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July 1996 
Vol. 2 No. 7 ISSN 1087-6219
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The California Supreme Court has ruled that the "Keno" game offered by the California State Lottery is illegal, because it is not a lottery. It is a "banking game." The decision has important implications for regulation of games of chance on Indian tribal lands in California.
In Keno, participants try to match between 1 and 10 numbers to a set of 20 numbers randomly selected by computer. Payoffs are based on the number of numbers selected, and the number matched. Payoffs are not dependent upon the total amount wagered, the number of participants or the number of winners.
The California State Lottery Act authorizes the California State Lottery Commission to operate lottery games. A lottery game is "any procedure authorized by the [Lottery] Commission whereby prizes are distributed among persons who have paid, or unconditionally agreed to pay, for tickets or shares which provide the opportunity to win such prizes." Cal. Gov. Code sec. 8880.12. In a lottery, the operator distributes prizes to the winners, but has no monetary stake in the outcome of a particular game. The operator's success depends solely on the number of entries that it attracts to the game.
The Supreme Court contrasted a lottery with a banking game, in which the operator bets against the other participants. It pays out on winning bets, and retains losing bets. The operator's success or failure depends on which participants, and on how many participants, win their bets. Keno is a banking game. The California State Lottery's success depends upon the outcome of each bet that is placed, not solely on the number of entries that Keno attracts.
The decision will affect regulation of gaming activities on tribal lands. The Indian Gaming Regulatory Act permits tribes to offer all gaming activities that are permitted by the state. See 25 U.S.C. secs. 2701 et seq. California Indian tribes have argued that the California State Lottery's authorization of Keno permits them to operate slot machines. In 1995 the Ninth Circuit decided that Indian tribes could offer games like Keno. Rumsey Indian Rancheria of Wintun Indians v. Wilson, 64 F.3d 1250 (9th Cir. 1995). That case is now before the federal district court in Sacramento, which has been awaiting the present decision before ruling on the legality of particular games.
Western Telcon, Inc. v. California State Lottery, 1996 WL 296235 (Cal. Sup. Ct. June 24, 1996).
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The Second District Court of Appeal in Los Angeles has ruled that policyholders may pursue unfair competition claims against their insurer related to the 1994 Northridge earthquake. The Supreme Court's ban on recovery of damages for unfair claims practices under the Insurance Code does not bar the claims. See Moradi-Shalal v. Fireman's Fund Ins. Cos., 46 Cal. 3d 287 (1988).
The policyholders alleged that State Farm "duped" them into believing that a change in its earthquake insurance practice did not affect coverage. They sought an injunction under the Unfair Competition Act. See Cal. Gov't Code secs. 17200 et seq.
Moradi-Shalal held that only the Insurance Commissioner could assert claims for unfair claims practices under Insurance Code section 790.03. Later decisions held that plaintiffs could not avoid that ruling by simply recasting their damages claims under another statute. See, e.g., American Int'l Group, Inc. v. Superior Court, 234 Cal. App. 3d 749 (1991) (plaintiff may not base a RICO claim on violations of section 790.03).
However, Moradi-Shalal did not eliminate claims that have an independent basis, even if the underlying acts also violate section 790.03. Manufacturers Life Ins. Co. v. Superior Court, 10 Cal. 4th 257 (1995). Here, the policyholders' claims had an independent basis in common law fraud and breach of the good faith covenant.
State Farm Fire & Casualty Co. v. Superior Court, 45 Cal. App.4th 1093 (1996).
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In its third look at a defamation action originally filed in 1984, the Ninth Circuit has affirmed a judgment in favor of The New Yorker magazine and one of its writers. The decision may end a lawsuit that involved two trials and a trip to the Supreme Court.
Jeffrey Masson was Projects Director of the Sigmund Freud Archives. He was discharged after he expressed his disillusionment with Freudian psychology. Janet Malcolm wrote an article about Masson for The New Yorker, entitled "Annals of Scholarship: Trouble in the Archives." Masson complained that Malcolm fabricated certain quotes that she attributed to him.
In 1991, the Supreme Court ruled that fabrication alone did not establish "actual malice," as required by New York Times Co. v. Sullivan, 376 U.S. 254 (1964). Masson also had to prove that the alteration caused "a material change in the meaning conveyed by the statement." Masson v. New Yorker Magazine, Inc., 501 U.S. 496 (1991).
At the first trial in 1993, the jury found for The New Yorker and against Malcolm, but could not agree on damages. The district court ordered a new trial for Malcolm on all issues. 832 F. Supp. 1350 (N.D. Cal. 1993). In November 1994, the jury in the second trial found for Malcolm on all five altered quotations that Masson claimed were defamatory. The district court entered judgment for Malcolm and The New Yorker.
The Ninth Circuit rejected Masson's argument that he should not have to establish material alteration for quotations that Malcolm attributed to the wrong occasion. Further, even if the district court incorrectly instructed that Malcolm had no duty to check contradictory information, its error was harmless. The jury found that the quotation in question was not false.
The district court properly entered judgment for The New Yorker on collateral estoppel grounds. Masson had a full and fair opportunity to litigate his claims in the second trial. The jury decided all the issues against him. There was no independent basis for imposing liability on The New Yorker.
Masson v. The New Yorker Magazine, Inc., 1996 WL 294457 (9th Cir. Jun. 5, 1996).
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The San Diego Division of the Fourth District Court of Appeal has ruled that jurors need not agree on a fraudulent act, so long as at least nine agree that plaintiff proved the elements of fraud.
Krista Stoner claimed that Bonnie Jo Williams fraudulently induced her to give up her baby for adoption. In its instructions, the trial court identified seven possibly fraudulent statements. The jurors asked whether they had to agree on which of the fraudulent statements had been proven. The trial court said that they did not, so long as nine agreed that Stoner had proved each of the elements of fraud.
The Court of Appeal agreed. It analogized to the rule in criminal cases. If only one criminal offense could exist as a result of the commission of various acts, the jury need not agree on which acts were committed. Nor does a criminal jury need to agree on the method used to commit a crime. The same principles apply in civil cases.
Stoner v. Williams, 1996 WL 340813 (Cal. Ct. App. Jun. 20, 1996).
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The Second District Court of Appeal in Los Angeles has ruled that supervisors have no personal liability for discrimination under the Fair Employment and Housing Act for personnel decisions.
FEHA makes it unlawful for "an employer" to discriminate in employment decisions. Cal. Gov't Code secs. 12940(a), 12941(a). It is unlawful for "an employer . . . or any other person" to harass. Cal. Gov't Code sec. 12940(h)(1). "Employer" includes a person acting as an agent of the employer. Cal. Gov't Code sec. 12926(d).
The Court of Appeal followed a "growing consensus" among federal courts construing Title VII. Those courts have held that supervisors do not have personal liability for discrimination, despite the inclusion of agents in the definition of employer. See, e.g., Miller v. Maxwell's Int'l Inc., 991 F.2d 583 (9th Cir. 1993). Supervisors may be liable for unlawful harassment under FEHA. Page v. Superior Court, 31 Cal. App. 4th 1206 (1995).
Janken v. GM Hughes Electronics, 1996 WL 296235 (Cal. Ct. App. Jun. 5, 1996).
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The Ninth Circuit has affirmed a summary judgment in favor of a Deputy Sheriff who shot a suspect. The Deputy Sheriff was entitled to qualified immunity, because he reasonably believed that there was a significant threat of death or serious physical injury.
Deputy Jackson attempted to restrain Paul Reynolds after Reynolds pulled a knife. Although initially cooperative, Reynolds refused to put the knife down. He eventually swung the knife at Deputy Jackson, who then shot him.
A police officer has qualified immunity if (1) the law governing his or her conduct is not clearly established, or (2) a reasonable officer could have believed that his or her conduct was lawful. Act Up!/Portland v. Bagley, 988 F.2d 868 (9th Cir. 1993). An officer may use deadly force if there is "probable cause to believe that the suspect poses a significant threat of death or serious physical injury to the officer or others." Tennessee v. Garner, 471 U.S. 1 (1985).
Deputy Jackson could have reasonably believed that his conduct was justified. Contrary opinions from plaintiff's experts did not raise a disputed issue of fact. Where the material facts as to what happened are undisputed, the trial court should determine the qualified immunity defense at the earliest possible opportunity as a matter of law.
Reynolds v. County of San Diego, 1996 WL 277412 (9th Cir. May 28, 1996).
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The Second District Court of Appeal in Los Angeles has ruled that a title company has no duty to issue a title policy, even though it is virtually impossible to sell real property without title insurance.
The plaintiff alleged that several title companies interfered with contracts for the sale of real property by refusing to issue title policies. Applying the Supreme Court's decision in Della Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal. 4th 376 (1995), the court held that plaintiffs could not establish that the refusal to issue title insurance was independently wrongful. Therefore, they had no claim for wrongful interference.
Quelimane Co. v. Stewart Title Guaranty Co., 1996 WL 335230 (Cal. Ct. App. Jun. 19, 1996).
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The Fifth District Court of Appeal in Fresno has ruled that a claim for bad tax advice accrues upon payment of the extra tax incurred because of the bad advice. That is when the taxpayers suffered "appreciable and actual harm."
The court distinguished International Engine Parts, Inc. v. Feddersen & Co., 9 Cal. 4th 606 (1995), in which the Supreme Court ruled that a claim for negligent preparation of tax returns accrued when the IRS assessed a deficiency. That taxpayer's damages were speculative until the deficiency assessment.
Van Dyke v. Dunker and Aced, 1996 WL 326927 (Cal. Ct. App. Jun. 14, 1996).
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Subsequent treatment of decisions reported on in earlier issues:
Camenisch v. Superior Court (June 1996 issue), now reported at 44 Cal. App. 4th 1689 (1996).
Color-Vue, Inc. v. Abrams (June 1996 issue), now reported at 44 Cal. App. 4th 1599 (1996).
Compassion in Dying v. State of Washington (April 1996 issue), stay granted (U.S. Sup. Ct. Jun. 10, 1996), rehearing by full court denied (Jun. 12, 1996).
Heard v. Lockheed Missiles & Space Co. (June 1996 issue), now reported at 44 Cal. App. 4th 1735 (1996).
Keenan v. Hall (June 1996 issue), now reported at 83 F.3d 1083 (9th Cir. 1996).
Lovell v. Poway Unified Sch. Dist. (May 1996 issue), opinion withdrawn (Jun. 7, 1996).
PMC, Inc. v. Saban Entertainment, Inc. (June 1996 issue), now reported at 45 Cal. App. 4th 579 (1996).
Smiley v. Citibank (South Dakota), N.A. (October 1995 issue), affirmed, 116 S.Ct. 1730 (1996).
Stevenson v. Superior Court (April 1996 issue), review granted (May 15, 1996). The decision may no longer be cited. Cal. R. Ct. 976(d), 977.
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