Makovoz Law prevailed on terminating sanctions for our client, ending a multi-million dollar case without a jury trial, in a breach of contract litigation between a management company and a large HOA. In addition, Makovoz Law succeeded in having Defendants counsel disqualified and significant monetary sanctions awarded.
According to the Court’s Final Statement of Decision, an HOA Board and its CEO, broke into Plaintiff’s email account, and monitored and took emails/documents, including attorney-client privileged communications. As the Final Statement of Decision found, Plaintiff only found out about the access to its emails after some emails were sent to its clients that could only have come from a client list contained in the email account. As stated in the Decision, Plaintiff’s attempt to change the password, led to the account being taken over. Investigations into access into the accounts determined the identity of some actors and subpoenas determined a long list of IP numbers, disguised with VPNs, who had accessed the account over many months. The court entered interim orders and set an evidentiary hearing. After years of discovery battles and compelled depositions, the Court held a two week evidentiary hearing, then considered hundreds of pages of briefing, before entering judgment in Plaintiff’s favor due to the egregiousness of the conduct.
The seminal case granting terminating sanctions where documents, including some privileged ones, belonging to one litigant were unlawfully accessed by the opposing litigant is Slesinger v. The Walt Disney Co., (2007) 155 Cal. App. 4th 736. In Slesinger, the appeals court affirmed terminating sanctions on the basis that “when a plaintiff's deliberate and egregious misconduct makes any sanction other than dismissal inadequate to ensure a fair trial, the trial court has inherent power to impose a terminating sanction.” Id. at 740. It held “a court's exercise of inherent power to dismiss for misconduct need not be preceded by violation of a court order.” Id. at 763.
In Slesinger, a shareholder in the Plaintiff corporation and her husband, whom the Court called an agent for the Plaintiff company [SSI], both “managed the lawsuit against Disney [the Defendant],” hiring an unlicensed investigator [Sands] to pick through the opposing party’s trash for documents. Id. at 773. Plaintiff’s agent [Bentson] was the one who worked with the investigator [Sands], and received documents from him. The decision reflects that “Bentson admonished Sands to ‘make sure what you're doing is legal and that you do it by the book.’” Id. at 742. Bentson received and passed on documents he got from the investigator to Plaintiff’s counsel, and the Company Shareholder, Patti Slesinger. The “sole corporate officer (President) and sole board member” was a different person [Shirley Laswell] whom the record reflects appeared unaware that the others had hired the investigator, but who later too passively received some documents from Bentson. Id. 742. The Appellate Court noted there was no supervision over the investigator by SSI, thus “With no supervision by SSI, Sands was free to obtain Disney documents as he saw fit.” Id. at 743.
The Slesinger trial court found in its Statement of Decision that Plaintiff’s “‘unlawfully obtained’ documents, and observes that ‘SSI had no right to break laws to obtain evidence.’” Id. at 768. The Appellate court, in turn, went one step further and found that the investigator “thus committed the crimes of theft (Pen.Code, § 484) and burglary (Pen.Code, § 459).” Id. at 768. It held the Plaintiff liable for such conduct, awarding terminating sanctions.
Another important case in this area is Department of Forestry & Fire Protection v. Howell (2017) 18 Cal.App.5th 154, 184, 190, in which the appellate court affirmed a trial court decision granting terminating sanctions including under Code Civ. Proc. §2023.030 §2023.010 and “inherent authority” as “a first remedy” under the Slesinger case. The sanctions were granted against the Plaintiff entity (Cal Fire), including because Plaintiff’s “investigator Joshua White engaged in spoliation when he destroyed his field notes,” the investigator altered a document, and investigator testified “untruthfully”. The Appellate Court determined there was evidence to support that Plaintiff (Cal Fire) deserved terminating sanctions, including because Cal Fire “presented false or evasive deposition testimony by White; and (4) engaged in spoliation when White improperly destroyed his field notes despite probable civil litigation” and violated discovery orders etc., In fact, as the trial court found “Cal Fire and its counsels’ vast array of discovery abuses suggests that they perceive themselves as above the rule of law. With their abuses infecting virtually every aspect of the discovery process, from false testimony, to pervasive false interrogatory responses, to spoliation of critical evidence, to willful violations of the Court's Orders requiring production…documents, Defendants and the Court simply have no reason to believe that these Defendants can receive, or could ever have received, a fair trial under these circumstances.” Id. at 185
Thus, while terminating sanctions are far less common than the usual outcomes involving judge/jury trials or settlements, the reality is that these form of sanctions have been granted in various cases, and can be a tool available in a litigator’s arsenal given the right circumstances.
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