A Comprehensive Guide to Medical Malpractice Lawsuits in California

Hospitals and doctors are often concerned about the size of medical malpractice awards. However, these awards have to be large in order to cover the damage a negligent doctor can inflict. A negligent doctor can inflict serious injuries on a patient that can dwarf most other types of injuries.

In 1975 though, California passed MICRA, a series of laws which make it difficult for patients to collect medical malpractice awards. However, MICRA creates procedural hoops which make the process more difficult and time consuming. These hoops include a narrower statute of limitations, a ninety day notice, the possibility of arbitration, and award caps.

This blog will discuss each hoop so that patients can collect malpractice payments which rightfully belong to them.

Statute of Limitations

As the name suggests, statutes of limitations place a timeframe on when a plaintiff can file a lawsuit. For example, victims of automobile accidents have a statute of limitation of two years. The victim has two years to sue or the victim loses the right to file a lawsuit regarding that accident.

Statutes of limitations are a common occurrence in personal injury, so medical malpractice claims have one as well. The statute of limitations for medical malpractice is three years after the injury, or one year after the plaintiff discovered or should have, through reasonable diligence, discovered the injury (CCP 340.5). The first half of this statute sounds reasonable – three years to file a claim is more than the two years given for automobile accidents.

However, the second half of the statute of limitations can prevent many plaintiffs from bringing their claims. The statute requires that medical malpractice victims bring their claim within one year after the victim discovers his or her injury or one year after the victim should have discovered his or her injury. This part of the statute of limitations is triggered when a victim suspects that his or her doctor was negligent (Knowles v. Superior Court).

This can very problematic for malpractice victims or their families. A patient may require many procedures performed by many doctors. Although victims or their families may suspect negligence happened sometime during the medical procedures, they need to bring lawsuits against specific parties. One year is often not enough time to identify which healthcare provider was careless, but courts still require that the claim be brought before that one year period is over. This will either result in the case being dismissed entirely (Jolly v. Eli Lilly) or in some defendants getting away without consequence (Knowles v. Superior Court).

1.     Statute of Limitations – Exceptions to The Three Year Rule

The statute of limitations, CCP 340.5, includes a few exceptions. If the defendant was fraudulent, tried to cover up the malpractice, or left a “foreign object” inside the plaintiff that has no medical effect, the three year limit does not trigger. Instead, CCP 340.5’s statute of limitations will be replaced by a more appropriate rule (Young v. Haines). For example, if a surgeon leaves a sponge inside the victim, the three year rule does not apply. Instead, the statute of limitations will be one year upon the victim’s reasonable discovery of the sponge inside her body.

Note that these exceptions only apply to the “three years after injury” rule. These exceptions do not apply to the one year rule regarding the victim’s suspicion of malpractice (Sanchez v. South Hoover Hospital).

2.     Statute of Limitations – Children

CCP 340.5 is far more lenient towards children. For children between the ages of six and eighteen, the statute of limitations is three years. The nonsense about “one year after discovery of injury or could have discovered injury” does not apply to children. For children under the age of six, the statute of limitations is extended until the child is eighteen.

Ninety Day Notice

The ninety day notice requirement is a procedural obstacle that MICRA specifically created to slow down medical malpractice suits. The ninety day notice requires the malpractice victim to send a written letter notifying the defendants that the victim intends to sue them for medical malpractice ninety days before the actual lawsuit is filed (CCP 364). More specifically, the notice must inform the defendants the legal basis of the claim, the type of injuries alleged, and the nature of the injuries alleged (CCP 364b). The notice can be sent through first class mail or fax (CCP 364).

The notice is designed to give healthcare providers an advantage by giving them extra time to prepare. However, the ninety day notice can also work to the malpractice victim’s advantage by extending the statute of limitations. If the notice is sent during the statute of limitations period, the statute will be extended.

For example, if the notice is served on the last day of the three year period, the statute of limitations will become three years and ninety days. Likewise, if the notice is served during the one year period upon the victim’s discovery of injury, the statute of limitations becomes one year and ninety days. The ninety day notice can extend the statute of limitations regardless of whether the applicable statute of limitations is one or three years (Russell v. Stanford University Hospital).


When plaintiffs sue in court, they often expect a jury trial. Alternative dispute resolutions, such as arbitration, often come as a surprise. Let’s go over some terms first though. “Alternative dispute resolutions” are methods of settling a case other than the use of a trial. They can include settlements or arbitration. Judges love alternative dispute resolutions because it means less work for them.

“Arbitration” is an alternative dispute resolution where the parties agree to the use of a third party to review the evidence and render a binding decision. The arbitrator can be one person or a panel of persons. Although arbitration might sound like trial by judge, arbitrators are not judges. The most significant difference is that arbitrators are selected by the parties whereas judges are not. This doesn’t sound too bad until one realizes that arbitrators are often chosen by the party with the deeper pockets.

Unfortunately for medical malpractice victims, MICRA allowed healthcare providers to arbitrate malpractice suits (CCP 1295). To be sure, both parties must agree to arbitration. “…Arbitration is binding only insofar as both parties consent in some fashion to the waiver of the right to a jury trial” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC). However, most patients will, at most, skim the agreements healthcare providers give them. Many patients will not realize that their case is subject to arbitration until they try to sue the healthcare provider.

Courts have generally upheld arbitration agreements, despite the fact that the healthcare providers often control who the arbitrators are. According to CCP 1295, arbitration clauses must at least, in “10 point bold red type” font, read: “NOTICE: BY SIGNING THIS CONTRACT YOU ARE AGREEING TO HAVE ANY ISSUE OF MEDICAL MALPRACTICE DECIDED BY NEUTRAL ARBITRATION AND YOU ARE GIVING UP YOUR RIGHT TO A JURY OR COURT TRIAL. SEE ARTICLE 1 OF THIS CONTRACT.” Some attorneys have speculated that arbitration is actually preferable for plaintiffs.

Damage Awards

The most infamous part of MICRA is its modification of medical malpractice damage awards. Although the damage cap is MICRA’s most well known provision, MICRA also changes the lump-sum rule and the collateral source rule. These rules might sound like a foreign language to laypersons, but they can be just as important to patients as the damage cap.

1.     Damage Cap

Non-economic damage awards against healthcare providers for professional malpractice are capped at $250,000 (CCP 3333.2). “Non-economic damage” includes pain and suffering, inconvenience, physical impairment, disfigurement, and other nonpecuniary damage. On the other hand, “economic damages,” such as lost wages, are not controlled by the cap (Francies v. Kapla).

It is also important to point out that the cap only applies to “healthcare providers for professional malpractice.” Professional malpractice by a healthcare provider is “a negligent act or omission to act by a health care provider in the rendering of professional services…provided that the act is within the scope of services for which the provider is licensed…” (CCP 3333.2(c) (2)).

Any case outside that definition is not covered by MICRA’s damage cap. Intentional battery, which are medical procedures without the patient’s consent, are not covered (Perry v. Shaw). Reckless neglect, such as neglect which constitutes abuse under the Elder Abuse and Dependent Adults Civil Protection Act, are not covered (Delaney v. Baker). Any persons who are not healthcare providers are not covered. The term “healthcare providers” is quite large though, and it includes unlicensed yet registered social workers (Prince v. Sutter Health Central).

2.     Periodic Payments

Most damages awards for negligence are given in single lump sums, which is the entire award given all at once at the end of trial. The lump sum rule has drawn criticism because accident victims are often under or overcompensated (Deocampo v. Ahn). It is difficult for courts to predict how much an accident victim might need in the future.

The lump sum rule is optional in medical malpractice cases. Parties are allowed to use periodic payments instead if the damage award is over $50,000 in future damages (CCP 667.7). For instance, defendants can pay a damage award of $9,312,335 in equal monthly installments for 336 months, the patient’s life expectancy, instead of all at once (Deocampo v. Ahn). The $9,312,335 award could exceed the $250,000 cap because the award was for future medical damages. The patient in Deocampo suffered from heart trouble which would likely result in future operations.

The option for periodic payments can be triggered by either party. Why would the patient want to be paid in periodic payments? As mentioned above, lump sum payments sometimes under compensate the patient. If the patient is paid $80,000 today but the patient actually needs $100,000 in the future, the patient would still need $20,000. With periodic payments, under compensation is never a problem.

However, the main risk with periodic payments is that the defendant might not always be around to pay the patient. Fortunately, the statute addresses this issue. If the defendant is not adequately insured, the court can order the defendant “to post security adequate to assure full payment” (CCP 667.7). The security is collateral property that the patient can collect and sell in the event that the defendant is unable to pay the damage award.

Suppose a therapist is found liable for a $70,000 award and he or she is not insured. The therapist can offer a summer beach house as collateral in the event that he or she is unable to make full payments. The beach house would be security for the patient if the therapist went into bankruptcy.

Finally, periodic payments favor the patient even if the patient passes away. If the patient passes away before the defendant makes full payment, the remainder of the payment is given to people the patient owes a duty of support. People the patient owes a duty of support are typically children or spouses. Of course, this provision only counts the patient’s lost earnings, so defendants can go back to court to modify the award. However, defendants cannot extinguish the obligation to pay the patient’s dependents (CCP 667.7(c)). 

3.     Collateral Source Rule

In most negligence cases, parties are not allowed to introduce evidence regarding liability insurance that the other party carries. For example, if there is a case involving a bus colliding with a car, the company which owns the bus cannot offer evidence that the car owner had medical or automobile insurance. “The Supreme Court of California has long adhered to the doctrine that if an injured party receives some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor” (Helfend v. Southern Cal. Rapid Transit Dist). In other words, the injured party can be paid twice: one payment from his or her insurance and a second payment by the jury.

In medical malpractice, this is far less likely to happen. MICRA abolished the collateral source rule in claims against healthcare providers for professional negligence (CCP 3333.1). This means that in medical malpractice, defendants can show the jury that the victim has social security, worker’s compensation, health/sickness/disability/accident insurance, or any other type of contract or agreement which would reimburse the victim (CCP 3333.1). The jury then has the discretion to lower the amount awarded. By abolishing the collateral source rule, MICRA shifts the weight of the patient’s injury from the defendant to the patient.


To be prepared, patients should have copies of the following. First, you should collect your medical record(s). Second, you also need any agreements or contracts made with the defendant(s). Third, you should also get copies of any social security, worker’s compensation, or other accident insurance you carry. If you do not have these documents on hand though, it is still possible to find them after the case has been filed.  

While MICRA has made filing for medical malpractice more difficult, it does leave a few doors open so that malpractice victims can still get payment for their injuries. California voters might have supported negligent doctors at the polls, but patients are still the ones who need protection.

California Homeowners’ Protection Against Deficiency Judgments

Homeowners who are worried about foreclosure may wonder what would happen if a foreclosure sale fails to cover all their debts. For example, if a foreclosure sale raises $50,000, but the homeowner owes $60,000, can the lender sue the homeowner for the remaining $10,000? In California, lenders are unlikely to succeed because the Golden State has the nation’s strongest anti-deficiency laws.

Anti-deficiency laws restrict, and in many cases, prohibit, lenders from collecting the remaining balance from the homeowner. Lenders can only obtain the balance through a court order, or deficiency judgments. However, courts are required to apply anti-deficiency laws liberally in order to carry out certain public policies underlying the anti-deficiency laws.

California enacted its anti-deficiency laws to 1) prevent multiplicity of actions, 2) require exhaustion of security before resort to debtor’s unencumbered assets, and 3) prevent unjust creditor acquisition of borrower’s property (Cadlerock Joint Venture v. Lobel). Each anti-deficiency law is designed to carry out these purposes.

One-Action Rule

The first purpose behind California’s anti-deficiency laws, preventing multiplicity of actions, greatly restricts lenders’ ability to collect deficiency balances. This restriction comes from the One-Action rule, which prohibits lenders or loan servicers from collecting deficiency balances unless the lender uses judicial foreclosure (California Code of Civil Procedure 726(a)). Judicial foreclosure is foreclosure through the courts. This rule channels all attempts to collect deficiency balances through the courts by prohibiting lenders from seeking deficiency balances outside of the courthouse.

Court intervention in the foreclosure process cannot be understated. Most lenders foreclose a home without appearing before a judge. If the lender goes to court, it will cost the lender significantly more time and money, which may discourage the lender from foreclosing the property altogether. Even if the lender decides to go to court, the borrower at least has the opportunity to present his or her case before a judge.

The One-Action Rule does carry an exception though. If the “entire value of security has been lost through no fault of the creditor, the creditor may immediately bring a personal action on the debt” despite the one form of action rule” (Bank of America v. Graves). If the property loses all value and the lender has nothing to do with the loss of value, then the lender can seek deficiency without foreclosing the property in court.

However, “no fault of the creditor” can include a few situations outside of fraud. For instance, “the creditor may not unilaterally divest its security interest without the consent of the debtor” (Cadlerock Joint Venture v. Lobel). The lender must notify the borrower if the lender intends to sell or give away parts of its interest in the property or the lender must comply with the One-Action rule.

Even if the lender does find a way around the One-Action rule though, other anti-deficiency laws may still apply.

Security-First Rule    

In some cases, the lender may seek the deficiency balance before foreclosure. The second purpose of California’s anti-deficiency laws is fulfilled by the Security-First rule, which requires the lender to “exhaust his security judicially before he may obtain a monetary deficiency judgment against the debtor (Security Pacific National Bank v. Wozab). The Security-First rule does not prevent the lender from foreclosing or seeking the deficiency balance. Instead, the Security-First rule forces the lender to choose between foreclosure or deficiency.

Unlike the One-Action rule, the Security-First rule is typically triggered by the borrower. The borrower can raise the Security-First rule as an affirmative defense if the lender seeks deficiency first, thereby forcing the lender to go through the foreclosure process before requesting the deficiency balance. On the other hand, even if the borrower fails to invoke Security-First, “he may still invoke it as a sanction against the creditors…[who] has made an election of remedies and waived the security” (Security Pacific National Bank v. Wozab). In other words, the lender may lose the right to foreclose if the borrower does not trigger the Security-First rule immediately and the lender decides to seek deficiency before foreclosure.

Prohibition on Dwellings  

The One-Action rule and Security-First rule are both restrictions on how a lender can obtain a deficiency judgment. The next anti-deficiency law, Section 580, prohibits deficiency judgments against the borrower altogether. Section 580b prohibits deficiency judgments if the judgment is for a loan used to purchase a dwelling with at most four families living in it (California Code of Civil Procedure 580b).

Section 580 is one of the strongest anti-deficiency protections in the nation. Section 580c extends the deficiency protection to any loan or subsequent loan used to refinance the mortgage, regardless of whether it’s the first refinanced loan or the fifth loan. The first version of 580c only protected the value of the original loan in the refinanced loan. The state legislature recently amended 580c so that refinanced loans executed after January 1st 2013 will receive the same anti-deficiency protection as original loans.

Although Section 580 offers borrowers strong protection against deficiency judgments, 580 does not apply in every case. Section 580b does not apply if the requirements are not met: 1) the loans must be taken out for the purposes of paying the mortgage, and 2) the property must be the borrower’s dwelling. Section 580 does not apply in cases where the lender is suing for fraud because borrowers who commit a wrong cannot be rewarded with legal protection (Alliance Mortgage v. Rothwell).


California offers the strongest anti-deficiency laws in the nation to borrowers thanks to its One-Action rule, Security-First rule, and protection of dwellings. Although the laws contain a few corner case exceptions, homeowners who have been foreclosed are assured that lenders will not take the clothes off their backs as well.

Holding an Employer Liable For Injuries Caused By Employees

Picture this: A pizza delivery driver is running behind on schedule. In order to meet his goal, the delivery driver floors the gas pedal when a signal light is about to turn red. Although the driver gets lucky a few times, eventually his luck runs out. He rams a motorcycle as the next signal light changes.

Who should be held liable for the motorcyclist’s injuries in this situation? The pizza delivery driver is the individual most responsible for the motorcyclist’s injuries, but the delivery driver is unlikely to have the money necessary to compensate for the medical bills, let alone the full damage award. Many personal injury attorneys will focus on the employer in situations like this in order to ensure that their client receives the most compensation possible under the law.

Employers can be held accountable for the injuries their employees inflict on others through one of two different theories: direct liability or vicarious liability.

Direct Liability

Direct liability, as the name suggests, is when the employer is directly responsible for the injury. This sounds odd, given that the employer is only responsible through the employee’s involvement. However, an employer can be directly liable when the “employer violated a duty of care it owed to the injured party and this negligence was proximate cause of resulting injury” (De Villers v. County of San Diego). From this case, we can identify three elements of direct liability. First, the employer must owe a duty of care to the injured party. Second, the employer must be negligent. Finally, the employer’s negligence must be the cause of the victim’s injuries.

The first requirement in this theory of liability is the duty between the employer and the injured party. The employer must have a legal obligation to the injured party to exercise a certain amount of care before the employer can be held directly liable. If there is no duty, the case against the employer cannot move forward.

For instance, in De Villers v. County of San Diego, the victim’s family sued the county of San Diego for negligently hiring a drug addicted employee and for allowing that employee to steal enough toxins to poison her husband, the victim. Although the facts suggested the county had been negligent, the court found that the defendant did not owe any duty to the husband’s family. The court ruled that a plaintiff who sues a public employer needs to show that the duty of care owed came from a statute and not just common notions of duty.

Direct liability typically involves negligent hiring, or failure to take reasonable care when hiring someone. “Under California law, an employer may be held directly liable for the behavior of an unfit employee where the employer was negligent in the hiring, training, supervising, or retaining of that employee” (Keum v. Virgin America Inc). In the pizza delivery example, the company could be directly liable if the company knew or could have known that the delivery driver had been responsible for numerous traffic accidents in the past, but retained him anyway.

Vicarious Liability

Vicarious liability is the process of holding a person accountable for the actions of another person, such as the employer-employee relationship (California Civil Code 2338). Vicarious liability involves the employee acting on behalf of the employer. “It is well established that traditional vicarious liability rules ordinary make principals or employers vicariously liable for acts of their agents or employees in the scope of their authority or employment (Meyer v. Holley). Since the employer is expected to be in control of the employee, the employer is at fault when the employee injures another person while the employee is working for the employer.

There are two elements required to hold an employer responsible for the actions of an employee through vicarious liability. First, the employer must have direction or control over the employee’s work. This element eliminates independent contractors from vicarious liability. The employer must be in control of both the methods as well as the goals of business (Valles v. Albert Einstein Medical Center).

The second element, the scope of employment, is more often contested. This element asks whether the employee was “on the job” when the victim was injured. If the employee was working on behalf of the employer, the employer should be responsible for the victim’s injuries because the employer could predict whether the accident would have occurred. One way to determine whether an employee acted within the scope of employment is by deciding whether the employee was on a detour or a frolic. A detour is a minor departure from duties while a frolic is a major departure from duties.

If the pizza delivery driver hit the motorcyclist while driving to a gas station, the delivery driver would be on a detour because gas is necessary for the driver to fulfill complete his job. If the delivery driver had hit the motorcycle on the way to his girlfriend’s house, the delivery driver would be on a frolic.

An employee on a detour is more likely to be in the scope of employment than an employee on a frolic. An employee on a frolic is typically on the frolic for personal reasons unrelated to business. An employee on a detour, however, is still a representative of the employer. For example, in Vasey v. Surrey Free Inns, a manager assaulted a guest after the guest failed to leave the inn. Although the manager was on a detour from typical responsibilities, assaulting a guest was not part of the manager’s job, the manager was still representing the inn during the assault and thus the inn was vicariously liable.

Although the distinction between frolic and detour appears to be clear, technology has made the line fuzzy. In Miller v. American Greetings Corp, the manager of the company was involved in an auto accident on his way to meeting with a probate attorney. Prior to the accident, the manager was on his cell phone with subordinates. However, the phone call was made a few minutes before the crash and it was unclear from the record whether the manger was still on the phone when the accident occurred. Although the courts eventually ruled that the manger was on a frolic, the case could have gone either way.

Direct liability and vicarious liability are the two legal theories personal injury attorneys use to hold an employer liable for victim’s injuries. Direct liability is focused on employer negligence in hiring while vicarious liability is focused on the employee as a proxy for the employer. The two theories sometimes overlap, but they are two distinct theories.

The California Supreme Court made this clear in Diaz v. Caramo. The high Court ruled that if the employer admits to one theory, the employer cannot be liable for the other. Employers can only be accountable for one theory of liability because “employer’s liability cannot exceed that of the employee driver who allegedly caused the accident.” In other words, victims cannot collect more than the harm done to them by the employee.

If the employer is found liable though, the victim is more likely to be compensated for the harm done to them. Contact the Pivtorak Law Firm by calling (415) 484-3009, or click here to request a free, confidential consultation online.

Recovering The Cost of Your Medical Bills After An Accident

After an accident, the victims are in need of medical attention. Medical aid though, like everything else in today’s world, costs money. Fortunately for victims, the costs of medical bills are recoverable in a lawsuit. Converting medical bills into damage awards is a tricky enterprise though, because of the wide range of rules involved in calculating such damage awards.

One such rule is the Collateral Source Rule (CSR). The CSR states that victims can have third parties pay for medical bills without having the amount paid deducted from their damage awards. “Third parties” primarily refers to insurance companies, although the term can include anyone who pays for the bills but is not directly involved in the accident. The CSR applies to both the giving of the awards as well as presentation of evidence to determine what the award should be.

The CSR has a limitation though. In Howell v. Hamilton, the California Supreme Court ruled that the CSR only applies to contracted prices of medical aid, not the actual prices. Suppose, for instance, that a surgery is worth $500,000. The victim’s insurance company negotiates the price down to $50,000.  Under the CSR, the victim is only entitled to $50,000 because $50,000 is the victim’s medical bill.  The actual market value of the surgery, $500,000, is not recoverable by the victim because neither the victim nor the victim’s insurance company paid the $500,000. Essentially, victims cannot recover more than what they paid or what third parties paid on their behalf for their medical bills.

The only exception is if the contracted price is a gift. In personal injury cases, “gifts” cannot be given “for commercial reasons and as a result of negotiations.” The CSR does not apply to discounts, a product of market bargaining. Gifts, on the other hand, come from a “donor’s desire to aid the injured,” and can thus be factored into a victim’s damage award. The gift exception exists because it is a policy which encourages charitable action, which the courts view as being in the public interest. (Howell v. Hamilton).

The Howell limitation to the CSR is a far reaching limitation. Howell applies to insurance provided by employers for on the job injuries, like in Sanchez v. Brooke, where the employee suffered burns and smoke inhalation when the building burned down. It also applies to victims covered by Medicare, like in Luttrell v. Island Pacific Supermarkets, where the elderly plaintiff suffered a hip injury after having an automated door hit him four times. Given Luttrell, there does not appear to be a distinction between private and government insurance, at least when calculating damage awards under the CSR.

Howell applies to presentation of evidence of past and future medical services. Calculating what a medical service is worth can be difficult, especially if the service is done in sessions rather than all at once. The patient may decline to finish the sessions or an unforeseen event may prevent the patient from finishing treatment.

In order to calculate treatment payment which has not been finished yet, courts can use evidence of previous medical services used by the victim to determine how much present treatment might be worth. Similarly, courts can call in medical experts to determine what a future medical service might be worth. Evidence of the actual market value of the medical services is suppressed under the Howell interpretation of the CSR. For instance, expert witnesses cannot reveal what a surgery’s actual market value is worth (Corenbaum v. Lampkin).

Being injured in an accident is a traumatic event for most people. Recovering the money lost from such an accident can be very difficult though, especially after the California Supreme Court’s latest ruling on tort recovery. The Pivtorak Law Firm by calling (415) 484-3009, or click here to request a free, confidential consultation online.

California Homeowner Bill of Rights Halts a Foreclosure

The California Homeowner Bill of Rights is less than half a year old, but it is already making its presence known to banks and other lending institutions. On April 15th, 2013, Kevin Singh filed for a preliminary injunction against Bank of America (BoA) and ReconTurst, the lenders who sought to foreclose Singh’s home. The Eastern District Court of California granted Singh’s request and issued a temporary restraining order, preventing BoA from selling Singh’s home in Sacramento. A month later, the parties settled and the case closed.

Singh v. Bank of America shows that the California Homeowner Bill of Rights is capable of giving homeowners much needed legal assistance. The District Court cited the California Homeowner Bill of Rights in its decisions, specifically the section in the California Homeowner Bill of Rights in its decisions, specifically the section prohibiting “dual tracking.” Dual tracking is the practice of negotiating with homeowners in default on their loans for a loan modification while simultaneously advancing the foreclosure process.

In Singh’s case, Singh had submitted an application for a first lien loan modification. BoA, however, never responded to the application. Instead, the bank used its subsidiary, ReconTrust Co., to foreclose Singh. As a result, the District Court found that the California Homeowner Bill of Rights “prevents BoA from conducting a trustee’s sale.”

However, in order to obtain this injunction, Singh had to meet a few requirements.  First, Singh had to submit a complete application for a loan modification. This requirement is easy to fulfill, but also very important, because the completed application is specifically required by the California Homeowner Bill of Rights as an aspect of dual tracking.

Second, the borrower has the burden of proving that granting preliminary injunction is a reasonable course of action for the court to take (Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers). The borrower proves this by showing that the borrower is likely to succeed on the merits, that the borrower would suffer irreparable harm without the injunction, that the balance of equities is in the borrower’s favor, and that the injunction is in the public interest (Winter v. Natural Resources Defense Council).

These factors are easier to prove than they sound. An injunction which “enforces a recently enacted law designed to protect the public,” like the California Homeowner Bill of Rights, would suffice. If a person’s family is forced to leave the home, it counts as an “irreparable harm,” so just being foreclosed is typically enough to prove that the borrower would suffer “irreparable harm.”

The third factor which must be proven, that the balance of equities be in the borrower’s favor, is fulfilled by the fact that preliminary injunctions are temporary. BoA’s ability to foreclose is “merely delay[ed],” at least until future hearings can fully resolve the case. The fourth factor in determining whether a preliminary injunction can be granted, succeeding on the merits, will depend on the facts of the case. In Singh, the facts closely matched the situation envisioned as illegal in the California Homeowner Bill of Rights – a bank “dual tracking” a borrower, so proving that Singh could prevail on the merits was not difficult.

The final hurdle to a preliminary injunction, at least in federal court, is the need for a bond payment. The bond is a safety measure in case the court made an error in issuing the injunction. The bond must be paid within a week of the injunction being issued. The amount for the bond depends on the costs the court believes the lender would suffer if the injunction was incorrectly given.

The California Homeowner Bill of Rights has taken its first test and Singh v. Bank of America proves that the new law is fulfilling its promise to help borrowers keep their homes. Although there are a few hoops that the borrower must jump through to utilize the California Homeowner Bill of Rights, the requirements are not difficult to meet.

Most important though, the case sends a strong signal to banks and other lending institutions. Although Singh has to pay a security deposit of $1,000, BoA has to pay $100,000 in legal fees for this one case. Given that Singh’s home is not worth $100,000 right now, BoA and other banks have every incentive not to foreclose unless it is absolutely necessary. In contrast with the foreclosure crisis of 2008, where foreclosure was the first response banks chose when a borrower defaulted, the law has changed dramatically.

California Homeowner Bill of Rights Empowers People Fighting to Stay in Their Home

The California Homeowner Bill of Rights was designed to protect homeowners from unfair practices by lenders and mortgage servicers during the foreclosure process. It was written to make borrowers aware of proper procedure before and during a foreclosure, the resources that they have to guide them through foreclosure, and what they can do if they have found that the lenders or mortgage servicers have not followed the law during the process.

After the “National Mortgage Settlement” in 2012, California Governor Jerry Brown agreed to sign California Assembly Bill 278 into law. The bill, which was designed by California Attorney General Kamala Harris, mimics the same service standards of the National Mortgage Settlement. All mortgage loan officers must abide by the California Homeowner Bill of Rights regardless of their involvement in the National Mortgage Settlement.

Sections 4 and 5 focus on the process of face-to-face interviews between the lender and the borrower before a foreclosure can be commenced, which allows the homeowner to seek out alternatives to foreclosure.

These sections also contain the procedures that mortgage servicers must follow to ensure “due diligence” when serving a borrower with a delinquency notice. A servicer must send the borrower a first-class letter, and call the borrower a minimum of three times during the morning, afternoon and evening. The servicer must also follow-up by sending a certified letter. They should also be able to provide a toll-free telephone number with live agents to take all calls. If the servicer has an active website, then it must provide a toll-free telephone number and a section which suggests documents for the borrower to gather before speaking with a mortgage servicer agent.

Section 6 of the Bill states that the borrower, if facing financial difficulty, must be notified by a mortgage servicer, trustee, mortgagee, authorized agent or beneficiary that they have the right to request a copy of their promissory note, a copy of their deed of trust/mortgage, a copy of assignments or deed of trust that would be needed to allow the servicer to foreclose, and a copy of their payment history highlighting the most recent period where they were no more than 60 days behind in payment. This set of rules favors the borrower because, in most cases, mortgage servicers aren’t required to keep copies of every single one of the documents previously mentioned. They may only have three out of four documents required to continue with the foreclosure. Since the Bill was written, there has been an increase in companies that offer to keep records in order to furnish the mortgage services with the proper documents when the time comes for them to supply the borrower with the requested copies.

There are also regulations preventing foreclosure on a home while there is a pending loan modification application or workout plan on a first mortgage; this is known as “dual-tracking,” which is covered in section 7. The Bill specifies that the benefits of the loan or workout plan must be greater than the benefit of foreclosing to the borrower. If the borrower’s loan modification application has been denied, then the Bill offers the borrower the gift of time. The borrower will have no less than 31 days after they have received notice of denial to appeal the rejected application.

The borrower has the right to direct contact with the person or group that has the authority to prevent the foreclosure from moving forward, which is referred to as the “single point of contact” in section 9. The borrower benefits from the “single point of contact” because it allows them the opportunity to discuss alternatives to foreclosure with the bank’s representatives.

In order to proceed with a non-judicial foreclosure, the mortgagee, beneficiary, trustee or their agents must first file a notice of default in the public records three months and 20 days prior. They must also file a notice of sale 20 days prior to the actual sale date.
Section 10 describes other provisions that would ensure that the filing of the notice of default is valid. The notice of default may only be filed by the beneficiary under the mortgage or deed, the original trustee or substituted trustee if on the deed of trust, or an agent assigned by the beneficiary on the deed of trust.

Section 12 of the Bill explains that if the borrower hasn’t already attempted to use all of the resources as an alternative to foreclosure, such as the first lien loan modification process, then another servicer may suggest other alternatives to the borrower. The servicer would then be obligated to communicate with the borrower in writing and state that the borrower is eligible for evaluation for foreclosure prevention; if it is or is not necessary for the borrower to submit an application, how to obtain an application, and an explanation on the application process. The manner in which the borrower’s application is processed is also covered in the Bill.  While the application is pending, the servicer may not file a notice of default or a notice of sale. The borrower cannot be charged for application fees, processing fees, or any other fees related to the prevention of foreclosure by the servicer. The Bill also prevents servicers from collecting late payment fees during a pending application or while the borrower is appealing a denied application, as long as the borrower is making their loan modification payments on time or any foreclosure prevention method is being considered or in process.

Accuracy of documentation is highly stressed in the Bill. The servicer must keep accurate and authentic documentation regarding a homeowner’s loan. Having reliable evidence is also necessary when submitting documents such as a declaration, notice of default, notice of sale, assigning a deed of trust, or substituting a trustee. If there are any mistakes made, such as inaccuracy or lack of evidence, the servicer may be fined up to $7,500 per mortgage or deed of trust by the court. The borrower would also have the right to file suit for financial damages based on these regulations.

The California Homeowner’s Bill of Rights has received a great deal of positive feedback. The Bill has been in effect since January 1, 2013. Many predict that the provisions of the Bill will soon be replicated and used in other states.

California Eliminates Dual Tracking in Foreclosure Actions

Throughout the foreclosure crisis, California lenders have been free to employ a practice known as “dual tracking.”  This practice has allowed mortgage lenders to forge ahead with foreclosure actions, including property sale, irregardless of whether they were simultanously engaged in loan modification discussions with borrowers.  In fact, “dual tracking” is a practice that many mortgage investors have long required lenders to pursue in order to expedite the foreclosure process to the extent possible.

The practice of dual tracking has presented serious problems for borrowers facing the prospect of home foreclosure.  Many borrowers have been lulled into an illusory sense of security thinking that they were protected from foreclosure while engaged in good faith loan modification negotiations with lenders, only to be blindsided by a foreclosure sale in the midst of this process.

Additionally, communication channels between lenders and borrowers have frequently become muddled as simultaneous actions were being taken by different lending departments, making it very difficult for a borrower to obtain a clear picture of the status of his or her loan at any given point in time.

To address the serious problems created by dual tracking, California has now made this practice illegal.  On October 3, 2012, a negotiated settlement took effect that bars this practice by five of California’s largest mortgage lenders including Bank of America, Citi, JP Morgan Chase, Wells Fargo, and Ally.  On January 1, 2013, California’s prohibition of dual tracking, the first such law in the United States, becomes applicable to all mortgage lenders.

Beginning in January, homeowners will have a right to sue lenders who continue to engage in the practice of dual tracking.  Under this law known as The Homeowner Bill of Rights, banks found to have violated the law may be forced to pay attorneys’ fees incurred by the borrower.  In addition, lenders may be hit with statutory civil damages of up to $50,000 per violation.  Perhaps most importantly, borrowers will be able to obtain an injunction halting foreclosure proceedings if able to demonstrate a willful, intentional, or reckless violation of the law.

If you are a California homeowner that has been subject to the practice of dual tracking, you are urged to contact a Forclosure Lawyer at The Pivtorak Law Firm by calling (415) 484-3009, or click here to request a free, confidential consultation online.

Can a Non-Party’s Bankruptcy Put the Brakes On Your Personal Injury Lawsuit?

A U.S. District Court judge in Georgia has ruled that Wal-Mart can not stop individuals from bringing personal injury lawsuits against the retail giant for allegedly defective gas cans sold to consumers.  Wal-Mart attempted to halt the lawsuits because the supplier of the gas cans, Blitz U.S.A., was currently under bankruptcy protection.  The company’s lawyers argued that Blitz’s indemnification of Wal-Mart created enough of a connection between the two companies to bring Wal-Mart under the protection of Blitz’s bankruptcy.  The court, however, disagreed, reasoning that there was no such close connection and that allowing the suits to go forward would not cause irreparable harm to the bankrupt party.  For more information on this case, you can read the full article at the San Francisco Chronicle’s web page.

The reason this story caught our eye is because we had a nearly identical question of law arise in one of our personal injury cases where the court also ruled in our favor after extensive motion work.  Our facts were slightly different:  Our client was injured after being rear-ended by an employee of a large corporation (to protect the identities of the parties involved, let’s call it “LC”), who was driving a company vehicle at the time.  Shortly before we filed suit, LC filed for a Chapter 11 business bankruptcy.  At that point, we knew that if we sued LC as well as the driver our case would be put on indefinite hold (possibly for years) while LC’s reorganization dragged along in the system.  We also knew after all that time our client’s claim against LC would most likely be discharged in the bankruptcy anyway.

Armed with this knowledge, we made a strategic decision and filed suit only against the driver.  Our adversaries, adeptly understanding the ramifications of our choice, tried to halt our lawsuit by claiming that the defendant was protected by the automatic stay in LC’s bankruptcy case.  Our contention was that the defendant, as an agent of LC, was separately liable for her own torts and therefore was independently liable for the car accident.

After much back-and-forth, a motion was filed by the defendant to stay our case while LC’s bankruptcy played out.  We knew that if we lost this motion, our case was ostensibly finished.  Luckily, the law in this area was fairly developed and there was a lot of good precedent for us.

In the Ninth Circuit, two cases specifically discuss these issues in some detail:  In re Chugach Forest Products, Inc. and Matter of Lockard.  But we had to convince the court that these cases applied to our situation even though, factually, they were not 100% on point.  Fortunately, the court in Chugach and Lockard outlined the law substantially enough, allowing us to assert our position with confidence.

The law spelled out in the cases is more or less straightforward:  The automatic stay in bankruptcy protects only the debtor and not third-parties who are independently liable to plaintiff.  The courts have created a very narrow exception to this rule in “unusual circumstances” where there is a very close connection in the financial interests of the debtor and the third-party, where it would cause irreparable harm to the bankruptcy debtor to allow the third-party to be sued.  The third-party’s mere right to indemnification from the debtor, however, is not an unusual circumstance that warrants applying the automatic stay.

As a result, we saw this as a simple issue:  Defendant, as LC’s agent, was independently liable for the rear-end collision and our client’s injuries.  As a result, we were free to bring a personal injury action against only the agent and not LC.  Because LC was not a party to this lawsuit, its bankruptcy should not have any effect on our litigation unless LC could show some irreparable harm to its reorganization efforts as a result.  But LC couldn’t do this because a mere employer-employee connection didn’t put the parties in an interlaced financial relationship where transactions affecting one automatically affected the other.  Furthermore, the employee’s right to indemnification simply wasn’t enough of an “unusual circumstance” under the law to justify putting a stop to our lawsuit.

In the end, the court agreed with our reasoning and declined to suspend our lawsuit because of LC’s bankruptcy.  After being allowed to continue the case was ultimately settled resulting in a very happy and grateful client.

Wells Fargo Loan Modification Class Action

The Pivtorak Law Firm, as lead co-counsel, has filed a class action lawsuit against Wells Fargo as a result of an allegedly deceptive forbearance-to-loan modification program.  This action was commenced in the federal district court for the Northern District of California on April 19, 2010.

The lawsuit alleges that Wells Fargo deceitfully attempted to collect payments from defaulted California residential mortgage borrowers by sending them a letter evidently promising to stop foreclosure proceedings and to approve them for a loan modification if they showed that they could make three monthly trial plan payments.  In reality, however, the letter promised nothing and most borrowers who made all three payments according to the agreement were not offered a loan modification but were subsequently foreclosed on by Wells Fargo, the suit says.  Plaintiffs allege that this program was initiated by Wells Fargo in order to circumvent the protections of California’s anti-deficiency laws, which prevent banks for pursuing homeowners’ personal money or property after a foreclosure sale.

The form letter sent to borrowers by Wells Fargo said that the bank had “good news.”  The letter also said that, according to financial information provided by the homeowner, they were qualified for a trial program showing they can make regular payments.  The suit alleges that the letter also contained other language that easily led borrowers to believe that their long and difficult struggle to make their mortgage payments was over.  Unfortunately, according to the lawsuit, their nightmare was just beginning.

Plaintiffs argue that instead of offering a three-month trial plan that is supposed to convert into a loan modification like the government’s Home Affordable Modification Program (“HAMP”), Wells Fargo intentionally gave borrowers the wrong impression that they were being offered such a program.  Instead, the suit says, Wells Fargo collected as many payments as it could from California residential borrowers before foreclosing on their homes.

On Jan. 3, 2011, Judge Joseph C. Spero ruled against Wells Fargo in its motion to dismiss Plaintiffs’ Rosenthal Fair Debt Collection Act and unfair competition law claims.  This ruling means that Plaintiffs have standing to pursue statutory damages against Wells Fargo for its unfair debt collection practices and restitution for payments borrowers made as a result of the bank’s collection letter as well as injunctive and declaratory relief, pending class certification.


February 22, 2011 – Managing Partner, Steve Berman, and his colleague Tom Loeser of the law firm of Hagens Berman Sobol Shapiro, LLP, associated into the case and will serve as co-lead counsel, representing homeowners in the case against Wells Fargo.