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Procedural Posture

Procedural Posture

By: SMITH THOMPSON

Appellant builder challenged the judgments of the Superior Court of San Mateo County (California) in favor of respondent buyers who brought an action against him for fraud and breach of contract.

Overview

Defendant builder constructed homes for veterans after applying for priorities on building materials pursuant to 50 U.S.C.S. app. §§ 631-645b. All of the homes purchased by respondents were built by appellant without compliance with and in violations of the plans and specifications submitted by him to the Civilian Production Administration. The court concluded that the federal statute did not contain exclusive remedies to purchasers. Respondents brought their case under common-law principles of breach of contract and fraud and so were entitled to pursue common-law remedies. The court agreed with appellant that there was no evidence of to support a finding of reliance on the plans and specifications of the home prior to purchasing with the exception of certain petitioners. The court did find that as beneficiaries to the contract between appellant and the United States, there was ample evidence to support the jury’s findings that the third-party contract had been breached to respondent’s damage. The court held that the court below had erroneously instructed the jury on determining damages. The court reversed the judgments with instruction to retry the issue of damages.

Outcome

The court reversed the judgment in favor of respondent buyers with instructions to retry the issue of damages because the trial court had erroneously instructed the jury on damages so that the jury split appellant’s liability for the claims of breach of contract and fraud.

Procedural Posture

Petitioner insurance company brought an application for a writ of mandate against respondent Superior Court of Los Angeles County, California, seeking to overturn its choice of law decision in a class action by real parties in interest policyholders against the insurance company.

Overview

The parties were counseled by their respective small business lawyer in California. The policyholders brought a class action suit against the insurance company, which was incorporated and headquartered in Illinois, contending the insurance company’s board of directors did not pay dividends it promised. The superior court ruled that California law governed the causes of action, so the insurance company filed a petition for a writ of mandate, seeking to challenge the choice of law ruling and to have the case dismissed. The court found that because the declaration of dividends concerned the internal affairs of the insurance company, the laws of the state where the company was incorporated applied. In this case, that state was Illinois. Absent one of the exceptions to the business judgment rule, either fraud, oppression, dishonesty, total lack of merit, illegality, or a failure of the board of directors to become sufficiently informed to make an independent decision, the company was not liable under Illinois law for a lack of dividends. However, both California and Illinois law agreed that the California court could take the case unless it could be dismissed on forum non conveniens grounds, so dismissal of the case was not appropriate.

Outcome

The court ordered that a peremptory writ of mandate be issued, which commanded the superior court to vacate its decision and issue a new one reflecting the fact that Illinois law should be applied to the corporation’s internal decisions, and that the action should not be dismissed, as requested by the insurance company.

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