Category: 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.

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.

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.

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.

On December 1, 2015, some significant changes to the Federal Rules of Civil Procedure will take effect.  Among the changes are revisions to Rule 26(b), which defines the scope of discovery.  The amendments will place new constraints on discoverable information.  Attorneys and clients should be aware of how these changes will affect their discovery requests to opposing parties, and also how they can use the amendments to limit overbroad requests.

The amended FRCP 26 will clarify the scope of discovery by requiring that discovery is both “relevant to any party’s claim or defense” and “proportional to the needs of a case.”  Courts are currently permitted to consider proportionality factors in order to limit discovery, but the amendment more clearly ties the proportionality factor to the scope of discovery.

In addition, the amendments will remove the well-known current language in Rule 26(b)(1) that allows discovery of information “reasonably calculated to lead to the discovery of admissible evidence.”  It will be replaced with the statement: “Information within this scope of discovery need not be admissible in evidence to be discoverable.”  According to the rule’s committee notes, the change is meant to correct the common misuse of the “reasonably calculated” phrase in defining the scope of discovery.  Instead, the new language is designed to allow discovery of non-privileged inadmissible information “so long as it is otherwise within the scope of discovery” (i.e., information that is both relevant and proportional).

These changes will likely limit the discovery burden that parties can attempt to impose on one another and encourage narrower discovery orders, especially in cases involving relatively small amounts of damages or clients with less resources.  All counsel practicing in federal court should stay abreast of these developments.

Earlier this month, Governor Jerry Brown signed legislation aimed at helping courts dispose of motions for summary judgment and summary adjudication more quickly.  Under Senate Bill 470, sponsored by the Judicial Council and California Judges Association, courts deciding summary judgment and adjudication motions need only consider evidentiary objections they deem material to the motion.  Objections not ruled on by the judge will be preserved for appellate review.

The goal of the bill is to “reduce and better direct the time and effort of trial courts” in ruling on these motions.  The impact of the legislation on practitioners remains uncertain, but in light of this new rule, attorneys would be well advised to consider streamlining their objections on summary judgment in order to minimize the risk that important ones are not overlooked.

At Lewis & Llewellyn, we routinely handle matters at both the trial court and appellate level.  As any litigator should know, whether or not an order is appealable, and the timing of the notice of appeal, can present some complex issues.

Last month, California’s Fifth District Court of Appeal issued an opinion holding that a “judgment” filed by a trial court was not, in fact, final and therefore was not appealable.  The lesson for lawyers – don’t file a notice of appeal until all the issues in your case have been decided, even if all that remains to be determined is the amount of punitive damages.

In Baker v. Castaldi, 235 Cal. App. 4th 218 (2015), plaintiff sued defendants for allegedly stealing his antiques.  Baker sought compensatory and punitive damages.  Phase one of the trial addressed liability and compensatory damages, as well as whether Baker was entitled to punitive damages.  Phase two, if required, would address the calculation of those punitive damages.

At the conclusion of phase one, the court issued a document titled “judgment” awarding plaintiff $610,500 in compensatory damages plus interest and costs against the defendants.  Punitive damages, which the court found were warranted, were to be determined in phase two which the court described as a separate trial.

Several appeals of the “judgment” were filed.  The Court of Appeal for the Fifth Appellate District, however, ruled that this “judgment” was neither final nor appealable.

The Court held, “[a] judgment is final where no issue is left for future consideration except the fact of compliance or noncompliance with the order.”  In this instance, the trial court issued a judgment regarding compensatory damages and liability, but still specified that the amount of punitive damages to be awarded would be decided in a subsequent proceeding.  Therefore, the Court of Appeal reasoned, “the ‘judgment’ did leave open an issue for future consideration: The amount of punitive damages.”

The lesson for litigants is clear.  A party cannot avoid a decision on damages by immediately appealing a ruling on liability.  As the Court of Appeal made clear, the amount of damages is “essential to a final determination of the rights of the parties.”  Therefore, the appeal will have to wait.

Many attorneys assume that using a peremptory challenge means they are entitled to reject a potential juror without stating a reason.  One prosecutor found out the hard way that this is not entirely true, particularly when faced with a Batson/Wheeler motion.

In People v. Cisneros, 2015 WL 521878 (Cal. App. 2d. Dist. Feb. 9, 2015), a recent opinion published by the Court of Appeal, a man was accused and convicted of making criminal threats against his girlfriend.  He appealed, alleging that the prosecutor had discriminiated against men in exercising peremptory challenges during jury selection.  The Court of Appeal agreed.

The Court of Appeal found that the prosecutor – who had used seven of her nine peremptory challenges to strike men from the prospective jury – had failed to provide an adequate, gender-neutral reason for exercising two of the challenges after opposing counsel raised Batson/Wheeler motions.  For the two challenges found to be improper, the prosecutor asserted, when asked by the trial court, that she believed the next jurors in line were each a “better fit.”

As the Court of Appeal held, “whenever counsel exercises a peremptory challenge, it necessarily means that he or she prefers the next prospective juror to the one being challenged (whether the individual qualities of the next person are known or unknown).  It is, in effect, no reason at all.  Thus, simply reciting this truism while striking a prospective juror who is member of a protected class is not an adequate nondiscriminatory justification for the excusal, particularly when, as here, in each instance to reach the preferred next prospective juror the prosecutor elected to strike a prospective male juror rather than one of the many prospective female jurors then seated in the jury box.”

However, as the Court of Appeal noted, the “bar [is] not high” – the prosecutor’s explanation for striking another juror for being “kind of rough around the edges” and another for being “overly-analytical” survived Batson/Wheeler motions.  Therefore, every lawyer should have a valid reason in mind when exercising a peremptory challenge, as long as that reason isn’t the next juror would be a “better fit.”

At Lewis & Llewellyn, we represent some of the world’s leading companies in responding to third party subpoenas, in both state and federal courts across the country.  Practitioners should take note that the Ninth Circuit Court of Appeals recently created some potentially helpful law regarding cost shifting for federal third party subpoenas.  Under Federal Rule of Civil Procedure 45(d)(2)(B)(ii), a court order commanding production in response to a subpoena “must protect a person who is neither a party nor a party’s officer from significant expense resulting from compliance.”  Though this language was added when the Rule was amended in 1991, it had not been interpreted by the Ninth Circuit until the recent decision in Legal Voice v. Stormans Inc., 738 F.3d 1178 (9th Cir. 2013).

In Legal Voice, Stormans, Inc. sued Washington State, seeking to enjoin enforcement of rules requiring pharmacies to maintain and dispense certain drugs.  Stormans subpoenaed the Northwest Women’s Law Center (“Law Center”), which had played an important role in the law’s enactment, but was a not a party to the underlying action.  The Law Center objected to the subpoena, and Stormans moved to compel.  The District Court granted the motion to compel as to six of the fourteen requests in the subpoena, but refused to grant the Law Center’s request under Rule 45(d)(2)(B)(ii) for Stormans to pay its cost of compliance.  On appeal, the Ninth Circuit overturned the District Court’s ruling, holding that “Rule 45(d)(2)(B)(ii) requires the district court to shift a non-party’s costs of compliance with a subpoena if those costs are significant.”  Id. at 1184.

Importantly, the court found that the rule “provides no exceptions,” “is mandatory,” and that “when discovery is ordered against a non-party, the only question before the court in considering whether to shift the costs is whether the subpoena imposes significant expense on the non-party.  If so, the district court must order the party seeking discovery to bear at least enough of the cost of compliance to render the remainder ‘non-significant.’”  Id. (citing references omitted).  The court subsequently found that the $20,000 the Law Center had incurred complying with the subpoena was “significant.”

This case is a potentially powerful tool for battling overly burdensome or costly discovery requests served on third parties.  Attorneys on the receiving end of a subpoena, or even a motion to compel, should keep this case in mind in responding – and potentially objecting – to subpoenas here in the Ninth Circuit and elsewhere.

At Lewis & Llewellyn, we practice in state and federal courts throughout the country. Attorneys who practice in federal court in Southern California – specifically the Central District of California – should be aware of new local civil rules that took effect on June 1, 2014.  The amended rules chiefly concern, among other things: (i) mandatory chambers copies for all pleadings filed electronically with the court; (ii) formatting for Supreme Court case citations in briefs, and (iii) additional sanctions on attorneys and parties for failure to follow local rules.

These seemingly picayune details can often determine whether a court grants or denies a critical motion.