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California Law Update – November 2021

By November 30, 2021December 29th, 2021Law Updates
  1. (Statute of Limitations) Plaintiff’s complaint was time-barred because it alleged a cause of action for professional negligence, rather than general negligence, rather than general negligence or premises liability. Stacy Mitchell v. Los Robles Regional Medical Center (2d Civil No. B309123 Super. Ct. No. 56-2019-00528548-CU-PO-VTA Ventura County California Courts of Appeal Second Appellate District Division Six Filed November 2, 2021)
  2. (Health Care) The recognition of new intentional tort of inadequately reimbursing a hospital was at odds with the purposes of the Knox-Keene Act. Long Beach Memorial Medical Center v. Kaiser Foundation Health Plan, Inc. (No. B304183, consolidation with No. B306322 Los Angeles County Super. Ct. No. NC061310 California Courts of Appeal Second Appellate District Division Two Filed November 4, 2021)
  3. (Jury Impartiality) Jurors’ impartiality was not an issue where a testifying doctor provided minor assistance to an alternate juror. The People v. Donte Latraille Revels (No. C089782 Super. Ct. No. STK-CR-2016-14091 California Courts of Appeal Third Appellate District Filed November 8, 2021)
  4. (Personal Jurisdiction) Establishing personal jurisdiction requires strict compliance with statutory requirements regarding service of process. Michael Kremerman v. Angela White (No. B307347 Los Angeles County Super. Ct. No. 19BBCV00331 California Courts of Appeal Second Appellate District Division Eight Filed November 8, 2021)
  5. (Business Law) Where the sole basis for an intentional interference with a prospective economic advantage claim is based on breach of contract, the trial court lacked subject matter jurisdiction because there was no tort. Drink Tank Ventures LLC, v. Real Soda in Real Bottles LTD (No. B298881, consolidated with B302215 Los Angeles County Super. Ct. No. BC654392 California Courts of Appeal Second Appellate District Division Two Filed November 10, 2021)
  6. (Insurance) An insured could not recover for loss of business income because it could not reasonably allege that the presence of COVID-19 on its premises caused the suspension of operations. The Inns by the Sea v. California Mutual Insurance Company (No. D079036 Super. Ct. No 20CV001274 California Courts of Appeal Division One Filed November 15, 2021)
  7. (Anti-SLAPP) Statements made to investors were not protected under the anti-SLAPP statute because they fell under the statute’s commercial speech exemption. Neurelis, Inc. v. Aquestive Therapeutics, Inc. (No. D078186 Super. Ct. No. 37-2019-00064665-CU-BT-CTL California Courts of Appeal Fourth Appellate District Division One Filed November 17, 2021)
  8. (Corporations) Trial court erred when adding an LLC as an alter ego judgment debtor because debtor’s former wife with an interest in the LLC may be an innocent third party harmed by the addition. Blizzard Energy, Inc. v. Bernd Schaefers (2dCivil No. B305774 Super. Ct. No. 17CVP-026 San Luis Obispo County California Courts of Appeal Second Appellate District Division Six Filed November 18, 2021)
  9. (Request for Admissions) Where substantial evidence shows that a party denying requests for admissions did not have a reasonable basis to deny it, the requesting party is entitled to costs of proof. Jefferey Spahn v. Dan Richards (No. A159495 Alameda County Super. Ct. No. RG17851006 California courts of Appeal First Appellate District Division Three Filed November 30, 2021)
  10. (Mandated Reporters) The Child Abuse and Neglect Reporting Act requires an objective standard but does not require reporting of facts the mandated reporter did not know but should have discovered. Jane Doe v. Lawndale Elementary School District (No. B305551 Los Angeles County Super. Ct. No. BC686649 California Courts of Appeal Second Appellate District Division Seven Filed November 30, 2021)

The above referenced court opinions have come to our attention during last month. Please find below a brief summary of these opinions for your consideration.

  1. (Statute of Limitations) Plaintiff’s complaint was time-barred because it alleged a cause of action for professional negligence, rather than general negligence, rather than general negligence or premises liability. Stacy Mitchell v. Los Robles Regional Medical Center (2d Civil No. B309123 Super. Ct. No. 56-2019-00528548-CU-PO-VTA Ventura County California Courts of Appeal Second Appellate District Division Six Filed November 2, 2021)

Plaintiff fell in the Emergency Department at defendant hospital. She filed a complaint for general negligence and premises liability more than one year after the date of her injury, alleging that the hospital staff failed to accompany her to the restroom, causing her to fall. The hospital filed a motion for summary judgment, arguing that the complaint stated a cause of action for professional negligence, rather than general negligence or premises liability, and thus it was time-barred under Section 340.5 of the California Code of Civil Procedure. The trial court granted summary judgment because the plaintiff filed a complaint beyond the one-year statute of limitations for medical professional negligence and found that the nursing staff’s decision to not assist the plaintiff was related to her medical care.

The plaintiff appealed contending that the court erred because helping someone walk to and from the restroom was not a professional medical service.

The appeals court affirmed. It found that the case arose from professional negligence because the nursing staff’s judgment that plaintiff could use the restroom without their assistance was a judgment made in the course of providing medical care to her, and their duty to protect plaintiff from falling while walking in the emergency room was one owed to a patient, not a member of the general public.

  1. (Health Care) The recognition of new intentional tort of inadequately reimbursing a hospital was at odds with the purposes of the Knox-Keene Act. Long Beach Memorial Medical Center v. Kaiser Foundation Health Plan, Inc. (No. B304183, consolidation with No. B306322 Los Angeles County Super. Ct. No. NC061310 California Courts of Appeal Second Appellate District Division Two Filed November 4, 2021)

This appeal raised three issues of first impression regarding the scope of the hospital’s lawsuit to collect reimbursement from a plan with which it had no contract, as well as the law applicable in the lawsuit.

Under federal and state law, a hospital is required to provide necessary stabilizing treatment for any person in an emergency medical condition. If the person is covered by a healthcare plan, California’s Knox-Keene Health Care Plan Act of 1975 “Act” requires the plan to reimburse the hospital for providing such emergency services and care. The amount of reimbursement depends on whether the hospital and plan already have a contract in place. If they do not, the plan must pay the reasonable and customary value for the health care services rendered. If a plan without a contract pays reimbursement that the hospital believes to be below the reasonable and customary value, the hospital may sue the plan in quantum meruit for the shortfall. In this case, the issue presented was whether or not the hospital can sue for the tort of intentionally paying an amount that was less than what the jury might later determine is the reasonable and customary value of emergency medical services and thereby obtain punitive damages. The appeals court ruled that the answer was “no”.

The appeals court noted that whether to recognize a new legal duty is typically governed by the policy question of whether the social benefits of imposing the duty outweigh the costs and burdens. Here, the court found that recognizing the legal duty to adequately reimburse the hospital is at odds with the purposes of the Act. If the new legal duty was recognized such as described by the hospital as an intentional tort it would drive up the cost of healthcare to the public. Moreover, the appeals court found that there was no evidence presented indicating that inadequate reimbursement was a widespread problem and the alleged damages were already recoverable in a quantum meruit action.

  1. (Jury Impartiality) Jurors’ impartiality was not an issue where a testifying doctor provided minor assistance to an alternate juror. The People v. Donte Latraille Revels (No. C089782 Super. Ct. No. STK-CR-2016-14091 California Courts of Appeal Third Appellate District Filed November 8, 2021)

Defendant appealed his convictions for child abuse based upon what plaintiff described as jury impartiality. The defendant contended that trial court abused its discretion in denying his motion for mistrial after a testifying expert doctor rendered assistance to on unconscious juror. The appeals court concluded there was no abuse of discretion.

The appeals court noted that the trial court was uniquely positioned to determine the jurors impartiality based on observations made. In this case, the juror passed out, remained in her chair and appeared to be asleep. When she did not respond, the specifying doctor went over to her and took her pulse. No specialized aid was given in the presence of other jurors. The doctor provided only the amount of care necessary as required by his Hippocratic Oath and the trial court thereafter polled the jurors explicitly asking if the incident would affect their impartiality. The jurors’ response was swift, noting that it would not.

  1. (Personal Jurisdiction) Establishing personal jurisdiction requires strict compliance with statutory requirements regarding service of process. Michael Kremerman v. Angela White (No. B307347 Los Angeles County Super. Ct. No. 19BBCV00331 California Courts of Appeal Second Appellate District Division Eight Filed November 8, 2021)

This appeal arises from a breach of contract action by a landlord against his former tenant. The trial court entered a default and a default judgment against the defendant. The tenant moved to vacate the default and resulting judgment, alleging she was never effectively served with the summons and complaint. The trial court denied the motion.

On appeal, appellant argued the trial court should have granted her relief under Code of Civil Procedure section 473, subdivision (d), and section 473.5. She argued the trial court never acquired personal jurisdiction over her because service of the summons upon the landlord was defective. The underlying facts were that a registered process server declared he attempted to serve the defendant on five separate occasions. The last time he left a copy of the summons and complaint with an individual, an “authorized employee” at Postal Annex, where the plaintiff maintained a private mailbox. The appeals court found that it was not proper service. Although Business and Professions Code Section 415.20(a)-(d) allows for substituted service to meet the requirements for personal jurisdiction, it must be strictly followed and service at a Postal Annex was not the tenant’s household, nor was the “authorized employee” a competent member of the tenant’s household. Further, the appeals court found that the landlord was aware of the tenant’s other address where he could have appropriately sent the complaint and summons. The appeals court found that the evidence showed this requirement was not met regarding personal service and reversed the trial court’s ruling.

  1. (Business Law) Where the sole basis for an intentional interference with a prospective economic advantage claim is based on breach of contract, the trial court lacked subject matter jurisdiction because there was no tort. Drink Tank Ventures LLC, v. Real Soda in Real Bottles LTD (No. B298881, consolidated with B302215 Los Angeles County Super. Ct. No. BC654392 California Courts of Appeal Second Appellate District Division Two Filed November 10, 2021)

This matter involved a beverage distributorship that sued another distributorship for several claims, but ultimately narrowed its lawsuit to a solitary tort claim for intentional interference with a prospective economic advantage premised solely on the theory that the other had engaged in independently wrongful conduct by breaching a nondisclosure and noncircumvention agreement.

The appeals court reversed the trial court finding that this was an invalid theory as a matter of law because an actor’s breach of contract, without more, could not amount to “wrongful conduct” capable of supporting a tort, including the tort of intentional interference with a prospective economic advantage. Conduct amounting to a breach of contract becomes tortious only when it also violates an independent duty arising from principles of tort law.

  1. (Insurance) An insured could not recover for loss of business income because it could not reasonably allege that the presence of COVID-19 on its premises caused the suspension of operations. The Inns by the Sea v. California Mutual Insurance Company (No. D079036 Super. Ct. No 20CV001274 California Courts of Appeal Division One Filed November 15, 2021)

This appeal presented an issue of first impression for a California appellate court: Does a commercial property insurance policy provide coverage for a business’s lost income due to the COVID-19 pandemic? The court ruled that under the specific insurance policy that was issued to the plaintiff for its five lodging facilities, it could not recover from the insurance company for its lost business income resulting from the COVID-19 pandemic. Accordingly, the appeals court affirmed the trial court’s order sustaining the defendant’s demurrer without leave to amend. The basis for the decision was that the plaintiff could not reasonably allege that the presence of COVID-19 on its premises was what caused the premises to be uninhabitable or unsuitable for its intended purpose. The plaintiff alleged it had ceased operations “as a direct and proximate result of the closure orders” by the Counties where it had lodging facilities. The court noted that the complaint and the closure orders demonstrated that the plaintiff’s facilities would have remained shut regardless of whether the virus was present in its facilities. Therefore, the trial court properly sustained the demurrer.

  1. (Anti-SLAPP) Statements made to investors were not protected under the anti-SLAPP statute because they fell under the statute’s commercial speech exemption. Neurelis, Inc. v. Aquestive Therapeutics, Inc. (No. D078186 Super. Ct. No. 37-2019-00064665-CU-BT-CTL California Courts of Appeal Fourth Appellate District Division One Filed November 17, 2021)

The plaintiff’s pharmaceutical companies developed their own respective means to administer diazepam, a drug used to treat acute repetitive seizures. The plaintiff was further along in the in the development process than the defendant. Thus, according to the plaintiff, the defendant engaged in a “multi-year, anticompetitive campaign to derail the Food and Drug Administration” from approving plaintiff’s new drug. Based on the defendant’s alleged conduct, plaintiff sued the defendant for defamation, malicious prosection, and violation of the unfair competition law. In response, the defendant brought a special motion to strike the complaint under the anti-SLAPP statute, Code of Civil Procedure section 425.16. The trial court granted in part and denied in part the defendant’s motion, finding that the defamation cause of action could not withstand the anti-SLAPP challenge. However, the court denied the motion as to the plaintiff’s other two causes of action.

On appeal, the appellate court agreed that at least some of the conduct giving rise to the defamation action was covered by the commercial speech exception to the anti-SLAPP statute and accordingly, determined that the trial court erred in granting the anti-SLAPP motion as to the defamation action. Some of the other conduct also gave rise to the Unfair Competition Law claim that was not subject to the anti-SLAPP statute. However, plaintiff based part of two of its causes of action on defendant’s petitioning activity. That activity was protected conduct under the anti-SLAPP statute, and plaintiff had not shown a likelihood to prevail on the merits. Thus, allegations relating to this petitioning should have been struck. Finally, the appeals court determined that the plaintiff had not shown a probability of success on the merits regarding its malicious prosection claim.

  1. (Corporations) Trial court erred when adding an LLC as an alter ego judgment debtor because debtor’s former wife with an interest in the LLC may be an innocent third party harmed by the addition. Blizzard Energy, Inc. v. Bernd Schaefers (2dCivil No. B305774 Super. Ct. No. 17CVP-026 San Luis Obispo County California Courts of Appeal Second Appellate District Division Six Filed November 18, 2021)

This appeal flowed from a California trial court’s decision to add a judgment debtor pursuant to the “outside reverse veil piercing” doctrine. The outside reverse veil piercing differs from the traditional veil piercing, which is permitted pursuant to the well-known alter ego doctrine. The alter ego doctrine prevents individuals or other corporations from misusing the corporate laws by a sham corporate entity. Under appropriate circumstances, traditional veil piercing permits a party to pierce the corporate or limited liability company so that an individual shareholders may be held personally liable for claims against the corporation. Rather than seeking to hold an individual responsible for the acts of an entity, reverse veil piercing seeks to satisfy the debt of an individual through the assets of an entity of which the individual is an insider. Outside reverse veil piercing arises when the request for piercing comes from a third party outside the targeted business entity. The underlying facts involved on injustice that was obtained by the plaintiff against a defendant individual. The fraud judgment was entered in California. The judgment defendant had a 50 percent interest in an entity which was targeted by the plaintiffs to satisfy the debt of the individual judgment defendant. The defendant’s spouse had the other 50 percent interest in the targeted entity. Neither, the spouse or the targeted entity were defendants in the underlying action. The trial court found that the target entity was the judgment defendant’s alter ego. Pursuant to the outside reverse veil piercing doctrine, the court modified the judgment to add the targeted entity as a judgment debtor.

The appeals court reversed finding that it would be unfair in causing an innocent third party harm by having the judgments against the targeted entity which was 50 percent owned by the spouse where there is no indication that she is involved in the fraud committed against the plaintiff’s by the judgment defendant. The appeals court remanded the matter to the trial court so it can weigh the competing equities and grant or deny relief depending on the balance of those equities.

  1. (Request for Admissions) Where substantial evidence shows that a party denying requests for admissions did not have a reasonable basis to deny it, the requesting party is entitled to costs of proof. Jefferey Spahn v. Dan Richards (No. A159495 Alameda County Super. Ct. No. RG17851006 California courts of Appeal First Appellate District Division Three Filed November 30, 2021)

This matter involved a claim related to a licensed contractor (defendant), who failed to build a new home for the plaintiff. During litigation, the defendant propounded a request for admissions pertaining to the plaintiffs’ claim that the parties formed an oral contract which the defendant agreed to build plaintiffs’ home. The request for admissions asked plaintiffs to admit the parties did not enter into an alleged oral contract and did not have a meeting of the minds as to that alleged contract. The request for admission is also asked the plaintiffs to admit the alleged oral contract was not binding or enforceable. Plaintiffs denied the request for admissions.

The matter went to trial and the jury returned a defense verdict. The jury concluded that there was no oral contract, and the defendant did not make a promise with clear and unambiguous terms. Thereafter, the defendant moved for its attorney’s fees and costs under California Code of Civil Procedure Section 2033.420 as it pertains to denial of request for admissions.

The trial court granted defendant’s motion for attorney’s fees and costs and the plaintiffs appealed. The appeals court affirmed the trial court’s ruling finding that the evidence introduced at trial proved the fact that an oral agreement did not exist, and furthermore, at the time the request for admissions were denied, the plaintiff was reasonably aware that there was no supposed oral contract. Given the evidence, the trial court could conclude that the plaintiffs did not have a reasonable belief to deny the request for admissions.

  1. (Mandated Reporters) The Child Abuse and Neglect Reporting Act requires an objective standard but does not require reporting of facts the mandated reporter did not know but should have discovered. Jane Doe v. Lawndale Elementary School District (No. B305551 Los Angeles County Super. Ct. No. BC686649 California Courts of Appeal Second Appellate District Division Seven Filed November 30, 2021)

Plaintiff filed suit against school district for negligence and for breach of the mandatory duty to report suspected abuse under the Child Abuse and Neglect Reporting Act (CANRA). The trial court granted the school District’s motion for summary judgement. The appellate court reversed concluding that a plaintiff bringing a cause of action for breach of a mandatory duty to report suspected abuse under CANRA must prove it was objectively reasonable for a mandated reporter to suspect abuse based on the facts the reporter actually knew, not based on facts the reporter recently should have discovered. The court found that if mandated reporters were held to the same standard so as to place them a position of an investigator concerning constructive knowledge, it would supplant of law enforcement who were responsible to investigate the reports.

The group defined as mandatory reporters include physicians, surgeons, psychiatrists, residents, interns, licensed nurses, marriage family therapists, social workers, in addition to adult supervisors at business with more than five employees whose duties require direct contact with the supervision of minors.

Should you have any questions concerning these court decisions or desire a copy of any of them, please do not hesitate to contact our office.