Justia Business Law Opinion Summaries

Articles Posted in California Courts of Appeal
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Plaintiffs challenged the constitutionality of two California statutes— Civil Code section 3333.2, which caps the number of damages a plaintiff may recoup for noneconomic losses at $250,000 (Civ. Code, Section 3333.2, subd. (b)); and Business and Professions Code section 6146, which sets limits on the amount of contingency fees a law firm may charge in representing a plaintiff in a professional negligence action against a health care provider. (Civ. Code, Section 3333.2 and Bus. & Prof. Code, Section 6146 are sometimes referred to collectively as the challenged statutes.)   The Fifth Appellate District affirmed the trial court’s judgment of dismissal. The court held that Plaintiffs lack standing to challenge civil code section 3333.2 and Business and Professions Code Section 6146. Further, the court held that the heirs do not have standing because the heir’s alleged injuries are insufficient to confer upon them standing to challenge the statutes in question. Moreover, the court could not conclude Plaintiffs will suffer hardship if declaratory relief is withheld. View "Dominguez v. Bonta" on Justia Law

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Doe alleges that she was sexually assaulted by a massage therapist during a massage at a San Rafael Massage Envy retail location. She filed suit against the Arizona-based franchisor that licenses the “Massage Envy” brand name (MEF), and the independently owned San Rafael franchise where the assault allegedly occurred. MEF moved to compel arbitration on the basis of a “Terms of Use Agreement” presented to Doe when she checked in for a massage she had booked at the franchise location. The trial court concluded that there was no agreement to arbitrate between Doe and MEF.The court of appeal affirmed, rejecting MEF’s argument that the “Terms of Use Agreement,” which was available to Doe via a hyperlink on the electronic tablet she was given at the franchise, was a valid and enforceable “clickwrap” agreement of the sort that courts routinely enforce. Doe did not have reasonable notice that she was entering into any agreement with MEF, much less notice of the terms of the agreement. The transaction was nothing like the typical transactions in which clickwrap agreements are used; Doe went to a physical location, where she was already a member, and was handed a tablet to check in for a massage. View "Doe v. Massage Envy Franchising, LLC" on Justia Law

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John’s Grill in San Francisco was closed or operating at limited capacity during the pandemic. The restaurant was covered by Sentinel’s “Spectrum Business Owner’s Policy,” providing first-party property coverage, third-party liability coverage, and umbrella liability coverage. Sentinel denied the Grill’s claim for business interruption coverage. The trial court upheld the denial.The court of appeal reversed. A nearly uniform line of cases has held that temporary loss of use of property due to the COVID-19 pandemic does not constitute “direct physical loss of or damage to” property for purposes of first-party insurance coverage; nearly all of these cases involved standard form language that was not customized in any material way. Sentinel’s policy, however, has customized language. Other cases have analyzed the undefined term “direct physical loss of or damage to” property. Sentinel’s policy, by endorsement, affirmatively grants coverage for “loss or damage” caused by a virus; a special definition of “loss or damage” is broad enough to encompass pervasive infiltration of virus particulates onto the surfaces of covered property. The coverage is expressly limited to situations in which the virus is the “result of” a listed cause, none of which John’s Grill has alleged. The court rejected Sentinel’s proposed broad reading, citing the illusory coverage doctrine. Insuring agreements should be read broadly in favor of coverage, View "John's Grill, Inc. v. Hartford Financial Services Group, Inc." on Justia Law

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Demo Services employs product demonstrators, who are classified as “part-time, nonexempt, hourly employees eligible for overtime pay according to state and federal law.” Demonstrators are generally assigned to a single Costco. There is office space within each Costco for demonstrators. Espinoza, employed as a demonstrator from 2011-2016, received a “Demonstrator Handbook.” Espinoza worked four days a week and her regular shift lasted for six hours. Upon arriving at Costco, Espinoza went to the office, clocked in, reviewed her assignment, got her supplies, set up her cart, went to the floor near the product, and started demonstrating the product. Espinoza could only leave her demonstration area to take a break when an assigned “breaker” relieved her. At the end of her shift, Espinoza had 15 minutes to return her cart to the office, wash her dishes, store her supplies, then clock out, entering her lunch break time. Espinoza filed a class action, alleging Labor Code violations.The trial court granted Demo summary judgment, reasoning that the outside salesperson exemption applied because Espinoza did not work at a site owned or controlled by her employer. The court of appeal reversed. An employee working at a fixed site not owned or leased by the employer is not subject to the outside salesperson exemption where the employer controls the employee’s hours and working conditions. Demo assigned Espinoza to work a fixed site, within a small, designated area, and controlled her conditions of work. View "Espinoza v. Warehouse Demo Services, Inc." on Justia Law

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Iris, incorporated in 1999, went public in 2007. In 2019, the SEC revoked the registration of Iris’s securities. Since its incorporation, Chin has been chairman of Iris’s three-member board of directors, its president, secretary, CEO, CFO, and majority shareholder. Chin’s sister was also a board member. Farnum was a board member, 2003-2014, and owned eight percent of Iris’s stock. In 2014, Farnum requested inspection of corporate minutes, documents relating to the acquisition of Iris’s subsidiary, and cash flow statements, then, in his capacity as a board member and shareholder, sought a writ of mandate. Before the hearing on Farnum’s petition, Farnum was voted off Iris’s board. The court denied Farnum’s petition (Corporations Code 1602) because Farnum no longer had standing to inspect corporate records due to his ejection from the board, and his request was “overbroad and lack[ed] a statement of purpose reasonably related to his interests as a shareholder.”Weeks later, Farnum served 31 inspection requests on Iris and subsequently filed another mandamus petition. The superior court denied the petition and Farnum’s associated request for attorney fees. On remand with respect to certain records, Farnum sought reimbursement of his expenses in enforcing his rights as a shareholder ($91,000). The court of appeal affirmed the denial of the request. Farnum scored “only a partial victory” given the scope of what he sought; there was no showing that on the whole, Iris acted without justification in refusing Farnum’s inspection demands. View "Farnum v. Iris Biotechnologies Inc." on Justia Law

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Plaintiff, cross-defendant, and appellant Tufeld Corporation (Tufeld) is the landlord. Defendant, cross-complainant, and cross-appellant Beverly Hills Gateway L.P. (BHG) is the tenant. The subject lease, as amended, has a term greater than 99 years. This contravenes Civil Code section 718,1, which provides in the relevant part: “No lease or grant of any town or city lot, which reserves any rent or service of any kind, and which provides for a leasing or granting period in excess of 99 years, shall be valid.” The main issue on appeal is whether a lease that violates section 718 is void or voidable.   The Second Appellate District affirmed in part and reversed in part and the matter is remanded for the trial court to consider whether to grant BHG prejudgment interest on restitution. The court held that the part of the lease exceeding 99 years is void. The court reasoned that here contrary to BHG’s assertion, section 718 does not only protect tenants; it protects landlords too. Moreover, the legislative purpose of section 718 serves to promote a public benefit. The private benefit exception does not apply to section 718. View "Tufeld Corp. v. Beverly Hills Gateway, L.P." on Justia Law

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Appellants Bull Field, LLC, Barley, LLC and Colburn Hills Ranch, LLC (Appellants) appeal from a judgment denying their petition for a writ of mandate (Petition). Appellants sought an order compelling respondent Merced Irrigation District (District) to sell them surplus surface water for the 2019 water year. Appellants’ farmland is outside the District, but within the same groundwater basin as the District’s service area. The District authorized the sale of surplus water to out-of-district users for 2019 but denied Appellants’ application to purchase such water. The District claimed, and the trial court found, that the District’s general manager denied Appellants’ applications to purchase surplus surface water because the District had a history of difficult dealings with Appellants’ manager. Substantial evidence supports that finding.   The Second Appellate District affirmed, finding that District acted within its discretion in making its decision on this ground. The court explained that the court may not interfere with the District’s discretionary decision that denying Appellants’ applications to purchase surplus water was in its best interest. The court may not substitute its judgment for the District about how its interests would best be served. So long as the District actually exercised such discretion, this court may not issue a writ contravening the District’s decision. View "Bull Field, LLC v. Merced Irrigation Dist." on Justia Law

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The Department of Alcoholic Beverage Control (Department) revoked a nightclub’s liquor license after the club’s owner, GC Brothers Entertainment LLC dba The Palms (Petitioner), failed to respond to an accusation alleging several violations of California statutes and regulations. Petitioner appealed the Department’s decision to the Alcoholic Beverage Control Appeals Board (Appeals Board), which affirmed it, and now seeks a writ of mandate directing the Department to vacate its decision.   The Second Appellate District granted the writ. The court held that the licensing scheme and strong state policy in favor of resolving cases on the merits grant an ALJ discretion to issue an OSC when he or she receives even an arguably deficient motion for relief from default. It thus runs contrary to the spirit of the licensing scheme to insist that a licensee present its complete and best case for relief within seven days of service of a notice of default. Here, the ALJ not only apparently believed he had no discretion to liberally construe Respondent’s motion for relief, but also found that Respondent’s failure to establish an irrelevant issue—proper service—constituted a failure to show good cause for relief. The ALJ’s failure to appreciate the scope of his discretion and application of an improper standard requires that we remand the matter to afford the ALJ an opportunity to exercise his discretion in the first instance and, applying the proper standard, determine whether Petitioner has shown good cause for relief from default. View "GC Brothers Entertainment v. Alcoholic Beverage Control etc." on Justia Law

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LAD-T, LLC, dba Toyota of Downtown Los Angeles (LAD-T), and its parent company Lithia Motors Inc. (Lithia; collectively, Defendants) appeal from an order denying their motion to compel arbitration of Plaintiff’s claims brought under the California Fair Employment and Housing Act (FEHA). Defendants contend the trial court erred in finding Business and Professions Code section 17918 barred them from enforcing an arbitration agreement made in the name of an unregistered fictitious business, DT Los Angeles Toyota.   The Second Appellate District vacated the order denying Defendants’ motion to compel arbitration remanded for the trial court to address whether Defendants have waived their right to compel arbitration. The court ruled that if the trial court finds waiver, it should again deny the motion to compel arbitration; if it finds no waiver, it should grant the motion. The court explained that it agrees with Plaintiff that Defendants failed to act diligently in filing their fictitious business name statement. Accordingly, in the interests of justice the court vacated the court’s order denying the motion to compel arbitration and direct the court to again consider the motion to compel arbitration limited to the narrow issue of whether Defendants have waived their right to compel arbitration by their delay in filing the fictitious business name statement. View "Villareal v. LAD-T, LLC" on Justia Law

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Michael O’Connor signed up for a loyalty program when he bought a pair of shoes and socks from Road Runner Sports, Inc. and Road Runner Sports Retail, Inc. (collectively, “Road Runner”). He alleged Road Runner did not tell him the loyalty program was an automatic renewal subscription and that his credit card would be charged an annual subscription fee. After discovering he had been charged for four years of subscription fees, he joined as the named plaintiff in a class action lawsuit alleging Road Runner had violated California’s Automatic Renewal Law and consumer protection statutes. Road Runner asserted O’Connor was bound by an arbitration provision it added to the online terms and conditions of the loyalty program, some three years after he enrolled. Although Road Runner conceded O’Connor did not have actual or constructive notice of the arbitration provision, it contended O’Connor created an implied-in-fact agreement to arbitrate when he obtained imputed knowledge of the arbitration provision through his counsel in the course of litigation and failed to cancel his membership. The Court of Appeal disagreed this was sufficient under California law to prove consent to or acceptance of an agreement to arbitrate. Accordingly, the Court affirmed the trial court’s order denying Road Runner’s motion to compel arbitration. View "Costa v. Road Runner Sports" on Justia Law