Putting the “Alternative” Back in Alternative Dispute Resolution

business conflict resolution concept

A recent settlement victory showed me once again that you can achieve amazing results at a mediation if you never lose sight of the fact that you are unrestrained by any “negotiating rules”, even if (or perhaps especially because) no one else in the room understands that to be the case.

Most who attend a mediation have in their minds that meditations must go a certain way, completely forgetting the “Alternative” in “Alternative Dispute Resolution”. Use that to your advantage, and don’t be afraid to let your crazy out.

I’m reminded of the scene from Fort Apache the Bronx, with Paul Newman. Not the greatest movie, but in one memorable scene, a cop (played by Newman) is confronted by a knife-wielding crazy person. Continue reading

Of course it’s a “self-serving declaration”! Why else would I file it?!

Frustrated Male Judge With Gavel And BookIf you lose a motion and rail against the stupidity of the judge, that’s just viewed as sour grapes. But today I was in court for a hearing, and it was the case BEFORE mine that raised my hackles, so I can rant with impunity. (And yes I won my motion, so this isn’t indirect sour grapes either.)

I mostly hear this refrain from opposing counsel, but judges sometimes make the same stupid remark. That remark is referring to a declaration as “self-serving”, and arguing that it should be disregarded on that basis. In reality, if you are filing declarations that aren't self-serving, you are doing something horribly wrong.

Let me give you the facts of the case in question so you’ll see what I’m talking about. Continue reading

Don’t Be That Attorney — Misstating Record on Appeal

Misstated RecordAs reported elsewhere, we received a very satisfying verdict of more than $1.5 million resulting from a defamatory email sent by a defendant, concerning our client. The defendant did not go silently into the good night, and appealed the verdict, claiming that there was insufficient evidence to support an award of that size.

That's all fine and good, but in appealing the verdict, the defense attorney completely misstated the record. On an appeal based on insufficient evidence, the appellant is required to set forth all the evidence that would tend to support that verdict. Indeed, if the appellant fails to do so, the Court of Appeal can deem the issue waived.

I devoted a full two-thirds of my responsive brief on appeal just setting the record straight by pointing out all the misstatements made by defense counsel. Continue reading

Don’t be That Attorney – If You Must Rant, At Least be Right

Angry man ranting and insulting rocketsI’m at the drive through teller at my bank yesterday, to cash a small check. I sign the back of the check and send it up the tube with my driver’s license and ATM card, a process I have followed dozens of times. But this teller is clueless. He asks if I have an account there, then asks for more identifying information, then he asks for the name of my business (even though the check is made out to me and has nothing to do with the business).

I remain calm, even when he comes back and says he cannot cash the check because they can’t find my account. I calmly ask, “You can’t get my account number from the ATM card?” He politely responds, “We can, but you only sent your license and a credit card.” I look down, and realize I had sent the wrong card. He had not been clueless at all, and was actually being quite accommodating trying to find my account information with what I had provided.

So what is the point of this quaint story? Imagine if when he had told me that he could not cash the check, that I had torn into him, calling him an incompetent idiot for being unable to look up my account information from my ATM card like every teller before him had been able to do? Then my diatribe would have all fallen back on me, and I would have been the idiot; a lesson I have learned from other times that I did not hold my tongue.

Realize that as an attorney, you can be wrong, no matter how convinced you are of your position, and that a rant seldom serves any purpose and can come back to bite you. Bringing us to today’s attorney not to emulate.

As reported by ABA Journal, Above the Law, CBS NewsPatentlyO, and even a blog about whiskey, a patent attorney apparently had had enough of patent examiners denying his applications. I don’t do patent law, but in my never to be humble opinion his client's “Telescoping Tripod Sprinkler Cart” was not eligible for a patent. Examiner Alexander Valvis agreed with me and rejected the application. The patent attorney responded by FILING the following rant:

REMARKS: Are you drunk? No, seriously … are you drinking scotch and whiskey with a side of crack cocaine while you “examine” patent applications? (Heavy emphasis on the quotes.) Do you just mail merge rejection letters from your home? Is that what taxpayers are getting in exchange for your services? Have you even read the patent application? I'm curious. Because you either haven't read the patent application or are … (I don't want to say the “R” word) “Special.” Continue reading

Don’t be that Attorney – Ten Ways to Make Yourself Look Foolish

I’ve had this article in mind for quite some time. I see attorneys make the same mistakes over and over, and I thought by posting an article listing those mistakes, I would have a place to send them to explain, in the nicest possible terms, that they are making themselves look like idiots.

The article idea sat on the back burner because I had not witnessed these mistakes for awhile. I was almost beginning to believe that with the ease of information retrieval via the Internet, perhaps attorneys had finally figured out these mistakes on their own. Foolish me. I saw opposing counsel in three of my cases make some of these mistakes just this week.

Most of these mistakes are specific to California civil procedure, but I’m sure even if you practice in another state you will have attorneys making similar mistakes under your procedural rules. I’m sorry this article is so long, but attorneys do a lot of boneheaded things. Feel free to direct other attorneys here when you see them making these mistakes.

1. Making a threat not based in reality.

Earlier this week, my firm substituted into a case involving a business tort. There had been problems with the client’s discovery responses before we got involved, and the day after we came into the case there was a hearing on a motion to compel. I successfully persuaded the court to reduce the sanctions sought against the client, but the court appropriately awarded about $600 in attorney fees for the time opposing counsel had spent on the motion.

Two days later I received a faxed letter from opposing counsel, demanding that our client “pay the $600 in sanctions within 48 hours.” The letter explained that if my client did not pay those sanctions with 48 hours, opposing counsel would go to court for additional sanctions.

There is no “sanctions for failing to pay discovery sanctions” motion. Sanctions can be reduced to a judgment, making all the normal methods for collecting a judgment available, but the court cannot force the payment of discovery sanctions. Even if there were such a motion, no court would impose additional sanctions for sanctions that had not been paid in four days. (Sanctions ordered paid to the court are a different matter of course.)

I wrote back to opposing counsel, asking him to provide the authority for seeking sanctions for failing to pay sanctions, and advising him that if he felt it was a good use of his time to prepare, file and argue whatever motion he had in mind in order to recover $600, he should do so, although I did anticipate that he would have the check in the next ten days if he could be patient. Ever helpful, I provide him with The Rutter Group citation explaining how discovery sanctions are recovered (section 9:1285 of Civil Procedure Before Trial if you want to check me). He wrote back, acknowledging that he was not aware of any authority, and thanked me in advance for the check.

What did that threat from opposing counsel accomplish, other than to show he does not know what he is talking about? You know what happens when you cry “wolf”. Never make a toothless threat. If you are going to posture, make sure the law backs you up. Otherwise you just look bad.

[7-3-2014 UPDATE:] This precise scenario arose in a current case, with me coming into the case on the eve of a motion to compel. This time, counsel screamed that he was going to seek a contempt order if my client did not pay the sanctions by a certain date. Again, ever helpful, I pasted this article into the bottom of my reply email and advised him that “failure to pay court ordered discovery sanctions is not enforced by a contempt procedure. I’ve provided an article below that provides information on how the failure to pay court ordered discovery sanctions is handled.” He responded with the technique often employed on elementary school playgrounds, where the child who was just beaten at tether ball turns to the victor and says, “yeah, well you’re ugly.” His response was, “If your own opinion, as expressed on your own blog, is the sole foundation for your position . . . we wish you the best of luck.” Did he not see the citation to The Rutter Group?

Many attorneys erroneously believe that advocacy involves lots of threats, arm waving and posturing. Recently I was bringing an ex parte application in a real property dispute. Our local rules require notice to the other side at least 24 hours before the hearing, and in the supporting declaration you must specify that said notice was provided, and state whether opposing counsel opposes the ex parte application. I can only know if you oppose the application by asking.

I am all about giving proper notice, because I don’t want to have to come back to court again when opposing counsel claims they did not have sufficient notice, so I provide notice by phone and in writing. One of the opposing attorneys was not available by phone, so I left a voice mail and then faxed and emailed a letter, asking in all instances if he intended to oppose the application. He responded to the email, stating that he would appear in court “and VEHEMENTLY oppose your motion!!”. I’m not kidding. Capital letters and two exclamation points (the bold was my own touch).

What was the point of that? It’s not enough to tell me that you will oppose the application; you have to make clear that you are REALLY, REALLY going to oppose the motion? Still ever helpful, I replied to the email, telling him to remember to breathe while being all vehement. True to his word, he was very loud and animated at the hearing, questioning at some point if I had really attended law school as I recall, but I won the motion (naturellement). I’m sure he felt worse than he would have if he had just opposed the motion, and not been quite so vehement.

I learned a long time ago that posturing accomplishes nothing. The other side already knows the strength or weaknesses of their case or defense (as well as yours), so posturing won’t change anything in that regard, and if you lose after a lot of posturing, you just feel stupid.

2. Failing to understand service and how the USPS works.

I sometimes wonder if there is a practice guide or seminar that offers these bad litigation tips that seem to reappear every six months or so. This is one I had not seen for quite some time, and then up it jumps again.

In another real estate case, we timely responded to some discovery propounded by the other side. Three days later, we received a letter from opposing counsel, explaining that he had not received the responses, that we had therefore waived all objections, and that if he did not get the responses in a week without objections, he would move to compel, get millions in sanctions, sell our children into slavery, and all the other usual nonsense.

Let me walk you through this so you never embarrass yourself like this attorney. How quickly you receive something mailed by opposing counsel depends on a number of factors, including when each side’s office has mail pick up and delivery. Our fine Legislature recognized this, and built it into the system. That’s why you get a full five extra days to respond to service by mail.

Let’s say the fine people from the USPS do not pick up mail from your office until 3:00 p.m. You prepare your discovery responses for service, give them to your secretary, and she prepares the proof of service, indicating it was mailed on that day. To keep it simple, let’s say she mailed the discovery responses on a Monday. But “mailed” does not mean she put it in a mailbox. The service statute provides that she can put it in the outgoing mail basket for mailing “following ordinary business practices.” Most offices don't make multiple runs to the mailbox throughout the day. In our hypothetical office, the procedure would probably be to run mail to the box before 3:00, and then again at the end of the day. That's the procedure my office follows, although I imagine most offices just run the mail down to the box once a day before that day's pick up, and the result would be the same. If the discovery was completed after 3:00, then that mail will not actually be picked up by the mail carrier until the following day. Perfectly okay under the rules, but you've just lost one day. So on Tuesday, the mail carrier picks up the mail at 3:00, drives around with it for the remainder of the day, and finally deposits it in the post office that evening for processing.

Does that discovery get processed in a single night and arrive at opposing counsel’s office on Wednesday? It could happen, especially if opposing counsel’s office also happens to have late mail delivery, but there is a reason you pay extra for overnight service, and even “priority mail” takes two days or more. Most of the time Tuesday’s mail will not be completely organized and put into the trucks for delivery until Thursday. That letter mailed on Monday could get to opposing counsel as early as Wednesday, but it could take four days or more, depending on whether the mail sorting or delivery guys called in sick, although the post office is usually very good about getting it all postmarked on the day it is received.

So what was wrong with this attorney sending the letter on Thursday, the day he should have anticipated receiving the responses? Admittedly, he was better than some attorneys I have seen who send the letter the day after the responses are due, but the problem remains that the letter went too far. Before posturing and threatening, just check the postmark when the documents are received! If he wanted to send a courteous letter saying the responses had not yet arrived, that’s fine, but he should have saved all the posturing about waived objections until he had the postmark in hand, because when he did receive the responses and saw from the postmark that they were served on time, he had to feel foolish. Making matters worse, he was guilty of:

3. Screaming that the proof of service was not signed.

Having received a document with an unsigned proof, opposing counsel will sometimes write to me to say something like, “we do not accept that your service was proper because the proof of service was UNSIGNED!!” (This is why I suspect this bad litigating comes from a seminar or “how to” book, because “unsigned” is always in all caps with two exclamation points.) Even more humorous, I have had cases where opposing counsel argued in opposition to a motion that the motion should be disregarded because the proof of service is unsigned and therefore there is no verification that the motion (they are responding to) was ever served. In the case just cited, opposing counsel wrote to say the discovery obviously must have been served late, “as evidenced by the fact that the proof of service is UNSIGNED!!”

Again, allow me to walk you through this so you won’t look foolish like this attorney.

When you file a document with the court or send discovery to the opposition, you prepare a proof of service attesting to the fact that you mailed – past tense – the document to opposing counsel. How can I make that stand out more? You are attesting that you mailED, mailED, mailED the document. If you sign the proof of service before you mail the document, you are perjuring yourself. If the proof of service you send to opposing counsel is signed, then that means you signed the proof of service, attesting that you mailed the document, before you actually mailed the document.

Yes, I get how it works in the real world and why 90 percent of attorneys do it wrong. The attorney prepares the court document and gives it to the secretary. The secretary prepares and signs the proof of service, makes copies, and then puts the original in the attorney service basket, mails a copy to opposing counsel, and keeps one copy for the file. But that is not proper service. We properly serve all documents with UNSIGNED!! proofs of service, so it can be done. Every court document you send to opposing counsel should have an UNSIGNED!! proof of service.

If you still cannot accept what I am saying because it so challenges your cherished beliefs, here is an official website from a Superior Court backing me up (item 3). Better yet, here is the official proof of service by the Judicial Council, with instructions on how to serve someone, specifically stating in item 3b that the proof of service sent to the other side must be unsigned.

Or, I don't know, how about if we just check the Code of Civil Procedure that sets forth the rules for service. CCP § 1013(b) states: “The copy of the notice or other paper served by mail pursuant to this chapter shall bear a notation of the date and place of mailing or be accompanied by an UNSIGNED!! copy of the affidavit or certificate of mailing.” (Emphasis added.) There is identical language for service by fax and email.

[2-15-2013 UPDATE:]  I was able to use this article for its intended purpose almost immediately. Rather than prepare a long letter explaining to opposing counsel why proofs of service are unsigned — oh, sorry, UNSIGNED!! — I directed him here. Despite my best efforts, complete with capital letters in varying colors, copious use of bold text and supporting authorities, including CCP § 1013(b), after reviewing this article he wrote again to advise that “I stand by my position that discovery served with an unsigned proof of service is invalid and does not preserve any objections.”

You know, as a philosopher once said, all you can do is all you can do.

4. Objecting to discovery when a demurrer is pending.

I am not a big fan of demurrers, and often when I see them it is clear the attorney is billing for the sake of billing. Opposing counsel once demurred to a complaint I filed that alleged our client had been terminated without cause. He demurred saying he could not imagine what we meant by “terminated without cause”. How can one provide more detail about how a termination was without cause? Maybe if we had used stronger words? “Plaintiff was absolutely, positively fired without cause.” Or perhaps, “Plaintiff was really, really, really fired without cause, and that's no lie.”

Anyway, if I bring a demurrer, there is good reason to do so. But it can take a month or more to have my demurrer heard, so I conduct discovery while the demurrer is pending. Often, I serve the discovery along with the demurrer.

I cannot tell you how many objections I have received, stating that discovery cannot occur while there is a demurrer pending. I had one attorney fight it all the way through a motion to compel on that basis.

Yes, you can conduct discovery while a demurrer is pending. Come on people. The Rutter Group – Civil Procedure Before Trial. It’s not hard to look this stuff up.

[1-14-2014 UPDATE:]   You ever hear a new word, and then you hear it like five times over the next week, and wonder how you could not have been aware of that word your whole life?  Well, maybe not, but it has happened to me, and this article is a little like that. I wrote it and now I'm seeing these rules broken in seemingly all of my cases.

I served the first round of written discovery with a demurrer to a complaint, and about two weeks after the responses were due, I got around to sending opposing counsel a friendly letter that the responses were still outstanding.

“Ha, ha, ha”, he chortled on the phone, “you can't serve discovery while a demurrer is pending, so we just ignored those.”

Can you say, “waived all objections?”

[1-1-2016 UPDATE:] Effective January 1, 2016, before filing a demurrer, you are required to meet and confer with opposing counsel, at least five days before a responsive pleading is due, to determine whether the filing of an amended complaint would address the points you plan to make in your demurrer. Then (assuming opposing counsel doesn't agree to file an amended pleading), you must file a declaration with your demurrer, specifying your meet and confer efforts. If the opposing party fails to meet and confer, you are granted an automatic 30-day extension to respond. See CCP § 430.41]

5. Objecting to discovery propounded before answer filed.

The plaintiff must wait ten days after service of the complaint before he, she or it can serve discovery. (And until the defendant appears in the action, it must be personally served.) There is no such limitation as to the defendant. As soon as the defendant receives the complaint, he can serve you with discovery, and even though he has not appeared in the action, he can serve that discovery by mail because the plaintiff has appeared. Look it up and stop objecting.

[7-1-2014 UPDATE:]  Well, this is more of a confession of ignorance rather than an update. For some reason, I get more emails about my prior parenthetical statement than anything else in this article. No, I cannot cite you to any authority requiring that a defendant be personally served with discovery prior to his appearance in the action, but it just makes sense. Service of a complaint by mail is insufficient, but once the defendant appears in the action, then you can serve at the address he, she or it sets forth in that first court document. To me, the defendant “agrees” to be served at the address he specifies in the first appearance document, and you don't have that authorization until then. If you have actual authority one way or the other, please let me know.

6. Objecting to an amended complaint filed after service of a demurrer.

This one doesn't happen very often, but I still see it occasionally and this embarrassment sometimes ends up in front of the court. I serve a complaint, the defendant files a demurrer, and after I review the demurrer, I decide the points are well taken and file an amended complaint instead of opposing the demurrer. I have actually received letters threatening sanctions for filing an amended complaint without leave of court, and have seen attorneys file a reply, outraged that I thought I could get away with just filing an amended complaint in response to a demurrer. My favorite was the attorney who wrote in his reply, “is it counsel’s plan to simply file an amended complaint every time we file a demurrer?”

Yes, you can file an amended complaint (once) without leave of the court at any time before opposition to the demurrer would be due. Here’s a very effective tip. If I file an amended complaint in response to a demurrer, I file a one-page “opposition” to the demurrer, just explaining that I filed an amended complaint, and citing the authority for doing so, hoping opposing counsel will read it and not do anything crazy. This should not be necessary since the filing of the amended complaint moots the demurrer, and the court will automatically take it off calendar, but a court once worked up a demurrer because it failed to see I had filed an amended complaint, and this procedure of filing an “opposition” avoids that.

The flip side of this is I see a lot of attorneys fighting clearly valid demurrers, when they should just amend the complaint. If the demurrer is well taken, just amend and don’t fight for the sake of fighting.

7. Failing to amend well in advance of demurrer hearing.

TDon't be a jerkhis one I see far too often. The other side files the complaint, I demur, and the opposing counsel files the amended complaint the morning of the hearing. Technically that is permitted [Not any more! See below.], but it is extremely jerk-like behavior. You forced the court to read and work-up the demurrer for no purpose. Don’t be a jerk. File the amended complaint on or before the day your opposition to the demurrer would be due. If you are pressed for time and unable to file the amended complaint before then, file a one page opposition stating that you are going to file an amended complaint. That will at least put the research attorney and/or court on notice.

[1-1-2016 UPDATE:] The California Legislature agreed with me, and added an “anti-jerk” provision to CCP § 472. Effective January 1, 2016, any amended complaint or cross-complaint must be filed by the date the opposition to the demurrer is due, or the ability to amend without leave is lost.]

Even with motions other than demurrers, always keep firmly in mind the fact that the judge must actually read (although in some courts it appears that they don't) and decide motions. Be sure to notify the court when the need to do so has been mooted.

In one of my cases, I filed a very detailed motion and the defense responded with an equally detailed opposition. As is my practice, I took out a legal pad, drew a line down the middle of the page, and went through the motion, setting forth each point and counter-point, in preparation for drafting my reply.

I worked my way through the entire opposition, which concluded with this language:

In the interest of preserving the record, it was necessary for defendant to show the fallacy of each of the points raised by the motion. However, defendant does not oppose the motion.

I filed a reply to point out to the court that the motion was unopposed, hoping it would not unnecessarily go through my motion and the opposition. I had attended a seminar where a judge had explained that he works up motions by first reading the reply and working backwards. I was hopeful this judge would follow that practice.

When the tentative ruling was posted online, it stated only, “The parties must appear.” The judge wanted defense counsel there so he could explain to her that he had read and researched my motion, and then read and researched the cases raised in the opposition, only to then reach the conclusion and realize the motion was unopposed. He was not happy.

Don't be a jerk with the court.

8. Objecting to “after hour” faxes.

Our court rules require that notice of an ex parte hearing be given no later than 10:00 a.m. the day before the hearing. Sometimes, if I have something going on the next day, I will fax and email the notice before I go home the night before. If I’m working late, that notice might go out at six or seven o’clock.

That process sometimes generates letters and emails from opposing counsel, screaming how I sent out the notice “after hours”, and stating that I am never again to send notice by fax or email given my outrageous behavior.

Think before you type, counsel. I wasn't required to give you notice until 10:00 a.m. the following day, but ever helpful, I gave you more than 12 hours of additional notice. In this world of mobile email, if you get my message, you have an additional 12 hours to adjust your schedule and plan your opposition. Absolute worse case scenario, if you don’t get the message until you arrive in the office the next day, I've probably given you a couple of extra hours of notice. You have lost nothing and gained everything by my “after hours” notice. If you are going to send me a letter, it should be to thank me for the extra notice. Heck, a fruit basket would be appropriate.

So fine, counsel, you just sent me a letter demanding that I never give you any more notice than is absolutely required under the statute. You like emergencies, and damn it, I’d better not do anything to keep this from being all the emergency it can be. Hey, no problem. My email lets me set the outgoing time. By all means I will take you off my courteous list and make certain you get those notices at the last possible moment.

Don’t immediately assume that everything opposing counsel does is for some nefarious purpose. Many years ago, I was co-counsel with another firm on a big case. We obtained a very large judgment for our client, and afterwards I got a call from the opposition, asking for the total amount with costs, attorney fees and interest, so the defendant could write a check and avoid the cost of those additional motions. When I called co-counsel, excited with the news, she said, “Don’t give them that information; they’re up to something.” She wanted to fight getting paid, because she immediately assumed opposing counsel had to be up to something. I was lead counsel, so I used my veto and gave opposing counsel the requested amounts, which they paid. The only thing they were up to was paying the judgment.

9. Objecting to too few discovery questions.

Yes, attorneys really do write to me, objecting to too few discovery requests. Oh, they probably don’t realize that is what they are doing, but that is the result.

Here is how it comes about. Most attorneys think it is intimidating to serve 400 interrogatories and the like, as though you and your client will cave when faced with so much work. In reality, it just puts the judge on notice that you are an unreasonable attorney when I go to court and get a protective order that your client pays for.

The far better discovery method I use is to serve small sets of discovery, either based around a particular factual issue, like formation of the contract, or just as issues arise during the litigation. One of the big advantages to this approach is I don’t have to wait until I have a big block of time to draft all the discovery I want to propound. I can bang out a quick set of ten document demands to get the information coming in, and then follow up with additional sets later as the issues of the case begin to flesh out.

I don't do this to make life easier for opposing counsel, but it does have the effect since he or she has to only answer a few discovery requests at a time. I'm okay with that because I'm generally a nice guy, but more importantly it has the benefit of keeping the matter in front of the opposing party. Those attorneys who think they are being clever with a massive set of discovery requests fail to realize that, once completed, the party won't have to think about the case again until their deposition or trial.

So the attorney gets a set of interrogatories today, ten days later receives my document demands, and ten days after that gets requests for admissions. I have actually had attorneys complain to the court that I am harassing their client with multiple, small sets of discovery. How do you think the court is going to respond? “Mr. Morris, would you please hold back and send one large set of discovery to Mr. Jones, rather than sending smaller sets. Apparently Mr. Jones is having trouble keeping your discovery organized.”

10. Claiming the parties are not permitted to communicate with one another.

This is another one that happened just this past week. Unbeknownst to me, my client, the defendant in the action, decided to contact the plaintiff to see if the matter could be resolved informally. The meeting was actually pretty productive from what I have seen, and we are talking settlement. But I got a letter from opposing counsel informing me of this meeting, and instructing me to immediately notify my client that the parties to the litigation are not permitted to communicate.

This is not the first time this has happened. How do attorneys get this so wrong? An ATTORNEY cannot communicate with a represented party, but the parties can continue to communicate to their hearts’ content. The cynical part of me thinks that I get these letters specifically because the attorney is fearful that the matter will be resolved if the parties talk it out. Don’t make the false claim that the parties cannot speak.

This is different than a situation where one party does not want to talk to the other party. If you get a letter from the opposition stating that their client has requested that your client not contact him or her, of course you should ask your client to honor that request.

Looking for a great way to market your law firm? Click on the ridiculously large START HERE button and I’ll show you step-by-step how to launch your first niche site. If you already have a website where you are utilizing content marketing (or want to try something different), then here are some more articles on how to market your law firm.

Court of Appeal Agrees that Penal Code Section 496(c) Allows Recovery of Treble Damages and Attorney Fees for Failure to Repay a Loan if Money Gained Through False Pretense.

Sorry, this tip probably won't be of any help unless you practice in California (although many states follow California, so you may have something similar — look at how many states now have an anti-SLAPP statute). But if you do work in the Golden State, this ruling could be very useful in your practice.

As we reported in October of 2011, we persuaded an Orange County Superior Court Judge to apply Penal Code section 496(c) – making it illegal to receive stolen goods – to a case where the defendant had failed to repay our client for a loan. The loan agreement did not provide for attorney fees, so by bringing the civil action under Penal Code section 496(c), our client was entitled not only to recovery of all of her attorney fees, but treble damages as well.

The case involved a loan made by our client to Joe Defendant, who failed to repay the loan, and we were retained by the plaintiff to sue. I am always bothered by cases where the worst that can happen to the defendant is that he is made to repay the money that he borrowed in the first place (plus interest). Most attorneys would have pursued this as a garden variety breach of contract case. However, since the loan agreement did not provide for attorney fees, Defendant would face no downside in fighting such an action. Sure, he would incur his own attorney fees, but at the end of the day the case would likely have settled for less than what was owed, or gone to trial and resulted in a judgment for only the loan amount. Our client would have been left far from whole.

We figured out a better way. Continue reading