We regularly compile a few recent rulings that may be of interest to our clients and friends. Feel free to contact any of the firm's litigation attorneys should you have questions about these cases.
[1. Insurance]
"FIRE SALE" TRIGGERS COVERAGE FOR TRADE LIBEL
An insured threatened to sell high-end products at close-out prices and the manufacturer sued, contending this would result in a diminution of its brand and trademark. The insurer (whose policy covered claims for disparagement of goods) refused to defend the claim contending that there was no potential for coverage because price reduction itself was not product disparagement and thus not covered under the policy. The trial court granted summary judgment in favor of the insurer, which was reversed on appeal. The appellate court found that the underlying complaint did not need to allege all of the elements of a cause of action for trade libel to trigger coverage for product disparagement. Instead, coverage could be triggered for trade libel because it was a reasonable interpretation that the insured's "fire sale" of products disparaged claimant's high-end product.
[2. Real Estate]
"BAD FAITH WASTE" OF SECURITY CAN BE ALLEGED BY FORECLOSING LENDER
After buyers bought a parcel of property with a deed of trust to secure approximately 90% of the purchase price, they demolished the structure with the intent to build a new building. After they failed to complete the new building and defaulted on their payment obligations, the holders of the security interest foreclosed and then brought suit for bad faith waste. The trial court found no bad faith existed because the borrowers had a good faith intent to build the new building. The court of appeal reversed, holding instead that bad faith waste may exist, regardless of whether the owners acted intentionally or recklessly. The court found that the destruction of the building constituted bad faith waste because there was no showing that its destruction was somehow caused by economic pressures of a depressed market.
[3. Contract Law]
EXPERT TESTIMONY ON CUSTOM AND PRACTICE SHOULD HAVE BEEN CONSIDERED BY TRIAL COURT
When a personal manager who had an oral agreement with an actress for a percentage of her income was terminated, he contended that he should be able to receive a percentage of income from engagements entered into and services rendered while he served as her manager. In response to a summary judgment by the actress, the manager submitted the declaration of a long time talent agent and personal manager as to the custom and practice in the entertainment business for compensation after a manager is terminated. The trial court refused to consider the declaration and judgment was entered for the actress. On appeal, the court found that the trial court erred in refusing to consider the declaration of the expert whose credentials qualified him to testify as to the custom and practice in the industry.
[4. Trade Secrets]
PLAINTIFF WHO SUBMITTED NO EVIDENCE OF TRADE SECRET THEFT LIABLE FOR DEFENDANT'S ATTORNEY'S FEES, EVEN THOUGH DISCOVERY WAS NOT COMPLETE
A company sued its competitor for misappropriation of trade secrets after several of its employees went to work for the competitor, claiming on information and belief that the former employees stole certain trade secret software. Plaintiff failed to oppose a motion for summary judgment, which was granted. Thereafter, the defendant filed a motion for attorney's fees under the Uniform Trade Secrets Act, which provides for the recovery of attorney's fees if the action is brought in bad faith. Plaintiff opposed the motion, contending that discovery was not complete. The trial court awarded attorney's fees to the defendant and plaintiff appealed. The court of appeal held that the trial court was correct because there was no evidence in the record that there was any theft of trade secrets. This absence alone was sufficient in order to award attorney's fees to the defendant.
[5. Arbitration]
ARBITRATION ORDERED EVEN THOUGH CC&R'S WERE CREATED BEFORE ANY CONDOS WERE SOLD
A developer created a homeowner's association when it developed a condominium project and included in the covenants, conditions and restrictions ("CC&R's") a provision that construction claims against the developer were required to be arbitrated. The HOA later sued the developer for construction defects and the developer contended that under the CC&R's the claims must be arbitrated. The trial court invalidated the arbitration clause in the CC&R's, finding that the HOA could not have consented to arbitration since it did not even exist when the CC&R's were recorded. The court of appeals agreed with the trial court, but the Supreme Court reversed finding, among other things, that it is not unreasonable based upon statutory and decisional law pertaining to common interest developments for a developer to bind future condominium owners via CC&R's to arbitrate their disputes.
[6. Arbitration]
CLASS ACTION WAIVER DOES NOT DEFEAT AN ARBITRATION CLAUSE UNDER THE FEDERAL ARBITRATION ACT
When a buyer purchased a used car from a Mercedes dealership and experienced mechanical problems, she brought a class action lawsuit. The sales agreement contained an arbitration clause under the Federal Arbitration Act (FAA) and included a class action waiver. The dealership petitioned for arbitration, which the trial court denied on the grounds that the Consumers Legal Remedies Act (CLRA) prohibited class action waivers. The court of appeals reversed the trial court and ordered the case to arbitration, citing to recent US Supreme Court cases and holding that the FAA's main purpose was to have streamlined results in arbitrations and the CLRA's class action waiver was an impediment to the FAA's policy objectives.
