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C.A. Affirms $818,084 Award for Late Settlement Payment
Opinion Rejects Contention That Liquidated-Damage Proviso in Agreement Called for Unenforceable Penalty
By a MetNews Staff Writer
The Third District Court of Appeal yesterday affirmed a $1.4 million judgment that includes $818,084 in liquidated damages based on a failure to make payment of $575,000 under a medical malpractice settlement agreement, rejecting the defendants’ contention that the late-fee is an unenforceable penalty.
Those defendants, two doctors and a medical spa, did not contest the award of the past-due $575,000 but insisted that Placer Superior Court Judge Charles Wachob improperly tacked on damages based on $50,000 per month/$1,644 per day in waiting time.
Justice Laurie M. Earl authored the majority opinion in which Acting Presiding Justice Ronald B. Robie concurred. Justice Jonathan K. Renner wrote a brief concurring opinion.
Supreme Court Opinion
The defendants, sued for malpractice based on botched surgeries in 20 cases, with those actions consolidated on appeal, pointed to the California Supreme Court’s 1973 opinion in Garrett v. Coast Southern Federal Savings & Loan Assn. in which it was held that the amount set as liquidated damages “must represent the result of a reasonable endeavor by the parties to estimate a fair average compensation for any loss that may be sustained.”
That case, Earl noted, “was decided several years before [Civil Code] section 1671 was amended.”
The amendment of that statute, enacted in 1872, came in 1977. Until then, §1670 said that a liquidated-damage provision is void unless validated by §1671, which in turn said:
“The parties to a contract may agree therein upon an amount which shall be presumed to be the amount of damage sustained by a breach thereof, when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damages.”
Legislation wiped out §1670; the 1872 standard was incorporated in a new subd. (d) which applies to consumer contracts and residential leases; subd. (b) was enacted, saying that “a provision in a contract liquidating the damages for the breach of the contract is valid unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made.”
Two Precedents Cited
The defendants also cited the 2008 Court of Appeal opinion by the Fourth District’s Div. Three in Greentree Financial Group, Inc. v. Execute Sports, Inc. and that court’s 2017 decision in Vitatech International, Inc. v. Sporn. In both cases, an agreed-upon liquidated-damage provision was disregarded because the amount bore no reasonable relationship to the harm that would flow from a breach/
Early wrote:
“This case is factually distinguishable from Greentree and Vitatech because the uncontradicted evidence in the record is that the parties agreed $1.5 million was a reasonable estimate of the total verdicts Plaintiffs would have recovered had their cases gone to trial, which is why they capped liquidated damages at that amount. We find nothing unreasonable about parties (particularly represented parties) agreeing to settle a lawsuit for a steep discount, and also agreeing that if the settlement amount is not paid, judgment will be entered on the amount the parties estimated would have been recovered at trial.”
Anticipated Damage
Greentree and Vitatech both relied upon the California Supreme Court’s 1998 opinion in Ridgley v. Topa Thrift & Loan Assn. It says:
“A liquidated damages clause will generally be considered unreasonable, and hence unenforceable under section 1671(b), if it bears no reasonable relationship to the range of actual damages that the parties could have anticipated would flow from a breach.”
Acknowledging that her court must adhere to dictates by the state’s high court, Early commented:
“We are not convinced that Ridgley creates a rule that allows a defendant in a lawsuit—particularly one who is represented by counsel—to actively negotiate a settlement agreement with a liquidated damages clause (and thus to effectively halt the plaintiffs prosecution of the case), to default on that agreement, and then to resist entry of judgment by arguing the clause is invalid because the damages it agreed to are too high.”
She expressed doubt that the Supreme Court intended to permit a defense based on the defendants, in effect saying, as the late Presiding Justice David Sills put it in his 2010 opinion in Wald v. TruSpeed Motorcars, LLC: “hey neener keener, gotcha sucker.”
Concurring Opinion
Renner recited §1671(b), quoted from Ridgley, and said:
“Here, the trial court found that the parties participated in significant negotiations to reach a fair amount of compensation for plaintiffs if defendants failed to pay the settlement amount. In particular, the parties agreed plaintiffs’ claim would yield a $1.5 million judgment if they continued to trial, but was worth $575,000 to plaintiffs if payment was made quickly. The settlement agreement incentivized immediate payment by defendants but capped damages for its breach at the $1.5 million worth of plaintiffs’ underlying claims. I conclude the trial court did not err in concluding defendants failed to meet their burden….For this reason alone, I would affirm the judgment.”
The case is Gormley v. Gonzales, C093201.
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EFRAIN GONZALEZ Former doctor |
YESSENNIA CANDELARIA pediatrician |
Two Doctors
The doctors who were sued for harm they inflicted on patients at defendant Advanced Medical Spa were Efrain Gonzalez and Yessennia Candelaria.
Gonzales was sentenced to three months in jail after prosecutors dropped a mayhem charge and a plea deal was reached based on procedures being performed by him despite a lack of qualifications. He was placed on interim suspension in 2013 and surrendered his medical license in 2018.
Candelaria in 2015 had her license revoked, but the order was stayed and she was placed on probation for seven years. She was found to have violated the terms of her probation and her license was revoked in 2018, but she is now practicing as a pediatrician.
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