Untitled Document

Litigation Update

Litigation Section News: June 2015

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

Managing Editor
Mark A. Mellor, Esq.

Table of Contents of This Issue

“It Ain’t Over Till The Fat Lady Sings.” – Ralph Carpenter.

In an action involving a business dispute, one of the causes of action alleged breach of contract, and the contract involved contained a prevailing party attorney fee provision. The trial court dismissed the action based on a forum selection provision, and the plaintiff filed the action in another State. In the dismissed California action, defendant then filed a motion for an award of attorney fees, which the trial court denied. The Court of Appeal affirmed, concluding defendant merely obtained an interim victory, but was not a prevailing party under Civil Code section 1717. (DisputeSuite.com, LLC v. Scoreinc.com (Cal. App. Second Dist., Div. 2; April 14, 2015) 235 Cal.App.4th 1261 [186 Cal.Rptr.3d 75].)

Restaurant Is A Nuisance.

Owners of a fast food restaurant in a high crime area agreed to comply with several conditions recommended by the city police department, but would not agree to operating conditions requiring patrons not to ‘“linger over a soda or other soft drink for more than 30 minutes’”; not allow prostitutes, pimps, drug users or dealers, or homeless individuals to loiter on the property for any purpose; not allow alcoholic beverages to be consumed on the property; paint over graffiti on the property with a matching color within 24 hours; have a California licensed, bonded, and uniformed security guard at the restaurant seven days a week from dusk until the restaurant closed who would, among other things, enforce the suggested operating conditions; install and maintain adequate fencing closing off the space on the north side of the business; implement a 24-hour ‘hot line’ telephone number for any inquiries or complaints about the restaurant or its operation; and limit the restaurant’s hours of operation to 6 a.m. to midnight Sunday through Thursday and to 6 a.m. to 2 a.m. Friday and Saturday.” When the matter did not resolve, the Zoning Administrator determined the restaurant was a public nuisance and imposed 22 conditions. That determination was upheld by the City Council’s Planning and Land Use Management Committee. The restaurant filed a petition for writ of mandate which was denied by the superior court. In their appeal from the denial of their request for extraordinary relief, the restaurant argued the de novo standard of review applied. The appellate court determined the substantial evidence standard of review applied and found there was substantial evidence to support the administrative determination the restaurant constituted a nuisance. (Benetatos v. City of Los Angeles (Cal. App. Second Dist., Div. 5; April 14, 2015) 235 Cal.App.4th 1270 [186 Cal.Rptr.3d 46].)

What Does Banana Mean? Build Absolutely Nothing Anywhere Near Anyplace.

In 2006, the Los Angeles City Council passed ordinance section 14.3.1. As stated in the ordinance, section 14.3.1’s purpose is to “provide development standards for Alzheimer’s/ Dementia Care Housing, Assisted Living Care Housing, Senior Independent Housing and Skilled Nursing Care Housing, create a single process for approvals and facilitate the processing of application of Eldercare Facilities. These facilities provide much needed services and housing for the growing senior population of the City of Los Angeles.” (§ 14.3.1(A).) In this case, the zoning administrator for the City of Los Angeles (City) approved a permit for an eldercare facility that exceeded the building square footage and number of guest rooms allowed under zoning regulations. Under the Los Angeles Municipal Code, no variance may be granted unless “the strict application of the provisions of the zoning ordinance would result in practical difficulties or unnecessary hardships inconsistent with the general purposes and intent of the zoning regulations.” Nearby residents challenged the facility arguing that the zoning administrator failed to make all of the necessary findings, including a finding of “unnecessary hardship.” The trial court found no substantial evidence supported the finding of “unnecessary hardship.” In affirming, the appellate court agreed with the trial judge that there was not substantial evidence to support the developer’s argument the unnecessary hardship was based on the construction’s economy of scale. The Court of Appeal ruled: “We therefore affirm the trial court’s judgment requiring the City to rescind its approval of the proposed eldercare facility.” (Walnut Acres Neighborhood Assn. v. City of Los Angeles (John C. Simmers) (Cal. App. Second Dist., Div. 8; April 15, 2015) 235 Cal.App.4th 1303 [185 Cal.Rptr.3d 871].)

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 Racial Profiling.

The background involves allegations the Maricopa County, Arizona Sheriff Joseph M. Arpaio’s police force has a custom, policy and practice of racially profiling Latino drivers and passengers, and of stopping them pretextually under the auspices of enforcing federal and state immigration-related laws, resulting in longer and more burdensome detentions for Latinos than for non-Latinos in violation of federal laws. The federal trial judge concluded defendants employed an unconstitutional policy of considering race as a factor in determining where to conduct patrol operations, in deciding whom to stop and investigate for civil immigration violations, and in prolonging the detentions of Latinos while their immigration status was confirmed. As a result, the trial court permanently enjoined defendants from conducting these procedures. On appeal, defendants argued the injunction was overbroad in such areas as ordering the racial profile training of police officers, corrective supervision procedures for constitutional violations and requiring video-recording of traffic stops. To the extent the injunction addressed constitutional violations, the Ninth Circuit Court of Appeals affirmed the trial court’s orders, but drew the line and reversed with regard to the injunction’s requirement those monitoring compliance take into account misconduct complaints about officers, stating, “if an officer commits spousal abuse, or clocks in late to work, or faces a charge of driving under the influence,” such actions may be violations of some rules or laws, but they do not involve constitutional issues. Thus, the injunction was affirmed in part and reversed in part. (Melendres v. Arpaio (Ninth Cir.; April 15, 2015) 784 F.3d 1254.)

Dismissal Of Dissolution Cause Of Action Negated Buyout Rights Of Both Corporations And Limited Liability Companies.

Two men each hold a 50 percent interest in numerous corporations and limited liability companies. One of the men, the plaintiff, sued the other, the defendant, for various causes of action alleging misconduct and breach of fiduciary duty. The involuntary dissolution claim seeks the appointment of a receiver to take possession of all of the companies’ assets and an order requiring they be sold to a third party. Defendant filed a motion to stay dissolution and appoint appraisers so he could buy out plaintiff’s interest in the companies. Defendant’s motion vis-à-vis the corporations was brought pursuant to Corporations Code section 2000 and with regard to the limited liability companies the motion was brought under Corporations Code section 17707.03, subdivision (c). A few weeks later, plaintiff dismissed his involuntary dissolution cause of action with prejudice. Figuring that once plaintiff dismissed the cause of action for dissolution, there was no dissolution to avoid, the trial court denied defendant’s motion. The appellate court noted that Code of Civil Procedure section 581, subdivision (c), generally grants a plaintiff an unfettered right to dismiss a cause of action before commencement of trial. Agreeing with the trial court, the Court of Appeal affirmed, stating the dismissal of the involuntary dissolution cause of action prevented defendants from invoking their buyout rights. (Kennedy v. Kennedy (Cal. App. Second Dist., Div. 5; April 20, 2015) 235 Cal.App.4th 1474 [186 Cal.Rptr.3d 198].)

White Collar Crime.

A criminal defendant stood accused of defrauding lenders in a scheme involving submitting false information on loan applications. Witnesses who worked in defendant’s real estate agency cooperated with the government and testified against defendant at trial. A jury found her guilty of conspiracy, bank fraud, mail fraud and wire fraud. After her conviction, defendant found some of the witnesses may have been promised immunity from prosecution in exchange for testimony, and one of the witnesses may have provided numerous documents copied from defendant’s business to the FBI. Under the Fourth Amendment, defendant had a right to be free from unreasonable searches. In Brady v. Maryland (1963) 373 U.S. 83 [83 S.Ct. 1194, 10 L.Ed.2d 215], the U.S. Supreme Court held that when the government withholds exculpatory evidence material either to guilt or punishment, a defendant’s right to due process is violated. In Giglio v. United States (1972) 405 U.S. 150 [92 S.Ct. 763, 31 L.Ed.2d 104], the high court extended the holding in Brady when it held that the prosecution’s failure to inform the jury that a witness had been promised not to be prosecuted in exchange for testimony was a violation of due process. Here, the government did not inform defendant that documents copied from defendant’s business by one of the cooperating witnesses were used at trial. Nor did the government inform defendant about the promises made to the witnesses. The trial judge denied defendant’s motions for a new trial. In vacating the orders denying the motions for new trial and ordering the trial judge to conduct an evidentiary hearing about whether an unlawful search occurred or whether any witnesses were promised immunity from prosecution for testifying, the federal appeals court noted: “Those charged with crime deserve a fair shake from government prosecutors.” (United States v. Mazzarella (Ninth Cir.; April 20, 2015) 784 F.3d 532.)

“It’s Simple, If It Jiggles, It’s Fat,” Arnold Schwarzenegger.

Apparently in an attempt to make the California Environmental Quality Act [CEQA; Public Resources Code section 21000 et seq.] less burdensome, the Legislature expressly exempted several categories of projects from CEQA review, projects which did not have a significant effect on the environment. Guidelines were written to implement the statute, and one of those exempted projects is single family homes. Well, the planned single family home involved in this case is a 6,478-square-foot mansion with an attached 3,394-square-foot 10-car garage. Pursuant to the guidelines, a City approved the permit application to build the single family home. The Court of Appeal invalidated the permit, relying on another guideline which provides: “A categorical exemption shall not be used where there is a reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances.” The California Supreme Court granted review and in reversing the Court of Appeal stated, “the Court of Appeal erred by holding that a potentially significant environmental effect itself constitutes an unusual circumstance. . .[t]he plain language of [the] Guidelines . . . requires that a potentially significant effect must be ‘due to unusual circumstance’ for the exception to apply. . . [t]his bifurcated approach to the questions of unusual circumstances and potentially significant effects comports with our construction of the unusual circumstances exception to require findings of both unusual circumstances and a potentially significant effect.” The case was remanded for further proceedings. In his concurring opinion, Justice Liu remarked: “It is unfortunate that today’s opinion, instead of simplifying the law in accordance with the CEQA statute and guidelines, adds further complexity to an area that many courts, practitioners, and citizens already find difficult to navigate.” (Berkeley Hillside Preservation v. City of Berkeley (Cal. Sup. Ct.; March 2, 2015) 60 Cal.4th 1086 [184 Cal.Rptr.3d 643, 343 P.3d 834].)

Dog Sniffs Car Stopped For Traffic Violation.

In Illinois v. Caballes (2005) 543 U.S. 405 [125 S.Ct. 834, 160 L.Ed.2d 842], a state trooper stopped a man for speeding. A drug officer heard about the stop over the police radio and went to the location with a drug-sniffing dog. While the man sat in the trooper’s car as the trooper wrote out a warning ticket, the drug officer walked the dog around the man’s car. The dog alerted to drugs in the car, and the man was arrested, convicted and sentenced to prison. The whole episode lasted less than 10 minutes. The United States Supreme Court noted the Fourth Amendment guards against unreasonable searches and seizures, but that this stop was lawful and not prolonged, so there was no unreasonable search or seizure. In the present Nebraska case, a man was lawfully stopped by a police officer just after midnight. By 12:28, the officer had finished explaining the warning ticket and had given back the driver’s and the passenger’s documents. At that point, the officer asked permission to walk his dog around the car, and the driver said, “no.” The officer ordered him out of his car, went to the patrol car for the dog and led the dog twice around the car. The second time around, the dog alerted to drugs in the car, and the man was arrested and charged. The United States Supreme Court stated a seizure justified only by a police-observed traffic violation becomes unlawful if it is prolonged beyond the time reasonably required to complete the mission of issuing a ticket for the violation. The high court sent the case back to the lower court to decide whether or not there was reasonable suspicion of criminal activity which justified detaining the driver beyond completion of the traffic infraction violation. (Rodriguez v. United States (U.S. Sup. Ct.; April 21, 2015) ___U.S.___ [135 S.Ct. 1609, 191 L.Ed.2d 492].)

Denial Of Motion To Strike Affirmed On Appeal.

Plaintiff alleges Sheriff’s deputies unlawfully entered her residence on two occasions, attempting to arrest her daughter pursuant to a bench warrant which had already been recalled. In the process, she says a deputy made defamatory statements to her neighbors. She brought an action against the County, the Sheriff and the deputies. Defendants moved to strike under the anti-SLAPP statute [Code of Civil Procedure section 425.16], and the trial court denied the motion. The appellate court noted no previous published California case has addressed whether a peace officer’s execution of a warrant is protected activity under the anti-SLAPP statute. The appellate court stated the anti-SLAPP statute is designed to protect the “valid exercise” of a person’s rights, and concluded it was not persuaded that execution of an arrest warrant qualifies for that protection. Nor was the appellate court persuaded protection is due for one of the deputies’ alleged defamatory remarks made during the course of execution of the warrant. The trial court’s order denying the motion to strike was affirmed. (Anderson v. Geist (Cal. App. Fourth Dist., Div. 2; April 22, 2015) 236 Cal.App.4th 79 [186 Cal.Rptr.3d 286].)

Previously we reported:

No Saving Bonds.

The first few paragraphs of the Ninth Circuit’s opinion explain the setting: “Barry Bonds was a celebrity child who grew up in baseball locker rooms as he watched his father Bobby Bonds and his godfather, the legendary Willie Mays, compete in the Major Leagues. Barry Bonds was a phenomenal baseball player in his own right. Early in his career he won MVP awards and played in multiple All-Star games. Toward the end of his career, playing the San Francisco Giants, his appearance showed strong indications of the use of steroids, some of which could have been administered by his trainer, Greg Anderson. Bond’s weight and hat size increased, along with the batting power that transformed him into one of the most feared hitters ever to play the game. From the late-1990s through the early-2000s, steroid use in baseball fueled the unprecedented explosion in offense, leading some commentators to refer to the period as the “Steroid Era.” In 2002, the federal government, through the Criminal Investigation Division of the Internal Revenue Service, began investigating the distribution of steroids and other performance enhancing drugs (“PEDs”). The government’s purported objective was to investigate whether the distributors of PEDs laundered the proceeds gained by selling those drugs. [¶] . . . The government convened a grand jury in the fall of 2003 to further investigate the sale of these drugs in order to determine whether the proceeds of the sales were being laundered. Bonds and other professional athletes were called to testify. Bonds testified under a grant of immunity and denied knowingly using steroids or any other PEDs . . .The government later charged Bonds with obstructing the grand jury’s investigation. After a jury trial, Bonds was convicted of one count of obstruction of justice in violation of 18 U.S.C. § 1503.” In affirming Bonds’ conviction, the appeals court noted that when factually true statements are misleading or evasive, they can prevent the grand jury from obtaining truthful and responsive answers. (United States v. Bonds (Ninth Cir.; September 13, 2013) 730 F.3d 890.) Vacated.

Saving Bonds.

The Ninth Circuit granted an en banc hearing. The court quoted the testimony for which Bonds was convicted of obstructing justice:

Q: Did Greg [Bond’s trainer] ever give you anything that required a syringe to inject yourself with?

A: I’ve only had one doctor touch me. And that’s my only personal doctor. Greg, like I said, we don’t get into each others’ personal lives. We’re friends, but I don’t—we don’t sit around and talk baseball. If you want to come to my house and talk about fishing, some other stuff, we’ll be good friends. You come around talking about baseball, you go on. I don’t talk about his business. You know what I mean?

The Ninth Circuit’s en banc opinion discusses how the statute Bonds was convicted of violating [18 U.S.C. § 1503] poses a significant hazard for everyone involved in our system of justice, “because so much of what the adversary process calls for could be construed as obstruction,” and “because the statute sweeps so broadly.” Bonds’ conviction was reversed for insufficient evidence. (United States v. Bonds (Ninth Cir.; April 22, 2015) 784 F.3d 582.)

Has The Law Caught Up With Science?

Probate Code section 6450 governs the relationship of parent and child, stating in part, “for the purpose of determining intestate succession,” the “relationship of parent and child exists between a person and the person’s natural parents, regardless of the marital status of the natural parents.” Under Probate Code section 6453, subsection (b), subdivision (2), a natural parent and child relationship may be established when “paternity is established by clear and convincing evidence that the father has openly held out the child as his own.” In the instant action, DNA testing shows the decedent fathered the child. The mother of decedent’s child, born out of wedlock, contends biological parents are, by definition, natural parents, and petitioned to administer decedent’s estate and for the child to be declared decedent’s heir. The trial court denied the mother’s petitions. The appellate court affirmed, stating: “We affirm the court’s order. In doing so, we conclude section 6453(b)(2)’s phrase, “openly held out,” requires the alleged father to have made an unconcealed affirmative representation of his paternity in open view. We also conclude substantial evidence supports the court’s finding Amine did not openly hold out A.S as his child.” (Estate of Britel (Cal. App. Fourth Dist., Div. 3; April 23, 2015) (As Mod. May 15, 2015) 236 Cal.App.4th 127 [186 Cal.Rptr.3d 321].)

Statute Of Limitations Against Hospital For Slip And Fall.

While plaintiff was hospitalized, she went into the bathroom in her private room. While she was in the bathroom, someone mopped the floor of her room. Walking back to her bed, she slipped and fell and was injured. A cleaning lady said, “I’m sorry. I’m so sorry.” Within two years of the fall, but more than one year afterward, she brought an action for damages against the hospital. Defendant moved for summary judgment based on the statute of limitations found in Code of Civil Procedure section 340.5, which applies to professional negligence. The trial court granted the motion. In reversing, the Court of Appeal held the action falls within the two-year statute of limitations found in Code of Civil Procedure section 335.1. (Pouzbaris v. Prime Healthcare Services-Anaheim, LLP (Cal. App. Fourth Dist., Div. 3; April 23, 2015) 236 Cal.App.4th 116 [186 Cal.Rptr.3d 314].)

Think Of The Children.

The Coogan Law was enacted in 1938 [now Family Code section 6750 et seq.] in response to the childhood star Jackie Coogan’s plight. Even though he earned millions as a child, Coogan was surprised to find out that when he reached adulthood that he was flat broke, because his mother and stepfather spent all his money….legally. The Coogan Law provides that for a contract involving a minor rendering artistic or creative services, the minor’s employer must set aside 15 percent “of the minor’s gross earnings” under the contract “in an account or other savings plan, and preserved for the benefit of the minor.” The funds are not supposed to be removed without court approval. The plaintiffs in this case are the parents or guardians of minors who have performed artistic or creative services. They allege Bank of America made withdrawals from the childrens’ Coogan accounts for monthly service fees without court approval. The trial court sustained defendant’s demurrer without leave to amend. The appellate court reversed, stating: “Such a debit, without court approval, is a prohibited withdrawal under the applicable state statute, and that state law prohibition on a debit by a national bank is not preempted by federal law.” (Phillips v. Bank of America, N.A. (Cal.App. Second Dist., Div. 5; April 27, 2015) 236 Cal.App.4th 217 [186 Cal.Rptr.3d 434].)

Think Twice Before Suing; You Might End Up Paying Six Figures In Fees & Costs After You’ve Calmed Down.

Plaintiff brought this action alleging that defendant misappropriated a trade secret, or was in the process of doing so, by seeking to hire away specialists in touchscreen technology, a field in which plaintiff and defendant compete. Defendant responded that it was entitled to solicit prospective employment candidates in plaintiff’s workforce and that there was no evidence it had acquired, or was seeking to acquire, any trade secret. After failing to secure temporary injunctive relief, and failing to obtain an order placing under seal evidence derived by defendant from public sources, plaintiff dismissed the action. The trial court awarded defendant $180,817.50 for its attorney fees pursuant to Civil Code section 3426.4, which authorizes such an award to the prevailing party where a claim for misappropriation of trade secrets is found to have been made in bad faith. On appeal, plaintiff contended that this was error because the trial court could not properly find that defendant was the prevailing party, or that plaintiff brought the action in bad faith. In affirming the order, the appellate court concluded: (1) the trial court’s findings are free of procedural error; (2) the finding of bad faith is amply supported by evidence that defendant did no more, and plaintiff accused it of no more, than attempting to recruit the employees of a competitor, which defendant was entitled to do under the laws of this state; and (3) defendant prevailed when, as the trial court impliedly found on substantial evidence, plaintiff dismissed the suit to avoid an adverse determination on the merits. (Cypress Semiconductor Corp. v. Maxim Integrated Products, Inc. (Cal. App. Sixth Dist.; April 28, 2015) 236 Cal.App.4th 243 [186 Cal.Rptr.3d 486].)

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        10% discount for Section members on continuing ed programs cosponsored by the CEB and the Section. See ceb.com/litigationsection for additional details. Link to Litigation Section page on CEB site Probate Court Refused To Honor Lien For Attorney Fees After Client’s Death.

An underlying action involved a claim to trust funds; that action was settled, and the settlement was approved by the probate court. But then the underlying plaintiff died too. The plaintiff in the present action was the lawyer for the underlying plaintiff. The lawyer had negotiated the settlement on behalf of the client who later died. The probate court refused to honor plaintiff’s attorney fee lien for his work on the settlement, and the present plaintiff/attorney/lienholder appealed. On appeal, the appellate court noted that pursuant to Civil Code section 2883, the lawyer’s lien attached once the client secured his rights to a portion of the trust pursuant to the settlement agreement and the following probate order. The appellate court found the lawyer is entitled to his fees and reversed the order of the probate court. (Novak v. Fay (Cal. App. Second Dist., Div. 5; April 28, 2015) 236 Cal.App.4th 329 [186 Cal.Rptr.3d 451].)

Motion To Change Venue.

In an action for bad faith and legal malpractice against several defendants, one of the defendants moved for a change of venue. Under Code of Civil Procedure section 396b, subsection (a), where an action has been filed in the wrong venue, a defendant may move to transfer the case to the proper court. If “an answer” is filed, the court may consider opposition to the motion and may retain the action in the county where filed for the convenience of the witnesses or the ends of justice. Here some, but not all, of the defendants had answered, and those defendants successfully opposed the motion to change venue because of the convenience of witnesses. The question before the appellate court was whether all defendants must answer before the court may consider opposition to the motion to change venue. Noting the important right of a defendant to defend in its own county, the appellate court concluded all defendants must answer the complaint before the trial court may consider opposition to a motion to change venue. The appellate court issued a preemptory writ of mandate directing the trial court to vacate its order denying the motion to transfer and to issue a new order granting the motion. (Cholakian & Associates v. Sup. Ct. (Elaine McDonald) (Cal. App. Third Dist.; April 29, 2015) 236 Cal.App.4th 361 [186 Cal.Rptr.3d 525].)

Take My Word For It. . .The Foreclosure Sale Was Canceled.

A notice of default had been recorded against plaintiffs’ residential property, and a notice of trustee sale was also recorded. Plaintiffs retained a lawyer to negotiate a loan modification with the lender. In their complaint for promissory estoppel, plaintiffs allege the lender agreed to continue the scheduled trustee sale and negotiate a modification. Discussions between the lender and the law firm continued until a few days before the house was sold at a trustee sale. The trial court granted the lender’s motion for summary judgment. On appeal, the lender argued the trial court was correct in not considering evidence of oral conversations between the law firm and the lender’s employee. Civil Code section 1624, subsection (a), subdivision (3), states that any agreement pertaining to the sale of real property or an interest therein is invalid, unless it is memorialized in writing and signed by the party to be charged. Civil Code section 2922 states a mortgage or deed of trust is subject to the statute of frauds. Civil Code section 1698 states that an agreement that modifies a contract subject to the statute of frauds is likewise subject to the statute of frauds. In affirming the grant of summary judgment, the appellate court stated the trial court did not err in finding that plaintiffs’ claim was barred by the statute of frauds. (Granadino v. Wells Fargo Bank, N.A. (Cal. App. Second Dist., Div. 2; April 29, 2015) 236 Cal.App.4th 411 [186 Cal.Rptr.3d 408].)

Federal Trial Court Not Required To Replace Ill Juror.

After a 12-member jury in a criminal trial had deliberated for more than a day and had received answers to five substantive questions, one of the jurors was excused for illness. Later the same day, the jury returned a guilty verdict. The defendant argued that under Federal Rules of Criminal Procedure, rule 23(b)(3), the court abused its discretion by proceeding with 11 jurors rather than seating an alternate. The Ninth Circuit affirmed defendant’s conviction, stating: “If the court had seated an alternate, it would have had to direct the jury to begin deliberations anew [], adding at least a day to the proceedings and imposing on the jurors the difficult task of discarding any conclusions they had already reached.” (United States v. Brown (Ninth Cir.; May 1, 2015) 784 F.3d 1301.)

California Supreme Court Rules On Costs/Attorney Fee Statutory Discrepancies In FEHA Cases.

Code of Civil Procedure section 1032, subdivision (b), guarantees prevailing parties in civil litigation awards of the costs expended in the litigation, and Code of Civil Procedure section 1033.5 requires the costs be reasonably necessary to the conduct of the litigation. Government Code section 12965, subdivision (b) provides that in Fair Employment and Housing Act [FEHA; Government Code section 12900 et seq.] actions the court has discretion to award to the prevailing party reasonable attorney fees and costs. The California Supreme Court held: “We conclude Government Code section 12965, subdivision (b), governs cost awards in FEHA actions, allowing trial courts discretion in awards of both attorney fees and costs to prevailing FEHA parties. We further conclude that in awarding attorney fees and costs, the trial court‘s discretion is bounded by the rule of Christiansburg [Garment Co. v. Equal Employment Opportunity Comm’n (1978) 434 U.S. 412 [98 S.Ct. 694, 54 L.Ed.2d 648]]; an unsuccessful FEHA plaintiff should not be ordered to pay the defendant’s fees or costs unless the plaintiff brought or continued litigating the action without an objective basis for believing it had potential merit.” (Williams v. Chino Valley Independent Fire Dist. (Cal. Sup. Ct.; May 4, 2015) 61 Cal.4th 97 [186 Cal.Rptr.3d 826, 347 P.3d 976].)

Your Tax Dollars At Work; State Agency Ordered [Once Again] To Pay A Man His Unemployment Insurance…[Editor’s Note: No Wonder Poor People Have Trouble Finding Representation].

The man’s work shoes were still in good shape, so he decided to donate his $150/year work shoe allowance for new work shoes for a friend. His attempted gesture was against company policy and he was fired. The Employment Development Department [EDD] refused the man’s claim for unemployment insurance. Ordered twice by the trial court and once by the Court of Appeal to give the man his benefits, EDD refused and the matter ended up at the Court of Appeal once again. In the present appeal, the appellate opinion states: “The Department, unfortunately, has shown itself repeatedly unable to see the forest in this matter, instead focusing doggedly on the bureaucratic trees.” The appellate court concluded: “The Department’s repeated error in this matter was its stubborn refusal to acknowledge that the exigencies of Robles’s extremely atypical situation could not be adequately addressed through recourse to ‘standard processing’ pursuant to its usual regulatory scheme. As a result, the trial court in this matter was confronted with a situation in which an individual who, though clearly substantively entitled to unemployment benefits under state law, had been denied those benefits for over three years. It has now been over five years since Robles, albeit misguidedly, offered to buy a pair of shoes for a friend. Enough is enough.” (Robles v. Employment Development Dept. (Cal. App. First Dist., Div. 4; May 4, 2015) 236 Cal.App.4th 530 [186 Cal.Rptr.3d 707].)

California Statute Violates The Dormant Commerce Clause.

The issue revolves around the dormant Commerce Clause, which is a limitation upon the power of the States to prohibit discrimination against interstate commerce. The statute involved is California’s Resale Royalty Act [Civil Code section 986(a)] which requires the seller of fine art to pay the artist a five percent royalty if the seller resides in California or the sale takes place in California. Plaintiffs are artists who claim auction houses and retailers violated the Act by failing to pay them royalties on sales of their fine art. The Ninth Circuit, sitting en banc, held the Act violates the dormant Commerce Clause insofar as it regulates sales outside California, but that the offending provision is severable from the remainder of the statute. (Sam Francis Found. v. Christies, Inc. (Ninth Cir.; May 5, 2015) 784 F.3d 1320.)

Statement Of Damages Doesn’t Count When It’s Not An Action For Personal Injury Or Wrongful Death.

Plaintiff sued for retaliation in violation of various Labor Code statutes. The complaint, itself specified only a civil penalty of $10,000 but did not otherwise specify the amount of damages. On the other hand, the statement of damages prayed for many zeroes. A default judgment for $129,673.48 plus costs and attorney fees was entered against defendant. Over two years later, defendant moved to set aside the default, arguing the judgment was void because the amount of damages was excessive in that plaintiff did not demand an amount of damages in the complaint. The trial judge refused to set aside the default, and the Court of Appeal reversed, stating: “We hold the default judgment is void because it exceeded the amount of damages stated in the complaint.” Nonetheless, the appellate court did not reverse the entry of default, and remanded to give plaintiff the opportunity to ask for the $10,000 civil penalty only. (Rodriguez v. Cho (Cal. App. Second Dist., Div. 8; May 7, 2015) 236 Cal.App.4th 742 [187 Cal.Rptr.3d 227].)

Doctrine Of Collateral Estoppel Applied To Malicious Prosecution Claim.

A man tried to cash some checks at a bank, but the bank refused. The situation evolved into bank employees calling the police and the man being arrested for making a criminal threat. Although the magistrate in the man’s preliminary hearing found the man lacked credibility, a jury acquitted the man on the criminal charges. The man thereafter sued the bank for malicious prosecution. The bank brought a motion for summary judgment, which the trial court granted. In affirming, the Court of Appeal stated: “[U]nder the doctrine of collateral estoppel, the determination of probable cause by the magistrate in plaintiff’s criminal proceeding, when the issue of [plaintiff’s] credibility had been raised before the magistrate, defeats, as a matter of law, plaintiff’s malicious prosecution claim.” (Greene v. Bank of America (Cal. App. Second Dist., Div. 5; May 12, 2015) 236 Cal.App.4th 922 [186 Cal.Rptr.3d 887].)

Nurse Drawing Blood For Police Department Alleges She Was Sexually Harassed By Police Officer.

A nurse alleges that while she was providing phlebotomist services to a police department, she was sexually harassed by a City police officer. A jury awarded damages against the City, and judgment was entered for $1.125 million. In its motion for JNOV, the City argued the nurse [who was not a City employee, or a special employee or a “person providing services pursuant to contract” under Government Code section 12940, subsection (j), subdivision (1), was not entitled to recover under FEHA [Government Code section 12900 et seq.; Fair Employment and Housing Act]. The trial court denied the JNOV, but ordered a new trial on both liability and damages because “the issues are so interrelated that damages cannot be separated from the facts underlying liability.” The nurse did not appeal from the order for a new trial, but the City appealed from the denial of the JNOV motion. The Court of Appeal affirmed the order denying the JNOV, finding the nurse was a person covered by Government Code section 12940, subsection (j), subdivision (1). (Hirst v. City of Oceanside (Cal. App. Fourth Dist., Div. 1; May 8, 2015) 236 Cal.App.4th 774 [187 Cal.Rptr.3d 119].)

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 California Supreme Court Echoes U.S. Supreme Court In Case Involving Settlement Deemed To Be Anticompetitive.

Previously We Reported: Ingenious Settlement May Be Anticompetitive Because Of The “Market Power Derived From The Patent.”

A drug company patented a drug [drug company #1] and a generic drug manufacturer [drug company #2] filed applications for generic drugs modeled after the patented drug. #1 brought an action against #2 claiming patent infringement. After the Food and Drug Administration approved the generic product, #1 and #2 entered into a settlement whereby #2 would not bring its generic product to market for a specified number of years and would promote the patented drug in exchange for millions of dollars. The Federal Trade Commission filed suit alleging violation of section 5 of the Federal Trade Commission Act by unlawfully agreeing to abandon their patent challenges in order to share in #1’s profits on the patented drug. The United States Supreme Court noted that because the settlement requires the patentee to pay the alleged infringer, rather than the other way around, this kind of settlement is often called a “reverse payment.” The high court stated: “In sum, a reverse payment, where large and unjustified, can bring with it the risk of significant anticompetitive effects; one who makes such a payment may be unable to explain and to justify it; such a firm or individual may well possess market power derived from the patent.” (Federal Trade Commission v. Actavis, Inc. (June 17, 2013) ___U.S.___ [133 S.Ct. 2223, 186 L.Ed.2d 343].)

Masthead. Senior Editor: Eileen C. Moore, Associate Justice, California Court of Appeal, Fourth District. Managing Editor: Mark A. Mellor, Esq.. Executive Committee: Carol D. Kuluva, Chair; Reuben A. Ginsburg, Vice-Chair; Kathleen Brewer,Treasurer; Robert Bodzin, Immediate Past Chair; Megan A. Lewis, Secretary. Members: Bruce P. Austin; Cynthia Elkins; Terrance James Evans; J. Thomas Greene; Jewell J. Hargleroad; Susan Kay Horst; Kevin J. Kelly; Karen J. Petrulakis;  Edward A. Torpoco; Klnh-Luan Tran; George Walles. Judicial Advisors: Hon. Suzanne Bolanos; Justice Victoria Chaney; Hon. Lawrence W. Crispo (Ret.); Hon. M. Lynn Duryee; Hon. Elizabeth Feffer; Hon. Terry B. Friedman; Hon. J. Richard Haden (Ret.); Hon. Jamie A. Jacobs-May; Justice Eileen Moore; Hon. Ronald S. Prager; Hon. John L. Segal; Hon. James L. Warren (Ret.). Advisors: Donald Barber; Charles V. Berwanger: Paul S. Chan; Tanja L. Darrow; Elizabeth A. England; David P. Enzminger; Michael D. Fabiano; Terry Barton Friedman; Michael A. Geibelson; Ruth V. Glick; Kevin J. Holl; Jamie A. Jacobs-May; Joel Kleinberg; Mark A. Mellor; Eileen C. Moore; Bradley A. Patterson; Norm Rodich; Jerome Sapiro, Jr.; e. robert (bob) wallach; Joan Wolff; Herb Yanowitz. Board of Trustees Liaisons: Daniel Dean (District 1); Craig Holden and Mark Shem (District 6); David J. Pasternak, Board Liaison. Section Coordinator: Mitch Wood, 415-538-2594, mitch.wood@calbar.ca.gov. Administrative Assistant: Ana Castillo, 415-538-2071, ana.castillo@calbar.ca.gov The California Supreme Court’s Recent Case:
“Reverse Payments” Held Anticompetitive Under California Law.

In 1987, Bayer received a patent on the active ingredient in its billion-dollar drug Cipro, and the patent expired in 2003. Barr Laboratories considered releasing a generic form of Cipro, and Bayer filed a patent infringement suit. But in 1997, Bayer and Barr settled; the settlement provided that Barr would postpone releasing its generic drug until Bayer’s patent expired. In return, Bayer agreed to pay Barr money and gave it exclusive rights to Cipro for resale. The present action arises from nine coordinated class actions which allege that the settlement violated Business and Professions Code section 16700, et seq., that it was anticompetitive under Business and Professions Code section 17200, et seq. and that it was prohibited under common law. The gravamen of the complaint is that the 1997 agreement preserved Bayer’s monopoly and ability to charge supra-competitive prices at the expense of consumers, and that Bayer in turn split these monopoly profits with Barr. After finding the settlement agreement did not restrain competition longer than the scope of the patent, the trial judge granted summary judgment, and the Court of Appeal affirmed, holding that agreements restraining competition within the scope of a patent are lawful unless the patent was procured by fraud. The California Supreme Court’s opinion begins by recognizing that antitrust law prohibits agreements that create or perpetuate monopolies, but that patent law grants temporary monopolies, and the court states: We consider here a crucial question at the intersection of these two bodies of law: what limits, if any, does antitrust law place on the ability of a patent holder to make agreements restricting competition during the life of its patent? In particular, when another entity tries to invalidate a patent and enter the marketplace, can the patentee pay the would-be competitor to withdraw its challenge and refrain from competing until at or near the natural expiration of the potentially invalid patent‘s life?” California’s high court followed the holding in Federal Trade Commission v. Actavis, Inc. (2013) ___U.S.___ [133 S.Ct. 2223, 186 L.Ed.2d 343], stating: “We conclude the same is true under state antitrust law. Some patents are valid; some are not. Sometimes competition would infringe; sometimes it would not. Parties illegally restrain trade when they privately agree to substitute consensual monopoly in place of potential competition that would have followed a finding of invalidity or non-infringement.” (In re Cipro Cases I & II (Cal. Sup. Ct.; May 7, 2015) 61 Cal.4th 116 [187 Cal.Rptr.3d 632, 348 P.3d 845].)

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