Wilde v. Capella Photonics

Filed 10/3/06 Wilde v. Capella Photonics CA6

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

Monitor Liability Managers, Inc. (Monitor) and Jason Fogg appeal from a post-judgment order imposing sanctions on them for failing to attend a mandatory settlement conference. Appellants contend that the sanctions order amounted to punishment for taking a particular settlement position, contrary to California Rules of Court, rule 222. The parties in the underlying litigation, Jeffrey Wilde and his former employer, Capella Photonics, Inc. (Capella), have not participated in this appeal. We affirm the order.

Background

Appellant Monitor is a liability insurance carrier for Capella, and appellant Fogg was a supervisor at Monitor. Wilde sued Capella and others for damages and injunctive relief in a complaint arising out of his employment contract. On August 24, 2005, the parties' attorneys, along with Wilde and the president of Capella, appeared at a settlement conference and announced that they had reached a settlement, pursuant to which Capella would pay Wilde $600,000. John McDonnell, who had worked on the case as judge pro tem, informed the court that Monitor would contribute a portion of the settlement amount, but there was a dispute over coverage which would be addressed between Monitor and Capella outside this proceeding.

Monitor had sent Chris Ziemba to the settlement conference. Ziemba represented to the court that he had authority to contribute $150,000 toward the settlement. Monitor had agreed to that maximum amount "based on [its] coverage defenses and [its] reservation of rights." In response to the court's inquiry, Ziemba stated that it was his direct supervisor, Jason Fogg, who had the authority to "go past" $150,000. The superior court found this representation unacceptable, however. Citing California Rules of Court, rules 222 and 227,[1] the court explained that because Ziemba was restricted in his ability to negotiate, "full settlement authority [was] not here at the courthouse." The court accordingly issued an order to show cause (OSC) directing appellants to pay $500 or explain why sanctions should not be imposed.

In response to the OSC, Ziemba submitted a declaration stating that he had "full authority" to settle the matter. He explained that despite his representation at the settlement conference that he lacked authority to go beyond $150,000, he actually could have offered the entire policy limits, but his analysis of the case and the company did not warrant any more than $150,000. The distinguishing point was "unwillingness to pay additional money towards settlement and not inability to pay additional money toward settlement." In their written opposition to the OSC, appellants argued that their settlement offer was in good faith and that sanctions would constitute a penalty against them merely for being unwilling to offer more than $150,000.

At the first of two hearings on the matter, appellants' counsel maintained that Ziemba did have the necessary authority, as he was "the one whose job it [was] to decide when to settle the case, whether to settle the case, and how much to settle the case for." The superior court pointed out, however, that at the settlement conference Ziemba had represented an inability to offer more than $150,000. Wilde's counsel advised the court (not under oath) that Ziemba had stated that he did not have authority to increase Monitor's contribution, but he would "communicate with his office in Chicago to see if he could get extended authority."

The superior court corrected the understanding of appellants' counsel as to what Ziemba had stated at the settlement conference, but it granted a continuance to permit counsel to obtain a transcript of that proceeding. At the continued hearing, appellants persisted in their assertion that their position was related solely to the coverage issues with Capella. No one with higher authority than Ziemba would have altered the decision to contribute a limit of $150,000, because that was the amount deemed appropriate based on appellants' coverage analysis. Ziemba's "only constraint" was that he was "not senior enough in the company to have more than X amount, which is what they perceive as their maximum exposure." Yet appellants' counsel continued to dispute the court's recollection that Ziemba had advised the court of his inability to settle for more than $150,000. Counsel argued that if Ziemba had seen a reason to pay more, "why wouldn't he have been able to pick up the phone and [demand] more" from his supervisor.

The superior court adhered to its decision to impose sanctions, on the ground that Monitor had violated rule 222(b) by failing to send a representative with "full authority" to settle the case. The court explained that its ruling had nothing to do with the amount offered; rather, the basis of the order was the limited authority of Ziemba to discuss a settlement amount greater than $150,000. Settlement conferences, the court observed, "are serious events" in which all participants "expend time and effort to resolve the case before trial." Each person in attendance "must be able to discuss settlement within the parameters of the particular case," whether those parameters are the policy limits, the last offer or demand, or "whatever amount is appropriate for the case." To allow a party or participant to preset the limitation on the ability to engage in this negotiation "would seriously frustrate the purpose [of the settlement conference]."

Discussion

Rule 222, which governs the procedures for mandatory settlement conferences, provides: "Trial counsel, parties, and persons with full authority to settle the case must personally attend the conference, unless excused by the court for good cause. If any consent to settle is required for any reason, the party with that consensual authority must be personally present at the conference." Rule 227 permits the court to "order a person, after written notice and an opportunity to be heard, to pay reasonable monetary sanctions to the court or an aggrieved person, or both, for failure to comply with the applicable rules, unless good cause is shown."

Appellants contend that the trial court erred in finding that they had violated rule 222. In their view, this was an error of law subject to de novo review, because it involved a misinterpretation of a rule of court. Appellants are mistaken. The underlying issue was a factual one: Did Ziemba have "full authority" to negotiate the settlement on behalf of Monitor? Notwithstanding appellants' assertions that he did, the superior court found otherwise. The imposition of sanctions based on this finding was a discretionary decision, which may not be overturned unless an abuse of discretion is shown. (Caldwell v. Samuels Jewelers (1990) 222 Cal.App.3d 970, 977.) " 'When the question on appeal is whether the trial court has abused its discretion, the showing is insufficient if it presents facts [that] merely afford an opportunity for a difference of opinion. An appellate tribunal is not authorized to substitute its judgment for that of the trial judge. [Citation.] A trial court's exercise of discretion will not be disturbed unless it appears that the resulting injury is sufficiently grave to manifest a miscarriage of justice. [Citation.] In other words, discretion is abused only if the court exceeds the bounds of reason, all of the circumstances being considered.' [Citation.]" (In re Woodham (2001) 95 Cal.App.4th 438, 443.)

Measured in accordance with these principles, the court's ruling did not constitute an abuse of discretion. The key fact appellants overlook is that Ziemba himself clearly informed the court at the settlement conference that he lacked independent authority to bind Monitor beyond $150,000. It makes no difference that Ziemba was the most knowledgeable person about this case or that he had evaluated the risk. That he had "full authority" to settle for up to $150,000 does not advance appellants' position in any way. Based on Ziemba's representation that he had to obtain Fogg's permission to exceed the $150,000 limit, the court properly determined that Ziemba did not have "full authority" to settle the case. Had Monitor sent Fogg or someone else with such authority, sanctions would not have been ordered, even if that person had steadfastly adhered to Monitor's settlement position.

Appellants nonetheless argue that the superior court gave the language of rule 222 an overly expansive interpretation by requiring "monetary authority" rather than "consensual authority." Beyond citing the Drafter's Notes, appellants do not develop this argument, which is unclear. The 1995 notes to rule 222 explain that the rule was being amended to "require any party with consensual authority to settle to be personally present at the conference." Appellants fail to explain how this comment distinguishes between "consensual" and "monetary" authority or how either term contributes to a different construction of the rule than the one reached by the superior court.

None of the remaining arguments helps appellants. That the case actually settled for more than $150,000 is completely irrelevant; the parties in the underlying action had already reached agreement for $600,000 when the settlement conference began. Nor do the cases discussed by appellants alter the result. This is not a situation involving sanctions for failure to compromise or sanctions for an offer that a settlement judge believed was too low. (See, e.g., Triplett v. Farmers Ins. Exchange (1994) 24 Cal.App.4th 1415, 1424 [insurer may not be sanctioned for low offer tantamount to refusal to settle, even if its motives were improper]; Halaby, McCrea & Cross v. Hoffman (Colo. 1992 ) 831 P.2d 902, 908 [settlement judge abused discretion by imposing sanctions because level of settlement authority was "insulting" to him].) None of the cited decisions involved circumstances like those presented here, where Ziemba, according to his own statement to the court, was not authorized to settle the case for more than $150,000. The court was apparently not convinced by appellants' argument that even if Fogg or another superior had attended the conference, the limit would have been the same. Contrary to appellants' representation on appeal, the court clearly stated that it was not saying that Monitor had to authorize settlement up to the policy limits. Nor was the court sanctioning Monitor "just because it had taken a maximum settlement position." The reason Monitor was found to have violated rule 222(b) was solely that on this important occasion it had not sent a representative with the independent authority to exceed the stated settlement limit.

Appellants further assert that the court abused its discretion because there was good cause for their failure to comply with rule 222. This argument turns on the premise that Monitor was being punished for its failure "to bring more money to the conference than the $150,000 that it was willing to pay and did pay." According to appellants, Monitor had "made its reasoned decision about how much was enough," but it was sanctioned "because the court disagreed as to the amount." As discussed earlier, this was not the basis of the court's order. Whether Monitor "had good cause for its financial limit" is therefore irrelevant. Also unsupported by the record is appellants' assertion that the court involved itself in the collateral coverage dispute between Capella and Monitor. Appellants' further suggestion that rule 222 itself is ambiguous is undeveloped; moreover, it is raised for the first time on appeal and has therefore been forfeited. (Cf. Kaufman & Broad Communities, Inc. v. Performance Plastering, Inc. (2006) 136 Cal.App.4th 212, 226.) [2]

The court did not misinterpret the language of rule 222(b), nor did it apply the provision in an arbitrary or irrational way to the facts presented. No abuse of discretion is shown.

Disposition

The order is affirmed.

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ELIA, J.

WE CONCUR:

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RUSHING, P. J.

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PREMO, J.

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[1] Further references to rules are to the California Rules of Court.

[2] Also forfeited is appellants' contention that the court's application of rule 222 unfairly burdens insurance carriers and violates insurers' due process rights. As this argument is raised for the first time on appeal, it will not be addressed. (Cf. Jansen Associates, Inc. v. Codercard, Inc. (1990) 218 Cal.App.3d 1166, 1170; Bartold v. Glendale Federal Bank (2000) 81 Cal.App.4th 816, 828.)