Source: http://www.claassenlegal.com/blog/
Timestamp: 2019-04-23 16:38:13+00:00

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Contractual provisions specifying forums and venues for dispute resolution are ubiquitous in modern life. From on-line retailers to airlines to e-mail providers, it is no exaggeration to state that the average American agrees to ten or more of them per day simply by visiting websites or installing software alone. Such provisions are equally wide-spread in commercial contracts and, given their wide use, significantly impact just about everyone’s rights in civil litigation. They determine when, where, and how disputes between private parties are resolved.
In DisputeSuite.com, the plaintiff brought a lawsuit in Los Angeles County alleging both contract and fraud claims. The dispute arose from a contractual relationship in which some of the contracts contained Florida choice of venue provisions.
The high court affirmed a lower court decision rejecting an award of attorney fees to a defendant who successfully moved to dismiss a contract and fraud case based on the doctrine of forum non-conveniens. The supreme court found that the trial court had not abused its discretion in denying attorney fees under Civil Code section 1717 when the defendant secured a mere procedural dismissal of a contract cause of action. The high court reasoned that the dismissal was merely procedural because the plaintiff could and in fact did re-file the lawsuit in Florida.
Broadly speaking the high court’s opinion in DisputeSuite.com is uncontroversial. It affirms trial courts’ discretion under Section 1717(b) to find that no party prevails unless a contract dispute is completely resolved. (See Civ. Code § 1717, Subd. b [“The court may also determine that there is no party prevailing on the contract . . .”].) That affirmation is squarely in line with the public policy behind the section. It was intended to prevent unfairly one-sided fee provision. (Santisas v. Goodin (1998) 17 Cal.4th 599, 602 (Santisas).) If a defendant could claim attorney fees for forum-related dismissals, fee awards in the pre-trial dismissal context would be one-sided even if a plaintiff ultimately succeeds on the merits in another forum.
However, in relying solely on Civil Code section 1717 in a case that included both contract and fraud claims the supreme court's opinion begs the question of what types of claims are covered by the decision.
The supreme court in DisputeSuite.com does not appear to have addressed its own prior statements in Santisas that tort causes of action fall outside the scope of Civil Code section 1717. Rather, it characterized the entire action, including the plaintiff’s contract and fraud claims, as a single “contract” action. Thus, the decision begs the question of whether a trial court’s discretion to deny fees under Subdivision (b)(1) of Section 1717 applies only to contract causes of action or to other actions as well.
Given the widespread use of contractual forum provisions, including arbitration clauses and contractual choices of venue, the supreme court missed a good opportunity to clarify for the plaintiffs' bar and its clients the risks they face from getting forum choices wrong in civil litigation. Similarly, it could have used the opportunity to clarify the potential rewards available to defendants through venue and forum challenges.
John Claassen is an experienced commercial litigator. He practices from the offices of Claassen, P.C. in Oakland, California. For more information about his firm, please click here. While this blog entry is published for informational purposes, portions of this blog post may constitute “communications” within the meaning of California Rule of Professional Conduct 1-400. Thus, as a possible "Advertisement" it is not intended to constitute legal advice. Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm. This possible Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2017. All rights reserved.
A david took on a goliath of sorts in the First District Court of Appeal last week. After the First District ordered the lower court to dismiss the case as a SLAPP (strategic lawsuit against public participation), the david lost big. The case is Barker v. Fox and Associates.
Motions brought under California’s Anti-SLAPP statute were not originally intended to pummel the little guy. Rather, Code of Civil Procedure section 425.16 was meant as a powerful tool to protect him from moneyed interests who asserted frivolous lawsuits to silence opposition.
The Anti-SLAPP statute works by imposing a stay on discovery and requiring the plaintiff to offer evidentiary and legal support for her claims at the start of a lawsuit. Even if the motion is denied, a defendant can appeal immediately. Thus, even if the plaintiff ultimately wins the motion, a case might be sidetracked for many months while the case is under review. If the defendant wins, she is entitled to a non-discretionary award of attorney’s fees. Awards given under the statute range from tens of thousands to even hundreds of thousands.
The archetypical SLAPP is a lawsuit by a rich developer suing a community activist who speaks out against a development. While over time the statute has broadened in scope, the statute focuses on whether the activity of the defendant that is challenged by the plaintiff arises from activity protected by the First Amendment.
Just how the Barker case resulted in a big loss for the wrong person serves as a good reminder to anyone considering a lawsuit to vindicate her reputation. In California, you need to be really careful.
While the Anti-SLAPP statute mostly applies to situations involving public figures or issues of public concern, it can also apply to situations that are not so obvious. It can apply to speech in connection with run of the mill lawsuits even between parties who are not rich, not noteworthy, and not speaking about big issues. It can apply in HOA settings. It can apply to on-line reviews about businesses. It can apply if it concerns a matter of public interest even if the situations lack news coverage.
Assuming that a defendant can show the Anti-SLAPP statute applies, offering evidence to support a defamation claim without having conducted discovery can often be challenging. In some situations, a plaintiff has to prove that the defendant lacked reasonable grounds for believing a statement was true or did not in fact believe a statement was true. Similarly, California has a defense, known as the “common interest” privilege, that requires similar proof. The common interest privilege applies to statements made between persons “interested in them” (persons providing on the job performance reviews). Without discovery, plaintiffs are often left with conjecture or hearsay as to what the defendant believed or on what a defendant based his statement.
In Barker, the plaintiff was an in-home caregiver for an elderly person. After a conservatorship was established, a nurse case management company took over the management of her care. Plaintiff continued to working alongside the case management company’s nurses along with other previous caregivers. One day, the elderly person was found bruised and emotionally distraught while in the care of a nurse hired by the case management company.
The company’s CEO responded to the situation by writing an e-mail to the conservator, the patient’s children, and others. The letter that suggested the plaintiff rather than the company nurse was responsible for what happened. Specifically, the CEO asserted that the plaintiff failed to provide an adequate orientation to the company nurse. The plaintiff was then placed on probation, which was followed by his resignation.
Upset by the reputational harm he suffered, the plaintiff filed a complaint. The complaint alleged causes of action for libel per se, intentional infliction of emotional distress, and negligent infliction of emotional distress. The defendants filed an Anti-SLAPP motion in response. The plaintiff did not argue that the Anti-SLAPP statute did not apply to the situation. He only argued that his case had some merit. The trial court agreed with the plaintiff. The defendants appealed.
The plaintiff waived an argument that the Anti-SLAPP Statute did not apply.
The plaintiff’s complaint did not identify the statements that were allegedly defamatory.
The e-mails on their face were not defamatory per se. Thus, the plaintiff was required to plead and proof special harm. The plaintiff never alleged or proved special harm.
The common interest privilege in Civil Code section 47(c) applied to the e-mails. Yet, the plaintiff offered no evidence of that the defendants felt ill-will towards them or believed the alleged statements were false.
Things arguably did not have to end this way. The plaintiff might have avoided dismissal by arguing that the Anti-SLAPP statute did not apply. The defendants only asserted that the statement was in connection with conservatorship proceedings and was thus protected. Yet, the e-mail was a statement very much outside of an official proceeding covered by the Anti-SLAPP statute. It concerned day-to-day care of a person rather than protected activity.
The plaintiff may also have been able to avoid dismissal by asserting the argument for the first time on appeal. Appellate courts typically allow the party defending an appeal to raise any argument that justify the trial court’s decision on the theory that it is the results that count, not necessarily the way the lower court arrived at the result.
In any event, Barker serves to remind all potential plaintiffs that things can go seriously wrong. You need to anticipate Anti-SLAPP motions. You need to avoid alleging facts that make it apply where possible. If it is not possible and you still want to bring the case, you need to ensure that your complaint is strong and the allegations have evidentiary support. The plaintiff in Barker did not do this and suffered a painful loss as a result.
20 years ago the California Legislature attempted to limit local rent ordinances by allowing landlords to set market rent at the beginning of tenancies through its enactment of the Costa Hawkins Rental Housing Act (the “Act”). Cal. Civ. Code § 1954.53. The Act nevertheless permitted local agencies to limit rent increases if the increase followed the issuance of a notice to vacate issued under Civil Code section 1946.1.
John Claassen practices civil litigation from the offices of Claassen, P.C. in Oakland, California. For more information about his firm, please click here. While this blog entry is published for informational purposes, portions of this blog post may constitute “communications” within the meaning of California Rule of Professional Conduct 1-400. Thus, as a possible "Advertisement" it is not intended to constitute legal advice. Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm. This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2015. All rights reserved.
FOR IMMEDIATE RELEASE. August 19, 2015. Claassen, P.C. scored a win for a client earlier this week when the Sixth District Court of Appeal reversed a trial court’s partial denial of a Special Motion to Strike. The panel of three justices returned the case to the lower court with directions to enter a new order striking the entire complaint and award attorney’s fees for the firm’s efforts. The case is Privato Security, LLC v. Sidman.
A special motion to strike is a device sometimes used by defendants to obtain an early dismissal of a case under California Code of Civil Procedure 425.16, sometimes called the Anti-SLAPP Statute. It is available when a plaintiff sues for alleged conduct that would typically be protected by the First Amendment and the case lacks even minimal merit. The motion must be brought soon after service of process. When a court grants such a motion, the complaint is dismissed with prejudice. The defendant is entitled to a mandatory award of attorney’s fees. Unlike many pre-trial motions, a defendant who loses all or part of the motion may appeal immediately.
In Privato Security, LLC v. Sidman, the firm’s client founded a company called WebLoq. WebLOQ allegedly ran into financial difficulties and it ceased operations in 2012 and its assets were assigned to a new company, Privato Security, LLC (Privato). Privato subsequently filed an action against the firm’s client alleging that he acted improperly in sending letters to other WebLOQ shareholders seeking their support in litigation and asserting Privato and its founders violated their fiduciary duties. It asserted causes of action for libel, breach of contract, unfair competition and declaratory relief.
The firm filed a special motion to strike on behalf of its clients, arguing that each of the causes of action was protected and the case lacked merit. The trial court granted the motion only in part, holding that the libel claim was protected and was barred by the litigation privilege. The firm then appealed the partial denial.
Sidman has made a threshold showing that the causes of action for breach of contract, unfair competition, and injunctive and declaratory relief arise from speech or petitioning activity protected under section 425.16, subdivision (e)(2) and Privato has not demonstrated a probability of prevailing on any of the causes of action. We therefore conclude that Sidman’s anti-SLAPP motion should be granted as to the causes of action for breach of contract, unfair competition, and injunctive and declaratory relief.
(Oakland, CA, April 18, 2015) There is currently a debate in California intermediate-level courts about whether attorney’s fees should be awarded to a defendant who obtains a non-substantive dismissal of a contract action when the contract contains an attorney-fee provision. The Second District Court of Appeals considered this issue in Disputesuite.com, LLC v. Scoreinc.com, et al., B248694 (Apr. 14, 2015) last week. In an apparent case of first impression among California courts, it held that a defendant who obtains a dismissal of an action based on a forum selection clause in a contract is not a “prevailing party” entitled to an award of attorney’s fees. A forum selection clause is a contract provision that requires actions to be asserted in a particular geographic location.
In Disputesuite.com the defendants obtained a dismissal of the case brought in California in favor of Florida based on a contract provision that provided “for the exclusive jurisdiction of the state and federal courts located in Hillsb[o]rough, Florida.” The Second District affirmed an order denying the defendant’s motion for attorney’s fees. To understand why the court declined to award fees, some background is in order.
In 1995, the Supreme Court held that “[t]he prevailing party determination is to be made only upon final resolution of the contract claims…[.]” Hsu v. Abbara (1995) 9 Cal.4th 863, 876. It held that a defendant who obtained a simple, unqualified victory by proving no contract was formed was entitled to an award of fees. Id. at p. 876.
The Supreme Court in HSU did not decide whether a defendant who obtains a dismissal for technical reasons is the prevailing party. Without a Supreme Court decision directly on point, state intermediate courts have come out on both sides of the issue. In Estate of Drummond (2007) 149 Cal.App.4th 46, the Sixth District Court of Appeal held that an attorney’s former clients, who had sued the attorney in a prior action, were not entitled to contractual attorney’s fees against him after he filed a petition against them in probate court. Because the dismissal stemmed from the compulsory counterclaim rule, a technical deficiency in the petition, the Sixth District reasoned there was no “final resolution” under Hsu.
The Fourth District has issued two decisions coming to the opposite result. See Profit Concepts Management, Inc. v. Griffith (2008) 162 Cal.App.4th 950 [awarding attorney fees after a defendant obtains a dismissal for lack of personal jurisdiction]; PNEC Corp. v. Meyer (2010) 190 Cal.App.4th 66 [finding no abuse of discretion where the trial court awarded contractual attorneys fees to a defendant who prevailed on a motion to dismiss based on forum non-conveniens].
Following Drummond, the Second District reasoned in Disputesuite.com that an award of attorney’s fees could only be reconciled with the pre-condition in Hsu that there be a final resolution of the contract claims if the word “final” is qualified to mean “final” for purposes of a particular lawsuit. Such an outcome, it reasoned, would be inconsistent with the thrust of the Hsu decision. Such an outcome, it continued, would also be inconsistent with the plain language of Civil Code section 1717, which articulates the circumstances under which contractual attorney fee provisions are honored.
The award of attorney’s fees in civil litigation is no insignificant event. The risk that the filing of any particular lawsuit might result in the award of fees is an important factor. In light of the conflict between the Fourth District on the one hand and the Second and Sixth Districts on the other hand, this important issue is ripe for review by the California Supreme Court. The way the Supreme Court resolves the question is less important than clarifying under what circumstances an award of attorney’s fees might be made.
John Claassen is an experienced litigator. He practices throughout California from the offices of Claassen, P.C. in Oakland, California. For more information about his firm, please click here. While this blog entry is published for informational purposes, portions of this blog post may constitute "communications" within the meaning of California Rule of Professional Conduct 1-400. Thus, as a possible "Advertisement" it is not intended to constitute legal advice. Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm. This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2015. All rights reserved.
(Oakland, CA March 3, 2015) Much goes into the art of judging. Judges have to listen well. They have to bite their tongue far more often than good ones let on. They have to know the law. They have to know the limits of their discretion. They exercise judgment. They check their feelings and make tough calls even when they know decisions made in their courtrooms can profoundly impact lives. They exercise restraint all day long. They sift through far more cases than many people realize. They have to honor the schedules of counsel and other professionals, including investigators and experts, coming through the courtroom.
Given the amount and complexity of the work crossing their benches and the huge impact their decisions sometimes have on lives, it must be tempting for some of them to take short cuts now and then. Short cuts can save work, save a schedule, or even spare a judge some of the guilt of making an impactful decision.
The Fourth District Court of Appeal recently issued a rebuke of sorts to a trial court for taking one such shortcut. The case is Andrew V. v. Superior Court, G051310 (4th Dist., January 23, 2015).
In Andrew V. v. Superior Court, the trial court issued a "temporary" order allowing a mother to move from Orange County to Washington State to take a job promotion after a custody investigator issued a recommendation allowing the move-away. However, the investigator was not available to be cross-examined on the date of the hearing to adopt the recommendations. The trial court continued the hearing date. However, it temporarily allowed the children to move to Washington pending the hearing. As a practical matter, the order probably ensured a final judgment in favor of the mother at the continued hearing: few courts would on their own allow a move-away to new schools and new city only to take it back a few months later. Instead, they would likely find it is in the best interests of the children to continue the new status quo.
A move-away case can be as heart wrenching as any in family law. Because of their impact on the children and parents alike, courts must review the situation de novo based on the best interests of the children in light of all of the factors if the two parents have joint physical custody. While a child-custody investigator often makes recommendations, both parents are entitled to a trial and have an express right to cross-examine the investigator. The decision is stayed for 30 days to allow for appellate review.
Respondent court erred in construing California law to allow for a “temporary” move-away first and a hearing later. A full adversarial hearing must precede, not follow, any out-of-state move-away order, however denominated.
There is no . . . exemption simply because the order is denominated as “temporary.” Temporary orders may have equally serious implications inasmuch as they alter the status quo and affect the children’s interests in stability and continuity. Children live in the present tense, and “temporary” relocations may have a severe and pernicious impact on their well-being and sense of security.
The Fourth District seems to have correctly decided the law. Its decision should serve as a reminder to a large number of courts and divorce professionals throughout the state that short-cuts involving important rights simply cannot be taken.
Still, in making an example of the situation for others to learn from, the children in Andrew V. have paid one helluva price. Returned from Washington after believing they were moving there permanently, they face the uncertain prospects of yet another court battle. For this reason, one can only observe that the process as a whole has failed them miserably.
(March 1, 2015, Oakland, CA) Intentional interference with prospective economic advantage allows recovery for a defendant’s interference with some types of economic relationships. The tort has received little scrutiny since 2003 when the California Supreme Court considered its intent requirement in Korea Supply Company v. Lockeed Martin Corp., 131 Cal.Rptr.2d 29, 29 Cal.4th 1134, 63 P.3d 937 (2003) (specific intent to interfere not required). Prior to Korea Supply, the debate centered mostly on whether, since the tort applies to a wider range of economic relationships than contractual interference, recovery should be limited to defendants whose interference was accomplished with “independently wrongful” conduct.
The tort received renewed attention late last month when Division 8 of the Second District Court of Appeal held in a case of first impression that the lowest bidder on a public works contract could be sued for prospective interference by the next lawful lowest bidder if the bid is won by the payment of unlawfully low wages. Roy Allen Slurry Seal, Inc. v. American Asphalt South, Inc., B255558 (February 20, 2015) resolved the question of whether a bidder for a public contract could enjoy an actionable expectancy. The majority’s holding provoked a strong dissent from Justice Beth Grimes who argued it conflicted with tenets of public contract law. A copy of the case is available here.
Whether a prospective interference claim should be available to losing bidders for public contracts turns on a few different policy concerns: obtaining the lowest price from a capable contractor and ensuring the completion of contracts.
In Roy Allan Slurry Seal, the winning bidder allegedly won approximately 23 contracts in a total of 5 counties for an aggregate of $14.6 million over three years by unlawfully paying below the prevailing wage required for public contracts set forth in Labor Code sections 1770 and 1771. After the plaintiffs sued in five separate counties, the trial courts came out with conflicting rulings on the defendant’s demurrers. The appellate proceedings were consolidated for hearing.
no losing bidder could ever sue a competitor for interfering with the bidding process no matter how egregious the misconduct because no economic relationship exists until and unless its bid is accepted. It does not require much imagination to envision a contractor who obtains a public works contract by bribery, extortion, or familial connections. At bottom, the intentional interference tort was designed to protect an economic expectancy that showed a reasonable probability of coming into being. A bidder on a public agency contract who in fact submits the lawful lowest bid has such an expectancy, and it should not be thwarted by a competitor’s illegal conduct.
The concerns expressed by the majority have merit. No legitimate interest is served by denying all remedy against a winning bidder whose unlawful conduct ensures the win. Over time, a court’s denial of a remedy to losing bidders for public contracts can have a profoundly important consequence: reduced competition. Specifically, the unlawful winning bidder slowly marginalizes competitors and gains pricing power.
These concerns are palpable from the facts alleged in Roy Allan Slurry Seal. Making a low bid with the expectation that the business can recoup the loss through illegally low wage payments is a risky proposition. The statutes in the Labor Code are especially harsh. They come with an award of attorney’s fees, expedited administrative procedures for relatively quick entries of judgment, penalties, and attorney-general lawsuits, to name just a few incentives imposed on employers in the Labor Code to get wage compliance right.
Because reasonable bidders will not typically risk violations of the Labor Code to undercut the few businesses willing to do so, reasonable bidders can eventually be marginalized or driven out of business entirely by unlawful actors. As lawful bidders lose relevance, the sole remaining unlawful one gains increased pricing clout. Specifically, public entities are allowed to overlook low bids based on some subjective factors, including the “responsibility” of the winning bidder. Whether a bidder is responsible turns in part on whether they have the skills and equipment necessary to complete the task. As the unlawful winning bidder wins more contracts, it acquires more experience and possibly equipment than its routinely losing competitors. As a result, it starts to look more responsible than the bidders it undercuts. Thus, in the long run, it competes with fewer bidders and can even sometimes bid over the now higher bid prices based on its perceived superior responsibility.
Justice Grimes argued in dissent that, since public contract law favors low bids, the majority erred in allowing a prospective interference claim. She explained that in this case it actually favored higher prices, which runs counter to policies of public contract law. In the short term she is correct. Yet, anti-competitive conduct feeds on this short-term outlook. Over the long term, by harming competition, unlawful bidders come into their clout-wielding own.
Justice Grimes also argued that a losing bidder can have no business expectancy in a public contract because, as a matter of law, bidders for public contracts have no expectancy in them. Her argument has some appeal on first blush in that it is bright-lined. Moreover, it ties in nicely with the policies in public contract law of non-liability of a public entity to losing bidders. However, the case at issue did not concern a public entity’s liability and no legitimate policy concern requires neat parallelism between the respective liabilities of a public entity and a winning bidder.
Moreover, one need only observe the conduct of the winning bidder to understand that Justice Grimes is in fact and business practice wrong. Indeed, the unlawful low bidder struts not with a mere business expectancy but rather with an absolute certainty that the contracts belong to it alone.
Losing bidders are in some ways the canaries in the coal mine of illegal contracting: they are the first to suffer when the environment turns foul. It is solidly within the public interest for losing bidders to voice a warning that not all is well. It is equally within the public interest for bad actors to operate under the risk that their profits will be completely undone.
That is not to say that there are not valid counter-vailing concerns. As much as there is a public interest in ensuring the integrity of bidding on public contracts, there is also a public interest in not routinely second-guessing contract awards. Opening winning bidders to easy litigation from competitors arguably threatens the completion of some public projects.
As noted above the Labor Code is rich in fodder to satisfy the independently wrongful conduct element of prospective interference claims. Some of the statutory violations are very technical. Without the element of an existing business relationship as a limiting factor on the tort in bid situations, there is some risk that the tort becomes as broad and technical as the Labor Code itself.
Still, in the vast majority of the cases, this fear should not play out. In the context of a bid for a single public contract, Labor Code violations would occur after the alleged interference. Indeed, the employees work after the bidding is complete. In the single bid situation, it would seem very difficult as a matter of law for the second lowest bidder ever to win.
At the same time, there is no strong public policy to be gained by awarding damages to a low bidder in a single bid because the bad actor has not yet gained clout from its activity. There is a correspondingly reduced incentive for the second lowest bidder to sue. Liability for a single contract is difficult to prove and the gains are usually less substantial.
Moreover, were a losing bidder to sue over merely technical violations of the Labor Code rather than substantive ones like unlawfully low wages, the losing bidder would likely face an uphill battle pleading and proving causation.
In the single bid situations, there exists another, albeit flawed remedy, in the form of ordinary mandate in Code of Civil Procedure section 1085. Such remedy is flawed because, while the government ought to approach such a petition somewhat neutrally, the bidding government entity’s interests in practice are at odds with the public interest in promoting competition. It wants the work completed by the contractor it chooses. The work is not completed by policing the competiveness of a single bid. And, over a widespread geographic area involving multiple public entities or contracts, mandate becomes an expensive and ineffective remedy.
Roy Allan Slurry Seal arose not from a single bid but from a score of them. There is plenty of evidence of past illegally low wage payments sufficient to support the independently wrongful conduct element of the tort. Given the large number of contracts at stake in the case, the millions of dollars at issue, and the palpable risk of reduced competition, a prospective interference claim by a losing bidder appears to be the public’s last defense to a particular brand of harmful public corruption.
John Claassen practices civil litigation from the offices of Claassen, P.C. in Oakland, California. For more information about his firm, please click here. While this blog entry is published for informational purposes, portions of this blog post may constitute "communications" within the meaning of California Rule of Professional Conduct 1-400. Thus, as a possible "Advertisement" it is not intended to constitute legal advice. Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm. This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2014-15. All rights reserved.
Claassen, P.C. Secures Nearly $300,000 for Oakland Property Owners In Settlement With The City.
Oakland, CA (Originally posted on August 6, 2014) The offices of Claassen, P.C. announced today that it secured a settlement of almost $300,000 from the City of Oakland on behalf of the firm's clients after their home was flooded by raw sewage. City workers had been undertaking a sewer main clean out operation on a main next to their house using high pressure water.
John Claassen practices civil litigation from the offices of Claassen, P.C. in Oakland, California. One of his practice areas is real property law. For more information about his firm, please click here. While this blog entry is published for informational purposes, portions of this blog post may constitute "communications" within the meaning of California Rule of Professional Conduct 1-400. Thus, as a possible "Advertisement" it is not intended to constitute legal advice. Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm. This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2014-15. All rights reserved.
CLAASSEN, PROFESSIONAL CORPORATION STANDS UP FOR PROPERTY OWNERS IN THE CITY OF OAKLAND.
Oakland, CA (Originally published Sept. 12, 2014) Claassen, Professional Corporation has joined with the Pacific Legal Foundation in filing the Opening Brief in an appeal challenging the City of Oakland’s administration of building code enforcement.
Since the economic crisis of 2008, it has become painfully clear that homes represent a large portion of people’s assets. Oakland in both 2000 and 2011 was slammed by, among others, the Alameda County Civil Grand Jury for messing with people’s biggest asset unfairly. It received particular criticism for its high fees and fines, heavy-handed and arbitrary enforcement, and unfair appeals process.
The brief challenges the unfair appeals process, which has not materially improved despite the criticism. It seeks to compel Oakland to follow state law in the administration of building code appeals. California Building Code section 1.8.8 lays out an appeals process to be used by building departments. Among other things, hearings should be held before an independent appeal panel made up of people with industry experience. Yet Oakland uses a single hearing officer who it pays, who is often a former employee of the City Attorney’s office, and who does not have industry experience.
The net result is an appeals process heavily stacked against owners. Oakland does not make public the percentage of appeals brought by owners that result in reversals. One can only surmise that it is exceedingly low.
Oakland, CA (Originally published, Oct. 22, 2014) As a civil litigator, I sometimes field phone calls from people who, after being threatened with litigation, ask, “Why can’t I sue first?” This “the best defense is a good offense” approach to litigation sometimes works and sometimes, well not so much. A recent California Court of Appeal case highlights a downside of filing a lawsuit to preempt some consumer lawsuits.
Lunada Biomedical v. Lunez, B243205 (Oct. 9, 2014) shows one pitfall can be the dismissal under California’s storied anti-SLAPP statute. The anti-SLAPP statute, found in Code of Civil Procedure section 425.16 allows any defendant to move to strike a complaint that both arises from protected activity and lacks minimal merit. The statute can be a game-changer; if the trial court strikes the complaint, the case ends and the defendants walks away with an award of attorney’s fees.
In Lunada, a dietary supplement company brought suit after a consumer served it with a pre-lawsuit notice under the Consumer Legal Remedies Act, Civil Code section 1750, et seq. (the “CLRA”). Such notices are required to obtain damages under the CLRA. The notice asserted the company engaged in deceptive advertising of a dietary supplement. The defendant company then filed a single-count declaratory relief claim seeking a declaration that the company’s advertising was legal and that the consumer’s CLRA notice lacked basis.
After the trial court granted the consumer’s Special Motion to Strike, the Second District affirmed. It reasoned as a preliminary matter that the supplement company’s lawsuit arose from the protected activity of serving the target with the CLRA notice.
It then held that the declaratory relief claim lacked merit. In doing so it relied on Filarsky v. Superior Court, 28 Cal.4th 419 (2002), a California Supreme Court case decided under the California Public Records Act (CPRA). There, the Supreme Court barred public entities from filing declaratory relief claims to fend off CPRA actions. The Court held that doing so would undermine the public’s rights under the CPRA that are not available in declaratory relief claims, including expedited hearings, attorney’s fees, and an obligation on the part of the agency to take a writ from any trial court order compelling disclosure. Extending Filarsky’s rationale to actions under the CLRA, the Second District reasoned that “Plaintiff’s declaratory relief action here eliminates an important incentive afforded by the CLRA, mandatory attorneys fees, and would thwart the CLRA’s purpose.” Because it determined that declaratory relief was not available as a matter of law to fend off a CLRA lawsuit, the Second District ruled that the plaintiff had no chance of prevailing.
All of this goes to show that a good defense does not always include an aggressive offense.
DID THE FOURTH DISTRICT GET COSTS WRONG IN OTAY RANCH?
Oakland, CA (Originally published, Nov. 6, 2014) I’ve been thinking recently about a decision issued by the Fourth District Court of Appeals on September 29, 2014. The issues considered in the published portions of Otay Ranch v. County of San Diego, 230 Cal. App. 4th 60 (4th Dist. Sept. 29, 2014) are hardly earth shattering. Yet, the court’s decision to uphold an allowance of $30,435 in attorney and paralegal fees relating to the preparation of the record after the petitioner voluntarily dismissed the case caught my eye.
While it’s no surprise that the trial court allowed some costs after the voluntary dismissal, the affirmance of the award of attorney and paralegal fees was unexpected; typically costs do not include fees. Code Civ. Pro. ¶ 1033.5(c)(5).
The Fourth District’s holding disincentives local agencies from adopting on-line or other tools that reduce or eliminate the costs of record preparation.
Allowance for fees for record preparation is limited to CEQA cases. In Otay Ranch, the former owner of a shooting range in Chula Vista brought a writ challenging the County of San Diego’s adoption of a Remedial Action Plan and Final Mitigation Negative Declaration. The petition asserted two causes of action – that the County failed to comply with the California Environmental Quality Act and for violation of Health and Safety Code section 25356.1 in preparation of the RAP.
There are differences between a petition for writ of mandate brought under CEQA and petitions arising from other laws. For CEQA causes of action, a statute expressly provides that the parties “shall pay any reasonable costs or fees imposed for the preparation of the record of proceedings . . .” Pub. Res. Code § 21167.6(b)(1).
For other mandamus actions, however there is no express general provision allowing the recovery of “fees” by the local agency for preparation of the record. Code Civ. Pro. § 1094.5. The administrative mandate statute refers rather only to the obligation of the petitioner to pay the costs related to the preparation of the record. Code Civ. Pro. § 1094.5(a). Similarly, a local agency “may recover from the petitioner its actual costs for transcribing or otherwise preparing the record.” Code Civ. Pro. § 1094.6(c).
The absence of an express provision regarding fees in the above statutes speaks volumes because the Legislature is aware of the difference. The Code of Civil Procedure for example carefully distinguishes between costs and fees. One of these distinctions is that costs ordinarily exclude fees. Code Civ. Pro. ¶ 1033.5(b)(1) (expert fees are not awardable as costs except under special circumstances) and (c)(5) (attorney’s fees awardable as costs only where “a statute of this state refers to an award of ‘costs and fees’”). Moreover, a party seeking attorney’s fees outside of county fee schedules generally must file a fee motion rather than to submit a memorandum of costs. Code Civ. Pro. ¶ 1033.5(c)(5).
Perhaps as a counterbalance to the risk of a large award of fees for record preparation, CEQA permits the petitioner to prepare its own transcript. Code Civ. Pro. § 1094.6. However, in a way that is consistent with the idea that petitioners face little risk for the local agency’s fees, petitioners lack the right to prepare the record when seeking writs under other statutes. Code Civ. Pro. § 1094.6(c) (the local agency “shall” prepare the record).
These differences matter in the Otay Ranch case because the petitioner voluntarily dismissed its CEQA claim before any party had prepared the record. The only claim remaining when the record was prepared was the petitioner’s cause of action for violation of the Health and Safety Code (which it later dismissed as well). The court nowhere explains why the language in CEQA relating to fees should apply to the only remaining claim, the Health and Safety Code claim.
It is noteworthy too that the mandate action for violation of the Health and Safety Code is for ordinary mandamus rather than administrative mandamus. H. & S. Code § 25356.1(g)(1). This means that the cost language in Code of Civil Procedure section 1094.5, which is the administrative mandate statute, does not apply to it.
Yet, in affirming the award of costs, the Fourth District first looked to the language of the Public Resources Code section 21167.6(b)(1) and Code of Civil Procedure sections 1094.5 and 1094.6. As explained above, only the latter code section has any applicability to the case and that latter section only refers to costs for the preparation of the record. See Code Civ. Pro. § 1094.6.
Moreover, the cases relied upon by the court in the Otay Ranch were CEQA cases. In other words, as CEQA cases, they do not support the proposition that petitioners asserting non-CEQA cases might be liable for any fees, let alone attorney’s fees for preparation of the record.
The court cited not cases that upheld the award of attorney’s fees. Even assuming the decision is otherwise sound, Otay Ranch cited no cases that upheld a trial court’s allowance of attorney’s fees as costs related to the preparation of the record.
The Fourth District’s holding disincentives local agencies from adopting on-line or other tools that reduce or eliminate the costs of record preparation. The right of people to seek review of local government and agency action through mandamus is an important one. Indeed, it is often the only mechanism people have to challenge unlawful government action. This is true at the state level. It also true at the federal level where exhaustion of administrative remedies is typically required before civil rights actions can be asserted.
While people often have only one route to a successful challenge of government action, that route is often expensive as it is. It requires retention of specialized legal counsel at specialist rates. It requires the advancing of all costs, including in most counties court reporter costs, jury fees and the like.
Courts should be mindful of the extraordinary expense faced by litigants as it is and, if there are good reasons for one side to assume a particular expense, court should it least be mindful of it in allowing costs.
In Otay Ranch, the County of San Diego successfully argued that, because of the complicated nature of the record, it required specialized skill for record preparation which it did not have in house. This argument was also an argument advanced in other cases cited by the Fourth District.
Yet, if you think about it, cities maintain records as a matter of course. While it can be complicated, it should not be for the most part. Local agencies are already well versed in the maintenance of records for all public hearings. Many agencies maintain software that maintains the prepared records. It should not be difficult for them to handle the task and, if it is, they should not be rewarded.
BANKS CAN’T HIDE BEHIND CHECK CASHING SERVICES WHEN NEGOTIATING FORGED CHECKS.
Oakland, CA (Originally published, Nov. 10, 2014) Many businesses face special risk when getting paid – their employees can easily divert incoming checks to their own accounts. Check cashing services provide the bad employee with an easy way of converting the checks to cash. The services can and sometimes do make payment on the diverted checks after the errant employees forge signatures unless the services are careful to verify whether the signatures are valid.
The employer eventually discovers the fraud and seeks to recover its loss. The employee herself is not a promising target. She is now likely unemployed, unemployable, and facing prosecution. So it sues its own bank for making payment, the check cashing service for paying the check, and the banks that accepted the deposits from the check cashing services in an effort to recoup its losses.
The question becomes whether the employer can hold the check cashing services’ own banks for accepting forged checks for deposit. The Fourth District Court of Appeals answered this question in the affirmative last Thursday in HH Computer Systems, Inc. v. Pacific City Bank, GO49028 (Nov. 6, 2014).
In HH Computer Systems, a business’s accounting manager diverted about 300 checks over a period of 18 months, cashing them at several local check cashing services. The check cashing services themselves deposited the forged checks with their own banks – several defendants in the action. The victim employer later sued those defendants for failure to use ordinary care in accepting forged checks from the check cashing services.
The trial court sustained without leave to amend the demurrer of the check cashing services’ banks. They argued that they were mere secondary banks, that the cashing services were the primary banks, and they had a right to rely on the check cashing services under Comm. Code 4207.
The Fourth District rejected this argument. It first provided a highly readable primer on negotiable instruments that is worth the time of any employer worried about employee theft. It noted that the UCC has long imposed on the first bank that accepts a deposit of a check – a depositary bank –a special role under Section 4-207 of the Uniform Commercial Code. See Cal. Comm. Code § 4207. It noted that the UCC requires depositary banks to ensure the validity of signatures, which the UCC defines as “endorsements.” It noted the bank does this by verifying identification and authority to cash a check. It noted that many banks manage the risk of employees’ theft of a business checks by requiring the deposit of business checks to a business’s own account. All other banks that participate in the negotiation of a deposited check have the right to rely on the first bank’s acceptance of signatures.
It then noted that check-cashing services are not banks within the meaning of the UCC because they can never fill one role played by banks – that of a payor bank. In other words, as distinguished from true banks, a check cashing service will never be the last bank in the line because they don’t give customers checking accounts. Moreover, functionally, check cashing services don’t engage in one key function of a bank: the acceptance of deposits.
Under the circumstances, the bank defendants are the “first” banks, they have a special duty to use care in accepting deposits, and they are potentially liable to victim employers under Commercial Code section 3405 if they fail to exercise due care. In HH Computer Systems, Inc., the employer argued that ordinary care in the banking industry was for banks to refuse the deposit of company checks into anything other than company bank accounts at least without securing an endorsement guarantee. The Fourth District found that the victim’s allegations that the banks failed to either reject the check or require an endorsement guarantee adequately alleged a lack of due care under Commercial Code 3405. The court also observed that, since the employee had use chicken scrawl to endorse the checks, the scrawl was an indicia of fraud that should have alerted the banks.
HH Computer Systems should give businesses an extra layer of protection against bad apple employees – it places on the first bank in the banking system in addition to the check cashing service – the duty to use due care when accepting checks for deposit. As a matter of policy, placing the burden on check cashing companies and their banks to ensure business checks are valid makes a lot of sense: it is extremely easy for them to do and check cashing companies themselves make money from consumers who lack their own bank accounts – not from business theft.
Employers of course should themselves use due care in hiring managerial employees. Yet, as between businesses, which cannot completely mitigate the risk of loss from dishonest employees, and the banking system, which can easily stop employee theft in its tracks, the banking system should bear the risk of loss.
Oakland, CA (Originally published Nov. 16, 2014) Federal Rule of Civil Procedure 8(a)(2) only requires a short and plain statement of a plaintiff’s claim. Invoking this rule last week in Johnson v. City of Shelby, No. 13-1318 (U.S. Sup. Ct. Nov. 10, 2013), the U.S. Supreme Court granted certiorari and summarily reversed the Fifth Circuit Court of Appeals in a somewhat unusual per curiam decision. Both the district court and reviewing court had held that a police officer’s federal civil rights complaint was defective because it failed to expressly cite section 1983.
The Supreme Court disagreed. It reasoned that federal pleading rules are not intended to result in the dismissal of improperly pleaded legal theories. It distinguished Bell Atlantic v. Twombly, 556 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 602 (2009), reasoning that they set forth the requirements for factual rather than legal allegations and thus did not support the lower courts’ dismissal.
The U.S. Supreme Court Roughs Up The Third Circuit in Per Curium Decision.
Oakland CA (originally published on Nov. 6, 2014). To prevail on a federal civil rights claim under 42 U.S.C. section 1983, a plaintiff must overcome a state official’s qualified immunity. Qualified immunity shields the official unless she violates a clearly established statutory or constitutional right.
In a somewhat unusual per curiam decision issued on Monday of this week, the U.S. Supreme Court granted certiorari and reversed a panel of the Third Circuit Court of Appeals on the issue of qualified immunity. The decision is in Carroll v. Carman, No. 14-212 (U.S. Sup. Ct. Nov. 10, 2014).
The Third Circuit rejected the jury’s application of the “knock and talk” exception to the Fourth Amendment’s warrant requirement. That exception allows an officer to enter portions of private property that are open to the public to knock on the door and speak with occupants. The intermediate court reasoned it was clearly established that the exception only applies when an officer approaches a front door.
The issue considered by the Supreme Court was whether the Third Circuit erred in concluding as a matter of law that the officer had violated a clearly established right. The Third Circuit had relied on a single decision – its own decision in Estate of Smith v. Marasco, 318 F.3d 497 (2003). It reasoned that, under Marasco it was clearly established that the “knock and talk” exception only applies where an officer first approaches a front door.
The Supreme Court also looked to other circuits and state courts, which had upheld warrantless searches where officers had approached entrances other than the front entrance that looked like customary entrances for visitors. It reasoned that the Third Circuit, Seventh Circuit, 9th Circuit and the Supreme Court of New Jersey had each upheld searches in circumstances similar to those in Marasco.
The rough treatment received by the Third Circuit in Carroll signals that the Supreme Court takes seriously the issue of whether a right is clearly established when attempting to overcome a state official’s qualified immunity defense. This is at least the second time in about two years the high court has considered this issue. See also Reichle v. Howard, 566 U.S. ___ ___ (2012). It also signals that intermediate courts should think twice about second-guessing a jury’s finding that a state official acted reasonably under all of the circumstances.
A Tenant's Claim For Breach Of A Settlement Agreement Is Not A SLAPP.
Oakland, CA (Originally published, December 7, 2014). A scenario repeats itself regularly in landlord tenant law. A new owner purchases a building with rent-controlled units. The new owner, who has paid a lot for the new building, wants to phase out the rent-controlled units with new, higher paying tenants. The new owner serves a notice to vacate and a rent controlled tenant fights back with a wrongful eviction case.
In Ben-Shahar v. Pickart, 2014 Cal. App. LEXIS 1071 (Cal. App. 2d Dist. Oct. 31, 2014), the tenants clearly won the fight. In the process, they added to a line of case slowly limiting the reach of the Anti-SLAPP Statute to unlawful detainer proceedings.
Some background is in order. In Ben-Shahar the tenant of a penthouse apartment in Santa Monica spent approximately $70,000 to remodel the penthouse. The first owner memorialized in writing an agreement to pay the tenant approximately $200,000 for the remodeling that had been performed upon the sale of the building.
When the new owner came along, he served the tenant with a 60 day notice to quit. A provision of the Santa Monica Rent Control Ordinance allows landlords to evict tenants so long as they occupy the unit within 30 days. If the landlord does not move in within 30 days, the landlord must offer the unit to the displaced tenant.
The tenant in the penthouse did not leave and an unlawful detainer proceeding was initiated. The court in the unlawful detainer proceeding was prepared to rule in favor of the new landlord. As a result, the parties entered into a settlement agreement stating that the tenant would vacate and the owner would move in within 30 days.
The tenant then sued the landlord for breach of the settlement agreement. The trial court denied the landlord’s Special Motion to Strike. The trial court also denied the tenant’s motion for attorney’s fees for the filing of a frivolous lawsuit.
Plaintiff’s complaint is not directed at the act of defendants’ filing the unlawful detainer proceedings or the parties’ act of settling the matter. Rather, it is directed the Pickarts’ acts constituting a purported breach of the settlement agreements based on their conduct in failing to occupy plaintiff’s apartment in a timely fashion as required by the SMCC.
Slip Op., at 16. The 2d District remanded the case for a determination of whether the landlord’s appeal of the denial of the motion was frivolous. Id. at 17. The 2d District’s decision is just one of the latest of decisions applying the Anti-SLAPP Statute to unlawful detainer sparingly. In light of the remand for a determination of frivolousness, counsel representing landlords defending wrongful eviction lawsuits would be well-advised to avoid filing them at all “[u]nless the sole basis of liability asserted in the tenant’s complaint is the filing and prosecution of the unlawful detainer action. . . .” Id.
John Claassen, an experienced Anti-SLAPP litigator, practices civil litigation from the offices of Claassen, P.C. in Oakland, California. Please click here if you have questions about the firm’s Anti-SLAPP practice. Copyright Claassen, Professional Corporation, 2014-15. All rights reserved. While this blog entry is intended for informational purposes only, portions of it may constitute “communications” within the meaning of Cal. R. of Prof. Conduct 1-400. No statement made in this Advertisement constitutes legal advice. Similarly, no statement made herein is intended to guarantee, serve as a warranty, or serve as a prediction of the outcome of any particular matter. This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California under the laws of any jurisdiction other than the State of California.
Oakland, California (Originally published, December 6, 2014). The 2d District held on December 5, 2014 that an attorney’s lawsuit seeking a declaration regarding the validity of an attorney lien filed by prior attorneys is not a SLAPP – or “strategic lawsuit against public participation.” The case is Drell v. Cohen, B253688 (2nd Dist. Dec. 5, 2014). In Drell, the plaintiff, an attorney, took over the representation of a client after the defendants withdrew as the client’s attorney. The former attorneys notified one of the insurers. When a settlement was reached, the insurer made out the settlement check payable to the defendants and the client rather than to the current attorney.

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