Source: https://www.caappellatelaw.com/
Timestamp: 2019-04-23 01:09:14+00:00

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In a recent opinion, the California Court of Appeal held that a party could be liable for the prevailing party’s attorney fees and costs even though the underlying contracts were deemed void and unenforceable.
In California-American Water Company v. Marina Coast Water District, 2017 WL 6397685, Marina Coast Water District (“Marina”) challenged the trial court’s order awarding attorney fees and costs to the respondents based on contracts that the court deemed void. The contracts provided that the prevailing party of any action or proceeding in any way arising from their agreement would be entitled to an award of attorney fees and costs. Marina contended that California Civil Code section 1717 authorizes a fee award only in cases involving an “action on contract,” but that Section 1717 could not apply because the contracts at issue had been declared void.
The First Appellate District admitted some “intuitive appeal” to Marina’s argument that a contractual attorney fees provision could not apply if the contract was deemed void from its inception. However, the Court ultimately concluded Marina’s argument to be unpersuasive.
In other words, had Marina prevailed in its effort to enforce the contracts, no one would dispute Marina’s entitlement to recover its attorney fees. Because the respondents successfully argued that the parties’ contracts were void, the mutuality of remedy doctrine required that respondents have the right to recover their attorney fees.
The Court noted that a different rule applies under section 1717 if a contract is held unenforceable because of illegality. However, the Court concluded that those concerns were inapplicable because the subject matter of Marina’s contracts was not illegal.
California-American Water Company serves as a reminder that a contractual attorney fees provision will survive a finding that the contract is void for reasons other than illegality.
In Dhillon v. John Muir Health, 2017 Cal. LEXIS 3649, the Supreme Court of California shed some light on the resolution of the long-standing conflict concerning the appealability of a trial court’s order on a petition for writ of administrative mandamus remanding for further proceedings before the administrative body.
Previously, a line of decisions held that a trial court’s order on administrative mandamus remanding the matter for further administrative proceedings is not an appealable final judgment. (Gillis v. Dental Bd. of California (2012) 206 Cal.App.4th 311, 318; Village Trailer Park, Inc. v. Santa Monica Rent Control Bd. (2002) 101 Cal.App.4th 1133, 1139–1140; Bolsa Chica Land Trust v. Superior Court (1999) 71 Cal.App.4th 493, 501–502; Board of Dental Examiners v. Superior Court (1998) 66 Cal.App.4th 1424, 1430.) However, in each of these cases, the Court of Appeal elected to treat the appeal as a petition for extraordinary writ and considered the matter on the merits, so the determination of whether there was an appealable final judgment did not affect the result of the cases.
In Dhillon, Dr. Dhillon brought action against a hospital operator, John Muir Health, for writ of administrative mandate challenging the suspension of his clinical privileges. The Superior Court granted the writ petition in part and ordered John Muir Health to conduct a hearing. John Muir Health filed a notice of appeal. The Court of Appeal dismissed the appeal, holding that “[t]he superior court’s order remanding the matter to John Muir Health is not a final, appealable order.” John Muir Health petitioned for review, and the Supreme Court granted review.
Instead of answering “the broad question whether remands to administrative agencies are always immediately appealable,” the Dhillon court focused on the nature of the particular remand, and concluded that the superior court’s order partially granting Dr. Dhillon’s writ petition was an appealable final judgment. Citing to two other Supreme Court cases, the Dhillon court held that “where no issue is left for future consideration except the fact of compliance or noncompliance with the terms of the first decree, that decree is final, but where anything further in the nature of judicial action on the part of the court is essential to a final determination of the rights of the parties, the decree is interlocutory.” The Dhillon court reasoned that the trial court’s order either granted or denied each of Dr. Dhillon’s claims and thus did not reserve jurisdiction to consider any issues. The Dhillon court reversed the dismissal of John Muir Health’s appeal and remanded the matter to the Court of Appeal with directions to reinstate the appeal because the trial court’s order was a final judgment.
While the Dhillon court did not hold that all remands to administrative agencies are immediately appealable, the Dhillon holding creates a case-by-case analysis rule such that it is up to the parties to argue that the trial court did not reserve jurisdiction to consider any issues, and hence the trial court’s remand to the administrative agencies was a final judgment and was appealable.
Parties (typically plaintiffs) may request the appointment of a receiver in cases involving disputes over corporate assets or interests in real estate. But the appointment of a receiver may have unexpected consequences for the party seeking appointment.
The receiver is an agent of the court and not of any party, and as such: (1) is neutral; (2) acts for the benefit of all who may have an interest in the receivership property; and (3) holds assets for the court and not for any party. (California Rules of Court, rule 3.1179, subd. (a).) A receiver is obligated to preserve and manage the property during the course of the receivership. (Title Ins. & Trust Co. v. Calif. Etc. Co. (1911) 159 Cal. 484, 492.) A receiver can be quite expensive. The receiver is entitled to hire counsel, accountants, and other professionals required for the receiver to carry out the receiver’s duties. Generally speaking, the receiver’s fee is often paid by the receivership estate. In other words, the assets held by the receiver are used to pay the receiver and those hired to assist the receiver.
That all sounds good, except that the Fourth District Court of Appeal recently held that a trial court may require a party, rather than the receivership estate, to pay the receiver’s fee, even long after the issuance of the final accounting order.
In Southern California Sunbelt Developers, Inc. v. Banyan Limited Partnership (2017) 8 Cal.App.5th 910, the Court held that while the final accounting order is an appealable order, “the final accounting represents a definitive determination only as to the matters presented therein,” i.e., whether the receiver exceeded his or her authority, caused injury to others, or acted negligently in operating the receivership estate. However, the Court held that the final accounting is not the final time the parties can question who is ultimately responsible for the court-appointed receiver’s fees. The Court reasoned that the issue is not an integral part of the receiver’s final accounting. And there are many factors a trial court should consider when determining whether the obligation to pay for the receivership should be the estate or be shifted to one or more of the parties.
Some of the factors the Court discussed include whether plaintiff or defendant most benefited from the receivership, whether the defendant acquiesced in the receivership, whether the property of a defendant was taken from his or her possession by the appointment of a receiver against his consent under an erroneous order which the defendant successfully resisted, whether it would manifestly be inequitable and unjust to throw upon the defendant or his property the burden of the litigation instituted by the plaintiff without right or reason, and whether the parties who procured the appointment of a receiver have any interest in the subject matter of the suit.
So, before asking the court for a receivership, parties should not assume that the assets of the receivership estate will necessarily be used to pay for the receivership. When weighing the benefits and burdens of a receivership, parties should consider the possibility that a party may have to pay out-of-pocket for the receiver’s fees.
On August 1 the California Supreme Court finally resolved a split of authority among California’s appellate courts over operation of the anti-SLAPP statute, Code of Civil Procedure section 425.16, in the mixed cause of action context. For over a decade, the appellate courts have disagreed as to how a plaintiff can satisfy the reasonable probability of success requirement when claims alleging both protected and unprotected activity are included within a single cause of action. Some appellate courts concluded that as long as the plaintiff demonstrated a reasonable probability of success on any part of the claim, including just the allegations of unprotected activity, the SLAPP motion had to be denied. (See Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90.) Others concluded that the plaintiff must focus upon and respond to the claims of protected activity, and failure to demonstrate a reasonable probability of success as to those claims meant the SLAPP motion should be granted and those specific claims stricken. (See Wallace v. McCubbin (2011) 196 Cal.App.4th 1169.) In Baral v. Schnitt_ 2016 Cal. LEXIS 6383, a unanimous Court emphatically sided with Wallace and rejected Mann.
As is frequently the case, Baral involved a complaint alleging protected and unprotected activity under the same cause of action. When the defendant moved to strike the claims of protected activity, the plaintiff demonstrated a reasonable probability of success on the allegations of unprotected activity and the trial court denied the SLAPP motion. The Court of Appeal affirmed, holding that under Mann, if the plaintiff demonstrates a reasonable probability of success on “any part of its claim,” then the SLAPP motion is denied because the cause of action is not frivolous.
In yet another installment of the gravamen of the complaint conundrum, the California Supreme Court is currently reviewing Park v. Board of Trustees of California State University (2015) 239 Cal.App.4th 1258. The issue is whether the SLAPP statute, Code of Civil Procedure section 425.16, “authorize[s] a court to strike a cause of action in which the plaintiff challenges only the validity of an action taken by a public entity in an ‘official proceeding authorized by law’ (subd. (e)) but does not seek relief against any participant in that proceeding based on his or her protected communications?” Say what?
In Park, plaintiff sued a university alleging racial discrimination as grounds for denial of tenure. The university filed a SLAPP motion arguing protected conduct in the form of official proceedings. The trial court denied the SLAPP motion, finding that the gravamen of the complaint was not protected activity such as the tenure review process, but rather, discrimination against plaintiff based on race. Because it denied the motion for lack of protected activity, the trial court did not reach the probability of success on the merits. But the Court of Appeal reversed, holding that alleged discriminatory motivations aside, since all of the operative facts involved various tenure review processes and communications, the gravamen of the complaint was in fact claims arising from protected activity. The Court of Appeal remanded for the trial court to consider plaintiff’s probability of success on the merits, but the high court intervened.
Park is still in the briefing stage, but could be far-reaching, depending on how it is decided. The grant of review itself is curious, given the narrow holding in Park that all of the allegations involved protected activity, and the fact that neither court reached the reasonable probability of success prong. Following the statutory scheme, courts have stayed away from injecting motive into the protected activity analysis. And no matter how tempting, carving out exemptions for suits brought solely to challenge “the validity of an action taken by a public entity” is bound to generate yet more volumes of SLAPP decisions. Stay tuned!
In Baral, plaintiff’s breach of fiduciary duty cause of action included claims that defendant prevented plaintiff from participating in a pre-litigation audit of the company’s books. Defendant’s SLAPP motion sought to strike the allegations related to the audit on the grounds that the litigation privilege precluded such claims and argued that under the SLAPP statute, the trial court could excise parts of a cause of action. The trial court denied the motion, comparing the relief requested to an ordinary motion to strike and concluding that a SLAPP motion is not a similar procedure.
The Court of Appeal affirmed, holding that since plaintiff demonstrated a reasonable probability of prevailing with respect to the claims that did not involve protected activity, the SLAPP motion had to be denied in its entirety. Baral disagreed with Cho and other decisions striking the claims of protected activity from an otherwise meritorious cause of action. Baral joined cases holding that when it comes to the SLAPP statute, a cause of action stands or falls, it is not subject to amputation of its parts.
What will the Supreme Court decide? For a cogent analysis, see Justice Henry Needham’s majority opinion in Wallace v. McCubbin (2011) 196 Cal.App.4th 1169. As Wallace observes, allowing meritless claims based on protected activity to remain because the same cause of action is adorned with meritorious claims arising out of nonprotected activity defeats the purpose of the SLAPP statute. According to Wallace, the Mann approach is problematic because it enables a plaintiff to succeed in demonstrating a reasonable probability of prevailing on the merits without even addressing the allegations of protected activity. So long as any meritorious claim is found within the cause of action, the defendant whose SLAPP motion is denied is saddled with defending the allegations based on protected activity until such time as those claims can be summarily adjudicated. Yet, it was the inadequacy of the summary judgment mechanism for preventing the chilling of protected activity that led to the SLAPP statute’s enactment in the first place. For the contrary view that when any merit is found, the cause of action is not a SLAPP, see the concurrence in Wallace. The merits were fully briefed as of November, so stay tuned for high court resolution of yet another SLAPP conundrum.

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