U.S. Court of Appeals for the Fifth Circuit, Corporativo Grupo R SA DE C.V. v. Marfield Limited Inc., Docket No. 22-20345

Admiralty

 

Maritime Law

 

Liens

 

Loans (Admiralty)

 

Preferred Naval Mortgage

 

Bareboat Charters

 

Standstill Agreements

 

London Maritime Arbitration Association Dispute Resolution Clause

 

 

State-Created Liens

 

Attachment of the Vessels under Texas State Law

 

 

 

 

 

Appeal from the United States District Court for the Southern District of Texas, USDC No. 4:19-CV-1963

 

 

In 2008, Intervenors-Appellees Caterpillar Financial Services Asia Pte Ltd (“Caterpillar”) and Eksportfinans ASA (“Eksportfinans”) provided a loan to Marfield Limited Incorporated (“Marfield”) for the construction of an offshore construction vessel named the M/V CABALLO MAYA (“MAYA”). To secure payment of this loan, Marfield executed and delivered a First Preferred Naval Mortgage to Eksportfinans and a Second Preferred Naval Mortgage to Caterpillar on December 19, 2008. As further security for outstanding sums owed to Caterpillar, Marfield executed a Third Preferred Naval Mortgage on April 17, 2014, encumbering the whole of the MAYA. The MAYA was flagged in Panama, so all three of those mortgages were submitted to the Panama Maritime Authority Directorate General of Public Registry of Property of Vessels (“PMA”), which is the central office for the recordation of Panamanian ship mortgages. The PMA reviewed all three mortgages twice and accepted them for recordation.

 

 

In 2012, Caterpillar and Intervenor-Appellee the Norwegian Government (“Norway”) provided a loan to Shanara Maritime International S.A. (“Shanara”) for construction of another offshore construction vessel named the M/V CABALLO MARANGO (“MARANGO”). To secure this loan, Shanara executed and delivered a First Preferred Naval Mortgage to Caterpillar and Norway on February 9, 2012. The following year, KFW IPEX-Bank GmbH (“KFW”) provided a loan to Shanara to finance the acquisition of cranes for installation aboard the MARANGO. To secure payment of this loan, Shanara executed and delivered a Second Preferred Naval Mortgage to KFW on January 24, 2013. The MAYA was also flagged in Panama, so both mortgages were submitted to the PMA, which reviewed the mortgages twice and accepted them for recordation.

 

 

Once construction of the MAYA and MARANGO was completed, Marfield and Shanara chartered the vessels to Oceanografia S.A. de C.V. (“Oceanografia”) for use in Mexico. The MAYA and the MARANGO were chartered there until early 2014, when the Mexican government seized the vessels in conjunction with its criminal investigation of Oceanografia. On February 28, 2014, Marfield and Shanara terminated their bareboat charters of the vessels with Oceanografia, and the vessels remained in the Mexican government’s custody. Shanara and Marfield could not generate revenue on the vessels and began to fall behind on their loan payments to Intervenors-Appellees Caterpillar, Norway, KFW, and Eksportfinans (collectively, the “Lenders”). Shortly after that, bankruptcy proceedings were commenced against Oceanografia in Mexico, and, on April 10, 2014, the Mexican government separately seized the MAYA and MARANGO in connection with the bankruptcy.

 

 

In early 2014, Grupo R, a Mexican conglomerate in the oil, gas, and energy sector, initiated discussions with Marfield and Shanara to purchase the MAYA and MARANGO. On March 21, 2014, the parties entered into purchase agreements for the vessels. Shanara and Marfield were subsequently unable to obtain the release of the vessels from the Mexican government, which violated the deadlines set forth in the purchase agreements. Since the agreements are governed by English Law and contain a London Maritime Arbitration Association dispute resolution clause, Grupo R initiated a London arbitration against Shanara and Marfield. Grupo R prevailed, and on May 30, 2019, a London Arbitration Panel entered awards of $5,000,000 against Marfield and $5,000,000 against Shanara.

 

 

From the initial arrest of the vessels until December 2017, the Lenders executed a number of amendments to the original loan agreements to reaffirm Marfield’s and Shanara’s payment obligations, which remained unfulfilled. On July 10, 2015, the Lenders, Marfield, and Shanara executed two Standstill Agreements in which Shanara and Marfield admitted that their cancellation of the Oceanografia charters constituted “materially adverse” events of default under their respective loan agreements. To avoid the imposition of liens over the MAYA and MARANGO, Caterpillar provided additional financing to Marfield and Shanara in the form of four “protective advances,” or loans. In return, Marfield and Shanara executed four Preferred Naval Mortgages in favor of Caterpillar to secure the outstanding amounts due, then registered those mortgages with the PMA. The PMA reviewed each of the mortgages twice, then accepted them for recordation. Since 2014, Shanara and Marfield have made no loan payments to the Lenders on any of the nine mortgages issued.

 

 

On May 30, 2019, Grupo R filed suit in the U.S. District Court for the Southern District of Texas seeking to attach the MAYA and MARANGO under the Texas Civil Practice and Remedies Code Section 61.001, et seq. Grupo R requested that the court attach the vessels so they could be sold at judicial auction to satisfy Grupo R’s arbitration awards. Grupo R attached a Certificate of Ownership and Encumbrance to its Complaint, identifying the First, Second, and Third Preferred mortgages over the MAYA and the MARANGO. At the time, the MAYA and MARANGO had been released from Mexican seizure and were located in Galveston, Texas.

 

 

On June 7, 2022, the court issued its findings of fact and conclusions of law, holding, in relevant part, that (1) Marfield and Shanara are in default under the loan agreements; and (2) the Lenders’ preferred ship mortgages related to said default outrank Grupo R’s state-created liens arising from Grupo R’s attachment of the MAYA and MARANGO under Texas state law. Grupo R timely appealed.

 

 

A.   Relative priority of the Lenders’ mortgages as to Grupo R’s state-created liens

 

On appeal, the parties dispute whether the Lenders’ liens created by the nine ship mortgages take priority over Grupo R’s liens that arose from the attachment of the MAYA and MARANGO under Texas state law. The relative priorities of the Lenders’ and Grupo R’s rights determine how the proceeds from the judicial sale of the MAYA and MARANGO should have been allocated. The law of the forum provides the relative rankings of the liens, while Panamanian law governs the substance of the liens. The ranking of liens in the United States, from highest priority to lowest priority, is as follows:

 

 

1. Custodia legis expenses;

 

2. Seamen’s liens for wages;

 

3. Salvage and general average liens;

 

4. Tort liens;

 

5. Preferred ship mortgage liens;

 

6. Liens for necessaries under CIMLA;

 

7. State-created liens that are maritime in nature;

 

8. Maritime liens for penalty/forfeiture for violation of federal statutes;

 

9. Perfected non-maritime liens;

 

10. Attachment liens;

 

11. Maritime liens in bankruptcy.

 

 

Under this ranking regime, Grupo R’s rights are classified as “state-created liens that are maritime in nature,” while the Lenders’ liens are classified as “preferred ship mortgages.” Grupo R’s liens arose when it caused the MAYA and MARANGO to be attached under Texas state law. The Lenders’ mortgage liens, on the other hand, arose when Shanara and Marfield failed to pay the mortgages over the MAYA and MARANGO, which had been executed in Panama and registered with the PMA. The Commercial Instruments and Maritime Liens Act (“CIMLA”), 46 U.S.C. § 31301 et seq., defines a preferred ship mortgage as a: mortgage  .  .  . established as a security on a foreign vessel if the mortgage . . . was executed under the laws of the foreign country under whose laws the ownership of the vessel is documented and has been registered under those laws in a public register at the port of registry of the vessel or at a central office.

 

 

The parties do not dispute that the Lenders’ preferred ship mortgage liens outrank Grupo R’s state-created maritime attachment liens, and the district court confirmed those rankings in its findings of fact and conclusions of law. The threshold issue on appeal is whether the Lenders’ mortgages are valid and enforceable against third parties like Grupo R, allowing Lenders to exercise their priority over the proceeds of the judicial sale of the MAYA and MARANGO.

 

 

B.   Validity and enforceability of the preferred ship mortgages under CIMLA and Panamanian law 

 

Grupo R and the Lenders agree that CIMLA and Panamanian law are implicated in the resolution of this lawsuit. At trial, it was undisputed that (1) the Vessels are registered under Panama’s flag; (2) the PMA is the public register or central office charged with recording vessel mortgages in Panama; and (3) all nine of the Lenders’ mortgages were recorded with the PMA, reviewed and accepted by the PMA before their recordation, and reviewed again by the PMA when it issued certificates confirming the mortgages’ compliance with Panamanian law. Under CIMLA, “a mortgage on a foreign vessel is preferred so long as it was properly (1) executed and (2) recorded under the laws of the nation in which the foreign vessel is registered.” For a preferred ship mortgage, CIMLA provides a cause of action in federal court “on default of any term of the preferred mortgage.” The mortgagee may bring a civil action or an admiralty action in personam against the mortgagor or guarantors to recover a deficiency. The mortgagee may also “enforce the preferred mortgage lien in a civil action in rem for . . . a foreign vessel.” As noted above, the parties agree that each of the Lender’s mortgages was executed in Panama and registered with the PMA. Accordingly, the Lenders’ mortgages are properly classified as “preferred ship mortgages” under CIMLA.

 

 

(…) Courts frequently accept affidavits from foreign-law experts to guide their analyses of foreign law.” When there are conflicting opinions offered by experts on foreign law, “it is not the credibility of the experts that is at issue, it is the persuasive force of the opinions they expressed.

 

 

The district court directed the allocation of proceeds of the MAYA and the MARANGO pursuant to its conclusions regarding the liens’ relative priorities. The proceeds from judicial sale of the MAYA were to be allocated as follows: (1) $63,243.90 to Grupo R and $663,745.12 to Caterpillar for their custodia legis lien claims; and (2) any remaining proceeds to Eksportfinans for its First Preferred Vessel Mortgage over the MAYA. The proceeds from the credit sale of the MARANGO were to be allocated to Grupo R in the amount of $63,243.90 for its custodia legis lien claims, and the remainder of the Amended Security Bond released to Norway, KFW, and Caterpillar.

 

 

(…) We are also not convinced that compliance with Article 260’s highly technical requirements is dispositive in this case. We previously held that it is “well established that the validity of a mortgage is dependent only on the existence of a debt actually secured by the mortgage and not on the description of the debt contained in the instrument.”

 

 

Further, other circuits have explained that foreign law plays a more limited role in determining the validity and enforceability of foreign mortgages under CIMLA. In M/V Prodromos, the Third Circuit explained that “the stringent procedural requirements for perfecting domestic ship mortgages are not imposed on foreign ship mortgages . . . to provide a simplified procedure for enforcing mortgages without destroying substantive rights.”

 

 

Oil Shipping (Bunkering) B.V. v. Sonmez Denizcilik Ve Ticaret A.S., 10 F.3d 1015, 1023 (3d Cir. 1993) (holding that the Ship Mortgage Act—CIMLA’s precursor—“specifically speaks to a limited role for foreign law by making the preferred status of foreign mortgages dependent only on their compliance with the execution and registration requirements of the applicable foreign law”).

 

 

We conclude that the district court correctly held that the nine preferred ship mortgages at issue are enforceable under CIMLA and Panamanian law, and that the Lenders’ preferred ship mortgage liens enjoy priority over Grupo R’s state-created maritime attachment liens.

 

 

For the reasons detailed above, we AFFIRM the district court’s findings of fact and conclusions of law with regard to (1) the validity, enforceability, and relative priority of the parties’ liens following the judicial sale of the MAYA and MARANGO, and (2) the status of Caterpillar’s and KFW’s lien positions following the credit sale of the MARANGO.

 

 

 

Secondary Sources: Varian, Rank and Priority of Maritime Liens, 47 Tul. L. Rev. 751 (1973); G. GILMORE AND C. BLACK, THE LAW OF ADMIRALTY, 596 (2d ed. 1975); SCHOENBAUM, ADMIRALTY & MAR. LAW §9:5 (6th ed. 2020); CHRISTIAN BREITZKE, JONATHAN S. LUX, MARITIME LAW DESK HANDBOOK, Part II. Flag and Registration of Vessels and Mortgages of Vessels (Wolters Kluwer 2019, 2021). This text was not introduced into the record as an exhibit, but the district court was authorized to consider it under Rule 44.1 of the Federal Rules of Civil Procedure. FED. R. CIV. P. 44.1.

 

 

 

 

(U.S. Court of Appeals for the Fifth Circuit, March 24, 2023, Corporativo Grupo R SA DE C.V. v. Marfield Limited Inc., Docket No. 22-20345)

California Court of Appeal, Gregg v. Uber Technologies, Inc., Docket No. B302925

Labor Law

 

Arbitration

 

Independent Contractor v. Employee

 

Uber

 

Private Attorneys General Act of 2004 (PAGA)

 

Non-Individual PAGA Claims And Individual PAGA Claims

 

PAGA Waiver

 

California Law

 

 

 

Johnathon Gregg sued Uber Technologies, Inc., and Rasier-CA, LLC (collectively, “Uber”), under the Private Attorneys General Act of 2004 (PAGA), Labor Code section 2698 et seq. He alleged Uber willfully misclassified him as an independent contractor rather than an employee, which led to numerous other Labor Code violations. In response, Uber moved to compel arbitration under the “Arbitration Provision” in the “Technology Services Agreement” (“TSA”), which Gregg accepted to use Uber’s smartphone application and become an Uber driver.

 

 

The trial court denied Uber’s motion and, in April 2021, this court affirmed. The United States Supreme Court vacated the affirmance in June 2022, when it granted Uber’s petition for writ of certiorari and remanded the case for further consideration in light of Viking River Cruises, Inc. v. Moriana (2022) ___U.S. ___ [142 S.Ct. 1906, 213 L.Ed.2d 179] (Viking River). In light of Viking River, we first determine the TSA’s PAGA Waiver is invalid and must be severed from the Arbitration Provision. We then conclude that under the Arbitration Provision’s remaining terms, Gregg must resolve his claim for civil penalties based on Labor Code violations he allegedly suffered (i.e., his individual PAGA claim) in arbitration, and that his claims for penalties based on violations allegedly suffered by other current and former employees (i.e., his non-individual PAGA claims) must be litigated in court. Lastly, we conclude that under California law, Gregg is not stripped of standing to pursue his non-individual claims in court simply because his individual claim must be arbitrated. Consequently, his non-individual claims are not subject to dismissal at this time. Instead, under the Arbitration Provision, they must be stayed pending completion of arbitration. Accordingly, we affirm in part and reverse in part the order denying Uber’s motion to compel arbitration. We remand the case to the trial court with directions to: (1) enter an order compelling Gregg to arbitrate his individual PAGA claim; and (2) stay his non-individual claims pending completion of arbitration.

 

 

PAGA authorizes an “aggrieved employee” to initiate a civil action “on behalf of himself or herself and other current or former employees” to recover civil penalties for violations of the Labor Code ordinarily “assessed and collected by the Labor and Workforce Development Agency.” (§ 2699, subd. (a).)

 

 

(…) Under Viking River, employers may enforce an agreement mandating arbitration of a plaintiff’s individual PAGA claim, even if the agreement does not require arbitration of the plaintiff’s non-individual claims. (See id. at p. 1925.)

 

 

(…) We begin our analysis by addressing whether the PAGA Waiver is enforceable under Viking River. We conclude it is not.

 

 

(…) We decline to follow Olabi for a few reasons. As an initial matter, the opinion was filed before Viking River was decided. (See Olabi, supra, 50 Cal.App.5th 1017; Viking River, supra, 142 S.Ct. 1906.) Therefore, the Olabi court did not interpret the agreement before it in the context of current law, which, as discussed above, now permits a PAGA lawsuit to be split into arbitrable and non-arbitrable components, and does not require it to be treated as an indivisible unit for purposes of arbitration.

 

 

(…) We hold that under California law, an alleged “aggrieved employee” (§ 2699, subd. (c)) is not stripped of standing to assert non-individual PAGA claims in court simply because he or she has been compelled to arbitrate his or her individual PAGA claim. (See Kim, supra, 9 Cal.5th at pp. 83-85; see also Johnson, supra, 66 Cal.App.5th at p. 930; Rocha v. U-Haul Co. of California (2023) 88Cal.App.5th 65, 77(Rocha).

 

 

(…) Uber appears to assume that even if Gregg’s non-individual claims are stayed pending completion of arbitration on his individual claim, he will be allowed to relitigate whether he is an “aggrieved employee” in court because the doctrine of issue preclusion will not apply to the arbitrator’s finding on the issue. This assumption is premature at best, and incorrect at worst. A split in authority has recently developed on this issue (compare Rocha, supra, 88Cal.App.5 that pp. 78-82 with Gavriiloglou v. Prime Healthcare Management, Inc. (2022) 83 Cal.App.5th 595, 602-607), and the parties have not asked to brief it. In any event, we express no opinion on the matter and need not address it. As discussed above, Kim and Johnson establish that regardless of its resolution, Gregg has not lost standing to assert his non-individual claims in court merely because he has agreed to arbitrate his individual claim.

 

 

Having concluded Gregg’s non-individual claims are not subject to dismissal at this time, we agree with the parties that under the Arbitration Provision, they should be stayed pending completion of arbitration on his individual claim. On this point, the Arbitration Provision states: “To the extent that there are any claims to be litigated in a civil court of competent jurisdiction because a civil court of competent jurisdiction determines that the PAGA Waiver is unenforceable with respect to those claims, the parties agree that litigation of those claims shall be stayed pending the outcome of any individual claims in arbitration.”

 

 

 

(California Court of Appeal, March 24, 2023, Gregg v. Uber Technologies, Inc., Docket No. B302925, Certified for Publication)

California Court of Appeal, Gregg v. Uber Technologies, Inc., Docket No. B302925

Contract Interpretation

 

California Law

 

 

 

(…) See Cundall v. Mitchell-Clyde (2020) 51 Cal.App.5th 571, 584, fn. 9 [describing “the principle of interpretation” known as expressio unius est exclusio alterius, under which “an author’s choice to specify one thing tends to exclude others”].

 

 

 

 

(California Court of Appeal, March 24, 2023, Gregg v. Uber Technologies, Inc., Docket No. B302925, Certified for Publication)

 

U.S. Court of Appeals for the Ninth Circuit, Radu v. Johnson Shon, Docket No. 22-16316

International Child Abduction

 

New Evidentiary Hearing

 

Ameliorative Measures

 

Pending Criminal Charges

 

Hague Convention on the Civil Aspects of International Child Abduction (Convention), Oct. 25, 1980, T.I.A.S. No. 11670

 

 

 

 

Domestically, the International Child Abduction Remedies Act (ICARA) implements the Convention’s rules, creates the United States Central Authority, and gives our courts jurisdiction to adjudicate disputes under the Convention. 22 U.S.C. § 9001 et seq.

 

 

Gaudin v. Remis made the consideration of ameliorative measures mandatory. See 415 F.3d 1028, 1035 (9th Cir. 2005) (“Courts applying ICARA have consistently held that, before denying the return of a child because of a grave risk of harm, a court must consider alternative remedies that would allow both the return of the children to their home country and their protection from harm.” (internal quotation marks and citation omitted)).

 

 

(…) The district court then contacted the State Department, Office of Children’s Issues’ country officer for Germany, who contacted the German Central Authority for the court.

 

 

(…) Shon again appealed. We stayed the appeal pending the Supreme Court’s resolution of Golan and eventually remanded for reconsideration in light of Golan’s clarification that consideration of ameliorative measures is discretionary rather than mandatory. See 142 S. Ct. at 1892–93.

 

 

The present appeal arises from the third return order. Given the parties’ uncertainty about aspects of the ordered remedy, and unresolved logistical issues, we ordered a limited remand while retaining jurisdiction to avoid further delay. See Friery v. L.A. Unified Sch. Dist., 448 F.3d 1146, 1150 (9th Cir. 2006) (ordering “a limited remand to the district court”). We directed the district court to clarify (1) its current Article 13(b) grave-risk finding and ameliorative measure(s) ordered, (2) whether Radu must pay for airfare, (3) whether Radu must pay for separate living arrangements, (4) the custody arrangements (sole or joint) while Shon was temporarily residing in Germany, (5) the custody arrangements if Shon is no longer able to legally reside in Germany before a German court decides custody, (6) the need to notify German child protective services upon the children’s arrival, and (7) whether, if necessary, German child protective services have jurisdiction to oversee the children’s wellbeing.

 

 

(…) Any categorical rule requiring new hearings would contravene the Convention’s directive for expeditious resolution.

 

 

(…) Our sister circuits agree. In March v. Levine, the question presented was whether the district court improperly granted summary judgment to a father petitioning for his children’s return without allowing discovery or a hearing on the merits. See 249 F.3d 462, 468 (6th Cir. 2001). The Sixth Circuit affirmed. Recognizing that Convention cases are unique, the court explained that “neither [the Convention nor ICARA] expressly requires a hearing or discovery”; instead they require “expeditious action.” Id. at 474. The court also found persuasive that “courts in other Contracting States to the treaty have also upheld summary proceedings on review.” Id. at 475 (discussing Australian court proceedings). The Tenth Circuit reached the same conclusion in West v. Dobrev, reasoning that Article 18’s permission to order return at any time provides trial courts “a substantial degree of discretion in determining the procedures necessary to resolve a petition filed pursuant to the Convention and ICARA.” 735 F.3d 921, 929 (10th Cir. 2013).

 

 

We now hold that, in cases governed by the Convention, the district court has discretion as to whether to conduct an evidentiary hearing following remand and must exercise that discretion consistent with the Convention. The district court did not abuse its discretion in declining to hold a third evidentiary hearing when the factual record was fully developed.

 

 

(…) “While a district court has no obligation under the Convention to consider ameliorative measures that have not been raised by the parties, it ordinarily should address ameliorative measures raised by the parties or obviously suggested by the circumstances of the case . . . .” Golan, 142 S. Ct. at 1893.

 

 

(…) The record supports the district court’s determination that the time frame in which a German court would determine custody would be a few months rather than years. The district court found that a merits decision would be made within months. Radu, 2023 WL 142908, at *2. Shon’s German law expert’s testimony supports this finding. He testified that a German court would likely require the children to live in Germany for up to six months before determining custody but that the court would also have discretion to make an earlier decision. And the district court cited a German statute providing that the determination of custody issues “shall have priority” and “shall be handled in an expedited manner.” That the waiting period is likely to be months instead of years is supported by the record.

 

 

(…) Third, based on the lack of any evidence or testimony about pending criminal charges in Germany, the court drew the supported inference that none existed.

 

 

 

 

 

(U.S. Court of Appeals for the Ninth Circuit, March 13, 2023, Radu v. Johnson Shon, Docket No. 22-16316, for Publication)

U.S. Court of Appeals for the Ninth Circuit, Radu v. Johnson Shon, Docket No. 22-16316, For Publication

Foreign Law

 

Interpretation of Foreign Law

 

Judicial Notice

 

Expert Testimony

 

Legal Research (Int’l)

 

Comity (Int’l)

 

Federal Procedure

 

 

 

(…) Federal Rules of Evidence. Fed. R. Civ. P. 44.1. Moreover, “the court is not limited by material presented by the parties; it may engage in its own research and consider any relevant material thus found.” Fed. R. Civ. P. 44.1 advisory committee’s note to 1966 amendment. That said, “expert testimony accompanied by extracts from foreign legal materials has been and will likely continue to be the basic mode of proving foreign law.” Universe Sales Co., Ltd. v. Silver Castle, Ltd., 182 F.3d 1036, 1038 (9th Cir. 1999). Courts nonetheless have an “independent obligation to adequately ascertain relevant foreign law, even if the parties’ submissions are lacking.” de Fontbrune, 838 F.3d at 997. Though international comity requires American courts to “carefully consider a foreign state’s views about the meaning of its own laws,” that deference has its limits. Animal Sci. Prods., Inc. v. Hebei Welcome Pharm. Co., 138 S. Ct. 1865, 1873 (2018). “The appropriate weight in each case . . . will depend upon the circumstances; a federal court is neither bound to adopt the foreign government’s characterization nor required to ignore other relevant materials.” Id.

 

 

(…) And our de novo review of the ultimate legal conclusion ensures that foreign legal issues are treated like domestic ones.

 

 

The district court neither abused its discretion nor violated Shon’s due process rights by communicating with the State Department and, through it, the German Central Authority. “Independent judicial research” on a legal question “does not implicate the judicial notice and ex parte issues spawned by independent factual research.” de Fontbrune, 838 F.3d at 999; see also G&G Prods. LLC v. Rusic, 902 F.3d 940, 948 (9th Cir. 2018) (“formal notice” of court’s intent to research foreign law not required). Nor do the Federal Rules of Evidence and its hearsay rules apply to foreign law materials, much as legal research on domestic law cannot trigger evidentiary objections. See de Fontbrune, 838 F.3d at 999.

 

 

 

 

(U.S. Court of Appeals for the Ninth Circuit, March 13, 2023, Radu v. Johnson Shon, Docket No. 22-16316, For Publication)

 

California Court of Appeal, Carrillo v. County of Santa Clara, Docket No. B322810

Statute of Limitations

 

Demurrer Without Leave to Amend

 

Civil Procedure

 

Suit Brought Against a Public Entity

 

Accrual of a Cause of Action

 

Discovery Rule

 

Delayed Discovery Exception

 

Medical Malpractice

 

California Law

 

 

 

Appellant Emilio Carrillo appeals from a judgment of dismissal of his medical negligence claim against respondent County of Santa Clara after the trial court sustained the County’s demurrer without leave to amend on statute of limitations grounds. We affirm.

 

 

On July 12, 2019, the County demurred to Carrillo’s FAC. The County argued that Carrillo’s medical negligence claim was time-barred, citing Code of Civil Procedure section 340.5 (MICRA),1which provides that a plaintiff must file suit “within three years after the date of injury or one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the injury, whichever occurs first.” (Code Civ. Proc., § 340.5.) Because Carrillo’s foot was amputated on December 20, 2017, the County argued he was required to file suit no later than December 20, 2018, making his January 18, 2019, complaint untimely.

 

 

1 MICRA is the Medical Injury Compensation Reform Act. (Anson v. County of Merced (1988) 202 Cal.App.3d 1195, 1199 (Anson).)

 

 

The County also argued that MICRA’s one-year limitations period was not extended by Government Code section 945.6 (the Government Claims Act), which provides that “any suit brought against a public entity on a cause of action for which a pre-filing claim is required to be presented” to the public entity must be filed within six months after the public entity’s rejection of the claim. The County argued that, for his claim against the County to be timely, Carrillo was required to satisfy the deadlines in both statutes.

 

 

Except in circumstances inapplicable here, “any suit brought against a public entity on a cause of action for which a claim is required to be presented” must be brought within six months after the County’s rejection of the claim. (Gov. Code, § 945.6, subd. (a)(1).) Additionally, under MICRA, a plaintiff alleging medical negligence must file suit within “three years after the date of injury or one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the injury, whichever occurs first.” (Code Civ. Proc., § 340.5.) As to the one-year limitations period, MICRA “sets forth two alternate tests for triggering the limitations period: (1) a subjective test requiring actual suspicion by the plaintiff that the injury was caused by wrongdoing; and (2) an objective test requiring a showing that a reasonable person would have suspected the injury was caused by wrongdoing.” (Kitzig v. Nordquist (2000) 81 Cal.App.4th 1384,1391.)

 

 

(…) We hold that, here, where both section 945.6 and MICRA apply, Carrillo was obligated to meet the deadlines set forth in both statutes.

 

 

Generally speaking, a cause of action accrues at the time when the cause of action is complete with all of its elements. (Fox v. Ethicon Endo-Surgery, supra, 35 Cal.4th 797 at 806). The “discovery rule” is an exception to this general rule and postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action. (Id. at 807.) To rely on the discovery rule for delayed accrual of a cause of action, a plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence. (Id. at 808.) In assessing the sufficiency of the allegations of delayed discovery, the court places the burden on the plaintiff to show diligence. (Ibid.) Conclusory allegations will not withstand demurrer. (Ibid.)

 

 

(…) Because Carrillo filed his suit more than a year after his amputation, the trial court did not err in sustaining the County’s demurrer on statute of limitations grounds.

 

 

 

 

(California Court of Appeal, March 13, 2023, Carrillo v. County of Santa Clara, Docket No. B322810, Certified for Publication)