CALIFORNIA SUPREME COURT

Arbitration

Quach v. Cal. Commerce Club, Inc. (2024) _ Cal.5th _ , 2024 WL 3530266: The California Supreme Court reversed the Court of Appeal decision which had reversed the trial court’s decision denying defendant’s motion to compel arbitration of plaintiff’s complaint alleging wrongful termination, age discrimination, retaliation, and harassment. The trial court denied the motion to compel arbitration concluding that plaintiff had shown he would suffer prejudice if arbitration was compelled. The Court of Appeal disagreed with the trial court, finding that defendant did not waive its right to compel arbitration and concluding the trial court’s finding that plaintiff had shown prejudice was not supported by substantial evidence. Two weeks after the Court of Appeal’s decision, the United States Supreme Court issued Morgan v. Sundance, Inc. (2022) 596 U.S. 411 (Morgan), holding that federal law does not require a showing of prejudice to establish waiver of the right to arbitrate. (Id. at pp. 413–414.) Because the California law requiring a showing of prejudice had been based upon earlier federal case law that was reversed by Morgan, the California Supreme Court abrogated the prejudice rule in light of Morgan and reversed the Court of Appeal’s decision. (July 25, 2024.)   

Torts

Downey v. City of Riverside (2024) _ Cal.5th _ , 2024 WL 3491142: The California Supreme Court reversed the Court of Appeal’s order affirming the trial court’s orders sustaining defendants’ demurrer, without leave to amend, to plaintiff’s complaint alleging negligence under Dillon v. Legg (1968) 68 Cal.2d 728 (Dillon). Plaintiff, the mother of daughter Jayde Downey, was giving driving directions to her daughter over a cell phone and heard the event when her daughter was severely injured in a car crash. The trial court, and later the Court of Appeal, concluded that plaintiff could not recover emotional distress damages against the defendants unless at the time of the crash she was aware of a causal connection between her daughter’s injuries and the defendants’ alleged negligence in maintaining the intersection. The California Supreme Court disagreed, concluding that under Dillon it is the awareness of an event that is injuring the victim — not awareness of the defendant’s role in causing the injury — that matters. Neither precedent nor considerations of tort policy supported requiring plaintiffs asserting bystander emotional distress claims to show contemporaneous perception of the causal link between the defendant’s conduct and the victim’s injuries. (July 22, 2024.)

CALIFORNIA COURTS OF APPEAL

Attorney Fees

Dickson v. Mann (2024) _ Cal.App.5th _ , 2024 WL 3421751: The Court of Appeal affirmed the trial court’s order denying the third party claim of law firm Higgs, Fletcher & Mack LLP (HFM) where it claimed ownership of $585,000 in funds it received from HFM client and defendant Jack Mann pursuant to a flat fee agreement for future legal representation that HFM entered into with defendant, and its denial of HFM’s motion for reconsideration. After defendant stipulated to the entry of a $12 million judgment in favor of plaintiff, judgment was entered on August 8, 2022. On August 22, 2022, plaintiff served HFM with a notice of levy for any money it was holding in trust for defendant, and HFM later filed its third party claim. The trial court properly rejected plaintiff’s claim that the funds were still defendant’s as long as they remained in the client trust account. The trial court properly denied the third party claim because HFM presented no evidence that it had earned the flat fee. HFM argued that the flat fee was earned once it was deposited. However, Rule 1.5(d) of the California Rules of Professional Conduct clearly provides that a flat fee is not earned until services are provided. The trial court also properly denied the motion for reconsideration. (C.A. 4th, July 18, 2024.)

Civil Code

Medina v. St. George Auto Sales, Inc. (2024) _ Cal.App.5th _ , 2024 WL 3548620: The Court of Appeal affirmed the trial court’s order overruling defendants’ demurrer to plaintiff’s complaint, and its later denial of a motion for summary judgment and a motion for nonsuit. Plaintiff purchased a used car and sued defendants asserting a claim under the Consumer Legal Remedies Act (the CLRA; Civ. Code, § 1750 et seq.) for misrepresenting that the car’s engine was properly functioning and concealing extensive repairs to the car’s engine to induce plaintiff into purchasing the car. Plaintiff and defendants settled the case and agreed to a stipulated judgment after the jury concluded that plaintiff had timely brought his action within three years after discovering defendant’s conduct. The settlement allowed defendants to appeal the issue of whether plaintiff’s complaint was untimely because it was not filed within the three-year statute of limitations under the CLRA. (See § 1783.) Defendants argued that the discovery rule does not apply the CLRA’s statute of limitations. Finding no case law on this point, the Court of Appeal concluded that the discovery rule applies to the CLRA’s statute of limitations. All of defendants’ other arguments were rejected. (C.A. 4th, July 26, 2024.)

Saurman v. Peter’s Landing Property Owner, LLC (2024) _ Cal.App.5th _ , 2024 WL 3548509: The Court of Appeal reversed the trial court’s orders granting defendant’s motion for summary judgment, and granting defendant’s motion for sanctions against plaintiffs’ attorney. Plaintiff husband, the successor in interest of his disabled wife who was allegedly killed by an unlawful access barrier in a restaurant, brought action against the current restaurant owner and the entity that previously owned the restaurant when plaintiff’s wife died, alleging violations under Americans with Disabilities Act’s (ADA) public accommodation provision, and violations of state’s disability access laws (the Unruh Act and the Disabled Persons Act (DPA). The trial court granted defendant’s motion for summary judgment as to the ADA cause of action, concluding that plaintiff husband lacked standing to bring a lawsuit for injunctive relief. It granted defendant’s summary judgment motion as to the state causes of action (Unruh Act and DPA) because plaintiff submitted no evidence to show any act, omission, or error by defendant current owner in relation to the action. Finally, the trial court granted the motion for sanctions, ordering plaintiff’s attorney to pay defendant $100,000 for pursuing what the trial court found to be frivolous claims. The Court of Appeal disagreed on each issue. It concluded that plaintiff husband had standing to commence an ADA claim on his deceased wife’s behalf in the superior court. It concluded that the Unruh Act and the DPA allowed plaintiff husband to seek injunctive relief from the current owner defendant. Finally, the Court of appeal concluded that the ADA, Unruh Act, and DPA claims that were supported by facts developed at the summary judgment stage were arguably legally meritorious and the trial court erred by imposing the attorney sanctions award. (C.A. 4th, July 26, 2025.)

Limited Liability Companies

Camden Systems v. 409 North Camden (2024) _ Cal.App.5th _ , 2024 WL 3506697: The Court of Appeal affirmed the trial court’s order granting defendant’s motion for summary judgment in plaintiff’s action seeking declarations that certain actions taken by members of defendant, including distributions to the members, were invalid and seeking return of the distributed funds. The trial court properly concluded that while some of the actions taken by its members at the company’s February 2021 annual meeting were invalid in light of defective notice of the meeting, at the February 2022 annual meeting a majority of the members ratified the prior actions, thereby curing any defect in the 2021 notice. The Court of Appeal affirmed, observing that the California Revised Uniform Limited Liability Company Act (the Act; Corp. Code, § 17701.01 et seq.), which governs the management and operation of limited liability companies, provides that a limited liability company generally “shall have all the powers of a natural person in carrying out its business activities.” (§ 17701.05.) Because a natural person has the power to ratify acts taken on the person’s behalf, limited liability companies likewise may, through their members, ratify actions previously taken on behalf of the company. In addition, the trial court also properly upheld the resolution adopted by the majority of defendant’s members to indemnify its members and advance defense costs and expenses incurred in the lawsuit filed by plaintiff. (C.A. 2nd, July 23, 2024.)