Hubbard v. Plaza Bonita, LP et al

Filing 218

ORDER After 188 Order to Show Cause Hearings: on or before 6/27/11, Flava's counsel shall submit to the Court, for in camera review, his billing statements for all work and expenses incurred that directly resulted from Plaintiff's counsel 's submitting to him a proposed settlement agreement in this case which purported to bear Barbara's genuine signature, but was not, in fact, Barbara's genuine signature. Signed by Magistrate Judge William V. Gallo on 6/13/11.(All non-registered users served via U.S. Mail Service)(lmt)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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BARBARA HUBBARD,

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Plaintiff,

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v.

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PLAZA BONITA, L.P., et al.,

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Defendants.

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Civil No. 09-1581-JLS(WVG)
ORDER AFTER ORDER TO
SHOW CAUSE HEARINGS

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I

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PROCEDURAL BACKGROUND

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On

July

22,

2009,

Plaintiff

Barbara

Hubbard

(hereafter

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“Plaintiff” or “Barbara”), filed a Complaint against the Plaza

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Bonita Shopping Center, and most, if not all, of the tenants at the

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shopping center.1/ The Complaint alleges that all of the named

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Defendants violated the Americans With Disabilities Act (hereafter

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“ADA”).

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After the Complaint was filed, Plaintiff settled her action

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with numerous named Defendants. On February 25, 2010, the Court

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1/

Plaintiff’s Complaint names at least 44 Defendants.

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09cv1581

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conducted a Settlement Disposition Conference with the remaining

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Defendants.

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appeared in person at the conference on behalf of Plaintiff. David

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Peters appeared in person at the conference on behalf of Defendant

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Flava Enterprises (hereafter “Flava”). Jonathan Block appeared by

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telephone at the conference on behalf of Hot Topic. Tony Bucchignani

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appeared by telephone on behalf of Defendant Westfield America. At

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that time, Defendants Hot Topic and Westfield America, inter alia,

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had entered into settlement agreements with Plaintiff, but Defendant

Lynn J. Hubbard III (hereafter “Plaintiff’s counsel”),

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Flava had not.

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Court that Plaintiff had passed away on November 13, 2009.2/

At the conference, Plaintiff’s counsel informed the

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After the conference, the Court directed Plaintiff’s counsel

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to file a Notice of Death pertaining to Plaintiff, pursuant to

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Federal Rule of Civil Procedure 25. On March 17, 2010, Plaintiff’s

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counsel filed the Notice of Death of Plaintiff. The Notice states

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that Plaintiff passed away on November 13, 2009.

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On March 29, 2010, Plaintiff’s counsel filed a Motion to

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Substitute

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Hubbard, II (hereafter “Lynn”).3/

Barbara

with

Barbara’s

surviving

husband,

Lynn

J.

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On May 12, 2010, Plaintiff’s counsel filed an Ex Parte Motion

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to Dismiss this action as to the remaining Defendant Flava. On June

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1, 2010, Defendant Flava filed an Opposition to the Motion to

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Dismiss and requested that an Order To Show Cause (hereafter “OSC”),

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2/

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3/

Flava’s counsel received a proposed settlement agreement from
Plaintiff’s counsel. However, Flava’s counsel suspected that someone
other than Plaintiff may have signed the proposed settlement
agreement because it was faxed to him on December 9, 2009, nearly a
month after Barbara had died.
Plaintiff’s counsel was the son of Barbara and Lynn.

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hearing be held regarding the potential falsification of Barbara’s

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signature, after her death, on the settlement agreement with Flava.

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On June 2, 2010, the District Judge assigned to this case

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denied Plaintiff’s counsel’s Motion to Substitute Barbara with Lynn

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because, by that time, Lynn had also passed away.4/

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On June 23, 2010, Flava’s Motion for an OSC was granted. The

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Order Granting the Motion for an OSC directed Plaintiff’s counsel to

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address

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Plaintiff’s counsel and Flava filed briefs regarding the issues that

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topics

raised

by

Flava’s

Motion.

Thereafter,

the Court directed to be addressed.

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several

On June 28, 2010, the District Judge assigned to this case
referred the OSC to the undersigned.

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On October 12, 2010, the Court held a hearing on the OSC.5/

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Prior to the hearing, Plaintiff’s counsel filed his own declaration,

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supported by four of his other clients, that stated that the

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standard operating procedure for (Plaintiff’s counsel) and the Disabled Advocacy Group is for clients
to sign a document - it’s called ‘(S)ignature
(A)greement’ and all it characterizes is basically a
special power of attorney that allows the Disabled
Advocacy Group to execute any kind of settlement
agreement and/or endorse any settlement check or
document in connection with the specific lawsuit in
question in which the client is being represented...
(OSC Hearing Transcript, October 12, 2010 at
12)(emphasis added).6/

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4/

Plaintiff’s counsel informed the Court that on March 31, 2010, Lynn
passed away.

5/

The original OSC hearing was set for August 24, 2010. However,
counsel requested extensions of time to file the requested briefing.
Therefore, the Court rescheduled the OSC hearing to October 12,
2010.

6/

The “Signature Agreement” states: “I hereby agree that the Disabled
Advocacy Group, APLC has my permission to execute any kind of
settlement agreement and/or endorse any settlement check or document

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(continued)
in connection with my Americans with Disabilities Act Lawsuit
against [name of defendant(s)].” The Court refers to the “Signature

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Pursuant to the Power of Attorney, the Court found that the
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signature on the Settlement Agreement provided to Mr. Peters on
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behalf of Flava, was not in fact, the signature of Barbara.(OSC
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Hearing Transcript, October 12, 2010 at 12).7/

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At the hearing, the Court requested that counsel file further
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briefing on several topics discussed at the hearing. Also, the Court
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continued the OSC hearing to January 27, 2011. Thereafter, counsel
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filed the requested further briefing.
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On January 27, 2011, the Court held a continued OSC hearing.
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At the hearing, the Court ordered Plaintiff’s counsel to file
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Supplemental Declarations regarding the authentication of Barbara’s
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signature. On February 10, 2011, the Supplemental Declarations were
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filed with the Court.
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On March 24, 2011, the District Judge assigned to this case
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denied Plaintiff’s Ex Parte Motion to Dismiss without prejudice,
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pending the issuance of this Order.
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II
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ISSUES RAISED AT THE OSC HEARING
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Agreement as “Power of Attorney” or “POA.”

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The Power of Attorney signed by Barbara in connection with this
action is attached to the Declaration of Lynn Hubbard III in
Response to Order To Show Cause, filed August 3, 2010, Exh. D. The
Power of Attorney signed by Barbara in connection with another
lawsuit, Hubbard v. Otay Ranch Town Center ,is attached to the
Declaration of Lynn Hubbard III in Response to Order To Show Cause,
filed August 3, 2010, Exh. E. The Court notes that the signatures on
Exhs. D and E appear to be different.

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7/

The Court notes that Plaintiff’s counsel’s Declaration directly
contradicts his February 25, 2010 statement to the Court that
“Barbara had signed numerous blank settlement agreements (prior to
her death).” The February 25, 2010 statement was made during a
Settlement Disposition Conference that was not on the record and was
not recited under oath.

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The June 23, 2010 Order directed Plaintiff’s counsel to
address the following topics:

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1. Why he should not be required to present to the Court

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documents and evidence that Plaintiff signed Exh. A,8/ attached to

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Defendant’s Supplemental Opposition to Plaintiff’s Ex Parte Motion

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to Dismiss and Request for Order To Show Cause (Doc. #182);

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2. Why he should not be required to provide to the Court
additional known and genuine signatures of Plaintiff;

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3. Why he should not be required to identify appearances that

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Plaintiff personally made in this Court and any documents signed in

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connection with those appearances;

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4. Why a hearing should not be held as to whether the

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signatures of Plaintiff in some or all of the settlement agreements

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in this matter have been falsified, and if so, what actions are

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appropriate to achieve accountability and deter those who would

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engage in this conduct;

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5.

Why

he

should

not

be

sanctioned

for

vexatious

and

unreasonable multiplication of legal proceedings for:

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(a)

prolonging

the

litigation

in

this

matter

by

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demanding settlements involving commitments to make changes to

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settlement agreements after Plaintiff’s death, including provisions

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in settlement agreements awarding attorneys fees even if the changes

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were not made;

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(b) failing to timely disclose to the Court Plaintiff’s
death;

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8/

Exh. A. is identified as containing a purportedly known genuine
signature of Barbara.

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6. Why his conduct should not be reported to the State Bar of
California;

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7. Why he and his law firm (Law Offices of Lynn Hubbard III,

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Disabled Advocacy Group, APLC) and the attorneys involved in this

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matter should not be disqualified from further representation of

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parties in litigation matters in this Court.

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A. Plaintiff’s Counsel’s Factual Response To The OSC

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On August 3, 2010, in response to the OSC, Plaintiff’s

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counsel described the circumstances under which Barbara signed the

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settlement agreement with Flava Enterprises:

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On November 11, 2009, Plaintiff’s counsel met with Barbara,

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who was hospitalized at the time, and told her that she was too

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frail to continue prosecuting ADA cases.

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him to settle her last case for whatever he could and give the

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proceeds to his father (Barbara’s husband, Lynn).

Barbara agreed and told

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On November 12, 2009, Plaintiff’s counsel instructed his

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assistant, Kaina Schukei, to offer to settle with Defendant Hot

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Topic. Hot Topic counter-offered and the counter offer was accepted.

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On November 13, 2009, Barbara passed away. She did not have

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a will. Lynn was Barbara’s sole beneficiary under California law and

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could decide what to do with her case. Lynn instructed Barbara’s

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counsel to “finish up” the pending lawsuit.

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Over the next six weeks, Plaintiff’s counsel finalized, or

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attempted to finalize, settlements with the remaining Defendants in

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the case. However, neither David Peters (hereafter “Peters”), nor

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his client Flava, signed the Settlement Agreement and when pressed

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to do so, cited Barbara’s death9/ and his client’s unwillingness to

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make changes to its facility because her lawsuit was moot.

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On

March

15,

2010,

David

Chamberlin

(then

employed

by

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Plaintiff’s counsel) sent Peters a letter informing Peters that Lynn

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intended to substitute himself as Plaintiff under Fed. R. Civ. Pro.

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25(a)(1), and was willing to agree to the original settlement.

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Peters did not respond.

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On March 29, 2010, Lynn moved to substitute himself as
Plaintiff. However, on March 31, 2010, Lynn passed away.

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Plaintiff’s counsel and his staff immediately asked Peters to

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stipulate to dismiss the lawsuit because there was no Plaintiff left

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in the case and no other person to substitute for Plaintiff. Most

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defense attorneys probably would have jumped at the opportunity to

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get out of the litigation. However, Peters declined the invitation.

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Five weeks later, Plaintiff’s counsel requested dismissal of

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this action because the action was moot.

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B. Flava’s Response to Plaintiff’s Counsel’s Factual Response
To The OSC
Flava objected to Plaintiff’s counsel’s recitation of the

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facts. He asserted that settlement offers which had been made to

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Flava and Hot Topic had not been accepted prior to Barbara’s death.

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Instead, Flava and Hot Topic filed documents with the Court which

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show that the offers for settlement were accepted after Barbara’s

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death.

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The Certificate of Death filed by Plaintiff’s counsel states

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that Barbara passed away on November 13, 2009 at 12:55 PM. On

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November 13, 2009 at 1:25 PM, Flava’s counsel preliminarily accepted

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Counsel for Flava learned of Barbara’s death, not through any
communication initiated by Plaintiff’s counsel, but coincidentally
from reading an article in The San Diego Reader newspaper.

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Plaintiff’s counsel’s offer for settlement. After several changes

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were made to the settlement agreement, on December 30, 2010, Peters

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informed Plaintiff’s counsel that Flava agreed to sign the settle-

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ment agreement without any further changes. Plaintiff’s counsel did

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not respond to Peters.

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C. Hot Topic’s Position Regarding Settlement Of The Case

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Hot Topic states, via the Declaration of Donna S. Gin, its

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attorney:
On November 12, 2009, I received a letter via facsimile from (Plaintiff’s counsel’s) office offering to
settle the case against Hot Topic... I verbally
countered Plaintiff’s offer... sometime on or after
November 16, 2009. Our counter-offer was accepted
verbally by (Plaintiff’s counsel’s) office on or
around December 1, 2009. On that day, I was told by
Kaina
Schukei,
(Plaintiff’s
counsel’s)
senior
paralegal that she would send over a draft settlement
agreement the following day. Until that point, we
had not discussed any of the terms of the settlement
agreement except for the dollar amount...
On December 7, 2009, Ms. Schukei responded (to me)
via e-mail that our changes (to the settlement
agreement) were acceptable to Plaintiff’s counsel and
that she would get me signatures shortly.
When Ms. Schukei told me she would “get signatures,”
I assumed she meant she would get the signatures of
Plaintiff Barbara and her attorney Lynn Hubbard
(III), as those were the only signature lines on the
agreement besides Hot Topic’s.
On December 8, 2009, I received via facsimile a copy
of the settlement agreement which had a signature in
the blank for Barbara Hubbard. I believed the signature on the document was indeed that of Barbara
Hubbard because I had no reason to believe otherwise.
I forwarded this document to my client for signature...
Hot Topic was dismissed from this action on or about
January 11, 2010.
Even with all of the foregoing communications, no one
from (Plaintiff’s counsel’s) office ever informed me
of the death of Plaintiff Barbara Hubbard, nor did I
become aware of the same until long after Hot Topic
was dismissed from the action. Had I known about
(Barbara’s) death at any time during the negotiation
of the settlement, I would have immediately halted
settlement discussions and notified my client of this
development.

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(Declaration of Donna S. Gin re: Plaintiff’s Ex Parte Motion
to Dismiss at 2-3)(emphasis added).

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D. October 12, 2010 OSC Hearing
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At the OSC hearing, the Court discussed with counsel the
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topics enumerated in Section II of this Order. The Court was
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satisfied with Plaintiff’s counsel’s explanations regarding several
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of the topics noted.10/ However, the authenticity of Barbara’s

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signature on the Power of Attorney, and the survivability of the
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Power of Attorney after Barbara’s death11/ continued to be issues

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that required further briefing.

Therefore, the Court ordered

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counsel to address those issues in further briefing.

A continued

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OSC hearing was held on January 27, 2011.
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E. January 27, 2011 OSC Hearing
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Prior to the January 27, 2011 hearing, counsel submitted
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further briefing required by the Court on October 12, 2010. At the
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hearing, counsel were given the opportunity to argue their respec16
tive positions regarding the authenticity of Barbara’s signature and
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the survivability of the Power of Attorney after Barbara’s death.
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III
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While the Court initially and tentatively was satisfied with
Plaintiff’s counsel’s explanation, and was willing to give him “the
benefit of the doubt,” it became apparent after full and final
reflection of the entire record and the case law presented, that
Petitioner’s counsel did not deserve, nor was he entitled to enjoy,
the Court’s continued willingness to give him the “benefit of the
doubt.”

11/

In addition to the issues noted above, the following issues also
remained unresolved: The imposition of sanctions on Plaintiff’s
counsel for his conduct in this litigation, whether the Court should
report his conduct in this litigation to the State Bar of
California, and whether Plaintiff’s counsel and his law firm should
be disqualified from further representation of parties in litigation
matters in this Court.

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ANALYSIS

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A. Documented Contradictions

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Prior

to

the

February

25,

2010

conference,

Plaintiff’s

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counsel had not informed any defendant in this case, nor the Court,

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that Plaintiff had passed away over three months earlier on November

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13, 2009. Additionally, Plaintiff’s counsel informed the Court of

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the following:

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•

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that he “heard (his) Mom was gravely ill,” leaving the Court
with the distinct impression “that Plaintiff’s counsel did

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not

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informed by someone else.”(OSC Hearing Transcript, October

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12, 2010, at 5);

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•

personally

observe

his

mother’s

condition,

but

was

that Chris Kohler (another of Plaintiff’s counsel’s clients)

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or possibly Plaintiff’s counsel’s father, Lynn, may substi-

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tute in as Barbara’s successor in interest, leading the Court

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to believe that no formal decision had yet been made. (OSC

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Hearing Transcript, October 12, 2010, at 8);

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•

that “Barbara Hubbard had signed numerous blank settlement

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agreements (prior to her death),” leading the Court to

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believe that the signature on the settlement demand and

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agreement provided to Mr. Peters on behalf of Flava was in

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fact “the genuine signature of Mrs. Hubbard, Barbara Hub-

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bard.” (OSC Hearing Transcript, October 12, 2010, at 12).

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However, all of the representations were directly contra-

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dicted by Plaintiff’s counsel’s sworn declaration filed on August 3,

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2010, in which he stated:

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•

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He personally observed his mother’s fragile condition at her
hospital bedside at which time she instructed him to settle

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the case quickly. (Plaintiff’s counsel’s Declaration at

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paras. 3-10; OSC Hearing Transcript, October 12, 2010, at 5-

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6);

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•

As early as November 17, 2009, but certainly no later than

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December 8, 2009, Lynn had assumed “unofficial”12/ control of

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this

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“ratifying” settlement agreements. (Plaintiff’s counsel’s

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Declaration at paras. 17-21; OSC Hearing Transcript, October

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12, 2010, at 6-10). Nowhere in the Declaration does Plain-

lawsuit

upon

Barbara’s

passing

and

that

10

tiff’s

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Lynn

was

considered as Barbara’s successor in interest.

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•

counsel

even

mention

that

Mr.

Kohler

was

being

Barbara did not, in fact, sign numerous blank settlement

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agreements, but rather executed a power of attorney giving

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Plaintiff’s counsel authority to sign a settlement agreement

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on her behalf, which was standard and customary practice of

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Plaintiff’s

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Declaration at paras. 34-36; OSC Hearing Transcript, October

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12, 2010, at 11-12).

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counsel’s

law

firm.

(Plaintiff’s

counsel’s

B. Authenticity of Barbara’s Signature

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At the January 27, 2011 hearing, the Court found that on the

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record presented to it at that time, Plaintiff’s counsel had failed

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to

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Attorney. (OSC Hearing Transcript, January 27, 2011, at 4-9).

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Therefore, the Court ordered Plaintiff’s counsel to file supplemen-

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tal declarations of two of Barbara’s family members to properly

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authenticate Barbara’s signature. On February 10, 2011, Plaintiff’s

properly

authenticate

Barbara’s

signature

on

the

Power

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”Unofficial” because no Motion for Substitution of Plaintiff had
been filed.

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counsel filed the Supplemental Declarations of Douglas Hubbard and

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Elora Hubbard, which properly authenticated Barbara’s signature.13/

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C. Survivability of Power of Attorney14/

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It is an elementary rule of law that the relation of attorney

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and client is terminated by the death of the client...” Mallory v.

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Rittenhouse, 99 Cal. App. 96, 104 (1929); see also Lanza v. Bank of

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America National Trust & Savings Assoc., 229 Cal. App. 2d 720, 724

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(1964). “Generally, a power of attorney terminates on the death of

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the principal. People v. Fenderson, 188 Cal. App. 4th 625, 634

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(2010); see also California Probate Code § 4152(a)(4); Rest. 3d

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Agency §3.06 and 3.07.

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In Mallory, the court held that the attorney-client relation-

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ship is terminated on the death of the client, “but an exception is

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made in the case of a special contract of employment, such as a

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specific contract to conduct a suit to final judgment, or some

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agreement on a fee for the entire case.” Mallory at 104. Mallory was

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cited approvingly in Lanza, supra. In Mallory, the exception was

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applied to a “contract to conduct a suit to final judgment,” which

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disposed of the whole case.

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Plaintiff’s counsel argues that Barbara’s oral instructions

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to him were that he was to immediately settle the case for whatever

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he could get and give the funds to his father, Lynn. Therefore,

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Barbara’s oral instructions created a “specific contract to bring

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13/

Flava’s objection to the Supplemental Declarations of Douglas
Hubbard and Elora Hubbard are overruled. Flava’s request for an
expert handwriting analysis of Barbara’s signature is denied.

14/

As previously noted, someone other than Barbara signed the
Settlement Agreement sent to Peters, pursuant to the Power of
Attorney. As noted in footnote 7, Barbara did not sign numerous
blank settlement agreements prior to her death, as Plaintiff’s
counsel originally stated to the Court.

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(this) suit to final judgment,” as quickly as possible. For this

2

reason,

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Barbara’s death.

the

attorney-client

relationship

did

not

terminate

on

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Flava argues that the Mallory exception does not apply

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because the attorney-client relationship creates an agency relation-

6

ship, wherein the attorney acts as an agent for the client. To

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support this position, Flava cites Stoll v. Stoll, 5 Cal. 3d 687,

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692 (1936). The Stoll court held that contract liability may survive

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the death of a contractor, but the contractor’s agent’s power to act

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on behalf of the decedent contractor may not survive the decedent’s

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death. Flava’s position is supported by Webster Real Estate v.

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Rickard, 21 Cal. App 3d 612, 616-617 (1972).

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real estate owner-broker contract in which the owner died before the

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property was sold. The court held that death of the owner of the

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property terminated the broker’s agency and the authority of the

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broker to represent the owner in seeking a buyer for the property.

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The court cited the Restatement Second of Agency, which states: “One

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cannot act on behalf of a non-existent person.” Further, an agency

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is terminated by the death of the principal. Estate of Friedman, 20

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Cal. App. 3d 399 (1971); Jay v. Dollarhide, 3 Cal. App. 3d 1001

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(1970) superceded by statute on other grounds; California Civil Code

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§§ 2355(b) and 2356(a).

Webster dealt with a

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As a result, Flava concludes that in this case, the agency

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was created and held for the benefit of Barbara, for her desire that

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she be able to gain barrier-free access to the stores at Plaza

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Bonita. The agency was not created for the benefit of Plaintiff’s

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counsel. As a result of Barbara’s death, the agency terminated and

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Plaintiff’s counsel did not have the authority to act on Barbara’s

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behalf. Consequently, Plaintiff’s counsel had no authority to sign

2

settlement agreements on Barbara’s behalf after her death. The Court

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agrees.

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The Mallory exception may apply if the Court views Plain-

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tiff’s counsel’s acts in settling Barbara’s case, as bringing the

6

suit “to final judgment.”

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judgment,” is obviously different from bringing a case to settle-

8

ment, where a judgment is not entered. Nevertheless, a fair reading

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of Mallory might suggest that bringing a case to “final judgment”

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may be equivalent to ending the case by settlement. However, neither

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Plaintiff’s counsel nor Flava provided the Court with any authority,

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nor

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bringing a case to “final judgment” is the equivalent of ending a

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case by settlement. Therefore, the Court does not adopt the view

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that the two ways of ending a case, as noted above, are equivalent.

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Regardless of whether “final judgment” and “settlement” are

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functional equivalents or whether the attorney-client relationship

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survived Barbara’s death, the Mallory exception does not excuse or

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justify Plaintiff’s counsel’s failure to inform opposing counsel

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that

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agreement was not hers, and that Plaintiff’s counsel was relying on

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Mallory for authority to sign the settlement agreement and bring the

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case to conclusion. In other words, Plaintiff’s counsel’s conduct

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lacked the transparency and candor expected of counsel practicing

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before this Court.

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could

the

Barbara

Court

had

find

died,

However, to bring a case to “final

any

that

authority,

the

that

signature

on

defines

the

whether

settlement

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D. The Appropriateness of Signing Barbara’s Name To The
Settlement Agreement
Even assuming the agency relationship extended beyond

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Barbara’s death, Flava argues that the Mallory exception does not

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support Plaintiff’s counsel’s signing Barbara’s name on an agreement

2

without

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Barbara’s signature.

informing

Flava’s

counsel

that

the

signature

was

not

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Flava goes further by accusing Plaintiff’s counsel of forgery

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of Barbara’s name. It cites to U.S. v. Price, 655 F.2d 958, 960 (9th

6

Cir. 1981), which states that forgery is a:

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“false making, with intent to defraud, of a document
which is not what it purports to be, as distinct from
a document which is genuine but nevertheless contains
a term or representation known to be false.” “A
document signed by a third person using the signature
of another is a forgery...” “Forgery contemplates a
writing which falsely purports to be the writing of
another person than the actual maker...” “Signing
one’s own name with the intent that the writing be
received as written by another person, or impersonating another in the signature of the instrument... or
signing in such a way as to make the writing purport
to be that of another... are all acts of forgery.”
(citations omitted)(emphasis added).

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Therefore, Flava argues that Plaintiff’s counsel’s signing

16

Barbara’s name on settlement agreements, without informing its

17

counsel that the signature on the document was not, in fact,

18

Barbara’s signature, constitutes forgery.

19

Flava goes even farther by accusing Plaintiff’s counsel of

20

committing

21

material information. Estate of Anderson, 149 Cal. App. 3d 336

22

(1983). The fraud need not be completed to establish it. Intent to

23

defraud is required. People v. Russell, 214 Cal. App. 2d 445 (1963).

24

It is not necessary that no actual harm result from the fraud to

25

merit disciplinary action. Resnik v. Cal. State Bar, 1 Cal. 3d 198

26

(1969).

fraud.

Extrinsic

fraud

is

the

failure

to

disclose

27

Flava alleges that it acted upon the signed settlement

28

documents as having Barbara’s genuine signature on them. One of the

15

09cv1581

1

Defendants

2

Barbara, in reliance that Barbara actually signed the settlement

3

agreement. Flava asserts that it incurred significant time and

4

expense in believing the same thing and acting pursuant thereto.

(Hot

Topic),

paid

money

to

settle

its

action

with

5

In Hallinan v. State Bar of Cal., 33 Cal. 2d 246 (1948),

6

defense counsel in that case explicitly requested that plaintiff

7

personally sign a release as part of the settlement of the case.

8

However, the plaintiff’s attorney instead signed the release under

9

a power of attorney to do so, but did not inform opposing counsel

10

that the signature was that of the attorney, not the plaintiff. The

11

court held that an attorney who puts his client’s signature on a

12

release, with the power of attorney to do so, without informing

13

opposing counsel that the signature is not the client’s signature,

14

is deceptive and punishable conduct. The punishable conduct was not

15

that the attorney put his client’s signature on the release, because

16

he had the authority to do so. Rather, the punishable conduct was

17

the failure to inform defense counsel that the signature on the

18

release was not his client’s signature, but his own.15/ Hallinan has

19

been followed for the same purpose and reasoning in Aronin v. Cal.

20

State Bar, 52 Cal. 3d 276, 286-287 (1990).

21

The Court finds that the situation in Hallinan is analogous

22

to the situation presented here. Plaintiff’s attorney in Hallinan

23

had a power of attorney from his client to sign documents on the

24

client’s behalf. The attorney signed the client’s signature on a

25

release and did not inform defendant’s counsel that the signature on

26

the release was not the client’s signature, despite the defendant’s

27
28

15/

In Hallinan, the attorney was punished with a three month suspension
from the practice of law.

16

09cv1581

1

attorney’s request that the client sign the release.16/ The court held

2

that the attorney’s conduct in signing the release on behalf of his

3

client, without informing defense counsel that the signature on the

4

release was not his client’s signature, was deceptive and punishable

5

conduct. The Court noted that the attorney’s signing of his client’s

6

name on the release was not the objectionable conduct. Rather, not

7

informing defense counsel that the signature on the release was not

8

the client’s signature was objectionable.

9

The Court concludes that Plaintiff’s counsel (or someone at

10

his

11

Agreements with Flava and Hot Topic under an expired power of

12

attorney to do so, but without informing Flava’s or Hot Topic’s

13

counsel that he had done so. Plaintiff’s counsel’s conduct in not

14

informing Flava’s and Hot Topic’s counsel that the signatures on the

15

settlement agreements were not, in fact, Barbara’s signature, was

direction)

placed

Barbara’s

signature

on

the

Settlement

16
17
18
19
20
21
22
23
24
25
26
27
28

16/

The fact that defendant’s counsel in Hallinan specifically requested
that the client sign the release is one of the only distinguishing
factors from the situation presented here. In this case, there was
no specific request that Barbara personally sign the Settlement
Agreement. Rather, Flava (and Hot Topic) tacitly understood that
Barbara had personally signed the Settlement Agreements, by viewing
what they believed to be Barbara’s original signature on the
Settlement Agreements, and by relying on communications with
Plaintiff’s counsel’s firm which created and reinforced this false
impression.

17

09cv1581

1

deceptive and punishable conduct. “This was an intentional deception

2

and thus constituted moral turpitude.” Aronin, 52 Cal 3d at 287.17/18/

3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

17/

The Court finds that Plaintiff’s counsel may have violated the
following statutes and rules:
California Business & Professions Code §6106, which states:
The commission of any act involving moral turpitude, dishonesty or
corruption, whether the act is committed in the course of his
relations as an attorney or otherwise, and whether the act is a
felony or misdemeanor or not, constitutes a cause for disbarment or
suspension.
If the act constitutes a felony or misdemeanor, conviction thereof
in a criminal proceeding is not a condition precedent to disbarment
or suspension from practice therefor.
California Rule of Professional Conduct 3-110, which states in
pertinent part:
(a) A lawyer shall not knowingly:
(1) make a false statement of fact or law to a tribunal or fail to
correct a false statement of material fact or law previously made to
the tribunal by the lawyer...
California Rule of Professional Conduct 5-220, which states:
A member shall not suppress any evidence that the member or the
member’s client has a legal obligation to reveal or to produce.
American Bar Association Model Rule of Professional Conduct 3.3,
which states in pertinent part:
(a) A lawyer shall not knowingly:
(1) make a false statement of fact or law to a tribunal or fail to
correct a false statement of material fact or law previously made to
the tribunal by the lawyer;...
(c) The duties stated in paragraphs (a)... continue to the
conclusion of the proceeding...
American Bar Association Model Rule of Professional Conduct 4.1,
which states in pertinent part:
In the course of representing a client a lawyer shall not knowingly:
(a) make a false statement of material fact or law to a third
person;...
American Bar Association Model Rule of Professional Conduct 7.1,
which states:
A lawyer shall not make a false or misleading communication about
the lawyer or the lawyer's services. A communication is false or
misleading if it contains a material misrepresentation of fact or
law, or omits a fact necessary to make the statement considered as
a whole not materially misleading .
American Bar Association Model Rule of Professional Conduct 8.4,
which states pertinent part:
It is professional misconduct for a lawyer to:
...
(c) engage in conduct involving dishonesty, fraud, deceit or
misrepresentation;
(continued)
(d) engage in conduct that is prejudicial to the administration of
justice;...
Southern District of California Local Rule 83.4 which states in

18

09cv1581

1

IV

2

SANCTIONS

3

There are two sources of authority under which a court can

4

sanction a party for improper conduct: (1) 28 U.S.C. § 1927 and (2)

5

the inherent power of federal courts to levy sanctions in response

6

to abusive litigation practices. Lahiri v. Universal Music and Video

7

Distribution Corp., 606 F.3d 1216, 1219 (9th Cir. 2010); B.K.B. v.

8

Maui Police Dept., 276 F.3d 1091, 1107-1108 (9th Cir. 2002).

9

1. 28 U.S.C. § 1927

10

28 U.S.C.A. § 1927 states:

11

14

Any attorney or other person admitted to conduct cases
in any court of the United States or any Territory
thereof who so multiplies the proceedings in any case
unreasonably and vexatiously may be required by the
court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred
because of such conduct.

15

Imposition of sanctions under 28 U.S.C. § 1927 (hereafter “§

16

1927") requires a finding of recklessness or bad faith on the part

17

of the attorney sanctioned. B.K.B., 276 F.3d at 1107; Lahiri, 606

18

F.3d at 1219.

12
13

19
20

pertinent part:

...

21

b. Standards of Professional Conduct. Every member of the bar of
this court and any attorney permitted to practice in this court must
be familiar with and comply with the standards of professional
conduct required of members of the State Bar of California, and
decisions of any court applicable professional conduct which are now
adopted as standards of professional conduct of this court. This
specification will not be interpreted to be exhaustive of the
standards of professional conduct. In that connection, the Code of
Professional Responsibility of the American Bar Association should
be noted. No attorney permitted to practice before this court will
engage in any conduct which degrades or impugns the integrity of the
court or in any manner interferes with the administration of justice
within the Court.

22
23
24
25
26
27
28

18/

The Court declines to address whether Plaintiff’s counsel committed
perjury or fraud, because these issues were not fully briefed by
counsel. The Court leaves to others whether to investigate
Plaintiff’s allegations in these regards.

19

09cv1581

1

The plain language of § 1927 establishes that, when a court

2

issues a sanctions award, it may include the costs, expenses and

3

attorney’s fees that were incurred by the aggrieved party by the

4

sanctionable conduct. Sanctions imposed under § 1927 “must bear a

5

financial nexus to the excess proceedings and may not exceed the

6

“costs, expenses and attorney’s fees reasonably incurred because of

7

the sanctionable conduct.” Norelus v. Denny’s Inc., 628 F.3d 1270,

8

1297 (11th Cir. 2010).

9

award under § 1927 may include the costs arising from the sanctions

10

proceedings themselves. See In re Tutu Wells Contamination Litiga-

11

tion, 120 F. 3d 368, 387-388 n. 21 (3rd Cir. 1997) overruled on other

12

grounds by Comuso v. Nat. R.R. Passenger Corp., 267 F.3d 331, 331

13

(3rd Cir. 2001); Brandt v. Schal Assoc., Inc., 960 F.2d 640, 649-651

14

(7th Cir. 1992); In re Stauffer Seeds, Inc., 817 F. 2d 47, 50 (8th

15

Cir. 1987).

Several courts have held that a sanctions

16

Further, exclusion from a sanctions award the costs incurred

17

in obtaining the award undermines the purposes of providing for

18

sanctions. “The time, effort and money a party must spend to get

19

another party sanctioned... is part of (the) harm caused by the

20

other

21

Moreover, exclusion from a sanctions award undermines the goal of

22

deterring future similar sanctionable conduct because it would

23

discourage the aggrieved party from pursuing sanctions. Id., at

24

1298-1299.

25

party’s

wrongful

conduct.”

Norelus,

628

F.3d

at

1298.

2. Court’s Inherent Powers

26

Under its “inherent powers,” a district court may award

27

sanctions in the form of attorneys’ fees against a party or counsel

28

who acts “in bad faith, vexatiously, wantonly, or for oppressive

20

09cv1581

1

reasons.”

2

648 (9th Cir. 1997); Adams v. AllianceOne, Inc., 2011 WL 2066617 at

3

*5 (S.D. Cal. 2011). “This inherent power derives from the lawyer’s

4

role as an officer of the court which granted admission.” In re

5

Snyder, 472 U.S. 634, 643 (1985). Under this inherent power, and

6

unlike statutory sanctions provisions, the Court may sanction a

7

“broad range of improper litigation tactics.” Knupfer v. Lindblade

8

(In re Dyer), 322 F.3d 1178, 1196 (9th Cir. 2003); Adams, supra, at

9

*5.

Primus Auto. Fin. Servs., Inc. v. Batarse, 115 F.3d 644,

10

Before awarding such sanctions, the Court must make an

11

express finding that the sanctioned party’s behavior “constituted or

12

was tantamount to bad faith.” Roadway Express v. Piper, 447 U.S.

13

752, 767 (1980), superceded by statute on other grounds as recog-

14

nized in 749 F.2d 217, 222 n.4 (5th Cir. 1984)); Lahiri, 606 F.3d at

15

1219; B.K.B., 276 F.3d at 1108. “[A] finding of bad faith ‘does not

16

require that the legal and factual basis for the action prove

17

totally frivolous; where a litigant is substantially motivated by

18

vindictiveness,

19

colorable claim will not bar the assessment of attorney’s fees.’”

20

Id., at 1108 [quoting Fink v. Gomez, 239 F.3d 989, 992 (9th Cir.

21

2001)]. “(S)anctions are available if the court specifically finds

22

bad faith conduct or conduct tantamount to bad faith. Sanctions are

23

available for a variety of types of willful actions, including

24

recklessness

25

improper purpose.” Id., at 1108 (quoting Fink, 239 F.3d at 994). Bad

26

faith can consist of “delaying or disrupting the litigation.” M.M.

27

v. Lafayette School Dist., 2011 WL 830261 (N.D. Cal. 2011) [quoting

28

Hutto v. Finney, 437 U.S. 678, 689 n.14 (1978).

obduracy,

when

combined

or

mala

with

21

an

fides,

the

additional

assertion

factor

of

such

09cv1581

a

as

1

The focus of the bad faith inquiry is the sanctioned party’s

2

abuse of the judicial process. Roadway Express, 447 U.S. at 765-66.

3

The bad faith requirement ensures that the district court’s exercise

4

of its broad power is properly restrained, and “preserves a balance

5

between protecting the court’s integrity and encouraging meritorious

6

arguments.” Id.; Adams, supra at *5.

7

Moreover, “the amount of an inherent powers sanction is meant

8

to do something very different than provide a substantive remedy to

9

an

aggrieved

party.

An

inherent

powers

sanction

is

meant

to

10

‘vindicate

11

Choice, 50 F.3d 730, 733 (9th Cir. 1995) (quoting Chambers v. NASCO,

12

Inc., 501 U.S. 32, 55 (1991). Nonetheless, the amount of monetary

13

sanctions based on attorneys’ fees must be “reasonable.”

14

Baden (In re Yagman), 796 F.2d 1165, 1184-85 (9th Cir. 1986) amended

15

on other grounds by 803 F.2d 1085 (9th Cir. 1986); Adams, supra, at

16

*6.

judicial

authority.’”

Mark

Indus.

v.

Sea

Captain’s

Brown v.

17

Here, the Court finds that Plaintiff’s counsel’s conduct in

18

this litigation, as discussed in this Order, warrants the imposition

19

of sanctions under §1927 and its inherent authority. Specifically,

20

Plaintiff’s counsel submitted to counsel for Flava and Hot Topic a

21

proposed

22

Barbara’s genuine signature, when the signature was not, in fact,

23

Barbara’s signature. In presenting the settlement agreement to

24

counsel for Flava and Hot Topic, Plaintiff’s counsel failed to

25

inform counsel for Flava, Hot Topic and the Court that the signature

26

on the settlement agreement was not that of Barbara, but instead,

27

penned by someone else.

settlement

agreement

that

was

represented

to

contain

28
22

09cv1581

1

The Court notes that Plaintiff’s counsel first represented to

2

it at the February 25, 2010 Settlement Disposition Conference that

3

Barbara had signed numerous blank settlement agreements prior to her

4

death.

5

purpose: Plaintiff’s counsel wanted the Court to believe that

6

Barbara had signed the proposed settlement agreement prior to her

7

death. However, when Flava’s counsel informed the Court that the

8

proposed settlement agreement he had received from Plaintiff’s

9

counsel was dated after Barbara’s death, Plaintiff’s counsel was

10

apparently forced to provide another explanation. It stretches

11

credulity to believe that Plaintiff’s counsel simply and honestly

12

made several mistakes of fact on February 25, 2010. The circumstan-

13

tial

14

resolution

15

resolution of the mens rea behind the February 25, 2010 misrepresen-

16

tations. Whether Plaintiff’s counsel was intentionally deceptive or

17

honestly mistaken on February 25, 2010, one thing is undisputable:

18

Plaintiff’s counsel informed no one that Barbara had died while he

19

continued to try to settle this action against Flava and Hot Topic

20

while at the same time leading opposing counsel to believe Barbara

21

was still alive and that she signed the settlement agreement.

22

Plaintiff’s counsel’s failure to inform all counsel concerned that

23

the signature on the proposed settlement agreements was not, in

24

fact, Barbara’s signature, would have never come to light absent

25

Flava’s counsel’s presentation to the Court of Plaintiff’s counsel’s

26

conduct.

This

representation

evidence
of

points
the

to

could

a

propriety

have

different
of

been

made

conclusion.

sanctions

does

for

only

However,

not

turn

one

the
on

a

27

After Flava’s counsel discovered that the signature on the

28

proposed settlement agreement that he received from Plaintiff’s

23

09cv1581

1

counsel did not bear Barbara’s genuine signature, he brought this

2

fact to the attention of the Court. Since the Court was presented

3

with Plaintiff’s counsel’s potentially objectionable conduct at that

4

time, the Court was required to have Plaintiff’s counsel explain his

5

conduct with respect to Barbara’s signature appearing on documents

6

dated after her death.

7

The Court finds that Plaintiff’s counsel’s conduct in this

8

regard, and the settlement agreements he submitted to Flava’s and

9

Hot Topic’s counsel and the Court, constitute recklessness and were

10

done in bad faith.

11

and the Court, the briefing requested by the Court by both Plain-

12

tiff’s counsel and Flava’s counsel, and the hearings held by the

13

Court, would not have been necessary. As a result, the Court

14

concludes that Plaintiff’s counsel unreasonably and vexatiously

15

multiplied the proceedings in this case.

16

Further,

Had Plaintiff’s counsel been candid with counsel

the

Court

concludes

that

Plaintiff’s

counsel’s

17

conduct, as discussed in this Order, was done for the purpose of

18

leading opposing counsel to believe that the proposed settlement

19

agreements received by them contained Barbara’s genuine signature,

20

when in fact, they did not. Plaintiff’s counsel’s conduct disrupted

21

the proceedings in this litigation and has delayed its conclusion.

22

Therefore, the Court concludes that any sanctions to be

23

imposed on Plaintiff’s counsel will suffice to deter Plaintiff’s

24

counsel from repeating the conduct as discussed in this Order.

25

As a result, on or before June 27, 2011, Flava’s counsel

26

shall submit to the Court, for in camera review, his billing

27

statements for all work and expenses incurred that directly resulted

28

from Plaintiff’s counsel’s submitting to him a proposed settlement

24

09cv1581

1

agreement in this case which purported to bear Barbara’s genuine

2

signature, but was not, in fact, Barbara’s genuine signature. After

3

the Court reviews Flava’s counsel’s billing statements in camera, it

4

will

5

counsel.

issue

6

appropriate

monetary

sanctions

against

Plaintiff’s

D. Report of Conduct to the State Bar of California

7

Since Plaintiff’s counsel’s conduct, as discussed in this

8

order, may have violated statutes and Rules of Professional Conduct,

9

(see fn. 17), the Court will report Plaintiff’s counsel’s conduct to

10

the State Bar of California.

11
12

E. Disqualification From Further Representation In This
Court
In footnote 17 of this Order, the Court noted that Plain-

13

tiff’s counsel’s conduct in this litigation may have violated

14

statutes and Rules of Professional Conduct. At this time, the Court

15

declines

16

disqualified from further representation in this Court. However,

17

pursuant to Local Rule 83.5, the Court refers Plaintiff’s counsel to

18

the Standing Committee on Discipline.

to

determine

whether

Plaintiff’s

counsel

should

19
20

DATED:

June 13, 2011

21
22
Hon. William V. Gallo
U.S. Magistrate Judge

23
24
25
26
27
28
25

09cv1581

be