July 26, 2016
The Return of Broad Attorney Sanctions--California Code of Civil Procedure Section 128.5
Prior to 1995, courts had the ability to impose monetary sanctions on litigants and their counsel for almost any kind of transgression, and some judges developed reputations for doing so very liberally! The relative calm that reigned after a significant change in the law in 1995 may be over. Effective January 1, 2015, California Code of Civil Procedure section 128.5 — a statute that authorizes the imposition of monetary sanctions for bad faith litigation tactics that are frivolous or solely intended to cause delay — is back. Dormant for several years but never repealed, the Legislature resuscitated it in 2014, and it again becomes part of every California litigator’s arsenal. This article briefly explains this development.
Before 1978, there was uncertainty as to whether the trial courts possessed inherent authority to impose monetary sanctions on litigants or their counsel. While some believed that trial courts did have such authority to punish misconduct, others raised due process concerns. In 1978, the California Supreme Court definitively resolved the issue. In Banguess v. Paine, 22 Cal.3d 626, 634-639 (1978), the Court held that trial courts could not award attorney fees as sanctions for misconduct unless they did so pursuant to an agreement of the parties or statutory authority.
B. Enactment of Code of Civil Procedure Section 128.5
In 1981, the Legislature responded to Banguess and attempted to address the problem of frivolous litigation by enacting a sanctions statute — California Code of Civil Procedure Section 128.5. Section 128.5, in its initial form, authorized trial courts to impose reasonable expenses, including attorney fees, incurred as a result of tactics or actions not based on good faith which were frivolous or which caused unnecessary delay. In 1985, Section 128.5 was amended slightly to allow awards of reasonable expenses, including attorney fees, as sanctions for bad faith actions or tactics that were frivolous or solely intended to cause unnecessary delay. The statute defined “actions” or “tactics” broadly to include filing and service of a complaint, cross-complaint, answer, other responsive pleadings, or the filing or opposing of motions. Section 128.5 was interpreted to require both objective bad faith (i.e., a frivolous action or tactic) and subjective bad-faith (i.e., inappropriate conduct, vexatious tactics, or an improper motive). West Coast Dev. v. Reed (1992) 2 Cal.App.4th 693. In practice, the subjective standard was difficult to prove. Nevertheless, requests for sanctions under section 128.5 became routine additions to many motions or opposition to motions.
C. The Legislature Freezes Section 128.5 And Enacts Code of Civil Procedure Section 128.7
In 1995, the Legislature amended Section 128.5 to apply solely to proceedings initiated on or before December 31, 1994. Simultaneously, it enacted California Code of Civil Procedure Section 128.7 to apply solely to proceedings initiated on or after January 1, 1995. Section 128.7 was modeled after Rule 11 of the Federal Rules of Civil Procedure. Section 128.7 applies to every document presented to any court. It requires that each such document be signed by an attorney or unrepresented party. By signing, the signer certifies that the document is not presented for an improper purpose and certifies that it contains no allegation, contention, claim, defense, or denial that lacks colorable support. It authorizes monetary sanctions for violations, including attorneys’ fees and expenses, but only after the alleged violator has received advance notice and time to correct or withdraw the challenged document.
In essence, the Legislature established two mutually exclusive sanctions regimes. Section 128.5, which was broader in scope and harder to prove, applied solely to proceedings initiated on or before December 31, 1994. Section 128.7, which was more restricted although intended to be easier to prove, applied solely to proceedings initiated on or after January 1, 1995. See Olmstead v. Arthur J. Gallagher & Co. (2004) 32 Cal.4th 804. However, with the passage of time, the 1994 date restriction in Section 128.5 rendered it virtually obsolete. At the same time, section 128.7 — particularly its advance notice feature — did not solve the problem of frivolous proceedings clogging California courts.
D. The Legislature Resurrects Section 128.5
In 2014, the Legislature amended Section 128.5 by, among other things, eliminating the 1994 date restriction. The author of the bill, Assemblyman Ken Cooley, was concerned that the courts had lost an important tool to discourage bad faith litigation activity. Advocates for the bill, mindful of the high standard under Section 128.5, argued that the amended Section 128.5 would not eliminate all bad conduct, but would at least discourage some of the worst conduct. Section 128.5, as amended, applies to the three-year period January 1, 2015 to January 1, 2018, unless the termination date is deleted or extended.
Under the new version of Section 128.5, “actions or tactics” are defined to include the filing and service of pleadings and the making or opposing of motions but discovery requests, responses, objections, and motions are specifically excluded. Code of Civil Procedure § 128.5 (b)(1), (f). “Frivolous” is defined as “totally and completely without merit or for the sole purpose of harassing an opposing party.” Id. §128.5(b)(2). In a change from the prior version, motions under Section 128.5 must comply with the standards, conditions, and procedures found in Section 128.7. Id. §128.5(f). As a result, advance notice providing an opportunity to withdraw the offensive material is now required under Section 128.5.
The new version of Section 128.5 also requires the party filing a sanctions motion under Section 128.5 to send copies of the motion or opposition and other materials, including any order granting or denying the motion by email to the California Research Bureau of the California State Library. The California Research Bureau must submit a report to the Legislature on or before January 1, 2017 so that a determination can be made whether the changes made to Section 128.5 had a demonstrable effort on reducing the frequency and severity of bad faith actions or tactics that would not be subject to sanction under Section 128.7. While the amended Section 128.5 does provide trial courts with an additional tool to sanction bad faith actions or tactics, in addition to Section 128.7, it remains to be seen whether it suffers from the same practical hardships experienced with the initial Section 128.5 and with Section 128.7.
Nancy Duffy McCarron, CBN 164780
Attorney, Real Estate Broker, BBB Arbitrator, CA Notary Public
Certified Forensic Loan Auditor, Property Manager
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