Justia California Court of Appeals Opinion Summaries

Articles Posted in Business Law
by
In an appeal related to a California insurance insolvency proceeding, the New York Plaintiffs requested clarification from the San Francisco Superior Court as to whether its orders "prohibit or stay" their New York claims. In the insolvency case, the trial court appointed the California Insurance Commissioner (Commissioner) as conservator, and later as liquidator, of CastlePoint. The trial court, as part of the process, issued injunctions and approved releases pertaining to claims filed against or on behalf of CastlePoint or its assets.The Court of Appeal concluded that some of the causes of action in the New York lawsuit are not barred. These causes of action relate to: (i) the alleged breach of so-called "successor obligor provisions"; and (ii) an alleged $143 million payment from ACP to shareholders of TGIL. The court explained that these causes of action are not asserted against CastlePoint or the insurance companies that were merged into it, and there is no indication the Commissioner could have asserted these causes of action on behalf of the insolvent insurance companies. Therefore, the court reasoned that permitting them to proceed in New York will not interfere in any meaningful way with the plan for CastlePoint's liquidation, especially given the New York Plaintiffs' agreement not to assert any judgment against the insolvent insurance companies' estate or assets.However, prior to entering into releases, the Commissioner could have asserted fraudulent conveyance causes of action and a cause of action for unjust enrichment because they are based on alleged improper transfers of assets of the insolvent insurance companies. Accordingly, the court concluded that these causes of action are barred by the injunctions and releases in the liquidation proceeding. The court affirmed in part and reversed in part. View "Lara v. Castlepoint National Insurance Co." on Justia Law

by
In 2010, after decades of cooperation in selling their hardware and software, HP and Oracle had a disagreement over Oracle’s decision to hire HP’s former CEO. The companies negotiated a confidential settlement agreement, including a “reaffirmation clause,” stating each company’s commitment to their strategic relationship and support of their shared customer base. Six months later, Oracle announced it would discontinue software development on one of HP’s server platforms.The trial judge held that the reaffirmation clause requires Oracle to continue to offer its product suite on certain HP server platforms until HP discontinues their sale. A jury subsequently found that Oracle had breached both the express terms of the settlement agreement and the implied covenant of good faith and fair dealing; it awarded HP $3.014 billion in damages. The court denied HP’s request for prejudgment interest. The court of appeal affirmed. The reaffirmation clause requires Oracle to continue to offer its product suite on certain HP server platforms. The trial court did not err in submitting to the jury the breach of contract and implied covenant claims. The court rejected Oracle’s argument that the judgment must be reversed based on violations of its constitutional right to petition and because HP’s expert’s testimony on damages was impermissibly speculative under California law and should have been excluded. View "Hewlett-Packard Co. v. Oracle Corp." on Justia Law

by
Over the course of a few years, an employee of Severin Mobile Towing Inc. (Severin) took about $157,000 in checks made payable to Severin’s d/b/a, endorsed them with what appears to be his own name or initials, and deposited them into his personal account at JPMorgan Chase Bank N.A. (Chase). Because the employee deposited all the checks at automated teller machines (ATM’s), and because each check was under $1,500, Chase accepted each check without “human review.” When Severin eventually discovered the embezzlement, it sued Chase for negligence and conversion under California’s version of the Uniform Commercial Code (UCC), and for violating the unfair competition law. Severin moved for summary judgment on its conversion cause of action, and Chase moved for summary judgment of all of Severin’s claims, asserting affirmative defenses under the UCC, and that claims as to 34 of the 211 stolen checks were time- barred. The trial court granted Chase’s motion on statute of limitations and California Uniform Commercial Law section 3405 grounds; the court did not reach UCL section 3406. The court denied Severin’s motion as moot, and entered judgment for Chase. On appeal, Severin argued only that the court erred in granting summary judgment to Chase on Severin’s conversion cause of action (and, by extension, the derivative UCL cause of action). Specifically, Severin argued the court erroneously granted summary judgment under section 3405 because Chase failed to meet its burden of establishing that Severin’s employee fraudulently indorsed the stolen checks in a manner “purporting to be that of [his] employer.” Severin further argued factual disputes about its reasonableness in supervising its employee precluded summary judgment under section 3406. The Court of Appeal agreed with Severin in both respects, and therefore did not reach the merits of Chase’s claim that its automated deposit procedures satisfied the applicable ordinary care standard. Accordingly, judgment was reversed and the matter remanded for further proceedings. View "Severin Mobile Towing, Inc. v. JPMorgan Chase etc." on Justia Law

by
D.C. was employed by Applied, 1996-2008, and claimed three industrial injuries: a specific injury to her neck and right upper extremity in 2001, a specific injury to her neck and both upper extremities in 2005, and a cumulative trauma injury to her neck, both upper extremities, and psyche ending on her last day working. D.C. claimed her injuries were due to the constant use of a computer keyboard. In 2006, she developed a pain disorder, anxiety, and depression, which she claimed were compensable consequences of her physical injuries. She later claimed that she was sexually exploited by Dr. Massey, the physician primarily responsible for the treatment of her industrial injuries. D.C. was diagnosed with PTSD. Applied's workers’ compensation carriers disputed liability for her psychiatric injuries.A workers’ compensation judge found that all of D.C.’s injury claims were industrial; awarded D.C. 100 percent permanent disability (PD) based on her PTSD alone; found no apportionment; and concluded that the insurers were jointly and severally liable for that award since Dr. Massey treated all three of her industrial injuries. The Workers’ Compensation Appeals Board generally affirmed.The court of appeal concluded there was substantial evidence of repeated exposure to injury-causing events and new injuries after 2005 that supported the finding of cumulative trauma ending in 2008. D.C. met her burden of proving that her PTSD was a compensable consequence injury that resulted from the treatment for her industrial injuries and that her employment was a contributing cause; as a matter of law, a patient cannot consent to sexual contact with her physician. The court rejected several challenges to the sufficiency of the evidence. The 100 percent PD award must be annulled as based on an incorrect legal theory, the alternative path theory. View "Applied Materials v. Workers' Compensation Appeals Board" on Justia Law

by
Pillar hired Epiphyte to convert its cryptocurrency into Euros. Epiphyte informed Pillar that it used Payward’s online exchange to convert its clients’ cryptocurrencies. Pillar transferred its cryptocurrency into Epiphyte’s account on Payward’s platform. After Epiphyte converted the currency but before the exchanged funds were transferred to Pillar’s bank account, four million Euros belonging to Pillar were stolen from Epiphyte’s account.Pillar sued Payward, alleging Payward knew or should have known that Epiphyte was using its Payward account on Pillar's behalf, failed to use standard security measures that would have prevented the theft, and falsely advertised that it provided the best security in the business. Payward moved to compel arbitration, claiming that Epiphyte agreed to Payward’s “Terms of Service” when it created an account, as required for all users, that those Terms included an arbitration agreement, and that Pillar was bound by that agreement.The court of appeal affirmed the denial of Payward’s motion. There is no evidence Epiphyte was acting as Pillar’s agent when it agreed to the Terms two years before Pillar hired it or that the agency relationship automatically bound the principal to the agent’s prior acts. There is no evidence Pillar knew the arbitration agreements existed or had a right to rescind them. No ratification occurred. There was no intent to benefit Pillar or similar parties. Pillar’s claims are not inextricably intertwined with the Terms. View "Pillar Project AG v. Payward Ventures, Inc." on Justia Law

by
In 2014, ALADS filed suit against defendants for breaches of their fiduciary duty to ALADS as members of its board of directors. ALADS obtained a temporary restraining order requiring the return of $100,000, and several weeks later a preliminary injunction preventing Defendant Macias from claiming to be a director. In 2018, the trial court entered judgment for ALADS, awarding damages sustained by ALADS and a permanent injunction, but found ALADS did not have standing to recover monetary compensation for its members. Afterwards, ALADs sought cost-of-proof sanctions, which the trial court denied. Both parties appealed.The Court of Appeal concluded that the trial court did not err in its conclusion that defendants breached their fiduciary duties to ALADS, or in its award of damages for harm to ALADS (except in one very minor respect), or in its award of a permanent injunction. However, the trial court did err when it concluded that ALADS did not have standing to seek the $7.8 million in damages on behalf of its members. The court explained that ALADS proved those damages without objection from defendants and had standing to do so. The court further concluded that ALADS was entitled to cost-of-proof sanctions. Accordingly, the court amended the judgment to include the $7.8 million in damages to ALADS's members, affirmed the judgment as amended, and remanded for the trial court to determine the appropriate amount of cost-of-proof sanctions. View "Association for Los Angeles Deputy Sheriffs v. Macias" on Justia Law

by
Plaintiff, cross-defendant and appellant Nissan Motor Acceptance Corporation (NMAC) was a subsidiary of nonparty Nissan Motors of North America. NMAC was a specialty lender that loaned money to Nissan automobile dealers. Defendants, cross-complainants and appellants, Michael A. Kahn (Kahn) and his wife Tami L. Kahn, plus a group of now defunct limited liability company auto dealerships they owned, were NMAC borrowers (collectively, “Superior”). This appeal and cross-appeal stemmed from the retrial of Superior’s cross-claims against NMAC. The jury awarded Superior $256.45 million in compensatory and punitive damages based on two promissory fraud theories: negligent misrepresentation and fraudulent concealment. The trial court granted NMAC’s motion for new trial based on juror misconduct, but denied NMAC’s motion for judgment notwithstanding the verdict (JNOV). Superior contended NMAC forfeited its right to complain about juror misconduct. It also challenged the sufficiency of the evidence to support the trial court’s discretionary decision to grant NMAC’s new trial motion. After review, the Court of Appeal concluded NMAC did not forfeit the basis for its new trial motion and substantial evidence supported the court’s juror misconduct findings. And contrary to Superior’s claim, the Court found nothing arbitrary or capricious in its prejudice ruling. Accordingly, the Court affirmed the new trial order. View "Nissan Motor Acceptance Cases" on Justia Law

by
The Contractors’ State License Law (Bus. & Prof. Code 7031), allows any person who utilizes the services of unlicensed building contractors to sue for disgorgement of all compensation paid for the performance of any act or contract, even when the work performed is free of defects. CDC brought a section 7031(b) claim for disgorgement against Obayashi in 2017, more than eight years after the completion of construction of the InterContinental Hotel in San Francisco. The issue of licensure came to light during litigation concerning construction defects.The trial court dismissed, citing Code of Civil Procedure 340(a), the one-year limitations period for statutory forfeiture or penalty causes of action. The court of appeal affirmed. The one-year statute of limitations applies to disgorgement claims brought under section 7031, and the discovery rule and other equitable doctrines do not. Even if such doctrines applied to statutory disgorgement claims, they would not apply under the circumstances presented under the pleadings. The court also upheld the trial court’s award of $231,834 in contractual attorney fees; the parties’ agreement contemplated the recovery of attorney fees for non-contractual causes of action that are initiated because of an alleged breach of the parties’ contract. View "San Francisco CDC LLC v. Webcor Construction L.P." on Justia Law

by
An electronic gaming device designed and supplied by Planet Bingo, LLC caused a fire in the United Kingdom. Several third parties made demands that Planet Bingo pay their damages resulting from the fire. However, Planet Bingo’s liability insurer, the Burlington Insurance Company (Burlington), denied coverage. Planet Bingo filed this action for breach of contract and bad faith against Burlington. In a previous appeal, the Court of Appeal held that Burlington’s policy did afford coverage, though only if one of the third-party claimants filed suit against Planet Bingo in the United States or Canada. Such a suit was then filed. Burlington accepted the defense and managed to settle the suit for its policy limits. In this action, the trial court granted summary judgment for Burlington, ruling that Burlington had provided all of the benefits due under the policy. Planet Bingo appealed, contending that Burlington conducted an inadequate investigation, and that Burlington wrongfully failed to settle the third-party claims, instead, denying coverage in the hope that the claimants would sue Planet Bingo in the United Kingdom, which would have let Burlington off the coverage hook. Planet Bingo claimed (and Burlington did not dispute) that it lost profits because the fire claims remained pending and unsettled. The Court of Appeal held Planet Bingo made out a prima facie case that Burlington was liable for failure to settle. Even though none of the claimants made a formal offer to settle within the policy limits, one subrogee sent a subrogation demand letter; according to Planet Bingo’s expert witness, in light of the standards of the insurance industry, this represented an opportunity to settle within the policy limits. The Court therefore did not address Planet Bingo’s claim that Burlington conducted an inadequate investigation. The Court also did not decide whether lost profits were recoverable as damages, because this issue was not raised below. View "Planet Bingo LLC v. The Burlington Ins. Co." on Justia Law

by
California residents who sell goods on eBay, an online marketplace, as part of their online businesses and use PayPal to receive payments for many of their sales filed a putative class action. The suit challenged provisions of the user agreements, including PayPal’s policy of placing a temporary hold on funds in a user’s account when PayPal believes there is a high level of risk associated with a transaction or a user’s account; PayPal’s retention of interest on users’ funds that are placed in pooled accounts when users maintain a balance in their PayPal accounts; PayPal’s buyer’s protection policy, which allows buyers, under certain circumstances, to dispute transactions up to 180 days after the date of purchase; and a claim that PayPal aids and abets buyers in defrauding sellers by the manner in which it resolves disputes. The court of appeal affirmed the dismissal of the claims against PayPal, without leave to amend. The challenged practices are not unconscionable. The degree of procedural unconscionability that arises from the fact that a contract is one of adhesion is ‘minimal.” View "Chen v. Paypal, Inc." on Justia Law