The California Supreme Court Rules On The Right To Attorney Fees Following Procedural Dismissals

Contractual provisions specifying forums and venues for dispute resolution are ubiquitous in modern life.  From on-line retailers to airlines to e-mail providers, it is no exaggeration to state that the average American agrees to ten or more of them per day simply by visiting websites or installing software alone.   Such provisions are equally wide-spread in commercial contracts and, given their wide use, significantly impact just about everyone’s rights in civil litigation.  They determine when, where, and how disputes between private parties are resolved.

The California Supreme Court took a small -- albeit flawed -- step towards softening the impact of such provisions when a plaintiff files in a forum other than the contractually specified forum.  In DisputeSuite.com, LLC v. ScoreInc.com, et al., S226652 (Apr. 6, 2017), the court affirmed a trial court order denying a fee award following procedural dismissals.  In doing so, it reduced the potential for insult in the form of an attorney fee award following the “injury” of pretrial dismissals founded on technicalities in contract cases

In DisputeSuite.com, the plaintiff brought a lawsuit in Los Angeles County alleging both contract and fraud claims.  The dispute arose from a contractual relationship in which some of the contracts contained Florida choice of venue provisions. 

The high court affirmed a lower court decision rejecting an award of attorney fees to a defendant who successfully moved to dismiss a contract and fraud case based on the doctrine of forum non-conveniens.  The supreme court found that the trial court had not abused its discretion in denying attorney fees under Civil Code section 1717 when the defendant secured a mere procedural dismissal of a contract cause of action.    The high court reasoned that the dismissal was merely procedural because the plaintiff could and in fact did re-file the lawsuit in Florida.

Broadly speaking the high court’s opinion in DisputeSuite.com is uncontroversial.  It affirms trial courts’ discretion under Section 1717(b) to find that no party prevails unless a contract dispute is completely resolved.  (See Civ. Code § 1717, Subd. b [“The court may also determine that there is no party prevailing on the contract . . .”].)  That affirmation is squarely in line with the public policy behind the section.  It was intended to prevent unfairly one-sided fee provision.   (Santisas v. Goodin (1998) 17 Cal.4th 599, 602 (Santisas).)  If a defendant could claim attorney fees for forum-related dismissals, fee awards in the pre-trial dismissal context would be one-sided even if a plaintiff ultimately succeeds on the merits in another forum.   

 However, in relying solely on Civil Code section 1717 in a case that included both contract and fraud claims the supreme court's opinion begs the question of what types of claims are covered by the decision. 

The supreme court itself has recognized that Civil Code section 1717 only applies to contract claims.  (See, e.g., Santisas, supra, 17 Cal.4th p. 615; Khan v. Shim (2016) 7 Cal.App.5th 49.)  Because section 1717 only applies to contract claims, it does not govern fee awards arising from tort claims like the fraud claim asserted by the plaintiff in DisputeSuite.com.  As the supreme court has noted:

[T]his conclusion [about the reach of Civil Code section 1717] does not affect the seller defendants' right to recover as costs the attorney fees they incurred in defense of the tort claims. Because section 1717 does not apply to those claims . . . it does not bar recovery of attorney fees that were incurred in litigation of those claims and that are otherwise recoverable as a matter of contract law.  (Santisas v. Goodin, supra, 17 Cal.4th p. 615 [alterations added; citations omitted.)

Simply put, tort claims “are not covered by section 1717, and the attorney fee provision, depending upon its wording, may afford . . . a contractual right, not affected by section 1717, to recover attorney fees incurred in litigating those causes of action.”  (Santisas v. Goodin, supra, 17 Cal.4th p. 615.)

The supreme court in DisputeSuite.com does not appear to have addressed its own prior statements in Santisas that tort causes of action fall outside the scope of Civil Code section 1717.  Rather, it characterized the entire action, including the plaintiff’s contract and fraud claims, as a single “contract” action.   Thus, the decision begs the question of whether a trial court’s discretion to deny fees under Subdivision (b)(1) of Section 1717 applies only to contract causes of action or to other actions as well.

Given the widespread use of contractual forum provisions, including arbitration clauses and contractual choices of venue, the supreme court missed a good opportunity to clarify for the plaintiffs' bar and its clients the risks they face from getting forum choices wrong in civil litigation.  Similarly, it could have used the opportunity to clarify the potential rewards available to defendants through venue and forum challenges.

John Claassen is an experienced commercial litigator.  He practices from the offices of Claassen, P.C. in Oakland, California.  For more information about his firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute “communications” within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This possible Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2017.  All rights reserved.

California’s Contractual Attorney Fee Statutes Require Revision

Successful California litigants may recover attorney fees when authorized by contract under Code of Civil Procedure sections 1032 and 1033.5.  Respectively, these statutes permit the prevailing party in civil litigation to recover costs and define “costs” to include attorney fees if authorized by contract among other things.

While the right to recover contractual attorney fees is clear generally, it plays out in practice in very different ways.   The contractual language, causes of action asserted by the plaintiff, how different causes of action are resolved, and the reasonableness of fee requests all determine whether California courts can and should award them.  Thus, the right to contractual attorney fees is complicated, situational, and not without traps for the unwary.

No small measure of the complication is due to a failure by the California Legislature over time and the California Supreme Court in Santisas v. Goodin (1998) 17 Cal.4th 599 to extend the public policy-based limits on contractual fee awards beyond contract causes of action. Yet, there is no good public policy reason to restrict them so.

There are sound reasons for treating contractual fee awards arising from non-contract causes of action the same way as fee awards arising from contract causes of action.  Treating contract causes of action and tort causes of action the same is good for parties negotiating contracts; it is far easier for them to forecast how the rights in fee provisions might play out.  It discourages excessive negotiations about fee provisions.  It might encourage wider application of California law in commercial contracts.

Moreover, treating different causes of action uniformly for purposes of contractual fee awards relieves trial courts of the burden of engaging in a complex weighing of factors regarding attorney fee awards.  That weighing is a core judicial function that should be reserved for parties’ substantive rights for the sake of efficiency.  Moreover, the complexity of fee awards gives rise to unnecessary traps for parties, invites sophisticated parties to contracts to insert onerous provisions relating to non-contract causes of action to their advantage, and creates some obscure traps for unwary plaintiffs and defendants alike.

A little background is in order:

In California, the contractual right to attorney fees is a modification of the “American rule”, which generally requires litigants to bear their own attorney fees in civil litigation around the U.S.  The American rule itself is codified in California, albeit subject to the parties’ freedom to allocate attorney fees in contract.  (See generally Code Civ. Pro. § 1021.)  In contrast, countries like England have as a rule long permitted the successful litigant to obtain fees against the other side in civil litigation with or without a contract.

While Sections 1032 and 1033.5 authorize courts to award of attorney fees when contracts provide for them, Civil Code section 1717 for the most part interprets them.

Central language of Civil Code section 1717 is provided for in Subsection (a).  It states in part:

In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.

“The primary purpose of this language is to ensure mutuality of remedy for attorney fee claims under contractual attorney fee provisions.”  (Santisas v. Goodin (1998) 17 Cal.4th 599, 610.)  The statute was intended to limit unfair fee provisions in contracts by applying them in favor of the prevailing party “‘whether he or she is the party specified in the contract or not.’”  (Ibid. [quoting Section 1717(a)]; see also Khan v. Shim (2016) 7 Cal.App.5th 49, 56 [Section 1717 was enacted to ban “unfair one sided fee provisions”].) 

The statute contains a few other provisions that support this purpose.  “Where a contract provides for attorney’s fees . . . that provision shall be construed as applying to the entire contract, unless each party was represented by counsel in the negotiation and execution of the contract, and the fact of that representation is specified in the contract.” (Civ. Code § 1717(a).)  “The express purpose” of this paragraph was to overturn an appellate opinion holding that “parties could limit the forms of action to which attorney’s fee might be applicable and section 1717 extended only to those types of actions provided for in the contract.” (Sears v. Baccaglio (1998) 60 Cal. App. 4th 1136 [citing Sciarrotta v. Teaford Custom Remodeling, Inc. (1980) 110 Cal. App. 3d 444.)

To ensure an attorney fee provision remains mutual when a defendant successfully defends a contract claim on the grounds that the agreement is void, unenforceable or should rescind them, the California Supreme Court has held that defendants are prevailing parties even though the contract is unenforceable.  (Santisas v. Goodin, supra, 17 Cal.4th p. 610, quoting Reynolds Metals Co. v. Alperson (1979) 25 Cal. 3d 124, 128.)

Section 1717’s elevation of fairness over private parties’ freedom of contract comes with an important limitation. The statute’s introductory phrase – “[i]n any action on a contract” – limits its application to contractual attorneys fees to cases involving an “action on a contract.”  “[S]ection 1717 applies only to actions that contain at least one contract claim.”  (Santisas v. Goodin, supra, 17 Cal.4th p. 615.)  “If an action asserts both contract and tort or other noncontract claims, section 1717 applies only to attorney fees incurred to litigate the contract claims.”  (Ibid.

Decades ago, courts cited Section 1717 to bar fee awards for claims other than contract claims.  (Schlocker v. Schlocker (1976) 62 Cal. App. 3d 921, 133 [reversing a trial court judgment awarding fees to the prevailing defendant in a fraud action because Section 1717 “gives no authority” for such an award . . .[;] “the suit was not, as the statute requires, on the contract but in tort for fraud”], Reynolds Metals Co. v. Alperson, supra, 25 Cal. 3d 124, p. 129 [“Where a cause of action based on the contract providing for attorney’s fees is joined with other causes of action beyond the contract, the prevailing party may recover attorney’s fees under section 1717 only as they relate to the contract action.”].)  In doing so, they sometimes interpreted the provision’s phrase “incurred to enforce the provisions of [the] contract” – to prohibit fee awards for non-contract claims.  (E.g. Reynolds Metals Co. v. Alperson, supra, 25 Cal. 3d 124 p. 158 [“[S]ection 1717 specifically refers to fees “incurred to enforce the provisions of [the] contract.”  A litigant may not increase his recovery of attorney’s fees by joining a cause of action in which attorney’s fees are not recoverable to one in which an award is proper.”], Stout v. Turney (1978) 22 Cal. 3d 718, 730 [denying fees under Section 1717 on a fraud claim because “[a] tort action for fraud arising out of a contract is not, however, an action ‘on a contract’ within the meaning of this section.”].)

To the extent these cases reached blanket conclusions about the applicability of fee provisions to tort claims without consideration of the fee provision’s scope, these older cases arguably misread the statute; Section 1717 is a statute of interpretation rather than authorization.  It interprets contractual fee provisions to be reciprocal despite the parties’ intent and defines key language regarding “prevailing parties” so as bar contractual fee awards following a voluntary dismissal.

These cases have not been followed recently to deny contractual attorneys fees for litigating tort claims.  (See Santisas v. Goodin, supra, 17 Cal.4th p. 615 and Khan v. Shim, supra, 7 Cal.App.5th 49.)  Thus, while fairness prevails over the freedom of contract when a plaintiff chooses to bring only a contract cause of action, unbridled freedom of contract apparently prevails over fairness when a plaintiff adds a tort or other non-contract cause of action to her contract cause of action or brings solely tort claims. Nothing in Section 1717 prevents a sophisticated contracting party from drafting a one-sided attorney fee provision in consumer contracts or otherwise in anticipation that tort claims might be brought against it.  This should not be but is currently the law of the land in California.

Section 1717 comes with yet another public policy-based limitation.   When a plaintiff or cross-complainant files a voluntary dismissal, it interprets “prevailing party” to exclude the defendant.  (Civ. Code § 1717(b)(2) [“Where an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.”].)  The purpose of this limitation is to resolve a “Hobson’s choice.”  In the words of the California Supreme Court, whose opinion was codified by subsection (b)(2),

In pretrial dismissal cases, we are faced with a Hobson’s choice of either (1) adopting an automatic right to attorney fees, thereby encouraging the maintenance of pointless litigation and violating the equitable principles which should govern attorney fee clauses, (2) providing for application of equitable considerations, requiring use of scarce judicial resources for trial of the merits of dismissed actions, or (3) continuing the former rule, denying attorney fees in spite of agreement. We are satisfied that concern for the efficient and equitable administration of justice requires that the parties in pretrial dismissal cases be left to bear their own attorney fees . . . (International Industries, Inc. v. Olen (1978) 21 Cal. 3d 218, 224-225.)

In Olen, the California Supreme Court chose the third answer to its Hobson’s choice in denying attorney’s fees to the defendants following pre-trial voluntary dismissal of an action against sublessees for breach of a sublease.  It cited the “equitable administration of justice” as the driving policy rationale.  The court in Olen did not want courts spending large amounts of time deciding motions for contractual attorney fees.

The Legislature amended Section 1717 to adopt the California Supreme Court’s holding in Olen by adding subsection (b)(2).  Even though the public policy concerns identified in Olen apply equally to non-contract causes of action, the Legislature took no steps to widen Section 1717’s reach.

From this inaction, the California Supreme Court in Santisas soon found legislative intent.  In Santisas the Supreme Court reversed an appellate decision that denied the defendants their fees after a plaintiff voluntarily dismissed an action that asserted a combination of contract and tort claims, including negligence and fraud. (Santisas v. Goodin, supra, 17 Cal.4th pp. 602, 622-633.)  The court rejected the holding of Jue v. Patton (1995) 33 Cal.App.4th 456, which had cited Olen’s concerns about the fair administration of justice to deny contractual attorney fee awards anytime a plaintiff voluntarily dismisses an action no matter the cause of action.  (See id. at p. 619, disapproving  Jue v. Patton, supra33 Cal.App.4th 456.)  Instead, the Olen court noted that the Legislature had not acted to expand the scope of section 1717 to encompass tort and other noncontract claims arising from contracts containing broadly worded attorney fee provisions.  Similarly, it noted that the Legislature did not enact separate legislation to address such claims or otherwise articulate public policy as permitting or precluding attorney fee awards as costs for such claims.

The Supreme Court also revisited the concerns it expressed in Olen about the administration of justice.  It stated that “we are of the view that the practical difficulties associated with contractual attorney fee cost determinations in voluntary pretrial dismissal cases are not as great as suggested in Olen.  Thus, it departed from its prior response to the Hobson’s choice identified in Olen, now adopting the Olen court’s Option 2.  (International v. Olen, supra, 21 Cal. 3d pp. 224-225 [applying “equitable considerations, requiring use of scarce judicial resources for trial of the merits of dismissed actions”].)

The Supreme Court erred in departing from Olens public policy choice.  There was no reason to do.  The Legislature fully supported it the first time and there is no reason to think the Legislature would not also have supported a natural extension of its holding to other causes of action.  The Supreme Court should have been of the view that the practical difficulties associated with fee determinations outweigh any possible benefit of allowing fees in non-contract actions.

The California Supreme Court’s departure from its reasoning in Olen for tort cases gives rise to unnecessarily complex decision-making.  First courts have to decide whether and to what causes of action an attorney fee provision might apply.  Second, courts must consider voluntary dismissals of non-contract causes of action and award fees on those.  Third, courts have to consider who prevailed on remaining causes of action.  If someone prevails at trial on a contract cause of action but loses on other causes of action, courts have to award fees under the contract cause of action under Subsection (c) of Civil Code section 1717.  If the fee award on the contract claim exceeds the amount of the judgment on the other claims, the court must find that the winner of the contract claim is the prevailing party on all claims.  Courts then must allocate if they can, fees between different causes of action.  Courts can then go on to consider the reasonableness of fees, an exercise that often results in the deposition of opposing counsel.  In short, fee applications themselves can metastasize into expensive derivative litigation squarely on the back of one or both of the litigants.

The California Supreme Court in Santisas failed to appreciate the added layer complexity in attorney fee award calculations when some causes of action are treated differently from other causes of action for purposes of contractual fee awards.  Courts’ limited time for civil litigation in this state should be spent on weighing parties’ substantive rights – not rendering overly complicated contractual fee determinations.

Limiting Section 1717 to contract causes of action is bad policy for other reasons.  It defeats the policy behind the statute.  Intended to limit unfair attorney fee provisions by allocating the risk of a fee award equally to the parties, the provision is unable fully to accomplish its purpose if parties can avoid its reciprocity by adding tort claims to contract actions.  Public policy should discourage rather than encourage parties from overburdening the court system with claims that are not pursued for their merit but rather for fees.

The court’s reliance on legislative inaction in Santisas was also unnecessary.  Legislative inaction did not stop the court in Olen when it made a bright-line rule against attorney fee awards in contract actions following voluntary dismissals by the plaintiff.  The Legislature had fully supported that decision.  There is no reason to think it would not have fully supported a further extension of Olen’s holdingLegislative inaction did not stop the California Supreme Court from extending the application of the Section 1717 to situations where the defendant successfully argues that the contract is unenforceable. 

Maintaining a cause-of-action based right to contractual attorney fees creates a trap for the unwary plaintiff who thinks she is doing right by all through the voluntary dismissal of tort claims before trial.  As a result of a Santisas plaintiffs need to watch their backs in conceding bad non-contract claims when they would be doing everyone a favor of conceding early what must be conceded.  The same can be said for defendants in tort actions, who are now required to pay careful attention to the language of fee provisions as they consider and make 998 offers and otherwise litigate cases.  Perfecting rights to attorney fees early in cases hardens litigants’ position and makes settlement more difficult.

Treating contract causes of action and tort causes of action the same has other benefits as well.  As a preliminary matter, California has some interest in broadening the reach of its laws.  Commercial parties within and without the state are more likely to choose California law if they can forecast with a reasonable degree of certainty what their agreement generally means when a dispute arises.   The added clarity decreases the cost of negotiating some commercial contracts. 

In sum, the court’s reliance on legislative inaction in Santisas is matched and then some by the many sound reasons for treating tort and contract claims need to be treated the same for purposes of contractual fee awards.  Either the legislature or the Supreme Court should step in to fix an overly complicated area of the law once and for all.

John Claassen is an experienced commercial litigator.  He practices from the offices of Claassen, P.C. in Oakland, California.  For more information about his firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute “communications” within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2017.  All rights reserved.

Sometimes The Little Guy Can’t Catch A Break Under The Anti-SLAPP Statute.

A david took on a goliath of sorts in the First District Court of Appeal last week.  After the First District ordered the lower court to dismiss the case as a SLAPP (strategic lawsuit against public participation), the david lost big.  The case is Barker v. Fox and Associates.

Motions brought under California’s Anti-SLAPP statute were not originally intended to pummel the little guy.  Rather, Code of Civil Procedure section 425.16 was meant as a powerful tool to protect him from moneyed interests who asserted frivolous lawsuits to silence opposition.

The Anti-SLAPP statute works by imposing a stay on discovery and requiring the plaintiff to offer evidentiary and legal support for her claims at the start of a lawsuit.  Even if the motion is denied, a defendant can appeal immediately.  Thus, even if the plaintiff ultimately wins the motion, a case might be sidetracked for many months while the case is under review.  If the defendant wins, she is entitled to a non-discretionary award of attorney’s fees.  Awards given under the statute range from tens of thousands to even hundreds of thousands.

The archetypical SLAPP is a lawsuit by a rich developer suing a community activist who speaks out against a development.  While over time the statute has broadened in scope, the statute focuses on whether the activity of the defendant that is challenged by the plaintiff arises from activity protected by the First Amendment.

Just how the Barker case resulted in a big loss for the wrong person serves as a good reminder to anyone considering a lawsuit to vindicate her reputation.  In California, you need to be really careful. 

While the Anti-SLAPP statute mostly applies to situations involving public figures or issues of public concern, it can also apply to situations that are not so obvious.  It can apply to speech in connection with run of the mill lawsuits even between parties who are not rich, not noteworthy, and not speaking about big issues.  It can apply in HOA settings.  It can apply to on-line reviews about businesses.  It can apply if it concerns a matter of public interest even if the situations lack news coverage.

Assuming that a defendant can show the Anti-SLAPP statute applies, offering evidence to support a defamation claim without having conducted discovery can often be challenging.  In some situations, a plaintiff has to prove that the defendant lacked reasonable grounds for believing a statement was true or did not in fact believe a statement was true.  Similarly, California has a defense, known as the “common interest” privilege, that requires similar proof.  The common interest privilege applies to statements made between persons “interested in them” (persons providing on the job performance reviews).  Without discovery, plaintiffs are often left with conjecture or hearsay as to what the defendant believed or on what a defendant based his statement.

 In Barker, the plaintiff was an in-home caregiver for an elderly person.  After a conservatorship was established, a nurse case management company took over the management of her care.  Plaintiff continued to working alongside the case management company’s nurses along with other previous caregivers.  One day, the elderly person was found bruised and emotionally distraught while in the care of a nurse hired by the case management company.

The company’s CEO responded to the situation by writing an e-mail to the conservator, the patient’s children, and others.  The letter that suggested the plaintiff rather than the company nurse was responsible for what happened.  Specifically, the CEO asserted that the plaintiff failed to provide an adequate orientation to the company nurse.  The plaintiff was then placed on probation, which was followed by his resignation.

Upset by the reputational harm he suffered, the plaintiff filed a complaint.  The complaint alleged causes of action for libel per se, intentional infliction of emotional distress, and negligent infliction of emotional distress.  The defendants filed an Anti-SLAPP motion in response.  The plaintiff did not argue that the Anti-SLAPP statute did not apply to the situation.  He only argued that his case had some merit.  The trial court agreed with the plaintiff.  The defendants appealed.

The Court of Appeal saw things differently.  Reversing, it offered several reasons for dismissing the case, including the following:

  1. The plaintiff waived an argument that the Anti-SLAPP Statute did not apply.
  2. The plaintiff’s complaint did not identify the statements that were allegedly defamatory.
  3. The e-mails on their face were not defamatory per se.  Thus, the plaintiff was required to plead and proof special harm.  The plaintiff never alleged or proved special harm.
  4. The common interest privilege in Civil Code section 47(c) applied to the e-mails.  Yet, the plaintiff offered no evidence of that the defendants felt ill-will towards them or believed the alleged statements were false.

Things arguably did not have to end this way.  The plaintiff might have avoided dismissal by arguing that the Anti-SLAPP statute did not apply.  The defendants only asserted that the statement was in connection with conservatorship proceedings and was thus protected.  Yet, the e-mail was a statement very much outside of an official proceeding covered by the Anti-SLAPP statute.  It concerned day-to-day care of a person rather than protected activity.  

The plaintiff may also have been able to avoid dismissal by asserting the argument for the first time on appeal.  Appellate courts typically allow the party defending an appeal to raise any argument that justify the trial court’s decision on the theory that it is the results that count, not necessarily the way the lower court arrived at the result. 

In any event, Barker serves to remind all potential plaintiffs that things can go seriously wrong.  You need to anticipate Anti-SLAPP motions.  You need to avoid alleging facts that make it apply where possible.  If it is not possible and you still want to bring the case, you need to ensure that your complaint is strong and the allegations have evidentiary support.  The plaintiff in Barker did not do this and suffered a painful loss as a result.

John Claassen is an experienced Anti-SLAPP litigator.  He practices from the offices of Claassen, P.C. in Oakland, California.  For more information about his firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute “communications” within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2015.  All rights reserved.

How Not To Avoid Rent Control in Berkeley.

20 years ago the California Legislature attempted to limit local rent ordinances by allowing landlords to set market rent at the beginning of tenancies through its enactment of the Costa Hawkins Rental Housing Act (the “Act”).   Cal. Civ. Code § 1954.53.  The Act nevertheless permitted local agencies to limit rent increases if the increase followed the issuance of a notice to vacate issued under Civil Code section 1946.1.

The First District Court of Appeal rejected today an attempt by landlords to avoid Berkeley’s rent ordinance by withdrawing such a notice.  The case is Mak v. City of Berkeley Rent Control Board The landlords served a tenant who had lived at the property for 28 years with a 60-day notice.  The parties reached an agreement with her whereby, in exchange for her departure, she agreed that the 60-day notice was “conclusively deemed withdrawn.”  They then rented the unit to new tenants at more than double the previous monthly rent.  In doing so, they presumed that, because the notice had been withdrawn, Berkeley’s rent  ordinance limiting rent increases was preempted.  Nevertheless, the new tenants applied to the Berkeley Rent Control Board to limit the permissible rent on the unit.  After a hearing, the Rent Board granted their request and reduced the maximum permissible rent.  After the owners petitioned for writ of mandate challenging the Rent Board’s decision, the First District upheld the decision.  It reasoned: 

Since the Rent Board found, based on evidence the sufficiency of which is not challenged, that the Burns tenancy was terminated pursuant to such a notice, it follows without more that its order establishing the maximum rental rate for the property (not claimed to be confiscatory) is valid and enforceable.  As the trial court observed, the agreement between Burns and the Maks may provide some evidence as to whether Burns vacated the premises pursuant to the notice, but it is not dispositive and certainly is not binding on non-parties to the agreement, such as the Rent Board and the Ziems.  (S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 349 [“The label placed by the parties on their relationship is not dispositive, and subterfuges are not countenanced.]”

John Claassen practices civil litigation from the offices of Claassen, P.C. in Oakland, California.  For more information about his firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute “communications” within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2015.  All rights reserved.

Claassen, P.C. SLAPPs A Plaintiff's Case On Appeal.

FOR IMMEDIATE RELEASE. August 19, 2015.   Claassen, P.C. scored a win for a client earlier this week when the Sixth District Court of Appeal reversed a trial court’s partial denial of a Special Motion to Strike.  The panel of three justices returned the case to the lower court with directions to enter a new order striking the entire complaint and award attorney’s fees for the firm’s efforts.  The case is Privato Security, LLC v. Sidman.

A special motion to strike is a device sometimes used by defendants to obtain an early dismissal of a case under California Code of Civil Procedure 425.16, sometimes called the Anti-SLAPP Statute.  It is available when a plaintiff sues for alleged conduct that would typically be protected by the First Amendment and the case lacks even minimal merit.  The motion must be brought soon after service of process.  When a court grants such a motion, the complaint is dismissed with prejudice.  The defendant is entitled to a mandatory award of attorney’s fees.  Unlike many pre-trial motions, a defendant who loses all or part of the motion may appeal immediately.

In Privato Security, LLC v. Sidman, the firm’s client founded a company called WebLoq.  WebLOQ allegedly ran into financial difficulties and it ceased operations in 2012 and its assets were assigned to a new company, Privato Security, LLC (Privato).  Privato subsequently filed an action against the firm’s client alleging that he acted improperly in sending letters to other WebLOQ shareholders seeking their support in litigation and asserting Privato and its founders violated their fiduciary duties.  It asserted causes of action for libel, breach of contract, unfair competition and declaratory relief.

The firm filed a special motion to strike on behalf of its clients, arguing that each of the causes of action was protected and the case lacked merit.  The trial court granted the motion only in part, holding that the libel claim was protected and was barred by the litigation privilege.  The firm then appealed the partial denial.

                The Court of Appeal held that the trial court erred.  It reasoned:

Sidman has made a threshold showing that the causes of action for breach of contract, unfair competition, and injunctive and declaratory relief arise from speech or petitioning activity protected under section 425.16, subdivision (e)(2) and Privato has not demonstrated a probability of prevailing on any of the causes of action.  We therefore conclude that Sidman’s anti-SLAPP motion should be granted as to the causes of action for breach of contract, unfair competition, and injunctive and declaratory relief.

John Claassen is an experienced Anti-SLAPP litigator.  He practices from the offices of Claassen, P.C. in Oakland, California.  For more information about his firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute “communications” within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2015.  All rights reserved.

Service of an Arrest Warrant by Sheriff Deputies Is Not Activity Protected by the Anti-SLAPP Statute

(Oakland, CA, April 25, 2015)  A special motion to strike under California Code of Civil Procedure section 425.16, commonly known as the Anti-SLAPP statute, is a defense tool that is used to achieve an early dismissal of a meritless lawsuit.  If a defendant shows a case arises from the plaintiff’s rights of petition or free speech, a plaintiff can avoid dismissal of her case only by showing it has “minimal merit.”  A prevailing defendant is entitled to an award of attorney’s fees.

On April 22, 2015, the Fourth District Court of Appeal affirmed the denial of an Anti-SLAPP motion brought by sheriff deputies who allegedly made defamatory statements about the plaintiff while serving an arrest warrant on the plaintiff’s daughter in a misdemeanor proceeding.  The deputies allegedly told the plaintiffs’ tenants that “everyone” in plaintiff’s residence was a “liar” and “criminal.”  The plaintiff’s complaint asserted causes of action styled “illegal search and seizure,” “abuse of powers,” and defamation, among seven others.  The case is Anderson v. Geist, et al., E058139 (Apr. 22, 2015).

In affirming the denial of the defendants’ Anti-SLAPP Statute, the Fourth District held that the defendants did not meet their initial burden because executing an arrest warrant is not an exercise of the deputies’ rights but rather the performance of a mandatory duty.  The court explained:

At base, the execution of a warrant is not an exercise of rights by the peace officer; it is the performance of a mandatory duty, at the direction of the court. (See Barnett v. State Farm General Ins. Co. (2011) 200 Cal.App.4th 536, 546 [“‘A search warrant is not an invitation that officers can choose to accept, or reject, or ignore, as they wish, or think, they should. It is an order of the court.’”].) Because peace officers have no discretion in whether or not to execute a warrant issued by the court, it seems unlikely that a lawsuit asserting claims arising from such activity could have the chilling effect that motivated the legislature to adopt the anti- SLAPP statute, or that extending protections of the anti-SLAPP statute to such activity would serve the statute’s goals. (See § 425.16, subd. (a).)

            The court also rejected the defendants’ contention that their allegedly defamatory statements to tenants were protected by the Anti-SLAPP Statute.  It reasoned that the statutory language “in connection with litigation” implies that that challenged statements must be aimed to achieve the objects of the litigation and nothing in the record supported the defendants’ arguments that the alleged statements helped achieve the objects of the misdemeanor proceeding against the plaintiff’s daughter.

            John Claassen is an experienced Anti-SLAPP litigator.  He practices from the offices of Claassen, P.C. in Oakland, California.  For more information about his firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute “communications” within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2015.  All rights reserved.

The Second District: Obtaining Dismissal Based On Forum Selection Clause Does Not Entitle The Defendant To A Contractual Fee Award

(Oakland, CA, April 18, 2015)  There is currently a debate in California intermediate-level courts about whether attorney’s fees should be awarded to a defendant who obtains a non-substantive dismissal of a contract action when the contract contains an attorney-fee provision. The Second District Court of Appeals considered this issue in Disputesuite.com, LLC v. Scoreinc.com, et al., B248694 (Apr. 14, 2015) last week.  In an apparent case of first impression among California courts, it held that a defendant who obtains a dismissal of an action based on a forum selection clause in a contract is not a “prevailing party” entitled to an award of attorney’s fees.  A forum selection clause is a contract provision that requires actions to be asserted in a particular geographic location. 

In Disputesuite.com the defendants obtained a dismissal of the case brought in California in favor of Florida based on a contract provision that provided “for the exclusive jurisdiction of the state and federal courts located in Hillsb[o]rough, Florida.”  The Second District affirmed an order denying the defendant’s motion for attorney’s fees.  To understand why the court declined to award fees, some background is in order.

In 1995, the Supreme Court held that “[t]he prevailing party determination is to be made only upon final resolution of the contract claims…[.]”  Hsu v. Abbara (1995) 9 Cal.4th 863, 876.  It held that a defendant who obtained a simple, unqualified victory by proving no contract was formed was entitled to an award of fees.  Id. at p. 876.

The Supreme Court in HSU did not decide whether a defendant who obtains a dismissal for technical reasons is the prevailing party.  Without a Supreme Court decision directly on point, state intermediate courts have come out on both sides of the issue.  In Estate of Drummond (2007) 149 Cal.App.4th 46, the Sixth District Court of Appeal held that an attorney’s former clients, who had sued the attorney in a prior action, were not entitled to contractual attorney’s fees against him after he filed a petition against them in probate court.  Because the dismissal stemmed from the compulsory counterclaim rule, a technical deficiency in the petition, the Sixth District reasoned there was no “final resolution” under Hsu.

The Fourth District has issued two decisions coming to the opposite result.  See Profit Concepts Management, Inc. v. Griffith (2008) 162 Cal.App.4th 950 [awarding attorney fees after a defendant obtains a dismissal for lack of personal jurisdiction]; PNEC Corp. v. Meyer (2010) 190 Cal.App.4th 66 [finding no abuse of discretion where the trial court awarded contractual attorneys fees to a defendant who prevailed on a motion to dismiss based on forum non-conveniens].

Following Drummond, the Second District reasoned in Disputesuite.com that an award of attorney’s fees could only be reconciled with the pre-condition in Hsu that there be a final resolution of the contract claims if the word “final” is qualified to mean “final” for purposes of a particular lawsuit.  Such an outcome, it reasoned, would be inconsistent with the thrust of the Hsu decision.  Such an outcome, it continued, would also be inconsistent with the plain language of Civil Code section 1717, which articulates the circumstances under which contractual attorney fee provisions are honored.

The award of attorney’s fees in civil litigation is no insignificant event.  The risk that the filing of any particular lawsuit might result in the award of fees is an important factor.  In light of the conflict between the Fourth District on the one hand and the Second and Sixth Districts on the other hand, this important issue is ripe for review by the California Supreme Court.  The way the Supreme Court resolves the question is less important than clarifying under what circumstances an award of attorney’s fees might be made.

John Claassen is an experienced litigator.  He practices throughout California from the offices of Claassen, P.C. in Oakland, California.  For more information about his firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute "communications" within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2015.  All rights reserved.

The Children Pay One Helluva Price For A Shortcut In A Child Custody Dispute.

(Oakland, CA March 3, 2015)  Much goes into the art of judging.  Judges have to listen well.  They have to bite their tongue far more often than good ones let on.  They have to know the law.  They have to know the limits of their discretion.  They exercise judgment.  They check their feelings and make tough calls even when they know decisions made in their courtrooms can profoundly impact lives.  They exercise restraint all day long.  They sift through far more cases than many people realize.  They have to honor the schedules of counsel and other professionals, including investigators and experts, coming through the courtroom.

Given the amount and complexity of the work crossing their benches and the huge impact their decisions sometimes have on lives, it must be tempting for some of them to take short cuts now and then.  Short cuts can save work, save a schedule, or even spare a judge some of the guilt of making an impactful decision.

The Fourth District Court of Appeal recently issued a rebuke of sorts to a trial court for taking one such shortcut.  The case is Andrew V. v. Superior Court, G051310 (4th Dist., January 23, 2015).

In Andrew V. v. Superior Court, the trial court issued a "temporary" order allowing a mother to move from Orange County to Washington State to take a job promotion after a custody investigator issued a recommendation allowing the move-away.  However, the investigator was not available to be cross-examined on the date of the hearing to adopt the recommendations.  The trial court continued the hearing date.  However, it temporarily allowed the children to move to Washington pending the hearing.  As a practical matter, the order probably ensured a final judgment in favor of the mother at the continued hearing: few courts would on their own allow a move-away to new schools and new city only to take it back a few months later.  Instead, they would likely find it is in the best interests of the children to continue the new status quo.

A move-away case can be as heart wrenching as any in family law.  Because of their impact on the children and parents alike, courts must review the situation de novo based on the best interests of the children in light of all of the factors if the two parents have joint physical custody.  While a child-custody investigator often makes recommendations, both parents are entitled to a trial and have an express right to cross-examine the investigator. The decision is stayed for 30 days to allow for appellate review.

After the issuance of this "temporary" move away order, the father filed a writ petition.  Granting the petition, the Fourth District reversed the trial court and took the unusual step of ordering the children back to California from what they probably thought was their new home.  In granting the petition, the appellate court reasoned in part:

Respondent court erred in construing California law to allow for a “temporary” move-away first and a hearing later. A full adversarial hearing must precede, not follow, any out-of-state move-away order, however denominated.

* * * *

We cannot sanction such a de facto move-away. . . “[t]he rules of procedure for reaching family law decisions — contained in the Family Code, the Code of Civil Procedure, the California Rules of Court, and local court rules — are not mere suggestions. The rules of procedure are commands which ensure fairness by their enforcement.” (

Respondent court operates under the misapprehension that the above procedural and substantive safeguards, including the automatic stay, do not apply to “temporary” or “interim” move-away orders. “But any order I make today would be a temporary order clearly made without prejudice subject to change.”

 There is no . . . exemption simply because the order is denominated as “temporary.” Temporary orders may have equally serious implications inasmuch as they alter the status quo and affect the children’s interests in stability and continuity. Children live in the present tense, and “temporary” relocations may have a severe and pernicious impact on their well-being and sense of security.

The Fourth District seems to have correctly decided the law.  Its decision should serve as a reminder to a large number of courts and divorce professionals throughout the state that short-cuts involving important rights simply cannot be taken.

Still, in making an example of the situation for others to learn from, the children in Andrew V. have paid one helluva price.  Returned from Washington after believing they were moving there permanently, they face the uncertain prospects of yet another court battle.  For this reason, one can only observe that the process as a whole has failed them miserably.

John Claassen is an experienced litigator.  He practices throughout California from the offices of Claassen, P.C. in Oakland, California.  For more information about his firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute "communications" within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2015.  All rights reserved.

Did The Fifth District Just Misapprehend the “Minimal Merit” Prong of The Anti-SLAPP Statute?

(Oakland, CA, March 1, 2015)  A special motion to strike under Code of Civil Procedure section 425.16, commonly known as the Anti-SLAPP statute, is a defense tool to achieve an early dismissal of a meritless lawsuit.  If a defendant shows a case arises from the plaintiff’s rights of petition or free speech, a plaintiff can avoid dismissal of her case only by showing it has “minimal merit.”  On February 20, 2015, the Fifth District Court of Appeal determined that a plaintiff’s defamation causes of action had minimal merit based solely on the plaintiff’s allegations that the defendant’s statements were false.  In the Court’s words:

[the plaintiff] alleges these statements are false.  Therefore, [the plaintiff] has established that his defamation claims have minimal merit.

 Slip Op. at 14.  The case is Grenier v. Taylor, F067263 (Feb. 20, 2015).  A copy of the opinion is available here.

The Fifth District’s reasoning in Grenier v. Taylor runs against settled authority – authority cited in the opinion itself – that “a plaintiff cannot simply rely on his or her pleadings, even if verified.” Instead, “the plaintiff must adduce competent, admissible evidence.”  Slip Op. at 7.  The Fifth District’s holding that the case has minimal merit because the plaintiff alleges it does apparently allows a plaintiff to defeat a special motion to strike based solely on the strength of her own allegations.  The conclusion is error.

  In fairness, the wording may have been loose.  Although it is not clear from the opinion itself, the plaintiff may have submitted a declaration or other admissible evidence showing the alleged statements were false.  If so, the statement should read “the plaintiff swore these statements are false.”  If so, the opinion should be amended to alter this language.  Alternatively, the Supreme Court should take it up on review and issue a summary decision remanding it for reconsideration in light of this error.  Alternatively, the opinion should be de-published. 

John Claassen is an experienced Anti-SLAPP litigator.  He practices from the offices of Claassen, P.C. in Oakland, California.  For more information about his firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute "communications" within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2015.  All rights reserved.

Prospective Interference: The Public’s Last Defense To Unlawful Bidding?

(March 1, 2015, Oakland, CA)  Intentional interference with prospective economic advantage allows recovery for a defendant’s interference with some types of economic relationships.  The tort has received little scrutiny since 2003 when the California Supreme Court considered its intent requirement in Korea Supply Company v. Lockeed Martin Corp., 131 Cal.Rptr.2d 29, 29 Cal.4th 1134, 63 P.3d 937 (2003) (specific intent to interfere not required).  Prior to Korea Supply, the debate centered mostly on whether, since the tort applies to a wider range of economic relationships than contractual interference, recovery should be limited to defendants whose interference was accomplished with “independently wrongful” conduct.

The tort received renewed attention late last month when Division 8 of the Second District Court of Appeal held in a case of first impression that the lowest bidder on a public works contract could be sued for prospective interference by the next lawful lowest bidder if the bid is won by the payment of unlawfully low wages.  Roy Allen Slurry Seal, Inc. v. American Asphalt South, Inc., B255558 (February 20, 2015) resolved the question of whether a bidder for a public contract could enjoy an actionable expectancy.  The majority’s holding provoked a strong dissent from Justice Beth Grimes who argued it conflicted with tenets of public contract law.  A copy of the case is available here.

Whether a prospective interference claim should be available to losing bidders for public contracts turns on a few different policy concerns: obtaining the lowest price from a capable contractor and ensuring the completion of contracts. 

In Roy Allan Slurry Seal, the winning bidder allegedly won approximately 23 contracts in a total of 5 counties for an aggregate of $14.6 million over three years by unlawfully paying below the prevailing wage required for public contracts set forth in Labor Code sections 1770 and 1771.  After the plaintiffs sued in five separate counties, the trial courts came out with conflicting rulings on the defendant’s demurrers.   The appellate proceedings were consolidated for hearing.

In ruling that second lowest lawful bidders like the plaintiffs could properly state a cause of action, the Second District reasoned it “had a tangible expectancy the contracts would be theirs, an expectation that was thwarted only by” the illegal conduct of the highest bidder.  The court expressed special concern that:

no losing bidder could ever sue a competitor for interfering with the bidding process no matter how egregious the misconduct because no economic relationship exists until and unless its bid is accepted.[] It does not require much imagination to envision a contractor who obtains a public works contract by bribery, extortion, or familial connections.  At bottom, the intentional interference tort was designed to protect an economic expectancy that showed a reasonable probability of coming into being.  A bidder on a public agency contract who in fact submits the lawful lowest bid has such an expectancy, and it should not be thwarted by a competitor’s illegal conduct.

The concerns expressed by the majority have merit.  No legitimate interest is served by denying all remedy against a winning bidder whose unlawful conduct ensures the win. Over time, a court’s denial of a remedy to losing bidders for public contracts can have a profoundly important consequence: reduced competition.  Specifically, the unlawful winning bidder slowly marginalizes competitors and gains pricing power.

These concerns are palpable from the facts alleged in Roy Allan Slurry Seal. Making a low bid with the expectation that the business can recoup the loss through illegally low wage payments is a risky proposition.  The statutes in the Labor Code are especially harsh.  They come with an award of attorney’s fees, expedited administrative procedures for relatively quick entries of judgment, penalties, and attorney-general lawsuits, to name just a few incentives imposed on employers in the Labor Code to get wage compliance right.

Because reasonable bidders will not typically risk violations of the Labor Code to undercut the few businesses willing to do so, reasonable bidders can eventually be marginalized or driven out of business entirely by unlawful actors.  As lawful bidders lose relevance, the sole remaining unlawful one gains increased pricing clout.  Specifically, public entities are allowed to overlook low bids based on some subjective factors, including the “responsibility” of the winning bidder.  Whether a bidder is responsible turns in part on whether they have the skills and equipment necessary to complete the task. As the unlawful winning bidder wins more contracts, it acquires more experience and possibly equipment than its routinely losing competitors.  As a result, it starts to look more responsible than the bidders it undercuts.  Thus, in the long run, it competes with fewer bidders and can even sometimes bid over the now higher bid prices based on its perceived superior responsibility. 

Justice Grimes argued in dissent that, since public contract law favors low bids, the majority erred in allowing a prospective interference claim.  She explained that in this case it actually favored higher prices, which runs counter to policies of public contract law.  In the short term she is correct.  Yet, anti-competitive conduct feeds on this short-term outlook.  Over the long term, by harming competition, unlawful bidders come into their clout-wielding own.

Justice Grimes also argued that a losing bidder can have no business expectancy in a public contract because, as a matter of law, bidders for public contracts have no expectancy in them.  Her argument has some appeal on first blush in that it is bright-lined.  Moreover, it ties in nicely with the policies in public contract law of non-liability of a public entity to losing bidders.  However, the case at issue did not concern a public entity’s liability and no legitimate policy concern requires neat parallelism between the respective liabilities of a public entity and a winning bidder.

Moreover, one need only observe the conduct of the winning bidder to understand that Justice Grimes is in fact and business practice wrong.  Indeed, the unlawful low bidder struts not with a mere business expectancy but rather with an absolute certainty that the contracts belong to it alone.

Losing bidders are in some ways the canaries in the coal mine of illegal contracting: they are the first to suffer when the environment turns foul.  It is solidly within the public interest for losing bidders to voice a warning that not all is well.  It is equally within the public interest for bad actors to operate under the risk that their profits will be completely undone.

That is not to say that there are not valid counter-vailing concerns.  As much as there is a public interest in ensuring the integrity of bidding on public contracts, there is also a public interest in not routinely second-guessing contract awards.  Opening winning bidders to easy litigation from competitors arguably threatens the completion of some public projects. 

As noted above the Labor Code is rich in fodder to satisfy the independently wrongful conduct element of prospective interference claims.  Some of the statutory violations are very technical.  Without the element of an existing business relationship as a limiting factor on the tort in bid situations, there is some risk that the tort becomes as broad and technical as the Labor Code itself. 

Still, in the vast majority of the cases, this fear should not play out.  In the context of a bid for a single public contract, Labor Code violations would occur after the alleged interference.  Indeed, the employees work after the bidding is complete.  In the single bid situation, it would seem very difficult as a matter of law for the second lowest bidder ever to win. 

At the same time, there is no strong public policy to be gained by awarding damages to a low bidder in a single bid because the bad actor has not yet gained clout from its activity.  There is a correspondingly reduced incentive for the second lowest bidder to sue.  Liability for a single contract is difficult to prove and the gains are usually less substantial. 

Moreover, were a losing bidder to sue over merely technical violations of the Labor Code rather than substantive ones like unlawfully low wages, the losing bidder would likely face an uphill battle pleading and proving causation. 

In the single bid situations, there exists another, albeit flawed remedy, in the form of ordinary mandate in Code of Civil Procedure section 1085.  Such remedy is flawed because, while the government ought to approach such a petition somewhat neutrally, the bidding government entity’s interests in practice are at odds with the public interest in promoting competition.  It wants the work completed by the contractor it chooses.  The work is not completed by policing the competiveness of a single bid.   And, over a widespread geographic area involving multiple public entities or contracts, mandate becomes an expensive and ineffective remedy.  

Roy Allan Slurry Seal arose not from a single bid but from a score of them.  There is plenty of evidence of past illegally low wage payments sufficient to support the independently wrongful conduct element of the tort.  Given the large number of contracts at stake in the case, the millions of dollars at issue, and the palpable risk of reduced competition, a prospective interference claim by a losing bidder appears to be the public’s last defense to a particular brand of harmful public corruption.

John Claassen practices civil litigation from the offices of Claassen, P.C. in Oakland, California.  For more information about his firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute "communications" within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2014-15. All rights reserved.

Claassen, P.C. Secures Nearly $300,000 for Oakland Property Owners In Settlement With The City.

Oakland, CA (Originally posted on August 6, 2014)  The offices of Claassen, P.C. announced today that it secured a settlement of almost $300,000 from the City of Oakland on behalf of the firm's clients after their home was flooded by raw sewage.  City workers had been undertaking a sewer main clean out operation on a main next to their house using high pressure water.

John Claassen practices civil litigation from the offices of Claassen, P.C. in Oakland, California.  One of his practice areas is real property law.  For more information about his firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute "communications" within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2014-15. All rights reserved.

CLAASSEN, PROFESSIONAL CORPORATION STANDS UP FOR PROPERTY OWNERS IN THE CITY OF OAKLAND.

Oakland, CA (Originally published Sept. 12, 2014)  Claassen, Professional Corporation has joined with the Pacific Legal Foundation in filing the Opening Brief in an appeal challenging the City of Oakland’s administration of building code enforcement.

Since the economic crisis of 2008, it has become painfully clear that homes represent a large portion of people’s assets. Oakland in both 2000 and 2011 was slammed by, among others, the Alameda County Civil Grand Jury for messing with people’s biggest asset unfairly. It received particular criticism for its high fees and fines, heavy-handed and arbitrary enforcement, and unfair appeals process.

The brief challenges the unfair appeals process, which has not materially improved despite the criticism. It seeks to compel Oakland to follow state law in the administration of building code appeals. California Building Code section 1.8.8 lays out an appeals process to be used by building departments. Among other things, hearings should be held before an independent appeal panel made up of people with industry experience. Yet Oakland uses a single hearing officer who it pays, who is often a former employee of the City Attorney’s office, and who does not have industry experience.

The net result is an appeals process heavily stacked against owners. Oakland does not make public the percentage of appeals brought by owners that result in reversals. One can only surmise that it is exceedingly low.

John Claassen practices civil litigation from the offices of Claassen, P.C. in Oakland, California.  For more information about the firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute "communications" within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2014-15. All rights reserved.

THE SECOND CIRCUIT DELIVERS “HOT POTATO” TO THE NEW YORK COURT OF APPEALS

Oakland, CA (originally published, Oct. 15, 2014)  The New York Court of Appeals received a “hot potato” of sorts from the United States Court of Appeals for the Second Circuit in April 2014 regarding a state law that requires attorneys admitted to practice in NY who reside elsewhere to maintain an office in state.  In Schoenefeld v. New York, 748 F.3d 464 (2d Cir. 2014), the Second Circuit certified a question regarding the minimum requirements for such an in state office to New York’s highest court after the Northern District of New York struck down the law.  A NY attorney residing out of state successfully argued at in the trial court that the requirement violates the Privileges and Immunities Clause of the U.S. Constitution.

In certifying the question, the Second Circuit stated that an answer to the question controls the law’s constitutionality.  What makes the New York Court of Appeals’ task challenging is an apparent need to define the minimum requirements for an office in a way that renders the statute constitutional when the statutory text implies and NY appellate decisions have held that non-resident must maintain some sort of physical or “bona fide” office space there and when a resident attorney “may set up her ‘office’ on the kitchen table.”

In my humble view, the NY Court of Appeals should not bother to answer the certified question in a way that supports the statute.  The law dates back to 1866 – that’s right 1866.  Back then buggies from the Bronx or Brooklyn probably took longer to arrive at Manhattan’s famed Centre Street courthouse then it now takes an attorney leaving his house in D.C. to get there for a morning hearing, train or flight notwithstanding.  Back then transportation from Buffalo took substantially longer than a flight from Los Angeles – or even Honolulu – takes today.

While in the past there may have been a need for a non-resident attorney to have a place in state to meet with clients or more importantly to receive legal papers from other attorneys and courts, no such special need for an in state office exists any more.  Electronic court filing, mail, e-mail, overnight delivery, readily available courier services in nearly all parts of the country, and quick flights, render the in state office requirement an anachronism.

The Court of Appeals could in theory answer the certified question by holding that the law only requires the appointment of an agent for service of process before a non-resident NY attorney may practice in New York.  That argument was advanced as a fallback by the State of New York in Schoenenfeld.   While such an appointment of service of process in state is almost certain to pass Constitutional muster, the appointment of any agent for service of process is not what is required by the plain language of the statute.

NY like all other states has an important interest in providing highly effective and affordable legal services both inside and outside its courts.  In my view there is no reason to deny clients their choice of NY-licensed attorneys based on their expertise, their affordability, their familiarity with the specifics of the case or the client, their ethics, or other factors in their discretion.

This writer is of the firm belief that state bars have far more to gain than to lose by opening their ranks to attorneys who reside in and even primarily practice in other jurisdictions.  The crosspollination of attorneys can substantially raise the local bar so to speak.  The benefits of crosspollination should not be downplayed.  Attorneys in some jurisdictions may be more advanced from a technology perspective than their NY counterparts.  Or, the NY attorney based in another jurisdiction may come from a tradition of oral argument that is better than the local level of oral argument.  In other words, allowing easy access to NY courts for qualified attorneys improves local practice.

Moreover, I would think that the average NY attorney loses substantially more from in state office requirements than she gains.  Delaware has an even more draconian in state office requirement than New York does.  For years, many a large New York firm practicing in the Delaware Court of Chancery has had to incur the rather massive costs of maintaining fully-staffed Delaware offices to appear in court there when they are every bit as capable of arguing Delaware cases from their offices in New York.

NY has one of the best and most storied bars in the country.  Its attorneys whether in state or out of state should be forced to compete based on the quality and efficiency of their legal services – not where they reside.

John Claassen practices civil litigation from the offices of Claassen, P.C. in Oakland, California.  For more information about the firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute "communications" within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2014-15. All rights reserved.

THE BEST DEFENSE IS NOT ALWAYS AN AGGRESSIVE OFFENSE

Oakland, CA (Originally published, Oct. 22, 2014)  As a civil litigator, I sometimes field phone calls from people who, after being threatened with litigation, ask, “Why can’t I sue first?” This “the best defense is a good offense” approach to litigation sometimes works and sometimes, well not so much.   A recent California Court of Appeal case highlights a downside of filing a lawsuit to preempt some consumer lawsuits.

Lunada Biomedical v. Lunez, B243205 (Oct. 9, 2014) shows one pitfall can be the dismissal under California’s storied anti-SLAPP statute. The anti-SLAPP statute, found in Code of Civil Procedure section 425.16 allows any defendant to move to strike a complaint that both arises from protected activity and lacks minimal merit. The statute can be a game-changer; if the trial court strikes the complaint, the case ends and the defendants walks away with an award of attorney’s fees.

In Lunada, a dietary supplement company brought suit after a consumer served it with a pre-lawsuit notice under the Consumer Legal Remedies Act, Civil Code section 1750, et seq. (the “CLRA”). Such notices are required to obtain damages under the CLRA.   The notice asserted the company engaged in deceptive advertising of a dietary supplement. The defendant company then filed a single-count declaratory relief claim seeking a declaration that the company’s advertising was legal and that the consumer’s CLRA notice lacked basis.

After the trial court granted the consumer’s Special Motion to Strike, the Second District affirmed. It reasoned as a preliminary matter that the supplement company’s lawsuit arose from the protected activity of serving the target with the CLRA notice.

It then held that the declaratory relief claim lacked merit. In doing so it relied on Filarsky v. Superior Court, 28 Cal.4th 419 (2002), a California Supreme Court case decided under the California Public Records Act (CPRA). There, the Supreme Court barred public entities from filing declaratory relief claims to fend off CPRA actions. The Court held that doing so would undermine the public’s rights under the CPRA that are not available in declaratory relief claims, including expedited hearings, attorney’s fees, and an obligation on the part of the agency to take a writ from any trial court order compelling disclosure. Extending Filarsky’s rationale to actions under the CLRA, the Second District reasoned that “Plaintiff’s declaratory relief action here eliminates an important incentive afforded by the CLRA, mandatory attorneys fees, and would thwart the CLRA’s purpose.” Because it determined that declaratory relief was not available as a matter of law to fend off a CLRA lawsuit, the Second District ruled that the plaintiff had no chance of prevailing.

All of this goes to show that a good defense does not always include an aggressive offense.

John Claassen practices civil litigation from the offices of Claassen, P.C. in Oakland, California.  For more information about the firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute "communications" within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2014-15. All rights reserved.

DID THE FOURTH DISTRICT GET COSTS WRONG IN OTAY RANCH?

Oakland, CA (Originally published, Nov. 6, 2014)  I’ve been thinking recently about a decision issued by the Fourth District Court of Appeals on September 29, 2014. The issues considered in the published portions of Otay Ranch v. County of San Diego, 230 Cal. App. 4th 60 (4th Dist. Sept. 29, 2014) are hardly earth shattering. Yet, the court’s decision to uphold an allowance  of $30,435 in attorney and paralegal fees relating to the preparation of the record after the petitioner voluntarily dismissed the case caught my eye.

While it’s no surprise that the trial court allowed some costs after the voluntary dismissal, the affirmance of the award of attorney and paralegal fees was unexpected; typically costs do not include fees.   Code Civ. Pro. ¶ 1033.5(c)(5).

After taking a closer look at the case, I am not at all convinced that the Fourth District’s ruling was correct.   As explained below, I believe the case is problematic because:

  1. The allowance of fees as costs appears limited to CEQA cases and at the time the record had been prepared in Otay Ranch, the CEQA cause of action had been voluntarily dismissed;
  2. Even assuming fees might otherwise be costs, the Fourth District cited no cases allowing fees; and
  3. The Fourth District’s holding disincentives local agencies from adopting on-line or other tools that reduce or eliminate the costs of record preparation.

Each reason is addressed in turn:

Allowance for fees for record preparation is limited to CEQA cases. In Otay Ranch, the former owner of a shooting range in Chula Vista brought a writ challenging the County of San Diego’s adoption of a Remedial Action Plan and Final Mitigation Negative Declaration. The petition asserted two causes of action – that the County failed to comply with the California Environmental Quality Act and for violation of Health and Safety Code section 25356.1 in preparation of the RAP.

There are differences between a petition for writ of mandate brought under CEQA and petitions arising from other laws. For CEQA causes of action, a statute expressly provides that the parties “shall pay any reasonable costs or fees imposed for the preparation of the record of proceedings . . .” Pub. Res. Code § 21167.6(b)(1).

For other mandamus actions, however there is no express general provision allowing the recovery of “fees” by the local agency for preparation of the record. Code Civ. Pro. § 1094.5. The administrative mandate statute refers rather only to the obligation of the petitioner to pay the costs related to the preparation of the record. Code Civ. Pro. § 1094.5(a). Similarly, a local agency “may recover from the petitioner its actual costs for transcribing or otherwise preparing the record.” Code Civ. Pro. § 1094.6(c).

The absence of an express provision regarding fees in the above statutes speaks volumes because the Legislature is aware of the difference. The Code of Civil Procedure for example carefully distinguishes between costs and fees. One of these distinctions is that costs ordinarily exclude fees. Code Civ. Pro. ¶ 1033.5(b)(1) (expert fees are not awardable as costs except under special circumstances) and (c)(5) (attorney’s fees awardable as costs only where “a statute of this state refers to an award of ‘costs and fees’”). Moreover, a party seeking attorney’s fees outside of county fee schedules generally must file a fee motion rather than to submit a memorandum of costs. Code Civ. Pro. ¶ 1033.5(c)(5).

Perhaps as a counterbalance to the risk of a large award of fees for record preparation, CEQA permits the petitioner to prepare its own transcript. Code Civ. Pro. § 1094.6. However, in a way that is consistent with the idea that petitioners face little risk for the local agency’s fees, petitioners lack the right to prepare the record when seeking writs under other statutes. Code Civ. Pro. § 1094.6(c) (the local agency “shall” prepare the record).

These differences matter in the Otay Ranch case because the petitioner voluntarily dismissed its CEQA claim before any party had prepared the record. The only claim remaining when the record was prepared was the petitioner’s cause of action for violation of the Health and Safety Code (which it later dismissed as well). The court nowhere explains why the language in CEQA relating to fees should apply to the only remaining claim, the Health and Safety Code claim.

It is noteworthy too that the mandate action for violation of the Health and Safety Code is for ordinary mandamus rather than administrative mandamus. H. & S. Code § 25356.1(g)(1). This means that the cost language in Code of Civil Procedure section 1094.5, which is the administrative mandate statute, does not apply to it.

Yet, in affirming the award of costs, the Fourth District first looked to the language of the Public Resources Code section 21167.6(b)(1) and Code of Civil Procedure sections 1094.5 and 1094.6. As explained above, only the latter code section has any applicability to the case and that latter section only refers to costs for the preparation of the record. See Code Civ. Pro. § 1094.6.

Moreover, the cases relied upon by the court in the Otay Ranch were CEQA cases. In other words, as CEQA cases, they do not support the proposition that petitioners asserting non-CEQA cases might be liable for any fees, let alone attorney’s fees for preparation of the record.

 The court cited not cases that upheld the award of attorney’s fees. Even assuming the decision is otherwise sound, Otay Ranch cited no cases that upheld a trial court’s allowance of attorney’s fees as costs related to the preparation of the record.

The Fourth District’s holding disincentives local agencies from adopting on-line or other tools that reduce or eliminate the costs of record preparation. The right of people to seek review of local government and agency action through mandamus is an important one. Indeed, it is often the only mechanism people have to challenge unlawful government action.   This is true at the state level. It also true at the federal level where exhaustion of administrative remedies is typically required before civil rights actions can be asserted.

While people often have only one route to a successful challenge of government action, that route is often expensive as it is. It requires retention of specialized legal counsel at specialist rates. It requires the advancing of all costs, including in most counties court reporter costs, jury fees and the like.

Courts should be mindful of the extraordinary expense faced by litigants as it is and, if there are good reasons for one side to assume a particular expense, court should it least be mindful of it in allowing costs.

In Otay Ranch, the County of San Diego successfully argued that, because of the complicated nature of the record, it required specialized skill for record preparation which it did not have in house. This argument was also an argument advanced in other cases cited by the Fourth District.

Yet, if you think about it, cities maintain records as a matter of course.  While it can be complicated, it should not be for the most part. Local agencies are already well versed in the maintenance of records for all public hearings.  Many agencies maintain software that maintains the prepared records. It should not be difficult for them to handle the task and, if it is, they should not be rewarded.

John Claassen practices civil litigation from the offices of Claassen, P.C. in Oakland, California.  For more information about the firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute "communications" within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2014-15. All rights reserved.

BANKS CAN’T HIDE BEHIND CHECK CASHING SERVICES WHEN NEGOTIATING FORGED CHECKS.

Oakland, CA (Originally published, Nov. 10, 2014)  Many businesses face special risk when getting paid – their employees can easily divert incoming checks to their own accounts. Check cashing services provide the bad employee with an easy way of converting the checks to cash. The services can and sometimes do make payment on the diverted checks after the errant employees forge signatures unless the services are careful to verify whether the signatures are valid.

The employer eventually discovers the fraud and seeks to recover its loss. The employee herself is not a promising target. She is now likely unemployed, unemployable, and facing prosecution. So it sues its own bank for making payment, the check cashing service for paying the check, and the banks that accepted the deposits from the check cashing services in an effort to recoup its losses.

The question becomes whether the employer can hold the check cashing services’ own banks for accepting forged checks for deposit. The Fourth District Court of Appeals answered this question in the affirmative last Thursday in HH Computer Systems, Inc. v. Pacific City Bank, GO49028 (Nov. 6, 2014).

In HH Computer Systems, a business’s accounting manager diverted about 300 checks over a period of 18 months, cashing them at several local check cashing services. The check cashing services themselves deposited the forged checks with their own banks – several defendants in the action. The victim employer later sued those defendants for failure to use ordinary care in accepting forged checks from the check cashing services.

The trial court sustained without leave to amend the demurrer of the check cashing services’ banks. They argued that they were mere secondary banks, that the cashing services were the primary banks, and they had a right to rely on the check cashing services under Comm. Code 4207.

The Fourth District rejected this argument. It first provided a highly readable primer on negotiable instruments that is worth the time of any employer worried about employee theft. It noted that the UCC has long imposed on the first bank that accepts a deposit of a check – a depositary bank –a special role under Section 4-207 of the Uniform Commercial Code. See Cal. Comm. Code § 4207.  It noted that the UCC requires depositary banks to ensure the validity of signatures, which the UCC defines as “endorsements.”   It noted the bank does this by verifying identification and authority to cash a check. It noted that many banks manage the risk of employees’ theft of a business checks by requiring the deposit of business checks to a business’s own account. All other banks that participate in the negotiation of a deposited check have the right to rely on the first bank’s acceptance of signatures.

It then noted that check-cashing services are not banks within the meaning of the UCC because they can never fill one role played by banks – that of a payor bank. In other words, as distinguished from true banks, a check cashing service will never be the last bank in the line because they don’t give customers checking accounts. Moreover, functionally, check cashing services don’t engage in one key function of a bank: the acceptance of deposits.

Under the circumstances, the bank defendants are the “first” banks, they have a special duty to use care in accepting deposits, and they are potentially liable to victim employers under Commercial Code section 3405 if they fail to exercise due care. In HH Computer Systems, Inc., the employer argued that ordinary care in the banking industry was for banks to refuse the deposit of company checks into anything other than company bank accounts at least without securing an endorsement guarantee.   The Fourth District found that the victim’s allegations that the banks failed to either reject the check or require an endorsement guarantee adequately alleged a lack of due care under Commercial Code 3405.   The court also observed that, since the employee had use chicken scrawl to endorse the checks, the scrawl was an indicia of fraud that should have alerted the banks.

HH Computer Systems should give businesses an extra layer of protection against bad apple employees – it places on the first bank in the banking system in addition to the check cashing service – the duty to use due care when accepting checks for deposit. As a matter of policy, placing the burden on check cashing companies and their banks to ensure business checks are valid makes a lot of sense: it is extremely easy for them to do and check cashing companies themselves make money from consumers who lack their own bank accounts – not from business theft.

Employers of course should themselves use due care in hiring managerial employees. Yet, as between businesses, which cannot completely mitigate the risk of loss from dishonest employees, and the banking system, which can easily stop employee theft in its tracks, the banking system should bear the risk of loss.

John Claassen practices civil litigation from the offices of Claassen, P.C. in Oakland, California.  For more information about the firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute "communications" within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2014-15. All rights reserved.

The U.S. Supreme Court Finds That An Imperfect Statement Of Legal Theory Is Not Grounds For A Dismissal With Prejudice

Oakland, CA (Originally published Nov. 16, 2014)  Federal Rule of Civil Procedure 8(a)(2) only requires a short and plain statement of a plaintiff’s claim. Invoking this rule last week in Johnson v. City of Shelby, No. 13-1318 (U.S. Sup. Ct. Nov. 10, 2013), the U.S. Supreme Court granted certiorari and summarily reversed the Fifth Circuit Court of Appeals in a somewhat unusual per curiam decision. Both the district court and reviewing court had held that a police officer’s federal civil rights complaint was defective because it failed to expressly cite section 1983.

The Supreme Court disagreed. It reasoned that federal pleading rules are not intended to result in the dismissal of improperly pleaded legal theories. It distinguished Bell Atlantic v. Twombly, 556 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 602 (2009), reasoning that they set forth the requirements for factual rather than legal allegations and thus did not support the lower courts’ dismissal.

The Supreme Court remanded with instructions to allow the plaintiff to insert a reference to section 1983 for “clarification and to ward off further insistence on a punctiliously stated ‘theory of the pleadings.’”

John Claassen practices civil litigation from the offices of Claassen, P.C. in Oakland, California.  For more information about the firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute "communications" within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California.  Copyright 2014-15.  All rights reserved.

The U.S. Supreme Court Roughs Up The Third Circuit in Per Curium Decision.

Oakland CA (originally published on Nov. 6, 2014).  To prevail on a federal civil rights claim under 42 U.S.C. section 1983, a plaintiff must overcome a state official’s qualified immunity. Qualified immunity shields the official unless she violates a clearly established statutory or constitutional right.

In a somewhat unusual per curiam decision issued on Monday of this week, the U.S. Supreme Court granted certiorari and reversed a panel of the Third Circuit Court of Appeals on the issue of qualified immunity. The decision is in Carroll v. Carman, No. 14-212 (U.S. Sup. Ct. Nov. 10, 2014).

In Carroll, the Third Circuit itself reversed a jury verdict finding that a police officer was entitled to qualified immunity in a Section 1983 lawsuit based on an illegal search of the plaintiff’s property. The property was on a corner and the officers had approached it at the rear porch because the porch “‘looked like a customary entryway.’”

The Third Circuit rejected the jury’s application of the “knock and talk” exception to the Fourth Amendment’s warrant requirement. That exception allows an officer to enter portions of private property that are open to the public to knock on the door and speak with occupants.   The intermediate court reasoned it was clearly established that the exception only applies when an officer approaches a front door.

The issue considered by the Supreme Court was whether the Third Circuit erred in concluding as a matter of law that the officer had violated a clearly established right. The Third Circuit had relied on a single decision – its own decision in Estate of Smith v. Marasco, 318 F.3d 497 (2003).  It reasoned that, under Marasco it was clearly established that the “knock and talk” exception only applies where an officer first approaches a front door.

The Supreme Court squarely rejected this reasoning. It explained that Marasco merely stands for the proposition that an unsuccessful encounter at the front door does not automatically mean an officer can approach the back door. In its words, “Marasco simply did not answer the question whether a ‘knock and talk’ must begin at the front door when visitors may also go to the back door.”

The Supreme Court also looked to other circuits and state courts, which had upheld warrantless searches where officers had approached entrances other than the front entrance that looked like customary entrances for visitors. It reasoned that the Third Circuit, Seventh Circuit, 9th Circuit and the Supreme Court of New Jersey had each upheld searches in circumstances similar to those in Marasco.

The rough treatment received by the Third Circuit in Carroll signals that the Supreme Court takes seriously the issue of whether a right is clearly established when attempting to overcome a state official’s qualified immunity defense.  This is at least the second time in about two years the high court has considered this issue. See also Reichle v. Howard, 566 U.S. ___ ___ (2012). It also signals that intermediate courts should think twice about second-guessing a jury’s finding that a state official acted reasonably under all of the circumstances.

John Claassen practices civil litigation from the offices of Claassen, P.C. in Oakland, California.  For more information about the firm, please click here.  While this blog entry is published for informational purposes, portions of this blog post may constitute "communications" within the meaning of California Rule of Professional Conduct 1-400.  Thus, as a possible "Advertisement" it is not intended to constitute legal advice.  Similarly, no statement made in this blog post is intended as a guarantee, warranty, or promise about the outcome of any litigation matter taken on by the firm.  This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California or under the laws of any jurisdiction outside of the State of California. Copyright 2014-15. All rights reserved.

A Tenant's Claim For Breach Of A Settlement Agreement Is Not A SLAPP.

Oakland, CA (Originally published, December 7, 2014).   A scenario repeats itself regularly in landlord tenant law. A new owner purchases a building with rent-controlled units. The new owner, who has paid a lot for the new building, wants to phase out the rent-controlled units with new, higher paying tenants. The new owner serves a notice to vacate and a rent controlled tenant fights back with a wrongful eviction case.

In Ben-Shahar v. Pickart, 2014 Cal. App. LEXIS 1071 (Cal. App. 2d Dist. Oct. 31, 2014), the tenants clearly won the fight. In the process, they added to a line of case slowly limiting the reach of the Anti-SLAPP Statute to unlawful detainer proceedings.

Some background is in order. In Ben-Shahar the tenant of a penthouse apartment in Santa Monica spent approximately $70,000 to remodel the penthouse. The first owner memorialized in writing an agreement to pay the tenant approximately $200,000 for the remodeling that had been performed upon the sale of the building.

When the new owner came along, he served the tenant with a 60 day notice to quit. A provision of the Santa Monica Rent Control Ordinance allows landlords to evict tenants so long as they occupy the unit within 30 days. If the landlord does not move in within 30 days, the landlord must offer the unit to the displaced tenant.

The tenant in the penthouse did not leave and an unlawful detainer proceeding was initiated. The court in the unlawful detainer proceeding was prepared to rule in favor of the new landlord. As a result, the parties entered into a settlement agreement stating that the tenant would vacate and the owner would move in within 30 days.

The tenant then sued the landlord for breach of the settlement agreement. The trial court denied the landlord’s Special Motion to Strike. The trial court also denied the tenant’s motion for attorney’s fees for the filing of a frivolous lawsuit.

The 2d District affirmed the denial of the Special Motion to Strike. It reasoned:

 Plaintiff’s complaint is not directed at the act of defendants’ filing the unlawful detainer proceedings or the parties’ act of settling the matter. Rather, it is directed the Pickarts’ acts constituting a purported breach of the settlement agreements based on their conduct in failing to occupy plaintiff’s apartment in a timely fashion as required by the SMCC.

Slip Op., at 16. The 2d District remanded the case for a determination of whether the landlord’s appeal of the denial of the motion was frivolous. Id. at 17. The 2d District’s decision is just one of the latest of decisions applying the Anti-SLAPP Statute to unlawful detainer sparingly. In light of the remand for a determination of frivolousness, counsel representing landlords defending wrongful eviction lawsuits would be well-advised to avoid filing them at all “[u]nless the sole basis of liability asserted in the tenant’s complaint is the filing and prosecution of the unlawful detainer action. . . .”  Id.

John Claassen, an experienced Anti-SLAPP litigator, practices civil litigation from the offices of Claassen, P.C. in Oakland, California.  Please click here if you have questions about the firm’s Anti-SLAPP practice.  Copyright Claassen, Professional Corporation, 2014-15. All rights reserved. While this blog entry is intended for informational purposes only, portions of it may constitute “communications” within the meaning of Cal. R. of Prof. Conduct 1-400. No statement made in this Advertisement constitutes legal advice. Similarly, no statement made herein is intended to guarantee, serve as a warranty, or serve as a prediction of the outcome of any particular matter. This Advertisement is not intended for any matter that would require the rendition of legal services outside of the State of California under the laws of any jurisdiction other than the State of California.