Changes Coming

Things have gone pretty dark in the last month here at the Northwest Small Business Law Blog. Not to worry. New and exciting things are in store for 2010, so stay tuned!

Supreme Court: “Willful Efforts” to Undermine Pretrial Discovery = $8m Default Judgment

Another reminder that cooperation in discovery is a strong policy in Washington. Full opinion here. From the Supreme Court of Washington Blog:

Magana v. Hyundai Motor Am., No. 80922-4. In a 7-2 vote, the Washington Supreme Court reinstated an $8 million default judgment against the Hyundai Motor Company for its “willful efforts” to undermine pretrial discovery in a personal injury lawsuit brought against the company. Jesse Magaña was riding in a 1996 Hyundai Accent, driven by Ricky Smith. They saw an oncoming truck driven by Dennis Nylander that appeared to be in their lane. Smith swerved, driving the car off the road. Magaña was thrown out of the rear window and was rendered a paraplegic due to his injuries.

Magaña filed suit against Hyundai Motor America and Hyundai Motor Company, the Smiths, and the Nylanders. At trial one of Magaña’s expert witnesses testified that a different seat belt design would have prevented Magaña’s injuries. Magaña prevailed at trial and was awarded over $8,000,000 in damages. On appeal the Court of Appeals reversed the ruling as it applied to Hyundai, and remanded for a retrial to address the issue of liability.

Today the Supreme Court, with Justice Richard Sanders writing for the majority, overturns the Court of Appeals and reinstates the $8 million default judgment. Court rules authorize a trial court to impose sanctions when a party fails to satisfy discovery requests, which can range from exclusion of evidence to default judgment. Harsh sanctions are justified when: “(1) one party willfully or deliberately violated the discovery rules and orders, (2) the opposing party was substantially prejudiced in its ability to prepare for trial, and (3) the trial court explicitly considered whether a lesser sanction would have sufficed.”

Fed. Arbitration Act Does Not Preempt Unconscionability Cause of Action

Courtesy of Willamette Law Online:

(1) Laster v. AT&T Mobility LLC

No. 08-56394 (10/27/09)

Before Circuit Judges Schroeder, Reinhardt and Bea

http://www.ca9.uscourts.gov/datastore/opinions/2009/10/27/08-56394.pdf

Arbitration Agreements / Federal Arbitration Act / FAA Does Not Preempt State Unconscionability

Opinion (Bea): A class action suit was filed against AT&T Mobility (“AT&T”) in the district of California alleging AT&T fraudulently offered free phones to all who signed up for its services. AT&T charged its new subscribers the sales tax based on the fullretail value of the free phones, spurring the individual claims of the class action. AT&T responded by pointing to the arbitration agreement in the Wireless Service Agreement (“WSA”) that requires arbitration of individual claims and waives class action suits. This arbitration agreement was revised to add a premium payment clause stipulating $7,500 payment to any California customer to receive an award through arbitration greater than AT&T’s last written settlement offer prior to selection of an arbitrator. AT&T filed a motion to compel arbitration based on this arbitration clause. The district court denied the motion, reasoning the arbitration agreement was unconscionable, and the Federal Arbitration Act (“FAA”)does not preempt California unconscionability law. AT&T timely filed an interlocutory appeal. The Ninth Circuit held that the class action waiver in the arbitration clause is unconscionable because (1) the agreement is a contract of adhesion, (2) the disputes with AT&T will likely to involve small amounts, and (3) the claim against AT&T alleges AT&T deliberately intended to cheat a large number of individual consumers out of small amounts of money. Further, the FAA does not preempt California unconscionability law because unconscionability is a generally valid contract defense, and it does not impede the FAA’s objectives. AFFIRMED

[Summarized by Rick Stockmann]

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Willamette Law Online provides a fantastic case summary service covering the Ninth Circuit, Oregon Courts, Intellectual Property, and the U.S. Supreme Court. Summaries are delivered weekly to your email inbox. You can subscribe to the summary service here.

2009 Washington Legislative Session Summary

Written by Matthew Bisturis of Schwabe, the 2009 Washington Legislative Session Summary: Tax and Business Legal Update is just that – a great update. Topics include:

• Corporations: Shareholder Action Without Meeting
• Limited Liability Companies: Reinstatement of Dissolved Limited Liability Companies
• Limited Partnerships: Uniform Limited Partnership Act
• Limited Liability Partnerships: Registered Agents
• Corporations: Corporations Sole
• Domestic Partners Treated as Married Persons
• Like-Kind Exchanges: New Regulation of "Exchange Facilitators" – 1031 Exchanges
• Recent Cases: Corporations: Shareholder Derivative Suits and Shareholder Dissenter's Rights
• Recent Cases: Limited Liability Companies: Liability of Dissolved LLCs

Thanks for the link, Oregon Legal Research Blog!

I want to say thanks to the Oregon Legal Research Blog for posting a link to this blog. Much appreciated!

The Oregon Legal Research (OLR) Blog explores the world through the mind of an Oregon public law librarian. Legal research tips, advice to the legal blawger/blogger, commentary on reading material, not a small amount of humor, and a few digressions will be included. A regional flavor will prevail, primarily Oregon and Portland-metro area, though the OLR bloggers reserve the right to post about places once lived and experiences savored – all with a legal research connection, of course.

Inside Your Law Firm: Avoiding Conflicts and Managing Risk

Today's post is akin an an "inside baseball" discussion (shout-out to Cliff Lee for his superb World Series performance last night): how to avoid conflicts and manage risk in your law firm. Actually, this is good information for your clients to understand as well - if they comprehend the rules we attorneys operate within, clients will be more inclined to sign a conflict waiver or nod in agreement when you explain that you cannot represent them in a particular case. Christopher Howard and Colin Folawn are the co-founders of Schwabe Williamson & Wyatt’s monthly ethics hour CLEs (which are open for all lawyers to attend and listed on the WSBA website). Their article, "Taking the 'Risky' Out of Your Business' is a great primer and reminder of best-practices in law firm risk management. It covers client intake, competence, communication, and technology. Full article here; excerpt below:

Lawyers are in the business of giving advice. This includes advice on how to manage risk. Yet lawyers frequently need to be reminded to follow their own advice. For the purposes of this article, risk management is taking steps to avoid lawsuits against you or your firm, bar complaints and unpaid bills. This article addresses some of the biggest red flags to be addressed in law office risk management.

Client Intake

It is always wise to fight a problem “on the beaches,” before it gets ashore. For lawyers, this means client and case intake. A disproportionately large number of claims and complaints against lawyers arise from clients and/or matters that should never have been taken in the first place. This may be the single biggest area where lawyers can manage their risk.

There can be a great deal of pressure for lawyers to bring in new business. But we cannot let this pressure overcome our better judgment when we are approached to take on a new matter.

There are many ways to identify clients or cases that should not be taken. In many cases, you will have a bad feeling during the first intake meeting. You should not ignore this feeling. If something seems wrong about the case or the client, you should think twice (or thrice) before taking the work.

Washington Appellate Court: Reconsideration of Mandatory Arbitration Not Available

In Dill v. Michelson Realty Co., 2009 Wash. App. LEXIS 2646 (No. 38063-3 October 20, 2009), Division Two of the Washington State Court of Appeals ruled that direct appellate review of a judgment on a mandatory arbitration award is not available. The court held that trial de novo is the "sole way to appeal an adverse decision in chapter 7.06 RCW [Mandatory] arbitration." Specifically, an appeal for a limitation on attorneys fees cannot be directly appealed.

The Dills sued Michelson realty and others under the Residential Landlord-Tenant Act (RLTA) for damages and loss of property related to an apartment and storage garage rental. The case proceeded to mandatory arbitration, and per the rules of mandatory arbitration the Dills agreed to waive any claims in excess of $50,000. The arbitrator awarded $45,000 in damages plus attorney fees and costs, which put the entire award above $70,000. Michelson petitioned the trial court and then the appellate court for modification of the award to cap it at $50,000. Both courts declined, refusing to alter the arbitration award except to add greater attorney fees. Division Two held there "is no mechanism for reconsideration of a mandatory arbitration award," absent trial de novo.