Key Decisions

April 2013 – All Articles

(filed under: Key Decisions Archive | April 10, 2013)

A Competitor Could Sue For Unfair Competition

Law Offices of Mathew Higbee v. Expungement Assistance Services
(Cal. Ct. of App., 4th Dist.), filed March 14, 2013

KEY FACTS

The Law Offices of Mathew Higbee sued Expungement Assistance Services for, among other things, statutory unfair competition under Business and Professions Code section 17200.  Higbee alleged that Expungement Assistance Services, an online legal services provider, unfairly competed with it by engaging in the unauthorized practice of law. Expungement Assistance Services purportedly undercut the competition by using unlicensed persons to perform legal work, thereby saving on attorney fees, and by employing unbonded and unregistered legal document assistants, thereby saving on the costs of posting statutorily mandated bonds and paying registration fees.  Higbee also alleged that by doing this, Expungement Assistance Services diverted business from it, thereby causing it injury and damage and that in order to compete, Higbee had to expend additional sums on advertising and had to lower its prices.

The trial court sustained a demurrer by Expungement Assistance Services, concluding that because Higbee had no direct business dealings with Expungement Assistance Services, Higbee lacked standing to assert a cause of action under Section 17200.

HOLDING & REASONING

The Court of Appeal reversed.

Section 17200 was enacted to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.  The legislature used broad sweeping language.  However, it became overextended in its use.  It became the basis of what the court described as a “shakedown lawsuit — the ‘I get rich’ lawsuit brought by a person who has had no business dealings with the proprietor being sued, but who has happened to notice that the hapless proprietor is out of compliance with a particular law.”  As a result of this development, Section 17200 was narrowed to preclude such lawsuits.  This was accomplished by imposing a requirement that the plaintiff lost money or property or was deprived of money or property.

The question before it, according to the court, was whether “in endeavoring to protect ‘mom and pop’ operators from the devastation wreaked by gold-digging plaintiffs, the UCL has been so narrowed as to preclude one business competitor from maintaining a UCL lawsuit against another with whom he or she has had no direct business dealings, where the defendant competitor’s unlawful business practices have caused injury and monetary or property loss to the plaintiff competitor.”

The court then held:

Bearing in mind that the UCL was originally conceived to protect business competitors, and also that the deterrence of unfair competition is an important goal of the UCL, we conclude that the lack of direct dealings between two business competitors is not necessarily fatal to UCL standing, provided the plaintiff competitor has suffered injury in fact and lost money or property as a result of the defendant competitor’s unfair competition.

ANALYSIS

The court had to walk a fine line in rendering its decision.  On the one hand, if Higbee could prove its allegations, its claim would be squarely within the scope of what Section 17200 was enacted to prevent.  However, the court did not want to expend the 17200 claim to uninjured non-competitors.

 

An Expert Didn’t Establish The Standard Of Care

Quigley v. McClellan
(Cal. Ct. of App., 4th Dist.), filed March 12, 2013

KEY FACTS

Karen Quigley bought a horse to use as a competition hunter jumper horse.  Before doing so, she had veterinarian Paul McClellan examine the horse to see that it was suitable for use as a competition hunter jumper horse.  McClellan reported that the horse was suitable.

Sometime after the purchase, the horse began to manifest physical problems that interfered with its ability to compete.  Quigley sued McClellan, arguing that he negligently performed the pre-purchase examination.

At trial, Quigley sought to establish the standard of care and its breach through the testimony of her expert witness, veterinarian Peter Heidmann.  Dr. Heidmann was questioned as to the standard of care as follows:

“[Question]:  From your general training and experience is there a standard of care applied to veterinarians in prepurchase examinations?”

“[Answer]:  There is.”

“[Question]:  And can you tell us that standard?”

“[Answer]:  A lot depends on the kind of horse.  The three critical parts of the prepurchase to me are identifying the problems, documenting them, and then explaining the relevance, potential relevance, of those problems to the client, to the potential buyer.”

Dr. Heidmann further explained “the communication is the most important part [of the prepurchase examination], so to me — not just identifying the problems but discussing the problems in detail in a way that a client can understand it is the critical thing.”

The jury found that McClellan was negligent.

HOLDING & REASONING

The Court of Appeal reversed.  It found that Quigley had not actually established the standard of care for a pre-purchase examination.

A veterinarian must exercise the same reasonable degree of skill, knowledge, and care ordinarily possessed and exercised by members of the medical profession under similar circumstances.  In order to establish what that degree of skill, knowledge and care is, there must be expert testimony explaining how the average veterinarian of ordinary skill and knowledge from the relevant community would have treated the case under similar circumstances.

Dr. Heidmann never actually testified that McClellan’s performance of the pre-purchase examination, or the subsequent disclosure of the horse’s medical history, was not consistent with what other doctors in the community would have arrived at under similar circumstances in the exercise of reasonable care.  Rather, he testified about how it compared to what he would have done.

As a result, there was no evidence of the standard of care and Quigley failed to meet her burden of proof.

ANALYSIS

This case shows how subtle aspects of an expert’s testimony can make an enormous difference in the outcome of a case.

 

Verbal Invasion Of Privacy Exists

Ignat v. Yum! Brands, Inc.
(Cal. Ct. of App., 4th Dist.), filed March 18, 2013

KEY FACTS

Melissa Ignat worked for Yum! Brands.  She suffered from bipolar disorder, which was treated with medications.  Sometimes the medications were effective and sometimes they were not.  Side effects of medication adjustments occasionally forced Ignat to miss work.

Ignat alleged that after returning from one such absence in mid-2008, her supervisor, Mary Shipma, informed her that Shipma had told everyone in the department Ignat was bipolar.  Ignat alleged her coworkers subsequently avoided and shunned her, and one of them asked Shipma if Ignat was likely to “go postal” at work.

Ignat was terminated in early September 2008.  She filed suit against Yum!  Brands and Shipma alleging one cause of action for invasion of privacy by public disclosure of private facts.  Yum! Brands and Shipma moved for summary judgment or summary adjudication.

The trial court granted the motion on the grounds that the right of privacy can be violated only by a writing but not by word of mouth.  Because Ignat had not produced any document disclosing private facts, she could not pursue this cause of action.  The trial court lamented the “irrationality” of this rule, but felt itself bound by precedent.

HOLDING & REASONING

The Court of Appeal reversed.  It ruled that, to the extent, the rule is that a cause of action for invasion of privacy by the disclosure of private information exists only if the disclosure is in writing, it “is outmoded and interferes with a person’s right to privacy without any corresponding benefit to any other right or policy.”

The court reasoned that other restrictions on liability for invasion of privacy serve other important interests, such as free speech or freedom of the press.  However, it noted that “no one has come up with a good reason for restricting liability to written disclosures, and it has long been acknowledged that oral disclosures can be just as harmful.”

Because the lack of a writing was the sole basis for the trial court’s grant of summary judgment, it would express only one opinion about the other issues raised in Yum! Brands and Shipma’s motion.  As to that, the court held:  “We conclude that alleging a violation of a person’s common-law right to privacy is not the equivalent of alleging a violation of the constitutional right to privacy.”

ANALYSIS

The only logical reason to confine privacy violations to written disclosures would involve the ability to prove the disclosures.  A written disclosure may be perceived as less easy to fabricate.  The court did not accept such a distinction or see any legitimate reason to draw a sharp distinction between written disclosures and verbal disclosures.

 

Other Cases Of Interest

 

A Shortened Statute Of Limitations Was Valid

Zamora v. Lehman
(Cal. Ct. of App., 2d Dist.), filed March 7, 2013

Three executives signed employment agreements with their corporate employer.  Each agreement contained a provision stating that if either party had “[a]ny claim” against the other, the claiming party had to present the claim in writing to the other party within one year of the date the claiming party knew or should have known about the facts giving rise to the claim.  Otherwise, the claim was forever barred.

The corporate employer filed for bankruptcy.  In the bankruptcy proceeding, the trustee filed an action against the three executives, alleging a breach of fiduciary duty.  The trustee dismissed one of the executives to avoid having to arbitrate the matter.  Litigation proceeded in the trial court as to the other two executives.

The trial court granted summary judgment in favor of the other two executives on the ground that neither the corporation nor the trustee in bankruptcy had satisfied the contractual one-year notice provision.

The Court of Appeal affirmed.

The court concluded that the one-year notice provision was not invalid and could legally be included in an employment contract.  It also rejected the argument that the executives had to show prejudice by the bringing of a late action.  In addition, the court rejected the trustee’s argument that the provision was inapplicable because she was unaware of it.

 

A Corporation’s Revival Validated Its Appeal

Bourhis v. Lord
(Cal. Sup. Ct.), filed March 4, 2013

If a corporation fails to pay its taxes, the state may suspend its corporate powers.  When its corporate powers are suspended, a corporation cannot prosecute a lawsuit or defend itself against one.

The state may later revive those powers if the corporation pays its taxes.

The California Supreme Court held that a corporation that files notices of appeal while its corporate powers are suspended may proceed with the appeals after those powers have been revived, even if the revival occurs after the time to appeal has expired.

The Court based its decision on two decisions it rendered in the 1970’s:  Rooney v. Vermont Investment Corp., 10 Cal.3d 351 (1973) and Peacock Hill Assn. v. Peacock Lagoon Constr. Co., 8 Cal.3d 369 (1972).  The Court opted to adhere to those decisions due to principles of stare decisis.

 

A Joint Settlement Offer Was Valid

McDaniel v. Asuncion
(Cal. Ct. of App., 5th Dist.), filed March 27, 2013

Amy Jo McDaniel and Melissa McDaniel sued Loyd Asuncion and others for wrongful death after Steven McDaniel died in a multi-car automobile collision.

Before trial, Asuncion served a statutory offer to compromise under Code of Civil Procedure section 998.  The offer was for of $100,000 and was made jointly to Amy Jo McDaniel and Melissa McDaniel.  They did not accept this offer.

Amy Jo McDaniel and Melissa McDaniel went to trial against Asuncion and one other defendant.  While the jury awarded Amy Jo McDaniel and Melissa McDaniel over $3.3 million on their claim against the other defendant, the jury returned a defense verdict in favor of Asuncion.

As the prevailing party, Asuncion submitted a memorandum of costs. Asuncion sought over $41,000 in expert witness fees.  Because Amy Jo McDaniel and Melissa McDaniel failed to obtain an award that was more favorable than Asuncion’s offer, the trial court awarded these expert fees to Asuncion.

The Court of Appeal affirmed the fee award.

The failure to accept a Section 998 offer can have consequences.  For example, if a plaintiff fails to obtain a more favorable result at trial, that plaintiff cannot recover his or her post-offer costs, must pay the defendant’s costs from the time of the offer, and may be required to pay the defendant’s reasonably incurred expert witness fees.

The purpose behind penalizing a party who fails to accept a reasonable Section 998 is to encourage the settlement of lawsuits before trial.

In general, a Section 998 offer made to multiple parties is valid only if it is expressly apportioned among them and not conditioned on acceptance by all of them. This is because with unallocated settlement offers to multiple plaintiffs, it may be impossible to determine whether any one plaintiff received a less than favorable result at trial than that plaintiff would have received under the offer.  Further, a lump sum offer places an offeree who wishes to accept at the mercy of an obstinate offeree who does not.

There are exceptions to this general rule.  Where there is more than one plaintiff, a defendant may still extend a single joint offer if the separate plaintiffs have a unity of interest such that there is a single, indivisible injury. Moreover, some courts have declined to mechanically apply a rule that renders a joint offer void without first examining whether it can be determined that the party claiming costs has, in fact, obtained a more favorable judgment.

Under California law, either the heirs or the personal representative on behalf of the heirs may bring a single joint indivisible action for wrongful death.  If the heirs or personal representative prevail, the proceeds are divided among the heirs.  As a result, there is no difficulty in telling if the judgment was more or less favorable than a joint settlement offer.  As a further result, the joint offer was not invalid.

 

Only Appealable Orders Are Appealable

Good v. Miller
(Cal. Ct. of App., 3d Dist.), filed March 13, 2013

Scott Good sued Patrick Miller, United Truck Insurance Services, and Sutter Insurance Company alleging a dispute over an insurance policy.

On October 26, 2010, the trial court had granted Miller’s unopposed motions to compel responses to discovery requests, ordering Good to provide “complete responses . . . without objections” no later than November 15, 2010.

On January 5, 2011, Miller sought monetary and terminating sanctions, alleging willful noncompliance with the order compelling discovery.

On May 11, 2011, the court entered an order granting terminating sanctions.  That same day Good filed a notice of appeal from that order.

On July 26, 2011, the court filed a judgment in favor of Miller.

On August 15, 2011, Miller filed a civil appeal mediation statement.  In it, Miller asserted that Good’s appeal had been taken from a nonappealable order.

Good filed his opening brief on August 3, 2012.  Under the section addressing appealability, he incorrectly asserted that the notice of appeal “was timely filed following the Entry of Judgment in this matter.”

The first argument in Miller’s respondent’s brief sought dismissal of the appeal on the ground that Good was attempting to appeal from a nonappealable order.

Good’s reply brief failed to respond to this argument.

The Court of Appeal dismissed Good’s appeal as being from a nonappealable order.  It explained:

Although under certain circumstances we have discretion to permit a premature appeal from a nonappealable order to be treated as timely filed after the ensuing judgment, there is a limit to our willingness to salvage appeals for parties “who ignore the statutory limitations on appealable orders.”

It then held:  “In this case, plaintiff has exceeded that limit.”  To aid legal community, they published its decision “to emphasize that it is imperative to appeal from an appealable order.”

The court noted three reasons why it opted not to salvage Good’s case:

First and foremost, Good did not ask the court to do so despite notice in the form of Miller’s civil appeal mediation statement and argument in his appellate briefing.  Second, Miller repeatedly raised the issue and Good repeatedly ignored it.  Third, Good misstated the relevant facts in the “Appealability” section of his briefing.

 

A Challenge To A Judge Was Timely

Entente Design, Inc. v. Superior Court
(Cal. Ct. of App., 4th Dist.), filed March 12, 2013

Leigh A. Pfeiffer filed a corporate dissolution action against Entente Design, Inc.  The case was originally assigned to the Honorable John S. Meyer for all purposes.

On November 6, 2012, counsel attended an ex parte hearing.  At the hearing, Judge Meyer granted defense counsel’s request to continue the start of trial one day from November 13 to November 14.  Judge Meyer also orally advised counsel he would not be available on November 14, and would tell them at the trial call on November 9 which trial judge would be assigned the case.

On the morning of November 9, counsel appeared before Judge Meyer, who informed counsel the Honorable Luis R. Vargas was available to try the case on November 14.

Counsel immediately reported to the courtroom and briefly consulted with Judge Vargas.  Judge Vargas confirmed the bench trial and the November 14 trial date.  Within an hour after leaving the courtroom, defense counsel filed a challenge to Judge Vargas pursuant to Code of Civil Procedure section 170.6.

Judge Vargas denied the challenge as untimely.

The Court of Appeal concluded that the challenge was timely and issued a writ of mandate.

A Section 170.6 challenge is permitted any time before the commencement of a trial or hearing.  There are, however, three exceptions to the general rule:  “the all purpose assignment rule,” “the 10-day/5-day rule,” and “the master calendar rule.”

Under the “all-purpose assignment rule,” a Section 170.6 challenge to a judge must be filed within 10 days for criminal cases, or within 15 days for civil cases, after notice of the judge’s all-purpose assignment.

Under the “10-day/5-day rule,” a Section 170.6 challenge to a judge who has not been assigned for all purposes must be filed at least five days before the trial date if the judge’s identity is known more than 10 days before that date.

Under the “master calendar rule,” a Section 170.6 challenge must be filed no later than the time the case is assigned for trial.  This is because when the master calendar department assigns a case to a particular judge for trial, the master calendar judge must immediately know if there is a challenge so he or she can assign another case to the challenged judge.

If that rule applied, the defendants’ challenge was untimely because they made it approximately an hour after Judge Meyer assigned the case to Judge Vargas for trial.

Whether the “master calendar rule” applies depended on whether Judge Meyer was managing a true master calendar when he assigned this case to Judge Vargas.

The appellate court concluded that the case did not involve a true master calendar assignment because the case was not ready for immediate trial when Judge Meyer assigned it to Judge Vargas.  The trial was to commence no earlier than two court days after the assignment.