Rhule v. WaveFront Technology, Inc., 2/23/17, 2DCA/5
In response to Requests for Admission, Plaintiffs mistakenly admitted that Defendant had not violated certain Labor Code sections, violations that had been alleged in the complaint and, presumably, were critical to Plaintiffs’ case. Plaintiffs realized their mistake and, after Defendant had already taken Plaintiffs’ depositions, asked the trial court to grant leave to amend the mistaken admissions. The trial court granted Plaintiffs’ motion subject to conditions, and subsequently granted Defendant’s motion for over $8,000 in attorney’s fees pursuant to Code of Civ. Proc 2030.300(c). Held: Affirmed.
First, on the legal question posed by the appeal, section 2033.300(c) provides that “The court may impose conditions on the granting of the motion that are just, including, but not limited to, the following: [¶] (1) An order that the party who obtained the admission be permitted to pursue additional discovery related to the matter involved in the withdrawn or amended admission. [¶] (2) An order that the costs of any additional discovery be borne in whole or in part by the party withdrawing or amending the admission.” Given that section 2033.300(c) mentions costs but not attorney’s fees, can the trial court award fees? Yes — Code of Civ. Proc. section 1033.5 treats attorney’s fees as a subset of costs. Moreover, section 2033.300(c) allows the court do what it deems “just,” which suggests that the trial court has wide discretion in this area.
Concerning Plaintiffs’ argument that the trial court abused its discretion in awarding these fees, the party challenging an award of attorney fees bears the burden of providing an adequate record to demonstrate error. Plaintiffs did not provide a reporter’s transcript or an agreed or settled statement, so it couldn’t meet that burden. The lesson: Hire a court reporter for important hearings.
Finally, the costs that trial court awarded were for opposing the motion to amend the admissions, and the anticipated costs (and fees?) related to retaking Plaintiffs’ depositions. $8000 seems steep, but that goes back to Plaintiffs’ failure to provide an adequate record for review.
In Matter of First Impression, 2DCA Hold that California Law Does Not Preclude Consideration Of Controls Required By Public Regulations In Finding An Agency Relationship
Secci v. United Independent Taxi Drivers 2/15/17, 2DCA2/5
Motorcyclist was hit by a cab and sued the cab driver and the cab company (United) for personal injury. United operates under a franchise agreement with the city where the accident occurred. Various government regulations and rules apply to United and United enforces those rules on its drivers. Whether a person is an employee, independent contractor or agent turns largely on the amount of control exercised by the company. The jury found that the driver was not an employee of United but was its agent. Liability was imposed on United on that basis. The trial court granted United’s motion for JNOV, holding that control exercised over the driver by virtue of government regulations shouldn’t count against the cab company for purposes of deciding agency. Held: Reversed.
The jury instruction (CACI No. 3705) on agency provides: “Whether a person performing work for another is an agent or an independent contractor depends primarily upon whether the one for whom the work is done has the legal right to control the activities of the alleged agent. … It is not essential that the right of control be exercised or that there be actual supervision of the work of the agent. The existence of the right of control and supervision establishes the existence of an agency relationship.” This is a fact question for the jury. A trial court can reverse the jury’s verdict on a motion for JNOV under limited circumstances. “A motion for a judgment notwithstanding the verdict may properly be granted only when, disregarding conflicting evidence and indulging in every legitimate inference which may be drawn from plaintiff’s evidence, the result is a determination that there is no evidence sufficiently substantial to support the verdict.”
United argued that control exercised over drivers by virtue of government regulation shouldn’t count in the agency-control analysis, an argument that the trial court accepted. At least two federal cases support United’s position; but there are no California cases on point.
The appellate court rejected the holding of the federal cases. Unlike federal law, under California agency law, independent contractorship is not necessarily mutually exclusive with a finding of agency. Simply put, an agent may also be an independent contractor. The court therefore rejected federal authorities relied on by United, and found that government regulation could be measured in the agency-control analysis.
The court found support for it conclusion in the “regulated hirer” exception to non-liability in the independent contractor area. While companies are not generally for the conduct of their independent contractors, one exception (among a growing number) concerns the “regulated hirer.” See Millsap v. Federal Express Corp., supra, 227 Cal.App.3d 425, 433–435 (Millsap). In Millsap, the court of appeal discussed the regulated hirer exception to the general rule of non-liability, pointing out that the hirer of an independent contractor may be held liable when “an individual or corporation undertakes to carry on an activity involving possible danger to the public under a license or franchise granted by public authority subject to certain obligations or liabilities imposed by the public authority.” So, when regulations exist for public safety, a company subject to those regulation can’t necessarily escape responsibility and liability to the public by simply passing the buck to its independent contractors.
Finally, the court rejected United’s argument that the regulations in question in this case were not for public safety but for quality of life. The court seemed to suggest that salient point was that the regulations occurred under the government’s police power. This last point is an important one because its portents that the rule announced by this court could be applied rather liberally.
In Debt Collection and Fair Debt Collection Practices Case, Summary Judgment Reversed For Debtor’s Failure to Present Facts Showing Debt As Time-Barred
Professional Collection Consultants v. Lauron 2/16/17, 6DCA
On summary judgment, the moving party has to connect the evidentiary dots to win. Here, bad credit card debt was assigned to debt collector PCC. PCC filed suit against debtor in California. Debtor had two credit cards accounts, and at least one was subject to a cardholder agreement with a Delaware choice of law provision. Delaware as a three year statute of limitations for breach of contract; California has a four year statute. Debtor cross-complained under federal and state fair debt collection laws alleging that PCC was attempting to collect a time-barred debt. Assuming both credit cards accounts were subject to Delaware law, the trial court granted debtor’s motion for summary judgment on PCC’s complaint, and then granted summary judgment on her claim that PCC had violated federal and state debt collection laws. PCC appealed. Held: Reversed.
Debtor failed to do three things. With respect to the one of the two credit cards, she failed to present evidence that it was subject to a cardholder agreement with a Delaware choice of law provision. Second, with respect to both credit cards, she failed to show when each cause of action accrued. A cause of action for breach of contract accrues on the failure of the promisor to do the thing contracted for at the time and in the manner contracted. The statute of limitations is a defense. Therefore, debtor had the burden to show when she stopped paying the credit cards according to the terms and conditions of the cardholder agreement. Presumably this could have been done simply by submitting a billing statement, and perhaps she did submit such evidence to the trial court. But in her appellate brief she failed to cite to the record showing that. As the court noted, it is not the appellate court’s responsibility to wade through the record and find the a party’s evidentiary cites for them.
An Appellate Affirmance that Reaches only Some Issues Can Still Result in Total Claim Preclusion; But Issue Preclusion Applies Only to Those Issues Actually Decided by the Appellate Court
Samara v. Matar, 2/15/17, 2DCA/7
Plaintiff sued two dentists in the same practice for dental malpractice concerning an implant procedure and post-op care. The employee dentist filed for summary judgment based on the statute of limitations and the absence of evidence of causation. (Plaintiff’s expert declaration didn’t use the critical words to a “reasonable degree of medical certainty,” and was therefore ineffective to raise a triable issue of fact on causation.) The trial court granted the motion on both grounds and plaintiff filed its first appeal. The first appellate court upheld the trial court’s ruling based solely on the statute of limitations, and did not reach the issue of causation. After remand, the supervising dentist filed his own summary judgment, arguing that the holding in the first appeal also established issue preclusion as to causation. The trial court agreed and granted supervising dentist’s motion. Held: Reversed.
Because dentist employer was in privity with dentist employee, claim preclusion could potentially apply to block plaintiff’s claim against supervising dentist. Claim preclusion arises if a second suit involves (1) the same cause of action (2) between the same parties [or those in privity with them] (3) after a final judgment on the merits in the first suit. As long as an appellate court affirms at least one ground on the merits, any other claim that was or could have been brought would be subsumed in the judgment, which operates as a merger or bar to any subsequent lawsuit based on the same primary right, whether or not the appellate court addressed the merits of that cause of action on appeal. However, claim preclusion could not apply in this case because the first appellate decision was based on the statute of limitations, which is a procedural matter and not a decision on the merits.
Issue preclusion depends on various factors including whether the issue was necessarily decided in a prior matter. Therefore, the same affirmance that can lead to claim preclusion will result in issue preclusion only for issues actually decided by the appellate court. The court cited a long line of authorities in support of this view, which is echoed by the Restatement Second of Judgments. A different rule would put pressure on appellate courts to discuss every issue raised in the judgment below, creating the judicial inefficiency that issue preclusion was intended to avoid in the first place.
(In case you’re wondering, the supervising dentist probably didn’t make a statute of limitations argument because he had rendered post-op care that apparently was within the statute of limitations.)
(In case you’re wondering, the supervising dentist probably didn’t make a statute of limitations argument because he had rendered post-op care that apparently was within the statute of limitations.)
Trial Court’s Denial of Stipulation to Continue Summary Judgment and Trial to Allow for Discovery was Abuse of Discretion
Hamilton v. Orange County Sheriff’s Dept., 2/7/17 4DCA/3
This decision will help promote professionalism in Orange County litigation culture. Plaintiff sued defendant for employment discrimination. Later, Defendant filed for summary judgment and hearing was scheduled to take place after the trial date. Defendant asked the trial court to continue the trial in order to accommodate summary judgment hearing, and the court granted its request. Plaintiff timely set depositions in order to oppose the summary judgment, but defense counsel was unavailable because of trial. Recognizing the problem that this presented to plaintiff, defense counsel agreed to stipulate to continue the summary judgment and the trial date. The stipulation was filed 16 days before the hearing. The trial court refused to sign the stipulation for a lack diligence, and granted Defendant’s unopposed motion for summary judgment. Held: Reversed.
There are two ways to continue the hearing on a motion for summary judgment: File a declaration under CCP 437c(h) at leaset 14 days before the hearing, or seek a continuance under the ordinary discretionary standard by making a showing of good cause. Getting a continuance under 437c(h) is liberally granted because of the phrasing of the statute. If plaintiff had submitted a 437c(h) request, the trial court would have been hard pressed to deny her request for more time. But Plaintiff filed a stipulation for a continuance of the summary judgment and the trial, and didn’t file a 437c(h) declaration.
The stipulation contained various recitals explaining the situation, and the fact the parties were having settlement discussions. The appellate court found that plaintiff had made a showing of good cause, and that the trial court had abused its discretion in refusing to sign the stipulation. The court said: “While that stipulation was, of course, not binding on the court, principles of encouraging civility, encouraging the settlement discussions that were ongoing, and disposing of cases on their merits counseled in favor of accepting it, absent some good reason for rejecting it.” The court found that while the plaintiff cold have been more diligent, a “relatively minor lack of diligence did not justify the substantial injustice the court‘s order created.” The court also noted that the trial court had granted Sheriff’s request to continue the trial to make way for the summary judgment; and the disparate treatment of plaintiff’s counsel “tilted the scales of justice sharply in favor of the Sheriff.”
The court acknowledged that the Trial Court Delay Reduction Act establishes timelines within which to complete cases. But the policy of promoting judicial economy is outweighed by the policy of disposing of cases on their merits.
CCP section 1281.4 Does Not Require Stay Of Action Pending Appeal Of Denial of Motion To Compel Arbitration
Montano v. Wet Seal, 1/30/17, 2DCA/4
Plaintiff brought a putative class action against Wet Seal alleging violations of California’s Labor Code, and she also included a PAGA claim. The parties had an arbitration agreement that contained a waiver of the right to join claims or bring an action as a private attorney general – i.e., both a class action and PAGA waiver. However, the agreement also provided: “If either party initiates or joins in a lawsuit or arbitration against the other party in violation of this waiver and the waiver is found to be unenforceable for any reason by a court or arbitrator, then this entire arbitration agreement is void and unenforceable by the parties.” This is the opposite of a “severability” provision. The trial court denied the motion to compel arbitration, and then granted plaintiff’s motion to compel discovery. Wet Seal appealed. Held: Affirmed.
First, the non-severability language is clear and Wet Seal didn’t put up much of a fight on that point. And why would they: Who would want potentially staggering class claims decided in arbitration without any right to appeal?
Second, Code of Civil Procedure section 1281.4 requires a trial court to stay an action until a motion to compel arbitration is determined. Wet Seal argued that 1281.4 also requires a trial court to stay the case while a party appeals the denial of a motion to compel arbitration. The court noted that it had already rejected that proposition in Berman v. Renart Sportswear Corp. (1963) 222 Cal.App.2d 385. As importantly, no statute authorizes an appeal of orders compelling discovery and the court rejected Wet Seal’s request to treat its appeal as a writ petition.
Hard to really see the value in pursuing this appeal.
In Trust Litigation, Beneficiary Can’t Sue Trustee for Lost Opportunity Cost
Williamson v. Brooks, 1/31/17 CA2/6
Plaintiff sued former trustees for breaching various fiduciary duties, including duty to keep her informed. Plaintiff alleged that if she had been better informed by the trustees she could have received trust distributions earlier and would have been able to save her house. The trial court rejected all of her claims, and further held that a beneficiary cannot recover for lost opportunity as part of damages. Held: Affirmed.
Her theories in the case didn’t match reality: Father created a family trust and distributed a certain number of shares in his company to subtrusts in favor of each of his adult children, including plaintiff. He made his attorney and accountant the initial trustees. Plaintiff was informed of the subtrust by her father as early as 2008 and 2009, but she didn’t act to gather more information. Moreover, in 2012, father realized if plaintiff became an owner of the company she might harm the company. He fired her for refusing to perform any work and also exercised his right to purchase the shares back from plaintiff’s subtrust. His company replaced the shares with a handsome promissory note, which called for monthly payments of over $6k.
After plaintiff was terminated, she wasn’t able to keep her home, at least on the terms that she preferred. She quitclaimed the home to her sister, who had helped her buy the house, and moved to a place that she had always wanted to live. Also in 2012, she contacted the then-trustees, who provided her with documents and worked with her to begin making monthly payments under the promissory note. After they resigned as trustees, the successor trustee sued them, alleging that they failed to keep plaintiff informed. If they had done what they were supposed to do, plaintiff says she could have kept her home.
The court rejected all of her claims. Even if the trustees had breached a duty to keep her informed (which the court said didn’t happen), plaintiff didn’t want to keep the house because she thought it was toxic, she rejected offers by the family that would have allowed her to keep it, and the house was underwater. Substantial evidence supported the trial’s court’s decision. Plaintiff claims that the trustees should have provided more information also fell flat: The basic duty of the trustee is to inform the beneficiary of the existence of the trust and their status as beneficiaries so they can exercise their rights to secure more information. Finally, no California case says that beneficiaries can recover the value of lost opportunities to the beneficiary.
Trial Court Has Inherent Authority to Award Attorney’s Fees and Charge Them against Beneficiary’s Share of Trust for Bad Faith Litigation Tactics.
Pizarro v. Reynoso, 1/18/17, 6DCA (Sacramento)
In trust litigation by a trust beneficiary against trustee, does the trial court have the inherent power to award attorney’s fees against a beneficiary’s interest in the trust (including against the interest of a non-suing beneficiary) for bad faith litigation tactics, like submitting false testimony in depositions, declarations and at trial? The trial court said, Yes. Held: Affirmed, in so far as the attorney’s fees awarded were chargeable against the beneficiary’s interest in the trust.
It is established that the court’s equitable power includes the power to charge attorney fees and costs against a beneficiary’s share of the trust if that beneficiary, in bad faith, brings an unfounded proceeding against the trust. Rudnick v. Rudnick(2009) 179 Cal.App.4th 1328, 1335. One of the beneficiaries sought to overturn the fee award because she was not the one who brought the action against the trustee. The court held that nothing in Rudnick requires instigation of an action against the trust by the offending beneficiary as a prerequisite to charging attorney fees and costs against the offending beneficiary’s share of the trust estate. Relying on the language of Rudnick and a similar case, the court held that the trial court’s authority exists as part of the inherent jurisdiction of equity to enforce trusts, secure impartial treatment among the beneficiaries, and to carry out the express or implied intent of the settlor.” And, “[w]here the expense of litigation is caused by the unsuccessful attempt of one of the beneficiaries to obtain a greater share of the trust property, the expense may properly be chargeable to that beneficiary’s share.” The fact that beneficiary took unfounded positions, acted in bad faith and testified falsely helped justify the trial court’s ruling.
Footnote: The appellate court reversed the grant of attorney’s fees only to the extent the fee award sought to impose personal liability against the beneficiary.
Pitzer’s guardian angel may protect it against providing late notice of insurance claim
Pitzer College v. Indian Harbor Insurance, 1/13/17, 9th Cir.
While constructing a student dorm, Pitzer College discovered darkened soils that required remediation. Three months after that, it performed the remediation. At some point, its risk management department discovered that the risk is insured, and, three months after remediation, the insurer was notified. Problem: The policy contains notice and consent provisions, as well as choice of law clause in favor of NY law. NY’s law on late notice — If you snooze you lose. But under California common law,
the notice-prejudice rule provides that an insurer must show that it was prejudiced by late notice in order for a notice clause in the policy to bar coverage. If California’s notice-prejudice rule is a “fundamental public policy” (no case apparently has said it is), the California rule will presumably trump NY law on that point.
After Indian Harbor denied coverage citing late notice, Pitzer sued. The trial court applied NY law in favor of Indian Harbor and dismissed Pitzer’s claims; on appeal, 9C has certified to the California Supreme Court the question of whether California’s notice-prejudice rule is a “fundamental public policy.” We’ll have to wait and see if Pitzer’s risk management department has a guardian angel looking after it.
No FLSA exemption from overtime for service advisors
Navarro v. Encino Motorcars, LLC, 1/9/17, 9th Cir.
The issue facing 9C was whether the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201–219, requires automobile dealerships to pay overtime compensation to service advisors. The district court said no and threw the case out. Held: Reversed (again).
Plaintiffs are service advisors for a Mercedes dealership that sells and services Mercedes-Benz cars.
In 1970, the DOL had issued a regulation that the 213(b)(10) exemption did not encompass service advisors. In 1974, 29 U.S.C. § 213(b)(10) was amended. It excludes from overtime compensation “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” at auto dealerships.
In 1978, the DOL issued an opinion letter that stated, contrary to the agency’s regulation, service advisors were exempt under 29 U.S.C. § 213(b)(10)(A). In 2007, the DOL proposed to amend the 1970 regulation to make it consistent with the 1978 opinion letter, but in 2011 it reaffirmed its regulation that service advisors are not exempt from overtime. Confused yet?
In throwing the case out, the trial court must have relied on the DOL’s 1974 opinion letter; in reversing the trial court, 9C gave deference to the DOL’s 2011 final rule reaffirming the agency’s original 1970 position under the principles of agency deference described in Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).
The Supreme Court reversed, holding that the DOL’s 2011 regulation was arbitrary and capricious for lack of even minimal supporting analysis, and it therefore lacked the force of law under the Administrative Procedure Act: “This lack of reasoned explication for a regulation that is inconsistent with the Department’s longstanding earlier position results in a rule that cannot carry the force of law.”
On remand, 9C still reversed the trial court. This time it did an old fashioned statutory construction, giving no deference to the DOL’s 2011 regulation.
The court found that because the exemption only lists “salesman, partsman, or mechanic,” service advisors are not covered. And even if service advisors are “salesmen,” they are not selling cars. They are also not servicing cars because Random House defines servicing as maintaining or repairing cars. And that service advisors are integral to the servicing process doesn’t make them servicers.
It didn’t help the employer that exemptions are narrowly construed. Finally, the court examined the legislative history and saw nothing to suggest that Congress intended to cover service advisors, only salesmen and mechanics.
If you want to still use the exemption, you’ll have to open your dealership in 4C, 5C or Montana.