Monday, December 23, 2002
Sec. 128.5 Still in Effect for Post-1994 Cases, Appeals Court Rules
By ROBERT GREENE, Staff Writer
A litigant can obtain sanctions for an opponent’s bad faith under a 22-year-old law even if the action was filed after a newer sanctions statute took effect in 1995, the First District Court of Appeal ruled Friday.
Code of Civil Procedure Sec. 128.5 is alive and well, the court ruled, and can form the basis of a sanctions order on even a recently filed case as long as the offensive conduct did not take the form of a pleading.
The ruling upholds an award of Sec. 128.5 sanctions against two plaintiffs who sued an insurance broker but lied about being able to get other insurance and making other claims following their automobile accident.
The opinion by Justice Joann Parrilli of Div. Three attempts to clarify the arsenal of sanctions that lawyers and their clients have at their disposal when they believe an opponent is lying, cheating, or using what used to be known as “Rambo” tactics.
The Legislature passed Sec. 128.5 in 1981 to permit sanctioning lawyers or litigants for frivolous motions or delay tactics. A new and by many accounts experimental law codified as Sec. 128.7 passed in 1994 but by its terms applies only to misconduct in pleadings, and only those filed in 1995 or later.
The new law, based on the Federal Rules of Civil Procedure, also gives the party accused of misconduct a chance to “cure” the problem. It passed with a sunset date of Jan. 1, 1999, but has been extended twice—the first time through the end of this year, the second time until Jan. 1, 2006.
Because Sec. 128.7 still could eventually lapse, Sec. 128.5 remains standing in the wings and absent further legislative action would return to the fore on the sunset of the newer law, Parrilli said.
Sec. 128.6, not discussed by Parrilli, mirroring provisions of Sec. 128.5, was scheduled to go into effect on Jan. 1. It provides, however, that it would not take effect if Sec. 128.7 were extended, which took place last year.
Parrilli said the first two statutes operate concurrently. Sec. 128.5 is still in effect, she said, and not just for cases filed before 1995.
Bucking the Legislative Counsel’s Digest that accompanied the newer Sec. 128.7, and also bucking the state Supreme Court’s view expressed in dicta, Parrilli said the Legislature left Sec. 128.5 intact for all kinds of litigation abuses except pleading misconduct when it passed the second law.
“[I]nterpretations found in the Legislative Counsel’s Digest are not binding on the courts,” Parrilli said. “And while dicta from our Supreme Court are persuasive and should ordinarily be followed, this sound advice is only controlling when the Supreme Court has conducted ‘a thorough analysis of the issues and such analysis reflects compelling logic.’”
The justice noted that when the Legislature approved Sec. 128.7 and made it effective only for pleadings filed on or after Jan. 1, 1995, it did not amend Sec. 128.5 to apply only to pleadings filed earlier.
“Instead, the Legislature inserted a limiting provision in the definition of sanctionable conduct, specifying that such conduct would include pleadings only if the conduct occurred in a proceeding initiated on or before Dec. 31, 1994…,” Parrilli said. Thus, the Legislature limited the scope of section 128.5, narrowing its application after 1994 to sanctions for conduct not involving pleadings.”
In the trial court, San Francisco Superior Court Judge Thomas H. Mellon Jr. rejected a motion by insurance broker Arthur J. Gallagher & Company for Sec. 128.5 sanctions against plaintiffs Carleen Olmstead and Cherie Rose.
Mellon said the conduct could well have been sanctionable under Sec. 128.5, but that the statute did not apply because the action was filed after Dec. 31, 1994. No recovery was available under Sec. 128.7, the judge ruled, because the company failed to comply with the 30-day safe harbor provision.
The judge also rejected a motion for reconsideration for Gallagher to request discovery sanctions under Sec. 2033.
Parrilli said Mellon erred by failing to apply Sec. 128.5, as well as by failing to permit a sanctions request under Sec. 2033. The matter was returned to the trial court for a hearing on the merits.
The case is Olmstead v. Arthur J. Gallagher & Company, A097117.
Copyright 2002, Metropolitan News Company