April 2021 Update
A conservatee’s incapacity may depend on whether the conservatorship is temporary or permanent or whether the conservator is conservator of the conservatee’s person or his or her estate. For example, in Holley v Silverado Sr. Living Mgmt., Inc. (2020) 53 CA5th 197, the court held that, for purposes of an elder abuse and wrongful death action, the deceased resident of a senior living facility was not bound by an arbitration agreement with the facility. The agreement had been signed, at the time the resident was admitted, by her survivors as temporary conservators of her person but not of her estate. Without the resident’s signature, there was no evidence that she consented, and without her consent, a court adjudication was required that she lacked capacity to enter into the agreement. See §2.26.
In determining whether there is mutual consent, the principal focus is on the acts of the parties as distinct from their unspoken thoughts. Martinez v BaronHR, Inc. (2020) 51 CA5th 962 (party’s unexpressed subjective intentions were irrelevant to issue of mutuality). See §3.4.
Fraud in the execution or inception of a contract will render it void, but fraud is not the only ground on which a document can be found void. In the following case, defects in property descriptions rendered deeds void without any connection to fraud-related claims. MTC Fin. Inc. v California Dep’t of Tax & Fee Admin. (2019) 41 CA5th 742, 747. See §3.6.
The presumption of undue influence is not applicable to at-death transfers between spouses by will, revocable trust, beneficiary form, or other instrument. Fam C §721(b); Prob C §21385. See §3.26.
Arbitration and delegation provisions that modified a workers’ compensation policy were illegal and unenforceable because they were not filed with the Insurance Commissioner as required by Ins C §11658. Jackpot Harvesting, Inc. v Applied Underwriters, Inc. (2019) 33 CA5th 719. See §3.37.
An agreement not to compete with an employee’s current employer was held enforceable in Techno Lite, Inc. v Emcod, LLC (2020) 44 CA5th 462. See §§3.37, 6.38.
In Hass v RhodyCo Prods. (2018) 26 CA5th 11, 29, the court held that a release agreement covering ordinary negligence in connection with a half-marathon race was valid, collecting cases. See §3.40A.
In Martinez v BaronHR, Inc. (2020) 51 CA5th 962, both parties signed an agreement but neither party placed their initials next to a jury waiver in the agreement, even though the drafter had included lines for their initials. The court held that the lack of initials was of no legal consequence and did not provide a basis for concluding that the parties did not mutually assent to the agreement. See §4.40.
In Reeder v Specialized Loan Servicing LLC (2020) 52 CA5th 795, the court held that an alleged oral agreement modifying a loan and trust deed was within the statute of frauds for real property interests, which encompassed promissory notes and related deeds of trust. See §4.44.
In Stover v ExperianHoldings, Inc. (9th Cir 2020) 978 F3d 1082, 1085, the Ninth Circuit held that “for changes in terms to be binding pursuant to a change-of-terms provision in the original contract, both parties to the contract—not just the drafting party—must have notice of the change in contract terms.” See §4.66.
By focusing on the objective intent of the parties, evidenced mainly by the words of their agreement, as the controlling factor in interpretation of the contract, California courts recognize the so-called objective theory of contract. Lange v Monster Energy Co. (2020) 46 CA5th 436. In Lange, the court ruled that an arbitration agreement was substantively unconscionable for several reasons: It required the employee to waive punitive damages as remedy for all nonstatutory claims; its injunctive relief provisions waived the requirement that the party show irreparable harm; and it waived the right to a jury trial “in the event that any controversy or claim is determined in a court of law.” See §§5.1, 5.77, 9.44.
In Nuvasive, Inc. v Miles (Del Ch, Aug. 26, 2019, No. 2017-0720-SG) 2019 Del Ch Lexis 325, the Delaware chancery court held that an employment contract’s choice-of-law provision selecting Delaware law to govern nonsolicitation and noncompete covenants was unenforceable because Delaware’s interest in freedom of contract, although a fundamental interest, was outweighed by California’s interest in overseeing conditions of employment relationships in that state, which prohibit noncompete provisions. See §5.54.
In Dougherty v Roseville Heritage Partners (2020) 47 CA5th 93, 103, the court ruled that an arbitration agreement was procedurally unconscionable and unenforceable. The agreement was on a preprinted form, buried in a 70-page packet of admission documents presented to the daughter of a patient who was being released from the hospital and needed to find a care facility that day; moreover, the documents were presented on a take-it-or-leave-it basis. The agreement was also substantively unconscionable, because the discovery limitations unfairly and unreasonably favored the defendants and the agreement contained an unenforceable predispute contractual jury trial waiver. See §§5.76–5.77, 5.79, 9.43, 9.44.
In Dennison v Rosland Capital LLC (2020) 47 CA5th 204, 212, the court held that an arbitration agreement was substantively unconscionable. It required the customer, but not the seller, to arbitrate; it required the customer to pay the seller’s costs and attorney fees if the seller obtained any relief on a motion to compel arbitration, but provided no mechanism for the customer to recover fees if he successfully resisted arbitration; it limited the seller’s liabilities, and it shortened the applicable limitations period from 4 years to 1 year. See §§5.77, 5.79.
In Garner v Inter-State Oil Co. (2020) 52 CA5th 619, the court held that the parties’ arbitration agreement provided for arbitration of class claims because a provision waiving the employee’s right to participate in a civil class action did not also preclude the employee’s participation in class arbitration. The agreement expressly included class action claims among the matters to be submitted to arbitration. See §5.78.
Whether a waiver has been established is measured by the circumstances existing at the time the waiver is exercised. Kec v Superior Court (2020) 51 CA5th 972, 980. See §5.87.
Among other things, the Song-Beverly Consumer Warranty Act (CC §§1790–1795.8), popularly known as the Lemon Law, makes it unlawful for merchants to ask or require customers to provide personal identifying information as a condition to accepting a credit card for payment. The Act does not prohibit merchants from requesting that information unless the request is made in circumstances that would lead a reasonable person to believe the information is required to complete the transaction. Williams-Sonoma Song-Beverly Act Cases (2019) 40 CA5th 647. See §6.24.
In AB Stable VIII LLC v MapsHotels & ResortsOne LLC (Del Ch, Nov. 30, 2020, No. 2020-0310-JTL) 2020 Del Ch Lexis 353, *5, the Delaware chancery court held that the consequences of the COVID-19 pandemic fell within an exception to the definition of material adverse effects in the agreement, and as a result, the seller’s business did not suffer a material adverse effect under the agreement. See §6.47.
In Jarboe v Hanlees Auto Group (2020) 53 CA5th 539, the court held that to enforce an agreement as third party beneficiaries, the nonsignatory defendants had to show that the agreement was made expressly for their benefit. See §7.61.
Because the foundation of the third party’s rights is the promisor’s contract, a third party beneficiary cannot assert any rights that are greater than the rights of the promisee under the contract. ButlerAmerica, LLC v Aviation Assur. Co., LLC (2020) 55 CA5th 136, 142. See §7.62.
The COVID-19 pandemic has spawned much litigation over the question whether the pandemic—or related governmental public health orders—constitute force majeure events that will excuse a party from contract performance. The outcome will generally depend on the specific language of the force majeure clause and thus will vary from case to case. If the clause is broad enough, the party may be excused. If the contract has no such clause or has one that is ambiguous, there are three extra-contractual defenses that may yet excuse contract performance: (1) the Civil Code provisions discussed in §§8.31 and 8.32, and (2) impossibility or impracticability as discussed in §§8.35–8.36, and (3) frustration of purpose as discussed in §8.38. Of course whether and to what extent these defenses apply will depend on the circumstances—the nature of the performance required under the contract, and how and to what extent the performance obligation has been affected by the COVID-19 pandemic. See §8.32.
The statutory definition of prevailing party in CC §1717 trumps any definition of prevailing party in the attorney fees provision of a contract. Waterwood Enters., LLC v City of Long Beach (Dec. 18, 2020, No. B296830) 2020 Cal App Lexis 1205. See §9.17.
In Rittmann v Amazon.com, Inc. (9th Cir 2020) 971 F3d 904, 915, the Ninth Circuit held that the Federal Arbitration Act (FAA) (9 USC §§1–16) exempts transportation workers who are engaged in the movement of goods in interstate commerce, even if they do not cross state lines. See §9.39.
In Revitch v DIRECTV, LLC (9th Cir 2020) 977 F3d 713, the Ninth Circuit held that the FAA does not preempt California’s “absurd results” canon (CC §1638; see §5.7), which requires that courts interpret contracts so as to avoid absurd results. See §9.40A.
In Victrola 89, LLC v. Jaman Props. 8 LLC (2020) 46 CA5th 337, 346, the court held that when an arbitration agreement provides that its “enforcement” shall be governed by the FAA, the FAA governs a party’s motion to compel arbitration and FAA procedural rules control. See §9.40B.
On October 10, 2019, Governor Newsom signed into law AB 51, which prohibits California employers from requiring prospective and current employees to waive any rights or procedures for a violation of the Fair Employment and Housing Act (FEHA) (Govt C §§12900–12996), “including the right to file and pursue a civil action or a complaint with, or otherwise notify, any state agency, … or any court or other governmental entity of any alleged violation.” Lab C §432.6(a). In effect, AB 51 thus seeks to prohibit employers from mandating an arbitration agreement as a condition of employment. Assembly Bill 51 was set to take effect January 1, 2020; however, in December 2019, the federal district court for the Eastern District of California temporarily restrained state officials from enforcing the law pending a full preliminary injunction hearing. Then, in Chamber of Commerce of the United States v Becerra (ED Cal 2020) 438 F Supp 3d 1078, the court granted a preliminary injunction against enforcement of Lab C §432.6(a), (b), and (c) on grounds that it is preempted by the FAA because it discriminates against arbitration and interferes with the FAA’s objectives. The decision was appealed to the Ninth Circuit on February 24, 2020. See §9.40C.
In Dennison v Rosland Capital LLC (2020) 47 CA5th 204, 209, the court held that when a contract included a severability clause stating that a court of competent jurisdiction could excise any unconscionable provision, there was no clear and unmistakable delegation to the arbitrator to decide whether the arbitration agreement was unconscionable. See §§9.41, 9.43A.
In Domestic Linen Supply Co., Inc. v L J T Flowers, Inc. (Dec. 4, 2020, Nos. B292863, B294788) 2020 Cal App Lexis 1148, the court held that there was no agreement to arbitrate. The form of the rental agreement was deceptive in that the arbitration clause was hidden in a thicket of fine print, and was not in capitalized, boldface type. See §9.41A.
In regard to procedural unconscionability, surprise differs from oppression. Surprise is present when the arbitration provision is concealed in a lengthy printed form. Oppression, on the other hand, occurs when there is a lack of negotiation and meaningful choice. Torrecillas v Fitness Int’l, LLC (2020) 52 CA5th 485, 493. In Torrecillas, the level of procedural unconscionability was insufficient to support a finding of the same: The employment agreement with the arbitration provision had no element of surprise; the language was clear and direct; and the employee had an opportunity to negotiate. See §9.43.
When the parties have a preexisting arbitration agreement, the agreement is unenforceable with respect to representative claims for civil penalties under the Private Attorneys General Act of 2004 (PAGA) (Lab C §§2698–2699.6). The agreement may be enforceable, however, with respect to other claims, including claims for victim-specific relief (such as unpaid wages). Olabi v Neutron Holdings, Inc. (2020) 50 CA5th 1017, 1019. See also Bautista v Fantasy Activewear, Inc. (2020) 52 CA5th 650, 656 (PAGA claim is dispute between employer and state; relief under PAGA is designed to benefit general public); Kec v Superior Court (2020) 51 CA5th 972, 978 (PAGA claim unwaivable). See §9.47B.