Articles: Civil Litigation Archives

Wishing and Hoping Won’t Make It So: Colyear II and its Impacts on Older Planned Communities

Of Counsel

Last year gave us an interesting case in the form of the second Colyear case, Colyear v. Rolling Hills Comm. Ass’n. of Rancho Palos Verdes (2024) 100 Cal.App.5th 110. And this one resulted in a major loss to the Association—rejecting the association’s attempt to enforce a tree-trimming covenant and the resultant $1.3 million dollars in attorneys fees awarded to the prevailing homeowner. The interesting part of the case, though, is what is has to say on the limits of a developer’s ability to create a ‘master planned community,’ and the disastrous effects of careless drafting in the annexation process.

In a nutshell, until around 1980, developers seeking to subdivide and sell a large, planned community generally recorded an initial declaration of CC&Rs, describing some (or all, in some cases) of the property envisioned to constitute the future, built-out community. Then, new tracts were made subject to a second set of CC&Rs, which might or might not incorporate by reference the original declaration. Today, the developer generally records a “Master Declaration,” which (1) identifies all the property which may become subject to the Master Declaration in the future, and (2) provides for the “annexation” of portions of that property, over time, to the Master Declaration (along with possible additional restrictions tailored to the newer properties), thus assuring that the Master Declaration governs the added tracts. But, Rolling Hills Community Association (“Rolling Hills”) was created in the mid-1930s, and therein lies the root of the problem.

When the developer began construction in 1936 it recorded a declaration of restrictions (“Declaration 150” [Original Declaration”]) which contained, amongst other provisions, a tree-trimming requirement. This Original Declaration also provided that other tracts would be subject to the provisions of “a Declaration of Restrictions” [emphasis added]. The Original Declaration did NOT state that the annexed properties would be subject to the Original Declaration. Neither did the Original Declaration provide the legal description of properties which were to be annexed. Some of the annexed tracts did have a tree-trimming covenant, some (including Colyear’s) did NOT contain such a covenant. To further confuse matters, some of the annexation declarations WITH the covenant were recorded after a series of annexation declarations that did NOT contain the covenant.

The Association grappled with the inconsistencies between the Original Declaration, and the various declarations of the annexed tracts, for 60 years. It was generally apparent that entirety of the Original Declaration (including the tree-trimming covenant) might not be enforceable against some, but not all, the annexed tracts. First, the Original Declaration did not identify those tracts as subject to its terms, and second, some of the declarations of annexation did not specifically “incorporate by reference” all the terms and conditions in the Original Declaration. There were tantalizing references in the Original Declaration suggesting it was intended to be the kind of “master declaration” we see today, such as describing the document as “a General Plan” for development of Rolling Hills, and a statement that the Association had the power to enforce provisions of those subsequent tracts’ CC&Rs, but the Original Declaration did not expressly identify Colyear’s tract, nor did Colyear’s declaration expressly incorporate by reference the Original Declaration. And that meant the tree trimming covenant could not be enforced against Colyear’s lot.

The Association tried to argue that Colyear must have known about the Original Declaration, since his declaration referred to the Original Declaration (“constructive notice.”) The Court was having none of it. First, Colyear’s title report did not list the Original Declaration as binding his lot. And, although Colyear’s declaration mentioned the Original Declaration, it did not “expressly incorporate by reference the restrictions found in the [Original Declaration.]” Other annexed tracts DID expressly incorporate by reference the provisions of the Original Declaration, just not Colyear’s tract CC&Rs. This in turn meant the portions of the Original Declaration enforceable against the various tracts changed depending on the exact language of the annexation declarations. The appellate court quoted the trial court with approval: “…To the extent a crazy quilt exists, it is a byproduct of the method by which [the developer] and [the Association] expanded this community.’ Ibid. at 124.

What should the Association have done to make the tree-trimming covenant effective against Colyear’s lot, avoiding the “crazy quilt” situation where some lots are covered by particular provisions, and others are not? It could have sought either to amend the Original Declaration to specifically add the additional lots, or to amend Colyear’s tract declaration to incorporate the tree trimming language from the Original Declaration. The record indicates the association considered doing this, until it concluded such an amendment was not likely to pass, or at least, not without considerable effort and cost. What the association DID do was to issue several “resolutions” addressing the issue, some of which simply asserted the tree-trimming provision DID apply to the annexed tracts, despite a well-documented record of internal ‘back and forth’ on whether the Original Declaration’s tree trimming covenant did apply to the annexed tract. As the court noted, however, a resolution is not a CC&R amendment.

Takeaways?

If your association was built before 1980 or so, and includes tracts annexed after the original declaration was recorded, look over the annexation declarations to make sure that all relevant covenants (for example, architectural covenants, noise control, view protections) are either spelled out explicitly in all tracts, or incorporated by reference—specifically—restrictions set forth in other declarations.
Before enforcing a covenant against an owner in an annexed tract, make sure the covenant you seek to enforce unquestionably applies to the lot in question. It’s helpful to look over a title report for a lot in the tract in question, if an owner is willing to share it.
If you have doubts after reviewing the governing documents as to the applicability of the covenant in question, consider whether to attempt a CC&R amendment, to avoid the “crazy quilt” result in the Colyear case.
It’s unlikely that adopting a rule requiring tree trimming on all lots would have sufficed in this case, because of the differences in the CC&R language in the various tracts. As we know, a rule must be consistent with the CC&Rs. And while a rule might flesh out vague maintenance guidelines (and thus be appropriate), given the notoriety of these inconsistencies in the Rancho Palos Verdes community, an owner in one of the tracts without such a requirement could easily argue that had the developer intended to encumber HIS lot with such a restriction, it could easily have done so, but did not—an inference that the developer intended NO tree trimming covenant.

You’ve Been Served – An Article to Supplement Epsten, APC’s Litigation Checklist

By Hannah I. Hughes, Esq.

“You’ve been served” are three little words that no one wants to hear. But what exactly does that mean and what should you do when you are served with a lawsuit?

Our firm has created a checklist for when you have been served with a lawsuit, which can be located here: https://www.epsten.com/youve-been-served-lawsuits-checklist/. This article is intended to serve as a supplemental article to that checklist.

If you are served with a lawsuit, it is important to note the time, date, and method of how the lawsuit was served on you. It is important to immediately provide this information to your legal counsel, along with copies of all documents that were served on you, so that they can determine first whether service was proper and second when a response to the lawsuit is due. For example, documents served in-person have a thirty (30) day deadline to file a response while documents served via mail will provide you with an additional two (2) days to respond. If the Association does not respond by the deadline, they may not be able to protect their interests in the lawsuit.

Once you have provided your legal counsel with a copy of the documents and a detailed explanation of the date, time, and method of service, you should also provide the same to your insurance carrier. Your insurance carrier is the only one that can determine whether there is insurance coverage for the claim. Among the benefits of tendering the lawsuit to your insurance carrier is that they could accept the claim and provide defense counsel for the Association. This means that the association’s legal fees and costs would be covered by your insurance carrier.

After providing your legal counsel and your insurance carrier with a copy of the documents that you were served with, along with a detailed explanation of the date, time, and method of service, it is important that you preserve potential evidence related to the lawsuit. The Board of Directors, the Community Association Manager, and any and all employees have a duty to preserve related evidence once a lawsuit is filed. This means that you cannot delete, remove, or otherwise destroy related evidence including, but not limited to, emails, Board Meeting Minutes, Invoices, letters, photographs, video, etc. Your attorney likely will send a letter to notify affected parties of their duty to preserve evidence.

In addition to preserving potential evidence, you must also preserve the attorney-client privilege. The attorney-client privilege serves to protect client communication to or from their attorney. This includes oral or written communications whether in person, over the phone, or via email. However, the privilege only applies if it is a communication to or from your attorney. That means you should not forward any emails, documents, or other correspondence from your attorney to anyone who is not the Community Association Manager or a member of the Board of Directors. Additionally, you should not discuss the case with anyone who is not a member of the Board of Directors or your Community Association Manager. Remember, the client holds the privilege; this means the client can waive that privilege by sharing information with a third party. It is important that you do not waive this privilege by including a third party who is not subject to the privilege.

Finally, some owners within the association may request notice or information regarding the lawsuit so that they can determine whether they need to inform or notify any potential buyers or other third parties. Although the association is not required to provide this information, your attorneys can prepare a letter to the membership regarding the litigation that is informative but does not waive the attorney-client privilege.

While the three little words “you’ve been served” may not be as sweet as “I love you”, they should be taken just as seriously. Be sure to utilize the checklist we have provided to assist you if you ever hear those three little words.

Reservation of Rights Letters Explained: How Should Your Association Respond?

By Lindsay J. Anderson, Esq.

Your Association gets sued by a homeowner. You reach out to your insurance company to let them know about the lawsuit then you sit back and relax because insurance is going to cover everything, right? Do not get too comfortable!

Insurance companies may not cover everything, or anything, that you believe they should. How do you know what the carrier is going to cover during the course of this particular lawsuit? Look no further than the reservation of rights (“ROR”) letter. Your insurance company is required by law to provide you, as its insured, with a reservation of rights letter detailing all possible limitations on coverage that the insurer may rely on in connection with adjusting the claim or suit.

Basic Definitions

Before we can understand what the insurance company is saying in its ROR letter, we need to understand the jargon that’s typically included in the letter. The following definitions provide the basics.

Duty to Defend: Used to describe an insurer’s obligation to provide you with a defense to claims made under an insurance policy. As a general rule, an insurer’s duty to defend you arises when there is potential for coverage under a policy.
Duty to Indemnify: Used to describe an insurer’s obligation to pay the claim, by funding a settlement or paying a judgment against the insured. Unlike the duty to defend, which is typically determined at the outset of the litigation, the duty to indemnify arises when the facts establish that there is a covered loss under the policy.
Tender: Under the terms of your insurance policy, you must give your insurance carrier notice of any claim or suit being made against the Association. Such notice includes a demand for defense (i.e., duty to defend) and indemnity (i.e., duty to indemnify) under the policy.
Trigger or Coverage Trigger: Refers to the event that must occur before a liability policy applies to a given loss.

What is a Reservation of Rights Letter?

The ROR letter will be a letter from your insurance company which notifies you of the carrier’s coverage position, including any limitations on coverage that may act as a complete or partial bar to coverage. The ROR letter also affords the insurer an opportunity to undertake a more thorough factual investigation into the claim without waiving its rights to deny or limit coverage at a later date.

ROR letters vary in form depending upon the insurance company but, in general, include a summary of the factual background surrounding the current claim, a detailed analysis of the applicable insuring agreement and applicable exclusions (i.e., intentional acts, breach of contract, no monetary damages being sought) and endorsements which may impact coverage, a reservation of rights, and, in some instances, a denial of coverage for some or all of the claims. Since ROR letters may be long and winding with insurance terms and phrases peppered throughout, they are difficult to understand.

What are the Insurance Company’s Duties (Refer to Definitions Above)?

The duties of an insurance company are set forth in the Insuring Agreement section of the policy. Typically, an insurer has two distinct duties – the “duty to defend” and the “duty to indemnify.” In California, the duty to defend is “triggered” when there is any possibility, no matter how remote, that the claim would be covered under the policy. Where your carrier defends an entire action where only a portion of the claims are covered, the carrier may seek reimbursement from you for any defense fees and costs incurred in defending the non-covered claims.

Under the typical scenario where an insured is faced with a third-party claim for monetary damages, the carrier is obligated to defend the action if, under the facts known, there is a possibility of coverage under the policy. Once a carrier’s defense obligations have been “triggered”, the carrier is obligated to hire counsel, retain experts, investigate the claim, pay defense costs, and defend the case through disposition.

The duty to indemnify is the insurance company’s duty to pay any monetary judgment (i.e., damages) rendered against an insured for a covered loss. A carrier’s indemnity obligations are limited by the terms of the insurance contract and should be detailed in the ROR letter.

Why is an ROR Letter Important?

California’s insurance regulations require an insurance company to provide you with a written response to a request for defense and/or indemnity. That response typically comes in the form of the ROR letter which puts you on notice of any limitations or exclusions to coverage. Knowing what is, and more importantly what is not, covered under the policy is crucial to making strategic decisions regarding the handling of the claim. By way of example, the ROR letter can assist the Association and its defense counsel in evaluating a settlement demand and determining whether or not it is in the Association’s best interests to settle a claim. However, it is worth noting that the decision to settle typically rests entirely with the insurance company.

The ROR letter is also how an insurance company reserves its rights to either deny or limit coverage under the policy and to recover defense fees and costs expended in connection with the defense or settlement of uncovered claims. Under California law, the carrier’s coverage defenses may be waived where the insured relies upon the carrier’s failure to specifically reserve its rights under the policy.

What Should You Do if Your Association Receives an ROR Letter?

Receiving an ROR letter from an insurance company may feel intimidating. However, knowing what to do and what to look for when you receive an ROR letter are crucial in getting a handle on the carrier’s coverage determination.

Your first step when you receive an ROR letter should be to share it with your attorney.
The next step is to carefully review the policy exclusions and endorsements and discuss them with your insurance professional so that you can work within your budget to buy the broadest coverage available.

The Importance of Having All the Facts at the Outset of Representing a Client in Litigation

By Joe Sammartino, Esq.

In the intricate and high-stakes world of litigation, thorough preparation is a cornerstone of effective legal representation. Central to this preparation is the necessity of gathering absolutely all the facts about a situation at the outset. This comprehensive understanding is crucial for several reasons: it informs the development of a robust legal strategy, ensures ethical conduct, enhances the credibility of the attorney, and ultimately increases the likelihood of a successful outcome for the client.

Developing a Robust Legal Strategy

A well-informed legal strategy is built on a foundation of complete and accurate facts. At the outset of representing a client, obtaining all necessary information allows an attorney to assess the strengths and weaknesses of the case comprehensively. To initiate the fact-finding process in a new case, the client must promptly share with the attorney all of the facts about the dispute, regardless of how old, indirectly related, or seemingly insignificant those facts may be. When in doubt err on the side of overinclusion, and let your attorney determine whether a fact is or is not relevant.

This initial fact-finding phase is essential for identifying the key legal issues, potential defenses, and the most compelling arguments to present. It enables the attorney to foresee possible challenges or weaknesses of the case and to plan accordingly, avoiding certain pitfalls that could arise from unforeseen evidence or aspects of the case.

Moreover, a detailed understanding of the facts aids in the effective allocation of resources to litigate the case. It helps the legal team decide where to focus investigative efforts, which expert witnesses to consult, and what evidence needs to be meticulously scrutinized or gathered. By having a clear picture from the beginning, an attorney can work more efficiently and strategically, ensuring that no critical detail is overlooked.

Ensuring Ethical Conduct

Ethical considerations are paramount in legal practice. An attorney is ethically bound to represent their client zealously while also maintaining integrity and honesty. Having all the facts of the case at the outset ensures that the attorney can provide candid advice to the client, outlining both the strengths and weaknesses of the case. This transparency is vital for managing the client’s expectations and for making informed decisions about whether to pursue litigation, negotiate a settlement, or explore alternative dispute resolution methods.

Additionally, complete knowledge of the facts prevents ethical breaches such as the inadvertent presentation of false or misleading information to the court. It also safeguards the attorney against potential conflicts of interest and ensures the attorney’s compliance with the duty of candor towards the tribunal.

Enhancing Credibility

An attorney’s credibility is a critical asset in litigation. Judges and juries are more likely to be persuaded by an attorney who demonstrates thorough knowledge of the case and presents well-substantiated arguments. Complete mastery of the facts at the outset allows the attorney to argue more confidently and persuasively. It also minimizes the risk of being caught off-guard by opposing counsel, which could undermine the attorney’s credibility and, by extension, the client’s position.

When an attorney is well-prepared and knowledgeable, it fosters trust not only with the court but with the client as well. Clients are more likely to have confidence in their legal representation when they see that their attorney has a deep understanding of their case and is prepared to advocate effectively on their behalf.

Increasing Likelihood of a Successful Outcome

Ultimately, the goal of litigation is to achieve a favorable outcome for the client. Having all the facts at the outset significantly enhances the chances of success. It allows the attorney to craft a coherent and compelling narrative, anticipate and counter opposing arguments, and present evidence in the most favorable light. Comprehensive preparation reduces the likelihood of surprises during the litigation process, such as unexpected testimony or newly discovered evidence that could adversely affect the case.

Conclusion

The importance of having all the facts at the outset of representing a client in litigation cannot be overstated. It is fundamental to developing a sound legal strategy, ensuring ethical conduct, enhancing the attorney’s credibility, and increasing the likelihood of a successful outcome. Thorough fact-finding at the beginning of a case sets the stage for effective advocacy and is a hallmark of professional and competent legal representation.

Potential Liability for Non-Employee COVID-19 Infections: See’s Candies, Inc. v. Superior Court

Employers may be held liable for COVID-19 (“COVID”) infections of non-employees, as evidenced by a recent California Court of Appeal decision.

In the recent case of See’s Candies, Inc. v. Superior Court, (Dec. 21, 2021, No. B312241) [2021 Cal. App. LEXIS 1076], the California Court of Appeal, Second District, found that an employer that has not taken adequate measures to prevent the spread of COVID in the workplace may be held liable if an employee contracts COVID at work and spreads it to a third-party, such as a spouse, if the third-party suffers a resulting injury. The court did not resolve the extent to which the employer’s duty of care reaches, however.

In See’s Candies, Matilde Elk caught COVID in March 2020 from working in close proximity to others on a packing line for her employer, Elk quarantined in her home, where her husband resided. Her husband subsequently caught COVID and died a month later.

Elk and her daughters sought wrongful death damages, including for loss of love and care. Elk claimed her husband’s death results from her employer’s failure to implement adequate safety measures, such as social distancing in the packing line room and restrooms.

Under the California Worker’s Compensation Act, Labor Code §§ 3200-6002, an employer’s liability for an employee’s workplace injury is generally limited to worker’s compensation. California courts had long established that this restriction on workplace injury remedies also applies to injuries collateral to or derivative of a workplace injury. See’s Candies argued that this rule, known as the “derivative injury doctrine,” should therefore limit its remedies to Ms. Elk’s family members to worker’s compensation, rather than open the door to widespread civil liability and remedies.

The court disagreed with See’s Candies. The court paralleled the circumstances in this case to a 1997 California Supreme Court Case, Snyder v. Michael’s Stores, Inc. (16 Cal. 4th 991) in which a minor with cerebral palsy and other disabling conditions claimed such conditions were a resulting injury of her exposure to toxic levels of carbon monoxide while in utero. This exposure occurred because her mother, while pregnant, was working as an employee at Michael’s when an incident involving carbon monoxide occurred. The Court found that the derivative injury doctrine did not remove the company’s civil liability to the baby because the harm to the baby was not dependent on, or derivative of, the harm to the mother. Rather, the harm to the baby was a result of her own exposure to carbon monoxide as a fetus.

In See’s Candies, the appellate court held that the derivative injury doctrine only applies when the third-party’s injury is derivative of the employee’s injury in the purest sense, meaning the injury to the third-party would not have happened in the absence of the injury to the employee. The court explained that, like the mother in Snyder, Elk merely served as a conduit of a pathogen and whether she had been harmed by the pathogen itself was irrelevant to the claims of her family members.

What Does this Mean for Your Association?
This case serves as a reminder that the best way your Association can protect itself from COVID liability is to follow the applicable governmental orders designed to help prevent the spread of COVID. As we all know, these orders change from time to time.

If you have any questions regarding the current orders or how to implement them, please contact us. We are here to help!

Temporary Restraining Orders & Preliminary Injunctions for the Protection of Association Workers and Board Members

In response to escalating violence in the workplace across the country, California enacted a statute that enables employers to better protect their employees in the workplace by permitting employers to obtain an injunction or restraining order on behalf of their employees. This law was enacted to establish parallel provisions to the civil harassment statute set forth in California Code of Civil Procedure section 527.8 to offer protection to “employees” of community associations in certain specific situations. “Employees” include association board members, community association managers, vendors and others for purposes of these restraining orders.

Purpose of the Statute

The purpose of the statute is to provide employers with a fast and relatively inexpensive means of protecting its employees from people who are violent or who threaten acts of violence against employees. In the association context, this protection allows employees to perform association business free of the fear of violence from those who seriously disrupt an otherwise peaceful community.

Often tempers will flare and disagreements will occur within an association when an unpopular decision is made. Residents sometimes show anger against board members, committee members, officers of the Association, management or maintenance people who are carrying out the decisions of the Board. These residents may try to stop a project or say inappropriate things to association employees. When these actions or comments consist of a violent act or a credible threat of violence, CCP Section 527.8 can be used to protect the employees. Unless the conduct escalates into violence or threats of violence, however, mere anger or inappropriate language do not constitute the type of conduct which calls for court action under this statute.

Who is Defined as an “employee” Under this Statute?

An association need not have traditional paid employees to obtain the benefit of the statute. The following people qualify as “employees” under CCP Section 527.8:

Board members, officers, committee members, and volunteers of an association;
Paid employees of an association, such as maintenance workers and grounds keepers or other persons employed at the workplace;
Most independent contractors and vendors, including Community Association Managers and those who work for association management companies;
Anyone whose job it is to go onto association property to perform work of any kind, whether paid or on a volunteer basis; and
All household members of an “employee.” There does not have to be a specific threat or act of violence toward each family member to obtain this additional protection.

Prerequisites to Obtaining the Injunction

There must be: (1) an actual violent act; (2) a credible threat of violence; or (3) stalking of the “employee.” Mere harassment cannot be enjoined under this statute unless the harassment involves a course of conduct that serves no legitimate purpose and causes the employee to fear for his/her personal safety or the safety of his/her immediate family members. Often, the threatening conduct has gone on for months or years, but becomes increasingly more frequent and threatening over time. One extremely violent or threatening act or episode, however, may be sufficient for an injunction to be granted.
The person to be protected must be an “employee” of the Association. Homeowners and tenants, who are not classified as employees under the statute, are not covered and must obtain their own restraining orders.

The Process for Obtaining the Temporary Restraining Order

Obtaining a permanent order protecting the employee is a two-step process. First, the association completes the necessary forms or paperwork and files it with the court to try to obtain a Temporary Restraining Order (“TRO”) from the local superior court. This order is what the name implies; it is temporary, is granted on very short notice if the association shows that the employees has suffered unlawful violence or a credible threat of violence, and provides almost immediate protection to the employee. Once the TRO is granted, it must be personally served on the respondent for the order to be enforceable. After the TRO is granted by the judge, the court will hold a future hearing to determine whether to make the order more permanent. This hearing is generally held within 25 days after the TRO is granted. At that time, the association must be prepared to prove with credible evidence including witness testimony that the order should be made permanent or for a specific period of time up to a maximum of three years.

What Can TROs and Injunctions do for an Association and its Employees?

The kinds of protection that can be included in these orders include the following:

All TROs and injunctions under Section 527.8 include the following standard language:

Violation of this order is a misdemeanor, punishable by a $1,000 fine, one year in jail, or both, or may be punishable as a felony. This order shall be enforced by all law enforcement officers in the State of California. Any person subject to a restraining order is prohibited from obtaining or purchasing or attempting to obtain or purchase a firearm by Penal Code Section 12021. Such conduct may be a felony and punishable by a $1,000 fine and imprisonment.

In addition to the automatic order above, the orders may prohibit the respondent from:

assaulting, battering or stalking the employee and other protected persons;
attending any board meetings or annual meetings of the Association;
following or stalking the employee to or from their place of work;
following the employee during hours of employment;
telephoning or sending communications to the employee by any means including but not limited to the mail, interoffice mail, fax, e-mail; or entering the workplace of the employee.

The orders will often require the respondent to “stay away” from the employee. For example, the order may require that the respondent stay 100 to 300 yards away from the association’s community (if a non-resident), the employee or the employee’s family members, the employee’s workplace, and/or the school and workplace of the employee’s family members.

Conclusion

This legal tool should be utilized in appropriate cases after consultation with counsel. It is an important tool that can be used by an association to stop violent and abusive people from harassing, intimidating and threatening employees within the Association that serves no legitimate purpose and causes the employee to fear for his/her personal safety or the safety of his/her immediate family members. Utilizing this statute in the appropriate manner can assist in trying to maintain a safe working environment for an association’s workers, community association managers, and board members.

The Litigation Discovery Process for Beginners

Litigation can be complex, expensive, time consuming, and contentious! These same four words can be said of discovery, the process whereby each side learns the facts supporting the other side’s case.

Litigation and discovery, in fact, go hand in hand, and although difficult at times, it is important to understand the process and appreciate why it is not only necessary but a powerful and important tool.

Discovery, or the “discovery process,” is exactly what the name implies:

It is the process of discovering evidence to prepare your case for trial.
It also involves discovering the evidence of the other party.

The purpose of discovery, and the ideals behind it, is to promote the truth-seeking function of litigation. In other words, it is designed to make trial less of a game and more of a fair contest.

There are two broad categories of discovery: Written Discovery (which includes interrogatories and requests for production of documents, the two most common forms), and depositions.

Interrogatories: Interrogatories are nothing more than written questions prepared by the attorney and sent to the other side. The opposing party is then required to answer the questions and affirm, under oath, the answers are true. These questions are usually very specific, asking for information such as dates and times, descriptions of events and even the identification of witnesses.

Requests for production of documents: Not surprising, requests for production of documents require the other party to produce documents in that party’s possession which are relevant to the case. The determination as to what is or is not relevant hinges upon the particular facts of the matter at hand; there is no “one size fits all.” Unlike interrogatories, requests for production of documents may be sent to non-parties. Non-parties are individuals or business entities that are not involved in the lawsuit but may possess documents that contain information that is relevant to it.

Depositions: A deposition is a sworn statement of a party or a witness that is given in the presence of a court reporter. The court reporter records the questions asked of the witness and the answer he or she gives. The court reporter then converts the recording into a written transcript that can be used at trial if the witness is unavailable. The deposition transcript can also be used to ensure the witness does not change his or her testimony at a later date.

Ultimately, discovery enables a more comprehensive understanding of the facts and allows for more informed and strategic decisions as the case is being prepared for trial. Having a clear path on which to navigate also increases the possibility the case may settle.

Because of this, investing time and effort in the discovery phase can have considerable cost savings later on down the road!

Budget Cuts Continue to Affect the State Courts, or "Justice Delayed is Justice Denied"

The State of California is in a fiscal crisis and the Courts of the State are not immune to this crisis. The Court system in California is divided up into counties. Each county has its own courts that operate partly on revenues generated from filing fees and local taxes and partly on funds from the Sacramento. Each county is dealing with the budget crisis in slightly different ways but the bottom line is that services offered by the Courts that we once took for granted are either no longer being offered or are being scaled back severely. For example, many counties do not provide court reporters for hearings or trials. It is now up to the litigants to contract with court-approved court reporters to attend and record the hearing or trial. The office hours for the Court Clerk’s office have been reduced, meaning that it is harder to file and retrieve documents with the Courts. Staff has been reduced both in the courtroom and the Clerk’s office. This means that it is taking much longer for the Court to process and return important documents such as dismissals, default judgments, abstracts of judgment, etc.

In San Diego County, the number of research attorneys supporting the judges has been drastically reduced. This has resulted in the Courts having to set motion hearing dates out further and further in the future to allow time for the limited number of research attorneys to thoroughly review the motion papers, research the law and provide the judge deciding the matter with a preliminary opinion. We are seeing hearings for such routine matters such as demurrers and motions to compel discovery responses being set six months or more in the future as opposed to pre-budget cut times when such motions were generally heard within sixty days or sooner.

In the face of a $9 million shortfall in its budget for fiscal year 2014-2015, the San Diego Superior Court has recently announced further cuts that will affect the administration of justice. Effective December 22, 2014, the Kearny Mesa Small Claims Courthouse will be closed and all operations, hearings and trials will be transferred to the Hall of Justice and Central Courthouse in Downtown San Diego. In addition, effective January 5, 2015, the Civil Appellate Departments in the San Diego North, South and East County Divisions will be closed and all case filings will be transferred to the Central Division.

This means that Associations filing Small Claims lawsuits will now have to file the lawsuit in the Central Courthouse and all Small Claims hearings will be held in the Central Courthouse. The Kearny Mesa facility on Clairemont Mesa Boulevard will close, effective December 22, 2014.

“The wheels of justice turn slowly, but grind fine.” (Attributed to Sextus Empiricus circa 500 A.D.) It seems that those wheels will be turning even slower due to the most recent budget cuts.

Attorneys’ Fees Incurred in Prelitigation ADR: Grossman v. Park Fort Washington Association

Are attorney’s fees expended for Alternative Dispute Resolution (“ADR”) before litigation recoverable by the prevailing party in subsequent litigation under the Davis-Stirling Act?

In Grossman v. Park Fort Washington Association (2012) 212 Cal.App.4^th 1128, the California Court of Appeal, Fifth District, determined that attorneys’ fees and costs incurred during prelitigation ADR are recoverable if two conditions are met: (1) an action is brought after the prelitigation ADR proceeding to enforce the governing documents; and, (2) the court finds one of the parties to be the prevailing party.

Grossman involved a dispute between the Association and two homeowners who built a cabana and fireplace in their backyard without the Association’s approval. The homeowners requested a variance for the unapproved structures which the Association denied based on its interpretation that the governing documents prohibited the cabana and fireplace. The Association informed the owners that the cabana and fireplace had to be removed and imposed a fine of $10 per day until the structures were removed.

The Association and the homeowners thereafter agreed to mediate the dispute as required under former Civil Code §1369.520 (current Civil Code §5930). The case did not settle at mediation and the homeowners filed a lawsuit alleging that the Association improperly interpreted the governing documents in refusing to approve the cabana or grant a variance and in imposing fines against them.

The trial court disagreed with the Association’s interpretation of the governing documents and held in favor of the homeowners finding that the Association’s governing documents allowed the cabana and the fireplace as long as the fireplace was more than 10 feet from the property line. Judgment was entered in favor of the homeowners and the fines imposed against the homeowners were rescinded.

The homeowners filed a motion for an award of their attorneys’ fees and costs as the prevailing party in the action. In their application for fees and costs, in addition to seeking an award of their fees and costs incurred during the lawsuit, the homeowners also asked for an award of their fees and costs incurred in connection with the prelitigation mediation. The Association opposed the motion arguing that the attorneys’ fees and costs incurred in conjunction with the prelitigation mediation were not authorized under former Civil Code §1354(c) (current Civil Code §5975(c)).

The trial court again disagreed with the Association and awarded the homeowners $112,665 in fees and costs which included fees for the prelitigation mediation. The Association appealed and the court of appeal affirmed the trial court’s award of attorneys’ fees and costs, including those that were incurred in the prelitigation mediation.

The appellate court carefully analyzed former Civil Code §1354(c) and held fees incurred during prelitigation ADR may be included in an award of reasonable attorneys’ fees and costs if two conditions are met: (1) an action is brought after the prelitigation ADR to enforce the governing documents; and, (2) the court finds one of the parties to be the prevailing party.

The court of appeal reasoned that since former Civil Code §1369.580 (current Civil Code §5930) essentially makes ADR mandatory, for a court to deny reasonable attorneys’ fees incurred in pursuing prelitigation ADR would be contrary to the strong public policy of promoting the resolution of disputes through mediation and arbitration. The court of appeal determined that public policy is served in interpreting former Civil Code §1354(c) (current Civil Code §5975(c)) in a manner that awards reasonable attorneys’ fees and costs incurred in prelitigation ADR proceedings.

Electronic Discovery: Preserving Electronically Stored Information

Advances in technology have caused significant changes in the way civil discovery is conducted. Before the advent of the computer age, most documentation was easily identified as paper. Today, however, documentation is more likely to take the form of an email, text message, or computer file. Just as society’s method of communication has evolved, so has the law. California’s Electronic Discovery Act (Code of Civ. Pro. § 2016.010 et seq.) allows litigants to obtain electronically stored information (“ESI”) through the discovery process. As a result, when a party reasonably anticipates litigation (whether by filing a lawsuit or by being sued) there is a duty to preserve all ESI that may be discoverable.

What is “ESI”?

ESI should be defined as broadly as possible. ESI includes any information stored electronically, magnetically, digitally, or optically, such as email, voicemail, instant messages, text messages, sound or video recordings, word processed documents, spreadsheets, and other similar electronic media. Devices used to store, produce, and transmit ESI include computers, laptops, servers, cellular phones, handheld wireless devices, and the like. ESI also includes information about electronic data called “metadata.” Metadata is a hidden recorded history about an electronic file’s creation, modification, location, and size, which can be vital to a document’s significance in litigation.

When does the duty to preserve ESI arise?

The duty to preserve ESI arises when a party reasonably anticipates litigation. Since there is no bright-line rule as to when litigation can be “reasonably” anticipated, it is best to preserve ESI at the time a dispute arises, whether a lawsuit has been threatened or not.

Who does the duty to preserve ESI extend to?

In the case of a common interest development (homeowners associations, planned developments, condominium projects, community associations, maintenance associations, etc.), directors, officers, committee members, managers, agents, and employees all have a duty to preserve ESI once litigation is anticipated. Additionally, any vendor, consultant, or other third party who may have ESI related to the dispute has a duty to preserve that ESI. For example, if the dispute is over financial expenditures, the association should notify its accountant in writing to preserve ESI in his or her possession that is related to the dispute. The same applies to other vendors, depending on the nature of the dispute. If a director utilizes his work email account, computer, or cellular phone to conduct association business, his employer would also be subject to the duty to preserve ESI under its control. Extending this preservation duty to the director’s employer as a result of communications outside the scope of the director’s employment can have negative implications for the director as well as the association if the ESI is not properly preserved. Therefore, directors and committee members should be careful from where they send and receive email, and from what account. Directors should consider setting up a separate email account solely for association business. Associations may also consider creating their own domain name and supplying email addresses to its directors and committee members.

What do I need to do to preserve ESI?

Once litigation is anticipated, refrain from deleting or destroying any ESI that exists. Enact procedures to prevent future deletion or destruction of ESI and ensure that all automatic computer operations that delete ESI by age, capacity, or other criteria are turned off. Do not overwrite or erase any back-up media and do not use any defragmenting or compression programs, or metadata scrubbers. Note that when ESI is “deleted” it can still be recovered. Therefore, be careful to preserve all ESI at the appropriate time. The penalties for failing to preserve ESI can be significant, and the penalties for purposely deleting or destroying ESI can be even worse.

How do I properly dispose of ESI when litigation is not anticipated?

The association should implement a policy on ESI destruction and deletion for use during times when litigation is not anticipated. If the association has such a policy in place (for example, ESI will be purged after five years if no litigation is anticipated), it will be harder for a challenging party to claim that evidence has been improperly destroyed than if ESI is randomly deleted.

In a time where email and text messages are often a more common means of communication than speaking face-to-face, associations must be aware where the duty to preserve ESI arises and to whom it extends. Every time you push the send button, you are creating a potentially discoverable document. Protect your association from potential discovery challenges and penalties by enacting proper policies on the use and storage of electronic information.