Author Archives: Faith Pincus

Fiduciary Duty Claims In Bankruptcy: Mitigating The Risks

Posted on by Faith Pincus

Mitigating the risks of fiduciary duty claims in bankruptcy is something every attorney and corporate board member should think about – very early on.

Joseph Swanson and Donald Kirk represent company officers and directors in commercial litigation matters, navigating high-stakes cases involving fiduciary duty and bankruptcy.

Donald recently spoke for our Director & Officer Litigation webinar, and we’re so glad to have his and Joseph’s permission to share their article below.

 

Fiduciary Duty Claims In Bankruptcy: Mitigating The Risks

By Joseph Swanson and Donald Kirk

Businesses and other organizations fail from time to time. That is a reality of our capitalist system. In the vast majority of these cases, the failure occurs despite the best efforts of the business’ senior management and board. Market forces, macroeconomic trends or just bad luck are most often the cause of any particular business’ demise.

Unfortunately for the management and board, however, they may be blamed for the business’ failure. In a bankruptcy, the trustee, shareholders, employees and other third parties frequently look to hold the directors and officers responsible. In many cases, this comes in the form of a breach of fiduciary duty or similar claim. These claims are all the more likely when the failed business had a significant directors and officers insurance policy in place. Although defending these claims can be stressful for the directors and officers, as discussed below, there are protections in place for the defendants and strategies that can mitigate that anxiety, reduce their exposure, and ultimately resolve the case.

The Failure of Oversight Claim

Directors and officers generally owe fiduciary duties to fulfill their positions with care, loyalty and in good faith. These duties require directors and officers to (1) act with diligence and in an informed manner, and (2) put the organization’s interests ahead of their own (i.e., avoid personal conflicts of interest). This is true whether the organization is for-profit or not-for-profit.

In the wake of a business’ failure, the duty of oversight is the fiduciary duty most often at issue. As explained in In re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996), a component of directors’ and officers’ fiduciary duties is an obligation to adequately oversee the organization, which includes establishing and monitoring compliance programs with regard to regulatory and legal obligations.

In cases subsequent to Caremark, the courts have stated that for liability to attach under the duty of oversight, the directors and/or officers must have “utterly failed to implement any reporting or information system or controls,” or, with such a system in place, “consciously failed to monitor or oversee its operations.” See, e.g., Stone ex rel. AmSouth Bancorporation v. Ritter, 911 A.2d 362 (Del. 2006).

As Caremark itself recognized, a failure of oversight claim is “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.” Caremark, 698 A.2d at 967. To be viable, a Caremark claim requires conduct by the defendants that is more egregious than gross negligence, and that would mean an intentional failure to act despite a known duty to act. In other words, the plaintiff will need to show that the defendants knew they were not fulfilling their fiduciary duties.

Notwithstanding these exacting standards, plaintiffs routinely assert a failure of oversight claim against directors and officers. This may be because this claim, which resides within the duties of loyalty and good faith, generally falls outside any otherwise applicable exculpation provisions.

Fiduciary Duty Claims in Bankruptcy Proceedings

In a bankruptcy, particularly where the organization previously obtained a sizable D&O insurance policy, directors and officers may find themselves the targets of a duty of oversight claim. The trustee may contend that the failure by the directors and officers to monitor the organization and respond to various risks resulted in the organization’s demise. Further, the trustee will likely contend that the D&O insurance policy — and its proceeds — belong to the estate for the benefit of its creditors. In that situation, the directors, officers and carrier can expect to receive a demand letter from the trustee’s counsel asserting a claim on the policy. To make things worse for the directors and officers, that claim may be in addition to other claims, such as for securities violations, fraud and the like, asserted against those defendants by other parties.

Tips for Staying Out of the Crosshairs

The scenario outlined above is daunting for directors and officers of a failed organization. However, the following tips can not only help avoid the scenario in the first place, but can also mitigate the defendants’ risks and resolve the matter as efficiently as possible once a failure of oversight claim is asserted.

1. Fulfill the Duty of Oversight

Ideally, the directors and officers will avoid a claim altogether by discharging their fiduciary duty of oversight. To do so, these individuals should implement a reporting system and controls suitable for their organization and then monitor that system and controls for any red flags. That system and controls generally include regular board meetings with presentations on compliance and other high-risk subjects relevant for the organization. The board meetings should include input from consultants, as needed, such as for capital campaigns, executive compensation and other significant corporate transactions. Such meetings and presentations should be memorialized in minutes. Other hallmarks of a reporting system and controls are the use of outside auditors and the establishment and monitoring of reporting hotlines. Where an organization is experiencing significant financial strain, the directors and officers should be especially diligent and mindful of any duties they may have to creditors. The bottom line is that a documented record of attentiveness to these issues can be the best defense to an attempt by a plaintiff to assign blame for the organization’s failure to the directors and officers.

2. Obtain Sufficient Insurance Coverage

The directors and officers of any organization should consider the sufficiency of any D&O insurance policy that the organization obtains on their behalf. Issues to consider with any D&O insurance policy include the nature of claims to be covered, any exclusions to coverage, the retention amount, and the period within which any claim must be submitted to the carrier. Where appropriate, directors and officers should consider purchasing tail coverage, which will permit them to report any claims made after the policy has expired. Directors and officers should be particularly cognizant of the sufficiency of their coverage in times of financial distress for the organization.

3. Respond Vigorously but Efficiently to Any Claim

If a claim is made against the directors and officers, they should seek counsel who will respond vigorously but efficiently to the allegations. Efficiency is particularly important where the D&O policy is a “wasting” policy, whereby defense costs erode the policy’s limits. It is important that defense counsel in these matters have the ability to efficiently manage what is often a dynamic situation with multiple constituencies that include not only the clients, but the trustee and her counsel, counsel for the carrier, and counsel for any other claimants.

Counsel’s investigation should gauge the seriousness of the allegations. The investigation should include targeted client interviews and with third parties, as well as targeted document review. In our experience, the electronically stored information (ESI) at issue in these matters can be significant, so it is important to develop a plan to locate and review key documents as efficiently as possible. In responding to the allegations, defense counsel should never lose sight of the rigorous standard for a breach of oversight claim. Counsel should focus on whether any reporting system or controls were in place, and if so, whether the directors and officers responded to red flags. The trustee and her counsel will likely contend that the mere fact of the organization’s failure is proof of a lack of oversight. That position, however, ignores Caremark and its progeny, which dictate that plaintiffs must link the organization’s collapse to the alleged lack of oversight.

4. Consider Presuit Mediation

We have seen an emerging trend where the trustee and her counsel will propose a presuit mediation in an attempt to resolve the claims against the directors and officers. This approach has several benefits that defense counsel should consider. First, by engaging in this process, defense counsel may be able to resolve the claims without a lawsuit being filed, which would otherwise publicly name the defendants. For obvious reasons, this can be very attractive to directors and officers of a failed organization. Second, the process is likely to be less expensive than full-blown litigation, which means that fewer policy proceeds will be spent on defense costs. Third, preparing for the mediation allows counsel to understand the allegations, and whether they have any basis, sooner. This puts defense counsel in a better position to advise their clients and the carrier about the merits of the claims. This is very helpful if the mediation fails to resolve the matter.

The failure of a business or other organization is a traumatic event for many constituencies, including the directors and officers. A breach of fiduciary duty claim only makes that situation worse for those individuals. By following these tips, however, directors and officers — and their counsel — can seek to avoid that claim in the first place. And, if a claim is asserted, these tips can help to reduce the exposure and achieve a resolution.

Gary Watt is our Latest Featured Speaker!

Posted on by Faith Pincus
29 Mar

Our latest featured speaker is Gary Watt from Hanson Bridgett!

Gary will be speaking at our upcoming Understanding SLAPPs program in San Francisco on April 5th. He recently spoke for us at our 4th Annual Advanced Appellate Conference, where seminar attendees raved about his presentation. We’re glad to have you again, Gary!

Gary serves as Chair of Hanson Bridgett’s Appellate Practice. He is a State Bar approved Certified Appellate Specialist, handling writs and appeals in all of the California appellate courts, including the California Supreme Court and the United States Court of Appeals for the Ninth Circuit. His practice also includes dispositive motions such as SLAPP, summary judgment, and post-trial motions. His appellate experience gives him unique insights into complex cases and esoteric disputes. He excels at issue spotting and arrives at thoughtful solutions to business problems. His practice includes risk management such as interpreting contracts, indemnity provisions, and more.

A passionate appellate lawyer and law professor, Gary has been on the faculty at U.C. Hastings College of the Law since 2001 teaching various appellate law courses and coaching intercollegiate moot court competition teams. Consistent with Hanson Bridgett’s commitment to pro bono work, Gary currently serves as Director of U.C. Hastings’ Ninth Circuit clinical program: the Hastings Appellate Project. As Director, he supervises law students in the pro bono legal representation of appellants. He is also a frequent lecturer at MCLE presentations throughout the Bay Area, and has taught hundreds of lawyers over the years on a vast array of appellate and litigation best practices.

Gary is also Chair of the Contra Costa County Bar Association’s appellate practice section. A prolific writer, Gary is a frequent contributor to the Daily Journal, The Recorder, and other legal publications, with over 75 published articles to date.

Jury Selection Techniques – Your Go To Guide

Posted on by Faith Pincus
23 Jan

Every couple of years we hold Jury Selection seminars throughout the country. And every time we do, our speakers provide us with fantastic tips and advice to help attorneys select better juries. Below is a terrific article about Jury Selection, written by Wade Chow, a 25+ year prosector in California.

Wade has spoken at our previous seminars about Jury Selection, as well as our Criminal Defense Boot Camp for Civil Lawyers and Newer Criminal Lawyers, where he received excellent evaluations. We loved working with Wade and we know you’ll find his suggestions invaluable.

Jury Selection – Your Go To Guide:

1.  The Problem

Many practitioners conduct ineffective voir dire. One cause is a misplaced fear of eliciting opinions that are harmful to one’s case. A second is an incorrect understanding of the purpose of voir dire. Third, practitioners fear to lose control of the venire, and as a result ask bland, meaningless questions in a manner that is unlikely to yield any helpful information. Finally, practitioners often leave cause challenges on the table because they fail to lock down the expressed bias of a prospective juror.

a.  The fear of juror taint

When a prospective juror offers an answer that is harmful to our case, e.g., if we are defending a medical malpractice case, a prospective juror relays a horrible experience with an inept doctor that has significant parallels to the plaintiff’s case, we fear that this information will taint our jury pool or expose weaknesses in our case. As a result, our inclination is to avoid asking questions that might elicit this kind of “harmful” information. We resort to safe, bland questions. When “harmful” answers arise, we are tempted to stifle that juror and stop him or her from elaborating, or we argue with the juror, attempting to educate him or convince him to be fair.

As will be discussed below, this is exactly the opposite of what we should be doing, and we should welcome any opportunity for a bad juror to identify him or herself. The fear of juror taint is overblown. There is no empirical evidence that a prospective juror is likely to change his underlying belief because he or she hears an anecdotal story. For example, if a prospective juror believes that police officers generally try to do their jobs correctly, another juror’s story about being the victim of police brutality is not going to suddenly make the first juror think that a claim of officer misconduct is more likely to be true.

b.  The purpose of voir dire

Many attorneys believe that the purpose of voir dire is one or more of the following: 1) to establish rapport; 2) to find out if we like the juror or if the juror likes us; 3) to pre-­‐condition the jury. While it may be nice if we accomplish the first two tasks in the course of jury selection, these are not particularly useful goals. First, overtly identifying good jurors for our case only makes the opposing party learn who to eliminate. Second, preconditioning a jury is improper.

c.  Control

Most attorneys fear the loss of control that asking an open ended question to a prospective juror can cause. This fear is one of the reasons why the “lecturer method” is so prevalent (i.e., leading questions intended to indoctrinate the jury about the law or facts of the case and establish the attorney’s authority or credibility with the jury). Under this method, the lawyer does 90% of the talking. Unfortunately, lecturing prospective jurors with questions like “can everyone set aside what personal feelings you have about gender discrimination and be a fair and impartial juror?” teaches us very little about the juror’s actual views and possible bias. We want safe and “good” answers, and so we ask bland, meaningless questions that are likely to result in false or aspirational answers.

d.  Technical shortcomings

Oftentimes, a trial attorney uncovers the basis for a cause challenge but fails to lock down the record. As a result, the juror will be “rehabilitated” by the judge or opposing counsel. This results in the expenditure of precious peremptory challenges and can make the difference between a good verdict and a bad.

2.  The solution

We suggest that there is one true purpose to jury selection, which is to identify jurors who will harm our case and get rid of them. This may be conceptualized as “jury de-­‐selection.” The fundamental premise behind this notion is that it is impossible to educate a juror out of a deeply held belief in the time we have available for voir dire.* It follows from this that it is also impossible to rehabilitate a juror who has expressed a bias harmful to our case. Conversely, we have no reason to fear juror taint for the very same reason.

If we accept these premises, we should do our level best to get the prospective jurors talking, and to particularly elicit the most relevant information (“harmful” though it be) from jurors who are bad for our case.

a.  The listener approach

From a social theory standpoint, it is important to understand that the approach we take toward a prospective juror materially impacts that juror’s willingness to offer information, particularly when such information may be socially unacceptable (e.g., racial bias) or embarassing.

As noted above, many trial attorneys stand in front of the panel and lecture the jurors (e.g., asking the group “does everyone understand that the plaintiff has the burden of proof at all times, and that I don’t have to put on a case, and that if they fail to meet their burden of proof, you have to vote for my client?”). Most often, the attorney does 90% of the talking. Lecturing usually results in silence and perhaps a few nods. At best, you will get meaningless answers that do not reveal anything about the jurors. If the question has a socially acceptable response, you will often get either a false or aspirational answer because it is awkward and uncomfortable for a biased juror to offer a true answer.

What we advocate is the listener approach. We want to use plain language and ask simple questions. We should never argue with a juror. We should never cut off a juror’s response. The prospective jurors should be doing 90% of the talking, and the attorney should be carefully listening to the answers.

b.  Politeness technique

“Politeness theory,” in other words, how we frame our question, is relevant to how willing the juror will be to answer the question. For example, there are many ways to ask a person to shut a window from less to more polite:

Hey, shut the window!

Can you shut the window?

Would you mind shutting the window?

Could you please shut the window?

Jurors feel social pressure to say they can be fair (this is known in social science as Social Desirability Bias). Our task of course is to get the juror to say he or she cannot be fair. Exploiting politeness theory can help us accomplish this.

i.  Strategies for overcoming Social Desirability Bias:

– Be aware of the power dynamic (the juror will perceive a power imbalance between us)

– Avoid expressions of disapproval

– Normalize juror perspectives

– Reflect outward (i.e., juror offers answer that is “bad,” we want to ask “Who else feels like juror x?”)

ii.  How to “be polite”

We should frame questions in the format “some people think…”

Compare the following:

Who here thinks police officers often use excessive force?

Some people think police officers often use excessive force. Juror X, how do you feel about that? [Follow with: “How many of us agree with Juror X?”]

c.  Command Superlative Analogue Technique

This technique may be used to initiate a conversation with a juror that is likely to produce helpful information about whether believes what we need him or her to believe to win the case. It is time consuming and therefore it should be used sparingly.

We want to know how the juror will behave if certain situations arise during the trial or during deliberations. For this reason, we might ask a juror whether he would change his mind just because the majority of jurors were voting the other way is not likely to yield anything more than an aspirational (i.e., how he or she wishes he or she would behave in that situation) or a false answer. We get false or aspirational answers because the juror has not been in that situation before and we are asking him or her to speculate how he or she would act.

Instead, we want to mine the juror for analogous experiences from his or her life that will shed light on what we want to know. This is the best predictor for juror behavior. If the juror tells us about an analogous incident, we will be able to gauge his or her answer and decide how this might affect the juror’s view of the case.

The steps to the Command Superlative Analogue technique:

i.  Command (“Tell us”)

ii.  Superlative (“about the most serious”)

iii.  Analogue (non-­‐legal situation)

Examples:

Tell us about the most serious situation you have seen where someone was treated badly because of his race.

Tell me about the person closest to you who has been affected by gender discrimination.

Share with us the most serious time when you or someone close to you was accused of doing something bad that you did not do.

d.  How to get a cause challenge: “Run to the bummer” technique

As we discussed above, if we accept that the true and only purpose of voir dire is eliminating bad jurors, we should welcome it when a juror offers an answer that displays actual bias against our cause. When a juror suggests that he has a bias, it is critical to lock down your cause challenge and immunize the juror from rehabilitation. This is true because jurors cannot be rehabilitated (see above: you cannot change a juror’s deeply held belief in the time available for voir dire). If the court rehabilitates your juror, you will have to exercise a peremptory challenge.

One method of locking down a cause challenge is the “run to the bummer” technique developed by public defenders in Colorado.

Steps

1.  Mirror juror’s answer:

So you believe that…

– Use juror’s exact language

– Do not paraphrase

– Do not argue

2.  Ask an open ended question inviting juror to explain

3.  Normalize the idea

Reflect outward to other jurors to get them to acknowledge same idea (“who else among us feels like juror x?”)

Do not be judgmental

4.  Leading questions to lock in challenge for cause

a.  Reaffirm juror’s position

b.  If juror tries to qualify his bias, strip away qualifications and force him into admitting preconceived notion

c.  Reaffirm where the juror is not

d.  Suggest how bias might provide basis for cause challenge

e.  Get juror to agree that his bias will affect ability to serve

f.  Immunize from rehabilitation

a.  Lock juror in on strength of his views

b.  Reassure juror that there is nothing wrong about having views that differ from lawyers, judge, or rules of jury service

* Social science studies tell us that people come to jury duty with strong biases, and that these biases affect how they decide cases even if they honestly believe they will be fair and even if they honestly believe they can set those biases aside. Rehabilitation and curative instructions are therefore meaningless.

 

Motions for Summary Judgment: A Few Simple Tips to Improve Immediately

Posted on by Faith Pincus
15 Jan

Karen Kimmey, Esq., a Partner at Farella Braun + Martel LLP, frequently speaks at our annual Superior Court Boot Camps. She is a favorite of attendees and always gives terrific advice and instruction. We’ve taken just a few of her basic tips from one of her presentations on Motions for Summary Judgment, and listed them below for your quick reference.

Our blog readers can take 50% off our Superior Court and Federal Court Boot Camp audio packages with the coupon code 50MSJ. 

Karen gets into much more detail at our programs, with a lot more advice, but we just wanted to list a few things for you to think about and do when writing your Motions for Summary Judgment.

  • Think strategically about whether to file for summary judgment regardless of odds of winning.
    • Educate the judge.
    • Preview your opponent’s evidence.
    • Consider the cost and effort required.
  • Spend more time on your Separate Statement.
    • Often an afterthought for counsel.
    • Document most relied-upon by many judges and clerks.
  • Include only those facts in your Separate Statement that are truly “material.”
    • The Court may assume it is material if it is in your Separate Statement.
    • Each fact should be discrete and independent.
  • Focus on your introduction and headings.
    • Explain in a couple sentences what relief you are seeking and why you are entitled to it.
    • Use argumentative headings to guide the argument.
  • Do not bother with a long recitation of summary judgment standards.
  • Simplify if you are seeking summary judgment; complicate if you are opposing.
  • Start the process early; it takes time to prepare the papers.

Karen is a favorite with our seminar attendees, and has spoken at almost every Superior Court Boot Camp held in San Francisco since 2011.

Stays, Bonding and Supersedeas in California: The Trial Court Just Ruled – Now What?

Posted on by Faith Pincus
12 Dec

by Pablo Drobny, recently retired Lead Appellate Court Attorney from the California Court of Appeal, Second Appellate District

I.  If the order or judgment is not appealable.

A.  If you are the losing side, consider a traditional writ petition.

B.  If you are winning side, remember an improper appeal does not stay enforcement of the order.

II.  When the judgment or order is immediately appealable, before a notice of appeal is filed:

A.  Review the statutes concerning stays and bonding on appeal to determine which provisions apply to your case.

i.  If more than one applies, see CCP §917.6.

B.  If you are the losing side, consider asking for a discretionary 10 day stay from the trial court (CCP §918).

C.  If you are the losing side, and you are indigent, make a motion under  CCP §995.240.

D.  If you are the winning side, consider asking the trial court to require a bond or undertaking (CCP §917.9.) even where the statute doesn’t require it.

III. Where CCP §916 applies, is the judgment stayed?

(See URS Corp. v. Atkinson/Walsh Joint Venture (2017) 15 Cal. App. 5th 872.)

A.  Filing of a notice of appeal does NOT stay a mandatory injunction.

B.  Filing of a notice of appeal does NOT stay matters not embraced in the judgment or affected thereby.

IV.  When to petition for a writ of supersedeas — CCP §923.

A.  When a bond is required but you cannot post one.

i.  Only if you first requested waiver in the trial court.

B.  When respondent and the trial court refuse to acknowledge a statutory stay — automatic or otherwise.

C.  When appellant wrongly insists there is an automatic stay.

D.  When the trial court denied a motion for a discretionary bond.

Pablo has spoken at every one of our appellate and writ seminars held in Los Angeles, since 2007. He’s the best – and one of the best rated speakers of all time! You can find some of his programs here:

Appellate Law Bundle

1st Annual Advanced Appellate Conference [Civil]

2nd Annual Appellate Conference

3rd Annual Advanced Conference

Demystifying Civil Appeals and Writs

Or you can just go to our audio page and search on “Appellate” as the keyword and California as the location.

Statements of Decision: The Ideal and the Reality

Posted on by Faith Pincus
14 Nov

by T. Peter Pierce, Esq., of Richards, Watson & Gershon

In 2018, we held our annual 3rd Advanced Appellate Conference program. One of our speakers, T. Peter Pierce, spoke about Statements of Decision: The Ideal and the Reality at that program, along with the Hon. Kathleen Banke, Associate Justice, CA Court of Appeal, 1st Appellate District, Division One. Peter has spoken at all of our appellate programs, including our 1st and 2nd Annual Advanced Appellate Conferences. And Peter came back for our 4th Annual Advanced Appellate Conference as well. Justice Banke spoke at our 3rd Annual and 4th Annual program in San Francisco and this year’s 5th Annual Appellate Seminar.

Limited time offer for our blog readers: Take 50% off any of the above conference recordings (with code SOD50) or 20% off of our Statements of Decision audio package (20SOD). Bundles excluded.

Both Peter and Justice Banke are fantastic speakers, as our attendees note every time they see Peter and Justice Banke speak.

We wanted to share with you some of their discussion, rules and cases they mentioned that you need to know about, and tips regarding Statements of Decision. And be sure to read all the way to the bottom to get to their list of strategies to employ.

A.     Applicable Circumstances for a Statement of Decision
– Trial court MUST issue a tentative decision on “the trial of a question of fact by the court.” (Cal. Rule Court (CRC) 3.1590.)
– Trial court MAY issue Statement of Decision on “the trial of a question of fact by the court.”  (CCP section 632.)  Must issue under certain circumstances (see below).
– Scope of “trial of a question of fact by the court.”  Does it apply to law and motion or other matters?

B.      Timing and Procedure Intertwined
1.  If trial is concluded within one calendar day or less than eight hours spread over more than one day, a party must request a Statement of Decision before the case is submitted for decision. Failure to do so means the loss of any right to a Statement of Decision, although a court may still issue one at its discretion. (CCP 632.)
2.  Regardless of length of trial, the trial court is required to issue a tentative decision. 
a.      If the trial court opts to announce a tentative decision orally, it must announce it in open court in the presence of all parties appearing at trial (CRC 3.1590(a)).  If the trial is concluded within one calendar day, or lasted less than eight hours, a party is not entitled to a written Statement of Decision.  Under CCP section 632, the trial court may issue an oral Statement of Decision.
b.      If the trial court does not announce its tentative decision in open court with all parties present, it must serve all parties with a minute order or written tentative decision.
         3.      Four specified options for a tentative decision are:
  Option 1- Court states that tentative decision is its proposed Statement of Decision (CRC 3.1590(c)(1)).
Issue: Does a party have 10 days after announcement or service of tentative decision to request that the Statement of Decision be modified to include certain issues (CRC 3.1590(d)), or does a party have 15 days under CRC 3.1590(g) to serve and file objections? Probably the latter because CRC 3.1590(c)(1) expressly refers to subdivision (g).
  Option 2- Court states it will prepare a Statement of Decision  (CRC 3.1590(c)(2)).  A party may request within 10 days of announcement or service of the tentative decision that the Statement of Decision include certain issues. (CRC 3.1590(d)).  The request should specify the controverted issues which the Statement of Decision should address.  (CCP section 632.)  Court must then prepare and serve a proposed Statement of Decision within 30 days of the announcement or service of its tentative decision.
   Option 3- Court orders a party to prepare a Statement of Decision (CRC 3.1590(c)(3)).  A party not ordered to prepare a Statement of Decision may request within 10 days of announcement or service of the tentative decision that the Statement of Decision include certain issues.  (CRC 3.1590(d).)  The request should specify the controverted issues which the Statement of Decision should address.  (CCP section 632.)
Option 4- Court directs that the tentative decision will become the Statement of Decision unless within 10 days a party (1) specifies the issues it requests be included in the Statement of Decision, or (2) “makes proposals” not included in the tentative decision (CRC 3.1590(c)(4)).  If a party does so, the court must then prepare and serve a proposed Statement of Decision within 30 days of the announcement or service of its tentative decision.
         4. The four options in the rule are not exclusive; the rule is phrased in the permissive “may.”  The court could do something else, like send out a written tentative decision without any further direction to the parties.
         Permissive language is consistent with the rule that a Statement of Decision is not required unless the parties request it.  If a Statement of Decision is timely requested and not waived, the trial court must render a Statement of Decision (Karlsen v. Superior Court(2006) 139 Cal.App.4th 1526, 1530-1531).  CCP section 632 requires the trial court to issue a Statement of Decision upon the request of any party if made within 10 days after the court announces a tentative decision (with exception of shorter trial where request must be made before submission of case).
Where the court did not designate either party to prepare a Statement of Decision, by default, and by analogy to California Rules of Court, rule 232(c) [predecessor to Rule 3.1590(c)], the court is required to prepare it.  (In re Marriage of Sellers(2003) 110 Cal.App.4th 1007, 1010–1011.)
        5.     Failure to issue a Statement of Decision in response to a timely request is not per se reversible error.  Instead, the failure is subject to harmless error review.  (F.P. v. Monier (November 27, 2017).)

C.      Elements of Statement of Decision
“A statement of decision explains the factual and legal bases for the trial court’s decision in a nonjury trial.” (Uzyel v. Kadisha(2010) 188 Cal.App.4th 866, 896.)

To comply with a request for a Statement of Decision, a court need only fairly disclose its determinations as to the ultimate facts and material issues in the case. (Central Valley General Hospital v. Smith (2008) 162 Cal.App.4th 501, 513.) When this rule is applied, the term ‘ultimate fact’ generally refers to a core fact, such as an essential element of a claim. Ultimate facts are distinguished from evidentiary factsand from legal conclusions. (Metis Development LLC v. Bohacek(2011) 199 Cal.App.4th 748, 758.)

The trial court is not required to respond point by point to the issues posed in a request for Statement of Decision. The court’s Statement of Decisionis sufficient if it fairly discloses the court’s determination as to the ultimate facts and material issues in the case.  (Ermoian v. Desert Hospital(2007) 152 Cal.App.4th 475, 494-495, 497-500; Golden Eagle Ins. Co. v. Foremost Ins. Co.(1993) 20 Cal.App.4th 1372, 1379–1380.)

A Statement of Decisionneed not address all the legal and factual issues raised by the parties. Instead, it need do no more than state the grounds upon which the judgment rests, without necessarily specifying the particular evidence considered by the trial court in reaching its decision.  (Muzquiz v. City of Emeryville(2000) 79 Cal.App.4th 1106, 1124.)

D.     Omissions or Ambiguities in the Proposed Statement of Decision
If a party fails to bring omissions or ambiguities in the proposed Statement of Decision’sfactual findings to the trial court’s attention, that party waives the right to assert on appeal that the Statement of Decision is deficient. (Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 59.)  The doctrine of implied findings would then apply if the statement truly contained ambiguities or omissions.

Ordinarily, when the court’s Statement of Decision is ambiguous or omits material factual findings, a reviewing court is required to infer any factual findings necessary to support the judgment. (Ermoian v. Desert Hospital(2007) 152 Cal. App. 4th 475, 494-495.)

If the Statement of Decision fails to decide a controverted issue or is ambiguous, any party may bring the omission or ambiguity to the trial court’s attention either before the entry of judgmentor in conjunction with a new trial motion or a motion to vacate the judgment under Code of Civil Procedure section 663. (CCP § 634.)  If an omission or ambiguity is brought to the trial court’s attention, the reviewing court will not infer findings or resolve an ambiguity in favor of the prevailing party on that issue. (CCP § 634.)

If an omission is not brought to the trial court’s attention as provided under the statute, however, the reviewing court will resolve the omission by inferring findings in favor of the prevailing party on that issue.If an ambiguity is not brought to the trial court’s attention as provided under the statute, the reviewing court will resolve the ambiguity by inferring that the trial court decided in favor of the prevailing party on that issue. (Code Civ. Proc., § 634.) To bring an omission or ambiguity to the trial court’s attention for purposes of Code of Civil Procedure section 634, a party must identify the defect with sufficient particularity to allow the court to correct the defect.  (Uzyel v. Kadisha(2010) 188 Cal. App. 4th 866, 896-897; Bay World Trading, Ltd. v. Nebraska Beef, Inc.(2002) 101 Cal.App.4th 135,139 [objections must be filed 15 days after proposed decision].)

In rendering a Statement of Decision under Code of Civil Procedure section 632, a trial court is required only to state ultimate rather than evidentiary facts.  The trial court need not discuss each issue listed in a party’s request for a Statement of Decision; all that is required is an explanation of the factual and legal basis for the court’s decision regarding the principal controverted issues at trial. (In re Marriage of Balcof (2006) 141 Cal.App.4th 1509, 1530; Hellman v. La Cumbre Golf & Country Club(1992) 6 Cal.App.4th 1224, 1230; Wallis v. PHL Associates, Inc. (2013) 220 Cal.App.4th 814, 824–827.)  Only when the trial court fails to make findings on a material issue which would fairly disclose the trial court’s determination would reversible error result.  If the judgment is otherwise supported, the omission of findings is harmless error unless the evidence is sufficient to sustain a finding in the losing party’s favor which finding would completely undermine findings supporting the judgment. A failure to make findings on an immaterial issue is not reversible error.

E.      Objections to a Proposed Statement of Decision
Any defects in the trial court’s Statement of Decisionmust be brought to the court’s attention through specific objectionsto the statement itself – not through a proposed alternative Statement of Decision. By filing specific objections to the court’s Statement of Decisiona party pinpoints alleged deficiencies in the statement and allows the court to focus on the facts or issues the party contends were not resolved or whose resolution is ambiguous. A proposed alternative Statement of Decisiondoes not serve these functions and does not satisfy the requirements of Code of Civil Procedure section 634 and Rule 3.1590. (Golden Eagle Ins. Co. v. Foremost Ins. Co.(1993) 20 Cal.App.4th 1372, 1380; Bay World Trading, Ltd. v. Nebraska Beef, Inc. (2002) 101 Cal.App.4th 135,139–140; Ermoian v. Desert Hospital(2007) 152 Cal.App.4th 475, 497-500;Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 59-61.)

F.      Interplay Between Statement of Decision and Judgment
A court may amend its Statement of Decisionafter it receives objections from affected parties. If judgment has not yet been entered, the trial court has inherent power to amend its Statement of Decision to award prejudgment interest. Even after a court has issued a written decision, the court retains authority to change its findings of fact or conclusions of law until judgment is entered. Until a judgment is entered, a Statement of Decision is not effectual for any purpose (Code Civ. Proc., § 664).  A court sitting as a trier of fact may at any time before entry of judgment amend or change its findings of fact.  (Bay World Trading, Ltd. v. Nebraska Beef, Inc.(2002) 101 Cal.App.4th 135, 141.)

A Statement or Decision or memorandum of decision is not appealable. Courts embody their final rulings not in Statements of Decision but in orders or judgments. Reviewing courts have discretion to treat Statements of Decision as appealable when they must, as when a Statement of Decision is signed and filed and does, in fact, constitute the court’s final decision on the merits. But a Statement of Decision is not treated as appealable when a formal order or judgment follows. (Pangilinan v. Palisoc(2014) 227 Cal.App.4th 765, 769; Alan v. American Honda Motor Co., Inc.(2007) 40 Cal.4th 894, 901.)

G.     Strategies Involving Statement of Decision
–        If the tentative decision is in your favor, do not request a Statement of Decision.
–        If the tentative decision is against you, timely request a Statement of Decision.  Possible exception when de novo standard of review.
–        If you lose on the tentative, identify alternative theories that the trial court did not decide, and request an express statement that the trial court did not reach the issues encompassed within those theories.
–        Be judicious in objecting to Statement of Decision.  Focus on broader issues and not on every minor point.
–        If you are the prevailing party, and the losing party objects to the Statement of Decision, think carefully about whether the objections will allow the trial court to clear up ambiguities and omissions, thereby bolstering the judgment in your favor.
–        If you are required to request a Statement of Decision before the case is submitted, make an educated guess as to whether you will be the prevailing party.

 

 

Administrative Writ of Mandamus – What is it?

Posted on by Faith Pincus
07 Nov

by Charles L. Post, Esq. and Eunice C. Majam-Simpson, Esq.

For our latest Writs of Administrative Mandamus course, held in September 2020, please click here.

In 2017, we held a terrific program on Administrative Writs of Mandamus. Two of our speakers, Charles L. Post, Esq. and Eunice C. Majam-Simpson, Esq., created this terrific outline highlighting the things you need to know about what an Administrative Writ of Mandamus is and the process surrounding it.

If you are interested in knowing more about Administrative Hearings, we held a program on hearings two years ago. You can find out more about that program here. Our audio packages include all materials distributed at the program, and the PowerPoints.

Administrative Writ of Mandamus – What is it?

A.  What is it?

  1.  A method of obtaining judicial review of agency (public and private) decisions and actions.

B.  Two Types

1.  “Administrative Mandamus” under CCP §1094.5 et seq.

2.  “Traditional” or “Ordinary” Mandamus Pursuant to CCP §1084

C.  Uses and Prerequisites

1.  Challenge of an agency’s adjudicatory decision (a decision that concerns private rights or interests, when a hearing is required by law to be given before the agency that issues the decision).

2.  Prerequisites

–  Final agency decision

–  The decision resulted from a proceeding which was required by law

–  Evidence was required to be taken

–  Discretion in factual determinations is vested within the agency

–  “Agency” can mean both governmental and private organizations

D.  Goal of Administrative Mandamus Review

1.  To obtain a writ (an order from the Court) to a lower tribunal (the agency) directing the agency to set aside its decision, to reconsider its decision, or take such other action as the Court directs. (CCP §1094.5(f).)

2.  Special Proceedings

–  CEQA (Public Resources Code § 21165.7)

–  Traditional Mandamus (CCP §§ 1084-1097, 1107-1110(b))

E.  Features of Administrative Mandamus

1.  Administrative mandamus is a civil, special proceeding. (CCP § 23-63)

2.  Administrative mandate is a judicial review but it is not a reconsideration of the agency decision. There are some agency decisions that by statute or case law are judicially reviewed at the appellate level. (Public Utilities Commission, Department of Alcoholic Beverage Control, State Bar, etc.)

3.  Equity applies in administrative mandamus. Curtain v. DMV (1981) 123 Cal.App.3d 481, 484.

4.  Speedy proceeding. Mandate hearings usually occur within weeks or months of a filing. Local court rules may specifically control the filing of an administrative mandamus (departments which may hear, other rules, etc.).

5.  No damages. In very narrow circumstances, a separate, later action for damages may be instituted. O’Hagan v. Board of Zoning Adjustment (1974) 38 Cal.App.3d 722, 729.

6.  No jury. Administrative mandamus is heard by the Court. CCP §1094.5(a).

7.  Administrative exhaustion required before judicial review is available by administrative mandamus.

8.  A court considering a writ of administrative mandamus conducts a limited trial de novo, reviewing the administrative proceedings and the evidence admitted during the hearing. A court may inquire into whether the agency acted in excess of its jurisdiction, committed a serious error of law, or abused its discretion in determining of facts. CCP §1094.5(b)-(c).

9.  Understand the standard of review. “Substantial evidence” or “independent judgment”.

10.  Petitioner has the burden of proof. “Rarely if ever, will a board determination be disturbed unless the petitioner is able to show a jurisdictional excess, a serious error of law, or an abuse of discretion on the facts.” Fukuda v. City of Angels (1999) 20 Cal.4th 805, 814.

11.  New evidence not admissible. (Yes, there are exceptions but they are few and far between. More on this later.)

12.  “Discovery” as that term is used in the Civil Code as to civil proceedings is not available in the usual administrative mandate proceedings. (Yes, there are exceptions. More on this later.)

13.  Presumption that the administrative decision is correct.

14.  Prevailing party obtains costs, including administrative record preparation costs, and other costs of suit.

15.  Attorney’s fees not usually available. (Yes, there are exceptions. More on this later.)

16.  Generally no joinder with other causes of action. (No addition of declaratory relief, etc.) Allowed when cases of unconstitutionality declarations or applications for traditional mandamus (especially useful when uncertain as to which type of writ should be sought).

17.  A hearing on a petition for writ of administrative mandamus proceeds like a law and motion matter but the result of the judgment. CCP §1094.5(a), (f). This hearing, therefore is the only “trial” in an administrative mandamus action. Unlike other types of trials, no witnesses testify, and with certain limited exceptions, the only evidence the Court can consider is the evidence in the administrative record.

F.  Judicial Review of What?

1.  Governmental agency decisions. Although there are a few statutory exceptions, proceedings under CCP §1094.5 are the exclusive remedy for challenging the final adjudicatory decision of a state or local government agency when the decision is the result of a required evidentiary hearing. The list of qualifying decisions is long: professional license denial, licensed disciplinary proceedings, employee discipline imposed by a state or local public employers, termination of tenured teachers, driver’s license decisions, denial of disability retirement benefits, and many zoning and land use decisions.

2.  Adjudicatory decisions of private organizations. Any private organization that by bylaws or due to internal rules must hold a hearing and reach an adjudicatory decision may be submitted to administrative writ review. Hospital privilege decisions, internal insurer decisions regarding fees that will be charged by participating practitioners, private company decisions to terminate or discipline employees under a grievance procedure that requires evidence to be taken and considered during a hearing and union decisions.

G.  How is this different from traditional Mandamus?

1.  Traditional writ of mandate under CCP §1085 is appropriate when the Petitioner has no plain, speedy, and adequate alternative remedy and the Respondent has a clear, present and usually ministerial duty to act.

2.  Traditional mandamus may also apply when an administrative agency is not required to hold an evidentiary hearing.

3.  Quasi-legislative acts may also be reviewed on traditional mandate.

H.  Objections to Evidence.

1.  Offering Evidence. A party may lose the opportunity to raise on writ of administrative mandamus by failing to raise the issue in the administrative hearing. This rule also applies to defenses that require an evidentiary showing. Jenron Corp. v. Dept. of Social Services (1997) 54 Cal.App.4th 1429, 1437 (failure to raise laches defense in administrative hearing waives the issues in subsequent administrative mandamus proceeding).

2.  A party must object to the admission of evidence at the administrative hearing, otherwise the evidentiary objection will be deemed waived. Hand v. Board of Examiners (1977) 66 Cal.App.3d 605, 613.

a.  Hearsay evidence in administrative proceedings. Important differences from civil proceedings. Hearsay is generally admissible to supplement or explain other evidence in administrative proceedings, as long as it is both relevant and is “the sort of evidence on which responsible persons are accustomed to rely in the conduct of serious affairs.” Gov’t. Code § 11513(c). Specific rules applicable to a given administrative proceeding may further limit or permit the use of hearsay. Know your rules.

b.  Hearsay objections must be made at the hearing. At risk of waiving issue in later judicial review.

c.  Exceptions

(1)      Lack of subject matter jurisdiction.

(2)      Failure to state a cause of action.

(3)      Constitutional issues.

d.  These issues may be raised at any time. Don’t rely on an exception. All things being equal, it is better to object than not object. Consider use of wholesale “throughout this proceeding” objections. Often the administrative hearing officer will prefer such “global” objections rather than forcing him or her to rule on each individual objection. This time saving technique, however, can have pitfalls. Make sure that the stipulation that all objections have been made and preserved is on the record.

I.  The Record

1.  The standard applies whether the Court is considering the writ under the independent judgment test or the substantial evidence test. This is also true when the Court is deciding a purely legal issue.

2.  CCP §1094.5(e) expressly limits judicial review to the evidence in the administrative record except when: (1) the evidence could not, with due diligence, have been procedure during the administrative proceedings; or (2) the administrative body improperly excluded the evidence. Western States Petroleum Assoc. v. Superior Court (1995) 9 Cal.4th 559, 578.

3.  Evidence outside the administrative record might also be appropriately considered on issues not related to the validity of the decision being challenged such as standing and capacity to sue; affirmative defenses such as laches, estoppel and res judicata and the accuracy of the record. Western States, supra, 9 Cal.4th at 578.

4.  Sufficient record is essential to meet Petitioner’s burden. Eureka Citizens for Responsible Government v. City of Eureka. That said, in cases where the issues is purely legal and base on undisputed facts, a full record may not be necessary. Elizabeth D. v. Zolin (1993) 21 Cal.4th 347, 353.

5.  When to make the request. The record may be requested before filing, at the time of filing, or shortly after filing a petition. The Respondent agency may begin preparing the record as soon as the petition has been filed. However, this is a statutory and regulatory driven process. Petitioner should ascertain whether a particular statutory or regulatory scheme includes any special requirements concerning when the record must be requested.

6.  Make request in writing.

7.  Laches, burden of proof, res judicata, estoppel, validity of regulations, duress and necessity. May be supported by evidence outside the record.

8.  Bias charges.

a.  Raising the issue.

b.  Constitutional due process requires a competent and impartial tribunal in administrative hearings. The issue of bias must be raised at the administrative hearing. In APA Act cases, claim of prejudice must be raised under the procedures of Government Code § 11512(c) or the issue will be waived. Less stringent standard of impartiality than allowed for a hearing for judges in a civil matter. “The fact that an administrative agency is both accuser and judge is not considered to deprive the accused of due process of law.” Hallot v. Superior Court (1992) 3 Cal.App.4th 1575.

9.  Statute of limitation issues. In cases governed under CCP §1094.6 and the Administrative Procedures Act, request for preparation of the administrative record within 10 days after the date of the administrative decision being challenged, the applicable statute of limitations will be tolled until 30 days after the record has been delivered or mailed to the Petitioner. CCP §1094.6(d).

J.  BEWARE! Know your statutes.

1.  Different statutes have different statute of limitations and time limits.

2.  Preparation of the record can take months, certain time lines apply.

 K.  Record Preparation.

1.  The Petitioner has the burden of proof and bears the burden and the cost of preparing and producing the administrative record. CCP §1094.5(a), CCP §1094.6(c).

2.  This cost may be recoverable if the Petitioner prevails.

3.  Agencies are required to prepare and produce a record.

Michael Sachs is our Latest Featured Speaker!

Posted on by Faith Pincus
michael
06 Nov

Our latest featured speaker is Michael Sachs from Clark Hill PLC!

Michael will be on the faculty panel at our upcoming 13th Annual California Superior Court Boot Camp in San Francisco on November 8!

Michael has previously spoken for us at our 12th Annual CA Superior Court Boot Camp, and our 2018 Mastering the Deposition seminars, where seminar attendees raved about his presentations. Welcome back, Michael!

Michael’s practice focuses on a variety of civil litigation matters, including toxic tort and product liability, Proposition 65, lemon law and employment law. He has handled these matters in all phases of pre-litigation, litigation and appeal. Michael has tried several matters to verdict in the various Bay Area Superior Courts and the Northern District of California and has argued before the California Court of Appeal. Michael is devoted to his clients and seeks to find cost-effective ways to manage their cases while still vigorously defending their interests in and out of the courtroom. He has achieved numerous successful results for his clients through settlement negotiations, mediations, dispositive motions and trial.

Steven Hart is our Latest Featured Speaker!

Posted on by Faith Pincus
steven
05 Nov

Our latest featured speaker is Steven Hart from Hart McLaughlin & Eldridge!

Steven will be on the faculty panel at our upcoming The Art of Jury Selection: Getting it Right in Chicago on November 29! This is Steven’s first year speaking with us, and we can’t wait for his presentation!

A seasoned trial lawyer with more than two decades of experience, Steven litigates a wide variety of civil matters including class action, mass torts, personal injury, products liability, toxic tort, environmental, automotive, and transportation cases. He also has a record of success representing both defendants and plaintiffs, from Fortune 500 companies, medium, and small businesses to individuals, in class action cases. Most recently, Steven obtained a $100 million-plus settlement for a class of farmers and small businesses in an antitrust class action suit in the Northern District Federal Court in Chicago. Steven received a 2013 Jury Verdict Reporter Trial Excellence Award for his work on this case, the highest reported Illinois verdict/settlement in 2013.

Steven has tried cases to successful jury verdict throughout the country and has argued before State and Federal courts of appeal. His practice includes State and Federal trial work in construction and premises liability actions. It was Steven’s work in the latter arena that led Kohl’s to nominate Steven’s firm as a “Go-To” Litigation Law Firm in American Lawyer’s 2012 survey. Steven also represents corporations and individuals in employment-related matters.

Steven serves as National Coordinating and Trial Counsel for several Fortune 500 companies in asbestos and environmental litigation. He is National Coordinating and Trial counsel for DHL transportation litigation. He has tried cases in Illinois, New York, Texas, Indiana, California, and Wisconsin for manufacturers and premises owners. He has developed extensive experience in epidemiology, medical causation, industrial hygiene, accident reconstruction, and biomechanics.

Steven is a published legal author and frequent lecturer. His writings have been published by the Illinois Institute of Continuing Legal Education, including “Using Expert Witnesses: Principles and Pitfalls.” Steven is also an adjunct professor in trial advocacy at Chicago-Kent College of Law. Numerous bar associations and legal organizations have asked him to speak at distinguished events.

Steven was recently appointed to the 47th Ward Democratic Organization Judicial Review Committee, where his committee will be responsible for interviewing, vetting and slating Cook County Judicial Candidates for election.
A resident of Chicago, Illinois, Steven is married to Jill Hart, and together they have two daughters and a son.

Brian Eldridge is our Latest Featured Speaker!

Posted on by Faith Pincus
brian
02 Nov

Our latest featured speaker is Brian Eldridge from Hart McLaughlin & Eldridge!

Brian will be on the faculty panel at our upcoming The Art of Jury Selection: Getting it Right in Chicago on November 29! Brian first spoke for us at our 9th Annual Federal Court & Litigation Boot Camp, where seminar attendees raved about his presentation. Welcome back, Brian!

Brian Eldridge is a trial lawyer who devotes 100% of his practice to civil litigation. Brian has a wide range of experience successfully litigating multi-million dollar, high-stakes cases on behalf of his clients. He concentrates his practice in products liability, construction/construction defect, transportation, premises liability, commercial litigation, mass torts, and class action matters. He has handled numerous cases involving death and catastrophic injuries, including paralysis, traumatic brain injuries, amputations and other significant permanent disabilities.

Within the commercial litigation context, Brian has successfully litigated cases involving breach of contract and allegations of fraud and bad faith. He has also handled numerous consumer class action lawsuits under federal statutes including the Fair and Accurate Credit Transactions Act (FACTA), the Fair Debt Collection Practices Act (FDCPA) and the Telephone Consumer Protection Act (TCPA). In addition, Brian has litigated cases involving alleged environmental exposure to mold, vinyl chloride, and polychlorinated biphenyl (PCB).

Brian was selected for inclusion in the Illinois Rising Stars list for eight straight years, from 2008 to 2015. No more than 2.5% of lawyers under the age of 40 in the state of Illinois are selected for this honor. In 2013, Brian was honored to be named to Chicago Daily Law Bulletin’s “40 Illinois Attorneys Under Forty to Watch” list. In 2015 and 2016, Brian was named an Emerging Lawyer by Leading Lawyers. The distinction of being named an Emerging Lawyer is reserved for the top 2% of Illinois lawyers who are 40 years old or younger and have been identified by their peers as proving themselves to be professional, ethical, and experienced at an early point in their legal career. In 2017, Brian was selected as an Illinois Super Lawyer, which is limited to 5% of attorneys in the state.

Brian’s practice philosophy focuses on being accessible and responsive to clients at all times. He is on the rapid response team for several clients and is frequently called upon to orchestrate immediate investigations. Through his years of practice, Brian has developed an extensive expert network, having worked with consultants in various specialized areas including medicine, engineering, construction, epidemiology, pharmacology, economics, federal regulations, safety standards, risk assessment and psychology.

Brian lives in Highland Park with his wife, Jodi, and their three daughters.