Wednesday, March 5, 2003
Court May Award Sec. 128.7 Sanctions After Plaintiff Agrees to Dismissal, Court of Appeal Rules
By a MetNews Staff Writer
A plaintiff cannot defeat a sanctions motion simply by agreeing to dismiss the underlying lawsuit with prejudice, this district’s Court of Appeal ruled yesterday.
Once the sanctions motion has been filed and taken under submission the trial judge retains the jurisdiction to rule on it, Presiding Justice Candace Cooper wrote for Div. Eight.
Although filing a sanctions motion after voluntary dismissal would defeat the purpose of the 21-day statutory “safe harbor” under Code of Civil Procedure Sec. 128.7 that allows parties to cure their sanctionable conduct, Cooper said, the same reasoning does not apply where the sanctions motion comes before dismissal.
“In these circumstances, belated abandonment of the case does not fulfill the object of the statute, and the policies favoring allowance of sanctions remain extant notwithstanding the dismissal,” Cooper said.
The ruling upholds a sanctions award against plaintiff Yossi Eichenbaum and his attorney for $2,268 for filing second, third and fourth amended complaints that purported to name his dead former partner as a defendant when the decedent’s trust had substituted in as defendant.
Eichenbaum and Barry Alon formed the Alon-Eichenbaum Limited Partnership in 1986, but Eichnbaum later alleged that in 1992 Alon transferred his 40 percent interest to his partner in exchange for satisfaction of a debt.
Alon allegedly disclaimed the transfer in 1998 based on the failure to garner approval from a majority of the partnership.
Eichenbaum sued Alon and the partnership, seeking a declaratory ruling as to his ownership of Alon’s interest. But Alon died during the early stages of the proceedings, and when Eichenbaum sought to enter Alon’s default, the Alon Family Revocable Trust moved to be substituted in and alleged that Alon had transferred his partnership interest to it.
The court permitted the substitution and granted Eichenbaum leave to amend to allege that Alon’s assignment had been oral and had been approved by a majority under the partnership agreement.
But Eichenbaum’s second amended complaint also named Alon, and the court sustained the trust’s demurrer based on that as well as on the allegation that the oral contract and the partnership agreement had been adequately alleged.
In the third amended complaint, Eichenbaum again named his deceased partner, and again failed to adequately allege an oral agreement and partnership approval, and the court again sustained the defendant’s demurrer.
Eichenbaum then filed a fourth amended complaintóagain naming Alon, this time alleging fraud.
This time the trust accompanied its demurrer and motion to strike with motions for sanctions.
Eichenbaum did not act to cure the misconduct by correcting or withdrawing the complaint within the 30-day safe-harbor periodóshortened this year to 21 daysóand Los Angeles Superior Court Judge David Horowitz heard the sanctions motions. He granted a motion under Code of Civil Procedure Sec. 177.5, requiring Eichenbaum and his lawyer each to pay $1,500 to the county for having violated the two prior court orders striking references to Alon as a defendant, and took the 128.7 motion under submission.
Eichenbaum then asked to dismiss his latest amended complaint without prejudice, and Horowitz placed the demurrer and motion to strike off calendar. But he ordered further briefing on whether he retained jurisdiction to grant the 128.7 motion. During the briefing process, Eichenbaum moved to dismiss with prejudice, and Horowitz accommodated him.
But several weeks later Horowitz granted the 128.7 motion, finding that Eichenbaum’s persistence, without asserting the necessary facts, in asserting that partnership had approved the transfer amounted to an argument that the court’s previous rulings were wrong.
Horowitz also held that the voluntary dismissals of the action had not deprived it of authority to impose sanctions.
“In the present case, appellants were given the full latitude of the safe harbor period,” the presiding justice said. “They ignored it, and did not withdraw their [fourth amended complaint], by dismissal, until after the sanctions motion had been filed, argued, and submitted for decision.”
The case is Eichenbaum v. Alon, 03 S.O.S. 1161.
Copyright 2003, Metropolitan News Company