Hale v. Social Valley LLC		CASE NO. 112CV230653
DATE: 31 October 2014	TIME: 9:00	LINE NUMBER: 26

This matter will be heard by the Honorable Judge Socrates Peter Manoukian in Department 19 in the Old Courthouse, 2nd Floor, 161 North First Street, San Jose. Any party opposing the tentative ruling must call Department 19 at 408.808.6856 and the opposing party no later than 4:00 PM Thursday 30 October 2014.  Please specify the issue to be contested when calling the Court and counsel.

On 31 October 2014, the motion of Defendant Bic Pho (“Defendant”) to vacate and set aside default and default judgment and orders deeming matters admitted and terminating sanctions entered against Defendant under Code of Civil Procedure section 473, subdivision (b), was argued and submitted.

Plaintiff Keith Hale (“Plaintiff”) did not file formal opposition to the motion.[1]

1. Statement of Facts.

Case No. 112CV230653 is entitled Hale v. Social Valley, LLC, Bic Pho, and Steve Ernst.

Case No. 113CV244046 is entitled Johnson v. Social Valley, LLC, Bic Pho, and Steve Ernst.

This case is a breach of contract claim. Defendant Social Valley represented to Plaintiffs that it was planning an event in September of 2012 at California’s Great America, an amusement park, and needed famous recording artists to perform at the event. In April of 2012, Plaintiff Johnson entered into an agreement with Defendants on behalf of The Conglomerate Group, LLC whereby Plaintiffs would secure recording artists to perform at Defendants’ event in exchange for a fee. Plaintiffs secured such talent but were informed on 5 May 2012 that Social Valley had not acquired the necessary capital to fund the event, including The Conglomerate Group’s contract. This suit for breach of contract followed.

On 17 August 2012, Plaintiff Hale filed a case for breach of contract and fraud against Defendant.  On 3 April 2013, plaintiff Johnson filed a case for breach of contract and fraud against Defendant. Plaintiffs’ cases against Defendant were consolidated on 18 June 2013.

Defendant Bic Pho’s failure to respond to discovery requests has led to  an entry of default against Defendant with a prove-up hearing for entry of judgment by default on 4 November 2014. Jury trial is set for 17 November 2014.

1. Discovery Dispute.

In late 2013, counsel for Defendant Bic Pho called demanding payment for services rendered. Defendant informed counsel he was being defending and indemnified by defendants Steve Ernst and Social Valley and that he was not responsible for payment. Following that conversation, counsel for Defendant did not communicate with Defendant again until the motion for terminating sanctions was granted on 8 August 2014.

On 8 July, 2014 Plaintiff filed a separate motion to deem matters set forth in Plaintiff’s second set of requests admitted, to compel production of documents, and for terminating sanctions against defendants. Defendant’s counsel, Mr. Timothy Pupach (“Mr. Pupach”), filed an untimely opposition to the motion including responses to the requests for admission by defendant for defendant Steve Ernst only. Counsel did not prepare or serve responses on Defendant Bic Pho’s behalf.

On 8 August 2014, Plaintiff’s motion to deem matters admitted for terminating sanctions against Defendant was granted.

On 25 September 2014 Defendant Bic Pho’s motion for reconsideration of this Court’s order issuing terminating sanctions and deeming matters to be admitted was denied. The Court[2] reiterated that Defendant still had not provided verified responses to the underlying discovery

On 21 October 2014 the Court [3]entered an order granting Plaintiff’s motion for summary judgment on the breach of contract cause of action against Defendant Social Valley, LLC. The Court denied the motion on the alter ego allegation as to defendant Steve Ernst based on a genuine dispute of material facts. The Court decided the motion for summary judgment was moot based on the termination sanctions order and impending default against Defendant. Mr. Pupach did not file any opposition papers on behalf of Defendant.

On 27 October 2014, Defendant Bic Pho filed the present motion.

III.     Analysis.

Defendant seeks to vacate and set aside default and default judgment and orders deeming matters admitted and terminating sanctions entered against Defendant under Code of Civil Procedure section 473, subdivision (b).

1. Motion for relief Pursuant to Code of Civil Procedure 473(b)
2. Motion to Set Aside Order Deeming Matters Admitted

A party may apply for relief against an adverse order that occurred as a result of the party’s or party’s counsel’s mistake, inadvertence, surprise, or excusable neglect. Code Civ. Proc. §473(b). However, relief under section 473 is unavailable when the discovery act provides analogous, if more limited, relief. Zellerino v. Brown (1991) 235 Cal.App.3d 1097, 1107. The Code of Civil Procedure §2033 incorporated the language of §473(b), regarding relief on the basis of mistake, inadvertence, or excusable neglect; thus, supersedes §473 as the method to obtain default relief where a party failed to respond to requests for admissions. A party may withdraw or amend admissions deemed admitted for failure to respond upon a showing of ‘mistake, inadvertence or excusable neglect’ and no substantial prejudice.” Wilcox v. Birtwhistle (1999) 21 Cal.4th 973, 979.

Code of Civil Procedure §2033.300 states in relevant part:

(b) The court may permit withdrawal or amendment of an admission only if it determines that the admission was the result of mistake, inadvertence, or excusable neglect, and that the party who obtained the admission will not be substantially prejudiced in maintaining that party’s action or defense on the merits.

(c) The court may impose conditions on the granting of the motion that are just, including, but not limited to, the following:

(1) An order that the party who obtained the admission be permitted to pursue additional discovery related to the matter involved in the withdrawn or amended admission.

(2) An order that the costs of any additional discovery be borne in who or in part by the party withdrawing or amending the admission.

Relief under section 473(b) is not appropriate in this matter, as there are alternative source of relief available in the Discovery Act.

Therefore, this Court should rule that Defendant’s motion to set aside the order deeming matters admitted under Code of Civil Procedure §473(b) is DENIED WITHOUT PREJUDICE to filing an appropriate motion for relief under the Civil Discovery Act.

However, this Court is aware of the principle that “[t]he law neither does nor requires idle acts.” Civil Code, section 3532.  Therefore, the resolution is as follows:

2. Motion to Set Aside Default and Default Judgment and Order Granting Terminating Sanctions
3. Timeliness of Defendants’ Motion.

A default is pending against Defendant Bic Pho with a prove-up hearing 4 November 2014. A motion for discretionary relief from default under Code of Civil Procedure, § 473(b) on grounds of “mistake, inadvertence, surprise or excusable neglect” must be made within six months after entry of default.^[4]  That timeframe, however,  is inapplicable here as Defendant requests mandatory relief from default based on an “attorney affidavit of fault,” a request which must be made within six months after entry of judgment pursuant to Code of Civil Procedure, § 473(b).  Defendants’ Motion to set aside default based on an “attorney affidavit of fault” was filed on 27 October 2014.

3. Vacating Default under Code of Civil Procedure, § 473.

Depending upon the timeliness of Defendant’s motion and the validity of the “attorney affidavit of fault” attached to Defendants’ motion, this Court is mandated, under Code of Civil Procedure, § 473, to give relief to Defendant subjected to terminating sanctions and subsequent default for failure to respond to discovery when the Defendant’s counsel’s failure to respond to discovery and comply with court orders due to the counsel’s mistake, inadvertence, surprise or neglect resulted in the dismissal. Code of Civil Procedure, § 473(b), which states in relevant part:

“The court may, upon any terms as may be just, relieve a party or his or her legal representative from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect. Application for this relief shall be accompanied by a copy of the answer or other pleading proposed to be filed therein, otherwise the application shall not be granted, and shall be made within a reasonable time, in no case exceeding six months, after the judgment, dismissal, order, or proceeding was taken. . . . Notwithstanding any other requirements of this section, the court shall, whenever an application for relief is made no more than six months after entry of judgment, is in proper form, and is accompanied by an attorney’s sworn affidavit attesting to his or her mistake, inadvertence, surprise, or neglect, vacate any (1) resulting default entered by the clerk against his or her client, and which will result in entry of a default judgment, or (2) resulting default judgment or dismissal entered against his or her client, unless the court finds that the default or dismissal was not in fact caused by the attorney’ s mistake, inadvertence, surprise, or neglect. The court shall, whenever relief is granted based on an attorney’s affidavit of fault, direct the attorney to pay reasonable compensatory legal fees and costs to opposing counsel or parties. . .”

Case law provides a similar result; “when a default [or dismissal] is the attorney’s fault the court must grant a timely noticed motion for relief. The only limitation is when the court finds [that] the default [or dismissal] was not in fact the attorney’s fault, for example when the attorney is simply covering up for the client. . . .” Rogalski v. Nabers Cadillac (1992) 11 Cal. App. 4th 816, 821, citation omitted. Thus, “[t]he court must also find that the default [or dismissal] was actually caused by the attorney’s mistake, inadvertence, surprise or neglect. . . .”  Billings v. Health Plan of America, supra, 225 Cal. App. 3d 250 at p. 256, citation omitted, Todd v. Thrifty Corp. (1995) 34 Cal.App.4th 986, 991.

Mandatory relief under CCP §473(b) can be granted only when the facts show that the attorney is solely responsible for the misconduct. Lang v. Hochman (2000) 77 CA 4^th 1225, 1251 (based on failure to obey numerous discovery requests and orders, court rejected CCP §473(b) motion, finding both defendant and defendant’s counsel to have been at fault). Because the law strongly favors trial and disposition on the merits, any doubts in applying section 473 must be resolved in favor of the party seeking relief from default. Waite v. Southern Pacific Co. (1923) 192 Cal. 467, 470-471; Flores v. Board of Supervisors, supra, 13 Cal.App.3d at p. 483.

Plaintiffs correctly observes that “[m]andatory relief under [CCP § 473(b)] is not available when the attorney and client are both responsible for discovery misconduct at results of a default judgment or dismissal of the action.  Rather, mandatory relief under [CCP § 473(b)] is available only when the attorney is solely responsible for the misconduct.  Lang v. Hochman (2000) 77 Cal. App. 4^th 1225, 1248; Johnson v.  Pratt & Whitney Canada, Inc. (1994) 28 Cal App 4th 613, 622.”  (Plaintiffs’ Opposing MPA, page 4, lines 14-19.)

Here, Defendant’s attorney, Timothy Pupach, admits fault and accepts sole responsibility for the orders against the Defendant via the filed affidavit. Mr. Pupach admits to filing an untimely opposition to Plaintiff’s 8 July 2014 motion, requesting terminating sanctions against defendants, including responses to the requests for admissions by defendant Steve Ernst only. Mr. Pupach states he did not prepare or serve responses on Defendant’s behalf because he was unable to communicate with him.

Further, in his affidavit Mr. Pupach states that he mistakenly believed the Defendant’s obligations were met by producing documents at the deposition of defendant Steve Ernst and by providing verified responses to the request for documents before the hearing. He also states that Defendant was out of the country from 11 July 2014 through 17 August 2014 and during that time he did not email or call the defendant but rather delivered documents to Defendant’s office in San Jose and did not hear from Defendant until after the subject orders were entered. Lastly, in his affidavit Mr. Pupach states that he did not prepare responses to discovery (requests for admission set two and requests for documents set one) for Defendant to verify and serve before the terminating sanctions motion was heard on 25 September 2014.

Elsewhere in the opposition papers filed by Plaintiffs, Defendant Pho is portrayed as obstructionist and evasive.  That may well be the case, but as this Court understands the law, as well as the credible evidence in this motion, Mr. Pupach attributes the default to himself and not to the client.

In this Court’s view, the pleadings do not indicate the existence of an attempt by the Defendant’s attorney, past or present, to “cover up” for the Defendant and indicate that the default was actually caused by the attorney’s mistake, inadvertence, surprise or neglect. The Court is therefore required to set aside the terminating sanctions and subsequent default against Defendant.

Therefore, Defendant’s motion to set aside the terminating sanctions and subsequent default is GRANTED.

1. Fees and Costs Mandatory.

In granting relief based on an “attorney affidavit of fault,” the court must “direct the attorney to pay reasonable compensatory legal fees and costs” to the opposing counsel or parties.  (Code of Civil Procedure, § 473(b).)  Relief under §473(b) is not conditional on the payment of said penalty.  Code of Civil Procedure section 473, subdivision (c) provides, in pertinent part, that: “(1) Whenever the court grants relief from a default, default judgment, or dismissal based on any of the provisions of this section, the court may do any of the following: [¶] (A) Impose a penalty of no greater than one thousand dollars ($1,000) upon an offending attorney or party. [¶] (B) Direct that an offending attorney pay an amount no greater than one thousand dollars ($1,000) to the State Bar Client Security Fund. [¶] (C) Grant other relief as is appropriate.”

 

 

1. Conflict of Interest between Defendant and Attorney Pupach

Defendant also bases his motion for relief under §473(b) on attorney Pupach’s failure to disclose that an attorney associated with his firm, while this litigation was pending, represented parties adverse to Defendant Bic Pho in another matter, Idgragon, LLC. v. Lexan, Inc., et al., case no. 1-13-CV-253093, including a cross-complaint for fraud against Defendant.

A court may set aside a judgment on the ground of mistake, inadvertence, or excusable neglect because a conflict in representation deprived a party of a fair trial. Tsakos Shipping & Trading, S.A. v. Juniper Garden Town Homes, Ltd. (1993) 12 Cal.App.4th 74, 94 (state judgment set aside on grounds of extrinsic fraud where meritorious defense not raised by defendant’s counsel due to conflict of interest.)

Here, it might be argued that Mr. Pupach’s failure to disclose the information relating to the conflict of interest did not result in the orders issued against Defendant and therefore is not relevant to this motion.  In the absence of any authority to the contrary, however, this Court believes that this event alone would justify setting aside the default judgment apart from the fault of Mr. Pupach or of Bic Pho.

Defense counsel represents that proper discovery responses have already been served.

1. Sanctions.

Plaintiffs do not seek monetary sanctions in opposing this motion.

Pursuant to Code of Civil Procedure, § 473(c)(1)(A-C), “[w]henever the court grants relief from a default, default judgment, or dismissal based on any of the provisions of this section, the court may do any of the following:

• Impose a penalty of no greater than one thousand dollars ($1,000) upon an offending attorney or party.
• Direct that an offending attorney pay an amount no greater than one thousand dollars ($1,000) to the State Bar Client Security Fund.
• Grant other relief as is appropriate.

Therefore, this Court orders that Mr. Pupach pay the sum of $1000.00 to the State Bar Client Security Fund within 20 days of the date of the filing of this Order.

Missed court-imposed deadlines and dismissals impose unnecessary stress upon the client and more work upon the Court and upon the Court staff.  Each court appearance requires that entries and actions be made by six separate clerks.  In accordance with Business & Professions Code, § 6086.7(a)(2), (b) and (c), this Court is required to report this matter to the State Bar:

“A court shall notify the State Bar of any of the following: . . . Whenever a modification or reversal of a judgment in a judicial proceeding is based in whole or in part on the misconduct, incompetent representation, or willful misrepresentation of an attorney. . .In the event of a notification made under subdivision . . . (a) . . ., the court shall also notify the attorney involved that the matter has been referred to the State Bar.  (c) The State Bar shall investigate any matter reported under this section as to the appropriateness of initiating disciplinary action against the attorney.”

 

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1. Order.

Thus, the motion is GRANTED IN PART and DENIED IN PART.  The motion is GRANTED as to the set aside of the order granting terminating sanctions and default and default judgment.  The motion is DENIED as to the set aside of the order deeming matters admitted.

This Court orders that Mr. Pupach pay the sum of $1000.00 to the State Bar Client Security Fund within 20 days of the date of the filing of this Order.

The Clerk of this Court is direct it to send a copy of this order to Office of the Trial Counsel, the State Bar of California

 

 

 

________________­­­____________ DATED:

_________________________­­­________________________ HON. SOCRATES PETER MANOUKIAN Judge of the Superior Court County of Santa Clara

[1]“The failure to file a written opposition or to appear at a hearing or the voluntary provision of discovery shall not be deemed an admission that the motion was proper or that sanctions should be awarded.”  Rule of Court 3.1348(b).

[2] The matter was heard by the Honorable Judge Socrates Peter Manoukian

[3] The matter was heard by the Honorable Judge Mary E. Arand

[4] The six-month time limit for granting relief under section 473 is jurisdictional and relief cannot be granted under section 473 if the application for such relief is instituted more than six months after the entry of the judgment, order or proceeding from which relief is sought. ( Weitz v. Yankosky (1966) 63 Cal.2d 849, 855; Thompson v. Vallembois (1963) 216 Cal.App.2d 21, 24; Stevenson v. Turner (1979) 94 Cal.App.3d 315, 318.)