Category

Litigation Tips

Beware the Pitfalls of CCP Section 664.6

By Litigation Tips

Most litigators are generally familiar with Section 664.6 of the California Code of Civil Procedure, which provides a summary procedure to enforce a settlement agreement after dismissal of a lawsuit.  Without such a provision, a non-breaching party would have to file a new lawsuit for breach of contract (the settlement agreement itself), which could then take months or even years to resolve, and thus frustrating the purpose of the underlying settlement.  Many settlement agreements therefore contain a provision specifically providing for the Court to retain jurisdiction under Section 664.6.  However, the California Court of Appeal clarified last week that such a provision is likely insufficient.

In Sayta v. Chu, an opinion issued on November 29, 2017 by the California Court of Appeal, the First Appellate District set forth clear and express requirements for invoking Section 664.6.  The underlying dispute, which arose from the termination of a tenancy, was subsequently resolved by written settlement agreement, and the lawsuit dismissed.  Following an alleged breach by defendant, plaintiff brought a motion to enforce the settlement agreement pursuant to Section 664.6.  The trial court denied the motion, a decision which was affirmed by the Court of Appeal.  This is because the parties failed to request, before dismissal, that the trial court retain jurisdiction to enforce the settlement, or alternatively, seek to set aside the dismissal.

Settlements are very often reached in confidence and therefore there may not be the opportunity to request that the Court retain jurisdiction.  It remains to be seen how the impact of Satya will be addressed in practice.  However, if there is any risk that the opposing side may breach the settlement agreement, the practitioner would be well advised to request that the Court retain jurisdiction on the record or in a minute order.

New Deadline for Expert Document Production in California

By Litigation Tips

When deposing a retained expert in California, a party may specify materials to be produced by the expert at the deposition.  In response, experts often appeared for deposition with reams of materials, often disorganized, in an attempt to sandbag the opposition.  This often forced the deposing party to scramble to review the materials during the deposition and waste limited deposition time.

Effective January 1, 2017, the California Legislature amended the Code of Civil Procedure to prohibit this tactic.  Section 2034.415 now requires an expert to produce materials at least three business days before his or her deposition.  Because the new rule requires production of materials three “business days” before the expert deposition, the party noticing the deposition would be well-advised to avoid noticing an expert deposition on a Thursday or Friday so as to take advantage of the weekend’s two extra days.

Avoid Setting Off Alarm Bells When Switching Jobs

By Litigation Tips

When departing a company to join a competitor, employees should proceed with caution before downloading “personal” information saved on their work computer.  While this material is not a company trade secret, downloading it shortly before departing the company can unnecessarily expose the employee to a legal headache.  After the employee has departed, the former employer will likely forensically examine her work computer, which will reveal whether and when external storage devices were connected.  But the exam will rarely determine what materials were actually transferred—meaning the former employer doesn’t know whether the employee downloaded family photos or key business documents.  So, connecting an external device to a work computer in the days/weeks before the employee’s departure can set off alarm bells, often resulting in the former employer sending a cease and desist letter to the departed employee and her new company.  The new company will then be concerned about liability for knowingly acquiring and/or using trade secrets, which leads to investigation, legal fees, and a less than stellar first impression of the new employee.

Lewis & Llewellyn has extensive experience advising individuals and companies on the myriad issues that can arise when an employee transitions from one company to another.  Click here to read more about this practice area.

CALIFORNIA SUPREME COURT HOLDS CONSUMER CLAIMS FOR INJUNCTIVE RELIEF CANNOT BE WAIVED IN AN ARBITRATION AGREEMENT

By Litigation Tips

On April 6, 2017, the California Supreme Court handed down a unanimous decision that will likely become a seminal case on the subject of class-action waivers and arbitration clauses in consumer contracts.  In McGill v. CitiBank, N.A., No. S224086 (Apr. 6, 2017), the Court held that an arbitration clause in Citibank’s credit card agreement purporting to waive a plaintiff’s right to seek public injunctive relief in any forum was contrary to California public policy and therefore unenforceable.  The Court further held that the Federal Arbitration Act does not preempt California’s consumer protection statutes.

In 2011, McGill brought a putative class action against Citibank based on alleged violations of three well-known California consumer-protection statutes—the Consumers Legal Remedies Act (CLRA), the False Advertising Law (FAL), and the Unfair Competition Law (UCL)—each of which provides injunctive relief as a remedy.  Citibank responded by seeking to compel arbitration of each of these claims.

The trial court declined to force McGill to arbitrate her public injunctive relief claims, finding that agreements to arbitrate claims for public injunctive relief under the CLRA, FAL, or UCL are unenforceable.  The Court of Appeal, however, disagreed and ordered all of McGill’s claims to arbitration, reasoning that the Broughton-Cruz rule was preempted by the Federal Arbitration Act.  The California Supreme Court reversed, holding that the contractual waiver of McGill’s right to seek public injunctive relief in any forum was unenforceable.  The Court side-stepped the issue of whether the Broughton-Cruz rule was preempted by the Federal Arbitration Act, focusing instead on the fact that the arbitration clause at issue purported to prevent McGill from seeking public injunctive relief in any forum, be it a court of law or arbitration.  By agreeing to submit her claims to arbitration, therefore, McGill was in effect also agreeing to limit the remedies to which she would have been entitled if she prevailed on her claims, reasoned the Court.  Because the public injunction remedies are intended to benefit the public, the Court held that their waiver is invalid.

Two takeaways from the Court’s decision are apparent.  First, savvy companies should review their consumer contracts to ensure that they do not contain the arbitration language at issue in McGill, and should consider adding carve-outs for public injunctive relief, or else they risk a finding that an agreement to arbitrate is “permeated by unconscionability” and therefore unenforceable.  Second, given that the U.S. Supreme Court has repeatedly ruled against California’s High Court in recent cases centered on arbitration—most notably AT&T Mobility v. Concepcion in 2011—it is almost certain that Citibank will petition the Court to review this decision.  And with the recent confirmation of Judge Neil Gorsuch to the long-vacant ninth seat on the Court, efforts to limit what rights consumers may waive through arbitration agreements are entering treacherous waters.

CALIFORNIA COURT OF APPEAL EXTENDS TORT CLAIM EXEMPTION IN CHILD SEXUAL ABUSE CASES

By Litigation Tips

A few weeks ago, in A.M. v. Ventura Unified School District, et al., 2016 WL 5936851 (Cal. Ct. App. Oct. 12, 2016), the Court of Appeal overturned a trial court decision limiting the ability of childhood sexual abuse victims to file suit.  The Court of Appeal found that California Government Code section 905(m), which waives the requirement that a tort claim be filed before suing a public agency for childhood sexual abuse, is not limited to cases in which the alleged abuser was employed by the public agency.  In other words, if a child files suit alleging that he or she was abused by his or her fellow students, no tort claim form is required.

The underlying complaint in A.M. alleged that the victim was bullied, battered, and sexually abused by some of her fellow students.  Even though her mother complained to the school district, no action was taken.  The trial court granted summary judgment in favor of the student defendants, finding that the plaintiff had failed to file a claim form and, therefore, was barred from filing suit against them.  The Court of Appeal rejected this narrow interpretation of the statute and reversed the trial court’s decision.

This decision is a welcome development for victims of childhood sexual abuse, and removes another barrier for victims seeking recourse through the courts.

SECTION 2019.210 – A POWERFUL TOOL FOR THE TRADE SECRETS DEFENDANT

By Litigation Tips

California Code of Civil Procedure section 2019.210 provides that, before the plaintiff in a trade secret lawsuit may commence discovery relating to its alleged trade secret(s), it must “identify the trade secret with reasonable particularity.”  This provision provides defendants with a powerful tool, preventing a plaintiff from alleging the misappropriation of trade secrets in vague or generalized terms, and then back-filing the allegations after discovery starts.  The Ninth Circuit has yet to rule on its applicability in federal court, and California district courts conducting an Erie analysis are split on the issue.  However, even district courts that hold section 2019.210 does not apply often require plaintiffs, pursuant to a federal court’s inherent Rule 26 powers, to disclose their trade secrets with particularity before obtaining discovery from defendants.  In sum, section 2019.210 can be a powerful tool, and in deciding whether to file a trade secret action in federal or state court, plaintiffs should expect that they will have to disclose their trade secrets with “reasonable particularity” – either pursuant to section 2019.210 or the court’s Rule 26 order – before they can begin discovery.

COMPANIES BEWARE: CALIFORNIA’S AUTOMATIC RENEWAL LAW HAS BECOME CALIFORNIA’S NEXT CLASS ACTION CRAZE

By Litigation Tips

The California Automatic Renewal Law (ARL) was passed in 2010 in order to prevent companies from locking consumers into renewal payment contracts without any ability to cancel.  Unfortunately, the ARL has created a difficult business environment, riddled with pitfalls for unsuspecting companies.  Most importantly, the regulatory framework created by the ARL provides for an incredibly precise set of rules detailing what all companies which have recurring payment contracts must do before, and after, signing up a customer.

The penalties for failing to comply are severe.  If a company fails to follow the ARL’s very specific and detailed rules, the law deems all “goods, wares, merchandise or products” sold as “unconditional gifts.”  This has allowed plaintiffs’ attorneys to argue that a company which violates the ARL must return 100% of its proceeds to every single California customer since 2010.

While the law was largely ignored at first, over the last few years, plaintiffs’ attorneys have begun aggressively pursuing class actions.  Since 2015, plaintiffs have filed putative class action lawsuits agains Birchbox, Dropbox, Google, Spotify and Tinder, just to name a few.  Nor are these class actions limited to large companies.  We have seen, and defended, relatively small subscription-based companies that have been targeted by plaintiffs’ counsel.

Due to the ARL’s broad language, few companies have opted to test its limits.  Based on a study of publicly available information, we have seen a large trend of defendants, or even would-be defendants, settling based on a demand letter or complaint alone.  However, the few companies that have engaged plaintiffs in litigation over the ARL have found some success, especially at the federal level.

FEDERAL TRADE SECRETS LAW TAKES EFFECT

By Litigation Tips

On May 11, 2016, the Defense of Trade Secrets Act (“DTSA”) became effective, establishing the first civil federal trade secrets law.  Importantly, the DTSA does not preempt state law, meaning a plaintiff alleging trade secret misappropriation can assess which law is more favorable before bringing suit and could also, depending on the case, opt to assert claims under both laws.  While the substantive elements of trade secret claims under the DTSA are similar to those under California law, the DTSA differs in several key respects.  For example, in contrast to California law, the DTSA does not, on its face, require a plaintiff to disclose its purported trade secrets with particularity before commencing discovery.  Because the particularity requirement can be a powerful tool for defendants, depending on the nature of its case, a plaintiff should consider whether to file suit under the DTSA to potentially avoid this procedural hurdle to obtaining discovery.  Moreover, the DTSA contains a civil seizure remedy, which, under certain circumstances, allows a plaintiff to obtain an ex parte order providing for the seizure of property necessary to prevent the dissemination of the trade secrets.  Depending on how courts apply the seizure provision, this remedy could be a reason in and of itself to bring suit under the DTSA.

EXERCISE CAUTION IN DRAFTING JUROR QUESTIONNAIRES

By Litigation Tips

While potential juror research, including the use of juror questionnaires, has become common in litigation, a recent order from U.S. District Judge William Alsup in the Oracle Corp. v. Google, Inc. copyright dispute is a good reminder that juror investigation can be taken too far.  Judge Alsup rejected the parties’ “intrusive” juror questionnaire, finding that the questionnaire was a tool for gathering information to be used in background checks on potential jurors.  “The court suspects that a real reason the parties wish to use the proposed questionnaire and its two-day (or more) procedure is to get the names of prospective jurors and their places of residence so that they may conduct extended Internet investigation,” wrote Judge Alsup.  Beyond juror privacy, Judge Alsup was also concerned that the information gathered could act as an insurance policy on appeal.  For example, the parties could use their internet research in an attempt to demonstrate a juror was untruthful during selection.  Canvassing the internet for jurors’ private information was particularly troubling, Judge Alsup noted, because jurors are instructed not to do any internet research on the case.  Such a double-standard could be confusing to them.

Whether or not others follow Judge Alsup’s lead remains to be seen.  But practitioners should exercise caution when crafting juror questionnaires to give due consideration to juror privacy.

IMPORTANT CHANGES TO THE CALIFORNIA CODE OF CIVIL PROCEDURE REGARDING DEMURRERS

By Litigation Tips

On January 1, 2016, important changes were made to the California Code of Civil Procedure (CCP) which will have a significant impact on the litigation process, particularly as it relates to demurrers.

The new CCP section 430.41 requires the parties to “meet and confer” before a demurrer is filed.  If the parties cannot complete a meet and confer 5 days before a responsive pleading is due, the demurring party can obtain an automatic 30-day extension by filing a declaration with the court.

Additionally, CCP section 430.41 now imposes a limit on the number of amended complaints that can be filed.  Under the previous demurrer statutes, there was no such limitation.  Now, a complaint cannot be amended more than three times, absent an offer to the trial court that there is a reasonable possibility the defect can be cured.

Moreover, CCP section 472 is amended to prevent amended complaints from being filed on the eve of a demurrer hearing.  An amended complaint must now be filed no later than the date an opposition to the demurrer is due.  An amended pleading can only be filed after that date pursuant to a stipulation of the parties.

In short, the new rules will limit the number of amended complaints and demurrers that can be filed.  It will also save counsel and the courts from having to prepare for demurrer hearings, only to have them rendered moot by amended complaints filed on the eve of the hearing.