Kowal Law Group Logo
Arbitration Gavel

Court Abused Its Discretion by Denying $4M Sanctions Request for Abusive Discovery

Tim Kowal     January 14, 2021

The Discovery Act provides for mandatory sanctions for discovery abuses unless the court finds the offending party acted with substantial justification or the sanction would be "unjust." Plaintiffs in Kwan Software Eng'g, Inc. v. Hennings (D6 Dec. 2, 2020) No. H042715, a high-stakes (the complaint sought $255 million) and multi-party Silicon Valley litigation over "cyber-squatting," gave false deposition testimony, submitted false declarations, and spoiled evidence.

Defendants filed a motion seeking $4 million in litigation fees for discovery abuse, and the trial court issued a 60-page OSC. Under Code of Civil Procedure section 2023.030(a): "... the court shall impose that sanction unless it finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust."

Although the court awarded terminating sanctions, ordered restitution of plaintiffs' prior $83,000 anti-SLAPP fee award, and ordered plaintiffs to pay the court $22,000 for costs incurred by the court, the court declined to award any monetary sanctions in favor of defendants. The court reasoned that, in the circumstances, such an award "could be considered as punishment" for misconduct already sanctioned.

The Sixth District disagreed and reversed. The Court acknowledged the standard of review on sanctions orders is deferential, and that "punitive" orders ordinarily are improper. But after "a careful reading" of the record, the Court concluded the trial court had failed to ever impose any sanction specifically for any of plaintiff's discovery abuses. The $22,000 sanction to be paid to the court was for plaintiffs' "fraud on the court." And the disgorgement of anti-SLAPP fees was "for plaintiffs' overall 'wrongful conduct.'" But as plaintiffs' false deposition testimony and spoliation of evidence, no sanction had been awarded.

Thus, the order denying mandatory money damages was not supported by the "unjust" exception to section 2023.030(a).

Concerning the "substantial justification" exception, however, the Court engaged in a curious bit analysis. The Court found that the "substantial justification" exception was implicitly not met. I find this odd because, ordinarily, the Court of Appeal only infers findings in favor of affirming the judgment. “The doctrine of implied findings requires the appellate court to infer the trial court made all factual findings necessary to support the judgment. (Sammis v. Stafford (1996) 48 Cal.App.4th 1935, 1942.) "The doctrine is a natural and logical corollary to three fundamental principles of appellate review: (1) a judgment is presumed correct; (2) all intendments and presumptions are indulged in favor of correctness; and (3) the appellant bears the burden of providing an adequate record affirmatively proving error. [Citations.]" (Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 58.)

Here, the Court chose to infer a finding in favor of reversing the judgment. And then the Court went on to find that "[s]ubstantial evidence supports that determination [in favor of the implied finding]." Again, this is unusual, because the substantial-evidence standard ordinarily is deployed in the aid of affirmance, not in reversal.

The denial of monetary sanctions was reversed and remanded for determination of an appropriate amount. The Court affirmed the denial of sanctions against plaintiffs' attorneys, however, finding there was no direct evidence the attorneys advised their clients to engage in any discovery abuse – a high evidentiary standard mandated by the statute.

h/t Michael Shipley.

Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at CALpodcast.com, and publishes summaries of cases and appellate tips for trial attorneys. Contact Tim at [email protected] or (949) 676-9989.
Get “Not To Be Published,” a weekly digest of these articles, delivered directly to your inbox!

"Moot points have to be settled somehow, once they get thrust upon us. If an assertion cannot be proved, then it must be settled some other way, and nearly all of these ways are unfair to somebody."

—T.H. White, The Once and Future King

"Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws."

— Plato (427-347 B.C.)

Show neither partiality to the weak nor deference to the mighty, but judge your fellow men justly.


"So far as the beginnings of law had theories, the first theory of liability was in terms of a duty to buy off the vengeance of him to whom an injury had been done whether by oneself or by something in one's power. The idea is put strikingly in the Anglo-Saxon legal proverb, 'Buy spear from side or bear it,' that is, buy off the feud or fight it out."

— Roscoe Pound, An Introduction to the Philosophy of Law

"A judge is a law student who grades his own papers."

— H.L. Mencken

"At common law, barratry was 'the offense of frequently exciting and stirring up suits and quarrels' (4 Blackstone, Commentaries 134) and was punished as a misdemeanor."

Rubin v. Green (1993) 4 Cal.4th 1187

"God made the angels to show Him splendor, … Man He made to serve Him wittily, in the tangle of his mind."

— Sir Thomas More in Robert Bolt's A Man for All Seasons

"Counsel on the firing line in an actual trial must be prepared for surprises, including requests for amendments of pleading. They cannot ask that a judgment afterwards obtained be set aside merely because their equilibrium was slightly disturbed by an unexpected motion."

Posz v. Burchell (1962) 209 Cal.App.2d 324, 334

"Upon putting laws into writing, they became even harder to change than before, and a hundred legal fictions rose to reconcile them with reality."

— Will Durant

"It may be that the court is thought to be excessively legalistic. I should be sorry to think that it is anything else."

— Hon. Sir Owen Dixon, Chief Justice of Australia

“It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is today, can guess what it will be tomorrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?”

— James Madison, Federalist 62

Copyright © 2024 Kowal Law Group
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram