Hot topic -- Posting a Bond to Stay Enforcement of Judgment Upon Appeal

Why a Civil Defendant May Need to Post a Bond to Appeal

A certain high-profile defendant has been in the news lately in regards to posting a bond to stay enforcement of a large judgment, so large it is likely (though far from certain) that it will be reduced on appeal.  I will not name the defendant but suffice it to say that the coverage of this issue has evidenced more political bias than understanding of the legal concepts involved.  A review of California law involving appeals and enforcement of judgments may therefore be helpful.

A judgment creditor may generally start enforcing the judgment upon notice of entry of the judgment

The plaintiff or other party with a monetary judgment in their favor becomes the judgment creditor while the party with a monetary judgment against them is a judgment debtor.  Once the Clerk of the Court has "entered" a judgment in the record, said judgment may generally be enforced up to ten years from its date.  Such enforcement may begin immediately unless, for example, the trial court grants a stay or the judgment debtor chooses one of the options below. 

 

As a practical matter, there is usually some delay in enforcement as a judgment creditor should obtain one or more "abstracts of judgment" from the Clerk of the Court in the county where the judgment has been entered.  The creditor must then "record" these in any counties where the debtor wishes to enforce the judgment by, for example, filing a lien.

General Rule: judgments are stayed pending filing a notice of appeal

A defendant in a civil suit generally has 60 days after being given proper notice of entry of judgment to file a notice of appeal. (California Rules of Court, rule 2.)  As an aside, there is a complex series of extensions related to filing post-trial motions such as a motion for a new trial.

Judgments are generally "stayed" upon filing an appeal, meaning they cannot be enforced, but, as discussed below, there are exceptions, the most important involving the enforcement of judgments for sums of money. (Code of Civil Procedure section 916; Code of Civil Procedure section 917.1.)

Exception:  monetary judgments

Crucially, monetary judgments are not automatically stayed pending an appeal. (Code of Civil Procedure section 917.1)  This is for the obvious reason that a judgment debtor would then have an incentive to appeal even if there is no merit to the appeal; such a delay, of course, may make it less likely the judgment creditor will later be able to find the judgment debtor's assets.

There is an exception to this exception, though.  Judgment amounts that are for "costs of suit" only are stayed despite the rule noted above.  If a party makes a successful offer under Code of Civil Procedure section 998, i.e., a reasonable offer to compromise is made and then rejected, the enforcement of costs awarded to a successful offeror under section 998 is stayed upon filing a notice of appeal. (Id.)

How to appeal without paying the judgment creditor 

A judgment debtor is subject to attempts to seize their assets, garnish their wages, or place a lien upon their accounts if the judgment is not stayed pending appeal.  Because it may be difficult to recover funds once paid to the judgment debtor, the judgment creditor should explore the options below to avoid payment of the judgment while the appeal is pending.

1. Posting a bond or undertaking by an "admitted" or "personal" surety

This is most often done by posting a bond by "an admitted surety insurer," meaning a "surety" - someone who will post the bond and then be responsible for payment of the judgment if the appeal is not successful - that is licensed in California. (Id.)  The bond amount would be 150% of the judgment. (Id.)  The additional amount beyond the judgment itself may be necessary to cover the "simple interest" upon the judgment at the annual rate of ten percent.

It goes without saying that an admitted surely will require payment in some percentage of the bond or undertaking to provide this service.

The posting of a bond or undertaking may also be done by a friend or relative, i.e., a "personal surety." (Id.)  The amount posted by the personal surety must be 200% of the judgment. (Id.)  

The requirements for being a personal surety are found in Code of Civil Procedure section 995.510 and include 1) being a resident of California, and 2) having net assets in California that exceed 200% of the judgment.  Neither an attorney nor the "principal," the judgment debtor, may act as a personal surety. (Id.) 

2. Depositing money with the Court

If one cannot obtain a bond or undertaking and nevertheless wishes to appeal, does one have to pay the judgment directly to the creditor to avoid seizure of assets?  The answer is no:  the judgment debtor may deposit money or negotiable securities directly with the Court. (Code of Civil Procedure section 917.1)

The complete text of section 917.1 is quoted below:

917.1. (a) Unless an undertaking is given, the perfecting of an appeal shall not stay enforcement of the judgment or order in the trial court if the judgment or order is for any of the following:
(1) Money or the payment of money, whether consisting of a special fund or not, and whether payable by the appellant or another party to the action.
(2) Costs awarded pursuant to Section 998 which otherwise would not have been awarded as costs pursuant to Section 1033.5.
(3) Costs awarded pursuant to Section 1141.21 which otherwise would not have been awarded as costs pursuant to Section 1033.5.
(b) The undertaking shall be on condition that if the judgment or order or any part of it is affirmed or the appeal is withdrawn or dismissed, the party ordered to pay shall pay the amount of the judgment or order, or the part of it as to which the judgment or order is affirmed, as entered after the receipt of the remittitur, together with any interest which may have accrued pending the appeal and entry of the remittitur, and costs which may be awarded against the appellant on appeal. This section shall not apply in cases where the money to be paid is in the actual or constructive custody of the court; and such cases shall be governed, instead, by the provisions of Section 917.2. The undertaking shall be for double the amount of the judgment or order unless given by an admitted surety insurer in which event it shall be for one and one-half times the amount of the judgment or order. The liability on the undertaking may be enforced if the party ordered to pay does not make the payment within 30 days after the filing of the remittitur from the reviewing court.
(c) If a surety on the undertaking pays the judgment, either with or without action, after the judgment is affirmed, the surety is substituted to the rights of the creditor and is entitled to control, enforce, and satisfy the judgment, in all respects as if the surety had recovered the judgment.
(d) Costs awarded by the trial court under Chapter 6 (commencing with Section 1021) of Title 14 shall be included in the amount of the judgment or order for the purpose of applying paragraph (1) of subdivision (a) and subdivision (b). However, no undertaking shall be required pursuant to this section solely for costs awarded under Chapter 6 (commencing with Section 1021) of Title 14.

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Attorney disqualification is improper remedy for failure to produce documents and respond to subpoena

The Second District, Division Seven, has ruled that while an attorney who fails to produce documents and/or produce a privilege log may be subject to sanctions, or perhaps even referral to the State Bar, a trial court erred when it instead disqualified said counsel from representing one of the parties. (Sunholm v. Hollywood Press Association (February 27, 2024) B324842.)  This is true even though the document withheld may have contained the other party's privileged information and, further, the to-be disqualified counsel was less than forthright about whether he currently possessed privileged material.

In Sundholdm privileged documents were accidentally filed and served upon counsel for plaintiff, who had sued the Holywood Foreign Press Association after he was expelled.  HFPA mistakenly attached a draft copy of its by-laws to its complaint notwithstanding that these by-laws were marked as attorney-client privileged material.  HFPA made an ex parte application to strike these by-laws from the record, which request was granted.  An amended complaint was then filed with the final version of the by-laws attached, as these did not contain any privileged material.  

Counsel Quinto of One LLP, attorney for plaintiff Sundholm, was then the subject of a motion to disqualify brought by the HFPA after it was alleged that he had, inter alia, 1) kept a copy of the privileged material, and 2) failed to respond to a deposition subpoena to produce documents including the privileged material.  This motion to disqualify of HFPA was made alongside its motion to compel production of the document which Quinto possessed and coyly said might be privileged.  Sundholm then sought to dismiss the remainder of his complaint against HFPA to avoid either motion being granted.  

Wendy W. Y. Chang, Judge presiding of the Superior Court of Los Angeles County, found the court lacked jurisdiction to consider the motion to compel due to the dismissal of the remainder of the complaint. The trial court nonetheless held it could rule upon the motion to disqualify and granted said motion.

The appellate court overturned the trial court’s grant of the motion to disqualify, not because it endorsed Quinto’s conduct, but because such was not the proper remedy for Quinto’s action.  In an opinion written by Justice Feuer, the court held:

We agree with the trial court that Quinto improperly refused to produce documents in response to a subpoena from HFPA seeking HFPA documents in Quinto’s possession that were privileged or to provide a privilege log. But disqualification of an attorney affects a party’s right to counsel of choice, and it should not be used to punish an attorney for improper conduct. Quinto’s conduct could have been addressed by an award of sanctions or, if appropriate, reporting the conduct to the State Bar of California. The drastic remedy of disqualification of counsel is appropriate only where the attorney improperly or inadvertently received information protected by the opposing party’s attorney-client privilege, the information is material to the proceeding, and its use would prejudice the opposing party in the proceeding. Here, there was no showing the HFPA documents would prejudice HFPA in the proceeding. We reverse. (Id., p. 2.)

Key to the court’s finding the trial court erred was the drastic nature of the remedy of disqualification of counsel.  The Second District explained disqualification is appropriate only where the following test is met: 1) opposing counsel improperly or inadvertently receives information protected by the opposing party’s attorney-client privilege, 2) the information is material to the proceeding itself, and 3) use of such by opposing party would result in actual prejudice of party seeking disqualification.  HFPA, however, could not establish it suffered prejudice from the retention of the privileged material given the suit against it was dismissed.

Analysis: mistakes — whether inadvertent or intentional — were made by counsel for both parties

Counsel for HFPA — Robert Ellison— admitted that a draft copy of the by-laws which included attorney-client privileged information was filed with the Court and served on opposing counsel.  Though swiftly corrected, this was a potential breach of the duty of due care owed to the client, necessitating the ex parte application to strike this matter.

At the same time, counsel for Quinto failed to either produce the privileged document or produce a privilege log detailing what document was being withheld.

Unresolved ethical issues, including “back ups” of information which should be "returned"

The Court of Appeal found that because HFPA could not establish prejudice from the retention of the privileged information, it did not need to consider whether Quinto acted unethically.  However, as the Court of Appeal explained at footnote six, the scenario in Sundholm implicates the ethical duty of counsel to disclose and possibly return inadvertently-disclosed privileged material:   

              

Pursuant to State Fund, supra, 70 Cal.App.4th at pages 656 to 657, “When a lawyer who receives materials that obviously appear to be subject to an attorney-client privilege or otherwise clearly appear to be confidential and privileged and where it is reasonably apparent that the materials were provided or made available through inadvertence, the lawyer receiving such materials should refrain from examining the materials any more than is essential to ascertain if the materials are privileged, and shall immediately notify the sender that he or she possesses material that appears to be privileged. The parties may then proceed to resolve the situation by agreement or may resort to the court for guidance with the benefit of protective orders and other judicial intervention as may be justified. We do, however, hold that whenever a lawyer ascertains that he or she may have privileged attorney-client material that was inadvertently provided by another, that lawyer must notify the party entitled to the privilege of that fact.” (See Rico v. Mitsubishi Motors Corp. (2007) 42 Cal.4th 807, 817-818 [adopting the State Fund holding and extending it to material protected by the work product doctrine].) 

The opinion therefore does not provide sufficient guidance to say with certainty whether or not Quinto acted unethically, instead merely hinting that he may have.  The appellate court also did not discuss the issue of what is to occur after a party notifies the other party it has inadvertently received privileged material.  

In the analog era, of course, the answer was often that the party “returns” the privileged material to the party who inadvertently disclosed such. As California Rules of Professional Responsibility, Rule 4.4, comment [1] states:

[1] If a lawyer determines this rule applies to a transmitted writing,* the lawyer should return the writing* to the sender, seek to reach agreement with the sender regarding the disposition of the writing,* or seek guidance from a tribunal.* (See Rico v. Mitsubishi (2007) 42 Cal.4th 907. . . .

But what does this mean in the digital era?  

Even if a document is “returned” to its sender, it most likely has already been scanned.  Moreover, even if it has ostensibly been “deleted,” a copy of the privileged material may be saved on a local or remote backup server.

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Short take-away -- "friends with benefits" may not may not qualify as a "dating relationship" under California law

A "friends with benefits" relationship may or may not qualify as a "dating relationship" under California law for purposes of application of domestic violence law. (M.A. v. B. F. (February 5, 2024) G061598.)  The Fourth District Division Three summarized the issue and its holding as follows:

We are asked here to determine whether a relationship characterized in modern parlance — and by the plaintiff in this case — as “friends with benefits” constitutes a dating relationship under Family Code section 6210, so as to support a tort claim for domestic violence. Whether such a dating relationship exists is inherently a fact-intensive inquiry, not susceptible to resolution based on shorthand labels or descriptors. We therefore do not hold a “friends with benefits” relationship is necessarily a dating relationship or that it can never be one. We simply conclude, on the specific record before us, substantial evidence supports the trial court’s finding that the relationship between plaintiff M.A. and defendant B.F. was not a dating relationship within the meaning of the relevant statutes. We affirm. (Id., pp. 1-2.)

This issue arises because California's Civil Code section 1708.6(a) provides the tort of "domestic violence" requires a "relationship."  Further, Penal Code section 13700 defines domestic violence to include "dating or engagement relationship" and Family Code section 6210 has a similar definition.

The majority in M.A. affirmed the trial court's judgment in favor of B.A. under a "substantial evidence" standard of review, showing deference to its review of the evidence.  It therefore found the trial court had the discretion to find, or, in the case here, to not find, a "friends with benefits" situation involved a "relationship," noting "different inferences" could be drawn from the facts. (Id., p. 13.)  The majority also noted section 6210 uses the phrase "frequent, intimate associations” but does not define such.

Justice Sanchez dissented from the majority opinion written by Justice Gooding.  The dissent concluded that under the facts here plaintiff M.A. fell under "the category of victims the law was meant to protect" no matter the on-and-off nature of the encounters between her and defendant. (Id., p. 6.)

What the opinion does not explain

It is unclear from the record here why the plaintiff did not also bring a tort claim for assault and battery or other related torts, which claims do not require she prove the parties were in a "relationship."  It is, for example, unclear from the opinion whether such a claim would be time-barred.  Footnote seven only states that:

We note M.A. had remedies available to her under the law to seek redress for her injuries, including tort claims against B.F. for assault and battery. 

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Short take-away: Release by bicycle rider absolved city of liability for injury from pothole

 

The First District has held that under California law a municipality may be absolved of liability by a release signed by a participant in a bicycle ride. (Ty v. White (Feb. 13,2024) A164483.)  The allegation, of course, was that the city failed to maintain the roadway:

Plaintiff Ty Whitehead sued defendant City of Oakland for injuries he suffered after his bicycle hit a pothole during a training ride for the AIDS LifeCycle fundraiser. Prior to the training ride, plaintiff signed an agreement releasing the “owners/lessors of the course or facilities used in the Event” from future liability. The trial court granted defendant’s motion for summary judgment, concluding the release was enforceable. Plaintiff appeals, arguing the release was invalid because it concerned a matter of public interest. (Id., p. 1.)

The appellate court affirmed the grant of summary judgment despite plaintiff's claim the release violated California's Civil Code section 1668,  barring the effect of a release where the transaction implicates the "public interest."  The Ty court rejected this argument, noting that this was not analogous to a release imposed by a charitable hospital, but, rather, involved an activity that was purely voluntary:

In this case, the overall transaction was plaintiff’s signing of a release of liability so that he could participate in the AIDS LifeCycle fundraiser and its organized training rides on defendant’s streets. We cannot, as plaintiff urges, ignore this aspect of this case. Likewise, it cannot reasonably be concluded that a cycling fundraiser is an essential service such that plaintiff was robbed of his free will in deciding whether to sign the release. (Id., p. 12.)

The plaintiff also argued the release was unenforceable because the defendant was grossly negligent and such cannot be waived by a release. The First District, however, found the release was valid because the city's alleged mistakes did not constitute gross negligence, i.e., "there is no evidence that these select mistakes substantially or unreasonably increased the inherent risk of the cycling activity at issue." (Id., p. 20.)

This opinion is of import because it not only reiterates the viability of agreements releasing municipalities from harm, but also because upholding the grant of summary judgment encourages trial courts to give motions for summary judgment and adjudication based on a release serious attention.  A contrary result from the appellate court, finding there were "triable issues" as to the effect of the release and that plaintiff was entitled to proceed to trial, would have discouraged trial courts from ruling a release is valid as a matter of law.

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Short take-away: PAGA action cannot be dismissed solely on manageability grounds

 

Short take-away:  Trial courts do not have inherent power to strike PAGA claims because they are supposedly "unmanageable"

The California Supreme Court has resolved a split of authority between appellate districts as to whether a trial court has inherent power to strike a Private Attorney General Act claim on grounds it is not manageable. (Estrada v. Royal Carpet Mills (January 18, 2024) S274340.)   Such PAGA claims are made under the "Labor Code Private Attorneys General Act of 2004," found at Labor Code section 2698, et seq.

Plaintiff Estrada filed suit, asserting Royalty violated Labor Code provisions requiring that it provide required break and rest periods, as well as seeking PAGA penalties for these Labor Code violations.  Plaintiff filed amended complaints realleging the individual claims as a class action.  The trial judge, the Hon. Randall J. Sherman, of the Orange County Superior Cout, held a bench trial as to the issue of individual vis a vis class claims and, though a class had already been certified, issued an order decertifying the class due to inconsistent individual claims, dismissing the PAGA claim, and entering a judgment of dismissal.

The Fourth District, Division Three, reversed the trial court and the Supreme Court granted review.  Chief Justice Guerrero wrote for a unanimous court and explained:

We now conclude that trial courts lack inherent authority to strike PAGA claims on manageability grounds. In reaching this conclusion, we emphasize that trial courts do not generally possess a broad inherent authority to dismiss claims. Nor is it appropriate for trial courts to strike PAGA claims by employing class action manageability requirements. And, while trial courts may use a vast variety of tools to efficiently manage PAGA claims, given the structure and purpose of PAGA, striking such claims due to manageability concerns — even if those claims are complex or time-intensive — is not among the tools trial courts possess. (Id., p. 2; footnote omitted.)

The Supreme Court explained that while trial courts do have inherent authority to establish procedures where no procedure exists, this does not extend to a broad power to dismiss claims.  Estrada  thus quoted from Weiss v. People ex rel. Dept. of Transportation (2020) 9 Cal. 5th 840, at 865, on this point:

While "[t]here may be cases in which the use of a nonstatutory motion procedure to dismiss a cause of action before trial is called for, . . . courts should be wary of such requests.” (Id., p. 8.)

Therefore, Estrada concluded that the requirement of "manageability" present in class action suits did not apply to PAGA claims. (Id., p. 20-22.)

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2024 California Supreme Court preveiw

2024 brings us the second year of service by California's new Chief Justice

On January 2, 2023, Chief Justice Patricia Guerrero was sworn in as the 29th Chief Justice of California.  She followed former Chief Justice Tani Cantil-Sakauye, who was regarded as a strong leader who brought stability and consistency to the administration of justice.  2024 will therefore be Chief Justice Guerrero's second year of service.

Predictions for 2024

If we were to hazard a prediction as to the ideology and direction of the Court in 2024, we would predict that its stability and consistency would continue.  In fact, there is only one remaining Republican appointee, Justice Corrigan, who was appointed by Governor Schwarzenegger in 2005.

More to the point, given the fact that Mr.  Schwarzenegger hardly governed as a political conservative, it appears the court is entirely moderate to left of center in terms of ideology.  There have been no notable four to three decisions in recent memory and the Court has become known for its unanimous seven to zero decisions. 

Key rulings likely to involve the scope of protections for employees

In 2024 the Supreme Court has already issued an opinion regarding whether a trial court may dismiss a Private Attorney General (PAGA) claim related to meal and rest breaks on "manageability" grounds. (Estrada v. California Commerce Club).  We will discuss Estrada in a future post, but it is worth noting this is not the only case relating to employment pending before the Supreme Court and, indeed, other cases with employment law issues may be granted review.  

The question then becomes:  will counsel for employees continue their recent success?  We will see, and, in the meantime, note that briefs of cases that have or will soon be argued are available here. 

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