Alert - Holguin v. Dish Network LLC: A Cautionary Tale of Contractual Interpretation of California Businesses

February 9, 2015

A consumer’s victory over her cable company offers a cautionary lesson for California businesses when it comes to their contractual relationships.  In Holguin v. Dish Network LLC (2014) 229 Cal.App.4th 1310, the Fourth Appellate District affirmed a decision in favor of the Holguin family and held that multiple documents executed by the Holguins in connection with purchasing “bundled” internet services from AT&T and Dish Network were properly considered a “single contract.”  Consequently, the breach of one of the documents constituted a breach of the entire contract, ultimately subjecting AT&T and Dish Network to a judgment for breach of contract, along with the payment of the Holguins’ attorneys’ fees under California Civil Code § 1717.

As many families do these days, the Holguins ordered “bundled” internet, cable and telephone services from AT&T.  The Holguins first executed an order form which identified the provider as “AT&T/DISH Network.”  A DISH Network service technician came to the Holguins’ home to install the system, and the Holguins executed three (3) additional documents: a service agreement, a residential customer agreement and a promotion agreement.  During the installation, the DISH technician ruptured a sewer line in the Holguins’ house, patched the hole in the wall, but neglected to repair the sewer line.  Fourteen (14) months later, and after suffering respiratory problems, the Holguins discovered the ruptured sewer line and resulting mold damage in their walls.  A lawsuit followed.

At trial, the trial court allowed a jury instruction on the Holguins’ breach of contract action which provided that correct installation of the television equipment was an implied term of a single contract, e.g., the jury instruction classified all four (4) agreements signed by the Holguins’ as a single contract.  The Holguins prevailed at trial and the defendants appealed. 

The Fourth Appellate District affirmed the trial court’s judgment, and explained that the four (4) documents were properly classified as a “single contract” pursuant to California Civil Code § 1642, notwithstanding the fact that they were executed at different times, and addressed different aspects of the “bundled” services.  Civil Code § 1642 provides: Several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together.”  The documents at issue involved the same transaction and the same parties, and therefore could properly be taken together as a single agreement.  Because California common law imposes a duty of “care, skill, reasonable expedience and faithfulness” in all contracts, and the service technician’s damage to the sewer line breached this duty, the verdict in favor of the Holguins on their breach of contract action was proper.

Holguin serves as a warning to businesses who deal in multiple agreements, or who provide services on an incremental basis.  When the same parties execute multiple documents relating to a single transaction, there is a risk that all documents will be deemed to be a part of a single contract, such that a breach of one is considered a breach of all.  Businesses would be well-advised to take extra precautions to isolate separate components of a single transaction from one another, in order to reduce the likelihood that an issue arising from one portion of a multi-part transaction, for example, will result in a breach of contract claim for the entire transaction.  The aim should be to decrease exposure to liability from the situation faced by AT&T and DISH Network, where the error of a contracted technician resulted in a significant breach of contract claim.