Key Decisions

April 2014 – All Articles

(filed under: Key Decisions | April 20, 2014)

An Insurance Broker Must Exercise A Duty Of Reasonable Care

Mark Tanner Construction, Inc. v. HUB International Insurance Services, Inc.
(Cal. Ct. of App., 3d Dist.), filed March 10, 2014, published March 10, 2014

KEY FACTS

Diversified Risk Insurance Brokers, which was later acquired by HUB International Insurance Services, Inc., marketed and sold a workers’ compensation insurance program to Mark Tanner Construction, Inc., and Mt. Lincoln Construction, Inc. The program became insolvent and left Tanner and Mt. Lincoln exposed to considerable liability.

Tanner and Mt. Lincoln sued HUB for professional negligence and constructive fraud. HUB moved for summary judgment, arguing that it had no duty to investigate or discover the insurance program’s financial condition or to disclose that it was financially unstable.

While the motion was pending, Tanner and Mt. Lincoln received a document that had been previously withheld. They believed the previously withheld document established that HUB was actually a broker for the insurance program. Based on this, they sought leave to amend their complaint and continue HUB’s summary judgment motion.

The trial court denied leave to amend or for a continuance and then granted HUB’s motion.

HOLDING & REASONING

The Court of Appeal affirmed.

The court first found that the trial court did not abuse its discretion in denying leave to amend. It stated:

A trial court does not abuse its discretion in denying leave to amend where the “party seeking amendment has been dilatory and/or delay has prejudiced or will prejudice the opposing party.” Prejudice will be found where the amendment “changed the tenor and complexity of the complaint,” delaying the trial, resulting in loss of critical evidence or added costs of preparation, and an increased burden of discovery. Leave to amend may also be denied where permitting an amendment would be futile.

The court acknowledged that the trial court may properly consider an alleged discovery violation when determining whether leave to amend is “in the furtherance of justice.” However, it concluded that such a discovery violation does not mandate leave to amend. Tanner and Mt. Lincoln failed to show how amending the complaint would materially change the case.

The court also found the trial court had not erred in refusing to grant a continuance. The party seeking a continuance must show: (1) the facts to be obtained are essential to opposing the motion; (2) there is reason to believe such facts may exist; and (3) the reasons why additional time is needed to obtain these facts. The Code of Civil Procedure requires more than a simple recital that “facts essential to justify opposition may exist.” The affidavit or declaration supporting the continuance request must detail the specific facts showing the existence of controverting evidence. Otherwise, any unprepared party could use section 437c(h) to get an automatic continuance.

Tanner and Mt. Lincoln failed to meet their burden. Their counsel’s declaration explained what discovery they wanted to do as a follow-up to the discovery of the new information, but never identified what facts they expected to establish by way of that discovery or how those would raise a triable issue of material fact.

On the merits of HUB’s motion, the court held that an insurance broker owes no duty to its clients to investigate the insurer’s financial condition before placing clients’ insurance with it. The insurance broker owes the client only the duty of reasonable care.

Tanner and Mt. Lincoln alleged that Diversified was their insurance broker; how they were bound by that allegation. Thus, the court found that Diversified exercised reasonable care when it placed the particular policies.

Since Diversified was “only” a broker, it did not owe Tanner or Mt. Lincoln fiduciary duties. And, because it did not owe them fiduciary duties, Diversified could not be liable for failing to disclose the insurance program’s financial condition.

ANALYSIS

There are several interesting aspects to this case, apart from discussing an insurance broker’s duties. Perhaps most noteworthy is the court’s comment:

Apparently distracted by what they perceive to be an egregious discovery violation, plaintiffs fail to adequately challenge either the legal bases or the factual findings of the trial court’s rulings. We find plaintiffs have failed to carry their burden to demonstrate error. Therefore, we shall affirm the judgment.

What was egregious discovery abuse to plaintiff was a nonissue to the trial and appellate courts. The outcome certainly differs from Doppes v. Bentley Motors, 174 Cal.App.4th 967 (2009), where the court took the extraordinary step of finding the trial court abused its discretion in failing to issue terminating sanctions for a defendant’s discovery abuse.

 

A Settlement Agreement Was Unenforceable When A Damages Provision Was Unreasonable

Purcell v. Schweitzer
(Cal. Ct. of App., 4th Dist.), filed February 24, 2014, published March 17, 2014

KEY FACTS

Lennox A. Purcell loaned Michael Schweitzer $85,000 for which Schweitzer gave Purcell a promissory note.

Schweitzer defaulted on the promissory note. Purcell sued. In March 2010, they settled: Schweitzer agreed to pay $38,000, along with interest at 8.5 percent, in 24 consecutive monthly installments. Under the settlement agreement, payments were due on the first day of each month, and considered late if received after the fifth day of the month. The agreement also provided that if a payment was late, it was considered a breach of the entire settlement agreement, making the entire original $85,000 due. The agreement also specified that this provision did not constitute an unlawful “penalty” or “forfeiture.” The agreement also provided that Schweitzer waived any right to an appeal and any right to contest or otherwise set aside the judgment.

In October 2011, Schweitzer tendered a late payment, paying it on October 11th instead of October 5th. With only two more payments due, Purcell accepted that late payment.

Based on the late payment, Purcell applied for entry of judgment. On October 17, 2011, the trial court entered a $58,829.35 judgment, with $58,101.85 identified as “punitive damages.”

Schweitzer continued to make payments pursuant to the stipulated payment plan, making monthly payments in November and December 2011. The December payment was the final payment due.

In August 2012, Purcell asserted that Schweitzer still owed $1,776.58. Schweitzer paid that amount in August 2012.

Schweitzer brought a motion to set aside the default judgment. Schweitzer’s motion contended that the stipulation and subsequently entered judgment represented an unlawful penalty for his breach of the settlement agreement.

The trial court granted the motion to set aside the default judgment, finding that the damages sought by Purcell bore no rational relationship to the damages Purcell would actually suffer as a result of Schweitzer’s breach. The court further found Schweitzer’s express waiver was unenforceable as against public policy.

HOLDING & REASONING

The Court of Appeal affirmed.

A contractual damages provision for the breach of the contract is valid unless the party seeking to invalidate it establishes that it was unreasonable under the circumstances existing at the time the contract was made. It is unreasonable if it bears no relationship to the damages that would be suffered by a breach of the particular contract.

The court held that the contract under consideration was the $38,000 settlement agreement, not the original $85,000 promissory note. Thus, damages of more than $58,000 bore no relationship to the damages that could possibly be sustained based on Schweitzer’s failure to pay the $38,000.

The court held that regardless of what the agreement said, it was against public policy to waive the right to assert the provision was not a penalty.

ANALYSIS

Had Schweitzer defaulted earlier in the process for failing to pay all sums due under the settlement agreement, Purcell’s argument might have been a bit more appealing to the court given that he had already agreed to accept less than half of what he was owed under the promissory note.

 

Broker’s Statements Were Misleading But Not Actionable

Saffie v. Schmeling
(Cal. Ct. of App., 4th Dist.), filed March 7, 2014, published March 7, 2014

KEY FACTS

Yousef Sasa owned a 0.62-acre parcel of undeveloped commercial property in Hemet, California.

In June 2006, Sasa’s real estate broker, Robert Schmeling, posted information about it on a multiple listing service. Included in the listing was the statement that: “This parcel is in an earthquake study zone but has had a Fault Hazard Investigation completed and has been declared buildable by the investigating licensed geologist. Report available for serious buyers.”

The Fault Hazard Investigation report was done in 1982. That date appeared prominently on its cover. The report, prepared by a “Registered Geologist,” found “no evidence of an active fault” on the property, and concluded that “the secondary effects of ground fissuring and cracking and the primary effects of ground rupture and displacement on a fault are unlikely to occur on the subject property.” The report made certain recommendations regarding the potential forces and effects of earthquakes that “[t]he design of all commercial structures to be constructed on the subject property should take into consideration.”

On July 23, 1982, an engineering geologist for the Riverside County Planning Department issued a letter granting “[f]inal approval of the report,” based on his opinion that the report “was performed in a competent manner consistent with the present ‘state-of-the-art’ and satisfies the requirements of the Alquist-Priolo Special Studies Zones Act and the associated Riverside County Ordinance No. 547.”

In 2006, Saffie bought the property, and received a copy of the 1982 report.

After consummating the transaction, when Saffie tried to develop the property, he discovered that the County of Riverside did not agree that the property was “ready to build.” The County’s understanding of the “state of the art” regarding investigation of fault hazards had changed after the 1994 Northridge earthquake, and it no longer accepted fault hazard investigation reports performed under earlier standards. The additional geological investigation now required by the County for approval rendered Saffie’s intended use of the property impractical.

Saffie sued Sasa, Schmeling, and his own broker. As to Schmeling, he asserted that Schmeling’s statement in the MLS regarding the Fault Hazard Investigation report was false or inaccurate because the statement failed to specify that the report dated back to 1982, creating a false impression that the report was current as of the date of the MLS listing and remained “valid” as a basis for commercially developing the property in 2006.

After a bench trial, the trial court decided that Saffie should take nothing on his claims against Sasa and Schmeling, but found his own broker liable for $232,147.50 for breach of fiduciary duty and negligence.

Saffie appealed as to Schmeling.

HOLDING & REASONING

The Court of Appeal affirmed.

Real estate brokers owe their own clients fiduciary duties. They owe third parties who are not their clients, including the adverse party in a real estate transaction, only those duties imposed by regulatory statutes. These duties include a general obligation of honesty, fairness and full disclosure toward all parties.

The court noted that Saffie did not dispute the truth of Schmeling’s statement in the MLS concerning the existence of the property’s Fault Hazard Investigation report. Nor did he challenge the accuracy of Schmeling’s summary description of the author’s conclusions.

Saffie’s claim failed “for the fundamental reason” that he did not identify anything about Schmeling’s statement itself that was false or inaccurate, as would be required for liability under Civil Code section 1088.

The court rejected Saffie’s contention that the passage of time between 1982 and 2006 rendered the Fault Hazard Report unreliable and invalid, thus making Schmeling’s statement in the MLS false or inaccurate. It noted that no one ever represented that the property was “buildable.” Any conceivably misleading characterization of the report the MLS statement arguably implies was cured by the notification that the report itself was available for “serious buyers” (and by actually providing the report).

The law does not require a seller’s broker to ensure that truthful representations are not misconstrued or misunderstood.

The court did note that “If seller’s broker had stated in the MLS listing that ‘the Property had been cleared to build upon by the County of Riverside,’ or had seller’s broker ‘blindly assert[ed] the ability to build,’ as buyer would have it, seller’s broker would be responsible for the truth of such statements.” But, since he didn’t, he was not liable.

The court also rejected Saffie’s assertion that Schmeling should have known the report was not current because Schmeling never represented that it was current.

ANALYSIS

This opinion emphasizes the difficulty of proving fraud where representations are literally true, even if they are potentially misleading and misconstrued.

 

An Employer’s Arbitration Clause Was Enforceable And Not Illusory

Casas v. CarMax Auto Superstores California LLC
(Cal. Ct. of App., 2d Dist.), filed February 26, 2014, published March 20, 2014

KEY FACTS

CarMax hired Mario Casas on August 8, 2008, as a service consultant. When CarMax hired Casas, he signed a Dispute Resolution Agreement in which he acknowledged receipt of the Dispute Resolution Rules and Procedures (DRRP) governing any arbitration.

CarMax fired Casas on December 17, 2010, citing poor results in customer service surveys.

Casas sued CarMax, alleging wrongful termination, Labor Code and Business and Professions Code violations, breach of an implied contract not to terminate employment without good cause, intentional infliction of emotional distress, negligent hiring, negligent retention, negligent supervision, and defamation. He claimed he was fired because of his refusal to participate in and his actual discussions of CarMax’s allegedly illegal actions.

CarMax filed a motion to compel arbitration, based on a Dispute Resolution Agreement. Casas opposed the motion to compel, arguing that the Dispute Resolution Agreement was not a contract, and that in any event the agreement was procedurally and substantively unconscionable.

The trial court denied CarMax’s motion to compel arbitration. It found the arbitration agreement “illusory” because it gave CarMax the right to alter or terminate the agreement and the DRRP. In reaching this conclusion, the trial court relied on Sparks v. Vista Del Mar Child & Family Services, 207 Cal.App.4th 1511 (2012).

HOLDING & REASONING

The Court of Appeal reversed. It found that Sparks did not apply.

In Sparks, an employee handbook contained (but did not highlight) a brief “dispute resolution policy” requiring the employee and employer to arbitrate any disputes arising out of the employment relationship, and provided that the handbook may be amended, revised and/or modified by the employer at any time without notice. The employee signed an acknowledgment of receipt of the handbook, but stated in a declaration that the employer did not make him aware of the arbitration clause and he was not aware of it. The trial court concluded that the employee’s mere acknowledgment of the handbook was insufficient to create an enforceable agreement to arbitrate. The court of appeal affirmed because: (1) the employer failed to call attention to the arbitration requirement in the handbook; and (2) because it concluded an agreement to arbitrate is illusory if the employer can unilaterally modify the handbook.

The court found that the Sparks case did not apply. Unlike the arbitration clause in Sparks, the CarMax arbitration agreement was not hidden in a handbook which the employee simply acknowledged receiving. Also, unlike the situation in Sparks, the agreement Casas signed provided a specific date for amending the agreement or the DRRP, 30-days notice of any change, and posting of the change at CarMax locations.

The court criticized Sparks’ conclusion that the agreement was illusory. It noted that the Sparks court did not elaborate on its reasoning and cited only out-of-state cases. It then observed that under California law, even a modification clause not providing for advance notice does not render an agreement illusory, because the agreement also contains an implied covenant of good faith and fair dealing.

ANALYSIS

This case continues an apparent trend on enforcing arbitration clauses in the employment context.

 

An Adverse Judgment Is Not A Default For Purposes Of Section 473 Relief

Noceti v. Whorton
(Cal. Ct. of App., 3d Dist.), filed March 18, 2014, published March 18, 2014

KEY FACTS

Anthony H. Noceti and Carol L. Noceti sued Rex R. Whorton for specific performance and breach of contract when Whorton failed to complete the sale of certain real property.

The court set the trial for October 3, 2011. Unfortunately, the Nocetis’ attorney erroneously calendared the trial for October 10, 2011. As a result, the Nocetis and their attorney failed to show up on the day of trial.

Whorton did show up for trial and moved the trial court for judgment. The trial court “reviewed the entire file” and granted judgment, awarding Whorton “$0 principal, $0 pre-judgment interest, $0 attorney’s fees and $0 costs.”

The Nocetis moved to set aside this judgment pursuant to Code of Civil Procedure section 473(b). The motion included their counsel’s declaration explaining he erroneously calendared the trial date for October 10, 2011, because of “serious chronic health problems” and “the loss of [his] secretary.” Plaintiffs’ counsel was unable even to appear at the section 473(b) hearing due to a recent chemotherapy treatment. He subsequently died.

The trial court denied the motion. It ruled that the Nocetis were not entitled to mandatory relief under section 473(b) because the judgment was not a “default,” which was the only judgment for which there was mandatory relief. It did not address discretionary relief.

HOLDING & REASONING

The Court of Appeal affirmed in part and reversed in part.

The court held that the judgment resulting from the Nocetis’ failure to appear for trial and resulting judgment was not a “default” entitling the Nocetis to relief under section 473’s mandatory relief provisions.

However, the court found that the Nocetis were not precluded from relief under section 473’s discretionary relief provisions. Although the Nocetis’ motion for relief did not specifically ask for discretionary relief, the court found that it contained sufficient language to have warranted the trial court’s consideration. Since the trial court did not consider such relief, the court sent the case back to the trial court.

ANALYSIS

The appellate court found a way to give the plaintiffs a break when they lost their day in court because their attorney was dying of cancer.

 

Motions In Limine Did Not Preserve Objections For Appeal

Brown v. American Bicycle Group, LLC
(Cal. Ct. of App., 4th Dist.), filed March 11, 2014, published March 11, 2014

KEY FACTS

Shelley Brown and Ronald Voigt were riding bicycles. Voigt was riding in front of Brown when the front fork on Voigt’s bicycle failed. Voigt fell, and caused Brown, who was unable to avoid Voigt, to crash as well. Brown sued the bicycle fork’s designer and distributor, American Bicycle Group, LLC (“ABG”), among others.

Before trial, Brown filed motions in limine to preclude ABG from offering evidence pertaining to Voigt’s alleged negligent maintenance of the bicycle, the lack of similar accidents involving the bicycle fork, and expert testimony suggesting that a foreign object may have struck Voigt’s bicycle fork. The trial court denied Brown’s motions.

A jury returned a verdict in favor of ABG. The trial court denied Brown’s motion for new trial, and Brown filed an appeal.

HOLDING & REASONING

The Court of Appeal affirmed.

In the published part of the opinion, the court rejected Brown’s argument that the trial judge erred in failing to disclose what Brown characterized as “significant financial ties with the insurance industry,” and that as a result, her due process right to an impartial judge was violated. The court concluded that the trial judge was not required to disclose his ownership interests in various insurance related companies, since none of those companies was a party to this case or a carrier for ABG. It also concluded that there was no violation of Brown’s due process right to an impartial judge.

In the opinion’s unpublished part, the court addressed Brown’s motions in limine. It held Brown’s motions in limine did not preserve her evidentiary objections, and that Brown had not demonstrated that she was prejudiced by the trial court’s rulings. It also noted that Brown’s claims as to two of the three in limine motions failed because the record on appeal did not establish that any of the evidence at issue in the motions in limine was offered at trial. The third motion failed on its merits.

When an in limine ruling admits evidence, the party seeking exclusion must object when the evidence is actually offered to preserve the issue for appeal. However, when (1) a specific legal ground for exclusion is advanced and subsequently raised on appeal; (2) the motion is directed to a particular, identifiable body of evidence; and (3) the motion is made at a time before or during trial when the trial judge can determine the evidentiary question in its appropriate context, a motion in limine may also serve to preserve a claim.

Even so, the better practice in handling motions in limine is for the parties to stipulate to the effect of the court’s rulings or for the trial judge to make it clear to counsel at the end of in limine arguments not only what the ruling on the motion is, but whether further objection or argument is desired when the evidence is presented.

In addition, erroneously admitting evidence will result in a reversal only if it results in prejudice to the party against whom it is offered.

Since the trial court stated that its denial of Brown’s motions was not its final decision and since Brown did not object to the evidence, she did not preserve her position for an appeal.

In addition, Brown did not designate the part of the record that contained evidence other than that of ABG’s expert. The court could not determine whether Brown was prejudiced by the asserted erroneous admission of evidence.

Finally, the court ruled that Brown failed to show that ABG’s expert’s opinion was not properly admitted. Although she argued that he used “junk science” to conclude a foreign object strike caused the failure, she did not establish that the expert’s opinion was not based on an appropriate analysis. Although the analysis was not done with scientific tools like a scan electron microscope, x-ray, ultra-sound, or chemical analysis, Brown failed to demonstrate that such tools were the exclusive methods of scientific analysis in this field. Nor did she demonstrate that the expert’s actual observations were not a methodology reasonably employed by experts in the field.

ANALYSIS

This case is a reminder that motions in limine serve a very limited purpose in many trials.

 

Records Request Was Not Burdensome

Weaver v. Superior Court
(Cal. Ct. of App., 4th Dist.), filed March 12, 2014, published March 12, 2014

KEY FACTS

La Twon Weaver, a prisoner sentenced to death, sought various records from the District Attorney’s Office of San Diego County under the California Public Records Act to assist in investigating whether the District Attorney impermissibly sought the death penalty based on the defendant’s race, the victim’s race, or both.

Weaver requested the District Attorney provide him with, among other things, copies of all charging documents in homicide cases the District Attorney filed between January 1977 and May 1993.

The District Attorney denied Weaver’s requests on various grounds including that: (1) the documents sought implicate the privacy rights of “hundreds of defendants and victims under article I, sections 1 and 28, of the California [C]onstitution;” and (2) the request for the list of homicide cases was overly burdensome because “programming and extraction of the data necessary to identify the records would require approximately 35-40 hours of time at a cost of $85 per hour for a total of approximately $3,400.”

The trial court denied Weaver’s request for the documents.

HOLDING & REASONING

The Court of Appeal granted a writ of mandate directing the trial court to order the District Attorney to provide the documents.

As to any right of privacy, the court held that producing copies of court filings in other cases would not violate any right to privacy with respect to either the victim or the defendant. It noted: “There is no reasonable expectation of privacy in documents required to be filed in court when those documents are not filed under seal.”

Rejecting the District Attorney’s burdensome argument, the court said: “We conclude the public’s interest in the fair administration of the death penalty is a longstanding concern in California, and it is inconceivable to us that any countervailing interest that the District Attorney could assert outweighs the magnitude of the public’s interest.” It noted that the $3,400 cost estimate to compile the list was not a sufficient burden as to justify the District Attorney’s refusal to compile it.

ANALYSIS

Although this is a criminal case, it could be relevant to civil discovery disputes involving harassing, overly burdensome or privacy objections.

 

Other Cases Of Interest

An Engineering Firm Was Not Strictly Liable For Seatback Collapse

Romine v. Johnson Controls, Inc.
(Cal. Ct. of App., 2d Dist.), filed March 17, 2014, published March 17, 2014

Jaklin Romine was seriously injured when the pick-up truck she was driving was hit from the rear in a multi-vehicle crash. The collision’s force caused Romine’s seatback to collapse and her to slide up the seat. She suffered spinal injuries that rendered her a quadriplegic.

Romine sued various persons and entities including Ikeda Engineering Corporation and Vintec Co. Ikeda participated in the design of her vehicle’s seat, Vintec manufactured the vehicle seat. By trial, these were the only remaining defendants.

At trial, Romine pursued a strict products liability theory based on a consumer expectations design defect theory. The jury returned a $24,744,764 verdict, and found that Ikeda and Vintec were 20 percent at fault for Romine’s injuries. After offsets for settlements with other defendants and an award of costs to Romine, the trial court entered a $4,606,926.68 judgment for Romine.

Ikeda and Vintec appealed. They argued that: (1) the trial court erred in permitting Romine to try her strict products liability action under the consumer expectations design defect test rather than under a risk/benefit design defect test; (2) the component parts doctrine precluded a finding of strict products liability against them; (3) Ikeda, as a provider of engineering services, could not be held strictly liable for a product it designed but did not manufacture, sell, or otherwise place in the stream of commerce; (4) the trial court improperly excluded evidence in connection with the apportionment of fault among other manufacturers; and (5) the trial court erred in permitting Romine to introduce evidence of the full amount billed for her past medical care rather than the amount her medical care providers accepted.

Romine also appealed. She argued that the trial court erred in failing to award her expert witness fees pursuant to Code of Civil Procedure section 998 and prejudgment interest pursuant to Civil Code section 3291.

The Court of Appeal reversed and remanded.

It held that Ikeda could not be held strictly liable for engineering services it provided. It also held the trial court erred in barring Ikeda and Vintec from apportioning fault for Romine’s injuries to other manufacturers.

Based on this, it remanded for a retrial limited to the issue of apportionment of fault. It ruled that the jury’s finding of defendants’ liability, except as to Ikeda, and its finding that Romine suffered damages of $24,744,764 were affirmed and were not to be a part of the retrial.

 

A Lender’s Predictions Were Not Actionable

Cansino v. Bank of America
(Cal. Ct. of App., 6th Dist.), filed March 26, 2014, published March 26, 2014

In 2000, Carlos and Resurreccion Cansino obtained a $280,000 mortgage loan. Over the next 10 years, they refinanced several times. Each time, it was for a larger principal amount, relying on the assumption that the value of their home would continue to appreciate and that they would continue to be able to refinance. When the housing market crashed and they found themselves owing more than their home was worth. Unable to refinance and unable to make the payments, they sued.

Among other things, the Cansinos asserted a cause of action for fraud. They alleged that the lender misrepresented that their home would continue to appreciate and that they would be able to continue to borrow against its equity.

The trial court sustained the lenders’ demurrers without leave to amend.

The Court of Appeal affirmed.

The court reasoned that: “The law is well established that actionable misrepresentations must pertain to past or existing material facts. Statements or predictions regarding future events are deemed to be mere opinions which are not actionable.” Forecasting that the Cansinos’ home would continue to appreciate was a prediction — not fraud. The court stated: “As a matter of law, defendants’ alleged representations that plaintiffs’ property would continue to appreciate in the future and that plaintiffs could then sell or refinance their home based on this forecasted future appreciation are not actionable in fraud.”

 

A Contractual Limitation Period Was Unenforceable

Ellis v. U.S. Security Associates
(Cal. Ct. of App., 1st Dist.), filed March 20, 2014, published March 20, 2014

Ashley Ellis went to work for U.S. Security Associates as a security guard. Ellis was promoted and came under the supervision of Rick Haynes. Haynes began sexually harassing Ellis. Haynes was counseled, apparently to no avail, and he was soon fired. Ellis was again promoted, but never paid the raise she was promised, and she resigned.

Ellis sued U.S. Security and others alleging three claims under the Fair Employment and Housing Act and two nonstatutory claims. These claims were timely under the applicable statutes of limitations. However, U.S. Security moved for judgment on the pleadings, based on Ellis’s signed application for employment where she agreed that “any claim or lawsuit… must be filed no more than six (6) months after the date of the employment action,” and where she waived “any statute of limitations to the contrary.”

The trial court granted the motion and dismissed Ellis’s complaint.

The Court of Appeal reversed.

The court recognized that reasonable contractual limitations of actions are generally valid and enforceable. However, it held that the particular limitation provision was unreasonable and against public policy because, among other things, the provision would result in different limitation periods for different acts or omissions in conjunction with Ellis’ employment with U.S. Security. And, it noted that a claim against U.S. Security might be time-barred while one against Haynes would not be because he did not have the benefit of a written employment agreement with Ellis.

 

Attorney’s Fees Were Not Recoverable

Soni v. Wellmike Enterprises Co., Ltd.
(Cal. Ct. of App., 2d Dist.), filed March 26, 2014, published March 26, 2014

Attorney Surjit Soni did business as “The Soni Law Firm.” Soni represented Wellmike Enterprises and Mike Chen in a legal matter. Soni sued Wellmike and Chen to recover unpaid legal fees. Soni prevailed. Soni then sought to recover attorney’s fees as the prevailing party, pursuant to the retainer agreement’s attorney fee’s provision.

Mr. Soni contended he was a sole practitioner who retained other attorneys to represent his interests. The trial court denied recovery on the ground attorney’s fees were not recoverable because Soni operated as a law firm which was represented in this litigation by employees or associates of the firm, rather than by outside counsel.

The Court of Appeal affirmed. It held substantial evidence supported the trial court’s determination that Soni operated as a law firm and that the attorneys who represented the law firm in this action were its employees.

The court distinguished between instances in which a party seeking attorney’s fees was representing its own interests and instances in which a corporate litigant used in-house counsel.

 

The Attorney-Client Privilege Applied

Seahaus La Jolla Owners Association v. Superior Court
(Cal. Ct. of App., 4th Dist.), filed March 12, 2014, published March 12, 2014

Seahaus La Jolla Owners Association is the homeowners’ association for a condominium development. It sued the developer’s builder for damages due to defects in certain common areas. Select unit owners also sued the builder, but for damages due to defects in their own units.

In connection with the Association’s claim and ensuing lawsuit, its attorneys met with homeowners in informational meetings. The builder, in deposing various homeowners, sought to discover the substance of the communications.

The Court of Appeal held that such communications were subject to the attorney-client privilege. It relied on the common interest doctrine and on statutory law addressing a homeowners’ association’s duty to communicate with its members.

 

A Plaintiff Could Not Voluntarily Dismiss To Avoid Dispositive Motion

Pielstick v. MidFirst Bank
(Cal. Ct. of App., 2d Dist.), filed March 26, 2014, published March 26, 2014

Stephen Pielstick sued MidFirst Bank and others for foreclosing on real property that he owned. The various defendants demurred to Pielstick’s complaint. The trial court sustained the demurrers with leave to amend. Pielstick amended. The defendants demurred again.

When the demurrer came on for hearing, the trial court asked whether an opposition had been filed and served. It quickly determined that an opposition had been filed, but that it was late. The defendants moved to strike the opposition. The court gave Pielstick the option of having it strike the late opposition and rule on the demurrers as if they had not been opposed or to have it continue the matter so it could read and consider his opposition. It stated that if he chose the latter course, he would be required to pay for the opposing attorneys’ time for having to wait for the court to read the opposition. Pielstick elected the latter option.

When the court again called the matter, Pielstick asked that he be allowed to dismiss without prejudice so that he could refile at a later time. The court denied his request and then sustained the demurrers with prejudice.

The Court of Appeal affirmed.

Although a plaintiff may voluntarily dismiss at any time before the trial starts, a plaintiff may not do so to avoid the consequences of a dispositive motion once it has become clear that he or she will lose that motion. Not only is it a burden on a defendant to let a plaintiff do this, it is a waste of judicial resources.

 

A Judge Was Not Subject To Disqualification For Officiating Opposing Counsel’s Wedding

Wechsler v. Superior Court
(Cal. Ct. of App., 4th Dist.), filed March 4, 2014, published March 4, 2014

Kenneth and Kimberly Weschler were going through a divorce. More than three years after the dissolution action was filed, the matter was assigned to Commissioner Ratekin to preside over post-judgment custody and support matters.

During the next several years, the parties had numerous disputes. In 2012, Kimberly filed a motion to increase support payments and both parties raised numerous other related issues. Kenneth was represented by Cary Cotten, and Kimberly was represented by Alexandra O’Neill.

After many continuances and the appointment of an accounting expert, the commissioner scheduled a hearing for November 1, 2013, to resolve pending motions.

One week before the November 1 scheduled hearing, both counsel appeared in court for an ex parte hearing regarding Kenneth’s request to continue the hearing. As they were waiting to be called, O’Neill told Cotten that Commissioner Ratekin would be officiating at her wedding later in the year.

When the Wechsler matter was called, Commissioner Ratekin did not mention her upcoming participation in the wedding, and neither party raised the issue. The court denied Kenneth’s continuance request. Two days later, Kimberly filed a declaration and motion seeking additional attorney’s fees and costs. Three days later, Kenneth’s counsel filed a verified statement of disqualification, asserting that Commissioner Ratekin should be disqualified for cause because the commissioner’s agreement to officiate in opposing counsel’s wedding might lead a person aware of the facts to entertain a doubt about the commissioner’s ability to be impartial in handling the case.

The court denied the disqualification motion. Kenneth sought review.

The Court of Appeal affirmed. It ruled that Kenneth had not established that a reasonable person aware of the facts would entertain doubts as to whether the commissioner could be impartial in the particular case.

The court noted that the California Supreme Court had previously rejected a criminal defendant’s claims that a trial judge’s act of officiating at the prosecutor’s daughter’s wedding several months before the commencement of a death penalty trial created an appearance of partiality.