Plaintiffs Advanced A Plausible Interpretation Of A Phrase In Prior Settlement Stipulation Such That Sanctions Were Not Warranted.
In Ponce v. Wells Fargo Bank, 21 Cal.App.5th 253, Case No. C080680 (3d Dist. Mar. 13, 2018) (published), a trial judge sanctioned plaintiffs who brought lender liability claims in a residential property dispute with terminating sanctions and also imposed over $25,000 in monetary sanctions (as against plaintiffs and their attorneys) under Code of Civil Procedure section 128.7. The basis for the sanctions was that plaintiffs advanced a frivolous interpretation of “predecessor in interest” language in a release under a prior settlement stipulation in other proceedings.
The Third District, on appeal, reversed. It was swayed by the fact that sanctioned plaintiffs presented a plausible interpretation of “predecessors in interest” under the prior settlement stipulation given that the defendants interpreting otherwise were not involved in the prior proceedings. Put another way, one could say that the reviewing court believed the trial judge erred by pulling the “sanctions trigger” without hearing more on the threshold contractual interpretation issue. After reaching the conclusion that plaintiffs’ contractual interpretation position was not frivolous in nature, it was no far stretch to conclude the claim was not brought for an improper purpose under section 128.5. This decision does establish that a failure to show frivolity means there was a failure to show an improper purpose, with the appellate court adjudicating this issue de novo (as opposed to the more deferential abuse of discretion standard which is generally hard to surmount on appeal).