Application for Employment Authorization - Update

I-765, Application for Employment Authorization

Republication from USCIS Website

https://www.uscis.gov/i-765?utm_source=rss-feed&utm_campaign=Forms%20Updates

Certain aliens who are in the United States may file Form I-765, Application for Employment Authorization, to request employment authorization and an Employment Authorization Document (EAD).  Other aliens whose immigration status authorizes them to work in the United States without restrictions may also use Form I-765 to apply to U.S. Citizenship and Immigration Services (USCIS) for an EAD that shows such authorization.

Form I-765 (PDF, 426 KB)

Instructions for Form I-765 (PDF, 390 KB)

I-765 Worksheet (PDF, 239 KB)

Form G-1145, E-Notification of Application/Petition Acceptance (PDF, 238 KB)

Supreme Court of Texas, Chalker Energy Partners III, LLC v. Le Norman Operating LLC, Docket No. 18-0352

Contract Law

Contract Formation

Email Exchange

Separate Instruments Construed as One Contract

Condition Precedent

Preliminary Agreement

Letter of Intent

No Obligation Clauses

Statute of Frauds

Common Law

Electronic Records

Texas Law

Contract Drafting

 

 

In Texas, a deal is, of course, a deal. An agreement as to many things can be oral, sealed by a handshake, even a $10.53 billion handshake. The common law has long recognized that an agreement can be expressed in multiple writings exchanged between the parties. Emails are such writings. (…) we must decide whether an email exchange reflected the meeting of minds required for a contract, given the nature of the transaction and the parties’ expressed contemplations. And we must begin to give certainty to this developing area of contract law. Today, we hold that the parties’ email exchange falls short of an agreement as a matter of law and therefore reverse the judgment of the court of appeals and render judgment for petitioners.

 

(…) Separate instruments construed as one contract: See, e.g., Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 840 (Tex. 2000) (“It is well-established law that instruments pertaining to the same transaction may be read together to ascertain the parties’ intent, even if the parties executed the instruments at different times and the instruments do not expressly refer to each other, and that a court may determine, as a matter of law, that multiple documents comprise a written contract. In appropriate instances, courts may construe all the documents as if they were part of a single, unified instrument.” (footnotes omitted)); Miles v. Martin, 321 S.W.2d 62, 65 (Tex. 1959) (“It is well settled that separate instruments executed at the same time, between the same parties, and relating to the same subject matter may be considered together and construed as one contract. This undoubtedly is sound in principle when the several instruments are truly parts of the same transaction and together form one entire agreement.” (citations omitted)); see also RESTATEMENT (SECOND) OF CONTRACTS § 132 (AM. LAW INST. 1981) (stating that a memorandum satisfying the statute of frauds “may consist of several writings if one of the writings is signed and the writings in the circumstances clearly indicate that they relate to the same transaction”).

 

Electronic Record: See TEX. BUS. & COM. CODE § 322.007(c) (“If a law requires a record to be in writing, an electronic record satisfies the law.”).

 

The Confidentiality Agreement provided in part:

No Obligation. The Parties hereto understand that unless and until a definitive agreement has been executed and delivered, no contract or agreement providing for a transaction between the Parties shall be deemed to exist and neither Party will be under any legal obligation of any kind whatsoever with respect to such transaction by virtue of this or any written or oral expression thereof, except, in the case of this Agreement, for the matters specially agreed to herein. For purposes of this Agreement, the term “definitive agreement” does not include an executed letter of intent or any other preliminary written agreement or offer, unless specifically so designated in writing and executed by both Parties.

By including the No Obligation Clause in the Confidentiality Agreement, Chalker and LNO agreed that a definitive agreement was a condition precedent to contract formation. A party seeking to recover under a contract bears the burden of proving that all conditions precedent have been satisfied.

(…) A condition precedent is an event that must happen or be performed before a right can accrue to enforce an obligation.

(…) While the No Obligation Clause does not define definitive agreement, it does make clear that “the term ‘definitive agreement’ does not include an executed letter of intent or any other preliminary written agreement or offer, unless specifically so designated in writing and executed by both Parties.”

(…) Black’s Law Dictionary defines preliminary agreement as a “precontractual understanding in which two commercial parties allocate their contributions to an undertaking but do not specify all the important terms of the deal.” In contrast, definitive serves “to provide a final solution or to the Assets, and the parties’ dealings suggest that they intended that a more formalized document, end a situation” and is “authoritative and apparently exhaustive”. The emails here are more akin to a preliminary agreement than a definitive agreement to sell like a PSA, would satisfy the definitive-agreement requirement.

 

(…) We do not suggest that the only document that would have satisfied the definitive-agreement requirement was a PSA, only that the emails here do not constitute a definitive agreement.

 

The court of appeals concluded that there is a fact issue as to whether the email chain satisfies the definitive-agreement requirement because the emails set out the assets to be sold, the purchase price, a closing day, and “other key provisions.” The court of appeals also relied on an email containing spreadsheets that Chalker sent to a third party detailing the “interest being sold for each area” and stating that “each area delivers a 67% WI to the buyer”. In a $230 million deal, however, these emails and spreadsheets may leave much to the imagination. Indeed, there were still key agreements to be negotiated between Chalker and LNO before a definitive agreement would exist. The parties had yet to agree upon an escrow agreement, a noncompete agreement, or a joint operating agreement.

 

If (…) the subsequent exchanging of unagreed-to drafts are sufficient to raise a fact question on the existence of a definitive agreement, No Obligation Clauses will be stripped of much of their meaning and utility. Even worse, these clauses would mislead parties operating under the assumption that they can freely engage in negotiations without binding themselves to proposals in an email exchange. By including the No Obligation Clause in the Confidentiality Agreement, the Sellers and LNO provided themselves with the freedom to negotiate without fear of being bound to a contract.

 

(…) See First Bank v. Brumitt, 519 S.W.3d 95, 110 (Tex. 2017) (reiterating that extrinsic evidence cannot be used to create an ambiguity in contractual language).

 

 

 

(Supreme Court of Texas, Chalker Energy Partners III, LLC v. Le Norman Operating LLC, February 28, 2020, Docket No. 18-0352, Chief Justice Hecht)

U.S. Supreme Court, Monasky v. Taglieri, Docket No. 18-935, J. Ginsburg

International Child Ab­duction

Hague Convention on the Civil Aspects of International Child Ab­duction

Habitual Residence

Swift Resolution (Six-Week Target Time for Resolving a Return-Order Petition)

The Hague Convention on the Civil Aspects of International Child Abduction (Hague Convention or Convention), implemented in the United States by the International Child Abduction Remedies Act, 22 U.S.C. §9001 et seq., provides that a child wrongfully removed from her country of “habitual residence” ordinarily must be returned to that country.

(Hague Conference on Private Int’l Law, Con­vention of 25 Oct. 1980 on the Civil Aspects of Int’l Child Ab­duction, Status Table, https://www.hcch.net/en/instruments/ conventions/status-table/?cid=24.)

The Convention’s return requirement is a “provisional” remedy that fixes the forum for custody proceedings. Sil­berman, Interpreting the Hague Abduction Convention: In Search of a Global Jurisprudence, 38 U. C. D. L. Rev. 1049, 1054 (2005). Upon the child’s return, the custody adjudication will proceed in that forum. To avoid delaying the custody proceeding, the Convention instructs contract­ing states to “use the most expeditious procedures avail­able” to return the child to her habitual residence. Art. 2, Treaty Doc., at 7. See also Art. 11, id., at 9 (prescribing six weeks as normal time for return-order decisions).

T. petitioned the U. S. District Court for the Northern District of Ohio for A. M. T.’s return to Italy under the Convention, pursuant to 22 U. S. C. §9003(b), on the ground that the child had been wrongfully removed from her country of “habitual residence.”

A child’s habitual residence depends on the totality of the circum­stances specific to the case, not on categorical requirements such as an actual agreement between the parents.

(…) A child habitu­ally resides where she is at home.

This fact-driven inquiry must be “sensitive to the unique circumstances of the case and informed by common sense.” Redmond v. Redmond, 724 F. 3d 729, 744. Acclima­tion of older children and the intentions and circumstances of caregiv­ing parents are relevant considerations, but no single fact is dispositive across all cases. The treaty’s “negotiation and drafting history” cor­roborates that habitual residence depends on the specific circum­stances of the particular case. Medellín v. Texas, 552 U. S. 491, 507. This interpretation also aligns with habitual-residence determinations made by other nations party to the Convention.

(…) Domestic violence should be an issue fully explored in the custody adjudication upon the child’s return. The Convention also has a mechanism for guarding children from the harms of domestic violence: Article 13(b) allows a court to refrain from ordering a child’s return to her habitual residence if “there is a grave risk that [the child’s] return would expose the child to physical or psychological harm or otherwise place the child in an intolerable situation.”

(…) A remand would consume time when swift resolution is the Convention’s objective. The instant return-order pro­ceedings began a few months after A. M. T.’s birth. She is now five years old. The more than four-and-a-half-year du­ration of this litigation dwarfs the six-week target time for resolving a return-order petition. See Art. 11, Treaty Doc., at 9. T. represents that custody of A. M. T. has so far been resolved only “on an interim basis,” Brief for Respond­ent 56, n. 13, and that custody proceedings, including the matter of M.’s parental rights, remain pending in It­aly. Tr. of Oral Arg. 60–61. Given the exhaustive record before the District Court, the absence of any reason to an­ticipate that the District Court’s judgment would change on a remand that neither party seeks, and the protraction of proceedings thus far, final judgment on A. M. T.’s return is in order.

(U.S. Supreme Court, February 25, 2020, Revised February 26, 2020, Monasky v. Taglieri, Docket No. 18-935, J. Ginsburg)

California Court of Appeal, Atwell Island Water District, Docket No. F076043, Certified for Partial Publication

California Law

Elections Code

Definition of “Election”

State Holiday

Water Board

Election took place on January 17, 2017, which was the day after a state holiday. Per Elections Code section 1100, elections may not be held the day after a state holiday.

Attorney (Holiday)

Brown Act

Appeal from an order of the Superior Court of Tulare County.

Atwell Island Water District (AIWD) is a California water district located in Tulare County, California, and is governed by a five-member board of directors. There is currently a dispute concerning which persons are the true members of its board.

AIWD is both the appellant and respondent in this appeal; appellant is governed by the controllers of the first faction, while respondent is governed by the controllers of the second faction.

The Brown Act, which applies to local water districts, defines a “meeting” as “any congregation of a majority of the members of a legislative body at the same time and location ... to hear, discuss, deliberate, or take action on any item that is within the subject matter jurisdiction of the legislative body.” (Castaic Lake Water Agency v. Newhall County Water District (2015) 238 Cal.App.4th 1196, 1198; Gov. Code, § 54952.2, subd. (a).) “ ‘Two or more persons are required in order to conduct a “meeting” within the meaning of the Brown Act.’ ” (Roberts v. City of Palmdale (1993) 5 Cal.4th 363, 375–376.) Furthermore, the Brown Act defines “action taken” to mean “a collective decision made by a majority of the members of a legislative body ... or an actual vote by a majority of the members of a legislative body ....” (Gov. Code, § 54952.6.)

(…) The trial court reached the proper result in granting the motion to strike without leave to amend. Appellant’s pleadings allege the election took place on January 17, 2017, which was the day after a state holiday. Per Elections Code section 1100, elections may not be held the day after a state holiday. The election was void for being held on an improper day, and Pace and Cameron therefore were not duly elected to the AIWD board. It follows no quorum was present at the meeting at which the action was taken to hire Herr’s firm, and therefore Herr was not authorized to prepare, sign, or file the stricken pleadings on AIWD’s behalf.

(…) It did run afoul of Elections Code section 1100, which provides that “no election shall be held ... the day before, the day of, or the day after a state holiday.” Government Code section 19853 provides that the third Monday in January (which is Martin Luther King, Jr. Day) is a state holiday. “Election” is defined by the Elections Code to mean “any election” provided for under the Elections Code, which would include elections conducted pursuant to Elections Code section 4108, and therefore the Elections Code section 1100 prohibition would apply to the election in the instant case. We can find no exception allowing for an election conducted by all-mail ballot to be held the day after a state holiday.

Since the January 17, 2017 election was void, Pace and Cameron were not duly elected to AIWD’s board of directors. And since they were not duly elected, John Mitchell was the only valid director present at the meeting at which Herr’s firm was allegedly retained to serve as AIWD’s general counsel, but John Mitchell could not constitute a quorum by himself. Herr’s firm was not retained by a majority of AIWD’s board of directors, and therefore Herr was not authorized to prepare, sign, or file pleadings on AIWD’s behalf. The granting of the motion to strike was the correct ruling.


Cal. Judges Benchbook: Civil Proceedings Before Trial (2019).

(California Court of Appeal, February 24, 2020, Atwell Island Water District, Docket No. F076043, Certified for Partial Publication)

Exclusive Distribution Agreement From the SEC Archives (2016)

An Exclusive Distribution Agreement From the SEC Archives (2016)

 

-       Between an U.S. Company and a distributor in the PRC

 

 

https://www.sec.gov/Archives/edgar/data/1672886/000155335019000923/zhong_ex10z4.htm

 

U.S. Court of Appeals for the Third Circuit, Walgreen Co v. Johnson & Johnson, Docket No. 19-1730

Assignment

 

Forum Selection Clause

 

Contract Provision Proscribing the Assignment of Any “Rights or Obligations Under” That Contract

 

Assignment of Federal Antitrust Claims. Barred by the Contract Provision?

 

Contract Provision Regarding Forum Selection Clause, Applicable in Antitrust Claims?

 

Distribution Agreement

 

New Jersey Law

 

Contract Drafting

 

 

 

(“Indirect” purchaser would lack antitrust standing).

 

This case raises the question of whether an assignment of federal antitrust claims is barred by a contract provision proscribing the assignment of any “rights or obligations under” that contract. The District Court answered in the affirmative and granted summary judgment against the appellants, who all want to assert antitrust claims they purportedly obtained by assignment from a party bound by the anti-assignment clause. We conclude that the District Court erred. The antitrust claims are a product of federal statute and thus are extrinsic to, and not rights “under,” a commercial agreement. Accordingly, we will reverse the grant of summary judgment and remand for further proceedings.

 

It is undisputed that New Jersey law governs the Distribution Agreement.

 

This appeal pertains to the scope of the anti-assignment language in Section 4.4 (the “Anti-Assignment Provision”) of the Distribution Agreement. In relevant part, the Anti-Assignment Provision states that “neither party may assign, directly or indirectly, this agreement or any of its rights or obligations under this agreement ... without the prior written consent of the other party.... Any purported assignment in violation of this section will be void.” (JA at 102 (emphasis added).)

 

In January 2018, Wholesaler assigned to Walgreen “all of its rights, title and interest in and to” its claims against Janssen “under the antitrust laws of the United States or of any State arising out of or relating to Wholesaler’s purchase of Remicade.

 

(…) It is undisputed that, if the Anti-Assignment Provision prevents the assignment, then, under the Supreme Court’s seminal decision in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), Walgreen, an “indirect” Remicade purchaser, would lack antitrust standing to assert claims against Janssen (…) In Illinois Brick, the Supreme Court created a “direct purchaser” rule for antitrust claims, “providing that only entities that purchase goods directly from alleged antitrust violators have statutory standing to bring a lawsuit for damages.” Wallach v. Eaton Corp., 837 F.3d 356, 365 (3d Cir. 2016). “The rule of Illinois Brick was founded on the difficulty of analyzing pricing decisions, the risk of multiple liability for defendants, and the weakening of private antitrust enforcement that might result from splitting damages for overcharges among direct and indirect purchasers.”

 

The statutory federal antitrust claims asserted in Walgreen’s complaint are extrinsic to, and not “rights under,” the Distribution Agreement. Applied to the Anti-Assignment Provision, the scope of which is limited to Wholesaler’s “rights under” the Distribution Agreement, it becomes evident that the provision has no bearing on Wholesaler’s antitrust claims, which rely only on statutory rights and do not implicate any substantive right under the Distribution Agreement. Accordingly, the Anti-Assignment Provision does not invalidate Wholesaler’s assignment of antitrust claims to Walgreen or otherwise present a bar to Walgreen’s standing to assert those antitrust claims against Janssen.

 

((…) The State has not brought the assigned claims based on any substantive right or duty found in the contract itself.)

 

(…) Courts that have considered the scope of anti-assignment clauses in the antitrust context often have looked to Section 322 of the Restatement (Second) of Contracts as part of their analysis.

 

(…) The terms “arise out of” and “arise under” are facially broader, more encompassing, and ultimately distinct from, the concept of “rights under” an agreement.

 

Regarding the application of New Jersey law to the Anti-Assignment Provision, Janssen correctly notes that neither Hartig nor any of the antitrust cases interpreting the scope of anti-assignment clauses that Walgreen cites (and which we find persuasive) applied New Jersey law. But that fact is not dispositive. Janssen cites no case, let alone a case applying New Jersey law, in which any court has found that federal antitrust claims fall within the scope of an anti-assignment clause prohibiting the assignment of “rights under” an agreement. Nor does Janssen identify any particular feature of New Jersey law that suggests it would diverge from the weight of authority on this issue. To the contrary, the New Jersey cases that Janssen does cite, in which anti-assignment clauses were held to foreclose statutory causes of action, are readily distinguishable. In each of those cases, unlike the antitrust claims at issue here, the statutory claims that were precluded by an anti-assignment provision all flowed from an underlying breach of one or more provisions of the contract containing the anti-assignment provision.

 

(…) Rini Wine Co. v. Guild Wineries & Distilleries, 604 F. Supp. 1055, 1057–59 (N.D. Ohio 1985) (forum selection clause applicable to “any action entered under the distributor agreement” encompassed antitrust claims where “the incident from which this dispute arises is indeed the termination of the distributor agreement,” and “Plaintiff has chosen to explain defendant’s conduct as an ‘unlawful combination and conspiracy’ in violation of federal and state antitrust laws in its complaint.”).

 

(…) Wallach did not involve a contractual anti-assignment provision. Instead, we addressed the entirely distinct question of whether the assignment of antitrust claims must be supported by consideration. Wallach, 837 F.3d at 361. In that context, we maintained our prior recognition that both contractual rights and non-contractual causes of action are assignable, and that the argument that non-contractual causes of action cannot be assigned rests “on an antiquated distinction between contractual rights and choses in action that no longer has a significant effect on the common law.” Id. at 369. Nowhere did we hold, or even suggest, that statutory antitrust claims are rights under a contract.

 

 

 

(U.S. Court of Appeals for the Third Circuit, February 21, 2020, Walgreen Co v. Johnson & Johnson, Docket No. 19-1730, Precedential)

California Court of Appeal, Fourth Appelate District, Wanke, Inc. v. AV Builder Corp., Docket No. D074392

Enforcement of Judgments Law

Writ of Execution and Notice of Levy

Third Party

Either Creditor's Suit, or Examination Proceedings

Setoff Claims; Right to Offset; Compensation

Two-year lien from issuance of writ of execution

One-year lien from examination order

No requirement for the judgment debtor to have present capacity to collect against the third person

Statute of limitations: four-year limitations period for an "action upon any contract, obligation, or liability founded upon an instrument in writing"

Wanke, Industrial, Commercial, Residential, Inc. (Wanke) obtained a judgment against Scott Keck and WP Solutions, Inc. (WP Solutions). To collect, Wanke filed a creditor's suit against third party AV Builder Corp. (AVB) to recover $109,327 that AVB owed WP Solutions in relation to five construction subcontracts. Following a bench trial, the court entered judgment in Wanke's favor for $83,418.94 after largely rejecting AVB's setoff claims.

The case proceeded to a two-day bench trial in June 2018. The parties stipulated as follows: Wanke obtained a judgment of $1,190,929 against WP Solutions and Keck; Keck discharged his debts in bankruptcy; and after serving a notice of levy on third-party AVB, Wanke learned that AVB owed $109,327 to WP Solutions. The sole issues presented to the court were AVB's setoff claims (§ 431.70) and Wanke's ability to collect given WP Solutions' incapacity.

Enforcement of Judgments Law

"Detailed statutory provisions govern the manner and extent to which civil judgments are enforceable. In 1982, following the recommendations of the California Law Revision Commission, the Enforcement of Judgments Law (EJL) was enacted. The EJL appears in sections 680.101 through 724.260 and is a comprehensive scheme governing the enforcement of all civil judgments in California." (Imperial Bank v. Pim Electric, Inc. (1995) 33 Cal.App.4th 540, 546 (Imperial Bank).)

After entry of a money judgment, the judgment creditor may obtain a writ of execution requiring the levying officer to enforce the judgment. (§ 699.510, subd. (a); Vinyard v. Sisson (1990) 223 Cal.App.3d 931, 939.) If property subject to levy is in a third party's possession, the levying officer serves a copy of the writ of execution and notice of levy on that person, who may not refuse to comply absent a showing of good cause. (§§ 700.040, subd. (a), 701.010.) A third party's failure to deliver property without good cause renders it directly liable to the judgment creditor for the lesser of the judgment debtor's interest in the property or debt, and the amount required to satisfy the money judgment. (§ 701.020, subd. (a).)

"A judgment creditor may enforce the 5 liability imposed by section 701.020 either pursuant to examination proceedings . . . or by way of a separate creditor's suit . . . ." (National Financial Lending, LLC v. Superior Court (2013) 222 Cal.App.4th 262, 271.)

Examination proceedings (§§ 708.110‒708.205) "permit the judgment creditor to examine the judgment debtor, or third persons who have property of or are indebted to the judgment debtor, in order to discover property and apply it toward the satisfaction of the money judgment." (Imperial Bank, supra, 33 Cal.App.4th at pp. 546‒547; see Evans v. Paye (1995) 32 Cal.App.4th 265, 280 (Evans).) Pursuant to section 708.120, a judgment creditor may "discover and specify property of the judgment debtor in the third person's possession, and obtain an order, on motion, determining any claim of exemption asserted by the judgment debtor." (Ilshin Investment Co., Ltd. v. Buena Vista Home Entertainment, Inc. (2011) 195 Cal.App.4th 612, 626 (Ilshin).) "When the third person claims no interest in the property or debt, such a motion procedure may be all that is required in order for the judgment creditor to obtain satisfaction of its judgment in whole or in part." (Ibid.)

However, "when the claims require a contested adjudication, the parties are entitled to have the issues determined in an independent creditor's action, rather than by the motion procedure under section 708.120, subdivision (d)." (Ilshin, supra, 195 Cal.App.4th at p. 626.) Pursuant to section 708.210, "if a third person has possession or control of property in which the judgment debtor has an interest or is indebted to the judgment debtor, the judgment creditor may bring an action against the third person to have the interest or debt applied to the satisfaction of the money judgment." "This action commonly is referred to as a creditor's suit." (Evans, supra, 32 Cal.App.4th at p. 276; see generally, §§ 708.210‒708.290.) A creditor's suit may be filed in the first instance without resorting to other procedures. (See Cal. Law Revision Com. com., 17 West's Ann. Code Civ. Proc. (2009 ed.) foll. § 708.210, p. 348.)

(…) (§§ 697.710 [two-year lien from issuance of writ of execution], 708.120, subd. (c) [one-year lien from examination order].)

(…) By its plain language, the creditor's suit statute considers solely whether the judgment debtor has an "interest" in property held by the third person or is owed a debt by the third person. There is no requirement for the judgment debtor to have present capacity to collect against the third person. And because no assignment is created, section 368 is not triggered and any incapacity by the judgment debtor does not present a bar to the judgment creditor's recovery.

(…) In short, Wanke could bring a creditor's suit against third party AVB under section 708.210 even though judgment debtor WP Solutions was a suspended corporation that lacked capacity to sue AVB.

Statute of Limitations
A creditor's suit must be commenced before the later of the following: "(1) The time when the judgment debtor may bring an action against the third person concerning the property or debt [and] (2) One year after creation of a lien on the property or debt pursuant to this title if the lien is created at the time when the judgment debtor may bring an action against the third person concerning the property or debt." (§ 708.230, subd. (a).) The levy and examination liens expired long before Wanke filed this creditor's suit. (§ 708.230, subd. (a)(2).) Accordingly, it is undisputed that Wanke's suit is timely only if it was filed within the time that WP Solutions "may bring an action" against AVB to recover the $109,327. (§ 708.230, subd. (a)(1).)

(WP Solutions could bring a collection action against AVB within four years of when AVB failed to meet its payment obligations under the waterproofing subcontracts. (§§ 337, subd. (a) [four-year limitations period for an "action upon any contract, obligation, or liability founded upon an instrument in writing"], 343 [four-year catchall period].) Thus, Wanke's suit is timely under section 708.230, subdivision (a)(1) if it was filed within four years of when WP Solutions' collection action accrued.)

"The right to offset is a long-established principle of equity." (Carmel Valley Fire Protection Dist. v. State of California (1987) 190 Cal.App.3d 521, 550; see Kruger v. Wells Fargo Bank (1974) 11 Cal.3d 352, 363.) As early as the 17th century, English chancery courts permitted a defense of setoff "founded on the equitable principle that 'either party to a transaction involving mutual debts and credits can strike a balance, holding himself owing or entitled only to the net difference.' " (Granberry v. Islay Inv. (1995) 9 Cal.4th 738, 743–744; Jess v. Herrmann (1979) 26 Cal.3d 131, 142 (Jess).) Codifying this principle, section 431.70 provides, in part:

"Where cross-demands for money have existed between persons at any point in time when neither demand was barred by the statute of limitations, and an action is thereafter commenced by one such person, the other person may assert in the answer the defense of payment in that the two demands are compensated so far as they equal each other, notwithstanding that an independent action asserting the person's claim would at the time of filing the answer be barred by the statute of limitations."

Traditional setoff rules "operate as an accounting mechanism to avoid a payment and repayment from one party to another," "simply eliminating a superfluous exchange of money between the parties." (Jess, supra, 26 Cal.3d at pp. 134, 137.) Section 431.70 "permits a defendant in a civil action to assert a claim for relief in its answer and allege, in effect, that the defense claim constituted prior payment for the plaintiff's claim and therefore should be set off against any award in the plaintiff's favor." (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 192.) "Relief by way of a section 431.70 setoff is limited to defeating the plaintiff's claim." (Id. At p. 195.) "A defendant may not obtain an award of affirmative relief against a plaintiff by way of section 431.70" and may instead "only assert the setoff defensively to defeat the plaintiff's claim in whole or in part." (Id. at p. 198.)

Section 431.70 requires "cross-demands for money." Mutuality is key—the demands must exist "between the same parties in the same right." (Harrison v. Adams (1942) 20 Cal.2d 646, 649‒650.) Although the statute refers to demands "for money," such demands need not be liquidated. (See Legis. Com., com. 14C West's Ann. Code Civ. Proc. (2009 ed.) foll. § 431.70, p. 226 ["It is not necessary under Section 431.70, as it was not necessary under [former] Section 440, that the cross-demands be liquidated."], citing Hauger v. Gates (1954) 42 Cal.2d 752, 755 ["[Former] section 440 does not require that the cross-demands be liquidated."].) Likewise, the fact that a demand has not been reduced to judgment is not an obstacle to setoff. (Harrison, at p. 649.)

From these authorities we derive a general rule. A setoff may be applied pursuant to section 431.70 between parties who owed each other mutual debts or credits at a time when neither claim was time-barred. By reducing or eliminating a defendant's obligation, setoff serves as an "innocuous accounting mechanism" to eliminate a superfluous exchange between the parties. (Jess, supra, 26 Cal.3d at pp. 137−138.)

(California Court of Appeal, Fourth Appelate District, February 19, 2020, Wanke, Inc. v. AV Builder Corp., Docket No. D074392, Certified for Partial Publication)

Footnotes - Waiver

Footnotes

“Arguments raised only in footnotes are waived.” Ford Motor Co. v. United States, 926 F.3d 741, 760 n.12 (Fed. Cir. 2019).

(U.S. Court of Appeals for the Federal Circuit, February 14, 2020, Seah Steel Vina Corp. v. United States Steel Corp., Docket No. 19-1091)