Judge: William D. Claster, Case: 21-01228073, Date: 2022-12-16 Tentative Ruling
Defendants' Trident Pacific Real Estate Group, Inc. and Gregg Williams Notice of Motion and Motion for Sanctions Against Nam Pham and DMVH LLC and Their Attorneys Pursuant to CCP Section 128.7 ROA 110
Defendants Trident Pacific Real Estate Group, Inc. and Gregg Williams move for sanctions under CCP § 128.7 against Plaintiffs Nam Pham and DMVH LLC, as well as their counsel of record, David S. Lee, Cynthia D. Ralls, and Lee, Landrum & Ingle, APC. For the reasons set forth below, the motion is GRANTED. The Court enters the following sanctions:
1. This action will be dismissed with prejudice.
2. Plaintiffs are ordered to pay Defendants $27,791.45 in sanctions. Of this amount, $23,607.45 is levied jointly and severally against Plaintiffs and their counsel.
Defendants’ two requests for judicial notice are GRANTED.
I. Service and Filing
Per a proof of service attached to the motion, the opening moving papers were electronically served on Plaintiffs on July 27, 2022. Accounting for the two-court-day extension for electronic service, Plaintiffs’ safe harbor period expired on August 19, 2022. Defendants filed the motion on August 23, 2022, after the safe harbor period expired.
II. Standard of Review
“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, among other things, the claims therein are neither factually nor legally frivolous. (CCP § 128.7(b).) “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.]” (Peake v. Underwood (2014) 227 Cal.App.4th 428, 440.)
The party seeking sanctions bears the burden of showing “the [other] party’s conduct in asserting the claim was objectively unreasonable.” (Ibid.) “A claim is objectively unreasonable if ‘any reasonable attorney would agree that [it] is totally and completely without merit.’ [Citation.]” (Ibid.)
III. Merits of Motion
Defendants served as court-appointed receivers in Hanh Thi Hoang v. DMVH, LLC et. al., Case No. A-18-779912-C, in the Eighth Judicial District Court in Clark County, Nevada (the “Receivership Action”). As part of the appointment, Defendants were charged with administering real properties owned by Plaintiffs. Plaintiffs allege that during the receivership, Defendants committed fraudulent acts, improperly commingled funds, and committed numerous other tortious and/or ultra vires acts that damaged Plaintiffs.
California law is clear that a receiver can only be sued with the permission of the court that appointed him. (See Ostrowski v. Miller (1964) 226 Cal.App.2d 79, 84 [“A receiver is a court appointed official who can be sued only by permission of the court appointing him.”].) It is undisputed that Plaintiffs (then represented by Pham, acting in pro per on behalf of himself and DMVH) failed to secure the permission of the court in the Receivership Action before filing suit in October 2021. In fact, they failed to seek such permission until March 24, 2022, two months after Plaintiffs’ counsel first appeared and roughly a month after they filed the operative FAC.
No reasonable attorney would have filed this suit, or maintained it after substituting in as counsel, without first seeking permission from the court in the Receivership Action to do so. The requirement for court permission to sue a receiver is unequivocal. This action was legally frivolous from the moment it was filed.
Were that not enough, the court in the Receivership Action not only denied Plaintiffs’ untimely request for permission to sue Defendants, it also specifically enjoined them from continuing to prosecute this lawsuit. (Defs.’ 1st RJN, Ex. 1.) Not only did Plaintiffs and their counsel do something no reasonable attorney would have done, but their continued prosecution of this action was in direct violation of the Nevada court’s injunction. To be sure, Plaintiffs attempted to appeal that order. (The appeal was dismissed because the order was unappealable, so Plaintiffs have apparently sought writ review. See Defs.’ 2nd RJN, Ex. 5; Ralls Decl., Ex. A.) But they put on no evidence that they even requested a stay of the injunction pending appeal, let alone evidence that such a stay was granted. No reasonable attorney would have continued to litigate this case in these circumstances.
Plaintiffs have no real response to the foregoing. They contend that anyone in Pham’s shoes would feel the same way he does. But feelings are not a legal basis for filing and maintaining a lawsuit, nor for disregarding blackletter law about the prerequisites for suing a receiver. Plaintiffs’ counsel say they do not believe a reasonable attorney would find this litigation frivolous, but the test for sanctionable conduct isn’t their subjective beliefs about what a reasonable attorney might do.
Plaintiffs point to the rule that sanctions are inappropriate only if claims are not warranted by existing law or by a good faith argument to change the law. But their opposition brief identifies no existing California law that permits Plaintiffs to sue Defendants without permission of the Nevada court. Nor do they make a single argument based on legal reasoning (as opposed to Pham’s feelings) for a change in the law.
In short, both the initial filing of this lawsuit and its continued prosecution are sanctionably frivolous.
IV. Remedy
“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.” (CCP § 128.7(d).)
Pham declares, “I may not be a sophisticated man with vast legal knowledge, but I know the difference between right and wrong. What happened in the Nevada state court system on my case was wrong. . . . I refuse to accept defeat until every last effort has been made to correct the wrongs that have been perpetrated against me and my company, even if that means facing the possibility of being sanctioned by this court.” (Pham Decl., ¶¶ 4-5.) Pham’s testimony makes clear that he will continue prosecuting this and similar actions unless and until he is stopped, regardless of what the Nevada court has already told him. He must be deterred from doing so.
Counsel’s arguments hardly fare better than Pham’s testimony. The opposition makes clear that counsel is willing to prosecute a case based on their client’s feeling that he has been wronged, without regard to whether the law permits it. This, too, must be deterred.
Accordingly, the Court orders this case be dismissed with prejudice as a sanction.
In addition, the Court finds that an award of attorney’s fees is warranted for effective deterrence. The Court has reviewed the billing records submitted by defense counsel and finds the rates charged to be reasonable for this market. From a review of the time entries (which reflect a reasonable amount of hours worked) and the litigation costs bill, all time and costs billed by defense counsel on this matter reflect “fees and other expenses incurred as a direct result of the violation,” which has been sanctionable since the moment it was filed. (Defendants have not, for example, pursued cross-claims against Plaintiffs, which would be an expense not directly resulting from the violation.) The Court therefore orders Plaintiffs to pay attorney’s fees and costs to Defendants in the amount of $27,791.45 as a sanction. Of this amount, $23,607.45 was incurred after Plaintiffs’ counsel associated in. Accordingly, David S. Lee, Cynthia D. Ralls, and Lee, Landrum & Ingle, APC are sanctioned jointly and severally with Plaintiffs for $23,607.45 as a sanction. (This leaves $4,184 for which Plaintiffs are solely responsible.) Counsel are reminded of their reporting obligations under Bus. & Prof. Code § 6068(o).