Court may consider attorney incivility in deciding whether to lower attorney fees awarded (Snoek v. Exaktime)

 

Courts may consider the incivility of counsel in deciding whether to lower the amount awarded to a party for said attorney's efforts

The Second District, Division Three, of the California Court of Appeal has upheld a trial court ruling reducing the amount of attorney fees awarded to a party due to the incivility of counsel for that party.  (Snoek v. Evaktime (October 21, 2023) BC708964.)  The Hon. Michael P. Linfield, Judge Presiding, of the Los Angeles County Superior Court, applied such a modifier against the plaintiff for the conduct of his counsel when the trial court awarded attorney fees:

Plaintiff Steve Snoeck appeals from the trial court’s order awarding him $686,795.62 in attorney fees after the court applied a .4 negative multiplier to its $1,144,659.36 adjusted lodestar calculation “to account for [p]laintiff’s counsel’s . . . lack of civility throughout the entire course of this litigation.” The court awarded Snoeck fees after he prevailed on one of his six causes of action against his former employer ExakTime Innovations, Inc. on his complaint for disability discrimination under the Fair Employment and Housing Act (FEHA) (Gov. Code, § 12900 et seq.) and related causes of action. The jury [had previously] awarded Snoeck $130,088 in damages on his claim ExakTime failed to engage in a good faith interactive process with him. (Id., p. 2.)

In ruling upon a post-trial motion for attorney fees, the trial court found plainrtiff's counsel's rates of $535.00 to $750.00 per hour "reasonable" but made several alterations to the fees requested, including mathematical corrections and applying a 1.2 positive multiplier to the to the "lodestar" rate awarded, given the length of the case and its "contingent" nature.  However, the trial court also found that plaintiff's counsel, Perry Smith, had been uncivil in sending communications containing ad hominem attacks on defense counsel and applied a .4 negative multiplier to the entire fee award.

In an opinion written by Justice Edgarton, the Second District found the trial court acted well within its discretion when it made this reduction.  In doing so the appellate court rejected the argument the .4 reduction was an improper "sanction" as well as that such a reduction controverted the purpose of the fee-shifting provision in FEHA:

Moreover, the court’s order specifically recognized civility was not just a moral good but an aspect of attorney skill. And, as discussed, ample evidence supports the court’s reduction of the lodestar to account for plaintiff’s counsel’s skill given his incivility toward opposing counsel and the court. (Cf. Edgerton v. State Personnel Bd. (2000) 83 Cal.App.4th 1350, 1363 [affirming application of positive multiplier given, in part, “ ‘the skill displayed by plaintiff’s counsel in overcoming the intransigent opposition of defendant’ ”].)
Nor did the court contravene the principles of the FEHA in doing so. The lodestar adjustment method—which gives the court the discretion to augment or diminish the lodestar figure to arrive at a reasonable fee—is the gold standard for determining an attorney fee award under the FEHA. (Id., p. 34; original emphasis.)

Potential consequences for counsel whose fees are reduced due to their own actions

To the extent such a fee reduction results in a decrease in monies ultimately paid to the client (and this is a hypothetical here, as we have no way of knowing if the plaintiff actually paid any fees out-of-pocket) a counsel whose actions have caused such a reduction in what is ultimately paid to a client may face certain consequences.  

First, the client may assert that engaging in uncivil conduct harming said client is a breach of the duty duties owed by the attorney, such as duties related to being a fiduciary and competently performing legal services.

Moreover, such an attorney assuredly owes a duty to the client to explain the consequences of such a ruling in terms of the reduction in attorney fees awarded including the specific reasons such fees are being reduced.  This implicates provisions of the California Rules of Professional Conduct, including rule 1.4 which provides a lawyer must keep a client informed as to significant developments in the case.  

Further, Rule 1.7 requires informing the client of any conflict of interest, and the breach of a fiduciary duty owed a client may be said to create such a "conflict."  Specifically, case law holds that  “attorneys have a fiduciary duty to disclose material facts to their clients, an obligation that includes disclosure of acts of malpractice.” (Beal Bank SSB v. Arter & Hadden LLP (2007) 42 Cal. 4th 503, at 514.)

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One-year MICRA Statute of Limitations Applies to Claim Against Ambulance Driver Who Read-Ended Another Motorist (Gutierrez v. Tostado)

 

The one-year Statute of Limitations in California's MICRA regime bars untimely claim against driver of ambulance who rear-ended third-party motorist while transporting another patient

Plaintiff Gutierrez was driving on the I-280 when he was rear-ended by an ambulance driven by defendant Tostado.  The driver and ambulance operator brought a motion for summary judgment based on the statute of limitations found in California's Medical Injury Compensation Reform Act (MICRA).  This statute was passed by the voters in 1975 and limits the amounts recoverable due to alleged negligence in providing medical services.  

The Hon. Christopher J. Rudy of the Santa Clara County Superior Court granted the motion.  On appeal, the Sixth Appellate District upheld the grant of summary judgment over the dissent of one Justice. (Gutierrez v. Tostado (December 1, 2023) H049983.)

Upon appeal, the issue was whether the one-year MICRA statute of limitations found in Code of Civil Procedure section 340.5, as opposed to the general two-year statute of limitations for tort actions, applied.  In other words, did MICRA's provisions apply where the negligence of medical providers was directed at a non-patient such as fellow motorist Gutierrez, who just happened to be driving in front of defendants' ambulance?

 

Justice Greenwood, joined by Justice Grover, wrote for the majority and found that because Tostado was driving the ambulance he was providing "professional [medical] services" at the time of the accident.  Therefore, the time limitations found in MICRA applied.  This is important because under case law such as Flores v. Presbyterian Intercommunity Hospital (2016) 63 Cal. 4th 75, at 88, only actions “alleging injury suffered as a result of . . . the provision of medical care to patients” are subject to MICRA. (Gutierrez, p. 3; italics added.)

The majority answered this question affirmatively and cited to Canister v. Emergency Ambulance Service, Inc. (2008) 160 Cal. App. 4th 388, at 407, where the MICRA one-year limit applied to injury to someone injured while riding in an ambulance who was not a patient.  As Gutierrez explained at pages five to six, the MICRA time limit applied to someone not receiving medical service but who was nonetheless still injured as a result of negligence in providing such services:

 

In Canister, a police officer accompanying an arrestee in the back of an ambulance was injured when the ambulance hit a curb. At the time of the accident, the ambulance was being driven by one EMT while another attended to the arrestee in the rear of the ambulance. The officer sued for negligence. (Canister, supra, 160 Cal.App.4th at p. 392.) After finding that an EMT was a health care provider and that transporting a patient constituted professional services within the meaning of MICRA, the Canister court held that MICRA extends to “ ‘any foreseeable injured party, including patients, business invitees, staff members or visitors, provided the injuries alleged arose out of professional negligence.’ [Citation.]” (Id. at pp. 407-408.) The court concluded that it was foreseeable as a matter of law that a police officer accompanying an arrestee in an ambulance might be injured in the operation of the ambulance. (Id. at p. 408.)

 

Justice Bromberg dissented and wrote that neither the plaintiff nor the defendants could have anticipated that MICRA would apply in this situation, i.e., "a run-of-the-mill traffic accident involving an ambulance that happened to be transporting a patient on a non-emergency matter, presumably with its siren off." (Gutierrez dissent, p. 2.)  The dissent also noted the plaintiff's lawyers were unlikely to know that MICRA applied to his claim because in 1982 the MICRA provisions specifically related to paramedics were removed. (Gutierrez dissent, p. 4.)  Moreover, at the time MICRA was enacted the general statute of limitations for tort claims was one-year, meaning MICRA was not intended to shorten the time to bring claims. Rather, its purpose was to reduce the amount of monetary awards for medical malpractice to prevent a reduction in affordable and available medical care to the public.

Further review of Gutierrez

This case may ultimately be headed to the California Supreme Court, given that the case law cited by the majority and dissent lacks harmony as to when MICRA does or does not apply.

It should also be noted that earlier this year MICRA was amended by the California legislature.  The original $250,000 "cap" on claims for professional medical negligence was increased.  Wrongful death claims from medical malpractice are now "capped" at $500,000 and this amount will increase by $50,000 each January until the maximum is $1,000,000.  For other claims, the "cap" is $350,000, with yearly increases of $40,000 until the new limit reaches $750,000.

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Update - California Appellate Trends for 2023

Two words come to mind in summing up trends in appellate law for the past year: stability and continuity.  Neither the California Supreme Court nor the six District Courts of Appeal veered off in a totally surprising direction.  Indeed, the Supreme Court issued a relatively modest 55 total majority opinions - this being modest in total number but not necessarily in terms of the breadth of the opinions - for the legal year 2022-2023.

Despite the trend toward stability and continuity, we do have a new Supreme Court Chief Justice, the Hon. Justice Patricia Guerrero.  She was nominated by Governor Newsome as Chief Justice and was elected by the people on November 8, 2023. Justice Guerrero replaces the well-regarded Justice Tani G. Cantil-Sakauye, who served as a Chief Justice for 12 years.  The former Chief Justice spent the last few years navigating the pandemic and the resulting closing and re-opening of our courts and the resulting modifications of California judicial procedure.  

Some relatively straightforward trends continued this year, including strictly holding arbitrators to the relevant standards related to disclosure, bias, misconduct, etc.  The days when trial courts might "rubber stamp" an arbitration award and fail to seriously consider allegations against the arbitrator and the parties would then expect an appellate court to defer to the trial court's confirmation of the arbitration award are largely gone. (See, e.g,., FCM v. Grove Phan, holding an adverse credibility determination based largely upon the need for a translator constituted "bias" by the arbitrator)

California courts are also working through a host of issues related to COVID-19 and coverage.  For example, Endeavor v. HDI Global held that a standard liability policy did not cover losses from the pandemic because there was no "direct" physical loss or damage.

Indeed, this very issue is now pending before the California Supreme Court in Another Planet Entertainment, L.L.C. v. Vigilent Insurance Co., wherein the Ninth Circuit Court of Appeal certified the following question:

Can the actual or potential presence of the COVID-19 virus on an insured’s premises constitute ‘direct physical loss or damage to property’ for purposes of coverage under a commercial property insurance policy?

For a preview of the next term of the California Supreme Court, please see the court's summary of pending cases.

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Short take-away -- misconduct for arbitrator to base credibility upon use ofinterpreter (FCM v. Grove Pham)

 

Arbitration award reversed due to "misconduct" where arbitrator makes adverse credibility determination upon party's use of an interpreter

The California Court of Appeal for the Fourth District, Division One, has overturned an award in a contractual arbitration proceeding because it was based, at least in part, upon an improper determination a witness was not credible. (KMI v. Grove Pham (October 17, 2023) D080801.)  Writing for a unanimous majority, Justice Dato overturned the order of the Hon. Daniel A. Ottalia, Judge Presiding, of the Riverside County Superior Court.  The trial court had confirmed the petition of plaintiff FCM to confirm the arbitration award in its favor over the objections of defendant Grove Pham.  Grove argued the arbitrator committed misconduct when she made a determination plaintiff and witness Phuong Pham was not credible.  

Despite the general rule that an appellate court defers to an arbitrator's findings as to credibility, the Fourth District found the arbitrator had improperly discounted Mrs. Pham's testimony:

In the arbitrator’s view, although the transaction “was rather complicated,” her decision in the case was “made easier by an evaluation of the credibility of the witnesses.”                                         ...

The arbitrator did not find Phuong or Trish credible. In explaining why, she highlighted as the key example Phuong’s use of an interpreter:

“Among the items that stand out, is Mrs. Pham’s use of an interpreter. While the Arbitrator understands that people for whom English is a second language frequently prefer to testify in their native language in important legal matters, Mrs. Pham’s use of an interpreter appeared to the Arbitrator to be a ploy to appear less sophisticated than she really is. She has been in the country for decades, has engaged in sophisticated business transactions and has functioned as an interpreter." (Id., p 5.) 

The appellate court found this finding rose to the level of "bias" against Pham,  given the fact there was little evidence to support it.  For example, the court of appeal noted that immigrant communities may include "thriving" businesses run by persons who speak English only as a second language, and the fact that Mrs. Pham requested an interpreter did not indicate her testimony was less credible.  The court further noted that the facts plead indicated Mrs. Pham had used her daughter as an interpreter during the subject business dealings.

The Fourth District thus held the record showed arbitrator "bias" and such bias is included in the definition of "misconduct." Consequently, the rights of the plaintiff were prejudiced, and such misconduct resulting in prejudice is one of the narrow grounds for overturning an arbitration award under California's Code of Civil Procedure section 1286.2(a)(3).

No Duty to Warn Tenant of Obvious Water Current (Nicoletti v. Goldrich Kest)

 

Landlord had no duty to warn of open and obvious condition of water current from flowing rainwater

The Second District, Division Eight has upheld a grant of summary judgment by the Hon. Daniel Crowley, Judge Presiding, of the Los Angeles Superior Court in a tenant versus landlord tort suit. (Nicoletti v. Goldrich Kest (November 14, 2023) B319377.)  Summary judgment was granted in favor of the landowner based on the defense that the hazard was an "open and obvious" condition.  Plaintiff Nicoletti allegedly fell due to a rainwater current while walking a dog on the premises she rented from defendant Dolphin Marina apartments, sued as the DBA of Goldrch Kent:

On April 9, 2020, Nicoletti took her neighbor’s dog for a walk around Dolphin’s apartment. . . . Nicoletti observed that it was raining that day with thunderstorms. At around 3:30 p.m., Nicoletti crossed the driveway of the North Side Gate entrance that led to the underground parking lot. The apartment complex also had a South Side Gate entrance and another entrance on Panay Way. Nicoletti testified that she had gone past the North Side Gate “thousands of times” before the incident.

Before crossing, Nicoletti observed that the concrete on the North Side Gate driveway was wet, and rainwater formed a current that was running down the driveway. Nicoletti did not observe any caution tape or other warning advisements. Nicoletti proceeded to cross, and the rainwater current knocked her down. Nicoletti then fell down the North Side Gate driveway and hit the gate at the bottom of the driveway. (Id., p. 2.)

The trial court found Dolphin did not have a duty to warn of the running rainwater on the driveway because it was a dangerous condition that was sufficiently obvious.  Dolphin countered  the danger from the water current was not obvious, but the trial court nonetheless granted summary judgment.  

The appellate court affirmed, noting the general rule that landowner must “maintain land in [its] possession and control in a reasonably safe condition.” (Alcaraz v. Vece (1997) 14 Cal. 4th 1149, at 1156; emphasis added.)  However, it also reiterated that "[a] harm is typically not foreseeable if the “dangerous condition is open and obvious," citing Jacobs v. Coldwell Banker Residential Brokerage Co. (2017) 14 Cal. App. 5th 438, at 446.

Upon appeal, Nicoletti further argued that an exception to this doctrine applied, namely that of "necessity."  The appellate court noted this argument was waived as it was first made upon appeal; nonetheless, the Nicoletti court considered and rejected this argument.  Writing for the majority, Justice Viramontes explained the "necessity" argument was not supported by the facts, and, more to the point, public policy indicated no duty should be imposed to place "warnings" due to temporary weather conditions:

Our holding is also consistent with our Supreme Court’s declaration that courts must assign tort duties “to ensure that those ‘best situated’ to prevent such injuries are incentivized to do so.” [Citation.]  Under these circumstances, Nicoletti was in a better position to avoid the obvious danger of walking across a current of water that formed as a result of a rainstorm that began that same day. As discussed above, Nicoletti could have chosen to use a different entrance. The burden imposed on Dolphin to constantly monitor weather conditions and immediately install warning signals is outweighed by Nicoletti’s ability to avoid a condition she should have observed as obviously dangerous. (Id., p. 9.)

Counsel for plaintiffs should note the obvious lesson that arguments destined for a Court of Appeal should first be made in the trial court.  

Defendants should be prepared to argue the applicability of the "necessity" exception to the open and obvious rule.  The defense should also be keen to address public policy issues, such as the scope of the duty the plaintiff seeks to impose, an example being the duty proffered here by the plaintiff, namely, that the landlord should have warned of the current due to the heavy rain that day.

Query - What are the most important Federal and California appellate decisions of 2023?

 

Thus far, the most important Federal and California appellate decisions of 2023 are. . . 

I have been asked what are the most important appellate decisions of 2023, either in Federal or California courts. 

 

Federal Opinions of 2023

As to opinions from our Federal courts, including the United States Supreme Court, the answer is straightforward due to the import and controversy surrounding this year's most talked-about decision.  

Students for Fair Admissions v. Harvard held equal protection under the law prohibits racial preferences in university and graduate school admissions.  To learn more, please see our discussion of Justice Thomas' concurrence, which focuses on the history of racial equality (and inequality) in our country as he writes in support of the majority.

California Opinions of 2023

Choosing just one California opinion is difficult because 2023 has perhaps had fewer blockbuster opinions from the California Supreme Court than in prior years.  Therefore, the answer lies in choosing an opinion that may have the most import for future legal disputes, not only in California but in other jurisdictions as well.  We have therefore chosen the Fourth District, Division Three opinion holding a website is not a "public place" for purposes of disability access, as this opinion is important to attempts to define the scope of a digital "place."

As we explained in a prior post, Acting Presiding Justice Sanchez wrote for the majority in Martin v. Thi E-Commerice,  and interpreted the phrase "place of public accommodation" as defined in the Americans with Disabilities Act.  The majority thus held the wording of the act excluded websites that have no relation to a physical location.  Consequently, a website not required for entrance to a location (in contrast to a website which, for example, might be used to make reservations for an actual physical location) is not subject to the provisions of the ADA as "the ADA unambiguously requires [such] a physical location." (Martin, p. 2.)

Please let us know if you have a contrary opinion as to the most important decisions of 2023.

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Arbitration — Employer alleged to have received trade secrets from a new employee does not have a right to “arbitrate” claims brought by prior employer against the new employer (Mattson v. Applied)

 

Arbitration — while a former employee may demand that the former employer arbitrate its claims of trade secret theft against him, the new employer who allegedly received the secrets cannot claim any right to arbitrate the claims against it

The First District, Division Five, has held agreement signed by an employee agreeing to arbitrate claims related to his employment cannot be utilized by the employee’s new employer to force the former employer to arbitrate claims against it related to theft of trade secrets. (Mattson v. Applied (October 30, 2023) A165378.)  Defendant Applied is a competitor of plaintiff Mattson and hired at least 14 former employees of Mattson, including co-defendant Lai, who eventually admitted that he emailed himself documents from his tenure at Mattson before he left for Applied.  Mattson sued both Lai and Applied, and the defense moved to compel arbitration pursuant to the employment agreement signed by Lai and Mattson.  

Plaintiff alleged causes of action for 1) misappropriation under the Uniform Trade Secrets Act against each defendant, and, as against employee Lai, breach of his employment agreement.  Of course, at the time the agreement with Mattson was signed, there was no employment or other sort of contractual relationship between Lai and Applied.

The Hon. Evelio M. Grillo, Judge Presiding, of the Superior Court of Alameda County ruled that while Lai could compel arbitration, Applied had no right to compel former employer Mattson to arbitrate.  The trial court also issued a broad preliminary injunction regarding any use of trade secrets.  Moreover, the trial court declined to stay litigation of the claims of Mattson against Applied until the claims against Lai could arbitrated.

Justice Burns and a unanimous court upheld the first two of these trial court orders.  Even though Applied could claim no contractural privity, it argued that “equitable estoppel” prevented Mattson from refusing arbitration of its claims against Applied.  This argument was rejected by the First District because, inter alia, former employer Mattson made no attempt to apply any portion of the employment agreement with Lai against new employer Allied:

Equitable estoppel provides a limited exception to this general rule.  When a signatory to a contract asserts claims against a non-signatory that rely upon, or are inextricably bound up with, the contract terms, the non-signatory may invoke an arbitration clause in the same contract.  

This makes sense.  As a matter of fairness, when a party to a contract seeks to hold a non-signatory defendant liable for obligations imposed by the contract, the party cannot evade an arbitration clause in the contract simply because the defendant is a non-signatory.  It’s a two-way street. 

Keeping this policy in mind helps define the limits of the rule.  It is not enough that a complaint simply refers to a contract; the claims must be founded on the contract.  Nor is it sufficient that a complaint alleges collusion between a signatory and non-signatory defendant, or that the controversy would not have occurred but for the existence of the contract, provided the contract is not the basis for the claims against the non-signatory.  In these situations, the policy rationale for equitable estoppel—"relying on an agreement for one purpose while disavowing the arbitration clause of the agreement”—does not exist.  (Id., pp. 5-6; citations omitted and emphasis added.)

The Mattson court therefore relied upon a federal case, Waymo LLC v. Uber Techs., Inc. (Fed. Cir. 2017) 870 F. 3d 1342, at 1343-1344) where, likewise, the claims of misappropriation against the new employer did not rely upon the employee's contract with the former employer.

The appellate court also upheld the injunction against Applied, finding the trial court had a reasonable basis for granting its order.  However, it overturned the trial court’s order denying the request to stay the litigation to first permit the completion of the arbitration with Lai.  As the First District pointed out, California's Code of Civil Procedure section 1281.4 provides a “stay” in these circumstances “shall” be granted:

If a court of competent jurisdiction. . . has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court . . . shall . . . stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate. (Id., p. 12.)

Tips for practitioners

Equitable estoppel is often misapplied by counsel, not only because it is an equitable concept that relies heavily upon how the facts of a particular case are to be interpreted.  The concept is also applied in a sloppy and/or cursory way because counsel wrongly presume the concept is entirely malleable because it involves "equity;" therefore, counsel mistakenly focus more on what they believe are the sympathies in their particular case rather than the limitations of the doctrine set forth by case law.  

However, the key concept in equitable estoppel may be said to be the parameters of "estoppel" and not the broader concept of equity.

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Claim of Malpractice by Partnership Does Not "Relate-Back" to the Filing of Partner's Malpractice Claim (Engel v. Pech)

 

For purposes of the statute of limitations, a claim of attorney malpractice by a partnership is independent of a partner's prior malpractice claim 

The Second District has upheld a demurrer to an entire complaint on the grounds that such is barred by the statute of limitations because the partnership's claim against their former counsel did not "relate back" to the prior date an individual partner filed his own malpractice claim. (Engel v. Pech (September 28, 2023) B324560.)  The court further held that, although timely, the individual partner's claim was not viable since any actual damages were suffered by the partnership itself.  The Hon. Maureen Duffy-Lewis, Judge Presiding, of the Los Angeles County Superior Court sustained the defendant attorney's demurer to the entire complaint, and the individual and partnership both appealed. 

Key to this ruling was the fact the prior malpractice claim of the partner was, by way of amendment to the complaint, later expanded to include that of the partnership; as the appellate court explained:

A limited liability partnership and one of its partners retained a lawyer but limited the scope of representation to having the lawyer represent the partnership in a specific, ongoing case. After the partnership lost the case, the partner sued the lawyer for malpractice. In an amended complaint, the partnership was added as a plaintiff. The partner’s complaint was filed before the statute of limitations ran; the amendment was filed after. (Id., p. 2; original emphasis.)

It should be noted that the alleged malpractice by Pech related to his work representing an accounting partnership, Engel & Engel, LLP (referred to by the court as "the LLP") in an action against Wells Fargo.  However, individual plaintiff and partner in the LLP, Jason Engel, was not named as an individual party to the suit against the bank.

In amending the partner's claim against Pech to also include the LLP, plaintiffs claimed the amendment "related back" to the date of filing the prior malpractice claim and therefore was proper even though it was beyond the one-year time-limit.  The Second District disagreed, characterizing the LLP's claim as "independent" and noting this was not analogous to other instances where a complaint "related back" because a newly-added plaintiff was enforcing the same right as the original plaintiff:

An amendment adding a new plaintiff will not relate back to a prior complaint if the new plaintiff is “enforc[ing] an independent right” that imposes a “‘wholly distinct and different legal obligation against the defendant’” (Bartalo v. Superior Court (1975) 51 Cal.App.3d 526, 533, italics omitted (Bartalo); Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 243 (Branick)). Because the partnership’s malpractice claims against the lawyer are distinct from—and in addition to—the partner’s malpractice claim, the partnership’s claims do not relate back and are untimely. (Id., p. 2; citation omitted.)

The Second District further noted the original complaint by the partner "misleadingly alleges that Engel himself. . . was. . . the party who prosecuted the Wells Fargo litigation" even though he was not. (Id., p. 5.)

As to the claim of Engel as an individual, the Second District found that even though both Engel and the LLP itself signed the retainer agreement with Pech, only the latter suffered damages. Writing for the majority, Justice Hoffstadt found this indicated only the LLP could bring a claim against Pech, given that the malpractice involved the Wells Fargo suit:

[T]he operative complaint is. . . explicitly limited to deficiencies in Pech’s representation during the Wells Fargo litigation, [meaning] the only entity that could have suffered damages as a result of that malpractice was the LLP, not Engel. (Id., p. 17.)

Tips for practitioners

Plaintiffs and their counsel should decide at the outset whom to include in the complaint and who has what particular claim.  Counsel should be especially careful in this regard where the subject of the lawsuit is prior business dealings that are well-documented.  Where there is such a trial of documents it is difficult to argue the plaintiff missed the statutory deadline to file because they were either 1) "ignorant" of the identity of a defendant, and/or 2) not aware of their specific role in the dealings between the parties.

Nonetheless, experience teaches that some counsel appear to rely far too heavily upon the general rule of "liberality" in amending pleadings and/or the "relation back" doctrine.  These counsel wrongly assume they may add parties who have different roles in the subject transactions and, therefore lesser or greater damages, at any stage in the proceedings by simply filing an amended complaint.

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Post-trial civil procedure - Defense May Have to Pay Cost of Proof Sanctions for Failing to Stipulate to Medical Records as "Business Records" (Vargas v. Gallizzi)

 

Post-trial civil procedure - defense failure to stipulate to the authenticity of medical records as "business records" entitles plaintiffs to claim the cost of having to prove their admissibility

Division Seven of the Second Appellate District of California has upheld and reversed post-trial orders by the Hon. Graciela L. Freixes of the Los Angeles County Superior Court. (Vargas v. Gallizzi (October 13, 2023) B317540.)  Following a prior appellate opinion remanding for a new trial to consider both loss of use and future non-economic damages, plaintiffs prevailed in the second trial and the parties wrangled over who should pay what after trial.  Justice Perluss and his colleagues on the Second District panel affirmed the trial court’s award of costs to the defense based on a successful pre-trial offer to compromise, but reversed the trial court's denial of any of the requested "cost of proof" sanctions to plaintiffs, finding they were entitled to claim the reasonable cost of having to prove matters unreasonably denied by the defense.  The final result is that the defense will owe the plaintiffs $15,125 in damages, plus a to-be-determined amount relating to attorneys fees and costs, while the plaintiffs will owe the defense its allowable costs of suit, or $28,547.66, including $12,000 for a particular expert’s fees for testifying.

What are sometimes called "cost of proof" sanctions may be awarded for the pre-trial costs of proving a matter the other party will not admit 

Vargas explained California's procedure for claiming attorney fees and costs related to factual matters the other party will not admit:

During pretrial discovery a party may serve a written request that another party “admit the genuineness of specified documents, or the truth of specified matters of fact, opinion relating to fact, or application of law to fact.” (§ 2033.010.) Such requests “‘are primarily aimed at setting at rest a triable issue so that it will not have to be tried. Thus, such requests, in a most definite manner, are aimed at expediting the trial. For this reason, the fact that the request is for the admission of a controversial matter, or one involving complex facts, or calls for an opinion, is of no moment. If the litigant is able to make the admission, the time for making it is during discovery procedures, and not at the trial.’” (Id., p. 9; emphasis added but citation omitted.)

Counsel for plaintiffs made multiple attempts to have defense counsel stipulate to the admissibility of medical records, to no avail.  Indeed, defense counsel refused to stipulate that such records were "business records" under Evidence Code section 1271 and therefore twice denied requests for admissions to this effect.  The trial court ultimately settled this contested issue pre-trial by ruling most of the records were in fact "business records:" 

. . . [T]he court heard argument regarding the parties’ motions in limine. . . [and] it appears the admissibility of medical records was argued because the minute order for July 30, 2021 states, “The Court rules that any sealed subpoena records received will be considered as business records. The admissibility of said records is deferred to the time of trial.” 

 

The issue was revisited during trial when Vargas and Garcia’s counsel indicated he would use some of the medical records to refresh Vargas’s recollection during her testimony. Gallizzi’s counsel objected that Vargas could not authenticate the documents and the records contained hearsay. The court responded, “I’ve deemed them not hearsay with regards to authentication and foundation because they were provided . . . as part of the subpoenaed records.” Ultimately the medical records proffered by Garcia and Vargas were admitted into evidence at trial except for approximately 10 pages the court ruled contained hearsay within hearsay. (Id., pp. 5-6.)

After trial plaintiffs brought a motion requesting a staggering $350,000 in attorney fees and costs related to defendant's supposedly “unreasonable” denial of the requests for admissions.  The trial court denied this motion, explaining, inter alia, that the issue of the authenticity of the medical records had been decided before trial and there was therefore no need to expend attorney effort to "prove" such during the actual trial.

The Second District reversed, remanding the matter for reconsideration as to the amount of the attorney fees and costs to be awarded related to the denial of the requests for admissions.  As the appellate court explained, Code of Civil Procedure section 2033.420 does not limit its scope to what is proven "at trial," providing a post-trial award to the party who "thereafter proves the genuineness of that document or the truth of that matter.”  Consequently, a post-trial award may include attorney fees and costs incurred "pre-trial" as part of the "proof" referenced in the statute, including, as was the case in Vargas, efforts in bringing pre-trial motions.

The Vargas court explained that plaintiffs had "proven" the records were business records during the pre-trial hearing and, more to the point, the denial by the defense was not “reasonable:"

. . . [A] defendant ‘cannot be forced to admit [a] fact prior to trial despite its obvious truth. [Citation.]’ [Citation.] But the failure to do so comes with consequences, exposure to a costs of proof award.”  Gallizzi had no reasonably held good faith belief she could prevail on the merits of the business records issue. Her denial rested solely on the potential for opposing counsel’s procedural error. Accordingly, Vargas and Garcia were entitled to recover the reasonable expenses incurred in proving the medical records were business records. (Id., p. 15.)

However, the plaintiffs were not permitted to claim the cost of proving causation at trial

Predictably, counsel also did not permit defendant to admit that she caused "some injury" to either plaintiff.   However, during opening statements defense counsel stated "I believe these ladies were injured."  Nonetheless, plantiffs’ post-trial motion asked for attorney fees and costs related to having prove causation at trial.  The appellate court found the trial court and properly denied this request for “cost of proof” sanctions as the plaintiffs would have had to have proved the amount and severity of their damages no matter what the defenses admitted.

The appellate court also affirmed the award of costs to the defendant

The appellate court also affirmed, with no modifications, the substantial award of costs to the defense.  Plaintiffs rejected an offer to compromise from the defendant made pursuant to Code of Civil Procedure section 998 and apparently "beat" this offer as the verdict at the second trial was less than this offer.

Plaintiffs quibbled with these costs, arguing the fact the defense expert designation stated the cost of testimony would be $6,000 for up to four hours indicated the claimed $12,000 should be reduced; however, as the court noted, the expert at issue testified over two separate days and thus charged a $6,000 minimum each day.  The appellate court also rejected the claim the trial court abused its discretion in awarding the defense the cost of real-time court reporter transcription, explaining "[plaintiffs] have not cited any authority for the proposition that real-time transcription fees are not allowable when deemed appropriate by the trial court." (Id., p. 19.)

Tips for practitioners

This suit illustrates the effect of post-trial motions for sanctions and/or costs of suit in California, including that:

• In addition to any actual damages awarded, parties may recover from the other costs and/or sanctions and each party may therefore have a resulting award against the other; and,
• The result is that the "net" award may be to the defendant, and not the plaintiff, depending on amounts awarded by way of post-trial motion.  

This second point is illustrated in Vargas by the judgment for damages of$15,125 to plaintiffs versus the costs awarded to the defense of $28,547.66.  If the "cost of proof" sanctions are less than this amount, it appears likely the plaintiffs will owe the defendant money following this second trial.  

Practitioners should therefore treat requests for admissions, particularly those related to the introduction of evidence at trial, very seriously.  Matters that are routinely admitted, such as the authenticity and admissibility of documents, should be admitted if it would be unreasonable to deny them.  At the same time, counsel whose clients reject section 998 offers to compromise should be aware of the increasing cost of litigation, including the charges of medical experts, and should take a "ballpark" estimation of these costs, including the cost of any and all experts called by opposing parties, into account when considering whether to reject or accept a statutory offer.

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Short take-away - offering advertisers a choice as to the gender and age may violate Calif. law (Liapes v. Facebook)

Short take-away - Plaintiffs may sue under the Unruh Civil Rights Act alleging racial and age-based discrimination based upon ads Facebook does or does not show

The First District, Division Three has reinstated a class action suit against Facebook alleging violations of California's Unruh Civil Rights Act. (Liapes v. Facebook (Sept. 29, 2023) A164880) Facebook, of course, requires users to reveal their age and gender and then offers advertisers the ability to target advertisements based on data that includes such.  Plaintiffs filed a class action lawsuit alleging, inter alia, that they were offered certain advertisements for insurance based on their age but were denied seeing other advertisements based on these criteria; indeed, advertisers had no choice but to select the preferred age and gender of users and, moreover, Facebook decides whom to target with a particular ad based on algorithms that rely on age and gender.

After the trial court sustained a demurrer to the complaint, plaintiffs appealed.  The First District found the plaintiffs had properly plead a violation of California law, assuming arguendo that the allegations in the complaint were true:

Liapes satisfied these requirements [of the Unruh Civil Rights Act]. As a Facebook user, she has transacted with it.  It knows her age and gender because all users must provide such information as a condition of joining Facebook. Liapes was interested in . . . obtaining life insurance because she did not have a policy at the time. . . .  But Facebook, Liapes alleged, used its Audience Selection tool, Lookalike Audience feature, and ad-delivery algorithm to exclude her from receiving certain insurance ads because of her gender and/or age.

The alleged injury is not conjectural or hypothetical.  Liapes identified a life insurance ad that was only sent to males ages 30 to 49 because the advertiser used the Audience Selection tool. (Id., pp. 9-10; citations omitted.)

Given that this class action suit takes direct aim at the business model of Facebook (Meta) it is likely that further judicial review and/or legislation will follow.  Facebook could, of course, settle this suit but it may face similar suits in other jurisdictions based upon the theory that targeted ads violate Civil Rights laws.

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