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

Posts Tagged ‘Court of Appeals’

Let’s Eat Grandma! Punctuation Matters

Posted on: July 19th, 2018

By: Ted Peters

California Corporations Code Section 1601 provides certain rights to shareholders of corporations doing business in California.  Specifically, as the statute currently reads, corporations are required to open their books and records upon written demand from any shareholder as long as the purpose of the demand is “reasonably related” to the shareholder’s interests.  In 2016, the California Court of Appeal in Innes v. Diablo controls, Inc., 248 Cal.App.4th 139 (2016), held that Section 1601 did not require a corporation to produce records in any particular place; rather, the corporation was required only to produce records in the state where they were located, even if outside of California.

On February 13, 2018, California Representative Brian Maienschein (R) sponsored a bill that would amend Section 1601.  In June, and without a single “no” vote against it, the California Legislature enacted the bill, AB 2237 (Maienschein).  Governor Jerry Brown signed the bill into law on July 9, 2018.

A redlined version of the changes to Section 1601 clearly illustrates that the amendments, which go into effect next year, effectively reverse the holding from Innes.  Specifically, when a shareholder demands an inspection, the records are to be made available for inspection “at the corporation’s principal office in [California], or if none, at the physical location for the corporation’s registered agent for service of process in [California].”  The amendment also provides an alternative procedure which would permit the shareholder to elect to receive the corporation’s books, records, and minutes by mail or electronically, as long as the shareholder agrees to pay the reasonable costs for copying or converting the requested documents to electronic format.

Thus, it is now clear that corporations doing business in the State of California will be required to produce records in California, regardless of where the records are maintained.  The significance of this change is obvious enough, but wait, there’s more… When amending the statute, the legislature made another minor change to the first sentence of the statute.

Previously, what was open to inspection were “The accounting books and records and minutes of proceedings…”  As amended, what will be open to inspection will be “The accounting books, records, and minutes of proceedings…”  The insertion of two commas seems innocent enough, but could lead to a heated debate as to the scope of shareholder inspections in general.  The term “accounting” in the original statute could have been interpreted to modify just “books” or both “books and records.” With the amendment, however, it would seem that “accounting books” and “records” are two separate things and a corporation might be justified in refusing to produce “accounting records” to the extent they differed from “accounting books.”

Maybe the drafters of the amendment were simply sticklers for the proper use of punctuation and thought it best to tidy the statute up.  Or maybe they intended to narrow the scope of what records corporations are required to produce.  Or perhaps the change was intended to send no message at all.  Why does it matter and who really cares?  Well, punctuation does matter, even one little comma.  At least grandmothers around the globe think so; there is a world of difference between  “Let’s eat Grandma” and “Let’s eat, Grandma.”

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

Is An Employee’s Intentional Act An Employer’s “Accident”?

Posted on: July 10th, 2018

By: Rebecca Smith and Zach Moura

It may just be, according to the California Supreme Court’s recent decision in Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co., Inc. (June 4, 2018, No. S236765).  In Liberty v. Ledesma, the underlying lawsuit was brought by a minor who sought damages for molestation committed by an employee of a general contractor (“L&M”) while the employee was working on a long-term construction project at the minor’s school.  In response to this underlying suit and the tendering of the action by L&M to its carrier, Liberty Surplus Insurance Corporation and Liberty Insurance Underwriters (“Liberty”), Liberty filed a declaratory relief action seeking to adjudicate that they had no duty to provide coverage under a general liability policy.

The certified question presented to the Supreme Court by the 9th Circuit Court of Appeals was when a third party sues an employer for negligent hiring, retention and supervision of an employee who intentionally injured that third party, does the suit allege an “occurrence” under the employer’s general liability policy?  The Supreme Court responded that the answer turns on whether the injury can be considered “accidental” and concluded “it can.”

In reaching its decision, the Supreme Court acknowledged that the act of L&M in hiring the employee who later turned out to be the molester was intentional and that the employee’s molestation of the student was also intentional; however, held that because L&M did not “expect” its employee to molest a student, an accident transpired as required by the definition of “occurrence” in the Liberty policy.  The Court emphasized that the issue of whether an act constituted an accident for purpose of coverage MUST be viewed from the standpoint of the insured.  Explaining their decision, the Court stated that because the molester’s acts were unanticipated from L&M’s perspective, they were accidents in the context of providing insurance.  The allegedly negligent hiring, retention and supervision were independently tortious acts according to the Supreme Court, which form the basis of their claim against Liberty for defense and indemnification.  Further, the Court stated that the molester’s intentional conduct did not preclude potential coverage for L&M.

While the Supreme Court effectively wiped out a line of California Court of Appeal decisions which held that the unexpected consequences of an intentional act are not an accident, the Court pointed out that if the determination was justified in that if the insurer’s argument regarding the definition of occurrence and accident were accepted, it would leave employers without coverage for claims of negligent hiring, retention or supervision whenever the employee’s conduct is deliberate.  Such a result, the Court opined, would be inconsistent with California law, which recognizes the cause of action even when the employee acted intentionally.

It is expected that the opinion will lead to an increase in claims to insurers from employers facing negligent hiring claims.  It may also lead to an increase in litigation of coverage for liability claims based on intentional acts that result in allegedly unexpected injury, which would previously have been denied on the basis that the unexpected consequences of an intentional act are not an accident and therefore, not an occurrence under personal injury liability coverage.

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

$10M Wrongful Death Verdict Against City of Albany Reversed on Sovereign Immunity Grounds

Posted on: June 26th, 2018

By: Wes Jackson

In a much-anticipated opinion, the Georgia Court of Appeals reversed a $10,640,000 trial verdict against the City of Albany on sovereign immunity grounds. Freeman Mathis & Gary attorneys Sun Choy, Jake Daly, and Wes Jackson represented the City as appellate counsel.

At trial, Sheryl Stanford and Wilfred Foster, as co-administrators of their son’s estate, argued that the City was partially responsible for the murder of their son at Brick City, a night club in Albany, after a fight that started in the club.  It was undisputed that, while Brick City was only licensed as a recording studio, the City allowed it to operate as an illegal nightclub even though it knew that the establishment was rife with drug use, illegal alcohol sales, and violence.  In an effort to overcome sovereign immunity, plaintiffs asserted the City maintained a “nuisance” by failing to shutter the illegal club.

After trial, a jury awarded the plaintiffs $15,200,000 in damages, apportioning 70% of the liability to the City. The jury only apportioned 10% of the liability to the owners and operators of Brick City, 13% to the actual murderer, and 1% each to seven participants in the brawl.

In reversing, the Court of Appeals concluded that plaintiffs cannot circumvent sovereign immunity by simply alleging that the City’s discretionary conduct amounted to the maintenance of a “nuisance.” While the plaintiffs may appeal to the Georgia Supreme Court, the case marks an important victory for the City of Albany and strengthens sovereign immunity protections for local governments in Georgia.

For additional questions about this matter or sovereign immunity under Georgia law, please contact Sun Choy ([email protected]), Jake Daly ([email protected]), or Wes Jackson ([email protected]).

Shortening the Statutory Limitations Period in a Residential Lease

Posted on: May 23rd, 2018

By: Jake Daly

Every state has statutes or rules governing the time within which various types of claims must be filed.  In Georgia, the general rule is that a personal injury claim must be brought within 2 years of the date the injury occurred.  Is this an immutable rule, or can it be changed by contract?  Thanks to a recent decision by the Georgia Court of Appeals, we know that a statutory limitations period may be shortened by a provision in a residential lease and that a contractual limitations period of 1 year is valid and enforceable.

The plaintiff in Langley v. MP Spring Lake, LLC allegedly tripped and fell on a crumbling portion of a curb in the parking lot of the apartment complex where she lived.  The incident occurred on March 3, 2014, and the plaintiff filed the lawsuit on March 3, 2016.  Under Georgia’s statute of limitations for personal injuries, the lawsuit would have been timely filed.  However, the lease contained a provision that required any lawsuit against the owner and/or manager to be filed within 1 year of the occurrence giving rise to the claim.  Based on this contractual limitations provision, the trial court granted summary judgment for the defendant, which was represented by Sun Choy and Jake Daly of Freeman Mathis & Gary, LLP.

The Georgia Court of Appeals affirmed the trial court’s decision on May 1, 2018.  The plaintiff’s sole argument on appeal was that a contractual limitations provision should not apply to claims that do not arise out of the contract.  Because the plaintiff’s claim was based on Georgia’s premises liability statute, not the lease, she contended that her claim was subject to the statutory limitations period of two years.  The Court of Appeals disagreed, holding that the absence of a relationship between the lease and the claim was irrelevant because the contractual limitations provision in the lease applied by its own terms to “any legal action.”  There being no statute or public policy prohibiting the shortening of a statutory limitations provision in a contract, the Court of Appeals concluded that the contractual limitations provision in the lease was valid and enforceable and that, therefore, the plaintiff’s claim was time-barred.

We know from this decision that a contractual limitations provision of 1 year is valid and enforceable, but the Court of Appeals did not address the limit of how short such a provision can be.  However, we believe that a contractual limitations provision of 6 months could be valid and enforceable because that is the statutory deadline in Georgia for providing ante litem notice of a claim for money damages to a municipality.  Regardless of where the limit will be drawn by future cases, owners and managers of residential rental property should consider including in their leases a contractual limitations provision of no longer than 1 year.  For assistance with drafting such a provision that will withstand scrutiny by the courts, as well as other provisions that may help limit liability, please contact Jake Daly at [email protected] or (770) 818-1431.

Winemakers Decan’t Warn a Consumer About Every Risk

Posted on: May 16th, 2018

A Pour Result for Plaintiffs’ Attorneys in California, but a Grape Win for Vintners

By: Robyn Flegal

In May 2018, the California Court of Appeals refused to revive a class action lawsuit claiming wines made by fifteen winemakers should contain an arsenic warning. The lawsuit was originally filed in 2015, alleging that these wines exposed consumers to arsenic in violation of California law. The panel of the California Court of Appeals held that the alcoholic beverage warning on these wines sufficiently notified customers about the potential risks associated with consuming the wine, despite the lack of a specific arsenic warning.

California’s Proposition 65—the safe drinking water and toxic enforcement act of 1986—protects the state’s drinking water sources from being contaminated with chemicals known to cause cancer, birth defects, or other reproductive harms. Prop 65 requires businesses to disclose exposures to such chemicals to Californians.

The appeals court held that the Office of Environmental Health Hazard Assessment requires companies to disclose one chemical for each health risk. Thus, because the alcoholic beverage warning alerted customers that wine could result in cancer and reproductive harm, the additional arsenic warning was unnecessary. The failure to provide a separate arsenic warning was therefore not a violation of the regulations.

Companies doing business in California should be aware of Proposition 65 and the labeling and disclosure requirements thereunder. For more information, please contact Robyn Flegal at [email protected] or any of FMG’s Commercial Litigation Professionals.