TVA May 2017 Newsletter

[The courts] may truly be said to have neither force nor will, but merely judgment….”
—Alexander Hamilton, Federalist no. 78

On behalf of our deserving and longsuffering client, my firm recently won reversal of a $5.1 million judgment that was given to a successor trustee on a missing promissory note. Missing, as in, the trustee had never seen it, and never even thought to look for it — though his predecessor did make off with at least $2 million in trust assets (not including later funneling cash to Liechtenstein and spending a night in jail for contempt). This resulted in much unplanned excitement at a trial that was supposed to be simply about whether and how much was owing on the note. The trial court largely ignored the fact the note was missing. The Court of Appeal seemed to have little trouble concluding that that wasn’t right, and sent it back for retrial.

We couldn’t be happier to see justice for our client — who had already paid the note before the former trustee sued him as part of her looting spree.

I won’t rehearse details here (though you can read a summary here), but it is taxing — to the client, certainly, but even to counsel — to await the correction of such a truly baseless decision. Everyone intuitively understands checks, governed by the same rule as notes, are rather useless in Xerox form, and it ought to be as obvious to a judge that ruling otherwise requires findings — and extraordinary findings at that. Supporting a judgment with findings is the essence of the judge’s power. The peculiar power of the Court – “hav[ing] neither FORCE nor WILL, but merely judgment” (Federalist #78) – must support itself, if at all, by prevailing upon reason.

For that matter, a case currently awaiting decision by the California Supreme Court goes to just this question: when a court omits findings, is the error reversible per se? Or must the appellant establish the error resulted in a “miscarriage of justice” as the state constitution generally requires? (Our appellate decision avoided this question by finding that the omissions were indeed prejudicial.) The answer seems a rather obvious “yes” from my vantage: in a bench trial, the judge steps into the empyrean role otherwise played by the jury, and thus a judge’s decision without findings is no less infirm than a sentence without a verdict. The very act of giving reasons helps ensure a decision is rooted in facts and law rather than subjective preferences. As Justice Cardozo wrote, a reviewing court “must know what [a] decision means before the duty becomes [the court’s] to say whether it is right or wrong.” (United States v. Chicago, Milwaukee, St. Paul & Pacific Railroad Co. (1935) 294 U.S. 499, 511.)

There are abiding reasons for requiring judges to explain themselves. It is captured, for one, in the very idea of a common law — a law that develops by way of a conversation taking place through judge’s considered opinions over time. And it is captured also in the very idea of the rule of law, particularly in the manner in which a judge’s decision — ostensibly affecting only the parties before it — also becomes, by ways mysterious, a generally accepted “law.” Just how is it that the resolution of a discrete dispute between two peculiar parties become “law”? And in the case of the U.S. Supreme Court, “law of the land”?

Abraham Lincoln’s first inaugural address touched on this. He defended his rejection of the ignominious decision in Dred Scott not merely because that decision was particularly evil, but because court decisions bind principally the parties before them — if they should travel further, they must pay their own freight, in the currency of decency and soundness of judgment, to the judicious mind of the public. To require any less, Lincoln held, would convert the courts’ peculiar power from merely judgment to FORCE, and WILL:

If the policy of the Government upon vital questions affecting the whole people is to be irrevocably fixed by decisions of the Supreme Court, . . . the people will have ceased to be their own rulers, having to that extent practically resigned their Government into the hands of that eminent tribunal.

There are no factual comparisons to Dred Scott here, of course, but the same principle applies to both momentous civil-rights cases as to common commercial cases: A court cannot issue a judgment without reasons that have some purchase on the public mind. A historic struggle ensued to undo the damage of the Dred Scott decision’s impressive compilation of densely packed but ultimately sophistic reasoning. Would that it have simply ruled: “Because we said so,” undoing its work would have proved less burdensome.

But whether our courts offer up elaborate casuistry or terse ipse dixit to support their decisions, it is no less important to inveigh against it. Word play and edicts as substitutes for the exercise of giving reasons is not only an affront to due process, but an indulgence in an Orwellian destabilization of language. It is toward “the view,” in the words of Joseph Epstein, “of intellectual order as a form of oppression,” terminating, ultimately, in nihilism and despotism.

In awaiting the reversal, I experienced a glimpse of understanding — imagining: were the appellate court to hold that the rules may be suspended at whim, and without reason — this must be how minds, subjected in such ways to long periods of epistemic authoritarianism and obfuscation and doublethink, become lost.

Try this trick and spin it
Your head will collapse
But there’s nothing in it
And you’ll ask yourself

Where is my mind?

Fortunately, courts generally do supply reasons, given enough persistence. “Because I said so” should never be enough — even when reduced to a judgment. It is encouraging to remember that is still the case.

Timothy M. Kowal, Esq.

(In non-legal news, my wife and I recently prevailed on the city council of Huntington Beach where we live to adopt a measure that would make HB the third Orange County city to stop using glyphosate and toxic herbicides in city parks.)

A party that wins a battle will not be entitled to recover its attorneys’ fees when the war remains to be fought
by Brendan M Loper, Esq.

One of the thornier aspects of litigation – and an aspect that is significant to any attorney and client – is the issue of fees, and more specifically the potential for recovering a client’s fees paid in litigation.  In California, fees generally may only be recoverable if either the contract or a statute provides for fees.  Civil Code Section 1717 permits fees to be awarded in “any action on a contract” where said contract “specifically provides” for fees and costs to be awarded in the event of litigation.  While this seems straightforward in theory, in practice it is anything but.  Parties will fiercely dispute not only which party prevailed, but also whether they prevailed in a manner entitling them to fees.  While the jurisprudence in this area is ponderous, it cannot be said to be fully settled, as courts continue to refine the law with respect to attorneys’ fees.

But it did become slightly more settled with the California Supreme Court’s decision in, LLC v., Case No. S226652 (Apr. 6, 2017).  There, one software company filed a breach of contract and fraud action against another.  The contracts at issue – which admittedly contained attorneys’ fees clauses – also contained provisions requiring any dispute to be subject to jurisdiction in Florida.  The plaintiff, however, instituted suit in California; when the defendant moved to dismiss on grounds of forums non conveniens – a fancy way of saying that the case had to be brought in Florida – the trial court agreed.

But when the defendant subsequently sought to recover $84,640 in attorneys’ fees on the grounds that it prevailed on the contract, the trial court denied its request.  In affirming, the Supreme Court held that the dismissal did not finally settle the litigation; instead, it simply shifted the litigation to another forum.  “Such a victory was insufficient to make [the defendant] the prevailing party as a matter of law.” (Id. at 8.)  Because the plaintiff could still conceivably recover on its claims in the Florida court, the defendant was not sufficiently victorious to recover fees.  In essence, it had won a battle, but not the war.

It should be noted that the Supreme Court was quick to emphasize that, in some circumstances, this kind of procedural dismissal could entitle a defendant to fees: “A procedural victory that finally disposes of the parties’ contractual dispute…may merit a prevailing party award of fees…” (Id. at 15-16.)  But where the dispute remains to be litigated, a California court will be reluctant to award fees.


SLAPP News: California Supreme Court reiterates, again, that wrongdoing is not “speech” just because someone talked about it
by Timothy M. Kowal, Esq.

The high court recently published Park v. Trustees of the Cal. State Univ., reversing a split appellate-panel decision. The Court held plaintiff’s retaliation claim could go forward and did not implicate protected conduct just because the trustees’ decision involved protected communications.

Skimming the decision, I was eager to find a discussion of the Court of Appeal’s crazy decision in Tuszynska v. Cunningham (2011) 199 Cal.App.4th 257. Tuszynska held that a victim’s allegations of employment discrimination and retaliation “arose from” the employer’s protected investigation and termination decision. That Fourth District opinion’s rationale, however, was later discredited by the Third District in Nam v. Regents of the Univ. of Cal. (2016) 1 Cal.App.5th 1176. Applying precedent in the California Supreme Court opinion of Navellier v. Sletten (2002) 29 Cal.4th 82, Nam underscored that “‘Quite to the contrary, the Supreme Court determined that the SLAPPer’s, not the defendant’s intent was irrelevant.” We thus do not ignore the defendant’s alleged motive.’” (Nam, supra, 1 Cal.App.5th at p. 1189.)

In other words, the protected activity is the defense or alternative explanation for the alleged conduct – not what the lawsuit “arises from.”

My eagerness was repaid as Park decides this split against authority against Tuszynska and its incoherent, unintelligible, and not even very good decision:

“The Tuszynska court concluded that, for anti-SLAPP purposes, a discrimination suit alleging an attorney was denied case referrals because she was a woman was necessarily based on both the referral decisions ―and, concomitantly, communications defendants made in connection with making those decisions.(Tuszynska, at p. 269.) To the extent Tuszynska v. Cunningham, supra, 199 Cal.App.4th 257 presupposes courts deciding anti-SLAPP motions cannot separate an entity‘s decisions from the communications that give rise to them, or that they give rise to, we disapprove it.”
Irrevocable trusts: not foolproof asset protection devices
by Brendan M. Loper, Esq.

Irrevocable trusts are often used to protect assets from the reach of creditors, but courts have chipped away at their foundation.  In U.S. v. Harris, No. 16-10152 (9th Cir. Apr. 20, 2017), the Ninth Circuit recently held that a beneficiary’s right to receive discretionary distributions from an irrevocable trust constitutes “property” to which a government lien may attach.

In 1997, Michael Harris was convicted of eight federal criminal counts related to theft from an employee benefit plan, sentenced to 30 months in prison, and ordered to pay the government $646,000 in restitution.  Harris is and was the beneficiary of two irrevocable, discretionary trusts established by his parents for support.  Typically, creditors – such as the federal government, in this case – cannot seek recovery of assets held in an irrevocable trust; only revocable trusts can be attacked.  But in 2015, the government sought a writ of continuing garnishment for any property – i.e., cash – distributed to Harris from the trusts.  In other words; the government did not seek to compel the trustees to turn over the assets to the government; instead, it sought an order that, should any funds be distributed from the trusts in the future, said funds had to be paid directly by the trustees to the government.

The Ninth Circuit held that the government was entitled to garnish the future distributions.  A federal restitution lien attaches to any “property” of a debtor, property being defined by “the breadth of the control the taxpayer could exercise over the property.” (Id. at 4.)  In California, the law grants a beneficiary such as Harris the absolute right to compel distributions from a trust “insofar as those distributions are necessary to fulfill the trusts’ purposes.” (Id. at 5.)  Because “Harris has a right to receive distributions under California law, his interest in the discretionary trusts is not a mere expectation…it constitutes ‘property’.” (Id. at 6-7.)

The key here seems to be that California law permits the beneficiary to compel distributions.  If the distributions were entirely discretionary – i.e., at the whim of the trustee – they likely wouldn’t be considered “property” to which the lien could attach, as Harris – as the beneficiary – would have no control over them.  But because he can exert some degree of control, the future distributions are subject to attachment.

While the opinion itself isn’t groundbreaking, it’s yet another example of “irrevocable” trusts nonetheless failing to provide sufficient asset protection.


From the Department of Obvious

The popular Capital One credit card commercials ask, “What’s in your wallet?” A bizarre footnote in the recent decision of People v. Truong (Cal. Ct. App. – April 5, 2017) suggests one court does not find the question to be entirely rhetorical:

“A credit card is generally defined as a “[s]tandard-size plastic token, with a magnetic stripe that holds a machine readable code. Credit cards are a convenient substitute for cash or check, and an essential component of electronic commerce and internet commerce. Credit card holders (who may pay annual service charges) draw on a credit limit approved by the card issuer such as a bank, store, or service provider (an airline, for example). Cardholders normally must pay for credit card purchases within 30 days of purchase to avoid interest and/or penalties.” ( [as of Apr. 4, 2017].)

Here’s another:

“In Oliver, the Supreme Court held that even if fences and “No Trespassing” signs are placed at various entry points to a private property located in a rural area, the government’s warrantless intrusion upon the open field of the property is not unconstitutional, as neither the fences nor the “No Trespassing” signs “effectively bar the public from viewing open fields in rural areas.” 466 U.S. at 179.”  U.S.A. v. RONALD ORVILLE GARCIA…, Slip Copy (2014)  2014 WL 12626350.

That’s United States Supreme Court binding interpretative precedent for the principle “look but don’t touch.”


In legal writing as in politics, “going negative” works
by Timothy M. Kowal, Esq.

This is fascinating…and depressing. Prof. Kenneth Chestek’s new paper at SSRN: Fear and Loathing in Persuasive Writing: An Empirical Study of the Effects of the Negativity Bias. Here’s the abstract:

“Cognitive psychologists have identified a phenomenon they call the “negativity bias,” in which humans seem to remember and be affected by negative information more strongly than by positive information. What are the implications of this bias for legal writers? Should they focus on negative themes (describing the opposing side as bad) instead of positive ones (describing their clients as good and worthy)? More specifically, do trial judges fall prey to the negativity bias?

“This article describes an empirical test in which 163 judges were asked to read different versions of a Preliminary Statement to a trial brief (some using positive themes, others using negative ones) to measure whether (and by how much) the judge’s perceptions of the parties were affected. The study concludes that, in many (but not all) cases, negative themes did seem to have more impact on the judicial reader.”

In other words, “staying above the fray” sounds nice, but it might not work. Though in our experience, your mileage may vary depending on the judge.

You can pry my Oxford comma from my cold, dead hands
by Timothy M. Kowal, Esq.

In his monthly column, Justice William Bedsworth offers an entry to the swelling list of admonitions to those who ignore the serial comma, also known as the Oxford comma (the one that comes before the “and” at the end of a series):

“Seems Maine’s overtime law excludes employees involved in “the canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of” various perishable products.” Note in that statute a long succession of commas sufficient to warm my heart, but the absence of one after “shipment.”
. . . .
“The parties were reduced to arguing the significance of the fact the words “canning, processing, preserving, freezing, drying, marketing, storing, [and] packing” are all gerunds, while “shipment” and “distribution” are nouns. . . . The drivers argued the dairy’s interpretation “contravenes the parallel usage convention.” . . . They invoked Scalia and Garner, Reading Law: The Interpretation of Legal Texts, in lamenting “asyndeton.”

To my way of thinking, all objections to the serial comma wither under the weight of these examples:

“Among those interviewed were Merle Haggard’s two ex-wives, Kris Kristofferson and Robert Duvall.”
“This book is dedicated to my parents, Ayn Rand and God.”
“Highlights of Peter Ustinov’s global tour include encounters with Nelson Mandela, an 800-year old demigod and a dildo collector.”


“An attorney is not a hired gun”

From the recent opinion in Sukumar v. Sbragia imposing $18,810 in sanctions for a frivolous appeal:

“Without citation to any authority, plaintiffs assert that sanctions for an objectively frivolous appeal cannot be awarded if “any issues raised on appeal require more than cursory review and rejection.” In other words, they claim that if a single argument they have made on any issue in their appeal is objectively reasonable, sanctions must be denied. We disagree. Under plaintiffs’ logic, appellants can escape sanctions for knowingly filing an untimely appeal for purposes of delay if they presented an objectively reasonable argument on the merits. An appeal is frivolous “when any reasonable attorney would agree that the appeal is totally and completely without merit.” (Flaherty, supra, 31 Cal.3d at p. 650, italics added.) An appeal can be totally and completely without merit where, as here, a single issue is unquestionably dispositive of the entire appeal.

An attorney in a civil case is not a hired gun required to carry out every direction given by the client. [Citation.] As a professional, counsel has a professional responsibility not to pursue an appeal that is frivolous or taken for the purpose of delay, just because the client instructs him or her to do so. [Citation.] Under such circumstances, the high ethical and professional standards of a member of the bar and an officer of the court require the attorney to inform the client that the attorney’s professional responsibility precludes him or her from pursuing such an appeal, and to withdraw from the representation of the client.” (Cosenza v. Kramer (1984) 152 Cal.App.3d 1100, 1103.)”

h/t Ben Shatz.