Section 128.7 Sanctions Not Available Following Arbitration

When a client has obtained a defense verdict, judgment or arbitration award, they will frequently ask what recourse they have to recover attorney’s fees and costs obtained in defending against the claims.  In California, costs are awarded to the prevailing party as a matter of right.  (Code Civ. Proc., § 1032 subd. (c).) Attorney’s fees are awardable if allowed by contract or statute.  (Code Civ. Proc, § 1033.5 subd. (a)(10).) If no contract or statute provides for a fee award, a party might seek lesser used remedies such as the tort of malicious prosecution or a request for sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure or California Code of Civil Procedure, section 128.7.

These two lesser used remedies are no longer viable options following contractual arbitration.  Malicious prosecution claims will not lie from a contractual arbitration.  (Brennan v. Tremco Inc. (2001) 25 Cal.4th 310, 314).  Today, in an opinion authored by Associate Justice Miguel Márquez, the Sixth Appellate District Court of Appeal also closed the door to seeking Section 128.7 sanctions following an arbitration.  In Optimal Markets, Inc.v . Salant (Nov. 26, 2013 H038571), a prevailing defendant in a binding contractual arbitration, following confirmation of the arbitration award, sought sanctions pursuant to Section 128.7.  The trial court denied the award on the ground that they were not authorized by statute.  On appeal, the moving parties argued that:

plaintiff’s attorneys, in advancing frivolous claims in the binding arbitration on behalf of their clients, advocated a meritless complaint before the court within the meaning of…section 128.7, thereby warranting the imposition of sanctions under that statute.

The Optimal Markets, Inc. court rejected this argument on appeal finding that a trial court has no authority to impose sanctions under section 128.7 for three reasons:

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Why Appellate Briefing Rules Matter

This post is the third in an ongoing series about maximizing a party’s chances of prevailing on appeal.  California appellate courts impose specific requirements on how arguments are to be presented on appeal.  A party cannot simply incorporate by reference trial arguments.  Nor can a party simply cut and paste arguments made in trial briefs without the relevant discussion of the standard of review and citations to the record.  Parties who proceed with an appeal without following appellate briefing rules run the risk of, at best, having an argument deemed forfeited on appeal, and at worst, being removed from a case and referred to the state bar.  Consider the unfortunate outcomes following four California cases:

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The Perils of In-House Counsel Simultaneously Representing Company and Employee

In Yanez v. Plummer (Nov. 5, 2013, C07026), the Third Appellate District issued an opinion highlighting the perils for an in-house lawyer who simultaneously represents the company and an employee.  Union Pacific fired Michael Yanez for dishonesty, citing a discrepancy between a statement that Yanez wrote and a deposition answer Yanez gave in a lawsuit concerning a co-employee’s on the job injury.  At that deposition, Union Pacific in-house counsel, Brian Plummer, represented both Union Pacific and Yanez.  Yanez met with Plummer prior to the deposition.  During this preparation session, Yanez told Plummer he was worried about how his testimony might hurt Union Pacific and may affect Yanez’ job.  Yanez asked Plummer who would protect Yanez at deposition.  Plummer indicated that he would be Yanez’ attorney at deposition.  Yanez’ conflicting deposition testimony led to Yanez’ termination by Union Pacific.  In the ensuing lawsuit, Yanez alleged malpractice, fraud and breach of fiduciary duty against Plummer.  Plummer successfully argued on a motion for summary judgment that Yanez could not establish the causation element of the claims against Plummer.

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