Untitled Document

Litigation Update

Litigation Section News : September 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

I Know What You're Watching.

When Netflix subscribers, family members, friends or guests of a Netflix subscriber log onto the subscriber’s account, the viewing history of each is available. The federal Video Privacy Protection Act [VPPA; 18 U.S.C.  2710] was enacted in 1988 in response to a newspaper’s publication of U.S. Supreme Court nominee Robert Bork’s video rental history. The VPPA permits consumers to maintain control over personal information in exchange for receiving services. California Civil Code section 1799.3 provides similar protection. Plaintiffs here are Netflix subscribers who allege Netflix violated these statutes by permitting disclosure of their viewing history to their families, friends and guests. The federal district court granted Netflix’s motion to dismiss for failure to state a claim, and the Ninth Circuit affirmed, stating the laws are not intended to require “the implementation of every conceivable method of preventing disclosures.” (Mollett v. Netflix, Inc. (Ninth Cir.; July 31, 2015) 795 F.3d 1062.)

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 Unconscionability Findings In Arbitration Agreements Still Possible In Other Than Class Action Waivers.

When the named plaintiff in a class action against a holding company purchased a car, he signed an arbitration agreement which contained a class action waiver. The trial court denied the defendant’s motion to compel arbitration, finding the class waiver unenforceable on the ground the California Legal Remedies Act [CLRA; Civil Code sections 1750-1784] declares the right to a class action to be nonwaivable. After the trial court’s decision, but prior to the Court of Appeal’s opinion, the U.S. Supreme Court issued AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333 [131 S.Ct. 1740, 179 L.Ed.2d 742], which held the Federal Arbitration Act [FAA] preempts California’s unconscionability rule prohibiting class waivers in consumer arbitration agreements. When the Court of Appeal issued its opinion in the instant case, it did not address whether the class waiver was enforceable and instead held other provisions within the arbitration agreement rendered the agreement as a whole to be unconscionably one-sided. The holding company took the matter to the California Supreme Court which held Concepcion requires enforcement of the class waiver provision but does not limit unconscionability rules applicable to other provisions of arbitration agreement. However, the California Supreme Court found that, applying those rules in the instant case, the Court of Appeal erred as a matter of state law in finding the agreement unconscionable. (Sanchez v. Valencia Holding Co., LLC (Cal. Sup. Ct.; August 3, 2015) 61 Cal.4th 899 [190 Cal.Rptr.3d 812, 353 P.3d 741].)

Question Of Fact In Age Discrimination Case.

Plaintiff is a border patrol agent within the Department of Homeland Security who at 54 was the oldest of the 24 persons who applied for one of four open positions within the agency. The four persons selected ranged from 44 to 48 years old. He sued for age discrimination, and the agency moved for summary judgment, offering nondiscriminatory reasons why plaintiff was not selected. In his opposition, plaintiff claimed the reasons offered by the agency were pretextual, and included evidence the supervisor partly responsible for the selection, although not the final decision-maker, expressed his preference for “young, dynamic agents” for the positions. Plaintiff further declared the supervisor persisted in having retirement discussions with him, despite the fact plaintiff did not want to retire. Lastly, plaintiff submitted evidence the same supervisor had discussions with other agents about his preference to promote “younger, less experienced agents.” The trial court granted summary judgment to the agency. In reversing, the Ninth Circuit stated: “The district court erred in two respects. First, as a matter of law, to create a genuine dispute of material fact on pretext, a speaker of discriminatory statements need not be the final decision-maker of an employment decision. . . .Second. . . .in concluding that [the supervisor] had a limited role in the hiring decision. [The supervisor] was the person who established the [pilot program that established the open positions for which plaintiff applied.]. . . . A reasonable jury could infer that [the supervisor’s] role in the decision-making process was significant and influential.” (France v. Johnson (Ninth Cir.; August 3, 2015) (As Amended, October 14, 2015) 795 F.3d 1170.)

$32,500,000 Punitive Damages Award Reversed.

Plaintiffs are the survivors and the estate of a decedent who suffered from mesothelioma as a result of his exposure to asbestos. The jury awarded various amounts to the survivors and the estate, and also awarded the estate $32,500,000 in punitive damages. With regard to the testimony about defendant Borg-Warner Morse TEC INC’s [BWMT] financial condition, the trial judge limited plaintiffs’ expert testimony to 30 minutes on direct, 30 minutes on cross and 10 minutes on rebuttal. Plaintiffs’ expert, Robert Johnson, stated that he evaluated all the factors that were available to him through publicly available information for BWMT. That publicly available information consisted solely of BorgWarner, Inc.’s [not BWMT], audited financial statements from 2009-2012 and an excerpt from an audited financial statement that documented the revenue and earnings of BWMT before interest and taxes in 2002. On cross-examination, Johnson conceded that his opinion was constrained by the dearth of publicly available information on BWMT and was limited to an estimation – he characterized it as an “understatement” – of BWMT’s revenue. He acknowledged that revenue, or the amount of money coming into a corporation, “doesn’t tell you anything about” profit or loss, cash on hand, debts for the corporation, or bank credits. Johnson further conceded that he had no information about BWMT’s net worth, market capitalization, research and development, stock buybacks, accounting fees, or CEO compensation. Johnson acknowledged that BWMT was one of “many” subsidiaries of BorgWarner, Inc. Johnson explained that nothing in the financial documents . . . specifically broke out the profitability of BWMT. He therefore looked at the most recent profitability figures he could find, the ones from 2002, and concluded that the figures “probably stayed the same” because BorgWarner, Inc. had not told its shareholders that profitability declined. The Court of Appeal noted: “As discussed above, the only evidence of BWMT’s financial condition was the somewhat muddled testimony of plaintiffs’ expert, Robert Johnson.” The appellate court further stated: “The problem is that this evidence was, at best, pertinent to only half of BWMT’s balance sheet and therefore was not, standing alone, meaningful evidence of BWMT’s financial condition.” The Court of Appeal reversed the award of punitive damages “because plaintiffs’ limited evidence of BMWT’s financial condition was not sufficient to sustain an award of punitive damages.” (Soto v. BorgWarner Morse TEC Inc. (Cal. App. Second Dist., Div. 4; August 5, 2015) 239 Cal.App.4th 165 [191 Cal.Rptr.3d 263].)

Counsel Should Not Have Been Disqualified.

A lawyer departing from a law firm sued both the firm and a partner in the firm. Both the partner and the firm are represented by the same counsel, and the trial court disqualified that counsel, holding there was an unwaivable actual conflict. The court concluded the conflict existed because the departing lawyer is a 50 percent shareholder of the firm, and the departing lawyer’s interests are in conflict with the partner who is a defendant. The trial court further ordered the departing lawyer plaintiff and the defendant partner to confer on the appointment of neutral counsel for the firm. The Court of Appeal reversed, concluding the interests of both the firm and the defendant lawyer are “perfectly aligned” in seeing the claims of the departing lawyer defeated. Coldren v. Hart, King & Coldren, Inc. (Cal. App. Fourth Dist., Div. 3; August 5, 2015) 239 Cal.App.4th 237 [190 Cal.Rptr.3d 644].)

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Class Action Plaintiffs Prefer State Court; Defendant Drug Company Wants Federal Court. State Court It Is.

The Class Action Fairness Act [CAFA; 28 U.S.C. § 1332(d); Pub. L. No. 109-2, 119 Stat.4 (2005)] authorizes the removal to federal court of “mass actions,” in which “monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact.” Here, plaintiffs filed five separate tort cases in California courts, each with fewer than 100 plaintiffs, alleging they suffered pancreatic cancer due to their use of drugs developed by defendant drug company. The drug company removed four of the five cases to federal court based upon conventional diversity jurisdiction, but the federal trial court granted plaintiffs’ motion to remand back to state court. Defendant thereafter removed all five cases based on CAFA, and plaintiffs again moved for remand, but this time the trial court denied their motions to remand back to state court. The Ninth Circuit reversed, instructing the trial court to remand the matters, stating that despite statements from some of the plaintiffs that they anticipated the actions would be tried together, “in none of the five cases did plaintiffs propose that the claims of one hundred or more persons be tried jointly.” (Briggs v. Merck Sharp & Dohme (Ninth Cir.; August 6, 2015) 796 F.3d 1038.)

Once Emergency Lights Activated By Police, A Driver Is Considered Detained.

Sheriff’s department received an emergency 911 call, reporting some people were fighting in an alley behind his home. The caller said he could hear screaming and one person had said, “the gun was loaded.” The caller stayed on the line, and shortly thereafter confirmed a squad car had arrived. As an officer drove along the alley, he saw a car coming toward him and away from the fight. The officer yelled: “Hey. Did you see a fight?” The other driver ignored the officer and kept driving. The officer turned around and found the car had parked on the street, a few houses down from where the fight was. The officer pulled behind the car and activated the emergency overhead lights of the patrol car. The driver identified himself and produced a driver’s license. He had watery, bloodshot eyes and smelled of alcohol. The driver was charged with felony driving under the influence, and pled guilty to driving with a blood alcohol over .08 percent. He later moved to suppress evidence of his physical condition, statements, and breath test results as the fruits of an unlawful detention. In affirming the conviction, the California Supreme Court found the driver was detained when the emergency lights were activated, and, unless the encounter was consensual, it had to be justified under the Fourth Amendment. The high court found there was such justification since the officer had a reasonable suspicion the driver had been involved in the fighting/loaded gun situation reported by the neighbor in the 911 call.  (People v. Brown (Cal. Sup. Ct.; August 6, 2015) 61 Cal.4th 968 [190 Cal.Rptr.3d 583, 353 P.3d 305].)

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Payback To Insurance Company After It’s Ordered To Pay Cumis Counsel To Defend Its Insured, And It Claims Cumis Counsel Padded The Bills.

The question tackled by the California Supreme Court here is that after an insurance company is compelled by a court order to provide independent counsel to defend its insured in a third party action pursuant to San Diego Federal Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358 [208 Cal.Rptr. 494], and the insurer complies under a reservation of rights, may the insurance company later proceed against independent counsel for padding the bills? The high court answered in the affirmative, stating: “We conclude that under the circumstances of this case, the insurer may seek reimbursement directly from Cumis counsel. If Cumis counsel, operating under a court order that expressly provided that the insurer would be able to recover payments of excessive fees, sought and received from the insurer payment for time and costs that were fraudulent, or were otherwise manifestly and objectively useless and wasteful when incurred, Cumis counsel have been unjustly enriched at the insurer’s expense. Cumis counsel provide no convincing reason why they should be absolutely immune from liability for enriching themselves in this fashion. Alternatively, Cumis counsel fail to persuade that any financial responsibility for their excessive billing should fall first on their own clients — insureds who paid to receive a defense of potentially covered claims, not to face additional rounds of litigation and possible monetary exposure for the acts of their lawyers. For these reasons, we reverse the judgment of the Court of Appeal insofar as it concluded that in this case, reimbursement cannot be obtained directly from Cumis counsel.” (Hartford Casualty Ins. Co. v. J.R. Marketing, L.L.C. (Cal. Sup. Ct.; August 10, 2015) 61 Cal.4th 988 [190 Cal.Rptr.3d 599, 353 P.3d 319].)

Mixed Issues Of Equity And Law.

When a case involves mixed issues of equity and law, a trial court may not act as a factfinder on issues it specifically reserves for jury determination. In this case, in granting a JNOV, the trial court “improperly transformed its equitable finding of unenforceability as to specific performance into a finding of unenforceability as to the legal issue of damages.”  (Darbun Enterprises, Inc. v. San Fernando Community Hospital (Cal. App. Second Dist., Div. 4; August 12, 2015) 239 Cal.App.4th 399 [191 Cal.Rptr.3d 340].)

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 Summary Judgment Reversed By California Supreme Court.

The negligent driving of a third party motorist caused another car to strike a tree planted on a center median owned and maintained by a City. The collision resulted in death or injury to all the car’s occupants. Plaintiffs sued the City for a dangerous condition of public property. The City moved for summary judgment, arguing the street and median were not dangerous conditions, and the accident was caused by third party conduct. The trial court granted the City’s summary judgment, ruling the magnolia tree did not cause the accident that killed the decedents, and the appellate court affirmed. The Supreme Court concluded the Court of Appeal erred in this case when it upheld the grant of summary judgment in favor of the City on the ground the magnolia tree was no a dangerous condition because the tree did not cause the negligent driving of a third party, but added: “On remand, the Court of Appeal must decide whether plaintiffs presented sufficient evidence to create a triable issue as to whether the configuration of the roadway was, in fact, a dangerous condition. . . [and] was a proximate cause of the fatal injuries suffered by their decedents.”  (Cordova v. City of Los Angeles (Cal. Sup. Ct.; August 13, 2015) 61 Cal.4th 1099 [190 Cal.Rptr.3d 850, 353 P.3d 773].)

Complex Scientific Causation Testimony.

Defendant is a pharmaceutical company and plaintiffs are persons who ingested a drug manufactured by defendant who allege they suffered from bladder cancer as a result of taking the drug for diabetes. At trial, plaintiffs’ expert testified that based on his performance of a differential diagnosis, he believed the drug was a substantial factor in causing a plaintiff’s bladder cancer. However, the court later ordered the expert testimony stricken, concluding it was speculative and lacking in foundation, and granted defendant’s motion for JNOV. In reversing, the appellate court stated: “By requiring that the expert rule out all other possible causes for Jack Cooper’s bladder cancer, even where there was no substantial evidence that other such causes might be relevant, the court exceeded the proper boundaries of its gatekeeping function in determining the admissibility of the complex scientific testimony. We also conclude that the evidence supported giving a jury instruction on multiple causation.” The appellate court ordered the jury’s verdict awarding $6.5 million to be reinstated. (Cooper v. Takeda Pharmaceuticals America, Inc. (Cal. App. Second Dist., Div. 3; August 13, 2015) 239 Cal.App.4th 555 [191 Cal.Rptr.3d 67].)

Pay The Two Dollars.

Class action plaintiff alleges a public entity operating a recreational park violates the Vehicle Code by issuing traffic citations based upon video camera images of a license plate, but not of the driver of a car in the park.  An ordinance authorizes the entity to use “automated” photographic or video equipment to enforce another ordinance about motor vehicles. In effect, the registered owner of a vehicle is liable for a stop sign violation. In this case, an automated video camera recorded a vehicle registered to plaintiff failing to stop on a roadway in a parkland property, and a park ranger issued and mailed an administrative citation to him. The trial court sustained the entity’s demurrer, and the Court of Appeal affirmed. The appellate court said the entity’s authority is derived from the Public Resources Code and Vehicle Code section 21 states that control under the Vehicle Code does not impair the entity’s authority to enforce ordinances relating to the management of its parklands.  (Everett v. Mountains Recreation & Conservation Authority (Cal. App. Second Dist., Div. 3; August 13, 2015) 239 Cal.App.4th 541 [191 Cal.Rptr.3d 59].)

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

"A Strong Spirit Transcends Rules." - Prince.

This is what happened: A young mother placed a 29-second video of her two little children in the kitchen dancing to Let’s Go Crazy by Prince on YouTube. She titled the video “Let’s Go Crazy #1.” During the video, the mother asks her 13-month old “what do you think of the music,” and he bobs his head up and down while holding a push toy. The artist’s publishing company claimed infringement of Prince’s work and ordered the video taken down, which it was. The purpose of copyright laws is to protect the economic interests of authors and artists. Pursuant to 17 U.S.C. § 512(f) [Digital Millennium Copyright Act; DMCA], the law provides a way for artists to take down offending uses of their work without going to court. Apparently the mother thought the whole takedown process was ridiculous and sued the artist’s publishing company, alleging the company misrepresented in its takedown notification, and that the video was a fair use of the artist’s music. Both the federal trial and appeals court found there was a question of fact whether or not the video represented a fair use, and the Ninth Circuit further stated: “We hold that the statute requires copyright holders to consider fair use before sending a takedown notification, and that failure to do so raises a triable issue as to whether the copyright holder formed a subjective good faith belief that the use was not authorized by law.” (Lenz v. Universal Music Corp. (Ninth Cir.; September 14, 2015) [115 U.S.P.Q.2D (BNA) 1965, Copy. L. Rep. (CCH) P30, 818, 43 Media L. Rep. 2305].)

"Challenging Someone Equipped With A Badge, Handcuffs, And A Gun To 'Arrest Me' Was Unwise." - The Ninth Circuit.

This is the situation. It’s a busy juvenile court in L.A. County, and the deputy public defender [P.D.] went back to her office. The judicial officer had 53 cases to be heard and wanted the P.D. there, but the P.D. did not answer her pages or pick up her phone, even though she heard them. A courtroom deputy was dispatched with an order to retrieve the P.D. He went to her office where the P.D. was talking with her supervisor. When she was told she was needed in court, she responded: “If you want me to come right now, you’ll have to arrest me.”  “Click, click,” went the handcuffs.  The P.D. brought an action under 42 U.S.C. § 1983, and the trial judge held in favor of the defendants, ruling the arrest violated the P.D.’s Fourth Amendment rights but that the deputy was protected by qualified immunity. The Ninth Circuit reversed, finding the deputy was not protected by qualified immunity. But the appeals court was underwhelmed with the importance of the situation, mentioning the cost to the taxpayers for all this litigation, and stating the dispute should have been settled with mutual apologies and a handshake.  (Demuth v. County of L.A. (Ninth Cir.; August 14, 2015) 612 F.App'x 475.)

Arbitration Agreement In Employment Case Unconscionable.

In a wrongful termination action, the trial court denied defendant’s  petition to compel arbitration because the agreement is procedurally and substantively unconscionable. On plaintiff’s first day of work, she was provided electronic access to the employer’s “onboarding system,” which included an arbitration agreement. Later the same day, plaintiff attempted to negotiate some of the terms because she said the agreement was too broad and did not include “several important terms.” The next day the general manager arranged a telephone conference call for plaintiff, the general manager and the human resources manager to discuss plaintiff’s concerns. During the call, plaintiff wanted to know who would pay for the arbitration and which firm would conduct it. The arbitration clause states in part: “I agree, as does the Company, to abide by the Company’s Dispute Resolution Policy (‘DRP’) and to arbitrate any dispute, claim, or controversy regarding or arising out of my employment (as defined by the Company’s DRP, a copy of which I may request at any time) that may arise between me and the Company, its parent, subsidiaries, affiliates or any other persons or entities acting as its agent.” In opposing the petition to compel arbitration, plaintiff submitted her own declaration which stated she was not given a copy of or access to the DRP. She further declared that during the conversation with the general manager and the human resources manager on her second day of employment, she requested a copy of the DRP to assist her in trying to negotiate an arbitration agreement to which she could agree, but the two managers told her they did not have a copy of it. Plaintiff also said she was told a copy of the DRP might be available at a later time, but if she did not sign the arbitration agreement as presented to her, it would be viewed as a refusal of the job offer, so she signed it. The Court of Appeal affirmed, stating “a high degree of procedural unconscionability accompanied the signing of the Agreement in this case,” the trial court’s findings that the agreement was one-sided, objectively unreasonable and lacked mutuality were supported by substantial evidence, and that substantive unconsionability permeated the entire agreement. (Carlson v. Home Team Pest Defense, Inc. (Cal. App. First Dist., Div. 4; August 17, 2015) 239 Cal.App.4th 619 [191 Cal.Rptr.3d 29].)

Previously We Reported:

Jury Awarded Lawyer $5,000/Hour For Fees.

An attorney, who represented a client in two divorce cases and a related Marvin action [Marvin v. Marvin (1976) 18 Cal.3d 660 [134 Cal.Rptr. 815, 557 P.2d 106]] without a statutorily required written hourly or contingency fee agreement, sued his client for the reasonable value of the services he rendered in the three cases. The jury, using a multiplier of five to increase the attorney’s hourly rate to $5,000 per hour, awarded the attorney $7.8 million in attorney fees. That amount greatly exceeded the amount that would have been due under an alleged oral hourly rate agreement and the amount to which the attorney would have been entitled under a contingency fee agreement the parties discussed towards the end of the representation, but to which the parties did not agree. The appellate court reversed, stating: “We hold that under the circumstances of this case, there was no legal or equitable justification for applying a multiplier to the lodestar amount of attorney fees found by the jury. Such multipliers generally are appropriate when, from the outset of an action, an attorney voluntarily assumes the contingent risk of nonpayment for his services—a risk not present here. Therefore, the trial court erred by instructing the jury that it could apply a multiplier to the lodestar amount. In addition, the jury award was excessive and inequitable. Accordingly, we reverse the judgment and remand the matter to the trial court with instructions to enter a new judgment on the special verdict form awarding the attorney a $1.8 million lodestar amount, minus certain deductions made in the original judgment, based on the jury findings of $1,000 per hour as the reasonable hourly rate and 1,800 hours as the reasonable number of hours expended on the two divorce cases and the Marvin action.” (Chodos v. Borman (2014) 227 Cal.App.4th 76 [173 Cal.Rptr.3d 266].)

The Current Decision:

This time around, after the trial court followed the directions of the Court of Appeal, the appellate court modified the judgment to add interest on the attorney fees award and costs, commencing from the date of the September 19, 2013 judgment at the rate of 10 percent per annum. (Chodos v. Borman (Cal. App. Second Dist., Div. 5; August 18, 2015) 239 Cal.App.4th 707 [190 Cal.Rptr.3d 889].)

Structured Settlement Protection Act Applied.

The trial court approved transfer of structured settlement payments to a factoring company and ordered the payor insurance company to send the funds directly to the factor, and the insurance company appealed. The Structured Settlement Protection Act [SSPA; Insurance Code section 10134 et seq.] was passed to protect structured settlement payees from exploitation by factoring companies.  Pursuant to Insurance Code section 10139.5, an annuity issuer and settlement obligor may not be required to divide payments, and the insurance company argued on appeal that the trial court’s order increased its burdens and risks. The appellate court reversed because the order puts the insurance company in the position of having to rely on another entity to fulfill its contractual obligations to the annuity recipient and would expose the insurance company to litigation if, for example, the factoring company or its assignee sought bankruptcy protection. (RSL Funding, LLC v. Alford (State Farm Fire and Casualty Co.) (Cal. App. Fourth Dist., Div. 2; August 18, 2015) (As mod. September 10, 2015) 239 Cal.App.4th 741 [190 Cal.Rptr.3d 917].)

Previously we reported:

Legal Malpractice Statute Of Limitations.

Plaintiff hired a lawyer to represent her in litigation. After settlement, plaintiff sought a refund of unearned attorney fees she had advanced as the lawyer had written her a letter stating she had a credit balance of $46,321.85 and the invoice so reflected. When the refund was not forthcoming, she hired another lawyer to try to get the refund. More than a year later, the second lawyer filed an action against the first lawyer for the refund. Under the legal malpractice statute of limitations found in Code of Civil Procedure section 340.6, the trial court sustained a demurrer and dismissed the action. In reversing, the appellate court stated:  “But surely it cannot be the case that every conceivable act an attorney may take that affects his or her client is one arising in the performance of legal services. For example, if a client leaves her purse unattended in the attorney’s office and the attorney takes money from it, would we say that act arose in the performance of legal services? How different is it if, when the legal services have been completed and the attorney’s representation has been terminated, the attorney keeps the unearned fees belonging to the client?” Pointing out the case was at the demurrer stage, the appellate court continued: “Here, the facts alleged in [plaintiff’s] second amended complaint could be construed as giving rise to a cause of action for the theft or conversion of an identifiable sum of money belonging to her. This being the case, we cannot say [the pleading] demonstrates clearly and affirmatively on its face that her action is necessarily barred by the section 340.6 statute of limitations.” (Lee v. Hanley, July 15, 2014) (Lee v. Hanley (2014) 227 Cal.App.4th 1295 [174 Cal.Rptr.3d 489].) —SUPERSEDED BY GRANT OF REVIEW

The Current Decision:

The California Supreme Court affirmed the Court of Appeal’s opinion, stating: “[W]econclude that section 340.6(a)‘s time bar applies to claims whose merits necessarily depend on proof that an attorney violated a professional obligation in the course of providing professional services. . . . as the Court of Appeal observed, section 340.6(a) does not bar a claim for wrongdoing — for example, garden-variety theft — that does not require proof that the attorney has violated a professional obligation, even if the theft occurs while the attorney and the victim are discussing the victim‘s legal affairs. Section 340.6(a) also does not bar a claim arising from an attorney‘s performance of services that are not ‘professional services,’ meaning ‘services performed by an attorney which can be judged against the skill, prudence and diligence commonly possessed by other attorneys.’” The Supreme Court cautioned: “We do not suggest that [the lawyer] is in fact liable for conversion. At this stage, we do not know whether [the lawyer] disputes that he owes [the client] the money she claims (perhaps they had previously agreed that [the lawyer] could keep any leftover portion of the advance), whether [the lawyer] made a bookkeeping error in handling [the client’s] money, or whether [the lawyer] misspent [the client’s] money or decided to keep it for no good reason. If, for example, [the client’s] claim turns out to hinge on proof that [the lawyer] kept her money pursuant to an unconscionable fee agreement (Cal. Rules of Prof. Conduct, rule 4-200) or that [the lawyer] did not properly preserve client funds (Cal. Rules of Prof. Conduct, rule 4-100), her claim may be barred by section 340.6(a). At this stage, however, without any development of the facts, we cannot conclude that section 340.6(a) necessarily bars [the client’s] claim.”  (Lee v. Hanley (Cal. Sup. Ct.; August 20, 2015) 61 Cal.4th 1225 [191 Cal.Rptr.3d 536, 354 P.3d 334].)

Jury Should Have Been Told Of Pretrial Settlement.

Plaintiff was injured in a car accident and sued alleging the drivers and owners of two other vehicles were at fault. One of the defendants settled with plaintiff, but a provision in the settlement required that defendant appear and participate as a party defendant at trial. A jury found the other defendant 60 percent liable to plaintiff. The other defendant appealed, and the Court of Appeal reversed, finding the trial court abused its discretion when it excluded evidence of the pretrial settlement. (Diamond v. Reshko (Cal. App. First Dist., Div. 4; August 20, 2015) (As mod. Sept. 17, 2015) 239 Cal.App.4th 828 [191 Cal.Rptr.3d 438].)

Previously we reported:

Insurance Company Can Require Insured To Obtain Its Consent Before Assigning Interest In Policy.

One Fluor Corp. assigned its rights under liability policies to another Fluor Corp. when they underwent complex corporate restructuring. In a declaratory relief action, the liability insurer objected that its approval was not given pursuant to a consent to assignment provision in the policy. Fluor contended the provision was void under an 1872 statute which provides:  “An agreement not to transfer the claim of the insured against the insurer after a loss has happened, is void if made before the loss . . .” (Ins.Code § 520.) The trial court denied Fluor’s motion for summary adjudication, as well as its invitation to disregard the California Supreme Court’s holding in Henkel Corp. v. Hartford Accident & Indemnity Co. (2003) 29 Cal.4th 934 [129 Cal.Rptr.2d 828, 62 P.3d 69], and Fluor sought extraordinary relief. The appellate court was unimpressed with Fluor’s argument, stating: “During the 130 years since its enactment, the 1872 statute has been cited only once. No one raised it in Henkel. . . .There is a logical reason for this obscurity. The 1982 statute can have no bearing as a ‘clear’ or ‘controlling’ legislative expression on the assignability of liability insurance for the simple reason that liability insurance did not exist in 1872.”  (Fluor Corp. v. Sup. Ct. (2012) 208 Cal.App.4th 1506 [146 Cal.Rptr.3d 527].) —SUPERSEDED BY GRANT OF REVIEW

The Current Decision:

Not only did the California Supreme Court reverse the Court of Appeal in this case, it reversed its own holding in Henkel Corp., supra, 29 Cal.4th 934 [129 Cal.Rptr.2d 828, 62 P.3d 69]. Henkel held that an assignment of policy benefits required the consent of the insurers, and since there was no consent, plaintiff was not entitled to coverage, which involved a successor corporation’s action against an insurance company for breach of its predecessor corporation’s policy. In Fluor, the present case, the Supreme Court stated: “We conclude that Insurance Code section 520 dictates a result different from that reached in Henkel, and accordingly we overrule the decision in Henkel to the extent it is inconsistent with the views expressed in the present opinion.” The high court explains no one cited Insurance Code section 520 in Henkel. That section, enacted in 1872, specifically restricts an insurer’s ability to limit an insured’s right to transfer or assign a claim for insurance coverage; it bars an insurer “after a loss has happened,” from refusing to honor an insured’s assignment of the right to invoke the insurance policy’s coverage for such a loss. (Fluor Corp. v. Sup. Ct. (Hartford) (Cal. Sup. Ct.; August 20, 2015) 61 Cal.4th 1175 [191 Cal.Rptr.3d 498, 354 P.3d 302].)

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