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The most important court decisions of the month
Welcome to Berger Kahn's monthly e-publication summarizing the most important California state and federal court decisions.

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Alcohol Maker Is Not Immune From Civil Liability
Fiorini v. City Brewing Co.
(Ct. of App. 5th Dist.), filed November 2, 2014

Twenty-three year old college student Ron Fiorini drank two Four Lokos and became disoriented and paranoid. Four Loko (nicknamed “liquid cocaine,” “liquid crack,” and “blackout in a can”) is an alcoholic beverage containing high levels of caffeine and other stimulants. Ron was shooting cans in the yard when the police arrived and shot him to death. Ron’s father sued City Brewing Company, LLC for negligence and strict liability, alleging that the high caffeine levels and alcohol increased Ron’s violent behavior risk. City Brewing moved for judgment on the pleadings, arguing that consuming the beverage was the proximate cause of the alcohol-related injury and that it was protected under the dram shop statutes. The dram shop statutes immunize those who sell alcoholic beverages from liability for injuries to or caused by intoxicated consumers. The trial court granted the motion, holding that the City Brewing was immune under California’s dram shop statutes because Four Loko was fit for beverage purposes and City Brewing furnished the beverage to Fiorini. But the Court of Appeal disagreed. It held that since City Brewing delivered the cans to a distributor and it did not take any affirmative steps to furnish the Four Loko to Fiorini, dram shop immunity would not apply. Therefore, the Court recognized that civil immunity did not extend to City Brewing.

Alleged Refusal To Settle Is Not “Wrong” When Policy Number And Insured Are Misidentified
Graciano v. Mercury General Corp.
(Ct. of App. 4th Dist.), filed October 17, 2014

Sonia Graciano suffered physical injuries when a Cadillac driven by Saul Ayala (“Saul”) hit her. California Automobile Insurance Company (“CAIC”) insured Ayala under a $50,000 policy limit. Six months before the accident, the same Cadillac was under a policy issued to a different person -- Jose Saul Ayala -- under a $15,000 policy (which by the time of the accident was no longer in force). Saul first reported the accident to CAIC, but did not give Graciano’s name as the injured party. After Saul’s report, Graciano’s attorney then contacted CAIC giving an incorrect policy number and misidentifying the driver as “Saulay Ala.” CAIC used this information to identify the cancelled $15,000 policy previously issued to Jose Saul Ayala. CAIC told Graciano’s attorney it would look into what appeared to be a “coverage problem.” Three weeks after the accident, Graciano’s attorney requested the declarations page and payment of the “maximum bodily injury limits.” She requested payment in 10 days, claiming that the policy limits would be open after the 10-day deadline. CAIC let Graciano’s attorney know it still had not found coverage for Jose Saul Ayala, but asked for a brief extension to continue its investigation. Graciano’s attorney refused. Still within the 10-day deadline, CAIC finished its investigation, identified the correct policy and driver, and tried to settle the claim with a full $50,000 policy limits offer. But Graciano rejected the offer, and instead alleged that CAIC acted in bad faith based on a “wrongful failure to settle” theory. Graciano argued that CAIC should have made the full policy limits offer earlier. The jury agreed and found in Graciano’s favor, awarding a $2 million dollar judgment. The Court of Appeal disagreed and reversed the judgment. The Court found that there was no substantial evidence that Graciano ever offered to settle her claims against the insured within limits, since she repeatedly referred to an incorrect insured. Instead, the Court noted that “the undisputed evidence showed CAIC did timely tender Saul’s full policy limits in an attempt to settle Graciano’s claim, and therefore acted in good faith as a matter of law ‘by offering the policy limits in exchange for a release [thereby doing] all within its power to effect a settlement.’”

Insured Entitled To Conditional Repair Cost Award Although Insured Had Not Made Any Repairs
Stephens & Stephens XII, LLC v. Fireman’s Fund Insurance Company
(Ct. of App. 1st Dist.), filed November 24, 2014

Fireman’s Fund Insurance Company issued a policy covering property damage for a building Stephens & Stephens XII, LLC owned. Three days after the policy went into effect, Stephens XII discovered that burglars had stripped electrical and other conduct materials and damaged the building. Stephens XII filed a claim with Fireman’s Fund, but Fireman’s Fund delayed resolving the claim. The Fireman’s Fund policy provided two measures for reimbursing damages: (1) full cost of repairing the damage so long as the repairs were made or (2) the “Actual Cash Value” or the damaged property’s depreciated value. Although Stephens XII had not repaired the damage, the jury awarded the full repair cost and lost business income (which the policy did not authorize). The jury noted that Stephens XII had not made any repairs because Fireman’s Fund failed to make any required policy payments. The jury did not award any lost rent -- which was covered under the policy. The trial court granted Fireman Fund’s motion for judgment notwithstanding the verdict, finding that neither award was appropriate under the policy. The Court of Appeal reversed. The Court found that Stephen XII was entitled to a “conditional judgment awarding these costs if the repairs were actually made.” It held, “[w]hen an insurer’s decision to decline coverage materially hinders an insured from repairing damaged property, procedural obstacles to obtaining the replacement cost value should be excused.” The Court also noted that the lost business income could be properly construed as compensable lost rent.


Bare Allegations Failed To Support Reasonable Entitlement To Overtime Pay
Landers v. Quality Communications Inc.
(U.S. Ct. of App. 9th Dist.), filed November 12, 2014

Greg Landers worked as a cable services installer for Quality Communications. He brought a class action lawsuit against Quality for failing to pay minimum and overtime wages. Landers alleged that he was subject to a “piecework no overtime” wage system where he allegedly was not paid for overtime. The District Court granted Quality’s motion to dismiss, finding that the complaint did not approximate any overtime hours worked. The Ninth Circuit affirmed, emphasizing that “[n]otably absent from the allegations in Landers’ complaint, however, was any detail regarding a specific workweek when Landers worked in excess of forty hours and was not paid overtime for that specific workweek and/or was not paid minimum wages.” Since Landers refused to amend his complaint, the case ended.

Hotel May Be Liable For Failing To Prevent Child’s Fall From Second Story Window
Lawrence v. La Jolla Beach & Tennis Club
(Ct. of App. 4th Dist.), filed October 31, 2014

Michael Lawrence suffered serious head and brain injuries after he fell from a second-story window at the La Jolla Beach and Tennis Club when he was five years old. Michael’s parents sued the Club, alleging negligence, dangerous condition of property, and negligent infliction of emotional distress. Michael’s mother also filed a complaint as guardian ad litem, alleging the same causes of action. The trial court granted the Club’s motion for summary judgment, finding that the Club had no duty to install a fall prevention device on the window and the failure to install a fall prevention device did not cause the accident. The Club’s expert, a certified building inspector, said the subject window met the applicable building codes and that there was no requirement that the windows have restrictors. The hotel’s former operations director testified that the majority of bay windows had bars because there was a concern that somebody or something could fall out of the window. The Lawrences’ expert noted that there were safety bars on some of the hotel room windows -- just not on the window where Michael fell. The Court of Appeal reversed. It first emphasized that although the duty of care both landlords and hotel owners owe is to “maintain their property in a reasonably safe condition because of the temporary nature of most hotel occupancies, hotel owners generally exercise far greater control over hotel rooms than landlords are able to exercise over leased premises.” Therefore, the hotel owner’s duty to “keep its ‘premises reasonably safe applies to defective or insecurely or unsafely fastened window screens.’” Finally, “[b]ecause a trier of fact could reasonably find defendants were negligent in failing to take reasonable measures that would have prevented Michael’s accident, it could also reasonably find that defendants’ negligence was a substantial factor in causing the accident.”

Managers May Maintain Wage And Hour Class Action For Nonexempt Tasks
Martinez v. Joe’s Crab Shack Holdings
(Ct. of App. 2nd Dist.), filed November 10, 2014

Roberto Martinez, Lisa Saldana, Craig Eriksen, and Chanel Rankin-Stephens worked as Joe’s Crab Shack managers. They filed a class action complaint, claiming they had been misclassified as exempt employees who were not entitled to overtime pay. The plaintiffs filed declarations from current and former managerial employees who stated that they were often required to perform utility functions, including filling in as cooks, servers, bussers, hosts, stockers, bartenders or kitchen staff. The managers said they had often worked extended hours performing hourly, non-managerial tasks, but had not been paid overtime. The trial court denied class certification, finding that the plaintiffs had not established that the claims were typical of the class, that they could adequately represent the class, and that common questions predominated. The Court of Appeal, however, found that there was a common question in the litigation in that the managers routinely filled in for hourly workers performing nonexempt tasks without being paid overtime wages. Therefore, the question became whether “a typically nonexempt task becomes exempt when performed by a managerial employee charged with supervision of other employees.” Finally, the Court found that class analysis was appropriate as a “more efficient and effective means of resolving plaintiffs’ overtime claim.”



Our Dedicated Key Decisions Team! 

Lance LaBelle
Orange County

David Ezra
Orange County

Ann Johnston
S. F. Bay Area

Roberta Winston
San Diego

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