Business Law Journal

What happens when a judge issues a decision based on legal authority that does not exist?  And what happens if the party adversely affected by that phony decision was oblivious to that fact until after the order was issued?  In what feels like a sign of the times, the California Court of Appeal recently confronted an issue that would have been unthinkable a few years ago: a court order based, in part, on case law that was entirely fabricated by a computer program and no one blinked an eye—at least until it was too late.

Every insurance policy has a maximum limit on the dollar amount that the policy will pay for a covered claim.  Some policies also contain sublimits that apply to specific types of losses.  Policyholders may mistakenly believe that these sublimits are in addition to the primary coverage limits that are available under the policy.  In reality, sublimits restrict or cap the maximum dollar amount that a policy will pay for a risk that is subject to the sublimit, regardless of the total primary coverage amount listed in the policy. 

In Haun v. Pagano (Cal.App.4th, Feb. 18, 2026, No. D084385) 2026 WL 455372 (“Haun”), a California Court of Appeal recently analyzed the impact of a unilateral fee-shifting provision involving competing claims for financial elder abuse brought under the Elder Abuse and Dependent Adult Child Protection Act (codified as Welfare and Institutions Code §§ 15600, et seq.) In Haun, the Court of Appeal held that section 15657.5(a) does not bar an award of attorneys’ fees for defense work that overlaps entirely with the successful prosecution of the prevailing petitioner’s own financial elder abuse claim.

The California Court of Appeal recently affirmed a trial court’s decision to award costs to a prevailing defendant in a member derivative action, even though the derivative plaintiff defeated a bond motion under Cal. Corp. Code §17709.02 at the outset of the case. In Barrios v. Chraghchian, No. B341773, 2026 WL 145207, *1 (Cal. Ct. of Appeal, Jan. 20, 2026), the plaintiff, Mr. Barrios, was an investor in the limited liability company and brought derivative claims against the company's managers, including the named defendant, Mr. Chraghchian, alleging that under their direction the company engaged in unauthorized transactions.

Why This Case Matters: This case alters the normal rules of priority. Recorded agreements that say they are covenants or equitable servitudes can be deemed to be permit conditions that survive foreclosures of prior liens.

In a pivotal 2025 decision, the California Supreme Court confirmed that businesses can be held to forum selection clauses even if doing so means waiving the procedural right to a jury trial under California law. This holding underscores a critical consideration for contract formation: what may seem like a routine contract clause can significantly alter your legal rights. Businesses must be vigilant during negotiations to ensure dispute resolution terms do not unintentionally undermine their position in future litigation.

According to two significant back-to-back rulings from the Northern District of California, using copyrighted books to train large language models (LLMs) qualifies as fair use under the Copyright Act, but the opinions differ on the impact of whether the copyrighted works were legally obtained or pirated on finding fair use.

Generative artificial intelligence (AI) has revolutionized how businesses create, communicate, and market.  For trademark owners and AI-utilizing businesses, however, AI brings not only opportunity but also significant risk.  

In Zackary Diamond v. Scott Schweitzer, et al., California Court of Appeal recently addressed whether a broad release and waiver of liability form, signed by a patron to a racing event as a prerequisite to gaining access to the pit area, released the racetrack’s owners from alleged negligence claims arising from an injury sustained as a result of a punch by a third party.  The Court of Appeal confirmed that the waiver and release protected the racetrack’s owners from such claims and affirmed summary judgment in their favor.

On March 21, 2025, the California Supreme Court rendered a decision in Madrigal, et al v. Hyundai Motor America (S280598) regarding the following question: “Does a plaintiff who has rejected a 998 offer or allowed it to be deemed withdrawn for want of timely acceptance, but later agrees to settle before trial, necessarily avoid the postoffer cost-shifting effects of section 998?”  The Supreme Court held that a plaintiff does not necessarily avoid section 998’s cost-shifting effects.