Manhan v. Gallagher

Filed 3/26/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
JONATHAN MANHAN et al.,
Plaintiffs and Appellants,
A158152
v.
SHANNON GALLAGHER, (City & County of San Francisco
Super. Ct. No. CGC18563734)
Defendant and Respondent.
Plaintiffs Jonathan and Jordan Manhan appeal from an order of the
trial court setting aside discovery sanctions they obtained against defendant
Shannon Gallagher. Plaintiffs argue that because they filed a voluntary
dismissal, the court lacked jurisdiction to reconsider and set aside the prior
sanctions orders. We affirm the order.
FACTUAL AND PROCEDURAL BACKGROUND
This case arises from a landlord-tenant dispute regarding a residential
lease. Plaintiffs filed suit against defendant alleging causes of action for
breach of contract and bad faith retention of a security deposit on the ground
that defendant wrongly withheld about $4,800 from their security deposit.
During the litigation, plaintiffs filed motions to compel further responses to
requests for admission and form interrogatories and requested sanctions.
With regard to their motion to compel further responses to their request for
admissions, plaintiffs sought $3,060 in monetary sanctions pursuant to Code
of Civil Procedure sections 2023.030, subdivision (a), and 2033.290,
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subdivision (d).1 With regard to their motion to compel further responses to
their form interrogatories, plaintiffs requested $3,360 in monetary sanctions
pursuant to sections 2023.030, subdivision (a), and 2030.300, subdivision (d).
Plaintiffs claimed these amounts constituted the reasonable value for the
time their attorney spent bringing the motions plus filing fees. The requests
for sanctions were supported by declarations from plaintiffs’ counsel—
associate attorney Matthew G. Whitten of the firm Brown, White and Osborn,
located in Los Angeles—filed under penalty of perjury, stating that his billing
rate in this particular matter was $300 per hour.
Minute orders for March 4, 2019 indicate the trial court granted both
motions to compel and awarded the requested sanctions. Written orders
granting the sanctions against defendant and ordering her to pay plaintiffs
were filed on March 20, 2019.
On April 15, 2019, plaintiffs filed a request for dismissal of the entire
action without prejudice. On the same day, defendant filed a motion for
reconsideration or to set aside the aforementioned sanctions orders. In her
motion, defendant acknowledged that plaintiffs had moved to dismiss their
lawsuit. She explained the basis for her motion for reconsideration under
section 1008 as follows: on March 20, 2019, she learned from a declaration
filed by plaintiffs’ lead attorney, Thomas Brown, that counsel was
representing plaintiffs “pro bono” and that plaintiffs incurred no legal fees in
connection with their suit. This was at odds with attorney Whitten’s
representation in support of the motions for sanctions that his billing rate in
this matter was $300 per hour. Alternatively, defendant asked the court to
set aside the sanctions orders pursuant to section 473’s provision for
1 All further statutory references are to the Code of Civil Procedure
unless otherwise indicated.
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discretionary relief. On this point, she claimed that her “due process rights
were overstepped” because she was in pain when she came to court, impaired
because of her pain and medications, and so mistakenly submitted to both
motions and the requests for sanctions when she thought she was only
submitting to the court’s question regarding the first issue pertaining to the
form interrogatories.
On May 2, 2019, defendant filed another declaration in support of her
motion for reconsideration or to set aside, in which she noted that plaintiffs
failed to file opposition to her motion and the time for doing so had elapsed.
Accompanying this supplemental declaration was a copy of a notice of entry
of dismissal showing the clerk entered the dismissal on April 18, 2019.
On May 6, 2019, plaintiffs filed a document entitled “objection to
(1) defendant’s notice of non-opposition and (2) defendant’s supplemental
declaration.” (Capitalization omitted.) Plaintiffs argued in part that the
court had no jurisdiction to reconsider the previously imposed sanctions
because plaintiffs dismissed their case.
On May 28, 2019, the trial court filed a written order indicating that it
heard defendant’s motion for reconsideration or to set aside the sanctions on
May 23, 2019, “[c]ounsel Kenneth White appeared via court call for Plaintiff
and indicated to the Court that there was no opposition to Defendant’s
Motion,” and the court granted defendant’s motion and set aside the
sanctions orders. The order further indicated it would continue hearing
“State Bar Matters” to a different date.
Plaintiffs filed a brief with the trial court that shed light on this State
Bar matter, explaining that the trial court, in its tentative ruling, indicated it
was going to submit defendant’s motion for reconsideration and the court’s
order to the State Bar. In a declaration accompanying this brief, attorney
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Brown explained, among other things: he is a partner at the firm; he has
represented plaintiff Jonathan Manhan and his business entities in
numerous legal matters over the last 20 years; he agreed to represent
plaintiffs against defendant—and to do so without charge—in part because
plaintiffs were unable to retain another attorney due to “the relatively small
amount in dispute”; and Brown assigned the case to associate attorney
Whitten without explaining that plaintiffs would not be charged, which is his
typical practice because he wants associates to “devote the same amount of
time and energy to all matters, whether a paying client or not.” Brown
asserted he reviewed the motions to compel, but did “not notice that it [sic]
did not disclose the special fee arrangement.” Brown stated it was his firm’s
usual practice to make clear their fee arrangement when seeking monetary
sanctions as a prevailing party on a motion to compel, and he apologized for
not making the nature of the fee arrangement clear.
Whitten filed his own declaration stating that when he filed the
motions to compel and for sanctions he believed the standard fee
arrangement between his firm and plaintiffs applied, and he was unaware
they were representing plaintiffs without charge. Defendant filed a
responsive brief and declaration.
A minute order dated June 21, 2019 states: “This matter was
continued solely for the purpose of addressing the referral of Plaintiff’s
counsel to the Bar. The Court determines that based on the explanations
provided in responsive declarations there was no intentional
misrepresentation. The Court will not refer this matter to the Bar at this
time. Counsel is admonished regarding representations to the Court without
full understating [sic] of the facts or the law.”
Plaintiffs filed a notice of appeal.
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DISCUSSION
A. Appealability
Initially, since this case is an appeal taken after a voluntary dismissal,
and a voluntary dismissal is not appealable (Gutkin v. University of Southern
California (2002) 101 Cal.App.4th 967, 975), we begin by examining the basis
of our own jurisdiction.
Section 904.1, subdivision (b), provides: “Sanction orders or judgments
of five thousand dollars ($5,000) or less against a party or an attorney for a
party may be reviewed on an appeal by that party after entry of final
judgment in the main action, or, at the discretion of the court of appeal, may
be reviewed upon petition for an extraordinary writ.” Case law has construed
this statutory provision as permitting an appeal from sanctions orders after a
voluntary dismissal. (Eichenbaum v. Alon (2003) 106 Cal.App.4th 967, 974.)
We agree with this interpretation, conclude that we have jurisdiction, and
turn to the merits.
B. The Order Setting Aside the Discovery Sanctions
Plaintiffs’ sole argument in this appeal is that the trial court lacked
jurisdiction to set aside the previously imposed sanctions after plaintiffs filed
a voluntary dismissal. We disagree.
Plaintiffs are correct that, as a general rule, a voluntary dismissal of an
action deprives the court of both subject matter and personal jurisdiction in
that case. (Gogri v. Jack in the Box Inc. (2008) 166 Cal.App.4th 255, 261.)
Based on this general rule, “most orders entered after the dismissal are void
and have no effect.” (Pittman v. Beck Park Apartments Ltd. (2018) 20
Cal.App.5th 1009, 1022.) That said, “[n]otwithstanding this general
principle, ‘courts have carved out a number of exceptions to this rule in order
to give meaning and effect to a former party’s statutory rights.’ [Citation.]
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When a postdismissal or postjudgment motion involves collateral statutory
rights, then the court may retain jurisdiction to determine and enforce those
rights.” (Ibid.) As particularly relevant here, “[c]ourts have . . . held
jurisdiction is retained postdismissal and postjudgment to decide motions for
sanctions.” (Ibid.; see id. at pp. 1023–1024.)
For instance, in Frank Annino & Sons Construction, Inc. v. McArthur
Restaurants, Inc. (1989) 215 Cal.App.3d 353 (Frank Annino), the Court of
Appeal found the trial court had jurisdiction to award sanctions to a
defendant under section 128.5 after the plaintiff dismissed that defendant
from the action. (215 Cal.App.3d at pp. 357–359.) In reaching this
conclusion, the court noted, “[e]ven after a party is dismissed from the action
he may still have collateral statutory rights which the court must determine
and enforce.” (Id. at p. 357.) The court discussed Spinks v. Superior Court
(1915) 26 Cal.App. 793, where that court held a defendant was entitled to a
judgment for costs after the plaintiff voluntarily dismissed the action,
observing, “ ‘it cannot be contemplated that the legislature, having provided
authority and means for the securing of costs to litigants, intended to leave a
defendant remediless against a plaintiff who chose to bring an action and put
a defendant to great costs in preparing to meet the same and then dismiss
the suit.’ ” (Frank Annino, at pp. 357–358.) The court in Frank Annino
reasoned, “[t]he sanctions statute serves much the same purpose as awarding
costs to the defendant in Spinks: to discourage parties and their attorneys
from engaging in bad faith tactics and to compensate a party victimized by
such tactics. [Citation.] If one party engages in bad faith tactics against
another party, there is no basis in logic or public policy to deny the victim the
remedy of sanctions simply because, through the bad actor’s own doing, the
victim is no longer a party.” (Id. at p. 358.)
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In Pittman v. Beck Park Apartments Ltd., supra, 20 Cal.App.5th 1009,
the Court of Appeal held the trial court did not lose jurisdiction to declare a
plaintiff a vexatious litigant after a voluntary dismissal. (Pittman, at
pp. 1021, 1024–1025.) Relying on cases such as Frank Annino, the court
reasoned that “[l]ike a motion for attorney fees or sanctions, a motion to
declare a self-represented plaintiff a vexatious litigant deals with an
ancillary issue and has no bearing on the finality of the judgment or
dismissal.” (Id. at pp. 1023–1024.) The retention of jurisdiction to decide a
vexatious litigant motion is consistent with the purpose of the statutes, i.e.,
to curb misuse of the court system and conserve the resources of the courts
and litigants. (Id. at p. 1024.) Moreover, dismissal does not rectify the harm
done by the filing of a groundless action or extinguish the court’s interest in
protecting its own resources. (Ibid.)
Here, the case at hand concerns statutory sanctions, the imposition and
reconsideration of which was a collateral issue not directly based on the
merits of the underlying proceeding. (Day v. Collingwood (2006) 144
Cal.App.4th 1116, 1125.) That a court retains jurisdiction to decide a motion
for reconsideration of sanctions is consistent with critical functions that
reconsideration performs, such as allowing courts to correct errors and
thereby prevent miscarriages of justice, and pressuring litigants to use great
care in presenting motions and ascertaining the facts. (See Phillips v. Sprint
PCS (2012) 209 Cal.App.4th 758, 768; Blue Mountain Development Co. v.
Carville (1982) 132 Cal.App.3d 1005, 1012 [“ ‘ “Public policy requires that
pressure be brought upon litigants to use great care in preparing cases for
trial and in ascertaining all the facts.” ’ ”].) There is no sound basis in logic or
public policy to deny a remedy to a party burdened with sanctions obtained
through misrepresentation (whether or not intentional) simply because a
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plaintiff dismisses an action. Disallowing reconsideration when sanctions are
based on misrepresentations plainly violates a reasonable sense of justice and
fair play. (Frank Annino, supra, 215 Cal.App.3d at p. 359.)
We thus conclude a trial court’s authority to reconsider sanctions
survives even after a plaintiff voluntarily dismisses an action. Plaintiffs
raise no other challenges to the propriety of the subject order and so we end
our discussion here.
DISPOSITION
The order of the trial court setting aside the discovery sanctions is
affirmed. Because defendant did not appear in this appeal, no costs are
awarded.
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_________________________
Fujisaki, Acting P.J.
WE CONCUR:
_________________________
Petrou, J.
_________________________
Wiseman, J.*
A158152
*
Retired Associate Justice of the Court of Appeal, Fifth Appellate
District, assigned by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
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Manhan et al. v. Gallagher
(A158152)
Trial Court: City and County of San Francisco
Trial Judge: Charles F. Haines
Attorneys:
Brown, White & Osbourn, Kenneth B. White, Thomas M. Brown for Plaintiffs
and Appellants.
Shannon Gallagher, in pro. per., for Defendant and Respondent.
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