A/C Privilege - Common Interest Doctrine

In Seahaus La Jolla Owners Association v. Superior Court (224 Cal.App.4th 754), the California Court of Appeals explained the Common Interest Doctrine of the attorney-client privilege.  The defendant sought to obtain information disclosed by counsel of the HOA at pre-litigation meetings; the defendant claimed that the presence of homeowners (who were affiliated with the defendant) at the pre-litigation meetings waived the attorney-client privilege. The plaintiff claimed the disclosure was was protected under the Common Interest Doctrine and contested the defendant's request.

The Court ruled in favor of the plaintiff and held the information privileged. As the Court explained, the Common Interest doctrine was a qualified privilege dependent on the content and circumstances of the communication sought to be privileged.  The qualification required that all parties (to the allegedly privileged communication) have (1) a common interest in securing legal advice related to the same matter, and (2) the communications are made to advance that common interest.  Since the homeowners were concerned with their respective property values in relation to the claim made by the HOA, they shared a common interest in the legal status of the HOA’s claim.  Since the disclosures were also made pursuant to the HOA’s claims, they were made to advance said common interest.  Because the HOA was required by law to notify all homeowners of upcoming litigation, its was required to disclose the information to homeowners affiliated with the defendant, and that did not destroy the privilege.

The court concluded that the decision did not expand the scope of the attorney-client privilege, but only applied recognized rules to an unusual set of facts.

Court Grants Ex Parte TRO Enjoining Defendants' Further Disruptive Communications

On Friday, April 1, 2016, the Honorable Manuel L. Real of the United State District Court for the Central District of California, granted our client’s ex parte application for a temporary restraining order against the defendants.

Our client, ReachLocal, Inc., caught wind of spurious internet postings and communications made on Defendant PPC Claim Limited’s website and by Defendant Kieran Cassidy.  Cassidy claimed that ReachLocal was misleading its clients and that he obtained ReachLocal’s entire current and former client list and would be contacting them in the future.  After the communications and postings continued, ReachLocal filed suit (C.D. Cal. 2:16-cv-01007) and applied for a temporary restraining order to prevent further communications by the Defendants.  In one of his last communications to ReachLocal’s CEO, Defendant Cassidy stated that he would be willing to come to an “agreement/arrangement” with ReachLocal, in order to (effectively) go away.  However, in his communications to ReachLocal clients, Cassidy failed to disclose his interest in a competing business - a fact significant to Judge Real in granting ReachLocal’s temporary restraining order.

Judge Real found ReachLocal to have demonstrated all elements for a preliminary injunction: (1) ReachLocal demonstrated a likelihood of success on its claim for trade secret misappropriation (among others); (2) threatened use of the customer list constituted irreparable harm; (3) in balancing the potential harms of the parties, ReachLocal's harm outweighed any the Defendants would incur by temporarily ceasing their communications; and (4) although Defendants claimed to be consumer advocates, by “engaging in this information campaign as part of a veiled competitive commercial practice[,] the desire to acquire an improper commercial advantage,” did not constitute injury to any public interest.

Judge Real granted the temporary restraining order, enjoining the Defendants from further communicating to ReachLocal clients and investors, directly, through massing mailings, email, LinkedIn, or any other website, until hearing a motion for a preliminary injunction.  Judge Real set the hearing for April 11, 2016.


Court Grants Ex Parte TRO preventing issuance of .Africa top-level domain

On Friday, March 4, the Honorable R. Gary Klausner ruled in favor of BNS' client, granting a temporary restraining order, enjoining Internet Corporation for the Assigned Names and Numbers (ICANN) from issuing the .Africa top-level domain.

Plaintiff Dot Connect Africa Trust (DCA) applied ex parte for a temporary restraining order on Wednesday March 2, believing that ICANN would be issuing the .Africa domain at its triannual meeting in Marrakesh, Morocco on March 5.  DCA brought suit in state court just weeks before, seeking to enforce ICANN's internal review process ruling that held ICANN improperly processed DCA's application, among other claims.  After ICANN removed to federal court, DCA amended its complaint and moved for a preliminary injunction.  Because the meeting would occur only days after, DCA followed the preliminary injunction with an ex parte application for a temporary restraining order.

Ruling in DCA's favor, Judge Klauser found serious questions going to the merits of DCA's case.  Coupled with the facts that .Africa can be issued only once and cannot be compensated for monetarily, the Court granted the temporary restraining order, enjoining ICANN from issuing .Africa until DCA's preliminary injunction is heard.

DCA's motion is set to be heard April 4, 2016

BNS Obtains Dismissal of Anticipatory Lawsuit on Forum Non-Conveniens Grounds

On February 5, 2016, the Central District granted a motion to dismiss on forum non conveniens grounds, entering judgment in favor of our client. 

After being warned of pending litigation overseas, the California manufacturer our client distributed for initiated a declaratory relief action in Los Angeles Superior Court.  After removing to federal court, BNS argued that convenience favored a dismissal or a stay of the action until the now-pending British suit was adjudicated.  The Court agreed and completely dismissed the case.   

Our client - a UK-based distributor - entered into a distribution agreement with a California manufacturer for distribution of products throughout Europe.  After a dispute arose between our client and the manufacturer, our client attempted to resolve the issue but warned of litigation if the efforts failed.  In an apparent attempt to avoid litigating in England, the manufacturer filed a lawsuit in Los Angeles Superior Court for declaratory relief.  The manufacturer sought a declaration that it properly terminated the distribution agreement.   

After removing the case to the Central District, BNS moved to dismiss the lawsuit on the grounds of forum non conveniens and lack of personal jurisdiction.  Although the agreement’s forum-selection clause was only permissive, the parties agreed that English law applied.  During the period of removal and moving to dismiss, our client initiated proceedings in England for breach of contract. 

The Court agreed with BNS that England provided an adequate alternative forum and both the public and private interest factors favored dismissal.   Particularly important to the Court was the fact that separate proceedings were now pending in England.  The Court noted that these proceedings not only determined whether the termination was proper, but also whether any breach and resulting damages occurred.  The Court also found persuasive the fact that our client’s witnesses were located in Europe, the costs of bringing those witnesses to California is high, and the manufacturer consented to jurisdiction in Europe by virtue of the permissive forum-selection clause.  The Court noted: “Even considering the “greater deference [afforded] to a plaintiff’s choice of [its] home forum” the private interest factors thus strongly favor dismissal.”  The Court further agreed that the “first-to-file” rule did not apply, as Plaintiffs were warned of litigation and filed in anticipation thereto.

With respect to the public interest factors, the Court emphasized the mandatory application of English law.  Although the manufacturer argued that English law would not be “odd or uninterpretable” as compared to California law, the Court held that the evaluation did not require such a consideration.  The fact that foreign law applied strongly favored dismissal.  Coupled with the fact that English courts are less congested than California courts, the Court held the public interest factors favored dismissal.

The Court granted the motion on the grounds of forum non conveniens without reach an analysis of personal jurisdiction. The Court entered judgment pursuant to FRCP 58, dismissing and closing the case.

Retroactive application of Conception to California arbitration provision waives class-arbitration

Recently, the Supreme Court reversed a California court’s refusal to enforce an arbitration agreement made unenforceable by valid California state law.  The Court emphasized the fact that under the Federal Arbitration Act, state law prohibiting class-arbitration waivers is invalid.  In her dissent, Justice Ginsburg focused on the parties’ intent at the time of execution and warned of the expansive path the Court is embarking on issuing decisions in a pro-business manner and wholly precluding relief to consumers.

In 2007, the plaintiffs in DirecTV, Inc. v. Imburgia (136 S. Ct. 463) entered into a service agreement with DirecTV.  The service agreement required all claims to be resolved by binding arbitration and included a class-arbitration waiver, with the caveat that “if the “law of your state” makes the waiver of class arbitration unenforceable, then the entire arbitration provision “is unenforceable.””  Although the agreement provided that the FAA would interpret the language, it was unclear whether the clause applied to this specific “law of your state” provision.  In 2008, the plaintiffs brought suit against DirecTV for early termination fees they believed violated California law.  At that time, California law held class-arbitration waivers unenforceable and DirecTV did not attempt to compel arbitration.  Five years later, when the Supreme Court invalidated California law holding class-action waivers unenforceable in AT&T Mobility LLC v. Conception, DirecTV moved to compel arbitration.  The California Court of Appeal found the phrase “law of your state” ambiguous and interpreted it against DirecTV (the drafting party), and ultimately denied the motion.  The California court conceded that Conception invalidated the class-action waiver ban under the FAA, but concluded that, exclusively under California law, the waiver in the service contract remained unenforceable.  The California court reasoned that the parties were free to select whatever law they chose to interpret the contract.  Since this specific provision required the application of the plaintiff’s state law, and ambiguous terms are interpreted against the drafter, the decision complied with Conception.  The California Supreme Court denied review and DirecTV petitioned for certiorari.

The Supreme Court started off with the premise that lower courts must follow the rule created in Conception.  Neither party contested this.  The Court then admitted that the parties are allowed to choose what law governs some or all of its provisions.  Although the main issue was whether California law, as applied, was consistent with the FAA, the underlying question was whether the application of California law included now invalid law. 

The first matter addressed was the language of the provision.  The Court rejected the idea that the phrase was ambiguous.  Next the Court stated that California case law held under general contract principles that references to California law incorporate the legislature’s power to change the law retroactively.  Third, the Court held that nothing indicated that a California court would apply invalid state law in any context other than arbitration.  Fourth, expanding on the third premise, the Court held that the interpretation of “laws of your state” to the extent they are not preempted by the FAA, would limit the application to arbitration.  Fifth, because the state law was invalidated by Conception, it could not maintain independent force under state law.  Sixth, and finally, reiterating the equal footing adhered to in the third and fourth points, because no authority suggested that “laws of your state” would apply invalid law in other contexts, the interpretation was invalid.  The Court rejected the interpretation that this specific clause was exempted from the general adoption of the FAA in the parties’ agreement.  Because the interpretation did not place arbitration agreements “on equal footing with all other contracts” the Court reversed and remanded for further proceedings.

In her dissent, Justice Ginsburg stressed the preclusive effect on consumers, making the cost of recovery more than it is worth.  She started her discussion with the fact that DirecTV did not oppose litigation until after Conception.  There was no reason to at that time, because DirecTV would have been precluded by California law.  When DirecTV moved to compel arbitration, the Court of Appeal based its decision on the fact that DirecTV knew of California law in 2007 and could not have predicted that, four years later, the Supreme Court would hold the FAA preempts state-law protection against compelled class-arbitration waivers. Even in its state court filing, DirecTV admitted that California prevented enforcement of the class-arbitration waiver. 

Going further, Ginsburg explains that Conception only holds that a state cannot compel class arbitration when prohibited by the agreement.  Just as the parties may agree to individual or class arbitration, the parties are also free to select the choice of law.  Since the CLRA was and is still valid in California, the parties were free to select that law.  The question at issue, according to Justice Ginsburg, was not whether the parties intended the “law of your state” phrase to include laws preempted by the FAA, but rather the law of the state as frame by the state legislature.  Ginsburg agreed with the California court, arguing that specifically referring to the “law of your state” in one provision, rendered the language meaningless if preempted by the FAA, considering the general FAA choice of law provision.  Ginsburg found it unbelievable, that any consumer would have anticipated the Court’s decision in Conception four years later.  Although the court has found a “federal policy favoring arbitration” in the FAA, it has also cautioned that finding to “where it reflects, and derives its legitimacy from a judicial conclusion that arbitration is what the parties intended because their express agreement to arbitrate was validly formed, legally enforceable, and best construed to encompass the dispute.”  

For the rest of her opinion, Ginsburg expressed her concern for the majority decision and the expansive deprivation of consumer rights.  Included in many consumer agreements, class action waivers effectively preclude consumers from obtaining remedies for minor injuries that make individual recovery cost prohibitive. She closed noting that in the EU only post-dispute arbitration agreements are binding, and mandatory arbitration clauses in consumer contracts are nearly nonexistent outside of the United States.