Champir LLC v. Fairbanks Ranch Association

Champir LLC v. Fairbanks Ranch Association
No. D077384, 2021 Cal. App. LEXIS 576 (Ct. App. June 22, 2021).

Court of Appeals of California, Fourth District, Division One

Filed June 22, 2021

No. D077384

Summary by Jillian M. Wright, Esq.:

Plaintiff owners sued an association over a dispute arising from the association’s plan to install traffic signals. The court issued a temporary restraining order and then a preliminary injunction blocking the project. The association then obtained consent from a majority of its members to proceed with the project, so the court dissolved the preliminary injunction. Both parties claimed they were the prevailing party in the lawsuit and sought their respective attorneys fees from the other. The court found the plaintiff owners to be the prevailing party and awarded the owners their fees and costs because their litigation was initiated to compel the association to comply with the CC&Rs, not to block the project.

TAKEAWAY: Determination of who is prevailing party requires ascertaining the parties litigation objective.

***End Summary***

CHAMPIR, LLC, et al., Plaintiffs and Respondents,
v.
FAIRBANKS RANCH ASSOCIATION, Defendant and Appellant.

APPEAL from a judgment of the Superior Court of San Diego County, Super. Ct. No. 37-2018-00028289-CU-NP-NC, Jacqueline M. Stern, Judge. Affirmed.

Gordon & Rees Scully Mansukhani, Thomas J. Stoddard and Casey Shaw for Defendant and Appellant.

Nicholas & Tomasevic, Craig M. Nicholas and Ethan T. Litney for Plaintiffs and Respondents.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

DO, J.

INTRODUCTION
Champir, LLC (Champir), Daniel Javaheri, and Shiva Dehghani (collectively, Plaintiffs) sued the Fairbanks Ranch Association (the Association) to enforce the recorded covenants, conditions, and restrictions (CC&Rs) of their planned development community. Upon resolution of the litigation, both parties sought an award of attorney fees and costs as the “prevailing party” under Civil Code section 5975, subdivision (c).[1] The court determined Plaintiffs were the prevailing party and entered judgment for Plaintiffs with an award of $112,340 in attorney fees, plus costs of suit. The Association appeals, asserting the court should have determined that it was the prevailing party in the litigation. We affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND
I.
Plaintiffs’ Lawsuit
Champir owns a home in Fairbanks Ranch, a planned development community in Rancho Santa Fe, California, where Javaheri and his wife, Dehghani, reside. Javaheri is the manager and a member of Champir. The Association is a non-profit homeowners’ association that governs and oversees the common areas of Fairbanks Ranch pursuant to recorded CC&Rs. Champir is a member of the Association with voting rights under the CC&Rs.

In June 2018, Plaintiffs sued the Association over a dispute arising from the Association’s plan to install traffic signals at the entrance gates of Fairbanks Ranch, one of which would be directly outside Plaintiffs’ home.

Plaintiffs alleged that in May 2008 the Association obtained majority approval from its voting members to spend a little over $5.3 million for improvements to the common areas, including installation of traffic signals at two entrance gates to Fairbanks Ranch, Gates 1 and 6 (Gates Project). The Gates Project was to be funded with money received from the Association’s settlement of an unrelated lawsuit in 2000, totaling $3.2 million, and a special assessment against the properties in Fairbanks Ranch for the balance. In June 2017, the Association moved $390,470 of the funds approved for the Gates Project into another fund called the San Dieguito Road Safety Fund. The Association believed that amount represented funds from the 2000 settlement that may have been improperly designated for “`purposes outside the scope of the settlement fund.'”

In October 2017, the Association informed its members that it had obtained approval from the County Board of Supervisors for installation of traffic signals at Gates 2 and 6, rather than Gates 1 and 6, as originally approved by the members. Plaintiffs’ home is at the intersection of Gate 2, “directly next to the proposed traffic signal.” Plaintiffs claimed that this was the first time they learned of the Association’s intention to install a traffic signal at Gate 2. In a written notice, the Association told members that “`[t]he Board worked through the administrative process quietly to avoid the political hurdles [their] community encountered in past attempts to get speed control on San Dieguito Road. That is the reason [homeowner members] may not have been aware of this effort until now.’ “A month later, the Association informed its members that it was in the process of collecting bids and the traffic signals would be completed within six months.

Plaintiffs alleged the Association breached the CC&Rs and exceeded its authority in several ways. First, the Association failed to request a vote and obtain approval from its members before entering into a contract to install the traffic signals at Gates 2 and 6. Such a vote, according to Plaintiffs, was required by the CC&Rs for any capital expenditure that exceeded five percent of the Association’s annual budget for the year allocated, or $200,000 for the relevant time period. Here, the contracted price for the project was estimated to cost $430,000. Second, the Association improperly proposed to pay for the traffic signals at Gates 2 and 6 with money previously approved by members in 2008 for the Gates Project involving Gate 1, without a new vote authorizing a different use of previously allocated funds. Third, the Association planned to transfer operation and maintenance of the traffic signals after construction to the County of San Diego, which Plaintiffs alleged would be an improper transfer of Association funds to a third party, without a prior vote or majority approval.

Plaintiffs asserted five causes of action, including claims for breach of governing documents, trespass, nuisance, declaratory relief, and injunctive relief. Plaintiffs claimed the proposed traffic light at Gate 2 would encroach on their property and cause a nuisance as a result of “increased noise, traffic, pollution, and light.” In addition to monetary damages, Plaintiffs sought to enjoin the Association from construction of the traffic lights until a judicial determination of the rights and responsibilities of the parties.

II.
The TRO and Preliminary Injunction
On June 14, 2018, the trial court granted Plaintiffs’ ex parte application for a temporary restraining order (TRO) and enjoined the Association from construction of a traffic signal at Gate 2, pending a hearing on Plaintiffs’ motion for a preliminary injunction.

The Association filed a request to modify the TRO to enjoin it from construction of “any part of the Gate 2 traffic signal on Plaintiff[s’] property” only. It presented evidence of a professional land survey to show construction of the traffic signal would not encroach on Plaintiffs’ property. On June 21, 2018, the trial court modified the TRO to allow the project to proceed on “non-plaintiff land” but enjoined the Association from construction of any part of the traffic signal on Plaintiffs’ property.

On September 7, 2018, Plaintiffs filed a motion for a preliminary injunction against the Association, seeking to enjoin it from construction of the traffic signal at Gate 2 and further expenditure of funds for the traffic signal at Gate 2. On October 5, the court granted Plaintiffs’ motion in part and issued a preliminary injunction enjoining the Association from proceeding with construction of the traffic signal at Gate 2 during the pendency of the lawsuit. The court specifically found that “Plaintiffs have established a reasonable probability of success on the merits of their claim for breach of the Association’s governing documents and that Plaintiffs will suffer irreparable injury if the injunction is not issued.”

On November 20, 2018, the Association requested the court dissolve the preliminary injunction due to a “material change in the facts.” After the preliminary injunction was issued, the Association had requested a vote and obtained written consent from a majority of its members to proceed with construction of the traffic signal at Gate 2, even if expenditures exceeded 5 percent of its budgeted expenses for the year. The Association argued it would, therefore, be acting within its authority under the CC&Rs to install the traffic signal at Gate 2. On December 14, the court ordered the preliminary injunction dissolved, finding a material change in facts based on the Association’s evidence showing that it “recently obtained the written consent of a majority of the Association’s members to proceed with the installation of a traffic signal at Gate 2.” Accordingly, the court concluded “the evidence no longer support[ed] restraining the Association” from constructing the traffic signal at Gate 2.

III.
Prevailing Party Fee Award
After the preliminary injunction was dissolved, Plaintiffs voluntarily dismissed their causes of action for trespass and nuisance on May 1, 2019 and the remaining causes of action on September 17, 2019.[2] Plaintiffs and the Association then filed respective motions for attorney fees, each claiming to be the prevailing party under section 5975, subdivision (c). The Association also requested attorney fees pursuant to the CC&Rs, which provided that the Association would be entitled to reimbursement of its legal expenses if a member sued it and the Association was “`successful or sustained in its position in such suit.'”

On November 5, 2019, after a hearing, the trial court determined Plaintiffs, and not the Association, were the prevailing party. The court awarded Plaintiffs their attorney fees in the amount of $112,340 and denied the Association’s motion for attorney fees. On December 6, the court entered judgment for Plaintiffs. The Association appeals, asserting the trial court should have found that it was the prevailing party.

DISCUSSION
I.
“Prevailing Party” Under Section 5975
The Davis-Stirling Common Interest Development Act (Davis-Stirling Act or the Act) governs an action to enforce the recorded CC&Rs of a common interest development. (§§ 4000-6150 [formerly sections 1350-1376].) Section 5975 provides that CC&Rs may be enforced as equitable servitudes, unless unreasonable, and “[i]n an action to enforce the governing documents [of a common interest development], the prevailing party shall be awarded reasonable attorney[ ] fees and costs.” (§ 5975, subds. (a), (c).) The prevailing party is entitled to attorney fees “`as a matter of right'” and the trial court is “`obligated to award attorney fees[ ] whenever the statutory conditions have been satisfied.'” (Salehi v. Surfside III Condominium Owners Assn. (2011) 200 Cal.App.4th 1146, 1152 (Salehi) [construing former section 1354], quoting Hsu v. Abarra (1995) 9 Cal.4th 863, 872 (Hsu).)

The Act does not define “prevailing party.” However, it is well established that “[t]he analysis of who is a prevailing party under the fee-shifting provisions of the Act focuses on who prevailed `on a practical level’ by achieving its main litigation objectives[.]” (Rancho Mirage Country Club Homeowners Assn. v. Hazelbaker (2016) 2 Cal.App.5th 252, 260 (Rancho Mirage), citing Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1574 (Heather Farms); Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 94 (Villa De Las Palmas) [affirming trial court’s determination that an association was the prevailing party because “[o]n a `practical level’ [citation], [it] `achieved its main litigation objective'”]; Almanor Lakeside Villas Owners Assn. v. Carson (2016) 246 Cal.App.4th 761, 773 (Almanor) [“[T]he test for prevailing party is a pragmatic one, namely whether a party prevailed on a practical level by achieving its main litigation objectives.”].)

II.
Standard of Review
On appeal, the Association’s sole contention is that the trial court “incorrectly concluded that the [Plaintiffs] were the prevailing parties in this action, and that [the Association] was not the prevailing party.”[3] It does not challenge the reasonableness of the fee amount.

We review the trial court’s determination of the prevailing party under the Davis-Stirling Act for abuse of discretion. (Villa De Las Palmas, supra, 33 Cal.4th at p. 94; Rancho Mirage, supra, 2 Cal.App.5th at p. 260; Almanor, supra, 246 Cal.App.4th at p. 774; Heather Farms, supra, 21 Cal.App.4th at p. 1574.) “`”`The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced from the facts, the reviewing court has no authority to substitute its decision for that of the trial court.'”‘” (Rancho Mirage, supra, at pp. 260-261.)

The Association argues we should apply de novo review because the “determination of the legal basis for an attorney fee award is a question of law, reviewed de novo.”[4] We disagree. There is no dispute as to the “legal basis” for the court’s attorney fee award. Both parties sought an award of attorney fees as the prevailing party under section 5975, subdivision (c). On appeal, both parties agree section 5975, subdivision (c) provides the statutory basis for the prevailing party to recover attorney fees. The Association’s dispute is not with the legal basis for the trial court’s attorney fee award, but with the “factual underpinnings” of the court’s determination that Plaintiffs prevailed in this action.

III.
No Abuse of Discretion in Trial Court’s Determination of Prevailing Party
In determining the prevailing party under the Davis-Stirling Act, “the trial court should `compare the relief awarded on the [ ] claim or claims with the parties’ demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources. The prevailing party determination is to be made . . . by “a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions.”‘” (Almanor, supra, 246 Cal.App.4th at p. 774, citing Hsu, supra, 9 Cal.4th at p. 876.)

The trial court engaged in that comparative analysis and determined that “Plaintiffs’ main objective in filing suit was to require the Association to comply with . . . [the CC&Rs] before proceeding with the installation of the traffic signal.” The court further found that Plaintiffs succeeded in their objective. By obtaining a TRO and a preliminary injunction, Plaintiffs compelled the Association to “immediately . . . obtain the written consent of its members” and were therefore “successful in their attempt to have the Association comply with the CC&Rs before installing the traffic signal.” Accordingly, the court determined Plaintiffs were the prevailing parties entitled to their reasonable attorney fees.

We will not disturb the trial court’s determination absent a clear showing of an abuse of discretion. (Villa De Las Palmas, supra, 33 Cal.4th at p. 94; Rancho Mirage, supra, 2 Cal.App.5th at p. 260; Almanor, supra, 246 Cal.App.4th at p. 774; Heather Farms, supra, 21 Cal.App.4th at p. 1574.) It is the Association’s burden to demonstrate the trial court abused its discretion by “`”`exceed[ing] the bounds of reason.'”‘” (Rancho Mirage, supra, at p. 260.) However, rather than presenting their appeal under the applicable standard of review, the Association continues to press their “respectful disagreement with the factual foundation” for the trial court’s conclusion “that the [P]laintiffs’ primary objective was met in this case.”

It argues the record does not support the trial court’s finding that Plaintiffs’ litigation objective was to obtain membership approval before installation of the traffic lights. It contends that “Plaintiffs’ own pleadings and motions in this case reveal that their singular goal in this litigation was to try to prevent the construction of a traffic signal next to their home.” It further contends “[t]he only remedy which Plaintiffs sought for Breach of Governing Documents was money.” Thus, the Association argues that since Plaintiffs failed to stop the construction of the traffic signal and failed to obtain any monetary relief, Plaintiffs were not the prevailing parties “as a matter of law.” We disagree.

First, the Association’s arguments ignore the governing standard of review. In deciding whether the trial court abused its discretion, we are bound by the substantial evidence rule. (Salehi, supra, 200 Cal.App.4th at p. 1154.) We presume the trial court’s judgment is correct, with “`”all intendments and presumptions . . . indulged to support the judgment[.]”‘” (Ibid.) “`”[T]he trial court’s resolution of any factual disputes arising from the evidence is conclusive.”‘” (Ibid.) “[W]e do not substitute our judgment for that of the trial court when more than one inference can be reasonably deduced from the facts.” (Almanor, supra, 246 Cal.App.4th at p. 776.)

Second, the record simply belies the Association’s contentions and demonstrates the trial court’s determination that Plaintiffs prevailed on a practical level was well within the bounds of reason. As set forth in the complaint, Plaintiffs’ primary cause of action was for breach of the governing documents, wherein they alleged the Association breached the CC&Rs and exceeded its authority in failing to request a vote and obtain majority approval from its members before taking actions to install the traffic lights, including the expenditure of Association funds. In seeking a TRO, Plaintiffs argued the Association had “completely ignored” and “disregarded” the CC&Rs and its actions should be enjoined until the rights and responsibilities of the parties under the CC&Rs could be judicially determined.

In seeking a preliminary injunction, Plaintiffs again made clear their objective: “[T]he Association approved . . . the construction of traffic signals at Gates 2 and 6 improperly because the Association did not seek a vote of the Members of the Association. [Plaintiffs’] ultimate goal in this Action is not to prevent the construction of the [traffic lights]. It is to compel the Association to submit this project to a vote of the Members and to let them decide. This authorizing procedure is required by the CC&Rs, Civil Code section 5605, . . . . If the Members decided to approve the project, Plaintiffs, as part of the Association, must live with that decision. Plaintiffs in this Motion [for a preliminary injunction] seek only to preserve the Status Quo until that vote can be had.” (Italics added.)

Further still, Plaintiffs asserted the burden of an injunction on the Association was “miniscule” because “it can simply hold a vote of the Members for the [installation of the traffic lights], vitiating an injunction.” (Italics added.) Promptly after the issuance of the preliminary injunction, the Association did just that. It put the matter to a vote and obtained majority approval from its members for the traffic lights and, on the basis of that material change in facts, the court granted the Association’s motion to dissolve the preliminary injunction. Only after the Association came into compliance with the CC&Rs did Plaintiffs voluntarily dismiss their entire action for mootness.

The Association argues, however, that Plaintiffs’ voluntary dismissal of the action, without any finding of liability against it, compels the conclusion that it is the prevailing party, as a matter of law. In support of this argument, the Association relies on the statutory definition of “prevailing party” under the general cost statute of Code of Civil Procedure section 1032, subdivision (a)(4), which provides that a “`[p]revailing party'” includes “a defendant in whose favor a dismissal is entered[.]” (Code. Civ. Proc. § 1032, subd. (a)(4).) But “the premise for this argument, that a litigant who prevails under the cost statute is necessarily the prevailing party for purposes of attorney fees, has been uniformly rejected by the courts of this state.” (Heather Farms, supra, 21 Cal.App.4th at p. 1572.) And as noted by the Heather Farms court, “Code of Civil Procedure section 1032, subdivision (a) only defines `”[p]revailing party”‘ as the term is used `in [that] section.’ It does not purport to define the term for purposes of other statutes.” (Ibid.) Moreover, elsewhere in its opening brief,[5] citing Heather Farms, the Association agrees the prevailing party under section 5975, subdivision (c), is determined by the pragmatic test of identifying “which party has prevailed on a `practical level.'”

The Association also relies on Coltrain v. Shewalter (1998) 66 Cal.App.4th 94 (Coltrain) to argue Plaintiffs’ voluntary dismissal of the action makes it the prevailing party. But Coltrain does not help advance the Association’s argument. There, the trial court awarded attorney fees to defendants as “a prevailing defendant” under Code of Civil Procedure, section 425.16, subdivision (c), the fee-shifting provision of the anti-SLAPP statute. (Coltrain, supra, at p. 100.) Although concluding the trial court erroneously applied the standard under Code of Civil Procedure section 1032, subdivision (a)(4), the Court of Appeal affirmed the fee award. (Id. at p. 107.) In doing so, the Court of Appeal held that “where the plaintiff voluntarily dismisses an alleged SLAPP suit while a special motion to strike is pending, the trial court has discretion to determine whether the defendant is the prevailing party for purposes of attorney[ ] fees under Code of Civil Procedure section 425.16, subdivision (c). In making that determination, the critical issue is which party realized its objectives in the litigation.” (Ibid., italics added.)

The Coltrain court rejected “defendants’ contention that a voluntary dismissal while a special motion to strike is pending should automatically entitle a defendant to attorney’s fees.” (Coltrain, supra, 66 Cal.App.4th at p. 107.) Rather, the court noted that “regardless of whether the action is a SLAPP suit or not, the plaintiff may have good faith reasons for the dismissal that have nothing to do with oppressing the defendant or avoiding liability for attorney’s fees.” (Ibid.) The Coltrain court also reiterated what the California Supreme Court has previously said on this subject: “`In particular, it seems inaccurate to characterize the defendant as the “prevailing party” if the plaintiff dismissed the action only after obtaining, by means of settlement or otherwise, all or most of the requested relief, or if the plaintiff dismissed for reasons, such as the defendant’s insolvency, that have nothing to do with the probability of success on the merits.'” (Coltrain, supra, 66 Cal.App.4th at p. 103, quoting Santisas v. Goodin (1998) 17 Cal.4th 599, 621-622.)

Here, the trial court acknowledged that “Plaintiffs eventually dismissed their claims without prejudice” and concluded “such conduct does not deprive them of prevailing party status.” It is a reasonable conclusion, from the litigation history, that Plaintiffs voluntarily dismissed the action because the Association’s capitulation after issuance of the preliminary injunction had mooted their action. The court did not find and nothing in the record suggests, as the Association argues, that “[r]ather than face trial, Plaintiffs dismissed” their claims.

The Association’s reliance on Salehi, supra, 200 Cal.App.4th 1146 is similarly unhelpful. In Salehi, the plaintiff dismissed without prejudice eight of ten causes of action against her condominium association on the eve of trial because her construction expert suddenly became unavailable. (Id. at pp. 1151-1152.) The plaintiff obtained a continuance of trial on the remaining two causes of action for negligent misrepresentation and fraud, believing she would not need the expert to prove those claims. (Ibid.) Before the trial date, the association moved for attorney fees as the prevailing party on the eight dismissed causes of action. (Id. at pp. 1152-1153.) The Court of Appeal reversed the trial court’s order denying the fee award. (Id. at pp. 1155, 1162.) In doing so, the Court of Appeal concluded that “[t]he record does not suggest that [plaintiff] would have prevailed on the merits. It does not appear that she was ready to go forward procedurally and prove the case substantively.” (Id. at p. 1155.) Here, unlike Salehi, the trial court specifically found “Plaintiffs have established a reasonable probability of success on the merits of their claim for breach of the Association’s governing documents” when it issued the preliminary injunction enjoining the Association from proceeding with construction of the traffic signal at Gate 2 during the pendency of the lawsuit.

Third, the Association’s focus on Plaintiffs’ prayer for relief to argue the true intent of Plaintiffs’ action was to prevent a traffic light from being installed, not enforcement of the governing documents, is misplaced. In determining litigation success, the court respects substance rather than form. (Rancho Mirage, supra, 2 Cal.App.5th at p. 260 [“We see nothing in the Davis-Stirling Act that suggests we should give more weight to the form of a complaint . . . than to the substance of the claims asserted and relief sought, in determining whether an action is one `to enforce the governing documents’ in the meaning of section 5975.”].) A prayer is not part of a cause of action. (Berg v. Investors Real Estate Loan Co. (1962) 207 Cal.App.2d 808, 815 [“It is elementary that the prayer is no part of the statement of the cause of action [citations] and that the issues involved are determinable from the facts alleged rather than from the prayer.”].)

Moreover, while preventing the installation of the traffic light “might have been a litigation `dream'” for Plaintiffs (Ritter & Ritter, Inc. Pension & Profit Plan v. The Churchill Condominium Assn. (2008) 166 Cal.App.4th 103, 127), it does not undercut their main litigation objective of requiring the Association to comply with the CC&Rs and obtain majority approval from its members before installing the traffic light. (See ibid. [Plaintiff homeowners were determined to be prevailing party despite not achieving “litigation `dream'” of obtaining correction of building defect where they succeeded in compelling membership vote. “The fact that the membership did not vote to correct this defect in the building does not mean that the [plaintiffs] failed on their main litigation objective.”].)

In sum, we conclude the trial court’s determination that Plaintiffs prevailed on a practical level was supported by substantial evidence and well within the bounds of reason. The Association has failed to demonstrate any abuse of discretion in the court’s award of attorney fees to Plaintiffs and denial of attorney fees to it under section 5975, subdivision (c).

IV.
Association’s Remaining Arguments
A. Any Claim of Error as to Inclusion of Javaheri and Dehghani in the Fee Award Is Forfeited
The Association argues the trial court erred in awarding attorney fees to Javaheri and Dehghani because they “are not the owners of the property” and therefore have “no right to enforce the CC&Rs.” As such, the Association argues, Javaheri and Dehghani “cannot be `prevailing parties’ in an action to enforce the governing documents of the Fairbanks Ranch Association.”

In support of this claim of error, the Association dedicates two short paragraphs in their opening brief, cites to no legal authorities whatsoever for their contentions, and provides unhelpful record citations. The record citations merely refer this court back to the Association’s Memorandum of Points and Authorities in Opposition to Plaintiffs’ Notice of Motion for Attorneys’ Fees and Costs, to pages which contain almost verbatim the same two short paragraphs as in their opening brief, and to a Notice of Lodgment which indicates the Fairbanks Ranch CC&Rs were at some point lodged as an exhibit with the trial court. Having not seen the CC&Rs, we do not know what the governing documents provide.

The Association also fails to provide any discussion of how the inclusion of Javaheri and Dehghani in the fee award resulted in prejudice.[6] Indeed, it does not even challenge the reasonableness of the fee amount.

“To prevail on appeal, an appellant must establish both error and prejudice from that error. [Citation.] In order to demonstrate error, an appellant must supply the reviewing court with some cogent argument supported by legal analysis and citation to the record. Rather than scour the record unguided, we may decide that the appellant has forfeited a point urged on appeal when it is not supported by accurate citations to the record. [Citations.] Similarly, we may disregard conclusory arguments that are not supported by pertinent legal authority.” (WFG National Title Ins. Co. v. Wells Fargo Bank, N.A. (2020) 51 Cal.App.5th 881, 894 (WFG).)

Simply put, the reviewing court is not required to develop the Association’s arguments or search the record for supporting evidence. For these reasons, we conclude the Association has forfeited the claim of any prejudicial error as it relates to the inclusion of Javaheri and Dehghani in the fee award. (WFG, supra, 51 Cal.App.5th at p. 894.)

B. Section 1717 Does Not Provide the Association with Any Basis for Recovering Attorney Fees Pursuant to the CC&Rs
In addition to section 5975, subdivision (c), the Association also sought an award of attorney fees pursuant to the CC&Rs, which provides the Association would be entitled to reimbursement of its legal expenses if a member sued it and the Association was “`successful or sustained in its position in such suit.’ “Although not raised in the trial court or in its opening brief, the Association argues in its reply brief that its “claim in this case that it is the prevailing party is based upon a contractual right to attorneys’ fees pursuant to Civil Code section 1717[.]” Although we do not consider arguments raised for the first time in a reply brief absent good cause (see footnote 3 ante), we quickly dispose of the Association’s argument.

Section 1717 provides that “[i]n any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, . . . shall be entitled to reasonable attorney’s fees in addition to other costs.” (§ 1717, subd. (a).) Section 1717, subdivision (b)(2) creates an exception to the recovery of attorney fees under this statute, and states that “[w]here an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.” (§ 1717, subd. (b)(2).) That exception codifies the holding in International Industries, Inc. v. Olen (1978) 21 Cal.3d 218, in which the Supreme Court “determined that a defendant could not recover attorney fees under section 1717 when the plaintiff voluntarily dismissed the action before trial.” (Hsu, supra, 9 Cal.4th at pp. 872-873.)

Thus, notwithstanding the trial court’s determination that the Association was not the prevailing party, and we find no abuse in that determination, the Association may not recover attorney fees under section 1717, subdivision (b)(2), since Plaintiffs voluntarily dismissed their lawsuit.

DISPOSITION
The judgment is affirmed. Plaintiffs are entitled to their costs on appeal.

McCONNELL, P. J. and DATO, J., concurs.

[1] All further undesignated statutory references are to the Civil Code, unless specified otherwise.

[2] Plaintiffs had previously moved on May 14, 2019 for an order dismissing the entire action “for mootness” and a determination that they were the “prevailing party” entitled to attorney fees. The court denied Plaintiffs’ motion because it was not persuaded the statute cited by Plaintiffs authorized dismissal and stated Plaintiffs may seek dismissal of their remaining claims under Code of Civil Procedure section 581, subdivision (b). The court also denied Plaintiffs’ request for a determination of prevailing party as premature because judgment had not been entered.

[3] The Association raises, for the first time in its reply brief, that the trial court abused its discretion by granting Plaintiffs’ motion for preliminary injunction. “Normally, a contention may not be raised for the first time in a reply brief.” (People v. Peevy (1998) 17 Cal.4th 1184, 1206; accord People v. Silveria and Travis (2020) 10 Cal.5th 195, 255 [“`”[i]t is axiomatic that arguments made for the first time in a reply brief will not be entertained because of the unfairness to the other party”‘”].) We do not consider arguments raised for the first time in the reply brief without a showing of good cause, which the Association did not make. (Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 894, fn. 10.)

[4] The Association cites to Conservatorship of Whitley (2010) 50 Cal.4th 1206 (Whitley) and Connerly v. State Personnel Bd. (2006) 37 Cal.4th 1169 (Connerly) to argue for de novo review. These cases are inapposite because they involved “`”the determination of whether the criteria for an award of attorney fees and costs . . . have been satisfied amounts to statutory construction and a question of law.”‘” (Whitley, at pp. 1213-1214, italics added [addressing whether a litigant’s nonpecuniary interests can disqualify him from eligibility for attorney fees under Code of Civil Procedure section 1021.5], quoting Connerly, at p. 1175 [determining whether the California Business Council can be assessed attorney fees under section 1021.5 as an “`opposing part[y]’ within the meaning of that statute”].) There is no issue of statutory construction here.

[5] On March 16, 2021, the Association filed a Notice of Errata regarding its opening brief, indicating that it “inadvertently listed incorrect citations to the record” and filed with the notice, a “corrected copy of Appellant’s Opening Brief” which “corrects such citation errors and makes no other changes other than to the form of the citations to the record.” On March 18, 2021, we issued notice that the Association’s Notice of Errata will be treated as a motion for leave to file an amended appellant’s opening brief and will be considered concurrently with the appeal. We hereby grant the Association’s unopposed motion for leave to file an amended opening brief.

[6] When the Association raised this standing argument at the hearing on attorney fees, Plaintiffs’ counsel argued “all litigation efforts in this case are consolidated . . . there’s [no] reasonable way to chop up the plaintiffs in this case.” The trial judge asked the Association, the work for all plaintiffs are “all intertwined, though, aren’t they?” Despite these questions being raised below, the Association does not address them on appeal.

 

Issakhani v. Shadow Glen Homeowners Association, Inc.

Issakhani v. Shadow Glen Homeowners Association, Inc.

(2021) 63 Cal.App.5th 917.

Court of Appeals of California, Second District, Division Two

April 30, 2021

No. B301746

Summary by Jillian M. Wright, Esq.:

A pedestrian jaywalked across a five-lane highway at night and was struck by a car. The pedestrian sued the association she was trying to visit for negligence and premises liability for having too few onsite parking spaces for guests. This appeal therefore presents the question: Does a landowner owe a duty of care to invitees to provide adequate onsite parking, either (1) under common law principles, or (2) by virtue of a 1978 city ordinance that rezoned the complex’s specific parcel for multifamily dwellings and conditioned that rezoning on providing a specific number of guest parking spaces? The court concluded that the answer to both questions is “no.”

TAKEAWAY: Associations do not have a duty to provide onsite guest parking for invitees. Even if a city ordinance or statute requires an association to establish a certain number of guest parking spaces, the association is not liable for any harm that results from its lack of guest parking.

***End Summary***

63 Cal.App.5th 917 (2021)

278 Cal. Rptr. 3d 270

ANAEIS ISSAKHANI, Plaintiff and Appellant,
v.
SHADOW GLEN HOMEOWNERS ASSOCIATION, INC., Defendant and Respondent.

APPEAL from a judgment of the Superior Court of Los Angeles County, Super. Ct. No. BC623438, Melvin D. Sandvig, Judge. Affirmed.

Gusdorff Law, Janet Gusdorff; Aghabegian & Associates and Alan Aghabegian, for Plaintiff and Appellant.

Horvitz & Levy, Daniel J. Gonzalez and Mitchell C. Tilner, for Defendant and Respondent.

922*922 OPINION
HOFFSTADT, J.—

A pedestrian who decided to jaywalk across a five-lane highway at night was struck by a car. The pedestrian sued the owner of the condominium complex she was trying to visit for negligence and premises liability for having too few onsite parking spaces for guests. This appeal therefore presents the question: Does a landowner owe a duty of care to invitees to provide adequate onsite parking, either (1) under common law principles, or (2) by virtue of a 1978 city ordinance that rezoned the complex’s specific parcel for multifamily dwellings and conditioned that rezoning on providing a specific number of guest parking spaces? We conclude that the answer to both questions is “no.” We accordingly affirm the trial court’s grant of summary judgment to the condominium complex.

FACTS AND PROCEDURAL BACKGROUND
I. Facts
After nightfall on June 10, 2014, Anaeis Issakhani (plaintiff) parked her car on the far side of a five-lane street. Rather than walk to the next marked crosswalk several hundred feet away, she jaywalked. She was struck by a car, and sustained a traumatic brain injury along with several skull fractures.

At the time she was struck, plaintiff was crossing the street to get to the Shadow Glen condominium complex where her friend lived. The complex has 170 onsite parking spaces, and they are marked as “Reserved” for residents or as “Visitor” for guests. Before parking on the street, plaintiff had tried to find a parking space onsite; specifically, she followed another car through the complex’s security gate and then drove around for two or three minutes before deciding there was no available space.

The Shadow Glen complex was built in 1979 as a 68-unit housing development in Sun Valley, California. Because the parcel was originally zoned for single and dual family housing, the complex’s original developer applied to the City of Los Angeles (the City) to have the parcel rezoned as a multiple dwelling zone. As required by the City’s municipal code, the developer’s application was considered by the City’s planning department, by a hearing examiner, by the City’s planning commission, and ultimately by the Los Angeles City Council (City Council). Because the City’s zoning map is set forth in a City ordinance, a City Council-enacted ordinance is required to rezone a parcel.

923*923 In enacting ordinance No. 151,411, the City Council granted the developer’s application on five conditions[1] that the City deemed “necessary to protect the best interests of and assure a development more compatible with the surrounding neighborhood”—namely, that (1) “[n]o building located on the site … exceed two stories or 25 feet in height,” (2) “[a]ll open areas not used for buildings, driveways, parking areas, recreational facilities, or walks … be attractively landscaped” and “equipped with automatic sprinklers,” (3) “[a] 10-foot landscaped buffer setback … be provided along [the five-lane street],” and populated with trees of a specified height and at a specified density, (4) “[a]ll lighting … be directed onto the site … to eliminate any glare to adjoining residential properties,” and (5) “guest parking” be “provide[d]” “at a ratio of one-half space per dwelling unit in excess” of that otherwise required by the municipal code. Because the complex was to have 68 units, ordinance No. 151,411 requires 34 “guest parking” spaces.

After construction was completed, the City issued a certificate of occupancy that reflected 170 parking spaces, which was 13 spaces more than required by the municipal code and ordinance No. 151,411.

By the time of the accident, the complex still had 170 parking spaces but only six of them were marked as “Visitor” spaces.

II. Procedural History
On June 10, 2016, plaintiff sued the Shadow Glen Homeowners Association, Inc. (the Association), which is the current owner of the Shadow Glen complex. In the operative, second amended complaint, plaintiff asserts claims for negligence and premises liability. Both claims rest on the premise that the Association’s failure to maintain the number of guest parking spaces mandated by ordinance No. 151,411 “created a foreseeable risk of harm for the Condominium’s guests.”

The Association moved for summary judgment. Following briefing and a hearing, the trial court granted summary judgment on the grounds that the Association owed plaintiff no duty under the common law or under ordinance No. 151,411.[2]

Following the entry of judgment, plaintiff filed this timely appeal.

924*924 DISCUSSION
Plaintiff argues that the trial court erred in granting summary judgment for the Association. A defendant is entitled to summary judgment if it can “show that there is no triable issue as to any material fact.” (Code Civ. Proc., § 437c, subd. (c).)[3] The defendant bears the initial burden of establishing that the plaintiff’s cause of action has “no merit” by showing that the plaintiff cannot establish “[o]ne or more elements of [her] cause of action.” (Code Civ. Proc., § 437c, subds. (o) & (p)(2).) If this burden is met, the “burden shifts” to the plaintiff “to show that a triable issue of one or more material facts exists as to that cause of action….” (Id., subd. (p)(2); see Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849 [107 Cal.Rptr.2d 841, 24 P.3d 493].)

Plaintiff’s claims for negligence and premises liability have the same elements—namely, (1) “a legal duty of care,” (2) “breach of that duty,” and (3) “proximate cause resulting in injury.” (Kesner v. Superior Court (2016) 1 Cal.5th 1132, 1158 [210 Cal.Rptr.3d 283, 384 P.3d 283] (Kesner).) Thus, if the Association does not owe plaintiff a duty of care, it is entitled to summary judgment.

We independently decide whether summary judgment is appropriate and whether a duty of care exists. (Jacks v. City of Santa Barbara (2017) 3 Cal.5th 248, 273 [219 Cal.Rptr.3d 859, 397 P.3d 210] [summary judgment]; Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 57 [77 Cal.Rptr.2d 709, 960 P.2d 513] [duty of care].) We accordingly owe no deference to the trial court’s rulings or reasoning. (Burgueno v. Regents of University of California (2015) 243 Cal.App.4th 1052, 1057 [197 Cal.Rptr.3d 44].)

I. Analysis of Duty of Care
A duty of care exists when one person has a legal obligation to prevent harm to another person, such that breach of that obligation can give rise to liability. (Brown v. USA Taekwondo (2021) 11 Cal.5th 204, 209 [___ Cal.Rptr.3d ___, 483 P.3d 159] (Brown); Paz v. State of California (2000) 22 Cal.4th 550, 559 [93 Cal.Rptr.2d 703, 994 P.2d 975] (Paz); Coffee v. McDonnell-Douglas Corp. (1972) 8 Cal.3d 551, 559, fn. 8 [105 Cal.Rptr. 358, 503 P.2d 1366]; Annocki v. Peterson Enterprises, LLC (2014) 232 Cal.App.4th 32, 37 [180 Cal.Rptr.3d 474] (Annocki).) Whether a duty of care exists is not a matter of plucking some immutable truth from the ether; instead, the 925*925 existence of a particular duty of care reflects a determination that the “`”sum total”‘” of “`”considerations of [public] policy [should] lead the law to say that the particular plaintiff is entitled to protection.”‘” (Paz, at p. 559; see Cabral v. Ralphs Grocery Co. (2011) 51 Cal.4th 764, 771 [122 Cal.Rptr.3d 313, 248 P.3d 1170] (Cabral); Scott v. Chevron U.S.A. (1992) 5 Cal.App.4th 510, 515 [6 Cal.Rptr.2d 810].)

In determining whether public policy warrants the creation of a duty of care, courts can look to the public policy (1) found in the common law (California Service Station etc. v. American Home Assurance Co. (1998) 62 Cal.App.4th 1166, 1175 [73 Cal.Rptr.2d 182] (California Service Station) [“The courts have always had the responsibility to define negligence duties….”]), and (2) embodied in statutes, regulations, and the like. (Vesely v. Sager (1971) 5 Cal.3d 153, 164 [95 Cal.Rptr. 623, 486 P.2d 151] (Vesely) [“A duty of care … may … be found in a legislative enactment”], overruled on other grounds as stated in Ennabe v. Manosa (2014) 58 Cal.4th 697, 707 [168 Cal.Rptr.3d 440, 319 P.3d 201]; J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 803 [157 Cal.Rptr. 407, 598 P.2d 60] [“A duty of care may arise through statute …”].)

A. Common law-based duty
An owner of land has a common law duty “to maintain land in [its] possession and control in a reasonably safe condition” “as to avoid exposing others to an unreasonable risk of injury.” (See Ann M. v. Pacific Plaza Shopping Center (1993) 6 Cal.4th 666, 674 [25 Cal.Rptr.2d 137, 863 P.2d 207], overruled on other grounds as stated in Reid v. Google, Inc. (2010) 50 Cal.4th 512, 527 [113 Cal.Rptr.3d 327, 235 P.3d 988]; Barnes v. Black (1999) 71 Cal.App.4th 1473, 1478 [84 Cal.Rptr.2d 634] (Barnes); Alcaraz v. Vece (1997) 14 Cal.4th 1149, 1156 [60 Cal.Rptr.2d 448, 929 P.2d 1239]; see generally Civ. Code, § 1714, subd. (a) [codifying this common law duty].) Because plaintiff alleges that she was struck by a car in the street due to the Association’s failure to provide enough onsite parking for guests, the question in this case becomes: Does the landowner’s common law duty of care entail protecting an invitee against injuries incurred offsite due to an alleged deficiency on the landowner’s property?[4]

926*926 It certainly can. The landowner’s “`duty of care encompasses a duty to avoid exposing persons to risks of injury that occur off site if the landowner’s property is maintained in such a manner as to expose persons to an unreasonable risk of injury offsite.'” (Kesner, supra, 1 Cal.5th at p. 1159, quoting Barnes, supra, 71 Cal.App.4th at p. 1478, italics added; see McDaniel v. Sunset Manor Co. (1990) 220 Cal.App.3d 1, 7 [269 Cal.Rptr. 196] (McDaniel) [“The fact that the injuries occurred on the adjacent property does not automatically bar recovery”].) But whether it should in a specific circumstance turns on the considerations articulated by our Supreme Court in Rowland v. Christian (1968) 69 Cal.2d 108, 113 [70 Cal.Rptr. 97, 443 P.2d 561] (Rowland), partially superseded by statute on other grounds as stated in Smith v. Freund (2011) 192 Cal.App.4th 466, 473, fn. 5 [121 Cal.Rptr.3d 427]. (Barnes, at p. 1479 [“The Rowland factors determine the scope of a duty of care whether the risk of harm is situated on site or off site”]; cf. Brown, supra, 11 Cal.5th at p. 217 [Rowland factors “not designed as a freestanding means of establishing duty” in a specific circumstance where, unlike here, there is no underlying duty running between the parties that might apply].)

We conclude that a landowner’s common law duty of care does not encompass a duty to provide onsite parking for invitees in order to protect them from traffic accidents occurring offsite as they travel to the premises, and we do so for two reasons: (1) such a duty is foreclosed by precedent, and (2) even if not foreclosed, the so-called Rowland factors counsel against such a duty.

1. Precedent
In Vasilenko v. Grace Family Church (2017) 3 Cal.5th 1077 [224 Cal.Rptr.3d 846, 404 P.3d 1196] (Vasilenko), our Supreme Court held that “a landowner who does no more than site and maintain [an offsite] parking lot that requires invitees to cross a public street to reach the landowner’s premises does not owe a duty to protect those invitees from the obvious dangers of the public street.” (Id. at p. 1092; see id., at p. 1097.)

Vasilenko forecloses imposing a duty upon a landowner to provide invitees with onsite parking in order to protect them from the dangers of crossing nearby streets to get to the property. If, as plaintiff contends, a landowner had a duty to provide onsite parking to invitees, the landowner in Vasilenko would have automatically breached that duty when it directed its invitees to offsite parking facilities; there would have accordingly been no reason for Vasilenko to examine whether, under the Rowland factors, a landowner had a duty to safely shepherd those invitees onto its property from those facilities. In other words, the only reason Vasilenko exists is because a landowner owes no duty to provide onsite parking to invitees. Vasilenko even made this explicit: 927*927 “[L]andowners are not required to provide parking for their invitees.” (Vasilenko, supra, 3 Cal.5th at p. 1090.)

What is more, Vasilenko is merely the most recent in a longer line of cases that have consistently refused to impose a duty upon landowners to provide onsite parking to protect their invitees from the dangers of crossing nearby streets to access the property. In McGarvey v. Pacific Gas & Electric Co. (1971) 18 Cal.App.3d 555 [95 Cal.Rptr. 894] (McGarvey), the plaintiff was injured when one of the defendant’s employees was making a U-turn on an adjacent street, a maneuver necessitated by the absence of any onsite parking for employees. McGarvey rejected the plaintiff’s argument that the defendant had “a duty … to provide … adequate [onsite] automobile parking facilities for all employees” and “customers.” (Id. at pp. 558, 562.) In Seaber v. Hotel Del Coronado (1991) 1 Cal.App.4th 481 [2 Cal.Rptr.2d 405] (Seaber), the plaintiff was killed in a crosswalk as he traveled from a hotel’s offsite parking lot to the hotel, a task necessitated by the absence of any onsite guest parking. Seaber rejected plaintiff’s argument that the hotel was liable for plaintiff’s death, a holding that would make no sense if the hotel had a precursor duty to provide onsite parking for its guests. (Id. at pp. 484-485, 492-493.)

Although a landowner’s duty of care encompasses a more specific duty not to maintain conditions on its property that exacerbate the dangers of invitees entering or exiting the property (Swanberg v. O’Mectin (1984) 157 Cal.App.3d 325, 330 [203 Cal.Rptr. 701] [obstructing shrubbery makes exiting the property more dangerous]; Annocki, supra, 232 Cal.App.4th at pp. 38-39 [layout of onsite parking lot encourages invitees to make a dangerous left turn when exiting the property]; Constantinescu v. Conejo Valley Unified School Dist. (1993) 16 Cal.App.4th 1466, 1473-1474 [20 Cal.Rptr.2d 734] [layout of onsite parking lot creates “`snarl-ups'” and congestion that make nearby streets more dangerous (italics omitted)]), McDaniel, Seaber and Vasilenko necessarily reject the notion that the absence of onsite parking by itself amounts to a “condition” on the property that exacerbates the offsite danger to invitees and gives rise to an actionable duty.

2. Analysis of the Rowland factors
The so-called Rowland factors fall into two broad categories— namely, (1) foreseeability-related factors, and (2) other “public policy factors.” (Cabral, supra, 51 Cal.4th at pp. 774, 781.) There are three foreseeability-related factors; they are (1) “the foreseeability of harm to the plaintiff,” (2) “the degree of certainty that the plaintiff suffered injury,” and (3) “the closeness of the connection between the defendant’s conduct and the injury suffered.” (Rowland, supra, 69 Cal.2d at p. 113; see Cabral, at p. 774.) 928*928 In assessing these foreseeability-related factors, the focus is general rather than specific: We are to ask whether the “kind of harm experienced” is “generally” foreseeable from the “category of negligent conduct at issue” rather than “whether a particular plaintiff’s injury was reasonably foreseeable in light of a particular defendant’s conduct.” (Ballard v. Uribe (1986) 41 Cal.3d 564, 572, fn. 6 [224 Cal.Rptr. 664, 715 P.2d 624].) There are four public policy factors; they are (1) “the policy of preventing future harm,” (2) “the moral blame attached to the defendant’s conduct,” (3) “the extent of the burden to the defendant and [the] consequences to the community of imposing a duty to exercise care with resulting liability for breach,” and (4) “the availability, cost, and prevalence of insurance for the risk involved.” (Rowland, at p. 113; see Cabral, at p. 781.)

The foreseeability-related factors counsel against imposing a duty upon landowners to provide onsite parking to avoid injury to invitees as they travel from offsite parking locales. To be sure, as in Vasilenko, the first two foreseeability factors favor imposing a duty to provide onsite parking. That is because it is “foreseeable that an invitee” forced to park offsite due to the lack of sufficient onsite parking—like the invitee in Vasilenko who was “directed to park in an overflow lot on the other side of a public street”— “might be struck by oncoming traffic while crossing the street” and because the plaintiffs in both cases certainly suffered injury when struck by cars. (Vasilenko, supra, 3 Cal.5th at p. 1085.) However, also as in Vasilenko and as plaintiff concedes, the third foreseeability factor counsels strongly against imposing a duty. That is because the “connection between the [landowner-]defendant’s conduct and the injury suffered” is “attenuated” rather than “close.” (Id., at pp. 1083, 1086.) If, as in Vasilenko, the connection was too attenuated because the invitee’s injury was most directly the product of his “decision as to when, where, and how to cross” the street as well as the driver’s “ability to see and react to crossing pedestrians” (id., at p. 1086), the connection is even more attenuated in this case, where it was the visitor’s decision—rather than the landowner’s—to select an offsite parking space on the far side of a busy street.

The public policy factors also counsel against imposing a duty upon landowners to provide onsite parking to avoid injury to invitees as they travel from offsite parking locales. Imposing a duty to provide sufficient onsite parking to accommodate all invitees would not be especially effective in preventing future harm. Most commercial and residential properties actively used by people consist of structures along with a finite number of parking spaces. Short of requiring landowners to bulldoze structures or excavate and build underground structures to create more parking spaces, imposing a duty upon landowners to set aside enough parking spaces for all invitees is likely to do nothing more than shift the identity of who is forced to park offsite— instead of invitees, it may instead be residents and employees who have to 929*929 park offsite. But shifting the identity of who has to park offsite would not do much to prevent future harm in the aggregate. Conversely, the persons best suited to prevent future harm from street-crossing accidents, Vasilenko noted, are the “drivers[] and invitees themselves.” (Vasilenko, supra, 3 Cal.5th at p. 1090.) Because there are few “reasonable ameliorative steps” available to landowners to create more parking spaces, landowners are not “particularly blameworthy” for failing to take them. (Id. at p. 1091.) Imposing a duty to provide sufficient onsite parking for all invitees would also impose an unacceptably heavy burden, as every business and every multifamily residential dwelling complex would be required to provide parking for every guest, or else face liability for damages incurred when those guests cannot find onsite parking and are injured when trying to access the property from offsite. If, as in Vasilenko, requiring landowners “to continuously monitor the dangerousness of the abutting street and other streets in the area,” “to relocate their [offsite] parking lots as conditions change,” and potentially “to hire employees to assist invitees with crossing the street” was considered a “significant burden[]” (id. at p. 1090), the burden imposed by the proffered duty here—that is, reconfiguring the property to accommodate parking for every guest or face liability for all accidents arising from their offsite parking—is massive. (See McGarvey, supra, 18 Cal.App.3d at p. 562 [noting similarly unachievable burden].) Indeed, it is this type of “`”potentially infinite liability”‘” that “`the concept of duty'” is designed to “`limit.'” (Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 397 [11 Cal.Rptr.2d 51, 834 P.2d 745].) Lastly, because insurance could be available to the landowner, the invitee, and the driver, the insurance factor is neutral in the analysis. (Accord, Vasilenko, at p. 1091.)

Thus, even if Vasilenko’s analysis of the Rowland factors did not dictate a finding of new duty, our own independent analysis of those factors counsels that finding.

B. Statute-based duty
A duty of care can also be grounded in—and hence “borrowed” from—the public policy embodied in a legislatively enacted statute or ordinance. (Elsner v. Uveges (2004) 34 Cal.4th 915, 927 & fn. 8 [22 Cal.Rptr.3d 530, 102 P.3d 915] (Elsner); see Vesely, supra, 5 Cal.3d at p. 164.)

Plaintiff argues that the Association owes her a duty of care by virtue of the guest parking conditions set forth in ordinance No. 151,411. We reject this argument for two reasons: (1) ordinance No. 151,411 is a parcel-specific ordinance adopted as the final step of a multistep administrative procedure and is therefore incapable of forming the basis for a duty of care, and (2) the 930*930 guest parking condition of ordinance No. 151,411 was aimed at preserving the aesthetic character of the surrounding neighborhood, and not at protecting invitees from traffic accidents.

1. Ordinance No. 151,411 is a special ordinance incapable of forming the basis for a duty of care
Not all legislative enactments—that is, not all statutes and ordinances —are capable of forming the basis for a duty of care giving rise to a negligence claim.

Legislative enactments sometimes embody and implement “a `broad, generally applicable rule of conduct on the basis of general public policy.'” (Horn v. County of Ventura (1979) 24 Cal.3d 605, 613 [156 Cal.Rptr. 718, 596 P.2d 1134] (Horn), quoting San Diego Building Contractors Assn. v. City Council of San Diego (1974) 13 Cal.3d 205, 212-213 [118 Cal.Rptr. 146, 529 P.2d 570].) When they do, they set forth the same type of “fundamental policy decisions” that are capable of forming the basis for a duty of care. (California Service Station, supra, 62 Cal.App.4th at p. 1176 [“The creation of a negligence duty of care involves fundamental policy decisions”].)

Other times, however, legislative enactments embody no fundamental policy decision. One such instance is where, as here, the enactment applies to a single parcel of property.[5]

There is no question that the City Council’s rezoning the Shadow Glen parcel was “a legislative act” because it was effectuated by means of an ordinance amending the City’s municipal code. (Arnel Development Co. v. City of Costa Mesa (1980) 28 Cal.3d 511, 516 [169 Cal.Rptr. 904, 620 P.2d 565]; Johnston v. Claremont (1958) 49 Cal.2d 826, 835 [323 P.2d 71], overruled on other grounds as stated in Associated Home Builders etc., Inc. v. City of Livermore (1976) 18 Cal.3d 582, 596 [135 Cal.Rptr. 41, 557 P.2d 473]; Mountain Defense League v. Board of Supervisors (1977) 65 Cal.App.3d 723, 728 [135 Cal.Rptr. 588]; Federation of Hillside & Canyon Assns. v. City of Los Angeles (2004) 126 Cal.App.4th 1180, 1195 [24 Cal.Rptr.3d 543].) But that act embodied no generally applicable, fundamental public policy. Instead, 931*931 ordinance No. 151,411 was a parcel-specific enactment that served as the culmination of a process of an internal, parcel-specific administrative review. The original developer of the Shadow Glen complex filed an application to rezone its parcel of property (and only its parcel of property), and that application proceeded through several levels of administrative review by City officials until the City Council, as the final level of that review, approved the developer’s rezoning application. Although the City Council’s mechanism for doing so was through enacting ordinance No. 151,411, that was necessary because the City’s zoning map was set forth in an ordinance (at the time, L.A. Mun. Code, § 12.04) and thus could be modified only through another ordinance. However, the mechanism of enacting an ordinance did not alter the fundamental character of the City Council’s act as embodying merely a parcel-specific policy that was tied to the “`facts peculiar to the individual case.'” (See Horn, supra, 24 Cal.3d at p. 613; Anaheim Redevelopment Agency v. Dusek (1987) 193 Cal.App.3d 249, 258 [239 Cal.Rptr. 319].)

Because ordinance No. 151,411 embodies no “general public policy,” it cannot be used as a fulcrum to create a duty of care.

2. Ordinance No. 151,411 was not designed to protect invitees against injuries suffered from parking offsite
Even if a statute or ordinance is designed to embody and effectuate fundamental public policy by setting forth a generally applicable rule of conduct, it can give rise to a duty of care actionable in negligence only if (1) the plaintiff invoking the statute is “`a member of the class of persons the statute [or ordinance] … was designed to protect,'” and (2) the “`harm'” the plaintiff suffered was “`one the statute [or ordinance] … was designed to prevent.'” (Ramirez v. Nelson (2008) 44 Cal.4th 908, 918 [80 Cal.Rptr.3d 728, 188 P.3d 659], quoting Stafford, supra, 33 Cal.3d at p. 324; see Nunneley v. Edgar Hotel (1950) 36 Cal.2d 493, 497-498 [225 P.2d 497] (Nunneley); Keech v. Berkeley Unified School Dist. (1984) 162 Cal.App.3d 464, 469 [210 Cal.Rptr. 7] (Keech).) Whether a statute or ordinance satisfies these requirements is a question of law. (Jacobs Farm/Del Cabo, Inc. v. Western Farm Service, Inc. (2010) 190 Cal.App.4th 1502, 1526 [119 Cal.Rptr.3d 529].)

Ordinance No. 151,411 satisfies neither of these prerequisites.

In assessing whom an ordinance was designed to protect and the harm it was designed to prevent, we apply the usual canons of statutory construction. (1300 N. Curson Investors, LLC v. Drumea (2014) 225 Cal.App.4th 325, 332 [170 Cal.Rptr.3d 173] [“The canons of statutory construction apply to local ordinances”].) We start with the text of the ordinance, and read that text “`”in the context of the statute … as a 932*932 whole.”‘” (People v. Valencia (2017) 3 Cal.5th 347, 358 [220 Cal.Rptr.3d 230, 397 P.3d 936], quoting Professional Engineers in California Government v. Kempton (2007) 40 Cal.4th 1016, 1037 [56 Cal.Rptr.3d 814, 155 P.3d 226]; see California Charter Schools Assn. v. Los Angeles Unified School Dist. (2015) 60 Cal.4th 1221, 1237 [185 Cal.Rptr.3d 556, 345 P.3d 911].) If the text does not provide a clear answer, we may also look to other “`extrinsic sources'” such as the ordinance’s legislative history. (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 531 [117 Cal.Rptr.2d 220, 41 P.3d 46].)

The condition in ordinance No. 151,411 that, as part of granting the developer’s rezoning request, required the developer to provide an additional 34 “guest parking” spaces was one of five such conditions. As noted above, the other conditions required the builder not to exceed a specified building height, to “attractively landscape” the complex’s “open areas,” to landscape a buffer setback on the main street outside the complex, and to point all lighting inward. The City specifically found that all five conditions were “necessary to protect the best interests of and assure a development more compatible with the surrounding neighborhood.” Indeed, the City’s municipal code defined a condition to rezoning—that is, a “Q classification”—as a condition “deemed necessary to protect the best interests of and assure a development more compatible with the surrounding property or neighborhood or to secure an appropriate development in harmony with the objectives of the General Plan.” As the plain text of the conditions themselves, the finding that justified them, and the codified definition of a rezoning condition all make clear, these conditions in ordinance No. 151,411—including the guest parking condition that would avoid overcrowded curbsides—were designed to preserve the residential character and aesthetics of the surrounding neighborhood. Indeed, the entire purpose of ordinance No. 151,411 was to rezone the complex’s parcel, and the chief purposes of most zoning laws are to “maint[ain] … the character of residential neighborhoods” and “`”advance aesthetic values.”‘” (Ewing v. City of Carmel-by-the-Sea (1991) 234 Cal.App.3d 1579, 1590 [286 Cal.Rptr. 382]; Echevarrieta v. City of Rancho Palos Verdes (2001) 86 Cal.App.4th 472, 478 [103 Cal.Rptr.2d 165].) What is more, the penalty for noncompliance with ordinance No. 151,411’s conditions is the imposition of administrative fines (L.A. Mun. Code, §§ 12.29, 11.2.01, 11.2.03, 11.2.04), a remedy that reinforces the notion that the developer’s duty was to the City (Selger, supra, 222 Cal.App.3d at p. 1591 [so holding]). As a result, ordinance No. 151,411 was designed to protect “the community at large” from the harm of deleterious aesthetics and degradation of the surrounding neighborhood. (Accord, Nunneley, supra, 36 Cal.2d at p. 497 [no duty where statute was “`intended to protect the interests of the … 933*933 community at large, rather than those of any particular class of individuals'”].) Nothing in ordinance No. 151,411 or its legislative history evinces any intent to protect invitees from traffic accidents that occur when they park offsite.

Plaintiff responds with three arguments.

First, she cites the section of the City’s municipal code introducing the “purpose” of the City’s zoning provisions. Among the seven general purposes of those code provisions is “to promote health, safety, and the general welfare.” (Italics added.) However, that all zoning activities by the City might be designed to further “promote … safety” in the general sense is irrelevant. What matters is whether the class of plaintiffs and the harm are “of the precise nature [the] statute [or ordinance at issue] was designed [to protect and] to prevent,” respectively (Bologna v. City & County of San Francisco (2011) 192 Cal.App.4th 429, 435 [121 Cal.Rptr.3d 406]; see Keech, supra, 162 Cal.App.3d at p. 469), not whether the “[city]wide scheme” for zoning “has an overall purpose of promoting … safety” (Capolungo v. Bondi (1986) 179 Cal.App.3d 346, 352 [224 Cal.Rptr. 326] (Capolungo)).

Second, plaintiff contends that the guest parking condition would have the inevitable effect of “lessening congestion on the streets” and obviating some of the need for offsite parking, and thus must have been designed in part to protect guests from the harm of traffic accidents. However, the fact that an ordinance not designed to protect the class of persons of which plaintiff is a part and not designed to protect against the harm she suffered might have a secondary effect or design to protect that class against that harm is not enough to create a duty of care. (See Capolungo, supra, 179 Cal.App.3d at pp. 351-352 [ordinance that prohibits motorists from parking in yellow curb loading zones for more than 24 minutes designed to facilitate loading and unloading, not to prevent traffic accidents; no duty]; Gilmer v. Ellington (2008) 159 Cal.App.4th 190, 203-204 [70 Cal.Rptr.3d 893] [statute prohibiting grid-locking of intersections designed to encourage free flow of traffic, not to protect against traffic accidents; no duty]; Lua v. Southern Pacific Transportation Co. (1992) 6 Cal.App.4th 1897, 1902-1903 [9 Cal.Rptr.2d 116] [regulation specifying when trains can block roadways designed to facilitate free flow of traffic, not to prevent accidents; no duty]; Selger, supra, 222 Cal.App.3d at pp. 1590-1591 [ordinance requiring property owners to keep abutting sidewalks clean designed to assist city in those duties, not to protect passersby from injury; no duty]; Urhausen v. Longs Drug Stores California, Inc. (2007) 155 Cal.App.4th 254, 269-270 [65 Cal.Rptr.3d 838] (Urhausen) [regulations governing the slope of parking spaces for disabled persons designed to enable access parking in those spaces, not to protect persons walking across those spaces on foot with crutches; no duty]; Victor v. 934*934 Hedges (1999) 77 Cal.App.4th 229, 234-238 [91 Cal.Rptr.2d 466] [statute prohibiting parking vehicles on sidewalks designed to prevent obstruction of sidewalks and injuries to pedestrians forced to walk around the “obstructing vehicle,” not to protect pedestrians on the sidewalk from being struck by vehicles not illegally parked; no duty]; Wawanesa Mutual Ins. Co. v. Matlock (1997) 60 Cal.App.4th 583, 587 [70 Cal.Rptr.2d 512] [statute that prohibits furnishing tobacco to minors designed to prevent addiction, not to prevent fires; no duty]; cf. Thomson v. Bayless (1944) 24 Cal.2d 543, 546 [150 P.2d 413] [ordinance prohibiting parking on highway when parking elsewhere is practicable “designed to protect persons traveling on the highway”; duty].)

Lastly, plaintiff cites the testimony of an expert that the “purpose” of ordinance No. 151,411’s guest parking condition was to “promote[] public safety” and to “reduce” the number of vehicles “park[ed] on the street.” However, the meaning and purpose of a legislative enactment is a question of law for the court; an expert’s opinion on such matters is an inadmissible legal conclusion. (Amaral v. Cintas Corp. No. 2 (2008) 163 Cal.App.4th 1157, 1179 [78 Cal.Rptr.3d 572] [expert opinion on meaning of statute “[ir]relevant” because statutory interpretation is for the court].) We therefore disregard it.

II. Plaintiff’s Further Arguments
Plaintiff assails our conclusion with several assertions that boil down to two arguments.

First, plaintiff argues that the Association engaged in active misfeasance because it reduced the number of available guest parking spaces from 34 to 6, and thereby engaged in affirmative misconduct that violated ordinance No. 151,411.

This argument is without merit for several reasons.

To begin, it conflates a duty of care with the standard of care. Although a statute or ordinance can give rise to a duty of care and simultaneously fix the standard of care (Elsner, supra, 34 Cal.4th at p. 927, fn. 8; Vesely, supra, 5 Cal.3d at p. 164; Johnson v. Honeywell Internat. Inc. (2009) 179 Cal.App.4th 549, 558 [101 Cal.Rptr.3d 726]), the two concepts are “analytical[ly] distinct[]” (California Service Station, supra, 62 Cal.App.4th at p. 1178). The duty of care establishes whether one person has a legal obligation to prevent harm to another (Paz, supra, 22 Cal.4th at p. 559), while the standard of care defines what that person must do to meet that obligation and thus sets the standard for assessing whether there has been a breach (Webster v. Claremont Yoga (2018) 26 Cal.App.5th 284, 288 [236 Cal.Rptr.3d 802]). The default standard of care is the obligation to take 935*935 “reasonable care” (Lopez, supra, 55 Cal.App.5th at p. 250; Flowers v. Torrance Memorial Hospital Medical Center (1994) 8 Cal.4th 992, 999 [35 Cal.Rptr.2d 685, 884 P.2d 142] (Flowers); see Ramirez v. Plough, Inc. (1993) 6 Cal.4th 539, 546 [25 Cal.Rptr.2d 97, 863 P.2d 167] (Ramirez), although a statute may define a more specific obligation (Ramirez, at p. 547; Flowers, at p. 997, fn. 2) and, under the doctrine of negligence per se, may erect a rebuttable presumption of breach if that obligation is not met (Evid. Code, § 669, subd. (a); California Service Station, at p. 1177; see also Sierra-Bay Fed. Land Bank Assn. v. Superior Court (1991) 227 Cal.App.3d 318, 333-334 [277 Cal.Rptr. 753] [“Nearly all the cases in which the presumption of negligence under Evidence Code section 669 has been applied involve what may be termed `safety’ statutes, ordinances or regulations, that is, governmentally designed standards of care intended to protect a particular class of persons from the risk of particular accidental injuries”]). The standard of care is relevant only if there is a duty of care for it to impose. The standard of care presupposes a duty; it cannot create one. (See Urhausen, supra, 155 Cal.App.4th at p. 270 [“a regulation will not be found to have … intended to prevent a particular accident merely because compliance with the regulation would foreseeably have prevented the accident”].) Yet that is what plaintiff invites us to do—to infer a duty of care from the fact that, if a duty of care otherwise existed, 34 guest parking spaces would set the standard of care. Because this puts the cart before the horse, we must decline plaintiff’s invitation.

Further, plaintiff’s invocation of the doctrine of misfeasance is of no aid. “Misfeasance exists when [a] defendant,” through its “affirmative actions,” “is responsible for making the plaintiff’s position worse” by “creat[ing] a risk of harm to the plaintiff.” (Weirum v. RKO General, Inc. (1975) 15 Cal.3d 40, 49 [123 Cal.Rptr. 468, 539 P.2d 36] (Weirum); Minch v. Department of California Highway Patrol (2006) 140 Cal.App.4th 895, 908 [44 Cal.Rptr.3d 846]; Romero v. Superior Court (2001) 89 Cal.App.4th 1068, 1079 [107 Cal.Rptr.2d 801].) “Liability for misfeasance is based on the general duty of ordinary care to prevent others from being injured by one’s conduct.” (Seo v. All-Makes Overhead Doors (2002) 97 Cal.App.4th 1193, 1202 [119 Cal.Rptr.2d 160]; see Weirum, at p. 49.) Thus, if a defendant has no duty of care under the general principles set forth above and does not otherwise undertake acts that prompt the plaintiff to be less careful (e.g., McDaniel, supra, 220 Cal.App.3d at pp. 9-10), its misfeasance is not actionable. As explained above, the Association owes plaintiff no duty of care under the general principles of the law of negligence and there was no evidence that plaintiff was less careful in crossing the street because the complex had fewer onsite parking spaces than required by ordinance No. 151,411.

Lastly, accepting plaintiff’s misfeasance-based argument creates perverse incentives inimical to tort law. If, as plaintiff suggests, the Association 936*936 commits actionable misfeasance by reducing the number of guest parking spaces from 34 to six—but engages in nonactionable nonfeasance if it never reserved 34 spaces in the first place—landowners, by virtue of tort law, would have every incentive to offer no guest parking. Yet the net effect of offering no guest parking is to make more people park offsite and thereby risk injury in traffic accidents.

Second, plaintiff argues that even if ordinance No. 151,411 does not by itself give rise to a duty of care, we should rebalance the Rowland factors through the prism of the ordinance’s requirement to have 34 guest parking spaces. We reject this argument. This argument once again commits the sin of conflating a standard of care with a duty of care. It also lacks the support of precedent and logic. Although a statute that does not support an evidentiary presumption of breach of the standard of care may still be considered when fixing the standard of care (e.g., Powell v. Pacific Electric Railway Co. (1950) 35 Cal.2d 40, 46 [216 P.2d 448]), plaintiff cites no precedent where a court in weighing the Rowland factors has considered a statute that does not by itself give rise to a duty. This is hardly a surprise, at least where, as here, one of the reasons the statute does not give rise to a duty of care is because it is not designed to protect the plaintiff against the harm at issue. Such a statute is, by dint of those reasons, irrelevant to the analysis dictated by the Rowland factors and thus should not influence them.

* * *
Because we have concluded that summary judgment is appropriate because the Association owes plaintiff no duty of care as a matter of law, we have no occasion to address the parties’ further arguments regarding the existence or nonexistence of proximate causation.

DISPOSITION
The judgment is affirmed. The Association is entitled to its costs on appeal.

Ashmann-Gerst, Acting P. J., and Chavez, J., concurred.

[1] In the lingo used in the zoning provisions of the City’s municipal code, these conditions are called “`Q’ Qualified classifications.”

[2] The trial court’s subsequent order stated that summary judgment was also granted on the ground that plaintiff could not prove causation.

[3] All further statutory references are to the Code of Civil Procedure unless otherwise indicated.

[4] This case therefore presents a different question than cases examining whether a landowner’s duty of care extends to deficiencies located on property adjacent to—but not on—the landowner’s property. (E.g., Lopez v. City of Los Angeles (2020) 55 Cal.App.5th 244, 256 [269 Cal.Rptr.3d 377] (Lopez) [defect on abutting public sidewalk]; Selger v. Steven Brothers, Inc. (1990) 222 Cal.App.3d 1585, 1588 [272 Cal.Rptr. 544] (Selger) [same]; Schaefer v. Lenahan (1944) 63 Cal.App.2d 324, 325-326 [146 P.2d 929] [same]; Williams v. Foster (1989) 216 Cal.App.3d 510, 515 [265 Cal.Rptr. 15] [same].)

[5] If a duty of care otherwise exists, a special ordinance that regulates a specific person or parcel can set the standard of care used to evaluate whether that independently existing duty has been breached. (Simoneau v. Pacific Electric Ry. Co. (1913) 166 Cal. 264, 269-270 [136 P. 544] [special ordinance granting defendant a franchise on condition that it operate its streetcars at no more than eight miles per hour can be used to assess whether defendant breached its existing duty of care when operating at faster speeds]; accord, Stafford v. United Farm Workers (1983) 33 Cal.3d 319, 324 [188 Cal.Rptr. 600, 656 P.2d 564] (Stafford) [injunction may be used to define standard of care].)

 

Schrage v. Schrage

Schrage v. Schrage

No. B298119, 2021 Cal. App. LEXIS 780 (Ct. App. Sep. 2, 2021).

Court of Appeals of California, Second District, Division Seven.

September 2, 2021

No. B298119

Summary by Jillian M. Wright, Esq.:

A plaintiff shareholder sued to dissolve several LLCs and close corporations. The court held the shareholder lacked standing to bring a cause of action for breach of fiduciary duty because the shareholder did not allege a derivative cause of action on behalf of the corporation.

TAKEAWAY: An individual corporate shareholder may not bring an action for indirect personal losses (that is, devaluation of his interest in the entity) sustained as a result of overall harm to the corporate entity. It is the corporate entity that must bring suit. If the corporate entity refuses to do so after an appropriate demand to do so from a shareholder, the shareholder may bring a suit to recover damage to the corporation (a “derivative action”) but the recovery in such case belongs to the corporation, not to the shareholder.

***End Summary***

69 Cal.App.5th 126 (2021)

LEONARD SCHRAGE, Plaintiff and Respondent,
v.
MICHAEL SCHRAGE et al., Defendants and Appellants.

APPEAL from orders and a judgment of the Superior Court of Los Angeles County, Super. Ct. No. BC579623, Yvette M. Palazuelos and Daniel J. Buckley, Judges. Affirmed as modified in part and reversed in part.

Randall S. Waier for Defendants and Appellants.

Manatt, Phelps & Phillips, Benjamin G. Shatz, Kishan H. Barot; Markun Zusman Freniere Compton and Steven M. Goldberg for Plaintiff and Respondent.

131*131 OPINION
SEGAL, J.—

INTRODUCTION
Michael and Joseph Schrage appeal from the judgment and several orders entered in an action filed by their brother, Leonard Schrage, for involuntary dissolution of the family business and breach of fiduciary duty. After Michael and Joseph invoked their statutory right under the Corporations Code to buy Leonard’s interests in the business pursuant to a court-ordered appraisal, the 132*132 parties stipulated to add five limited liability companies to the eight limited liability companies, five corporations, and one limited partnership that were already subject to the appraisal and buyout proceeding. The trial court confirmed a valuation of Leonard’s interests determined by appraisers and a court-appointed referee. The court also issued an alternative decree ordering that Michael and Joseph had to pay the appraised amount by a certain date and that, if they did not, the entities would be wound up and dissolved. Michael and Joseph appealed from that order, but voluntarily dismissed the appeal. They did not pay the buyout amount, and the court proceeded to wind up and dissolve the family business, including the five additional limited liability companies.

Meanwhile, Leonard proceeded on his cause of action for breach of fiduciary duty against Michael and Joseph. Following a court trial, the court found in favor of Leonard on that cause of action, awarded Leonard compensatory and punitive damages, and entered judgment in favor of Leonard and against Michael and Joseph. The court also denied various postjudgment motions.

Michael and Joseph argue the alternative decree to wind up and dissolve the family business and the “follow-up judgments and orders” are void as a matter of law because the trial court lacked jurisdiction to dissolve the five limited liability companies the parties stipulated to include in the appraisal and buyout proceeding. We reject this argument because the trial court had fundamental jurisdiction and Michael and Joseph are estopped from collaterally attacking the alternative decree. Michael and Joseph also argue Leonard lacked standing to assert his cause of action for breach of fiduciary duty. We agree with this argument because Leonard’s cause of action was derivative, not individual. Therefore, we affirm the order of dissolution (with a modification), reverse the award of damages for breach of fiduciary duty, and dismiss the appeals from nonappealable orders.

FACTUAL AND PROCEDURAL BACKGROUND
A. Leonard Sues His Brothers To Dissolve the Family Business and for Breach of Fiduciary Duty
We pick up with the story in this (the parties’ third) appeal where we left off following Michael and Joseph’s appeal from an order awarding Leonard fees and expenses he incurred in a court-ordered appraisal under Corporations Code section 1800.[1] (See Schrage v. Schrage (Aug. 19, 2020, B288478) [nonpub. opn.] (Schrage I); see also Schrage v. Schrage (May 14, 2021, 133*133 B307539) [nonpub. opn.] (Schrage II).) But first we repeat some of the basic facts of the case summarized in Schrage I.

Leonard, Michael, and Joseph each owned a one-third interest in the Sage Automotive Group, a family-owned car dealership business founded by their father. In April 2015 Leonard filed this action against Michael, Joseph, and 14 corporate entities in the Sage Automotive Group to dissolve and wind up those entities. Leonard alleged Michael and Joseph engaged in a pattern of self-dealing and mismanaged the business by, among other things, misappropriating company assets to fund a separately owned car dealership and to pay for lavish personal expenses, making business decisions without Leonard’s consent, and denying Leonard access to corporate books and records. Leonard sought to dissolve five corporations under section 1800, eight limited liability companies under section 17707.03, and one limited partnership under section 15908.02. Leonard also sought compensatory and punitive damages against Michael and Joseph for breach of fiduciary duty. (Schrage I, supra, B288478.)

In June 2016 Michael and Joseph filed a motion under sections 2000, 15908.02, and 17707.03 (collectively, the buyout statutes) to stay the dissolution causes of action and determine the value of Leonard’s interest in the entity defendants. On August 23, 2016 the trial court stayed Leonard’s three dissolution causes of action (one for each legal form of business entity) to allow Michael and Joseph to proceed on their election to purchase Leonard’s interests in the business. The court did not stay Leonard’s breach of fiduciary duty cause of action or Michael and Joseph’s causes of action in their cross-complaint for breach of fiduciary duty, conversion, and recording confidential communications in violation of Penal Code sections 630 and 632. (Schrage I, supra, B288478.) The trial court also denied Michael and Joseph’s motion for judgment on the pleadings on Leonard’s cause of action for breach of fiduciary duty, ruling Leonard had alleged an individual cause of action against his brothers, not a derivative cause of action on behalf of the entities in the Sage Automotive Group.

On September 19, 2016 the parties entered into a stipulation, approved by the court, to appoint Retired Judge Louis M. Meisinger as the referee to oversee and adjudicate all aspects of the appraisal process, including selecting the appraisers, determining the buyout price, and setting a deadline for Michael and Joseph to pay the buyout price. The order stated that “Judge Meisinger’s determinations in this regard will be final, and all parties expressly waive any right to contest, challenge, or object to such rulings ….”

The parties entered into another stipulated order on January 5, 2017 to govern the appraisal and buyout proceeding. That order provided, among 134*134 other things, the appraisal and buyout process would include the 14 entity defendants named in the first amended complaint, plus five additional limited liability companies (collectively, the buyout entities). The five limited liability companies that were not named defendants in any of the three causes of action for involuntary dissolution, but that were subject to the appraisal and buyout process by stipulation, were UCNP 3, UCNP 4, UCNP 5, UCNP 6, and UCNP 8 (collectively, the UCNP entities). To allow the appraisers to value each entity, the order required the parties to give the appraisers a variety of information, including organizational agreements, historical and projected financial data, and real estate holdings. The stipulation provided that, after the appraisers submitted their written reports to the parties and Judge Meisinger, the parties would meet and confer to try to reach agreement on the valuation assigned to each entity and the overall value of Leonard’s one-third interest in the buyout entities, “which shall constitute the buy-out price to be paid by Michael and Joseph to Leonard.” If the parties were unable to agree on a buyout price, Judge Meisinger would set the price following a hearing.

On July 25, 2017, following a contested appraisal process, Judge Meisinger submitted a recommendation and proposed order confirming the value of Leonard’s interests in the buyout entities was $40,237,000 and stating that, if Michael and Joseph did not pay Leonard that amount by September 11, 2017, the buyout entities (including the UCNP entities) would be wound up and dissolved. Judge Meisinger’s recommendation also stated that, under the September 19, 2016 stipulation and order, his findings were “`final’ and `all parties expressly waive any right to contest, challenge, or object to such rulings before'” the court. On July 28, 2017 the trial court approved the referee’s recommendation and entered it as the court’s order and alternative decree.

Michael and Joseph did not pay Leonard by September 11, 2017, but they did file a notice of appeal from the July 28, 2017 order and alternative decree. Michael and Joseph subsequently filed requests to dismiss that appeal, and on May 31, 2018 this court granted those requests and dismissed the appeal.[2] Meanwhile, on September 27, 2017 the trial court appointed a receiver to wind up and dissolve the buyout entities. In Schrage I we modified and affirmed an order granting Leonard’s motion for attorneys’ fees and other expenses incurred in the appraisal process and in obtaining certain injunctive relief during that process. (Schrage I, supra, B288478.)

135*135 B. The Trial Court Enters a Net Judgment of Approximately $31 Million in Favor of Leonard and Against Michael and Joseph
A bifurcated court trial began in April 2018 on Leonard’s cause of action for breach of fiduciary duty and on Michael and Joseph’s cross-complaint. Following almost two months of testimony, the court on October 12, 2018 issued a tentative decision finding Michael and Joseph breached their fiduciary duties to Leonard, awarding Leonard compensatory damages offset by an amount for Leonard’s unclean hands, finding Michael and Joseph acted with malice, oppression, and fraud, and ruling against Michael and Joseph on their cross-complaint. The court began the punitive damages phase of the trial on November 26, 2018.

On March 12, 2019 the court entered judgment in favor of Leonard and against Michael and Joseph in the amount of approximately $31 million. The judgment consisted of $962,903.13 on the first, second, and third causes of action for involuntary dissolution,[3] $24,418,473 in compensatory damages on Leonard’s cause of action for breach of fiduciary duty offset by $3,506,412 for Leonard’s unclean hands, and punitive damages of $5 million against Michael and $5 million against Joseph.

Michael and Joseph filed motions to vacate and amend the judgment and for a new trial. Michael and Joseph argued the trial court lacked subject matter jurisdiction and personal jurisdiction over the UCNP entities for the July 28, 2017 alternative decree and the September 27, 2017 order appointing a receiver to wind up and dissolve the buyout entities, which made those orders void as a matter of law; the “one judgment rule” and claim preclusion (which they referred to as res judicata) barred Leonard’s cause of action for breach of fiduciary duty because the appraisal and buyout process should have included the value of that cause of action; the trial court erred in awarding compensatory and punitive damages on Leonard’s cause of action for breach of fiduciary duty; and Michael and Joseph’s affirmative defense of unclean hands precluded any recovery by Leonard on his cause of action for breach of fiduciary duty.

The trial judge was unavailable to hear Michael’s and Joseph’s postjudgment motions, and another judge heard them. Following a hearing, the court 136*136 denied the motions, and Michael and Joseph timely appealed from the judgment and the postjudgment orders.[4]

DISCUSSION
Michael and Joseph argue the alternative decree and subsequent orders and judgment are void as a matter of law because the trial court lacked jurisdiction to order the appraisal and dissolution of the UCNP entities; Leonard lacked standing to assert his cause of action for breach of fiduciary duty because his claims were derivative, not individual; the trial court exceeded its jurisdiction by failing in the appraisal and buyout process to assess the economic impact of the cause of action for breach of fiduciary duty; the election of remedies doctrine, the “one judgment rule,” and claim preclusion barred Leonard’s cause of action for breach of fiduciary duty; the trial court erred in awarding compensatory and punitive damages for Leonard’s cause of action for breach of fiduciary duty; and Michael and Joseph’s affirmative defense of unclean hands precluded any recovery by Leonard for his cause of action for breach of fiduciary duty. We conclude the standing argument has merit, the jurisdictional argument does not, and we do not reach the other issues.

A. The Buyout Statutes
As we explained in Schrage I, the “statutory buyout provisions of the Corporations Code provide a defendant in an involuntary dissolution action with a mechanism for avoiding dissolution by purchasing the plaintiff’s shares or other interests. [Citations.] Section 2000, subdivision (a), which applies to corporations, states that, `[i]n any suit for involuntary dissolution,… the corporation or, if it does not elect to purchase, the holders of 50 percent or more of the voting power of the corporation (the “purchasing parties”) may avoid the dissolution of the corporation and the appointment of any receiver by purchasing for cash the shares owned by the plaintiffs or by the shareholders so initiating the proceeding (the “moving parties”) at their fair value.’ If the parties are unable to agree on the fair value of the shares, and the purchasing parties post a bond with sufficient security to pay the moving parties’ estimated reasonable expenses, `the court upon application of the purchasing parties … shall stay the winding up and dissolution proceeding and shall proceed to ascertain and fix the fair value of the shares owned by the moving parties.'” (Schrage I, supra, B288478.)

“Section 2000, subdivision (c), prescribes the procedure for determining the fair value of the shares and the relief available to the moving parties if the 137*137 shares are not purchased. That provision states in relevant part: `The court shall appoint three disinterested appraisers to appraise the fair value of the shares owned by the moving parties, and shall make an order referring the matter to the appraisers so appointed for the purpose of ascertaining the value…. The award of the appraisers or of a majority of them, when confirmed by the court, shall be final and conclusive upon all parties. The court shall enter a decree, which shall provide in the alternative for winding up and dissolution of the corporation unless payment is made for the shares within the time specified by the decree.’ Sections 17707.03 and 15908.02 contain substantively identical buyout provisions for limited liability companies and limited partnerships, respectively.” (Schrage I, supra, B288478.)

“The statutory buyout procedure is `a special proceeding’ that, `once initiated, “supplants” a cause of action for involuntary dissolution.’ [Citations.] `In such a proceeding, [the] purchasing parties aspire to buy out the moving party, with minimal expenditure of time and money that would otherwise be spent in litigation, in order to preserve the corporation. If they … cannot pay the purchase price, or decide not to do so, then both sides must walk away, receiving pro rata the proceeds resulting from dissolution of the corporation. On the other hand, if the purchasing parties tender the amount determined by the court, the moving party cannot reject the share price as being too low.’ [Citation.] The buyout procedure `does not determine whether the corporation should be dissolved, but instead, provides the plaintiff and defendant with a statutory remedy without [a] trial’ on the merits.” (Schrage I, supra, B288478; see Ontiveros v. Constable (2018) 27 Cal.App.5th 259, 277 [237 Cal.Rptr.3d 892] [“A value of the corporation’s stock is determined and then the defendant has a period by which it is to pay the plaintiff for its stock. If the defendant does not do so, a judicial decree will dissolve the corporation.”].)

B. Michael and Joseph Cannot Collaterally Attack the Alternative Decree
Michael and Joseph contend the alternative decree and “confirming judgments and orders” are void and unenforceable because the trial court lacked subject matter jurisdiction to order the appraisal and buyout of the five UCNP entities.[5] The alternative decree, however, was an appealable order. (See § 2000, subd. (c); Cotton v. Expo Power Systems, Inc. (2009) 170 Cal.App.4th 1371, 1376 [89 Cal.Rptr.3d 112]; Dickson v. Rehmke (2008) 164 Cal.App.4th 469, 476 [78 Cal.Rptr.3d 874].) Michael and Joseph had an 138*138 opportunity to challenge that order in their appeal from the alternative decree, but they dismissed the appeal, making that order final. (See Code Civ. Proc., § 913; Estate of Sapp (2019) 36 Cal.App.5th 86, 100 [248 Cal.Rptr.3d 244]; Patchett v. Bergamot Station, Ltd. (2006) 143 Cal.App.4th 1390, 1396 [49 Cal.Rptr.3d 941]; Schrage I, supra, B288478.) Nevertheless, Michael and Joseph can challenge it in this appeal if it is a void order, because a party may collaterally attack a void judgment or order at any time. (Falahati v. Kondo (2005) 127 Cal.App.4th 823, 830, fn. 9 [26 Cal.Rptr.3d 104]; accord, Deutsche Bank National Trust Co. v. Pyle (2017) 13 Cal.App.5th 513, 526-527 [220 Cal.Rptr.3d 691]; see Code Civ. Proc., § 473, subd. (d) [“[t]he court … may, on motion of either party after notice to the other party, set aside any void judgment or order”].)

A judgment or order that is not void but “merely” voidable, however, is generally not subject to collateral attack. (See People v. American Contractors Indemnity Co. (2004) 33 Cal.4th 653, 661 [16 Cal.Rptr.3d 76, 93 P.3d 1020] (American Contractors); Adoption of Myah M. (2011) 201 Cal.App.4th 1518, 1531 [135 Cal.Rptr.3d 636].) “When a court has fundamental jurisdiction, but acts in excess of its jurisdiction, its act or judgment is merely voidable. [Citations.] That is, its act or judgment is valid until it is set aside, and a party may be precluded from setting it aside by `principles of estoppel, disfavor of collateral attack or res judicata.’ [Citation.] Errors which are merely in excess of jurisdiction should be challenged directly, for example by motion to vacate the judgment, or on appeal, and are generally not subject to collateral attack once the judgment is final unless `unusual circumstances were present which prevented an earlier and more appropriate attack.'” (American Contractors, at p. 661; see Adoption of Myah M., at p. 1531 [“A claim that does not concern the trial court’s fundamental subject matter jurisdiction is waived if not timely asserted.”].) We review de novo the trial court’s ruling that neither the alternative decree nor the judgment is void for lack of subject matter jurisdiction. (See Mack v. All Counties Trustee Services, Inc. (2018) 26 Cal.App.5th 935, 940 [237 Cal.Rptr.3d 568]; Talley v. Valuation Counselors Group, Inc. (2010) 191 Cal.App.4th 132, 146 [119 Cal.Rptr.3d 300].)

1. Michael and Joseph Cannot Collaterally Attack the Alternative Decree as a Void Order Because the Trial Court Had Fundamental Jurisdiction To Adjudicate the Buyout Proceeding
a. Applicable Law
“A judgment or order is void when there is an absence of fundamental jurisdiction. However, an act in excess of jurisdiction simply renders an order of judgment voidable. `Lack of jurisdiction in its most fundamental or 139*139 strict sense means an entire absence of … authority over the subject matter or the parties…. [Citation.]’ In contrast, a court acts in excess of jurisdiction in the broader sense `where, though the court has jurisdiction over the subject matter and the parties in the fundamental sense, it has no “jurisdiction” (or power) to act except in a particular manner, or to give certain kinds of relief, or to act without the occurrence of certain procedural prerequisites.’ [Citation.] `Action “in excess of jurisdiction” by a court that has jurisdiction in the “fundamental sense” … is not void, but only voidable.'” (Adoption of Myah M., supra, 201 Cal.App.4th at p. 1531; see In re Marriage of Goddard (2004) 33 Cal.4th 49, 56 [14 Cal.Rptr.3d 50, 90 P.3d 1209] [“A court can lack fundamental authority over the subject matter, question presented, or party, making its judgment void, or it can merely act in excess of its jurisdiction or defined power, rendering the judgment voidable.”]; see also American Contractors, supra, 33 Cal.4th at pp. 660-661; People v. The North River Ins. Co. (2020) 58 Cal.App.5th 300, 311-313 [272 Cal.Rptr.3d 370]; Torjesen v. Mansdorf (2016) 1 Cal.App.5th 111, 117 [204 Cal.Rptr.3d 325] (Torjesen).)

“Subject matter jurisdiction … is the power of the court over a cause of action or to act in a particular way.” (Greener v. Workers’ Comp. Appeals Bd. (1993) 6 Cal.4th 1028, 1035 [25 Cal.Rptr.2d 539, 863 P.2d 784]; see People v. Superior Court (Mitchell) (2010) 184 Cal.App.4th 451, 458 [109 Cal.Rptr.3d 207].) “[L]ack of subject matter jurisdiction means the entire absence of power to hear or determine a case; i.e., an absence of authority over the subject matter.” (Guardianship of Ariana K. (2004) 120 Cal.App.4th 690, 701 [15 Cal.Rptr.3d 817]; see Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280, 288 [109 P.2d 942] (Abelleira) [“A court has no jurisdiction to hear or determine a case where the type of proceeding or the amount in controversy is beyond the jurisdiction defined for that particular court by statute or constitutional provision.”]; 2 Witkin, Cal. Procedure (2020) Jurisdiction, § 44 [“A court without authority to try actions of the type or class to which the action belongs is `not competent,’ i.e., it has no jurisdiction of the subject matter.”].)

“Subject matter jurisdiction is conferred by constitutional or statutory law.” (Guardianship of Ariana K., supra, 120 Cal.App.4th at p. 701.) In general, article VI, section 10 of the California Constitution confers broad authority on the superior courts. (Donaldson v. National Marine, Inc. (2005) 35 Cal.4th 503, 512 [25 Cal.Rptr.3d 584, 107 P.3d 254]; see Cal. Const., art. VI, § 10 [except as otherwise provided, “[s]uperior courts have original jurisdiction in all other causes”]; see also Code Civ. Proc., § 410.10 [a “court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States”].) “A court does not necessarily act without subject matter jurisdiction merely by issuing a judgment going beyond the sphere of action prescribed by law. `Speaking generally, any acts which exceed the defined power of a court in any instance, 140*140 whether that power be defined by constitutional provision, express statutory declaration, or rules developed by the courts and followed under the doctrine of stare decisis, are in excess of jurisdiction.'” (Pajaro Valley Water Management Agency v. McGrath (2005) 128 Cal.App.4th 1093, 1101 [27 Cal.Rptr.3d 741]; see American Contractors, supra, 33 Cal.4th at p. 661 [“`”[W]hen a statute authorizes [a] prescribed procedure, and the court acts contrary to the authority thus conferred, it has exceeded its jurisdiction.”‘”].)

b. The Buyout Statutes Conferred Subject Matter Jurisdiction for the Buyout Proceeding
Michael and Joseph do not argue the trial court lacked subject matter jurisdiction over Leonard’s causes of action for involuntary dissolution. Nor do they contend the court lacked subject matter jurisdiction to adjudicate the appraisal and buyout proceeding for the 14 entity defendants Leonard named in those causes of action or to dissolve them. They argue only that the “addition of the UCNP entities in the buyout proceedings, when they were not the subjects of a pending judicial dissolution cause of action, rendered the alternative decree, and ensuing judgments and orders,” void.[6]

To determine whether an error is jurisdictional in a fundamental sense, courts “look first to the language of the statute.” (American Contractors, supra, 33 Cal.4th at p. 661; see In re Marriage of Goddard, supra, 33 Cal.4th at p. 54; People v. The North River Ins. Co., supra, 58 Cal.App.5th at p. 313.) For example, in American Contractors the Supreme Court considered whether the trial court lacked fundamental jurisdiction when it declared a bond forfeited without complying with two “jurisdictional prerequisites” in Pen. Code, §§ 1305 and 1306. (See generally People v. Safety 141*141 National Casualty Corp. (2016) 62 Cal.4th 703, 710 [199 Cal.Rptr.3d 272, 366 P.3d 57] [describing the jurisdictional prerequisites of Pen. Code, §§ 1305 and 1306].) The Supreme Court observed that neither statute declared the surety released or the bond exonerated if the court failed to comply with those prerequisites under the circumstances in that case. (American Contractors, at p. 661.) “Based on what sections 1305 and 1306 said and did not say, the Supreme Court [in American Contractors] concluded the failure `to follow the procedural requirements to enter judgment properly did not affect the court’s statutory control and jurisdiction over the bond.’ [Citation.] Accordingly, the court held the trial `court’s failure to comply with section 1306 … “does not effect a fundamental loss of jurisdiction, i.e., `an entire absence of power to hear or determine the case, an absence of authority over the subject matter of the parties.'”‘” (People v. The North River Ins. Co., at p. 314, quoting American Contractors, at pp. 662-663.)

The buyout statutes established the court’s subject matter jurisdiction to conduct and adjudicate the buyout proceeding and to dissolve the entities subject to that proceeding. As discussed, the relevant language of section 2000 states: “In any suit for involuntary dissolution, … the holders of 50 percent or more of the voting power of the corporation (the `purchasing parties’) may avoid the dissolution of the corporation and the appointment of any receiver by purchasing for cash the shares owned by the plaintiffs … (the `moving parties’) at their fair value. [T]he court upon application of the purchasing parties, … in the pending action …, shall stay the winding up and dissolution proceeding and shall proceed to ascertain and fix the fair value of the shares owned by the moving parties. The court shall enter a decree, which shall provide in the alternative for winding up and dissolution of the corporation unless payment is made for the shares within the time specified by the decree. If the purchasing parties do not make payment for the shares within the time specified, judgment shall be entered against them and the surety or sureties on the bond for the amount of the expenses (including attorneys’ fees) of the moving parties.” (§ 2000, subds. (a)-(c), italics added; see §§ 15908.02, 17707.03.) Thus, if the purchasing parties follow through on buying out the minority shareholder (or member or partner), the buyout proceeding successfully avoids litigation and the dissolution of the corporation. But if the purchasing parties are unable or unwilling to buy out the minority shareholder, the entity subject to the proceeding is wound up and dissolved.

In compliance with the buyout statutes, the trial court on August 23, 2016 granted Michael and Joseph’s motion to stay Leonard’s involuntary dissolution causes of action, thereby establishing subject matter jurisdiction for the buyout proceeding. The court still had subject matter jurisdiction over the proceeding on January 5, 2017, when Michael, Joseph, and Leonard stipulated to include the UCNP entities in the proceeding. And the court had 142*142 subject matter jurisdiction on July 28, 2017, when it issued the alternative decree providing that the entity defendants and the UCNP entities would be wound up and dissolved if Michael and Joseph did not pay Leonard by September 11, 2017.

The buyout statutes do not address circumstances where, as here, the owners of an entity all agree to submit that entity (or, here, several entities) to an existing buyout proceeding over which the trial court undoubtedly had authority. But considering the statutes’ silence on this issue, the broad authority conferred on superior courts (including the power to dissolve companies organized under the laws of California), and cases holding that neither the addition of nonparties to an action nor the violation of certain statutory requirements (even where “jurisdictional”) divests a court of its subject matter jurisdiction, we conclude the addition of the UCNP entities to the existing buyout proceeding did not undermine the court’s “inherent authority to deal with the case or matter before it.” (Law Offices of Ian Herzog v. Law Offices of Joseph M. Fredrics (1998) 61 Cal.App.4th 672, 680 [71 Cal.Rptr.2d 771]; see American Contractors, supra, 33 Cal.4th at p. 661; Abelleira, supra, 17 Cal.2d at p. 288; Conservatorship of O’Connor (1996) 48 Cal.App.4th 1076, 1087-1088 [56 Cal.Rptr.2d 386].)

For example, in Serrano v. Stefan Merli Plastering Co., Inc. (2008) 162 Cal.App.4th 1014 [76 Cal.Rptr.3d 559] the court held the trial court adjudicating a personal injury action had subject matter jurisdiction to adjudicate a fee dispute between the plaintiff and a nonparty court reporting company. Even though the dispute “was not within the scope of the pleadings and pertained to a third party” (id. at p. 1028), the matter involved a right created by California discovery statutes and the court’s authority to control the conduct of its ministerial officers, and the dispute was “typical of those commonly adjudicated in California courts” (id. at p. 1030). Similarly, in Lovett v. Carrasco (1998) 63 Cal.App.4th 48 [73 Cal.Rptr.2d 496] the court held the trial court had subject matter jurisdiction to adjudicate third parties’ medical lien claims in an underlying personal injury action. (Id. at p. 54.) The court in Lovett stated that “adjudication of claimants’ medical lien claims is clearly within the general subject matter jurisdiction of the superior court.” (Ibid.) Thus, the “jurisdictional issue [was] whether the court acted in excess of its jurisdiction by adjudicating the liens in the [underlying] action,” not whether the court had fundamental jurisdiction. (Ibid.; see Law Offices of Stanley J. Bell v. Shine, Browne & Diamond (1995) 36 Cal.App.4th 1011, 1021-1023 [43 Cal.Rptr.2d 717] [trial court in an underlying personal injury action had subject matter jurisdiction to issue an order denying a claim under an attorney’s lien, even though contractual liens generally are enforced in an independent action by the attorney against the client].)

143*143 Nor did the fact the trial court arguably acted contrary to the authority conferred by the buyout statutes divest the court of subject matter jurisdiction. In Torjesen the plaintiff judgment creditor filed a petition under the Enforcement of Judgments Law (Code Civ. Proc., § 680.010 et seq.) to invalidate a third party claim on a deceased judgment debtor’s property. (Torjesen, supra, 1 Cal.App.5th at p. 113.) The Enforcement of Judgments Law, however, provides that, “[a]fter the death of the judgment debtor, enforcement of a judgment against property in the judgment debtor’s estate is governed by the Probate Code, and not by this title.” (Code Civ. Proc., § 686.020.) The trial court nevertheless granted the judgment creditor’s petition under the wrong statute. (Torjesen, at p. 113.) The third party claimant did not appeal from that ruling, but two years later filed a motion to vacate the order, arguing the trial court did not have jurisdiction to proceed under the Enforcement of Judgments Law. (Torjesen, at p. 113) The court in Torjesen rejected that argument: “Without question, the superior court has jurisdiction over disputes related to the enforcement of judgments and the validity of claims to property that has been levied upon. [Citations.] The statutory scheme does not deprive the superior court of jurisdiction over these matters. It simply limits the manner in which a judgment creditor may enforce a judgment against a deceased judgment debtor’s property.” (Id. at p. 118.) The court in Torjesen agreed that the superior court erred in allowing the judgment creditor to proceed under the Enforcement of Judgments Law, but the court held “that error was an act in excess of jurisdiction” rendering the order voidable, not void for lack of subject matter jurisdiction. (Torjesen, at p. 118; see Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 97-98, 99 [101 Cal.Rptr. 745, 496 P.2d 817] [default judgments erroneously entered in favor of a collection agency that knowingly filed “statutorily inadequate complaints” in the wrong counties were not void for lack of “`jurisdiction’ in the fundamental sense”]; Law Offices of Ian Herzog v. Law Offices of Joseph M. Fredrics, supra, 61 Cal.App.4th at p. 680 [order compelling arbitration in the absence of an arbitration agreement, in violation of Code Civ. Proc., § 1281, was only an act in excess of jurisdiction]; In re Marriage of Hinman (1992) 6 Cal.App.4th 711, 718 [8 Cal.Rptr.2d 245] [“while the court’s award [granting joint custody to a nonbiological parent] may have been beyond its statutory authority, the court did not lack jurisdiction in the fundamental sense”].)

Thus, even if the trial court erred by including the five UCNP entities in the appraisal and buyout proceeding, the trial court undoubtedly had subject matter jurisdiction over the proceeding. Michael and Joseph do not contest the court’s jurisdiction to hear and determine the case with regard to the 14 entity defendants. Neither the voluntary addition of the five UCNP entities to the buyout proceeding nor the trial court’s purported error in issuing the alternative decree over entities that were not parties to the involuntary 144*144 dissolution causes of action disturbed or eliminated the court’s subject matter jurisdiction. At most, the alternative decree was an act in excess of the statutory authority conferred by the buyout statutes. (See Barquis v. Merchants Collection Assn., supra, 7 Cal.3d at p. 99; People v. The North River Ins. Co., supra, 58 Cal.App.5th at p. 314.)

The cases cited by Michael and Joseph do not hold otherwise. In general, those cases stand for the proposition that the court’s power to conduct a special proceeding under the buyout statutes depends on the existence of a cause of action for involuntary dissolution. (See Boschetti v. Pacific Bay Investments, Inc. (2019) 32 Cal.App.5th 1059, 1066 [244 Cal.Rptr.3d 480] [“`the right of buyout under section 15908.02 is dependent upon a cause of action for judicial dissolution'”]; Ontiveros v. Constable, supra, 27 Cal.App.5th at p. 271 [“a party’s right under section 2000 depends entirely on the existence of a cause of action for involuntary dissolution of a corporation”]; Kennedy v. Kennedy (2015) 235 Cal.App.4th 1474, 1481 [186 Cal.Rptr.3d 198] [“[u]pon dismissal of [a] dissolution cause of action, there is no dissolution to avoid and, thus, no right to buy out plaintiff’s interests” under section 2000]; Panakosta Partners, LP v. Hammer Lane Management, LLC (2011) 199 Cal.App.4th 612, 635 [131 Cal.Rptr.3d 835] [“[w]ithout a pending judicial dissolution action, the trial court was without jurisdiction to allow the buyout petition to proceed”]; Dabney v. Dabney (2002) 104 Cal.App.4th 379, 383 [127 Cal.Rptr.2d 917] [“no court has inherent authority to decide a matter for which there is no legally recognized cause of action”]; Housing Group v. United Nat. Ins. Co. (2001) 90 Cal.App.4th 1106, 1107-1108 [109 Cal.Rptr.2d 497] [pending litigation is required before parties may stipulate to the appointment of a judicial referee or temporary judge to secure a settlement enforceable by the court].) Unlike those cases, here there were causes of action for involuntary dissolution pending at the time Michael and Joseph moved to stay them and initiate the buyout proceeding and at the time Michael, Joseph, and Leonard agreed to add the five UCNP entities to the pending proceeding.

Michael and Joseph also argue the trial court could not have subject matter jurisdiction unless Leonard added the UCNP entities as defendants to a pending cause of action. But third parties may appear and be bound by a judgment without being named in a complaint. (See People ex rel. Becerra v. Superior Court (2018) 29 Cal.App.5th 486, 493 [240 Cal.Rptr.3d 250]; Fireman’s Fund Ins. Co. v. Sparks Construction, Inc. (2004) 114 Cal.App.4th 1135, 1145-1147 [8 Cal.Rptr.3d 446]; In re Marriage of Williams (1985) 163 Cal.App.3d 753, 759-760 [209 Cal.Rptr. 827].) As stated, Michael and Joseph do not argue the trial court lacked personal jurisdiction over the five UCNP entities, and in any event the UCNP entities’ participation in the appraisal and buyout proceeding without objection (to this day) acknowledged the authority of the court in that proceeding. (See Rockefeller 145*145 Technology Investments (Asia) VII v. Changzhou SinoType Technology Co., Ltd. (2020) 9 Cal.5th 125, 139 [260 Cal.Rptr.3d 442, 460 P.3d 764] [“`a party may voluntarily submit himself to the jurisdiction of the court, or may, by failing to seasonably object thereto, waive his right to question jurisdiction over him'”]; Becerra, at p. 493 [“a person can become a party to an action, even if not named in the complaint, by appearing and participating without any objection by the other parties”]; Thomson v. Anderson (2003) 113 Cal.App.4th 258, 266 [6 Cal.Rptr.3d 262] [“`[b]ecause the personal jurisdiction requirement is a waivable right, there are a “variety of legal arrangements” by which a litigant may give “express or implied consent to the personal jurisdiction of the court”‘”].)[7]

2. Michael and Joseph Cannot Collaterally Attack the Alternative Decree as a Voidable Order
As discussed, a party generally may not collaterally attack errors in excess of jurisdiction once the judgment or order is final unless there are “unusual circumstances” that prevented the party from making an “earlier and more appropriate attack.” (American Contractors, supra, 33 Cal.4th at p. 661; see People v. The North River Ins. Co., supra, 58 Cal.App.5th at p. 311; Torjesen, supra, 1 Cal.App.5th at p. 118.) No unusual circumstances prevented Michael and Joseph from an earlier attack on the alternative decree.[8] Indeed, Michael and Joseph could have appealed, and did appeal, from the 146*146 alternative decree, but they dismissed their appeal. And the UCNP entities never objected to their inclusion in the buyout proceeding or appealed from the alternative decree or judgment. (See Travis v. Brand (2021) 62 Cal.App.5th 240, 254 [276 Cal.Rptr.3d 535] [nonparties have standing to appeal where “the judgment has a `res judicata effect'” or is otherwise binding on the nonparty], review granted June 23, 2021, S268480; Marsh v. Mountain Zephyr, Inc. (1996) 43 Cal.App.4th 289, 295 [50 Cal.Rptr.2d 493] [same].)

Moreover, a “party may be precluded from setting aside a voidable act or judgment made in excess of jurisdiction by `”principles of estoppel.”‘ [Citation.] `When … the court has jurisdiction of the subject, a party who seeks or consents to action beyond the court’s power as defined by statute or decisional rule may be estopped to complain of the ensuing action in excess of jurisdiction. [Citations.] Whether he shall be estopped depends on the importance of the irregularity not only to the parties but to the functioning of the courts and in some instances on other considerations of public policy. A litigant who has stipulated to a procedure in excess of jurisdiction may be estopped to question it when “[t]o hold otherwise would permit the parties to trifle with the courts.”‘” (Mt. Holyoke Homes, LP v. California Coastal Com. (2008) 167 Cal.App.4th 830, 842 [84 Cal.Rptr.3d 452]; see Garibotti v. Hinkle (2015) 243 Cal.App.4th 470, 481 [197 Cal.Rptr.3d 61] [“`The doctrine of estoppel to contest jurisdiction … “provides that when a court has subject matter jurisdiction over an action, `a party who seeks or consents to action beyond the court’s power as defined by statute or decisional rule may be estopped to complain of the ensuing action in excess of jurisdiction.'”‘”].)

Michael and Joseph agreed to include the five UCNP entities in the buyout proceeding and did not question the validity of the court’s alternative decree for 18 months (when they first raised the issue on appeal from the award of attorneys’ fees and costs in Schrage I).[9] They are estopped from arguing the trial court acted in excess of its jurisdiction by including the UCNP entities in the alternative decree. (See Kristine H. v. Lisa R. (2005) 37 Cal.4th 156, 166 [33 Cal.Rptr.3d 81, 117 P.3d 690] [“Given that the court had subject matter jurisdiction to determine the parentage of the unborn child, and that [the plaintiff] invoked that jurisdiction, stipulated to the issuance of a judgment, and enjoyed the benefits of that judgment for nearly two years, it would be unfair both to [the defendant] and the child to permit [the plaintiff] to challenge the validity of that judgment.”]; Torjesen, supra, 1 Cal.App.5th at 147*147 p. 116 [a court order in excess of jurisdiction “was not subject to collateral attack two years after it was entered”]; Mt. Holyoke Homes, LP v. California Coastal Com., supra, 167 Cal.App.4th at p. 842 [applicants could not set aside a voidable judgment where the applicants did not question jurisdiction until three and a half years after the latest date on which it contended the coastal commission lost jurisdiction].)

Michael and Joseph attempt to salvage their collateral attack on the alternative decree by asserting they “forewarned the trial court of this jurisdictional impediment” and agreed only to include the UCNP entities in the appraisal, not for purposes of the winding up and dissolution that followed their failure to buy Leonard’s interest in the appraised entities. This assertion does not persuade. First, Michael and Joseph’s so-called forewarning appeared in their motion to stay the involuntary dissolution causes of action filed six months before their stipulation to include the UCNP entities in the appraisal and buyout proceeding, and it made no mention of the UCNP entities. Second, the plain language of the stipulated order undermines Michael and Joseph’s position. It is true the stipulated order lists the UCNP entities as “Entities to be Valued as Part of the Appraisal Engagement,” which in turn is defined as “the engagement and qualifications of the appraisers and the appraisal process.” But the stipulated order also provides Judge Meisinger was to issue an order stating the cumulative value of Leonard’s one-third interest in the Sage Automotive Group, “which shall constitute the buy-out price to be paid by Michael and Joseph to Leonard (the `Buy-Out Value’),” and the order defines the Sage Automotive Group to include the UCNP entities. Thus, Michael and Joseph agreed the amount they had to pay to prevent the winding up and dissolution of the Sage Automotive Group included the value of the UCNP entities. If Michael and Joseph intended only to submit the UCNP entities to the appraisal process, they would not have agreed to an aggregate buyout value that did not differentiate among individual entities, or at least among the entity defendants and the UCNP entities.[10]

148*148 Michael and Joseph are attempting to unwind the alternative decree on the basis the trial court erred in doing the very thing Michael and Joseph asked the court to do. To approve their belated request would invite the very trifling with the courts the doctrine of estoppel to contest jurisdiction seeks to prevent. (See Lovett v. Carrasco, supra, 63 Cal.App.4th at pp. 54-55 [allowing a litigant to stipulate to a procedure in excess of jurisdiction and then challenge the procedure on appeal, would permit the parties “`”`to trifle with the courts'”‘”]; Law Offices of Ian Herzog v. Law Offices of Joseph M. Fredrics, supra, 61 Cal.App.4th at p. 680 [defendant’s stipulation the court could order the parties to arbitration estopped him from attacking arbitration award on that basis]; see also Kristine H. v. Lisa R., supra, 37 Cal.4th at p. 166; Mt. Holyoke Homes, LP v. California Coastal Com., supra, 167 Cal.App.4th at p. 842; In re Marriage of Jackson (2006) 136 Cal.App.4th 980, 989 [39 Cal.Rptr.3d 365]; Conservatorship of O’Connor, supra, 48 Cal.App.4th at p. 1092.)[11]

C. Leonard Lacked Standing To Assert His Cause of Action for Breach of Fiduciary Duty
Michael and Joseph contend Leonard did not have standing to assert an individual cause of action against them for breach of fiduciary duty because Leonard sought and received an award of damages to the Sage Automotive Group and not to himself. Leonard contends that he suffered an individual injury and that, in any event, close corporations like those comprising the Sage Automotive Group are not subject to the derivative action rule. Michael and Joseph have the better argument: The allegations in Leonard’s complaint, the evidence at trial, and the court’s findings show Leonard’s causes of action were derivative.

149*149 1. Applicable Law
“[M]ajority shareholders, either singly or acting in concert to accomplish a joint purpose, have a fiduciary responsibility to the minority and to the corporation to use their ability to control the corporation in a fair, just, and equitable manner. Majority shareholders may not use their power to control corporate activities to benefit themselves alone or in a manner detrimental to the minority. Any use to which they put the corporation or their power to control the corporation must benefit all shareholders proportionately and must not conflict with the proper conduct of the corporation’s business.” (Jones v. H. F. Ahmanson & Co. (1969) 1 Cal.3d 93, 108 [81 Cal.Rptr. 592, 460 P.2d 464] (Jones); accord, Sheley v. Harrop (2017) 9 Cal.App.5th 1147, 1171 [215 Cal.Rptr.3d 606]; see § 17704.09 [describing the fiduciary duties of members and managers of a limited liability company]; Feresi v. The Livery, LLC (2014) 232 Cal.App.4th 419, 425 [182 Cal.Rptr.3d 169] [same]; Everest Investors 8 v. McNeil Partners (2003) 114 Cal.App.4th 411, 424-425 [8 Cal.Rptr.3d 31] [describing the fiduciary obligations in a partnership].)

A minority shareholder may bring a cause of action for breach of fiduciary duty against majority shareholders as an individual claim or as a derivative claim, depending on the circumstances. (See Daly v. Yessne (2005) 131 Cal.App.4th 52, 63 [31 Cal.Rptr.3d 420]; Jara v. Suprema Meats, Inc. (2004) 121 Cal.App.4th 1238, 1252-1253, 1257-1258 [18 Cal.Rptr.3d 187] (Jara); see also Sutter v. General Petroleum Corp. (1946) 28 Cal.2d 525, 530 [170 P.2d 898] [“a stockholder may sue as an individual where he is directly and individually injured although the corporation may also have a cause of action for the same wrong”]; Goles v. Sawhney (2016) 5 Cal.App.5th 1014, 1018, fn. 3 [210 Cal.Rptr.3d 261] [“A single cause of action by a shareholder can give rise to derivative claims, individual claims, or both.”]; Denevi v. LGCC, LLC (2004) 121 Cal.App.4th 1211, 1222 [18 Cal.Rptr.3d 276] [same].) But where a cause of action seeks to recover for harms to the corporation, the shareholders have no direct cause of action “[b]ecause a corporation exists as a separate legal entity” (Grosset v. Wenaas (2008) 42 Cal.4th 1100, 1108 [72 Cal.Rptr.3d 129, 175 P.3d 1184] (Grosset)) and “`is the ultimate beneficiary of such a derivative suit'” (Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1003 [84 Cal.Rptr.3d 642]). (See Cotton v. Expo Power Systems, Inc., supra, 170 Cal.App.4th at p. 1380 [“A derivative claim is a property right that belongs to the corporation.”].)

“The shareholders may, however, bring a derivative suit to enforce the corporation’s rights and redress its injuries when the board of directors fails or refuses to do so. When a derivative suit is brought to litigate the rights of the corporation, the corporation is an indispensable party and must be joined as a nominal defendant.” (Grosset, supra, 42 Cal.4th at p. 1108; 150*150 accord, Jones, supra, 1 Cal.3d at pp. 106-107; see Patrick v. Alacer Corp., supra, 167 Cal.App.4th at p. 1004 [“Though the corporation is essentially the plaintiff in a derivative action, `[w]hen a derivative suit is brought to litigate the rights of the corporation, the corporation … must be joined as a nominal defendant.'”].)

“An action is deemed derivative `”if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets.”‘ [Citation.] When a derivative action is successful, the corporation is the only party that benefits from any recovery; the shareholders derive no benefit `”except the indirect benefit resulting from a realization upon the corporation’s assets.”‘” (Grosset, supra, 42 Cal.4th at p. 1108, fn. omitted; see Bader v. Anderson (2009) 179 Cal.App.4th 775, 793 [101 Cal.Rptr.3d 821] [“a derivative suit is one in which the shareholder seeks `redress of the wrong to the corporation'”].)

“`The stockholder’s individual suit, on the other hand, is a suit to enforce a right against the corporation which the stockholder possesses as an individual.'” (Jones, supra, 1 Cal.3d at p. 107, fn. omitted; see Bader v. Anderson, supra, 179 Cal.App.4th at p. 793; Denevi v. LGCC, LLC, supra, 121 Cal.App.4th at p. 1222.) For example, “`[i]f the injury is one to the plaintiff as a stockholder and to him individually, and not to the corporation, as where the action is based on a contract to which he is a party, or on a right belonging severally to him, or on a fraud affecting him directly, it is an individual action.'” (Sutter v. General Petroleum Corp., supra, 28 Cal.2d at p. 530.) “The individual wrong necessary to support a suit by a shareholder need not be unique to that plaintiff. The same injury may affect a substantial number of shareholders. If the injury is not incidental to an injury to the corporation, an individual cause of action exists.” (Jones, supra, 1 Cal.3d at p. 107, fn. omitted; see Bader, at p. 793 [“A direct (as opposed to a derivative) action is maintainable `only if the damages [are] not incidental to an injury to the corporation.'”]; see also Schuster v. Gardner (2005) 127 Cal.App.4th 305, 313 [25 Cal.Rptr.3d 468]; Denevi, at p. 1222; Nelson v. Anderson (1999) 72 Cal.App.4th 111, 124 [84 Cal.Rptr.2d 753] (Nelson).)

The principles governing derivative actions in the context of corporations apply to limited liability companies and limited partnerships. (See Sprengel v. Zbylut (2019) 40 Cal.App.5th 1028, 1040-1041 [253 Cal.Rptr.3d 561] [limited liability company]; Everest Investors 8 v. McNeil Partners, supra, 114 Cal.App.4th at pp. 425-426 [limited partnership].) We review de novo the trial court’s ruling Leonard had standing to maintain his cause of action for breach of fiduciary duty as an individual claim, rather than a 151*151 derivative claim. (See A.J. Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 687 [251 Cal.Rptr.3d 423] [standing is a question of law to which we apply a de novo standard of review]; Citizens for Amending Proposition L v. City of Pomona (2018) 28 Cal.App.5th 1159, 1174 [239 Cal.Rptr.3d 750] [same].)

2. Leonard Sought and Recovered Damages for Injuries to the Sage Automotive Group
Leonard alleged Michael and Joseph committed a wide variety of misdeeds, including “misappropriat[ing] at least $1.7 million of company funds” to open, advertise, and operate a Lotus dealership without Leonard’s consent or participation; mismanaging the Sage Automotive Group by engaging in “dishonest and manipulative accounting practices”; using Sage Automotive Group assets for personal gain; undermining Leonard’s authority with Sage Automotive Group employees; denying Leonard access to Sage Automotive Group’s books, records, and bank accounts; ceasing payment for directors and officers insurance coverage; and rebranding the Sage Automotive Group without Leonard’s consent. Leonard alleged these acts “significantly impeded Leonard’s ability to manage or participate in the affairs of the [Sage Automotive Group],” “caused damage to the [Sage Automotive Group,] and devalued his interest in turn.”

At trial, Leonard’s expert witness on damages, Gordon Klein, calculated Leonard’s damages as one-third the difference between the 2015 court-approved valuation in the alternative decree and the value of the Sage Automotive Group at the time of trial, adjusted for market changes. Klein reviewed the dealerships’ financial statements “to ascertain the diminution in value which ha[d] occurred” and concluded they collectively had declined in value over $65 million since April 2015. Klein attributed additional losses to a $3.6 million settlement with the Federal Trade Commission that arose from alleged misconduct by Michael and Joseph, “[e]xcess payments” to accountants and lawyers, and a reserve of $6 million for the anticipated settlement of a warranty fraud case brought by Nissan Motor Company against Michael and Joseph. Klein opined the total “loss in value” of the Sage Automotive Group was over $75 million, of which one-third, or approximately $25 million, was “[s]uffered by [Leonard]” because he owned one-third of the businesses. Klein estimated that, depending on the court’s findings, losses due to market forces not attributable to Michael and Joseph’s “alleged mismanagement” could reduce Leonard’s damages to about $18 million. For this reason, Klein determined Leonard’s damages were between $18,311,746 and $24,418,473.

152*152 Klein also testified he did not include in his analysis any amounts for Leonard’s claims against Michael and Joseph for “`personal misappropriations'” or “personal aggrandizement,” which Klein defined as “taking economic benefits or sums that are outside the ordinary course of business and/or were not expenses incurred for the economic benefit of the business or its partners.” Klein also said he did not analyze whether using Sage Automotive Group funds to seed the Lotus dealership caused specific losses to the Group. Klein said the scope of his assignment was to focus on, “at the core, the diminution in the value of the dealerships, plus … avoidable liabilities and payments that, but for alleged misconduct …, should not have happened and, therefore, result[ed] in damages.”

The trial court, in its statement of decision, found Michael and Joseph “pushed [Leonard] out” of the Sage Automotive Group, leaving him no “meaningful control over its operations”; engaged in self-dealing by diverting Sage Automotive Group funds to the separately held Lotus dealership; expended Sage Automotive Group assets without authorization; engaged in false advertising that led to the settlement with the Federal Trade Commission and a “dramatic drop in profit[s]”; and left the Sage Automotive Group in such “financial turmoil” that some of its assets had to be sold to a competitor. The trial court credited Klein’s damages analysis and awarded Leonard the upper end of Klein’s range (i.e., $24,418,472), “given the defense’s total failure to substantiate market causes for the precipitous and undisputed decline” in the Sage Automotive Group’s value, offset by losses attributable to Leonard’s unclean hands.

The allegations in Leonard’s first amended complaint, the basis and calculation of Leonard’s damages at trial, and the court’s findings show that the gravamen of Leonard’s action was injury to the Sage Automotive Group and the “whole body of its stock and property” and that Leonard sought to, and ultimately did, recover damages for injuries to the entities. (Grosset, supra, 42 Cal.4th at p. 1108; see Avikian v. WTC Financial Corp. (2002) 98 Cal.App.4th 1108, 1115 [120 Cal.Rptr.2d 243] (Avikian) [plaintiffs’ “core claim” of mismanagement that caused the corporation’s demise “amount[ed] to a claim of injury to [the corporation] itself”]; Nelson, supra, 72 Cal.App.4th at p. 127 [“the action must be derivative” where the defendant’s actions caused the corporation to lose “earnings, profits, and opportunities, rendering all the shares valueless”].) Leonard did not allege, and the trial court did not award, damages for any injury that was not “incidental to an injury to the corporation.” (Jones, supra, 1 Cal.3d at p. 107; see ibid. [although the plaintiff alleged “the value of her stock [was] diminished by defendants’ actions,” she did not allege “the diminished value reflect[ed] an injury to the corporation and resultant depreciation in the value of the stock”]; Avikian, at p. 1116 [the plaintiffs’ “own damages, the loss in value of their investments 153*153 in [the corporation], were merely incidental to the alleged harm inflicted upon [the corporation] and all its shareholders” (italics omitted)].)

Indeed, Leonard’s primary complaint was that his brothers’ mismanagement (including by driving him out of the Sage Automotive Group) squandered the Sage Automotive Group’s assets and ultimately led to its demise. That is a derivative claim. “[W]here conduct, including mismanagement by corporate officers, causes damage to the corporation, it is the entity that must bring suit; the individual shareholder may not bring an action for indirect personal losses (i.e., decrease in stock value) sustained as a result of the overall harm to the entity.” (Bader v. Anderson, supra, 179 Cal.App.4th at p. 788; see Heshejin v. Rostami (2020) 54 Cal.App.5th 984, 994, fn. 10 [268 Cal.Rptr.3d 836] [“`”a shareholder cannot bring a direct action for damages against management on the theory their alleged wrongdoing decreased the value of his or her stock (e.g., by reducing corporate assets and net worth)”‘”; instead, the “`”corporation itself must bring such an action, or a derivative suit may be brought on the corporation’s behalf”‘”]; Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 651 [32 Cal.Rptr.3d 266] [plaintiff’s breach of fiduciary duty claim for corporate mismanagement and diverting corporate assets was derivative]; PacLink Communications Internat., Inc. v. Superior Court (2001) 90 Cal.App.4th 958, 964 [109 Cal.Rptr.2d 436] [minority members’ fraudulent transfer claim was derivative where the “injury was essentially a diminution in the value of their membership interest in the [limited liability company] occasioned by the loss of the company’s assets”]; Nelson, supra, 72 Cal.App.4th at pp. 125-126 [minority shareholder’s breach of fiduciary duty claim alleging the other shareholder of the corporation negligently managed the business was derivative]; Marsh et al., Marsh’s Cal. Corp. Law (2021 supp.) Derivative Action, § 15.11[A][1] [“The clearest cases [of derivative actions] are those involving situations where the alleged wrongful actions of the defendants have reduced the corporate assets and net worth.”].)

Leonard makes two arguments to show his cause of action for breach of fiduciary duty was an individual claim. First, Leonard lists 10 injuries that he says “hurt [him] alone.” None of the listed injuries, however, caused a discrete injury or damages to Leonard. Five of the listed injuries affected or reduced corporate assets or value without creating any nonincidental injuries to Leonard: (1) destruction of a document “related to personal spending using [Sage Automotive Group] funds”; (2) exclusion of Leonard from operational decisions; (3) falsification of corporate records and decisionmaking without Leonard’s input; (4) falsification of Leonard’s signature on an application to 154*154 purchase a Hyundai dealership;[12] and (5) the purchase of the Hyundai dealership without consulting Leonard.[13] Two injuries listed by Leonard—(6) instruction to Sage Automotive Group’s counsel to file a cross-complaint against Leonard, requiring Leonard “to `pay for a lawsuit against himself,'” and (7) use of the cross-complaint “as a `pretextual threat to remove Leonard as a board member'”—were cited by the trial court as evidence of Michael and Joseph’s oppression in support of the award of punitive damages; they were not bases for the compensatory damages award.

Another listed injury—(8) failure to honor the wish of the brothers’ father to make Leonard the majority owner of the Sage Automotive Group—is conduct ascribed to Sage Automotive Group’s (or their father’s) lawyer, not to Michael and Joseph; and another—(9) issuance of unequal distribution checks—is contradicted by the court’s statement of decision, which acknowledged that Leonard eventually received the missing distribution check, albeit six weeks after Michael and Joseph received theirs. That leaves (10), Leonard’s claim he suffered discrete injuries when Michael and Joseph reneged on their promise “`to “indemnify” Leonard'” for losses related to the Lotus dealership separately held by Michael and Joseph. The promise apparently flowed from the two brothers’ recognition they used Sage Automotive Group funds to seed the new Lotus dealership. Even if Michael and Joseph’s failure to indemnify Leonard and make him whole created an individual injury, the court awarded Leonard damages based on the overall diminution in value to the Sage Automotive Group, not the amount Michael and Joseph owed Leonard from funds used to start a separately owned venture.

Second, Leonard argues we should follow the decision in Jara, which, according to Leonard, “support[ed] the notion that the policy reasons undergirding the rule requiring shareholder lawsuits to proceed derivatively do not apply to actions involving closely held businesses” like the Sage Automotive Group. In Jara the minority shareholder of a corporation alleged the two other shareholders breached their fiduciary obligations by paying themselves excessive executive compensation without the plaintiff’s approval and for the purpose of reducing the amount of profit to be shared with the plaintiff. (Jara, supra, 121 Cal.App.4th at pp. 1248, 1258.) The plaintiff did not allege the two majority shareholders mismanaged the corporation; in fact, the corporation’s success enabled the majority shareholders to increase their executive compensation. (Id. at p. 1247.)

155*155 The court in Jara held that, while “the alleged payment of excessive compensation did have the potential of damaging the business,” the plaintiff stated an individual cause of action against the majority shareholders because he alleged the payment of executive compensation “was a device to distribute a disproportionate share of the profits to the two officer shareholders during a period of business success.” (Jara, supra, 121 Cal.App.4th at p. 1258.) The court read the Supreme Court’s decision in Jones to allow “a minority shareholder to bring a personal action alleging `a majority stockholders’ breach of a fiduciary duty to minority stockholders, which resulted in the majority stockholders retaining a disproportionate share of the corporation’s ongoing value.'” (Jara, at pp. 1257-1258; see Jones, supra, 1 Cal.3d at p. 107; see also Crain v. Electronic Memories & Magnetics Corp. (1975) 50 Cal.App.3d 509, 521-522 [123 Cal.Rptr. 419] [breach of fiduciary cause of action against a majority shareholder for self-dealing that enriched the majority shareholder and left minority shares “valueless and unsalable” was an individual claim].)

We have some doubt whether Jara was correctly decided. At a minimum, however, it is distinguishable. The court in Jara characterized the plaintiff’s claim as “tantamount to a discriminatory payment of dividends” and cited cases allowing individual causes of action to recover the value of disproportionate payments to majority shareholders. (Jara, supra, 121 Cal.App.4th at pp. 1256-1257, citing Smith v. Tele-Communication, Inc. (1982) 134 Cal.App.3d 338, 341-342 [184 Cal.Rptr. 571] [majority shareholders retained disproportionate value of tax savings]; Crain v. Electronic Memories & Magnetics Corp., supra, 50 Cal.App.3d at p. 521 [majority shareholder “deprived plaintiffs of their ownership interests in an ongoing and potentially profitable business without any compensation whatsoever”]; Low v. Wheeler (1962) 207 Cal.App.2d 477, 479 [24 Cal.Rptr. 538] [majority shareholders “refused to declare dividends” to minority shareholder]; De Martini v. Scavenger’s Protec. Assn. (1935) 3 Cal.App.2d 691, 698 [40 P.2d 317] [majority shareholders deprived the minority shareholders of their “`share of the profits of the business'”].)

The Jara court distinguished the circumstances in these cases from those in cases “dealing with mismanagement,” such as Avikian, supra, 98 Cal.App.4th 1108 and Nelson, supra, 72 Cal.App.4th 111. (Jara, supra, 121 Cal.App.4th at p. 1258.) In Avikian a group of minority shareholders alleged the majority shareholders improperly bought and sold assets of the corporation and, with the corporation in financial distress, chose to pursue a “self-serving arrangement[] causing the demise of [the corporation],” rather than accepting an investor who was “willing to rescue” the corporation. (Avikian, at p. 1116.) The court in Avikian held that these alleged acts harmed the corporation rather than merely “affect[ing] the way in which the parties owned it” (id. at p. 1115) and that, because the plaintiffs’ damages were “the loss in value of 156*156 their investments in [the corporation],” their damages were “merely incidental to the alleged harm inflicted upon [the corporation] and all its shareholders” (id. at p. 1116). In Nelson a minority shareholder sued the majority shareholder for breach of fiduciary duty after the majority shareholder made “improper management decisions,” causing the minority shareholder “to lose her investment and prospective profits.” (Nelson, at p. 124.) The minority shareholder argued she could bring an individual cause of action because she “suffered injury to her reputation and emotional distress, and lost her out-of-pocket expenses, as well as other employment opportunities.” (Ibid.) The court in Nelson disagreed: “Because all of the acts alleged to have caused [the plaintiff’s] injury amount to alleged misfeasance or negligence in managing the corporation’s business, causing the business to be a total failure, any [fiduciary] obligations so violated were duties owed directly and immediately to the corporation.” (Id. at p. 125.) Moreover, “[t]he economic damages proven at trial were lost profits to the corporation as the result of rejected opportunities.” (Id. at p. 126.)

This case is more like Avikian and Nelson than Jara. Unlike the plaintiff in Jara, Leonard did not allege Michael and Joseph retained a disproportionate share of the Sage Automotive Group’s value; he alleged Michael and Joseph destroyed the value of the businesses for all of the shareholders (and members and partners). The court awarded Leonard damages based on the overall diminution in value of the Sage Automotive Group, not the difference in value between Leonard’s shares in the Group and those of Michael and Joseph. (Cf. Jara, supra, 121 Cal.App.4th at p. 1258 [describing the plaintiff’s damages as his “fair share of the corporation’s profits”]; see also Jones, supra, 1 Cal.3d at p. 107 [the diminution in value of the minority shareholders’ stock did not “reflect[] an injury to the corporation,” but instead resulted from the majority shareholders’ self-serving scheme to increase the value of their shares]; Smith v. Tele-Communication, Inc., supra, 134 Cal.App.3d at p. 342 [plaintiff was “deprived of a portion of his distributive share of [the corporation]”].) Similar to the plaintiffs’ allegations in Avikian and Nelson, Leonard alleged that his brothers’ mismanagement diminished the value of the Sage Automotive Group overall and that the value of each of their interests, “in turn,” suffered accordingly. That Klein computed Leonard’s damages by dividing the Sage Automotive Group’s overall diminution of value by three confirms the gravamen of Leonard’s complaint was injury to the corporation as a whole, “`”without any severance or distribution among individual holders,”‘” and not to Leonard individually. (Grosset, supra, 42 Cal.4th at p. 1108; see Avikian, supra, 98 Cal.App.4th at p. 1116.)

The court in Jara also relied on the absence of policy considerations favoring a derivative action in the context of that case, including preventing “`a multiplicity of actions by each individual shareholder,'” protecting creditors “`who have first call on the corporate assets,'” and complying with procedural 157*157 prerequisites for bringing a derivative action under section 800.[14] (Jara, supra, 121 Cal.App.4th at pp. 1258-1259.) Section 800, the court stated, “shield[s] the corporation from meritless lawsuits by requiring the plaintiffs to have contemporaneous stock ownership and by giving the defendants the right to move the court for an order requiring a bond” and “requires the plaintiffs to submit a demand to the board of directors before filing suit” to encourage the “`intracorporate resolution of disputes'” and protect “`managerial freedom.'” (Jara, at p. 1259; see § 800, subds. (b) & (c).) The court in Jara observed: “The objective of preventing a multiplicity of lawsuits and assuring equal treatment for all aggrieved shareholders does not arise at all when there is only one minority shareholder. The objective of encouraging intracorporate resolution of disputes and protecting managerial freedom is entirely meaningless where the defendants constitute the entire complement of the board of directors and all the corporate officers. And the policy of preserving corporate assets for the benefit of creditors has, at best, a very weak application where the corporation remains a viable business.” (Jara, at p. 1259.)

The court in Nelson also considered whether the policies advanced by the derivative action rule applied in the context of close corporations and reached the opposite conclusion. The court stated: “A derivative action may appear to [the plaintiff] to be an empty formality when there are only two shareholders, and one of them is the alleged wrongdoer. However, the law demands certain prerequisites to bringing a derivative action which have not been alleged or proven in this case, such as alleging `in the complaint with particularity[, the] plaintiff’s efforts to secure from the board such action as plaintiff desires, or the reasons for not making such effort, and … further that plaintiff has either informed the corporation or the board in writing of the ultimate facts of each cause of action against each defendant or delivered to the corporation or the board a true copy of the complaint which plaintiff proposes to file.'” (Nelson, supra, 72 Cal.App.4th at p. 127.)

We acknowledge the policies underlying the derivative action rule do not apply with equal force in actions involving closely held companies. Requiring Leonard to name the entities that comprise the Sage Automotive Group (and the UCNP entities) as nominal defendants in this action will not prevent a multiplicity of lawsuits or assure equal treatment for all aggrieved shareholders. And the objective of encouraging intracorporate resolution of disputes and 158*158 protecting managerial freedom has less meaning where Michael, Joseph, and Leonard constitute the board of directors and corporate officers. (See Jara, supra, 121 Cal.App.4th at p. 1259.) But the plain language of sections 800, 15910.02, and 17709.02 does not exclude close corporations or small partnerships or companies from the procedural prerequisites before a shareholder, limited partner, or member may file a derivative action. (See Nelson, supra, 72 Cal.App.4th at p. 127.) To allow Leonard to maintain his cause of action for breach of fiduciary duty as an individual action would essentially eliminate the derivative action rule in the context of close corporations and other closely held entities. California law does not support that result.

3. Leonard Did Not Allege a Derivative Cause of Action or Comply with the Statutory Prerequisites To Bring Such an Action
Leonard did not allege a derivative cause of action on behalf of the Sage Automotive Group (or any of its constituent entities) or attempt to comply with the requirements of sections 800, 15910.02, or 17709.02 to do so. Therefore, Leonard did not have standing to bring such an action, and the judgment on the cause of action for breach of fiduciary duty must be reversed. (See Bader v. Anderson, supra, 179 Cal.App.4th at p. 793; Nelson, supra, 72 Cal.App.4th at pp. 127-128.)

DISPOSITION
The judgment on the causes of action for involuntary dissolution is modified, consistent with Schrage I, to correct the amount in favor of Leonard Schrage to $401,509.50 and, as modified, is affirmed. The order denying Michael and Joseph’s motion to set aside the judgment is affirmed. The appeals from the alternative decree and the order appointing the referee are dismissed. The judgment on the cause of action for breach of fiduciary duty is reversed. The parties are to bear their costs on appeal.

Perluss, P. J., and Feuer, J., concurred.

[1] Undesignated statutory references are to the Corporations Code.

[2] We take judicial notice of the May 31, 2018 order of dismissal in Schrage v. Schrage (B285049) under Evidence Code sections 452, subdivision (d), and 459. The notice of appeal in this case purports to appeal again from the July 28, 2017 order. We dismiss the second appeal from that order as untimely.

[3] Michael and Joseph appealed from this portion of the judgment in Schrage I, and we modified the amount to strike $561,393.63 in injunction-related attorneys’ fees, leaving an award of $401,509.50 for referee fees and appraisal-related attorneys’ fees. (Schrage I, supra, B288478.)

[4] Joseph Schrage died after the trial court entered judgment in this action, and the executor of his estate filed the notice of appeal.

[5] Michael and Joseph do not argue the trial court lacked personal jurisdiction over the UCNP entities, even though the two brothers claim they made that argument in their motions for a new trial and for an order vacating the judgment, and even though their opening brief on appeal cites law that a judgment is void if the trial court lacked personal jurisdiction.

[6] We do not address Michael and Joseph’s argument the trial court lacked subject matter and personal jurisdiction to order “post judgment, Sage Vermont, nunc pro tunc, as a `dissolved entity’ under the control of the receiver to be wound up.” There is no indication in the record Michael and Joseph appealed from that order, which was issued on August 16, 2019, after Michael and Joseph filed their notices of appeal in this action, and which is not included in the record of this appeal. Even assuming the August 16, 2019 order was appealable, we do not have jurisdiction to review it in this appeal. (See In re Baycol Cases I & II (2011) 51 Cal.4th 751, 761, fn. 8 [122 Cal.Rptr.3d 153, 248 P.3d 681] [“if an order is appealable, [an] appeal must be taken or the right to appellate review is forfeited”]; Williams v. Impax Laboratories, Inc. (2019) 41 Cal.App.5th 1060, 1071 [254 Cal.Rptr.3d 707] [same].) In addition, the vast majority of Michael and Joseph’s argument appears in a footnote. (See Sabi v. Sterling (2010) 183 Cal.App.4th 916, 947 [107 Cal.Rptr.3d 805] [“Footnotes are not the appropriate vehicle for stating contentions on appeal.”]; Evans v. Centerstone Development Co. (2005) 134 Cal.App.4th 151, 160 [35 Cal.Rptr.3d 745] [raising an issue in a two-page footnote “is a violation of court rules that require arguments to be contained in discrete sections with headings summarizing the point”]; see also Holden v. City of San Diego (2019) 43 Cal.App.5th 404, 419-420 [255 Cal.Rptr.3d 873] [an “appellant cannot bury a substantive legal argument in a footnote and hope to avoid waiver of that argument”].)

[7] We also question whether Michael and Joseph have standing to assert this argument on behalf of the UCNP entities. (See City of Riverside v. Horspool (2014) 223 Cal.App.4th 670, 678 [167 Cal.Rptr.3d 440] [a party may appeal “only that portion of the judgment adverse to the appealing party’s interest”]; In re Marriage of Hinman, supra, 6 Cal.App.4th at p. 719, fn. 3 [an “appellant may only complain of errors which injuriously affect her”]; Nichols v. Nichols (1933) 135 Cal.App. 488, 491 [27 P.2d 414] [an appellant cannot “urge errors which affect only his coparties who do not appeal, and such errors can be reviewed only at the instance of the parties affected thereby”]; see also Brenner v. Universal Health Services of Rancho Springs, Inc. (2017) 12 Cal.App.5th 589, 605 [219 Cal.Rptr.3d 135] [“As a general rule, a third party does not have standing to bring a claim asserting a violation of someone else’s rights.”].) After all, as we will discuss, Michael and Joseph argue Leonard lacked standing to assert his cause of action for breach of fiduciary duty for the very reason the alleged violations harmed only the entity defendants, not Leonard. Similarly, Michael and Joseph arguably lack standing to argue on behalf of the UCNP entities that the alternative decree and judgment cannot bind the UCNP entities. Although the buyout statutes give any shareholder aggrieved by an alternative decree standing to appeal the court’s decision (§§ 2000, subd. (c), 17707.03, subd. (c)(3), § 15908.02, subd. (d)), Michael and Joseph dismissed their appeal from the alternative decree. And they do not argue on appeal they were injured by the court’s exercise of jurisdiction over the UCNP entities.

[8] The January 5, 2017 stipulated order gave Michael and Joseph the right to raise any dispute concerning the proceedings with Judge Meisinger. According to the alternative decree, after the appraisal and valuation process was complete Michael and Joseph asked Judge Meisinger for the first time to make discrete findings on the value of the constituent entities comprising the Sage Automotive Group (which included the UCNP entities). Judge Meisinger denied Michael and Joseph’s request “for the reasons stated in the transcript of that hearing.” Michael and Joseph do not challenge that aspect of Judge Meisinger’s decision or the alternative decree, nor did they include the transcript of the hearing before Judge Meisinger in the record on appeal.

[9] In Schrage I we rejected Michael and Joseph’s argument the alternative decree was void for lack of jurisdiction because they failed to appeal directly from the order, file a motion under Code of Civil Procedure section 473, subdivision (d), or file a collateral action challenging the order. (Schrage I, supra, B288478.)

[10] Michael and Joseph recognize their collateral attack on the consent decree is limited to jurisdictional arguments. (See Kabran v. Sharp Memorial Hospital (2017) 2 Cal.5th 330, 339 [212 Cal.Rptr.3d 361, 386 P.3d 1159]; Armstrong v. Armstrong (1976) 15 Cal.3d 942, 950-951 [126 Cal.Rptr. 805, 544 P.2d 941].) In a nod to that limitation, Michael and Joseph argue the trial court “exceeded its jurisdiction” by failing to include in the buyout value “the economic impact of Leonard’s derivative allegations and prayer in his verified complaint.” This is not a jurisdictional argument; it is an argument the trial court made a substantive error in determining the value of the buyout entities. A “mistaken application of law” cannot be collaterally attacked. (Armstrong, at pp. 950-951; see Fireman’s Fund Ins. Co. v. Workers’ Comp. Appeals Bd. (2010) 181 Cal.App.4th 752, 767 [104 Cal.Rptr.3d 641] [“Errors of substantive law are within the jurisdiction of a court and are not typically acts beyond the court’s fundamental authority to act.”].)

[11] Michael and Joseph listed in their notices of appeal a “Void Judgment” dated September 27, 2017, which was actually the trial court’s order appointing a receiver. That order was appealable, and Michael and Joseph did not file a timely notice of appeal. (See Code Civ. Proc., § 904.1, subd. (a)(7); Wells Fargo Financial Leasing, Inc. v. D & M Cabinets (2009) 177 Cal.App.4th 59, 66 [99 Cal.Rptr.3d 97].) Because Michael and Joseph do not argue the order was void, except as a consequence of the court’s lack of jurisdiction to enter the alternative decree, we do not have jurisdiction to consider any appeal from the September 27, 2017 order and must dismiss the appeal from that order. (See City of Calexico v. Bergeson (2021) 64 Cal.App.5th 180, 189 [278 Cal.Rptr.3d 470].) And even if we had jurisdiction, Michael and Joseph forfeited the argument by failing to support it in their briefs with any argument or citation to authority. (See Rios v. Singh (2021) 65 Cal.App.5th 871, 881 [280 Cal.Rptr.3d 404]; Cal. Rules of Court, rule 8.204(a)(1)(B) [briefs must support each point by argument and, if possible, by citation of authority].) And, even if we considered the argument on the merits, it would fail for the same reasons the argument concerning the alternative decree fails.

Michael and Joseph also appeal from the trial court’s postjudgment order denying their motion to set aside the judgment under Code of Civil Procedure sections 663 and 663a on the same grounds. That order is appealable. (See Ryan v. Rosenfeld (2017) 3 Cal.5th 124, 131-135 [218 Cal.Rptr.3d 654, 395 P.3d 689].) We affirm it for the same easons we affirm the judgment of dissolution.

[12] Leonard presumably could allege an individual injury as a result of identity theft, but he did not, and the court did not award any damages for identity theft or similar injury.

[13] In connection with the withholding of books and records, Leonard did not allege his inability to inspect company records precluded him from discharging his fiduciary duty or attempting to enforce his inspection rights under section 1601 or 1602. (See generally Wolf v. CDS Devco (2010) 185 Cal.App.4th 903, 916 [110 Cal.Rptr.3d 850]; Havlicek v. Coast-to-Coast Analytical Services, Inc. (1995) 39 Cal.App.4th 1844, 1856 [46 Cal.Rptr.2d 696].)

[14] Section 800 states the procedural prerequisites to bringing a derivative action against a corporation. In general, section 800, subdivision (b), requires a shareholder to inform the directors about the action and to “make a reasonable effort to induce them to commence suit themselves or otherwise redress the wrong, unless such efforts would be `useless’ or `futile.'” (Friedman et al., Cal. Practice Guide: Corporations (The Rutter Group 2021 supp.)  6:622; see § 800, subd. (b)(2).) Section 800, subdivision (c), gives the corporation and its directors the right to ask the court to require a bond under certain circumstances. Sections 17709.02 and 15910.02 provide similar procedural requirements for derivative actions on behalf of limited liability companies and limited partnerships, respectively.

 

Rischbieter v. Blue Lake Springs

Rischbieter v. Blue Lake Springs
(Aug. 11, 2021, No. C087880) __Cal.App.5th__ [2021 Cal. App. Unpub. LEXIS 5180].

Court of Appeals of California, Third District, Calaveras

Filed August 11, 2021

No. C087880

Summary by Jillian M. Wright, Esq.:

The corporation is a community association under the Davis-Stirling Common Interest Development Act even if its articles of incorporation do not comply with Civil Code section 4280 because that section does not articulate a consequence for such an omission and the association demonstrated a good faith attempt to organize under the Davis-Stirling Common Interest Development Act.

TAKEAWAY: Associations should check their articles of incorporation and other governing documents and check with legal counsel if there is any ambiguity as to whether the Davis-Stirling Common Interest Development Act applies.

***End Summary***

 

DOUGLAS C. RISCHBIETER, Plaintiff and Appellant,
v.
BLUE LAKE SPRINGS HOMEOWNERS ASSOCIATION, Defendant and Respondent.

DOUGLAS C. RISCHBIETER, Plaintiff and Appellant,
v.
BLUE LAKE SPRINGS HOMEOWNERS ASSOCIATION, Defendant and Respondent.

Appeal from the Superior Court No. 15CV40810

NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

MAURO, Acting P. J.

Douglas Rischbieter, the owner of two property lots in a Calaveras County subdivision, sued the Blue Lake Springs Homeowners Association (Blue Lake) after it reinstated a requirement that property owners pay dues per lot rather than per member. The trial court granted Blue Lake’s motion for judgment (Code Civ. Proc., § 631.8) and entered judgment in favor of Blue Lake.

Rischbieter now contends (1) Blue Lake made a judicial admission that a property owner cannot hold more than one Blue Lake membership, and the trial court should not have allowed evidence to the contrary; (2) Blue Lake is not an “association” within the meaning of the Davis-Stirling Common Interest Development Act (the Davis-Stirling Act) (Civ. Code, § 4000 et seq.); (3) the Corporations Code exception allowing a property owner to hold more than one membership in a homeowners association does not apply to Blue Lake; and (4) the trial court erred in excluding a 2012 letter.

We asked the parties for supplemental briefing on whether an entity is not an association within the meaning of the Davis-Stirling Act if its articles of incorporation do not comply with Civil Code section 4280, subdivision (a), and also whether a de facto association could exist when there is a defect in the articles of incorporation.

Having considered the briefing and arguments of the parties, we conclude (1) Blue Lake did not make a clear and unequivocal admission that a property owner cannot hold more than one Blue Lake membership, (2) during the relevant time period, Blue Lake was an association under the Davis-Stirling Act, (3) the exception set forth in Corporations Code section 7312, subdivision (d) is applicable in this case, and (4) Rischbieter’s evidentiary challenge has not been preserved for review.

We will affirm the judgment.

BACKGROUND
Blue Lake filed articles of incorporation with the Secretary of State in 1963 and subsequently filed amended articles in 1965, 1969, and 1983. The amended articles filed in 1983 state that Blue Lake is a nonprofit mutual benefit corporation with the purpose to maintain and operate recreational facilities for the benefit of the owners of lots in the Blue Lake Springs subdivision.

At the time of trial, the recreational facilities for the Blue Lake Springs subdivision included two lakes, beaches, a lodge and restaurant, tennis courts, a swimming pool, a shuffleboard court, a basketball court, and a playground. Blue Lake also offered various programs and activities for children and adults.

The covenants, conditions and restrictions (CC&Rs) for the subdivision required property owners to become members of Blue Lake and to pay membership dues fixed by Blue Lake. Blue Lake’s manager testified that the words “dues” and “assessments” were used interchangeably.

Rischbieter and his wife owned two lots in the subdivision. From 1997 through 2008, Rischbieter made two dues payments for the two lots and received two membership cards. However, for the year 2009, the Blue Lake board voted that dues would be assessed per member rather than per lot. Rischbieter made only one dues payment that year. But the following year, the Blue Lake board voted that dues would again be assessed per lot.

Although Rischbieter made two dues payments in 2010 and 2015, he made only a single payment for the years 2011 through 2014 and 2016 through 2018. Blue Lake sent Rischbieter delinquent notices and eventually suspended his membership.

Rischbieter sued Blue Lake in 2015, asserting causes of action for breach of the CC&Rs, waiver, estoppel, and declaratory and injunctive relief. The matter proceeded to a bench trial and after Rischbieter rested his case, Blue Lake moved for judgment under Code of Civil Procedure section 631.8. The trial court granted the motion and issued a statement of decision.

The trial court found that Blue Lake was a planned development as defined in Civil Code section 4175. It said the absence of certain language in Blue Lake’s articles of incorporation, as required by the Davis-Stirling Act, was excused because the articles were filed with the Secretary of State before the Davis-Stirling Act was enacted and there was no requirement that Blue Lake file amended articles. It further concluded that Blue Lake fell within the exception of Corporations Code section 7312, subdivision (d), because it is a common interest development. In addition, the trial court determined that Blue Lake’s bylaws and CC&Rs permitted dues to be charged per lot, the governing documents authorized Blue Lake to suspend a membership when a member did not pay all dues, and the evidence showed that Rischbieter did not pay all dues. The trial court granted judgment in favor of Blue Lake.

STANDARD OF REVIEW
During a bench trial, a party may move for judgment after the other party has finished presenting evidence. (Code Civ. Proc., § 631.8, subd. (a).) The trial court must weigh the evidence and may render a judgment in favor of the moving party or may decline to render judgment until the close of all the evidence. (Ibid.)

Our review of such a judgment and its underlying findings is the same as it would be for a judgment entered after a completed trial. The findings and judgment are not erroneous if supported by substantial evidence, and we view the evidence in the light most favorable to the judgment, resolving evidentiary conflicts in favor of the prevailing party and indulging in all reasonable inferences to uphold the trial court’s findings. But we independently review an interpretation of the law based on undisputed facts. (San Diego Metropolitan Transit Development Board v. Handlery Hotel, Inc. (1999) 73 Cal.App.4th 517, 528; see Golden Rain Foundation v. Franz (2008) 163 Cal.App.4th 1141, 1147 (Golden Rain).)

DISCUSSION
I
According to Rischbieter, Blue Lake made a judicial admission that a property owner cannot hold more than one Blue Lake membership, and the trial court should not have allowed evidence to the contrary.

Paragraph 14 of Rischbieter’s complaint alleged that pursuant to Corporations Code section 7312, no property owner may hold more than one Blue Lake membership. Blue Lake admitted that allegation in its answer to the complaint.

A pleading can limit the issues at trial and narrow the proof. If facts alleged in the complaint are not controverted by the answer, they are not in issue, and no evidence need be offered to prove their existence. If an issue has been removed from a case by an admission in the answer, it is error to receive evidence on the matter. (Fuentes v. Tucker (1947) 31 Cal.2d 1, 4-5; see Welch v. Alcott (1921) 185 Cal. 731, 754.)

Nevertheless, paragraph 14 cannot be viewed in isolation. Paragraph 15 of the complaint alleged that no exception in Corporations Code section 7312 applied to Blue Lake, but Blue Lake denied that allegation. Blue Lake also denied the allegations in paragraphs 16 and 17 of the complaint that Rischbieter held only one Blue Lake membership and that pursuant to Corporations Code section 7312, Blue Lake could only charge Rischbieter dues for one membership. On this record, there was no clear and unequivocal admission by Blue Lake that a property owner could not hold more than one Blue Lake membership. (See Geimann v. Board of Police Commissioners (1910) 158 Cal. 748, 753-754; Spalding v. Spalding (1925) 75 Cal.App. 569, 581-582; see generally Fundin v. Chicago Pneumatic Tool Co. (1984) 152 Cal.App.3d 951, 955.) Rischbieter’s judicial admission contention lacks merit.

II
Rischbieter next claims Blue Lake is not an “association” within the meaning of Civil Code section 4080.

In California, common interest developments are subject to the provisions of the Davis-Stirling Act (§ 1350 et seq.), enacted in 1985. (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 377-378.) Here, the trial court made the correct threshold determination that the Blue Lake Springs subdivision was a planned development (a type of common interest development) within the meaning of the Davis-Stirling Act. (Civ. Code, §§ 4100, subd. (c), 4175, 4185, subd. (a)(3), 4095, subd. (a).) There were over 2,000 properties in the Blue Lake Springs subdivision, and Rischbieter and his wife owned two lots. Blue Lake did not own those lots, but instead owned and maintained the common areas. The CC&Rs and amended bylaws required lot owners to pay dues and authorized Blue Lake to record a lien against the property of a delinquent member and institute foreclosure proceedings to collect delinquent dues and assessments. Based on the above, the Blue Lake Springs subdivision was a planned development under the Davis-Stirling Act. (Civ. Code, § 4175.)

An association under the Davis-Stirling Act is (1) a nonprofit corporation or unincorporated association (2) created for the purpose of managing (3) a common interest development. (Civ. Code, § 4080.) The record shows that Blue Lake was a nonprofit corporation created to manage the Blue Lake Springs subdivision, a type of common interest development. (Civ. Code, §§ 4080, 4100, 4175.)

Nevertheless, Rischbieter argues Blue Lake is not an association because its articles of incorporation do not comply with Civil Code section 4280.

Civil Code section 4280 is part of the Davis-Stirling Act. Its predecessor statute (former Civil Code section 1363.5) provided in relevant part: “The articles of incorporation of any common interest development association filed with the Secretary of State on or after January 1, 1995, shall include a statement that . . . identifies the corporation as an association formed to manage a common interest development . . . .” (Stats. 1994, ch. 204, § 1, italics added [former Civil Code section 1363.5].)

The Legislature amended former Civil Code section 1363.5 in 2011, deleting the phrase “on or after January 1, 1995.” (Stats. 2011, ch. 204, § 1.) Then, in 2014, the statutory language became Civil Code section 4280 without further substantive change. (Stats. 2012, ch. 180, § 2.) In 2013, the Legislature added subdivision (c) (Stats. 2013, ch. 605, § 20), which provides: “Documents filed prior to January 1, 2014, in compliance with former Section 1363.5, as it read on January 1, 2013, are deemed to be in compliance with this section.”

Blue Lake’s amended articles of incorporation were filed before the enactment of the Davis-Stirling Act and did not contain a statement that Blue Lake was an association formed to manage a common interest development. The question is whether this omission precludes a finding that Blue Lake is an association under the Davis-Stirling Act.

Civil Code section 4280 does not articulate a consequence for such an omission. But California law provides that when there are defects in the formation of a corporation, a de facto corporation may exist “where there is an attempt in good faith to organize under a valid law, followed by use of the corporate franchise, i.e., actual assumption of corporate powers.” (9 Witkin, Summary of Cal. Law (11th ed. June 2020 update) Corporations, § 23; accord Midwest Air Filters Pacific, Inc. v. Finn (1927) 201 Cal. 587, 592 [“The requisites to constitute a corporation de facto are three: (1) A charter or general law under which such a corporation as it purports to be might lawfully be organized; (2) a bona fide attempt to organize thereunder; and (3) an actual user of the corporate franchise.”]; Westlake Park Inv. Co. v. Jordan (1926) 198 Cal. 609, 613-616 (Westlake Park) [same]; Martin v. Deetz (1894) 102 Cal. 55, 65 [stating that a de facto corporation “exists where a number of persons have organized and acted as a corporation; have put on the habiliments of a corporation; have assumed the form and features of a corporation; have conducted their affairs, to some extent, at least, by the methods and through the officers usually employed by corporations; and have assumed the appearance, at least, of the counterfeit presentment of a legal corporate body”]; 15 Cal.Jur.3d (August 2020 Update) Corporations, § 77.) In Westlake Park, the California Supreme Court observed that upholding de facto corporations encourages the stability of business transactions. (Westlake Park, at pp. 614-615.)

Here, Blue Lake filed articles of incorporation and amended articles of incorporation, managed the planned development, and also filed Statements of Information with the Secretary of State pursuant to Corporations Code section 8210, affirming it was an association formed to manage a common interest development under the Davis-Stirling Act. (See Civ. Code, §4280, subd. (b).) Under the circumstances, even if Blue Lake did not amend its articles of incorporation after the enactment of former Civil Code section 1363.5 to state that it was an association formed to manage a common interest development, it was nevertheless a de facto association under the Davis-Stirling Act during the relevant time period. (Civ. Code, §§ 4080, 4100, 4175, 4200.)

Rischbieter urges in his supplemental opening brief that Golden Rain, supra, 163 Cal.App.4th 1141, demonstrates why strict compliance should be required. But Golden Rain is inapposite; it involved Civil Code section 1353, not Civil Code section 4280, and it did not discuss the effects of non-compliance. (Golden Rain, at p. 1152.)

Rischbieter further asserts that Blue Lake is a social and recreational club, not an association. He says Blue Lake was so identified in its articles of incorporation. However, we cannot find the words “social and recreational club” in the original or amended articles of incorporation or in the Davis-Stirling Act. In any event, Rischbieter does not explain why a social and recreational club cannot be an association under the Davis-Stirling Act. We reject his unsupported argument.

III
Rischbieter further contends the Corporations Code exception allowing a property owner to hold more than one membership in a homeowners association does not apply to Blue Lake.

A nonprofit mutual benefit corporation, such as Blue Lake, may admit persons to membership, as provided in its articles of incorporation or bylaws. (Corp. Code, § 7310.) Generally, no person may hold more than one membership, and no fractional memberships may be held in the corporation, except as provided in Corporations Code section 7312. (Corp. Code, § 7312.) Corporations Code section 7312, subdivision (d) provides that the articles or bylaws of an association created in connection with a planned development with five or more lots may permit a person who owns more than one lot or unit to hold a separate membership for each lot or unit. (See also Bus. & Prof. Code, §§ 11003, 11004.5.)

During the relevant time period, Blue Lake was an association, and the Blue Lake Springs subdivision was a planned development with more than five lots. Moreover, based on the provisions of the amended bylaws, which we review de novo, a property owner may hold more than one membership in Blue Lake. Among other things, those provisions indicate that membership and the number of votes awarded were based on ownership of a lot; specifically, ownership of one lot gives rise to one membership and the right to exercise one vote. Consistent with our reading of the above provisions, Rischbieter said he had the right to exercise two votes because he owned two lots. Also, the amended bylaws obligated the board to send a written notice to each owner of annual and special assessments that were “levied against his or her Lot,” suggesting that assessments were to be levied on a per-lot basis. Our construction is consistent with Blue Lake’s practice of charging multiple-lot owners for multiple memberships. Although Rischbieter argues the governing documents did not allow charging on a per-lot basis, his failure to cite to the record forfeits the argument. (Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246-1247; City of Lincoln v. Barringer (2002) 102 Cal.App.4th 1211, 1239.)

Rischbieter urges that even if the exception set forth in Corporations Code section 7312, subdivision (d) is applicable, it could not require him to purchase two memberships, it would only “permit” him to do so upon his election. The language of the statute does not support the assertion that holding a separate membership for each lot under the section 7312, subdivision (d) is at the owner’s election. Rischbieter does not cite any authority supporting his interpretation of section 7312, subdivision (d).

Rischbieter also says Blue Lake did not have the authority to suspend his membership rights and privileges because he paid dues on one of his lots. But the CC&Rs provided that the right to use the recreational facilities may be suspended when a member is in default in the payment of any dues, fees or assessments levied by Blue Lake.

IV
In addition, Rischbieter argues the trial court abused its discretion by excluding an October 31, 2012 letter from evidence.

A trial court has broad discretion in determining the relevance of evidence. (Donlen v. Ford Motor Co. (2013) 217 Cal.App.4th 138, 148; McCoy v. Pacific Maritime Assn. (2013) 216 Cal.App.4th 283, 295.) The party challenging the trial court’s evidentiary ruling must make a clear showing that the ruling exceeds the bounds of reason. (Shaw v. County of Santa Cruz (2008) 170 Cal.App.4th 229, 281; Geffcken v. D’Andrea (2006) 137 Cal.App.4th 1298, 1307.)

Rischbieter argues the October 31, 2012 letter was probative of the fact that Blue Lake did not believe it had to follow the Davis-Stirling Act because it was an association. But he does not show where in the record he made such an argument in the trial court. He further argues the letter was relevant to paragraph 51.b of his complaint, which alleged that Blue Lake breached the CC&Rs and/or bylaws by unreasonably and arbitrarily suspending his membership and privileges to use the recreational facilities. Again, however, Rischbieter does not show that he pointed to paragraph 51.b in the trial court in arguing the relevance of the letter.”As a general rule, an appellate court will not review an issue that was not raised by some proper method by a party in the trial court.” (Morgan v. Imperial Irrigation Dist. (2014) 223 Cal.App.4th 892, 913.) The arguments have not been preserved for review. (Ibid.)

DISPOSITION
The judgment is affirmed. Blue Lake shall recover its costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)

DUARTE, J., and KRAUSE, J., concurs.

 

Armstrong v. Cty. of Placer

Armstrong v. Cty. of Placer
(E.D.Cal. May 3, 2021, No. 2:21-cv-00779-KJM-KJN) 2021 U.S.Dist.LEXIS 84526.

United States District Court, E.D. California
May 3, 2021
No. 2:21-cv-00779-KJM-KJN

Summary by Jillian M. Wright Esq.:

An association failed to keep members apprised of development and installation of a cell phone tower but member’s temporary restraining order was denied because member waited three weeks to file. The local rules of court required the court to consider a plaintiff’s delay in seeking relief. The court held that the delay also undercuts a plaintiff’s argument that they will suffer irreparable harm.

TAKEAWAY: While this case concerned installation of a cell phone tower, it is a good reminder as to improper actions by owners. Respond to owners’ unapproved construction in a timely fashion. Unreasonable delay may impact an association’s ability for injunctive relief.

***End Summary***

Tylor Armstrong, et al., Plaintiffs,
v.
County of Placer, et al., Defendants.

ORDER

KIMBERLY J. MUELLER, Chief District Judge.

Plaintiffs Tylor Armstrong and Kimberly Armstrong move for a temporary restraining order barring defendants AT&T Mobility (AT&T) and any persons acting in concert with it from beginning construction of a cellphone tower close to their second home in Lake Tahoe. See generally Mot. TRO, ECF No. 4; Mem. P&A (Mem.), ECF No. 4-1; Compl., ECF No. 1. Construction is scheduled to commence May 3, 2021. Mem. at 1. The motion is denied.

I. BACKGROUND

In 2011, plaintiffs purchased vacant land in Martis Camp, a private “luxury community” in the Lake Tahoe area. Mem. at 2, 7; Compl.  17. Martis Camp is managed by defendants Martis Camp Club and Martis Camp Community Association, “non-profit” corporations that manage parcels of real property and facilities for its members. TRO Opp’n at 2 (Opp’n), ECF No. 8. The Armstrongs chose to build their second home in Martis Camp because it offers “premier amenities and incredibly breathtaking views.” Aff. Tylor Armstrong  1 (Armstrong Aff.), Mot. TRO, ECF No. 4-2.

The Armstrongs built the Residence, an approximately $10.75 million dollar property with “unobstructed” and “stunning views of the nearby golf course and Northstar’s Lookout Mountain.” Id.  3; Mem. at 2. On average, the Armstrongs spend ten weeks a year in this second home. Armstrong Aff.  3.

In 2015, while they both were on the golf course, Martis Camp Club’s Chief Operating Officer, Mark Johnson, spoke with Tylor Armstrong and shared that Martis Camp was considering contracting with Verizon for construction of a cell tower near the Residence. Armstrong Aff.  4. At the time, details of the plan were sparse. See id. In October 2016, Mr. Armstrong reached out about the cell tower construction project and was told he would be kept informed of future developments. Id.  5.

At some point, Martis Camp ceased working with Verizon and began discussions with a new service provider, AT&T. See Armstrong Aff.  6, 15; Opp’n at 3. Martis Camp ultimately gave permission to AT&T to build a 110 foot “5G” cellphone tower at 7951 Fleur Du Lac Drive, Truckee, California 96161, within “a few hundred feet” from the Residence. Armstrong Aff. 6; see also Mem. 1-2 (referencing “the contract for the construction of the tower between AT&T and defendant the Martis Camp community”). The new cell tower, once constructed, will be visible from every window of the Residence except the master bedroom and will “entirely destroy the overwhelmingly pristine, charming and breathtaking views from [the Armstrongs’] property.” comply with the court’s directive to notify certain defendants of the May 1 deadline and if they did not provide notice as directed their reasons for not doing so. Armstrong Aff.  6. Plaintiffs, through Mr. Armstrong, aver they were never informed of the new plans to proceed with AT&T by either the Martis Camp leadership or defendant Placer County. Id.  9, 22-25.

The Armstrongs recently decided they wanted to have a home closer to their children and decided to sell their Martis Camp home. Id.  32; see Mem. at 2. In March 2021, the Armstrongs entered into a contract for the sale of the Residence for $10.75 million. Armstrong Aff.  10. The prospective buyer put down a deposit of $322,500 dollars and agreed to a rapid closing schedule: 14 days for contingency inspections and 17 days for closing. Compl.  72. The Armstrongs did not disclose the prospect of a cell tower being constructed nearby. Id. 74.

On March 29, 2021, the Armstrongs’ real estate agent learned of the plan for a cell tower. Id.  75. She informed the Armstrongs they needed to disclose the existence of the construction plans to the buyer. Armstrong Aff.  14. The Armstrongs still chose not to inform the buyer as they “did not know if AT&T had a valid contract with Martis Camp or secured its necessary permits. . . . [nor] how . . . the project would [] impact[] the Residence.” Id.  15.

Ultimately, after pressure from their real estate agent, plaintiffs agreed to allow Martis Camp to disclose some of the cell tower details to the buyer. Compl.  79. The buyer requested a few additional days to explore the implications of the cell tower construction site in close proximity to the home; the Armstrongs did not grant the request for more time. Armstrong Aff. 18-19. On April 1, 2021, the buyer withdrew his offer and cancelled his contract with the Armstrongs. Id.  20. Plaintiffs now believe the cell tower will cause “significant adverse aesthetic impacts to our property,” id.  9, and potentially reduce the property value by approximately 2 million dollars, Compl.  65.

Defendants Martis Camp Club and Martis Camp Community Association have opposed the request for a temporary restraining order and paint a different picture than that suggested by plaintiffs. In their opposition, the Martis Camp defendants state that plans for the cell tower were discussed in June 2019 at one of Martis Camp’s regularly scheduled Board meetings. Opp’n at 3; see also June 15, 2019 Martis Camp Club Board of Directors Meeting at 4, Ex. B, Opp’n, ECF No. 8-1. Defendants aver that public notices “were mailed by the County to property owners of record within 300 feet of the site proposed for the cell tower.” Decl. of Chief Operating Officer of Martis Camp Club Mark Johnson (Johnson Decl.)  12, ECF No. 8-1. Plaintiffs’ complaint alleges the cell tower will be “roughly a few hundred feet” from the Residence. Compl.  23; Armstrong Aff.  12 (noting “prospect of a 5G cell tower in very close proximity to the Residence”). Defendants also say Mr. Armstrong sent an email to Martis Camp executive staff and Board Members on April 7, 2021, slightly less than a month ago, that he would file suit before May 3, 2021. Johnson Decl. 13-14.

On April 30, 2021, three days prior to the start date for construction of the cell tower, on a Friday afternoon, plaintiffs filed their complaint, making eleven claims. See generally Compl. The first four claims are brought against Placer County and allege the County deprived plaintiffs of their property without due process and deprived them of their First Amendment rights to protest the cell tower’s approval. Compl. 88-112. Plaintiffs bring six claims against Martis Camp Community Association and Martis Camp Club alleging breach of contract, breach of fiduciary duty, breach of implied covenant of good faith and fair dealing, negligence, intentional interference with prospective economic advantage, intentional interference with a contractual relationship, and negligent interference with prospective economic advantage. Id. 113-164. Plaintiffs’ motion for a temporary restraining order and preliminary injunction seeks to enjoin AT&T and others acting in concert with it from commencing construction of the cell tower on May 3, 2021.

II. LEGAL STANDARD

A temporary restraining order or “TRO” may be issued only upon a showing “that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition.” Fed. R. Civ. P. 65(b)(1)(A). The purpose of such an order is to preserve the status quo and to prevent irreparable harm “just so long as is necessary to hold a hearing, and no longer.” Granny Goose Foods, Inc. v. Brotherhood of Teamsters, 415 U.S. 423, 439 (1974). A TRO is an extraordinary remedy, and a plaintiff who requests a TRO must prove that remedy is proper by a clear showing. See Mazurek v. Armstrong, 520 U.S. 968, 972 (1997).

In determining whether to issue a temporary restraining order, a court applies the factors that guide the evaluation of a request for preliminary injunctive relief: whether the moving party “is likely to succeed on the merits, . . . likely to suffer irreparable harm in the absence of preliminary relief, . . . the balance of equities tips in [its] favor, and . . . an injunction is in the public interest.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008); see Stuhlbarg Int’l. Sales Co. v. John D. Brush & Co., 240 F.3d 832, 839 n.7 (9th Cir. 2001) (stating that the analysis for temporary restraining orders and preliminary injunctions is “substantially identical”).

Alternatively, courts may analyze a TRO request using a sliding scale approach through which the elements of the “test are balanced, so that a stronger showing of one element may offset a weaker showing of another.” Alliance for Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011). This test requires plaintiffs to demonstrate the requisite likelihood of irreparable harm, show that an injunction is in the public interest, raise “serious questions” going to the merits, and show a balance of hardships that “tips sharply” in plaintiffs’ favor. Id. at 1131-36 (concluding that the “serious questions” version of the sliding scale test for preliminary injunctions remains viable after Winter).

III. ANALYSIS

A. Irreparable Injury

“Under Winter, plaintiffs must establish that irreparable harm is likely, not just possible, in order to obtain a preliminary injunction.” Alliance for Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011) (emphasis in original). “The key word in this consideration is irreparable. Mere injuries, however substantial, in terms of money, time and energy necessarily expended in the absence of a stay, are not enough.” Mclean v. Aurora Loan Servicing, No. 11-0455, 2011 WL 4635027, at *1 (S.D. Cal. Oct. 5, 2011) (emphasis in original, quoting Sampson v. Murray, 415 U.S. 61, 90 (1974)). “Economic injury alone does not support a finding of irreparable harm, because such injury can be remedied by a damage award.” Rent-A-Ctr., Inc. v. Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991). “Monetary injury is not normally considered irreparable.” L.A. Mem’l Coliseum Comm’n v. Nat’l Football League, 634 F.2d 1197, 1202 (9th Cir. 1980).

1. AT&T and Martis Camp Defendants

Plaintiffs have not shown why the injury they allege they will suffer is not addressable by monetary damages. While in one portion of their motion plaintiffs argue that “no award of damages can compensate Plaintiffs for the destruction of their pristine” view, Mem. at 8, the complaint identifies an approximate $2 million dollar reduction in the value of their property if the cell tower construction proceeds. Compl. 65. The complaint itself invokes nonmonetary values, alleging the “tower will destroy the unique property view . . . and Plaintiffs’ peaceful and beneficial possession of their property.” Id.  2. But plaintiffs themselves had not planned to continue using the Residence, which they “enjoy” and typically visit for ten weeks per year, Armstrong Aff. 3, once the sale they thought would close by March 30, 2021 was effected. Id.  20. It is only because the planned sale went awry that plaintiffs must now remain in the house until June 2022, while their “primary residence in Victoria (Canada) is scheduled for a major renovation starting July 1st.” See id.  32. While plaintiffs complain that their own “beautiful, unobstructed view of the golf course and mountains in the background,” will be destroyed, id., at least until they depart in slightly over a year, they do not provide authority supporting a grant of temporary injunctive relief to prevent this kind of short-term injury. In their discussion of public interest factors, they do not identify protection of a uniquely pristine viewshed as a broader public consideration. Mem. at 10. Given their plans to relocate, plaintiffs do not explain how recovering any reduction in their property value from AT&T or the Martis Camp defendants, who have contracted for the impending cell tower installation, is not a sufficient legal remedy. “The possibility that adequate compensatory or other corrective relief will be available at a later date, in the ordinary course of litigation, weighs heavily against a claim of irreparable harm.” Qualcomm Inc. v. Compal Elecs., Inc., 283 F. Supp. 3d 905, 914-15 (S.D. Cal. 2017) (quoting Sampson v. Murray, 415 U.S. 61, 90 (1974)) (addressing irreparable harm in context of stay).

Even if plaintiffs identified a type of harm that could justify immediate injunctive relief, it appears some time remains before the cell tower itself is erected. Opp’n at 7-8; Johnson Decl. 15. In that time the court could hear a properly noticed and briefed motion for preliminary injunction.

2. Placer County

Plaintiffs also say they will experience irreparable injury if a temporary restraining order does not issue, given the deprivation of their constitutional rights by Placer County. Specifically, plaintiffs argue construction of the cell tower will permanently deprive them of their First Amendment right to petition the government. Mem. at 6; Armstrong Aff. 28-29. Plaintiffs represent that Placer County’s administrative review process, which has been completed, did not afford them notice or an opportunity to oppose the cell tower construction. Mem. at 6. Plaintiffs cite no legal authority to support their position given the factual allegations of this case. Constitutional violations may be the basis of irreparable injury, but the cases plaintiffs cite involve parties seeking injunctive relief before the threatened constitutional violation has occurred. See, e.g., Elrod v. Burns, 427 U.S. 347, 373 (1976) (at time injunctive relief was sought, public employees were being threatened with discharge for their political beliefs). “It is not enough that the claimed harm be irreparable; it must be imminent as well.” Vico v. U.S. Bank, No. 1208440, 2012 WL 12888826, at *6 (C.D. Cal. Oct. 29, 2012); Caribbean Marine Servs. Co., Inc. v. Baldrige, 844 F.2d 668, 674 (9th Cir. 1988) (“[A] plaintiff must demonstrate immediate threatened injury as a prerequisite to preliminary injunctive relief.” (emphasis in original)). In this case, plaintiffs’ alleged constitutional violations based on the First Amendment are not imminent or prospective. If the County did commit constitutional violations, those violations occurred in the past. Compl. 49-65 (describing County’s administrative review permit process, which “does not require an applicant to provide notice and present its application at a public hearing” if upon initial review of an application the cell tower antennae is not “visually obtrusive”); id. 70 (because persons in plaintiffs’ shoes “are not notified and are unaware of pending cell tower projects, they cannot file a timely appeal with the County”). Plaintiffs cite no legal authority or probative evidence to support any argument that construction of the cell tower will deprive them of an ongoing constitutional right. See Am. Passage Media Corp. v. Cass Commc’ns, Inc., 750 F.2d 1470, 1473 (9th Cir. 1985) (reversing entry of preliminary injunction because movant’s evidence was insufficient to demonstrate irreparable harm).

3. Conclusion

The Armstrongs have not satisfied their burden of showing they are “likely to suffer irreparable harm in the absence of preliminary relief.” Winter, 555 U.S. at 20. The court therefore need not review the additional factors relevant to determining whether a temporary restraining order should issue. See Ctr. for Food Safety v. Vilsack, 636 F.3d 1166, 1174 (9th Cir. 2011).

B. Delay

Plaintiffs’ delay also counsels against granting the temporary restraining order they request. This district’s Local Rules impose specific requirements on any party that requests temporary injunctive relief. See L.R. 231. In evaluating the merits of a temporary restraining order, the applicable rule provides as follows:

In considering a motion for a temporary restraining order, the Court will consider whether the applicant could have sought relief by motion for preliminary injunction at an earlier date without the necessity for seeking last-minute relief by motion for temporary restraining order. Should the Court find that the applicant unduly delayed in seeking injunctive relief, the Court may conclude that the delay constitutes laches or contradicts the applicant’s allegations of irreparable injury and may deny the motion solely on either ground.

L.R. 231(b). Here, plaintiffs were aware of the impending construction of the cell tower since at least as early as late March 2021. On April 7, 2021, plaintiffs emailed the Martis Camp Club Executive staff and informed them they planned to litigate the issue before May 3. Johnson Decl. 13. Plaintiffs then waited more than three weeks to file suit, moving for a temporary restraining order on the Friday afternoon before the Monday morning when they say construction is due to begin. This delay supports denial of the motion for a temporary restraining order. Mammoth Specialty Lodging, LLC v. We-Ka-Jassa Inv. Fund, LLC, No. 10-0864, 2010 WL 1539811, at *2 (E.D. Cal. Apr. 16, 2010) (two-week delay in filing temporary restraining order and doing so three days before foreclosure sale sufficient to deny motion). The delay also undercuts plaintiffs’ arguments that they will suffer irreparable harm. See Oakland Trib., Inc. v. Chron. Pub. Co., 762 F.2d 1374, 1377 (9th Cir. 1985); see also Cocina Cultura LLC v. Oregon, No. 20-02022, 2020 WL 7181584, at *4 (D. Or. Dec. 7, 2020) (plaintiff’s three-month delay in seeking injunctive relief signaled “a lack of urgency and irreparable harm”).

IV. CONCLUSION

The court denies plaintiffs’ motion for a temporary restraining order. The Armstrongs may calendar their motion for a preliminary injunction motion on the court’s regular calendar to allow for full briefing by all affected parties.

This order resolves ECF No. 4.

IT IS SO ORDERED.

[1] Plaintiffs filed this motion for a temporary restraining order and preliminary injunction on April 30, 2021 at 2:57 p.m. See generally Mot. TRO. Just over an hour later, this court issued a minute order directing plaintiffs to inform defendants AT&T, Martis Camp Club, and Martis Camp Community that if they wished to file an opposition to the TRO they must do so by May 1, 2021 at 5:00 p.m. Minute Order, ECF No. 7. Plaintiffs’ counsel promptly called the court to confirm the May 1 deadline was on the Saturday and the courtroom deputy confirmed it was. Plaintiffs have not filed any notice confirming that they complied with the court’s directive. Martis Camp Club and Martis Camp Community represent they received no communication from plaintiffs regarding their filing deadline, Opp’n at 2 n.1, although these defendants obviously learned of plaintiffs’ motion somehow. Plaintiffs are ordered to file a notice of their efforts to

Clayton v. Bigelo, LLC

Clayton v. Bigelo, LLC
(S.D.Cal. Mar. 24, 2021, No. 21cv285-GPC(BLM)) 2021 U.S.Dist.LEXIS 55670.

Summary by Jillian M. Wright Esq.:

Owner Clayton sued another owner Bigelo, LLC (“Bigelo”) arguing the construction of a two-story home on the lot was prohibited by the CC&Rs and interfered with his view rights and right to privacy. Bigelo argued two-story homes were not prohibited but rather that the association had the power to review applications for two-story homes if an architectural committee was in place. An architectural committee was not in place, so approval was not necessary as long as the structure was in harmony with other homes in the community. The court found the home was in harmony since there were other two-story homes in the community. The court held that a declaration did not impose a ban on two-story homes or include view protections for surrounding property.

TAKEAWAY: View disputes are amongst the most frequently litigated association issues. Note, however, that absent an express covenant protecting view, there are generally no view rights in California.

***End Summary***

 

Kahn v. Price

Kahn v. Price

(2021) 69 Cal.App.5th 223.

Court of Appeals of California, First District, Division Three

September 22, 2021

No. A159536. No. A160057

Summary by Jillian M. Wright Esq.:

A court found that a tree’s obstruction of neighbor’s view constituted a “continuous nuisance” which has no statute of limitations. A tree obstructing a view is a continuous nuisance, rather than a permanent one, because the tree is a nuisance that could be abated with trimming or cutting. Additionally, a plaintiff is under no obligation to produce physical evidence of the unobstructed views before the tree growth.
TAKEAWAY: If an association’s governing documents have view requirements with which an owner fails to comply, then the association may not be barred by statutes of limitation from bringing a claim for breach of the governing documents. On the other hand, an association should not dismiss an owner’s complaint about obstructed views based on the statute of limitation alone.

***End Summary***

69 Cal.App.5th 223 (2021)

LINDA KAHN, Plaintiff and Respondent,
v.
KATHERINE PRICE et al., Defendants and Appellants.
LINDA KAHN, Plaintiff and Respondent,
v.
KATHERINE PRICE et al., Defendants and Appellants;
WILLIAM S. WEISBERG et al., Objectors and Appellants.

Appeal from the Superior Court of City and County of San Francisco, Super. Ct. Nos. CGC18564579, CGC18564579. Hon. Jeffrey S. Ross, Judge.
Law Offices of Tony J. Tanke, Tony J. Tanke; Weisberg & Miller and William S. Weisberg for Defendants and Appellants.

Bonapart & Associates, Barri Kaplan Bonapart; Bien & Summers and Eilliot L. Bien for Plaintiff and Respondent.

226*226 [CERTIFIED FOR PARTIAL PUBLICATION[*]]

OPINION

PETROU, J.—

This lawsuit concerns the parties’ long-standing dispute concerning the presence of a Monterey pine tree (the tree) growing in the rear yard of the property owned by defendants and appellants Katherine and Richard Price (the Prices). The tree obstructs plaintiff and respondent Linda Kahn’s views of the San Francisco Bay and Marin County from the main level of her residence.

Kahn sought declaratory and injunctive relief available under the San Francisco Tree Dispute Resolution Ordinance (Ordinance; S.F. Pub. Works Code, art. 16.1, § 820 et seq.[1]), which creates “rights in favor of private property owners” to restore their “views lost due to tree growth” on adjoining property. (Id., §§ 821, subd. (a)(1), 827.) Following a bench trial, the court 227*227 entered an amended judgment in favor of Kahn, declaring her right to the restoration of the views that “are now obstructed by the Monterey pine tree” and directing the tree’s removal. The court also granted Kahn’s request for Code of Civil Procedure[2] section 128.5 sanctions in the sum of $47,345.30, payable by the Prices and their trial counsel, William S. Weisberg, and the law firm of Weisberg & Miller, jointly and severally.

We see no merit to the Prices’ arguments that the lawsuit was barred by the statute of limitations, that dismissal is required for Kahn’s failure to comply with the Ordinance’s prelitigation procedures, or that the trial court erred in directing the tree’s removal. We also see no merit to the challenge by the Prices and their trial counsel to the award of sanctions against them. Accordingly, we affirm the amended judgment.[3]

FACTUAL AND PROCEDURAL BACKGROUND

We set forth the underlying facts as found by the trial court and taken in part from its statement of decision. We present additional facts in our discussion of the issues.

A. Background

Kahn purchased a multistory residence in San Francisco in 1976.[4] At the time, the residence had unobstructed views from the primary living areas 228*228 located on the north side of the home on the main level as well as unobstructed views from the north-facing rooms on the second and third floors. The residence’s northerly and northwesterly views—of the San Francisco cityscape and Bay, the Golden Gate Bridge, Angel Island, and southern Marin County—remained unobstructed by any other vegetation or the tree until 2011.

In or about 1998, the Prices’ predecessors in interest (prior owners) purchased the multistory residence on property that is downslope from and abuts Kahn’s property. The properties are separated by a structure (a retaining wall topped by a lattice fence) located 10 to 12 feet above ground level on the Kahn property; the tree is located at “the very rear” of the Prices’ backyard and is adjacent to the retaining wall.

When Kahn replaced the lattice fence atop the retaining wall in 2001, she saw the origins of the tree that likely had been growing from a “volunteer seedling” since approximately 1999. The tree appeared “hedge-like” and was “well below the height of the lattice fence.” By 2007, the tree was beginning to grow above the lattice fence but did not obstruct Kahn’s views. However, by 2011 the tree was visible above the lattice fence at which time Kahn advised the prior owners that the tree was eclipsing her views. Kahn offered to pay for the removal of the tree, but instead the prior owners trimmed the tree.

In 2012, when Kahn learned the prior owners had sold the property to the Prices, Kahn contacted the Prices in writing and in person. The Prices, who were then living in Hong Kong and only visiting the San Francisco property occasionally, assured Kahn they would consult with their landscape architects about the tree.

“In late 2016, when it appeared informal resolution was unlikely,” Kahn began the Ordinance’s prelitigation procedures[5] by serving the Prices with a tree claim in early 2017[6] and the parties engaged in private mediation (in lieu 229*229 of community board mediation under the Ordinance) in June 2017. When private mediation failed in late 2017, and the Prices declined to participate in arbitration, Kahn filed this lawsuit in early 2018 seeking declaratory and injunctive relief.

B. Trial Proceeding

At a bench trial held in June 2019, the court heard the testimony of the Prices, Kahn, Kahn’s relative, Kahn’s friend, and an immediate neighbor of Kahn and the Prices. The court also heard testimony of Kahn’s expert consulting arborist and the Prices’ expert consulting arborist, expert aerial photographer, expert geotechnical engineer, and real estate appraiser. The court considered extensive documentation including the parties’ written communications and photographs taken at various times and from various locations within and without the parties’ properties. Lastly, the court conducted an onsite inspection of the parties’ properties on June 19, at which time the parties and counsel were present.[7]

The court found that since the purchase of her home in 1976 Kahn had “enjoyed” views (from all floors) of “the San Francisco cityscape, the Bay, the Golden Gate bridge, southern Marin County, and Angel Island” until 2011 when the tree began obstructing and ultimately “eclipsed” the views; but for the tree, Kahn’s residence would still have those unobstructed views. Under the heading, “Historic Evidence of Views,” the court specifically found: “Kahn, her [relative] and [her friend], both of whom regularly visited the Kahn home, testified to the northerly views over San Francisco, San Francisco Bay, southern Marin County, and Angel Island. The views were a principal factor in the Kahns’ decision to purchase the property. The testimony and historic photographs establish that, when the Kahns purchased their home, the `views,’ as defined in [Ordinance] Section 822(n), from the garden, terrace, dining room, and kitchen dining area—north facing rooms located on the main level—were unobstructed. Nor was the view obstructed from any of the north facing rooms on the upper two levels of the Kahn home. (Kahn home’s historic views). The evidence also establishes that the northerly and northwesterly views of the San Francisco cityscape, the Bay, the Golden Gate 230*230 bridge, southern Marin County, and Angel Island remained unobstructed by the tree or any other vegetation until at least 2011.”

The trial court also considered the burdens and benefits of the tree pursuant to the Ordinance’s enumerated criteria and based upon the “testimonial and documentary evidence,” the court’s “personal inspection of the parties’ respective properties,” and “the written and oral arguments of counsel.”

Regarding the tree’s burdens, the court found that “the Kahn home had unobstructed views from the Golden Gate to Angel Island and, but for the tree, would still have that view. There are landmarks, vistas and other unique features, including the San Francisco Bay, Angel Island, and portions of southern Marin County which would be visible from the first level of the Kahn home, in the dining room and the kitchen, as well as from the patio and rear garden, but are partially or completely eclipsed by the tree’s growth from 2011 to the present.” The court found credible the photographic methodology used by Kahn’s arborist who documented “the tree’s effect and estimated the obstructions to be 50-60% from the dining room, 90% from the kitchen table, 20-30% from the rear patio, and 30-40% of [the view] from the rear yard looking north to northeast.”

The court’s own observations during the site visit corroborated the arborist’s testimony. The court also found it was “only the tree—and not other factors—which obstruct the view and create the burdens listed in the Ordinance.” In sum, the court found “overwhelming” evidence that: “the tree’s rapid growth in both height and breadth obstructs the views of landmarks and vistas that could once be seen”; “[t]he degree of obstruction makes that burden significant and substantial”; and “there are no other factors contributing to the burden.”[8]

Discussing the tree’s benefits, the trial court specifically found that “the tree’s vigor in this context and location is not a benefit.” In so concluding, the 231*231 court explained that “Kahn raised concerns about the tree when it was young. Had [the Prices or their predecessors in interest] heeded her warning, when the tree was small, a skilled arborist … could have advised on pruning that would have maintained the unique features of the Monterey pine while limiting its intrusion on the Kahn home’s historic views. Instead the tree’s owners ignored her requests, while the tree grew rapidly. Then in a belated effort to ameliorate the complaint, the tree was subjected to repeated topping and trimming. The unfortunate result is the tree no longer has the visual qualities of a Monterey pine…. If the tree survives, unaffected by the beetles and pine-pitch canker, true to the species, it will become a very large stature tree…. [I]f the tree is pruned to mitigate the view-related burdens, given its growth-pattern, the effects of that pruning will be fleeting— demanding frequent attention. [The parties’ immediate neighbor] testified that the tree obstructs the views of the Golden Gate Bridge and surrounding waters from his home. Even when the tree is pruned in a manner which improves—but does not restore—those views, due to rapid growth, the view obstruction recurs within a very short period of time.”

In evaluating the tree’s “aesthetics, a trait in the eye of the beholder,” the trial court found, “[u]nderstandably, that the Prices insisted that the tree’s role in their yard, and, indeed in their decision to purchase the home, is paramount. They extol its virtues in shading their yard, providing a backdrop for their landscaping and assuring privacy for their family. While the court does not seek to substitute its artistic opinion for that of the homeowners, there are objective factors which cannot be ignored. The other landscaping in the Prices’ yard is dwarfed by the tree. While the other trees and plants are all proportional to one another, the looming Monterey pine is disproportionate to all the surrounding vegetation and looms ominously. The tree is located at the very rear of their yard and atop a steep slope, adjacent to the retaining wall and Kahn’s lattice fence. [The Prices’ arborist] testified that, given [the tree’s] distance from the Prices’ home, it does not provide shade to either the home or the outdoor areas where the family would be dining or socializing….”

On the issue of “soil stability provided by the tree,” the trial court found not credible the testimony of Prices’ geotechnical engineer who opined, “without any data, testing, or explanation—that removal of the tree would result in a `landslide’ affecting multiple properties.” Nor did the witness “distinguish whether the `landslide’ would occur regardless whether the stump and roots were removed at the time the tree is felled, or if they were allowed to remain. [Kahn’s arborist] testified that leaving the roots and stump to decompose—while planting woody vegetation which could take root while the [tree’s] roots decayed—would assure soil stability. Planting along the entire length of the retaining wall would provide additional stability as it is unlikely that the tree’s roots extend to the western edge of the yard.” The 232*232 court found no evidence that soil stability had been an issue during the decades predating the tree, and, no evidence that the retaining wall’s stability depended on the tree. The court also found that, if the tree’s roots contributed to the soil stability, it was at most a minor benefit and one which could be secured by leaving them in place after the tree was removed and added plantings.

The trial court did find the tree provided some visual screening for the yard and the children’s bedrooms in the Prices’ home, allowing for “minimal privacy,” but “any benefit of this screening is minor and insignificant.” In so concluding, the court found unpersuasive the Prices’ contention that the tree was critical to provide privacy from the Kahn residence. “The Price yard and living spaces are not visible from the main floor of the Kahn home, not because of the tree, but because of the difference in elevation and the retaining wall and fence separating the Kahn home and the Prices’ home. To the extent, the tree blocks views of the Prices’ home, it does so from only a portion of the upper floors of the Kahn home and therefore does not provide the `privacy’ the Prices’ claim to be essential. To the extent the Prices’ claimed need for privacy is sincere—rather than merely a justification for retaining the tree—the site visit provided evidence of the visibility of the Prices’ yard and children’s bedrooms from neighbors to the east, west, and south. The site inspection also demonstrated that the interior of the Prices’ home is visible on many sides.” “Neighbors in many homes—much closer than the Kahn home—can peer into the Price property, and yet the Prices have not installed window coverings to provide the privacy they claim to value.” The court’s own observations were “corroborated” by Kahn’s arborist’s “room-by-room analysis,” documented by photography from the yard and interior of the Prices’ home.

Having determined the tree’s burdens were “overwhelming” and “the benefits the tree confers to be minimal,” the court therefore concluded Kahn had met her burden of proving “the burdens posed by the tree outweighed the benefits and that restorative action is required.” In deciding the appropriate type of restorative action, the court evaluated the Ordinance’s “[a]ppropriate [r]estorative [a]ctions” of (i) no action, (ii) trimming, (iii) thinning, (iv) delayed trimming or thinning, (v) topping, or (vi) tree removal with possible replacement plantings. (Ord., § 824, subd. (c)(1).) The court explained its reasons for finding that the first five actions were not feasible and the sole action that best achieved the Ordinance’s objectives was removal of the tree, which we will later discuss in the analysis.

233*233 The court also explained its decisions regarding the apportionment of costs between the parties. (Ord., § 825.)[9] As to costs for the restorative action of tree removal, the court found the tree was not present before September 28, 1988, the effective date of the Ordinance. Consequently, the court directed that the cost of tree removal (the court-ordered restorative action) was to be paid “in equal proportion by the parties.” As to litigation costs, the trial court found Kahn and the Prices were to pay their own attorney’s fees pursuant to Ordinance section 825, subdivision (b), but Kahn as the prevailing party was entitled to her costs as defined in the Code of Civil Procedure.

The trial court entered judgment on December 2, 2019, later amended on February 28, 2020, in favor of Kahn “on both the cause of action for declaratory relief and the cause of action for injunctive relief” under the Ordinance. The court declared Kahn was entitled to restoration of her obstructed views, and to that end, the Prices were directed to remove the tree “so that the stump is cut to grade and the roots remain intact” and the stump was to “be treated to ensure that it will not re-sprout.” The parties were to follow specific procedures in hiring a licensed, bonded, and insured tree-care company to perform and complete the tree removal. The Prices were directed to pay the tree removal company and provide Kahn with a copy of the paid invoice and proof of payment; within five court days of receipt of the paid invoice, Kahn was to pay one-half of the amount paid to the tree removal company as evidenced by the paid invoice. The Prices were granted the right to “plant replacements at their option and expense,” with the proviso that they “select species which, at maturity, will not interfere with the Kahn home’s historic views.” The amended judgment also included provisions awarding Kahn (1) $69,150.65 as costs (§ 1032 [prevailing party costs]; Ord., § 825, subd. (b) [court costs allocated at court’s discretion]), (2) $41,182.50 as attorney fees and expert fees (§ 2033.420 [expenses incurred in proving matters which a party to whom a request for admission was directed failed to admit]), and (3) $47,345.30 as section 128.5 sanctions, payable jointly and 234*234 severally by the Prices and their trial counsel William S. Weisberg and the law firm of Weisberg & Miller.

Appellants’ timely appeal ensued.[10]

DISCUSSION

I. Trial Court’s Rulings on Statute of Limitations, Ordinance’s Prelitigation Procedures, and Laches

A. Relevant Facts

Before trial, the Prices sought to bifurcate the trial with phase one regarding their affirmative defense that the lawsuit was time-barred. While conceding the Ordinance contained no statute of limitations, the Prices asserted the applicable Code of Civil Procedure statute of limitations was three years for either a claim in the nature of a permanent nuisance or liability created by statute (§ 338, subds. (a), (b)), for which there were no exceptions. In opposition, Kahn argued, among other things, that her action sought abatement of a continuing nuisance for which no statute of limitations was applicable. The trial court denied the bifurcation motion, informing the parties it would consider the statute of limitations issue at the conclusion of Kahn’s case-in-chief as allowed under section 631.8.[11]

At the close of Kahn’s case, the Prices filed a section 631.8 motion for judgment on two grounds: (1) Kahn had failed to comply with the Ordinance’s prelitigation procedural requirement of filing a tree claim that included “physical (i.e. visual) evidence” showing the existence of an unobstructed view from the main level of the residence before the growth of the tree, and the purported defect had not been remedied by the photographic and expert testimony presented by Kahn; and (2) the lawsuit was time-barred under section 338, subdivision (a).

The trial court denied the motion, specifically finding that Kahn had complied with the Ordinance’s procedures and her tree claim was sufficient to meet the Ordinance’s requirements. The court also found that, because the 235*235 Ordinance required Kahn to comply with prelitigation procedures before filing her lawsuit, “under any reading of the statute of limitations,” “the complaint could not be filed until the prerequisites to litigation had been satisfied.” In its statement of decision, the court stated it had denied the section 631.8 motion for “the reasons stated on the record”; “[t]he Ordinance does not contain a statute of limitations”; and “[a]fter considering the pre-filing history, [the court] determined independently that Kahn met all pre-filing conditions and filed this case timely.”

Prior to trial the Prices also sought to have the court rule on their contention that the lawsuit was barred by laches, which the court said it would also consider at the close of Kahn’s case pursuant to a section 631.8 motion for judgment. However, in their section 631.8 motion the Prices did not seek dismissal based on laches. Instead, at the conclusion of the case in its statement of decision the court found the lawsuit was not barred by laches based on a lack of evidence to support the defense. The court initially found Kahn had not delayed in asserting her rights. “In 2011, after a period of rapid growth, the tree significantly encroached into Kahn’s view and she contacted [the former property owners], and offered to pay to remove the tree. Instead [the former owners] trimmed the tree. When Kahn learned that the Prices purchased the property, she contacted them in writing and in person—the procedures the Ordinance mandates as prerequisites to initiating a civil action. [Ord., section] 823. The Prices’ responses to Kahn’s requests justified her reasonable belief that, as neighbors, they could resolve the issue amicably and informally. The Prices, who were living in Hong Kong, and only visiting the … property occasionally, assured her that they would consult with their landscape architects. In late 2016 when it appeared informal resolution was unlikely, Kahn acted expeditiously, serving a tree claim in early 2017 and then engaging in mediation. When the mediation failed in late 2017, and the Prices declined arbitration, Kahn filed this case in early 2018. Kahn did not delay; she proceeded precisely as required by the Ordinance. There is no evidence that Kahn `acquiesced’ in the view obstruction. To the contrary, the Prices complain that she was insistent, persistent, and even aggressive in her efforts to remove the view obstruction. Nor is there evidence that the time from the Prices’ ownership to trial was due to delay caused by Kahn or that it prejudiced the Prices. To the contrary, it is Kahn who has been affected as her view has been obstructed as these proceedings are prolonged.”

B. Analysis

1. Statute of Limitations

We undertake an independent examination when reviewing whether a lawsuit is time-barred by any applicable statute of limitations. (William L. 236*236 Lyon & Associates, Inc. v. Superior Court (2012) 204 Cal.App.4th 1294, 1304 [139 Cal.Rptr.3d 670].) Moreover, “[i]f the decision of [the trial] court is correct on any theory of law applicable to the case, the judgment or order will be affirmed regardless of the correctness of the grounds upon which the … court reached its conclusion.” (Estate of Beard (1999) 71 Cal.App.4th 753, 776 [84 Cal.Rptr.2d 276], original italics.) Having made our de novo review, we conclude the action was timely filed albeit for a reason different from those given by the trial court.[12]

While the Prices recognize the Ordinance does not provide for a statute of limitations, they contend the lawsuit is nonetheless time-barred by various statute of limitations provided for in the Code of Civil Procedure. However, we need not address these arguments as this lawsuit “meets the crucial test” for an action to abate a continuing nuisance for which any statute of limitations is inapplicable. (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1197-1198 [151 Cal.Rptr.3d 827, 292 P.3d 871] (Aryeh).)[13] The Prices’ arguments challenging the application of the continuous nuisance doctrine are unavailing.

We initially reject the Prices’ argument that the continuous nuisance doctrine does not apply because “courts have generally declined to apply continuous accrual” rules to statutory causes of action. The Ordinance does not contain a statute of limitations and is otherwise silent as to an accrual date for a lawsuit after prelitigation procedures fail. In the analogous context of statutes, such silence “triggers a presumption in favor of permitting settled common law accrual rules to apply. `As a general rule, “[u]nless expressly provided, statutes should not be interpreted to alter the common law, and should be construed to avoid conflict with common law rules. [Citation.] `A statute will be construed in light of common law decisions, unless its language “`clearly and unequivocally discloses an intention to depart from, alter, or abrogate the common-law rule concerning the particular subject matter….’ [Citations.]” [Citation.]'”‘ [Citation.]” (Aryeh, supra, 55 Cal.4th at p. 1193; see Carson Harbor Village, Ltd. v. City of Carson Mobilehome Park Rental Review Bd. (1999) 70 Cal.App.4th 281, 290 [82 Cal.Rptr.2d 569] 237*237 [“[w]e interpret ordinances by the same rules applicable to statutes”].) We thus may assume, in the absence of any specific provision in the Ordinance, that San Francisco intended the application of “the usual judicial rules governing accrual” to apply to a lawsuit filed under the Ordinance. (Aryeh, supra, at p. 1193.) In other words, the Ordinance is governed by common law accrual rules to the same extent as a statute. (Aryeh, at p. 1196.)

We also reject the Prices’ arguments that the continuous nuisance doctrine cannot apply because they did not create a nuisance by having a tree on their property, California law does not impose nuisance liability for simple tree view obstruction, and the complaint does not allege a cause of action for nuisance. It is true that under California law a landowner has no common law right to an unobstructed view over adjoining property and therefore nuisance liability does not lie for a view obstruction as a matter of common law. (Eisen v. Tavangarian (2019) 36 Cal.App.5th 626, 635 [248 Cal.Rptr.3d 744].) However, at issue is a property owner’s legal right to pursue a private action under the Ordinance, which was enacted under San Francisco’s police power to resolve tree view obstruction disputes between adjoining landowners. (See Kucera v. Lizza (1997) 59 Cal.App.4th 1141, 1148-1149 [69 Cal.Rptr.2d 582] [Town of Tiburon View and Sunlight Obstruction from Trees Ordinance upheld as a proper exercise of police power; “`[l]ocal government may … protect views….'” “through the regulation of tree planting or growth”].)

The Ordinance specifically allows a complaining property owner to seek an abatement (“restoration”) of a tree view “obstruction,” which falls within Civil Code section 3479’s broad definition of a “nuisance,” i.e., “an obstruction to the free use of property, so as to interfere with the comfortable enjoyment of life or property.”[14] We do not look at the label of the cause of 238*238 action (violation of the Ordinance) or the failure to mention nuisance in the complaint, “but to the nature of the obligation allegedly breached.” (Aryeh, supra, 55 Cal.4th at p. 1200.) Here, a tree owner’s obligation under the Ordinance is based on a “nuisance theory” for “direct injury to [the complaining party’s] property,” i.e., view obstruction caused by a growing tree on adjoining property. (Mangini v. Aerojet-General Corp. (1991) 230 Cal.App.3d 1125, 1136 [281 Cal.Rptr. 827] (Mangini).)

We also reject the Prices’ contention that the continuous nuisance doctrine does not apply because the tree view obstruction was not a “continuing” nuisance, but rather “permanent” in nature. “Where a nuisance is of such character that it will presumably continue indefinitely it is considered permanent, and the limitations period runs from the time the nuisance is created. [Citations.] On the other hand, if the nuisance may be discontinued at any time it is considered continuing in character. [Citations.]” (Phillips v. City of Pasadena (1945) 27 Cal.2d 104, 107 [162 P.2d 625] (Phillips); see id. at p. 108 [where it appeared from complaint’s allegations that locked gate could be removed at any time, the appellate court could not say, as a matter of law, that the locked gate constituted permanent nuisance; “[i]f the nuisance was in fact continuing in character, the claim was filed within time”].)

We have no difficulty in concluding that in this case the tree view obstruction constituted a continuous nuisance—”an encroachment which [is] not willful but unintentional, and which is abatable,” as the law presumes such an encroachment will not be permanently maintained. (Kafka v. Bozio (1923) 191 Cal. 746, 751 [218 P. 753]; see Madani v. Rabinowitz (2020) 45 Cal.App.5th 602, 608-609 [258 Cal.Rptr.3d 939] [“the `”crucial test of the permanency of a … nuisance is whether the … nuisance can be discontinued or abated”‘”; “[u]nder this test, sometimes referred to as the `abatability test’ [citation], a … nuisance is continuing if it `can be remedied at a reasonable cost by reasonable means'”].) As the trial court found, even though the former owners had pruned the tree, the tree continually grew and by 2011 had substantially obstructed Kahn’s views. The court specifically took note of the testimony of Kahn’s arborist, as well as other percipient witnesses, that even after the latest pruning in February 2019 there was no change in the obstructed views from the first level of Kahn’s residence; and as explained by the arborist, “`from the first level, [the pruning] opened up sky, none of the distant views.'”

Nor do we see any merit to the Prices’ related assertion that the lawsuit is barred because the “wrongdoing, causation and injury arising from view obstruction were complete no later than 2011.” “That is because the 239*239 `continuing’ nature of the nuisance refers to the continuing damage caused by the offensive condition, not to the acts causing the offensive condition to occur.” (Mangini, supra, 230 Cal.App.3d at p. 1147.) “Every repetition of a continuous nuisance is a separate wrong for which the person injured may bring successive actions … until the nuisance is abated, even though an action based on the original wrong may be barred.” (Phillips, supra, 27 Cal.2d at pp. 107-108; see also Civ. Code, § 3483 [“[e]very successive owner of property who neglects to abate a continuing nuisance upon, or in the use of, such property, created by the former owner, is liable therefor in the same manner as the one who first created it”].)

Lastly, we are not persuaded by the Prices’ argument that the application of the continuous nuisance doctrine will lead to inequitable results. Because the Ordinance is not “meant to replace the peaceful, sensible, and just resolution of differences between neighbors acting in good faith” (Ord., § 821, subd. (c)), its apportionment of costs appears to provide sufficient motivation for reasonable adjoining property owners to resolve their disputes without litigation. If a delay in bringing an action to restore obstructed views unreasonably impacts the rights of the tree owner, as the Prices contend, the court can handle that circumstance under the equitable doctrine of laches.[15] As we have noted, the trial court rejected the Prices’ request to dismiss the lawsuit based on laches, and they have not challenged that ruling on this appeal.

In sum, we conclude Kahn’s lawsuit was timely filed as the continuous nuisance doctrine rendered any statute of limitations inapplicable. In light of our determination, we do not address the parties’ other contentions.

240*240 2. Ordinance’s Prelitigation Procedures

In order to pursue either binding arbitration or a court action, a complaining party must prepare a written “tree claim,” and serve the tree claim on the tree owner. (Ord., § 823, subd. (c).) Ordinance section 822, subdivision (j) defines a “tree claim” as follows: “`Tree claim’ shall mean the written basis for arbitration or court action under the provisions of this Article which includes the following: (1) The nature and extent of the alleged obstruction, including pertinent and corroborating physical evidence. Evidence may include, but is not limited to, photographic prints, negatives, or slides. Such evidence must show absence of the obstruction at any documentable time during the tenure of the complaining party. Evidence to show the date of acquisition must be included. (2) The location of all trees alleged to cause the obstruction, the address of the property upon which the trees are located, and the present tree owner’s name and address. (3) Any mitigating actions proposed by the parties involved to resolve the tree claim. (4) The failure of personal communication between the complaining party and the tree owner to resolve the alleged obstruction as set forth in Section 823(a) of this Article. The complaining party must provide physical evidence that written attempts at reconciliation have been made and failed. Evidence may include, but is not limited to, copies of and receipts for certified or registered mail correspondence.”

The Prices contend dismissal of the lawsuit is required because Kahn’s prelitigation tree claim failed to include (1) “pertinent and corroborating physical evidence” in the nature of visual images showing an absence of an obstructed view from the main level of her residence before the growth of the tree, (2) “[e]vidence to show the date of acquisition” of the property by the property owner, and (3) “physical evidence that written attempts at reconciliation have been made and failed.” The latter two categories of evidence were satisfied by the trial court’s admission of grant deeds showing Kahn had acquired the property in 1976 and continued to own the property and written correspondence showing “attempts at reconciliation have been made and failed.”

As to the argument that the Ordinance requires a prelitigation tree claim to include corroborating physical evidence in the form of visual images showing no obstruction before the growth of the tree, nowhere does the Ordinance provide that the court is without jurisdiction to adjudicate a tree claim and must dismiss the action if the prelitigation tree claim fails to include such evidence. While the Ordinance requires the parties participate in prelitigation procedures before pursuing either binding arbitration or litigation, and a tree owner would be entitled to a stay of the action to compel compliance if a complaining party had not complied with the prelitigation procedures (see 241*241 McMillin Albany LLC v. Superior Court (2018) 4 Cal.5th 241, 255-256, 259 [227 Cal.Rptr.3d 191, 408 P.3d 797]), that does not mean that the trial court must dismiss a tree action if the prelitigation tree claim fails to include physical evidence of the absence of the obstruction before the growth of the tree.

Simply put, the Ordinance does not contain a clear intent “to limit the fundamental jurisdiction of the courts” to adjudicate only in those cases where the complaining party’s prelitigation tree claim includes pertinent and corroborating evidence of the absence of an obstruction before the growth of the tree. (Quigley v. Garden Valley Fire Protection Dist. (2019) 7 Cal.5th 798, 808 [249 Cal.Rptr.3d 548, 444 P.3d 688], italics added.) If there were an intent to “withdraw a class of cases from state court jurisdiction, we expect” [the Ordinance would] make that intention clear. (Ibid.) Instead, the Ordinance “makes no reference to the jurisdiction of the courts, nor does it otherwise speak to the courts’ power to decide a particular category of cases.” (Quigley, at p. 808.) Thus, we reject the Prices’ argument that the trial court was required to dismiss the action for Kahn’s failure to attach to her prelitigation tree claim visual images of the absence of the obstruction from the main level of her residence before the growth of the tree.

In the alternative, the Prices argue that dismissal is still required because Kahn did not “fill the physical evidence gap” at trial as she presented only testimonial evidence regarding there being an unobstructed view before the growth of the tree. We see no merit to this argument. At trial, the court must determine both “[t]he existence of landmarks, vistas, or other unique features which cannot be seen because of growth of trees since the acquisition of the property” (Ord., § 824, subd. (a)(4)), and the degree to which the “alleged obstruction interferes with [the] view … by means of a measuring instrument or photography” (id., § 824, subd. (a)(5)); and, further, “[t]he extent of … view available and documentable as present at any time during the tenure of the complaining party is the limit of restorative action which may be required” (id., § 824 (c)(6)). However, these provisions do not impose a specific evidentiary requirement on the complaining party to produce visual images of the absence of obstruction before the growth of the tree, as the Prices suggest.

Moreover, even assuming the need for photographic evidence, the trial court’s findings based on the above enumerated criteria—that Kahn had enjoyed unobstructed views from the main level of her home before the growth of the tree—is supported by both Kahn’s testimonial evidence and her arborist’s testimony regarding the absence of the obstruction before the growth of the tree based on an evaluation of the available historic photographs taken from the second level of the residence and the current partial 242*242 view obstructions from the main level of the residence. (See fn. 8, ante.) The trial court, as the trier of fact, could properly combine the arborist’s testimony with its own onsite observations and the testimonial evidence of Kahn and her witnesses regarding the absence of the obstruction before the growth of the tree, “`thus weaving a cloth of truth out of selected available material.'” (Stevens v. Parke, Davis & Co. (1973) 9 Cal.3d 51, 67-68 [107 Cal.Rptr. 45, 507 P.2d 653].)

In sum, we conclude the trial court was not required to dismiss the action predicated on Kahn’s failure to include in her prelitigation tree claim visual images of unobstructed views from the main level of her residence before the growth of the tree. Given this conclusion, we need not address the Prices’ additional evidentiary arguments.

II., III.[*]

……………………………………………………………………..

DISPOSITION

Case No. A159536. The appeal from the judgment, filed December 2, 2019, is dismissed.

Case No. A160057. The appeals from the orders, filed February 25, 2020, and February 26, 2020, are dismissed. The amended judgment, filed February 26, 2020, is affirmed.

Plaintiff and respondent Linda Kahn is awarded costs on appeals in case No. A159536 and case No. A160057.

Fujisaki, Acting P. J., and Chou, J.,[†] concurred.

[*] Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is certified for publication with the exception of the following portions of the Discussion: part II. (Trial Court’s Order Directing Tree Removal) and part III. (Trial Court’s Imposition of Section 128.5 Sanctions).

[1] On December 1, 2020, we granted the Prices’ request to take judicial notice of the Ordinance. San Francisco Tree Dispute Resolution Ordinance sections are hereafter referred to as “Ordinance section….”

[2] All undesignated statutory references are to the Code of Civil Procedure.

[3] The Prices filed a notice of appeal from a judgment filed December 2, 2019 (case No. A159536) and an amended notice of appeal from an amended judgment filed February 26, 2020, as well as separate February 25, 2020 orders awarding costs, attorney and expert fees, and sanctions in favor of Kahn (incorporated in the amended judgment), and a separate February 26, 2020 order denying their motion for sanctions against Kahn and her trial counsel (case No. A160057). William S. Weisberg and the firm of Weisberg & Miller are named as additional appellants in the amended notice of appeal filed in case No. A160057. On the court’s own motion, we consolidated the appeals in case No. A159536 and case No. A160057 for purposes of oral argument and disposition.

The appeal from the February 26, 2020 order denying the Prices’ motion for sanctions against Kahn and her trial counsel is dismissed as no appeal lies from that order. (Wells Properties v. Popkin (1992) 9 Cal.App.4th 1053, 1055 [11 Cal.Rptr.2d 845] [“denial of a motion for sanctions is not a judgment and is therefore not appealable” (original italics)].) The appeals from the December 2, 2019 judgment and the February 25, 2020 orders awarding costs, attorney and expert fees, and sanctions in favor of Kahn, are dismissed as superseded by the appeal from the February 26, 2020 amended judgment. The issues raised on the dismissed appeals from the December 2, 2019 judgment and the February 25, 2020 orders are considered on the appeal from the February 26, 2020 amended judgment. (§ 906.)

[4] Kahn originally purchased the residence together with her late husband Paul Kahn in 1976. At the time of this litigation the residence was owned by Kahn, individually and as trustee of the Survivor’s Trust under the Paul and Linda Kahn Trust, dated November 7, 1995.

[5] Ordinance section 823 requires the parties to participate in prelitigation procedures of “initial reconciliation” (written and if possible, in person notice of dispute) and “Community Board” mediation. (Id., subds. (a), (b).) If the initial reconciliation fails and Community Board mediation is not elected or fails, “the complaining party must prepare a tree claim as defined in Section 822 (j), and provide a copy to the tree owner in order to pursue either binding arbitration or litigation. This process constitutes the filing of a tree claim.” (Id., subd. (c).) “In those cases where initial reconciliation fails and binding arbitration is not elected, civil action may be pursued by the complaining party for resolution of the sunlight access or view tree claim under the provisions of the Ordinance. The litigant must state in the complaint that arbitration was offered and not accepted.” (Id., subd. (d).)

[6] The tree claim consisted of Kahn’s trial counsel’s letter entitled “Tree Claim by the Owner [At Specified Address].” In the body of the letter counsel explained the nature of the dispute as known and understood by Kahn. Kahn’s counsel attached to her letter a copy of the Ordinance and a copy of a January 22, 2017 five-page report prepared by Kahn’s expert arborist who testified at trial.

[7] After the onsite inspection counsel put on the record that during the site inspection the participants viewed the Prices’ property from the three “levels” at the back of the house and the “outdoors,” and viewed Kahn’s property from the three levels of the house and the backyard. The court specifically remarked that the “photographs” did not really “portray the circumstances given the difference in altitude between [the homes] and the relationship of the trees to the houses and the topography.”

[8] In 2017 the tree had an overall height of approximately 25 feet, but by the time of the June 2019 trial the tree was approaching approximately 30 to 32 feet in overall height and was approximately 10 to 12 feet above the lattice fence that sat atop the retaining wall separating the properties. Kahn’s arborist testified that other counties had ordinances that classified the Monterey pine tree as “undesirable,” because it was a fast growing, large stature tree, growing over three feet per year and reaching heights of 35 to 40 feet. At trial, Kahn’s arborist described the tree’s “current condition[ ]” as follows: When you were standing on the main level of Kahn’s residence, “you have at least 3 … to 5 feet above the fence before you start to have an obstruction of the Bay and distant hills” from the main level of Kahn’s residence. Based on photographs of the tree taken from the second level of Kahn’s residence in February 2019, “the current views of the pine in that location, you can juxtaposition yourself below to show that,” at least in the 1970s, there was no view obstruction on the main level of Kahn’s residence.

[9] Ordinance section 825, entitled “APPORTIONMENT OF COSTS,” “[a]dded by Ord. 445-88, App. 9/28/88,” provides in pertinent part: “(b) Costs of Litigation. The complaining party shall pay 100 percent of both parties’ reasonable attorneys’ fees in the event that his or her claim is finally denied, or no action is ordered pursuant to Section 824(c). In all other cases the complaining party and the tree owner shall each pay his or her attorney’s fees. Court costs shall be allocated to the parties at the court’s discretion. (c) Costs of Restorative Actions. At any time during the procedure specified in this ordinance the parties may agree between themselves as to the allocation of the costs of the restorative action. If such an agreement is not reached, the following shall apply: (1) As to trees planted prior to the effective date of this ordinance the complaining party shall pay 100 percent of the costs of the initial restorative action. The complaining party shall pay the cost of subsequent restorative action as a result of the recurrence of the same obstruction. (2) As to trees planted subsequent to the effective date of this chapter [sic] the tree owner and the complaining party shall each be responsible for 50 percent of the costs of restorative action and subsequent recurrence of the same obstruction.” (Original boldface.)

[10] While the Prices seek reversal of the amended judgment in its entirety, they do not specifically challenge the directive that the parties are to share the costs of tree removal. Nor do the Prices present any substantive arguments challenging the award of costs, attorney fees, and expert fees payable to Kahn.

[11] Section 631.8, provides in pertinent part, that “[a]fter a party has completed his presentation of evidence in a trial by the court, the other party, without waiving his right to offer evidence in support of his defense or in rebuttal in the event the motion is not granted, may move for a judgment.” (Id., subd. (a).)

[12] Accordingly, we do not separately address the Prices’ contention that the trial court made two “prejudicial errors of law” when it ruled that no statute of limitations applied because the Ordinance did not mention a limitations period, and Kahn filed this case timely because her delay in filing was due to her need to satisfy the Ordinance’s prelitigation procedures.

[13] We reject the Prices’ argument that Kahn “forfeited any right to rely” on the continuous nuisance doctrine by failing to properly raise the issue in the trial court. As we have noted, during the course of litigating the pretrial motion for bifurcation, Kahn’s opposition included a discussion that the continuous nuisance doctrine rendered any statute of limitations inapplicable. When the Prices later renewed their statute of limitations argument in support of their section 631.8 motion, Kahn chose not to submit additional written opposition, but her counsel argued, among other things, that any statute of limitations was rendered inapplicable by the continuous nuisance doctrine.

[14] The Civil Code also distinguishes between a public and private nuisance. A public nuisance is defined as “one which affects at the same time an entire community or neighborhood, or any considerable number of persons, although the extent of the annoyance or damage inflicted upon individuals may be unequal.” (Civ. Code, § 3480.) A private nuisance is defined as “[e]very nuisance not included in the definition of the last section.” (Id., § 3481.) The statutory definitions incorporate “the fundamental principle that a private nuisance is a civil wrong based on disturbance of rights in land while a public nuisance is not dependent upon a disturbance of rights in land but upon an interference with the rights of the community at large.” (Venuto v. Owens-Corning Fiberglas Corp. (1971) 22 Cal.App.3d 116, 124 [99 Cal.Rptr. 350] (Venuto).) While a public nuisance may be abated by any public body or officer authorized thereto by law, a private person may maintain an action for a public nuisance, if it is specifically injurious to himself, but not otherwise. (Civ. Code, §§ 3493, 3494.) If the nuisance may be considered both “private as well as a public one,” “there is no requirement that the plaintiff suffer damage different in kind from that suffered by the general public and he `does not lose his rights as a landowner merely because others suffer damage of the same kind, or even of the same degreen….'” (Venuto, supra, at p. 124.) Here, the Ordinance is silent as to whether the tree view obstruction is to be considered either a public or private nuisance. Because this appeal does not require us to decide whether a lawsuit under the Ordinance is one in the nature of a public or private nuisance, we do not further address the issue.

[15] As the record shows, the parties and the trial court proceeded on the basis that a lawsuit filed under the Ordinance could be defended against by laches. In the absence of any arguments to the contrary in the appellate briefs, we proceed on the same assumption. In any event, we note in passing that if the lawsuit were considered a claim to abate a private nuisance (see Venuto, supra, 22 Cal.App.3d at p. 124 [“`[t]he essence of a private nuisance is an interference with the use and enjoyment of land'”]), it can be defended against by laches (see Felsenthal v. Warring (1919) 40 Cal.App. 119, 129 [180 P. 67]). If the lawsuit were considered a claim to abate a public nuisance, concededly, as a general rule, it could not be defended against by either laches or the statute of limitations. (See City of Turlock v. Bristow (1930) 103 Cal.App. 750, 756 [284 P. 962]; Civ. Code, § 3490 [“[n]o lapse of time can legalize a public nuisance, amounting to an actual obstruction of public right”].) Albeit, under certain particular circumstances it has been held that laches may prohibit a public nuisance abatement cause of action where, after a “weighing process,” the court has determined that the “injustice to be avoided was sufficient to counterbalance the effect of the defense upon a public interest.” (City and County of San Francisco v. Pacello (1978) 85 Cal.App.3d 637, 646 [149 Cal.Rptr. 705] [appellate court concluded that under the particular circumstances therein the city and county’s action to abate an alleged public nuisance was barred by laches].)

[*] See footnote, ante, page 223.

[†] Judge of the San Mateo Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

 

Gonzalez v. Mathis

Gonzalez v. Mathis

(2021) 12 Cal.5th 29.

Supreme Court of California

August 19, 2021

No. S247677

Summary by Jillian M. Wright Esq.:

Landowners owe no duty to independent contractors or contractors’ workers, and landowners are not legally responsible to protect them against known hazards on premises unless the landowner directed the contractor to perform the job in a way that caused the injury.
TAKEAWAY: Associations can tell an independent contractor what to do, but should stay away from instructing them how to do it. Additionally, requiring a contractor to use an association’s equipment, promising and then failing to fix a known safety hazard, and refusing to allow the contractor to take safety precautions could subject the association to liability if injury results.

***End Summary***

12 Cal.5th 29 (2021)
LUIS GONZALEZ, Plaintiff and Appellant,
v.
JOHN R. MATHIS et al., Defendants and Respondents.

Appeal from the Superior Court of Los Angeles County, Super. Ct. BC542498. Gerald Rosenberg, Judge.

Second Appellate District, Division Seven, B272344.

Review Granted (published) XX 20 Cal.App.5th.

Evan D. Marshall; Law Offices of Wayne McClean, Wayne McClean; Panish Shea & Boyle, Brian J. Panish and Spencer R. Lucas for Plaintiff and Appellant.

Arbogast Law, David M. Arbogast; The Bronson Firm and Steven M. Bronson for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiff and Appellant.

Latham & Watkins, Marvin S. Putnam, Jessica Stebbins, Robert J. Ellison and Michael E. Bern for Defendants and Respondents.

Fred J. Hiestand for the Civil Justice Association of California as Amicus Curiae on behalf of Defendants and Respondents.

June Babiracki Barlow and Neil Kalin for California Association of Realtors as Amicus Curiae on behalf of Defendants and Respondents.

Newmeyer & Dillion, Alan H. Packer and Jack R. Rubin for California Building Industry Association as Amicus Curiae on behalf of Defendants and Respondents.

Greines, Martin, Stein & Richland, Edward L. Xanders and Eleanor S. Ruth for Association of Southern California Defense Counsel as Amicus Curiae on behalf of Defendants and Respondents.

LeClairRyan and William A. Bogdan for Associated General Contractors of California as Amicus Curiae on behalf of Defendants and Respondents.

Horvitz & Levy, Stephen E. Norris and Joshua C. McDaniel for American Property Casualty Insurance Association and Chamber of Commerce of the United States of America as Amici Curiae on behalf of Defendants and Respondents.

37*37 OPINION
GROBAN, J.—

There is a strong presumption under California law that a hirer of an independent contractor delegates to the contractor all responsibility for workplace safety. (See generally Privette v. Superior Court (1993) 5 Cal.4th 689 [21 Cal.Rptr.2d 72, 854 P.2d 721] (Privette); SeaBright Ins. Co. v. US Airways, Inc. (2011) 52 Cal.4th 590 [129 Cal.Rptr.3d 601, 258 P.3d 737] (SeaBright).) This means that a hirer is typically not liable for injuries 38*38 sustained by an independent contractor or its workers while on the job. Commonly referred to as the Privette doctrine, the presumption originally stemmed from the following rationales: First, hirers usually have no right to control an independent contractor’s work. (Privette, at p. 693.) Second, contractors can factor in “the cost of safety precautions and insurance coverage in the contract price.” (Ibid.) Third, contractors are able to obtain workers’ compensation to cover any on-the-job injuries. (Id. at pp. 698-700.) Finally, contractors are typically hired for their expertise, which enables them to perform the contracted-for work safely and successfully. (See id. at p. 700; Rest.3d Torts, Liability for Physical and Emotional Harm, § 57, com. c, p. 402.)

We have nevertheless identified two limited circumstances in which the presumption is overcome. First, in Hooker v. Department of Transportation (2002) 27 Cal.4th 198 [115 Cal.Rptr.2d 853, 38 P.3d 1081] (Hooker), we held that a hirer may be liable when it retains control over any part of the independent contractor’s work and negligently exercises that retained control in a manner that affirmatively contributes to the worker’s injury. (Id. at p. 202.) Second, in Kinsman v. Unocal Corp. (2005) 37 Cal.4th 659 [36 Cal.Rptr.3d 495, 123 P.3d 931] (Kinsman), we held that a landowner who hires an independent contractor may be liable if the landowner knew, or should have known, of a concealed hazard on the property that the contractor did not know of and could not have reasonably discovered, and the landowner failed to warn the contractor of the hazard. (Id. at p. 664.)

We granted review in this case to decide whether a landowner may also be liable for injuries to an independent contractor or its workers that result from a known hazard on the premises where there were no reasonable safety precautions it could have adopted to avoid or minimize the hazard. We conclude that permitting liability under such circumstances, thereby creating a broad third exception to the Privette doctrine, would be fundamentally inconsistent with the doctrine. When a landowner hires an independent contractor to perform a task on the landowner’s property, the landowner presumptively delegates to the contractor a duty to ensure the safety of its workers. This encompasses a duty to determine whether the work can be performed safely despite a known hazard on the worksite. As between a landowner and an independent contractor, the law assumes that the independent contractor is typically better positioned to determine whether and how open and obvious safety hazards on the worksite might be addressed in performing the work. Our case law makes clear that, where the hirer has effectively delegated its duties, there is no affirmative obligation on the hirer’s part to independently assess workplace safety. Thus, unless a landowner retains control over any part of the contractor’s work and negligently exercises that retained control in a manner that affirmatively contributes to the injury (Hooker, supra, 27 Cal.4th at p. 202), it will not be liable to an 39*39 independent contractor or its workers for an injury resulting from a known hazard on the premises. Because the Court of Appeal held otherwise, we reverse the judgment.

I. BACKGROUND
This case comes before us after the trial court granted a motion for summary judgment. We therefore “take the facts from the record that was before the trial court when it ruled on that motion. [Citation.] `”We review the trial court’s decision de novo, considering all the evidence set forth in the moving and opposing papers except that to which objections were made and sustained.”‘ [Citation.] We liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party. [Citation.]” (Yanowitz v. L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037 [32 Cal.Rptr.3d 436, 116 P.3d 1123].)

Defendant John R. Mathis lives in a one-story house with a flat, sand-and-gravel roof. The roof contains a large skylight covering an indoor pool. Plaintiff Luis Gonzalez is a professional window washer who first started cleaning Mathis’s skylight in the 1990s as an employee of Beverly Hills Window Cleaning. In the mid-2000s, Gonzalez started his own professional window washing company. Gonzalez advertised his business as specializing in hard to reach windows and skylights. His marketing materials stated that he “trains his employees to take extra care … with their own safety when cleaning windows.”

In or around 2007, Mathis began regularly hiring Gonzalez’s company to clean the skylight. Gonzalez would climb a ladder affixed to the house to access the roof. Directly to the right of the top of the ladder, a three-foot-high parapet wall runs parallel to the skylight. Mathis constructed the parapet wall for the aesthetic purpose of obscuring air conditioning ducts and pipes from view. The path between the edge of the roof and the parapet wall is approximately 20 inches wide. Gonzalez would walk between the parapet wall and the edge of the roof and use a long, water-fed pole to clean the skylight. Gonzalez testified that he did not walk on the other side of the parapet wall—i.e., between the parapet wall and the skylight—because air conditioning ducts, pipes, and other permanent fixtures made the space too tight for him to navigate.

On August 1, 2012, at the direction of Mathis’s housekeeper, Gonzalez went up on to the roof to tell his employees to use less water while cleaning the skylight because water was leaking into the house. While Gonzalez was walking between the parapet wall and the edge of the roof on his way back to the ladder, he slipped and fell to the ground, sustaining serious injuries. Gonzalez did not have workers’ compensation insurance.

40*40 Gonzalez contends that his accident was caused by the following dangerous conditions on Mathis’s roof: (1) Mathis’s lack of maintenance caused the roof to have a very slippery surface made up of “loose rocks, pebbles, and sand”; (2) the roof contained no tie-off points from which to attach a safety harness; (3) the roof’s edge did not contain a guardrail or safety wall; and (4) the path between the parapet wall and the roof’s edge was unreasonably narrow and Gonzalez could not fit between the parapet wall and the skylight due to obstructing fixtures. Gonzalez testified that he knew of these conditions since he first started cleaning Mathis’s skylight, although the roof’s condition became progressively worse and more slippery over time. Gonzalez also testified that he told Mathis’s housekeeper and accountant “months before the accident” that the roof was in a dangerous condition and needed to be repaired, though Gonzalez did not indicate that his work of cleaning the skylight could not be performed safely absent the roof’s repair.

The trial court granted Mathis’s motion for summary judgment, finding that Mathis owed no duty to Gonzalez pursuant to the Privette doctrine. The Court of Appeal reversed. It held that a landowner may be liable to an independent contractor or its workers for injuries resulting from known hazards in certain circumstances. (Gonzalez v. Mathis (2018) 20 Cal.App.5th 257, 272-273 [228 Cal.Rptr.3d 832] (Gonzalez).) More specifically, the Court of Appeal relied on dicta in Kinsman providing that, “`when there is a known safety hazard on a hirer’s premises that can be addressed through reasonable safety precautions on the part of the independent contractor, … the hirer generally delegates the responsibility to take such precautions to the contractor'” (Gonzalez, at p. 268) to hold that, “[a]s a corollary, the hirer can be held liable when he or she exposes a contractor (or its employees) to a known hazard that cannot be remedied through reasonable safety precautions” (id. at pp. 272-273). The Court of Appeal additionally held that disputed issues of material fact existed as to whether Gonzalez could have taken reasonable safety precautions to avoid the danger, precluding summary judgment. (Id. at pp. 273-274.)

We granted review.

II. DISCUSSION
The Privette doctrine holds that a hirer generally delegates to an independent contractor all responsibility for workplace safety and is not liable for injuries sustained by the contractor or its workers while on the job. We are asked to determine whether, despite the Privette doctrine, a landowner may be liable for injuries stemming from a known hazard on the premises that neither the contractor nor its workers could have avoided through the adoption of reasonable safety precautions. To resolve this, it is helpful to 41*41 provide an overview of the principles underlying Privette and its progeny. We then discuss the general premises liability rules that apply to known hazards on the landowner’s property. Finally, we discuss whether, under Privette, a landowner delegates to an independent contractor any duty it might otherwise owe under the usual premises liability rules to protect the contractor or its workers from known hazards on the property.

A. The Privette Doctrine
In Privette, we considered whether a landowner could be liable for injuries sustained when an independent contractor’s employee fell off a ladder while carrying hot tar up to a roof during a roof installation. (Privette, supra, 5 Cal.4th at pp. 691-692.) We held that the doctrine of peculiar risk—which provides that landowners are vicariously liable for injuries to third parties resulting from the negligence of independent contractors in performing inherently dangerous work on the landowners’ property—does not apply to injuries sustained by the contractor’s own employees. (Ibid.) We explained that the doctrine was meant to ensure that third parties received compensation from the person who benefitted from the work (i.e., the landowner) in the event the contractor was insolvent. (Id. at p. 701.) The availability of workers’ compensation, however, eliminates this concern as to the contractor’s own employees by ensuring that the employees will receive some compensation for their injuries. (Id. at pp. 701-702.) We also noted that allowing a contractor’s employees to sue the hirer would lead to the anomalous result where the “nonnegligent person’s liability for an injury is greater than that of the person whose negligence actually caused the injury” because the contractor’s exposure would be limited to workers’ compensation while the hirer would be subject to tort damages. (Id. at p. 698.) We further observed that imposing tort liability on hirers “would penalize those individuals who hire experts to perform dangerous work rather than assigning such activity to their own inexperienced employees.” (Id. at p. 700.)

Over the nearly three decades since we decided Privette, we have repeatedly reaffirmed the basic rule that a hirer is typically not liable for injuries sustained by an independent contractor or its workers while on the job. Our more recent cases emphasize delegation as the key principle underlying this rule: Because the hirer presumptively delegates to the independent contractor the authority to determine the manner in which the work is to be performed, the contractor also assumes the responsibility to ensure that the worksite is safe, and the work is performed safely. (SeaBright, supra, 52 Cal.4th at p. 600.) This rule applies even where the hirer was at least partially to blame due to its negligent hiring (Camargo v. Tjaarda Dairy (2001) 25 Cal.4th 1235, 1238 [108 Cal.Rptr.2d 617, 25 P.3d 1096]) or its failure to comply with preexisting statutory or regulatory workplace safety 42*42 requirements (SeaBright, at p. 594). It also applies to a solo independent contractor who has no employees and who has declined to obtain workers’ compensation insurance, such that the contractor will receive no coverage for his or her injuries. (Tverberg v. Fillner Construction, Inc. (2010) 49 Cal.4th 518, 521 [110 Cal.Rptr.3d 665, 232 P.3d 656] (Tverberg).)

We have nonetheless identified two situations in which a hirer has failed to effectively delegate all responsibility for workplace safety to the independent contractor. First, in Hooker, we held that a hirer will be liable where it exercises retained control over any part of the contractor’s work in a manner that affirmatively contributes to the worker’s injuries. (Hooker, supra, 27 Cal.4th at p. 202.) The hirer in Hooker had contractually retained the right to correct certain dangerous conditions on the worksite that were created by the contractor’s work. (Ibid.) We nevertheless rejected the plaintiff’s argument that such retained control over the safety conditions of the worksite, in and of itself, was sufficient to establish liability. (Id. at pp. 210-211.) We reasoned “it would be unfair to impose tort liability on the hirer of the contractor merely because the hirer retained the ability to exercise control over safety at the worksite” since “the person primarily responsible for the worker’s on-the-job injuries[] is limited to providing workers’ compensation coverage.” (Id. at p. 210.) But if the hirer negligently exercises its retained control “in a manner that affirmatively contributes to an employee’s injuries, it is only fair to impose liability on the hirer.” (Id. at p. 213.) We also made clear in Hooker that this exception to Privette is not met solely because a hirer is aware that there is an unsafe condition on the worksite or knows that the contractor is engaging in an unsafe work practice. (See id. at pp. 214-215.) Something more is required, such as “`inducing injurious action or inaction through actual direction'” (id. at p. 211); directing “`the contracted work be done by use of a certain mode'” (id. at p. 215); or interfering with “`the means and methods by which the work is to be accomplished'” (ibid.). Thus, we found that the hirer in Hooker did not exercise its retained control in a manner that affirmatively contributed to the injury where it merely permitted vehicles to use the overpass and knew that, in order to allow vehicles to pass through, the contractor’s crane operator was required to engage in the unsafe practice of retracting the crane’s stabilizing outriggers. (Id. at pp. 214-215.) But we did find that the hirer in Hooker’s companion case, McKown v. Wal-Mart Stores, Inc. (2002) 27 Cal.4th 219 [115 Cal.Rptr.2d 868, 38 P.3d 1094] (McKown), exercised its retained control in a manner that affirmatively contributed to the injury where it requested the independent contractor to use the hirer’s own defective equipment in performing the work. (Id. at p. 225.)

Second, in Kinsman, we addressed whether a landowner may be liable for injuries sustained by an independent contractor’s employee that were caused by a concealed hazard; specifically, hidden asbestos dust and 43*43 debris at a worksite. We held that the landowner could be liable if “the landowner knew, or should have known, of a latent or concealed preexisting hazardous condition on its property, the contractor did not know and could not have reasonably discovered this hazardous condition, and the landowner failed to warn the contractor about this condition.” (Kinsman, supra, 37 Cal.4th at p. 664, fn. omitted.) We based our holding on the premises liability rule that a landowner has a duty to warn a visitor of a dangerous condition on the property “`so that [the visitor], like the host, will be in a position to take special precautions when [the visitor] comes in contact with it.'” (Kinsman, at p. 673, quoting Rowland v. Christian (1968) 69 Cal.2d 108, 119 [70 Cal.Rptr. 97, 443 P.2d 561]; see also Rest.2d Torts, § 343.) Our holding was also grounded in Privette’s strong presumption in favor of delegation. We explained that, while a landowner delegates to an independent contractor the duty to protect its workers against hazards on the worksite, such delegation “is ineffective when the hirer, as landowner, fails to provide the contractor with the information—the existence of a latent hazard—necessary to fulfill that responsibility.” (Kinsman, at p. 679; see also id. at p. 673.)

B. Premises Liability Rules Applicable to Known Hazards
As described above, Kinsman involved a concealed hazard, which is not at issue here. Nonetheless, we discussed in Kinsman the usual landowner liability rule regarding an obvious hazard that applies to persons who visit the premises. (Kinsman, supra, 37 Cal.4th at pp. 672-674.) We explained that, typically, “`if a danger is so obvious that a person could reasonably be expected to see it, the condition itself serves as a warning, and the landowner is under no further duty to remedy or warn of the condition.'” (Id. at p. 673.) Still, we observed that landowners may be liable for injuries to persons resulting from an obvious hazard where “`”the practical necessity of encountering the danger, when weighed against the apparent risk involved, is such that under the circumstances, a person might choose to encounter the danger.”‘” (Ibid., quoting Krongos v. Pacific Gas & Electric Co. (1992) 7 Cal.App.4th 387, 391, 394 [9 Cal.Rptr.2d 124] [owner of a construction yard could be liable to an employee of the yard’s lessor for injuries resulting from an obvious hazardous power line].) This rule is consistent with the Restatement Second and Restatement Third of Torts. (Rest.2d Torts, § 343A [a landowner is generally not liable for injuries resulting from a “known or obvious” hazard, “unless the [landowner] should anticipate the harm despite such knowledge or obviousness”]; Rest.3d Torts, Liability for Physical and Emotional Harm, § 51, com. k, p. 251 [same].)

We did not determine in Kinsman whether or under what circumstances the above rule—which is set forth in section 343A of the Restatement Second of Torts (titled “Known or Obvious Dangers”)—might apply to 44*44 independent contractors. Instead, our rule in Kinsman applies only to situations in which an independent contractor could not be reasonably expected to ascertain or discover a hidden danger, a circumstance not at issue here. (Kinsman, supra, 37 Cal.4th at p. 673.) We did, however, squarely address the related section 343 of the Restatement Second of Torts (titled “Dangerous Conditions Known to or Discoverable by Possessor”). We observed that this section “must be modified, after Privette” as applied “to a hirer’s duty to the employees of independent contractors.” (Kinsman, at p. 674.) Section 343 provides that a landowner is liable for a hazard on the premises when it “`(a) knows or by the exercise of reasonable care would discover the condition, and should realize that it involves an unreasonable risk of harm to such invitees, and [¶] (b) should expect that they will not discover or realize the danger, or will fail to protect themselves against it.'” (Kinsman, at p. 674, quoting Rest.2d Torts, § 343, italics added by Kinsman.) We explained that the italicized phrase does not apply to independent contractors because, once the contractor becomes aware of a concealed hazard’s existence, it becomes the contractor’s responsibility to take whatever precautions are necessary to protect itself and its workers from the hazard. (Kinsman, at p. 674.)

Despite the above reasoning, we speculated in dicta in Kinsman that, even as to independent contractors, “[t]here may be situations … in which an obvious hazard, for which no warning is necessary, nonetheless gives rise to a duty on a landowner’s part to remedy the hazard because knowledge of the hazard is inadequate to prevent injury.” (Kinsman, supra, 37 Cal.4th at p. 673.) We further observed that, “when there is a known safety hazard on a hirer’s premises that can be addressed through reasonable safety precautions on the part of the independent contractor, a corollary of Privette and its progeny is that the hirer generally delegates the responsibility to take such precautions to the contractor….” (Kinsman, at p. 673.) The Court of Appeal relied on this discussion to create a third exception to the Privette doctrine: Where there were no reasonable safety precautions the independent contractor could have taken to avoid or protect against a known hazard, the landowner may be liable. (Gonzalez, supra, 20 Cal.App.5th at pp. 272-273.) But, as the Court of Appeal acknowledged, we did not set out to resolve in Kinsman whether or under what circumstances a landowner may be liable to an independent contractor or its workers for injuries resulting from known hazards on a premises; instead, we resolved only whether a landowner may be liable for concealed hazards on a premises. (Kinsman, supra, 37 Cal.4th at p. 664; see also Gonzalez, at p. 272, fn. 1.) And, we had no need to determine whether a landowner could be liable where no reasonable safety precautions exist that would protect an independent contractor or its workers from a known hazard on the premises, since the plaintiff in Kinsman acknowledged that “reasonable safety precautions against the hazard … were readily available….” (Kinsman, at p. 673; see also B.B. v. County of Los 45*45 Angeles (2020) 10 Cal.5th 1, 11 [267 Cal.Rptr.3d 203, 471 P.3d 329] [“`”[C]ases are not authority for propositions not considered”‘”].) We resolve this question below.

C. Delegation of a Landowner’s Duties Regarding Known Hazards Under Privette
This case compels us to answer a simple but important question: If there is a known hazard on a property that the independent contractor cannot remedy or protect against through the adoption of reasonable safety precautions, and the contractor or one of its workers is injured after proceeding to do the work anyway, is the landowner liable to the contractor in tort? We conclude that, pursuant to Privette’s strong presumption that a hirer delegates to an independent contractor all responsibility for workplace safety, a landowner owes no duty to the contractor or its workers to remedy a known hazard on the premises or take other measures that might provide protection against the hazard. Privette’s “no duty” rule applies even where the contractor is unable to minimize or avoid the danger through the adoption of reasonable safety precautions. A landowner does not fail to delegate responsibility to the contractor for workplace safety simply because there exists a known hazard on the premises that cannot be readily addressed by the contractor. Were we to hold otherwise, we would vastly expand hirer liability and create considerable tension with decades of case law establishing that a hirer is not liable where it is merely aware of a hazardous condition or practice on the worksite.

Further analysis of our reasoning in Kinsman, Hooker, and SeaBright make this conclusion clear. As we recognized in Kinsman, applying to independent contractors the Restatement’s rule that a landowner may be liable where it “`should expect'” that a visitor “`will fail to protect themselves against'” a known hazard on the premises would be inconsistent with Privette’s presumption of delegation. (Kinsman, supra, 37 Cal.4th at p. 674, italics omitted quoting Rest.2d Torts, § 343.) Once an independent contractor becomes aware of a hazard on the premises, “the landowner/hirer delegates the responsibility of employee safety to the contractor” and “a hirer has no duty to act to protect the employee when the contractor fails in that task….” (Kinsman, at p. 674.) A rule establishing landowner liability for a known hazard where there were no reasonable safety precautions the contractor could have adopted to protect against the hazard would turn Privette’s presumption of delegation on its head by requiring the landowner to affirmatively assess workplace safety. The landowner would need to determine whether the contractor is able to adopt reasonable safety precautions to protect against the known hazard and, if not, to remedy the hazard. This makes little sense given that a landowner typically hires an independent 46*46 contractor precisely because of the contractor’s expertise in the contracted-for work and the hirer usually has no right to interfere with the contractor’s decisions regarding safety or otherwise control the contractor’s work. (Privette, supra, 5 Cal.4th at pp. 693, 700; see also Torres v. Reardon (1992) 3 Cal.App.4th 831, 840 [5 Cal.Rptr.2d 52] [As between the hirer and the contractor, “the contractor better understands the nature of the work and is better able to recognize risks peculiar to it”]; Rest.3d Torts, Physical and Emotional Harm, § 57, com. c, p. 402 [“[H]irers of independent contractors have less knowledge than employers about the safety-related details and methods of the work”].) Our conclusion in Kinsman that a landowner delegates all responsibility to independent contractors to “`protect themselves against'” a known hazard (Kinsman, at p. 674, italics omitted), coupled with the principles underlying Privette’s straightforward rule that a hirer of an independent contractor delegates to the contractor all responsibility for workplace safety (see Privette, at p. 693; SeaBright, supra, 52 Cal.4th at p. 597), leads us to reject a rule that would allow a contractor to recover in tort so long as it proves it was unable to adopt reasonable safety precautions in the face of a known hazard.

In addition, a rule that would expose a landowner to tort liability whenever an independent contractor is unable to adopt reasonable safety precautions to protect against a known danger would create tension with our holding in Hooker by providing an avenue for liability premised upon a hirer’s failure to correct an unsafe work condition. In Hooker, we held that a hirer is not liable under Privette where it merely permits a dangerous work condition or practice to exist. (Hooker, supra, 27 Cal.4th at p. 215.) This is true even where the hirer knows of the danger and has the authority and ability to remedy it. The facts of Hooker make this clear: The hirer in Hooker had the authority to prevent traffic on an overpass the independent contractor was constructing. (Id. at p. 214.) The hirer also knew that, to allow traffic to pass through, the contractor’s crane operator was required to (i.e., had no other option other than to) engage in the unsafe practice of retracting the crane’s stabilizing outriggers. (Ibid.) Despite the hirer’s knowledge of the unsafe practice, we held that the hirer was not liable for failing to take affirmative steps within its authority to remedy it. (Id. at pp. 214-215.)

In the nearly two decades following our opinion in Hooker, courts have consistently reaffirmed that “[a] hirer’s failure to correct an unsafe condition” is insufficient, by itself, to establish liability under Hooker’s exception to the Privette doctrine. (Khosh v. Staples Construction Co., Inc. (2016) 4 Cal.App.5th 712, 718 [208 Cal.Rptr.3d 699]; see also Tverberg v. Fillner Construction, Inc. (2012) 202 Cal.App.4th 1439, 1446 [136 Cal.Rptr.3d 521] (Tverberg II) [“[P]assively permitting an unsafe condition to occur … does not constitute affirmative contribution”].) To be liable, a hirer must instead exercise its retained control over any part of the contracted-for 47*47 work—such as by directing the manner or methods in which the contractor performs the work; interfering with the contractor’s decisions regarding the appropriate safety measures to adopt; requesting the contractor to use the hirer’s own defective equipment in performing the work; contractually prohibiting the contractor from implementing a necessary safety precaution; or reneging on a promise to remedy a known hazard—in a manner that affirmatively contributes to the injury. (See Hooker, at pp. 212, fn. 3, 215; McKown, supra, 27 Cal.4th at p. 225; Tverberg II, at pp. 1446-1448; Ruiz v. Herman Weissker, Inc. (2005) 130 Cal.App.4th 52, 65-66 [29 Cal.Rptr.3d 641]; Ray v. Silverado Constructors (2002) 98 Cal.App.4th 1120, 1132-1134 [120 Cal.Rptr.2d 251] (Ray).)

We recognize that Hooker was based upon a retained control theory of liability (which applies to all hirers), whereas this action is based upon a premises liability theory (which would apply to only landowner hirers). Nevertheless, a rule that exposes a landowner to liability whenever there are no safety precautions available to protect an independent contractor or its workers against a known hazard would, in practice, swallow the rule we set forth in Hooker, at least as applied to landowners, because it would expose the landowner to liability even in situations in which it did not interfere with or exert control over any part of the contractor’s work, such as the contractor’s decisions regarding workplace safety. Indeed, it would give rise to a “Catch-22” situation: A landowner could avoid liability under Hooker by declining to interfere with the contractor’s decisions regarding whether or how it might safely perform the work in view of a hazard on the worksite, only to be potentially liable under the Court of Appeal’s rule for not exercising control over the contractor’s work by attempting to remedy or provide protections against that hazard.

Finally, our conclusion is consistent with our holding in SeaBright. In SeaBright, we addressed whether a hirer could be liable where an employee of an independent contractor hired to maintain and repair a luggage conveyor belt was injured because the conveyor belt lacked the safety guards required by Cal-OSHA regulations. (SeaBright, supra, 52 Cal.4th at pp. 594-595.) In answering “no” to this question, we explained that even though the hirer’s regulatory duty to install the safety guards preexisted the contract, the hirer delegated to the independent contractor “any tort law duty it owe[d] to the contractor’s employees to ensure the safety of the specific workplace that is the subject of the contract.” (Id. at p. 594, italics omitted; see also id. at pp. 601, 603.) The Court of Appeal’s proposed third exception to Privette would subject a landowner to liability for failing to remedy a known hazard on the premises, even though a hirer who fails to comply with clearly defined statutory and regulatory workplace safety requirements—and thereby creates an unsafe condition on the worksite—is not liable for such injuries under SeaBright.

48*48 Following our holdings in Hooker and SeaBright, several Court of Appeal decisions have found no hirer liability in circumstances strikingly similar to those presented here. In Delgadillo v. Television Center, Inc. (2018) 20 Cal.App.5th 1078 [229 Cal.Rptr.3d 594], an employee of an independent contractor fell to his death while he was washing a commercial building’s windows when his descent apparatus detached from the roof. (Id. at p. 1081.) The plaintiffs submitted evidence that (1) the building’s owners had a statutory and regulatory duty to provide approved anchor points on the roof to support window washers; (2) the building contained no such anchor points; and (3) without the anchor points, there was no safe way to clean the windows. (Id. at pp. 1083-1084.) The court nevertheless determined that the landowners owed no duty because, under our holding in SeaBright, they delegated to the contractor the duty to comply with all statutory and regulatory requirements necessary to provide a safe workplace. (Delgadillo, at p. 1091.) The court also found that the owners did not exercise retained control over the contractor’s work in a manner that affirmatively contributed to the injury because, while the building had inadequate anchor points, the owners did not “suggest or request” that the contractor use them in cleaning the windows. (Id. at p. 1093.) Like SeaBright, Delgadillo illustrates that even where an unsafe condition exists on the premises due to the landowner’s failure to comply with specific statutory and regulatory duties, the landowner is not liable because it is the contractor who is responsible for its own workers’ safety.

Similarly, in Madden v. Summit View, Inc. (2008) 165 Cal.App.4th 1267 [81 Cal.Rptr.3d 601], the court applied our holding in Hooker to find that the hirer (a general contractor) was not liable for injuries suffered by an employee of an independent contractor who fell from a raised patio during construction of a residential home. (Madden, at pp. 1271, 1276-1278.) The plaintiff claimed the hirer was negligent for failing to install protective railing along the open side of the patio. (Id. at pp. 1270-1271.) The court held that this was insufficient to amount to affirmative contribution. (Id. at pp. 1276-1278.) The court explained that, while the plaintiff alleged that its employer (the independent contractor) had no authority to install protective railing, there was no evidence that the hirer “participated in any discussion about placing a safety railing along the patio, became aware of any safety concern due to the lack of such a railing, or intervened in any way to prevent such a railing from being erected.” (Id. at p. 1277.) In other words, there was no evidence that the hirer “directed that no guardrailing or other protection against falls be placed along the raised patio, or that it acted in any way to prevent such a railing from being installed.” (Id. at pp. 1276-1277.)

Finally, in Brannan v. Lathrop Construction Associates, Inc. (2012) 206 Cal.App.4th 1170 [142 Cal.Rptr.3d 336] (Brannan), an employee of an independent contractor fell off a wet plastic scaffold that he believed was the 49*49 only means of access to the area in which he was working. (Id. at p. 1174.) The contractor had the authority to stop the work due to a safety concern but did not have any authority to remove the scaffold. (Id. at pp. 1174, 1178.) The court held that the hirer was not liable for the employee’s injuries because there was no indication that it exercised any retained control over the contractor’s work in a manner that affirmatively contributed to the injury. (Id. at pp. 1179-1180.) The court reasoned that even if the presence of the scaffold required the plaintiff to climb over it to perform his work, the hirer never directed the plaintiff to climb over the scaffold. (Id. at pp. 1178-1179.) The court further noted that the contractor did not ask the hirer to remove the scaffolding for safety reasons, nor did the hirer promise to do so. (Id. at p. 1180.)

The above cases illustrate how the Court of Appeal’s rule would subject landowners, but not general contractors or other hirers, to potential tort liability under an identical set of factual circumstances. All of our Privette line of cases, aside from Kinsman, considered “whether an employee of an independent contractor may sue the hirer of the contractor under tort theories covered in chapter 15 of the Restatement Second of Torts.” (Hooker, supra, 27 Cal.4th at p. 200.) That chapter covers the circumstances under which any hirer (whether a landowner or other hirer) may be liable for injuries sustained to third persons due to the work of an independent contractor. Kinsman, on the other hand, considered whether a landowner (but not a general contractor or subcontractor) may be liable for injuries sustained by an independent contractor’s workers under the premises liability tort theories covered by chapter 13 of the Restatement Second of Torts. (See Kinsman, supra, 37 Cal.4th at p. 673.) Thus, the Kinsman rule applied only to landowners (which we clarified in Kinsman also includes land possessors), and not to nonlandowner hirers.

If we were to adopt the Court of Appeal’s rule regarding known hazards, which is based on the premises liability rules discussed in Kinsman and thus applies exclusively to landowner hirers, we would be holding landowners liable for known dangerous conditions on the worksite even though nonlandowner hirers would not be liable under the same circumstances. To illustrate this discord, the landowners in Delgadillo would be liable because they owned a building that had an unsafe but known condition on the roof (i.e., the lack of statutorily required anchor points) and there were no reasonable safety precautions the window washers could have implemented in order to avoid the hazard and clean the windows safely. This liability would attach even though the landowner did not exercise any retained control over the contracted-for work in a manner that affirmatively contributed to the injury. But the general contractors in Brannan and Madden would not be liable 50*50 because they did not own the premises and also did not exercise any retained control over the contracted-for work in a manner that affirmatively contributed to the injury.

Tort law sometimes imposes heightened duties on landowners, including a duty to remedy obvious hazards on their property in certain circumstances. Nonetheless, we can think of no compelling reason for making the Privette doctrine largely inapplicable to landowner hirers such that they are unable to delegate the duty to maintain a safe workplace to an independent contractor. Indeed, it would be contrary to Privette’s strong presumption that all hirers delegate responsibility for workplace safety to independent contractors if we created two disparate rules under which landowners would be liable for known hazards on the worksite in certain circumstances while other nonlandowner hirers would not be liable for such hazards under the same circumstances. If anything, a landowner—perhaps especially a residential homeowner—will normally be less likely than a general contractor to have knowledge regarding the “methods used and requirements of the work being performed” by an independent contractor (Toland v. Sunland Housing Group, Inc. (1998) 18 Cal.4th 253, 268 [74 Cal.Rptr.2d 878, 955 P.2d 504] (Toland)) and is, therefore, less likely to understand whether and what safety precautions are available to protect the contractor’s workers from a known hazard on the premises. It made sense for us to adopt a rule in Kinsman that holds landowners accountable for concealed hazards on their property of which they should reasonably be aware and the independent contractor is unlikely to discover because the landowner is the only party with knowledge of the danger and cannot effectively delegate responsibility for workplace safety without alerting the contractor to the danger. (Kinsman, supra, 37 Cal.4th at p. 677; see also id. at p. 679.) This rationale does not apply where the hazard is open and obvious, as in this case. Moreover, we stopped short in Kinsman of imposing a duty on the landowner to remedy the concealed hazard or to provide the contractor with safety precautions that would protect it against the hazard, recognizing that it is the contractor’s duty to implement whatever precautions are necessary to protect its workers against the hazard once warned of it. (See id. at pp. 673-674.) Stated differently, once the hazard is known to the contractor, the contractor has at its disposal all of the information necessary to determine whether or how the work can be performed safely. We therefore decline to adopt a rule that subjects landowners to greater liability than other hirers for injuries stemming from known hazards.

Furthermore, it would be difficult, if not impossible, for a landowner to ever obtain summary judgment were we to adopt a rule that subjects landowners to potential liability where there are no reasonable safety precautions available to protect against a known danger. (Cf. Toland, supra, 18 Cal.4th at p. 268 [rejecting a rule that would impose liability based on a 51*51 hirer’s “`superior knowledge'” of the “`risk[s]'” of the work because the rule would not be amenable to summary judgment]; see also id. at pp. 275-276 (conc. & dis. opn. of Werdegar, J.).) The question of whether the independent contractor, in hindsight, could have adopted reasonable safety precautions to protect against a known hazard will almost always encompass disputed issues of material fact. (See Gonzalez, supra, 20 Cal.App.5th at pp. 273-274 [recognizing that the reasonableness of a party’s actions in confronting a known hazard or taking precautions to protect against the hazard “is generally a question of fact for the jury to decide”].) If a plaintiff were able to survive summary judgment merely by alleging there were no reasonable safety precautions available, Privette’s presumption of delegation would be rebuttable in nearly all instances, which would effectively amount to no presumption at all.

We acknowledge that there will sometimes be financial and other real world factors that might make it difficult for an independent contractor to raise safety concerns with the hirer or to simply walk away from a job it has deemed to be unsafe. But independent contractors can typically factor the cost of added safety precautions or any increased safety risks into the contract price. (Privette, supra, 5 Cal.4th at p. 693.) They can also purchase workers’ compensation to cover any injuries sustained while on the job. (Id. at pp. 698-700.)[1] Furthermore, our holding avoids the unfair “tort damages windfall” that would result from adopting a rule that allows independent contractors and their workers to obtain tort damages from the landowner while the landowner’s own employees are limited to workers’ compensation. (SeaBright, supra, 52 Cal.4th at p. 599; see also Privette, at p. 700.) Were we to adopt the Court of Appeal’s rule—which applies only to injuries suffered by independent contractors and their employees—we would allow contractors and their employees to obtain tort damages from the landowner when injured as a result of a known hazard on the premises. Conversely, those persons who were directly employed by the landowner would be limited to workers’ compensation for any injuries sustained while on the premises. To impose tort liability “on a person who hires an independent contractor for specialized work would penalize those individuals who hire experts to perform dangerous work rather than assigning such activity to their own inexperienced employees.” (Privette, at p. 700.)

Gonzalez argues that the Privette doctrine applies only where the independent contractor is specifically tasked with repairing the hazard or 52*52 where the hazard was created by the work for which the contractor was retained. Only then, in Gonzalez’s view, is the risk inherent to the work the contractor was hired to perform. Gonzalez’s argument goes well beyond the rule adopted by the Court of Appeal and fails on its merits for at least two reasons. First, Gonzalez’s view of the risk inherent to his work is overly narrow: It cannot be seriously disputed that cleaning a skylight will always entail at least some risk of falling off a roof. Second, Gonzalez’s position is contrary to our holdings in Tverberg and Kinsman. We recognized in Tverberg that the bollard holes that caused the independent contractor’s injury were wholly unrelated to his task of constructing a metal canopy. (Tverberg, supra, 49 Cal.4th at p. 523 [“The bollards had no connection to the building of the metal canopy, and [the independent contractor] had never before seen bollard holes at a canopy installation”].) The contractor also did not create the hazard; the holes were dug by a different subcontractor for a different purpose. (Id. at p. 522.) Nevertheless, we determined that the doctrine of peculiar risk does not apply when an independent contractor “seeks to hold the general contractor vicariously liable for injuries arising from risks inherent in the nature or the location of the hired work over which the independent contractor has, through the chain of delegation, been granted control.” (Id. at pp. 528-529, italics added.) Since the proximity of the bollard holes to the location where the canopy was to be constructed made “the possibility of falling into one of those holes … an inherent risk of” the contractor’s work, the contractor—and not the hirer—was responsible for protecting himself against that risk. (Id. at p. 529.) Similarly, in Kinsman, the independent contractor was hired to install scaffolding and not to remove or remediate the asbestos hazard. (Kinsman, supra, 37 Cal.4th at p. 664.) The plaintiff’s exposure to asbestos was also not caused by his work; instead, the work of other contractors generated asbestos dust and debris to which the plaintiff was exposed. (Ibid.) We did not hold that the landowner in Kinsman could be liable because the hazard was not inherent to the contractor’s work. Instead, we held that the landowner could be liable if the asbestos hazard was unknown to and undiscoverable by the contractor and the landowner failed to warn of it, irrespective of the fact that the contractor did not create the hazard and was not hired to remediate the hazard. (Id. at pp. 675, 683.) As these and our other Privette cases make clear, a hirer presumptively delegates to an independent contractor all responsibility for workplace safety, such that the hirer is not responsible for any injury resulting from a known unsafe condition at the worksite—regardless of whether the contractor was specifically tasked with repairing the unsafe condition and regardless of whether the danger was created by the work for which the contractor was retained.

Gonzalez additionally argues that delegation under Privette “is essentially a form of primary assumption of risk” and that, pursuant to the principles governing the primary assumption of risk doctrine, Mathis had “an 53*53 affirmative duty to not increase the risk above the level inherent in the activity.” Relying on primary assumption of risk cases, Gonzalez argues that since Mathis increased the risk that he would fall off the roof, Mathis must be held liable. Gonzalez is mistaken; the primary assumption of risk and Privette doctrines “are distinct.” (Gordon v. ARC Manufacturing, Inc. (2019) 43 Cal.App.5th 705, 717 [256 Cal.Rptr.3d 820].) The Privette doctrine is concerned with who owes a duty of care to ensure workplace safety—the hirer or the independent contractor—under principles of delegation. (See SeaBright, supra, 52 Cal.4th at pp. 599-600.) The assumption of risk doctrine asks whether a defendant owes a duty of care where the plaintiff voluntarily assumes the risks of a dangerous activity or occupation. (See Kahn v. East Side Union High School Dist. (2003) 31 Cal.4th 990, 1003-1005 [4 Cal.Rptr.3d 103, 75 P.3d 30].)

If the risks are inherent to the activity or occupation and cannot be mitigated without fundamentally altering the nature of the activity or occupation, primary assumption of risk applies and the defendant owes no duty of care. (See, e.g., Avila v. Citrus Community College Dist. (2006) 38 Cal.4th 148, 163 [41 Cal.Rptr.3d 299, 131 P.3d 383] [defendant owed no duty because being hit by a pitch, whether intentionally or not, is an inherent risk of baseball]; Priebe v. Nelson (2006) 39 Cal.4th 1112, 1132 [47 Cal.Rptr.3d 553, 140 P.3d 848] [defendant owed no duty because kennel worker “assumed the risk of being bitten or otherwise injured by the dogs under her care and control”].) Secondary assumption of risk is essentially a form of comparative negligence under which a defendant owes a duty of care to the plaintiff, but the plaintiff bears some fault for voluntarily encountering a known risk. (Gregory v. Cott (2014) 59 Cal.4th 996, 1001 [176 Cal.Rptr.3d 1, 331 P.3d 179].) If the strong presumption of delegation under Privette is overcome, assumption of risk and comparative fault principles may become relevant. (See McKown, supra, 27 Cal.4th at pp. 223, 226 [although the hirer was liable for affirmatively contributing to the injury, the jury allocated 55 percent of the fault to the independent contractor under comparative negligence principles].) But these principles have no bearing on whether, in the first instance, Mathis delegated to Gonzalez a duty to ensure workplace safety under Privette. If Gonzalez’s view were correct, then there would have been no need for us to articulate in Hooker that a hirer is liable only where it exercises retained control over any part of the independent contractor’s work in a manner that affirmatively contributes to the injury. Instead, we would have simply held that a hirer is liable whenever it increases the risk of injury.

For these reasons, we conclude that a landowner will generally not be liable for an injury to an independent contractor or its workers resulting from a known hazard on the property. Of course, if there is evidence that the landowner exercised any retained control over any part of the contractor’s work in a manner that affirmatively contributed to the injury, the landowner’s 54*54 actions would fall within the established Hooker exception to the Privette doctrine. But we decline to find a broad third exception to the Privette doctrine that would expose a landowner to liability for known hazards on the worksite where the independent contractor is unable to adopt reasonable safety precautions to protect against the hazard. Such a rule would be inconsistent with the strong presumption under Privette that a landowner delegates all responsibility for workplace safety to the independent contractor.

D. Application to the Present Case
We now apply our holding to the facts of this case. Gonzalez contends that Mathis’s roof was hazardous because the skylight could only be cleaned while walking along an unreasonably narrow path between the parapet wall and the roof’s exposed edge and, due to Mathis’s years-long failure to maintain the roof, this path was slippery and covered in loose sand, gravel, and rocks. Gonzalez additionally argues that he was not hired to and lacked the expertise necessary to repair the roof or change the permanent fixtures on the roof such that he and his workers could clean the skylight safely. Thus, Gonzalez concludes, Mathis’s duty to maintain the roof in a reasonably safe condition was never delegated to him. But while Mathis may not have delegated any duty to repair the roof or make other structural changes to it, Mathis did delegate to Gonzalez a duty to provide a safe workplace to his workers and to perform the work for which he was retained in a safe manner. This encompassed a duty on Gonzalez’s part to assess whether he and his workers could clean the skylight safely despite the existence of the known hazardous conditions on the roof. It would be contrary to the principles underlying Privette to hold that Mathis also had a duty to determine whether the work could be performed safely absent remediation of a known hazard. Landowners, like Mathis, hire independent contractors precisely because of their expertise in the contracted-for work. This expertise puts contractors in a better position to determine whether they can protect their workers against a known hazard on the worksite and whether the work can be performed safely despite the hazard.

We emphasize that our holding applies only to hazards on the premises of which the independent contractor is aware or should reasonably detect. (See Kinsman, supra, 37 Cal.4th at p. 675.) Although we recognized in Kinsman that the delegation of responsibility for workplace safety to independent contractors may include a limited duty to inspect the premises (id. at p. 677), it would not be reasonable to expect Gonzalez to identify every conceivable dangerous condition on the roof given that he is not a licensed roofer and was not hired to repair the roof (see id. at pp. 677-678). Here, however, it is undisputed that Gonzalez was aware of the roof’s dangerous conditions. 55*55 Consequently, Gonzalez had a duty to determine whether he and his workers would be able to clean the skylight safely despite the known dangerous conditions.

We also do not address whether and under what circumstances a landowner might be liable to an independent contractor or its workers who are injured as a result of a known hazard on the premises that is not located on or near the worksite. (See Kinsman, supra, 37 Cal.4th at p. 674, fn. 2.) Gonzalez argues that the path between the parapet wall and the edge of the roof was just a means to access the worksite, as opposed to being a part of the worksite, but this is belied by the undisputed evidence in the record. The path ran parallel to the skylight and Gonzalez testified that he utilized it while cleaning the skylight. Moreover, even if it were true that Gonzalez was required to traverse the path just to get to the skylight, it still would have constituted an inherent risk in the job for which he was hired. (See Tverberg, supra, 49 Cal.4th at p. 529 [“Because the bollard holes were located next to the area where Tverberg was to erect the metal canopy, the possibility of falling into one of those holes constituted an inherent risk of the canopy work”].) We do not resolve whether Mathis might have been liable under circumstances not presented on these facts, such as if the hazard had been located nowhere near the skylight and had been wholly unconnected to Gonzalez’s work in cleaning the skylight.

Gonzalez alternatively argues that, even if we decline to adopt the Court of Appeal’s rule, Mathis should still be held liable under the well-established Hooker exception to Privette. First, he claims that Mathis retained sole authority to hire a professional roofer to repair the roof and exercised that authority in a manner that affirmatively contributed to his injury by failing to do so. We made clear in Hooker, however, that a hirer does not exercise any retained control over the contractor’s work in a manner that affirmatively contributes to the contractor’s injury by merely permitting or failing to correct an unsafe work condition. (Hooker, supra, 27 Cal.4th at pp. 214-215; see also Padilla v. Pomona College (2008) 166 Cal.App.4th 661, 667, 671 [82 Cal.Rptr.3d 869] [hirer’s sole ability to depressurize the pipes that caused the plaintiff’s injury did not amount to an exercise of retained control in a manner that affirmatively contributed to the injury].) Although Gonzalez testified that he informed Mathis’s housekeeper and accountant that the roof was in poor condition and should be repaired, neither Mathis nor any of his staff promised, expressly or implicitly, to repair the roof. (See Hooker, at p. 212, fn. 3 [“[I]f the hirer promises to undertake a particular safety measure, then the hirer’s negligent failure to do so should result in liability if such negligence leads to an employee injury”]; Tverberg II, supra, 202 Cal.App.4th at p. 1448 [triable issue as to whether hirer’s statement that it did not currently have the materials needed to cover the bollard holes amounted to an implicit promise to cover the bollard holes once such materials were 56*56 obtained]; Brannan, supra, 206 Cal.App.4th at p. 1180 [case would have been decided differently had the hirer promised to remove the wet scaffolding].) They also did not prohibit or dissuade Gonzalez from implementing any particular safety measure or from requesting repairs as a condition of continuing the work. (See Ray, supra, 98 Cal.App.4th at pp. 1134, 1137 [hirer contractually prohibited independent contractor from implementing the one safety precaution that would have saved the worker’s life].)

We do not decide whether there may be situations, not presented here, in which a hirer’s response to a contractor’s notification that the work cannot be performed safely due to hazardous conditions on the worksite might give rise to liability. For example, we do not decide whether a hirer’s conduct that unduly coerces or pressures a contractor to continue the work even after being notified that the work could not be performed safely due to a premises hazard would fall under the Hooker exception to Privette. We decide only that neither Mathis nor any member of his staff exercised any retained control over Gonzalez’s work in a manner that affirmatively contributed to Gonzalez’s injury simply by being made aware that the roof was slippery and needed repair.

Second, Gonzalez argues that Mathis exercised his retained control over the work in a manner that affirmatively contributed to Gonzalez’s injury when Mathis’s housekeeper directed Gonzalez to go on to the roof on the day of the accident to tell his workers to use less water in cleaning the skylight. However, the general direction to “go on to the roof” did not interfere with or otherwise impact Gonzalez’s decisions regarding how to safely perform the work or provide a safe workplace for his employees. Mathis’s housekeeper did not, for example, direct Gonzalez to walk between the parapet wall and the roof’s edge or otherwise influence his decisions regarding whether and how he might safely cross over the roof in order to reach his workers. And, although Mathis’s housekeeper did exert some control over how Gonzalez conducted his work by directing him to “use less water,” Gonzalez does not contend that the use of less water was in any way causally connected to his injury. Gonzalez instead contends that he was injured because the configuration of the roof required him to walk between the parapet wall and the roof’s exposed edge, and the roof’s dilapidated condition made its surface very slippery. Thus, the housekeeper’s instruction did not amount to an exercise of retained control over any part of the work in a manner that affirmatively contributed to Gonzalez’s injury.

In sum, pursuant to Privette, Mathis delegated all responsibility for workplace safety to Gonzalez. This delegation included a responsibility on Gonzalez’s part to ensure that he and his workers would be able to clean the skylight safely despite the known dangerous conditions on the roof which 57*57 increased the risk of falling. Mathis is not liable under our well-established precedent because he did not exercise any retained control over any part of Gonzalez’s work in a manner that affirmatively contributed to Gonzalez’s injury.

III. DISPOSITION
We conclude that, under Privette, a landowner presumptively delegates to an independent contractor all responsibility for workplace safety, including the responsibility to ensure that the work can be performed safely despite a known hazard on the worksite. For this reason, a landowner will generally owe no duty to an independent contractor or its workers to remedy or adopt other measures to protect them against known hazards on the premises. Though a landowner may, nevertheless, be liable for a known hazard on the premises if it exercises its retained control over any part of the independent contractor’s work in a manner that affirmatively contributes to the injury, Gonzalez failed to present any evidence tending to show that such circumstances existed in this case. We therefore reverse the judgment of the Court of Appeal and remand to the Court of Appeal with instructions to affirm the trial court’s judgment.

Cantil-Sakauye, C. J., Corrigan, J., Liu, J., Cuéllar, J., Kruger, J., and Jenkins, J., concurred.

[1] That Gonzalez himself did not have workers’ compensation insurance does not change our analysis. Gonzalez was legally required to obtain workers’ compensation coverage for his employees (Lab. Code, § 3700) and he had the option of obtaining coverage for himself (Ins. Code, § 11846). Moreover, the “presence or absence of workers’ compensation coverage” is not key to determining whether Privette should apply. (Tverberg, supra, 49 Cal.4th at p. 522.)

 

Vazquez v. Jan-Pro Franchising

Vazquez v. Jan-Pro Franchising

(2021) 10 Cal.5th 944.

Supreme Court of California

January 14, 2021

No. S258191

Summary by Jillian M. Wright Esq.:

The standard to determine whether workers should be classified as employees or independent contractors for purposes of obligations imposed by California’s wage orders, as set forth in the landmark California Supreme Court case Dynamex Operations West, Inc. v. Superior Court, applies retroactively. In Dynamex, the Supreme Court held that the “ABC Test” applies under California law in determining whether workers should be classified as employees or independent contractors for purposes of obligations imposed by California’s wage orders.
TAKEAWAY: Associations need to be aware of the “ABC Test” to ensure their independent contractors are not considered employees for purposes of wage-order claims. Under the “ABC Test”, a worker is presumed to be an employee unless the employer can show three conditions are satisfied: (1) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, (2) the worker performs work outside the usual course of the hiring entity’s business, and (3) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

***End Summary***

10 Cal.5th 944 (2021)
478 P.3d 1207
GERARDO VAZQUEZ et al., Plaintiffs and Appellants,
v.
JAN-PRO FRANCHISING INTERNATIONAL, INC., Defendant and Respondent.

Appeal from the Northern District of California, 3:16-cv-05961-WHA.

Original Proceeding on request pursuant to rule 8.548, Cal. Rules of Court.

Appeal from the Ninth Circuit, 17-16096.

947*947 Lichten & Liss-Riordan and Shannon Liss-Riordan for Plaintiffs and Appellants.

Nayantara Mehta; Cynthia L. Rice, Verónica Meléndez; Jennifer Reisch; Carol Vigne; Ellyn Moscowitz; Rocio Alejandra Avila; and Jora Trang for National Employment Law Project, California Rural Legal Assistance Foundation, Equal Rights Advocates, Legal Aid at Work, Legal Aid of Marin, National Domestic Workers Alliance and Worksafe, Inc., as Amici Curiae on behalf of Plaintiffs and Appellants.

Olivier Schreiber & Chao, Monique Olivier; and Reynaldo Fuentes for California Employment Lawyers Association and Partnership for Working Families as Amici Curiae on behalf of Plaintiffs and Appellants.

O’Hagan Meyer, Jeffrey M. Rosin; Willenken, Jason H. Wilson, Eileen M. Ahern and Amelia L.B. Sargent for Defendant and Respondent.

Marron Lawyers, Paul Marron, Steven C. Rice and Paul B. Arenas for Taxicab Paratransit Association of California as Amicus Curiae on behalf of Defendant and Respondent.

Arnold & Porter Kaye Scholer, James F. Speyer and Vanessa C. Adriance for California Chamber of Commerce and the International Franchise Association as Amici Curiae on behalf of Defendant and Respondent.

Horvitz & Levy, Jeremy B. Rosen, Peder K. Batalden and Felix Shafir for Chamber of Commerce of the United States of America as Amicus Curiae on behalf of Defendant and Respondent.

Paul Hastings, Paul Grossman and Paul W. Cane, Jr., for California Employment Law Council and Employers Group as Amici Curiae on behalf of Defendant and Respondent.

948*948 OPINION
CANTIL-SAKAUYE, C. J.—

At the request of the United States Court of Appeals for the Ninth Circuit, we agreed to decide the following question of California law (see Cal. Rules of Court, rule 8.548): Does this court’s decision in Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903 [232 Cal.Rptr.3d 1, 416 P.3d 1] (Dynamex) apply retroactively?

For the reasons set forth below, we conclude that Dynamex does apply retroactively. In Dynamex, this court was faced with a question of first impression: What standard applies under California law in determining whether workers should be classified as employees or independent contractors for purposes of the obligations imposed by California’s wage orders? In addressing that question, we concluded that under one of the definitions of “employ” set forth in all California wage orders—namely, to “suffer or permit to work”—any worker who performs work for a business is presumed to be an employee who falls within the protections afforded by a wage order. (Dynamex, supra, 4 Cal.5th at p. 916.) We further held that such a worker can properly be found to be “an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.” (Id. at pp. 916-917.) This standard, also used in other jurisdictions to distinguish employees from independent contractors, is commonly referred to as the “ABC test.” (Id. at p. 916.)

In concluding that the standard set forth in Dynamex applies retroactively —that is, to all cases not yet final as of the date our decision in Dynamex became final—we rely primarily on the fact that Dynamex addressed an issue of first impression. It did not change a settled rule on which the parties below had relied. No decision of this court prior to Dynamex had determined how the “suffer or permit to work” definition in California’s wage orders should be applied in distinguishing employees from independent contractors. Particularly because we had not previously issued a definitive ruling on the issue addressed in Dynamex, we see no reason to depart from the general rule that judicial decisions are given retroactive effect.

Defendant Jan-Pro Franchising International, Inc., asserts that an exception to the general rule of retroactivity should be recognized here. Defendant maintains that, prior to the issuance of our decision in Dynamex, it reasonably believed that the question of whether a worker should be classified as an 949*949 employee or independent contractor would be resolved under the standard set forth in this court’s decision in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 [256 Cal.Rptr. 543, 769 P.2d 399] (Borello). Borello addressed whether farmworkers hired by a grower under a written “sharefarmer agreement” were independent contractors or employees for purposes of the workers’ compensation statutes. (Id. at p. 345.) The Borello decision, however, did not address whether a worker should be considered an employee or an independent contractor for purposes of the obligations imposed by a wage order. Indeed, twice in the last decade, we signaled that the test for determining whether a worker should be classified as an employee or independent contractor in the wage order context remained an open question. (Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522 [173 Cal.Rptr.3d 332, 327 P.3d 165] (Ayala); Martinez v. Combs (2010) 49 Cal.4th 35, 57-58 [109 Cal.Rptr.3d 514, 231 P.3d 259] (Martinez).)

Defendant additionally contends that it could not have anticipated that the distinction between employees and independent contractors for purposes of the obligations imposed by a wage order would be governed by the ABC test that we adopted in Dynamex. But defendant’s argument carries little weight when, as here, the underlying decision changes no settled rule. Moreover, public policy and fairness concerns, such as protecting workers and benefitting businesses that comply with the wage order obligations, favor retroactive application of Dynamex. Thus, we do not view the retroactive application of the ABC test to cases pending at the time Dynamex became final as improper or unfair.

Accordingly, in response to the question posed by the Ninth Circuit, we answer that this court’s decision in Dynamex applies retroactively.

I. DYNAMEX’S INTERPRETATION OF THE SUFFER OR PERMIT TO WORK DEFINITION IN WAGE ORDERS APPLIES RETROACTIVELY TO ALL NONFINAL CASES GOVERNED BY SIMILARLY WORDED WAGE ORDERS
As noted, the sole issue before this court is whether our decision in Dynamex, supra, 4 Cal.5th 903, applies retroactively.[1]

We begin with a brief summary of the Dynamex decision. In Dynamex, we faced the question regarding what standard applies in determining 950*950 whether, for purposes of the obligations imposed by California’s wage orders, a worker should be considered an employee who is covered and protected by the applicable wage order or, instead, an independent contractor to whom the wage order’s obligations and protections do not apply.[2] As we explained in Dynamex, all currently applicable California wage orders, in defining the terms as used in the wage orders, define the term “`employ'” in part to mean “`suffer, or permit to work'” and define the term “`”employee”‘” to mean “`any person employed by an employer.'” (Dynamex, supra, 4 Cal.5th at p. 926; see id. at p. 926, fn. 9.) At the same time, we noted that the wage orders do not contain a definition of the term “`independent contractor'” nor any “other provision that otherwise specifically addresses the potential distinction between workers who are employees covered by the terms of the wage order and workers who are independent contractors who are not entitled to the protections afforded by the wage order.” (Id. at p. 926.)

After a lengthy review of prior relevant California decisions (Dynamex, supra, 4 Cal.5th at pp. 927-942), we described the variety of standards that “have been adopted in legislative enactments, administrative regulations, and court decisions as the means for distinguishing between those workers who should be considered employees and those who should be considered independent contractors.” (Id. at p. 950 & fn. 20.) We explained that as early as 1937, the suffer or permit to work standard embodied in California’s wage orders had been described “as `the broadest definition’ that has been devised for extending the coverage of a statute or regulation to the widest class of workers that reasonably fall within the reach of a social welfare statute.” (Id. at p. 951.) We took note of a number of criticisms that had been advanced regarding several tests that rely upon a “multifactor, `all the circumstances’ standard” for distinguishing between employees and independent contractors. (Id. at p. 954; see id. at pp. 954-956.) Thus, in part to avoid these criticisms, we concluded in Dynamex that it is “most consistent with the history and purpose of the suffer or permit to work standard in California’s wage orders … to interpret that standard as: (1) placing the burden on the hiring entity to establish that the worker is an independent contractor who was not intended to be included within the wage order’s coverage; and (2) requiring the hiring entity, in order to meet this burden, to establish each of the three factors embodied in the ABC test—namely (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the 951*951 performance of the work and in fact; and (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.” (Id. at pp. 956-957, fn. omitted.)

Accordingly, this court’s decision in Dynamex was based upon a determination concerning how the term “suffer or permit to work” in California wage orders should be interpreted for purposes of distinguishing between employees who are covered by the wage orders and independent contractors who are not protected by such orders.

The Dynamex decision constitutes an authoritative judicial interpretation of language—suffer or permit to work—that has long been included in California’s wage orders to define the scope of the employment relationships governed by the wage orders. Thus, under well-established jurisprudential principles, our interpretation of that language in Dynamex applies retroactively to all cases not yet final that were governed by wage orders containing that definition. (See Newman v. Emerson Radio Corp. (1989) 48 Cal.3d 973, 978 [258 Cal.Rptr. 592, 772 P.2d 1059] (Newman) [“The general rule that judicial decisions are given retroactive effect is basic in our legal tradition”]; Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 24 [44 Cal.Rptr.2d 370, 900 P.2d 619] (Waller) [“[T]he general rule [is] that judicial decisions are to be applied retroactively”].) As the United States Supreme Court observed in Rivers v. Roadway Express, Inc. (1994) 511 U.S. 298, 312-313 [128 L.Ed.2d 274, 114 S.Ct. 1510]: “A judicial construction of a statute is an authoritative statement of what the statute meant before as well as after the decision of the case giving rise to that construction.” In McClung v. Employment Development Dept. (2004) 34 Cal.4th 467, 474 [20 Cal.Rptr.3d 428, 99 P.3d 1015], this court, after quoting the foregoing passage from Rivers v. Roadway Express, Inc., observed: “This is why a judicial decision [interpreting a legislative measure] generally applies retroactively.” (See Woosley v. State of California (1992) 3 Cal.4th 758, 794 [13 Cal.Rptr.2d 30, 838 P. 2d 758] (Woosley) [“`Whenever a decision undertakes to vindicate the original meaning of an enactment, putting into effect the policy intended from its inception, retroactive application is essential to accomplish that aim'”].)

As past cases have explained, the rule affirming the retroactive effect of an authoritative judicial decision interpreting a legislative measure generally applies even when the statutory language in question previously had been given a different interpretation by a lower appellate court decision. Indeed, the United States Supreme Court’s decision in Rivers v. Roadway Express, Inc., supra, 511 U.S. 298, quoted above, involved just such a circumstance. In that case, the high court held that its interpretation of a statutory term 952*952 contained in the Civil Rights Act of 1866 (14 Stat. 27) applied retroactively, notwithstanding the fact that a line of prior federal appellate court decisions had set forth a contrary interpretation.

California decisions apply this same rule. In In re Retirement Cases (2003) 110 Cal.App.4th 426, 441-454 [1 Cal.Rptr.3d 790], for example, the Court of Appeal held that the California Supreme Court’s interpretation of a term in a pension statute in Ventura County Deputy Sheriffs’ Assn. v. Board of Retirement (1997) 16 Cal.4th 483 [66 Cal.Rptr.2d 304, 940 P.2d 891] applied retroactively, even though the Ventura County decision explicitly rejected an earlier contrary interpretation of the same statutory term by another appellate decision in Guelfi v. Marin County Employees’ Retirement Assn. (1983) 145 Cal.App.3d 297 [193 Cal.Rptr. 343]. In Woosley, supra, 3 Cal.4th 758, 794, we reaffirmed the principle that “[t]he circumstance that our decision overrules prior decisions of the Courts of Appeal does not in itself justify prospective application.” We elaborated: “An example of a decision which does not establish a new rule of law is one in which we give effect `to a statutory rule that courts had theretofore misconstrued [citation].'” (Ibid.) Such a decision applies retroactively, we concluded, because there is no material change in the law. (Ibid.)

Dynamex presented a question of first impression concerning how a wage order’s suffer or permit to work standard should apply in the employee or independent contractor context. In resolving that issue, our decision in Dynamex did not overrule any prior California Supreme Court decision or disapprove any prior California Court of Appeal decision. Thus, the well-established general principle affirming the retroactive application of judicial decisions interpreting legislative measures supports the retroactive application of Dynamex.

II. NO EXCEPTION TO THE RETROACTIVITY OF DYNAMEX IS JUSTIFIED
Defendant argues that an exception to the general retroactivity principle should be applied here because, prior to Dynamex, businesses could not reasonably have anticipated that the ABC test would govern at the time when they classified workers as independent contractors rather than employees. Defendant relies on past cases noting that “narrow exceptions to the general rule of retroactivity [have been recognized] when considerations of fairness and public policy are so compelling in a particular case that, on balance, they outweigh the considerations that underlie the basic rule.” (Newman, supra, 48 Cal.3d at p. 983; see, e.g., Williams & Fickett v. County of Fresno (2017) 2 Cal.5th 1258, 1282 [218 Cal.Rptr.3d 362, 395 P.3d 247]; Claxton v. Waters (2004) 34 Cal.4th 367, 378-379 [18 Cal.Rptr.3d 246, 96 P.3d 496].) This 953*953 recognized exception arises “`when a judicial decision changes a settled rule on which the parties below have relied.'” (Claxton, at p. 378; see also Alvarado v. Dart Container Corp. of California (2018) 4 Cal.5th 542, 572 [229 Cal.Rptr.3d 347, 411 P.3d 528] (Alvarado) [same]; Williams & Fickett, at p. 1282 [same]; Waller, supra, 11 Cal.4th at p. 25 [judicial decision “clarif[ying]” the law applies retroactively].)

In support of its position, defendant initially contends that prior to Dynamex, it—assertedly like other California businesses—reasonably believed that the question of whether a worker should be considered an employee or an independent contractor would be determined by application of the standard set forth and applied in this court’s decision in Borello, supra, 48 Cal.3d 341. Under these circumstances, defendant maintains that it would be unfair to apply the ABC standard adopted in the Dynamex decision, rather than the Borello standard, to nonfinal cases that predate the Dynamex decision. For the reasons discussed below, we disagree that an exception to the general rule of retroactivity is warranted on this theory.

To begin with, it is important to understand that California’s wage orders have included the suffer or permit to work standard as one basis for defining who should be treated as an employee for purposes of the wage order for more than a century. (Martinez, supra, 49 Cal.4th at pp. 57-58.) Additionally, at least since the 1930s, the suffer or permit to work standard has been understood as embodying “`the broadest definition'” of employment for extending coverage of a social welfare statute. (Dynamex, supra, 4 Cal.5th at p. 951; see id. at pp. 950-951 [citing United States v. Rosenwasser (1945) 323 U.S. 360, 363, fn. 3 [89 L.Ed. 301, 65 S.Ct. 295], quoting language of then-Senator (later United States Supreme Court justice) Hugo L. Black in describing the incorporation of the suffer or permit to work standard in the federal Fair Labor Standards Act of 1938 (29 U.S.C. § 201 et seq.) as adopted in 1937].)

Defendant contends that prior to Dynamex, a putative employer would have reasonably anticipated that the question whether a worker should properly be classified as an employee or independent contractor for purposes of the obligations imposed by an applicable wage order would be governed by the Borello decision. But, as noted above, Borello was not a wage order case and that decision did not purport to determine who should be interpreted to be an employee for purposes of a wage order. We resolved this question for the first time in Dynamex. “Because the relevant portion of [the opinion] did not address an area in which this court had previously issued a definitive decision, from the outset any reliance on the previous state of the law could not and should not have been viewed as firmly fixed as would have been the case had we previously spoken.” (Newman, supra, 48 Cal.3d at pp. 986-987; 954*954 see also Alvarado, supra, 4 Cal.5th at p. 573 [declining to limit holding to prospective application when “defendant cannot claim reasonable reliance on settled law”].) In Newman, we concluded that our decision applied retroactively “even if one views [it] as breaking new and unexpected ground, … [because] it did so in an indisputably unsettled area.” (Newman, at p. 987.) Moreover, in two decisions following Borello, we expressly declined to decide the question of what standard applies in determining whether workers should be classified as employees or independent contractors in the wage order context. In Martinez, decided eight years prior to Dynamex, this court addressed the question regarding what standard should be utilized in deciding whether an employment relationship existed between the plaintiff workers and defendant business entities for purposes of a potentially applicable wage order. Explaining that no prior case had directly addressed the proper interpretation of the relevant provisions of the wage order relating to the terms “`employ'” and “`employer,'” we explicitly held that the suffer or permit to work definition was one of three alternative bases upon which an employment relationship could be established for purposes of the obligations imposed by an applicable wage order. (Martinez, supra, 49 Cal.4th at pp. 50, 64.)

In Martinez itself, the controversy turned on whether, for purposes of the obligations imposed by the wage order, the plaintiff workers could properly be considered employees of business entities other than the workers’ most direct or immediate employer. Thus, Martinez did not present the question of whether the workers were properly considered employees or, instead, independent contractors for purposes of the wage order. Yet we expressly signaled that this was an open question, emphasizing that we were “not decid[ing]” in Martinez whether “the decision in [Borello] has any relevance to wage claims.” (Martinez, supra, 49 Cal.4th at p. 73.)

In Ayala, supra, 59 Cal.4th 522, a case decided four years prior to Dynamex, we explicitly noted that we had solicited supplemental briefing from the parties concerning the possible relevance of the tests for employee status set forth in the applicable wage order in determining whether a worker was an employee or an independent contractor for purposes of the wage order. (Id. at p. 531.) Ultimately, our decision in Ayala did not reach the issue upon which we had solicited supplemental briefing, relying instead on the ground that in the trial court the plaintiff employees in Ayala had relied solely on the Borello standard, and we could resolve that case on that basis without considering the wage order definitions of employment. (Ibid.) Nonetheless, at the same time, our decision in Ayala explicitly stated that “we leave for another day the question of what application, if any, the wage order tests for employee status might have to wage and hour claims such as these” (ibid.)—namely, claims raising the question of whether workers should 955*955 properly be considered employees or independent contractors for purposes of the obligations imposed by a wage order.

In light of these passages in Martinez and Ayala, employers were clearly on notice well before the Dynamex decision that, for purposes of the obligations imposed by a wage order, a worker’s status as an employee or independent contractor might well depend on the suffer or permit to work prong of an applicable wage order—and that the law was not settled in this area. (See Newman, supra, 48 Cal.3d at pp. 986-987 [explicit statements in previous decisions that this court was expressly declining to decide an issue demonstrated that the matter was “in flux” and “any reliance on the previous state of the law could not and should not have been viewed as firmly fixed”].) By “expressly declin[ing] to decide the issue, thereby reserving our ultimate judgment on the question for some later date,” we “`highlighted the fact that this question remained to be decided by this court.'” (Id. at p. 988, italics omitted.) Thus, defendant’s reasonable reliance argument is unconvincing.

Further, although defendant maintains that in classifying its workers as independent contractors it reasonably relied on the Borello standard, as this court explained in Dynamex, one of the principal deficiencies of the Borello standard is its numerous factors that must be weighed and balanced—and such a standard effectively prevents employers and employees from determining in advance how that classification will be resolved. (Dynamex, supra, 4 Cal.5th at pp. 954-955.) Thus, as a practical matter, defendant overstates the degree to which declining to extend the Borello test to this context will impinge upon its reasonable expectations. It is worth noting in this regard that in Borello itself the agricultural workers were found to be employees rather than independent contractors even though the workers controlled the manner and details of their work, including the hours that they worked.[3] (Borello, supra, 48 Cal.3d at p. 346.)

Defendant further argues that even if it should have reasonably anticipated that a worker’s designation as an employee or independent contractor would depend upon the application of a wage order’s suffer or permit to work definition, it could not reasonably have anticipated that in Dynamex this court would adopt the ABC test as the appropriate standard. We reject the contention that litigants must have foresight of the exact rule that a court ultimately adopts in order for it to have retroactive effect. And indeed, the ABC test articulated in Dynamex was within the scope of what employers reasonably 956*956 could have foreseen. Prior decisions of this court had certainly provided putative employers notice concerning the potential breadth of the suffer or permit to work language. In Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 585 [94 Cal.Rptr.2d 3, 995 P.2d 139], this court noted that federal cases had interpreted that phrase to apply when a putative employer “`knows or should have known'” that work is being performed on its behalf. (See id. at pp. 584-585.) And in describing the scope of the suffer or permit to work definition in Martinez, we stated that “[a] proprietor who knows that persons are working in his or her business without having been formally hired, or while being paid less than the minimum wage, clearly suffers or permits that work by failing to prevent it, while having the power to do so.” (Martinez, supra, 49 Cal.4th at p. 69.) Moreover, the three elements of the ABC test are prominent factors already listed in Borello, supra, 48 Cal.3d at page 351. Last, because Dynamex did not change a previously settled rule, any reliance by the parties on the previous state of the law is not particularly persuasive in our retroactivity determination. (Newman, supra, 48 Cal.3d at p. 986.) “At a minimum, litigants necessarily were aware that” the employee/independent contractor distinction in the applicable wage orders “was uncertain and yet to be definitively established.” (Id. at p. 987.)

It also bears noting that in Dynamex, this court determined that “the suffer or permit to work definition is a term of art that cannot be interpreted literally in a manner that would encompass within the employee category the type of individual workers, like independent plumbers or electricians, who have traditionally been viewed as genuine independent contractors who are working only in their own independent business.” (Dynamex, supra, 4 Cal.5th at p. 916.) This was so, we explained, because applying a broad “knows or should have known” that work was being performed formulation in the employee/independent contractor context would treat true independent contractors as employees for purposes of the wage order, when they could not reasonably have been intended to be so treated. (Id. at pp. 948-950.) Accordingly, this court harmonized the legislative intent to adopt the broadest standard for determining who should be treated as an employee for purposes of the wage order with the recognition that there was no intention to bring classic independent contractors within the reach of the wage orders. It was in this context that the court in Dynamex concluded that it was appropriate to adopt the ABC test as the standard for determining whether a worker should properly be considered an employee or independent contractor. (Id. at pp. 956-964.) We did not depart sharply from the basic approach of Borello, even though a literal reading of the suffer or permit to work definition would have swept far more broadly. Thus, even if we were to give weight to defendant’s reliance argument at this juncture, it bears repeating that the test 957*957 we ultimately adopted in Dynamex drew on the factors articulated in Borello and was not beyond the bounds of what employers could reasonably have expected.

It is true that “we have long recognized the potential for allowing narrow exceptions to the general rule of retroactivity when considerations of fairness and public policy are so compelling in a particular case that, on balance, they outweigh the considerations that underlie the basic rule.” (Newman, supra, 48 Cal.3d at p. 983.) In this case, however, fairness and policy considerations underlying our decision in Dynamex favor retroactive application. As we explained in Dynamex, the wage orders’ protections benefit workers by “enabl[ing] them to provide at least minimally for themselves and their families and to accord them a modicum of dignity and self-respect.” (Dynamex, supra, 4 Cal.5th at p. 952.) The wage orders also benefit “those law-abiding businesses that comply with the obligations imposed by the wage orders, ensuring that such responsible companies are not hurt by unfair competition from competitor businesses that utilize substandard employment practices.” (Ibid.) And, “the minimum employment standards imposed by wage orders are also for the benefit of the public at large, because if the wage orders’ obligations are not fulfilled the public will often be left to assume responsibility for the ill effects to workers and their families resulting from substandard wages or unhealthy and unsafe working conditions.” (Id. at p. 953.) Applying the interpretation of the suffer or permit to work definition adopted in Dynamex only prospectively would potentially deprive many workers of the intended protections of the wage orders to which they may have improperly been denied, as well as permit businesses to retain the unwarranted advantages of misclassification.[4] Last, because we have already applied our decision in Dynamex retroactively—to the Dynamex parties themselves—it would be unfair to withhold the benefit of that decision to other similarly situated litigants.

In sum, no “compelling and unusual circumstances justify[] departure from the general rule” of retroactivity. (Newman, supra, 48 Cal.3d at p. 983; see Waller, supra, 11 Cal.4th at p. 25 [rejecting argument against retroactivity because law in question was “but a logical extension” of well-established principles].) As we noted, Borello itself distinguished between an employee and an independent contractor “by focusing on the intended scope and purposes of the particular statutory provision or provisions at issue.” (Dynamex, supra, 4 Cal.5th at p. 934.) Given the longstanding definition of “employ” as to suffer or permit to work in California’s wage orders, and the 958*958 unsettled nature of its application in the employee/independent contractor context, we reject the contention that it is unfair to putative employers to apply the ABC standard to work settings that predate the Dynamex opinion. Indeed, we have routinely applied our decisions interpreting wage orders retroactively, even when the parties did not anticipate the precise interpretation of such orders. (See, e.g., Frlekin v. Apple, Inc. (2020) 8 Cal.5th 1038, 1057 [258 Cal.Rptr.3d 392, 457 P.3d 526]; Mendiola v. CPS Security Solutions, Inc. (2015) 60 Cal.4th 833, 848, fn. 18 [182 Cal.Rptr.3d 124, 340 P.3d 355].)

Given the constraints imposed by the statute of limitations, the retroactive application of Dynamex will in practice affect a limited number of cases. Nonetheless, in light of the general rule of retroactivity of judicial decisions and the fundamental importance of the protections afforded by the wage orders, we find no compelling justification for denying workers included in such lawsuits the benefit of the standard set forth in Dynamex.

III. CONCLUSION
In answer to the question posed by the Ninth Circuit, we conclude that our decision in Dynamex applies retroactively to all nonfinal cases that predate the effective date of the Dynamex decision.

Corrigan, J., Liu, J., Cuéllar, J., Kruger, J., Groban, J., and Humes, J.,[*] concurred.

[1] Although the particular facts of the underlying federal litigation in this case arise from a franchising arrangement, the question of California law posed by the Ninth Circuit that we agreed to answer does not involve any inquiry into the general relationship or applicability of the Dynamex decision to franchise agreements or arrangements, and we do not address that subject.

[2] California’s wage orders were promulgated by the Industrial Welfare Commission (IWC), the state agency charged with fixing minimum wages, maximum hours of work, and conditions of labor for various industries. (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1026 [139 Cal.Rptr.3d 315, 273 P.3d 513].) Although the Legislature defunded the IWC in 2004, its wage orders remain in full force and effect. (Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1102, fn. 4 [56 Cal.Rptr.3d 880, 155 P.3d 284].)

[3] Defendant also asserts that it relied on our decision in Patterson v. Domino’s Pizza, LLC (2014) 60 Cal.4th 474 [177 Cal.Rptr.3d 539, 333 P.3d 723]. Patterson addressed the propriety of imposing vicarious liability on a franchisor for a franchisee’s wrongdoing, rather than the question of what standard applies in determining whether workers should be classified as employees or independent contractors for purposes of California’s wage orders.

[4] Having concluded that our decision in Dynamex applies retroactively, and having found no reliance or fairness considerations weighing against the general rule that judicial decisions apply retroactively, we likewise reject defendant’s related due process challenge to retroactive application.

[*] Administrative Presiding Justice of the Court of Appeal, First Appellate District, Division One, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

 

Dickson v. Century Park E. Homeowner’s Ass’n

Dickson v. Century Park E. Homeowner’s Ass’n

(C.D.Cal. May 13, 2021, No. 2:20-cv-05152-JWH-MAAx) 2021 U.S.Dist.LEXIS 141845.

United States District Court, C.D. California.

April 19, 2021.

No. 2:20-cv-05152-JFW-MAA

Summary by Jillian M. Wright Esq.:

An owner sued an association alleging violation of the Rosenthal Act. The court determined that an association is not a debt collector under the Rosenthal Act because it does not collect “consumer debt,” as that term is defined by the Rosenthal Act; assessments are not “consumer credit transactions.”

TAKEAWAY: Even if an association is not a debt collector under the Rosenthal Act, its legal counsel and/or its management company could be considered debt collectors under the Federal Fair Debt Collection Practices Act as the definition of what constitutes debt is different under the two acts. Caution: cases may be brought against associations in either the state or federal court, so relief in a California court may not help in a case brought in federal court.

***End Summary***

 

BRENDA DICKSON, Plaintiff(s),
v.
CENTURY PARK EAST HOMEOWNERS ASSOCIATION, SWEDELSON & GOTTLIEB, BRIAN MORENO, and DOES 1-10, Defendant(s).

Case No. 2:20-cv-05152-JFW-MAA.

STIPULATED PROTECTIVE ORDER
MARIA A. AUDERO, Magistrate Judge.

1. PURPOSES AND LIMITATIONS
Discovery in this action is likely to involve production of confidential, proprietary, or private information for which special protection from public disclosure and from use for any purpose other than prosecuting this litigation may be warranted. Accordingly, the parties hereby stipulate to and petition the Court to enter the following Stipulated Protective Order. The parties acknowledge that this Stipulated Protective Order does not confer blanket protections on all disclosures or responses to discovery and that the protection it affords from public disclosure and use extends only to the limited information or items that are entitled to confidential treatment under the applicable legal principles. The parties further acknowledge, as set forth in Section 13.3 below, that this Stipulated Protective Order does not entitle them to file confidential information under seal; Local Rule 79-5 sets forth the procedures that must be followed and the standards that will be applied when a party seeks permission from the Court to file material under seal. Discovery in this action is likely to involve production of confidential, proprietary, or private information for which special protection from public disclosure and from use for any purpose other than prosecuting this litigation may be warranted.

2. GOOD CAUSE STATEMENT
The court has ordered to the disclosure of confidential business or financial information, information regarding confidential business practices, or other confidential research, development, or commercial information (including information implicating privacy rights of third parties), information otherwise generally unavailable to the public, or which may be privileged or otherwise protected from disclosure under state or federal statutes, court rules, case decisions, or common law.

Accordingly, to expedite the flow of information, to facilitate the prompt resolution of disputes over confidentiality of discovery materials, to adequately protect information the parties are entitled to keep confidential, to ensure that the parties are permitted reasonable necessary uses of such material in preparation for and in the conduct of trial, to address their handling at the end of the litigation, and to serve the ends of justice, a protective order for such information is justified in this matter. It is the intent of the parties that information will not be designated as confidential for tactical reasons and that nothing be so designated without a good faith belief that it has been maintained in a confidential, non-public manner, and there is good cause why it should not be part of the public record of this case.

3. DEFINITIONS
3.1. Action: Dickson v. Century Park East Homeowners Association, et al., Case no. 2:20-cv-05152-JFW-MAA
3.2. Challenging Party: A Party or Nonparty that challenges the designation of information or items under this Stipulated Protective Order.
3.3. “CONFIDENTIAL” Information or Items: Information (regardless of how it is generated, stored or maintained) or tangible things that qualify for protection under Federal Rule of Civil Procedure 26(c), and as specified above in the Good Cause Statement.
3.4. Counsel: Outside Counsel of Record and In-House Counsel (as well as their support staff).
3.5. Designating Party: A Party or Nonparty that designates information or items that it produces in disclosures or in responses to discovery as “CONFIDENTIAL.”
3.6. Disclosure or Discovery Material: All items or information, regardless of the medium or manner in which it is generated, stored, or maintained (including, among other things, testimony, transcripts, and tangible things), that is produced or generated in disclosures or responses to discovery in this matter.
3.7. Expert: A person with specialized knowledge or experience in a matter pertinent to the litigation who has been retained by a Party or its counsel to serve as an expert witness or as a consultant in this Action.
3.8. In-House Counsel: Attorneys who are employees of a party to this Action. In-House Counsel does not include Outside Counsel of Record or any other outside counsel.
3.9. Nonparty: Any natural person, partnership, corporation, association, or other legal entity not named as a Party to this action.
3.10. Outside Counsel of Record: Attorneys who are not employees of a party to this Action but are retained to represent or advise a party to this Action and have appeared in this Action on behalf of that party or are affiliated with a law firm which has appeared on behalf of that party, and includes support staff.
3.11. Party: Any party to this Action, including all of its officers, directors, employees, consultants, retained experts, In-House Counsel, and Outside Counsel of Record (and their support staffs).
3.12. Producing Party: A Party or Nonparty that produces Disclosure or Discovery Material in this Action.
3.13. Professional Vendors: Persons or entities that provide litigation support services (e.g., photocopying, videotaping, translating, preparing exhibits or demonstrations, and organizing, storing, or retrieving data in any form or medium) and their employees and subcontractors.
3.14. Protected Material: Any Disclosure or Discovery Material that is designated as “CONFIDENTIAL.”
3.15. Receiving Party: A Party that receives Disclosure or Discovery Material from a Producing Party.
4. SCOPE
The protections conferred by this Stipulated Protective Order cover not only Protected Material, but also (1) any information copied or extracted from Protected Material; (2) all copies, excerpts, summaries, or compilations of Protected Material; and (3) any testimony, conversations, or presentations by Parties or their Counsel that might reveal Protected Material.

Any use of Protected Material at trial shall be governed by the orders of the trial judge. This Stipulated Protective Order does not govern the use of Protected Material at trial.

5. DURATION
Even after final disposition of this litigation, the confidentiality obligations imposed by this Stipulated Protective Order shall remain in effect until a Designating Party agrees otherwise in writing or a court order otherwise directs. Final disposition shall be deemed to be the later of (1) dismissal of all claims and defenses in this Action, with or without prejudice; and (2) final judgment herein after the completion and exhaustion of all appeals, rehearings, remands, trials, or reviews of this Action, including the time limits for filing any motions or applications for extension of time pursuant to applicable law.

6. DESIGNATING PROTECTED MATERIAL
6.1. Exercise of Restraint and Care in Designating Material for Protection.

Each Party or Nonparty that designates information or items for protection under this Stipulated Protective Order must take care to limit any such designation to specific material that qualifies under the appropriate standards. The Designating Party must designate for protection only those parts of material, documents, items, or oral or written communications that qualify so that other portions of the material, documents, items, or communications for which protection is not warranted are not swept unjustifiably within the ambit of this Stipulated Protective Order.
Mass, indiscriminate, or routinized designations are prohibited. Designations that are shown to be clearly unjustified or that have been made for an improper purpose (e.g., to unnecessarily encumber the case development process or to impose unnecessary expenses and burdens on other parties) may expose the Designating Party to sanctions.
6.2. Manner and Timing of Designations.

Except as otherwise provided in this Stipulated Protective Order (see, e.g., Section 6.2(a)), or as otherwise stipulated or ordered, Disclosure or Discovery Material that qualifies for protection under this Stipulated Protective Order must be clearly so designated before the material is disclosed or produced.
Designation in conformity with this Stipulated Protective Order requires the following:
(a) For information in documentary form (e.g., paper or electronic documents, but excluding transcripts of depositions or other pretrial or trial proceedings), that the Producing Party affix at a minimum, the legend “CONFIDENTIAL” to each page that contains protected material. If only a portion or portions of the material on a page qualifies for protection, the Producing Party also must clearly identify the protected portion(s) (e.g., by making appropriate markings in the margins).
A Party or Nonparty that makes original documents available for inspection need not designate them for protection until after the inspecting Party has indicated which documents it would like copied and produced. During the inspection and before the designation, all of the material made available for inspection shall be deemed “CONFIDENTIAL.” After the inspecting Party has identified the documents it wants copied and produced, the Producing Party must determine which documents, or portions thereof, qualify for protection under this Stipulated Protective Order. Then, before producing the specified documents, the Producing Party must affix the legend “CONFIDENTIAL” to each page that contains Protected Material. If only a portion or portions of the material on a page qualifies for protection, the Producing Party also must clearly identify the protected portion(s) (e.g., by making appropriate markings in the margins).
(b) For testimony given in depositions, that the Designating Party identify the Disclosure or Discovery Material on the record, before the close of the deposition, all protected testimony.
(c) For information produced in nondocumentary form, and for any other tangible items, that the Producing Party affix in a prominent place on the exterior of the container or containers in which the information is stored the legend “CONFIDENTIAL.” If only a portion or portions of the information warrants protection, the Producing Party, to the extent practicable, shall identify the protected portion(s).
6.3. Inadvertent Failure to Designate.

If timely corrected, an inadvertent failure to designate qualified information or items does not, standing alone, waive the Designating Party’s right to secure protection under this Stipulated Protective Order for such material. Upon timely correction of a designation, the Receiving Party must make reasonable efforts to assure that the material is treated in accordance with the provisions of this Stipulated Protective Order.
7. CHALLENGING CONFIDENTIALITY DESIGNATIONS
7.1. Timing of Challenges.

Any Party or Nonparty may challenge a designation of confidentiality at any time that is consistent with the Court’s Scheduling Order.
7.2. Meet and Confer.

The Challenging Party shall initiate the dispute resolution process, which shall comply with Local Rule 37.1 et seq., and with Section 4 of Judge Audero’s Procedures (“Mandatory Telephonic Conference for Discovery Disputes”).[1]
7.3. Burden of Persuasion.

The burden of persuasion in any such challenge proceeding shall be on the Designating Party. Frivolous challenges, and those made for an improper purpose (e.g., to harass or impose unnecessary expenses and burdens on other parties) may expose the Challenging Party to sanctions. Unless the Designating Party has waived or withdrawn the confidentiality designation, all parties shall continue to afford the material in question the level of protection to which it is entitled under the Producing Party’s designation until the Court rules on the challenge.
8. ACCESS TO AND USE OF PROTECTED MATERIALS
8.1. Basic Principles.

A Receiving Party may use Protected Material that is disclosed or produced by another Party or by a Nonparty in connection with this Action only for prosecuting, defending, or attempting to settle this Action. Such Protected Material may be disclosed only to the categories of persons and under the conditions described in this Stipulated Protective Order. When the Action reaches a final disposition, a Receiving Party must comply with the provisions of Section 14 below.
Protected Material must be stored and maintained by a Receiving Party at a location and in a secure manner that ensures that access is limited to the persons authorized under this Stipulated Protective Order.
8.2. Disclosure of “CONFIDENTIAL” Information or Items.

Unless otherwise ordered by the Court or permitted in writing by the Designating Party, a Receiving Party may disclose any information or item designated “CONFIDENTIAL” only to:
(a) The Receiving Party’s Outside Counsel of Record, as well as employees of said Outside Counsel of Record to whom it is reasonably necessary to disclose the information for this Action;
(b) The officers, directors, and employees (including In-House Counsel) of the Receiving Party to whom disclosure is reasonably necessary for this Action;
(c) Experts of the Receiving Party to whom disclosure is reasonably necessary for this Action and who have signed the “Acknowledgment and Agreement to Be Bound” (Exhibit A);
(d) The Court and its personnel;
(e) Court reporters and their staff;
(f) Professional jury or trial consultants, mock jurors, and Professional Vendors to whom disclosure is reasonably necessary or this Action and who have signed the “Acknowledgment and Agreement to be Bound” (Exhibit A);
(g) The author or recipient of a document containing the information or a custodian or other person who otherwise possessed or knew the information;
(h) During their depositions, witnesses, and attorneys for witnesses, in the Action to whom disclosure is reasonably necessary provided: (i) the deposing party requests that the witness sign the “Acknowledgment and Agreement to Be Bound” (Exhibit A); and (ii) the witness will not be permitted to keep any confidential information unless they sign the “Acknowledgment and Agreement to Be Bound,” unless otherwise agreed by the Designating Party or ordered by the Court. Pages of transcribed deposition testimony or exhibits to depositions that reveal Protected Material may be separately bound by the court reporter and may not be disclosed to anyone except as permitted under this Stipulated Protective Order; and
(i) Any mediator or settlement officer, and their supporting personnel, mutually agreed upon by any of the parties engaged in settlement discussions.
9. PROTECTED MATERIAL SUBPOENAED OR ORDERED PRODUCED IN OTHER LITIGATION
If a Party is served with a subpoena or a court order issued in other litigation that compels disclosure of any information or items designated in this Action as “CONFIDENTIAL,” that Party must:

(a) Promptly notify in writing the Designating Party. Such notification shall include a copy of the subpoena or court order;
(b) Promptly notify in writing the party who caused the subpoena or order to issue in the other litigation that some or all of the material covered by the subpoena or order is subject to this Stipulated Protective Order. Such notification shall include a copy of this Stipulated Protective Order; and
(c) Cooperate with respect to all reasonable procedures sought to be pursued by the Designating Party whose Protected Material may be affected.
If the Designating Party timely seeks a protective order, the Party served with the subpoena or court order shall not produce any information designated in this action as “CONFIDENTIAL” before a determination by the Court from which the subpoena or order issued, unless the Party has obtained the Designating Party’s permission. The Designating Party shall bear the burden and expense of seeking protection in that court of its confidential material and nothing in these provisions should be construed as authorizing or encouraging a Receiving Party in this Action to disobey a lawful directive from another court.

10. A NONPARTY’S PROTECTED MATERIAL SOUGHT TO BE PRODUCED IN THIS LITIGATION
10.1. Application.

The terms of this Stipulated Protective Order are applicable to information produced by a Nonparty in this Action and designated as “CONFIDENTIAL.” Such information produced by Nonparties in connection with this litigation is protected by the remedies and relief provided by this Stipulated Protective Order. Nothing in these provisions should be construed as prohibiting a Nonparty from seeking additional protections.
10.2. Notification.

In the event that a Party is required, by a valid discovery request, to produce a Nonparty’s confidential information in its possession, and the Party is subject to an agreement with the Nonparty not to produce the Nonparty’s confidential information, then the Party shall:
(a) Promptly notify in writing the Requesting Party and the Nonparty that some or all of the information requested is subject to a confidentiality agreement with a Nonparty;
(b) Promptly provide the Nonparty with a copy of the Stipulated Protective Order in this Action, the relevant discovery request(s), and a reasonably specific description of the information requested; and
(c) Make the information requested available for inspection by the Nonparty, if requested.
10.3. Conditions of Production.

If the Nonparty fails to seek a protective order from this Court within fourteen (14) days after receiving the notice and accompanying information, the Receiving Party may produce the Nonparty’s confidential information responsive to the discovery request. If the Nonparty timely seeks a protective order, the Receiving Party shall not produce any information in its possession or control that is subject to the confidentiality agreement with the Nonparty before a determination by the Court. Absent a court order to the contrary, the Nonparty shall bear the burden and expense of seeking protection in this Court of its Protected Material.
11. UNAUTHORIZED DISCLOSURE OF PROTECTED MATERIAL
If a Receiving Party learns that, by inadvertence or otherwise, it has disclosed Protected Material to any person or in any circumstance not authorized under this Stipulated Protective Order, the Receiving Party immediately must (1) notify in writing the Designating Party of the unauthorized disclosures, (2) use its best efforts to retrieve all unauthorized copies of the Protected Material, (3) inform the person or persons to whom unauthorized disclosures were made of all the terms of this Stipulated Protective Order, and (4) request such person or persons to execute the “Acknowledgment and Agreement to be Bound” (Exhibit A).

12. INADVERTENT PRODUCTION OF PRIVILEGED OR OTHERWISE PROTECTED MATERIAL
When a Producing Party gives notice to Receiving Parties that certain inadvertently produced material is subject to a claim of privilege or other protection, the obligations of the Receiving Parties are those set forth in Federal Rule of Civil Procedure 26(b)(5)(B). This provision is not intended to modify whatever procedure may be established in an e-discovery order that provides for production without prior privilege review. Pursuant to Federal Rule of Evidence 502(d) and (e), insofar as the parties reach an agreement on the effect of disclosure of a communication or information covered by the attorney-client privilege or work product protection, the parties may incorporate their agreement in the Stipulated Protective Order submitted to the Court.

13. MISCELLANEOUS
13.1. Right to Further Relief.

Nothing in this Stipulated Protective Order abridges the right of any person to seek its modification by the Court in the future.
13.2. Right to Assert Other Objections.

By stipulating to the entry of this Stipulated Protective Order, no Party waives any right it otherwise would have to object to disclosing or producing any information or item on any ground not addressed in this Stipulated Protective Order. Similarly, no Party waives any right to object on any ground to use in evidence of any of the material covered by this Stipulated Protective Order.
13.3. Filing Protected Material.

A Party that seeks to file under seal any Protected Material must comply with Local Rule 79-5. Protected Material may only be filed under seal pursuant to a court order authorizing the sealing of the specific Protected Material at issue. If a Party’s request to file Protected Material under seal is denied by the Court, then the Receiving Party may file the information in the public record unless otherwise instructed by the Court.
14. FINAL DISPOSITION
After the final disposition of this Action, within sixty (60) days of a written request by the Designating Party, each Receiving Party must return all Protected Material to the Producing Party or destroy such material. As used in this subdivision, “all Protected Material” includes all copies, abstracts, compilations, summaries, and any other format reproducing or capturing any of the Protected Material. Whether the Protected Material is returned or destroyed, the Receiving Party must submit a written certification to the Producing Party (and, if not the same person or entity, to the Designating Party) by the 60-day deadline that (1) identifies (by category, where appropriate) all the Protected Material that was returned or destroyed and (2) affirms that the Receiving Party has not retained any copies, abstracts, compilations, summaries or any other format reproducing or capturing any of the Protected Material. Notwithstanding this provision, Counsel is entitled to retain an archival copy of all pleadings; motion papers; trial, deposition, and hearing transcripts; legal memoranda; correspondence; deposition and trial exhibits; expert reports; attorney work product; and consultant and expert work product, even if such materials contain Protected Material. Any such archival copies that contain or constitute Protected Material remain subject to this Stipulated Protective Order as set forth in Section 5.

15. VIOLATION
Any violation of this Stipulated Order may be punished by any and all appropriate measures including, without limitation, contempt proceedings and/or monetary sanctions.

IT IS SO STIPULATED, THROUGH COUNSEL OF RECORD.

Dated: April 16, 2021 ____________________________ Attorney(s) for Plaintiff(s) Dated: ________________ ____________________________ Attorney(s) for Defendant(s) Dated: ________________ ____________________________ Attorney(s) for Defendant(s)
FOR GOOD CAUSE SHOWN, IT IS SO ORDERED.

Dated: ___________________ _______________________________ Maria A. Audero United States Magistrate Judge
Any violation of this Stipulated Order may be punished by any and all appropriate measures including, without limitation, contempt proceedings and/or monetary sanctions.

IT IS SO STIPULATED, THROUGH COUNSEL OF RECORD.

Dated: ____________________________ Attorney(s) for Plaintiff(s) Dated: April 19, 2021 ____________________________ Attorney(s) for Defendant(s) Dated: ________________ ____________________________ Attorney(s) for Defendant(s)
FOR GOOD CAUSE SHOWN, IT IS SO ORDERED.

Dated:________________ ____________________________ Maria A. Audero United States Magistrate Judge
Any violation of this Stipulated Order may be punished by any and all appropriate measures including, without limitation, contempt proceedings and/or monetary sanctions.

IT IS SO STIPULATED, THROUGH COUNSEL OF RECORD.

Dated: ___________________ ____________________________________ Attorney(s) for Plaintiff(s) MURCHISON & CUMMING, LLP Dated: April 19, 2021 ____________________________________ Attorney(s) for Defendant(s) Dated: ___________________ ____________________________________ Attorney(s) for Defendant(s)
FOR GOOD CAUSE SHOWN, IT IS SO ORDERED.

Dated: ___________________ ____________________________________ Maria A. Audero United States Magistrate Judge MURCHISON & CUMMING, LLP Dated: April 19, 2021 Nancy N. Potter Attorney(s) for Defendants, SWEDELSONGOTTLIEB and BRIAN MORENO Dated: _______________ _________________________________________ Attorney(s) for Defendant(s)
FOR GOOD CAUSE SHOWN, IT IS SO ORDERED.

Dated: 4/19/21 _______________________________________ Maria A. Audero United States Magistrate Judge
EXHIBIT A
ACKNOWLEDGMENT AND AGREEMENT TO BE BOUND
I, __________________ [full name], of __________________________________ ____________________ [address], declare under penalty of perjury that I have read in its entirety and understand the Stipulated Protective Order that was issued by the United States District Court for the Central District of California on ___________________ [date] in the case of ____________________________________________________________ [case name and number]. I agree to comply with and to be bound by all the terms of this Stipulated Protective Order, and I understand and acknowledge that failure to so comply could expose me to sanctions and punishment in the nature of contempt. I solemnly promise that I will not disclose in any manner any information or item that is subject to this Stipulated Protective Order to any person or entity except in strict compliance with the provisions of this Stipulated Protective Order.

I further agree to submit to the jurisdiction of the United States District Court for the Central District of California for the purpose of enforcing the terms of this Stipulated Protective Order, even if such enforcement proceedings occur after termination of this action. I hereby appoint _______________ [full name] __________________ of ____________________ [address and telephone number] as my California agent for service of process in connection with this action or any proceedings related to enforcement of this Stipulated Protective Order.

Signature: _____________________________ Printed Name: _____________________________ Date: _____________________________ City and State Where Sworn and Signed: _____________________________
[1] Judge Audero’s Procedures are available at https://www.cacd.uscourts.gov/honorable-maria-audero.