Month: January 2018

SMS Financial v. Cornerstone Title, 1DCA/2, 1/26/18

When a borrower pays off his mortgage, the lender (beneficiary) is supposed to reconvey the deed of trust (DOT). If the lender doesn’t do that, the title insurer can instead issue and record a release after a 75 day waiting period and after providing 10 days’ notice as required in Civil Code section 2941. The title insurer’s release is equivalent to a reconveyance of the DOT.  However, the title insurance company that prepares or records a release under section 2941(b)(3) is “liable to any party for damages, including attorney’s fees, which any person may sustain by reason of the issuance and recording of the release.” Civil Code § 2941(b).

Here, Cornerstone Title recorded such a release of lender’s DOT even though the loan hadn’t been paid off. The lender didn’t know Cornerstone Title had released the DOT, and subsequently sold the DOT to a plaintiff, SMS Financial.  SMS didn’t learn about the the Cornerstone release until the loan went into default and Cornerstone tried but was unable to foreclosure on the property subject to the DOT.  SMS sued various parties including Cornerstone Title. The trial court granted Cornerstone Title’s demurrer without leave, holding that when it acquired the DOT the predecessor’s right to sue Cornerstone did not pass to SMS. Held: Reversed. Continue reading “Assignee of Deed of Trust (DOT) Can Sue Title Company That Mistakenly Released the DOT Before the Assignment Occurred”

MTC Financial v. Nationstar Mortgage, DCA1/3, 1/22/18

Countrywide made two loans to borrower—a purchase money loan of about $200k, and a HELOC of $15k. Each was secured by a deed of trust against the borrower’s home, which were created the same day and filed for recordation with the County Recorder on the same date and same time (8 a.m.).  The Recorder indexed the HELOC DOT ahead of the purchase money DOT.  The indexing made the purchase money DOT appear to be junior to the HELOC DOT.  The loans were subsequently purchased on the secondary market by different lenders, and no one took action to fix the inadvertent priority problem. On default, the HELOC lender proceeded with a nonjudicial foreclosure sale, which created a surplus.  The owner of the purchase money DOT (Nationstar), the foreclosed borrower and the HOA (who had held a junior lien for unpaid HOA dues) proceeded to fight over the surplus. Even though a junior lienholder is entitled to the surplus before the foreclosed borrower, the trial court held that Nationstar was actually the senior lienholder and not entitled to anything. Held: Affirmed. Continue reading “Who Has Priority When Two Deeds of Trust Are Submitted for Recordation at the Same Time”

Centex Homes v. St. Paul Fire and Marine Insurance, DCA3, 1/22/18

When a claim is asserted against an insured, the insurance company usually has the right to assign the counsel of its choice to defend the insured.  (Note that some companies have the clout to negotiate the right to choose their own counsel.) The carrier’s letter accepting coverage often includes a reservation of rights.  But not every reservation of rights triggers the right to independent counsel.  The insured will have a right to choose its own counsel (hired at the insurer’s expense) where competing interests between insurer and insured create an ethical conflict for counsel. Generally speaking, that happens when the issues to be litigated in the underlying case can determine the outcome of coverage (as opposed to being “extrinsic” to the litigation). When that happens, counsel retained by insurer can affect the outcome of the coverage question, which is what creates a conflict.

Here, homeowners sued Centex (a home developer) and various subcontractors for construction defect claims. Centex had coverage under a policy issued by St. Paul, who assigned counsel to defend Centex. Centex wanted independent counsel,  and cited St. Paul’s reservation of rights as creating the necessary conflict. But St. Paul’s reservation of rights was innocuous—it only reserved the right to deny indemnity for any claims that weren’t covered by the policy and also reserved the right to reimbursement of costs spent to defend non-covered claims.  The trial court held that wasn’t enough to trigger the right to cumis counsel. Held: Affirmed. Continue reading “Cumis Counsel Refresher”

Guan v. Hu, DCA2/1, 1/12/18

This was a breach of contract case concerning the purchase of a single family home.  Defendant Hu’s lover arranged the acquisition of $2.6M Malibu property in Hu’s name, with financing provided by the lover’s very generous friend, Mr. Guan.  Hu agreed to sell the property if the relationship didn’t work out; when it didn’t work out,  Hu refused to the sell the property. The terms of the contract, and how the parties agreed to split the proceeds if a sale should be required do not matter to the outcome. What matters most, and makes this case very strange, are the following facts: First, the trial court granted Hu’s demurrer to Guan’s breach of contract action without leave to amend.   And while the trial court never formally reconsidered its demurrer ruling, it nonetheless allowed Guan to proceed to trial on that cause of action.  The cause of action was styled as one for “Rescission”— but was , in substance, a breach of contract claim asking for remedy of rescission. After a bench trial, the trial court found for Guan, ordered the sale of the property by receiver, and further ordered that Hu’s share be reduced by the value of the four years’ free rent she had enjoyed during the controversy.  Hu appealed, arguing that Guan couldn’t proceed let alone prevail on a breach of contract action for rescission because of the trial court’s earlier ruling granting the demurrer without leave. Held: Affirmed. Continue reading “Party Allowed to Proceed on Cause of Action Even Though Demurrer Granted Without Leave to Amend”

Martinez v. Dept. of Health Services, DCA2/6, 1/12/18

This case is interesting because it explains what amount of a Medi-Cal lien should be paid from a personal injury settlement.  Here, Medi-Cal advanced about $89k for medical expenses that Martinez incurred for injuries he suffered due to alleged medical negligence. Martinez sued the doctor and settled for $150k.  When Martinez and DHS couldn’t agree on how much to pay DHS on its lien, DHS filed a motion to have the court determine the amount.  And here’s how that’s done:  First, the trial court determined the total value of Martinez’s case by adding $250k in non-economic damages to the $89k in medical costs, for a total value of $366k. The settlement of $150k was 40% of $366k; thus, a maximum of 40% of the Medi-Cal lien ($39k) could be asserted against the settlement.  However, the trial court did not reduce the lien by 25% for attorney’s fees, as required by Welfare and Institutions Code 14124.72(d). The appellate court corrected that, further reducing the lien to about $29k.  The appellate court affirmed the trial court’s rejection of Martinez’s argument that his case was work over $2MM—MICRA limits non-economic damages to $250k and Martinez had failed to present evidence at trial in support of additional economic damages (e.g., he presented no evidence of lost earning capacity).

Patricia Murray Dental et al. v Dentsply International, DCA1/4, 1/10/18

This is an ill-conceived UCL class action brought by dentists against the maker of a dental device called Cavitron, an ultrasonic scaler. The dentists said that the scaler’s water-line would build up biofilm (a film covering microbes of bacteria), and couldn’t deliver sterile water into a patient’s mouth during surgical procedures. The dentists alleged that the risk of biofilm build-up wasn’t disclosed by the manufacturer. After a month long bench trial, the trial court found for Dentsply: As licensed dentists, plaintiffs knew the very facts that they claimed weren’t disclosed by Dentsply.  They therefore failed to meet their burden of proof that the class was “likely” to be misled, the key element of UCL’s fraudulent business practices prong. Dentists appealed. Held: Affirmed. Continue reading “Dentists’ UCL Class Action Against Device Manufacturer a Colossal Waste of Court Resources”

Medical Acquisition Company (MAC) v. Tri-City Healthcare District, 1/11/18, DCA4/1

Some lawyers think that they need to make every argument and allege every cause of action that they can think of. That approach can have disastrous consequences, as demonstrated by this case. Tri-City executed a ground lease of property to MAC to develop a medical office building.  MAC agreed to develop the building at its own expense. Tri-City wasn’t happy about the subsequent construction process and sued MAC for breach of ground lease. Later, Tri-City amended its complaint to include eminent domain and also decided to take title to the property before trial (see below). Too clever by half—The most significant issue became how much Tri-City would have to pay MAC in just compensation. The jury ultimately answered that question: $16.83 million. It also found that Tri-City breached the implied covenant of good faith and fair dealing, and that MAC hadn’t breached the ground lease.

For the attorneys driving Tri-City’s litigation strategy, that’s a bad day at the office, or perhaps a few.  Tri-City has to pay $17M , and, presumably, millions more to complete the unfinished medical office building.  It should have stuck to the breach of lease case. Continue reading “When Adding an Eminent Domain Cause of Action Is a $18M Strategic Disaster”

Oracle v. Rimini Street, 1/8/18, Ninth Circuit

Oracle sells software (e.g., Peoplesoft) that most people don’t know how to use, at least without an expert.  Its software is extremely expensive and tailored to specific clients; those clients don’t update customized software without running the upgrade in “development environments,” aka a “sandbox.” In steps Rimini Street, an internationally known third party expert who assists Oracle (and many other types of) customers with software deployment and updates. Under the color of the client’s license to use Oracle software, Rimini would copy the client’s software and help the client with deployments and updates (“direct use”).  However, Rimini would also use that copy of the client’s software to set up sandboxes that it would subsequently use to help other customers of Oracle using the same software (“cross-use”). The judge granted partial summary judgment to Oracle, and the jury subsequently found copyright infringement. The total award (including interest and fees) was over $124M. Rimini appealed. Held: Affirmed in part, reversed in part and remanded for further proceedings. Continue reading “Oracle-Rimini Copyright and Computer Abuse (CDAFA) Battle Continues”

Italian Colors Restaurant et al. v.  Xavier Becerra, California AG, 1/3/18, Ninth Circuit

Under federal law, it used to be illegal for retailers to impose a surcharge on customers who purchased goods with a credit card; although retailers could offer discounts to people who paid with cash specifically to encourage payment with cash. (Mathematically there was no difference—this was special interest legislation for the benefit of credit card companies.). When that law expired in 1984, California passed its own version, Civil Code 1748.1, which included a treble damage provision. In 2014, a group of retailers wanted to set a single-sticker-price for their products and impose a surcharge for the use of credit cards. While they hadn’t done so, they claimed they were subject to an imminent invasion of a legally protected interest, and therefore had standing. They sued the California AG in federal court, alleging that 1748.1 violated their right to free speech under the First Amendment. The district court granted retailers summary judgment, and the California AG appealed. Held: Affirmed. Continue reading “Ninth Circuit Holds that California Law Forbidding Surchage for Purchasing With Credit Card Violates First Amendment”

To prevail on a disability claim under the ADA claim, plaintiff is required to establish (1) that she was disabled under the ADA; (2) that she was a qualified individual with a disability; and (3) that she was discriminated against by her employer because of that disability.  A qualified individual with a disability is defined as an individual with a disability who, with or without reasonable accommodation, can perform the essential functions of the employment position that such individual holds or desires. The ADA defines discrimination to include an employer’s failure to make a reasonable accommodation. The term “reasonable accommodation” may include acquisition or modification of equipment or devices and other similar accommodations for individuals with disabilities.  See 42 U.S.C. § 12111(9).

That all may sound straightforward, but try applying these principles to a real life situation, which is where things get hard: Whether an accommodation is reasonable depends on the individual circumstances of each case, and requires a fact-specific, individualized analysis of the disabled individual’s circumstances and the [potential] accommodations. Continue reading “Disability Discrimination and Reasonable Accommodation Matters Can Be Hard to Assess”