California Case Summaries

New California Civil Cases

by Monty A. McIntyre, Esq.

Monty A. McIntyre, Esq. is the publisher of California Case Summaries™, which provides monthly, quarterly and annual summaries, organized by legal topic, of every new published CA civil case—helping lawyers save time, win more, and make more money. Monty has been a California civil trial lawyer since 1980, a member of ABOTA since 1995, and is a mediator, arbitrator and referee at ADR Services, Inc., conducing Zoom hearings throughout California. To schedule a matter, contact Monty’s case manager Haward Cho, haward@adrservices.com or hawardSDteam@adrservices.com, (213) 683-1600. California Case Summaries™ (https://cacasesummaries.com).

CALIFORNIA SUPREME COURT

Partnerships

Siry Investment, L.P. v. Farkhondehpour (2022) __ Cal.5th __ , 2022 WL 2840312: The California Supreme Court affirmed in part, and reversed in part, the Court of Appeal’s decision in plaintiff’s action alleging fraudulent diversion of partnership profits. After a prior appeal, the case was remanded to the trial court. Defendants failed to respond to discovery responses, even after being ordered to do so. The trial court issued an order granting terminating sanctions striking defendants’ answers and entering their default. The trial court later issued a default judgment against defendants in the total sum of $12,023,067.10 (compensatory damages, with interest, of $956,487; treble damages of $2,869,461 pursuant to Penal Code section 496(c); punitive damages of $4 million (plus $1 only against defendant 416 South Wall Street); attorney fees totaling $4,010,008.97; and costs of $187,109.13). The California Supreme Court, addressing conflicts in the Courts of Appeal, ruled that (1) a party in default has standing to file a motion for a “new trial” asserting legal error relating to calculation of damages and (2) a trial court may award treble damages and attorney fees under Penal Code section 496, subdivision (c) in a case involving, not trafficking of stolen goods, but instead, fraudulent diversion of a partnership’s cash distributions. The Court of Appeal, applying Code of Civil Procedure section 657(7), properly determined that defendants’ challenges to the damages awarded in the original and amended default judgment raised, and constituted, errors in law that were properly brought to the court’s attention via defendants’ motion to vacate the trial court’s decision and to grant a new trial/judgment hearing. Treble damages and attorney fees are available under Penal Code section 496(c) when property has been obtained in any manner constituting theft, and the Supreme Court concluded that the statute’s unambiguous words apply to fraudulent diversion of partnership case distributions. (July 21, 2022.)

Settlement

Grande v. Eisenhower Medical Center (2022) __ Cal.5th __ , 2022 WL 2349762: The California Supreme Court affirmed the Court of Appeal’s decision that had affirmed the trial court’s ruling, following a bench trial, concluding that the language in a settlement and release agreement whereby plaintiff had settled an earlier class action wage and hour action against a staffing company (FlexCare LLC) did not bar the claims the plaintiff had against defendant hospital (Eisenhower Medical Center) in this class action wage and hour case. Staffing company FlexCare LLC arranged for a nurse, plaintiff Lynn Grande, to work at defendant hospital. The staffing company agreed to indemnify defendant hospital for certain obligations relating to the staffing arrangement. Plaintiff nurse sued the staffing company for violating the Labor Code and the Unfair Competition Law. That case settled and the trial court entered judgment upon the settlement. The hospital was not a named party in that action. Plaintiff nurse then sued defendant hospital, based on the same alleged violations. The trial court rejected defendant’s

argument that because of the first judgment, claim preclusion foreclosed plaintiff’s second suit. The California Supreme Court agreed. Claim preclusion can be asserted only by a party in the first action or someone in privity with a party in the first action. In this case, a nonparty (defendant hospital) argued that it was in privity with a party (the staffing agency) to benefit from the claim-preclusive effect of a judgment that undoubtedly bound an opposing party (the plaintiff nurse). Privity requires the sharing of an identity or community of interest, with adequate representation of that interest in the first suit, and circumstances such that the nonparty should reasonably have expected to be bound by the first suit. (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 826.) There was no such privity in this case because of the hospital and staffing agency’s different legal interests. Moreover, preclusion could not be based on a claimed indemnification or agency relationship between the hospital and the staffing company. The California Supreme Court disapproved of Castillo v. Glenair, Inc. (2018) 23 Cal.App.5th 262, 278–281 to the extent it was inconsistent with this decision. (June 30, 2022.)

CALIFORNIA COURTS OF APPEAL

Arbitration

Evenskaas v. California Transit, Inc. (2022) _ Cal.App.5th _ , 2022 WL 2763374: The Court of Appeal reversed the trial court’s order denying defendant’s motion to compel arbitration of plaintiff’s wage and hour class action. The trial court denied the motion on the grounds that California law, rather than the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.), applied to the arbitration agreement because the agreement did not involve interstate commerce, and under the California Supreme Court’s decision in Gentry v. Superior Court (2007) 42 Cal.4th 443 (Gentry) plaintiff’s waiver of his right to bring class action claims was unenforceable. The Court of Appeal disagreed. Because defendant California Transit was hired to provide paratransit services (required to be provided by the Americans with Disabilities Act of 1990 (42 U.S.C. § 12101 et seq.), and plaintiff was hired to provide those services, the arbitration agreement involved interstate commerce for purposes of the FAA, the FAA applied to the arbitration agreement, and the FAA preempted the Gentry rule that certain class action waivers in employment arbitration agreements are unenforceable. (C.A. 2nd, July 15, 2022.)

Attorney Fees

City of L.A. Dept. of Airports v. U.S. Specialty Ins. Co. (2022) _ Cal.App.5th _ , 2022 WL 2156119: The Court of Appeal affirmed the trial court’s decision denying defendant’s motion to attorney fees after the jury returned a verdict in favor of plaintiff awarding it $1. Defendant bonding company argued that, despite losing on contract liability, it was entitled to fees as the prevailing party because the jury awarded plaintiff only nominal damages rather than the $3.4 million that plaintiff sought. The Court of Appeal concluded the trial court had discretion to find that neither party prevailed. (C.A. 1st, June 15, 2022.)

Corporations

Fowler v. Golden Pacific Bancorp. (2022) _ Cal.App.5th _ , 2022 WL 2253851: In an action to compel an inspection of books and records pursuant to Corporations Code section 1600 et seq., the Court of Appeal determined the primary issue in the appeal was moot because plaintiff was no longer a member of defendant’s board of directors after it was acquired by Social Finance, Inc. Nevertheless, it elected to exercise its discretion to reach the merits because it was presented with an issue of substantial and continuing public interest: whether a director’s “absolute” right of inspection under section 1602 may be curtailed because the director and corporation are involved in litigation and there is a possibility the documents could be used to harm the corporation. The Court of Appeal held the mere possibility that information could be used adversely to the corporation is not by itself sufficient to defeat a director’s inspection rights. Rather, any exception to the general rule favoring unfettered access must be limited to extreme cases, where enforcing an “absolute” right of inspection would produce an absurd result, such as when the evidence establishes the director’s clear intent to use the information to breach fiduciary duties or otherwise commit a tort against the corporation. (C.A. 3rd, June 23, 2022.)

Elder Abuse

Royals v. Lu (2022) _ Cal.App.5th _ , 2022 WL 2800956: The Court of Appeal reversed the trial court’s order granting plaintiff’s request for a pretrial right to attach order (RTAO) in the sum of $3,440,000 against defendant under section 15657.01 of the Elder Abuse and Dependent Adult Civil Protection Act (the Elder Abuse Act; Welfare & Institutions Code, section 15600 et. seq.). After plaintiff filed her petition, defendant filed a cross-petition. Both made competing claims of Elder Abuse against the other. A financial elder abuse claimant may obtain an attachment for potential compensatory damages and an award of attorney fees and costs associated with those damages, but only if the request for it complies with all applicable provisions of the statutory scheme governing pretrial attachments (the Attachment Law; Code of Civil Procedure, section 481.010 et. seq.). The Court of Appeal reversed the trial court, concluding that defendant’s

attachment application did not comply with four provisions of the Attachment Law. It was not (i) supported by competent evidence (id., section 482.040), (ii) did not on an attachable “amount” (id., section 484.020(b)), (iii) was not based on a claim upon which an attachment may be issued (id., section 484.020(a)), and (iv) was not measured by the defendant’s claimed “indebtedness” to the plaintiff (id., section 483.015(a) (1)). Ruling on an issue of first impression, the Court of Appeal held that potential punitive damages and statutory penalties in a financial elder abuse claim may not be secured by the extraordinary remedy of a pretrial attachment. (C.A. 1st, July 18, 2022.)

Employment

California Business & Industrial Alliance v. Becerra (2022) _ Cal.App.5th _ , 2022 WL 2353367: The Court of Appeal affirmed the trial court’s order sustaining defendant’s demurrer, without leave to amend, to a complaint filed by plaintiff, a lobbying group for small and midsized businesses in California, seeking a judicial declaration that the Labor Code Private Attorneys General Act of 2004 (PAGA; Labor Code, section 2698 et seq.), is unconstitutional under various theories and an injunction forbidding defendant from implementing or enforcing PAGA. On appeal, plaintiff argued that PAGA violates California’s separation of powers doctrine by allowing private citizens to seek civil penalties on the state’s behalf without the executive branch exercising sufficient prosecutorial discretion. The Court of Appeal rejected this argument for two reasons. First, the California Supreme Court held in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian), that “PAGA does not violate the principle of separation of powers under the California Constitution,” and Iskanian was directly on point and controlling. Second, even if Iskanian did not require the result, the Court of Appeal would have reached it anyway through application of California’s preexisting separation of powers doctrine. PAGA is not meaningfully distinguishable from comparable qui tam statutes outside the employment context, including the California False Claims Act (Government Code, section 12650 et seq.), the Insurance Frauds Prevention Act (Insurance Code, section 1871 et seq.), the Safe Drinking Water and Toxic Enforcement Act of 1986, colloquially known as Proposition 65 (Health & Safety Code section 25249.5 et seq.) and many others. Plaintiff and its supporting amici failed to produce one single case in which any of these many statutes has been held to violate California’s separation of powers doctrine. Nor do they identify any sufficiently significant distinctions between those statutes and PAGA, or any other compelling reason for the Court of Appeal to break new ground. (C.A. 4th, June 30, 2022.) Sanchez v. Bezos (2022) _ Cal.App.5th _ , 2022 WL 2352784: The Court of Appeal affirmed the trial court’s ruling that plaintiff’s declaration, asserting that numerous reporters had informed him of defendants’ accusations against him, was inadmissible hearsay. The Court of Appeal also affirmed the trial court’s order granting of defendants’ anti-SLAPP motion to strike (Code of Civil Procedure, section 425.16) and entry of judgment in favor of defendants, and its post-judgment order awarding attorney fees in the sum of $218,385 and costs in the sum of $36,019.26. Plaintiff’s action alleged defamation and intentional infliction of emotional distress. Plaintiff’s declaration in opposition to the anti-SLAPP motion recounted not what he himself had witnessed, but what reporters told him they had witnessed. The reporters’ statements were offered for the truth of the matter asserted, namely that the reporters heard defendants make defamatory comments about plaintiff. The reporters’ statements therefore were hearsay. The reporters’ statements recounted in plaintiff’s declaration were not made under oath or penalty of perjury, and the trial court properly declined to consider them and properly granted the anti-SLAPP motion and awarded fees and costs. (C.A. 2nd, June 30, 2022.)

Insurance

Marina Pacific Hotel and Suites, LLC v. Fireman’s Fund Ins. Co. (2022) _ Cal.App.5th _ , 2022 WL 2711886: The Court of Appeal reversed the trial court’s order sustaining defendant’s demurrer, without leave to amend, to plaintiffs’ complaint alleging causes of action for breach of contract, tortious breach of contract, elder abuse and unfair competition based upon defendant’s denial of coverage and refusal to pay (or to advance) commercial property insurance policy benefits for losses caused by the COVID pandemic. Plaintiffs alleged the COVID-19 virus was present on, and had physically transformed, portions of the insured properties—“direct physical loss or damage” within the meaning of defendant’s first party commercial property insurance policy. The trial court sustained the demurrer concluding that the COVID-19 virus could not cause direct physical loss or damage to property for purposes of insurance coverage. The trial court also found there was a virus exclusion in the policy. The Court of Appeal disagreed, concluding that by alleging that COVID-19 not only lives on surfaces but also bonds to surfaces through physicochemical reactions involving cells and surface proteins, which transformed the physical condition of the property and forced plaintiffs to close their business on the property, plaintiffs adequately alleged direct physical loss or damage caused by the COVID-19 virus and a cause of action for breach of contract. (C.A. 2nd, July 13, 2022.) n