45 Cal.App.5th 1098
Cal. Ct. App.2020Background:
- In 1998 Siry Investment and partners formed a limited partnership to renovate/lease a downtown LA building; in 2003 two general/controlling partners allegedly diverted rent and charged non‑partnership expenses, reducing Siry’s distributions.
- Siry sued in 2007; a 2009 jury verdict for Siry was reversed on appeal for ambiguity about who (individuals vs. trusts) was liable and the case was remanded for retrial.
- On remand (post‑2013) Siry served two rounds of focused discovery (liability, alter‑ego, and defendants’ finances); defendants repeatedly failed to comply with court orders to produce documents and answer without objections.
- After prolonged noncompliance and monetary sanctions, the trial court imposed terminating sanctions (struck answers), entered default, and after a prove‑up awarded compensatory damages, treble damages under Penal Code §496(c), punitive damages, and substantial attorney fees.
- Defendants moved for new trial challenging legal errors in the judgment; the trial court reduced punitive/treble awards and required election between them; Siry elected treble. Parties appealed; the Court of Appeal affirmed terminating sanctions but eliminated treble damages and the §1029.8 attorney‑fee award.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether terminating sanctions are available when the withheld discovery covers fewer than all issues in a case | Siry: terminating sanctions are appropriate for willful, persistent refusal to obey discovery orders even if discovery is issue‑limited | Defendants: terminating sanctions are improper unless the withheld discovery encompasses every issue to be tried | Court: trial court may impose terminating sanctions for partial‑issue discovery refusal after weighing totality of circumstances; breadth of issues is a factor, not a dispositive bar |
| Whether a defendant who is in default may move for a new trial based on errors in law (e.g., improper damage awards) | Siry: defaulting party cannot move for new trial and lacked standing | Defendants: defaulting parties may move for new trial to correct legal errors that affect damages | Court: defaulting defendants may move for a new trial to raise "errors in law" (preserves quicker correction and parallels appellate review) |
| Whether asserting the Fifth Amendment after discovery orders excuses prior discovery noncompliance or bars terminating sanctions | Neman: Fifth Amendment privilege barred compelled discovery and precluded sanctions once asserted | Siry: privilege was defectively and belatedly asserted; does not excuse prior contumacious conduct | Court: privilege was defectively asserted (blanket objections), lacking particularized nexus and raised after prolonged noncompliance; it did not bar terminating sanctions |
| Whether Penal Code §496(c) authorizes treble damages and attorney fees for fraud/ conversion or only for trafficking/ receiving stolen goods | Siry: §496(c) allows treble damages for any conduct constituting "theft," including fraud, conversion, misrepresentation | Defendants: §496(c) is focused on stolen goods/markets for stolen property and does not extend to ordinary fraud misappropriation | Court: §496(c) treble damages and its attorney‑fee remedy do not apply to ordinary fraud/ diversion claims absent conduct involving trafficking/receiving stolen property; treble and §496 fees were struck; punitive damages restored where appropriate |
Key Cases Cited
- Deyo v. Kilbourne, 84 Cal.App.3d 771 (Cal. Ct. App. 1978) (terminating sanctions should be calibrated to dereliction; proportionality and purpose of protecting discovery rights)
- Lopez v. Watchtower Bible & Tract Soc. of New York, 246 Cal.App.4th 566 (Cal. Ct. App. 2016) (broad discretion to sanction and incremental approach to lesser sanctions)
- Mileikowsky v. Tenet Healthsystem, 128 Cal.App.4th 262 (Cal. Ct. App. 2005) (history of abuse and number of attempts to obtain discovery relevant to sanctions)
- Electronic Funds Solutions, LLC v. Murphy, 134 Cal.App.4th 1161 (Cal. Ct. App. 2005) (warnings and court notices important in sanction calculus; reciprocity of discovery duties)
- John v. Superior Court, 63 Cal.4th 91 (Cal. 2016) (standard of review when construing statutory rights to post‑trial relief)
- Switzer v. Wood, 35 Cal.App.5th 116 (Cal. Ct. App. 2019) (held §496(c) treble damages could extend to fraud; Court of Appeal here respectfully parts ways)
- Lacagnina v. Comprehend Systems, Inc., 25 Cal.App.5th 955 (Cal. Ct. App. 2018) (rejects broad application of §496 to non‑stolen‑property contexts)
- Citizens of Humanity, LLC v. Costco Wholesale Corp., 171 Cal.App.4th 1 (Cal. Ct. App. 2009) (legislative history: §496 addressed markets for stolen goods)
- Dyna‑Med, Inc. v. Fair Employment & Housing Com., 43 Cal.3d 1379 (Cal. 1987) (statutory construction: ascertain legislative intent and avoid imputing major, unexpressed changes)