CALIFORNIA ATTORNEY'S FEES

Deadlines, Sanctions: $1,500 In Code Civ. Proc. § 2023.030 Sanctions Issued Against Nonparty, For Failure To Comply With A Deposition Subpoena For Production Of Business Records, Reversed On Appeal

The Deposition Subpoena And Motion To Compel Compliance Were Not Properly Served On Nonparty, Plus The Motion To Compel and For Sanctions Was Untimely.

            In Yousif v. Alpine Orthopedic Medical Group, Case No. F078734 (5^th Dist., May 7, 2021) (unpublished), certain defendants in a malpractice action sought discovery from a nonparty doctor through a deposition subpoena for production of business records. (Code Civ. Proc. § 2020.010(a)-(b).)  Later, when defendants sought a motion to compel and sanctions, the trial court issued $1,500 in § 2023.030 sanctions against nonparty doctor for not fully complying with the deposition subpoena.

            Nonparty doctor appealed, and the Fifth District reversed – finding abuse of discretion.

            Neither the deposition subpoena, nor the motion to compel, had been properly served on nonparty doctor, and a subpoena for production of business records may not be enforced against an individual who was not personally served with the subpoena, nor against one who is not the custodian of records or a person qualified to make the attestation required by Evidence Code § 1561.

            The proof of service for the deposition subpoena indicated it had been personally served on “ANNA B,” with no evidence that she was an “officer, director, custodian of records, or . . . agent or employee authorized . . . to accept service of a subpoena.” ((§ 2020.220(b)(2).)   In fact, defendants did not dispute a declaration by Anna B., which stated that she worked in the front office, had the deposition subpoena thrown at her face while she was working, and that the custodian of records had not been served with the subpoena.  The motion to compel was also served on Anna B., instead of being personally served on doctor nonparty as required pursuant to Cal. Rules of Court, rule 3.1346.  As such, defendants were not entitled to sanctions as they failed to demonstrate a misuse of the discovery process warranting sanctions because they failed to prove that the subpoena was personally served on nonparty doctor or the custodian of his records.

            Additionally, the motion to compel and for sanctions was untimely pursuant to the mandatory 60-day deadline set forth in § 2025.480(b) and should have been denied by the trial court.

Requests For Admission, Sanctions: 2/8 DCA Reverses And Remands Trial Court’s Denial Of Costs Of Proof Sanctions To Plaintiff Association And Amends $75,190.98 Judgment Entered In Plaintiff’s Favor To Add Over $7.8 Million In Damages

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. 

Reasonableness Of Fees, Sanctions: 50% Fee Recovery Award To Prevailing Party Was No Abuse Of Discretion

Denial Of $16,060 Sanctions Fee Request Was No Error Because It Was An Interim Ruling Not Impacting The Litigant’s Eventual Prevailing Party Status.

            In Aquino v. Klein, Case No. B301186 (2d Dist., Div. 3 Apr. 8, 2021) (unpublished), a dispute between friends, who went into business and then had a falling out romantically, resulted in a close to decades in litigation by which one party prevailed against a trustee to the tune of $422,669.93.  The prevailing party then moved for an initial recovery of $458,007.63 in fees, later reduced to $386,355.02 after the trial court asked for justification.  (BLOG HINT:  Always bad when you backpedal around $35,000 in a fee request, given that fees motions are always about credibility.)  Ultimately, the lower court only awarded $192,000.50 in fees, about 50% of the reduced request.  Prevailing party appealed this as well as the denial of an interim order denying sanctions and a $16,060 sanctions request.

            The 2/3 DCA affirmed.  The interim sanctions award was not reviewed because it was intermediate and the prevailing party obtained relief later, such that it was not reviewable under Code of Civil Procedure section 906.  With respect to the $192,000.50 appeal in which the prevailing party argued the fee award was not enough, appellant could not hurdle the abuse of discretion standard, especially given that the lower court scrutinized things and wanted further justification.  Appellant argued that a more specific basis for the fee award was warranted, but only cited federal civil rights cases which did not govern the law with respect to private parties (where no statement of decision is required, generally, under state law). 

            Judge Salter, an Orange County Superior Court Judge, sitting by assignment, authored the 3-0 decision.

Discovery, Sanctions: 1/3 DCA Affirms Trial Court’s Order, Entered After Plaintiffs Voluntarily Dismissed The Case, Setting Aside Monetary Sanctions Previously Imposed Against Defendant For Discovery Abuses.

Exceptions To The General Rule That Deprives Trial Courts Of Jurisdiction Following Voluntary Dismissal Of A Case Allow Trial Courts To Retain Jurisdiction To Determine And Enforce Collateral Statutory Rights – Such As Motions For Sanctions.

            In Manhan v. Gallagher, Case No. A158152 (1^st Dist., Div. 3 March 26, 2021) (published), plaintiffs filed motions to compel for further discovery responses and obtained monetary sanctions against defendant for discovery violations.  In support of their motions, plaintiffs’ counsel submitted a declaration stating his billing rate in the matter was $300 per hour.  Plaintiffs later dismissed their lawsuit against defendant without prejudice. On the same day, defendant filed a motion for reconsideration or to have discovery sanctions imposed against her set aside based on a declaration filed by plaintiffs’ lead attorney stating plaintiffs had incurred no legal fees and had been represented pro bono in their case against defendant. 

            It turned out that the associate attorney who filed the declaration claiming a $300 hourly billing rate for his work on the lawsuit was unaware that the firm had taken the case pro bono in light of plaintiffs’ long-standing relationship with the firm. 

            After the trial court granted defendant’s request and set aside the monetary sanctions imposed against her, plaintiffs appealed – arguing that the trial court lacked jurisdiction to consider and set aside the previously imposed sanctions following plaintiffs’ voluntary dismissal of the action.

            The 1/3 DCA affirmed – citing Pittman v. Beck Park Apartments Ltd., 20 Cal.App.5th 1009, 1022-1024.  While, as a general rule, voluntary dismissal of a case deprives the trial court of both subject matter and personal jurisdiction in that case, a number of exceptions have been carved out allowing a trial court to retain jurisdiction postdismissal and postjudmgent to determine and enforce collateral statutory rights – such as motions for sanctions. Further, the panel found no sound basis in logic or public policy to deny a remedy to a party burdened with sanctions obtained through misrepresentation (whether or not intentional) simply because a plaintiff dismisses an action – that disallowing reconsideration in cases such as this, where sanctions are based on misrepresentations, violates a reasonable sense of justice and fair play.

Discovery, Sanctions: Continued Deficiencies In Discovery Responses Resulted In Monetary And Evidentiary Sanctions Against Self-Represented Plaintiff, And Ended In Terminating Sanctions.

Affirmance Of The Terminating Sanctions Mooted Plaintiff’s Appeal Of The Trial Court’s Order Sustaining Defendants’ Demurrers And Motions To Strike.

            Following ten months of meet and confer correspondence, seven sets of amended discovery responses, and impositions of evidentiary and $8,000 in monetary sanctions, the trial court issued terminating sanctions with prejudice against self-represented plaintiff for his continued failure to correct persistent issues with his discovery responses.

            Plaintiff appealed in Soofi v. Contreras Law Firm, Case No. D076884 (4^th Dist., Div. 1 March 25, 2021) (unpublished) – alleging trial court bias and claiming his discovery deficiencies were the result of his misunderstanding of the discovery statutes – not willful noncompliance.  The 4/1 DCA affirmed – finding no abuse of discretion nor bias.  Plaintiff had been provided with ample time and opportunity to correct his errors of providing incomplete or nonresponsive information to defendants, and failed to meet his burden of showing the actual probability of bias by the trial judge.

            Because the panel affirmed the terminating sanctions – which the trial court issued with prejudice, resulting in the dismissal of the entire case – it did not reach plaintiff’s challenges to the trial court’s order sustaining defendants’ demurrers and motions to strike.

In The News, Sanctions: Attorneys In Voting Dispute Sanctioned For Not Being Candid With The Court

They Should Have Revealed That An Almost Identical Motion Was Made And Denied Before.

            As recently reported in the on-line ABA Journal, the Fifth Circuit Court of Appeals in Texas Alliance for Retired Americans v. Hughs, No. 20-40643 (5^th Cir. Mar. 11, 2021) (per curiam, 2-1 vote) issued sanctions against defendant’s attorney in a lawsuit seeking elimination of straight-ticket voting in Texas based on the theory it disproportionately affected minorities.  What happened is that defendant filed a second motion to supplement the appellate record even though a nearly identical first motion had been denied earlier.  As indicated by the majority, “This inexplicable failure to disclose the earlier denial of their motion violated their duty of candor to the court.”  It also was an improper motion for reconsideration filed outside of the fourteen-day window for such motions under appellate rules.  Even if the attorneys were confused about what was done earlier, all they had to do was disclose the earlier motion in their subsequent paperwork. The majority imposed double-barrel sanctions: (1) the fees and costs incurred by plaintiffs in connection the duplicative motion; and (2) “double costs.” 

Sanctions: $125,690.56 Section 128.5 Sanctions Order Against Plaintiff’s Class Action Attorneys, Hinged On Settlement Agreement Release Language, Reversed As A Matter Of Law

Also, Order Denying Sanctions Request Is Not Appealable In Itself, With A Writ Or Appeal After Final Judgment Being The Ways To Challenge Such An Order.

            Plaintiff’s class action attorneys, who represented a client arising out of spiraling events from a minor alleged debt by Capital One, were sanctioned $125,690.56 under CCP § 128.5 (full request plus “fees on fees”) for pursuing a frivolous class action suit against a law firm which sent a Capital One dunning letter, premised on the theory that earlier settlement agreement language expressly released “attorneys” inclusive of Capital One’s attorneys.  Attorneys appealed, and it is a good thing they did.

            The 4/1 DCA, in Smith v. Hunt & Henriques, Case No. D076278 (4^th Dist., Div. 1 Mar. 2, 2021) (unpublished), reversed as a matter of law.  That occurred because it was not crystal clear that Capital One’s attorneys sending the dunning letter were included within the scope of or were third beneficiaries under the “attorneys” language in the settlement agreement such that the class action litigation could not be viewed as frivolous based upon the released language theory.

            Attorneys also had requested that the lower court sanction the law firm for bringing its section 128.5 motion, a request which was denied.  No appeal could be had from the order denying sanctions because it was only reviewable through a mandate writ petition (which might be consolidated with the underlying appeal) or from a later appeal of a final judgment in the action. 

Sanctions: Ninth Circuit Reverses Six Sanctions Imposed By District Court Under Inherent Authority, Rather Than Pursuant To Statute Or Rule, Against Prevailing Plaintiff For Disobeying A Discovery Order

The District Court Did Not Have The Benefit Of The Goodyear Tire Decision At The Time It Issued The Sanctions Order So A Remand Was In Order.

            America Unites For Kids v. Rousseau, Case No. 16-56390 (9^th Cir. January 22, 2021) (published), has a nice discussion on the procedural requirements and substantive limitations that apply when a district court imposes sanctions under its inherent authority, rather than pursuant to any statute or rule.

            In this case, two nonprofit environmental organizations sued Santa Monica Malibu Unified School District administrators and board members to enforce the Toxic Substances Control Act (TSCA), 15 U.S.C. §§ 2601-2629.  Specifically, they sought remediation of several school buildings containing dangerous levels of polychlorinated biphenyls (PCBs).  PCBs, which the EPA concluded to be hazardous in concentrations of 50 parts per million or more, were used prior to 1978 to enhance pliability in products such as caulk, adhesives, and paint.

            To resolve a discovery issue between the parties, the district court limited plaintiffs’ testing for PCBs to air and wipe sampling – only allowing testing of caulk or more invasive testing if the air/wipe sampling revealed the necessity.  After the first nonprofit disobeyed the orders and conducted unauthorized testing, the district court, under its inherent authority, issued six separate sanctions against first nonprofit and five separate sanctions against second nonprofit for its attempt to profit from the unauthorized testing.  One of the imposed sanctions struck both nonprofits’ prayer for attorneys’ fees, expert witness fees, and costs, which otherwise likely would have been allowed under 15 U.S.C. § 2619(c).

            After conducting trial, the district court entered judgment in favor of first nonprofit, issued a permanent injunction against the district from using offices/classrooms built before 1979 unless they were remediated, dismissed second nonprofit for lack of standing, and ordered each party to bear its own costs and attorneys’ fees.

            The Ninth Circuit, through a 2-0 majority decision by District Judge Simon (District Judge for the District of Oregon, sitting by designation), vacated and remanded the district court’s sanctions order in its entirety and reversed the district court’s dismissal of second nonprofit for lack of standing. 

            As to the sanctions, the Ninth Circuit – recognizing that the district court did not have the benefit of Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178 (2017) [discussed in our April 23, 2017 post] when it issued its sanctions ruling under its inherent authority – found that the district court failed to apply the “but for” standard directed in Goodyear Tire for any sanctions it imposed as compensatory rather than punitive, failed to provide plaintiffs with the required criminal procedural safeguards for the punitive sanctions imposed, and failed to make explicit findings of either: (1) a willful violation of a court order; or (2) bad faith. 

            As to the district court’s dismissal of second nonprofit, the Ninth Circuit concluded that although second nonprofit did not have members per se, it had associational standing in the lawsuit.  A close connection exists between second nonprofit’s mission and the interests of its non-member teachers – enough to give the nonprofit a personal stake in the outcome of this lawsuit.

            Circuit Judge O’Scannlain dissented on the sanctions and lack of standing issues – finding that the Goodyear Tires framework did not apply to the district court’s denial of attorneys’ fees, that the denial was a proper exercise of the district court’s discretion under TSCA, and that other sanctions were not properly challenged by plaintiffs on appeal.  As to the lack of standing issue, Judge O’Scannlain found that second nonprofit failed to provide evidence it was an association or that teacher who supported the organization was the functional equivalent of a member.

Discovery, Sanctions: $6,954.95 Deposition Discovery Sanctions Award Was Appealable Even Though It Was Payable To Two Different Recipients, While $1,750 Sanctions Award Was Not Appealable

However, The Merits Appeal Of The $6,954.95 Sanctions Award Did Not Succeed Based On Failure To Appreciate The Nature Of The Deposition Process.

            Burke v. Newport-Mesa Unified School Dist., Case No. G058732 (4^th Dist., Div. 3 Jan. 21, 2021) (unpublished), authored by Justice Goethals of our local Santa Ana appellate court, has some interesting discussion points on discovery sanctions appealability thresholds and on the nature of the deposition process in civil litigation.

            In this one, plaintiff was sanctioned two times in relation to deposition conduct or non-conduct: (1) $6,954.95 in discovery sanctions for refusal to answer questions at a court-ordered deposition, although they were made payable to two different sets of recipients (one motion based on the same conduct); and (2) $1,750 in discovery sanctions for failing to sit for a subsequent deposition, payable to just one party.  Plaintiff, obviously upset, appealed.

            The $1,750 order was not appealable because it was one for sanctions below $5,000.

            However, the $6,954.95 order was appealable, because CCP § 904.1(a)(12) focuses on the amount to be paid, not the amount split between any diverse recipients.  All the more so because it was a single motion arising from the same deposition conduct.  Respondents argued that a removal of the matter to federal court somehow divested jurisdiction away from the state courts, but this did not resonate with the appellate court.  However, although getting past the crucial appealability and procedural hurdles, plaintiff could not prevail on the merits.   After all, he refused to answer 223 questions at his deposition and responded “I don’t know” to an additional 234 questions.  Plaintiff argued that he “cured” any transgressions by providing supplemental responses after the deposition in writing to many of the unanswered questions, but the appellate court indicated this misapprehended the difference between on-the-spot deposition cross-examination and an after-the-fact interrogatory type of answering process—no effective cure at all and a misunderstanding of the deposition process.  In the end, the larger sanctions order was affirmed, and the appeal from the lower sanctions order was dismissed.

Appealability, Discovery, Sanctions: Appeal Of Terminating Sanctions Does Not Necessarily Also Encompass Challenge To Discovery Monetary Sanctions

2/7 DCA Implicitly Suggests Disagreement With Other Decisions, But Finds Two Sanctions Orders Were Not Intertwined.

            OK, for you folks who love technical appealability issues, Taylor v. Forde, Case No. B298957 (2d Dist., Div. 7 Jan. 20, 2021) (unpublished), may be your forte, especially when it comes to appealability of discovery terminating sanctions orders and discovery monetary sanctions.  Be careful when you appeal a terminating sanctions order.

            What happened here is that both discovery terminating sanctions and monetary sanctions orders were entered, but no judgment was ever entered on the complaint or stricken cross-complaint—no default prove-up proceedings resulted in a final judgment.  Appellants appealed the terminating sanctions order, but they did not contest the monetary sanctions order.  The lack of a final judgment on the merits sealed the deal with respect to appealing the terminating sanctions order, except for appellant’s argument that the appeal of the monetary sanctions preserved the appeal of the terminating sanctions.  Appellant argued that the terminating sanctions order was “inextricably intertwined” with the monetary sanctions order over the $5,000 limit such that everything was good. 

            The 2/7 DCA disagreed, dismissing the appeal.  It questioned whether the “inextricably intertwined” exception in Nickell v. Matlock, 206 Cal.App.4^th 934 (2012) and Mileikowsky v. Tenet Healthsystem, 128 Cal.App.4^th 262 (2005) was valid.  However, the terminating sanctions and monetary sanctions orders were not intertwined given no suggestion the sanctions order was erroneous, all the more so because they serve different purposes.  Because the terminating sanctions order was nonappealable and not intertwined, the appeal was dismissed.    

Family Law, Sanctions: Trial Court’s Award To Attorney Husband Of $800 In Attorney Fees In The Nature Of Sanctions Under Section 271 Reversed As A Matter Of Law

Self-Represented Attorney Husband Incurred No Fees To Which The Section 271 Sanctions Must Be Tethered.

            Family Code § 271, subdivision (a), provides that “the court may base an award of attorney’s fees and costs on the extent to which the conduct of each party or attorney furthers or frustrates the policy of the law to promote settlement of litigation and, where possible, to reduce the cost of litigation by encouraging cooperation between the parties and attorneys. An award of attorney’s fees and costs pursuant to this section is in the nature of a sanction.”  However, as the 1/3 DCA concluded in the next case, “section 271 mandates that sanctions be ‘tethered’ to attorney fees and costs.”

            In Marriage of Erndt & Terhorst, Case No. A157876 (1^st Dist., Div. 3 January 11, 2021) (partially published – fees as sanctions discussion published), the trial court directed husband to prepare a stipulated judgment based on the settlement entered into between husband and wife as recited in open court.  The settlement agreement included an equal division of the community portion of wife’s retirement plan.  However, wife had omitted her retirement plan’s survivor benefits – believing that if the survivor benefit were not mentioned, husband’s right to it would terminate upon entry of the judgment of dissolution.  When husband learned of the omission, he included it as an omitted asset under Family Code § 2556 – awarding each party survivor benefits in relation to their share of the awarded community interest.  Wife refused to sign, so husband, who was now self-represented, went back to the trial court seeking a survivor benefit award – with the trial court granting husband’s request and directing the stipulated judgment to include the award. 

            When wife continued to refuse to sign the stipulated judgment, husband returned to the trial court seeking to have the stipulated judgment signed by the trial court elisor, $6,102 in attorney fees, $180 in costs, and § 271 sanctions against wife for her repeated refusal to follow court orders and sign the stipulated judgment.  Wife finally complied with the court’s direction and signed the stipulated judgment in open court.  The trial court then awarded husband sanctions of $180 in costs and $800 in reasonable attorney fees for husband’s preparation for and attendance at that day’s hearing.

            Wife appealed, and the 1/3 DCA reversed the $800 portion of the awarded sanctions – concluding that § 271 sanctions must be tethered to attorney fees and costs.  (Menezes v. McDaniel, 44 Cal.App.5^th 340, 350 (2019) [discussed in our January 16, 2020 post]; Sagonowsky v. Kekoa, 6 Cal.App.5th 1142, 1153 (2016) [misconduct over and beyond fees/costs actually incurred not within reach of section 271].)  Because husband was self-represented by the time he sought sanction, he incurred no fees in preparing for and attending the hearing.  Additionally, California courts have interpreted “attorney fees” to mean exactly what it says in the context of sanctions under Code of Civil Procedure section 128.7 and in the context of contractual attorney fees awarded under Civil Code section 1717 – with sanctions in the form of attorney fees and reasonable attorney fees not available to self-represented litigants who have not incurred or become liable for such fees.

Sanctions: Trial Judge’s Failure To Expressly Specify The Sanctionable Conduct Required A Remand And Do-Over

Appellate Court Found Basis Existed For Sanctions, But Required Greater Clarity Especially Given That Bar Discipline Could Be At Issue.

            An attorney in American Express Bank FSB v. Singh (Abdeljawad), Case No. E074042 (4^th Dist., Div. 2 Dec. 30, 2020) (unpublished) violated a court order to personally appear at a Fall 2019 hearing to address a possible forgery of a substitution of attorney.  Instead, the attorney telephonically appeared because he was in Chicago on a family visit, eschewing the option to come back one day earlier to comply with the lower court’s order.  The lower court was not impressed, setting a later hearing to impose sanction not to exceed $1,500 under “all remedies available to the court pursuant to CCP §§ 128.6, 177.5, 575.2, CRCs and Riverside Local Rules of Court, and/or other statute or existing case precedent.”  At the subsequent hearing, the lower court sanctioned attorney $1,000 for not making a personal appearance, payable to the clerk of the court, but did not specify the specific statute or the conduct giving rise to the sanctions in its written order.

            The 4/2 DCA reversed and remanded for a do-over on due process grounds.  Although it was inferable that the sanctions were imposed under CCP § 177.5 and there was cause for imposition of them, the failure to explain the conduct or circumstances justifying the order required a re-do—especially given that the explanation may be valuable in determining whether additional discipline was warranted (given that the sanction was reportable to the State Bar).  (See Caldwell v. Samuels Jewelers, 222 Cal.App.3d 970, 977 (1990).)

            The moral of the story here is to make sure you, as attorney practitioners, obey an edict to personally attend a hearing or get the matter continued so that you can comply. 

Discovery, Sanctions: Monetary Discovery Sanctions Improperly Denied Against Litigants Under “Unjust” Exception Simply Because Other Terminating Sanctions Granted Previously

However, Litigant’s Attorneys Were Not Subject To Sanctions Because No Evidence Indicated The Attorneys Advised The Clients To Engage In The Discovery Violations.

            Litigators need to read the Sixth District’s recent decision in Kwan Software Engineering, Inc. v. Hennings, Case Nos. H042715 et al. (6^th Dist. Dec. 2, 2020) (published) on sanctions available for discovery abuses.  In a very scholarly opinion, the Court of Appeal held that (1) monetary sanctions cannot be denied against litigants engaging in discovery abuses simply because terminating sanctions (in this case, dismissing some claims) had been previously granted, because this does constitute injustice under the “sanctions unjust” exception; and (2) litigant’s attorneys cannot be sanctioned under Code of Civil Procedure section 2023.030 unless there is evidence that they advised the clients to engage in the discovery violations.  Here is what the Sixth District had to say on the attorney issue: “We understand defendants’ observation about the difficulty of eliciting direct proof of such conduct in light of an attorney’s ethical obligations and privileges protecting attorney-client communications. However, the difficulty of carrying this burden stems from the statute itself, and we lack the authority to ignore its explicit statutory directive.”    

Bankruptcy, Sanctions: Ex-Partners In State Court Lawsuit Against Debtor With A Discharge Injunction Properly Not Sanctioned For Contempt Fees When They Had An Objective Belief The Debtor Had Returned To The Partnership State Court Dispute

Ninth Circuit Came To The Same Result, Even Under An Objective Standard Although SCOTUS Sent The Case Back Based On Denying Contempt Fees Under A Less Stringent Good Faith Belief Standard.

            On April 28, 2020, we posted on In re Taggart, a Ninth Circuit decision where two ex-partners in state court litigation against a debtor obtaining a discharge injunction were not hit with contempt fees when they took certain actions with a good faith belief that the debtor had re-entered into the state court fray—with the federal appeals court reversing a contrary lower court ruling.  SCOTUS, in Taggart v. Lorenzen, 139 S.Ct. 1795, 1799 (2019), vacated that prior Ninth Circuit decision and remanded after determining that an objective, rather than subjective, standard is more appropriate in determining whether the ex-partner creditors could be held in civil contempt for violating the bankruptcy discharge injunction.  On remand, in Taggart v. Lorenzen, No. 16-35402 (9^th Cir. Nov. 24, 2020) (published), the Ninth Circuit came to the same result based on applying the higher objective standard to the creditors’ conduct and knowledge of events. 

Sanctions: 2/3 DCA Affirms $16,111 In Discovery Sanctions Resulting From Attorney’s Violation Of Discovery Order For Which The Panel Overturned His Contempt Conviction

Misuse Of The Discovery Process Does Not Have To Be Willful Before Monetary Sanctions May Be Imposed, But Punishment For Contempt Rests Upon A Clear, Intentional Violation.

            We previously discussed the next case in our February 24, 2017 post.  At that time, the 2/3 DCA had dismissed minor’s appeal from an order that her attorney pay discovery sanctions to opposing party in the form of attorney’s fees and costs as the minor was not the aggrieved party.  The California Supreme Court reversed and remanded – holding the record was clear that minor’s attorney intended to participate in the appeal.

            In K.J. v. Los Angeles Unified School Dist., Case No. B269864 (2d Dist., Div. 3 November 11, 2020) (unpublished), the trial court determined that plaintiff minor’s attorney violated a discovery order – for which it found him guilty of contempt and sentenced him to 24 hours in county jail and a $750 fine.  Additionally, the trial court stated in its order that defendant could seek fees and costs associated with the contempt hearing. 

            Meanwhile, attorney filed a writ petition with the 2/3 DCA to challenge the contempt order, and the appellate court issued an order staying enforcement of the contempt order pending further order of the 2/3 DCA.  Attorney ultimately prevailed on the contempt order – with the appellate panel concluding substantial evidence establishing beyond a reasonable doubt that attorney had willfully disobeyed the trial court’s order did not exist.

            Before that determination was made, defendant moved for monetary sanctions of $100,000 from attorney and his law office, made up of $52,247.41 in fees and costs, and $47,752.59 in sanctions “to deter future misconduct” – with the trial court awarding $16,111 in discovery sanctions.  Attorney appealed – unsuccessfully challenging the sanctions order as void because it violated the temporary stay and, alternatively, as an abuse of discretion because it included fees and costs related to the contempt proceeding to which he ultimately prevailed, and was not authorized by statute because his client submitted to a neuropsychiatric exam as ordered.

            The 2/3 DCA found no violation of the temporary stay.  The temporary stay applied only to the contempt order, which did not include an award of monetary sanctions nor a decision on the merits of such a motion.  The trial court made clear that the monetary sanctions order was being issued for an obstruction of the discovery process, and was not dependent on the ultimate outcome on attorney’s contempt appeal.  The appellate panel agreed.  A contempt order requires a finding of willfulness, but a monetary sanctions order does not.  As a result, the trial court reasonably could find that although a party was not guilty of contempt, it was properly assessed monetary sanctions for misusing the discovery process. (Ellis v. Toshiba American Information Systems, Inc., 218 Cal.App.4^th 853, 878 (2013).)  

            The panel also found no abuse of discretion.  It was unable to conclude that the trial court awarded fees associated with the contempt hearing as the record did not clearly demonstrate whether the award included fees related to the contempt hearing, and the trial court awarded defendant only a fraction of the fees it sought.  As to the statutory authority to issue sanctions, the 2/3 DCA concluded “misuse” of the discovery process is not limited to a failure to appear at a court-ordered examination, but also may include an attorney’s actions that influence his client not to fully participate in such an examination after being ordered by a trial court to do so – for which the trial court has broad discretion to issue sanctions. 

Sanctions: Attorney Convicted On 4 Counts Of Civil Contempt, Fined $3,600 And Ordered To Pay Opposing Party’s Attorney Fees And Costs Wins Reversal Of Fees/Costs Order And Has 3 Of 4 Civil Contempt Convictions Overturned

Attorney Fees/Costs Order Was Not Supported By Statute And The Proper “Unit Of Prosecution” For Attorney’s Conduct At A Fifteen Minute Settlement Conference Was A Single Count Of Contempt.

            In Moore v. Superior Court, Case No. G058609 (4^th Dist., Div. 3 November 16, 2020) (published), while representing a client at a fifteen minute mandatory settlement conference, attorney displayed rude and unprofessional conduct.  In fact, the settlement conference lasted only 15 minutes as a direct result of attorney’s behavior.  The trial court conducted a contempt proceeding – finding attorney in contempt and fining him $900 each for four categories of misconduct: (1) yelling and interrupting the settlement officer and opposing counsel; (2) falsely accusing opposing counsel of lying without explanation; (3) refusing to engage in settlement discussions; and (4) blocking the settlement officer from invoking the aid and authority of the supervising judge by threatening that this would unlawfully divulge settlement information.  The trial court also ordered attorney to pay opposing party’s attorney fees and costs pursuant to Code Civ. Proc., § 1218(a).  Attorney appealed.

            In a 3-0 opinion authored by Justice Goethals, the 4/3 DCA found attorney’s conduct demonstrated a total lack of respect for the court, the settlement officer, opposing counsel and the opposing party, and “was a continuous insult to the dignity and process of the court that continued throughout the 15-minute course of the settlement conference.”  However, the panel overturned three out of four of the attorney’s civil contempt convictions, including the fees imposed for those three convictions, and reversed the trial court’s order on the attorney fees and costs.

            As to the civil contempt convictions, the appellate panel followed the analysis provided for “unit(s) of prosecution” in In re Keller, 49 Cal.App.3^rd 663, 667-669 (1975); Conn v. Superior Court, 196 Cal.App.3d 774, 788 (1987); and Koehler v. Superior Court, 181 Cal.App.4^th 1153, 1169-1170 (2010) – reasoning that attorney could not be punished for multiple counts of contempt stemming from his behavior at the 15-minute settlement conference, and that attorney’s due process rights were violated by convicting him of four, separate counts of civil contempt when only one was identified in the trial court’s order to show cause.

            As to the reversal of the attorney fees and costs ordered by the trial court pursuant to CCP § 1218(a), the appellate panel determined section 1218(a) did not apply in this case as the contempt at issue was not for violating a court order. 

            In a final statement by the 4/3 DCA, the panel noted, “[t]hough [attorney]’s petition is largely successful, that success should in no way be construed as an endorsement by this court of his behavior.”

Arbitration, Sanctions: $22,159.50 In § 128.7 Sanctions Affirmed Against Plaintiff’s Attorney Who Filed Motion Seeking To Stay Arbitration And Remit The Parties To Judicial Remedies Based On Defendants’ Failure To Pay Arbitration Fees

Attorney Was Notified By The American Arbitration Association That The Error In Applying Defendants’ Fees Had Been Corrected, And The AAA Simply Needed Plaintiff’s Confirmation Of Intent To Proceed.

            In McCluskey v. Henry, Case No. A158851 (1^st Dist., Div. 3 November 2, 2020) (partially published – fees discussion unpublished), plaintiff sued employees of Airbnb, Inc. for intentional infliction of emotional distress after her account was terminated.  Pursuant to an arbitration clause in the parties’ contract, the trial court granted defendants’ motion to stay the action and compel arbitration.  Plaintiff then filed her claim for arbitration with the American Arbitration Association, and each side paid their respective fees by the deadline set by AAA.  Unfortunately, due to an error in AAA’s system, defendants’ payment was not properly credited – resulting in AAA’s administrative closing of the case.  Once the error was rectified, AAA notified the parties and requested confirmation from plaintiff that she wished to continue so the case could be reopened.  After receiving no response from plaintiff’s counsel by AAA’s deadline, AAA sent out a second notice with a new deadline for responding.  Plaintiff’s counsel did not respond. 

            Instead, he went back to the trial court with an unsuccessful motion to lift the stay – asserting that, pursuant to Code Civ. Proc. § 1281.4, defendants had failed to timely pay their arbitration fee which “constituted a default, waiver, lack of good faith and fair dealing, or breach of the arbitration agreement.”  The defendants were successful, however, on their request for sanctions – with the trial court awarding $22,159.50 in fees incurred for opposing the motion to lift the stay.

            Attorney appealed, raising a slew of arguments – violation of his due process rights; section 128.7 “not drawn with sufficient clarity such that it properly[] informed” him as to what he must do to avoid sanctions; defendants’ motion papers failed to adequately inform him that sanctions were being sought for specific violating conduct; that section 128.7 requires a moving party to “incur” attorney fees and, since Airbnb was the entity paying defendants’ fees, defendants could not seek and be awarded sanctions; and other substantive challenges  – all of which failed.  The 1/3 DCA found the trial court properly based its frivolity decision  on its findings that the AAA had twice notified Attorney that the arbitration case would be reopened once Attorney confirmed plaintiff’s intent to proceed.

            Interestingly, Attorney made an argument that the trial court had exceeded its jurisdiction in issuing the sanctions order as Code Civ. Proc. § 1281.4 prohibited the trial court from hearing and ruling upon the sanctions motions during the stay.  Ironically, pursuant to Code Civ. Proc. § 1281.4, the trial court had no jurisdiction to lift the stay and set the case for trial on the basis that defendants’ conduct inhibited arbitration.  However, because Attorney’s violating conduct occurred before the trial court – not in the arbitration proceeding – and the trial court had retained jurisdiction over the original suit, the trial court had the jurisdiction and authority to address this situation.

 

Family Law, Sanctions: Sixth District Affirms $75,000 In § 271 Sanctions Against Ex-Wife With Mental Health Issues And Denial Of Her § 2030 Needs-Based Attorney Fees Request Despite Trial Court’s Failure To Make Express Findings

Wife Failed To Take Advantage Of Protections Afforded To Parties Suffering Mental Health Issues And She Suffered No Prejudice When Trial Court Failed To Make Express Findings Because It Considered And Addressed The Same Statutory Factors In Determining Spousal Support.

            Under California Rules of Court, Rule 1.100, parties can seek accommodations from the trial court, pursuant to the Americans With Disabilities Act of 1990 (ADA) (42 U.S.C. § 12101 et seq.), or other applicable state and federal laws.  Alternatively, a party can participate in the litigation through a guardian ad litem.  (Code Civ. Proc., § 372 et seq.)

            Husband made such a request for wife in Marriage of Taylor, Case No. H045227 (6^th Dist. October 30, 2020) (unpublished), requesting appointment of a guardian ad litem due to concerns about wife’s ability to participate in proceedings based on her claimed mental health issues.  However, husband dismissed request when wife opposed and stipulated to an independent evaluation along with the release of certain medical records.  This came back to bite him, in the form of delays and substantial, unnecessary attorney’s fees and costs, when wife failed to execute documents related to the parties’ agreement regarding the division of certain marital assets, began raising issues previously resolved, and requested a continuance of the final status conference – claiming her PTSD was causing her great difficulty in reviewing and comprehending documents, and completing tasks.

            When wife’s conduct prompted husband to seek Family Code § 271 sanctions against her, the trial court awarded him $75,000 – finding billing statements submitted by husband to be reasonable, and commenting that “[t]hat doesn’t nearly being to make [husband] whole, but I think it is a fair and appropriate ruling given the totality of the circumstances here.”  Additionally, the trial court denied wife’s request for needs-based section 2030 attorney’s fees without making express findings supporting the denial.

            On appeal, wife argued that the trial court abused its discretion in determining that she engaged in sanctionable conduct because her conduct was the result of her mental health condition and was not intentional.  However, the Sixth District disagreed – finding that sanctions are based on a party’s conduct that frustrates the policy of the law to promote settlement of litigation and reduction of litigation costs, not the party’s intent, and substantial evidence supported the sanctions.  Additionally, wife had the opportunity to take advantage of protections afforded to parties suffering mental health conditions, but failed to timely do so.

            As to wife’s needs-based fees request, the appellate panel found the trial court erred in not making the requisite express findings for its denial, but that the trial court’s error was not prejudicial to wife. Immediately preceding its consideration of wife’s section 2030 request, the trial court addressed each statutory factor it was required to consider and weigh in ordering long-term spousal support – the same factors considered when determining whether to award section 2030 fees – and determined wife had significant liquid or investable assets, and that the parties had relatively equal financial circumstances.

Sanctions: $5,310 Sanctions Order Against Attorney Under CCP § 128.5 And CCP § 1209 (Contempt) Affirmed On Appeal

Message From This One Is Be Candid With The Court—Do Not Tell Half-Truths!

            In Levine v. Berschneider (Richards), Case No. B300824 (2d Dist., Div. 6 Oct. 29, 2020) (published), an attorney was sanctioned $5,310 under CCP § 128.5 (bad faith tactics) and § 1209 (contempt) for playing coy on whether settlement checks had been received in a hearing before the lower court.  The sanctions order was affirmed, with the appellate court reiterating two key principles to guide all attorneys, especially litigators:  (1) attorneys have a duty of candor to the court; and (2) the duty of candor encompasses a duty to inform the court about important subsequent events so that “half-truths” are not made to the court. The 2/6 DCA also emphasized that a misrepresentation of material facts is subject to sanction under section 128.5, citing Young v. Rosenthal (1989) 212 Cal.App.3d 96, 128.)

Appealability, Family Law, Sanctions: $5,000 Sanctions Award Against Ex-Husband’s Attorney Found Not Appealable

Specific Appealability Provisions Governed The Result.

            In Marriage of Rattan & Prasad, Case No. A157880 (1^st Dist., Div. 3 Sept. 24, 2020) (unpublished), ex-husband’s attorney was disqualified and was assessed with a CCP §§ 128.5/128.7 sanctions motion of $5,000 for filing frivolous motions.  Attorney’s appeal of the sanctions order was unsuccessful because (1) CCP § 904.1(a)(12) only allows appeal of sanctions exceeding $5,000; and (2) CCP § 904.1(a)(12) did not rescue appeals of non-discovery sanctions below $5,000 because it only allowed a party to appeal from them.

Family Law, Sanctions: Section 271 Sanctions Affirmed But CCP § 128.7 Sanctions For Reconsideration Motion Reversed Based On Lack Of Appropriate Procedural Compliance

Failure To Follow 128.7 Procedural Requirements Doomed Part Of Sanctions Award.

            CCP § 128.7 sanctions are procedural in nature and rule bound.  Do not follow the procedural rules, and you will lose a sanctions order in the lower court.  Marriage of Nott, Case No. B293055 (2d Dist., Div. 5 Sept. 16, 2020) (unpublished), is a good illustration of what will result in a reversal when due process requirements are not satisfied.

            What happened here was that ex-wife was hit with a Family Code section 271 sanction of $2,500, which was affirmed because the record showed she did not cooperate with a QDRO attorney to get closure on the issue.  However, because she was hit with a $4,500 sanctions for filing a frivolous reconsideration motion (one governed by CCP § 128.7), that one had to be reversed because ex-husband failed to file a separate 128.7 sanctions motion and failed to serve it at least 21 days before filing the motion with the court.  That required a reversal on this aspect of the appeal.  (Martorana v. Marlin & Saltzman, 175 Cal.App.4^th 685, 698-700 (2009).)

Family Law, Sanctions: $4,290 Sanctions Against Wife’s Attorney Under CCP § 128.7 Reversed On Two Grounds

First, A Section 2030 Earlier Denial Request Is Not Subject To Reconsideration Limitations, And Husband Did Not Give Proper Section 128.7 Notice Of The Bases For Sanctions—Double Whammy Reversal On Appeal.

            The Fourth District, Division Two, in Marriage of Hull, Case No. E072222 (4^th Dist., Div. 2 Sept. 15, 2020) (unpublished) was a 3-0 panel decision reversing a $4,290 CCP § 128.7 sanctions award against wife’s attorney for renewing a needs-based motion after an earlier denial of attorney’s fees.  [The concurring justice did not disagree with some footnotes which he believed disparaged appealing attorney.}

            The bases for reversal was two-fold in nature:  (1) a section 2030 renewed motion cannot be sanctioned because it is not subject to reconsideration request limitations; and (2) the section 128.7 motion did not contain the precise grounds upon which sanctions were ultimately granted, something which cannot happen based on the “safe harbor” and due process strictures codified under this statute. 

Discovery, Sanctions: $5,684 Discovery Sanction Against Plaintiffs Affirmed Where They Could Not Produce A Written Confirmation Of A Discovery Extension

Beyond That, The Defense Did Not Pull The Trigger Too Hastily On Motions To Compel, Trying To Work It Out.

            Discovery frequently is the bane of both practitioners and judges, not to mention studies that confirm it has led to an increase in the costs of civil litigation for many, many cases.  California has a scheme allowing parties to stipulate to discovery extensions, but they must be confirmed in writing (although emails certainly satisfy this requirement).  The next case shows the importance of creating an adequate record where sanctions are being fought on the basis that a discovery extension was obtained from the other side.

            In Cantu v. Equinox Holdings, Inc., Case No. B295973 (2d Dist., Div. 5 Sept. 15, 2020) (unpublished), Plaintiffs failed to answer some paper discovery requests and failed to obtain a firm written confirmation of a discovery extension, although the propounding defense attorneys tried to work it out.  Plaintiffs finally propounded boilerplate objections to the requests and tried to argue that a blanket-type extension had been granted without evidence of a written confirmation.  The defense waited a little while longer, filing motions to compel and seeking $9,440 in attorney’s fees as discovery sanctions.  The trial judge used a blended hourly rate and reduced the number of hours to impose a sanction of $5,684 against plaintiffs.

            Plaintiffs’ appeal was not successful.  As a stark reminder to which we have posted on before, the failure to provide a reporter’s transcript of the relevant law-and-motion hearings was fatal, especially where a discretionary ruling was involved as opposed to one on legal issues.  Further, there was no clear proof of a written discovery extension such that there was no substantial justification for the opposition to the motions to compel.  The appellate court also observed that the defense did not file the motions to compel too soon, only doing so after receiving boilerplate objections and no plan by the other side as to providing real answers.

Family Law, Sanctions: 4/2 DCA Affirms $29,993 In Family Code §§ 271 and 2030 Sanctions Issued Against Ex-Husband, Plus Another $3,892.50 In Code Civ. Proc., § 1987.2(a) Fees And Costs For Ex-Wife’s Successful Motion To Quash

Self-Represented Ex-Husband Learned The Hard Way That Uncooperative Conduct, Unduly Delaying Resolution, And Refusal To Participate In RFO Hearing Can Be Incredibly Costly – And This Was On Top Of $13,200 In Sanctions Already Issued Against Him Earlier In This Case.

            In Marriage of Ehirim, Case No. E072397 (4^th Dist., Div. 2 September 14, 2020) (unpublished), husband and wife with no minor children were involved in a post-judgment dispute related to some community investment account balances held in wife’s name, and community credit card debt paid after separation by wife with her separate property funds.  The investment accounts and credit card debt had not been adjudicated in the earlier judgment – with the trial court reserving jurisdiction to determine the balance of those investments, as well as community bank accounts and debts.

            Self-represented husband was uncooperative in resolving the investment/credit card issues with wife.  As a result, both parties filed requests for orders related to the investment/credit card issues.  Husband then subpoenaed credit card companies and other financial institutions, where wife held accounts, seeking overly broad and irrelevant information – including requests for items such as signature cards – for dates extending well beyond the parties’ date of separation.  Additionally, husband subpoenaed wife’s employer seeking overly broad and irrelevant information that extended well beyond the date of separation.  When husband refused to scale back the scope of his subpoenas, wife successfully moved to quash or limit the subpoenas to relevant time frames and to information relevant to the parties’ dispute.  Afterward, the trial court awarded wife $3,892.50 in fees and costs pursuant to Code Civ. Proc., § 1987.2(a).  Section 1987.2(a) provides the trial court with the discretion to award reasonably incurred expenses, including reasonable attorney fees, to a party prevailing in a motion to quash.

            When trial on the remaining investment accounts and credit card debt came about, husband refused to participate and walked out.  Only wife testified and provided documentation.  After determining community division of the investment accounts, offsets from the paid community credit card debt and other unpaid equalization payments from husband to wife, the trial court issued $10,000 in Family Code § 271 sanctions against husband for his conduct – conduct which frustrated the policy of the law promoting settlement and reducing the cost of litigation.  The trial court additionally ordered husband to pay $19,993 of wife’s attorney fees “as and for additional sanctions” pursuant to Family Code §§ 271 and 2030.  These awards were on top of $13,200 in unpaid sanctions previously issued against husband in this case.

            The 4/2 DCA found no abuse of discretion and affirmed – concluding the trial court’s factual findings and awards of fees/costs and issuance of sanctions were amply supported by the record.

Discovery, Sanctions: Trial Court Cannot Impose Discovery Sanctions Once A Vexatious Litigant Motion Is Filed

Imposition Of Sanctions Was Error Because Filing Of Motion Stayed Further Proceedings Except A Ruling On The Vexatious Litigant Motion.

            In Hanna v. Little League Baseball, Inc., Case Nos. E070995 et al. (4^th Dist., Div. 2 Aug. 18, 2020) (partially published; sanctions discussion published), defendant filed a motion to have plaintiff declared a vexatious litigation under CCP § 391(b), requesting plaintiff post security and requiring plaintiff to obtain judicial prefiling permission for other pleadings—common requests in this type of motion.  Defendant also had moved to obtain discovery sanctions against plaintiff.  The lower court entertained all these motions at the same time, granting the vexatious litigant motion and ordering plaintiff to pay $1,200 in discovery sanctions.  Although affirming the vexatious litigant determination, the 4/2 DCA reversed the grant of discovery sanctions.  The reason was based on the clear statutory language of CCP § 391.6, which stays proceedings such that the lower court lacked jurisdiction to entertain and to impose discovery sanctions.

Costs, Sanctions: Trial Court Properly Denied CCP § 128.7 Sanctions Even Though Opposition Evidence Was Not Overwhelming; However, Costs Had To Be Awarded To Attorney Obtaining Dismissal Of Ex-Client’s Malpractice Complaint

Prevailing Attorney Fell Within Mandatory Category Of A Routine Costs Grant.

            This next matter involved a contentious domestic, non-divorce temporary restraining order situation where an attorney sued for recovery of unpaid fees by one side (a male in a relationship with an ex-girlfriend) where there were malpractice allegations that the attorney had an affair with a former girlfriend of client/provided confidential information to the former girlfriend.  In the end, client’s malpractice action was dismissed on a demurrer, but the superior court clerk refused to enter a routine costs award based on the dismissal—after the trial judge refused to award CCP § 128.7 sanctions against client based on the salacious allegations in the ex-client’s case.

            The 4/1 DCA, in Kelly v. Rutman, Case No. D076022 (4^th Dist., Div. 1 July 21, 2020) (unpublished), affirmed the sanctions denial but reversed the refusal to award routine costs.

            Without going into all the specifics, the inferences from the attorney-former girlfriend relationship—although not overwhelming—did allow discretion to the trial judge to deny section 128.7 sanctions based on the overall circumstances.  Not the same result on the routine costs issue.  Here, attorney was a prevailing party when the malpractice action was dismissed—ex-client obtained no relief and a dismissal was entered in attorney’s favor (Code Civ. Proc., § 1032(a)(2)), a precise category allowing attorney recovery of routine costs.

Sanctions, SLAPP: Trial Court Appropriately Issued Sanctions Against Defendant, Who Was Involved In Pending Litigation With Plaintiff, For Violation Of Restraining Order Dictating Method And Nature Of Communications With Plaintiff

Defendant’s Claims Of Litigation Privilege And Anti-SLAPP Law Protections Were No Defense Of Her Violations Of Restraining Order.

            Self-represented husband and wife were involved in litigation through various lawsuits against self-represented ex-girlfriend of husband – claiming ex-girlfriend conspired with others to fraudulently obtain money, including substantial sums allegedly conned from husband.  Husband’s relationship with ex-girlfriend ended just prior to the beginning of his relationship with wife.

            Alleging harassing and intimidating conduct from wife, ex-girlfriend sought a restraining order in Wons v. Ferry, Case No. F073347 (5^th Dist., July 13, 2020) (unpublished).  The trial court, finding evidence of wife’s conduct justified issuance of a restraining order – but recognizing the parties remained embroiled in several pending litigations – issued a restraining order prohibiting contact between wife and ex-girlfriend except as necessary to participate in litigation, and ordering that such communication be conducted only in writing and to be not harassing in nature.

            When wife violated this order, the trial court imposed $500 in sanctions against her.  When wife continued to violate this order, the trial court imposed a second sanctions award against her in the amount of $1,000. 

            On appeal, wife argued that her communications with ex-girlfriend were not subject to restraint and sanctions because they were protected by the litigation privilege and anti-SLAPP laws.  The 5^th District didn’t buy it and affirmed.  The restraining order did not preclude wife from contacting ex-girlfriend about the ongoing litigation.  It simply limited the ways in which that contact could occur – in writing and without a harassing nature.

            Wife’s arguments of litigation privilege and anti-SLAPP law protections failed because she was not restrained from or sanctioned for pursuing litigation, but for violating a valid court order warranted by her own behavior.  Sanctions for violations of a restraining order are not precluded simply because the conduct occurs in the course of pending litigation.

Requests For Admission, Sanctions: Costs Of Proof Sanctions Affirmed Against Contestants To Will Who Denied Critical RFA Without Reasonable Ground To Believe They Could Prevail On The Matter At Trial

The Only One Of Four Will Contestants Who Showed For Trial Provided No Evidence To Support The Request For Admission Denial.

            Estate of Moshier, Case No. G057076 (4^th Dist., Div. 3 June 29, 2020) (unpublished) involved a will contest brought by decedent’s adoptive brother and three adult nieces against decedent’s wife.  Decedent’s will named wife as the executor of his estate and left the entire estate to her – which included the house decedent had inherited from his late father where decedent and wife lived.  Decedent had no children. When wife petitioned to probate the will, brother and nieces contested – seeking an intestate share of the estate as, they argued, the will did not comply with Probate Code sections 6110 and 6111 because it was witnessed only by wife instead of two individuals, and was not signed by decedent because the signature omitted decedent’s middle initial.

            When wife propounded discovery, contestants denied a Request for Admission asking for admission that decedent’s intent was to leave his entire estate to wife.  Instead, contestants claimed the house decedent inherited was meant to stay in the family and decedent would not have left the house to anyone but decedent’s adoptive brothers.  At trial, decedent’s best friend and his biological half-sister testified that decedent’s intent was to leave his entire estate to his wife.  On the other side, only one person showed for trial – a niece who had not seen the decedent in over 25 years, had never spoken with decedent about his property, will or intentions as to his estate, and who had no documents or other witnesses to support the contention that the house was to stay in the family.  The trial court found evidence supporting decedent’s intent to leave everything to his wife to be clear and convincing, and denied the will contest.  Afterward, wife successfully moved for Code of Civil Procedure § 2033.420 costs of proof sanctions to recover the fees she incurred in proving the truth of the matter regarding decedent’s intent, and was awarded $23,675 in fees and $3,707 in costs.

            The 4/3 DCA affirmed.  Contestants’ argument that the trial judge, rather than a temporary judge, was required to hear the sanctions motion fell flat.  First, contestants had stipulated to having the temporary judge hear the motion and had failed to withdraw that stipulation.  Second, the motion for costs of proof sanctions involved sanctionable conduct during pretrial discovery, not sanctionable conduct during trial, and ruling on the motion did not require the trial judge’s knowledge of the parties’ trial conduct.  Beyond this, the 4/3 DCA concluded there was no abuse of discretion in awarding the costs of proof sanctions – wife proved the truth of decedent’s intent at trial, and contestants had no reasonable ground to believe they would prevail on the issue of decedent’s intent.

Sanctions: Section 128.5 Sanctions Reversed In Second Appeal On Sanctions Issue Because Subjective Bad Faith Determination On Remand Was Made By Judge Other Than Trial Judge

1/2 DCA Also Concludes That An Appellate Court Is Not Bound To The Rule Of Law Of The Case Where Adherence Would Result In An Unjust Decision.

            Armstrong v. Daly, Case No. A155656 (1^st Dist., Div. 2 June 26, 2020) (unpublished) represents the second appeal related to a Code Civ. Proc. § 128.5 motion for sanctions in this case which was filed by defendant against plaintiff’s attorney – alleging the petition for dissolution of marriage, where there was no valid marriage, was pursued for the sole purpose of causing unnecessary delay in defendant’s unlawful detainer action against plaintiff. 

            The first appeal was filed by defendant when the trial court denied his section 128.5 motion for failure to comply with the safe harbor provision found in Code Civ. Proc. § 128.7.  When the 1/2 DCA reversed and remanded, based on San Diegans for Open Government v. City of San Diego, 247 Cal.App. 4^th 1306 (2016), the motion was assigned to a new judge who imposed sanctions of $23,352.68 against plaintiff’s attorney without further briefing or argument.  This second appeal was filed by plaintiff who argued for reversal based on intervening case authority and legislative history establishing that section 128.5 contained a safe harbor provision, and on the grounds that the motion was not heard by the trial judge on remand.    

            The appellate panel reversed – concluding that ruling on the section 128.5 sanctions motion required a finding of subjective bad faith, and that the trial judge – who observed the trial as well as plaintiff’s counsel’s justification for bringing a dissolution proceeding where there was no valid marriage – was in the best position to make that determination.  (Orange County Dept. of Child Support Services v. Superior Court, 129 Cal.App.4^th 798, 805-806 (2005).)  To that end, the 1/2 DCA ordered that, on remand, the trial judge hear the motion if defendant continues to pursue sanctions.

            The panel also rejected defendant’s contention that it was precluded from revisiting its prior holding in this case under the doctrine of law of the case.  The 1/2 DCA recognized the doctrine of the law of the case, which generally precludes multiple appellate review of the same issue in a single case, as a rule of procedure that will be disregarded when adherence would result in an unjust decision.  Here, the 1/2 DCA found, the principal ground for exception to the doctrine of law of the case existed – an intervening or contemporaneous change in the law.  Since the panel’s first ruling in this case on the sanctions issue, the Legislature urgently reacted to San Diegans by amending section 128.5 to clarify its previous intent by importing section 128.7 conditions and procedures, including the 21-day safe harbor provision.  Also, since the panel’s first ruling in this case, appellate courts had uniformly held that section 128.5 (before amendment) required compliance with the safe harbor provision of section 128.7.  (See Nutrition Distribution, LLC v. Southern SARMS, Inc., 20 Cal.App.5^th 117, 130 (2018).) 

Sanctions: Sixth District Affirms Code Civ. Proc. § 128.5 Monetary Sanctions Of $8,025 Against Self-Represented Defendant Bringing Second Motion To Set Aside And Vacate 2010 Judgment

Defendant Dismissed Appeal Of First Order On Set Aside/Vacate Motion Before Filing Second Set Aside/Vacate Motion

            In TAT Capital Partners v. Feldman, Case No. H044004 (6^th Dist., June 12, 2020) (unpublished), a self-represented defendant appealed from a second trial court order denying his motion to set aside and vacate a 2010 judgment against him, and from the $8,025 section 128.5 sanctions against him.

            Defendant’s first motion to set aside and vacate the 2010 judgment was heard on January 24, 2014 and denied.  Defendant (along with other defendants) appealed the trial court’s order, but requested that the appeal be dismissed.  Then, more than two years later, defendant (without other defendants) filed a second motion to set aside and vacate the 2010 judgment, which was, again, denied – with the trial court concluding defendant’s motion constituted a motion to reconsider its prior rulings and that defendant had not satisfied the requirements for bringing a motion for reconsideration.  Additionally, the trial court found defendant – as a matter of law – barred from raising challenges to rulings that had been subject to judicial review.  Finally, in finding defendant’s motion frivolous, meritless, unreasonable, and brought in bad faith for purposes of harassing, the trial court issued section 128.5 sanctions against defendant in the amount of $8,075.  Defendant again appealed, but the Sixth District found neither error nor abuse of discretion and affirmed.

            Defendant argued that the trial court erred in imposing the sanctions because plaintiff had become a forfeited entity in 2014 for failure to file tax returns.  Therefore, defendant claimed – based on Revenue and Taxation Code section 19719(a) – plaintiff lacked capacity in 2016 to oppose his motion and move for sanctions.  Based on the same premise, Defendant also raised Revenue and Taxation Code sections 2301 and 2301.5 for the first time in his reply brief.  However, the Sixth District found that defendant had not adequately presented this to the trial court and as such could not argue it on appeal.  Nonetheless, the appellate panel found none of defendant’s arguments related to plaintiff’s capacity under the cited Revenue and Taxation Code sections helpful to plaintiff.  Section 19719(a) relates to the criminal penalty for a prohibited exercise of corporate powers and rights after suspension or forfeiture, section 23301 applies to a foreign taxpayer only if the taxpayer is qualified to do business in California, and – pursuant to United Medical Management Ltd. v. Gatto, 49 Cal.App.4^th 1732, 1741 (1996) – failure to pay its taxes does not prevent a foreign corporation from bringing or defending actions, nor forfeit its corporate powers.

Appealability, Discovery, Family Law, Requests For Admission, Sanctions: Appeal Dismissed For Petitioner Who Was Dissatisfied With Trial Court’s Order On His Motion To Have Requests For Admission Deemed Admitted And For Sanctions

The Appellate Court Has No Jurisdiction To Review A Discovery Order.

            Petitioner father and respondent mother in Minasian v. Katz, Case No. A158517 (1^st Dist., Div. 2 June 11, 2020) (unpublished) were involved an incredibly protracted action – dating back to 2004 – regarding their child who was born the year before. 

            In 2018, petitioner served respondent with Requests for Admission, but considered petitioner’s original and second sets of responses inadequate, and filed a Request for Order to have the RFAs deemed admitted and for sanctions against respondent.  When the trial court ultimately ordered sanctions of $195 against respondent and that she file proper responses within 21 days, petitioner appealed – arguing the trial court exceeded its authority and discretion in ruling the respondent would have 21 additional days to file her RFA responses.  Unfortunately for petitioner, his appeal turned out to be an exercise in futility.  The 1/2 DCA dismissed.  The panel concluded petitioner’s appeal was of a discovery order, not a judgment, and that it was without jurisdiction to rule on the discovery order given there is no statutory provision allowing for an appeal of an order on a discovery motion.  (Lund v. Superior Court of Orange County, 61 Cal.2d 698, 709 (1964); Code Civ. Proc. § 904.1.)  

Sanctions, Special Fee Shifting Statutes: Prevailing CPRA Petitioner Properly Denied Fees Under Mandatory Fee-Shifting Statute And Under Code Civ. Proc. Section 128.5 Based On Her Self-Represented Status

Prevailing Petitioner Was Not Represented By Legal Counsel And Did Not Incur Or Become Liable For Attorney Fees.

            In Drevaleva v. Alameda Health Sytem, Case No. A158282 (1^st Dist., Div. 4 May 29, 2020) (unpublished), the trial court denied prevailing CPRA (California Public Records Act) petitioner’s requests for attorney’s fees, under Gov. Code section 6259(d) and Code Civ. Proc. section 128.5, because she was self-represented.  

            The 1/4 DCA affirmed.  Although the CPRA includes a mandatory fee-shifting statute (Gov. Code § 6259(d)), the appellate panel followed the reasoning in Trope v. Katz 11 Cal.4^th 274 (1995), which provides that a party need to incur/become liable for attorney fees in order to recover fees.  Likewise, the 1/4 DCA applied the same reasoning to plaintiff petitioner’s section 128.5 fees request (Musaelian v. Adams 45 Cal.4^th 512 (2009)).  Plaintiff petitioner paid no fees for legal representation, nor did she become liable to pay attorney fees.  To the extent section 6259(d) does not include the word “incur,” the 1/4 DCA found the definition of “attorney’s fees” discussed in Trope applied here – that a prevailing party is entitled to recover fees if that party were represented by counsel.

 

Sanctions: $6,075 CCP §128.5 Sanctions Award Affirmed On Appeal In Long-Spanning Neighbor Spat

Plaintiff Litigant Properly Assessed With Sanctions Because Engaged In Litigation For Improper Purpose In Light of Releases Under Prior Settlement Agreement.

            Beuchel v. Flanagan, Case No. B296548 (2d Dist., Div. 2 May 28, 2020) (unpublished) demonstrates, yet again, how neighborhood disputes can result in dire consequences, although the amount involved was not that bad in the end.  However, there is an object lesson to this case—try to work it out!

            In this one, neighbors …. not so much neighbors, were involved.  They were neighbors for 20 years, but litigants for 15 years.  They finally signed a prior settlement agreement, replete with releases, but that did not stop the plaintiff from filing a suit on a boundary dispute issue yet again.  Plaintiff lost, with the trial judge imposing $6,075 in sanctions for the filing of a complaint for an “improper purpose.”

            Plaintiff’s appeal went for naught.  The prior settlement agreement release was binding, basically disposing of the case and showing plaintiff filed suit out of animus.  Plaintiff was sanctioned for filing a complaint for an “improper purpose,” not legal frivolity—which would have shifted the blame to plaintiff’s attorney, not the situation here so that plaintiff had to bear the sanctions award.

Probate, Request For Admissions, Sanctions: More Than $1.8 Million In CCP § 128.5 Sanctions Went POOF! On Appeal, But RFA “Cost Of Proof” Sanctions Of Over $1 Million Stuck On Appeal

128.5 Sanctions Went Away Because It Did Not Apply To The Action Datewise, While RFA “Sanctions” Were No Abuse Of Discretion Even Though Substantial In Nature.

            First of all, we hope all of our readers are safe—this pandemic has presented unprecedented, bizarre consequences, but hope you are well.  We are happy to report that the California appellate courts are doing a good job staying in business, which also means we get to post on the decisions which emanate from our busy California appellate courts.  So, let’s go to it on the one unpublished decision on April 28, 2020 dealing with fee issues.  Co-contributor Mike also wants to thank his paralegal, Shanna Strader, for her great work in making sure posts are timely made—not to mention that she writes some of them!

            In Estate of Khatri, Case No. A150546 (1^st Dist., Div. 3 Apr. 28, 2020) (unpublished), two brothers were involved in a long-running dispute over the divisions of family assets, primarily six commercial properties after their mother died.  Mother left all of the assets to one son, which triggered a brother-against-brother fight which featured undue influence allegations by the brother left out.  Ultimately, ousted brother lost after a 16-day bench trial.  Winning brother then sought fees under two regimes—CCP § 128.5 (sanctions) and CCP § 2033.420 (costs-of-proof sanctions for denying discovery requests for admissions without substantial justification).  The probate court was persuaded by winning brother’s submissions, giving him full relief as follows: (1) 128.5 motion -- $1,497,680.75 in attorney’s fees and $346,874.19 in costs; and (2) 2033.420 motion -- $865,559.25 in fees and $138,621.55 in costs.  As you can predict, losing brother appealed.

            The result on appeal?  A split verdict, but probably not the one desired by the losing brother/appellant.

            Initially, the good news for appealing brother.  He was able to get the 128.5 sanctions reversed as a matter of law.  The reason was that these sanctions only applied to actions filed (not pending) after January 1, 2015, the effective date of § 128.5 after some legislative “sunsets,” such that it simply did not apply to the case—all as clarified through 2017 amendments which were only declaratory of the result reached by the appellate court here.

            But now the bad news.  The appellate court found that the lower court did not abuse its discretion in awarding the costs-of-proof sanctions totaling over $1 million.  Losing brother did not meet his burden in showing that any good faith/substantial justification exceptions applied to his denials on critical undue influence requests for admissions—all the more so given his lack of medical proof to show there was undue influence.  So, substantial fees/costs affirmed on appeal.

Discovery, Sanctions: $7,862.50 Sanctions Award Against Cross-Complainant In Insurance Case Affirmed On Appeal For Presenting An Unsuccessful Motion To Augment An Expert Witness Designation

Cross-Complainant’s Dilatory Conduct Justified The Sanctions Award.

            Code of Civil Procedure section 2034.630 states that a trial court “shall impose a monetary sanction . . . against any party, person, or attorney who unsuccessfully makes or opposes a motion to augment or amend expert witness information, unless it finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.”   This section was front and center in Black v. Fireman’s Fund Ins. Co., Case No. A155428 (1^st Dist., Div. 1 Apr. 23, 2020) (unpublished).

            In this case, a cross-complainant/insured brought an insurance bad faith suit against cross-defendant/insurer Fireman’s Fund.  He designated two expert witnesses.  Fireman’s Fund tried for over 1 ½ years to depose one of these experts, although the expert had informed cross-complainant that he would not provide expert testimony unless paid.  A trial judge ordered the deposition of the expert under penalty of exclusion of his testimony at trial or otherwise.  Cross-complainant did not produce the expert before the expert discovery cut-off and then brought a motion to augment the expert designation based on the claim that he needed time to find/designate a new expert.  The trial judge denied the motion and imposed $7,862.50 in sanctions under section 2034.630. 

            Cross-complainants’ appeal of the sanctions order was unsuccessful.  The record showed, quite clearly, that the initially designated expert was not going to provide testimony until he was paid, and cross-complainant showed no “substantial justification” for his delay in resolving the matter or designating a new expert for 1 ½ years.  Beyond that, the appellate court found this event was part and parcel of dilatory conduct by cross-complainant, who had obtained 6 continuances of the trial date during the course of the litigation.  Sanctions order affirmed.

Sanctions: $5,185.00 Section 128.7 Sanctions Award Against Plaintiff For Legally Frivolous Lawsuit Against Successor Attorney Defendant Who Did Not Pay Plaintiff’s Medical Lien When His Client’s Case Resolved Affirmed On Appeal

Second District Finds Gilman Precisely On Point.

            In Medfin Manager, LLC v. Carrazco, Case No. B292644 (2d Dist., Div. 3 April 6, 2020) (unpublished), a personal injury patient signed contractual liens giving the hospital that provided some of his medical care a lien against any settlement or judgment he might recover in litigation for his injuries.  Patient’s original attorney in the personal injury case signed consents for payment of the medical lien.

            The hospital assigned its lien documents to Plaintiff, and the original attorney referred the personal injury case to Defendant/successor attorney.  When successor attorney settled the case, he successfully negotiated with patient’s medical providers for a reduction of their liens, but Plaintiff would not agree to a reduction of its lien.  Patient then instructed successor attorney not to pay Plaintiff, and acknowledged that the unpaid medical bills were his responsibility.

            Plaintiff sued successor attorney, patient, and original attorney for breach of contract and fraud, and successor attorney filed a section 128.7 motion for sanctions against Plaintiff and its attorneys.  Successor attorney argued that he was not contractually bound to Plaintiff because he never signed the lien, and that the fraud cause of action alleged no facts as to his involvement.  Additionally, Plaintiff’s attorney agreed in a letter to successor attorney that there was no cause of action for fraud against him, but failed to prepare a dismissal of the fraud cause of action as promised.

            As to the breach of contract claims, Plaintiff argued that successor attorney was bound by the medical liens/consents by becoming attorney of record.  The trial court was not persuaded – finding successor attorney under no obligation to a lien he did not sign pursuant to Gilman v. Dalby (2009) 176 Cal.App.4^th 606 [discussed in our August 13, 2009 post].

            In Gilman, a patient and his original counsel signed a medical lien, but the successor attorneys did not.  The successor attorneys were merely aware of the liens, but mere awareness of the liens did not create a contractual obligation on the successor attorneys’ part. 

            Plaintiff appealed the trial court’s granting of successor attorney’s 128.7 motion and the $5,185 in sanctions awarded against it, but the 2/3 DCA affirmed – finding Gilman precisely on point, and Plaintiff’s two causes of action against successor attorney objectively unreasonable and legally frivolous. 

Discovery, Sanctions: Louisiana Federal District Judge Assesses Fees And Sanctions Against Defendant And/Or Its Attorney For Deposition Interruptions, Speaking Objections, Instructions To Not Answer, Witness Coaching, And Failure To Prepare The Deponent

Various Fees And Sanctions Ordered Under FRCP 37.

            We sometimes blog on cases outside of California.  This one caught our eye because it received press in a March 30, 2020 post by Debra Cassens Weiss in the ABA Journal.

            In REC Marine Logistics, LLC v. Richard, No. 19-11149 (E.D. La. Mar. 27, 2020) (Docket Doc. 93) [linked here], U.S. Magistrate Judge Dana M. Douglas confronted plaintiff’s request for attorney’s fees for bringing an earlier motion to compel and then fees/costs/sanctions under FRCP 37 for defense counsel’s dilatory discovery actions and his tactics during a noticed deposition in a maritime injury case.  Magistrate Judge Douglas initially awarded $3,675 in fees for an earlier motion to compel, which then turned the focus upon defense counsel’s conduct during the deposition.  He made 145 interruptions during questioning, 16 instructions to the witness not to answer, 106 objections (including 52 speaking objections), and 11 instances of interrupting to ask his own questions during the cross-examination of the witness, not to mention that the witness was coached and was unprepared for the deposition.  Defense counsel appeared on 170 pages of the 255-page deposition transcript.  Based on this conduct, the magistrate judge ordered the defendant and his attorney to pay the attorney’s fees and costs associated with the deposition and pay plaintiff’s fees associated with the sanctions motion, as well as defense counsel paying individual sanctions in the amount of $1,000.  Wisely, defendant did not oppose the fees/sanctions motion brought by plaintiff.

            BLOG OBSERVATION—The seminal federal case for deposition protocol is Hall v. Clifton Precision, 150 F.R.D. 525 (E.D. Pa. 1993).   A Southern District of California district judge in the past issued a Hall-type order.  (See Vestin Realty Mortgage II Inc. v. Klaas, No. 08-CV-2011 (S.D. Cal. Oct. 25, 2010).) However, some of the Hall protocols have been found to be too inflexible such that more moderate approaches are followed.  (See Chesbrough v. Life Care Centers, Inc., 2014 WL 861200 (Mass. Super. Feb. 14, 2014) at *2, 3, 5 [especially addressing attorney conferences with deponents during legitimate breaks, not deposition special interruptions].). District courts are generally not impressed with conferences in depositions where a question is pending unless a privilege/trade secret/privacy issue is involved, frequently sanctioning for such interruptions.  (See, e.g. New Age Imports, Inc. v. VD Importers, Inc., 2019 WL 1427468, at *3 (C.D. Cal. Feb. 21, 2019) [motion to compel second deposition of witness due to in-deposition conference was “substantially justified” so as to support an award of costs]; Horowitz v. Chen, 2018 WL 4560697, at *3-5 (C.D. Cal. Sept. 20, 2018) [attorney and client “repeatedly left the room together while a question was pending;” costs and redeposition ordered].)

Appealability, Sanctions: Attorney, Although Not Appealing In Appeal By Client, Has Standing To Proceed Unless Prejudice To Opposing Party

California Supreme Court Indicate Prejudice, Not Per Se, Analysis Is Applicable.

            As indicated in our Year-End 2019 cases relevant to this blog, the only pending case on sanctions issue was still pending for decision.  Well, it is in.

            In K.J. v. Los Angeles Unified School Dist., Case No. S241057 (Cal. Supreme Ct., Jan. 30, 2020), the California Supreme Court decided that a sanctions motion against an attorney, although only appealed by the client, was proper where the circumstances showed that the attorney’s interests were at stake and no prejudice attended to the other side.  Again, prejudice—a key focal concern in any appeal—was front and center in the determinative ruling by our state supreme court.

Sanctions, Section 998: 1/5 DCA Reversed And Remanded CCP § 998 Award In Favor Of Defendants, Although Reversing As A Matter Of Law CCP § 128.5 Sanctions Against Plaintiff

Lower Court’s 998 Award Needed Recalculation; 2017 Amendments To Section 128.5 Rendered That Award Against Plaintiff Invalid As A Matter Of Law.

            In Lee v. Harjono, Case No. A151656 (1^st Dist., Div. 5 Jan. 23, 2020) (unpublished), plaintiff (a lawyer) sued defendant driver and his wife in a car accident case, rejecting some CCP § 998 offers by the defense.  The jury found driver to be not negligent, even though defendants had to engage an expert witness as part of their defense.  The trial judge awarded defendants $2,100 out of a $14,516 expert witness fee request under section 998.  The lower court also imposed $3,070 out of a requested $31,809 in CCP § 128.5 sanctions against plaintiff for his frivolous prosecution of an unfair competition claim against defendants. 

            Both of those awards were reversed on appeal.

            CCP § 998 Award.  There were multiple problems with the section 998 award, likely compounded by voluminous filings by both sides.  The trial court awarded $1,400 for expert costs incurred before the first 998 offer was made, something which was improper.  Then, the lower court only awarded $700 out of the remaining request despite finding that the costs itemizations were reasonable.  The appellate jurists scratched their collective heads, sending the matter back for a recalculation because it could not make sense of what was awarded.

            CCP § 128.5 Sanctions Award.  This one was reversed altogether based on 2017 amendments to section 128.5 requiring safe harbor notice and proof of subjective intent.  The appellate panel found that the 2017 amendments clarified existing law, rather than change it, such that it applied to transactions predating its enactment.  Because the sanctions award could not be justified under the 2017 amendments, it had to be reversed as a matter of law.

Arbitration, Sanctions: 4/3 DCA Affirms $50,000 Code Civ. Proc. Section 128.5 Sanctions Awarded Against Client And Attorney For Their Frivolous Litigation and Dilatory Tactics

Broad Language In The Parties’ Retainer Agreement Authorized Arbitrator’s Review Of Ancillary Matters – Such As Litigation Conduct Rationally Related To The Underlying Dispute.

            In ATG Electronics, Inc. v. The Mulcahy Law Firm, Case No. G056931 (4^th Dist., Div. 3 January 16, 2020) (unpublished), Law Firm claiming Former Client owed almost $100,000 in outstanding legal bills demanded arbitration pursuant to the parties’ retainer agreement. In response, Former Client filed a complaint in O.C. Superior Court alleging fraud, breach of fiduciary duty, claims for restitution and declaratory relief – seeking compensatory and punitive damages, and attorney fees.  Law Firm successfully moved to compel arbitration. Former Client then filed a counterclaim against Law Firm, with the same allegations, and a response asserting numerous affirmative defenses against Law Firm’s claim.  In the end, the arbitrator found the case to be a simple dispute about unpaid attorney fees, Former Client’s actions as a “despicable effort to ‘stiff’” Law Firm, Former Client’s affirmative defenses nothing but “red herrings” intended to avoid payment of the legal fees, and Law Firm’s fees as “reasonable and extremely necessary” – awarding Law Firm $119,931.15 in damages, arbitration fees and future interest.  Additionally, the arbitrator awarded $25,000 in monetary sanctions, under Code Civ. Proc. § 128.5, against Former Client and its counsel for what he found to be “bad faith activities or tactics that are frivolous” for the lawsuit filed in superior court, and another $25,000 for asserting affirmative defenses and pursuing a counterclaim that were meritless.

            Former Client (and its counsel) fared no better on appeal of the sanctions award.  In a 3-0 opinion authored by Justice Moore, the 4/3 DCA found the arbitrator had not exceeded his authority – given the broad language in the arbitration provision of the parties’ retainer agreement did not limit the arbitrator’s review and thereby allowed his review of ancillary matters.  Additionally, pursuant to the principles underlying Moncharsch v. Heily & Blase (1992) 3 Cal.4^th 1 and Heimlich v. Shivji (2019) 7 Cal.5^th 350 [reviewed in our May 30, 2019 post], the 4/3 DCA reminded that an arbitrator’s decision is generally not reviewable for errors of fact or law, and that by voluntarily agreeing to arbitration in their retainer agreement, the parties had agreed to bear the risk of uncorrectable legal or factual error in return for a quick, inexpensive, and conclusive resolution to their dispute.