Due Process and All That

Behm v. Clear View Techs., No. H040032 (D6, as modified Oct. 16, 2015)

A trial court entered terminating sanctions against Defendant after it failed to comply with discovery orders. The complaint prayed only for damages “in excess of $200,000.” But Plaintiff moved for and obtained a default judgment of $1.26 million, including $970k in punitives and compensatory damages that were more than $100k over the prayer. Defendant moved for mandatory relief from default under Code of Civil Procedure § 473(b) on the grounds that its attorney’s mistake was the cause of the default. The court denied the § 473(b) motion, but vacated the default judgment on the grounds that it shouldn’t have awarded more than what was demanded in the complaint. It invited plaintiff to file a new default judgment motion limited to $200k in damages. Both parties appealed.

On the damages issue, before a default judgment can be entered, a defendant is entitled to adequate notice of the potential damages at issue. That way, it can understand the consequences of the entry of a default and make an informed decision whether to oppose it. Due process and all that. 

Unusually, this comes from the complaint, which is supposed to state the amount of monetary damages demanded. § 425.10(a)(2). But under Civil Code § 3295(e), a plaintiff isn’t allowed to plead the amount of a punitive damages demanded. Instead, she is supposed to serve a notice of her intent to seek punitives, in which she states the amount sought. See § 425.115. Any damages for a default judgment, then, are capped at what’s in the complaint plus the noticed punitives. See § 580(d).

Under § 425.115(f), the punitive damages notice is supposed to be served “before a default may be taken.” But the statute is not very clear about how the timing works when default is the result of a terminating sanction. Prior cases, however, employ a practical approach and hold that a § 425.115 notice is timely so long as it is served at the same time as the sanctions motion. Plaintiff’s problem, however, is that she served her notice three days after her terminating sanctions motion was granted. That was too late to give adequate pre-default notice. So, unless Plaintiff were to to amend her complaint (which would effectively undo the entry of default and start the game over) she couldn’t recover more than the $200,000 she prayed for. So the trial court correctly struck the punitives and any compensatory award over the $200k.

As to whether § 473(b) entitled Defendant to relief from the default itself 
(as opposed to the default judgment), although the provision is sometimes called “mandatory,” the relief isn’t actually mandatory unless certain conditions are met. One of which that is relief is inappropriate if “the court finds that the default or dismissal was not in fact caused by the attorney’s mistake[.]” That determination is factual, and in making it, the trial court is entitled to assess credibility. 

Here, the attorney had made prior statements to the court and opposing counsel, blaming his client’s recalcitrance in providing information, and not his own mistakes, as the reason discovery had not been forthcoming. His declaration—in which he personally took the blame for the discovery failures that led to the terminating sanction—was completely inconsistent with those statements. The trial court was entitled to credit the former explanations over the latter, and thus didn’t abuse its discretion in denying the motion on the basis that the attorney’s mistake wasn’t the true cause of the default. 

Affirmed.

It’s worth noting that the opinion here steps over a number of open § 473(b) issues (addressed in a prior post) that have been the subject of considerable dispute. 

1. It’s not clear that an involuntary default entered as a result of terminating sanctions for discovery noncompliance is even “dismissal or default” subject to the mandatory default rule;

2. A split in authority remains about whether the “not in fact caused” standard entails just the attorney’s proximate cause of the default or whether the client must be “totally innocent.” The court here doesn’t address the standard;

3. A prior case seems to require an express written finding that the attorney’s wasn’t the cause of the default. It’s not clear whether there was such a finding in this case; and

4. That same case says that to get the benefit of § 473(b), the moving party has to cure the basis of the default, which here would mean providing responses to all of the pending discovery that Defendant had been stiffing Plaintiff on. No sense here that that was done.