Justia Business Law Opinion Summaries

Ford Motor Company (Ford) appealed from an order denying its motion to compel arbitration of Plaintiffs’ causes of action for breach of warranty, violations of the Song-Beverly Consumer Warranty Act (Civ. Code, Section 1790 et seq.; the Song-Beverly Act) and for fraudulent omission arising from alleged defects in a sports utility vehicle Plaintiffs’ purchased from the dealership, AutoNation Ford Valencia (AutoNation). The central question on appeal is whether Ford as the manufacturer of the vehicle, can enforce an arbitration provision in the sales contract between Plaintiffs and AutoNation to which Ford was not a party under the doctrine of equitable estoppel or as a third-party beneficiary of the contract.   The Eighth Circuit affirmed. The court concluded Ford cannot enforce the arbitration provision in the sales contract because Plaintiffs’ claims against Ford are founded on Ford’s express warranty for the vehicle, not any obligation imposed on Ford by the sales contract, and thus, Plaintiffs’ claims are not inextricably intertwined with any obligations under the sales contract. Nor was the sales contract between Plaintiffs and AutoNation intended to benefit Ford. View "Montemayor v. Ford Motor Co." on Justia Law

Plaintiffs were stockholders of Sempra when the Aliso Canyon Natural Gas Storage Facility (Aliso Canyon facility) experienced a natural gas leak (Aliso gas leak). Sempra was a California corporation “whose operating units invest[ed] in, develop[ed], and operate[d] energy infrastructure, and provide[d] gas and electricity services to [its] customers in North and South America.” One of Sempra’s wholly-owned subsidiaries, Southern California Gas Company (SoCalGas), maintained the Aliso Canyon facility. Defendants were either officer of Sempra or members of the Board or officers or members of the board of directors of SoCalGas at the time of the Aliso gas leak. When Plaintiffs filed the operative amended complaint, eight of the Board members had also been Board members at the time of the leak.  The trial court issued the judgment of dismissal, which Plaintiffs timely appealed.   The Second Appellate District affirmed. The court concluded that a director acts with “reckless disregard” of his duties, within the meaning of section 204, subdivision (a)(10)(iv), when the director (1) does an intentional act or intentionally fails to act in accordance with those duties, (2) with knowledge, or with reason to have knowledge, that (3) the director’s conduct creates a substantial risk of serious harm to the corporation or its shareholders. The court held that Plaintiffs have not alleged particularized facts supporting their Caremark theory of liability and thus have failed to plead to demand futility as required under section 800, subdivision (b)(2). View "Kanter v. Reed" on Justia Law

Samsara rented San Francisco office space from Rreef for a ten-year term, to be in “delivery condition” by November 1, 2019. Samsara provided an $11,384,368.00 letter of credit as “collateral for the full performance.” In 2021, Samsara sued, asserting that in July 2019, after Rreef had certified “delivery condition,” Samsara discovered that the premises were contaminated with lead and asbestos and that after Samsara conducted testing, Rreef cut off its access to the premises. The next day, Rreef served Samsara a 5-day notice to pay rent or quit based on Samsara’s alleged failure to pay rent for August-September 2021 ($1,826,697.95). Rreef subsequently filed an unlawful detainer complaint, alleging that Samsara stopped paying rent and had created a pretext to avoid its lease obligations. In October 2021, Rreef sought a writ of attachment in the unlawful detainer action, seeking $3,796,175.51: the amount demanded in the 5-day notice and $1,784,477.53 for October-November.The court granted Rreef’s application. The court of appeal reversed and remanded. The court rejected Samsara’s arguments that the amount that Rreef sought to attach must be reduced under Code of Civil Procedure 483.015(b)(4) by the amount remaining on the letter of credit and that the trial court erroneously refused to consider Samsara’s affirmative defenses of waiver and estoppel. However, the trial court declined to consider Samsara’s retaliatory eviction defense and whether Rreef sought attachment for an improper purpose. View "Rreef America Reit II Corp, YYYY v. Samsara, Inc." on Justia Law

The landlord is a four-member LLC with a single asset--a building in downtown Napa. The tenant, Stone Brewing, a large beer brewing and retail corporation, operates a brewpub in the building. Stone Brewing did not pay rent for several months during the pandemic. The landlord sued for unlawful detainer. Stone argued it was excused from paying rent because COVID-19 regulations and business interruptions triggered a force majeure provision in its lease.The trial court granted the landlord summary judgment, finding that the force majeure provision only excused performance if the claiming party was unable to meet its obligations due to factors outside its control; the tenant admitted during discovery it had the financial resources to pay rent during the period of the COVID-19 regulations but simply refused to do so. The court of appeal affirmed. The force majeure provision does not apply where the tenant had the ability to meet its contractual obligations but chooses not to perform due to financial constraints. The plain meaning of the force majeure provision does not support an interpretation that ties a party’s obligation to pay rent to its profitability or revenue stream instead of a delay or interruption caused by the force majeure event itself. View "West Pueblo Partners, LLC v. Stone Brewing Co., LLC" on Justia Law

Coast Restaurant Group appealed the dismissal of its case. The trial court sustained respondent AmGUARD Insurance Company’s demurrer to the operative complaint without leave to amend. Appellant contended the court erred in sustaining the demurrer because it showed business income losses resulting from governmental orders prohibiting on-site dining at its restaurant due to the COVID-19 virus were covered under the relevant insurance policy. The Court of Appeal concluded appellant did show there was potential coverage under the policy, but respondent showed that an exclusion in the policy applied to preclude coverage as a matter of law. View "Coast Restaurant Group, Inc. v. AmGUARD Insurance Company" on Justia Law

Reliant Life Shares, LLC (Reliant or LLC) was a profitable limited liability company owned in equal parts by three members. Two of them, SM and DC, were longtime friends and business partners. After DC stopped working out of the offices of Reliant because of a medical condition, no one at Reliant expected him to return to work, but SM assured CDC he remained a loyal business partner. Before long, however, SM and the third member of Reliant, SG, tried to force out DC, splitting the company’s profits and other revenues 50/50 and paying DC nothing. The LLC sued DC, seeking a declaratory judgment that he was properly removed as a member of the LLC. DC cross-complained against the parties and the LLC, alleging breach of contract, fraud, breach of the duty of loyalty and several other causes of action, seeking damages, an accounting and imposition of a constructive trust over funds obtained through violation of fiduciary duties. The jury awarded DC damages and valued his equity interest. The LLC, SM, SG, and several of their entities appealed. They assert a multitude of arguments for reversal of the judgment.   The Second Appellate District found no merit in any of the claims and affirmed the judgment in full. The court found that the trial court acted well within its discretion when it decided alter ego claims in phase one. Further, the court found no merit in the election of remedies argument, either as it relates to prejudgment interest or anything else. View "Reliant Life Shares, LLC v. Cooper" on Justia Law

Defendant appealed an order under Corporations Code section 7616 confirming the validity of an election removing the former board of the Lake Lindero Homeowners Association, Inc. (the Association) and electing a new board of directors. Defendant made two contentions: (1) the election was not valid because it contravened the Association’s bylaws and statutory provision governing board recall elections, and (2) section 7616 did not authorize Plaintiffs' action or the trial court’s order validating the recall election.   The Second Appellate District affirmed. The court held that the appeal is not moot: material questions remain regarding the construction of the bylaws and statutes governing the vote required to remove the association’s board of directors. Further, the court explained that the trial court correctly determined the former board was validly recalled under the Association’s bylaws and statutory law. The court explained that the trial court correctly recognized section 7616, subdivision (d) authorizes the court to “direct such other relief as may be just and proper” in connection with confirming the validity of a board election. Here, the complaint alleged Defendant, in his role as CEO and with the sanction of a majority of the former board, was engaged in frustrating the new board’s efforts to fulfill its duties under the Association’s bylaws. Having confirmed the validity of the new board’s election, the statute plainly authorized the trial court to enter an order confirming Defendant had no authority to act on behalf of the Association, as was “just and proper” under the Association’s bylaws. View "Lake Lindero Homeowners Assn., Inc. v. Barone" on Justia Law

During an investigation into possible violations of California overtime laws by appellant Nor-Cal Venture Group, Inc. (Nor-Cal), respondent Labor Commissioner for the State of California (Commissioner) subpoenaed Nor-Cal's business records. The Commissioner ultimately issued a wage citation to Nor-Cal, seeking over $900,000 in penalties and unpaid wages for alleged misclassification of about 40 restaurant managers. Nor-Cal challenged the wage citation in an “informal” adjudicatory hearing, and while that adjudication was pending, Commissioner issued a subpoena directing Nor-Cal’s “Person(s) Most Knowledgeable” on certain topics to testify at a deposition. When Nor-Cal refused, Commissioner filed a petition to a trial court to compel Nor-Cal to comply. The trial court agreed with Commissioner and ordered Nor-Cal to comply with the deposition subpoena. On appeal, Nor-Cal challenged the trial court’s order, arguing: (1) the California Government Code did not contemplate parties to adjudicatory informal hearings taking depositions for the purpose of discovery; and (2) because, under the trial court’s reasoning, only Commissioner could issue deposition subpoenas during the pendency of an informal adjudication, the trial court’s order permitting non-reciprocal discovery violated due process. The Court of Appeal reversed the trial court's order, finding that while Commissioner had broad power to issue investigative subpoenas to a company for suspected violations of the law, "that broad power ends upon initiation of adjudicative proceedings against the company." View "Garcia-Brower v. Nor-Cal Venture Group" on Justia Law

This appeal from summary judgment in favor of Sequoia Insurance Company (Sequoia) was one of thousands of cases nationwide involving a claim for business interruption coverage arising out of the COVID-19 pandemic. The outcome here turned on whether there was evidence creating a triable issue that the insured, Best Rest Motel, Inc. (Best Rest), sustained lost business income “due to the necessary ‘suspension’ ” of its operations “caused by direct physical loss of or damage” to the insured property. Best Rest contended its case fell directly within the exception discussed by the Court of Appeal in Inns-by-the-Sea v. California Mut. Ins. Co., 71 Cal.App.5th 688 (2021). Though the Court found Inns might undermine, if not entirely foreclose Best Rest’s case, the Court limited its holding by positing in dicta a “hypothetical scenario” where “an invisible airborne agent would cause a policyholder to suspend operations because of direct physical damage to property.” Here, the Court determined Best Rest's argument failed because the record contained no evidence creating a triable issue that the hotel “could have otherwise been operating” but for the presence of COVID-19 on the premises. Best Rest’s own evidence established the exact opposite was true: its vice president and operating partner testified that the phones were “ringing off the hook[ ]” with cancellations—not because of COVID-19 in the hotel, but because of government shut down orders and travel restrictions that shuttered tourism. Accordingly, the Court affirmed summary judgment in the insurance company's favor because there was no evidence creating a triable issue that COVID-19 in the hotel caused the claimed lost income. View "Best Rest Motel, Inc. v. Sequoia Insurance Co." on Justia Law

G Companies Management, LLC, a California limited liability company, appealed an order staying its cross-complaint against LREP Arizona, LLC, based on the forum selection clause in a loan agreement between the parties. The cross-complaint alleged multiple causes of action, all based on the assertion that the interest rates charged in the loan agreement were usurious under California law, and G Companies contended the trial court erred because a forum selection clause was not enforceable if doing so would deprive a California resident of the protections of the state's fundamental public policy. The trial court held enforcement of the selection clause was appropriate because: (1) the loan transaction was substantially related to the chosen forum (Arizona); and (2) California had a complicated relationship with usury and allowed unlimited interest rates to be charged in numerous circumstances. LREP contended the court’s decision was correct because the “many exceptions” to California’s interest rate limits demonstrate that the prohibition of usury “is not a fundamental policy” in California. To this, the Court of Appeal disagreed and therefore reversed. "By virtue of its inclusion in article XV, section 1, of our Constitution, and because it cannot be waived, we find that California’s usury law does reflect a significant public policy. It prohibits money lending at rates higher than specified, even while recognizing numerous exceptions to those rate limitations. The complexity of the law does not imply a lack of commitment to the policy. To the contrary, such a fine-tuned approach suggests that significant effort has gone into determining the circumstances under which interest rate limitations are necessary for the protection of Californians." View "G Companies Management, LLC v. LREP Arizona LLC" on Justia Law