Geragos & Geragos, Mark J. Geragos, Alexandra Kazarian for Plaintiff and Appellant. CL Ludmer and Christopher L. Ludmer for Defendant and Respondent.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County No. 37-2020-00008058-CU-NP-CTL, Katherine A. Bacal, Judge. Affirmed.
Geragos & Geragos, Mark J. Geragos, Alexandra Kazarian for Plaintiff and Appellant.
CL Ludmer and Christopher L. Ludmer for Defendant and Respondent.
McCONNELL, P. J.
Alex and Ani, LLC (Alex and Ani) and its legal counsel, Geragos & Geragos, APC (the Geragos Firm), challenge an order imposing $3,500 in monetary sanctions against the Geragos Firm for filing a frivolous legal malpractice lawsuit on behalf of Alex and Ani against attorney Tracy Warren. They contend the trial court erred in finding the legal malpractice lawsuit was legally and factually frivolous. However, Alex and Ani and the Geragos Firm did not oppose Warren's motion for sanctions on the merits when it was pending in the trial court. Therefore, they have forfeited their arguments on appeal. On this basis, we affirm.
Events Preceding the Lawsuit
Alex and Ani is a jewelry company. In May 2017, Alex and Ani retained the law firm Ogletree, Deakins, Nash, Smoak & Stewart, P.C. (Ogletree Deakins) and Warren, an Ogletree Deakins shareholder, to provide legal counsel to the company on employment matters. Warren previously served as legal counsel for Alex and Ani's president, Cindy DiPietrantonio, in an unrelated matter. Her representation of DiPietrantonio ended in 2014- three years before Alex and Ani retained Ogletree Deakins and Warren.
Towards the end of 2017, DiPietrantonio and Alex and Ani's Chief Financial Officer, Robert Woodruff, both reported several concerning personnel matters to Warren. They told Warren that Mark Geragos-the principal of the Geragos Firm and the personal attorney for Alex and Ani's owner-had conflicts of interest with the company and had engaged in various hostile, threatening, and inappropriate behaviors towards company employees. Soon after, Alex and Ani terminated the employment of DiPietrantonio and Woodruff.
Following their termination, DiPietrantonio and Woodruff contacted Warren and told her Alex and Ani owed them unpaid compensation. DiPietrantonio also told Warren she was considering suing Alex and Ani for sexual harassment, hostile work environment, retaliation, and breach of contract. During these conversations, Warren told DiPietrantonio and Woodruff she represented Alex and Ani-not the two of them personally- and any statements they made to her would be relayed to the company. They stated they understood.
On January 8, 2018, Warren sent a letter to Alex and Ani's board of directors-a letter that would ultimately give rise to the present legal malpractice lawsuit. The appellate record does not include a copy of the letter. But, according to Warren, the letter discussed the legal risks the company faced in connection with: (1) the firing of DiPietrantonio and Woodruff; and (2) Mark Geragos's misconduct. The Geragos Firm describes the letter in very different terms, characterizing it as a "demand letter" sent to coerce a settlement payout out of Alex and Ani in favor of Warren's former client and personal friend, DiPietrantonio.
On January 9, 2018, one day after Warren sent the letter to Alex and Ani's board of directors, the company terminated its attorney-client relationship with Ogletree Deakins and Warren effective immediately.
Ogletree Deakins terminated Warren's employment a few weeks later. According to Warren, Ogletree Deakins used the ending of the Alex and Ani attorney-client relationship as pretext for the termination. She states Ogletree Deakins actually terminated her employment because she complained of pay inequity and sexual harassment at the law firm. The circumstances surrounding the termination of Warren's employment are the subject of a separate lawsuit pending in the Superior Court for the County of San Diego, Warren v. Ogletree, Deakins, Nash, Smoak& Stewart, P.C., 37-2019-00004338-CU-OE-CTL.
The Lawsuit and Motion for Sanctions
On January 17, 2019-one year and eight days later-the Geragos Firm filed a legal malpractice action on behalf of Alex and Ani against Ogletree Deakins and Warren. The operative complaint alleged Warren "assisted" DiPietrantonio "in threatening potential legal action" against the company, "submitted a demand letter" on behalf of DiPietrantonio, and transmitted attorney-client privileged information to DiPietrantonio to enable her "to coerce substantial settlement funds from Alex and Ani"-all while pretending to represent the legal interests of Alex and Ani. It alleged the misconduct caused Alex and Ani to make a settlement payment to DiPietrantonio, which it otherwise would not have made. The complaint alleged causes of action for breach of fiduciary duty, legal malpractice, and negligent supervision.
On May 21, 2019, Warren filed a motion to transfer venue from the Superior Court for the County of Los Angeles, where the legal malpractice lawsuit was pending, to the Superior Court for the County of San Diego. She asserted the transfer was warranted because she resided and worked in San Diego, she and Ogletree Deakins performed legal services for Alex and Ani in San Diego, and Alex and Ani was not a resident of Los Angeles.
Sometime after Warren filed her motion to transfer venue, she served Alex and Ani with a motion for sanctions under Code of Civil Procedure section 128.7, thus triggering Alex and Ani's 21-day window to withdraw or amend its complaint (the so-called safe harbor waiting period). In her motion for sanctions, Warren argued the complaint was filed primarily for an improper purpose; was unwarranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law; and lacked evidentiary support. She requested that the court strike the complaint and order monetary sanctions against both Alex and Ani and the Geragos Firm.
Further undesignated statutory references are to the Code of Civil Procedure.
Warren asserted the complaint was legally and factually frivolous for three main reasons. First, she argued the complaint was time-barred because all three claims were subject to a one-year statute of limitations measured from the discovery of the alleged legal malpractice (see § 340.6), yet Alex and Ani did not file its complaint until one year and eight days after the date of discovery. Second, she asserted there was no evidence of causation-a necessary element of all three claims-because Mark Geragos's alleged misconduct was the sole cause of Alex and Ani's settlement payment to DiPietrantonio. Third, she contended any settlement agreement between Alex and Ani and DiPietrantonio necessarily released DiPietrantonio's attorneys; thus, Warren would be released from liability if in fact she represented the legal interests of DiPietrantonio as alleged in the operative complaint.
On August 15, 2019-after Warren served her motion for sanctions, but before she filed it-the trial court granted her motion to transfer venue. Thus, the case was transferred to San Diego.
On February 20, 2020, Warren re-served her motion for sanctions on Alex and Ani and the Geragos Firm. They did not withdraw or amend the complaint during the ensuing 21-day safe harbor waiting period.
On March 16, 2020, Warren filed her motion for sanctions. The motion was calendared for June 19, 2020, but later taken off calendar due to court closures related to the COVID-19 pandemic. After the courts reopened, Warren filed an ex parte application to re-calendar her motion. The court granted the ex parte application and re-calendared the sanctions motion for August 7, 2020.
On July 27, 2020, Alex and Ani filed a request to dismiss Warren from the case without prejudice. The court granted the dismissal request.
On July 31, 2020, a week before the calendared sanctions hearing, Warren filed a notice stating Alex and Ani had not filed a timely written opposition to the motion for sanctions. She urged the court to infer from the company's non-opposition that her motion was meritorious.
On August 5, 2020, two days before the calendared sanctions hearing, Alex and Ani filed a response to Warren's notice of non-opposition. The response stated the court should deny Warren's motion for sanctions because she did not adequately meet and confer with Alex and Ani before she filed the motion. It also stated the motion should be denied because Warren had been dismissed from the case without prejudice and, therefore, "the offending actions were corrected." The response did not address the substance of the motion for sanctions. The court construed Alex and Ani's response as a late-filed opposition brief and re-calendared the sanctions hearing.
The court held a hearing for the sanctions motion and, on August 24, 2020, granted the motion in part. It declined to order dismissal of the case with prejudice, but it imposed $3,500 in monetary sanctions solely against the Geragos Firm. The court found Alex and Ani's conduct was objectively unreasonable and Alex and Ani presented no colorable legal or factual arguments to show its claims were well-grounded. Further, the court found Alex and Ani's belated dismissal of Warren without prejudice did not warrant a denial of the motion for sanctions. As the court explained, "the safe harbor period expired before the sanctions motion was filed on March 16, 2020 and [Alex and Ani] did not dismiss Warren until months later, on July 27, 2020." The court ordered the Geragos Firm to report the monetary sanctions order to the State Bar as mandated by Business and Professions Code section 6068, subd. (o)(3) and (o)(8).
On September 17, 2020, Alex and Ani requested dismissal of the entire action with prejudice, which the court granted.
On September 21, 2020, Alex and Ani filed its notice of appeal.
The Court Has Appellate Jurisdiction
At the outset, we address whether we have appellate jurisdiction to hear the appeal challenging the imposition of $3,500 in monetary sanctions.
Under section 904.1, subdivisions (a)(11) and (a)(12), an appeal may be taken from a judgment or order directing payment of monetary sanctions if the sanctions exceed $5,000. Pursuant to section 904.1, subdivision (b)," [s]anction 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, maybe reviewed upon petition for an extraordinary writ."
Warren contends our court does not have jurisdiction to hear the appeal under section 904.1, subdivisions (a)(11) or (a)(12), because the sanctions amount does not exceed $5,000. She claims we do not have jurisdiction under section 904.1, subdivision (b) either because no "final judgment [has] been entered," and Alex and Ani and the Geragos Firm did not ask us to construe their appeal as a petition for an extraordinary writ. We agree the amount of the monetary sanctions ($3,500) is too low for section 904.1, subdivisions (a)(11) and (a)(12), to apply. However, we conclude the sanctions ruling is reviewable under section 904.1, subdivision (b).
"Although the statute (§ 904.1, subd. (b)) speaks of an appeal after entry of final judgment, the manifest policy, of deferring appellate review of a lesser sanctions order to the conclusion of the case in the trial court, is satisfied once the action has been voluntarily dismissed with prejudice." (Eichenbaum v. Alon (2003) 106 Cal.App.4th 967, 974 (Eichenbaum).) Under such circumstances, the party or attorney against whom sanctions have been ordered is "entitled to appellate review" of the sanctions order. (Ibid.; see also Manhan v. Gallagher (2021) 62 Cal.App.5th 504, 508-509 [appellate court had jurisdiction in appeal from set-aside of monetary sanctions where appeal was taken after voluntary dismissal without prejudice]; accord Mesa Shopping Center-East, LLC v. O'Hill (2014) 232 Cal.App.4th 890, 899 ["Common sense dictates that we forego a hypertechnical interpretation of section 904.1 that would leave the [appellants] without the right to appeal despite an adverse judicial ruling ending the action"].)
Here, the trial court issued its adverse sanctions ruling and Alex and Ani filed its request to dismiss the entire action with prejudice a few weeks later. The court granted the dismissal request and Alex and Ani filed its notice of appeal four days after that. Because the appeal was taken after the adverse sanctions ruling against the Geragos Firm, and after the entire action was dismissed with prejudice, we have appellate jurisdiction to hear the case under section 904.1, subdivision (b). (See Eichenbaum, supra, 106 Cal.App.4th at p. 974.)
On the notice of appeal, Alex and Ani marked a checkbox stating it was appealing" [a]n order or judgment under Code of Civil Procedure, § 904. 1(a)(3)-(13)," which suggests it may have been attempting to appeal under section 904.1, subdivisions (a)(11) and (12)-provisions that do not apply for the reasons stated. Additionally, the notice of appeal identifies Alex and Ani as the only appealing party; it does not identify the Geragos Firm as an appealing party. However, any alleged defects on the notice of appeal do not preclude us from hearing the appeal. The civil case information statement filed by Alex and Ani and the Geragos Firm states the basis for the appeal is section 904.1, subdivision (b). Warren does not contend she was prejudiced or misled by any defects in the notice of appeal. Further, it is reasonably clear the Geragos Firm intended to join Alex and Ani in the appeal, as evidenced by the fact monetary sanctions were ordered solely against the Geragos Firm. (K.J. v. Los Angeles Unified School Dist. (2020) 8 Cal.5th 875, 888.) Given these facts, we construe the notice of appeal to state the appeal was taken under section 904.1, subdivision (b), by both Alex and Ani and the Geragos Firm. (See id. at p. 882 ["' "notices of appeal are to be liberally construed so as to protect the right of appeal if it is reasonably clear what [the] appellant was trying to appeal from, and where the respondent could not possibly have been misled or prejudiced."'"]; Cal. Rules of Court, rule 8.100(a)(2).)
Section 128.7 "authorizes trial courts to impose sanctions to check abuses in the filing of pleadings, petitions, written notices of motions or similar papers." (Musaelian v. Adams (2009) 45 Cal.4th 512, 514.) Subdivision (b) requires parties and attorneys who present the court with pleadings or similar papers to certify that: (1) the pleadings or papers are "not being presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation," (2)" [t]he claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law," and (3) "[t]he allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery." (§ 128.7, subd. (b).) Subdivision (c) authorizes courts to impose an "appropriate sanction" on parties, attorneys, or law firms that violate subdivision (b), or are responsible for violations of subdivision (b). (Id., subd. (c).)
A two-step procedure governs sanctions motions under section 128.7. First, "[t]he moving party serves the sanctions motion on the offending party without filing it. The opposing party then has 21 days to withdraw or correct the improper pleading and avoid sanctions (the safe harbor waiting period). At the end of the waiting period, if the pleading is not withdrawn or appropriately corrected, the moving party may then file the motion." (San Diegans for Open Government v. City of San Diego (2016) 247 Cal.App.4th 1306, 1316, citing § 128.7, subd. (c)(1).) The safe harbor waiting period is" 'intended to foster compliance... and to conserve judicial resources otherwise spent adjudicating a sanctions motion by affording a prescribed period of time during which a party may correct or withdraw a frivolous or improper pleading or motion without any penalty.'" (CPF Vaseo Associates, LLC v. Gray (2018) 29 Cal.App.5th 997, 1003.)
In assessing whether a party, a law firm, or an attorney has violated section 128.7, a trial court must determine whether the pleading or similar paper "was filed for an improper purpose or was indisputably without merit, either legally or factually." (Peake v. Underwood (2014) 227 Cal.App.4th 428, 440 (Peake).) "A claim is factually frivolous if it is 'not well grounded in fact' and it 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.' [Citation.] In either case, to obtain sanctions, the moving party must show the party's conduct in asserting the claim was objectively unreasonable. [Citation.] A claim is objectively unreasonable if 'any reasonable attorney would agree that [it] is totally and completely without merit.'" (Ibid.)
Ordinarily, we review an order imposing sanctions under section 128.7 for abuse of discretion. (Bucur v. Ahmad (2016) 244 Cal.App.4th 175, 190.)
Appellants Forfeited Their Claims of Error
Alex and Ani and the Geragos Firm raise several arguments regarding why the legal malpractice action was not frivolous and, therefore, why the trial court purportedly abused its discretion in imposing monetary sanctions.
For example, they assert the action was timely because Alex and Ani's claims were subject to the three-year statute of limitations governing legal malpractice claims in Rhode Island (R.I. Gen. Laws Ann. § 9-1-14.3), rather than the one-year statute of limitations governing such claims in California (§ 340.6). In the alternative, they claim their lawsuit was timely because the statute of limitations did not start running in January 2018; rather, it began running in July 2018, when Alex and Ani made its settlement payment to DiPietrantonio. Additionally, Alex and Ani and the Geragos Firm argue the claims had evidentiary support because it was undisputed Warren engaged in at least some of the conduct underpinning the lawsuit-for example, she admitted meeting with DiPietrantonio and Woodward and sending the letter to Alex and Ani's board of directors. We do not address these arguments because Alex and Ani and the Geragos Firm did not present them to the trial court.
Alex and Ani's principal place of business is Rhode Island.
" '[I]t is fundamental that a reviewing court will ordinarily not consider claims made for the first time on appeal which could have been but were not presented to the trial court.'" (Perez v. Grajales (2008) 169 Cal.App.4th 580, 591; see Peake, supra, 227 Cal.App.4th at p. 443 ["Because a trial court has broad discretion in ruling on a sanctions motion, it is incumbent on the party opposing the motion to proffer all factual and legal theories showing the party's challenged assertions were not frivolous and had at least some merit. By failing to raise this theory before the trial court, the trial court was not provided the opportunity to evaluate the theory as part of its exercise of discretion. Thus, the point is forfeited."].) "Bait and switch on appeal not only subjects the parties to avoidable expense, but also wreaks havoc on a judicial system too burdened to retry cases on theories that could have been raised earlier." (JRS Products, Inc. v. Matsushita Electric Corp. of America (2004) 115 Cal.App.4th 168, 178.) Thus, as a general matter," 'we ignore arguments, authority, and facts not presented and litigated in the trial court.'" (Newton v. demons (2003) 110 Cal.App.4th 1, 11.) Because Alex and Ani and the Geragos Firm did not make their appellate arguments in the trial court, they have waived their ability to raise them here.
In their reply brief, Alex and Ani and the Geragos Firm contend they were unable to present their position to the trial court. They throw a number of arguments at the wall to see what sticks, claiming: (1) they were simply too busy or preoccupied to oppose the sanctions motion, or to amend or dismiss the complaint, because they were meeting and conferring with Warren; (2) the courts were closed in connection with the COVID-19 pandemic; and (3) the trial court violated Alex and Ani's due process rights by denying the company an "opportunity to make [its] record" at the sanctions hearing. The record disproves these demonstrably false arguments-which give us considerable pause as to whether the Geragos Firm has satisfied its duty of candor to this court.
With respect to the first argument, Alex and Ani and the Geragos Firm had ample time and opportunity-nearly a full year-to complete their meet and confers with Warren, develop whatever arguments they deemed necessary to oppose the motion for sanctions, and/or withdraw or amend the offending complaint. Warren served her motion for sanctions in mid-2019. Yet Alex and Ani did not amend or withdraw the complaint during the ensuing safe harbor waiting period. Then, Warren re-served the motion on February 20, 2020, thus starting a new safe harbor waiting period. Again, the safe harbor waiting period came and went, and Alex and Ani still did not amend or withdraw its complaint. Ultimately, after several months of meet and confers and the expiration of two safe harbor waiting periods, Warren filed her sanctions motion on March 16, 2020. Given this lengthy timeline, Alex and Ani and the Geragos Firm's failure to present their arguments to the trial court is not excused by the mere fact there may have been continuing meet and confers at the time Warren filed her sanctions motion.
Further, nothing else precluded Alex and Ani or the Geragos Firm from filing a timely opposition to the motion for sanctions. The courts temporarily closed after Warren filed her sanctions motion, and the sanctions hearing was briefly taken off calendar due to the COVID-19 pandemic. However, as Alex and Ani and the Geragos Firm acknowledge, the courts later reopened and the sanctions hearing was put back on calendar. At that time, Alex and Ani and the Geragos Firm could have opposed the sanctions motion on the merits. They did not do so.
Finally, the court did not violate Alex and Ani's due process rights by precluding the company from asserting its position at the sanctions hearing. On the contrary, the court held a telephonic hearing at which all parties were represented by counsel. At the hearing, the court expressly invited the Geragos Firm to argue the motion on behalf of its client. After this invitation, the Geragos Firm urged the court to deny the sanctions motion because Warren had been dismissed from the case without prejudice. But the Geragos Firm did not respond to any of Warren's substantive arguments concerning why the legal malpractice complaint was frivolous. The Geragos Firm's unilateral decision to argue procedural and equitable considerations- rather than the substance of the sanctions motion-does not mean the court deprived the Geragos Firm of the chance to argue the motion on the merits.
The court stated: "Okay. So I'll hear from counsel for Plaintiff." Later, it told all the hearing attendees: "I want to wait and make sure that I've heard everything." Despite these entreaties, the Geragos Firm did not argue the merits of the motion for sanctions.
In sum, Alex and Ani and the Geragos Firm had sufficient opportunity to file a timely written opposition to the merits of the sanctions motion, or to otherwise present their arguments to the trial court. Because they did not do so, their appellate arguments are waived.
In her appellate brief, Warren claims the present appeal is frivolous. She asks us to dismiss the appeal and impose additional monetary sanctions on the Geragos Firm for filing and maintaining the frivolous appeal. Additionally, after appellate briefing was complete, this court issued a sua sponte motion indicating it was considering whether to impose appellate sanctions against the Geragos Firm for filing and prosecuting a frivolous appeal. The Geragos Firm opposed the court's sua sponte motion and the parties argued the appellate sanctions issue during oral argument.
We have discretion to impose sanctions on a party or its attorney for taking a frivolous appeal. (§ 907 ["When it appears to the reviewing court that the appeal was frivolous or taken solely for delay, it may add to the costs on appeal such damages as may be just."]; Cal. Rules of Court, rule 8.276(a)(1) ["a Court of Appeal may impose sanctions ... on a party or an attorney for... Taking a frivolous appeal or appealing solely to cause delay"].)" [A]n appeal should be held to be frivolous only when it is prosecuted for an improper motive-to harass the respondent or delay the effect of an adverse judgment-or when it indisputably has no merit-when any reasonable attorney would agree that the appeal is totally and completely without merit." (In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650.)
We doubt many reasonable attorneys would file and maintain appeals where, as here, they failed to present any of their fact-laden appellate arguments to the trial court for consideration in the first instance. As discussed above, the waiver doctrine generally applies under such circumstances. Further, we are dismayed by the Geragos Firm's distortion of the appellate record in an apparent effort to salvage its waived arguments.
Nonetheless, we decline to impose appellate sanctions on the Geragos Firm. "Although appellate courts ordinarily will not consider a matter raised for the first time on appeal, whether to apply that rule is largely a question of the appellate court's discretion." (Air Machine Com SRL v. Superior Court (2010) 186 Cal.App.4th 414, 421, fn. 7.) Given this discretion, it is at least conceivable we could have reached the merits of the appellate arguments presented by Alex and Ani and the Geragos Firm-even though we did not. Further, Warren waited until oral argument to respond substantively to the arguments belatedly raised by Alex and Ani and the Geragos Firm. Therefore, it is difficult for us to assess whether Alex and Ani and the
Geragos Firm's arguments would have been potentially meritorious, or at least non-frivolous, had they been timely asserted. For both these reasons, we decline to order appellate sanctions against the Geragos Firm.
The judgment is affirmed. Respondent Tracy Warren is entitled to her appellate costs.
WE CONCUR: HALLER, J., O'ROURKE, J.