City of L. A. v. PricewaterhouseCoopers, LLC

• Decision Date: 20 October 2022
• Docket Number: B310118
• Parties: CITY OF LOS ANGELES, Plaintiff and Appellant, v. PRICEWATERHOUSECOOPERS, LLC, Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

84 Cal.App.5th 466

300 Cal.Rptr.3d 432

CITY OF LOS ANGELES, Plaintiff and Appellant,

v.PRICEWATERHOUSECOOPERS, LLC, Defendant and Respondent.

B310118

Court of Appeal, Second District, Division 5, California.

Filed October 20, 2022

Office of the City Attorney, Michael N. Feuer, Kathleen A. Kenealy, Joseph A. Brajevich ; Browne George Ross O'Brien Annaguey & Ellis, Ellis George Cipollone O'Brien Annaguey, Eric M. George, Guy C. Nicholson and Kathryn L. McCann, Los Angeles, for Plaintiff and Appellant.

Gibson, Dunn & Crutcher, Casey J. McCracken, Irvine, Daniel J. Thomasch, Lauren J. Elliot and Joseph M. Ortega, for Defendant and Respondent.

MOOR, J.

A defendant in a civil lawsuit filed a motion for sanctions under Code of Civil Procedure sections 2023.010 and 2023.030 of the Civil Discovery Act (Discovery Act; § 2016.010 et seq.) nine months after the case was dismissed with prejudice, seeking monetary sanctions for egregious misuse of the discovery process while the litigation was pending.¹ The trial court awarded $2.5 million in sanctions. On appeal from the postjudgment order, in response to a letter from this court inviting additional briefing pursuant to Government Code section 68081, the sanctioned party contends the Discovery Act does not authorize the trial court to award monetary sanctions under section 2023.030 alone or together with section 2023.010.

We hold that monetary discovery sanctions may be imposed under section 2023.030 only to the extent authorized by another provision of the Discovery Act. Section 2023.010 describes conduct that is a misuse of the discovery process, but does not authorize the imposition of sanctions. The plain language of the statutory scheme does not provide for monetary sanctions to be imposed based solely on the definitional provisions of sections 2023.010 or 2023.030, whether construed separately or together. We conclude that the sanctioned party met its burden on appeal to show error, because the award of monetary sanctions was not authorized by the statutes cited.

The trial court was authorized by other provisions of the Discovery Act, however, to impose some amount of monetary sanctions in connection with rulings in favor of the defendant on discovery motions during the litigation. We cannot evaluate on this record whether the sanctions awarded may have been an appropriate exercise of the trial court's discretion under other discovery provisions because the defendant presented its costs in the motion below based on the general categories of misconduct described in section 2023.010, rather than on the defendant's reasonable expenses incurred as a result of sanctionable conduct under discovery provisions other than sections 2023.010 and 2023.030. Because the question of the court's authority to award sanctions under sections 2023.010 and 2023.030 was not squarely raised in the trial court, and no prior case law held that the statutory language of section 2023.030 requires monetary sanctions to be authorized by another provision of the Discovery Act, the order in this case must be reversed and remanded to allow the defendant to present the issue of sanctions to the trial court for determination under the correct law.

The sanctioned party has raised two additional contentions on appeal that must be addressed. First, the sanctioned party asserts that the trial court had no jurisdiction to rule on a motion for monetary sanctions under the Discovery Act after the case was dismissed with prejudice. We hold that when the court is authorized under a provision of the Discovery Act to impose monetary sanctions, the court retains jurisdiction after the lawsuit is dismissed to rule on the issue of discovery sanctions as a collateral matter. Second, the sanctioned party contends that the motion for sanctions was untimely. We hold that the timeliness of a motion for monetary sanctions following a successful discovery motion is a matter within the trial court's discretion, and no abuse of the court's discretion has been shown. We reverse the postjudgment order awarding sanctions and remand for a new determination on the issue of discovery sanctions.

FACTUAL AND PROCEDURAL BACKGROUND

Billing Errors

In 2010, plaintiff and appellant City of Los Angeles entered into a contract with defendant and respondent PricewaterhouseCoopers, LLC (PWC) to modernize the billing system for the Los Angeles Department of Water and Power (LADWP). Using new billing software introduced in 2013, the City failed to accurately bill a significant portion of its customers. LADWP customers began filing lawsuits against the City over billing disputes.

On March 6, 2015, the City's special counsel Paul Paradis, Gina Tufaro, and Paul Kiesel, along with the City's attorneys Michael Feuer, Thomas Peters, Joseph Brajevich, Richard Tom, and Eskel Solomon, filed the instant action against several defendants, including PWC. The City alleged PWC fraudulently induced the City to enter into the contract for the billing system and breached the contract.

On April 1, 2015, Ohio attorney Jack Landskroner, on behalf of plaintiff Antwon Jones, filed a class action lawsuit against the City based on the billing errors (the class action). Without filing an answer, the City entered into mediation in the class action in June 2015. The parties to the class action entered into a preliminary settlement agreement on August 7, 2015. The trial court judge in this case presided over both the class action and the City's civil case.

Discovery Begins

On December 21, 2015, PWC served requests for production of documents related to remediation of the billing system and the alleged damages. "Remediation" included identifying the overcharges, issuing refunds to customers, and correcting the defects in the billing system. The c served responses, refusing to provide documents for a majority of the requests. On June 8, 2016, PWC served a second set of requests seeking documents concerning remediation, to which the City served responses.

After informal conferences, the parties reached a discovery agreement. The City served a privilege log on January 20, 2017, that identified more than 19,000 documents as privileged. Approximately 1,200 of the documents were listed as protected by the attorney-client privilege, but did not show an attorney as the sender or recipient. Approximately 17,000 of the documents were listed as protected attorney work product, but did not show an attorney as the sender or recipient, and the documents did not appear to disclose the mental impressions of an attorney. Most of the documents were described as investigation at the direction of counsel concerning remediation.

One of the documents listed as protected attorney work product was described as an initial complaint for a lawsuit entitled Jones v. PWC , dated January 24, 2015, with a cover letter from attorney Eskel Solomon in the city attorney's office to several LADWP employees and attorneys.

PWC Motion to Compel Granted in Part and Denied in Part

On February 3, 2017, PWC filed a motion to compel the documents withheld by the City as privileged that were not authored by an attorney, written to an attorney, and did not appear to disclose the mental impressions of an attorney. At a March 6, 2017 hearing on the motion, PWC suggested there was no true adversity of interest in the class action proceedings. Rather than seeking to minimize damages, the City's intent had been to identify and refund all of the overcharges, which would become part of the City's accounting of damages. PWC argued that documents were not privileged simply because an attorney had instructed LADWP employees to perform the work or because the documents were sent to an attorney. PWC also argued that the privilege was waived by showing the documents to third party consultants and opposing counsel. The common interest privilege did not apply, because a party does not have a common interest with its litigation adversary. In response, the City's special counsel Paradis argued strenuously that all of the documents constituted attorney work product.

The court granted PWC's motion to compel in part and denied it in part. The court ordered production of the documents withheld based on attorney work product, because the work of programmers, computer technicians, and other third parties involved in remediation was predominately related to a business purpose and not privileged under the work product doctrine.

The court denied the motion to compel as to the documents withheld on the basis of attorney-client privilege, but ordered the City to revise the privilege log entries to be specific enough to allow the court to meaningfully analyze whether the documents were in fact privileged. If the City created a timely revised log, PWC could file a motion to compel any remaining documents which PWC believed were not privileged, in accordance with the discovery statutes. A written order entered on April 4, 2017, reflected the court's ruling.

In April 2017, the City produced a revised privilege log with 1,547 entries. In May 2017, PWC served a third set of requests for production seeking all documents transmitted between LADWP and Jones's counsel before August 7, 2015. The City responded that the only responsive document was a comprehensive settlement demand from Jones protected by the settlement privilege or other privileges. The City asserted that no documents were sent by LADWP to Jones's counsel before August 7, 2015.

On July 20, 2017, the class action settlement was approved and entered as the final judgment. The class action judgment included payment of all remediation costs, as well as a total payment of $19,000,000 in attorney fees, including $15,200,000 to the attorneys for Jones and two other plaintiffs.

The City provided another revised privilege log with just 1,058 entries on September 29, 2017. Some of the documents that the City listed on the original log as privileged under the work product doctrine were reclassified and...