Friday, July 11, 2014

Getting There the Long Way

DFEH v. Ottovich, No. A136607 (D1d4 June 30, 2014)

This case is an appeal of a damages award entered after the trial court struck the defendants answer as a discovery sanction. Interestingly, the propriatey of the sanction is not a contention on appeal.

The trial court struck defendant’s answer and entered default as a sanction for his non-compliance with discovery orders. Plaintiff—the Department of Fair Employment and Housing, bringing a housing discrimination case on behalf of an individual—then filed a statement of damages under Code of Civil Procedure § 585. It did not, however, follow § 425.11, which requires a personal injury plaintiff* to serve a statement of damages before a default can be taken against a defendant. The court held a prove-up, after which it awarded a default judgment of about $250,000. The court later relieved the defendant from the default judgment due the failure to comply with § 425.11, but did not un-strike the answer. Based on the struck answer, it granted DFEH’s motion for summary judgment on liability.** Defendant moved to reconsider, which was denied.  The court then conducted a jury trial on damages. The jury awarded about $8,000, and defendant appealed.

Two questions are presented: (1) did relieving defendant from default automatically reinstate his answer; and (2) did the court err in denying the reconsideration motion. The court of appeal answers both in the negative, without much difficulty.

As to the answer, the trial court’s order specifically left the striking of the answer intact. Given that the court relieved defendant from default specifically for the purpose of curing plaintiff’s failure to give pre-default notice of damages—and not to reverse its sanction—nothing made it incumbent on the court to also un-strike the answer. It was thus permissible to treat the case like no answer had been filed. So all facts as to liability could be deemed admitted.

Nor did the trial court err in declining to reconsider its summary judgment ruling. The motion did not raise “new or different facts, circumstances, or law” and was thus permissibly denied under § 1008. Moreover, even if the motion were treated as a motion for discretionary relief from default under § 473(b)—as defendant argued on appeal—it was properly denied. The motion didn’t address the the discovery misconduct, which was original justification for striking the answer. The court thus didn’t abuse its discretion in denying it.


*This isn’t a personal injury case, so § 425.11 doesn’t facially apply. See generally Schwab v. Rondel Homes, Inc., 53 Cal. 3d 428, 432 (1991) (§ 425.11 applies when plaintiff’s primary injuries are to his physical or emotional person). But why it matters—which is not clear from the opinion—is a result of another weird California procedural rule.

Those familiar with federal default procedure know that if there’s a damages number in the complaint, the clerk can enter the judgment for the sum certain. Fed. R. Civ. P. 55(a)(1). But if no number is alleged, the court has to conduct an evidentiary hearing where the defendant can contest the amount of damages. Fed. R. Civ. P. 55(a)(2).

Weirdly, California lacks the latter option. Section 585 requires an evidentiary prove-up, but it’s entirely on an ex parte—real ex parte, not California ex parte—basis. The due process implications of that are avoided by the fact that § 425.10(a)(2) requires that “[i]f the recovery of money or damages is demanded, the amount demanded shall be stated.” There is an exception for PI cases, where “the amount shall not be stated”—presumably to head off in terroram complaints for massive damages against doctors in malpractice cases. But in those cases,
§ 425.11 kicks in, requiring a party to serve a damages statement before seeking a default.

The problem, however, is that for non-personal injury cases § 425.10(a)(1) is honored only in the breach. In all but the simplest cases, calculating damages requires an expert who isn’t going to be retained until long after the complaint is filed. So almost every complaint seeks “damages according to proof at trial,” or something like that. If the defendant defaults, however, that poses a problem. As Schwab explains, the ex parte prove up under § 585 has due process issues because the defendant won’t have notice about how much skin he has in the game before defaulting.

So, there are two potential solutions for non-PI cases where damages aren’t quantified. One would require the plaintiff either put an estimate into the original complaint to amend to put in a specific number before seeking default.  That doesn’t seem to happen too often. On the other hand, cases suggest that the plaintiff can “provide post-complaint, pre-default notice to the defendant of the amount to be sought if the defendant defaults.” Finney v. Gomez, 111 Cal. App. 4th 527, 544 (2003). That is precisely what § 425.11 requires. Thus the parts of § 425.11 that deal with default effectively apply to non-personal injury cases where no damages number is alleged in the complaint, even though they don’t say so.

**And although the approach the court took here seems like an effective work-around that resolves the due process issues presented by § 585’s lack of an adversarial prove-up when defendant doesn’t know the damages demand, it begs another question. As a recent case explains, § 437c(f) bars summary judgment on liability only if the amount of damages are still in contest. So, had the issue been raised, it’s not clear that the trial court actually had the power to do what it did here absent the consent of the parties.

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