Tuesday, December 18, 2007

Andrea Rice Newsletter

LIABILITY UPDATE
December 21, 2007
http://www.andreariceesq.com/

In Dodson v. J. Pacific, Inc. 2007 Daily Journal D.A.R 13199, the Second Appellate District of the California Court of Appeal held that where a plaintiff has undergone surgery in which a herniated disc is removed and a metallic plate inserted, and the jury has expressly found that the defendant’s negligence was a cause of plaintiff’s injury, the failure to award any damages for pain and suffering results in a damage award that is inadequate as a matter of law.

Major Dodson (Dodson) was self-employed in the scrap metal business. He sued J. Pacific, Inc. for general negligence and premises liability in connection with an incident that occurred on December 12, 2002, while J. Pacific’s employees were loading large cylindrical pieces of scrap metal onto Dodson’s flatbed truck. During the loading process, a metal cylinder, weighing between four and five thousand pounds, slipped from the prongs of the forklifts, and fell onto and rolled off Dodson’s truck. Dodson, who was standing behind the truck when the cylinder slipped and began to roll, ran to avoid the rolling cylinder, tripped on pea gravel on the ground, and fell. He slid into several steel posts and struck the left side of his back and neck on the posts.

After the incident, the loading process, which took another hour and a half or so, was completed, and Dodson drove his loaded truck to his scrap metal yard and then to his home. The following day, he drove the loaded truck to Atlas Iron & Metal, where the scrap metal was unloaded.

Five days later, Dodson saw his primary physician, Dr. Tanya Arvan. Arvan’s notes showed Dodson stated that he had “pain in the knees and the knees give out,” but showed no other complaint. Dodson did not tell Dr. Arvan about his fall because he “didn't think it was that serious.” Some time later, he spoke to the manager at J. Pacific, telling him he thought he might need to see a doctor. The manager referred Dodson to a Superior Care facility. The facility took x-rays of Dodson’s neck, arms, legs and back. Dodson received physical therapy (heat treatments) for a month or so, and was referred to another doctor. Dodson continued experiencing pain, and fell on two additional occasions, on January 7, 2003 and January 24, 2003. On the latter occasion, Dodson was taken to the hospital and came under the care of Dr. Sasan Yadegar, a neurosurgeon. Dr. Yadegar recommended surgery and, on February 4, 2003, removed the herniated disk and arthritic joints and inserted a metallic plate. After the surgery, Dodson experienced a loss of equilibrium and “a lot of pain” in his arms, knees, neck and back, and used a walker for about nine months. Since then, he has used a cane. Dodson received physical therapy from June 2003 to May 2004, consisting of heat treatments and massages to the neck, back and knees.

In April 2004, Dodson filed this lawsuit. At the conclusion of trial, the jury rendered a special verdict. It found J. Pacific was negligent, and its negligence was a cause of Dodson’s injury. It further found Dodson suffered economic damages of $16,679 caused by the accident, but suffered no non-economic damages. The jury also found that 50 percent of the negligence causing Dodson’s injury was attributable to Dodson. Judgment was entered for Dodson in the sum of $8,339.50.

Dodson filed a motion for a new trial on the issue of non-economic damages or, in the alternative, an additur to the judgment in the amount of $150,000. The trial court denied the motion, ruling that the verdict “did not leave [Dodson] with an inadequate recovery on a fair consideration of the evidence”; no facts suggested passion, prejudice or corruption on the part of the jury; and Dodson “had a fair trial, and the jury awarded an ample sum in consideration of the entire record.” Dodson appealed, and the Court of Appeal reversed.

The court observed that, in some cases, courts have found jury awards which fail to compensate for pain and suffering inadequate as a matter of law. (E.g., Haskins v. Holmes (1967) 252 Cal.App.2d 580, 585-586 (Haskins ) [award insufficient where plaintiff sustained severe head injuries necessarily requiring surgery, but the trial judge awarded only $88.63 in excess of the plaintiff’s actual medical expenses, in effect “allowing nothing for pain and suffering”; it was “patently obvious” that “substantial pain, suffering, shock and inconvenience” necessarily and inevitably accompanied the injuries].) The courts have also stated, however, that an award that does not account for pain and suffering is “not necessarily inadequate as a matter of law”(id. at p. 586), and that “[e]very case depends upon the facts involved.” (Miller v. San Diego Gas & Elec. Co. (1963) 212 Cal.App.2d 555, 558 (Miller ).)

The controlling rule, we believe, was best stated in Miller, which affirmed a jury verdict that made no allowance for pain and suffering. Miller distilled this principle from the precedents it reviewed: Cases finding an award inadequate for failure to account for pain and suffering “ involved situations where the right to recover was established and . . . there was also proof that the medical expenses were incurred because of defendant’s negligent act.” (Miller, supra, 212 Cal.App.2d at p. 558.) In such situations, Miller concluded, “[i]t is of course clear that ... a judgment for no more than the actual medical expenses occasioned by the tort would be inadequate.” (Ibid.) On the other hand, a verdict may properly be rendered for an amount less than or equal to medical expenses in cases where, “even though liability be established, a jury . . . may conclude that medical expenses paid were not occasioned by the fault of the defendants.” (Id. at p. 559; see also Haskins, supra, 252 Cal.App.2d at p. 586 [an award “for the exact amount of, or even less than, the medical expenses is not necessarily inadequate as a matter of law, because in the majority of cases there is conflict on a variety of factual issues – whether plaintiff received any substantial injury or suffered any substantial pain, or whether the medical treatment was actually given or given as a result of the injuries, or reasonable or necessary”].)

The court’s review of the foregoing precedents lead it to conclude that this case fell squarely among those in which the jury verdict was found to be inadequate as a matter of law. “In Dodson’s case, the factual conflicts that Miller and Haskins tell us may justify the jury’s failure to award non-economic damages – whether the plaintiff received any substantial injury or suffered any substantial pain; whether medical treatment was actually given or was given as a result of the injuries; and whether the medical treatment was reasonable or necessary – were resolved by the jury in its special verdict. In Dodson’s case, we know – because the jury expressly decided – that J. Pacific’s negligence was a cause of Dodson’s injury, and that Dodson suffered economic damages ‘caused by the accident. . . .’ We know that he underwent surgery in which a herniated disc was removed and replaced with a metallic plate. We know the jury awarded damages, at least in part, for Dodson’s surgical expenses. A plaintiff who is subjected to a serious surgical procedure must necessarily have endured at least some pain and suffering in connection with the surgery. While the extent of the plaintiff’s pain and suffering is for the jury to decide, common experience tells us it cannot be zero.”

Because the award of damages was inadequate as a matter of law, the denial of a new trial on the issue of damages was an abuse of the trial court’s discretion. Accordingly, the judgment must be reversed and the matter remanded for a new trial limited to the issue of the amount of Dodson’s damages.

----Andrea Lynn Rice

Wednesday, December 12, 2007

Andrea Rice December 14th Newsletter

LIABILITY UPDATE
December 14, 2007

In Philipson & Simon v. Gulsvig 2007 Daily Journal D.A.R 13383, the Fourth Appellate District of the California Court of Appeal held that each of a law firm’s causes of action fell within the protection of the anti-SLAPP statute, where each of them was based substantially upon a client’s petitioning activity—first her initiation of a fee arbitration proceeding under the Mandatory Fee Arbitration Act (“MFAA”), and then her initiation of a cross-complaint against the law firm in the present action.

Lori Gulsvig was a shareholder, officer and employee of California Shirt Sales, Inc., a California Corporation (CSS California). CSS California entered into an agreement with Tultex, Inc., pursuant to which CSS California sold assets to Tultex. Tultex formed a Virginia corporation, also called California Shirt Sales, Inc. (CSS Virginia) for the purpose of owning those assets. Prior to the asset sale, CSS California had an account receivable, owed by a company called Color Spot, and hired defendant, the law firm of Philipson & Simon (Philipson), to collect it. Philipson was able to obtain a judgment against Color Spot on behalf of CSS California. In October of 2001, Philipson obtained a settlement of the Color Spot judgment. The total amount to be paid by Color Spot was $85,000, of which $15,000 was designated as “attorney fees.” Philipson remitted $70,000 of the funds to Gulsvig, and made clear its intention to keep the remaining $15,000 for itself.

After Gulsvig filed her request to arbitrate the dispute, Philipson informed her that it questioned her right to retain any part of the settlement funds, and further that Campbell Advisors, P.C. (the plaintiff in this case) had asserted its own claim to the funds as successor in interest to Tultex. Philipson requested that Gulsvig remit back to it the $70,000 she had already received from the Color Spot settlement, and offered to retain those funds in its trust account pending a determination of which party was entitled to them.

When Gulsvig did not accede to Philipson’s request that she return the settlement funds she had already received, it threatened her with a lawsuit, and even provided her with a proposed complaint. The complaint accused Gulsvig of breach of contract, conversion and fraud, and sought damages stemming from her retention of settlement funds which allegedly belonged to Campbell. Approximately three months later, Philipson itself, then acting as counsel for Campbell, filed the complaint against Gulsvig. Gulsvig responded with a demurrer and a motion to disqualify Philipson from further representing Campbell. Gulsvig also filed a cross-complaint against Philipson, alleging causes of action for breach of fiduciary duty, negligence, breach of contract and conversion.

Philipson then filed its own cross-complaint against Gulsvig. It is the second-amended version of that cross-complaint that is at issue in this appeal. Gulsvig responded to Philipson’s second amended cross-complaint by a motion to strike it, and each of the causes of action contained in it, as a SLAPP action. The trial court denied the motion. Gulsvig appealed and the Court of Appeal ordered the trial court to grant the motion as to Philipson’s fraud and negligent misrepresentation causes of action.

Code of Civil Procedure section 425.16, subdivision (b)(1), requires a two-step process for determining whether a defendant’s section 425.16 motion to strike should be granted. “First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. The moving defendant’s burden is to demonstrate that the act or acts of which the plaintiff complains were taken ‘in furtherance of the [defendant]’s right of petition or free speech under the United States or California Constitution in connection with a public issue,’ as defined in the statute.” (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) Then, if the court finds that such a showing has been made, the burden shifts to plaintiff to demonstrate “there is a probability that the plaintiff will prevail on the claim.” (§ 425.16, subd. (b)(1).)

The court began its de novo review with the proposition that filing a lawsuit does qualify as “petitioning” under the anti-SLAPP law. (Chavez v. Mendoza (2001) 94 Cal.App.4th 1083, 1087.) “Further, we have little trouble concluding that the initiation of a State Bar sponsored fee arbitration proceeding is likewise covered; after all, it is an official proceeding established by statute to address a particular type of dispute.” Next, the court noted that “where a cause of action alleges both protected and unprotected activity, the cause of action will be subject to section 425.16 unless the protected conduct is ‘merely incidental’ to the unprotected conduct [citation].” “Here, Philipson alleges as part of its fraud and negligent misrepresentation causes of action, that as a result of Gulsvig’s misepresentations, it had been ‘sued in this action,’ and was facing ‘possible exposure, attorneys fees and costs.’ . . . Of course, the only one who has sued Philipson is Gulsvig herself, and thus these damage allegations are based on Gulsvig’s own petitioning activity. . . .”

The court next turned to the issue of whether Philipson sustained its burden of demonstrating a probability of success on the merits of these causes of action. This means it must demonstrate it has “ ‘stated and substantiated a legally sufficient claim.’ ”

The court first considered Philipson’s fraud and negligent misrepresentation causes of action and found that this claim was insufficient to state a cause of action for fraud. “What Philipson alleges here is that Gulsvig consistently represented to it, after the sale of CSS California to Tultex, that Tultex owned the Color Spot receivable. . . . [¶] We cannot view this story, as told by Philipson in its own pleading, as demonstrating anything like ‘reasonable reliance.’ Philipson’s role, as Tultex’s attorney, simply does not allow it to unquestioningly abandon its professional obligations to that client, simply because an officer of the company (who has previously stated consistently that a particular asset belongs to Tultex) suddenly claims that she has personally owned that asset all along. . . . This is exactly the sort of case in which we can ‘ “ ‘determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud.’ [Citation.]” ’ . . . There is not. Any reliance would have been unreasonable.”

Addressing the contract causes of action, the court reached a different conclusion. The court found that Philipson had failed to properly serve Gulsvig with the required arbitration notice. It nonetheless concluded that Gulsvig waived her right to arbitrate those distinct fee claims. Under subdivision (d) of Business and Professions Code section 6201, a client waives her arbitration rights under the statute by “commencing an action or filing any pleading seeking either of the following: [¶] (1) Judicial resolution of a fee dispute to which this article applies. [¶] (2) Affirmative relief against the attorney for damages or otherwise based upon alleged malpractice or professional misconduct.” (Italics added.) “In this case, Gulsvig had already filed her own cross-complaint, seeking affirmative relief against Philipson based upon various alleged breaches of professional obligations, when Philipson filed its second amended cross-complaint. As the trial court pointed out, the contract claims stated in Philipson’s second amended cross-complaint may be properly used to offset the damage claims alleged against it by Gulsvig, and are thus a proper subject for inclusion in the same lawsuit. (§ 426.30.)”

----Andrea Lynn Rice

Thursday, December 6, 2007

Los Angeles Attorney Newsletter

LIABILITY UPDATE
December 7, 2007
http://www.andreariceesq.com/

In Fairbanks v. Superior Court 2007 Daily Journal D.A.R 12788, the Second Appellate District of the California Court of Appeal held that insurance is neither a “good” nor a “service” within the meaning of the Consumer Legal Remedies Act (Civ. Code, §§ 1750 et seq. [“CLRA”]), a pro-consumer statute intended to protect low-income consumers from deceptive or unfair business practices that prohibits specific deceptive or unfair acts in the sale or lease of goods and services.

Pauline Fairbanks purchased from Farmers New World Life Insurance Company (“Farmers”) a Flexible Premium Universal Life policy. The Flexible Premium Universal Life policies sold by Farmers were represented to be permanent insurance. When she was sold such a policy, Fairbanks was informed that she could keep the policy in full force indefinitely by paying a stated premium amount. In reality, this premium amount was insufficient to keep the policy in force to maturity. Fairbanks alleged in her complaint that Farmers’ policies were misrepresented and that Farmers engaged in deceptive and unfair practices in the design and marketing of the policies.

Fairbanks, on behalf of herself and others similarly situated, sued Farmers in November of 2003. Farmers moved for a dismissal of the CLRA cause of action, arguing that it had no merit because insurance is neither a “good” nor a “service” within the meaning of the CLRA. The superior court granted the motion. The Court of Appeal denied plaintiffs’ petition for writ of mandate.

The court observed that the CLRA is a statute that regulates any “transaction intended to result or which results in the sale or lease of goods or services to any consumer.” (Civ. Code, § 1770 subd. (a).) It lists 23 “proscribed practices,” a few of which “could conceivably apply to insurance. For instance, ‘[r]epresenting that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have’ is prohibited under this act. (Civ. Code, § 1770 subd. (a)(5).) Additionally, ‘[r]epresenting that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another’ is prohibited. (Civ. Code, § 1770, subd. (a)(7).) ‘Representing that the subject of a transaction has been supplied in accordance with a previous representation when it has not,’ (Civ. Code, § 1770 subd. (a)(16)), and ‘[i]nserting an unconscionable provision in the contract,’ (Civ. Code, § 1770, subd. (a)(19)), are additional acts proscribed by the CLRA that could arguably relate to insurance. . . .”

The court pointed out that portions of the Insurance Code also regulate unfair and deceptive practices in the business of insurance. The Unfair Insurance Practices Act (“UIPA”) prohibits the making, issuance or circulation of “any estimate, illustration, circular or statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the dividends or share of the surplus to be received. . . .” (Ins. Code, § 790.03, subd. (a)). In addition, the UIPA proscribes the knowing misrepresentation of “pertinent facts or insurance policy provisions relating to any coverages at issue,” (Ins. Code, § 790.03 subd. (h)(1)), and any attempts “to settle a claim by an insured for less than the amount to which a reasonable person would have believed he or she was entitled by reference to written or printed advertising material accompanying or made part of an application.” (Ins. Code, § 790.03, subd. (h)(7)). “We here consider whether the generally-applicable provisions of the CLRA override the insurance-specific provisions of the UIPA, and provide for a private right of action where the UIPA provides only for administrative enforcement.” The court concluded that it does not.
The court first found that the plain language of the CLRA indicates that insurance is not a “good.” “Goods” are defined as tangible chattels bought or leased for personal, family or household use. (Civ. Code, § 1761, subd. (a).) “Insurance is not a tangible item. Thus it cannot be a ‘good.’ It follows that the pertinent issue here is whether insurance can be considered a ‘service’ under the CLRA.”

The CLRA defines “Services” as “work, labor, and services for other than a commercial or business use, including services furnished in connection with the sale or repair of goods.” Insurance is defined by the Insurance Code as “a contract, whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.” (Ins. Code, § 22). “Obviously, insurance contracts are not work or labor. Nor can these indemnification agreements easily be described as personal services or services ‘furnished in connection with the sale or repair of goods.’ . . .”

The court pointed out that, in an analogous decision, one court held that issuance of a credit card is not a “service” under the CLRA. (Berry v. American Express Publishing, Inc. (2007) 147 Cal.App.4th 224, 229-230). “The Berry court reasoned that the extension of credit is not a ‘service,’ especially when it is an extension of credit unconnected to a specific sale or lease transaction. A similar analysis applies to insurance, which is an essentially financial transaction, completely unrelated to the sale or lease of any identifiable consumer good or service.”

Further, in determining whether the CLRA applied to credit cards, the Berry court found significant the exclusion of the words “money” and “credit” from the definition of “consumer” in the CLRA. “Similarly, . . . although ‘insurance’ was indisputably a part of the model rule on which the CLRA was based, insurance was not included in the final draft of the act.” “The legislative history of the CLRA indicated that it was adapted in large part from provisions contained in the National Consumer Act (‘NCA’), a model rule proposed by the National Consumer Law Center at Boston College. The NCA’s definition of ‘services’ specifically includes insurance. . . . Yet, when the California Legislature adapted the NCA to enact the CLRA, it omitted insurance from the definition of ‘services.’ The obvious conclusion is that the Legislature intentionally omitted insurance because it did not intend for the CLRA to apply to insurance. . . .”

“Policy considerations” also confirmed the court’s conclusion. “In a practical sense, allowing for a CLRA remedy for insurance fraud would wreak havoc on the established code and decades of case history. Although, at one time, private actions were considered permissible under Insurance Code section 790.03, subdivision (h) (Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880), the California Supreme Court held in 1988 that the enforcement of section 790.03(h) was limited to administrative sanctions by the Insurance Commissioner, and that the Legislature had never intended, by its enactment of the UIPA, to create a private right of action. (Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287, 303-304.)”

It is clear that, if insurance were considered a “service” under the CLRA, many of the unfair and deceptive practices prohibited by the UIPA would also constitute “proscribed practices” under the CLRA. . . . Thus, allowing a private right of action under the CLRA would, in effect, undermine the holding in Moradi-Shalal and allow a private right of action for UIPA violations. This private right of action would be based not on any express grant of the right in clear, understandable, unmistakable terms, but on a conclusion that, although the CLRA was silent on the matter of insurance, it was intended to create a private right of action for insurance practices already regulated elsewhere. Indeed, interpreting the CLRA to apply to insurance would, in effect, swallow the UIPA whole by allowing a private right of action where the courts have explicitly held that a private right of action under that statute was never intended.

----Andrea Lynn Rice