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January 2003 
Vol. 9 No. 1 ISSN 1087-6219
Copyright and Trademark Notice | Disclaimer
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The California Supreme Court has ruled that the licensing entity for DVD encryption technology may not sue an encryption opponent in California. Although he posted the course code for a decryption program on the web, the opponent did not expressly aim his activities at California.
The DVD Copy Control Association (CCA), headquartered in California, began administering licenses for the Content Scrambling System (CSS) in December 1999. CSS encrypts DVD movies to prevent unauthorized copying. Matthew Pavlovich, currently a resident of Texas, was the driving force behind the LiVid video project while a student at Purdue University in Indiana.
LiVid operated a web site that did not solicit or transact business, and did not provide for interactive exchange between visitors and the site. Shortly before CCA began administering licenses, LiVid posted the source code for a program that could defeat the CSS protection. CCA sued to enjoin misappropriation of its trade secrets.
Although the due process clause allows a state to exercise personal jurisdiction over a defendant based on the effects within the state of intentionally tortious conduct, it is not enough that the defendant should have known that his actions would cause harm in the state. The plaintiff must show that the defendant expressly aimed his conduct at the state.
Pavlovich could not have known that posting would harm CCA in California, because it was not yet administering licenses when he did so. Although he might have guessed that it would have some effects in California (because the movie, consumer electronics and computer industries are centered there), that alone did not prove that he expressly aimed his conduct at California.
Pavlovich v. Superior Court, 29 Cal. 4th 262 (2002).
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The California Supreme Court has ruled that a California trial court should not have interfered in Minnesota litigation between a Minnesota employer and one of its former employees. Although a California court might reasonably conclude that the covenant not to compete in dispute was invalid under California law, that is not the kind of exceptional circumstance that would justify an injunction against a lawsuit in another state.
Mark Stultz worked for Medtronic for five years in Minnesota. When he began his job, he signed an agreement not to work for a competitor for two years after termination of his employment. He quit and went to work for Advanced Bionics, a Medtronic competitor with headquarters in California.
Stultz and Advanced Bionics sued Medtronic in California for a declaration that the covenant not to compete was void under Business and Professions Code section 16600, which makes void “every contract by which anyone is restrained from engaging in a lawful profession, trade or business of any kind.” Medtronic sued Stultz in Minnesota for breach of contract, and Advanced Bionics for tortious interference with contract.
The Minnesota court enjoined Stultz from working at Advanced Bionics in any competitive role, and enjoined Stultz and Advanced Bionics from obtaining any relief in another court that would effectively stay or limit the Minnesota action. The California court ordered Medtronic not to take any further steps to enforce the covenant in any other court.
A California court may only enjoin parties from litigating in another state in exceptional circumstances. The possibility that the pendency of two actions may lead to an embarrassing race to judgment is not enough. California's interest in protecting its employees from covenants not to compete was also not enough.
The fact that Stultz and Advanced Bionics filed their action in California first did not matter. The “first filed” rule would only apply if two courts in California had concurrent jurisdiction. It was never meant to apply where the two courts are in different states.
Advanced Bionics Corp. v. Medtronic, Inc., 29 Cal. 4th 697 (2002).
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The California Supreme Court has ruled that a component part manufacturer is strictly liable for defects in the component that cause damage to persons or other property. Although the economic loss rule generally bars strict liability recovery for damage to the product itself, the rest of the house is a separate “product” from the windows.
Filipina and Nestor Jimenez sued two window manufacturers on behalf of themselves and a class of homeowners. They alleged that Viking Industries and T.M. Cobb had manufactured defective windows that damaged other portions of their house. Viking and Cobb manufactured the windows in parts that others assembled and installed in the houses.
A manufacturer is strictly liable in tort for product defects that harm persons or property. Component manufacturers have no different status just because their products are incorporated into other products. What matters is whether the components were defective when they left the factory, and whether the defect caused the alleged injuries.
The economic loss rule distinguishes tort recovery for personal and property damage from contractual warranty recovery for economic loss resulting from the failure of the product to meet the consumer's economic expectations. When the defect in the product only damages the product itself, the economic loss rule bars recovery.
Whether the homeowners may recover depends upon what the relevant product is. The Supreme Court rejected the window manufacturers' argument that the product was the entire house. The component manufacturer's duty does not necessarily end when the component is incorporated into a larger product.
The court declined to consider whether it should treat defective raw materials the same way, or whether there may be other situations where the economic loss rule would bar recovery for damage to a finished product caused by a defective component part.
Jimenez v. Superior Court, 29 Cal. 4th 473 (2002).
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In companion cases, the California Supreme Court has refused to recognize claims for money damages under the California constitution for infringement of a public employee's due process liberty interest, or an elected legislator's free speech rights. The availability of alternative remedies made recognition of a constitutional right unnecessary.
The University of California removed Richard Katzberg as chair of the radiology department at the UC Davis Medical Center following an investigation of alleged mishandling of funds in the department. Almost a year later Katzberg sued for damages for infringement of his due process liberty interest, because he had not received a name-clearing hearing. After the lawsuit began, Katzberg rejected he University's offer of a name-clearing hearing.
Christine Degrassi was a Glendora city council member from 1994 until March 1999. She claimed that a number of city officials and other individuals threatened, intimidated and retaliated against her because of her votes and her political views.
To decide whether there is a cause of action based on a particular constitutional provision, a court first examines whether the text or the legislative history demonstrates an intent to afford or to withhold a damages remedy. In these two cases, there was no indication one way or the other.
Next, the court should engage in the constitutional tort analysis adopted by the United States Supreme Court. See Bivens v. Six Unknown Federal Narcotics Agents, 403 U.S. 388 (1971). That involves consideration of whether an adequate remedy exists, the extent to which a new cause of action would change established tort law, and the nature and significance of the constitutional right. Of those factors point toward recognition, the court should also consider whether there are any special factors that counsel hesitation in recognizing a damages claim.
Both plaintiffs had adequate alternative remedies. Either one could have sought immediate declaratory, injunctive or writ relief that would have limited any damage. Katzberg could have sued for defamation if there had been damage to his reputation.
In Degrassi's case, recognition of a damages claim might produce adverse policy consequences. The court was “reluctant to endorse a cause of action that would subject to post-hoc judicial scrutiny and assessment of damages the kind of political differences, squabbles and perceived slights that are inherent in a representative government body.”
Katzberg v. Regents of the University of California, 29 Cal. 4th 300 (2002); Degrassi v. Cook, 29 Cal. 4th 333 (2002).
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The Ninth Circuit has published an opinion dismissing an appeal to remind all counsel of the potential consequences of failure to comply with its rules. It dismissed the appeal because both the brief and the excerpts of record were inadequate.
The brief violated Federal Rule of Appellate Procedure 28, because it did not contain a corporate disclosure statement, a jurisdictional statement, appropriate references to the record, a summary of argument, or a statement of the standard of review for each issue.
The excerpts of record violated Circuit Rule 30-1.3, because they did not include the notice of appeal, the trial court docket, the trial transcript or the ruling appealed from.
The inadequacy of either document alone would have been a sufficient basis for dismissing the appeal. The appellate procedure rules are “not optional suggestions … but rules that … are entitled to respect, and command compliance.”
Community Commerce Bank v. O'Brien, 312 F.3d 1135 (9th Cir. 2002).
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Subsequent treatment of decisions reported on in earlier issues:
Bank of America v. City and County of San Francisco (December 2002 issue), now reported at 309 F.3d 551 (9th Cir. 2002).
Costco Cos. v. Gallant (December 2002 issue), review denied (Jun. 12, 2002).
People v. Metters (April 1998 issue), review retransferred to Court of Appeal (Oct. 17, 2001), subsequent opinion not published (Sep. 23, 2002), review denied (Dec. 18, 2002).
Robinson v. Solano County (August 2000 issue), opinion after rehearing en banc, 278 F.3d 1007 (9th Cir. 2002).
Salazar v. Diversified Paratransit, Inc. (December 2002 issue), now reported at 103 Cal. App. 4th 131 (2002), rehearing denied (Nov. 14, 2002), petition for review filed (Dec. 6, 2002).
West v. Bechtel Corp. (December 2002 issue), rehearing denied (Apr. 5, 2002).
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