that complaint if the plaintiff is victorious. Applying that standard, the amount-in-controversy requirement is easily satisfied here, and we have subject matter jurisdiction over this action.” (Chavez v. JPMorgan Chase & Co. (9th Cir., Apr. 20, 2018) 2018 U.S. App. LEXIS 10011.)

Dismissal of Securities Class Action Reversed; Scienter Not Required.

A federal trial court dismissed a securities class action under the Securities Exchange Act of 1934 (15 U.S.C. § 78n(e)) brought by corporate shareholders because they failed to plead a strong inference of scienter for defendants’ alleged violations of § 14(e). In reversing, the Ninth Circuit Court of Appeals stated: “We now hold that Section 14(e) of the Exchange Act requires a showing of negligence, not scienter. Accordingly, we reverse the dismissal of the complaint and remand the case to the district court for it to reconsider Defendants’ motion to dismiss under a negligence standard.” (Varjabedian v. Emulex Corp. (9th Cir., Apr. 20, 2018) 2018 U.S. App. LEXIS 10000.)

Protective Order Denied, Even After Slap and Scratch.

After promises his affair was over, a husband’s girlfriend telephoned him. The wife saw the woman’s picture on her husband’s cell phone. When the husband reached to grab the cell phone from his wife, she slapped and scratched him. The husband unsuccessfully sought a domestic violence protective order. Family Code § 6203, subdivision (a) provides: “For purposes of this act, ‘abuse’ means any of the following: [¶] (1) To intentionally or recklessly cause or attempt to cause bodily injury. [¶] (2) Sexual assault. [¶] (3) To place a person in reasonable apprehension of imminent serious bodily injury to that person or to another. [¶] (4) To engage in any behavior that has been or could be enjoined pursuant to Section 6320.” Stating the trial court found the wife did not commit an act of abuse under the statute, the Court of Appeal concluded there was no abuse of discretion in not issuing a protective order. (Fischer v. Fischer(Cal. App. 1st Dist., Div. 2, Apr. 20, 2018) 2018 Cal. App. LEXIS 357.)

“As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce,” Adam Smith.

Under the Fifth and Fourteenth Amendments, private property may not be taken for public use without just compensation. The owner of a mobile home park filed an action alleging an unconstitutional taking after a city approved lower rent increases rather than the higher increases requested by the owner. The owner requested an increase of $618.05 per space, and the city’s rent review board approved $36.74 increase per space. The next year, the owner requested $342.46 per space, and the board approved $25.02 per space. A federal trial court, after a jury trial, entered a judgment finding an unconstitutional taking and awarding the park more than $3 million in damages. The Ninth Circuit Court of Appeals applied the factors set forth in Penn Central Transportation Co. v. City of New York (1978) 438 U.S. 104: the regulation’s economic impact on the claimant; and, the extent to which the regulation interferes with distinct investment-backed expectations. The appeals court reversed, stating: “On the evidence in this case, no reasonable finder of fact could conclude that the Board’s denials of [plaintiff’s] requested rent increases were the functional equivalent of a direct appropriation of the Property.” (Colony Cove Props., LLC v. City of Carson (9th Cir., Apr. 23, 2018) 2018 U.S. App. LEXIS 10125.)

Order in the Court; the Monkey Wants to Speak.

The Ninth Circuit Court of Appeals described the case before it: “We must determine whether a monkey may sue humans, corporations, and companies for damages and injunctive relief arising from claims of copyright infringement.” It all began in 2011 when a wildlife photographer left his camera unattended in a reserve. A monkey took several photographs of himself with the camera. Those monkey selfies were published in a book. In 2015, People for the Ethical Treatment of Animals sued the photographer, the reserve and the book publisher for copyright infringement on behalf of the monkey. A federal trial court dismissed the action for lack of standing. In affirming dismissal of the action, the appeals court acknowledged the complaint alleges the monkey is the author and owner of the photographs and that the monkey suffered concrete and particularized economic harm, but concluded the monkey lacked statutory standing because the Copyright Act (17 U.S.C. § 101 et seq.) does not expressly authorize animals to file copyright infringement suits. (Naruto v. Slater (9th Cir., Apr. 23, 2018) 2018 U.S. App. LEXIS 10129.)

Storage Facility Not an Insurer.

Plaintiff stored some of his belongings in a self-storage unit. In the rental agreement, the storage facility required renters to obtain insurance for their goods. Or, alternatively, the storage facility would collect $10/month and would assume the risk of losses for up to $2,500. Plaintiff did not obtain insurance and was charged $10/month, presumably because he did not obtain the required insurance. In this action, plaintiff sued the storage facility contending its rental contract constitutes a contract of insurance and it is not licensed to sell insurance. The California Supreme Court concluded the storage facility’s “alternative indemnity agreement is not subject to regulation under the Insurance Code,” and affirmed the action’s dismissal. (Heckart v. A-1 Self Storage, Inc. (Cal., Apr. 23, 2018) 2018 Cal. LEXIS 2762.)

Parol Evidence Admitted, Even Though Contract Was Integrated.

Two of three business partners testified at trial that the third partner falsely represented to them he was required to be the majority shareholder, so the two, the plaintiffs, each agreed to contribute 5,000 of their shares to the third. On appeal, the third, the defendant, argued that evidence of his representation was improperly admitted. They all agree their contract was integrated. But the defendant argued that evidence of fraud is only admissible in cases where the validity of the agreement is at issue. Applying Code of Civil Procedure § 1856 and the California Supreme Court holding in Riverisland v. Fresno-Madera Production Credit Assn.(2013) 55 Cal. 4th 1169, the Court of Appeal stated: “The court’s intention in Riverisland was to bring its case law into line with section 1856, subdivision (g), which states: ‘this section does not exclude other evidence . . . to establish . . . fraud.’ As the court noted, in Riverisland “’c]onspicuously omitted was any mention of Pendergrass and its nonstatutory limitation on the fraud exception.’ (Id. at p. 1179.) Therefore, we decline to give Riverisland the narrow reading [defendant] advances. Although IIG was not attempting to rescind the shareholder agreements, it set out to prove that [plaintiffs] had entirely different understandings about the meaning of those agreements based on [defendant’s] allegedly fraudulent misrepresentations.” (2018 Cal. App. LEXIS 361.)

Human Rights Abuses.

Approximately 6,000 foreign nationals filed this action under the Alien Tort Statute (ATS; 28 U.S.C. § 1350)] alleging they or their family members were injured by terrorist attacks in the Middle East over a 10-year period. Defendant is a Jordanian financial institution with branches throughout the world, including New York. Plaintiffs contend bank officials allowed the bank to be used to electronically transfer funds to Hamas and other terrorist groups in the Middle East, which in turn enabled or facilitated criminal acts of terrorism, causing death and injuries for which plaintiffs seek compensation. The statute provides: “The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” The United States Supreme Court stated a court must ask whether it has the authority and discretion in an ATS suit to impose liability on a corporation without specific direction from Congress to do so. While this case was pending, the nation’s highest court held in Kiobel v. Royal Dutch Petroleum Co. (2012) 569 U.S. 108 that the ATS does not extend to suits against foreign corporations when “all relevant conduct took place outside the United States.” Under Kiobel, a federal trial court dismissed the current action. The Supreme Court affirmed dismissal of the current action, leaving it to Congress to determine whether victims of human rights abuses may sue foreign corporations in federal court. (Jesner v. Arab Bank, PLC (U.S., Apr. 24, 2018) 200 L.Ed.2d 612.)

Inter Partes Review.

In a process known as inter partes review under the Leahy-Smith America Invents Act (35 U.S.C. § 100 et seq.), the United States Patent and Trademark Office (PTO) is authorized to reconsider and to cancel an issued patent claim in limited circumstances. Here, plaintiff gained ownership of a patent related to protection of oilwells and filed a patent infringement action against defendant. Defendant defended itself in federal court and also filed a petition for inter partes review by the PTO Board. The federal district court ruled in favor of plaintiff and the PTO Board ruled counter, invalidating the district court’s determination. A federal Court of Appeals affirmed the PTO board’s ruling. The Supreme Court granted certiorari, and held the inter partes review process does not violate either Article III or the Seventh Amendment. (Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC (U.S., Apr. 24, 2018) 200 L. Ed. 2d 671.)

Challenge to Scope of Inter Partes Review.

Plaintiff sought inter partes review of a software patent owned by a patent holder, alleging that all 16 of its patents are unpatentable.However the director of the United States Patent and Trademark Office (PTO) instituted review of only nine of the 16. The U.S. Supreme Court held that the PTO must decide the patentability of all challenged claims. (SAS Inst., Inc. v. Iancu (U.S., Apr. 24, 2018) 200 L.Ed.2d 695.)

A Class Action in Federal Court is Transferred and Stayed.

Plaintiff purchased a weight loss supplement in her home state of Pennsylvania, and later filed a class action against its manufacturers and marketers in the Southern District of California. A federal trial court transferred her class action to the Eastern District of California where it was consolidated with a similar action. The two federal actions were then stayed pending the outcome of a third class action that is proceeding in California state court. In the present action, plaintiff petitions for a writ of mandate to reverse the transfer order. The Ninth Circuit Court of Appeals held: “Although we agree with Bozic that it was clear error to transfer her action to the Eastern District, issuance of the writ would have no practical impact on this case in its current procedural posture, and any injury Bozic might face is purely speculative. We therefore hold that the extraordinary remedy of mandamus is unwarranted at this time.” (Bozic v. United States Dist. Court (9th Cir., Apr. 25, 2018) 2018 U.S. App. LEXIS 10423.)

Aiding & Abetting Conversion; Aiding & Abetting Breach of Fiduciary Duty.

Plaintiff contends her investment advisor took $490,108.16 from her investment account. The investment advisor was on the board of directors of defendant company. Defendant demanded repayment of a loan taken out by the investment advisor. The investment advisor allegedly forged plaintiff’s signature and withdrew money from plaintiff’s account to repay the loan. Defendant did not inquire about the source of the funds. Plaintiff sued defendant for aiding and abetting conversion and aiding and abetting a breach of fiduciary duty. The trial court granted defendant’s motion for summary judgment. The following were among defendant’s undisputed facts in the separate statement in support of the MSJ, all of which plaintiff conceded were undisputed:

  • “[The investment advisor] did not make any representation to [defendant]’s attorneys regarding the source of the funds that he ultimately used to satisfy his obligations”;
  • “[Defendant] never suggested or implied that [the investment advisor] should obtain the money used to pay the settlement proceeds from any particular source in any particular manner, including by committing an unlawful or tortious act, including using funds entrusted to him by [plaintiff]”;
  • “[Defendant] did not have any knowledge that [the investment advisor] may have used [plaintiff’s] money to pay his obligations.”

The Court of Appeal found that defendant met its initial burden to shift the burden to plaintiff.She produced evidence of the following:

  • Defendant knew the investment advisor had ceased payments on its loan;
  • Defendant knew the investment advisor had been terminated by his brokerage firm;
  • Defendant had established a special committee to investigate defendant;
  • Defendant learned the brokerage firm and the investment advisor were being investigated by FINRA;
  • Defendant knew the investment advisor had stolen money from both defendant and other clients of the brokerage firm.

In reversing the grant of summary judgment, the appeals court stated: “[Plaintiff] has sufficiently placed material facts—the extent of [defendant’s] knowledge and of its good faith—in issue; thus, the matter requires trial rather than summary disposition.” (Welborne v. Ryman-Carroll Foundation (Cal. App. 2nd Dist., Div. 2, Apr. 25, 2018) 2018 Cal. App. LEXIS 365.)

“Money Can Buy You a Fine Dog, But Only Love Can Make Him Wag His Tail,” Kinky Friedman.

A law firm entered into a contingency fee agreement with a client. According to the agreement, if 100 days passed after execution of the fee agreement and the law firm completed nine identified “minimum tasks,” the contingency fee would increase from 30 to 35 percent. The case settled for over $1.6 million. Applying a 35-percent contingency rate, the law firm received close to $600,000 in fees. In a demand for arbitration with the law firm, the client alleged “Attorney[s] did not complete tasks 1 and 9.” Accordingly, the client claimed the contingency fee of 35 percent was improper. In advance of the arbitration, the client submitted, and the three-person arbitration panel accepted, an ex parte “confidential arbitration brief” that was not provided to the law firm. In the confidential brief, the client raised and argued additional claims not presented in his arbitration demand. A majority of the panel ruled in the client’s favor and awarded him a refund of a portion of the fees paid, relying on claims the client raised in the confidential brief. The law firm moved to vacate the arbitration award. The trial court denied the motion. In reversing, the Court of Appeal concluded the arbitration award was procured by “undue means” (Code Civ. Proc., § 1286.2) and must be vacated. (Baker Marquart LLP v. Kantor (Cal. App. 2nd Dist., Div. 2, Apr. 25, 2018) 2018 Cal. App. LEXIS 364.)

Union Organizing on a Reservation.

An Indian tribe owns a casino on a reservation, with 462 employees, five of whom are tribe members. A labor union began an organizing drive at the casino when nine casino employees distributed leaflets at the front entrance. Casino security personnel took a photograph and told them they would be reported to personnel, so they ceased distributing leaflets. At a later time, a casino employee who was on a break distributed leaflets to other employees as they clocked out, and the casino issued a disciplinary warning to the distributing employee. After complaints were filed and a trial was held, an administrative law judge with the National Labor Relations Board (NLRB) held the casino committed unfair labor practices, violating the National Labor Relations Act (29 U.S.C. § 151 et seq.). Eventually the matter made its way to the Ninth Circuit Court of Appeals to decide whether the NLRB may regulate the relationship between employees working in commercial gaming establishments on tribal land and the tribal governments that own and manage those establishments, and whether the NLRB’s decision was correct. The court answered both questions yes.(Casino Pauma v. NLRB (9th Cir., Apr. 26, 2018) 2018 U.S. App. LEXIS 10553.)

Lodestar Attorney Fees Not Limited by Fees Actually Charged.

After a teacher interceded in a confrontation between two of his students, the school district placed him on unpaid leave and issued an accusation and a notice of intent to dismiss or suspend him without pay. The Commission on Professional Competence conducted a hearing, dismissed the accusation, and ordered the district to reinstate the teacher to his former position with back pay and benefits. At all relevant times, Education Code § 44944, subdivision (e)(2) provided: “If the Commission on Professional Competence determines that the employee should not be dismissed or suspended, the governing board shall pay . . . reasonable attorney’s fees incurred by the employee.”When the teacher failed to disclose his law firm’s hourly rate, maintaining the information was privileged under Business & Professions Code § 6149 as well as irrelevant to a determination under Education Code § 44944, the trial court denied his request for attorney fees. In reversing, the Court of Appeal stated: “The issue presented on appeal is whether the phrase “reasonable attorney’s fees incurred by the employee” in section 44944 necessarily limits a fee award to fees actually charged. We conclude it does not. In determining the reasonable fees to which [the teacher] is entitled, the trial court should apply the lodestar method: the reasonable hours spent, multiplied by the prevailing hourly rate for similar work in the community.” (Glaviano v. Sacramento City Unified School Dist. (Cal. App. 3rd Dist., Apr. 26, 2018) 2018 Cal. App. LEXIS 370.)

90-day Limitations Period Begins to Run When EEOC Gives a Right-to-Sue Notice, Not When Aggrieved Person Becomes Eligible to Receive a Right-to-sue Notice.

Plaintiff sued her former employer for sexual harassment and retaliation under title VII of the Civil Rights Act of 1964. A federal trial court dismissed the action after granting a motion for summary judgment based on the statute of limitations. Under title VII, an aggrieved person must exhaust administrative remedies by first filing a complaint with the Equal Employment Opportunity Commission (EEOC) or a qualifying state agency and receiving a right-to-sue letter. (42 U.S.C. § 2000e-5.) The question facing the Ninth Circuit Court of Appeals was whether the 90-day period for filing a civil action in court begins when the aggrieved person becomes eligible to receive a right-to-sue letter from the EEOC or when the person is actually given a right-to-sue notice.The appeals court held: “We hold that the 90-day period referenced in 42 U.S.C. § 2000e-5(f)(1) begins when the aggrieved person is given notice of the right to sue by the EEOC.” (Scott v. Gino Morena Enters., LLC (9th Cir., Apr. 27, 2018) 2018 U.S. App. LEXIS 10762.)

Action for Inadequate Medical Care in Jail.

When a jail took in a prisoner, the jail nurse asked him whether he used drugs. He told her he took heroin intravenously three times a day. The inmate was thereafter assigned to regular housing, and not to a medical unit. He was prescribed Tylenol for pain, Zofran for nausea and Atarax for anxiety. The nurse ordered that a clinical opiate withdrawal assessment be performed five times a day, but a doctor crossed out that section of the order and handwrote that a clinical assessment for alcohol be done for four days. After 30 hours, the inmate was found dead in a cell when other inmates called out, “man down.” The man’s family sued for lack of adequate medical care under 42 U.S.C. § 1983, and a federal trial court granted summary judgment to both the entity and individual defendants. In reversing the grant of summary judgment, the Ninth Circuit Court of Appeals held that plaintiffs must prove something more than negligence, but less than subjective intent, and the matter was remanded for further proceedings. (Gordon v. Cty. of Orange (9th Cir., Apr. 30, 2018) 2018 U.S. App. LEXIS 10977.)

California Supreme Court States Rule to Determine Whether a Worker is an Employee or an Independent Contractor.

In this action, delivery drivers brought a class action against a nationwide delivery company alleging they are independent contractors rather than employees. California wage orders impose obligations relating to minimum wages, maximum hours and a limited number of very basic working conditions of California employees. The California Supreme Court held:“[W]e conclude that in determining whether a worker is properly considered the type of independent contractor to whom the wage order does not apply, it is appropriate to look to a standard, commonly referred to as the ‘ABC’ test, that is utilized in other jurisdictions in a variety of contexts to distinguish employees from independent contractors. Under this test, a worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.” (Dynamex Operations West, Inc. v. Superior Court (Cal., Apr. 30, 2018) 2018 Cal. LEXIS 3152.)

Formerly Wealthy Plaintiff Cannot Afford to Continue With Arbitration.

Plaintiff sued her investment advisor for breach of fiduciary duty and several other torts after she and her husband lost more than $2 million. After successfully moving to compel arbitration, defendants pushed for three arbitrators instead of just one, bringing the hourly rate to $1,450. After three years of arguing about discovery and other motions, the matter still has not actually been arbitrated; yet the costs have already exceeded $15,000. Plaintiff asked the arbitrators to order defendants to either pay the arbitration costs or else return to superior court. The arbitrators directed her to ask for such relief from the court, so she filed a declaratory relief action. The trial court denied her relief. In reversing, the Court of Appeal stated: “We conclude, based primarily on Roldan v. Callahan & Blaine (2013) 219 Cal.App.4th 87 (Roldan), plaintiff may be entitled to the relief she seeks.”(Weiler v. Marcus & Millichap Real Estate Investment Services, Inc. (Cal. App. 4th Dist., Div. 3, Apr. 30, 2018) 2018 Cal. App. LEXIS 383.)

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