Judge: Robert S. Draper, Case: BC469884, Date: 2022-08-31 Tentative Ruling

Case Number: BC469884    Hearing Date: August 31, 2022    Dept: 78

Superior Court of California

County of Los Angeles

Department 78

Defendants’ Motion to Recover Reasonable Expenses Incurred in Disproving Failures to Admit Requests for Admission is DENIED.

FACTUAL BACKGROUND

This is an action for malicious prosecution. The Complaint alleges as follows. Plaintiff Peaches Nong Jensen (“Jensen”) owned Plaintiff Peachtree Financial Corporation (“Peachtree”), and Defendant Perry Leonard Segal (“Segal”) owned Defendant Charon Solutions, Inc. (“Charon”). (Compl. ¶ 18.) Peachtree and Charon in turn were 50% members of a company called P&P Holdings, LLC (“P&P). (Compl. ¶¶ 19-20).

Jensen owned real property on Cass Avenue in Woodland Hills (“Cass Property”). (Compl. ¶ 24.) Charon and Segal have contended that they entered into an oral agreement with Jensen to split the lot of the property to allow P&P to build luxury residences on the split-off lot. (Compl. ¶ 25.)

In 2004, Jensen sued an entity or person named “Silver” for concealing various constructing defects in the Cass Property. (Compl. ¶ 31.) While the action was pending in December 2005, Charon gave notice of its withdrawal from P&P, and Segal and Charon demanded that Jensen pay them a sum of money, or they would intervene in the Silver action and seek damages against Jensen for her alleged actions in relation to the Cass property. (Compl. ¶ 33.)

Jensen did not agree to the terms, and Charon filed a motion to intervene in the Silver action in December 2005. (Compl. ¶ 35.) This motion was a sham, since the allegations rested on claims to ownership of the Cass property, which were without merit, and because it was intended to vex and injure Plaintiffs for failing to accede to Charon and Segal’s demands. (Compl. ¶ 35.) The motion was denied in January 2006. (Compl. ¶ 36.)

Charon’s withdrawal from P&P became effective in March 2006. (Compl. ¶ 38.)

In December 2008, Charon filed claims against Jensen and Peachtree alleging fraud in relation to the purported oral contract on the Cass property. (Compl. ¶¶ 39, 46.) Charon was represented by Defendants Justin J. Shrenger (named here both individually and as a corporation of the same name, referred to collectively as “Shrenger”), and later by Defendants Marcin Lambirth LLP, Timothy Lambirth, John B. Marcin, Lisa Miller, Regina Ashkinadze, and Graham A. Bentley (collectively, “Marcin-Lamberth”). (Compl. ¶¶ 6-14, 39-42.) Defendants prosecuted the fraud claims against Jensen and Peachtree because they knew that their invalid contract claims were time-barred and precluded by the statute of frauds. (Compl. ¶ 46.) The action was terminated on the merits in favor of Peachtree and Jensen respectively in January and September of 2010. (Compl. ¶¶ 47-50.)

PROCEDURAL HISTORY

On September 19, 2011, Plaintiffs filed the Complaint alleging one cause of action for Malicious Prosecution.

On January 18, 202, this Court granted the anti-SLAPP motions of the Shrenger and Marcin-Lamberth defendants.

On March 28, 2012, this Court granted Charon and Segal’s anti-SLAPP rulings in favor of Shrenger, Marcin-Lamberth, Charon, and Segal.

On May 4, 2012, Segal and Charon filed a Cross-Complaint against Plaintiffs for malicious prosecution of a Cross-Complaint in the underlying December 2008 action.

On July 17, 2012, this Court granted Plaintiffs’ anti-SLAPP motion against the Cross-Complaint.

Charon and Segal filed a Notice of Appeal of the anti-SLAPP motion against the Cross-Complaint.

On March 5, 2014, a Remittitur was filed affirming the Court’s partial grant of Charon and Segal’s anti-SLAPP motion, and its grant of Plaintiffs’ anti-SLAPP motion against the Cross-Complaint.

On April 23, 2015, this Court denied Charon and Segal’s Motion for Summary Judgment or Adjudication.

On April 5, 2016, following trial, the jury entered a verdict in favor of Plaintiffs, and awarded them $1,000,000 in damages. On April 6, 2016, the jury awarded $250,000 respectively against both Segal and Charon. The Court entered judgment according to this verdict on April 21, 2016.

On June 10, 2016, this Court denied Segal and Charon’s Motion for New Trial.

Charon and Segal filed a Notice of Appeal from Judgement on July 7, 2016.

A remittitur was filed on March 26, 2018, affirming all findings of liability, while remanding the matter for new trial on compensatory damages (based on the Court’s order allowing overly-redacted attorneys’ fee bills), and ordering that, if compensatory damages at the new trial exceed $25,000, affirming the punitive damages award.

On April 23, 2018, this matter was transferred from Department 48 to the instant Department 78.

This Court on March 20, 2019, granted in part Charon and Segal’s Motion to Compel Further Responses to Deposition Questions.

On June 21, 2019, this Court granted Charon’s Motions to Compel Further Responses to Requests for Admission, Set Four, Form Interrogatory No. 17.1, and Requests for Production, Set Five.

On September 8, 2021, trial began.

On September 16, 2021, the Jury reached a verdict finding that Segal and Charon’s malicious prosecution of the Declaratory Relief and Unjust Enrichment causes of action in the underlying action were a substantial factor in causing harm to Jensen.

On January 6, 2022, Defendants filed a Motion for New Trial.

On February 14, 2022, this Court denied that Motion.

On March 24, 2022, Defendants filed a Notice of Appeal.

On March 29, 2022, Defendants filed the instant Motion to Recover Reasonable Expenses Incurred in Disproving Failures to Admit Requests for Admission.

On July 18, 2022, Jensen filed an Opposition.

On July 20, 2022, Defendants filed a Reply.

DISCUSSION

      I.          MOTION TO RECOVER REASONABLE EXPENSES INCURRED IN DISPROVING FAILURES TO ADMIT REQUESTS FOR ADMISSION.

Defendants seek costs pursuant to CCP section 2033.420.

Under Code of Civil Procedure section 2033.420, subdivision (a), if a party failed to admit the truth of any matter when requested to do so, and if the party who requested that admission thereafter proved the truth of that matter, the requesting party may move for an order requiring the party to whom the request was directed to pay the reasonable expenses incurred in making that proof, including reasonable attorney fees. 

“One need not be a prevailing party to be entitled to sanctions under this statute.” (Smith v. Circle P Ranch Co. (1978) 87 Cal.App.3d 267, 275 (Smith) [referring to former Code Civ. Proc., § 2034].)  “Costs of proof are available against a party only, not its counsel.”  (Estate of Manuel (2010) 187 Cal.App.4th 400, 404.) 

There are four exceptions: (1) an objection to the request was sustained or a response to it was waived under Code of Civil Procedure section 2033.290; (2) the admission sought was of no substantial importance; (3) the party failing to make the admission had reasonable ground to believe that that party would prevail on the matter; and (4) there was other good reason for the failure to admit. (Code Civ. Proc., § 2033.420, subd. (b).) 

The award of expenses, including attorneys’ fees, for denial of a request of admission is not a discovery sanction or penalty for abuse of the discovery process because requests for admissions are a procedural mechanism intended to expedite the trial by reducing the number of triable issues to be adjudicated. (City of Glendale v. Marcus Cable Associates, LLC (2015) 235 Cal.App.4th 344, 353.) Requests for admission are not used to obtain additional information but serve as a dispute-resolution device to eliminate time and expense of formal proof at trial. (Id. at 353-54.) Because such award is not sanctions for discovery misconduct, the costs of proof for an improperly denied request for admission can only be imposed against a party and cannot be imposed against the party’s attorney. (Estate of Manuel (2010) 187 Cal.App.4th 400, 402-03.) 

The determination of whether there were no good reasons for denying the requested admission, whether the requested admission was of substantial importance, or the amount of expenses to be awarded, if any, is within the sound discretion of the trial court. (Bloxham v. Saldinger (2014) 228 Cal.App.4th 729, 753.) If it is clear from the evidenced introduced by either party that the party who denied for lack of information or belief had access to the information at the time the requests for admission were propounded, sanctions are justified because the party who denied the admission has a duty to investigate. (Smith v. Circle P Ranch Co. (1978) 87 Cal.App.3d 267, 275.) A request for admission has “substantial importance” when the matter requested is central to the disposition of the case. (Brooks v. American Broadcasting Co. (1986) 179 Cal.App.3d 500, 509.) In evaluating whether there was “good reason” to deny a request to admit “a court may properly consider whether at the time the denial was made the party making the denial held a reasonably entertained good faith belief that the party would prevail on the issue at trial. (Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1276.) 

An accounting is required (e.g., by declarations from moving party’s counsel) setting forth the hourly fees and time spent to prove the truth of the specific matters denied, as opposed to time spent in preparation for trial generally or in proving other matters at trial of the case.  (Garcia v. Hyster Co. (1994) 28 Cal.App.4th 724, 737 (Garcia) [counsel’s conclusory statements insufficient]; see also In re Tobacco Cases II (2015) 240 Cal.App.4th 779, 807 [denial of cost-of-proof expenses proper when moving party failed to provide accounting of actual costs incurred and instead asked for amount equal to estimated costs that prevailing defendant expected to recover].)  Indeed, “the California Supreme Court intended its lodestar method to apply to a statutory attorney’s fee award unless the statutory authorization for the award provided for another method of calculation.”  (Meister v. Regents of University of California (1998) 67 Cal.App.4th 437, 448–449.) Code of Civil Procedure section 2033.420 does not provide another method.

Here, Defendants argue that Jensen improperly denied Defendants’ requests for admission that Defendants did have probable cause to prosecute causes of action for Fraud and Conversion in the Underlying Action, and that, after the time that the Underlying Demurrer disposed of the two other Underlying Causes of Action for Unjust Enrichment and Declaratory Relief, Jensen suffered limited damages in the form of attorney fees. (Motion at p. 1.) Defendants argue that Jensen forced them to repeatedly relitigate these issues, despite numerous courts repeatedly holding that Defendants did, indeed, have probable cause to prosecute those claims.

Defendants note that the court in the underlying action ruled against Jensen’s Demurrer as to the Fraud and Conversion causes of action. (Exhibit 230.) Additionally, the Court denied a Motion for Nonsuit, finding that there was “sufficient evidence for the jury to decide these issues.” (Id. at 11:6-7.)

In this action, Defendants note that this Court ruled in response to Charon’s anti-SLAPP motion that Defendants had probable cause for the fraud causes of action, and that this decision was affirmed on appeal.

In affirming that decision, the Court of Appeal stated that “With respect to Jensen, we find dispositive the evidence showing probable cause to initiate and prosecute the underlying fraud action.” (Exh. E at 8.) Additionally, the Court found that “multiple interim rulings demonstrated that the Attorneys and Charon had probable cause to bring and pursue the first amended complaint in that action.” (Ibid.) The Court cited to Swat-Fame, Inc. v. Goldstein (2002) 101 Cal.App. 4^th 613, 626, in which the Swat-Fame Court held that “because the trial court overruled Swat-Fame’s demurrer to the fraud claim, the lawyers necessarily had probable cause to bring the claim for fraud.” (Ibid.)

Additionally, Defendants note that the Trial Court in the Underlying Action held that the overruling of the Demurrer on the Fraud and Conversion claims did not necessarily mean that Defendants had probable cause to pursue those claims. Defendants contend that the 2017 Court of Appeal decision reversed that decision on that point. (Exh. G at 20-22.) Accordingly, the Court of Appeal found that Jensen could proceed on her Malicious Prosecution claim regarding the Declaratory Relief and Unjust Enrichment causes of action only. (Exh. G at 31.)

Nonetheless, Defendants argue, Jensen consistently and repeatedly introduced evidence regarding damages resulting from the prosecution of the disposed causes of action. Defendants contend that, as they repeatedly had to needlessly relitigate this same issue, the fees requested are substantial and intertwined with all aspects of the trial.

In opposition, Jensen makes several arguments. The Court will address them in the order they are presented.

First, Jensen notes that Defendants’ Counsel’s Declaration supporting the Motion does not contain a jurat, and therefore is inadmissible. However, Defendants’ Counsel filed an amended declaration containing said jurat, so this point is moot.

Next, Jensen contends that Defendants’ Counsel could not properly authenticate the exhibits in support of his declaration, as he does not possess personal knowledge of the exhibits. However, Jensen does not cite any such exhibit that she believes Defendants’ Counsel is incapable of authenticating, and upon review, there are none apparent to the Court.

Next, Jensen argues that Defendants’ moving papers are “Devoid of any segregation or specification of the amount supposedly entailed in making proof at trial of any particular subject matter at all – much less segregated as to expenses incurred in making proof of specific matter set forth in Requests for Admission said to have been improperly denied by [Jensen].”

On this point, the Court agrees. The billing statements supplied by Defendants are vague and unclear, and there is no supporting declaration linking them to Counsel’s need to disprove the matters that should have been admitted. (Josefsberg Decl., at pp 15-32.) Indeed, there is no way for the Court to differentiate between costs necessary to prove the matters in question, and costs requisite in preparation for trial, which are unrecoverable under 2033.420. (See Garcia v. Hyster Co. (1994) 28 Cal.App.4^th 724, 736.)

Next, Jensen argues that the issues that Defendants sought to be proven in their requests for admission would have properly been admitted through requests for judicial notice. Jensen contends that she was never asked to admit the existence of the decisions supposedly affirming that probable cause existed, only Defendants interpretation of said decisions. Jensen argues that she properly declined to admit Defendants’ interpretation.

However, the purpose of a request for admission is to serve as a “procedural mechanism intended to expedite the trial by reducing the number of triable issues to be adjudicated.” (City of Glendale, Supra, at p. 353.)

While judicial notice would have recognized the existence of these decisions, it would not have rendered true Defendants’ interpretation of them. As it is the interpretation of the orders that would have reduced the number of triable issues to be adjudicated, the fact that Defendants could have requested judicial notice as to their existence is irrelevant to the instant discussion.

Next, Jensen argues that Attorney Josefsberg cannot be awarded attorney fees, as he is a moving party. Jensen cites to Trope v. Katz (1955) 11 Cal.4^th 274, to support this contention.

However, as Defendants note in their reply, Trope applies to attorneys appearing in propria persona, which is not the case here.

Finally, Jensen argues that she had good reason to believe that her claim was meritorious, as she prevailed on an anti-SLAPP motion brought by Defendants against Jensen, prevailed on a motion for summary judgment brought by Defendants against Jensen, and prevailed in the first trial against Defendants.

However, as Defendants argue in their reply, Jensen does not reconcile her assertion of an anti-SLAPP victory with the 2013 Court of Appeal decision holding that probable cause did exist.

Additionally, Summary Judgment was denied because the Court found that probable cause existed for the Declaratory Relief and Unjust Enrichment causes of action.

Finally, as Defendants accurately note, Plaintiff cannot rely on the underlying trial decision that was eventually overturned on this matter in the 2017 Appeal decision.

Simply put, numerous courts, at both the trial and appellate level, through multiple decisions, have found that probable cause existed for Defendants to bring their fraud and conversion claims in the underlying action. Indeed, the Court of Appeal expressed in no uncertain terms that the interim rulings dispositively showed that probable cause existed, therefore remanding the issue to this Court on only the Declaratory Relief and Unjust Enrichment causes of action.

By improperly refusing to admit as much, Jensen forced Defendants, and this Court, to repeatedly address an issue that should have been settled. Accordingly, her failure to do so is precisely the sort of failure 2033.420 envisions.

With that said, Jensen accurately notes that Defendants’ requested billing hours are conclusory, and in no way allow this Court to determine what hours were spent relitigating the improper matter, as compared to simply preparing for trial.

Accordingly, is an essential element of the claim for relief, Defendants’ Motion to Recover Reasonable Expenses Incurred in Disproving Failures to Admit Requests for Admission is DENIED.

DATED:  August 31, 2022

___________________________

Hon. Robert S. Draper

Judge of the Superior Court