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Lips v. Scottsdale Healthcare Corporation (5/3/10)

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This case was brought to try to create a new tort: third-party spoliation (i.e. “spoliation” by someone who’s not a party to a lawsuit). As with many cases brought to make legal points, the lawyers win while their client loses.

We blogged the opinion of the Court of Appeals (which, as we suggested then, was written to slide the case to the Supreme Court while not changing the law but also not sticking anybody’s neck out – the bureaucratic mind at work). The facts haven’t changed: Lips got a hip replacement at Scottsdale/Osborn. Part of it broke, requiring its replacement. She wanted to sue its manufacturer but the hospital had thrown the old hardware away, so she sued the hospital for spoliation.

The Supreme Court looked separately at the issues of negligent and intentional third-party spoliation.

The alleged damage to Plaintiff’s cause of action was an economic injury. There is no general duty of due care for the economic – as opposed to physical – safety of others. Plaintiff argued that there should be a “limited” duty because her surgeon told SHC that it had to keep the hardware. But the requests or demands of others do not create duties. (Another way of saying this is that they don’t create rights, which we wish people would remember when “reserving the right” to do something they have no right to do.) In a footnote, though, the court obliquely points out that the hospital could be liable if it had undertaken to keep the hardware and then damaged it.

A tort of intentional third-party spoliation, however, would in the court’s view be perfectly consistent with the law so long as it required a specific intent to damage the plaintiff’s claim. But this plaintiff didn’t allege that and the surgeon’s message wasn’t enough to create an inference of one. “Therefore, even assuming that we would recognize the tort of third-party intentional spoliation,” Plaintiff loses. The opinion upholds the trial court’s dismissal of the claim while vacating what the Court of Appeals had to say about intentional spoliation.

We won’t claim entirely to understand why the court is playing games here. The effect of the ruling is to create a tort of intentional third-party spoliation. If it didn’t want to change the law, the thing to do was to decline review. If it hadn’t realized when it accepted review that this plaintiff couldn’t quite qualify for a new tort then it could – as it has done before in analogous situations – announce that the petition had been improvidently granted. Instead, it approves the tort, defines it, vacates the lower court’s explanation that there is no such tort, but plays coy about whether its going to “recognize” it. The fact is that this is a major change in the law, and it is done by dictum, and if the court is embarrassed by that then – rather than do the deed and try to preserve its modesty with a fig leaf – it shouldn’t have. No matter who signed the briefs.

Stylistically the opinion is clear and relatively short, though its longest paragraph (12) is mostly unneeded. Citations to Doubtful Danny Dobbs or to the cheerful but bibulous Bill Prosser are always red flags but are handled reasonably here.

State v. Eazy Bail Bonds (CA1 4/21/10)

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Good grief. 

Eazy bonded an accused who jumped. Eazy’s President – a non-lawyer – appeared at the forfeiture hearing, argued the matter, and then obtained a couple of continuances. When the judge finally ruled against Eazy she was told that she could move for reconsideration or appeal. A lawyer filed the motion and the appeal.

The Court of Appeals held that since she wasn’t a lawyer Eazy hadn’t technically “appeared” in the forfeiture proceedings and therefore couldn’t, as a matter of law, have made the showing necessary to avoid forfeiture. (Eazy is apparently a corporation, though you have to read between the lines a bit to reach that conclusion.)

Eazy’s lawyer asked the court to publish this to give “guidance” to trial courts, some of which have apparently been letting bail bond employees appear for their companies.

Kudos to him for that. But, like we said, good grief. Lawyers have been chastised for years about UPL. Heaven forefend that someone take a phone call from a guy who turns out to be a public adjuster, for example. The document-preparer committee spends most of its time, and rightly so, riding herd on preparers who think they can give legal advice. And yet the Court of Appeals has to “guide” judges not to let bondsmen make court appearances?

Pardon us hereafter if we yawn about UPL. Get your own house in order first.

Loiselle v. Cosas Management Group (CA1 4/20/10)

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There are one or two subplots but this was published to talk about unjust enrichment.

Loiselle’s employee convinced him to lend money to defendant CMG: $25,000, to be repaid in one week along with a $10,000 “loan fee.” Sounds like a Nigerian email but Loiselle was apparently shocked, shocked to find out that it was a scam. The employee owed CMG money and used the $25,000 to reduce his debt and to convince CMG to loan him $21,000 more. He then committed suicide. Loiselle asked for his money back; CMG refused; Loiselle sued for unjust enrichment. The trial court ordered CMG to return the $25,000. CMG appealed.

The Court of Appeals agreed that CMG had been “unjustly” enriched even though it hadn’t done anything wrong. It was enough that Loiselle had made a “mistake.” A mistaken person “is not precluded from maintaining an action for restitution merely because the benefit was conferred due to his lack of care,” quotes the court from the Restatement, its only reference to Loiselle’s evident lack of foresight or common sense. The court also points out that the employee purported to act as CMG’s agent, which the Restatement may say means something in equity even though (the court does not point out) there was no apparently agency at law.

CMG’s fall-back position was that a subsequent change of circumstance – namely, loaning the employee another $21,000 – made repayment of the full amount inequitable. The Court of Appeals, after five pages of parsing the Restatement and some cases, allowed as how that might be so. It remanded to let CMG try to prove that various sections of the Restatement might let it keep $21,000 of the $25,000 (but only if it also shows that it can’t get the money from the employee’s estate, a requirement the court said did not bind Loiselle).

So, a legitimate creditor must repay money innocently received in order to protect a rank speculator from loss.

In recent decades the Restatement has come off the rails but trusty old things like the 1937 Restatement of Restitution that this court used are wonderful guides. The problem is that even in those days the professors were inclined to treat equity as if it were law, creating ever-finer rules and sub-rules so that any case could be decided by reading their book. It is possible, among all those trees, to lose the forest. This is not so much the appellate court’s fault; it isn’t in the business of second-guessing the details of equitable rulings (not in normal civil cases, anyway). But its too bad that the Court of Appeals played along, taking a microscope to Restatement paragraphs rather than pointing out that the touchstone of equity is, well, equity.