SB 1256: Civil law: litigation: The Civility in Litigation Act.

Existing law states the time and procedure for commencement of civil actions.

This bill would require a person who claims to have been aggrieved by an alleged unlawful act or practice, to send a letter to the person or entity he or she alleges to have caused the harm that sets forth alleged facts in support of the grievance and any other information necessary to inform the person or entity of the alleged harm suffered, prior to filing any legal action or pursuing legally mandated alternative dispute resolution, as specified. The bill would require the person who claims to have been aggrieved to engage with that person or entity in good faith efforts to be made whole, if, during the 30-day period following the date on which the letter was received there is a response from the person or entity that is alleged to have engaged in the unlawful act or practice.

The bill would toll the statute of limitations on a claim arising from the alleged unlawful act or practice for the 30-day period, including the following period of negotiations, if any. If, after that 30-day period there is no response, the bill would authorize the person who claims to have been aggrieved to pursue other efforts to be made whole, including filing a claim in a court of competent jurisdiction or alternative dispute resolution. The bill would require that if the person who claims to have been aggrieved files a complaint in a court of law, he or she shall describe in the complaint the good faith efforts he or she made to comply with these provisions or attach a copy of the letter sent pursuant to this section and proof of its mailing to the complaint.

The bill would also authorize a court, factfinder, or arbiter, if it determines that these provisions were not complied with in good faith, to dismiss a claim that is otherwise authorized, in which case it would be required to state in writing and with specificity why the case was dismissed, and whether or not the case is dismissed with or without prejudice.

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2015-2016 Regular Session

Bill No: SB 1256 (Author:Anderson)

Version: February 18, 2016

Hearing Date: May 3, 2016

Fiscal: No

Urgency: No

Consultant: RD

SUBJECT

Civil law: litigation: The Civility in Litigation Act

DESCRIPTION

This bill would enact the Civility in Litigation Act to generally require a person who claims to have been aggrieved by an alleged unlawful act or practice to first send a letter to the person or entity alleged to have caused the harm, as specified, before filing any legal action or pursuing legally mandated alternative dispute resolution. If the person or entity alleged to have engaged in the unlawful act or practice responds within 30 days after the specified letter is received, or delivery of the letter is attempted, this bill would further require the claimant to engage with the person or entity alleged to have engaged in the unlawful act or practice in good faith efforts to be made whole.

This bill would require that a copy of the letter be filed together with any complaint filed in a court of law and would subject the claimant to other specified requirements when filing a complaint with the court. This bill would provide that if a court, factfinder, or arbiter determines that the provisions of the bill were not complied with in good faith, that determination may be grounds for dismissing a claim that would otherwise be authorized. Lastly, this bill would not apply to claims arising from matters related to the Family Code, the Fair Employment and Housing Act, the Penal Code, or the Probate Code, or to cases of a true emergency, as specified.

BACKGROUND

California law permits a party to bring various actions in court to seek redress for harms suffered, following certain procedures. As a threshold matter, a civil action must be brought forth in a timely fashion—i.e., within specified statutes of limitations.

This bill would enact the Civility in Litigation Act to toll the statute of limitations for a minimum of 30 days and to require, before filing any legal action or pursuing legally mandated alternative dispute resolution, that a person who claims to have been aggrieved by an alleged unlawful act or practice first send a letter to the person or entity alleged to have caused the harm and engage “in good faith efforts to be made whole,” as specified.

CHANGES TO EXISTING LAW

Existing law generally provides that civil actions must be commenced within applicable statutes of limitations under the Code of Civil Procedure, as specified, without exception, unless the Legislature prescribes a different limitation by statute in special cases. (Code Civ. Proc. Sec. 312.)

Existing law provides that evidence that a person has, in compromise or from humanitarian motives, furnished or offered or promised to furnish money or any other thing, act, or service to another who has sustained or will sustain or claims that he or she has sustained or will sustain loss or damage, as well as any conduct or statements made in negotiation thereof, is inadmissible to prove his or her liability for the loss or damage or any part of it. (Evid. Code Sec. 1152(a).)

This bill would add the “Civility in Litigation Act” to require, notwithstanding any law, that a person who claims to have been aggrieved by an alleged unlawful act or practice shall, before filing any legal action or pursuing legally mandated alternative dispute resolution, including mandatory arbitration, send a signed letter, as specified, to the person or entity he or she alleges to have caused the harm that sets forth alleged facts in support of the grievance and any other information necessary to inform the person or entity of the alleged harm suffered. This bill would toll the statute of limitations on a claim arising from the alleged unlawful act or practice subject to this section for a period of 30 days following the date of mailing of the letter, as specified, plus any additional period of time during which the parties engage in negotiations.

This bill would provide, if the person or entity alleged to have engaged in the unlawful act or practice responds to the person who claims to have been aggrieved within 30 days after the letter, above, is received, or delivery of the letter is attempted, the person claiming to have been aggrieved shall engage with the person or entity alleged to have engaged in the unlawful act or practice in good faith efforts to be made whole.

This bill would provide that if the person alleged to have engaged in an unlawful act or practice fails to respond to the letter within 30 days after the letter is received, or delivering of the letter is attempted, the person who claims to have been aggrieved may pursue other efforts to be made whole, including filing a complaint in a court of competent jurisdiction or alternative dispute resolution, including mandatory arbitration, if applicable.

This bill would provide that if the person who claims to have been aggrieved files a complaint in a court of law, he or she shall attach to the complaint a copy of the letter sent pursuant to this section and proof of its mailing. If the person who claims to have been aggrieved knows that the letter he or she sent to the person or entity alleged to have engaged in the unlawful act or practice was not received, he or she must also: (1) disclose that information in the complaint; (2) describe the good faith efforts he or she made to comply with this section; and (3) include any information explaining whether and why the requirements of the Civility in Litigation Act were not complied with.

This bill would provide that, if a court, factfinder, or arbiter determines that the provisions of this paragraph were not complied with in good faith, that determination may be grounds for dismissing a claim that would otherwise be authorized. Because of the public policy encouraging resolution of disputes and a full and fair hearing on those disputes, if the court or other lawfully authorized factfinder dismisses a claim under this paragraph, he or she must state in writing and with specificity why the case was dismissed and whether the case was dismissed with prejudice. This bill would provide that if the alleged claims by an aggrieved party are not time barred, including the tolling of the limitation period as specified for under the bill, the claims should be dismissed without prejudice to allow the aggrieved party to cure any alleged defects.

This bill would provide that the Civility in Litigation Act does not apply to a claim arising from matters related to, or violations of, the Family Code, the Fair Employment and Housing Act, the Penal Code, or the Probate Code. The Act would also not apply in the case of a true emergency in which court relief is required immediately under the terms and conditions required under existing law for injunctive relief, as specified.

This bill would provide that attempts to comply with the Civility In Litigation Act by a person receiving a demand shall be construed to be an offer to compromise and shall be inadmissible as evidence pursuant to specified law. Further, this bill would provide that attempts to comply with a demand shall not be considered an admission of engaging in an unlawful act or practice. Evidence of compliance or attempts to comply with this Act may be introduced by a defendant solely for the purpose of establishing good faith or to show compliance with this section.

COMMENT

1. Stated need for the bill

According to the author:

Current law establishes the time and procedure for the commencement of a civil action. As a matter of public policy and judicial resources, settlement and or resolution of disputes and a full and fair hearing of claims is to be encouraged. Regrettably, what have become known as “drive by” lawsuits, harassing and sometimes frivolous, have become a way of life for many small businesses and individuals; stifling productivity and clogging our court system and wasting precious judicial resources.

SB 1256 is designed to put some civility back into our legal system both in furtherance of the public policy favoring settlement efforts, but also as a prescription for reducing the financial pressure on our court system and their resources. [ . . . ]

In support, the San Diego County Apartment Association writes that this bill “follows in the footsteps of SB 1186 [Steinberg and Dutton, Ch. 383, Stats. 2012] that, among other things, requires that any intent to sue letter pertaining to an ADA violation, must be sent at least 30-days prior to filing a lawsuit and must include specific problems and date of violation so that business owners will know why they are being sued. SB 1256 seems to be extending the similar provisions contained in SB 1186 to other civil actions. Hopefully, it will resolve many of the problems with drive-by lawsuits in California by encouraging settlement efforts prior to going to court.”

Also in support, the Civil Justice Association of California writes that “SB 1256 does not limit the rights of any claimant. The bill instead will require that the person alleged to have caused the harm be afforded an opportunity to make the aggrieved person whole before a complaint is filed. This bill will promote prompt, early settlement of those claims that can be resolved by good faith negotiation prior to filing a civil action. The bill will also discourage the filing of abusive or nuisance claims designed to extract a settlement from defendants weighing the cost of defending lawful conduct.”

2. This bill places all burdens to comply with the Civility in Litigation Act on the plaintiff, even if the defendant does not make good faith efforts to respond

This bill would enact the Civility in Litigation Act to generally require a person who “claims to have been aggrieved by an alleged unlawful act or practice” (hereinafter “plaintiff” or “injured party”) to first send a letter to the person or entity alleged to have caused the harm, as specified, before filing any legal action or pursuing legally mandated alternative dispute resolution. (Emphasis added.) If the person or entity alleged to have engaged in the unlawful act or practice responds within 30 days after the specified letter is received, or delivery of the letter is attempted, this bill would further require the claimant to engage with the person or entity alleged to have engaged in the unlawful act or practice in good faith efforts to be made whole. Moreover, if the person or entity alleged to have wronged the plaintiff does not respond, the bill then charges the person claiming to be aggrieved to “pursue other efforts to be made whole,” “including filing a complaint in a court of competent jurisdiction or alternative dispute resolution . . . .”

First, it is unclear what “other efforts” an injured party might be able to take to make him or herself whole if the defendant will not engage in settlement negotiations or if the plaintiff does not file suit in court (or in an alternative dispute forum); nonetheless the suggestion is that there are other options generally available to a plaintiff that would not require the participation of the person alleged to have caused the injury. Second, it is unclear why this bill places the onus wholly on the plaintiff to make him or herself whole, or to prove good faith efforts were made to resolve issues “civilly” before going to court—even in instances where the potential defendant does not cooperate.

To this latter point, the bill provides that while a plaintiff can proceed to file a complaint in a court of law if the party alleged to have engaged in the unlawful act or practice does not respond to the letter in due time, the plaintiff must not only provide a copy of the proof of its mailing, but the plaintiff must also: (1) disclose to the court if they know that the letter was not received (how the plaintiff is to know that fact, is unclear); (2) describe the good faith efforts he or she made to comply with the Civility in Litigation Act; and (3) include any information explaining whether and why the provisions of this section were not complied with. Again, this is after the plaintiff has already attached a copy of the letter and the proof of mailing, in instances where the defendant has not replied to their letter. Further demonstrating the unequal treatment of the parties involved in a potential lawsuit, the bill would ensure that any attempts to comply with the Civility in Litigation Act by a person receiving a demand shall be construed to be an offer to compromise and shall be inadmissible as evidence pursuant to specified law, and shall not be considered an admission of engaging in an unlawful act or practice. Notably, no such similar protections are made for offers of comprise that might undermine the claimant’s case if disclosed or used as evidence in an ensuing lawsuit.

Indeed, the very language of this bill appears to operate under the premise that most claims are false or without merit and that most defendants are innocent and unfairly targeted. Relatedly, the undertone of the bill appears to be that plaintiffs will not, and do not, engage in good faith efforts to settle cases outside of the courts under existing law.

3. Current law already encourages settlement

Despite assertions by proponents that this bill is needed to encourage settlements in California (see Comment 1), it appears that California law already attempts to encourage settlements in many different ways. For example, in small claims cases, California law requires that a person first ask the other side for payment before going to court, absent a good reason. The person can ask in person, by phone, or in writing in what is known as a “demand letter,” and must tell to the court that they did this, and how, on their court form. (See Code Civ. Proc. Sec. 116.320, requiring a plaintiff commencing an action in the small claims court to file a claim under oath that set forth, among other things, that: (1) the plaintiff, where possible, has demanded payment and, in applicable cases, possession of the property; and (2) the defendant has failed or refused to pay, and, where applicable, has refused to surrender the property.) Looking beyond small claims cases, California Rules of Court also authorize courts, more generally, to require mandatory settlement conferences on the court’s own motion or at the request of any party. (Cal. Rules of Court 3.1380.)

Separately, Section 998 of the Code of Civil Procedure also seeks to encourage settlement in civil actions by allowing for the imposition of monetary sanctions against parties to civil actions that decline pre-trial settlement offers and subsequently fail to obtain a more favorable outcome at trial. Specifically, the law provides that, not less than 10 days prior to commencement of trial or arbitration of a dispute to be resolved by arbitration, any party may serve an offer in writing upon any other party to the action to allow judgment to be taken or an award to be entered in accordance with the terms and conditions stated at that time. If the offer is not accepted prior to trial or arbitration or within 30 days after it is made, whichever occurs first, the offer is to be deemed withdrawn, and cannot be given in evidence upon the trial or arbitration. (See Code Civ. Proc. Sec. 998.) Relatedly, Section 3291 of the Civil Code, provides that if the plaintiff, in an action to recover damages for personal injury, makes an offer to compromise pursuant to Section 998 that the defendant does not accept prior to trial or within 30 days, whichever occurs first, and the plaintiff obtains a more favorable judgment, the judgment shall bear interest at the legal rate of 10 percent per annum calculated from the date of the plaintiff’s first offer that is exceeded by the judgment. (Civ. Code Sec. 3291.) As noted by various courts, both of these statutes are “designed to encourage settlements and penalize those who refuse reasonable settlement offers.” (See e.g., Hrimnak v. Watkins (2005) 38 Cal.App.4th 964, 980-981, citing Evers v. Cornelson (1984) 163 Cal.App.3d 310, 317; Bank of San Pedro v. Superior Court (1992) 3 Cal.4th 797, 804; Lakin v. Watkins Associated Industries (1993) 6 Cal. 4th 644, 663.)

Yet other examples exist demonstrating that existing law encourages settlement between the parties at the outset of a claim in specific situations. For example, the Public Contracting Code (which is not exempted by this bill) provides that a public entity has full authority to compromise or otherwise settle any claim relating to a contract at any time. (Pub. Contract Sec. 9201(a).) In relation to public works claims under $375,000, specifically, the Public Contract Code provides for the ability of a claimant to demand an informal conference to meet and confer for settlement of issues in dispute between the claimant contractor and the local agency under specified circumstances. Upon a demand, the local agency must schedule a meet and confer conference within 30 days for settlement of a dispute. (Pub. Contract Sec. 20104.2(d).) Following the meet and confer process, if the claim, or any portion remains in dispute, the claimant may file a claim pursuant to the Government Tort Claims Act. (Pub. Contract Sec. 20104.2(e).)

Furthermore, the Evidence Code reflects a public policy encouraging settlements by way of protecting offers of compromise, as well as any conduct or statements made during negotiations for settlement of a claim—thus ensuring the “complete candor between the parties that is most conducive to settlement.” (Evid. Code Sec. 1152; see Comment to Section 1152, as enacted in 1965.)

It is unclear as to what, if any, empirical information exists that would demonstrate settlements are on the decline or otherwise rare in spite of such existing laws promoting settlement. To the extent that proponents also argue that this bill will curb “abusive or nuisance claims,” no such information has been provided supporting any contentions that California courts are inundated or unable to dispense with abusive or nuisance claims under existing laws relating to frivolous lawsuits or vexatious litigants. Moreover, given that this bill does not set any parameters around what can and cannot be included in these letters (such as pre-litigation demands for money), it is entirely possible that, in due time, parties will return to alleging that the letters required under this bill are used by plaintiffs to extort or harass innocent parties into agreeing to money settlements under the threat of facing suit. Indeed, the bill merely requires that the person set forth alleged facts in support of the grievance and any other information necessary to inform the person or entity of the alleged harm suffered, not unlike a complaint.

In opposition, Consumer Attorneys of California writes that plaintiffs will often times reach out to potential defendants prior to filing in an effort to settle cases, “but this effort depends upon the circumstances of each case. A hard and fast rule just doesn’t make sense nor have we seen evidence that the current system is broken and in need of a fix.” Likewise, Disability Rights California also writes in opposition that this bill “creates unnecessary barriers to implementation of all civil litigation in California, [and] specifically civil rights laws. In most instances, attorneys and parties try to resolve claims prior to litigation, so the bill is not needed.”

4. Other opposition arguments

In opposition, the Consumer Attorneys of California (CAOC) writes that this bill is not only one-sided and increases burdens on plaintiffs, but it will increase litigation, cause further delay to the already overburdened and underfunded court system, and ultimately act to further delay justice. CAOC argues that “[i]n order for a judge to determine that SB 1256’s good faith requirements were violated, he or she would have to review settlement discussions, which otherwise would be inappropriate and against the law as settlement offers are generally confidential. Then the judge would be required to value the case at the start based on these negotiations alone rather than on its merits.  These procedures would cause confusion and delay by requiring a judge to make judicial decisions based on initial, uninvestigated allegations and defenses and would result in an increase of litigation to determine whether these vague requirements were met.”

Again, CAOC contends that the bill’s provisions are “severely one-sided” in favor of defendants. CAOC specifically raises concern that the bill allows a case to be dismissed if the injured party does not negotiate in good faith, but does not provide for a similar penalty against a defendant who refuses to take responsibility or negotiate in good faith. Moreover, as noted in Comment 3, above, the bill expressly protects the defendant from any actions made to comply with the procedures in SB 1256, but provides no similar protection for the plaintiff. Furthermore, CAOC writes, while the bill requires the plaintiff to disclose all facts and information necessary to inform the defendant of the harm suffered, it does not require similar disclosure from the defendant, thus giving the defendant “a free and early look at the case, without requiring any information in exchange.”

Additionally, CAOC argues that the bill is an abrogation of the plaintiff’s constitutional right to trial. “Plaintiffs are not always simply interested in a settlement—often times it is as important or more important to publically expose defendants’ wrongdoing.  This is not only cathartic to the plaintiff but it helps inform the public of defendant’s wrongdoing and thereby reduces the chance that the defendant will continue to get away with its bad acts against others.” Lastly, CAOC asserts that it is offensive, if not dangerous and unethical, to have an absolute mandate that a plaintiff make a good-faith effort to settle, particularly in cases where the plaintiff has been sexually harassed or molested by a defendant.

Disability Rights California (DRC) also writes in opposition to the bill, listing nine different traps created by the bill “for the unwary.” Among other things, DRC lists the following concerns:

• The bill will disadvantage individuals proceeding without lawyers, who will not know or understand that this is required before they file on their own behalf.
• Many types of litigation require urgent action to prevent irreparable harm. This includes cases involving harassment, threats, emergencies, environmental hazards and more. The bill exempts such litigation from the 30-day pre-filing requirement ONLY for “true” emergencies, an undefined term, subjecting individuals and communities to 30 days of harm prior to filing or the risk that their request for injunctive relief will result in dismissal of their case.
• This measure creates procedural nightmares where parties have both federal and state claims. The state does not have the authority to impose procedural barriers on most federal civil rights claims. So, a party might be required to try to resolve some claims, but not others? This is unworkable in practice.
• Despite the narrow exemption for employment and housing discrimination cases under CA Gov. Code 12960 (Fair Employment and Housing Act), the bill would apply to other types of civil rights cases, including claims under the Unruh Act, the Ralph Act, and the Disabled Persons Act.
• The measure fails to address the fact that many types of claims require exhaustion of administrative remedies, and would create great confusion about whether you need to try to resolve before proceeding to exhaust (which would create problems with already extremely short statutes of limitation) or during the administrative process, including under the CA Government Torts Claims statutes.
• The bill could be particularly troubling when raising claims against government entities, because negotiating with such entities can take an extremely long time due to the levels of approval necessary for resolution.

Support: Civil Justice Association of California; San Diego County Apartment Association

Opposition: Consumer Attorneys of California; Disability Rights California

HISTORY

Source: Author

Related Pending Legislation: None Known

Prior Legislation: None Known

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