Robinson v. U-Haul Co. of California

Citations: 4 Cal. App. 5th 304; 209 Cal. Rptr. 3d 81; 2016 Cal. App. LEXIS 874Docket: A141396, A145828

Court: California Court of Appeal; October 18, 2016; California; State Appellate Court

Original Court Document: View Document

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U-Haul Company of California (UHC) initiated a lawsuit against Leigh Robinson, an independent dealer, for breach of contract and unfair competition after Robinson terminated their agreement and began renting competitor Budget trucks. UHC claimed Robinson violated a noncompetition covenant in their dealer contract which prohibited him from offering competitors' products while a UHC-funded Yellow Pages ad promoted his business. In response, Robinson sought a judicial declaration to nullify the noncompetition covenant, alleging it was void due to fraud in the inducement.

After UHC's request for a preliminary injunction was denied and its complaint was dismissed, Robinson filed a separate action for malicious prosecution against UHC and claimed violations under the Business and Professions Code section 17200 (unfair competition law). He argued that the noncompetition covenant was illegal and that UHC's aggressive enforcement through litigation constituted unfair competition. A jury awarded Robinson over $195,000 for damages related to malicious prosecution, and the trial court issued a permanent injunction against UHC from enforcing the noncompetition covenant in California, along with awarding Robinson over $800,000 in attorney’s fees as a private attorney general.

In their consolidated appeals, UHC contended that the trial court erred in issuing the injunction since they had voluntarily ceased enforcement of the covenant and that Robinson's request for attorney’s fees was filed late. The court concluded that the injunction was appropriately issued and that it did not abuse its discretion by allowing the late filing, affirming the judgment and the fee award. The court also granted Robinson's request for judicial notice regarding the case.

Covenants not to compete are generally illegal in California, with specific exceptions. Between 2001 and 2006, UHC promoted Downtown Self Storage in Yellow Pages ads as a U-Haul rental location, paying for these ads in advance. In September 2006, after renewing the advertising, Robinson terminated his dealer contract with UHC and opened a competing Budget rental truck dealership at the same location. UHC warned Robinson against competing while the ads were active, emphasizing its policy to enforce non-competition provisions aggressively.

In December 2006, UHC filed a complaint (Robinson I) in Solano County Superior Court against Robinson, alleging unfair competition, breach of contract, and seeking injunctions to prevent Robinson from renting Budget trucks and engaging with competitors for a year post-ad expiration. Robinson countered with a cross-complaint claiming UHC breached the dealer contract, which voided the non-competition clause, and sought a judicial declaration to that effect. 

UHC's motion for a preliminary injunction was denied in June 2007, and shortly after, UHC dismissed its complaint, purportedly to avoid paying Robinson's attorney fees. Robinson's attorney declared that UHC would not reinitiate proceedings against Downtown Self Storage. UHC then moved for summary judgment on Robinson's cross-claims, arguing they were moot due to the dismissal. Robinson dismissed his breach of contract claim but continued to seek a declaration that the noncompetition covenant was void. He also argued that UHC had a history of threatening lawsuits against former dealers without valid grounds, undermining the legitimacy of the covenant enforcement.

Robinson pursued declaratory relief against UHC, which contended the dispute was moot due to its waiver of the noncompetition clause against Robinson. The trial court, in February 2008, denied Robinson’s summary judgment motion, citing the mootness of the claim and his failure to provide sufficient evidence of UHC's ongoing enforcement of similar clauses against other dealers. Robinson sought to reopen discovery to uncover additional lawsuits against dealers that UHC had not disclosed, which led to a limited discovery allowance in May 2008. Ultimately, UHC's summary judgment motion remained unresolved as Robinson dismissed his cross-complaint for declaratory relief before a ruling could be made. UHC's attempt to recover attorney's fees was denied, with the court ruling it was not the prevailing party.

In a separate action, Robinson filed Robinson II as a class action on June 9, 2008, alleging malicious prosecution and violations of the Unfair Competition Law (UCL) against U-Haul. He sought to permanently enjoin U-Haul from including noncompetition clauses in its dealer contracts in California and to notify current dealers of their unenforceability. During the trial in August 2013, the court ruled that the noncompetition clause was illegal under California law, asserting that U-Haul knowingly included it to mislead dealers. This ruling was not contested on appeal. Although Robinson's motion for class certification was denied, the case proceeded as an individual action, during which UHC defended its noncompetition clause by alleging misappropriation of its trade name and trade secrets.

On August 22, 2013, the jury determined that UHC did not have a reasonable belief that Robinson was misusing trade secrets when it filed the first lawsuit (Robinson I), nor did it reasonably believe that Robinson’s rental of Budget trucks would confuse customers while the Yellow Pages advertisement was active. The jury awarded Robinson $195,310 in compensatory damages for malicious prosecution but did not award punitive damages. Following this, in September and October 2013, Robinson pursued a claim under the Unfair Competition Law (UCL), seeking judgment, an injunction, and attorney’s fees. He introduced a 1987 FTC order prohibiting UHI and subsidiaries from initiating proceedings to harass competitors, along with evidence of four prior lawsuits filed by UHC against former dealers regarding noncompetition covenants from 1995 to 2005.

On October 1, 2013, UHC filed a motion for judgment on the UCL claim, arguing that Robinson lacked standing and that the claim was moot since it had abandoned efforts to enforce the noncompetition clause in California. UHC's in-house counsel, Kristine Campbell, provided a declaration stating that since 2010, UHC had modified its contracts to void noncompetition clauses where prohibited and had not attempted enforcement in California since the dismissal of Robinson I. Despite UHC's claims, anecdotal evidence from some dealers indicated they were not informed of this policy.

On January 17, 2014, Judge Harry S. Kinnicutt ruled in favor of Robinson on the UCL claim, issuing a permanent injunction against U-Haul from enforcing the noncompetition covenant against any dealers. The court found the UCL claim was not moot as it presented a public interest issue likely to recur, implicitly rejecting U-Haul's standing argument. The final judgment on January 22, 2014, awarded Robinson damages from the malicious prosecution claim and granted attorney’s fees on the UCL claim, although the specific amounts were left blank. U-Haul appealed the judgment on March 21, 2014. Following further proceedings, on May 14, 2015, the court awarded Robinson $834,008.09 in attorney’s fees under Code of Civil Procedure section 1021.5, and U-Haul subsequently appealed this order. The two appeals were consolidated on August 21, 2015, at the parties' request.

UHC argues against the issuance of a permanent injunction, claiming errors in the court's decision based on several points: a lack of evidence for a continuing violation, Robinson's lack of standing, the absence of broad public interest in Robinson’s UCL claim, the mootness of Robinson’s summary judgment motion in a prior case which UHC believes should preclude the injunction, and the exclusion of witness testimony asserting that UHC ceased enforcing the covenant not to compete in California. 

The court's issuance of the injunction was deemed an appropriate exercise of discretion, supported by substantial evidence. The trial court's findings indicated UHC had a history of attempting to enforce the covenants, and although UHC claimed to have modified its practices, there was insufficient proof that it communicated these changes effectively to its California dealers. The court found UHC's disclaimer of enforcement lacked reliability, noting that past practices raised concerns about potential adverse effects on California dealers and their customers. 

The court considered whether voluntary compliance could negate the need for an injunction, referencing case law that suggests an injunction may be denied if a party willingly adheres to its terms. However, the court emphasized that the absence of evidence to suggest UHC would refrain from prohibited actions did not preclude the issuance of the injunction. Overall, the combination of UHC's historical enforcement behavior and its inadequate modifications provided substantial grounds for the court's decision.

A party's voluntary discontinuation of illegal conduct does not automatically preclude injunctive relief, as established in **People ex rel. Feuer v. Superior Court**. The court retains the authority to assess the legality of previous actions, especially if the behavior could be resumed. The good faith of a party's cessation of unlawful practices is critical; if a defendant has not legally committed to avoiding future violations, doubts about their sincerity may arise. UHC's lawsuit against Robinson was part of a broader pattern of knowingly illegal behavior over many years, evidenced by UHC's acknowledgment of its aggressive enforcement of non-competition clauses despite their illegality in California. Even after revising its dealer contracts in 2010, UHC failed to eliminate the problematic clauses, and insufficient notification to dealers indicated continued non-compliance. UHC's policy change occurred only after losing a preliminary injunction motion and facing further litigation, calling into question the reliability of its commitment to cease enforcement of the non-competition covenant. The trial court found UHC's history of resistance to policy amendments justified the issuance of an injunction to prevent future violations. Additionally, UHC's argument that Robinson lacked standing under the UCL due to an absence of personal injury was cited, referencing **Amalgamated Transit Union**, indicating the necessity for the plaintiff to demonstrate direct harm from the alleged unfair competition.

Section 17204 allows the Attorney General, county district attorneys, city attorneys, and any individual who has suffered an actual injury and lost money or property due to unfair competition to seek injunctive relief under the Unfair Competition Law (UCL). The case of Aron v. U-Haul Co. of California established that a customer who incurred unfair refueling costs had standing under the UCL. Proposition 64, passed in 2004, narrowed the standing requirements, indicating that mere potential harm to the public is insufficient for an individual to have standing. However, specific harm from anticompetitive conduct does confer standing, as seen in Medrazo v. Honda of North Hollywood. Robinson was deemed to have standing because he faced litigation from UHC, incurring attorney’s fees as a result of UHC’s actions, which included using litigation tactics to intimidate former dealers from engaging with competitors. UHC’s practices constituted an unfair business practice, similar to the collection agency's abusive litigation tactics in Barquis v. Merchants Collection Assn. Robinson's situation was not a case of collusion between an attorney and a plaintiff to exploit a business. 

UHC argued the case was moot, but acknowledged that courts can resolve issues of broad public interest even if events typically render a case moot. The standard of review for such determinations is unclear, with some issues reviewed de novo and others potentially subjected to an abuse of discretion standard. Ultimately, the court found that UHC's noncompetition clause did present a matter of broad public interest, affirming its discretion in the matter.

Palsson is pertinent to the present case as it addresses restrictions on employment opportunities via bylaws of a private entity, specifically an association of real estate brokers. In Palsson, a significant majority of brokers denied Palsson's membership, and consequently, his access to the multiple listing service (MLS), based on the association's requirement that members must be primarily engaged in real estate. This bylaw not only denied Palsson access to the MLS but also restricted his employment opportunities with the majority of brokers in the region. When Palsson challenged this decision, the board sought a declaratory judgment to validate its bylaws. The California Supreme Court considered preliminary issues, including mootness, ultimately finding the board's practices posed significant anticompetitive risks and violated the Cartwright Act. The court applied the broad public interest exception to mootness, emphasizing the substantial interest of various stakeholders, including consumers and trade associations. The presence of amicus briefs from influential parties highlighted the case's importance, though the court noted that such factors should not solely dictate the applicability of the public interest exception. Additionally, UHC's argument that the limited number of independent dealers in California invalidated the broad public interest exception was rejected; the court deemed 1,000 dealers, along with past and prospective dealers, as sufficiently representative of the public. The trial court also recognized that the covenant's anticompetitive effects extended beyond the dealers to their customers and the broader truck rental market.

UHC's enforcement of its noncompetition covenant in California harmed its competitors by restricting their access to rental outlets and limiting customer access to rental trucks, thereby negatively impacting price competition in the market. This situation warranted an injunction to protect UHC’s dealers, past and prospective, its competitors, and the public involved in the truck and trailer rental market. UHC argued that Judge Beeman’s February 2008 ruling in Robinson I, which denied Robinson’s summary judgment motion based on mootness, should collateral estop Robinson from obtaining an injunction in Robinson II. Collateral estoppel requires several conditions: the issue must be identical to one decided previously, actually litigated, necessarily decided, final and on the merits, and the party against whom it is asserted must have been involved in the prior case. In this instance, collateral estoppel did not apply because Robinson did not raise a UCL violation in Robinson I, and Judge Beeman did not rule on any UCL-related issues. The issues in both cases were factually and legally distinct, and the declaration by Campbell, which UHC claimed mooted the issues, did not exist at the time of the prior ruling. Furthermore, a determination of mootness does not constitute a decision on the merits, meaning that the mootness ruling from Robinson I was not binding in Robinson II. Thus, the court concluded that collateral estoppel did not prevent the issuance of the injunction.

When cases involve issues of significant public interest that are likely to arise again, courts may decide on the merits even if the specific issue is moot for the involved party. UHC argued that the trial court wrongly excluded Savelle Jefferson’s testimony regarding UHC's cessation of enforcing a restrictive covenant in California. UHC claimed this testimony would demonstrate changes in dealer contracts and communication with dealers. However, Robinson contended that Jefferson lacked the necessary personal knowledge for such claims. The trial court ruled the testimony irrelevant, and upon review under an abuse of discretion standard, it was determined that the court's decision was justified due to the minimal relevance of the evidence. Even if deemed relevant, the court could have excluded it under Evidence Code section 352, which allows for such discretion. Furthermore, even if the testimony should have been allowed, any potential error was harmless because the court had already considered similar evidence from another source, Campbell, which did not change the outcome. 

Regarding attorney’s fees, the U-Haul defendants contended that Robinson should not be awarded fees due to procedural issues. Robinson filed a motion for attorney’s fees related to his malicious prosecution claim before judgment was entered, claiming a total of $1,063,248.29. The trial court tentatively denied this request, stating that the jury's verdict was interlocutory. It deferred any decision on fees related to the unfair competition law (UCL) claim until after final judgment. Ultimately, the court’s judgment awarded Robinson the right to attorney’s fees on the UCL claim but did not specify an amount. Subsequently, Robinson filed a memorandum of costs, seeking $1,154,738 in attorney’s fees after the judgment was issued.

UHC filed a motion to tax costs, asserting that Robinson could not claim attorney’s fees through a memorandum of costs and needed to submit a noticed motion instead. At that time, Robinson had the opportunity to file a motion for attorney's fees within 60 days as per Rule 3.1702(b)(1). He opposed the motion to tax costs, insisting that a memorandum of costs was appropriate since he was entitled to attorney's fees after the final judgment. During the April 3, 2014 hearing, Robinson’s counsel shifted his position, arguing that he could file a motion for attorney’s fees anytime after the final judgment under section 1021.5, citing Angelheart v. City of Burbank. UHC countered that Rule 3.1702 required Robinson to file his motion within 60 days of the final judgment notice, a deadline that had passed. UHC also claimed Angelheart was overruled by Sanabria v. Embrey. In response, Robinson acknowledged the applicability of Rule 3.1702 but requested that his earlier requests for attorney’s fees be considered timely under Rule 8.104(a). On June 19, 2014, the trial court ruled on UHC’s motion, noting Robinson’s counsel had been informed multiple times that his motions were premature and that he needed to re-file after final judgment. Consequently, the court struck Robinson’s requested attorney’s fees from his memorandum of costs, allowing a renewed motion if he obtained an extension under Rule 3.1702(d). Robinson subsequently filed for an extension, citing his attorney’s misunderstanding that the court had already determined he was entitled to fees. On January 15, 2015, the trial court granted Robinson’s extension motion, finding that his attorney’s honest mistake constituted good cause under Rule 3.1702(d).

Robinson filed a motion for $1,166,430.51 in attorney's fees, asserting entitlement under a contractual provision in the dealer contract for his malicious prosecution claim and through a private attorney general theory related to his UCL claim under section 1021.5. The trial court denied the request for contractual fees, reasoning that the malicious prosecution claim was tort-based. However, it granted $834,008.09 in fees for the UCL claim, citing that Robinson had enforced an important public interest right, conferred a significant benefit to independent dealers and residents in California, and that the financial burden of private enforcement exceeded his personal interest.

Regarding the extension of time for filing the attorney's fees motion, Robinson's attorney did not dispute the necessity of filing within 60 days post-judgment notice. Nevertheless, the court's allowance of a belated motion was upheld, with Rule 3.1702(d) interpreted liberally to permit extensions for good cause, even post-deadline. The court found that claims of inadvertence could constitute good cause if not prejudicial. UHC's argument for applying the standards of Code of Civil Procedure section 473 to Rule 3.1702 was rejected, emphasizing that legal standards from other sections should not be automatically applied to Rule 3.1702.

The trial court has significant discretion in ruling on extensions to file attorney’s fees motions under the “good cause” standard of Rule 3.1702(d), compared to the more restrictive criteria for relief from judgments under Code of Civil Procedure, section 473(b). "Good cause" in this context refers to a valid reason for a party's failure to meet a filing requirement. The court's finding of "good cause" is generally reviewed deferentially for abuse of discretion, supported by case law. In the case of Robinson, the judge initially directed counsel to file post-judgment but later recognized an "honest mistake" in counsel's interpretation. This finding was backed by the attorney's declaration and deemed reasonable based on the circumstances. The trial court judiciously denied the initial fee request but allowed a late motion after receiving an adequate explanation. The reasonableness of counsel's misunderstanding was crucial, and credibility was assessed by the judge who had extensive familiarity with the case. No prejudice to U-Haul was found, as it was aware of the grounds and amounts for fees sought before judgment. Procedural irregularities did not invalidate the fee award, and the judgment affirming the attorney’s fee award to Robinson was upheld, with costs awarded to Robinson on appeal.