Judge: Walter P. Schwarm, Case: 30-2021-01191524, Date: 2022-11-29 Tentative Ruling
Motion No. 1:
Defendants’ (The Ensign Group, Inc. and Ensign Services, Inc.) Motion for Sanctions Pursuant to Code of Civil Procedure § 128.7(b) (Motion), filed on 5-12-22 under ROA No. 196, is DENIED. The Notice of Motion (Notice) was filed on 5-12-22 under ROA No. 205.
Code of Civil Procedure section 128.7 states in 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. . . . [¶] (d) A sanction imposed for violation of subdivision (b) shall be limited to what is sufficient to deter repetition of this conduct or comparable conduct by others similarly situated. Subject to the limitations in paragraphs (1) and (2), the sanction may consist of, or include, directives of a nonmonetary nature, an order to pay a penalty into court, or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of some or all of the reasonable attorney's fees and other expenses incurred as a direct result of the violation.”
Peake v. Underwood (2014) 227 Cal.App.4th 428, 448 (Peake), explains, “As with Rule 11 (28 U.S.C.) sanctions, Code of Civil Procedure section 128.7 sanctions should be ‘made with restraint’ [citation], and are not mandatory even if a claim is frivolous. [Citations.] Further, when determining whether sanctions should be imposed, the issue is not merely whether the party would prevail on the underlying factual or legal argument. Instead, courts should apply an objective test of reasonableness, including whether ‘any reasonable attorney would agree that [the claim] is totally and completely without merit.’ [Citations.] Thus, the fact that a plaintiff fails to provide a sufficient showing to overcome a demurrer or to survive summary judgment is not, in itself, enough to warrant the imposition of sanctions. [Citations.] [¶] Because our adversary system requires that attorneys and litigants be provided substantial breathing room to develop and assert factual and legal arguments, sanctions should not be routinely or easily awarded even for a claim that is arguably frivolous. Courts must carefully consider the circumstances before awarding sanctions.”
“Under Code of Civil Procedure section 128.7, a court may impose sanctions for filing a pleading if the court concludes the pleading was filed for an improper purpose or was indisputably without merit, either legally or factually. [Citation.] The court here imposed sanctions based on its finding that the claims were legally and factually frivolous. A claim is factually frivolous if it is ‘not well grounded in fact’ and it is legally frivolous if it is ‘not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law.’ [Citation.] In either case, to obtain sanctions, the moving party must show the party's conduct in asserting the claim was objectively unreasonable. [Citation.] A claim is objectively unreasonable if ‘any reasonable attorney would agree that [it] is totally and completely without merit.’ [Citations.]” (Id., at p. 440.)
Kumar v. Ramsey (2021) 71 Cal.App.5th 1110, 1120-1121 (Kumar), states, “ ‘A court has broad discretion to impose sanctions if the moving party satisfies the elements of the sanctions statute.’ [Citation.] Like its federal counterpart, however, rule 11 of the Federal Rules of Civil Procedure (28 U.S.C.), section 128.7 should be utilized only in ‘the rare and exceptional case where the action is clearly frivolous, legally unreasonable or without legal foundation, or brought for an improper purpose.’ [Citation.] ‘Because our adversary system requires that attorneys and litigants be provided substantial breathing room to develop and assert factual and legal arguments, [section 128.7] sanctions should not be routinely or easily awarded even for a claim that is arguably frivolous’ [citation], and instead ‘should be “made with restraint.” ’ [Citation.] Indeed, even if a plaintiff could not successfully defend against either demurrer or summary judgment, that alone is insufficient to support the sanction of dismissal. [Citation.]” (Footnotes 8 and 9 omitted.)
Initially, the court finds that Defendants’ complied with the 21-day period required by Code of Civil Procedure section 128.7, subdivision (c)(1). (Notice of Lodging filed on 10-4-22 under ROA No. 719.) The Notice of Lodging indicates that Defendants served the Motion on Plaintiffs (Aramark Management, LLC and HPSI Services, LLC) on 4-15-22. The filing of this Motion occurred on 5-12-22. Since 5-12-22 is more than 21 days from 4-15-22, Defendants have complied with the 21-day period in Code of Civil Procedure section 128.7, subdivision (c)(1).
The Motion states, “Because the Court already ruled that the allegations in the FAC were insufficient to support Plaintiffs’ claims, [Minute Order at 2], Plaintiffs cannot rely on those allegations to support the claims in the SAC; they must allege different facts. But apparently unwilling to accept the Court’s ruling, Plaintiffs mixed previous allegations with new allegations. To the extent the SAC is based on allegations already found insufficient, it violates subdivisions (b)(1) and (2) of Section 128.7.” (Motion; 4:4-8.) The Motion also states, “Plaintiffs know their new allegations lack evidentiary support, and that such evidence will not be revealed through discovery.” (Motion; 1:5-7.)
Plaintiffs’ Opposition to Defendants’ Motion for Sanctions (Opposition), filed on 9-20-22 under ROA No. 659, states, “Defendants’ argument that Plaintiffs should be sanctioned because certain allegations in the SAC ‘lack evidentiary support’ is meritless. Aside from their conclusory language, Defendants do not argue that the SAC’s allegations lack evidence. Rather, they improperly ask this court to resolve factual disputes as to the evidence in Defendants’ favor. In other words, Defendants concede the existence of evidentiary support, but ask the Court to believe their version of the events instead – based on Defendants’ interpretation of the evidence.” (Opposition; 3:23-28.)
The court’s 3-4-22 Minute Order states in part, “The gravamen of all of the causes of action appear to be that the defendants, through the Borgquists, misappropriated plaintiffs’ business, financial, customer and other information deemed to be ‘confidential and/or proprietary.’ (FAC ¶ 33) Defendants are alleged to have received that confidential information and used it to unfairly compete with the plaintiffs. (FAC ¶¶ 69 & 94.) [¶] Without the allegations of the misappropriation and receipt of plaintiffs’ confidential/trade secret information, none of the causes of action in the FAC would survive independently. [¶] Thus the demurrer is sustained with leave to amend as to the 1st – 5th Causes of Action in the FAC.” After the court’s 3-4-22 Minute Order, Plaintiffs filed a Second Amended Complaint (SAC) on 3-14-22 under ROA No. 171. Defendants filed this Motion, a Demurrer to the SAC (ROA No. 222), and a Motion to Strike (ROA No. 209) on 5-12-22.
On 10-4-22, the court overruled Defendants’ Demurrer to the SAC as to the first, second, fourth, and fifth causes of action in the SAC. (10-4-22 Minute Order.) The court sustained the Demurrer with leave to amend as to the third cause of action in the SAC. (10-4-22 Minute Order.) On 10-4-22, the court denied the motion to strike as to paragraphs 7, 59, 60, 65-67, 72-75, 81, 84, 100, 115 122, 126, 131, 132, 133 in the SAC, and paragraphs 2, 3, 4, and 6 of the Prayer for Relief in the SAC. (10-4-22 Minute Order.) The court granted the motion to strike as to paragraph 75 in the SAC. (10-4-22 Minute Order.)
First, the court finds that the SAC does not improperly exceed the scope of the leave to amend granted by the court on 3-4-22. The court’s 3-4-22 Minute Order does not limit Plaintiff from repeating allegation contained in the First Amended Complaint. The court’s 3-4-22 Minute Order merely states the reason the court sustained the demurrer as required by Code of Civil Procedure section 472d.
Second, the court has already found that the SAC has sufficiently plead the first, second, fourth, and fifth causes of action and denied the motion to strike in its entirety as except for one paragraph. (10-4-22 Minute Order.) The issue for the court under this Motion is to determine whether a claim is frivolous. That is, whether the claims are objectively unreasonable in terms of whether any reasonable attorney would agree that the claims are totally and completely without merit. As stated in Kumar, the failure to successfully oppose a demurrer does not by itself warrant sanctions under Code of Civil Procedure section 128.7. The court recognizes that Defendants’ view of the underlying facts is different that Plaintiffs’ view of the underlying facts. The court’s role at motion pursuant to Code of Civil Procedure section 128.7 is not to resolve those factual disputes.
Based on the above, the court finds that Plaintiffs’ claims are frivolous. Specifically, the court finds that the claims are not objectively unreasonable in terms of whether any reasonable attorney would agree that the claims are totally and completely without merit.
Therefore, the court exercises its discretion and DENIES Defendants’ (The Ensign Group, Inc. and Ensign Services, Inc.) Motion for Sanctions Pursuant to Code of Civil Procedure § 128.7(b) filed on 5-12-22 under ROA No. 196.
Plaintiffs are to give notice.
Motion No. 2:
Based on Plaintiff’s (Aramark Management, LLC) Notice of Withdrawal filed on 8-29-22 under ROA No. 513, Plaintiff’s Motion to Compel Further Responses to Its First Set of Form Interrogatories to Defendant Ensign Services, Inc. (filed on 6-20-22 under ROA No. 343, and scheduled for hearing on 11-29-22) is OFF CALENDAR.