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CALIFORNIA CASE LAW ALERT 

 

Reverse chronological e-mail alerts prepared for the California Lawyers Association (formerly State Bar of California) Labor & Employment Law Section since 2007, covering California, 9th Circuit and US Supreme Court decisions, and new laws signed by Governor. To subscribe, contact LaborLaw@CLA.Legal.

 

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Long Beach Unified School Dist. v. Margaret Williams, LLC (CA2/4 B290069 12/9/19) Retaliatory Termination of Contract/Anti-SLAPP

 

Long Beach Unified School District (the District) appeals from the dismissal of its cross-complaint under Code of Civil Procedure section 425.16, commonly known as the anti-SLAPP statute.  (See Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871, 880 (Wilson).)  In 2006, the District entered into a contract with respondent Margaret Williams, LLC (Williams LLC), which had been formed by Margaret Williams that year for the purpose of working for the District.  According to Williams, the District required her to form a business entity to enter the contract, which was a standardized form agreement with terms she could not negotiate.  For nearly a decade, Williams worked full-time for the District, through her LLC, on construction management and environmental compliance, including work under the District’s agreement with a state agency to clean up material at a school construction site contaminated with arsenic.  After a dispute arose between Williams and the District about alleged violations of the cleanup agreement, Williams was diagnosed with arsenic poisoning, and the District terminated Williams LLC’s then-current contract, which included an indemnity provision.

 

Williams and her LLC filed a lawsuit against the District (the Underlying Action).  Each plaintiff brought claims alleging the termination was retaliatory, and Williams brought claims alleging the District unlawfully caused her arsenic poisoning.  The District invoked the indemnity provision to demand that Williams LLC defend and indemnify the District in the Underlying Action.  After Williams LLC refused to defend the District against the LLC’s own and Williams’s claims, the District filed a cross-complaint alleging, inter alia, that this refusal breached the contract.  Williams LLC filed an anti-SLAPP motion to strike the cross-complaint, arguing, inter alia, that the District could not prevail on its cross-claims because the indemnity provision is unconscionable.  The trial court granted the motion and struck the District’s cross-complaint.

 

On appeal, the District contends the trial court erred in striking its cross-complaint under the anti-SLAPP statute.  In the alternative, it contends the trial court erred in denying the District leave to include nine additional pages in its brief opposing the anti-SLAPP motion. 

 

Finding no error, we affirm.  If enforced as the District requested, the indemnity provision would require Williams LLC to fund the District’s defense against the very litigation the LLC and Williams brought against the District.  The District’s cross-complaint therefore arose from that litigation or the LLC’s refusal to sabotage it -- each of which is protected by the anti-SLAPP statute.  Moreover, the District sought to require the LLC not only to fund the District’s defense, but also to reimburse the District for any award secured by Williams or the LLC falling within the provision’s broad scope.  Such a bar to meaningful recovery embodies a high degree of substantive unconscionability, sufficient -- when combined with the procedural unconscionability shown through Williams LLC’s unrebutted evidence of adhesion, oppression, and surprise -- to establish that the indemnity provision is unconscionable.  We limit the provision to avoid an unconscionable result, rendering it inapplicable to claims brought by Williams LLC and claims brought by Williams.  As a result of this limitation, the District fails to show error in the dismissal of the District’s breach of contract and declaratory relief claims.  The District further fails to show error in the dismissal of its other cross-claims, or in the denial of its application for leave to file an oversized opposition brief.

 

https://www.courts.ca.gov/opinions/documents/B290069.PDF