CLOSE X
RSS Feed LinkedIn Instagram Twitter Facebook
Search:
FMG Law Blog Line

Posts Tagged ‘Court of Appeal’

DOL Fiduciary Rule Suffers a Slow Death

Posted on: May 15th, 2018

By: Ted Peters

In 2016, the U.S. Department of Labor (“DOL”) promulgated a set of rules and regulations now infamously referred to as the “Fiduciary Rule.”  After multiple criticism and legal challenges, the Fifth Circuit Court of Appeal struck down the Fiduciary Rule effective May 7, 2018.  Surprising many, the DOL elected not to challenge the Fifth Circuit ruling.  Even more surprising, however, was the bulletin issued by the DOL on the effective date of the court’s order.

The court’s ruling, which was not opposed by the DOL, left many unanswered questions.  Enter the DOL’s field bulletin.  Rather than admitting the total defeat of the Fiduciary Rule, however, the DOL seeks to maintain the status quo.  Specifically, the DOL announced that pending further guidance, advisors will not be penalized for either complying with the Fiduciary Rule, or ignoring it in favor of pre-existing standards.  Unfortunately, this announcement leaves the single most important question unanswered – what is the standard to which advisors will be held?  With the U.S. Securities and Exchange Commission working on its own set of rules, and the wait-and-see approach embraced by the DOL notwithstanding, only time will tell.

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

“Lien On Me, When You’re Insured …”*

Posted on: May 11th, 2018

*Apologies to Bill Withers.

By: Zach Moura

On May 8, 2018, the Court of Appeal, Second District, upheld a trial court’s decision that an insured plaintiff who chooses to receive treatment from providers who are outside of his private health insurance plan is not prohibited by Howell v. Hamilton Meats & Provisions Inc. (2011) 52 Cal.4th 541, from introducing the full charged amount of his medical bills into evidence for the purpose of determining his economic damages in Pebley v. Santa Clara Organics, LLC (May 8, 2018, No. B277893) ___Cal.App.5th___ [2018 Cal. App. LEXIS 409.)

Pebley was injured in a motor vehicle accident caused by an employee of defendant Santa Clara Organics, LLC (Santa Clara).  Pebley initially sought treatment through his medical insurance carrier, Kaiser Permanente (Kaiser). Then, after filing a personal injury action against defendants, Pebley obtained care from a specialist outside the Kaiser network. While Pebley testified he was referred to the doctor by “members of his men’s group”, defendants drew the court’s attention to an internet article co-written by one of Pebley’s attorneys, noting that while “[t]ypically, medical liens in personal injury cases have been used where the plaintiff is uninsured” (or the carrier will not authorize recommended medical care), the attorney authors proposed that insured plaintiffs use the lien form of medical treatment to allow them “to sidestep the insurance company and the impact of Howell, Corenbaum and Obamacare” because treating on a lien basis increases the “settlement value” of personal injury cases. And indeed, Pebley’s post-Kaiser medical treatment was provided on that basis.

The trial court granted plaintiff’s motions in limine to exclude: evidence that Pebley was insured through Kaiser; arguments concerning Pebley’s decision not to seek medical treatment through his insurance; evidence of the amounts an insurance company may pay, or what a medical provider may accept, for medical services; and evidence that Pebley obtained most of his medical treatment on a lien basis. The trial court denied defendants’ motion in limine to exclude evidence of unpaid bills from health care providers under Howell.

The Court of Appeal held that Pebley was to be considered uninsured (or non-insured) for purposes of proving the amount of his damages for past and future medical expenses.  The consequence of that, under Bermudez v. Ciolek (2015) 237 Cal.App.4th 1311, 1336, was that Pebley could instead rely on an expert to “competently testify that the amount incurred and billed is the reasonable value of the service rendered”, and “the defendant may then test the expert’s opinion through cross-examination and present his or her own expert opinion testimony that the reasonable value of the service is lower”, leaving the jury to “best decide the reasonable value” of the medical services.

Defendants presented expert testimony that the reasonable and customary value of the services provided by the various medical facilities was substantially less than the amounts actually billed, and defendants’ medical expert opined that 95% of private pay patients would pay approximately 50% of the treating professionals’ bills. The jury rejected this expert evidence and awarded Pebley the billed amounts.

The Pebley decision will likely lead to an increase in the prevalence of insured plaintiffs seeking treatment outside their insurance networks on a lien basis.

If you have questions or would like more information, please contact Zach Moura at [email protected].

DOJ Fails to Challenge 5th Circuit Ruling Striking Fiduciary Rule

Posted on: May 3rd, 2018

By: Theodore C. Peters

On March 15, 2018, the Fifth Circuit Court of Appeal stuck down the “fiduciary rule” proposed by the Department of Labor (DOL), which required brokers to act in the best interests of their clients in retirement accounts.  Subsequently, there was much speculation as to whether the Department of Justice (DOJ), acting on behalf of the DOL, would appeal that decision.  The April 30, 2018 deadline for the DOJ to appeal came and went, but …. nothing.  The Fifth Circuit’s ruling, therefore, is slotted to take effect on May 7, 2018.

In late April, AARP and several state attorneys general (including California, New York and Oregon) joined forces in seeking the court’s permission to intervene as defendants in the case, and also sought an en banc hearing before the entire 17-judge circuit. AARP contends that the court’s decision striking down the DOL rule puts Americans’ retirement security at substantial risk, resulting in an “issue of exceptional importance.”  The plaintiffs in the case, opponents of the DOL rule, formally opposed the motions to intervene on April 30.  Counsel for the plaintiffs charged that the “last-minute motions do not come close to justifying their unprecedented bid to intervene…”

On May 2, the Fifth Circuit denied the intervenors’ motions.  The court’s decision looks to be the final nail in the coffin holding the DOL’s fiduciary rule.  Despite this ruling, however, the DOL still has one more card it could play – it can file a petition by June 13 to have the Supreme Court hear the case. Even if the DOL stands quietly by and does nothing, the Supreme Court could conceivably take the case up on its own.

Ultimately, this legal brouhaha focuses attention on the SEC, which is currently taking public comment on newly proposed standards of conduct for brokers and advisors.

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

New Clarity for California CCP 998 Offers

Posted on: April 18th, 2018

By: Gretchen S. Carner

California Code of Civil Procedure section 998 settlement offers (“998 offer”) are valuable settlement tools, often under-utilized in prevailing party attorneys’ fees cases.  The California Court of Appeal has bolstered defendants’ ability to confidently make valid 998 offers, exclusive of attorneys’ fees, so that a motion for attorneys’ fees can be brought after acceptance of the offer.

The California Court of Appeal recently held that a defendant’s 998 offer to pay the plaintiff $12,500 “exclusive of reasonable costs and attorney[ ] fees, if any” was clear and unambiguous.  (Timed out LLC v. 13359 Corp. (Feb. 27, 2018, No. B280301) ___Cal.App.5th___ [2018 Cal. App. LEXIS 262].)  In Timed Out LLC v. 13359 Corp., plaintiff sued defendant for misappropriation of a model’s right of publicity under Civil Code section 3344 (section 3344).  Section 3344(a) provides for “prevailing party” attorneys’ fees and costs.  After trial, the court awarded plaintiff $4,483.30 “exclusive of any costs [or] attorneys’ fees that may be set by noticed [m]otion.”

Defendant submitted a cost bill that included post-offer attorneys’ fees and costs.  Plaintiff moved to strike the cost bill on the grounds, among others, that the 998 offer was invalid because the terms “exclusive of attorneys’ fees, if any” was ambiguous.  The Court of Appeal concluded that the usual and ordinary meaning of the term “exclusive of” in this context is that the settlement amount did not include fees and costs, and that one could not fairly interpret the phrase “if any” to require a concession that plaintiff may not be entitled to any attorney fees if it accepted the 998 offer.  The 998 offer did not deny Plaintiff’s right to recover attorneys’ fees and costs, nor could it have reasonably been interpreted to do so.  The offer provided that Defendant would pay $12,500, which was ‘exclusive of,’ meaning not including, reasonable costs and attorneys’ fees.  Where a 998 offer does not expressly preclude the recovery of fees and costs, a prevailing party may seek them.  Defendant was awarded its post-offer attorneys’ fees and costs.

The take away here is that defendants in any case where statutory attorneys’ fees and costs are at stake, should think about serving early 998 offers to cut off and limit their potential liability for significant attorneys’ fees that quickly add up during protracted litigation.  In addition, if the plaintiff does not obtain an award greater than defendant’s 998 offer (plus plaintiff’s actual award of attorneys’ fees and costs), the defendant is entitled to recover its post-offer attorneys’ fees and costs.  This should give great pause to plaintiff’s counsel who have weak or meritless cases.

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

Homeowners’ Associations: Banning Short Term Rentals May Violate 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].