CALIFORNIA ATTORNEY'S FEES

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            In ATG Electronics, Inc. v. The Mulcahy Law Firm, Case No. G056931 (4^th Dist., Div. 3 January 16, 2020) (unpublished), Law Firm claiming Former Client owed almost $100,000 in outstanding legal bills demanded arbitration pursuant to the parties’ retainer agreement.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.”

Sanctions: Moofly Productions Opinion Certified For Publication

Trial Court Must Provide 21-Day Safe Harbor Warning Before Imposing Sanctions For Improper Reconsideration.

            On June 1, 2018, we posted on Moofly Productions, LLC v. Favila, Case No. B282084 (2d Dist., Div. 1 June 1, 2018), unpublished at the time. It held that a trial court must follow CCP § 128.7 21-day safe harbor rules before imposing sanctions for an improper reconsideration motion under CCP § 1008. We can now report that the opinion was certified for publication on June 22, 2018. 

            Read our June 1, 2018 post here.

Discovery, Family Law, Sanctions: $5,500 Discovery Sanctions Award Against Ex-Client Attorney Reversed Where Attorney Not Given Notice She Was A “Sanctions Target”

Due Process Violation Was Reason For Reversal.

             In Marriage of Mehta & Grover, Case No. A146919 (1^st Dist., Div. 4 June 19, 2018) (unpublished), a $5,500 discovery sanction against an ex-attorney for wife was reversed on due process grounds. What happened was that before the discovery sanctions motion was decided, attorney was relieved as wife’s attorney, with nothing in the papers indicating she was the target of a discovery sanctions request (with only her client wife indicated as a target). The subsequent $5,500 sanctions order against ex-attorney was reversed on due process grounds, given the attorney had no notice that she was personally the subject of the sanctions request. Here is what the appellate court had to say on a broader basis with respect to sanctions request in moving or opposing papers: “To interpret [Code of Civil Procedure] section 2023.040 as imposing a notice obligation only on those who elect to include a sanctions motion in moving papers (i.e., in a discovery motion or in a separate sanctions motion), and not on those who include a sanctions motion in opposition papers, would defeat the obvious purpose of the statute and would lead to absurd consequences.” (Slip Op., p. 9.)

Sanctions: 2/1 DCA, In Unpublished Decision, Determines That Trial Court Must Comply With CCP § 128.7 Safe Harbor Rule Before Sanctioning Party For Violating CCP § 1008 Reconsideration Prohibitions

Trial Judge Did Not Notify Putative Sanctioned Party That It Would Be Sanctioned Sans A Withdrawal Of The Reconsideration Motion.

            Moofly Productions, LLC v. Favila, Case No. B282084 (2d Dist., Div. 1 June 1, 2018) (unpublished) demonstrates that trial judges, just like litigants, must satisfy CCP § 128.7 sanctions safe harbor requirements before doling out sanctions under statutes subject to section 128.7 strictures.

            Code of Civil Procedure section 1008(d) allows sanctions to be imposed for an improper reconsideration motion “as allowed by [s]ection 128.7.” In turn, section 128.7 does allow a court to impose sanctions on its motion, pursuant to subdivision (c)(2), if the court enters an order describing the specific conduct appearing to violate the sanctions statute and directing an attorney, law firm, or party to show cause why it has not violated section 128.7(b) unless within 21 days of service of the OSC there is a withdrawal/correction by the notified attorney, law firm, or party.

            In Moofly Productions, the trial judge did not notify Moofly that it would be subject to sanctions if it did not withdraw the motion for reconsideration. Instead, the court denied the motion for reconsideration at the same moment that it issued the OSC, mooting Moofly’s subsequent attempt to withdraw its motion. The appellate court held that the trial judge was subject to the 21-day safe harbor requirements of section 128.7 before imposing sanctions for an unwarranted motion for reconsideration under section 1008. This resulted in a reversal of a $10,499.51 sanctions award made payable to defense counsel by Moofly and one of its attorneys.

Sanctions: U.S. Magistrate Judge Issues $10,000 In 28 U.S.C. § 1927 Sanctions Against Class Action Attorney Giving Dishonest Excuse For Not Timely Filing Class Certification Motion

Instagram And Suspicious Plane Itinerary, Along With Attorney Admission, Led To Imposition Of Sanctions.

            When it comes to blowing deadlines which can be cured, counsel should be candid with courts in requesting relief, which can be granted if the circumstances are right.  The next situation, which has drawn quite a bit of publicity, illustrates the necessity for honesty in requesting such relief.

            What happened in Ha v. Baumgart Café of Livingston, Civil Action No. 2:15-cv-5530-ES-MAH (D.N.J. Apr. 26, 2018 (PACER Document No. 123) is that a class conditional certification motion deadline in a wage/hour case was blown by co-counsel who then filed a request for extension of time to file the motion.  Co-counsel said that she had to attend to a family emergency in Mexico City, and attached a copy of her plane itinerary as corroborating proof.  Her other co-counsel was unaware that the deadline had been blown or that she had a family emergency.  In opposition, defense counsel presented an Instagram account showing that plaintiffs’ attorney was not in Mexico City when the motion was due but was instead in New York City.  Also, the date on the flight itinerary supplied as corroboration listed a date which did correspond to the actual date of the week for that designated date.  The attorney first withdrew the class certification motion with prejudice, and then reversed course asking to change the withdrawal to be without prejudice.  This resulted in a rift between plaintiffs’ two attorneys, with the one attorney moving to withdraw as plaintiffs’ counsel.  U.S. Magistrate Judge Michael A. Hammer eventually found no prejudice from the delay in filing the motion, allowed the one attorney to withdraw, and ordered the remaining attorney to obtain new local counsel.  During the various hearings, the withdrawing attorney admitted she was not in Mexico City during the pertinent dates and the remaining counsel indicated he was unaware of the blown deadline until later. 

            The defense requested leave to apply for sanctions, which the magistrate judge granted.  He found that sanctions were justified under 28 U.S.C. § 1927 because the offending attorney misled the court and other attorneys in the case as shown by the Instagram account, flight itinerary, and her own admissions in open court.  However, remaining counsel was not sanctioned.  With respect to the amount of sanctions, the magistrate judge awarded $10,000 in favor of defense attorneys on a pro rata basis, but found that the $44,283 request was “unreasonably high.”

     

Bankruptcy/Sanctions: Contempt Sanctions Against Creditor For Knowingly Violating Discharge Injunction Could Not Stand Based On Creditor’s Subjective Good Faith Belief, Even If Unreasonable

Ninth Circuit Clarified Some Reasoning In Zilog Decision.

            In In re Taggart, Case No. 16-35402 (9^th Cir. Apr. 23, 2018) (published), the Ninth Circuit clarified some prior reasoning in In re Zilog, 450 F.3d 996, 1009 n.14 (9^th Cir. 2006) to reinforce that contempt sanctions cannot be assessed against a creditor for knowingly violating a discharge injunction based on creditor’s good faith belief, even if unreasonable in nature.  The bankruptcy judge found the creditor’s subjective intent was irrelevant, an erroneous determination resulting in the BAP’s prior decision to reverse the bankruptcy judge ruling—with the Ninth Circuit affirming the BAP’s reversal.

Sanctions: $34,000 In CCP § 128.5 Sanctions Affirmed Against Litigant Unsuccessfully Trying To Upset Earlier Adjudication Based Upon Extrinsic Fraud

Among Other Things, Damning Admissions In Debtor Exam Sealed The Deal.

            In Quadri v. Alkayali, Case No. G054914 (4th Dist., Div. 3 Apr. 19, 2018) (unpublished), the 4/3 DCA—in a panel decision authored by Justice Bedsworth—affirmed around a $ 34,000 sanction against a litigant losing an “extrinsic fraud” challenge to a prior verdict.  Among other things, the affirmance was justified because the appellant had made disavowals in earlier debtor examinations of having any ownership interest in a company which was contrary to the contention that he was indeed the controlling shareholder of the company years later. 

Sanctions: Third District Decides That An Asserted Nonfrivolous Claim Cannot Be Found To Be Brought For An Improper Purpose Under CCP § 128.7

Plaintiffs Advanced A Plausible Interpretation Of A Phrase In Prior Settlement Stipulation Such That Sanctions Were Not Warranted.

            In Ponce v. Wells Fargo Bank, 21 Cal.App.5^th 253, Case No. C080680 (3d Dist. Mar. 13, 2018) (published), a trial judge sanctioned plaintiffs who brought lender liability claims in a residential property dispute with terminating sanctions and also imposed over $25,000 in monetary sanctions (as against plaintiffs and their attorneys) under Code of Civil Procedure section 128.7.  The basis for the sanctions was that plaintiffs advanced a frivolous interpretation of “predecessor in interest” language in a release under a prior settlement stipulation in other proceedings. 

            The Third District, on appeal, reversed.  It was swayed by the fact that sanctioned plaintiffs presented a plausible interpretation of “predecessors in interest” under the prior settlement stipulation given that the defendants interpreting otherwise were not involved in the prior proceedings.  Put another way, one could say that the reviewing court believed the trial judge erred by pulling the “sanctions trigger” without hearing more on the threshold contractual interpretation issue.  After reaching the conclusion that plaintiffs’ contractual interpretation position was not frivolous in nature, it was no far stretch to conclude the claim was not brought for an improper purpose under section 128.5.   This decision does establish that a failure to show frivolity means there was a failure to show an improper purpose, with the appellate court adjudicating this issue de novo (as opposed to the more deferential abuse of discretion standard which is generally hard to surmount on appeal).

Appealability/Discovery/Sanctions: Separate Discovery Sanctions Cannot Be Aggregated For Purposes Of Meeting $5,000 Appealability Threshold

Two Separate Sanctions Below $5,000 Cannot Be Aggregated For Appealability Purposes.

            In Mitchell Anthony Productions, LLC v. Baron, Case No. B282974 (2d Dist., Div. 5 Mar. 28, 2018) (unpublished), the trial judge awarded $4,860 in discovery sanctions on separate motions to compel further discovery responses to the interrogatories and requests for production.  The sanctioned party appealed because the total sanctions came to $9,720, claiming that the $5,000 jurisdictional threshold for an appeal of monetary sanctions over $5,000 was met.  (CCP § 904.1(a)(11), (a)(12).) 

            The appellate court dismissed the appeal.  The reason?  A party cannot aggregate monetary sanctions for purposes of appealability purposes, fully endorsing the reasoning to the same effect in Calhoun v. Vallejo City Unified School Dist., 20 Cal.App.4^th 39, 44-45 (1993) [1^st Dist., Div. 5]), but indicating this did not foreclose an extraordinary writ petition if a true wrong was done through a sanctions order below. 

Sanctions: CCP § 128.7 And Family Code Section 271 Sanctions Improperly Imposed Against Attorney

$5,000 Sanctions Award Against Attorney Reversed.

            Attorney and client her were sanctioned for $5,000 under CCP § 128.7 and Family Code § 271 in Saidiner v. Jacobs-Jakubowicz, Case No. B275860 (2d Dist., Div. 7 Mar. 26, 2018) (unpublished).  Attorney appealed the sanctions award, which was reversed on appeal.

The CCP § 128.7 sanctions could not stand because it was imposed without giving attorney the benefit of the 21-day safe harbor protection.  The Family Code section 271 basis for the award was infirm, because sanctions can only be awarded against a party, not an attorney, with Division 7 endorsing the same result reached in Webb v. Webb, 12 Cal.App.5^th 876, 883 [an earlier 2/8 DCA decision discussed in our June 14, 2017 post].  Furthermore, the section 128.7 sanctions were improperly directed to be paid to party’s counsel, rather than the party.  (Webb v. Webb, 12 Cal.App.5^th at 878.) 

Sanctions: CCP § 128.5 Sanctions For 1/1/15 – 8/7/17 Time Frame Must Comply With Safe Harbor Section 128.7 Requirements

Second District Departs Company With Contrary Result In San Diegans for Open Government.

            San Diegans for Open Government v. San Diego, 247 Cal.App.4^th 1306, 1317 (2016) [reviewed in our June 9, 2016 post] held that a party filing a CCP § 128.5 sanctions motion does not need to comply with the safe harbor waiting period described in section 128.7(c)(1).

            We can now report that the Second District, Division 7, has expressly departed company with this view in Nutrition Distribution, LLC v. Southern SARMs, Case No. B280983 (2d Dist., Div. 7 Jan. 31, 2018) (published).  That led the appellate court to affirm a trial judge’s denial of sanctions based on moving party’s failure to satisfy section 128.7’s “safe harbor” protection where the motion for sanctions was based on a purportedly frivolous complaint, written motion or court filing that could be withdrawn or on some other alleged action or tactic that could be appropriately corrected.

Discovery/Sanctions: Yelp Properly Ordered To Disclose Documents Relating To Anonymous Reviewer Making Alleged Slanderous Comments

However, Sanctions Order Relating To Discovery Order Reversed As A Matter Of Law Based On Evolving, Unsettled Area Of The Law.

            In Yelp Inc. v. Superior Court, Case Nos. G054358/G054422 (4^th Dist., Div. 3 Nov. 13, 2017) (published), plaintiffs successfully obtained a discovery order against Yelp compelling it to disclose documents that might reveal the identity of an anonymous reviewer allegedly making slanderous statements (with plaintiffs proving a prima facie case of slander).  The lower court also imposed $4,962.59 in discovery monetary sanctions against Yelp.

            Although losing a standing argument, plaintiffs did obtain affirmance of the discovery order.  However, with respect to the sanctions order, the 4/3 DCA—in a 3-0 opinion authored by Presiding Justice O’Leary—reversed as a matter of the law given that this area of the law was evolving and unsettled such that Yelp’s challenge of the discovery order was substantially justified. 

            BLOG OBSERVATION—We noticed that Steve Krongold, who both contributors know, won the merits on behalf of plaintiffs.  Congratulation, Steve.

Sanctions: Trial Court’s “Vestigial Jurisdiction” When Case Ordered To Arbitration Justified CCP § 128.7 Sanctions Against Litigant’s Counsel

Continuing Jurisdiction And Waiver Principles Justified Sanctions Order.

Old Jail Whipping Post.  St. Augustine, Florida.  John Margolies, photographer.  Library of Congress.

            Windsor Mango Way LLC v. Taylor, Case No. B268967 (2d Dist., Div. 3 Sept. 28, 2017) (unpublished) is a case where an attorney was sanctioned under CCP § 128.7 for conduct relating to a case which had been ordered to arbitration.  Attorney challenged the order primarily on the theory that the trial court lacked jurisdiction to issue sanctions given the case had been ordered to arbitration.

            Not so, said the Court of Appeal in affirming the sanctions order.  Two reasons sealed this conclusion.  First, because the sanctions ordered related to activities after a motion to compel was granted, the trial court had “vestigial jurisdiction” to order sanctions and an erroneous order did not give rise to CCP § 473 relief.  Second, waiver principles precluded attorney’s efforts to vacate the sanctions order because attorney himself invoked the jurisdiction of the trial court when he moved for sanctions against the other party on his client’s own behalf.