Another Frivolous Sanction Is Reversed by Court of Appeal

Monday, December 2, 2002

Page 7

PERSPECTIVES (Column)

Another Frivolous Sanction Is Reversed by Court of Appeal

By ROGER M. GRACE

Code of Civil Procedure §177.5 gives a court the power to impose a monetary sanction on a person who snubs a court order. It provides:

“A judicial officer shall have the power to impose reasonable money sanctions, not to exceed fifteen hundred dollars ($1,500), notwithstanding any other provision of law, payable to the county in which the judicial officer is located, for any violation of a lawful court order by a person, done without good cause or substantial justification.”

Well, it seems that Los Angeles Superior Court Judge Richard C. Hubbell wanted to impose a monetary sanction against a lawyer, Marvin Gross, and his Westwood law firm, Gross, Gross & Simon, for supposedly continuing to represent a client after he had issued an order of disqualification, as well as for other conduct. He desired to penalize them in an amount greater than $1,500 (and apparently didn’t feel a need to go so far as to invoke his contempt power). So, Hubbell imposed a sanction in the amount of $3,150.00, payable to the plaintiffs and their lawyers, pursuant to Code of Civil Procedure section 575.2 and California Rules of Court, rule 227.

There was, however, an impediment to his doing that. Neither the statute nor the court rule even arguably provided authority for his action.

Sec. 575.2 simply gives the go-ahead to a superior court to enact a local rule providing for sanctions payable to the other side in the event local rules aren’t observed. In her unpublished opinion reversing the sanction order, filed Wednesday, Presiding Justice Vaino Spencer said:

“The trial court’s order imposing sanctions clearly states that sanctions are being imposed for the failure to comply with court orders. There is no mention of any failure to comply with a local court rule authorizing the imposition of sanctions. Accordingly, by its terms, Code of Civil Procedure section 575.2 does not provide a basis for the award of sanctions.”

Aside from that, it does not appear that §575.2 itself authorizes sanctions even for violations of local rules; it merely says that local rules “may provide” for sanctions.

Rule 227 authorizes sanctions, payable “to the court or an aggrieved person,” where a state court rule has been breached.

Spencer wrote:

“Previous versions of rule 227 permitted an award of sanctions for ‘[t]he failure of any person to comply with these rules, local rules, or order of the court.’…italics added….The version in effect at the time the sanctions order was made did not permit an award of sanctions for failure to comply with a court order. Hence, rule 227 does not provide a basis for the trial court’s award of sanctions.”

When imposing sanctions on lawyers for doing what they’re not supposed to do, it would be nice if judges would make sure they know what they are doing.

It’s too bad sanctions cannot be imposed on Hubbell, and other of his cohorts, when they go beyond mere judicial error, and act in the total absence of legal authority. Hubbell’s conduct was unlawful, and certainly it was oppressive to Gross and his firm, who were put to the trouble of seeking relief in the appellate court from a frivolous order.

(For a column on other such orders see Perspectives, “Some Sanctions Entail Frivolous Conduct—on the Part of Judges Making the Orders,” Sept. 21, 2000.

A question not reached by Spencer, in light of her conclusion that the provisions cited by Hubbell did not authorize sanctions for disobedience of a court order, was whether any order was, in fact, violated.

It is clear that Gross did not violate the disqualification order. Hubbell had barred Gross and his firm from representing the defendant, Michael Entel. The supposed violation stemmed from Gross writing to the Small Business Administration offering to purchase a note on real property which was headed for foreclosure. If not foreclosed upon, the property was to be conveyed by one of the plaintiffs in the action before Hubbell, a trust, to Entel, who lived on the property. Entel did not have the means to pay off that note, himself. So, Gross asked the SBA to sell the note to him.

His action surely did not amount to legal representation. Rather, Gross was acting in the capacity of a friend and entrepreneur. Had a nonlawyer written the letter, a contention that this was practicing law without a license would be implausible.

Additionally, Gross was found by Hubbell to have violated an order to turn over papers to the plaintiffs’ lawyers. Did he, in fact, disobey that order? Perhaps so. But if he did, his noncompliance was, under the circumstances, not punishable.

The order came not in response to a discovery motion. Rather, the plaintiffs, protesting Gross’ action in contacting the SBA, made an ex parte application on July 30, 2001 for a temporary restraining order. Hubbell granted a TRO barring Gross from acquiring the SBA note. He also commanded that Gross turn over documents to the plaintiffs’ counsel relating to the note, and ordered Gross and his firm to show cause why a preliminary injunction should not be issued.

Gross, who did not appear to oppose the TRO, subsequently offered to stipulate to entry of the preliminary injunction. However, on the stipulation, he crossed off reference to a surrender of the documents.

Neither Gross nor anyone from his firm appeared at the Aug. 13, 2001 hearing on the OSC, and a preliminary injunction was issued. Gross faxed the documents to the plaintiffs’ lawyers on Aug. 20.

On Aug. 31, the plaintiffs filed an application for an OSC re contempt and a motion for sanctions based on Gross’ attempt to assist Entel subsequent to the disqualification order.

On Oct. 5, 2001, a hearing was held, the matter was taken under submission, and on Oct. 15, Hubbell imposed the sanction. After reciting that Gross had disobeyed the disqualification order, he added:

“Gross Gross & Simon further violated this Court’s order demanding that Gross Gross & Simon turn over documents pertaining to the Small Business Administration Loan. This order was served on Gross Gross & Simon on July 31, 2001....Mr. Gross notes his refusal to so comply as demonstrated by his marked changes striking out this portion of the stipulation submitted by Plaintiffs, which conformed to the Court’s order....Such conduct necessitated another court hearing and motion by Plaintiffs which might have been avoided.”

In other words, as Hubbell saw it, Gross should have provided the documents in response to the TRO and stipulated without exception to the preliminary injunction, obviating the need for the Aug. 13 hearing.

According to Spencer’s recitation of facts, the plaintiffs sought sanctions based on Gross’ alleged disregard of the disqualification. If, in fact, Hubbard based the sanction, even in part, on a different ground — failure to produce documents in a timely manner — due process would have demanded a forewarning.

In any event, the action by Hubbell on July 30 was grotesque. He ordered third-party discovery in response to an ex parte motion for a TRO. To state the obvious, the plaintiffs had at their disposal a customary and statutorily authorized means of seeking the documents: a subpoena duces tecum. For Hubbell to bypass normal discovery procedures was — especially given the lack of an emergency situation — unfathomable.

Gross later claimed he did not realize the TRO required immediate production. Assuming, however, that the order was sufficiently clear, Gross, to play it safe, should either have complied with it or sought a writ.

He did not seek a writ. Is he lawfully subject to consequences for not having complied? Spencer’s opinion leaves open that possibility. It says:

“We note that an award of sanctions or other action against appellants is not precluded by this ruling. We hold only that, if appropriate, it must be made pursuant to an applicable statute.”

“Other action” would appear to refer to a contempt proceeding.

Could Gross lawfully be adjudged in contempt for having failed to produce documents pursuant to the TRO? No.

Civil Code §1209(a)(5) specifies that “[d]isobedience of any lawful judgment, order, or process of the court” is a contempt. Note the word “lawful.”

Writing for the state Supreme Court in 1968, Justice Roger Sullivan recited in In re Berry, 68 Cal.2d 137, at 147:

“In this state it is clearly the law that the violation of an order in excess of the jurisdiction of the issuing court cannot produce a valid judgment of contempt…and that the ‘jurisdiction’ in question extends beyond mere subject matter or personal jurisdiction to that concept described by us in Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280, at page 291: ‘Speaking generally, any acts which exceed the defined power of a court in any instance, whether that power be defined by constitutional provision, express statutory declaration, or rules developed by the courts and followed under the doctrine of stare decisis, are in excess of jurisdiction, ...’ ”

If Hubbell’s order was in excess of his jurisdiction, any violation of it would not be a contempt.

Hubbell’s order was in excess of jurisdiction.

Code of Civil Procedure §2020(a) provides that except as to officers, directors, managing agents or employees of a party, “the process by which a nonparty is required to provide discovery is a deposition subpoena.” There was no deposition subpoena.

More fundamental is that Hubbell was entirely out of line in issuing a TRO that did not merely “restrain,” but ordered that a particular act be performed.” The California Supreme Court stated this rule in 1897 in Hagen v. Beth, 118 Cal. 330:

“The granting of a mandatory injunction pending the trial, and before the rights of the parties in the subject matter which the injunction is designed to affect have been definitely ascertained by the chancellor, is not permitted except in extreme cases where the right thereto is clearly established and it appears that irreparable injury will flow from its refusal.”

That rule is unchanged today (and was applied by Spencer’s panel in 1995). If a mandatory preliminary injunction may not issue absent irreparable injury if it does not, it follows that a TRO directing that an act be performed most certainly is impermissible except under extreme circumstances (which clearly were not present).

It follows that a sanction could not properly be imposed under §177.5. That section authorizes a sanction where there has been a “violation of a lawful court order….” The disqualification order was lawful, but was not violated; the order to produce documents was not lawful, hence any delay in complying with it was non-sanctionable.

An issue that was not before Spencer’s panel was whether Gross and his firm should have been disqualified, in the first place.

The disqualification was based on Gross having previously represented Eicher, Inc., a plaintiff in the action against Entel. Gross had been Entel’s lawyer for several years and, while Entel was general manager of Eicher, he asked Gross to represent the corporation at an administrative hearing. Spencer recounted:

“Gross stated that Entel contacted him in April 2000 regarding a hearing before the Employment Development Department for a former Eicher, Inc. employee. Gross agreed to represent Eicher, Inc. in the matter. Gross and his son, Marc D. Gross, interviewed two Eicher, Inc. employees regarding grounds for the former employee’s termination. They reviewed the former employee’s salary records. They represented the corporation at several hearings. They never went to Eicher, Inc.’s premises or saw any of the corporation’s other books or records.”

The California Supreme Court held in Flatt v. Superior Court (1994) 9 Cal.4th 275 “where a former client seeks to have a previous attorney disqualified from serving as counsel to a successive client in litigation adverse to the interests of the first client, the governing test requires that the client demonstrate a ‘substantial relationship’ between the subjects of the antecedent and current representations.

Gross’ representation of the corporation at a routine unemployment hearing would not seem to have any relationship whatever, let alone a “substantial” one, to its current action against Entel based on his allegedly having looted corporation assets.

It would thus appear that Hubbell…

•Disqualified Gross and his firm without legal justification;

•Restrained Gross — based on an order disqualifying him from acting as Entel’s lawyer in the case — from performing non-legal services for Entel;

•Ordered him, in connection with a temporary restraining order issued pursuant to an ex parte application, to turn over documents which had not been subpoenaed;

•Imposed a sanction on him and on his law firm for supposedly disobeying two court orders, proceeding under a statute and a court rule neither of which authorized a sanction on that ground;

•Imposed the sanction notwithstanding that one of his two proclamations (the disqualification order) had not been violated and the other (to turn over documents) had been made in excess of the court’s jurisdiction.

This cannot be characterized as stellar judicial performance.