Category: Litigation Tips

On January 1, 2024, the California Legislature amended the California Business and Professions Code to solidify and reinforce the prohibition of noncompete agreements in employment contracts.

Effective February 14, 2024, Section 16600.1 mandates that employers notify all current and former California employees hired after January 1, 2022, with existing “noncompete agreements” or contracts containing a “noncompete clause” that these agreements are now considered void.  Additionally, Senate Bill 699 introduces Section 16600.5, declaring any contract void under Section 16600 as unenforceable, regardless of signing location or date.  Employers are restricted from enforcing such contracts, even if executed and maintained outside California.

On September 30, 2023, California Governor Gavin Newsom signed Senate Bill No. 235 (SB235) into law, which amends California Code of Civil Procedure section 2016.090.  It institutes a new procedure for initial disclosures of information and documents.  Beginning on January 1, 2024, parties will be required to make initial witness and document disclosures within 60 days of another party’s request.  Failure to comply or act in good faith with the new law will result in a court-imposed sanction of $1,000.

The initial disclosures shall include:

• “The names, addresses, telephone numbers, and email addresses of all persons likely to have discoverable information … that the disclosing party may use to support its claims or defenses, or that is relevant to the subject matter of the action or the order on any motion made in that action.”
• “A copy, or a description by category and location, of all documents” and
• Any insurance policies that may be used “to satisfy, in whole or in part, a judgment entered in the action or to indemnify or reimburse for payments made to satisfy the judgment.”

The new law also clarifies that “a party is not excused from its initial disclosures because it has not fully investigated the case, because it challenges the sufficiency of another party’s disclosures, or because another party has not made it’s disclosures.”  The rule will remain in effect until January 1, 2027.

These changes have the potential to streamline fact investigations and reduce the amount of written discovery exchanged between parties.  The new timeline will also require counsel to evaluate their position and case strategy much earlier to ensure all relevant information is captured in the initial disclosure.  Counsel would be well-advised to familiarize themselves with the new rule, which may catch opposing counsel off guard.

The march of Artificial Intelligence appears to be inevitable and speculation is rife as to whether AI language models like ChatGPT will replace lawyers.  While AI models have the potential to assist lawyers and enhance efficiency in legal research and fact discovery, it is unlikely that they will be able to replace lawyers entirely:

• Dispute resolution involves a high degree of interpersonal communication and negotiation, which requires emotional intelligence and social skills that AI models do not possess.  Lawyers must be able to communicate effectively with clients, judges, and opposing counsel, and to negotiate complex legal settlements that take into account the needs and interests of all parties involved.
• Dispute resolution requires more than an understanding of legal concepts and principles; the key skill is analysis and application of legal principles to specific cases and situations.  AI models can provide suggestions and recommendations based on patterns in data, but they do not have the ability to identify or understand legal nuances and subtleties, to make intuitive judgments, or to draw on their own experience and expertise to craft persuasive legal arguments.
• Caution is warranted even in the realm of legal research because, at least at this time, AI model’s responses are not always reliable.  According to OpenAI, ChatGPT “sometimes writes plausible-sounding but incorrect or nonsensical answers . . . because there’s currently no source of truth.”  Indeed, the quality of data on which AI models are trained is just as important as the quantity of data on which it is trained.  If the data is incomplete or biased in some way, ChatGPT may provide incomplete or biased results.

That said, the potential for AI to process vast amounts of data and generate intelligible insights promises to enhance the efficiency of human lawyers, allowing firms that adopt these innovations to deliver better, cost-effective outcomes to its clients.

Last month a divided Ninth Circuit panel ruled that California employers can require workers to sign an arbitration agreement as a condition of employment.  This is a reversal of the panel’s September 2021 ruling which allowed partial enforcement of A.B. 51, which California enacted to protect employees from “forced arbitration.”

The panel decided to revisit the case following the United States Supreme Court’s ruling in Viking River Cruises v. Morian, which the U.S. Chamber of Commerce and the California Chamber of Commerce argued invalidated the law.  In this ruling, the Supreme Court upheld that the Federal Arbitration Act preempts state laws, such as A.B. 51, that aim to limit arbitration agreements.  “Because the FAA’s purpose is to further Congress’s policy of encouraging arbitration, and A.B. 51 stands as an obstacle to that purpose, A.B. 51 is therefore preempted,” the majority Ninth Circuit panel stated in its opinion.

This win for California employers allows them to continue to mandate arbitration agreements with employees without the potential of civil or criminal liability.  However, this may not be the end of the story.  California employers would be well-advised to continue to track developments on this issue as the State of California evaluates its next steps and response to this ruling.

On January 5, 2023, the Federal Trade Commission (FTC) proposed a nationwide ban on non-compete clauses.  The proposed ban follows initial findings by the FTC that non-competes constitute an unfair method of competition, which violates Section 5 of the FTC Act.  This also follows through on President Biden’s 2021 Executive Order on Promoting Competition in the American Economy, which encourages the Commission to take action against the unfair use of non-compete clauses and other potentially restrictive covenants that may unfairly limit workers’ wages and mobility.

The proposed rule includes three main elements:

1. It categorizes all non-compete agreements to be unfair methods of competition and makes it illegal under Federal law to enter into or maintain non-competes with any workers, including employees, independent contractors, externs, interns and volunteers;
2. it requires employers to rescind existing non-competes; and
3. it requires employers to notify current and former employees of the rescission and provides a template for such notices.

The FTC has estimated that the new rule could increase wages by nearly $300 billion per year.  While still subject to a public comment period, finalization and judicial review, if implemented, the new rule would have a seismic impact on employment agreements nationwide.  Naturally, we will keep you informed of further developments.

January 1, 2023 will see the introduction of hundreds of new laws in California.  While most will go unnoticed by the vast majority of the public, here are just a handful of new laws which will likely have widespread impact.

Jaywalking rules relaxed: Police officers will be prohibited from stopping or citing people for jaywalking “unless a reasonably careful person would realize there is an immediate danger” of a collision with a vehicle or bicyclist.  In other words, pedestrians will no longer be cited for crossing the street outside of a crosswalk, unless they are in immediate danger of being hit.

Increase to minimum wage: Beginning on January 1, 2023, all California employers, regardless of size, must provide their employees a minimum wage of not less than $15.50 per hour.  Many California cities, including San Francisco, already have ordinances in place that mandate a higher minimum wage.

Abortion rules eased: Nurse practitioners will now be able to perform first-trimester abortions without a doctor’s supervision.  This is one of about a dozen new laws intended to increase abortion access in California, some of which have already taken effect.

Rape kit DNA: Police departments will be prohibited from using the DNA profile of sexual assault survivors in investigations of unrelated crimes.  The new law was proposed after it came to light that the San Francisco Police Department was using DNA from rape kits to identify suspects in unrelated crimes, prompting a national outcry.

Restriction on fur sales: Finally, in a blow to fashionistas, the sale and manufacture of new fur clothing and accessories will be outlawed.  The law passed in 2019, but legislators delayed implementation until 2023 to give retailers time to unload their inventories.  Retailers can still sell secondhand fur clothing or décor and the ban will not apply to faux fur.  The new law does not apply to leather, taxidermied animals, cowhides and the full skin of deer, sheep and goats.

The New Year brings with it some important changes to the Code of Civil Procedure (“CCP”).  On January 1, 2021, California updated the CCP to incorporate two of the Covid-related Emergency Orders.  These changes are welcome updates for lawyers who have long relied on email service and remote depositions to increase case efficiency and reduce client costs.

For cases filed after January 1, 2019, CCP § 1010.6 now requires represented parties to accept eService and to eServe upon request.  Keep in mind that the serving party must confirm the email service address before completing service.

CCP § 1010.6 also clarifies that “electronic filing” is the act of transmission to the court as opposed to approval of the filing.  This clarifies that a party need not wait for a document to be accepted by the court before service is complete—a key distinction given that many clerks’ offices are currently working with skeleton crews.  Section 1010.6 also extends the statute of limitations for filing complaints and cross-complaints where the eFiling was rejected for failure to comply with the rules or pay the applicable fees.

CCP § 2025.310 codifies Emergency Rule 11, which allowed deponents to appear outside the presence of the deposition officer, thus facilitating remote depositions.

Finally, CCP § 599 automatically extends certain cut-off dates when trials are continued.  This includes the exchange of expert witness information, which previously needed to be specifically ordered by the Court if a trial was continued.

The practitioner would be well-advised to acquaint herself or himself with the new rules, which are likely to further streamline litigation by removing unnecessary red tape.

All civil claims are subject to a statute of limitations, meaning if they are not pursued within a certain time period a lawsuit cannot be brought.  The length of the statute depends on the specific claim, but most claims have a limitations period of between two and six years.

When the COVID-19 pandemic hit, followed by significant court closures, the California Judicial Council responded with Emergency Rule 9.  The rule “tolled” (or “paused”) the statutes of limitation for civil actions from March 6, 2020 until 90 days after Governor Newsom lifted the state of emergency.  “Tolling” stops or suspends the running of statutes of limitations; when the tolling period ends, the clock starts again.

The Judicial Council has now amended Rule 9 to provide an end date for the tolling period.  Specifically, Amended Emergency Rule 9 creates two tolling periods depending on the length of the pertinent statute of limitation.  Under Rule 9(a), statutes of limitations that exceed 180 days are tolled from April 6, 2020 until October 1, 2020.  Under Rule 9(b), statutes of limitations of up to 180 days are tolled from April 6, 2020, until August 3, 2020.

Because most statutes of limitation are over 180 days, the practical effect of the Amended Rule appears to be that most civil statutes of limitation have been extended by 178 days, i.e. the period between April 6, 2020 and October 1, 2020.  The new rule may therefore revive claims that were otherwise time barred, or provide litigants with more time to file their claims.

That said, the Judicial Council provided no guidance or illustration on the application of the amended rule, and some commentators have noted that its effect is not altogether clear, particularly as it relates to claims with a shorter limitations period.

Since statutes of limitation are critical in litigation, the practitioner would be well-advised to acquaint himself or herself with the new rule and its effect.

Earlier this year, the California legislature adopted multiple changes to the Code of Civil Procedure.  Given COVID-related Court shutdowns and delays, many of these new rules may have gone overlooked.

Here is a refresher on the most impactful changes:

• CCP section 2031.280(a):  Now requires that “[a]ny documents or category of documents produced in response to a demand for inspection, copying, testing, or sampling shall be identified with the specific request number to which the documents respond.”  The rule used to require that “[a]ny documents produced in response to a demand for inspection, copying, testing, or sampling shall either be produced as they are kept in the usual course of business, or be organized and labeled to correspond with the categories in the demand.”  Counsel receiving a voluminous document production now has firm footing to request that opposing counsel clearly identify what documents correspond to each request for production.
• CCP section 2030.210(d) and (e): Now requires counsel to provide electronic versions of interrogatories and requests for admission to the opposing party upon request.  The responding party also must provide the responses in electronic format upon request.  Note that this can save both parties significant time in preparing discovery “shells” and separate statements, especially for lengthy discovery requests.
• CCP section 2023.050: Sanctions are required if a party, person, or attorney produces the requested documents within 7 days of a scheduled hearing on a motion to compel.  The sanctions also apply to nonparty discovery.
• CCP section 2016.090: Authorizes the court, upon stipulation of all parties, to order the exchange of initial disclosures prior to serving written discovery.  The initial disclosure requirements are similar to those in Federal Rule of Civil Procedure 26.

Counsel would be well-advised to conduct a comprehensive review of these new rules to ensure compliance. The new rules may also provide an effective sword when dealing with opposing counsel.

As most business leaders know, the most stringent privacy law in the United States—the California Consumer Privacy Act (“CCPA”)—went into effect this year and applies to all companies that do business in the Golden State.  The CCPA’s private right of action gives California residents the right to sue companies when their personal information is subject to unauthorized access, theft, or disclosure stemming from a company’s failure “to implement and maintain reasonable security procedures and practices.”  Because the CCPA creates a right to statutory damages (ranging from $100 to $750 per violation) without the need to prove actual harm, companies should prepare for a deluge of CCPA class actions. 

One critical aspect of such preparation should be to implement a security breach response plan that will promptly and effectively respond to individual consumer notices following an alleged security breach.  Under the “notice and cure” provision of the CCPA, a private plaintiff must provide a company with 30 days’ written notice prior to filing a lawsuit.  “In the event a cure is possible,” a company can avoid “individual statutory damages of class-wide statutory damages” if it “actually cures” the violation within 30 days and provides the consumer with a written statement to that effect.  The notice and cure provision thus provides a promising avenue for companies seeking to sidestep CCPA class actions.  That said, this section is sure to be one of the most hotly contested parts of the CCPA because the term “cure” is undefined by the statute. 

The attorneys at Lewis & Llewellyn are fully prepared to defend our clients’ interests in single plaintiff and putative class actions based on alleged CCPA violations.  Contact us to learn more about the CCPA or our deep experience addressing privacy issues in litigation.