Justia Business Law Opinion Summaries

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

In 2010, the City of Irvine adopted a plan to guide development of the Irvine Business Complex (the IBC), which covered roughly 2800 acres in the City. It also prepared and approved a program environmental impact report (the 2010 PEIR) that studied the effects of the development plan under the California Environmental Quality Act (CEQA). Several years later, real party in interest and appellant Gemdale 2400 Barranca Holdings, LLC (Gemdale), submitted a plan to redevelop a 4.95-acre parcel in the IBC. The City determined all the environmental effects of the proposed project had been studied in the 2010 PEIR, and it found the project would have no further significant environmental effects. It approved the project over the objections of Hale Holdings, LLC, the managing member of plaintiff IBC Business Owners for Sensible Development (petitioner). Petitioner then filed a petition for writ of mandate. The trial court granted the writ and entered judgment in favor of petitioner. The City and Gemdale appealed, arguing the City correctly approved the project. The Court of Appeal disagreed with the contentions made on appeal: (1) there was insufficient evidence showing the project’s greenhouse gas emissions were within the scope of the 2010 PEIR; and (2) no exemption applied because the project involved unusual circumstances which could cause significant environmental effects. As such, the Court affirmed the judgment. View "IBC Business Owners for Sensible Development v. City of Irvine" on Justia Law

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

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

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