CLARK v. OPTICAL COATING LABORATORY, INC.,

Filed 7/24/08

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

This toxic tort lawsuit by 32 plaintiffs went to a jury trial against defendants the State of California (the State), Southern Pacific Transportation Company (Union Pacific), and Optical Coating Laboratory, Inc. (OCLI). The trial was marked by repeated objections, sustained by the court, that plaintiffs attorneys were violating its in limine orders. Ultimately, after warning the attorneys that they were risking a mistrial and exposing themselves to substantial sanctions, the court declared a mistrial based on their cumulative misconduct.

Following the mistrial, the trial court took the following actions from which these consolidated appeals were taken: (1) awarded all defendants a combined total of $1,151,041.25 in attorney fees and costs as sanctions against plaintiffs attorneys; (2) reconsidered and granted dispositive motions by OCLI and the State that had been denied before trial commenced; and (3) made a separate award to the State of $672,501.25 in attorney fees and $439,535.31 in expert witness fees jointly and severally against all plaintiffs.

Finding no legal basis for the attorney fees, costs, and expert witness fees awarded as sanctions against plaintiffs and their attorneys, we reverse those awards. We also reverse the judgment in favor of OCLI. We affirm the judgment in favor of the State, and the expert fee award made to the State under Code of Civil Procedure[1] section 998.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Overview of Plaintiffs Allegations

Plaintiffs are 32 individuals who have all lived or worked in the West College Avenue neighborhood of Santa Rosa. In 2000, plaintiffs learned that the private water wells they used for drinking water had been contaminated with trichlorethylene (TCE) and perchlorethylene (PCE). They eventually retained the law firm of Gonzalez & Robinson to investigate the cause of the contamination and pursue compensation from those responsible. Plaintiffs claimed that the contamination caused them to suffer both economic losses and a wide range of adverse health effects.

In 2001, plaintiffs sued the City of Santa Rosa, the County of Sonoma, the State, Union Pacific, OCLI, and several entities that formerly owned or operated dry cleaning businesses near the West College Avenue neighborhood. The trial was bifurcated into liability and damages phases. Just prior to jury selection in the liability phase, all of the solvent defendantsexcept the State, Union Pacific, and OCLIsettled with plaintiffs.

The relevant facts and allegations pertaining to these three defendants may be summarized as follows:

Union Pacific owned a nine and one-half acre parcel of land, known as 99 Frances Street, located approximately one-half mile northeast of the West College Avenue neighborhood. Beginning in 1967, the Frances Street property and a smaller adjacent property, 1143 Briggs Avenue, had been leased for use by a succession of scrap metal recyclers and auto wreckers. In 1988, the North Coast Regional Water Quality Control Board (Water Board) discovered that the Frances Street site was contaminated with leaking 55-gallon drums, old batteries, large quantities of shredded metal, and aboveground and underground storage tanks. Ultimately, both sites were found to be highly contaminated with TCE, PCE, and other toxic chemicals. Plaintiffs alleged that those contaminants seeped into the groundwater beneath the sites and ultimately migrated into plaintiffs wells, contributing to their contamination.

OCLI has maintained a facility in Santa Rosa since the 1950s. OCLI developed thin film coating processes for government and industry, and created products at its Santa Rosa facility that use high performance optical thin films to manage light, such as solar cell covers on satellites, camera lenses, and mirrors used in copiers and scanners. In the process of creating certain of its products, OCLI used various industrial solvents, including acetone, PCE, TCE, trichorethane (TCA), and freon 113. Plaintiffs allege that OCLI disposed of over 300 drums containing toxic wastes, including PCE and TCE, at the Frances Street site. They allege that these contaminants migrated from that site onto their properties and into their well water.

Plaintiffs allegations linking OCLI to the site were based in part on three internal Water Board memoranda. Two of the memos, written in 1990, purported to summarize conversations with an anonymous tipster who claimed that as an employee of Donald Kessler, the owner of an auto wrecking yard leasing the Briggs Avenue site, he had transported a truckload of 55-gallon drums from OCLI to be dumped at the site in approximately 1973. According to the memo, the tipster reported that, at Kesslers instruction, he had emptied the drums liquid contents on the ground before dumping them. He had seen a total of approximately 300 drums at OCLI ready for disposal on that occasion. The third memo, written two years later, purported to summarize a 1992 telephone conversation between a Water Board staffer and Kessler.[2] According to that handwritten memo, Kessler stated that drums were in fact either picked up or delivered to his site from OCLI and that, although the drums were supposed to be empty because they were to be used by him for storage of metal waste, some of the drums probably had liquid in them and employees werent always paying attention to the matter.

According to plaintiffs, the States liability arises vicariously from the failure of certain Water Board employees to immediately notify local officials in July 1988, after the Water Board issued a cleanup and abatement order for the Frances Street site, that the contamination of that site was likely to cause substantial injury to the public health or safety within the meaning of Health and Safety Code section 25180.7, subdivision (b).[3]

B. Pretrial Motions

1. The States Summary Judgment Motion and Motion for Judgment on the Pleadings

The State moved for summary judgment in January 2004, asserting that (1) Health and Safety Code section 25180.7 imposed a mandatory duty on certain State employees but not on the State itself, (2) section 25180.7 could not create tort liability because the injuries claimed by plaintiffs were not actionable under the California Tort Claims Act,[4] and (3) the undisputed evidence showed that no Water Board employee violated a mandatory duty to disclose under Health and Safety Code section 25180.7. The trial court denied the States motion, finding that [p]laintiffs raise triable material issues of fact, specifically showing that the moving party possessed information requiring it to provide warnings earlier, and to more people, than it did.[5] This court denied the States ensuing petition for a writ of mandate overturning the trial courts decision, without issuing a written opinion.

In July 2005, the State reiterated the purely legal arguments raised in its summary judgment motion by means of a motion for judgment on the pleadings. In addition, the State asserted one new legal argumentthat it was immune from liability under Health and Safety Code section 25400, subdivision (b).[6] The court, with a different judge presiding, denied that motion as well.

2. OCLIs Summary Judgment Motion

OCLI also moved for summary judgment, arguing among other things that there was no evidence it had ever sent hazardous wastes to the Frances Street or Briggs Avenue sites. OCLI relied on the declaration of Ken Pietrelli, a company vice-president, acknowledging that OCLI had sold empty scrap drums and drums containing scrap metal to West Coast Metalsone of the scrap metal dealers leasing the sites in 1960s and 1970sbut denied that OCLI had ever sent or disposed of any drums containing chemicals to West Coast Metals. In opposition, plaintiffs sought judicial notice of the 1990 and 1992 Water Board staff memos recounting information provided by the anonymous tipster and by David Kessler. Over OCLIs hearsay objection, the trial court (1) took judicial notice of the existence of the documents, and (2) denied OCLIs motion for summary judgment.

3. OCLIs In Limine Motions

As the trial date approached, OCLI made a number of in limine motions. OCLI moved to exclude as double hearsay all mention of the 1990 and 1992 Water Board internal memoranda. In opposition to these motions, plaintiffs merely asserted in one sentence that the challenged documents have been admitted by Court. In support of that proposition, plaintiffs attached the order made in connection with OCLIs summary judgment motion, in which a different trial judge had granted plaintiffs request that it take judicial notice of the memorandas existence. Notwithstanding the earlier ruling, the court granted OCLIs motions in limine as to these memos on April 11, 2006.

OCLI also moved before trial to exclude evidence that the groundwater beneath its own facility was contaminated, on the ground that such evidence was irrelevant to whether it improperly disposed of hazardous waste off-site, and was unduly prejudicial under Evidence Code section 352. Plaintiffs argued that the evidence was relevant to proving that OCLI was the source of the contamination found at Frances Street since the chemicals found at the two locations were assertedly identical. The trial court found the evidence to be inadmissible under Evidence Code section 352.

4. OCLIs First Motion to Dismiss

After the court granted OCLIs in limine motions, OCLI moved to dismiss the case against it, arguing that the courts rulings had excluded the only evidence of its liability. In response, plaintiffs argued that the following evidence, to be adduced at trial, would be sufficient to support an inference that chemicals originating at OCLI had found their way into the groundwater underneath the Frances Street and Briggs Avenue sites: (1) Ken Pietrellis admission in his declaration in support of OCLIs summary judgment motion that OCLI had delivered used drums to West Coast Metals during the 1960s and 1970s; (2) the opinion of plaintiffs expert, Dr. Lorne Everett, based on an April 1988 OCLI environmental report, that the chemical solvents OCLI had formerly used were consistent with those discovered at the Briggs Avenue and Frances Street sitesincluding TCE, freon 113, and acetone;[7] (3) Dr. Everetts anticipated testimony that this mixture of chemicals is rare and somewhat unique to the industrial activity that occurred at OCLI; (4) a 1988 Water Board report stating that 55-gallon drums containing hazardous chemicals had been found at the sites; and (5) the asserted fact that OCLI could not identify any other possible source for the contamination found at the sites.

The trial court reluctantly denied OCLIs motion to dismiss without prejudice to OCLI raising the same issues by way of a motion for nonsuit at the appropriate time. The court explained that it would feel more comfortable deciding the issues after plaintiffs had a chance to put in all of their admissible evidence concerning OCLI.

C. The Mistrial

Before trial commenced, Union Pacific had filed a motion in limine precluding any party in the liability phase of the trial from referring to plaintiffs alleged damages, including their chemical exposure level, medical conditions, or the extent or nature of their personal injuries or property damage (hereafter MIL No. 1). Union Pacifics proposed order on MIL No. 1 included a provision that if plaintiffs violated the order and a mistrial resulted, the court shall impose a monetary sanction upon Plaintiffs counsel in an amount equaling the cost of [Union Pacifics] attorneys fees incurred from the date the trial commences to the date of any mistrial.

Plaintiffs opposed both the substantive and sanctions provisions of the proposed order. The trial court granted MIL No. 1, subject to the qualification that plaintiffs would be allowed to introduce evidence during the liability phase that their wells were contaminated. This ruling came in response to plaintiffs argument that some evidence of harm had to be allowed because harm was an element of their negligence liability causes of action against defendants. The court accordingly modified the written order submitted by Union Pacific to allow evidence that plaintiffs wells had been contaminated. At the hearing on the motions, the State requested that it also be awarded attorney fees as sanctions if plaintiffs violated the proposed order. Without being more specific, the court responded that the order on MIL No. 1 (hereafter In Limine Order No. 1) would apply to everybody in the case. However, the court made no change in the wording of the submitted order to broaden its application in any respect.

After the trial began, plaintiffs counsel and witnesses violated a series of in limine and other pretrial court orders, culminating in the declaration of a mistrial before plaintiffs were able to complete their case-in-chief. Plaintiffs counsel first clashed with the court during jury selection on May 9, 2006, by bringing a visibly disabled minor plaintiff to the courthouse and positioning him in front of the jury panel as they entered the courtroom. This violated an in limine order generally excluding minors from the courtroom. On May 10 and 11, while under questioning by plaintiffs counsel, Dr. Everett offered testimony on three occasions that violated in limine orders and drew objections.

On May 16, plaintiffs counsel, Keith Robinson, who was already on notice of the courts heightened concern about violations of its orders, began asking one of the plaintiffs about the fact that she had to begin paying for water from the city after her well was found to be contaminated. Union Pacifics counsel objected based on In Limine Order No. 1 and the parties held an unreported sidebar conversation. As soon as the parties went back on the record in the presence of the jury, Robinson asked the witness whether she had suffered harm or loss from having to buy the citys water. This further violation of In Limine Order No. 1 drew an immediate objection from Union Pacifics counsel. The trial court sustained the objection, excused the jury for the day, and informed Robinson in strong terms that the court was out of patience with his violation of its orders, and that he seemed to be deliberately inviting a mistrial as well as a citation for contempt. Robinson apologized for his question and the court accepted his apology. At the same time, the court warned Robinson to be very, very careful because the cumulative prejudice from violating the courts orders was starting to reach the level where a mistrial might be required, at which point counsel would owe the opposing parties a large amount of money because thats the order of the Court.

On May 23, 2006, the court warned Robinson during a colloquy that the next time he asked a question that invited a witness into an area covered by a motion in limine he would be risking a mistrial, contempt citation, and an attorney fee sanctions award under In Limine Order No. 1. The last straw for the court occurred the next day during the examination of Kenneth Pietrelli by Robinsons cocounsel, Charles Cochran. Cochran asked Pietrelli about the Water Boards investigation of OCLIs disposal practices, an area that the court had specifically declared off limits in an oral ruling made on May 9. At that point, the court invited the defense to bring an oral motion for a mistrial, which they did. All of the defendants also joined in an oral motion for an award of fees against plaintiffs counsel pursuant to In Limine Order No. 1. The court granted both motions and set a date for a hearing on the amount of defendants fees and costs. In making these rulings, the court observed that it had never seen a case where the courts orders were so blatantly disobeyed.

Before the date set for the hearing, defendants submitted a letter to the court calling its attention to issues regarding a trial courts authority to award attorney fees as sanctions in connection with a mistrial. The letter proposed that the parties be given an opportunity to brief the issue of attorney fees as sanctions, and further advised that defendants would be asking the court to reconsider its rulings on their prior dispositive motions. At the hearing, the trial court (1) informed Robinson and Cochran that it was going to cite them for contempt, (2) invited defendants to bring their own motions for sanctions under section 128.7 and In Limine Order No. 1, (3) advised that on its own motion it was going to reconsider its rulings on the States motion for summary judgment and OCLIs motion to dismiss, and (4) set a briefing schedule and combined hearing date for the order to show cause re contempt and other motions. Union Pacific and OCLI filed separate motions for sanctions, and OCLI and the State also joined in Union Pacifics motion based on In Limine Order No. 1. OCLI filed a renewed motion to dismiss and the State filed a renewed motion for summary judgment.

D. The Courts Post-mistrial Rulings

Following a hearing held on August 18, 2006, the trial court made the following rulings: (1) sanctions for attorney fees and costs were appropriate as to all defendants under In Limine Order No. 1; (2) fees and costs were recoverable jointly and severally from Cochran, Robinson and Gonzalez & Robinson in the amounts of $588,307.71 for Union Pacific, $419,608.80 for OCLI, and $143,124.74 for the State; (3) OCLIs award also included sanctions under section 128.7 because the case against it lacked evidentiary support; (4) OCLI was entitled to the dismissal of plaintiffs claims against it; (5) the State was entitled to summary judgment; and (6) Cochran and Robinson were found to be in contempt of court.[8]

After its summary judgment motion was granted, the State moved for a further award of its defense costs from the plaintiffs, including expert witness fees, under sections 998 and 1038. The trial court granted the States motion for defense costs, awarding the State $672,501.25 in attorney fees under section 1038, and $439,535.31 in expert witness feesjointly and severally against all plaintiffsunder both sections 998 and 1038.

Robinson, Gonzalez & Robinson, and Cochran timely appealed from the sanctions awards (case Nos. A115474 and A115445). Plaintiffs filed separate appeals from the granting of: (1) OCLIs motion to dismiss (case No. A115399); (2) the States motion for summary judgment (case No. A116164); and (3) the States motion for defense costs (case No. A116901). We consolidated the five appeals.

II. DISCUSSION

A. Fee Awards Based on In Limine Order No. 1

The court found that it had the power to award fees as sanctions under In Limine Order No. 1 on three grounds: (1) its inherent powers under section 187, (2) judicial estoppel in that plaintiffs counsel did not object to the order after it was made applicable to all parties, and (3) because all of the parties agreed to permit attorney fees as a sanction for causing a mistrial as long as it was applicable to both sides. Plaintiffs counsel take issue with each stated basis for the courts award.

1. Courts Inherent Authority

The trial court believed it had the statutory authority to enforce the attorney fee provision of In Limine Order No. 1 under sections 187 and 128, subdivision (a)(4).[9] [10] The court reasoned that section 187 gives courts broad inherent powers in complex multi-party cases to fashion new procedures to manage and control the litigation. (See Cottle v. Superior Court (1992) 3 Cal.App.4th 1367, 1380.) In particular, because this case involved complex scientific issues, many parties, and a lengthy phased trial, the court believed it had the inherent power to make orders ensuring that relevant evidence was introduced at the appropriate time and in a nonprejudicial manner. By virtue of section 128, subdivision (a)(4), the court believed it had the power to back up its orders by imposing monetary sanctions, including attorney fees, for their violation.

Plaintiffs counsel rely primarily on Bauguess v. Paine (1978) 22 Cal.3d 626 (Bauguess), which reversed an award of attorney fees imposed as a sanction on an attorney for causing a mistrial. (Id. at pp. 633, 640.) The Bauguess court in fact held specifically that a courts inherent power to exercise supervisory control over judicial proceedings does not include the power to award attorney fees as a sanction for attorney misconduct absent specific legislative authorization or agreement of the parties. (Id. at pp. 633640; see also, Olmstead v. Arthur J. Gallagher & Co. (2004) 32 Cal.4th 804, 809 (Olmstead) [Bauguess . . . held that trial courts may not award attorney fees as a sanction for misconduct unless they do so pursuant to statutory authority or an agreement of the parties]; Trans-Action Commercial Investors, Ltd. v. Firmaterr, Inc. (1997) 60 Cal.App.4th 352, 371373 (Trans-Action) [in partial reliance on Bauguess, invalidating rule of court that permitted courts to impose attorney fees in situations not specifically authorized by statute].)

The rationale for the Supreme Courts holding in Bauguess was that allowing the trial courts to impose attorney fees as sanctions for attorney misconduct without statutory protections would undermine due process and threaten the independence of the bar: It would be both unnecessary and unwise to permit trial courts to use fee awards as sanctions apart from those situations authorized by statute. If an attorneys conduct is disruptive of court processes or disrespectful of the court itself, there is ample power to punish the misconduct as contempt. Moreover, unlike the power advocated by respondent, a courts inherent power to punish contempt has been tempered by legislative enactment to provide procedural safeguards. [Citations.] Among these safeguards is the opportunity, in cases where the contempt occurs out of the immediate view and presence of the court, to disqualify the judge . . . . Additionally, the Legislature has limited the penalty for civil contempt to five days in jail and a $500 fine. [Citations.] Absent such safeguards, serious due process problems would result were trial courts to use their inherent power, in lieu of the contempt power, to punish misconduct by awarding attorneys fees to an opposing party or counsel. [] The use of courts inherent power to punish misconduct by awarding attorneys fees may [also] imperil the independence of the bar and thereby undermine the adversary system. (Bauguess, supra, 22 Cal.3d at pp. 637638.)

As an initial matter, we note that the trial court in this case held that Bauguess had been superseded by the enactment of section 128.5 and was no longer controlling. We do not agree with the courts analysis. Section 128.5, which authorizes the imposition of monetary expense sanctions, including attorney fees, for bad faith actions or tactics, was superseded for actions filed on or after January 1, 1995, by section 128.7. The latter statute provides a more limited authorization for the imposition of fees as sanctions for the filing of improper signed pleadings. (Id., subd. (a).) Although it is true that the Legislature enacted section 128.5 to broaden the power of trial courts to award monetary sanctions in response to Bauguess (see Olmstead, supra, 32 Cal.4th at p. 809), the statute only superseded Bauguess and supplied legislative authorization for the type of fee award invalidated in the Bauguess case for cases filed within the limited time window during which it was in effect, i.e., between 1982 and 1994. Rather than undermining Bauguess, the adoption of section 128.5 shows the Legislatures acceptance of its core holding that trial courts may not award attorney fees as a sanction for misconduct absent statutory authority (or an agreement of the parties). Bauguesss continued viability is shown by its application after the adoption of section 128.5. (See Sheller v. Superior Court (2008) 158 Cal.App.4th 1697 [reversing fee award against attorney for misleading communication with prospective class members]; Trans-Action, supra, 60 Cal.App.4th at pp. 365366.)

Sections 128.5 and 128.7 plainly do not authorize the fee awards made in this case to the extent they are based on counsels asserted violation of In Limine Order No. 1. Section 128.5 has no application to cases filed on or after January 1, 1995, while section 128.7 applies solely to attorney misconduct in the filing or advocacy of groundless claims made in signed pleadings and other papers. ( 128.7, subd. (b).) Equally, sections 128, subdivision (a)(4) and 187, relied upon by the court, cannot supply the type of statutory authorization required under Bauguess. These generic statements of the courts powers to formulate suitable procedures and command obedience to its orders do not by their own terms authorize any specific form of attorney sanction, much less impose the type of procedural safeguards that the Bauguess court found essential.

Defendants rely on Stephen Slesinger, Inc. v. Walt Disney Co. (2007) 155 Cal.App.4th 736 (Slesinger), a case that distinguished Bauguess and Trans-Action in upholding the trial courts inherent authority to impose terminating sanctions for egregious discovery abuses. (Slesinger, at pp. 762, 764, fn. 19.) Defendants argue that if a court has the inherent authority to dismiss a case in appropriate circumstances, it must also have the authority to include fee-shifting provisions in its pretrial orders to encourage compliance with those orders. But Slesinger involved extreme discovery abuse by a party, including the theft of confidential and privileged documents. (Id. at pp. 741756.) Under those circumstances, where any sanction short of dismissal would have deprived the opposing party of a fair trial, the Slesinger panel found that the trial court did have the inherent power to dismiss. (Id. at pp. 762763, 764.) In support of its position, the panel cited statutory language in which the Legislature had expressly acknowledged the inherent power of courts to dismiss. (Id. at p. 763, citing 581, subd. (m), 583.110.) In contrast, citing Bauguess and Trans-Action, the Slesinger court was careful to point out that the inherent authority to sanction for egregious misconduct does not include the power to award attorney fees to punish that misconduct. (Id. at p. 764, fn. 19, italics added.) Thus, Slesinger directly refutes defendants argument that the court had the inherent power to impose attorney fees as a sanction for violating In Limine Order No. 1.

Defendants also argue that Bauguess is inapplicable because, unlike that case, the fees here were imposed for violation of a pretrial court order. According to defendants, the issue of whether the court had the authority to enter an in limine order with a fee-shifting provision prior to trial, and to enforce such pretrial order, was not addressed in Bauguess and related cases. Here, unlike Bauguess, the issuance of the pretrial order gave counsel ample notice that fees could be awarded for causing a mistrial.

Defendants narrow reading of Bauguess makes little sense. If a court could grant itself the power to award fees as sanctions merely by issuing a pretrial order, much of Bauguesss reasoning would have to be cast aside. The Bauguess court began its analysis of the courts inherent powers to award fees as sanctions from the premise that our courts normally follow the traditional American rule that each side bears its own attorney fees, and that nonstatutory departures from that practice have been recognized only infrequently after careful analysis and a finding that compelling reasons of public policy warranted such an award. (Bauguess, supra, 22 Cal.3d at pp. 634636.) Allowing courts to freely suspend or displace the traditional rule by pretrial orderwith no comparable analysis or findingswould seem to clash directly with that premise. Further, the Bauguess court was concerned that court-crafted sanctions would lack the  appropriate safeguards and guidelines developed following a thorough in-depth investigation  that only the legislative process could provide. (Id. at p. 639, quoting Young v. Redman (1976) 55 Cal.App.3d 827, 838839.) Again, holding that a court may give itself the ad hoc authority to impose fee-shifting as a sanction without safeguards or guidelines seems flatly inconsistent with Bauguesss reasoning.

For these reasons, we hold that the trial courts award of attorney fees against plaintiffs counsel for their asserted violation of In Limine Order No. 1 was neither within the courts inherent powers nor authorized by statute.

2. Judicial Estoppel and Agreement of the Parties

The trial court also believed it could impose the sanctions award based on judicial estoppel and agreement of the parties because plaintiffs counsel assertedly requested and the court agreed that the order would be made applicable to all parties. We do not believe that the record in this case supports either theory.

Plaintiffs counsel submitted written opposition to MIL No. 1, including its sanctions provision. Plaintiffs position was understandable. Union Pacific had made no secret of the fact that the motion and sanctions provision were aimed exclusively at plaintiffs. The motions stated objective was to restrain plaintiffs from introducing evidence that Union Pacific considered to be highly prejudicial, although the proposed order itself precluded such evidence from being admitted without regard to the party offering it. For its part, the proposed sanctions provision addressed only one possible scenarioUnion Pacifics recovery of its fees from plaintiffs counsel in the event the latter violated the order and a mistrial was declared.

It is true that the issue of the orders one-sidedness in favor of Union Pacific did come up at the hearing on the parties in limine motions. However, this issue was only raised several minutes after the trial court had in fact already granted Union Pacifics motion, and it was raised by the State, not by plaintiffs.[11] At that time, the following colloquy occurred:

[Counsel for the State]: Also, again, not to retrace steps, but we joined in [MIL No. 1]. And in Union Pacifics motion . . . one of the remedies they asked for was their attorneys fees and a mistrial if plaintiffs violated that motion. I just want to make clear that when the Court issues its ruling, that were included in that, too. And if a mistrial occurs because of misconduct by plaintiffs in bringing in damages issues or other second phase issues . . . we would like to . . . recover our attorneys fees as well.

[The Court]: Well, just to clarify, in terms of the orders that the Courts going to impose, its going to be plaintiffs shall be precluded, or defense shall be precluded from bringing up this evidence. Because it happens to be your motion or OCLIs motion or [Union Pacifics] motion or the plaintiffs concern, thats going to apply to everybody in the case.

[Plaintiffs Counsel]: Well, shouldnt the preclusion orders not just be plaintiffs, but also be defendants are precluded from

[The Court]: Oh, absolutely. (Italics added.)

Despite the courts comments during this colloquy, the only written modification the court made to Union Pacifics proposed order was to add some handwritten language allowing plaintiffs to introduce evidence of well contamination.

A number of conclusions may be drawn from this record. First, contrary to defendants contention, plaintiffs never requested that In Limine Order No. 1 be modified to provide that plaintiffs could obtain their fees if a defendant violated the order and caused a mistrial. The State was the only party to request that the sanctions provision be broadened to cover parties other than Union Pacific. Its request was not that the sanctions clause be reciprocal between plaintiffs and defendants, but only that it operate in favor of the State as well as Union Pacific. Plaintiffs counsel offered one comment during this colloquy. That comment did not refer to the sanctions provision of In Limine Order No.1 nor was it even directed to that order in particular. Plaintiffs simply requested that all of the preclusion orders being entered that day preclude defendants as well as plaintiffs from introducing prohibited evidence. The court readily agreed to that but, as to In Limine Order No. 1 at least, no change was necessary to the proposed order because Union Pacific had already drafted it to bar any party from introducing damages evidence during the liability phase of the trial.

Second, plaintiffs never agreed that the order would be acceptable if it allowed them to recover their fees in the event one of the defendants caused a mistrial. Nothing in the record shows that such a proposal was ever initiated by or put to plaintiffs counsel, or that counsel ever accepted it.

Third, the trial court never in fact indicated on the record that it was modifying Union Pacifics proposed In Limine Order No. 1 to reflect the type of reciprocal sanctions clause that defendants claim plaintiffs sought or accepted. The court never responded on the record to the substance of the States request that the sanctions clause cover the States attorney fees, never stated that it intended to widen the scope of the sanctions clause to apply in favor of all parties, and never changed the written order to reflect any such modification even though it did modify that order in another respect agreed to by the parties.

Fourth, even assuming contrary to the record that plaintiffs counsels italicized comment ante may plausibly be taken as an implied request that the sanctions clause be made reciprocal, that would still not establish plaintiffs acquiescence in the remedy. Faced with an objectionable order, a party may act defensively to lessen the impact of the error without waiving it for purposes of appellate review. (Electronic Equipment Express, Inc. v. Donald H. Seiler & Co. (1981) 122 Cal.App.3d 834, 857; see also Park City Services, Inc. v. Ford Motor Co., Inc. (2006) 144 Cal.App.4th 295, 311 [attorney who properly objects to an erroneous ruling does not waive the error by endeavoring to make the best of a bad situation for which he was not responsible].) In this regard, plaintiffs counsel cite the somewhat analogous case of Levine v. Pollack (1995) 37 Cal.App.4th 129. There, the trial court advised the plaintiff that it would grant her request for a continuance of the trial only on the improper condition that she agree to pay the defendants attorney fees for trial preparation. (Id. at p. 132.) The plaintiff reluctantly agreed, believing she had no choice in the matter. (Ibid.) Upon the plaintiffs appeal from a later order awarding fees against her, the Court of Appeal rejected the defendants argument that the plaintiff was estopped by her agreement from objecting to the fees. The plaintiffs comments did not operate as an estoppel, according to the appellate court, because her agreement was made reluctantly and in the mistaken belief that the court had the authority to order the fees as condition for a continuance. (Id. at p. 139.)

Since the sanctions provision of In Limine Order No. 1 was unauthorized by statute and not within the courts inherent authority, and because there is no plausible evidence in the record that plaintiffs counsel ever agreed to the provision or forfeited objection to it by estoppel, we will reverse the three attorney fee awards defendants obtained based on that order.[12]

B. OCLI Dismissal

Plaintiffs contend that the trial court committed the following prejudicial errors in granting OCLIs renewed motion to dismiss: (1) excluding the anonymous tipster and Kessler memos written by Water Board staff, (2) excluding evidence of the contamination found at OCLIs own facility, and (3) failing to recognize that even without the excluded material plaintiffs had sufficient evidence to support a jury verdict against OCLI.[13] Although the issue is a close one, we agree with plaintiffs on the latter point as discussed post, and will reverse the judgment in OCLIs favor. For the guidance of the trial court on remand, we begin with the evidentiary issues plaintiffs have raised.

1. The Tipster and Kessler Memos

Plaintiffs argue on appeal that the two Water Board memos recounting staffs 1990 contacts with an anonymous tipster and David Kesslers 1992 telephone call were admissible under Evidence Code sections 1230 and 1280, notwithstanding their double-hearsay character.[14][15] Plaintiffs maintain that the outer layer of hearsaythe out-of-court written statements made by the Water Board staffers when they created the memoswere admissible as official records under section 1280, while the inner layer of hearsaythe out-of-court oral statements made by the tipster and Kessler as reported in the memoswere admissible as declarations against interest under section 1230.

Based on the record, it appears that plaintiffs would have been able to establish the foundational elements for the official records exceptions to apply had they been given an opportunity to do so. The authors of the memos, Christine Wright-Shacklett and Susan Warner, both testified at trial. OCLIs trial counsel never disputed that the preparation of these memos was part of Warners and Wright-Shackletts official duties, that the documents were prepared close in time to the events described, or that Warner and Wright-Shacklett were reliable record-keepers. Thus, the primary issue on appeal concerned the inner layer of hearsaywhether the statements by the tipster and Kessler as recorded in the memos could be offered for their truth.

Story Continue As Part II ..

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[1] All statutory references are to the Code of Civil Procedure unless otherwise indicated.

[2] Kessler had passed away by the time the lawsuit was filed.

[3] The pertinent provision, which was enacted as part of Proposition 65, reads as follows: Any designated government employee who obtains information in the course of his or her official duties revealing the illegal discharge or threatened illegal discharge of a hazardous waste within the geographical area of his or her jurisdiction and who knows that the discharge or threatened discharge is likely to cause substantial injury to the public health or safety must, within 72 hours, disclose that information to the local Board of Supervisors and to the local health officer. (Health & Saf. Code,  25180.7, subd. (b).)

[4] Government Code section 810 et seq.

[5] The trial court decided the motion without considering the States principal declaration in support of it. The trial court excluded in its entirety the declaration of Water Board executive officer, Susan Warner, upon the sole ground that she failed to include a recitation that she had personal knowledge of the matters stated therein. It was evident from the declaration that Warner did have personal knowledge of the matters discussed in it.

[6] Health and Safety Code section 25400, subdivision (b) states in relevant part: [A] public entity . . . shall not be liable for any injury or property damage caused by an act or omission taken by . . . a person authorized by a public entity . . . acting within the scope of employment to abate or attempt to abate hazards reasonably believed to be an imminent peril to public health and safety caused by the discharge, spill, or presence of a hazardous substance, unless the act taken or omission was performed in bad faith or in a grossly negligent manner.

[7] The 1988 environmental report suggested that at least some of these chemicals were stored in drums at various locations in the OCLI facility, as were other materials. According to the Pietrelli declaration, OCLI sold only drums that had been used to hold scrap metal to West Coast Metals.

[8] We reversed the contempt orders and have directed the trial court to take no further action with respect to contempt. (Robinson v. Superior Court (Jan. 26, 2007, A115483) [nonpub. opn.] and Cochran v. Superior Court (Jan. 26, 2007, A115711) [nonpub. opn.].)

[9] When jurisdiction is, by the Constitution or this Code, or by any other statute, conferred on a Court or judicial officer, all the means necessary to carry it into effect are also given; and in the exercise of this jurisdiction, if the course of proceeding be not specifically pointed out by this Code or the statute, any suitable process or mode of proceeding may be adopted which may appear most conformable to the spirit of this Code. ( 187.)

[10] Section 128, subdivision (a)(4) provides in relevant part: (a) Every court shall have the power to . . . [] . . . [] (4) . . . compel obedience to its judgments, orders, and process, and to the orders of a judge out of court, in an action or proceeding pending therein.

[11] At plaintiffs request, and with the concurrence of all parties, the trial court had by that time already agreed to modify the proposed in limine order to clarify that evidence of well contamination could be introduced.

[12] We do not reach plaintiffs counsels further arguments that (1) the courts after-the-fact finding of an agreement regarding fees violated plaintiffs due process rights; (2) attorney Cochran was not bound by any purported agreement by attorney Robinson to a reciprocal sanctions clause; (3) on its own terms, In Limine Order No. 1 did not authorize the fee awards made because the mistrial did not arise from its violation; and (4) the sanctions awarded under In Limine Order No. 1 must fail because the trial court abused its discretion in declaring a mistrial.

[13] Plaintiffs also argued that the trial court erred by not allowing them to conduct additional discovery before deciding OCLIs renewed motion to dismiss. In our view, plaintiffs did not need the courts permission to conduct discovery since the declaration of mistrial automatically reopened discovery. (See Fairmont Ins. Co. v. Superior Court (2000) 22 Cal.4th 245, 247.) In any event, this issue is mooted by our reversal of the judgment in OCLIs favor.

[14] Evidence Code section 1230 provides in relevant part: Evidence of a statement by a declarant having sufficient knowledge of the subject is not made inadmissible by the hearsay rule if the declarant is unavailable as a witness and the statement, when made, was so far contrary to the declarants pecuniary or proprietary interest, or so far subjected him to the risk of civil or criminal liability . . . that a reasonable man in his position would not have made the statement unless he believed it to be true.

[15] Evidence Code section 1280 provides in pertinent part: Evidence of a writing made as a record of an act, condition, or event is not made inadmissible by the hearsay rule when offered . . . to prove the act, condition, or event if all of the following applies: [] (a) The writing was made by and within the scope of duty of a public employee. [] (b) The writing was made at or near the time of the act, condition, or event. [] (c) The sources of information and method and time of preparation were such as to indicate its trustworthiness.