Real Estate: Lack of Assignment With Sales Price Reduction Eliminates Right to Compensation for Inverse Condemnation:
Ridgewater Associates LLC v. Dublin San Ramon Services District (May 2010): Failure to get an assignment of rights from prior owner means new property owner cannot sue for a government taking of property. Ridgewater bought a warehouse next to sludge lagoons operated by Dublin San Ramon Services District. The original offering price of the property was $2.65 million, but that price was reduced to $2.5 million after due diligence inspections revealed that certain water table and water intrusion conditions may have caused damage to the property and required repair. Prior to purchasing the property the buyer and seller did not take any steps to preserve the prior owner’s inverse condemnation rights. An assignment of the seller’s rights to the buyer would have transferred those rights to the buyer. After purchase, Ridgewater noted continuing water crossing over the property from the lagoons causing erosion of the property and sued the District for inverse condemnation. The District moved for summary judgment, arguing that Ridgewater lacked standing because it lacked an assignment by the previous owner. The Court of Appeals found that Ridgewater did not lack standing because there was property damage as a result of a public use during its ownership. Despite finding that there was a “taking” of private property by public use, the Court of Appeal found the price reduction eliminated any diminution in value or damages measured by the cost to repair property damage. Essentially, the Court of Appeal found that Ridgewater had been compensated for the “taking” - - just not by the government.
Professional Liability: Attorney’s Duty To a Former Client is Limited:
Oasis West Realty LLC v. Kenneth Goldman (March 2010): Defendant Kenneth Goldman for a time represented plaintiff Oasis West Realty, Inc. in connection with Oasis’ efforts to redevelop real estate it owned in Beverly Hills. Attorney Goldman was familiar with the Beverly Hills City Council and was on the Board of a local homeowners association near where the Hilton was to be built. Two years after that representation ended, Oasis alleged that Mr. Goldman took some action in opposition to the redevelopment (he wrote a note to some neighbors urging them to sign a petition against development of the Hilton because its size was all wrong, etc.). Oasis sued Goldman for breach of fiduciary duty, professional negligence and breach of contract on the theory that Goldman’s acts constituted a breach of the lawyer’s ethical duties to Oasis. The Court of Appeal noted that an attorney’s duty to a client is defined not just by the Rules of Professional Conduct and the statutes of the Business and Professions Code, but also by the general principals of fiduciary relationships. Oasis was arguing that the duty of loyalty prohibited Goldman from opposing the Hilton project, and that the duty of loyalty not only limits successive adverse representation, bur addresses a lawyer’s conduct in a private capacity. The Court of Appeal found that there was no rule that by representing a client, a lawyer forever after forfeits the constitutional right to speak on matters of public interest. And, the Court of Appeal expressly declined the invitation to make any such rule.
Construction: Unlicensed Contractor Must Disgorge All Payments:
Alatriste v. Ceasar’s Exterior Designs, Inc. (April 2010): Hirer’s knowledge of unlicensed landscape contractor does not impede hirer’s right to recover all proceeds paid to landscaper for all work performed. Esaul Alatriste hired Cesar’s Exterior Designs, Inc., Inc. (CED) to do landscaping work at his home. CED worked for 5 months and then terminated its services because Alatriste stopped paying CED. By that time, CED had been paid $57,500.00. Alatriste never expressed any disappointment in CED’s work. Later, Alatriste sued CED to recover the total amount paid under the Business & Professions Code section 7031(b). The Court of Appeal in San Diego ruled that CED had to disgorge all of the payments even though Alatriste knew that CED was not licensed. Further, even though CED had been licensed during some part of the work, the Court reviewed the statute and found that “if the contractor was unlicensed at any time during the performance,” then the hirer could seek to recover full reimbursement.
Construction: Duty to Warn Other Companies’ Employees:
In Miguel Saurez v. Pacific Northstar Mechanical, Inc. (2009), the Court of Appeal ruled that a mechanical subcontractor had a statutory duty to warn of a known dangerous condition that could injure its employees or the employees of other contracting companies. In Saurez, A subcontractor’s employee received an electrical shock from an ungrounded fixture - - an I-bolt in the ceiling- - but received only minor injuries. The employee reported the incident to his foreman, but that foreman did not tell the general contractor. A few weeks later, two of the general contractor’s employees, one on a ladder and the other spotting below, were injured when the employee on the ladder grabbed the I-bolt, received a shock and fell from the ladder onto his co-worker. The 2 injured employees brought a suit against the subcontractor company arguing that it had a duty to warn of the I-bolt condition even though the subcontractor company did not create the condition nor was inspection of the area included in its scope of work. The Court of Appeal found that Cal-OSHA requires all employers to furnish a place of employment “that is safe and healthful for the employees therein.” The Court of Appeal concluded that the Cal-OSHA provisions “impose a duty on each employer, at a multi-employer work site, to report all non-obvious hazards about which the employer learns because its employees were exposed to them during the course of their work, even if the employer in question did not create the hazard.”
Construction: Prompt Payment Rights and Obligations:
Martin Brothers Construction, Inc. v. Thompson Pacific Construction, Inc. (December 2009): The California Public Contract Code 7107 requires a public agency to pay retention to its general contractors within 60 days after completion. Similarly, Business and Professions Code section 7108.5 requires a general contractor to pay its subcontractors no later than 10 days after receiving progress payments from the owner. Failure to make timely payment, results in statutory penalty of 2% per month on the improperly withheld amount. Also, in an action for collection of those funds, the prevailing party is entitled to recover attorney fees. The exception to the “rule” is that up to 150% of the amount owed may be withheld if there is a “bona fide dispute” as to what is owed. In the Martin Brothers case, the Court of Appeal found that the “bona fide dispute” exception only requires that the contractor have a good faith belief that there is a dispute to be resolved. Further, the prompt payment requirement applies “unless otherwise agreed to in writing.” Therefore, where subcontractor agreed to provide conditional lien releases before being paid, subcontractor waived late payment penalty rights.
Construction: No Recovery of Attorney Fees Where Retention Not Owed:
Diaa Yassin v. Vinicio Solis (May 2010): Plaintiff and appellate Diaa Yassin, a licensed contractor, was hired to do improvement work on the Solises’ home. The construction contract price was $75,000.00 and it provided that the amount was to be paid in part by a down payment on signing, more at rough framing inspection, “$15,000.00 at final inspection, and $7500.00 upon completion of the work and before occupancy. . . .” After the City inspector signed a “final inspection” (which was actually the drywall inspection), the Solises refused to pay Yassin because of their dissatisfaction with Yassin’s work and manner. The Solises terminated Yassin and hired another contractor to complete the work. Yassin sued for $30,900.00 and the Solises cross-complained for deficient construction. Neither party sued to recover attorney fees under the prompt payment statute or otherwise. The trial court awarded Yassin nothing on his claim and awarded the Solises $50,000.00 on their cross-complaint. After a post-trial motion based on the prompt payment statute (Civil Code section 3260), the trial court awarded the Solises $36,205.00 in attorneys’ fees on the theory that the Solises prevailed on Yassin’s claim for $7,500 due and payable upon completion of work and issuance of a certificate of occupancy, which the trial court deemed to be a retention under section 3260. Yassin appealed the damages and attorney fee awards. The Court of Appeal in Los Angeles affirmed the damages award to the Solises, but reversed the attorney fees award on the basis that the amount that was claimed to be outstanding was not a “retention” within the meaning of the statute. Looking closely at the word “retention” within Section 3260, and the agreement of the parties that after the “final inspection,” Yassin was expected to do more work to complete the project, and also noting that no percentage was withheld from the installment payments, the Court of Appeal found that the last expected payment did not constitute “retention.” The Court of Appeal referred to the earlier case of McAndrew v. Hazegh (2005) and noted that “efore the 2 percent penalty or attorney fees may be recovered under section 3260, subdivision (g), the contractor must establish that the owner being sued has actually withheld retention proceeds/payments from the contractor. Retention proceeds or retention payments are ‘payments relating to work already done but which are not presently paid, which instead are withheld until completion of 100 percent of the [contractor’s] work.’ (citing to Western Landscape Construction v. Bank of America (1997). Since no “retention” was involved, the attorney fees noted in Section 3260 were not recoverable.
Construction: Bid Challenge to Accepted Higher Bidder is Denied:
Cypress Security, LLC v. City and County of San Francisco (April 2010): Cypress Security, LLC former provider of security services for the San Francisco Department of Human Services (DHS), lost to competitor Guardsmark, LLC in a contract proceeding initiated by DHS through a request for proposals. The RFP was for a period of four or more years, described services needed, qualifications and added: “Proposals meeting the minimum qualifications.” Of the 100 point scale to be used in evaluating the bids, 40 points were to be allocated for “Fiscal areas” including the contractor’s “fiscal strength” to meet its obligations. A stated qualification was: “The Contractor is preferred to have an existing collective bargaining agreement, as the existing guards (i.e. Cypress’ employees) are SEIU local 24-7.” Cypress and Guardsmark, and four other qualified companies, submitted proposals. Cypress’ proposed hourly wages and rates undercut Guardsmark’s for all time periods in the RFP. Guardsmark and Cypress were the top scorers, and the DHS asked them additional questions including some related to the pay levels for new and absorbed employees. Cypress wrote that entry-level hourly pay would be the higher of $11.62 or the negotiated new collective bargaining agreement rate. Guardsmark wrote that entry-level pay would be $12.00 an hour and rates for absorbed employees would not be reduced. The proposals were then scored and the DHS announced a tentative decision that Guardsmark had the winning proposal. Proposals by two companies offering billing rates lower than Cypress’s or Guardsmark’s were also rejected. Cypress filed a formal challenge, raising its appeal arguments and others. That challenge was rejected by the DHS Executive Director. Through further analysis by the DHS in response to the protest by Cypress, it was determined that Cypress’s proposal might indeed result in a $6 million savings to the DHS. Despite that, the Board of Supervisors approved the award to Guardsmark. Cypress filed a certified petition for writ of mandate, raising essentially the same issues raised on this appeal - - that DHS failed to apply the evaluation criteria set forth in the RFP and arbitrarily increased Cypress’s proposal through the “equitable comparative analysis,” and that Guardsmark’s proposal was non-responsive and should have been rejected because it proposed three alternative bids, exceeded a page limitations, and was not submitted with a proper financial statement. The trial court adopted the tentative ruling that the criteria in the RFP and price was only one factor and the DHS had the discretion to make the award where other delineated factors were favorable to Guardsmark. Cypress claimed abuse of discretion in that “DHS used unstated criteria to “punish[]” [Cypress] for propose wages that were lower than Guardsmarks, contrary to RFP statements that pricing was a major” factor. The Court of Appeal sitting in San Francisco first reviewed the fundamental proposition that a public entity’s failure to use correct and exclusive criteria to award a public contract may constitute an abuse of discretion. (citing Monterey Mechanical Co. v. Sacramento Regional County Sanitation Dist. (1996).) The parties seemed to agree that, because San Francisco is a charter city, the charter removed this contract from various Public Contract code requirements. (In cases where the alternative process of invitation for bids is used, the Public Contract Code provision requires that awards be made to a lowest responsible bidder. (Citing to Ghilotti Construction Co. v. City of Richmond (1996); Valley Crest Landscape, Inc. v. City Council (1996); R&A Vending Services, Inc. v. City of Los Angeles (1994).) The Court of Appeal found that “low pricing” was not the over arching criteria that Cypress claimed it was because neither the RFP nor its pricing structure subpart expressly used the term “low price” or indicated that a “lowest responsible bidder” would prevail. A charter city has discretion to award to the lowest responsible bidder. Here the RFP read” The “top-ranked bidder whose proposal is determined to meet the needs of the Ciry will be recommended to negotiate a proposed contract.” Noteworthy is that the Court of Appeal, pointing to the RFP pricing –structure subpart, advised: “Keep in mind that the proposed expenses in the rate should related to proposed services. Are the salaries and wages for the proposed services realistic and competitive? Is the guard wage structure adequate for San Francisco based wages and benefits? ” and then pointed out that the specific mention of San Francisco, “a notoriously expensive place to live”. The Court of Appeal said that such RFP language does not support Cypress’s attempt to read that language as limiting DHS’s interest to minimally adequate wages and benefits. Thus, the Court of Appeal rejected the notion that a balancing of cost-saving against adequate benefits and wages was inconsistent with the RFP.
Transportation: Debate Renews on: Employer’s Direct Liability For Negligent Hiring:
Dawn Renae Diaz v. Jose Carmaco, Sugar Transport, et al. (February 2010; Review by Supreme Court granted May 12, 2010 and case depublished in meantime) This case will be watched because the Diaz Court of Appeal ruled that a trucking employer’s “negligent hiring” of a truck driving employee is a separate and distinct tort from vicarious liability for the employee’s tort. In a collision occurring on highway 101, plaintiff was seriously injured when a northbound car collided with a truck operated by Mr. Carmaco, an employed truck driver of Sugar Transport. The collision caused the northbound car driver to jump the median and land on plaintiff’s southbound car, resulting in serious injury to plaintiff. Plaintiff sued alleging negligence of the truck driver. Plaintiff also alleged that Sugar Transport was vicariously liable and was directly liable under a theory of negligent hiring and retention. Sugar Transport initially denied that it was Mr. Carmaco’s employer and that Mr. Carmaco was not operating within the scope of his work at the time of the collision. Before commencement of trial, Sugar Transport admitted that it was vicariously liable if Mr. Carmaco was liable. It objected to admission of evidence of the truck driver’s past driving history including citations, arguing that the evidence was irrelevant, inadmissible character evidence in light of its admission that it was vicariously liable for the negligence, if any, of its truck driving employee. The trial court admitted the evidence. The jury returned a verdict for more than $22,000,000.00. Sugar Transport appealed contending that it was error for the trial court to admit evidence of the truck driver’s prior employment, driving, and accident history as well as by instructing the jury on the theory of negligent hiring and retention. On appeal, Sugar Transport relied on Armenta v. Churchill (1954) decided by the California Supreme Court and Jeld-Wen, Inc v. Superior Court (2005) decided by a California Court of Appeal. In Armenta, the Supreme Court dealt with a case in which a road-paving worker was killed when a dump truck backed over him. Defendants were the truck driver and his wife, who owned the company employing the driver and who was the registered owner of the truck. The wife was sued for vicarious liability and on a direct action for negligent entrustment. The wife admitted that she was the employer and that husband was acting within the scope of his work at the time of the accident. At trial, plaintiff offered evidence that husband had been found guilty of 37 traffic violations, including a conviction for manslaughter, all of which were known to wife. On appeal, the Supreme Court in Armenta held that the trial court properly excluded the evidence. The Supreme Court reasoned: “It is true that defendant[wife’s] admission of vicarious liability as the principal for the tort liability, if any, of her husband was not responsive to plaintiffs’ added allegations of fact … relating to her personal negligence…. Plaintiffs’ allegations in the two counts with respect to [wife] merely represented alternative theories under which plaintiffs sought to impose upon her the same liability as might be imposed upon her husband…. Since the legal issue of her liability for the alleged tort was thereby removed from the case, there was no material issue remaining to which the offered evidence could be legitimately directed.” The same result occurred in Jeld-Wen, in which the trial court has held to have properly excluded evidence of the employee’s driving history offered by plaintiff as relevant on the direct action against the employer for negligent entrustment of the offending vehicle because the employer had admitted to the alternative charge of vicarious liability, should the employee be found negligent. In this Diaz case, the Court of Appeal held that the trial court did not commit error in admitting evidence of Carcamo’s driving and employment history because the alternative direct action against Sugar Transport was for negligent hiring, not negligent entrustment. The distinction appears to be “thin.” We will await the Supreme Court’s handling of the Diaz matter.
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