Declarations and Exclusions

The Esquire Strikes Back: ethicalEsq Site Rises Again

Apparently, rumors of the demise of David Giacalone's ethicalEsq are proving to be a bit premature. David has let it be known that his site is about to be revived, with a slightly revised agenda but still focused on attorney ethics and client-centric reform issues, under the new moniker of giacalone's Bar & Grill. It is a true pleasure to re-welcome David's particular voice and perspective to the legal weblogosphere.

(Meanwhile, as the Bar & Grill is tuning up, readers may wish to look into the Gacalone-inspired discussions at Sherry Fowler's Stay of Execution on the web journal-ists' constant conundrum: how many are actually reading what gets posted on sites like these?)

When in San Diego . . .

Attorneys with appearances in the downtown Courthouse in San Diego may want to be aware that the wi-fi signal from the next door Wyndham Emerald Plaza Hotel is sufficiently strong that it can be picked up from the benches beside the windows at that end of the Courthouse. In this fashion, we were able to upload the three immediately preceding posts.

Word to the wise. Sufficient, eh?

Happy Thanksgiving to all our Decs and Excs readers, and to legal Web Journal-ists everywhere!

Court Reverses Damages for Wrongful Death for Improper Inclusion of Emotional Distress

Emphasizing the limitations on the amounts permitted to be awarded as damages under California’s wrongful death statute, the Court of Appeal has reversed an award of $1.3 Million in damages to parents who had not seen their son in 20 years prior to his death.

The deceased, Dwayne Nelson, was arrested and restrained by officers of the Los Angeles County Sheriff’s Department when, freshly released from prison, he was found in the middle of an intersection shooting a gun into the air and at passing motorists. The police applied a “total appendage restraint procedure,” at the end of which Nelson had lost consciousness. Paramedics were unable to revive him, and he died. His parents, Lottie and Wallace Nelson, sued the county for damages for their son’s death. At trial, the jury found the county liable and awarded the Nelson’s $2 Million in damages; that amount was reduced to $1.3 Million based on the jury’s finding that Dwayne Nelson was 35 percent responsible for bringing about his own death. The county appealed.

While rejecting many of the county’s arguments -- including claims that the Nelsons had no standing to sue and that the cause of death had not been adequately proven -- the Court of Appeal agreed that the amount of damages awarded was excessive as a matter of law. Damages for wrongful death are strictly limited by statute in California (as in most other jurisdictions) and the amount awarded could not be explained other than by the jury’s consideration of improper elements of damage.

A plaintiff in a wrongful death case is entitled to recover damages for his own pecuniary loss, which may include (1) the loss of the decedent’s financial support, services, training and advice, and (2) the pecuniary value of the decedent’s society and companionship -- but he may not recover for such things as the grief or sorrow attendant upon the death of a loved one, of for his sad emotions, of for the sentimental value of the loss.

The evidence established that the parents had separated when Dwayne was 12 years old, that Dwayne left home at age 18 and that neither of the parents had actually seen him for the next 20 years. Not only did they not know his whereabouts at the time of death, they did not know of his drug addiction and repeated incarcerations. He had provided his parents no financial support at any time. As the court put it, “[c]haritably, . . . Dwayne’s future financial prospects at the time of his death were limited,” especially given that he would likely have been sentenced for as long as 21 years for the various felonies he was committing when he was arrested. The jury’s $2 Million verdict could not be justified except as compensation for the parents’ “understandable but noncompensable emotional distress” or as an improper attempt to punish the county (which would not be permissible in a case founded on negligence). The Court of Appeal reversed and remanded the case for a new trial on the issue of damages.

The decision in Nelson v. County of Los Angeles (November 25, 2003), Case No. B161431 can be found at these links in PDF and Word formats.

Bitter with the Sweet: Passenger Obliged to Reimburse Driver's Insurer for Payment of Passenger's Medical Bills

A passenger whose medical bills were paid by her driver’s automobile insurer can be required to reimburse that insurer out of a settlement reached with the opposing, negligent driver.

Sharla Rae Moloney was a passenger in Denise Poppert’s vehicle when it was rear-ended. Poppert had automobile insurance with Mercury Casualty Company that included “excess” medical payments coverage. (“Primary” coverage had been available at a higher premium, but Poppert had chosen the less expensive “excess” version.) Mercury paid Moloney’s medical bills of $4,411.35. When Moloney received a $15,000 settlement from the negligent rear-ender’s insurer, Mercury asserted a clause in its policy entitling it to reimbursement. Moloney contended that she was not bound by that clause, because she had never directly entered into any contract with Mercury.

The Court of Appeal disagreed, and ordered judgment in Mercury’s favor. Although Moloney was not a party to the insurance contract with Mercury, she was a beneficiary of that agreement and willingly accepted benefits paid under the policy.

Because the contract provides the foundation of the third party beneficiary’s rights, she ‘must take that contract as [s]he finds it,’ rather than having the right to select the parts she finds advantageous and reject those she finds not to her liking. [Citations.] In the context of an insurance policy, a contrary conclusion would create the anomalous result of providing greater benefits under the policy to the third party beneficiary, who paid nothing, than the policy provides to the insured who paid for the coverage.

The decision in Mercury Casualty Company v. Moloney (November 25, 2003), Case No. D040282, can be found at these links in PDF and Word formats.

A Sea Change in Punitive Damages: Court of Appeal Reduces Punitive Award By 90%+ on Remand from U.S. Supreme Court

In a further consideration of the impact of the U.S. Supreme Court’s decision in State Farm v. Campbell (April 2003), a California Court of Appeal has concluded that the fundamental underpinnings of California punitive damage law must be reconsidered.  As a result of such a reconsideration, the court has directed the reduction of a punitive damage award against the Ford Motor Company from $290 Million to $23,723,287.

Three members of the Romo family were killed and three others were seriously injured when their 1978 Ford Bronco rolled over while trying to avoid another vehicle.  The Bronco’s metal roof structures collapsed and its fiberglass structures shattered.  In the original trial, the jury awarded the various family members and the estates of the deceased victims compensatory damages of approximately $5 Million and punitive damages of $290 Million.  In a prior appeal, the Court of Appeal affirmed that verdict. Following its decision in Campbell, the U.S. Supreme Court granted review; it then remanded the case to the state Court of Appeal to reconsider the punitive damage award in light of Campbell.  (Our report on a prior California consideration of the impact of Campbell can be found here.)

Although the Court of Appeal disclaims any intent to “write a treatise on the subject of punitive damages,” the Court’s 30-page decision does essentially that.  The Court first looks to the historical development of punitive damage law in California.  Initially, the rationale underlying punitive damages was to impose additional punishment for private wrongs, i.e., the particular wrongdoing that had harmed the plaintiff(s) in a particular case.  That philosophy changed “in the era of products liability litigation.”

In cases of mass-produced consumer goods or company-wide practices of large insurers, outrageous or malicious wrongdoing was no longer simply an affront to the dignity of a single victim. Instead, the affront was to all affected by the goods or services or, given the reach of the misconduct, the affront was viewed as one to society as a whole.  In this view, because the ‘wrong’ was directed beyond the immediate plaintiff, punitive damages awards needed to be based on the overall scope of the wrong in order to deter the mass torts.

This is the approach that the court determines was rejected by the Supreme Court in Campbell.  “[A]s a matter of due process under the federal Constitution, the court adopted the more limited, historically based view of punitive damages.”  As a result,

the legitimate state goal that punitive damages may seek to achieve is the ‘condemnation of such conduct’ as has resulted in ‘outrage and humiliation’ to the plaintiffs before the court; it is not a permissible goal to punish a defendant for everything else it may have done wrong.

Because the $290 Million punitive award could be explained only as a means of punishing Ford for its entire course of conduct in connection with Bronco rollover risks -- the plaintiffs' attorney had argued memorably at trial that the jury should return an award “large enough to force Ford to recall all remaining 1978-1979 Broncos still on the road and ‘crush them to dust’” -- the Court of Appeal conditionally reduced the punitive damage award to $23,723,287.  If the plaintiffs do not accept that reduction, the case is remanded for a new trial strictly on the punitive damages issue.

The opinion in Romo v. Ford Motor Company (November 25, 2003), Case No. F034241 can be found at these links in PDF and Word formats.

California Supreme Court: Employer is Strictly Liable for Harassment by Supervisor, but Employee Must Take Reasonable Steps for Own Protection

Addressing a claim under California's Fair Employment and Housing Act [FEHA], the California Supreme Court has held that an employer will be held strictly liable for the wrongful acts of a supervisor whose conduct gives rise to a claim of sexual harassment on a "hostile environment" theory. However, the Court has also concluded that the employee may not recover any damages that the employee "could have avoided with reasonable effort and without undue risk, expense, or humiliation", such as by reporting the incidents to the employer at the time they occurred.

Under the language of FEHA relating to sexual harassment, an employer is only liable for harassment by a non-supervisor when the employer has actual or constructive knowledge of the harassment and fails to take immediate steps to correct the situation. This is essentially a negligence standard. When the harassment is committed by a supervisor, however, the Court concludes that the language of FEHA imposes strict liability: that the acts were committed by a supervisor is sufficient to impose liability on the employer without regard to the employer's knoweldge or opportunity to take remedial measures.

However, the lack of notice to the employer may still operate to reduce the damages that the harassed employee can claim. The Court concludes that harassment claims against an employer under FEHA must be subject to the "avoidable consequences doctrine," and that the employee may not recover any damages that might have been avoided had the employee complained or taken other reasonable steps for the employee's own protection. The application of the doctrine is required largely as a matter of public policy:

The avoidable consequences doctrine is well established and broadly applied, and nothing in the FEHA’s language and structure indicates that the Legislature intended to abrogate this fundamental legal principle. On the contrary, failure to apply the avoidable consequences doctrine to FEHA sexual harassment claims could undermine a basic goal of the FEHA—to make employers the first line of defense against sexual harassment in the workplace. A rule making employers liable even for those damages that an employee could have avoided with reasonable effort and without undue risk, expense, or humiliation would significantly weaken the incentive for employers to establish effective workplace remedies against sexual harassment.

The Court's opinion in State Department of Health Services v. Superior Court (McGinnis) (Nov. 24, 2003), Case No. S103487, is available at these links in PDF and Word formats.

Attorneys Behaving Badly: No Recovery for Services Rendered When Attorneys Withdrew Unilaterally After Client Raised Legitimate Questions

There is a special store of scorn and derision on which appellate judges can draw when they conclude that attorneys have behaved in a manner exactly reflecting credit on their profession. Most often, the judges’ low opinion of counsel’s performance will be displayed to a limited audience when the appeal comes on for oral argument. When, however, the court concludes that attorneys should be made an example of, the court’s expressions of disapproval will be incorporated in the court’s opinion, and the opinion will be certified for publication.

The Court of Appeal for the Fourth District has just published such a decision. The issue before the court is whether the attorneys, who had withdrawn from representing the plaintiffs in an insurance “bad faith” case based on the attorneys’ seemingly unilateral determination that there had been a “breakdown” in the attorney-client relationship, evidenced by a single letter from the client asking questions about the content of a pleading, could claim nearly half of a later settlement as the value of the services they had rendered before withdrawal. Finding the withdrawal to have been purely for the attorneys’ own convenience and not compelled by any ethical obligation, the court concludes that the attorneys are entitled to nothing in the way of compensation.

The flavor of the opinion is captured in the introductory summary, which merits quotation at length:

A real estate empire collapses. The estate’s bankruptcy trustee, through its attorney of record, sues the empire’s accountants for their role in the collapse. The parties settle. As part of the settlement, the trustee’s attorneys now represent the accountants in a suit against their malpractice insurer on a contingency fee basis (while still representing the trustee in enforcing the settlement). The accountants waive the obvious conflict.

The accountants then write a letter asking some questions as to the basis for the suit against their malpractice insurer, which they have every right to do. After all, it is just as likely that they will be sued for malicious prosecution as the attorneys if the lawsuit is unsuccessful. The attorneys, however, are offended. Perhaps they sense they are being set up to take the fall if the litigation fails and they and their clients find themselves sued for malicious prosecution. But they never say that. In their motion to withdraw as counsel, the merely cite, without elaboration, a ‘break down in communications.’

The accountants, however, don’t think the differences are irreconcilable and oppose the withdrawal. Now chastened and humbled for being so uppity as to question their lawyers, they practically beg the attorneys to return.

The accountants lose the withdrawal motion. The trial court will not force unwilling lawyers to work for willing clients. So the accountants thrash around for a new law firm, and eventually find one, but not one willing to take the case on contingency.

Then comes the surprise. With their new attorneys, the accountants settle with the malpractice insurer on favorable terms, obtaining a large sum of money. The original attorneys return to assert a quantum meruit claim on the settlement. Can they?

Of course not. Taking umbrage at being asked facially legitimate questions by one’s client about the basis for a lawsuit is not justifiable cause warranting recovery in quantum merit. [Citation omitted.] Clients have every right to ask questions of their lawyers as to the basis of a lawsuit, and the asking of such questions is not a reasonable basis to claim a ‘break down in communications.’ If there was any ‘break down,’ it was the lawyers who did not want to answer legitimate questions posed by their clients as to the validity of their clients’ claims against their malpractice carrier.

In the remainder of the opinion, the court provides a blow-by-blow account of the prior litigation, the correspondence that precipitated the claimed "breakdown," and the circumstances under which the original attorneys sought to be paid. The court emphasizes the rule that an attorney who withdraws from a contingent fee case because he must -- because ethical rules require the withdrawal under the circumstances -- or an attorney who has been "fired" by the client unilaterally, may recover the reasonable value of the services rendered prior to the termination of the relationship, in order to avoid giving the client a "free ride" on the attorney's efforts. However, attorneys who withdraw for reasons of their own, thereby relieving themselves of the risks and costs that they had previously agreed to bear in the litigation, cannot not thereafter claim any benefit when the case is successfully completed by others.

The decision in Rus, Miliband & Smith v. Conkle & Olesten (Nov. 21, 2003), Case No. G030325, is available at these links in PDF and Word formats.

Shooting Spree II: 9th Circuit Finds Gun Manufacturers Potentially Liable for Shootings at Jewish Community Center

The August 1999, shooting rampage by admitted anti-Semite Buford Furrow at the North Valley Jewish Community Center in Granada Hills, California, continues to generate appellate decisions. We previously reported here on the state Court of Appeal's decision that the Community Center itself could not be held liable for any of the injuries or deaths inflicted by Furrow. Today, however, the 9th Circuit U.S. Court of Appeals has held in a 2-1 decision that the manufacturers and distributors of the guns used and possessed by Furrow may be held liable for negligence or for creating a public nuisance.

The case before the 9th Circuit had been dismissed at the pleadings stage: the District Court had concluded that even if all of the facts alleged by the plaintiffs were taken as true, they did not amount to a claim congnizable under California law. The District Court relied, among other things, on the California Supreme Court's decision in Merrill v. Navegar (2001) "that, although the plaintiffs characterized their action as a negligence claim, it was in reality a products liability action and therefore barred by then-existing California Civil Code section 1714.4, which barred gun manufacturers from liability
in a products liability action." The 9th Circuit decision concludes that the claims alleged by Furrow's victims are not based on product liability theories, that is, that they are not based on an argument that the guns were "defective" or "unreasonably dangerous." Rather, the 9th Circuit assumes that the guns were not defective and concludes that the plaintiffs have alleged facts that, if ultimately proven, would establish that the defendants were negligent in the manner in which they conducted the distribution of their non-defective product. The Court summarizes the plaintiffs' allegations concerning distribution, which it presumes to be true for purposes of its decision:

Plaintiffs allege that Glock’s marketing and distribution strategy includes the purposeful oversupply of guns to police departments and the provision of unnecessary upgrades and free exchange of guns with police departments to create a supply of post-police guns that can be sold through unlicensed dealers without background checks to illegal buyers at a profit. Glock allegedly targets states like Washington, where the gun laws are less strict than in California, in order to increase sales to all buyers, including illegal purchasers, who will take their guns into neighboring California. The ATF has provided Glock with the names of the distributors who are responsible for the sales of guns that end up in the hands of criminals, but Glock has ignored the information and continues to supply these same distributors.

Based on this theory, the Court finds that California's bar to product liability theories against the defendants does not apply to the defendants' independent negligence in their methods of distribution:

Unlike the Merrill plaintiffs, who alleged that the gun manufacturers’ decision to distribute the guns in question to the general public was negligent in light of the guns’ alleged defective design features and therefore was “simply a reformulated claim that the weapon, as designed, fails the risk/ benefit [products liability] test,” . . . here plaintiffs focus on the negligent distribution of a nondefective product. The focus is on the defendants’ affirmative actions in distributing their products to create an illegal secondary market for guns that targets illegal purchasers.

(Emphasis added.) On this basis, as well as on an extended analysis of nuisance law, the 9th Circuit majority (Judges Richard Paez and Sidney Thomas) reverses the order of dismissal and send the case back to the District Court for further proceedings.

The 9th Circuit's decision in Ileto v. Glock, Inc. (Nov. 20, 2003) Case No. 02-56197, can be read here.

Down on the Corner, Out in the Street: Busy Crosswalk is Not a "Dangerous Condition on Public Property"

Shirley Brenner was injured when she was struck by an automobile while using a crosswalk in the City of El Cajon. She filed suit agianst the city alleging that the placement of the crosswalk and the absence at the site of additional traffic controls constituted a dangerous condition on public property for which the City could be held liable. The trial court found the allegations of Brenner's complaints insufficient and dismissed the case on demurrer; the Court of Appeal has affirmed that decision.

The Court of Appeal summarizes the three grounds on which Brenner claimed that an actionable dangerous condition existed, none of which it found persuasive:

Brenner's complaint, shorn of its generalized allegations and conclusions, cites three factors to support her claim of the dangerous condition of Chase Avenue. First, she alleges the expansion of Chase Avenue to a four-lane street resulted in an increase in the numbers of cars traveling the road and the speed at which they traveled. Second, she alleges an increased number of pedestrians cross Chase Avenue at or near the Chase/Estes intersection to patronize a park, two bus stops, a convenience store and a school in the area. Third, she alleges City did not install traffic regulation or safety devices to reduce the dangers to pedestrians posed by crossing Chase Avenue.

The appellate panel emphasized that a dangerous condition can only be assessed by assuming that those in the area will themselves be acting with reasonable care for their own protection and of those around them. Nothing alleged in Brenner's complaints tended to show that the conditions around the crosswalk were such that "a driver using due care while traveling along Chase Avenue would be unable to stop for pedestrians who were using due care while crossing at the Chase/Estes intersection." (Italics added.) Moreover, the court emphasized that Brenner's third theory -- that additional safety devices should have been installed -- is precluded by statute.

The opinion in Brenner v. City of El Cajon (Nov 19, 2003), Case No. D040579, can be found at these links in PDF and Word formats.

New Governor Schwarzenegger Moves On Workers' Compensation Reform

Moving on one of his principal campaign promises, newly installed California governor Arnold Schwarzenegger has called a special session of the Legislature, with workers' compensation reform high on the agenda.  The Governor's proposals, most of which are receiving support from Insurance Commissioner John Garamendi, are squarely targeted at reducing loss costs with the expectation that reduced costs will lead to reduced premiums.  The optimistic goal is to cut premiums by as much as 50%.  The Sacramento Bee summarizes the highlights of the Governor's proposals:

* An independent medical review of cases. The move aims to speed up treatment for injured workers, reduce costly litigation that has bogged down the administrative process and base decisions on medical principles. Former Gov. Gray Davis and Garamendi pushed for independent review last spring, but lawmakers rejected it.

* Tighten standards for determining permanent disability. Schwarzenegger's plan entails using uniform objective disability guidelines, requiring doctors to decide disability cases and placing limits on financial awards. Indemnity, or benefits paid to workers for lost wages and permanent disability, accounts for about 49 percent of workers' comp costs.

* Conduct an independent audit of the financially troubled California State Compensation Insurance Fund, the state's insurer of last resort. State Fund, a quasi-public insurer, holds more than 50 percent of the marketplace because of insolvencies by workers' comp carriers.

* Permit all employers to set up their own workers' comp system with a separate pool of funds and alternative dispute resolution. Currently, the law allows only unionized employers to carve out such a system.

* Specify that the "cure and relief" principle covers only what is medically necessary to return injured employees to work. Critics argue the current interpretation leads to higher costs because some workers receive more treatment than necessary.

* Give employers the option of buying group care and workers' comp medical insurance from one carrier. Employers are now required to have workers' comp coverage, and many provide health care through a separate insurer.