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Engstrom Lipscomb & Lack, Girardi & Keese, Jerome Falk, Kathryn Werdegar, Ronald George, State Bar of California, Thomas Girardi

California Court of Appeals Biting Ruling Slams Engstrom Lipscomb & Lack’s Walter Lack and Steven Shuman as Sanctioned Twice Imposed (December 2 , 2011)


SAM LEE et al., Plaintiffs and Appellants, v. DEUTSCHE BANK et al., Defendants and Respondents.



— December 02, 2011


Engstrom, Lipscomb & Lack, Walter J. Lack, Steven C. Shuman, Gary A. Praglin and Richard P. Kinnan for Plaintiffs and Appellants.Greenberg Traurig, Paul J. Schumacher, Raymond B. Kim and Karin L. Bohmholdt for Defendants and Respondents.


On September 22, 2010, the trial court issued an order imposing sanctions of $10,000 upon the attorneys for the plaintiffs herein.1  By their appeal in this matter, the attorneys seek reversal of that order.   This case arose from the claims of multiple plaintiffs against two brokerage defendants, Deutsche Bank Securities, Inc. and Themis Asset Strategies, LLC (Themis).2

The immediate issue that led to the award of sanctions was the trial court’s earlier order, on November 2, 2009, granting the motion of DBSI to compel arbitration pursuant to agreements that DBSI had with all of the plaintiffs, except HBI Financial, Inc., a Washington corporation (HBI).   The repeated objections by plaintiffs to such order, advanced by the attorneys, ultimately led the trial court, as we describe below, to issue the sanction order of September 22, 2010 that is now before us.

Our review of this record supports the conclusion that the trial court’s order was supported by substantial evidence and was well within its discretion.   We will therefore affirm that order.   In addition, we have before us the motion of DBSI for an award of sanctions against the attorneys for the filing of a frivolous appeal.   As the contentions advanced by the attorneys in this appeal were no better than the repeated arguments and motions made in the trial court and which it found to be sanctionable, we will grant DBSI’s motion for sanctions on appeal.


On April 14, 2009, the plaintiffs, represented by the attorneys, filed their original complaint 3 against DBSI. Some of their claims also involved the Themis defendants and some did not.   The complaint alleged multiple counts involving claims for broker malpractice and breach of fiduciary duty all arising out of accounts the various plaintiffs had with DBSI. As already noted, all of the plaintiffs, except HBI, were parties to agreements that contained provisions requiring arbitration of disputes before the National Arbitration Association or the New York Stock Exchange.4  With respect to those plaintiffs who also had agreements with the Themis defendants, they were also subject to arbitration clauses requiring arbitration of any disputes before JAMS.

On August 26, 2009, DBSI moved (1) to compel arbitration as to all of the plaintiffs except HBI and (2) to stay any court action with respect to the claims of HBI. Plaintiffs vigorously opposed DBSI’s motion and argued that (1) the motion shall be denied pursuant to Code of Civil Procedure section 1281.2, subdivision (c) because the plaintiff HBI had its own claims that had to be resolved by the court, not an arbitrator;  (2) it would be inefficient and unfair to proceed with multiple arbitrations (i.e., the JAMS arbitration for the claims against the Themis defendants and the FINRA arbitration for the claims against DBSI);  and (3) it would be unfair to stay the court trial of HBI’s claim pending completion of the arbitration of the claims of the other plaintiffs.

After extensive oral argument, the trial court, on November 2, 2009, granted DBSI’s motion to both compel arbitration as to all plaintiffs, except HBI, and to stay any further court action with respect to the claims of HBI. The trial court rejected plaintiffs’ arguments with respect to Code of Civil Procedure section 1281, subdivision (c) and instead found section 1281.4 to be controlling.5  Indeed, the trial court made it clear that any unfairness that may result to plaintiff HBI, by virtue of the delay of a trial of its claims, was one of its own making.   During oral argument, the court stated, “You [HBI] had an option to file a separate action, and you chose not to, for whatever reason ․ the law is that I should uphold arbitration agreements.   And the fact that you chose to lump yourself, HBI, in with these others who had arbitration agreements puts the court in the awkward position of staying HBI’s rights.” 6

One exception to the stay order was that the Themis defendants were permitted to file a motion to compel arbitration under their agreements.   Instead of doing so, however, they entered into a stipulation with the plaintiffs, including HBI, to arbitrate with FINRA.   Thus, by this stipulation, HBI agreed to arbitrate its claims against the Themis defendants (even though it was under no contractual obligation to do so) and to do so with FINRA rather than JAMS. The trial court approved this stipulation on December 28, 2009.   Thereafter, plaintiffs attempted to combine the Themis arbitration with DBSI arbitration;  there, they also included allegations against DBSI that alleged the existence of a joint venture between the Themis defendants and DBSI as to HBI and all of the remaining plaintiffs and sought joint and several liability as to all of the claims, even though the stipulation that was submitted to the court had made no mention that any such action would be taken.   It appears that plaintiffs misrepresented the court’s order to FINRA by asserting that the court’s order of November 2, 2009, had required combined arbitrations, which the trial court’s order clearly did not.   DBSI, believing that plaintiffs were seeking to avoid compliance with the trial court’s order of November 2, 2009, filed an ex parte application for an order compelling plaintiffs to obey that order.   In its moving papers, DBSI argued that plaintiffs’ effort was an attempt to (1) violate the stay order as to HBI, (2) secure arbitration between all of the parties in a single arbitration that had not been ordered, (3) obtain resolution of facts in one arbitration that would impact another, and/or (4) impose back-door “joint venture” allegations that would have the effect of violating the court’s order no matter who was joined in the arbitration.

DBSI brought this application to the trial court on February 9, 2010.   Plaintiffs, at the same time brought a motion for “Partial Relief from Stay,” purportedly to obtain leave to proceed with their claims against the Themis defendants only in arbitration.

The trial court held another lengthy hearing on February 22, 2010, the bulk of which again was devoted to the attorneys arguing the unfairness of not permitting HBI to immediately proceed with its claims.   The trial court reiterated its belief that HBI’s problem was one of its own making in having made the strategic decision to join in the same complaint with arbitrating plaintiffs.   Indeed, the trial court expressed its frustration that the issue even had come before it again:

“[DBSI’s Counsel]:  But the stipulation [between the Themis defendants and plaintiffs] was entered into by [Themis] and [counsel for plaintiffs].   And they deliberately in my estimation or recklessly represented to you that we just want to go off [to] FINRA and arbitrate before FINRA.   They take your order, and they absolutely misrepresent that order to the arbitrators.

“The Court:  And I agree.   I don’t have anyway of saying that it was deliberate or reckless or otherwise.   But the November 2nd order was clear, and, frankly, I don’t know [why] we’re here.

“[Plaintiffs’ Counsel]:  Your Honor, one reason why I’m here ․ is to request that you deny our petition [for relief from stay] without prejudice so that we can file a motion to consolidate [the arbitrations]․

“The Court:  Whoa, whoa, whoa, whoa.   The order was November.   The time to file a motion for reconsideration would have been 10 days later.   I’m not going to go back to my November 2nd Order on ․ February the 22nd and reopen, for lack of a better term, that can of worms.

“[Plaintiffs’ Counsel]:  Your Honor, the case was stayed as of November until [the Themis defendants] decided what to do․  We couldn’t have known that this moment would be the result․

“The Court:  How could you not have known that?   You knew of the existence of various parties.   There had been an agreement reached between counsel.   You knew of the effect of that agreement.   And now you’re coming in and you’re Monday morning quarterbacking, in effect.   You’re coming back and you’re saying I should have known about that, maybe I did know about that, but now I’m saying I didn’t know about that.   And it really bothers me.”

As the trial court saw it, what the plaintiffs (including HBI) were attempting to do was to combine the Themis defendants’ arbitration (as established by the December 2009 stipulation) with the arbitration between DBSI and the plaintiffs that had been ordered on November 2, 2009, over three months earlier.   This record reflects that it was the trial court’s clear intention not to combine these two arbitrations nor to permit HBI to “bootstrap” its claims against DBSI (which had been specifically stayed by the November 2nd, order) to the stipulated arbitration proceeding against the Themis defendants.   Nonetheless, the trial court denied DBSI’s motion for an order issuing a contempt citation.   It contented itself with a denial of HBI’s motion for relief from stay and the issuance of an order directing compliance with the November 2nd order.

In its formal order, dated March 22, 2010, the trial court explained the findings and rationale for its ruling.   We set forth verbatim the relevant findings and conclusions of the court as they provide a valuable predicate to the court’s later ruling on the plaintiffs’ subsequent motion to “clarify” this order (the two footnotes included in the following quotation are part of the trial court’s order):

“After considering DBSI’s Application and Plaintiffs’ Petition, and hearing the oral argument of counsel, the Court granted DBSI’s Application (except as to the request for holding Plaintiffs and/or their counsel in contempt, which was denied), and denied Plaintiffs’ Petition, on the following grounds:

“1.  The Court finds that two main issues were presented to the Court by DBSI’s Application and Plaintiffs’ Petition:  (a) whether Plaintiffs violated the Court’s November 2, 2009 Order (‘November Order’) by (i) asserting claims being brought by HBI Financial Inc. (‘HBI’) in FINRA Arbitration Case No. 09–07182 (the ‘FINRA Arbitration’), that were stayed by the Court in its November Order, and (ii) asserting claims made by Plaintiffs against Themis and Clark in the FINRA Arbitration, and (b) whether arbitration of Plaintiffs’ claims, including those of HBI, should be allowed to proceed against Defendants Themis and Clark in the same arbitration proceeding as the claims against DBSI.

“2.  First, the Court finds that Plaintiff HBI improperly asserted claims against DBSI in Claimants’ First Amended Statement of Claim (‘FASOC’) submitted in the FINRA Arbitration.7  The November Order stayed all claims by HBI against DBSI. Notwithstanding, HBI made allegations against DBSI, both on the face of the FASOC and by claiming the existence of a so-called ‘joint venture’ involving DBSI and Themis.   Plaintiff HBI also seeks an award against DBSI and the other respondents ‘jointly and severally.’   Accordingly, the Court finds that Plaintiff HBI violated the stay imposed against it by the Court’s November Order by including such allegations in the FASOC.

“3. Second, the Court finds that it would be inappropriate to allow Plaintiffs’ claims, including those of HBI, against Themis and Clark to be arbitrated in the same proceeding as the claims against DBSI. Although the Court may in its discretion, pursuant to California Code of Civil Procedure § 1281.3, consolidate separate arbitration proceedings, the Court did not intend for the parties to participate in a single arbitration proceeding by its November Order.   Furthermore, and contrary to Plaintiffs’ representations to FINRA in the FASOC, the Court did not intend for Plaintiffs to prosecute their claims in a single arbitration proceeding when it signed the order on December 28, 2009 granting the Stipulation to Compel Arbitration Against Themis Asset Strategies, LLC and Derek Clark and Stay Order (the ‘December Order’).8  Finally, to the extent that Plaintiffs previously sought, or now seek, to move for such consolidation, the Court finds that Plaintiffs have failed to meet their burden of proof under Section 1281.3 of showing that the disputes arise from the same transactions or series of related transactions, and/or that there are common issues of law or fact creating the possibility of conflicting rulings by more than one arbitrator or panel of arbitrators, and therefore, any such request for consolidation is denied.   Accordingly, the Court finds that Plaintiffs violated the November Order by improperly including claims against Themis and Clark in the FINRA Arbitration and/or including Themis and Clark as parties in that arbitration.

“4. With respect to the issue of contempt raised in DBSI’s Application, the Court declines to hold Plaintiffs and/or their counsel in contempt of court at this time because the Court does not find that Plaintiffs and/or their counsel ‘knowingly’ violated the November Order.”

The form of this order had been submitted to plaintiffs prior to March 22, 2010 when it was signed and filed.   They filed vigorous objections thereto.   Contemporaneously with the issuance of the above quoted order, the trial court also issued a minute order stating that it “reads and considers defendants’ Summary of Responses filed herein on March 5, 2010 and Proposed Order, plaintiffs’ Objections filed herein on March 5, 2010, and defendants [‘] Responses filed herein March 9, 2010.[¶]  Plaintiffs’ objections are overruled.”

On March 24, 2010, HBI sought writ relief in this court from the trial court’s order of March 22, 2010 without making any claim that such order was in any way “unclear.”   HBI requested that:  “Either or both that the Appellate Court issue an order directing the trial court to vacate its order denying plaintiff HBI Financial, Inc. the right to participate in FINRA arbitration, and mandating the trial court to issue an order permitting HBI to pursue it [sic] claims against Themis and Clark in FINRA arbitration, or, that the order staying the action of HBI Financial, Inc. as to co-defendants Deutsche Bank Securities, Inc. and its brokers be vacated.”

While the aforesaid writ application was pending before this court, the plaintiffs, on April 22, 2010, filed their “Motion to Clarify the Court’s March 22, 2010 Order.”   Plaintiffs claimed that (1) the order was confusing in that it was not clear whether they were permitted to allege a joint venture in the arbitration as to plaintiffs other than HBI and (2) the formal order of March 22, 2010 did not accurately reflect what had taken place at the February 22 ex parte hearing.

DBSI opposed the motion arguing that this motion was simply one for reconsideration which required compliance with Code of Civil Procedure section 1008 and plaintiffs had failed to do so.   When this motion came on for hearing on July 9, 2010, the trial court repeatedly expressed its frustration as to why plaintiffs were continuing their efforts to avoid the impact of the original order of November 2, 2009 and the ruling on March 22, 2010 enforcing that order:

“I thought this issue had been put to rest.   We, again, have a motion to clarify what I think is a very clear order.   I’ve provided you with a tentative.   I don’t know what to say.   Honestly, I don’t know what to say.   You’re either trying to have a 1008 motion under the guise of a motion for clarification, which would be improper or you’re just straining everyone’s patience.   I don’t know which․  [¶]․  It’s somewhat interesting to the court, because really we go back even before March, way before March.   Without going through extensively the file to give you all of the dates, it seems to me this issue has come before the court at least three times.   Is that correct?   [DBSI’s Counsel]:  That’s correct Your Honor.  [The Court]:  And, frankly, I never thought it was unclear․  [¶]․  I’m really getting a bit frustrated here because plaintiffs filed the action, plaintiffs framed the pleadings, plaintiffs pursued their rights.   There are arbitration agreements, granted, differing arbitration agreements.   The court dealt with that.   I don’t think we need to revisit this anymore, so [the motion to clarify is] denied.” 10

On June 4, 2010, DBSI prepared and served a motion for an award of sanctions in the sum of $20,445.   It did so, it asserts, because of the very substantial expense it had been put to in defending against and responding to the plaintiffs’ repeated motions and related legal activity following the trial court’s original order compelling arbitration on November 2, 2009.   DBSI, however, did not file the sanctions motion until after the court’s July 9, 2010 order denying the clarification motion.   DBSI did so because the motion sought sanctions pursuant to Code of Civil Procedure sections 1008 and 128.7, and section 128.7 contains a “safe harbor” provision, requiring service of a sanctions motion 21 days in advance of its filing to provide the offending party and counsel an opportunity to withdraw the motion or other pleading that is the subject of the sanction motion.  (Code Civ. Proc., § 128.7.) Thus, when plaintiffs pursued the matter in court following July 9, they were aware that DBSI was seeking sanctions.

At the hearing on DBSI’s sanction motion, which was held on September 3, 2010, plaintiffs claimed to still be confused and that sanctions were inappropriate because they had brought the clarification motion in good faith.   The trial court was not impressed.   It noted that:  “Well, it’s not that you came in just once.   It’s that you came in twice.   And in the second instance, it was really a 1008.   It was a motion for reconsideration, which was not timely.   We had had a discussion at the earlier hearing about what the court intended.   It was very clear what the court intended.   The record was clear.   The minute order was clear, and, yet, you came in again and did the same thing all over again.”

The trial court granted the motion under both sections 1008, subdivision (d), and 128.7, but reduced the amount sought by more than half—to $10,000.   The court found that the motion seeking clarification was frivolous, brought for an improper purpose, brought to delay the arbitration, and had been brought before the court three times already.   The court, having previously given plaintiffs and their counsel the benefit of the doubt was obviously no longer of the same mind.   In announcing the ruling, the court made its views quite clear.

“[THE COURT]:  “Well, I think plaintiffs have been told over and over again that the conduct was not warranted, was not justified.   And I do think that $10,000 is an adequate deterrent.  [¶] And, Mr. Shuman [one of plaintiffs’ counsel], I disagree with you.   It’s not as if you came in here once saying we don’t understand.   You came in here three times.   The first time was in February, when the motion was heard.   And if at that time the order was unclear, you should have so indicated.   There was a second opportunity when the court, again, looked at the proposed order.   You submitted objections.   Those objections were overruled.   You then came in yet then another time.   It’s just over and over and over, and it’s clear to me that what you’re really trying to do is just simply delay the arbitration and that will not be allowed․  [¶] ․ It’s plain English.   All right.

“MR. SHUMAN:  I’m not arguing – I’m arguing what our good faith belief was, Your Honor.

“THE COURT:  Well, I’m afraid that, you know, any reading of Webster’s dictionary would tell you what it meant.   So I think the sanctions are entirely appropriate, and, frankly, the more you argue, the more I’m inclined to up the sanctions, but I’ll leave them as indicated.   The motion for sanctions is granted. $10,000 in sanctions.”

The sanction order was imposed upon the attorneys only and in favor of DBSI. The attorneys have filed a timely appeal.


The attorneys argue that the award of sanctions against them was an abuse of discretion and therefore should be reversed.   In support of that claim they argue the same “clarification” issues repeatedly raised and argued before the trial court and in two writ petitions in this court.11


1. Standard of Review

In this case, the trial court, in imposing the sanctions that are the subject of this appeal, relied upon Code of Civil Procedure section 128.7, subdivision (b) and (c) and 1008, subdivision (d).12  It was the violation of section 1008 by plaintiffs and their counsels’ repeated filing of motions that served as the basis for the trial court’s sanction order.   While the violations of section 1008 prompted the sanction award, the award itself was required to be in accordance with section 128.7.

“Section 128.7, subdivision (c) authorizes the imposition of sanctions upon a finding of a violation of subdivision (b) as follows:  ‘If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation.   In determining what sanctions, if any, should be ordered, the court shall consider whether a party seeking sanctions has exercised due diligence.’   “ (Kojababian v. Genuine Home Loans, Inc. (2009) 174 Cal.App.4th 408, 422 (Kojababian ), italics in original.)

Under the explicit language of section 128.7, subdivision (c), the trial court retains the discretion, upon the finding of a violation of subdivision (b), to determine whether a sanction is warranted in the first instance;  and, if so, the type and amount of sanctions warranted.   Thus, the trial court only exercises its discretion whether to impose a sanction, when there has been a violation of section 128.7, subdivision (b).  “ ‘ “ ‘ “ ‘To be entitled to relief on appeal from the result of an alleged abuse of discretion it must clearly appear that the injury resulting from such a wrong is sufficiently grave to amount to a manifest miscarriage of justice.’  “ ‘ “ ‘ (Sabek, Inc. v. Engelhard Corp. (1998) 65 Cal.App.4th 992, 1001.)  Section 128.7, subdivision (c) does not require the imposition of monetary sanctions upon the finding of a violation of section 128.7, subdivision (b);  rather, it gives the trial court discretion to impose sanctions based on such a finding.”   (Kojababian, supra, 174 Cal.App.4th at p. 422.)

In other words, it is the violation of section 128.7, subdivision (b), in this case by the repeated violations of the provisions of section 1008 that triggers the trial court’s exercise of its discretion as to whether to impose sanctions.   Absent a showing of arbitrariness, we will presume the correctness of the trial court’s decision to award sanctions.  (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.)

2. The Violations of the Requirements of Section 1008 Are

Clearly Established By This Record

Code of Civil Procedure section 1008 requires any motion for reconsideration to be brought within ten days of notice of entry of the order and based upon “new or different facts, circumstances, or law” than those before the court at the time of the original order at issue.  (Code Civ. Proc., § 1008.)  Section 1008, subdivision (d) provides, “[a] violation of this section may be punished as a contempt and with sanctions as allowed by Section 128.7.”  Section 1008 is jurisdictional;  it was amended in 1992 to require new and different facts, circumstances, or law so that parties would not have the ability to drain resources with the same motion “over and over.”   (Darling, Hall & Rae v. Kritt (1999) 75 Cal.App.4th 1148, 1157.)

It is clear from this record that plaintiffs made no real effort to meet the requirements of section 1008.   Indeed, plaintiffs steadfastly maintained that, because they did not “invoke” or cite section 1008, they were not bound by its requirements.   They have instead argued that they were simply seeking “clarification.”   Of course, as the trial court properly recognized, “the name of the motion is not controlling.   The requirements for a motion for reconsideration ‘apply to any motion that asks the judge to decide the same matter previously ruled on.’  “ (R & B Auto Center, Inc. v. Farmers Group, Inc. (2006) 140 Cal.App.4th 327, 373.)

Irrespective of its name, the plaintiffs’ clarification motion sought reconsideration of many prior rulings.   For example, although plaintiffs have claimed otherwise, their motion effectively sought reconsideration of the trial court’s original order of November 2, 2009 compelling arbitration and staying the action.   In that regard, each of the repeated motions, including the one for clarification sought to obtain a backdoor ruling permitting the so-called “joint venture” allegations that would effectively draw issues into the FINRA arbitration that had been ordered either (1) stayed (as to HBI), or (2) not to be joined in this arbitration (as to the Themis defendants).   Plaintiffs had already sought reconsideration from the trial court in one form or another at least three times before the clarification motion had been brought by way of (1) objections to the November 2009 proposed order compelling arbitration, (2) the February 22, 2010, motion for partial relief from stay and opposition to ex parte application for compliance and contempt, and (3) the objections to the proposed order on those proceedings.   In addition, plaintiffs had already sought review of those orders both in this court and in the Supreme Court.

Although this history itself is sufficient to support the trial court’s conclusion that plaintiffs were doing everything they could to undermine the original and subsequent orders on the topic, we need not rely on that history in order to find that the “clarification” motion was an improper reconsideration motion.   It is only necessary to look at the proposed orders and objections that arose after the February 22, 2010, hearing.   As plaintiffs concede, they submitted a brief on March 5, 2010, objecting to the order on the very same grounds they would later present again in their motion for clarification.   And, as plaintiffs also concede, the trial court expressly considered and overruled those objections on March 22, 2010.   Thus, there was no new fact, no new circumstance, no new law even asserted with respect to the clarification motion;  instead, it was admittedly exactly the same argument as had been presented before.  (See McPherson v. City of Manhattan Beach (2000) 78 Cal.App.4th 1252, 1265–1266 [holding that there was no “new” evidence even where a party claimed it was precluded from presenting its interpretation of the law, where the law and the interpretation had been presented in the briefs];  In re Marriage of Drake (1997) 53 Cal.App.4th 1139, 1168–1169 [even where party submitted new facts and motion for reconsideration only a week after initial ruling, trial court did not abuse its discretion in awarding sanctions where no credible explanation was offered for the failure to present the facts earlier].)

Leaving aside the fact that plaintiffs were unable to satisfy the “new evidence” standard, they made no effort to come within the ten-day deadline imposed by section 1008, subdivision (a).   The cases relied upon by plaintiffs are not helpful to their position.   For example, their reliance on Tutor–Saliba–Perini Joint Venture v. Superior Court (1991) 233 Cal.App.3d 736 does not support their argument that the trial court’s award of sanctions was an abuse of discretion.   Most significantly, the decision in Tutor–Saliba–Perini was superseded by the amendment to section 1008 enacted in 1992.   When that decision was issued in 1991, section 1008 did not contain the jurisdictional requirement that motions for reconsideration be based upon new facts, circumstances, or law.   Those requirements were added by the Legislature in 1992, after Tutor–Saliba–Perini was decided.  (Stats.1978, ch. 631, § 2.)

In re Marriage of Flaherty (1982) 31 Cal.3d 637, also cited by the attorneys, did not involve a trial court’s imposition of sanctions after a series of improper reconsideration motions pursuant to Code of Civil Procedure sections 1008 and 128.7.   Instead, it involved the Supreme Court review of a Court of Appeal order imposing sanctions for a frivolous appeal.   The Supreme Court set the appropriate standard for imposition of sanctions for a frivolous appeal, determined that a legal argument advanced was not frivolous, and set the minimum due process standards for imposition of appellate sanctions in that regard.  (I In re Marriage of Flaherty, supra, at pp. 647–650.)   Nothing about that case has any bearing on seriatim reconsideration motions to a trial court and whether a trial court abused its discretion in granting sanctions against the moving party.

Finally, the attorneys’ reliance on Code of Civil Procedure section 473(d) and cases decided under it is misplaced.   It is well-settled that “clerical mistakes in ․ judgment or orders” do not include orders that are the “deliberate result of judicial reasoning and determination,” and those that “cannot reasonably be attributed to exercise of judicial consideration or discretion,” which plainly are the supposed “errors” complained of here.   (Estate of Sloan (1963) 222 Cal.App.2d 283, 292 [trust decree concerning taxes];  Wilson v. Wilson (1952) 109 Cal.App.2d 673 [asserted error in divorce decree which granted plaintiff right to use real property].)

The inclusion of the language with which plaintiffs now take issue was no “clerical mistake.”   Instead, it was the result of many hearings and reasoned consideration by the trial court, including:  (1) the court’s February 22, 2010, ruling, (2) a proposed order that produced objections on that very topic, (3) response to those objections, on that very topic, (4) an express ruling considering and overruling those objections.   As such, section 473(d) is inapplicable.  (See also Baldwin v. Home Savings of America (1997) 59 Cal.App.4th 1192, 1196–1197 [claim that trial court failed to consider relevant law is no basis for seeking reconsideration];  Gilberd v. AC Transit (1995) 32 Cal.App.4th 1494, 1500 [attorneys’ failure to request oral argument did not warrant reconsideration under 1008 or section 473’s provisions for excuse or neglect].)

3. The Sanction Award Was Reasonable

The reason for the trial courts’ broad discretion in deciding to award sanctions under section 1008 was aptly stated in Darling, Hall & Rae v. Kritt:  “Section 1008 is designed to conserve the court’s resources by constraining litigants who would attempt to bring the same motion over and over.”  (Darling, Hall & Rae v. Kritt, supra, 75 Cal.App.4th at p. 1157.)   Here, the trial court went even further, awarding sanctions not only because the attorneys had violated the mandate of section 1008, but also because they had violated section 128.7.13

In essence, plaintiffs’ argument, unsupported by any declaration, is “we acted in good faith because we were so certain that the trial court was wrong.”   But believing that the trial court was “wrong” in its ruling is no grounds for ignoring every mandate of section 10DP1⌑Given all the circumstances, the trial court was well within its discretion in finding that the attorney had brought a frivolous motion for clarification “for an improper purpose.”   As the trial court expressly recognized, the amount it intended to impose was modest.   It saw repeated motions on the same topic, months and months apart, and a series of writ petitions attacking the very orders plaintiffs later would brand as “unclear.”   There was no—and could be no—reason for the motion for clarification other than to try to persuade the trial court, once again, to change its mind.   The sanctions award was modest and proper.   It was not an abuse of discretion.

4. The Motion for Sanctions on Appeal

DBSI filed and served a timely motion for additional sanctions against the attorneys for filing and prosecuting a frivolous appeal.   We previously ordered that such motion would be heard, considered and ruled upon contemporaneously with the merits of the appeal.   The attorneys have filed a written response to such motion and have had the opportunity to argue against the motion at oral argument.

The applicable rule of law governing sanctions on appeal is found in Code of Civil Procedure section 907, which states:  “When it appears to the reviewing court that the appeal was frivolous or taken solely for delay, it may add to the costs on appeal such damages as may be just.”   Our Supreme Court interpreted this to include both a subjective standard and an objective standard in In re Marriage of Flaherty, supra, 31 Cal.3d at p. 649.   To summarize, the rule established by our Supreme Court is that “an appeal should be held to be frivolous only when it is prosecuted for an improper motive – to harass the respondent or delay the effect of an adverse judgment – or when it indisputably has no merit – when any reasonable attorney would agree that the appeal is totally and completely without merit.  [Citation.]”  (Id. at p. 650.)   Although a finding of either standard is enough to warrant sanctions, “[t]he two standards are often used together, with one providing evidence of the other.   Thus, the total lack of merit of an appeal is viewed as evidence that appellant must have intended it only for delay.”  (Id. at p. 649.)

“An appeal that is simply without merit is not by definition frivolous and should not incur sanctions ․ [t]he punishment should be used most sparingly to deter only the most egregious conduct.”  (In re Marriage of Flaherty, supra, 31 Cal.3d at pp. 650–651.)  “An unsuccessful appeal should not be penalized as frivolous if it ‘ “ ‘presents a unique issue which is not “indisputably” without merit’ ․, involves facts which are ‘not amendable to easy analysis in terms of existing law’ ․, or makes a reasoned ‘argument for the extension, modification, or reversal of existing law’․   “ ‘ [Citation.]”  (Westphal v. Wal–Mart Stores, Inc. (1998) 68 Cal.App.4th 1071, 1081 (Westphal ).)

On March 24, 2010, the attorneys sought writ relief in this court from the trial court’s order of March 22, 2010 which enforced the November 2, 2009 order.   We rejected that petition with a jacket denial (No. B223252).  The attorneys’ petition for review of that denial was also denied by our Supreme Court.   While the writ was pending before this court, a motion to “clarify” the March 22, 2010 order was filed on April 22, 2010.   After that motion was denied by the trial court, the attorneys again sought writ relief before this court.   We again denied the requested relief by a jacket denial (No. B226165) on September 1, 2010.   Now, in their two-and-a-half page opposition in which they cite no legal authority, the attorneys assert the same arguments that were repeatedly raised in the two prior writ petitions filed in this court, which we previously denied.   As a result, we find that the appeal before us today does not present any unique issues.   Additionally, the attorneys neither allege any facts not amendable to an easy analysis in terms of existing law nor make a reasoned argument for the extension, modification, or reversal of existing law.   Under Westphal, the appeal is not one that is merely unmeritorious, but rises to the level of frivolous.   Therefore, we find that any reasonable attorney would agree that the appeal, which asserts the same meritless arguments which were previously put forth in writs denied by this court, is totally and completely without merit.   The total lack of merit of the appeal is also evidence that the attorneys brought it solely for delay or harassment of the respondents.

Based on the foregoing, we will grant DBSI’s motion for sanctions for a frivolous appeal against appellants’ attorneys.  (See e.g., Cohen v. General Motors Corp. (1992) 2 Cal.App.4th 893, 897 [“we believe the burden of paying the sanctions most properly belongs exclusively to appellant’s counsel”].)   The issue as to the amount of such sanctions, however, should be determined by the trial court upon remand.  (See e.g., Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 461.)


The order imposing sanctions of $10,000 upon the attorneys is affirmed.   DBSI’s motion for sanctions upon appeal is granted;  the amount of which is to be determined by the trial court on remand.   DBSI shall recover its costs on appeal.


We Concur:


1.  FN1.  The attorney appellants in this matter are Walter J. Lack, Esq., Steven C. Shuman, Esq., Gary A. Praglin, Esq., and the law firm of Engstrom, Lipscomb and Lack, a professional corporation (hereinafter, the attorneys).   The order that is the subject of this appeal imposed the $10,000 sanctions jointly and severally.

2.  FN2.  Deutsche Bank Securities, Inc. (erroneously sued herein as Deutsche Bank Alex Brown), and certain of its officers or employees that were also joined in this action as defendants, Christopher Frank, John Paul Javellana, Ken Ro and Bruce Treitman are herein collectively referred to as DBSI. The sanction order which is the subject of this appeal was issued in favor of DBSI. The interests of the other defendants in this case, Themis and Derek C. Clark (collectively, the Themis defendants) are not involved in this appeal.

3.  FN3. The plaintiffs filed their first amended complaint on May 13, 2009.   That is the operative pleading in this matter.

4.  FN4.  The arbitration functions of these two organizations was ultimately merged into an entity known as the Financial Industry Regulatory Authority (FINRA) and it was that new organization which the trial court later determined to be the proper venue for arbitration of disputes arising under DSBI’s agreements with the plaintiffs other than HBI.

5.  FN5.  Code of Civil Procedure section 1281.4 provides in relevant part:  “ ․ [¶] ․ If an application has been made to a court of competent jurisdiction, whether in this State or not, for an order to arbitrate a controversy which is an issue involved in an action or proceeding pending before a court of this State and such application is undetermined, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until the application for an order to arbitrate is determined and, if arbitration of such controversy is ordered, until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.”

6.  FN6.  As DSBI correctly notes, the record does not provide any reason why the plaintiffs chose to include HBI in the same action with other than the tactical one of using HBI’s joinder as an argument to avoid an order compelling arbitration of the other plaintiffs’ claims.

7.  FN7.  “In their Petition, Plaintiffs argued that DBSI lacks standing to object to the inclusion of HBI in the arbitration.   The Court rejects Plaintiffs’ argument.   The FASOC clearly indicates that HBI is proceeding against DBSI as well as Themis and Clark.”

8.  FN8.  “In Claimants’ FASOC, Plaintiffs asserted that ‘[the December Order] authorizes Claimants to proceed against [Themis] in this FINRA Arbitration’ and that ‘[the December Order] orders arbitration between Claimants and THEMIS/CLARK in this FINRA proceeding.’ (italics added.)   The Court finds that these statements misstate the Court’s intent and prior orders.   By signing the December Order, the Court only approved Plaintiffs, on the one hand, and Themis and Clark, on the other hand, to proceed by way of arbitration before FINRA.   The Court did not intend for those proceedings to be consolidated with Plaintiffs’ claims against DBSI, and the Court would not have signed the December Order had it known that Plaintiffs would attempt to do so.”

9.  FN9.  At the request of DBSI, we take judicial notice of our files in No. B223252 as well as those of the Supreme Court to which a petition for review in this matter was submitted.

10.  FN10.  Plaintiffs sought writ relief from this court with respect to the denial of their clarification motion (No. B226165).  We denied the requested relief by a jacket denial on September 1, 2010.

11.  FN11.  We will not engage arguments that go beyond the straightforward issues presented to us.   That is, did the trial court properly exercise its discretion and was there substantial evidence in the record to support its decision.

12.  FN12.  Code of Civil Procedure section 128.7, subdivision (b) and (c), provide, in relevant part:  “(b) By presenting to the court, whether by signing, filing, submitting, or later advocating, a pleading, petition, written notice of motion, or other similar paper, an attorney or unrepresented party is certifying that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, all of the following conditions are met:  [¶] (1) It is not being presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.  [¶] (2) The claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law.  [¶] (3) The allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.  [¶] (4) The denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief. [¶] (c) If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation.   In determining what sanctions, if any, should be ordered, the court shall consider whether a party seeking sanctions has exercised due diligence.  [¶] (1) A motion for sanctions under this section shall be made separately from other motions or requests and shall describe the specific conduct alleged to violate subdivision (b).  Notice of motion shall be served as provided in Section 1010, but shall not be filed with or presented to the court unless, within 21 days after service of the motion, or any other period as the court may prescribe, the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected.   If warranted, the court may award to the party prevailing on the motion the reasonable expenses and attorney’s fees incurred in presenting or opposing the motion.   Absent exceptional circumstances, a law firm shall be held jointly responsible for violations committed by its partners, associates, and employees․ [¶] ․ “Code of Civil Procedure section 1008, subdivision (d) provides, in relevant part:  “A violation of this section may be punished as a contempt and with sanctions as allowed by Section 128.7․ “

13.  FN13.  We have found no published decision in which a court has addressed whether, in imposing sanctions under section 1008, the trial court must make the same substantive determinations as to frivolousness, delay, and harassment that are required by section 128.7.   We believe the answer to that question—which has not been raised by plaintiffs –is “No.” Section 1008(d) provides:  “A violation of this section may be punished as a contempt and with sanctions as allowed by Section 128.7.”   In our view, the “as allowed by Section 128.7” language refers to the procedural safe-harbor provisions, notice, and opportunity to be heard aspects of section 128.7, which are not contained in the sanctions subdivision of section 1008 itself.   Conversely, section 1008 makes clear from a substantive standpoint that a mere “violation” of section 1008’s requirements can give rise to sanctions.   Had the Legislature intended for all aspects of section 128.7, including its substantive provisions, to be incorporated, the Legislature would not even need to reference section 128.7 in section 1008.



About Leslie Brodie

Leslie Brodie is a reporter, writer, blogger, activist, and a religious leader in the community.


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