Sanctions: $35,000 Sanctions Order Payable By Plaintiffs’ Attorney To Opposing Defense Counsel Affirmed On Appeal

Plaintiffs’ Counsel Wanted Sanctions Award “Offset” Against Judgment Obtained By Counsel For Fees Judgment Adverse To His Clients, But It Was Not In The Cards!

            Talk about an interesting card game, the next case—Petrik v. Mahaffey & Associates (Berger Kahn), Case No. G055779 (4^th Dist., Div. 3 June 25, 2019) (unpublished)—exemplifies this in spades.

            Plaintiffs’ attorney represented his clients in a large construction defect case, which was settled for $400,000 even though plaintiffs did not like the settlement, but it was sustained in an earlier proceeding.  Plaintiffs, represented by Berger Kahn (BK), sued for malpractice and contractual breach against their ex-counsel, which filed a cross-complaint.  During this secondary dispute, a discovery referee imposed a $35,000 sanction against plaintiffs’ former counsel, made payable to BK, not the ex-client.  Plaintiffs’ ex-counsel paid the sanctions for a while to BK, but then defaulted.  However, a jury did find that Plaintiffs’ ex-counsel was entitled to substantial fees which Plaintiffs did not pay during the CD case representation.  In essence, there were further bickering proceedings between Plaintiffs’ ex-counsel and BK over whether the sanctions award was satisfied, with Plaintiffs’ ex-counsel arguing that the sanctions award should be offset against his judgment against his ex-clients. 

            The trial and appellate court did not accept this reason for reversal proffered by Plaintiffs’ ex-counsel.  After observing that setoff is an equitable defense allowed as early as the 17^th century by English chancery courts, see Granberry v. Islay Investments, 9 Cal.4^th 738, 743-744 (1995), it found that Plaintiff’s counsel had no right to recover anything from BK such that setoff was inappropriate.  There also was no “implicit assignment” by Plaintiff to BK such that BK still was owed money, which was cemented by Plaintiffs’ ex-counsel’s course of conduct in paying BK over an extended period of time.  Presiding Justice O’Leary penned this decision on behalf of a unanimous 4/3 DCA panel.