Litigation Update: November 2019

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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
  • Editors, Dean Bochner, Glenn Danas, Julia Shear Kushner, Jessica Riggin, Kenneth Wang, and David Williams
“Even if you flippin’ fries at McDonald’s, if you are excellent, everybody wants to be in your line,” Oprah Winfrey.

Workers employed at McDonald’s franchises in California alleged that they were denied overtime premiums, meal and rest breaks, and other benefits in violation of the Labor Code. They further alleged that McDonald’s and its franchisee (which owned all the franchises where plaintiffs worked) are joint employers and that McDonald’s is therefore liable for these Labor Code violations. A federal district court granted summary judgment for McDonald’s, holding that it is not a joint employer of the franchisee’s employees and that plaintiffs’ ostensible agency and negligence claims fail as a matter of law. Affirming, the Ninth Circuit Court of Appeals concluded there is no evidence that McDonald’s had the requisite level of control over the franchisee’s employees to render it a joint employer.  (Salazar v. McDonald’s Corporation (9th Cir., Oct. 1, 2019) 939 F.3d 1051.)

Jury Verdict for Plaintiff on Retaliation Claim Reversed.

A jury found for plaintiff and against his employer on causes of action for retaliation in violation of Labor Code § 1102.5, subdivision (c), and the Fair Employment and Housing Act (Gov. Code, § 12940 et seq.; FEHA). Reversing, the Court of Appeal explained that under Labor Code § 1102.5, subdivision (c), “the plaintiff must identify both the specific activity and the specific statute, rule, or regulation at issue; the court must then determine the legal question whether the identified activity would result in a violation or noncompliance with the identified statute, rule, or regulation, and, if so, the jury must determine the factual issue whether the plaintiff was retaliated against for refusing to participate in the identified activity.” Although the trial court in this case declined to make the requisite legal determination, the Court of Appeal concluded that remand was not necessary because plaintiff “failed to present sufficient evidence . . . to establish that any acts he was asked to perform would result in a violation of or noncompliance with any identified . . . statute, rule, or regulation.” As to the FEHA claim, the appellate court found that the jury was erroneously instructed because it was allowed “to find in favor of [plaintiff] even if no violation of FEHA was committed.” The court concluded that defendant was entitled to judgment in its favor because plaintiff “failed to present evidence . . . that any adverse employment action he suffered was motivated by retaliation for complaints he made regarding discrimination or other activity protected by FEHA.”  (Nejadian v. County of Los Angeles (Cal. App. 2nd Dist., Div. 4, Oct. 1, 2019) 40 Cal.App.5th 703.)

Workers’ Compensation Insurance for Special Employees.

A general employer leased employees to a special employer. The general employer obtained workers’ compensation insurance for the special employees, and the special employer’s insurance excluded special employees. A special employee was injured while working for the special employer. When the general employer’s insurance company became insolvent, the California Insurance Guarantee Association (CIGA) took over the special employee’s claim. The Workers’ Compensation Appeals Board ordered the special employer to bear all liability for compensation of the injured worker because the special employer had not signed the limiting endorsement to its policy. The Court of Appeal reversed, finding the special employer substantially complied with its endorsement responsibility. The appellate court held that “CIGA shall be liable for the claim.” (Travelers Property Casualty Company of America v. Workers’ Compensation Appeals Board (Cal. App. 2nd Dist., Div. 1, Oct. 2, 2019) 40 Cal.App.5th 728.)

Ordinance Prohibiting Airbnb Rentals Does not Violate the Dormant Commerce Clause.

Plaintiff rented out her house on Airbnb when she went on vacation. The city where she lived passed an ordinance prohibiting property rentals of 30 days or less with an exception for rentals where a primary resident remains in the dwelling. Plaintiff brought a class action against the city, arguing that the ordinance violates the dormant commerce clause, which denies states the power to unjustifiably discriminate against or burden the interstate flow of articles of commerce. A federal district court dismissed the complaint without leave to amend. Affirming, the Ninth Circuit stated: “Because [plaintiff] fails to show a high burden on interstate commerce—and, at most, suggests some negligible burden on the [city’s] local economy, the complaint cannot meet the standard established in Pike [v. Bruce Church, Inc. (1970) 397 U.S. 137].” (Rosenblatt v. City of Santa Monica (9th Cir., Oct. 3, 2019) 940 F.3d 439.)

“All the libel lawyers will tell you there’s no libel any more, that everyone’s given up,” Ian Hislop.

Defendant’s mother retained a law firm but later terminated the representation.  Shortly after the law firm placed a lien on her case, someone with defendant’s photograph and initials reviewed the firm on Yelp, stating it was “underhanded and shady” and “unprofessional and unethical.” Two days later, an anonymous reviewer posted an identical review on an online lawyer directory. Additional unfavorable reviews about the firm were placed on other web sites. The law firm sued the defendant for defamation. The trial court granted the defendant’s special motion to strike under the anti-SLAPP statute (Code Civ. Proc., § 425.16). Affirming, the Court of Appeal found the reviews constituted protected activity and that the law firm did not satisfy its burden to demonstrate it would prevail on the merits. The appellate court observed that the firm did not establish that the defendant posted the reviews and that the content of the reviews suggested that the author was the defendant’s mother rather than the defendant. (Abir Cohen Treyzon Salo, LLP v. Lahiji (Cal. App. 2nd Dist., Div. 2, Oct. 3, 2019) 40 Cal.App.5th 882.)

Suit Against Child Welfare Agency.

The parents of two minor children were engaged in divorce proceedings when a county child protective services agency received a referral that the children were at risk of neglect and abuse by their father. The mother sought custody of the children in family court, proffering a declaration that read in part: “[a county social worker] advis[ed] me not to force our children to visit with their father. It was suggested . . . that I seek legal action immediately to keep our children safe.” The family court denied the application and rebuked the agency. The agency subsequently determined that the evidence against the father was inconclusive and closed the referral. But the father later received a letter from the agency stating that the allegations against him were substantiated and that he had been placed on the Child Abuse Central Index (CACI). After the father complained, the agency initially confirmed he had been placed on CACI, but later said he actually had never been placed on CACI. The father and his children filed a civil rights action against the county and its employees under 42 U.S.C. § 1983. A federal district court dismissed the action on qualified immunity grounds. Reversing in part, the Ninth Circuit held that the First Amendment retaliation claim could proceed, stating: “Plaintiffs have pleaded both a lack of any substantiated concern for the children’s safety (which may well be the equivalent of probable cause in this context) and differential treatment. These allegations together support the inference that [the social worker] was motivated by retaliatory animus.”  (Capp v. County of San Diego (9th Cir., Oct. 4, 2019) 940 F.3d 1046.)

Malicious Prosecution Action Stricken Under Anti-SLAPP Statute.

In this action alleging malicious prosecution and intentional infliction of emotional distress (IIED), plaintiff sued the lawyer who represented her opponent in a prior action, which was dismissed before trial. In the present action, the trial court granted the lawyer’s anti-SLAPP motion (Code Civ. Proc., § 425.16) and struck the complaint, concluding that the IIED claim was barred by the litigation privilege (Civ. Code, § 47) and the malicious prosecution claim could not succeed because the evidence showed that the lawyer had probable cause to prosecute the prior action. Affirming, the Court of Appeal stated: “We agree with the trial court that [the lawyer] had sufficient evidence of the potential merit of her client’s claims to meet the probable cause requirement. . . . Faced with the choice of accepting the version of events presented by her client or the version described by the opposing party, [the lawyer] appropriately opted to continue advocating for her client. She could not be liable for malicious prosecution for making that choice so long as the client’s claims were arguably meritorious.” (Litinsky v. Kaplan (Cal. App. 2nd Dist., Div. 2, Oct. 4, 2019) 40 Cal.App.5th 970.)

Award of Punitive Damages Upheld.

Tenants sued the owner of their building under various tort theories and prevailed, obtaining awards of compensatory and punitive damages. On appeal, the building owner argued that punitive damages were improperly awarded because plaintiffs did not prove his net worth. Affirming, the Court of Appeal held: “The record shows that Plaintiffs were excused from this requirement because [the defendant] refused to produce evidence of his financial condition.” The court also concluded that defendant had forfeited the argument that the punitive damages were excessive because the only basis for that argument was that he was not wealthy and he refused to produce evidence of his wealth. (Garcia v. Myllyla (Cal. App. 2nd Dist., Div. 2, Oct. 4, 2019) 40 Cal.App.5th 990.)

No Attorney-Client Relationship.

A limited liability company was equally owned by two persons, Sprengel and Mohr. Sprengel filed an action to dissolve the company and sued Mohr for copyright infringement. During dissolution, the company was represented in the copyright claim by a law firm that is the defendant in the current action. After the dissolution and copyright claims were resolved, Sprengel sued the law firm for legal malpractice, alleging the firm violated professional duties by undertaking representation of the company without her consent. In the legal malpractice case, the law firm filed a motion for summary judgment, arguing its representation of the company did not create an attorney-client relationship with Sprengel. Sprengel argued the law firm owned her a professional duty of care based on her status as a 50-percent owner of the company. The trial court granted the motion for summary judgment. Affirming, the Court of Appeal stated: “Sprengel has presented no evidence that would support the finding of an implied attorney-client relationship.” (Sprengel v. Zbylut (Cal. App. 2nd Dist., Div. 7, Oct. 7, 2019) 40 Cal.App.5th 1028.)

Moving Party Did Not Show Protected Activity in Its Anti-SLAPP Motion.

In a 2017 superior court action, the court found that shuttle drivers are independent contractors.  In 2018, the shuttle company filed a second civil action seeking a declaration that the doctrine of collateral estoppel precludes the Labor Commissioner from considering employee wage claims from shuttle drivers. The Labor Commissioner filed a special motion to strike pursuant to the anti-SLAPP statute (Code Civ. Proc., § 425.16). The trial court denied the motion. The Court of Appeal affirmed, finding the gravamen of the declaratory relief action is not protected activity, and stating the shuttle companies have “the right to seek an answer to the question whether collateral estoppel applies to these claims.” (Supershuttle International, Inc. v. Labor & Workforce Development Agency (Cal. App. 2nd Dist., Div. 8, Oct. 7, 2019) 40 Cal.App.5th 1058.)

Previously we reported:
A Website Can Be a Place of Public Accommodation Under the ADA.

Plaintiff is blind. He sued a pizza restaurant under the Americans with Disabilities Act (42 U.S.C. § 12101) for failing to design, construct, maintain, and operate its website and mobile application to be fully accessible to him. He contends on at least two occasions he unsuccessfully attempted to order online a customized pizza from a nearby Domino’s but he could not order the pizza because Domino’s failed to design its website and app so his software could read them. A federal trial judge granted Domino’s motion for summary judgment and dismissed the action. Reversing, the Ninth Circuit Court of Appeals held that Domino’s website is a place of public accommodation, stating: “[T]he ADA applies to Domino’s website and app, which connect customers to the goods and services of Domino’s physical restaurants. . . .” (Robles v. Domino’s Pizza, LLC (9th Cir., Jan. 15, 2019) 913 F.3d 898.)

The latest:
The U.S. Supreme Court denied certiorari. (Domino’s Pizza, LLC v. Robles, (S.Ct., No. 18-1539, Oct. 7, 2019).)

Plaintiff Claims the Power to Invalidate Mortgage Assignments by Not Paying His Mortgage.

Plaintiff sued various entities for wrongful foreclosure. The heart of plaintiff’s case was an allegation that one financial institution may not validly assign a mortgage to another if the mortgage is in default. Such an assignment, plaintiff contended, was “void.” The trial court sustained defendants’ demurrer. Affirming, the Court of Appeal stated: “[Plaintiff’s] legal argument is incorrect because he does not explain how the assignments of his mortgage are void as a matter of law. His complaint seems to suggest that a borrower, by refusing to pay, can prevent a lender from assigning the debt. Why? [Plaintiff] does not give a logical basis for this strange suggestion. Neither does he support it with legal authority. The trial court properly sustained the demurrer.” (Myles v. PennyMac Loan Services, LLC (Cal. App. 2nd Dist., Div. 8, Oct. 8, 2019) 40 Cal.App.5th 1072.)

Special Relationship.

Plaintiffs sued the U.S. Olympic Committee (USOC), USA Taekwondo (USAT) and others for sexual abuse by their taekwondo coach, Marc Gitelman. The trial court sustained the demurrers of USOC and USAT without leave to amend. As to USAT, the appellate court reversed, stating: “We conclude USAT, which is the national governing body for the Olympic sport of taekwondo, had a special relationship with Gitelman because Gitelman was required to register with USAT to coach taekwondo at USAT-sponsored competitions, athletes could only compete in competitions with registered coaches, USAT could (and later did) implement policies and procedures to protect athletes from sexual abuse by their coaches, and USAT could (and later did) bar Gitelman from coaching athletes at taekwondo competitions for his violations of USAT’s policies and procedures. USAT was therefore in a unique position to protect taekwondo youth athletes from harm.” As to USOC, the Court of Appeal affirmed, “because [USOC] did not have a special relationship with Gitelman or plaintiffs. Although USOC had the ability to control USAT, including requiring it to adopt policies to protect youth athletes, it did not have direct control over the conduct of coaches.” (Brown v. USA Taekwondo (Cal. App. 2nd Dist., Div. 7, Oct. 8, 2019) 40 Cal.App.5th 1077.)

Employee or Independent Contractor?

Plaintiff filed a class action on behalf of transit workers. He alleged defendant misclassified the workers as independent contractors, violating several California statutes. The trial court denied the motion for class certification. While the appeal was pending, the California Supreme Court decided Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903, in which it adopted the ABC test. 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. Reversing the denial of class certification, the Court of Appeal stated: “We conclude that: (1) the ABC test adopted in Dynamex is retroactively applicable to pending litigation on wage and hour claims; (2) the ABC test applies with equal force to Labor Code claims that seek to enforce the fundamental protections afforded by wage order provisions; and (3) statutory claims alleging misclassification not directly premised on wage order protections, and which do not fall within the generic category of ‘wage and hour laws,’ are appropriately analyzed under what has commonly been known as the ‘Borello’ test (referring to S.G. Borello and Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341.” (Gonzales v. San Gabriel Transit, Inc. (Cal. App. 2nd Dist., Div. 4, Oct. 8, 2019) 40 Cal.App.5th 1131.)

Defendant Not a Joint Employer.

In a wage and hour class action, plaintiff alleged he had been employed as the station manager of several Shell-owned gasoline stations operated by Danville Petroleum, Inc. He further alleged that “while he had been hired by Danville, Shell was liable as his ‘joint employer’ because Shell ‘both directly and indirectly controlled the wages, hours or working conditions’ of Danville’s employees.” Shell moved for summary judgment. The trial court found Shell was not plaintiff’s joint employer and granted Shell’s motion. Affirming, the Court of Appeal stated: “The record is undisputed that Danville alone set [plaintiff’s] wages, determined which employees would be deemed exempt from overtime regulations, and was solely responsible for Danville’s payroll function and compliance with labor laws. Danville alone set its meal and rest break policies, enforced its own employee handbook, and determined [plaintiff’s] work schedule and the number of employees who worked at a particular station. That Danville may have understaffed its service stations, requiring [plaintiff] to cover shifts for other employees and work longer hours, are working conditions that Danville created and Shell had no contractual authority to control or alter.” (Henderson v. Equilon Enterprises, LLC (Cal. App. 1st Dist., Div. 1, Oct. 8, 2019) 40 Cal.App.5th 1111.)

Original Intent of Arbitration Agreement.

A dispute arose between the Rams and St. Louis. When the Rams relocated from Los Angeles to St. Louis in 1995, they entered into a broad arbitration agreement with various St. Louis entities, which provided that virtually any dispute between them would be arbitrated under the rules of the American Arbitration Association (AAA) “then existing” at the time of the dispute. After the Rams decided to return to Los Angeles in 2016, however, St. Louis bypassed arbitration altogether and filed a lawsuit in state court, seeking substantial damages on the theory that the Rams violated a 1984 internal guidance document promulgated by the NFL Commissioner. The Rams moved to compel arbitration, but the Missouri Court of Appeals refused to allow the question of arbitrability to go to the arbitrators on the theory that the parties could not agree in 1995 to incorporate future rule changes reserving arbitrability questions for the arbitrator. The Missouri Court of Appeals held that the claims in the action did not touch on matters covered by the parties’ prior lease and relocation agreement, and therefore were not arbitrable. (St. Louis Regional Convention v. National Football League (Mo. Ct. App., Sept. 3, 2019) 581 S.W.3d 608.) The Rams filed a petition for certiorari with the U.S. Supreme Court and also filed an application to stay the Missouri proceedings pending disposition of its petition. The Rams argued the Missouri court’s decision “represents a classic example of the kind of judicial hostility to arbitration that the FAA was designed to counteract.” The U.S. Supreme Court denied the Rams’ request for a stay pending a ruling on the petition for writ of certiorari. (Rams Football Co. v. St. Louis Regional Convention (S.Ct., No. 19/A335, Oct. 8, 2019).)

No Life Insurance Even Though the Insured Was Sick When Premium Was Not Paid and Died Shortly After the Policy Lapsed.

Insurance Code §§ 10113.71 and 10113.72 came into effect on January 1, 2013. A relevant portion of the statutes states: “An individual life insurance policy shall not be issued or delivered in this state until the applicant has been given the right to designate at least one person, in addition to the applicant, to receive notice of lapse or termination of a policy for nonpayment of premium. The insurer shall provide each applicant with a form to make the designation.” In this case, the insured purchased a 60-year term life insurance policy in 2005 that provided a 31-day grace period before it could be terminated for non-payment of the premium. The insured failed to pay the premium due on January 9, 2013, and his policy lapsed 31 days later. Shortly thereafter, the insured passed away. His designated beneficiary, his daughter, sued the life insurance company for breach of contract and breach of the implied covenant of good faith and fair dealing. The matter proceeded to a jury trial, and the insurance company prevailed. The Court of Appeal affirmed, finding the statutes do not apply retroactively. (McHugh v. Protective Life Ins. (Cal. App. 4th Dist., Div. 1, Oct. 9, 2019) 40 Cal.App.5th 1166.)

Public Access to the Beach.

Plaintiffs sought to extend their residence further onto the beach. They challenged the California Coastal Commission’s permit condition requiring their construction to be set back five feet from the seaward property line. Plaintiffs argued the commission erred in finding that a five-foot buffer was needed to safeguard the public’s access to the beach and associated walkway. Plaintiffs also argued the five-foot setback requirement constituted an unconstitutional taking of their property. Affirming the trial court’s denial of plaintiffs’ petition for writ of administrative mandate, the Court of Appeal found that substantial evidence supported the commission’s determination that the remodel would have an adverse impact on the public’s access to the beach. (Greene v. California Coastal Commission (Cal. App. 2nd Dist., Div. 5, Oct. 9, 2019) 40 Cal.App.5th 1227.)

Employer’s Rounding Policy Does Not Violate the Labor Code.

Plaintiff worked as a bartender in a hotel. She sued the hotel for wage and hour violations, including that the hotel’s electronic timekeeping system automatically rounded time entries either up or down to the nearest quarter hour when employees checked in or out and that the hotel improperly calculated the premium payment owed to her when it failed to provide her with statutorily required meal and/or rest breaks. The trial court granted the hotel’s motion for summary adjudication on both issues. Affirming, the Court of Appeal held first that “Loews’s rounding policy does not systematically undercompensate its employees over time.”  It also found that that “the statutory terms ‘regular rate of pay’ and ‘regular rate of compensation’ are not synonymous, and the premium for missed meal and rest periods is the employee’s base hourly wage.”  (Ferra v. Loews Hollywood Hotel, LLC (Cal. App. 2nd Dist., Div. 3, Oct. 9, 2019) 40 Cal.App.5th 1239.)

Families May Proceed Against Government for Failure to Warn.

A family, including two of the family’s children and one of the children’s friends were camping in Yosemite National Park. Around 5:00 a.m., a limb from a large oak tree overhanging the campsite broke and fell on the tent where two boys were sleeping, killing them. The parents of the two boys sued the United States under the Federal Tort Claims Act (FTCA). A federal district court dismissed the complaint based on the discretionary function exception of the FTCA that bars suits based upon a federal official’s exercise or performance or the failure to perform a discretionary function or duty (28 U.S.C. § 2680(a)). The Ninth Circuit affirmed the dismissal of the fraudulent concealment claims; however, with regard to the negligence claims, the appeals court reversed, stating: “[T]he discretionary function exception does not bar the families’ claim that the government negligently failed to give Park visitors any warning about the tree.” (Kim v. United States (9th Cir., Oct. 10, 2019.) 940 F.3d 484.)

Insurance Company Has No Duty to Indemnify.

A customer purchased a prescription drug from a retailer. According to the customer’s complaint against the retailer, her skin began to peel off all over her body; she was admitted for critical care at a burn unit with a diagnosis of Stevens-Johnson Syndrome. The drug was supplied to the retailer by a bulk prescription drug supplier. The supplier and the supplier’s insurer refused to indemnify the retailer. The trial court granted the supplier’s and its carrier’s motion for summary adjudication because the customer’s lawsuit was based not on a defective product distributed by the supplier but on the retailer’s alleged mislabeling of the product and failure to warn of possible adverse reactions to the product. The Court of Appeal affirmed, concluding that the indemnification/defense clause in the supplier’s contract with the retailer and the additional insured endorsement did not require the supplier and its carrier to defend the retailer against customer’s lawsuit. (Target Corp. v. Golden State Ins. Co. Ltd. (Cal. App. 2nd Dist., Div. 6, Oct. 10, 2019) 41 Cal.App.5th 13.)

Default Judgment Was Void Independent of Its Being Vacated.

An attorney, the defendant in the present legal malpractice action, represented plaintiff in a lawsuit resulting in a 2008 default judgment. In October 2015, a judgment debtor wrote to plaintiff, claiming the judgment was void. In November 2015, plaintiff’s new attorney correctly opined that the judgment was indeed void. In September 2016, the debtor filed a motion to vacate the judgment, which was granted the following month. In May 2017, plaintiff filed a legal malpractice lawsuit against defendant attorney. During a court trial on stipulated facts, the trial court found the judgment had been valid until it was vacated. The trial court also found the statute of limitations applicable to plaintiff’s legal malpractice lawsuit had been tolled until “actual injury” first occurred in September 2016, when plaintiff began incurring hourly attorney fees to oppose the judgment debtor’s motion to vacate the judgment. The Court of Appeal reversed because the default judgment was void independent of it being vacated, stating: “Discovery of the void judgment and whatever injury resulted therefrom occurred at least by November 2015 when the judgment debtor wrote to Sharon and her new attorney claiming the judgment was void. The statute ran one year from that date.” (Sharon v. Porter (Cal. App. 4th Dist., Div. 3, Oct. 10, 2019) 41 Cal.App.5th.)

Medicare Need Not Reimburse CIGA.

California requires insurers providing certain types of coverage to participate in the California Insurance Guarantee Association (CIGA), which provides funding when a member insurer becomes insolvent and unable to pay its insureds’ claims. State law prohibits CIGA from reimbursing state and federal government agencies, including Medicare. CIGA filed this declaratory action after Medicare paid for and demanded reimbursement from CIGA for medical expenses of certain individuals whose workers’ compensation benefits CIGA was administering. A federal district court ruled in favor of Medicare, concluding that federal law preempted California law to the extent it prohibited CIGA from reimbursing Medicare. The Ninth Circuit reversed, stating: “As a ‘secondary payer,’ Medicare is entitled to seek reimbursement from a beneficiary’s ‘primary payer,’ typically private insurance. But CIGA is not a primary plan, and specifically not a ‘workmen’s compensation law or plan.’ [citation]. Instead, it is an insolvency insurer of last resort. Insurance regulation is a field traditionally occupied by the states, and we must presume that the Medicare secondary payer provisions do not preempt state insurance laws unless Congress clearly manifested its intent to do so. Nothing in the Medicare statute or its implementing regulations suggests that Congress meant to interfere with state schemes designed to protect against insurer insolvencies. We therefore remand for further proceedings.” (California Insurance Guarantee Association v. Azar (9th Cir., Oct. 10, 2019) 940 F.3d 1061.)

Medical Device Case Tossed.

After undergoing a double mastectomy, a woman had silicone breast implants manufactured by defendant drug company implanted during reconstructive surgery. She thereafter suffered severe health problems, including significant vision loss. Her doctor removed the implants, stating that a silicone gel bleed from the implants caused the woman’s health issues. A federal trial court granted the drug company’s motion for summary judgment. Affirming, the Ninth Circuit stated that “for a state law claim regarding a Class II medical device to survive express preemption by the MDA (Medical Device Amendments to the Food, Drug and Cosmetic Act; 21 U.S.C. § 360 et seq.), a plaintiff must establish that the defendant violated an FDA requirement.” (Weber v. Allergan, Inc. (9th Cir., Oct. 11, 2019) 940 F.3d 1106.)

No Improper Proportionality Analysis in Attorney Fee Award.

Plaintiff appealed from the trial court’s order awarding her attorney fees following the settlement of her action against a car manufacturer under the Song-Beverly Consumer Warranty Act (Civ. Code, § 1790 et seq.). Plaintiff sued defendant after she purchased a defective used vehicle that defendant refused to repurchase. The parties settled the litigation, with defendant agreeing to pay plaintiff $85,000, plus reasonable attorney fees and expenses. After failing to reach agreement on the attorney fees amount, plaintiff moved for a fee award, claiming a lodestar of $127,792.50 and a 1.5 multiplier, for a total of $191,688.75. The trial court awarded only $73,864 in fees. On appeal, plaintiff contended the court abused its discretion in reducing her fee award and engaged in a prohibited proportionality analysis. Specifically, she pointed to the following statement by the court during the hearing: “‘So this is [a request for] $192,000 for a case that you settled for $85,000 and didn’t go to trial. Don’t you think that just on its face, that’s a little much?’” The Court of Appeal affirmed the award, finding no abuse of discretion and stating: “Given the court’s clear expression in its final order of its reasons for the reductions, we will not speculate, based on a stray remark the court made at the hearing, that it had other, prohibited reasons that would require reversal.” (Morris v. Hyundai Motor America (Cal. App. 2nd Dist., Div. 7, Oct. 11, 2019) 41 Cal.App.5th 24.)

Lack of Standing to Appeal from Judgment.

The trial court approved a class action settlement after appellant, an unnamed class member, objected to the settlement and unsuccessfully filed an ex part application to intervene. The court entered a judgment pursuant to the settlement. Appellant unsuccessfully moved to vacate the judgment and then appealed from the judgment. She did not appeal from the denial of her motion to vacate, and in her appellate briefs she did not challenge the denial of her application to intervene.  Dismissing her appeal, the Court of Appeal stated: “Because [appellant] is not a party of record and has not utilized the procedures available to alter her status, she lacks standing to appeal from the judgment.” (Eck v. City of Los Angeles (Cal. App. 2nd Dist., Div. 7, Oct. 15, 2019) 41 Cal.App.5th 141.)

Removal from State Court to Federal Court Has Consequences.

A group of Nevada correctional officers alleged violations of the of Fair Labor Standards Act (29 U.S.C. § 203; FSLA) by the state of Nevada and its Department of Corrections. Nevada removed the case from state court to federal court and then moved for judgment on the pleadings. A federal district court found that Nevada waived its Eleventh Amendment immunity to plaintiffs’ FLSA claims by removing the case to federal court. Affirming, the Ninth Circuit stated: “We now hold that a State that removes a case to federal court waives its immunity from suit on all federal-law claims in the case, including those federal-law claims that Congress failed to apply to the states through unequivocal and valid abrogation of their Eleventh Amendment immunity.” (Walden v. State of Nevada (9th Cir., Oct. 16, 2019) 2019 WL 5199557.)

Look Where You’re Going.

Unpainted pillars the height of a coffee table surround the Los Angeles Convention Center to protect against car bombs. Plaintiff walked into one of them and was injured. She sued the city for dangerous condition of public property. The trial court granted the city’s motion for summary judgment. Affirming, the Court of Appeal analyzed the city’s defense of design immunity pursuant to Government Code § 830.6. The appellate court noted: “Key evidence included how this bollard looked on the sidewalk. It was big. It was designed to stop cars. It was obvious to pedestrians who looked where they were going. There is more proof of reasonableness, but we need not recite it because reasonable minds would agree this bollard in this location was conspicuous and not a danger to pedestrians,” concluding “[i]t was reasonable to approve this plan.” (Dobbs v. City of Los Angeles (Cal. App. 2nd Dist, Div. 8, Oct. 16, 2019) 41 Cal.App.5th 159.)

Health Care Costs Paid to Counties.

Tulare County runs a health care clinic. California’s State Department of Health Care Services refused to pay Tulare’s clinic the full amount the clinic paid to a contractor. Instead, the state paid only the contractor’s underlying costs. The county clinic petitioned the superior court, asking the court to order the state to pay the full amount. The trial court granted the petition. Affirming, the Court of Appeal stated that what the state paid the county clinic, “[b]y statute, . . . was too little,” explaining: “Medicaid is a federal program subsidizing state spending on medical care for the poor. (42 U.S.C. § 1396-1; 42 C.F.R. § 430.0.) To get Medicaid funds, states must agree with the federal government to spend the funds in accord with federally imposed conditions. (42 C.F.R. § 430.10; see also Armstrong v. Exceptional Child Center, Inc. (2015) 135 S.Ct. 1378, 1382.) And states must match federal dollars with their own, at a rate set by Congress. (42 U.S.C. §§ 1396a, 1396b.)” (Tulare Pediatric Health Care Center v. State Department of Health Care Services (Cal. App. 2nd Dist., Div. 8, Oct. 16, 2019) 41 Cal.App.5th 163.)

A Direct Employer Is Different From a Contract Employer.

Plaintiff asserted claims under the Fair Employment and Housing Act (Gov. Code, § 12900 et seq.; FEHA) against her contracting employer, a manufacturing company that negotiated with plaintiff’s direct employer, a temporary-staffing agency. Plaintiff’s claims required a threshold showing that the contracting employer was her employer. Disputing that assertion at trial, the contracting employer framed the inquiry as a contest of relative influence between the direct and contracting employers, stating in closing argument, “ ‘Did [the contracting employer] have control over plaintiff more than the temp agency?’ (Italics added.)”  The jury returned a special verdict finding that the contracting employer was not plaintiff’s employer. Plaintiff unsuccessfully moved for a new trial, and judgment was entered in favor of the contracting employer.  On appeal, plaintiff argued that there was insufficient evidence to support the special verdict finding. Affirming, the Court of Appeal stated: “To evaluate whether an entity is an employer for FEHA purposes, courts consider the totality of circumstances and analyze several factors, principal among them the extent of direction and control possessed and/or exercised by the employer over the employee.” (Jimenez v. U.S. Continental Marketing, Inc. (Cal. App. 4th Dist., Div. 1, Oct. 17, 2019) 41 Cal.App.5th 189.)

Anti-SLAPP Motion Was Timely.

In a neighbor dispute, defendants appealed the trial court’s denial of a motion pursuant to Code of Civil Procedure § 425.16, the anti-SLAPP statute, directed at three claims plaintiff asserted for the first time in its first amended complaint. Although defendants’ motion was filed within 60 days after the filing of the amended complaint, the trial court denied the motion as untimely because the new claims were based on facts alleged in the original complaint and the motion was filed more than 60 days after service of the original complaint. (See Code Civ. Proc., § 425.16, subd. (f) [60-day deadline to file motion after service of “complaint”].) Reversing, the Court of Appeal stated: “An anti-SLAPP motion may be brought within 60 days of service of an amended complaint ‘if the amended complaint pleads new causes of action that could not have been the target of a prior anti-SLAPP motion, or adds new allegations that make previously pleaded causes of action subject to an anti-SLAPP motion.’” (Starview Property, LLC v. Lee (Cal. App. 2nd Dist., Div. 8, Oct. 17, 2019) 41 Cal.App.5th 203.)

No Fly List.

Plaintiffs are on the No Fly List, which prohibits them from boarding commercial aircraft flying to, from, or within the United States, or through U.S. airspace. They challenged under the Fifth Amendment due process clause both their inclusion on the No Fly List and the sufficiency of the procedures available for contesting their inclusion on the list. They argued that the criteria for inclusion on the No Fly List were unconstitutionally vague and violated their procedural and substantive due process rights. A federal district court granted summary judgment to the government. Affirming, the Ninth Circuit stated: “Here, the No Fly List criteria are not impermissibly vague because they require a prediction of future criminal conduct . . . .” Regarding plaintiffs’ procedural due process arguments, the appeals court balanced three considerations: (1) plaintiffs’ liberty interests; (2) the risk of an erroneous liberty deprivation through the current traveler redress procedural safeguards; and (3) the government’s interest in national security, including the administrative burdens that additional procedural requirements would entail. As to the plaintiffs’ substantive due process claims, the appeals court cited 49 U.S.C. § 46110(a), which places review of Transportation Security Administration orders in the Court of Appeals, and not in the district court, where plaintiffs filed their claims; thus, the federal trial court had no jurisdiction to hear that claim. But the Ninth Circuit stated that the plaintiffs “are free to assert their substantive due process claims in an appropriate court of appeals . . . .” (Kashem v. Barr (9th Cir., Oct. 21, 2019) 2019 WL 5303288.)

Contraceptive Issues Under Obamacare.

The Affordable Care Act (42 U.S.C. § 300gg-13(a)) and the regulations implementing it require group health plans to cover contraceptive care without cost sharing. Federal agencies issued final rules exempting employers with religious and moral objections from this requirement. A federal district court issued a preliminary injunction barring enforcement of the rules in several states. Affirming, the Ninth Circuit stated: “We affirm the preliminary injunction, but we emphasize that our review here is limited to abuse of discretion. Because of the limited scope of our review and ‘because the fully developed factual record may be materially different from that initially before the district court,’ our disposition is only preliminary. . . . The injunction only preserves the status quo until the district court renders judgment on the merits based on a fully developed record.” (State of California v. Little Sisters of the Poor (9th Cir., Oct. 22, 2019) 2019 WL 5382250.)

Arbitration Award Vacated Due to Arbitrator’s Failure to Disclose Ownership Interest in Arbitration Company.

The parties had a disagreement and had agreed to resolve their disagreements through arbitration. They selected an arbitrator from a list of arbitrators provided by JAMS, the arbitration company specified in their agreement. The arbitrator heard the matter and issued an award, which was then confirmed by a federal district court. The Ninth Circuit reversed, stating: “We conclude, given the Arbitrator’s failure to disclose his ownership interest in JAMS, coupled with the fact that JAMS has administered 97 arbitrations for Monster over the past five years, that vacatur of the Award is necessary on the ground of evident partiality.” The dissenting judge stated: “By nature of the fact that arbitrators are hired and paid by the parties for whom they conduct private arbitrations, arbitrators have an economic stake in cultivating repeat customers for their services. In addition, arbitrators affiliated with an arbitration firm have an interest in not causing the firm to lose its top clients. At least to some extent, this means arbitrators have incentives to make decisions that are viewed favorably by parties who frequently engage in arbitrations. This feature of private arbitration, even if distressing, is an inevitable result of the structure of the industry.” (Monster Energy Company v. City Beverages, LLC (9th Cir., Oct. 22, 2019) 940 F.3d 1130.)

Court Cut FLARPL Amount.

A husband’s trial attorney recorded three Family Law Attorney’s Real Property Liens (FLARPL’s) on the family residence before it was sold (Fam. Code, § 2033, subd. (a)). The trial court reduced the lien because the parties were contesting the date of marital separation and the full $250,000 lien amount could impair the equal division of community assets and debts. Affirming, the Court of Appeal stated: “We affirm and conclude that section 2034, subdivision (c) permits a family law court to reduce or limit a FLARPL after the lien is recorded.” The appellate court also stated: “Family law practitioners should read this opinion with the following in mind: ‘[F]amily law court is a court of equity . . . .’” (In re Marriage of Bittenson (Cal. App. 2nd. Dist., Div. 6, Oct. 22, 2019) 2019 WL 5387353.)

Ability to Perform Work Duties at a Theoretical Location Is Not Enough.

After eight years working in a courthouse, plaintiff began experiencing constant fatigue and dizziness at work. She complained of a smell in the building. Her doctor told her the problem was hormonal, and she underwent a hysterectomy. After six weeks at home, she felt much better, but as soon as she began working in the courthouse again the symptoms returned. She asked to work in a different location, but the employer only moved her to different locations within the same building. Her symptoms continued, and she consumed all of her sick time and was eventually terminated. She applied for disability retirement but was denied after pursuing her claim through the administrative process. Thereafter, she filed a petition for writ of administrative mandate, which the trial court denied, finding that plaintiff had not shown she was incapable of performing her duties at a theoretical location. Under Government Code § 21156, “incapacity for performance of duty” has been interpreted to mean “the substantial inability of the applicant to perform his [or her] usual duties.” Reversing, the Court of Appeal stated: “We conclude that CalPERS may not deny disability retirement under section 21156 when, due to a medical condition, applicants can no longer perform their duties at the only location where their employer will allow them to work.” (McCormick v. California Public Employees’ Retirement System (Cal. App. 1st Dist., Div. 1, Oct. 25, 2019) 2019 WL 5485359.)

Preparing False Documents.

A city council member facing a recall drive collected false declarations to be given to law enforcement and used in court. She was convicted of violating Penal Code § 134, a felony. That statute states: “Every person guilty of preparing any false or ante-dated book, paper, record, instrument in writing, or other matter or thing, with intent to produce it, or allow it to be produced for any fraudulent or deceitful purpose, as genuine or true, upon any trial, proceeding, or inquiry whatever, authorized by law, is guilty of felony.” On appeal, defendant contended she should have been prosecuted under the perjury statute, Penal Code § 118, instead of § 134 (perjury has a less onerous punishment). Affirming defendant’s conviction, the Court of Appeal discussed the rule in In re Williamson (1954) 43 Cal.2d 651: “The doctrine that a specific statute precludes any prosecution under a general statute is a rule designed to ascertain and carry out legislative intent. . . . Here, the evidence establishes that defendant duped the petition signers into signing declarations. There was no agreement to provide false information. The petition signers’ statements were neither willful nor were the statements made with the declarants’ knowledge that the statements were false. Thus, neither perjury nor subornation of perjury covers defendant’s conduct regarding the petition signers’ declarations.” (People v. Lucero (Cal. App. 3rd Dist., Oct. 25, 2019) 2019 WL 5485394.)

Substantial Performance a Question of Fact.

Plaintiffs and defendant performed on a contract, and defendant had a 90-day period to obtain a lien release, but did not obtain a release until 8 days after that 90-day period ended. For that reason, the trial court granted plaintiffs’ motion for summary adjudication of their breach of contract claim and of defendant’s rescission and breach of contract claims. Voluntary dismissal of other causes of action produced an appealable final judgment. Reversing, the Court of Appeal stated: “Whether [defendant] substantially performed its contract obligations is a triable issue of material fact that defeats summary adjudication. We hold that a provision in the parties’ contract making time of the essence does not automatically make [defendant’s] untimely performance a breach of contract because there are triable issues regarding the scope of that provision and whether its enforcement would result in a forfeiture to [defendant] and a windfall to [plaintiffs].” (Magic Carpet Ride LLC v. Rugger Investment Group, L.L.C. (Cal. App. 4th Dist., Div. 3, Oct. 25, 2019) 2019 WL 5485327.)

Secondary Boycott Enjoined.

The National Labor Relations Board petitioned for enforcement of an order entered by the board against an ironworkers’ union to “[c]ease and desist from inducing or encouraging” certain persons “to engage in a strike or a refusal to perform work in the course of employment” in order to force various companies to cease doing business with a concrete company in violation of section 8(b)(4)(i)(B) of the National Labor Relations Act (29 U.S.C. § 151 et seq.). The union’s business agent appealed to employees of another company specifically to induce or encourage a secondary boycott in support of the union’s labor dispute with the concrete company. The business agent texted the other company’s employees, phoned one of the employees, and spoke with some of the employees at the jobsite. The union conceded its statutory violation, but argued that the order unconstitutionally abridged its First Amendment free speech rights. The Ninth Circuit rejected this argument, rejected the argument that the union’s communications were protected under section 8(c ) of the act, and granted the board’s application for enforcement of the order. (NLRB v. IAB Local 229 (9th Cir., Oct. 28, 2019) 2019 WL 5539505.)

No Fiduciary Duty Owed by County.

The county sold plaintiff’s real property at a tax sale, paying the excess proceeds to plaintiff. Plaintiff contended the county breached a fiduciary duty owed to him when it did not account for its expenses or hold the proceeds in an interest-bearing account. The trial court sustained the county’s demurrer without leave to amend. Affirming, the Court of Appeal stated: “There is no duty on the county for plaintiff’s benefit to audit expenses, invest the excess proceeds, or pay interest to him.” (Hodges v. County of Placer (Cal. App. 3rd Dist., Oct. 29, 2019) 2019 WL 5558191.)

Who Is a Consumer Under the CLRA?

Plaintiff sued defendant for violation of the Consumer Legal Remedies Act (Civ. Code, § 1750 et seq.; CLRA). Because of poor credit, plaintiff purchased a vehicle through his company, a landscaping business, and title was taken in the business’s name. However, plaintiff testified the vehicle was for his personal use, and the retail installment sale contract stated the truck was purchased for personal and not commercial purposes. Defendant likewise admitted in response to plaintiff’s request for admissions that the vehicle was purchased for plaintiff’s personal use. The trial court instructed the jury that it was conclusively established that the vehicle was purchased for personal use. The jury awarded plaintiff $10,435.88 in compensatory damages and $10,000 in punitive damages. On appeal, defendant contended plaintiff lacked standing to sue because his business purchased the vehicle. Affirming, the Court of Appeal quoted Civil Code § 1761, subdivision (d): “ ‘Consumer’ means an individual who seeks or acquires, by purchase or lease, any goods or services for personal, family, or household purposes.” (Kalta v. Fleets 101, Inc. (Cal. App. 2nd Dist., Div. 8, Oct. 29, 2019) 2019 WL 5558674.)

Candor Toward the Court.

The Court of Appeal affirmed an order denying a petition to compel arbitration and published its opinion to “remind the profession of . . . the importance of candor toward the court.” The trial court found that the arbitration agreements were procedurally and substantively unconscionable and denied defendant’s petition to compel arbitration; defendant appealed. The Court of Appeal noted that defendant selectively quoted portions of the lengthy agreements in a manner that misrepresented their complexity, length, and confusing nature. Defendant also failed to advise the reviewing court of the California Supreme Court’s opinion in OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, filed after the appellate briefing and before oral argument. Kho described a similar arbitration agreement as involving “an unusually high degree of procedural unconscionability.” (Id. at p. 118.)  Rule 3.3 of the recently revised California Rules of Professional Conduct, entitled “Candor Toward the Tribunal,” states that a lawyer shall not “fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel . . . .”  The Court of Appeal stated:  “It is hard to imagine legal authority more ‘directly adverse to the position of’ [defendant] than Kho— hard to imagine a more obvious violation of Rule 3.3.” (Davis v. TWC Dealer Group, Inc. (Cal. App. 1st Dist., Div. 2, Oct. 30, 2019) 2019 WL 5586867.)

No Waiver of Administrative Remedy by Doctor Who Filed Lawsuit.

A physician’s clinical privileges were terminated; he requested an administrative hearing. After the administrative process began, the physician filed a civil action against the hospital and others for employment discrimination. A defendant filed a special motion to strike (Code Civ. Proc., § 425.16), and the physician dismissed the civil action before the motion was heard. The hospital thereafter stopped the administrative proceedings, contending the physician forfeited his right to such proceedings by filing the civil action. The physician filed a petition for writ of mandate to compel the hospital to complete the administrative proceedings, and the superior court granted the petition. The hospital and other defendants appealed. Affirming, the Court of Appeal stated: “The argument misinterprets the doctrine of exhaustion of administrative remedies. That doctrine precludes premature lawsuits; it does not mean that filing a premature lawsuit necessarily waives an administrative remedy.” (Stafford v. Attending Staff Association of LAC + USC Medical Center (Cal. App. 2nd Dist., Div. 2, Oct. 30, 2019) 2019 WL 5587044.)

Jury Instruction on Causation in Asbestos Case.

A man died from mesothelioma as a result of his childhood exposure to asbestos. His father worked for years at a sugar refinery owned by defendant’s predecessor in interest. His widow and children sued defendant. The jury awarded them $1,958,461 in economic damages and a total of $11 million in noneconomic damages. On appeal, defendant argued that the trial court erred by instructing the jury on causation using CACI No. 435 (Causation for Asbsestos-Related Cancer Claims) rather than CACI No. 430 (Causation: Substantial Factor), as defendant requested. The Court of Appeal affirmed, rejecting the argument that CACI No. 435 should be given only if the defendant was a manufacturer or supplier of a product containing asbestos. The court also stated: “Giving CACI No. 430 in its entirety also would have meant instructing the jury on the principle of ‘but-for’ causation. Although generally subsumed within the substantial factor test, ‘the but-for test is inappropriate in cases when two forces are actively operating and each is sufficient to bring about the harm.’ . . . A ‘but-for’ instruction is therefore inappropriate in the asbestos context, at least when there are multiple sources of exposure.” The Court of Appeal explained that although there was only one defendant in this case, there was evidence that the decedent had been exposed to asbestos at other junctures in his life, and it would be inaccurate to tell the jury that defendant was absolved of liability if one of these other exposures was also a cause of his mesothelioma. (Lopez v. The Hillshire Brands Company (Cal. App. 1st Dist., Div. 5, Oct. 30, 2019) 2019 WL 5587346.)

Plaintiff Has Standing Under the FCRA.

Plaintiff alleged a bank obtained her credit report for a purpose not authorized by the Fair Credit Reporting Act (15 U.S.C. § 1681; FCRA). The Ninth Circuit held that a consumer suffers a concrete injury in fact when a third party obtains her credit report for a purpose not authorized by the FCRA, and a consumer plaintiff need allege only that her credit report was obtained for a purpose not authorized by the statute to survive a motion to dismiss; the defendant has the burden of pleading it obtained the report for an authorized purpose. (Nayab v. Capital One Bank (9th Cir., Oct. 31, 2019) 2019 WL 5608837.)

City Need Not Inform DOJ of Prisoners’ Release Dates.

The City of Los Angeles did not comply with the Department of Homeland Security’s (DHS) requests for advance notice of detained aliens’ dates of release from prison. The federal Department of Justice (DOJ) conditioned the receipt of federal funds awarded under a grant administered by DOJ on compliance with DHS’s requests for advance notice and on providing federal agents access to correctional facilities to meet with detained aliens or persons believed to be aliens. The city filed suit against DOJ, seeking an injunction against implementation of the conditions. The district court granted a preliminary injunction. Affirming, the Ninth Circuit held that DOJ had no statutory authority to impose the conditions. (City of Los Angeles v. Barr (9th Cir., Oct. 31, 2019) 929 F.3d 1163.)

Who Gets the Money Remaining After a Home Foreclosure Sale?

A foreclosure sale of a home was conducted by the trustee. Following an initial distribution of the sale proceeds, the trustee determined there were conflicting claims to the remaining proceeds, known as the surplus fund. The trustee deposited the surplus fund with the court so it could determine the claimants’ respective priorities pursuant to Civil Code § 2924, subdivisions (c) and (d). Among the claimants were the grantee of the 2004 deed of trust who claimed his trust deed was senior in priority because it was created first in time. Another claimant was the tax department of the State of California, claiming its tax lien had priority because the trust deed was void and unenforceable based upon its insufficient legal description. The trust deed’s legal description contained multiple inaccuracies or ambiguities, and no extrinsic evidence was presented to resolve them. The trial court entered judgment in favor of the tax department. The Court of Appeal affirmed, finding the grantee did not carry the burden of showing the trust deed’s legal description of the property was sufficient to make it enforceable. (MTC Financial Inc. v. California Department of Tax and Fee Administration (Cal. App. 4th Dist., Div. 3, Oct. 31, 2019) 2019 WL 5616896.)

Arbitration Agreement Unconscionable.

Defendant administers intercollegiate football competition among 37 California community colleges. Defendant sanctioned a college for providing football players with meals and access to work and housing not available to other students. The college challenged the sanction by filing a petition for writ of mandate and complaint against defendant, and filed a motion for judgment on the petition. Defendant argued in opposition that the dispute was subject to an arbitration agreement. The college argued that the agreement was unconscionable.  The trial court disagreed and compelled arbitration. The Court of Appeal noted that the college had no ability to negotiate the terms of the contract containing the arbitration provision at the time it was made, could not opt out of the arbitration provision, and had no meaningful choice other than to accept the provision. The provision was inconspicuous within a lengthy document. The court rejected the argument that the college’s sophistication obviated any procedural unconscionability.  The Court of Appeals found both procedural and substantive unconscionability, concluded that the offending provisions could not be severed, and therefore reversed. (Bakersfield College v. California Community College Athletic Association (Cal. App. 3rd Dist., Oct. 31, 2019) 2019 WL 5616682.)

Forum Selection Clause Deprives Plaintiff of a Jury Trial.

The trial court granted defendant’s motion to dismiss based on a clause in the parties’ lease agreement designating the State and County of New York as the forum for any litigation arising out of the lease. The lease also included a New York choice-of-law clause and a jury trial waiver. On appeal, plaintiff argued that enforcing the forum selection clause improperly deprived him of his right to a jury trial. The Court of Appeal agreed, stating, “we find that enforcing the forum selection clause here would be contrary to California’s fundamental public policy protecting the jury trial right and prohibiting courts from enforcing predispute jury trial waivers.” (Handoush v. Lease Finance Group, LLC (Cal. App. 1st Dist., Div. 3, Oct. 31, 2019) 2019 WL 5615674.)

Service Charge vs. Gratuity.

An employer who provides a banquet facility at which food and beverages are served adds a mandatory, and substantial, “service charge” to the contract for every banquet. The employer distributes some of the service charge to managerial employees who do not serve food and beverages at the banquet. An employee filed a putative class action to force the employer to treat the service charge as a gratuity and distribute all of it to employees who do serve food and beverages at the banquet. The employer contended a service charge can never be a gratuity. The trial court agreed and sustained the employer’s general demurrer without leave to amend. Labor Code § 3511 requires gratuities go only to the nonmanagerial employees involved with the actual serving of the food and beverages. Reversing, the Court of Appeal stated: “We conclude there is no categorical prohibition why what is called a service charge cannot also meet the statutory definition of a gratuity, and thus we reverse.” (O’Grady v. Merchant Exchange Productions, Inc. (Cal. App. 1st Dist., Div. 2, Oct. 31, 2019) 2019 WL 2635577).)

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