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Archive for the ‘Commercial Liability’ Category

Homeowners’ Associations: Banning Short Term Rentals on Coastal Properties May Violate the California Coastal Act

Posted on: April 9th, 2018

By: Jeffrey R. Cluett

The California Court of Appeal overturned a denial of a preliminary injunction of a homeowners’ association resolution banning short term rentals (“STR”).  It found that appellants made a prima facie case that the ban violated the California Coastal Act, which requires a permit for any “development” that changes “the intensity of use or access to land in a coastal area.”  Greenfield v. Mandalay Shores Cmty. Ass’n (2018) 2018 Cal.App.LEXIS 258, **1-2.

Mandalay Shores is a development in the Oxnard Coastal Zone.  Id., *2.  For decades, non-residents have rented homes there on a short-term basis.  Id.  In June 2016, Mandalay Shores Community Association (“Association”) adopted a resolution banning STRs for less than 30 days.  Id. at *3.  In August 2016, the Coastal Commission advised the Association that the ban was a “development” under the Coastal Act requiring a coastal development permit.  Thereafter, the Greenfields, who own a residence at Mandalay Shores, sued for declaratory and injunctive relief.  Id. at *4.  The trial court denied the Greenfields’ ex parte application for a temporary restraining order and motion for preliminary injunction, finding that the STR ban was not a “development” within the California Coastal Act.   Id. at *5.

The Court of Appeal disagreed.  It noted that the California Coastal Act intends to “[m]aximize public access to and along the coast and maximize public recreational opportunities to the coastal zone consistent with sound resources conservation principles and constitutionally protected right of property owners.”  Id. (citation omitted).  “Development” includes any change in the density or intensity of use of the land.  Id.  The courts interpret “development” expansively to respect the Coastal Act’s mandate that it be liberally construed.  Id. at **5-6.  Accordingly, courts have held that closing and locking a gate that is usually open to the public is a “development,” as is posting “no trespassing” signs on a parcel used to access the beach.  Id. at 6.

The court found that the Greenfields made a prima facie showing to issue a preliminary injunction staying enforcement of the STR ban until trial.  Id. at *8.  The court therefore ordered the trial court to enter a new order granting appellant’s motion for a preliminary injunction.  Id.  The key takeaway for Associations with homes with beach access, therefore, is that changing regulations concerning who can rent those homes may fall afoul of the California Coastal Act.

This case is set for a Status Conference on May 21, 2018, where it will presumably be set for trial; the November 6, 2017 trial had been vacated pending appeal.  At trial, the case will turn on whether the STR ban is a “development” that would result in “a change in intensity of use or access.”

Despite the Court of Appeals ruling, the Association could yet prevail.  With the ban, residents and long-term renters would have beach access.  Therefore, that precluding short-term renters from renting may not be a “development” that “results in a change in the intensity of use or access to land in a coastal area” because residents and long-term renters would have beach access.  The question, therefore, is whether the California Coastal Act allows an Association to determine which people may have beach access.  Because this is a different situation from posting “no trespassing” signs or closing and locking a gate, which seeks to bar all beach access, the court may come to a different conclusion.

If you have any questions or would like more information, please contact Jeff Cluett at [email protected].

When Appealing to the Environmentally-Friendly Consumer Results in RICO Litigation

Posted on: April 6th, 2018

By: Justine A. Baakman

With the push toward production of environmentally friendly motor vehicles driven primarily by consumer demand, vehicle manufacturers have been forced to rapidly adapt vehicle design and marketing strategies.  Appeals to the environmentally conscious consumer often involve touts of vehicle emissions test results with the goal of elevating one’s vehicle above the competition through achieving a lower result than any vehicle on the market.  The necessity to meet consumer demand in this respect has left vehicle manufactures open to suit by consumers unsatisfied with the emissions performance of their vehicles as compared to those advertised by vehicle manufactures.

BMW North America is the latest vehicle manufacturer facing such litigation.  In a class action federal suit filed by consumers residing in Pennsylvania, Maryland, and Colorado, BMW faces allegations of fraud, misrepresentation, and violation of consumer protection and unfair trade practices laws in relation to its emissions test results advertising of its 2009-2013 X5 xDrive 35d models and its 2009-2011 330d models.  BMW faces allegations that the subject models emit significantly higher levels than those advertised to consumers.

BMW has also been accused of violating the Racketeer Influenced and Corrupt Organizations Act (RICO) arising from allegations that it installed emissions cheat devices on the models at issue to render lower emissions test results, and in turn, appeal and attract environmentally conscious consumers to its vehicles.  Additional allegations include that the models at issue emit emissions at 27 times higher than the maximum level allowed by the Environmental Protection Agency, and that BMW colluded with a vehicle parts maker to attain the results advertised to consumers.

For further information or for further inquiries involving commercial liability, you may contact Justine Baakman of Freeman Mathis & Gary, LLP, at [email protected].

BREAKING – D.C. Circuit Sets Aside Key Portions of FCC Ruling in Long-Awaited TCPA Decision

Posted on: March 20th, 2018

By: Matthew N. Foree

The United States Court of Appeals for the District of Columbia Circuit has finally issued its decision in the appeal of the Federal Communication Commission’s July 2015 Declaratory Order regarding the Telephone Consumer Protection Act. The industry has been anxiously awaiting this decision for over two years. The decision provides helpful guidance to those defending TCPA claims. The highlights are set forth below.

First, the decision rejects the FCC’s guidance concerning the qualifications of an automatic telephone dialing system (ATDS). Whereas the FCC defined ATDS broadly such that it took into consideration the device’s potential ability to store or produce telephone numbers to be called and to dial such numbers in determining its “capacity” to do so, the D.C. Circuit found that this definition was impermissibly expansive.  Among other things, the D.C. Circuit found that the FCC’s decision “fails to satisfy the requirement of reasoned decisionmaking.”  Therefore, the court set aside the FCC’s treatment of the issue.

Also, the D.C. Circuit considered the FCC’s treatment of reassigned cellular telephone numbers and particularly the issue of consent provided by one user of a cell phone when that number is reassigned to another user.  The FCC determined that callers could have one free call to continue to rely on the previous subscriber’s consent.  The D.C. Circuit questioned why the consent should stop at one call and determined that the FCC did not provide a satisfactory answer to this question.  As such, the court set aside the FCC’s treatment of reassigned numbers as a whole.

Additionally, the D.C. Circuit considered the revocation of consent, an issue that has become particularly active in TCPA litigation. The D.C. Circuit did not set aside the FCC’s determination that consent could be revoked at any time by any reasonable means.

Please join Matt Foree and Jennifer Lee on Thursday, March 29, 2018 at 3:00 PM EST for a webinar entitled “Unpacking the D.C. Circuit’s Decision on the FCC’s 2015 TCPA Ruling.”  We will discuss in more detail the D.C. Circuit’s decision, including the impact of the ruling on the defense of TCPA cases moving forward.

If you have any questions or would like more information, please contact Matthew Foree at [email protected].

Multi-Million Dollar California Verdict Affirmed Despite Questionable Causation

Posted on: March 6th, 2018

By: Theodore C. Peters

Proof of causation is a frequently debated topic in tort cases where the battle between “possible” and “probable” is bitterly fought.  Tort victims are left empty-handed unless they can sufficiently demonstrate the causal connection between the defendant’s conduct and the harm that befell them.  Speculation or conjecture is insufficient; a plaintiff must prove more.  But how much more, and where is the line drawn when there is no direct evidence supporting a causal connection and where it is equally plausible that the defendant’s act or omission did not cause the harm in question?  The California court of appeal, In Dunlap v. Folsom Lake Ford, recently provided some guidance.

In Dunlap, the plaintiff suffered personal injuries while driving a truck that flipped after its steering allegedly locked up.  The defendant car dealership admitted that a previous owner complained of similar steering problems, and there was evidence that the dealership had diagnosed a problem with worn ball joints, but denied that this was  the cause of the accident.  Rather, the defendant asserted that the accident occurred after the truck and the van it was towing jackknifed when the van suffered a blow out.  Prior to the litigation, the insurers took action to destroy both the truck and the van for salvage, so the parties’ experts were unable to physically inspect the vehicles and instead were limited to photographs which were admitted into evidence.  The photographs were inconclusive and the parties’ experts thus offered competing opinions of their respective interpretation of this evidence.

The defense accident reconstruction expert opined that, as a consequence of the jackknifing vehicles the truck was forcefully pushed, resulting in the equivalent of a PIT (police-intervention technique) maneuver which pushed the truck into a counterclockwise spin causing the accident.  In contrast, the plaintiff’s expert testified that “it was ‘more likely true than not’ that the worn-out ball joints caused the accident, and it was ‘not at all’ a close call.  In his opinion, if the ball joints had been replaced, ‘we would not be here today.’”  The court also noted that “[t]here was evidence that a particular defect (worn ball joints) was present in the truck, and that [the dealer] was aware the ball joints could cause steering lock and needed to be replaced but failed to replace them or verbally advise the owner to do so.”

The jury found in favor of the plaintiff and awarded over $7.4M in damages.  On appeal, the dealership claimed that, because there was no physical evidence that could confirm plaintiff’s expert’s opinion, plaintiff’s evidence as to causation was speculative and plaintiff’s expert should not have been permitted to testify that the ball joints were worn sufficiently to prevent steering.  In finding that the record supported a finding of causation based on non-speculative evidence, the court stated: “Expert testimony on causation can enable a plaintiff’s case to go to the jury only if it establishes a reasonably probable causal connection between the act and the injury… A possible cause only becomes “probable” when, in the absence of other reasonable causal explanations, it becomes more likely than not that the injury was a result of its action.  This is the outer limit of inference upon which an issue may be submitted to the jury.”  The appellate court concluded that substantial evidence supported the jury’s finding of causation, and affirmed the judgment.

The Dunlap opinion is consistent with a growing body of case law that favors letting juries decide issues of questionable causation where the proof satisfies a “more likely than not” standard.  While mere speculation and conjecture are certainly not enough, circumstantial evidence and reasonable inferences that can be drawn from such evidence are sufficient proof of causation to support a jury verdict.

If you have any questions or would like more information, please contact Ted Peters at [email protected].

Using Summary Judgment during the Arbitration Process

Posted on: February 22nd, 2018

By: Erin E. Lamb

Many attorneys assume that once a case is in private arbitration, dispositive motions are against the rules and are no longer a useful tool to resolve cases. How could an arbitrator have the power to consider a dispositive motion? After all, arbitration is sold to all parties as a process that all parties must willingly opt into — in the interest of limiting the complexities of arbitration, not adding to them, as dispositive motions do. Most attorneys participating in arbitration therefore would never think of pursuing dispositive motions, even when faced with res judicata or statute of limitations issues.

This is an incorrect and unduly limiting view of the arbitration process. None other than the Supreme Court of the United States, has upheld the power of an arbitrator to adopt procedures necessary to give effect to the parties’ arbitration agreement. Stolt-Neilsen v. AnimalFeeds International, 559 U.S. 663 (2010).  It’s up to the arbitrator to determine procedural questions by looking at the arbitration agreement. In turn, most arbitration agreements invoke an arbitration providers’ rules. Most rules, including the most recent American Arbitration Association rules (last updated in 2009), indirectly give arbitrators expansive powers and wide latitude in the procedures used to give effect to the arbitration agreement.

The 2009 American Arbitration Association rules, still in effect ten years later, state that arbitrators are required to “take such steps as they may deem necessary or desirable to avoid delay and to achieve just, speedy, and cost-effective resolution of large, complex, commercial cases.” In fact, in AAA commercial cases, the rules directly address dispositive motions: “The arbitrator may allow the filing of and make rulings upon a dispositive motion only if the arbitrator determines that the moving party has shown that the motion is likely to succeed and dispose of or narrow the issues in the case.” The use of “only” makes the rule seem limiting; in reality, it directly gives arbitrators the ability to hear and rule on said motions. Multiple federal courts have affirmed arbitration awards where the arbitrator ruled on a motion for summary judgment or on summary disposition. Some arbitration provider’s rules even specifically allow for it – the JAMS rules specifically allow for the filing of dispositive motions even under objection from the other side.

Simply put, unless your arbitration agreement specifically, plainly, and expressly prohibits dispositive motions, an arbitrator is empowered to grant any relief necessary to reach a final determination of the matter, including dispositive motions. Only in the face of a specific written agreement would an arbitrator be acting outside the contractually delegated authority of the arbitration agreement. This is an important thing to consider for all attorneys in arbitration cases – and at the time of the agreement to arbitrate, not after.

If you have any questions or would like more information, please contact Erin Lamb at [email protected].