Supreme Court weighs sanctions against LA over legal dispute

The state Supreme Court considered Wednesday whether the city of Los Angeles could be sanctioned for $2.5 million for discovery abuse during a legal dispute with PricewaterhouseCoopers LLC over a lawsuit it dropped.

The question concerns a 1986 law, the Civil Discovery Act, and whether trial court judges have independent authority to impose monetary sanctions. A 2nd District Court of Appeal panel said no because monetary sanctions were not authorized under the statute.

Kathryn L. McCann, a partner with Annaguey McCann LLP who represents the city, argued that Los Angeles County Superior Court Judge Elihu M. Berle "did not have the inherent authority to impose monetary sanctions."

But Gibson, Dunn & Crutcher LLP partner Julian W. Poon, noting that several individuals pleaded guilty to felonies over the lawsuit, argued that the city was using "tortured reasoning" to maintain that monetary sanctions were not permitted.

Much of the argument revolved around what the Legislature intended when drafting the law and whether a decision against the city would "open the floodgates" for a host of motions for monetary sanctions by litigants.

Justices seemed skeptical about that. "What happened in this case is relatively unusual," Justice Leondra R. Kruger told McCann. "I'm not sure what the danger of opening the floodgates would be." City of Los Angeles v. PricewaterhouseCoopers LLC, S277211 (Cal. S. Ct., filed Nov. 23, 2022).

The case stems from the city's lawsuit against PricewaterhouseCoopers, which provided the Los Angeles Department of Water and Power with billing software. The city reached a $67 million settlement with customers. Jones v. City of Los Angeles, BC577267 (Los Angeles Co. Sup. Ct., filed April 1, 2015).

But the consulting company accused lawyers in the Los Angeles city's attorney's office, and outside counsel, of colluding with plaintiffs' attorneys, leading to a raid by the FBI of several attorneys' offices. That led to guilty pleas on federal charges by attorneys involved, including Thomas H. Peters, former head of the city attorney's civil litigation branch, on a count of aiding and abetting extortion.

In March, the State Bar filed disciplinary charges against Tarzana attorney Michael J. Libman for allegedly colluding with the city to reach a settlement without discovery.

But the question before the state Supreme Court involved whether Berle had the authority in October 2020 to impose monetary sanctions under the Civil Discovery Act. Much of the discussion revolved around a debate over specific language in the law and whether it permitted or forbid monetary sanctions against the city.

McCann told the justices that Poon's argument "was more appropriate before a legislative committee" considering an amendment to the law and that sanctions are only permitted under method-specific provisions. "If legislators wanted inherent authority to impose monetary sanctions, they would have said that," she added.

But Poon, emphasizing the felonies involved in the underlying settlement, said the 2nd District panel majority's conclusion that trial judges have power to impose sanctions, but only nonmonetary ones, undermines the purpose of the law.

That power includes the authority to terminate a case. But in the underlying complaint, that didn't matter. "How do you terminate a case that the city has already terminated itself?" Poon told the court.

Justice Joshua P. Groban did not participate in oral arguments. 5th District Court of Appeal Justice Mark W. Snauffer, an appointee of Gov. Jerry Brown, participated by assignment.