California Litigation Attorney Blog

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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    California real estate values have fluctuated wildly in different localities over the past 25 year.  When values fall, a property owner may apply for a property tax value reduction when warranted. 

     What happens if a reduction is granted for one year?  Must the owner apply for another reduction?

     Apparently not, unless the county assessor gives notice that the reduced value has been increased.  See State Board of Equalization opinion letter 93-71.

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Worker FactoryThe Grinch has come early for many employers as the new minimum wage of $10.00 an hour takes effect on January 1, 2016.  Most employers are already aware of this increase and have taken steps to update their payroll, etc. for their low-level employees.  However, many employers either forget or are unaware of the domino effect that increases to the minimum wage have on other higher-level employees.

For example, beginning January 1, 2016, salaried employees will need to be paid a minimum of $41,600 per year, an increase of $4,160 from the prior minimum of $37,440.  This change could catch the unwary employer by surprise.  Employers should review all employee positions and schedules to ensure that all employee’s pay is compliant with the upcoming minimum wage increases.

Next month, I will discuss the effect of the increased minimum wage on employees who work split shifts.

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SB588 The Fair Day’s Pay Act, goes into effect in California as of January 1, 2016. Employers within the state should become familiar with the provisions of the Act because it greatly enhances the authority of a Labor Commissioner to enforce judgments for unpaid wages.

Under this new law, which begins at Code of Civil Procedure §690.020, the Labor Commissioner is authorized to issue stop work orders against employers (and successor employers) who have judgments against them for nonpayment of wages, to issue levies against employer’s bank accounts and accounts receivable, and to place liens against employer’s real and personal property.

The law also imposes criminal and personal liability against certain individuals that act for the employer such as owners, officers, directors and managing agents. Because of this new law, such individuals have potential personal liability where no liability previously existed.

The areas of potential individual liability are as follows:

(a) the violation of any provision regulating minimum wages or hours and days of work in any state Industrial Welfare Commission (IWC) wage order;

(b) waiting time penalties under Labor Code section 203;

(c) violation of the requirement to provide itemized wage statements under Labor Code section 226;

(d) failure to provide rest, meal and recovery periods under Labor Code section 226.7;

(e) actions to recover unpaid minimum wages and overtime under Labor Code section 1193.6 and 1194; and

(f) failure to pay expense reimbursements under Labor Code section 2802.

Based upon this new exposure for personal liability, it is imperative for all employers to review their wage and hour policies and practices to ensure that they are in compliance with all applicable laws.

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Landlord Tenant LeaseAs a real estate partition attorney in California, the most common question I receive is whether a co-owner has a right to partition a property by sale, meaning a court-ordered sale of the entire property to the highest bidder after the property is marketed to third parties. The rule in this area of law is absolute: the right to partition the property by sale is available to any co-owner of real property, known in the law as a co-tenant (tenant-in-common or joint-tenant).

One treatise on California law explains the issue as follows: “Ordinarily, therefore, if a party seeking partition is shown to be a tenant in common or a joint tenant, the right [to partition] is absolute and cannot be denied, either because of any supposed difficulty or on the suggestion that the interests of the cotenants will be promoted by refusing the application or temporarily postponing the action. The only indispensable requirement is that a clear title be shown, and in no event is a partition to be denied because it might result in financial loss to the cotenants.” 48 Ca Jur Partition § 36.

One case explained that: “The action for partition may be brought by one or more of the persons described in section 752 of the Code of Civil Procedure. It is a special proceeding regulated by the provisions of the statute and ordinarily, if the party seeking partition is shown to be a  tenant in common, and as such entitled to the possession of the land sought to be partitioned, the right is absolute.” Bacon v. Wahrhaftig (1950) 97 Cal.App. 2d 599, 603.

Yet another case set forth that: “Ordinarily, if the party seeking partition is shown to be a tenant in common, and as such entitled to the possession of the land sought to be partitioned, the right to partition is absolute, and cannot be denied, ‘either because of any supposed difficulty, nor on the suggestion that the interest of the cotenants will be promoted by refusing the application or temporarily postponing action, . . .’” Priddel v. Shankie (1945) 69 Cal.App. 2d 319, 325.

This means that the right to partition does not depend upon the fractional interest of the co-tenant. For example, a co-tenant holding only a small fractional interest could file a partition action. One reason the law allows this is that it may be very hard, if not impossible, to market a fractional ownership of real estate, as few parties will be interested in becoming a co-owner with the remaining co-owner(s).

Moreover, the right to partition does not requiring infighting among the co-owners. For example, an ex-husband can file a partition action even if he has an entirely-amicable relationship with his ex-wife, so long as they are co-owners of the property. Generally, partition actions involve parties who are or were very close, such as family (or former family), intimate partners (or formerly-intimate partners), and close friends (or formerly close friends). Indeed, parties would rarely end up as co-owners unless they did so voluntarily, based on trust existing at the time, or involuntarily, based on a trust, will, divorce decree or otherwise creating the co-ownership.

Further, the right to partition does not depend upon the hardship that a partition may cause to the tenant-in-possession (co-owner-in-possession). For example, an ex-wife can file a partition action that may cause the sale of the house occupied by her ex-husband, a co-owner of the property, even if the ex-husband may have no where else to live. One reason for this is that the ex-husband is welcome to be the highest bidder for the property. To the extent the tenant-in-possession is not the highest bidder, the tenant-out-of-possession should not receive diminished profits from the sale because of the hardship it may cause the tenant-in-possession, who can only offer a diminished sum. To prevent problems caused by a tenant-in-possession who would prefer that the property not be marketed for sale, an experienced partition attorney should request that the court take appropriate action if the tenant-in-possession fails to fully cooperate with an orderly sale of the property.

There are many ways to become a co-owner of real estate, but unless all co-owners agree to sell, there is only one remedy under the law: a complaint in state court for partition by sale. To ensure that a partition action proceeds smoothly given the unique complications in every case, co-owners should seek the advice of an experienced partition attorney in California.

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Scales of JusticeCourts begin to recognize that a lawyer need not hire outside counsel for advice.

Almost every lawyer will encounter at least one unhappy client who may sue for malpractice, whether the “claim” is legitimate or not.

With whom may the lawyer confer about the beef (before suit and representation by insurance counsel)?

Several resources are available, including state bar ethics hotlines and other lawyers.

Until recently, if a lawyer who received a client complaint was in a firm, it was an open question if communications with another lawyer in the firm were protected Attorney/Client communications.

Thankfully, the courts have started to publish written opinions that affirm the right of a firm to have an in-house general counsel, sometimes called an ethics counsel.  When a whiff of a dissatisfaction claim arises, the “offending” lawyer should immediately alert the firm’s general counsel, who would provide advice about ethical duties to the client and advice to the lawyer about how to proceed in other regards, as well.

One illustrative case from California is Edwards Wildman Palmer LLP v. Superior Court (2014) 231 Cal. App. 4th 1214Palmer (as it’s called) sets forth conditions for preserving from discovery by the client intra-firm communications between the “offending” lawyer and the firm’s general counsel as being attorney-client confidential communications.  Just as communications with an outside lawyer hired by the firm would be privileged, so would in-house communications with a lawyer whose job it is to advise the firm in such matters and who had had no involvement with the client.

However, the Palmer court did point out that certain conditions must be met to claim the privilege successfully.  One has to avoid the “prairie fire” communications within a firm among those who have no business communicating about the client, the file and the claim (other than necessary reports from the in-house general counsel re: status).  In other words, the general counsel needs to behave as an outside lawyer would who had been hired by the firm to represent it.

Other states whose courts have recognized the right to have an in-house general counsel include Georgia and Massachusetts.  Check with your state bar association for pertinent information.

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ConstructionIn 2002, the California Legislature enacted SB 800 to cover residential construction defect claims…or so most thought.  Its intent was to give developers, builders and contractors the right to repair alleged defects before homeowners filed suit.  It required the homeowners to give notice and an opportunity to repair.

In 2013, the California intermediate appellate court in Orange County upset the apple cart in Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App. 4th 98, an insurance subrogation case.  A Los Angeles County District Court of Appeal (Burch v. Superior Court (2014) 223 Cal.App. 4th 1411) agreed with the Liberty Mutual court that the Right to Repair Act (as SB 800 is known) is not the exclusive remedy available to homeowners, i.e., they could sue without giving notice of defects and an opportunity to repair.

In 2015, California’s Fifth District Court of Appeal went the other way, citing the language in Civil Code sections 896, 897, 931, 943 and 944, as well as the Legislative History in concluding that homeowners must give notice and allow repairs to be attempted before suing.

Now that there is a conflict among the intermediate appellate panels, will the California Supreme Court right the wrong of Liberty Mutual/Burch and enshrine McMillan as the law of the state?

Stay tuned.  One may assume that if the Supreme Court takes up McMillan, there would be a plethora of amici curiae briefs.  Should be fun to watch!

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