Second District, Division 1 Sustains Substantial Sanctions Award on Appeal.
Sanctions can sting. The next case shows it–and we bloggers are still smarting from having read the case.
BCX International, Inc. v. York, Case No. B198375 (2d Dist., Div. 1 Feb. 10, 2009) (unpublished), briefly put, involved a Massachusetts corporate plaintiff that, during trial, was exposed as not having a California charter so as to maintain the action going forward. A lurid tale of fingerpointing devolved, but the trial court eventually granted the individual defendant’s motion for Code of Civil Procedure section 128.7 sanctions with respect to trial work expended by defendant in a case brought by an incapacitated plaintiff. (Mercifully, the trial court did grant plaintiff time to register in California, but still found a mistrial necessary so that the jury was not left hanging for months.) Plaintiff was assessed with 128.7 sanctions of $118,584.95 as a result of the mistrial.
Plaintiff appealed, but lost.
Section 128.7 sanctions are authorized against a represented party. (Burkle v. Burkle, 144 Cal.App.4th 387, 399 (2006).) This type of trial court award is reviewed under an abuse of discretion standard. (Guillemin v. Stein, 104 Cal.App.4th 15, 16 (2002).) Any abuse of discretion here? Hardly, concluded the appellate panel. It had to do little more than quote this reasoning by the trial court: “The trial was a waste of time for all concerned, including the jury. To gamble that the company’s lawsuit could proceed to judgment without its status being discovered was a bad faith action or tactic.”
The lesson seems clear: if you are representing a plaintiff chartered out of state, check with the Secretary of State or Business Portal Search (both on the web) to make sure the plaintiff is a California qualified foreign corporation. If you discover it is not, get it qualified pronto, so as to avoid unhappy trial judges having to stay or postpone proceedings at critical junctures. (See Corp. Code, secs. 2105(a), 2203(c); United Medical Management Ltd. v. Gatto, 49 Cal.App.4th 1732, 1739, 1741 (1996).)