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February 2001 
Vol. 7 No. 2 ISSN 1087-6219
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The Ninth Circuit has ruled that a program that distributes the interest on lawyers' trust accounts (IOLTA) to a charitable foundation constitutes a taking of client property under the Fifth Amendment. It remanded to the district court to determine the appropriate remedy.
The State of Washington requires lawyers and non-lawyer real estate “closing officers” to hold small and short term client money in interest bearing trust accounts, with the interest going to the Legal Foundation of Washington. Clients are only entitled to interest on their money if the interest earned would be greater than the cost to establish a separate interest bearing account or sub-account for that client. In 1990, the program generated $3.9 million; in 1995, $2.7 million.
In Phillips v. Washington Legal Foundation, 524 U.S. 156 (1998), the Supreme Court determined that the interest earned in IOLTA programs is property that belongs to the client. However, it declined to rule on whether such programs effected a taking of the client's property, or what would constitute just compensation.
In the instant case, the Ninth Circuit rejected Washington's argument that there was no taking because there was no real economic impact on the clients. According to the proponents of the program, if there had been no IOLTA program, the funds would not have generated sufficient interest to offset the costs. However, if there had been no client funds in the first place, there would have been no interest at all. Therefore, the value was created by the client funds.
Although the clients were entitled to a declaration that the IOLTA program was a taking of their property, the court did not decide what other remedy might be appropriate. Because just compensation is determined by the loss to the property owner, no compensation would be due if the proponents of the IOLTA can show on remand that the clients would earn nothing if the program did not exist.
Washington Legal Foundation v. Legal Foundation of Washington, 2001 WL 20994 (9th Cir. Jan. 10, 2001).
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The Ninth Circuit has ruled that the County of Los Angeles is subject to section 1983 liability for the actions of its sheriff in determining how long to hold a jail inmate before releasing him or her. In carrying out that function the sheriff is a County policymaker.
The Los Angeles County Sheriff's Department has a policy of holding jail inmates until it conducts a check on the Automated Justice Information System to determine if the inmate is wanted by another law enforcement agency. The Department does not run that check until all wants that arrive on the inmate's scheduled release date have been entered. That may not occur until one or two days after the scheduled release date.
A number of inmates subjected to the procedure filed six separate lawsuits against the County and the Sheriff's Department, claiming that they were over detained in violation of the federal Constitution. The Sheriff's Department and the County argued that they were not liable, because the sheriff was acting as a state official in a law enforcement function. Therefore, he was not subject to suit under section 1983. The Ninth Circuit disagreed.
In McMillian v. Monroe County, 520 U.S. 781 (1997), the Supreme Court ruled that an Alabama county sheriff was not subject to suit under section 1983 because he was acting for the state in carrying out his law enforcement duties. However, the Court cautioned that liability under section 1983 must be determined on a case-by-case basis by examining all relevant law.
In this case, the California Constitution designates sheriffs as county officers. Although the Government Code grants the State Attorney General power over the sheriffs' activities involving investigation or detection of crime, it grants county boards of supervisors broad fiscal and administrative powers over the county jails. Counties also retain the power to transfer control of the jail to a county-created department of corrections.
The court found further support for the County's liability in statutory provisions establishing that the County, not the State, should pay any money damages. The County's charter established the office of sheriff as an elected position. The board of supervisors retains budgetary oversight and control over the Sheriff's Department.
The court also distinguished County of Los Angeles v. Superior Court (Peters), 68 Cal. App. 4th 1186 (1998), in which the California Court of Appeal ruled that the sheriff was a state actor. That case involved detention based on a facially valid warrant, which is a law enforcement function recognized as a state matter under the California Constitution. In any event, the decision was not binding on the Ninth Circuit, because the issue is one of federal law.
Streit v. County of Los Angeles, 2001 WL 28097 (9th Cir. Jan. 12, 2001).
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The Second District Court of Appeal in Los Angeles has ruled that an employer may be liable for wrongful termination in violation of public policy if it fires an employee for refusing to sign a confidentiality agreement that contained an invalid covenant not to compete.
After Playhut hired Richard D'Sa, it asked him to sign a confidentiality agreement. The agreement provided that D'Sa would not disclose Playhut's trade secrets, and that he would transfer to Playhut any inventions and patents that he made or obtained during his employment. The agreement also contained the following covenant not to compete:
“Employee will not render services, directly or indirectly, for a period of one year after separation of employment with Playhut, Inc. to any person or entity in connection with any Competing Product. . . . Employee agrees that, upon accepting employment with any organization in competition with the Company or its affiliates during a period of five year(s) following employment separation, Employee shall notify the Company in writing within thirty days of the name and address of such new employer.”
Playhut fired D'Sa for refusing to sign the confidentiality agreement. The Court of Appeal reversed the trial court's grant of summary judgment in Playhut's favor.
Business and Professions Code section 16600 provides that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business is to that extent void.” Playhut's covenant violated section 16600.
A plaintiff seeking to pursue a tort claim for wrongful termination in violation of public policy must identify a policy rooted in constitutional or statutory provisions that affects the public at large and is fundamental, substantial and well established. Section 16600 is a clear legislative declaration of public policy against covenants not to compete.
Playhut argued that section 16600 would prevent enforcement of the covenant against D'Sa. Therefore, Playhut did not violate public policy by insisting on execution of its confidentiality agreement, because it was free to enforce the other provisions. The court rejected the reasoning. Playhut's employees were unlikely to be sufficiently versed in California law to know that they could sign the agreement without fear that they would be bound by the covenant not to compete.
D'Sa v. Playhut, Inc., 85 Cal. App. 4th 927 (2000).
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The California Supreme Court has ruled that public defenders do not have discretionary act immunity under Government Code section 820.2. The acts or omissions of a public defender in representing a defendant in a criminal action do not involve the type of basic policy decisions that are insulated from liability under section 820.2.
Deputy Public Defender Julie Leeds represented Glenn Russell Barner in a bank robbery prosecution. Leeds failed to follow up on some information in an FBI memorandum that indicated a confidential informant had identified someone else as the bank robber. Although Barner was convicted of the bank robbery, he had the conviction set aside. On the retrial, the court dismissed the charges after the FBI declined to identify the confidential informant. Thereafter another individual admitted that he had committed the robbery, and Barner obtained a finding that he was factually innocent. He then sued Leeds for malpractice.
Under Government Code section 820, public employees are liable for their torts unless a statute provides otherwise. Section 820.2 provides that “a public employee is not liable for an injury resulting from his act or omission where the act or omission was the result of the exercise of the discretion vested in him, whether or not such discretion be abused.”
Earlier Supreme Court decisions had established that immunity under section 820.2 is reserved for basic policy decisions that have been expressly committed to coordinate branches of government. See, e.g., Caldwell v. Montoya, 10 Cal. 4th 972 (1995). The immunity is intended “to give legislative and executive policymakers sufficient breathing space in which to perform their vital policymaking functions.” Tarasoff v. Regents of the University of California, 17 Cal. 3d 425 (1976). By contrast, operational decisions that are routine to the normal operation of the public employee's office are not immune under section 820.2.
A public employee's decision about whether to provide professional services at all might involve a basic policy decision imbued with the immunity of section 820.2. However, choosing among alternatives and the exercise of professional skill only involve operational judgments that are not entitled to immunity.
Barner v. Leeds, 24 Cal. 4th 676 (2000).
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The Ninth Circuit has rejected a claim of qualified immunity by a county social worker who removed a minor from her mother's home because of suspected abuse by the stepfather.
Under clearly established law, a government official must obtain prior judicial authorization to remove a minor unless there is reasonable cause to believe that the child is in imminent danger of serious bodily harm.
A reasonable social worker could not have believed that removal was justified in this case. The alleged conduct was limited to improper touching. The social worker left the child in the home for four days after her initial interview. She could not have believed that there was imminent danger.
Mabe v. San Bernardino County, 2000 WL 33124987 (9th Cir. Jan. 24, 2001).
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Subsequent treatment of decisions reported on in earlier issues:
Calhoon v. Lewis (July 2000 issue), review denied (Dec. 20, 2000).
Jensen v. Wells Fargo Bank (January 2001 issue), rehearing denied (Dec. 28, 2000), petition for review filed (Jan. 12, 2001).
Ramirez v. Circuit City Stores, Inc. (January 2000 issue), review dismissed and cause remanded (Oct. 18, 2000). The decision remains uncitable. Cal. R. Ct. 976(d), 977.
Swenson v. County of Los Angeles (November 1999 issue), review dismissed and cause remanded (Jan. 24, 2001). The decision remains uncitable. Cal. R. Ct. 976(d), 977.
Three Boys Music Corp. v. Bolton (June 2000 issue), cert. denied, 2001 WL 46307 (Jan. 22, 2001).
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