It is somewhat of a general rule that corporate decisionmakers are not liable for making bad business decisions - hindsight is 20/20, after all. This "business judgment rule" is often used as a shield against attacks by litigants who claims that evidence of a conflict of interest or bad faith exists, and courts must often wade through the details to determine whether a genuine conflict exists, whether a party acted in bad faith, or if decisionmakers' words and actions (however rough around the edges) were in fact taken with the company's best interests in mind. A recent case out of the California Court of Appeal highlights how detailed these analyses can be: the court held that while the conflict-of-interest exception to the business judgment rule arises when the interests of the individual decisionmakers diverge from the interest of the enterprise as a whole, it did not apply in a case where the uncontested evidence showed the company’s decisionmakers had in fact worked in the company’s best interests. In that regard, the evidence showed that these decisionmakers expressed frustration with and even expressly disparaged a former colleague, but after weighing the evidence, the court determines that it was not corporate bad faith for company decisionmakers to be frustrated with a corporate team member who is earning profits for doing nothing, nor is there precedent for extending the concept of bad faith to a situation where a company decisionmaker, while working in the company’s best interests, privately disparaged a colleague.

Although courts have generally upheld electronic signatures as evidence that a party read and agreed to a contract, the California Court of Appeal recently held that the existence of such a signature is not conclusive. Instead, the court held that a dual dispute existed as to whether a party had actually executed his electronic signature on loan documents where the party was in his 90’s, suffered from dementia, and did not use a computer, mobile phone, or e-mail... and yet he supposedly opened his daughter’s e-mail on what was presumably her mobile phone, created a digital signature, and electronically clicked through and executed it - all in the space of 23 seconds. The court further found that the party did not ratify the agreement through a telephone call in which he responded affirmatively to information regarding the loan when that same conversation revealed he lacked comprehension of the agreement throughout the brief conversation.

The Ninth Circuit recently confirmed that, under California law, a claim for fraud or "deceit" by concealment requires a plaintiff to actually plead affirmative acts taken by the defendant to conceal facts, documents, or other matters from the Plaintiff. In other words, mere non-disclosure is simply not enough to show active concealment. To plead a concealment theory of fraud, a plaintiff must actually allege facts showing the defendant took action to hide the truth.

While Courts have a strong presumption in favor of arbitration, California Code of Civil Procedure section 1281.2(c) allows a Court to stay or refuse to compel arbitration when (1) a party to the arbitration agreement is also a party to a pending court action . . . with a third party, arising out of the same transaction or series of related transactions, and (2) there is a possibility of conflicting rulings on a common issue of law or fact. This provision is not superseded by the Federal Arbitration Act--which is largely considered to be even more friendly towards arbitrations than California law.

In a bizarre case, the California Court of Appeals threw out a Police Chief's employment retaliation claim after she was effectively terminated for sending private text messages to a friend and co-worker nearly a decade earlier. The kicker is that, while the County threatened to portray the Police Chief as a racist, her messages were actually complaining about the inappropriate nature of two racist memes. This is a bad decision, both in terms First Amendment jurisprudence and in supporting an anti-racist mentality within our police departments.

The U.S. District Court for the Western District of Arkansas held that the contract's "non-cancellable clause" was enforceable as Walmart was unable to cancel a multi-year, multi-million dollar contract with London Luxury LLC even when Walmart refused the shipments due to lab findings that the gloves failed tests.

In a suit gripping the interest of grunge and fashion fans alike, Nirvana initially alleged that Kurt Cobain designed the famous smiley face logo and that Marc Jacobs improperly used the logo in its clothing line. Marc Jacobs rebutted that the group lacked enforceable rights to the logo, and after years of litigation, the parties informed the court that they would accept the mediator's proposal to resolve their dispute.

The Supreme Court unanimously held that social media content generated by public officials, including blocking comments, will be considered state action under § 1983 if the posting official has both the authority to speak on the State's behalf and is considered to be using that authority when making content.

Upending four decades of precedent, the Supreme Court held that courts will no longer give deference to agencies' interpretation of the statutes which grant or amend agency power. This holding has wide-ranging implications for future challenges to agency rules and decisions, with the Environmental Protection Agency at particular risk from litigious challengers.

A bit of an odd case, but one that's worth noting: the California Court of Appeal recently held that an individual is capable of recognizing his or her own handwritten signature, and so if that person does not later deny that a signature is his or her own, it does not matter whether that person remembers signing the document or not, as a failure to recall signing the document will not create a factual dispute about the signature’s authenticity.

In theory, discovery sanctions are intended to curb the abuse of the discovery process and compensate a party forced to enforce discovery violations. In reality, Courts usually require multiple rounds of meet and confer efforts, participation and informal discovery conferences, and even then go to great lengths to avoid issuing sanctions. Luckily, if those efforts are unsuccessful and a discovery motion is decided on the merits, the costs of those meet and confer efforts may be included in a sanctions award. A small victory for the enforcement of discovery rules.

While the United States President is not entitled to immunity from criminal prosecution for unofficial acts, the rules the U.S. Supreme Court established for proving that the acts are unofficial makes a President’s immunity all-but absolute.

An Anti-SLAPP motion allows a defendant who is sued for speaking out and exercising their First Amendment rights a speedy and relatively inexpensive defense. In the late 90s, the California legislature made the denial of an Anti-SLAPP motion immediately appealable. Since then, an unexpected trend has emerged where corporate defendants use this right by filing and then appealing meritless Anti-SLAPP motions as a way to pause their litigation and dramatically increase costs. In a recent decision, the California Court of Appeal has once again pled that the law be revisited to foreclose this loophole.

An arbitrator's powers are generally limited by the parties' agreement. But who decides if an issue within the arbitrator's power in the first place? This is called the "Delegation Question" and has been hotly debated with the ever-increasing use of arbitration agreements. In a recent decision, the Ninth Circuit meticulously reviewed the history of the question, inconsistent Supreme Court precedent, and ultimately decided that "in the face of silence or ambiguity" and without "clear and unmistakable evidence" the default is that the Delegation Question is decided by a judge, not by an arbitrator.

California Dramatically Limits Third-Party Discovery In An Arbitration: After avoiding the subject for years, a California Court of Appeals has clearly stated that an Arbitrator's ability to order third party discovery is highly limited under both the Federal Arbitration Act and the California Arbitration Act. While some exceptions still exist, they are narrow and will likely continue to shrink.

California has created a bright line rule that claims under the Private Attorney General Act (PAGA) cannot be forced into arbitration. When faced with an overly broad arbitration provision that required all "representative actions" to be arbitrated and which did not allow the provision to be severed if found invalid, the California Court of Appeal held that an employer may not selectively enforce the arbitration provision and the entire provision was unenforceable. When entering into contracts, best practice is to have a provision be severable if it is found to be illegal.

As lawyers, we have a duty to only file meritorious cases. That duty protects both lawyers and clients alike. Case in point: when JC Lee (Stan Lee's daughter) and her attorneys filed a lawsuit to enforce an agreement that had already been the subject of numerous lawsuits over the last two decades, the Court held that the lawsuit had no merit, was filed for an improper purpose, and fined Ms. Lee $1,000,000, with her attorneys jointly responsible for $250,000.

Many contracts have a choice of law provision, governing which state's law applies in interpreting the contract. Too often, contracting parties ignore these clauses, to their detriment. In Airs Aromatics, LLC v. CBL Data Recovery Technologies Inc., a California Court held that while New York substantive law is to be applied based on the parties' New York choice of law provision, California procedural law still applies to the California court's decision. Confused? So were both parties. To avoid such thorny procedural issues, try to match your choice of law provisions with the state where a lawsuit is likely to be filed—or simply add a choice of venue provision requiring the lawsuit to be filed in a specific state.

In California’s continuing struggle with the Federal government over arbitration, a California Court has once again affirmed that a claim made purely under California’s Private Attorneys General Act (PAGA) cannot be compelled to arbitration, regardless of any underlying agreements between the parties, because “A PAGA claim is made on behalf of the State and the State cannot be compelled to go to arbitration.”

A default is what happens when a litigant fails to timely respond to a lawsuit. In Airs Aromatics, LLC v. CBL Data Recovery Technologies Inc., the California Court of Appeals reaffirmed the reality that once default is granted, the defaulting party has no "rights to participate in the litigation" or "take any further affirmative steps in the litigation." No matter how frivolous, ridiculous, or unfair, a lawsuit seems, failing to respond is almost never a good choice.

A case Orsus Gate filed earlier this year highlights the ways that the federal EB-5 program has been abused by unscrupulous actors. Details of the case, as well as some of the larger systemic problems inherent in the program, can be found in this Mercury News article.

Recently, the California Court of Appeals provided an effective reminder as to why choosing the right counsel is so important. In Hernandez v. FCA US LLC, et al., after the lawsuit settled, the Court set a deadline for Ms. Hernandez (the Plaintiff) to request her attorneys’ fees. Her attorneys blew the deadline and the Court dismissed the case. Her attorneys then made several motions to undue their mistake, including requesting that the case be reinstated based on their own “neglect.” Unfortunately for Ms. Hernandez, both the trial Court and the Court of Appeals refused to excuse the neglect, essentially barring her from recovering any attorneys’ fees. Such neglect is more common than people realize. 

Orsus Gate utilizes both calendaring software as well as our attorneys’ independent review of the docket as QA/QC to ensure that our clients avoid the same fate. 

It goes without saying that you should read a contract before you sign it, and waivers of liability are no exception: as the California Court of Appeals recently held in Kanaovsky et al v. At Your Door Self Stor, et al., “[o]ne may not contract to accept risk, decide to be self-insured, and then retroactively demand to be paid by the other side after there is a loss.”

Put another way: next time you rent a car, storage unit, or other service where insurance is offered, be sure to consider the risk involved in rejecting the offer, as you likely won’t get a second bite at the apple should things not work out.