California Litigation Attorney Blog

It promises to be another long, hot summer for employers as the California State Legislature and the courts continue to expand employer responsibilities and duties to employees.  A relatively recent case that hasn’t garnered too much attention (Cochran v. Schwan) involves the requirement for employers to reimburse employees in many circumstances for cell phone expenses. 

 

In ruling that cell phone expenses were reimbursable, Cochran held that the only issue was whether an employee was required to make work-related calls on a personal cell phone, and that it was irrelevant whether the employee changed plans to accommodate work-related cell phone usage or even whether the employee actually paid for his cell phone (as opposed to a parent or spouse).   Thus, if the nature of your employee’s work requires them to regularly use a cell phone (e.g delivery driver, etc.), you may want to consider providing a company cell phone or having the employee provide his/her cell phone bill to you for payment on a monthly basis to avoid the administrative nightmare of having to determine the “reasonable percentage” of the employee’s monthly bill you are obligated to pay. 

 

Also, keep in mind that you may still be responsible for reimbursement of cell phone expenses even if you do not specifically require the employee to use a cell phone for work purposes if the employee can demonstrate that you knew or should have known that a cell phone was reasonably required to carry out the employee’s duties.  Therefore, it’s probably a good idea to review the job descriptions of all of your employees and attempt to figure out whether you should be implementing a cell phone reimbursement protocol. 

 

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corporate lawIn California, an entity that has been suspended is disqualified from exercising any right, power or privilege as an entity during the time of the suspension. Therefore, the suspended entity lacks the legal ability to enter into a binding and enforceable contract with a third party. However, the contracts entered into during a time of suspension are not void; rather, the contracts are voidable at the option of the other party – but not at the option of the suspended entity. (Calif. Rev. & Tax Code §23304.1)

Any party that enters into a contract with a suspended entity should immediately determine whether or not that party wants to rescind the contract. The reason that an immediate decision is needed is because the right to rescind the contract is not permanent; the right to rescind may only exist during the time that the entity remains in a suspended status.

A suspended entity has the ability to revive the entity by filing an application with the California Secretary of State. In conjunction with the filing of the application, the suspended entity must (1) pay all delinquent taxes owed, including penalties, fees and interest, (2) file any delinquent tax returns, and (3) file a reviver request form. Additionally, at the option of the suspended entity, it may file an application to seek relief from the voidability of its contracts. If such an application is filed, so long as the contracts were not previously rescinded while the entity was suspended, the entity receives relief from the voidability of its contracts. Therefore, any party that wants to avoid a contract entered into with a suspended entity must move quickly to rescind the contract before the entity is revived and before the entity obtains relief from the voidability of its contracts

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Plaintiff homeowner sued a contractor for improper work, alleging (among other things) that the contractor is/was licensed.

At trial, plaintiff homeowner’s lawyer demanded that the contractor provide a verified certificate from the California State Contractors License Board confirming proper licensure, despite the allegation of proper licensure in the complaint.

The trial court ruled that the lack of the certificate was fatal to the contractor’s case, so California Business & Professions Code section 7031 required disgorgement of payments received by the contractor.

The appellate court reversed, ruling that plaintiff homeowner’s complaint alleging that the contractor was licensed meant that licensure was not “controverted” (per the statutory language), but had been judicially admitted. (Womack v. Lovell, et al. (2015) 237 Cal. App. 4th 772.)

No doubt, plaintiff’s complaint was boilerplate in certain regards, but boilerplate may be judicial admission. So, be careful what you allege!

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ADAThe Federal American with Disabilities Act (Title 42, sections 12101 et. seq. of the United States Code [“ADA” for short]) the California Unruh Act (Civil Code sections 51 – 53) present pitfalls for owners and tenants of commercial properties.

While the Unruh Act protects against discrimination generally, with disabilities among the areas of protection, the ADA covers disabilities specifically.  One area these statutes cover is the denial of access to businesses open to the public.  Violations can include inadequate parking and failure to provide ramps to entry ways for wheelchair bound individuals.  Other violations are less obvious.  Penalties for violations include statutory fines (currently $4,000 per violation under the Unruh Act) and remedial orders.  The ADA is very technical and violations unknown to the property owner and tenant often exist.

Enforcement of the ADA and the Unruh Act can be by private lawsuit, with the owner and tenant both potentially liable.  In addition to statutory damages and remedial orders, a successful plaintiff is entitled to reimbursement of attorneys fees and other legal expenses.  Violations can be costly for the unwary.  A defendant need not intend to violate these statutes to be liable.  Additionally, there is no requirement that a property owner or tenant be given an opportunity to cure a defect, no matter how small, before being sued.  In fact, some law firms and plaintiffs exist for the sole purpose of searching for noncompliant properties.

One way to limit your potential exposure is to obtain an evaluation of your property from a Certified Access Specialist.  A list can be obtain from the ca.gov site for the State of California.  These evaluations are relatively inexpensive and can be performed in a day.  Do not rely on representations of compliance with the law in a purchase and sale agreement or in a lease.  These representations are standard and are often made in the face of unknown violations and will not prevent you from being sued.  If you are unfortunate enough to be sued for violating the ADA and the Unruh Act, hire competent counsel to resolve the matter for you as expeditiously and inexpensively as possible.

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Effective January 1, 2016, the contractor’s licensing bond for California contractors, as required by Business & Professions Code section 7071.6, was increased from $12,000 to $15,000. Under section 7071.6, the bond must be in place before the Contractor’s State Licensing Board (“CSLB”) can issue an active license, reactive or inactive license, or renew an active license.

In California, the following are the requirements for a valid Contractor’s Licensing bond:

(a)              It must be written by a surety company licensed through the California Department of Insurance;

(b)             It must be in the amount of $15,000;

(c)              The business name and license number on the bond must correspond exactly with the business name and license number on the CSLB’s records;

(d)             It must have the signature of the attorney-in-fact for the surety;

(e)              It must be written on a form approved by the Attorney General’s office; and

(f)              It must be received at the CSLB’s headquarters office within 90 days of the effective date of the bond.

 

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Assembly Bill 622 was recently adopted, adding Labor Code section 2814 in California. Under section 2814, it is an unlawful business practice for an employer to consult the E-Verify system for a prospective employee until after an offer of employment has been extended to the prospective employee. Thus, an employer cannot check on the residency status of the prospective employee as part of the process of evaluating the employee for hire, but must wait until after an offer has been made to verify that the individual is authorized to work in the United States. It is also an unfair business practice to check on the residency status of existing employees.

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A Trap for the Unwary?

 

Word processing programs make it easier to archive and re-use work product, as we all know.  This has led to the expansion of standard agreements by adding boilerplate, sometimes without thinking.

 

One example is a Confidentiality Clause in a settlement agreement between parties in a lawsuit. 

 

How can one make a settlement “confidential” if one needs a Good Faith Settlement order from the court to immunize at least one of the settling parties from claims by non-settling parties in the same suit?  The latter are entitled to know the settlement’s terms.  Confidentiality makes no sense and would be impossible, without all kinds of additional court procedures, including gag orders, etc.

 

Then, there’s the problem of enforcement.  First, how would one know who breached that provision?  Machiavelli might leak the settlement terms then blame the other party in order to exact some revenge, whether by a sanction in the settlement agreement (e.g., give back money paid) or by filing a motion or by publicly complaining about the innocent party blabbing (which it didn’t do). 

 

Second, a settlement agreement is supposed to settle a matter, not provide a vehicle for continuation of the battle, but on different grounds.

 

Too often, we leave standard provisions in our forms and forget to edit them appropriately.  Editing is appreciated by our clients, if not by our fellow practitioners.

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Businesses are often contacted by other businesses that are seeking information about the job performance of a former employee. The first step that should be taken by a prudent business is to establish a company-wide policy on how such inquiries are to be handled. Such a policy should include the following:

(1)           All inquiries about former employees should be directed to only one person, such as the human resource director;

(2)           The designated person should limit the information provided to the dates of employment and the job title; and

(3)           No opinions as to the former employee’s job performance should be expressed.

There is potential liability to an employer if false information is provided about a former employee based upon a defamation claim. A policy which restricts the amount of information provided can limit the exposure on such claims. Additionally, in California, such a claim may not be available if the statement is based on an employer’s evaluation of an employee’s performance, so long as the evaluation is considered only an opinion and is not false. (See, Jensen v. Hewlett-Packard Co. (1993) 14 Cal.App.4th 958.)

Any business that is sued by a former employee will be aided if it can establish the existence of a written policy that addresses the type of information that is provided about former employees. Also, there are aggressive ways of responding to complaints of the defamation nature, such as a motion to strike under Code of Civil Procedure section 425.16, that can be supported by the existence of a written policy. Therefore, it is important for all businesses to adopt and implement such a written policy.

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Last month we discussed the effect that California’s new minimum wage of $10.00 has on salaried employees.  This month, we tackle the effect on employees who work split shifts.

Many employers (such as restaurants) have employees who work a morning shift (e.g. 9am-noon) and then an afternoon shift (4pm-9pm).  California regulations require employers to pay a split shift premium of one hour’s pay if their employees only make the minimum wage.  Under the old $9 an hour rate, if an employee was paid $9 an hour and worked 9am-noon and 4pm-9pm, the employee must be paid at least $81 or an effective hourly rate of $10.13.  Under the new $10 minimum wage, if an employee is paid $10 an hour and works 9am-noon and 4pm-9pm, the employee must be paid at least $90 or an effective hourly rate of $11.25.  Therefore, the increase in the minimum wage also effects whether an employee receives a split shift premium.  If an employer already pays its employees at least $11.25 an hour, it will not have to pay any premium for having them work a split shift.

 

Many wage and hour regulations are tricky and non-intuitive.  Make sure to consult with an employment law attorney if you have any concerns regarding whether your practices and procedures comply with California’s myriad of requirements.

Worker Factory

Worker Factory

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A well-known fact that bears repeating is that an irrevocable trust is only good for avoiding probate to the extent it is actually funded with assets. If California’s summary probate procedures are unavailable (a topic for another blog) the personal representative of a decedent’s estate may need to resort to probating assets that are not titled in the name of the decedent’s trust as of their date of death.  A common example is when a settlor lists real property (e.g. their residence) on a schedule (the ubiquitous Schedule “A”) that designates the property the settlor transferred to their trust, but fails to record a deed conveying the property to the trust prior to their death.

The solution to this conundrum is to file what is known as a Heggstad petition to get a court order declaring the property listed on the trust schedule is a trust asset, despite the settlor’s failure to formally transfer the asset to the trust.   Probate Code Section 850 incorporates the court’s ruling in the Estate of Heggstad (1993) 16 CA4th 943, 20 CR2d 433.  In Heggstad, the court held that a written declaration of trust by the owner of real property that included an attached schedule listing the specific property was sufficient to transfer the property into the trust despite the lack of a formal conveyance.  But what happens if the settlor fails to specifically list an asset on their Schedule “A”?

What could have been fatal to any would-be Heggstad petitioner may be salvageable under a recent case from the Fourth District of Appeals, Ukkestad v. RBS Asset Finance, Inc. In Ukkestad, a decedent owned two parcels of real property which were titled in the name of the decedent, not his trust. Ukkestad v. RBS Asset Finance, Inc., (2015) 235 Cal. App. 4th 156.  The probate court denied the filed Heggstad petition since the decedent’s trust failed to include a specific description of the real property.

The Ukkestad court reversed the probate court’s decision holding that the trust declaration’s general language providing for assignment of “all of the Grantor’s right, title and interest in and to all of his real and personal property… owned by the Grantor, wherever situated” was in fact sufficient to transfer the real properties into the decedent’s trust since it was possible to refer to public records to determine the decedent’s ownership of the real property.  The key was that despite the fact the property was not specifically listed (i.e., an address or legal description), the trust declaration expressly stated that the settlor transferred “all” of his property to his trust, and public records (i.e. recorded deeds) could be used as extrinsic evidence to show the settlor in fact owned the property prior to the transfer.

Ukkestad greatly expands the holding of Heggstad and makes the filing of a successful Heggstad petition easier in many cases if a drafter is careful to insert language which would comport with Ukkestad regarding the transfer of “all” of the settlor’s property.  Of course the best practice remains to formally title assets in the name of the trust soon after its creation, but it is helpful to know there are options if something goes awry.

 

 

 

 

 

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Scales of JusticeEffective January 1, 2016, SB 383 severely limits the use of demurrers in California through newly-enacted California Code of Civil Procedure § 430.41.

Under existing law, a party in a civil action may object to a complaint, cross-complaint, or answer by demurrer, thereby alleging that the pleading fails to state a claim or is otherwise defective. If such motions are granted, the case can be potentially terminated from the outset. However, the sponsors of SB 383 claimed “that ‘nuisance’ demurrers are clogging the courts.”

Lawyers would be wise to come up to speed on the unique aspects of the new statute, explained below.

1. Meet and Confer Requirement Before Demurrer to Initial Pleading or Amended Pleading

First, California Code of Civil Procedure (CCP) § 430.41(a) imposes a requirement before filing a demurrer that the parties meet and confer “for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” This same subsection also imposes a further “meet and confer again with the party who filed the amended pleading before filing a demurrer to the amended pleading.”

2. Content of Meet and Confer

Second, California Code of Civil Procedure § 430.41(a)(1) specifies the content of the meet and confer process, explaining that “the demurring party shall identify all of the specific causes of action that it believes are subject to demurrer and identify with legal support the basis of the deficiencies. The party who filed the complaint, cross-complaint, or answer shall provide legal support for its position that the pleading is legally sufficient or, in the alternative, how the complaint, cross-complaint, or answer could be amended to cure any legal insufficiency.” However, as explained below, it is not clear whether there are any ramifications to a defective meet and confer, so long as it occurs.

3. Automatic 30-Day Extension for Failure to Meet and Confer

Third, California Code of Civil Procedure § 430.41(a)(2) provides that: “The parties shall meet and confer at least five days before the date the responsive pleading is due. If the parties are not able to meet and confer at least five days prior to the date the responsive pleading is due, the demurring party shall be granted an automatic 30-day extension of time within which to file a responsive pleading, by filing and serving, on or before the date on which a demurrer would be due, a declaration stating under penalty of perjury that a good faith attempt to meet and confer was made and explaining the reasons why the parties could not meet and confer. The 30-day extension shall commence from the date the responsive pleading was previously due, and the demurring party shall not be subject to default during the period of the extension. Any further extensions shall be obtained by court order upon a showing of good cause.”

In other words, avoiding the phone call or email of opposing counsel will not provide a plaintiff any advantage, but instead may delay the plaintiff’s case.

4. Meet and Confer Declaration Required With Every Demurrer

Fourth, California Code of Civil Procedure § 430.41(a)(3) requires that: “The demurring party shall file and serve with the demurrer a declaration stating either of the following: (A)  The means by which the demurring party met and conferred with the party who filed the pleading subject to demurrer, and that the parties did not reach an agreement resolving the objections raised in the demurrer. (B)  That the party who filed the pleading subject to demurrer failed to respond to the meet and confer request of the demurring party or otherwise failed to meet and confer in good faith.”

However, the statute does not provide any specific remedy for an insufficient meet and confer, instead providing that: “Any determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.” California Code of Civil Procedure § 430.41(a)(4).

5. Inability to Demur to Amended Pleading on Grounds That Could Have Been Raised in Demurrer to an Earlier Pleading

Fifth, California Code of Civil Procedure § 430.41(b) eliminates the ability of counsel to repeatedly demur to portions of a pleading that remain unchanged. Specifically, it provides that: “A party demurring to a pleading that has been amended after a demurrer to an earlier version of the pleading was sustained shall not demur to any portion of the amended complaint, cross-complaint, or answer on grounds that could have been raised by demurrer to the earlier version of the complaint, cross-complaint, or answer.”

This subdivision may require creative lawyering, as plaintiffs and cross-complainants will be able to argue that points in a demurrer to an amended pleading could have been raised in opposition to a prior pleading. In practice, this will severely limit the ability of defendants and cross-defendants to demurrer to portions of a complaint that remain unchanged.

6. Potential Court-Ordered Conferences Regarding Amendments to Pleadings

Sixth, California Code of Civil Procedure § 430.41(c) allow the court to order a conference after granting leave to amend, presumably under the belief that such a meeting will prevent further demurrers. Specifically, the subsection provides that: “If a court sustains a demurrer to one or more causes of action and grants leave to amend, the court may order a conference of the parties before an amended complaint or cross-complaint or a demurrer to an amended complaint or cross-complaint, may be filed. If a conference is held, the court shall not preclude a party from filing a demurrer and the time to file a demurrer shall not begin until after the conference has concluded. Nothing in this section prohibits the court from ordering a conference on its own motion at any time or prevents a party from requesting that the court order a conference to be held.”

This provision would most likely be invoked in complicated or hotly-disputed cases to avoid the judicial resources used in ruling on repeated demurrers.

7. Three Amendment Limit Subject to Four Exceptions

Seventh, California Code of Civil Procedure § 430.41(e) provides certain limitations on the ability to amend pleadings in response to demurrers. Specifically, subsection(e)(1) provides that: “In response to a demurrer and prior to the case being at issue, a complaint or cross-complaint shall not be amended more than three times . . . .”

However, there are four exceptions to this three-amendment limit found in the text of the new statute.

The first exception is found in the text of subsection(e)(1), which provides that the three-strikes rule is only for amendments: “In response to a demurrer and prior to the case being at issue . . . .” In other words, the three strikes appears to apply only to amendments after a demurrer is sustained, not to amendments made after a meet and confer.

The second exception is found in subsection(e)(1), which provides that the rule applies only “absent an offer to the trial court as to such additional facts to be pleaded that there is a reasonable possibility the defect can be cured to state a cause of action.” In other words, the longstanding practice of courts to allow amendments if an amendment can cure the defect remains.

The third exception is found in subsection(e)(1), which explains that: “The three-amendment limit shall not include an amendment made without leave of the court pursuant to Section 472, provided the amendment is made before a demurrer to the original complaint or cross-complaint is filed.” In turn, Section 472 of the California Code of Civil Procedure is also amended by SB 383, which now permits an amendment to a pleading after a demurrer only if the amendment is filed and served “no later than the date for filing an opposition to the demurrer.” This means that the days of amendments on the eve of the hearing on the demurrer are over.

The fourth exception is found in subsection (e)(2), which provides that: “Nothing in this section affects the rights of a party to amend its pleading or respond to an amended pleading after the case is at issue.”

In practice, this statute should severely limit the abusive use of demurrers while also limiting non-abusive demurrers that could have terminated litigation at the outset. Moreover, it is likely that the use of motions for judgment on the pleadings will increase as there are no such limitations on these motion under SB383, despite their procedural similarity to demurrers. The statute includes a sunset clause providing that this experiment will end automatically on January 1, 2021 unless the legislature decides otherwise.

Only time will tell if this statute will have the desired effect, and what side-effects will result.

Text of California Code of Civil Procedure § 430.41:

(a)  Before filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer. If an amended complaint, cross-complaint, or answer is filed, the responding party shall meet and confer again with the party who filed the amended pleading before filing a demurrer to the amended pleading.

(1)  As part of the meet and confer process, the demurring party shall identify all of the specific causes of action that it believes are subject to demurrer and identify with legal support the basis of the deficiencies. The party who filed the complaint, cross-complaint, or answer shall provide legal support for its position that the pleading is legally sufficient or, in the alternative, how the complaint, cross-complaint, or answer could be amended to cure any legal insufficiency.
(2)  The parties shall meet and confer at least five days before the date the responsive pleading is due. If the parties are not able to meet and confer at least five days prior to the date the responsive pleading is due, the demurring party shall be granted an automatic 30-day extension of time within which to file a responsive pleading, by filing and serving, on or before the date on which a demurrer would be due, a declaration stating under penalty of perjury that a good faith attempt to meet and confer was made and explaining the reasons why the parties could not meet and confer. The 30-day extension shall commence from the date the responsive pleading was previously due, and the demurring party shall not be subject to default during the period of the extension. Any further extensions shall be obtained by court order upon a showing of good cause.
(3)  The demurring party shall file and serve with the demurrer a declaration stating either of the following:
(A)  The means by which the demurring party met and conferred with the party who filed the pleading subject to demurrer, and that the parties did not reach an agreement resolving the objections raised in the demurrer.
(B)  That the party who filed the pleading subject to demurrer failed to respond to the meet and confer request of the demurring party or otherwise failed to meet and confer in good faith.

(4)  Any determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.

(b)  A party demurring to a pleading that has been amended after a demurrer to an earlier version of the pleading was sustained shall not demur to any portion of the amended complaint, cross-complaint, or answer on grounds that could have been raised by demurrer to the earlier version of the complaint, cross-complaint, or answer.
(c)  If a court sustains a demurrer to one or more causes of action and grants leave to amend, the court may order a conference of the parties before an amended complaint or cross-complaint or a demurrer to an amended complaint or cross-complaint, may be filed. If a conference is held, the court shall not preclude a party from filing a demurrer and the time to file a demurrer shall not begin until after the conference has concluded. Nothing in this section prohibits the court from ordering a conference on its own motion at any time or prevents a party from requesting that the court order a conference to be held.
(d)  This section does not apply to the following civil actions:   (1)  An action in which a party not represented by counsel is incarcerated in a local, state, or federal correctional institution.
(2)  A proceeding in forcible entry, forcible detainer, or unlawful detainer.

(e)   (1)  In response to a demurrer and prior to the case being at issue, a complaint or cross-complaint shall not be amended more than three times, absent an offer to the trial court as to such additional facts to be pleaded that there is a reasonable possibility the defect can be cured to state a cause of action. The three-amendment limit shall not include an amendment made without leave of the court pursuant to Section 472, provided the amendment is made before a demurrer to the original complaint or cross-complaint is filed.
(2)  Nothing in this section affects the rights of a party to amend its pleading or respond to an amended pleading after the case is at issue.

(f)  Nothing in this section affects appellate review or the rights of a party pursuant to Section 430.80.
(g)  If a demurrer is overruled as to a cause of action and that cause of action is not further amended, the demurring party preserves its right to appeal after final judgment without filing a further demurrer.
(h)  This section shall remain in effect only until January 1, 2021, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2021, deletes or extends that date.

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California law says if you want to play in California, stay in California or pre-pay in California

Scales of JusticeAny plaintiff in an action or special proceeding who resides out of state or is a foreign entity remains susceptible to an arduous motion by a defendant at any time during the proceeding.

“The motion requires the plaintiff to post a bond or undertaking to secure an award of costs and attorney fees which could be awarded to the defendant in the action.” (California Code of Civil Procedure §1030.)

The burden on the moving defendant is limited to showing two practical elements: (1) plaintiff resides out of state or is an out of state entity; and (2) the defendant can show a reasonable possibility of prevailing in the matter. (Baltayan v. Estate of Getemyan (2001) 90 Cal.App.4th 1427, 1430.)

When looking for a reasonable possibility, the Court reviews any substantial evidence that could support the moving party winning at trial. (Shannon v. Sims Service Center, Inc. (1964) 164 Cal.App.3d, 911 (prior arbitration award qualified as substantive evidence).) Declarations with key documents reviewed under judicial notice support the reasonable possibility element. And a prevailing party attorney fee clause adds further momentum in the motion.

The amount of the bond or undertaking is set at the discretion of the trial court. However, the ideal scenario exists where an out of state plaintiff has filed several unsuccessful motions in pre-trial work up such as a motion for judgment on the pleadings and/or a motion for summary adjudication. Upon surviving those motions and based on the declarations and documents filed therein, defendant’s counsel can use those costs and fees to support a hefty amount for the bond in the 1030 motion. Ultimately, the penalty for failing to post the bond is dismissal.

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