Seeking Party Does Everything Right, But Has Sanctions Award Reversed Based Upon Imposition on Wrong Persons.
Nagy v. Willow Creek Community Services Dist., Case No. A118909 (1st Dist., Div. 3 Nov. 4, 2008) (unpublished) is an excellent primer on the procedural and substantive elements of obtaining an imposition of sanctions under Code of Civil Procedure section 128.7, which can include reasonable attorney’s fees, for submission of court papers that are factually frivolous (not well grounded in fact), legally frivolous (not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law), and interposed for an improper purpose. (Guillemin v. Stein, 104 Cal.App.4th 156, 167 (2002).) In Nagy, a defendant seeking 128.7 sanctions in a CEQA dispute did everything right and got them, only to lose a $6,554 award on appeal because it obtained the sanctions against the wrong persons (the represented parties, rather than the attorneys).
Nagy contains these distillations of 128.7 principles:
· A 128.7 award is discretionary and sanctions grant orders are reviewed on appeal for abuse of discretion. (Guillemin v. Stein, supra, 104 Cal.App.4th at 167). Discretion is abused, however, where a trial court bases its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence. (Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990).)
· Federal case law construing rule 11 of the Federal Rules of Civil Procedure is persuasive authority with regard to the meaning of section 128.7 based on the nearly identical wording of the rule and the statute. (Guillemin v. Stein, supra, 104 Cal.App.4th at 167.)
· A filing is deemed frivolous where an attorney “files a pleading or other papers which no competent attorney could believe was well grounded in fact and warranted by law,” whereas a filing has an “improper purpose” if filed for reasons of “personal or economic harassment.” However, where a complaint is challenged under section 128.7, “the ‘improper purpose’ analysis is not necessary because a non-frivolous complaint cannot be said to be filed for an improper purpose.” (Greenberg v. Sala, 822 F.2d 882, 885 (9th Cir. 1987); Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1362 (9th Cir. 1990).)
· Under the legally frivolous prong, the test is whether a party’s conduct is “objectively unreasonable,” with no showing of bad faith required. (Guillemin v. Stein, supra, 104 Cal.App.4th at 167.) This involves an assessment of (1) “the knowledge that reasonably could have been acquired at the time the pleading was filed”; (2) “the type of claims and difficulty of acquiring sufficient information”; and (3) “which party has access to the relevant facts.” (Townsend, supra, 929 F.2d at 1364.)
· Section 128.7 contains a “safe harbor provision,” with the party seeking sanctions needing to (1) serve a notice of motion for sanctions of the offending party at least 21 days before filing the motion with the court, and (2) allow the offending party to withdraw the pleading during the 21-day period before the notice of motion can actually be filed with the court. (Levy v. Blum, 92 Cal.App.4th 625, 637 (2001).)
· Where 128.7 monetary sanctions are sought solely based on the filing of a legally frivolous complaint (section 128.7(b)(2)), they cannot be awarded against a represented party. (Section 128.7(d)(1).) However, monetary sanctions can be awarded against a represented party for the filing of a paper for an improper purpose. (See Laborde v. Aronson, 92 Cal.App.4th 459, 466 (2001).) Because the sanctions in Nagy were assessed against the represented parties (and not their attorneys) for the filing of a legally frivolous complaint, the sanctions “directly contravene[d] the dictates of the statute” and thereby “constitute[d] an abuse of discretion.” This counsels that sanctions need to be carefully directed at the proper “targets.”