The case is Velocity Investments, LLC v. Nguyen (Cal. Ct. App., 3d Dist., No. C102846, Aug. 28, 2026), and it turns on two documentation rules that every debt buyer in the state already has to follow.

Two Rules Every Debt Buyer Has to Follow

California’s Fair Debt Buying Practices Act, which lawyers call the Debt Buyers Act, was passed to stop a wave of collection lawsuits built on thin evidence, cases where the person being sued couldn’t tell whether the debt was even theirs. The Act sets two requirements. Before collecting, a debt buyer must have access to a document evidencing the consumer’s agreement to the debt (the access requirement), and it must attach that document to the collection complaint (the attachment requirement). Violate either, and the consumer can recover actual damages plus statutory damages of $100 to $1,000.

The Paperwork Problem

Velocity Investments sued Thong Huu Nguyen in 2019 to collect an unpaid balance of $5,158.61. To its original complaint, Velocity attached a generic borrower agreement between “the borrower” and WebBank, pages of terms plus a blank loan agreement and promissory note, and it referred to a transaction history it never attached. The trouble was that the borrower agreement didn’t tie Nguyen to any debt. It carried no signature, didn’t name him as the borrower, and read as a precursor to a loan rather than proof of one. The blank note inside had empty fields where the loan amount, dates, interest rate, and member ID should have been.

Nguyen cross-complained on behalf of a class. Velocity then tried to clean things up with an amended complaint attaching the executed $8,000 note and the transaction history, and the trial court found the error corrected and granted summary judgment for Velocity.

The Fix Came Too Late

The Court of Appeal reversed. The borrower agreement attached to the original complaint didn’t evidence Nguyen’s agreement to the debt, so the attachment requirement was violated the day the complaint was filed. And here’s the part that matters for anyone collecting debt: the amended complaint did nothing to erase that violation. The court noted that the Rosenthal Act, a related California collection statute, expressly lets collectors cure their mistakes, yet the Debt Buyers Act contains no such provision. When the Legislature leaves a cure option out of one statute while writing it into a sibling statute, that silence is deliberate. A defective complaint stays defective.

Velocity had one more card. It argued any mistake was a “bona fide error,” an honest, unintentional slip made despite reasonable procedures, because it relied on an experienced collection firm that automated its filings and had an attorney check each complaint against a checklist. The court refused to resolve that on summary judgment. Whether those procedures were actually reasonable is a jury question, including whether it’s reasonable to lean entirely on outside counsel for compliance. That goes to trial.

The court also held Nguyen could sue without showing he lost a dime. Unlike federal courts, California courts don’t require a concrete injury, and the Act makes statutory damages available on top of any actual damages, not instead of them.

What This Means for Businesses That Collect Debt

The lesson isn’t subtle. If you file collection complaints in California, the documents have to be right the first time, because an amendment is no longer a reset button. A class cross-complaint can survive even where the consumer suffered no measurable loss.

The bona fide error ruling reaches past debt buyers. Many businesses lean on automation and outside professionals to stay compliant and treat that reliance as a defense. Still, “our system was supposed to catch it” is an argument you make to a jury, not a shield that ends the case early. If your compliance runs on a process, you should be able to explain how it’s built to prevent the exact error that happened.

The Bottom Line

Debt collection in California runs on documentation, and the margin for error just narrowed. A missing or mismatched attachment is a completed violation, not a fixable typo, and statutory damages plus class exposure make it costly. If your business collects consumer debt, or leans on a firm that does, now is the time to audit how your complaints get assembled and reviewed before they’re filed, not after a cross-complaint lands. Horst Legal Counsel works with businesses on collection compliance and consumer finance litigation. If you’d like a second set of eyes on your process, we’re glad to help. Contact us here.

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In Toy v. City and County of San Francisco (Cal. Ct. App., 1st Dist., July 24, 2026), the First District Court of Appeal held that a challenge to municipal water rates has to be brought as a reverse validation action. That’s a specialized procedure, one with its own short deadline and its own strict notice rules, and the court held that failing to follow it is fatal no matter how strong the underlying claim.

Here’s the background in plain terms. California’s validation statutes let a public agency file a lawsuit to confirm, or validate, something it has done, such as adopting a rate. Private parties can bring the mirror image, a reverse validation action, to invalidate that same decision. When these statutes apply, they take over, and they replace whatever other route a private party might have imagined using to challenge the agency. In 2021 the Legislature added Government Code section 53759, which says any action attacking a water or sewer rate adopted after January 1, 2022 must be filed within 120 days and must run through the validation procedures.

The plaintiffs here didn’t do that. In October 2023 they filed an ordinary class action attacking San Francisco’s new water rates under Proposition 218, the voter initiative that bars local governments from charging more for a property-related service than the service actually costs. They styled it as a claim for a refund and related relief. The City answered, asserted its defenses, and then litigated. For roughly fourteen months it filed case management statements, posted jury fees, took depositions, and agreed to consolidate the two related cases. Then, in early 2025, the City moved for judgment on the pleadings, a motion that asks the court to decide the case on the complaint alone, on a single ground: the plaintiffs had used the wrong procedure. The trial court agreed and dismissed the case without leave to amend. The Court of Appeal affirmed.

The most useful part of the opinion for anyone who litigates against a government body is what the court did with the waiver argument. The plaintiffs said the City gave up the validation defense by litigating the case for over a year before raising it. The court disagreed, and the reasoning matters. Waiver means the intentional surrender of a known right, and simply defending a lawsuit isn’t that. A public agency doesn’t give anything up by answering a complaint and fighting it. More to the point, compliance with the reverse validation procedures isn’t an affirmative defense the agency has to raise early or lose. It’s a prerequisite to the court’s jurisdiction. If the plaintiff never satisfies it, the court never had the power to hear the case, and the agency can point that out late.

The plaintiffs also argued that because they really wanted a refund, validation law didn’t apply. The court rejected that too, consistent with earlier decisions holding that a refund label can’t rescue a claim that is, at bottom, an attack on the validity of an agency’s rate. And the court found no good cause to excuse the misstep, noting that the requirements were well established and, in its words, all in the books. The City’s own rate notice had even told ratepayers about the 120-day deadline and the reverse validation procedure.

What This Means for Businesses, Property Owners, and Ratepayers

If you might challenge a municipal water or sewer rate adopted after January 1, 2022, treat it as a validation action from the first day. That means a 120-day clock that starts running at adoption, a summons in the specific form the statute requires, and service by publication to all interested persons, not just service on the agency. Miss any of those, and the strength of your Proposition 218 argument won’t matter.

It also means you can’t read anything into the agency’s conduct. A city can litigate your case for a year and still move to dismiss it as procedurally improper, because the defect goes to the court’s power to act, not to a defense the city can forfeit. Waiting for the government to raise the issue is not a strategy.

The Bottom Line

Challenges to government rates and fees are won or lost on planning as much as on the merits. Before you file, confirm whether the validation statutes apply, calendar the 120-day deadline, and build the notice and publication steps into your plan from the start. A meritorious claim filed the wrong way is still a losing claim. Real estate litigation, disputes with public agencies, and challenges to government fees and assessments are central to our practice at Horst Legal Counsel. If you’re weighing a challenge to a rate or fee, or you’ve received a notice of a new one, we’re glad to talk it through. Contact us here.

The post San Francisco Litigated a Water Rate Class Action for a Year, Then Won by Showing It Was Filed the Wrong Way appeared first on Horst Legal Counsel.

The decision is Tesoro Refining & Marketing Company LLC v. City of Carson (Cal. Supreme Ct., Aug. 10, 2026), and it reaches every business paying a local tax in a city with its own refund ordinance. Chief Justice Guerrero, writing for a unanimous Court, held that the Government Claims Act preempts these local procedures.

How Carson’s Local Tax Refund Detour Worked

Carson voters approved an Oil Industry Business License Tax in 2017, charging refinery and petroleum storage operators a quarterly tax of one-quarter of one percent of their gross receipts from business in the city. Tesoro runs a refinery there. After an audit, Carson decided Tesoro had underpaid for a stretch spanning late 2017 into 2018 and sent a deficiency notice. Tesoro paid under protest, then filed a refund claim with the city clerk on the standard state form, arguing the assessment was untimely and the city’s calculation method was wrong. The city denied it, and Tesoro sued.

Carson’s response was procedural. It argued Tesoro had skipped steps, because the city’s ordinance says a taxpayer must first ask the finance director for a refund, then appeal to the city manager, before going to court. The trial court agreed and dismissed, and so did the Court of Appeal. But the Supreme Court reversed.

One Statewide Rulebook for Claims Against Local Government

The Government Claims Act sets a single, uniform procedure for presenting “all claims for money or damages against local public entities.” It spells out who files, what the claim must say, which form to use, where it goes, and how long the government has to respond, generally 45 days before the claim is deemed rejected and the claimant can sue. The Legislature built that system in the late 1950s and early 1960s to replace a chaotic patchwork of local rules the courts had long called “traps for the unwary.”

The legal engine of the decision is field preemption, the rule that when the Legislature means a statute to occupy an entire subject, a local law regulating in that same area cannot be enforced. Reading the Act’s text, structure, and history, the Court concluded the Legislature occupied the whole field of claim presentation. A city may write its own procedures only for the narrow categories the Act carves out, and local tax refunds are not among them.

A Refund Request Is a Claim, Whatever the City Calls It

Carson’s main move was to relabel its refund process as a separate administrative remedy the taxpayer had to exhaust first. The Court rejected the relabeling. A claim for money or damages is a demand asserting a right to be paid, and a request to recover an allegedly unlawful tax is exactly that. Because the city was imposing extra presentation steps on a claim the Act already governs, those steps fell. And once a procedure is preempted, there’s nothing left to exhaust.

One limit matters. The ruling covers local taxes set by a city’s own ordinance. It doesn’t touch property taxes, sales and use taxes, or other taxes whose refund procedures come from the Revenue and Taxation Code or another state statute.

What This Means for Businesses and Property Owners

If your company pays a local business or gross receipts tax and you think the city miscalculated it or assessed it too late, you no longer have to complete the city’s internal refund-and-appeal process before suing. Pay under protest if you must, file your claim under the state Act, and if the city denies it or misses its deadline, you can go to court. The city can’t add steps, add delay, or set a trap that forfeits your claim over one of its internal deadlines. That’s true even in charter cities, which often assume home rule lets them design their tax machinery end to end. It doesn’t reach how a refund claim gets presented.

The Bottom Line

Tesoro is a win for predictability. Businesses challenging a local tax now follow one clear procedure instead of a city-specific maze. If you’re weighing whether to contest a municipal assessment, the path to court is shorter and surer than the ordinance might suggest, and any local rule demanding extra pre-suit steps for a refund is now vulnerable. Tax disputes with local government, and the strategy around preserving and pursuing a refund, are work Horst Legal Counsel handles for business clients. If a city has assessed your business a tax you believe is wrong, we’re glad to talk it through. Contact us here.

The post Cities Can No Longer Bury Your Local Tax Refund in Red Tape appeared first on Horst Legal Counsel.

The case is Gilead Tenofovir Cases (Cal. Supreme Ct., Aug. 3, 2026), and while the facts are about HIV medication, the principle reaches every manufacturer that has ever kept one product on the shelf while working on the next.

Two Drugs and a Fifteen-Year Gap

Gilead makes tenofovir-based HIV treatments. Its first, TDF, won FDA approval in October 2001 and became a cornerstone of therapies that save millions of lives worldwide each year. (Before these drugs, HIV carried a 95 percent fatality rate.) One month after that approval, Gilead filed to begin human testing of a second compound, TAF, as a potential backup. A small early trial, fourteen days and thirty subjects, suggested TAF could match TDF’s antiviral effect at a much lower dose, which plaintiffs say meant less risk of kidney, bone, and tooth damage. In 2004, Gilead announced it was shelving TAF. It resumed development in 2010, ran its first large-scale clinical trial in 2013, and won FDA approval in November 2015, ahead of the 2017 expiration of its TDF patent.

The plaintiffs took TDF and allege they suffered serious injuries. Here is the key move. They concede TDF was not defective and don’t say Gilead should have pulled it. They say Gilead should have brought TAF to market years earlier, that they would have switched, and that the delay cost them a safer option. They also concede the data Gilead had in 2004 was not enough to get TAF approved.

Why the Court Refused to Require a Safer Alternative

The plaintiffs built their claim on negligence, the failure to use reasonable care, and on Civil Code section 1714, which sets a default rule that everyone must act with reasonable care to avoid harming others. The trial court let the negligence claim proceed. The Court of Appeal agreed that a manufacturer’s duty of care, its legal obligation to act reasonably toward others, could extend beyond simply not selling a defective product.

The Supreme Court reversed. It signaled doubts about whether a manufacturer can ever be liable in negligence for a nondefective product. Still, it did not have to resolve that larger question. Even assuming such a duty could exist, the Court held that the Rowland factors, the considerations California courts weigh when deciding whether to carve out an exception to the default duty of care, compel an exception here.

The reasoning is practical. A manufacturer cannot reliably know during early testing that a drug in development is safer, so it cannot foresee that any delay will harm users of the existing product. The link between a development decision and a later injury is attenuated, running through a chain of uncertain science and choices by regulators, doctors, and patients. And imposing the duty would backfire. It would invite hindsight second-guessing of complex research decisions, and it could push companies to stop investigating backup products, since an early hint of a safety improvement could later be turned into a lawsuit.

What This Means for Manufacturers and In-House Counsel

The holding is written for drug makers, but the logic travels. A manufacturer’s duty stays anchored to the product it actually sold and whether that product was defective. Your internal decisions about what to develop, how to prioritize research, and when to launch are not a separate source of tort liability just because a plaintiff can later point to something better in your pipeline.

Two things follow. First, if you sell a product that is not defective, a “you should have built a safer one faster” claim now runs straight into Gilead. Second, the Court’s willingness to use Rowland to rein in an expanding duty is worth remembering whenever a plaintiff tries to stretch ordinary negligence into new territory.

Bottom Line

Innovation involves timing, and timing involves judgment calls made under uncertainty. After Gilead, those judgment calls are far harder to convert into a negligence case in California, at least where the product you sold was not defective. If your company makes anything, read it before your next product-liability threat letter arrives. Horst Legal Counsel advises manufacturers, product companies, and in-house teams on liability exposure, litigation strategy, and risk management. If you want to talk through how Gilead affects your product line or a pending claim, we’re glad to help. Contact us here

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Winning a lawsuit is only half the job. If the company or person that owes you money has no assets, the judgment can be close to worthless on its own. A recent California Court of Appeal decision, 8451 Melrose Property, LLC v. Akhtarzad, gives businesses another way to collect, letting a court add new parties to a judgment after the case is over when the evidence shows they were the real players behind it.

A Judgment Is Only as Good as Your Ability to Collect It

Your business wins a lawsuit. After years of fighting, you finally have a judgment worth millions of dollars.

Then reality sets in.

The party you sued has no real assets. That courtroom win suddenly doesn’t feel like much of a win at all. Most business owners assume that’s where the story ends. But in some cases, it doesn’t.

In 8451 Melrose Property, LLC v. Akhtarzad, the California Court of Appeal held that the people truly running a business can be put on the hook for its judgment, even when their names never appeared on the case, if they controlled the litigation and shared in the rewards.

The Tenant Wasn’t the Only One Behind the Lease

The dispute started with a commercial lease. The tenant stopped paying rent soon after moving in and left the building gutted, and the landlord was out millions. After two trials and two appeals, the landlord won a judgment of more than $10.5 million for unpaid rent and the cost of restoring the property.

Winning didn’t solve the real problem. The landlord still had to collect.

That’s when the picture changed. As the landlord dug in, evidence surfaced that the named tenant, Sina Akhtarzad, had never been acting alone. He was one member of an undisclosed “one-for-all” family partnership, a group of relatives who for decades pooled their real estate investments, income, and expenses and ran the whole thing as a single pot of money. The partnership, not Sina by himself, was the real tenant. A family corporation called Amey Enterprise handled the leasing.

So the landlord asked the court to amend the judgment under Code of Civil Procedure section 187, a state law that lets a court fix who is really named on a judgment, and add the individual partners and Amey as judgment debtors, the parties legally required to pay. The trial court did, and the Court of Appeal affirmed.

Knowing About the Lawsuit Wasn’t Enough. Controlling It Was.

Here’s the part that should get every business owner’s attention. The partners didn’t get added just because they knew about the case. Under California law, simply knowing your business partner is being sued does not make you personally responsible for the result. If that were the rule, anyone loosely tied to a lawsuit could be dragged onto the judgment.

What pushed these partners over the line was control. The partnership paid for the defense. It let Sina fight the case on everyone’s behalf through both trials and both appeals. The partners sat behind the litigation the entire time, funding it and benefiting from it, while keeping their names off the caption.

On those facts, the court applied a three-part test: whether the added parties controlled the underlying lawsuit, whether they shared such a unity of interest with the original debtor that their separate identities didn’t really exist (in plain terms, whether they were all effectively one operation), and whether it would be unfair to treat the debt as the named tenant’s alone. The court also made clear that alter ego, the usual doctrine for holding the people behind a company liable for its debts, is not the only path. Here, equity was enough.

What This Means for Business Owners

There are two lessons here, and which one applies depends on which side of the “v.” you’re on.

If your business wins a judgment, don’t assume your options stop at the party named in it. When the evidence supports it, you may be able to reach the people who were actually running the business or the litigation from behind the scenes, even years after the fact. Section 187 carries no statute of limitations, so a defendant who thought the case was long over can still be added.

If you operate through several entities, a partnership, or a handshake arrangement, the warning runs the other way. Courts will look past the names on the paperwork. If you’re directing the litigation, paying for the defense, and sharing in the upside, you can end up personally liable even though you were never named as a defendant. Structure matters, but so does conduct. If your real role in a business doesn’t match what’s on paper, you may be carrying risk you can’t see.

Bottom Line

Winning in court is a milestone, but it only counts if you can collect. 8451 Melrose Property, LLC v. Akhtarzad shows that California courts will look past formal business structures when the evidence proves someone else was really running the dispute.

If you’re holding a judgment that looks impossible to collect, or you’re worried about how your own business setup could expose you in a future fight, Horst Legal Counsel can help you weigh your options and build a strategy that protects you before a small problem becomes an expensive one. Contact us here.

Source link: https://www.courts.ca.gov/opinions/documents/B340673.PDF

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When your business files a lawsuit, an early ruling from the judge can change the entire course of the case. If that ruling goes against you, it may be tempting to look for the fastest way to get in front of the Court of Appeal. A recent California Supreme Court decision shows why one shortcut, voluntarily dismissing your case too soon, can cost you the very appeal you’re trying to pursue.

A Shortcut That Can Cost You More Than Time

You’ve spent months preparing your lawsuit. The complaint is filed, the case is moving forward, and then the judge dismisses several of your claims. The judge gives you permission to amend them, but you believe the ruling is legally wrong.

Now you’re faced with a decision. Do you spend more time and money continuing the case, or do you end it now and appeal?

At first glance, dismissing the lawsuit might seem like the quickest route. If the case is over, you should be able to appeal, right?

Not necessarily.

In Maniago v. Desert Cardiology Consultants’ Medical Group, the California Supreme Court made clear that voluntarily dismissing your case before the trial court has finally resolved your claims does not automatically create a right to appeal. In the wrong circumstances, it can do the opposite.

The Shortcut That Didn’t Work

The plaintiffs in Maniago sued a cardiologist and his medical group, alleging multiple causes of action. The trial court sustained demurrers to several claims with leave to amend, meaning the plaintiffs had the opportunity to revise those claims and continue litigating. One negligence claim was still pending, and another claim had not been challenged at all.

Rather than amend the complaint or continue with the remaining claims, the plaintiffs voluntarily dismissed the entire lawsuit before the trial court had entered a final judgment on any claim. They then attempted to appeal the rulings that had gone against them.

The Supreme Court held that this approach did not create an appealable judgment under these circumstances. Because the plaintiffs dismissed the action before the trial court had finally resolved any of their claims, the Court of Appeal did not have jurisdiction to hear the case.

Why the Supreme Court Reached That Result

California generally follows what’s known as the final judgment rule. In most civil cases, an appeal is available only after the trial court has entered a final judgment resolving the case.

The Supreme Court explained that allowing parties to voluntarily dismiss a lawsuit before any claim has been finally decided, simply to obtain immediate appellate review, would undermine that rule and encourage piecemeal appeals. At the same time, the Court emphasized that its decision was limited to the facts before it. It did not decide every situation involving a voluntary dismissal, only the one presented in Maniago.

There Was a Better Option

One of the most useful parts of the decision is what the Court suggested the plaintiffs could have done instead.

Depending on the circumstances, a party may ask an appellate court to review an important issue early by filing a writ petition. Writ review is discretionary, so it is not available in every case, but it is one recognized path to early appellate review.

Another option is to allow the trial court’s rulings to become a final judgment before dismissing any remaining claims. That approach follows California’s normal appellate process and helps preserve the right to appeal.

The lesson is simple: before making a procedural decision that ends your case, make sure you understand how it could affect your appellate rights.

What This Means If You’re Suing to Protect Your Business

Business litigation is full of strategic decisions. Some involve settlement, others involve trial, and some involve deciding when, and how, to appeal.

After Maniago, businesses that bring lawsuits should think carefully before voluntarily dismissing a case after an unfavorable ruling. What looks like a faster path to appellate review could end up closing that door altogether.

If you’re considering an appeal, talk with your attorney before taking any step that could affect the timing of your case. A few extra months in the trial court may be far less costly than losing the opportunity to appeal altogether.

Bottom Line

The Maniago decision shows that litigation strategy is about more than winning or losing individual motions. The procedural choices you make along the way can determine whether an appellate court ever gets the chance to review your case.

If your business is involved in litigation and you’re considering an appeal, it’s important to understand your options before making a move that’s difficult to undo. The right strategy at the trial court level can protect your ability to challenge an unfavorable decision later. An experienced litigation attorney can help you evaluate those options and preserve your rights every step of the way.

The post This Litigation Shortcut Could Cost You Your Right to Appeal appeared first on Horst Legal Counsel.

If your business uses generative AI to draft anything that goes out under your name, a California appellate court just showed you how the failure actually happens, and it is not the failure most people brace for. The problem here wasn’t a company that banned AI or ignored the risk. It was a professional who had an AI policy requiring human verification, and who still filed a document full of fabrications. A policy on paper did not save him.

The case is Del Biaggio v. Bansen (Cal. Ct. App., 1st Dist., Div. 4, July 10, 2026), and although it grew out of a dairy contract dispute in Humboldt County, the lesson has nothing to do with cows.

A Dairy Contract That Turned Into an AI Cautionary Tale

Daniel Del Biaggio worked at the Bansens’ dairy under an agreement that promised him salary, livestock transferred over time, and an eventual chance to lease the operation. When the Bansens allegedly failed to hand over the livestock he was owed, he sued and won a $52,850 jury verdict. As the prevailing party, the side that wins, he asked for his attorney fees under the contract, including hours his lawyer’s paralegal had billed. That fee fight is what carried the case up on appeal.

It might have stayed an ordinary fee dispute. Then the court read the opening brief.

What the Court Actually Held

On the money questions, the result was mixed. The court upheld the trial judge’s decision to cut the attorney’s hours, since block billing, lumping many tasks into a single time entry, and several thin causes of action gave the judge room to trim. It reversed the exclusion of paralegal fees, holding that a contract promising the prevailing party its “attorneys’ fees,” a term the contract left undefined, reasonably includes the reasonable cost of paralegal work. It also erased a sanction the trial court had imposed on Del Biaggio’s lawyer, finding that his reconsideration motion, a request that the trial judge revisit its own ruling, was proper.

Then the court turned to something it raised on its own. Del Biaggio’s opening brief attributed quotations to the California Supreme Court’s decision in PLCM Group v. Drexler that appear in no case at all, and it misdescribed other authority. Those invented quotations stated the exact proposition counsel wanted to prove. The lawyer’s own declaration acknowledged the passages came from generative AI and were never properly verified before filing.

Why “We Have an AI Policy” Wasn’t Enough

Here is the part every business should sit with. The lawyer told the court his office uses AI “consistent with State Bar guidance,” with “protocols requiring human verification of all outputs.” The court was unmoved, and its reasoning is the real takeaway.

First, the protocol did not actually deliver the review it promised. The lawyer planned to have a paralegal confirm that the citations existed while he was tied up in another trial. The court said that plan was inappropriate even if it had worked, because he never intended to read the cited law himself. Checking that a source exists is not the same as reading what it says.

Second, the court flagged a detail worth remembering. The fabricated quotations said precisely what the lawyer was hoping to prove. That should have been the warning sign. AI output is most dangerous at the exact moment it tells you what you want to hear.

The sanction was $1,500, paid to the court, with the opinion forwarded to the State Bar. The dollar figure is small. The professional and reputational consequence is not.

What This Means for Businesses Using AI

Read the holding as a governance standard, because that is how it will be used. A written AI policy is not a defense unless the review it promises actually happens, on the real output, performed by someone competent to catch the error. Delegating verification to a proxy step, like confirming a citation exists rather than reading it, is precisely the gap that produced this result. And when AI hands you something that confirms your position perfectly, that is the moment to slow down, not speed up.

For regulated professionals, the exposure is discipline and sanctions. For everyone else, it is contracts built on invented terms, reports with fabricated support, and decisions made on facts that were never real.

Bottom Line

If your organization uses generative AI, the question is not whether you have a policy. It is whether a qualified human reviews the substance of what the tool produces before it leaves the building. This decision turns that from a nice-to-have into a benchmark a court is now willing to enforce. Horst Legal Counsel advises businesses on AI governance, professional risk, and the disputes that follow when controls fail. If you want a candid look at where your current process would leave you, we are glad to talk it through.

The post Your AI Policy Won’t Save You If Nobody Reads the Output appeared first on Horst Legal Counsel.

In Doe v. Marysville Joint Unified School District (Cal. Supreme Ct., July 2, 2026), the Court held that a plaintiff who voluntarily dismisses the same claims twice, the second time in federal court, isn’t barred from bringing those state law claims all over again in California state court. For anyone who tracks litigation exposure, that’s a meaningful gap between what a federal dismissal feels like and what it actually does.

Two dismissals, then a third filing

The plaintiffs are former students who allege a school counselor abused them years ago. Those underlying facts, disturbing as they are, aren’t what the case turned on. The Court set them aside as irrelevant to the legal question. What matters here is the sequence of filings.

The plaintiffs first sued the school district in state court, then voluntarily dismissed, which simply means a plaintiff chooses to drop their own case. The same day, they refiled in federal court, adding federal claims alongside their state law claims. When the district moved to dismiss, the plaintiffs dismissed again, this time under Federal Rule of Civil Procedure 41(a)(1)(A)(i), which lets a plaintiff drop a case early without a judge’s sign-off. Each dismissal was “without prejudice,” meaning the plaintiffs reserved the right to come back. Then they filed a third time, in California state court, raising only their state law claims.

The district saw an opening. Federal Rule 41(a)(1)(B) contains what’s known as the two-dismissal rule: if a plaintiff dismisses the same claim a second time, that dismissal “operates as an adjudication on the merits,” which is legal shorthand for a ruling that treats the claim as decided. The district argued this converted the second dismissal into a final loss, one that should block the state court case under claim preclusion, the doctrine that stops a party from relitigating a claim already resolved. The trial court agreed and threw the case out. A divided Court of Appeal affirmed.

What the Supreme Court actually held

The Supreme Court reversed, and its reasoning is worth understanding because it corrects a common misreading. Leaning on the U.S. Supreme Court’s decision in Semtek Int’l Inc. v. Lockheed Martin Corp., the Court explained that the two-dismissal rule is a rule of federal procedure, not a rule of claim preclusion. “Adjudication on the merits,” as Rule 41 uses the phrase, means only that the plaintiff can’t refile the same claim in the same federal court. That’s a necessary condition for claim preclusion. It is not a sufficient one.

In plain terms, the rule polices the door of the federal courthouse where the dismissals happened. It doesn’t lock every other courthouse in the country. A dismissal that bars a refiling in federal court still doesn’t touch a plaintiff’s ability to press state law claims in state court, where the federal rule has no force at all. California, the Court noted, has no equivalent two-dismissal rule of its own.

Reading the rule any other way would raise real problems. It would push past the limits of the federal Rules Enabling Act, which bars procedural rules from enlarging or shrinking substantive rights, and it would create the very state-federal outcome gap that federalism principles exist to prevent. Because the plaintiffs’ voluntary dismissals weren’t judgments on the merits under either federal or California law, the result came out the same under both the federal and the California rules of claim preclusion.

Why this matters for your litigation strategy

For defendants, the practical lesson is direct. Don’t assume a plaintiff’s repeated dismissals mean the threat is gone. If the claims can stand on state law, they can reappear in California state court, and a federal procedural rule won’t stop them. That possibility belongs in how you evaluate settlement posture, reserves, and overall risk.

For plaintiffs and their counsel, the decision preserves flexibility. A stumble in federal court, or a deliberate retreat from it, doesn’t automatically forfeit state law claims that belonged in state court in the first place.

And for anyone choosing between forums, the case is a reminder that where you file, and where you dismiss, carries consequences that don’t always travel with you. Federal and state litigation run on different rules, and the seams between them are exactly where disputes like this one live.

The Bottom Line

A dismissed case isn’t always a closed case. Doe v. Marysville draws a clean line: the federal two-dismissal rule bars refiling in the same federal court, and nothing more. If you’re weighing whether a matter is truly behind you, or planning your next move across state and federal forums, that line is worth knowing before you lean on it.

Business litigation, appellate strategy, and the procedural questions that decide where a case can be fought are central to Horst Legal Counsel’s practice. If you’re assessing whether a dismissed matter can return, or mapping strategy across state and federal court, we’re glad to talk it through. Contact us here.

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The case is Sunflower Alliance v. Department of Conservation (Cal. Supreme Ct., June 25, 2026). A company called Reabold wanted to reopen a dormant oil well in Contra Costa County, plugged and idle since the 1980s, and convert it into a well for injecting treated wastewater deep underground, about 12,600 gallons a day for twenty years. CalGEM, the state division that regulates these wells, approved the project and declared it exempt from the California Environmental Quality Act, the law that forces environmental review of projects that may carry impacts. It leaned on the “class 1” categorical exemption, which covers minor alterations to existing facilities involving “negligible or no expansion” of an existing or former use. A community group, Sunflower Alliance, sued. Turning an oil-extraction well into a wastewater-injection well, it argued, is no negligible change.

What the Class 1 Exemption Actually Asks

The Court of Appeal sided with the company, but its reasoning is what should get your attention. It read “negligible” to mean environmental risk. Because the agencies had found the injection posed little danger to nearby water, the court called the change in use negligible and the exemption satisfied. Strip the case to its core and one question remains. Does “negligible” measure the change in use, or the risk of environmental harm?

The Supreme Court’s Answer

The change in use, and only the change in use. Writing for a unanimous court, Chief Justice Guerrero held that the exemption’s text speaks to expansion of use and says nothing about environmental risk, and a court doesn’t get to write in words the regulation left out. The risk question has its own home in CEQA’s structure. When the state built its catalog of categorical exemptions, it decided once, at the rulemaking stage, that those categories of projects don’t typically cause significant environmental effects. Let an agency or a court relitigate that risk project by project, at the exemption stage, and you collapse two separate steps of the law and skip the public environmental review reserved for projects that don’t qualify.

So the court reversed and handed the case back to answer the right question, whether converting a shuttered oil well into a high-volume injection well is a negligible change in use. Justice Kruger, concurring, put her finger on the part left unresolved. Deciding what counts as “negligible” still needs a yardstick, and she pointed to the Guidelines’ own examples, adding a bike lane to a street, turning a home into an office, as the measure of how much change the exemption can absorb.

What This Means for Developers, Property Owners, and Operators

If your project reaches approval through a CEQA categorical exemption, the takeaway is blunt. Anchor your case to the scope of the change in use, not to how safe the project is. A file thick with evidence of low environmental impact, however convincing, answers a question the exemption never asked. For anyone who learned to win exemptions by pointing at minimal harm, that’s a genuine reset.

It cuts both ways. A genuinely low-risk project can still be too large a change in use to qualify, so some projects that used to slip through will now draw full review. But the same rule protects a truly minor change from being second-guessed on risk grounds. For oil and gas operators, water agencies, and industrial users eyeing conversions of existing facilities, the scope-of-use framing now governs. For developers and property owners, the play is to show, on the record, how the project fits the nature and degree of an existing use, and to treat the categorical exemption as the narrow tool the Supreme Court says it is.

Bottom Line

Categorical exemptions exist to spare routine projects from full environmental review, not to let agencies make the case-by-case risk calls the Legislature assigned to the rulemaking process. After Sunflower, the question at the exemption stage is clean, and it isn’t whether your project is safe. It’s whether your project is a negligible change in use. If the honest answer is no, a mountain of risk evidence won’t rescue the exemption, and an approval built on that evidence is a challenge waiting to happen. The time to get the framing right is at the application, before the exemption is granted and then fought over in court. Horst Legal Counsel advises developers, property owners, and businesses on land use, CEQA compliance, and the disputes that follow. If a categorical exemption sits on your project’s critical path, let’s pressure-test it before someone else does.

The post Your Project’s Low Environmental Risk Won’t Win You a CEQA Exemption appeared first on Horst Legal Counsel.

The case is Division of Occupational Safety and Health v. Uber Technologies, Inc. (Cal. Ct. App., 2d Dist., June 18, 2026). Dino Park made deliveries through Uber Eats. In May 2023, after dropping off an order, he fell down a flight of stairs and died of his injuries days later. Cal/OSHA, the state agency responsible for workplace safety, carries a mandatory duty to investigate on-the-job deaths. It asked Uber for a meeting. Uber said no. So the agency issued an administrative subpoena, a regulator’s formal demand for records that doesn’t require filing a lawsuit first, seeking twenty categories of documents about Park’s work and how he died. Uber produced nothing and stood on a single theory: Park was an independent contractor under Proposition 22, the 2020 ballot measure that lets app-based drivers be treated as contractors when certain conditions hold, so the agency had no jurisdiction over it. The trial court ordered Uber to produce everything. Uber appealed.

Why the Subpoena Survived

Uber’s core argument had a surface logic. If Cal/OSHA only regulates employees, and Park was no employee, then the agency should have to establish employment before demanding a single page, perhaps in a separate lawsuit filed for that purpose. The court took that logic apart. An agency can issue a subpoena precisely to find out whether the target falls within its reach in the first place. As the court put it, drawing on decades of authority, a regulator may investigate on nothing more than a suspicion the law is being broken, or even just to satisfy itself that it isn’t. Forcing Cal/OSHA to win the contractor fight before it could investigate would invert the whole purpose of the subpoena, which was to gather the very facts that answer that question.

Two backup arguments fared no better. Uber claimed the subpoena power operates only during an on-site workplace inspection. The statute says no such thing, and the court refused to read in a limit the Legislature never wrote. Uber then argued that once the agency issued a citation carrying a small penalty, the subpoena went moot, meaning the live dispute was over. Wrong again. The six-month deadline Uber leaned on governs citations, not investigative subpoenas. Read Uber’s way, a company could simply stall until the clock ran out, and courts don’t hand businesses that kind of escape hatch.

The Limit That Matters

Uber didn’t walk away empty-handed. The trial court had ordered all twenty categories produced without cutting one, and several reached far past Park. Some swept in records on every “user” of the platform, a definition wide enough to scoop up ordinary customers. The court couldn’t see how customer data illuminated a delivery driver’s death, so it reversed that piece and sent the case back to trim the demands to what’s actually relevant. The point cuts both ways. A regulator’s investigative power runs broad, and it still has a floor, and that floor is relevance.

What This Means for Employers and Platform Companies

The classification label on your workforce won’t wall off an investigation into whether the label is right. That call belongs to the agency first, and a subpoena built to make it is enforceable. For gig and platform businesses, Proposition 22 may govern the ultimate question of who counts as an employee, but it doesn’t stop an agency from investigating whether the conditions for contractor status are even met. And for any company staring down a regulatory demand, stonewalling is the weakest hand at the table. The move that actually worked for Uber wasn’t refusing to engage. It was engaging, then fighting the demand on scope.

Bottom Line

The moment to call counsel is when the agency first makes contact, not after a judge has ordered you to comply. By then the only argument left, that the demand sweeps too far, arrives with your credibility already spent getting there. There’s real room to narrow an overbroad investigation. There’s almost none to argue the agency can’t investigate at all. Horst Legal Counsel advises businesses on regulatory investigations, worker classification, and the decisions that land the day an agency comes knocking. If you’d rather know where your company stands before that day, let’s talk.

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