HSCP GLOBAL LAW FIRM https://www.chelinlaw.com Wed, 09 Sep 2020 14:41:20 +0000 en-US hourly 1 https://wordpress.org/?v=5.4.11 https://wp-content/uploads/sites/309/2018/10/cropped-chelin-law-firm-favicon-32x32.png HSCP GLOBAL LAW FIRM https://www.chelinlaw.com 32 32 The People v. McGee https://the-people-v-mcgee/ Wed, 09 Sep 2020 14:41:20 +0000 https://www.chelinlaw.com/?p=1392 Weeding Through Probable Cause: Marijuana and the Automobile Exception

The post The People v. McGee appeared first on HSCP GLOBAL LAW FIRM.

]]>

Weeding Through Probable Cause: Marijuana and the Automobile Exception

September 9, 2020

As recounted in The People v. Tyrone Brendon McGee C088342 (Super. Ct. No. STK-CR-FER-2018-0009346), on July 28, 2018, the police in Stockton, California initiated a traffic stop after noticing an expired registration on the car being driven by Tyrone McGee. Two officers approached the vehicle, one on each side. Both officers smelled unburned marijuana. The officer on the passenger side noticed an unsealed bag of marijuana in the cleavage of the passenger. The car was searched. A loaded handgun was found in the passenger’s zipped up purse on the floor of the car. After being Mirandized, Mr. McGee admitted that the handgun had come into his possession and that he had placed it in the passenger’s purse. Subsequent to the preliminary examination, Mr. McGee moved to suppress evidence of his statements and any evidence seized in the search. The magistrate denied Mr. McGee’s motion. The trial court denied Mr. McGee’s renewed suppression motion. Mr. McGee pled no contest to being a felon in possession of a firearm but appealed to the Court of Appeal. The Court of Appeal’s decision presents an interesting set of guidelines for persons driving around with cannabis in this modern era of legalized marijuana. What did the Third Appellate District of the Court of Appeal of the State of California rule? Read on.

A quick detour before delving into the McGee analysis for standard of review wonks. The Court of Appeal recognized that “[w]here a motion to suppress is submitted after the filing of an information, the appellate court disregards the findings of the superior court and reviews the determination of the magistrate who ruled on the motion to suppress, drawing all presumptions in favor of the factual determinations of the magistrate……against the constitutional standard of reasonableness.” Now back to the main road.

The “automobile exception” is a powerful tool available to law enforcement. As the Court of Appeal noted, while the Fourth Amendment of the US Constitution guarantees the right to be free from unreasonable search and seizure, once a vehicle is lawfully stopped, police may conduct a warrantless search of any area of the vehicle if

Schedule a Consultation

[contact-form-7]

Meet the Humberside Attorney you need on your side.


Share

they have “probable cause to believe….the vehicle contains evidence of criminal activity or contraband.” This includes searching compartments and containers (such as the passenger’s purse in this case) whose contents are not in plain view. One should never underestimate the near pervasiveness of circumstances which exist allowing the police to take the first step towards invoking the “automobile exception” nor fail to appreciate that taking advantage of this pervasiveness is an intentional design of modern policing. That first step is simply lawfully pulling over the vehicle. In his recent book “Talking to Strangers”, author Malcolm Gladwell outlines in Chapter 11 (entitled “Case Study: The Kansas City Experiments”) how the warrantless search of vehicles became, and has remained, an important technique in the arsenal of the police designed to get weapons off the streets. Indeed, in a footnote to the McGee case, which dealt with the intent of the officers in stopping Mr. McGee’s car, it is revealed that one of them admitted that his role as an officer on Stockton’s Community Response Team was to “perform [ ] proactive traffic stops…..try [ ] to deter crime, find things, anything that’s illegal.” There are almost countless reasons for being lawfully stopped by police while driving. The California Vehicle Code is lengthy. No driver is perfect. Rolling through right turns on red lights, not stopping before the line at intersections and failing to signal a lane change are obvious examples of common violations. But there are myriad other pitfalls when considering that failing to advance quickly enough upon a light turning green or failing to make a right turn “as close as practicable to the right-hand curb” are enough to permit the police to pull over an automobile. The list of erratic or sloppy driving errors that can result in a stop on a suspicion of driving under the influence is long and almost veers into the realm of the subjective. Then, of course, there are the violations relating to the vehicle itself (brake lights, etc.) and license place registration, such as in the present case.

The Court of Appeal, citing Ornelas v. United States (1996) 517 U.S. 690, noted that once a car is pulled over, the trigger for establishing probable cause sufficient for the encounter to move into a warrantless search of the entire vehicle and its contents is whether the facts and circumstances “are sufficient to warrant a man of reasonable prudence in the belief that contraband or evidence of a crime will be found.” The analysis then turned to the issue of cannabis and the particular facts and circumstances informing the stop and search of Mr. McGee and his vehicle.

The People argued that the discovery of any amount of marijuana, even a lawful amount, supplies sufficient probable ground to search the vehicle. It is noted that under California law it is legal for an individual aged 21 or older to possess up to 28.5 grams of marijuana (California Health & Safety Code section 11362.1(a)(1)). This argument should give one serious pause when considering that the very State that passed legislation legalizing cannabis was now advancing an argument that mere possession of a substance it had legalized was sufficient grounds to search an entire car and all of its compartments and the bags and containers stored within it without a warrant. But the State was not pursuing a legal frolic. For years after Proposition 64 was enacted in 2016, as noted by the Court of Appeal while referencing People v. Fews (2018) 27 Cal. App. 5th 553, 562, “courts still held officers may still conduct a probable cause search pursuant to the automobile exception to determine whether a subject is properly adhering to statutory limitations on possession and use that remained in effect.” [Emphasis added] Nonetheless, the Court of Appeal rejected the State’s argument. The Court of Appeal, relying on People v. Lee (2019) 40 Cal. App. 5th 853, found that the discovery of a legal amount of marijuana without any additional evidence to support a reasonable belief that there is an illegal amount present is insufficient to justify a probable cause search under the automobile exception. This is good news for anyone pulled over for rolling through a stop sign with a fresh salmon on their back seat as, applying the principles followed by the Court of Appeal, the police would not be permitted to search the entire car because you may have quantities of fish in the trunk in excess of those allowed according to the California Department of Fish and Wildlife 2020 Ocean Salmon Sport Regulations. You can come up with your own examples.

However, unfortunately for Mr. McGee, the Court of Appeal’s analysis, and the State’s arguments, did not stop at examining the amount of marijuana discovered in his passenger’s cleavage. The State relied by analogy on People v. Souza (1993) 15 Cal. App. 4th 1646, 1653 which held that an open container of alcohol is sufficient to establish probable cause to search a car. The Court of Appeal agreed. Relying on California Health and Safety Code section 11362.3 (a) (4) which makes it unlawful to possess an open container or package of cannabis or cannabis products while “driving operating or riding in the passenger seat…of a motor vehicle”, the Court of Appeal held that, just as in Souza, supra, the presence of contraband (an unsealed container) “provided probable cause to believe the passenger possessed other open containers” and thus justified the search of the car and the passenger’s purse. The Court of Appeal expressly stated that the situation in the case before it was somewhat analogous to Fews, supra where the defendant was pulled over holding a half-burnt marijuana cigar in his hand and there was a smell of burnt cannabis coming from the car, thus supporting the inference that the defendant was driving under the influence and/or driving while in possession of an open container of marijuana, thus giving reasonable probable cause to search the car.

Mr. McGee had also advanced an argument that his case was analogous to In re D.W. (2017) 13 Cal. App. 5th 1249. Contrasting McGee to In re D. W. illustrates the permissiveness of the automobile exception justification for warrantless searches. In In re D.W., the police approached a group of individuals, some with known gang association. One of them, 17-year-old D.W., smelled of marijuana and ultimately admitted to the having just smoked some. The police decided to search D.W. for more marijuana and discovered a revolver in his backpack. D.W. moved to suppress the evidence of firearm offenses on the basis that the search was an invalid because it did not properly fall within search incident to arrest exception to the requirement for a warrant. The Court of Appeal originally rejected D.W.’s argument but after subsequent jurisprudential developments, the California Supreme Court transferred the case back to the Court of Appeal for reconsideration. The Court of Appeal revered its earlier decision and suppressed the evidence. D. W. maintained that since neither smelling, nor being under the influence, of marijuana is a crime there was no probable cause to arrest D.W., and thereby search him incident to a valid arrest. The Court of Appeal agreed. The Court of Appeal noted that “when a custodial arrest is made, and that arrest is supported by independent probable cause, a search incident to the custodial arrest may be permitted.” The Court of Appeal referenced People v. Macabeo (2016) 1 Cal. 5th 1206 where the defendant had rolled through a stop sign on his bicycle and pictures of underage girls were found on his cell phone which the police had searched incident to his Vehicle Code infraction stop. The Court in Macabeo stated that “[t]here is no exception for a search incident to citation.” The In re D. W. Court of Appeal indicated that while the police had searched D.W. because of his marijuana smell and admitted ingestion, the possession of less than 28.5 grams was a mere infraction punishable by a fine under the Health and Safety Code and that smoking marijuana was a “minor, nonjailable offense” under California law. Further, and importantly, the Court of Appeal stated that “even if the officers could reasonably conclude” that D. W. possessed marijuana “it would have been mere conjecture to conclude that he possessed enough to constitute a jailable offense.” Thus the Court of Appeal held that the police “had neither cause to make a custodial arrest nor evidence that he was guilty of anything more than an infraction” and found the warrantless search failed to satisfy the search incident to arrest exception and was unreasonable under the Fourth Amendment. The Court of Appeal in McGee, dealing in that case with the automobile exception, reminded that that exception “requires only a showing of probable cause the vehicle contains contraband or evidence of a crime” and where such probable cause exists the police may search the vehicle even if the offense ‘is an infraction and not an arrestable offense.” Indeed, the McGee Court of Appeal explicitly held that the “distinction between misdemeanors and infractions is irrelevant to the probable cause analysis under the automobile exception.”

In summary, possession of a legal amount of cannabis, properly stored, is not sufficient grounds to search a vehicle pursuant to the automobile exception. However, if the substance is not properly stored in a sealed container, there is probable cause to search the vehicle for other open containers (i.e. contraband), even though the offense of an open container is only an infraction and not a crime. A much easier threshold to cross than a search incident to arrest which requires probable cause of a crime (not just an infraction) leading to the arrest before a search is justified.

The post The People v. McGee appeared first on HSCP GLOBAL LAW FIRM.

]]>
Orozco v. WPV San Jose https://orozco-wpv-san-jose/ Fri, 26 Jul 2019 19:54:21 +0000 https://www.chelinlaw.com/?p=1374 Hot Dog! Fraudulent misrepresentation or concealment about the actual existence of a risk leads to liability even when the potential of that very risk is assumed under the final agreement….and a little something about attorney's fees.

The post Orozco v. WPV San Jose appeared first on HSCP GLOBAL LAW FIRM.

]]>

Hot Dog! Fraudulent misrepresentation or concealment about the actual existence of a risk leads to liability even when the potential of that very risk is assumed under the final agreement….and a little something about attorney’s fees:

July 26, 2019

Misrepresentation and/or concealment of existing competitive circumstances during commercial lease negotiations can lead to liability even though the actual bargain struck in the concluded lease provides no exclusivity protection for the tenant whatsoever and no breach of the lease would arise for renting other space to competitors in the future. The Sixth District, California Court of Appeal decision in Orozco v. WPV San Jose (2019) 36 Cal.App.5th 375, 248 Cal. Rptr. 3d. 623 provides an interesting set of circumstances where the substance of the misrepresentation did not concern any promissory fraud by the landlord as to future conduct and was, in a certain sense, expressly excluded from the lease but nonetheless obviated the tenant’s ability to make a fully informed decision with knowledge of the exact set of circumstances existing as at the time of entering into the lease. Indeed, in this case, beyond not asking for the protection of an exclusive use clause in the lease, the tenant did not even read the full agreement.

Schedule a Consultation

[contact-form-7]

Meet the Humberside Attorney you need on your side.


Share

The plaintiff, Paul Orozco (“Orozco”), a successful Mexican-style fast food restauranteur was looking to open a new concept fast food gourmet hot dog and sausage restaurant in a San Jose shopping center known as The Plant. The Plant was not yet fully leased. Orozco knew that Five Guys had opened at The Plant and was serving hot dogs but did not see their “ancillary” hot dog business as competitive to his planned new concept. Over the course of multiple meetings and conversations, Orozco, who had explained the concept for his proposed restaurant, repeatedly asked the leasing representative, who worked for WPV San Jose LLC, a subsidiary of the defendant, Vornado Realty Trust (“Vornado”), whether any other restaurants with competing products or concepts were being considered for the other available spaces at The Plant. He was consistently told that no such restaurants were being considered. This was not true. Vornado did not reveal to Orozco that there were already ongoing negotiations, which ultimately resulted in a concluded lease, with a restaurant which would be offering hot beef sandwiches, hot dogs and sausages (this restaurant was called Al’s Beef”). Notably, there was no indication that Orozco ever asked whether it was the intention of The Plant not to consider competitive tenants in the future.

Orozco sought the assurance that no competitors in terms of products or concept were being considered for The Plant up to the day that the plaintiff, Solid Restaurant Ventures LLC (“Solid”) signed its 10-year lease for premises at The Plant. Solid was the company that Orozco had formed for his new hot dog and sausage venture, which he called Pauly’s Famous Franks N Fries (“Pauly’s”) (concurrently with Solid signing its lease, Orozco also signed a personal guarantee of the lease in his individual capacity). He was again given the assurance he requested. Nonetheless, and unknown to Orozco, Al’s Beef had already signed a lease for a location at The Plant. Pauly’s opened and was successful. Al’s Beef opened 6 months later and Pauly’s business declined by 30% overall. Approximately 6 months later, Sordid closed down Pauly’s. Solid and Orozco sued Vornado and the owners of The Plant for, among other causes of action, intentional fraud and fraudulent concealment (based on the theory of fraud in the negotiation (inducement) of the lease), for rescission, restitution and damages. No cause of action for breach of the lease was alleged.

The following facts were found concerning Orozco’s dealings with the negotiation and execution of the lease: (i) Orozco knew that at least one other restauranteur (Five Guys) was selling hot dogs at The Plant, (ii) Orozco was told, in response to his inquiry during negotiations, that he would not be given the name of other tenants being considered for The Plant, (iii) Orozco did not read the entire lease and only read the front part with the major deal terms, (iv) the lease contained an integration clause, (v) the lease contained several disclaimers that the landlord had not made any representations about existing or future tenants, (vi) Orozco, on behalf of Solid, signed a separate Tenant Estoppel disavowing any representations made by the landlord or Vornado, (vii) Orozco did not ask for, and was not given, an exclusive use term in the lease for the protection of Pauly’s business, and (viii) the lease contained an exhibit of exclusive uses for the benefit of some of the other tenants, which did not include any exclusivity for Pauly’s use.

At trial, the jury found Vornado liable to Solid for the torts of intentional misrepresentation and fraudulent concealment. Interestingly, the jury did not find Vornado’s conduct constituted malice, oppression or fraud sufficient to warrant punitive damages. Sordid was awarded damages of: (i) $676,967 for lost profits, (ii) $129, 462 for operational losses, and (iii) $65,712 for start-up costs for another Pauly’s opened afterwards in San Jose.

The bargain struck by Orozco for Solid’s lease included assuming the risk of direct competition to Pauly’s at The Plant. Orozco did not bargain for, or receive, any exclusivity protection for Solid. The misrepresentation/concealment did not relate to the terms or provisions of the lease or any promise by the landlord as to future competitors at The Plant or as to the conduct and/or administration of the lease. Solid would have had no available cause of action had The Plant started negotiations with, and rented space to, a different direct competitor to Pauly’s immediately after Solid had entered into its lease. Nonetheless, the substance of the misrepresentation/ concealment was such that Orozco and Solid were unaware, and walked into a situation, such that the risk of future competition was a certainty and not just an acceptable and agreed upon potentiality. Quite a different set of considerations and risks are presented to a commercial tenant who seeks to open a new and untested business in the face of immediate and certain competition as opposed to one who has the ability to gain a priority of use position and the opportunity to establish a steady and enduring market situation with attendant goodwill as a barrier to entry to potential future competitors. Vornado’s conduct denied the plaintiffs the ability to have knowledge of, and analyze, the true circumstances surrounding the long term leasing decision they were about to make even though they assumed the very risk of immediate competition by virtue of the terms and provisions of the lease and guaranty that they respectively signed.

Regardless of the acceptance of evidence concerning intentionally misrepresented or concealed facts, Orozco v. WPV San Jose reminds us that reasonableness of reliance must always be proved to reach the finish line of liability. The special instructions given to the jury by the trial court advised that in considering the issue of the reasonableness of reliance on the alleged misrepresentations or concealment the jury could (not must) take into consideration such matters as (i) whether the lease or the Tenant’s Estoppel expressly disavowed any purported representations, (ii) whether Solid was represented by counsel in dealing with the lease, (iii) whether Solid asked for any changes to the lease, (iv) any questions asked by Solid and the responses given, and (v) whether Solid communicated the importance of its concern about competitors. The special instructions also note that the preceding list of considerations was not exhaustive of the factors the jury could consider in making its determination. It is interesting to consider, hypothetically, what evidence may have been proffered to negate a finding that Orozco’s and Solid’s reliance was not reasonable. Presumably, evidence that Sordid and Orozco were prepared to enter into the lease and guaranty regardless of whether or not Vornado’s responses were accurate, or that they doubted the veracity of that information, would have sufficed in that regard. Evidence negating or calling into doubt the reasonableness of reliance is something to fully and carefully consider when representing a party against whom an intentional misrepresentation is alleged.

Orozco v. WPV San Jose presented two other interesting findings:

  • Attorney’s Fees for Orozco but not for Solid: The trial court denied both Solid’s and Orozco’s requests for attorney’s fees. The lease contained a unilateral attorney’s fees clause entitling the landlord to attorney’s fees against Solid in the limited circumstances of actions taken as a result of the breach or default of the lease. The Court of Appeal noted that, while such a unilateral attorney’s fees clause in favor of the landlord would be made reciprocal by virtue of Civil Code Section 1717 (a), the damages awarded to Solid must have been “on a contract” for Section 1717 to apply. The Court of Appeal noted that for a cause of action to be “on a contract”, it must arise out of, be based upon or relate to an agreement “by seeking to define or interpret its terms or to determine or enforce a party’s rights or duties under the agreement” and that a determination in that regard is made by looking at “the overall nature of” the complaint pursued. Solid’s damages solely arose form causes of action based in tort (indeed, Solid did not even allege breach of contract at trial) and the Court of Appeal affirmed the trial court’s decision to deny Solid its attorney’s fees. Conversely, with respect to Orozco, the Court of Appeal stated “[t]he guaranty includes a provision entitling a prevailing party to their attorney’s fees in “an action against the other arising out of or in connection with this Guaranty [emphasis added]” and found that this “expansive language” was “sufficient to encompass Orozco’s fraud action and rescission remedy.” The Court of Appeal relied upon Lerner v. Ward (1993) Cal. App. 155 which had held that broad attorney’s fees provisions providing, as in that case, that the prevailing party was entitled to attorney’s fees “in any action or proceeding arising out of this agreement” permitted awarding attorney’s fees for tort actions based in fraud “arising from the agreement” in accordance with Code of Civil Procedure Section 1021 which leaves the measure and mode of attorney’s fees “to the agreement, express or implied, of the parties.” In Lerner, the court specifically found that a tort action based on fraudulent inducement to enter into a contract is an action “arising from the agreement.” The Court of Appeal found that Orozco had “prevailed in an action arising from the guaranty”, reversed the trial court and remanded the matter for a determination of attorney’s fees to be awarded to Orozco. This seems inconsistent with the decision regarding Solid’s attorney’s fees in that Orozco’s remedy was similarly based in tort and he specifically sought rescission of the very contract on whose attorney’s fees provision he was relying. Ultimately this seeming inconsistency can only be understood, and given some semblance of juridical consistency, as follows: (i) a cause of action only based in tort is insufficient to overcome the “on the contract” restriction of Civil Code Section 1717, (ii) however, the courts consider broad attorney’s fees language concerning actions such as “arising from this agreement” to include both contract and tort actions, to which Code of Civil Procedure Section 1021 is applicable, and (iii) the attorney’s fees clause in Solid’s lease was expressly limited to breaches or defaults under the lease and did not expand to any actions simply “arising out of the agreement”, rendering Code of Civil Procedure Section 1021 unavailable for Solid’s tort based actions in any event. The interesting question for future cases is whether or not the Court of Appeal’s reasoning as to the unavailability of attorney’s fees for Solid (because Solid’s tort claim was not “on the contract”) would remain unchanged had the lease included a unilateral provision for the landlord to attain attorney’s fees for prevailing on any action “arising from this lease.” Depending on the answer to that question, there could be a rather intriguing scenario where Civil Code Section 1717 was unavailable to the tenant in circumstances involving a tort based cause of action relating to a lease (for not being “on the contract”) but a successful tort based cause of action brought by the landlord would entitle the landlord to attorney’s fees (pursuant to Section 1021 as having “arisen from the agreement”).
  • Solid’s election for damages over rescission (and implicit contract affirmation) was not inconsistent with Orozco seeking rescission of the guaranty of the lease: The trial court had ruled orally that Solid would not be entitled to lost profit damages if it elected rescission as a remedy. Consequently, Solid elected damages (which implicitly affirmed the lease although it was rendered unenforceable due to its inducement by fraud). The trial court then stated that Orozco could not elect rescission of his guaranty of the lease, in part, because the trial court did “not think that the lease and the guaranty can be separated, and we cannot have inconsistent verdicts.” The Court of Appeal reversed the trial court and held that the relevant consideration was whether Orozco and Solid were separate legal entities and not whether the lease and guaranty were separate. The Court of Appeal held that as “legally distinct entities, they may pursue and receive separate remedies for Vornado’s fraud.” That said, the Court of Appeal also recognized that the rights and obligations of Solid arose from the lease and in respect of Orozco, personally, arose from the guaranty. Further, the Court of Appeal noted that the trial court was in error in also holding that rescission of Orozco’s guaranty was unavailable because he did not suffer pecuniary loss as the law is well settled that pecuniary loss is not required to be shown for rescission to be obtained for fraud.

The post Orozco v. WPV San Jose appeared first on HSCP GLOBAL LAW FIRM.

]]>
Monster Energy v. Schechter et. al. https://monster-energy-schechter/ Fri, 12 Jul 2019 20:55:31 +0000 https://www.chelinlaw.com/?p=1361 July 12, 2019 - Surprise!!! You Just Became A Party To Your Client’s Agreement.

The post Monster Energy v. Schechter et. al. appeared first on HSCP GLOBAL LAW FIRM.

]]>

Surprise!!! You Just Became A Party To Your Client’s Agreement:

July 12, 2019

Monster Energy Company v. Schechter et. al. 2019 S.O.S. 3287 establishes a strong cautionary precedent for both litigators and transactional attorneys that they may be bound as parties to the confidentiality provisions of their clients’ settlement or other agreements (indeed the principles underlying the case are applicable to terms and provisions beyond those dealing with confidentiality). The judgment was a unanimous 7-0 en banc decision handed down on July 11, 2019 by the Supreme Court of California and was written by the Honorable Madame Justice Corrigan.

In 2012, Monster Energy Company (“Monster Energy”) was sued for products liability and wrongful death by the parents of a teenager who died of cardiac arrest after consuming two energy drinks. The parents were represented by Bruce Schechter (“Schechter”) of R. Rex Parris Law Firm (“Parris Firm”). The case ultimately settled and the parties entered into a confidential settlement agreement. The parties’ respective attorneys, including Shechter, signed the confidentiality agreement under the preprinted heading which read “APPROVED AS TO FORM AND CONTENT.” None of the attorneys for the parties were named, identified or defined as a “Party” to the settlement agreement. There was also no evidence that Schechter had, himself, personally negotiated the settlement agreement.

The settlement agreement contained the following terms and provisions within the body of the agreement (emphasis below has been added):

  • that it was made “on the behalf of the settling Parties, individually, as well as on the behalf of their, without limitation, respective beneficiaries, trustees, principals, attorneys, officers, directors, shareholders, employers, employees, parent company(ies), affiliated company(ies), subcontractors, members, partners, subsidiaries, insurers, predecessors, successors-in-interest, and assigns”;

Schedule a Consultation

[contact-form-7]

Meet the Humberside Attorney you need on your side.


Share
  • a confidentiality clause which provided that “The Parties understand and acknowledge that all of the terms, conditions and details of this Settlement Agreement including its existence are to remain confidential. Plaintiffs and their counsel agree that they will keep completely confidential all of the terms and contents of this Settlement Agreement, and the negotiations leading thereto, and will not publicize or disclose the amounts, conditions, terms, or contents of this Settlement Agreement in any manner . . . Specifically, and without limitation, Plaintiffs and their counsel of record, individually and on behalf of themselves and their principals, partners, agents, attorneys, servants, representatives…successors-in interest and assigns agree and covenant, absolutely and without limitation, to not publicly disclose to any person or entity, including, but not limited to, newspapers, magazines, television…” various facts in respect of the settlement; and
  • that “[i]n regard to any communication concerning the settlement of this Action, the Parties and their attorneys and each of them hereby agree that neither shall make any statement about the Action, each other party or Defendants’ products in relation to this Action, in the media, including but not limited to print, television, radio or Internet,” and any comment “shall be limited to the following, or words to their effect: ‘This matter has been resolved.’ ” .

However, an article about the action against Monster Energy later appeared on the website “LawyersandSettlements.com” under the title “ ‘Substantial Dollars’ for Family in Monster Energy Drink Wrongful Death Suit.” In the article, several quotes were attributed to Schechter and reference was made to “substantial dollars” being paid by Monster Energy in settlement. Further, the article quoted Schechter as saying that he could not reveal the exact amount of the settlement because “Monster wants the amount to be sealed.” Monster Energy sued Schechter and the Parris Firm, alleging four causes of action, including, breach of contract.

Schechter and the Parris Firm brought an anti-SLAPP motion to strike Monster Energy’s action pursuant to Code of Civil Procedure section 425.16. The trial court (Riverside County Superior Court) denied that motion; however; the Court of Appeal (Fourth Appellate District, Division Two) reversed that decision (See Monster Energy Co. v. Schechter (2018) 26 Cal.App.5th 54.) The Supreme Court of California reversed the Court of Appeal judgement and denied the anti-SLAPP motion.

All levels of the Court agreed that Schechter’s statements met the first prong of the anti-SLAPP analysis and constituted protected free speech. However, the Supreme Court found that the plaintiff, Monster Energy nonetheless defeated the second prong of the anti-SLAPP analysis by meeting the burden of demonstrating that its claim had a probability of prevailing on its breach of contract claim which hinged on whether Schechter and the Parris Firm were bound by the confidentiality provisions of the settlement agreement. The Supreme Court noted that Monster Energy’s burden to satisfy the second anti-SLAPP step was “a low one” only requiring a showing that its cause of action has at least “minimal merit” by establishing that the claim is both legally sufficient and supported by sufficient prima facie facts if the plaintiff’s evidence is credited.

The Supreme Court recognized the general consensus that the notation “APPROVED AS TO FORM AND CONTENT” above counsel’s signature at the end of an agreement “has a fixed meaning understood by the legal community” and, in and of itself, does nothing more than amount to an assertion by a party’s attorney that the document is in proper form, embodies the deal struck between the parties and that the attorney sees no impediment to their client signing the document However, the Supreme Court noted that the notation did not preclude “as a matter of law, a finding that [the attorney] also intended to be bound by the agreement” and that the issue of intent “requires an examination of the agreement as a whole, including substantive provisions referring to counsel.” In other words, while the notation itself does not bind the attorney to the agreement, it does not act as an insulation from being bound and does not, per se, mean that the attorney did not otherwise intend to be bound as may be demonstrated by other facts and circumstances. As the Supreme Court pointed out “[a]n attorney’s signature on an agreement containing substantive provisions imposing duties on counsel may reflect an intent to be bound even though counsel also approves the document for his client’s signature.”

The Supreme Court noted that a settlement agreement is ultimately a contract with the attendant legal principles applied to its analysis. In this case, that analysis turned to whether Schechter manifested an intent to be bound to the settlement agreement, as determined by objective criteria, such that there was the necessary mutual consent for contract formation. The conclusion was that a trier of fact could reasonably find that Schechter agreed to be bound. Of course, this was not a finding that Schechter was bound but rather only a finding that such a conclusion could reasonably be reached by a trial court. But the decision certainly lays out a road map for future trial courts to reach that conclusion under similar facts and circumstances.

In its examination, the Supreme Court rejected that Court of Appeal’s conclusions that Schechter did not objectively manifest an intent to be bound due to the fact that (i) he was not in the settlement agreement as a party thereto, and (ii) he signed under the “APPROVED AS TO FORM AND CONTENT” notation with its common understanding as merely indicating that the agreement was certified by counsel as one which the client could properly sign and enter. The Supreme Court expressly stated that its decision recognized that confidentiality provisions represent material and substantive terms of settlement agreements, play a significant role in facilitating settlements and would be vitiated if a party’s counsel were free to publicly disseminate the settlement terms despite a restriction on the client form doing so. It was noted that Schechter read and signed the settlement agreement and that “a signature on a written contract is an objective manifestation of assent to the terms set forth there.” According to the Supreme Court “[t]here is no question that the language of the settlement agreement generally, and the confidentiality provisions in particular, purported to encompass not only the [ …] parties but also their respective counsel. “

According to the Supreme Court, the most salient circumstances upon which a trier of fact could reasonably conclude Schechter as being bound were the terms of the confidentiality provisions which were extensive and repeatedly referred to positive obligations of confidentiality being imposed on both the parties “and their counsel.” As the Supreme Court stated “[i]t is the substance of the agreement that determines his status as a party to the contract, as opposed to a party to the lawsuit. The agreement clearly refers to others beside the […] parties” and “ it is reasonable to argue that counsel’s signature on the document evinced an understanding of the agreement’s terms and a willingness to be bound by the terms that explicitly referred to him, which, in turn, would appear consistent with the expectations of the parties and their counsel.” Thus, even though Schechter may have only believed he was signing for “form and content approval” and nothing more, his signature on the document and substantive terms giving rise to obligations on his behalf was enough for an objective view that his signature was his manifest consent to be bound by the agreement.

The first cautionary bell ringing from this decision is that its reasoning is not confined to settlement agreements. Signing agreements simply to “APPROVE AS TO FORM AND CONTENT” is by no means an uncommon practice in commercial transactions where confidentiality provisions are regularly included. Second, one can imagine that counsel (litigators or transactional attorneys), lulled by the commonly recognized understanding of the notation (as noted by the Supreme Court), may sometimes gloss over review of clauses that are commonly encountered as boilerplate. So, while diligent counsel may have been careful to ensure that the substance of a confidentiality clause is reasonable in the circumstances (may there be reference to the existence of the agreement? may the parties refer to the fact of the agreement but nothing more? may the parties refer to the agreement and the essence of the underlying transaction but not the amounts involved? etc. etc.), it is not unforeseeable that the string of parties and the list of their representatives, and the exact placement of the verb, may not have had the benefit of the same detailed attention. Third, the principles behind the Supreme Court’s reasoning would apply equally to any clause which contains an obligation on the part of a party and their attorney and is not confined to confidentiality clauses.
One particular horror show scenario present itself. Imagine that a settlement agreement similar to the one in this case contained a clause that the parties on one side are jointly and severally liable for any breach by any of them; in that case, counsel for a party could find themselves liable for a breach of confidentiality they did not even commit!! Further, one wonders, given the Monster Energy decision, what are the conflict of interest considerations which arise in a scenario where the opposing party insists on both similar confidentiality language and counsel signing a “form and content” certification as a condition of a settlement agreement which the client desperately desires but which counsel does not wish to sign.

There are some good practice steps attorneys can take in light of this decision. First, if at all possible, avoid signing client agreements as counsel altogether, including as “APPROVED TO FORM AND CONTENT.” A representation in the agreement that the parties were represented by independent counsel, understand its terms and had its legal ramifications and significance explained fulfills the same concern as the notation and should suffice. Second, make sure that any clauses which list a string of representatives after naming the party (ie “ the party and their respective shareholders, directors, representatives…”) do not contain obligations for persons who are not really parties as opposed to placing an obligation and liability on the actual party if their representatives engage in the restricted conduct. Third, if one must sign an “APPROVED AS TO FORM AND CONTENT” notation on an agreement which is otherwise devoid of any substantive terms obligating the attorney, consider possibly adding some language making it explicit that the attorney is not a party to the agreement or bound thereby under any circumstances (although this may be belts and suspenders and likely unnecessary given the Supreme Courts comment that “If… the agreement contains no provision purporting to bind counsel or otherwise impose any obligation on him, the question is easily answered. In that circumstance, counsel’s signature that he approved the agreement as to form and content could only mean he is approving it for his client’s signature.”) But be assured of this, in the event of any ambiguity concerning this issue, it is unlikely the Court’s charity in arriving at objective interpretations will be triggered for lawyers who do not understand the legal significance of what they sign.

The post Monster Energy v. Schechter et. al. appeared first on HSCP GLOBAL LAW FIRM.

]]>
Clifford v. Trump https://clifford-v-trump/ Tue, 18 Dec 2018 19:59:21 +0000 https://www.chelinlaw.com/?p=508 December 18, 2018 - Did defamation in American politics just get Stormier? It seems so if political rhetoric Trumps all.

The post Clifford v. Trump appeared first on HSCP GLOBAL LAW FIRM.

]]>

Did Defamation In American Politics Just Get Stormier? It Seems So If Political Rhetoric Trumps All:

December 18, 2018

Johannes Gutenberg’s printing press revolutionized human communications. Ideas and information could be spread more easily. Today, there are an estimated 6000 tweets per second, which corresponds to approximately 500 million tweets a day. A blistering stream-of-consciousness torrent gushes forth 24/7 onto our ubiquitous screens. Much of it is invective spread at light speed. Never has so much nasty stuff been said and never has it been so quickly and widely disseminated. Fertile soil for the weed of defamation to blossom on the electronic vine of human communication.

The relationship between Stephanie Clifford (a.k.a. Stormy Daniels) and President Donald Trump, whatever its original nature, is spawning a considerable volume of litigation. One of the latest decisions from the Court analyzes issues surrounding defamation when the underlying subject is a matter of public concern (or a public figure). An analysis of that decision might lead one to conclude that the floodgates on what is protected political rhetoric have been thrown open as wide as they can go unless it can be subsequently distinguished as a legal precedent unique to its very bizarre set of circumstances in terms of subject matter and participants.

On April 30, 2018, Clifford filed a federal Complaint for defamation against President Trump in the Southern District of New York. The case was later transferred on the joint agreement of the parties to the Central District of California. Clifford alleged that in 2011, after agreeing to speak to a magazine about her relationship with Trump, she and her daughter were approached in a parking lot by a man who threatened that she had better “Leave Trump alone. Forget the story.” After Trump’s election to the Presidency, Clifford released a sketch of the man who had purportedly threatened her. The following day, from his personal Twitter account, Trump tweeted “A sketch years later about a nonexistent man. A total con job, playing the Fake News for Fools (but they know it)!” Clifford’s lawsuit alleged that President Trump’s tweet was defamatory. In part, she claimed that the tweet claimed that she

Schedule a Consultation

[contact-form-7]

Meet the Humberside Attorney you need on your side.


Share

was a liar, that she could not be trusted and that she had invented the story about being threatened. She also claimed that it had been published with actual malice because, as she further alleged, either Trump knew about the man that threatened her (either because he or his attorney had directed him to make the threat) or, alternatively, Trump had acted with reckless disregard for the truth because he could not have known what had happened to Clifford in a parking lot in 2011.

In response to Clifford’s lawsuit, the President brought a Special Motion to Dismiss/Strike Plaintiff’s Complaint on the basis that the lawsuit was a Strategic Lawsuit Against Public Interest (“SLAPP”) and an alternative Motion to Dismiss. The California District Court stated that a Special Motion to dismiss under an anti-SLAPP statute is to be treated as analogous to a motion to dismiss under Federal Rules of Civil Procedure 12 (b)(6), applied the substantive requirements of the applicable anti-SLAPP statute, and granted the Special Motion. The alternative Motion to Dismiss was denied as being moot given the decision in the Special Motion. Significantly, Clifford was not given leave to amend her Complaint, effectively ending her lawsuit barring a successful appeal of the decision.

After a discussion under the New York choice-of-law principles (where the case had originally been filed), the Court determined that Texas law (where Clifford is domiciled) was applicable. Texas’ anti-SLAPP statute (which is similar to most other jurisdictions with similar legislation) provides that its objective is to “encourage and safeguard the constitutional rights of persons….to speak freely…and otherwise participate in government to the maximum extent permitted by law” while at the same time recognizing the rights of persons to bring meritorious lawsuits when they have been injured. Under Texas law, the Courts have defined the exercise of the right of “free speech” as communication relating to a matter of “public concern”. In turn, the Texas statute defines a “matter of public concern” as issues relating to such matters as (without being exhaustive): the government, community well-being and public officials or public figures. For a defendant to avail themselves of the Texas anti-SLAPP motion legislation, they must demonstrate that the defamation alleged concerned the defendant’s exercise of free speech. Once that is established, the burden switches to the plaintiff who must establish “by clear and specific evidence a prima facie case for each essential element of the claim.” Note that even if this can be established by a plaintiff, the Texas anti-SLAPP statue still affords the defendant the ability to prevail on the motion by establishing by a preponderance of evidence “each essential element of a valid defense” to the claim.

It was not very difficult for the California District Court to find that Clifford’s lawsuit related to the President’s exercise of his right to free speech on an issue of public concern. The Court noted that a contextual analysis of the allegations and their underlying circumstances involved (i) a plaintiff (Clifford), who had styled herself as an adversary of the President of the United States in Court filings, (ii) releasing a sketch of a man who she claimed had threatened her in order to suppress a story about her purported sexual affair with the President, (iii) other allegations by the plaintiff that Trump and his attorney had aggressively tried to silence the plaintiff specifically with an eye on not upsetting the President’s election chances, and (iv) significant portions of the overall context, including the release of the sketch and the President’s alleged defamatory tweet, occurring while the defendant was the sitting President of the United States Of America. One could argue that there is likely not a better example of speech related to an “issue of public concern” than in this particular case.

Having crossed this threshold, the California District Court then moved to the substantive analysis of whether Clifford had established a prima facie case for each element of her defamation claim. Under Texas law, and generally, the elements required to support a cause of action for defamation require (1) publication of a false statement, (2) defamatory of the plaintiff, (3) the requisite degree of fault regarding the truth of the statement (malice for public individuals or in relation to a matter of public concern), and (4) damages (unless the statement constituted defamation per se, being words that inherently injure a person’s reputation without the need for proof of injury).

It is the first element (the publication of a false statement by the defendant) upon which the Court spent most of its analysis and rested its decision. The law of defamation has long been the subject of exceptions designed to protect robust public debate and the marketplace of ideas from being unduly stifled. Defamation, in its broadest sense, involves a false publication that would subject the defamed to hatred, contempt or ridicule. The common law permitted the extension of defamation to statements of fact or opinion. Initially the balance was struck between vigorous public debate and harmful publication under the doctrine of “fair comment”, which allowed for a privilege when the publication concerned matters of public concern, was based on true facts, represented the actual opinion of the one making the statement and was not made solely to cause harm. The Supreme Court, in New York Times Co. v. Sullivan, 376 U.S. 254 (1964) extended First Amendment protections to speech involving public officials by requiring that defamation in such circumstances required “actual malice”, defined as actual knowledge that a statement was false or reckless disregard as to its falsity. Three years later, in Curtis Publishing Co. v. Butts, 388 U.S. 130 (1967), this First Amendment protection was extended to “public figures.” When the subject of the alleged defamatory statements is a private person caught up in matters of public concern, the “actual malice” standard is reduced to the requirement of finding the statement was made negligently in terms of it being false or not. Finally, in Philadelphia Newspapers Inc. v. Hepps, 475 U.S. 767 (1986), the Supreme Court held that in the case of matters of public concern, the burden shifts to the plaintiff to establish that the statements were false as opposed to the burden resting with defendants to prove that they were true. As the Supreme Court noted in Milkovich v. Lorain Journal Co., 497 U.S. 1 (1990), this burden shift was “justified on the grounds that placement by state laws of the burden of proving truth upon media defendants who publish speech of public concern deters speech because of fear that liability will unjustifiably result.”

What the Supreme Court has rejected, however, is the notion that “opinion” is automatically protected under the First Amendment when it comes to matters of public concern. The reason for this is that opinions often imply the assertion of objective facts. As Judge Friendly noted in Cianci v. New York Times Publishing Co., 639 F. 2d. 54, 61 (CA2 1980), it “would be destructive of the law of libel if a writer could escape liability for accusations of [defamatory conduct] simply by using, explicitly or implicitly, the words “I think.” Where the line of First Amendment protection for public discourse becomes murky centers around the concept, of statements that “cannot reasonably be interpreted as stating actual facts.” Since statements made in newspapers, online, in speeches and through other publication forms and forums about matters of public concern do not conveniently or easily sort themselves into black and white categories of actionable or not, context must guide the analysis of reasonable interpretation. The broad and general circumstances, format and style of the speech or statement are crucial factors in arriving at a determination. However, in the Clifford v. Trump case, the political context per se is arguably elevated to the controlling factor regardless of any reasonable interpretation of easily understood and objectively verifiable facts within a published statement. If that’s the case, then, at least in politics, anything goes.

The California District Court, in its analysis of whether Clifford had sufficiently pleaded the first element of defamation (being the publication of a false statement) referred to three principles laid out in Milkovich, supra and Bentley v. Bunton, 94 S.W. 3d 561 (Tex. 2002) which are that, in order to be defamatory, statements in the context of public discourse, (i) must be provable as false, (ii) must reasonably be interpreted as stating actual facts, (iii) must be made with knowledge or reckless disregard of their falsity. The Court quite easily found that the plaintiff had satisfied the first principle and noted that the President’s tweet contained verifiably true or false statements. These were that Clifford was a liar about the alleged threat and her alleged affair with the President both because the President claimed that the man who allegedly threatened Clifford did not exist and that Clifford was engaged in a “con job.” However, the Court next found that the plaintiff’s claims fell apart when examining the second set of Bentley/Milkovich principles. Relying on a quote from the Dissent of Justice Brennan in Milkovich, supra, the Court noted that “a statement that is “pointed, exaggerated, and heavily laden with emotional rhetoric and moral outrage” cannot constitute a defamatory statement.” The Court concluded that Trump’s tweet constituted “rhetorical hyperbole”, and “extravagant exaggeration [that is] employed for rhetorical effect” and displayed “an incredulous tone, suggesting that the content of the tweet was not meant to be understood as a literal statement about Plaintiff.” In other words, the Court found that the tweet, being rhetoric and hyperbole, could not be reasonably understood as stating an actual fact. The Court also noted, as a further contextual factor in arriving at its decision, that the President did not repeat the allegations in his tweet and found the President’s comments to be a “single, excited reference” which the President did not seek to sustain or support other than in the one tweet.

Thus, the Court pushed the Trump tweet into the safe haven category of rhetoric and hyperbole in order to tip the scale to a finding that it was First Amendment protected speech. Yet, the Supreme Court noted in Bose Corp. v. Consumers Union of United States Inc., 466 U.S. 485 (1984), that there needs to be an ”independent examination of the whole record.” In Clifford v. Trump, there was scant surrounding record with which to dress the President’s comments with any characterization which could belie their plain meaning. In two short sentences, with minimal verbiage, he called Clifford a liar. It was simple language stating that the man Clifford claimed had threatened her “did not exist” and that her story was a “con job.” There was little other context let alone any that would suggest that the President was not actually calling Clifford a liar or did not want or expect those reading the tweet to think anything other than that Clifford was a liar. The tweet carried none of the hallmarks of rhetoric, exaggeration, extravagance or figurative speech. The President called Clifford a liar and he meant exactly that. Contrast this with the case of Greenbelt Cooperative Publishing Assn. Inc. v. Bresler 398 U.S. 6 (1970), where a local newspaper was not liable for describing a tough-negotiating developer as having committed “blackmail” because the overall examination of the record indicated that the use of the word “blackmail” was, as Chief Justice Rehnquist described in Milkovich, supra, “loose, figurative or hyperbolic language which would negate the impression” that the writer was seriously maintaining that such a crime had been committed. The same held true in in Letter Carriers v. Austin, 418 U.S. 264 (1974), where the overall context dictated the finding that the word “traitor” when discussing a union “scab” was a loose and figurative use of the word and thus non-defamatory. In contrast, the majority decision in the Milkovich case held that the statements in a local newspaper that Milkovich, a high school wrestling coach, had out and out lied in a hearing before an Ohio High School Athletic Association constituted actionable defamatory statements because they involved the straightforward assertion that Milkovich had lied under oath without any surrounding factors to indicate that this was a loose or exaggerated characterization and not a clear cut allegation of perjury. So what gives? Why did the President get a pass? The Court’s reliance upon Rehak Creative Services, Inc. v. Witt, 404 S.W.3d 716 (Tex. App. 2013) points towards the answer.

The overall facts and circumstances in Rehak, supra and the statements at issue, presented a richer field for contextual analysis than President Trump’s two sentence tweet. Nonetheless, in Rehak, the Texas Court of Appeals, as the Court specifically noted, “held that none of the statements on [the defendant’s] website constituted defamation in large part because [the defendant’s] “website’s tone” and the “campaign context” of the statements suggested that the statements constituted “rhetorical hyperbole” that was part of politics.” The Court then wrapped up its relevant conclusions by noting that Clifford had publicly presented herself “as a political adversary” to the President and had, in Court filings, “challenged the legitimacy” of Trump’s 2016 election. The Court held that it was loathe to “significantly hamper the office of the President” in responding to political challenges and adversaries and that, in response to Clifford’s comments the President should be allowed to voice his own “non-actionable opinions.”. According to the Court “[any] strongly-worded response by a president to another politician or public figure could constitute an action for defamation. This would deprive this country of the “discourse” common to the political process.” Finally, the Court reasoned that “[to] allow Plaintiff to proceed with her defamation action would, in effect, permit Plaintiff to make public allegations against the President without giving him the opportunity to respond. Such a holding would violate the First Amendment.”

It appears that the Court has bootstrapped the President’s tweet into protected First Amendment speech because it is speech from the President. Any plain analysis of the statements, and their context both general and broad, leads to the reasonable interpretation that President Trump was calling Clifford a liar, plain and simple. Indeed, in the broadest of contextual analyses, could anyone really believe that President Trump was simply saying “Oh that Ms. Clifford, what an imagination!” He was telling a nation that she was a liar, loud and clear. There was no rhetoric, there was no hyperbole and there was no figurative speech. The Court seemingly pushed the tweeted statements into protected status, under the “rhetorical hyperbole” rubric, because it involves Presidential politics. The Court’s final analysis, in the paragraph above, is not truly consistent with the law. Not every “strongly-worded” response would be actionable, only those that meet the Milkovich/Bentley analysis. It is not counter to the First Amendment to prevent a President from defaming another unless the Court wants to establish a further category of automatically protected public speech called “Presidential speech” where no further analysis is necessary. The Court almost goes that far. This is, in a sense, somewhat understandable. First, the office of the President, especially in this new technological era, needs to be free to communicate without fear of being sued. Second, and more important and far reaching, the Court recognized the public discourse “common to the political process” in America. Rehak, supra, did the same. Ultimately, that political landscape is nasty, fast and rapier sharp. It is a digital world full of mean, sharp and vicious attacks. The Court’s decision, it is suggested, almost recognizes that political speech falls within the First Amendment protection afforded “rhetorical hyperbole” simply because it is political speech, regardless of, and without the need for, any further analysis. Perhaps with the complete and non-stop inundation of digital communication, the situation in American politics must necessarily so devolve lest the Courts become clogged with lawsuits claiming defamation for myriad social media posts, tweets, television commercials, etc. Of course, there will be cases that so clearly cross the line that their actionability for defamation will remain notwithstanding the political context (for example, falsely alleging murder by a political opponent); however, that is a very far line to cross. But if the Courts are to be consistent, then the offices of Governor, Mayor and so on down the political line, will need to be afforded the same protection from “significantly hampering” their ability to engage in the public discourse with political rivals and adversaries.

The post Clifford v. Trump appeared first on HSCP GLOBAL LAW FIRM.

]]>