Sara Stout vs. Principal Funds Distributors, Inc.
Nature of Proceeding:
Filed By:
Motion for Sanctions
Ruggles, Matthew J.

Defendants’ Motion for Sanctions Pursuant to C.C.P., sec. 128.7 is GRANTED.

Defendants Principal Funds Distributors, Inc. (“Principal”), Theresa Shuping and Alexander Ghazanfari move pursuant to C.C.P., sec. 128.7, for an order: (i) awarding monetary sanctions, jointly and severally against Plaintiff Sara Stout and her attorneys of record, Lawrance A. Bohm of the Bohm Law Group and Erika M. Caspar of the Law Office of Erika M. Caspar, to be paid to Defendants in the amount of $6,820 for the reasonable attorneys’ fees and costs, (ii) striking with prejudice all claims alleged by Plaintiff Sara Stout against Defendants and (iii) granting any other relief which the Court deems proper.

Defendants assert that plaintiff and her counsel have violated C.C.P., sec. 128.7(b) (1), (2) and (3) by signing, filing, submitting, and advocating a pleading containing allegations that are not warranted by existing law or a nonfrivolous argument for the extension or change in existing law, that lack evidentiary support, and have been presented to the Court for an improper purpose.

An attorney who presents a pleading to the court makes an implied certification as to its legal and factual merit and is subject to sanctions for violation of this certification. Code Civ. Proc. §128.7; See Murphy v. Yale Materials Handling Corp.(1997) 54 Cal. App. 4th 619, 622. Here plaintiff has pursued a claim lacking both legal and factual support, and/or pursued an action with the primary purpose of harassing defendant. Code Civ. Proc. §128.7.

Defendants served this motion on Oct. 31, 2013 and then after the expiration of the statutory safe harbor period, re-served and filed it with the Court on Dec. 17, 2013.

Defendants’ Request for Judicial Notice is GRANTED.

Facts

Plaintiff, through her counsel, has filed two lawsuits with this Court against defendant Principal, relating to Plaintiff’s employment, which ended on October 14, 2004. Plaintiff is represented by the same attorneys in both lawsuits, and is currently pursuing both suits simultaneously.

The instant case no. 2013-1425256 (“Second Complaint”) filed May 23, 2013, is almost identical to the allegations in her first action, case no. 05AS04909 (“First Complaint”) filed on November 3, 2005.

The only differences are that First Complaint contained a cause of action for wrongful termination and the Second Complaint adds Ghazanfari as a Defendant.

After the First Complaint was filed, Defendants filed a motion in that action to compel arbitration. The parties stipulated to arbitrate the dispute and to dismiss the entire action, and the individual defendants, Shuping and Shobert. The First Complaint was submitted to arbitration with AAA, and the parties are in the process of scheduling a hearing of that action.

The Second Complaint omits the wrongful termination claim and adds Ghazanfari as a Defendant. Plaintiff’s Second Complaint seeks identical damages, adding a request for “expungement of Plaintiff’s U5.”

No Merit as to the Entity Defendant

As set forth in the demurrer heard concurrently herewith, there is no legal or factual basis for filing two virtually identical pleadings against Principal. Plaintiff provides no legal or factual basis for two virtually identical pleadings against the entity defendant.

While the plaintiff asserts that she had the option of filing in either the court system or before the Financial Industry Regulatory Authority (“FINRA”) that does not explain why two simultaneous actions are appropriate or permissible. No legal authority for plaintiff’s proposition that defendant had an obligation to inform plaintiff of her right to FINRA arbitration is provided. Plaintiff was represented by counsel.

The only possible purpose is to harass Defendants and to try to gain some sort of advantage in connection with the case pending before the AAA.

Defendant Principal has been forced to incur additional attorneys’ fees to defend both lawsuits simultaneously, including filing a demurrer to the Second Complaint requesting abatement of the Second Complaint because there is another action pending.

No Merit as to the Individual Defendants

The claims against the individual defendants Shuping and Ghazanfahri are also without merit. Plaintiff added a cause of action for defamation to the Second Complaint, which is barred by the one year statute of limitations. C.C.P., sec. 340(c).

Although plaintiff alleges in her Second Complaint that she first saw the defamatory statement in the U5 on Dec. 11, 2011 (Second Complaint, para. 71) this verified allegation is contradicted by her deposition testimony on Jan. 23, 2007, that she had already seen that allegedly defamatory document. (Ruggles Dec., Exh. 1, 52:4-11.) As defamation was not alleged until the Second Complaint was filed in 2013, it is barred by the one year statute of limitations.

Plaintiff’s Second Complaint alleges a 6th cause of action for retaliation against all defendants. Plaintiff failed to exhaust her administrative remedies against Defendant Ghazanfahri, as she never filed a DFEH complaint against him or received a right to sue letter.

Plaintiff now has voluntarily dismissed the 6th cause of action of the Second Complaint against Ghazanfari, only, on Jan. 16, 2014, approximately one month after this motion was filed. C.C.P., sec. 128.7(c)(1), provides a 21 day “safe harbor” period in which the motion for sanctions is served but not filed, to permit the plaintiff an opportunity to withdraw or appropriately correct the complaint. However, the trial court is empowered to impose sanctions under section 128.7 even after plaintiff has dismissed the action where the voluntary dismissal was filed After the “safe harbor” period has expired and after defendants’ motion for sanctions was filed. A belated abandonment of the case (or cause of action) does not fulfill the object of the statute, and the policies favoring allowance of sanctions remain extant notwithstanding the dismissal. Eichenbaum v. Alon (2003) 106 Cal. App. 4th 967, 975.

In the First Complaint, Shuping was a named defendant. By stipulation of counsel, Shuping was dismissed from the First Complaint. Plaintiff cannot now, belatedly, file a second action against Shuping, as the one year period, following the Nov. 2008 right to sue letter, in which plaintiff may file a FEHA cause of action against that defendant has expired. Sanctions can be imposed against a party for pleadings which are “presented primarily for an improper purpose, such as to harass or cause unnecessary delay or needless increase in the cost of litigation.” See C.C.P., sec. 128.7(b) (1); Burkle v. Burkle (2006) 144 Cal. App. 4th 387, 402-403 (upholding sanctions against a party and her attorney for bringing claims in multiple forms and unnecessarily increasing litigation costs).

Here, the Second Complaint was verified by plaintiff, and filed more than seven years after the First Complaint, leading to the conclusion that the party’s pleadings are “presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.” C.C.P., sec. 128.7(b) (1).

The motion is therefore granted, the Court orders an award of monetary sanctions, jointly and severally against Plaintiff Sara Stout and her attorneys of record, Lawrance A. Bohm of the Bohm Law Group and Erika M. Caspar of the Law Office of Erika M. Caspar, to be paid to Defendants in the amount of $6,820 for the reasonable attorneys’ fees and costs, and the Second Complaint is ordered stricken, with prejudice.

Pursuant to B and P § 6086.7, the Clerk is directed to send a copy of this ruling to the State Bar.

Prevailing parties are directed to submit a formal order and judgment for the Court’s signature.