Case Name: Luna Owners’ Association v. LB/L-KB Terra Serena LLC, et al.
Case No.: 2015-1-CV-276349

Plaintiff Luna Owners’ Association brings this action against defendants LB/L-KB Terra Serena LLC (“Terra Serena”) and KB Home South Bay, Inc. (“KB Home”), the developers of the residential housing project that Luna now manages. Luna alleges that the following elements of the project are defective in some manner: the building envelope system and its appurtenant components, water resistive barrier systems, the exterior and interior paint systems, the stucco system, the plumbing and sewage systems, the electrical system, the mechanical/HVAC systems, the structural and fire resistive systems, the roofing system, the asphalt roadway and concrete flatwork systems, the podium slab system, the site drainage systems, planter boxes and raised planter systems, entry door and sliding glass door systems, window systems, exterior deck systems, gypsum board systems, building insulation systems, perimeter metal gate systems, utility supply line systems, water heater systems, exterior lighting systems, building foundation/soils compaction systems, swimming pool systems, and other building components. (Complaint, ¶ 39.) Luna also served a notice of claim as required by title 7 of section 896 of the Civil Code (“title 7” or the “Right to Repair Act”), which more specifically describes the violations at issue. (Id., ¶ 34.)

On February 15, 2015, Luna filed this action for (1) breach of functionality standards established by title 7, (2) negligence, (3) strict liability, (4) breach of implied warranty, (5) breach of express warranties, (6) breach of subcontracts, and (7) breach of fiduciary duty and conspiracy to breach fiduciary duty. All claims other than the sixth cause of action for breach of subcontracts are asserted against Terra Serena and KB Home.

Currently at issue is Terra Serena and KB Home’s motion for summary adjudication of the following “issues”: (1) plaintiff’s claims arising out of seven specified components of the project are barred by the statute of limitations for title 7 claims and (2) plaintiff’s claim for attorney fees lacks merit.

I. Requests for Judicial Notice

Defendants’ request for judicial notice of filings in this action and recorded documents is GRANTED. (See Evid. Code § 452, subds. (d) and (h); Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 265 [“[A] court may take judicial notice of the fact of a document’s recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document’s legally operative language, assuming there is no genuine dispute regarding the document’s authenticity. From this, the court may deduce and rely upon the legal effect of the recorded document, when that effect is clear from its face.”].)

Luna’s request for judicial notice of recorded documents is also GRANTED.

II. Statute of Limitations

Defendants contend that the applicable statutes of limitations bar the following claims: (1.1) claims arising out of the installation and operation of the plumbing and sewer system, (1.2) claims arising out of the electrical system, (1.3) claims related to cracks that display significant vertical displacement or that are excess in the pathways, driveways, hardscape, sidewalls, sidewalks, and patios, (1.4) claims related to interunit noise transmission standards, (1.5) claims related to the irrigation systems and drainage, (1.6) claims related to the application of paint and stains causing deterioration of building surfaces for the length specified by the paint or stain manufacturer’s representations, and (1.7) claims related to the landscaping systems.

Luna opposes this aspect of defendants’ motion on both procedural and substantive grounds.

A. Procedural Issues

Luna contends that defendants’ motion is procedurally improper with respect to this set of issues, because summary adjudication of these issues would not completely resolve any cause of action. Luna urges that its claims arising from the various components of the project are interrelated and do not constitute separate causes of action.

Defendants acknowledge that Luna has grouped the various alleged defects in the project into a series of causes of action in its complaint, each of which addresses the totality of alleged defects. However, they contend that each set of claims identified in their motion’s first issue constitutes a separate cause of action despite the manner in which Luna framed its complaint. (See Code Civ. Proc., § 437c, subd. (p)(2) [“A defendant or cross-defendant has met his or her burden of showing that a cause of action has no merit if that party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to that cause of action.”], italics added.)

As an initial matter, defendants did not frame their motion as a motion for summary adjudication of causes of action; rather, they seek summary adjudication of the “issue” that “plaintiff has made claims that are time barred pursuant to Civil Code §896,” and the sub-issues set forth above. These are not the sort of “issues” that may be summarily adjudicated, and defendants’ motion fails for that reason alone. (See Code Civ. Proc., § 437c, subd. (f)(1) [summary adjudication available as to “issues of duty” only], italics added; Schmidlin v. City of Palo Alto (2007) 157 Cal.App.4th 728, 743-744 [“A motion for summary adjudication tenders only those issues or causes of action specified in the notice of motion, and may only be granted as to the matters thus specified.”].) Notably, because of the way their motion is framed, it is unclear whether defendants seek relief with respect to portions of Luna’s first cause of action only, or with respect to all six causes of action asserted against them in the complaint (which would be improper under the law discussed below). This ambiguity is fatal to the motion under Schmidlin. (At p. 744 [noting that the opposing party must be fairly appraised of the scope of a request for summary judgment or adjudication].)

Setting this problem aside for the moment, defendants are correct that “a party may present a motion for summary adjudication challenging a separate and distinct wrongful act even though combined with other wrongful acts alleged in the same cause of action.” (Lilienthal & Fowler v. Superior Court (Karr) (1993) 12 Cal.App.4th 1848, 1854-1855; but see Bagley v. TRW, Inc. (1999) 73 Cal.App.4th 1092, 1095, fn. 2 [questioning Lilienthal, particularly in the context of a motion seeking summary adjudication of voluminous “issues”].) Winston Square Homeowner’s Assn. v. Centex West, Inc. (1989) 213 Cal.App.3d 282 held that separate construction defects may give rise to separate claims under the primary rights theory for defining a cause of action, which California follows. (At pp. 287-298.) Although Luna correctly notes that Winston arose in the context of a judgment entered following trial, there is no reason to disregard it on that ground since the primary rights theory also determines what constitutes a separate cause of action for purposes of summary adjudication. (See Quiroz v. Seventh Ave. Center (2006) 140 Cal.App.4th 1256, 1277, fn. 25 [court may enter summary adjudication based on the statute of limitations following the primary rights theory]; Hindin v. Rust (2004) 118 Cal.App.4th 1247, 1256-1257 [discussing Lilienthal in the context of the primary rights theory].)

Consequently, defendants could obtain summary adjudication of claims arising from separate construction defects under appropriate circumstances. However, as discussed below, here, defendants present inadequate evidence of the specific factual basis for Luna’s claims, as opposed to their general subject matter. Thus, it is impossible to determine whether one or several claims have actually been asserted by Luna under the primary rights theory, a theory which defendants do not even discuss in their moving papers. Defendants accordingly do not establish that the issues they identify are appropriate for separate resolution on summary adjudication.

On reply, defendants change their approach and argue that their motion pertains to separate “claims for damages.” This argument also fails because a motion for summary adjudication is properly addressed to a claim for punitive damages only. (See Code Civ. Proc., § 437c, subd. (f)(1) [a party may move for summary adjudication of a claim for damages if it contends that “there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code”]; DeCastro West Chodorow & Burns, Inc. v. Superior Court (Initial Amalgamation Ltd.) (1996) 47 Cal.App.4th 410, 421 [“The reference to ‘one or more claims for damages’ … is … qualified by, and limited to, punitive damages.”].)

Defendants’ motion consequently fails on procedural grounds, as well as on the substantive grounds discussed below.

B. The Right to Repair Act

The Right to Repair Act applies to individual housing units first sold on or after January 1, 2003. (Lantzy v. Centex Homes (2003) 31 Cal.4th 363, 374, fn. 8.) In Burch v. Superior Court (Premier Homes, LLC) (2014) 223 Cal.App.4th 1411, the Court of Appeal explained the impetus for and impact of the Act:

The California Supreme Court in Aas v. Superior Court (2000) 24 Cal.4th 627, 647, 652–653, 101 Cal.Rptr.2d 718, 12 P.3d 1125 (Aas ), held that deficiencies in residential construction were actionable in tort only if they caused property damage or personal injury. The Legislature enacted the Right to Repair Act in 2002 abrogating the holding in Aas by allowing the recovery of damages for specified defects resulting in only economic loss. [Citations.] The act sets forth construction standards the violation of which constitutes a deficiency in construction for which a “builder,” as defined in the act, and to some extent a general contractor and others, can be held liable to a homeowner without the need to show property damage or other injury. (Civ. Code, §§ 896, 897, 942.)
(At p. 1417.) As recognized by Burch, “the act does not provide an exclusive remedy and does not limit or preclude common law claims for damages for construction defects that have caused property damage.” (Id. at p. 1418, citing Liberty Mutual Insurance Company v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98, 105.)

The Act sets forth building standards for various enumerated functions and components of a structure. (See Civ. Code, § 896.) As discussed, violations of these standards are actionable whether or not they cause property damage or personal injury. While the standards set forth in section 896 “are intended to address every function or component of a structure,” “[t]o the extent that a function or component of a structure is not addressed by these standards, it shall be actionable [under the Act] if it causes damage.” (Civ. Code, § 897; Lantzy v. Centex Homes, supra, 31 Cal.4th at p. 374, fn. 8 [a homeowner may sue under the Act “for (1) specific violations of the statutory standards (Civ. Code, § 896) and (2) any other ‘function or component of [the] structure,’ to the extent inadvertently omitted from the standards, that causes damage (id., § 897)”].) Section 896 establishes statutes of limitations specific to several of the functions and components discussed therein; where a specific statute does not apply, “no action may be brought to recover under this title more than 10 years after substantial completion of the improvement but not later than the date of recordation of a valid notice of completion.” (Civ. Code, § 941, subd. (a).)

Where it applies, the Act expressly supersedes the statutes of limitations applicable to other construction defect claims. (Civ. Code, § 941, subd. (d) [“Sections 337.15 and 337.1 of the Code of Civil Procedure do not apply to actions under this title.”]; Lantzy v. Centex Homes, supra, 31 Cal.4th at p. 382, fn. 16 [“Where it applies, the new scheme expressly supersedes section 337.15, though it retains the basic premise that suit may commence no later than 10–years after substantial completion of the project.”].)

C. Analysis

Defendants urge that the various claims at issue in this motion are subject to certain statutes of limitations established by section 896 of the Act, which range from one to five years in length. They do not contend that Luna’s claims would be barred by the default statute of “10 years after substantial completion of the improvement but not later than the date of recordation of a valid notice of completion.” The parties agree that the statutes at issue run from the “close of escrow,” but disagree regarding when escrow closed for purposes of this action. The Court need not resolve their dispute on this point, however, because defendants’ motion suffers from a more fundamental problem.

To show which of the various statutes of limitation established by the Act apply to the claims at issue in their motion, defendants rely on three pieces of evidence: Luna’s notice of claim; a declaration by Tim Fitzpatrick, a construction litigation consultant; and a declaration by R. Scott Diaz, their attorney. In his declaration, Mr. Fitzpatrick identifies groups of claims set forth in the notice of claim and then states in conclusory fashion, “[b]ased upon my experience, review, and observations made of the property, knowledge of Plaintiff’s claims and allegations, and review of information provided thus far by Plaintiffs, these claims involve” a particular component of the project and are consequently subject to the statute of limitations corresponding to that component. Similarly, in his declaration, Mr. Diaz states that “[b]ased upon my knowledge of the claims asserted by Plaintiff in its Notice of Claim, Complaint, and review of the information provided by Plaintiff,” Luna is or is not making certain claims.

Luna objects the statements in Mr. Fitzpatrick’s declaration on various grounds, including that they lack foundation and constitute improper expert testimony. (Evid. Code, §§ 801-803.) These objections have merit. “[W]hen an expert’s opinion is purely conclusory because unaccompanied by a reasoned explanation connecting the factual predicates to the ultimate conclusion, that opinion has no evidentiary value.” (Jennings v. Palomar Pomerado Health Systems, Inc. (2003) 114 Cal.App.4th 1108, 1117.) Similarly, Mr. Diaz’s conclusory statements based on his knowledge of Luna’s claims and review of unspecified “information” provided by Luna lack an adequate foundation. Defendants do not identify or provide to the Court the “information” from Luna that they rely on in characterizing its claims, although evidence of the factual basis for Luna’s claims could obviously be obtained through discovery.

Thus, the only evidence properly before the Court regarding the scope of Luna’s claims is the complaint—which defendants do not contend shows on its face that any claims are time-barred—and the notice of claim. As with the complaint, it is simply not self-evident from the face of the notice of claim which of the various statutes of limitation established by the Right to Repair Act apply to the claims listed therein. For example, defendants contend that the four-year statute for violations of subdivision (e) of section 896 applies to the following claims from the notice of claim:

32. Rust from boiler adversely affects roof materials and may adversely affect roof warranty;
…

46. Defective design, materials, construction and installation of:
t. Defective design, materials, construction and installation of drain, waste and vent systems;
u. Defective design, materials, construction and installation of plumbing systems and plumbing lines, …;
v. Defective design, materials, construction, and installation of hot water heaters ….

Subdivision (e) of section 896 provides that “[p]lumbing and sewer systems shall be installed to operate properly and shall not materially impair the use of the structure by its inhabitants.” Taking the claims identified by defendants in order, the source of “[r]ust from [a] boiler” is not clear; while it could arise from improper installation of the plumbing and sewer systems, it could also arise from a problem subject to the default statute under the Act, such as corrosion or leaks in the plumbing, sewer, and utility lines (Civ. Code, § 896, subd. (a)(14)-(15)) or other “water issues” set forth in subdivision (a). It is not apparent that “drain, waste and vent systems” have anything to do with plumbing and/or sewer systems. While the remaining items do include a reference to defective installation of the plumbing system, depending on the specific issue with that system, the longer statute applicable to corrosion or leaks may apply. Returning to the sub-“issue” identified by defendants’ motion, it is consequently not established that any and all of Luna’s “claims arising out of the installation and operation of the plumbing and sewer system” are subject to the four-year statute.
Defendants similarly fail to meet their initial burden as to the remaining six sub-issues. The Court need not address each of these sub-issues in detail given that defendants’ motion is procedurally improper in the first instance. Significantly, Mr. Fitzpatrick and Mr. Diaz declare that they do not even believe Luna is making claims related to the majority of the sub-issues identified by defendants’ motion, but such claims could be encompassed by the broad descriptions set forth in the notice of claim. (See Decl. of Tim Fitzpatrick ISO Mot., ¶¶ 16, 18, 20, 22-24, 26, 28-29; Decl. of R. Scott Diaz ISO Mot., ¶¶ 23, 26-32.) Defendants’ request for summary adjudication of such hypothetical issues is wholly improper. (See State ex rel. Wilson v. Superior Court (Bristol-Myers Squibb Co.) (2014) 227 Cal.App.4th 579, 592, fn. 14 [even where the parties stipulate to such a result, the summary adjudication procedure should not “serve as a mechanism for obtaining advisory rulings and appellate review on hypothetical issues”].)

Limitations issues may be resolved on summary judgment only where the facts are uncontradicted and susceptible of only a single legitimate inference. (San Diego Unified School Dist. v. County of San Diego (2009) 170 Cal.App.4th 288, 300.) Here, defendants have introduced inadequate evidence regarding the factual basis for Luna’s claims, and the Court is unable to determine which statutes of limitations will ultimately apply.

Consequently, the motion for summary adjudication is DENIED as to issue 1, on both procedural and substantive grounds.
Luna’s objections to Mr. Fitzpatrick’s declaration (objection nos. 1-15) are SUSTAINED. (Evid. Code, §§ 801-803.) The Court does not rule on Luna’s objections to Mr. Diaz’s declaration or defendants’ objections to Luna’s evidence, as these objections are not material to its holding. (See Code Civ. Proc., § 437c, subd. (q).)

III. Request for Attorney Fees

While Luna did not raise a procedural challenge to this aspect of defendants’ motion, the motion for summary adjudication of Luna’s request for attorney fees in this action is procedurally improper and premature. A request for attorney fees is not a cause of action or a request for damages that may be resolved on summary adjudication. (Code Civ. Proc., § 437c, subd. (f)(1); DeCastro West Chodorow & Burns, Inc. v. Superior Court, supra, 47 Cal.App.4th at p. 421.)

Defendants’ motion is consequently DENIED as to issue 2.

Case Name: Barbara Joan Antrobus v. Vallco International Shopping Center, LLC, et al.
Case No.: 2014-1-CV-268988

Factual and Procedural Background

This is an action for premises liability. In her complaint, plaintiff Barbara Joan Antrobus (“Plaintiff”) alleges the following: On August 24, 2013, Plaintiff was shopping at a mall owned by defendant Vallco Shopping Mall, LLC (“VSM”), where she “approached a set of stairs that was insufficiently distinguished from the level surface of the walkway.” (Compl., ¶ 6.) Due to the design of the stairway, inadequate lighting, and the lack of signage or warnings, Plaintiff missed a step and fell, causing her to suffer personal injuries. (Compl., ¶¶ 6-7.) The complaint asserts one cause of action for premises liability.

On February 11, 2016, VSM served Plaintiff with a demand to submit to an independent medical examination (“IME”). (See Declaration of Patrick J. Torsney at Exhibit A.)

On February 24, 2016, Plaintiff objected to the demand because the scheduled IME was not within 75 miles of her residence as required under Code of Civil Procedure section 2032.220. (See Declaration of Patrick J. Torsney at Exhibit B.)

The IME was scheduled to occur on March 31, 2016 in Larkspur, California. Plaintiff did not appear for the IME. Following Plaintiff’s nonappearance, VSM (through counsel) sent two emails to Plaintiff’s attorney in an attempt to resolve the discovery dispute and reschedule the IME. (See Declaration of Patrick J. Torsney at Exhibit C.) The parties were unable to resolve the discovery dispute and now seek intervention from the Court.

Currently before the Court is (1) VSM’s motion to Compel IME and (2) Plaintiff’s motion for protective order. VSM filed a request for judicial notice in conjunction with the motion. Both sides filed written oppositions. VSM filed reply papers. VSM seeks an award of monetary sanctions in conjunction with the motions.

Motion to Compel IME

VSM moves to compel Plaintiff to attend an IME because she failed to appear at her previously scheduled examination and her physical condition is directly in controversy in this personal injury action.

Request for Judicial Notice

VSM requests judicial notice of a copy of the GOOGLE MAPS distance from Plaintiff’s residence to the location of the IME. (See Request for Judicial Notice at Exhibit D). The Court finds that the map is subject to judicial notice under Evidence Code section 352, subdivision (h) as a fact or proposition that is not reasonably subject to dispute and capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy. (See United States v. Perea-Rey (9th Cir. 2012) 680 F.3d 1179, 1182, fn. 1[finding “Google map” to be a source “ ‘whose accuracy cannot reasonably be questioned’ ”].)

Accordingly, the request for judicial notice is GRANTED.

Legal Standard

“In any case in which a plaintiff is seeking recovery for personal injuries, any defendant may demand one physical examination of the plaintiff, if both of the following conditions are satisfied: (1) The examination does not include any diagnostic test or procedure that is painful, protracted, or intrusive; (2) The examination is conducted at a location within 75 miles of the residence of the examinee.” (Code Civ. Proc., § 2032.220, subd. (a)(1)-(2).)

“If a defendant who has demanded a physical examination under this article, on receipt of the plaintiff’s response to that demand, deems that any modification of the demand, or any refusal to submit to the physical examination is unwarranted, that defendant may move for an order compelling compliance with the demand. This motion shall be accompanied by a meet and confer declaration under Section 2016.040.” (Code Civ. Proc., § 2032.250, subd. (a).)

Analysis

The parties dispute whether the total distance of the IME is within 75 miles of Plaintiff’s residence as required by statute. In opposition, Plaintiff provides her own Google Maps showing the total distance to be 78.4 miles from her residence to the examination. (See Declaration of John K. Crowley at Exhibit B.) However, Plaintiff’s map along with the map submitted by VSM, provide alternative routes showing distances of 66.1 miles and 64.3 miles from Plaintiff’s residence to the examination location. (Ibid.; Request for Judicial Notice at Exhibit D.) In fact, the alternative routes appear to provide more direct paths between Plaintiff’s residence and the examination. Given these alternative routes, the Court concludes that the total distance of the IME is within 75 miles of Plaintiff’s residence and thus complies with the statute. Other than the distance, Plaintiff does not otherwise contest the motion.

Therefore, the motion to compel IME is GRANTED. Plaintiff shall submit to a medical examination performed by Dr. Michael J. Oechsel, M.D., whose specialty is orthopedics. The examination shall take place at 18 Bon Air Road in Larkspur, California on September 1, 2016 at 1:30 p.m. The examination shall consist of a full and complete physical examination to determine the exact nature and extent of the injuries in controversy allegedly suffered by Plaintiff as a result of acts alleged in the complaint. No procedure causing undue pain or discomfort or endangering Plaintiff’s life or health shall be used.

Request for Sanctions

The court shall impose a monetary sanction against any party, person, or attorney who unsuccessfully makes or opposes a motion to compel compliance with a demand for a physical examination, unless it finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust. (Code Civ. Proc., 2032.250, subd. (b).)

VSM’s request for monetary sanctions is DENIED as the Notice of Motion fails to request sanctions against Plaintiff or her counsel. (See Code Civ. Proc., § 2023.040 [“A request for sanction shall, in the notice of motion, identify every person, party, and attorney against whom the sanction is sought, and specify the type of sanction sought.”].)

Motion for Protective Order

Plaintiff moves for a protective order on the sole ground that the IME is scheduled at a place in excess of 75 miles from her residence. For the reasons stated above, this argument fails and thus the motion for protective order is DENIED.

In opposition, VSM seeks $1,200 in monetary sanctions which includes one hour preparing the opposing papers at a billing rate of $200 per hour. The amount also includes a $1,000 IME cancellation fee. The Court finds that VSM was substantially justified in opposing the motion. Furthermore, there are no circumstances that make imposing the sanction unjust.

Accordingly, the request for monetary sanctions is GRANTED. Plaintiff’s counsel shall pay $1,200 to counsel for VSM within 20 calendar days of this Order.

Case Name: OptumSoft, Inc. v. Arista Networks, Inc.
Case No.: 2014-1-CV-263257

This action for breach of contract and trade secret misappropriation arises from a license agreement between plaintiff OptumSoft, Inc. and defendant Arista Networks, Inc. regarding OptumSoft’s TACC computer software. Currently before the Court is OptumSoft’s motion to compel the production of source code following Phase I of the trial.

I. Factual and Procedural Background

TACC is a platform for developing modular or distributed applications and systems. (Complaint, ¶ 8.) According to OptumSoft, when the parties entered into the subject license agreement on November 30, 2004, TACC was still a work in progress, and the parties anticipated that Arista personnel would write code that would include improvements, corrections, modifications, and/or derivative works. (Id. at ¶ 9.) Arista agreed that OptumSoft would own such “TACC-Related Work” and associated intellectual property rights, and, in exchange, OptumSoft provided a royalty-free license to TACC. (Id. at ¶¶ 11-13.) OptumSoft alleges that Arista breached the parties’ agreement in multiple ways, including by refusing to acknowledge OptumSoft’s ownership of TACC-Related Work and associated intellectual property. (Id. at ¶ 16.)

On April 4, 2014, OptumSoft filed this action for (1) breach of contract, (2) misappropriation of trade secrets, and (3) declaratory relief. Arista filed a cross-claim for declaratory relief. Following several case management conferences, the Court bifurcated the action into two phases for purposes of discovery, dispositive motion practice, and trial. (January 8th, 2015 Order re: Case Management, p. 2.) The first phase addressed the ownership of 19 specific source code modules identified by OptumSoft, and all other discovery was stayed while this phase was resolved. (Ibid.) The second phase of the trial will address the remainder of the parties’ claims, including the ownership of any remaining disputed property, alleged breaches related to the improper disclosure of OptumSoft’s confidential information, and OptumSoft’s claim for trade secret misappropriation. (Id. at p. 3.)

Phase I was tried to the Court in September and October of 2015, and the Court’s final statement of decision issued on March 23, 2016. The Court found that Arista had indeed agreed to deliver all TACC improvements, corrections, modifications, and derivative works to OptumSoft upon request in exchange for a perpetual, non-revocable, and non-exclusive license to use TACC. (Final Statement of Decision Following Phase I Trial, pp. 5-6, 9-11.) However, it disagreed with OptumSoft’s broad interpretation of the scope of ownership in TACC “improvements” to include any code that could potentially increase the functionality of TACC or aid a TACC programmer in developing programs with TACC. (Id. at p. 11.) The Court held that “improvements” meant “actual changes or modifications to actual TACC files, directories, or source code,” and found that none of the 114 disputed files at issue in Phase I were owned by OptumSoft under this definition. (Id. at pp. 12-14.) The Court also found that the location of any files encompassed by the agreement did not impact OptumSoft’s ownership rights, and stated that “[t]he fact that Optumsoft does not have immediate access to Arista’s file directories should not prejudice its right to claim ownership of those files” and “Optumsoft should be assured that they are receiving all of the files to which they are entitled and the Court will address this further with the parties during the next phase of litigation.” (Id. at p. 13.)

In their joint case management statement filed on April 29, 2016, the parties discussed their continuing dispute over the production of Arista’s source code beyond the 19 modules at issue in Phase I. This motion followed.

II. Analysis

OptumSoft moves to compel further responses to its requests for production (“RPD”s) nos. 6 and 7, which were served on September 18, 2014. The RPDs seek all source code created by Arista, “including any source code development history or other metadata associated with the source code.” On December 3, 2014, Arista served its first amended responses to the RPDs, objecting to the requests at issue and stating that it would not produce all source code, but had produced the source code for the 19 modules at issue in Phase 1 in accordance with the Court’s October 24th, 2014 case management order. The Court’s order staying discovery regarding additional source code followed.

OptumSoft now renews its request for the production of all Arista source code and development history for review by its expert, contending there is no other way for it to determine what (if any) source code written by or for Arista belongs to OptumSoft. Arista opposes OptumSoft’s motion on the grounds that OptumSoft failed to adequately meet and confer before filing it; OptumSoft fails to establish good cause supporting its requests; and the requests are unduly burdensome, both with respect to the amount of code at issue and because the source code is Arista’s most valuable proprietary asset and OptumSoft is a direct competitor.

As an initial matter, the Court finds that good cause supports OptumSoft’s request. Arista does not deny that source code derived from TACC may be intermixed with its other source code and appears to concede that some form of review of the source code is appropriate. Furthermore, Arista does not meet its burden to demonstrate that producing the source code would be unduly burdensome with respect to the time or expense involved. (See Code Civ. Proc., § 2031.310, subd. (d) [upon a motion to compel the production of electronically stored information, the party opposing production “shall bear the burden of demonstrating that the information is from a source that is not reasonably accessible because of undue burden or expense”]; West Pico Furniture Co. v. Superior Court (Pacific Finance Loans) (1961) 56 Cal.2d 407, 417-418 [because “some burden is inherent in all demands for discovery,” a party claiming that requested discovery is unduly burdensome must make a particularized showing of facts demonstrating hardship, including evidence showing the quantum of work required to respond].)

However, the Court is not inclined to grant OptumSoft’s expert access to all of Arista’s source code. Contrary to OptumSoft’s argument, it is not only proper but necessary for the Court to consider the risk to Arista’s proprietary source code in crafting a discovery order. (See Code Civ. Proc., § 2017.020, subd. (a) [“The court shall limit the scope of discovery if it determines that the burden, expense, or intrusiveness of that discovery clearly outweighs the likelihood that the information sought will lead to the discovery of admissible evidence.”]; see also Code Civ. Proc., § 2031.060, subd. (b)(5) [court may issue a protective order providing “[t]hat a trade secret or other confidential research, development, or commercial information not be disclosed, or be disclosed only to specified persons or only in a specified way”].) Here, the Court finds the review proposed by OptumSoft to be intrusive in light of Arista’s interest in its confidential source code and the parties’ competitive status. Furthermore, given OptumSoft’s failure to establish ownership of any of the 19 software modules at issue in Phase I and the lack of evidence that any other aspect of Arista’s source code that has not been delivered to OptumSoft is owned by OptumSoft, the Court deems the likelihood that review of the source code will yield admissible evidence of code owned by OptumSoft to be relatively low.

In addition, Arista’s argument that OptumSoft has failed to show adequate efforts to meet and confer on this issue is well-taken. (See Code Civ. Proc., § 2031.310, subd. (b)(2) [party moving to compel a further response to a request for production must file a meet and confer declaration].) In particular, OptumSoft does not address Arista’s proposal to have a neutral expert review the source code. The Court is inclined to adopt this approach, but believes that the parties themselves are best equipped to address the details of that process through meet and confer. Notably, neither party has yet presented the Court with a complete proposed review methodology. The Court hesitates to impose a particular technological solution, such as the use of MOSS, but expects that the parties will consider a number of options in order to control costs and ensure that the review methodology is clear, objective, rational, and neutral.

In accordance with the above, the hearing on this matter is CONTINUED TO AUGUST 26, 2016 to enable the parties to meet and confer regarding the manner of inspection. Specifically, the parties should discuss the following issues regarding the use of a neutral expert to conduct the inspection: (1) who the expert will be, (2) what methodology he or she will employ to review Arista’s source code and source code development history for code potentially owned by OptumSoft and how any such code will be delivered to OptumSoft, (3) whether modifications to the protective order in this action are necessary in order to protect Arista’s source code, and (4) how the parties will share the costs of the review. By August 15, the parties shall file (1) a proposed stipulated order for a neutral inspection or for an alternative manner of inspection agreeable to both of them and/or (2) supplemental briefing, not to exceed 10 page in length for each party, addressing any remaining points of disagreement and outlining the parties’ respective proposals on each point.

Case Name: Garrett, et al. v. Bumble Bee Foods, LLC
Case No.: 2014-1-CV-264322

This is a putative class action. Plaintiffs Patrick Garrett, Jeff Mains, and Linda Eustice (collectively, “Plaintiffs”) bring this lawsuit against defendant Bumble Bee Foods, LLC (“Defendant”). Plaintiffs allege Defendant illegally misbranded its products by using labeling that included unauthorized Omega 3 nutrient content claims containing the statement “Excellent Source of Omega 3.” (Complaint, ¶ 22.) Plaintiffs also allege Bumble Bee Albacore Tuna in Water is misbranded because the label contains a “heart-check” mark endorsement from the American Heart Association but does not disclose that this was a paid endorsement. (Complaint, ¶¶ 41-44.)

The Complaint, filed on April 25, 2014, sets forth the following causes of action: [1] Business and Professions Code § 17200, et seq. (Unfair Business Acts and Practices); [2] Business and Professions Code § 17200, et seq. (Unfair Business Acts and Practices); [3] Business and Professions Code § 17200, et seq. (Fraudulent Business Acts and Practices); [4] Business and Professions Code § 17500, et seq. (Misleading and Deceptive Advertising); [5] Business and Professions Code § 17500, et seq. (Untrue Advertising); [6] Consumers Legal Remedies Act, Cal. Civ. Code § 1750, et seq.; [7] Breach of Implied Warranty of Merchantability; [8] Negligent Misrepresentation; [9] Negligence; [10] Unjust Enrichment; [11] Common Count of Money Had and Received; and [12] Declaratory Judgment.

I. Motion for Class Certification

On May 20, 2016, the Court heard Plaintiffs’ motion for class certification. Plaintiffs seek to certify the following class:

All persons in the state of California who, from April 12, 2008 until July 21, 2014, purchased Bumble Bee Foods, LLC’s Solid White Albacore Tuna in Water labeled or advertised as “Excellent Source Omega 3” and/or bearing an American Heart Association seal without disclosing it as a paid endorsement.

In the Court’s tentative ruling posted prior to the May 20 hearing, the Court stated:

In this case, it is not apparent how a very large group of class members will be able to self-identify as class members and ultimately prove their membership. It is unlikely (and Plaintiff provides no evidence otherwise) that class members will have retained receipts for their canned tuna purchases over the course of approximately six years and it is also unlikely they will be able to accurately remember they purchased the specific items at issue in this lawsuit. Under these circumstances, it is difficult to see how class members will be able to be accurately identified. Therefore, the Court is inclined to deny the motion for class certification.

In other words, the Court found there is a significant problem with ascertainability. Rather than deny the motion outright, the Court gave the parties the opportunity to provide supplemental briefing on this issue, to explain to the Court how class members can be accurately identified. The parties have filed their supplemental briefing and the motion is again before the Court.

Plaintiffs’ supplemental brief does not address the Court’s primary question – how class members can be accurately identified. Instead, Plaintiff argues that because rule 23 of the Federal Rules of Civil Procedure does not mention ascertainability, it should not be a part of the class certification analysis to the extent that courts across the country have made it a factor. Plaintiffs also repeat their assertion from the moving papers that a class is ascertainable if the class definition includes objective criteria by which consumers can determine if they are members of the class. These arguments are unhelpful in that they provide the Court with no guidance on how members of the proposed class can be identified as a practical matter in this case. To the extent Plaintiffs believe the class definition is already sufficiently ascertainable or that the Court should not apply an ascertainability requirement, the Court already reached a different conclusion as explained in the original tentative ruling on Plaintiffs’ motion.

It is true that the proposed class definition uses objective criteria. As argued by Defendant, however, Plaintiffs provide no explanation for how class members could self-identify, years after the representations complained of, where multiple similar products were on the market, and where there are three different label variations at issue, not all of which are allegedly actionable.

In a similar case involving Gerber food products, the court stated:

The number of products at issue in this case, the varieties included and not included in the class definition, the changes in product labeling throughout the class period, the varied and uncertain length of time it takes for products with new labels to appear on store shelves, and the fact that the same products were sold with and without the challenged label statements simultaneously make Plaintiff’s proposed class identification method administratively unfeasible. [Citation.] While it may be reasonable to ask consumers to submit affidavits testifying that they purchased a Gerber 2nd Foods product during the class period, asking consumers to remember whether or not they purchased a qualifying flavor in a package that bore a challenged statement is unlikely to produce reliable results.

(Bruton v. Gerber Products Company (N.D. Cal. 2014) 2014 WL 2860995, at *9.)

The same reasoning applies here. It is unlikely that most class members would have retained receipts of their purchases of canned tuna products and there does not appear to be any reliable method for putative class members to remember whether they made purchases (or how many purchases were made) during the class period of the specific variety of tuna at issue and whether those cans of tuna were labeled or advertised as “Excellent Source Omega 3” and/or bearing an American Heart Association seal without disclosing it as a paid endorsement. Plaintiffs have not suggested any such method in their supplemental brief.

Therefore, the proposed class is not ascertainable and this defect is fatal to the motion for class certification. Accordingly, Plaintiffs’ motion for class certification is DENIED.

II. Motion to Seal

On May 20, 2016, the Court heard Plaintiffs’ motion to seal. Plaintiffs move to seal three documents, submitted as Exhibits A, B, and C to the Declaration of Pierce Gore in Support of Motion to File Under Seal. Exhibit A is a document setting forth internal deliberations of Defendant. Exhibits B and C are redacted and unredacted versions of Plaintiffs’ motion for class certification and accompanying memorandum of points and authorities. The Court stated in its tentative ruling that Plaintiffs provided no basis for sealing in the Gore Declaration and Plaintiffs were ordered to file a supplemental memorandum of points and authorities and a supplemental declaration providing specific facts supporting the overriding interest that would justify sealing these exhibits. Plaintiffs have filed their supplemental briefing and the motion is again before the Court.

In the Declaration of Pierce Gore Concerning Plaintiffs’ Supplemental Brief in Support of Motion to Seal (“Gore Supp. Decl.”), Gore states that Exhibit A is a document produced by Defendant in discovery that contains confidential information about the competitive positioning of numerous Bumble Bee product offerings. (Gore Supp. Decl., ¶ 3.) Gore asserts that if the information in Exhibit A were made public, it could place Bumble Bee at a competitive disadvantage. (Ibid.) Exhibit A is therefore subject to sealing. (See Universal City Studios, Inc. v. Superior Court (2003) 110 Cal. App. 4th 1273, 1286 [financial information involving confidential matters relating to the business operations of a party is subject to sealing when public revelation of these matters would interfere with the parties’ ability to effectively compete in the marketplace].) Exhibits B and C are redacted and unredacted versions of Plaintiffs’ motion for class certification that refer to the information in Exhibit A. Consequently, Exhibits A, B, and C are subject to sealing. Plaintiffs’ motion to seal is GRANTED.

Case Number: BC610100 Hearing Date: July 20, 2016 Dept: 56

Case Name: Urbina, et al. v. Seneca Mortgage Servicing, LLC
Case No.: BC610100
Matter: Demurrer to Complaint

Tentative Ruling: Demurrer is sustained.

Plaintiffs Jose and Aura Urbina filed this action against Defendant Seneca Mortgage Servicing LLC. Plaintiffs allege that Defendant failed to provide a loan modification, and they assert causes of action for (1) violation of Civil Code § 2923.7, (2) violation of Civil Code § 2923.6, (3) violation of Civil Code § 2924.10, (4) negligence, and (5) violation of Bus. & Prof. Code § 17200. Defendant demurs to the Complaint. In connection with the demurrer, Defendant requests judicial notice of recorded grant deeds and the deed of trust; the RJN is granted.

Indispensable Parties –
Plaintiffs’ action concerns a loan secured by real property, but they have failed to include Jose Alfaro who is named on the loan and title to the property, and Rosa Alfaro who was previously named on the title. Plaintiffs’ opposition fails to address this issue. The demurrer is sustained on the ground that Plaintiffs have failed to name necessary and indispensable parties pursuant to CCP §389. See Mut. Bank v. Blechman (2007) 157 Cal.App.4th 662, 667-69.

HBOR Claims –
Defendant demurs on the ground that Plaintiffs have failed to allege facts supporting the HBOR claims. The Court agrees in part.

The purpose of HBOR is to impose requirements “as part of the nonjudicial foreclosure process”. See Civil Code § 2923.4(a). But Plaintiffs have not alleged that the nonjudicial foreclosure process has been commenced. Therefore, Plaintiffs’ requests for injunctive relief are premature, as there is nothing to enjoin. The demurrer is sustained for the 1st through 3rd COAs on this ground.

Plaintiffs allege that they submitted a complete loan modification application. But this is conclusory because it fails to allege that all required documents have been supplied, which is an element of their claim. See CCP §§ 2923.6(h) & 2924.10(b). The demurrer is sustained for the 2nd and 3rd COAs on this ground.

Negligence –
Plaintiff’s 4th COA is based on negligence in reviewing Plaintiffs’ loan modification application, but there is no legal duty of care in connection with consideration for a loan modification. E.g. Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 68-69. The demurrer is sustained for the 4th COA.

B&P Code § 17200 –
The 5th COA is based on the other claims, and is deficient for the same reasons. The demurrer is sustained for the 5th COA.

Ruling –
The demurrer is sustained for all COAs and for failure to join indispensable parties. If Plaintiffs seek leave to amend, this should be argued at the hearing.

Case Number: BC514367 Hearing Date: July 20, 2016 Dept: 58

Hearing Date: Wednesday, July 20, 2016
Calendar No: 11
Case Name: Amirianfar v. AMI Commercial LLC, et al.
Case No.: BC514367
Motion: Motion to Enforce Stipulated Judgment
Moving Party: Defendant Kamran Amirianfar
Responding Party: Plaintiff Kourosh Amirianfar

Tentative Ruling: Motion is denied.
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On 7/8/13, Plaintiff Kourosh Amirianfar filed this action against Defendant Kamran Amirianfar seeking the dissolution of nominal defendant AMI Commercial LLC in which Kourosh and Kamran each held 50% interest and which owned commercial real property located at 777 E. Pico Blvd. and 778 E. 12th St., Los Angeles, CA. On 7/28/14, the Court entered a stipulated judgment and retained jurisdiction to enforce the terms and conditions pursuant to CCP § 664.6, which ordered sale of the properties and a wind-up of AMI’s business affairs by 1/30/15 or the Court would appoint a referee/receiver. On 2/6/15, the parties submitted a joint stipulation to extend the deadline for the sale and wind-up to 7/30/15.

Motion to Enforce Stipulated Judgment –
On 6/27/16, Kamran filed this motion to enforce the stipulated judgment pursuant to CCP § 664.6. Kamran submits that the properties were encumbered by a loan which had a balloon principal payment due 10/4/14 (Kamran Decl. ¶¶ 4-5), but the parties were unable to sell or refinance the property prior to the due date such that additional interest, late charges, and fees and costs of $150,230.66 were incurred (id. ¶ 8). The parties each paid one-half of the additional loan charges (id.), and $160,000 from the November 2015 sale of the properties has been held in escrow pending resolution of the parties’ dispute as to fault for the additional loan charges (id. ¶ 9).

CCP § 664.6 provides in pertinent part: “If parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, . . . the court, upon motion, may enter judgment pursuant to the terms of the settlement.” On a motion pursuant to CCP § 664.6, the Court may receive evidence, determine disputed facts, decide what terms the parties have agreed upon, and enter the terms of a settlement agreement as a judgment: the Court’s factual findings is subject to a substantial evidence standard. Osumi v. Sutton (2007) 151 Cal.App.4th 1355, 1360.

The pertinent portion of the stipulated judgment Kamran appears to seek to enforce states that the parties are to reasonably and in good faith cooperate to complete the refinancing of the mortgages on the properties at a rate lower than is currently being paid. Stipulated Judgment ¶ 12. However, there is no term that the Court may enforce to determine the parties’ dispute as to fault for the additional loan charges or, upon such determination, order disbursement of the remaining funds in escrow to either party (see Kadin Decl. ¶ 11, Ex. 22 (joint escrow instructions concerning the remaining escrow funds)). Therefore, the motion is denied.

The Court notes that CCP § 664.6 is not the exclusive means to enforce a settlement agreement, and that the Court’s ruling does not render an opinion as to whether there is an enforceable settlement agreement if pursued by either party through alternative means (i.e., summary judgment, suit for breach of contract, or suit in equity). See Robertson v. Chen (1996) 44 Cal.App.4th 1290, 1293. Additionally, the Court renders no opinion on Kamran’s argument that the parties’ dispute as to fault for the additional loan charges is subject to arbitration (see Kurata Decl. ¶ 5).

Case Number: BC597595 Hearing Date: July 20, 2016 Dept: 58

Hearing Date: Wednesday, July 20, 2016
Calendar No: 9
Case Name: Wasserman v. Coon, et al.
Case No.: BC597595
Motion: Demurrers and Motions to Strike
Moving Party: (1) Defendant Redband Investments V, LLC
(2) Defendants SRC Construction, Inc. and Sean Russell Coon
Responding Party: No oppositions filed

Tentative Ruling: Demurrers are overruled. Motions to strike are denied. Defendants Redband Investments V, LLC and SRC Construction, Inc. and Sean Russell Coon to answer within 15 days.
________________________________________

Bankruptcy
The Court will inquire again about the status of the bankruptcy petition of defendant Marilyn Coon, notice of which was filed herein on February 26, 2016. The Court expects to inquire about the suitability of a stay herein only as to defendant Coon.

Prior Proceedings
On 10/16/15, Plaintiff Barbara Wasserman filed this action against Defendants Marilyn Coon, Kirk Dirickson, Justin Dirickson, Jacob Rodriguez, Nabih Youssef & Associates (“NYA”), Maya Termite Control, Inc., and LBR Associates, Inc. arising out of alleged defective construction on property located at 5001 Marmol Dr., Woodland Hills, CA 91364. On 12/14/15, Plaintiff filed a First Amended Complaint which added Sean Russell Coon, SRC Construction, Inc., and Redband Investments V LLC as defendants. Plaintiff alleges that Redband hired M. Coon, S. Coon, SRC, J. Rodriguez, and NYA to remodel and repair the property so that it could be sold but that the construction was defectively done. Plaintiff entered into a purchase contract with Redband (represented by LBR) on 9/23/13 where no significant defects were disclosed. Plaintiff hired K. Dirickson, J. Dirickson, and Maya to inspect the property which revealed no defects. Plaintiff discovered defects after escrow closed.

On 6/3/16, the Court granted Plaintiff leave to file a Second Amended Complaint to add claims against new defendants Michelle T. DeLisio and Pickford Real Estate, Inc. dba Berkshire Hathaway Home Services California Properties fka Prudential California Realty Pickford Realty (Plaintiff’s sales agent and broker). At the hearing on 6/3/16, the court granted Plaintiff’s request to file a Third Amended Complaint. Plaintiff filed the TAC on 6/24/16 which asserts causes of action for breach of contract, negligence, fraud, intentional infliction of emotional distress, rescission, and breach of fiduciary duty.

On 2/26/16, M. Coon filed notice of a bankruptcy stay, Case No. 25815. OSC re: bankruptcy and status conference and trial setting conference is set for 7/20/16. Trial is set for 2/6/17; FSC for 1/26/17.

Demurrers and Motions to Strike –
Redband, SRC, and S. Coon have filed demurrers and motions to strike which were directed at the FAC but the Court deemed them directed at the SAC and permitted supplemental papers to be filed. No supplemental papers have been filed, and Plaintiff failed to file oppositions to the motions. In light of the filing of the TAC and consistent with the Court’s 6/3/16 order, the Court treats the demurrers and motions to strike as directed at the TAC. Except as noted, the motions raise substantively identical issues.

1. Intentional Infliction of Emotional Distress & Fraud
Redband, SRC, and S. Coon argue that Plaintiff fails to allege extreme and outrageous conduct to support the claim for intentional infliction of emotional distress (see generally Hailey v. Cal. Physicians’ Service (2007) 158 Cal.App.4th 452, 474), or facts with particularity to support the fraud claims (see generally Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 72-73; Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184 (requiring pleading facts which “show how, when, where, to whom, and by what means the representations were tendered)). The Court disagrees.

Plaintiff alleges that Redband hired SRC and S.Coon to remodel and repair the property which was completed by August 2013 (TAC ¶21), that SRC and S. Coon knew that this work was to facilitate Redband selling the property to an individual who would reside there (id. ¶ 22), that SRC and S. Coon had covered mold with new paint and carpet, concealed stress cracks by painting or sealing, and covered 100 sandbags against the up-slope at the rear of the property, and provided other deficient work (id. ¶ 27). Redband, SRC, and S. Coon executed disclosure statements on 10/4/13 representing that there were no significant defects and that the construction work was done according to code (id. ¶ 29, Exs. 2-3) Plaintiff purchased the property on 10/25/13 (id. ¶ 26). At the pleading stage, this is sufficient to allege extreme and outrageous conduct and fraud.

2. Rescission
Redband argues that Plaintiff fails to allege facts to support rescission, but Plaintiff’s fraud claim is sufficient (Civil Code §1689(b)(1)).

3. Negligence
SRS and S. Coon argues that Plaintiff fails to allege facts supporting a legal duty of care owed by them to Plaintiff. See, e.g., Bellah v. Greenson (1978) 81 Cal.App.3d 614, 619.
However, Plaintiff alleges that SRC and S. Coon knew that their construction services were being provided so that the property could be sold to an individual who would reside at the property (TAC ¶ 22). At the pleading stage, this is sufficient

4. Punitive Damages
Redband, SRC, and S. Coon argue that Plaintiff fails to alleged sufficient facts to support punitive damages. The Court finds that the fraud claims are sufficient to support the punitive damages allegations.

5. Attorney Fees
Redband argues that Plaintiff fails to attach the terms of the parties’ purchase agreement to support the claim for attorney fees, but the TAC has done this (TAC ¶ 23, Ex. 1).

Case Name: Xfund Management Company et al v Van Vuuren and nominal defendant Silicon Valley Bank
Case No: 16CV297191

The Motion for Appointment of Referee by Plaintiffs’ Xfund Management Company, LLC (Management Company) and Xfund 2, LLC, (General Partner) is DENIED.

Code of Civil Procedure Section 638 provides that the court may appoint a referee upon the motion of any party to a written contract..that provides that any controversy arising therefrom shall be heard by a referee if the court finds that a reference agreement exists between the parties. Plaintiffs seek the appointment of a referee pursuant to the Deposit Agreement and Disclosure Statement which governs the rights between Silicon Valley Bank and those who deposit money at the bank. Specifically, plaintiffs wants a privately paid referee/judge to adjudicate the first cause of action for Declaratory and Injunctive relief in plaintiffs’ complaint. In that cause of action, plaintiffs contend an actual controversy exists between plaintiffs (Xfund General Partner and Xfund Management Company) and defendant Hugo Van Vuuren concerning their respective rights under the operating agreements for the General Partner and the Management Company. Plaintiffs contends complete management and control rests with Mr. Chung, not Mr. Van Vuuren. Plaintiffs assert Mr. Chung should control the subject bank accounts and Mr. Van Vuuren should not be able to access or control those accounts. (Paragraph 38 of Complaint). Whoever prevails on this issue will likely control the bank accounts at issue.

Paragraph 1 of the Silicon Valley Bank’s Deposit Agreement states in relevant part “…if a dispute arises between you and us regarding this agreement or any Service”…the right to a jury trial is waived. Paragraph 2 of the agreement states in relevant part: “….if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge.”

Civil Code Section 1644 sets forth that words in a contract are to be understood in their ordinary and popular sense.

A plain reading of paragraphs 1 and 2 of the Deposit Agreement demonstrates that Silicon Valley Bank is attempting to avoid having a jury determine disputes between it and its account holders. Paragraph 1 seeks a waiver of a jury trial as long as such a waiver is permitted by law. And, in paragraph 2, if the waiver of the right to a jury trial is not enforceable, the Bank seeks to have the dispute decided by a private judge. Neither side addressed this specific point.

More to the point, however, this is not a dispute between Silicon Valley Bank on the one hand and the account holders on the other hand. Nor is it a dispute regarding the Deposit Agreement or any Service. Indeed, as the verified complaint makes clear in paragraph 8, the Bank is named as a nominal defendant “simply for the purpose of allowing the Court to afford complete relief as this action seeks a declaration of rights with respect to who can have access to the bank accounts maintained at the Bank.” As the verified complaint repeatedly alleges, this case is ultimately a dispute between Mr. Chung (who owns a majority interest in the Management Company and beneficially owns just over 50% of the membership interest in the General Partner) and Mr. Van Vuuren over who has control over Xfund and its assets. (See, for example, verified complaint paragraphs 1-4,21,22-24,37-44).

Civil Code Section 1636 states that “A contract must be so interpreted as to give effect to the mutual intent of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.”
It would be absurd to conclude that at the time the Deposit Agreement was entered into the parties intended that the Bank’s Deposit Agreement would trigger and ultimately decide the manner and mode under which disputes arising from the operating agreements between the General Partner and Management Company would be adjudicated simply because access to bank accounts may be at issue. In fact, on p. 57, paragraph 10 b of the Deposit Agreement, there is already a mechanism in place to deal with “Disputes Over Access or Control.” Part of that paragraph states: “If a dispute arises over control or access to your account………We may…thereafter “freeze” the account until we get evidence satisfactory to us that the dispute has been resolved.” That is precisely what happened here. The Bank has frozen 4 bank accounts and is apparently awaiting the resolution of this dispute. Paragraph 10 b also mentions that the Bank has the option of commencing an action in Interpleader so that the court can decide who owns the funds. The Bank also gives itself other specific options when there is a dispute over access or control to bank accounts. However, importantly, the Bank does not mention that a dispute involving access or control to bank accounts must be referred to a private referee under Code of Civil Procedure 638.

The Motion to Appoint A Referee is DENIED

Case Name: Ying Xiong, et al. v. Pingyi Yan, et al.
Case No.: 16-CV-292330

This is an action for fraud and rescission of stock purchase agreements brought by plaintiffs Yunlong Wang (“Wang”) and his wife Ying Xiong (“Xiong”) (collectively, “Plaintiffs”) against defendants Pingyi Yan (“Yan”), Micropoint Bioscience, Inc. (“Micropoint”) and Shenzhen Micropoint Bioscience, Inc. (“SMBI”) (collectively, “Defendants”).

Micropoint is a California corporation with its principal place of business in Santa Clara, California. (Compl., ¶ 5.) SMBI is a Chinese corporation with its principal place of business in Shenzhen, Guangdong Province, China. (Compl., ¶ 6.) Micropoint is a wholly-owned subsidiary of SMBI. (Compl., ¶¶ 5-6.) Micropoint researches and develops biomedical technology for SMBI, which SMBI then sells and distributes in China. (Compl., ¶ 9.)

Wang was a corporate officer of both Micropoint and SMBI and held 24 percent of the outstanding shares in each corporation. (Compl., ¶ 11.) SMBI and Micropoint needed to raise additional capital in order to remain solvent, but purportedly had no offers for financing from venture capital firms. (Compl., ¶ 12.) Consequently, Yan, the chairman of the boards of Micropoint and SMBI, approached Wang about purchasing his shares in each corporation. (Compl., ¶¶ 4, 13, 15.) At the time, Yan owned 43.99 percent of the outstanding shares in Micropoint and SMBI. Yan misrepresented the valuations of Micropoint and SMBI, and offered a low price for Plaintiffs’ shares based on his representation that both corporations were worth only 4 million dollars. (Compl., ¶¶ 13-14.)

The parties executed two stock purchase agreements for the sale of the Micropoint and SMBI shares. (Compl., ¶¶ 22-24.) Several years later, Plaintiffs heard Yan had actually been in financing negotiations with several venture capital firms at the time he approached Wang about the stock purchase. (Compl., ¶ 28.) Plaintiffs also learned that shortly after the execution of the stock purchase agreements, Micropoint and SMBI closed a round of financing based on a valuation of 12 million dollars, not 4 million dollars as Yan previously represented. (Compl., ¶ 28.)

Based on these allegations, Plaintiffs assert causes of action against Defendants for: (1) breach of fiduciary duty; (2) fraud; (3) negligent misrepresentation; (4) constructive fraud; (5) rescission; (6) unfair competition; and (7) quantum valebant.

Currently before the Court is SMBI’s motion to quash service of the summons and complaint, or in the alternative, to stay or dismiss the action on the ground California is an inconvenient forum.

“A defendant, on or before the last day of his or her time to plead or within any further time that the court may for good cause allow, may serve and file a notice of motion. . . [t]o quash service of summons on the ground of lack of jurisdiction of the court over him or her.” (Code Civ. Proc., § 418.10, subd. (a)(1).) SMBI moves to quash service of the summons and complaint on the ground the court lacks jurisdiction over it based on improper service and insufficient minimum contacts.

“When a defendant challenges the court’s personal jurisdiction on the ground of improper service of process ‘the burden is on the plaintiff to prove the existence of jurisdiction by proving, inter alia, the facts requisite to an effective service.’ [Citation.]” (Summers v. McClanahan (2006) 140 Cal.App.4th 403, 413.) Similarly, “[w]hen a nonresident defendant challenges personal jurisdiction [based on minimum contacts], the plaintiff bears the burden of proof by a preponderance of the evidence to demonstrate the defendant has sufficient minimum contacts with the forum state to justify jurisdiction.” (DVI, Inc. v. Superior Court (2002) 104 Cal.App.4th 1080, 1090.)

The Court is presently conflicted as to whether the evidence presented by Plaintiffs is sufficient to support a finding of jurisdiction over SMBI. Plaintiffs made a request for authorization to conduct jurisdictional discovery if necessary. “A trial court has discretion to continue the hearing on a motion to quash service of summons for lack of personal jurisdiction to allow the plaintiff to conduct discovery on jurisdictional issues.” (Burdick v. Superior Court (2015) 233 Cal.App.4th 8, 30.) Given the circumstances and the record before the Court, the Court finds it appropriate to authorize Plaintiffs to conduct limited discovery with respect to jurisdictional issues only, including the nature of the relationship between SMBI and Micropoint and the manner in which these corporations were either separately or jointly operated and controlled. The Court will therefore continue the hearing on SMBI’s motion to allow Plaintiffs to conduct this jurisdictional discovery.

SMBI also moves the Court to stay or dismiss this action based on (1) a forum selection clause in a contract to which SMBI was not a party and (2) the convenience to the parties under the doctrine of forum non conveniens in the event the Court finds there is a basis for exerting personal jurisdiction over it. Since this motion was made in the alternative and the Court must first decide the fundamental issue of personal jurisdiction, the hearing on the motion to stay or dismiss is continued as well.

Based on the foregoing, the hearing on SMBI’s motion to quash, or in the alternative, to stay or dismiss the action is hereby continued to Thursday, October 6, 2016 at 9:00 a.m. in Department 9. Plaintiffs shall serve and file a supplemental brief, not to exceed 7 pages, addressing the jurisdictional issues as well as any supporting evidence no later than Friday, September 23, 2016. SMBI may serve and file a supplemental brief in reply, not to exceed 7 pages, as well as any responsive evidence no later than Friday, September 30, 2016.

The Court will prepare the order.

Case Name: Jane Doe v. Campbell Union High School District, et al.
Case No.: 16-CV-289981

I. Background and Discovery Dispute

This is an action arising out of the sexual assault of a minor brought by Jane Doe (“Plaintiff”) against Campbell Union High School District (“Defendant”). Plaintiff attended Prospect High School, operated by Defendant. (Compl., ¶ 2.) In December 2013, when Plaintiff was 15 years old, another minor student sexually assaulted her in a campus restroom during school hours. (Compl., ¶¶ 3, 15-18.) Plaintiff alleges Defendant was negligent in hiring administrators, teachers, and staff who failed to adequately supervise students. (Compl., ¶¶ 20-32.) Plaintiff asserts causes of action against Defendant for: (1) negligent retention, hiring, and supervision; (2) negligent supervision of students; and (3) sexual harassment.

Plaintiff served Defendant with requests for the production of documents, set one (“RPD”). (Sebastian Decl., Exh. 1.) As relevant to the present discovery dispute, RPD Nos. 3, 7, 8, 9, and 10 sought the school records of the alleged student perpetrator (referred to as “Doe 1”). (Sebastian Decl., Exh. 1.) RPD No. 13 sought documents relating to Defendant’s investigation of complaints it received from Plaintiff and her parents. (Sebastian Decl., Exh. 1.) Defendant objected on numerous grounds, including confidentiality, and provided substantive responses that were limited by its objections. (Sebastian Decl., Exh. 2.) The parties met and conferred in good faith in an attempt to informally resolve their discovery dispute, but were unsuccessful in doing so. (Sebastian Decl., Exhs. 3-6.) During their meet and confer discussions, the parties agreed to execute a stipulated protective order, but have yet to file one with the Court. (Sebastian Decl., Exh. 5.) Currently before the Court is Plaintiff’s motion to compel further responses to RPD Nos. 3, 7, 8, 9, 10, and 13.

II. Motion to Compel Further Responses

The propounding party may move for an order compelling further responses to inspection demands if the party deems the responding party’s objections are too general or lack merit or that its representations of inability to comply are inadequate, incomplete, or evasive. (Code Civ. Proc., § 2031.310, subd. (a)(2)-(3).) The moving party must first show there is good cause for the discovery sought. (Code Civ. Proc., § 2030.310, subd. (b)(1).) Once the propounding party establishes good cause, the burden shifts to the responding party to justify its objections and responses. (Kirkland v. Superior Court (2002) 95 Cal.App.4th 92, 98.)

A. Good Cause

To demonstrate good cause for the discovery sought, the moving party must make “a fact-specific showing of relevance.” (Glenfeld Development Corp. v. Superior Court (1997) 53 Cal.App.4th 1113, 1117.) Discovery is allowed for any matters not privileged that are either relevant to the subject matter involved in the action or reasonably calculated to lead to the discovery of admissible evidence. (Code Civ. Proc., § 2017.010.) Information is relevant to the subject matter if it might reasonably assist a party in evaluating its case, preparing for trial, or facilitating settlement. (Gonzalez v. Superior Court (1995) 33 Cal.App.4th 1539, 1546.) “Admissibility is not the test and information, unless privileged, is discoverable if it might reasonably lead to admissible evidence.” (Ibid., original italics.) Courts liberally construe the relevance standard, and any doubts as to whether a request seeks information within the scope of discovery are generally resolved in favor of discovery. (Colonial Life & Accident Ins. Co. v. Superior Court (1982) 31 Cal.3d 785, 790.)

Here, the RPD seek documents tending to show whether or not the school knew that Doe 1 posed a risk to the safety of Plaintiff or other students as well as its knowledge of the adequacy of its staffing and student supervision. Such information is relevant because it may tend to prove or disprove Plaintiff’s claims for negligent hiring and negligent supervision, and may lead to the discovery of admissible evidence with respect to these claims and her sexual harassment claim. Defendant does not dispute the relevance of the requests at issue. Accordingly, Plaintiff has carried her initial burden of demonstrating good cause for the discovery sought. The burden thus shifts to Defendant to justify its objections and responses.

B. Objections

1. Miscellaneous Objections

Defendant objected to each RPD at issue on the grounds of overbreadth, vagueness and ambiguity, relevance, and equal availability of information. Defendant does not attempt to justify any of these objections. Defendant’s objections on these grounds are therefore overruled, although the Court finds many of the requests to be overbroad in type and timeframe. For example, the Court finds little basis for RPD 3 which seeks production of all of Doe 1’s school records, many of which will have little or no relevance to this case.

Defendant also objected to each RPD at issue on the grounds of the attorney-client privilege and work product doctrine. Plaintiff argues it has waived these objection by failing to include specific information in support of its objections in its responses and a privilege log. While Defendant does not attempt to justify the attorney-client privilege and work product doctrine objections, a party’s assertion of a boilerplate privilege objection does not operate as a waiver of its objection. (See Best Products, Inc. v. Superior Court (2004) 119 Cal.App.4th 1181, 1188-89.) Accordingly, Defendant’s objections on the grounds of attorney-client privilege and the work product doctrine are preserved. If any responsive document is withheld on the basis of the attorney-client privilege or the work product doctrine, Defendant must produce a privilege log identifying each document withheld and setting forth sufficient facts for Plaintiff to evaluate the merits of the claim of privilege. (See Best Products, Inc. v. Superior Court, supra, 119 Cal.App.4th at pp. 1188-89; see also Code Civ. Proc., § 2031.240, subd. (c).)

2. Official Information Privilege Objections

Defendant attempts to justify its objections to each RPD on the ground these requests seek information protected by the official information privilege.

The official information privilege protects “information acquired in confidence by a public employee in the course of his or duty and not open, or officially disclosed, to the public prior to the time the claim of privilege is made.” (Evid. Code, § 1040, subd. (a).) A government entity has the privilege to refuse to disclose such information if disclosure is prohibited or would go against the public interest. (Evid. Code, § 1040, subd. (b)(1)-(2).) The government entity bears the burden of proving it is entitled to withhold documents based on the official information privilege. (Marylander v. Superior Court (2000) 81 Cal.App.4th 1119, 1128.) “The threshold determination is whether the information [ ] was acquired in confidence.” (Ibid.) “If the information was acquired in confidence, the trial court next must balance the interests to determine whether the necessity for preserving the confidentiality of the information outweighs the necessity for disclosure in the interest of justice.” (Id. at pp. 1128-29.)

Defendant has not established the information sought by each RPD at issue was acquired in confidence. Defendant states in a conclusory manner that it “conducted an internal investigation, acquiring official information in confidence, when [Plaintiff] notified [Defendant] of her injuries.” (Opp. at p. 4:23-24.) Defendant does not actually claim that the official information it purportedly acquired in confidence is the same information sought by each RPD at issue or otherwise provide any specifics as to how or why documents responsive to each RPD or facts contained in those documents were obtained in confidence. Defendant cites no authority in support of its position. Moreover, Defendant does not address whether it has maintained the confidentiality of the purportedly privileged information up until the time it made its claim of privilege. Defendant thus fails to carry its threshold burden of establishing the RPD at issue seek information acquired in confidence.

Additionally, even if Defendant had carried its threshold burden, it fails to demonstrate the necessity for preserving the confidentiality of the information outweighs the necessity for disclosure in the interest of justice. Defendant’s argument in this regard is little more than a recitation of the legal standard. Defendant states, without more, that its “interest in maintaining the full and free participation in internal investigations (conducted with the intent to improve the safety of its students) outweighs [Plaintiff’s] interest in the documentation.” (Opp. at p. 5:2-4.) It does not provide any authority in support of its argument or provide any explanation why its interest outweighs Plaintiff’s.

Furthermore, the parties agreed to execute a stipulated protective order. The Court observes that “[i]f intrusion is limited and confidential information is carefully shielded from disclosure except to those who have a legitimate need to know, privacy concerns are assuaged.” (See Hill v. National Collegiate Athletic Assn. (1994) 7 Cal.4th 1, 38.) The Court will require that a stipulated protective order be signed before any of the documents are produced, and the parties are ordered to submit a proposed order. As a result, there will be no significant disclosure of the information produced.

Defendant’s claimed interest in student safety does not outweigh Plaintiff’s interest in the information, given she also has an interest in student safety and this action may ultimately result in improved policies and supervision of students that may reduce the likelihood of on-campus sexual assaults. (See, e.g., Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360, 374 [litigant’s interest in discovery bolstered by potential benefit to others as a result of the litigation].) Defendant thus fails to establish its interest in the confidentiality of the information outweighs Plaintiff’s need for this relevant information.

In conclusion, Defendant has not justified its objections on the ground of the official information privilege. Its objections on this ground to each RPD at issue are therefore overruled.

3. FERPA and Education Code Section 49077 Objections
Defendant objected to RPD Nos. 3, 7, 8, 9, and 10, but not RPD No. 13, on the ground these requests seek information protected under the Family Educational Rights and Privacy Act (the “FERPA”), 20 U.S.C. § 1232, et seq. Defendant argues its objections are justified because the FERPA prohibits it from releasing this information.
Defendant’s objections are not well-taken because the “FERPA does not actually prohibit the release of education records.” (Rim of the World Unified School District v. Superior Court (“Rim of the World”) (2002) 104 Cal.App.4th 1393, 1398.) “It is obvious [ ] that [FERPA] does not provide a privilege against disclosure of student records.” (Rios v. Read (E.D.N.Y. 1977) 73 F.R.D. 589, 598.) “The statute says nothing about the existence of a school-student privilege analogous to a doctor-patient or attorney-client privilege.” (Ibid.)
“Rather, FERPA conditions the availability of federal funds on conformance with its provisions.” (Rim of the World, supra, 104 Cal.App.4th at p. 1398; see also BRV, Inc. v. Superior Court (2006) 143 Cal.App.4th 742, 751-52.) In exercising its power of the purse, Congress sought to deter schools from adopting lax policies allowing unfettered disclosure of student records, not to prohibit disclosure under appropriate circumstances and pursuant to notice requirements designed to protect student information. (Ibid.; see also Gonzaga University v. John Doe (2002) 536 U.S. 273, 275 [the FERPA is directed towards institutional policies and practices, not individual instances of disclosure].)
The FERPA expressly allows the release of school records “furnished in compliance with judicial order [ ] upon condition that parents and the students are notified of all such orders [ ] in advance of the compliance therewith by the educational institution or agency. . . .” (20 U.S.C. § 1232g, subd. (b)(2)(B).) Consequently, an institution is not at risk of losing federal funding by disclosing school records on a case-by-case basis, so long as its disclosure is in conformity with this procedure. (See, e.g., Ellis v. Cleveland Municipal School Dist. (N.D.Ohio 2004) 309 F.Supp.2d 1019, 1023-24 [case-by-case disclosure of protected student information was consistent with the FERPA].)
Defendant argues, for the first time in its opposition, that it is similarly prohibited from producing responsive documents pursuant to Education Code section 49077. Defendant did not object on this basis to any of the RPD at issue.
As an initial matter, objections not raised in response to an inspection demand are waived. (Scottsdale Insurance Co. v. Superior Court (1997) 59 Cal.App.4th 263, 273-74; see also Code Civ. Proc., §§ 2031.240, 2031.300, subd. (a).) Defendant did not object to any RPD on the basis of Education Code section 49077.
In any event, the Legislature adopted Education Code section 49060, et seq. in response to the FERPA. (See Ed. Code, §§ 49060, 49076 [specifically referencing the FERPA and legislative intent to create procedures consistent therewith]; see also BRV, Inc. v. Superior Court, supra, 143 Cal.App.4th at pp. 751-52.) Education Code section 49077, while a completely separate statute, is nearly identical to the companion subdivision of the FERPA and states: “Information concerning a student shall be furnished in compliance with a court order or a lawfully issued subpoena. The school district shall make a reasonable effort to notify the parent or legal guardian of the pupil in advance. . . .”
However, the Court is concerned about production of private student information without prior notice to Doe 1 (if 18 years of age or older) and Doe 1’s parents before making this order. Accordingly, the Court will continue this hearing to September 22, 2016 at 9:00 a.m., or any later Tuesday or Thursday that counsel agrees to, to allow for notice to Doe 1’s parents so they have an opportunity to be heard. Defendant shall give notice to Doe 1 and/or Doe 1’s parents within five days after this hearing, provide them with a copy of this order and the moving papers, and inform that any written opposition must be filed and served on all parties at least 9 court days before the hearing, and that they have the right to attend the hearing.

C. Substantive Responses

In response to RPD No. 3, Defendant stated: “Subject to and without waiving these objections, Defendant is unable to comply with this request. All responsive documents in defendant’s possession, custody or control are either protected by the attorney-client privilege or otherwise not subject to disclosure pursuant to FERPA.” (Sebastian Decl., Exh. 2.)

In response to RPD Nos. 7, 8, 9, 10, and 13, Defendant stated: “Subject to and without waiving these objection, Defendant has conducted a diligent search and reasonable inquiry in a good faith effort to comply with this request but is unable to do so. Defendant has no unprivileged documents in its possession, custody, or control that are responsive to this request.” (Sebastian Decl., Exh. 2.)

If a party represents he or she is unable to comply with an inspection demand, he or she must indicate a diligent search and reasonable inquiry was undertaken, the reason the documents could not be located (e.g., lost, destroyed, never existed), and any individuals he or she believes might have the requested documents. (Code Civ. Proc., § 2031.230.)

Defendant’s responses are stated as inability to comply and contain some statutory language from Code of Civil Procedure section 2031.230. However, these responses merely restate Defendant’s other objections, including its FERPA and official information privilege objections, discussed above. Further written responses to RPD Nos. 3, 7, 8, 9, 10, and 13 are therefore warranted.

III. Conclusion

Based on the foregoing, the motion to compel further written responses to RPD Nos. 3, 7, 8, 9, 10, and 13 is GRANTED. Within 10 calendar days of this order, Defendant shall provide Plaintiff with verified, code-compliant further responses, without objections, except for those based on the attorney-client privilege or work product doctrine, and shall produce a privilege log.

The motion to compel production of responsive documents is continued to September 22, 2016 at 9:00 a.m. in Department 9, or such later date as the parties agree. Within 5 calendar days of this order, Defendant shall give written notice to Doe 1 and his parents or legal guardians of this order with the moving and opposing pleadings, and as stated above, inform them of the right to file opposition and appear at the hearing.

Both parties represent they intend to execute a stipulated protective order. (See Motion at p. 8:14-15; see also Opp. at p. 5:12-13; see also Sebastian Decl., Exh. 5.) The parties are ordered to execute and submit the proposed order forthwith.

The Court will prepare the order.

Case Name: Richtek USA, et al. vs. uPI Semiconductor Corp., et al.
Case No.: 2011-1-CV-192991

This is an action for trade secrets misappropriation filed by plaintiffs Richtek USA, Inc., a California corporation, and Richtek Technology, a Taiwanese corporation (collectively “Richtek”). Currently at issue are two related motions to dismiss by defendant uPI Semiconductor Corporation: a motion to dismiss pursuant to a forum selection agreement and a motion to dismiss pursuant to the doctrine of forum non conveniens.

I. Factual and Procedural Background

A. Richtek’s Allegations

The operative Amended Complaint (“AC”) alleges that Richtek is a world-wide leader of power management integrated circuit (“IC”) solutions, including DC-DC power controllers that regulate voltage and can convert a high DC voltage to a low DC voltage so devices can have lower DC power consumption. (FAC, ¶ 15.) Richtek’s proprietary technologies and trade secrets include innovative circuit designs, layouts, and methods that regulate power efficiently for modern electronic devices. (Id. at ¶ 16.) Richtek claims “Business Trade Secrets” including market survey data, customer contacts, product definitions with tailored solutions, product roadmaps, pricing strategies, customer feedback, and verification data, as well as “Technical Trade Secrets” related to its technologies. (Id. at ¶¶ 48-66.)

Richtek alleges that defendant uPI Corporation, a Taiwanese corporation, manufactures and sells power controllers, regulators, and converters for use in products containing them, including single buck controllers and multiple phase buck controllers, which regulate and can convert a high DC voltage to a low DC voltage and are based on Richtek’s misappropriated trade secrets. (AC, ¶ 17.) The AC lists various uPI power management products that are allegedly based on Richtek’s misappropriated trade secrets. (Id. at ¶¶ 21-22.) Richtek alleges that uPI has transacted with multiple American businesses (Advanced Micro Devices Apple, Hewlett Packard, Intel, nVidia, Broadcom, and Dell), resulting in the importation and sale of their products into California and the United States. (Id. at ¶¶ 24-43.)

Richtek alleges that various former employees developed a plan to improperly take its trade secrets for the purpose of illicitly competing with Richtek and profiting from that theft. (AC, ¶¶ 103-107.) Upon leaving Richtek, the former employees started soliciting business from Richtek’s customers on behalf of uPI and others. (Id. at ¶ 107.) By at least January 2008, most of the former Richtek employees were employed by uPI and continued to use Richtek’s misappropriated trade secrets with the full knowledge and cooperation of uPI to design, develop, manufacture, offer to sell, sell and import such products into the United States. (Id. at ¶ 109.) Richtek alleges on information and belief that the former Richtek employees violated their duty to Richtek, Richtek’s policies, and their employment agreements by copying and/or not returning Richtek’s trade secret information and disclosing them to uPI and others without Richtek’s consent. (Id. at ¶ 83.) Richtek further alleges that uPI engaged defendant Silicon Xtal (“SXC”) to use Richtek’s misappropriated trade secrets to conduct marketing and sales in the U.S. and to promote uPI’s Power Management IC Products to U.S. companies, many of which were previous Richtek U.S. customers. (Id. at ¶ 111.)

B. Additional Litigation Between the Parties

Judicially-noticed records establish that in 2007, Richtek Taiwan filed a criminal complaint in Taiwan for “disclosure of industrial and commercial secrets about business” and “breach of trust” against various individual uPI defendants and also filed a civil complaint in Taiwan alleging patent infringement and trade secret misappropriation against uPI and several individual uPI defendants. On December 2, 2009, Richtek filed a complaint with the United States International Trade Commission (“ITC”) against uPI under Section 337 of the Tariff Act of 1980 and also filed claims for patent infringement and trade secrets misappropriation against uPI and several corporate defendants in federal court (Richtek Technology Corp., et al. v. uPI Semiconductor Corp., et al., Case No. 3:09-cv-05659-WHA (N.D. Cal., Dec. 2, 2009)). The ITC investigation terminated on September 9, 2010, based in part on a consent order providing that uPI would not sell or import any DC-DC controllers or products using Richtek’s asserted trade secrets. On January 3, 2011, the district court dismissed the non-federal claims in the federal action and stayed all federal claims pending re-examination of the asserted patents.

C. Proceedings in This Action

On January 28, 2011, Richtek filed the instant state action for trade secret misappropriation following the federal court’s dismissal of these claims.

On May 23, 2012, the Court sustained the demurrer of uPI, SXC, and various individual uPI defendants to the original complaint on the ground that Richtek’s claim was time-barred under Taiwan’s borrowed two-year statute of limitations. The Court denied the uPI defendants’ related motion to dismiss based on forum non conveniens, finding that the untimeliness of the claim under Taiwanese law rendered Taiwan an unsuitable alternative forum. The Court denied as moot the individual uPI defendants’ motion to dismiss based on a forum selection agreement in their employment contracts with Richtek.

On June 4, 2012, Richtek filed the operative AC, which asserts eighteen counts of trade secret misappropriation against uPI, SXC, James Chang, Amanda Dai, YP Huang, JC Chen, and Ming Chen. On February 8, 2013, the Court again sustained a demurrer by uPI, Chang, and Huang on the basis of the Taiwanese statute of limitations, this time without leave to amend. It also granted a renewed motion to dismiss based on the forum selection agreement as to JC Chen, deeming the motion moot as to Chang and Huang in light of its ruling on their demurrer. It deemed a renewed motion to dismiss for forum non conveniens moot as to uPI and the individual defendants, but denied the motion as to SXC, finding that SXC had not shown whether an action against it in Taiwan would be barred by the statute of limitations.

Richtek appealed the June 4th ruling. On November 24, 2015, the Court of Appeal issued its opinion reversing the ruling on the demurrer and affirming the ruling as to the motion to dismiss based on the forum selection agreement. (See Richtek USA, Inc. v. uPI Semiconductor Corporation (2015) 242 Cal.App.4th 651.) With respect to the demurrer, the Court of Appeal found that the Court had improperly relied on judicially-noticed documents regarding the 2007 Taiwan complaints to conclude that Richtek had knowledge of the misappropriation at issue at the time those complaints were filed. It expressly did not reach the issue of whether the Taiwan statute of limitations applies to this action. (Id. at p. 661, fn. 5.) The Court of Appeal found that the mandatory forum selection provision in defendant JC Chen’s employment agreement required that the trade secret claims against him be filed in Taiwan. (Id. at pp. 661-662.)

Richtek subsequently dismissed individual defendants Chang and Huang, presumably because their employment with Richtek was governed by the same agreement containing the same forum selection clause as JC Chen’s. It also filed a request for dismissal with prejudice as to SXC. The parties indicated in a recent case management statement that Richtek and Ming Chen are near to concluding a settlement. It does not appear that Amanda Dai has appeared in this action. That leaves the claims against uPI at issue in these motions as the only remaining claims in active dispute.

II. Motion to Dismiss Pursuant to Forum Selection Agreement

uPI now moves to dismiss this action pursuant to the forum selection clause in the individual defendants’ employment agreements.

A. Waiver

As an initial matter, Richtek contends that uPI waived its arguments based on the forum selection clause by choosing not to join in the individual defendants’ earlier motions based on this clause.

“[O]bjections to the venue of an action,” including those based on forum selection agreements, “are waived unless promptly presented.” (Smith, Valentino & Smith, Inc. v. Superior Court (Life Ins. Co. of Pennsylvania) (1976) 17 Cal.3d 491, 497; see also Trident Labs, Inc. v. Merrill Lynch Commercial Finance Corp. (2011) 200 Cal.App.4th 147, 157 [unreasonable to enforce forum selection clause where defendant chose “to extensively litigate in the original forum by filing a cross-complaint, conducting substantial discovery, and filing motions seeking relief from the forum court”].)
Cases arising in the context of arbitration clauses are instructive with respect to this issue. Those cases consider the following factors with respect to waiver:

(1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place; and (6) whether the delay affected, misled, or prejudiced the opposing party.

(Sobremonte v. Superior Court (Bank of America Nat. Trust and Sav. Ass’n) (1998) 61 Cal.App.4th 980, 992, internal citations and quotations omitted.)

Here, uPI has not taken any actions inconsistent with its asserted right to have this action litigated in Taiwan. Rather, it has repeatedly filed forum non conveniens motions arguing that the action should be heard in Taiwan, and successfully demurred to the complaint based on the Taiwan statute of limitations. The delay caused by Richtek’s successful exercise of its right to appeal the Court’s ruling on uPI’s demurrer does not constitute a substantial invocation of the litigation machinery by uPI; furthermore, Richtek has not been prejudiced by uPI’s delayed assertion of the forum selection clause, since the Court deemed the earlier motion on that ground by individual defendants to be moot as to all parties to the demurrer. This action has not yet progressed beyond the pleading stage, and the only motions uPI has filed so far pertain to the initial issues of whether the complaint states a claim and should be heard in this Court.

Consequently, uPI has not waived its right to invoke the forum selection clause.

B. uPI’s Standing to Enforce the Forum Selection Clause

Richtek also contends that uPI lacks standing to enforce the forum selection clause, which is contained in a contract between Richtek and its individual former employees to which uPI is not a party.

uPI argues that it is “so closely related to the contractual relationship” at issue that it is entitled to enforce the forum selection clause. (Bancomer, S. A. v. Superior Court (Reilly) (1996) 44 Cal.App.4th 1450, 1461.) A non-signatory is permitted to enforce a forum selection clause under this theory where “(1) it agreed to be bound by the terms of the … agreement, (2) the contracting parties intended the [non-signatory] to benefit from the … agreement, or (3) there was sufficient evidence of a defined and intertwining business relationship with a contracting party.” (Ibid.) uPI contends that the third circumstance is present here. Regardless,
[t]he key to the closely related test is whether the nonsignatories were close to the contractual relationship, not whether they were close to the third party signator. This makes sense because the forum selection clause is part of the underlying contract, and it is the contractual relationship gone awry that presumably spawns litigation and activates the clause. Giving standing to all closely related entities honors general principles of judicial economy by making all parties closely allied to the contractual relationship accountable in the same forum, thereby abating a proliferation of actions and inconsistent rulings.
(Bugna v. Fike (2000) 80 Cal.App.4th 229, 235.)

Here, Richtek alleges that uTI’s founder, James Chang “conceived the plot to steal [Richtek’s] Trade Secrets and launch uPI to directly compete with Richtek when he was still working for Richtek.” (FAC, ¶ 104.) He and other former Richtek employees launched uPI “[w]ithin a short time after leaving Richtek” and lied about their reasons for leaving Richtek in order to conceal their conspiracy. (Id. at ¶ 105.) “As part of this illicit scheme, Defendants Amanda Dai and J.C. Chen stayed behind at Richtek as … corporate moles to continue to illicitly funnel Richtek Business and Technical Trade Secrets … to other Former Richtek Employees who were already working at or for uPI ….” (Id. at ¶ 106.) “With full knowledge,” uPI “orchestrated and participated in the scheme to facilitate the Former Richtek Employees’ misappropriation of [Richtek’s] Trade Secrets and to conceal the Former Richtek Employee’s actions from Richtek for an extended period of time.” (Id. at ¶ 116.)

These allegations demonstrate that uTI is closely related, not only to the former Richtek employees, but to their agreement with Richtek to “bear special confidentiality responsibility” for any confidential Richtek documents and “not to use any research or marketing secret of [Richtek]” after leaving its employment. (See Decl. of Alali Dagogo-Jack ISO Mot., Ex. B, “Employment Commitment Letter,” sections IV and VIII.) Richtek alleges that uTI was formed for the very purpose of competing with Richtek using trade secrets misappropriated by its former and current employees. Consequently, uTI like the employees, is entitled to hold Richtek to its agreement to litigate trade secret misappropriation claims in Taiwan. (See Lu v. Dryclean-U.S.A. of California, Inc. (1992) 11 Cal.App.4th 1490, 1494 [forum selection clause was enforceable by non-signatory defendants “alleged to have participated in the fraudulent representations which induced plaintiffs to enter into the Agreement”; “[t]o hold otherwise would be to permit a plaintiff to sidestep a valid forum selection clause simply by naming a closely related party who did not sign the clause as a defendant”]; Bugna v. Fike (2000) 80 Cal.App.4th 229, 235 [forum selection clause was enforceable by non-signatory defendants where “the heart of the complaint is that [the signatory defendant] conspired with respondents” to profit from the unconscionable agreement], italics original; cf. Bancomer, S. A. v. Superior Court, supra, 44 Cal.App.4th at p. 1460 [non-signatory bank could not enforce forum selection clause where “[t]here is no evidence of any intertwining business arrangement”: “The bank, it is alleged, acted alone. There were no assertions of fraudulent conduct by any other person or entity.”]; Berclain America Latina v. Baan Co. (1999) 74 Cal.App.4th 401, 408 [parent company could not enforce forum selection clause contained in contract between its subsidiary and plaintiff where parent did not acquire subsidiary until several years after the contract was executed—but “if [parent] had owned [subsidiary] at the time it entered into the agreement with [plaintiff] and if [parent] had been involved in that transaction, then under Lu … it would likely be appropriate” to allow the parent to enforce the clause].)

In a footnote to its opposition brief, Richtek requests leave to file a second amended complaint removing unspecified allegations concerning the individual defendants, which it contends are no longer necessary to the complaint now that the individual defendants have been dismissed. The Court will not address the merits of this request, which must be raised via a noticed motion, at this time. (See Leader v. Health Industries of America, Inc. (2001) 89 Cal.App.4th 603, 613.) It notes, however, that any amendment would be subject to the sham pleading doctrine. (See Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425–426 [allegations rendering a pleading vulnerable to attack cannot simply be omitted without explanation in an amended pleading].)

C. Remaining Issues

As urged by uPI, the Court of Appeal has already expressly determined that the forum selection provision at issue is a mandatory provision that binds Richtek as well as its employees. (See Richtek USA, Inc. v. uPI Semiconductor Corporation, supra, 242 Cal.App.4th at pp. 661-662.) In addition, it necessarily found that the provision encompasses not only claims for breach of Richtek’s employment agreement, but related claims for trade secret misappropriation—which are the only claims asserted in this action. These findings are the law of the case. (See Stock v. Meek (1952) 114 Cal.App.2d 584, 586 [“Where questions presented on a subsequent appeal were necessarily involved in a former appeal, and the conclusion arrived at on the former appeal could not have been reached without expressly or impliedly deciding the question subsequently presented, the decision on the former appeal is the law of the case ….”].)

Given that the forum selection provision is mandatory, the traditional forum non conveniens factors (whether the designated forum is a suitable alternative forum and whether the balancing of various private and public interest factors favors retaining the action in California) are not considered. (See Verdugo v. Alliantgroup, L.P. (2015) 237 Cal.App.4th 141, 147, fn.2.) To avoid enforcement of such a provision, the plaintiff bears a “heavy burden” to show that enforcement would be wholly “unreasonable under the circumstances of the case.” (Wimsatt v. Beverly Hills Weight etc. Internat., Inc. (1995) 32 Cal.App.4th 1511, 1523.) Richtek, which raises only the waiver and standing arguments that have already been addressed, does not meet that burden here.

uPI’s motion to dismiss pursuant to the forum selection clause is accordingly GRANTED.

III. Motion to Dismiss Pursuant to Forum Non Conveniens

In light of the ruling above, uPI’s alternative motion to dismiss on the ground of forum non conveniens is MOOT.

Case Name: Gutierrez v. Google Inc.
Case No.: 2015-1-CV-277104

This is a putative class action brought by plaintiff Rosa Gutierrez (“Plaintiff”). Plaintiff alleges she and the putative class members were employed by Defendant Google, Inc. (Complaint, ¶ 9.) Defendant failed to pay Plaintiff and the class members all wages due, including by: failing to pay overtime premiums; failing to properly maintain records; failing to provide accurate itemized statements for each pay period; failing to properly compensate Plaintiff and class members for necessary expenditures; and requiring or permitting employees to work off the clock. (Ibid.)

The Complaint, filed on February 23, 2015, sets forth the following causes of action: [1] Failure to Provide Required Meal Periods; [2] Failure to Provide Required Rest Periods; [3] Failure to Pay Overtime Wages; [4] Failure to Pay Minimum Wages; [5] Failure to Pay Timely Wages During Employment; [6] Failure to Pay All Wages Due to Discharged and Quitting Employees; [7] Failure to Maintain Required Records; [8] Failure to Furnish Accurate Itemized Wage Statements; [9] Failure to Indemnify Employees for Necessary Expenditures Incurred in Discharge of Duties; [10] Unfair and Unlawful Business Practices; and [11] Representative Action for Civil Penalties. On February 19, 2016, this Court granted Google’s demurrer with leave to amend and on February 22, 2016, Plaintiff filed a First Amended Complaint (“FAC”) alleging similar causes of action to what was pled in the original Complaint.

On May 19, 2016, the parties participated in a mediation presided over by David Rotman, an experienced wage and hour mediator. After a full day of mediation, the parties agreed to settle the matter for a total sum of $4,750,000 which includes approximately 4730 current and former non-exempt employees who work or have worked at Google from Feb. 23, 2011.

Plaintiffs now move for Preliminary Approval of Class Action Settlement.

I. Plaintiff’s Motion for Preliminary Approval of Class Action Settlement

A. Legal Standard

Generally, “questions whether a settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court’s broad discretion.” (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234-235, citing Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794.)

In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such as “the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement.”

(Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at pp. 244-245, citing Dunk, supra, 48 Cal.App.4th at p. 1801 and Officers for Justice v. Civil Service Com’n, etc. (9th Cir. 1982) 688 F.2d 615, 624.)

“The list of factors is not exclusive and the court is free to engage in a balancing and weighing of factors depending on the circumstances of each case.” (Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 245.) The court must examine the “proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” (Ibid., quoting Dunk, supra, 48 Cal.App.4th at p. 1801 and Officers for Justice v. Civil Service Com’n, etc., supra, 688 F.2d at p. 625, internal quotation marks omitted.)

The burden is on the proponent of the settlement to show that it is fair and reasonable. However “a presumption of fairness exists where: (1) the settlement is reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.”

(Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 245, citing Dunk, supra, 48 Cal.App.4th at p. 1802.)

B. Terms of the Settlement

According to the moving papers, the Total Settlement Amount is $4,750,000 which is broken down as follows: (1) Settlement Administrator fees and expenses not to exceed $30,000; (2) a proposed class representative incentive payment to Plaintiff in the amount of $15,000; (3) attorney’s fees in the amount of $1,583,333.33 representing one-third of the Total Settlement Amount; (4) costs and expenses not to exceed $50,000; (5) a payment to the California Labor and Workforce Development Agency in the amount of $35,625 in settlement of the PAGA claim. The remaining amount of the settlement proceeds (“Net Settlement Amount”) in the sum of $3,036,041.67 will be distributed to the eligible Class Members. The Settlement Allocation Formula for the distribution is set forth below.

According to the terms of the Settlement Agreement, the settlement shares will be determined by the number of workweeks that each Class Member worked. Each Class Member will be credited with one unit for each workweek that he or she worked in a position covered by the Settlement. According to the moving papers, the average Settlement Share for a Class Member will be approximately 641.87, although the amounts will vary depending on the number of workweeks that each Class Member worked.

In assessing the fairness of the Settlement, the Court notes that the settlement was achieved with the assistance of an experienced mediator after a full day of arms-length negotiations. According to the moving papers, the settlement came after extensive investigation and research and the parties engaged in pre-settlement discovery including depositions of two “persons most knowledgeable,” interrogatories, requests for admissions and document requests which included Google’s applicable wage-and-hour policies and related training and information documents as well as timekeeping and payroll data for all non-exempt employees state-wide over the relevant time period. After this was produced, Plaintiff and her counsel obtained an expert and analyzed the data in order to properly evaluate the strength and weaknesses of her case. Google also provided to Plaintiff the results of an independent expert survey that it engaged Field Research Corporation to conduct which was completed by 1933 Class Members.

The moving papers outline the strength and weaknesses of the respective claims and the risks inherent with proceeding with the litigation in lieu of settlement. Specifically, the moving papers discuss the meal and rest period claims, the “off the clock” claims, the expense reimbursement claims, and the derivative claims for inaccurate wage statement penalties, waiting time penalties, failure to maintain required records and unfair competition. Plaintiff discusses the legal defenses raised by Google and the challenges of certifying a class in light of these defenses. Plaintiff’s estimate that the total maximum potential recovery for the Class (exclusive of interest and derivative penalties) to be approximately $34,754,736.27. In terms of the PAGA claim, the proposed payment to the LWDA is $35, 625. There is little discussion in the moving papers as to how this amount was reached and why it represents a fair settlement of the PAGA claim. Without additional information addressing how the PAGA payment to the LWDA was reached, the Court cannot fully assess this aspect of the Settlement.

The Declaration of Matthew J. Matern sets forth the background and experience of counsel in litigating these type of class action lawsuits and the Court is satisfied with the experience and expertise of counsel in handling these type of cases.

Regarding the request for attorney’s fees and expenses, the Court also has an independent right and responsibility to review the requested attorney’s fees and only award so much as it determines reasonable. (See Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 127-128.) Plaintiffs’ counsel seeks attorneys’ fees and costs in the amount of $1,583,333.33. The moving papers indicate that this amount is not more than 33% of the Settlement and these type of contingency fee payments are recognized under the common fund doctrine, which allows a party recovering a fund for the benefit of others to recover attorney’s fees from the fund itself. (See City and County of San Francisco v. Sweet (1995) 12 Cal.4th 105, 110-111.) Prior to the final approval hearing, counsel should provide detailed information about the lodestar as well as billing records to allow the Court to conduct a lodestar cross-check to further evaluate the reasonableness of the fee request. (See Lealao v. Beneficial Cal. Inc. (2000) 82 Cal.App.4th 19, 46-47.)

Regarding class representative awards, “‘[t]he rationale for making enhancement or incentive awards to named plaintiffs is that they should be compensated for the expense or risk they have incurred in conferring a benefit on other members of the class.’ [Citation.] An incentive award is appropriate ‘“if it is necessary to induce an individual to participate in the suit[.]” … [Citation.]’ [Citation.] ‘[C]riteria courts may consider in determining whether to make an incentive award include: 1) the risk to the class representative in commencing suit, both financial and otherwise; 2) the notoriety and personal difficulties encountered by the class representative; 3) the amount of time and effort spent by the class representative; 4) the duration of the litigation and; 5) the personal benefit (or lack thereof) enjoyed by the class representative as a result of the litigation. [Citations.]’ [Citation.] These ‘incentive awards’ to class representatives must not be disproportionate to the amount of time and energy expended in pursuit of the lawsuit. [Citation.]” (Cellphone Termination Fee Cases (2010) 186 Cal.App.4th 1380, 1394-1395.) The moving papers seek an incentive award for the named Plaintiff in the amount of $15,000. While the Court recognizes the fact that such awards are appropriate and supported by the law, the amount requested is higher than this Court typically awards in similar cases. Counsel should provide detailed information from the class representative documenting her involvement in the case and the amount of time spent on the case. Assuming there is proper evidentiary support, the Court views the reasonable range for incentive awards to be in the $10,000-$15,000 range.

C. Conditional Certification of the Proposed Class:

Plaintiff requests that the following settlement class be provisionally certified: “All persons who work or worked for Google in a non-exempt position in California at any time from Februrary 23, 2011, through the date on which the Court grants preliminary approval of the Settlement or August 18, 2016, whichever is sooner.” (Settlement Agreement, Exhibit 1 to Matern Declaration).

Legal Standard

Rule 3.769(d) of the California Rules of Court states that “[t]he court may make an order approving or denying certification of a provisional settlement class after [a] preliminary settlement hearing.” California Code of Civil Procedure Section 382 authorizes certification of a class “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court ….” As interpreted by the California Supreme Court, Section 382 requires the plaintiff to demonstrate by a preponderance of the evidence (1) an ascertainable class and (2) a well-defined community of interest among the class members. (Sav-On Drug Stores, Inc. v. Superior Court (Rocher) (2004) 34 Cal.4th 319, 326, 332.)

The “community-of-interest” requirement encompasses three factors: (1) predominant questions of law or fact, (2) class representatives with claims or defenses typical of the class, and (3) class representatives who can adequately represent the class. (Ibid.) “Other relevant considerations include the probability that each class member will come forward ultimately to prove his or her separate claim to a portion of the total recovery and whether the class approach would actually serve to deter and redress alleged wrongdoing.” (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435.) The plaintiff has the burden of establishing that class treatment will yield “substantial benefits” to both “the litigants and to the court.” (Blue Chip Stamps v. Superior Court (Botney) (1976) 18 Cal.3d 381, 385.)

In the settlement context, “the court’s evaluation of the certification issues is somewhat different from its consideration of certification issues when the class action has not yet settled.” (Luckey v. Superior Court (Cotton On USA, Inc.) (2014) 228 Cal.App.4th 81, 93.) As no trial is anticipated in the settlement-only context, the case management issues inherent in the ascertainable class determination need not be confronted, and the court’s review is more lenient in this respect. (Id., pp. 93-94.) However, considerations designed to protect absentees by blocking unwarranted or overbroad class definitions require heightened scrutiny in the settlement-only class context, since the court will lack the usual opportunity to adjust the class as proceedings unfold. (Id., p. 94.)

Ascertainable Class

“The trial court must determine whether the class is ascertainable by examining (1) the class definition, (2) the size of the class and (3) the means of identifying class members.” (Miller v. Woods (1983) 148 Cal.App.3d 862, 873.) “Class members are ‘ascertainable’ where they may be readily identified without unreasonable expense or time by reference to official records.” (Rose v. City of Hayward (1981) 126 Cal.App.3d 926, 932.)

Here, plaintiff estimated at the time of mediation that there were 4730 current and former employees who can be identified by Google’s records. Class members are easily identifiable from defendants’ payroll records. The Court consequently finds that the class is numerous and ascertainable.

Community of Interest

With respect to the first community of interest factor, “[i]n order to determine whether common questions of fact predominate the trial court must examine the issues framed by the pleadings and the law applicable to the causes of action alleged.” (Hicks v. Kaufman & Broad Home Corp. (2001) 89 Cal.App.4th 908, 916.) The court must also give due weight to any evidence of a conflict of interest among the proposed class members. (See J.P. Morgan & Co., Inc. v. Superior Court (Heliotrope General, Inc.) (2003) 113 Cal.App.4th 195, 215.) The ultimate question is whether the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants. (Lockheed Martin Corp. v. Superior Court, supra, 29 Cal.4th at pp. 1104-1105.) “As a general rule if the defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages.” (Hicks v. Kaufman & Broad Home Corp., supra, 89 Cal.App.4th at p. 916.)

Here, common legal and factual issues predominate. These issues include whether defendants’ rounding policy was lawful and whether there were legally compliant meal and rest period policies, off the clock policies and expense reimbursement policies.

As to the second factor,

The typicality requirement is meant to ensure that the class representative is able to adequately represent the class and focus on common issues. It is only when a defense unique to the class representative will be a major focus of the litigation, or when the class representative’s interests are antagonistic to or in conflict with the objectives of those she purports to represent that denial of class certification is appropriate. But even then, the court should determine if it would be feasible to divide the class into subclasses to eliminate the conflict and allow the class action to be maintained.

(Medrazo v. Honda of North Hollywood (2008) 166 Cal. App. 4th 89, 99, internal citations, brackets, and quotation marks omitted.) Here, like other members of the class, plaintiff was employed as a nonexempt employee and suffered alleged violations due to defendants’ failure to provide meal and rest periods. The anticipated defenses are not unique to plaintiff, and there is no indication that plaintiff’s interests are otherwise in conflict with those of the class.

Finally, adequacy of representation “depends on whether the plaintiff’s attorney is qualified to conduct the proposed litigation and the plaintiff’s interests are not antagonistic to the interests of the class.” (McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450.) The class representative does not necessarily have to incur all of the damages suffered by each different class member in order to provide adequate representation to the class. (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 238.) “Differences in individual class members’ proof of damages [are] not fatal to class certification. Only a conflict that goes to the very subject matter of the litigation will defeat a party’s claim of representative status.” (Ibid., internal citations and quotation marks omitted.)

Plaintiff has the same interest in maintaining this action as any class member would have. Further, she has hired experienced counsel. Plaintiff has sufficiently demonstrated adequacy of representation.

Substantial Benefits of Class Certification

“[A] class action should not be certified unless substantial benefits accrue both to litigants and the courts. . . .” (Basurco v. 21st Century Ins. (2003) 108 Cal.App.4th 110, 120, internal quotation marks omitted.) The question is whether a class action would be superior to individual lawsuits. (Ibid.) “Thus, even if questions of law or fact predominate, the lack of superiority provides an alternative ground to deny class certification.” (Ibid.) Generally, “a class action is proper where it provides small claimants with a method of obtaining redress and when numerous parties suffer injury of insufficient size to warrant individual action.” (Id. at pp. 120-121, internal quotation marks omitted.)

Here, there are an estimated 4730 members of the proposed class. It would be inefficient for the Court to hear and decide the same issues separately and repeatedly for each class member. Further, it would be cost prohibitive for each class member to file suit individually, as each member would have the potential for little to no monetary recovery. It is clear that a class action provides substantial benefits both to the litigants and the Court in this case.

In sum, plaintiff has demonstrated that this action is appropriate for class treatment, and that he and his counsel will adequately represent the class.

Regarding Notice, the content of a class notice is subject to court approval.
If the court has certified the action as a class action, notice of the final approval hearing must be given to the class members in the manner specified by the court. The notice must contain an explanation of the proposed settlement and procedures for class members to follow in filing written objections to it and in arranging to appear at the settlement hearing and state any objections to the proposed settlement. (Cal. Rules of Court, rule 3.769(f).)

In determining the manner of the notice, the court must consider:

(1) The interests of the class;
(2) The type of relief requested;
(3) The stake of the individual class members;
(4) The cost of notifying class members;
(5) The resources of the parties;
(6) The possible prejudice to class members who do not receive notice; and
(7) The res judicata effect on class members.

(Cal. Rules of Court, rule 3.766(e).)

Here, the Proposed Notice is attached as Exhibit A to the Settlement Agreement. The Notice describes the lawsuit, explains the settlement, and instructs class members that they may receive a payment, opt out of the settlement, or object. The release language is provided. The maximum settlement amount is set forth along with itemized estimated deductions for attorney’s fees and expenses, administrator costs and the incentive award with the remainder representing a net settlement fund. The Class Member information sheet is attached which includes for each Class Member the number of covered workweeks upon which his or her individual settlement share will be calculated as well as the estimated amount of the settlement share. The Proposed Notice does need to be changed to indicate that Class Members can either object in writing as set forth in the current Notice, or can appear at the hearing and object at that time without submitting a written objection.

With this minor modification, the notice procedures are adequate. The notice itself complies with the requirements for class notice. It provides basic information about the settlement, including the settlement amount and plan of allocation. It also explains what claims will be released by the settlement and the compensation that will be requested by plaintiffs’ counsel. It instructs potential class members how to dispute their work history information and how to opt out of the class.

Counsel is instructed to submit Supplemental Briefing of the reasonableness of the PAGA Settlement so that the Court can fully assess this aspect of the Settlement. Counsel is also instructed to amend the Notice to advise Class Members that they can object in writing or in person at the Final Fairness Hearing. The Motion for Preliminary Approval will be continued to August 22nd, 2016 at 9 a.m. and Supplemental Briefing will be due no later than August 15, 2016.

Case Name: Mamarian, et al. v. KB Home South Bay, Inc.
Case No.: 2015-1-CV-288222

Defendant KB Home South Bay Inc. (“KB Homes”) brings this Motion to Stay the Action in its Entirety pending the Plaintiffs’ mandated compliance with California’s Right to Repair statute as set forth in California Civil Code Section 895 et seq (“SB 800”). The underlying litigation is a construction defect action brought by the Plaintiff owners of 6 single family residences located in San Jose, CA. All of the homes were originally sold on or after January 1, 2003.

KB now moves to stay this entire action pending Plaintiffs’ compliance with the pre-litigation procedures of the Right to Repair Act, California Civil Code section 895 et seq. (hereinafter the “Act” or “SB 800”). KB argues that the Act requires Plaintiffs to give KB notice of their claims and an opportunity to inspect and repair any alleged construction defects before a lawsuit is filed. KB anticipates Plaintiffs’ reliance on Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98 (“Liberty Mutual”) as dispensing with the pre-litigation procedures for common law claims, but KB argues that Liberty Mutual is not controlling because it arose out of unique facts and concerns related to an insurer’s subrogation claims.

In opposition, Plaintiffs argue there is no basis to stay this action because they have not included a cause of action for violation of the SB800 building standards and the First Amended Complaint (“FAC”) only includes causes of action for negligence, strict liability, and breach of contract and warranty. Plaintiff argue that under Liberty Mutual, SB 800 does not prohibit homeowners from bringing non-SB 800 causes of action such as negligence, strict liability, and breach of contract for damages that result from violations of SB 800 building standards. According to the opposition papers, Liberty Mutual and Burch v. Superior Court (2014) 223 Cal.App.4th 1411 make it clear that homeowners may elect to bring common law causes of action instead of bringing a claim under SB800.

In reply, KB argues that the action should be stayed because Plaintiffs seek damages clearly covered by SB 800. KB argues that even though the FAC does not state a formal cause of action for violation of SB800, the common law causes of action in the FAC allege defects in foundation slabs, soil, electrical systems, mechanical systems, driveways, hardscapes, stucco, exterior finishing, windows, doors, HVAC units, roofs, plumbing and a wide variety of other areas. KB argues that since the SB800 process applies to “any action” seeking recovery for the categories of construction defects covered in Civil Code Sections 896 and 897, both of which overlap with the damages claimed in this lawsuit, Plaintiffs’ claims are clearly governed by SB800. KB further argues that Liberty Mutual is distinguishable as it does not deal with a defendant builder’s entitlement to a stay in order to perform pre-litigation repairs, as the builder in that case had performed pre-litigation repairs.

Discussion

The Right to Repair Act, California Civil Code section 895 et seq., sets forth various standards for residential constructions and procedures for construction defect actions brought under the Act.

In any action seeking recovery of damages arising out of, or related to deficiencies in, the residential construction, design, specifications, surveying, planning, supervision, testing, or observation of construction, a builder, and to the extent set forth in Chapter 4 (commencing with Section 910), a general contractor, subcontractor, material supplier, individual product manufacturer, or design professional, shall, except as specifically set forth in this title, be liable for, and the claimant’s claims or causes of action shall be limited to violation of, the following standards, except as specifically set forth in this title.
(Cal. Civ. Code, § 896.)

The construction standards set forth in section 896 pertain to water issues (subd. (a)), structural issues (subd. (b)), soil issues (subd. (c)), fire protection issues (subd. (d)), plumbing and sewer issues (subd. (e)), electrical system issues (subd. (f)), and other areas of construction (subd. (g)). The Act also includes “a requirement that builders provide a one-year ‘fit and finish’ warranty (§ 900), and it established a new 10-year statute of limitations (§ 941). These provisions clearly benefit homeowners.” (Standard Pacific Corp. v. Superior Court (2009) 176 Cal.App.4th 828, 832.)

The Act establishes pre-litigation procedures that a claimant must initiate prior to filing an action for violation of these standards (Civ. Code, § 910). “These procedures include a requirement that the claimant provide notice of claim ‘to the builder.’ ([Cal. Civ. Code, § 910], subd. (a).) (Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194, 1211.) “The builder may elect to respond to the claim by inspecting the alleged violation (§ 916), offering to repair it (§ 917), and either repairing the violation, or arranging for a repair to be done (§§ 918, 921). If the builder fails to respond to the claim, or otherwise fails to comply with the requirements of the Act’s prelitigation procedures, the claimant may bring an action for a violation of the Act’s standards without further resort to the prelitigation procedures. (§§ 915, 920.) A claimant may also file an action for a violation of the Act’s standards alleging an inadequate repair. (§ 927.)” (Greystone Homes, supra, 168 Cal.App.4th at p. 1211.) “If the claimant does not conform with the requirements of this chapter, the builder may bring a motion to stay any subsequent court action or other proceeding until the requirements of this chapter have been satisfied. The court, in its discretion, may award the prevailing party on such a motion, his or her attorney’s fees and costs in bringing or opposing the motion.” (Cal. Civ. Code, § 930, subd. (b).)

The Act applies only to new residential units where the purchase agreement with the buyer was signed by the seller on or after January 1, 2003. (See Civ. Code, § 938.) In the immediate case, there does not appear to be a dispute that the homes were sold on or after January 1, 2003 and therefore subject to the requirements of Civil Code Section 895, et seq. Additionally, there does not appear to be a dispute that the Plaintiffs have not complied with the Act’s pre-litigation notice requirements.

In Liberty Mutual, supra, the Court of Appeal (4th App. Dist., Div. 3) reversed the dismissal of an insurer’s subrogation action against a housing developer for recovery of the insured’s relocation expenses incurred while the house was being repaired. The Liberty Mutual court examined the language and legislative history of the Act and found that “the Right to Repair Act does not expressly or impliedly support an argument that it mandates an exclusive remedy, and certainly does not derogate common law claims otherwise recognized by law. [Citation.]” (Liberty Mutual, supra, 219 Cal.App.4th at pp. 108-109.) The particular discussion of the Act’s history and purpose was in regard to the Act’s abrogation of the “economic loss rule” in residential construction defect cases:

In Aas v. Superior Court (2000) 24 Cal.4th 627, 632 [101 Cal. Rptr. 2d 718, 12 P.3d 1125], the California Supreme Court held that construction defects in residential properties, in the absence of actual property damage, were not actionable in tort. The plaintiffs in Aas v. Superior Court contended that their homes suffered a variety of construction defects, and sought as damages from the homebuilders the costs of repair and/or the diminution in the value of their homes. [Citation.] The trial court excluded evidence of any defects that had not caused property damage; both the Court of Appeal and the Supreme Court upheld that evidentiary ruling. [Citation.]

In 2002, the California Legislature enacted the Right to Repair Act. A key specified goal of the Act was to abrogate the holding of Aas v. Superior Court. “In response to the holding in Aas, the Legislature enacted Civil Code section 895 et seq.” [Citation.] The legislative history of the Act explained: “This bill would make major changes to the substance and process of the law governing construction defects. It is the product of extended negotiations between various interested parties. Among other things, the bill seeks to respond to concerns expressed by builders and insurers over the costs associated with construction defect litigation, as well as concerns expressed by homeowners and their advocates over the effects of a recent Supreme Court decision that held that defects must cause actual damage prior to being actionable in tort [Aas v. Superior Court, [supra,] 24 Cal.4th 627]. [¶] … [¶] … [E]xcept where explicitly specified otherwise, liability would accrue under the standards regardless of whether the violation of the standard had resulted in actual damage or injury. As a result, the standards would essentially overrule the Aas decision and, for most defects, eliminate that decision’s holding that construction defects must cause actual damage or injury prior to being actionable.” [Citations.] (Id. at pp. 103-104.)

The Liberty Mutual court held that “the Act does not provide the exclusive remedy in cases where actual damage has occurred because of construction defects. Therefore, Liberty Mutual’s subrogation claims were not time-barred for failing to comply with the Act.” (Id. at p. 109.)

KB argues that Liberty Mutual is distinguishable and does not control because it involved a subrogation claim in a case involving catastrophic loss where the builder had already performed repairs. KB further points out that Liberty Mutual did not discuss the Act’s pre-litigation notice requirement, but rather, the Act’s statute of limitations for plumbing and sewer systems (Cal. Civ. Code, § 896, subd. (e)).

In contrast, Plaintiffs argue that nothing in Liberty Mutual confines its holding to the subrogation context. In Burch v. Superior Court (2014) 223 Cal.App.4th 1411 (“Burch”), the Court of Appeal (2nd App. Dist., Div. 3) followed Liberty Mutual in reversing summary adjudication of claims for negligence and breach of implied warranty. Notably, Burch was not a subrogation action, but an action by the homeowner against the general contractor and developer. The court found that the plaintiff’s counts for negligence and breach of implied warranty “allege common law claims for damages for construction defects, including defects allegedly resulting in property damage. We conclude that the Right to Repair Act does not preclude such common law claims and that the summary adjudication of the second and third counts on this basis was error.” (Burch, supra, 223 Cal.App.4th at p. 1418.) Burch supports Plaintiffs’ position that Liberty Mutual is not confined to the subrogation insurance context.

However, neither Liberty Mutual nor Burch pertained to the pre-litigation notice requirements. As KB points out, the builder in Liberty Mutual had performed repairs before the subrogation action was brought. (Liberty Mutual, supra, 219 Cal.App.4th at p. 101.) Burch contains no mention of whether the plaintiff complied with the pre-litigation notice requirements, or whether those procedures applied to the plaintiff’s common law claims. Thus, neither case is directly controlling on the precise issue raised in this motion.

Furthermore, Liberty Mutual contains no discussion of California Civil Code section 943, subdivision (a), which provides:

Except as provided in this title, no other cause of action for a claim covered by this title or for damages recoverable under [Civil Code] Section 944 is allowed. In addition to the rights under this title, this title does not apply to any action by a claimant to enforce a contract or express contractual provision, or any action for fraud, personal injury, or violation of a statute. Damages awarded for the items set forth in Section 944 in such other cause of action shall be reduced by the amounts recovered pursuant to Section 944 for violation of the standards set forth in this title.

Section 944, referenced in section 943, subdivision (a), provides:

If a claim for damages is made under this title, the homeowner is only entitled to damages for the reasonable value of repairing any violation of the standards set forth in this title, the reasonable cost of repairing any damages caused by the repair efforts, the reasonable cost of repairing and rectifying any damages resulting from the failure of the home to meet the standards, the reasonable cost of removing and replacing any improper repair by the builder, reasonable relocation and storage expenses, lost business income if the home was used as a principal place of a business licensed to be operated from the home, reasonable investigative costs for each established violation, and all other costs or fees recoverable by contract or statute.

Liberty Mutual makes only a brief reference to section 943, subdivision (a), citing the exceptions set forth in the second sentence of section 943, subdivision (a) as support for the position that the Act “is not the exclusive means for seeking redress when construction defects cause actual property damage.” (See Liberty Mutual, supra, 219 Cal.App.4th at p. 107.) However, the court did not consider whether the subrogated insurer’s damages (e.g., relocation expenses) were “damages recoverable under Section 944” as stated in the first sentence of section 943, subdivision (a). In fact, section 944’s list of recoverable damages includes “reasonable relocation and storage expenses[.]” Section 944 also includes “the reasonable cost of repairing and rectifying any damages resulting from the failure of the home to meet the standards[.]” (Italics added.) Under these statutory provisions, even if a homeowner or subrogated insurer brings common law claims alleging actual damages, if those damages fall within the scope of section 944, then, under the first sentence of section 943, subdivision (a), those claims for section 944 damages can only be brought “as provided in this title[.]” (See Lovell v. Fong, (Apr. 2, 2014) 2014 Cal.App.Unpub. LEXIS 2311, *21, fn. 10 [criticizing Liberty Mutual as “inconsistent” with section 943, subdivision (a)].)

In the instant case, a review of the FAC confirms the fact that Plaintiffs’ damages allegations include expenses to cure the damage, defects and/or deficiencies, diminution in value of the properties, and expenses to retain expert consultants to analyze and determine the method of repairing the defects and damages. Section 944 includes the reasonable value of repairing any violation of the standards set forth in the Act, the reasonable cost of repairing and rectifying any damages resulting from the failure of the home to meet the standards, and reasonable investigative costs for each established violation. All of Plaintiffs’ causes of action are based on the same damages allegations. Under section 943, subdivision (a), Plaintiffs’ claims for damages recoverable under section 944 must be brought “as provided in this title[.]” Section 943 is found in Chapter 5 (Procedure) of Division 2, Part 2 of Title 7 (Requirements for Actions for Construction Defects). The pre-litigation notice requirements are found in Chapter 4 (Prelitigation Procedure) of the same title. Thus, Plaintiffs’ claims for damage recoverable under section 944 are subject to the pre-litigation notice requirements of the Act.

Applying these principles to the immediate litigation, the Court finds that it would be neither equitable nor fair to abrogate the pre-litigation requirements of Section 895 simply because the Plaintiffs have included common law causes of action. It would undermine the purpose of SB800 and invite gamesmanship in pleadings if Defendants were not able to employ the prelitigation requirements prior to the inception of full-blown litigation. Accordingly, the Defendant’s Motion to Stay the Proceedings is GRANTED until the prelitigation procedures in Civil Code 895 et seq. are completed.

Case Name: Cilker Apartments, LLC v. Western National Construction, et al.
Case No.: 2013-1-CV-258281

This case arises out of alleged construction defects at One Pearl Place Apartments, a 182-unit residential apartment building in San Jose. Currently before the Court are the following motions: (1) a motion by plaintiff Cilker Apartments, LLC for a new trial; (2) a motion by general contractor Western National Construction (“WNC” or “Western National”) for judgment on the pleadings as to Cilker’s complaint; and (3) a motion by defendant and cross-defendant California Classic Paver Designs (“CA Classic Pavers” or “CCPD”) for determination of good faith settlement.

I. Cilker’s Motion for New Trial

Cilker moves for a new trial with respect to the Court’s order granting summary judgment in favor of defendants and cross-defendants Madera Framing, Inc. and Rounds & Buroker, Inc. dba Madera Construction on the basis of a release executed by Cilker, Madera Framing, and Western National during prior litigation. Madera Framing and Madera Construction (collectively, the “Madera Defendants”) separately oppose Cilker’s motion.

A. Factual and Procedural Background

On May 24, 2016, the Court granted separate motions for summary judgment by the Madera Defendants against both Cilker and Western National, over both parties’ oppositions. The order provided the following relevant background on the release at issue:

In late 2003, Madera Framing performed framing work at the One Pearl Place project. After its work was completed, Madera Framing was not paid. On December 1, 2003, Madera Framing filed a complaint in Santa Clara County Superior Court naming Cilker and Western National [(the “Prior Action”)]. The lawsuit ended in a mutual release and settlement agreement that was fully funded and executed.

(Ex. 1 to Mot., Order After Hearing on May 6, 2016, Ex. A., p. 2, citations omitted.)

The settlement agreement identifies Cilker as a “Settling Party” and provides for a $215,000 payment by Cilker to Madera Framing in consideration for the dismissal of the Prior Action with prejudice, with the Madera entities to deliver to Cilker “a fully executed and notarized release of Madera’s mechanic’s lien” within three business days of receiving payment and the fully executed settlement agreement. (Ex. 3 to Mot., Mutual Release and Settlement Agreement, ¶ 1.) The release encompasses “any and all claims, demands, arbitrations, actions, or causes of action, that arise out of or relate to the claims alleged in the [first amended complaint and related pleadings in the Prior Action], or which could have been alleged [therein], whether known or unknown.” (Id. at ¶ 2.) Excepted from the release are “any claims Cilker and WNC have against each other regarding which party is ultimately responsible for this settlement payment” (ibid.) and “any and all claims, rights and defenses concerning, [sic.] responsibility for future claims by third parties for personal injury, construction defects and/or resultant property damage occurring at the Project or arising out of the work related to the Project, but only to the extent such claims arise out of conditions that were unknown to WNC or Cilker and not apparent by reasonable inspection as of the date this Agreement became fully executed” (id. at ¶ 3).

The Court found that the release applied to the claims against the Madera Defendants at issue in this action and granted summary judgment in their favor. On June 9, 2016, Western National filed a motion for judgment on the pleadings as to Cilker’s complaint based on the same release, which is also at issue. Cilker now moves for a new trial with respect to the summary judgment rulings.

B. Untimely and Oversized Brief

As an initial matter, the Madera Defendants correctly note that Cilker’s 19-page brief filed in support of its motion exceeds the page limitations established by the California Rules of Court. (See Cal. Rules of Court, rule 3.1113(d) [“Except in a summary judgment or summary adjudication motion, no opening or responding memorandum may exceed 15 pages.”].) The brief, which was filed on June 27, 2016, is also untimely, since Cilker filed its notice of intent to move for a new trial on June 14, 13 days earlier. (See Cal. Rules of Court, rule 3.1600(a) [memorandum must be filed and served within 10 days of filing of notice of intention to move for a new trial].)

These defects constitute an independently sufficient ground for the Court to deny Cilker’s motion. (See Cal. Rules of Court, rule 3.1600(b) [“If the moving party fails to serve and file a memorandum within the time prescribed in (a), the court may deny the motion for a new trial without a hearing on the merits.”], rule 3.1113(g) [oversided memorandum “must be filed and considered in the same manner as a late-filed paper”]; Quantum Cooking Concepts, Inc. v. LV Associates, Inc. (2011) 197 Cal.App.4th 927, 932-934 [trial court properly denied motion for a new trial for failure to comply with rule 3.1113].) As discussed below, the motion also fails on its merits

C. Evidentiary Issues

Cilker’s request for judicial notice of the docket in the Prior Action is GRANTED. (Evid. Code 452, subd. (d).)

The Court declines to issue individual rulings on Madera Construction’s objections to evidence, and Madera Framing’s motion to strike portions of the evidence submitted in support of Cilker’s motion is DENIED. The Court will not rely upon any inadmissible evidence submitted by Cilker and will discuss relevant evidence in context below, but there is no authority for the proposition that it must issue individual evidentiary rulings in connection with a motion for a new trial.

D. Legal Standard

A motion for a new trial seeks “a reexamination of an issue of fact in the same court after a trial and decision by a jury, court, or referee.” (See Code Civ. Proc., § 656 [defining “new trial”].) “A motion for a new trial is appropriate following an order granting summary judgment.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 858.)

A motion for new trial may only be made on the seven grounds set forth in Code of Civil Procedure section 657, insofar as they materially affect the substantial rights of the aggrieved party. (See Code Civ. Proc., § 657.) Generally, the matter must be determined by the same judge who presided over the challenged decision. (Id. at § 661.) The trial court has the “duty to weigh and consider the evidence of both parties and exercise its discretion in passing upon a motion for new trial.” (Anderson v. Dahl (1932) 121 Cal.App. 198, 200.)

Cilker refers to four of the seven grounds set forth in section 657 in support of its motion: (1) irregularity in the proceedings of the court, jury or adverse party, or any order of the court or abuse of discretion by which either party was prevented from having a fair trial (Code Civ. Proc., § 657(1)); (2) accident or surprise which ordinary prudence could not have guarded against (id. at § 657(3)); (3) newly discovered material evidence which could not, with reasonable diligence, have been discovered and presented at the hearing (id. at § 657(4)); and (4) error in law, occurring at the trial and excepted to by the party making the application (id. at § 657(7)).

E. Irregularity, Accident or Surprise, or Newly Discovered Evidence

“Sections 657 and 658 establish seven grounds for a new trial, which fall into two groups.” (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1192.) “Motions seeking a new trial on the first four grounds ‘must be made upon affidavits’ (§ 658).” (Ibid.; Code Civ. Proc., § 658.) These procedures are strictly construed, and the trial court lacks the authority to grant a new trial on a ground that requires a supporting affidavit when no such affidavit has been submitted. (See Cembrook v. Sterling Drug Inc. (1964) 231 Cal.App.2d 52, 66; Gaskill v. Pacific Hospital of Long Beach (1969) 272 Cal.App.2d 128, 130; Gardner v. Marshall (1944) 24 Cal.2d 686, 690.)

A motion for new trial on the ground of irregularity at the proceeding (Code Civ. Proc., § 657(1)) requires affidavits showing that neither the party “nor his attorney was aware of the” irregularity before the decision was rendered. (Weathers v. Kaiser Foundation Hospitals (1971) 5 Cal.3d 98, 103.) A motion on the ground of accident or surprise (Code Civ. Proc., § 657(3)) requires a showing of a condition or situation in which a party is unexpectedly placed to his detriment, which ordinary prudence on his or her part could not have guarded against. (Hata v. Los Angeles County Harbor/UCLA Medical Center (1995) 31 Cal.App.4th 1791, 1806.) A motion on the ground of newly discovered evidence (Code Civ. Proc., § 657(4)) must be supported by a showing that “(1) the evidence is newly discovered; (2) [the party] exercised reasonable diligence in discovering and producing it; and (3) it is material to” that party’s case. (Doe v. United Airlines, Inc. (2008) 160 Cal.App.4th 1500, 1506.) If the party’s showing is clearly lacking in essential particulars, the grant of a new trial is an abuse of discretion. (Ibid.)

Here, the only changed circumstance that Cilker identifies is Western National’s motion for judgment on the pleadings, which is based on the same release that the Madera Defendants successfully relied upon in moving for summary judgment. Cilker submits no affidavit showing that Western National’s position could not have been anticipated—it merely argues that Western National took a contrary position in unspecified “judicial pleadings” (Mot., p. 4) and in a settlement agreement executed in 2006, years before the present action was filed (Mot., p. 5). It does not explain how it was prejudiced by Western National’s change in position, given that it opposed the Madera Defendants’ motions at the time they were initially at issue. Nor does Cilker identify any newly-discovered evidence pertinent to the Madera Defendants’ motions for summary judgment. Consequently, Cilker’s motion is not justified based on subparts (1), (3), or (4) of section 657.

F. Error in Law

Cilker’s real contention, and the first and primary ground it cites in support of its motion, is that the Court’s ruling on the Madera Defendants’ summary judgment motions was erroneous. (See Code Civ. Proc., § 657(7).) For the Court to grant a new trial on this ground, the error must have materially affected Cilker’s substantial rights. (Code Civ. Proc., § 657; see also Sherman v. Kinetic Concepts, Inc. (1998) 67 Cal.App.4th 1152, 1161 [“Prejudice is required: … there is no discretion to grant a new trial for harmless error.”].)

Cilker contends that the Court made the following erroneous determinations in granting the Madera Defendants’ summary judgment motions: (1) the settlement agreement is unambiguous; (2) the Court would not consider extrinsic evidence; (3) there were no triable issues of fact regarding the intent of the agreement; and (4) the agreement released Cilker’s claims in this action.

Taking these arguments in their logical order, Cilker is correct that

[t]he interpretation of a contract involves a two-step process: First the court provisionally receives (without actually admitting) all credible evidence concerning the parties’ intentions to determine ambiguity, i.e., whether the language is reasonably susceptible to the interpretation urged by a party. If in light of the extrinsic evidence the court decides the language is reasonably susceptible to the interpretation urged, the extrinsic evidence is then admitted to aid in the second step—interpreting the contract.
(Wolf v. Superior Court (Walt Disney Pictures and Television) (2004) 114 Cal.App.4th 1343, 1351, citing Winet v. Price (1992) 4 Cal.App.4th 1159, internal quotations omitted.) To the extent that the Court’s statement that there was “no reason for [it] to look at evidence regarding the intent of the parties” suggests otherwise, that statement was in error. (Order at Ex. A, p. 3.)

However, Cilker must show that any misstatement of the law or refusal by the Court to consider extrinsic evidence materially affected its substantial rights. (Code Civ. Proc., § 657.) Cilker cites the following evidence that it did not intend to release claims relating to construction deficiencies against Western National or the Madera Defendants:

First, it points to statements by its counsel in the Prior Action that this was not Cilker’s intent. However, “evidence of the undisclosed subjective intent of the parties is irrelevant to determining the meaning of contractual language.” (Winet v. Price (1992) 4 Cal.App.4th 1159, 1166, fn.3.) Next, Cilker points to its counsel’s asserted statement to counsel for Western National that “any and all future disputes that [Cilker] may have against [Western National] would need to be expressly identified as not being covered by the Agreement.” (Ex. 6 to Mot., Decl. of David Mitchell ISO Cilker’s Opp. to Madera Constructions Mot. for Summary Adjudication, ¶ 7.) However, such an express exemption of all future disputes between Cilker and Western National was simply not included in the settlement agreement, and has no bearing on Cilker’s expressed intention regarding future disputes with the Madera Defendants.

Next, Cilker invites the Court to review drafts of the settlement agreements showing that the exception for claims by “third parties” was included in the proposed agreement before it was contemplated that Cilker would become a party to the settlement. Cilker contends that this shows it was intended to remain a “third party” even after it became a party to the settlement agreement, but this is not a reasonable inference or a reasonable interpretation of the agreement. Cilker also implies that testimony by Madera Framing lawyers that they could not recall the Prior Action or settlement negotiations; testimony by Madera officer Jerry Merry that he “assumed” the Madera Defendants had been released from any liability regarding the project at issue; and the fact that documents relating to the negotiations were withheld from production under claim of privilege shows that the defendants are hiding relevant evidence about the parties’ intent, but this argument is wholly speculative.

Cilker also cites settlement communications between Madera Framing’s counsel and Western National’s counsel that it argues confirm “that it was the intent of the parties to exclude from the release any claims relating to construction deficiencies that were not known, or discoverable, upon reasonable inspection.” (Mot. at p. 15.) However, the communications discuss language similar to that included in the final agreement, which excludes third party claims “only to the extent such claims arise out of conditions that were unknown to [Western National] or Cilker,” not all unknown claims. (Settlement Agreement, ¶ 3.) In fact, as the Court noted during the hearing on the Madera Defendants’ motions, the settlement includes a broad, express release of unknown claims among the parties pursuant to California Civil Code section 1542. (Id. at ¶ 4.)

Finally, Cilker points to the parties’ conduct after the settlement agreement was executed—specifically, Western National’s position in opposition to the Madera Defendants’ summary judgment motions that the agreement did not release the claims at issue; the Madera Defendants’ belated assertion of the agreement as a defense to this action; and Western National’s execution of a subsequent 2006 settlement agreement acknowledging Cilker’s right to sue it for construction defects. However, the parties’ litigation conduct is not relevant “course of performance” evidence as discussed in the authorities cited by Cilker. (See Epic Communications, Inc. v. Richwave Technology, Inc. (2015) 237 Cal.App.4th 1342, 1355; Sterling v. Taylor (2007) 40 Cal.4th 757, 772–773 [“the practical construction placed upon [a contract] by the parties before any controversy arises as to its meaning affords one of the most reliable means of determining the intent of the parties”], italics added.) Furthermore, the 2006 settlement agreement is not newly-discovered and was not before the Court in connection with the Madera Defendants’ summary judgment motions, and the Court disagrees that it acknowledged Cilker’s right to sue Western National for construction defects.

Cilker consequently does not show that the Court failed to consider any material evidence relating to the intended meaning of the settlement agreement. Specifically, the evidence cited by Cilker does not show that the settlement agreement is ambiguous in any of the three respects urged by Cilker in its motion. First, it does not show any ambiguity regarding whether the claims against the Madera Defendants are within the scope of the agreement’s release, which encompasses not only claims that were asserted in the Prior Action, but claims that “relate to” such claims “or which could have been alleged in the Action, whether known or unknown.” (Settlement Agreement, ¶ 2.) The evidence also does not show any ambiguity regarding whether Cilker is a “third party” under the exception to the release. That exception clearly contrasts the “Settling Parties,” defined to include Cilker, with “third parties” who are not Settling Parties. (Id. at ¶ 3.) Finally, the third ambiguity asserted by Cilker is a variation on its first argument that the scope of the release is ambiguous. The fact that the exception to the release refers to “work related to the Project” does not render the distinct language used in the release itself ambiguous.

Cilker’s various remaining arguments as to why the Court erred in finding that there were no triable issues regarding whether the release applies to the claims against the Madera Defendants also fail. First, the Court did not construe the exception to the release in isolation from the rest of the settlement agreement. Second, there is no triable issue of fact regarding whether Cilker received consideration for executing the settlement agreement. The agreement itself indicates that the dismissal of the Prior Action and Madera’s associated delivery of a fully executed and notarized release of its mechanic’s lien to Cilker constituted consideration for Cilker’s payment. (Settlement Agreement, ¶ 1.)

G. Request for Reformation

Finally, Cilker argues that it is entitled to reformation of the settlement agreement should the Court decline to grant it a new trial. As urged by the Madera Defendants, any such request is beyond the scope of the pleadings, the issues raised in the prior summary judgment motions, and consequently, the present motion for a new trial. (See Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1258 [“The complaint limits the issues to be addressed at the motion for summary judgment. … If plaintiff wishes to expand the issues presented, it is incumbent on plaintiff to seek leave to amend the complaint either prior to the hearing on the motion for summary judgment, or at the hearing itself.”].) The Court notes that any claim for reformation must be supported by specific factual allegations, which Cilker does not offer here. (See George v. Automobile Club of Southern California (2011) 201 Cal.App.4th 1112, 1132-1133 [bare, conclusory allegations are insufficient to state a cause of action for reformation].)

H. Conclusion and Order

In light of the above, Cilker’s motion for a new trial is DENIED.

II. Western National’s Motion for Judgment on the Pleadings

Western National’s request for judicial notice of the Court’s May 24th order granting the Madera Defendants’ motions for summary judgment is GRANTED as to the existence, content, and legal effect of the order. (Evid. Code, § 452, subd. (d); Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1564-1568 [a court may take judicial notice of the existence and content of each document in a court file, but cannot take judicial notice of the truth of hearsay statements or factual findings therein].) Cilker’s request for judicial notice of various filings in this action is GRANTED to the same extent. (Ibid.)

Western National moves for judgment on the pleadings as to Cilker’s complaint, arguing that in awarding summary judgment in favor of the Madera Defendants based on the release associated with the Prior Action, the Court “necessarily found that the clear and unambiguous terms of the settlement agreement between Cilker, WNC and the Madera parties released all claims between those settling parties.” (Mot., p. 5.)

But the Court found no such thing. Clearly, the parties did not release “all claims” between them without limitation. As discussed above, they released claims “aris[ing] out of or relate[d] to the claims alleged in the [Prior Action], or which could have been alleged [therein].” The Prior Action related to work performed by the Madera Defendants. In ruling on the Madera Defendants’ summary judgment motions, the Court had no occasion to consider whether or how the Release might apply to Cilker’s claims against Western National, which involve more than the Madera Defendants’ work. Contrary to Western National’s argument, this issue was not actually or necessarily decided by the Court’s prior order. (See Bridgeford v. Pacific Health Corp. (2012) 202 Cal.App.4th 1034, 1042 [setting forth these and other requirements for collateral estoppel to apply].)

Western National’s motion is accordingly DENIED.

III. CA Classic Pavers’s Motion for Determination of Good Faith Settlement

CA Classic Pavers seeks an order approving its $500,000 settlement with Cilker. Western National opposes CA Classic Pavers’s motion to the extent it seeks an order precluding the contractual claims alleged in Western National’s cross-complaint.

A. Legal Standard

California Code of Civil Procedure section 877.6 provides that a party to an action involving two or more alleged joint tortfeasors may seek a determination that a settlement was made in good faith. To promote settlement (Cal-Jones Properties v. Evans Pacific Corp. (1989) 216 Cal.App.3d 324, 327), such determination “shall bar any other joint tortfeasor … from any further claims against the settling tortfeasor … for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.” (Code Civ. Proc., § 877.6, subd. (c).) The amount paid by the settling defendant reduces the claim against the other defendants. (Code Civ. Proc., § 877, subd. (a).)

In Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, the Supreme Court set forth factors to be considered in approving a good faith settlement, including
a rough approximation of plaintiffs’ total recovery and the settlor’s proportionate liability, the amount paid in settlement, the allocation of settlement proceeds among plaintiffs, and a recognition that a settlor should pay less in settlement than he would if he were found liable after a trial. Other relevant considerations include the financial conditions and insurance policy limits of settling defendants, as well as the existence of collusion, fraud, or tortious conduct aimed to injure the interests of nonsettling defendants.
(At p. 499.) “[O]nly when the good faith nature of a settlement is disputed,” however, is it “incumbent upon the trial court to consider and weigh the Tech-Bilt factors.” (City of Grand Terrace v. Superior Court (Boyter) (1987) 192 Cal.App.3d 1251, 1261.)

“Where there are multiple defendants, each having potential liability for different areas of damage, an allocation of the settlement amount must be made.” (L.C. Rudd & Son, Inc. v. Superior Court (Krystal) (1997) 52 Cal.App.4th 742, 750.) It is the settling parties’ burden to explain “the evidentiary basis for any allocations and valuations made sufficient to demonstrate that a reasonable allocation was made.” (Ibid.) Nevertheless,

the inquiry at the good faith settlement stage is not the same as the inquiry at trial, where complete precision of allocation could presumably be achieved. Since we are dealing with a pretrial settlement, in which the factual findings or determinations made on contested issues of liability or damages are tentative, … we must necessarily apply a broader and more permissive standard for evaluating good faith of a settlement as to such allocation. … [W]hat should be required of the settling parties is that they furnish to the court and to all parties an evidentiary showing of a rational basis for the allocations made and the credits proposed. They must also show that they reached these allocations and credit proposals in an atmosphere of appropriate adverseness so that the presumption may be applied that a reasonable valuation was reached.

(Regan Roofing v. Superior Court (Finkelstein) (1994) 21 Cal.App.4th 1685, 1704, internal citations omitted.) “[W]here the settling parties have failed to allocate, the trial court must allocate in the manner which is most advantageous to the nonsettling party.” (Dillingham Construction N.A., Inc. v. Nadel Partnership (1998) 64 Cal.App.4th 264, 287.)

The court may consider affidavits and counteraffidavits, and may receive other evidence at the hearing on the motion in its discretion. (Code Civ. Proc., § 877.6, subd. (b).) “The party asserting the lack of good faith shall have the burden of proof on that issue.” (Code Civ. Proc., § 877.6, subd. (d).) Bad faith may be established by “demonstrat[ing] that the settlement is so far ‘out of the ballpark’ in relation to [the Tech-Bilt] factors as to be inconsistent with the equitable objectives of the statute.” (Tech-Bilt v. Woodward-Clyde & Associates, supra, 38 Cal.3d at pp. 499-500.) “[W]hen no one objects, the barebones motion which sets forth the ground of good faith, accompanied by a declaration which sets forth a brief background of the case is sufficient.” (City of Grand Terrace v. Superior Court, supra, 192 Cal.App.3d at p. 1261.)

B. Analysis

As an initial matter, Western National opposes CA Classic Pavers’s motion on the sole ground that it “believes that CCPD and its counsel may be under the misguided notion that CCPD’s settlement with Cilker serves to resolve CCPD’s liability to WNC” for contractual claims asserted in Western National’s cross-complaint. As urged by Western National, “a good faith settlement order does not bar a non-settling tortfeasor from asserting an indemnification claim against the settling defendants based on an express contract.” (Interstate Fire and Cas. Ins. Co. v. Cleveland Wrecking Co. (2010) 182 Cal.App.4th 23, 32.) Since Western National does not raise any other issue with the settlement in its opposition, CA Classic Pavers’s motion is essentially unopposed.

CA Classic Pavers is both a defendant and a cross-defendant to Western National’s cross-complaint. It indicates that it subcontracted with Western National to furnish and install approximately 37,000 square feet of interlocking paving stones at vehicular and pedestrian areas at One Pearl Place, including a bed of sand under the pavers. At the pedestrian areas, its work was installed on top of a podium slab and other components built by other subcontractors. Cilker alleges that water accumulates and leaks through the podium deck to the concrete garage structure below, and leaks at the perimeter of the podium deck damaging the stucco and substrate of the residential units. At the vehicular areas, CA Classic Pavers installed pavers on-grade and around support columns. Cilker alleges that sealant joints in that area were improperly constructed, resulting in water intrusion and damage to framing and finishes installed by other subcontractors.

Western National used Cilker’s final defect list and repair cost proposal to allocate the defects and related repair costs to the subcontractors, and allocated 2.4% of Cilker’s total claim ($799,923) to CA Classic Pavers. CA Classic Pavers subsequently issued a Code of Civil Procedure section 998 offer to compromise to Cilker in the amount of $500,000, which Cilker accepted on June 10, 2016.

CA Classic Pavers’s motion exceeds the “barebones” showing required for an unopposed motion, and the settlement appears to be in the ballpark of its liability given Western National’s allocation. (City of Grand Terrace v. Superior Court, supra, 192 Cal.App.3d at p. 1261.) However, CA Classic Pavers does not propose an allocation of the settlement among the defendants as required under the circumstances. The Court will consequently use the allocation proposed by Western National in the absence of any objections by the parties.

In light of the above, CA Classic Pavers’s motion is GRANTED.

Case Name: Attia, et al. v. Google, Inc., et al.
Case No.: 2014-1-CV-274103

This is an action for misappropriation of trade secrets and related causes of action. Currently before the Court are a demurrer and motion to strike by defendants Google, Inc., Larry Page, Sergey Brin, Sebastian Thrun, and Eric “Astro” Teller (collectively, the “Google Defendants”), in which defendants Flux Factory, Inc., Michelle Kaufmann, Jennifer Carlile, Augusto Roman, and Nicholas Chim (collectively the “Flux Factory Defendants”) move to join. The Google Defendants also bring a motion for sanctions pursuant to Code of Civil Procedure section 128.7.

I. Factual and Procedural Background

In the operative second amended complaint (“SAC”), plaintiffs Eli Attia (“Attia”) and Eli Attia Architect PC (“Attia PC”) allege that Attia is one of the world’s leading and most innovative architects. (SAC, ¶ 1.) Attia has spent the last 50 years creating a game-changing new technology that can fundamentally change the way buildings are created, which is called “Engineered Architecture” or “EA.” (Ibid.)

In 2009, Attia began looking for a partner, and on or about July 25, 2010, he was approached by Google X, an affiliate of defendant Google, Inc. (“Google”), through defendant Teller. (SAC, ¶¶ 24-26.) On or about August 8, 2010, Google proposed and executed with Attia a Non-Disclosure Agreement (“NDA”) permitting Google to use confidential information received from Attia to facilitate technical discussions concerning existing or future product development efforts by the parties. (Id. at ¶ 27.) Google also induced Attia to relocate with his family to Palo Alto in late 2010 so that he could work at Google’s Mountain View campus. (Id. at ¶ 28.)

On January 12, 2011, Attia entered into an Inbound Services Agreement (“ISA”) and an associated Statement of Work (“SOW”), in which Google acknowledged that the “‘Genie Project was inspired by [Attia’s] experience and Pre-Existing Intellectual Property.’” (SAC, ¶¶ 36-37.) The SOW describes certain of Attia’s proprietary information and identifies documents that contain Attia’s proprietary information, including “All presentations & brochures,” notes, emails, patents, and “other related intellectual property developed as of the SOW Effective Date.” (Id. at ¶ 37.) Under the ISA, any “invention, improvement, development, concept, discovery or other proprietary information” that Attia had an interest in before January 12, 2011 remained his property. (Ibid.)

During the negotiations regarding the ISA and SOW, Google made a request for a non-exclusive, royalty-free, perpetual, irrevocable, worldwide license, which was rejected, and then proposed a royalty for a non-exclusive license, which was also rejected; ultimately, Attia agreed to provide a “non-commercial” and nonexclusive license to use the proprietary information only until June 31, 2011. (SAC, ¶ 38.) The SOW provided that if the program was successful and any of Attia’s Pre-Existing Property was used to develop Genie, “Google, in its sole discretion, will consider seeking an exclusive license and will make reasonable efforts to negotiate for a license to a portion or all of the Pre-existing Property at mutually agreed upon price and terms.” (Id. at ¶ 39.)

Google was so satisfied with the viability of Attia’s Engineered Architecture technology that it applied to the United States Patent and Trademark Office for patents containing numerous claims reciting Attia’s Pre-existing Property, including his Engineered Architecture trade secrets, disclosed by Attia to Google pursuant to the NDA and the ISA/SOW. (SAC at ¶ 46.) However, defendants plotted to squeeze Attia out of the project and misappropriate his Pre-existing Property, including his Engineered Architecture trade secrets. (Id. at ¶ 53.) Google pretended to kill the Genie Project to give Attia the false impression that it was not planning to misappropriate Attia’s Pre-existing Property. (Id. at ¶ 57.) Rather than shutting down Project Genie, however, Google was surreptitiously taking steps to develop and promote Genie further, which Attia discovered in mid-December of 2011. (Id. at ¶¶ 58-60.)

In 2011, Google allegedly spun off Project Genie into a new company, defendant Flux Factory, Inc. (“Flux Factory”), which was co-founded and is headed by defendants and former Project Genie team members Kaufmann, Carlile, Roman, and Chim. (SAC, ¶¶ 67, 69.) Flux Factory is simply a reconstitution of Project Genie under a different name. (Id. at ¶ 69.)

The Google Defendants had the obligation to negotiate a license to use Attia’s Pre-existing Property, including his Engineered Architecture trade secrets, and fairly compensate Attia if they wanted to continue using it. (SAC, ¶ 76.) The Google Defendants refused to do so and intentionally misappropriated Attia’s proprietary Engineered Architecture invention. (Ibid.)

The SAC sets forth the following causes of action: (1) misappropriation of trade secrets (by Attia against all defendants); (2) breach of the ISA (by plaintiffs against Google and Flux Factory); (3) declaratory relief (by plaintiffs against all defendants).

Plaintiffs filed this action on December 5, 2014. After the Court granted plaintiffs’ unopposed motion to file a first amended complaint (“FAC”), the Google Defendants demurred to each cause of action in the FAC and moved to strike its request for punitive damages. On February 1, 2016, the Court issued an order sustaining the demurrer with leave to amend as to the claim for trade secret misappropriation and without leave to amend as to a claim for breach of the NDA; overruling the demurrer as to the claims for breach of the ISA and declaratory relief; and granting the motion to strike without leave to amend.

Plaintiffs filed the SAC on February 9, 2016, and the instant motions followed.

I. Demurrer and Motion to Strike

The Flux Factory Defendants’ motion to join in the Google Defendants’ demurrer and motion to strike is GRANTED.

The Google Defendants’ request for judicial notice of documents referenced by the SAC, which plaintiffs do not oppose, is GRANTED. (Evid. Code, § 452, subd. (h); Ingram v. Flippo (1999) 74 Cal. App. 4th 1280, 1285, fn.3 [taking judicial notice of documents not attached to, but referenced by, the complaint; “[s]ince the contents of the letter and media release form the basis of the allegations in the complaint, it [thus becomes] essential that we evaluate the complaint by reference to these documents”]; Stormedia Inc. v. Superior Court (Werczberger) (1999) 20 Cal.4th 449, 457, fn.9 [where “both sides refer to the documents in their briefs and plaintiff … does not oppose the request, the request [should be] granted,” reasoning that plaintiff is thus “implicitly request[ing] judicial notice of… the documents”].)

A. Demurrer

Defendants demur to the first cause of action on the ground that it is barred by the three-year statute of limitations and otherwise fails to state a claim. (Code Civ. Proc., § 430.10, subd. (e).) The individual defendants demur to the dependent third cause of action for declaratory relief on the same ground.

With respect to the statute of limitations, the defendants contend that publication of a patent application extinguishes trade secret rights, and Attia alleges that he knew Google was filing patent applications containing the alleged trade secrets in May and June of 2011. (SAC, ¶ 64.) As urged by Attia, however, the SAC alleges that the patent applications at issue were not published until 2012. (Id. at ¶ 63.) Information in non-published patent applications can retain trade secret status. (See Jardin v. Datallegro, Inc. (S.D. Cal., Apr. 12, 2011, No. 10-CV-2552-IEG WVG) 2011 WL 1375311, at *3 [“Information in patent applications can retain trade secret status, but that protection is lost when the patent application publishes.”]; Farhang v. Indian Institute of Technology, Kharagpur (N.D. Cal., June 1, 2010, No. C-08-02658 RMW) 2010 WL 2228936, at *14 [“Based on the allegations in the SAC, plaintiffs took reasonable steps to maintain the secrecy of the core technology by filing a patent application with non-published status and only providing access to the core technology to defendants under the confidentiality obligations set forth in the NDA.”]; Innovatier, Inc. v. CardXX, Inc. (D. Colo., Aug. 1, 2011, No. 08-CV-00273-PAB-KLM) 2011 WL 3293789, at *4 [“The fact that CardXX included material in applications to the USPTO does not diminish the secrecy of the material during the period before the USPTO approved the patent or published the application. Material in a patent application remains secret unless and until it is published by the USPTO.”].) Therefore, the allegation that patent applications were filed in May and June of 2011 does not itself show that the alleged secrets became public or that the statute of limitations was triggered at that time.

The Court previously sustained defendants’ demurrer to the trade secret claim on statute of limitations grounds because Attia had alleged that the filing of the patent applications constituted a misappropriation. In the SAC, Attia clarifies that the filing of the patent applications was conditionally authorized pursuant to his agreements with Google, and the alleged misappropriation occurred later—according to Attia, when the applications were published without compensation to him. (See SAC, ¶¶ 61, 64-65.) Defendants raise several arguments against this theory, which the Court will address in their logical order.

First, defendants contend that the conditional authorization theory violates the sham pleading doctrine, but the theory does not directly contradict Attia’s prior allegation that Google’s misappropriations included “applying for and obtaining” the patents at issue. (FAC ¶ 77; SAC, ¶ 84.) More importantly, the sham pleading doctrine does not apply to a change in legal theory as opposed to a factual allegation. (See Berman v. Bromberg (1997) 56 Cal.App.4th 936, 949 [“the ‘sham pleading rule’ should not be applied in a case, as here, where the plaintiff seeks to change his legal theory of recovery and the legal conclusions he seeks to draw from underlying factual events”].)

Next, defendants contend that Attia’s declarations submitted in connection with the patent applications show that he assigned all rights in the subject inventions without a condition of later payment. (See Decl. of Kevin L. Spark ISO Demurrer to FAC, Exs. D and F.) However, while the declarations recite that Attia had already received unspecified “consideration” for the assignment, this is a disputed fact of which the Court may not take judicial notice. (See Richtek USA, Inc. v. uPI Semiconductor Corporation (2015) 242 Cal.App.4th 651, 660 [while court may take judicial notice of the existence and contents of a document, “the truthfulness and proper interpretation of the document are disputable”].) Plaintiffs allege that consideration was never provided, and the Court must accept this allegation on demurrer.
Defendants also argue that, even accepting the theory that filing the patent applications was conditionally authorized, the conditional license expired in June 2011, so the statute was triggered at that time, when they continued to use the alleged secrets without a license. Attia does allege that Google’s license to use his proprietary information expired on June 31, 2011 unless the parties agreed to a further license (SAC, ¶¶ 38-39), which they did not (id. at ¶¶ 99-101). While Google “pretended to kill the Genie Project” in December 2011 (id. at ¶ 57), Attia does not deny that he knew the project continued during much of 2011 without a license. Nevertheless, Attia alleges that he continued to participate in the project during this time, “present[ing] Genie to several industry leaders” with Google and negotiating an ownership interest in the separate company to which the parties planned to “spin off” the project. (Id. at ¶¶ 48-52.) These circumstances could support a finding that Attia gave his implied consent to Google’s continued use of his secrets during this period, notwithstanding the lack of an express license. (See Civ. Code, § 3426.1, subd. (b)(2) [trade secret misappropriation is disclosure or use of the secret of another without express or implied consent].) It was only when Attia learned that Google “was surreptitiously taking steps to develop and promote Genie further” –a week after telling him on December 7, 2011 that it would end the project—that the statute was clearly triggered. (SAC, ¶¶ 57-58.) Attia’s alleged discovery of Google’s misappropriation was thus within three years of the filing of this action on December 5, 2014.

In order for the bar of the statute of limitations to be raised by demurrer, the complaint must show clearly and affirmatively that the action is barred. (Lee v. Hanley (2015) 61 Cal.4th 1225, 1232.) Here, the allegations of the SAC do not clearly show that Attia should have suspected the Google Defendants would use his secrets without his consent before late December 2011.

Defendants’ only remaining argument regarding the trade secret misappropriation claim is that Attia’s agreement to a contract grouping his asserted secrets with other property under the heading “Publicly available Pre-existing Property” constitutes an admission that the alleged secrets were publicly available. However, Attia alleges that he was unaware Google had added the “publicly available” language to Exhibit A of the SOW, and defendants cite no authority for the bold proposition that mislabeling secrets as publicly available in a pre-litigation context is a conclusive admission. While the “publicly available” label is certainly relevant to the issue of whether Attia took reasonable measures to protect his alleged secrets, it is not dispositive at the demurrer stage.

Defendants’ demurrer to the first cause of action is consequently OVERRULED. The individual defendants’ demurrer to the third cause of action for declaratory relief is wholly dependent on the demurrer to the first cause of action, and is also OVERRULED.

B. Motion to Strike

As an initial matter, plaintiffs’ opposition to the motion to strike is untimely. While the Court will exercise its discretion to consider the late filing this time, plaintiffs are cautioned to comply with filing deadlines in the future.

Defendants move to strike the SAC’s allegation that “Google inserted [the “publicly available” language discussed above] at the last minute with the fraudulent intent of undermining any later claim by Mr. Attia that Google misappropriated his trade secrets.” (SAC, ¶ 35.) Defendants correctly contend that a change to a draft agreement that was disclosed in a redline document cannot have been “fraudulently” concealed. (See Cohen v. Wedbush, Noble, Cooke, Inc. (9th Cir. 1988) 841 F.2d 282, 287 [“We know of no case holding that parties dealing at arm’s length have a duty to explain to each other the terms of a written contract.”], overruled on another ground by Ticknor v. Choice Hotels Intern., Inc. (9th Cir. 2001) 265 F.3d 931; Brown v. Wells Fargo Bank, NA (2008) 168 Cal.App.4th 938, 959 [“Generally, it is not reasonable to fail to read a contract; this is true even if the plaintiff relied on the defendant’s assertion that it was not necessary to read the contract.”], italics original.) The Court will consequently strike the “fraudulent” language from the SAC.
Nevertheless, plaintiffs obviously included this allegation in response to defendants’ argument, raised in connection with their prior demurrer, that the “publicly available” language constitutes an admission by plaintiffs. It was defendants who raised this issue, and plaintiffs are entitled to respond to their argument. Google does not dispute that it added the “publicly available” language during the end of negotiations, without specifically clearing this change with plaintiffs, or that it did so in order to bolster its position that the property identified by Attia in Exhibit A to the SOW is not a trade secret. Consequently, as discussed further below, plaintiffs had a good faith basis to include these portions of the allegation, and the Court will not strike them.

Defendants also move to strike plaintiffs’ prayer for punitive damages, which was struck from the FAC without leave to amend. Plaintiffs urge that this prayer is really a request for exemplary damages for willful trade secret violations pursuant to Civil Code 3426.3, subdivision (c). However, exemplary statutory damages are not “punitive damages,” and plaintiffs did not have leave to re-assert a claim for punitive damages in the SAC. The Court will again strike this language.

The motion to strike is accordingly GRANTED WITHOUT LEAVE TO AMEND IN PART AND DENIED IN PART. The following language is hereby struck from the SAC without leave to amend:

-“fraudulent” (SAC, p. 11, l. 16) and

-paragraph 116 of the prayer for relief in its entirety.

II. Motion for Sanctions

Finally, the Google Defendants move for sanctions pursuant to Code of Civil Procedure section 128.7 on that basis that plaintiffs’ allegation regarding the “fraudulent” insertion of the “publicly available” language in Exhibit A to the SOW is factually and legally baseless.

Under section 128.7, “a court may impose sanctions for filing a pleading if the court concludes the pleading was filed for an improper purpose or was indisputably without merit, either legally or factually.” (Peake v. Underwood (2014) 227 Cal.App.4th 428, 440.) A claim is factually frivolous if it is not well grounded in fact and it is legally frivolous if it is not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law. (Ibid.) In either case, to obtain sanctions, the moving party must show that asserting the claim was objectively unreasonable. (Ibid.) A claim is objectively unreasonable if any reasonable attorney would agree that it is totally and completely without merit. (Ibid.)

In the Court’s view, plaintiffs’ position that they did not notice the last-minute change to the heading of Exhibit A—and that Google intended this—is directly responsive to defendants’ argument that plaintiffs’ failure to object to the change constitutes a binding admission that none of the property listed in the exhibit is a secret. While calling Google’s actions in adding the language “fraudulent” was overzealous, plaintiffs do not assert a claim for fraud or any other legally frivolous claim. Consequently, the Court does not find that the challenged allegation is factually or legally frivolous.

The motion for sanctions is accordingly DENIED.

Case Name: Salvatierra v. Intuitive Surgical, Inc.
Case No.: 2014-1-CV-272069

This is a putative employment class action alleging that defendant Intuitive Surgical, Inc. misclassified certain employees as exempt. Currently before the Court are plaintiffs’ motions (1) for leave to file a third amended complaint and (2) for preliminary approval of a class action settlement.

I. Factual and Procedural Background

Plaintiffs are former employees in Intuitive’s Customer Service Group. (Second Amended Complaint (“SAC”), ¶ 1.) They allege that defendants required them and other putative class members to work approximately 50 or more hours per week without overtime pay, and sent generic pre-litigation “acknowledgement” forms and correspondence with vague and confusing terms to former employees in lieu of full payment of owed wages. (Id. at ¶¶ 47-49.) This correspondence offered less than the wages actually owed, implying that all class members worked only 44 hours per week. (Id. at ¶ 49.) The pre-litigation correspondence, as well as additional post-litigation correspondence of a similar nature, violated several provisions of the Labor Code. (Ibid.) Intuitive has also failed to provide accurate time records to members of the class. (Id. at ¶ 50.)

Plaintiffs filed this action on October 21, 2014, and filed the operative SAC on May 29, 2015. The SAC asserts claims for (1) failure to pay overtime wages, (2) failure to furnish timely/accurate wage statements, (3) waiting time penalties, (4) unlawful business practices, (5) conversion, and (6) violation of the Private Attorney General Act (“PAGA”).

The parties have reached a settlement. They now jointly move for an order granting plaintiffs leave to file a third amended complaint adding a seventh cause of action for violation of the Fair Labor Standards Act (“FLSA”), so that the settlement may include a waiver of such claims. Plaintiffs also move for an order preliminarily approving the settlement, provisionally certifying the settlement class, appointing plaintiffs as the class representatives and their counsel as class counsel for settlement purposes, approving the form and method for providing notice to the class, and scheduling a final fairness hearing.

On June 30, 2016, the Court issued a tentative ruling continuing the hearing on this matter to allow supplemental briefing addressing the following issues concerning the settlement: (1) the propriety of resolving this action on a claims-made basis (including a proposal for a more robust notice procedure), or a proposal to eliminate the claim form submission requirement for California class members; (2) the propriety of requiring class members to opt in to an FLSA settlement to receive the benefits of a class settlement, or a proposal for the separate resolution of the FLSA and class claims from separate funds; (3) the adequacy of the settlement amount in light certain issues identified by the Court; (4) the basis for the division of the class into and the allocation of the settlement proceeds among the various subclasses, including a statement of the number of members of each subclass; and (5) the basis for the individual settlement payments to the class representatives and a discussion of their membership in the subclasses.

Plaintiffs and defendant filed separate supplemental briefs on July 25, 2016. Having read and considered the briefs, the Court is satisfied that the structure and value of the claims-made settlement is fair and adequate, so long as more robust notice procedures are adopted to ensure class members are able to receive their settlement payments or opt out of the settlement without releasing their claims if they choose. Furthermore, the Court finds that the requirements of an ascertainable class and a well-defined community of interest are satisfied for purposes of settlement. Class counsel and the currently-named plaintiffs will adequately represent the entire class.

The motion for leave to file a third amended complaint and motion for preliminary approval of the existing settlement are consequently GRANTED, subject to the following modifications to the notice and notice procedures:

1. The Class List will include class members’ last known phone numbers.

2. Before the class notices are sent, the claims administrator will run the Class List through the United States Postal Service’s National Change of Address database to obtain class members’ current addresses.

3. If a written notice is returned as undeliverable, the claims administrator will call the class member’s last known phone number and take other reasonable measures (such as searching in electronic databases) to attempt to locate a current address for that class member within 7 calendar days of receiving the returned notice. The administrator will re-mail the notice to the class member upon confirming a current address.

4. The Notice Period will be 90 days, and class members will also have 90 days to opt in to the FLSA collective action.

5. The portion of page two of the notice set forth in bold font (beginning “PLEASE READ THIS NOTICE CAREFULLY.”) will clearly identify the subclass to which each class member belongs.

6. The notice will be modified to state that class members may appear and object at the final fairness hearing without filing or mailing any written objection with the Court or to counsel.

Finally, the Court has an independent right and responsibility to review the requested attorney fees and only award so much as it determines reasonable. (See Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 127-128.) Plaintiffs’ counsel should submit billing records and lodestar information prior to the final approval hearing in this matter so the Court can compare the lodestar information with the requested fees. In addition and as previously noted, the $34,951.75 proposed enhancement payments to the class representatives are unusually high. The Court will address the propriety of the enhancement payments at the final fairness hearing.

Case Name: Mona Lisa Mendieta v. County of Santa Clara, et al.
Case No.: 16-CV-290744

I. Introduction

This is a negligence action brought by Mona Lisa Mendieta (“Plaintiff”) against the County of Santa Clara and its employee Rachel McDaniel (“McDaniel”) (collectively, “Defendants”).

McDaniel is a deputy sheriff who served as Plaintiff’s probation officer. (Compl., ¶¶ 3, 8.) In June 2012, when Plaintiff was 15 years old, Defendants released her into the custody of her biological mother instead of her adoptive parents. (Compl., ¶ 8.) Plaintiff alleges her biological mother and her partner are affiliated with the Norteño street gang, and are involved in the sale of illegal drugs and prostitution. (Compl., ¶ 8.) When Defendants released Plaintiff into the custody of her biological mother, she was forced to live with six children ages 7 months to 7 years in a one-bedroom motel room. (Compl., ¶ 9.) Plaintiff alleges she was held at the motel against her will, subjected to statutory rape, offered alcohol and drugs, verbally and psychologically abused, and given illegal drugs to sell at her school. (Compl., ¶ 9.) Plaintiff witnessed violence on a daily basis, including a shooting. (Compl., ¶¶ 12-13.) Plaintiff was also held at gunpoint. (Compl., ¶ 12.)

Plaintiff could not endure these living conditions and frequently went without food, so she left her biological mother’s residence in September 2013. (Compl., ¶¶ 11, 14.) Upon her departure, while staying at a temporary residence her biological mother helped arrange, she was pushed out of a second-story window. (Compl., ¶ 14.) She was admitted to intensive care, found by the San Jose Police Department, and placed back in the custody of her adoptive mother. (Compl., ¶ 14.)

Plaintiff suffers from Post-Traumatic Stress Syndrome, shoulder pain, and severe headaches, neck, and back pain. (Compl., ¶ 16.) Plaintiff alleges these ailments are attributable to Defendants’ negligent failure to investigate her biological mother prior to placing her in her custody. (Compl., ¶ 16.)

Plaintiff asserts causes of action against Defendants for negligent infliction of emotional distress, negligence, and negligent failure to investigate. Currently before the Court is Defendants’ demurrer to each cause of action on the ground of failure to state facts sufficient to constitute a cause of action. The parties met and conferred in advance of the filing of the demurrer in compliance with Code of Civil Procedure section 430.41. (Loisel Decl., ¶¶ 3-4.)

II. Request for Judicial Notice

In determining the legal sufficiency of a pleading on demurrer, courts may consider facts subject to judicial notice. (See Code Civ. Proc., § 430.30, subd. (a); see also South Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732.)

Defendants ask the Court to take judicial notice of records from her adoptive mother’s previous case against Defendants. A matter must be relevant to a material issue in order for a court to take judicial notice of it. (Silverado Modjeska Recreation and Park Dist. v. County of Orange (2011) 197 Cal.App.4th 282, 307, fn. 18.) These records are not relevant to a material issue before the Court and are not therefore a proper subject of judicial notice.

Defendants also ask the Court to take judicial notice of Plaintiff’s administrative claim and application to present a late claim. A court may take judicial notice of “[o]fficial acts of the legislative, executive, and judicial departments of the United States and of any state of the United States.” (Evid. Code, § 452, subd. (c).) Official acts include a government entity’s records pertaining to compliance with the Government Claims Act. (Gong v. City of Rosemead (2014) 226 Cal.App.4th 363, 376, citing Evid. Code, § 452, subd. (c).) Plaintiff’s administrative claim and late-claim application are part of the County of Santa Clara’s records of compliance with the Government Claims Act and clearly relevant. Consequently, Plaintiff’s administrative claim and application to present a late claim are the proper subject of judicial notice.

Defendants’ request for judicial notice is therefore GRANTED with respect to Plaintiff’s claim and late-claim application and DENIED with respect to the records from her adoptive mother’s previous case.

III. Demurrer

Defendants argue all of Plaintiff’s claims are subject to demurrer on the ground of failure to state sufficient facts because she failed to comply with the pre-litigation claim requirement pursuant to the Government Claims Act, she cannot assert common law claims against a public entity, and Defendants are immune from liability.

A. Government Claims Act

Defendants argue Plaintiff failed to timely file an administrative claim, an application for leave to present a late administrative claim, and a petition for relief from the claim presentation requirements.

Before filing a civil action for damages against a public entity, a plaintiff must lodge an administrative claim with the entity that sets forth “[a] general description of the indebtedness, obligation, injury, damage or loss incurred so far as it may be known at the time of presentation of the claim.” (Gov. Code §§ 910, 945.4.) A plaintiff must submit the administrative claim within six months of the accrual of his or her claim. (Gov. Code § 911.2, subd. (a); see also J.J. v. County of San Diego (2014) 223 Cal.App.4th 1214, 1219.) If a plaintiff fails to timely submit an administrative claim within six months of accrual, he or she may apply to the public entity for leave to present a late claim within one year of the accrual of his or her claim. (J.J. v. County of San Diego, supra, 223 Cal.App.4th at p. 1220, citing Gov. Code, § 911.4.)

“‘If the public entity denies the application, Government Code section 946.6 authorizes the injured party to petition the court for relief from the claim requirements.’” (J.J. v. County of San Diego, supra, 223 Cal.App.4th at p. 1220, quoting Munoz v. State of California (1995) 33 Cal.App.4th 1767, 1777.) “Filing a late-claim application within one year after the accrual of a cause of action is a jurisdictional prerequisite to a claim-relief petition.” (Santee v. Santa Clara County Office of Education (1990) 220 Cal.App.3d 702, 713.) “When the underlying application to file a late claim is filed more than one year after the accrual of the cause of action, the court is without jurisdiction to grant relief under Government Code section 946.6.” (J.J. v. County of San Diego, supra, 223 Cal.App.4th at p. 1221.) The petition itself must be filed within six months of the denial of the application to present a late claim. (See Lineaweaver v. Southern Cal. Rapid Transit Dist. (1983) 139 Cal.App.3d 738, 740-41; see also Code Civ. Proc., § 946.6.) The six-month deadline for filing the petition is mandatory. (Lineaweaver v. Southern Cal. Rapid Transit Dist., supra, 139 Cal.App.3d at p. 741.)

Complying with the pre-litigation claim requirement is a mandatory prerequisite to maintaining a cause of action against a public entity or its employee. (State v. Superior Court (2004) 32 Cal.4th 1234, 1249 [“[F]ailure to timely present a claim for money or damages to a public entity bars a plaintiff from filing a lawsuit against that entity.”]) It is well established “that failure to allege facts demonstrating or excusing compliance with the requirement subjects a complaint to general demurrer for failure to state a cause of action.” (Id. at pp. 1244-45.)

Here, Defendants argue and Plaintiff does not dispute her causes of action accrued in September 2013. The last event Plaintiff alleges her claims are based upon is her fall from the second-story window and return to the custody of her adoptive mother in September 2013. She does not allege any subsequent events as the basis for her claims. Plaintiff waited until June 2, 2015, well over six months after her causes of action accrued, to submit her administrative claim. (Request for Judicial Notice, Exh. A; see also Opp. at p. 2:5-9.) Plaintiff’s claim was therefore untimely.

Because Plaintiff’s claim was untimely, she filed a late-claim application on July 31, 2015. (Request for Judicial Notice, Exh. B; see also Opp. at p. 2:5-9.) Plaintiff filed her application more than one year from the accrual of her causes of action. Contrary to Plaintiff’s argument in opposition to the demurrer, she did not have one year from obtaining the age of majority to file her late-claim application. (See J.J. v. County of San Diego, supra, 223 Cal.App.4th at p. 1220 [must submit late-claim application within one year even if claimant is a minor during that time], citing John R. v. Oakland Unified School Dist. (1989) 48 Cal.3d 438, 444, fn. 3.) Her late-claim application was therefore untimely as well.

Next, on September 8, 2015, the County of Santa Clara denied her untimely late-claim application by not responding within 45 days. (Gov. Code, § 911.6, subd. (c) [late-claim application denied by operation of law if entity does not respond within 45 days].) Consequently, in order to avoid a bar to litigation, Plaintiff needed to petition the Court for relief from the pre-litigation claim requirement by March 2016. Plaintiff does not allege she filed a petition for relief. In fact, it is clear she failed to file such a petition because she affirmatively requests relief from the claim requirement in opposition to the demurrer. Plaintiff therefore failed to obtain judicial relief from the pre-litigation claim requirement prior to filing her complaint.

Based on the foregoing, Plaintiff’s causes of action are barred by the Government Claims Act because she did not comply with the pre-litigation claim requirement or obtain judicial relief from non-compliance prior to filing her complaint.

B. Common Law Claims

Defendants also argue Plaintiff may not maintain claims against them for common law negligent infliction of emotional distress, negligence, and negligent failure to investigate because only statutory claims may be brought against a public entity.

The Government Claims Act limits public entities’ liability for common law claims. (Miklosy v. Regents of the University of California (“Miklosy”) (2008) 44 Cal.4th 876, 899.) “‘Except as otherwise provided by statute: [¶] (a) A public entity is not liable for an injury, whether such injury arises out of an act or omission of the public entity or a public employee or any other person.’” (Ibid., quoting Gov. Code, § 815, subd. (a), original italics.) “The Legislative Committee Comment to section 815 states: ‘This section abolishes all common law or judicially declared forms of liability for public entities, except for such liability as may be required by the state or federal constitution, e.g., inverse condemnation. . . .’” (Miklosy, supra, 44 Cal.4th at p. 899.) It is well established “section 815 abolishes common law tort liability for public entities.” (Ibid.) Consequently, “a public entity cannot be held liable for common law negligence.” (McCarty v. Cal. Dept. of Transportation (2008) 164 Cal.App.4th 955, 977; see also Dina v. Cal. Dept. of Transportation (2007) 151 Cal.App.4th 1029, 1053 [“[A]ny claim of negligence against [a public entity] must be based on a statute.”]; see also McAllister v. L.A. Unified School Dist. (2013) 216 Cal.App.4th 1198, 1218-19 [may not assert claim for negligent infliction of emotional distress].)

All of Plaintiff’s claims are common law negligence claims. Plaintiff does not identify a statutory basis for her claims anywhere in her complaint. Accordingly, Plaintiff may not maintain any of her claims against Defendants.

C. Immunity

Finally, Defendants argue Plaintiff may not maintain claims against them because they are immune from liability.

“[A] public employee is not liable for an injury resulting from his [or her] act or omission where the act or omission was the result of the exercise of the discretion vested in him [or her], whether or not such discretion be abused.” (Gov. Code, § 820.2.) Furthermore, “a public entity is not liable for an injury resulting from an act or omission of an employee of the public entity where the employee is immune from liability.” (Gov. Code, § 815.2, subd. (b).)

Discretionary acts and omissions for which a public employee is not liable include the decision of whether or not to remove a child from his or her home and where to place a child in protective custody. (See Jacqueline T. v. Alameda County Child Protective Services (2007) 155 Cal.App.4th 456, 466; see also County of Los Angeles v. Superior Court (2002) 102 Cal.App.4th 627, 633.) Similarly, a public employee cannot be held liable for the decision to release an incarcerated juvenile from custody or the selection of a custodian and placement of a juvenile in the care and residence of that custodian upon release. (Thompson v. County of Alameda (1980) 27 Cal.3d 741, 748-49 [no liability for releasing juvenile on parole to his mother].)

All three of Plaintiff’s claims are based on McDaniel’s decision to release her into her biological mother’s custody without adequately investigating her fitness as a custodian. McDaniel’s decision was discretionary, and she cannot therefore be held liable for her decision. Additionally, because McDaniel is immune, the County of Santa Clara cannot be held liable for her acts. Plaintiff cannot therefore maintain any of her claims against Defendants.

IV. Conclusion

Plaintiff cannot maintain any of her negligence claims against Defendants because she failed to timely present an administrative claim pursuant to the Government Claims Act, she cannot assert common law causes of action for negligence, and Defendants are immune from liability. Defendants’ demurrer to the first, second, and third causes of action is therefore sustainable.

A court may deny leave to amend if the plaintiff cannot demonstrate any reasonable possibility of curing the defect in the pleading through amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) “If there is no liability as a matter of law, leave to amend should not be granted.” (Schonfeldt v. State of California (1998) 61 Cal.App.4th 1462, 1465, citing Baughman v. State of California (1995) 38 Cal.App.4th 182, 187.)

Here, given the nature of the defects in the pleading, the Court cannot see and Plaintiff does not suggest there is any reasonable possibility she could cure them through amendment. Consequently, the demurrer to the first, second, and third causes of action on the ground of failure to state sufficient facts is SUSTAINED WITHOUT LEAVE TO AMEND.

The Court will prepare the order.

Case Name: Gyoergy “George” Rath v. Panasas, Inc., et al.
Case No.: 2015-1-CV-286493

I. Introduction

This is an action for breach of contract and fraud arising out of an employment dispute between self-represented plaintiff Gyoergy “George” Rath (“Plaintiff”) and defendants Panasas, Inc. (“Panasas”) and its employee Christopher Y. Emura (“Emura”) (collectively, “Defendants”).

According to the allegations in the second amended complaint (“SAC”), Plaintiff applied for a job at Panasas through a recruiting agency in April 2013. (SAC, ¶ 5.) After being interviewed on June 18, 2013, Panasas offered Plaintiff a position as an independent contractor. (SAC, ¶¶ 6-7.) The parties executed an independent contractor services agreement (“ICSA”). (SAC, ¶ 8; see also SAC, Exh. 1.)

In August 2013, Plaintiff left his job in Hungary, shipped both of his cars to the United States, and moved to California. (SAC, ¶¶ 5, 10.) Panasas paid for his roundtrip flight, with a return date of June 30, 2014. (SAC, ¶ 10.) Plaintiff, a software engineer, began working at the Panasas campus in Sunnyvale, California in September 2013. (SAC, ¶ 12.) Panasas terminated Plaintiff on October 11, 2013 as part of a workforce reduction instigated by investor panic over its financial health. (SAC, ¶¶ 12-16.) Plaintiff returned to Europe in April 2014 and obtained employment with a German company in September 2014. (SAC, ¶ 21.)

According to Plaintiff, Defendants promised to employ him for a minimum of six months, convert his contract position to a full-time employee position, and to pay up to $15,000.00 of his moving expenses, including the cost of shipping his cars to the United States, but terminated him early, failed to convert his position, and refused to reimburse him before belatedly paying him only $3,000.00. (SAC, ¶¶ 8, 10, 15, 19.) Plaintiff alleges Emura threatened him with unspecified ramifications if he attempted to pursue reimbursement of his moving costs. (SAC, ¶ 18.)

Plaintiff asserts causes of action for: (1) promissory fraud (against Defendants); (2) breach of written contract (against Panasas); (3) breach of written contract (against Panasas); (4) breach of oral contract (against Panasas); (5) promissory fraud (against Defendants); and (6) undue influence and breach of the covenant of good faith and fair dealing (against Emura).

Currently before the Court is Defendants’ demurrer to the first, third, fourth, fifth, and sixth causes of action on the ground of failure to state facts sufficient to constitute a cause of action. The parties met and conferred in advance of the filing of the demurrer in compliance with Code of Civil Procedure section 430.41. (Swiss Decl., ¶¶ 3-4.)

II. Request for Judicial Notice

Defendants request judicial notice of the complaint and first amended complaint in support of their demurrer. The Court may take judicial notice of these court records pursuant to Evidence Code section 452, subdivision (d). The request for judicial notice is therefore GRANTED.

III. Demurrer

“A demurrer tests only the legal sufficiency of the pleading.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-14, superseded by statute on other grounds.) On demurrer, the complaint must be given “a reasonable interpretation by reading it as a whole and all of its parts in their context.” (Mead v. Sanwa Bank California (1998) 61 Cal.App.4th 561, 565.) “For purposes of a demurrer, [courts] accept as true both facts alleged in the text of the complaint and facts appearing in exhibits attached to it.” (Id. at pp. 567-68.) If facts appearing on the face of exhibits to the complaint are inconsistent with the factual allegations in the text of the complaint, the facts appearing in the exhibits are given precedence. (Ibid.)

A. First and Fifth Causes of Action

Defendants argue Plaintiff’s first and fifth causes of action for promissory fraud fail because the written terms of the ICSA, attached as Exhibit 1 to the SAC, directly contradict the allegations appearing within the first and fifth causes of action.

“The elements of promissory fraud (i.e., of fraud or deceit based on a promise made without any intention of performing it) are: (1) a promise made regarding a material fact without any intention of performing it; (2) the existence of the intent not to perform at the time the promise was made; (3) intent to deceive or induce the promisee to enter into a transaction; (4) reasonable reliance by the promisee; (5) nonperformance by the party making the promise; and (6) resulting damage to the promisee.” (Behnke v. State Farm General Insurance Co. (2011) 196 Cal.App.4th 1443, 1453.)

1. First Cause of Action

Plaintiff’s first cause of action is based on the allegation that Defendants promised there was six months of secured funding for his position pursuant to the ICSA. Defendants argue Plaintiff fails to allege they promised he would be employed for six months with the intent not to fulfill this promise or that he thereafter reasonably relied on their promise because the ICSA clearly discloses his employment was for an unspecified term.

Plaintiff alleges Defendants hired him to work for at least six months pursuant to the terms of the ICSA. (SAC, ¶ 8.) Paragraph 7 of the ICSA, entitled “Term and Termination,” however, states the agreement is valid for one year unless terminated earlier. (SAC, Exh. 1.) Subdivision (b) and (c) of paragraph 7 state the agreement may be terminated by either party with or without cause upon 15 days’ notice. (SAC, Exh. 1.) Plaintiff’s allegation in the text of the SAC that he had a six-month contract is thus inconsistent with the facts appearing on the face of the ICSA. Consequently, the facts appearing within Exhibit 1 will be given precedence. Plaintiff therefore fails to allege Defendants promised to employ him for six months.

Plaintiff’s allegations with respect to the elements of intent not to perform and to deceive are also insufficient. As an initial matter, since Defendants did not promise to employ Plaintiff for six months, there is no operative promise they could have intended not to perform. Moreover, even if Plaintiff’s allegation as to the six-month term of employment was sufficient, he does not explicitly allege they intended not to perform at the time the promise was ostensibly made or intended to deceive and induce him into entering into the agreement. He simply alleges, without more, their promise was untrue. Such an allegation does not reflect the promise was untrue at the time it was made. Plaintiff therefore fails to allege Defendants intended not to perform the subject promise or intended to deceive and induce him into entering into ICSA.

Finally, Defendants argue Plaintiff’s purported reliance was unreasonable as a matter of law because the ICSA unambiguously states the working relationship may be terminated at any time so long as 15 days’ notice are provided. A plaintiff cannot reasonably rely on representations as to the nature of a contract that directly contradict the written terms of the contract itself. (Brown v. Wells Fargo Bank, N.A. (2008) 168 Cal.App.4th 938, 958-59.) “That is, when a plaintiff asserts that the defendant misrepresented the nature of the contract, the contract is not considered void due to fraud if the plaintiff had a reasonable opportunity to discover the true terms of the contract.” (Ibid.) As discussed above, the ICSA clearly states the working relationship may be terminated with 15 days’ notice. Accordingly, Plaintiff’s allegation of reliance on a representation contradictory to the terms of the ICSA does not rise to the level of an allegation that his reliance was reasonable. Moreover, he does not otherwise allege he was denied an opportunity to discover the true terms of the contract. Plaintiff therefore fails to allege facts with respect to the element of reasonable reliance.

Based on the foregoing, Plaintiff failed to allege all of the elements for a claim of promissory fraud, and his claim is subject to demurrer. When sustaining a demurrer, a court may deny leave to amend if the plaintiff cannot demonstrate any reasonable possibility of curing the defect in the pleading through amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) Here, Plaintiff does not demonstrate any reasonable possibility of curing the defect, and the Court is unable to see how he could do so given his claim, which he alleges is based on the ICSA, is directly contradicted by the facts appearing on the face of the ICSA itself. The demurrer to the first cause of action is therefore SUSTAINED WITHOUT LEAVE TO AMEND.

2. Fifth Cause of Action

Plaintiff’s fifth cause of action is based on the allegation that Defendants promised to convert his contract position to a full-time employee position. Defendants argue Plaintiff’s fifth cause of action is defective because several emails he attached as exhibits to the SAC clearly contradict this allegation. Defendants also argue a fraud claim may not be based on an implied promise.

Within the fifth cause of action, Plaintiff alleges Defendant promised to convert his contract position to a full-time position. (SAC, ¶ 43.) This allegation is inconsistent with Plaintiff’s allegation that he was hired for a contract position with only “the prospect of an employment position at the end of the contract.” (SAC, ¶ 8.) Moreover, the emails attached as Exhibit 5 to the SAC do not contain any promises to convert his contract position to a position of permanent employment. In these emails, Emura clearly states Plaintiff’s position is a contract position and that it is too soon to tell whether hiring him as a full-time employee would be possible. (SAC, Exh. 5.) Given Plaintiff’s allegation that Defendants promised to convert his contract position to a full-time position is inconsistent with the facts appearing in Exhibit 5 to the SAC as well as paragraph 8 of the SAC, the Court give the latter factual allegations precedence. Plaintiff therefore fails to allege Defendants made any actionable promise to him or made any representations upon which he could have reasonably relied. His claims is therefore subject to demurrer.

With respect to their second argument, Defendants state Plaintiff “alleges a cause of action for promissory fraud against Panasas on the grounds that Panasas, by its behavior, implied a promise of conversion to work employment.” (Mem. of Pts. & Auth. at p. 9:11-12.) Defendants argue a fraud claim cannot be based on a promise implied through conduct. While Defendants may be correct as a matter of law, it is unclear and they do not explain or otherwise elaborate as to how Plaintiff’s fifth cause of action is based on an implied promise. Defendants therefore fail to substantiate their argument, and it is not a basis for sustaining the demurrer.

Based on the foregoing, Plaintiff fails to state a claim for promissory fraud based on a promise to convert his contract position to a full-time position. As with his first cause of action, Plaintiff cannot demonstrate any reasonable possibility of curing the defect in his claim through a third amendment to the complaint. The demurrer to the fifth cause of action is therefore SUSTAINED WITHOUT LEAVE TO AMEND.

B. Fourth Cause of Action

Defendants argue Plaintiff’s fourth cause of action for breach of oral contract is subject to demurrer because an ostensible oral agreement is contradictory to the written ICSA, and the claim is barred by the statute of limitations.

“A cause of action for breach of contract requires pleading of a contract, plaintiff’s performance or excuse for failure to perform, defendant’s breach and damage to plaintiff resulting therefrom.” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.)
1. Inconsistent Allegations

First, Defendants argue Plaintiff’s claim is subject to demurrer because the ostensible oral agreement is contradictory to the written ICSA because the ICSA was a fully-integrated agreement. Defendants do not provide any authority in support of their argument, and the demurrer to the fourth cause of action is not therefore sustainable on that basis.

2. Statute of Limitations

Defendants argue Plaintiff’s fourth cause of action is time-barred because it accrued in October 2013, and he did not assert the claim until December 2015, after the statute of limitations ran. In opposition, Plaintiff argues his claim is not time-barred because it accrued in February 2014 pursuant to the discovery rule.

A general demurrer will lie where a statute of limitations defense appears clearly and affirmatively from the face of the complaint. (E-Fab., Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315-16.) A general demurrer will not lie when “the complaint shows merely that the action may be barred.” (Ibid.) In determining whether a claim is time-barred, a court must determine (1) which statute of limitations applies and (2) when the plaintiff’s claim accrued. (Id. at p. 1316.)
The statute of limitations for breach of an oral contract is two years. (Code Civ. Proc., § 339, subd. 1; see also NBCUniversal Media, LLC v. Superior Court (“NBC”) (2014) 225 Cal.App.4th 1222, 1230.) “Generally, the limitations period starts running when the last element of a cause of action is complete.” (NBC, supra, 225 Cal.App.4th at p. 1231.) “The discovery rule ‘postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.’” (Id. at p. 1232, quoting Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806.)
Code of Civil Procedure section 339, subdivision 1 does not explicitly state the statute of limitations for a breach of oral contract claim begins to run from the time a plaintiff discovers or has reason to discover the ultimate facts making up each element of his or her claim. (Cf. Code Civ. Proc., § 339, subd. 3 [statute of limitations for rescission claim runs from discovery of fraud or mistake].) Even so, courts apply the discovery rule to breach of contract claims involving fraud or misrepresentation. (NBC, supra, 225 Cal.App.4th at p. 1233 [“Although delayed accrual under the discovery rule generally applies to most tort actions, it has been held applicable to certain types of breach of contract actions, such as those involving fraud or misrepresentation by the defendant.”]) “In order to rely on the discovery rule for delayed accrual of a cause of action, ‘[a] plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.’ [Citation.]” (Fox v. Ethicon Endo-Surgery, Inc., supra, 35 Cal.4th at p. 808.)
As an initial matter, Plaintiff’s fourth cause of action does not arise out of fraud or misrepresentation. The discovery rule thus does not apply. Moreover, even if the discovery rule applied, Plaintiff does not allege facts showing he was unable to discover Defendants refusal to pay all of his moving expenses sooner despite reasonable diligence. Plaintiff’s cause of action thus accrued once all of the elements of the claim for breach of contract were complete.
In his fourth cause of action, Plaintiff alleges Defendants orally agreed to pay for his moving expenses up to $15,000.00 in April 2013 and breached this promise by covering only $3,000.00 of his moving expenses. (SAC, ¶ 40.) Plaintiff alleges “the termination forced [him] to foot the bill.” (SAC, ¶ 40.) Panasas terminated Plaintiff in October 2013. (SAC, ¶ 15.) Plaintiff’s allegations thus disclose Defendants ostensibly breached the oral agreement to cover his moving expenses and he suffered damages in the amount of the moving expenses he paid out of pocket in October 2013.

Plaintiff thus had until October 2015 to assert his cause of action for breach of oral contract because the statute of limitations is two years. Plaintiff did not file the SAC until May 23, 2016, long after the statute of limitations ran. Even so, a claim is not time-barred if a plaintiff can establish it relates back to an earlier filed pleading. (See Barrington v. A.H. Robins Co. (1985) 39 Cal.3d 146, 151.) Here, Plaintiff filed the first amended complaint in December 2015, which was also after the statute of limitations ran. Plaintiff filed the original complaint in October 2015, before the statute of limitations ran. The Court will therefore consider whether Plaintiff’s claim relates back to the original complaint.

A claim relates back to the filing of the original action if it is based on the same general set of facts, seeks recovery against the same defendants for the same injuries, and refers to the same incident as alleged in the original complaint. (Ibid.)

Here, the original complaint filed in October 2015 involved the same parties, including Defendants, but only alleged facts and causes of action pertaining to unpaid wages and wages lost while seeking employment following his termination. The original complaint never referred to moving expenses or any agreement to reimburse him for such expenses. Plaintiff did not seek to recover moving expenses until he filed the first amended complaint. Consequently, Plaintiff’s claim does not relate back to the original complaint because it involves a completely different injury based on distinct facts and circumstances. Because Plaintiff’s claim does not relate back to the only pleading filed before the statute of limitations ran, his claim is time-barred.

Given that Plaintiff’s claim could not possibly relate back to the original complaint and there is no reasonable possibility he could allege a claim that would not be time-barred, the demurrer to the fourth cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

C. Third Cause of Action

With respect to the third cause of action for beach of written contract, Defendants’ sole argument is that Plaintiff fails to allege the terms of the written contract they ostensibly breached by failing to reimburse him for expenses incurred on a business trip to Ukraine.

In order to properly state a claim for breach of contract, a plaintiff must “plead the terms of the contract either [verbatim] or according to legal effect.” (Twaite v. Allstate Insurance Co. (1989) 216 Cal.App.3d 239, 252.)

Here, the ICSA is attached as Exhibit 1 to the SAC. On its very first page, the provision entitled “Compensation” states an independent contractor will be reimbursed for approved business expenses. While Plaintiff might have more clearly identified this exhibit in his third cause of action, looking at the SAC as a whole and giving it a reasonable interpretation in light of all of its parts in context, it is clear the ICSA is the applicable written agreement. The ICSA is the only written agreement referenced throughout the SAC and attached thereto. Plaintiff therefore adequately alleges the terms of the agreement Defendants purportedly breached. The demurrer to the third cause of action is therefore OVERRULED.

D. Sixth Cause of Action

Plaintiff’s sixth cause of action is presented as a claim for undue influence and breach of the covenant of good faith and fair dealing. Defendants argue Plaintiff fails to state a cause of action because undue influence is not a cause of action and he does not seek to rescind the ICSA. Defendants additionally argue Plaintiff does not allege ultimate facts constituting a claim for breach of the implied covenant of good faith and fair dealing.

1. Undue Influence

A party may assert a cause of action for rescission if his or her assent to the contract at issue was obtained through undue influence. (Civ. Code, § 1689, subd. (b)(1).) Consequently, undue influence is not a cause of action in and of itself, but a theory upon which a party may claim a contract should be rescinded. (See Das v. Bank of America, N.A. (2010) 186 Cal.App.4th 727, 743.) In order to state a claim for rescission, “the plaintiff must ordinarily allege the party against whom rescission is sought took some advantage of the mental weakness or incapacity of the other party.” (Ibid.)

Plaintiff does not assert a claim for rescission or seek to invalidate the ICSA in his prayer for relief. Moreover, Plaintiff generically asserts Emura intimidated him and does not allege he was vulnerable to influence. Plaintiff therefore fails to state a claim for rescission based on undue influence.

2. Implied Covenant of Good Faith and Fair Dealing

Defendants argue Plaintiff’s allegations with respect to the implied covenant of good faith and fair dealing are insufficient because he does not allege Emura entered into a contract with him in his individual capacity.

“The implied covenant of good faith and fair dealing rests upon the existence of some specific contractual obligation.” (Racine & Laramie, Ltd. v. Department of Parks & Recreation (“Racine”) (1992) 11 Cal.App.4th 1026, 1031, citing Foley v. Interactive Data Corp. (1988) 47 Cal.3d.654, 683-84.) “‘In essence, the covenant is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party’s rights to the benefits of the contract.” (Racine, supra, 11 Cal.App.4th at pp. 1031-32, quoting Love v. Fire Insurance Exchange (1990) 221 Cal.App.3d 1136, 1153, original italics; see also Guz v. Bechtel National, Inc. (2000) 25 Cal.4th 317, 349, original italics [The covenant prevents a party “from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made.”])

Here, Plaintiff asserts this cause of action against Emura alone, but does not allege the existence of any contract between Emura and himself. Plaintiff therefore fails to allege an underlying contractual obligation, and the demurrer to the sixth cause of action is therefore sustainable.

3. Conclusion

Plaintiff does not suggest the manner in which he could cure the defects in this cause of action through an additional amendment. Accordingly, the demurrer to the sixth cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

Case Name: Wong. v. Wong, et al.
Case No.: 2012-1-CV-235777

After full consideration of the evidence, the separate statement submitted by the parties, and the authorities submitted by each party, the court makes the following rulings:

According to the allegations of the second amended complaint (“SAC”), in early 2001, Naomi Wong (“Naomi”) and Paul Wong (“Paul”) asked Keith Tai Wong (“Keith”) to build a new house for them at 4039 Moreland Avenue in San Jose (“Moreland property”), and promised to reimburse him for all his construction costs after they sold the property. (See SAC, ¶ BC-1.) Keith expended $600,000 of costs to build the house, but upon sale of the property, Naomi and Paul only reimbursed Keith $90,000 and refused to reimburse the remainder. (See SAC, first cause of action, ¶¶ BC-1-2.) In April 2003, Naomi asked Keith to allow use of his property at 295 N. San Tomas Aquino Road in Campbell (“San Tomas property”) to secure a mortgage loan, the proceeds from which would be used to pay the costs of constructing a house at 1857 W. Campbell Avenue in Campbell (“Campbell property”). (See SAC, third cause of action, ¶ BC-1.) Naomi promised Keith to pay off the mortgage loan and reimburse him for the costs incurred on the mortgage loan when she sold the property; however, Naomi did not do either when she sold the Campbell property. (See SAC, third cause of action, ¶¶ BC-1-2.) Naomi also fraudulently abused her power as executor of her sister Alina Wong’s (“Alina’) estate to deprive Keith of $1.9 million. (See SAC, fifth cause of action, ¶¶ FR-2-6.) In April 2004, Keith lent $150,000 to Jason Lin (“Lin”), Alina’s estranged husband, through agents Naomi and Paul, who named themselves as beneficiaries of the trust deed issued by Lin against the property on which Lin was seeking financing for the completion of a home construction project at 1022A North Stelling Rd. in Cupertino (“Stelling property”). (See SAC, ¶ sixth cause of action, ¶ IT-2.) After Lin failed to repay the loan, Keith retained an attorney who filed a judicial foreclosure action, naming Naomi and Paul as the nominal plaintiffs as they were the named beneficiaries. (See SAC, sixth cause of action, ¶ IT-3.) Keith asked Naomi and Paul to sign a reconveyance to him of the trust deed, and in November 2011, they did so. (See SAC, ¶ IT-4.) However, before the intended substitution, a settlement was reached where Lin would pay $125,000 in installment payments, and from January 2013 to Mach 2014, those payments were made. (See SAC, sixth cause of action, ¶¶ IT-5.) On March 14, 2014, the court heard a motion to enforce the settlement brought by Naomi in which Naomi alleged that she had made the involved loan from her own funds, not funds from Keith, and that ensuing payments should be made to her. (See SAC, sixth cause of action, ¶ IT-6.) The Court ruled that payments should be made to Naomi, but Keith believes that Naomi should be deemed to be the constructive trustee of all payments. (See SAC, sixth cause of action, ¶¶ IT-6-8.) On July 3, 2014, Keith filed the SAC against Naomi and Paul, asserting causes of action for: breach of contract; fraud; breach of contract; fraud; fraud; intentional tort; intentional tort; and, intentional tort.

On April 21, 2015, Naomi filed a second amended cross-complaint (“SAXC”). According to the allegations of the SAXC, Keith purchased the San Tomas property on November 27, 2002. (See SAXC, ¶ 13.) In 2003, Keith were contemplating divorce, and in an effort to hide his assets from the marital community, Keith transferred titles of his properties to friends and relatives, including the San Tomas property which was conveyed to Naomi, her younger brother Quan Wong (“Quan”) and Alina. (See SAXC, ¶¶ 14-15.) In February 2004, an employee of Keith’s construction contracting business was seriously injured, and he did not have workers’ compensation insurance. (See SAXC. ¶ 16.) In March 2004, Keith asked Naomi, Quan and Alina to sign a grant deed to transfer title to Paul, T.C.P. Wong (“T.C.P”) and H.T. Wei, but Naomi did not understand the exact nature of the document. (See SAXC, ¶ 17.) On April 6, 2004, the injured employee filed a claim against Keith’s business. (See SAXC, ¶ 19.) On August 24, 2004, H.T. Wei secured a $550,000 Deed of Trust and Assignment of Rents in favor of Jade Wong against the San Tomas property. (See SAXC, ¶ 20.) At the end of 2004 or early 2005, Naomi opened a checking account for personal expenses. (See SAXC, ¶ 18.) On June 28, 2005, Keith orchestrated that Paul, T.C.P., and H.T. Wei to add Naomi to the title of the San Tomas property; Naomi was unaware that she was put on the title to the property. (See SAXC, ¶ 21.) In July or August 2005, Keith contacted Naomi to co-sign mortgage documents related to a property in Jamestown (“Jamestown property”) but the document was actually related to the San Tomas property. (See SAXC, ¶¶ 22-23.) On October 11, 2005, Keith filed a petition for bankruptcy under Chapter 7, falsely stating under oath that he did not own any real property and was not a party to any executory contracts. (See SAXC, ¶ 24.) In March 2006, Naomi moved out of the Bay Area to San Diego, but kept her Citibank checking account and turned over control of the account. (See SAXC, ¶ 25.) On May 12, 2006, the mortgage on the San Tomas property was refinanced (“Second San Tomas Deed of Trust”) with CitiMortgage as the lender, and the documents were signed by Tho Huynh as attorney in fact for Naomi Wong. (See SAXC, ¶ 26.) From 2006 to 2010, Alina and Keith arranged for payments on the San Tomas property to be made on the mortgage from Naomi’s bank account without Naomi’s knowledge. (See SAXC, ¶ 28.) In March 2010, Naomi finally learned that Alina had taken the Second San Tomas Deed of Trust in Naomi’s name by instructing Tho Huynh to sign as Naomi’s attorney in fact. (See SAXC, ¶ 29.) In November 2010, Naomi learned that Keith was using funds from her bank account to make the mortgage payments and she then confronted Keith, who promised to assume the loan or refinance it in his name if she would execute a grant deed transferring title of the San Tomas property back to him. (See SAXC, ¶ 30.) On November 29, 2010, Naomi executed a grant deed transferring title to her interest in the San Tomas Property to Keith and delivered the executed and notarized deed to Keith to record; however, Keith failed to record the deed until May 5, 2011. (See SAXC, ¶ 31.) Naomi then inquired several times as to whether he had refinanced the San Tomas property or otherwise taken steps to remove her name from the Second San Tomas Deed of Trust, and Keith assured her that he would do so once his bankruptcy was off his credit history, which she believed to be 7 years from the filing of his bankruptcy, or October 2012. (See SAXC, ¶ 32.) However, Keith did not refinance the San Tomas property or otherwise remove Naomi’s name from the Second San Tomas Deed of Trust, despite Naomi’s repeated demands, and, on April 9, 2013, Naomi realized that Keith would not willingly remove her name from the Second San Tomas Deed of Trust when Keith filed the complaint against her. (See SAXC, ¶ 33.) On April 21, 2015, Naomi filed the SAXC, for the first time alleging a cause of action against cross-defendant CitiMortgage, Inc. (“CitiMortgage”). The lone cause of action asserted against CitiMortgage is the tenth cause of action for declaratory relief, which alleges:

Ms. Wong did not have knowledge of, or give her informed consent to enter into the Second San Tomas Deed of Trust with CitiMortgage. CitiMortgage has been informed of Ms. Wong’s lack of consent, and has failed to remove her as a borrower on the Second San Tomas Deed of Trust….

As a result, a declaratory judgment is both necessary and proper at this time in order to determine the respective rights of the parties regarding liability for the Second San Tomas Deed of Trust.

(SAXC, ¶¶ 147-148.)

Cross-defendant CitiMortgage moves for summary judgment on the SAXC against it on the grounds that: the tenth cause of action for declaratory relief is time-barred as to CitiMortgage; and, the tenth cause of action is without merit because CitiMortgage is a bona fide encumbrancer.

CitiMortgage’s request for judicial notice

CitiMortgage’s request for judicial notice is GRANTED. (See Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1382, quoting Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal. App. 4th 1106, 1117; see also Evans v. California Trailer Court, Inc. (1994) 28 Cal.App.4th 540, 549; see also Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265 (stating that “a court may take judicial notice of the fact of a document’s recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document’s legally operative language… [and, f]rom this, the court may deduce and rely upon the legal effect of the recorded document”)

Naomi’s objections to the documents that are the subject for judicial notice are OVERRULED.

The SAXC is time-barred as against CitiMortgage.

CitiMortgage asserts that the tenth cause of action is time-barred. “A plaintiff must bring a claim within the limitations period after accrual of the cause of action.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806.) “The general rule is that a cause of action accrues when the wrongful act is done and not at the time of plaintiff’s discovery.” (Prudential Home Mortgage Co. v. Super. Ct. (Diaz) (1998) 66 Cal.App.4th 1236, 1246.) “An important exception to the general rule of accrual is the ‘discovery rule,’ which postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.” (Fox, supra, 35 Cal.4th at p.807.) “A plaintiff has reason to discover a cause of action when he or she ‘has reason at least to suspect a factual basis for its elements.’” (Id.) “The discovery rule only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action.” (Id.) “The discovery rule… allows accrual of the cause of action even if the plaintiff does not have reason to suspect the defendant’s identity… because the identity of the defendant is not an element of a cause of action.” (Id.) “The Legislature, in codifying the discovery rule, has also required plaintiffs to pursue their claims diligently by making accrual of a cause of action contingent on when a party discovered or should have discovered that his or her injury had a wrongful cause.” (Id. at p.808.)

The parties agree that the applicable statute of limitations is three years. (See CitiMortgage’s memorandum of points and authorities in support of motion for summary judgment (“CitiMortgage’s memo”), p.9:21-28; see also Naomi’s opposition to CitiMortgage’s motion for summary judgment (“Opposition”), p.7:2-5.)

As previously stated, Naomi’s tenth cause of action of the SAXC is for declaratory relief. Damages is not an element of a declaratory relief cause of action; rather, the cause of action requires the existence of an actual controversy relating to the legal rights and duties of the respective parties and the request for a declaration of a declaration of those rights and duties. (See Code Civ. Proc. § 1060; see also Wellenkamp v. Bank of America (1978) 21 Cal.3d 943, 947 (stating that “[a] complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the parties under a written instrument or with respect to property and requests that the rights and duties of the parties be adjudged by the court”), citing Cal. Code Civ. Proc. § 1060 and Maguire v. Hibernia Savings & Loan Society (1944) 23 Cal.2d 719.) If “the rights of the complaining party have crystallized into a cause of action for past wrongs [such] that a money judgment will fully resolve the dispute, and that no continuing relationship exists to justify a declaration of future rights… an actual controversy which can be resolved by means of declaratory judgment” is not presented. (See Roberts v. Los Angeles County Bar Assn. (2003) 105 Cal.App.4th 604, 618 (stating that “[d]eclaratory procedure operates prospectively, and not merely for the redress of past wrongs”); see also Code Civ. Proc. § 1061 (stating that “[t]he court may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances”); see also General of America Ins. Co. v. Lilly (1968) 258 Cal.App.2d 465, 470 (stating that “[t]he declaratory relief statute should not be used for the purpose of anticipating and determining an issue which can be determined in the main action”; also stating that “[t]he availability of another form of relief that is adequate will usually justify refusal to grant declaratory relief”); see also Pacific Electric Ry. Co. v. Dewey (1949) 95 Cal.App.2d 69, 73 (stating that “declaratory relief is unavailable for the determination of issues involved in an already pending action or to prevent such issues from being presented to a jury”); see also Warren v. Kaiser Foundation Health Plan, Inc. (1975) 47 Cal.App.3d 678, 683 (stating that “the court may refuse to entertain the action where ‘the rights of the complaining party have crystallized into a cause of action for past wrongs, [and] all relationship between the parties has ceased to exist’”).)

In support of its assertion that the tenth cause of action for declaratory relief is time-barred as against it, CitiMortgage presents Naomi’s deposition testimony in which she admits that: she first learned that CitiMortgage had made a loan secured by the San Tomas property in 2010 through Keith; when she discovered that Keith and Alina had been making mortgage payments to CitiMortgage from her Citibank account, she confronted Keith about it and demanded that he remove her name off the loan; although Keith said that he would remove her name off the loan as soon as she transferred title to him, after multiple demands, Keith still has not removed her name; Keith claimed he would be able to refinance the loan after his bankruptcy record was off his credit history, which would have been October 2012, but instead, he filed a lawsuit against her . (Peeters decl., exh. 28 (“Pl.’s depo”), pp. 369:9-25, 370:1-5; 371:6-25, 372:1-10, 385:4-12.) CitiMortgage also presents the SAXC in which Naomi alleges that “[i]n March 2015, Ms. Wong learned in that her sister, Alina Wong[,] had taken out the Second San Tomas Deed of Trust in Ms. Wong’s name by instructing their brother Thomas Wong a.k.a. Tho Huynh to sign as Ms. Wong’s attorney in fact…. In or about November of 2010, Ms. Wong learned that Keith Wong was using funds from her bank account to make monthly mortgage payments. Ms. Wong confronted Keith Wong, and he promised to assume the loan or refinance it in his name if Ms. Wong would execute a grant deed transferring title of the San Tomas Property back to Keith Wong.” (SAXC, ¶¶ 29-30.) CitiMortgage also presents Naomi’s discovery responses in which Naomi admits that she learned that Keith was using funds from her bank account to make monthly mortgage payments on the San Tomas Property in November 2010, and confronted Keith about the situation. (See Peeters decl., exh. 32, response to RFA 18 (Naomi admitting that she “learned of the existence… that false documents and legally deficient documents had been used without my knowledge or consent to sign the CITIMORTGAGE DEED OF TRUST… in or about November 2010”); see also Peeters decl., exh. 33, response to FI number 17.1, RFAs 19 and 20 (Naomi admitting that “[i]n or about, November 2010, Ms. Wong learned that Keith Wong was using funds from her bank account to make monthly mortgage payments on the San Tomas Property, which is when she learned that there was a mortgage on the property… Ms. Wong confronted Keith Wong about the situation, and he promised to assume the loan or refinance it in his name…”); see also Peeters decl., exh. 34, response to SI 7 (stating same).) CitiMortgage meets its initial burden to demonstrate that the tenth cause of action of the SAXC—the lone cause of action asserted against it—is time-barred as to it.

In opposition, Naomi does not dispute that she knew that the CitiMortgage Deed of Trust was in her name in November 2010. (See Naomi’s separate statement in opposition to CitiMortgage’s separate statement, undisputed material fact number 5.) Instead, Naomi asserts that the statute of limitations on the tenth cause of action for declaratory relief “did not begin to run until April 9, 2013, when [Naomi] learned that [Keith] had broken his promise to remove her from the Second San Tomas Deed of Trust.” (Naomi’s opposition to CitiMortgage’s motion for summary judgment (“Opposition”), p.6:19-21.) Plaintiff asserts that she “did not sustain any damages until April 9, 2013, when she learned that Keith had broken his promise to remove her from the Second San Tomas Deed of Trust.” (Id. at p.7:6-10.) In support of her assertion, Naomi cites to Thomas v. Canyon (2011) 198 Cal.App.4th 594. There, the court stated that “[w]here as here, ‘damages are an element of a cause of action, the cause of action does not accrue until the damages have been sustained.’” (Thomas, supra, 198 Cal.App. 4th at p.604.) “Mere threat of future harm, not yet realized, is not enough.” (Id.)

However, unlike the breach of fiduciary duty cause of action in Thomas, damages is not an element to the declaratory relief cause of action. Thus, Naomi’s argument relying on Thomas, supra, is unavailing. Moreover, it is apparent from Naomi’s opposition that the basis for the claim as against CitiMortgage is CitiMortgage’s failures to recognize “the multiple red flags indicating that something was amiss with the loan” and nevertheless, issuing the loan. (See Opposition, pp.4:8-27, 5:1- 9.) Thus, CitiMortgage’s alleged failures, including the reliance of the power of attorney, the residence of Paul and Naomi at the San Tomas property, the failure to meet certain underwriting condition, and the failure to verify Naomi’s identity with Naomi—again, the basis for Naomi’s cause of action against CitiMortgage—occurred on May 28, 2006. Naomi was immediately affected by the alleged failures when her name was placed on the Second San Tomas Deed of Trust and it was recorded. Naomi had a reason to suspect a factual basis for her claim no later than November 2010 when she learned that she was on the Second San Tomas Deed of Trust and that Alina and Keith had been allegedly making payments from her account as to it. CitiMortgage did nothing to prevent Naomi from filing any claim against it. Instead, Naomi apparently relied on the fraudulent promise of Keith; however, this establishes a cause of action against Keith, not against CitiMortgage. Moreover, to the extent that the cause of action is premised on the alleged fraudulent promise by Keith, as such a cause of action crystallized into a cause of action for a past wrong such that a money judgment will fully resolve the dispute, an actual controversy is not presented here as to CitiMortgage as to that alleged fraudulent promise.

Naomi also argues that the SAXC is not time-barred as against CitiMortgage because the SAXC relates back to the initial cross-complaint, filed on May 7, 2013, as the initial cross-complaint included Roe allegations and, although the summons served upon CitiMortgage did not state it was being sued as a Roe Cross-Defendant, that is a sheer technical and clerical error. (See Opposition, pp.9:1-28, 10:1-228, 11:1-19.) However, “[a]n amended complaint relates back to a timely filed original complaint, and thus avoids the bar of the statute of limitations, only if it rests on the same general set of facts and refers to the same ‘offending instrumentalities,’ accident and injuries as the original complaint.” (Davaloo v. State Farm Ins. Co. (2005) 135 Cal.App.4th 409, 415.) Here, the initial cross-complaint did not contain any claim against any bank or lender. In fact, the initial cross-complaint does not involve the Second San Tomas Deed of Trust whatsoever; it instead involves a loan Naomi made to Jason Lin and Keith’s purported interest in the Moreland property. (See initial cross-complaint, ¶¶ 1-27.) The SAXC neither rests on the same general set of facts, nor to the same offending instrumentalities, accident and injuries as the initial cross complaint. Further, as CitiMortgage argues, it is undisputed that Naomi was aware of CitiMortgage’s identity in November 2010 when she discovered that she was on the Second San Tomas Deed of Trust and Naomi learned that Alina and Keith had been allegedly making payments from her account to CitiMortgage. Thus, at the time that the initial cross-complaint was filed, Naomi knew CitiMortgage’s identity and was not genuinely ignorant of its identity. (See Woo v. Superior Court (1999) 75 Cal.App.4th 169, 177 (stating that “[a] further and nonprocedural requirement for application of the section 474 relation-back doctrine is that [the plaintiff] must have been genuinely ignorant of [the Doe defendant’s] identity at the time she filed her original complaint”).) Here, it is clear that the SAXC does not relate back to the filing of the initial cross-complaint.

Accordingly, Naomi has failed to demonstrate the existence of a triable issue of material fact as to whether the SAXC is time-barred as to cross-defendant CitiMortgage, and CitiMortgage’s motion for summary judgment is GRANTED.
As the Court grants CitiMortgage’s motion for summary judgment on the ground that the SAXC is time-barred as to CitiMortgage, it is unnecessary to determine whether CitiMortgage establishes that it is a bona fide encumbrancer.

As the Court did not address the motion as to whether CitiMortgage is a bona fide encumbrancer, the Court did not rely on the portion of the Wood declaration to which Naomi objects.

CitiMortgage’s objection numbers 3 and 6 to Naomi’s declaration are SUSTAINED. The remainder of CitiMortgage’s objections are not the basis for the Court’s order.

Case Name: Manuel Echenique v. Omar Gonzalez-Ortega
Case No.: 2016-CV-294345

Factual and Procedural Background

This is a motor vehicle accident case. Plaintiff Manuel Echenique (“Plaintiff”) filed a judicial council form first amended complaint (“FAC”) against defendant Omar Gonzalez-Ortega (“Defendant”) setting forth causes of action for motor vehicle negligence, general negligence and negligence per se. The alleged motor vehicle accident occurred on or about April 26, 2014 at SR-87 southbound, 120 feet north of Branham Lane in San Jose, California. Plaintiff alleges that Defendant was intoxicated at the time of the accident. As a result of the collision, Plaintiff has incurred hospital and medical expenses and suffered general damages and wage loss.

Currently before the Court is Defendant’s motion to strike portions of the FAC. (See Code Civ. Proc., §§ 435, 436.) Plaintiff filed written opposition. Defendant filed reply papers.

Motion to Strike Portions of the FAC

Defendant moves to strike the punitive damage allegations in the FAC because they are not supported by facts establishing malice, oppression, or fraud.

Legal Standard

A court may strike out any irrelevant, false, or improper matter asserted in a pleading. (Code Civ. Proc., § 436, subd. (a).) A court may also strike out all or any part of a pleading not filed in conformity with the laws of the State of California. (Code Civ. Proc., § 436, subd. (b).) The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice. (Code Civ. Proc., § 437, subd. (a).)

Analysis

“In order to state a prima facie claim for punitive damages, a complaint must set forth the elements as stated in the general punitive damage statute, Civil Code section 3294. These statutory elements include allegations that the defendant has been guilty of oppression, fraud, or malice. ‘Malice’ is defined in the statute as conduct ‘intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.’ ‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights. ‘Fraud’ is ‘an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.’” (Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 63 [internal citations omitted].)

In Taylor v. Superior Court (1979) 24 Cal.3d 890, the California Supreme Court held that punitive damages may be sought where the gravamen of the complaint is that the “[d]efendant became intoxicated and thereafter drove a car while in that condition, despite his knowledge of the safety hazard he created thereby.” (Id. at p. 896.) This is exactly what Plaintiff alleges in the FAC. In particular, Plaintiff alleges that “Defendant became severely intoxicated and drove his car at an alcohol level of 2.5 times the legal limit, despite knowing of the safety hazards he created to other drivers by doing so.” (See Exemplary Damages Attachment to the FAC.) This is a sufficient allegation of conscious disregard for purposes of seeking punitive damages. Furthermore, contrary to Defendant’s argument, a plaintiff is not required to plead facts showing a history of prior arrests or convictions to establish punitive damages. (See Taylor, supra, at p. 896 [“[W]hile a history of prior arrests, convictions and mishaps may heighten the probability and foreseeability of an accident, we do not deem these aggravating factors essential prerequisites to the assessment of punitive damages in drunk driving cases.”].) Therefore, the Court finds that Plaintiff has properly alleged a claim for punitive damages.

Consequently, the motion to strike portions of the FAC is DENIED.