CALIFORNIA SUPREME COURT

Arbitration

De Leon v. Juanita's Foods (2022) _ Cal.App.5th _ , 2022 WL 17174498: The Court of Appeal affirmed the trial court’s order, after the commencement of arbitration proceedings between plaintiff and defendant, concluding that defendant materially breached the arbitration agreement when it failed to pay its share of the arbitration fees within 30 days after they were due, and allowing plaintiff to proceed with his claims against defendant in court. The Court of Appeal concluded that the trial court correctly ruled that defendant was in material breach of the arbitration agreement. (Code of Civil Procedure, sections 1281.97(a)(1); 1281.98(a)(1).) (C.A. 2nd, November 23, 2022.) 

Civil Procedure

City of L.A. v. PricewaterhouseCoopers, LLC (2022) _ Cal.App.5th _ , 2022 WL 12010415: The Court of Appeal reversed the trial court’s order granting a motion for sanctions under Code of Civil Procedure sections 2023.010 and 2023.030, filed nine months after the case was dismissed, that awarded sanctions in the sum of $2.5 million. The Court of Appeal held that monetary discovery sanctions may be imposed under section 2023.030 only to the extent authorized by another provision of the Discovery Act. Section 2023.010 describes conduct that is a misuse of the discovery process, but does not authorize the imposition of sanctions. The plain language of the statutory scheme does not provide for monetary sanctions to be imposed based solely on the definitional provisions of sections 2023.010 or 2023.030, whether construed separately or together. The trial court erred, because the award of monetary sanctions was not authorized by the statutes cited. The trial court’s order was reversed and remanded to allow defendant to present the issue of sanctions to the trial court for determination under the correct law. The Court of Appeal also held that when a trial court is authorized under a provision of the Discovery Act to impose monetary sanctions, the court retains jurisdiction after the lawsuit is dismissed to rule on the issue of discovery sanctions as a collateral matter. Regarding the issue of whether the sanctions motion was timely filed, the Court of Appeal held that the timeliness of a motion for monetary sanctions following a successful discovery motion is a matter within the trial court’s discretion, and no abuse of the court’s discretion was shown in this case. (C.A. 2nd, October 20, 2022.)

Shapell Socal Rental Properties v. Chico's FAS (2022) _ Cal.App.5th _ , 2022 WL 9755390: The Court of Appeal reversed the trial court’s order denying defendant’s motion to set aside a default and a default judgment. The case involved a commercial lease, where the tenant started paying lower rent due to COVID-19 issues. Counsel for defendant notified plaintiff of their representation of defendant, and asked plaintiff to give them notice of any actions regarding the lease. Counsel for plaintiff sought a default, and later a default judgment, without notifying defendant’s counsel. The Court of Appeal held that an attorney has both an ethical and statutory obligation to warn opposing counsel, if counsel’s identity is known, of an intent to seek a default and to give counsel a reasonable opportunity to file a responsive pleading (LaSalle v. Vogel (2019) 36 Cal.App.5th 127, 137 (LaSalle)), and that duty is reinforced by a statutory obligation arising under Code of Civil Procedure section 583.130. The trial court abused its discretion in denying the motion to set aside the default and default judgment and failing to address the breach of ethical and statutory duties by plaintiff’s counsel. (C.A. 4th, October 17, 2022.)

Employment

CSV Hospitality Management v. Lucas (2022) _ Cal.App.5th _ , 2022 WL 9744258: The Court of Appeal reversed the trial court’s order granting plaintiff’s request for a restraining order under the Workplace Violence Safety Act (Code of Civil Procedure, section 527.8). During the evidentiary hearing, the trial court denied defendant’s request to cross-examine plaintiff’s employee witnesses. Cross-examination of the party who has petitioned for a restraining order constitutes relevant evidence within the scope of the hearing. (Evidence Code section 773(a).) Code of Civil Procedure section 527.8(j) specifically states that the trial court “shall receive any testimony that is relevant” during the hearing on a petition. The trial court’s failure to allow defendant to cross-examine witnesses was contrary to section 527.8(j), and denied defendant his right to due process. (C.A. 1st, filed September 20, 2022, published October 17, 2022.)

Real Property

Hobbs v. City of Pacific Grove (2022) _ Cal.App.5th _ , 2022 WL 16921175: The Court of Appeal affirmed the trial court’s order denying plaintiffs’ motion for summary judgment as to their second claim alleging that defendant city’s Ordinance No. 18-005 violated plaintiffs’ right to due process by arbitrarily limiting the number of homes that could be offered as short-term rentals and by subjecting them to random selection for nonrenewal of licensure. Although the two plaintiffs no longer had standing, the Court of Appeal retained jurisdiction to decide the issue because the case presented an issue of substantial and continuing public interest that was capable of repetition. The Court of Appeal concluded the plaintiffs failed to establish that their economic interest in renting their vacation homes exclusively for transient visitors was an entitlement subject to state or federal constitutional protection as a matter of law. To the extent they asserted a “vested right” in that particular economic use of their real property, they established neither right—beyond the expressly defined terms of their license—nor vesting on the record. Nor did they establish that defendant’s curtailment of short-term rental licenses was so unrelated to legitimate state interests that it could be said to infringe on substantive due process. (C.A. 6th, filed October 14, 2022, published November 14, 2022.)

Settlements

Gormley v. Gonzalez (2022) _ Cal.App.5th _ , 2022 WL 6924078: The Court of Appeal affirmed the trial court’s order granting plaintiffs’ motion to enforce a settlement agreement and entering judgment against defendants in the amount of $1,393,084 (the settlement amount of $575,000 plus $818,084 in liquidated damages). Plaintiffs in 20 separate medical malpractice lawsuits (plaintiffs) filed against two doctors and a medical spa and the defendants in those lawsuits (defendants) resolved the underlying lawsuits by entering into a global settlement agreement pursuant to which defendants agreed to pay plaintiffs $575,000 in two installments. If the installments were not paid on time, liquidated damages would be assessed at the rate of $50,000 per month and $1,644 per day, up to a cap of $1.5 million. The trial court rejected defendants’ argument that the liquidated damages provision was unreasonable and thus invalid pursuant to Civil Code section 1671(b). The trial court properly considered all of the circumstances existing at the time the settlement agreement was negotiated, and it properly concluded defendants failed to meet their burden of establishing the liquidated damages provision was unreasonable under the circumstances existing at the time the contract was made. The parties were represented by counsel throughout the settlement negotiations, and the liquidated damages provision involved “significant negotiations” and “numerous drafts.” Although the parties estimated plaintiffs’ recovery at trial would be $1.5 million, defendants only had insurance for six of the 20 lawsuits, which meant plaintiffs might be unable to collect any judgments they obtained after trial. Plaintiffs thus agreed to accept a significantly reduced settlement amount ($575,000) in exchange for assurances that defendants would be able to pay that amount quickly. The liquidated damages provision was negotiated in order to incentivize prompt payment, and the damages were capped at $1.5 million, the amount the parties estimated plaintiffs would have recovered at trial. (C.A. 3rd, October 12, 2022.)