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California Case Law Update

Contracts

Technica LLC v. Carolina Casualty Insurance Company
WL 1674108
9th Cir. 2014

Facts: Candelaria, the prime government contractor on a federal construction project, provided a payment bond as required by the terms of the government contract and the Miller Act, and enlisted Carolina Casualty Insurance Company (“CCIC”) as its surety. Candeleria entered into a subcontract with Otay Group, Inc. (“Otay”) to perform a portion of the work, and Otay contracted with Technica to act as a sub-subcontractor. Technica provided labor, material and services to the project. After submitting invoices to Otay and Candeleria, Technica only received partial payments for its work. After Candeleria terminated Otay’s subcontract, Technica filed a complaint in district court, invoking its rights under the Miller Act to recover outstanding payments owed on the subcontract against the payment bond. The district court granted Candelaria and CCIC’s motion for summary judgment.

Holding: The Court of Appeal reversed, holding a subcontractor’s lack of a California contractor’s license did not bar it from pursuing a Miller Act claim for payments due on a subcontract for work on a federal construction project in California.

Arbitration

Carmona v. Lincoln Millennium Car Wash, Inc.
WL 1569182
Cal.App.4th

Facts: Plaintiffs were employees of defendant car wash companies Lincoln Millennium Car Wash, Inc. and Silver Wash, Inc. Plaintiffs were all native Spanish speakers who spoke little to no English when they began working for the companies. They were presented with a document they believed was a “work application,” which contained an arbitration provision partially written in English and Spanish. The managers never explained the documents to the plaintiffs, nor did they inform the plaintiffs they were waving their right to appear before a court. The plaintiffs later testified they did not understand what an “arbitration proceeding” meant and understood they must sign the document as a prerequisite for working at the car wash. The defendant car wash companies later filed a petition to compel arbitration, which was denied by the trial court.

Holding: The Court of Appeal affirmed, holding the arbitration agreement was unconscionable and should not be enforced. An agreement to arbitrate, like any other contract, is subject to revocation if the agreement is both “procedurally” and “substantively” unconscionable. The court found the agreement was procedurally unconscionable because it was presented on a “take it or leave it basis” when the companies failed to provide the rules of the AAA, gave the plaintiffs insufficient time to review the agreement, and failed to translate key portions of the agreement into Spanish. The court also found the agreement was substantively unconscionable for lack of “mutuality” because the enforceability clause allowed the companies to bring claims against the plaintiffs in court but restricted the plaintiffs to arbitration.

Attorney Fees

Mega RV Corporation v. HWH Corporation
WL 1691371
Cal.App.4th

Facts: Plaintiffs purchased a motor home from Mega RV Corporation (“Mega RV”). Plaintiffs subsequently sued Mega RV, among others, pursuant to the Song-Beverly Consumer Warranty Act, for alleged defects in the motor home. Mega RV argued component part manufacturers were subject to liability and indemnity obligations under section 1792 of the Act. However, the trial court concluded component part manufacturers were not required to indemnify Mega RV for any relief obtained by the plaintiffs.

Holding: The Court of Appeal affirmed in part, holding a component part manufacturer was not required to indemnify the retail seller of a motor home because the component manufacturer is only subject to obligations under the Act if it has provided an express warranty to the consumer relating to the component part at issue. The Court reversed the part of the judgment awarding attorney fees to the component manufacturer, holding the trial court erred in applying the tort of another doctrine.

Civil Procedure (costs)

Desaulles v. Community Hospital of the Monterey Peninsula
WL 1724043
Cal.App.4th

Facts: The plaintiff sued her former employer, Community Hospital of the Monterey Peninsula (“Hospital”), alleging a cause of action for failure to accommodate her disability or medical condition under the California Fair Employment and Housing Act (“FEHA”). Before becoming employed by Hospital, the plaintiff had suffered from cancer and undergone a bone marrow transplant, which left her with a compromised immune system. According to her doctor, this affected her ability to be in direct contact with anyone, including hospital patients who suffer from viral, bacterial, and fungal infections. Thereafter, the Hospital placed the plaintiff on a leave of absence and eventually terminated her employment. The trial court granted Hospital’s in limine motion excluding evidence and argument that Hospital had failed to accommodate the plaintiff. As a result of it’s in limine ruling, the court ruled against the plaintiff on the merits on her related claims for retaliation, intentional and negligent infliction of emotional distress, and wrongful termination in violation of public policy. Subsequent to this ruling, the parties settled the plaintiff’s contract claims and judgment against the plaintiff followed. The parties’ settlement agreement was silent regarding the payment of litigation costs. The Hospital was eventually awarded costs, and no costs were awarded to the plaintiff.

Holding: The Court of Appeal reversed the trial court’s order awarding costs to the Hospital. Under California law, a prevailing party is entitled to recover litigation costs in any action or proceeding as a matter of right. A “prevailing party” includes the party with a net monetary recovery. If a party recovers anything other than monetary relief, a trial court would determine the prevailing party and use its discretion to determine the amount and allocation of costs. However, a trial court does not have discretion to deny costs completely when an award is mandatory, though it may exercise discretion over the amount awarded. Here, the Court found the settlement payment constituted a “net monetary recovery.” Therefore, the plaintiff was the prevailing party entitled to mandatory costs.

Civil Procedure (statute of limitations)

NBC Universal Media, LLC v. Superior Court (Montz)
WL 1665035
Cal.App.4th

Facts: Plaintiffs originally sued NBC Universal Media, LLC and Universal Television Network (“the networks”), alleging breach of implied contract and breach of confidence in connection with concepts they previously pitched for a television series called “Ghost Expeditions: Haunted.” Plaintiffs alleged the networks misappropriated, used and exploited their concept by producing the series “Ghost Hunters” without their permission and without compensating them. The networks filed a motion for summary judgment, asserting the plaintiffs’ claims were barred by the applicable two-year statute of limitations. The trial court denied this motion.

Holding: The Court of Appeal granted a petition for writ of mandate and ordered the trial court to grant summary judgment to the defendants. The Court held the two-year statute of limitations under Code of Civil Procedure section 339 applied, and the plaintiffs filed their complaint more than two years after the first broadcast of “Ghost Hunters.” The Court rejected the plaintiffs’ argument they were entitled to delayed accrual of their causes of action under the discovery rule because they did not see an episode of “Ghost Hunters” until sometime after the first broadcast. The mere fact the plaintiffs did not personally view the program until sometime later was irrelevant. The discovery rule does not operate to delay accrual of a cause of action beyond the point at which the factual basis became accessible to a plaintiff to the same degree as it was accessible to any other member of the public.

Employment

Saffer v. JP Morgan Chase Bank
WL 1678172
Cal.App.4th

Facts: Plaintiff worked for Washington Mutual Bank (“WaMu”), when it subsequently failed and was purchased by JP Morgan Chase Bank (“JPMC”). The Federal Deposit Insurance Corporation (“FDIC”) published notices informing creditors that claims against WaMu had to be submitted to the FDIC before the end of December 2008. In June 2009, plaintiff filed suit against WaMu, alleging the defendants constructively discharged him in violation of public policy and in breach of express and implied employment contracts. JPMC compelled the suit to arbitration, and subsequently moved to dismiss the action. The arbitrator dismissed the case, and the trial court confirmed the arbitration award.

Holding: The Court of Appeal vacated the judgment dismissing the action and remanded the action to the trial court with direction to enter an order of dismissal against the plaintiff for lack of subject matter jurisdiction. Even if the arbitration agreement was unenforceable, the trial court would still lack the ability to adjudicate his claims. The Court held the plaintiff’s failure to comply with the mandatory administrative exhaustion requirements with the FDIC as required by the Financial Institutions Reform, Recovery and Enforcement Act prevented the trial court from acquiring jurisdiction over his claims.

Judgments

DKN Holdings LLC v. Faerber
WL 1381358
Cal.App.4th

Facts: DKN, a lessor on a commercial lease, sued the defendants, two of three co-lessees, for unpaid rents and other monies due under the lease. In a prior action, DKN obtained a money judgment against the third co-lessee, following a court trial on the merits for monies due under the lease. The lease provides co-lessees shall be “jointly and severally” liable to comply with the terms of the lease. Although DKN sued the two co-lessees in the prior action, DKN dismissed them without prejudice before trial and judgment. The trial court concluded the judgment against the third co-lessee bars DKN’s claims in the present action.

Holding: The Court of Appeal affirmed, concluding the complaint does not and cannot state a cause of action against the two co-lessees for monies due under the lease. DKN’s claims against the two co-lessees in the present action are barred by the claim preclusion aspect of the res judicata doctrine.

Torts

Sykora v. State Department of State Hospitals
WL 1783754
Cal.App.4th

Facts: The plaintiff filed a government tort claim with the Victim Compensation and Government Claims Board (“the Board”), alleging he suffered damages stemming from medical malpractice. He did not include the required $24 filing fee. The Board affixed its stamp on the claim and assigned it a claim number. After receiving no response from the Board, the plaintiff later filed a negligence action against the defendant. More than a year after the claim was filed, the defendant challenged the claim in a motion for judgment on the pleadings because the plaintiff did not pay the filing fee. The trial court agreed and granted the defendant’s motion.

Holding: The Court of Appeal reversed the judgment on the pleadings, ruling if a claimant omits a required filing fee for a claim, the entity must notify the claimant of this deficiency with a timely Notice of Insufficiency under the Government Code. Because the defendant had not done so, under Government Code section 911, the defendant waived any defense based on the omission of the fee. In addition, because the defendant did not serve a notice stating the claim was untimely, it waived any argument that the lack of a fee resulted in the claim not being timely filed.

Consumer Rights

Loeffler v. Target Corporation
WL 1714947
Cal.4th

Facts: The plaintiffs alleged Target improperly collected sales tax reimbursement from them when they purchased hot coffee “to go.” Plaintiffs filed a class action lawsuit against Target, asserting claims for unfair business practices, violation of the California Legal Remedies Act and the tax regulations, and various torts. Target argued the California Constitution and state law provide limited methods for seeking tax refunds, which preclude consumer claims against the retailer. The trial court agreed.

Holding: The Court of Appeal affirmed, holding consumers have no private right of action against a retailer for the return of sales tax which the retailer allegedly improperly collected from them. Instead, the California Constitution requires any challenge to the collection of sales tax must comply with the tax refund procedures as set forth in the legislature, which do not authorize civil actions against retailers who collect the tax. A plaintiff cannot evade the statutory scheme for sales tax refunds by characterizing what is essentially a sales tax refund claim as some other statutory or common law claim.

ABOUT THE AUTHOR:
 Kelly Denham graduated from Loyola Law School in 2012. Ms. Denham’s primary focus at Tyson & Mendes is construction defect litigation. Contact Kelly at 858.263.4117 or kdenham@tysonmendes.com.

Download Article Here: California Case Law Update