Money Too.

Kwan Software Eng’g, Inc. v. Hennings, No. H042715 (D6 Dec. 2, 2020)

After a years-long record of fraud on the court, false testimony, and spoliation of evidence, the trial court dismissed Plaintiffs complaint in this case as a terminating sanction. It declined, however, to award Defendants’ monetary sanctions under the discovery act. As we recently discussed, the Discovery Act requires an award of monetary sanctions as compensation in the form of reasonable costs unless the non-prevailing party was substantially justified or an award would be unjust. See Code Civ. Proc. § 2023.030(a). 

In the course of issuing terminating sanctions, the trial court made findings from which it is clear that a substantial justification was not present. Nor would it be unjust—that other sanctions were awarded did not render it unjust to also require plaintiffs to compensate Defendants for the increase expense incurred as a result of Plaintiffs’ discovery misconduct. So the trial court abused its discretion by not awarding monetary sanctions.

Sanctions were not merited, however, against Plaintiffs’ former attorneys. The record established that that the attorneys had not “advised” their clients to engage in discovery abuse, which precludes any award under § 2033.030(a).

Reversed in part.

No Free Pass for Misconduct While Away for the Summer in Federal Court.

Moofly Prods., LLC v. Favila, No. B294825 (D2d1 Mar. 4, 2020)

Two issues here: 1. Can a superior court issue terminating sanctions based on conduct that occurred while a case, since remanded, had been removed to federal court? 2. When is there a right to jury trial on a claim for fraudulent conveyance?

The terminating sanctions issue arose from discovery misconduct—including violating court orders—that occurred after the case had been removed based on a putative copyright infringement claim but before it was remanded. The magistrate judge recommended terminating sanctions. The district court, however, dismissed the copyright claim and declined jurisdiction under 28 U.S.C. § 1367(c)(3) to send the remainder of the case back to state court. Although the district judge found the recommendation for terminating sanctions to be well-founded, it left the ultimate decision to the superior court on remand.

Defendant renewed the terminating sanctions motion on remand. The superior court dismissed the claims, and the Court of Appeal affirms. The conduct at issue rose to the level of terminating sanctions. Plaintiff wholesale refused to participate in discovery and ignored court orders to the contrary. Given the lack of authority otherwise, that Plaintiff’s misconduct occurred while the case was removed to federal court did not matter.

The dismissal of Plaintiffs claims left standing Defendants’ cross-claims for fraudulent transfer of some IP between two related entities controlled by Plaintiff and his wife. Those claims got tried to the court, which found for Defendants. Plaintiff now claims that deprived it of its right to jury trial. 

Generally, claims for fraudulent conveyance or equitable trust are equitable and carry no right to jury trial. There is an exception, however, for claims to recover a determinate sum of money. Because that kind of claim most closely resembles remedies available at law in 18th Century England—replevin, trover, money had and received—the U.S. Supreme Court has determined that the right to jury trial would attach to such claims. See Granfinanciera, S.A. v.Nordberg, 492 U.S. 33 (1989). 

The Seventh Amendment hasn’t been incorporated against the states. But California courts would generally reach the same result under state law—the key distinction being that California law looks to the law of England in 1850 instead of 1789. In any event, the res in this case isn’t a sum certain of money, it’s intangible IP. Recovery of that kind of property has always required and still requires a resort to equity. So there’s no right jury trial.

Affirmed.

Serial Discovery Abuser Gets Terminating Sanctions. And they Stick, for Once!

J.W. v. Watchtower Bible & Tract Society of N.Y., No. E066555 (D4d2 Dec. 10, 2018)

A Girl sued the Watchtower Society—the governing body of the Jehovah’s Witnesses—for its failure to prevent her from being molested by an elder of the Church. In discovery, she requested a copy of all correspondence received by the Church after it sent a letter to its congregations asking them to explain any occasions where persons known to have molested children were promoted to positions of authority with the Church. The Church claimed the documents were subject to the clergy-penitent privilege and that it would be unduly burdensome to search for them. The trial court disagreed and granted Girl’s motion to compel.

Angry, But Not Frivolous

Ponce v. Wells Fargo, No. C080680 (D3 Mar. 13, 2018)

Code of Civil Procedure §128.7(b)(1) authorizes sanctions against a party or attorney who signs a document “presented primarily for an improper purpose[.]” In this case—some kind of confusing mortgage mod/foreclosure dispute on its fourth iteration—the court found that Plaintiffs brought their complaint for an improper purpose and entered terminating sanctions under § 128.7(b)(1). 

Plaintiffs don’t seem to dispute that they might have been subjectively malicious. But they say they nonetheless can’t be sanctioned under § 128.7, because their lawsuit was based on an at least colorable theory. Relying mostly on federal authority interpreting Rule 11, the Court of Appeal agrees. The standard for “improper purpose” sanctions requires the signed paper to be without objective merit. If the paper—whether a motion, complaint, or otherwise—isn’t frivolous, it has not been brought for an “improper purpose,” as a matter of law.

Reversed.

Fast and Loose Doesn’t Look Good on You

Padron v. Watchtower Bible & Tract Society of N.Y., Inc., No. D070723 (D4d1 Nov. 9, 2017)

In a child sex abuse case against a Church, the Church is stonewalling about producing documents detailing other abuse incidents. In another, related case, it previously convinced the Court of Appeal that terminating sanctions weren’t appropriate, in lieu of a coercive monetary penalty that could exceed the propounding party’s costs of litigating the discovery issue. See Lopez v. Watchtower Bible and Tract Society of New York, Inc., 246 Cal. App. 4th 566 (2016). So when the Church kept stonewalling in this case, following Lopez, the trial court found a willful refusal to comply with its discovery orders to produce exactly the same documents and by fined it $4,000 per day of noncompliance. The Church appeals, again.

But this time it doesn’t end well.

The Downside of Ignoring in Limine Rulings

Osborne v. Todd Farm Serv., No. B260280 (D2d6 May 2, 2016)

Plaintiff was injured when an allegedly defective hay bale she was standing on fell apart. She sued two Defendants—the Supplier and a company she claimed had manufactured the bale. None of the records in the case identified the source. And while there are apparently features of hay bales that would clue one into where they were manufactured, that would require expert testimony. Plaintiff, however, didn’t timely disclose a hay source expert under Code of Civil Procedure § 2034.260. She instead waited and designated herself as a “supplemental” expert under § 2034.280. But as Fairfax v. Lords, 138 Cal. App. 4th 1019 (2006) explains, that’s a no-no. You can’t sandbag in disclosing experts as “supplemental” if you had every reason to anticipate that they would be needed in at the time of the original disclosures. So the trial court struck her designation.

Thou Shalt Not Taze Opposing Counsel

Crawford v. JP Morgan Chase Bank, No. B257415 (D2d6 Dec. 9, 2015)

I have previously mentioned how hard it is to get sanctions to stick. Here’s a case where they do. Of course, the facts of this case are completely insane.

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.

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.