Opinion
No. 58150-3-I.
October 22, 2007.
Appeal from a judgment of the Superior Court for King County, No. 02-2-12120-9, Dean Scott Lum, J., entered March 30, 2006.
Affirmed by unpublished opinion per Cox, J., concurred in by Appelwick, C.J., and Grosse, J.
The imposition and amount of sanctions are committed to the sound exercise of discretion by the trial court. Here, the trial court properly decided that counsel's instruction to his client not to answer certain questions at a deposition was improper. The amount of the sanction imposed for that violation was proper. Moreover, we cannot say that the trial court abused its discretion by declining to impose further sanctions in this case. We affirm.
Wash. State Physicians Ins. Exch. Ass'n v. Fisons Corp., 122 Wn.2d 299, 338, 858 P.2d 1054 (1993).
In 1998, Britannia Holdings Limited invested over $9 million with Alistar Capital Corporation. Bernard G. Greer was Alistar's president and CEO. He managed Britannia's investment.
In January 2002, the Greers formed J.T.F. Family L.L.C. (JTF LLC). They subsequently transferred their 19-acre residence, referred to as the Jolly Troll Farm, to JTF LLC. In March 2002, JTF LLC sold the residence for approximately $4.7 million. From that sale, $94,000 remained in escrow in a "holdback account" to satisfy certain repairs and other matters. After those obligations were satisfied, the Greers received the remaining $60,000.
In May 2002, Britannia sued Bernard and Judith Greer and Alistar for securities fraud. Britannia obtained a default judgment for over $11 million against the Greers and Alistar.
On July 19, 2002, Britannia deposed Bernard Greer in supplemental proceedings. He testified that after the sale of the 19-acre residence by JTF LLC, there was $600,000 remaining, which was placed in an escrow account at the Bank of Washington. Britannia's attorney asked Greer about the escrow account, but William Beresford, Greer's attorney, directed him not to answer. It appears the parties resumed the deposition without further immediate action to obtain a ruling from the trial court on the propriety of the instruction not to answer.
On August 2, 2002, Britannia moved to compel discovery, specifically further deposition testimony by Greer. Several days later, Richard Beresford, William Beresford's co-counsel, conceded that the instruction for Greer not to answer at the July 19 deposition was improper, and that Britannia was entitled to answers.
By mid-August 2002, the Greers had substantially emptied all of their assets held in JTF LLC's account. The Greers wired a substantial portion of the money overseas. JTF LLC wired $165,000 to the Greers' daughter, Nan Greer, and wired $130,000 to Alistar Nicaragua, a family-controlled entity in Nicaragua.
On August 29, 2002, Britannia reconvened Bernard Geer's deposition. When asked about JTF LLC's assets, Greer failed to disclose the $60,000 holdback from the sale of the residence.
In February 2003, William and Richard Beresford withdrew as the Greers' attorneys. It appears they did so on the basis of concerns about conflicting ethical obligations. Matthew Cruz, counsel on appeal, subsequently appeared on behalf of the Greers.
In March 2003, the court ordered the Greers to deliver all of the money and property in their possession and under their control to Britannia, including the money transferred overseas. The record suggests that they never complied.
In 2004, Britannia moved for sanctions against Beresford Booth PLLC in the amount of $465,000, plus attorney fees. The court denied Britannia's request for $465,000 in sanctions, but granted it $250 in attorney fees for the improper instruction not to answer further questions at the July 19 deposition and for Britannia's subsequent motion to compel.
This timely appeal followed.
SANCTIONS
Britannia argues in its opening brief that the trial court abused its discretion when it failed to sanction or inadequately sanctioned counsel for actions in connection with discovery during supplemental proceedings. We disagree.
Appellant's Brief at 15-27.
Standard of Review
In the seminal case of Washington State Physicians Insurance Exchange Ass'n v. Fisons Corp., our state supreme court recognized the importance of the trial court's discretion in imposing sanctions:
[T]he sanction rules are "designed to confer wide latitude and discretion upon the trial judge to determine what sanctions are proper in a given case and to 'reduce the reluctance of courts to impose sanctions'. . . . If a review de novo was the proper standard of review, it could thwart these purposes; it could also have a chilling effect on the trial court's willingness to impose . . . sanctions."
Fisons, 122 Wn.2d at 339 (quoting Cooper v. Viking Ventures, 53 Wn. App. 739, 742-43, 770 P.2d 659 (1989) (quoting Fed.R.Civ.P. 11 advisory committee note, 97 F.R.D. 198 (1983))).
A trial court abuses its discretion when its decision is "manifestly unreasonable, or exercised on untenable grounds, or for untenable reasons."
Burnet v. Spokane Ambulance, 131 Wn.2d 484, 494, 933 P.2d 1036 (1997).
In its reply brief, Britannia asserts that the proper standard of review for this court to apply to the trial court's actions is de novo. In doing so, it relies on cases that do not support its argument.
Britannia also filed a statement of supplemental authorities, citing In re Firestorm and Bryant v. Joseph Tree, Inc. for further support that we should apply something other than an abuse of discretion standard of review. But the supreme court in Fisons, before holding that the proper standard is one of abuse of discretion, specifically noted that Bryant had declined to establish a standard of review for sanctions cases. And the court in Firestorm applied a de novo standard of review to the purely legal question of whether an ex parte contact with an expert witness under specific circumstances constituted a violation of CR 26. Neither of these cases provides support for applying a de novo standard of review in this case.
129 Wn.2d 130, 916 P.2d 411 (1996).
119 Wn.2d 210, 829 P.2d 1099 (1992).
Fisons, 122 Wn.2d at 338 n. 67 (citing Bryant, 119 Wn.2d at 218).
Civil Rule 30(h)(3)
Civil Rule (CR) 30(h)(3) provides that instructing a deponent not to answer questions is improper, except when based upon privilege. CR 37(a)(4) provides that if the trial court grants a motion to compel discovery, it shall require "the party or attorney advising such conduct or both of them to pay to the moving party the reasonable expenses incurred in obtaining the order, including attorney fees." Prior to filing a motion seeking an order to compel discovery, counsel must have a discovery conference in person or by telephone.
While courts are given wide latitude in determining what sanctions are appropriate, "the least severe sanction that will be adequate to serve the purpose of the particular sanction should be imposed." The purposes of sanctions are to deter, punish, compensate, and educate.
Fisons, 122 Wn.2d at 355-56.
Id. at 356.
Here, Britannia could have sought immediate relief, including a request for sanctions, at the time of the deposition. For reasons that are unclear, it failed to do so. However, it moved for sanctions against Beresford Booth PLLC almost two weeks later. Britannia asserted below, as it does on appeal, that William Beresford knew that Bernard Greer, or JTF LLC, had $405,000 in its account during the July 19 deposition. It also claims that when the deposition was reconvened on August 29, Greer had transferred almost all of the money out of the account. Britannia argues that by instructing Greer not to testify, Beresford provided a six-week delay that allowed his clients to move money beyond the court's immediate reach. It maintains that Beresford prevented it from learning about the $405,000 while in the Greers' possession.
In response, William Beresford denies that he had any involvement in assisting Greer in protecting his assets. He stated in his declaration that he mistakenly instructed Greer not to testify, but was unaware of any ongoing asset transfers by Greer. Richard Beresford also stated in his declaration that during July and August of 2002, he was not aware of Greer's attempts to place assets beyond the reach of creditors.
Clerk's Papers at 1149.
Clerk's Papers at 1131-32.
Clerk's Papers at 1142.
At the sanctions hearing, the trial court noted that neither attorney called the court for a ruling on Beresford's instruction to his client not to answer questions at the time of the deposition. The court further noted that it was being asked to rule on discovery sanctions and it was unclear whether the mandatory CR 37 conference ever occurred. It stated that there appeared to have been such an effort when Richard Beresford called Britannia's counsel after receiving the motion to compel, at which time Beresford conceded that the instruction not to answer was improper.
The trial court ruled on the sanctions motion strictly as a discovery issue and awarded Britannia the amount of attorney fees and costs it incurred for Greer's refusal to answer deposition questions on July 19 and for Britannia's subsequent motion to compel deposition testimony. It ordered that the amount was later to be determined by the court.
The trial court properly exercised its discretion in denying Britannia's request for additional sanctions. The court was entitled to believe the testimony of Beresford regarding the events at issue and deny sanctions beyond those it awarded. In short, there was no abuse of discretion.
The cases cited by Britannia do not say otherwise. In Fisons, a drug company continually refused to produce documents during discovery. Four years after the plaintiffs filed the lawsuit, a document was anonymously delivered to their attorneys, revealing that the drug company knew about the dangers of the drug, which it had previously denied. The discovery of this document eventually led to the discovery of another document, which proved the plaintiffs' case. The plaintiffs moved for sanctions based on discovery abuse, and the special discovery master denied the motion, ordering the drug company to immediately produce all requested documents. The trial court deferred to the discovery master and declined to impose sanctions against the drug company.
Fisons, 122 Wn.2d at 347-52.
Id. at 337.
Id. at 338.
Our state supreme court reversed, holding that the trial court abused its discretion by applying the wrong legal standard. The court stated that whether an attorney has made a reasonable inquiry to comply with the discovery rules should be judged by an objective standard, and the trial court should consider all of the surrounding circumstances. The court decided that had the drug company complied with the plaintiffs' requests for production, the first document showing knowledge would have been produced early in litigation. It further decided that the drug company's responses and answers to discovery requests were misleading and failed to comply with "either the spirit or letter of the discovery rules and thus were signed in violation of the certification requirement."
Id. at 345-46.
Id. at 343.
Id. at 349.
Id. at 352.
In Gammon v. Clark Equipment Co., Richard Gammon was killed when a Bobcat 720 loader tipped over on its side while he was clearing a house foundation. His wife, Judy Gammon, brought a wrongful death action against Clark Equipment Company, the manufacturing company. Throughout discovery, Clark refused to turn over accident reports and answered interrogatories by objecting to their scope. Gammon moved for sanctions for discovery abuse and for an order to compel the production of accident reports. The trial court awarded Gammon $2,500 in sanctions, and after trial, denied her motion for a new trial.
38 Wn. App. 274, 276, 686 P.2d 1102 (1984), aff'd, 104 Wn.2d 613 (1985).
Id. at 277.
This court remanded for a new trial. The court held that the $2,500 in sanctions did not adequately punish Clark for its wrongdoing. The court noted that although Gammon requested that Clark disclose its knowledge of prior accident reports over two years before trial, the vast majority of accident reports were not produced until trial was already underway.
Id. at 282.
Id. at 281.
In re Guardianship of Lasky, a mother created a living trust for the benefit of her two children. After her death, the son received his half of the trust estate and was named trustee of the other half for the benefit of his sister. An attorney was appointed as the sister's guardian. The attorney filed an action to remove the son as trustee of the trust due to alleged misconduct and also challenged the validity of the trust. The trust was found to be valid, and the claims were dismissed. The trial court awarded the trust $8,500 in CR 11 sanctions against the attorney.
54 Wn. App. 841, 843, 776 P.2d 695 (1989).
Id. at 845.
Id. at 847-48.
On appeal, this court held that the sanctions imposed were too lenient in light of the facts of the case and the alleged damages to the trust. This court reasoned that the attorney failed to make any investigation regarding the claims of his client who was developmentally disabled, and he also ignored all evidence presented to the contrary. The attorney's conduct resulted in the accumulation of large legal expenses that otherwise need not have been incurred.
Id. at 855.
Id.
None of these cases retreats from the abuse of discretion standard. Under that standard, our query is whether the trial court's choices are within those that are tenable. None of the cases suggests that the review standard is de novo.
Moreover, the trial court here chose to believe that Beresford Booth PLLC did not engage in egregious discovery violations that warranted further sanctions beyond those imposed. Rather, the court limited the imposition of sanctions against counsel to the violation of CR 30(h)(3) that occurred when William Beresford instructed Greer not to answer questions regarding JTF LLC's assets. This was not an abuse of discretion.
$60,000 Holdback
Next, Britannia argues that Beresford Booth violated the rules of professional conduct by failing to disclose the Greers' $60,000 holdback.
Rule of Professional Conduct (RPC) 3.3(a)(2) requires an attorney "to disclose a material fact to a tribunal when disclosure is necessary to avoid assisting a criminal or fraudulent act by the client unless such disclosure is prohibited by Rule 1.6." RPC 1.6(a) prohibits an attorney from disclosing client confidences and secrets, including "information protected by the attorney-client privilege under applicable law."
In re Schafer, 149 Wn.2d 148, 159, 66 P.3d 1036 (2003).
Here, when Bernard Greer's deposition reconvened in August 2002, he failed to disclose the $60,000 holdback from the sale of his residence. William Beresford was aware of the holdback. At that time, it was unclear what amount the Greers would be entitled to keep after satisfying certain obligations regarding the sale of their 19-acre residence. Concerned with the ethical issue about disclosure of the holdback, the Beresfords withdrew in February 2003.
Beresford was faced with conflicting duties regarding whether he was required to disclose Greer's omission of the holdback. To resolve the conflict, he withdrew. The trial court properly exercised its discretion in declining to award Britannia $60,000 in sanctions. Even if there was a violation of the rules of professional conduct, the trial court was entitled to conclude that Britannia failed to establish a basis to impose sanctions.
In short, we cannot say that the trial court abused its discretion in denying Britannia's request for $405,000 in sanctions.
ATTORNEY FEES
Britannia requests attorney fees on appeal based on RAP 18.1 and CR 37 for discovery misconduct. Because there is no further basis for fees on appeal, we deny the request.
We affirm the trial court's orders on sanctions.