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Journal of Consumer Attorneys Associations for Southern California
Exhaustion The Doctrine of Exhaustion, the Labor Code, MacDonald and Senate Bill 666. Enough, already!
Complex Cases Inverse condemnation: Less complex than it sounds? Fraud: The fundamentals Ethics challenges in mass-tort litigation settlements Watch what you plead: The effects of judicial and evidentiary admissions The Affordable Care Act and… • Settlement planning • The Collateral Source Rule Basics that every plaintiff’s lawyer needs to know • Going beyond the Workers’ Comp exclusive remedy • Immigrant clients: Protecting against the undervaluation of their cases
THE 65TH ANNUAL CAALA INSTALLATION & AWARDS DINNER — January 18, 2014 (Pg. 85)
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Contents Volume 41, Number 1, JANUARY 2014
Editor-in-Chief Jeffrey Ehrlich Associate Editors Joan Kessler, James Kristy, Beverly Pine, Norman Pine, Rahul Ravipudi, Ibiere Seck, Geraldine Weiss Editors-in-Chief Emeriti Kevin Meenan, William Daniels, Steven Stevens, Christine Spagnoli, Thomas Stolpman Managing Editor Cindy Cantu email@example.com Copy Editor Eileen Goss
Publisher Richard Neubauer firstname.lastname@example.org Art Director David Knopf
Consumer Attorneys Association of Los Angeles President Treasurer Geoffrey Wells Michael Arias President-Elect Secretary Joseph Barrett Shawn McCann First Vice President Immediate Past President David Ring Lisa Maki Second Vice President Executive Director Ricardo Echeverria Stuart Zanville
Board of Governors Martin Aarons, Mike Armitage, Shehnaz Bhujwala, Todd Bloomfield, John Blumberg, Michael Cohen, Scott Corwin, David deRubertis, Danica Dougherty, Jeffrey Ehrlich, Tobin Ellis, Mayra Fornos, Stuart Fraenkel, Scott Glovsky, Jeff Greenman, Christa Haggai, Genie Harrison, Arash Homampour, Neville Johnson, Bill Karns, Aimee Kirby, James Kristy, Lawrence Lallande, Tobin Lanzetta, Tim Loranger, Anthony Luti, Minh Nguyen, Rahul Ravipudi, Taylor Rayfield, David Rosen, Jeffrey Rudman, Ibiere Seck, Doug Silverstein, Kathryn Trepinski, Geraldine Weiss, Ronnivashti Whitehead, Andrew Wright Orange County Trial Lawyers Association President Secretary Casey Johnson
President-Elect Ted Wacker
First Vice President Vincent Howard Second Vice President H. Shaina Colover
Third Vice President Geraldine Ly
B. James Pantone
Treasurer Jonathan Dwork Parliamentarian Jerry Gans Immediate Past President Scott Cooper
Executive Director Janet Thornton
Board of Directors Melinda S. Bell, Anthony W. Burton, Brent W. Caldwell, Darren J. Campbell, Cynthia A. Craig, Robert B. Gibson, T. Gabe Houston, Paul E. Lee, Kevin G. Liebeck, H. Gavin Long, Solange E. Ritchie, Sarah C. Serpa, Adina T. Stern, Douglas B. Vanderpool, Janice M. Vinci, Atticus N. Wegman Periodicals postage paid at Los Angeles, California. Copyright © 2014 by the Consumer Attorneys Association of Los Angeles. All rights reserved. Reproduction in whole or in part without written permission is prohibited.
ADVOCATE (ISSN 0199-1876) is published monthly at the subscription rate of $50 for 12 issues per year by the Consumer Attorneys Association of Los Angeles, 800 West Sixth Street, #700, Los Angeles, CA 90017 (213) 487-1212 Fax (213) 487-1224 www.caala.org
Send address changes to ADVOCATE c/o Neubauer & Associates, Inc. P.O. Box 2239 Oceanside, CA 92051 6 — The Advocate Magazine
condemnation: Less complex than it sounds? 12 Inverse Inverse condemnation is a powerful and often overlooked cause of action when a public work is substantially responsible for causing damage to private property. Jill S. Casselman and James P. Koelzer
challenges in mass-tort litigation settlements 24 Ethics Mass-tort litigation presents a myriad of ethical challenges and disclosure is key. Pete Kaufman
Collateral Source Rule under the Affordable 32 The Care Act (ACA) Defendant would like a double discount of plaintiff’s future medical-care damages. Don’t give it to them. Bruce G. Fagel
what you plead: The effects of judicial 40 Watch and evidentiary admissions
What you say can and will be used against you in a court of law. Understanding the effects of judicial and evidentiary admissions can be the difference between losing on summary judgment and prevailing at trial.
Paul Traina, Jared Beilke and Andrew Jacobson
beyond Workers’ Compensation 56 Going for injured employees
A look at the common exceptions to California’s exclusive remedy rule. Brian Kabateck and Anastasia Mazzella
The fundamentals 68 Fraud: A look at the issues and law that arise in fraud cases at differing stages of litigation, up to and including trial. Ara Jabagchourian
Law: How quickly the post-MacDonald world turns 76 Labor A look at the doctrine of exhaustion of administrative remedies after MacDonald was clarified by the Legislature in SB 666, specifically in the context of Labor Code section 98.7. Matthew S. McNicholas and Alyssa Kim Schabloski
Affordable Care Act and settlement planning 91 The Plaintiffs with disabilities may require a Special Needs Trust to preserve eligibility for Medi-Cal or to qualify for governmentsubsidized health insurance under ACA. Kevin Urbatsch Advertising Sales: Neubauer & Associates, Inc. Chris Neubauer - Sales Manager. 760-721-2500 Fax: 760-721-0294 e-mail: email@example.com Rate card available online at www.theadvocatemagazine.com
Submitting articles for publication: Check the annual editorial calendar at www.theadvocatemagazine.com to see when your legal topic would be most appropriate. Articles on time sensitive matters are welcome throughout the year, as are opinion columns, humor pieces, human-interest stories, lifestyle and personality features. Send your article as a WordPerfect or Word document attachment to e-mail: firstname.lastname@example.org. Please check the website for complete editorial requirements. Reprint permission: E-mail written request to Managing Editor Cindy Cantu: email@example.com
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clients: Protecting against 96 Immigrant the undervaluation of their cases
Immigration status should not interfere with calculation of damages. Elinor Leary
A BOUT T HIS I SSUE Complex litigation: Keeping it simple Rahul Ravipudi Appellate reports and cases in brief Frye v. County of Butte The trial court's “Statement of Decision” was actually an appealable judgment, which triggered the parties’ deadlines to file a notice of appeal.
Jeffrey Isaac Ehrlich
E XECUTIVE D IRECTOR
Consumer Attorneys Association of Los Angeles
Daniel Patrick Moynihan: His quote will help achieve patient protection in 2014. Stuart Zanville F ROM
G OVERNMENT R EL ATIONS B ULLETIN Political Updates from Sacramento and Washington
CAALA R ESOURCE C ENTER Still need to complete your MCLE credits? Use CAALA’s Resources! Visit CAALA’s Legal Education Center at CAALA.org
D IRECTORY OF A DVERTISERS C ALENDAR OF E VENTS
Orange County Trial Lawyers Association
CAALA C ONNECTION C ENTER Welcoming the newest members to CAALA THE
Consumer Attorneys Association of Los Angeles
Starting with a lot of changes Introducing the new president of CAALA
Keep the momentum going Recognizing those who have served, and the challenges in the year ahead.
On the cover: Main Image: Exhausted Runner | Maridav | www.shutterstock.com
The Advocate Magazine — 7
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About this Issue Rahul Ravipudi
Complex litigation: Keeping it simple The key to complex litigation is to keep it simple. That is easier said than done. It seems that the simple cases are becoming much more complex over time. Even if there are times where barriers deter some of us from getting involved in complex litigation – the financial investment, the significant investment of time, risk analyses – the issues presented in many complex litigation matters can be applied across the entire spectrum of litigation. Ara Jabagchourian of Cotchett, Pitre & McCarthy, LLP has, over the year, generously shared his wealth of knowledge on business torts. This time, Ara’s comprehensive article deals with identification and litigation of fraud cases. Whether your client is the victim of fraudulent billing, misrepresentations, bait and switches, Ponzi schemes, or something else, Ara’s treatise will help you determine what claims to make and why. Pete Kaufman of Panish Shea & Boyle, LLP is one of the best mass tort litigators around. Recently, he published an article about the verdict in Kransky which just recently culminated in a multi-billion dollar settlement with Johnson & Johnson relating to its defective Depuy hips. So on the heels of helping solidify this massive mass-tort settlement, Pete has submitted a relevant and thoughtful article addressing ethical issues in negotiating
and effectuating a mass-tort settlement. His article is an eye-opener into the intricacies of leading the charge in litigating and resolving mass actions. Matthew S. McNicholas and Alyssa Kim Schabloski of McNicholas & McNicholas, LLP delve into employment law and the ever-changing rules relating to the exhaustion of administrative remedies. Matthew and Alyssa’s article is a perfect primer which helps explain what are, and are not, administrative remedies, the recent passing of SB 666 and its effect on the “exhaustion doctrine.” This is an ever changing body of rules, and I suspect Matthew and Alyssa will need to continuously update us all before the end of the year. Paul Traina, Jared Bielke, and Andrew Jacobson of Engstrom, Lipscomb & Lack are well versed in trying complex cases. Their trial experience resulted in this thoughtful article about what constitutes an evidentiary or judicial admission. This must-read article creates awareness as to whether and when you can bind a defendant in your case with statements made in pleadings or other documents. Similarly, this article provides guidance on when statements you make in pleadings could have a binding effect on your client. Jill S. Casselman and James P. Koelzer, Robins, Kaplan, Miller & Ciresi
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L.L.P. explore the world of inverse condemnation focusing on private citizens’ claims against governmental entities for taking or damaging their private property. If the claim is not barred, the recovery could include attorneys’ fees and costs! Moving outside the world of complex litigation, we have several excellent articles. Kevin Urbatsch and Scott MacDonald have written a timely article regarding plaintiffs with disabilities who may need a Special Needs Trust to preserve eligibility for Medi-Cal or to qualify for government-subsidized health insurance under the Affordable Care Act. Continuing with the Affordable Care Act, Bruce Fagel discusses its impact on the Collateral Source Rule, specifically how the defense may seek to use it for a double discount on future medicals. Finally, Elinor Leary of the Veen Firm, San Francisco, discusses how immigrant status should not interfere with calculating damages. For those actively involved in complex litigation, I hope this edition is something you will keep in your brief bag and constantly reference. For those who don’t, I hope this edition encourages you to do so. There will never be enough consumer attorneys protecting consumers from the myriad of business torts committed.
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10 â€” The Advocate Magazine
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Jill S. Casselman
James P. Koelzer
Condemnation: Less complex than it sounds? Demystifying inverse condemnation and holding public entities liable for damage to private property While the government’s power to take private property for public use through eminent domain is well understood, private citizens’ right to sue the government for taking or damaging private property is less well understood. And yet, the right exists even when the public entity did not intend to take the property or cause the damage. Inverse condemnation is a powerful and often overlooked cause of action to assert this right. Whether as a result of a fire, flood, landslide, noise, dust or fumes, and whether the damage is to a private residence or a blight on a commercial 12 — The Advocate Magazine
property, if a public work was a substantial factor in causing the damage, a plaintiff can recover damages, including attorneys’ and experts’ fees from the responsible public entity. This holds true for insurers who may either join, or stand in the shoes of, an insured in a subrogation action for damages. While the claim is a powerful one, it is also nuanced, and may be subject to special defenses and exceptions in some unique but recurring factual circumstances. Thus, it is important that potential inverse-condemnation plaintiffs and their counsel fully understand the somewhat unique features of this claim.
Constitutional underpinnings An inverse-condemnation claim is constitutional in nature. In fact, it is based upon the same constitutional provisions as eminent-domain actions. The California Constitution’s Article I, section 19 (formerly art. I, § 14) requires payment of just compensation when private property is taken for public use or damaged. The words “or damaged” were added to the Constitution in 1879 “to clarify that recovery of just compensation provision is not limited to physical invasions of property taken for ‘public use’ in eminent domain, but also
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Condemnation â€” continued
encompasses special and direct damage to adjacent property resulting from the construction of public improvements.â€? (Customer Co. v. City of Sacramento (1995) 10 Cal.4th 368, 379â€“380.) The policy underlying this concept is that the costs of a public improvement benefiting the community should be spread among those who benefited rather than allocated to a single person or entity within the community. (Belair v. Riverside County Flood Control Dist. (1988) 47 Cal.3d 550, 558; see also Pacific Bell v. City of San Diego (2000) 81 Cal.App.4th 596, 608.) Otherwise, one citizen would be disproportionately forced to bear the burden of a public work intended to benefit the public as a whole. (Holtz v. Superior Court of San Francisco (1970) 3 Cal.3d 296, 303.) The constitutional nature of an inverse condemnation claim carries several important benefits to putative plaintiffs, and their counsel. First, because inverse plaintiffs vindicate constitutional rights, both expertsâ€™ fees and attorneysâ€™ fees are recoverable as a matter of course. Second, unlike most other claims against government entities, a putative inverse plaintiff need not wade through the frequently treacherous waters of filing a government claim. Third, inverse-condemnation claims are typically decided on a plaintiff-friendly â€œno faultâ€? standard, which does not require showing of negligence to recover. Additionally, because inverse condemnation is not a tort claim, traditional tort-based defenses, like comparative fault and contributory negligence, do not apply in ordinary inverse-condemnation cases. (Ingram v. Redondo Beach (1975) 45 Cal.App.3d 628, 633.) Prejudgment interest is also recoverable. These features can render an inverse claim, where available, vastly superior to alternative theories of recovery, such as nuisance or dangerous condition of public property. In short, plaintiffs benefit from an overarching policy that we ought not put unwieldy restrictions upon plaintiffsâ€™ efforts to vindicate their constitutional rights. 14 â€” The Advocate Magazine
Key elements of the claim The elements of the cause of action are straightforward, but different than negligence and other more traditional tort claims. To prove a typical inversecondemnation claim, a plaintiff must establish that a public work was a substantial factor in causing damage to private property. The â€œpublic work,â€? or â€œpublic use,â€? requirement can be satisfied by showing that the damage was caused by a use for public purposes. This means a â€œuse which concerns the whole community or promotes the general interest in its relation to any legitimate object of government.â€? (Bauer v. County of Ventura (1955) 45 Cal.2d 276, 284.) A public-works project, such as the construction of a new freeway, which unintentionally triggers landsliding or flooding would be a prototypical example. (See, e.g., Albers v. County of Los Angeles, (1965) 62 Cal.2d 250, 263-264; Akins v. State (1998) 61 Cal.App.4th 1; Arreola v. County of Monterey (2002) 99 Cal.App.4th 722.) In some cases, the person or entity who actually causes the damage need not even be a public entity for the use to be a public use. For example, the delivery of electricity has been held to be a public use, regardless of whether the electrical utility is privately owned. (Barham v. Southern Cal. Edison Co. (1999) 74 Cal.App.4th 744, 751.) But the plaintiff must demonstrate that the government entity substantially participated in â€œplanning approval, construction or operation of the public project or improvement.â€? (DiMartino v. City of Orinda (2000) 80 Cal.App.4th 329, 336.) â€œDamageâ€? for purposes of an inverse claim is considered to be â€œany actual physical injury to real property proximately caused by [a public] improvement as deliberately designed and constructed,â€? and it is â€œcompensable under â€Ś our Constitution whether foreseeable or not.â€? (Belair v. Riverside County Flood Control Dist. at 558, quoting Albers v. County of Los Angeles at 263-264.) A taking or damage can occur when the public entity causes physical damage to the property with, or without, an actual invasion by the public
entity. (San Diego Gas & Electric (1996) 13 Cal.4th 893, 940-41.) In fact, even an intangible intrusion onto the property can constitute â€œdamageâ€? so long as the intrusion places a burden on the property that is direct, substantial, and peculiar to the property itself. (Oliver v. AT&T Wireless Services (1999) 76 Cal.App.4th 521, 530.) Depending on the nature of the property damaged, recoverable damages may include diminution in value of the property or the cost of repair. However, where greater than the diminution in value, the cost of repair is not always recoverable.
In Albers v. County of Los Angeles, supra, 62 Cal.2d 250, a case involving a landslide caused in part by public improvements, the California Supreme Court set forth the current standard of â€œno faultâ€? inverse liability and established â€Ś the seminal rule for all strict liability inverse cases to follow. The Albers Court stated: â€œAny actual physical injury to real property proximately caused by the improvement as deliberately designed and constructed is compensable under article I, section 14, of our Constitution whether foreseeable or not.â€? (Id., 62 Cal.2d at 263-264.) Shortly thereafter, in Holtz v. Superior Court (1970) 3 Cal.3d 296, the Supreme Court expanded upon the Albers case, again finding that liability would attach, regardless of the â€œreasonablenessâ€? of the public entityâ€™s conduct. Thus, even absent any fault on the part of the public entity or public works, liability still follows so long as the damage was caused by the deliberately constructed and planned public improvements. The Holtz Court then established â€œsubstantial causeâ€? rather than â€œproximate causeâ€? as the threshold for inverse condemnation to apply. This has been the standard ever since. The â€œsubstantial causationâ€? test is extremely plaintiff friendly. It does not require a showing that the public use or improvement was the sole, or even the
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Condemnation — continued
largest, cause of damage to private property. Rather, it merely requires that the public improvement be a substantial cause, even if it is only one of several concurrent causes. (Bunch v. Coachella Valley Water Dist. (1997) 15 Cal.4th 432, 440 [summarizing the holdings of Albers and Holtz].) Thus, a public entity is liable in inverse condemnation, without fault, whenever its public work is simply one (potentially among many) “substantial factors” which cause damage to private property. (See Marshall v. Dep’t of Water & Power (1990) 219 Cal.App.3d 1124, [“[A] governmental entity may be held strictly liable, irrespective of fault, where a public improvement constitutes a substantial cause of the plaintiff ’s damages even if only one of several concurrent causes.”])
16 — The Advocate Magazine
Moreover, tort-based defenses, like comparative fault and contributory negligence, do not apply in ordinary inversecondemnation cases. Thus, except in the context of exceptional cases (below), any claim or argument regarding the plaintiffs’ comparative fault – such as the unreasonable failure to protect their property is improper.
Who can sue?
Property owners are not the only ones who can avail themselves of the benefits of an inverse-condemnation claim. Insurance companies can also pursue a governmental entity for damages sustained by their insured through a subrogation claim. (Kardly v. State Farm Mut. Auto. Ins. Co. (1989) 207 Cal.App.3d 479, 488.) Once an insurer pays the amount
of the loss on the insured’s property, the insurer stands in the place of its insured to pursue his or her right of action against any other party responsible for that loss. (Traveler’s Indemnity Company v. Ingebretson (1974) 38 Cal.App.3d 858, 864.) Where the insurer pays for only a portion of the damage, an insurer can join the insured in an action seeking recovery in inverse conversation to recover the amount of the insurance proceeds. (McMahan’s of Santa Monica v. City of Santa Monica (1983) 146 Cal.App.3d 683, 687; Hodge v. Kirkpatrick Development, Inc. (2005) 130 Cal.App.4th 540.) As a matter of policy, subrogation of inverse claims is a win-win for property owners and insurance companies alike, because it enables both to participate and
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Condemnation — continued
be made whole through the vindication of the property owner’s constitutional rights.
Exceptional cases: Exceptions to no-fault liability
• The emergency exception The so-called “police power” or “emergency exception” to the inversecondemnation compensation requirement bars recovery to a plaintiff whose property is damaged during the legitimate exercise of police power. (House v. L.A. County Flood Control Dist. (1944) 25 Cal.2d 384, 391.) Courts reason that in such cases where immediate action is necessary to prevent impending peril, the emergency circumstances constitute “full justification for the measures taken to control the menacing condition, and
18 — The Advocate Magazine
private interests must be held wholly subservient to the right of the state to proceed in such manner as it deems appropriate for the protection of the public health or safety.” (Ibid.) Nevertheless, courts have carefully circumscribed the types of emergencies that will shield a public entity from inverse-condemnation liability. (Odello Bros. v. County of Monterey (1998) 63 Cal.App.4th 778, 789, citing Holtz v. Superior Court, supra, 3 Cal.3d at p. 305 [explaining that “[i]nstances of this character are the demolition of all or parts of buildings to prevent the spread of conflagration, or the destruction of diseased animals, or rotten fruit, or infected trees where life or health is jeopardized.”]) Accordingly, this exception is little used and not likely to bar
inverse claims absent extreme circumstances. • The natural watercourse and floodcontrol exceptions The more popular exceptions invoked by governmental entities in defense to inverse claims are the “natural watercourse” and “flood-control” exceptions. These exceptions, where applicable, change the standard a plaintiff must meet from the no-fault “substantial factor” test to the more onerous “rule of reasonableness.” The rule of reasonableness was set forth by the California Supreme Court in Belair v. Riverside County Flood Control Dist. (1988) 47 Cal.3d 550, and Locklin v. City of Lafayette (1994) 7 Cal.4th 327, and requires a balancing of various factors to
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Condemnation — continued
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determine whether or not the public entity acted unreasonably. These factors include: the purpose served by the project, offsetting reciprocal benefits, feasible alternatives, risk-bearing capabilities, whether the damage is a normal risk of land ownership, and distribution of damages across the project. (Locklin, 7 Cal.4th at pp. 368-69.) In order to come within the natural watercourse exception, a public entity must show that the damage occurred as a result of discharging flow into a natural watercourse. A natural watercourse “is a channel with defined bed and banks made and habitually used by water passing down as a collected body or stream in those seasons of the year and at those times when the streams in the region are accustomed to flow.” (Id. at p. 345.) To invoke the flood-control exception, a defendant must demonstrate that the public work that caused the damage was a flood-control improvement, that the flood-control improvement failed to function as intended, and that the damage done was done to properties historically subject to flooding. (Yamagiwa v. City of Half Moon Bay (N.D. Cal. 2007) 523 F. Supp. 2d 1036, 1093-94.) Flood-control works include dams, levees, and other public works designed to prevent naturally recurring floods. These exceptions to the Albers strictliability rule were rooted in the common law, and have now been expressly adopted by the California Supreme Court in Belair and Locklin. Belair was a flood-control case involving a suit by a large group of plaintiffs whose properties were damaged by the failure of a flood control levee that gave way in heavy storms. The levee had been built by the flood-control district to protect the plaintiffs’ land from periodic flooding to which it had been subject prior to construction of the levee. Locklin involved a claim for damages to properties adjoining a natural watercourse allegedly caused by defendants’ discharge into the creek which substantially increased the flow. The policy considerations motivating both of these exceptions are the same: Where the public work did not cause the damage,
but merely failed to prevent or ameliorate damage which would have occurred naturally in the absence of the public work, it would be unjust to allow plaintiffs to recover without demonstrating that the public entity behaved unreasonably. Thus, in matters coming within the natural watercourse or flood-control exceptions, a public entity will be liable in inverse condemnation only if the design, construction, or maintenance of a public improvement poses an unreasonable risk of harm to the plaintiffs’ property, and the unreasonable aspect of the improvement is a substantial cause of damage. (Arreola v. County of Monterey, 99 Cal.App.4th at p. 722.) Although the California Supreme Court’s rulings in Locklin and Belair are well-settled, much inverse-condemnation litigation involves a dispute over whether or not their holdings apply. While some public entities will push for a more sweeping pronouncement of reasonableness in all inverse cases, courts have repeatedly affirmed that the Albers’ strictliability rules still apply where the exceptions do not.
Inverse-condemnation law can be a highly advantageous, plaintiff-friendly claim, which plaintiffs and their counsel should keep in mind before filing suits involving damage to private property. However, its generous standards do not apply in all instances, and potential inverse claims should be evaluated carefully. James P. Koelzer is with Robins, Kaplan, Miller & Ciresi L.L.P. where he litigates and tries inverse-condemnation claims, as well as other disputes involving damage to real and personal property, as well as complex contract disputes. Jill Casselman is with Robins Kaplan, Miller & Ciresi L.L.P. where she practices property and complex business litigation. She has represented property owners in multiple inverse condemnation actions, up through and including trial.
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Top 10 Pete Kaufman
Ethics issues in mass-tort litigation settlements Mass-tort litigation presents a myriad of ethical challenges and disclosure is key. The advent of successful mass-tort litigation dates only from the last quarter of the 20th century. Perhaps the best examples of this are the asbestos and tobacco litigations, easily the two biggest mass-tort cases in the history of the U.S., or any, legal system. Both were marked by long periods of struggle for claimants. While suits involving injuries caused by exposure to asbestos were filed as early as the late 1920s, it was not until the 1980s that plaintiffs first achieved the stratospheric results for which the litigation is now famous. The first seven-figure verdict was achieved in 1982, the same year asbestos’ manufacturer Johns-Manville declared bankruptcy. By the early 1990s, more than half of the 25 largest manufacturers in the U.S. joined that company in seeking protection from the claims of tens of thousands of injured victims. (See “Asbestos Hazards Handbook — Chapter 9: The Asbestos Producers.” Lhc.org.uk.) The tobacco litigation suffered through similarly inauspicious results before the 1990s. Between 1954 and 24 — The Advocate Magazine
1994, hundreds of claims were filed against cigarette manufacturers, but almost none were successful. (See Howard M. Erichson, The End of the Defendant Advantage Wm. & Mary Envtl. L. & Pol’y Rev., 2001, at 126.) As one commentator observed, in an apt thumbnail of the first four decades of the litigation: “Eight hundred and thirteen claims filed against the industry, twentythree tried in court, two lost, both overturned on appeal. Not a penny paid in damages.” (See Peter Pringle, Cornered: Big Tobacco at the Bar of Justice, at 7). Then, in the late 1990s, plaintiffs’ attorneys teamed with attorneys general of at least 42 states to bring actions seeking recuperation of Medicare expenses arising from tobacco-associated illnesses, leading to settlements in the hundreds of billions of dollars. The twin watersheds of tobacco and asbestos have, in large part, spurred the dramatic increase in mass-tort litigation; in particular, in pharmaceutical and medical-device cases. In many respects,
this has been a boon to consumers, and has served as a much-needed deterrent to manufacturers. But mass-tort litigation presents myriad challenges to practitioners. One of the thorniest areas is the resolution of cases involving hundreds, or even thousands, of clients injured by a single defendant, and the scope of this problem can hardly be overstated. Historically, far less than 1 percent of all mass-tort cases proceed to trial. Indeed, in many mass-tort litigations, no cases are tried. As a consequence, the vast majority of cases are settled by agreement of the parties. The mechanisms for resolving these cases are varied, and implicate a number of rules of ethics and conduct. Plaintiffs’ counsel must be aware of their responsibilities to clients, and of the ways in which these obligations are best discharged, within the parameters of any settlement. The ethical rules governing representation of clients, resolution of claims and conflicts of interest were drafted in
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Ethics — continued
the context of single plaintiff/single-event cases. The rules impose on practitioners an obligation to understand the nature of the defendant’s liability, the extent of plaintiff ’s damages, the value of the case for purposes of resolution, and the likely outcome in the event of trial. The rules also require counsel to communicate settlement offers to the client, and to assist her in making an informed decision about whether and when to settle, and for how much. For example, Model Rule of Professional Conduct (“MR”) 1.4 requires a lawyer to explain a matter to her client to the extent reasonably necessary to permit the client to make an informed decision. And MR 1.7 requires communication of information reasonably sufficient to permit the client to
appreciate the significance of the matter in question. Where an attorney represents more than one client in the same case, the potential for conflicts of interest exists. Differences in the severity of the injuries suffered by the plaintiffs, resulting in disparate values for their respective claims, can create tension when the case is settled. The attorney may seek to leverage the stronger claim to settle the weaker one, which can redound to the detriment of the former client. Similarly, an attorney may be tempted to jettison the weaker claim in order to resolve the stronger, more lucrative one. For these reasons, and others, the rules require attorneys to make clients in multi-plaintiff cases aware of potential conflicts of interest.
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MR 1.7(b) provides that conflicts arising from representation of multiple clients can generally be waived, but only if the attorney reasonably believes all clients can be represented effectively. In cases involving multiple clients, the parties can agree to an aggregate settlement; that is, a sum intended to compensate and resolve all claims. These settlements are attractive for the practical reason that they can be efficient, and for the cynical reason that, oftentimes, all parties think they are gaming the arrangement to their benefit; defendants may assume that weaker claims are diluting stronger claims, and plaintiffs may assume that stronger claims are adding value to weaker claims. The potential for mischief inherent in aggregate settlements provides the rationale for MR 1.8(g), which requires that, when an attorney represents more than one client, she cannot enter into an aggregate settlement without disclosing the existence and nature of all claims, as well as the participation of each client, and without first obtaining informed written consent from all clients. In California, the requirements of MR 1.8(g) should be read in the context of Rule 3-310 of the State Rules of Professional Conduct which requires that the disclosure to clients must include the relevant circumstances, and actual and reasonably foreseeable consequences, of any decision or waiver they are asked to make. The rule prohibits an attorney from undertaking the representation of any client if there is a potential conflict of interest, unless the client gives informed, written consent. In multiplaintiff cases, in order for the attorney to continue with the representation of all parties, there must be unanimous consent on the part of each client. And before the attorney can agree to an aggregate settlement, she must consult with each client, identify all settling clients, and disclose the amount each client is receiving. The rules governing consultation do not require an in-person meeting; the required information can be provided by any reasonable means.
Ethics continues 26 — The Advocate Magazine
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Ethics — continued
For the attorney handling singleevent cases, discharging these ethical obligations is a relatively straightforward matter. Ensuring ethical compliance when handling litigations involving many plaintiffs, represented by the same firm, is more complicated. The difficulty is due largely to the mechanics of mass-tort litigation. These cases nearly always involve a single defendant, or a small group of defendants, and thousands, or even tens of thousands of plaintiffs. The plaintiffs are represented by hundreds of attorneys, or more. Mass-tort cases are typically consolidated before one federal court (as in a multidistrict litigation) or before a single-state court (as in a Judicial Counsel Coordinated Procedure “JCCP”, in California). To be sure, these cases have some features of a single-event case.
Discovery and development of the general liability case proceed much as they would in a case involving a single plaintiff. In efficiently run coordinated actions, this work will be done by a group of plaintiff ’s attorneys, under the direction of a court-appointed Plaintiff ’s Steering (or Executive) Committee. As in any litigation, the ultimate goal is either resolution or trial. There are a number of benefits of mass, or aggregate, settlements, most of which are similar to the benefits of masstort litigation. Demonstrating liability in mass-tort cases that involve defective drugs or medical devices can be exceedingly difficult. Few firms possess the resources necessary to pursue mass litigation against the manufacturers of these products. Consolidated mass actions
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ensure the participation of sophisticated, well-financed attorneys. Cooperation among all plaintiffs’ counsel usually works to decrease the costs of litigation for individual plaintiffs, often quite significantly. Collaboration nearly always improves attorney work product, which adds value to most cases and increases settlement leverage. But the task of resolving individual claims falls to the attorney representing the plaintiff. It is that attorney’s responsibility to ensure that her clients’ rights are protected, and that their claims are resolved fairly, and in a manner consistent with all ethics rules. Mass-tort settlements cannot be handled like class-action settlements, in which one lump sum is divided among all class members, in accordance with one consistently applied methodology, which requires court approval. This approach works in class actions because Rule 23 imposes requirements of commonality and typicality on all claims. Compliance with Rule 23, and a grant of class certification, ensures (as much as possible) that the damages suffered by all claimants (the members of the class) are similar, if not identical. The class representative can prosecute the claim on behalf of all class members because her damages are assumed to be more or less equivalent to those suffered by each class member. Conflicts of interest are avoided because class counsel is pursuing a damages’ model applicable to all claimants, and there is no incentive, or reason, to privilege one claim over another. Moreover, judicial oversight is provided, indeed required, via mandated fairness hearing and approval of attorney’s fees. Finally, nearly all class settlements have a release valve built in, with the opportunity to opt out of any proposed resolution. Mass-tort cases, however, cannot be treated, or resolved, like class cases. The most notable authority for this prohibition is Amchem Products, Inc. v. Windsor (1997) 521 U.S. 591. Amchem, an asbestos case, essentially stands for the proposition that, in mass actions where there are disparities between plaintiffs (in exposure
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Ethics — continued
to the injury-producing product, in laws of the states in which they were exposed and injured, and in the types and severity of injuries actually suffered), the requirements of commonality of issues of fact and law are not met. Because these disparities nearly always exist in masstort cases, class-type settlements of these cases are almost always impossible. This means, essentially, that for the purposes of resolution, mass-tort cases must be treated individually, and in accordance with all applicable ethical rules. Unfortunately, true individual resolution of every case in a practitioner’s “inventory” of cases in a mass-tort litigation is often impractical, if not impossible. Defendants will rarely, if ever, propose or negotiate settlement amounts for each case. Rather, a defendant will propose an aggregate settlement of all of the attorney’s cases. This permits the defendant to apply its own internal settlement calculus to cases, and permits it to report (in ways that that are self-serving and, oftentimes, deliberately misleading) the lowest possible average, and maximum, settlement amounts for cases in a litigation. In particular, pharmaceutical defendants are quite fond of setting out a handful of parameters for “compensability” of cases in a litigation, and then offering attorneys, or firms, an aggregate settlement, which plaintiffs’ counsel must then allocate to individual claimants. Mass-tort litigations usually are resolved one of two ways: global, or matrix, settlements; or inventory settlements. In a global settlement, the defendant, with or without the agreement of plaintiffs’ counsel, proposes a settlement to cover all extant claims. The proposal will ordinarily identify an amount of money the defendant has dedicated to settle all claims, together with a methodology, or matrix, which sets out criteria according to which all claims will be paid. In a global settlement, plaintiffs’ counsel applies the matrix to her clients’ claims, determines how much each would receive under the settlement proposal, and makes a recommendation to each client about whether to accept or reject the offer. In an inventory settlement, the 30 — The Advocate Magazine
defendant negotiates a settlement of all cases handled by a single firm, or group of firms. As in a matrix settlement, the defendant will usually seek to negotiate one sum to resolve all cases, rather than individually negotiating all claims. In an inventory settlement, plaintiffs’ counsel should evaluate each claim individually to determine a minimum settlement amount to recommend to each client. After all clients have consented to a minimum amount for which each will agree to settle, counsel can add the values of all claims together to reach a minimum aggregate settlement amount. If plaintiffs’ counsel is successful in negotiating a settlement greater than the aggregate total, each client should receive a pro rata percentage of this “excess” amount. As discussed below, the mechanics of this approach should be disclosed to all clients in advance of any settlement negotiations. The key to ethical compliance in mass-tort settlements, however they are handled, is disclosure. While there is disagreement with respect to the amount that is required, the author proposes that candid and open communication with clients is always the best approach. In order to comply with the requirements of MR 1.8, this disclosure should start when the attorney-client relationship is initiated. Practitioners should provide masstort clients with all information about how their case will be handled and, when appropriate, how it will be resolved. At a minimum, disclosure related to settlement should be provided when resolution is imminent. Counsel should provide as much information as possible about the circumstances, terms and process of any proposed settlement. The goal should be to enable all clients to make informed decisions about whether to accept or reject the settlement amount. Where counsel is proposing an allocation of funds, she must explain the mechanism or methodology used to determine the individual distributions. Counsel must also make clear in the disclosure that, at time of distribution, clients have waived any potential conflict regarding joint representation.
An adequate settlement disclosure communication should contain a comprehensive update on the litigation, including the procedural status, and any upcoming mediation or trial dates. While it is probably not necessary to include a blow-by-blow description of the negotiations, practitioners should provide some discussion of the settlement talks. With respect to settlement criteria and values, clients should understand that all cases are different, because of reasons related to liability, causation, and damages. It is critically important for practitioners to disclose the criteria used to determine settlement amounts, for example: the nature and extent of the injury; the existence of co-morbid conditions; the age of the plaintiff; or the existence of an economic loss, like a loss of earnings. Any evaluation must be done according to objective, consistent criteria, verifiable from medical records and other documents. Counsel must always bear in mind that she cannot favor one client over another. Finally, practitioners should also identify and explain the applicable ethical rules. Communications regarding the way mass-tort cases are handled and resolved should not elide ethical obligations; rather, all potential conflicts of interest should be disclosed and described. And the client must be told that she has the right to accept or reject any settlement proposal, as well as the right to advice from independent counsel in making her decision. The mass-tort plaintiff ’s bar has the ability to perform an enormously important service for the American public, by holding manufacturers accountable for their errors. But it must resist the recent drift, evident in some drug litigations, to a practice which privileges massive and seemingly deliberately obtuse settlements, and which treat claimants as commodities, and not as clients. Pete Kaufman is an attorney at Panish, Shea & Boyle in Los Angeles specializing in drug and device litigation. He is a graduate of the University of Wisconsin-Madison and the University of Florida, Levin College of Law.
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Bruce G. Fagel
The Collateral Source Rule under the Affordable Care Act Defendant would like a double discount of plaintiff’s future medical-care damages. Don’t give it to them. Since the enactment of the Affordable Care Act (ACA) the defense bar has moved quickly to add the ACA as a collateral source that could potentially reduce most of an injured plaintiff ’s recovery for future medical-care costs. At several recent national meetings, authors have presented research papers that suggest that the ACA should simplify and reduce calculations of future medical damages by limiting those costs to “health insurance premiums and out-ofpocket limits less any pre-injury expected medical costs and penalties if uninsured.” Defense firms are now suggesting to courts that the jury should only award six months of future medical-care costs and the premiums, deductibles and co-pays for a bronze level health insurance coverage under the ACA since full coverage would kick in after six months of uninsured status. All insurance plans under 32 — The Advocate Magazine
the ACA must provide certain required benefits, including ambulatory patient services, emergency services, hospitalizations, mental health care, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, chronic disease management and other services that would subsume most if not all of plaintiff ’s future medical-care costs. Plaintiffs in all personal-injury cases should expect the defense to try to significantly reduce any award for future medical-care costs, citing the ACA. This issue will need to be addressed and dealt with in every case of personal-injury that has future medical-care needs.
Traditional Collateral Source Rule in personal-injury tort cases The Restatement Second of Torts section 920A(2) defines the traditional common-law collateral-source rule that
“payments made to or benefits conferred on the injured party from other sources are not credited against the tortfeasor’s liability, although they cover all or a part of the harm for which the tortfeasor is liable.” Thus, the plaintiff can collect both past and future medical-care costs, even if health insurance paid some of those past costs and may be expected to pay medical-care costs in the future. The recent case of Howell v. Hamilton Meats (2011) 52 Cal.4th 541, limits plaintiffs’ recovery to the actual amount paid by their health insurance for past medicalcare costs, and Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308, appears to extend this limitation to future damages. Most private health-insurance contracts contain a reimbursement provision that allows the health insurer to collect the money paid for a plaintiff ’s past
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ACA — continued
medical care when the plaintiff recovers such damages from a third party. This provision prevents a double recovery for the plaintiff by allowing the health insurer to recover the costs of care when the plaintiff recovers past and future medical-care costs from a third-party tort claim. The defense argument in Howell focused on the lack of legal support or rationale for a plaintiff receiving damages for the amount of medical care billed when the health insurer could only recover from the plaintiff the amount of money actually paid for such care. Most health-insurance contracts provide for a substantial reduction between the amount billed for care and the amount actually paid. In addition to the subrogation clauses in most private health-insurance contracts, public insurance pro-
grams (Medi-Cal and Medicare) have an absolute right to recover the amount paid for past medical-care costs paid for a beneficiary/plaintiff. Under Brown v. Stewart (1982) 129 Cal.App.3d 331, Medi-Cal benefits are exempted from the collateral-source definition under Civil Code section 3333.1 which otherwise allows a jury to consider health-insurance payments and benefits in medicalmalpractice cases.
Collateral source benefits allowable as evidence in medical-malpractice cases
Civil Code section 3333.1, which was part of the MICRA legislation in 1975, specifically abolished the traditional collateral-source rule for medical-malpractice cases and allowed a shifting of the liabili-
ty for a plaintiff ’s medical-care costs from a defendant health-care provider to the plaintiff ’s health-insurance company. The statute allows the defendant in a medical-malpractice case to introduce evidence to a jury of collateral-source benefits to the plaintiff, including health insurance. The rationale for this statute was that “the legislature apparently assumed that in most cases the jury would set plaintiff ’s damages at a lower level because of its awareness of plaintiff ’s “net” collateral source benefits.” (Fein v. Permanente Medical Group (1983) 38 Cal.3d 137.) To prevent a “double deduction,” since a jury would presumably not award damages for medical-care costs paid for by the plaintiff ’s health insurance, under section 3333.1 (b) “No
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ACA — continued
source of collateral benefits shall recover any amount against the plaintiff.” The constitutionality of this statute was upheld by the California Supreme Court in Barme v. Wood (1984) 37 Cal.3d
174, where the Court held that the providers of collateral source benefits have no vested right to reimbursement and that subdivision (b) was rationally related to the legitimate goals of MICRA.
This section did not affect the reimbursement/subrogation rights of healthinsurance carriers in those personal injury cases not involving a health-care provider. This public-policy tradeoff, which aims to prevent both a double recovery and a double deduction, is at the basis of understanding how and when the ACA may be applicable in a personalinjury tort claim.
Reimbursement/Subrogation rights under the ACA
There are two parts of the ACA and each should have a different outcome with regard to subrogation/reimbursement. The defense will conveniently ignore the public health-insurance part of the ACA, which greatly expands Medicaid in most states. Most of the current public focus on the ACA has involved the health-insurance exchanges that resemble traditional private healthinsurance with premiums, deductibles, and co-pays. As basically an extension of the existing private health-insurance market, it is likely that such private plans under the ACA will have the right of reimbursement for any monies paid for an insured’s health-care costs, although it is not clear from the ACA legislation that private insurance carriers will invoke such a right. However, the largest expansion of health insurance under the ACA involves an expansion in Medicaid in those states that allowed such an expansion, which has included California. It is anticipated that the expansion of Medicaid and the Children’s Health Insurance Program (CHIP) will provide coverage for an additional 17 million individuals in the U.S. This expansion basically involves raising the level of income, below which families and individuals are eligible for Medicaid. California’s Medicaid program, MediCal, has an absolute right to assert a lien against the recovery in any third-party tort claim. Thus, even in medical-malpractice cases under Civil Code section 3333.2 which allows introduction of collateralsource benefits paid and payable for
ACA continues 36 — The Advocate Magazine
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medical-care costs, Medi-Cal is exempted specifically because it is a federal program funded by the taxpayers. In Brown v. Stewart the Court noted “the legislature, in enacting MICRA, was aware that the Governor would not be willing to use general funds to pay for malpractice premium increases.” According to the court, such would be the effect of precluding reimbursement of Medi-Cal payments. (Brown v. Stewart, 129 Cal.App.3d at p. 341.) The Court extended that reasoning to apply to Medicare payments as well in Jordan v. Long Beach Community Hospital (1988) 248 Cal.Rptr. 651. [This case was decertified by the Supreme Court on other grounds]. But the reality for at least the last 30 years is that both MediCal and Medicare have the right of reimbursement from the plaintiff for any money paid for past medical-care costs. Attorneys in filing a personal-injury claim are required to notify Medi-Cal and/or Medicare about such a claim, which allows Medi-Cal and Medicare to assert their lien for past medical expenses paid on behalf of the plaintiff. If the injured plaintiffs have MediCal or Medicare as their health insurance at the time of injury, such collateral source benefits would be excluded in any personal injury case, including medicalmalpractice cases. However, the import of the defense attempt to use the ACA is not on past damages, but rather on future medical-care costs. Even judges who have previously excluded any reference to the ACA in past years because of the speculation involved with such a proposed legislation will now be faced with a U.S. Supreme Court approval of this law, National Federation of Independent Business v. Sebelius (2012) __ S.Ct. __, 132 S.Ct. 2566. Despite attempts by the U.S. House of Representatives to “de-fund Obamacare,” it is clearly the law of the land and the ACA’s required benefits, premium costs and other specifics are no longer speculation. Thus, dealing with the attempt by the ACA to eliminate most of plaintiff ’s future medical-care costs requires focusing on the Medi-Cal and Medicare aspects of any personal
injury case that involves future medicalcare costs.
Applicability of Medi-Cal and Medicare to future medical-care costs Most injured plaintiffs who have significant future medical-care costs and who are on Medi-Cal at the time of resolution of their case will qualify for a special needs trust, which will allow them to maintain eligibility for Medi-Cal benefits into the future. There is no reason to change health insurance from Medi-Cal to a private health-plan under an ACA health insurance exchange. By the time of resolution of the case, the plaintiff will know and understand what benefits have been provided under Medi-Cal, and thus what would be expected to continue in the future. Once Medi-Cal is paid for any past medical-care costs, a plaintiff with a special needs trust may continue to obtain Medi-Cal benefits in the future. Medi-Cal retains the right of reimbursement for all such future benefits paid on behalf of the plaintiff. Medi-Cal is allowed to assert a lien against any amount remaining in the plaintiff ’s special needs trust at the time of their death. Thus, the injured plaintiff does not get a double recovery, because their estate must repay Medi-Cal for any future medical-care benefits that are paid. Since the plaintiff must repay Medi-Cal for any medical-care benefits paid for in the future, there is no reason to lower plaintiff ’s recovery for future medical-care costs. There will be no double recovery under current law if the jury does not consider future Medi-Cal benefits that may be paid for the plaintiff ’s future medical care. Medicare’s right to recover for future medical-care costs paid now requires that a plaintiff establish a Medicare Set Aside Trust, specifically to protect Medicare’s interest. Although the specific rules and regulations for such Medicare Set Aside Trusts are still in progress, unlike MediCal which collects money paid only after the plaintiff dies, Medicare requires that the plaintiff set aside sufficient money in advance of any future payments to pay for what Medicare might pay for in the
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future. Again, there is no double recovery for the plaintiff since Medicare will recover whatever it might pay for future medical-care benefits. Any plaintiff who is on either Medi-Cal or Medicare will be considered to have health insurance already and will not qualify for a health-insurance exchange under the ACA. Medi-Cal and Medicare do not and would not require plaintiff to transfer to another health-care plan under the ACA This is critical to understanding the purpose and effect of the ACA. As enacted by Congress and signed into law, the purpose of the ACA was to expand health-insurance coverage to most of the 45 million Americans who do not have health insurance. The ACA does not require or allow those on Medi-Cal or Medicare to transfer to a private healthinsurance exchange. In any personal-injury case where the defense attempts to introduce evidence of the premium costs and benefits of the ACA to reduce plaintiff ’s claim for future medical-care expenses, a clear distinction must be drawn between those cases where plaintiff will be expected to continue on Medi-Cal or Medicare and/or will establish a Medicare setaside trust. In cases involving children or young adults who have not paid enough into Medicare through work, a Medicare setaside trust may not be necessary because the plaintiff would not qualify for Medicare benefits even after two years of a permanent disability. In such cases, where the plaintiff is likely to have received Medi-Cal benefits between the time of their injury and the time of the resolution of their claim, the defense would have to prove that the plaintiff would both lose their Medi-Cal benefits and then wait six months before qualifying for full healthinsurance coverage under the ACA. The only logic to such a position is that it would provide a basis to shift the financial responsibility for plaintiff ’s future medical-care costs away from a negligent defendant and thus lower plaintiff ’s recovery for such future-care costs. Where an injured plaintiff has Medi-Cal and has past medical care paid
for under the Medi-Cal program, there is no logical reason why the plaintiff should drop their Medi-Cal, then go uninsured for six months, simply to provide a basis for the defendant to shift responsibility for plaintiff ’s future medical-care costs. Since any such injured plaintiff facing the probability of the need for future medical care can utilize a special needs trust to protect their eligibility for MediCal coverage, there is no reason to drop such coverage and then sit uninsured for six months simply to benefit the defendant. In those cases where a plaintiff has paid into Medicare sufficiently to qualify for Medicare benefits after two years of disability, Medicare requires that the plaintiff establish a Medicare set-aside trust, which allows Medicare to pay for plaintiff ’s future care costs. Once a Medicare set-aside trust is established, the cost of which is part of plaintiff damages, there is no reason or basis for the plaintiff to then purchase private health insurance under the ACA health insurance exchange. If a patient has private health insurance at the time of resolution of their case, the defense will argue that if the plaintiff loses their health insurance because their injury prevents employment, which usually provides such health insurance, then the ACA should apply, with damages limited to the premiums, deductibles, and co-pays. However, in most cases involving significant future medical costs, it is more likely that the plaintiff would have lost their private health insurance and gone on Medi-Cal or Medicare long before the resolution of their claim. Thus, only in those rare circumstances where a plaintiff has no health insurance both at the time of their injury and at the time of the resolution of their case would the defense be able to argue the applicability of the ACA. Even in such cases, if the private health insurance which the defense would have the plaintiff purchase, claims a reimbursement right under federal law similar to that claimed by self-funded plans under ERISA, then such a right of reimbursement would still require a jury to award
plaintiff the full cost of future medicalcare expenses that are reasonably certain to be required for plaintiff ’s future medical-care needs. The California Supreme Court held in Barme v. Wood, 37 Cal.3d at p180, fn. 6, “that the right of reimbursement enjoyed by some of the other collateral sources enumerated in Sec. 3333.1 subdivision (a) may be guaranteed by federal law. Under federal supremacy principles, of course, in such cases MICRA provisions will have to yield.” (Brown v. Stewart (1982) 129 Cal.App.3d 331, 341.) The defense bar in personal-injury tort cases will aggressively push for the introduction of evidence about the ACA before a jury. They will claim, through their experts, that the ACA, effectively minimizes any damages for future medical-care costs in all medical-malpractice cases under Civil Code section 3333.1, and in all non-health-care defendant cases where they can assert such a claim. This is because the defense bar has been told that the ACA “may well have indirectly resulted in a great deal of tort reform.” It is therefore essential that this claim be challenged in every case where such evidence would otherwise result in a double deduction of plaintiff ’s future medical-care damages. Otherwise, any plaintiff will face a double reduction of their damages for future medical-care costs. Bruce G. Fagel, M.D., graduated from the Univ. of Ill. (1972), and was licensed to practice medicine: Illinois, 1973; California 1975. He received his JD at Whittier College (1982). Dr. Fagel is a regularly invited speaker before organizations of attorneys, physicians, and hospitals internationally, and has been interviewed by CBS, ABC, NBC and various media affiliates. Featured in “The Best Lawyers in America, 2007.” He has been an eight-time nominee by Consumer Attorneys Association for Trial Lawyer of the Year and recently featured in the National Law Journal as “The 10 Best Trial Attorneys in the Nation.” Dr. Fagel has authored various articles on medical-malpractice issues and served as a consultant on medical-malpractice law to the California Judicial Counsel Committee, which wrote the new CACI jury instructions. JANUARY 2014
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Paul A. Traina
Watch what you plead: The effects of judicial and evidentiary admissions What you say can and will be used against you in a court of law What you say can and will be used against you in a court of law. This Miranda warning, which is so familiar in criminal cases, applies equally to civil litigators who may be “stuck” with judicial admissions as a result of what is pled in a complaint or evidentiary admissions made in earlier complaints. Careless language in a complaint can be the difference between getting to trial and losing on the merits at the time that a summary-judgment motion is brought by your adversary. Defense attorneys are keen on identifying factual assertions as judicial admissions, and using those judicial admissions as proof of undisputed facts, which cannot, if truly judicial admissions, be rebutted. To avoid an adverse ruling, or facts that you are ultimately “stuck” with, a litigator must carefully plan and thoroughly investigate all of the facts and issues when preparing the initial complaint. The factual allegations in the complaint must be accurate and consistent with the client’s anticipated testimony, and supportive of the legal theory which is to be advocated.
What is a judicial admission?
What is a judicial admission and what is the impact of a judicial admission made in a pleading? The well-recognized concept of judicial admissions was raised in Dang v. Smith (2010) 190 Cal.App.4th 646. In Dang, the court held that “statements in a pleading are always admissible against the pleader to prove the matter asserted – as is any other statement by a party.” The court categorized these statements as “‘a conclusive concession of the truth of [that] matter,’ thereby ‘removing it from the issues.’” In other words, a judicial admission is an admission incorporated in a pleading that is conclusive in that proceeding on the party who makes it. 40 — The Advocate Magazine
A judicial admission is a party’s unequivocal concession of the truth of a matter, which effectively removes the fact as an issue from the litigation. (Gelfo v. Lockheed Martin Corp. (2006) 140 Cal.App.4th 34, 48.) Judicial admissions are most commonly found in allegations set forth in pleadings, such as a plaintiff ’s complaint. (Cytodyn, Inc. v. Amerimmune Pharmaceuticals, Inc. (2008) 160 Cal.App.4th 288.) Facts established by pleadings as judicial admissions are conclusive and may not be contradicted. As one court has put it, “a pleader cannot blow hot and cold as to the facts positively stated.” (Myers v. Trendwest Resorts, Inc. (2009) 178 Cal.App.4th 735, 746.) However, allegations are judicial admissions only in the case in which made, if at all.
Not every assertion in a complaint is a judicial admission
The court in Barsegian v. Kessler & Kessler (2013) 215 Cal.App.4th 446, 452, emphasized an important limit on the characterization of allegations in pleadings and elsewhere as judicial admissions. The Court noted that a judicial admission is ordinarily a factual allegation by one party that is admitted by the opposing party. Judicial admissions include: factual stipulations; answers to requests for admission; an answer that admits the allegations in a complaint or cross-complaint. In Barsegian, the plaintiff sued her former attorneys for legal malpractice because of their handling of a realestate transaction and the remaining defendants for breach of lease, fraud, and related claims arising out of her purchase of the same property. The complaint alleged, inter alia, that “each of the defendants was the principal, partner, co-venturer, agent, servant, trustee, or employee of each of the other defendants herein.” The Kessler defendants moved to compel arbitration as a result
of an arbitration clause in the retainer agreement. The trial court denied the motion on grounds of waiver and the possibility of inconsistent rulings resulting from litigation with the third parties. On appeal, the Kessler defendants argued that Barsegian’s allegation that all defendants are agents of one another constituted a binding judicial admission that gave the remaining defendants the right to enforce the arbitration agreement between Barsegian and the Kessler defendants. As a result, the Kessler defendants concluded that the remaining defendants were not “third parties” to that arbitration agreement. The appellate court found that the “principal … agent” allegation was not a judicial admission because: Complaints in actions against multiple defendants commonly include conclusory allegations that “all of the defendants were each other’s agents or employees and were acting within the scope of their agency or employment.” And, even though such conclusory allegations have been criticized as “egregious examples of generic boilerplate, they still may be necessary … at the outset of a lawsuit, before discovery.” Accordingly, “If the Kessler defendants’ argument were sound, then in every multi-defendant case in which the complaint contained such boilerplate allegations of mutual agency, as long as one defendant had entered into an arbitration agreement with the plaintiff, every defendant would be able to compel arbitration, regardless of how tenuous or nonexistent the connections among the defendants might actually be. (Id. at 451.) Barsegian then observed that “not every factual allegation in a complaint automatically constitutes a judicial admission. Otherwise, a plaintiff would
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conclusively establish the facts of the case by merely alleging them, and there would never be any disputed facts to be tried.” (Id. at 452.) Instead, the court noted, that “a judicial admission is ordi-
narily a factual allegation by one party that is admitted by the opposing party.” (Ibid.) Barsegian also rejected the judicialadmission argument because the defen-
dants wanted to use the mutual-agency allegation to obtain arbitration but then intended to contest the truth of that allegation at the eventual proceeding. “That is not how judicial admissions operate. We conclude that the Kessler defendants do not in fact wish to treat the mutualagency allegation as a judicial admission … and we will not treat it as such.” (Id. at p. 453.) Dang v. Smith, 190 Cal.App.4th 646, foreshadowed the legal rationale of Barsegian. In Dang, a legal-malpractice case, the plaintiff, in her complaint alleged that her attorney failed to record a lien. The plaintiff then sought to assert, in opposition to summary judgment, that the malpractice was actually the failure to perfect the lien, which although recorded had been discharged by the debtor’s death due to a failure to perfect. The defendant sought to use the judicial-admission doctrine to prevent plaintiff from changing her theory i.e., failure to record vs. failure to perfect. The court found that plaintiff ’s allegation in her complaint that “her attorney failed to record the lien” did not constitute a judicial admission because the defendant did not agree to the truth of the alleged admission made. More specifically, the defendant was not relying on the substantive allegation (that he, the defendant, failed to record the lien) as an admission of fact. Rather, the defendant was procedurally trying to bar plaintiff from amending her theory in a manner the court felt was broader, rather than directly contradictory. The court concluded that a defendant cannot rely on a judicial admission that the defendant himself proves is false. (Id. at pp. 657658.)
Not all judicial admissions are alike
Judicial admissions are not solely confined to affirmative allegations. Judicial admissions can also be determined by a party’s failure to deny an allegation. Defendants are not immune to judicial admissions and their answers should be especially scrutinized in Federal Court where general denials are
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not allowed. However, judicial admissions do not result from the permissible use of inconsistent counts or defenses unless they involve contradictions of fact in a verified pleading. (See Beatty v. Pacific States Savings & Loan Co. (1935) 4 C.A. 2d 692, 697-98.) Although not often utilized by opposing counsel as judicial admissions, a stipulation as to disputed evidence or facts, if not in excess of the authority of the attorneys entering it and if conforming to procedural requirements, results in a judicial admission removing the issues agreed upon from the case in which such stipulation is made. (Gonzales v. Pacific Greyhound Lines (1950) 34 Cal.2d 749.) As such, stipulations to facts should always be fully investigated and avoided if possible, unless you as a practitioner
44 — The Advocate Magazine
understand the conclusiveness of the factual proposition that you are agreeing too. Judicial admissions are not only confined to pleadings or stipulations. An oral statement by counsel in the same action is a binding judicial admission if the statement was an unambiguous concession of a matter then at issue and was not made improvidently or unguardedly. (Fassberg Const. Co. v. Housing Authority of City of Los Angeles (2007) 152 Cal.App.4th 720.) Not every document filed by a party constitutes a pleading from which a judicial admission may be extracted. Section 420 of the Code of Civil Procedure explains that pleadings serve the function of setting forth “the formal allegations by the parties of their respective
claims and defenses, for the judgment of the Court.” “The pleadings allowed in civil actions are complaints, demurrers, answers, and cross-complaints.” (Code Civ. Proc., § 422.10.) When these pleadings contain allegations of fact in support of a claim or defense, the opposing party may rely on the factual statements as judicial admissions. (Myers v. Trendwest Resorts, Inc., (2009) 178 Cal.App.4th 735, 746.) Moreover, admissions in pleadings are not always dispositive of an ultimate issue or other probative facts. (Electronic Equipment Express, Inc. v. Donald H. Seller & Co. (1981) 122 Cal.App.3d 834, 850.) Even where an admission may exist, leave to amend is routinely and should be granted. (Bahan v. Kurland, (1979)
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98 Cal.App.3d 808, 812; see also Valerio v. Andrew Youngquest Constr. (2002) 103 Cal.App.4th 1264, 1272, Avalon Painting Co. v. Alert Lbr. Co. (1965) 234 Cal.App.2d 178, 184-185; Berman v. Braumberg (1977) 56 Cal.App.4th 936, 948-949.) A judicial admission is not treated procedurally as evidence. For example, the particular pleading or allegation is not formally offered in evidence but may nevertheless be relied upon and treated in argument as part of the case. Although judicial admissions are usually conclusive, California does allow a party to amend or withdraw its admission under proper circumstances. Dang v. Smith, supra, (2010) 190 Cal.App.4th at 659, n.1 said the law recognizes that a pleader may contradict a prior judicial
admission provided there is a showing of mistake or other excuse for changing an allegation of fact. Also, pursuant to section 2033.300 of the Code of Civil Procedure, a party may withdraw or amend an admission made in response to a request for admission on leave of court granted after notice to all parties. However, the court may permit withdrawal or amendment of an admission only if it determines that the admission was the result of mistake, inadvertence, or excusable neglect, and that the party who obtained the admission will not be substantially prejudiced in maintaining that party’s action or defense on the merits. (New Albertsons, Inc. v. Superior Court (2008) 168 Cal.App.4th 1403.)
Evidentiary admissions Although the statements or allegations of fact in a plaintiff ’s pleadings may not constitute binding and conclusive judicial admissions, the statements in pleadings may properly be considered as evidentiary admissions or prior inconsistent statements. (Magnolia Square Homeowners Assn. v. Safeco Ins. Co. (1990) 221 Cal.App.3d 1049, 1061; Dolinar v. Pedone (1944) 63 Cal.App.2d 169, 176; Jones v. Tierney-Sinclair (1945) 71 Cal.App.2d 366, 373; 4 Witkin, supra, Pleading, § 414, p. 511; 1 Witkin, Cal. Evidence, supra, Hearsay, § 98, at pp. 922-923.) Evidentiary admissions should not be confused with judicial admissions. Understanding the differences between these similar but distinct legal principles
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gives complex-litigation practitioners insight necessary to advance past summary judgment and ultimately prevail at trial. Judicial admissions can have harsh consequences and can be dispositive for your client’s case. Evidentiary admissions are those alleged admissions which you commonly see in a motion for summary judgment that you are opposing. Unlike judicial admissions, when faced with evidentiary admissions in a summary judgment, the practitioner is required to submit other competent evidence rebutting defendant’s evidence which creates a material issue of fact allowing the case to proceed to trial. The admissibility of evidentiary admissions derives from one of the most well-known and often repeated tenets of law: An out-of-court statement offered for its truth is hearsay and is not admissible in court. Evidentiary admissions are exceptions to the hearsay rule. They are statements made by a party or its agent, regardless of whether they are made out of court or in court, typically used to contradict or otherwise impeach the party’s current assertion. Evidentiary admissions can also assist in proving the truth of the matter asserted, depending on the circumstances surrounding the making of the statement. They are exempted from the definition of hearsay under the California and Federal Rules on the theory that their admissibility into evidence is the result of the adversary system rather than satisfaction of the conditions of the hearsay rule. Unlike judicial admissions, evidentiary admissions are merely considered another item in evidence and are not binding or conclusive on the trier of fact. Like any other evidence, evidentiary admissions are subject to contradiction or explanation. More specifically, they can be rebutted with other competent evidence. Thus, the classification of a statement as either an evidentiary or a judicial admission has a tremendous impact on the way an issue is treated. An evidentiary admission is an item in the mass of evidence that the jury can consider, while a judicial admission is conclusive that the evidence is automatically accepted as true!
This difference in how a court classifies the admission, as either judicial or evidentiary, may in some circumstances decide the case. For instance, in a realestate action, where the statute of frauds presumably applies, if plaintiff ’s counsel incorrectly states that the contract was oral, the court may bind the plaintiff to his or her counsel’s statement and dismiss the case for failure to satisfy the statute of frauds. (Link v. Wabash RR. Co. (1962) 370 U.S. 626, 633-34.) The California Evidence Code sets forth the admissibility of evidentiary admissions as follows: Evidence Code section 1220 states evidence of a statement is not made inadmissible by the hearsay rule when offered against the declarant in an action to which he is a party in either his individual or representative capacity, regardless of whether the statement was made in his individual or representative capacity. (See also Evid. Code, § 1222 [admission authorized by party]; § 1235 [prior inconsistent statement.]) The Federal Rules treat evidentiary admissions similar to California State Courts. It is now well accepted that statements made by an attorney during the course of litigation, whether oral or written, are presumed to be authorized by the client, and thus constitute admissions by that party. In fact, Rules 801(d)(2)(B),(C), and (D) of the Federal Rules of Evidence provide that any relevant statement made by a party or his agent acting in the scope of his employment, which is offered against that party, is generally admissible into evidence as an evidentiary admission (Fed. R. Evid. 801(d).)
The effect of judicial and evidentiary admissions on summary judgment As stated above, evidentiary admissions often provide inadequate support for summary judgment because the person against whom such evidentiary admissions are offered may explain the admission and thereby, in effect, controvert it or at least avoid being held to the fact apparently admitted. (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 426.)
Defendants often, and sometimes with success, rely on judicial admissions in the opposing party’s pleading to conclusively establish or eliminate triable issues of material fact. (Myers v. Trendwest Resorts, Inc., supra, 178 Cal.App.4th at 747.) In summary-judgment or summaryadjudication proceedings, admissions of material facts made in an opposing party’s pleadings are binding on that party as judicial admissions; they are conclusive concessions of the truth of those matters, are effectively removed as issues from the litigation, and may not be contradicted by the party whose pleadings are used against him or her. (St. Paul Mercury Ins. Co. v. Frontier Pacific Ins. Co. (2003) 111 Cal.App.4th 1234.) However, a judicial admission is effective (i.e., conclusive) only in the particular case it was made. (4 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 453, p. 586, e.g., Betts v. City Nat. Bank (2007) 156 Cal.App.4th 222, 235, (admission in proposed probate pleading not binding because pleading was not filed in current case.) Moreover, it is well established that fragmentary, tacit, equivocal, or ambiguous allegations in a pleading do not constitute conclusive judicial admissions. (Kirby v. Albert D. Seeno Construction Co. (1992) 11 Cal.App.4th 1059, 1066-67, Irwin v. Pacific Southwest Airlines (1982) 133 Cal.App.3d 709, 714.) A pleading containing legal conclusions and mixed legal-factual statements does not constitute a judicial admission, and contrary evidence is allowed. (Berman v. Braumberg (1977) 56 Cal.App.4th 936, 949 [mistaken legal conclusion], Bahan v. Kurland (1979) 98 Cal.App.3d 808, 812 [mixed legal and factual conclusion].) Two arguments can be effectively advanced when opposing a summary judgment where the defendant has alleged that you are bound by conclusive judicial admissions. More often than not, the alleged conclusive judicial admission of fact is not actually a factual assertion at all but merely a legal conclusion that is not binding i.e., the legal conclusion depends on disputed facts. Second, many times the alleged judicial admission is not a judicial admission, JANUARY 2014
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but rather an evidentiary admission which can be rebutted with competent facts. Furthermore, courts are reluctant to characterize admissions as judicial and
conclusive rather than evidentiary. In Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465, 482, the Court held that summary judgment should not be based
on tacit admissions or fragmentary and equivocal concessions, which are contradicted by other credible evidence. Likewise, after the summary judgment, many attorneys incorrectly attempt to characterize a fact listed as undisputed during the motion for summary judgment as conclusive in later proceedings (trial) in the same case. As such, many attorneys opposing such motions are wary of listing facts as undisputed, fearing that the fact which was undisputed at the summary judgment will be used against him or her at trial. The appellate court has provided clarity on this issue. An agreement in the separate statement that a fact is ‘undisputed’ is a concession only for purposes of the summary judgment motion. It is not evidence (because not under oath or verified); nor is it a judicial admission. (Wright v. Stang Manufacturing Co. (1997) 54 Cal.App.4th 1218, 1224.) In Wright, defendants sought to defeat a product liability, at the time of trial, claiming that because plaintiff had not disputed some of the facts made at the time of summary judgment he was therefore bound to those “undisputed facts” at the time of trial. The trial court found in favor of the defendants, finding that the failure to dispute the fact at summary judgment was a continuing admission and was conclusive. The Court of Appeal rejected defendants’ argument, holding that defendants failed to establish that plaintiffs’ response to their separate statement of undisputed facts [should have been] accorded the same effect as a judicial admission in a pleading. (Id. at fn. 2-3.) The Wright court held that separate statements of undisputed facts in support of a motion for summary judgment or adjudication make no binding judicial admissions. Meyers v. Trendwest follows Wright on this point. (Id., 178 Cal.App.4th at p. 747.)
Be wary of your client’s prior factual assertions. Generally, a pleading containing an admission is admissible against the pleader in a proceeding subsequent to
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the one in which the pleading is filed. This is true even on behalf of a stranger to the former action. (Dolinar, supra, 63 Cal.App.2d at 176.) However, the plead-
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statements were inadvertently made or were not authorized by him or made under mistake of fact. (Id. at 177.) Practitioners in complex civil and business litigation should especially be wary of the consequences of judicial admissions in earlier litigation. For example, you represent a client who claims that his prior attorney committed malpractice leading to his bankruptcy. Likewise, your client has filed separate complaints against other third parties claiming that these third parties are also at fault or the cause of his demise. Those other pleadings, and the factual allegations made in those pleadings are viewed as evidentiary and sometimes judicial admissions which can impact your ability to pursue the malpractice case and/or the damages which you would be entitled to recover. Your clients will not understand the impact of these collateral actions and/or the statements and effect on the malpractice action. A review of all complaints and pleadings should be undertaken by the practitioner in order to evaluate the effect of judicial/ evidentiary admissions in those collateral proceedings.
An allegation in a pleading superseded by later amendment is not a judicial admission. (See Witkin 1 Evidence Ch. VI, Â§ 97.) A pleading superseded by later amendment has been determined to be neither a conclusive judicial admission nor even an evidentiary admission but only a prior inconsistent statement that may be used solely for impeachment and not as affirmative evidence. (Meyer v. State Bd. of Equalization (1954) 42 Cal.2d 376.) Because prior inconsistent statements are now admissible under their own hearsay exception, the Meyer rule has lost its significance; and unless the courts should decide to exclude it altogether, the superseded pleading will have evidentiary effect. More recent precedent has stated that superseded pleadings may be used at trial as admissions against interest, but the party who made the pleadings must be allowed to explain the changes.
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(Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 426.)
The effect of judicial admissions, especially at the time when a summary judgment is brought, cannot be underestimated. A judicial admission may (1) prove a fact that could not otherwise be proven by competent evidence; (2) prevent the introduction of damaging evidence; and (3) even create a fact that is otherwise nonexistent. Judicial admissions normally cannot be rebutted and prevent the maker of the admission from doing so. However, because of the potentially devastating impact of judicial admissions, trial courts have the discretion to accept or reject treating a state-
ment as a judicial admission either characterizing the admission as evidentiary or allowing, in appropriate circumstances, a motion to amend or modify the pleading as a result of mistake or inadvertence. The take away is this – get the facts right at the time you prepare your complaint and understand the other pleadings that may exist in any collateral proceedings. Paul Traina earned his J.D. from Pepperdine University School of Law, Malibu, California and is a partner at the law firm of Engstrom, Lipscomb & Lack. He was admitted to the California State Bar in 1991 and specializes in Complex Civil Business Litigation, Class Action Lawsuits, Securities Litigation, and Professional Liability Claims cases. Among his many awards he was named
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one of Southern California’s Super Lawyers, 2004-2008. He also served as an Associate Editor Consumer Attorneys of California, 2002-2003. Jared Beilke earned his J.D. from Southwestern University School of Law, Los Angeles, California and is a partner at the law firm of Engstrom, Lipscomb & Lack. He was admitted to the California State Bar in 1997 and specializes in Business Litigation, Environmental Litigation, Insurance Bad Faith, and Personal Injury. Andrew Jacobson earned his J.D. from UCLA School of Law and is an associate at the law firm of Engstrom Lipscomb & Lack. He specializes in complex civil and business litigation.
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Brian S. Kabateck
Going beyond Workers’ Compensation for injured employees A look at the common exceptions to California’s exclusive remedy rule Most attorneys understand that when an employee has been injured at work, the employee is limited to the remedies available under the Workers’ Compensation Act, Labor Code sections 3600 et seq. There are only a handful of recognized exceptions to this “exclusive remedy rule.” As a result, it is tempting to concentrate on potential third-party defendants and assume the employer is immune from civil liability, particularly if the injured employee has already filed or received worker’s compensation benefits. But employer immunity is not a foregone conclusion. There are several situations in which injured workers can file and collect workers’ compensation benefits and also sue their employers for the same incident. This article provides an overview of the history and purpose of the exclusive remedy doctrine and the recognized exceptions. (This article is limited to employer immunity under the Workers’ Compensation Act, Lab.Code. §§ 3600 et seq. It does not cover coemployee liability or the liability of general contractors for subcontractor employee injuries.)
California’s workers’ compensation laws have existed for more than 100 years. In fact, California was one of the first states to adopt a comprehensive statutory scheme for workplace injuries. From the very beginning, California’s workers’ compensation laws were designed to strike a bargain between employees and their employers in which employers assumed liability for workplace injury regardless of their fault, and in return, employees gave up their right to sue their employers (or co-employees) in court. This presumed “compensation bargain” is the foundation upon 56 — The Advocate Magazine
which the exclusive remedy rule was built. The Roseberry Act of 1911 was the beginning of California’s efforts to compensate injured employees while insulating employers from the potentially devastating financial consequences of civil liability. The Roseberry Act encouraged employers to provide voluntary workers’ compensation disability benefits in exchange for civil immunity. The Workers’ Compensation Insurance Safety Act of 1913, also known as the Boynton Act, made those benefits compulsory and precluded employees from bringing lawsuits against their employers. In 1917, the Workers’ Compensation Industrial Safety Act was amended, becoming far more comprehensive than its predecessors. The 1917 Act specifically precluded employees from filing civil suits and deemed workers’ compensation the “exclusive remedy” for any work-related injuries. The exclusive remedy rule set forth in the 1917 Act was later codified in Labor Code section 3600, which sets forth the conditions that must exist to trigger the exclusivity rule, and section 3602, which bars civil actions against an employer. Through the ensuing years, judicially-created exceptions threatened to erode these exclusivity provisions. Thus, in 1982, the Legislature amended section 3602, ratifying some of those judicially-created exceptions, including those for assault and fraudulent concealment of an injury, and limiting others, such as the dual capacity doctrine which had greatly expanded employer liability for product defect claims. In the last 20 years, however, the California Supreme Court has consistently held that the Labor Code is not the be-all-end-all for exceptions to the exclusive-remedy rule. Employer
liability is still alive and well for certain types of employer conduct that falls outside the compensation bargain. Although the “outside the compensation bargain” exception expands an employee’s right to sue his or her employer, the courts have limited the type of conduct that qualifies for the exception to that which falls outside the normal employment relationship in violation of public policy.
Conditions of compensation – Labor Code section 3600
The exclusive remedy rule applies only when the injury meets the “conditions of compensation” listed under Labor Code section 3600, subdivision (a). If any one of the conditions is not met, the employee may be able to pursue a lawsuit outside the workers’ compensation system. Section 3600 provides a laundry list of conditions; however, the first two are threshold issues in any exclusive remedy analysis. (1) Where, at the time of the injury, both the employer and the employee are subject to the compensation provisions of this division. This condition contemplates an employment relationship; if the injured worker is not an “employee,” the exclusive remedy rule does not apply. Not surprisingly, the Workers’ Compensation Act provides a presumption in favor of finding an employment relationship. Under Labor Code section 3357, any person who renders service for another is presumed to be an employee. However, the presumption does not apply if the injured worker is an “independent contractor.” This is an important avenue to explore when analyzing whether a client has a valid case against the person or company that hired him.
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The question of whether an injured worker is an “employee” or “independent contractor” is a question of fact that depends on several factors. The most influential factors include whether the alleged employer had the right to control the manner and means of accomplishing the result desired from the services rendered, whether the alleged employer had the right to discharge at will, whether the alleged employer provided tools, equipment, and location, the method of payment, length of time the services were to be performed, etc. (S.G. Borello & Sons, Inc. (1989) 48 Cal.3d 341.) Injured workers often invoke the “independent contractor” stance when they are sent by one employer to perform services for a third party, such as when a temporary employment agency supplies a business with workers. In this situation, injured workers argue they are independent contractors for the thirdparty hirer. California courts, however, have routinely rejected this argument pursuant to the “special employment doctrine.” Under the special-employer doctrine, an employee can have two employers (a general employer and a special employer) as long as both employers have some right of control over the employee’s performance. Both employers will be responsible for workers’ compensation benefits and both will be immune from civil liability under the exclusive remedy rule. (Ybarra v. John Bean Technologies Corp. (E.D. Cal. 2012) 853 F.Supp.2d 997). (2) Where, at the time of the injury, the employee is performing service growing out of and incidental to his or her employment and is acting within the course of his or her employment. Assuming the plaintiff is an employee, the second issue is whether the injury happened in the “course of employment.” If not, the employee may bring a tort action against the employer, assuming some basis of tort liability can be shown. This situation arises when an off-duty employee is injured on work premises or when an employee is injured while performing services outside the scope of his
normal job duties or outside normal work hours. This would appear to be a straightforward exception. The courts, however, have been reluctant to allow employees to sue their employers in these situations. Generally, if there is a nexus between the employee’s work and his injury, the injury arose in the course of employment and the exclusive remedy applies. For example, in Eckis v. Sea World Corp. (1976) 64 Cal.App.3d 1, 9, the Court held that the employee was in the course and scope of her employment while she was riding a whale at her employer’s request, even though she had been hired as and regularly performed the work of a secretary. The court concluded the exclusive remedy rule applies, if: “(1) an employee is injured on the employer’s premises during regular working hours, (2) when the injury occurs while the employee is engaged in an activity which the employer has requested her to undertake, and (3) when the injury-causing activity is of service to the employer and benefits the employer’s business.” This is largely true even if the “activity causing the injury was not related to the employee’s normal duties or the circumstances surrounding the injury were unusual or unique.” (Ibid.) Additionally, an off-duty injury might still fall within the “course of employment” if the injured employee reasonably expects that the activity is expressly or implicitly required by the employment. (Kidwell v. Workers’ Comp. Appeals Bd. (1989) 33 Cal.App.4th 1130. [CHP officer’s injury incurred at home, while off duty, while practicing long jump required for annual physical fitness test, was considered in course of employment because officer reasonably believed practice was required to pass test].)
The Labor Code exceptions
If the conditions in Labor Code section 3600 are met, an employer is immune from civil liability unless one of the recognized exceptions applies. The most commonly recognized exceptions to employer immunity are found in Labor Code sections 3602(b), 3706, and 4558.
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(1) Employer’s willful physical assault §3602(b)(1) Courts have limited this exception to situations where an employer uses force or violence, or makes a physical move coupled with the threat of violence (pulling a gun on an employee and threatening to kill him). Employees must also show an actual, specific intent to cause injury. (Magliulo v. Superior Court (1975) 47 Cal.App.3d 760 [waitress could sue restaurant owner whom she accused of violently striking and pushing her]; Herrick v. Quality Hotels, Inns, Resorts (1993) 19 Cal.App.4th 1608 [security guard could sue his employer where security director threatened guard with a gun, pointing it at him and saying “I am going to blow your head off ”].) This exception may also apply where the employer “ratifies” one employee’s willful physical assault and battery of another. “Ratification,” however, can be difficult to prove. (Fretland v. County of Humboldt (1999) 69 Cal.App.4th 1478, 1489-1490 [employer did not ratify coemployee’s alleged assault and battery where there was evidence the employer investigated the plaintiff ’s complaints and reprimanded co-employee].) (2) Employee’s injury is aggravated by the employer’s fraudulent concealment of the existence of the injury and its connection with the employment. § 3601(b)(2). This exception is triggered when an employee’s injury or disease was caused by exposure to harmful chemicals or substances in the workplace. However, for the exception to apply, an injured worker must prove three elements: (1) the employer knew of the employee’s injury and its connection to employment; (2) the employer concealed that knowledge from the employee; and (3) the concealment aggravated the employee’s injury. (Foster v. Xerox Corp. (1985) 40 Cal.3d 306, 311.) The first element requires a plaintiff to prove the employer had actual knowledge of the specific injury and its connection to the workplace; mere
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awareness of a risk, even a substantial risk, is insufficient. (Santiago v. Firestone Tire & Rubber Co. (1990) 224 Cal.App.3d 1318, 1331.) (3) Employer’s defective product, sold to a third party, and provided for employee’s use by a third person — § 3602(b)(3) This is often referred to as the “product-liability exception.” Before 1982, employees could sue an employer for products liability if their injuries were caused by an employer’s defective product if that product was manufactured for the sale to the public. If the product was manufactured solely for use in the workplace, the employee’s exclusive remedy was workers’ compensation. This was a common law exception to the exclusive remedy rule known as the “dual capacity doctrine.” However, in 1982 the California Legislature limited the scope of the dual capacity doctrine as a basis for liability by enacting Labor Code section 3602(b)(3). Under § 3602(b)(3), an exception applies only where the employee’s injury was caused by the employer’s product, which itself was provided to the employee not by the employer, but by an independent third person who obtained the
product from the employer for valuable consideration. In other words, the employee must come into contact with the product as a consumer, not as part of his or her job. (Behrens v. Fayette Manufacturing Co. (1992) 4 Cal.App.4th 1567, 1574-1575 [finding the exception did not apply where employee was sent to repair a wind turbine manufactured by her employer and sold to a third party; court concluded the employee did not come into contact with the allegedly defective wind turbine as a consumer, but as the primary objective of her job].) (4) Employer fails to obtain Workers’ Compensation Insurance — § 3706 This one is obvious. If employer failed to obtain workers’ compensation insurance, the exclusive remedy does not apply and the employer is subject to civil liability. (5) Power Press Exception — § 4558 To state a cause of action under Labor Code section 4558, the plaintiff must show (1) the machine is a “power press” as defined by the statute; (2) injury or death is proximately caused by the employer’s knowing removal of or knowing failure to install a point of operation guard on a power press, and (3) the
removal or failure to install was specifically authorized by the employer under conditions known by the employer to create a probability of serious injury or death. There are many instances where an employee is injured on a machine that does not have the proper guarding. However, the fact that a machine did not have a guard does not automatically invoke an exception to the exclusive-remedy rule. The Labor Code specifically limits the “power press” exception to “any material-forming machine that utilizes a die which is designed for use in the manufacture of other products.” (Lab. Code, § 4558, subd.(a)(4).) The issue will come down to whether the machine uses a “die” as contemplated by the Labor Code. While there is no all-encompassing definition of the word “die” for purposes of avoiding the exclusive remedy rule, the California Supreme Court has determined that “die,” refers to a tool that “imparts shape to material by pressing or impacting against or through the material, that is, by punching, stamping or extruding.” (Rosales v. Depuy Ace Medical Co. (2000) 22 Cal.4th 279 [holding that
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the term “die” does not refer to a tool that imparts shape by cutting along the material in the manner of a blade]; see also, Graham v. Hopkins (1995) 13 Cal.App.4th 1483 (1993) [rejecting the defense’s broad definition of “die” as “a device which shapes materials”]; McCoy v. Zahniser Graphics, Inc. (1995) 39 Cal.App.4th 107 [printing press was not “power press,” since it did not form materials to be used in manufacture of other products].) The California Supreme Court recently limited the power-press exception with respect to derivative claims, finding Labor Code section 4558 does not provide an employee’s spouse with a cause of action for loss of consortium. In LeFiell Mfg. Co. v. Superior Court, 55 Cal.4th 275 (2012), O’Neil Watrous filed a civil action against LeFiell Manufacturing for injuries O’Neil suffered while he was operating a swaging machine at work. The swaging machine is a “power press machine” within the meaning of Cal. Labor Code section 4558. His spouse filed a claim for loss of consortium; however, the supreme court held that the loss of consortium claim should have been dismissed on demurrer by the trial court because “where, as here, the worker’s power press injuries do not prove fatal, the Legislature has expressly restricted standing to bring the action at law… to the injured worker alone [and not his spouse].” The LeFiell case is a perfect example of how California courts will only interpret the statutory exceptions by their express terms.
Conduct that falls outside the compensation bargain
The Labor Code does not provide the entire universe of exceptions to the exclusive remedy rule. Thanks to the California Supreme Court, there are additional exceptions for employer conduct that falls outside the “compensation bargain.” As the California Supreme Court noted in the landmark case,
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Fermino v. Fedco, 7 Cal.4th 701 (1994) (“Fermino”), the Labor Code does not “definitively delineate the scope of the compensation bargain.” While the California Supreme Court expanded an employee’s right to sue his or her employer for misconduct that falls “outside the compensation bargain,” courts have generally limited this exception to employer conduct that is not a “normal part of the employment relationship.” (Id. at 715.) The specifically enumerated exceptions found in the Labor Code clearly meet this test as do other types of conduct not mentioned in the Labor Code such as false imprisonment, disability discrimination, sexual harassment, defamation, and wrongful termination in violation of public policy. (Fermino v. Fedco, supra, 7 Cal.4th 701 [false imprisonment not subject to exclusive remedy rule]; Shoemaker v. Myers (1990) 52 Cal.3d 1 (1990) [exclusive remedy did not bar plaintiff ’s claim for wrongful termination in violation of public policy where plaintiff was subjected to harassment and termination in retaliation for whistle-blowing]; City of Moorpark v. Superior Court (1998) 18 Cal.4th 1143 [exclusive remedy rule does not bar discrimination claims brought under the Fair Employment Housing Act, Government Code section 12940]; Davaris v. Cubaleski (1993) 12 Cal.App.4th 1583, 1591 [defamatory statements made to damage employee’s reputation are neither “normal part of the employment relationship” nor risk of employment within exclusivity provision of workers’ compensation act].) One of the most common misconceptions in determining whether an employer’s conduct falls “outside the compensation bargain” is that any intentional or willful misconduct by an employer escapes the clutches of the exclusive remedy rule. This is an oversimplification of the principles set forth in Fermino. There are some injuries caused by ordinary employer conduct that intentionally, knowingly, or recklessly harms an employee, which are still subject to workers’ compensation exclusivity, but may entitle the employee to 66 — The Advocate Magazine
increased workers’ compensation benefits. (Fermino v. Fedco, supra, 7 Cal.4th 710; Arendell v. Auto Parts Club (1994) 29 Cal.App.4th 1261.) The real test is whether the employer’s conduct violated public policy: “An inquiry into an employer’s motivation is “undertaken not to determine whether the employer intentionally or knowingly injured the employee, but rather to ascertain whether the employer’s conduct violated public policy and therefore fell outside the compensation bargain.” (Fermino v. Fedco, supra, 7 Cal.4th 715.) A prime example of intentional employer misconduct that is still subject to the exclusive remedy rule is failure to provide a safe workplace, including willful violation of safety codes or regulations. (See, e.g., Arendell v. Auto Parts Club (1994) 29 Cal.App.4th 1261 [two store employees who were injured in a robbery alleged employer failed to provide security despite knowing the store was in a high crime area; court held the employees failed to allege the employer acted deliberately with the specific intent to injure the employees and found there is no fundamental public policy requiring a retail employer to provide adequate store security]; Gunnell v. Metrocolor Laboratories, Inc. (2001) 92 Cal.App.4th 710, 727 [employer’s concealment of hazardous nature of cleaning substances and failure to provide adequate protective gear and proper training for employees remains within the course of employment and does not fall outside the compensation bargain].) In other words, simply alleging that an employer intentionally injured an employee is not enough to avoid the exclusive remedy rule.
A note on intentional infliction of emotional distress claims
Claims for intentional infliction of emotional distress are viable only if the emotional distress resulted from conduct that falls outside the compensation bargain (e.g., in connection to discrimination, sexual harassment, defamation, etc.). When emotional distress arises from actions that are a normal part of the
employment relationship, the claim will be barred by the exclusive remedy rule. (Fretland v. County of Humboldt, 69 Cal.App.4th at p. 1492 [“emotional distress claims are not barred by the exclusivity rule to the extent they seek emotional distress damages for the alleged work-related injury discrimination”]; La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co. (1994) 9 Cal.4th 27 [exclusive remedy rule barred claims for any emotional injury caused by the employer’s alleged failure to give the employee the auditing hours promised, unacceptable rate of pay, cramped office space, poor lighting conditions, leaking roof, and office remodeling; this conduct was clearly the sort that normally occurs in the workplace, even if deemed a constructive discharge].)
Although there are only a handful of exceptions to the exclusive remedy rule, each one has multiple characteristics and nuances. An attorney presented with a client injured at work should take sufficient time to review these exceptions to assess whether the employer is a viable defendant in a civil lawsuit. Brian Kabateck is the managing partner of Los Angeles-based Kabateck Brown Kellner, LLP, the 2013 president of the Consumer Attorneys of California and has been named one of the top 100 lawyers in California on numerous occasions. Anastasia Mazzella is a senior associate at Kabateck Brown Kellner LLP. She is an integral part of the law firm’s practice, having evaluated hundreds of cases in the areas of products liability, employment, business litigation, and professional liability and consumer protection laws. Ms. Mazzella has researched, drafted and argued over 100 motions and briefs in both state and federal court.
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The fundamentals in establishing a fraud case A look at the issues and law that arise in fraud cases at differing stages of litigation Matters involving fraudulent conduct are all around us. They range from the used-car lot rolling back odometers to multi-national general contractors submitting false invoices to their clients to Wall Street’s involvement in the subprime fiasco. Despite the fact that fraudulent conduct is being perpetuated every day, there are not enough governmental resources to prosecute the wrongdoing. This is where the civil justice system plays a vital role; filling a void created by governmental budget cuts and other “austerity” measures that have been applied to curb government oversight. When one takes a brief overview of the CACI Instructions, you will not find a cause action called “fraud.” Rather, fraud cases are a cluster of causes of actions which include intentional misrepresentation, concealment, false promise and negligent misrepresentation. Each one has unique aspects that impact everything from pleading through proof at trial. What this article attempts to do is set forth some of the issues and law that generally arise in fraud cases at differing stages of litigation, up to and including trial.
Pleading rules differ in fraud cases
of fraud. But as discussed below, there are situations where fraud need not be alleged with particularity. “Less specificity is required when Respondent must necessarily possess full information concerning the facts of the controversy.” (Committee On Children’s Television, Inc. v. General Foods Corp., 35 Cal.3d at p. 217.) “Even under the strict rules of common law pleading, one of the canons was that less particularity is required when the facts lie more in the knowledge of the opposite party . . .” (Ibid.) Furthermore, the requirement of “particularity” in pleading fraud should not be overdone, in that complaints should be kept to a reasonable length. (Id. at p. 217.) When a plaintiff files a claim for fraud, defendants almost always seem to file a demurrer based on the issue of the pleadings specific enough. The cases above should provide a basis for some push back. Ultimately, what you must demonstrate in the complaint is the “who, what, where, and how” of the fraud. To the extent that you cannot allege some of these facts, you must be able to persuasively argue that the missing facts are within the knowledge of the defendant.
The pleading rules of liberality have a few exceptions. One area that requires allegations to be made with particularity is that of fraud. (Committee On Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) The particularity requirement serves two purposes. First, it provides notice to the Respondent so as to furnish the Respondent with certain definite charges which can be intelligently met. Second, the pleading should be sufficient to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge
There was a long-standing rule in California that prohibited the use of parol evidence to establish fraud in the inducement. The use of evidence of a prior or contemporaneous statement that contradicted the terms of a written instrument was excluded under the parol evidence rule, even if a claim of fraud was raised. (Bank of America etc. Assn. v. Pendergrass (1935) 4 Cal.2d 258, 263.) The long-standing prohibition of introducing evidence of fraud that may also be parol evidence was recently over-
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turned in the matter of River Island Cold Storage v. Fresno-Madera Production Credit Ass’n (2013) 55 Cal.4th 1169. The California Supreme Court held that “fraud undermines the essential validity of the parties’ agreement. When fraud is proven, it cannot be maintained that the parties freely entered into an agreement reflecting a meeting of the minds.” (Id., 55 Cal.4th at p. 1182.) Thus, California has re-established the fraud exception to the parol evidence rule, which was held abated for nearly 80 years. Even with the fraud exception, expect an aggressive cross-examination of the plaintiff (or signatory) to focus on the written terms of the contract. This will especially be true when asked about the written term that is being contradicted by the claimed fraudulent statement. This lends to attacking not only the veracity of the plaintiff claiming that fraudulent oral statements were made, but also the reasonableness of plaintiff ’s reliance on those fraudulent statements.
One of the major targets subject to attack in most fraud cases is the element of reasonable reliance. “Justifiable reliance is an essential element of a claim for fraudulent misrepresentation, and the reasonableness of the reliance is ordinarily a question of fact.” (Guido v. Koopman (1991) 1 Cal.App.4th 837, 843.) Actual reliance occurs when a misrepresentation is ‘an immediate cause of [a plaintiff ’s] conduct, which alters his legal relations.’ and when, absent such representations, ‘he would not, in all reasonable probability, have entered into the contract or other transaction.’ It is not . . . necessary that [a plaintiff ’s] reliance upon the truth of the fraudulent misrepresentation be the
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sole or even the predominant or decisive factor in influencing his conduct . . . It is enough that the representation has played a substantial part, and so has been a substantial factor, in influencing his decision. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 976-77, internal citations omitted.) In assessing actual reliance, one needs to look at the conduct of the plaintiff before the representations were made versus after. If the misrepresentation is an “inducing cause of the party’s assent,” then actual reliance exists. (1 Witkin, Summary of California Law, Contracts (10th Ed.), §300; citing Rest.2d, Contracts §167.) In assessing whether one’s reliance was justified, the focus is on the plain-
tiff ’s belief in light of his own knowledge and experience. (Gray v. Don Miller & Associates, Inc. (1984) 35 Cal.3d 498, 503.) However, a plaintiff cannot put his faith in representations that are patently and obviously false that “he must have closed his eyes to avoid discovery of the truth.” (Blankenheim v. E.F. Hutton, Co., Inc. (1990) 217 Cal.App.3d 1463, 1474.) Where a defendant asserts that a plaintiff ’s reliance was “preposterous” or “shown to be patently and obviously false,” the burden shifts to the defendant. (Hartong v. Partake, Inc. (1968) 266 Cal.App.2d 942, 965.) “Where a plaintiff commences an investigation, his failure to discover the truth may be excused by the defendant’s superior knowledge of the facts, [or] the difficulty in ascertaining all of the facts.” (Id., at p. 966.)
“Even if the plaintiff discovers some suspicious circumstances, his reliance is reasonable if the defendant allays his doubts with further assurances.” (Ibid.) When the issue of reasonable reliance is a close one, defendant’s discovery will delve into the sophistication of the plaintiff. (See CACI 1908.) Discovery will also focus on the circumstances surrounding the transaction, including the available evidence at the time of the transaction, assistance of other professionals, the amount being paid for what was received, etc. These issues usually take center stage at trial. In addition, the misrepresentation or concealed fact does not need to be the only reason why the plaintiff acted. “[I]t is well settled that the alleged fraud need not be the sole cause of a party’s reliance.” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 170.) Rather, all that needs to be shown is that the misrepresentation or concealed fact substantially influenced plaintiff ’s choice, even if it was not the only reason for his conduct. (CACI 1907.) In fact a “presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material.” (Engalla v. Permanente Medical Group, Inc., 15 Cal.4th at p. 977.) On the issues of reliance and causation, expect a slew of discovery regarding the reasons why someone entered into the contract. Obviously, people are motivated to enter into a contract for a whole host of reasons. What is important to establish is that the misrepresented or concealed fact was material or substantial enough to warrant a finding of causation.
Is rescission required?
The majority of fraud cases arise from contract. The issue always faced is whether a party must rescind the contract and seek restitution or affirm the contract and sue for fraud damages. First off, the plaintiff is allowed to make the election. (Campbell v. Birch (1942) 19 Cal.2d 778, 791.) Second, as a practical matter, the party may be forced to have to elect to affirm the contract and seek damages. For instance, an improvement
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made to your real property or business requires you, as a practical matter, to pursue damages. It would make little sense for instance, unless the job improvement was done in a manner that requires it to be torn out and redone, to rescind a roofing job if the fraud was centered on false bills for material and labor, but the job was otherwise adequate. This issue is one that needs to be addressed very early in the case.
California courts have recognized two measures of damages in fraud related cases: the “out-of-pocket” measure and the “benefit-of-the-bargain” measure. The “out-of-pocket” measure of damages is directed at restoring plaintiffs to the financial position that they enjoyed
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before the fraudulent transfer. (Stout v. Turney (1978) 22 Cal.3d 718, 725.) The “benefit-of-the-bargain” measure is concerned with satisfying the expectancy interest of defrauded plaintiffs by putting them in the position they would have enjoyed had the false representation been true. (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1240.) The “benefit-of-the-bargain” measure applies general tort damages. Civil Code section 3333 provides for an “amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not.” (Civ.Code, §3333.) Furthermore, the benefit-of-the-bargain rule has been viewed as an effective deterrent measure of damages, especially in cases of fraud. “Unlike
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the ‘out-of-pocket’ measure of damages, which are usually calculated at the time of the transaction, ‘benefit-of-the-bargain’ damages may be appropriately calculated as of the date of discovery of the fraud.” (Salahutdin v. Valley of California, Inc. (1994) 24 Cal.App.4th 555, 568.) The “benefit-of-the-bargain” measure of damages is concerned with satisfying the expectancy interest of the defrauded plaintiff by putting him in the position he would have enjoyed if the false representation relied upon had been true. (Stout, 22 Cal.3d at p. 725.) The “benefit-of-the-bargain” awards the difference in value between what the plaintiff actually received and what he was fraudulently led to believe he would receive. In fact, the “benefit-of-the-bargain” rule “contemplates an award even when the property received has a value equal to what was given for it.” (Stout, 22 Cal.3d at p. 725.) For this reason, courts have considered it a more effective deterrent to fraud. Where a fiduciary is involved, an award of damages under Civil Code section 3343 is much more expansive than the “out-of-pocket” standard. (See Salahutdin, supra, 24 Cal.App.4th at p. 565.) In fact, application of the “benefitof-the-bargain” measure of damages may be the just remedy in cases of fraud. Where there is a fiduciary involved, it benefits the plaintiff in both the issue of reliance (it is reasonable to rely on a fiduciary) and damages (more expansive approach to damages). The “out-of-pocket” measure of damages is straightforward. It ultimately allows recovery of any monies that were spent as a direct result of the fraud. The “benefit-of-the-bargain” measure allows a more creative approach to damages. It allows you to argue a measure of damages which is the difference of what the plaintiff expected to get and what he or she actually received because of the fraud. It is always important before you get anywhere near trial that you decide which of these two measures of damages you will seek as the two can vary widely based on the circumstances of the case.
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Hiring experts early in these types of cases may be warranted.
Inconsistent findings on the verdict form One issue that always seems to arise is the conflict of proof in an intentional misrepresentation/concealment claim versus a negligent misrepresentation claim. Inevitably (unless there was some form of waiver under contract), when one makes a claim for an intentional fraud, a negligent misrepresentation claim is also asserted. The trouble arises with the element requiring evidence that the defendant knew that the representation was false when it was made (intentional fraud) versus that the defendant may honestly have believed that the representation was true but had no reasonable grounds for believing it to be so (negligent misrepresentation). You can see that the difference in the two is the issue of the defendant’s state of mind. In the intentional-fraud context, the defendant knew that the statement made was false. In the negligent-representation claim, although the defendant may have believed the statement to be true, there was no reasonable basis to make it. If the jury makes a finding that both states of mind existed, you have a contradictory
finding and created a hornet’s nest of problems on appeal. A solution to this problem that my office has employed is two-fold. First, we spend a considerable amount of time during closing argument explaining the differences between these two elements in the differing claims. While displaying the actual jury instructions, we argue that it is either one or the other, hopefully having enough circumstantial evidence to prove the intentional conduct. Second, my office has employed a practice of placing the questions related to the intentional-fraud claim before the negligent-misrepresentation claim in the verdict form. We place a transition instruction after the intentional-fraud claim, after the damages question, which instructs the jury to skip the negligent-misrepresentation claim entirely. We understand that doing this waives our ability to raise issues on appeal related to the negligent-misrepresentation claim, but by doing so, we avoid the all too common problem of having inconsistent findings by the jury related to the defendant’s state of mind.
In no way does this article attempt to become the reference guide for fraud cases. A comprehensive analysis on this
topic could fill a book. The hope here is to provide enough information to serve as a starter for more trial lawyers to take up these cases. It is the author’s belief that by taking up more of these cases, it will aid in re-establishing the profession of law as a noble profession. Not only does prosecuting these cases bring an individual justice, but it also serves a societal function of holding those who prey on the vulnerable accountable under the law. There are not too many out there (except for the extreme fringes of the Chamber of Commerce) who believe that fraud on children, families and the elderly are positive actions and that prosecuting such cases is the equivalent of “ambulance chasing.” These cases tend to have the jury bias going in the plaintiff ’s direction and based on my own anecdotal research (whatever that’s worth), most folks believe that these cases should be prosecuted. Ara Jabagchourian is a partner at Cotchett, Pitre & McCarthy LLP, where he practices civil litigation in several areas, including financial fraud, injury and intellectual property. Prior to joining private practice, Jabagchourian served as a staff attorney for the Federal Trade Commission’s Bureau of Competition in Washington, D.C.
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Labor law: How quickly the post-MacDonald world turns A look at the doctrine of exhaustion of administrative remedies after MacDonald, as clarified by the legislature in Senate Bill 666 On August 27, 2013, the Third District Court of Appeal issued its opinion in MacDonald v. State of California (2013) 219 Cal.App.4th 67. The MacDonald court held that plaintiff Aaron MacDonald was barred from bringing a Labor Code section 1102.5 cause of action for failure to exhaust his administrative remedies. The Third District found that by failing to file a claim with the Labor Commissioner under Labor Code section 98.7, MacDonald did not exhaust his administrative remedies as required per Campbell v. Regents of the University of California (2005) 35 Cal.4th 311, 321. The MacDonald opinion expressly disagreed with the opinion of the Second District Court of Appeal in Lloyd v. County of Los Angeles (2009) 172 Cal.App.4th 320, which, until MacDonald, was the only published California case on point regarding the exhaustion of administrative remedies with the Labor Commissioner. Mere weeks after MacDonald, however, on October 5, 2013, Governor Brown signed SB 666. The legislative analysis of SB 666 unequivocally indicates that the bill clarifies that exhaustion of administrative remedies with the Labor Commissioner is not required unless the underlying statutory provision specifically requires exhaustion. Within weeks of the MacDonald decision, then, the rule regarding the exhaustion of administrative remedies with the Labor Commissioner went from well-settled under Lloyd, to contested under MacDonald, to clarified by the Legislature. This whirlwind reflects the continued relevance for both litigants and the courts of the doctrine of exhaustion of administrative remedies. As coined, the doctrine describes in broad terms a rather nuanced area of the law. This doctrine requires that when a remedy before an administrative agency is provided by 76 — The Advocate Magazine
law – i.e., statute, regulation, or ordinance – a party must seek relief in that forum before the court will act. In practical terms, if a plaintiff fails to exhaust a required administrative remedy, the plaintiff is barred from seeking relief from the courts. This seemingly simple definition belies a more complicated analysis of whether various “remedies” must be exhausted under this doctrine. To fully analyze this area of law, this article first examines some basic tenets of California administrative law. The article then examines the doctrine of exhaustion of administrative remedies (the “exhaustion doctrine”) in greater detail. The article next evaluates the recently passed SB 666, which clarifies the exhaustion doctrine under the Labor Code. The article concludes with some strategic considerations.
Admin Law 101
Administrative law is the vehicle by which the Legislature delegates authority to public agencies to administer our state statutory schemes. While not known as the most scintillating area of law, some principles of administrative law are nevertheless critical to understanding the exhaustion doctrine. In particular, procedural due-process rights, which are at the core of administrative adjudication, may be determinative of whether the exhaustion doctrine is requisite or excused. Under federal law, procedural due process applies only if government action deprives a person of “liberty” or “property.” (See, e.g., Board of Regents v. Roth (1972) 408 U.S. 564, 569-570.) In California, however, due process of law also applies to the administrative process itself: “[D]ue process safeguards required for protection of an individual’s statutory interests must be analyzed in the context of the principle that freedom from arbitrary adjudicative procedures is a substantive element of one’s liberty.” (Saleeby v. State Bar
(1985) 39 Cal.3d 547, 564 (emphasis added).) The Saleeby court went on to describe four considerations of due process protection: Generally, ‘the dictates of due process’ necessitate considering ‘(1) the private interest that will be affected by the official action, (2) the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards, (3) the dignitary interest in informing individuals of the nature, grounds and consequences of the action and in enabling them to present their side of the story before a responsible governmental official, and (4) the governmental interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.’ (Saleeby, supra, 39 Cal.3d at 565 (emphasis added) (internal citations omitted).) Thus, procedural due process in administrative setting requires, at minimum, notice and the reasonable opportunity to be heard and to respond, with additional safeguards to be determined in the context of the proceeding. In Saleeby, the Bar was required to issue sufficient findings to afford Saleeby the ability to obtain judicial review of the Bar’s decision. (Saleeby, supra, 39 Cal.3d at 566-567) In addition, in Skelly v. State Personnel Board (1975) 15 Cal.3d 194, the court found that at the pre-discharge stage, due process required that the aggrieved employee be given “notice of the proposed action, the reasons therefore, a copy of the charges and materials upon which the action is based, and the right to respond, either orally or in writing, to the authority initially imposing discipline.” (Skelly, supra, 15 Cal.3d at 215.)
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California has gone to great lengths to protect procedural due-process rights. In addition, when a hearing is not explicitly provided by statute, California courts have read an implied right to a hearing into the statutory scheme. (See, e.g., Fascination, Inc. v. Hoover (1952) 39 Cal.2d 260, 269; Traverso v. People ex rel. Dep’t of Transportation (Caltrans) (1993) 6 Cal.4th 1152, 1163-1164.) Furthermore, even though due process of law applies only to state action, California courts have applied due-process procedures to certain private organizations, such as hospital staff or medical associations (see, e.g., Anton v. San Antonio Comm. Hosp. (1977) 19 Cal.3d 802, 815) or private employment contracts (see, e.g., Coltran v. Rollins Hudig Hall Int’l, Inc. (1998) 17 Cal.4th 93, 107-108).
Thus, knowing the administrative remedies available is critical for understanding when they must be exhausted before coming to court. Due-process rights, and the failure to provide them, may be a key factor in identifying whether the available administrative remedies must be exhausted.
The exhaustion doctrine
The exhaustion doctrine requires that when a remedy before an administrative agency is provided by law, a party must first exhaust that administrative remedy before coming to court. The exhaustion doctrine serves the public policy interests of bolstering administrative agency autonomy and authority, and promoting judicial economy by establishing a record for review
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and reducing or even avoiding litigation. Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280 established the exhaustion doctrine in California as one of jurisdiction: “[Exhaustion] is not a matter of judicial discretion, but is a fundamental rule of procedure laid down by the courts of last resort, followed under the doctrine of stare decisis and binding upon all courts . . . Exhaustion of the administrative remedy is a jurisdictional prerequisite to resort to the courts.” (Abelleira, supra, 17 Cal.2d at 293.) The remedies available may be internal to the party, such as internal procedures of a public employer (see, e.g., Campbell, supra, 35 Cal.4th 311) or external procedures of a public agency (e.g., exhaustion of administrative remedies with the Department of Fair Employment and Housing). Practically speaking, since exhaustion is a matter of the jurisdiction of the court, if a plaintiff failed to exhaust her administrative remedies, the defense can demur to the complaint, move for summary judgment or summary adjudication, or make a motion for judgment on the pleadings. Exhaustion is a complete defense, and your client’s case will be dismissed for failure to exhaust. (At least one case seems to indicate that unless this defense is raised at the trial court, the defense is waived. (Green v. City of Oceanside (1987) 194 Cal.App.3d 212, 222-223. But cf. Hittle v. Santa Barbara Cty. Employees Retirement Ass’n (1985) 39 Cal.3d 374, 389.) 1 However, numerous exceptions to the exhaustion doctrine have been developed. These exceptions generally fall within two categories: “faulty procedure” and “irreparable injury.” This article will focus on the “faulty procedure” exceptions, as irreparable injury claims are not often accepted. (For a successful “irreparable injury” case, see Dep’t of Personnel Adm’n v. Sup. Ct. (1992) 5 Cal.App.4th 155.) “Faulty procedure” exceptions include futility, inadequate remedy, lack of notice,
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lack of jurisdiction, and constitutional issues. The futility exception balances the purpose of exhaustion with the cost of enforcing it. Imposing the costs of exhaustion on a party is difficult to justify when those costs are certain to be a waste. When a party can show that the agency’s refusal to grant the relief sought is positively certain, then the remedy need not be exhausted. (Ogo Associates v. City of Torrance (1974) 37 Cal.App.3d 830, 834 (seeking relief from a zoning scheme enacted to block the very project the developer wanted to build).) Exhaustion is not excused, though, just because the agency is unlikely to grant the relief sought. (Yamaha Motor Corp. USA v. Sup. Ct. (1986) 185 Cal.App.3d 1232, 1241-1242 (finding that a series of previously decided cases adverse to the litigant’s position is not enough to state with certainty that the agency would continue to take the same position on those facts). But cf. Jacobs v. State Bd. of Optometry (1978) 81 Cal.App.3d 1022, 1030; Dep’t of Personnel Administration v. Superior Court (Greene) (1992) 5 Cal.App.4th 155, 166 (superseded by statute on other grounds); Doster v. Cty. of San Diego (1988) 203 Cal.App.3d 257, 261-262.) When a procedure fails to provide clearly defined mechanisms for the sub-
mission, evaluation, and resolution of complaints, the remedy is inadequate and exhaustion is not required. (Santa Teresa Citizen Action Group v. City of San Jose (2003) 114 Cal.App.4th 689, 701702.) Whether a party must exhaust an available administrative remedy, and whether that remedy is adequate under the law, is necessarily a fact-specific question pertaining to the administrative procedure in question. (See, e.g., Azusa Land Reclamation Co. v. Main San Gabriel Water Basin Watermaster (1997) 52 Cal.App.4th 1165, 1211.) Again, however, at minimum the procedure must provide for notice and the reasonable opportunity to be heard. Note, however, that even if an administrative remedy will not resolve all of the plaintiff ’s issues or the remedy is incomplete – e.g., the remedy does not provide for money damages – some courts still require exhaustion when exhaustion serves the doctrine’s purposes. (Edgren v. Regents of the University of California (1984) 158 Cal.App.3d 515, 521-522. But cf. Rojo v. Kliger (1990) 52 Cal.3d 65, 80-81 (exhaustion not required where agency cannot provide compensatory damages); Andrews v. County of Orange (1982) 130 Cal.App.3d
944, 968 at n.19 (disapproved of on other grounds by People v. Nesler (1997) 16 Cal.4th 561.) Lack of notice arises when a party lacks minimally adequate notice – exhaustion is not required. (Horn v. County of Ventura (1979) 24 Cal.3d 605, 616-618.) This exception typically arises in local land use planning cases. The lack of jurisdiction exception is poorly developed in the case law. According to some cases, a party does not have to exhaust if the subject matter of the dispute lies beyond the agency’s jurisdiction. (See, e.g., Keiffer v. Bechtel Corp. (1998) 65 Cal.App.4th 893, 899.) However, any legal issue could be framed as a dispute about jurisdiction, and the exhaustion doctrine normally applies to both legal and factual issues. Finally, a plaintiff is excused from the exhaustion doctrine when the plaintiff makes a constitutional challenge to the statutory scheme upon which the agency or its procedures are based, on its face. (State v. Superior Court (1974) 12 Cal.3d 237, 251 (challenging the underlying statute); Horn, supra, 24 Cal.2d at 611 (challenging the procedure).) The constitutional exception does not apply
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The exhaustion doctrine is not…
The exhaustion of administrative remedies doctrine is often confused with the requirement of exhaustion of judicial remedies and the primary jurisdiction doctrine. Be careful! Although they are related concepts, both are distinct from the administrative remedies’ doctrine. The exhaustion of judicial remedies rule generally states that once a party avails herself to administrative proceedings, the only way to challenge the factual findings and/or decisions of those proceedings is by seeking relief from the courts. The importance of the adequacy of the administrative remedies is highlighted here: without an adequate underlying factual record in the administrative proceedings, the court will not be able to determine whether to grant judicial relief from those factual findings! The judicial-exhaustion rule is based on the doctrine of res judicata and the issue preclusion of collateral estoppel. (Risam v. County of Los Angeles (2002) 99 Cal.App.4th 412, 419-420.) The primary jurisdiction doctrine is distinct from the exhaustion doctrine in that the exhaustion doctrine applies where the administrative agency is the exclusive forum in which a party may bring a claim. (City of Industry v. City of Fillmore (2011) 198 Cal.App.4th 191, 210.) On the other hand, the primary jurisdiction doctrine contemplates original jurisdiction by the courts, but the case may be shifted to an administrative agency which also has the power and special competence to resolve the case. In this situation, the agency makes the initial decision in the case, but typically the court retains the power of judicial review of the agency’s action. (Farmers Insurance Exchange v. Superior Court (1992) 2 Cal.4th 377, 390-391.) The confusion of the primary jurisdiction doctrine may be evident in
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Rojo v. Kliger (1990) 52 Cal.3d 65. Rojo brought a claim for wrongful termination based on sex discrimination in the common law, rather than under the Fair Employment and Housing Act (FEHA). The defendant moved for summary judgment based in part on the failure to exhaust administrative remedies under FEHA. Although the court determined that Rojo was not required to exhaust external administrative remedies under FEHA, the court did not specifically frame the issue as a question of primary jurisdiction. Instead, the court went through a lengthy analysis on whether the exhaustion should apply to Rojo’s common-law – not statutory – claims. This area of the law is easily confused by the unwary. Understanding the difference between the exhaustion of
administrative remedies, exhaustion of judicial remedies, and the primary jurisdiction doctrine may give you additional ammunition to defeat a demurrer or overcome summary judgment.
MacDonald created conflict regarding exhaustion under the Labor Code On March 19, 2009, the Second District issued its opinion in Lloyd. The opinion specifically concluded that plaintiffs seeking relief pursuant to Labor Code section 1102.5 were not required to exhaust administrative remedies with the Labor Commissioner under Labor Code section 98.7. “Labor Code section 98.7 merely provides the employee with an additional remedy, which the employee may choose to pursue. [¶] Further, case law has recognized there is no requirement
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that a plaintiff proceed through the Labor Code administrative procedure in order to pursue a statutory cause of action.” (Lloyd, supra, 172 Cal.App.4th at 330-31 (emphasis added, internal citations omitted).) Until MacDonald was published more than four years later, Lloyd was the only published, binding decision on the exhaustion issue. On August 27, 2013, however, the Third District concluded in MacDonald that Lloyd’s holding that exhaustion under Labor Code section 98.7 was not required was wrong because it was supposedly inconsistent with the California Supreme Court’s opinion in Campbell. In Campbell, the plaintiff was employed by the University of California. She alleged that she was fired in retaliation for whistle-blowing activities. The UC had a detailed set of regulations, promulgated by the Board of Regents, specifically requiring that such retaliation claims be submitted to an internal administrative body, which was empowered to provide appropriate relief. Rather than availing herself of that remedy, the plaintiff filed suit. The Campbell court concluded: The present action involves a policy the Regents established to handle complaints of retaliatory dismissal for whistleblowing in an orderly manner. Because we may treat such a policy as equivalent to a statute in this action, and because that policy required Campbell to resort initially to internal grievance practices and procedures, Campbell had an administrative remedy within the meaning of Abelleira and its progeny. (Campbell, supra, 35 Cal.4th at 324.) At no point did the court in Campbell reference Labor Code section 98.7 in concluding that the plaintiff failed to exhaust administrative remedies. The court relied entirely upon the mandatory administrative remedies directly applicable to whistleblower claims, which the court concluded were the equivalent of a statute. If the court had concluded that exhaustion under section 98.7 was required, then the court need not have
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engaged in the extended analysis of the Regent’s internal administrative remedies available to the Campbell plaintiff. It would simply have concluded that the plaintiff ’s failure to exhaust remedies under Labor Code section 98.7 was fatal to her claim. The court did not rely on section 98.7 because by its express terms, exhaustion is not required under that section. Section 98.7(f) states, “The rights and remedies provided by this section do not preclude an employee from pursuing any other rights and remedies under any other law.” (Lab. Code, § 98.7(f).) Thus, the Legislature expressly affords employees the option of either filing a claim with Labor Commissioner or directly proceeding to court to pursue
their rights and remedies. This express provision negates the need to exhaust administrative remedies under Labor Code section 98.7. The California Supreme Court explained more than half a century ago: It is, of course, well settled that where an administrative remedy is provided by statute relief must be sought from the administrative body and the remedy exhausted before the courts will act; and that a court violating the rule acts in excess of jurisdiction. (Abelleira v. Dist. Ct. of Appeal, 17 Cal.2d 280, 292.) It is equally well settled that where a statute provides an administrative remedy and also provides an alternative judicial remedy the rule requiring
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exhaustion of the administrative remedy has no application if the person aggrieved, and having both remedies afforded him by the same statute, elects to use the judicial one. (Scripps Memorial Hosp., Inc., v. Cal. Emp. Comm., 24 Cal.2d 669, 673.) (City of Susanville v. Lee C. Hess Co. (1955) 45 Cal.2d 684, 689 (emphasis added, internal citations truncated).) Although the Supreme Court [in City of Susanville] referred to the alternative remedies being afforded by the “same statute,” cases have applied the alternative judicial remedy exception where the administrative remedy and alternative judicial remedy are provided by different statutes within the same statutory scheme. (Coastside Fishing Club v. Cal. Fish & Game Comm’n (2013) 215 Cal.App.4th 397, 415-16 , citing, inter alia, San Elijo Ranch, Inc. v. Cty. of San Diego (1998) 65 Cal.App.4th 608, 613-614 [exhaustion doctrine did not preclude city from pursuing judicial remedy to enforce its conditional use permit issued to county for expansion of county’s landfill because California Integrated Waste Management Act gives local governmental entities both an administrative and a judicial remedy to enforce their reasonable land use conditions or restrictions on solid waste management facilities]; and Muir v. Steinberg (1962) 197 Cal.App.2d 264, 269-270 [exception applied where administrative remedy and judicial remedy were in different sections of the Water Code].) Since the Legislature expressly stated that section 98.7 does not preclude plaintiffs from pursuing their existing rights, and since one such existing right is a claim for retaliation under Labor Code section 1102.5, the Third District incorrectly concluded that exhaustion under section 98.7 was required before a section 1102.5 whistleblower action could be prosecuted. Furthermore, the permissive language used by the Legislature in Labor Code section 98.7 bolsters this conclusion, which section provides: “[A]ny person who believes that he or she has been discharged or otherwise discriminated
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against in violation of any law under the jurisdiction of the Labor Commissioner may file a complaint with the division within six months after the occurrence of the violation . . . .” (Lab. Code, § 98.7 (emphasis added).) The definitions of these terms comes from Section 15 of the Labor Code which specifically notes that, as used in the Labor Code, the term “‘shall’ is mandatory and ‘may’ is permissive.” (Lab. Code, § 15.) Thus, according to the Labor Code’s own definitions, exhaustion under section 98.7 is not mandatory. The court must presume that the Legislature intended to use the permissive wording in the statute, given that the Legislature specifically codified the differentiating verbiage. (Janken v. GM Hughes Electronics (1996) 46 Cal.App.4th 55, 60 (holding that the “primary determinant” of legislative intent are the words used by the Legislature).) The Legislature, though it defined both the mandatory “shall” and the permissive “may” in section 15 of the Labor Code, specifically chose to use ‘may’ in section 98.7. The Legislature’s chosen language is the most reliable indicator of its intent because “‘it is the language of the statute itself that has suc-
cessfully braved the legislative gauntlet.’” (Cal. School Employees Assn. v. Governing Board (1994) 8 Cal.4th 333, 338.) When, as here, the statutory language is clear and unambiguous, there is no need for judicial construction, as there is nothing for a court to interpret. (Cal. School Employees Assn., supra, 8 Cal.4th at 340.) Finally, the MacDonald court’s conclusion is further undermined by the California Labor Commission, Division of Labor Standards Enforcement (DLSE). The DLSE is the office of the Executive Branch tasked with interpreting and enforcing all provisions of the Labor Code. (Lab. Code, §§ 21, 79, 82.) The DLSE has issued myriad opinion letters stating that administrative exhaustion pursuant to Labor Code section 98.7 is not a mandatory prerequisite to filing whistleblower claims under provisions of the Labor Code. The Labor Commissioner has expressly advised that an employee does not have to first file a claim under section 98.7 before filing a whistle-blower action. The Commissioner has concluded: “The DLSE’s position is that the wiser course is not to require exhaustion of Labor Code section 98.7 procedures prior to raising a statutory claim in
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a civil action.” The Commissioner continued that “[u]nlike the procedures in Campbell, the Labor Commissioner’s procedures under Section 98.7 are not quasijudicial in nature” and provided a detailed analysis supporting its conclusion that exhaustion was not required. The views of this agency tasked with implementing section 98.7 is entitled to consideration. (Am. Nurses Ass’n v. Torlakson (2013) 57 Cal.4th 570, 611 (stating “An agency interpretation of the meaning and legal effect of a statute is entitled to consideration and respect by the courts . . .”).) MacDonald’s conclusion is at odds with the express terms of Labor Code section 98.7, longstanding decisions by this Court, and the California Labor Commissioner. [Editor’s note – on the day that this article was submitted to the publisher, the California Supreme Court ordered that MacDonald be depublished.)
SB 666 clarified the confusion MacDonald created: Exhaustion is not required
On October 5, 2013, Governor Brown signed SB 666, which states, in pertinent part:
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An individual is not required to exhaust administrative remedies or procedures in order to bring a civil action under any provision of this code, unless that section under which the action is brought expressly requires exhaustion of an administrative remedy. This subdivision shall not be construed to affect the requirements of Section 2699.3. The legislative counsel’s digest of SB 666 indicates that the bill clarifies that exhaustion of administrative remedies is not required unless the underlying statutory provision specifically requires exhaustion. The Senate Judiciary Committee analysis, in three separate places, states: • This bill would clarify that an employee is not required to exhaust administrative remedies before filing a civil action under the Labor Code, unless otherwise expressly statutorily required to exhaust administrative remedies. (p. 1.) • This bill would clarify that an employee or job applicant is not required to exhaust administrative remedies or procedures in order to bring a civil action under any provision of the Labor Code, unless the provision under which the action is brought expressly requires exhaustion of an administrative remedy. (p. 4.) • This bill would also clarify that an employee or job applicant is not required to exhaust administrative remedies or procedures in order to bring a civil action under any provision of the Labor Code, unless the provision under which the action is brought expressly requires exhaustion of an administrative remedy. (p. 7.) The legislative analysis by the Assembly Committee on Judiciary is in accord with the Senate Judiciary Committee: this bill . . . [¶] 5) Clarifies that an employee . . . is not required to exhaust administrative remedies or procedures in order to bring a civil action under any provision of the Labor Code, unless the provision
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Post MacDonald — continued under which the action is brought expressly requires exhaustion of an administrative remedy. The Senate and Assembly Judiciary Committees’ use of “clarifies” indicates that any ambiguity regarding whether exhaustion of administrative remedies is required must be resolved by turning to the statutory provision of the Labor Code section under which the action is filed. Only if the underlying provision expressly requires exhaustion of administrative remedies is exhaustion in fact required.
Although SB 666 cleared up any conflict about the exhaustion doctrine under the Labor Code, understanding the exhaustion doctrine is an important consideration from the time of your first interview with a potential client. Knowing if your client’s case is subject to demurrer or summary judgment for failure to exhaust is critical before you invest your time and resources into a case. Give close scrutiny to matters involving complaints about public agencies. Obtain the necessary documents you need about an agency’s procedures to determine whether the remedy is adequate, or if some other exception applies. Making this determination early will save you substantial headaches later on. Matthew S. McNicholas is a partner with McNicholas & McNicholas, LLP in Los Angeles. Mr. McNicholas has been practicing law for approximately sixteen years, spending nearly his entire career doing plaintiff ’s litigation. Mr. McNicholas graduated from Loyola Law School and the University of California, Los Angeles. Mr. McNicholas is a member of the American Board of Trial Advocates and the American College of Trial Lawyers, among other professional associations. Alyssa Kim Schabloski is an associate with McNicholas & McNicholas, LLP. Ms. Schabloski has only practiced in plaintiff side litigation during her six years of practice. Ms. Schabloski graduated from UCLA School of Law, and Barnard College. Ms. Schabloski is a member of CAALA, CAOC, and the Cowboy Lawyers Association. 90 — The Advocate Magazine
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The Affordable Care Act and settlement planning Plaintiffs with disabilities may require a Special Needs Trust to preserve eligibility for Medi-Cal or to qualify for government-subsidized health insurance under ACA The Affordable Care Act (ACA) makes healthcare more reasonable and accessible for many Americans.1 The enactment of the Affordable Care Act poses both a new opportunity and challenge for plaintiffs with special needs. This article will discuss options for plaintiffs navigating affordable health care options for special-needs’ individuals. Scott MacDonald, a senior financial advisor for Merrill Lynch Wealth Management and a Certified Special Needs Advisor (CSNA), will provide additional context by discussing specific financial examples for an individual.
There are many aspects to settlement planning but one concern has always been lifetime access to affordable healthcare. This has been a challenge for persons with special needs since workplace healthcare is not available to them, often making California’s Medicaid welfare program, Medi-Cal, their only option. Additionally, persons with special needs historically have been automatically denied private health insurance because of their pre-existing disabling condition. An advancement that the ACA makes for people with disabilities is accessibility. The ACA requires insurance companies to treat all customers equally and not to segregate people with these pre-existing conditions. In other words, private health insurance will become available for the first time for persons with special needs. The ACA also makes private healthcare more appealing for persons with profound disabilities because it removes the lifetime limits on health insurance that had made private plans unattractive.
Medi-Cal and Special Needs Trust
Traditionally, an individual with special needs had to have less than $2,000 in his or her own name in order to qualify
for Medi-Cal. That person could have more if he or she utilized a Special Needs Trust (SNT) authorized by 42 U.S.C. §1396p(d)(4)(A) or (C)2. Until now, most plaintiffs with special needs had no other choice but to place his or her litigation recovery into an SNT if they wanted to be eligible for Medi-Cal – often their only option for healthcare – and simultaneously preserve funds for future use. A plaintiff ’s litigation recovery will often be the first wealth that they encounter. Rarely do persons with special needs have the financial aptitude to appropriately manage any type of wealth. Even for those persons with disabilities who do have legal capacity, it is uncommon that they can manage their capital in a reasonable and practical fashion. By definition, plaintiffs with special needs who qualify for Medi-Cal or Supplemental Security Income (SSI) are also unable to find gainful employment. The availability of unencumbered access to cash combined with an inability
to properly maintain their personal finances make persons with special needs a prime target for financial predators looking to take advantage of them. For that reason alone, an SNT is imperative. The trust allows disabled individuals to preserve their suitability for benefits (without court supervision). Concurrently, the individual has a trustee who has a fiduciary obligation to utilize these funds for the plaintiff ’s sole benefit under a prudent investment standard. Under these circumstances, an SNT provides those with special needs the best chance for a lifetime of financial protection. There are several situations where maintaining Medi-Cal eligibility is critical. This specific welfare program is the only payer for certain types of benefits such as In-Home Support Services (IHSS). The Medi-Cal program also offers access to certain waiver programs that provide free, targeted solutions for the unique needs of
Special Needs Trust continues JANUARY 2014
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Special Needs Trust Planning and the ACA make the decision not to fund the settlement into an SNT and lose the SSI as a result, the annual spending amount would be $3,614 – a 71 percent reduction for life! The individual with special needs can still utilize private healthcare even if they select the SNT option. This has the added benefit of providing a higher quality healthcare through private insurance and limit (or eliminate) the SNT Medi-Cal payback after the plaintiff dies. It is surprising to see that using this option is generally far superior on a cost-benefit analysis than doing without the SNT. There will still be individuals who are disabled and have capacity who will want their settlements in their own name (and under their control) despite the financial benefit of not doing it this way. There is certainly nothing wrong with this approach, but the individual should be making this decision with the benefit of all the factors that go into an appropriate settlement plan. Scott MacDonald holds the Certified Special Needs Advisor designation, which is an internal Merrill Lynch self-study curriculum based on a variety of wealth management topics and a course exam. Neither Bank of America, Merrill Lynch nor its financial advisors provide tax, accounting or legal advice. Clients should review any planned financial transactions or arrangements that may have tax, accounting or legal implications with their personal professional advisors. Investment products are not FDIC insured, are not bank guaranteed and may lose value.
By Scott MacDonald For plaintiffs with special needs who have capacity and are deciding whether it makes financial sense to utilize a Special Needs Trust (SNT), we explore the question: Will foregoing an SNT and purchasing health insurance via the California ACA exchange, Covered California (www.CoveredCA.com), improve their future financial situation? The chart below describes the achievable lifestyle of a 40-year-old woman with a disability who receives Supplemental Security Income (SSI) and Medi-Cal, exploring different financial amounts resulting from litigation. These figures are striking. As seen below, if an individual receives a financial amount of $2,868,000, utilizing an SNT can help them to achieve a higher monthly income, rather than take the funds and purchase private health insurance. In fact, across all options, the value of adopting an SNT and receiving the resulting SSI payments results in dramatically increased standards of living. The primary reason for these outcomes is access to SSI over a lifetime with a cost of living adjustment (COLA). The value of that income is generally in the hundreds of thousands of dollars for most beneficiaries. Under lower financial amounts, the effect on annual spending is even more vivid. If an individual with special needs receives $100,000, the annual achievable lifestyle with the SNT would be $12,610. If they PLANNING PROJECTIONS (40 YEAR OLD FEMALE) SETTLEMENT NET ASSET LEVEL =>
Net Spendable Income – Annual Amount [u] SNT Only [v]
No SNT, Buy ACA Insurance [w]
SNT with ACA Supplemental [w]
No SNT, Expanded Medi-Cal
Income Percent of Federal Poverty Limit [x]
138 percent [y]
Average Annual ACA Premium (Net Subsidy) [z]i
Average Monthly ACA Premium (Net Subsidy)
Source: Merrill Lynch Wealth Management Analysis through the Wealth Outlook Program, May 2013.
i Covered California (2013). Health Plans & Rates for 2014: Making the Individual Market in California Affordable, 32-76.
Footnotes to Chart EM = Qualifies for the Expanded Medi-Cal Program NQ = Not Qualified for Expanded Medi-Cal Program u – After-tax spendable income, net of premium or SNT expenses, assuming 2.5 percent COLA through actuarial life expectancy of the beneficiary v – Net Spendable Income for SNT options has been reduced by $3,000 expense to establish the SNT and 1 percent annual administrative expenses. Assumes $856 monthly SSI income received with 2.5 percent annual COLA. w – Net Spendable Income for ACA options has been reduced by average annual premium and maximum annual out of pocket expenses for the respective income level (based on percent of FPL) x – Assumes 4 percent annual taxable income based on the settlement net asset level y – Maximum annual income level to qualify for the Expanded Medi-Cal Program is 133 percent of the Federal Poverty Limit ($15,282) plus 5 percent ($11,490 *.05 percent = $574.50 ) any income disregard = $15,856 for 2013 z – Average of highest premium rate for that income level across the 19 California regions. Amount shown is beneficiary’s cost after federal subsidy.
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disabled persons, which cannot be replicated or replaced with the new ACA health insurance programs.
The ACA caps the amount of money that a person will have to pay out-ofpocket each year toward medical costs. For example, if a person in California earns less than $17,235 a year in 2013, the annual out-of-pocket limit he or she has to pay is $2,250. Otherwise, the general ACA annual out-of-pocket limit for an individual is $6,350 per year.3 President Obama’s health-reform law also allows the adoption of expanded Medicaid by individual states. By implementing expanded Medicaid (Medi-Cal here in California), states take away the resource requirement for Medicaid and in its place focus on an individual’s income. Therefore, for people between the ages of 19 and 65, California’s MediCal eligibility will include persons with incomes up to 133 percent of the Federal Poverty Limit (FPL)4 – plus an automatic five percent income disregard or $15,586 for individual in 2013.5 Furthermore, the ACA provides government-subsidized aid to health-care premiums for those with incomes of 138 percent through 400 percent of the FPL ($15,586 - $45,960 for individuals in 2013).6 Nonetheless, it is important to note that persons already receiving MediCal or who are applying for long-term nursing home care are not eligible for this new, expanded program.
are unique, a thoughtful financial and legal analysis of each individual plaintiff ’s situation is essential to their future well-being. Proper consultation with specialized legal and financial professionals is essential in obtaining the best outcome for plaintiffs and limiting the liability of consumer attorneys. Kevin Urbatsch is a settlement planning attorney in San Francisco, California. He is a Certified Specialist in Estate Planning, Probate, and Trust law and practices exclusively in the estate planning field with an expertise in planning for minors and persons with disabilities on receipt of settlement funds. He is the author of several books on special needs planning and a frequent lecturer on Qualified Settlement Funds, Medicare SetAside Accounts, and Special Needs Trusts.
Contact him at Kevin@Urbatsch.com or visit the Web site: www.MyersUrbatsch.com.
Endnotes 1 “Affordable Care Act,” U.S. Department of Health and Human Services 2 U.S. Government Information (n.d.). Title 42 — The Public Health and Welfare, 6-7, Retrieved from http://www.gpo.gov/fdsys/pkg/USCODE-2010title42/pdf/USCODE-2010-title42-chap7-subchapXIXsec1396p.pdf 3 Covered California (2013). Health Plans & Rates for 2014: Making the Individual Market in California Affordable, 4-5. 4 Office of the Legislative Counsel (May 2010). Compilation of Patient Protection and Affordable Care Act, 198-205, Retrieved from http://housedocs.house.gov/energycommerce/ppacacon.pdf 5 2013 Poverty Guidelines. (2013, January 24). Retrieved June 4, 2013, from US Department of Health & Human Services: http://aspe.hhs.gov/poverty/13poverty.cfm 6 2013 Federal Poverty Guidelines. (n.d.). Retrieved June 4, 2013, from Families USA: http://www.familiesusa.org/ resources/tools-for-advocates/guides/federal-povertyguidelines.html
To summarize options available due to the ACA, persons with special needs have at least four choices for litigation recovery: (1) Use an SNT only; (2) Use an SNT but also buy ACA private healthcare; (3) Do not use an SNT and buy ACA private insure; or (4) Do not use an SNT but rely on the new expanded Medi-Cal. While the ACA provides a substantial improvement in health care options for plaintiffs with special needs, it would be irresponsible to assume that special needs settlement planning and SNTs should be eliminated. As all client cases JANUARY 2014
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From the Editor Jeffrey Isaac Ehrlich Editor-in-Chief
Appellate Reports and cases in brief About Cases ofthis interest Issue to members of the plaintiffs’ bar Isaac Ehrlich Frye v. CountyJeffrey of Butte
Editor-in-Chief (2013) __ Cal.App.4th __ (3d Dist.) Who needs to know about this case? All lawyers who litigate cases. Why it’s important: Holds that a document filed by the trial court titled “Statement of Decision” was actually an appealable judgment, which triggered the parties’ deadlines to file a notice of Jeffrey Isaacfrom Ehrlich appeal. Their later appeals a document titled “judgment” were untimely, and their appeals were dismissed. This case illustrates that counsel cannot take for granted what the legal effect of a document is for the purposes of appealability based solely on its title, and must instead carefully analyze By Jeffrey Isaac Ehrlich orders andEditor-in-Chief decisions to determine whether they qualify as an appealable judgment. Synopsis: County animal-control officers seized Frye’s horses. She filed administrative proceedings challenging the validity of the seizure. On September 21, 2010, the trial court issued a document called a “statement of decision” finding that there were defects in the procedure used by the county, and remanding the matter for further administrative hearings. On April 15, 2011, Frye moved to have the trial court enter a judgment in her favor. On August 22, 2011, the court entered a document called “judgment” ordering new administrative hearings. A notice of entry of this judgment was filed on August 31, 2011, and the county appealed within 60 days. Frye then filed a cross-appeal nine days later. The appellate court dismissed the appeal and cross-appeal, finding that they were not timely. The court held that the statement of decision resolved all issues before the trial court for consideration, and therefore constituted an appealable judgment, triggering the parties’ right to appeal. Since no
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notice of entry was served, the parties had 180 days after entry of the “judgment” to file their notice of appeal. The trial court lacked jurisdiction to extend this deadline, or to enter the document it titled “judgment.”
Short(er) takes Class Action Fairness Act (CAFA); removal; proof. Mondragon v. Capital One Auto Finance (9th Cir. 2013). Mondragon filed a class action in the Superior Court against Capital One Finance and Ron Baker Chevrolet alleging various state-law violations related to the disclosures in auto-financing contracts. The defendants removed under CAFA. Mondragon sought remand based on the “local controversy” exception to CAFA, in 28 U.S.C. § 1332(d)(4)(A), which allows remand to allow a state court to hear a class action in which greater than two-thirds of the class are citizens of the forum state. Mondragon argued that his class definitions – All persons who purchased a vehicle from Ron Baker Chevrolet for personal use to be registered in California; and All persons who purchased a vehicle in California for personal use to be registered in California – demonstrated that the local-controversy exception was met. No further affirmative proof was provided on this issue concerning the state of residence of the members of the plaintiff class. The district court accepted this argument and remanded. Defendants appealed, and the Ninth Circuit reversed. It held that there must be some facts in evidence from which the district court can make factual findings to support a remand based on the local-controversy requirements, and by failing to provide any proof concerning the citizenship of the class, Mondragon had failed to satisfy his burden.
Sanctions; Code Civ. Proc. § 128.7; frivolous claims; arbitrators and arbitration: Optimal Markets, Inc. v. Salant (2013) _ Cal.App.4th _ (6th Dist.) Optimal filed a complaint against several defendants. The parties agreed to have the case resolved in binding arbitration. The arbitrator denied all of Optimal’s claims, and awarded attorney’s fees and costs against it. The defendants had also requested sanctions against Optimal and its counsel, but the arbitrator denied that request because he concluded that he lacked the authority to order sanctions under the terms of the parties’ arbitration agreement. The defendants filed motions in the Superior Court to confirm the arbitration award and for sanctions under Code of Civil Procedure section 128.7. The trial court confirmed the award, but refused to award sanctions, finding that the arbitrator’s decision not to award sanctions resolved the matter and was binding. Affirmed. Section 128.7 provides a mechanism for obtaining sanctions arising out of court proceedings. Since the case was resolved in arbitration, it did not apply. The arbitrator was more familiar with the facts and circumstances of the case than the trial court, since the matter was resolved before the arbitrator, not the trial court. It therefore was proper for the arbitrator to decide the sanction issue in the arbitration. Torts; comparative fault of dismissed defendants; Code Civ. Proc. § 581c, subd.(d); causation: Leal v. Mansour (2013) __ Cal.App.4th __ (2d Dist., Div. 8.) Felipa Hernandez died while a patient at a hospital. Her family filed a wrongful-death action against the hospital and her physician. At the close of the plaintiff ’s evidence at trial the hospital moved for nonsuit, and its motion was granted. The case proceeded against the doctor. The jury returned a verdict in
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favor of the doctor, finding that his negligence was not a substantial factor in causing Ms. Hernandez’s death. On appeal, the plaintiffs argued that the trial court erred in allowing the doctor to present evidence and argument that a ventilator malfunction, not the doctor’s negligence, was the cause of death. They argued that section 581d, subd.(d) should have precluded the doctor from offering evidence about the ventilator. That section precludes a defendant from attempting, over the plaintiff ’s objection, to attribute fault to a defendant who has been dismissed on the basis that the defendant was without fault. The Court of Appeal held that the statute did not preclude the doctor from arguing that a ventilator malfunction was the cause of death, because the nonsuit in favor of the hospital had not been made on the ground that it was without fault. Rather, it had been made on the ground that there had been no showing as to the hospital’s standard of care. The fact that the ventilator was the hospital’s equipment did not mean that attributing fault to the ventilator was tantamount to attributing fault to the hospital.
not actually seen the accident. Yanez was later fired by the railroad because of this testimony, because it violated its policy against dishonesty. Yanez sued Plummer for legal malpractice, and the trial court granted summary judgment for Plummer. Reversed. Plummer did not advise Yanez that he had a potential conflict of interest that resulted from his representation of both Yanez and the railroad, and he falsely told Yanez that as long as he testified truthfully, he would not be fired. And Plummer elicited the testimony from Yanez that contradicted his prior witness
statements, and did not give him an opportunity to clarify or explain the discrepancy. Accordingly, there were triable issues of fact about whether Plummer’s conduct was a substantial factor leading to Yanez’s termination. Jeffrey Isaac Ehrlich is the principal of the Ehrlich Law Firm, with offices in Encino and Claremont, California. He is a cum laude graduate of the Harvard Law School, a certified appellate specialist by the California Board of Legal Specialization, and a member of the CAALA Board of Governors. He is the editor-in-chief of Advocate magazine.
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Legal malpractice; in-house counsel: Yanez v. Plummer (2013) __ Cal.App.4th __ (3rd Dist.) Yanez worked for the Union Pacific Railroad. He saw a co-worker injured on the job, and wrote a witness statement, which said that he had witnessed the accident as it happened. The injured worker sued the railroad, and Yanez was deposed. He was represented by Plummer, the railroad’s in-house attorney, which was representing the railroad in the case. In a pre-deposition meeting, Yanez told Plummer that he had not actually seen the entire incident. He expressed concern about his job status, because his testimony was likely to be unfavorable to the railroad. He asked Plummer to “protect” him in the deposition. Plummer told him that, as long as he testified truthfully, his job would not be affected by his testimony. In the deposition, Plummer elicited testimony from Yanez in which he admitted that he had
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Immigrant clients: Protecting against the undervaluation of their cases Immigration status should not interfere with calculation of damages “We are a nation of immigrants. We are the children and grandchildren and great-grandchildren of the ones who wanted a better life, the driven ones, the ones who woke up at night hearing that voice telling them that life in that place called America could be better.” — Mitt Romney It is estimated that there are elevento twelve-million immigrants currently residing illegally in the United States. The topics of immigration and finding a pathway to citizenship have been center stage in recent national and statewide political debate. Just this year, AB 263, SB 666 and AB 524 were passed to protect immigrant workers from abusive employers. Despite the advances, many immigrant workers face prejudice and hostility in the communities in which they live and work. As our clients, they also face efforts to limit their ability to recover enough money to support their families
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and seek adequate medical care when they are injured and unable to work. These efforts come via motions in limine seeking to limit damages in these ways. • The defense attempts to limit any past wage-loss claim to the amount your client could have earned in his “home” country from the date of the accident to the date of trial, despite the fact that your client lives in California and has never been subject to deportation proceedings; and • The defense attempts to limit claims for future medical expenses to expenses your client would incur in his home country. These attempts have the ancilliary effect of making potentially highly prejudicial evidence of your client’s immigration status relevant when it would otherwise be properly excluded. These attempts must be defeated using sound law-and-motion practices that preserve your client’s damages as well as his human dignity.
“We asked for workers. We got people instead.” — Max Frisch
An immigrant is entitled to bring suit for damages It is long settled law that a person does not need to be a citizen to have access to the courts. (Martinez v. Fox Valley Bus Lines (N.D. Ill 1936) 17 F.Supp. 576.) In finding that an immigrant here illegally was not barred from pursuing a personalinjury action, at least one district court noted that Congress had never barred an “alien” whether lawfully or unlawfully within the United States, from access to the courts. On the contrary, the Civil Rights Act of 1870 provided that “[a]ll persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed
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by…citizens…” (Id. at p. 577; codified at 42 U.S.C. 1981.) In California, the issue of the relevancy of citizenship status was addressed in Clemente v. State (1986) 40 Cal.3d 202. Clemente considered the case of a longterm U.S. resident who was working in the U.S. without a legal visa. Clemente made a future wage-loss claim. The trial court did not allow questioning of Clemente’s wife regarding his citizenship. The defense claimed this was error because his citizenship status was relevant to a determination of plaintiff ’s claim for future lost earnings. The Supreme Court upheld the trial court’s ruling: “We cannot say that in the instant case the trial court erred in refusing to permit questioning of plaintiff ’s wife regarding her husband’s citizenship. Plaintiff had been gainfully employed in this country prior to his two accidents, there was no evidence that he had any intention of leaving this country and the speculation that he might at some point be deported was so remote as to make the issue of citizenship irrelevant to the damages question.” (Clemente, supra, 40 Cal.3d at p. 221)
undocumented workers are expressly entitled to workers’ compensation benefits. (Lab. Code, § 3351.) An injured worker is entitled to recover those bene-
fits “wherever he is residing, legally or illegally.” (Del Taco v. WCAB (2000) 79 Cal.App.4th 1437, 1441.) An injured worker’s legal status does not affect his
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Immigration status is irrelevant to liability issues
In California, a plaintiff ’s immigration/citizenship status is “irrelevant to the issue of liability.” (Hernandez v. Paicius (2003) 109 Cal.App.4th 452, 460 [where no loss of earnings are claimed, plaintiff ’s U.S. residency status was not relevant, as plaintiff ’s residency is not relevant to liability issues], citing, Rodriguez v. Kline (1986) 186 Cal.App.3d 1145, 1149.) As to issues of liability, there is no question this evidence should be excluded.
Past wage losses should be allowed at U.S. rates
The defense will try to reduce your past wage losses by seeking to have them calculated using the currency from your client’s country of origin. This is almost certainly an exchange rate that disfavors your client. First, it is worth noting the analogy in the workers’ compensation context –
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Undervaluation — continued
right to temporary disability payments, which includes full compensation for past lost wages, payable in U.S. dollars. (Id., at pp. 1441-1443; Lab. Code, § 4453.) Note, too, that courts have repeatedly expressed concern that a plaintiff ’s status as an immigrant is likely to arouse prejudice against the plaintiff. “[S]uch testimony, even if marginally relevant, [is] highly prejudicial.” (Clemente, supra, 40 Cal.3d at p. 221.) The court of appeal in Hernandez v. Paicius, supra, 109 Cal.App.4th 452, held it was not only “entirely irrelevant” to mention the plaintiff ’s immigration status, but also “highly inflammatory.” (Id. at p. 460) The Hernandez court also noted that the California Legislature “felt strongly enough about the sensitive subject of immigration status” to enact several statutes limiting the use of immigration status – Labor Code section 1171.5, Civil Code section 3339, and Government Code section 7285. These are identical statutes. All protections, rights, and remedies available under state law, except any reinstatement remedy prohibited by federal law, are available to all individuals regardless of immigration status who have applied for
employment, or who are or who have been employed, in this state. For purposes of enforcing state labor, employment, civil rights, and employee housing laws, a person’s immigration status is irrelevant to the issue of liability, and in proceedings or discovery undertaken to enforce those state laws no inquiry shall be permitted into a person’s immigration status except where the person seeking to make this inquiry has shown by clear and convincing evidence that this inquiry is necessary in order to comply with federal immigration law. “These statutes leave no room for doubt about this state’s public policy with regard to the irrelevance of immigration status in enforcement of state labor, employment, civil rights, and employee housing laws.” (Hernandez, supra, at pp. 459-460.) By analogy, your client’s immigration status is irrelevant in allowing just compensation for past lost wages. The defense may cite Hoffman Plastic Compounds v. NLRB (2002) 535 U.S. 137. In that case, the Supreme Court concluded that the Immigration Reform and Control Act (IRCA) (8 U.S.C. § 1324a) and the holding in Sure-Tan, Inc. v. NLRB (1984) 467 U.S. 883 precluded the National Labor Relations Board from awarding back pay to an undocumented worker who had
been laid-off for supporting union activities. (Hoffman, supra. at pp. 151-152.) You should be quick to point out that the issue decided in Hoffman relates to a Congressional grant of power to an administrative agency. The defense will be hard-pressed to identify any California decision that extends Hoffman to prevent an injured person from recovering actual, past lost wages. There are a few other cases the defense may cite, but a careful read of the cases reveals they do not deal with actual past lost wages. Alonso v. State of California (1975) 50 Cal.App.3d 242, 244245 decided that an “illegal alien” was properly denied unemployment insurance benefits on the basis that he was not “available for work.” Rodriguez v. Kline (1986) 186 Cal.App.3d 1145, 1149 dealt with the issue of whether a plaintiff who is deportable is entitled to future lost wages. The Rodriguez court decided that a deportable plaintiff is not available for future work and is therefore not entitled to lost future wages at California rates. NB: If you face a Rodriguez issue regarding future lost wages, be sure to ask the court to conduct a pretrial hearing as recommended in Rodriguez: We are convinced the competing concerns expressed in Clemente can
WELCOME TO THE COOK ISLANDS
is not out of reach. Cook Collection Attorneys, PLC (877) 989 4730
www.cookcollectionattorneys.com David J. Cook, Principal Attorney Collecting judgments for California plaintiff attorneys since 1974. Cook@squeezebloodfromturnip.com 98 — The Advocate Magazine
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best be reconciled by treating any question regarding a plaintiff ’s citizenship or lawful place of residence as one of law, to be decided exclusively by the trial court outside the presence of the jury. Therefore, whenever a plaintiff whose citizenship is challenged seeks to recover for loss of future earnings, his status in this country shall be decided by the trial court as a preliminary question of law. (See Evid. Code, § 310.) At the hearing conducted thereon, the defendant will have the initial burden of producing proof that the plaintiff is an alien who is subject to deportation. If this effort is successful, then the burden will shift to the plaintiff to demonstrate to the court’s satisfaction that he has taken steps which will correct his deportable condition. (Rodriguez, supra, 186 Cal.App.3d 1145, 1148-49) Note that even if your client is found to be “deportable” following a hearing under Rodriguez, there is no element of speculation when it comes to his past wage loss – just make sure your client remains in the state and comes to court for trial.
Future medical damages should be allowed at U.S. rates
Fair and just compensation is the goal of our justice system
In the U.S., a person who seeks medical care or tort compensation for pay for medical care does not need to establish their residency or citizenship status. It is not a crime for a doctor to provide medical treatment to an injured undocumented worker, nor is it a crime for the injured worker to receive care. The Emergency Medical Treatment and Active Labor Act requires hospitals to provide care to anyone needing emergency treatment regardless of citizenship. (42 U.S.C. § 1395dd; see Brooker v. Desert Hosp. Corp. (1991) 947 F.2d 412, 415.) A defendant who claims the value of future medical care should be determined by the value of such care in the plaintiff ’s country of origin should be forced to bear the burden of proof as to whether that country’s medical system can actually provide the quality of care needed. (See Sosa v. M/V Lago Izabal (5th Cir. 1984) 736 F.2d 1028, 1034 [trial court properly based award for past and future medical expenses on American standards because it specifically found that plaintiff would not receive adequate medical care in Mexico].)
There is much to be done to protect and strengthen the rights of California’s workers, no matter where they were born. We must prevent the defense from reducing their responsibility solely by calling into question the immigration status of the plaintiff. To allow such reduction would frustrate tort law’s objectives of “deterrence” and “compensation” (Murillo v. Rite Stuff Foods, Inc. (1998) 65 Cal.App.4th 833, 842-843) Strategic lawand-motion practice can preserve the dignity of the trial and the dignity of our clients. Elinor Leary is a trial attorney at The Veen Firm, San Francisco. She represents people who have been catastrophically injured. Ms. Leary has tried cases to verdict as well as reached large settlements in numerous other cases. She devotes significant time to public interest work and to mentoring students and newer attorneys. She is a member of the Consumer Attorneys of California, and The American Association for Justice. She is on the Board of Governors at the USF School of Law and on the Executive Committee of the USF Inn of Court.
Case value… $2.5 million Policy limit… $300,000 On the table… Policy limits offer Defendant… Age 65, Malibu resident and retired real estate broker Do you accept the offer? Learn the secrets of an IRS 1040 return, the 1099INT and a credit report. Review and critique of financial disclosures. Legal strategies to flush out concealed assets. Assessment whether assets are immune or vulnerable to enforcement. What is an URLA?
David J. Cook, Esq.
Cook Collection Attorneys, PLC
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From the Executive Director Stuart Zanville
Consumer Attorneys Association of Los Angeles
Daniel Patrick Moynihan: His quote will help achieve patient protection in 2014 “Everyone is entitled to his own opinion, but not to his own facts.” — Daniel Patrick Moynihan
save lives. The Troy and Alana Pack From the Patient Safety Act will require drug and Executive Director alcohol testing of doctors, crack down on
prescription drug abuse and overpreZanvillequotes, This is one ofStuart my favorite scribing and hold doctors accountable for CAALA politicians. from one of my favorite medical negligence. Moynihan was a straight-talking, threeIt’s a fairly straightforward ballot time U.S. Senator from New York who measure that bears the state-approved also served in the administrations of four title “Drug and Alcohol Testing of U.S. Presidents, from JFK to Richard Doctors.” Nixon. Does money talk? It’s a great quote and it’s as approProtecting patients doesn’t sound priate today as it was 30 years ago. like a very controversial objective, but Zanvilletoday doesSadly, most of the Stuart population according to an article on the San CAALA n’t seem to know the difference between Francisco Chronicle’s SFGate Web site, a fact and an opinion. In this age of the “even before the initiative was cleared for Internet and cable TV, we are overcirculation medical organizations and whelmed with comments from a dearth insurance companies had contributed or of so-called political reporters and lent more than $31 million to the experts. The challenge is to separate the planned campaign to defeat it.” opinions from the facts. With that much money, you’d think This isn’t as easy as it sounds. One the groups opposed to the bill would at explanation comes from cognitive scienStuart Zanville least get the facts straight. But, that’s not tist George Lakoff who talks about frames Consumer Attorneys Association of Los Angeles the case. that are established in the synapses of Those opposed to protecting patients our brains and says that “when the facts say the measure will hurt patients by don’t fit the frames, the frames stay and increasing the cost of health care and the facts go.” reducing access to trusted doctors, comTrial lawyers deal with this challenge munity health clinics and hospitals. every day, not just in the courtroom but Those are opinions with no factual also in the court of public opinion. foundation. As most of you know by now, Jamie Court, president of Consumer California voters will be voting this fall By Stuart Zanville Watchdog, on a patient protection initiative will of Los Consumer Attorneysthat Association Angeles a co-sponsor of the initiative, was quoted in the L.A. Times that “Malpractice costs − claims and premiums − amount to about one-half of one percent of all healthcare costs. It would be mathematically impossible for malpractice costs to impact healthcare costs.” The Federal Tort Claims Act specifically counters the claim that community Decipher, summarize clinics would pay more in malpractice & organize medical premiums and that would reduce access records for the poor. The fact is that any commuPrepare medical nity clinic that receives federal funding chronologies Medical bill review pays nothing for malpractice coverage. and audit A spokesperson for the California Medical Association dismisses as frivolous the parts of the Pack Patient Safety Act (805) 577-7851 that protect patients. The spokesperson www.deciphermed.com says the initiative is really only about
From the Executive Director
From the Executive Director
Legal Nurse & Certified Medicare Set-Aside Consultant
Kathy Cross, R.N., B.S., MSCC
100 — The Advocate Magazine
changing or eliminating the 38-year-old cap on damages caused by medical malpractice. “That’s what it’s really about. The other parts of that measure are nothing more than window dressing.” That type of statement implies that there is no need to protect patients and that the safety of patients is not an issue. Unfortunately, that’s another example of an opinion, not a fact.
Cost of negligence
The Center for Justice and Democracy has published its new Medical Malpractice Briefing book which includes nearly 100 pages of facts, not opinions about medical malpractice. You can download it at www.thepoptort.com. The facts are irrefutable. Preventable medical mistakes pose a serious health risk. The white paper refers to a report published in the Journal of Patient Safety and reported by Pro Public, that “between 210,000 and 440,000 patients each year who go to the hospital for care suffer some type of preventable harm that contributes to their death. That would make medical errors the thirdleading cause of death in America, behind heart disease, which is the first, and cancer, which is second.” More specifically, “A surgeon in the United States leaves a foreign object such as a sponge or towel inside a patient’s body after an operation 39 times a week, performs the wrong procedure on a patient 20 times a week and operates on the wrong body site 20 times a week.” Over the next few months a lot will be written and spoken about the Troy and Alana Pack Patient Safety Act. Most will be opinion, not fact, but let’s not forget Daniel Patrick Moynihan. As the lines between truth and fiction become more and more blurred, we should thank the senator for his quote that should now be familiar to all of us. It’s short, so I’ll repeat it again and hopefully, you will remember it: “Everyone is entitled to his own opinion, but not to his own facts.” — Daniel Patrick Moynihan
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From the President Casey Johnson
Orange County Trial Lawyers Association
Keep the momentum going Recognizing those who do so much for the organization, and looking at the challenges ahead Being a trial lawyer is undoubtedly one of the most rewarding professions in the world. Trial lawyers can literally put a name and a human face to what we do every hour of every day. Whether seeking damages for a client who suffered personal injuries in an automobile collision, for a young child whose mother lost her life due to preventable medical negligence, or for an employee wrongfully denied overtime pay – trial lawyers work diligently to help injured and wronged parties to seek justice. Perhaps it is because of the noble nature of such work that I am particularly honored and humbled to serve as the 2014 President of the Orange County Trial Lawyers Association. Properly acknowledging the OCTLA leaders and volunteers whose hard work and vision helped lay the foundation for the success currently enjoyed by the organization could fill this entire issue – which neither space nor time permits. Nevertheless, both Scott Cooper and Janet Thornton must be recognized for their tireless and fruitful efforts in 2013. As the Executive Director of OCTLA, Janet Thornton continues to serve as the trusted navigator to the OCTLA ship. Directly involved in each and every aspect of the organization, not a single OCTLA event would occur or be
102 — The Advocate Magazine
even remotely successful without Janet Thornton’s guidance and assistance. As 2013 President, Scott Cooper was OCTLA’s deliberate and thoughtful captain who helped ensure the continued growth and strength of an organization that is well respected locally and throughout the state by both the bench and the bar. His efforts and leadership culminated in OCTLA’s Top Gun Awards dinner and charity auction, which raised more than $67,000 for Operation Veterans Re-Entry, a program of the Public Law Center. OCTLA owes a debt of gratitude to both Janet and Scott for their many years of service. While I am excited and honored to take the helm at OCTLA, I recognize that stormy skies mean that many challenges lie ahead. Between the continued underfunding of California’s courts and the perpetual tort reform efforts to undermine consumer rights, OCTLA must continue to be vigilant in its efforts to help protect access to justice. As the 2014 OCTLA President, I will continue to ensure OCTLA’s involvement in the work being done locally and statewide to ensure that tort victims have access to justice and can be fully compensated for their injuries and damages – and not limited by Draconian limits established more than 38 years ago.
OCTLA’s 2014 efforts will officially kick off at the Installation of Officers and Directors on February 1, 2014, at the Balboa Bay Resort in Newport Beach. In addition to swearing in those who will serve OCTLA as board members and officers in the coming year, Judge Glenda Sander will be honored as OCTLA’s Trial Judge of the Year. As gratifying as our work as trial lawyers is, nothing can revitalize our spirits more than spending an evening with other trial lawyers, reminding each other that we are in this fight together. I hope each of you will join OCTLA on February 1, 2014, as we celebrate the success of the past year and re-commit to truly preserving access to justice in the year ahead. For more information about attending or sponsoring the event, please contact OCTLA at email@example.com or (949) 916-9577. Casey Johnson is a partner at Aitken*Aitken*Cohn, specializing in representing plaintiffs in matters involving catastrophic injuries, wrongful death, insurance bad faith and premises liability. Casey graduated summa cum laude from San Diego State University, and obtained his JD from USC Law School. He is the 2014 President of the OCTLA and also serves on the Boards of Directors for the Robert Banyard Inn of Court and the Orange County Lavender Bar Association.
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Sacramento Update By Lea-Ann Tratten Consumer Attorneys of California Political Director Take the high road As the fight heats up over efforts to boost patient safety in California by testing doctors for substance-abuse problems and by modernizing MICRA’s 38-year-old noneconomic damages cap, our foes in the medical industrial complex are giving all indications that they will range far, spend big and stoop low in the fight to protect their bottom line. First a bit of background: Consumer Attorneys of California is working with Internet executive Bob Pack and Consumer Watchdog to collect signatures and put on the ballot an initiative called the Troy and Alana Pack Patient Safety Act. This act is named after Troy and Alana Pack and is sponsored by Bob Pack, who tragically lost his two young children when they were run down on a sidewalk near their home by a neighborhood woman who was doctor-shopping in order to abuse prescription drugs. Once qualified, the measure will appear on the Nov. 4, 2014 general election ballot. The initiative is born out of frustration over the inactions of state lawmakers, who this past year once again proved they are ensnared by the medical industrial complex. It is our belief that while Sacramento may be afraid to confront the state’s patient safety epidemic and the accompanying lack of justice for injured families, the public is not. In the meantime, our foes are spending big to spread mistruths. At the California Democratic Party executive board meeting in Burlingame in Nov., the disingenuously named Californians Allied for Patient Protection – the Astroturf coalition that acts as a front group for the medical-industrial complex – distributed a flyer implying that President Obama supports maintaining California’s limits on noneconomic damages and asked for support to oppose the Pack initiative. The flyer was paid for by Nor Cal insurance, a medical-malpractice insurer. Insurance Commissioner Dave Jones caught sight of the flyers and asked California Democratic Chairman John Burton for an opportunity to address the assembled 500-party faithful. Commissioner Jones exposed the insurance industry ploy and the amassed group ceremoniously ripped up the flyers and expressed their displeasure with the deception. At the same convention, Bob Pack addressed the Progressive Caucus, the Women’s Caucus and Veteran’s Caucus, and explained the initiative. By all accounts, Pack was positively received. Our opponents are also urging local governments to oppose the measure. In what truly feels like a game of “whack a mole,” CAOC has on several occasions over the past months learned about potential pro-MICRA resolutions on city-council agendas. We’ve sent a SWAT team of lawyers and MICRA victims to speak the truth about the initiative. Thus far we are two for two in beating back efforts.
104 — The Advocate Magazine
Meanwhile, signatures to put the Pack Act on the ballot are being collected at an unprecedented rate. The company in charge of signature gathering, which has been in business for decades, has never seen a more popular measure. Twice the predicted numbers of signatures are enrolling each week. Public response is consistent with what we have seen in polling: Seventy-three percent of Californians support the measure after simply reading the title and summary of the initiative. And after an onslaught of negative arguments are thrown at the initiative, the measure holds at 64 percent. In short, freed of the political stronghold of the medical industry, the public supports changing the law. The medical industry is underestimating the public’s frustration with a lack of attention to patient safety and an absence of justice. And they are underestimating the power of patients and their attorneys. CAPP’s attacks are creating more energy and organizing within our ranks than has been seen in years. Truth squads are mobilizing at local government meetings and organizing events. This is grassroots at its finest. Please join us in the fight.
Washington Update By Linda Lipsen CEO, American Association for Justice Accountability for generic drug manufacturers After extensive advocacy over a two-year period by the American Association for Justice and Public Citizen, the FDA has issued a proposed rule on generic drug labeling. The rule, as proposed, would overturn the Mensing decision by allowing generic drug manufacturers to use the Changes Being Effected (CBE) process to update their labels with new safety information. The FDA’s CBE regulation, 21 C.F.R. §314.70(c), currently allows brand-name drug manufacturers to strengthen safety language without prior FDA approval. The proposed rule will restore accountability for generic manufacturers and put them on equal footing with the brands. The proposed rule was published in the Federal Register on November 13th. The comment period will be open for 60 days. AAJ will file comments in support of the rule as well as pursue other advocacy options to ensure it becomes effective as soon as possible. Also, in case you missed it, the TODAY Show recently highlighted the lack of legal accountability for generic drug manufacturers. You can watch the clip online here: http://www.today.com/news/safetyadvocates-loophole-puts-users-generic-drugs-risk-8C11545187. It features American Association for Justice member Larry Jones and his client. You can help advocate on this issue by signing our online petition and sharing the petition link with your clients: www.change.org/ petitions/keep-our-medicine-cabinets-safe.
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CAALA Resource Center
Still need to complete your MCLE credits? Use CAALA’s Resources! Visit CAALA’s Legal Education Center at CAALA.org Remember, California attorneys in State Bar Compliance Group 3 (with last names beginning with N-Z) must complete their required MCLE credits by February 3, 2014. Attorneys are required to complete a total of 25 hours of approved credit every three years, including four hours of Legal Ethics, one hour of Elimination of Bias in the Legal Profession, and one hour of Prevention/Detection/Treatment of Substance Abuse or Mental Illness. CAALA’s Legal Education Center is an excellent resource to complete any missing credits. A special bundle package is offered to complete those last-minute Legal Ethics and Specialty Credits at a discounted rate or FREE for 2013 Vegas Convention Registrants. The bundle contains the Legal Ethics session (which contains three Legal Ethics Self-Study credits) and the Specialty Credits session (which includes one Legal Ethics Self-Study credit, one Elimination of Bias Self-Study credit, and one Substance Abuse Prevention Self-Study credit) from the 2013 Las Vegas Convention. Topics and speakers include: 2013 Las Vegas Convention − Legal Ethics (3 Hours Legal Ethics) • How to Make Ethical Use of California Legislative History Carolina Rose • Avoiding Legal Malpractice and Malicious Prosecution Kenneth Feldman
• Ethical Considerations in ADR Hon. Joe Hilberman (Ret.) • Ethical Issues with Jurors (post-trial motions, social media issues) Hon. Kevin Brazile • Professional & Ethical Conduct in the Courtroom Hon. Rolf Treu 2013 Las Vegas Convention − Specialty Credits • Legal Ethics (1 Hour) Avoiding Trouble with the State Bar Joe Dunn, Murray Greenberg, Thomas Layton, Hon. Donald Miles, Hon. Richard Platel • Elimination of Bias (1 Hour) Identifying and Avoiding Gender, Sexual Preference & Disability Bias Jennifer Reisch, RJ Molligan, Daniel Danziger • Substance Abuse Prevention (1 Hour) Recognizing the Early Signs of Drug and Alcohol Abuse Gary Hoffman • Finding Help: Resources Available to Treat Addiction David Mann, The Other Bar
• Medi-Cal, Medicare & Government Liens: Ethical Pitfalls John Rice
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ADR Providers ADR Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 Carrington, R.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84 Corcoran, Tim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72 Daniels, Jack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 Fields ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90 First Mediation Corp - Jeffrey Krivis . . . . . . . . . . . . . .90 Gage, Sandy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Graver, Darryl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Hanger, Bob . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 Jossen, Sanford Law Office . . . . . . . . . . . . . . . . . . . .70 Judicate West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 Mehta, Steven G. Mediation . . . . . . . . . . . . . . . . . . .20 Sepassi & Tarighati, LLP . . . . . . . . . . . . . . . . . . . . . . .13 Announcements and Career Opportunities CAALA Installation Dinner . . . . . . . . . . . . . . . . . . . . .85 CAALA Legal Education Center . . . . . . . . . . . . . . . . .81 CAALA Membership . . . . . . . . . . . . . . . . . . . . . . . . . .83 Camerata Pacifica . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 Jury Verdict Alert . . . . . . . . . . . . . . . . . . . . . . . . . . .103 OCTLA Installation . . . . . . . . . . . . . . . . . . . . . . . . . . .75 Attorneys – Appeals Bader, Donna . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78 Ehrlich Law Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 Steven B. Stevens . . . . . . . . . . . . . . . . . . . . . . . . . . . .96 Attorneys - Accepting Referrals Bailey Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 Banifsheh, Danesh & Javid, PC . . . . . . . . . . . . . . .22-23 Bisnar | Chase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Cheong Denove Rowell Bennett & Karns . . . . . . . . . .43 Cook, David . . . . . . . . . . . . . . . . . . . . . . . . . . . . .98-99 Danz, Stephen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 Dordick Law Offices . . . . . . . . . . . . . . . . . . . . . . .54-55 Edzant, Barry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 Engstrom, Lipscomb & Lack . . . . . . . . . . . . . . . . . . . .45 Galipo, Dale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87 Gelber, Bruce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58 Girardi | Keese . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 Greene Broillet & Wheeler . . . . . . . . . . . . . . . . . . . . . .1 Hodes Milman Liebeck Mosier . . . . . . . . . . . . . . . . .42 Kesluk & Silverstein . . . . . . . . . . . . . . . . . . . . . . . . . . .97 Law Offices of Lisa Maki . . . . . . . . . . . . . . . . . . . . . .71 Law Offices of Michels & Lew . . . . . .Inside Back Cover Makarem & Associates . . . . . . . . . . . . . . . . . . . . . . . .25 Manly & Stewart . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 McGonigle, Timothy . . . . . . . . . . . . . . . . . . . . . . . . . .21 McNicholas & McNicholas . . . . . . . . . . . . . . . . . . . . .9 Metzger Law Group . . . . . . . . . . . . . . . . . . . . . . . . . .79 Panish Shea & Boyle . . . . . . . . . . . . . . . . . .Back Cover Richard Harris Law Firm . . . . . . . . . . . . . . . . . . . . . . . .4 Rizio & Nelson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Shernoff Bidart Echeverria Bentley LLP . . . . . . . . . . .53 Taylor & Ring, LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 The Traut Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Court Reporters Atkinson Baker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 Jonnell Agnew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93 Kusar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Personal Court Reporters . . . . . . . . . . . . . . . . . . . . . .31 Defense Medical Exam Observation Advantage Representatives . . . . . . . . . . . . . . . . . . . .95 Haiby, Michael . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60 PRIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89
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Expert Witnesses – Medical Graboff, Dr. Steven . . . . . . . . . . . . . . . . . . . . . . . . . . .46 Luckett, Karen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86 Physician Life Care Planning . . . . . . . . . . . . . . . . . . .77 Roughan & Associates at LINC, Inc. . . . . . . . . . . . . .69 Expert Witnesses – Technical & Damages Balian & Associates . . . . . . . . . . . . . . . . . . . . . . . . . . .74 Collins, Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .95 Phillips, Fractor & Company . . . . . . . . . . . . . . . . . . . .89 Financial Services California Attorney Lending . . . . . . . . . . . . . . . . . . . .59 CPT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97 Farber, Patrick (Struct. Settlements) . .Inside Front Cover Fast Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62 Fund Capital America . . . . . . . . . . . . . . . . . . . . . . . . .61 RD Legal Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . .36 Shapiro Settlements . . . . . . . . . . . . . . . . . . . . . . . . . .101 Summit Structured Settlements . . . . . . . . . . . . . . . . . .28 The James Street Group (Structured Settlements) . . . .18 Graphics/Presentations/Video Court Graphix . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102 CSC Anatomy Arts . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Executive Presentations . . . . . . . . . . . . . . . . . . . . . . . .7 High Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Juris Productions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 Verdict Videos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
Consumer Attorneys Association of Los Angeles 800 West Sixth Street,#700 Los Angeles, CA 90017 (213) 487-1212 www.caala.org
ASSOCIATION OF LOS ANGELES
CAALA Consumer Attorneys
January 18, 2014 CAALA GALA – Installation & Awards Dinner Hosted Reception: 5:30pm Dinner & Program: 7:00pm Beverly Wilshire Hotel Beverly Hills January 30, 2014 What’s New in Tort & Trial: 2013 in Review Registration: 5:00pm Program: 6:00pm Beverly Wilshire Hotel Beverly Hills
Insurance Programs Lawyers Mutual Insurance Company . . . . . . . . . . . . .67 Lawyer’s Pacific Insurance . . . . . . . . . . . . . . . . . . . . .19 Narver Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
Board & Committee Meetings Executive Committee – CAALA Offices Downtown Los Angeles, 6:00pm Jan. 9, Feb. 6, Mar. 6
Investigators Hudson Investigations . . . . . . . . . . . . . . . . . . . . . . . . .52 Shoreline Investigations . . . . . . . . . . . . . . . . . . . . . . .82 Tristar Investigation . . . . . . . . . . . . . . . . . . . . . . . . . .102
Board of Governors – CAALA Offices Downtown Los Angeles, 6:00pm Jan. 23, Mar. 20
Legal Marketing Berbay Corporation . . . . . . . . . . . . . . . . . . . . . . . . . .16 Legal Nurse Consultants Cross, Kathy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100 Nutris Consulting . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 PJ West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82 Legal Research Quo Jure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88 Legal Support Services 4 Corners Deposition Summaries . . . . . . . . . . . . . . . .60 ABC Virtual Offices . . . . . . . . . . . . . . . . . . . . . . . . . .29 USA Express Legal & Investigative Services . . . . . . .80 Medical & Dental Service Providers Buena Vista Pharmacy . . . . . . . . . . . . . . . . . . . . . . . .35 Doctors on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Injury Institute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39 Landmark Imaging . . . . . . . . . . . . . . . . . . . . . . . . . . .50 North Valley Eye Medical Group . . . . . . . . . . . . . . .64 Parehjan & Vartzar Chiropractic, Inc. . . . . . . . . . . . .34 Organizations CAOC – PAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86 Polygraph Investigations Trimarco & Associates . . . . . . . . . . . . . . . . . . . . . . . . .51
Education Committee – CAALA Offices Downtown Los Angeles, 5:00pm Jan. 23, Mar. 20 New Lawyers Committee - CAALA Offices Downtown Los Angeles, 6:00pm Jan. 21, Feb. 18, Mar. 18 Orange County Trial Lawyers Assn. 25602 Alicia Parkway, #403 Laguna Hills, CA 92653 (949) 916-9577 www.octla.org February 1, 2014 2014 Installation of Officers & Judicial Awards Program Balboa Bay Club Newport Beach
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CAALA Connection Center Get connected with other CAALA Members! Start the New Year by joining a committee. Connect with fellow members and be part of the CAALA community through a committee. Current attorney members are welcome to volunteer and participate in CAALA’s major committees: Education, Governmental Relations, Membership, Public Relations, New Lawyers and the Women’s Caucus. These committees keep the wheels moving at CAALA and make great things happen for our membership. We welcome any amount of time you can contribute. Below are the new Committee Chairs for 2014 and descriptions about the committees. Please e-mail the designated staff person for more information.
CAALA Connection Center
Education Committee Chair: Genie Harrison; Co-Vice Chairs: Christa Ramey and Jeffrey Rudman The Education Committee coordinates all MCLE programs for the Consumer Attorneys Association of Los Angeles, including the Annual Las Vegas Convention. The committee meets regularly to develop new and cutting-edge programs for the membership. Volunteers should be willing to devote time for substantive review and discussion of all CAALA education programs, however, speaking spots are not guaranteed. The committee meets the third Thursday of the month from 5:00 - 6:00 p.m. You must be an attorney member of CAALA to join the committee. For more information, contact Cindy Cantu, Senior Director of Education and Events, firstname.lastname@example.org. Governmental Relations Committee Chair: Bill Karns; Vice Chair: Kathryn Trepinski CAALA’s Governmental Relations Committee provides a forum for consumer attorneys to learn about legislative and political issues, meet directly with local legislators and participate in the fight to protect the rights of consumers. Members of the Governmental Relations Committee participate in all aspects of the political process from establishing relationships with new candidates to working on targeted political campaigns and maintaining relationships with local legislators. The Governmental Relations Committee meets in person and by telephone conference call. For more information, contact Stuart Zanville, Executive Director, email@example.com.
Offices Membership Committee Co-Chairs: Scott Corwin and Minh Nguyen Volunteer members devote an hour or two a month to help build and strengthen the association through member recruitment and retention
campaigns, expansion of member benefits, mentor program and more. The committee works on various projects throughout the year including member incentive programs. Attorney members are welcome to attend and participate in the monthly committee meetings. Contact Liz Hagan, Membership Manager at firstname.lastname@example.org. New Lawyers Committee Chair: Ibiere Seck; Vice Chair: Martin Aarons Attorney members who have been admitted to the practice of law for less than 10 years are invited to be part of CAALA’s New Lawyers Committee. The New Lawyers of CAALA meet monthly for roundtable programs covering subjects specifically focused for newer members. The New Lawyers Committee is a great way to meet other new attorneys and increase your network in the legal community. For meeting dates and additional information, contact Liz Hagan, Membership Manager, email@example.com. Public Relations Committee Co-Chairs: Ronnivashti Whitehead and Geraldine Weiss CAALA’s Public Relations Committee engages in programs and projects that educate the public, the media and CAALA members about issues that are important to the Consumer Trial Bar. Programs include the CAALA Speakers Bureau, social media initiatives, an annual Media Education Seminar and a multi-faceted program that provides resource information to members and other attorneys regarding the L.A. Civil Courts. The Public Relations Committee meets in person and by telephone conference call. For more information, contact Stuart Zanville, Executive Director, firstname.lastname@example.org. Women’s Caucus Co-Chairs: Amy Solomon and Ibiere Seck This members-only caucus provides support, resources and a forum for sharing ideas and concerns affecting women in the legal industry. Each Women’s Caucus event is an informal gathering of members for candid discussions you’ve been dying to have and now can! Caucus programs are complimentary and open to current female members. Events are posted on CAALA’s Web site and e-mail announcements are sent. For meeting dates and additional information, contact Liz Hagan, Membership Manager, email@example.com.
Connect with New CAALA Members: We welcome the following new members who joined CAALA during the month of November
Southwestern Law School
Gibson & Hughes
Law Office of Jonathan M. Pennell
Law Offices of Roberts-Ross
Corrales Law Group
Loyola Law School
The Layfield Law Firm, APC
Pepperdine University School of Law
Law Offices of Timothy P. Dillon
Law Offices of Steven Ibarra
Attorney at Law
Attorney at Law
The Layfield Law Firm
Kesluk & Silverstein
Law Offices of Brent A. Duque
JML Law, APLC
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From the President Geoffrey Wells
Consumer Attorneys Association of Los Angeles
Introducing the 2014 President of CAALA
Starting with a lot of changes, but remembering where we came from For those who do not know me or my background, I thought I would start with a brief introduction. Born in Seattle, Washington, growing up on Bainbridge Island, Washington (population 10,000) and graduating from Bainbridge Island High School, I believe I learned small-town values while living in the shadow of the larger City of Seattle. Later, I attended the University of Washington as an undergrad and matriculated to Pepperdine Law School. My recollection is I spent most of my college years on the baseball diamond, doing bullpen sessions, running poles, hitting fungo bats, throwing batting practice or pitching in games. I have been married for 25 years to Janet Ray, who works as Senior Counsel for Smart & Final. We have two children, Morgan and Garrett, who are both in college. As a lawyer, I have been practicing in Los Angeles since 1986. I spent two years practicing as a defense lawyer for the firm of Dummit & Agajanian. I then joined the plaintiffs’ bar and practiced for five years at the Law Offices of Michael J. Piuze. I have spent the last 21 years with the plaintiff ’s firm of Greene Broillet & Wheeler, both as an associate and a partner. I would like to think that having worked in both a small plaintiff ’s firm as well as a larger plaintiff ’s firm will give me valuable insight into many of the issues encountered by the constituents I have been elected to represent in CAALA. I am very excited to be your president in 2014. Initially when I ran for office some six years ago, it seemed like it would be a long time before I actually became president. However, looking back now, the time has gone very fast. Additionally, I have been fortunate to be able to learn a great deal from the 108 — The Advocate Magazine
presidents I have served over the last five years. I want to be a person who is in touch with our membership and its needs. I envision that my primary role as president is to shepherd our membership through the Court Consolidation Plan that has been implemented in the County of Los Angeles. I am well aware of and in complete agreement with the statement that “justice delayed is justice denied.” I have been an active participant in the Court Consolidation Committee and have attended the meetings representing our interests along with other fellow plaintiff trial lawyers. It has become abundantly clear that it is going to be very important for our membership to lend our support to the Court staff and the judiciary during this difficult period of diminished funding. I do recall the days of answering “ready” in Department 1 back in the 1980s, when we were required to stipulate to extend the five-year statute, being issued beepers and watching our clients languish interminably, waiting for more than five years after their case was filed. I experienced the Trial Court Delay Reduction Act of 1990, which changed the landscape of the courthouse and initially started with the goal of getting all cases to trial within 24 months of filing of the complaint. Over the next two decades, most cases received a trial court date within one year of filing the complaint. It’s critical for all of us and for our clients that we make sure the court consolidation does not take us back to the days of waiting four or five years before getting to trial. Another goal of my presidency is to continue to grow our membership and reach out and connect with our new and younger trial lawyers. The best way to do this is to better understand their wants
and needs and provide them with highquality free webinars and seminars that are put on by the top trial lawyers in California and insure that the topics covered are pertinent and relevant. I am going to continue to promote and expand this program as I have found it to be extremely successful and a real asset to our current membership. I also want to continue to support the List Serve, which has been such a valuable resource for experts, depositions, discovery items and advice for our membership. It strengthens our organization and opens up an all important dialogue that makes each of us better lawyers for our clients. Another focus of my presidency is to emphasize and promote stronger civility between counsel. This includes not only civility between opposing counsel, but better civility between competing plaintiff ’s lawyers. I firmly believe that one CAALA member’s success is good for all of our members. We need to cheer each other’s accomplishments and realize that the victories of our fellow members benefit us all in championing our clients’ causes. I am also a strong supporter of CAOC and AAJ. I am very much aware of our current MICRA battle and the importance of that fight to each of our member’s practices and pledge my commitment and support to fighting that battle. I believe that we will have a strong voice at the table with the Court Consolidation Committee in Los Angeles. I believe that our Board of Governors in 2014 will do a fantastic job and we will be your voice to help protect your clients in your practices throughout the year. I look forward to meeting each and every member this year.
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Published on Jan 16, 2014