TVA April Newsletter

  Legal News
_April 2017

“You may not be interested in law, but law is interested in you.” —Leon Trotsky *

* Well, no, Trotsky didn’t quite say that. The quote attributed to him says “war,” not “law.” But Trotsky didn’t say that either — he said “dialectic,” a word whose meaning takes a lawyer’s skill to twist and torture it into something resembling “war.” But I am fairly certain misquoting a misquote is not actionable. And if it is, well, that’s what the asterisk’s for.

But the misquote is no less true for being misquoted, and and the derivative misquote might be truer still. To follow the law one must follow legal news. And that is becoming harder every day. Lawmakers pass new and exciting laws with great regularity, but legislatures are like the old major television networks: we now have as many agencies and bureaus and commissions than we have cable and internet streaming media services, publishing more laws than we could binge-consume in a lifetime. Mandatory references in the CFR alone — “shall,” “must,” “prohibited,” etc. — number over a million. Legacy legislators could never have produced content in such volumes, let alone review them. “The legislator,” said the father of legislative reference work, Charles McCarthy, “is a busy man; he has no time to read.”

And that is before we get to the court reporters published by our judiciary. To avoid what strikes their consciences as unhappy results, judges replace those of our rules that are perfectly understandable under mountains of abstruse exceptions. This often seems unnecessary: the insurance policy that strict rules take out against their negative consequences is predictability — clarity is the only premium they charge. When the legal system stops paying that premium, the coverage lapses, and the only predictability that remains is that we shall be ruled by a majority of robed persons.

The 18th century English jurist William Blackstone once remarked:

“In this country we do not tolerate criminal statutes like those of the emperor Caligula, who wrote his laws in very fine print and displayed them high on tall pillars, ‘the more effectually to ensnare the people.'”

But the sentiment is, sadly, an anachronism. We moderns write very fine laws indeed, and stack them high as the sun.

Here are some notable and amusing recent entries from those ever-swelling volumes.

Timothy M. Kowal, Esq.
Shareholder

Does the Judiciary Understand Judicial Admissions?
by Brendan M Loper, Esq.

The judicial admission is a simple concept: when you take a position in a pleading, discovery response, or open court, you’re stuck with it. But whenever you see such a plain and sensible rule, expect to find enough exceptions to fill a volume.

For a while, things seemed to go all right. As recently as 2010, the Court of Appeal for the Sixth District of California held unequivocally that “a pleaded fact [i.e. in a complaint] is conclusively deemed true as against the pleader.” (Dang v. Smith (2010) 190 Cal.App.4th 646, 657.) And in 2012, Thurman v. Bayshore Transit Management, Inc., 203 Cal.App.4th 1112 at page 1155, the Fourth District held “the trial court may not ignore a judicial admission in a pleading, but must conclusively deem it true as against the pleader.” So far so good.

But in 2013, the Second District Court of Appeal held that “not every factual allegation in a complaint automatically constitutes a judicial admission.”  (Barsegian v. Kessler & Kessler (2013) 215 Cal.App.4th 446, 452.) Instead, a judicial admission “is ordinarily a factual allegation by one party that is admitted by the opposing party.” That is, it is less one party’s admission than it is a joint stipulation.

What to make of this apparent retelling of the doctrine?

The logic underlying the Second Appellate District’s opinion appears flawed; it contends, for example, that if the Dang court’s interpretation were true, “a plaintiff would conclusively establish the facts of the case by merely alleging them, and there would never be any disputed facts to be tried.” (Id.)  But as the Barsegian court itself noted, a judicial admission is a “conclusive concession[] of the truth…by the party whose pleadings are used against him or her.” (Id. at 451 (citing Myers v. Trendwest Resorts, Inc. (2009) 178 Cal.App.4th 735, 746).)  In other words, the doctrine may be used against the pleader, but not the responsive party.  Simply pleading facts would not, as the Barsegian court incorrectly implies, “conclusively establish the facts of the case.”

As retired Judge Michael Marcus helpfully points out, Barsegian “misses the point that judicial admissions also occur when language is inconsistent with and not in support of a proponent’s position.” In this way, Judge Marcus explains, a judicial admission is “like self-serving hearsay, which generally has no exception for its admissibility since it is inherently untruthful, an allegation favorable to the party asserting it is just that – a claim that will have to be proven at a contested hearing. In contrast, an inconsistent statement is admissible hearsay,” as the Dang court explained.

One wonders how the Barsegian court so obviously misapplied the law. We would posit the Barsegian decision might have been driven by equitable more than legal concerns. Buried later in the opinion, for example, is a discussion about how the moving parties sought to bind the pleading party to its judicial admissions at one point in the case, while disclaiming the truth of said admissions later in the case. It appears the Barsegian court disliked this attempt to blow hot and cold with the doctrine. Unfortunately, its response throws a perfectly sensible and intelligible doctrine into confusion.

Hard cases not only make bad law, they ruin good law.

Black-and-white statute of limitation for attorney-malpractice actions gets a fresh coat of gray
by Teddy T. Davis, Esq.

The one-year period to bring an action for malpractice typically begins after the lawyer last represented you, often easily identified as the date of formal withdrawal. But can it really be that easy?

A recent California Court of Appeal decided it’s not, holding instead the relationship ended when the attorney served the client with a motion for withdrawal as counsel, and NOT when the motion was granted 44 days later.

In Flake v. Neumiller & Beardslee, a former client filed suit against his former attorneys for legal malpractice. The complaint was filed on what the former client believed was the last day before the statute of limitations on legal malpractice ran. In response to the complaint, the attorneys moved for summary judgment contending the claims were barred by the statute of limitations. In their motion, the attorney-defendants argued the statute of limitations began to run when they served the former client with the withdrawal motion on November 25th.

The former client opposed the motion for summary judgment contending: he did not have any recollection of receiving the withdrawal motion; the facts alleged in the withdrawal motion regarding an agreement that another attorney would take over representation were false; and that, in any event, the statute of limitation did not begin to run until after the withdrawal motion was granted on January 7th of the following year.

The trial court ultimately agreed with the attorney defendants, holding the complaint for legal malpractice was untimely and barred by the statute of limitations.

The former client appealed. In ruling on the appeal, the Court of Appeal first explained that in instances where the attorney unilaterally withdraws as counsel, the attorney-client relationship ends when “the client actually has or reasonably should have no expectation that the attorney will provide further legal services.” Thus, the Court held that the client’s subjective belief did not control.

It also held that a final court order was not required to sever the attorney-client relationship. Instead, the Court looked to when a reasonable person would conclude his or her attorney was not going to perform additional legal services on their behalf. In doing so, the Court found the trial court’s determination that this occurred either when the attorney told the client after the verdict that the client would not be responsible for an attorneys’ fees award, causing the client to believe his part in the litigation was over; or when the client received the withdrawal motion in which the attorney-defendants represented that another attorney was handling the post-judgment motions and appeal. As both occurred before the withdrawal motion was granted, the former client’s complaint was time barred and he could not pursue his claims for legal malpractice.

As always, the law favors the vigilant, before those who sleep on their rights.

Litigation-funding industry continues to grow
by Brendan M. Loper, Esq.

With the recent publicity of Hulk Hogan’s lawsuit against Gawker Media, and specifically the funding of the lawsuit by third-party Silicon Valley billionaire Peter Thiel, much attention has been drawn to the practice of “litigation funding.”

The term refers to the practice in which an outside party funds all or part of a plaintiff’s litigation in exchange for a portion of the recovered proceeds.  The rise of the practice stems partially from the significant cost of litigation; faced with incurring hundreds of thousands of dollars in attorneys’ fees – if not more – many plaintiffs are reluctant to commence a lawsuit, even a righteous one.

Enter a litigation funding firm.  Essentially, rather than the attorney taking the case on a contingency basis, the third party funds the case on a similar basis.  (At least, that’s the basic conceptual model.  Some larger litigation funding firms have extended their reach to other avenues, including purchasing judgments to pursue.)

As the application of the practice has grown, and as attorneys and clients have become more comfortable with litigation funding, the industry has boomed.  One of the preeminent litigation funding firms, Burford Capital Ltd., recently announced that its profit after tax rose 75 percent from the prior year, and the firm committed $378 million to new investments (a yearly increase of 83 percent).  If, as expected, the practice becomes even more commonplace, expect that growth to continue.

If a choice-of-law clause matters, so does the forum
by Timothy M. Kowal, Esq.

A recent opinion of the California Court of Appeal held a New York choice-of-law clause was ineffective to enforce a party’s waiver of jury trial. In Rincon EV Realty LLC v. CP III Rincon Towers, Inc., New York-based parties negotiated a loan agreement with a New York choice-of-law clause, signed the agreement in New York, and disbursed the funds in New York, with the funds ultimately going to build apartments in San Francisco. In a lawsuit following a default of the loan, the California court nonetheless held that, although New York law generally allows jury-trial waivers, and although the parties expressly agreed to New York law, the waiver would violate a fundamental policy of California and thus was unenforceable.

Shareholder protections also are implicated by this ominous exception to choice-of-law enforceability. Under Nevada law, for example, judgment creditors may not obtain a turnover order against a shareholder of a Nevada corporation – the shares may not be seized, and the sole remedy is a charging order against future distributions. (Nev. Rev. Stats. 78.746.) Predicting a judgment creditor would seek to apply contrary California policy, TVA recently filed a complaint for declaratory relief in Nevada state court, seeking an order that Nevada’s shareholder protections apply. To avoid the outcome and dismiss the suit, the judgment creditor was forced to promise, on the record, that it would not seek to overcome Nevada’s shareholder protections.

As a result of TVA’s Nevada lawsuit, when the creditor sought to enforce its judgment in California court, the creditor had to acknowledge that Nevada law applied.

Beware of depending unduly on a choice-of-law provision.

UPDATE: Collecting Against Spendthrifts in Bankruptcy, Judgment Collection
by Timothy M. Kowal, Esq.

In our February newsletter, we noted the California Supreme Court was reviewing whether the ambiguous spendthrift protections of Probate Code sections 15300-15309 meant to impose an absolute cap of 25% against creditors. The Court has answered: “no.”

In its recent decision, styled Carmack v. Reynolds, the Court “hold[s] that the Probate Code does not impose such an absolute limit on a general creditor’s access to the trust.” Instead, “a general creditor may reach a sum up to the full amount of any distributions that are currently due and payable . . . . and separately may reach a sum up to 25 percent of any payments that are anticipated to be made to the beneficiary” in the future. The Court provides a helpful hypothetical near the end of its opinion to illustrate how its somewhat complicated holding might apply.

It’s an interesting opinion that concludes the legislature probably made an oversight in drafting the statutes, which gave rise to the confusion.

Employer underpays departing employee $300, gets stuck with $30,000 for employee’s legal fees
by Timothy M. Kowal, Esq.

Is an employee leaving? Pay up. Pay in full. There is no “A for effort.” Pay it all.

In last month’s Court of Appeal opinion in Beck v. Stratton, employee leaves and employer asks his reputable payroll company, ADP, to cash him out. For reasons that “no one at trial court explain,” ADP issued a check for $303.55 less than the total $1,075 the employee was entitled to. Employee filed with the Labor Commissioner, who awarded $6,060 against the employer.

The employer should have cut his losses there, but he decided to go for the gusto and appeal, and lost again. To the employer’s surprise, however, the superior court case he believed to have been a limited civil action turned out to have been an unlimited civil action. That meant the prevailing employee was entitled to his fees, adding $31,365 to the penalty – over 100 times more than the original underpaid amount.

Out of the Mouths of Pro Se Litigants: Trespass to Chattel Children
by Timothy M. Kowal, Esq.

In a recent Eastern District Court ruling dismissing complaint, a pro se litigant alleges the city of Tulare took his children, and demands return of his “non-contraband property” after the city “arbitrarily and capriciously deprived Plaintiff of property [i.e., his kids] under color of law . . . .” The court dismisses with leave to amend, noting trespass – whether to property, chattel, or children – sounds in state law, not federal, and might we suggest a 42 USC 1983 claim instead?

“What’s in a vowel?”
by Timothy M. Kowal, Esq.

A common trick for misleading customers, apparently, is the banking industry’s use of the term “financial advisor” — spelled with an “o.”

“Advisor” is apparently an unregulated title that anyone can use, whereas the title “adviser” — spelled with an “e” — can only be used if the employee has a fiduciary responsibility to the client.

“Advisors can sell you the third, fourth, fifth or least beneficial product to you,” [research and former investment manager Larry] Elford said. “They do that a great deal of the time if it makes them more commissions, or if their bank manager is telling them they need to sell more of the house-brand product.”

If someone on your team of professionals starts converting e’s to o’s – like “advisor,” or “lawyor” perhaps, or, somewhat more conspicuously, “trustoo” – beware.

Irish Court Awards €20,000 Damages To Woman Who Bumped Knee On Restaurant Table
by Timothy M. Kowal, Esq.

Mention the term “frivolous lawsuit” and the most common anecdote on tap is the woman who sued McDonald’s because she apparently didn’t understand that coffee is hot. But poor Stella Liebeck was actually quite seriously scalded by McDonald’s undrinkably hot coffee, kept near boiling for commercial rather than culinary purposes.

So let us freshen up our anecdotes. Replace Ms. Liebeck with Annette O’Connor. And replace the commonplace-turned-actionable fact “coffee is hot” with “tables have legs.” To wit, via law prof Jonathan Turley:

“O’Connor booked Mother’s Day weekend at The Mullingar Park Hotel with five friends in March 2011.  She was shown to their table by the restaurant manager.  The manager pulled out her chair and she then sat down and pulled her chair under the table. That caused her knee to hit the table leg.  She finished the meal but saw a doctor later. She insisted that knee pain interfered with her work as a hairdresser.

“The case turned on liability for hidden dangers and the negligence of not warning O’Connor.  [Not warning her that tables have legs, mind you. –Ed.] It further insisted placing a table cloth to cover the legs was “a reckless or careless and inattentive manner.”

“The hotel also argued contributory negligence but the court ruled that it could not be applied to the O’Connor because the restaurant specifically directed her to the table and, so directed, was not expected to make a unilateral investigation of the underside of the table.”

For someone whose own profession involves putting chemicals and sharp objects near her customers’ heads, O’Connor’s gambit here seems not especially propitious.

Or, if you have a soft spot for sore knees, try this one: Lawyer Files Class Action Against Donut Shop for Putting Margarine on Bagels Instead of Butter.