Developments of Interest

New Cases of Interest - November 20, 2012

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Kandy Kiss of California, Inc. v. Tex-Ellent, Inc. (2012) 209 Cal.App.4th 604.  In this case a seller provided a fabric sample to the buyer from which the buyer developed a garment line using the print design on the fabric sample.  Another entity owned the design copyright and sued the buyer in Federal court for copyright infringement, successfully.  Buyer then brought suit against the seller for breach of warranty, and the seller sought to dismiss the action for lack of subject matter jurisdiction, contending that the dispute was a copyright dispute and jurisdiction was therefore exclusively in Federal court.  The trial court agreed and dismissed the buyer's complaint awarding attorney's fees to the seller based upon a purchase order form and an invoice which contained provisions for attorney's fees.

The appellate court affirmed the award regarding attorney's fees finding that the seller was entitled to recover even though there had been no trial on the case because the dismissal was unqualified and ended the buyer's ability to obtain a judgment.  The entering of the order on a subject matter jurisdiction basis was still a sufficient dismissal to trigger the attorney's fees clause.

CitiBank N.A. v. Tabalon (2012) 209 Cal.App.4th Supp. 16.  This is a SLAPP case in which a debtor had brought a cross-complaint against a creditor for unfair debt collection practices and the creditor sought to strike the cross-complaint.  The motion was denied, with the Appellate Division of the Superior Court determining that it did not have jurisdiction to review a pre-judgment ruling on an anti-SLAPP motion in a limited civil case, finding instead that any ruling on an anti-SLAPP motion must go to the Court of Appeal.  The Appellate Division determined that because of the absence of any other language in the statute, the Legislature must have intentionally excluded interlocutory appeals in limited civil cases because the statutory language regarding an appeal is expressly with regard to unlimited civil appeals.

Chaker v. Mateo (2012) 209 Cal.App.4th 1138.  This is another SLAPP action which followed a defamation complaint with the trial court granting the defendant's SLAPP motion, which the court of appeal affirmed.  The appellate court concluded that the defamation claim arose from the exercise of the right of free speech and the defamatory statements were of public interest.  The underlying facts involved a brief romantic relationship between the plaintiff and the defendant and during the relationship the defendant became pregnant and had the plaintiff's child.  There was a contentious paternity and child support dispute which followed.  On an internet consumer website there were a series of derogatory statements made about the plaintiff by the defendant and these also appeared on a social networking website which provided an open forum for members to comment on a variety of subjects.

The court of appeal found the statements which were part of "rip off report" website to be within the context of consumer information of public interest and the social website comments received similar treatment.  Plaintiff then failed to establish a probability of success on the merits of his claim resulting in the granting of defendant's SLAPP motion.

Mastick v. TD Ameritrade (2012) 209 Cal.App.4th 1258.  In this case a client investor had signed two investment management agreements, each of which contained an arbitration clause that specified different arbitration rules.  One of the agreements provided that it was governed by California law, while the other provided it was governed by Nebraska law.  The trial court concluded that there was the possibility of inconsistent outcomes and applied CCP §1281.2(c) to stay the arbitration.  On appeal the court found that this was appropriate in the agreement that was governed by California law, but not as to the agreement which was governed by Nebraska law, because the Nebraska statute did not have a provision similar to CCP §1281.2(c) which would give the trial court discretion to stay the arbitration proceedings.

Cleveland v. Johnson (2012) 209 Cal.App.4th 1315.  Certain investors provided capital to a company that was developing a new line of business and in exchange were to receive a percentage of the profits from the business.  The president of the company and other controlling shareholders formed a new corporation to operate the project, and the company in which the investors had provided capital became insolvent.  The investors brought an action for breach of contract based on successor liability and ratification theories, and also for breach of fiduciary duty.  The court found that the doctrine of successor liability can be applied to a corporation that succeeds to the assets of an unincorporated, but clearly separate, line of business of another corporation.  Successor liability is by nature an equitable doctrine, and it is appropriate to examine successor liability on the unique facts of each case.  Here the facts of inadequate consideration, fraud and breach of fiduciary duty were sufficient to support application of the successor liability doctrine.

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