Trial Court Was Required To Award Plaintiff Its Reasonable Fees And Costs Incurred In Proving Matters Defendants Failed To Admit Without Reasonable Grounds To Do So, And Plaintiff Association Had Standing To Seek Damages On Behalf Of Its Members.
In Assn. for L.A. Deputy Sheriffs v. Macias, Case No. B295086 (2d Dist., Div. 8 April 30, 2021) (published), plaintiff Association for Los Angeles Deputy Sheriffs (a nonprofit mutual benefit corporation that represents LASD and the district attorney’s bureau of investigations employees in contract negotiations) sued two of its board members for breaches of fiduciary duty, fraud, constructive fraud, conversion, and declaratory relief. The breaches occurred after the board’s director and president had been removed due to lack of eligibility to be director under the Association’s bylaws. He and the board’s vice president fought the removal by causing Association great disruption in its management by creating confusion and informing staff that Macias was still president, conducting board meetings without the required quorum, obtaining a $100,000 cashier’s check without approval from an Association account to retain counsel to fight the removal, and so on.
After four years of litigation and a 7-day trial, the trial court entered judgment for $75,190.98, plus postjudgment interest, in Association’s favor, but sustained defendants’ last-minute objection to Association’s requested $7.8 million in damages on behalf of its members for lost salary increases – concluding Association had standing to sue only if it brought a class action. On appeal, the 2/8 DCA concluded the class action analysis was an improper test for associational standing as California follows the federal rule on an association’s standing to sue on behalf of its members. “[A]n association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.” (Hunt v. Washington State Apple Advertising Com., 432 U.S. 333, 343 (1977).) With substantial evidence supporting both causation and damages findings that Association members suffered $7,813,833 in lost salary increases due to defendants’ actions, the panel amended the judgment to add that amount.
The trial court also denied Association’s postjudgment Code Civ. Proc. § 2033.420 motion for costs of proof sanctions, related to defendants’ failure to admit the truth of basic matters in their requests for admission responses, based on the following grounds: (1) lack of jurisdiction due to the parties’ pending appeals; (2) some denials were not unequivocal and Association had not identified the specific fees/costs incurred to prove those that were; and (3) defendants had reasonable grounds to believe they would prevail on the conversion claim and the breach of fiduciary duty claim as to the appointment of a member to the board without a quorum.
The 2/8 DCA found abuse of discretion for each basis for denial stated by the trial court.
First, the trial court did retain jurisdiction to rule on the costs of proof motion as an appeal does not stay proceedings on “ ‘ancillary or collateral matters which do not affect the judgment [or order] on appeal’ even though the proceedings may render the appeal moot.” (Varian Medical Systems, Inc. v. Delfino, 35 Cal.4th 180, 191 (2005).)
Second, defendants’ claims of insufficient information to respond to matters they clearly knew or should have known constituted a “failure to admit” response as specified in §§ 2033.420(a) and (b)(4). No motion to compel was necessary as the responses were complete, and Association did not waive its right to cost of proof fees. Also, there is no statutory requirement that fees and costs must be separately allocated to each specific request for admission – especially where all the requests relate to a single issue as was the case here.
Third, nothing prevented defendants from admitting facts related to their taking of $100,000 and returning it 17 days later regardless of what they believed about Association’s standing was to recover funds taken from its own account, and defendants had no reasonable ground to deny that voting to appoint a board member without quorum was a breach of fiduciary duty based on their belief director/president should not have been removed.
Finding the trial court was required by § 2033.420 to award Association its reasonable fees and costs incurred in proving matters defendants failed to admit without reasonable grounds to do so, the panel reversed and remanded for determination of those fees and costs.
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