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In re Marriage of Schiffman

California Court of Appeals, Second District, Third Division
Mar 20, 2008
No. B197567 (Cal. Ct. App. Mar. 20, 2008)

Opinion


In re the Marriage of MYRNA and FRED SCHIFFMAN. MYRNA SCHIFFMAN, Appellant, v. FRED SCHIFFMAN, Respondent. B197567 California Court of Appeal, Second District, Third Division March 20, 2008

NOT TO BE PUBLISHED

APPEAL from an order of the Superior Court of Los Angeles County, Los Angeles County Super. Ct. No. BD343415, James D. Endman, Commissioner.

Freid and Goldsman and Gary J. Cohen for Appellant.

Law Offices of Jeffrey W. Doeringer and Jeffrey W. Doeringer for Respondent.

Kitching, J.

INTRODUCTION

Myrna Schiffman (Myrna) appeals an order awarding sanctions of $30,000 pursuant to Family Code section 271, subdivision (a), against her former husband, Fred Schiffman (Fred), to compensate Myrna for attorney’s fees and costs incurred during failed settlement negotiations. Myrna contends that the trial court erroneously failed to award sanctions of the full $80,000 of attorney’s fees and costs incurred during the settlement proceeding. The trial court, however, did not find that Fred engaged in bad faith settlement negotiations; instead, the trial court found that Fred repeatedly made settlement offers without considering the consequences and then changed his mind, which at a certain point in the settlement negotiations became sanctionable conduct. Because a reasonable judge could make this order, we find no abuse of discretion in the award of sanctions in an amount lower than Myrna requested. Myrna also contends that the sanctions award was erroneous because it did not include $435,000 in attorney’s fees and costs incurred after settlement negotiations ended. No authority, however, required the trial court to award sanctions for all attorney’s fees and costs Myrna incurred after settlement negotiations, and Myrna has not shown error in the sanction award on this basis. We affirm the sanctions order.

As is customary in family law cases where parties share the same surname, we refer to them by their first names for ease of reference, and mean no disrespect. (Rubenstein v. Rubenstein (2000) 81 Cal.App.4th 1131, 1136, fn. 1.)

Unless otherwise stated, statutes in this opinion will refer to the Family Code.

FACTUAL AND PROCEDURAL HISTORY

Petition for Dissolution of Marriage:

The parties married on September 2, 1962, separated on April 3, 2001, and had no minor children. On April 4, 2001, Myrna filed a petition for dissolution of marriage, naming Fred as respondent.

Trial was set for September 11, 12, 18, 19, and 25, 2003. Fred’s trial brief contained various contentions concerning the disposition of community property, which included four properties improved with apartment buildings. Fred contended that these four properties should be sold and that the parties should divide sale proceeds equally. From August through December 2003, the parties engaged in negotiations to settle the disposition of these four properties. As set forth more fully, post, those settlement negotiations were unsuccessful.

On May 20, 2004, the parties filed a stipulation to bifurcate the issue of attorney’s fees and costs for trial subsequent to trial on other issues. Trial was completed by October 1, 2004. Trial of a bifurcated issue of a Salomon Smith Barney account was held on June 7, 2005.

Judgment of Dissolution:

On May 2, 2006, a judgment of dissolution was filed. The judgment included an award of community property to Myrna of real property at 3621 Emerald Street, Torrance, California, with an adjusted value (fair market value less encumbrances and debts, to be assumed by Myrna) of $4,315,140, an equalizing payment of $3,630,496.91 due Myrna from the division of property set forth elsewhere in the judgment, and other community property assets. The judgment included an award of community property to Fred of real property at 1242/1246 Wellesley Avenue, Los Angeles, California, valued at $3,530,000; real property at 1942 Pelham Avenue, Los Angeles, California, valued at $2,800,000; and real property at 1435 South Bundy Drive, Los Angeles, California, valued at $1,350,000, and other assets of community property.

Myna’s Motion for Attorney’s Fees and Costs and for Sanctions:

On October 16, 2006, Myrna filed a trial brief on the bifurcated issue of attorney’s fees and costs and for sanctions pursuant to section 271. It alleged that after proposing a settlement agreement in August 2003, Fred backed out of that proposed agreement and took an untenable position as to the disposition of the four rental properties, which resulted in the parties having to undergo a lengthy trial costing hundreds of thousands of dollars in attorney’s fees and costs. Myrna sought $500,000 in attorney’s fees and costs as sanctions pursuant to section 271.

Myrna alleged that on August 11, 2003, Fred’s counsel sent a letter to Myrna’s counsel proposing that Fred buy out Myrna’s interest in the four apartment buildings. Myrna agreed to a buy out by Fred, and Myrna’s counsel began work on a deal point memorandum that would be enforceable pursuant to Code of Civil Procedure section 664.6. The parties’ tentative agreement in August 2003 for a buy out of $4,902,394 was based on appraisals performed in December 2002. Fred intended to obtain a loan to buy out Myrna’s interest. The third version of the deal point memorandum was not finalized by the September 11, 2003, mandatory settlement conference date, and at the mandatory settlement conference Fred obtained a continuation of the trial date to February 18-20, 2004. The parties continued working on the deal point memorandum. After August 14, 2003, eleven versions of the deal point memorandum were drafted. The parties’ correspondence reflects the course of the settlement proceedings.

Myrna’s counsel’s September 9, 2003, letter to Fred’s counsel contains a settlement offer and a revised deal point memorandum. The deal point memo awarded the four apartment properties to Fred upon his payment of $4,902,394 to Myrna, with Fred to obtain a written loan commitment letter for this amount by September 22, 2003. A September 17, 2003, letter from Myrna’s counsel to Fred’s counsel reflects changes to the deal point memorandum discussed by counsel earlier that day. A September 22, 2003, letter from Myrna’s counsel to Fred’s counsel noted that Myrna’s counsel had received no written comments from Fred’s counsel concerning the most recent version of the deal point memorandum. A September 30, 2003, letter from Myrna’s counsel to Fred’s counsel stated that Myrna’s counsel had received signed letters of interest regarding all four apartment properties which complied with the deal point memo, but had not yet received comments regarding the memorandum itself. A newly revised copy of that deal point memorandum was enclosed, with changes to a “rental income” paragraph and a changed deadline for letters of interest. The letter stated that Myrna’s counsel had to receive a copy of the revised deal point memo by October 2, 2003, or Myrna would no longer be willing to settle pursuant to its terms and would obtain updated appraisals on the apartment properties.

An October 3, 2003, letter from Fred’s counsel to Myna’s counsel stated that Fred’s counsel expected to send a comment letter on the deal point memorandum the following week, and that compliance with the terms of the deal point memorandum was “well under way,” with finalized letters of interest for loans on the four apartment properties. The letter stated that Fred had paid loan processing fees on all four properties, had opened escrow, and had ordered title insurance and loan documents. An October 8, 2003, letter from Fred’s counsel to Myrna’s counsel noted the latter’s comment that Myrna stated she was ready to reject the deal. The letter stated that Fred had advanced $12,000 in loan application fees to lenders and continued to make good faith efforts to buy out Myrna’s interest in the four apartment properties, with the intent to close refinancing not later than October 31, 2003. The letter attached Fred’s comments. Myrna’s counsel’s October 17, 2003, letter responded to Fred’s comments. Myrna refused to change the November 6, 2003, compliance date to November 14, 2006, did not agree to sell the South Bundy apartment property first, and did not agree to a new date for payment of interest on the balance of the half-payment due Myrna for her community property share of the four properties. Myrna’s counsel made most of the remaining changes Fred requested.

On October 20, 2003, Fred’s counsel’s letter to Myrna’s counsel stated that Fred’s counsel had received the seventh version of the revised deal point memorandum, and provided comments. This letter insisted on changing the November 6, 2003, compliance date to November 14, 2003; stated that the $4,902,394 amount was to be set forth specifically, instead of being set forth as “not less than $4,902,394;” requested deletion of six lines in paragraph II.B.5.a.; stated that Fred’s counsel would discuss sale of the South Bundy apartment property with Fred; insisted on retaining Fred’s ability to make an ex parte application before the closing date deadline if Myrna failed to cooperate to effectuate a timely closing; stated that there could be no freeze on Fred’s ability to use his retirement accounts; questioned the accuracy of an extension date to November 20, 2003 with regard to the closing of escrow for the Emerald refinance; stated that jurisdiction should remain with the trial judge regarding deduction of certain items from rental income, and Fred should not be solely responsible for such expenses; requested a change to a paragraph governing rental properly bank accounts; and requested a phrase in a paragraph concerning third parties’ claims against Fred.

An October 30, 2003, letter from Myrna’s counsel to Fred’s counsel refers to an October 27, 2003, letter from Fred’s counsel, which is not in the record. The October 30, 2003, letter states that the context of the October 27, 2003, letter was that “we had reached an impasse. Your October 27, 2003 letter completely ignores the fact that certain issues were and are not negotiable.” Myrna’s counsel, however, stated that it was still possible to reach an agreement, and agreed to most of the items requested by Fred. Myrna did not agree to a change concerning sales of the apartment properties, stating: “Our position continues to be that should Mr. Schiffman default, Ms Schiffman can sell whatever property(ies) are necessary to provide her with sufficient equalization funds.”

Myrna’s counsel also stated that Fred should bear property expenses, which issues should be brought before the trial court. Myrna’s counsel also refused to make the requested change concerning third parties’ claims against Fred.

Myrna’s counsel’s November 6, 2003, letter to Fred’s counsel referred to the claim, made by Fred’s counsel in a November 5, 2003, letter that is not in the record, that the case had not settled because Myrna’s counsel had not provided Myrna’s final declaration of disclosure. Myrna’s counsel called this claim “beyond preposterous,” stated that the parties still did not have an agreement on several significant issues, and stated that Myrna’s counsel had no reason to believe that Fred had changed his position on any of these issues. Myrna’s counsel stated that: if Fred defaulted, Myrna wanted the option to sell whatever buildings were necessary to make up the balance in the equalization payment; that Fred had to bear property expenses as set forth in paragraph IV of version seven of the deal point memorandum; that Fred should borrow enough against the properties to cover his loan origination fees; and that Fred had not paid his Mountaingate membership bill, as required by the deal point memorandum. Additionally, Myrna did not agree to pay to replace carpet in a unit at the Wellesley building and did not agree to split the cost for a roof at the Emerald building.

A November 14, 2003, letter from Fred’s counsel to Myrna’s counsel stated that Fred would agree to the deal point memorandum in its present form (provided on October 30, 2003), with some changes: (1) changing the date for close of the loans to December 1, 2003; (2) each party immediately receiving $150,000 from frozen, non-retirement accounts, so that Fred could pay loan origination fees; (3) the deal point memorandum should provide that in the event Fred’s default resulting from his failure to pay Myrna sums from refinancing proceeds, Fred would have an opportunity to cure the default at any time, with his cure to stop sale of any properties which had begun; (4) regarding Myrna’s sale of properties in the event of a default, the deal point memorandum should provide that such properties should be listed at not less than the appraisal values upon which the sum payable to Myrna in the deal point memorandum is based; and (5) that upon agreement being reached on the deal point memorandum, the parties should each with draw $150,000 from blocked house sale proceeds, and within one day of such withdrawal, the deal point memorandum would be signed contemporaneously with deeds being signed by Myrna as to the four apartment properties, and demand letters and original releases regarding the lis pendens being singed by Myrna’s counsel on her behalf. A November 14, 2003, letter from Myrna’s counsel to Fred’s counsel enclosed a ninth draft of the deal point memorandum incorporating changes requested in Fred’s November 14, 2003, letter and in later discussions. The letter stated that with refinancing of the four properties, Myrna was to receive $4,902,394. The letter also stated that it was “imperative” that Myrna’s counsel receive the deal point memorandum signed by Fred by the following Monday.

A November 17, 2003, letter from Myrna’s counsel to Fred’s counsel enclosed version 10 of the deal point memorandum.

A November 19, 2003, letter from Fred’s counsel to Myrna’s counsel stated that interest rate fluctuations had resulted in a “shortfall” in money Fred would receive from refinancing; the difference between the refinancing funds and the amount Myrna was to receive would be paid to Myrna from Fred’s share of an account containing sale proceeds from the house; the refinance could not close on December 1, 2003, and therefore the deal point memorandum would need to be revised to indicate that the refinance would be completed on or before December 15, 2003; but the parties still needed to execute the deal point memorandum and have demand letters sent to lenders as soon as possible to close on or before December 15, 2003.

A November 25, 2003, letter from Fred’s counsel to Myrna’s counsel set forth changes pursuant to discussions the previous week. These changes included: the award to Fred of Pegasus Property Management, and a change to the deal point memorandum to reflect a $1,160 balance in the Pegasus Property Management account; change of close of escrow to December 15, 2003; addition of a paragraph in the deal point memorandum that its terms would become effective as of the date it was executed; that the deal memo should be revised to state that a $65,386 “shortfall” in refinancing proceeds would be paid to Myrna from Fred’s share of a Smith Barney account when that account was divided; that the deal point memorandum should be revised to show that $8,000 in additional roofing costs and $18,000 to replace decking at the Emerald apartment building should be paid from reserve funds; that the deal memo should set forth balances in Myrna’s separate property accounts that were being confirmed to her; that instruction letters to lenders should be changed to reflect monies paid to Myrna from the escrow; and the instruction letter to Washington Mutual needed to include a statement about payment of real property taxes.

Myrna’s counsel’s November 25, 2003, letter to Fred’s counsel stated that Myrna did not agree to pay for carpeting, decking, or additional roofing expenses.

Myrna’s counsel’s December 3, 2003, letter to Fred’s counsel stated that Myrna would not agree to further revisions to the deal point memorandum, and considered the 10th version of that deal point memorandum to be the final version. The letter stated that any shortfall would be dealt with in a separate letter agreement and that the December 15, 2003, deadline would be interlineated into version 10 where appropriate. The letter agreed to revise an instruction letter to Washington Mutual to reflect a statement about property tax and modification of amounts. The letter again stated that Myrna would not agree to pay for decking, roofing costs, carpeting, or any other improvements Fred requested. The letter concluded: “If we do not receive the signed Deal Point Memo, interlineated as necessary with the December 15, 2003 date, by 2:00 p.m. on Friday, December 5, we will have no choice but to proceed to trial.”

Fred’s counsel’s December 4, 2003, letter to Myrna’s counsel stated that, as set forth in Myrna’s counsel’s December 3, 2003, letter, “it is apparent that we have not reached a resolution for the settlement of this matter that involves Fred buying out Myrna’s interest in the apartment buildings. Based upon your letter and Myrna’s prior statements that she does not want to own any of the buildings, Fred will cooperate in the immediate sale of the apartment buildings. This will provide an immediate resolution of this matter for both parties and save unnecessary attorney’s fees and costs to further litigate in court.”

Myrna’s counsel’s December 5, 2003, letter stated that if Myrna’s counsel did not have the signed deal point memorandum by 5:00 p.m., Myrna’s counsel intended to update appraisals on the four apartment properties, with the cost to be advanced by Myrna, who would seek reimbursement from Fred at trial. The letter stated that Myrna did not agree to list the properties for sale at this time, and took the position that Fred was to take the properties and buy out Myrna, which would be Myrna’s position at trial.

Fred’s counsel’s December 8, 2003, letter to Myrna’s counsel stated that Fred agreed to sell the apartment buildings immediately, and did not agree to have appraisal values updated for those properties. Fred asserted that if Myrna wanted updated appraisals, she would need to retain an independent appraiser at her own cost. Fred’s counsel’s letter requested authority supporting Myrna’s position that the court ordered Fred to buy out Myrna’s interest in the apartment properties instead of ordering sale of the buildings or an in-kind division of the buildings. Fred’s counsel asked that Myrna’s counsel to call to arrange a time to discuss issues with the trial judge concerning carpet replacement in two buildings, payment of the roofing contractor for the additional $8,000 in roofing costs to replace the Emerald property roof, and $18,000 to repair decking at the Emerald building, which was required by both the insurer and the lender.

Fred’s counsel’s December 18, 2003, letter to Myrna’s counsel reiterated that Fred’s position was that the apartment buildings should be immediately listed for sale.

Fred’s counsel’s January 21, 2004, letter to Myrna’s counsel noted the parties’ different positions regarding the four apartment properties, with Myrna wanting the properties awarded to Fred and the court to order Fred to buy out Myrna’s interest in those properties, while Fred wanting to sell the properties. Fred’s counsel asked Myrna’s counsel to call him to resolve this issue, or Fred and Myrna would incur large attorney’s fees to prepare for trial. A second letter on January 21, 2004, from Fred’s counsel to Myrna’s counsel stated that Myrna’s counsel had informed Fred’s counsel that Myrna would not agree to sell the buildings and took the position that the trial court should award the buildings to Fred, despite his objections. The letter stated that it was therefore necessary to proceed to prepare for trial, and requested that Myrna’s counsel produce all reports and schedules prepared by Myrna’s designated experts.

Fred’s Attorney Fee Motion:

On October 17, 2006, Fred filed an attorney fee brief, which argued several issues. First, it argued that the division of the community estate gave both parties a separate estate worth nearly $10 million, and thus Myrna did not need Fred to pay her attorney’s fees and costs.

Second, Fred argued that the trial court should order Myrna to pay a portion of Fred’s attorney’s fees and costs pursuant to section 271. This was based on the claim that in June 2001, less than two months after Myrna filed the dissolution petition, Fred made a settlement offer to Myna to resolve the matter by dividing the apartment buildings, investments, and cash accounts equally between the parties, but Myrna did not respond to this offer and failed to respond to any of Fred’s settlement offers made over the next two years. In April 2003, the parties began negotiations for Fred’s purchase of Myrna’s interest in all the apartment buildings, but the parties could not agree to a settlement. Fred disputed Myrna’s claim that because Fred backed out of the deal, Fred should be charged with Myrna’s attorney’s fees and costs for time spent negotiating the settlement that involved Fred’s purchasing Myrna’s interest in the four apartment buildings. Fred argued that statements by Myrna’s counsel in correspondence to Fred’s counsel reflected that no deal was ever reached, and thus Myrna’s attempts to portray Fred as acting incorrectly or hindering settlement were an attempt to mislead the trial court about the parties’ negotiations. “There was never a settlement agreement from which [Fred] withdrew. [Myrna’s] counsel stated that there was ‘no deal.’ ”

Fred alleged that he incurred thousands of dollars of attorney’s fees and costs in settlement negotiations with Myrna, and the failure of settlement negotiations was not a basis for making Fred responsible for Myrna’s attorney’s fees and costs pursuant to section 271. Fred alleged that after settlement negotiations broke down, Fred proposed selling the buildings or dividing them equally, but Myrna refused to do so. Instead Myrna took the position that the only way to resolve the matter was for Fred to buy out Myrna’s interest in the apartment buildings.

Myrna’s Reply to Fred’s Attorney’s Fee and Sanction Motion:

In a reply filed October 27, 2006, Myrna disputed the assertions in Fred’s attorney’s fee and sanction motion. Myrna reiterated that the trial court should order Fred to pay $500,000 as attorney’s fees and costs as section 271 sanctions because of Fred’s “inexcusable behavior in backing out of the parties’ settlement and taking an untenable position that the parties’ rental properties should be sold and the capital gains and sales costs ‘hit’ be shared by the parties.” Myrna further argued that Fred’s conduct throughout the litigation was sanctionable behavior under section 271, in that his conduct made every effort to discourage cooperation with Myrna and her agents.

Fred’s Reply to Myrna’s Attorney’s Fee and Sanction Motion:

Fred’s reply asserted that he had always requested division of the four apartment properties equally between the parties, and that Myrna’s insistence that he buy out her interest in those properties and her statement that she did not want to be awarded any apartment buildings caused Fred to propose selling the buildings. Fred argued that Myrna’s entrenched position resulted in the parties going to trial and incurring resulting attorney’s fees. Fred also objected to Myrna’s attempt to portray Fred as backing out of a settlement; instead, Fred argued that there was never a meeting of the minds and that Myrna did not agree to many of Fred’s proposed changes to the deal point memoranda.

The Further Judgment:

On January 18, 2007, a further judgment on the bifurcated issue of attorney’s fees and costs was filed. The judgment denied Fred’s request for attorney’s fees pursuant to section 271. The trial court found that Fred frustrated settlement within the meaning of section 271 by making settlement proposals and withdrawing them, resulting in the matter having to go to trial.

The trial court denied Myrna’s request for $265,000 in attorney’s fees and costs incurred to go to trial after Fred backed out of settlement proposals, and $170,000 in post-trial attorney’s fees and costs, on the basis that such sanctions were not within the scope of section 271.

The trial court, however, granted Myrna’s request for attorney’s fees pursuant to section 271 in the amount of $30,000, which was a portion of the $80,000 in attorney’s fees and costs Myrna incurred in negotiating the settlement with Fred and drafting eleven versions of the deal point memorandum.

Myrna’s Appeal:

Myrna filed a timely notice of appeal on March 12, 2007.

ISSUES

Myrna claims on appeal that the trial court

1. erroneously limited its award of attorney’s fees and costs as sanctions pursuant to section 271 to $30,000, and instead should have awarded Myrna all her attorney’s fees and costs in the settlement proceeding; and

2. erroneously ruled that section 271 did not authorize an award of sanctions for attorney’s fees and costs incurred after the settlement negotiations ended.

DISCUSSION

1. Section 271 Sanctions and the Standard of Review

Section 271, subdivision (a) states: “Notwithstanding any other provision of this code, the court may base an award of attorney’s fees and costs on the extent to which the conduct of each party or attorney furthers or frustrates the policy of the law to promote settlement of litigation and, where possible, to reduce the cost of litigation by encouraging cooperation between the parties and attorneys. An award of attorney’s fees and costs pursuant to this section is in the nature of a sanction. In making an award pursuant to this section, the court shall take into consideration all evidence concerning the parties’ incomes, assets, and liabilities. The court shall not impose a sanction pursuant to this section that imposes an unreasonable financial burden on the party against whom the sanction is imposed. In order to obtain an award under this section, the party requesting an award of attorney’s fees and costs is not required to demonstrate any financial need for the award.”

This court reviews a section 271 sanction order according to the abuse of discretion standard. (In re Marriage of Feldman (2007) 153 Cal.App.4th 1470, 1478.) “ ‘ “ ‘[T]he trial court’s order will be overturned only if, considering all the evidence viewed most favorably in support of its order, no judge could reasonably make the order.’ ” ’ ” [Citation.] ‘In reviewing such an award, we must indulge all reasonable inferences to uphold the court’s order. ’ ” (Ibid.) This court reviews any findings of fact forming the basis for the sanctions award under a substantial evidence standard of review. (Id. at p. 1479.)

To the extent that the Court of Appeal is called on to interpret statutes relied on by trial court to impose sanctions in a dissolution proceeding, this court applies a de novo standard of review. (In re Marriage of Feldman, supra, 153 Cal.App.4th at p. 1479.)

2. The Sanctions Award Was Not an Abuse of Discretion Because It Was Lower Than the Amount Requested

Myrna claims that the $30,000 in sanctions imposed by the trial court was too low, and instead the trial court should have awarded Myrna all her attorney’s fees and costs.

Myrna first argues that the trial court erroneously found that Fred did not start wasting everyone’s time until the fifth or sixth draft of the deal point memorandum. The trial court made this statement in the hearing on the sanctions motion. It was in the context of a reminder that the courts viewed it as important that the parties in a dissolution proceeding understand a written agreement, and that parties were even allowed to back out of a written, signed agreement at the last moment. The trial court further stated that this was not a situation in which Fred made offers with no intent of following through or imposed a small item at the end to prevent a deal from being reached. Instead the trial court asked when, during 11 drafts of the deal point memorandum, Fred’s inability to make up his mind became sanctionable as conduct that frustrated the policy of the law to promote settlement of litigation. The trial court stated: “I think the policy of [section] 271 is to encourage everybody to settle, but not to sit and negotiate for the purpose of wasting time because you’re not ready to make the deal yet and I think at some point that happened. I can’t sit down and say ‘this is the point,’ whether it’s the sixth, seventh, eighth time it falls apart. But I think at some point halfway through you have to realize that you can’t keep coming up with proposals and then backing out of it . . . because you haven’t checked something out.” On this basis, the trial court did not award the $80,000 requested, but found that $30,000 in sanctions was appropriate.

We reject Myrna’s argument that the trial court’s order defies reason. The trial court did not find that Fred engaged in settlement negotiations in bad faith. Instead the trial court found that Fred repeatedly made settlement offers without considering the consequences and then changed his mind. The trial court found that at a certain point in the settlement negotiations, such conduct became sanctionable. This order was not one that no reasonable judge could make. We find no abuse of discretion.

Myrna also argues the trial court erroneously reduced the approximately $82,000 in attorney’s fees and costs claimed by Myrna to the $30,000 ordered by the trial court. Section 271 “vests the trial court with the discretion to award attorney fees and costs. It provides in pertinent part: ‘In making an award pursuant to this section, the court shall take into consideration all evidence concerning the parties’ incomes, assets and liabilities.’ This provision does not require that the sanction imposed compensate for all fees and costs expended.” (In re Marriage of Battenburg (1994) 28 Cal.App.4th 1338, 1345-1346.) An award in an amount lower than that sought by the party moving for sanctions was within the trial court’s discretion.

A declaration from Myrna’s attorney stated that his office incurred approximately $82,000 in fees and costs between August 14, 2003, and November 2003, $70,000 of which was attributable to work on the deal point memorandum.

We find no abuse of discretion in the sanctions award.

3. Myrna Has Not Shown Error in the Trial Court’s Rejection of Myrna’s Request for Attorney’s Fees and Costs Incurred After Settlement Negotiations Ended

Myrna claims that the trial court erroneously failed to make a sanctions award for all attorney’s fees and costs Myrna incurred after the settlement negotiations ended, i.e., for her attorney’s fees and costs for trial preparation, trial, and post-trial proceedings. We conclude that Myrna has not shown that the sanctions award was erroneous on this basis.

a. The Finding That Fred Could Pay All $500,000 of Fees and Costs Requested by Myrna Did Not Require the Trial Court to Award Sanctions in This Amount

Myrna makes a broad claim that the sanctions order was too low as a matter of law because the trial court found that it would not have been an unreasonable burden on Fred to pay all $500,000 of fees and costs requested by Myrna.

Section 271, subdivision (a) states, in relevant part: “In making an award pursuant to this section, the court shall take into consideration all evidence concerning the parties’ incomes, assets, and liabilities. The court shall not impose a sanction pursuant to this section that imposes an unreasonable financial burden on the party against whom the sanction is imposed.”

On the issue of whether a sanction imposed an unreasonable financial burden on Fred, the judgment stated: “The Court, based on inquiry to Respondent and his response thereto, finds that Respondent received at least $700,000 in liquid funds at Judgment and that it is not an unreasonable financial burden on Respondent to pay all or part of the sanctions requested by Petitioner.” This satisfies the statutory requirement that the court not impose a sanction imposing an unreasonable financial burden on the party against whom the sanction is imposed. A finding that it was not an unreasonable financial burden for the sanctioned party to pay the sanctions requested, however, does not require the trial court to order sanctions in the amount requested. Section 271 contains no such requirement.

Myrna cites several cases in which small awards have been held erroneous as a matter of law. None of these cases, however, involved a sanctions order made pursuant to section 271 or its predecessor statutes. (In re Marriage of Braud (1996) 45 Cal.App.4th 797, 827; In re Marriage of Hargrave (1985) 163 Cal.App.3d 346, 355-357; In re Marriage of Fransen (1983) 142 Cal.App.3d 419.) The attorney fee awards in Braud, Hargrave, and Fransen, moreover, were not sanctions awards, but instead were “need-based” awards. (Braud, at p. 827; Hargrave, at p. 356; Fransen, at pp. 426-427.) In such awards, the trial court made an attorney fee award in order to assure that the party in whose favor the award was made had sufficient resources to litigate the matter effectively. (§§ 2030, subds. (a)(1) and (2), and 2032, subd. (b); In re Marriage of Sullivan (1984) 37 Cal.3d 762, 768.) Section 271, by contrast, is a sanctions statute, which is not based on the moving party’s needs for funds to litigate: “In order to obtain an award under this section, the party requesting an award of attorney’s fees and costs is not required to demonstrate any financial need for the award.” (§ 271, subd. (a).) Thus the cases Myrna cites have no relevance to this appeal.

b. No Authority Required the Trial Court to Award Sanctions for All Attorney’s Fees and Costs Myrna Incurred After Settlement Negotiations Ended

Myrna’s real argument is that the trial court erroneously ordered the sanctions award based only on fees and costs incurred during the settlement proceedings (from August to December 2003), rather than basing the sanctions award on Myrna’s attorney’s fees and costs incurred thereafter, i.e., for Myrna’s attorney’s fees and costs incurred before trial, during trial, and after trial, amounts which Myrna claims totaled $500,000. Myrna argues that if the purpose of section 271 is punishment, the trial court should have required Fred to pay Myrna’s attorney’s fees and costs for the trial and post-trial proceedings. The argument is that Fred’s sanctionable conduct during settlement negotiations—Fred’s backing out of the settlement—made trial of the matter necessary. Therefore, Myrna reasons, the trial court should not have limited its sanctions award to attorney’s fees and costs incurred during the settlement, but should have ordered Fred to pay all Myrna’s attorney’s fees and costs incurred after settlement negotiations ended. We disagree. Although the trial court could have awarded sanctions for conduct occurring subsequent to the settlement discussions, it determined not to do so and we find no abuse of discretion.

Section 271, subdivision (a), has two purposes, as stated in describing sanctionable conduct: “the court may base an award of attorney’s fees and costs on the extent to which the conduct of each party or attorney furthers or frustrates the policy of the law [1] to promote settlement of litigation and, [2] where possible, to reduce the cost of litigation by encouraging cooperation between the parties and attorneys.” Thus, section 271 does not limit a sanctions award to attorney’s fees and costs incurred in settlement negotiations. Conduct which frustrates the policy of the law to reduce the cost of litigation by encouraging cooperation between the parties and attorneys can occur in family law proceedings other than settlement negotiations. Numerous cases have imposed section 271 sanctions on conduct which did not occur during settlement negotiations. (In re Marriage of Quay (1993) 18 Cal.App.4th 961, 969-970 [sanctions imposed for husband’s and husband’s attorney’s failure to cooperate in discovery matters and in making an accounting, and for mismanagement of community funds]; In re Marriage of Norton (1988) 206 Cal.App.3d 53, 55-59 [sanction award to husband for former wife’s filing of unwarranted petition to recover custody of parties’ children]; In re Marriage of Melone (1987) 193 Cal.App.3d 757, 763-766 [sanction award to wife for attorney’s fees incurred in defending husband’s appeal of temporary spousal support order]; In re Marriage of Feldman, supra, 153 Cal.App.4th at p. 1475 [husband ordered to pay $140,000 in attorney fees for nondisclosure of financial information]; Burkle v. Burkle (2006) 144 Cal.App.4th 387, 392-393, 399-400 [in dissolution proceeding, wife sanctioned $32,950 for husband’s attorney fees and costs in connection with obtaining dismissal of wife’s separate civil action brought to enforce interim orders made in the dissolution proceeding, over which family law court had jurisdiction.]

Myrna, however, provides no authority that sanctionable conduct during settlement negotiations requires an award of attorney fees and costs incurred not only during those settlement negotiations but also in all proceedings thereafter. For one thing, although the trial court found that Fred’s conduct during settlement negotiations was sanctionable, it made no finding that Fred and Myrna settled the case, and then Fred reneged on that settlement. A review of the written settlement correspondence shows that the parties never reached a final agreement. At the last stage of those negotiations, Myrna’s counsel’s December 3, 2003, letter to Fred’s counsel stated that Myrna would not agree to any further revisions to the deal point memorandum, considered the tenth version of that deal point memorandum to be the final version, refused to pay for necessary improvements to the apartment buildings, and stated that if a signed deal point memo was not received by 2:00 p.m. on December 5, 2003, Myrna would proceed to trial. Fred’s counsel’s December 4, 2003, letter to Myrna’s counsel responded that in light of the latest letter, it was apparent that the parties had not reached a settlement that would involve Fred buying out Myrna’s interest in the apartment buildings, and that given Myrna’s statement that she did not want to own any of the buildings, Fred would cooperate in their immediate sale. Both parties, in other words, adopted irreconcilable positions; there was no settlement. Thus Fred’s failure to settle did not alone cause the matter to go to trial, and the trial court made no such finding. Therefore there is no basis for requiring Fred to pay for attorney’s fees and costs incurred by Myrna throughout the rest of the dissolution proceeding. To adopt Myrna’s position would be to say that whenever settlement negotiations failed and the parties could not reach a settlement agreement, one party (or both parties) had grounds to claim as section 271 sanctions their attorney’s fees and costs incurred throughout the rest of the dissolution proceeding. Such a conclusion is untenable. The threat of such sanctions, moreover, would strongly discourage either party from entering into settlement negotiations in the first instance.

Myrna argues that the trial court’s holding contravenes the holding of In re Marriage of Quay, supra, 18 Cal.App.4th at p. 970. With regard to sanctions ordered pursuant to the predecessor statute to section 271, Quay states: “[Husband] Steven argues that the only attorney fees before the court were incurred after his wrongful conduct, and that the award is therefore improper. We reject this argument. The statute, we think, contemplates assessing a sanction at the end of the lawsuit, when the extent and severity of the party’s bad conduct can be judged.” (Ibid.) The Marriage of Quay opinion contains no facts suggesting that the sanctions were based on attorney’s fees incurred after Steven’s wrongful conduct. Marriage of Quay simply holds that a party may move for sanctions, and the court may award them, at the end of the lawsuit, rather than contemporaneously with the conduct giving rise to sanctions. (Ibid.) When the opinion states that it rejects Steven’s argument, it appears that the court is asserting that the attorney fees before the court were incurred during and because of his wrongful conduct, not after it.

The factual basis of Myrna’s sanction motion, moreover, was focused primarily on Fred’s conduct during the settlement negotiation. Nonetheless Myrna’s motion claimed $500,000 in attorney’s fees and costs, a figure which included $265,800 of fees and costs attributable to trial and trial preparation incurred from December 2003 through January 7, 2005, and $175,000 of post-trial fees incurred through September 25, 2006. Although some post-settlement conduct was alleged as an additional basis for the section 271 sanctions request, the trial court impliedly rejected these as a basis for the sanctions award. Myrna claims that the trial court interpreted section 271 to limit the sanctions award to attorney’s fees and costs incurred by Myrna during settlement negotiations. We find nothing in the record, however, to support that conclusion. We reiterate that Myrna provides no basis for expanding the section 271 sanctions to include attorney’s fees and costs incurred by Myrna after Fred’s sanctionable conduct occurring during the settlement negotiations.

Myrna draws an analogy between section 271 and Code of Civil Procedure section 998, arguing that the latter statute constitutes a legislative endorsement of the principle of compensating the innocent party for fees and costs incurred after settlement breaks down, and thus shows that the Legislature did not intend for section 271 to preclude the trial court’s consideration of post-settlement expenses when setting the amount of a sanction award. The fee-shifting statute of Code of Civil Procedure section 998 operates so differently than the sanction statute of section 271, however, that no useful analogy can be drawn between the two statutes and no inference of the Legislature’s intent in enacting section 271 arises from Code of Civil Procedure section 998. The same is true of other fee-shifting statutes cited by Myrna. (Code Civ. Proc., § 1021.5; Gov. Code, § 12965(b).)

DISPOSITION

The order is affirmed. Costs on appeal are awarded to defendant Fred Schiffman.

We concur: CROSKEY, Acting P. J., ALDRICH, J.


Summaries of

In re Marriage of Schiffman

California Court of Appeals, Second District, Third Division
Mar 20, 2008
No. B197567 (Cal. Ct. App. Mar. 20, 2008)
Case details for

In re Marriage of Schiffman

Case Details

Full title:MYRNA SCHIFFMAN, Appellant, v. FRED SCHIFFMAN, Respondent.

Court:California Court of Appeals, Second District, Third Division

Date published: Mar 20, 2008

Citations

No. B197567 (Cal. Ct. App. Mar. 20, 2008)