Wasserman's Appellate Summaries
September 29, 2000
By Lawrence Wasserman, Esq.
Netlaw Libraries welcomes back attorney Lawrence Wasserman as a new website contributor. We are pleased to announce that his guest column, which synopsizes the recent decisions from the Ninth Circuit Court of Appeals, the California Supreme Court, the six California appellate districts, as well as some of the recent and interesting decisions from the U.S. Supreme Court, will be appearing as a regular feature for members and guests visiting the Netlaw Libraries website. We hope that you will find it to be a good way to start your legal research day and welcome your comments and criticisms regarding the column.
Edgerton v. State Personnel Board/Department of Transportation
Case No. A083792
California Court of Appeal, First District, Division Four
EMPLOYMENT-OFF DUTY DRUG TESTING-EVIDENCE-FAILURE TO PROVIDE CHAIN OF CUSTODY OF URINE SAMPLE-ATTORNEY FEE AWARD
Edgerton, an equipment operator for Caltrans, failed a random drug test by testing positive for marijuana. Caltrans issued a notice of adverse action and dismissed Edgerton. Caltrans agreed to reduce Edgerton’s dismissal to a suspension of 20 working days and Edgerton agreed to remain drug and alcohol free and to submit to random follow-up drug testing. A year later Edgerton failed a follow-up drug test by testing positive for methamphetamines. Caltrans dismissed Edgerton. The State Personnel Board upheld the dismissal. Edgerton sued. The trial court issued an injunction prohibiting off-duty testing for illegal drug use and attorney fees were awarded. The district court found that there was no proper chain of custody of the urine samples used in the tests and the tests were inadmissible. An issue of fact was found as to whether the drug test was taken off-duty.
HELD: Chain of custody documentation is required at the collection site and at the testing laboratory where specimens are vulnerable to tampering. Caltrans failed to sustain its burden of proving that Edgerton suffered a positive drug test because its documentation of the chain of custody for Edgerton’s samples was lacking. Although a violation of chain of custody procedures does not per se invalidate a drug test based on the documentation before him, the Medical Review Officer did not have enough information to certify that the chain of custody was complete and sufficient. Edgerton rebutted the Evidence Code presumption that official duty has been regularly performed. The random drug testing at issue is in itself an intrusion on an individual’s privacy rights, which is significantly enhanced when an employee is subject to follow-up drug testing on his off-duty time. Caltrans’s employees have no reasonable expectation that they will be subject to off-duty follow-up drug testing on their personal time because Caltrans’s written policies provide that employees will be subject to testing when they are on duty. In order to justify off-duty drug testing, Caltrans was required to show that no less intrusive alternatives were available. The lodestar amount for attorney fees was properly increased. Affirmed.
Carpenters Health and Welfare Trust Fund for California v. McCracken
Case No. A084037
California Court of Appeal, First District, Division Three
CIVIL-STATE COURT JURISDICTION-ERISA PREEMPTION OF SUIT RELATING TO SETTLEMENT AGREEMENT RELATING TO PAYMENT UNDER AN ERISA PLAN
McCracken and his family are eligible for benefits under a health Plan administered by the Carpenters Health and Welfare Trust Fund for California. Rodney’s daughter, Jenny was injured in a pedestrian/motor vehicle accident. Jenny sued those allegedly responsible for her injuries. In the interim, the Plan paid Jenny’s medical expenses. The McCracken's signed an agreement for reimbursement with CHWT if they recovered from a third party. They received a partial settlement in the sum of $100,000 for Jenny’s injuries. CHWT demanded reimbursement for $96,763.42 in medical expenses. The McCrackens refused to make any reimbursement. CHWT filed suit. The suit was settled with the McCracken's agreeing to pay $45,000. The McCrackens refused to pay the settlement amount and CHWT sued in state court. The trial court found that it did not have jurisdiction and judgment was for the McCrackens.
HELD: In determining the breadth of Employee Retirement Income Security Act preemption, courts must go beyond the unhelpful text and the frustrating difficulty of defining its key term, and look instead to the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive. In this case, although the settlement agreement between CHWT and the McCrackens relates to employee benefits, it does not relate to an employee benefit plan. CHWT’s common law cause of action for breach of the agreement is not preempted by ERISA. Reversed and remanded.
*Wilshire-Doheny Associates v. Shapiro
Case No. B135292
California Court of Appeal, Second District, Division Five
CIVIL-ATTORNEY FEES FOR CORPORATE AGENT SUCCESSFULLY DEFENDING ACTION BROUGHT BY THE CORPORATION AGAINST THE AGENT-REQUIREMENT OF GOOD FAITH ACTION BY THE AGENT
In 1989, Wilshire-Doheny Associates acquired a building in Los Angeles with money borrowed from Daishin, a Japanese company. Shapiro, a real estate broker assisted in the acquisition and became the building manager. The building lost money, and in 1993, when real estate prices declined. As a settlement WDA transferred the building to Daishin. Daishin and WDA, and the persons (including Shapiro) associated with WDA and the building operator executed mutual releases, including releases for unknown claims. A subsequent suit by an employee against WDA precipitated cross suits by the parties for recission of the agreement, conversion and related causes of action. The trial court held the mutual release was valid, binding and enforceable. Judgment was for Shapiro, who then sought his attorney fees and costs, based on an articles of incorporation provision for indemnification, the Corporations Code, and for bad faith conduct. The trial court denied the motion.
HELD: The Corporations Code provides that a corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was an agent of the corporation, against expenses actually and reasonably incurred by that person in connection with the defense or settlement of the action if the person acted in good faith, in a manner the person believed to be in the best interests of the corporation and its shareholders. The trial court erred in determining, as a matter of law that the Corporations Code did not apply, because appellants were pursuing their own interests in opposing rescission of the mutual release. That Shapiro was sued by the corporation is not a bar to recovery. While Shapiro's innocence of the misconduct alleged was not established, his lack of liability was established by the mutual release. In this respect, the determination of the case is one on the merits. There is no requirement of a showing of good faith in the Corporate Code for the indemnification provision to be applicable if the corporate agent been successful on the merits in defense of any proceeding. Reversed the denial of attorney fees.
Wise v. Thrifty Payless
Case No. C032388
California Court of Appeal, Third District
(Certified for publication with the exception of part II of the discussion.)
TORTS-APPLICATION OF LITIGATION PRIVILEGE DISCLOSURE
Based on the Confidentiality of Medical Information Act, Wise recovered $100,000 in her suit against defendant, Thrifty Payless, for damages resulting from the unauthorized disclosure by Payless of prescription drug information to her husband Rick Wise, from whom she had recently separated in contemplation of a marital dissolution. Her husband had gone to Thrifty and requested a printout of all prescriptions and costs for tax purposes. Thrifty's in limine motion to prohibit plaintiff or any of her witnesses from making any reference to damages or loss suffered by her, as the result of her husband’s use of the drug printout, in either the dissolution action or in investigative proceedings conducted by the DMV, was denied.
HELD: By statute the publication of any information in a judicial information is privileged. Although originally enacted with reference to defamation actions alone the privilege has been extended to any communication, whether or not it is a publication, and to all torts other than malicious prosecution. Litigants and other participants are absolutely privileged from being sued on the basis of communications they make in the context of family law proceedings. Mr. Wise was privileged to use the prescription list in litigation. While Mr. Wise's conduct was privileged, Thrifty's own tortious conduct clearly was not. Thrifty was not a litigant or other participant authorized by law and the disclosure was not made to further the object of litigation. Affirmed.
Lammers v. Superior Court/Lammers
Case No. D035476
California Court of Appeal, Fourth District, Division One
FAMILY LAW-LOCAL RULE REQUIRING REQUEST FOR READING OF CASE FILE BEFORE HEARING-FACIAL CONSTITUTIONALITY-DENIAL OF DUE PROCESS AS THE RULE WAS APPLIED
The San Diego Superior Court has a local rule relating to temporary orders made in family law matters. The Rule relates to the procedure for an advance review of a file set for hearing. The rule provides: "Normally the court cannot take a recess to review the court file in detail on the day of the hearing. If counsel wants the court to read a file before the hearing then counsel shall notify opposing counsel of the request. Counsel shall also notify the calendar clerk of the department in which the matter is calendared no later than noon on the day before the hearing. The pre-read request shall include a designation of all relevant documents filed by both sides. Where counsel requests the court read more than eight documents, counsel shall make arrangements with the calendar clerk for counsel to place yellow tags on the documents to be read. If opposing counsel objects to the request for the pre-read, opposing counsel shall notify the calendar clerk for the department of the specific objection. This will not, however, prevent the pre-read. In the Lammers matter a prereading was not requested. At the hearing it turned out that more than 20 minutes was needed for argument. The court cut off argument after 20 minutes and made a support order, without prejudice to further review.
HELD: The local rule was found to be within the rule making power of the court and facially constitutional. In this case the family law court erred by not reviewing the record before making its order. The court could have put the matter over until it had additional time to review the file or taken the case under submission. Within this context, the court misapplied the Rule and denied a litigant procedural due process. Since the order that has been vacated by a later hearing and order there is no reason to set it aside. Petition denied.
Welch v. State Of california
Case No. F033421
California Court of Appeal, Fifth District
TORTS-STANDING TO BRING ACTION FOR WRONGFUL DEATH-REQUIREMENT FOR STANDING AS PUTATIVE SPOUSE-COMMON LAW MARRIAGE
Leonard Welch was killed when a large tree growing along State Route 99 fell onto the highway and hit Welch’s pick-up truck. Mary Welch sued as his surviving spouse. Mary and Leonard never complied with the requirements for a valid marriage under California law. Although they lived together for almost 30 years and conducted themselves as if married, Mary and Leonard neither acquired a marriage license nor engaged in a solemnization ceremony. The trial court granted the State summary adjudication.
HELD: The class of persons who may assert a wrongful death cause of action is limited to the decedent’s heirs. An heir under this section includes a putative spouse who was dependent on the decedent. A "‘putative spouse’ means the surviving spouse of a void or voidable marriage who is found by the court to have believed in good faith that the marriage to the decedent was valid. It is undisputed that Mary and Leonard made no attempt to either procure a marriage license or formally solemnize their union. California abolished common law marriage in 1895. Mary was not a putative spouse. Affirmed.
Shaw v. Hughes Aircraft Company
Case No. G021049
California Court of Appeal, Fourth District, Division Three
EMPLOYMENT-STANDING TO APPEAL-INFORMAL SUBSTITUTION OF PARTY BY FILING MOTIONS TO VACATE IN THE ACTION-WRONGFUL TERMINATION-BREACH OF CONTRACT-SPOLIATION OF EVIDENCE
Shaw was employed in the legal department of Hughes Aircraft Company. He was quite outspoken and vigorous in his enforcement of his determination of legal procedures within the company. He was later accused of sexual harassment and suspended. After an investigation by independent counsel it was determined that the charges were credible and Shaw was terminated. Shaw sued and recovered judgment for wrongful termination, spoliation of evidence and attorney fees. Hughes Electronics Corporation seems to have been injected in the suit by merely appearing and stating in papers it filed in the case that the correct name of the defendant was Hughes Electronics Corporation. Shaw acceded in the change by thereafter filing papers directed to Hughes Electronics. When Hughes Electronics filed the appeal of the judgment Shaw challenged its standing to appeal.
HELD: Hughes Electronics did not become a party by filing a substitution in the Superior Court after the appeal. The court had no jurisdiction over the case after the appeal. One who is legally aggrieved by a judgment may become a party of record and obtain a right to appeal by moving to vacate the judgment pursuant to the Code of Civil Procedure. One is aggrieved when the judgment has an immediate, pecuniary, and substantial effect on his interests or rights. Hughes Electronics has standing to appeal. Party status, is available to a nonparty who moves for judgment notwithstanding the verdict and for a new trial. There is no question that Hughes Electronics satisfied the requirement, that it be aggrieved by the judgment. It assumed the obligation to pay it in papers it filed. The jury’s finding that there was no breach of contract is irreconcilable with its finding that Hughes did breach the implied covenant of good faith, so both claims must be retried. The Court also concluded that there was a compromise verdict on the wrongful termination claim, and all must be set aside and a new trial ordered on these claims. Another inconsistency was that there was a judgment on the merits in favor of a Hughes employee for defamation, which would bar recovery against the employer when the only claim against it is based on vicarious liability and there is no allegation the employer, committed an independent tort. There is not support for the spoliation judgment. A party to an action has no tort claim for spoliation if he knew or should have known of the spoliation before trial or other decision on the merits. Reversed and remanded in part and reversed in part.
National Association For The Advancement Of Psychoanalysis v. California Board of Psychology
Case No. 99-15243
U.S. Court of Appeals for the Ninth Circuit
CONSTITUTIONAL-STATE REGULATION OF PRACTICE OF PSYCHOLOGY-DUE PROCESS-EQUAL PROTECTION-FREEDOM OF SPEECH
In 1958, the California Legislature enacted the Psychology Certification Act. The practice of psychology in California requires a license and is defined as rendering any psychological service to the public for a fee. The California Board of Psychology regulates the practice of psychology. The NAAP is a national membership association of professional psychoanalysts. The NAAP and several individual persons joined in a suit against the CBP for unreasonably restricting access to NAAP members for professional psychoanalysis. The complaint was dismissed on the grounds that it failed to state claims under the due process and equal protection provisions of the First or Fourteenth Amendment.
HELD: To withstand Fourteenth Amendment scrutiny, a statute is required to bear only a rational relationship to a legitimate state interest, unless it makes a suspect classification or implicates a fundamental right. Psychoanalysts are not a suspect class entitled to heightened scrutiny. Substantive due process rights do not extend to the choice of type of treatment or of a particular health care provider. The licensing scheme neither utilizes a suspect classification nor implicates a fundamental right and is rationally related to California's interest in protecting the mental health and safety of its citizens. The mental health licensing laws are content neutral; they do not dictate what can be said between psychologists and patients during treatment. Nothing in the statutes prevents licensed therapists from utilizing psychoanalytical methods or prevents unlicensed people from engaging in psychoanalysis if no fee is charged. Affirmed.
Howard v. Hui/Everex Systems
Case No. 98-17324
U.S. Court of Appeals for the Ninth Circuit
SECURITIES-EXTENT OF PARTICIPATION IN MAKING MISREPRESENTATION BY CORPORATE EXECUTIVE-REQUIREMENT OF SCIENTER IN MAKING A FALSE REPRESENTATION UNDER THE SECURITIES ACT-PARTICIPATION-JURISDICTION OVER FOREIGN DEFENDANT
Howard, a purchaser of stock in the computer manufacturer, Everex Systems, claims that defendants artificially inflated the price of Everex stock by falsely representing that the company had achieved profitability. Judgment was for all defendants.
HELD: The district court held that because Hui, as Chief Executive Officer, did not participate in the drafting of the false financial statements, he did not make a statement within the meaning of the Securities Exchange Act. The district court erred in making this determination. When a corporate officer signs a document on behalf of the corporation, that signature will be rendered meaningless unless the officer believes that the statements in the document are true. Substantial participation or intricate involvement in the preparation of fraudulent statements is grounds for primary liability even though that participation might not lead to the actor's actual making of the statements. The evidence was also sufficient for a finding of scienter on the part of Hui. Hui is not entitled to a good faith defense, because he cannot show that he acted in good faith and did not directly or indirectly induce the violations. Although defendant, Wong, reviewed and approved financial statements as a member of the Board, such activity does not rise to a level of supervision or participation sufficient for a Securities Act violation. The foreign entities should not have been dismissed for lack of jurisdiction. A defendant who is alleged to have knowingly traded on an American exchange on the basis of inside information has purposefully availed himself of the instrumentality's of United States commerce and can reasonably expect to be hailed into an American court. Affirmed in part and reversed in part and remanded.
*Change in law, interesting case, or just watch out!
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