The Supreme Court of California isn’t always interested in money disputes, but throw attorney misconduct into the mix and you get the City of LA v. Pricewaterhousecoopers reinstating a sanction for “egregious” city attorney’s office collusion totaling $2.5 million.
Angling for contractual attorneys’ fees in your defense? The recent Am. Bldg. Innovation v. Balfour Beatty Constr. case reminds attorneys to consider whether asserting the contract in an affirmative defense is enough, or if you need to file a cross-complaint.
We also discuss:
Appellate Specialist Jeff Lewis' biography, LinkedIn profile, and Twitter feed.
Appellate Specialist Tim Kowal's biography, LinkedIn profile, Twitter feed, and YouTube page.
Sign up for Not To Be Published, Tim Kowal’s weekly legal update, or view his blog of recent cases.
Announcer 0:00
Welcome to the California appellate podcast, a discussion of timely trial tips and the latest cases and news coming from the California Court of Appeal and the California Supreme Court. And now your hosts, Tim Kowal and Jeff Lewis,
Jeff Lewis 0:17
welcome everyone. I am Jeff Lewis
Tim Kowal 0:19
and I'm Tim Kowal, a certified appellate specialist. Both Jeff and I face a lot of unusual problems that come up at trial and on appeal, and in this podcast, bringing you recent cases and guests, we expose you to the unusual. If you find this podcast helpful, we always appreciate it when you recommend us to a colleague. Yeah. If you like being surprised
Jeff Lewis 0:36
in your legal legal practice, go ahead and turn the volume
Tim Kowal 0:39
down. Yeah. Okay, Jeff, we have a few more cases and tidbits to share with our audience. The Supreme Court's been productive recently, ruling on some cases that we have followed, one that we have, that we had talked about earlier, before it went up on review. This was the city of Los Angeles versus Price Waterhouse Coopers case involving a big sanctions award of two and a half million dollars in discovery sanctions. And there had been a dissent, a dissenting opinion by Justice Grimes saying that there is no specific discovery act statute that authorizes these particular sanctions. These are just kind of General, General abuses that don't fall under one of the specific discovery abuses. And so justice Grimes thought that that didn't pass muster, but the Supreme Court affirmed the sanctions. So in this case, the city attorney had colluded, or city attorney, some attorneys in the city attorney's office, I should say, had colluded with a nominally adverse party and a separate class action in order to enrich the attorneys and orchestrate damages through Price Waterhouse Coopers, and successfully hid that fact for two and a half years through discovery abuse and bad as that was, the sanctions for the egregious abuse could not stand initially, the statutes generally providing for sanctions are only definitional, and did not themselves authorize any sanctions. Dissenting. Justice Grimes, you know, actually, I'm sorry, and now I realize I had reversed it. It was the it was the majority that have found no sanctions. And Justice Grimes, who thought that, no, even though there's not a specific state statute on point, the sanctions are still justified. And she reasoned that that, by the same reason, it would be a wrong without a remedy, and the the court has inherent jurisdiction and discretion to to root out abuses in litigation that that occurs in, you know, conducted by the council appearing before it. And the Supreme Court agreed and did something about the problem. The Supreme Court decided that the general sections of civil of the civil discovery act allow a judge to impose monetary sanctions for egregious discovery abuses, rather than being relegated to imposition of discovery violations under specific sections of the discovery act. And that meant that the two and a half million dollars in discovery sanctions were reinstated. The court was careful to observe that the notice and causation and reasonableness principles which apply in specific discovery abuse provisions also need to be applied in this exercise of the more inherent General Power in these situations. What are your reactions to this? Jeff, this is a big, hefty sanctions award,
Jeff Lewis 3:23
yeah, you know, I following this case. And you know first place, you might think, holy smokes, this really gives wide latitude for trial courts to issue sanctions for maybe unspecified conduct or a pattern of conduct. But court, the California Supreme Court was pretty careful to put some limits here and say, Hey, reminder, sanctions are not to punish, believe it or not, they are to achieve the objects of discovery, and you're still limited by requirements of reasonableness and causation. And so it is not a blank check for trial courts just to grant unlimited sanctions based on perceived amorphous discovery abuses. There's got to be some real specificity as to what happened and a linkage between what happened and the sanctions sought. And there has to be showing that it's not punitive, but rather related to achieving the objectives of discovery. So I'm good with this result.
Tim Kowal 4:23
You're good with the result. Do you think that I don't recall, in this case, if there had been discussion about instead of a monetary sanction, if a evidence or issue sanction would have been appropriate? Usually those are seen as, you know, escalating the problem, and a litigant would probably rather have a monetary sanction than one of these penalties or these remedies that wind up prejudicing the party's case, but in this case, I don't know if that's if that's true with the two and a half million dollar sanction, yeah,
Jeff Lewis 4:52
I don't know. I think litigants almost would rather have an escalation of. You know, issue, preclusion, terminating sanctions, striking, pleadings, those kinds of things, and then ultimately monetary but I'm okay with the result here, you know, I gotta tell you, nine times out of 10 I do not agree with Justice Grimes and how she turns out on many cases, especially slap cases. But here I'm with, I'm with her dissent, and I'm with what the California Supreme Court did here.
Tim Kowal 5:20
Okay, so that was, that was the Price Waterhouse Coopers case. The next case that that caught my eye recently is the American building innovation versus Balfour Beatty construction case. This is on a on a attorney's fees issue. Attorneys fees issues to attorneys are always near and dear to our heart, because that's, that's we make sure we get paid in a lot of these cases. And the this case was interesting because it dealt with what, what I had seen as kind of an ambiguity in a Supreme Court case from a few years ago, mountain air enterprises versus sundowner. So you know, it's, it's clear that you're entitled to contractual attorney's fees when you prevail on a contract claim. But then the question that was teed up in, you know, that came up in mountain air and the Supreme Court and now in the American building cases, what happens when the when the contract issue was raised by way of an affirmative defense? There was some confusion in the mountain air case, because a there was a contractual defense, raised in a in an affirmative defense, and mountain air said, No, that is not an action on a contract. That's just a affirmative defense. It's not an action on a contract. So even though you prevailed on that contract defense, it wasn't raised in a complaint or a cross complaint, just a, just a plain affirmative defense. So sorry, no attorneys fees for you, but, but that rule has been clarified. I don't think that American building has gone against the Supreme Court, but what? But factually and procedurally, it's something a little bit different happened in the American building case, which held that raising a contract defense and prevailing on that contract. Affirmative defense did entitle the defense to attorney's fees, contractual attorney's fees, which in this case, wound up being over one and a half million dollars. So the plaintiff contractor here had sued under the party's contract for payment for work rendered, but the defendant asserted an affirmative defense that the contractor wasn't licensed. It was one of those cases, Jeff, where it's, it's always a little bit sad. You think, because you can, you can see innocent contractors just getting hosed on providing good, decent services. But just because their contract, your their license, had been expired or something, or there was some oversight they don't get, they don't get any of their any payment for any of their work. You've obviously
Jeff Lewis 7:42
never had a bad job done on a home improvement contract. Go
Tim Kowal 7:45
ahead, okay? And then the but the defendant proved the that affirmative defense that the contractor wasn't licensed, and the trial court awarded contractual attorney's fees. And so on appeal, the contractor raised mountain air and said, Hey, this was only prevailing on a affirmative defense, and mountain air said you don't get a contractual attorney's fees prevailing on an affirmative defense, so you don't get your civil code 1717 fees. But American building the Court of Appeal said that this misapprehends mountain air is holding, and I think the court's right. The Court explained that the reason that mountain air denied fees to the party who prevailed on the affirmative contract defense in that case asserted an affirmative defense based on a completely different contract than the one raised in the complaint. And so there, and there was no direct claim or cross claim brought on that other contract. But here it was different. The affirmative defense was based on the very same contract that the plaintiff's claim was based on. So really, the claim was on a contract. It just it, yeah, the claim was on a contract. It was not the affirmative defense that was on the contract. It was the complaints, the complaint that was on the contract, and so that met the element under 1717, and so attorneys fees were available. So so I think that provides helpful clarification to mountain air, that if you are raising a contract defense and it's based on a contract that is not raised in the complaint, then if you want to to trigger your right to attorney's fees, you need to bring a cross complaint based on that new contract. Yeah, absolutely
Jeff Lewis 9:29
anybody have confidence you're going to win if you do that. Yeah, yeah.
Tim Kowal 9:32
And frankly, when I when I had originally read mountain air, I thought it was unfortunate. I thought that an affirmative defense based on a contract should be deemed to be an action on a contract, but giving but after further thought, I think it, it offers a an interesting strategic option to a defendant who is, who is considering pursuing a contract defense based on a different contract, if you want to pursue that, that contract. Defense and an affirmative in by way of affirmative defense, but not a cross complaint, then you can avoid, you know, if that, if that affirmative defense is unsuccessful, you know you would be on the hook for attorney's fees to the plaintiff for defeating your affirmative defense. And that would be unexpected. I think that would be an unjust result. So in this case, now, when you're the defendant, you're thinking about raising in a defense based on a contract. You have the option if you want to raise that defense and trigger your right to attorney's fees for, you know, hopefully successfully proving that defense, you need to also raise it in a cross claim. And if you do that and you lose, you can be on the hook for you can expose your client to attorney's fees. So, so go into that with, you know, go into those situations with eyes wide open to both of those possibilities, right? All right. Next case, Jeff. This is just a short one that caught my eye. It was raised from the from the folks at the California attorney's fees blog. This was phrases the proposition that family law contingency agreements are not valid in this state, there's a rule of Professional Conduct, 1.5 subdivision c1, it provides that contingency agreements and family law proceedings are void against public policy because they incentivize attorneys to discourage reconciliation between the family law litigants. Of course, this, this may have been dicta in this case, the case was right versus right. The panel did not have to apply this provision because the subject retainer agreement was not a contingency arrangement. I'm not sure why that exactly came up, but that that caught my eye as a good reminder, if maybe that's already well known among the family law bar, but it was not well known to
Jeff Lewis 11:46
me. Yeah, you know, I don't practice family law, but I do appellate cases in the family law context when there's a disparity of finances between the parties and the courts of make need based awards and of fees, and it's often the case where the only way lawyers or the only way parties can afford lawyers, if those lawyers agree to accept compensation, not on a contingent basis, but in terms of contingent the outcome of the case, but contingent on the ability of a party to secure a court ordered fee shifting from the adverse party. So, yeah, the result here wasn't surprising.
Tim Kowal 12:24
Yeah, okay, Jeff, to wrap up, we got, I've got a couple of, well, a couple of other cases that that were, they're not, not normally our beat, but I thought they were very I thought they were interesting. This. The first one involved a directed verdict in favor of the NFL. This was concerning its I think a class. It was an antitrust case involving its NFL Sunday Ticket platform. The central district judge Philip Gutierrez entered judgment as a matter of law for the NFL ruling that the court had improperly admitted the plaintiff's expert opinion. It's all the details I had to share with you about that case, but it's a $14 billion antitrust case, and apparently plaintiff's expert offered some opinion that the judge later had misgivings about and thought, No, I'm just going to enter a directed verdict in favor of NFL on the basis of that improper expert opinion? Yeah, you know, I
Jeff Lewis 13:22
remember reading this at the time, and it was, is a post trial dalbert Motion to challenge admissibility of some of this expert testimony. Wasn't I gotta tell you, I've never seen, maybe just haven't been doing enough of these appeals. I haven't seen post trial and miscibility attacks to experts if you don't object, in the middle of trial or before trial, isn't it too late? That was my surprising take from this.
Tim Kowal 13:49
Yeah, that was my hot take too. Is that if the judge had misgivings about his own evidentiary rulings, I thought the remedy would be a new trial, because the the plaintiff, you know, once the plaintiff got in that expert testimony, they thought, Okay, we've, we've established our damage, the damages prong of our claim, and they move on to closing arguments, and then the judge says, Oh, wait, by the way, your your damages evidence was improper, so I'm going to cut it out. And all looks like you haven't put on any evidence of damages. So directed verdict for the defense that seems to get the put the plaintiff in an unfair spot. Because if the plaintiff had known what the evidentiary ruling would have been at the time, they could have presumed, you know, maybe they would have had some other damages theory that they could have offered evidence on, but, but this, this whole, it seems like a procedural irregularity that deprived the plaintiff of a fair trial here. I just thought the remedy of a judgment as a matter of law was the wrong way to go. Yep,
Jeff Lewis 14:50
that's extreme,
Tim Kowal 14:52
all right. Last one in arbitration news, Disney sought, seeks a wrongful. Death arbitration based on its Disney plus EULA, the End User License Agreement. Basically what had happened here is that a decedent's widow had Once signed up for a free trial of Disney plus that had an arbitration clause in it, and Disney was able to this is in a Florida case. And I apologize I don't have an update on what's going on with the case, but, but the news was that Disney was seeking to compel this one to arbitration based on the fact that the widow had at one time in the past, or the decedent at one time in the past, had signed up for the end for Disney, plus, which just seems it struck me as this is why people think that the pro arbitration policy is sometimes not on the level or goofy, if you will. Can't improve on that. All right. Jeff, anything else to report, save
Jeff Lewis 15:51
the date. Tim, we are contemplating December 10, Tuesday, December 10, to meet downtown LA with some of our listeners. Have a West West Los Angeles or, I guess I should say, a West Coast version of appellate Twitter meetup in downtown LA lunchtime, Tuesday December 2 location to be determined. To pencil that in to our listeners if they want to get together with us, and you say, Tuesday
Tim Kowal 16:17
December 10. Tuesday December 10, yeah, Tuesday December 10. Yeah, Tuesday December 10. I'm going to put that on my calendar. So reach out to us. Those of you in appellate Twitter land and appellate LinkedIn land and just appellate land in general, if you're interested in meeting up with some fellow appellate nerds, have some lunch and and talk about the recent LA Superior Court, electronic recording order and jurisdictional whether anti slap orders are appealable, or rendered mood after a judgment has been issued, or any of the other nerdy things we like to talk about on this podcast, then let's get it all together. Yeah, I'll
Jeff Lewis 16:53
buy a free drink for anyone who can convince Tim that cleaned up is appropriate in all circumstances.
Tim Kowal 16:59
Yeah, all right, we're good. If
Jeff Lewis 17:02
you have suggestions for future episodes, please email us at info at Cal podcast.com, and our upcoming episodes, look for tips on how to lay the groundwork for an appeal when preparing for trial.
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