Lagace v. MillsPeninsulaHospital

Filed 1/29/07 Lagace v. Mills Peninsula Hospital CA1/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

Appellant appeals the trial courts order granting sanctions against her attorney in the amount of $2,000. We affirm.

STATEMENT OF THE FACTS AND PROCEDURAL HISTORY

Appellant decided to sue respondent for employment discrimination after she was terminated from her job as a nurse. On May 3, 2005, appellant filed a complaint alleging nine causes of action against respondent and its affiliate, Sutter Health.

On July 5, 2005, respondent demurred to this complaint, alleging that three of the claims were preempted by federal law and that the remaining six employment discrimination claims were substantively defective. In response, appellant filed her first amended complaint (FAC) on August 2, 2005. The FAC omitted four of the original allegations, including two employment claims for harassment and retaliation. It set forth five causes of action: three employment discrimination claims, including an allegation of medical disability discrimination, and two contract claims.

On August 19, 2005, respondents demurred to the FACs contract claims and moved to strike other portions of the complaint. Regarding appellants claim for medical disability discrimination, respondent argued that the allegation was improper under the Fair Employment and Housing Act. It also pointed out that appellant had previously released her workers compensation claim and therefore could not allege it in her complaint.

On September 8, 2005, appellant lodged a proposed second amended complaint (PSAC) in conjunction with her opposition brief to the motion to strike. She did not oppose the demurrer. In her opposition brief, she argued that the motion to strike was moot because her PSAC corrected or addressed all of the points raised by respondent. On September 20, 2005, appellant dismissed Sutter Health from the action.

The trial court sustained respondents demurrer to the two contract claims on September 30, 2005. The court also granted respondents motion to strike portions of the first cause of action, including references to the workers compensation claim, and gave appellant 10 days leave to amend the complaint.

Before filing a revised second amended complaint, appellant sent respondent a courtesy copy. Two days later, on October 7, 2005, respondents counsel wrote to appellants counsel, advising him that the complaint was flawed in that it: 1) included claims of retaliation and harassment that had been stated in the original complaint but had been omitted from the FAC, 2) alleged a cause of action against dismissed defendant Sutter Health, 3) included the medical disability language that the court had ordered stricken, and 4) alleged facts that were contrary to appellants deposition testimony. Respondent indicated that it would file a motion for sanctions under Code of Civil Procedure section 128.7 if appellant filed the complaint as drafted.[1]

On October 12, 2005, appellant filed her second amended complaint (SAC). The SAC did not correct several of the problems noted by respondents counsel. For example, the SAC named Sutter Health as a defendant and included the claims for retaliation and harassment. It also included the workers compensation claim that the court had previously ordered stricken. On October 26, 2005, respondent served, but did not file, its motion for sanctions.

On November 3, 2005, appellant filed a motion for leave to amend the SAC, seeking: 1) to remove Sutter Health as a defendant, 2) to delete the workers compensation claim, and 3) to add the additional allegations regarding harassment and retaliation. She asserted that respondents grounds for sanctions were addressed by this proposed third amended complaint (TAC) and that the sanctions motion was therefore moot. The hearing on the motion to amend was set for December 6, 2005.

On November 4, 2005, respondent filed its third demurrer and second motion to strike. The hearing on these motions was set for December 1, 2005. Appellant did not oppose the demurrer and argued that the motion to strike was moot in light of her motion to amend the SAC.

On November 21, 2005, the court issued tentative rulings sustaining the demurrer and granting the motion to strike. That same day, respondent filed its motion for sanctions. It also filed an opposition to appellants motion for leave to amend the SAC.

On December 6, 2005, the court granted respondents motion to strike with leave to amend. The court also sustained the demurrer to the workers compensation claim without leave to amend. The court found that the motion to amend was moot, as leave to amend had been granted in conjunction with the motion to strike.

Appellant filed her opposition to the motion for sanctions on December 14, 2005. She argued that the courts ruling on respondents third demurrer and second motion to strike, along with the filing of the TAC, rendered the sanctions motion moot. She filed the TAC on December 16, 2005. The TAC alleged five causes of action, including the disputed claims for harassment and retaliation.

The sanctions motion was heard on December 21, 2005. On December 29, 2005, the trial court issued an order granting respondents motion and directing appellants attorney to pay $2,000 in sanctions. Appellant filed a request for dismissal with prejudice on February 24, 2006.

On April 21, 2006, appellant filed her notice of appeal of the sanctions order pursuant to section 904.1, subdivision (b).

DISCUSSION

I. Is the Sanctions Order Appealable?

Respondent moved to dismiss the appeal on the grounds that a sanctions order followed by a voluntary dismissal is nonappealable. We denied the motion without comment. Respondent renews this argument on appeal.

After the sanctions were awarded, respondent made an offer to compromise under section 998, offering to waive its right to seek fees and costs in exchange for a dismissal. Respondents offer letter specifically excluded the sanctions award from its waiver. Appellant agreed to dismiss the case with prejudice.

Respondent argues that we should dismiss this appeal for lack of jurisdiction because the underlying order is nonappealable. It points out that appellant is appealing the sanction order pursuant to section 904.1, which authorizes the appeal of sanctions orders under $5,000 after entry of final judgment in the main action. ( 904.1, subd. (b).)[2] Respondent claims that a dismissal with prejudice is not a final judgment, citing to Cook v. Stewart McKee & Co. (1945) 68 Cal.App.2d 758, 760.

Respondent acknowledges other cases, however, wherein a party was allowed to appeal a sanctions order after a voluntary dismissal, including Eichenbaum v. Alon (2003) 106 Cal.App.4th 967, 973974, and Stewart v. Colonial Western Agency, Inc. (2001) 87 Cal.App.4th 1006, 1012. Respondent attempts to distinguish these two cases based on their facts. In particular, it argues that appellant waived her right to appeal by entering her request for dismissal with no reference to the sanctions order.

Appellant contends she did not forfeit her right to appeal the sanctions order when she voluntarily dismissed her lawsuit. In particular, she suggests that it is irrelevant that her request for dismissal is silent as to the appealability of the sanctions order because the parties could not have stipulated to appellate jurisdiction if no such jurisdiction existed.

This same argument that respondent advances here was addressed in Eichenbaum v. Alon, supra, 106 Cal.App.4th 967, 974, wherein the court stated: Although the statute . . . speaks of an appeal after entry of final judgment, the manifest policy, of deferring appellate review of a lesser sanctions order to the conclusion of the case in the trial court, is satisfied once the action has been voluntarily dismissed with prejudice. Respondent attempts to distinguish this case by arguing that Eichenbaum treated the appeal as an extraordinary writ, but the court merely indicated in dicta that, as a general matter, this kind of an appeal may also be treated as an extraordinary writ. (Ibid.) Accordingly, we find that we do have jurisdiction to hear this appeal.

II. The Safe-Harbor Period of Section 128.7

Section 128.7, subdivision (c)(1), provides that a [n]otice of motion shall be served . . . but shall not be filed with or presented to the court unless, within 21 days after service of the motion, or any other period as the court may prescribe, the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected.[3] Respondent served the motion for sanctions on October 26, 2005. Appellants 21-day safe-harbor period expired on November 16, 2005. The motion was filed on November 21, 2005.

A party seeking sanctions must follow a two-step procedure. First, the moving party must serve on the offending party a motion for sanctions. Service of the motion on the offending party begins the 21-day safe-harbor period during which the sanctions motion may not be filed with the court. During the safe-harbor period, the offending party may withdraw or correct the improper pleading and thereby avoid sanctions. If the pleading is withdrawn or corrected, the motion for sanctions may not be filed with the court. If the pleading is not withdrawn or corrected during the safe-harbor period, the motion for sanctions may then be filed.

The purpose of the safe harbor provisions is to permit an offending party to avoid sanctions by withdrawing the improper pleading during the safe harbor period. [Citation.] This permits a party to withdraw a questionable pleading without penalty, thus saving the court and the parties time and money litigating the pleading as well as the sanctions request. [S]anctions under section 128.7 are not designed to be punitive in nature but rather to promote compliance with statutory standards of conduct. [Citation.] (Malovec v. Hamrell (1999) 70 Cal.App.4th 434, 441, fn. omitted.)

Appellant argues that by filing her motion to amend the SAC on November 3, 2005, she appropriately corrected the SAC within the 21-day period. She states that she could not have finalized an amended complaint within the 21-day period because, under section 1005, a motion to amend requires 21 days notice. Therefore, she could not have obtained the courts permission to file a revised complaint within the safe-harbor period. Citing to Civil Code section 3531 ([t]he law never requires impossibilities) she contends that since it is impossible to complete the procedure required to amend an allegedly offending complaint, the filing of a motion for leave to amend during the safe-harbor period should be sufficient to avoid sanctions.

Conceding that there is no legal authority to support her proposition that filing a motion to amend a complaint within the safe-harbor period satisfies the correction requirement, she invites us to consider this as an issue of first impression that awaits our resolution. While we must address the issue, as appellant raises it, we do not believe it to be a particularly close call.

Our obligation in applying section 128.7 is to carry out the Legislatures intent. [Citations.] The words of a statute are the surest indication of the Legislatures intent. (Goodstone v. Southwest Airlines Co. (1998) 63 Cal.App.4th 406, 423.) The language of section 128.7 is clear. The challenged paper itself must be appropriately corrected.

Manifestly, the SAC itself was not corrected by the filing of the motion for leave to amend it. At the expiration of the safe-harbor period, the SAC was still the operative pleading. Moreover, there was no guarantee that the motion to amend would have been granted, as whether to permit such an amendment is left to the discretion of the trial court. (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1091.) Thus, the motion to amend merely created the possibility that the flaws noted by respondent would have been corrected at some future time.

Appellant strenuously argues that it simply cannot be the rule that nothing short of voluntary dismissal of the entire action will suffice to avoid sanctions when, through inadvertence rather than intentional misconduct, a complaint is filed that contains errors counsel freely acknowledges and offers promptly to correct. While the result may be harsh, it appears to us that appellant is incorrect. And we note courts have observed that [i]t is difficult to imagine a more appropriate correction than voluntary dismissal. (Hart v. Avetoom (2002)95 Cal.App.4th 410, 415.)

We must presume that the Legislature was aware of the time required to obtain a hearing on a motion to amend a complaint when it drafted section 128.7. We also note that the Legislature recently shortened the safe-harbor period from 30 to 21 days, further suggesting that time is of the essence. While we are not unsympathetic to appellants position, we will not carve out an exception that the Legislature has not seen fit to include.

In sum, appellant was aware of the 21-day time limit and chose to risk the imposition of sanctions by seeking to amend her complaint rather than dismissing it outright. And as she did dismiss the case voluntarily shortly after sanctions were imposed, it is difficult to see how she would have been prejudiced had she dismissed the complaint within the safe-harbor period. We also note that respondents counsel alerted her to the possibility of sanctions more than 20 days before it served its motion, giving her ample time within which to make a considered decision as to how to proceed.

III. Did the Trial Court Abuse its Discretion?

Appellant contends that the court had no legitimate grounds for awarding sanctions. We review the trial courts order for abuse of discretion. (Guillemin v. Stein (2002) 104 Cal.App.4th 156, 167.)  When the question on appeal is whether the trial court has abused its discretion, the showing is insufficient if it presents facts which 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 courts 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.)

The trial court found that the SAC violated both subdivisions (b)(2) and (b)(3) of section 128.7.[4] Specifically, the court found that the SAC: 1) alleged facts contrary to appellants deposition testimony, 2) resurrected abandoned claims of harassment and retaliation that were raised in the original complaint, deleted from the FAC, and included in the SAC without first obtaining leave of court, 3) alleged claims against a previously dismissed defendant, and 4) asserted the workers compensation claim after the court had granted respondents motion to strike it from the FAC.

Appellant contends that sanctions were not warranted under any of these four grounds. She characterizes the last two grounds as mere mistakes that she was seeking to correct via her motion to amend. She argues that the first ground would be more properly addressed by a motion for summary judgment because trial courts should not be permitted to assess the truth and evidentiary sufficiency of a complaints allegations under section 128.7. Finally, she contends that the second ground does not make sense because the court had earlier given her leave to amend after granting respondents motion to strike portions of the SAC.

Appellant effectively concedes that the third and fourth justifications cited by the trial court for imposing sanctions were valid because the two claims were absolutely precluded by the courts previous rulings sustaining respondents demurrer and granting its motion to strike. We proceed to examine her arguments concerning the first and second justifications.

As to appellants objections to the first justification, we believe section 128.7 contemplates that the trial court can examine the factual underpinnings of a complaint. Section 128.7 states, in part, that by signing a pleading or other document filed with the court, an attorney is certifying that the allegations and other factual contentions have evidentiary support or are likely to have evidentiary support. ( 128.7, subd. (b)(3).) We question how a court would be able to determine whether an attorney had violated this provision if it were unable to take relevant evidence, such as deposition testimony, into account.

Moreover, we agree with respondent that a sanctions order is not the same as an order granting a motion to strike or sustaining a demurrer because it does not have a preclusive effect on a litigants future pleadings. An order sustaining a request for sanctions results in an award of sanctions only. While it may discourage a litigant from pursuing a particular claim, it does not result in the dismissal of that claim.

As to appellants assertions regarding the continued viability of the two abandoned claims derived from the original complaint, we do not see much support in the record for her position that the court granted leave to add these claims to the SAC. At the hearing on December 6, 2005, the court stated: [W]hen I looked at the denied motion to strike previously, you had already added, without leave of court, those causes of action [for retaliation and harassment] and [respondent] had moved to strike them on the basis that they were improperly added and I agreed with the argument. I granted the motion to strike, but I granted leave to amend because it would be an abuse of discretion for me not to allow a party to amend their pleading if there is a reasonable possibility that they can properly allege a claim.

The court gave appellant more than one opportunity to amend her complaint. The SAC that appellant filed demonstrates that she did not give full attention to the guidance that the court provided in its rulings. Through carelessness or inadvertence, appellant thus caused respondent to incur unnecessary legal fees. Section 128.7, which imposes a lower threshold for sanctions than . . . under . . . section 128.5 does not require a showing of bad faith; the conduct under scrutiny need only be objectively unreasonable to justify sanctions. (Guillemin v. Stein, supra, 104 Cal.App.4th 156, 167.) While we might have exercised our discretion differently, we find support for each of the four justifications cited to in the trial courts order. We therefore cannot say that the trial court abused its discretion in awarding sanctions in this case.

The ruling is affirmed.

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

[2] Section 904.1, subdivision (b), provides: Sanction orders or judgments of five thousand dollars ($5,000) or less against a party or an attorney for a party may be reviewed on an appeal by that party after entry of final judgment in the main action, or, at the discretion of the court of appeal, may be reviewed upon petition for an extraordinary writ.

[3] A prior version of the statute required 30 days between service and filing.

[4] Section 128.7, subdivision (b) provides, in part: By presenting to the court, whether by signing, filing, submitting, or later advocating, a pleading, petition, written notice of motion, or other similar paper, an attorney or unrepresented party is certifying that to the best of the persons knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, all of the following conditions are met: [] . . . [] (2) The claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law. [] (3) The allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.