Key Decisions

September 2013 – A $176,900 Discovery Sanction Was Reasonable

(filed under: Key Decisions Archive | September 24, 2013)

A $176,900 Discovery Sanction Was Reasonable

Ellis v. Toshiba America Information Systems
(Cal. Ct. of App., 2d Dist.), filed August 7, 2013, published August 7, 2013

KEY FACTS

Jeffrey Ellis sued Toshiba America Information Systems in a class action lawsuit. Ellis was represented by two law firms. One was Caddell & Chapman, a Texas law firm with experience litigating class actions. The other was Lori Sklar, a sole practitioner and a member of the California Bar doing business as Sklar Law Offices out of her home office in Minnesota.

After the matter settled, Caddell & Chapman and Sklar sought fees as the attorneys for the successful class. 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), to be apportioned between Sklar and Caddell & Chapman, plus expenses of $99,750. Toshiba did not oppose the application by Caddell & Chapman for $1,125,000 in fees. However, it indicated the intention to take discovery into the basis of what it considered to be Sklar’s “exorbitant” fee request. It indicated it would seek the production of documents and the depositions of Sklar and others, including Sklar’s expert.

Protracted litigation and many discovery disputes followed Sklar’s initial fee estimate. In essence, Toshiba sought the source data for Sklar’s time records, in “native format.” It wanted these so it could search the entries and sort and categorize them. It also wanted the records in “native format” because it would contain information, decipherable by a computer expert, relative to when the information was prepared and edited. Sklar resisted. The trial court entered two orders compelling Sklar to provide the records and to permit a forensic expert to inspect the hard drive on her computer. The trial court warned about the consequences of non-compliance, including that it might lead to the court concluding that what Sklar submitted in support of her fee petition was not credible and did not support the petition. Nonetheless, Sklar did not comply. Eventually, 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.

The trial court issued a 27-page ruling awarding Sklar $176,900 in fees (for work during the merits phase of the class action by the staff of Sklar), and awarding nothing for Sklar’s own work. It then subtracted the $165,000 sanctions award. The net award to Sklar was $11,000.

HOLDING & REASONING

The Court of Appeal affirmed the sanction award and the trial court’s determination that Sklar was entitled to nothing for her own work. It reversed and remanded as to the fee for the work done by Sklar’s staff, as there was a computational error that it wanted the trial court to correct. In addition, the court sanctioned Sklar for submitting as an item in the appellant’s appendix, something that was altered from what had been submitted to the trial court.

As to the trial court’s imposition of monetary sanctions, the court found no abuse of discretion as Sklar failed to comply with two different trial court orders. The court reminded that “[t]here is no requirement that misuse of the discovery process must be willful for a monetary sanction to be imposed;” and that “[w]henever one party’s improper actions—even if not “willful”—in seeking or resisting discovery necessitate the court’s intervention in a dispute, the losing party presumptively should pay a sanction to the prevailing party.” It then ruled that Sklar’s conduct, as it had detailed in its opinion, “amply supports the sanctions award.” It agreed with the trial court’s remark that “the record in this case is one of obfuscation and delay by [Sklar].”

The court also found monetary sanctions were justified based on Sklar’s failure to engage in the meet and confer process mandated by the Code of Civil Procedure. It reminded: “[A] reasonable and good faith effort at informal resolution entails something more than bickering with [opposing] counsel…Rather, the law requires that counsel attempt to talk the matter over, compare their views, consult, and deliberate.” Sklar failed to do so.

The court rejected Sklar’s argument that the trial court exceeded its jurisdiction in ordering that a forensic expert be permitted to inspect the hard drive of her computer and that as a result, she was justified in disobeying its order. Among other things, the court observed: “[T]he sizeable nature of Sklar’s fee request and her resistance to the court’s inquiries regarding her seemingly excessive rates made the court’s inspection orders reasonable and necessary.” It stated:

Sklar requested over $24 million in attorney fees. In support, she provided hard copies of her billing records purporting to show that she worked at a superhuman rate, followed by a CD with PDF copies of those time records (which she acknowledges had been redacted). Sklar later represented that she had deleted all the original electronic billing records that arguably might have cast doubt on the accuracy of her billing. We therefore reject Sklar’s complaint that the court exceeded its jurisdiction when it authorized Toshiba’s inspection of her hard drive to determine whether any of that electronically stored information survived her destruction of the files.

After finding that the monetary sanction award was not an abuse of discretion, the court found that the trial court did not abuse its discretion in declining to award Sklar anything on her fee request.

The trial court was within its discretion in concluding that Sklar’s billing records were “unusable” for the purpose of calculating a fee. The records were inconsistent, contained omissions, and billing entries were inaccurate and even contradictory. The number of hours claimed were excessive (over five years, about 11 hours a day every day), and Sklar’s hours included activities that should have been handled by an expert witness, fact investigator, or paralegal. In addition, the trial court was within its discretion to apply the negative inference resulting from Sklar’s failure to submit source information for her fee request.

ANALYSIS

This harsh result seems to be the court’s reaction to a very over-the-top fee request. The court’s opinion strongly suggests that it perceived significant over-reaching, to put it mildly, in the fee request. The sanctions more or less neutralized even the legitimate aspects of the fee request.