CALIFORNIA ATTORNEY'S FEES

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            Estate of Moshier, Case No. G057076 (4^th Dist., Div. 3 June 29, 2020) (unpublished) involved a will contest brought by decedent’s adoptive brother and three adult nieces against decedent’s wife.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.

Appealability, Discovery, Sanctions: $3,456.70 In Fee Sanctions Based On Denial Of Postjudgment Discovery Order Upheld On Appeal

Motion Denying Discovery Order Is Nonappealable, But 2/8 DCA Treated It As Mandate Petition; CCP § 128.5 Principles Were Not Involved, Because Discovery Sanctions Were At Issue Instead.

            The 2/8 DCA in Dalessandro v. Mitchell, Case No. B293472 (2d Dist., Div. 8 Dec. 17, 2019 unpublished), but certified for publication on January 3, 2020, dealt with a plaintiff who had a postjudgment discovery motion denied for failure to affix postage to the demand (making service improper) and who was also assessed (along with his counsel) with discovery sanctions of $3,456.70.  Plaintiff appealed.

            On a liminal jurisdictional issue, the appellate panel did agree that the postjudgment discovery was not appealable, acknowledging a split in authority but siding with the non- appealability decisions.  However, it did exercise discretion to treat the appeal as a mandate petition so the merits could be heard expeditiously.

            Because there was no postage attached to the discovery demand, service was improper such that sanctions were warranted.  Plaintiff’s argument that there was noncompliance with CCP § 128.5(f) by failing to give “safe harbor” leeway was bogus because the lower court issued fees as sanctions for discovery abuse.  Nothing demonstrated that an opposing party had to meet and confer with respect to alerting the demanding party to defects in discovery requests (such as improper service).  Finally, opposing party did request sanctions in his motion to compel opposition, a perfectly valid way of presenting the issue to the lower court. 

Sanctions: Fourth District Affirms Monetary Sanctions Imposed Against Plaintiffs And Their Attorney For Abuse Of The Discovery Process

Appealing The Order Without A Reporter’s Transcript And With Only Partial Excerpts From The Clerk’s Transcript Proved To Be A Fatal Flaw.

            In Williams v. Hernandez, Case No. E071599, (4^th Dist. Div. 2 October 28, 2019) (unpublished), plaintiffs and their attorney challenged a monetary sanctions order issued against them for repeated failures to respond to discovery requests and attend scheduled depositions.

            To support their position, they provided the Fourth District with an inadequate record and no reporter’s transcript.  As a result, the 4/2 DCA deemed their argument forfeited.

            Additionally, the 4/2 DCA found no abuse of discretion upon review of the partial record that was provided.  Rather, the limited record established the abuse of the discovery process and provided ample grounds for the trial court’s order.

            BLOG COMMENT:  If you are appealing an order on an abuse of discretion standard, as here, it is essential to provide an adequate record for review – including a reporter’s transcript.

POOF!, Sanctions: $70,548.95 CCP § 128.5 Order Against Most Plaintiffs Reversed Based On Erroneous Denial Of Relief From Jury Trial Waiver

Also, Another Plaintiff Was Not Give Safe Harbor Notice In Time To Do Anything—So, A Reversal.

            The importance of the jury trial right was front and center in Mackovksa v. Viewcrest Road Properties, Case No. B288778 (2d Dist., Div. 7 Sept. 18, 2019) (published), although the ultimate merits reversal also made a reversal of CCP § 128.5 sanctions against certain plaintiffs an ensuing result on appeal.

            What happened here was that a lower court would not grant relief from a jury trial waiver where the plaintiff side did not post jury fees at the case management conference.  The case was then transferred to a different trial judge, who conducted a bench trial, ruled in favor of the defense, and then imposed $70,540.95 in CCP § 128.5 sanctions against plaintiffs for prosecuting a frivolous action, overruling objections that no safe harbor period compliance took place and that the sanctions motion was untimely filed. 

            Plaintiffs wisely appealed.

            The 2/7 DCA, given that the appeal focused on the inviolate constitutional right to a jury trial, reversed the merits judgment and the sanctions award. 

            Plaintiffs did not challenge the jury waiver by writ, opting for an appeal.  There appears to be a split in authority on whether a party has to show actual prejudice rather than presumed prejudice when that party appeals versus pursing a writ.  The Court of Appeal found that actual prejudice did not have to be shown when the normal appeals route was chosen.  Plaintiffs were entitled to a jury trial they did not obtain.

            With respect to sanctions against most of the plaintiffs, a reversal was required because it was founded on a bench trial which should not have occurred.  As to another plaintiff, no safe harbor period was given such that the sanctions award went POOF! on that basis.

Sanctions: Under 2014 Version Of CCP § 128.5 (Objective Standard Only), Trial Judge Correctly Imposed Sanctions Against Plaintiff For Filing A Complaint Without Evidentiary Support

Sanctions Order Was $27,253.51 In Fees/Costs, Out Of A Requested $36,304.11.

            We have seen an uptick in appeals involving CCP § 128.5 in the last several months, with California’s intermediate appellate courts dealing with the differences in the 2014 and 2017 versions of the statute.  In Avalanche Funding, LLC v. Swickard, Case No. C083954 (3d Dist. Sept. 12, 2019) (unpublished), the Third District was dealing with the 2014 version of section 128.5.

            The case involved an underlying dispute over grazing rights on rangeland in Lassen County, with the Third District (as the Fifth and the Second, Division 6) frequently addressing cases in more rural, agricultural areas. 

            In this one, the trial judge wanted to see evidence that a reservation of grazing rights was in plaintiff’s chain of title, sustaining a demurrer with leave so as to inspire plaintiff to request a dismissal of its complaint without prejudice eight days later.  Defendants moved for section 128.5 sanctions against plaintiff, requesting $36,304.11 in attorney’s fees and costs.  The trial judge granted the motion, awarding instead $27,253.51 ($25,000 in fees and the remainder in costs).

            The Third District affirmed.  The 2014 version only required an objective standard (rather than both objective and subjective), but plaintiff’s complaint was filed without evidentiary basis to claim defendant had no grazing rights reservation given that the right to pasture cattle on land belonging to another is a profit a prendre of indefinite duration.  That plaintiff dismissed its action without prejudice was fine, with nothing demonstrating the trial judge was punishing plaintiff for exercise of that right.  The amount of the sanctions was no abuse of discretion, given that the trial judge did reduce the request by defendant.

            BLOG OBSERVATION—In a footnote, the Third District observed that the 2017 amendment to section 128.5 may have resulted in a change such that both objective and subjective standards had to be satisfied, but it did not have to reach that issue.  We commend readers to consult Marriage of Sahafzadeh-Taeb and Taeb, Case No. A152178 (1^st Dist., Div. 2 Aug. 26, 2019) (published) [discussed in our August 26, 2019 post], which held that the 2017 amendment does have both objective and subjective standards needing to be satisfied.

Sanctions: Lack Of Reporter’s Transcript Of Trial Proceedings Doomed Challenge To CCP § 128.5 Sanctions Order For Plaintiff Prosecuting A Frivolous Discrimination Claim

Trial Judge Awarded $36,037.54 In Fees (Out Of Requested $298,649) And $18,524.13 (Out Of Requested $54,986.19) To Defendant, Assessed Jointly And Severally Against Plaintiff And Her Attorneys.

            The lack of an adequate record doomed an abuse of discretion challenge by plaintiff to a CCP § 128.5 sanctions order in Cabrera v. Popchips, Inc., Case No. B286222 (2d Dist., Div. 7 Sept. 11, 2019) (unpublished).

            What occurred is that plaintiff bringing a multi-count FEHA/discrimination case beat a defense summary judgment motion, but she lost on all counts when the jury returned a verdict in favor of two defendants.  The major business defendant Popchips brought a section 128.5 motion for bad-faith tactics against plaintiff and her attorneys based on the case being frivolous as demonstrated by the jury verdict, requesting $298,649 in attorney’s fees and $54,985.19 in costs.  The lower court granted the motion, but only with respect to the discrimination claim.  The sanctions order, made jointly and severally against plaintiff and her attorneys and in favor of Popchips, was for $36,037.54 in fees—12% of the request (unlike the defense advocating 75% of the total request)—and $18,524.12 in expert fees/costs.

            Plaintiff appealed, with the 2/7 DCA affirming. 

            Plaintiff first argued that the denial of the summary judgment motion was dispositive in showing there was no bad faith prosecution of the action.  Not so, said the appellate panel, because sometimes the unfounded nature of a case is only revealed after a trial and an adverse trial result.  (Rosenman v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, 91 Cal.App.4^th 859, 866 (2001); Bond v. Pulsar Video Productions, 50 Cal.App.4^th 918, 923 (1996).)  The other principal argument was that the sanctions order was an abuse of discretion, but this one was submarined by plaintiff’s failure to provide a reporter’s transcript of the trial proceedings (presenting only selective trial exhibits, with no indication of which ones were admitted into evidence) such that an inadequate record was presented for review of the issue.

Discovery, Sanctions: Failure To Designate The Deposition Video In The Appellate Court Doomed Challenge To $11,000 Sanction For Unilaterally Terminating A Videotaped Deposition

Motion To Augment The Record To Include The Video, One Day After The Appellate Argument, Was Deemed Untimely.

            Genesis Media, LLC v. Misle, Case No. B294620 (2d Dist., Div. 3 Sept. 10, 2019) (unpublished) is an appeal from a discovery sanction where an inadequate appellate record and untimely motion to augment sealed the fate of the sanctioned parties.

            However, the facts are interesting to say the least. 

Plaintiff Genesis Media, whose founder was Howard Misle, filed a breach of contract action against Ownzones Media and an individual in connection with Ownzones’ agreement to produce and operate a cannabis-focused media and lifestyle business.  Defendant Ownzones noticed Mr. Misle’s videotaped deposition in Las Vegas at the defense firm which had an armed security guard in the firm’s lobby.  A kerfuffle then ensued, with Mr. Misle apparently leaving the deposition room before any question could be answered based on the security guard’s presence in the law firm lobby.  Ultimately, plaintiff’s attorney terminated the deposition because the security guard was not removed from the lobby.  Plaintiff moved to compel the deposition and for resultant sanctions, even though no protective order motion was filed by the defense (although defense counsel claimed he suspended the deposition in order to seek a protective order).  The lower court reviewed the deposition video, granting the motion to compel and sanctioning Mr. Misle, plaintiff, and plaintiff’s counsel, jointly and severally, in the reduced amount of $11,000—expressly finding that the deposition video confirmed defendant counsel’s account of events leading to the motion to compel. 

            Mr. Misle and plaintiff’s counsel appealed, but they failed to designate the deposition video.  Big mistake.  The sanctions award was affirmed based on an inadequate record.  However, appellants obviously sensed at the appellate argument that they should have designated the video, bringing a motion to augment the record with the video one day after the oral argument.  This was denied as untimely.  (Regents of University of California v. Sheily, 122 Cal.App.4^th 824, 826 n. 1 (2004).) 

Sanctions: 1/1 DCA Clarifies That Subjective Bad Faith Is Required Under CCP § 128.5, With Only Objective Bad Faith Required Under CCP § 128.7

San Diegans for Open Government Decision Is No Longer Good Law Under Section 128.5.

            Looks like Marriage of Sahafzadeh-Taeb and Taeb, Case No. A152178 (1^st Dist., Div. 1 Aug. 26, 2019) (published) has finally clarified the differences in “bad faith” now required for the version of CCP § 128.5 in effect under 2017 urgency litigation.

            Here is what the Court of Appeal had to say:

            “We publish this opinion to make explicit that no vestige remains of the holdings in San Diegans for Open Government v. City of San Diego (2016) 247 Cal.App.4th 1306 (San Diegans) concerning the requirements of section 128.5.  Among other things, San Diegans held that an objective standard applies when determining whether a party’s or an attorney’s conduct is sanctionable under section 128.5, as it does under section 128.7. (Id. at pp. 1314–1317.) As we explain, section 128.5 has since been amended to specifically overrule San Diegans on this point. . . .  The law concerning the kind of conduct sanctionable under sections 128.5 and 128.7 has, thus, largely returned to its pre-San Diegans state—with a more stringent standard requiring subjective bad faith applicable to section 128.5, and a lesser standard, requiring only objective bad faith, applicable to section 128.7.”  In footnote 2 of its opinion, the 1/1 DCA also observed this (although not central to its decision): “These amendments also abrogated another of San Diegans’ holdings—that section 128.5 did not incorporate the safe harbor provisions of section 128.7. (Nutrition Distribution, LLC v. Southern SARMs, Inc. (2018) 20 Cal.App.5th 117, 126–130.)”

            What happened here is that attorneys on both sides of a dissolution dispute said they were ready for trial in a hearing such that a readiness conference was excused.  On the date of the scheduled trial, wife and her attorney were present, but only husband appeared, explaining to the lower court that his attorney was engaged in another trial which ran over.  The family law judge entertained briefing and did not buy it, assessing $3,575 in § 128.5 sanctions, $1,575 against husband and $2,000 against husband’s attorney.

            The 1/1 DCA affirmed the award against husband’s attorney, but it reversed the award against husband.  It agreed that, in light of the 2017 urgency amendments, section 128.5 requires subjective bad faith rather than objective bad faith.  However, the award was sustained against husband’s attorney because she engaged in unjustifiable dereliction of her obligations conducted with an improper purpose, given that she should have known the other matter might spill over and made no attempt to notify opposing party/the family law judge.

            The lower court’s order was not procedurally improper because it did recite the factual circumstances behind the order in sufficient specificity.  However, there was no evidence that husband engaged in subjective bad faith, because nothing showed he knew of his attorney’s prior representation to the court on readiness and husband actually appeared to relay what his attorney had told him about not being able to attend. 

Sanctions: Failure To Raise Safe Harbor Argument In Opposition To CCP § 128.5 Sanctions Before Judicial Referee Was A Waiver

However, A Waiver—But Only One Endorsed Through A 2-1 Panel Opinion Split By The 2/5 DCA.

            1100 Wilshire Property Owners Assn. v. Wilshire Commercial LLC, Case No. B285336 (2d Dist., Div. 5 Aug. 23, 2019) (unpublished) is a case where a court-appointed referee sanctioned plaintiff HOA $31,065 for taking a frivolous legal position in connection with a board of directors election, one at odds with the referee’s own previously expressed interpretation of HOA election cumulative voting rules.  (The winning side asked for $117,075.50 in fees and costs.)  Referee’s sanction award was affirmed on appeal, but drew a split opinion on whether the winning side had to provide “safe harbor” notice under CCP § 128.5 given the intermediate difference of opinion on the safe harbor issue as expressed in San Diegans for Open Government v. City of San Diego, 247 Cal.App.4^th 1306, 1316-1317 (2016) and Nutrition Distribution, LLC v. Southern SARMs, Inc., 20 Cal.App.5^th 117, 126-127 (2018).  The majority believed that the issue was waived, because the losing side did not even raise it—"Such arguments to depart from precedent are routinely made, and made precisely for the reason why we hold forfeiture applies:  to preserve an issue for appeal.”  (Slip Op., pp. 15-16 n. 10; Justice Baker, author of majority opinion.)  In dissent, Justice Moor would have found no waiver applied because San Diegans was the only decision around such that losing side’s failure to object was forgivable.

Family Law, Sanctions: Father Making Another Sanctions Motion After Trial Judge Already Ruled On Prior Request Was Properly Denied

“A Party Cannot Be Sanctioned Twice For the Same Misconduct.”

           Presiding Justice Gilbert, who has a unique writing style, summed up the “end result” in Marriage of Anka & Yeager, Case No. B289610 (2d Dist., Div. 6 Aug. 19, 2019) (unpublished) this way: “A party cannot be sanctioned twice for the same misconduct.”

            In this case, a trial judge earlier imposed sanctions against a mother and her attorney to the tune of $50,000, jointly and severally (payable to the superior court), for disclosing confidential information contained in a child custody evaluation report, which authorizes a lower court to impose monetary sanctions under Family Code section 3111(d).  Mother and her attorney appealed, with the 2/6 DCA affirming the sanctions award against the attorney, but not as to mother.  While the appeal was pending, father made a motion for attorney’s fees and costs for the appeal as additional sanctions, which was denied by the trial judge. 

            The 2/6 DCA affirmed the “further” sanctions denial.  The problem here was that the trial court had previously imposed sanctions for attorney’s conduct, such that “[i]t cannot now impose additional sanctions for the same misconduct.”  (Sabado v. Moraga, 189 Cal.App.3d 1, 10-11 (1987).)

Prevailing Party, Sanctions, Special Fee Shifting Statute: Motel Owner And City Properly Found To Not Have Prevailed For Purposes Of Substandard Building Fee-Shifting Statute

Also, Motel Owner Properly Hit With Opposition Fees For Denied CCP § 128.5 Motion.

            In City of South Lake Tahoe v. Cobrae, Case No. C083568 (3d Dist. Aug. 5, 2019) (unpublished), City of South Lake Tahoe filed a petition seeking appointment of a receiver against a motel owner based on allegations that he had a substandard building in violation of several building violations.  Before the hearing on the petition, a property inspection demonstrated that nearly all the violations had been corrected, although there was conflicting evidence as to whether the corrections occurred before or after the filing of the petition.  City dismissed its petition with prejudice, with both parties filing dueling motions for attorney’s fees under Health and Safety Code section 17980.7(c)(11), which allows fees and costs to be awarded to a prevailing party under the Health and Safety Code building violation scheme.  The trial court denied fees to either party, although it did award City some fees for opposing a denied CCP § 128.5 motion brought by motel owner.

            All these determinations were affirmed by the Third District on appeal.

            It first dismissed an issue preclusion argument based on the petition dismissal, determining that this dismissal did not usurp the lower court’s ability to adjudge attorney’s fees and it was not established that the violations were corrected before the petition was filed.  The trial court determined that neither side prevailed on a pragmatic basis, because City did not obtain its receiver/obtain demolishment of the motel while motel owner did have to complete repairs and avoided the implied threat of demolition—good news and bad news for each.

            This pragmatic view of things was no abuse of discretion, according to the Third District.  With respect to the award of opposition fees to City, this was expressly authorized by CCP § 128.7(c)(1), and no safe harbor notice was required because City had no choice but to oppose such that giving notice to the other side would not mean anything (as well as not required under section 128.7(c)(1)). 

Sanctions, Section 1717: Failure To Provide Safe Harbor Notice And Combining 1717 Fee Request With Sanctions Motion Rendered $176,869 Award Infirm

Prelitigation Conduct Does Not Justify 128.5 Sanctions Award, But Combo Motion Also Justified The Result.

            In Broadcast Music, Inc. v. Structured Asset Sales, LLC (Currency Corp.), Case Nos. B272418/B278379 (2d Dist., Div. 2 July 30, 2019) (unpublished), the appellate court reversed a $176,869 CCP § 128.5 sanctions award against a client represented by co-contributor Mike.  His client appealed, obtaining a reversal with the benefit of experienced co-appellate counsel.

            The sanctions award was reversed for two primary reasons.  First, the moving party did not provide the 21-day safe harbor requirement of Nutrition Distribution, LLC v. Southern SARMs, Inc., 20 Cal.App.5^th 117, 123-130 (2018).  The losing side argued that the safe harbor provision did not apply because the opposing party’s conduct could not be withdrawn or corrected.  However, its authorities only related to pre-litigation conduct (which was the germane alleged conduct), versus pendency of litigation conduct, such that they did not support the argument.  Second, and alternatively, the respondent did not make the sanctions motion separately from a combined Civil Code section 1717 motion such that it was not permissible.  Respondent argued that section 1717 gave an independent ground to sustain the fees award, but the problem was that the sanctions motion was not authorized and that section 1717 does not authorize sanctions fees.  No appellate fees awardable to respondent because (1) no section 1717 fees were awarded at the trial level, and (2) the appellate court could not award for final appeals results which were not the subject of prior fee requests. 

            BLOG OBSERVATION—Mike’s co-counsel on appeal were Edward A. Hoffman (lead counsel), F. Jay Rahimi, and Matthew D. Kanin, all of whom he enjoyed working with along the way.

Sanctions: $16,000 CCP § 128.7 Sanction Against Successor Counsel, Based On Motion Not Specifying The Improper Conduct Before He Formally Substituted In, Was Reversed

Simply Filing A Declaration Saying “Retained” Was Not Tantamount To Presentation Of Complaint Filed By Predecessor Counsel.

           Timing can be everything, and it was in the next case considering a CCP § 128.7 sanctions award in Primo Hospitality Group, Inc. v. Haney, Case No. B283030 (2d Dist., Div. 5 July 5, 2019) (published).

            Predecessor counsel had filed a legal malpractice action against certain attorneys relating to a commercial lease water intrusion matter in which there was a $2.5 million-plus award against the malpractice plaintiffs.  (About half of total award was attorney’s fees.)  After the prior attorney successfully withdrew, malpractice plaintiffs retained another attorney despite the existence of a slew of section 128.7 motions.  Successor counsel finally formally substituted into the case, but he did not file a new complaint and only filed a previous declaration saying he was “retained” with respect to the germane motion for sanctions.  Successor counsel filed opposition to two summary judgment motions, with one being dispositive on a causation defense.  Then, based on the last section 128.7 motion, the lower court sanctioned successor counsel to the tune of $16,000.

            Successor counsel’s appeal was successful.  Timing was everything here.  Successor counsel’s filing of a “retention only” declaration was not the equivalent presentation of a complaint to the court, which had been signed by earlier counsel.  Although the summary judgment opposition might have been sanctionable, the relevant sanctions motion did not specify that conduct as the basis for sanctions.  With respect to the time of filing the “retention only” declaration, it was not crystal-clear successor counsel was proceeding on the extant complaint, based on reasoning in the federal decision of Bakker v. Grutman, 942 F.2d 236, 240 (4^th Cir. 1991).  Sanctions award reversed.

Sanctions: Although Lower Court’s CCP § 128.5 Order Failed To Be Sufficiently Detailed In Writing, Bad Faith Finding Became Law Of The Case For The Remand Proceeding

$6,400 Sanctions Award Against Attorney Was At Issue For Going Away On A European Vacation Rather Than Reporting For Trial.

            In Mid-Centry Insurance Company v. Mazarei, Case No. G056643 (4^th Dist., Div. 3 June 27, 2019) (unpublished), plaintiff insurer was suing to recoup defense expenses to an insured, with the lower court determining that no duty of defense was owed.  That meant the matter was going to trial to see what should be reimbursed to the insurer.  The trial was continued several times, with defendants’ counsel not showing up for trial after losing an ex parte continuance request based on a fictional medical condition attributed to one of the defendants.

One of the defendants did show up for trial call, prompting the lower court to continue the matter for an OSC re sanctions against defense counsel and recognition that trial had to be continued because defendants had been “stranded.”

           Defense counsel did appear at the OSC, with the trial court imposing $6,400 in sanctions under CCP § 128.5.  However, the sanctions order was not detailed as required under section 128.5 such that a remand was in order.  But there was one important caveat:  given that the record below did show bad faith, that finding became law of the case and did not have to be revisited on remand.  (West Coast Development v. Reed, 2 Cal.App.4^th 693, 706 n. 6 (1992).) 

            Acting Presiding Justice Bedsworth authored the 3-0 opinion for a 4/3 DCA panel. 

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

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

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

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

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

Sanctions: Respondents Concede That $1,110 Sanctions Award Against Opponent Had To Be Reversed Under CCP § 128.5

2/2 DCA Follows Sister Division 7’s Reasoning In Nutrition Distribution.

            In Kleidman v. Hilton & Hyland Real Estate, Inc., Case No. B285692 (2d Dist., Div. 2 April 26, 2019) (unpublished), $1,100 in sanctions were awarded against appellant and in favor of respondents based on a request in a motion to strike costs. Commendably, respondents conceded that the sanctions were improper because they were not made separately from the motion to strike costs and did not follow the 21-day safe harbor provision in CCP § 128.7(c)(1). That was based on the reasoning in Nutrition Distribution, LLC v. Southern SARMs, Inc., 20 Cal.App.5^th 117 (2018), a 2/7 DCA decision holding that CCP § 128.5 motions must comply with the section 128.7 safe harbor requirements. The 2/2 DCA apparently sides with Nutrition Distribution on this issue in the sanctions area.  

Family Law, Sanctions: Husband Losing Hiding Marital Asset Appeal Was Going To Have To Pay Attorney’s Fees And Frivolous Appeal Sanctions On Remand, Likely, In Some Amount

Rub Here Was That Trial Judge Stayed Any Fee Ruling Pending Determination Of Merits Appeal.

           Although procedurally different in nature, Marriage of Haghighat, Case No. G054993 (4^th Dist., Div. 3 April 17, 2019) (unpublished) demonstrates how family law judges and appellate justices can impose attorney’s fees and frivolous appeal sanctions when a litigant hides marital assets.

            Briefly stated, husband eventually lost a merits appeal that he hid marital assets, which under Family Code section 1101 allows for recovery of interest, attorney’s fees and costs, as well as the invested assets. However, the trial judge stayed any ruling on fees until the appeal on the merits decision was made.

            The 4/3 DCA affirmed the merits decision as well as remanded to the family law judge to determine the initial fees requested under section 1101 as well as sanctions for the frivolous appeal. Although normally the appellate court would determine the frivolous appeal sanctions, this one went back to the lower court to set given that it had to determine the initial fees which had to be awarded also. Justice Goethals authored the 3-0 panel decision.

In The News, Sanctions: Over $1 Million Sanctions Imposed Against Condo Plaintiff And His Lawyer In Cook County Superior Court

Sanctions Paid For Fees Incurred By HOA/Condo Board Members And For Increased HOA Insurance Costs.

            As reported by Debra Cassens Weiss in an April 8, 2019 post on the ABA Journal (on-line version), a Cook County, Illinois (Chicago) state court judge has sanctioned a condo litigant and his attorney over $1 million in sanctions to cover attorney’s fees/costs incurred by the HOA and a condo board member as well as to cover increased HOA insurance costs. Judge Margaret Ann Brennan found no basis for the claim and labeled the sanctioned persons’ actions as “simply obscene.” One of the defending attorneys, who has practiced 48 years in Cook County, observed that the sanctions award could be a record and was one like he had never seen before as far as amount.

Requests For Admissions, Sanctions: Defendants Properly Denied RFA Costs Of Proof Sanctions And Plaintiff Properly Denied CCP § 128.7 Request For Defense Bringing Frivolous Proof Of Costs/128.5 Sanctions Motion

Defendant Failed To Meet RFA Costs Of Proof Burden Or Segregate Out Costs For Actually Proving Truths Of Matters In A Demurrer Proceeding, While Plaintiff’s Request For 128.7 Sanctions In An Opposition Was Procedurally Infirm.

            I guess we can say that the results in Eng v. Brown, Case No. D072980 (4^th Dist., Div. 1 March 21, 2019) (unpublished) shows how meeting procedural requirements or burden of proof elements are keys in winning RFA costs-of-proof sanctions or CCP § 128.7 sanctions requests.

            In this one, the defendants prevailed after a jury trial against plaintiff, moving for costs of proof sanctions for request for admissions denials under CCP § 2033.420 and for CCP § 128.5 sanctions. In response, plaintiff asked for CCP § 128.7 sanctions against the defense for bringing frivolous motions, but only doing so through an opposition to the defense motions. The lower court denied the defense motions and never really ruled on plaintiff’s 128.7 request.

            The 4/1 DCA affirmed the defense appeal of the costs of proof sanctions denial and plaintiff’s cross-appeal of the 128.7 request denial.

            Defense Appeal. The problem with some of the costs of proof requests was that defendants failed to prove to the trial judge what they had to prove in the truth of certain facts with respect to RFA denials. They never submitted trial transcripts before the lower court so it could make the determination; simply supplying them on appeal did not help as far as showing how the lower court abused its discretion. However, the defense did win a demurrer with respect to a conversion cause of action for which certain RFA denials were made. Although expressing skepticism that CCP § 2033.420 could be used at a demurrer stage of proceedings, the appellate court assumed it could but found that the defense failed to isolate expenses relating to the denials at issue—instead, the defense sought all fees applicable in the demurrer proceeding, which did not meet its burden to segregate under section 2033.420.

            Plaintiff’s Cross-Appeal. The flaw in this cross-appeal was that Plaintiff never made a separate motion for 128.7 sanctions. Rather, plaintiff simply made a request for them in the opposition to the 2033.420/128.5 motions by the defense—a procedurally improper method of requesting 128.7 sanctions.

Sanctions: $5,000 CCP § 128.7 Sanctions Jointly And Severally Assessed Against Defendant And Its Attorney Reversed On Appeal (Which Was Treated As A Writ)

Appeal Treated As Mandate Petition, With Plaintiff Not Showing He, As In Pro Per Attorney, Incurred Any Independent Attorney’s Fees.

            In Electronic Universe, Inc. v. Superior Court (Reece), Case No. B285898 (2d Dist., Div. 3 Feb. 20, 2019) (unpublished), corporate defendant (which was suspended for failure to pay franchise fees) and its attorney were sanctioned, jointly and severally, $5,000 in sanctions fees under CCP § 128.7. However, the moving party was an in pro per attorney seeking § 128.7 attorney’s fees.   Defendants appealed, and that was a good move by them.

            First up was an appealability issue. The trial judge’s order was for just $5,000, with the appeal statute only allowing for an appeal unless it exceeded $5,000. The appellate court, as it can, decided to treat the appeal as a mandate petition in an effort to resolve the dispute. The 2/3 DCA panel further justified that this was the right move because the attorney defendant would have to report sanctions over $1,000 to the State Bar even if they were unwarranted such that it would be prejudicial to the attorney in the meantime (stay tuned, but you probably know what happened here—as if our titles did not give it away).

            Next up was the merits ruling after the appeal was treated as a writ for appellate review. The problem here was that the moving in pro per attorney never showed that he incurred any independent attorney’s fees or expenses as a result of the defendants’ conduct. (Key here was that the suspended defendant company revived its existence so as to proceed with the appeal.) That invoked the Trope v. Katz prohibition (see our Leading Case No 12), which does not allow in pro per moving attorneys to recover for their own fees in such situations. (Musaelian v. Adams, 45 Cal.4^th 512, 520 (2009).) Sanctions overturned on appeal.

Sanctions: CCP § 128.7 Sanctions Award Reversed Because Disputed Factual Issues Does Not Mean The Litigation Was Frivolous

$3,500 Sanctions Award Was At Issue.

            Justice Bendix, the author of Osborn v. Saucedo, Case No. B283605 (2d Dist., Div. 1 Feb. 1, 2019) (unpublished), reminds trial judges that litigation is not frivolous where there are disputed issues of fact even if they might be somewhat slim in nature. A $3,500 sanctions award under CCP § 128.7 was reversed because the dispute involved an oral agreement relating to tenant removal of fixtures separate from the written lease provisions. The disputed facts in such a scenario showed that the litigation was not frivolous in nature even though plaintiff lost.

Sanctions: $17,820 In CCP § 128.7 Sanctions Affirmed, Because No Subjective Bad Faith Finding Necessary, Unlike What Is Required Under § 128.5

However, No Additional Appellate Sanctions Imposed.

            In Horner v. Judges’ Retirement System, Case No. C084619 (3d Dist. Jan. 25, 2019) (unpublished), the Third District affirmed a $17,820 sanctions award imposed under CCP § 128.7, observing in the process that no showing of bad faith (only legal frivolousness) is necessary under this sanctions statute versus the bad faith showing required under § 128.5. However, it refused to impose additional appellate sanctions, based on this reasoning: “The easy case is where there is evidence the appeal was filed for an improper motive. The more difficult case is to distinguish misguided lawyering from an egregious misuse of the appellate process because we certainly do not want to punish a lawyer for full-throated advocacy on behalf of his or her client by raising a novel theory or nudging the development of the law” (Slip Opn. at p. 7), with there being enough advocacy to justify the result.

Sanctions: $12,000 In CCP § 128.5 Sanctions Were No Abuse Of Discretion For Unsuccessful Disqualification Motion On The Eve Of Trial

“Safe Harbor” Argument Might Have Worked, But It Was Waived Because Only Raised In Appellant’s Reply Brief.

            Hanna v. City of Long Beach, Case No. B281878 (2d Dist., Div. 3 Dec. 17, 2018) (unpublished) shows how good arguments can be lost if not timely raised. In this one, City and its counsel were jointly sanctioned $12,000 for unsuccessfully attempting to disqualify plaintiff’s counsel on the eve of trial. The appellate court found this award was no abuse of discretion. However, in its reply brief, City raised the argument that no “safe harbor” period had been afforded under CCP § 128.7 in line with the Second District’s Nutrition Distribution opinion [No. 19 on our 2018 Top 25 Decisions]. This might have been a winner, but City did not raise the contention until filing its appellant’s reply brief. Too late—the argument was waived!

Sanctions: 4/1 DCA Panel Agrees That CCP § 128.5 Sanctions Are Unwarranted Unless Moving Parties Comply With CCP § 128.7 “Safe Harbor” Requirements

Panel Disagrees With Prior 4/1 Panel In San Diegans for Open Government And Follows Contrary Result Reached By 2/7 DCA In Nutrition Distribution.

            We find the result in CPF Vaseo Associates, LLC v. Gray, Case No. D072909 (4^th Dist., Div. 1 Dec. 6, 2018) (published) both refreshing and correct in its reasoning. It goes to show you that appellate courts, even within different panels in a particular division, are willing to disagree among themselves.

            In this one, a 4/1 DCA panel decided that CCP § 128.5 moving parties must satisfy the 21-day “safe harbor” requirement of CCP § 128.7 in order to be procedurally entitled to sanctions—providing the opposing party an opportunity to withdraw the challenged conduct. This panel decided that a different 4/1 DCA panel’s decision to the contrary in San Diegans for Open Government v. City of San Diego, 247 Cal.App.4^th 1306 [reviewed in our June 9, 2016 post] was not the right result, siding instead with the reasoning by the 2/7 DCA in Nutrition Distribution, LLC v. Southern SARMS, Inc., 20 Cal.App.5^th 117, 130 [reviewed in our Feb. 3, 2018 post].

            BLOG OBSERVATION—Co-contributor Mike made this argument before a Los Angeles County Superior Court judge, who did not accept it because only San Diegans was published at the time. Likely, this decision may make unnecessary California Supreme Court review given that there is now an intermediate appellate court “plurality” requiring compliance with the “safe harbor” requirements.

Appealability, Sanctions: Later Order Vacating Default Judgment Was Appealable But Stayed Where Prior Appealed Order Had Required $27,968.75 In Attorney’s Fees And Costs To Vacate Default Judgment

Result Was Defendant Had 25 Days After Remittitur To Pay Fee/Costs Vacate Award, With Dissenting Justice Believing That The Fees/Costs Award Should Be Reduced Down By Another $17,250.

            This next case, F&S Investment Properties v. Nguyen-Stevenson, Case Nos. B281031/B281973 (2d Dist., Div. 1 Oct. 9, 2018) (unpublished), is a 2-1 decision regarding stay appealability issues and how much discretion attends a lower court’s decision to condition a vacate of a default judgment based on payment of $27,968.75 in attorney’s fees and costs.

            Plaintiff obtained a default judgment against defendant, who moved to set aside under CCP § 473.5 (a section allowing this be done but with fee and cost shifting as the trial judge deems just and proper). The trial court granted the vacate of the default judgment on condition that defendant serve an answer and pay $27,968.75 in fees and costs. Defendant did not pay and appealed this order; later, the trial court ordered the vacate default and reinstatement of the default judgment, a second order appealed from by defendant.

            The 2/1 DCA majority agreed that the first order was appealable and that it was ambiguous—it either said the judgment will be set aside upon payment or was set aside no matter what, such that is was appealable. However, the majority decided that the conditional payment order was no abuse of discretion but that the lower court had no jurisdiction to make the second order given that the first order was not one for payment of money per se such that it was stayed on appeal.   The result was that the plaintiff had to pay the money 25 days after the remittitur issuance or else the default judgment would be reinstated.

            In dissent, Justice Johnson found the $27,968.75 amount was an abuse of discretion because there was no proper allocation of fees and costs for work to actually get the default judgment vacated; he would have reduced the amount of $17,250 at a minimum.

Sanctions: February 2017 Report By California Research Bureau On CCP § 128.5 and 128.7 Sanctions Motions Show They Are Not Filed In Very Many Cases

Report Also Shows That Reporting Attorneys Did Not Provide The “End Conclusions” To The Sanctions Requests.

            In February 2017, the California Research Bureau issued a mandatory report for 2015-2016 relating to the use of CCP § 128.5 motions (whether alone or combined with CCP § 128.7 motions) as required under section 128.5. Although attorneys are under a requirement to report to the California Research Bureau, its results show that even reporting attorneys do not provide the actual order on the 128.5 proceeding in 64.4% of matters for which initial motion submissions were made. However, we do give you a flavor for the conclusions reached by the Bureau:

• 128.5 requests, whether single or combined with 128.7 requests, totaled only .05% of all civil filings for 2015-2016;
• 129 sanctions motions were made during 2015-2016, as reported;
• Of those reported motions, 11.6% were granted, 24% were denied, and 64.4% of the motions never resulted in reporting the results on the sanctions requests;
• The county leaders as far as numbers of sanctions requests were, in order: Los Angeles; Orange; San Francisco; San Diego; Santa Clara;
• If one takes away the nonreporting anomaly, one-third of the frivolous action requests were granted (15 of 46), with 6 of 15 awarded for full attorney’s fees requests and with the average award being $8,833; and
• When one boils down both the Bureau and Judicial Council statistics, less than one-half of 1% of civil cases filings involved 128.5 requests (singular or combined with 128.7 requests).

Arbitration, Sanctions: After Compelling Arbitration And Then Failing To Pursue It, Fitbit And Its Litigation Attorneys Liable For Bad-Faith Sanctions In Heart-Tracking Devise Action

Fitbit Did Finally Agree To Arbitrate, But Only After District Judge Expressed Concerns Over Its Litigation Conduct, Which Will Result In Some Amount Of Sanctions And Other Prospective Actions Ordered By District Judge.

            Arbitration frequently is invoked by defendants because of the perception that it is more user friendly in many types of cases, including consumer disputes. U.S. District Judge James Donato of the Northern District of California put it this way in the case we post on next: “[The defense conduct in this case] has also bolstered the perception that arbitration is where consumer lawsuits go to die. While the merits of that view can be debated, it’s no surprise that many people, including judges, are skeptical about arbitration agreements in light of situations like this one. Fitbit’s conduct undermines the public’s confidence in getting a fair shake when arbitration is compelled.”

            In McClellan v. Fitbit, Inc., Case No. 3:16-cv-00036-JD (N.D. Cal. July 24, 2018 [Doc. 153 “Order re Arbitration Proceedings,” Dkt. No. 146]), Fitbit moved to compel arbitration against a plaintiff consumer in a suit alleging that the company made misrepresentations about the accuracy of its heart rate monitoring devices. District Judge Donato granted the request, but Fitbit failed to pay AAA arbitration fees and told plaintiff it had no intention of arbitrating her claims or the arbitrability issues delegated to the arbitration for determination, ostensibly because the AAA fees were way more than her actual claim was worth. One of plaintiff’s attorneys’ paralegal took notes of a phone call with Fitbit’s counsel Morrison & Foerster where this intention was announced, which spurred a conference with the district court and drew some concerns “in plain terms” at a hearing so as to cause Fitbit to pay its fees before the AAA suspended the case and then proceed with the arbitration.

            However, the story did not end there. District Judge Donato, although denying more draconian relief requested by Ms. McClellan, did find that Fitbit and its attorneys were going to have to pay sanctions for bad-faith litigation conduct as well as do filings in prospective actions and do 90-day update filings in the case before him.

            Ms. McClellan first argued that by failing to pay the arbitration fee, Fitbit had lost the right to arbitrate. The district court rejected that argument, because Fitbit had changed course and paid the arbitration fee before AAA suspended the case. She then suggested that the district court should find the arbitration agreement unenforceable for all of Fitbit’s customers as a punishment for its conduct in her case. District Judge Donato also rejected this suggestion, reasoning that the tactics in this one case did not necessarily undermine arbitration in future cases or inherently waive a consumer’s right to pursue statutory remedies under Fitbit’s terms of service with the arbitration provision.

            But, the district judge found that Fitbit and its attorneys would have to pay some amount of yet-to-be-determined sanctions for bad-faith litigation conduct under Chambers v. NASCO, Inc., 501 U.S. 32, 43, 45-46 (1991), which allows courts to assess fees against counsel where a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons. Beyond that, he ordered that Fitbit was ordered to file a copy of his decision in all cases where it sought to compel arbitration with consumers for a period of one year from the order’s date and directed that the parties file joint status statements every 90 days until the arbitration proceedings were completed.

            The moral of the story is that if you elect to compel arbitration, you better stick with it or risk sanctions.  

           

Discovery/Sanctions: Plaintiff In Pro Per Attorney Properly Imposed With Discovery Sanctions Of $5,510 (Inclusive Of Attorney’s Fees) Under CCP § 2030.300(d)

Appellate Court Rejects In Pro Per’s Due Process Argument And Challenge To Temporary Judge’s Initial Assignment To Motion Matter.

            DeWitt v. HSBC Bank USA, N.A., Case No. A151545 (1^st Dist., Div. 2 June 22, 2018) (unpublished) is a situation where an in pro per attorney, representing himself as plaintiff, sued several defendants in a California Anti-Spam Act case. A superior court judge granted a motion to compel further responses against plaintiff and imposed monetary discovery sanctions of $5,510 against plaintiff/in Bank’s favor under CCP § 2030.300(d). Earlier, plaintiff had nixed having the motion matter heard by a temporary judge, which in hindsight was a mistake.

Plaintiff appealed the motion to compel and discovery sanctions, although only the sanctions award was appealable. (CCP § 904.1(a)(12); Doe v. U.S. Swimming, Inc., 200 Cal.App.4^th 1424, 1432 (2011).)

            Plaintiff’s two challenges on appeal did not succeed.

            First, plaintiff argued there were due process/equal protection violations in allowing discovery sanctions, inclusive of fees, to be awarded against an in pro per attorney, who could not gain fees as sanctions based on the attorney’s self-representation. The First District, Division 2 rejected this argument based upon the reasoning in Kravitz v. Superior Court, 91 Cal.App.4^th 1015, 1020 (2001). Kravitz first of all recognized that an in pro per plaintiff winning discovery sanctions can obtain reasonably identifiable expenses incurred such as computer-assisted legal research, photocopying, or transportation to/from court, just like lawyers representing parties can recover out-of-pocket costs. However, by definition, self-represented have incurred no attorney’s fees such that they are not similarly situated for due process/equal protection purposes. As far as the asymmetry argument made by plaintiff, the fact in pro per plaintiffs can recover out-of-pocket expenses is not that far askew because most lawyers representing parties ordinarily include such expenses in their hourly rates.

            Second, the record showed that the temporary judge did not hear the motion matter after plaintiff objected, with the matter going to a superior court judge who made an independent review. Plaintiff should have stuck with the temporary judge, whose tentative was to issue sanctions of only about 1/5^th of the amount eventually awarded by the superior court judge. Ouch! – this case reinforces the old adage “Be careful what you ask for.”