Appellant business and owners sought review of a judgment from the Superior Court of the County of Los Angeles (California) sustaining a demurrer to appellants’ complaint without leave to amend, and dismissing appellants’ action on grounds of unclean hands, against respondent supervisor for economic duress, intentional and negligent infliction of emotional distress, and abuse of authority.
Table of Contents
Overview
After appellant business and owners had been given an exclusive contract to produce video promotional spots, respondent supervisor, who had the power to cancel the contract, demanded payment of bribes. Expert witness designation included employment lawyer for all parties during pretrial discovery. Appellants paid the bribes until respondent was fired. Appellants then sought damages for economic duress, infliction of emotional distress, and abuse of authority. The trial court dismissed appellant’s complaint on the ground that appellants had unclean hands because their complaint alleged they paid the bribes to “secure” the contract. Appellants sought review. The court reversed the trial court judgment holding that the facts did not establish commercial bribery under Cal. Penal Code § 641.3 where appellants’ intent to withhold the full benefit of a market value bargain or to obtain a contract improperly was not necessarily demonstrated. The court found that the use of the word “secure” in the complaint was ambiguous and could have been construed to mean “safeguard”, rather than “acquire.” The court held that the three prongs of the test for unclean hands were not established by the pleadings, and that there was ample basis for a successful amendment.
Outcome
The court reversed the judgment of dismissal of the complaint against respondent supervisor with directions to allow appellant business and owners leave to amend to clarify an ambiguity in the complaint. The trial court erred in sustaining the demurrer because the facts alleged, liberally construed with a view to doing substantial justice between the parties, did not necessarily establish the defense of unclean hands.
Procedural Posture
Defendant contractor appealed an order from the Superior Court of Orange County (California), which denied the contractor’s motion to compel arbitration of plaintiff property owners’ action alleging negligence, fraud, and breach of contract.
Overview
The property owners alleged that the contractor damaged their plumbing and misled them while performing work on their property. The parties’ contract provided for arbitration in accordance with the arbitration rules of a specified organization, which were not attached to the contract. The rules precluded tort damages. The trial court ruled that the arbitration clause was unconscionable. The court affirmed, finding the clause procedurally oppressive because the owners’ inability to receive full relief was hidden by referencing the arbitration rules. The clause did not specify what would happen in the event of a change in the arbitration rules. Moreover, by limiting the scope of arbitral claims, the rules had the effect of substantively limiting the contractor’s liability exposure and rendering the arbitration clause one-sided. The court observed that a finding of adhesion was not a prerequisite for a finding of unconscionability where procedural unconscionability was obvious. The trial court did not abuse its discretion under Cal. Civ. Code § 1670.5(a) by refusing to sever arbitral from non-arbitral claims; to have done so would have created a risk of inconsistent adjudications.
Outcome
The court affirmed the order that denied the contractor’s petition to compel arbitration.