Request For Admissions/Section 1717: Trial Judge Correctly Denied Proof Of Costs Sanctions And Attorney’s Fees To Prevailing Parties

Losing Side Had Reasonable Cause To Deny RFAs And Lack Of Agreement With Fees Clause Precluded 1717 Recovery.

            In Preferred Auto Dealers Self Ins. Program, Inc. v. Anderson Enterprises, Inc., Case Nos. A148518 et al. (1^st Dist., Div. 4 Mar. 2, 2018) (unpublished), PADSIP (a group self-insurer of workers’ compensation claims) lost a breach of contract claim against various defendant members/private employers in complicated litigation involving group and membership exposure under the workers’ compensation security scheme.  Certain members then moved for an award of attorney’s fees under the RFA costs-of-proof sanctions provision (CCP § 2033.420) and under a contractual fees clause theory (Civil Code § 1717).  The trial court denied the fee requests, prompting an appeal by several members. 

            Those determination were upheld on appeal.

            With respect to the RFA costs-of-proof sanctions request, the appellate court agreed with the trial court’s conclusion that, although PADSIP’s legal theory of liability was erroneous, it was not unreasonable and based on a plausible interpretation of application regulations.  Also, PADSIP was found to hold a good faith belief in the validity of its case.  One membership group claimed there were discovery abuses in the case, but the Court of Appeal observed that CCP § 2033.420 in not a penalty or a discovery sanction for misuse of the discovery process, but rather a procedural compensatory mechanism to expedite trial by reducing the number of triable issues that must be adjudicated.

            The problem with the Civil Code section 1717 theory was that there was no contract or agreement with a fees provision.  Without a contractual predicate, no fees were recoverable.