Ellis v. Toshiba Am. Info. Sys., Inc.

• Citation: 160 Cal.Rptr.3d 557,218 Cal.App.4th 853
• Decision Date: 10 September 2013
• Docket Number: B220286,B227078
• Court: California Court of Appeals
• Parties: Jeffery L. ELLIS et al., Plaintiffs, v. TOSHIBA AMERICA INFORMATION SYSTEMS, INC., Defendant and Respondent; Lori J. Sklar, Objector and Appellant.

218 Cal.App.4th 853

160 Cal.Rptr.3d 557

Jeffery L. ELLIS et al., Plaintiffs,

v. TOSHIBA AMERICA INFORMATION SYSTEMS, INC., Defendant and Respondent;Lori J. Sklar, Objector and Appellant.

B220286

B227078

Court of Appeal,

Second District, Division 1, California.

Filed August 7, 2013

As Modified August 14, 2013

As Modified on Denial of Rehearing Sept. 10, 2013

See 2 Witkin, Cal. Evidence (5th ed. 2012) Discovery, § 253.

APPEAL from orders of the Superior Court of Los Angeles County, Anthony J. Mohr, Judge. Affirmed in part and reversed in part with directions. (Los Angeles County Super. Ct. No. BC328556)

Lori J. Sklar, in pro. per.; Murphy, Pearson, Bradley & Feeney, Harlan B. Watkins and John P. Girarde,San Francisco, for Objector and Appellant.

Keller Rackauckas Umberg Zipser, Dean J. Zipser, Carole E. Reagan; Manatt, Phelps & Phillips, Benjamin G. Shatz, Los Angeles, and Adina L. Witzling, Costa Mesa, for Defendant and Respondent.

JOHNSON, J.

Lori J. Sklar represented the plaintiffs in a class action against Toshiba America Information Systems (Toshiba). Sklar appeals from the trial court's orders awarding monetary sanctions against her and the court's order awarding her no attorney fees. Toshiba cross-appeals the order awarding staff fees to Sklar Law Offices. We affirm the order awarding monetary sanctions against Sklar, and affirm in part and reverse in part the order regarding attorney fees.

SUMMARY

In February 2005, Caddell & Chapman, a Texas law firm with experience litigating class actions, and Sklar, a sole practitioner and a member of the California bar doing business as Sklar Law Offices (SLO) out of her home office in Minnesota,¹ filed a class action against Toshiba,² on behalf of a class of purchasers of a Toshiba laptop computer which had an electrostatic discharge problem with the top cover. After a two-day mediation, in November 2005 Sklar and all other counsel signed a settlement term sheet, giving each class member a 12–month repair warranty extension (or, if the class member already had the extended warranty, a $35 credit voucher), and either $25 in cash or a $50 voucher for the repair to replace the defective top cover. Conflicts ensued between counsel regarding the drafting of a settlement agreement. Sklar later objected to the settlement, including an objection to the inclusion of the amount of her fees in the class notice, and the proposed settlement initially was submitted to the court without her signature in May 2006.

After further negotiations, Sklar filed a motion for preliminary approval of the settlement in August 2006. In an attached declaration, Sklar stated that she would seek legal fees of more than $24,700,000 (represented as 25 percent of a settlement value placed at $98,975,862),³ to be apportioned between Sklar and Caddell & Chapman, plus expenses of $99,750. Toshiba filed a declaration by counsel stating that it had agreed not to oppose the application by Caddell & Chapman for $1,125,000 in fees, but Toshiba intended to take discovery into the basis of Sklar's “exorbitant” fee request, and would seek the production of documents and the depositions of Sklar and others, including Sklar's expert.

The trial court granted preliminary approval of the settlement in October 2006. The class notice, disseminated in October and November 2006, stated: “Sklar Law Offices will ask the Court for attorneys' fees in the amount of $24,743,965.50, less whatever the Court awards Caddell & Chapman for its attorneys' fees. Sklar Law Offices will ask for litigation expenses in the amount of $114,900. Toshiba will oppose these requests.” In May 2007, the court granted final approval and entered judgment.

In January 2008 the trial court awarded Caddell & Chapman $1,050,000 in attorney fees and $75,000 in costs, for a total of $1,125,000. Sklar's initial fee petition, filed later in January 2008, requested fees of either $7,847,362.50 under a lodestar/multiplier approach, or $24,743,965.50 as a percentage of the settlement value, and $410,383.53 in expenses (this time for Sklar alone). Sklar's subsequent fee application in October 2009 requested fees of $12,079,534.69, plus expenses for SLO of $905,752.72.

As promised, Toshiba opposed Sklar's fee request, and protracted litigation and many discovery disputes followed Sklar's initial fee estimate in 2006. On August 31, 2009, the trial court granted Toshiba's motion for monetary sanctions against Sklar in the amount of $165,000 for fees and costs Toshiba incurred related to Sklar's failure to comply with court discovery orders, and her failure to meet and confer in good faith. Sklar appealed, and the sanctions order is the subject of appeal No. B220286.

On June 30, 2010, the trial court issued a 27–page ruling awarding SLO $176,900 in fees (for work during the merits phase of the class action by the staff of SLO), and awarding nothing for Sklar's work; subtracting the $165,000 sanctions award, the net award to SLO was $11,900. Sklar appealed the order denying attorney fees, Toshiba cross-appealed from the award of fees for work by SLO staff, and the fee award is the subject of appeal No. B227078.

We consolidated the two appeals. For the reasons detailed below, we affirm the order awarding monetary sanctions against Sklar, and affirm in part and reverse in part the order regarding attorney fees.

BACKGROUND

I. Sklar disobeyed the court order to allow forensic computer inspections, and the trial court imposed monetary sanctions.

We describe in some detail the arduous procedural history of Toshiba's attempt to obtain discovery of electronically stored information regarding Sklar's request for attorney fees.

A. Toshiba sought Sklar's electronic billing records.

After the preliminary approval of the settlement in October 2006, Toshiba began to seek discovery, including document production and Sklar's deposition, related to Sklar's August 2006 statement that she would make a fee request of over $24 million. Among other items, Toshiba sought an electronic, searchable, copy of time records Sklar had produced in hard copy. Toshiba characterized those records as showing that Sklar worked on the class action “nearly all day (sometimes as much as 16.75 hours), every day, seven days a week, including holidays, for some 22 months.” Toshiba served subpoenas in October 2006 and January 2007, each of which sought computer data and files related to time billed by Sklar or SLO in the class action. In response, Sklar produced a compact disc (CD) containing Portable Document Format (PDF) copies of the time records, which on appeal she characterizes as “redacted to protect attorney-client and work product privileges.” Toshiba continued to request a searchable electronic copy of Sklar's time records.

The trial court held a hearing on January 26, 2007 on Sklar's objections to Toshiba's discovery requests, asking Sklar's counsel and Sklar: “[D]o you really think that I'm going to allow this to proceed and give Ms. Sklar the benefit of $24 million in fees without having her be deposed, without having her produce any documents?” Given that Sklar's fee request included time records showing she worked “up to 16–hour days seven days a week for a number of weeks,” the court stated that Sklar would have to produce time records which were not redacted. Sklar's counsel argued that the records were complete; counsel for Toshiba rejoined that Sklar had represented that the time records were redacted, and Toshiba was unable to tell what had been excised. The court responded: “I'm not going to take your [Sklar's] word for it, I must tell you.... [N]ot with this kind of a request. The amount of money you want is staggering, and I think it has to be ... scrutinized ... before I approve this kind of an award.” Allowing that “[a]t the end of the day I may award [Sklar] every penny,” the court emphasized that Toshiba had the right to verify both that the time records showed what Sklar actually did, and that the claimed attorney time did not represent something that could have been done by a secretary or paralegal.

Counsel for Toshiba requested that the electronic version of the time records be produced “in its native format in the program it was used or at least something ... searchable.” The trial court ordered Sklar to appear for deposition and to produce the electronic time records in “native format,” ⁴ and told Sklar's counsel to hire an “I.T. expert” or consultant to redact any privileged information.

Toshiba's counsel subsequently wrote to Sklar's counsel to clarify that “[n]ative format is the format[s] in which the documents were originally created and maintained, including all metadata ⁵ associated with those files.” Sklar then produced a CD–Rom containing a set of Microsoft Word files of Sklar's time records which were searchable versions of the time records produced in hard copy, with none of the metadata associated with the original files. Sklar's counsel explained that at the time of the October subpoena the time records only existed in Adobe Acrobat form and had no associated metadata, and the Microsoft Word files were the time records as they existed at the time of the subpoena.

At Sklar's deposition in March 2007, she testified that before she produced the time records (including around the end of 2006), she had converted the records into Adobe format, deleting the original Word files using a program called “Wipe and Delete.” Sklar had used this program daily to eliminate metadata. As a result, it was not possible to tell when or how often Sklar created time records, among other things.

After Sklar's deposition, Toshiba requested that Sklar allow Toshiba's expert to inspect Sklar's computers (at Sklar's expense) to determine whether it was possible to recover any of the deleted files and metadata. Sklar refused.

B. Toshiba filed a motion for sanctions regarding Sklar's destruction of her original electronic billing records.

Toshiba then filed a motion for...