Appellate Reports

The dangers and difficulties of trying to put “teeth” into a settlement by including provisions that increase the amount the settling defendant must pay if it fails to perform

Jeffrey I. Ehrlich
2017 December

Vitatech International, Inc. v. Sporn

(2017) __ Cal. App.5th __ (Fourth Dist., Div. 3.)

Who needs to know about this case:

Lawyers who draft settlement agreements.

Why it’s important:

It provides an example of the dangers and difficulties of trying to put “teeth” into a settlement by including provisions that increase the amount the settling defendant must pay if it fails to perform.

Synopsis:

Vitatech filed a breach-of-contract lawsuit against Defendants, seeking more than $166,000 in damages. On the eve of trial, the parties settled for $75,000. As part of the settlement, Defendants stipulated to entry of judgment against them “in the full prayer of the Complaint,” but Vitatech agreed to “forbear” from filing the stipulation and to accept the $75,000 “as full Settlement of its claims against Defendants” if they paid by the designated date. When Defendants failed to pay, Vitatech filed the stipulation and the trial court entered judgment against Defendants for more than $300,000, which included compensatory damages, prejudgment interest, attorney fees, and costs.

Defendants moved to vacate the judgment, arguing it was an unenforceable penalty under Civil Code section 1671, subdivision (b). The trial court denied the motion because it found the judgment’s higher amount was not a penalty or liquidated damages provision subject to section 1671(b). Rather, the court concluded the reduced amount Vitatech agreed to accept was merely a discount if Defendants paid their debt as agreed.

The Court of Appeal reversed and remanded with directions to the trial court to grant the motion and enter a new judgment for the $75,000 settlement amount, plus trial court costs. Under well-established precedent, including Greentree Financial Group, Inc. v. Execute Sports, Inc. (2008) 163 Cal.App.4th 495, the stipulated judgment for more than four times the amount that Vitatech agreed to accept as full settlement of its claims is an unenforceable penalty because it bears no reasonable relationship to the range of damages the parties could have anticipated would result from Defendants’ failure to timely pay the settlement amount. Contrary to Vitatech’s argument, the stipulation for entry of judgment was not merely a permissible discount provision, because the stipulation compromises disputed claims and resolves pending litigation. Although Defendants stipulated to entry of judgment if they did not timely pay, they never admitted liability on the underlying claims or the amount of damages allegedly caused by the breach of the underlying contract.

 Short(er) takes:

Civil Procedure; denial of continuances; abuse of discretion: Denton v. City and County of San Francisco (2017) __ Cal.App.5th __ (First Dist., Div. 2.)

Denton sued the City, his employer, alleging discrimination, retaliation, and other claims. The City filed a motion for summary judgment. Before the hearing date for the motion, the parties reached a settlement. Denton’s counsel filed a notice of conditional settlement, which explained that the parties had agreed to all material terms, but had not yet agreed on the final terms of the writing documenting the settlement, and that it had yet to be approved by the Board of Supervisors. A week later, Denton discharged his attorney and substituted into the case pro per. Denton entered into an exchange of email with defense counsel, in which she asked whether he was attempting to back out of the settlement, and he explained that he was not.

The City filed an ex parte application that asked the court to vacate the conditional settlement, and to keep the scheduled summary judgment motion on calendar. The court granted the application. Denton thereafter attempted to negotiate a new settlement, and on the day before the summary judgment hearing, filed a new notice of conditional settlement. The trial court granted the summary judgment motion on the ground that it was unopposed. After judgment was entered, Denton filed a new-trial motion, which was denied. Reversed.

When a request for a continuance of a summary judgment motion is made on grounds other than the mandatory basis of Code of Civil Procedure, section 437c, subdivision (h), the court must determine whether the party requesting the continuance has established good cause, and whether good cause has been shown is reviewed for abuse of discretion.

In light of what occurred in the brief hearing, and the short shrift given Denton by the trial court, it might be said that the trial court acted arbitrarily. Or capriciously. That, of course, would end the matter. But even if those adjectives do not apply, Denton should have been granted the continuance in the circumstances he found himself, circumstances that were not his fault. The effect, of course, was the granting of the motion – and summary judgment – without Denton given any fair opportunity to oppose it. This cannot be. As Witkin tersely summarizes it, discretion “must be exercised with due regard to all interests involved, and the refusal of a continuance that has the practical effect of denying the applicant a fair hearing is reversible error.”

Civil rights; excessive force; qualified immunity: Zion v. County of Orange (9th Cir. 2017) _ F.3d _.

Connor Zion suffered several seizures. He then had a seemingly related episode where he bit his mother and cut her and his roommate with a kitchen knife. Police were called. Deputy Juan Lopez arrived at Zion’s apartment complex. As Lopez exited his police car, Zion ran at him and stabbed him in the arms. Deputy Michael Higgins drove up separately and witnessed the attack on Lopez. The events that followed were captured by the police cruiser’s dashboard cameras.

Higgins fired nine shots at Zion from about 15 feet away. Zion fell to the ground. Higgins then ran to the spot where Zion had fallen and fired 9 more rounds into his body from a distance of about 4 feet, emptying his weapon. Zion had curled up on his side. Higgins then paused and walked in a circle. Zion was still moving. Higgins then took a running start and stomped on Zion’s head three times. Zion died at the scene. His mother filed a civil-rights action under 42 U.S.C. § 1983 claiming that Zion had used excessive force, had deprived her of her child without due process, and asserting other claims.

The District Court granted summary judgment on all claims in favor of all defendants. Reversed.

Police use of force is excessive and violates the Fourth Amendment if it’s objectively unreasonable under the circumstances. Relevant factors include the severity of the crime at issue, whether the suspect poses an immediate threat to the safety of the officers or others, and whether he is actively resisting arrest or attempting to evade arrest by flight. Plaintiff did not challenge Higgins’ first nine-round volley, but challenges the second, as well as the head stomps.

By the time of the second volley, Higgins had shot at Zion nine times at relatively close range and Zion had dropped to the ground. In the video, Zion appears to have been wounded and is making no threatening gestures. While Higgins couldn’t be sure that Zion wasn’t bluffing or only temporarily subdued, Zion was lying on the ground and so was not in a position where he could easily harm anyone or flee. A reasonable jury could find that Zion was no longer an immediate threat, and that Higgins should have held his fire unless and until Zion showed signs of danger or flight. Or, a jury could find that the second round of bullets was justified, but not the head-stomping.

The Defendants argued that Higgins’s continued use of deadly force was reasonable because Zion was still moving. They cite authority for the proposition that “[I]f police officers are justified in firing at a suspect in order to end a severe threat to public safety, the officers need not stop shooting until the threat has ended.” The Ninth Circuit rejected this argument, observing that, “terminating a threat doesn’t necessarily mean terminating the suspect. If the suspect is on the ground and appears wounded, he may no longer pose a threat; a reasonable officer would reassess the situation rather than continue shooting. This is particularly true when the suspect wields a knife rather than a firearm. In our case, a jury could reasonably conclude that Higgins could have sufficiently protected himself and others after Zion fell by pointing his gun at Zion and pulling the trigger only if Zion attempted to flee or attack.”

If a jury determines that Zion no longer posed an immediate threat, any deadly force Higgins used after that time violated long-settled Fourth Amendment law. Accordingly, the Defendants were not entitled to qualified immunity.

The court also found that the head-stomping would allow a reasonable jury to find that Higgins acted out of anger or emotion, rather than for any legitimate law-enforcement purpose. As a result, Zion’s mother’s claim under the 14th amendment that she was denied a liberty interest in the companionship and society of her child was not properly dismissed on summary judgment.

Punitive damages; wrongful eviction: Fernandes v. Singh (2017) __ Cal.App.5th __ (Third Dist.)

In June 2013, Fernandes sued her landlords, Raj Singh and his wife Kiran Rawat, individually and as trustees for their trust, for wrongful eviction and related claims. When Singh rented Fernandes the property in 2010, it was not habitable. Later that year Singh filed an unlawful detainer action against her, using a false name to circumvent the pre-filing requirements of the vexatious-litigant statutes (he had previously been determined to be a vexatious litigant). The case was dismissed for non-appearance by the parties. Singh filed a second unlawful detainer action, and Fernandes prevailed, obtaining a conditional judgment reducing her rent and ordering Singh to repair the premises. Singh then filed a third unlawful detainer action, which fraudulently alleged an amount of unpaid rent, filed a fraudulent proof-of-service, took Fernandes’s default, obtained an eviction order, had the sheriff evict Fernandes, and then changed the locks on the apartment. Fernandes returned after work to find she was locked out, with deputies barring her entrance, so she could not “retrieve even her most rudimentary belongings” including “necessities of life, like food and clothing.” She had nowhere to live, stayed with friends, and struggled to keep her job.

Singh never made the required repairs, and never complied with a court order to return the property Fernandes had left in her unit, although she found some of her property in a trash can. The estimated value of the missing property was nearly $21,000. Her ordeal at Singh’s hands caused Fernandes “great emotional distress.” The trial court found that “Singh rented uninhabitable premises to Fernandes at an exorbitant rental rate and then retaliated against her when she complained about the uninhabitable conditions. His conduct is utterly indefensible.” The total award for compensatory damages was $87,894.

The court also found that Singh acted with malice, fraud and oppression, and that Rawat ratified and approved his conduct. Singh failed to provide any evidence of his financial condition. The trial court imposed punitive damages of $350,000. Affirmed.

The appellate court found that all five factors used to evaluate reprehensibility of the defendant’s conduct were met: [1] the harm caused was physical as opposed to economic; [2] the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; [3] the target of the conduct had financial vulnerability; [4] the conduct involved repeated actions or was an isolated incident; and [5] the harm was the result of intentional malice, trickery, or deceit, or mere accident. Hence, the degree of reprehensibility was high.

Although the plaintiff seeking punitive damage ordinarily bears the burden of proving the defendant’s financial condition, cases have held that noncompliance with a court order to disclose financial condition precludes a defendant from challenging the sufficiency of the evidence of a punitive damages award on appeal. Those cases apply here. The award of punitive damages was roughly four times the compensatory damages. On the facts presented, it was not excessive.

Jeffrey I. Ehrlich Jeffrey I. Ehrlich

Jeffrey I. Ehrlich is the principal of the Ehrlich Law Firm, in Claremont, California. He is a cum laude graduate of the Harvard Law School, a certified appellate specialist by the California Board of Legal Specialization, and a member of the CAALA Board of Governors. He is the editor-in-chief of Advocate magazine and a two-time recipient of the CAALA Appellate Attorney of the Year award.

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