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Long Beach Unified School District v. Margaret Williams, LLC

California Court of Appeals, Second District, Fourth Division

December 9, 2019

LONG BEACH UNIFIED SCHOOL DISTRICT, Cross-complainant and Appellant,
v.
MARGARET WILLIAMS, LLC, Cross-defendant and Respondent.

          APPEAL from orders of the Superior Court of Los Angeles County, No. NC060708 Dudley W. Gray, II, Judge. Affirmed.

          Christen Hsu Sipes, Scott J. Sterling and Joshua D. Watts; Bassi, Edlin, Huie & Blum, Fred M. Blum, Michael E. Gallagher, Tiffany Wells-Fox, Lisa Stevenson, J. Kyle Gaines and Barry D. Bryan for Cross-complainant and Appellant.

          Schonbrun, Seplow, Harris & Hoffman and Wilmer J. Harris for Cross defendant and Respondent.

          MANELLA, P. J.

         INTRODUCTION

         Long Beach Unified School District (the District) appeals from the dismissal of its cross-complaint under Code of Civil Procedure section 425.16, commonly known as the anti-SLAPP statute. (See Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871, 880 (Wilson).) In 2006, the District entered into a contract with respondent Margaret Williams, LLC (Williams LLC), which had been formed by Margaret Williams that year for the purpose of working for the District. According to Williams, the District required her to form a business entity to enter the contract, which was a standardized form agreement with terms she could not negotiate. For nearly a decade, Williams worked full-time for the District, through her LLC, on construction management and environmental compliance, including work under the District's agreement with a state agency to clean up material at a school construction site contaminated with arsenic. After a dispute arose between Williams and the District about alleged violations of the cleanup agreement, Williams was diagnosed with arsenic poisoning, and the District terminated Williams LLC's then-current contract, which included an indemnity provision.[1]

         Williams and her LLC filed a lawsuit against the District (the Underlying Action). Each plaintiff brought claims alleging the termination was retaliatory, and Williams brought claims alleging the District unlawfully caused her arsenic poisoning. The District invoked the indemnity provision to demand that Williams LLC defend and indemnify the District in the Underlying Action. After Williams LLC refused to defend the District against the LLC's own and Williams's claims, the District filed a cross-complaint alleging, inter alia, that this refusal breached the contract. Williams LLC filed an anti-SLAPP motion to strike the cross-complaint, arguing, inter alia, that the District could not prevail on its cross-claims because the indemnity provision is unconscionable. The trial court granted the motion and struck the District's cross-complaint.

         On appeal, the District contends the trial court erred in striking its cross-complaint under the anti-SLAPP statute. In the alternative, it contends the trial court erred in denying the District leave to include nine additional pages in its brief opposing the anti-SLAPP motion.

         Finding no error, we affirm. If enforced as the District requested, the indemnity provision would require Williams LLC to fund the District's defense against the very litigation the LLC and Williams brought against the District. The District's cross-complaint therefore arose from that litigation or the LLC's refusal to sabotage it -- each of which is protected by the anti-SLAPP statute. Moreover, the District sought to require the LLC not only to fund the District's defense, but also to reimburse the District for any award secured by Williams or the LLC falling within the provision's broad scope. Such a bar to meaningful recovery embodies a high degree of substantive unconscionability, sufficient -- when combined with the procedural unconscionability shown through Williams LLC's unrebutted evidence of adhesion, oppression, and surprise -- to establish that the indemnity provision is unconscionable. We limit the provision to avoid an unconscionable result, rendering it inapplicable to claims brought by Williams LLC and claims brought by Williams. As a result of this limitation, the District fails to show error in the dismissal of the District's breach of contract and declaratory relief claims. The District further fails to show error in the dismissal of its other cross-claims, or in the denial of its application for leave to file an oversized opposition brief.

         PROCEEDINGS BELOW

         A. Williams LLC's History with the District

         Williams formed Williams LLC in 2006. The same year, Williams LLC entered into a contract to work for the District, as a consultant, on construction management and environmental compliance. In a declaration submitted by her LLC in support of its anti-SLAPP motion, Williams stated that she formed her LLC as a requirement for working for the District: “In order to work with the District, I was directed by the Executive Facilities Planning Manager to form a corporation or partnership. This was the only way I could work for the District: I could not enter into a contract with the District as an individual.” Further, the District presented the contract “on a ‘you either sign or you don't work' basis, ” and Williams was “unable to negotiate the terms.” The terms were standardized; the contract was “a standard form contract given to all contractors before they were allowed to perform any work for the District.” The District has not submitted evidence that the terms of the contract were negotiable. Nor has it submitted evidence that Williams LLC was formed for any purpose other than to meet the District's requirements for Williams to work for it.

         Williams worked full-time for the District, through her LLC, for nearly a decade, during which she signed a new contract between her LLC and the District in 2013. Williams's duties included overseeing environmental compliance at a construction site for a school, the Newcomb Academy (Academy). According to her declaration, Pinner Construction (Pinner) -- the District's general contractor at the Academy site -- illegally brought contaminated material onto the site in October 2013. Williams directed Linik Corporation (Linik) -- the District's construction supervisor at the site -- to remove the contaminated material, but Linik ignored her. Through the following year, Williams attempted to resolve the problem by discussing it with two District administrators, one of whom directed Williams to oversee the site's cleanup. In January 2015, the District and the California Department of Toxic Substances Control (DTSC) entered into a cleanup agreement requiring the District to remove potentially hazardous material at the site. The District designated Williams as its project manager for the cleanup agreement.

         Later that year, the District gave control over the Academy site project (and all other projects affiliated with Linik) to District employee Les Leahy and consultant Jerry Vincent. According to Williams, Leahy and Vincent deliberately interfered with her efforts to prevent continued mishandling of the contaminated material. As a result, while she was at the site between June 1 and 4, 2015, she came into contact with arsenic.

         In a declaration of his own, Leahy characterized the dispute between Williams and Pinner as a “clash of personalities” that impaired communication. On June 3, 2015, concerned with the “aggressive manner” in which Williams communicated her concerns, he told Williams to direct all communications to Pinner through himself or Vincent.

         The next day (June 4), Williams cancelled a meeting with Vincent and announced that she would no longer work on projects associated with Pinner or Linik. She also sent a letter to District administrators, alleging that Leahy had “completely neutralized” her on the Newcomb Academy project, that her access to her District email account and a facilities server had been disabled, and that Leahy had refused to explain these events. She interpreted these actions as constructive termination, explaining, “[M]y ability to do my job has been completely eliminated by these actions, and the ability to run my business impacted. I cannot even contact my own company staff without getting on the server and accessing my emails. I have worked in the District for almost 10 years and everything is on that computer, as it would be if I were a staff member in the District, including important records for my company.” Further alleging that the District had rebuffed her repeated attempts to discuss these matters, she stated that she would not allow Williams LLC employees to return to work until the District clarified its recent actions. She and Williams LLC's employees did not return to work.

         Three days later (June 7), Williams sent a report to DTSC, asking for help in ensuring the District's compliance with the cleanup agreement and preventing danger at the Academy site. Two days later (June 9), the District sent Williams LLC a letter terminating its contract based on its employees' failure to return to work. Soon thereafter (around June 12), Williams was rushed to a hospital due to sudden illness and diagnosed with arsenic poisoning, which she claims has caused her permanent neurological damage and chronic pain.

         According to Williams, she had worked full-time on District projects in the near-decade between her formation of her LLC and the District's termination of its contract. As of December 2017, when she executed her declaration, her LLC had been a party to only one other contract -- a contract with another school district for an “immaterial” profit. Her LLC did not plan to form any other contracts. In his declaration, Leahy alleged -- on information and belief -- that Williams “and/or” her LLC had worked for two other school districts before working for the District. The District submitted no other evidence of Williams or her LLC working for anyone but the District.

         B. The Underlying Action and Tenders of Defense

         Williams and her LLC brought the Underlying Action.[2] In their operative complaint, Williams and her LLC jointly asserted a cause of action for retaliation under Government Code section 12653, alleging the District terminated Williams LLC's contract in retaliation for the efforts by Williams and her LLC to stop Pinner and Linik from violating environmental requirements. Williams LLC separately brought causes of action for breach of contract and breach of the covenant of good faith and fair dealing -- both similarly premised on the District's termination of the contract. Williams separately brought causes of action for negligence (premises liability), negligent infliction of emotional distress, and intentional infliction of emotional distress -- all premised on the District's wrongfully causing Williams's arsenic poisoning.

         Williams LLC's 2013 contract with the District included an indemnity provision reading, in relevant part, as follows:

         “1. To the fullest extent permitted by law, [Williams LLC] agrees to indemnify, and hold DISTRICT entirely harmless from all liability arising out of:

         “[¶]... [¶]

         “b. General Liability: Liability for damages for (1) death or bodily injury to a person; (2) injury to, loss or theft of property; (3) any failure or alleged failure to comply with any provision of law or (4) any other loss, damage or expense arising under either (1), (2), or (3) above, sustained by [Williams LLC] or the DISTRICT, or any person, firm or corporation employed by [Williams LLC] or the DISTRICT upon or in connection with the PROJECT, except for liability resulting from the sole or active negligence, or ...


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