Trial judge can impose monetary sanctions for discovery abuse

A Los Angeles County judge had the independent authority to impose monetary sanctions for discovery abuse against the city of Los Angeles in a long-running litigation about water billing software, the state Supreme Court ruled Thursday.

The question concerned a 1986 law, the Civil Discovery Act, and whether trial court judges have the independent authority to impose sanctions. Justice Leondra R. Kruger, an appointee of Gov. Jerry Brown, wrote for the court, saying yes.

The decision reversed a 2nd District Court of Appeal decision, which concluded that PricewaterhouseCoopers LLC, seeking $2.5 million in sanctions for discovery misuse, must rely on the discovery method-specific sanctions provisions of the Civil Discovery Act alone.

The Supreme Court sided with Superior Court Judge Elihu M. Berle. The justices rejected an argument by Kathryn L. McCann -- a partner with Annaguey McCann LLP who represents the city -- that a decision against the city would "open the floodgates" for monetary sanction motions.

"Under the general sanctions provisions of the Civil Discovery Act, the trial court had the authority to impose monetary sanctions for the City's pattern of discovery abuse," Kruger wrote.

"The court was not limited to imposing sanctions for each individual violation of the rules governing depositions or other methods of discovery," she added. City of Los Angeles v. PricewaterhouseCoopers LLC, 2024 DJDAR 8056 (Cal. S. Ct., filed Nov. 23, 2022).

PricewaterhouseCoopers accused the Los Angeles city attorney's office, and outside counsel, of colluding with plaintiffs' lawyers in a reverse auction arrangement that settled the faulty billing case for $67 million with no discovery. The defense plan was to then use the ratepayer plaintiffs in a lawsuit against PricewaterhouseCoopers, which denied allegations that its billing system was faulty.

The related scandal led to an FBI raid of the city attorney's office, outside counsel's offices and the Department of Water and Power. Several lawyers pleaded guilty to felony charges, including Thomas H. Peters, former head of the city attorney's civil litigation branch, on a count of aiding and abetting extortion. He was subsequently disbarred.

"We are gratified by the Supreme Court's complete vindication of PwC's position on the law and the facts," Julian W. Poon, a partner at Gibson, Dunn & Crutcher LLP who represents the consulting company, said in a statement.

"The shameless discovery abuse committed by the City of Los Angeles, which PwC uncovered in the trial court, has led to several federal guilty pleas and convictions of city officials, including at the Department of Water and Power, and its outside counsel," Poon added. "Justice Kruger's unanimous opinion reinstating an extraordinary multimillion dollar sanctions award rights a grievous wrong."

The debate in the case concerned whether the state Civil Discovery Act gave Berle the authority to impose monetary sanctions against the city in October 2020.

During oral arguments in June, McCann argued that they are only permitted under method-specific conditions. "If legislators wanted [trial judges to have] inherent authority to impose monetary sanctions, they would have said that," said told the justices.

Poon, noting the felonies in the underlying case, said the 2nd District majority's conclusion that judges have the power to impose sanctions, but only nonmonetary ones, defeated the purpose of the law. He told the justices that the city was using "tortured reasoning."

McCann and other lawyers working with the Los Angeles city attorney's office could not be reached for comment on the ruling Thursday.

Justice Joshua P. Groban did not participate in the decision. 5th District Court of Appeal Justice Mark W. Snauffer, an appointee of Gov. Jerry Brown, participated by assignment and concurred in the ruling.