Developments of Interest

New Cases of Interest - January 3, 2013

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Richey v. AutoNation, Inc. (2012) 210 Cal.App.4th 1516.  This is a case in which an employer terminated an employee four weeks before the expiration of the employee's approved medical leave.  The case went to arbitration and the arbitrator denied the employee's Family Rights Act claim determining that the employer had an honest belief, after a "superficial" investigation that the employee had been misusing the leave.  The court of appeal reversed the trial court's decision to confirm the arbitration award, and issued instructions to vacate the award and to conduct further proceedings.  The court found that it was "clear legal error" for the arbitrator to rely on the "honest belief" defense.  An employer may not in terminating or failing to reinstate an employee granted approved medical leave under the California Family Rights Act defend a lawsuit based on its "honest belief" that the employee was abusing the leave.  The employer must instead provide evidentiary facts sufficient to carry the burden of proof contemplated by the Act.  The employer was required to conduct an adequate investigation and to develop sufficient facts to establish that the employee actually engaged in conduct warranting dismissal as well, which the court also found had not occurred here.  The employer had purported to terminate the employee under a company policy which the court found to be imprecisely worded and inconsistently applied.

Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc. (2012) 211 Cal.App.4th 230.  In this case a general contractor brought an action against a subcontractor for the amount which was in excess of the subcontractor's bid that the general contractor had to pay a substitute subcontractor.  The trial court awarded damages to the general contractor on promissory estoppel claims, but found for the subcontractor on breach of contract claims.  It also awarded attorney's fees to the general contractor.

The court of appeal reversed, holding that the promissory estoppel claim was not a claim "on a contract" for the purpose of invoking a right to recover attorney's fees pursuant to Civil Code Section 1717.  When a party prevails on a promissory estoppel claim, but recovers nothing on a breach of contract claim in the same action, the party prevailing on the promissory estoppel claim is not the party prevailing on the contract entitled to recover attorney's fees.  Instead, it was the defendant who recovered on the contract action, even though losing on the promissory estoppel claim, who is entitled to recover attorney's fees incurred in defeating the contract claim.

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