MEAT DEPARTMENT INC v. KEENEY (1991)

The action at bench originated in the complaint of The Meat Department charging defendants with legal malpractice in their defense of Meat Department in an unlawful detainer action.   This appeal is from a trial court judgment of dismissal entered for failure of plaintiff/appellant to respond to an order requiring further response to interrogatories and to a request for production of documents.   The judgment is based upon the adoption by the trial court of recommendations of a privately compensated referee to whom the matter was referred.   The referee's recommendation is, in turn, based in significant part on a finding that plaintiff/appellant's purported compliance with an order compelling further responses to interrogatories was “inadequate for the reasons indicated in [defendants/respondents'] ‘Separate Statement of Questions and Responses in Dispute.’ ”   Both the reference and the adoption of the moving parties' statement of reasons for inadequacy of discovery response are on this record significant to this appeal.

I

STANDARD AND SCOPE OF APPELLATE REVIEW

 The necessary foundation of our decision is a threshold determination of the appropriate standard and scope of appellate review in light of the nature of the proceedings which led to the dismissal of plaintiff's complaint.   Two aspects of these proceedings are significant to this determination.

First, the choice of the discovery sanction of dismissal of the complaint rather than a lesser sanction was discretionary.   Hence we review the record to determine whether there is a reasonable probability that trial court discretion might have been exercised differently if error had not occurred.   Second, the dismissal sanction is founded in the report of a privately financed referee to whom the matter was diverted to conserve commissioned judicial resources.   Because of the reference we limit our review of the record.   Having concluded that there is a reasonable probability that two significant trial court errors may have affected trial court discretion in determining the appropriate sanction, we have not gone further to guide the trial court on remand with respect to any other error asserted by appellant that conceivably may be present.   Rather we remand for reconsideration de novo of all questions of discovery abuse not expressly resolved in this opinion.

This limited scope of appellate review in the case at bench follows from the rationale for reference to a privately compensated referee in the first instance.   The California civil discovery scheme embodies mechanisms designed to be self executing.  (2 Hogan, Modern Cal.Discovery (4th ed. 1988) § 13.8, p. 230.)   But in practice there are failures in the civil discovery system.   Sometimes the failure results from incompatibility between procedure which is designed to be self executing and the adversary process, as where questions of privilege must be resolved.   More frequently, as seems to be the situation in the case at bench, system failure occurs where the adversary process' function of dialectic presentation in search of truth is transmuted by the parties to a battle on the discovery front.

Departure from self-execution to adversariness in discovery requires that resources of the commissioned judiciary, dedicated to resolving claims and defenses on the merits, be diverted to addressing the system failure.   These resources become unavailable to other litigants disputing on the merits who are awaiting a forum in a long, slow moving, queue.

The now common mechanism of trial court reference of discovery disputes to referees compensated by the parties directly addresses this problem.   By privatizing part of their function, courts make available to other litigants disputing on the merits the resources of the commissioned judiciary that otherwise would be exhausted in adjudicating discovery disputes which in theory should not have arisen in the first place, but which in practice are inevitable.

This rationale counsels preservation of the limited resources of the commissioned appellate judiciary as well.   These resources are wasted if having found reason to remand the matter to the trial court which presumably will remand to the referee, we undertake the task of sifting through the detritus of the discovery record (here a literal three-foot shelf) in search of significant fragments from which to construct our guidance to the trial court on remand.

II

TRIAL COURT DISCRETION WHERE THERE HAS BEEN A REFERENCE

 The rationale which justifies privatizing a portion of the judicial function also affects the calculus involved in the exercise of trial court discretion in considering the propriety of a terminating sanction.   California cases identify three different interests vindicated by this sanction.   First, and of most weight, sanctions for discovery abuse, including the terminating sanction, are intended to vindicate the interest of the litigant who is denied access to information.  (E.g., Caryl Richards, Inc. v. Superior Court (1961) 188 Cal.App.2d 300, 305, 10 Cal.Rptr. 377;  Deyo v. Kilbourne (1978) 84 Cal.App.3d 771, 793, 149 Cal.Rptr. 499;  see also 2 Hogan, Modern Cal.Discovery (4th ed. 1988) § 15.4, pp. 308–309.)

Another interest vindicated by the terminating sanction is that of the court in compelling obedience of its process.  (Morgan v. Southern Cal. Rapid Transit Dist. (1987) 192 Cal.App.3d 976, 237 Cal.Rptr. 756.)   The third interest is that of timely access to other litigants unimpeded by the unnecessary call upon judicial resources resulting from discovery abuse in the case where the sanction is imposed.  (Sauer v. Superior Court (1987) 195 Cal.App.3d 213, 240 Cal.Rptr. 489.)

This third interest in providing access to other litigants is of much lesser import where a privately financed referee has been interposed in the decisional process.   The reference itself has vindicated most of this interest.   With one of the three interests protected by the terminating sanction for discovery abuse absent, greater circumspection in granting this sanction is required when there has been a reference.

Having thus established the predicate for our decision, we turn to the specific aspects of this appeal which require that the trial court's judgment of dismissal be reversed and remanded for reconsideration.

III

THE BACKGROUND TO THE CASE

Plaintiff/appellant, The Meat Department, Inc., entered into a lease of restaurant premises from The Plaza International Hotel, a California corporation.   The lease was for an initial 10–year period ending April 21, 1982, and granted to Meat Department an option to renew for an additional 10–year period.   Any holding over after the term of the lease was expressly month-to-month.   The initial period of the lease expired, but Meat Department continued to occupy the premises.   In late 1985 Meat Department filed an action seeking declaratory relief that it had renewed its lease with Plaza International.   On November 6, 1985, Plaza International served a 30–day notice to quit on Meat Department.   Meat Department continued its occupancy of the restaurant premises, and International Hotels Construction and Management Inc., a Delaware corporation, alleging that it was “aka The Plaza International Hotel,” filed its action in unlawful detainer to dispossess Meat Department.

Meat Department was represented in the unlawful detainer action by E. Ludlow Keeney, Jr., and his law firm, Mitchell, Ashworth, Keeney, Barry & Pike, the defendants in the case at bench.   Plaza International prevailed in the litigation and was awarded a writ of possession.   This judgment was affirmed on appeal.

IV

RELEVANT PROCEEDINGS IN THE TRIAL COURT

The complaint in the case at bench was filed on August 13, 1987.   Its charging allegations assert that defendants negligently represented plaintiff in the unlawful detainer action, more specifically by misrepresenting its rights under the lease and by failing to assert various affirmative defenses including lack of standing, retaliatory eviction, estoppel and laches, and failure to conduct discovery.   The complaint asserts this negligence was the proximate cause of plaintiff's suffering an adverse judgment, incurring moving expenses, and damage to its business, and as well to incur damage and costs to regain clientele and business activity.   The complaint asserts that defendants' negligence was not discovered until August 13, 1986.

After answering the complaint denying its charging allegations and asserting the affirmative defense of the statute of limitations defendants, on March 16, 1988, propounded the interrogatories and request for production of documents the responses to which are at issue here.   In essence these interrogatories seek amplification of plaintiff's contentions with respect to defendants' negligence, proximate cause (the effect of any negligence on outcome of the unlawful detainer action), damages, the date of discovery of the claimed negligence, and facts in support of these contentions.   The request for production of documents tracks the allegations in the complaint and seeks documents related to these allegations.

No response to the interrogatories or request for production of documents having been received despite informal communication by counsel for the parties, defendant Keeney, but not the other defendants, filed a motion on July 8, 1988 to compel plaintiff to respond to the interrogatories and the request for production of documents and for sanctions.   Plaintiff did not appear on this motion.   On September 12, 1988, the trial court entered its order granting defendant Keeney's motion, compelling responses within 20 days, and imposing a monetary sanction of $450.   Trial was set on “fast track” for August 23, 1989.

There followed almost six months of informal action by the parties with respect to plaintiff's compliance with the court's order of September 12.   On April 3, 1989, defendants filed their notice of motion to dismiss for discovery abuse by plaintiff and supporting declarations.   Declarations and documentary evidence in support of the motion recount a variety of discovery abuses and delaying tactics on the part of plaintiff in addition to its violation of the trial court's order.   Plaintiff filed its opposition to the motion on April 21, 1989.   The declarations and documentary evidence in support of this opposition deny the facts of discovery abuse asserted by defendants and attribute delay to defendants.

On May 19, 1989, the trial court ordered a reference of the discovery dispute to a “J.A.M.S.” affiliated referee to be compensated by the parties.   On June 28, 1989, the referee notified counsel by letter that defendant's motion to dismiss was granted.   Recommendations of referee and order of dismissal together with express findings supporting dismissal were filed by the referee on July 24, 1989.   The recommendation recites that:  (1) An order imposing evidentiary sanctions would be fatal to the plaintiff's case so that dismissal is the only alternative;  (2) plaintiff's responses to interrogatories are little more than statements of contentions and are virtually devoid of facts;  and (3) a combination of delays occasioned by plaintiffs and their totally inadequate responses to interrogatories had put defendants in an untenable position because even if responses were supplemented so as to be adequate, defendants would not have the opportunity of necessary investigation and further discovery based on the answers.

The express findings of the referee supporting dismissal recite that plaintiff abused the discovery process by:  (1) failing to respond to interrogatories and requests for production;  (2) disobeying the order requiring production and further responses and by providing evasive responses to interrogatories;  (3) refusing to honor a stipulation of counsel regarding document maintenance and making documents available and withdrawing them in a manner designed to avoid meaningful access;  (4) repeatedly cancelling depositions of its officers and agents by misrepresenting its intention to substitute new counsel immediately;  and (5) by depriving its record counsel of the ability to provide meaningful discovery and to participate meaningfully in “meet and confer” sessions.

While holding adequate plaintiff's responses to eight of the interrogatories to which the court had previously ordered further responses, these findings conclude that plaintiff had violated the order because responses to twelve other interrogatories were “inadequate for the reasons indicated in defendants' ‘Separate Statement of Questions and Responses in Dispute’ ”  The trial court adopted the referee's findings and entered its order of dismissal on July 24, 1989.   Judgment of dismissal was entered the same day.  “NOTICE OF RULING” was given July 26, 1989.

On August 3, 1989, plaintiff filed a motion objecting to the referee's findings, to set aside these findings, and for reconsideration.   This motion was denied on September 22, 1989.   On October 18, 1989, plaintiff filed its notice of appeal from:  “1.   The minute order entered on or about September 22, 1989 ․ denying Plaintiff's motion to set aside and vacate the entry of judgment of dismissal of this action․ [and] 2.   The minute order entered on or about September 22, 1989 ․ denying Plaintiff's motion for reconsideration of the order of dismissal[ ]” and the trial court order denying plaintiff's motion to tax costs.

V–VI **

VII

THE SUBSTANTIAL ISSUES

In this portion of our opinion we address appellant's contentions that:  (1) defendants by participating in informal production of documents by plaintiff waived their right to seek dismissal for plaintiff's failure to respond to defendants' request for production of documents;  and (2) the trial court abused its discretion in imposing a sanction terminating plaintiff's suit rather than a lesser sanction.   These contentions subsume appellant's other arguments to the effect that the terminating sanction was improper for lack of predicate orders compelling further answers to interrogatories, production of documents, attendance at depositions, and maintenance of a document facility.

The Contention That Defendants/Respondents Waived Their Right To Seek Sanctions For Plaintiff/Appellant's Violation Of the Trial Court's Order Compelling Response To Defendant's Request For Production Of Documents.

 Plaintiff/appellant correctly argues for the abstract proposition that a discovery right may be waived.  (Freshman, Mulvaney, Marantz, Comsky, Kahan & Deutsch v. Superior Court (1985) 173 Cal.App.3d 223, 233–235, 218 Cal.Rptr. 533.)   Waiver, however, is a question of fact and we must sustain the trial court's determination of the issue if it is supported by substantial evidence.   A waiver of defendants' right to the written response to its production demand required by Code of Civil Procedure section 2031, subdivision (f) could have been found from defendants' participation in production by plaintiff of document themselves despite the absence of the required initial response.   But such a finding was not required as a matter of law, and the referee and trial court found to the contrary:  that is, that plaintiff, in an effort to inhibit defendant's preparationwhile proceeding with its own, deliberately misled defendants by production of a mass of documents mostly innocuous but excluding others of significant importance until shortly before the date set for trial.

These findings are supported by the following facts and permissible inferences drawn from the record.   While by March 3, 1989, plaintiff had produced 18 “Bekins” boxes of documents, as of April 21, 1989, many documents had not been produced including those of particular importance.   In the period of discovery from June of 1988 to June 30, 1989, plaintiff did not cooperate with its counsel of record in responding to discovery.   By October 25, 1988, the case files had been transferred from plaintiff's original counsel to one of its present attorneys, but new counsel did not file a substitution of attorney until January 30, 1989, thus denying defendants effective access to discovery for the period.

Shortly after new counsel were substituted for plaintiff, and although the question had been resolved previously by agreement with its prior counsel, plaintiff obtained a further delay in discovery disclosure by filing a deceitful, frivolous, and subsequently denied motion to disqualify defense counsel for conflict of interest.   The purported conflict of interest arose out of the presence in the law firm representing defendants of a lawyer who had previously been employed by an attorney for plaintiff who had represented it in the appeal in the underlying lawsuit.   The conflict question was resolved by a “Chinese Wall” denying the lawyer any participation in the instant case.   However to buttress its position on the motion, plaintiff sought to manufacture a conflict by directing an unsolicited letter purporting to disclose confidential information to the particular lawyer.  .he letter was returned unopened.

While delaying access of defendants to information and inhibiting their preparation for trial for the better part of a year, plaintiff was industriously assembling its case.   On June 23, 1989, about one month before the discovery cut-off, plaintiff filed notice of motion for summary judgment or summary adjudication of issues.   This motion is supported by some 260 pages of documentation, a substantial portion of which consists of information not previously disclosed in discovery which would have been disclosed if plaintiff had complied with its discovery obligations.   At the same time plaintiff opposed defendants' motion to continue the trial date.

Abuse Of Trial Court Discretion In Imposing the Sanction Terminating Plaintiff's Suit Rather Than a Lesser Sanction.

Given the presence of the recited evidence from which the trial court could have inferred egregious discovery abuse on the part of appellant/plaintiff it is certainly conceivable that a trial court order imposing the terminating sanction might be proper.  (See Sauer v. Superior Court (1987) 195 Cal.App.3d 213, 240 Cal.Rptr. 489.)   The problem in the case at bench revolves about the facts that:  (1) the trial court imposed the terminating sanction because evidentiary sanctions would so eviscerate plaintiff's claim as to make it impossible to maintain;  (2) our examination of the record discloses error in ruling on the sufficiency of answers to interrogatories which when properly construed support a narrow but tenable claim for malpractice if these facts are established at trial;  and (3) our sampling of the trial court's other rulings on the sufficiency of plaintiff's response to the order compelling further answers to interrogatories establishes that at least one ruling was erroneous for lack of a predicate order compelling the response.   For us to conclude that if the trial court had realized the errors in the referee's report it nevertheless would have exercised its discretion to enter the terminating sanction would be to engage in pure speculation.

Our first reference is to defendants' interrogatories two and four.   Plaintiff asserted that one act of negligence on the part of defendants consisted of their admitting the standing of the unlawful detainer plaintiff despite the fact that this plaintiff was not the lessor of the relevant lease and there was no allegation otherwise establishing standing.   Interrogatories two and four both ask the basis for plaintiff's contention that the result of the unlawful detainer trial would have been different if defendants had not been negligent or misrepresented to plaintiff its rights under the lease.   Plaintiff responded in part that International Hotels Construction and Management, Inc., the plaintiff in the unlawful detainer action lacked standing to sue as disclosed by the unlawful detainer complaint and relevant lease.

This response was clearly adequate.   The relevant lease designates Plaza International Hotel, a California corporation as lessor, and this entity served the notice to quit.   The plaintiff in the unlawful detainer action was International Hotels Construction and Management, Inc., a Delaware corporation.   Defendants' stated reason for rejecting this response does not assert its inadequacy.   Rather the stated reason is that “[n]o facts are asserted to indicate this ․ defect could not be cured by amendment,” and this reason was adopted by the referee and trial court.

 In effect the reason recited by defendants and uncritically accepted by the referee and trial court converted a motion to test responsiveness to an interrogatory to one which tested sufficiency of the legal impact of the response, that is, from a motion for the discovery sanction of termination to a motion for summary adjudication.   Significantly this move shifted the burden from defendants where it belonged on a motion for summary adjudication to the plaintiff.

Here this erroneous admixture of summary adjudication with a motion for the terminating sanction for abuse of discovery, and consequent erroneous shift of the burden of producing evidence, is not harmless.   When the burden is appropriately placed, the harmless nature of the error must be demonstrated by the presence, and not absence, in the record of unrebutted evidence that the unlawful detainer complaint could and would have been amended and the action pursued by a proper plaintiff.   Defendants have not called any such evidence to our attention.   To the contrary what evidence there is in the record includes indicia of doubt that amendment to cure the defect and further pursuit of the action were foregone conclusions.   There are references to the bankruptcy of “International Hotels” raising the prospect that the critical decision to amend and pursue the unlawful detainer could well have rested in someone other than the management of the unlawful detainer plaintiff or could otherwise have been affected by the bankruptcy.   We do not suggest that this is necessarily the case.   We do emphasize that this is an inappropriate state of the record to justify the trial court's action in granting what was in effect a summary adjudication of the issue.

The erroneous confusion of a motion for discovery sanctions with a motion for summary adjudication was not rendered harmless by other discovery abuses of plaintiff fatal to its cause of action.   Contrary to defendants' assertion there are sufficient answers to interrogatories of fact of damages resulting from this asserted act of negligence and refuting defendants' contention that plaintiff's discovery abuses support the conclusion that the statute of limitations had run.

As a minimum with respect to the question of damages, plaintiff's response to Interrogatory No. 23 must be treated as adequate in light of the reason given by the trial court for its inadequacy.   This interrogatory asks for the facts supporting plaintiff's contention of damages not specified elsewhere, and plaintiff's response refers to loss of goodwill, loss of annual income and attorney's fees incurred by plaintiff.   The reasons given by defendants for inadequacy of this response which were accepted uncritically by the referee and adopted by the trial court refer only to “goodwill” and “annual income” thus accepting the adequacy of the response asserting attorney's fees as an element of damages.

Nor do plaintiff's discovery responses compel a conclusion that the malpractice claim is deemed barred by the statute of limitations expressed in Code of Civil Procedure section 340.6, subdivision (a).   Defendants argue that inadequacies in plaintiff's responses support the conclusion that plaintiff acquired knowledge of the mal practice more than one year before the action was filed.   This argument misreads the record.   Plaintiff's response to Interrogatory No. 16 asserts the date of discovery of the alleged malpractice as August 13, 1986, and this response was found adequate by the trial court.   Interrogatory No. 17 seeks facts supporting this assertion.   Plaintiff's response states that defendants concealed from plaintiff various specific acts alleged to constitute malpractice, and this answer was found sufficient by the referee and trial court.

In sum the record discloses error in one aspect of the trial court's ruling which cannot be said to be harmless.   We do not imply, however, that the record necessarily precludes exercise of discretion of the trial court granting defendants' motion and imposing the terminating or some other sanction on plaintiff.   Rather the question is the direction the exercise of trial court discretion would have taken absent the error.   This is beyond our ability to determine;  hence the matter must be remanded to the trial court.

 The reliance of the referee and trial court on the reasons specified by defendant when holding plaintiff's responses to interrogatories inadequate led to at least one other significant error.   Interrogatory No. 11 seeks facts upon which plaintiff's contention that defendants failed to exercise reasonable care is based.   Defendants' motion to compel further answers to this interrogatory was granted on September 12, 1988.   One of the reasons given by defendants, and adopted by the referee and court, for the inadequacy of plaintiff's response to the dictates of the court's order respecting Interrogatory No. 11 is that plaintiff did not honor a “very specific request for additional information” contained in a letter of January 11, 1989.   There was no court order compelling plaintiff to supply the detailed information required by the January 11 letter from defendants, and violation of a court order compelling response is a necessary predicate to a terminating, issue, or evidentiary sanction.  (See 2 Hogan, Modern Cal.Discovery, supra, § 15.4, pp. 305–308.)

DISPOSITION

The judgment of dismissal is reversed and the case is remanded to the trial court for further proceedings consistent with parts I, II, and VII of this opinion.

FOOTNOTES

FOOTNOTE.  

FOOTNOTE.   See footnote 1, ante.

THOMPSON, Associate Justice.* FN* Assigned by the Chairperson of the Judicial Council.

WIENER, Acting P.J., and BENKE, J., concur.