Tag: 2023 News

Elaine Estrada, was a former employee of the City of La Habra Heights. On April 28, 2016, the Los Angeles County District Attorney’s Office filed a felony complaint against Estrada that charged her with one count of misappropriation of public funds in violation of Penal Code section 424, subdivision (a), (count 1), and one count of embezzlement by a public officer in violation of Penal Code section 504 (count 2).

As to both counts, it was alleged that, between April 1, 2007 and July 31, 2009, Estrada removed payroll deductions, and as a result, did not pay the required employee share for dependents covered on her plan. The City did not discover the alleged conduct until an audit in 2012 because Estrada was responsible for the payroll and timekeeping of all City employees.

Estrada pled no contest to a felony that arose out of the performance of her official duties. Under the terms of Estrada’s plea agreement, the conviction was later reduced to a misdemeanor under Penal Code section 17 and then dismissed under Penal Code section 1203.4.

Government Code section 7522.72 provides that if a public employee is convicted of a felony for conduct arising out of or in the performance of his or her official duties, the employee forfeits certain accrued retirement benefits, which “shall remain forfeited notwithstanding any reduction in sentence or expungement of the conviction.” Thus California Public Employees’ Retirement System (CalPERS) determined that Estrada forfeited a portion of her retirement benefits as a result of her felony conviction.

Estrada appealed the forfeiture action. The ALJ found CalPERS was correct in its determination that Estrada was convicted of a felony arising out of her official duties as an employee of the City. As a result, the ALJ concluded that Estrada forfeited her right to retirement benefits for the period from September 1, 2007, the earliest date of the commission of the felony, through June 28, 2017, the date of her felony conviction.

On August 6, 2019, after the ALJ issued the proposed decision but before the Board adopted it, Estrada returned to criminal court. Following an off the-record conference with Estrada’s counsel and a deputy district attorney, the court stated that it was granting a request to issue a nunc pro tunc order. The court then found “nunc pro tunc that on June 28th, 2017, the defendant pleaded to the felony but was not convicted.” The court further found that “on January 3rd, 2018, the defendant was convicted of a misdemeanor and sentenced to a misdemeanor.” At the request of Estrada’s counsel, the court added that “[t]he record will so reflect that the defendant did not suffer a felony conviction in this case.”

Estrada filed a petition for writ of administrative mandate in Los Angeles County Superior Court seeking an order directing CalPERS to set aside its forfeiture decision and to reinstate her retirement benefits. Estrada argued that she was entitled to retain her retirement benefits because she was convicted of a misdemeanor, not a felony, and the criminal case against her was dismissed. The trial court denied Estrada’s petition.

The Court of Appeal affirmed the denial in the published case of Estrada v. Public Employees’ Retirement System -B317848 (September 2023).

On Appeal Estrada contends that her retirement benefits were not subject to forfeiture under section 7522.72 because she withdrew her plea to the felony and entered a new plea to a misdemeanor, and the criminal case was later dismissed. The Court of Appeal Disagreed.

“Under the plain language of section 7522.72, a public employee’s accrued retirement benefits are subject to forfeiture upon his or her conviction of a job-related felony. While section 7522.72 does not define the terms “convicted” or “conviction,” the general rule in California is that ” ‘[a] plea of guilty constitutes a conviction.’ ” (People v. Banks (1959) 53 Cal.2d 370, 390 – 391; accord, People v. Laino (2004) 32 Cal.4th 878, 895.) “A guilty plea ‘admits every element of the crime charged’ [citation] and ‘is the “legal equivalent” of a “verdict” [citation] and is “tantamount” to a “finding” [citations]’ ” (People v. Wallace (2004) 33 Cal.4th 738, 749.)

“This interpretation of section 7522.72 is also consistent with the legislative purpose of statute. … section 7522.72 is part of PEPRA (of the California Public Employees’ Pension Reform Act of 2013) , which was enacted to close loopholes and to curb abusive practices that existed in California’s public pension system.”

“Our conclusion in this case is further supported by Danser v. Public Employees’ Retirement System (2015) 240 Cal.App.4th 885, in which the Court of Appeal considered section 75526, a benefit forfeiture statute applicable to judges.”

The order denying the petition for writ of administrative mandate was affirmed

In December 2017 the Long Beach Memorial Medical Center treated Vernon Barnes for injuries he received in a car accident. Afterward Barnes submitted a personal injury claim to Allstate, which insured the driver Barnes claimed was at fault in the accident. The Medical Center informed Allstate by letter that Barnes had incurred $116,714.67 in expenses for his treatment at the Medical Center and that the Medical Center was asserting a lien for that amount under the Hospital Lien Act (HLA).

Under the Hospital Lien Act (HLA) (Civ. Code, §§ 3045.1-3045.6), “when a hospital provides care for a patient, the hospital has a statutory lien against any . . . settlement received by the patient from a third person responsible for his or her injuries, or the third person’s insurer, if the hospital has notified the third person or insurer of the lien.” (Mercy Hospital & Medical Center v. Farmers Ins. Group of Companies (1997) 15 Cal.4th 213, 215 (Mercy Hospital).) The HLA prohibits an insurer from paying a patient without paying the hospital the amount of its lien, or as much as can be satisfied from 50 percent of the patient’s recovery from the tortfeasor or insurer.

In February 2020 Barnes and Allstate settled his claim for $300,000. The settlement agreement provided Allstate would pay this amount by sending Barnes’s attorneys three checks: one made payable to Medicare for $24,230.93, one made payable to Barnes and his attorneys for $159,054.40, and one made payable to Barnes and the Medical Center for $116,714.67, the amount of the lien. The settlement agreement also provided Barnes and his attorneys would indemnify, defend, and hold harmless Allstate and its insured against claims by the Medical Center or anyone else with a statutory right of recovery against Allstate and its insured.

Later in February 2020 Allstate sent Barnes’s attorneys a check for $116,714.67 made payable to Barnes and the Medical Center. That check, however, was never deposited, and by March 2021 it had expired. At that time Allstate sent Barnes’s attorneys a second check for the same amount made payable to the same parties (the March 2021 check). To Allstate’s knowledge, that check was never cashed.

In May 2021 the Medical Center filed this action against Allstate, asserting a single cause of action for violating the HLA. The Medical Center alleged that Allstate, having received written notice of the Medical Center’s lien regarding Barnes’s medical treatment, violated the HLA by paying Barnes to settle his personal injury claim without paying the Medical Center the amount of its lien.

Allstate filed a motion for summary judgment which the the trial court granted, ruling Allstate’s two-payee check, which was never cashed, satisfied its obligation under the HLA. The Court of Appeal reached the opposite conclusion and reversed in the published case of Long Beach Memorial Medical Center v. Allstate Ins. Co. -B321876 (September 2023).

Allstate argues that giving Barnes’s attorneys a check for $116,714.67 made payable to Barnes and the Medical Center constituted a payment to the Medical Center for the amount of its lien. As in the trial court, Allstate declines to specify which check made payable to the Medical Center as co-payee—the February 2020 check or the March 2021 check—Allstate claims satisfied its payment obligation to the Medical Center.

Citing Crystaplex Plastics, Ltd. v. Redevelopment Agency (2000) 77 Cal.App.4th 990 (Crystaplex), Allstate argues the check(s) in question constituted payment to the Medical Center because a “check issued to multiple payees, delivered to one payee, is delivery of a check.”

However “Allstate may have constructively delivered the check(s) to the Medical Center does not mean Allstate made a ‘payment’ to the Medical Center.“

On the contrary, as a general rule – a check of itself is not payment until cashed . . . .(Hale v. Bohannon (1952) 38 Cal.2d 458, 467; accord, Cornwell v. Bank of America (1990) 224 Cal.App.3d 995, 1000; see Navrides v. Zurich Ins. Co. (1971) 5 Cal.3d 698, 706 [a “check is never a payment of the debt for which it is given until the check itself is paid or otherwise discharged’”]; Hale, at p. 467 [the “mere giving of a check does not constitute payment’”]; Mendiondo v. Greitman (1949) 93 Cal.App.2d 765, 767 [same]; Art Frost of Glendale v. Hooper (1955) 130 Cal.App.2d Supp. 903, 906 [“[u]ntil the check involved here was cashed, . . . the obligation of the drawer remained in existence”]; Bas s v. Olson (9th Cir. 1967) 378 F.2d 818, 820 [“under governing California law, mere possession of an uncashed check is not equivalent to payment,” and therefore, “prior to the actual presentation of the check at the bank,” the defendant, who physically possessed the check,”was never ‘paid’”].)

The Court of Appeal then concluded that there “is no evidence either check Allstate made out to the Medical Center as a co-payee was ever cashed. In fact, it appears undisputed that neither was.”

“And Allstate’s argument the Medical Center suffered no harm because it could ‘resolve’ its lien with Barnes seems disingenuous: The obvious point of including Barnes as co-payee was to empower him to negotiate keeping some portion of the amount of the Medical Center’s lien for himself.”

In 2017, A-Brite Blind and Drapery Cleaning initiated an action with the Department’s administrative hearing bureau against State Compensation Insurance Fund regarding State Fund’s policy premiums.

Following an evidentiary hearing, an administrative law judge issued a proposed decision to the Commissioner, who declined to adopt it.

Instead, the Commissioner issued his own decision and order on November 16, 2018 , finding that State Fund violated the Insurance Code by, among other things, including an unlawful rating tier modifier during the 2015 and 2016 policy periods. The Commissioner further designated the A-Brite order as precedential under Government Code section 11425.60, subdivision (b).

State Fund filed a motion for reconsideration, which was deemed denied when the Commissioner failed to respond.

On January 28, 2019, more than a month before the deadline for State Fund to challenge the A-Brite order in the trial court by petition for writ of mandate (Cal. Code Regs., tit. 10, § 2509.76, subd. (a)), State Fund’s general counsel sent a letter to the Department, asking the Commissioner to “rescind the designation of the [A-Brite] Decision as precedential,” as the decision contained “clear errors of facts and law.”

In response to the letter, the Department’s attorney, Bryant Henley, contacted State Fund to discuss settlement. State Fund and the Department ultimately signed a settlement agreement which said “State Fund agrees, further, not to file a Writ Petition challenging, in whole or in part, the A-Brite Order. The Department agrees to remove the precedential designation from the A-Brite Order, rendering the decision non-precedential.”

On March 15, 2019, State Fund’s deadline for filing a writ petition challenging the A-Brite order expired.

Ten days later, after noting “several legal and factual issues in common” between the A-Brite matter and another administrative action brought against State Fund, an ALJ for the Department took official notice of the A-Brite order, the A-Brite settlement agreement, and various other A-Brite documents in In the Matter of the Appeal of Sessions Payroll Management, Inc. (File: AHB-WCA-18-47, July 18, 2019) (the Sessions matter).

The ALJ also ordered the parties to brief whether the “doctrines of exhaustion of judicial remedies and collateral estoppel preclude relitigation of factual and/or legal issues decided by the Commissioner in A-Brite.” After reviewing the briefs, the ALJ disagreed with State Fund, instead adopting Sessions’s position that both doctrines applied and issuing an order finding that State Fund was precluded from relitigating the factual and legal issues decided in A-Brite.

On June 10, 2019, State Fund filed a petition for a peremptory writ of administrative mandate challenging the merits of the 2018 A-Brite order. Aware that the petition was filed after the limitations period had run, State Fund alleged that equitable estoppel and equitable tolling applied to render the petition timely. Among other things SCIF alleged “that the Commissioner intentionally misled State Fund by representing that the settlement agreement would preclude any use of the A-Brite order in subsequent proceedings.”

On November 19, 2020, in response to State Fund’s effort to reopen the A-Brite matter by filing this writ, the ALJ in Sessions issued an order vacating its ruling finding the A-Brite order preclusive in that case, as the A-Brite order was no longer final for purposes of collateral estoppel and judicial exhaustion.

The same day, the Department filed a motion for summary judgment in the trial court, arguing that State Fund’s petition was time-barred as a matter of law. The court granted the motion, finding that neither equitable estoppel nor equitable tolling applied to extend the period of limitations.

In doing so, it found that the settlement agreement only required the Department to “de-designate” the A-Brite order as precedent under the applicable Government Code section, and it did not preclude the Department from binding State Fund to the A-Brite order through other means, such as nonmutual offensive collateral estoppel.

The Court of Appeal affirmed the trial court dismissal in the unpublished decision of State Compensation Ins. Fund v. Dept. of Insurance -C093897 (September 2023).

A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful. (Civ. Code, § 1636.).

The “Department’s interpretation suggests that State Fund agreed not to pursue the writ, while also agreeing to be bound by the A-Brite order with respect to every company raising the same issues in all future administrative actions against State Fund.This reading of the agreement would render the contract largely illusory, granting no benefit to State Fund.”

“Here, the plain language of the contract controls, and does not support the narrow reading advanced by the Department. … State Fund agreed to be bound by the order with respect to A-Brite. It did not agree to be bound by the A-Brite order with respect to any other party. ” … “The contractual language supports State Fund’s interpretation.”

However the Court went on to say “While we agree with State Fund’s interpretation of the settlement agreement, we conclude that State Fund fails to raise a question of material fact as to whether equitable estoppel or equitable tolling applies in this case.”

A defendant may be estopped from asserting the statute of limitations as a defense if four elements are present:: (1) the party to be estopped must be apprised of the facts; (2) he [or she] must intend that his [or her] conduct shall be acted upon, or must so act that the party asserting the estoppel had a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he [or she] must rely upon the conduct to his [or her] injury. (Honeywell v. Workers’ Comp. Appeals Bd. (2005) 35 Cal.4th 24, 37, quoting City of Long Beach v. Mansell (1970) 3 Cal.3d 462, 489.).

“Here, the doctrine is inapplicable to the facts before us. There is no misrepresentation, or nondisclosure of facts, which caused State Fund to refrain from filing the writ.” The dispute was over interpretation of the agreement.

“However, State Fund is not necessarily without further remedy. It still may challenge the ALJ’s application of collateral estoppel in Sessions if that order is reinstated.”

Anonymously named Jane Doe sued her former employer Na Hoku, Inc. and former manager Ysmith Montoya asserting multiple claims arising from Montoya’s alleged sexual harassment and assault of Doe.

The employer successfully moved to compel arbitration, and the court ordered the case to binding arbitration. September 1, 2022 was the “due date” for real parties to pay certain arbitration fees and costs to the arbitrator.

On Friday, September 30, Na Hoku mailed a check for $23,250 to the Texas address provided. On Monday, October 3, counsel for real parties informed AAA that payment had been mailed. On October 5, AAA received real parties’ payment and applied it to the case.

Doe moved to vacate the trial court’s order compelling arbitration on the grounds that real parties had failed to pay their arbitration fees and costs within 30 days of the due date as required by statute. She argued their late payment was a material breach of the arbitration agreement and waived their right to compel arbitration.

The trial court denied the motion. It noted that that “the provider’s demand was for payment remitted by October 3,” the court ruled that real parties “indisputably complied” with the date “having remitted (i.e., sent) the sum in by that date.” The court recognized the possible “ambiguity as to whether a ‘due’ date meant the day the sum had to be remitted or received by the provider” but concluded AAA’s second communication “clarified this: The date was for the remitting of the sum.” In the trial court’s view, because real parties’ remittance of payment by October 3 “satisfied the due date imposed by the provider.”

The Court of Appeal reversed the trial court order in the published case of Doe v Superior Court (Na Hoku Inc) – A167105 (September 2023).

Doe argues the trial court misinterpreted Code of Civil Procedure section 1281.98 in allowing real parties more than 30 days to pay arbitration fees and costs.

Here, the statutory language is not clear. While some terms in the statutory scheme are defined, there is no definition for the term “paid” in the clause “if the fees or costs required to continue the arbitration proceeding are not paid within 30 days after the due date.” (§ 1281.98, subd. (a)(1).)

Webster provides a number of definitions for “pay” (including “to make due return to for services rendered or property delivered,” “to give in return for goods or service,” and “to make a disposal or transfer of (money)”) and “paid” as “marked by the receipt of pay,” or “being or having been paid or paid for.”

Black’s Law Dictionary has no separate entry for “paid” but offers multiple definitions of “pay”: “1. To give money for a good or service that one buys . . . . 2. To transfer money that one owes to a person, company, etc. . . . 3. To give (someone) money for the job that he or she does . . .”

After reviewing the statutory language and dictionary definitions it said “while we acknowledge that most service providers would not consider themselves “paid” until they received payment, the term “paid” is reasonably subject to more than one interpretation.“

Thus the Court of Appeal reviewed the legislative purpose of the statute and concluded that “Here, the construction offered by petitioner, i.e., payment made and received within 30 days of the due date, best effectuates this legislative purpose.“

“This construction provides a clear, bright-line rule for determining compliance with the 30-day statutory grace period as the arbitrator can readily and definitively determine whether funds have been received to satisfy any outstanding fees or costs owed for a pending arbitration. If such fees are not received by the conclusion of the statutory grace period, an employee may immediately elect to pursue options for relief.”

As a backstory to the new decision just published by the 9th Circuit Court of Appeals, a civil case, was filed April 11, 2022 in San Francisco Superior Court by the San Francisco and Los Angeles District Attorneys, alleging that the Potter Handy LLP San Francisco lawfirm and 15 of its lawyers — including name partners Mark Potter and Russell Handy — of violating California’s Unfair Competition Law by bringing fraudulent and deceitful litigation under the Americans with Disabilities Act against small businesses. The district attorneys asked the court to enjoin the law firm from further violations and make it repay thousands of small businesses that settled claims over the last four years.

In dismissing the district attorneys’ case in August 2022, San Francisco Superior Court Judge Curtis Karnow found that the conduct of Potter Handy attorneys was covered by California’s “litigation privilege” that attaches to court filings and communications related thereto. The judge found that the privilege applied “irrespective of the communication’s maliciousness or untruthfulness.”

On October 20,2022 the San Francisco District Attorney announced that they would appeal the dismissal of their case against Potter Handy LLP.  The outcome of that appeal is not yet known.

Meanwhile, on October 2, 2020, Orlando Garcia – who is currently represented in this case by Potter Handy LLP – filed a complaint in the California state court challenging Gateway Hotel’s “reservation policies and practices,” specifically “the lack of information provided on [Gateway’s] website that would permit [Garcia] to determine if there are rooms” that would accommodate his disability. Garcia contended that Gateway’s failure to provide this information violated the ADA and California law.

Gateway removed the case to federal court, and Garcia subsequently amended his complaint, dropping his claim based on California law. Gateway then moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), and the district court granted the motion after concluding that the information on Gateway’s website complied with the ADA’s requirements.

Gateway then sought an award of attorney’s fees, which the court denied because it could not “conclude on the record before it that [Garcia]’s case was frivolous or unreasonable” and because there was no “clear indication that [Garcia]’s lawsuit was vexatious.”

Gateway then filed an application for costs, which the court awarded. After filing two motions to retax costs that the court denied on procedural grounds, Garcia filed a third motion to retax costs, arguing that costs may be awarded to defendants under the ADA only if the action was frivolous, unreasonable, or without foundation. The court denied this motion after concluding that Brown v. Lucky Stores, Inc., 246 F.3d 1182 (9th Cir. 2001) – the legal authority cited in support of Garcia’s position – was irreconcilable with the Supreme Court’s intervening decision in Marx v. General Revenue Corp., 458 U.S. 371 (2013).

The district court followed “the Supreme Court’s intervening decision in Marx rather than the Ninth Circuit’s earlier precedent” in Brown, and determined that Rule 54(d)(1) governed the award of costs in ADA actions. And because Rule 54(d)(1) provides that costs may be awarded to a prevailing party at the district court’s discretion, the court concluded that Gateway properly received its costs in the action and denied Garcia’s motion to retax costs.

These orders were followed by a timely appeal. The 9th Circuit Court of Appeals reviewed the case, and affirmed the award of costs to the Hotel in the published case of Garcia v Gateway Hotel – 21-55926 (September 2023).

This case required the 9th Circuit Court of Appeals to clarify the circumstances under which a defendant may be awarded its costs in an action brought under the Americans with Disabilities Act of 1990 (“ADA”), 42 U.S.C. § 12101 et seq. Gateway contends that the standard for awarding costs to ADA defendants is governed by Federal Rule of Civil Procedure 54(d)(1), which allows courts the discretion to award costs to prevailing parties “[u]nless a federal statute . . . provides otherwise.”

Appellant Orlando Garcia contends that the ADA’s fee- and cost-shifting statute “provides otherwise” because it permits ADA defendants to receive their costs only where there is a showing that the action was frivolous, unreasonable, or groundless. He relied on Brown v. Lucky Stores, Inc., supra. Therefore, he contends that the district court should have granted his motion to retax costs, which would have, in effect, denied Gateway’s application for costs.

The majority opinion agreed with the district court and concluded that its decision in Brown cannot be reconciled with the Supreme Court’s decision in Marx, and therefore it has been effectively overruled. Accordingly, it held that Rule 54(d)(1) governs the award of costs to a prevailing ADA defendant, and such costs may be awarded in the district court’s discretion.

Circuit Judge Hurwitz wrote the dissenting opinion. He agreed with the majority that after Marx Rule 54(d)(1) controls the award of costs to a prevailing defendant in an ADA action. He also agreed with the majority that prior caselaw holding that the ADA “provides otherwise” than Rule 54(d)(1) cannot be reconciled with Marx. But, he parted company with his colleagues on whether our three-judge panel is free to reach these conclusions.

“The proper course – even when the eventual outcome is, as today, seemingly preordained – is to require an en banc court to inter our previous decisions unless an intervening Supreme Court abrogates them.”