DocketNumber: No. 76720-3
Judges: Owens
Filed Date: 4/6/2006
Status: Precedential
Modified Date: 10/19/2024
fl We are asked to resolve several issues involving the trial court’s award of discovery sanctions, attorney fees, costs, and damages against the manufacturer of a defective, stucco-like product applied to the exterior of the plaintiffs’ home. Remanding the matter, the Court of Appeals directed the trial court to eliminate a portion of the sanctions award and make additional findings on the record supporting the imposition of sanctions. The Court of Appeals also ordered the trial court to recalculate the attorney fees and costs assessed under the Consumer Protection Act (CPA), chapter 19.86 RCW. We reverse the Court of Appeals on the foregoing issues, but we affirm the conclusion of the trial court and Court of Appeals that the plaintiffs were entitled to damages not only for the physical repair of their home, but also for the home’s diminished value.
¶2 Kurtis and Pamela Mayer began remodeling their waterfront vacation home in Dash Point in 1988. In April 1989, contractors applied to the exterior of the home the Exterior Insulation Finish System (EIFS), a synthetic stucco product manufactured by Sto Industries. In 1990, after the Mayers noticed water damage below the windows, the windows were recaulked. Four years later, the Mayers discovered dry rot around the window trim and in the substructure of the exterior walls. The Mayers sued Sto and others in April 1995. By early 1997, the Mayers had settled their claims with all defendants except Sto. The Mayers’ claims against Sto under the CPA and the Washington product liability act (WPLA), chapter 7.72 RCW, were tried to a jury in June 1997 before Pierce County Superior Court Judge John A. McCarthy. The jury returned a defense verdict.
¶3 After the verdict, an attorney in North Carolina representing plaintiffs in EIFS litigation sent the Mayers a copy of a 1991 memorandum written by Sto’s technical services manager, Thomas Remmele, in which Remmele admitted that the EIFS was inherently flawed. Because Remmele had testified to the contrary at the Mayers’ trial, the Mayers filed a motion under CR 59, seeking a new trial based upon the newly discovered evidence. The trial court denied the motion, as well as the Mayers’ subsequent motion for reconsideration, and the Mayers appealed.
¶4 In an unpublished decision, the Court of Appeals reversed the trial court’s denial of the Mayers’ motion for a new trial, concluding that “[ajdmission of the memorandum
¶5 After the parties accepted Judge McCarthy’s offer to recuse himself, the case was reassigned to Pierce County Superior Court Judge Rosanne Buckner and tried before a jury in April and May 2002. The Mayers used the Remmele memo, as well as dozens of other previously withheld documents, to support their claim that Sto was liable under the CPA and the WPLA for its failure to warn. The jury returned a verdict for the Mayers. The Mayers were awarded $266,653.75 in damages,
¶6 As to the Mayers’ renewed motion for discovery sanctions, the trial court imposed the following monetary sanctions against Sto to compensate the Mayers for the first trial and first appeal: $468,147.29 in attorney fees and expenses for the first trial; $276,732.75 in interest on that sum; and $33,717.00 in attorney fees for the first appeal. The trial court stated that the discovery sanctions “serve [d] only to compensate the Mayers for the wasted effort from the first trial” and that the attorney fees requested for the first
¶7 Sto appealed, and the Mayers cross-appealed. The Court of Appeals held that the trial court erred in four respects: (1) awarding sanctions without following the procedures set forth in Burnet v. Spokane Ambulance, 131 Wn.2d 484, 933 P.2d 1036 (1997); (2) imposing interest on the sanctions; (3) awarding attorney fees under the CPA for the second trial without excluding the time spent on non-CPA matters; and (4) failing to clarify that the costs awarded for the second trial must be limited to those listed in RCW 4.84.010. Mayer v. Sto Indus., Inc., 123 Wn. App. 443, 98 P.3d 116 (2004). The Court of Appeals upheld the trial court’s instruction entitling the Mayers to damages for both the cost of restoration and the diminution in value.
¶8 The Mayers petitioned this court for review, and Sto raised additional issues in its answer. We granted review, and both parties thereafter filed supplemental briefs.
ISSUES
¶9 (1) Did the trial court abuse its discretion in awarding monetary compensatory discovery sanctions without following the procedures set forth in Burnet, 131 Wn.2d 484?
¶10 (2) Did the Court of Appeals correctly conclude that the trial court had awarded “interest on the sanctions”? If the interest awarded was not “interest on the sanctions” but “interest as a sanction,” was the award an abuse of the trial court’s discretion?
¶11 (3) Assuming (contrary to Sto’s contention in its answer) that the Mayers established the elements of their CPA claim, did the trial court abuse its discretion by awarding attorney fees under the CPA for the second trial without segregating the time spent on the CPA claim from time spent proving the WPLA violation?
¶12 (4) Did the Court of Appeals properly direct the trial court to clarify on remand that it had limited the costs awarded under the CPA to those listed in RCW 4.84.010?
ANALYSIS
¶14 Standard of Review. A trial court exercises broad discretion in imposing discovery sanctions under CR 26(g) or 37(b), and its determination will not be disturbed absent a clear abuse of discretion. Associated Mortgage Investors v. G.P. Kent Constr. Co., 15 Wn. App. 223, 229, 548 P.2d 558 (1976); Fisons, 122 Wn.2d at 355-56; Burnet, 131 Wn.2d at 494. An abuse of discretion occurs when a decision is “manifestly unreasonable, or exercised on untenable grounds, or for untenable reasons.” Associated Mortgage, 15 Wn. App. at 229. A discretionary decision rests on “untenable grounds” or is based on “untenable reasons” if the trial court relies on unsupported facts or applies the wrong legal standard; the court’s decision is “manifestly unreasonable” if “the court, despite applying the correct legal standard to the supported facts, adopts a view ‘that no reasonable person would take.’ ” State v. Rohrich, 149 Wn.2d 647, 654, 71 P.3d 638 (2003) (quoting State v. Lewis, 115 Wn.2d 294, 298-99, 797 P.2d 1141 (1990)). Questions of law are reviewed de novo. In re Firestorm 1991, 129 Wn.2d 130, 135, 916 P.2d 411 (1996); Fisons, 122 Wn.2d at 339 (noting that “[a] trial court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law”).
f 15 (1) Applicability of the Burnet Requirements. The Mayers first moved for discovery sanctions before Judge McCarthy, after the Court of Appeals determined in its first, unpublished decision that Sto’s discovery abuse entitled them to a new trial. The Mayers asserted that sanctions were warranted “under authority of CR 26(g)” and this court’s decision in Fisons, 122 Wn.2d 299. CP at 1670. Adhering to Judge McCarthy’s conclusion that the fashioning of an appropriate remedy would have to await the
f 16 The two rules are similar. CR 26(g) requires that if a party is represented by counsel, at least one attorney of record must sign every discovery request, response, or objection. The signature “constitutes a certification that he has read the request, response, or objection, and that to the best of his knowledge, information, and belief formed after a reasonable inquiry it is . . . consistent with these rules and warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law.” CR 26(g). The rule further provides that if the certification requirement is violated, “the court, upon motion or upon its own initiative, shall impose upon the person who made the certification, the party on whose behalf the request, response, or objection is made, or both, an appropriate sanction, which may include an order to pay the amount of the reasonable expenses incurred because of the violation, including a reasonable attorney fee.” Id. (emphasis added). Assuming that the trial court imposed the discovery sanctions pursuant to CR 26(g) and this court’s interpretation of that rule in Fisons, the court imposed the monetary compensatory sanctions against Sto for its counsel’s certifica
f 17 CR 37(b)(2) provides, in part, that “if a party fails to obey an order entered under rule 26(f), the court in which the action is pending may make such orders in regard to the failure as are just.”
f 18 The Court of Appeals held in this case that the trial court abused its discretion by imposing monetary compensatory sanctions on Sto without following the procedures set forth in Burnet, 131 Wn.2d at 494. See Mayer, 123 Wn. App. at 454-55. Burnet concerned a trial court’s order under CR 37(b)(2)(B). When defendant Sacred Heart Medical Center received a supplemental response to one of its interrogato
When the trial court “chooses one of the harsher remedies allowable under CR 37(b), ... it must be apparent from the record that the trial court explicitly considered whether a lesser sanction would probably have sufficed,” and whether it found that the disobedient party’s refusal to obey a discovery order was willful or deliberate and substantially prejudiced the opponent’s ability to prepare for trial.
Id. at 494 (quoting Snedigar v. Hodderson, 53 Wn. App. 476, 487, 768 P.2d 1 (1989), rev’d in part, 114 Wn.2d 153, 786 P.2d 781 (1990)).
¶19 To arrive at its three factors, the Burnet court relied on Snedigar, which had in turn relied on Associated Mortgage, 15 Wn. App. 223. The Snedigar court’s holding (with the Burnet court’s deletions italicized) is as follows:
We . . . hold that when a trial judge chooses one of the harsher remedies allowable under CR 37(b), the reasons for that choice should he clearly stated on the record. We further hold that when the most severe sanction of default or dismissal is ordered, it must be apparent from the record that the trial court explicitly considered whether a lesser sanction would probably have sufficed, and whether it found the Associated Mortgage due process factors [of willfulness and substantial prejudice] to be present.
53 Wn. App. at 487 (emphasis added); Associated Mortgage, 15 Wn. App. at 228-29 (holding that “the sanction of a default judgment authorized by CR 37(b)(2)(C) is a harsh remedy, which should only be granted where there has been
¶20 In sum, the case law that the Burnet court relied on established that before a trial court may impose a CR 37(b)(2)(B) sanction excluding testimony, a showing of willfulness was required; that for “one of the harsher remedies allowable under CR 37(b),” the record must clearly state the reasons for the sanction; and that for the “most severe” CR 37(b)(2)(C) sanction of dismissal or default, the record must show three things — the trial court’s consideration of a lesser sanction, the willfulness of the violation, and substantial prejudice arising from it. However, by elliptically quoting the three-part test of Snedigar, the Burnet court extended the test beyond the “most severe” sanctions of dismissal or withdrawal to encompass “the harsher remedies allowable under CR 37(b)” — a phrase that, at a minimum, means a CR 37(b)(2)(B) sanction excluding testimony but that, more broadly, encompasses any and all of the sanctions described in CR 37(b)(2)(A)-(E). However, nothing in Burnet suggests that trial courts must go through the Burnet factors every time they impose sanctions for discovery abuses. Nor does Burnet indicate that a monetary compensatory award should be treated as “ ‘one of the harsher remedies allowable under CR 37(b).’ ” 131 Wn.2d at 494 (quoting Snedigar, 53 Wn. App. at 487).
¶21 In the present case, the Court of Appeals acknowledged that Burnet concerned a CR 26(f) violation (which triggers sanctions under CR 37(b)(2)), but the court went on to state that “[t]he Burnet rationale applies equally
¶22 A second problem with the extension of the Burnet test to the sanctions in the present case is that, here, at issue is the imposition of monetary compensatory sanctions. Even if the three-part Burnet test were applicable to the request for sanctions under CR 26(g) — or if the request made by the Mayers were construed as a request under CR 37(b)(2) — the monetary compensatory sanctions could not be viewed as “ ‘one of the harsher remedies allowable under CR 37(b),’ ” triggering the three-part test. Burnet, 131 Wn.2d at 494 (quoting Snedigar, 53 Wn. App. at 487). CR 37(b)(2) identifies monetary sanctions as an award made “in lieu of” or “in addition” to the orders described in CR 37(b)(2)(A)-(E). Significantly, in Roberson v. Perez, 123 Wn. App. 320, 96 P.3d 420 (2004), review denied, 155 Wn.2d 1002 (2005), the Burnet factors were applied to the trial court’s determination that the proper sanction for a discovery abuse was to vacate a defense verdict, but the Roberson court treated the award of an additional compen
¶23 In light of the foregoing analysis, we reverse the Court of Appeals and hold that the reference in Burnet to the “ ‘harsher remedies allowable under CR 37(b)’ ” applies to such remedies as dismissal, default, and the exclusion of testimony — sanctions that affect a party’s ability to present its case — but does not encompass monetary compensatory sanctions under CR 26(g) or CR 37(b)(2). 131 Wn.2d at 494 (quoting Snedigar, 53 Wn. App. at 487); see, e.g., Rivers v. Wash. State Conference of Mason Contractors, 145 Wn.2d 674, 686, 41 P.3d 1175 (2002) (requiring that Burnet factors be considered on the record “[w]hen a trial court imposes dismissal or default in a proceeding as a sanction for violation of a discovery order” (emphasis added)).
¶24 (2) Interest Awarded as Discovery Sanctions. As the Fisons court stated,
[t]he purposes of sanctions orders are to deter, to punish, to compensate and to educate. Where compensation to litigants is appropriate, then sanctions should include a compensation award.
122 Wn.2d at 356 (footnote omitted). Here, the trial court specifically stated that the purpose of its sanctions award
$744,880.04 (Discovery Sanctions — first trial fees and expenses ($468,147.29) and interest for four years, 338 days, ($276,732.75)
CP at 3472. Plainly, the trial court’s judgment defined the trial court’s award of “Discovery Sanctions” as the sum of the fees and expenses from the first trial and the interest accruing on that amount. The judgment did not describe the attorney fees and expenses as the “Discovery Sanctions” and the interest on those fees and expenses as interest on the “Discovery Sanctions.” The chart is consistent with the following explanation in the judgment:
As a discovery sanction, the Court awards the Mayers the $468,147.29 spent on the first trial and interest on that amount of $276,732.75 for the four years and three hundred and thirty-eight days between July 25, 1997 [the date Sto entered judgment in its favor following the first trial] and June 28, 2002, the date on which the parties mutually agreed that this judgment should be entered. This sanction serves only to compensate the Mayers for the wasted effort from the first trial.
CP at 3476 (emphasis added). The Court of Appeals inaccurately labeled the interest portion of the sanctions as “Interest on the Sanctions” and further mischaracterized that portion of the sanctions as “prejudgment interest on the fees and costs the Mayers incurred in the first trial.” Mayer, 123 Wn. App. at 456 (emphasis added). The Court of Appeals then noted that prejudgment interest is available only on liquidated sums and that “[a]wards of reasonable attorney fees are classically unliquidated claims.” Id.
¶25 We reverse the decision of the Court of Appeals on this point and hold that the trial court did not abuse its discretion in calculating a reasonable compensatory sanction. The limitations on prejudgment interest have no applicability here, given that the interest at issue was a portion of the sanctions, not interest on a judgment. Analogous issues were raised in Roberson, 123 Wn. App. 320,
¶26 (3)-(4) Attorney Fees and Costs under the CPA.
¶27 As to the trial court’s award of costs under the CPA, the CPA permits a successful plaintiff to recover “the costs of the suit, including a reasonable attorney’s fee.” RCW 19-.86.090. The trial court made the following finding regarding CPA costs:
The Mayers requested $169,822 in litigation costs under the Consumer Protection Act. The Court finds that the $47,000 for court reporters and transcripts, $53,000 for professional fees, the $29,000 for expert fees in the Detering Declaration and the miscellaneous charges cited on page 32 of Sto’s Opposition to*694 Mayers Motion ($1,308.95) are deducted from the requested amount for a cost award under the CPA of $48,691.05.[5 ]
This court has held that “it gives the plaintiff in a Consumer Protection Act action an unwarranted recovery to extend costs beyond those statutorily defined in RCW 4.84.010.” Nordstrom, Inc. v. Tampourlos, 107 Wn.2d 735, 743, 733 P.2d 208 (1987). RCW 4.84.010 entitles a prevailing party to recover, in general, filing fees, costs for service of process, notary fees, reasonable expenses for reports and records entered into evidence, statutory attorney and witness fees, and “[t]o the extent that the court. .. finds that it was necessary to achieve the successful result, the reasonable expense of the transcription of depositions used at trial.” On the issue of the trial court’s award of CPA costs, the Court of Appeals concluded that remand was warranted for the trial court to demonstrate that its award of CPA costs was consistent with Nordstrom and RCW 4.84.010.
¶28 We disagree. The record establishes, first, that Sto fully apprised the trial court of the law governing the award of CPA costs. See “Sto’s Opposition to the Mayers’ Motion for Attorney Fees and Litigation Costs,” CP at 3096-101 (citing and discussing, among other decisions, Nordstrom, 107 Wn.2d 735). Second, the record shows that Sto delineated for the trial court the objectionable items submitted in the Mayers’ request for CPA costs. The trial court’s attentiveness to Sto’s particular objections is evident in the trial court’s memorandum decision and its findings, where the court refers to Sto’s objections by citing the page number in Sto’s memorandum. Because we find the record sufficiently clear, we reverse the Court of Appeals decision to remand the issue.
¶29 (5) Damages for Diminished Value. Sto argued that the trial court erred in awarding the Mayers “stigma damages,” damages for the home’s diminished value. However, where the damage to real property is permanent, a plaintiff is entitled to recover not only for the costs of
CONCLUSION
¶30 The Court of Appeals decision is affirmed in part and reversed in part. On the two issues pertaining to discovery sanctions, we reverse the Court of Appeals and uphold the trial court’s sanctions award. Likewise reversing the Court of Appeals, we affirm the trial court’s calculation of attorney fees and costs under the CPA. We affirm the determination of the Court of Appeals that the trial court did not err in awarding the Mayers not only damages for repairing their home, but also damages for the home’s diminished value. Pursuant to RAP 18.1, the Mayers requested their attorney fees on appeal under the CPA; as the prevailing party, the Mayers are entitled to recover the portion of their attorney fees relating to the CPA issues.
Alexander, C.J., and C. Johnson, Madsen, Sanders, Bridge, Chambers, Fairhurst, and J.M. Johnson, JJ., concur.
Clerk’s Papers (CP) at 1401-05. The jury attached the following note to the verdict form: “This decision was very difficult to arrive at. We followed the laws as presented to us and the instructions. The evidence showed that the STO product is reasonably safe, that there are adequate instructions and there was no act of deception. We feel sorry for the damages sustained by the Mayers. The Mayers deserve to be compensated for those damages. But we find the law, the evidence and the testimony does not support that the defendant is that party. We further believe that the current literature on the STO product should be more descriptive about the type of system it is.” CP at 1604.
The jury set the total damages at $484,825 but allocated 55 percent of the fault to Sto, 20 percent to the Mayers, and 25 percent to other entities.
CR 26(f) permits the trial court to order a discovery conference and requires that, following such a conference, “the court shall enter an order tentatively identifying the issues for discovery purposes, establishing a plan and schedule for discovery, setting limitations on discovery, if any, and determining such other matters, including the allocation of expenses, as are necessary for the proper management of discovery in the action.” The record in the present case does not appear to include an order entered pursuant to CR 26(f).
Sto’s contention that the Mayers failed to establish the elements of their CPA claim is unpersuasive. Although Sto has correctly pointed out a mistake in the Court of Appeals decision, that mistake did not undermine the court’s analysis. CPA plaintiffs must prove five elements, the third of which is that the challenged act “affects the public interest.” Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 784-85, 719 P.2d 531 (1986). To establish the public interest element, the act is first categorized as either a consumer transaction or a private dispute. Here, the Court of Appeals properly identified the matter as a private dispute, but the court then mistakenly set forth the factors applicable to a consumer transaction. Nevertheless, that error proved inconsequential because the court actually applied the private dispute factors to the facts before it.
CP at 3477. The finding mirrors the trial court’s “Memorandum Decision on Fees and Costs.” CP at 3469.
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