Ride sharing service has no duty to perform background checks on all potential riders (Shikha v. Lyft)

California's Second District, Division Three, has ruled the general duty of due care one owes to another does not extend to include a duty owed by ride-share platforms to its drivers to perform "background checks" on all passengers. (Shikha v. Lyft (May 17, 2024, B321882.)

Writing for the court, Justice Adams summarized the factual and procedural background succinctly:

In February 2020, Al Shikha was working as a Lyft driver when he accepted a ride request through the Lyft app from passenger Ricky A. Alvarez.  During the ride, and without any warning or provocation, Alvarez repeatedly stabbed Al Shikha, causing lacerations to Al Shikha’s left hand and both legs.  In  April 2020, Al Shikha filed a complaint asserting three causes of action against Lyft: (1) failure to provide workers’ compensation insurance; (2) negligence; and (3) failure to provide a safe place of employment. (Id., pp. 2-3.)

The Second District explained there was no justification for imposing such a duty despite the general rule that all persons owe a duty of due care to others to act reasonably. (See, e.g., Civil Code section 1714.1.)   As the Second District opinion teaches, the statutory duty to verify the criminal record of a driver does not extend to doing so for passengers. As to any common-law duty, Shikha found no duty was owed to its own drivers even though Lyft was admittedly in a "special relationship" with these persons.  This conclusion required analysis of the factors enunciated by the Supreme Court in 1969's Rowland v. Christian, including the crucial factor of foreseeability:

To depart from the general principle that all persons owe a duty of care to avoid injuring others . . . ‘involves the balancing of a number of considerations’: ‘the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, the moral blame attached to the defendant’s conduct, the policy of preventing future harm, the extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach, and the availability, cost, and prevalence of insurance for the risk involved.’ [Citation.]” (Brown, supra, 11 Cal.5th at p. 217, citing Rowland, supra, 69 Cal.2d at pp. 112– 113; accord, Kuciemba v. Victory Woodworks, Inc. (2023) 14 Cal.5th 993, 1021 (Kuciemba).)  We consider the Rowland factors at “ ‘a relatively broad level of factual generality.’ [Citation.]” [Citation.] . . . Before analyzing the Rowland factors, we must identify the specific duty Al Shikha asserts Lyft should undertake. (Castaneda v. Olsher (2007) 41 Cal.4th 1205, 1214 (Castaneda).)  The complaint alleges Lyft has a duty to conduct “basic, inexpensive public record background checks on passengers to determine whether they pose a risk of harm to drivers (or to obtain consent from drivers that they may be transporting a known criminal).” On appeal, Al Shikha argues Lyft is required to “either warn drivers about riders with serious criminal histories[ ] or otherwise exclude such riders from its network.” 

“ ‘The most important factor to consider in determining whether to create an exception to the general duty to exercise ordinary care . . . is whether the injury in question was foreseeable.’ [Citations.]” (Regents, supra, 4 Cal.5th at p. 629.) In assessing the Rowland factors in cases involving a defendant’s duty to prevent third party criminal conduct, courts have employed a “sliding-scale balancing formula.” [Citation.]  (Id., pp. 8-10.)

Discussing cases involving the duty to prevent the criminal acts of third parties, such as Ann M. v. Pacific Plaza v. Pacific Plaza Shopping Center (1993) 6 Cal. 4th 666, the Second District explained that in deciding whether to impose a duty of due care, the "burden" of preventing the plaintiff's harm must be balanced against the effectiveness of the proposed precautions.  Here, this analysis indicated no duty of due care was owed given the proposed precaution (background checks) was both burdensome and of "dubious" effectiveness:

Al Shikha contends conducting criminal background checks on all potential rideshare passengers would entail minimal costs and would not be highly burdensome. Lyft, in contrast, asserts the obligation would impose significant financial and social burdens. Lyft argues screening each passenger would require a “huge and unwieldy infrastructure”; that it would expose Lyft to liability because there is no guarantee it would successfully identify people inclined to violence; it would be impossible for passengers to download and sign up for the app at the time a ride is needed; it would burden those with criminal histories who are not inclined to violence but still need transportation; it would unfairly discriminate against broad segments of the population; it would have an “unfair or even unlawful[ly] discriminatory effect on minorities and marginalized populations”; and it would conflict with the strong public policy of maintaining consumer privacy. As the court determined in Castaneda, we similarly conclude here that conducting criminal background checks on all rideshare passengers would be “a burdensome, dubiously effective and socially questionable obligation . . . .” (Castaneda, supra, 41 Cal.4th at p. 1217.) (Id., p. 17.)

The Shikha  court noted that not only did plaintiff fail to provide any cogent argument as to why and how a background check would prevent future injuries, but logic dictated background checks cast a very wide net, as nearly one in three adult Californians have an arrest record. (Id., p. 19.)

It should also be noted Shikha discussed the recent case of Kuciemba v. Victory Woodwork, involving the supposed duty owed by a landowner to the spouse of someone working on the land to prevent the worker's exposure to COVID-19.  The  California Supreme Court unanimously held the spouse's was limited to a workers compensation remedy.

Of course, plaintiff in Shikha argued there was a "failure to warn" of the potential harm from the violent passenger.  However, in Moses v. McKeever a visitor to a condo similarly argued they were owed the duty to be "warned" about a defect in the HOA's common area because such an injury to those entering and exiting the condo was "foreseeable."  However, the appellate court found there was no duty owed by an individual owner or tenant to warn of defects in the HOA's common area.

Analysis

When looking at both practicalities and public policy, it appears the result in Shikha could not have been otherwise.  Indeed, if the duty plaintiff sought to impose were imposed on ride-sharing services, a whole host of persons who do not have access to their own vehicle could potentially be barred from using these services.  This includes not only convicted felons but also, more broadly, those who have been arrested for a wide variety of offenses even if not ultimately charged or convicted.

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Opinion: Disrupting a University is an attack on our civilization

In his masterpiece Civilisation: A Personal View by Kenneth Clark, a 13-part television series, Mr. Clark stands in front of the Notre Dame Cathedral and says, essentially, that if even one cannot define civilization, one knows it when one sees it.  He could have easily stood in front of the Imperial Palace in Japan, the Opera House in Sydney, Angkor Wat in Cambodia, or Corcovado in Rio — for when we see something that mankind has built, something which requires both creativity, struggle, and, indeed, human genius, we know that it represents civilization in all its flaws and grandeur.

In the past few days, we have all seen students and others assaulted and even tasered, windows broken, classes and graduations canceled, and sheer hate against fellow humans based simply upon their religion and/or race.  These actions are in violation of not only University Codes of Conduct but also state and Federal laws, and, of course, the Constitutional rights of the persons against whom these “protesters” seek to bar from University campuses.

At a minimum, these spoiled and ignorant undergraduates should be arrested and, indeed, expelled and not merely suspended.  Faculty who have joined them in their hate and the accompanying attempts to shut down learning should similarly be arrested if they have violated the law and then fired.  This should occur after a public and televised hearing, not only to preserve the right to due process but also so that we may see what each individual has done to set back civilization and take us back in time to a more brutal, selfish, and hate-filled past.

No University can survive as a University with students who call for the genocide of the Jewish people, support Hamas and its rape of women and murder of children in front of their parents (and vice versa), and, indeed, who seem oblivious to the fact that their fellow Americans are still being held hostage by Hamas.

Indeed, no civilization can withstand such actions unless they are condemned in the strongest terms.

The rejoinder, of course, is that within the hate and fascist attempts to shut down other people’s points of view, there is some sort of “point” being made — a claim belied by the fact that no one should listen to anyone who attempts to occupy the public square to the exclusion of other voices.  In our common law tradition, the concept of forfeiture is relevant to both the relinquishment of rights and the concept of equity. Anyone attacking civilization forfeits any chance to change our mind.

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Bui v. Ky: Spouse of candidate not “limited purpose public figure” for purposes of defamation law

 

California’s Fourth District, Division Three, has found the spouse of someone running for office is not automatically considered a “limited purpose public figure” for defamation law, meaning the plaintiff does not have to prove “malice” to prevail. (Bui v. Ky (May 8, 2024) G062338.)  Writing for the majority, Justice Delaney explained the statements at issue:

The full scope of actions allegedly engaged in by defendants were specified in the complaint as follows: “On or about February 13, 2022, Defendant [Nam] interviewed [Ngo] on his YouTube channel. During that interview Defendants said and implied that they knew the family of [plaintiff], that she [(plaintiff)] was the daughter of a Commander of the Communist Party regime, [and] that her husband’s family and relatives were all communists. Defendants identified [plaintiff’s] father as ‘Vu Thanh’, a high ranking communist leader, a Commander, and published several photos of an older man in a communist uniform, confirmed by Defendant NGO KY as [plaintiff’s] father. Defendants further claimed that during the 2022 Tet parade, that [plaintiff] and several friends all wore red with yellow hats, just like the communist regime’s flag, and that they danced and played communist music all along Bolsa Ave.” According to the complaint, these statements were false. It elaborated: “[Plaintiff’s] father was a civil engineer who retired in 2000. He never participated in the military. The man in uniform photo does not show [plaintiff’s] father. [Plaintiff] never participated or was involved with the Communist Party. [Plaintiff] wore a red dress, symbolic of the Lunar new year, in the Tet parade. The music played was Vietnamese pop music for the young people to dance to. It was not communist music.” (Id., p. 3.)

Plaintiff brought a Special Motion to Strike based upon Code of Civil Procedure section 425.16, which permits a defendant to challenge a complaint — by providing evidence such as written declarations —  if it involves certain “protected activity” under the First Amendment and the defense shows the plaintiff can not show they will prevail.  The public policy underlying this motion is to provide a summary proceed to dispose of Strategic Lawsuits Against Public Participation or "SLAPP" suits:

“The Legislature enacted section 425.16 in response to ‘a disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances.’” (Rand Resources, LLC v. City of Carson (2019) 6 Cal.5th 610, 619.) The special motion to strike provided for in the statute is “‘intended to resolve quickly and relatively inexpensively meritless lawsuits that threaten free speech on matters of public interest.’” (Ibid.) By legislative direction, the statute is to “be construed broadly.” (§ 425.16, subd. (a).) “Litigation of an anti-SLAPP motion involves a two-step process. First, ‘the moving defendant bears the burden of establishing that the challenged allegations or claims “aris[e] from” protected activity in which the defendant has engaged.’” (Bonni v. St. Joseph Health System (2021) 11 Cal.5th 995, 1009 (Bonni).) The statute sets forth the four categories of protected activity. (§ 425.16, subd. (e).) “Second, for each claim that does arise from protected activity, the plaintiff must show the claim has ‘at least “minimal merit.”’” (Bonni, supra, 11 Cal.5th at p. 1009.) This step of the anti-SLAPP analysis “has been described as a summaryj udgment-like procedure. [Citation.] The court determines whether ‘“the plaintiff has stated a legally sufficient claim and made a prima facie factual showing sufficient to sustain a favorable judgment.”’ [Citation.] The plaintiff ‘“may not rely solely on its complaint, even if verified; instead, its proof must be made upon competent admissible evidence.”’ [Citation.] The defendant may submit evidence in support of its motion. [Citation.]  (Id., pp. 9-10.)

Judge Lee of the Orange County Superior Court granted the motion to strike and the plaintiff appealed.  The appellate court upheld the grant as to the claim for emotional distress, as the motion and opposition showed the anti-SLAPP statute applied and that plainiff's claim lacked merit.  

However, the grant of the Special Motion to Strike was reversed as to the defamation claim.  The Fourth District agreed with defendant that the anti-SLAPP law applied because the election involved the “public interest,” but found the Special Motion to Strike should have been denied as plaintiff had demonstrated her defamation claim had merit and she indeed might prevail.  

This holding was based in large part upon a rejection of defendant’s claim that plaintiff was a public figure for the limited purpose of the candidacy of her husband and, therefore, under New York Times v. Sullivan, had to show “actual malice” on the part of the defendant to prevail.  

The Bui opinion therefore teaches that whether a spouse is a “public figure” depends on the facts and not all spouses of candidates meet this test:

Where we diverge from defendants’ proffered analysis is the next step, which concerns plaintiff’s involvement in the debate. From defendants’ perspective, “[a] candidate does not run in isolation; in making [the decision to run for office] he or she brings the candidate’s family into the public eye.” To the extent this is an urge for us to find any political candidate’s family members to be limited purpose public figures simply by reason of the candidate’s choice to run for public office, we decline to so hold. Defendants do not point us to any authority for such a broad sweeping rule.  Moreover, doing so would effectively turn family members of a political candidate, including children, into public figures through no purposeful action of their own. The Supreme Court has cautioned that the finding of such involuntary public figure status “must be exceedingly rare.” (Gertz, supra, 418 U.S. at p. 345.) We find no justification for the families of political candidates, generally, to be one of those “exceedingly rare” instances. (Id., p. 13; emphasis added and footnote and citations omitted.)

Analysis 

The unstated context of this opinion is the fact that many in the Vietnamese-American community remain opposed to erasing the horrors of the communist regime in Vietnam that has ruled the country since the invasion of South Vietnam by North Vietnam following the withdrawal of United States forces.  The allegation that someone has cooperated with this murderous regime is considered highly inflammatory and therefore highly defamatory to those who risked their lives to escape Vietnam. 

 

The Fourth District made the right call here: a rule that a family member of a political candidate is a political figure simply because they are related to the candidate would greatly expand the concept of who is and is not a “public figure” and, therefore, must meet a much higher bar to prove defamation.  

This, of course, comports with public policy, as such 1) encourages candidacy for political office, and 2) discourages the making of false statements as to the family of a candidate.

Finally, this case again shows the importance of knowing when and when not to file a Special Motion to Strike as opposed to simply filing an ordinary demurrer challenging the complaint on its face.  Unlike a demurrer, a Special Motion to Strikeis is decided upon evidence, and not simply the language in the complaint, and in many circumstances, this is a great advantage to the moving defendant.  However, such a motion is also more "high stakes" as, unlike a demurrer, under section 426.15 attorney fees may be awarded to the prevailing party upon a Special Motion to Strike.

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Breaking news - Supreme Court rules legislative bodies cannot "take" private property by way of untethered "fees" (Sheetz v. County of El Dorado)

United States Supreme Court:  legislative bodies cannot "take" property by way of unlimited "fees" 

A recent Supreme Court opinion illustrates how lower courts often get it completely wrong, despite apparently clear precedent, and as this case shows, this is particularly likely to occur when courts get swept along with a judicial trend.  Such an unfortunate trend is interpreting the Fifth Amendment's bar against taking property without just compensation so narrowly as to permit the government to do virtually whatever it wants to a landowner's property, no matter logic or the law. 

In Sheetz v. County of El Dorado, No. 22–1074 (April 12, 2024), a unanimous Supreme Court found California courts had it entirely wrong when they found (the term "rubber stamp" comes to mind) an outrageous "fee" a landowner must pay to build a home -- having no relationship to the services provided or the cost of the project to local government -- did not implicate the bar against the "taking" of private property. The practical effect of ignoring the full effect of the Firth Amendment is that "fees" enacted by a legislative body have no upward limit and may take five, ten, or more percent of the value of the property, and a property owner may not even bring a Fifth Amendment claim.

The opinion authored by Justice Barett found these courts had misapplied prior precedent.  As the syllabus to the opinion sets forth, the issue was whether a California county could impose a $23,420 "traffic impact fee" upon an ordinary residential landowner unlucky enough to own a lot in El Dorado County and who wished to build a home:

As a condition of receiving a residential building permit, petitioner George Sheetz was required by the County of El Dorado to pay a $23,420 traffic impact fee. The fee was part of a “General Plan” enacted by the County’s Board of Supervisors to address increasing demand for public services spurred by new development. The fee amount was not based on the costs of traffic impacts specifically attributable to Sheetz’s particular project, but rather was assessed according to a rate schedule that took into account the type of development and its location within the County. Sheetz paid the fee under protest and obtained the permit. He later sought relief in state court, claiming that conditioning the building permit on the payment of a traffic impact fee constituted an unlawful “exaction” of money in violation of the Takings Clause. In Sheetz’s view, the Court’s decisions in Nollan v. California Coastal Comm’n, 483 U. S. 825, and Dolan v. City of Tigard, 512 U. S. 374, required the County to make an individualized determination that the fee imposed on him was necessary to offset traffic congestion attributable to his project. The courts below ruled against Sheetz based on their view that Nollan and Dolan apply only to permit conditions imposed on an ad hoc basis by administrators, not to a fee like this one imposed on a class of property owners by Board-enacted legislation. 84 Cal. App. 5th 394, 402, 300 Cal. Rptr. 3d 308, 312.

In other words, the trial court, the Third Appellate District of California, and the California Supreme Court (which denied review) did not give full effect to precedent such as Nollan v. California Coastal Comm’n, 483 U. S. 825 (1987), and Dolan v. City of Tigard, 512 U. S. 374 (1994) indicating a fee with no nexus to the effect of the actual development is a "taking."  As Justice Barret wrote:

The California Court of Appeal rejected that argument because the traffic impact fee was imposed by legislation, and, according to the court, Nollan and Dolan apply only to permit conditions imposed on an ad hoc basis by administrators. That is incorrect. The Takings Clause does not distinguish between legislative and administrative permit conditions. (Sheetz., p. 14.)

Justice Barret and the remaining eight justices all agreed the fact a fee was imposed by a legislative body, rather than being imposed by a regulatory power, did not insulate said fee from scrutiny.  Simply put, the Bill of Rights applies equally to the executive and legislative branches of government.  

Therefore, the majority opinion explained the proper test for considering whether a "fee" is a taking:

Our decisions in Nollan and Dolan address this potential abuse of the permitting process. There, we set out a two-part test modeled on the unconstitutional conditions doctrine. See Perry v. Sindermann, 408 U. S. 593, 597 (1972) (government “may not deny a benefit to a person on a basis that infringes his constitutionally protected interests”). First, permit conditions must have an “essential nexus” to the government’s land-use interest. Nollan, 483 U. S., at 837. The nexus requirement ensures that the government is acting to further its stated purpose, not leveraging its permitting monopoly to exact private property without paying for it. See id., at 841. Second, permit conditions must have “‘rough proportionality’” to the development’s impact on the land-use interest. Dolan, 512 U. S., at 391. A permit condition that requires a landowner to give up more than is necessary to mitigate harms resulting from new development has the same potential for abuse as a condition that is unrelated to that purpose. See id., at 393. This test ap- plies regardless of whether the condition requires the land- owner to relinquish property or requires her to pay a “monetary exactio[n]” instead of relinquishing the property. Koontz, 570 U. S., at 612–615. (Id., p. 6.)

Analysis

The degree to which the lower courts "got it wrong" is stunning, and, in particular, the narrow reading of Nollan/Dolan is quite troubling.  As to the failure of the California Supreme Court to show any interest in preventing local government from unlawfully taking private property, the fact it declined to review an appellate opinion finding one of the protections of the Bill of Rights does not apply simply because it was the legislature that violated a citizen’s rights speaks for itself.

Though the opinion was unanimous, it leaves open the question of whether a particular fee is permissible, to wit, whether a particular fee meets constitutional muster, i.e, whether it has an  "“‘essential nexus’” to the government’s land-use interest and has “‘rough proportionality’” to a property’s impact on that interest." (Concurrence by J. Gorsuch, p. 1.)

Of course, if a legislature or similar body may impose an unlimited "fee" upon someone wishing to build a single home, under the rubric that limitations on such fees do not apply to legislative enactments, then the Fifth Amendment "takings clause" has no effect as long as the law classifies the taking as a legislatively-mandated "fee."

As noted in his concurrence, Justice Gorsuch is of the opinion whether a fee is a "taking" does not depend upon whether it is imposed upon a single property or a class of properties as the same constitutional rules apply to the rights of the "many" as they do to the "few."  Justice Gorsuch notes the majority opinion leaves this question for another day:

The Court notes but does not address a separate question: whether the Nollan/Dolan test operates differently when an alleged taking affects a “class of properties” rather than “a particular development.” (Id.)

Indeed, the concurrence of Justice Kavanaugh, to which Justices Kagan and Jackson joined, recognizes this issue has not been resolved.  However, Justice Kavanaugh takes the view the Sheetz opinion does not prohibit local government from tailoring land-use fees based upon the effect of an entire development in toto rather than requiring that the fee have a nexus to the effect of a single property owner.

Finally, the role of the Pacifica Legal Foundation must be noted. As did the Cato Institute, Pacifica filed an amicus curiae brief.  If it were not for the efforts of his own counsel and these "friends of the court, Mr. Sheetz might still be stuck paying a nearly $24,000 "traffic fee" to build what the Supreme Court termed "a modest prefabricated house" for his wife and grandson.

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Res ipsa loquitur does not apply to ordinary negligence claim (Howard v. Accor)

 

Hotel operator not liable for showerhead malfunction under res ipsa loquitur theory

The Second District, Division Eight has affirmed a grant of summary judgment by the Hon. Jill Feeney, Judge Presiding, of the Los Angeles County Superior Court. (Howard v. Accor Management (April 3, 2024) B320603.)  The plaintiff alleged two theories of negligence, claiming that:

As Monique Howard went to shower during her hotel stay, the handheld shower head fell apart. Howard cut herself and fell. Later she sued the hotel for negligence and premises liability. The trial court granted summary judgment. We affirm because Howard failed to mount a triable issue of material fact on the key issue of notice and failed to establish the applicability of a venerable but inapt doctrine—res ipsa loquitur. (Id., pp. 1-2.)

Specifically, plaintiff alleged the shower head malfunctioned not after she used it in the morning but after she did so later in the day, and thus only after her hotel room had been cleaned, and that on this second use the shower head fell apart:

As soon as I stepped in the shower and turned the water on I noticed that it was spraying me in the face, which was a little odd for me because I had took a shower earlier that day. I was -- kind surprised me, plus I had full makeup on. It was spraying me in my face. When that happened I went to take the shower off of the shower handle and that is when it just dismantled and fell apart.” (Id., p. 2)

Defendant Accor moved for summary judgment, which the trial court granted. The appellate court affirmed, finding plaintiff had not shown there was a triable issue as to the issue of whether the hotel had any notice of the defect in the shower head as plaintiff could not show either actual or constructive notice.

The appellate court also found that plaintiff could not show the doctrine of "res ipsa loquitur," Latin for "the thing speaks of itself," applied.  This doctrine may be used to show the negligence of the defendant from the factual scenario, i.e., that it was "more likely than not"  defendant was negligent, without the need to provide more specifics as to what the defendant actually did that breached the standard of care.  The Second District rejected this argument, noting the plaintiff had not proven the elements of the doctrine because, inter alia, the trial court had sustained objections to the proferred testimony of the plaintiff's safety expert, Brad Avrit, on the grounds his statements involved improper legal opinion.

Importantly, the court noted res ipsa did not apply because the facts did not show it was more likely the defendant's negligence, as opposed to some other cause, caused the injury:

Howard’s papers ask us to make many leaps of logic to infer it was more likely than not that the housekeeper’s negligence caused the shower wand to break. [Citation.] Howard’s deposition testimony leads to reasonable inferences the cause was something else: the shower head sprayed Howard because it was facing her, and Howard’s quick reach for the wand or an inherent defect could have caused its dismantling. There is no inconsistency between these causes and Howard’s and her boyfriend’s statements about the care they took with their earlier showers. The evidence does not show the shower wand was broken before Howard grabbed it. When describing the incident at her deposition, Howard did not say the wand was sharp or broken then. Nor does Howard’s declaration say she was cut before the wand fell apart. (Id., pp. 7-8.)

Conclusion and analysis

The opinion of Justice Wiley affirmed the grant of judgment in favor of hotelier Accor, finding the trial court made no errors of law and that the rulings upon the objections to Mr. Avrit's opinions were well within that court's sound discretion.  The key portion of the opinion is the discussion of res ipsa loquitur, which the trial court found was only applicable to show negligence when there was evidence, and not mere speculation, to show that all of its elements applied.  These elements, which the Howard court strictly construed, were summarized at pages nine and ten: 

. . . [A]s our Supreme Court has explained it, “certain kinds of accidents are so likely to have been caused by the defendant’s negligence that one may fairly say ‘the thing speaks for itself.’ ” (Brown v. Poway Unified School Dist. (1993) 4 Cal.4th 820, 825.) The doctrine has three requirements: (1) the accident was of a kind that ordinarily does not occur absent someone’s negligence; (2) the instrumentality of harm was within the defendant’s exclusive control; (3) the plaintiff did not voluntarily contribute to the harm. (Id. at pp. 825–826 & 836.)

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Hot topic -- Posting a Bond to Stay Enforcement of Judgment Upon Appeal

Why a Civil Defendant May Need to Post a Bond to Appeal

A certain high-profile defendant has been in the news lately in regards to posting a bond to stay enforcement of a large judgment, so large it is likely (though far from certain) that it will be reduced on appeal.  I will not name the defendant but suffice it to say that the coverage of this issue has evidenced more political bias than understanding of the legal concepts involved.  A review of California law involving appeals and enforcement of judgments may therefore be helpful.

A judgment creditor may generally start enforcing the judgment upon notice of entry of the judgment

The plaintiff or other party with a monetary judgment in their favor becomes the judgment creditor while the party with a monetary judgment against them is a judgment debtor.  Once the Clerk of the Court has "entered" a judgment in the record, said judgment may generally be enforced up to ten years from its date.  Such enforcement may begin immediately unless, for example, the trial court grants a stay or the judgment debtor chooses one of the options below. 

 

As a practical matter, there is usually some delay in enforcement as a judgment creditor should obtain one or more "abstracts of judgment" from the Clerk of the Court in the county where the judgment has been entered.  The creditor must then "record" these in any counties where the debtor wishes to enforce the judgment by, for example, filing a lien.

General Rule: judgments are stayed pending filing a notice of appeal

A defendant in a civil suit generally has 60 days after being given proper notice of entry of judgment to file a notice of appeal. (California Rules of Court, rule 2.)  As an aside, there is a complex series of extensions related to filing post-trial motions such as a motion for a new trial.

Judgments are generally "stayed" upon filing an appeal, meaning they cannot be enforced, but, as discussed below, there are exceptions, the most important involving the enforcement of judgments for sums of money. (Code of Civil Procedure section 916; Code of Civil Procedure section 917.1.)

Exception:  monetary judgments

Crucially, monetary judgments are not automatically stayed pending an appeal. (Code of Civil Procedure section 917.1)  This is for the obvious reason that a judgment debtor would then have an incentive to appeal even if there is no merit to the appeal; such a delay, of course, may make it less likely the judgment creditor will later be able to find the judgment debtor's assets.

There is an exception to this exception, though.  Judgment amounts that are for "costs of suit" only are stayed despite the rule noted above.  If a party makes a successful offer under Code of Civil Procedure section 998, i.e., a reasonable offer to compromise is made and then rejected, the enforcement of costs awarded to a successful offeror under section 998 is stayed upon filing a notice of appeal. (Id.)

How to appeal without paying the judgment creditor 

A judgment debtor is subject to attempts to seize their assets, garnish their wages, or place a lien upon their accounts if the judgment is not stayed pending appeal.  Because it may be difficult to recover funds once paid to the judgment debtor, the judgment creditor should explore the options below to avoid payment of the judgment while the appeal is pending.

1. Posting a bond or undertaking by an "admitted" or "personal" surety

This is most often done by posting a bond by "an admitted surety insurer," meaning a "surety" - someone who will post the bond and then be responsible for payment of the judgment if the appeal is not successful - that is licensed in California. (Id.)  The bond amount would be 150% of the judgment. (Id.)  The additional amount beyond the judgment itself may be necessary to cover the "simple interest" upon the judgment at the annual rate of ten percent.

It goes without saying that an admitted surely will require payment in some percentage of the bond or undertaking to provide this service.

The posting of a bond or undertaking may also be done by a friend or relative, i.e., a "personal surety." (Id.)  The amount posted by the personal surety must be 200% of the judgment. (Id.)  

The requirements for being a personal surety are found in Code of Civil Procedure section 995.510 and include 1) being a resident of California, and 2) having net assets in California that exceed 200% of the judgment.  Neither an attorney nor the "principal," the judgment debtor, may act as a personal surety. (Id.) 

2. Depositing money with the Court

If one cannot obtain a bond or undertaking and nevertheless wishes to appeal, does one have to pay the judgment directly to the creditor to avoid seizure of assets?  The answer is no:  the judgment debtor may deposit money or negotiable securities directly with the Court. (Code of Civil Procedure section 917.1)

The complete text of section 917.1 is quoted below:

917.1. (a) Unless an undertaking is given, the perfecting of an appeal shall not stay enforcement of the judgment or order in the trial court if the judgment or order is for any of the following:
(1) Money or the payment of money, whether consisting of a special fund or not, and whether payable by the appellant or another party to the action.
(2) Costs awarded pursuant to Section 998 which otherwise would not have been awarded as costs pursuant to Section 1033.5.
(3) Costs awarded pursuant to Section 1141.21 which otherwise would not have been awarded as costs pursuant to Section 1033.5.
(b) The undertaking shall be on condition that if the judgment or order or any part of it is affirmed or the appeal is withdrawn or dismissed, the party ordered to pay shall pay the amount of the judgment or order, or the part of it as to which the judgment or order is affirmed, as entered after the receipt of the remittitur, together with any interest which may have accrued pending the appeal and entry of the remittitur, and costs which may be awarded against the appellant on appeal. This section shall not apply in cases where the money to be paid is in the actual or constructive custody of the court; and such cases shall be governed, instead, by the provisions of Section 917.2. The undertaking shall be for double the amount of the judgment or order unless given by an admitted surety insurer in which event it shall be for one and one-half times the amount of the judgment or order. The liability on the undertaking may be enforced if the party ordered to pay does not make the payment within 30 days after the filing of the remittitur from the reviewing court.
(c) If a surety on the undertaking pays the judgment, either with or without action, after the judgment is affirmed, the surety is substituted to the rights of the creditor and is entitled to control, enforce, and satisfy the judgment, in all respects as if the surety had recovered the judgment.
(d) Costs awarded by the trial court under Chapter 6 (commencing with Section 1021) of Title 14 shall be included in the amount of the judgment or order for the purpose of applying paragraph (1) of subdivision (a) and subdivision (b). However, no undertaking shall be required pursuant to this section solely for costs awarded under Chapter 6 (commencing with Section 1021) of Title 14.

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