Judge Martha K. Gooding, Case 21-01223241 2023-05-15 Tentative Ruling

Judge: Martha K. Gooding, Case: 21-01223241, Date: 2023-05-15 Tentative Ruling

1) Motion to Set Aside/Vacate

2) Case Management Conference

The Court DENIES the Motion by Defendant Panda Motors dba California Motors Direct (“Defendant”) for an order setting aside the Court's November 9, 2022, Order granting Plaintiff Benito Bello Leon's Motion to Reopen Case and for Evidentiary Sanctions pursuant to Civil Procedure Code (“CCP”) section 473(b).

Legal Standard

Section 473(b) contains two provisions for relief from default—a mandatory provision that “covers only default judgments and defaults that will result in the entry of judgments” and a discretionary provision that is broader in scope. (Even Zohar Construction & Remodeling, Inc. v. Bellaire Townhouses, LLC (2015) 61 Cal.4th 830, 838.) Under the discretionary provision, a “court may, upon any terms as may be just, relieve a party or his or her legal representative from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect.” (CCP § 473(b).)

The party moving for relief under section 473(b) bears the burden of demonstrating that the attorney’s neglect was excusable. (Garcia v. Hejmadi (1997) 58 Cal.App.4th 674, 682 (“Garcia”).) “In determining whether the attorney's mistake or inadvertence was excusable, ‘the court inquires whether “a reasonably prudent person under the same or similar circumstances” might have made the same error.’ ” (Zamora v. Clayborn Contracting Group, Inc. (2002) 28 Cal.4th 249, 258.) “In other words, the discretionary relief provision of section 473 only permits relief from attorney error ‘fairly imputable to the client, i.e., mistakes anyone could have made.’” (Ibid.) “‘Conduct falling below the professional standard of care, such as failure to timely object or to properly advance an argument, is not therefore excusable. To hold otherwise would be to eliminate the express statutory requirement of excusability and effectively eviscerate the concept of attorney malpractice.’” (Ibid.)

In determining whether to grant relief, the trial court assesses the credibility of witnesses and resolves evidentiary conflicts. (Shamblin v. Brattain (1988) 44 Cal.3d 474, 479 (“Shamblin”).) “The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced from the facts, the reviewing court has no authority to substitute its decision for that of the trial court.” (Id. at pp. 478-479.) A trial court abuses its discretion if there is no evidence supporting its decision. (Stack v. Stack (1961) 189 Cal.App.2d 357, 368.)

Mandatory Relief Under Section 473(b) is Not Available

Defense counsel first argues that it is entitled to mandatory relief under section 473(b) because it has provided an attorney affidavit of fault and the evidentiary sanction is equivalent of a default. The Court disagrees.

Because the mandatory relief provision of Section 473(b) only applies to defaults, default judgments, or dismissals – none of which happened here – mandatory relief is not available to Defendant; at most, Defendant can seek only discretionary relief.

Defendant argues that because the Court imposed a sanction preventing it from conducting discovery, it effectively has lost its day in court. The Court disagrees; proceeding to a trial without having conducted discovery is not the same as being prevented from trying the case because judgment was entered by default.

Nor is the Court’s order the equivalent of a dismissal.

Newly-enacted CCP section 1281.97 provides that if the drafting party materially breaches the arbitration agreement and is in default under CCP § 1281.97(a), the employee or consumer may withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction. (CCP § 1281.97.) If the employee or consumer proceeds with a court action, the court must impose sanctions on the drafting party under CCP § 1281.99. (CCP § 1281.97(d).)

The Court found Defendant was in material breach of the arbitration contract between the parties and ordered the case to proceed in court, rather than in arbitration. (ROA 128).

Section 1281.97 also provides that the court may order any of the following sanctions “unless the court finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust”:

(1) An evidence sanction by an order that prohibits the drafting party from conducting discovery in the civil action. (CCP §1281.99(b)(1).)

(2) A terminating sanction by

(a) an order that strikes out the pleadings or parts of the pleadings of the drafting party,

(b) an order that renders a judgment by default against the drafting party, or

(CCP §1281.99(b)(2).)

The Court already analyzed whether, under the circumstances here, imposition of a sanction would be unjust, and it had no trouble finding that an evidence sanction prohibiting Defendant from conducting discovery in the civil action is not unjust based on the facts presented in opposition to the 11/9/22 Motion. Those are the same facts presented now in support of this Motion.

Notably, the Court did not order terminating sanctions, even though they are authorized by the statute. (See Rodriguez v. Brill (2015) 234 Cal.App.4th 715, 718–719, 725–726, 733 (judgment of dismissal that implements termination sanction for discovery abuse is a “dismissal entered” for purposes of CCP § 473(b).)

Defendant cites no case supporting its argument that an evidentiary/discovery sanction is tantamount to, or the functional equivalent of, either a default or a terminating sanction. It clearly is not. Defendant has every right to litigate and try the case; it will just have to do so without the benefit of discovery. Having the right to present evidence at trial is in no way equivalent to a default or a terminating sanction. As the court stated in Shayan v. Spine Care & Orthopedic Physicians (2020) 44 Cal.App.5th 167, 170–171: “The plain language of the statute is unambiguous and controlling. It would be a disservice to embroider this language with freeform extensions to “analogous” situations. Lawyers are pretty good at inventing analogies. This provision sees heavy use in trial courts. In the long run, everyone benefits from clear, exact, and predictable rules of civil procedure. This statute, as written, gives a clear, exact, and predictable rule. The Legislature can amend it if the coverage is wrong. Until the Legislature acts, the statute's words settle the matter.”

In its Reply Brief, defense counsel argues for the first time that the reason counsel (and its legal assistant) did not make the payment after being reminded “week after week," (as the Court noted in the 11/9/2 Order) is that it only steps in to assist with payment, particularly with this client, when the deadline is rapidly approaching and the client has not made payment. (Suppl. Sirey Dec., ¶ 2.) This is unavailing for at least three reasons.

First, the Court declines to consider this new evidence, which was not presented in opposition to Plaintiff’s 11/9/22 Motion and not presented in this Motion until the Reply.

Second, in any event, the Court finds the new evidence not credible. Once defense counsel received the second notice from the AAA extending the payment deadline, it was clearly aware that its client had not paid the fees. That was sufficient to put defense counsel on alert (perhaps even high alert) that it might need to advance the fees to the AAA by the new deadline to preserve its client’s right to arbitrate.

Third, even if the Court were to consider this argument, to the extent counsel is attempting to shift some of the blame for non-payment to its client, the argument actually reinforces the conclusion that mandatory relief is unavailable here. A party can rely on the mandatory provision of section 473 only if the party is totally innocent of any wrongdoing and the attorney was the sole cause of the default or dismissal. (Lang v. Hochman (2000) 77 Cal.App.4th 1225, 1248.)

The Court Denies The Request for Discretionary Relief

Having rejected Defendant’s argument that it is entitled to mandatory relief under section 473, the Court turns to Defendant’s request for discretionary relief under the statute. For the reasons explained below, the Court exercises its discretion to deny relief.

The Court finds not credible or persuasive Defendant’s assertion that its counsel’s failure to pay the invoices was the result of mistake or excusable neglect.

Defense counsel acknowledges receipt of the June 6, 2022, letter from AAA regarding filing fees due to be paid to initiate the arbitration. (Sirey Dec. ¶ 2; Ex. 1.)

The June 6, 2022, letter demanded payment no later than June 20, 2022. (Ex. 1.)

The payment deadline was entered on defense counsel’s calendar for this case. (Sirey Dec., ¶5.)

No payment was made on or before the June 20, 2022, deadline.

Defense counsel offers no excuse or explanation why the first deadline was ignored.

On June 21, 2022, Defendant's counsel received a second letter from AAA regarding filing fees due to be paid to initiate the arbitration. (Sirey Dec. ¶3; Ex. 2.)

The June 21, 2022 letter granted an extension of the deadline, demanding payment no later than July 20, 2022.

As for the second, extended deadline, defense counsel testifies that on or about July 12, 2022, multiple staff members at its law firm (Madison Law) tested positive for COVID-19, in response to which Madison Law elected to close its office and require all persons to work remotely until further notice, if they were able to do so. (Sirey Dec., ¶7.)

After receiving this notification, attorney Paige Sirey (“Sirey”) was on vacation from July 14-15, 2022. Then she worked remotely for a few days, from July 18-22. (Id.) Sirey physically returned to the Madison Law office on or about July 25, 2022. (Id.)

There is no indication that the attorneys and staff did not have access to the firm’s calendar during the time they were working remotely. The firm’s personnel may have been working from outside the office, but they were working – and part of working for a law firm means performing the basic minimum task of ensuring that all case deadlines are timely met.

On or about July 14, 2022, Jessica Ruiz (“Ruiz”), who is an assistant on this case and who typically handles the payment and/or confirmation of payment of arbitration fees with the requisite arbitration provider, including AAA, tested positive for COVID-19 and was sick. (Sirey Dec. ¶ 8; Ruiz Dec., ¶ 2.) Ruiz was required to remain home from work from July 15-21, 2022, while she recovered and until she tested negative. (Ruiz Dec. ¶ 3.) Ruiz returned to work on July 22, 2022. (Id.) Assuming Ruiz was not working during any of those sick days, it was incumbent on other members of the firm – including attorneys or other staff – to ensure that case deadlines were met during her absence. The illness of one assistant does not excuse the attorneys and/or other staff members from monitoring the calendar and ensuring case deadlines are met.

Sirey testifies she and her staff were unable to meet on July 18, 2022, to review the upcoming deadlines and confirm they either had been (or would be) completed because neither Sirey nor Ruiz was physically in the office. (Sirey Dec. ¶8.) The Court finds this excuse flimsy and not credible. There is no reason shown why Sirey, who was back from vacation and working remotely on July 18, and July 19, and on July 20 – all of them weekdays, and all within the July 20 deadline set by the AAA – could not have, as part of her remote work tasks, simply checked the case calendar, readily ascertained that payment had not been made, and arranged for timely payment.

In short, the evidence shows that defense counsel had from June 6 through July 20 – a total of 45 days – to pay the arbitration fees. Their suggestion that their failure to make payment during that time was excusable because a staff assistant assigned to the case was sick for 6 of those days and because an attorney on the case was on vacation for 2 of those days is neither credible nor persuasive.

Finally, Defendant again argues that it is not in material breach of the arbitration agreement because no invoice was ever presented; that its obligation to pay the fees therefore was never triggered; and that the Court should consider this in evaluating its failure to pay the fees.

The Court has already thoroughly addressed this argument in it 119/22 Minute Order and will not repeat that analysis here. Instead, the Court incorporates herein its prior analysis and conclusion in the 11/9/22 Order, as though they are fully set forth in this order. (See ROA 128.) Suffice to say that, for the reasons set forth in ROA 128, the Court concludes this argument is factually unsupportable and not credible.

In conclusion, based on the Court’s evaluation of the timeline of events, and its evaluation of credibility of the declarations, the Court finds Defendant has not met its burden of demonstrating that it failed to pay the arbitration fees because of mistake or excusable neglect.

Motion is denied.

Plaintiff is ordered to give notice.