The Most Important California Court Decisions for the week of August 21-25, 2017
(Civil Procedure, Insurance, Labor & Employment)
This is a weekly edition of the most important court decisions in California. You can find last week’s edition here.
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Cal Sierra Development, Inc. v. George Reed, Inc.
August 22, 2017
(2017) 2017 Cal. App. LEXIS 719
Cal Sierra Development, Inc. (“Cal Sierra”), and Western Aggregates, Inc. entered into a Mutual Operations Agreement (“MOA”) for the Yuba Goldfields. Pursuant to the MOA and accompanying deeds, Cal Sierra had the superior right to mine for precious metals, subject to certain exceptions; Western Aggregates had the subordinate right to the surface estate.
Thereafter, Western Aggregates entered into a license agreement with George Reed, Inc. (“Reed”), permitting Reed to locate a mobile asphalt plant on the portion of the Yuba Goldfields known as the Deep Reserve. A dispute arose when Cal Sierra’s gold mining dredge was on course to collide with the asphalt plant. Cal Sierra altered the dredge course and demanded arbitration to settle the dispute. The arbitration panel found for Cal Sierra on its claim of breach of contract, but found Cal Sierra failed to prove its tort claims of trespass, nuisance, and conversion.
After the arbitration was complete, Cal Sierra proceeded with its lawsuit against Western Aggregates’ licensee Reed and its parent company, Basic Resources, Inc. for trespass, intentional inference with contract, and negligent interference with economic relations. After a trial on the affirmative defenses of res judicata (claim preclusion) and collateral estoppel (issue preclusion), the court found res judicata applied and entered judgment for defendants. Cal Sierra appealed, contending that defendants failed to establish the elements of res judicata and that the application of res judicata in this case is inequitable.
The Court of Appeal affirmed, holding that derivative liability supported the trial court’s conclusion that the Western Aggregates and Reed/Basic Resources, Inc. were in privity. The claims of trespass and nuisance that were resolved in the arbitration involved the same primary right to be free from interference with mining operations. Although no final judgment had been entered on the arbitration award (Code of Civil Procedure § 1287.4), the award had been satisfied and was a final judgment for purposes of claim preclusion.
Miller v. City of Portland
August 22, 2017
(2017) 2017 U.S. App. LEXIS 15953
Roberta F. Miller sued the City of Portland and three Portland police officers under 42 United States Code § 1983 for asserted Fourth Amendment violations. Portland made a Federal Rule of Civil Procedure 68 Offer of Judgment for $1,000, plus reasonable attorney’s fees to be determined by the District Court, which Miller accepted. When Miller moved for fees, however, the District Court denied the motion on the ground that the $1,000 award was a de minimis judgment under 42 United States Code § 1988.
The Court of Appeal reversed the District Court’s order and remanded for the calculation and award of a reasonable fee award. The Court held that the District Court employed the wrong analysis when it applied principles governing § 1988 awards, rather than principles governing contract construction, to decide Miller’ fee motion.
The Court held that a prevailing plaintiff under an accepted Rule 68 Offer, which provides for the award of reasonable attorney’s fees, is entitled, under the Rule 68 Offer, to an award of fees in some amount. Thus, the magistrate judge and the District Court decided the wrong question, whether plaintiff was entitled to fees under § 1988, rather than the amount of fees to which she was entitled under the Rule 68 Offer.
Retzloff v. Moulton Parkway Residents’ Association
August 23, 2017
(2017) Cal. App. LEXIS 727
Amber Retzloff, James Franklin, and Nancy Stewart (collectively, “Plaintiffs”) sued Moulton Parkway Residents’ Association, No. One (“Association”), twice for alleged violations of the Davis-Stirling Common Interest Development Act (Civil Code § 4000 et seq.; “The Act”). The first suit was dismissed without prejudice by plaintiffs and the trial court sustained the Association’s demurrer to the second suit without leave to amend. The court further concluded that plaintiffs’ second action was frivolous and awarded the Association costs and attorney’s fees under Civil Code § 52351(c).
Plaintiffs appealed, arguing that section 5235(c) does not entitle a prevailing Associationto attorney fees, and the Association should not have been awarded costs because their action was not frivolous. In response, the Association argued that plaintiffs waived their right to appeal by raising a new legal theory on appeal and satisfying the trial court’s judgment in full.
The Court of Appeal affirmed in part and reversed in part. The court noted that raising a new legal theory on appeal was permissible because it presented only a question of law about statutory interpretation. Satisfaction of the judgment did not waive the right to appeal absent evidence of a compromise or agreement not to appeal.
The Association could not recover attorney fees because the statutory language authorized only recovery of costs (Civil Code § 5235(c)) and attorney’s fees can be awarded only when specifically provided for by statute (Code Civil Procedure § 1021). As such, the trial court did not err in finding the action frivolous because a previous action had been dismissed for failure to certify (Civil Code § 5950(a)) dispute resolution efforts (Civil Code § 5930 (a)) and the deficiency had not been adequately remedied.
Los Angeles Lakers, Inc. v. Federal Insurance Company
August 23, 2017
(2017) 9th Cir. No. 15-55777
David M. Emanuel attended a basketball game at the Los Angeles Lakers’ (“Lakers”)home arena, the Staples Center. While at the game, Emanuel observed a message on the scoreboard, inviting attendees to send a text a message to a specific number. Emanuel sent a text message to the number, hoping the Lakers would display the message on the scoreboard. In response, Emanuel received the following text message: “Thnx! Txt as many times as u like. Not all msgs go on screen. Txt ALERTS for Lakers News alerts. Msg&Data Rates May Apply. Txt STOP to quit. Txt INFO for info.”
Subsequently, Emanuel, on behalf of himself and others similarly situated, brought a class action lawsuit against the Lakers alleging that the Lakers sent the response text message using an “automatic telephone dialing system,” in violation of the Telephone Consumer Protection Act (“TCPA”). The Lakers promptly sought coverage from its insurance provider, the Federal Insurance Company (“Federal”), to defend it against the lawsuit. Federal denied coverage and declined to defend the Lakers, concluding that Emanuel had brought an invasion of privacy suit, which was specifically excluded from coverage.
After asking Federal to reconsider its position, the Lakers sued Federal for breach of contract and tortious breach of the implied covenant of good faith and fair dealing, asserting that Federal had violated the Policy by denying coverage for the Emanuel lawsuit. After removing the suit to federal court, Federal filed a motion to dismiss the suit for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The District Court granted the motion and dismissed the case without leave to amend. The District Court found that the Lakers could not succeed in the suit under any cognizable legal theory, because TCPA claims are “implicit invasion-of-privacy claims” that fall squarely within the Policy’s “broad exclusionary clause” which specifically provided that “[n]o coverage will be available” for a claim, based upon, arising from, or in consequence of libel, slander, oral or written publication of defamatory or disparaging material, invasion of privacy, wrongful entry, eviction, false arrest, false imprisonment, malicious prosecution, malicious use or abuse of process, assault, battery or loss of consortium[.]” The Lakers timely appealed.
The Court of Appeal affirmed the District Court’s dismissal, holding that because a TCPA claim is inherently an invasion of privacy claim, Federal correctly concluded that the underlying TCPA claims fell under the Policy’s broad exclusionary clause. Accordingly, Federal did not breach the insurance policy, or the implied covenant of good faith and fair dealing, under any cognizable legal theory, when it declined to defend against or cover the underlying complaint.
Mahan v. Charles W. Chan Insurance Agency, Inc.
August 23, 2017
(2017) Cal. App. LEXIS 725
86-year-old Frederick Mahan and his 79-year-old wife Martha Mahan and their daughter, Maureen Grainger, as trustee of the revocable living trust that held their life insurance policies, filed suit against Charles W. Chan, the Charles W. Chan Insurance Agency, Inc., Omar Kaddoura, Cung Thai, and the American Brokerage Network (collectively “Defendants”), all of whom provided life insurance advisory services to the couple. The complaint alleged causes of action for violations of the Elder Abuse and Dependent Adult Civil Protection Act (“The Elder Abuse Act”) (Welfare & Institutions Code § 15600 et seq.), negligence, breach of fiduciary duty under Insurance Code § 785 et seq., fraud, and unlawful business practices under Business & Professions Code § 17200.
The first amended complaint alleged that defendants, who were aware of the couple’s cognitive decline, carried out an elaborate scheme that involved arranging the surrender of one of the life insurance policies and the replacement of the other with a policy providing more limited coverage, at massively increased cost. The premiums for the new coverage, spread over the term it was to be in force, amounted to some $800,000, forcing the couple to feed cash into the trust to sustain it and, in effect, consuming most of their intended $1M gift in transaction costs, including $100,000 in commissions to defendants.
The trial court sustained defendants’ demurrers to the couple’s first amended complaint, ruling that they had not alleged any deprivation of property owned by them within the meaning of Welfare & Institutions Code, § 15610.30. Because neither of the demurrers attacked the trust’s right to pursue the negligence, breach of fiduciary duty, fraud, and unlawful business practices causes of action, the court’s ruling left those claims intact, with the trust remaining as the sole plaintiff in the action.
The Court of Appeal reversed the judgment and remanded concluding that the trial court erroneously dismissed the couple’s other causes of action because the deprivation of property for wrongful use or by undue influence that the court had found sufficient for purposes of the Elder Abuse Act could also serve as sufficient injury to support those causes of action. The Court found that linchpin of the alleged scheme by defendants was the donative transfer of money and assets by the couple to the trust.
The allegations of the first amended complaint could reasonably be read to assert that, by artifice and manipulation designed to take advantage of the trustee’s willingness to follow what she perceived to be her father’s wishes, defendants deprived the couple of property indirectly, using the trust as an instrument of their scheme. As such, the first amended complaint sufficiently alleged that the losses claimed by the couple were the property of an elder because it alleged damage to the couple’s estate plan, loss of the money they felt compelled to transfer to the trust to pay for the replacement policy’s term coverage, and loss of the money they felt compelled to transfer to the trust to pay defendants’ commissions. Moreover, the Court held that accepting the allegations of the first amended complaint as true, defendants wrongfully obtained tens of thousands of dollars in commissions as a result of their false statements about the terms of the couple’s refinance, which defendants knew were less favorable to the couple than their previous insurance policies. Thus, there was enough to say defendants knew or should have known of the likely harm their scheme would have on the couple.
The first amended complaint sufficiently alleged the couple’s felt the need to pay more into the trust to keep it afloat was brought about by undue influence. Further, Defendants were alleged to have taken advantage of two aged individuals, both in a state of cognitive decline, and, by use of their professed expertise as insurance professionals, carried out an elaborate plan of replacing insurance on the victims’ lives by actions or tactics that included haste or secrecy, ultimately visiting serious inequity on them, which included adverse economic consequences, divergence from their prior intent, and commissions paid that were out of proportion to the value of the services rendered to them.
Riddell, Inc. v. Superior Court (Ace American Insurance Co.)
August 23, 2017
Riddell, Inc. and other football helmet manufacturers and affiliates (collectively, “Riddell”) are defendants in lawsuits filed by numerous former professional football players alleging personal injuries resulting from their use of Riddell football helmets (“third party actions”). Riddell filed suit against numerous insurers (collectively, the “Insurers”) alleging that they owe Riddell a defense and indemnity in the third party actions. In Riddell’s action against the Insurers (the “Coverage Action”), the Insurers propounded discovery seeking information relating to prior claims against Riddell, which model of Riddell helmet each of the plaintiffs in the third party actions wore, and the dates of use.
Unsatisfied with Riddell’s responses to some of the discovery requests, the Insurers moved to compel further responses, including privilege logs of documents Riddell had withheld in discovery responses that had already been provided. Riddell moved for a protective order staying the discovery at issue. The trial court granted the motions to compel and denied the motion for a protective order. Riddell filed a petition for a writ of mandate challenging the rulings with respect to the discovery requests.
The Court of Appeal agreed with Riddell that the discovery at issue is logically related to factual issues in the third party actions and that a stay of that discovery is therefore appropriate. However, The Court agreed with the Insurers that Riddell must provide privilege logs of documents withheld in document productions that have already occurred. Accordingly, the Court granted the petition and directed the trial court to vacate its order on the Insurers’ motions to compel and to enter a new order granting the motions as to the privilege logs only and to grant Riddell’s request for a stay of the discovery at issue.
Labor & Employment
Alamillo v. BNSF Railway Co.
August 25, 2017
(2017) U.S. App. LEXIS 16267
Antonio Alamillo filed this suit against BNSF Railway Company (“BNSF”) for wrongful termination in violation of public policy, based on underlying violations of California Fair Employment and Housing Act (“FEHA”), California Government Code § 12940 et seq. Alamillo claims that BNSF discriminated against him on the basis of his disability, failed to accommodate his disability, and failed to engage in an interactive process with him to determine a reasonable accommodation for his disability. See California Government Code §§ 12940(a), (m)(1), (n).
The District Court granted summary judgment to BNSF, reasoning that BNSF could not have violated the FEHA because Alamillo’s termination was based on attendance violations that took place before he was diagnosed with a disability and before any accommodation was requested.
The Court of Appeal affirmed the District Court’s summary judgment in favor of BNSF holding that Alamillo failed to establish that BNSF discriminated against him based on his disability, obstructive sleep apnea (“OSA”), under FEHA. In deciding, the Court applied the three-step burden-shifting test in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973), and held that Alamillo’s claim failed at the first step, establishing a prima facie case of discrimination, because the record contained no evidence that Alamillo’s OSA was a substantial motivating reason for BNSF’s decision to terminate him.
The Court also held that even if Alamillo had made a prima facie case of discrimination, his claim would fail at the third step because he had not offered evidence that BNSF’s stated reason, Alamillo’s history of attendance violations, was either false or pretextual. The Court further concluded that BNSF did not engage in unlawful discrimination by declining to alter appellant’s disciplinary outcome, termination, based on his OSA diagnosis. As such, the Court held that BNSF did not violate its reasonable accommodation duty under FEHA.