Judge Stephen P. Pfahler, Case Number: 22STCV11454, Date: 2024-02-05 Tentative Ruling

Judge: Stephen P. Pfahler, Case: 22STCV11454, Date: 2024-02-05 Tentative Ruling

Case Number: 22STCV11454 Hearing Date: February 5, 2024 Dept: 68

Dept. 68

Date: 2-5-24

Case # 22STCV11454

Trial Date: 7-1-24

SANCTIONS

MOVING PARTY: Plaintiff, Matthew Garza

RESPONDING PARTY: Defendant, Gilbert Insurance Services, Inc.

RELIEF REQUESTED

Motion for Issue and Monetary Sanctions

SUMMARY OF ACTION

Plaintiff Matthew S. Garza was a Major League Baseball (MLB) pitcher for 12 years. Plaintiff’s career with a MLB team ended after the 2017 season, due to a pitching arm shoulder injury, which was not successfully repaired following surgery well enough to return to MLB pitching form.

Prior to the injury causing event, Plaintiff procured a ten million disability insurance policy from defendant Certain Underwriters at Lloyd’s of London Subscribing to the Policy (Lloyd’s). Plaintiff maintains the policy was procured and submitted by defendant International Specialty Insurance Services, Inc. (ISI), Nigro Karlin Segal & Feldstein, LLP and NKSFB, LLC (collectively NKSFB). Defendants Paradigm - Gilbert Insurance Group, LLC, and Gilbert Insurance Services, Inc. (Paradigm and Gilbert) assisted Plaintiff in providing information in support of the application, though the application admittedly omitted certain information at the time of submission. Following submission of the claim to Lloyd’s, the claim was denied based at least in part on the provision of an incomplete application.

On July 1, 2021, Plaintiff filed a complaint for Breach of Contract, Breach of Implied Duty of Good Faith and Fair Dealing, and Breach of Duties as an Insurance Broker. The case was initially filed in Fresno County, and transferred to Los Angeles County on April 5, 2022, following a successful motion to change venue. Lloyd’s also previously filed a cross-complaint against Paradigm and Gilbert for Fraud, Negligence, Negligent Misrepresentation, and Comparative Fault/Contribution.

On May 11, 2022, the case was reassigned from complex court to Department 68, and independent calendar court. On July 26, 2022, the court granted the motion to strike the cross-complaint with leave to amend. Lloyd’s filed its first amended cross-complaint on August 11, 2022. On December 6, 2022, the court denied the motion to strike the first amended cross-complaint.

On December 21, 2022, the court granted Plaintiff leave to file a first amended complaint. The amended pleading added in defendants NKSFB and new causes of action. On the same date, the first amended complaint for Breach of Contract (first and fourth causes of action), Breach of Implied Covenant of Good Faith and Fair Dealing, Breach of Duties as an Insurance Brokers, Intentional Misrepresentation, Negligent Misrepresentation, and Breach of Fiduciary Duties, was filed.

On March 23, 2023, the court denied the motion to compel arbitration. On March 29, 2203, the court overruled the demurrer to the first amended complaint, and a motion for sanctions, both brought by Gilbert Insurance Services.

On December 14, 2023, the court granted the motion of International Specialty Insurance Services, Inc. to interplead $133,624.68 in funds with the court.

RULING: Granted in Part/Denied in Part.

Plaintiff Matthew Garza moves for $15,000 in monetary sanctions and/or issue sanctions against defendant Gilbert Insurance Services, Inc. (Gilbert) for a violation of the September 5, 2023, order compelling further discovery to production of documents (set two). Gilbert in opposition contends that “technical problems” in producing certain electronically stored information in their “native format” significantly delayed production, but maintains production will occur. Gilbert maintains that issue sanctions are “unwarranted,” as the violation was not willful, and the requested monetary sanctions are excessive. Defendants Nigro Karlin Segal & Feldstein, LLP and NKSFB, LLC (collectively NKSFB) in a separate opposition challenge the motion on procedural defects, as well as substantive due process concerns in that an issue sanctions against Gilbert would improperly prejudices the collective defendants defense in the action for based on an “indiscriminate” requested sanction. Plaintiff in two separate replies to the individual oppositions. As to Gilbert, Plaintiff emphasizes the lack of production regardless of excuses. Plaintiff also challenges a failure to preserve evidence and contends Gilbert altered evidence. As to the NKSFB parties, Plaintiff denies any reference to the parties in the requested sanctions.

“Discovery sanctions ‘should be appropriate to the dereliction and should not exceed that which is required to protect the interests of the party entitled to but denied discovery.’” (Young v. Rosenthal (1989) 212 Cal.App.3d 96, 118-119 citing Deyo v. Kilbourne (1978) 84 Cal.App.3d 771, 793; Newland v. Superior Court (1995) 40 Cal.App.4th 608, 613.) A prerequisite to the imposition of the dismissal sanction is that the party has willfully failed to comply with a court order. (Mileikowsky v. Tenet Healthsystem (2005) 128 Cal.App.4th 262, 279-280; Laguna Auto Body v. Farmers Ins. Exchange (1991) 231 Cal.App.3d 481, 487 overruled on other grounds in Garcia v. McCutchen (1997) 16 Cal.4th 469, 478, fn. 4.); Young v. Rosenthal (1989) 212 Cal.App.3d 96, 114.) Preventing parties from presenting their cases on the merits is a drastic measure; terminating sanctions should only be ordered when there has been previous noncompliance with a rule or order, and it appears a less severe sanction would not be effective. (Link v. Cater (1998) 60 Cal.App.4th 1315, 1326; Department of Forestry & Fire Protection v. Howell¿(2017) 18 Cal.App.5th 154, 191 [“Terminating sanctions are to be used sparingly because of the drastic effect of their application.”].) “The trial court may order a terminating sanction for discovery abuse ‘after considering the totality of the circumstances: [the] conduct of the party to determine if the actions were willful; the detriment to the propounding party; and the number of formal and informal attempts to obtain the discovery.’” (Los Defensores, Inc. v. Gomez¿(2014) 223 Cal.App.4th 377, 390.)

Evidence or issue sanctions may be imposed only after parties violated discovery orders compelling further responses, except in exceptional circumstances, including where there was sufficiently egregious misconduct regarding a failure to respond to discovery, or a prior discovery order would be futile. (New Albertsons, Inc. v. Sup. Ct. (2008) 168 Cal.App.4th 1403, 1428.) “The discovery statutes thus ‘evince an incremental approach to discovery sanctions, starting with monetary sanctions and ending with the ultimate sanction of termination.’ (Citation.) Although in extreme cases a court has the authority to order a terminating sanction as a first measure (Citations), a terminating sanction should generally not be imposed until the court has attempted less severe alternatives and found them to be unsuccessful and/or the record clearly shows lesser sanctions would be ineffective.” (Lopez v. Watchtower Bible & Tract Society of New York, Inc. (2016) 246 Cal.App.4th 566, 604.) To avoid sanctions, the burden of proving that a discovery violation was not willful is on the party on whom the discovery was served. (Cornwall v. Santa Monica Dairy Co. (1977) 66 Cal.App.3d 250, 252- 253.)

The court finds the motion properly identifies defendant Gilbert Insurance Services, Inc. While a separate statement is statutorily required under California Rules of Court, rule 3.1345(a)(7), the court finds the missing statement in no way precludes or inhibits consideration of the subject matter. The court therefore addresses the substance of the requested relief.

On September 5, 2023, the court granted Plaintiff’s motion to compel further responses to Request for Production of Documents (set two), numbers 36- 38, 40- 42, 45, 46, 51-67, 76, 77- 81, 92, and 94-101. The subject motion was filed approximately three months after the order. It remains undisputed that no production occurred. The motion also comes following the unsuccessful motion for sanctions under Code of Civil Procedure section 128.7 brought by Gilbert against Plaintiff. The subject motion directly seeks information related to Dennis Gilbert regarding the submitted insurance application.

The NKSFB defendants in fact specifically seek to establish a distance between the ongoing dispute between Plaintiff and the Gilbert discovery through their own compliance. [Declaration of Vishwanath Mohan.] The requested list of issue sanctions are extensive:

· Gilbert fully understood that Plaintiff’s medical records maintained by Major League Baseball (“MLB”) was the best source of information regarding Plaintiff’s medical history;

· Gilbert never sought, obtained, or reviewed Plaintiff’s medical records before submitting either the Original or the Supplemental Applications to ISI on behalf of Plaintiff;

· Gilbert acknowledged and voluntarily assumed the duty to assist Plaintiff with completing the responses to questions and requests for information on both the Original and Supplemental Applications;

· At the time Gilbert submitted the Original and Supplemental Applications to ISI on Plaintiff’s behalf, Gilbert fully understood that submitting a complete and accurate application was “important in the event of a claim” being filed by Plaintiff;

· Gilbert acknowledged and voluntarily assumed the duty to speak with Matt Garza to obtain answers to the questions set out in the Application before Gilbert submitted the Original or Supplemental Applications to ISI on behalf of Plaintiff;

· No one from Gilbert ever contacted Plaintiff to review the information contained in either the Original or Supplemental Applications before submitting them on behalf of Plaintiff;

· No one from Gilbert ever sought or obtained Plaintiff’s signature on the Supplemental Application before Gilbert submitted the Supplemental Application on behalf of Plaintiff.

· Dennis Gilbert, as an authorized representative of Defendant Gilbert, falsely certified that he had “truly and accurately recorded all the information given to me by the applicant” when he signed the Agent Statement on Plaintiff’s Original Application;

· Gilbert acknowledged and voluntarily assumed the duty to review Plaintiff’s MLB medical records to confirm that no other medical information existed besides the information set out in the Original Application before submitting the Original and Supplemental Applications on behalf of Plaintiff;

· Dennis Gilbert, as an authorized representative of Gilbert, falsely certified that he "kn[e]w of no other medical information about the person applying for coverage other than that contained on this application" when signed the Agent Statement on Plaintiff's Application;

· Gilbert acknowledged and voluntarily assumed the duty to verify that Mr. Gaza either filled out the entire Application himself or personally reviewed the Application completed by others before submitting the Original or Supplemental Applications on behalf of Plaintiff;

· Dennis Gilbert, as an authorized representative of Gilbert, falsely certified that Mr. Gaza had either filled out the entire Application himself or personally reviewed the Application completed by others before submitting the Original or Supplemental Applications on behalf of Plaintiff, when signed the Agent Statement on Plaintiffs Application;

· Gilbert acknowledged and voluntarily assumed the duty to explain to Mr. Garza each of the "benefits, exclusions and limitations" set out in the Subject Policy before submitting the Original or Supplemental Applications on behalf of Plaintiff;

· Dennis Gilbert, as an authorized representative of Gilbert, falsely certified that he had explained to Mr. Garza "each of the benefits, exclusions and limitations" set out in the Subject Policy when signed the Agent Statement on Plaintiffs Application;

· Gilbert did not verify the accuracy of the medical information contained in either the Original or Supplemental Applications before submitting them to ISI on behalf of Plaintiff;

· At the time Plaintiff was seeking a disability insurance policy in 2017, Gilbert had a preexisting financial arrangement or agreement with NKSFB regarding the placement of athlete disability insurance policies;

· Gilbert failed to disclose to Plaintiff that it had a pre-existing financial arrangement or agreement with NKSFB regarding the placement of athlete disability insurance policies;

· Gilbert cannot prove that Plaintiff lied in his first deposition session;

· Plaintiff is not pursuing this case solely to extract or seek money from Gilbert (or its owner) to which Plaintiff is not legally entitled;

· Dennis Gilbert' s reputation has not been injured in any way because of the existence of this lawsuit;

· Dennis Gilbert has not suffered any emotional distress because of Plaintiff's original complaint or Plaintiff's FAC;

· Dennis Gilbert is not entitled to recover attorneys' fees or costs because of Plaintiff's original complaint or Plaintiff's FAC; and • The claims asserted against Gilbert in Plaintiffs lawsuit are not, in any manner, frivolous;

· Dennis Gilbert, as an authorized representative of Gilbert, falsely certified that he “kn[e]w of no other medical information about the person applying for coverage other than that contained on this application” when signed the Agent Statement on Plaintiff’s Application;

· Gilbert acknowledged and voluntarily assumed the duty to explain to Mr. Garza each of the “benefits, exclusions and limitations” set out in the Subject Policy before submitting the Original or Supplemental Applications on behalf of Plaintiff;

· Dennis Gilbert, as an authorized representative of Gilbert, falsely certified that he had explained to Mr. Garza “each of the benefits, exclusions and limitations” set out in the Subject Policy when signed the Agent Statement on Plaintiff’s Application;

· Gilbert did not verify the accuracy of the medical information contained in either the Original or Supplemental Applications before submitting them to ISI on behalf of Plaintiff;

· Gilbert failed to disclose to Plaintiff that it had a pre-existing financial arrangement or agreement with NKSFB regarding the placement of athlete disability insurance policies;

· Gilbert cannot prove that Plaintiff lied in his first deposition session;

· Plaintiff is not pursuing this case solely to extract or seek money from Gilbert (or its owner) to which Plaintiff is not legally entitled;

· Dennis Gilbert’s reputation has not been injured in any way because of the existence of this lawsuit;

· Dennis Gilbert has not suffered any emotional distress because of Plaintiff’s original complaint or Plaintiff’s FAC;

· Dennis Gilbert is not entitled to recover attorneys’ fees or costs because of Plaintiff’s

The court generally adheres to a style of robust discovery in order to facilitate the parties’ presentation of their case, thereby allowing a fair prosecution and defense of the action. In cases of extreme practice, the court will follow the progression of evidentiary and issue sanctions, with terminating sanctions only reserved for the most extreme of cases, as well established in the standard. The court hesitantly imposes issue and evidentiary sanctions, where the result leads to a potential windfall for the prevailing party and an effective “avoidance of a decision on the merits.” (Rutledge v. Hewlett-Packard Co. (2015) 238 Cal.App.4th 1164, 1194 accord McGinty v. Superior Court (1994) 26 Cal.App.4th 204, 214 [“On balance, we conclude that it was excessive and an abuse of discretion for the trial court to impose the preclusive witness and evidence sanction in this case for Hood's violation of the authority of another court, where no real harm has been done to Avco, and where the punishment falls most harshly not on the supposed malefactor but on the petitioners in their ability to have their case decided on the merits.”]

The summary of exchanges leading to the three-month delay demonstrates a lack of urgency in the efforts to produce all un-doctored files with the assistance of information technology system consultants. The parties’ differences of opinions on liability regarding Gilbert and incidentally the NKSFB defendants (See Declaration of Pierce O’Donnel), including Gilbert’s efforts to seek sanctions against Plaintiff, also provides context for the underlying course of dilatory conduct. The delayed provision of the subject discovery supports an argument for a finding of willful conduct.

The court however takes into account the efforts and promise to now produce the files, and therefore tailors the sanctions to addressing the delay itself rather than making an evidentiary and/or issue impacting order on discoverable information. (Do It Urself Moving & Storage, Inc. v. Brown, Leifer, Slatkin & Berns (1992) 7 Cal.App.4th 27, 37.) The court also finds support for the argument that a non-participating party in the discovery dispute should not suffer from a windfall order without any assertion of wrongful conduct directed to the suffering party/ies. (Parker v. Wolters Kluwer United States, Inc. (2007) 149 Cal.App.4th 285, 301.)

Contrary to the arguments in reply, two specific issue sanction requests specifically identify the NKSFB parties: “At the time Plaintiff was seeking a disability insurance policy in 2017, Gilbert had a preexisting financial arrangement or agreement with NKSFB regarding the placement of athlete disability insurance policies;” and “Gilbert failed to disclose to Plaintiff that it had a pre-existing financial arrangement or agreement with NKSFB regarding the placement of athlete disability insurance policies...” The court finds an impact to the parties notwithstanding the intention to exclusively limit sanctions to Gilbert. For the reasons addressed above, the court therefore denies the motion for issue sanctions.

The court also finds the preservation of evidence argument, particularly emphasized in the reply conflates the purpose of the sanctions motion. While pre-lawsuit methods for preservation of evidence exist (Code Civ. Proc. §§ 2035.010, 2035.030), courts considering the question find no specific basis of authority for a requirement of preservation of evidence other than a functionally equivalent preliminary injunction in the form of a protective order, or reliance on spoliation rules following any alleged destruction of evidence. (Dodge, Warren & Peters Ins. Services, Inc. v. Riley (2003) 105 Cal.App.4th 1414, 1419 accord Northpoint Homeowners Assn v. Superior Court (1979) 95 Cal.App.3d 241, 244-246; see San Francisco Unified School Dist. ex rel. Contreras v. First Student, Inc. (2013) 213 Cal.App.4th 1212, 1227 (footnote 10); Cedars-Sinai Med. Ctr. v. Superior Court (1998) 18 Cal.4th 1, 17-18; New Albertsons, Inc. v. Sup. Ct. (2008) 168 Cal.App.4th 1403, 1431; Williams v. Russ (2008) 167 Cal.App.4th 1215, 1223; Coprich v. Superior Court (2000) 80 Cal.App.4th 1081, 1089–1090.)

To the extent Plaintiff contends spoliation of evidence, the court reviews the standard. “Spoliation of evidence means the destruction or significant alteration of evidence or the failure to preserve evidence for another's use in pending or future litigation.” (Williams v. Russ (2008) 167 Cal.App.4th 1215, 1223.) There is no tort liability for intentional spoliation of evidence committed by a party to the action to which the evidence is relevant and which is, or reasonably should have been, discovered by the spoliation victim, before conclusion of the underlying action. (Cedars-Sinai Med. Ctr. v. Superior Court, supra, 18 Cal.4th at pp. 17-18.) Nor is a tort remedy available for negligent spoliation committed by a party to the action. (Coprich v. Superior Court (2000) 80 Cal.App.4th 1081, 1089–1090.)

A party may seek non-tort remedies for spoliation, including discovery sanctions, and a ruling pursuant to Evidence Code section 413 of a presumption that destroyed evidence would be adverse to spoliator. (Cedars-Sinai Med. Ctr. v. Superior Court, supra, 18 Cal.4th at p. 11.) “[A] party moving for discovery sanctions based on the spoliation of evidence must make an initial prima facie showing that the responding party in fact destroyed evidence that had a substantial probability of damaging the moving party's ability to establish an essential element of his claim or defense.” (Williams v. Russ, supra, 167 Cal.App.4th at p. 1227.) The court finds the argument for spoliation sanctions lacks sufficient, separately articulated factual support. The discovery remains outstanding. The court declines to consider speculation on potential alterations or destruction prior to any actually presented e-mails. The court therefore declines to consider the spoliation evidentiary request.

The court finds however that the subject motion was properly filed in that it prompted a greater effort from Gilbert to facilitate and complete the discovery process. The court therefore awards financial sanctions as compensation for the costs associated with the subject motion. (Manlin v. Milner (2022) 82 Cal.App.5th 1004, 1025 [“For a trial court to decline to award any amount of monetary sanctions when it finds discovery misconduct has occurred is arbitrary and an abuse of discretion”].)

The court accepts the hours spent following up from the September 5, 2023, order and following through on the instant motion, and the apparent composite rate of $500/hour billed amongst the three attorneys. [Declaration of Richard Giller.] Nevertheless, the 15 hours of anticipated time spent on reviewing the opposition and drafting the reply is excessive. The court grants additional monetary sanctions in the amount of $6,000 joint and several against Gilbert Insurance Services, Inc. and counsel for Gilbert only. (Code Civ. Proc., § 2031.310, subd. (i).) Payable within 30 days.

Multiple motions for summary adjudication and summary judgment set between May 14, 2024, and May 18, 2024. Trial currently scheduled for July 1, 2024.

Plaintiff to give notice.