CALIFORNIA ATTORNEY'S FEES

Appeal Sanctions/Family Law: $552,153.28 Fee Award Under Family Code Section 271 Affirmed Based On Substantial Evidence In Sixth District Published Decision

 

Appellate Frivolous Sanctions Also Awarded Against Appellant/Her Counsel.

     Marriage of Wahl and Perkins, Case No. H035712 (6th Dist. Feb. 2, 2012) (certified for publication) is a situation where an ex-wife was ordered to pay $552,153.28 as a fee “sanctions” to ex-husband under Family Code section 271. (For any newbees or anyone who might need reminding, this is a statutory section in the family law area allowing an award of fees against a litigant--without any real showing of injury but indicating that the litigant can financially bear the award--for not furthering settlement or making the matter more litigious in nature.) It is an interesting opinion to show how the abuse of discretion standard will result in affirmance, as well as show how appellate courts may be pulling the “trigger” more often on frivolous appeals--awarding expenses to the clerk of the court for the costs of processing such appeals.

     Based on the record, ex-wife had assets of $7 million, $5 million of which were accessible. So, she certainly could bear the consequences of a loss given the facts recited in the opinion--including numerous custody/visitation battles both in California and Pennsylvania. However, the real ouch was ex-wife who had to pay $15,000 to the clerk for a frivolous appeal and her two attorneys had to pay $5,000 each for the same reason.

Allocation/Appellate Sanctions/Special Fee Shifting Statute: Fourth District, Division 3 Sanctions Plaintiffs’ Attorneys For CRC Appeals Violations And Losing Derivative Plaintiffs Are Hit With Substantial Fee Awards Under Civil Code Section 1717

 

Case #1: Appellate Sanctions Are Imposed.

     In Alexandros v. Cole, Case No. G043715 (4th Dist., Div. 3 Dec. 30, 2011) (unpublished), plaintiffs lost a minority shareholder breach-of-fiduciary duty suit against various defendants and then lost their appeal. However, the appellate court also awarded $10,000 (out of a requested $30,000) in sanctions to defendants because plaintiffs’ attorneys admitted violating California Rules of Court relating to appellate practice--including irrelevant documents in the appellants’ appendices and making numerous unsupported factual statements without record citations. [BLOG OBSERVATION--Co-contributor Mike has litigated securities cases on the defense side against the attorneys who were sanctioned.]

Case #2: Brusso Allows for Defendants to Obtain Section 1717 Fees Against Nonsignatory Plaintiffs in Derivative Actions.

     In our January 29, 2009 post on West Hill Farms v. RCO Ag Credit (a nonpublished Fifth District decision), we learned that winning defendants in shareholder derivative lawsuits are usually limited to the amount of a posted Corporations Code section 800 bond (capped at $50,000). However, West Hill Farms did observe that there were other bases for an award that is not so capped--namely, Brusso v. Running Springs Country Club, Inc., 228 Cal.App.3d 92, 107-108 (1991), where a court determined that a successful defendant may collect fees from plaintiff shareholders under Civil Code section 1717 if derivative claims are based on a contract containing a fees clause. Well, Brusso was front and center in the companion case to the one we just discussed, with that case being Conrad v. KOR Electronics, Inc., Case Nos. G044457/G044682 (4th Dist., Div. 3 Dec. 30, 2011) (unpublished).

     Conrad involved nonsignatory plaintiff shareholders who lost a derivative suit against numerous defendants (KOR shareholders, KOR directors, and KOR), with the lower court awarding two adverse fees awards against one plaintiff broken down as $747,012 to KOR directors/KOR and $919,224 to two shareholders. Even though the losing plaintiff was a nonsignatory shareholder to repurchase/investor agreements with a fees clause, the lower court determined that Brusso allowed the recovery.

     On the whole, the fee awards were affirmed on appeal. Acting Presiding Justice Rylaarsdam, who wrote this and the prior companion opinion on behalf of 3-0 panels, found that the derivative action did seek to rescind the contracts and that Brusso was still good law. (Brusso is must reading in this area, based not only on section 1717 but on the inequity of allowing nonsignatory derivative plaintiffs to recover fees under the substantial benefit doctrine unless a similar substantial benefit through fee recovery was conferred upon the winning defendants under 1717 reciprocity principles.) However, the fee award in favor of Cole had to be reversed because he was not a party to the contract and was not an intervenor defending on KOR’s behalf. Plaintiff also correctly challenged the fees awarded to KOR, because derivative plaintiff cannot be assigned a corporation’s liability to pay to itself the corporation’s own attorney’s fees and any corporate indemnification duty to directors for their fees is separate from recovery of fees against a derivative litigant. Fortuitously, the trial court had apportioned fees between Cole, KOR and another director entitled to fees so that this formula allowed the appellate court the good fortune to reduce the fees to the other director down to $249,004 (down from $747,012). With that reduction, the remainder of the fee awards were sustained. [BLOG OBSERVATION--In many federal and state securities suits, plaintiffs do not face fee exposure absent frivolous conduct because there are no fee-shifting bases. However, if there is a fees clause involved in a derivative context, plaintiffs attorneys are well advised to advise their clients that there well might be exposure under Brusso in California derivative litigation.]

Appellate Sanctions/Civility: $10,000 Sanctions Ordered Paid To Appellate Court Clerk For Lying To Court, Seeking Unwarranted Sanctions, Bullying Opposing Counsel, Showing No Remorse, And Vowing To Continue Such Practices

 

Civility To Both Other Lawyers and the Court, Cries Out Loud and Clear in Justice Bedsworth-Authored Opinion.

     Here is a very interesting decision that is going to be cited in what needs to be done in “proving up” for default judgment purposes, general civility to other lawyers and the court system, and appellate sanctions that are appropriate for the conduct listed in our first headline.

     Kim v. Westmoore Partners, Inc., Case No. G044216 (4th Dist., Div. 3 Nov. 29, 2011) (certified for publication), authored for a 3-0 panel by Acting Presiding Justice Bedsworth, involved the reversal of a $5 million default judgment against six defendants (or a total $30 million judgment) and is must reading in this area alone on the care that must be taken in “proving up” default judgments. However, there is more in this one. After defendants appealed from the judgments, plaintiff’s counsel requested an extension of time to file his respondent’s brief based on the complexity of the issues and conflicting counsel time commitments. Although the extension was granted by the appellate court, respondent’s counsel submitted a brief that was a near verbatim duplicate of another brief in a 2009 case that involved different circumstances (with counsel even signing the brief as representing the client in the earlier 2009 case). The brief had an identical assertion as in the prior brief that opposing counsel was guilty of falsely arguing the case and an identical assertion that the appeal was frivolous (the latter argument running afoul of the extension request being based on the complexity of the matter). Opposing counsel asked the appellate court to take judicial notice of the 2009 brief, which it did and issued a sua sponte notice that the court was considering imposition of sanctions against respondent’s counsel.

     This did get a response from respondent’s counsel, who denied any wrongdoing and reargued his sanctions request against the defendants. He also defended his right to copy prior work product and informed the appellate court that the sanctions notice was erroneous and likely should have been targeted at appellants’ counsel. At the appellate sanctions hearing, another attorney not aware of the sanctions notice appeared, which prompted the appellate court to send a second order to get respondent’s lead counsel to appear personally.

     The appellate court found numerous violations by respondent’s counsel: (1) failure to back up his appellate extension request properly (especially shown by filing a copycat of a 2009 brief rather than truly addressing complex issues); (2) failure to file a respondent’s brief compliant with the California Rules of Court (again corroborated by copying a prior brief that involved different circumstances); and (3) falsely accusing opposing counsel of making false arguments and requesting sanctions based on such a contention. Although opposing counsel did not request sanctions, the appellate court imposed sanctions of $10,000 on respondent’s counsel, upping the “conservative” $6,000 the same appeals court imposed in another case, DeRose v. Huerlin, 100 Cal.App.4th 158 (2002).

     Now, here is the passage on civility that we are sure will be often quoted in the future:

“ . . . Sanctions are serious business. They deserve more thought than the choice of a salad dressing. “I‘ll have the sanctions, please. No, on second thought, bring me the balsamic; I‘m trying to lose a few pounds.” A request for sanctions can never be so lightly considered as to be copied word for word from another brief – much less copied in reliance on facts from another case that do not obtain in the present one. A request for sanctions should be reserved for serious violations of the standard of practice, not used as a bullying tactic.

“Our profession is rife with cynicism, awash in incivility. Lawyers and judges of our generation spend a great deal of time lamenting the loss of a golden age when lawyers treated each other with respect and courtesy. It‘s time to stop talking about the problem and act on it. For decades, our profession has given lip service to civility. All we have gotten from it is tired lips. We have reluctantly concluded lips cannot do the job; teeth are required. In this case, those teeth will take the form of sanctions.

“We do not come to this conclusion lightly. Judges are lawyers, too. And while we have taken   on a different role in the system, we have not lost sight of how difficult it is to practice law. Indeed, at the appellate level, we are reminded daily how complex and recondite the issues that confront practitioners daily can be.

“So we are loath to act in any way that would seem to encourage courts to impose sanctions for mistakes or missteps. But for serious and significant departures from the standard of practice, for departures such as dishonesty and bullying, such steps are necessary. We will step onto the slippery slope and trust our colleagues on the trial court bench to tread carefully along with us. It is time to make it clear that there is a price to pay for cynical practices.

“If this be quixotic, so be it. Rocinante is saddled up and we are prepared to tilt at this windmill for as long as it takes.” (Sli Opn., p. 30.)

 

Rocinante.  Detail of the Cervantes Monument.  Madrid.  Wikipedia.

Appeal Sanctions: Ouch! Appellant Sanctioned $2,000 For Appellate Court Processing Costs And Will Have To Pay More To Respondent On Remand

 

Appeal Labeled “Insulting” by Appellate Court.

     In Kempton v. Prudential California Realty, Case No. B2311633 (2d Dist., Div. 2 Nov. 16, 2011) (unpublished), appellant appealed a costs award but made a blatantly false argument to the court, namely, that the trial court did not have a costs memorandum before it in ruling on a motion to tax costs. The appellate court found the appeal “insulting” and, on its own motion, remanded for frivolous sanctions to be determined in favor of respondent. Also, the Court of Appeal imposed $2,000 in sanctions payable to its own clerk for the taxpayer burden of having to process the frivolous appeal. Ouch!

Appeal Sanctions: Fourth District, Division 2 Says $8,000 Is Frivolous Sanctions Cost To Taxpayers For Processing An Appeal

Frivolous Appeal No Laughing Matter.

     Marriage of Shannahan, Case No. D058220 (4th Dist., Div. 2 Nov. 10, 2011) (unpublished) is not blog-worthy for its ultimate result of affirming a $20,000 Family Code section 271 sanctions award against husband. However, it is worthy for establishing the “going rate” for frivolous appeal sanctions to the clerk of the court when the winner on appeal fails to submit proof of its fees/costs on appeal. What is the going rate? $8,000, according to the 4/2 appellate court, which relied on (but reduced a little) the $8,500 figure derived from a 2008 study by the Second District. (See Huschke v. Slater, 168 Cal.App.4th 1153, 1163-1164 (2008).) It will be interesting to see if the Second District ups the ante in upcoming decisions.

 

Library of Congress.  c1896.

Appeal Sanctions: Frivolous Appeal, In Second District, May Cost Appellant Around $8,500.00 In Payment Of Court Expense Alone

 

Appellate Court Gives Us Updated Figures on Costs for Processing Appeal That Goes to Opinion.

     This one will be of interest to general readers and appellate practitioners, a diverse audience but one that should pay attention nonetheless.

     In Marriage of Peng and Hsieh, Case No. B221318 (2d Dist., Div. 8 July 12, 2011) (unpublished), appellant was hit with appellate sanctions payable to the court clerk for bringing a frivolous appeal. Although this sanction payable to the government is a proper sanction for a frivolous appeal (Pollock v. University of Southern California, 112 Cal.App.4th 1416, 1433 (2003); accord, Pierotti v. Torian, 81 Cal.App.4th 17, 35 (2000) [because frivolous appeal harms the court, not just the respondent, additional award of sanctions payable directly to the court clerk to compensate the state for the cost of processing such appeals is appropriate]), the opinion is helpful in giving an update on the sanctions amount that is appropriate.

     Here is how it stacks up.

     “A number of Court of Appeal decisions have adopted figures of $5,900 to $6,000 as a conservative estimate of the costs of processing an average appeal, basing those

figures on a calculation made in 1992. (See, e.g., Pollock v. University of Southern California, supra, 112 Cal.App.4th at 1434; Pierotti, supra, 81 Cal.App.4th at 36; Cohen v. General Motors Corp., 2 Cal.App.4th 893, 897 (1992).) A current cost analysis undertaken by the clerk’s office for the Second Appellate District, using the same general methodology, indicates the cost of processing an appeal that results in an opinion by the court is approximately $ 8,500, while the cost for processing a case that is resolved without opinion (for example, by dismissal for lack of an appealable order) is approximately $1,750.” (In re Marriage of Gong & Kwong, 163 Cal.App.4th 510, 520 (2008.))

     Not surprisingly, appellant in Marriage of Peng and Hsieh was hit with appellate sanctions of $8,500 payable to the court clerk and $15,000 payable to respondent for the frivolous appeal.

Appeal Sanctions/Family Law: $2,800 271 Sanctions Award Affirmed

 

Appeal Deemed Frivolous, With Reminding Words of Wisdom to Those Choosing to Appeal.

     Justice Yegan of the Second District, Division 6 on behalf of a 3-0 panel, has penned a decision with some sobering reminders on the nuances of appellate practice, and is likely going to be quoted down the line.

     In re Marriage of Greenberg, Case No. B226064 (2d Dist., Div. 6 Apr. 28, 2011) (certified for publication) affirmed a $2,800 sanctions award against husband under Family Code section 271. The reason is that husband could not come close to beating the abuse of discretion standard, opting to represent himself in pro per and ignoring the factual findings that lead to the resultant award. Bad choices.

     Here are some of Justice Yegan’s “gems” from this opinion:

     *”Abraham Lincoln once said, ‘He who represents himself has a fool for a client.’ Here, the client is an attorney who represented himself in the trial court. He now represents himself on appeal. He is unschooled on the basics of appellate law, suggesting that Lincoln’s observation applies on appeal.”

     *”We also warned the bar [in In re Marriage of Martin (1991) 229 Cal.App.3d 1196, 1200, 20 years ago] that sanctions could be ordered for appeals based upon a theory asking to substitute our judgment for that of the trier of fact. As we said then and we repeat now, ‘no one seems to listen.’ (Id., at p. 1200.) We are ever hopeful that appellate lawyers are listening.”

     *”Husband, a pro per attorney, suffers from a lack of objectivity. (Estate of Gilkison (1998) 65 Cal.App.4th 1443, 1448-1450 [‘tunnel vision’]. He would have been well served to read Gilkison before invoking the appeal process. This appeal is frivolous.”

     The sanctions award was affirmed, and the appellate court referred the affirmed order to the State Bar for investigation (although indicating that the Star Bar should determine if any discipline is merited).

Special Fee Shifting Statute/Appeal Sanctions: Ninth Circuit Affirms $78,109.65 Lanham Act Bad Faith Fee/Costs Award

 

Appellate Sanctions For Frivolous Appeal Denied For Lack of Separate Motion and More.

     In Lahoti v. Vericheck, Inc., Case No. 10-35388 (9th Cir. Feb. 16, 2011) (for publication), the district court determined that a litigant had acted in bad faith so that $78,109.95 in attorney’s feees and costs should be assessed against him under the Lanham Act, 15 U.S.C. § 1117(a). No abuse of discretion in doing so, said the Ninth Circuit, because bad faith of one of the parties is one of those “exceptional circumstances” giving rise to fees under section 1117(a). (Stephen W. Boney v. Boney Servs., Inc., 127 F.3d 821, 827 (9th Cir. 1997).)

     The winning party also asked for the Ninth Circuit to award reasonable attorney’s fees as a sanction against appellant for bringing a frivolous appeal. Besides finding that the appellate arguments were not wholly without merit, the federal appeals court noted that appellee procedurally failed to bring the sanctions request in a separate motion, which did not allow the opposing party sufficient notice to meet the challenge. (Fed. R. App. P. 38; Gabor v. Frazer, 78 F.3d 459, 459-460 (9th Cir. 1996).) Sanctions request denied.

Special Fee Shifting Statute/Appellate Sanctions: Losing Plaintiff In Civil Harassment Case Hit With $1,000 In Attorney’s Fees And $1,000 In Additional Appellate Sanctions For Frivolous Appeal

 

Defendant Was Victor Both Below and On Appeal.

     In our March 25, 2009 post, we explored Krug v. Maschmeier, 172 Cal.App.4th 796 (2009), which held that a winning defendant in a civil harassment proceeding could be awarded attorney’s fees in the discretion of the lower court. Now, an appellate decision has applied this to affirm a small fee award as well as award appellate sanctions against the unsuccessful plaintiff.

     Ray v. Kent, Case No. B217771 (2d Dist., Div. 2 Feb. 7, 2011) (unpublished) was a situation where a plaintiff bringing a civil harassment proceeding lost, with the lower court later awarding the winning defendant $1,000 in attorney’s fees under Code of Civil Procedure section 527.6(i). Krug held that a prevailing party under this section could include a prevailing defendant.

     The losing plaintiff appealed, but lost yet again. The deferential substantial evidence standard demonstrated that the denial of the harassment proceeding was justified, as was the lower court’s award of fees in favor of defendant.

     Winning defendant also sought appellate sanctions for a frivolous appeal against plaintiff, requesting sanctions of $6,375. The appellate court agreed that the appeal was without foundation, pointing to numerous extensions and the eventual filing of a 3 page appellate brief that ignored numerous appellate standards of practice. The sanctions for this appeal? Losing plaintiff, who was in pro per, was ordered to pay defendant $1,000 in sanctions for filing a frivolous appeal.

Appeal Sanctions: Sanctions Get Doled Out, Jointly And Severally Against Clients And Their Attorney, For Two Frivolous Appeals.

First District, Division 5 Provides Updated Information on Compensating Aggrieved Litigants As Well As Appellate Courts for Frivolous Appeals.

     The companion cases of Peirona v. TMT Associates, LLC, Case No. A126790 (1st Dist., Div. 5 Dec. 17, 2010) (unpublished) and Peirona v. Nguyen, Case No. A126551 (1st Dist., Div. 5 Dec. 17, 2010) (unpublished) are two interesting appellate cases in which sanctions were doled out for frivolous appeals. They are interesting for the appellate mindset that goes into imposing sanctions, as well as the costs to taxpayers for processing appeals at the intermediate appellate stage.

     For those of you who want to visit this area, the leading case on the standard for frivolous appeals is In re Marriage of Flaherty, 31 Cal.3d 637, 650 (1982), which established that the judicial compass centers on deciding whether the appeal was prosecuted for an improper motive or whether it indisputably had no merit.

Requests For Admissions: Corporate General Counsel Defendant and Corporate Defendant Hammered With $123,455 In RFA “Costs Of Proof” Sanctions In Personal Injury Case

Second District, Division 2 Affirms And Awards $5,000 For a Frivolous Appeal.

     In our category “Requests for Admissions,” we have discussed numerous cases examining the “costs of proof” sanctions under Code of Civil Procedure section 2033.420 for litigants that unreasonably deny RFAs for matters later proven true at trial. (The most potent sanction is that attorney’s fees are within the ambit of what can be recovered.) In the next case, we report on one that really stung two defendants, with the appellate court reminding us that the status of the primary litigant—in this case, an individual defendant who was assistant general counsel for Toyota Motor Sales USA, Inc.—does carry weight in the ultimate result reached by the court.

     Grant v. Toyota Motor Sales USA, Inc., Case No. B220766 (2d Dist., Div. 2 Sept. 20, 2010) (unpublished) involved a pedestrian who was hit by an assistant general counsel of Toyota, who denied fault-based RFAs even after he (the defendant driver) admitted during his deposition that he struck defendant in a crosswalk and failed to yield to the pedestrian. Yikes! The matter proceeded to trial, with the jury awarding plaintiff $623,990 for medical expenses, economic losses, and pain/suffering.

     That was hardly the conclusion of the litigation. Plaintiff then moved for $139,610 in attorney’s fees, expert witness fees and other expenses under the RFA “costs of proof” provision. The trial court granted her sanctions of $123,455 ($84,875 of which constituted of attorney’s fees).

     Defendants, driver and Toyota (with the company owning the vehicle driven by assistant general counsel), appealed.

Appeals Sanctions: Frivolous Appeal Draws $6,750 Sanctions Against Appellants

Requested Sanctions of $14,623.91 Are Pared Down to $6,750.

     In Girardi v. Princess Cruises, Case No. B217192 (2d Dist., Div. 7 Aug. 24, 2010) (unpublished), appellants were found to have prosecuted a frivolous appeal based on the standards set forth in the California Supreme Court in In re Marriage of Flaherty, 31 Cal.3d 637, 650 (1982) [one of our Leading Cases]. The objective lack of merit to the appeal was substantive basis for the appellate court's frivolousness determination.

     Respondent requested to recoup $14,623.91 in attorney's fees as the appropriate sanction. So what did the Court of Appeal? It issued sanctions of $6,750. Reason? Respondents' counsel's time to cure the incomplete record filed by appellants and preparing/attending oral argument was a little too hefty. In doing so, the appellate panel believed that preparing for and attending local oral argument on a single-issue, nonmeritorious matter "reasonably should consume no more than five hours of attorney time." (Slip Opn., p. 10.)

Costs and 998 Expert Witness Fees: Court Of Appeal Affirms Most Of Trial Court Decision Awarding Routine Costs, Denying Expert Witness Fees, and Denying Attorney’s Fees

First District, Division 5, Except for a $49 Adjustment, Tells Everyone to Go Home But For a Minor $1,000 Appellate Sanctions.

     Salvio Street, LLC v. Lee, Case Nos. A122408/A123080 (1^st Dist., Div. 5 July 29, 2010) (unpublished) is an interesting case, not just for the legal issues, but because it demonstrates how pragmatic appellate courts are when reviewing costs/fees issues after years and years of litigation. Yep, you guessed it—they affirm (with minor adjustments), reminding litigants that enough is enough. Or, as our post suggests, time for everyone to go home (if any house is remaining after the expenditure of costs and fees)!

     In this “long-running saga” over the ownership of certain real property in the Bernal Heights neighborhood of San Francisco (the appellate court’s words, not ours), Salvio Street sought to quiet title to the property, but an attorney representing two parties claiming an ownership in the property (Lien and Yen) actually claimed his own separate interest in the property based on a fee agreement with his two clients. Salvio Street won, with attorney found to have no interest in the property. Salvio Street was awarded $8,190.05 in costs (out of a requested $13,183.97), but was denied any award of attorney’s fees (out of a requested $176,470.75). [Salvio Street relied on the fees clause in the Woo-Lien-Yen Purchase Agreement, which was involved in a prior appeal in the long-running saga.] Salvio Street and attorney Lee both appealed.

 

                                                                                                       Sources:  Yahoo Maps – Satellite view (left); Wikipedia (right)

Appeal Sanctions: Attorney Losing Discovery Sanctions Is Also Hit With Appellate Sanctions Of $23,343,75

Second District, Division 8 Gives a “Double Whammy.”

     In line with suggestions we have made in prior posts, appellate practice in California is a specialty. Do not get involved and do not lightly appeal abuse of discretion rulings unless you consult an appellate specialist or have practiced before the California appellate courts. The next case is a stark reinforcement of the wisdom of these suggestions.

     A contentious family law surrogacy dispute involved “parents” squabbling about numerous subjects, primarily centering about mother’s lifestyle, child’s support requirements, sperm donor’s (dad’s) child visitation rights, and overall paternity issues.

     Dad’s attorney was hit with $5,000 in discovery sanctions after discovery was sent covering, among other things, subjects such as mother’s topless dancer, actress, and Internet bikinis enterprising activities. Dad’s attorney was miffed at these sanctions and appealed as objector.

     Attorney lost both the merits and more in Abbot v. Kitts, Case No. B200824 (2d Dist., Div. 8 Apr. 7, 2009) (unpublished). The discovery sanctions were found justified by the appellate court. However, it went farther. The panel found that attorney’s appeal was frivolous under Code of Civil Procedure section 907, citing In re Marriage of Flaherty, 31 Cal.3d 637, 650 (1982) [one of our Leading Cases] in support of the result. Mother was awarded an extra $23,343.75 for attorney’s frivolous appeal.

     Quote of the Day—“ … an attorney is never justified in taking such wholly unmeritorious positions before the court, even if requested to do so by a client. It is the attorney, not the client, who is the professional occupying a trusted position as an officer of the court. He must resist the misguided or improper urgings of his vengeful, angry, or merely ignorant client.” (Bauer, J., sitting by assignment, on behalf of the 3-0 panel.)

Appellate Sanctions: $5,000 Frivolous Appeal Sanctions Assessed Where Limitations, Res Judicata, and Mootness Considerations Were At Play

Second District, Division 8 Assesses Sanctions on Appeal.

     “It is clear that appellant feels strongly that he has been aggrieved and that the passage of time has not weakened that conviction. While one can sympathize, on a human level, with such a feeling, it is nevertheless true that disappointed expectations, no matter how deeply felt, are not a license to engage in repeated and blatantly meritless litigation. In this case, [respondent], not to speak of the judicial system, has had to bear the costs of litigation, including this appeal, which is bereft of even a colorable appearance of legitimacy.”

     This passage from Estate of Pitts - James St. Julian v. Jewish Family Service of Los Angeles, Case No. B195805 (2d Dist., Div. 8 Mar. 13, 2009) (unpublished) set up what was to follow (namely, sanctions) and again counsels that litigants consult attorneys with expertise in appellate matters before seriously pursuing appeals of adverse determinations.

     Appellant brought an appeal on matters that were time barred, resolved by past rulings (under res judicata principles), or were moot based on the death of a personal representative seven years earlier. The appellate panel found the appeal to be frivolous, awarding sanctions of $5,000 jointly and severally against appellant and his counsel.

     St. Julian

Family Law: Section 271 Sanctions Award Affirmed On Appeal Even Where Fee Recovery Encompassed Fees Not Tied To Loser’s Failure To Cooperate.

 

Fourth District, Division One Sustains $3,000 Award Against Husband.

     In our category “Cases: Family Law Awards,” we have reviewed past decisions discussing Family Code section 271, which allows a family judge to award fees as a sanctions against a litigant or counsel who frustrates the policy of encouraging settlement or cooperation in family law disputes. Under this provision, the court does have to take into effect a party’s ability to pay such sanctions. The next case illustrates that the amount of the sanctions does not have to be precisely tethered to the offensive conduct.

Appellate Sanctions: Timely Notify The Court Of Appeal About A Settlement Or Risk Sanctions Being Awarded Against You Under CRC 8.276(a)

First District, Division Two Orders Appellant’s Attorney to Pay Clerk Administrator $6,000 for Failing to Notify Court of Settlement Until One Day Before Oral Argument of Appeal.

     California Rules of Court, rule 8.244(a)(1),(3) requires that appellants file a notice of settlement with the appellate court, with the expectation that an abandonment or request for dismissal of the appeal will follow in 45 days. The First District, Division Two gave recent teeth to this rule, sanctioning appellant’s counsel $6,000 for waiting until one day before the scheduled oral argument—about 10 months after the settlement in principle had been reached—to notify the appellate court about the settlement. The case is Huschke v. Slater, Case No. A117114 (1^st Dist., Div. 2 Dec. 2, 2008) (certified for publication).

          The basic time chronology went like this:

• July 27, 2007 -- appellant files her opening brief;
• October 1, 2007 – appellate court send oral argument waiver letter, expressly

            asking the parties to notify it if settlement discussions

            are underway;

• October 10, 2007- appellant requests oral argument;
• December 2007 – case is settled in principle;
• August 25, 2008 – court sets cause for oral argument on September 16, 2008;
• September 15, 2008 – one of appellant’s counsel’s associates notifies the

            Presiding Justice that the case settled in December 2007

           and requests that the appeal be taken off calendar.

     The Court of Appeal was not impressed with the failure to comply with rule 8.244 and asked both sides’ counsel to submit a joint declaration of explanation, mainly on why the notice of settlement was so dilatory. Appellant’s counsel contended that a November 2007 letter was sent to both the appellate court and respondent’s counsel about the settlement, but neither had a file copy of the letter nor otherwise had evidence of receipt.

     Using both Code of Civil Procedure section 907 [the frivolous/dilatory appeal provision] and California Rules of Court, rule 8.276(a)(1)-(4) [a catchall allowing imposition of sanctions for “committing any other unreasonable violation of the rules”], the appellate panel found that there was at least injury to the court such that sanctions were justified as against appellant’s counsel personally.

     What about the amount of the sanctions? The Court of Appeal borrowed heavily from a methodology used in the Second District’s decision in Marriage of Gong & Kwong, 163 Cal.App.4^th 510, 520 (2008) [reviewed in our post of May 30, 2008], which determined that it cost about $8,500 for appellate courts to work up a case through full opinion. Because most of the work to a tentative opinion had been done, $6,000 was found to be the appropriate sanction—the same amount ordered by the Gong & Kwong sister court.

     Message from this case: don’t dally in notifying the Court of Appeal of a settlement and don’t wait until the eve of oral argument—after resources have been expended—to notify the court of a major development (unless the settlement happened on the eve of argument).

     Law professor  Shaun Martin, in his December 2, 2008 blawg post about Huschke v. Slater, on California Appellate Report, links the reader to the website of San Francisco attorney Andrew Dimitriou, the unfortunate subject of the appellate sanctions, thereby drawing attention to Mr. Dimitriou's self-description:  "He has lectured extensively on legal ethics . . . ."

Defendant Successfully Obtains Recovery Of Attorney’s Fees And Costs For Successfully Setting Aside A Default And Also Obtains Appellate Sanctions Based On Plaintiff’s Frivolous Appeal

Fifth District Reminds Appealing Litigants and Appellate Counsel That They Should Not “Bait and Switch” or Simply “Vent Their Spleen” Before the Appellate Courts.

            The next case we discuss reinforces that appellate practice has different rules, with litigants needing to carefully assess whether they have some legal or factual errors of a prejudicial nature.  Simply “venting spleens” or switching positions completely can result in imposition of sanctions, as they did in the decision of PDM Steel Service Centers, Inc. v. Mullen & Filippi, Case No. F04031 (5^th Dist. Aug. 8, 2008) (unpublished).

            There, defendant obtained the set aside of an entry of default based on defective service.  Subsequently, the trial court ordered plaintiff’s counsel to pay to defendant’s counsel $5,341.40 in attorney’s fees and $553.02 in costs incurred in successfully bringing the motion of set aside the default.  See Code Civ. Proc. sec. 473(c)(1)(C).  In fact, at a recorded hearing, one of plaintiff’s counsel admitted the set aside decision was correct based on the evidence and indicated “we’re here merely to take, I guess, our lumps which are to answer to the sanctions.”  Evidence below also showed that defendant’s counsel offered to accept service through the acknowledgment/receipt procedure even after the defective service, but this seemingly reasonable proposal was not accepted.

            Curiously enough, plaintiff appealed (represented by the same trial counsel).  Neither plaintiff nor its attorneys should have done so, because appellate sanctions were imposed in addition to affirmance of the set aside order.

            Acting Presiding Justice Levy, writing for a 3-0 panel of the Fifth District, found it inexplicable that plaintiff reversed course from its position in the trial court—the set aside order was justified—by arguing on appeal that plaintiff complied with service of process requirements.  Not only did this conduct below give rise to waiver, but sterner language came from the appellate panel.  “Bait and switch on appeal not only subjects the parties to avoidable expense, but also wreaks havoc on a judicial system too burdened to retry cases on theories that could have been raised earlier.  (JRS Products, Inc. v. Matshusita Electric Corp. of America (2004) 115 Cal.App.4^th 168, 178.)  Appellant’s attack on the trial court’s sanctions—via a rehashing of factual points to which appellant’s trial counsel conceded in the superior court—is tantamount to a forbidden ‘bait and switch.’”  (Slip Opn., at p. 23.)  Sanctions were found justified under the abuse of discretion review standard.

            That was not the end of appellate saga for plaintiff or its counsel.  Defendant filed a motion for imposition of sanctions against plaintiff and its counsel for bringing a frivolous appeal under Code of Civil Procedure section 907.  Applying the factors set forth in In re Marriage of Flaherty, 31 Cal.3d 637 650 (1982) [one of our Leading Cases], Justice Levy found that the appeal was frivolous based on the “bait and switch” strategy, a selective recitation of only favorable facts, a failure to address the trial judge’s reliance on certain statutory provisions that were dispositive in nature, and omission of critical documents from the clerk’s transcript on appeal (which transcript is prepared at appellant’s direction).  “An opening brief on appeal is not an appropriate vehicle for an attorney to ‘vent his spleen’ after sustaining a loss in the trial court …. An unsupported appellate tirade is more than just words on papers; it represents a real cost to the opposing party and the state.  An appellate outburst, when committed to the pages of an opening brief, becomes an expensive proposition for all those concerned.  Justice requires that those costs be borne by the person or persons who unreasonably caused them.”  (Slip Opn., at p. 25.)

            The inquiry then turned to the amount of sanctions to be imposed.  The appellate panel considered such factors as the amount of respondent’s attorney’s fees on appeal; the amount of the judgment against appellant; the degree of frivolousness and delay; and the need for discouragement of like conduct in the future, citing Pierotti v. Torian, 81 Cal.App.4^th 17, 33-34 (2000).  Defendant introduced evidence in the sanctions motion indicating that it incurred appellate attorney’s fees and costs totaling $6,131.12.  Given the reasonableness of the sanctions request, in tandem with the delay and high degree of frivolousness, the Fifth District imposed $6,131.12 in sanctions jointly and severally against plaintiff’s counsel.  But it went even farther.  Even though a 1992 study indicated that it cost about $6,000 for the state to process an average civil appeal (and these costs likely have risen higher in the last few years), the appellate panel believed that the sanctioned attorneys should also pay $3,000 to the clerk of the court as compensation for having to process a frivolous appeal.  Lastly, the sanctioned attorneys were ordered to forward a copy of the opinion to the State Bar upon return of the remittitur.  (The remittitur is the “finality” order issued after the time to seek review from the state supreme court expires or review is denied.  See Cal. Rules of Ct., rule 8.272.)

            BLOG OBSERVATION—In line with our Mission Statement, the PDM Steel panel reemphasizes that attorney’s fees are an important part of the process, but not just because they are receivables for the practicing attorney.  It offered the following quote from International Industries, Inc. v. Olen, 21 Cal.3d 218, 224 (1978), which cogently complements our Mission Statement:  “The purpose of litigation is to resolve participants’ disputes, not compensate participating attorneys.  Our courts are sufficiently burdened without combat kept alive solely for attorney fees.”  We hope our blog is offering everyone tips on how to litigate fee proceedings and is inspiring thought about fee entitlement/exposure at all stages of a particular matter. 

            

            

            

Close Call On Appellate Sanctions--Appellant Of Adverse Arbitration Award Averts Sanctions By Raising One Marginally Plausible Argument On Appeal

Fifth District Finds One Argument Out of Three Contentions Was Not Frivolous.

            In our July 15, 2008 post, we reviewed Patel v. Sagar, a case involving an appeal from a contractual arbitration award.  We summarized the principles from Moncharsh v. Heily & Blase, 3 Cal.4^th 1 (1992) according arbitral finality to most arbitration awards and holding that mere errors of law or fact are generally not sufficient to upset such awards.  The next case reinforces the rigor with which appellate courts review arbitration awards, with the appellant barely escaping sanctions for raising one “marginally plausible” argument on appeal.

            With respect to appellate sanctions imposed for a dilatory or frivolous appeal, Marriage of Flaherty, 31 Cal.3d 637, 649-650 (1982) is the seminal case enunciating the governing substantive and procedural guidelines.  Sanctions may be imposed under Code of Civil Procedure section 907 and California Rules of Court, rule 8.276 when (1) the appeal was prosecuted for an improper motive such as to harass the respondent or for dilatory purposes (a prong focusing on the subjective good faith of the party and counsel), or (2) the appeal is frivolous (a prong focusing on the objective inquiry of whether any reasonable attorney would have agreed that the appeal is totally and completely meritless in nature).  Because there are fair warning due process requirements, rule 8.276(a) requires a separate motion emanating from the respondent or the appellate court.  A party must file the motion no later than 10 days after appellant’s reply brief is due, and the appellate court must give appellant written notice and an opportunity to oppose within 10 days after notice is sent.  Usually, the sanctions motion is heard along with the argument on the merits.

            In Van Dyke v. Conagra Grocery Products, Case No. F053235 (5^th Dist. July 17, 2008) (unpublished), appellant was the loser under an arbitration award involving an option to purchase ranchland that was secured by a trust deed.  The arbitrator ruled that the specific performance claim did not implicate the one-action rule of Code of Civil Procedure section 726 under the operative circumstances.  Appellant argued that the award violated public policy under the one action rule, that arbitrator prejudicially excluded essential evidence, and that the arbitrator’s construction of an assignability provision was completely irrational.

            Appellant lost all three challenges on appeal.  Justice Vartabedian, writing for a  3-0 Fifth District panel, affirmed the arbitration award.  They also denied respondent’s motion for appellate sanctions, but deemed it was “an extremely close matter.”  The Court of Appeal found the second and third arguments were frivolous and dilatory in nature.  However, with respect to the first argument, the panel found it “was at least marginally plausible,” given that the public policy exception to arbitral finality “is still a developing area of appellate law and the cases have not exhausted the list of policies that might weigh against arbitral finality.”  Although also observing that appellant “did not, in fact, make a very good argument” under this exception, the appellate panel refused to find the issue was frivolous.  (Slip Opn., at pp. 11-12.)

            On the merits, the Fifth District determined that nothing in the policies of the security-first or one-action statutes precludes parties from electing binding arbitration.

            (BLOG OBSERVATION—Rule 8.276 does require that a litigant raise the sanctions issue by motion.  We have seen many published and unpublished decisions that have denied sanctions because the issue was raised in a respondent’s brief rather than through the specified motion procedure.)

            

APPELLATE COURT ASSESSES SANCTIONS, REMANDS FOR AN AWARD OF ATTORNEY’S FEES ON APPEAL, AND ORDERS LOSING APPELLATE ATTORNEYS TO PAY MONEY TO COURT CLERK FOR PROCESSING OF FRIVOLOUS APPEAL

First District Finds Appeal Frivolous and Assesses Sanctions Against Losing Party and Losing Attorneys As Well as Remands for Award of Appellate Attorney Fees to Winning Party.

            Stressing what we have said before in prior posts (see May 22 and 28, 2008 posts), appellate law is no area for neophytes.  It is a boutique practice with its own rules and review standards of a unique nature.  Parties and lawyers need to take care that their appeals have enough merit to avoid sanctions and fees even if the appeals are ultimately unsuccessful.  If not, a painful illustration of what can happen is provided in a recently published decision, In re Marriage of Gong and Kwong, Case No. A114589 (1^st Dist., Div. 1 May 29, 2008, certified for publication after rehearing).

            There, a husband (Kwong) failed to meet his child support and college expense obligations.  Former wife (Gong) filed a motion for payment, and husband agreed to pay $115,000 in settlement of the claimed payments.  Husband failed to make the settlement payment, and a family judge ordered former husband to make over $300,000 in payments and also awarded former wife almost $16,000 in attorney’s fees.  The family law judge also entered a charging order so that husband’s partnership interest could be levied upon to satisfy the judgment. 

            The family law judge issued his verbal ruling on June 5, 2000 and his statement of decision in late August 2000.  However, various delays occurred due to the contentious nature of the litigation such that the formal order was not entered until March 1, 2001.

            Former husband moved for, but lost, a contention that he satisfied his past obligations based on his claim that he paid all arrearages owed when the formal order was filed in March 1, 2001 rather than the earlier June 5, 2000 date of hearing.  Although heard by a different family law judge, the new jurist found that the arrearages had to relate back to the earlier date, or else it meant the first judge “called time out for eight or nine months while everyone agreed on the preparation of the final document.” 

            However, former husband appealed and reiterated the argument that he was “current” based on the later March 1, 2001 date—a contention which had been soundly rejected by the lower court.  Wife filed a motion for sanctions, and the appellate court asked that the motion be addressed at oral argument (needless to say, a bad sign).

            The appellate court did not like the appeal brought by husband and also issued a harsh rebuke to husband’s primary appellate attorneys. 

            Utilizing the test for appellate sanctions enunciated in In re Marriage of Flaherty, 31 Cal.3d 637, 650 (1982), the First District found husband should pay former wife $15,000 in appellate sanctions for bringing a frivolous appeal which the Court of Appeal also dismissed.  The appellate court found the appeal was subjectively brought to delay (based on husband’s past history of delinquencies in making payments for his children’s benefit) and was objectively unmeritorious (because the first family law judge obviously did not mean to place a moratorium on arrearages while a formal order was being prepared for entry).  Gong for Kwong.

            The First District also remanded to have the lower court award former wife attorney’s fees on appeal.  She claimed to have spent $30,000 for fees on appeal.  Although leaving the determination of the proper amount of fees for the family law judge, the appellate court made no comment suggesting they were unreasonable in the least.  (PRACTICE POINTER—Appellate courts very seldom award attorney’s fees for appellate work.  Most frequently, they remand to the lower court for consideration of the proper fees to be awarded on appeal.)

            In an interesting twist, the Court of Appeal also ordered the two primary appellate attorneys to pay $3,000 each to the clerk of the appellate court as reimbursement for the costs of having the Court work up the case for decision.  For appellate practitioners and the general public, there is a salient discussion of the average cost for processing an average appeal—ranging from a low of $5,900 to a high of $8,500.  The First District chose $6,000 as the appropriate figure, dividing it up for payment between the two losing appellate attorneys.  The appellate court ended by reminding attorneys that they have ethical obligations to not pursue frivolous appeals, but should opt instead to withdraw from representation rather than simply acting as “hired gun[s] required to carry out every direction given by the client,” citing Cosenza v. Kramer, 152 Cal.App.3d 1100, 1103 (1984).