Key Decisions

March 2013 – All Articles

(filed under: Key Decisions Archive | March 22, 2013)

The Tortfeasor’s Policy Was Primary

GuideOne Mutual Insurance Company v. Utica National Insurance Group
(Cal. Ct. of App., 4th Dist.), filed February 28, 2013 

KEY FACTS

Gary West, while driving his own car, struck and severely injured a motorcyclist, Robert Jester.  At the time, West was working as a pastor for Crosswinds Community Church (Crosswinds) and Christian Evangelical Assemblies (CEA).

Jester and his wife sued West, Crosswinds and CEA for personal injuries.  That action settled for $4.5 million.  West’s personal auto insurer, State Farm, paid its $100,000 policy limits.  Crosswinds’ insurer, GuideOne, paid its $1 million policy limits on a commercial general auto liability policy.  GuideOne also paid its $1 million policy limits on a commercial liability umbrella policy.  CEA’s insurers, Utica, paid its $1 million policy limits on a commercial auto liability policy and $1.4 million out of its $5 million policy limits on a commercial liability umbrella policy.

GuideOne sued Utica for equitable contribution to collect what it felt were overpayments it made in the Jester action.  GuideOne asserted that its contribution to the Jester settlement exceeded its proportionate share of coverage by $600,000.  GuideOne brought a motion for summary judgment, which the court granted.  The trial court determined the priority of coverage for the $4.5 million Jester action settlement amongst the five policies was (1) State Farm’s $100,000 policy; (2) GuideOne’s $1 million primary policy and Utica’s $1 million primary policy; and (3) $400,000 from GuideOne’s $1 million umbrella policy and $2 million from Utica’s $5 million umbrella policy, representing the ratio as to the respective coverage held by GuideOne and Utica under those umbrella policies.

HOLDING & REASONING

The Court of Appeal reversed.

The appellate court concluded that the trial court erred in awarding GuideOne equitable contribution in the amount of $600,000 from Utica’s umbrella policy.  That figure represented what the trial court felt was GuideOne’s pro rata share of coverage under its own umbrella policy.  This was wrong because an employer is only vicariously liable for the actions of an employee.  As such, all of the insurance policies covering the employee, primary and excess, must be exhausted before the umbrella policy of an insurer that covered only the employer must make a contribution.

Both GuideOne policies were primary and both of Utica’s policies were excess because the GuideOne policies insured West, the tortfeasor, and the Utica policies insured CEA, who was only vicariously liable.

ANALYSIS

The court held that California Insurance Code section 11580.9 did not establish priority of the excess policies.  As a result, it applied general principles to prioritize the excess policies that insured the tortfeasor before the excess policies covering vicariously liable parties.

 

CHP Had No Duty To Injured Bus Passengers

Greyhound Lines, Inc. v. Department of the California Highway Patrol
(Cal. Ct. of App., 5th Dist.), filed January 23, 2013 

KEY FACTS

In the early morning, an SUV was in a single vehicle rollover accident that left it on its side blocking one of the lanes of traffic on State Route 99.  The SUV’s headlights and taillights were out and its dark undercarriage was facing on-coming traffic.

A truck driver reported this accident to a CHP 911 operator.  A second motorist also called 911.  The 911 operator did not flag the accident as blocking traffic lanes and as a result, it was not noted as a priority.

Approximately three minutes after these reports, a Greyhound bus hit the SUV.  The bus collision resulted in the deaths of three bus passengers and the three occupants of the SUV.

As a result of the bus collision, Greyhound was sued for damages based on its alleged negligence.  It cross-complained against various cross-defendants including the California Highway Patrol.  Greyhound alleged that CHP was negligent in that, upon being alerted to the first accident by passing motorists, the CHP 911 operator failed to enter the code for lane blockage and thus the CHP response was unnecessarily delayed.

The trial court sustained CHP’s demurrer without leave to amend and dismissed Greyhound’s cross-complaint as against CHP.

HOLDING & REASONING

The Court of Appeal affirmed.

The court held that under California law, law enforcement personnel, including CHP officers, have no duty to come to the aid of another unless a special relationship exists between the injured party and the officers.  Such a special relationship arises if an officer’s affirmative act creates the peril, or contributes to, increases, or changes the risk that otherwise exists.

There was no special relationship between CHP and the injured bus passengers.  CHP did not perform any affirmative acts to create the peril, to increase it or to change it.

The court rejected Greyhound’s argument that CHP owed a duty of care to the bus passengers based on the 911 operator’s assurances to the 911 callers that CHP was on the way.  According to Greyhound, the CHP operator lulled the callers into a false sense of security and dissuaded them from rendering further assistance.  However, the test was not whether CHP lulled the callers into a false sense of security, but rather whether it lulled the bus passengers into one.  That, it did not do.  Further, as to whether the callers would have rendered further assistance had the CHP operator not said that CHP was on its way, that was “replete with speculation and conjecture” and would not give rise to a cause of action.

ANALYSIS

The court’s opinion seemed to recognize that any broad recognition of duty would expose emergency service providers to liability in too many situations.

 

Pregnant Employees Are Entitled To Take Leave

Sanchez v. Swissport, Inc.
(Cal. Ct. of App., 2d Dist.), filed February 21, 2013

KEY FACTS

Anna Sanchez worked for Swissport as a cleaning agent.  In February 2009, she was diagnosed with a high-risk pregnancy, requiring bed rest.  After her diagnosis, she requested and received a temporary leave of absence from Swissport.  She was given just over 19 weeks of leave, consisting of her accrued vacation time in addition to the time allotted by the California Family Rights Act (CFRA) and Pregnancy Disability Leave Law.  However, when that time ran out, she was fired.

Sanchez sued Swissport for (1) discrimination based on pregnancy and pregnancy-related disability, (2) discrimination based on sex, (3) failure to prevent discrimination, (4) failure to accommodate and engage in a timely, good faith interactive process, (5) retaliation, (6) wrongful and tortious discharge, (7) intentional infliction of emotional distress (IIED), (8) unfair business practices under California Business and Professions Code section 17200 et seq., and (9) breach of implied and/or express contract.  She alleged that Swissport had actual knowledge that she was anticipated to deliver her baby on or about October 19, 2009 and needed a leave of absence lasting until she gave birth.  She also alleged that “at no time, prior to the termination of her employment, did [Swissport] ever contact Plaintiff to engage her in a timely, good faith interactive process in order to identify available accommodations, such as the extended leave of absence she had requested, so that she could remain employed.”

The trial court dismissed Sanchez’s case after sustaining a demurrer by Swissport.  It found that Swissport had provided Sanchez with all of the leave mandated by the PDLL and the CFRA, and therefore had satisfied all of its obligations under the FEHA.

HOLDING & REASONING

The Court of Appeal reversed.  It noted that the case was one of first impression, in which it was asked “to determine whether an employee who has exhausted all permissible leave available under the Pregnancy Disability Leave Law (PDLL), Government Code section 12945, may nevertheless state a cause of action under the California Fair Employment and Housing Act (FEHA), section 12900, et seq.”

After reviewing the applicable laws, the court concluded that Sanchez was entitled to leave beyond what was provided in the PDLL and CRFA and that because Swissport had not afforded her that time, it could be subject to liability.

ANALYSIS

This opinion confirms how difficult it can be for California employers to successfully interact with their employees.


Injury In Hospital Not Necessarily Professional Services

Flores v. Presbyterian Intercommunity Hospital
(Cal. Ct. of App., 2d Dist.), filed February 27, 2013

KEY FACTS

Catherine Flores was a patient at Presbyterian Intercommunity Hospital.  Flores injured her left knee and elbow when a bed rail collapsed, causing her to fall to the floor.  Flores sued the hospital for general negligence and premises liability.

The hospital asserted that Flores’s lawsuit was time barred because she had not brought the lawsuit within one year after the date of her injury.  It argued that Flores’s lawsuit arose out of professional malpractice, which has a one-year statute of limitations.

The trial court concurred and dismissed Flores’s lawsuit.

HOLDING & REASONING

The Court of Appeal reversed.  Based on a survey of case law and statutory analysis, the court concluded that Flores’s action sounded in ordinary negligence, so as to be governed by the two-year statute applicable to personal injury actions.

ANALYSIS

It is not always easy to distinguish between ordinary and professional negligence.  Obviously, the distinction significantly impacts the applicable statute of limitations.


Equity Requires Clean Hands

Aguayo v. Amaro
(Cal. Ct. of App., 4th Dist.), filed January 13, 2013 

KEY FACTS

Sofia and her husband Jesus Duran Aguayo are in the “business” of acquiring properties by adverse possession.

Herman Infante and Isabel Infante acquired a property by grant deed in 1946.  The property served as the family home for Herman and Isabel and their two children, Alfred Infante and Richard Infante.  Richard’s biological daughter, Michelle Amaro, was raised on the property until she was adopted by a different family when she nine years old.  Herman died in 1969.  Isabel died in 1993.  After their parents died, Alfred and Richard continued to reside at the property.

On January 2, 1999, Jesus placed a sign on the property stating “No Trespassing.”  The sign also indicated that Sofia was the “owner” of the property.  Jesus and Sofia claimed to have changed the locks to the front door of the house, placed a fence around the property and made electrical, plumbing and drywall repairs.

On April 27, 2000, Jesus and Sofia recorded a quitclaim deed that purported to transfer the property from “Jesus Duran” to Jesus Aguayo and Sofia Aguayo.  There was no “Jesus Duran” and there was no prior conveyance of the property to a “Jesus Duran.”  The quitclaim deed stated that tax statements should be mailed to Sofia at her own address.  She paid both back taxes on the property and all other property taxes as they accrued.

In 2004, Sofia filed a verified complaint to quiet title to the property.  The complaint sought a judgment that the property belonged to Sofia under the doctrine of adverse possession.  Michelle Amaro, as special administrator of the Estate of Isabel Infante, filed a cross-complaint against Sofia and Jesus for quiet title.

The trial court found that Sofia took possession of the property by claim of right and color of title.  It also further found that although Sofia met the “technical requirements” of adverse possession, her quiet title action “must fail as she proceeded with unclean hands in asserting her adverse interest in this property.”  The court based its ruling on the fact that Sofia recorded the quitclaim deed so the property tax bills would be sent to her and not the legal owner.  Based on this, it quieted title to Amaro.

HOLDING & REASONING

The Court of Appeal affirmed.  It found that the trial court had not abused its discretion in applying the defense of unclean hands and that there was substantial evidence in support of its finding that Sofia had unclean hands.

The doctrine of unclean hands is a defense to an equitable action, including an action to quiet title.  It rests on the maxim that he who comes into equity must come with clean hands.

Not all wrongful conduct constitutes unclean hands.  Only if the misconduct is directly related to the cause at issue can a defendant invoke the doctrine.

The elements of adverse possession are:  “(1) Possession must be by actual occupation under such circumstances as to constitute reasonable notice to the owner.  (2) It must be hostile to the owner’s title.  (3) The holder must claim the property as his own, under either color of title, or claim of right.  (4) Possession must be continuous and uninterrupted for five years.  (5) The holder must pay all the taxes levied and assessed upon the property during the period.”

Adverse possession under color of title is based on a written instrument, judgment, or decree that purports to convey real property but is for some reason defective.  The good faith of the occupant, in relying on a defective instrument, is a crucial element to establishing adverse possession based upon color of title.  Adverse possession under a claim of right is not founded on a written instrument, judgment or decree.  A claim of right can be founded on either a deliberate trespass, or a mistake if the claimant intends to claim the area occupied as his or her land.

The wrongful act of trespass cannot be the basis for an unclean hands defense to adverse possession by claim of right.  This is because such a defense is inconsistent with the possibility of adverse possession by claim of right.

Nonetheless, unclean hands was available to Amaro because the basis for her unclean hands defense was not Sofia’s trespass on the property.  Rather, it was Sofia’s deceitful act of recording a wild deed for the purpose of diverting tax bills to her address.

ANALYSIS

By its very nature, adverse possession involves an adverse possessor acting hostile toward an existing owner.  This decision draws a line by deciding that filing a false deed to divert tax bills goes too far.

 

Online Retailers May Collect Personal Information

Apple, Inc. v. Superior Court
(Cal. Sup. Ct.), filed February 4, 2013 

KEY FACTS

David Krescent sued Apple Inc. for violation of the Song-Beverly Credit Card Act of 1971.  That Act governs the issuance and use of credit cards.  Among other things, the Act prohibits retailers from “[r]equest[ing], or requir[ing] as a condition to accepting the credit card as payment . . . , the cardholder to write any personal identification information upon the credit card transaction form or otherwise.”  It also prohibits retailers from requesting or requiring the cardholder “to provide personal identification information, which the [retailer] . . . writes, causes to be written, or otherwise records upon the credit card transaction form or otherwise,” and from “[u]tiliz[ing] . . . a credit card form which contains preprinted spaces specifically designed for filling in any personal identification information of the cardholder.”

Krescent alleged that Apple requested or required him to provide his address and telephone number as a condition of accepting his credit card as payment for the online purchase of material he wanted to download from the internet.

Apple filed a demurrer to challenge Krescent’s lawsuit.  It asserted that the prohibitions applied to “brick-and-mortar” retailers, not to online retailers.

The trial court overruled Apple’s demurrer.

Apple sought review by way of a petition for a writ of mandate.  However, the Court of Appeal summarily denied review.

HOLDING & REASONING

The California Supreme Court accepted the matter for review, reversed the Court of Appeal order denying review and directed the Court of Appeal to issue a writ consistent with its opinion.

The Court made a careful consideration of the statute’s text, structure, and purpose, and concluded that Section 1747.08 does not apply to online purchases in which the product is downloaded electronically.

In reaching its decision, the Court concluded that based on certain provisions of the Act, the Legislature had intended to permit retailers to protect themselves against fraud.  This included being able to look at the credit card or other identification.  However, the authorized fraud prevention measures did not exist in online transactions, particularly those in which a consumer could download the “product” being purchased, such as music.  That fact, combined with the fact that the Act had been enacted before online commerce had become popular, led the Court to conclude that it did not apply to online retailers.

The Court was careful to note that it was not ruling on whether Section 1747.08 applied to online transactions that do not involve electronically downloadable products or to any other transactions that do not involve in-person, face-to-face interaction between the customer and retailer.

ANALYSIS

This case presents a look at competing problems created by modern technology and the desire for privacy.  The Supreme Court did not offer any remedies, but it did not prohibit what may be one of the only means of helping reduce fraudulent transactions, and left it for the Legislature to try to find a solution.

Other Cases Of Interest

 

A Fired Employee Was Not Entitled To Damages

Harris v. City of Santa Monica
(Cal. Sup. Ct.), filed February 7, 2013

Wynona Harris was a bus driver who worked for the City of Santa Monica.  After the City fired her, Harris sued the City alleging that she was fired because of her pregnancy in violation of the prohibition on sex discrimination in the Fair Employment and Housing Act (“FEHA”).  The City claimed that Harris had been fired for poor job performance.

At trial, the City asked the court to instruct the jury that if it found a mix of discriminatory and legitimate motives, the City could avoid liability by proving that a legitimate motive alone would have led it to make the same decision to fire Harris.  The trial court refused the instruction, and the jury returned a substantial verdict for Harris.

The Court of Appeal reversed, holding that the requested instruction was legally correct and that the trial court’s refusal to give it was a prejudicial error.

The California Supreme Court held that the Court of Appeal was correct in part.  It held that under the FEHA, when a jury finds that unlawful discrimination was a substantial factor motivating a termination of employment, and when the employer proves it would have made the same decision absent such discrimination, a court may not award damages, backpay, or an order of reinstatement.  However, it also held that the employer does not escape liability entirely and could be subject to an injunction compelling it to stop discriminatory practices.

The Court reasoned that in light of the FEHA’s express purpose of not only redressing but also preventing and deterring unlawful discrimination in the workplace, an employee could still be awarded, where appropriate, declaratory relief or injunctive relief to stop discriminatory practices.  In addition, the employee may be eligible for reasonable attorney’s fees and costs.

Based on this reasoning, the Court affirmed the Court of Appeal’s judgment overturning the damages verdict and remanded for further proceedings.


Attorney’s Fees Were Properly Awarded

Cates v. Chiang
(Cal. Ct. of App., 4th Dist.), filed February 7, 2013

Candace Cates brought a taxpayer action against several defendants, including the California Gambling Control Commission and the California State Controller, alleging these entities had failed to discharge their mandatory statutory duties to collect money derived from gambling owed to the state by various Indian tribes.

The trial court granted summary judgment in the defendants’ favor.  However, the appellate court reversed and remanded.

After the case was remanded to the trial court, the Commission completed audits of all of the affected tribes and determined the tribes had underpaid the state by about $12.8 million, and collected at least $11.5 million of this amount.  Based on the Commission’s audits and its collection of the delinquent funds, Cates was satisfied that the Commission was complying with its mandatory duties and dismissed her substantive causes of action.  As part of the dismissal, the parties stipulated the court would decide issues pertaining to Cates’s entitlement to attorney fees and the reasonable amount of any such fees in bifurcated proceedings.

The trial court found that Cates’s action was a “catalyst” that caused a change in the defendants’ conduct and vindicated an important public interest.  As such, it awarded her $2,011,844.  This figure was based on 2,398 attorney hours at a $451 blended hourly rate and a 1.85 positive multiplier.

In affirming, the Court of Appeal held the trial court had not abused its discretion in determining the fee award and rejected the Commission’s evidentiary challenges to the reconstructed attorney time records.  It noted that the evidentiary challenges go to the weight of the evidence and not to its admissibility and that the trial court had sufficient information to evaluate the reliability of the submitted records.  As to those records, some were prepared contemporaneously with the work being performed while others were reconstructed based on actual work product.  As to the reconstructed records, there was expert testimony that when records are reconstructed, they tend to understate work actually performed rather than to overstate it.