Chinese Drywall Manufacturer Claims Product Was Not for American Market
October 22, 2013 —
CDJ STAFFTaishan Gypsum Co. Ltd. Claimed in a hearing at the Fifth Circuit Court of Appeals that when they sold about $8.5 million of contaminated drywall to Venture Supply Inc. of Virginia, that they had no awareness that the drywall would be sold in the United States. Joe Cyr, an attorney for Taisan told the court that “Venture Supply never said it was going to distribute the goods in Virginia.”
One of the judges on the three-judge panel, Judge Jennifer Walker Elrod, was skeptical of Taishan’s claim, asking, “it was packed and labeled for the Virginia market, isn’t that correct?” When asked by a judge if Taishan was trying to avoid accountability, Cyr said that Tiashan “has not said that it doesn’t want to be accountable for its drywall.” Taishan holds the position that claims against it should be arbitrated in the People’s Republic of China.
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Attorney Writing Series on Misconceptions over Construction Defects
June 28, 2013 —
CDJ STAFFMark Wiechnik, a litigation partner at Herrick, Feinstein LLP, has started a seven-part series in which he looks at the misconceptions homeowner board members have when they’re facing construction defect lawsuits. He opens by setting the scene of unit owners “complaining of leaks, roof problems, mold and myriad of other issues”, but conflicting views on what to do about them. In his series, he looks at some of the most common mistaken assumptions and discusses how board members should respond.
Wiechnik’s first misconception examined is the claim that “we should file a homeowners warranty claim right away!” He notes that this is “rarely a good idea,” since if the building is more than two years old, the warranty will only be worthwhile if the building is near collapse. He also notes that once you file a warranty claim, “the association is precluded from ever filing a lawsuit on that issue.”
Additionally, Wiechnik points out that filing a warranty claim puts everything into the hands of an arbitrator, who gets control of the whole process and whose decision is final, whether the association is happy with the results. Further, he notes, “the program favors builders and contractors over the homeowners.”
In his second section, he looks at the fears that if the developer is bankrupt, there is no point is suing. Here he notes that the money for repairs does not come from the developer, but “from the developer’s and subcontractor’s insurance carriers.”
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Question of Parties' Intent Prevents Summary Judgment for Insurer
December 02, 2015 —
Tred R. Eyerly – Insurance Law HawaiiThe insurer's and insured's intent as to which entities were to be insured prevented the insurer's motion for summary judgment. Chaus v. State Farm Fire & Cas. Co., 2015 U.S. Dist. LEXIS 136311 (E.D. La. Oct. 5, 2015).
Water damage from a broken pipe occurred at the insured's building. Blaze Chaus LLC owned the building.The building was occupied by two entities which provided health care services: Dr. Kelly G. Burkenstock, M.D. and Azure Spa, Inc. Dr. Burkenstock was the sole owner of all three entities.
The application for commercial insurance was submitted by "Dr. Kelly G. Burkenstock, d/b/a/ Blaze Chaus LLC." The application requested a "Physicians and Surgeons Endorsement" and reflected that the business activities of the applicant as "Internal Medicine Doctor."
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Construction Client Advisory: The Power of the Bonded Stop Notice Extends to Expended Construction Funds
February 07, 2014 —
Steven M. Cvitanovic - Haight Brown & Bonesteel LLPCFO to CEO: “I have bad news, the developer on our biggest project has run out of money.” Frightening words for sure, but contractors should not overlook the bonded stop notice in situations where the construction lender seemingly has expended all construction funds. The recent case of Brewer Corporation v. Point Center Financial, Inc. 2014 WL 346636 illustrates this point.
Contractors have two options at their disposal to secure payment on private works of improvement. The first is the mechanics lien. However, construction loan trust deeds are normally recorded prior to the commencement of construction and therefore have priority over mechanics liens. Connolly Development, Inc. v. Superior Court (1976) 17 Cal.3d 803, 827. Enter the bonded stop notice. The bonded stop notice requires the lender to withhold unexpended funds and, if it fails to do so, it is personally liable to the claimant for the full amount of the claim. But the stop notice also has the power of “priority” over any assignment of construction loan funds, whether before or after a stop notice is served. Civil Code § 3166, now Civil Code § 8544.
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Steven M. Cvitanovic, Haight Brown & Bonesteel LLPMr. Cvitanovic may be contacted at
scvitanovic@hbblaw.com
Insurer Fails to Establish Prejudice Due to Late Notice
October 17, 2022 —
Tred R. Eyerly - Insurance Law HawaiiSummary judgment awarded to the insurer was reversed because the insurer presented no evidence of prejudice caused by untimely notice. Perez v. Citizens Prop. Ins. Corp., 2022 Fla. App. LEXIS 5435 (Fla. Ct. App. Aug. 10, 2022).
The insureds' home suffered water damage due to Hurricane Irma around September 10, 2017. A claim was submitted to Citizens on November 27, 2018. Citizens had an independent adjuster inspect, but then denied the claim due to untimely notice.
The insureds sued and Citizens moved for summary judgment. Citizens argued it was prejudiced because it could not confirm the cause of the loss or the property damage attributed to it.
The court agreed that the insureds' notice was untimely. The insureds were notified by tenants renting the property that leaks appeared around the time of Hurriane Irma. The policy language, however, placed the burden to rebut the presumption of prejudice caused by late notice on Citizens. Whether the insurer was prejudiced was a question of fact. Citizens failed to demonstrate any prejudice due to the untimely notice.
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Tred R. Eyerly, Damon Key Leong Kupchak HastertMr. Eyerly may be contacted at
te@hawaiilawyer.com
District Court of Missouri Limits Whining About the Scope of Waiver of Subrogation Clauses in Wine Storage Agreements
May 01, 2019 —
Gus Sara - The Subrogation StrategistIn Netherlands Ins. Co. v. Cellar Advisors, LLC, 2019 U.S. Dist. Lexis 10655 (E.D. Mo.), the United States District Court for the Eastern District of Missouri considered the scope of a waiver of subrogation clause in two wine storage agreements. The court held that the subrogation waivers were limited in scope and, potentially, did not apply to the damages alleged in the pleadings. This case establishes that, in Missouri, waivers of subrogation are narrowly construed and cannot be enforced beyond the scope of the specific context in which they appear.
In 2005, Krista and Reid Buerger (the Buergers) contracted Marc Lazar (Lazar) to assist with purchasing, transporting and storing their wine. In 2006, the Buergers entered into a contract with Lazar’s company, Domaine StL, for the storage of their wine in St. Louis. In 2012, the Buergers contracted with Lazar’s other company, Domaine NY, for storage of their wine in New Jersey. The 2006 and 2012 contracts included subrogation waivers. Pursuant to the contracts, Lazar and the Domaine companies (collectively, Defendants) would buy wine for the Buergers by either using the Buergers’ credit card or invoicing them after a purchase.
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Gus Sara, White and Williams LLPMr. Sara may be contacted at
sarag@whiteandwilliams.com
Beware: Hyper-Technical Labor Code Violations May Expose Employers to Significant Claims for Penalties under the Labor Code California Private Attorneys General Act of 2004 (PAGA)
May 10, 2017 —
Angela Reston-Nunez – Newmeyer & Dillion LLPMost employers know that companywide policies or practices that do not strictly comply with applicable state or federal employment laws can expose employers to class action lawsuits by large numbers of employees seeking recovery of massive sums in damages, attorneys’ fees and costs. Unfortunately, traditional class action lawsuits are not the only representative actions employers should be concerned with. Recent litigation trends have shown that California’s lesser known Labor Code Private Attorneys General Act of 2004 (“PAGA”) can be equally, if not more harmful to employers than class actions due to steep penalties for minor violations.
WHAT IS PAGA?
Under PAGA, “aggrieved employees” can sue employers for alleged Labor Code violations. Like class actions, a PAGA plaintiff sues on a representative basis on behalf of themselves and other workers. However, unlike class action plaintiffs, PAGA plaintiffs do not seek damages; rather, they seek civil and statutory penalties formerly recoverable solely by state agencies in enforcement actions.
The distinction between recovery of damages in class actions and recovery of penalties in PAGA actions reflects the often-insidious nature of PAGA claims. While workers have long alleged “derivative” PAGA claims for penalties in connection with more substantive underlying Labor Code violations (meal or rest break violations, for example), we have seen a recent spike in PAGA suits alleging hyper-technical Labor Code violations with no underlying substantive violation, and where the “aggrieved employees” have suffered no actual harm.
WHAT'S AT STAKE?
Equally troubling for employers is the method by which significant penalties are aggregated. With a few significant exceptions, penalties generally range from $50 to $250 per violation. At first blush, this may not seem like much, however total penalties rise rapidly when considering that calculations are made on a per-employee and a per-pay period basis.
AN EXAMPLE ON HOW PAGA WORKS
Consider the following example based on one recent case:
Issue: An employee brought a PAGA-only lawsuit on behalf of himself and 400 other “aggrieved employees” against his employer for alleged Labor Code violations.
Claim: The employee claimed the employer’s 30-year practice of paying employees 9 days after the close of the applicable payroll period violated Labor Code Section 204(d), which requires payment to be made within 7 days of the close of the payroll period. The employee claimed that, under PAGA, the employer was liable for a minimum penalty of $100 per employee, per pay period, going back at least one year (the statutory limitations period for PAGA claims).
Exposure: With 400 employees, 24 pay periods per year, and $100 per violation, the plaintiff sought a minimum of $960,000 in penalties (not including substantial attorneys’ fees, costs and interest also available under PAGA), despite offering no evidence of harm suffered by the employees or prior notice of the issue.
OTHER IMPORTANT CONSIDERATIONS
In addition to a draconian penalties scheme, there are a myriad of additional aggravating factors for employers involved in PAGA litigation, such as:
- PAGA plaintiffs are not required to meet the rigorous class certification standards required of class action plaintiffs, meaning plaintiffs’ attorneys may be more likely to bring meritless “strike suits” aimed at obtaining quick settlements based on significant alleged penalties exposure.
- 75% of PAGA penalties recovered by way of settlement or judgment are directed to the state of California, while the "aggrieved employees” only keep 25%, reinforcing the notion that PAGA claims are frequently attorneys’-fee-driven, rather than for protecting employees.
STEPS FOR EMPLOYERS TO PROTECT THEMSELVES
Fortunately, there are a number of measures employers can take prior to and during wage and hour litigation which can dramatically reduce, or even eliminate, exposure to substantial penalties and damages. This includes:
- Regular reviews. Prior to litigation, we recommend regular detailed reviews of company policies and practices in order to identify areas of possible concern and ensure compliance with California’s ever-changing labor laws.
- Take action. On receipt of a new PAGA claim, taking immediate action to remedy an alleged violation within the Labor Code’s 33-day “safe harbor” time-period may help limit an employer’s exposure, and could bar a plaintiff from filing suit at all.
- Be aggressive. Once a PAGA or class action claim is in litigation, a proactive, aggressive approach to claim evaluation, investigation and litigation is critical.
For these reasons and more, it’s in an employers’ best interest to monitor these issues closely and seek input when appropriate.
Angela Reston-Nunez is a labor and employment attorney in Newmeyer & Dillion’s Walnut Creek office. For questions regarding PAGA, class action or individual wage and hour issues, or other employment law matters, please feel free to contact Angela Reston-Nunez at (925) 988-3249 or angela.reston-nunez@ndlf.com.
About Newmeyer & Dillion
For more than 30 years, Newmeyer & Dillion has delivered creative and outstanding legal solutions and trial results for a wide array of clients. With over 70 attorneys practicing in all aspects of business, employment, real estate, construction and insurance law, Newmeyer & Dillion delivers legal services tailored to meet each client’s needs. Headquartered in Newport Beach, California, with offices in Walnut Creek, California and Las Vegas, Nevada, Newmeyer & Dillion attorneys are recognized by The Best Lawyers in America©, and Super Lawyers as top tier and some of the best lawyers in California, and have been given Martindale-Hubbell Peer Review's AV Preeminent® highest rating. For additional information, call 949-854-7000 or visit www.ndlf.com.
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Melissa Dewey Brumback Invited Into Claims & Litigation Management Alliance Membership
October 14, 2013 —
CDJ STAFFMelissa Dewey Brumback has been invited to join the Claims & Litigation Management Alliance, an “invitation only” organization of insurance companies, litigation and risk managers, claims professionals, and attorneys. Ms. Brumback, an attorney at Ragsdale Ligget PPLC, has a practice that focuses on construction law and business disputes. Her clients include architects and engineers in construction-related claims. Ms. Brumbuck is respected as an author and lecturer on construction law.
The Claims & Litigation Management Alliance comprises the leaders of claims and litigation management. Members are risk and litigation managers, insurance and claims professionals, and corporate and outside counsel.
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