Marie SWAN, Plaintiff and Respondent, v. SHELBY FINE ARTS et al., Defendant and Respondent.*
In a multi-count tort and contract action filed by Marie Swan (plaintiff) against Shelby Fine Arts, Ron Caven and Kurt Caven (defendants), defendants' insurer, New Hampshire Insurance Company (New Hampshire), has appealed from an order imposing $1,270.50 in sanctions on it because of its conduct in connection with three voluntary settlement conferences.
The settlement conferences in question took place on December 15, 1988, December 30, 1988, and January 12, 1989.
The December 15 conference, which had been requested by both parties, was held before a three-member panel consisting of the trial court and two private attorneys. Plaintiff and her attorneys were present; defendants' attorney was present and defendants were on telephone standby, and an adjuster was present on behalf of New Hampshire. Plaintiff demanded the policy limits of $300,000, and New Hampshire made an offer of $20,000.
Defendants' attorney and the adjuster both stated, at the December 15 conference, that there was a coverage dispute. The attorney was not sure what the dispute was about; the adjuster stated that the dispute was based on the time the incident occurred and the policy period. The attorney and the adjuster both thought that a declaratory relief action had been filed in Los Angeles, but neither had any further information about the action. There had been no previous references to any coverage problems. In their reply to plaintiff's interrogatories defendants had stated that they were not aware of any coverage conflicts or reservation of rights on the part of New Hampshire.
The trial court continued the December 15 conference to December 30. In addition, at the end of the December 15 conference, after defendants' attorney had left, the trial court told plaintiff's attorney that it was ordering defendants to provide plaintiff with a copy of the insurance policy and to provide plaintiff with information about the declaratory relief action filed by New Hampshire so that a meaningful settlement conference could take place on December 30. That same day, December 15, plaintiff's attorney hand-delivered a letter to defendants' attorney in regard to the foregoing orders.
Defendants' attorney did not respond to the letter. On December 21, plaintiff's attorney wrote another letter to defendants' attorney, and again asked the attorney for a copy of the policy and for information about the declaratory relief action.
On December 28, defendants' attorney told plaintiff's attorney that she had asked New Hampshire for a copy of the policy and had not yet received one, and that she had no information about the declaratory relief action.
On December 30 the second settlement conference took place, before the trial court only. At the conference were: plaintiff and her attorney; defendants' attorney; New Hampshire's claims representative, and an attorney representing New Hampshire. Plaintiff made a demand of $250,000, and New Hampshire made an offer of $50,000. New Hampshire's attorney gave plaintiff's attorney a copy of a declaratory relief action which he had filed that day in San Diego Superior Court. No one gave plaintiff's attorney a copy of the policy.
The trial court continued the conference to January 12, and ordered New Hampshire's attorney to provide plaintiff with a copy of the policy. The attorney said he would do so.
At the January 12 conference were: plaintiff's attorneys; defendants' attorney, New Hampshire's claims representative, and New Hampshire's attorney. Plaintiff was on telephone standby. Plaintiff made a demand of $150,000 and New Hampshire repeated its offer of $50,000. New Hampshire did not produce the policy, nor did it offer any explanation for its failure to do so. The trial court discontinued the settlement conference and advised plaintiff's attorneys that it would consider a motion for sanctions.
On January 18, plaintiff noticed a motion for an order requiring New Hampshire to pay plaintiff's reasonable expenses and attorney's fees incurred as a result of: (1) New Hampshire's failure to participate in good faith in the December 15 settlement conference; and (2) New Hampshire's failure to produce a copy of the policy despite the trial court's December 15 and December 30 orders to do so. The motion was based on: (1) rule 227 of the California Rules of Court (sanctions in respect to rules, local rules, and court orders); (2) various local rules; and (3) Code of Civil Procedure sections 575.2 (imposition of penalties for failure to comply with local rules), 177.5 (powers to impose sanctions for violations of lawful orders) and 128.5 (payment of expenses attributable to bad faith actions or frivolous or delaying tactics). In the motion plaintiff requested $452 for her expenses in attending the December 15 and December 30 conferences from San Francisco, where she was living, and attorney's fees of $1,920.
New Hampshire filed opposition to the motion, arguing, among other things, that: (1) its representatives had attended all three settlement conferences and had negotiated at each of the conferences in good faith; (2) the policy did not cover plaintiff's action; (3) the trial court had no jurisdiction to compel New Hampshire's claims representative to appear at a “mandatory” settlement conference or to produce documents because New Hampshire was not a party to plaintiff's action; and (4) the personal appearance by New Hampshire's attorney at the December 30 and January 12 settlement conferences did not give the trial court jurisdiction over New Hampshire's employees.
New Hampshire's opposition was supported by a declaration of its attorney. The declaration recited, in relevant part:
“There was a hearty give and take and discussion of the issues at the settlement conferences which occurred on December 15, 1988 and December 30, 1988. The basis for NEW HAMPSHIRE'S position regarding settlement, both in terms of the facts and law in the underlying case and in terms of the coverage problems presented has been exhaustively presented, and even in far greater detail than required by the laws of the State of California․
“Declarant is informed and believes that the Court's oral order of December 15, 1988, was communicated to plaintiff's counsel and then by plaintiff's counsel to counsel for defendant SHELBY FINE ARTS, and then to NEW HAMPSHIRE․ At no time was NEW HAMPSHIRE ․ or its representatives served with any summons or subpoena in connection with its appearances at the settlement conferences of December 15, 1988, December 30, 1988, or January 12, 1988.”
Defendants also filed opposition to plaintiff's motion for expenses and attorney's fees. Defendants' opposition was supported by a declaration of their attorney. The declaration recited, in relevant part:
“In a phone conversation I had with [a representative of New Hampshire] on January 24, 1989, he advised me that a copy of the policy was on its way to [New Hampshire's attorney]. He indicated that there was not one true certified copy of the policy, but rather that the policy is a compilation of various forms and endorsements․ I did submit a request for a copy of said policy prior to the winter holidays․ [U]nfortunately there has been some delay in response․ I hope that [t]his court does not view this procedural problem as an intentional disregard of its order in that it was not.”
On January 30, 1989, a month after it had been ordered to do so, and almost three weeks after the January 12 conference, New Hampshire sent plaintiff a copy of the policy.
On March 24, 1989, after a hearing for which there is no transcript in the record, the trial court entered an order requiring New Hampshire to pay plaintiff $1,270.50 in sanctions. In computing the $1,270.50, the court added one-half of plaintiff's costs for the December 15 conference (plaintiff did not attend the January 12 conference), and approximately one-half of the attorney's fees requested by plaintiff's attorneys for the December 15 conference, the January 12 conference, and the preparation of the sanctions motion. (New Hampshire does not challenge the amount of the sanctions.) The reason the court halved plaintiff's costs and fees is apparent from its statement, in the order, that it thought sanctions would also be appropriate against defendants' attorneys, but that it would not impose such sanctions because plaintiff had made no request therefor.
The court's order also recited, in relevant part:
“The Court finds that it has the authority to order sanctions in actions concerning voluntary settlement conferences which are conducted by a Judge of the Superior Court; See California Rules of Court, Rule 222(b) and Rule 227; Raygoza v. Betteravia Farms (19 ) 193 Cal.App.3d,  1595–96 [239 Cal.Rptr. 188], and to grant sanctions against persons attending the settlement conference who are not party litigants. City of El Monte v. Takei (1984) 158 Cal.App.3d 244, 249 [204 Cal.Rptr. 559].
“It appears to this Court that sanctions are appropriate in this case in that defendants' counsel and the insurance company appeared at the settlement conference unprepared for any meaningful negotiations. Consequently, the December 15, 1988 settlement conference was a waste of the plaintiff's and the three judge settlement panel's time.
“Both the adjustor and the defense attorney's lack of familiarity of [sic] the substance of the coverage dispute rendered the December 15, 1988 settlement conference a nullity․
“Sanctions should be assessed against NEW HAMPSHIRE for its failure to participate in good faith at the December 15, 1988 settlement conference when they were represented by an uninformed outside adjuster with limited authority to settle. [The adjuster] had limited knowledge of the case, could not articulate the basis for the coverage dispute and consequently could not effectively negotiate any settlement.
“The Court also finds that sanctions against NEW HAMPSHIRE are appropriate for the delay in producing the insurance policy pursuant to court order on December 30, 1988․ The Court finds that NEW HAMPSHIRE'S failure to produce this ․ policy ․ before the January 12, 1989 settlement conference to be a failure to participate in good faith, which again rendered the January 12, 1989 settlement conference to be a useless exercise.” (Fn. omitted.)
Shortly afterwards, plaintiff's action was tried to a jury and the jury returned a verdict in favor of plaintiff in the amount of $364,385. Judgment was entered on the verdict and New Hampshire's appeal from the sanctions order followed.
New Hampshire contends: (1) the award of sanctions was improper because New Hampshire attended each settlement conference and negotiated at each conference in good faith; (2) the trial court's order requiring production of the policy was improper; (3) the trial court improperly demanded that New Hampshire disclose non-discoverable information; and (4) the trial court had no jurisdiction to compel New Hampshire to be present at the settlement conferences or to produce documents because New Hampshire was not a party to plaintiff's action. For her part, plaintiff contends that she is entitled to sanctions because New Hampshire's appeal is frivolous.
I THE SANCTIONS AWARD
As noted, plaintiff sought her expenses and attorney's fees pursuant to, among other things, rule 227 of the California Rules of Court (hereinafter referred to as rule 227), and the trial court relied on that rule in making its award. Rule 227 recites, in relevant part:
“The failure of any person to comply with these rules, local rules, or order of the court, unless good cause is shown, or failure to participate in good faith in any conference those rules or an order of the court require, is an unlawful interference with the proceedings of the court. The court may order the person at fault to pay the opposing party's reasonable expenses and counsel fees, ․ in addition to any other sanction permitted by law.”
New Hampshire contends that the trial court abused its discretion in awarding sanctions under rule 227, because New Hampshire's representatives attended the settlement conferences in question and made offers at each of the conferences. However, New Hampshire ignores the trial court's findings that: (1) New Hampshire's adjuster appeared at the December 15 conference “unprepared for any meaningful negotiations”; “[unfamiliar with] the coverage dispute,” and “with limited authority to settle,” and (2) New Hampshire failed to comply with the court's December 30 order to produce the policy before the January 12 conference.
The foregoing conduct of New Hampshire's constitutes: (1) a failure to comply with a local rule (rule 1.8 of the San Diego County Superior Court Rules for “Settlement Conferences” (hereinafter referred to as rule 1.8), which requires that “claims adjusters for insured defendants ․ shall be present, with complete authority to settle the case” (emphasis added)); (2) a failure to comply with a court order; and (3) a failure to participate in good faith in the December 15 and January 12 conferences. Accordingly, the trial court properly awarded sanctions under rule 227.
New Hampshire does not challenge the trial court's findings, ante, nor, as noted, does New Hampshire challenge the amount of the award. Instead, New Hampshire asserts that the sanctions order “is based purely upon the trial court's subjective judgment that NEW HAMPSHIRE should have offered more toward settlement.” However, this assertion is contradicted both by the court's findings, ante, and by the absence of any reference, in the order, to any settlement amounts New Hampshire offered or should have offered.
In view of all the foregoing, New Hampshire's contention that the trial court abused its discretion in awarding sanctions is without merit.
II THE ORDER REQUIRING PRODUCTION OF THE POLICY
New Hampshire contends that the December 15 order requiring it to produce the policy was improper because no motion had been made for such production and New Hampshire was not a party to the action. However, as New Hampshire concedes, the sanctions award was not based on the December 15 order, but on the December 30 order. In a footnote in its sanction order, the trial court stated: “․ the Court believes that its order [to produce the policy] was effective on December 15. However, to resolve any notice question, the Court has used the December 30 date to determine the sanctions which should be levied for failure to produce the policy.”
Moreover, even if we construe New Hampshire's contention as having been directed to the December 30 order, the contention is also without merit. As to the absence of a motion for the production of the policy, New Hampshire does not contend that it had no notice that such production was required, or that it was prejudiced by the absence of written notice. In addition, New Hampshire cannot credibly argue that plaintiff should have made a motion for production of the policy before the December 15 conference, when plaintiff was not aware, before the conference, that such production was necessary. (As noted, ante, the coverage issue was raised for the first time at the conference.)
As to the trial court's jurisdiction over New Hampshire as a non-party, rule 1.8 of “Settlement Conferences,” supra, which New Hampshire does not challenge,1 requires claims adjusters for insured defendants to attend settlement conferences, and it would be virtually meaningless for the adjusters to attend the conferences if they were not subject to the trial courts' orders at the conferences. Significantly, rule 227 is not limited to parties, but authorizes the trial court to award sanctions against any “person” who fails to comply with any local rules or order of the court.
In City of El Monte v. Takei (1984) 158 Cal.App.3d 244, 204 Cal.Rptr. 559, which the trial court here relied on in its sanctions order, the court used rule 217, the predecessor to rule 227, to uphold the trial court's award of sanctions against a non-party insurance carrier who had failed to appear at a mandatory settlement conference, in violation of a local court rule. New Hampshire attempts to distinguish City of El Monte on the ground that that case involved the failure of the carrier to appear at the conference, and this case does not involve any such failure. However, this distinction is immaterial to the jurisdictional issue, because, in affirming the trial court's award of sanctions against a non-party carrier who had failed to attend a settlement conference, the City of El Monte court necessarily recognized that the trial court would have had jurisdiction over the carrier if the carrier had attended the conference. Such jurisdiction, of course, would extend to an order, such as the order in the case here, to produce the policy.
In view of all the above, New Hampshire's contention that the trial court's order requiring it to produce the policy was improper is without merit.
III NON–DISCOVERABLE INFORMATION
New Hampshire concedes that plaintiff is entitled to discovery of “the existence and contents of” the policy. (Code Civ.Proc., § 2017, subd. (b).) New Hampshire contends, nonetheless, that “[t]he Court's ‘Order’ specifically requires the insurance company to disclose non-discoverable information; i.e., the nature and substance of the ongoing coverage disputes,” and that such discovery of such information is precluded by section 2017, subdivision (b).
However, although discovery of the nature and substance of coverage disputes is precluded by section 2017, subdivision (b), the trial court did not order New Hampshire to produce such information, nor does New Hampshire refer to anything in the record which even remotely suggests that it did.
New Hampshire also contends that production of the policy would invade defendants' privacy rights. In support of this contention New Hampshire relies on Insurance Code section 791.13. That section provides that an insurance institution “shall not disclose any personal or privileged information about an individual collected or received in connection with an insurance transaction․” New Hampshire does not argue that an insurance policy constitutes “personal or privileged information about an individual,” nor, considering that the policy is discoverable under Code of Civil Procedure section 2017, could such an argument be made.
In view of all the foregoing, New Hampshire's contention that the policy is non-discoverable is without merit.
Without citing any applicable authority, New Hampshire contends that the trial court did not obtain jurisdiction over it pursuant to rule 1.8 because that rule, as applied here, is “an unwarranted and unconstitutional exercise of power over non-party insurers and their employees.”
This is so, New Hampshire argues, because there is no statutory procedure “by which the Court, of its own volition, can require a person or entity against whom no jurisdiction has been invoked to appear before it and produce documents.” (Italics added.) This argument, of course, begs the question as to whether jurisdiction has been invoked over the person or entity.
Moreover, if New Hampshire is arguing that rule 1.8 is unconstitutional because it requires claims adjusters for insurers to be present at settlement conferences, the trial court did not “apply” that rule here, because New Hampshire's adjuster voluntarily appeared at all three settlement conferences, and New Hampshire's attorney voluntarily appeared at the December 30 and January 12 conferences.
Further, if New Hampshire is arguing that rule 1.8 is unconstitutional because it impliedly allows trial courts to order claims adjusters to produce documents, New Hampshire cannot challenge such application of the rule here, because, by voluntarily appearing at all the settlement conferences, its claims adjuster subjected himself to the court's jurisdiction, including the jurisdiction to order him to produce documents. Moreover, at the December 30 conference, where the court ordered New Hampshire to produce the policy, the adjuster was accompanied by New Hampshire's attorney, who not only did not challenge the trial court's jurisdiction to make the order, but also agreed to comply therewith.
Otherwise, even if we were disposed to address New Hampshire's constitutional argument on its merits, there is no such “argument” to address. This is because New Hampshire cites no authority either for the proposition that rule 1.8 is unconstitutional or for the proposition that it is unconstitutional for a trial court to order a defendant's carrier who has voluntarily appeared at a settlement conference and has raised a coverage issue to produce the policy for the plaintiff. Nor does New Hampshire offer any reasons why either rule 1.8 or the trial court's order to produce the policy is unconstitutional.
Instead of offering any such reasons, New Hampshire merely makes the conclusory assertion that “[i]t is not reasonable ․ to view the inherent power of the court as giving it power to create jurisdiction over a non-party who may or may not have knowledge concerning the nature and extent of liability insurance provided to one of the parties over whom the court does have jurisdiction.” However, rule 1.8 requires an adjuster “with complete authority to settle the case” to attend a settlement conference. If the adjuster did not have knowledge of the nature and extent of coverage, as New Hampshire suggests, his or her presence at the conference would be unnecessary. Accordingly, assuming that only knowledgeable adjusters will attend settlement conferences, it is not only reasonable to give trial courts jurisdiction over such adjusters, but also unreasonable not to do so.
V SANCTIONS FOR A FRIVOLOUS APPEAL
Plaintiff contends that she is entitled to sanctions because New Hampshire's appeal is frivolous. We agree.
“[A]n appeal should be held to be frivolous only when it is prosecuted for an improper motive—to harass the respondent or delay the effect of an adverse judgment—or when it indisputably has no merit—when any reasonable attorney would agree that the appeal is totally and completely without merit.” (In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650, 183 Cal.Rptr. 508, 646 P.2d 179.)
In the case here, New Hampshire's appeal from a $1,270.50 order against it, an order which is far more costly to appeal than to pay, strongly suggests that the appeal was prosecuted for the improper motives of harassing plaintiff as well as delaying the payment of the $1,270.50.
Otherwise, the appeal “indisputably has no merit.” This is because: (1) not one of New Hampshire's arguments is based on any applicable authority; (2) most of the arguments are based on a misrepresentation either of the trial court's order to produce the policy or the trial court's sanctions order or both, and (3) the contested issues, namely, (a) the discoverability of the policy, (b) the trial court's jurisdiction to order New Hampshire to produce the policy, and (c) the propriety of the sanctions order, are governed by, respectively, (a) Code of Civil Procedure section 2017, subdivision (b), (b) rule 1.8 and The City of El Monte, supra, and (c) rule 227. In sum, “any reasonable attorney would agree that the appeal is totally and completely without merit.” (In re Marriage of Flaherty, supra, 31 Cal.3d at p. 650, 183 Cal.Rptr. 508, 646 P.2d 179.)
For filing and pursuing a frivolous appeal, New Hampshire and its attorneys are ordered to pay plaintiff sanctions, measured by the reasonable attorney's fees incurred by plaintiff in responding to New Hampshire's appeal.
The trial court's order imposing sanctions is affirmed. New Hampshire and its attorneys are ordered to pay plaintiff sanctions on this appeal. The case is remanded to the trial court to determine the amount of sanctions. Costs are awarded to plaintiff.
1. New Hampshire does challenge rule 1.8 in its jurisdictional argument, which we discuss in section IV, infra.
WIEN, Associate Justice, Assigned.
TODD, Acting P.J., and NARES, J., concur.