In re Marriage of Kalior & Cioffi

Filed 9/27/07 In re Marriage of Kalior & Cioffi CA2/1

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

APPEAL from an order of the Superior Court of Los Angeles County, Richard E. Denner, Judge. Affirmed.

Law Offices of Douglas A. Bagby and Douglas A. Bagby for Appellant.

Edward J. Horowitz; Silberberg & Ross, Fred Silberberg and Jeremy A. Lane for Respondents.

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Several years after their marriage was dissolved pursuant to a stipulated judgment, the wife claimed her husband had misrepresented the value of his business back when they were negotiating the stipulated judgment. Her motion to set aside the judgment was ultimately denied and sanctions were imposed against her, but not her lawyer. The husband appeals, contending the wifes lawyer should have been sanctioned. We disagree and affirm the judgment.

FACTS

A.

Lawrence (Larry) Kalior and Kimberly Cioffi married in 1982 and by the mid-1990s had two children. They decided to separate in 1999 and (although no dissolution action had been filed) Larry gave Kimberly a schedule of assets and debts executed under penalty of perjury on December 22. Among other assets, the schedule listed 700 shares in Larrys insurance business, Transportation Insurance Brokers, Inc. (TIB), and stated that these shares (valued by Larry at $700,000) represented 70 percent of TIBs issued shares. An attachment reflected TIBs gross revenue for the 11 months ending November 30, 1998, as about $7 million.

On January 2, 2000, Larry and Kimberly executed a stipulation for judgment in a still nonexistent dissolution action. Larrys business lawyer signed the stipulation, approving it as to form and content, but Kimberly (having consulted three lawyers, but not retained any of them) was not yet represented by counsel. On January 27, Larry filed a petition to dissolve the parties marriage. On June 12, the trial court entered a judgment of dissolution based on the parties stipulation.

B.

In June 2004, Kimberly, represented by Fred Silberberg (one of the lawyers she had consulted in 1999), filed a motion to set aside the judgment, contending Larry had made fraudulent misrepresentations about TIBs value during their 1999 settlement discussions, and had made perjured statements about TIBs value in his December 1999 schedule of assets. According to Kimberlys supporting declaration, Larry had told her in December 1999 that TIB was on the verge of bankruptcy and that its value was minimal. In June 2003, she said, she received an e-mail with an attached profit and loss statement showing that TIBs revenues had exceeded $7 million in 1998 -- which (she claimed) was the first time she had any reason to believe Larry had defrauded her.

Kimberlys motion precipitated nearly two years of litigation focusing on two issues -- whether Kimberlys motion was time-barred by Family Code section 2122 (which turned on whether she knew or should have known about TIBs financial condition before 2003), and whether Larry had in fact made fraudulent misrepresentations about TIBs financial condition. Although Larry ultimately prevailed, it took a great deal of time and effort to persuade the court that he had not, in fact, done the things alleged by Kimberly:

In August 2004, Larry moved to bifurcate the limitations issue. When his motion was denied, he asked us to issue a writ of mandate. We summarily denied his petition. (Kalior v. Superior Court (Nov. 23, 2004, B179202).)

In December, Larry moved for summary judgment on the limitations issue. When the trial court granted Kimberlys request for a continuance pending completion of discovery, Larry filed another petition for a writ of mandate. We summarily denied his petition. (Kalior v. Superior Court (Mar. 30, 2005, B181815).)

In March 2005, Larry moved for sanctions ($250,000) against Kimberly and Silberberg, claiming that Kimberlys motion to vacate the judgment was filed without evidentiary support or a reasonable inquiry into the factual basis for the motion. (Code Civ. Proc., 128.7.)[1] At about the same time, Larry filed a series of motions to limit or suspend Kimberlys discovery requests for TIBs financial records pending resolution of Larrys summary judgment motion. The trial court appointed a discovery referee (Hon. Isabel R. Cohen, Ret.), who recommended (1) that the trial court deny Larrys discovery motions on the ground that there was no authority for the court to limit Kimberlys discovery, and (2) that the court order Larry to pay (a) $55,000 in sanctions to Kimberly and (b) 90 percent of the referees fees.

In September, the trial court adopted most of the referees recommendations, directed Larry to produce the documents requested by Kimberly, and ordered him to pay $55,000 in sanctions to Kimberly and 90 percent of the referees fee. Larry filed another petition for a writ of mandate, which we summarily denied. (Kalior v. Superior Court (Oct. 12, 2005, B186198).)[2]

On January 13, 2006, the trial court denied Larrys motion for summary judgment.

C.

On January 30, 2006, the trial court heard Kimberlys motion to vacate the judgment and Larrys motion for sanctions against Kimberly and Silberberg, then (a) denied Kimberlys motion (finding her claims were not credible), (b) granted Larrys motion for $100,000 in sanctions against Kimberly, and (c) denied Larrys motion for sanctions against Silberberg (because the court was not convinced that Silberberg was responsible for Kimberlys actions).

In March, the trial court entered a 30-page statement of decision finding, among other things, that Kimberly had repeatedly presented false testimony in support of her claims about the parties settlement discussions, Larrys valuation of TIB, and her allegations about Larrys purported misrepresentations. Conversely, the court found Larrys testimony was credible, that he never told Kimberly that TIB was on the verge of bankruptcy, that Kimberlys testimony was simply not credible (particularly when she claimed that Larry had pressured her to sign the stipulation for judgment), that Kimberly had fully understood that she had an interest in TIB and that, based on her discussions with three lawyers, she knew full well that she could have litigated the extent of her interest and the value of Larrys shares. The court also found that Kimberly had knowingly accepted virtually all the parties cash savings (about $275,000) rather than litigate TIBs value because she had wished to proceed, as soon as possible, with the execution of the documents to resolve the issues, and permit her to purchase a residence, and move on with her life. The court found that Larrys 1999 valuation of TIB was not unreasonable.

Larrys motion for sanctions against Kimberly was granted for the same reasons the court denied her motion to vacate the judgment; Larrys motion for sanctions against Silberberg was denied because the court found Silberberg did not know and should not have known that Kimberlys claims lacked credibility.

Larry appeals from the order denying his motion for sanctions against Silberberg.

DISCUSSION

Larry contends that, because incontrovertible evidence shows that Silberberg failed to conduct a reasonable inquiry before filing Kimberlys motion and subsequent papers, the trial court necessarily abused its discretion when it denied Larrys request for sanctions against Silberberg. We disagree.

The most the evidence shows is that Silberberg, confronted with conflicting stories about the parties 1999 settlement discussions, chose to believe his own client. Unless it was unreasonable for him to do so, he was required to do just that in order to represent his client zealously, free from a threat that he would be sanctioned for doing what he was retained to do. (Guillemin v. Stein (2002) 104 Cal.App.4th 156, 167-168.) In light of the numerous times Silberberg prevailed both in the trial court and before us, we cannot say the trial court abused its discretion by finding that Silberbergs conduct was not sanctionable. This is particularly true since there is no evidence that Silberberg actually knew Kimberly was fabricating her fraud claims.[3]

We reject Larrys contention that Silberberg should have offered an explanation of what steps [he] took to seek an evidentiary foundation for Kimberlys claims. As the party seeking sanctions, it was up to Larry to present evidence supporting his motion. (Cf. Harris v. Rudin, Richman & Appel (2002) 95 Cal.App.4th 1332, 1343 [to be entitled to sanctions under section 128.5, the moving party had to establish the statutory elements for the award].) The cases relied on by Larry are inapposite -- in all of them there was at least some evidence that the sanctioned lawyer had failed to conduct even a cursory investigation. (Hendrix v. Naphtal (9th Cir. 1992) 971 F.2d 398 [a diversity case in which the lawyer failed to confirm that the parties lived in different jurisdictions]; Autotech Corp. v. NSD Corp. (N.D. Ill. 1989) 125 F.R.D. 464 [a patent infringement case in which the defendants had never sold the infringing devices]; Jones v. International Riding Helmets, Ltd. (11th Cir. 1995) 49 F.3d 692 [lawyer pursued a products liability action against a helmet maker that did not exist at the time the defective helmet was manufactured]; Childs v. State Farm Mut. Auto. Ins. Co. (5th Cir. 1994) 29 F.3d 1018 [attorney continued to prosecute case after defendants insurer established that auto accident had been staged].)

Although the order denying Kimberlys motion to set aside the stipulated judgment and the order sanctioning Kimberly establish that Kimberly lied to her lawyer, to her former husband, and to the court, they do not establish that her lawyer knew or should have known that she was lying. There was nothing inherently implausible about Kimberlys claim that her former husband undervalued his company or otherwise lied about the state of its financial affairs. Larry controlled TIB and its books. Larry was represented by counsel, albeit not a matrimonial lawyer, at the time the stipulated judgment was entered; Kimberly was not. The statute of limitations issue was not open and shut, as shown by the fact that the trial court denied Larrys motion for summary judgment on this ground. And Silberberg certainly conducted discovery -- at the time, Larrys claim was that Silberberg was doing much more discovery than was necessary, not too little. Finally, there was some corroboration for Kimberlys story -- TIBs controller, Joel Richman, testified at his deposition that Kimberly seemed genuinely surprised when he told her in June 2003 that TIB might be worth more than she thought, and Kimberlys expert, Kenneth Bodenstein, concluded that TIB was worth seven times more than the value Larry placed on it back in 1999. The fact that these witnesses later proved themselves less than credible is beside the point.

Under these circumstances, we cannot say the trial court abused its discretion when it denied Larrys motion for sanctions against Silberberg. (In re Marriage of Drake (1997) 53 Cal.App.4th 1139, 1168.)

DISPOSITION

The March 17, 2006, order denying Larrys motion for sanctions against Silberberg is affirmed. The parties are to pay their own costs of appeal.

NOT TO BE PUBLISHED.

VOGEL, J.

We concur:

MALLANO, Acting P.J.

JACKSON, J.*

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*Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

[1] Subsequent section references are to the Code of Civil Procedure.

[2] About a week after we denied Larrys third petition, he filed a notice of appeal from the September 2005 sanction order (Kalior v. Cioffi (B186886)), but voluntarily dismissed that appeal in June 2006.

[3] The fact that Kimberly gave the December 1999 paperwork (which included a statement of TIBs 1998 gross revenues) to Silberberg does not mean Silberberg had to reject her claim that Larry had told her TIB was on the verge of bankruptcy.