Justia Business Law Opinion Summaries

Almost twenty years after four dentists formed a partnership to acquire and maintain a dental office building, the then-partners amended their agreement to allow one of the partners, Dr. Richard Hallberg, to assign his partnership interest to his living trust, and to substitute the trustee (then Dr. Hallberg) as a general partner in place of Dr. Hallberg individually. Litigation ensued 15 years later after Dr. Hallberg's death over whether, despite the substitution, Dr. Hallberg was still a partner at the time of his death, which would trigger buyout provisions that applied in the event of a partner's death.While a trust cannot act in its own name and must always act through its trustee, a trust is a "person" that may associate in a partnership under the Uniform Partnership Act of 1994 (UPA), based on the plain language of the UPA's definition of "person." The clear statutory language is reinforced by other provisions of the statute, as well as by its legislative history. The Court of Appeal held that Dr. Hallberg was not a partner when he died. Rather, his trust, or the trustee of his trust, was the partner. The court saw no contradiction between the terms of the UPA and California trust law. To the extent Presta v. Tepper, (2009) 179 Cal.App.4th 909, 918, suggested otherwise, the court disagreed. Accordingly, the court reversed the trial court's judgment holding that the trust was not a separate legal entity. View "Han v. Hallberg" on Justia Law

Appellant prevailed against respondents on causes of action that included fraud, conversion of property, and treble damages under Penal Code section 496. At issue on appeal, was the section 496 causes of action. In this case, even though the jury returned a special verdict that found respondents violated section 496(a), the trial court declined to award treble damages to plaintiff under the statute.The Court of Appeal held that section 496 is clear and unambiguous, and its remedial provisions should be applied where, as here, a clear violation of section 496(a) has been found. Therefore, the court reversed in part and remanded for the trial court to enter a modified judgment that includes treble damages on the section 496 causes of action. The court also reversed the trial court's denial of plaintiff's motion for attorney fees premised on section 496(c) and remanded. The court affirmed in all other respects. View "Switzer v. Wood" on Justia Law

In 2008, Lucinda Cox and Hollis Griffin, who had been friends for over 20 years, opened a cosmetology school together. Cox was one of the school's teachers and Griffin handled administration. The relationship deteriorated over time: Cox alleged Griffin intentionally filed a false police report accusing Cox of forgery and embezzlement, leading to Cox's arrest and seven-day incarceration. Cox's attorney asked the court to instruct the jury on false arrest (false imprisonment) and intentional infliction of emotional distress. Cox's complaint did not allege a cause of action for malicious prosecution, and the court did not instruct on malicious prosecution. After the jury awarded Cox $450,000 in a general verdict, the trial court granted Griffin's motion for judgment notwithstanding the verdict (JNOV) because under Hagberg v. California Federal Bank, 32 Cal.4th 350 (2004), citizen reports of suspected criminal activity can only be the basis for tort liability on a malicious prosecution theory. When a citizen contacts law enforcement to report a suspected crime, the privilege in Civil Code section 47(b) barred causes of action for false imprisonment and intentional infliction of emotional distress, even if the police report was made maliciously. Cox's only argument on appeal was the JNOV should have been reversed because "the elements of malicious prosecution were supported by substantial evidence in the record." The Court of Appeal rejected Cox's argument because an appellant "cannot challenge a judgment on the basis of a new cause of action [she] did not advance below." The Court found an exception to that rule allowing a change in theory on appeal if the new theory involves a question of law on undisputed facts. But that exception did not apply here because the record did not contain undisputed evidence establishing all elements of malicious prosecution. Accordingly, although the jury found that Griffin intentionally filed a false police report causing Cox emotional distress, the Court of Appeal was compelled to affirm the defense judgment. View "Cox v. Griffin" on Justia Law

In the underlying actions, the People asserted claims under Business and Professions Code section 17501 against real parties in interest and alleged that real parties sold products online by means of misleading, deceptive or untrue statements regarding the former prices of those products. The trial court sustained real parties' demurrer without leave to amend on the ground that the statute was void for vagueness as applied to real parties.The Court of Appeal granted the petition for writ of mandate seeking relief from the ruling regarding the section 17501 claims, and held that real parties failed to demonstrate any constitutional defect on demurrer. Regarding real parties' challenge to section 17501 as an unconstitutional regulation of free speech, as a preliminary matter, the court rejected petitioner's contention that the statute targets only false, misleading or deceptive commercial speech; the plain language of the statute restricts protected commercial speech and thus, the statute was subject to the test for constitutional validity set forth in Central Hudson Gas & Elec. v. Public Serv. Comm'n (1980) 447 U.S. 557, 566; and, because the undeveloped record was inadequate to apply the test, real parties' "free speech" challenge necessarily failed on demurrer. The court also rejected real parties' contention that section 17501 was void for vagueness, and rejected the facial and as-applied challenges. View "People v. Superior Court" on Justia Law

Plaintiff, while a director of a nonprofit public benefit corporation called Wildlife Waystation, filed suit against defendants alleging claims of self-dealing and misconduct. The trial court sustained defendants' demurrers to the complaint, which claimed that plaintiff no longer had standing when the Waystation board of directors removed her as a director.The Court of Appeal reversed and held that plaintiff did not lose standing to maintain this action when Waystation removed her as a director. Rather, she had standing under Corporations Code sections 5233, 5142, and 5223 at the time she instituted this action, and her subsequent removal as director did not deprive her of standing. The court also held that the trial court erred in sustaining the demurrer without leave to amend for failing to join the Attorney General as a indispensable party and notifying the Attorney General of the action. Accordingly, the court remanded with instructions. View "Summers v. Colette" on Justia Law

Jarvis Properties, a limited partnership, owns a parcel of land. Its general partners, Todd and James (brothers), each own a 50 percent interest in the partnership, which is less than the majority consent required to act on behalf of the partnership (Corp. Code, 15904.06(a)). The brothers cannot agree on what to do about the parcel. Their partnership agreement does not address decision-making deadlocks. James sought partition by sale, naming Todd and Jarvis Properties as defendants. Todd hired his own lawyer and hired a separate lawyer, Roscoe, to represent the partnership. James objected to having Roscoe represent the partnership and moved to disqualify Roscoe. James argued that Roscoe was not authorized to act by the requisite majority of the general partners and that Roscoe, who took the position that he was not subject to the direction of either partner and was being paid by Todd, was not acting in the best interests of the partnership and would run up unnecessary litigation costs and deplete the partnership’s limited assets. The court of appeal affirmed an order disqualifying Roscoe. James had a sufficient interest to challenge Roscoe’s authority, having demonstrated a risk that Roscoe's representation may advance Todd’s interests and may not be in the Partnership's best interests. On remand, the court may wish to explore options for resolving deadlock at the entity level and consider appointing a receiver or other neutral. View "Jarvis v. Jarvis" on Justia Law

Boschetti sued Pacific Bay, Sparks, and others, alleging that Boschetti and Sparks owned commercial real property through membership in limited liability companies and partnerships, that defendants provide real property management services for the real estate portfolio, and that Pacific Bay paid itself improper distributions in violation of its fiduciary duty to Boschetti. Sparks and Pacific Bay cross-complained, seeking dissolution of six of the out-of-state LPs and LLCs because Sparks and Boschetti could not coexist effectively given the litigation. Boschetti sought to avoid dissolution by buy-outs. When an action is brought to dissolve a California LP or LLC, the other partners or members may avoid the dissolution by purchasing, for cash, the interests owned by the party seeking dissolution, Corp. Code 15908.02(b), 17707.03(c)(1). These “buyout” provisions do not apply to an action to dissolve a general partnership, sections 16801–16807. An amended cross-complaint alleged that Boschetti and Sparks have a general partnership and sought an order dissolving that partnership. The out-of-state LPs and LLCs hold title to property owned by the general partnership. Boschetti again sought to avoid dissolution and moved to stay the dissolution of the LPs and LLCs. The court of appeal held that the trial court lacks authority to order the dissolution of the out-of-state entities. View "Boschetti v. Pacific Bay Investments Inc." on Justia Law

A default judgment may not be entered for an amount in excess of the demand in the operative pleadings when the plaintiff seeks an accounting or valuation of a business. A comparison of whether a default judgment exceeds the amount of compensatory damages demanded in the operative pleadings are to be examined on an aggregate basis, rather than on a claim-by-claim or item-by-item basis.The Court of Appeal held, in this case, that the default judgment awarding compensatory damages of $2,806,532 exceeded the $987,500 in compensatory damages specified in the operative complaint. Therefore, the default judgment was void to the extent of the coverage. The court remanded for the trial court to determine whether to give plaintiff the option to accept a modified default judgment in this reduced amount or to amend her complaint to demand greater relief. View "Sass v. Cohen" on Justia Law

Plaintiff engaged Pinel to sell his Danville home in 2008. In 2015 he filed a putative class action lawsuit on behalf of California residents who, in 2004-2011, used Pinel to buy or sell a home in California and had utilized TransactionPoint, Fidelity's real estate software program, alleging Pinel had entered into unlawful sublicensing agreements with Fidelity subsidiaries, allowing those entities to contract their settlement services to Pinel clients using TransactionPoint, and the Fidelity defendants paid unlawful sublicensing fees to Pinel for the TransactionPoint-generated business. The defendants cited the arbitration clause in plaintiff’s listing agreement, which contained a notice provision required by Code of Civil Procedure 1298(c) with spaces for the client’s and broker’s initials. Pinel produced a copy of plaintiff's listing agreement. The 1298(c) notice on the copy showed plaintiff’s initials; the space for Pinel’s initials was blank. Pinel submitted a declaration that the original listing agreement was destroyed in accordance with Pinel’s normal document retention policy; that the copy was obtained from the listing agent; that it was Pinel’s policy to allow a client to elect whether to assent to the arbitration provision by initialing paragraph 19B; that Pinel “would as a matter of policy and custom and practice adopt the election of the client and initial Paragraph 19B.” The court of appeal affirmed the denial of Pinel’s motion. Pinel failed to establish that it had initialed the arbitration provision. The language of that provision contemplated mutual agreement and that each would indicate assent by initialing the provision. View "Juen v. Alain Pinel Realtors, Inc." on Justia Law

Appellants, Sorokine and Koudriavtseva, are husband and wife. DBS and Kornach are California licensed contractors; DBS worked on their San Rafael house, while Kornach did not. Kornach, a longtime friend of Sorokine’s, had purchased materials for DIY projects at the property because of the discounts afforded to licensed general contractors. Sorokine does not speak English; Kornach often interpreted for Sorokine. After Koudriavtseva fired DBS, she hired unlicensed builders to complete the work and remedy alleged defects. DBS sued, alleging breach of contract and foreclosure of mechanic’s lien. Appellants’ response named as cross-defendants DBS, Komach, and ACIC, which had issued a surety bond to Kornach. The court of appeal reversed a directed verdict against appellants on a claim they violated an Internal Revenue Code provision and awarding $20,000 in sanctions and $122,995 in attorney fees against them. There was no evidence that appellants knew that 1099s issued to Komach were incorrect. The court also reversed directed verdicts against appellants on claims they had asserted against others; appellants were unable to prove damage because the trial court had granted a motion in limine preventing appellants from introducing evidence of payments made to an unlicensed contractor. The court also reversed an award of cost of proof damages to Kornach based on requests for admissions propounded by a different party. View "Design Built Systems v. Sorokine" on Justia Law