One of the first pieces of advice an appellate attorney will give a trial attorney is: Don’t forget to request a statement of decision. But this advice puzzles experienced trial attorneys, who know that the trial judge, after a bench trial, is already required—without request—to give tentative decisions. And a statement of decision is usually just a copy-and-paste job of the tentative. So what, then, is the big deal?
The appellant in Marriage of Burger (D4d3 Aug. 18, 2022 No. G060313) 2022 WL 3500197 could tell you. Even though the trial judge had issued a written decision, the appellant lost her appeal because she failed to request a statement of decision. Here’s how it happened:
Nancy Burger was seeking an increased support award from her ex-husband, Robert. Nancy argued that Robert should contribute more money to meet her marital standard of living. Nancy also sought her attorney fees. The trial judge ultimately denied her request, including the request for attorney fees.
(For those interested, the opinion contains is an interesting discussion about how different courts handle a supporting spouse’s payment of adult children’s college tuition.)
Nancy argued that the trial court failed to consider her request for attorney fees and costs. She pointed out that the trial court's written ruling contained no express analysis of the factors governing need-based attorney fee awards under section 2030. Instead, the trial court summarily denied her request for attorney fees. Nancy argued this amounts to a failure by the trial court to exercise its discretion as to the attorney fee request and required reversal.
And Nancy had a point. Section 2030 says that the trial court “shall make findings” on the statutory factors. And a recent published opinion in Abdelqader v. Abraham (2022) 76 Cal.App.5th 186 held that, where a statute requires the trial court to make findings, the statute means what it says. The appellant is not expected to do anything further, including requesting a statement of decision.
Unfortunately for Nancy, however, the court here held that her statutory right to findings was not enough. Robert pointed out that Nancy had failed to request a statement of decision. Absent a statement of decision, the reviewing court will infer any factual findings supported by substantial evidence that are necessary to the result. (Slavin v. Borinstein (1994) 25 Cal.App.4th 713, 718; In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133-1134.)
The cause-and-effect of failing to request a statement of decision is set out nicely in the opinion:
“This transforms the applicable standard of review from abuse of discretion to substantial evidence. In short, if substantial evidence exists such that the trial court could have properly exercised its discretion against awarding attorney fees, we must affirm. Crucially, this change means we do not consider whether the record reflects the trial court actually exercised its discretion and analyzed all the relevant factors—the standard of review compels us to assume the trial court did so if substantial evidence exists to support its judgment.”
And because the record reflected a comparison of assets indicating Nancy had more net assets than Robert, substantial evidence supported the denial of need-based fees.
This is significant because, had the abuse-of-discretion standard applied, reversal would have been required. That is because findings were required to be made, the trial court does not make them, and thus the Court of Appeal could not presume that the trial court considered the mandatory statutory factors. This results in a finding that the trial court abused its discretion, because the failure to exercise discretion is an abuse of discretion.
But instead, because the appellant did not request a statement of decision, the Court of Appeal inferred that the required findings—those not included in the written ruling—were impliedly made. That means the trial court did consider the requisite factors, and thus did not abuse its discretion.
Of course, this is all a legal fiction. But legal fictions comprise the substantial part of legal decisions.
This result is contrary to Abdelqader v. Abraham (2022) 76 Cal.App.5th 186 (discussed here). That case dealt with a similar statute that requires written findings be made (there, to rebut a presumption of domestic violence under Family Code § 3044).
The respondent in Abdelqader urged that the missing findings could be inferred under the implied-findings doctrine because the appellant had failed to request a statement of decision. But the Court of Appeal rejected that argument, holding that the trial court’s obligation to make findings required by statute was not conditioned on requesting a statement of decision: “our independent research has not found any case where an appellate court held that a trial court does not have to comply with the requirements of section 3044 unless a party requests a statement of decision. The reason for this absence is clear. Section 3044 is not triggered by whether a party requests a statement of decision. Further, such a request (or the absence of such a request) does not impact a court’s duty to follow section 3044 whatsoever.” (Abdelqader, supra, 76 Cal.App.5th at p. 8.)
The same result should have obtained here. Just as with section 3044 at issue in Abdelqader, section 2030 requires that the trial court “shall make findings” on various factors. And just as in Abdelqader, the court here failed to make the required findings.
There appears to be a split on this issue within the Fourth District.
Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. Contact Tim at tkowal@tvalaw.com or (714) 641-1232.
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Three recent cases remind litigants of some important tips when opposing anti-SLAPP motions:
Also: What questions do you want to hear appellate justices answer? The podcast will be hosting some retired appellate justices in future episodes, and we want to put to them the questions you’ve been itching to have answered. Email Tim at tkowal@tvalaw.com.
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Tim Kowal 0:03
merely spending money on litigation does not transform a case about misappropriation of money into a protected conduct.
Announcer 0:14
Welcome to the California appellate podcast, a discussion of timely trial tips and the latest cases and news coming from the California Court of Appeal, and the California Supreme Court. And now your hosts, Tim Kowal and Jeff Lewis. Welcome, everyone.
Jeff Lewis 0:26
I am Jeff Lewis.
Tim Kowal 0:27
And I'm Tim Kowal. On this the California appellate law podcast, we try to provide a resource for trial attorneys who are facing appeals. Both Jeff and I are appellate specialist, but we split our practices about evenly between trial and appellate courts. And on this podcast, we try to give our listeners some perspective they can use in their practice.
Jeff Lewis 0:45
All right, everyone, welcome to the podcast and a quick announcement. This podcast is sponsored by Casetext. Casetext is a legal research tool that harnesses AI, and a lightning fast interface to help lawyers find case authority fast. I've been a subscriber since 2019, and I highly endorsed the service listeners of the podcast will receive a 25% lifetime discount available to them if they sign up at casetext.com/calp. That's casetext.com/caLP.
Tim Kowal 1:12
All right, Jeff, I had a couple of cases that I found in the past week that involves slabs, or one of them involves slaps in the other I'm going to I'm going to fit that square peg into the round hole anyway. And the this first one involves lawsuits over money that the lytic that the defendant tried to squeeze into the square hole of a slap and the court said no way. So the takeaway is that appropriating money is not speech in the anti slap context. So see if you can spot the slap issue in this fact pattern. So first plaintiff sues his business partner partner taking money from the partnership. So far, we're clean this is just a basic business tort. No slap plaintiff also alleges that the partner can sealed the wrongful activity. So still nothing swappable so far, but then the plaintiff goes on to allege that the partner used the misappropriated money to pay lawyers for litigation. So what do you say, Jeff? Haha, allegations about litigation. That means it's a slap, right? Nope. A stretch. Too much of a stretch. That's what the defendant ran up against in Manland vs. Milner a second district case this month in August 2022. It's an unpublished opinion, but we're going to talk about that aspect of it. The defendant in that case is, as you mentioned, Jeff was incorrect. Merely spending money on litigation does not transform a case about misappropriation of money into a protected conduct involving the slap or in triggering the slap statute. So here is the courts explanation for why spending misappropriated money on protected litigation conduct is still not a slap, quote, no element of the defendant mandolins claims depends on the purpose for the diversion of funds, but only on the diversion itself. And whether that diversion constituted self dealing, the diversion may have been to further some protected activity, for example, to fund a political campaign or publish a newsletter or fund litigation. But that purpose does not convert Manland suit to one arising from the protected activity and quote, so the the opinion is unpublished. But, Jeff, I think the court should publish that opinion, defendants continue to raise this this angle, this protected activity. Now, the defendants argument was not without some support. There is a very, very commonly cited case routine versus Cohen. It's commonly cited in an anti slap motions in an effort to transform a misappropriation claim into a protected conduct triggering the anti slap statute. Wherever the misappropriated money is used for litigation spending it on lawyers for litigation or for some other protective conduct. Defendants often file an anti slap motion saying, Look, your your complaint alleges protected conduct. So it's a slap. What do you think, Jeff, do you think do you think this case ought to be published you think comes up often enough?
Jeff Lewis 4:07
I think this case is correctly decided. And I think there is an abuse. Sometimes people, defense lawyers read the word court or litigation in the pleadings, and all of a sudden, they automatically think about anti slap. And I think the court got it right here that what a person intends or believes they're going to do with the money at some point is not terribly relevant to establishing a prima facia case and therefore shouldn't be relevant for slap purposes. And then I think you and I should penned a letter to the Court of Appeal politely asking them to, to publish,
Tim Kowal 4:40
I'll send you a draft we'd love to have your your cosign on it. Personally. I had a case where I represented the plaintiff, and the allegations were quite similar. There was allegations of misappropriation of funds. There as circumstantial evidence, we talked about how the funds were used for subsequent litigation conduct and wallah we got hit with anti slap motion, we defeated it in the trial court. But then we spent two years in the Court of Appeal got it affirmed, but in an unpublished opinion, and so if we had, if we had gotten that opinion published, then maybe man lid wouldn't have brought his anti slap motion here. What do you think if we, if we go forward with this request for publication and get it published, do you think that will deter these kinds of lawsuits, or these kinds of slap motions rather
Jeff Lewis 5:25
well, and you know, listeners of our podcast, looking for ways to shift attorneys fees and litigation like this, instead of doing an anti slap in a in a case like this with theft of money, they could just invoke that penal code section you referred to in our last episode, and find another way to get attorneys fees and not use a slap.
Tim Kowal 5:42
We're always looking for angles. Yeah, that penal code section we talked about 496 C. All right. Here's another case that I that I thought maybe I tried to stump you with Jeff, and the question, the the kind of the umbrella question here is, how can you enforce an appellate stay? Now in our last episode, we talked with Joseph chore about judgment enforcement and state of judgment enforcement. And one of the aspects that we talked about was, now when you file an appeal, you're supposed to get an automatic stay of enforcement. But the trick is how to enforce an automatic stay when the other side doesn't agree with you that that there's an automatic stay in place.
Jeff Lewis 6:21
It's only as automatic as the courts and your opposing counsel, believe it.
Tim Kowal 6:25
That's right. So in practice, the automatic stay sometimes become which becomes wishful thinking. For example, when it comes to fee awards on slap motions, there is the coils versus parent decision. And my recent article, which persuasively demonstrates that slap fee awards are cost awards, and thus automatically stayed pending appeal. But when we, as we talked about in the last episode, Jeff, you and you and Joseph demonstrated that there are still a lot of attorneys holding on to the bad reasoning in Dowling versus Zimmerman holding that slap fee awards or like money judgments, and thus, not automatically stayed on appeal. And and I'm smirking at you, Jeff, because obviously, these are both published opinions, they may both be cited by litigants in support of either one of those propositions, although they are their opposite one another. But Jeff, if you are representing a plaintiff, in an appeal of a slap award against and so you got to, you know, usually you are the moving defendant, but sometimes you're the plaintiff defending against the slap motion. So let's say you're, you're defending against the slap motion on behalf of the plaintiff. And you want to enforce the automatic stay under Qualls, because you've got to an attorney's fees award against you. And the trial court had just got it wrong. It was not a slap it was it was like the mandolin case we just talked about. But the court went along with it and found that there was protected activity. So now you've got into a slap attorneys fees award against you, you want to get it reversed. But in the meantime, you want to prevent your client from getting his bank account white, so you want to enforce the automatic stay under the coils decision. So what do you do? How do you affect the automatic stay when the other side is saying no, no, no, there's the dowel in case I'm able to to I'm able to go forward and enforce it. Autumn notwithstanding the stay.
Jeff Lewis 8:15
Yeah, maybe we should retitle this segment, not stump Jeff. But make Jeff squirm because I don't like being in this position. You know, I typically do represent defendants but uh, in the rare case, that I actually represented a plaintiff in a smack a strategic motion against credible claims that was improperly granted. And there were fees out there that I wanted stayed, I would argue that costs are not routine costs. And the one way shifting provided by the anti slap statute, maybe makes quills more persuasive, the Darling and that limited instance. And I'd file motion the trial court to confirm the automatic stays in place, but I would certainly hold my nose while making the argument and I'd do my best to argue for a discretionary stay based on the specific facts of the case.
Tim Kowal 8:58
Okay. All right. I think that's right. But here's where I want to talk about something kind of kind of nitty gritty, and we're going to talk about labels. So if you're going to file a motion to enforce the stay, that's the type of motion that the aggrieved party filed in this recent case, Merit versus specialized Loan Servicing LLC. It's a sixth district case, this August 2022. It's not a slap case. But the principles concerning halting a foreclosure sale in to honor the the automatic appellate stay are still applicable here. So the trial court denied the motion for for stay to enforce the automatic appellate stay. And on appeal, the court dismissed the appeal because an order denying enforcement of a stay is not an appealable order. As the merit court noted an order denying enforcement of an automatic stay is not listed as among the appealable orders under Code of Civil Procedure section nine oh 4.1. Instead, the court said the appropriate method of challenge During the denial of an order to enforce the stay under Section 916 is a petition for writ of super Sidious. But the curious thing, Jeff about this is that the appellant did file a motion a petition for Super Sidious. And it was summarily denied, as most repetitions are, because unlike an appeal, a writ petition, may be summarily denied. You're not entitled to a reasoned decision that you are in direct appeal. That's in addition to the statistical likelihood of prevailing The other reason you want to be be able to file a direct appeal is because you're entitled to a reasoned decision, not just a one word postcard that says denied. So Jeff, here's what I would suggest you could try. If you want to get direct review of an order denying and enforcement of the automatic stay. And here's my suggestion, you need to file the motion for enforcement of stay labeled as an application for an injunction because it's it's effectively the same thing as enforcement of the state. You want to enjoin the other party from wiping bank accounts or leaning on property in what have you. But the critical difference is denials of injunctions are appealable. Under Section nine, oh 4.1 Subdivision a six, what do you think, Jeff, by by that strategic labeling and in citation of the injunction statutes? Would that? Would you think that would work to bring it within the appealability? Under nine? Oh, 4.1? Well, yeah,
Jeff Lewis 11:25
great idea. I don't ever want you representing my opponents and slap matters because of this idea. But let me ask you this, if a slap fee award is automatically stayed without the need for posting a bond or anything, and you call it an injunction to go in and prevent enforcement or recognize the automatic stay, and injunctions are void unless there's a bond ordered, could you then be forcing as the plaintiff, your client to post a bond to support an injunction whereas they wouldn't normally be required to post a bond?
Tim Kowal 12:00
That's a good point. I do not think you could use labeling to get around the statutory injunction statutory stay and bond requirements. So if, if this is a case, a money judgment. Now now under Qualls, remember, if we're talking about this as a slap than a slap fee award is deemed a cost Award, which is exempt from the bond requirements for money judgment. So it's not treated as a money judgment. But assuming we were talking about a money judgment, you're trying to enforce the automatic stay of a money judgment, you would still have to file or you still have to post the bond as required under nine 17.1. Don't you think they're I don't I don't think trial court or a court of appeal would be taken with the idea that you can get around those by labeling your motion as as an injunction motion? No. Right. Okay. But one other case, just kind of rounding out getting a trifecta of slap related cases. This this case Ray is versus Escobar out of the second district also in August 2022. Case held that a late slap motion. Although the trial court allowed the filing of the slap motion beyond the 60 day presumptive requirement, it was an abuse of discretion to allow the late filed slap motion here. So the defendant in this case filed an anti slap motion outside of the 60 day window. And while that window may be enlarged in the trial court's discretion, there are limits to that discretion. And so what happened here in this case, the slap motion was filed over six months after the amended complaint, but it was filed over two years after the original complaint. The case the opinion wasn't entirely clear, but I take it that the court felt that the slab issues were raised in the original complaint. And so the amended complaint did not renew the 60 day window to file the anti slap motion. Also, in this case, the parties had engaged in considerable motion and discovery practice and the defendant. This seemed to be the most important reason for the court, the defendant gave no reason for the delay. Why that 60 day window needed to be so enlarged to allow for a motion filed over two years after the original filing of the complaint. So the trial court's discretion to consider late filed slap motions is not unlimited. That's the upshot here, the court must consider the length of the delay. The reasons offered for the delay and potential prejudice to the plaintiff. And the court didn't consider those things here. So the flap order was reversed. Yeah, interesting. I
Jeff Lewis 14:31
gotta tell you, I've never actually litigated the issue of elite filed anti slot motion and I've never dealt with appeal in terms of the courts discretion. This interesting case, even though it's unpublished Court of Appeal employed a an analysis very similar to late filed petitions to compel arbitration, looking at you know, how did the parties act? Did they act like they wanted an off ramp out of litigation and into the world of contractual arbitration, or did they try to take advantage of all the court powers in terms of discovery and motion practice, and is a late anti slap motion does it for the purposes of a slap, which allows for early exit of the case and, and avoiding that discovery of motion practices. Interesting. I appreciate you bringing it to my attention. You're muted.
Tim Kowal 15:15
And now Jeff, if the defendant had come to you, in this case, before filing the bladed anti slap motion, what sorts of criteria or factors would you try to raise to that the court could could rely on for a valid exercise of its discretion to enlarge the window to file the slap motion? Yeah,
Jeff Lewis 15:34
good questions. One wasn't sure which of the parties was improper here. But if it was the slapping party, the person filing the anti anti slap motion was improper. That'd be something I'd point the court to. And the other thing is prejudice. You know, who's really prejudiced by the late filing of a slap? I didn't see really a discussion of prejudice in this case.
Tim Kowal 15:54
Right. All right. Yeah. That concludes my anti slap tour de force. And you had a case about First Amendment issues.
Jeff Lewis 16:01
I do love First Amendment cases, and a case came out today, the day we're recording this podcast in the US Court of Appeals for the District of Columbia Circuit, the DC Circuit. And this is not a California case. But I found it interesting, both in terms of legal writing and substance. The introduction to this case is simple. And to the point. And for the writing alone, I really think the opinions noteworthy hears from the courts introduction. Lisa Guffey and Christine Smith work at the Administrative Office of the United States courts, when they are away from work, they want to express support for their preferred candidates in partisan elections. AiO employees could do that for the first 79 years of the agency's history. But since 2018, the EO has forbidden it that prohibition violates the Free Speech Clause of the First Amendment. Great, powerful, clear, succinct statement. It's interesting, the opinion doesn't really state why and that's most the biggest question I have about this case. But back in 2018, the Administrative Office issued a list of like nine restrictions they were imposing on employees what they could and couldn't do, off duty went away from my work. And these are the things they were prevented from doing included making public expressions of support, donating money to campaigns wearing buttons or displaying signs at home, attending a party's convention, or attending a candidate's campaign events. Now, these
Tim Kowal 17:26
are just in their personal capacities, not in any official capacity,
Jeff Lewis 17:30
correct off duty and the people in ministry of office do not decide decisions, they are not typically what you think of in terms of judicial employees may provide technology support and resource and administrative support to make sure justices can travel here and there. And that the judges here in cases are the lawyers who work under the supervision of the courts on panels have the tech they need to do what they do. And the administrative office went to court and tried to justify these regulations saying it's important to protect the perception of the judiciary as impartial. That's why they put these regulations in place in 2018. But in this decision that was issued today, because administrative office employees do not actually decide cases there's too tenuous a connection between these employees and any perception impartiality in the judiciary. And it's just an interesting decision reminder, the public employees do retain first amendment rights in terms of what they can and can't do when they're off duty.
Tim Kowal 18:34
Yeah, that sounds like the right outcome to me. What about you, Jeff? And it does seem like to me too tenuous a connection between, you know, the tech support workers at the court and other administrative clerical type workers who who are not involved in any way in deciding cases, they should be able to preserve their First Amendment liberties when off duty. No,
Jeff Lewis 18:56
it's absolutely the right result. And I just I'm super curious, maybe a listener of a podcast will email me the answer what happened in 2018, that cause the EO to issue these nine regulations that were struck down in this decision? What was the problem that they were trying to fix that that for decades, employees could do this? And all of a sudden they could,
Tim Kowal 19:16
that would that would make for a valuable piece of journalism? Yeah. Yeah. Okay. Well, we just have a couple of tidbits to finish us off today. listeners should note that next month on September 20, we're going to have David Ed injure on the show to talk about the Supreme Court vacancy as most, as many of our listeners may have heard this, the Chief Justice has announced her retirement and Governor Newsom has announced a replacement and David editor is going to be talking about that and some of the discussion and and mild controversy that surrounds whether her replacement may be nominated merely or or has to be appointed. Can the governor delay the appointment or nomination until after the election to prevent the need? For a retention election, so we'll ask David editor that on our episode on September 28, actually, September 28, will talk with David integer and the podcast will be released on the 27th of September. Great,
Jeff Lewis 20:12
great. And then, going back about 30 episodes, we interviewed someone about the Charlie Manson genetics case someone was an heir to Charlie Manson. And a quick announcement about that episode, State of California has approved us as MC le providers for that episode. And stay tuned in the weeks to come for details on how to claim your credit if you listen to that episode for not just m CLE credit, but for appellate specialization, M CLE. Credit, we're looking to become M CLE providers for all our episodes, but for right now, Episode 10 has been approved. And we'll we'll get you the details on how to claim your credit in the coming weeks.
Tim Kowal 20:53
We are always looking to enhance the value of this podcast for our listeners. Yeah. All right. Well, that wraps us up for this episode. And a quick Oh, Jeff, you had a question for our listeners.
Jeff Lewis 21:04
Yeah, yeah, quick question for our listeners. If we were to have one or two retired California appellate justices, as guests in the next few weeks, what questions would you want us to ask if those appellate justices email us your best suggestions at info at Cal podcast.com.
Tim Kowal 21:23
And I remember when we have been chats on the show, and you talked about how it was important for both the bench and the bar to kind of cross pollinate, you know, the the bar wants to know what the bench is thinking. And the bench also wants to know what the bar is thinking. So this is a good opportunity to to help further that cross pollination. And we also want to again, thank case text for sponsoring our podcast each week, we include links to the cases that we discuss, and we use casetext to provide our listeners links to those cases, and listeners can find a 25% discount available to them if they sign up to casetext at casetext.com/CA L P.
Jeff Lewis 22:01
And if you have suggestions for future episodes, including questions for retired California appellate justices, please email us at info at Cal podcast.com. And in our upcoming episodes, look for tips on how to lay the groundwork for an appeal when preparing for trial.
Tim Kowal 22:15
So you next time,
Announcer 22:16
you have just listened to the California appellate podcast, a discussion of timely trial tips and the latest cases and news coming from the California Court of Appeal and the California Supreme Court. For more information about the cases discussed in today's episode, our hosts and other episodes, visit the California appellate law podcast website at Cao podcast.com. That's c a l podcast.com. Thanks to Jonathan Cara for our intro music. Thank you for listening and please join us again
Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. Contact Tim at tkowal@tvalaw.com or (714) 641-1232.
Get a weekly digest of these articles delivered to your inbox by subscribing here: https://tvalaw.com/california-appellate-newsletter.
Just won a lawsuit? Before you file your memo of costs, read the dissent in Srabian v. Triangle Truck Center (D5 Aug. 12, 2022 No. F080066) (nonpub. opn.). The upshot: A memo of costs needs to be signed under penalty of perjury. It is an evidentiary showing, after all.
In this, the Judicial Council form MC-010 for the memo of costs has been letting us all down. The memo of costs is required to be “verified,” and that means signed under penalty of perjury. But the form doesn’t have that language. So if you use it, expect your opponent may deploy Justice Kathleen Meehan’s sound reasoning in her dissent.
The majority acknowledged that, under California Rules of Court rule 3.1700(a), a memorandum of costs "must be verified….” And here, the memo of costs, using Judicial Council form MC-010, was not signed under penalty of perjury (because the form does not have that language). And it did not attach any exhibits supporting the claimed costs.
But the majority concluded that the way the rules define “verified” leaves some doubt whether it necessarily means signed under penalty of perjury. And a lay definition does not include such a requirement.
Besides, the majority goes on, the signed memo of costs, though not signed under penalty of perjury, substantially complied with the rules, and did not prejudice the opposing party.
Justice Meehan dissented. She disagreed with using a lay understanding of the word “verified.” Although words or phrases in a statute should be given their usual and ordinary dictionary meaning (In re Friend (2021) 11 Cal.5th 720, 730), Justice Meehan noted that “this canon of construction yields to a technical-meaning exception when words have acquired a peculiar meaning in the law (ibid.; accord, Brown v. Superior Court (2016) 63 Cal.4th 335, 351; see Civ. Code, § 13 [words and phrases are to be construed according to "approved usage," but "such others as may have acquired a peculiar and appropriate meaning in law ... are to be construed according to such peculiar and appropriate meaning"]; accord, Code Civ. Proc., § 16).”
Here, the word “verified,” explains Justice Meehan, “has a specific and long-standing meaning, although it is not defined by statute. In multiple statutory contexts, including historically for a memorandum of costs, verified or verification refers to a sworn statement or one that is certified under penalty of perjury.” Demonstrating this point, Justice Meehan plumbed the civil procedure statutes dating back to 1873, and through the legislative overhaul in 1986. Her conclusion: the requirement of a “verified” cost memorandum always meant either using a sworn oath-and-affidavit procedure, or signed under penalty of perjury.
Justice Meehan also noted that the Judicial Council did get it right in its form for costs after appeal. Form APP-013 includes a penalty-of-perjury recital.
Without a signature under penalty of perjury, Justice Meehan concludes, a cost memorandum is a hearsay document, insufficient to shift the burden of proof to the opposing party.
Justice Meehan underscores the importance of the penalty-of-perjury requirement by referencing the fact that the memo of costs here contained a number of obvious inaccuracies, and yet the trial court awarded the exact amount stated on the memo. Thus, the defect did prejudice the appellant. As Justice Meehan concludes:
“[T]his is exactly why the sworn nature of the cost memorandum is important—it reminds all claimants and their attorneys of the need for accuracy and the grave responsibility they have with respect to the truth and correctness of the costs being sought.” (Citing Kulshrestha v. First Union Commercial Corp. (2004) 33 Cal.4th 601, 609 [declarations under penalty of perjury ensure witness understands grave responsibility assumed with respect to the truth].)
Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. Contact Tim at tkowal@tvalaw.com or (714) 641-1232.
Get a weekly digest of these articles delivered to your inbox by subscribing here: https://tvalaw.com/california-appellate-newsletter.
Every attorney who loses a case feels the sting of defeat. But the losses you never forget are the ones you really deserved to win.
I share two experiences where trial judges were not following the law. The first judge indicated he was going to rule based on “cultural considerations” favoring a family patriarch. But to that judge’s credit, eventually he abandoned that view.
The second judge thumbed his nose at Supreme Court precedent. The Conservatorship of McQueen case, concerning judgment-enforcement, holds that the plaintiff’s right to claim enforcement fees is terminated the moment a judgment is paid in full. Despite a dramatic showing of full payment of a judgment (using an armored car and guard), the judge declined to follow binding precedent.
Not all judges have the same fidelity to law and precedent. That is why the right to appeal is so important.
Watch the clip here.
This is a clip from episode 30 of the California Appellate Law Podcast. The full episode is available here.
Tim Kowal helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. His appellate practice covers all of California's appellate districts and throughout the Ninth Circuit, with appellate attorneys in offices in Orange County and Monterey County. Contact Tim at tkowal@tvalaw.com or (714) 641-1232.
There is a high frustration quotient in defending against judgment enforcement. There is supposed to be an automatic stay of orders on appeal, but in practice this is wishful thinking. So you may have to do what the aggrieved party did in Merritt v. Specialized Loan Servicing, LLC (D6 Aug. 11, 2022 No. H048463) 2022 WL 3274131: file a motion to enforce the stay.
Only, don’t call it a “motion to enforce a stay.” As the Merritt court noted, an order denying enforcement of an automatic stay is not listed as among the appealable orders in Code of Civil Procedure section 904.1. Instead, file it as an application for a temporary restraining order or a preliminary injunction. It’s the same thing, and denials are appealable under section 904.1.
When you read the facts of the case, you can see why the court did not pay the Merritts the benefit of looking beyond labels. The Merritts are running on fumes on a 15-year-long dispute with their bank on whose home loans the Merritts stopped paying back in 2008. Eventually, the Merritts were declared vexatious litigants, and were ordered to post a $250,000 bond to continue their litigation—at this stage, a complaint asserting debt-collection torts.
The Merritts appealed various orders, but the interesting one was the order denying their ex parte application to enforce the automatic stay of foreclosure of their home. The court held that that order was not reviewable because it is not appealable: “An order denying an application to enforce an automatic stay pending appeal under section 916 is not one of the orders listed in section 904.1.”
The court went on to note that “[T]he appropriate method of challenging the denial of an order to enforce the stay arising under section 916 is a petition for writ of supersedeas [citations].” (Hedwall v. PCMV, LLC (2018) 22 Cal.App.5th 564, 572; Estate of Dabney (1951) 37 Cal.2d 402, 408.)
But the curious thing is that the appellants did file a petition for supersedeas. And it was summarily denied.
There is authority that the summary denial of a pretrial writ petition on an issue that could also be reviewed on appeal from the judgment is not final (Fink v. Shemtov (2010) 180 Cal.App.4th 1160, 1172 [relating to vexatious litigant statute].)
On the other hand, where a writ petition is the only authorized mode of appellate review, summary denial of the petition is necessarily on the merits, and qualifies as a final judgment adversely determined to the petitioner. (Ibid.)
But this point is not quite ironclad. For example, consider that an order making a vexatious litigant declaration under Code of Civil Procedure section 391.7 is not appealable under section 904.1. So under the rule mentioned above, they could only ever be reviewable via writ, meaning litigants would never be entitled to a reasoned decision on them. (State ex rel. Dept. of Pesticide Regulation v. Pet Food Express Ltd. (2008) 165 Cal.App.4th 841, 852 [unlike an appeal, a writ petition may be summarily denied without a written opinion].) But then again, at least one case has held that these prefiling declarations may be reviewed as injunction orders. (Luckett v. Panos (2008) 161 Cal.App.4th 77, 90.) And injunction orders are directly appealable under section 904.1. (But a recent unpublished case, discussed here, did not cite or follow Luckett. )
The upshot is that you can get review of an order denying enforcement of an appellate stay, but only on a writ basis—which means you have no right to a reasoned decision as you would on a direct appeal.
So that raises the question: could the stay-enforcement question have been raised on direct review, so that you can get a reasoned opinion? The answer is: Maybe. A few things to note:
First, orders granting or denying injunctions are appealable under section 904.1(a)(6).
Second, if the trial court denied the motion, note that the appeal would not stay enforcement. So you still have to address any threat of mootness, such as by filing a petition for a writ of supersedeas in the Court of Appeal.
But even if that petition were summarily denied, then unless the appeal were rendered moot, you should still entitled to a reasoned decision on the merits on the direct appeal from the order denying an injunction. (Cal. Const., art. VI, § 14 [appellate court decisions that determine causes shall be in writing with reasons stated].)
Note, however, that an initial search does not reveal any appellate cases in which litigants have sought to enforce an appellate stay via injunctions. But here are some other examples of orders that have been treated as injunctions and thus directly appealable:
Logically, a motion to enforce the automatic appellate stay is in the nature of an injunction, as it seeks to preserve the status quo.
So next time you have to move for an order to enforce the automatic appellate stay, frame the motion alternatively as a motion for a preliminary injunction, specifying the acts that would tend to render the appeal moot. If that motion is denied, file your petition for supersedeas. But also appeal the denial order. That way, you have chance of getting the Court of Appeal to actually furnish a reasoned decision.
Why is a reasoned decision so important? Getting a reasoned decision is how litigants can have confidence the court has actually considered an issue. “Misconceptions and oversights of fact and law are discovered in the process of writing.” (Baker, A Review of Corpus Juris Humorous (1993) 24 Tex. Tech. L.Rev. 869, 873, quoted in Lebovits, Curtin & Solomon, Ethical Judicial Opinion Writing (2008) 21 Geo. J. Legal Ethics 237, 345.) The writing process helps ensure the decision is rooted in facts in the record rather than subjective preferences. (Walker, Discovering the Logic of Legal Reasoning (200) 35 Hofstra L. Rev. 168; cf., 2 Cooper, State Administrative Law (2d ed. 1965) pp. 467-68 [findings requirement in administrative decision-making facilitates orderly analysis and minimizes random leaps from evidence to conclusions]; Baker, op. cit. supra, 24 Tex. Tech. L.Rev. at 872, quoted in Lebovits et. al., op cit. supra, 21 Geo. J. Legal Ethics at 244 [written decisions “constrain arbitrariness”].) Written findings “make the case easily reviewable on appeal by exhibiting the exact grounds upon which the judgment rests.” (Frascona v. Los Angeles R. Corp. (1920) 48 Cal.App, 135, 137.)
Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. Contact Tim at tkowal@tvalaw.com or (714) 641-1232.
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So you won a huge court case? Big deal — can you collect? Judgment enforcement, and defense against judgment enforcement, are critically important to litigants. But enforcement sits in that twilight region in between the trial and the appeal, so most trial and appellate attorneys do not know a lot about it. But Joseph Chora does. Judgment enforcement is all he does.
We ask Joseph to share some of his best enforcement tips (a teaser: don’t file fraudulent-transfer actions; file a lien instead—it’s faster, cheaper, and it flips the burden of proof). And some of the biggest pitfalls (e.g., failing to make an enforcement plan early).
We also discuss:
Joseph Chora’s website and LinkedIn profile.
Appellate Specialist Jeff Lewis' biography, LinkedIn profile, and Twitter feed.
Appellate Specialist Tim Kowal's biography, LinkedIn profile, Twitter feed, and YouTube page.
Sign up for Tim Kowal’s Weekly Legal Update, or view his blog of recent cases.
Use this link to get a 25% lifetime discount on Casetext.
Joseph Chora 0:03
Find something that is difficult, arcane and that other attorneys don't know how or don't like to do, and you'll always have work.
Announcer 0:11
Welcome to the California appellate podcast, a discussion of timely trial tips and the latest cases and news coming from the California Court of Appeal, and the California Supreme Court. And now your hosts, Tim Kowal and Jeff Lewis.
Jeff Lewis 0:25
Welcome, everyone. I am Jeff Lewis.
Tim Kowal 0:27
And I'm Tim colwall. The California appellate law podcast is a resource for trial and appellate attorneys. Both Jeff and I are appellate specialists. And we also split our time about evenly in the trial court as well. And in each episode of the podcast, we tried to bring our audience of trial attorneys and appellate attorneys some legal news and insights they can use in their practice. And a quick
Jeff Lewis 0:49
thank you to case tax our podcast sponsor case Texas, a legal research tool that harnesses AI and a lightning fast interface to help lawyers find case authority fast. I've been a subscriber since 2019, and I highly endorse the service listeners of the podcast will receive a 25% lifetime discount available to them if they sign up at case text.com/calpis case text.com/ca L P.
Tim Kowal 1:14
Now, Jeff, as appellate attorneys at about the time you and I are preparing to close our doors and turn off our phones and spend many quiet hours alone with the appellate record. There are other attorneys out there doing much more exciting things, and I'm talking about judgment enforcement. I've done only a little bit of collection work myself. But in preparing for doing that work. I spent many entertaining hours online reading about exotic things like Sheriff auctions and till taps and even how you can send the sheriff to a debtors home to take their cash, cars, valuables, or even for the sake of leverage his beloved little pet dog judgment. Enforcement and defense against judgment enforcement are very important to litigants facing an appeal, but it kind of sits in that Twilight space in between the trial and the appeal. So most trial and appellate attorneys don't know a lot about judgment enforcement and defensive judgment enforcement. So we thought that today our audience might enjoy hearing from a specialist in the area of judgment enforcement and defense and the judgment enforcement attorney on my speed dial is Joseph Chaura. Joseph is a judgment enforcement attorney whose practice focuses exclusively on the enforcement of judgments not only in California, but also nationally and internationally. In addition to enforcing judgments. Joseph works with both trial and appellate attorneys with sensitive investigations that need the confidentiality of a law office and also the technical knowledge of a private investigation firm. So Joseph Tura, welcome to the podcast.
Joseph Chora 2:41
Happy to be here. Thank you, Tim. Thank you, Jeff. Now,
Tim Kowal 2:45
Joseph years ago, I listened to a collection attorney suggest using a Writ of Execution to have the sheriff visit the debtors house. And like I mentioned earlier, take his beloved pet for the sake of leverage, because often at that point, the debtor will just get out his checkbook and start writing the check to the creditor. Does that sort of thing really happened in your practice and forcing judgments?
Joseph Chora 3:06
Well, first of all, let me just be clear that anytime assets, any property that's taken, it's taken for the financial value not for leverage, that would be an improper purpose. And that would be a great way to have your levy undone. So if a pet were valuable, say a show dog or a rare bird, then that would make sense. But if you have a mutt that's 10 years old, and you're the end of his life, no real value or they've been sentimental, the judge would probably put a kibosh on that.
Tim Kowal 3:37
I see. So if you start going through the house and and pointing to family portraits on the wall and start taking those that would be only for sentimental value and for leverage and not a proper purpose of judgment enforcement.
Joseph Chora 3:48
Exactly right. And there there are exemptions that exempt normal typical household goods, fine art, whether or not it has sentimental value that has real value to it is always available for seizure.
Tim Kowal 4:01
Okay, interesting. Well, that's an important nuance that that was not related. When I watched that video by another judgment enforcement attorney years ago. I wonder if you. Nonetheless, you must have some interesting stories from your practice in judgment enforcement and defense. I wonder if you could, if you could tell us one.
Joseph Chora 4:18
Sure. I'll tell you an urban legend that my firm may or may not have been involved with small judgment about $75,000, the lead attorney decided to examine the debtor. And during our discovery, we discovered that the debtor had a girlfriend and so the lead attorney decided it might be beneficial. If we examined the wife, the girlfriend and the husband all on the same day. Let's just say that exam those examinations never took place checkbook came out and the $75,000 were
Tim Kowal 4:54
satisfied. Well that's, that is very that's very clever. So that's so obviously The debtor got got service of a copy of those judgment debtor, third party judgment debtor examinations,
Joseph Chora 5:05
the debtor must be notified of everything that's filed, whether or not it involves them directly. Yeah.
Tim Kowal 5:11
Well, and that's and, and obviously that was done, partly for leverage. But ostensibly they had, they may have some useful information as well. So it was it was still a proper purpose. Certainly, the leverage was just a bonus.
Joseph Chora 5:26
Yes. Another example, if you're interested is a little more technical. There was a debtor, it was a bicycle company, and they had a large judgments 600 $700,000 against them. They had been around for 30 years, they had developed intellectual property, they went into bankruptcy, but they created a shadow Corporation in which they transferred all their assets, except for the intellectual property. And so the leverage that we were able to put on them was, we're going to sell your intellectual property for $1. And the creditor will buy it, and you will forever be without your intellectual property, or you can sell this judgment, they ended up settling for about 125% of the judgment. Wow, the alternative would be to lose their IP. Yeah, the golden goose? Well,
Tim Kowal 6:19
well, I can't I can't ask the question that artists get asked and writers and things that how do you come up with these with your ideas? But is there a network of judgment enforcement attorneys? Where do you get the these ideas to put leverage? Are these are these original ideas? Or are they kind of industry secrets,
Joseph Chora 6:37
I would say about half and half, we have seven lawyers at our firm. And there is nothing better in the world. And maybe I'm outing myself as a dinosaur. But remote work has no place in my firm. There's nothing better than two attorneys staring each other in the eye and talking about a case than synergy that spontaneous generation of of ideas is so valuable when you have to be creative.
Tim Kowal 7:02
Tell us more about about how you got in to developing a specialty doing collection work. Have you always done collection work? Or did you start out as a business litigation attorney, or some other sort,
Joseph Chora 7:13
I have always done collection work. When I finished law school, I didn't know a thing. I like most of us, like all of us, right? And I thought, I'm gonna do everything. I'm gonna do family law, commercial law, environment, everything I could do so that anybody who came to me I could do, I could take care of their case,
Tim Kowal 7:32
you're you're a door attorney, as they call it, take on any client who walks in the door, toaster whatever pops
Joseph Chora 7:38
up. But some I was networking with other attorneys, and a senior told me that's a stupid idea. Don't do that. He said, find something that is difficult, arcane, and that other attorneys don't know how or don't like to do, and you'll always have work. And I thought, okay, I can do that. And so I was going to do pre judgment work, like pre judgment writs of attachment, written possession. And then I ran into my now partner who was already doing collections, and it was a match made in heaven, as they say the rest is history.
Tim Kowal 8:13
Yeah, pre judgment, writs of attachment, that that would be highly specialized. So this is, so you branched out a little bit from from that? Well, very interesting. And then I do note that there, there are only 11 legal specialty areas that are recognized by the state bar. And as you mentioned, judgment enforcement is a specialized and arcane area of law. But it's not one of the recognized specialty areas in which you can certify or get as good as a certified license from the State Bar, should it be an area of legal specialty that the state bar should recognize, in your opinion?
Joseph Chora 8:46
You know what I think it shouldn't be. But I'm okay that it's not, it makes me more of a specialist that there are no titles. It's kind of just me, there is a specialty but and it's called creditors rights, but it's specifically as slanted toward bankruptcy.
Tim Kowal 9:02
I see. Does much of your work bleed into the bankruptcy sphere?
Joseph Chora 9:07
Oftentimes, typically, the lifecycle for a case for us is to evaluate the judgment determine if the debtor has money, and then or assets, I should say. And so if we're pursuing people who have the assets to pay and they want relief, they typically reach toward an appeal, bond, or bankruptcy. So all our cases from the outset, are prepared for those two eventualities.
Tim Kowal 9:30
And we'll talk a little bit more about appeal bonds later, I wanted to ask if you tell us just a little bit about your national and international practice, obviously, some debtors will, will skip town and go across state lines, and so domestication of judges of california judgments and other states may be necessary. Tell us a little bit about that aspect of your practice. So
Joseph Chora 9:50
I'm a minimalist. If I don't have to file a lawsuit, I would much prefer to take care of things via motion. And I recommend that if a person's Major nexus of assets is in a different state, that you hire an attorney in that local state. Typically, my multi state enforcement is either when their assets are concentrated in California, and they have smaller assets, satellite assets in different states, or they're just entirely spread out throughout the entire country. And it wouldn't matter who you worked with. I can't hear you, Tim,
Tim Kowal 10:25
a couple more questions about your by way of introduction here. What is something that a lot of civil attorneys don't know about judgment enforcement, but should know about judgment enforcement,
Joseph Chora 10:34
I've got two big ones for you. Gold Nuggets. If nothing else you can get from this this interview. And my my presence here is one if you have a judgment against someone, and they transfer an asset, you don't have to file another lawsuit. You don't have to file a fraudulent transfer action. You can just levy on the asset transfers,
Tim Kowal 10:56
you can just levy so instead of having to file a separate judgment enforcement complaint, what is the process of living on the action? Is it through the sheriff? Yeah,
Joseph Chora 11:06
yeah. So let's just say the debtor owns a house, it's in his name, you levy on it, you go through the process, you sell the house scenario to before you're able to get a hold of the debtor, he transfers the asset the house to his 17 year old son, rather than filing a fraudulent transfer action to unwind that transfer. You simply levy on the house in the name of the sun, and you unwind transfer via motion through the levee process.
Tim Kowal 11:36
Wow. So that, that short circuits a lot of unneeded civil procedure, I guess.
Joseph Chora 11:42
I mean, lawsuits discovery, a skillet, the debtors. Number one defense is delay. And if you have a multimillionaire defendant $300,000 buys a lot of delay.
Tim Kowal 11:55
There must still be some some due process that the son would have in that scenario. Could he file objections? How could he still delay that process of the levying on the on the fraudulently transferred asset,
Joseph Chora 12:07
anytime you levy on an asset, the debtor can make a claim of exemption that this property shouldn't be levied upon. And any third parties can make a third party claim of ownership. And so the Son would have to come forward and the note the burden of proof is on the son to prove that he owns the property, and that it was purchased for value that he paid the real value to his father for that property.
Tim Kowal 12:33
Whereas if if the creditor had filed an independent collection action, the creditor would have the burden of proof. Exactly right. That's a very interesting, very, very useful nugget of information. Let's see. And one other kind of book and that question about something that civil attorneys should know, what is something that civil attorneys definitely should not try to do on their own without a judgment enforcement specialist?
Joseph Chora 12:59
You know, I think it's like anything, it depends on the on the practitioner, if you're used to getting out of your comfort zone, doing a lot of research, you can do just about anything, a good practice guide, a couple calls to your friend Joseph Chara, and and away you go, the only thing I would absolutely suggest that you outsource is the asset investigation. The second and most important step is to make sure the guy you're chasing or the gal you're chasing has assets that you can eventually take and convert into money.
Tim Kowal 13:30
Yeah, well, the What about after after the attorney has made a couple of calls for advice to his good friend Joseph Chara, and and then kind of run into a brick wall. What is the brick wall that that attorneys often run into and decide? You know, this is this is too much research. I haven't spent this much time in the rudder guide since I was a first year associate Joseph, can you can you take over x? What is what is x?
Joseph Chora 13:54
The one that scares most attorneys is living upon a house. Because everyone you talk to says it can't be done. It's never done. It's so complicated. It doesn't work to find someone to tell you. It's easy peasy. 123 I'll probably be the only person who tells you that
Jeff Lewis 14:12
still even in during the pandemic with some of the measures that courts have put into place in terms of the pandemic. Yeah, we
Joseph Chora 14:20
took several houses during the pandemic, it the hard part isn't taking the house. The hard part is getting the people out of the house. Yeah, if you do it right. You sell the house to a third party. You've got the money. You don't care if the people get out of the house or not.
Jeff Lewis 14:34
Wow, okay, Tim, remind me never to cross this guy.
Tim Kowal 14:39
Okay, let's uh, let's get into still more some some nitty gritty questions about judgment enforcement. Let's, let's start with an overview. Joseph, I wonder if you could kind of give us just a general outline overview of the judgment enforcement process. Maybe we start at you know, that maybe the moment the judgment is entered, I assume that's that's whenever what's that's when the creditor starts So looking at Judgment enforcement options, and that's when the debtor, and often me, as the appellate attorney will will say, Well, you can appeal this, but you got to make sure that, you know, you're not going to lose your house and get your bank account wiped out. Otherwise, how are you going to pay me for this all this great appellate work if the plaintiff is wiping your bank account, so maybe give us an overview of the process to all
Joseph Chora 15:20
the trial attorneys out there, you know, before you file the lawsuit, you should know that the person has money to pay the amount that you want, you can conduct an asset investigation, it happens sometimes where I'll get a claim, and I'll look at the debtor and he didn't hide his assets. He just never really had the assets. The second is the is the judgment facially valid, I would say one out of maybe 10. I look at the judgment, and it can't be enforced the way it was written. And so we'll have to go back in and get it amended or inter lineated or something, just to get it fixed up.
Tim Kowal 15:55
Can you give an example of, of how a judgment can be facially invalid? I hadn't actually thought about that before. Sure,
Joseph Chora 16:01
sure. It happens a lot. When we get to the third part where we're enforcing, we have to send instructions to the sheriff. And the sheriff is a stickler. They're not lawyers and writing clerks. But the names of the entities have to be described, it has to be ABC, Inc, ABC LLC, if it's just ABC, you've got an unenforceable judgment. That can really be an issue. If there's a question. Sometimes these debtors will have entities with similar names. And there's some confusion. And it can be a problem
Tim Kowal 16:36
is that that sort of thing happened with DBAs. And other aka A's,
Joseph Chora 16:43
it does aliases. You know, sometimes women will get married and their last name will change. But those kinds of aka aliases, and when names change for marriage, those are relatively easy fixes where the judgment doesn't have to be amended. It's typically business entities where we find the most problems.
Tim Kowal 17:00
Okay. Anything else in the kind of the outline of judgment enforcement? What what happens when when judgment enforcement gets started? What typically, do you see at that point as the does the debtor decide? Okay, well, it looks like now the rubber has hit the road and and they're going to start enforcing, so maybe I better just write the check.
Joseph Chora 17:19
So, you know, after the review of the facially valid judgment, it's the acid investigation to find out what assets this debtor has, and how is he holding them that kind of leads right into the next step, which is developing an enforcement plan, whether he's got money in an offshore Trust Bank Accounts of business, you know, valuable art, whatever the asset is, that kind of sets the shape. And at this point, you'll also kind of get some information as to whether or not there has been transfers. And whether you want to again, like we talked about before levy on the asset anticipating unwinding that transfer through the levy process. But you're right there first response is to run, hide in delay.
Tim Kowal 18:02
Yeah. All right. Well, here is in one of my exposures to judgment enforcement and defensive judgment enforcement, I came across an important California Supreme Court case conservatorship of McQueen. It's a 2014 case. And what I learned from that case, in representing an appellant defendant who was trying who had stage judgment forcement, and was trying to minimize his exposure to attorney fees for judgment forcement McQueen says that the right to seek judgment forcement fees is cut off if the judgment is fully satisfied. So what that means, I take it is that if the plaintiff creditor has spent $100,000, on Joseph Chara, to to enforce the judgment, but the but the appellant defendant writes a check and fully satisfies the face amount of the judgment plus any interest accrued before Joseph Chara files his Motion for Judgment enforcement fees, then the right to judgment forcement fees is cut off. Is that the gist of what McQueen says Joseph?
Joseph Chora 19:07
That's exactly right. And I've seen it, I've seen it happen, where I call it sloppy, but maybe in a tension, where someone will be a little slow asking for fees, you can file a memorandum of cost after judgment at any interval, we typically do it around five or $6,000. So as we as we're generating fees, we're adding that adding them to the judgment immediately. Again, $5,000 is just enough that it's low enough that they're not going to want to pay their attorney to fight it. And even if they do, we're going to win. And then we add our fees for fighting it onto the judgment as well. You teach the judge the judgment debtor right away, don't fight my fees, and that's more pressure to settle.
Tim Kowal 19:47
Got it so you don't have to file a full fledge Motion for Judgment enforcement fees. You can just keep putting these bookmarks in by way of memoranda.
Joseph Chora 19:57
Exactly right. And by picking small
Jeff Lewis 19:59
them bounce, maybe the other side wouldn't go through the bother of filing a motion to tax or strike or whatever the opposition is interesting.
Joseph Chora 20:06
Exactly. Right. Yeah. Well, that's
Tim Kowal 20:08
a good tip. One of the other one of the exceptions to McQueen. Again, McQueen says that, that the debtor can cut off the right to judgment enforcement fees by fully satisfying the judgment before the creditor formally requests the enforcement fees. The exception to that is that is that to satisfy the judgment, it has to be not only paid or not only tendered but paid and received. So a check, or even a cashier's check doesn't work if the creditor because the creditor can simply hold on to the check and not cash it until the creditor has filed the enforcement the fee motion. So the exception or to really make the remedy of the Queen work, you would have to the debtor has to pay the creditor in cash. Is that Is that right, Joseph?
Joseph Chora 20:53
Oh, I'll tell you my experience has been not as technical. I know. That's what the case says. But as we all know, judges will do whatever they want, whenever they want. Let them be appealed. Typically, what I've seen is that there's an understanding when counsel has been presented with the law, as long as there's received once you receive the check, I suppose a cashier's check would would make a stronger case cash an even stronger case. But yes, cash is what's required. But there's some wiggle room and maybe that's honor among attorneys. And you know, sometimes attorneys don't necessarily have that honorable stance.
Tim Kowal 21:31
Interesting. Okay. Yeah, my my experience with that I once tried to make use of McQueen and add a mic. My client, the debtor had paid the fully satisfied the judgment by paying in cash quite a large sum of money in order to cut off judgment enforcement fees. And we cited McQueen to the trial court, but the trial court still granted the later filed motion for enforcement fees. So I was very frustrated that McQueen was not was not given force in effect, in my experience, and then I'll just bookmark a couple of other cases for the audience here. We don't have to go into detail here. But but just to kind of underscore what you just said, Joseph that your mileage may vary. So there's there's a case a gray one, CP B versus SEC acquisitions, a 2015. Court of Appeal decision that held that if a judgment were were not fully satisfied because of the existence of as yet on awarded attorney fees, the phrase before the judgment is fully satisfied with serve no purpose, which is basically confirming what we had just been been talking about in McQueen, it held to kind of a literal reading of McQueen. But another court of appeal out of the second district went a different direction last year in Wertheim LLC versus currency court, where it held that additional fees were potentially award double pursuant to the creditors motion for them, because that right had been revived by a previous appeal. So even though that motion had been filed after the judgment was fully satisfied, the court said well, but the payment in full satisfaction of the judgment wasn't conditioned on it being accepted as full satisfaction. So we're going to let the creditor file and potentially receive fees for enforcement even after satisfaction of the judgment. So it kind of undermined the holding of McQueen and as confirmed by gray one CPB. And, and I wonder, Joseph, if, you know, is there any requirement that the defendant when the defendant or a debtor pays the judgment in full satisfaction that does the creditor hat? Or does the debtor have to indicate on the form of payment that it's being made on the condition that it'd be accepted as full satisfaction?
Joseph Chora 23:43
Well, I'll tell you, there is no condition. But every time we get right up to the end, there's always a question to the penny, how much is owed. And you'd be surprised how difficult the accounting can be. And the smart lawyers will overpay because there's no question that it's been paid. Because if you're one penny short, you leave the door open.
Tim Kowal 24:06
I have noticed that it's it can be difficult to calculate it. I myself will do it multiple times and kind of do it different ways. And then opposing counsel will still have something that's just a little bit different and always gives me heartburn. So I agree with what you say about you know, maybe just write how much over should you write write the check.
Joseph Chora 24:24
Again, it's rare that I've never paid a judgment. But I'll tell you, the attorneys who have circumvented the issue have paid about over $1,000 over just to make sure that it's done done. And of course a scrupulous attorney will return what we feel they should be what they should receive.
Tim Kowal 24:44
Got it. Okay. I wanted to ask you also about trust and probate judgments in my experience, they they have not been subject to the enforcement of judgments law, the EJ L What do you say Are they are are judgments against a trust, an irrevocable trust after the settler has passed away? Are they? Can they be subject to the E jl? Or are they purely creatures of the trial of the probate judges discretion?
Joseph Chora 25:13
So it's been my experience that if you want to bust a trust or reach into the assets that are due to a third party like a beneficiary, then you need to go into probate. But if the trustee on behalf of the trust is a judgment debtor, we have seized trust property.
Tim Kowal 25:35
Is there a way of doing that? Does the does will the trustee say no, no, no, you have to file a creditor claim even judgments are just mere claims against the trust, and they have to be brought by way of a creditor claim.
Joseph Chora 25:49
So what I can tell you what we've done, and I tell my employees is all the time just because it worked doesn't mean you did it. Right. We will if we had a judgment against the trust, and we levied on on Trust Bank account, and the money was seized, and it was sent to the sheriff and the trustee, and the beneficiaries had an opportunity to file claims of exemption or third party claims. They didn't and the money was released to us. Game over once it's released, there's pretty much no going back.
Tim Kowal 26:15
Got it. So even if it's done or not done completely, right, once the money is released, it's pretty much a done deal, you kind of get back into that principle of possession is nine tenths.
Joseph Chora 26:25
There is strong law that once the gavel falls and the auction or turnover by the sheriff is complete. It's very rare to have that undone.
Tim Kowal 26:37
So with that in mind, would you suggest if you were if you were approached by the creditor with a judgment against a trust where the settler passed away and the trust is under administration of the probate court? Would you suggest, you know, taking a stab at using the enforcement of judgments, law and just living upon assets that way before resorting to the creditor claim process? Say that again? Because
Joseph Chora 27:00
I think this is a different set of facts?
Tim Kowal 27:03
Well, you've got to let's say you have a judgment against a trustee, the settler has passed away. So the trust is being administered by the probate court.
Joseph Chora 27:11
So it's going against the person who the decedent or it's against the
Tim Kowal 27:16
successor, successor trustee. So at this, yeah, so at this point, it's against the trust or the trustee, but it's the successor it's not the original settlers. It's because it's it's an irrevocable trust now, because the settler has passed away. So this is the point at which if you have a claim against the trust, any creditor ordinarily needs to file a creditor claim you can't file a lawsuit against the deceased settler, they need to file a creditor claim and they will get meted out that way in the probate court. Now, I've I've seen this in the context where the successor trustee is in litigation following the death of a settler and their claims and cross claims and a judgment is entered against the successor trustee. But the the judgment creditor can't get any satisfaction can't get any any can enforce that judgment, because the probate court says no, no, no, you can only seek satisfaction by way of filing a creditor claim, I'd have
Joseph Chora 28:11
to look at it. But my first instinct would be to move forward through the standard enforcement process
Tim Kowal 28:16
until someone tells you know, exactly right. Yeah, yeah, that was I had I had a miserable experience in that case. And just just to finish that story, we did file the creditor claim, the trustee basically pocketed it and didn't do anything with it. And so we filed a petition to enforce the creditor claim, and then the probate judge basically pocketed it never set it for hearing. And so there we sat for a better part of eight years. Meanwhile, the trustee can continues to litigate paying her own attorneys, of course, well, while we can't get any satisfaction on on our attorney fee judgment against the trustee, and made me think that the EGL probably should apply against truss. Let's see, we also discussed a case recently in which a plaintiff and a defendant agreed to use a general verdict form they were kind of brokering about whether to use general or specific or specific verdict forms, and they agreed to use a general verdict form in exchange for a stipulation to limit judgment enforcement. It would be limited to just collecting against the insurance policy and indemnity duties. I wonder if you had ever seen this sort of thing. And it seemed, seemed very, very creative solution. And I just wondered, gosh, does that does a stipulation like that hold up by the time you get a judgment, can your rights to enforce a judgment under the the full panoply of enforcement methods under the EGL be limited by pre judgment? stipulations?
Joseph Chora 29:45
It certainly can. there's case law that a judgment is a contract, and if you get into that frame of mind, you can craft it any way you like, you know, we talked about invalid judgments earlier with the wrong parties. You can definitely limit and shape how a judgment comes out.
Tim Kowal 30:03
Now, would you have to incorporate that stipulation into the face of the judgment?
Joseph Chora 30:09
Absolutely. There's a doctrine, the merger doctrine that says all claims are merged into that piece of paper. And so, you know, every time I talk to a trial attorney, this is another nugget, all your work, all your depositions, all that discovery, all that trial prep, everything comes down to that piece of paper. If it's not on the piece of paper, it's not there.
Tim Kowal 30:30
So if you forget to put that in your proposed form of judgment, and the judge has signs that without that, without any evidence of that stipulation being in the form of judgment, then you're out of luck, that stipulation for all intents and purposes does not exist. I take it correct. Yeah, there was
Joseph Chora 30:45
a case that we had, and it was a while ago, and we litigated it post judgment. But attorneys fees were awarded, but did not show up on the face of the judgment. And so we ended up not being able to get attorneys fees for enforcement. Wow.
Tim Kowal 31:02
All right, let's move on, I want to ask you a little bit about Alter Ego judgments. Now, most attorneys know that they have the option whenever they are suing a defendant. And they think that there there are or may be alter egos that they can get liability attached to, they have the option to either allege those alter egos in the complaint and go forward with Discovery against those alter egos and prove the alter ego at trial. Or they can just ignore all those alter egos get the judgment against the primary defendant and then seek alterego liability afterward, after entry of the judgment in a Code of Civil Procedure, section 187 motion? And I wonder, Joseph, what, what do you think attorneys ought to know when considering these two routes?
Joseph Chora 31:46
So we just had a case that we dealt with on this where the plaintiff waited too long in the trial cycle, and it was too close to trial. And the judge said, Yeah, you know what, I think he is an alter ego, but I'm not gonna let you add them because you're going to disrupt my docket, too bad. If you have what you need to make that person an alter ego, do it sooner than later. It's better to do it before Entry of Judgment. Because then even if you fail, we still have post judgment for a second swing.
Tim Kowal 32:21
went about trying to add an alter ego after the after the entry of judgment, where that alter ego individual did not appear was not a participant in the lawsuit are litigants are plaintiff still able to add those kinds of non appearing alter egos after the entry of the judgment?
Joseph Chora 32:39
So there's a there's a lot of nuance in that, in that area. In order to find an alter ego, you need to have a unity of interest, unjust result will occur if the corporate entity or the non Alter Ego is respected. And finally, the proposed Alter Ego has to have had their due process rights protected by participation, even if only vicariously in the underlying litigation. So there's a lot of analysis that would go into that.
Tim Kowal 33:11
Right. So it might be different out analysis, if you're if the lead defendant is the individual who's already participating in the trial, and you're just thinking about maybe adding other partnerships or maybe a trustee capacity or LLCs, that maybe potential alter egos, you could maybe leave those for after the entry of the judgment, but you can't proceed against the LLC, for example, as the lead defendant and then count on later adding the individual members as alter egos under CCP 187.
Joseph Chora 33:41
You could if the member or members were virtually represented by control of the
Tim Kowal 33:49
LLC, you'd have to establish that, that they control the litigation.
Joseph Chora 33:53
Exactly right. Yeah. And the due process is that their due process rights are protected, they were virtually represented in the lawsuit.
Tim Kowal 34:00
Okay. All right, next subject. Now, now here, I thought maybe you could settle a dispute between Jeff and me about anti slap fee awards. As the audience may know, I've taken the position that I published an article in California litigation magazine last month that that anti slap fee awards are automatically stayed on appeal, even without the need to post a bond. That's because under the 1992 legislative amendments, there is there's no more no longer the routine versus non routine cost distinction. So slap fee awards are treated just like any other kind of fee awards or costs, which are automatically stayed. There is a little bit of an older kid, and that's confirmed and then in the coils, decision coils versus parents. There's a slightly older appellate decision in Dalling that says slap fees are non routine costs. So they're more like they're they're more like money judgments. They're they're not automatically stayed without without the appeal. Not like we say without a bond. And I wonder if you've said that'll that settle that bet. Are they are they automatically state or not?
Joseph Chora 35:05
Jeff, did you want to be heard before I? Well, I
Jeff Lewis 35:07
was gonna bring a motion that that grossly misstates the holding of Darling Darling. The court said that it was the intent of the legislature to deter frivolous slap lawsuit and that by not recognizing automatic stay, they were furthering the legislative intent in protecting litigants from slabs. That was my reading of darling. But go ahead.
Tim Kowal 35:30
Well, that sounds like the daily court was making a very impassioned campaign statement to join the legislature and rewrite that statute.
Joseph Chora 35:38
So we use anti slap quite a bit, oftentimes judgment, debtors will feel the pressure of our enforcement and they'll want to hit back. And so we get sued on a regular basis. And we act we're constantly anti slapping, picking up fees, and then applying additional pressure. my law partner does the majority of the anti slap work and I had to phone a friend this morning to get his take on it. We had a good discussion about it. And the winner is Jeff.
Jeff Lewis 36:05
Your partner's brilliant.
Joseph Chora 36:08
Not stayed. They are not routine, cos that analysis is still good.
Tim Kowal 36:12
All right. Well, there, there are two different Court of Appeal decisions on that standing for either proposition. So whatever side of that issue you find yourself on, there is a court of appeal decision that meets your needs. And you can cite either one of them and any trial court is free to accept either one that the court happens to feel is more persuasive. All right. Let's see, I wanted to move on on the related issue of bonds and stays. I wondered, I think you mentioned that issue comes up. Sometimes in your practice of judgment enforcement, do you get involved in litigation over appellate stays of enforcement,
Joseph Chora 36:47
we do that that typically comes up, we have started to develop an appellate practice, as part of our judgment enforcement will do a little bit of pre litigation or pre judgment, bankruptcy, appellate work, a little bit of probate, but again, it's all focused on the judgment. So those state motions, you know, again, they'll cite that it's doesn't have to be stayed, whether it's anti slap, or just in general, that we do some of that work.
Tim Kowal 37:13
Let's see. Have you ever seen? Go ahead, Jeff.
Jeff Lewis 37:16
Oh, just gonna ask. So let me ask you, if there's a case where you've got a judgment, you're doing judgment forcement and the other side appeals? And let's say they post an adequate bond, there's no dispute over the amount of the bond or the adequacy of the collateral or whatever. Do you then cool your jets for two years while the appeal winds its way through? Or is there anything you do during the two years on behalf of creditors? While the case is up on appeal?
Joseph Chora 37:39
There really isn't anything that we can do. You know, I'm sure you're aware it's 150 for 150% for accredited and unaccredited, 200%. All we do is we kind of bookmark and manage to make sure that should we win the appeal, that the money's there, if there's some change? For whatever reason, if the appeal becomes crazy expensive, then, you know, we would go in, you know, fight about the adequacy, but other than that, no, absolutely. We pull our chests. Okay.
Tim Kowal 38:07
Interesting. What if the what if the amount of the judgment changes, such as by a subsequent, a post judgment award of attorneys fees and costs at that point that gets added to the amount of the judgment by operation of statute? Do you? Do you ever advise your clients to go in on a motion to increase the amount of the bond?
Joseph Chora 38:25
We've done it several times for just that kind of thing, where there will be something pending, and I'll post a bond, whether it's adequate at that moment, or it's slightly inadequate. And then when the attorneys fees come in, it is then inadequate? Yes, we will go in and object to the sufficiency of the bond.
Tim Kowal 38:45
Is that useful leverage point? Or is it is it more just because you want to make sure your client is fully protected?
Joseph Chora 38:52
It's a protection thing. And unfortunately, some of these attorneys are short sighted in that they want to fight about the amount of the bond, and we'll spend 20 grand fighting about the bond. And so they'll, they'll then be right minus the 20. And then we'll fight again and it'll go up another 20. And they're always $20,000 behind and we'll go in three or four times before they figure it out.
Tim Kowal 39:14
And you're in adding the enforcement fees on top of everything. Yeah,
Jeff Lewis 39:19
yeah. The first rule of holes for debtors is to put the shovel down and stop digging when you find yourself in a hole and rarely do they do they follow that rule?
Tim Kowal 39:29
All right, and Jeff, Jeff, and I have we're both still looking for someone who has ever seen a personal surety bond. Have you ever encountered one of these personal surety bonds now that everyone knows about if you want to stay a judgment on appeal, you have to post a surety bond but it's an admitted surety bond SB one of the surety that's acknowledged by the what is the California Insurance Commissioner, I think, but you can you could post a personal surety bond basically just another person who's willing to vouch for you. It has to be in I think four times the amount of the judgment at that point, I've never seen that I take it I just said, no,
Joseph Chora 40:05
no, no, no, but you know what? There is a an organization of judgment enforcers. I'm gonna put that out. I'm gonna, I'm gonna see if I can find one for you.
Tim Kowal 40:14
Okay, that'd be interesting. I did read one really interesting case that's always stuck in my head that the name of it is but I don't know how to pronounce it buzz Gaea. And and the issue was, it involved a personal surety bond, the the debtor had transferred assets to his wife, who went and posted the personal surety bond, and the creditor said, but that's a fraudulent transfer. And the judge said, No, it wasn't, it was made for the benefit of the creditor, because that bond is in the benefit, it's now held, you know, that those assets are now held by the wife, who is now essentially a co judgment debtor by virtue of that personal surety bond. So it didn't transfer it out of the hands of away from the reach of the creditor. So it was that was that was all fair.
Joseph Chora 40:57
That sounds like the right decision.
Tim Kowal 41:00
But still, I've never seen seen one of these creatures only heard about them, and they're they seem enticing, but no takers so far. I had another question about now we're getting to the end of the process of the appeal. Let's say that the appellant obtains reversal of the judgment against him, and but the the appellate had made some partial satisfaction had paid some amount of the judgment along the way. So now the formerly prevailing plaintiff is liable to return all the all that partial satisfaction he had received on the judgment. And not only that, but full restitution as well, including interest and even lost business profits. That was a case we saw last year in Dr. Leeville, LLC versus West Lake health care. As I recall, in that case, it involved in eviction of a business from a building, and the tenant appealed the order. In the meantime, the landlord went in and sold the building, maybe didn't sell the building but evicted the plaintiff and the plaintiff evicted, sorry, the tenant, the tenant lost the business, and there was some million dollars in lost profits that I think nearly was was awarded, or I think maybe it was left unsettled. But the upshot was that the formerly prevailing plaintiff may be liable for lost business profits, if they're if their former judgment is reversed. I wondered if that sort of risk ever, ever comes into your thinking when advising whether to go forward with enforcing a judgment?
Joseph Chora 42:33
Absolutely. You know, we talked about debtors running into bankruptcy and the appellate court. And so if the debtor appeals, we want to know, what's the likelihood that this is going to be overturned, and the creditor needs to know that if that happens, there's a good chance that you're going to be responsible for returning that money that we've paid out to you.
Jeff Lewis 42:55
Yeah, better invested better than 10% return? What?
Tim Kowal 43:00
Yeah, so is it is it a good idea for the for the creditor to kind of once once recover once having recovered either part or all of the of the judgment? Is it? Is it good to sit on it until the resolution of the appeal?
Joseph Chora 43:15
You know, that's the recommendation that we make to clients. One of the strategies that we employ is the DIS entitlement doctrine. Oftentimes, again, people who have money don't want to pay and so they will fraudulently transfer, they won't provide documents, they won't sit for examinations, they'll engage in obstructive litigation tactics. I we've brought a couple successful. We have one patent pending right now this entitlement motion to dismiss the appeal without reaching the merits. And so if, if our appellate standing isn't that great, and I'll try it, it is the disentanglement. Yeah, that's
Tim Kowal 43:50
a great tip. how egregious does the do the debtors evasions need to be in order to kind of meet that threshold for dismissal under the DIS entitlement doctrine.
Joseph Chora 44:00
So like most cases, it says, contempt is not required, but contempt would work, right. And contempt is relatively easy to show. I mean, you can get contempt for not complying with a subpoena not appearing at a court order debtor examination, that's a court order to appear and you are in violation of that court order. Typically, for us, it's obstructive litigation tactics. It's a pattern of continually taking actions to disrupt to hinder delay and defraud the creditor.
Tim Kowal 44:32
Is that an active strategy in some of your cases to to kind of check those boxes to see if you can satisfy the elements of a dis entitlement motion?
Joseph Chora 44:42
Absolutely. So again, from the beginning of the case, we're thinking appeal, what are our what are the merits of our appeal? Are we in a strong position, but at the same time, are they shooting themselves in the foot by opening themselves up to be dismissed on before They reached the merits.
Tim Kowal 45:01
That's I think that's a great tip. I love I love bringing this entitlement motions when, when when they're justified I think in the last year or so, Jeff, in the in the cases I think both of us are always looking out for for opinions that dismiss appeals on this entitlement grounds. It seems to be getting, at least from my eyes, it seemed to be getting a little bit harder to to meet this standard for dis entitlement. I wondered if that met with your experience, Joseph are are they harder to achieve than they used to dismissals on disinter this entitlement grounds?
Joseph Chora 45:31
I'll be honest, I think we're at a total of four that we've done. So I don't have a tremendous amount of experience. But no, I don't I don't find them any more difficult. That being said, the debtors that we deal with are the worst of the worst. They're the 1% that when you hear the facts, you're like, Oh, my God, why didn't this person in jail?
Tim Kowal 15:52
Yeah, yeah. All right. So now, to wrap all this up, we've talked about a lot of things relating to judgment enforcement, from the technical to gold nuggets of tips that that attorneys both trial and appellate attorneys should employ. And I wonder, Jeff, if you can kind of Joseph if you could bring it full circle and, and tell us now, many, many attorneys will, as I mentioned earlier, will try to take some of the steps themselves to enforce a judgment or defend enforcement of judgment, what are some signals that attorneys should should look out for to read to tell them that it might be time to bring in a judgment enforcement specialist at this point,
Joseph Chora 46:28
my advice is always the same. Call me early or call me late. But I'll be more effective if you call me early. Again. When you're thinking about filing a case, check to make sure he has the money. When you're getting ready to enter judgment, there are certain things you want to do immediately, right? Just from an appellate point of view, if you file a notice of ruling, you shorten their window to file an appeal, if you don't, they have six months, little things like that, that you may not be thinking about preparation for bankruptcy, we prepare all our cases that they're gonna go into bankruptcy. If you call me after they've gone into bankruptcy, I can still help but not nearly as much if we prepared six months ago, then we're going to bank so early is better late, I might still be able to do something.
Tim Kowal 47:12
Yeah, well, I've got a number of tips that I've written down that I plan to use in my own practice. I'm sure you have to Jeff, I want to thank Joseph Chaura, for joining us on this on this episode. I think this has been enormously helpful for me at a minimum and hopefully for the rest of our audience. And Jeff, I think that wraps us up this episode.
Jeff Lewis 47:30
Yeah. First, I'm going to go tell my staff not to cease dogs as part of debtors examinations. And yeah, we want to thank you for being here and want to thank case tax for sponsoring our podcast each week, we include links to the cases we discuss using case text and listeners of the podcast can find a 25% discount available to them if they sign up at case text.com/scalp. That's case text.com/ca LP.
Tim Kowal 47:52
And if you have suggestions for future episodes, or topics that we should cover on future episodes of the podcast, please email either Jeff or me at info at cow podcast.com. In our upcoming episodes, look for more tips on how to lay the groundwork for an appeal and preparing for trial.
Jeff Lewis 48:07
See you next
Announcer 48:08
time. You have just listened to the California appellate podcast, a discussion of timely trial tips and the latest cases the news coming from the California Court of Appeal and the California Supreme Court. For more information about the cases discussed in today's episode our hosts and other episodes, visit the California appellate law podcast website at ca elf podcast.com. That's c a l podcast.com. Thanks to Jonathan Caro for intro music. Thank you for listening and please join us again.
Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. Contact Tim at tkowal@tvalaw.com or (714) 641-1232.
Get a weekly digest of these articles delivered to your inbox by subscribing here: https://tvalaw.com/california-appellate-newsletter.
[Blog note: After this firm, joined by Jeff Lewis Law, filed a request for publication, on September 7, 2022 the court granted publication. The opinion is now published. ]
Put on your anti-SLAPP issue-spotting glasses and see if you spot the issue in this fact pattern: Plaintiff sues his business partner for taking money from the partnership. But the plaintiff also alleges that the partner used the money to pay his lawyers on litigation.
Probably your ears perked up at the mention of “litigation.” And that’s what got the defendant’s attention in Manlin v. Milner (D2d1 Aug. 10, 2022 Nos. B313253, B315077) 2022 WL 3223817 (nonpub. opn.). But he was wrong: merely spending money on litigation does not transform the misappropriation of the money into protected conduct.
The parties in this case were in eight real-estate investment LLCs together. Manlin sued Milner on contract and business-tort claims, alleging various self-serving activities. Milner turned around and cross-complained against Manlin. Adding a third layer of pleadings, Manlin cross-complained, this time against Milner and his attorneys.
It was Manlin’s cross-complaint that drew the anti-SLAPP motion. Manlin alleged Milner had diverted funds from the LLCs to pay his legal expenses in this lawsuit.
Milner filed an anti-SLAPP motion, citing caselaw that funding litigation is protected petitioning activity. (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056.) The trial court granted the motion.
The Court of Appeal reversed the order granting Milner’s anti-SLAPP motion. The court explained:
“Here, the element of Manlin's claim for breach of fiduciary duty is the self-dealing act of diverting funds from the LLCs in which Manlin owns an interest. The allegation that the cross-defendants engaged in this self-dealing completes the claim. Why they did so, for example to fund litigation,—is not an element of the claim, and therefore forms no basis for liability.”
For this proposition that motives are not germane to the anti-SLAPP analysis, the court cited to Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1061 (Park), where a professor sued the university for denying him tenure, and alleging several statements reflecting racial animus. The university filed an anti-SLAPP motion, arguing that the statements were protected conduct. That may be true, the Park court reasoned, but the plaintiff did not allege the statements were actionable, only that they were evidence of wrongdoing.
The same analysis applied here: Manlin was suing Milner and his attorneys for taking the money, not for what they spent it on (i.e., protected litigation activity). As the court put it:
“No element of Manlin's claim depends on the purpose for that diversion, but only on the diversion itself and whether it constituted self-dealing. The diversion may have been to further some protected activity—for example to fund a political campaign or publish a newsletter or fund litigation—but that purpose does not convert Manlin's suit to one arising from the protected activity. The protected use to which cross-defendants put the diverted funds may supply evidence of the selfishness of their self-dealing but does not convert the use itself into the basis for liability.”
The opinion is unpublished, but the court should publish it. Defendants continue to raise Rusheen v. Cohen in anti-SLAPP motions in an effort to escape misappropriation claims so long as some of the misappropriated money was spent on lawyers.
I saw almost the exact same scenario as Manlin in another case of mine a few years ago. The Court of Appeal came to the conclusion that taking money does not become protected just because it was spent on lawyers — just like Manlin. And it issued that holding in an unpublished opinion — just like Manlin. And so anti-SLAPPers are free to try again.
Until we get this holding nice and crystal clear in a published opinion, we are going to continue seeing repeat performances.
Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. Contact Tim at tkowal@tvalaw.com or (714) 641-1232.
Get a weekly digest of these articles delivered to your inbox by subscribing here: https://tvalaw.com/california-appellate-newsletter.
Senior Judge Clifford Wallace of the 9th Circuit has said, speaking of appellate court mediation programs, that “we ha[ve] a way to get people to talk.” Appellate mediator John Derrick talks with Tim Kowal and Jeff Lewis about the effectiveness of appellate court mediation programs — and about one unusual way a judge might get parties to talk.
Watch the clip here.
This is a clip from episode 32 of the California Appellate Law Podcast. The full episode is available here.
Tim Kowal helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. His appellate practice covers all of California's appellate districts and throughout the Ninth Circuit, with appellate attorneys in offices in Orange County and Monterey County. Contact Tim at tkowal@tvalaw.com or (714) 641-1232.
CEB has republished my article, “Supreme Court Affirms the Use of Powerful Civil-Theft Remedies Under Penal Code 496 in Business-Tort Cases,” about the recent decision in Siry Investment, L.P. v. Farkhondehpour (Cal. Jul. 21, 2022 No. S262081) 2022 WL 2840312.
Siry held that the remedies under Penal Code section 496(c) — treble damages and attorney fees — are indeed available in business tort cases that fit the description of receipt of stolen property.
This means that many fraud, breach of fiduciary duty, and even breaches of contracts and loans, could carry these steep penalties. These are powerful remedies, and their application to these relatively commonplace lawsuits is now specifically guaranteed by the Supreme Court.
Several appellate courts had declined to extend these remedies to garden-variety business-tort cases on policy grounds. The Supreme Court shared these concerns, but held the language of the statute indicated this was the intent of the legislature.
My original article is here. The California Appellate Law Podcast episode discussing Siry is here.
Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. Contact Tim at tkowal@tvalaw.com or (714) 641-1232.
Get a weekly digest of these articles delivered to your inbox by subscribing here: https://tvalaw.com/california-appellate-newsletter.
Business litigators need to know about the civil-theft remedies under Penal Code section 496. After some appellate courts expressed distaste for awarding treble damages and attorney fees to garden-variety business torts, Tim Kowal and Jeff Lewis discuss the California Supreme Court’s opinion deciding the question:
Yes, it seems a little surprising—but yes, that is what the statute says. In your next fraud, conversion, breach of fiduciary duty, or even breach of contract case, consider whether your facts fit Siry Investment, L.P. v. Farkhondehpour (Cal. Jul. 21, 2022 No. S262081). If so, treble damages and attorney fees under section 496 may be supported.
Jeff and Tim also discuss what to do when after a judgment is reversed but an appeal of a post-judgment fee award is still pending. The answer suggested by Mid-Wilshire Property, L.P. v. Dr. Leevil, LLC (D4d3 Jul. 20, 2022 no. G059899) 2022 WL 2824967 (nonpub. opn.) is: consider a stipulated reversal.
Finally, two appellate courts suggest different attitudes toward appellate sanctions. Shiheiber v. JPMorgan Chase Bank (D1d2 Jul. 26, 2022) No. A160188, did not issue sanctions, but urged the bar to think twice about “clogging the docket” with frivolous appeals and distracting the court from more important work. The court in Pop Top Corp. v. Rakuten Kobo Inc. (Fed. Cir. July 14, 2022) No. 2021-2174 awarded $107,000 against what the dissent suggested was merely a “weak case.” But as the dissent warned, the right of appellate review applies even to weak cases.
Tim Kowal 0:03
The judicial burden of reviewing a weak appeal or reviewing one sided argumentation does not warrant the sanction of award of attorneys fees. Welcome to
Announcer 0:13
the California appellate podcast, a discussion of timely trial tips and the latest cases and news coming from the California Court of Appeal, and the California Supreme Court. And now your hosts, Tim Cole and Jeff Lewis.
Jeff Lewis 0:26
Welcome, everyone. I am Jeff Lewis.
Tim Kowal 0:28
And I'm Tim colwall. The California appellate law podcast is a resource for trial and appellate attorneys Jeff and I are both appellate specialists, but we split our practices about evenly between trial and appellate court. In each episode of this podcast, we try to bring our audience of trial and appellate attorneys some legal news and insights that they can use in their practice.
Jeff Lewis 0:48
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Tim Kowal 1:16
Okay, and in this episode, we're going to cover some recent important cases that we've come across that have struck our eye and that might be of some use to our audience, these cases cover for business, tort litigators, a recent Supreme Court California Supreme Court case that affirms the use of the powerful civil theft remedies under Penal Code Section 496. In business tort cases, and on a point of appellate procedure, we're going to cover a couple recent case that reminds about the possibility of using stipulated reversals of a attorney fee award after the underlying judgment is reversed. And finally, a couple of recent cases about sanctions for frivolous arguments on appeal. Okay, so turning to our first case, on penal code section 496. Now, civil trial attorneys have long had an industry secret if you're in the know. So say you are suing over an unpaid loan. And if the borrower never intended to pay back the loan, and you can prove that intent, then that's not only a breach of contract, it's also a form of theft by false pretenses. So you could not you not only can assert a cause of action for breach of contract, but also a fraud cause of action. And under Penal Code Section 496, civil theft is punishable by treble damages and attorney fees. So for those in on the secret of if you are aware of 496, then it's a powerful tool in the business lawyers toolkit. But there's been one problem for the past couple of decades and civil business tort lawyers have been using the Penal Code 496 Is that courts really don't like section 496. Judges worry that lawyers will tend to overuse it and turn every garden variety law loan or business tort case into a civil theft case that results in treble damages and attorney fee awards. So, as a consequence of that distaste for applying for 96 to civil cases, there arose a split of authority with some cases enforcing section 496 and other cases refusing to enforce it. So breaking the split the California Supreme Court kept the powerful civil theft remedies intact. In the case the case name is serie investment LP versus far Condon poor. It is a July 2022 California Supreme Court case in which the Court held that the civil theft remedies under 496 up did apply to a case involving a diversion of partnership cash now the the facts of Serie involves a pretty garden variety business toward action. There are two partners who are alleged to have diverted partnership assets to themselves very via the various trusts involved in the partnership. The jury in the first trial awarded a quarter million dollar in damages plus punitive, which was reduced by the judge to about $725,000 Each, which wasn't a good outing for the defendants, but it wasn't exactly devastating. They wound up doing worse after their their appeal. They did win the appeal on an ice technical issue and got the judgment reversed and remanded for a new trial. But at that point, the defendants refused to respond to discovery despite a court order and the plaintiff got so the plaintiff got terminating sanctions against the defendants. In this time around the plaintiff sought remedies under Penal Code Section 496, which the plaintiff had not done the first time around. The plaintiff got treble damages and attorneys fees, and the court entered judgment against the defendants for almost a million dollars in damages. $2 million in treble damages under 496 and 4 million in punitive damages. Now the punitive damages and the treble damages were duplicative. You can't get both. And one interesting thing when when the trial judge asked the plaintiff to choose Do you want the the treble damages or do you want the punitive damages? Jeff, the plaintiff chose the treble damages Even though treble damages were only 2 million, the punitive damages were 4 million. I wonder if my suspicion is that the plaintiff figured that well, punitive damages can be challenged on appeal for a new trial motion for being excessive, if they are, you know, more than the net worth of the of the defendants or for other reasons. And the treble damages are set by statute and less subject to challenge. And I wondered if, if you think that was a shrewd move by the plaintiff in choosing treble damages rather than the punitive damages, even though the punitive damages were twice as much?
Jeff Lewis 5:34
Yeah, you know, that's interesting. I wonder also whether or not in bankruptcy court, statutory treble damages versus punitive damages are treated differently for purposes of dischargeability. Haven't looked at that issue. But it's interesting election that the party made.
Tim Kowal 5:50
I hadn't thought of that either. That's also an interesting consideration. So ultimately, the trial court entered judgment against the defendants for over $7 million. Remember the judgment after the first trial had been only $1.5 million. So the plaintiff quadrupled the amount of damages after the first judgment being reversed and getting a second trial. So the defendants appealed the aspects of the judgment as improper under Section 496. And the Court of Appeal agreed with the defendants, but then the Supreme Court granted review and reinstated the penal code for 96 penalties. But the court didn't throw open the floodgates. The court was did agree that there were some concerns about section 496 being too broadly applied. And the Court said it gives pause and justice Groban joined by Justice Krueger concurred in the majority opinion to note that they do not read the majority as endorsing civil theft penalties in most consumer or commercial transactions. So the upshot is that if you have a civil case, involving fraud that looks or smells something like theft by false pretenses, consider seeking remedies under Penal Code Section 496 Subdivision C. But don't get too creative. Under Siri investments, policy concerns, do give pause, even though they're not a valid basis to refuse to enforce section 496. So try to look for that there. There are three cases that the Supreme Court analyzed that supported damages under Section 496 tried to get your case to fit under those types of fact patterns and don't get too creative. Or else you might, you might run afoul. Yeah, yeah, concerns.
Jeff Lewis 7:33
Thank you for briefing this case, I wasn't aware of this civil application of this penal code. It's another great tool in the toolkit. So thank you
Tim Kowal 7:42
know, I can admit to falling prey to these to getting too creative. Because ever since I first learned about section 496, every time I get a breach of loan case, I'm always looking well, did they make any payment because if they didn't make any payment, then maybe we can argue that they never intended to make the payment. And so the loan was, was solicited under false pretenses. And so we can we can shoehorn a section for 96. cause of action there.
Jeff Lewis 8:07
Yeah, like, yeah, to a hammer. The whole world looks like a nail, I see anti slap issues in every case I look at so I get that.
Tim Kowal 8:15
Yeah, yeah. Okay, let's move on to the next case I wanted to talk about and, Jeff, I've asked you about this in the past, but stipulated reversals of a fee award. So here's a common scenario when that had a rather uncommon resolution. So let's say you've appealed a judgment. And there's a there was a post judgment fee award. And you've separately appealed the attorney fee award. Now, now, let's say that you are successful and appealing the underlying judgment. So the underlying judgment gets reversed. But what happens to the fee award? After reporting the victory to the client, you suddenly remember, you know, what do you what do you do with this fee award? You still have to brief it and get an opinion on it, or does it just go away automatically. And this is the scenario that happened in mid Wilshire property LP versus Dr. Louisville. There have been many installments of this case. I think there were three or four prior opinions. In this case, the appellant had reversed a judgment but briefing had not even begun in the separate appeal of the fee award of almost a million half a million dollars. So here's what the parties did there. They filed a joint stipulated request to summarily reverse the attorney fee award, and then the appellate court granted it. The court did make a few comments about the party's request, noting that some concerns about the burden involved in a stipulated reversal under Code of Civil Procedure section 128 sub A ordinarily a stipulated reversal of a judgment is very difficult to meet. And that is Hardesty versus Hinton and Alfred here, though those concerns were not really important because the parties were correct. That reversal of the fee award was inevitable after the judgment had been reversed. And I had asked you in the past Jeff, if if I'm appealing a judgment and then there's a post judgment fee award heard that, you know, maybe the fee award, maybe I've got a couple of issues I could raise on appeal. But I'm really not banking on getting it reversed independently, I really just want to, I want to make sure that it gets that it goes away if I win the appeal. And maybe I'd also like to stay in forcement, the of the fee and cost award pending my pending my appeal of the underlying judgment. And I'd have to have that that fee and cost award appealed in order to invoke the automatic appellate stay of fees and costs. What do you think, Jeff, do you have any any advice on that approach?
Jeff Lewis 10:32
I don't know that I would ever counsel a client to appeal, something where you didn't have a meritorious argument or for purposes of delaying enforcement of judgment. I think the best advice there is to counsel the client to bond around it and hope for the best and the main appeal.
Tim Kowal 10:49
Well, I can't the bond, where would the bond come in? You can't the bond doesn't stay enforcement. Unless you appeal it. I guess you could enter it into a stipulation with the other side, please don't enforce it. I'll give you a bond.
Jeff Lewis 11:03
Yeah. Yeah. I think that would be just about the only approach you could take there. Yeah. But you have to sign your name to a notice of appeal and then fight as a sign your name to briefs where there's not fantastic arguments in support of the appeal on the fee motion? I don't know.
Tim Kowal 11:21
Well, we're talking about that. There's a difference between a non meritorious appeal and a sanction. Oh, or a frivolous appeal. Yeah.
Jeff Lewis 11:28
Yeah. Yeah, I suppose a clever attorney could always find a decent argument to raise.
Tim Kowal 11:33
Well, of course, we're all clever attorneys here. All right. So the tip I came away with from the mid Wilshire property case was if you've appealed a cost award, and it's not consolidated with your main appeal, you might try to draw the court's attention to it in your briefing, let the court know that, look, if you're considering reversing the judgment, maybe maybe also order the appeal of the fee award dismissed. And with the with the underlying fee award being vacated, as a result, so that hopefully the court will also dispose of the cost appeal at the same time as the merits appeal. Yeah. All right. The the third case or in actually this is a pair of cases, has to do with appellate sanctions. So this is the other the other end of this conversation, we were just talking about the difference between maybe an appeal it's not meritorious, but but we also want to certainly make sure that we're not filing any appeals that are not only not only lack merit, but are sanctionable. You can be sanctioned for of course lying to the to the court or for failing to disclose key authorities. But there are two recent cases that remind the bar that appellate sanctions can be imposed simply for making really bad arguments. So the court published a stern admonition to the appellate in Shai Hiber vs. JP Morgan Chase Bank, this is a July 2022 case. This this case stands is a warning to other attorneys against quote clogging our appellate docket with meritless appeals. The court didn't actually go forward and issue sanctions here. But that was only because the respondent didn't actually file a motion for sanctions. The appeal there arose from an award of sanctions by the trial court under a Code of Civil Procedure section 570 5.2 that related to a plaintiff's failure to comply with the local rules in in this case, it was failing to meet various pre trial filing deadlines such as timely filing motions and eliminating and trial exhibits. The trial court was extraordinarily patient and indulgent toward the offending plaintiff's attorney and reduced the requested $25,000 sanction to just $950 Being mindful to stay under the $1,000 trigger to require automatic reporting to the State Bar. But the plaintiff appealed. Anyway, the Court issued a lengthy opinion thoroughly analyzing the statutory structure and holding that sanctions under Section 570 5.2 does encompass failures to meet pre trial filing deadlines, and does not require a finding of bad faith. The when I go, let's let's just point out
Jeff Lewis 14:09
here, it's a $950 sanction. And this lawyer probably spent more than $950 in costs to file the notice of appeal. It's shocking to appeal this kind of sanction order. But yeah,
Tim Kowal 14:24
go ahead. You get the idea. There's something else going on under the surface here.
Jeff Lewis 14:28
Maybe maybe.
Tim Kowal 14:30
So the Court of Appeal went on to note that the plaintiffs briefing was to put it lightly substandard. So specifically, the court noted the plaintiff did not address a case that was directly on point. The plaintiff, quote, makes no attempt at any valid exercise and statutory interpretation. The plaintiff, quote, does not engage at all with the statutory text. The plaintiff, quote, provides no pertinent legal authority and reason relies on inaccurate citations to the California Rules of Court and irrelevant staff. jute and a bad misreading of irrelevant case law. And finally, the plaintiff, quote provided us virtually no assistance in reaching our decision. Now, when seemed the most damning to my to my eyes. Jeff, the whole idea of briefing or at least the the holy grail of appellate briefing is to write something that will later find its way into the opinion. And not only did none of the plaintiff's arguments make it into the into the conclusion, it was rejected as being of no assistance whatsoever. The court reminded counsel about her duty of candor under Rule 3.3 of the rules of professional conduct. And the court characterized plaintiff's appellate representation as, quote, ultimately empty advocacy. And then Jeff, the court went on to make this policy adverse observation. It's a little bit lengthy, but I wanted to ask a question about whether this was appropriate to put in a judicial opinion. So here's the here's the courts policy observation, quote, There are presumptively innocent individuals who would who could be any one of us who have been incarcerated for crimes they say they did not commit because of errors in the conduct of their prosecution. There are parents who could be any one of us who have been separated from their children because of errors in the application of our juvenile dependency laws. There are children who could be any one of ours, who often against the backdrop of difficult life circumstances have made errors of judgment that have brought them to the attention of our juvenile delinquency courts, sometimes resulting in the imposition of terms of rehabilitation that may go unwarranted, excessive or unduly harsh, we could go on when counsel files and appellate brief in a civil case such as this, that is so utterly lacking and content sufficient to persuade us of the claims they raised on appeal by presenting arguments and conclusory fashion failing to engage in any meaningful analysis, citing no potentially relevant authorities and failing to address authorities that plainly are relevant. It is not it not only dooms their clients appeal, it also clogs our appellate docket and inhibits our ability to timely review and decide other cases, including those involving interests have the utmost personal urgency and importance. And, Jeff, the what I wanted to ask you about this observation of the courts about frivolous appeals clogging our dockets is that the court seems to suggest it's not just clogging the docket for meritorious matters, but for also also for special kinds of matters. And and the suggestion of the court is that there are some matters that maybe are more equal than others, like those involving innocent incarcerated litigants or children. I think it's one thing for courts to warn litigants not to file cases that are meritless. I think we can all understand the implicit importance of that. But do we want courts to treat certain classes of cases as intrinsically more important than others?
Jeff Lewis 17:46
Well, you know, I read that case, maybe a little differently than you did you know, they didn't this court did not issue sanctions here, mostly because neither the other side didn't request it formally or in the right procedure. I think it's entirely appropriate for a court of appeal when it's reaching its tipping point in terms of meritless appeals to announce to the bar and a published decision. Hey, we're busy here with these other cases, we're getting tired of frivolous appeals, you're on notice appellate bar, that sanctions are coming. I think that's entirely appropriately I maybe wouldn't have phrased it this way. And, you know, I think by number of cases, maybe lemon law cases probably impact the Court of Appeal more than some of these dependency and criminal law cases that are referenced here. And certainly lemon law cases are not the most important cases in our society. But yeah, I think it's entirely appropriate for the Court of Appeal to announce sanctions are coming for the next one.
Tim Kowal 18:40
I have no problem with the sanctions for meritless appeals, I just wondered about juxtaposing it with other classes of cases and the idea that there is a there are higher echelons and lower echelons of cases that not only is this meritless, but it's only about money in these lousy money cases are boring to
Jeff Lewis 18:56
us. Yeah. Yeah. No, that's a fair point.
Tim Kowal 18:59
Well, here's so and here's the other case I wanted to I wanted to raise to our audience attention. poptop Corp versus Rakuten Kobo Inc. Now it's out of the Federal Circuit, but the appellate there was hit with a whopping $107,000 in sanctions, so I thought it deserved a mention and also, more importantly, because of the dissent, think raises an important point. So in the defendant, in this case, Kobo obtained a summary judgment of plaintiff pop tops patent infringement claim poptop holds a patent over a text highlighting code and ebooks so if you ever use Kindle or another ebook reader, and you'd like to make annotations or highlight specifically in your ebooks, apparently poptop has some sort of patent that covers certain kinds of highlighting code in ebooks, and poptop claim that it's patent covered Cobos ebooks because they're ebooks apparently have text highlighting capability and they have codes, so therefore it must fall under our patent somehow. Kobo, however, showed that their text highlighting is handled by code in their app and not in the ebooks themselves, so they made this distinction that it took it out of the poptop patent. And the trial court agreed with Kobo and granted summary judgment for Kobo poptop appealed, but pop tops problem was that it never addressed that core argument of Cobos and under federal rule of appellate procedure 38. A federal court of appeal may award just damages and single or double cost to the appellee. If we determine that an appeal is frivolous, and they did hold that pop tops appeal was frivolous here, the courts have a long standing policy of enforcing rule 38 vigorously. And what else did the court say here that the judgment by the tribunal below was so plainly correct and the legal authority contrary to appellants position, is so clear that there is really no appealable issue? And an appeal is frivolous as argued when the appellant engages in misconduct in arguing the appeal? So here poptop quote, blatantly misconstrued Cobos position in arguing that the parties disputed the scope of the patent. The court found that pop tops misrepresentation of Cobos position warranted sanctions. And there's one interesting citation here. More flow industries held that an appeal was frivolous, as argued where the appellant quote manufactured arguments in support of reversal by distorting the record. So the court awarded sanctions totaling over $107,000. Now, and here's where Judge Newman comes in with a dissent from the sanctions award. Judge Newman agreed that the appeal did in fact lack merit, but judge Newman stressed that sanctions for raising unmeritorious arguments implicated the rights to due process and appellate review. And that's why normally sanctions are not awarded merely quote, simply because the appellant has a weak case, the right of appellate review applies even for weak cases. And Judge Newman went on to note precedent reversing sanctions, where the appellants arguments could be said to fall just within the ragged edge of the penumbra surrounding legitimate advocacy, and further quoted that the line between the tenuously arguable and the frivolous can be an uncertain one. And sanctions should not be imposed so freely as to make the parties with legitimately appealable issues hesitant to come before an appellate court. Too easy sanctions can have an undue chilling effect on the right to appellate review. And finally, Judge Newman close with this note, litigation by its nature reflects the spin of advocacy and the right of appellate review as a safeguard to the rule of law. The judicial burden of reviewing a weak appeal or reviewing one sided argumentation does not warrant the sanction of award of attorneys fees. And I wondered, after reading, Judge Newman's dissent here, and then reflecting back on the first case we talked about in Shai Hiber, I was taken with the due process, observations judge Newman made and the importance of appellate review, I thought the parting observations and Shai hybrid that we had talked about a moment ago, Jeff just didn't sit right with me. But the courts frustration with frivolous arguments and substandard advocacy, advocacy certainly is justified. But the court, I think, should direct their frustration at counsels lack of diligence without suggesting comparisons to other types of cases in the courts docket. I wonder what you thought if you if anything in judge Newman's dissent changed your perspective on appellate sanctions?
Jeff Lewis 23:27
No, although I will say, look, in the first case we reviewed today, the big issue was there was no citation to relevant authority. There was no meaningful advocacy, no helpful arguments in the appellate briefing. In the second case involving a federal appeal. It didn't seem like the appellate advocacy fell below the mark. It just was a weak case. But yeah, in short, no, I think I see a lot of frivolous appeals. And maybe I'm just getting old and impatient and irritable. But I think Courts of Appeal don't sanction these cases enough.
Tim Kowal 24:06
Not enough sanctions, according to Jeff, what about what about in the this poptop case, as you mentioned, it was you could see judge Newman's point that maybe this is merely a mirror, you know, an unpersuasive case, a weak case. And yet, and yet the appellant got hit with $107,000 and appellate sanctions. Yeah, I think I would have sided with Judge Newman in this one. What about you?
Jeff Lewis 24:27
Yeah, you know, it's hard to say I don't do this kind of law in terms of the underlying claims. So it's hard to assess whether or not it was truly frivolous. But I say you got two federal judges issuing a great issue sanctions here. I tend to I tend to favor issuing sanctions here. Okay. You know, what I found interesting is there was a line in the decision about whether to make it jointly and several between the lawyers and the client. And you know, it's always an interesting thing, the decision to appeal to clients decision, but the lawyers are usually egging them on. Yeah, you should appeal Are you got a good chance. And once the notice of appeal is filed, it's really the lawyer who's responsible for 99% of the oral advocacy and the written advocacy and to to sanction clients for attorneys. misconduct. It's interesting. I was joint and several role here. And if anything, raises an eyebrow for me, it's the decision to sanction the client in these circumstances.
Tim Kowal 25:26
Hmm. Interesting. I hadn't thought about that angle of it. So you would you'd put more more of the fault at the feet of the attorneys, at least the the appellate attorneys, is that, is that analysis the same at trial? Or do you have a different approach there?
Jeff Lewis 25:38
Maybe, maybe it's because it's the rare day when you anok excuse me, CA, when you when I see a case, imposing sanctions for the mere filing of a notice of appeal, or even having the temerity to appeal, as opposed to the briefing, and the record preparation and the delays, et cetera, which is really in the hands of a lawyer.
Tim Kowal 25:58
Right. Okay. Well, that that covers the cases that I wanted to talk about, Jeff, I think we have some news and tidbits that we wanted to cover as well. Yeah, there
Jeff Lewis 26:06
are a few I wanted to cover, I do a lot of work in the social media and defamation space. And every few weeks, I get a call from a potential client who has been blocked on social media by a politician, and they want me, me to help them write a letter to the politician to get them unblocked. And a new use case just came down by the Ninth Circuit. It's Garni, a versus O'Connor Ratcliffe. And we'll put a site in our in our show notes about this. And this was the first time the Ninth Circuit has squarely held that when a public official uses social media to carry out their official duties, they, these officials cannot block social media accounts that are critical. And it's an interesting case, because it's not the first circuit to hold this, that it's a violation of the First Amendment to block critical social media accounts. On the other hand, on the flip side, I get a lot of people who are upset that Twitter or Facebook can't be held accountable for wholesale blocking certain accounts, certain politicians. So I know it's a result that leaves many people feeling uneasy, but in terms of my personal practice, and my representation of people who've been blocked, it's gonna make life a lot easier for me to make demands on on politicians to unblock their Twitter accounts.
Tim Kowal 27:19
Yeah, I continue to find this a difficult area of law for me to me to understand that the users of the accounts cannot cannot block people from accessing them, but the platform's themselves can shut the can shut the whole space down. So is it a is it a public forum or not?
Jeff Lewis 27:38
Yeah, I think the key facts here, at least in this Ninth Circuit case is these politicians started these accounts, when they're campaigning for office, they put their official official website on their Twitter accounts, and they use these accounts to communicate with their, with the public about school business. These are school officials. And those are the key facts. If a politician maybe had a private account or an account that wasn't official, maybe the outcome would have been different here.
Tim Kowal 28:05
What about? I believe that I'm not, I'm not a Twitter expert. But my understanding is that users can make complaints about other users. And maybe they can they can only block the users. So that particular user cannot see the other users posts. But can the user is there a way for a user to make a complaint against another user that prevents their access to that, to that forum to that public officials
Jeff Lewis 28:30
feed? Oh, sure. Twitter, if it receives enough complaints about a certain account, that person will lose access, can't post and presumably maybe can't even read their old posts?
Tim Kowal 28:40
Yeah. Really, again, it just my confusion is, at what point does do First Amendment rights attach to a Twitter feed? And is that the whole panoply of First Amendment rights? Or is it circumscribed by by the social media proprietors the platform's rules and regulations?
Jeff Lewis 28:59
Yeah, you know, it's a relatively new case, we'll be interested to see if somebody decides to take this up to the Supreme Court. And if the supreme court grants review, interesting, see what happens, because I think there's a split of authority on this particular issue of whether or not a First Amendment action can be premised on blocking someone's social media account.
Tim Kowal 29:18
Yeah. All right. Interesting case, one to follow. All right.
Jeff Lewis 29:21
And then a second thing I wanted to talk about on today's podcast is not a case, it's a new law. I'm gonna get on my soapbox a little bit here. So my apologies in advance, you might, my listeners might hear some bias in my rendition of the story. I've been following SB eight, which is, you know, the Texas law that allows private lawsuits to be filed by private persons against anyone who helps someone get an abortion. And I've always thought that law was not intellectually honest because the basis of the law was to in a world where Roe v. Wade was still in place. The basis of that law was to say, hey, there's no government action here. It's private parties so there's no government restriction on abortion. Anyway, California has now taken an interesting twist on SBA, the Texas abortion bounty law, California this month just passed SB 1327, which allows private lawsuits to be filed against those who make, sell or distribute assault weapons in California. Unlike the Texas law, the California law places a $10,000 bounty that can be collected by private litigants, against people who sell or manufacture these weapons. Tim, I just think this law is dishonest. It takes an approach that there's no government involvement and taking or limiting gun rights, despite the fact that it's the intent and effect of this law. It's the intended effect of the California Legislature to limit gun rights and to say, oh, it's in the hands of private litigants. Therefore, there's no government action. I think it's completely dishonest. But in the same way that the Texas laws dishonest one interesting twist on this law is the law on its face says that if the United States or Texas Supreme Court ever decides to overturn or invalidate SBA, the gun law goes away. So the California bounty law only lasts as long as the Texas abortion law anyway. Yeah, my two cents about this new law.
Tim Kowal 31:12
Yeah, that's Yeah, makes it seem a little bit. It certainly puts a political tinge to it. It seems like tit for tat. And, yeah, I tend to agree with you. I haven't. I haven't thought through either these laws to the bottom to figure out what, but but I like you, there's something that doesn't sit right with me about about either one of them. And I but I can't quite articulate what it is. Is it just because, well, you can't make a law on these things. But you can, you can allow private enforcement of them. See, there's something that seems like an end run around it. But I I'm not sure if I'm confident to say that, that that in and of itself makes it inappropriate. Yeah, there is something clever about about it. And I can't tell if it's, if it's too clever by half, I suspect maybe they both are. But if they if one of them's right, or one of them is legitimate, then they're both legitimate. And if they are just one of them, just plain mischief, and the other is just plain mischief. So I think they both rise or fall on the same rationale. Yeah,
Jeff Lewis 32:17
they're, they're both illegitimate mischief. But it'd be interesting to see how it, how it all plays out. All right. You know, the final tidbit I want to share. It's kind of a crazy story coming out from the I think it was the Orange County Superior Court, I read about this. And above law, we'll put a site in our case notes about this above law article, there was a case in which counsel at the conclusion of a hearing, one of the lawyers announced to the court in open court, I want to say, Have a good weekend to my opponent. And I want to say, Have a good weekend to both counsel and repeated this phrase twice. I'll see you next Tuesday. See you next Tuesday. And the judge at the time made a comment about Oh, how nice of counsel to say that and many people know that. See you next Tuesday is a shorthand reference to a another nice word. And the lawyer the judge figured it out a few days later had a following meeting in chambers, and called the lawyers and I guess the lawyer said the comment admitted to it and chambers that he set it as an inside joke to his staff. He didn't think anyone would catch on to it. As a result of saying this statement on the record and then admitting in chambers to the judge what he did, the court took offense and has referred the matter to the state bar for disciplinary action, which I found really surprising. Well, first of all surprising the statement was made surprising he would own up to it in court and chambers, and then really surprised that it resulted in a state bar referral. I guess you got to be super careful. humor doesn't play well in court.
Tim Kowal 33:50
No, well, I I don't know whether I'm more offended by the vileness of the comment or it's unoriginality. Just just repost all the way around. But yeah, I like you. I'm shocked by the whole thing. I don't even know what to what what sort of punishment is due here. But yeah, I am offended by the whole thing. That this would happen in a in one of our courts. In the court that I'm most typically practicing by the way. I had a couple of tidbits one can footnotes get you sanctioned? Yes. Yes, you have experience on that point. The reason? Some lawyers defending meta platforms, which is formerly Facebook, involved in an antitrust action ran afoul of the DC court's rule according to an order from Judge James E. Boalsburg. The offending brief contained 19 footnotes, including several lengthy ones, including one that topped 150 words, the Court struck the brief for violating the local rule for attempting, quote to circumvent page limits by taking advantage of the single spacing that footnotes use. The court ordered counsel to file a new brief immediately with no more than five footnotes containing no more than 20 aggregate lines of text. The Federal Court and the District of Columbia as well as several other courts have warned brief writers against too many footnotes instructing that these drop down asides shall not be excessive. I think that's, that's good. Good rule if you do decide to use footnotes at all, do not IRQ the court by by using them excessively, or voluminously. I also picked up this tidbit that I thought I was bucked up by it as being a being a generalist and a specialist in any one substantive area of law. I appreciated this there was a short post about Seventh Circuit Judge Diane Woods latest law review article entitled, generalist judges and a specialist world judge would noted that there that quote, the need to explain even the most complex area to a generalist judge forces the bar to demystify legal doctrine and to make the law comprehensible. And I've always had that kind of intuitive sense that, that there is something that we generalist do have a certain advantage over specialists because we don't understand all the jargon. We don't understand a lot of the concepts intuitively we have to work our way through them. And so must our readers on the bench have to work through them. And so as we have freshly gone through the exercise of working through all of these very tough, nitty gritty, nitty gritty, substantive or areas laden with expertise, we are in a maybe in a better position to relate them to other generalists. Yeah. It's interesting, interesting perspective. All right. Well, that's, I think that's all we have for this week, Jeff.
Jeff Lewis 36:42
All right. Yeah, I think so. Again, we want to thank casetext for sponsoring the podcast each week, we include links to the cases we discuss using case tax and listeners of the podcast can find a 25% discount available to them if they sign up at casetaxt.com/calp. That's casetaxt.com/CALP,
Tim Kowal 37:01
and if any of our listeners have suggestions for future episodes, including guests or topics that we should cover, please email Jeff or me at info at cow podcast.com. And in our upcoming episodes, look for more tips on how to lay the groundwork for an appeal when preparing for trial. See you next time.
Announcer 37:18
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Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. Contact Tim at tkowal@tvalaw.com or (714) 641-1232.
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Judges are rightly frustrated with counsel who do not respond to unfavorable facts and arguments. So when asked what I find frustrating about appellate practice, my answer is: judicial opinions that do not answer the strongest arguments.
On most occasions when an appellate court has not agreed with my client’s position, our courts give excellent analysis. This allows my client (and me) to swallow the bitter pill.
But on several occasions, I have searched in vain for a substantive analysis of my strongest arguments. Going into an appeal, appellants understand their chances are slim. What they should be able to count on is the dignity of an explanation to their positions. It is, after all,
guaranteed by the California Constitution:
Under article VI, §14 of the California Constitution, the appellate courts of this state are required to provide reasons for their rulings: “Decisions of the Supreme Court and courts of appeal that determine causes shall be in writing with reasons stated.” An opinion need not be exhaustive, but “a decision directing the issuance of a peremptory writ in the first instance is a ‘judgment’ ” within the meaning of provisions of Art. VI, “and the court must set forth the grounds for such a decision.” (Lewis v. Superior Court (1999) 19 Cal.4th 1232.) “[A]n opinion sufficiently states ‘reasons’ if it sets forth the ‘grounds’ or ‘principles’ upon which the justices concur in the judgment.”
To paraphrase Orwell, one does not need to be accepted, but merely to be understood. And Epictetus: “To the rational creature that which is against reason is alone past bearing; the rational he can always bear. Blows are not by nature intolerable.”
Watch the clip here.
This is a clip from episode 30 of the California Appellate Law Podcast. The full episode is available here.
Tim Kowal helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. His appellate practice covers all of California's appellate districts and throughout the Ninth Circuit, with appellate attorneys in offices in Orange County and Monterey County. Contact Tim at tkowal@tvalaw.com or (714) 641-1232.
You can be sanctioned for lying to a court or from failing to disclose key authorities. That’s obvious. But two recent courts remind the bar that appellate sanctions may be imposed for making bad arguments. One of those cases imposed a whopping $107,000 in appellate sanctions.
The other court did not issue sanctions, but signaled to attorneys who make poor arguments and avoid authorities harmful to their cases may be subject to sanctions.
The court published its stern admonition to the appellant in Shiheiber v. JPMorgan Chase Bank (D1d2 Jul. 26, 2022) No. A160188, as a warning to other attorneys against “clog[ging] our appellate docket” with meritless appeals. Though the court did not issue sanctions, the court noted this was because the respondent did not file a motion for sanctions.
This appeal arose from an award of sanctions under Code of Civil Procedure section 575.2 for the plaintiff’s failure to comply with local rules: here, meeting various pre-trial filing deadlines, such as motions in limine and trial exhibits. The indulgent trial court awarded just $950, markedly reducing the requested $25,000 and keeping the amount under the trigger to report to the State Bar.
But the plaintiff appealed anyway. The court issued a lengthy opinion thoroughly analyzing the statutory structure. The court held that sanctions under section 575.2 does encompass failures to meet pre-trial filing deadlines, and does not require a finding of bad faith.
The court went on to note that the plaintiff’s briefing was substandard. Specifically, the plaintiff did not address a case directly on point; the plaintiff “makes no attempt at any valid exercise in statutory interpretation”; the plaintiff “does not engage at all with the statutory text”; the plaintiff “provides no pertinent legal authority, and relies on inaccurate citations to the California Rules of Court, an irrelevant statute and a bad misreading of irrelevant caselaw”; and the plaintiff “provided us virtually no assistance in reaching our decision.” The court reminded counsel about her duty of candor under rule 3.3 of the Rules of Professional Conduct. And the court characterized plaintiff’s appellate representation as “ultimately empty advocacy.”
The court went on to make a policy observation:
“There are presumptively innocent individuals-who could be any one of us-who have been incarcerated for crimes they say they did not commit, because of errors in the conduct of their prosecution. There are parents-who could be any one of us-who have been separated from their children, because of errors in the application of our juvenile dependency laws. There are children-who could be any one of ours-who, often against the backdrop of difficult life circumstances, have made errors of judgment that have brought them to the attention of our juvenile delinquency courts, sometimes resulting in the imposition of terms of rehabilitation that may be unwarranted, excessive or unduly harsh. We could go on. When counsel files an appellate brief in a civil case such as this that is so utterly lacking in content sufficient to persuade us of the claims they raise on appeal-by presenting arguments in conclusory fashion, failing to engage in any meaningful analysis, citing no potentially relevant authorities and failing to address authorities that plainly are relevant-it not only dooms their client's appeal. It also clogs our appellate docket and inhibits our ability to timely review and decide other cases, including those involving interests of the utmost personal urgency and importance.”
The court did not award sanctions, noting the respondent had not moved for sanctions. (But the court also cited Cal. Rules of Court, rule 8.276(c)-(e), which empowers the court to issue sanctions on its own motion.) But the court concluded with this parting warning:
“We publish this opinion to make clear that, in the future, an appellate argument such as this that is so lacking in even potentially persuasive value will indeed carry the possibility of sanctions as a frivolous appeal.”
The appellant was hit with a whoping $107,000 in sanctions in Pop Top Corp. v. Rakuten Kobo Inc. (Fed. Cir. July 14, 2022) No. 2021-2174, so it deserves mention even though it is from the Federal Circuit. The defendant, Kobo, obtained summary judgment of plaintiff Pop Top’s patent-infringement claim. Pop Top holds a patent over text-highlighting code in ebooks. Pop Top claimed its patent covered Kobo’s ebooks, because they have text-highlighting capability, and they have code.
But, Kobo showed, their text-higlighting is handled by code in their app, not in the ebooks themselves, so it’s outside the scope of the patent. The trial court agreed, and granted summary judgment to Kobo.
Pop Top appealed, but never addressed Kobo’s argument.
Under Federal Rule of Appellate Procedure 38, a federal court of appeal may "award just damages and single or double costs to the appellee" if we determine that an appeal is frivolous. The courts have a "longstanding policy of enforcing Rule 38 vigorously." Walker v. Health Int'l Corp., 845 F.3d 1148, 1157 (Fed. Cir. 2017). An appeal is frivolous as filed when "the judgment by the tribunal below was so plainly correct and the legal authority contrary to appellant's position so clear that there really is no appealable issue." State Indus., Inc. v. Mor-Flo Indus., Inc., 948 F.2d 1573, 1578 (Fed. Cir. 1991). An appeal is frivolous as argued when the appellant engages in misconduct in arguing the appeal. Id.
Here, Pop Top "blatantly misconstrue[d] Kobo's position" in arguing that the parties disputed the scope of the patent. In fact, Kobo’s position was that, even under Pop Top’s construction, there was no infringement. Pop Top's misrepresentation of Kobo's position warranted sanctions. See Mor-Flo Indus., 948 F.2d at 1579 (holding appeal frivolous as argued where appellant "manufactured arguments in support of reversal by distorting the record").
The court awarded sanctions totaling over $107,000.
Judge Newman dissented from the sanctions award. While agreeing the appeal lacked merit, Judge Newman stressed that sanctions for raising unmeritorious arguments implicated the rights to due process and appellate review. See Beghin-Say Int'l Inc. v. Ole-Bendt Rasmussen, 733 F.2d 1568, 1573 (Fed. Cir. 1984) (declining to award sanctions despite "a total absence of merit" in the appellant's arguments).
This is why, normally, sanctions are not awarded merely “’simply because the appellant has a weak case.’ The right of appellate review applies even for weak cases. Biodex Corp. v. Loredan Biomedical, Inc., 946 F.2d 850, 863 (Fed. Cir. 1991) ("As we have repeatedly noted, '[a]n appeal having a small chance for success is not for that reason alone frivolous' and thus deserving of sanctions." (quoting Finch v. Hughes Aircraft Co., 926 F.2d 1574, 1578 (Fed. Cir. 1991)).”
Judge Newman also noted precedent reversing sanctions where the appellant's arguments could "be said to fall just within the ragged edge of the penumbra surrounding legitimate advocacy." Refac Int'l Ltd. v. IBM, 798 F.2d 459, 460 (Fed. Cir. 1986). "The line between the tenuously arguable and the frivolous can be an uncertain one, and sanctions should not be imposed so freely as to make parties with legitimately appealable issues hesitant to come before an appellate court." Finch, 926 F.2d at 1578. Too-easy sanctions can have “an undue chilling effect” on the right to appellate review. Id.
Judge Newman closed with this note: “Litigation by its nature reflects the spin of advocacy, and the right of appellate review is a safeguard to the rule of law. The judicial burden of reviewing a weak appeal or receiving one-sided argumentation does not warrant the sanction of award of attorneys' fees.”
Juxtapose the policy observations in Shiheiber with Judge Newman’s due-process observations in Pop Top. After reading Judge Newman’s dissent, the parting observations in Shiheiber no longer sit right with me.
The court is right to concern itself with the existence of important cases needing its attention. There are always more important cases. But this should not be taken to suggest that cases that do not involve what the court calls “the utmost personal urgency and importance” deserve lesser treatment. That is what Shiheiber’s comments suggest to me: that the court sees cases as coming in different tiers. And if your case does not involve utmost personal urgency and importance, then you may be at greater risk of testing the court’s patience.
The court’s frustration with meritless arguments and substandard advocacy is justified. But the courts should direct their frustration at counsel’s lack of diligence, without suggesting comparisons to other types of cases in the court’s docket.
Thanks to the CalAttorneysFees.com blog for reporting on the Pop Top case and to Ben Shatz for reporting on the Shiheiber case.
Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. Contact Tim at tkowal@tvalaw.com or (714) 641-1232.
Get a weekly digest of these articles delivered to your inbox by subscribing here: https://tvalaw.com/california-appellate-newsletter.