Wednesday, January 29, 2014

Terminating Sanctions, Affirmed.

Los Defensores v. Gomez, No. B240725 (D2d4 Jan. 24, 2014)

The court of appeal upholds terminating sanctions issued by the trial court for defendants
persistent failures to comply with their discovery obligations.

This case involves the dark arts of attorney advertising in the market for Spanish-language legal services. Back in the ‘80s plaintiffs, an umbrella advertising group for Spanish-speaking lawyers, pooled together to advertise as “Los Defensores.” Their trademark (figuratively, and—as they contend here—literally) was a phone number: 636-3636, which they obtained in the 213 and 714 area codes, and later as a toll-free 1-800 number. Los Defensores has apparently spent about $123 million advertising the number over the past thirty years, using it to obtain significant market share.

Around 2000, in connection with their car rental business, defendants obtained the same number in a number of other Southern California area codes. They soon noticed that the numbers were drawing large numbers of wrong number callers looking for legal advice. Realizing that the numbers were valuable to attorneys looking for clients, defendants began to license their referrals of the callers on the incoming lines to various and sundry ethically lax attorneys, for significant sums of money. This all led to defendants getting sued in this case for common law unfair competition under California law, based on the theory that the 636-3636 number was Los Defensores’ common law trademark when it came to the legal services business.

In their depositions, both individual defendants testified that incoming calls to their 636-3636 lines were logged in a “status book” and “call log” which were used to set up appointments between potential clients and the licensing attorneys. When defendants failed to produce these materials in response to requests for production, plaintiffs moved to compel. The court granted their motion and awarded attorneys’ fees as sanctions. Defendants, however, never produced any such documents. 

After getting the runaround for a while, plaintiff moved for further sanctions. In opposition, defendants submitted declarations from one defendant and their attorney claiming that, notwithstanding the deposition testimony from both defendants, the requested documents never existed. The trial court granted the motion, finding that defendants’ “conduct was an extremely severe and aggravated failure to comply with its orders, with substantial [earlier] sanctions doing nothing[.]” The court issued terminating sanctions that put the defendants into default.

The court of appeal affirmed. Although terminating sanctions are not issued lightly, they can be appropriate when a violation is willful, there has been a history of abuse, and less severe sanctions have failed to coerce the sanctioned party to comply with the rules. Generally, terminating sanctions issue only after a party has disobeyed at least one prior discovery order. Here, substantial evidence supported the court’s finding that after being compelled to produce documents reflecting their receipt of 636-3636 calls, defendants willfully concealed or destroyed these documents to keep them from discovery. Defendants testified about these materials in their depositions; the trial court was entitled to find that their after-the-fact explanations that the documents never existed were not credible.


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