Case Number: EC061003 Hearing Date: April 18, 2014 Dept: B

Motion for:
1. Order striking each cause of action in Complaint as frivolous.
2. Order imposing monetary sanctions of $3,375 on Plaintiff.

This case arises from the Plaintiff’s claim that the Defendant breached an agreement to manage a business venture, Jasmine Sweets manufacturing. The Plaintiff claims that the Defendant never provided an accounting of income, never paid the Plaintiff her share of the profits, and never sought the Plaintiff’s consent before selling the business and keeping all the funds.

Trial set for August 4, 2014.

This hearing concerns the Defendant’s motion for sanctions under CCP section 128.7. The Defendant argues that the Plaintiff’s Complaint has no merit because she sold her shares in the business. CCP section 128.7 provides that the Court may impose monetary sanctions on a party or attorney that presents a pleading, petition, motion, or other similar papers in the following circumstances:

1) the document is presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.
2) the claims, defenses, and other legal contentions therein are not warranted by existing law or by a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law.
3) the allegations and other factual contentions have no evidentiary support;
4) the denials of factual contentions are not warranted on the evidence.

Accordingly, under section 128.7 there are basically three types of submitted papers that warrant sanctions:

1) factually frivolous (not well grounded in fact);
2) legally frivolous (not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law); and
3) papers interposed for an improper purpose.
Guillemin v. Stein (2002) 104 Cal. App. 4th 156, 167.

In order to impose sanctions, the Court must find that the conduct is “objectively unreasonable”. Id.

The Defendant offers evidence of a stock transfer agreement dated December 24, 2009 in which the Plaintiff transferred her 1,000 shares in the company, Jasmine Sweets Manufacturing, to 3249 San Fernando LLC. This indicates that the Plaintiff is not the real party in interest because she transferred her shares to 3249 San Fernando LLC.

However, the Plaintiff’s opposition contains facts to demonstrate that the shares were transferred back to the Plaintiff in early 2011. The Plaintiff, Alina Aloian, states that after the Defendant harassed her and refused to inform her about the finances for the business, she transferred her shares to a male friend, Areg Baghdassarian, because she believed that the Defendant would communicate with a male business partner. Ms. Aloian states in paragraphs 10 to 12 that after the Defendant also refused to communicate with Areg Baghdassarian, the shares were transferred back to her in early 2011.

In addition, the Plaintiff’s opposition contains the declaration of her attorney, Henrik Mosesi, who states that prior to accepting the Plaintiff’s case, he conducted in inquiry into the facts of the case. Mr. Mosesi states in paragraph 2 that he reviewed all the documents, including the stock transfer agreements in 2009 and 2011. Mr. Mosesi states that when the Defendant’s counsel raised the stock transfer agreement, Mr. Mosesi informed opposing counsel that the stock had been transferred back to the Plaintiff.

These facts in the opposition papers indicate that the Plaintiff’s Complaint has evidentiary support because she recovered possession of the stock in 2011. Further, the facts indicate that Plaintiff’s counsel performed an inquiry to determine whether the Plaintiff’s claims had legal merit and an evidentiary basis. Accordingly, there are no grounds to find that the Plaintiff’s attorney engaged in “objectively unreasonable” conduct when he presented the Complaint to the Court.

Therefore, the Court denies the Defendant’s motion for sanctions under CCP section 128.7.

The Plaintiff seeks an award of monetary sanctions under CCP section 128.7(h). However, section 128.7(h) does not authorize an award of monetary sanctions to oppose the motion. Instead, section 128.7(h) states that a motion for sanctions that was brought for an improper purpose “shall itself be subject to a motion for sanctions.” Section 128.7(h) authorizes a party to file a motion for sanctions under section 128.7(h) regarding a motion for sanctions for section 128.7. It does not authorize an award of monetary sanctions to oppose the original motion. Thus Plaintiff will need to file her own motion for sanctions for the court to consider this.

Accordingly, the Court denies the Plaintiff’s request for monetary sanctions.