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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Short take away - Policy does not cover COVID-19 losses as there is no direct physical loss or damage (Endeavor v. HDI Global)

Short take away - Second District sides with insurer as to much-litigated COVID coverage issues currently before the California Supreme Court

The Second District, Division Two has ruled in favor of an insurance company denying coverage to an entertainment entity for losses from the COVID-19, or SARS CoV-2, virus. (Endeavor v. HDI Global (Sept. 21, 2023) B323865) Endeavor had a commercial liability insurance policy with HDI which required that, for there to be coverage:

(1) there be an “[i]nsured physical loss or damage” to some property, and (2) this physical loss or damage to some property “occur within [1 or 10] statute mile[s] from [Endeavor’s] premises. . . .

Endeavor maintained the inclusion of the phrase "event" in another clause in the policy obviated the requirement that all losses include "physical loss of damage" to tangible property and sued insurer HDI when coverage was denied.  A demurrer challenged Endeavor's entire complaint, and this demurrer was sustained, without leave to amend, by the Hon. Elaine Lu, Judge of the Los Angeles County Superior Court.

Upon appeal Justice Hoffstadt wrote an opinion affirming the trial court and interpreting the policy as requiring not merely an event but also actual physical damage.  As the Endeavor opinion noted at the outset, issues as to whether 1) loss of property, rather than mere loss of use of property, is required for coverage, and 2) whether the absorption of COVID-19 on the surface of the property qualifies for coverage as a "loss," are both currently pending before the California Supreme Court:

This question is one on which the Courts of Appeal have split, and is pending before our Supreme Court in John’s Grill, Inc. v. The Hartford Financial Services Group, Inc. (2022) 86 Cal.App.5th 1195 (John’s Grill), review granted Mar. 29, 2023, S278481, and Another Planet Entertainment, LLC v. Vigilant Ins. Co. (9th Cir. 2022) 56 F.4th 730, request for certification granted Mar. 1, 2023, S277893. Until that Court provides guidance, we side with the vast majority of cases holding that direct physical loss or damage to property, rather than mere loss of the property’s use, is a prerequisite for coverage. We further hold that two of the clauses in the policy here—namely, extension clauses dealing with orders by civil authorities and with impediments to access—do not, by their addition of the word “event,” eliminate the requirement of direct physical loss or damage to property.

Second, has “direct physical loss or damage to property” been sufficiently pled where, as here, the policy holder alleges that the virus that causes COVID-19 has either been deposited onto or “adsorbed” to the surface of the policy holder’s property? The Courts of Appeal have split on this question as well, and that question is pending before our Supreme Court in Shusha, Inc. v. Century-National Ins. Co. (2022) 87 Cal.App.5th 250 (Shusha), review granted Apr. 19, 2023, S278614. Until that Court provides guidance, we side with those cases holding that the ephemeral existence of COVID-19 or its predecessor virus on property does not constitute “direct physical loss or damage to property” as a matter of law. (Id., pp. 2-3.)

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Short take-away - Website is not a public "place" subject to the ADA and the Unruh Act (Martin v. Thi E-Commerce)

Short take-away - A website with no physical location cannot be sued for failure to fully implement screen reading for blind visitors

Plaintiffs admittedly seek out websites that are not fully accessible to the disabled and therefore sued a website unrelated to the entrance to any physical location, i.e., a "stand alone" e-commerce website.  They alleged the website was not fully compatible with screen-reading technology to assist blind visitors, resulting in a violation of California's Unruh Act barring discrimination based on disability.  More specifically they argued the website is a place of "public accommodation" under the Federal Americans with Disabilities Act ("ADA") and compatibility with screen reading technology was therefore required.

Acknowledging that both Federal and California courts were split as to how to apply the statutory language "place" to a website, the Fourth Appellate District, Division Three, held that a site that exists purely in cyberspace was not a "place" as fined by the ADA. (Martin v. THI Commerce (September 13, 2023) G061234.) 

Acting Presiding Justice Sanchez wrote for the majority and interpreted the phrase "place of public accommodation," as defined in the Americans with Disabilities Act, as excluding websites that have no relation to any physical location.  Therefore, a website not required for entrance to a physical location (in contrast to a website used to make entrance reservations) is not subject to the provisions of the ADA as "the ADA unambiguously requires a physical location." (Martin, p. 2.)  The demurrer sustained by the Hon. Theodore R. Howard of the Orange County Superior Court as to the entire complaint was therefore upheld by the Fourth District.

Justice Delaney dissented, noting that Mirriam Webster's Collegiate Dictionary (2003) provides that "'Place’ includes. . . ‘an indefinite region or expanse.'"  The dissent argued the intent of the ADA was to be applied broadly and the examples given as to places of public accommodation in the statute were meant to be examples only and should not limit its application to future technology. 

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Short take-away - Animal control must release, rather than euthanize, dogs (Santa Paul Animal Recue v. County of LA)

 

Short take-away - Animal Control does not have discretion to refuse to release dogs to pre-approved animal rescue group

The Second Appellate District, Division Five, has held that under California statute the Los Angeles County Animal Control Dept. does not have the discretion to refuse to release a dog to an animal rescue group. (Santa Paul Animal Rescue v. County of Los Angeles (August 21, 2023) B318954.)  Plaintiff animal rescue group wanted to adopt dogs which animal control defined as "unadoptable" due to behavioral problems.  Plaintiff filed a Petition for a Writ of Mandate with the Los Angeles County Superior Court, and Judge James C. Chalfont entered an order of dismissal following a demurrer by the County.  

Writing for the court, Justice Moor explained that while the County could decide who was an approved animal rescue organization, once they approved the organization they had no discretion to refuse to release a dog to it rather than proceed with euthanization.  The Hayden Act, and, in particular, Food and Agriculture Code section 31108, et seq., provide for what it termed a "ministerial duty" to release a dog whether or not the dog has been determined to be adoptable.  

Simply put, as long as the animal rescue organization has been approved by the County -- and the County does indeed have discretion in initially approving animal rescue organizations --  animal control has no discretion to refuse to release an animal to such an organization.  The only exception is for animals who are "irremediably" suffering from illness or injury.  This result comports with California public policy that all "adoptable" dogs be adopted.

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Notwithstanding Federal admiralty law, California worker’s compensation Law applies to Injury at yacht club (Ranger v. Alamitos Bay)

State courts have concurrent tort jurisdiction under admiralty and maritime law but plaintiff is limited to worker’s compensation recovery 

Plaintiff Ranger fell at the Alamitos Bay Yacht Club in Long Beach, California, while lowering a boat into the water.  He sued in state court but his tort claims were dismissed as worker's compensation was determined to be his exclusive remedy. (Ranger v. Alamitos Bay Yacht Club (September 6, 2023) B315302.)  Specifically, the Hon. Mark C. Kim of the Los Angeles County Superior Court sustained, without leave to amend, a demurer on the grounds that plaintiff Ranger could not state a tort claim in California Superior Court.  The Second District, Division Eight, affirmed the trial court but held it did not need to decide the issue of whether or not admiralty jurisdiction applied.

As set forth in both the Constitution and maritime statutes [1], Federal courts have exclusive jurisdiction over certain claims.  At the same time, state courts may adjudicate in personam “maritime claims” as they have “concurrent jurisdiction” over such suits. (Id., p. 2.)  

As the Ranger court explained, this means the issue of whether admiralty jurisdiction applies is “supernumerary,” or excess, to deciding whether California worker’s compensation is the exclusive remedy for a worker such as Ranger injured at a Yacht Club. (Id.)

This is because Ranger was an "employee" excluded from "maritime jurisdiction" under 1984 amendments to the Longshoremen’s and Harbor Worker's Act (“Longshore Act”) found at 33 U.S.C. section 902(3) and (3)(b).  This act established Federal worker’s compensation for what Ranger termed “maritime employment.” (Ranger, p. 3, citing 33 U.S.C. sections 902 and 905.)  More specifically, workers at a “club” are defined as such “employees,” as discussed in more detail below. 

In terms of interpreting this statute vis a vis common law precedent, Ranger explained that while what it called “admiralty courts” [2] are ostensibly “common law” courts, they look primarily to legislative enactments for guidance. (Ranger, p. 3; emphasis deleted.)  At page three, Ranger therefore summarized what it called “admiralty law" including "general maritime law:"

To set out our analysis in more detail, we begin by defining admiralty law. The Constitution implicitly directed courts sitting in admiralty to proceed as common law courts. Where Congress has not prescribed specific rules, these courts developed an amalgam of traditional, modified, and new common law rules. That amalgam is the general maritime law, which is no longer the exclusive province of federal judges. Congress and the states legislate extensively in these areas. When exercising their common law authority, admiralty courts look primarily to legislative enactments for policy guidance. (Citations omitted.)

Key to deciding Ranger were the 1984 amendments to the Longshore Act.  This act excluded many persons defined as an “employee” from Federal worker’s compensation, expressly providing the employee of a “club” is such an excluded employee:

In 1984, Congress responded by introducing a degree of clarity: Congress sharpened the Longshore Act’s focus to exclude employees who, although they happened to work on or next to navigable waters, lacked a sufficient nexus to maritime navigation and commerce. In response to the experiences of many witnesses, Congress adopted what it called a “case-specific approach.”

We now quote the textual result: the pertinent provision— subsection three of section 902 of the Longshore Act—as it stands after the 1984 amendments. Our italics highlight key words.

“The term ‘employee’ means any person engaged in maritime employment, including any longshoreman or other person engaged in longshoring operations, . . . but such term does not include—

. . . 

 “(B) individuals employed by a club, camp, recreational operation, restaurant, museum, or retail outlet. . .  (Ranger, p. 4-5; original emphasis.)

The Second District therefore disregarded oft-cited Federal common-law precedent that did not adequately address the 1984 language quoted above even though such cases have not been expressly overruled by Federal courts.  These included Green v. Vermilion Corp. (5th Cir. 1998) 144 F. 3d 332, and Southern Pacific Co. v. Jensen (1917) 244 U.S. 205, the Ranger court noting the later featured a “celebrated” dissent by Justice Oliver Wendell Holmes.

Justice Wiley, writing for the Ranger court, succinctly summed up the court’s holding that, pursuant to California’s Labor Code sections 3351 and 3600, Ranger’s remedy was limited to a worker’s compensation claim:  

 . . . California’s workers’ compensation law is Ranger’s exclusive remedy. Congress in 1984 decreed this state law aptly covers his situation. A core part of the state workers’ compensation bargain is that injured workers get speedy and predictable relief irrespective of fault. In return, workers are barred from suing their employers in tort. The trial court correctly dismissed Ranger’s tort suit against his employer. (Ranger, p. 13.)

Tips for practitioners

Those prosecuting or defending tort claims should remember the concurrent jurisdiction of state courts in regard to a personal injury involving “navigable waters” which may fall under Federal Maritime Law.  They should likewise note that despite what their law school professors may have stressed as to the supremacy of Federal law, the modern — though by no means recent — trend is to recognize “concurrent” state court jurisdiction as to personal injuries even if the claim would otherwise fall under admiralty law.  

At the same time, Ranger reminds us that tort claims that otherwise fall under this “concurrent” jurisdiction and might otherwise be decided by a state court may be pre-empted by worker’s compensation exclusivity.  Counsel on both sides should therefore look to the Longshore Act, as amended in 1984, and their state law to determine if such a tort claim is instead within the exclusive purview of the worker’s compensation scheme in their state.

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1 — Article Three, Section Two of the United States Constitution states in part:

The judicial power shall extend to all cases, in law and equity, arising under this Constitution, the laws of the United States, and treaties made, or which shall be made, under their authority;--to all cases affecting ambassadors, other public ministers and consuls;--to all cases of admiralty and maritime jurisdiction;--to controversies to which the United States shall be a party;--to controversies between two or more states;—between a state and citizens of another state;--between citizens of different states;--between citizens of the same state claiming lands under grants of different states, and between a state, or the citizens thereof, and foreign states, citizens or subjects. (Emphasis added.)

By virtue of the Judiciary Act of 1989, Federal Courts have exclusive jurisdiction over admiralty and maritime Law claims but state courts retain their own jurisdiction over common law claims:

The district courts shall have original jurisdiction, exclusive of the courts of the States, of . . . [a]ny civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled. (28 U.S.C. section 1333(1); emphasis added.)

2 — While the terms “admiralty” and “maritime” are often used interchangeably, the Constitution expressly gives Federal courts jurisdiction over admiralty "and" maritime law. (See note one.)  "Maritime law" may be said to have global application and encompasses international waters, while "admiralty law" encompasses commercial maritime activities and therefore includes disputes involving coastal areas and inland waterways which may be defined as “navigable waters.”

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