The
California Supreme Court’s 2012-2013 term: Clearing away the underbrush
By J.
Clark Kelso
High courts are appropriately reluctant
to overrule their own precedents. Respect for prior decisions lies at the heart
of stare decisis and is one of the distinguishing features of judicial
reasoning. At the same time, courts have an obligation to review their prior
work to determine whether it still serves the public interest. If the needs of
today’s generation require improvements or changes to the law, the courts
should not hesitate in making those improvements. Also, it sometimes happens
that a court simply gets it wrong the first time around, and courts should not
hesitate to correct their own mistakes. This year, the California Supreme Court
had a number of important brush-clearing decisions.
The fraud exception
to the parol evidence rule
Our first case this year is a good
example of a decision that clears away some old underbrush and corrects an old
error. In Riverisland Cold Storage v. Fresno-Madera Production Credit
Association, 55 Cal.4th 1169 (2013), the court overruled its 77-year-old decision in Bank of America v. Pendergrass, 4 Cal.2d 258
(1935). The issue involved the fraud exception to the parol evidence rule. As a
general matter, the parol evidence rule protects the integrity of written
contracts by making their terms the exclusive evidence of the parties’
agreement. Under the rule, parol evidence is inadmissible to vary the terms of
a contract.
However, like all good rules, it has a
number of exceptions. One of the well-established exceptions to the parol
evidence rule allows a party to present extrinsic evidence to show that the
agreement was tainted by fraud. The reason for this exception seems obvious. Fraud
is a serious enough allegation that if fraud can be proven, it should trump the
writing. Although this exception is generally stated in broad terms around the
country and in the Restatement of Contracts, in 1935 the California Supreme
Court adopted in Pendergrass a limitation on the fraud exception pursuant to
which evidence offered to prove fraud “must tend to establish some independent
fact or representation, some fraud in the procurement of the instrument or some
breach of confidence concerning its use, and not a promise directly at variance
with the promise of the writing.” Pendergrass, 4 Cal.2d at 263.
This so-called Pendergrass limitation on
the fraud exception to the parol evidence rule has been criticized for decades,
but lower courts have continued to apply it, as is their constitutional
mandate. In Riverisland, the California Supreme Court unanimously
overturned Pendergrass, noting that its holding really wasn’t supported
by California law even at the time it was decided, appeared to be inconsistent
with California’s parol evidence statute which codified the fraud exception,
was not followed by other jurisdictions and was rejected by the restatement and
most treatises. The rule also may actually have provided a shield for
fraudulent conduct, which is precisely the opposite of what the fraud exception
was supposed to accomplish. For all these reasons, the court rejected the Pendergrass decision and brought California’s version of the fraud exception to the parol
evidence rule back into the mainstream of contracts law around the country.
The common law release rule
Another example of
clearing away some old, bad law is found in Leung v. Verdugo Hills Hospital,
55 Cal.4th 291 (2012), where the court abandoned the common law
release rule pursuant to which a release of one joint tortfeasor automatically
released all other joint tortfeasors as a matter of law. Six days after his
birth, the plaintiff suffered irreversible brain damage. Through his mother as guardian
ad litem, he sued his pediatrician and the hospital in which he was born.
Before trial, the plaintiff and the pediatrician agreed to a settlement of $1
million, the limit of the pediatrician’s malpractice insurance policy. After a
jury trial, the plaintiff was awarded both economic and noneconomic damages.
The jury found that the pediatrician was 55 percent at fault, the hospital 40
percent at fault and the parents 5 percent at fault. On the hospital’s appeal,
a major contention was that under the common law release rule, the plaintiff’s
settlement with the pediatrician also released the non-settling hospital from
liability for the plaintiff’s economic damages. The Court of Appeal reluctantly
agreed, correctly recognizing that under the common law rule, the release of
one joint tortfeasor released all joint tortfeasors as a matter of law.
The California Supreme
Court granted review to consider the continuing viability of the release rule,
and it decidedly unanimously to abandon the rule. The
rationale for rule had been the theory that there can be only one compensation
for a single injury and because each joint tortfeasor is liable for all of the
damage, any joint tortfeasor's payment of compensation in any amount satisfied
the plaintiff's entire claim. The basic problem with the rule, among
other things, is that it assumes – contrary to fact in many cases – that
when a plaintiff settles with one defendant in exchange for a release, it has
received full compensation for its injuries. But there can be many reasons for
settling with a defendant for less than full compensation including, as in this
case, the fact that the defendant has a cap on insurance.
The California
Legislature recognized the harshness of the common law rule and in 1957 enacted
Code of Civil Procedure Section 877, which rejected the release rule in the
context of good faith settlements. According to Section 877, where a plaintiff
enters into a good faith settlement with one or more joint tortfeasors, that
settlement merely reduces, by the settlement
amount, the damages that the plaintiff may recover from the non-settling joint
tortfeasors. But Section 877 applies by its terms only to good faith
settlements. In Verdugo, the trial court determined that the settlement
had not been made in good faith and held that, since Section 877 did not
apply, the old common law release rule came into play.
In its
opinion, the Supreme Court finished the work begun by the Legislature in 1957.
Recognizing that the rule resulted in unjust and inequitable results even as
applied to a bad faith settlement, the court abandoned the release rule in its
entirety. Now, any settlement with a joint
tortfeasor will reduce the plaintiff’s damages by the amount of the settlement
but will not entirely bar recovery against another joint tortfeasor. Having
rejected the release rule, the court then had to choose how to apportion
damages among the joint tortfeasors, and it adopted a
“setoff-with-contribution” approach to this problem, pursuant to which the money paid by the settling tortfeasor is credited
against any damages assessed against the non-settling tortfeasors, who are
allowed to seek contribution from the settling tortfeasor for damages they have
paid in excess of their equitable shares of liability.
Assumption
of risk
Our next case involves a slightly
different type of brush-clearing. In Nalwa v. Cedar Fair, 55 Cal.4th 1148 (2012), the court did not need to overrule any prior decisions, but it did
successfully clarify the scope of its prior decisions dealing with the primary
assumption of risk doctrine.
Some 20 years
ago, in Knight v. Jewett, 2 Cal.4th 296 (1992), the California Supreme
Court rationalized the tension in California law between the doctrine of
assumption of risk and the doctrine of comparative fault. The problem was that
assumption of risk is an all-or-nothing defense that is triggered when the
plaintiff exposes him or herself to certain risks of injury, and comparative
fault is a limited defense that simply reduces the plaintiff’s recovery when
the plaintiff’s own unreasonable conduct has contributed to the accident. The
two defenses appear to have a significant degree of overlap.
In Knight, the court
rejected the argument that comparative fault had entirely replaced assumption
of risk, but language in the decision appeared to limit the assumption of risk doctrine
to certain types of sports and sports-related injuries. Knight itself
involved an injury that occurred during an informal game of touch football. The
issue before the Supreme Court in Nalwa v. Cedar Fair was whether
primary assumption of risk applied to a plaintiff who suffered a fractured
wrist, which resulted from a head-on collision in a bumper car ride at Great
America. The Court of Appeal held that the doctrine did not apply because it
concluded a commercial bumper car ride was not a sport and was therefore
outside the scope of the defense.
The Supreme Court quite
sensibly reversed. The whole point of the primary assumption of risk defense is
that people intentionally and reasonably engage in risky behavior as a central
part of many recreational activities. If the courts were to impose the same
standards on those activities as they impose in other contexts, much of the fun
of the activity would be squeezed out. Low-speed collisions are essential to
the bumper car ride experience, and the jostling that occurs from those
collisions is the very reason the ride is fun. The plaintiff in this case
suffered a very unusual injury, apparently because at the very moment of the
collision, she had placed her hand on the dashboard of the bumper car at an
angle where the head-on collision fractured her wrist. For the Supreme Court,
that was still a type of injury within the reasonable scope of the recreational
activity. The decision in Nalwa makes it clear that Knight and
its progeny are not limited to sports and that primary assumption of risk is a
more general doctrine dealing with any type of voluntary participation in risky
recreational activities.
Half remedies
Sometimes, it is better to
receive half a loaf than receive nothing at all. That fairly describes the
result in Harris v. City of Santa Monica, 56 Cal.4th 2103
(2013), which involved the issue of remedies for employment discrimination. A rather common
factual defense in employment discrimination cases is that even if the
plaintiff had been subjected to some degree of discriminatory treatment, the
employer also had perfectly legitimate, non-discriminatory reasons for taking
the adverse employment action complained of by the plaintiff. The problem is
essentially one of mixed causation, a topic that courts often struggle to
accommodate to the all-or-nothing nature of most civil judgments.
In Harris v. City of Santa Monica,
the California Supreme Court dealt with a case where a bus driver alleged that
she was fired because of her pregnancy in violation of the prohibition on sex
discrimination in the Fair Employment and Housing Act. The city claimed that
she had been fired for poor job performance. At trial, the city asked the court
to instruct the jury that if it found a mix of discriminatory and legitimate
motives, the city could avoid liability by proving that a legitimate motive
alone would have led it to make the same decision to fire her. The trial court
refused the instruction, and the jury returned a substantial verdict for the
employee. The Court of Appeal reversed, holding that the requested instruction
was legally correct and that refusal to give it was prejudicial error.
The Supreme Court agreed in part with
the Court of Appeal, holding that under the Fair Employment and Housing Act,
when a jury finds that unlawful discrimination was a substantial factor
motivating a termination of employment, and when the employer proves it would
have made the same decision absent such discrimination, a court may not award
damages, back pay or an order of reinstatement. However, the court also held that
the employer does not entirely escape liability. In light of the act’s express
purpose of not only redressing but also preventing and deterring unlawful
discrimination in the workplace, the court held that the plaintiff could still
be awarded, where appropriate, declaratory relief or injunctive relief to stop
discriminatory practices. If awarded such relief, that also might make the
plaintiff eligible for reasonable attorney’s fees and costs, giving the
plaintiff, at most, a half remedy and half a loaf.
Things not to do with a parolee
We close this year with a pair of cases
involving parolees. Parolees find themselves in between full imprisonment and
freedom. Although parolees have much greater freedom to move about, their
rights have not been fully restored. And that can make it risky to associate
with parolees, as our final two cases demonstrate.
First, in People v. Schmitz, 55
Cal.4th 909 (2012), we see the driver of a car who learns that
having a parolee as a passenger can have some serious consequences,
particularly if you are carrying illegal drugs in the car. The law of search
and seizure in the context of automobiles is wonderfully complex, and when that
law intersects with the law related to searches of a parolee, you can be sure
to get some interesting results.
That’s what we see in Schmitz where
a police officer, aware that the front-seat passenger was on parole, searched
the back seat of defendant’s car and recovered drugs and drug paraphernalia
from a chips bag and a pair of shoes. The defendant, the driver, sought to
suppress that evidence. The majority concluded that the search was reasonable
under the Fourth Amendment, which permits a search of those areas of the
passenger compartment where the officer reasonably expects that the parolee
could have stowed personal belongings or discarded items when aware of police
activity. Additionally, the officer may search personal property located in
those areas if the officer reasonably believes that the parolee owns those
items or has the ability to exert control over them. So if you bring a parolee
with you as a passenger, you can pretty well expect the entire inside of the
car to be fair game for a search.
It gets worse if you help a parolee
abscond from parole. According to Section 32 of the Penal Code, an accessory is
a person “who, after a felony has been committed, harbors, conceals or aids a
principal in such felony, with the intent that said principal may avoid or
escape from arrest, trial, conviction or punishment, having knowledge that said
principal has committed such felony or has been charged with such felony or
convicted thereof.”
In People v. Nuckles, 56 Cal.4th 601 (2013), the Supreme Court addressed the question whether a person who
intentionally aids a parolee in absconding from parole supervision qualifies as
an accessory to the crime for which the parolee had originally been sentenced
to prison. The court held that such a person was indeed an accessory. The
defendant argued that there was not a sufficient nexus between the original
crime and aiding a parolee in absconding from parole. But the court disagreed,
noting that so long as the defendant intentionally helped a parolee avoid some
aspect of his punishment for his felony conviction, that help established the
sufficient nexus between her aid and the original felony. Section 32, after
all, expressly refers to aiding a felon avoid punishment.
So, although it may be a little
surprising, when you help a felon abscond from parole, you have become an
accessory to the underlying felony. Another thing not to do with a parolee.
J. Clark Kelso is a professor at the University of the
Pacific McGeorge School of Law and he serves as the federally appointed
receiver responsible for California’s prison medical care system. The views
expressed in this article are solely the personal views of the author.