Untitled Document

Litigation Update

Litigation Section News: February 2016

Senior Editor
Eileen C. Moore, Associate Justice
California Court of Appeal, Fourth District

Table of Contents of This Issue

Pre-Merger Arbitration Agreement Survived Merger.

In 2000, law firm #1 sent a letter to a lawyer offering him employment; the letter contained an arbitration provision. In 2006, law firm #2, which had subsumed law firm #1 in a merger, and the lawyer signed a termination agreement/resignation letter. Later, the lawyer sued law firm #2 for breach of the termination agreement. Law firm #2 petitioned for arbitration, and the lawyer contended the 2006 termination agreement, which did not contain an arbitration provision, constituted a novation of the offer letter. Finding the termination agreement did not supersede the offer letter, the trial court granted the petition to compel arbitration. The arbitrator found law firm #2 had breached the termination agreement and awarded damages to the lawyer, but nevertheless rejected many of the lawyer’s claims. The trial court confirmed the award at law firm #2’s request. The lawyer appealed. The Court of Appeal held the lawyer forfeited his nonsignatory/standing argument by not raising it below, and also by  stating a “plaintiff may be equitably estopped to deny the nonsignatory defendant’s right to enforce an arbitration clause that is contained within the contract that plaintiff has placed at issue.” Additionally, the appellate court found law firm #2 succeeded to law firm #1’s contract rights, and also, the court held the offer letter was not modified by the termination agreement. (Jenks v. DLA Piper Rudnick Gray Cary US LLP (Cal. App. First Dist., Div. 1; December 16, 2015) 243 Cal.App.4th 1.) http://www.courts.ca.gov/opinions/documents/A143990.PDF

Create Your Member Profile. On-line My State Bar Profile allows you to access the Litigation Section’s members only area, update your contact information, pay your dues online, and more. To set up your account, go to calbar.ca.gov/members. Link to My State Bar Profile Parents Did Not Include Teenaged Daughter In Insurance Policy On Car Exclusively Driven By Her.

While driving a GMC pickup truck owned by her father, a 17-year-old got into an accident. However, even though the daughter was the only one to drive the pickup, the father had excluded his daughter from insurance coverage in order to save money on premium payments. The daughter’s mother, who is the ex-wife of the father, had insurance on her own vehicles, but not the GMC. The mother’s Nationwide policy provided coverage for a household member’s use of a “non-owned” vehicle, but not if the non-owned auto was “furnished or available” for “regular use.” Nationwide brought an action for declaratory relief, and the trial court entered a declaratory judgment in its favor. The 17-year-old’s family appealed, contending the vehicle was not available for the daughter’s use at the time and place of the accident because her parents did not want her driving that far from home and had told her not to drive at all for a week or two as punishment for bad grades. In affirming, the Court of Appeal stated: “The situation in this appeal falls squarely within this purpose of preventing abuse. The GMC was basically [the daughter’s] vehicle, but no one insured the truck for her use. Even though it was registered to her father and he had a key, [the daughter] had her own key and was the only one who drove it for a year and a half, with the possible de minimus exception that her mother may have driven it once or twice. . . . . The vehicle was for her exclusive use.” (Nationwide Mutual Ins. Co. v. Shimon (Cal. App. Third Dist.; December 17, 2015) 243 Cal.App.4th 29.) http://www.courts.ca.gov/opinions/documents/C071776.PDF

Mental Examination Of Child Plaintiff Does Not Include Interview Of Parents.

The parents of a kindergartener filed a complaint, with the mother as guardian ad litem for the child, alleging the child was sexually molested by another kindergartener at school. The school district sought an order compelling the plaintiff kindergartener to submit to a mental examination, which would include personal interviews of the child and his parents by a psychiatrist. The court so ordered, and the plaintiffs sought extraordinary relief. In issuing a writ of mandate, the Court of Appeal stated: “Nothing in [Code of Civil Procedure] section 2032.020 contemplates a ‘collateral interview’ of a minor’s parents as part of a mental examination of a party who is a minor.”  (Roe v. Sup. Ct. (Hollister School District) (Cal. App. Sixth Dist.; December 18, 2015) 243 Cal.App.4th 138 [196 Cal.Rptr.3d 317].) http://www.courts.ca.gov/opinions/documents/H042060.PDF

Attorney Fee Award Reversed And Remanded For Trial Court To Provide A Specific Explanation For The Award.

A man was falsely accused of sexual activity and held to answer after a preliminary hearing during which a fabricated lab report was used as evidence. After the charges were dismissed, the man sued a City and a police officer for violation of his civil rights under 42 U.S.C. § 1983. Immediately prior to trial, the parties settled the dispute and the man sought attorney fees in the amount of $1,448,397 based on 2,249.9 hours of compensable attorney hours and costs of $72,255. The trial court awarded $436,807.50 for fees and $23,935.07 for costs. The Court of Appeal noted the parties’ settlement agreement specifically provided for fees pursuant to federal law, but was silent with regard to Code of Civil Procedure section 1021.5, which permits recovery by a successful plaintiff when “a significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public or a large class of persons.” The appellate court declined to add terms to the settlement agreement and concluded plaintiff was entitled to recover those fees provided for in the agreement. However, the appeals court found that after the trial court made a lodestar calculation, the amount for fees was $873,615, but the court divided that amount by half. The appellate court then concluded the trial court did not explain its reasons for arriving at the amount it did, stating that “unless such an explanation is given, adequate appellate review is not feasible.” The trial court’s order was reversed and the case was remanded to enable the superior court to reconsider plaintiff’s motion for attorney fees and “to provide a clear, specific explanation of the resulting award, including the reasons for its calculation of the lodestar amount and for any adjustment of the lodestar amount.” (Kerkeles v. City of San Jose (Cal. App. Sixth Dist.; December 18, 2015) 243 Cal.App.4th 88 [196 Cal.Rptr.3d 252].) http://www.courts.ca.gov/opinions/documents/H040919.PDF

City Estopped From Reneging After Developer Relied On Promise.

In 1999, City issued a conditional use permit [CUP 4153] permitting development of two hotels near Disneyland by some developers. At that time, the City intended to build an overpass on a portion of the property owned by the developers. In exchange for taking that portion of the property, the City promised to build a parking structure. Relying on the City’s promises and representations, the developers reduced the number of hotel rooms and made other design changes. In the end, the City refused to live up to its agreement to build a parking structure, instead passing another conditional use permit [CUP 5573] that allowed construction of surface parking in lieu of the parking structure. Both the trial court and the appellate court held the City was estopped from changing the design approved in CUP 4153. (HPT IHG-2 Properties Trust v. City of Anaheim (Cal. App. Fourth Dist., Div. 3; December 21, 2015) 243 Cal.App.4th 188 [196 Cal.Rptr.3d 326].) http://www.courts.ca.gov/opinions/documents/G049695.PDF

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MSJ Decided On Issue Not Briefed.

The appellate court decided a motion for summary judgment in favor of the moving party on an issue not briefed by the parties nor considered by the trial court. In doing so, the appellate court stated: “Thus, the record established that [the opposing party] ‘could not have shown a triable fact issue’ had the point relied upon by the trial court been raised by the moving party. (Marlton Recovery Partners, LLC v. County of Los Angeles (Cal. App. Second Dist., Div. 1; November 20, 2015) 242 Cal.App.4th 510.) http://www.courts.ca.gov/opinions/documents/B257400.PDF

Disclosure Under Public Records Act Ordered.

A man who was fired by a school district requested documents under the Public Records Act [Government Code section 6250, et seq.], but the school district refused to produce them. The superior court denied his petition because the man already has the documents. The Court of Appeal agreed with the man’s argument that he seeks production under the Public Records Act so he may release the documents to the public without being subjected to claims of improperly disclosing confidential information. The appellate court granted extraordinary relief and remanded the matter to the superior court to “conduct an in camera review of the requested documents to determine if any are protected by the attorney-client privilege . . .[and] also redact to delete the identities of and personal information about unrelated third parties. The court shall then enter a new order for School District to produce the nonprivileged or redacted documents.” (Caldecott v. Superior Court (Newport-Mesa Unified School District) (December 21, 2015) 243 Cal.App.4th 212 [196 Cal.Rptr.3d 223].) http://www.courts.ca.gov/opinions/documents/G051917.PDF

CEB Benefits for Litigation Section Members.
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Declaration Used To Prove Limited Jurisdiction Case.

A judgment was entered against a man for unpaid credit card charges in a limited civil case. The man’s original debt was owed to a bank. The bank sold the account to a receivables company. The receivables company assigned the account to plaintiff. The declaration of plaintiff’s custodian of records, with attached bill of sale, assignment and monthly billing statements, was used at trial to prove the debt. On appeal, defendant contended the trial court erred in admitting the declaration and attachments based on inadmissible hearsay, lack of foundation and lack of authentication. The appellate division of the superior court found an exception to the hearsay rule, Evidence Code section 1271’s business records exception applied, and affirmed. (Unifund CCR, LLC v. Dear (Cal. Super. Ct.; December 21, 2015) 243 Cal.App.4th Supp. 1.) http://www.courts.ca.gov/opinions/documents/JAD15-19.PDF

Superior Court Abused Its Discretion In Sanction Order Over Discovery Issue.

In a personal injury action, the trial court granted defendant’s Motion in Limine and excluded three of plaintiff’s proposed witnesses as an evidence sanction for failure to respond completely to an interrogatory. Defendant had sent form interrogatory 12.1 asking about witnesses who witnessed “the incident,” and plaintiff responded with the name and address of one witness. Thereafter, plaintiff identified several witnesses she intended to call at trial, none of which witnessed the accident, but each would testify about plaintiff’s physical limitations. The Court of Appeal issued a peremptory writ of mandate directing the trial court to vacate its order.], (Mitchell v. Sup. Ct. (Ernestine Lisa Johnson) (Cal. App. Second Dist., Div. 4; December 4, 2015) (Ord. Pub. December 22, 2015) 243 Cal.App.4th 269 [196 Cal.Rptr.3d 168].) http://www.courts.ca.gov/opinions/documents/B264143.PDF

Membership in the ADR Subcommittee.  The Litigation Section ADR Subcommittee, which is comprised of both ADR professionals and advocates, focuses on recent case law and legislative developments in the field of alternative dispute resolution. The ADR Subcommittee also provides educational programs on ADR issues. Members of the Litigation Section who wish to join the ADR Subcommittee should send an e-mail and resume to the co-chairs of the Committee: Jeff Dasteel (Jeffrey.dasteel@gmail.com) and Don Fischer (donald.fischer@fresno.edu). Emil to Don Fischer Email to Jeffrey Dasteel Expansion Of The Doctrine Of Primary Assumption Of The Risk.

Plaintiff, a United Parcel Service [UPS] delivery driver, was injured when he lifted a box with a shipping label prepared by a university that inaccurately stated the weight on the box. Concluding the university owed no duty to plaintiff and that the doctrine of primary assumption of the risk applies, the trial court granted summary judgment to the defendant. “[P]rimary assumption of the risk doctrine applies and bars [plaintiff’s] negligence action, and we need not discuss whether the University owed [plaintiff] a duty of care under the factors set forth in Rowland v. Christian [(1968) 69 Cal.2d 108 [70 Cal.Rptr. 97, 443 P.2d 561].” (Moore v. William Jessup University, December 28, 2015.) (Moore v. William Jessup University (Cal. App. Third Dist.; December 28, 2015) 243 Cal.App.4th 427 [197 Cal.Rptr.3d 51].) http://www.courts.ca.gov/opinions/documents/C073433.PDF

Strict Time Limits For Court To Rule On Motion To Vacate Judgment.

Plaintiff obtained a default judgment in January 2013. In July 2013, the trial court entered a revised judgment after defendant moved to vacate the judgment. The Court of Appeal reversed both the order vacating the original judgment and the revised judgment, stating Code of Civil Procedure section 663a provides that the trial court’s failure to rule within 60 days after service of notice of entry of judgment or service of the first notice of intention to move to vacate, whichever occurs first, automatically results in a denial of the motion without further court order. (Garibotti v. Hinkle (Cal. App. Fourth Dist., Div. 3; December 29, 2015) 243 Cal.App.4th 470 [197 Cal.Rptr.3d 61].) http://www.courts.ca.gov/opinions/documents/G048680.PDF

Law Firm Automatically Disqualified.

One shareholder sued another shareholder and a small construction firm over a dispute in the operation of the construction firm. Defendant was represented in the suit by a law firm which had been retained by the construction company in 2006 and never discharged; nor had the law firm ever withdrawn from representing the company. Plaintiff moved to disqualify the law firm. The trial court denied the motion to disqualify. In reversing, the Court of Appeal stated: "If a party moving to disqualify an attorney establishes concurrent representation, the court is required, 'in all but a few instances,' to automatically disqualify the attorney without regard to whether the subject matter of the representation of one client relates to the representation of a second client in the lawsuit. [] Thus, the law firm should have been automatically disqualified." (M'Guinness v. Johnson (Cal. App. Sixth Dist.; December 30, 2015) 243 Cal.App.4th 602 [196 Cal.Rptr.3d 662].) http://www.courts.ca.gov/opinions/documents/H040614.PDF

Okay For Legislature To Ask The People Of California For An Advisory Opinion.

In Citizens United v. FEC (2010) 558 U.S. 310 [130 S.Ct. 876, 175 L.Ed.2d 753, 22 Fla. L. Weekly Fed. S. 73], (Citizens United), a divided United States Supreme Court invalidated federal election law restrictions on the political speech of corporations, holding that a speaker’s identity as a corporation, as opposed to natural person, could not justify greater regulation of speech than the First Amendment would have otherwise permitted. In 2014, the California Legislature sought to place on the general election ballot a nonbinding advisory question, Proposition 49. The measure would have asked the electorate whether Congress should propose, and the Legislature ratify, a federal constitutional amendment overturning the United States Supreme Court decision in Citizens United, supra, 558 U.S. 310 [130 S.Ct. 876, 175 L.Ed.2d 753, 22 Fla. L. Weekly Fed. S. 73]. Petitioners, a taxpayer’s organization, petitioned for a writ of mandate, urging the unconstitutionality of the Legislature’s action, and the California Supreme Court ordered the Secretary of State to refrain from placing Proposition 49 on the ballot. The California Supreme Court has now resolved the constitutionality of the proposition: “We conclude: (1) as a matter of state law, the Legislature has authority to conduct investigations by reasonable means to inform the exercise of its other powers; (2) among those other powers are the power to petition for national constitutional conventions, ratify federal constitutional amendments, and call on Congress and other states to exercise their own federal article V powers; (3) although neither constitutional text nor judicial precedent provide definitive answers to the question, long-standing historical practice among the states demonstrates a common understanding that legislatures may formally consult with and seek nonbinding input from their constituents on matters relevant to the federal constitutional amendment process; (4) nothing in the state Constitution prohibits the use of advisory questions to inform the Legislature’s exercise of its article V-related powers; and (5) applying deferential review, Proposition 49 is reasonably related to the exercise of those powers and thus constitutional. We deny the instant petition for a writ of mandate.” (Howard Jarvis Taxpayers Assn. v. Padilla (Cal. Sup. Ct.; January 4, 2016) 62 Cal.4th 486 [196 Cal.Rptr.3d 732, 363 P.3d 628].) http://www.courts.ca.gov/opinions/documents/S220289A.PDF

Bean Counter Doctor Never Sees Patient About Whose Care He Dictates.

A worker’s compensation doctor provided a man with a psychotropic medication. Another doctor, an anesthesiologist, who had never seen the patient, determined the drug was unnecessary and decertified it for use. Typically a person gradually withdraws from the drug, but in the present case, it was suddenly stopped and the man suffered four seizures, resulting in additional physical damages. The man and his wife sued the review company and the reviewing doctor for negligence. The trial court sustained defendants’ demurrers without leave to amend. The Court of Appeal affirmed in part and reversed in part, finding that to the extent the plaintiffs are faulting the reviewing doctor for not communicating a warning to the man about gradual withdrawal, their claims are not preempted by the Workers Compensation Act [WCA] because that warning would be beyond the “medical necessity” determination made by the reviewing doctor. But to the extent the plaintiffs are faulting the reviewing doctor for incorrectly deciding the medical necessity of the drug, their claims are preempted by the WCA. (King v. CompPartners, Inc. (Cal. App. Fourth Dist., Div. 2; January 5, 2016) 243 Cal.App.4th 685 [196 Cal.Rptr.3d 696].) http://www.courts.ca.gov/opinions/documents/E063527.PDF

Discovery Propounded By Judgment Creditor.

A judgment creditor of a $47 million judgment, as part of its efforts to enforce the judgment, propounded requests for production of documents pursuant to Code of Civil Procedure section 708.030 and later brought a motion to compel. The trial court granted the motion to compel and the judgment debtor appealed. After deciding it is not clear whether or not the order granting the motion to compel is appealable, the Court of Appeal treated the appeal as a petition for a writ of mandate because the judgment debtor would have no adequate remedy if the order granting the motion to compel is not appealable. The Court of Appeal then denied the petition, stating: “We conclude the trial court had authority under section 708.030 to compel [the judgment debtor] to produce documents in its possession or control regarding third parties, and we reject [the judgment debtor’s] contentions that [several of the requests] violate the privacy rights of third parties and that [other requests] are overbroad.” (SCC Acquisitions, Inc. v. Sup. Ct. (Western Albuquerque Land Holdings, LLC) (Cal. App. Fourth Dist., Div. 3; January 6, 2016) 243 Cal.App.4th 741, [196 Cal.Rptr.3d 533].) http://www.courts.ca.gov/opinions/documents/G050546.PDF

Retrial Ordered Because Jury Instruction Improperly Shifted The Burden Of Proof.

In an action by an insured against an insurance company which denied a claim, plaintiff requested that the trial court give a standard jury instruction explaining that, when a loss is caused by a combination of covered and excluded risks, the loss is covered if the most important or predominant cause is a covered risk. (CACI No. 2306.) Defendant instead proposed a special jury instruction placing on plaintiff the burden of proving the collapse of the house was “caused only by one or more” of the perils listed in the policy, and that there was no coverage if the cause of the collapse involved any peril other than those listed. When the trial court indicated its intention to give part of defendant’s proposed special instruction, plaintiff indicated that giving such an instruction was tantamount to directing a verdict in favor of defendant, because there was no dispute the damage to the house was caused by perils in addition to those listed in the policy. Defendant then moved for a directed verdict on both causes of action. The trial court granted the motion. The Court of Appeal reversed and remanded for retrial, stating: “Because the instruction improperly shifted the burden of proof, the trial court erred in its decision to instruct the jury with defendant’s proposed special instruction and in granting defendant’s motion for directed verdict based on the decision to give that instruction.” There was another issue, however. The trial court had also granted defendant’s motion for a directed verdict on plaintiff’s claim for punitive damages, and plaintiff argued that a reversal of the judgment would automatically vacate the entire judgment, including the directed verdict on the punitive damages claim, and entitle him to a retrial of his claim for punitive damages as if there had been no first trial. Alternatively, he argues there was sufficient evidence that the punitive damages issue should have been left for the jury to decide.  The Court of Appeal found no error with regard to the punitive damages issue, and did not order a retrial on that issue. (Vardanyan v. AMCO Ins. Co. (Cal. App. Fifth Dist.; January 7, 2016) 243 Cal.App.4th 779 [197 Cal.Rptr.3d 195].) http://www.courts.ca.gov/opinions/documents/F069953.PDF

Trial Court Erred In Refusing To Issue Domestic Violence Restraining Order.

The trial court declined to issue a domestic violence restraining order for two reasons. First, it determined that mental abuse was insufficient, and, second, that past physical abuse was insufficient. The court of Appeal reversed. With regard to mental abuse, the appellate court stated: “In this case, the testimony that the trial court did permit revealed significant acts of emotional abuse, well beyond accessing and disseminating texts and email. The acts of isolation, control, and threats were sufficient to demonstrate the destruction of Rodriguez’s mental and emotional calm.” With regard to physical abuse, the appellate court stated: “No showing of the probability of future abuse is required to issue a DVPA restraining order: ‘A trial court is vested with discretion to issue a protective order under the DVPA simply on the basis of an affidavit showing past abuse.”’ (Rodriguez v. Menjivar (Cal. App. Second Dist., Div. 7; December 16, 2015) (Ord. Pub. January 7, 2016) 243 Cal.App.4th 816 [196 Cal.Rptr.3d 816].) http://www.courts.ca.gov/opinions/documents/B263062.PDF

Restrictions On Commercial Speech Regarding Alcoholic Beverages To Be Reconsidered Under Strict Judicial Scrutiny In Light Of First Amendment.

During the early 1900s, manufacturers and wholesalers of alcoholic beverages “tied” retailers to them by providing them with loans, reduced rents, free equipment and other means. Such “tied-house” arrangements caused a vast growth of the number of saloons and bars, resulting in various social evils. Accordingly, California passed Business and Professions Code section 25503(f)-(h), forbidding giving anything of value to retailers for advertising their alcoholic products. Thus, for example, a liquor store owner in California can hang a Captain Morgan Rum sign in the store’s window, but the Captain can’t directly or indirectly pay for that advertising. In 1986, in Actmedia, Inc. v. Stroh (9th Cir. 1986) 830 F.2d 957, the court held that section 25503 was consistent with the First Amendment, but now states: “As a content-based restriction on non-misleading commercial speech regarding a lawful good or service, section 25503(f)-(h) now must survive heightened judicial scrutiny.” The case was remanded to the trial court. (Retail Digital Network, LLC v. Appelsmith (Ninth Cir.; January 7, 2016) 810 F.3d 638.) http://cdn.ca9.uscourts.gov/datastore/opinions/2016/01/07/13-56069.pdf

"Some Parents Say It Is Toy Guns That Make Boys Warlike. But Give A Boy A Rubber Duck And He Will Seize Its Neck Like The Butt Of A Pistol And Shout 'Bang,'" George Will.

A 15-year-old boy brought a civil rights claim against the county and a sheriff’s deputy. Just prior to being shot, the 15-year-old was playing “cops and robbers” with friends while riding his bicycle and carrying a replica of a semiautomatic pistol. Two deputies spotted him, made a U-turn and approached him from behind. The deputies ordered the boy to stop, which he did.  What happened next is disputed. Either the boy complied with the directive to drop the imitation gun or he turned toward the deputies with the replica in his hand. In either event, one of the deputies fired a single shot, wounding the boy in the chest. The boy was subsequently charged with three misdemeanor counts of brandishing an imitation firearm. Pursuant to a plea bargain, the boy admitted he had been brandishing and was placed on six months probation. It was after that guilty plea that he brought his civil suit for violation of his civil rights under 42 U.S.C. § 1983. Finding the deputy used excessive force, a jury awarded the boy $1.1 million. Additionally he was awarded $2 million in attorney fees. The county and deputy appealed, arguing that under the holding of Heck v. Humphrey (1994) 512 U.S. 477 [114 S.Ct. 2364, 129 L.Ed.2d 383], the judgment was inconsistent with the boy’s admission of his violation of law. The Court of Appeal agreed and reversed the judgment. The matter was remanded to give the boy an opportunity to amend his complaint to add claims that are not subject to the Heck bar. (Fetters v. County of Los Angeles (Cal. App. Second Dist., Div. 1; January 8, 2016) 243 Cal.App.4th 825 [196 Cal.Rptr.3d 848].) http://www.courts.ca.gov/opinions/documents/B252287.PDF

Social Security Benefits Separate Property; County Pension Community Property.

Throughout a marriage, a husband contributed to Social Security through payroll deductions, and the wife, a public employee, contributed to a local pension plan in lieu of Social Security. The court had to decide how a state court divides those retirement benefits. Both the trial court and the Court of Appeal held that “Social Security benefits are separate property and the wife’s county retirement benefits are community property[.] [T]he Social Security benefits may not be considered and the county benefits must be divided equally between the parties.” (In re Marriage of Peterson (Cal. App. Second Dist., Div. 4; January 11, 2016) 243 Cal.App.4th 923 [197 Cal.Rptr.3d 588].) http://www.courts.ca.gov/opinions/documents/B259322.PDF

Legal Malpractice Statute Of Limitations.

Lawyers prepared a trust in 1999. The trustee brought suit against the lawyers for professional negligence on February 27, 2014. Citing the statute of limitations in Code of Civil Procedure section 340.6, the lawyers demurred, and the trial court sustained the demurrer without leave to amend. The previous trustee resigned on March 2, 2013, and until she resigned defendants represented that trustee. Because of the continuing representation of the previous trustee by the lawyers, the Court of Appeal reversed, concluding the statute of limitations was tolled until March 22, 2013, and the action was filed within one year of that date. (Kelly v. Orr (Cal. App. Fourth Dist., Div. 1; January 11, 2016) 243 Cal.App.4th 940 [196 Cal.Rptr.3d 901].) http://www.courts.ca.gov/opinions/documents/D067735.PDFb

Previously we reported:

Stolen Veterans Benefits And Valor.

A defendant served in the U.S. Marines a little over a year after the Korean War ended. His discharge document, known as a DD-214, states “N/A” with regard to medals awarded and wounds sustained. More than 40 years later, he filed a claim for Post-Traumatic Stress Disorder [PTSD], claiming he suffered PTSD as a result of his participation in a secret combat mission in North Korea in August or September 1955. He claimed he was severely wounded in the mission, and received a Purple Heart Medal, the National Defense Medal, the Korean War Service Medal, the Korean War U.N. Service Medal and Ribbons, Navy Commendation Ribbons with a Bronze V and a Silver Star Medal. The Veterans Administration [VA] denied his claim. Thereafter the defendant submitted a different DD-214, listing the wounds and medals he claimed, and this time his claim was granted. However, the VA later received information the second DD-214 was fraudulent. The VA reversed its decision to grant the claim and required the defendant to pay back the benefits he had received. He was later charged with and convicted of several crimes, including wearing military medals without authorization in violation of 18 U.S.C. § 704(a) [the Stolen Valor Act]. After his conviction, the U.S. Supreme Court struck down that statute on First Amendment grounds in the case of United States v. Alvarez (2012) ___U.S.___ [132 S.Ct. 2537, 183 L.Ed.2d 574, 23 Fla. L. Weekly Fed. S. 468], in which the high court held that false speech is generally entitled to protection under the First Amendment. So, the defendant asked the trial court to set aside his conviction on First Amendment grounds, and his request was denied. The Ninth Circuit Court of Appeals affirmed the trial court’s denial of the defendant’s claim after considering this defendant’s specific conduct and concluding there was no violation of the Constitution or laws of the United States.  (United States v. Swisher (9th Cir.; October 29, 2014) 771 F.3d 514) (Vacated).)

The recent opinion of the Ninth Circuit:
This time around, the Ninth Circuit reviewed the case under 28 U.S.C. § 2255, which is a substitute for habeas corpus relief for federal prisoners. The majority stated that Alvarez clarified that lies do not fall into a category of speech that is excepted from First Amendment protection, and reversed the conviction. Judge Bybee dissented, stating: “Xavier Alvarez announced in a public meeting that he was a former Marine and had been awarded the Congressional Medal of Honor. . . the United States indicted Swisher under the Stolen Valor Act. . . which prohibits ‘knowingly wearing. . . any decoration or medal authorized by Congress. . . except when authorized. . . The majority today holds that Swisher’s conduct is a form of speech entitled to the same protection as Alvarez’s actual speech. I beg to differ. The Supreme Court’s decision in Alvarez does not compel the result here. The law has always been able to tell the difference between conduct and speech, even when the conduct may have some communicative value. I respectfully dissent.” (United States v. Swisher (Ninth Cir.; January 11, 2016) 811 F.3d 299.) http://cdn.ca9.uscourts.gov/datastore/opinions/2016/01/11/11-35796.pdf

Anti-Dilution Provision.

Plaintiffs are investors in a publicly traded company. Defendants are a company, its CFO, and a director who was also the CEO. Plaintiffs held 5,740,741 warrants, entitling them to purchase up to the same number of shares of common stock at $2.90/share. The warrants included an anti-dilution provision, requiring the company to adjust the exercise price set in the warrants “to equal the consideration paid” by a subsequent investor. But the anti-dilution provision did not apply to certain categories of securities. A few years later, a third party, who is a non-party to this lawsuit, promised to make up to $10 million available to the company to be accessed at the option of the company over a set period of time. In exchange, the company issued common stock and warrants to the third party, and promised to issue additional common stock in exchange for any future cash received from Lincoln. Defendants refused to apply the plaintiffs’ anti-dilution provision to the agreement with the third party, so plaintiffs sued the company for breach of contract and declaratory relief, and the individual defendants for breach of fiduciary duty. After a court trial, the superior court rejected the breach of fiduciary duty claims, but ruled the anti-dilution provision applied to the third party transaction and that the company had breached its contract with plaintiffs. But the trial court also reduced the exercise price of the warrants from $2.90/share to $0/share, and awarded no damages to plaintiffs. Agreeing with the trial judge that the anti-dilution provision applies to the transaction, the Court of Appeal reversed and remanded for retrial solely on the proper remedy for the company’s breach of the warrants, noting that valuing consideration paid for securities might not always be as simple as dividing the amount of money paid by the number of shares purchased. (Speirs v. Bluefire Ethanol Fuels, Inc. (Cal. App. Fourth Dist., Div. 3; December 15, 2015) (Pub., January 12, 2016) 243 Cal.App.4th 969 [197 Cal.Rptr.3d 25].) http://www.courts.ca.gov/opinions/documents/G048698A.PDF

Summary Judgment Affirmed In Dangerous Condition Of Public Property Claim.

The family of a student fatally injured while riding a bicycle across a University of California campus sued the Regents for a dangerous condition of public property. The trial court granted summary judgment, concluding the action was barred under the recreational trail immunity provided by Government Code section 831.4. On appeal, the plaintiffs contended the bikeway does not serve the statutory purpose of keeping a recreational trail open to the public, without the burden and expense of putting the property in a safe condition and defending claims for injuries, because it was designed to be used for biking and the Regents have taken responsibility for the bikeway’s safety. In affirming the grant of summary judgment, the Court of Appeal noted the plaintiff’s opposition papers agreed that it was undisputed the bikeway was used for recreation, as well as travel across campus, and stated: “Since the Great Meadow Bikeway has mixed uses that undisputedly include recreation, the Regents have trail immunity under section 831.4, subdivision (b) from claims.”  (Burgueno v. Regents of University of California (Cal. App. Sixth Dist.; December 15,  2015) (As mod.; January 13, 2016)  243 Cal.App.4th 1052 [197 Cal.Rptr.3d 44].) http://www.courts.ca.gov/opinions/documents/H040416.PDF

“The Greatness Of A Nation Can Be Judged By The Way Its Animals Are Treated.” --Mahatma Gandhi.

Plaintiffs sought to enjoin the continued operation of the elephant exhibit at the Los Angeles Zoo because of concerns about abuse and neglect. At trial, there was evidence the ground where elephants are kept is hard which creates a risk of injury, and that elephants in captivity develop foot problems from a lack of exercise. The judge determined the Zoo is not meeting the needs of at least the sole male elephant and concluded the elephants are emotionally and socially deprived due to the limited choices of enrichment activities available to them, expressing concern the male elephant was living in isolation. The plaintiffs contend the Zoo’s conduct violates animal cruelty provisions of California’s Penal Code. The trial court granted some of the relief sought by plaintiffs but denied much of it. In the end, the trial court prohibited the use of particular forms of discipline, required the elephants to have specific amounts of exercise time and required rototilling of the soil in the exhibit. The Court of Appeal largely agreed with the trial court, concluding the orders concerning soil maintenance and exercise time were proper, and rejecting plaintiff’s claim the trial court erred when it decline to order the exhibit closed. (Leider v. Lewis (Cal. App. Second Dist., Div. 8; January 14, 2016) 243 Cal.App.4th 1078 [197 Cal.Rptr.3d 266].) http://www.courts.ca.gov/opinions/documents/B244414.PDF

Trying To Avoid Trial By Going To Mediation…Be Careful!

In a wage and hour case, the parties went to mediation during the final months of the five year period provided by Code of Civil Procedure section 583.310. Under Code of Civil Procedure sections 1775, 1775.7 and 1775.9, courts may order cases into mediation as an alternative to judicial arbitration and some of the time is not included in computing the five year period. But that did not happen here; in this case, the parties went to private mediation. The trial court dismissed the action under the five year rule, and the Court of Appeal affirmed, stating: “We conclude that section 1775.7 only applies to mediation conducted in a court-annexed alternative dispute resolution program. We also conclude that [plaintiffs] did not show it was impossible, impracticable or futile to bring [the] case to trial within five years. Accordingly, we affirm.” (Castillo v. DHL Express (USA) (Cal. App. Second Dist., Div. 3; December 15, 2015) (Pub.; January 14, 2016) 243 Cal.App.4th 1186 [197 Cal.Rptr.3d 210].) http://www.courts.ca.gov/opinions/documents/B258432.PDF

Formula For Overtime Bonuses.

In a wage and hour case, the defendant/employer submitted evidence of the formula it uses in calculating the amount of overtime paid on attendance bonuses in its motion for summary judgment. The trial court granted summary judgment, and the appeal raised the sole question of whether defendant’s formula for calculating overtime on flat sum bonuses paid in the same pay period in which they are earned is lawful. The Court of Appeal concluded the formula is lawful and affirmed the grant of summary judgment, and noted there is no California law specifying a method for computing overtime on flat sum bonuses, but defendant’s formula complies with federal law. (Alvarado v. Dart Container Corp. of California (Cal. App. Fourth Dist., Div. 2; January 14, 2016) 243 Cal.App.4th 1200 [197 Cal.Rptr.3d 304].) http://www.courts.ca.gov/opinions/documents/E061645.PDF

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