Judge Ronald F. Frank, Case Number: 22STCV17938, Date: 2023-08-16 Tentative Ruling

Judge: Ronald F. Frank, Case: 22STCV17938, Date: 2023-08-16 Tentative Ruling

Case Number: 22STCV17938 Hearing Date: August 16, 2023 Dept: 8

Tentative Ruling¿

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HEARING DATE: August 16, 2023¿¿

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CASE NUMBER: 22STCV17938

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CASE NAME: Voyager Indemnity Insurance Company v. Smiley Sean, et al.

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MOVING PARTY: Plaintiff, Voyager Indemnity Insurance Company

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RESPONDING PARTY: Defendants, Smiley Sean and Ramsey Sean

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TRIAL DATE: Not Set.

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MOTION:¿ (1) Motion for Sanctions ¿

Tentative Rulings: (1) GRANTED as against defense counsel DeWitt Algorri & Algorri, LLP in the amount of $7,500.

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I. BACKGROUND¿¿

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A. Factual¿¿

On June 1, 2022, Plaintiff, Voyager Indemnity Insurance Company (“Plaintiff”) filed this action against Defendants, Smiley Sean and Ramsey Sean as surviving heirs of Mark S. Sean, deceased (collectively “Defendants”). On July 20, 2022, Plaintiff filed a First Amended Complaint (“FAC”) alleging a cause of action for Declaratory Relief.

This action arises out of an auto collision on August 11, 2019, that resulted in the death of Mark Sean. Mark Sean’s surviving heirs are Defendants Smiley and Ramsey Sean. Defendants have filed two lawsuits in this Court against Samantha Herasme and Fair Titling Trust—neither Herasme nor Fair Titling Trust are parties to this declaratory relief action. The first lawsuit was filed by the Defendants’ prior counsel, Charles Koro and Andrew Myers of Brown, Koro & Romag, LLP under case number 20STCV41562, and was initiated on October 29, 2020, and was dismissed on January 25, 2021. (Complaint, ¶ 20, 29.)

The second lawsuit was filed by the Defendants’ current counsel Ernest Algorri and Alex Lopez of DeWitt Algorri & Algorri, LLP, under case number 20STCV48987 (the “Related Action”). The Related Action was initiated about a month before the first lawsuit was dismissed, on December 23, 2020, and is active. (Complaint, ¶ 29.) Both lawsuits bring a single cause of action for wrongful death against Herasme and Fair Titling Trust, although only Herasme has ever been served. Plaintiff Voyager Indemnity Insurance Company (“Voyager”) accepted coverage of Herasme for both lawsuits and is paying for Herasme’s defense. (Complaint, ¶ 18.) The applicable insurance policy (the “Policy”) covering Herasme has a $50,000 policy limit. (Complaint, ¶ 8.)

The Complaint alleges that about month and a half before filing the Related Action, on November 10, 2020, Defendants, through their attorneys at the time (Koro and Myers), sent a policy-limits settlement demand to Voyager, providing less than three days to respond. (Complaint, ¶¶ 21-24.) Plaintiff asserts Voyager timely manifested acceptance of the demand on November 13, 2020—agreeing to the demand’s terms, conditions, and payment amount—and complying with the demand’s numerous requests. However, Plaintiff notes that Voyager was unable to issue a check and ship it from its offices in Florida to Defendants’ counsel in California within the three-day deadline.

Plaintiff notes that sometime after Voyager manifested acceptance of the demand, Defendants retained new lawyers, the firm of Algori and Lopez. Plaintiff argues that through their new counsel, Defendants unreasonably construed Voyager’s acceptance as a “counter-offer” and “rejected” it. (Complaint, ¶¶ 28-30.) Plaintiff contends that on January 4, 2021, Voyager reiterated its acceptance. (Complaint, ¶ 31.) Plaintiff further contends that on January 5, 2021, the Seans, through their counsel, insisted that “there is NO settlement” and went on to say—despite Voyager’s attempted acceptance—that “your principal’s rejection of our clients’ demand is egregious.” (Complaint, Exhibit 6.) Plaintiff claims that on January 15, 2021, counsel for the Seans revealed the intent of their characterization of Voyager’s acceptance. Plaintiff argues that when asked to confirm the Seans “contend that Voyager Indemnity’s $50,000 policy limit is ‘open’ and you will never in the future agree to resolve for the policy limit,” the Seans responded: “My clients are now ready to settle for the actual value of their claim.” (Complaint, Exhibits 7, 8.)

On June 6, 2023, Defendants brought a third request to stay this action ex parte. Plaintiff notes that the previous two requests were denied. Further, Plaintiff contends the ex parte motion was brought without complying with rules for reconsideration. Plaintiff argues the new motion to stay relies on the same basic argument: that a factual overlap exists between the declaratory relief action and a related negligence action, and misrepresents that Voyager is seeking default judgment against its insured (Plaintiff argues that is not so.) Further, Plaintiff notes that aside from that misrepresentation, Defendants cite no new facts or law to make their re-revived case. Based on this, Plaintiff contends that Defendants brought their ex parte application in bad faith, and is seeking its fees and costs to oppose the re-revived request to stay as a sanction.

B. Procedural¿¿

On July 13, 2023, Plaintiff filed this Motion for Sanctions. On August 3, 2023, Defendants filed an Opposition of Motion for Sanctions. On August 9, 2023, Plaintiff filed a reply brief.

II. ANALYSIS¿¿

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A. Legal Standard

Code of Civil Procedure § 128.5 permits a trial court to “order a party, a party’s attorney, or both, to pay the reasonable expenses, including attorney’s fees, incurred by another party as a result of actions or tactics, made in bad faith, that are frivolous or solely intended to cause unnecessary delay.” (Code Civ. Proc., § 128.5(a).) Actions or tactics include, but are not limited to, filing or opposing motions, complaints, answers, or other responsive pleadings. (Code Civ. Proc. §¿128.5(b)(1).) “ ‘Frivolous’ means totally and completely without merit or for the sole purpose of harassing an opposing party.” (Code Civ. Proc. § 128.5(b)(2).) Bad faith is determined using a subjective standard. (In re Marriage of Sahafzadeh-Taeb & Taeb (2019) 39 Cal.App.5th 139, 134-35.)

Expenses pursuant to § 128.5 cannot be imposed unless noticed in a party’s moving or responding papers, or on the court’s own motion after providing the offending party notice and an opportunity to be heard. (Code Civ. Proc., § 128.5(c).) An order imposing expenses must be in writing and must recite in detail the action, tactic, or circumstances justifying the order. (Id.)

Sanctions under this section may also be awarded if the offending party is provided a 21-day safe harbor to withdraw or correct its offending document or pleading. Specifically, “[i]f the alleged action or tactic is the making or opposing of a written motion or the filing and service of a complaint, cross-complaint, answer, or other responsive pleading that can be withdrawn or appropriately corrected, the court on its own motion may enter an order describing the specific action or tactic, made in bad faith, that is frivolous or solely intended to cause unnecessary delay, and direct an attorney, law firm, or party to show cause why it has made an action or tactic as defined in subdivision (b), unless, within 21 days of service of the order to show cause, the challenged action or tactic is withdrawn or appropriately corrected.” (Code Civ. Proc. § 128.5(f)(1)(D)(1).) An award of sanctions may include an award of attorney’s fees incurred as a direct result of the offending party’s bath faith action or tactic. (Code Civ. Proc. § 128.5(f)(1)(D)(2).)

B. Discussion

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Here, Plaintiff argues that Defendants’ ex parte application filed on June 6, 2023 was frivolous and made in bad faith. Because Plaintiff contends that Defendants’ previous two motions to stay were denied, Plaintiff argues that Defendants should have complied with Code of Civil Procedure § 1008(b) and included an affidavit providing information about Defendants’ prior attempts to stay and “what new or different facts, circumstances, or law are claimed to be shown. (Cal. Code Civ. Proc. §1008(b).) No such affidavit was attached to the Application. Further, Plaintiff argues that the application had nothing new or different to say, and thus could not have complied with section 1008(b). Plaintiff argues the only shred of purportedly “new” evidence proffered by Defendants is actually a misrepresentation of the procedural posture: the Application allegedly misrepresents that Voyager “recently served and is now seeking to enter default judgment against Defendant Herasme.” (Application at 5:25. The Declaration of N. Alex Lopez (the “Lopez Decl.”) perpetuates the misrepresentation. Lopez Decl., ¶ 5 (“Plaintiff Voyager Indemnity Co. has only recently served and is now seeking to enter default judgment against Defendant Herasme.”) Plaintiff argues that while it requested the clerk enter a Clerk’s default against Herasme after her time to answer the SAC expired, Plaintiff has not sought entry of a default judgment. Lastly, Plaintiff argues that there is no factual overlap between this action and the related wrongful death case.

In opposition, Defendants argue that Plaintiff violated the safe harbor provision by serving its motion for sanctions without allowing Defendants sufficient time to withdraw their application. Defendants note that this Motion for Sanctions was e-served on the Defendants’ counsel on June 20, 2023, after 11pm, and thus under the safe harbor provision in § 128.7(c)(1), Defendants should have been allowed to voluntarily withdraw their application through July 13, 2023 – 21 days safe harbor plus two court days for e-service. This Court notes that this Motion was filed on July 13, 2023.

Next, Defendants argue their application was necessary to avoid prejudice in both this matter and the related wrongful death case. It is Defendants’ position that they were obligated to request a stay of the Voyager action and file their motion so that they may not be deprived of litigating these exact same issues that have been plead and litigated in the wrongful death action for more than a year prior to Plaintiff’s filing. Defendants note their application was occasioned by Plaintiff’s attempt to secure a default against its insured, which arose after the Defendants’ prior motions for a stay were denied. Defendants argue that an Entry of Default can inextricably lead to an Entry of Judgment on the critical issues as to whether there has been a “settlement” of the underlying actin as alleged in Plaintiff’s DRA and could also lead to the application of collateral estoppel on the issue as to whether Plaintiff’s insured was in the course and scope of her employment thus negating a chief aspect of the Seans’ wrongful death claims against her employer. Lastly, Defendants argue now that Plaintiff’s instant motion is frivolous and warrants sanctions.

In Plaintiff’s reply brief, it argues that Defendants’ reliance on the safe harbor provision is misplaced as it is impossible to provide a 21-day notice to an ex parte application set for hearing the morning after it was first filed. The Court agrees. As an initial matter, the Court notes that although Section 128.5 generally requires that an offending party be given a 21-day safe harbor period within which a motion or other filing may be withdrawn or appropriately corrected, it does not and cannot apply when withdrawal or correction of allegedly frivolous documents or actions would be impractical. (Changsha Metro Group Co., Ltd. v. Peng Xueng (2020) WL 6441346 at *9.) Here, applying the 21-day safe harbor to ex parte proceedings would be impractical given its emergency nature.

The Court also notes that all three of the Motions to Stay were virtually the exact same, and not based on new facts between the first and second motion, nor between the 2^nd motion and the 3^rd application for an ex parte order except for the Plaintiff’s having applied for the Clerk’s default. In the Court’s judgment, even without express reference in the ex parte application to Code of Civil Procedure section 1008, there was in fact a new element that had not existed previously, i.e., the perceived risk by Defendants that Ms. Herasme might have a default judgment taken against her with concomitant implications for claim and issue preclusion. Of course, Plaintiff could not have taken a default judgment without making application to the Court for the same, with notice to defendants, so the need was not so dire as to require the ex parte application nor its requested stay that day. However, the June 6, 2023 ex parte application did not seek merely to stay Plaintiff’s pursuit of a default judgment against Ms. Herasme, but rather a stay of the entire case. That is where defense counsel went too far. In the Court’s view, defense counsel leveraged the fact of entry of the clerk’s default against Herasme as a justification to make a third run at convincing the Court that it had ruled mistakenly on the two prior occasions.

A Section 128.7 sanctions motion requires a predicate act as listed by the Legislature in subdivision (b) (1) through (b)(4) of that section, i.e., a frivolous argument, or a motion being presented primarily for an improper purpose, or a factual contention being asserted without evidentiary support or without a reasonable information or belief. The predicate act here was a frivolous application to stay the entire case after the Court had already twice denied such a stay. Defendants did not take a writ to the appellate court nor filed a motion for reconsideration. Had the ex parte application been limited to a stay of taking a default judgment against Ms. Herasme, such a request may have had a good faith basis, and the Court takes that good faith basis as a partial mitigation of the lack of good faith in making the global request for a stay of the entire case a third time. The re-argument of case law and factual contentions that underpinned Defendants' two previous attempts to convince the Court to stay the entirety of the declaratory relief action make it clear that the ex parte application was not being restricted to just a delay in Plaintiff’s taking of a default judgment against Ms. Herasme.

Having determined that defense counsel violated Section 128.7(b), the Court next turns to the monetary sanctions to be awarded commensurate with the violation. In the Court’s view, the amount of the requested monetary sanctions is excessive. Some of the same amounts of time and hearing attendance would have been required if Defendants had sought to stay only the pursuit of a default judgment against Ms. Herasme. The Court finds partially mitigating circumstances as discussed above. Taking all circumstances into account, the Court reduces the claimed sanctions amount to $7,500, payable within 30 days of Plaintiff’s notice of ruling being served on defense counsel.