December 2018 Update
The current update includes changes that reflect recent developments in case law, legislation, court rules, and jury instructions. Summarized below are some of the more important developments included in this update since publication of the 2017 update.
Pleading damages. A default judgment in plaintiff’s favor could not exceed $25,000 when the complaint alleged damages “estimated to exceed $25,000” but did not allege any specific damages amount. Airs Aromatics, LLC v CBL Data Recovery Technols., Inc. (2108) 23 CA5th 1013. See §1.13.
Attorney fees. In California-American Water Co. v Marina Coast Water Dist. (2017) 18 CA5th 571, CC §1717 attorney fees were awarded to prevailing plaintiffs in an action to void the parties’ contracts; the fee clauses were enforced if the contracts, though void, were not illegal. See §1.23.
For a contract case involving multiple parties, in which the court found there was more than one prevailing party entitled to attorney fees, see Burkhalter Kessler Clement & George LLP v Hamilton (2018) 19 CA5th 38 in §1.26.
In Shapira v Lifetech Resources, LLC (2018) 22 CA5th 429, plaintiff’s voluntary dismissal before submitting written closing arguments in a bench trial triggered CC §1717(b)(2) and cut off the defendant’s right to attorney fees. See §1.26.
Brandt Fees. When an award of Brandt fees was remanded for redetermination, remand of the punitive damages award was also required. See Pulte Home Corp. v American Safety Indem. Co. (2017) 14 CA5th 1086 in §1.34.
Liquidated Damages. For a case discussing liquidated damages, see Vitatech Int’l, Inc. v Sporn (2017) 16 CA5th 796 in §1.42.
Real Estate Buyer/Seller
Specific Performance. For a recent case discussing a tenant’s entitlement to offsets for rent in a judgment for specific performance of an option to purchase, see Petrolink, Inc. v Lantel Enters. (2018) 21 CA5th 375 in §2.7.
Preemption. The Ninth Circuit recently articulated a two-part test to determine whether a state law employment claim is preempted by the Railway Labor Act or §301 of the Labor Management Relations Act: the state claim is preempted if it arises entirely from a collective bargaining agreement or requires construction of a collective bargaining agreement. See Alaska Airlines, Inc. v Schurke (9th Cir 2018) 898 F3d 904 in §§3.2, 3.33.
In Light v Department of Parks & Recreation (2017) 14 CA5th 75, the court of appeal held that the Workers’ Compensation Act (Lab C §§3200–6149) does not preempt a claim for intentional infliction of emotional distress because an employer’s unlawful discrimination is not a normal incident of employment. See §3.97.
Back Rent. An unlawful detainer judgment did not preclude a landlord from filing a separate civil action for collection of back-due rent that accrued in months other than the month for which damages were awarded in the unlawful detainer action. See Hong Sang Mkt., Inc. v Peng (2018) 20 CA5th 474 in §4.86.
Constructive eviction. In Multani v Knight (2018) 23 CA5th 837, the court held that a sewer backup that occurred while a commercial unlawful detainer action was pending did not constitute a constructive eviction because the tenant’s possession had already become unlawful. See §4.14.
Retaliatory eviction. Effective January 1, 2018, retaliatory conduct prohibited by CC §1942.5 includes reporting or threatening to report a tenant (or the tenant’s known associates) to immigration authorities. See CC §1942.5(c) in §4.36.
For a retaliatory eviction case in which a large punitive damages award was upheld and not subject to the CC §1942.5 cap, see Fernandes v Singh (2017) 16 CA5th 932 in §4.36.
Liquidated Damages. A late fee provision in a rental agreement is unenforceable when the landlord made no attempt to approximate actual losses caused by late payment of rent. See Del Monte Props. & Invs., Inc. v Dolan (2018) 26 CA5th Supp 20 in §4.106.
Injury to Property
Construction Defects. The California Supreme Court held in McMillin Albany LLC v Superior Court (2018) 4 C5th 241 that the Right to Repair Act (CC §§895–945.5), which imposes a prelitigation notice and cure procedure, is the virtually exclusive remedy for construction defect claims for pure economic losses and for actual property damage. See §5.10.
Nuisance immunity. For a case involving a statutory immunity defense under CC §3482 (activity done under authority of statute cannot be deemed nuisance), see Williams v Moulton Niguel Water Dist. (2018) 22 CA5th 1198 in §5.6A.
Consent to private nuisance. For a discussion of the circumstances in which a prior owner’s consent is a defense under Mangini and Beck to the current owner’s claim for continuing nuisance, see Otay Land Co., LLC v U.E. Ltd. (2017) 15 CA5th 806 in §5.48.
Fire cases. Fire suppression and investigation costs are recoverable under Health & S C §13009, and attorney fees may be recoverable as private attorney general fees under CCP §1021.5. See, e.g., Heron Bay Homeowners Assn. v City of San Leandro (2018) 19 CA5th 376 in §5.54. Punitive damages were not supported in Pacific Gas & Elec. Co. v Superior Court (Butte Fire Cases) (2018) 24 CA5th 1150, in which the court of appeal held that an unsuccessful risk management policy does not necessarily reflect a conscious and willful company decision to ignore or disregard a risk. See §5.38.
Intellectual Property Infringement and Misappropriation
Extraterritoriality. For in-depth discussion of how courts decide if U.S. intellectual property statutes apply to an alleged infringement, see WesternGeco LLC v ION Geophysical Corp. (2018) ___ US ___, 138 S Ct 2129, in which the United States Supreme Court held that when a competitor manufactured components for an infringing product in the United States and then shipped them to companies abroad who combined the components to create an infringing product, the infringement occurred within the United States and damages for lost profits were domestic, not extraterritorial. See §6.2.
Patent infringement. In Halo Electronics, Inc. v Pulse Electronics, Inc. (2016) ___ US ___, 136 S Ct 1923, the United States Supreme Court held that a finding of willful infringement does not require the trial court to award enhanced damages under 35 USC §284. See §6.13.
Copyright infringement. For a case discussing the burden on the defendant to prove what percentage of its profits was not attributable to infringement, see Williams v Gaye (9th Cir 2018) 895 F3d 1106 in §6.16.
The author of chapter 7, Robert W. Wood, analyzes the impact of the Tax Cuts and Jobs Act (Pub L 115–97, 131 Stat 2054), which took effect on December 22, 2017. Significant changes include
Patent recoveries. Patents, inventions, models, and designs were added to the list of assets that are not capital assets in the hands of their creators. Therefore, despite some exceptions, counsel should generally assume that patent recoveries are ordinary income. IRC §1221(a)(3). See §7.37.
Contingent attorney fees. The tax code provisions allowing for miscellaneous itemized deductions (see IRC §§67–68) are suspended from January 1, 2018, to December 31, 2025. IRC §§67(g), 68(f). Contingent attorney fees, which were generally categorized as miscellaneous itemized deductions under IRC §67(b), can no longer be deducted unless there is an above-the-line deduction available when calculating adjusted gross income. See §7.49.
Attorney fees in discrimination cases. Attorney fees related to a settlement or payout related to sexual harassment or sexual abuse can no longer be taken as a business deduction if the settlement or payment is subject to a nondisclosure agreement, and if the fees were paid or incurred after December 22, 2017. It is unclear if this provision, intended to punish defendants, also applies to the plaintiff’s legal fees. Most commentators believe that this was not the intent and, at the time of this update, lawmakers intended to introduce a technical corrections bill. IRC §162(q). See §7.49.
Deductions that are permissible in determining adjusted gross income now include attorney’s fees when paid by, or on behalf of, the taxpayer in connection with whistleblower awards made in actions brought under specified federal securities and commodity exchange laws or state false claims acts. IRC §62(a)(21). See §7.49B.