California Appellate Law Blog

Road Show

Gary A. Watt — Tue, 20 Mar 2012 11:44:00 -0800

In my recent blog entry, 998 Update: Avoiding the Wreckage, I mentioned that the CCP 998 decisions keep on coming. Little did I know that even more were on the way. Each new decision covers a wrinkle that could affect the outcome of a case in dramatic ways. And so as lawyers, we have to constantly update our understanding of how the statute works. It's actually not that easy -- the more one ponders the operation of the statute -- the more one sees additional potential complications. All of which can make evaluating a 998 offer a stressful process, after all, our clients are relying upon our expertise, right?

In an attempt to share some accumulated knowledge and reduce that stress, Don Willenburg of Gordon & Rees and I are taking our 998 MCLE presentation on the road. We are presenting in San Jose on April 4 in conjunction with the Santa Clara County Bar Association. You can find the details here: m360.sccba.com/event.aspx And then on May 17, we will be presenting at the Contra Costa County Bar Association in Martinez: http://www.cccba.org/attorney/calendar/event.php?id=1457

Both programs are two hours long and will cover a spate of recent 998 decisions. I hope you can join us and share some insights and war stories of your own. In the meantime, here is a list of the more recent decisions that may cause you some, well, "excitement."

998 Decision Summaries

Hope to see you in San Jose or later, in Martinez.

998 Update: Avoiding the Wreckage

Gary A. Watt — Mon, 05 Mar 2012 08:00:21 -0800

Evaluating Code of Civil Procedure section 998 offers brings to mind the partner that every associate meets – the one that ends the assignment with, “It shouldn’t take long – it’s a no-brainer.” Of course, that assignment is always anything but a “no-brainer.” The same can be said about analyzing 998 offers. While the statute’s principles are easily understood, its operation can be devilish. In reality, analyzing 998 offers is complex, key details are easily overlooked and mistakes, costly.

Quite often, multiple offers are made during the course of litigation. This is deep water, strewn with the wreckage of parties making erroneous conclusions about the viability of prior offers. A recent decision, Martinez v. Brownco Construction Company, Inc. 2012 Cal.App. LEXIS 122, drives home the risk of being wrong on the law.

In Martinez, the plaintiff made a 998 offer for $250,000 which expired without being accepted by the defendant. About two-and-a-half years later, the plaintiff made another 998 offer, this time for $100,000, also ignored by the defendant. At trial, the plaintiff obtained a judgment of $250,000. Because the defendant-offeree did not obtain a more favorable judgment at trial, the plaintiff sought expert witness fees from the date of the earlier 998 offer. The trial court, however, concluded that plaintiff’s second 998 offer “extinguished the first for all purposes.”

The Court of Appeal reversed. It concluded that when a plaintiff makes two or more reasonable 998 offers, all of which are valid and expire by operation of law, the plaintiff can shift expert witness fees from the earliest offer. As Martinez put it, “this rule encourages early settlement . . . .” And after examining contrary authority, the Martinez court concluded that “no principle requires a different result simply because [the plaintiff] made the second offer.”

Interestingly, Martinez did not discuss One Star, Inc. v. Staar Surgical Company (2009) 179 Cal.App.4th 1082. One Star held that in multiple offer cases, “the party’s last [valid] section 998 offer is effective unless expressly revoked.” (Emphasis added.) So which is it? The earliest valid offer as stated in Martinez or the last valid offer as stated in One Star? While the two holdings appear at odds, with some close scrutiny, they might be reconciled.

In One Star, revocation of a second pending offer brought the offeror’s earlier, expired 998 offer back into play. The offeree argued that making the second offer rendered the earlier offer irrelevant for cost/fee shifting purposes. The trial court agreed. But the Court of Appeal reversed. After discussing the settlement purposes of section 998, One Star held that if a valid 998 offer is not accepted and a subsequent offer is revoked while pending, the earlier offer is still in play after trial.

One Star contrasted the situation in Palmer v. Schindler Elevator Corp. (2003) 108 Cal.App.4th 154 that takes an earlier offer out of play. There, a second offer was made while the first offer was still pending. As a result, the second offer superseded the first one. When that second offer turns out to be invalid, the offeror cannot fall back on the first offer because the offeree was deprived of the full statutory time to consider and accept the earlier offer. From a policy perspective, Palmer makes sense.

Where’s that reconciliation? One Star was not considering two prior, valid offers. If it had been, then to the extent the court held that the last valid offer controls, One Star and Martinez have irreconcilable differences. That’s an interesting dilemma considering both cases come from the Second District (Division Four and One, respectively). But cases are not authority for propositions not considered and in One Star, only a single valid offer was at issue. If its holding is limited to its facts – a single, prior valid offer followed by a second offer that is revoked – then One Star does not conflict with Martinez – both cases involve fee shifting by the “earliest” valid offer.

But one thing is clear; the two cases aptly demonstrate that even appellate justices grapple with section 998's operation. So while understanding its foundational principles may be a “no-brainer,” the actual operation of the statute is no simple matter. It’s also no laughing matter. In Martinez, the plaintiff stood to recover $253,000 in expert witness fees dating from the first 998 offer. That included $188,000 in expert fees already incurred while the defendant was pondering the second 998 offer of $100,000.

Given the state of the law prior to Martinez, defendant’s counsel may have reasonably believed that fees could only shift from the date of the second offer. But the 998 decisions keep on coming and that belief was not only wrong, but costly. And if attorneys do not understand the rules, how can the clients know how much skin is in the game? A thorough and current understanding of section 998 will help lawyers, and their clients, avoid the wreckage.

The Carrot and Stick

David M. Marchiano — Mon, 13 Feb 2012 16:07:10 -0800

Code of Civil Procedure section 998 jurisprudence is a hot topic these days. Last month, the Fourth Appellate District directly addressed the issue of whether a defendant can recover the fees expended on a plaintiff’s expert when the plaintiff fails to obtain a more favorable award under section 998(c). In Chaaban v. Wet Seal, Inc., 2012 Cal.App. LEXIS 84 (January 31, 2012), the Court held that the trial court has discretion to award the defendant expert fees, regardless of whose witness the expert is.

Sally Chaaban sued her employer, Wet Seal, for wrongful termination. She hired an expert witness, Miles Locker, to testify at trial. Wet Seal deposed Locker and, due to impending trial-related deadlines, ordered an expedited transcript, which doubled the cost. Locker did not testify at trial because of a successful in limine motion by Wet Seal. Before expert discovery, Chaaban rejected Wet Seal’s offer to compromise under section 998, the amount of which was not reported.

Wet Seal prevailed at trial and filed a memorandum of costs claiming $29,770.67, including the amount paid to Locker to depose him and the charges related to ordering the expedited deposition transcript. Chaaban filed a motion to tax costs, objecting to a number of items, including the Locker costs. The trial court denied the motion and allowed virtually all of Wet Seal’s costs.

Chaaban appealed, contending three main errors: (1) Wet Seal was not entitled to the amount expended to expedite the transcript; (2) Wet Seal was entitled only to reimbursement for fees paid to its own expert, not plaintiff's expert; and (3) She should not have to pay for Locker’s fee since he was not allowed to testify at trial.

The Court rejected all three contentions.

First, the expedited costs were justified because motions in limine had to be exchanged the next day at the issue conference.

As for whether section 998 permits the reimbursement of fees Wet Seal paid to Locker to secure his testimony, that was a question of statutory interpretation, which the Court reviewed de novo.

Chaaban erroneously based her argument on section 998, subdivision (d), which covers offers made by plaintiffs to defendants. Section 998(c)(1) applies to offers made by defendants to plaintiffs and contains no limitation on the source of an expert: “If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff . . . shall pay the defendant's costs from the time of the offer. [T]he court . . . , in its discretion, may require the plaintiff to pay a reasonable sum to cover costs of the services of expert witnesses, who are not regular employees of any party, actually incurred and reasonably necessary in either, or both, preparation for trial . . . or during trial . . . of the case by the defendant.”

The Court determined that the policy underlying section 998(c) – to encourage pre-trial settlement by providing a strong financial incentive to a party who fails to achieve a better result than that party could have achieved by accepting his or her opponent’s offer – supports the principle that a non-settling plaintiff is potentially liable for all of the expert fees a defendant was required to pay. The Court described this as the “stick” portion of section 998’s carrot-and-stick incentive. “The carrot is that by awarding costs to the putative settler the statute provides a financial incentive to make reasonable settlement offers.” The stick portion is “better served by including all experts within its purview.”

But Chaaban didn’t stop there. She contended the fees were not recoverable because an expert’s fee was not an enumerated item of cost allowable under Code of Civil Procedure Section 1033.5. In doing so, Chaaban ignored the explicit statutory language of section 998(a): “The costs allowed under . . . Section 1032 shall be withheld or augmented as provided in this section.” The Court clearly has the discretion under Section 998(a) and 998(c)(1) to award expert fees when a plaintiff rejects a 998 offer and fails to obtain a more favorable award or judgment.

Speaking of discretion, with the exception of the statutory interpretation issue, the Court reviewed the denial of the motion to tax costs under the highly-deferential abuse-of-discretion standard of review. The Court would reverse only if there had been a “clear abuse of discretion” and a “miscarriage of justice.” And this clearly not being the case, the Court affirmed the denial.

Finally, the fee paid to Locker was recoverable despite the fact he never testified at trial because taking his deposition was reasonably necessary to prepare for trial. Without Locker’s deposition testimony, Wet Seal would have lacked the very subject matter on which it based its motion in limine.

Moral: The Court has sharpened the stick. Before evaluating offers to compromise under section 998, counsel must know all of the potential costs for which a non-settling party may be liable if he or she rejects the offer and fails to obtain a more favorable award. And in case the explicit statutory language isn’t clear enough, now lawyers have a published opinion directly on point to support recovery of expert fees under 998(c), regardless of whose witness the expert is. How’s that for encouraging settlement?

Undoing Default Judgments

Guest Author — Sun, 12 Feb 2012 04:03:24 -0800

By Limor Lehavi

Default judgments can be appealed for failure to state a cause of action and excessive damages. That is the holding of a recent opinion written by Justice Bedsworth for the California Court of Appeal, Fourth Appellate District, in which the court overturned a default judgment, and entered judgment for the defendants instead. (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267.)

The complaint was filed by a creditor for payment on promissory notes. The creditor attached seven promissory notes to the complaint. The creditor also alleged that the debtors complied with the loan obligations until approximately one year before the complaint was filed. Six of the notes had maturity dates that were much earlier, and the creditor did not allege any extensions had been given. The seventh note required payment only when the business had cash available, and the complaint did not allege that cash was available. Although the complaint failed to state a cause of action, the court entered a default judgment for $30 million.

But the default judgment would not stand.

The appellate court was critical of the trial court, holding that it should independently evaluate whether the complaint was properly pled. Since the complaint failed to state a cause of action, then under Code of Civil Procedure section 580, judgment should not have been entered. In reversing the judgment, the court stressed that a default is not a penalty. A defendant can make a tactical decision not to answer a complaint. And if well pleaded allegations of a complaint do not state a proper cause of action, the default judgment cannot stand.

Further, under section 580, default judgment cannot be entered in an amount in excess of that demanded in the complaint. And in cases where the damages require proof beyond the mere allegations of the complaint, a defaulting defendant may challenge the sufficiency of the evidence to support the damage award on appeal. The Court of Appeal then rejected as woefully deficient plaintiff’s allegations of entitlement to millions in damages.

Much has been written about the Kim decision's discussion of sanctions against counsel. That may be more entertaining to read, but the default judgment aspects of the case are much more likely to recur. And while the appellate court lamented a lack of published decisions on the issue of challenging damages after a default is entered, it took a big step toward filling that void. More importantly, it also provided precedent for obtaining relief from improper and overreaching default judgments.

Up In Smoke

Gary A. Watt — Wed, 04 Jan 2012 08:32:46 -0800

A recent decision by the Third Appellate District is a reminder of the opportunity and the limits of a motion for judgment on the pleadings. The case is Collins v. eMachines, Inc.

In Collins, the plaintiffs brought a putative class-action against eMachines for defects in its computers. eMachines moved for judgment on the pleadings. As set forth in Code of Civil Procedure section 438, judgment on the pleadings allows a plaintiff to assert that the answer does not state facts sufficient to constitute a defense. And as is more commonly used, judgment on the pleadings allows a defendant to allege jurisdictional defects or that the complaint/cross-complaint fails to state a cause of action. Judgment on the pleadings can be used if the opportunity to demur has passed.

The trial court, in a two-sentence order, granted judgment on the pleadings as to plaintiffs' Consumer Legal Remedies Act (CLRA), Unfair Competition Law (UCL), common law fraud and unjust enrichment causes of action, then dismissed the complaint with prejudice. The court stated that plaintiffs did not and could not allege any facts to support their claims.

The plaintiffs appealed.

On appeal, the standard of review was decisive. As with a demurrer, the Court of Appeal examined the operative complaint de novo to determine whether it stated a cause of action. And it accepted as true all allegations of material fact, but not contentions, deductions, or conclusions of law or fact. Conducting such review, the Court observed that plaintiffs alleged not only defects in the computers at the time they were sold, but also knowledge of such facts by eMachines and a concerted effort to conceal the defects from consumers. At the pleading stage, such allegations easily stated claims under the CLRA, the UCL, and for common law fraud.

In distinguishing eMachines' legal arguments, the Court noted:

"[T]he present case is also unlike Bardin [v. Daimler Chrysler Corp.]. In Bardin, the material comprising the [defective] exhaust manifolds was simply immaterial at the time of the [purchase] transaction; the manifolds worked in their latent way during the warranty period and nothing was said, implied or assumed about their composition . . . The same cannot be said for the . . . [defective] floppy disk [which] was central to the function of the computer as a computer. The exhaust manifolds at issue in Bardin, by contrast, were just blowing smoke."

The Court of Appeal reversed.

Hands Off!

David M. Marchiano — Thu, 15 Dec 2011 14:22:44 -0800

Every now and again a case comes along with a result that directly impacts the everyday lives of millions of people. One would not expect such a case to originate in traffic court, however.

But that was the backdrop for a recent case, People v. Nelson (2011) 200 Cal.App.4th 1083, in which Division 2 of the First District Court of Appeal affirmed a guilty judgment against Carl Nelson for violating Vehicle Code section 23123 – also known as California’s hands-free law.

The facts are simple and commonplace: Nelson was driving one morning in Richmond when he stopped at a red light. While he waited for the light to turn green, he picked up his flip-type wireless phone and began to dial a number, his motor running and car still in gear. As he began to move the phone to his ear, a motorcycle officer pulled up next to the driver’s side window. The officer saw Nelson using his phone and cited him for violating section 23123, which states that persons shall not drive on public roadways using a wireless telephone unless the phone is configured for hands-free listening and talking, and used in that manner while driving.

Nelson argued to the traffic commissioner at trial that he was not “driving” his vehicle when he used his wireless telephone since he was stopped at a red light. He based his argument on the California Supreme Court's determination in Mercer v. Department of Motor Vehicles (1991) 53 Cal.3d 753 that the term “drive” as used in Vehicle Code section 23512 (prohibiting driving under the influence of alcohol or drugs), requires proof of “volitional movement.”

Nelson was found guilty of violating section 23123 and the appellate division of the superior court affirmed his conviction. That court then granted Nelson’s request for transfer certification to the Court of Appeal because it thought it necessary to determine “whether the term ‘driving’ as used in section 23123 requires contemporaneous volitional movement of the motor vehicle as an element of the offense.”

In a rather long opinion, Justice Lambden held that it does not. The court employed statutory analysis, including a lengthy discussion of section 23123’s legislative history and similar Vehicle Code statutes that use the terms “driving” and “while driving.” The court also discussed several cases, including Mercer, which the court found easily distinguishable since it did not address fleeting stops. In the end, Carl Nelson (and all drivers texting while waiting patiently for the light to turn green) lost. But then again, was there was any other option?

The court put it this way: “We would also open the door to innumerable phone calls to and from drivers that commence during such fleeting pauses and are difficult to end quickly when traffic resumes – because, for example, of an employer or client to please on the other end of the call, an important voice mail message to listen to or finish, or an unexpected wait on hold encountered.” Any contrary result would have certainly thwarted the legislature’s intent and purpose of the statute – to control and restrict the use of hand-held wireless phones while driving.

So next time you’re stopped at a red light, consider your neighbors: while the woman who fixes her make-up in the mirror while driving to work is perfectly legal, the overachieving young associate who tries to type an answer to her boss’s e-mail before the light turns green, will be the one subjected to the fine. So Nelson – while amusingly simple factually – will have far-reaching effects on everyday Californians. At the very least, it will provide support for Siri, the new hands-free feature on Apple’s iPhone 4S.

Lastly, the Court of Appeal made clear that it was deciding only the narrow issue presented by the lower court and also that it had “determined section 23123’s application only regarding defendant’s circumstances, and not regarding the hypothetical examples he discusses.” So be on the lookout for the next case in which a defendant – waiting impatiently for the clearing of a bad accident – picks up the phone and calls (or texts) her husband to tell him that she’ll be home late.

One last interesting tidbit: Justice Richman – while concurring in the result – wrote separately to express his belief that the appeal could have been resolved without the extensive scholarly analysis of section 23123’s legislative history. So how long should the opinion have been? Just four paragraphs, which would have made this post significantly longer than the case on which it was based!

Goin Round in Circles

Gary A. Watt — Thu, 03 Nov 2011 09:26:18 -0800

A recurring theme is that collectively speaking, lawyers often make and evaluate Code of Civil Procedure section 998 offers without a complete understanding of how the statute operates. That knowledge gap is a little scary.

But before you conclude I am talking down to trial lawyers (and many have heard me admire how trial lawyers react in real time and keep all those plates in the air), check this out: judges sometimes get 998 offers wrong too. And think about this – if anyone sees 998 offers in operation the most – it’s the civil trial court judges. After all, they have the robust caseloads and are more apt to regularly deal with 998 offers.

In preparing for the upcoming 2011 MCLE Spectacular presentation, I came across a splendid example of how section 998 trips up lawyers and sometimes judges alike. The case is Warfield v. Chandler 2011 Cal.App. Unpub. LEXIS 4024. Warfield has a lot to offer.

In Warfield, the plaintiff obtained a judgment for $13K. As the “party with a net monetary recovery” (see Code Civ. Proc., § 1032(a)(4)), plaintiff filed a memorandum seeking $4K in statutory costs.

Defendant brought the trial court’s attention to a $25K 998 offer that plaintiff had not accepted. Defendant argued that because plaintiff’s judgment and costs totaled only $17K, plaintiff failed to obtain a more favorable judgment at trial, making defendant entitled to all her costs.

The trial court was not led astray, however, and properly awarded the prevailing party plaintiff her pre-offer costs (under 1032) and defendant her post-offer costs (under 998’s cost shifting). The result was a net judgment of $3,728 in favor of defendant.

And then a funny thing happened.

Faced with the $3,728 judgment in favor of defendant (after netting out the parties’ respective awards), the trial court invited defendant to file a memorandum of costs for defendant’s pre-998-offer costs. The trial court then ruled that defendant was actually the prevailing party (under 1032(a)(4)), and awarded defendant her pre-998-offer costs in the amount of $7,614, for a total award of $11,342.

Sensing that something wasn't quite right, the trial court invited plaintiff to appeal.

But on appeal, the Court of Appeal’s hands were tied because plaintiff did not file a separate notice of appeal from the post-judgment cost award. (See, Code Civ. Proc. § 904.1(a)(2).) Nevertheless, the Court of Appeal discussed the merits “because the trial court clearly erred and, if for no other reason, [its] discussion [might] preclude repetition of the error.”

So which comes first? The prevailing party determination? The 998 cost shifting?

As the Court of Appeal put it, “Sections 1032 and 998 require the trial court to follow a simple two-step procedure. First, the trial court must determine the prevailing party utilizing the general rule of section 1032 and determine the recoverable costs as permitted by section 1033.5. Second, the trial court must then augment or withhold the amount determined in step one pursuant to the dictates of section 998. After these two steps are completed, the trial court's cost award is complete.”

It sounds simple, right? Yet in Warfield, the trial judge determined the prevailing party, then the 998 cost shifting, then made a new prevailing party determination, then awarded more costs.

So why do lawyers and sometimes even judges, go astray when it comes to 998 offers? The steady flow of appellate decisions is a warning to us all. Despite the basic concepts behind it, operation of section 998 is anything but simple. And mapping the operation of 998 can, if not carefully done, get one goin 'round in circles.

Frivolity

Gary A. Watt — Tue, 30 Aug 2011 17:01:53 -0800

What's that old saying that a good lawyer can argue just about anything? While that may be true, a recent decision by the Sixth District Court of Appeal demonstrates that some arguments are better left not taken. Sometimes it's probably better to walk away.

But if taken, a proper record should be designated, or what follows could be quite, well, unpalatable. For failure to properly perfect the record on appeal can be viewed as evidence that the appeal is frivolous. And if the Court of Appeal finds the appeal frivolous, it can award sanctions in the form of respondent's attorney fees and fines paid to the court. That's exactly what happened in Foust v. San Jose Construction Company, where appellant was ordered to pay $15,000 in sanctions.

What went wrong?

Foust sued San Jose Construction for breach of an employment agreement. During a three day bench trial, witness testimony was presented and exhibits admitted. The trial court ruled against Foust, finding much of his testimony lacked credibility. Foust appealed, but he failed to designate any reporter's transcripts. The Court of Appeal had some thoughts on that:

"The fatal problem with this appeal is that Foust fails to provide us with a reporter's transcript from his court trial or any other adequate statement of the evidence." The court also observed that although there was no way to be sure, it appeared that as many as 107 exhibits could have been admitted at trial, yet Foust designated only two. After reiterating the presumption of correctness that applies to a judgment or order, the court stated, "If the record is inadequate for meaningful review, the appellant defaults and the decision of the trial court should be affirmed."

The court then turned to San Jose Construction's motion for sanctions for a frivolous appeal. "We conclude that sanctions are warranted because Foust's appeal is indisputably without merit." "The essence of Foust's appeal is that, based on these select documents and his self-serving assertion that he would never agree to modify the [employment] agreement, this court should reevaluate his credibility and [reverse]." "Without a proper record, there is no way for this court to find that the trial court's conclusions were not supported by substantial evidence." And "sanctions are also warranted because it appears that Foust has filed his appeal for the improper purpose of harassing San Jose Construction."

The result? Sanctions including $8,743 in attorney fees payable to the opposing party and $6,000 payable to the court. Not exactly an occasion for frivolity.

Get It In Writing

Ioana Mondescu — Fri, 12 Aug 2011 10:45:31 -0800

A recent ruling by the Fourth District Court of Appeal confirms that unless an order of dismissal is in writing, signed by the trial judge, and filed, it is ineffective as a judgment under Code of Civil Procedure section 581d. In Powell v. County of Orange (Aug. 8, 2011) 2011 Cal.App. LEXIS 1024, the court held that neither a stamped, nor a signed minute order meets the requirements of section 581d. Consequently, such an order does not qualify as a final judgment that might serve the basis for appellate jurisdiction. For the decision, please click here

In Powell, following a hearing on an order to show cause regarding dismissal for lack of prosecution, the trial court dismissed the action without prejudice and issued a minute order to that effect. Neither the minute order, nor any other order from the trial court was signed and recorded in the clerk’s transcript, or in the superior court’s register of actions.

Subsequently, Powell filed a “Motion to Set Aside Dismissal Judgment”, which the trial court denied. Powell then filed a motion for reconsideration, pursuant to section 1008, which was also denied by the court. Thereafter, Powell filed a notice of appeal, identifying the order being appealed from as “Denial of Motion for Reconsideration/Motion to Set Aside Dismissal.”

The appellate court dismissed the appeal for lack of appellate jurisdiction. The court emphasized that section 581d specifically requires that “dismissals ordered by the court shall be in the form of a written order signed by the court and filed in the action” and only “those orders when so filed shall constitute judgments.” (Emphasis added.)

Accordingly, the court urged strict compliance with the dictates of section 581d, cautioning courts and litigants that final orders of dismissal be accomplished by a separate written, signed order by the trial court and filed in the register of actions in the case, rather than by signed or stamped minute order.

The court also joins the majority of other appellate courts, and reaffirms that an order denying a motion for reconsideration is not appealable even when based on new facts or law. In arriving at this conclusion, the court highlights that recent amendments to section 1008 expressly provide that an order denying a motion for reconsideration is not appealable. If the order that was the subject of the motion for reconsideration is appealable, the denial of the motion for reconsideration is reviewable as part of an appeal from that order. (The legislation amending section 1008 was signed by the Governor on July 11, 2011, and will become effective on January 1, 2012.)

Be Brief

Gary A. Watt — Wed, 27 Jul 2011 15:49:43 -0800

In what appears to be a trend (see prior post, In Search Of), another decision issued last week demonstrates a different kind of missing ingredient in legal briefs -- the argument:

"The jury awarded Quantum $1 million in damages. Subsequently, LV Associates moved for a new trial and judgment notwithstanding the verdict. The trial court denied the post-trial motions, finding their one-page supporting memoranda lacked any discussion related to the facts or to the cited law, failing to comply with Rule 3.1113 of the California Rules of Court." Quantum Cooking Concepts Inc. v. LV Associates Inc. 2011 Cal.App. LEXIS 951.

Digging a little deeper, the case reveals that the thrifty approach to briefing in Quantum Cooking involved two separate issues assigned a half a page each. Somewhere there is an attorney mourning the adage, "be brief" and pondering the high school English teacher's mantra that less is more, at least when taken to the extreme.

But if leaving the required statement of facts, specific evidentiary references and arguments out is problematic, there are greater sins of inclusion. If you are going to let it all hang out in a brief, it's still a good idea to attend to basic spelling and grammar and it's always a good idea to refrain from calling the judge names. A recent Fifth Circuit decision is, well, you decide:

http://www.virginiaappellatelaw.com/2011/07/articles/writing/dont-mess-with-texis-sic-legalwriting-lessons-from-a-fifthcircuit-benchslap/

In Search Of

Gary A. Watt — Tue, 19 Jul 2011 10:16:43 -0800

Here's a reminder about the appellate lawyer's obligation to tie legal arguments to the record. In addition, every now and then you run across what appears to be a little judicial jab in an appellate opinion:

"Under the circumstances, [Plaintiff] has not met his burden of showing abuse of discretion. Each appellate brief must 'support any reference to a matter in the record by a citation to the volume and page number of the record where the matter appears.' (Citation) 'The reviewing court is not required to make an independent, unassisted study of the record in search of error or grounds to support the judgment. It is entitled to the assistance of counsel.' (Citation) 'It is the duty of counsel to refer the reviewing court to the portion of the record which supports appellant's contentions on appeal. If no citation is furnished on a particular point, the court may treat it as waived.' (Citation) Further, [Plaintiff] has already filed three complaints without being able to state a single cause of action." (Durrell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1371-1372.)

Okay, so maybe more than just a little jab.

The $36K Pellet

Gary A. Watt — Fri, 17 Jun 2011 07:27:03 -0800

Every now and again an appellate decision comes down the pike with the banner, "they didn't, did they!?" A recent decision, Kimes v. Grosser, 2011 Cal.App. LEXIS 671, is a notorious example. Cat lovers, stop reading now. But those annoyed by a neighbor's cat, dog, or even the neighbors themselves, here's your chance to take a deep breath.

I don't know how much a box of pellets for a pellet gun costs these days. But I am pretty confident that each pellet does not cost $36,000. Yet, that is the minimum that it will probably cost the Grossers in damages for shooting their neighbor's cat. No, I am not making this up.

Annoyed by the cat, the Grossers got inspired to try to make a lasting impression on it. And so, plaintiff alleges, they shot it. With a pellet gun. But apparently the cat still had at least one of its nine lives available, and survived, if only barely. Surgery saved its life, but the cat was paralyzed. The cat's meds exceed $36K.

The Grossers moved in limine to exclude evidence of plaintiff's veterinarian expenses because the cat was "an adopted stray of very low economic value." They contended that damages were limited to the amount by which the shooting reduced the cat's fair market value. (Think of the old beater that hippie down the street drives, the one with all the rust and dents. What's one more dent, right?)

The trial court granted the motion because plaintiff would be unable to prove that the value of this cat exceeded the "cost of repair." Under the usual rule, a plaintiff is limited to the lesser of the diminution of the property's market value caused by the injury, or the reasonable cost of repairing the property. But in the case of the cat, the reasonable cost of repairing the property, er cat, far exceeded the cat's market value (before or after the shooting). And so with no real prospect of proving damages under the general rule, plaintiff refused to go to trial and the court dismissed the case.

But the Court of Appeal reversed. The exception for property having little to no market value applied. The proper measure is "the amount which will compensate for all the detriment proximately caused . . ." (Civil Code section 3333.) And so, when it comes to pets with little or no market value in comparison to special damages, costs incurred for care and treatment are admissible and a jury can decide whether such costs are reasonable.

Moral? Avoid those self-help remedies, especially if violent impulses are involved. And for pet owners, if such tragedy befalls you, then under Civil Code section 3333 the veterinarian's bills are recoverable. And whether a pet dies or not, punitive damages are also available. (Civil Code section 3340.) Let's hope you never need to resort to these provisions.

The Right Words

Gary A. Watt — Wed, 08 Jun 2011 15:35:57 -0800

Speaking of Code of Civil Procedure section 998 offers, another decision came out on May 25, 2011. It is interesting because one would think that the issue had already been covered by a published opinion, but apparently not. The case is Puerta v. Torres, 2011 Cal.App. LEXIS 649. And it holds, simply enough, that if a 998 offer lacks a place for the offeree to accept by signing, the offer is invalid.

Puerta is another one of those cautionary tales. There, the defendant offered to waive costs in exchange for a dismissal. Plaintiff refused the offer and defendant prevailed at trial. Defendant moved for expert-witness fee shifting pursuant to 998. The trial court awarded some $5,300 in fees to defendant.

But the Court of Appeal reversed. It noted that the 998 statute was amended in 2006 to state, "The written offer shall include . . . a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted." Applying the "plain meaning" principles of statutory construction, the appellate court held that the Legislature meant what it said, and that 998 offers are invalid without the acceptance provision. The court also noted that requiring written acceptance (by signing the 998 offer where indicated, or by separate writing), and providing a place for acceptance in 998 offers, eliminates disputes that otherwise arise over oral acceptances.

It's probably a rare case that goes to trial and has expert witness fees of only $5,300. And imagine explaining to your client that expert witness fees could have been recovered, but you forgot to put a place in the 998 offer to indicate acceptance. The salt in the self-inflicted wound will be the irony that the plaintiff never accepted--so it didn't matter that there was no place for acceptance. How about avoiding all this by simply inserting the right words in your 998 offers?

Magic Words

Gary A. Watt — Tue, 31 May 2011 04:08:21 -0800

A recent appellate decision is notable for two reasons. First, it has to be one of the shortest published opinions on record -- the text fits on one page. Second, it holds that when a Code of Civil Procedure section 998 offer includes the phrase, "each side to bear their own costs," the word "costs" includes any attorney fees available to the offeree as a prevailing party. The case is Martinez v. Los Angeles County Metropolitan Transportation Authority 2011 Cal.App. LEXIS 620 (2d Dist.).

In Martinez, the Transit Authority made a 998 offer to plaintiff stating that it "offers to Compromise the above-captioned matter for the total sum of $2,501.00 each side to bear their own costs." Plaintiff accepted and later moved for statutory attorney fees under the ADA. The trial court denied the motion and the court of appeal affirmed.

Generally, a "party who secures a recovery by accepting a section 998 offer is entitled to costs and [attorney] fees unless they are excluded from the offer." (Engle v. Copenbarger & Copenbarger, LLP (2007) 157 Cal.App.4th 165, 168-169.) And in Engle, where the 998 offer was silent as to costs and fees, the offeree was entitled to both. But, according to Martinez, "Unless the offer expressly states otherwise, an offer of a monetary compromise under section 998 that excludes "costs" also excludes attorney fees."

As the appellate court put it, a party accepting a 998 offer is entitled to costs under Code of Civil Procedure section 1032. And section 1033.5 subdivision (a)(10) provides that attorney fees are allowable costs under section 1032, when authorized by contract, statute, or law. Thus, "it follows that when a section 998 offer provides that each party will bear its own costs the word "costs" refers to all the costs described in section 1033.5, including attorney fees."

So, should you simply say "each side to bear its own costs" when making 998 offers? Why not say "each side to bear its own costs and attorney fees"? Here's a thought: A decision of the Second District Court of Appeal is not binding on the other state appellate courts. And one thing is certain, if you are trying to truly resolve the matter for your client, as opposed to say, generating an appeal to defend, why trust only the magic words?

Mincing Words

Gary A. Watt — Thu, 31 Mar 2011 13:25:48 -0800

The United States Supreme Court heard oral argument last week in a case further exploring the contours of the Miranda warning, J.D.B. v. North Carolina. The issue is whether an interrogator should, or must, consider the suspect's age in determining whether to give the warning. The facts involved a 13 year old student corralled in a school office with two police officers and an assistant principal. The dispute is whether, under the Court's latest Miranda jurisprudence, a court should presume the student felt free to leave--the upshot of the North Carolina supreme court's holding that no Miranda warning was necessary because the boy was not in custody.

Like the Court's prior decisions revisiting Miranda, the ideological divide is wide and judicial temperature, well, a little heated. Counsel for the student argued that "The empirical data demonstrates to us that the older a child is to an adult, the more adult-like they are." Justice Scalia immediately fired back, asking if she really needed data to reach that conclusion. Ouch.

Of course, the gallery broke up.

And when Justice Breyer asked North Carolina Attorney General Roy Cooper, "You know the sentence I'm referring to in my dissent, presumably,?" Scalia broke in with "Some people don't read dissents. He may not have read it." To which Breyer parried, "I live always in hope." Hope, and on a Supreme Court with Justice Scalia, a thick skin.

Here's a little taste of Scalia at his bitter best, dissenting in Dickerson v. United States, 530 U.S. 428, 465 (2000), back in the bad-old-days when Miranda revision wasn't going his way:

Today's judgment converts Miranda from a milestone of judicial overreaching into the very Cheops' Pyramid (or perhaps the Sphinx would be a better analogue) of judicial arrogance. In imposing its Court-made code upon the States, the original opinion at least asserted that it was demanded by the Constitution. Today's decision does not pretend that it is -- and yet still asserts the right to impose it against the will of the people's representatives in Congress.

Tell us how you really feel, Antonin.

Legal Eagles

Gary A. Watt — Tue, 22 Mar 2011 07:51:15 -0800

As appellate veterans know, oral arguments in the Ninth Circuit frequently tend to be hotter than in the state appellate courts. And one of the great things about being director of the Hastings Appellate Project, the clinical program in which Hastings students handle pro bono cases in the Ninth Circuit, is watching the students argue their cases. On any given day, the Hastings students are easily among the best advocates on the calendar. Which brings to mind that old saw about how you get to Carnegie Hall...

And last week was no exception. Teresa Li, third-year law student at Hastings and Archer Norris law clerk, argued in the Ninth Circuit. Under my supervision as well as that of assistant director Stephen Tollafield, Teresa and fellow student Brian Pettit represented a pro se plaintiff in an employment discrimination case. The case involved the unsettled state of the federal pleading requirements since the United States Supreme Court decided Twombly and Iqbal. Those cases set out a "plausibility--fair notice" standard replacing the longstanding "no set of facts" standard from Conley v. Gibson. The federal courts have been perplexed ever since, including the district court which dismissed the complaint for failure to meet the Twombly and Iqbal standards.

But on March 16, 2011, Teresa argued before Circuit Judges William Fletcher, Procter Hug, and Milan Smith. After Teresa laid out a litany of reasons why the plaintiff's complaint satisfies Twombly and Iqbal, Circuit Judge Smith interjected that he thought her client has a "slum dunk" case. The decision is pending.

Photo, left to right: Stephen Tollafield, Brian Pettit, Teresa Li, Gary Watt

The oral argument audio is available at:
http://www.ca9.uscourts.gov/media/view_subpage.php?pk_id=0000007204

Wanted: Statutory Interpretation

Gary A. Watt — Tue, 15 Mar 2011 14:50:08 -0800

An ongoing and unresolved question in California is whether Labor Code section 2750.5 applies to homeowners and makes them the "employer" of an unlicensed contractor and the unlicensed contractor's employees. Think about that one. You hire a contractor to spruce up the bathroom or remodel the kitchen. One of the workers is injured. And the contractor turns out to be unlicensed.

So? So the Privette doctrine does not apply. So myriad Cal-OSHA and other regulations may be used by the plaintiff to create a presumption of negligence under Evidence Code section 669. (Elsner v. Uveges (2004) 34 Cal.4th 915, 928.) So being deemed plaintiff’s employer can also expose you to civil and criminal penalties, not just tort liability. (See, e.g., Labor Code § 6423 et seq.) And depending on the language in your homeowners’ policy, being deemed an “employer” could trigger the “business pursuits” coverage exclusion. These are only some of the ways that being deemed an employer can carry potentially devastating consequences.

As the California Supreme Court recently put it, "whether unlicensed contractors or their workers may or must be deemed the homeowners’ employees under [Labor Code] section 2750.5, either for purposes of tort liability generally or with regard to Cal-OSHA specifically, are difficult and unsettled questions in this court.” (Cortez v. Abich (2011) 51 Cal.4th 285, 291.) And unfortunately, the Court missed a golden opportunity in Cortez to resolve these issues, leaving in place instead an alternative approach that is bound to create inconsistent results in the trial and appellate courts.

In Cortez, the homeowners hired an unlicensed contractor to handle demolition and replacement of the roof as part of a large-scale home makeover. The project included addition of a new master suite, garage, and many other upgrades. The homeowners moved out and did not supervise the work. When the plaintiff arrived, not much of the house remained standing. The front appeared intact, but at the rear only some walls made out of brick and some of the roof structure remained. Plaintiff climbed onto the remaining part of the roof, took two steps and fell when a portion of it collapsed. He suffered serious injuries. (Cortez, supra, 51 Cal.4th at pp. 289-290.)

Plaintiff sued the contractor and the homeowners for negligence and premises liability. The trial court granted summary judgment in favor of the homeowners. The Second District affirmed. But the Supreme Court reversed. And unfortunately, the Court did not reach whether 2750.5 applies to homeowners, ostensibly because “Defendants …neglected to seek review of these [homeowner-as-employer] issues …” Thus, the Court focused solely on Cal-OSHA's "household domestic service" exclusion. The Court concluded that given that provision’s express listing of “employment” as “including all excavation, demolition and construction work,” then construction work of the magnitude undertaken in Cortez could not be excluded as “household domestic service.”

By taking that tack, the high court left unresolved the larger question of whether the Legislature even intended for Labor Code section 2750.5 to apply to homeowners. Instead, resolution of these disputes will turn on application of the “household domestic service” exclusion in home improvement cases. Determining whether a project is excluded or not will be governed by “the totality of the circumstances, including but not limited to, the scope of the project and the extent to which it involves significant demolition and construction work, the labor and skills required for the project, the need for building and/or other construction permits, and the extent to which those hired for the project are subject to state licensing requirements.” (Cortez, supra, 51 Cal.4th at p. 295, fn. 4.) But as the test suggests, the household domestic service exclusion will be subject to far-ranging and varied judicial interpretation. The trial and appellate courts are bound to be kept busy sorting it all out.

As for the big issue, Labor Code section 2750.5? The Supreme Court has the power to issue an order expanding the issues on review and so in Cortez, the Court missed its chance. As Justice Janice Rogers Brown previously implored, application to homeowners "cannot be a proper interpretation of [Labor Code] section 2750.5, and the Legislature should act promptly, by deleting or amending the penultimate paragraph of section 2750.5, to restore an apparently straightforward intent which has been undermined by the section's garbled syntax." (Fernandez v. Lawson (2003) 31 Cal.4th 31, 44 (Brown J., concurring).)

Justice Brown has a way with words, doesn't she? Wanted: statutory interpretation.

Remand Diplomacy

Gary A. Watt — Thu, 10 Mar 2011 12:43:56 -0800

Ever notice how the appellate courts provide "guidance" to the lower courts on remand? You know what I mean, "we take no position" and "while the lower court is free to revisit" and so on. Of course, usually followed by a magnificent qualifier, that says "but" in capital letters. Here's a gem:

Because we are vacating the district court's Rule 11 orders on other legal grounds, we express no opinion at this stage about the particular reasonableness of any fees the district court elected to award Mattel. We do, however, encourage the district court on remand to ensure that the time spent by Mattel's attorneys was reasonably and appropriately spent in relation to both the patent frivolousness of Christian's complaint and the services directly caused by the sanctionable conduct. FN 12

FN 12: For example, because the action was frivolous on its face, why would Mattel's attorneys need to spend 700 hours . . . for the summary judgment motion and response? . . . Mattel's theory was stunningly simple and required little explication . . . Christian v. Mattel, 286 F.3d 1118, 1131-32, FN 12 (9th Cir. 2002).

Don't you love it?! We express no opinion but see our footnote for our actual opinion. And oh, by the way, if you (district court) fail to correctly read our "no opinion" you will be reversed. Again!

Remand diplomacy.

Houston

Gary A. Watt — Sun, 06 Feb 2011 16:00:17 -0800

Just got back from Houston. The University of Houston's Blakely Law Center and the Andrews Kurth law firm host the Moot Court National Championship. The competition, only three years old, is invitation only. It features the top 16 moot court programs based on the prior academic year's final intercollegiate competition rankings. Hastings has been invited every year. And by the way, this year Hastings was the only team west of the Rockies to be invited.

This year's problem was patent infringement and trademark dilution. Our Hastings team won four preliminary rounds and made it to the semifinals before bowing out. They were amazing advocates. The team, pictured left to right, included Erica Connolly, Coach Watt, Thomas Fay, and Ryan Rezai. Not pictured is student-coach and Hastings 3L, Josephine Mason. Their success was even more impressive because this time my team was all 2Ls.

Last year, Hastings did not field a team due to budget cuts. But in the inaugural event, we were also semifinalists. Two trip, two semifinalists. Not bad.

But not good enough. So with apologies to Dean Martin fans, if there is such a thing, next year "I'm going back to Houston, Houston, Houston."

Wrinkles

Gary A. Watt — Mon, 24 Jan 2011 13:29:02 -0800

Code of Civil Procedure section 998 offers rest upon a simple concept. As one Court of Appeal put it, 998 offers "encourage settlement by providing a strong financial disincentive to a party--whether it be a plaintiff or a defendant--who fails to achieve a better result than that party could have achieved by accepting [a 998] settlement offer. (This is the stick. The carrot is that by awarding costs to the putative settler the statute provides a financial incentive to make reasonable settlement offers.)" (Bank of San Pedro v. Superior Court (1992) 3 Cal. 4th 797, 804.) But if the carrot and stick is a simple concept, it's the actual business that can be complicated.

The starting point is a valid offer that a trial court finds to be "reasonable and made in good faith." (See, e.g., Nelson v. Anderson (1992) 72 Cal.App.4th 111, 134.) A recent Court of Appeal decision aptly demonstrates a wrinkle--the tricky business of serving a 998 offer with a complaint. Wait a minute, can you do that? The answer is, "it depends."

In Najera v. Huerta, 2011 Cal.App.LEXIS 16, the Court of Appeal agreed with the trial court that a 998 offer served with a plaintiff's complaint was not reasonable or made in good faith. Therefore, although the plaintiff obtained a much more favorable judgment at trial, shifting of expert witness fees and prejudgment interest (under Civil Code section 3291) to the tune of almost $100K, was denied. Yet, as plaintiff contended on appeal, another case, Barba v. Perez (2008) 166 Cal.App.4th 444, 450-451, held that a 998 offer served with the summons and complaint was not unreasonable or made in bad faith, and fees were shifted.

So what gives?

According to the Fifth District in Najera, Barba is unique on its facts. There, although the 998 offer was served with the complaint, "the parties had a close, semifamilial relationship, and there was free flow of information between them." (Barba, supra, 166 Cal.App.4th at p. 450.) And, information had actually been provided in conncetion with the 998 offer. But Barba also recognized that when information is sparse, and requests for extensions of the time to respond or for information are rejected or ignored, "such obstinacy would be viewed as potent evidence that plantiff's offer was neither reasonable nor made in good faith."

In contrast, in Najera, although plaintiff served the insurance carrier with a prelitigation demand letter, when the carrier asked for more information, none was provided. The next thing that happened was service of the complaint and the 998 offer. When panel counsel received the new file including the 998 offer, 17 days had already run. And when defense counsel wrote to plaintiff's counsel objecting to having insuffiicient time to learn the facts of the case and substantiate the damages, the response was merely that plaintiff's counsel considered the offer in good faith in light of its amount, $50K, compared to the prior policy limits demand letter. Thus, Najera concludes that unlike Barba, "there were no special circumstances present to show that at that early (and time critical) juncture . . . defendant's counsel had access to information or a reasonable opportunity to evaluate plaintiff's offer within the 30-day period."

So what are the takeways? If counsel receives a 998 offer with service of the complaint (or later), and it appears facially valid, ask for the necessary time and information to evaluate the case including an extension of the expiration date of the 998 offer. Document the exchanges. As for plaintiff's counsel, if maximizing the fee-shifting potential of a 998 offer by service with the complaint is a must, then make sure that reasonable requests for information are accomodated. Otherwise, absent unusual circumstances like those in Barba, your 998 offer will probably be found unreasonable and lacking good faith. Or, to borrow the dissenting justice in Barba's phrase, "the wicked slider in plaintiff's arsenal" may nevertheless fail to make it anywhere near the strike zone.