Rai v. Real Time Resolutions CA1/1

Filed 5/25/16 Rai v. Real Time Resolutions CA1/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION ONE
NEELAM BALA RAI,
Plaintiff and Appellant,
A143787
v.
REAL TIME RESOLUTIONS, INC., (Alameda County
Super. Ct. No. RG 14738411)
Defendant and Respondent;
MICHAEL ROONEY,
Objector and Appellant.
Plaintiff Neelam Bala Rai filed an adversary proceeding against defendant Real
Time Resolutions, Inc. (Real Time) in her bankruptcy case, claiming injury from an
allegedly frivolous adversary proceeding filed earlier by Real Time. The bankruptcy
court dismissed Rai’s proceeding, ruling that her state law claims for malicious
prosecution and unfair business practices were preempted by federal law. Rai thereafter
filed the present action, alleging the same claims found preempted by the bankruptcy
court and joining four other claims based on the failure of Real Time to remove a lien
from her real property in 2005.
Real Time demurred to the complaint and sought sanctions against Rai and her
attorney. The trial court sustained the demurrer without leave to amend, finding the
claims first asserted in the bankruptcy court to be barred by the doctrine of res judicata
and holding the remaining claims to be barred by the statute of limitations. The court
also levied sanctions against Rai’s attorney, appellant Michael Rooney, for his refiling of
the claims dismissed in the bankruptcy adversary proceeding. We affirm.
I. BACKGROUND
In August 2005, Rai obtained a line of credit (LoC) from Real Time, secured by a
residence she owned in Berkeley (residence).1 A few months later, in October 2005, Rai
refinanced the mortgage on the residence (mortgage). At closing of the mortgage, Real
Time submitted a demand for payment of the $71,677 outstanding balance of the LoC,
and this demand was satisfied (the payoff). Despite this, the deed of trust associated with
the LoC has never been reconveyed, and the lien remains against her residence.
In March 2010, Rai filed for bankruptcy. Although Rai paid off the outstanding
balance of the LoC in 2005, she apparently resumed drawing against the LoC at some
time prior to her bankruptcy filing. In a schedule submitted in the bankruptcy
proceeding, the contents of which Rai declared to be true under penalty of perjury, she
listed an outstanding debt under the LoC of $300,000. In June 2010, Rai filed a motion
in her bankruptcy case to value the collateral securing the LoC, arguing the LoC debt
should be considered unsecured because the outstanding balance of the mortgage, which
Rai claimed to be the senior lien, exceeded the value of the residence. (11 U.S.C.
§ 506(a), (d).) The bankruptcy court granted the motion, declared that the LoC lien could
not be enforced, and held that it would be voided upon completion of the bankruptcy
proceedings.
Over a year later, in September 2011, Real Time filed an adversary proceeding in
Rai’s bankruptcy case, seeking a determination of the LoC lien priority vis-à-vis the
mortgage. The bankruptcy court dismissed this proceeding. Although the bankruptcy
1
The record is not always clear as to the identity of parties acting on behalf of the
lender in connection with the LoC. Consistent with the practice of the parties, we use the
designation “Real Time” to refer generically to entities acting in this capacity.
2
court prepared a decision explaining its rationale, that decision is not found in the
appellate record.2
At some point, Rai filed an adversary proceeding against Real Time in the
bankruptcy court. An amended complaint in that proceeding, filed in August 2013,
alleged causes of action for malicious prosecution and unfair business practices under
Business and Professions Code section 17200, on the ground Real Time’s prior adversary
proceeding was meritless and was maintained for the improper purpose of extorting an
undeserved settlement from Rai.
Real Time moved for judgment on the pleadings on Rai’s adversary proceeding,
arguing state law claims, such as Rai’s malicious prosecution and unfair business
practices claims, “are preempted by applicable bankruptcy law when such causes of
action arise out of a prior proceeding in bankruptcy court under bankruptcy law.” The
bankruptcy court granted the motion for judgment on the pleadings “[f]or the reasons
stated on the record at the hearing,” and judgment dismissing Rai’s adversary proceeding
was entered on August 15, 2014. A transcript of the hearing at which the bankruptcy
court explained its reasoning is not included in the appellate record, but we presume, and
Rai does not dispute, that the court accepted Real Time’s preemption argument.3 There is
no evidence in the appellate record of an appeal of this judgment.
Less than two weeks later, Rai filed the present action in superior court against
Real Time and other parties. Her operative pleading, the first amended complaint
(complaint), alleges causes of action for breach of contract, cancellation of instrument,
negligence, negligence per se, malicious prosecution, and unfair business practices. The
2
Rai’s first amended complaint in this action alleges that the bankruptcy court
dismissed Real Time’s adversary proceeding after concluding that Real Time had notice
of the intervening recordation of the mortgage lien when it permitted Rai to make draws
against the LoC following the payoff. As a result, the LoC lien did not qualify for a
superior position.
3
The record does contain a transcript from an earlier hearing at which the
bankruptcy judge expressed favorable interest in the preemption argument. It is possible
this is the hearing to which the bankruptcy judge was referring, but the order is unclear in
this regard.
3
breach of contract action alleges that the LoC was paid off at the time of closing of the
mortgage and contends defendants violated the LoC contract by failing to reconvey the
deed of trust at that time. The claim seeks specific performance of the contract. The
cancellation of instrument cause of action seeks execution of a certificate of discharge of
the LoC under Civil Code section 2941, on the grounds the LoC was satisfied. The two
negligence causes of action contend defendants were negligent in failing to reconvey the
LoC deed of trust upon Rai’s satisfaction of the outstanding balance. The malicious
prosecution and unfair business practices claims are materially identical to the causes of
action dismissed by the bankruptcy court.
Real Time filed a demurrer to the complaint, arguing primarily that the contract,
cancellation, and negligence claims were barred by the statute of limitations and all
claims were barred by the doctrine of res judicata. At the same time, Real Time filed a
motion for sanctions against Rai and Rooney, arguing this action is frivolous.
The trial court sustained the demurrer without leave to amend and granted the
motion for sanctions in part. In an extensive written opinion, the trial court found the
malicious prosecution and unfair business practices claims barred by res judicata, but it
found no such bar to the remaining causes of action. The court, however, found these
claims barred by the statute of limitations, since all were premised on Real Time’s failure
to extinguish the lien in 2005, when it received the payoff. The court rejected Rai’s
argument that maintenance of the lien was, in effect, a continuing violation. The court
denied the motion for sanctions against Rai, but it granted limited sanctions against
Rooney, based on his refiling of the malicious prosecution and unfair business practices
claims previously dismissed by the bankruptcy court.
II. DISCUSSION
Rai contends the trial court erred in sustaining the demurrer without leave to
amend, while Rooney contends the trial court abused its discretion in awarding sanctions.
“ ‘A demurrer tests the legal sufficiency of the complaint . . . .’ [Citation.] In
determining whether appellant properly stated a claim for relief, ‘our standard of review
is clear: “ ‘We treat the demurrer as admitting all material facts properly pleaded, but not
4
contentions, deductions or conclusions of fact or law. [Citation.] We also consider
matters which may be judicially noticed.’ [Citation.] Further, we give the complaint a
reasonable interpretation, reading it as a whole and its parts in their context. . . .” ’
[Citation.] Our review is de novo.” (Golden Gate Hill Development Co., Inc. v. County
of Alameda (2015) 242 Cal. App. 4th 760, 765.)
A. Res Judicata
“ ‘Res judicata’ describes the preclusive effect of a final judgment on the merits.”
(Mycogen Corp. v. Monsanto Co. (2002) 28 Cal. 4th 888, 896.) Because “[t]he normal
rules of res judicata and collateral estoppel apply to the decisions of bankruptcy courts,”
(Katchen v. Landy (1966) 382 U.S. 323, 334), the involuntary dismissal of an adversary
proceeding acts as a judgment on the merits for purposes of res judicata (In re Schimmels
(9th Cir. 1997) 127 F.3d 875, 884). When a federal court renders a judgment while
acting within its federal question jurisdiction, as the bankruptcy court did here, California
courts must give to that judgment the same preclusive effect the judgment would have in
a federal court. (Semtek Int’l Inc. v. Lockheed Martin Corp. (2001) 531 U.S. 497, 507;
Martin v. Martin (1970) 2 Cal. 3d 752, 761.) Accordingly, we apply federal law in
determining the preclusive scope of the bankruptcy court’s judgment.
Under federal law, “Res judicata . . . applies only where there is ‘(1) an identity of
claims, (2) a final judgment on the merits, and (3) privity between parties.’ [Citation.]
. . . We consider four factors in determining an ‘identity of claims’: [¶] (1) whether rights
or interests established in the prior judgment would be destroyed or impaired by
prosecution of the second action; (2) whether substantially the same evidence is presented
in the two actions; (3) whether the two suits involve infringement of the same right; and
(4) whether the two suits arise out of the same transactional nucleus of facts. [¶]
[Citation.] ‘The last of these criteria is the most important.’ [Citation.] [¶] . . . [¶] . . . A
plaintiff need not bring every possible claim. But where claims arise from the same
factual circumstances, a plaintiff must bring all related claims together or forfeit the
opportunity to bring any omitted claim in a subsequent proceeding.” (TIRN v. U.S. Dept.
of State (9th Cir. 2012) 673 F.3d 914, 917–918.)
5
We are counseled by the Ninth Circuit, “in the unique bankruptcy context, ‘the
principle of res judicata should be invoked only after careful inquiry because it blocks
unexplored paths that may lead to truth . . . .’ ” (In re Enewally (9th Cir. 2004) 368 F.3d
1165, 1172–1173.)
There is no real question the two claims actually decided by the bankruptcy court
are barred by res judicata. As pleaded in this action, the claims are materially identical to
the claims dismissed by the bankruptcy court. Both are based on Real Time’s allegedly
wrongful filing of the adversary proceeding; both seek damages for the loss of rental
value during the pendency of Real Time’s adversary proceeding; and much of the
language in the two pleadings is identical. (See DCFS USA, LLC v. District of Columbia
(D.D.C. 2011) 820 F. Supp. 2d 1, 3 [claim barred by res judicata when identical to claim
decided in earlier adversary proceeding].) The judgment in the bankruptcy adversary
proceeding therefore precluded Rai’s refiling of these claims in a subsequent state
lawsuit.
Rai makes no argument against the application of res judicata to these claims in
her opening brief. In the reply brief, she argues a finding of preemption is not a decision
on the merits and the bankruptcy court lacked subject matter jurisdiction because it erred
in finding Rai’s claims to be preempted. Both arguments are without merit. Contrary to
Rai’s contention, a judgment based on preemption is a decision on the merits for
purposes of res judicata. The legal basis of the decision does not matter, so long as the
claims are actually resolved. (Stewart v. U.S. Bancorp (9th Cir. 2002) 297 F.3d 953, 956
[“The phrase ‘final judgment on the merits’ is often used interchangeably with ‘dismissal
with prejudice.’ [Citations.] . . . ‘[U]nless the court in its order for dismissal otherwise
specifies, a dismissal . . . other than a dismissal for lack of jurisdiction, for improper
venue, or for failure to join a party under Rule 19, operates as an adjudication upon the
merits.’ ”]; In re Schimmels, supra, 127 F.3d 875, 884 [involuntary dismissal of an
adversary proceeding is a judgment on the merits for purposes of res judicata].) Rai cites
no relevant case law to the contrary. With respect to subject matter jurisdiction, as the
trial court pointed out, Rai argued extensively in the bankruptcy court that it did have
6
subject matter jurisdiction over the claims. Further, an error of law, if error it was, did
not retroactively divest the court of such jurisdiction. (State of California v. Superior
Court (2004) 32 Cal. 4th 1234, 1239.) Again, Rai cites no relevant case law in support of
her position.
The remaining claims have a different factual basis. Rather than Real Time’s
maintenance of the adversary proceeding in 2011, these claims are based on Real Time’s
failure to extinguish the LoC lien in 2005, when it received the payoff.4 We find it
unnecessary to decide whether these claims, too, are barred by res judicata or collateral
estoppel because, as discussed below, we conclude they are barred by the statute of
limitations.
B. Statute of Limitations
Rai’s claims for breach of contract, cancellation of instrument, negligence, and
negligence per se are all premised on the failure of Real Time to reconvey the lien in
2005 when it received the payoff. While Rai does not dispute the statutes of limitations
on the claims would have long since lapsed if they accrued at that time, she contends
accrual of her causes of action was tolled for the duration of Real Time’s failure to
reconvey the deed of trust under the doctrines of continuing violation or continuous
accrual. We do not address the application of these doctrines because we conclude that,
even if they are applicable here, the statute of limitations for claims premised on the
allegedly wrongful maintenance of the lien accrued when Rai resumed making
withdrawals against the LoC, since Real Time’s obligation to reconvey the deed of trust
on the basis of the payoff ceased once Rai incurred further debt under the LoC. Because
Real Time’s submissions demonstrate conclusively that Rai resumed drawing on the LoC
more than four years prior to her filing of this action, the claims are now barred by the
statute of limitations.
4
In her opening brief, Rai seems to suggest these four claims are based on events
occurring in the bankruptcy court, as well as the payoff. As pleaded, the claims refer
solely to the obligation arising out of the payoff, and our decision is based on that
construction of the claims.
7
“The limitations period, the period in which a plaintiff must bring suit or be
barred, runs from the moment a claim accrues. [Citations.] Traditionally at common
law, a ‘cause of action accrues “when [it] is complete with all of its elements”—those
elements being wrongdoing, harm, and causation.’ [Citation.] . . . [¶] To align the actual
application of the limitations defense more closely with the policy goals animating it, the
courts and the Legislature have over time developed a handful of equitable exceptions to
and modifications of the usual rules governing limitations periods. These doctrines may
alter the rules governing either the initial accrual of a claim, the subsequent running of
the limitations period, or both. . . . [U]nder the theory of continuous accrual, a series of
wrongs or injuries may be viewed as each triggering its own limitations period, such that
a suit for relief may be partially time-barred as to older events but timely as to those
within the applicable limitations period.” (Aryeh v. Canon Business Solutions, Inc.
(2013) 55 Cal. 4th 1185, 1191–1192.)
Even if we were to assume Rai’s causes of action did not accrue so long as Real
Time allegedly wrongfully maintained the lien against her property, they necessarily
would have accrued once Real Time’s wrongful maintenance of the lien ceased. One
way for the allegedly wrongful maintenance to end, plainly, was for Real Time to
reconvey the deed of trust.
In addition, Real Time’s alleged wrongful maintenance of the lien would have
ceased if Rai made a new draw under the LoC, regardless of whether the deed of trust had
been reconveyed. Under the terms of the LoC, Real Time was required to lend Rai
money on demand through August 2010, up to the maximum credit limit. Rai could draw
against the LoC merely by writing a check or using a credit card issued to her by Real
Time in connection with the LoC. Under the terms of the deed of trust, the trustee had no
obligation to reconvey the deed unless Rai had performed all of her obligations under the
LoC. Not surprisingly, one of those obligations was to repay all debts incurred under the
LoC. Accordingly, assuming Real Time had an obligation to reconvey the deed of trust
once it had received the payoff, which satisfied Rai’s outstanding debt under the LoC,
that obligation ceased if Rai incurred additional debt under the line of credit. Because
8
Rai was no longer in the position of having performed her obligation under the LoC to
pay all existing debts, the trustee no longer had an obligation to reconvey the deed of
trust. For this reason, Real Time’s allegedly wrongful maintenance of the lien following
the payoff ceased if Rai made further draws on the LoC, and Rai’s causes of action based
on wrongful maintenance of the lien accrued upon the cessation of Real Time’s wrongful
maintenance.
Based on the documents submitted by Real Time in its request for judicial notice,
it is clear Rai made additional draws against the LoC, thereby causing her various claims
for wrongful maintenance of the lien to accrue. As noted above, Rai submitted a sworn
schedule to the bankruptcy court upon commencement of the proceeding acknowledging
an outstanding balance under the LoC of $300,000. This filing represents an admission
by Rai of the existence and amount of the debt.5 Further, Rai thereafter successfully
sought a ruling from the bankruptcy court under Bankruptcy Code section 506 (11 U.S.C.
§ 506) that this debt was deemed unsecured because the collateral underlying the debt
was insufficient. She is therefore judicially estopped from denying the existence of the
debt. (See Jogani v. Jogani (2006) 141 Cal. App. 4th 158, 179–180.)
Further, because those draws occurred more than four years prior to her filing of
this action, the statute of limitations on her claims based on the alleged wrongful
5
The trial court properly took judicial notice of the bankruptcy schedule under
Evidence Code section 452, subdivision (d), which permits judicial notice of the records
of state and federal courts. While we cannot take judicial notice of the truth of statements
contained in a document merely because the document itself is a subject of judicial notice
(Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal. App. 4th 256, 265–266, disapproved
on other grounds in Yvanova v. New Century Mortgage Corp. (2016) 62 Cal. 4th 919,
939, fn. 13), the contents of the bankruptcy schedule were admissible under Evidence
Code section 1220, which creates a hearsay exception for admissions of a party contained
in a sworn statement. (Estate of Anderson (1997) 60 Cal. App. 4th 436, 441.) Although
Rai contends she “has always denied further advances,” the bankruptcy schedule plainly
demonstrates that further advances occurred. Rai acknowledged as much when she
admitted in the original complaint in this action that Real Time extended to her
“additional . . . credit” following the payoff. Because there is no suggestion Rai received
any financing from Real Time other than the LoC, this additional credit must have come
from the LoC.
9
maintenance of the lien expired prior to the filing. For purposes of this analysis, we
assume the longest statute of limitations potentially applicable to her claims is the four-
year statute applicable to her claim for breach of a written contract. (Code Civ. Proc.,
§ 337, subd 1.) It unnecessary to decide the precise statute of limitations applicable to the
two negligence claims, since Rai proposes no possible statute of limitations longer than
four years.6 (E.g., Code Civ. Proc., § 338, subd. (b) [three-year statute of limitations for
trespass or injury to real property]; Code Civ. Proc., § 343 [four-year residual statute of
limitations].) Rai’s initial bankruptcy schedule noting a debt under the LoC was filed in
March 2010. The motion for valuation of the lien was filed in June 2010. The present
lawsuit was not filed until August 2014, more than four years after the submission of both
the schedule and the motion. Accordingly, Real Time’s submission established that Rai
had made further draws on the LoC no later than a date more the four years prior to the
filing of her lawsuit. The statute of limitations had therefore expired on her claims for
wrongful maintenance of the lien by the time she filed this action.
C. Sanctions Against Rooney
“[Code of Civil Procedure] [s]ection 128.7 requires that all pleadings filed with
the court be signed by an attorney of a represented party, or, if the party is not
represented by counsel, by the party. [Citation.] The signing of a filed pleading
constitutes a certification by the person signing it that after a reasonable inquiry, the
pleading (1) is not being presented for an improper purpose; (2) contains positions that
are not frivolous; (3) alleges factual matter having evidentiary support; and (4) contains
denials of factual allegations, which denials have evidentiary support. [Citation.] Based
upon these requirements, the court, after proper statutory notice, may impose
sanctions upon the attorneys, law firms, or parties who have improperly certified a
pleading in violation of subdivision (b) of section 128.7.” (Optimal Markets, Inc. v.
Salant (2013) 221 Cal. App. 4th 912, 919–920, fns. omitted.) For purposes of Code of
6
The final claim based on wrongful maintenance, for an order cancelling the lien,
was mooted when Rai made further draws on the line of credit, thereby removing any
obligation of Real Time to reconvey the deed of trust as a result of the payoff.
10
Civil Procedure section 128.7 (hereafter section 128.7), a claim 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.’ ” (Peake v. Underwood (2014)
227 Cal. App. 4th 428, 440.) In making this judgment, courts must “apply an objective
test of reasonableness, including whether ‘any reasonable attorney would agree that [the
claim] is totally and completely without merit.’ ” (Id. at p. 448.) We review an award of
sanctions under section 128.7 for abuse of discretion. (Peake, at p. 441.)
Rooney contends his refiling of the claims for malicious prosecution and unfair
business practices was not legally frivolous because the claims were supported by a good
faith argument for the reversal of the law of preemption. He cites Graber v. Fuqua
(Tex. 2009) 279 S.W.3d 608 (Graber), in which the Texas Supreme Court held that a
claim for malicious prosecution premised on the alleged wrongful filing of an adversary
proceeding in bankruptcy court is not preempted by federal law. (Id. at pp. 612, 617,
620.) The Graber court therefore reached a legal conclusion directly contrary to that of
the Ninth Circuit cases on which the bankruptcy court relied in finding Rai’s claims
preempted (e.g., MSR Exploration, Ltd. v. Meridian Oil, Inc. (9th Cir. 1996) 74 F.3d 910,
916) and California cases addressing the same issue (e.g., Pauletto v. Reliance Ins. Co.
(1998) 64 Cal. App. 4th 597, 606 [following MSR]). Rooney argues he intended to urge
the trial court to follow Graber in finding these claims not preempted by federal law.
Had Rai initially filed her malicious prosecution and unfair business practice
claims in state court, as the plaintiff in Graber did, she might have had a good faith basis
for asserting them, premised on the reasoning of Graber. By the time Rooney filed the
complaint, however, the issue of preemption had been rendered irrelevant. Once the
bankruptcy court had dismissed the claims, the doctrine of res judicata precluded refiling
of the claims in state court, regardless of the merits of the bankruptcy court’s ruling on
preemption. Claims coming within the scope of res judicata are barred even if the
11
judgment disposing of them was erroneous.7 (U.S. v. ITT Rayonier, Inc., supra, 627 F.2d
at p. 1004 [“The doctrine of res judicata does not depend on whether the prior judgment
was free of error. [Citation.] If it did, judgments would lack finality, the very rationale
of the rule of res judicata.”].) Short of a demonstration of lack of jurisdiction, the
bankruptcy court’s decision could not be challenged in what amounts to a collateral
attack in the superior court. (In re Bailleaux (1956) 47 Cal. 2d 258, 262, disapproved on
other grounds in In re Russell (1974) 12 Cal. 3d 229, 235 [grounds for collateral attack on
federal judgment are “limited”]; Bank of America v. Jennett (1999) 77 Cal. App. 4th 104,
118.) If Rai was to challenge the bankruptcy court’s preemption holding, her only
avenue was an appeal of that decision in federal court.
In the absence of some good faith argument for avoiding application of the
doctrine of res judicata with respect to the malicious prosecution and unfair business
practice claims, the trial court did not abuse its discretion in finding Rooney’s filing of
them to have been legally frivolous. As discussed above, Rooney raised no argument
against the application of res judicata to these claims in the opening brief. The arguments
raised in the reply brief, again as discussed above, were wholly without merit and made
without citation to relevant legal authority. We therefore have no basis for finding an
abuse of discretion.
Rooney also argues the trial court erred in granting sanctions because Real Time
failed to comply with the safe harbor provision of section 128.7, subdivision (c)(1). That
subdivision “requires the party seeking sanctions to serve on the opposing party, without
filing or presenting it to the court, a notice of motion specifically describing the
sanctionable conduct. Service of the motion initiates a 21-day ‘hold’ or ‘safe harbor’
period. [Citations.] During this time, the offending document may be corrected or
7
For this reason, we have not separately addressed Rai’s argument in the opening
brief that her “claim for malicious prosecution [should be] reinstated because the
Bankruptcy Code does not preempt her claim.” Under the doctrine of res judicata, the
merits of the bankruptcy court’s ruling are irrelevant (U.S. v. ITT Rayonier, Inc. (9th Cir.
1980) 627 F.2d 996, 1004), and we have no power to “reinstate” Rai’s claims.
12
withdrawn without penalty. If that occurs, the motion for sanctions ‘ “shall not” ’ be
filed. [Citation.] [¶] . . . ‘ “The purpose of the safe harbor provisions is to permit an
offending party to avoid sanctions by withdrawing the improper pleading during the safe
harbor period. [Citation.] This permits a party to withdraw a questionable pleading
without penalty, thus saving the court and the parties time and money litigating the
pleading as well as the sanctions request.” ’ ” (Li v. Majestic Industrial Hills LLC (2009)
177 Cal. App. 4th 585, 590–591, fn. omitted.)
Rooney argues that within 21 days after filing of Real Time’s motion for
sanctions, Rai withdrew the original complaint and filed her first amended complaint,
thereby satisfying subdivision (c)(1) of section 128.7. The first amended complaint,
however, did not “withdraw[] or appropriately correct[]” the malicious prosecution and
unfair business practice claims. (Ibid.) It merely amended one of the claims by adding a
paragraph of legal argument addressing the claim for sanctions. Because the amended
complaint neither withdrew nor materially amended the “challenged . . . claim[s],”
Rooney failed to satisfy subdivision (c)(1). (Ibid.)
Rooney also argues the trial court failed to make necessary findings under
section 128.7, subdivision (d), which states, in relevant part: “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.”8 Subdivision (d) does not,
however, require that findings to this effect be made. Rather, the trial court’s findings
under section 128.7 are governed by subdivision (e), which states: “When imposing
sanctions, the court shall describe the conduct determined to constitute a violation of this
section and explain the basis for the sanction imposed.” Here, the trial court described in
detail the conduct on which the sanctions order was based and explained the amount of
sanctions was determined by the fees paid by Real Time for preparation and argument of
8
Rooney’s argument is phrased as a challenge to the court’s findings, but he also
seems to suggest the amount of the sanction constituted an abuse of discretion. To the
extent Rooney intends to challenge the amount of sanctions, we find no abuse of
discretion.
13
the sanctions motion. The court noted that it declined to award the cost of fees incurred
in connection with the demurrer because Real Time had not made a timely request for
those fees, and also declined to award “an additional amount of sanctions of $10,000
solely to deter future bad faith or frivolous filings.” These findings are sufficient under
section 128.7. (Hopkins & Carley v. Gens (2011) 200 Cal. App. 4th 1401, 1418
[approving essentially identical findings].)
III. DISPOSITION
The judgment of the trial court is affirmed. Real Time may recover its costs on
appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)
14
_________________________
Margulies, Acting P.J.
We concur:
_________________________
Dondero, J.
_________________________
Banke, J.
A143787
15