Key Decisions

May 2012 – Read All Cases

(filed under: | May 16, 2012)

California Employers Are Not Required To Police Employees To Ensure That Meal Periods Are Actually Taken

Brinker Restaurant Corp. v. Superior Court
(Cal. Sup. Ct.), filed April 12, 2012 

KEY FACTS

The Brinker Restaurant Corporation operates various restaurant chains and a class action lawsuit was filed on behalf of Brinker’s cooks, stewards, waiters, buspersons and other employees. It alleged that Brinker failed to provide employees with required meal and rest periods. Plaintiffs tried to certify subclasses, including a subclass for alleged rest period violations and a subclass for alleged meal period violations.

Brinker opposed class certification. Brinker argued that individual issues predominated because Brinker was only required to permit the breaks to be taken, not to force employees to actually take the breaks.

Brinker pointed out that many employees took the breaks Brinker allowed, and an individual inquiry would be required for employees who did not take breaks Brinker provided.

The trial court granted class certification, ruling that common issues predominated. The appellate court, however, issued a writ and reversed class certification. The California Supreme Court granted review.

HOLDING & REASONING

The court first determined that with respect to the restaurant industry, employees are entitled to a 10-minute rest break if they work at least 3.5 hours, but not more than 6 hours, and two 10-minute rest breaks if they are required to work 6 to 10 hours.

The Supreme Court held that “in the context of an eight-hour shift, as a general matter, one rest break should fall on either side of the meal break. Shorter or longer shifts and other factors that render such scheduling impractical may alter this general rule.”

In terms of class certification for rest periods, Brinker conceded that it had a uniform rest break policy.

While the court suggested that Brinker’s uniform rest break policy was lawful, it concluded that the Court of Appeal erred in denying class certification. The Supreme Court ruled Brinker would be better off with a certified class and a ruling in favor of its uniform policy. Otherwise, repeated denial of class certifications could lead to a series of class action lawsuits against Brinker.

With respect to meal periods, the court concluded that California law requires a meal period of at least 30 minutes if an employee is required to work more than 5 hours.

Under applicable law, employers are required to provide employees with an uninterrupted 30-minute meal period when the employee’s work day exceeds 5 hours. (Two meal periods are required when the work day exceeds 10 hours.)

To try to get class certification, plaintiffs also argued that employers are required to ensure that employees take their meal periods and do no work during their meal periods. The California Supreme Court rejected the argument concluding that:

“Indeed, the obligation to ensure employees do no work may in some instances be inconsistent with the fundamental employer obligations associated with the meal break: to relieve the employee of all duty to relinquish any employer control over the employee and how he or she spends the time.”

The Supreme Court went on to note that where employers relieve the employee of duty, an appropriate off-duty meal period has occurred, whether or not the employee decides to continue working.

Of course, the court was careful to admonish employers, noting that “an employer may not undermine” a uniform policy of “providing meal breaks by pressuring employees to perform their duties in ways that omit breaks.”

The Supreme Court concluded that “the employer is not obligated to police meal breaks and ensure no work thereafter is performed. Bona fide relief from duty and a relinquishment of control satisfies the employer’s obligations, and work by a relieved employee during a meal break does not thereby place the employer in violation of its obligations . . . .”

The court also rejected plaintiffs’ argument that meal periods had to be strictly timed within 5 hour allotments. Instead, the court concluded that “Wage Order No. 5 imposes no meal timing requirements beyond those in section 512. An employer’s obligation is to provide a first meal period after no more than five hours of work and a second meal period after no more than 10 hours of work.”

Having concluded that its rulings would impact the trial court’s discretionary assessment of class certification, the court decided to “remand the question of meal subclass certification to the trial court for reconsideration in light of the clarification of the law we have provided.”

ANALYSIS

California employers had been waiting for the Brinker decision for a long time. The decision has generally been regarded as very favorable for employers, since it pays respect to the differences and variety of challenges that face employers in various business contexts, and it rejects the notion that employers have to micromanage employees even when they have agreed to relieve the employee of all duty and completely relinquish control. To be sure, the decision leaves room for future class action filings based on various employer policies that may be appropriately subject to class action treatment. In the meantime, the decision does offer some much needed guidance in terms of the substance surrounding meal periods and rest breaks.

*****

A Settlement That Results In A SIR’s Satisfaction Triggers Indemnification

Axis Surplus Insurance Company v. Glencoe Insurance Ltd.
(Cal. Ct. of App., 4th Dist.), filed April 11, 2012 

KEY FACTS

Axis Surplus Insurance Company and Glencoe Insurance Ltd. provided general liability insurance in favor of Pacifica Pointe L.P. Pacifica was sued in a construction defect suit and tendered claims to both Axis and Glencoe. Axis agreed to defend Pacifica subject to a reservation of rights. Glencoe’s policy contained a self-insured retention (SIR) and stated Glencoe had no duty to investigate or defend any claim until Pacifica satisfied the SIR. Glencoe declined the defense tender because the Pacifica had not satisfied its SIR. However, Glencoe monitored the construction defect suit and asked Pacifica to inform it once it satisfied the SIR.

Pacifica and Axis paid a total of $1 million to settle the construction defect suit. Although Glencoe refused to participate in the settlement, it approved of Pacifica contributing $250,000 as part of the settlement. Pacifica contributed the $250,000. This contribution satisfied its SIR.

After the settlement, Axis sued Glencoe for declaratory relief and equitable contribution to recover at least a portion of the $750,000 it paid in settlement. After a bench trial, the court found in favor of Axis and allocated a 60/40 split of Axis’s settlement payment to the advantage of Axis.

Glencoe appealed.

HOLDING & REASONING

The Court of Appeal affirmed.

The court explained that equitable contribution is available to apportion a loss among several insurers when each of those insurers is obligated to indemnify or defend the same loss or claim, and one insurer has paid more than its share of the loss or defended the action without any participation by the others. Thus, the central question was whether Glencoe was obligated to indemnify or defend Pacifica.

In an action for equitable contribution by a settling insurer against a nonparticipating insurer, the settling insurer has met its burden of proof when it makes a prima facie showing of potential coverage under the nonparticipating insurer’s policy. The settling insurer does not have to prove actual coverage.

After the settling insurer has satisfied its burden of proof, the burden shifts to the nonparticipating insurer to prove an absence of actual coverage under its policy.

The court rejected Glencoe’s argument that Axis had to show not only that Pacifica paid $250,000 to satisfy its SIR, but that this payment only applied to covered property damage. It reasoned that by settling, the parties gave up their right to have liability “established” by a trier of fact and the settlement becomes presumptive evidence of the insured’s liability and the amount of that liability. It noted that any other rule would make the settling insurer’s right to settle meaningless. Thus, the court concluded the settlement is presumed to be made for only damages covered under the applicable policy. Because the settlement included Pacifica’s payment of the SIR, the SIR shares the presumptive effect of the settlement as well. Therefore, Axis had no obligation to prove the SIR applied only to “covered property damage” as defined in the Glencoe policy.

The court next rejected Glencoe’s contention that its legal obligation to provide Pacifica with a defense in the construction defect suit could only be triggered after Pacifica satisfied the SIR, which was when the construction defect suit was settled. The court noted that Glencoe’s contention concerned the timing of its obligation to indemnify rather than whether it had one at all. As to the timing issue, the court noted that there was no precedent to which it could look.

In resolving the timing issue, the court considered the fact that although Pacifica had tendered the claim to Glencoe and Glencoe was “monitoring” the litigation, it otherwise did nothing. Then, recognizing that equitable contribution is an equitable doctrine and attempts to do what is “fair,” the court said:

To allow Glencoe to defeat an equitable contribution claim merely based on the timing of the payment of the SIR would award Glencoe for its inaction and work an injustice. Glencoe appears to have been hiding behind the SIR requirement in its policy, gambling that Pacifica would not satisfy it because Axis was providing Pacifica with a defense in the construction defect suit. We decline to adopt a rule sanctioning such gamesmanship.

It held:

When the insured has tendered a claim to the nonparticipating insurer, the nonparticipating insurer’s duty to defend is subject to the insured satisfying an SIR, and the insured satisfies the SIR as payment of a settlement of which the nonparticipating insurer was aware, the timing of the insured’s payment of the SIR does not prevent the settling insurer from establishing the nonparticipating insurer’s legal obligation to cover the underlying claim.

ANALYSIS

The court’s remark about Glencoe “hiding behind the SIR requirement in its policy, gambling that Pacifica would not satisfy it because Axis was providing Pacifica with a defense in the construction defect suit,” is interesting. Like Executive Risk Indemnity, Inc. v. Jones, 171 Cal.App.4th 319 (2009), this decision highlights certain risks that attach to carriers who approach litigation, with the expectation that a SIR offers substantial protection.

*****

A Statutory Offer To Compromise Made Jointly To Spouses May Trigger The Offertory’s Right To Costs

Farag v. ArvinMeritor, Inc.
(Cal. Ct. of App., 2d Dist.), filed April 24, 2012

KEY FACTS

Nasseem Farag was diagnosed with mesothelioma, a cancer linked to asbestos exposure. Nasseem and his wife, Sanna, sued various companies that manufactured or sold asbestos-containing automobile parts. One of these was ArvinMeritor, whose predecessor, Rockwell International Corporation, was a manufacturer and distributor of asbestos-containing brake linings.

Before trial, ArvinMeritor served an offer to compromise pursuant to California Code of Civil Procedure section 998. ArvinMeritor offered the Farags one cent ($0.01) in exchange for a dismissal with prejudice and a mutual waiver of costs. The offer was made jointly to the Farags and did not specify that the offer was capable of acceptance by either Nasseem or Sanna without the consent of the other. The offer was based on ArvinMeritor’s assertion there was no evidence that Nasseem had been exposed to any ArvinMeritor product.

The Farags did not accept the offer and proceeded to trial. The jury returned a verdict in favor of ArvinMeritor.

Because it prevailed after having made a statutory offer to compromise, ArvinMeritor submitted a memorandum of costs which included a request for $11,033 for expert witness fees, as well as $2,173 in expert travel costs.

The Farags filed a motion to tax those costs, as well as other costs requested by ArvinMeritor.

The trial court partially granted the motion to tax costs, but denied the Farags’ motion to tax the expert witness fees and expert travel costs.

The Farags appealed the court’s denial of their motion to tax the expert witness fees and expert travel costs.

HOLDING & REASONING

The Court of Appeal affirmed, rejecting the Farags’ argument that an unallocated joint offer under Section 998 to a husband and wife is void in the absence of a showing the offer provides fair and reasonable value.

In Meissner v. Paulson, 212 Cal.App.3d 785 (1989), the court held that a joint offer was made to the two plaintiffs did not give the offeror a right to costs. It reasoned that to be accepted, both plaintiffs had to consent to settlement and agree as to apportionment of the settlement offer between them and that a plaintiff would be required to second-guess all joint offers to determine whether a failure to reach agreement with a coplaintiffs would cause a risk of section 998 costs against them. The court concluded that the Legislature had not intended such a result.

In Vick v. DaCorsi, 110 Cal.App.4th 206 (2003), the court noted that in Meissner, the offer required that all of the plaintiffs accept and distinguished an offer made jointly to a husband and a wife who were suing over the purchase of an asset that constituted community property.

In Weinberg v. Safeco Ins. Co. of America, 114 Cal.App.4th 1075 (2004), the court held that a joint offer by a defendant to a husband and wife who were suing over an insurer’s mishandling of a personal injury claim under its uninsured motorist coverage did not trigger the right to costs. However, in Barnett v. First National Ins. Co. of America, 184 Cal.App.4th 1454 (2010), another insurance bad faith case, the Weinberg court reversed itself. It did so based on considerations of how community property laws impacted the rights of a husband or wife to accept a settlement.

Having addressed prior discussions, the court held that the Farags failed to properly raise the issue of the joint offer in the trial court. Thus, right or wrong, they could not raise it on appeal. Moreover, the Farags failed to show why Barnett was wrongly decided and ought not be followed.

ANALYSIS

This is yet another in a series of recent cases in which the courts have upheld a litigant’s rights to costs when an opponent fails to accept a statutory offer to compromise. Prior decisions often made it very difficult for a defendant to serve 998 offers in multi-plaintiff cases. At least where the plaintiffs are married, serving an effective statutory offer may now be easier.

*****

An Attorney’s Failure To Pay A Court Reporter’s Fees Is Not Conduct Protected By The Anti-SLAPP Statute Even If The Attorney Has Complained That The Fees Were Excessive

Personal Court Reporters, Inc. v. Rand
(Cal. Ct. of App., 2d Dist.), filed April 20, 2012 

KEY FACTS

Personal Court Reporters, Inc. is a court reporting service. It sued attorneys Gary Rand and Suzanne Rand-Lewis and their law firm Rand & Rand-Lewis for failing to pay for court reporting services of $32,323.45.

Rand and Rand-Lewis filed an Anti-SLAPP motion under California Code of Civil Procedure section 425.16, seeking to have the complaint stricken and dismissed. In making the motion, they asserted that the action was prohibited because it was in retaliation for their having exercised their right to speak and petition for the redress of grievances. Their basic position was that they were attorneys who, through their respective professional law corporations, represented clients in prior lawsuits and who, on behalf of their clients, protested that Personal Court Reporters’ court reporting fees were “illegal, excessive, and unnecessary.” Rand and Rand-Lewis asserted that in retaliation for those protests, Personal Court Reporters sued them in their individual capacities and under the nonexistent “DBA Rand & Rand-Lewis.”

The trial court denied the motion.

HOLDING & REASONING

The Court of Appeal affirmed and imposed sanctions against Rand, Rand-Lewis, and their attorney Timothy Rand-Lewis, for having brought a frivolous appeal.

The court explained that a SLAPP suit — a strategic lawsuit against public participation — seeks to chill or punish a party’s exercise of constitutional rights to free speech and to petition the government for redress of grievances and that the Legislature enacted Section 425.16 to provide a procedural remedy to dispose of such lawsuits.

There is a two-prong test. The moving party must first establish that the lawsuit arose from its exercise of protected rights. If it does so, then the opposing party must show that it can establish the moving party’s liability.

The court first turned to the question of whether Personal Court Reporters’ lawsuit arose out of protected conduct. It held: “Notwithstanding that the complaint was filed after court reporting services were provided in the underlying cases, we conclude the acts alleged in the complaint did not arise from the underlying lawsuits for purposes of the anti-SLAPP statute.”

The mere fact that an action was filed after protected activity took place does not mean the action arose from that activity for the purposes of the anti-SLAPP statute. Moreover, the fact that a cause of action arguably may have been “triggered” by protected activity does not mean that it is one arising from that protected activity. In the anti-SLAPP context, the critical consideration is whether the cause of action is based on the defendant’s protected free speech or petitioning activity.

The court concluded that notwithstanding Personal Court Reporters’ allegations regarding arguably protected activity (protesting that certain court reporting fees in underlying cases were illegal, excessive, and unnecessary), those allegations were only incidental to the causes of action for breach of contract and common counts, which were based essentially on nonprotected activity — the nonpayment of overdue invoices. The references to arguably protected activity were only incidental to a cause of action based essentially on nonprotected activity.

Because the action was not based on protected activity, there was no need for the court to consider if Personal Court Reporters could make a prima facia case.

After ruling that Rand and Rand-Lewis were not entitled to relief, the court sanctioned them for having brought a frivolous appeal.

It said:

Notwithstanding defendants’ argument to the contrary, this case is a simple contract dispute. Plaintiff alleges that defendants have failed to pay for court reporting services rendered. We have determined that defendants’ attempt to transform a collections case into an action that chills their constitutional rights is meritless.

Then, it noted that this particular appeal was not the first time Rand, while represented by Timothy Rand-Lewis, had appealed an order denying an Anti-SLAPP motion that was based on essentially the same arguments, and lost.

In the case of California Back Specialists Medical Group v. Rand, 160 Cal.App.4th 1032 (2008), California Back Specialists Medical Group (“CBSMG”) sued Rand for failing to honor its medical liens in connection with his representation of clients in a personal injury action. Rand filed a special motion to strike in which he claimed he orally notified CBSMG that he would not honor the liens because he questioned the reasonableness and necessity of the medical care and resulting bills. Based on this, Rand argued that he was being sued as a result of protected conduct. The trial court denied Rand’s motion and found it frivolous, and the Court of Appeal affirmed.

In view of the fact that Rand should have known that the appeal was frivolous, the court assessed sanctions, saying:

Where, as here, a party appeals and merely repeats an argument that was soundly rejected by another appellate panel, we have little difficulty concluding that the party lacked good faith in pursuing the appeal. Defendants’ conduct is especially egregious because they failed to bring the prior case to our attention and did not address its holding after plaintiff cited it in its brief.

ANALYSIS

Law develops only through the advocacy of novel and sometimes creative theories. Many rules we now consider fundamental aspects of California law became cornerstones of California jurisprudence only because attorneys made (what were once considered) creative arguments. However, there are limits to such creativity, and as the court itself noted: “[W]here a party bases an appeal on an argument that has been rejected and sanctioned in another trial court and affirmed on appeal, the principle of ‘once burned, twice shy’ applies.”

*****

Other Cases Of Interest

Needlessly Voluminous Summary Judgment Evidentiary Objections Can Be Overruled As A Group

Cole v. Town of Los Gatos
(Cal. Ct. of App., 6th Dist.), filed April. 27, 2012

After attending a baseball game at Blossom Hill Park in Los Gatos, Sara Cole returned to her vehicle, which she had parked between the north edge of the park and Blossom Hill Road. While standing near the back of her vehicle she was hit by a car driven by Lucio Rodriguez, who was driving while intoxicated.

Cole brought suit against Rodriguez and the Town of Los Gatos. As to the Town, she alleged that the road and the area where she had parked — both of which were Town property — were in a dangerous condition because their configurations, coupled with their relative locations, induced park visitors to park where she had parked while inducing eastbound drivers on Blossom Hill Road to drive through that area in order to bypass stalled traffic on the road.

The trial court granted Town’s motion for summary judgment, finding no evidence that any dangerous condition of Town’s property was a proximate cause of Cole’s injuries.

The Court of Appeal reversed. It found that the evidence before the trial court raised numerous issues of fact concerning the existence of a dangerous condition and a causal relationship between the characteristics of the property and plaintiff’s injuries.

The court first addressed the standards for motions for summary judgment.

It then explained that:

The first step in analyzing any motion for summary judgment is to identify the elements of the challenged cause of action or defense in order to isolate those targeted by the motion. Plaintiff’s cause of action against Town is defined by statute, specifically the portion of the Government Claims Act entitled Liability of Public Entities and Public Employees. These statutes declare a general rule of immunity (Gov. Code, § 815) and then set out exceptions to that rule. Plaintiff invokes the exception for a dangerous condition of public property, as set out in Government Code section 835 (§ 835). As there laid out the cause of action consists of the following elements: (1) a dangerous condition of public property; (2) a foreseeable risk, arising from the dangerous condition, of the kind of injury the plaintiff suffered; (3) actionable conduct in connection with the condition, i.e., either negligence on the part of a public employee in creating it, or failure by the entity to correct it after notice of its existence and dangerousness; (4) a causal relationship between the dangerous condition and the plaintiff’s injuries; and (5) compensable damage sustained by the plaintiff.

The court then turned to the question of whether Cole had presented evidence that could have led a jury to find each of these elements. It said: “It thus appears that the only colorable grounds for the motion were that plaintiff was unable to establish two elements of her cause of action: a dangerous condition of public property, and a causal relationship between that condition and plaintiff’s injuries.” It addressed each in turn.

As to dangerous condition, the court said:

A “dangerous condition” for present purposes is “a condition of property that creates a substantial (as distinguished from a minor, trivial or insignificant) risk of injury when such property or adjacent property is used with due care in a manner in which it is reasonably foreseeable that it will be used.” … To establish a qualifying condition, the plaintiff must point to at least one “ ‘physical characteristic’ ” of the property. However the location of property may constitute a qualifying characteristic. Further, as the statutory language makes clear, a qualifying risk need not be one posed to users of the public property; it may be a hazard presented to users of “adjacent property.” It follows that, since all of the property involved here belonged to Town, a dangerous condition might consist of any characteristic of any part of that property that foreseeably endangered users of any other part.

It then ruled that Cole’s premise that there was a dangerous condition because “the configuration of Blossom Hill Road and the adjacent gravel area created a danger to users of the latter in that eastbound drivers on Blossom Hill Road were often induced to leave the road (as Rodriguez did) and enter the graveled area, where they posed an obvious hazard to persons who had parked there (as plaintiff did), and particularly those standing near the rear of a vehicle parked diagonally, as was the custom,” was amply supported by the evidence.

The court also found ample evidence of causation. It rejected Town’s assertion that Cole could not prove that the condition of its property was a substantial factor in causing her injury. It specifically rejected Town’s reliance on the fact that Rodriguez was drunk. While it is true that Rodriguez was drunk and a cause of the accident, it was possible that the dangerous condition of Town’s property was also a cause. The court even noted that Town’s argument was “contrary to first-year tort law, i.e., that an injury can have only one cause, or that only one tortfeasor can be held liable for it.”

The court rejected Town’s assertion that Rodriguez’ conduct was a superceding intervening cause of Cole’s injuries which would have precluded it from being liable.

The court addressed objections that Town raised to Cole’s declarations and evidence. Showing its displeasure with multiple meritless objections, the court said:

Town opens each objection by citing one or two rules of evidence but in the ensuing discussion manages to allude to perhaps half of the major principles in the Evidence Code. We believe that where a trial court is confronted on summary judgment with a large number of nebulous evidentiary objections, a fair sample of which appear to be meritless, the court can properly overrule, and a reviewing court ignore, all of the objections on the ground that they constitute oppression of the opposing party and an imposition on the resources of the court. We also note that an evidentiary objection is only preserved for review if it is “so stated as to make clear the specific ground of the objection.” (Evid. Code, § 353, subd. (a), italics by the court.) Failure to comply with this requirement furnishes its own ground for overruling objections such as those before us.

The court was also critical of Town’s reasoning in connection with its objections. It deemed certain objections to have been abandoned by virtue of Town’s failure to cite authority or make coherent argument in support of them. It then remarked on Town’s objection that Cole’s expert’s opinion as to the condition of Town’s property was irrelevant.

The real gist of the objection, then, is not that the evidence failed to establish a dangerous condition, but that evidence of a dangerous condition was itself rendered immaterial by plaintiff’s supposed inability to establish another element of the cause of action, i.e., proximate cause.

It might indeed be argued, as a matter of abstract logic, that when a party cannot prove one necessary element of his cause of action, evidence of other elements ceases to be “of consequence to the determination of the action.” (Evid. Code, § 210.) But this is only because once the stated condition is established, the entire matter should be concluded against the party asserting that cause of action. At that point all further evidence, no matter who offers it, becomes inconsequential. The court should enter judgment forthwith; it certainly need not trouble itself with disputes over evidence. Here, if plaintiff was unable to establish causation there was no occasion to consider the relevance of its expert’s opinions, or any other question, concerning the existence of a dangerous condition. Under the stated premise, Town was entitled to judgment without so much as a glance at the Evidence Code.

Town’s relevance objection thus appears to constitute a peculiar kind of rhetorical periphrasis or circumlocution in which one argument (inadmissibility of evidence) is used as a kind of Trojan horse for another, quite different argument (lack of causation). Since Town elsewhere asserted the real point without any such disguise (see pt. III, post), the only effect of its assertion in a different guise—and the only apparent purpose—is to weigh down Town’s presentation with additional verbiage. From the perspective of judicial efficiency, not to mention logical parsimony, this objection should have been disregarded as redundant and superfluous.

In a footnote, the court followed up:

This stratagem, unfortunately, recurs throughout Town’s presentation below and on appeal. An argumentative heading asserting some seemingly dispositive premise will be followed by a non-syllogistic, inconclusive discussion of that premise culminating in a repetition of the claim that, in any event, plaintiff cannot establish proximate cause. A motion confined to that single ground might not have led the trial court into error and might not have generated this expensive and unnecessary appeal. Certainly it would have consumed fewer resources than Town’s motion has.

*****

An Appeal Filed Only For Purposes Of Delay Has No Merit And Justifies Sanctions

Brown v. Wells Fargo Bank, NA
(Cal. Ct. of App. 2d Dist.), filed April 16, 2012 

Jane Brown was in default on a home mortgage. Wells Fargo started foreclosure proceedings. To prevent the sale of her home, Brown sued Wells Fargo. The trial court granted a preliminary injunction which stopped the sale, but required Brown to deposit $1,700 a month into a trust account.

Brown failed to make the deposits. As a result, Wells Fargo sought an ex parte order dissolving the injunction so it could go forward with the sale. The trial court declined to grant ex parte relief, but set a hearing for a noticed motion on short notice. At the hearing, Brown’s attorney failed to show that Brown had made the deposits or to offer a valid reason why she didn’t make them.

The trial court dissolved the injunction.

Brown filed an appeal. This had the effect of staying the order dissolving the injunction.

The sole basis for Brown’s appeal was her contention that the order dissolving the injunction was granted on an ex parte basis. Shortly before the appellate court heard oral argument, Brown sought to dismiss the appeal.

The Court of Appeal declined Brown’s request to dismiss the appeal and then affirmed the trial court’s order dissolving the injunction. It ruled that although the hearing on Wells Fargo’s motion was done on short notice, it was not done ex parte.

The court also ruled that the appeal was frivolous. It said: “Some appeals are filed to delay the inevitable. This is such an appeal. It is frivolous and was ‘“dead on arrival” at the appellate courthouse.’” As a result, the court sanctioned Brown and her counsel and referred the matter to the California State Bar for consideration of discipline against Brown’s counsel.

*****

An Attorney Fee Award In A Wage And Hours Case Was Payable To The Attorney Absent A Provision To The Contrary In The Fee Agreement

Henry M. Lee Law Corporation v. Superior Court
(Cal. Ct. of App., 2d Dist.), filed April 16, 2012 

Henry M. Lee represented Ok Song Chang as her attorney in employment litigation based on the allegation that her employer, A-Ju Tours, violated wage and hours laws by failing to pay Chang at least the minimum wage. The trial resulted in a $62,246.74 judgment in favor of Chang. The trial court awarded Chang $300,000 in attorney fees under Labor Code sections 1194(a) and 226(e).

Before A-Ju Tours paid the fee award, Chang substituted herself in propria persona for Lee.

Lee moved to intervene in the action and to amend the post judgment order awarding attorney fees to make the fee award payable to Lee. The trial court denied the motion.

Lee petitioned the Court of Appeal for extraordinary relief by way of a writ of mandate. Lee contended that he was entitled to intervene and that the attorney fee award belongs to and should be made payable to him.

The Court of Appeal issued the writ. It concluded that Lee, as a person whose interests were injuriously affected by the order awarding attorney fees, was entitled to move to vacate the order and enter a new order awarding fees to him. It also concluded that an appeal from the denial of Lee’s motion would not be an adequate remedy and that extraordinary writ review was appropriate.

On the merits of Lee’s motion, the court held that an attorney fee award under Labor Code sections 1194(a) and 226(e) should be made payable to the attorney who provided the legal services rather than the client, unless their fee agreement otherwise provides.

There was an unresolved factual question as to the terms of the agreement between Chang and Lee, so it was for the trial court, on remand, must consider the agreement in ruling on Lee’s motion.

*****

The Manufacturer Of A Machine That Causes Asbestos Fibers To Be Released Into The Air Can Be Liable For Manufacturing A Defective Product

Shields v. Hennessy Industries, Inc.
(Cal. Ct. of App., 1st Dist.), filed April 30, 2012 

Leonard Shields worked predominantly as an automobile mechanic. In that role, he was exposed to asbestos resulting in injuries, including asbestosis-related pleural disease and lung cancer. He sued Hennessy Industries on the theory that it manufactured and sold a brake arcing machine, designed and used exclusively for grinding brake linings, which contained asbestos, thereby releasing asbestos fibers into the air.

The trial court ruled that, because Hennessey’s machine itself was not made with asbestos and Hennessy did not itself manufacture or distribute any product made with asbestos, Shields had not, and could not, plead a viable cause of action against Hennessy for negligence or strict products liability.

The Court of Appeal reversed. The court recognized that generally, a manufacturer is not liable for injuries caused by defects in another manufacturer’s products. However, it also recognized an exception when the manufacturer’s products acts upon another manufacturer’s product and thereby causes the harm.

The manufacturer of pumps that use asbestos-containing gaskets is not liable for injuries caused when asbestos fibers from those gaskets is released into the air. However, in contrast to the situation presented by Hennessy’s machine, the pumps did not cause the asbestos fibers to be released into the air. Therefore, Shields had a viable cause of action against Hennessy.

*****

Creditors Were Not Bound By An Arbitration Agreement In A Financial Advisor’s Contract With The Debtor Corporation Because They Were Not Third Party Beneficiaries Of That Contract

Epitech, Inc. v. Kann
(Cal. Ct. of App., 2d Dist.), filed April 16, 2012 

AutoLife Acquisition Corporation had substantial short-term secured debt obligations were soon to come due. It retained a financial advisor, Kann Capital, Ltd., through its principal, Garry Michael Kann, to help it to obtain long-term financing. This long-term financing would presumably have enabled it to pay off its short-term creditors.

The financing was never obtained, and AutoLife ultimately fell into bankruptcy. AutoLife’s short-term creditors sued Kann. They alleged that his fraudulent misrepresentations induced them to forbear from foreclosing on their security, to their ultimate financial detriment.

Kann filed a petition to compel arbitration. He asserted that the short-term creditors had been third-party beneficiaries of his contract with AutoLife, which contained an arbitration clause. He asserted that was because his performance of the contract with AutoLife would have benefited the short-term creditors.

The trial court denied the motion. Kann appealed.

The Court of Appeal affirmed. It ruled that the short-term creditors were not third-party beneficiaries of the contract between Kann and AutoLife.

The court reasoned that AutoLife’s pre-existing obligation to the secured creditors was to pay them the money that they were owed. However, Kann’s performance under the contract would not have discharged that obligation because Kann did not contract to pay the secured creditors any money at all. Additionally, under the terms of Kann’s engagement letter, Kann did not agree to obtain the financing. Rather, the agreement was only for him perform certain acts geared toward possibly obtaining financing.

Based on these factors, Kahn’s performance might have enabled AutoLife to pay the short-term creditors, but whether it did so was not under his control. If AutoLife had paid, that was only incidental to Kann’s performance.

Finally, the court noted that the short-term creditors were suing Kann for misrepresentations that allegedly occurred before AutoLife engaged Kann. Liability for those alleged misrepresentations could not be subject to an agreement that did not yet exist.

*****

Church Members Did Not Have A Right To Solicit Donations In Front Of A Grocery Store

Ralphs Grocery Company v. Missionary Church of the Disciples of Jesus Christ
(Cal. Ct. of App., 2d Dist.), filed April 25, 2012

Ralphs operated a grocery store. It was stand-alone building with a private sidewalk/apron that ran between the storefront and a fire lane that bordered the customer parking lot. People are invited onto the property solely to shop for food and related products. The particular store did not offer amenities such as plazas, walkways or central courtyards containing benches, and Ralphs did not encourage customers to linger, meet friends, be entertained or congregate on store property for any purpose other than shopping.

Members of the Missionary Church of the Disciples of Jesus Christ regularly placed themselves in front of the entry/exit doors of the grocery store to solicit donations without first seeking permission from store management or attempting to comply with Ralphs’ rules for expressive activity.

Ralphs filed suit for trespass, seeking to enjoin the Church’s activities on its property. Ralphs and the Church filed cross-motions for summary judgment.

In opposing Ralphs’ motion, the Church placed its reliance on the case of In re Lane, 71 Cal.2d 872 (1969) and expressly disclaimed reliance on the case of Robins v. Pruneyard Shopping Center, 23 Cal.3d 899 (1979).

The trial court granted Ralphs’ motion. The Court of Appeal affirmed.

In the Lane case, the California Supreme Court held that a store owner could not prevent a labor union from picketing on a privately owned sidewalk in front of a store. The Court observed that the sidewalk was open to members of the public who were invited to use it to access the store. Thus, members of the public could exercise their First Amendment rights to freedom of speech.

In the Pruneyard case, the California Supreme Court held that the right to speak could be exercised inside a large shopping mall where members of the public were invited to congregate and socialize.

In rejecting the Church’s reliance on the Lane case, the court reasoned that the evidence established no relation whatsoever between the Church’s expressive activities and the particular location. The Church had no grievance against Ralphs, much less a labor grievance of the kind at issue in Lane. The sole message the Church wished to communicate was its need for funds to support its efforts on behalf of the poor and needy. The Church had no reason to choose Ralphs’ store over the myriad other locations where its members could have congregated to communicate their message.

Since the Church had disclaimed reliance on the Pruneyard case and did not present evidence equating the Ralphs premises with the shopping center considered in the Pruneyard case, the court did not address it.

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A Senior Lienholder’s Foreclosure On Real Property Does Not Eliminate A Junior Lienholder’s Right To Sue — Unless They Are One And The Same

Bank of America, N.A. v. Mitchell
(Cal. Ct. of App., 2d Dist.), filed April 10, 2012 

GreenPoint Mortgage Funding, Inc. loaned Michael Mitchell $315,000 to purchase a home. The loan was secured by two promissory notes and a first and second deeds of trust.

When Mitchell defaulted on the loan, GreenPoint foreclosed on the promissory note that was secured by the first deed of trust and sold the property. GreenPoint then assigned the second deed of trust to Bank of America. Bank of America sued Mitchell to recover the indebtedness evidenced by the promissory note that was secured by the second deed of trust.

Mitchell demurred to the complaint based on his assertion that the action was barred by California’s antideficiency law.

The trial court sustained the demurrer without leave to amend. It then awarded attorney fees to Mitchell.

The Court of Appeal affirmed.

Under California law, when a lender forecloses nonjudicially, it is barred from recovering the difference between the amount of the loan and the selling price of the foreclosed property. However, when a senior lienholder forecloses, a junior lienholder may still sue the borrower. An exception to this is if the senior and junior lienholders are one and the same.

As GreenPoint’s assignee, Bank of America stood in the same position as GreenPoint. It had no rights greater than GreenPoint. Since GreenPoint could not sue on the second promissory note as a result of its having foreclosed, neither could Bank of America.