Developments of Interest

New Cases of Interest - July 8, 2014

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07/08/2014

Graham v. Bank of America (2014) 226 Cal.App.4th 594.  This is another in a series of cases in which a borrower brings an action against the lender and related defendants, and in this case the borrower alleged causes of action for fraud and deceit, violations of California's unfair competition law and declaratory relief.  The action was brought to halt foreclosure proceedings and alleged that the defendants knew the appraisal for the borrower's home was speculative and represented a false statement of the value of the home and that the home was represented to continue to appreciate in order to permit a future sale or refinance at a substantial profit before adjustable rate mortgage payments kicked in.  Plaintiff's action was dismissed on demurrer, which the Court of Appeal upheld, noting that the borrower could not state a cause of action for fraud or deceit based on the allegations made in that predictions about a buyer's real estate investment or fair market value of the property are not actionable representations.  The court also held that even if actual misrepresentations were alleged, a sufficient nexus between those misrepresentations and alleged economic harm was not present.  The court also noted that the appraisal was undertaken for the benefit of the defendants and the defendants did not owe the borrower a duty with respect to the appraisal or to guaranty the success of the borrower's investment.

Public Employee's Retirement System v. Moody's Investor Service, Inc. (2014) 226 Cal.App.4th 643.  In this case defendant Moody's filed a SLAPP motion concerning the complaint brought by the Public Employee's Retirement System which alleged negligent misrepresentation.  The court found that the action arose from the rating agency's exercise of Constitutionally protected speech activities in that the structured investment vehicle ratings at issue constituted an ongoing discussion regarding the financial wellbeing of a significant investment opportunity that it was of interest to a definable portion of the public.  However dismissal under the SLAPP statute was not warranted because plaintiff had demonstrated a probability of prevailing on the merits.  Plaintiff had made out a case that the ratings were actionable as professional opinions or deliberate affirmations of fact regarding the nature and quality of the investment product.  Plaintiff also made a prima facia showing that they had justifiably relied on the ratings when purchasing the investment vehicles, and the defendant failed in its burden to prove a complete defense to the cause of action.

Piccinini v. California Emergency Management Agency (2014) 226 Cal.App.4th 685.  In this case a governmental appointee sued the agency he had been appointed to be employed by for wrongful termination, breach of contract and promissory estoppel alleging that he had incurred damages in relying on his appointment as the deputy chief of the agency, only to be told that just before he was to report for that work his position had been eliminated due to lack of funding.  The court found that a claim for promissory estoppel was proper under Government Code §19257 giving a claim to someone who accepts in good faith an offer a state employment even if it is in violation of the rules and statutes governing state hiring and civil service tenure that is subject to the appropriation of sufficient funds.  However, the causes of action for wrongful termination and breach of contract were subject to demurrer and the demurrer was properly sustained as to those claims.  The employment was not one held by contract but by statute and the employee had no vested contractual right and therefore could pursue the promissory estoppel claim only.

City of Montebello v. Vasquez (2014) 26 Cal.4th 1084.  This is another SLAPP action.  A city brought a declaratory relief action alleging that a former city administrator and three former city council members who had negotiated and voted on, respectively, a public contract in which they had a prohibited financial interest.  The contract involved a waste hauling company which had obtained an exclusive contract with the city.  The company made significant contributions to the council members' campaigns and the complaint alleged that the council members had voted to approve the contract with the expectation that the company would financially support their campaigns.

The SLAPP motion was denied with the court finding that the public enforcement exemption did not apply because the city's lawsuit did not involve an issue of statewide concern.  The alleged acts relating to the contract did not constitute protected activity.  The council members' acts of voting represented a commitment of the Legislative power on behalf of their constituents for the approval of the city contract which did not implicate their personal free speech rights nor any other personal First Amendment right.  Similarly, the administrator's negotiation of the contract as part of his job did not implicate the rate of free speech or the right to petition.

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