Gottlieb v. Iskowitz
Filed 6/20/12 Gottlieb v. Iskowitz CA2/3
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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opinion has not been certified for publication or ordered published for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 THREE
DAVID K. GOTTLIEB, as Trustee in Bankruptcy, etc., et al.,
Plaintiffs
and Appellants,
v.
GARY ISKOWITZ et al.,
Defendants
and Respondents.
_____________________________________
AND RELATED CROSS-ACTION.
B216029
consolidated w/B219558
(Los
Angeles County
Super. Ct.
Nos. BC384493 & BC385790)
APPEALS from an
order and judgment of the Superior Court
of
County, Elizabeth A. White,
Judge. Reversed in part, affirmed in
part and remanded with directions.
Pachulski Stang
Ziehl & Jones, Jeremy V. Richards and Ellen M. Bender for Plaintiff and
Appellant David K. Gottlieb.
Hill,
Farrer & Burrill, Dean E. Dennis, Daniel J. McCarthy and Paul M. Porter for
Plaintiffs and Appellants Georges Marciano individually and in his capacity as trustee for
Georges Marciano Trust, M.D.; Marciano 1987 Investment Trust; Georges Marciano
Gift Trust FBO Matthew; Georges Marciano Gift Trust FBO Scott; Scott Marciano -
1988 Investment Trust; Georges Marciano Gift Trust II FBO Kevin; Georges
Marciano Gift Trust II FBO Matthew; Georges Marciano Gift Trust II FBO Scott;
Georges Marciano Gift Trust II FBO Chloe; Georges Marciano 1994 Investment
Trust FBO Kevin; Georges Marciano 1994 Investment Trust FBO Scott; Georges
Marciano 1994 Investment Trust FBO Matthew; Georges Marciano 1994 Investment
Trust FBO Chloe; Beverly Wilshire Properties; Beverly Hills Antiques, Inc.; MSK
Realty, Inc.; Kevinair, LLC; Fox Properties, Inc.; Georges Marciano Holdings,
Inc.; Georges Marciano Finance, Inc.; Go Jeans USA; Just Jeans, Inc.; and
9521 Sunset LLC.
Garrett
& Tully, Stephen J. Tully, Efren A. Compeán; Greines, Martin, Stein &
Richland, Irving H. Greines, Robert A. Olson and Marc J. Poster for Defendants
and Respondents.
Georges Marciano (Marciano)
and his various entitles (Marciano entities)
collectively referred to as Marciano), appeal a judgment in favor of Marciano’s
former accountants, Gary Iskowitz (Gary), Gary’s accounting firm Gary Iskowitz
& Co., LLP (the Iskowitz firm), Gary’s accounting partner, Carolyn Malkus
(Carolyn), and Gary’s spouse, Theresa Iskowitz (Theresa), also an accountant
with the firm (sometimes collectively referred to as Iskowitz).
In these consolidated
cross-actions (L.A. Super. Court, case Nos. BC384493 & BC385790), the
trial court imposed terminating sanctions against Marciano for discovery
abuse. The trial court dismissed
Marciano’s complaint against Iskowitz and struck Marciano’s answer and entered
his default on the Iskowitz cross-complaint, which resulted in a $55 million
judgment against Marciano pursuant to a default proveup.
The essential issues
presented include whether the trial court abused its discretion in imposing
terminating sanctions against Marciano for noncompliance with discovery, and
whether the trial court awarded excessive damages on the default proveup.
Based on our review of the
record, we perceive no abuse of discretion in the imposition of terminating
sanctions, which resulted in the dismissal of Marciano’s complaint against
Iskowitz and the entry of Marciano’s default on the Iskowitz
cross-complaint. However, on the record presented,
the amount of the damages which were awarded on the default proveup is
excessive. Therefore, the judgment is
reversed and the matter is remanded for further proceedings consistent with
this opinion.
FACTUAL AND PROCEDURAL
BACKGROUND
1. The
consolidated actions.
a.
On January 28, 2008, Marciano and various entities (Marciano entities)
sued the Iskowitz firm, as well as Gary and Carolyn (LASC No. BC384493) (the
Marciano action). Gary and his firm
handled Marciano’s personal and business accounting and tax matters for over 20
years. Carolyn was a partner in the
Iskowitz firm who worked on Marciano’s account.
Marciano alleged defendants
misappropriated Marciano’s money and were liable for
conversion and breach of fiduciary duty.
b. The
Iskowitz action.
On February 20, 2008, Gary, Carolyn and Theresa
filed a separate action against Marciano, individually, LASC No. BC385790 (the
Iskowitz action). Gary sought damages for
emotional distress and conspiracy to commit libel per se, while Carolyn and
Theresa pled a cause of action for libel per se.
The Iskowitz lawsuit
alleged, inter alia, that beginning in 2006, Marciano had engaged in a
deliberate campaign to harass, intimidate and spread vicious lies about Gary
for the express purpose of ruining him, and that Marciano engaged in a course
of conduct that included numerous malicious acts and libels which was intended
to ruin Gary, including making false utterances to Gary and third parties that
Gary was part of a “team of crooks,†was a liar, was “cooking my books and
records,†and had embezzled from him.
On June 23, 2008, the trial court consolidated the Marciano action
with the Iskowitz action, with the Iskowitz action being deemed a
cross-complaint.
On October
14, 2008, the Iskowitz firm also filed a cross-complaint in the Marciano action
alleging one cause of action for “Willful Filing of Fraudulent Tax Information
Return.â€
c. Marciano’s
noncompliance with discovery; trial court granted 14 motions to compel
discovery and imposed monetary sanctions each time.
Iskowitz propounded
discovery to Marciano, who resisted Iskowitz’s discovery efforts.
On 14 occasions in the
six-month period between June and December of 2008, Iskowitz was forced to move
for orders compelling responses and further responses to discovery.
Iskowitz prevailed on its
discovery motions. The trial court granted 14 motions by Iskowitz to compel
discovery and ordered Marciano to comply with discovery. On all 14 occasions, the trial court
imposed monetary sanctions against
Marciano, in the total sum of $35,955.
d. Motion
for terminating sanctions.
On
December 24, 2008, Iskowitz filed a motion (1) for terminating sanctions in the
Marciano action, seeking dismissal of Marciano’s second amended complaint, and
(2) for terminating sanctions in the Iskowitz action by striking Marciano’s
answer and entering his default.
Alternatively, Iskowitz requested evidentiary sanctions.
The moving papers specified four
discovery order violations from the four pertinent discovery motions, to
wit: (1) failure to provide appropriate
supplemental responses to defendants’ first set of special interrogatories,
without objection, in violation of a July 25, 2008 order; (2) failure to
provide adequate further supplemental responses to form interrogatories, set
one, by December 15, 2008, in violation of a November 24, 2008 order; (3)
failure to provide adequate further supplemental responses to the first set of
special interrogatories, without objection by December 15, 2008, in violation
of a November 24, 2008 order; and (4) failure to produce all documents
responsive to a first request for production of documents by December 11, 2008,
in violation of a December 11, 2008 order.
e.
On February 25, 2009, the trial court entered
an order granting Iskowitz’s motion (1) for an order imposing terminating
sanctions against all plaintiffs in the Marciano action by dismissing their
second amended complaint with prejudice; and (2) for an order imposing
terminating sanctions against Marciano in the Iskowitz action by striking Marciano’s
answer and entering his default. The
February 25, 2009 order states in pertinent part:
“Having considered the motion, the
papers filed in support thereof, the opposition and the reply, the
discovery motions and hearings in this matter, and good cause appearing
therefor, the Court makes the following findings:
“1. The case law is replete with
holdings which provide that so long as there is a prior court order requiring a
party to comply with discovery, that that party is aware of the court’s order,
and, yet, still willfully fails to comply, the court may issue terminating
sanctions. The instant case speaks
volumes to that situation.
“2. The Court doubts that if it were to look in the annals of
jurisprudence it would find a case that even comes close to the discovery
violations that the Court has seen in this particular case. Plaintiffs Georges Marciano and the Marciano
Entities and defendant Georges Marciano (collectively, the ‘Marciano Parties’)
have engaged in a consistent pattern of failure to cooperate with
discovery. The court takes judicial
notice of a complete record of the discovery violations as documented by the
Iskowitz parties in the within motion.
“3. The Marciano Parties have asserted objections in responses when the
Court ordered them not to. The Marciano
Parties served further responses which were not verified, which are the
equivalent of no response at all. The
Marciano Parties served further responses which were not signed, which were,
again, the equivalent of no responses at all.
The Marciano Parties served supplemental responses, but they were
unchanged from the original responses.
“4. The Marciano Parties have
taken the word processing system to new heights by simply duplicating and
copying responses to discovery multiple times over. The record before the Court is replete with
violations.
“5. Plaintiffs failed to provide
appropriate supplemental responses to defendants’ first set of special interrogatories,
without objection, in violation of the Court’s order dated July 25, 2008, when
they twice served unverified responses
that merely repeated the allegations of their pleadings and that continued to
assert unmeritorious objections, The violation of this order by plaintiffs was
willful.
“6. Plaintiffs failed to provide
adequate further supplemental responses to form interrogatories, set one, by
December 15, 2008, in violation of the Court’s order dated November 24, 2008,
when they instead provided only unverified, meaningless responses. The violation of this order by plaintiff was
willful.
“7. Defendant Georges Marciano
failed to provide adequate further supplemental responses to
cross-complainants’ first set of special interrogatories, without objection, by
December 15, 2008, in violation of the Court’s order dated November 24, 2008,
when he provided only unverified, meaningless responses. The violation of this order by Georges
Marciano was willful.
“8. Defendant Georges Marciano
failed to produce all documents responsive to cross-complainants’ first request
for production of documents by December 11, 2008, in violation of the Court’s
order dated December 11, 2008, when he provided millions of pages of
disorganized and largely irrelevant documents purportedly in response to the
Iskowitz Parties’ document requests. The
violation of this order by Georges Marciano was willful.
“9. Defendant Georges Marciano
failed to provide adequate further supplemental responses to
cross-complainants’ first set of special interrogatories, without objection, by
December 31, 2008, in violation of the Court’s order dated December 11, 2008,
when he provided only unverified, unsigned, meaningless, repetitive responses
that were the equivalent of no responses at all. The violation of this order by Georges
Marciano was wilful.
“10. The Marciano Parties’ failure
to comply with this Court’s orders compelling discovery has interfered, and
continues to interfere, with the Iskowitz Parties’ efforts to complete the
discovery necessary in this matter in order to defend themselves against
plaintiffs’ claims and for cross-complainants to prosecute their claims against
cross-defendant Georges Marciano.â€
Based on the above, the trial court granted Iskowitz’s motion for an
order imposing terminating sanctions. On
February 25, 2009, the trial court issued an order dismissing Marciano’s second
amended complaint with prejudice, struck Marciano’s answer to the Iskowitz
cross-complaint and entered Marciano’s default on said cross- complaint.
Notice of entry of the order was served on March 6, 2009. On May 5, 2009, Marciano and the Marciano
entities filed notice of appeal from
the February 25, 2009 dismissal order imposing terminating sanctions. (2d Civ. No. B216029.)
f. Default
proveup proceedings on the Iskowitz cross-complaint against Marciano,
individually.
(1)
Liability phase
On July 17, 2009, the trial
court conducted a default prove-up hearing on liability issues. The court heard testimony from Carolyn and
Theresa, and received the declarations of Gary, Miriam Choi, Camille Abat, Alex
Gilinets, Christopher Kirkwood, Stephen J. Tully, Tafiana V. Wallace, John
Greene and Claudette Lussier, along with supporting exhibits.
On August 18, 2009, the
trial court entered an order determining Marciano was liable for libel per se
and intentional infliction of emotional distress.
(2) Damages phase
On August 26,
2009, the trial court conducted a default prove-up hearing on damages. After hearing the evidence and arguments of
counsel, the trial court awarded damages of $55 million. The damages which were awarded were identical
to the damages requested by Gary, Theresa and Carolyn in their respective statements
of damages.
The breakdown of damages is
as follows: to Gary, $10 million for
“emotional distress,†$5 million for loss of professional and personal
reputation, $10 million for “shame, mortification and hurt feelings,†and $20
million for punitive damages, for a total award to Gary of $45 million; to
Theresa, $1 million for “emotional distress,†$1 million for loss of
professional and personal reputation, $1 million for “shame, mortification and
hurt feelings,†and $2 million for punitive damages, for a total award to
Theresa of $5 million; and to Carolyn, $1 million for “emotional distress,†$1
million for loss of professional and personal reputation, $1 million for
“shame, mortification and hurt feelings,†and $2 million for punitive damages,
for a total award to Carolyn of $5 million.
g. Subsequent
proceedings.
On October 15, 2009, the trial court denied Marciano’s motion
for a new trial, stating “the court finds the damages reasonable.â€
On October 7, 2009, Marciano
filed a timely notice of appeal from the August 26, 2009 judgment. (2d Civ. No. B219558.) The two appeals were consolidated under
No. B216029.
Marciano contends: the trial court abused its discretion in
imposing terminating sanctions; the trial court failed to act as gatekeeper to
protect Marciano’s statutory and constitutional rights; the compensatory
damages were unproven and excessive in any event; there was insufficient
evidence of Marciano’s financial condition to support punitive damages; and
Judge White’s bias deprived Marciano of his due
process right to an impartial judge.
1. Trial
court acted within its discretion in imposing terminating sanctions.
a. Propriety
of a terminating sanction; standard of appellate review.
“ ‘The trial court should
consider both the conduct being sanctioned and its effect on the party seeking
discovery and, in choosing a sanction, should “ ‘attempt[] to tailor the
sanction to the harm caused by the withheld discovery.’ †[Citation.]
The trial court cannot impose sanctions for misuse of the discovery
process as a punishment.’
[Citation.] ‘ “Discovery
sanctions ‘should be appropriate to the dereliction, and should not exceed that
which is required to protect the interests of the party entitled to but denied
discovery.’ †[Citation.] If a lesser sanction fails to curb abuse, a
greater sanction is warranted:
continuing misuses of the discovery process warrant incrementally
harsher sanctions until the sanction is reached that will cure the abuse. “A decision to order terminating sanctions
should not be made lightly. But where a
violation is willful,[
name="_ftnref5" title="">[5]] preceded by a
history of abuse, and the evidence shows that less severe sanctions would not
produce compliance with discovery rules, the trial court is justified in
imposing the ultimate sanction.†’ [Citation.]â€
(Van Sickle v. Gilbert (2011)
196 Cal.App.4th 1495, 1516 (Van Sickle).)
Imposition of discovery
sanctions “ ‘lies within the trial court’s discretion, and is reviewed
only for abuse.’ [Citation.] ‘Sanction orders are “subject to reversal
only for arbitrary, capricious or whimsical action.†’ [Citation.]â€
(Van Sickle, supra,
196 Cal.App.4th at p. 1516.) The
“question before this court is not whether the trial court should have imposed
a lesser sanction; rather, the question is whether the trial court abused its
discretion by imposing the sanction it chose.
(Laguna Auto Body v. Farmers Ins.
Exchange [(1991)] 231 Cal.App.3d [481,] 491.)†(Do It
Urself Moving & Storage, Inc. v. Brown, Leifer, Slatkin & Berns
(1992) 7 Cal.App.4th 27, 36-37.)
b.
respect to Iskowitz’s request for production of documents, set one.
On March 25,
2008, Marciano filed an answer to the Iskowitz cross-complaint, in which
Marciano asserted 35 separate affirmative defenses, ranging from assumption of
the risk, laches and estoppel, to the assertion that imposition of punitive
damages would violate his right to substantive due process and equal
protection.
On April 11,
2008, Iskowitz served a request for production of documents, set one (Nos. 1
through 40), based almost verbatim on the affirmative defenses pled in
Marciano’s answer.
On May 19, 2008, Marciano served his responses to the request
for production of documents. Despite the
fact Iskowitz’s discovery request was based upon Marciano’s own affirmative
defenses as pled in his answer, Marciano’s responses consisted solely of
objections. Marciano did not produce a
single document.
On June 25, 2008, Iskowitz
moved for an order compelling Marciano to provide further responses to
Iskowitz’s first request for production of documents.
On July 25, 2008, the matter
came on for hearing. The trial court
granted Iskowitz’s motion to compel further responses to the request for
production of documents and sanctioned Marciano in the sum of $1,890. The July 25, 2008 order directed Marciano to
serve “further verified responses without
objection to requests for production Nos. 1 through 40 that are the subject
of this motion, by no later than [August
4], 2008.†(Italics added.)
On July 24, 2008, one day
before the hearing on the motion to compel, Marciano served by mail his
supplemental responses to the first request for production of documents. In the supplemental responses, Marciano again
objected to the discovery requests and his responses to requests Nos. 1 through
20 and 29 through 40 stated, “[u]nder the provisions of an appropriate
protective order, Responding Party will make available for inspection and
photocopying his non-privileged responsive documents.â€
On July 28, 2008, the trial
court signed a stipulation for a protective order regarding Marciano’s
documents.
On August 12, 2008,
Iskowitz’s counsel sent a letter to Marciano’s counsel concerning Marciano’s
supplemental responses to the first request for production of documents. The letter stated in pertinent part: “[Marciano’s] supplemental responses to the
Document Request continue to assert a series of identical boilerplate
objections to each request. The court’s
order dated July 25, 2008 specifically states that [Marciano] shall serve
further verified responses without objection by August 4, 2008. Accordingly,
please withdraw the objections and provide complete responses without objection.†(Italics added.) The letter further stated: “In response to Request Nos. 1 through 20 and
29 through 40, [Marciano] [stated] that ‘[u]nder the provision of an
appropriate protective order . . . .’ he ‘will make
available for inspection and copying his non-privileged responsive documents.’ As you know, a stipulated protective order
was signed by Judge White on July 28, 2008.
Please let me know when [Marciano’s] responsive documents will be
available for inspection and copying.â€
Marciano’s counsel did not
respond to the August 12, 2008 letter.
On October 21, 2008,
Iskowitz’s counsel followed up with another letter to Marciano’s attorney,
again seeking Marciano’s responses to the first request for production of
documents. This letter reiterated, “we
previously requested that Mr. Marciano produce the requested documents in
a letter dated August 12, 2008 to Mr. Marciano’s prior counsel, Luan Phan,
Esq. No
documents were ever produced. Please
produce the requested documents as indicated in Mr. Marciano’s responses by
October 24, 2008, or we will have no choice but to file a motion to
compel.†(Italics added.)
On October 23, 2008,
Marciano’s counsel requested an extension to October 31, 2008 for Marciano to
produce the requested documents. Via
email, Iskowitz’s counsel agreed to this extension.
On November 10, 2008,
Iskowitz filed a motion to compel Marciano’s compliance with Iskowitz’s first
request for production of documents. As
of the date of the filing of said motion to compel, Marciano had not provided
documents in compliance with the first request for production of documents.
On December 11, 2008, the
trial court heard and granted Iskowitz’s motion to compel responses to request
for production of documents, set one. It
ruled, “All documents will be produced today (December 11, 2008), except for
Bank of America documents which will be later produced.â€
On December 10 and 11,
Marciano produced 185 CDs of documents, containing over 15 million pages of
documents. This “document dumpâ€
purported to be responsive to Iskowitz’s requests for production.
However, with respect to the
content of Marciano’s production of documents, the declaration of Tatiana
Wallace, counsel for Iskowitz, stated:
“I have spent over 30 hours and reviewed approximately 10% of the
documents produced by [Marciano]. The
documents were not Bates-labeled, were produced without any corresponding index
and did not appear to be in any particular order. None of the documents were segregated to
respond to any of the specific requests for production propounded to
[Marciano]. None of the records appear
to have been reviewed prior to their production as they contain massive amounts
of personal, private and privileged information, including communications with
counsel, social security numbers, account numbers, login names and passwords. [¶] In
the course of my review of plaintiffs’ records, I did not encounter a single
document which supported any of [Marciano’s] allegations against any of the
[Iskowitz Parties]. Approximately 70% of
the records reviewed wore not only non-responsive to the Iskowitz Parties’
requests, but were entirely irrelevant to the pending litigation. For example, included in plaintiffs’ recent
production were documents dating back to the 1980s and 1990s;
architectural/interior design plans and over 500 pages of movie lists for Mr.
Marciano’s airplane; Mr. Marciano’s online shopping spree for personal items,
such as men’s sweaters, lamps, carpets, tables, etc.; records regarding
Mr. Marciano’s search for contractors and property managers, including
multiple candidate resumes; personal e-mails unrelated to this matter; various
pleadings from unrelated cases and many others.â€
On December 24, 2008,
Iskowitz filed the motion for terminating sanctions, based in part on
Marciano’s failure to produce all documents responsive to a first request for
production of documents by December 11, 2008, in violation of the December 11,
2008 order.
c. No
abuse of discretion in imposition of terminating sanctions; Marciano’s willful
failure to produce documents supportive of his affirmative defenses was
sufficient to warrant terminating sanctions.
With respect to the trial
court’s finding that Marciano had not complied with the court’s order to
produce all documents responsive to Iskowitz’s first request for production of
documents, Marciano’s contention is as follows:
“The December 11 Minute
Order required Marciano to produce all documents by December 11. Marciano complied by producing 185 CDs of
documents on December 10 and 11. But the
trial court found inadequate compliance because the documents were
‘disorganized and largely irrelevant.’
The finding was based on the declaration of [Iskowitz’s] counsel stating
that she had reviewed ‘approximately 10% of the documents produced.’ Although
90% were not reviewed, the court found the production ‘largely irrelevant.’
†(Italics added.)
We reject Marciano’s claim
that he fulfilled his discovery obligations by dumping 15 million pages of
uncategorized documents on Iskowitz over a two-day period, eight months after
Iskowitz propounded the discovery request.
Marciano emphasizes Iskowitz’s counsel only reviewed about 10 percent of
the 15 million documents before declaring the production largely
irrelevant. However, Marciano cites no
authority for the proposition that opposing counsel was required to pore over
the 15 million documents in their entirety in order to ascertain Marciano’s
compliance with his discovery obligations.
Based on the 10 percent sample reviewed by Iskowitz’s counsel, the trial
court reasonably could infer the remaining documents were similarly
nonresponsive.
A dump of disorganized
documents by definition is noncompliant.
Code of Civil Procedure section 2031.280 states at subdivision (a): “Any documents produced in response to a demand
for inspection, copying, testing, or sampling shall either be produced as they are kept in the usual course of
business, or be organized and labeled to correspond with the categories in the
demand.†(Italics added.) Marciano has neither argued, nor shown, that
his document dump complied with said statutory requirement.
In sum, the record
abundantly supports the following finding by the trial court on the motion for
terminating sanctions: “8. Defendant Georges Marciano failed to produce
all documents responsive to cross-complainants’ first request for production of
documents by December 11, 2008, in violation of the Court’s order dated
December 11, 2008, when he provided millions of pages of disorganized and
largely irrelevant documents purportedly in response to the Iskowitz Parties’
document requests. The violation of this
order by Georges Marciano was willful.â€
As discussed, “where a
violation is willful, preceded by a history of abuse, and the evidence shows
that less severe sanctions would not produce compliance with discovery rules,
the trial court is justified in imposing the ultimate sanction.†’ [Citation.]â€
(Van Sickle, supra, 196
Cal.App.4th at p. 1516.)
Marciano engaged in a
persistent course of discovery abuse, resulting in 14 orders compelling
discovery and 14 orders imposing monetary sanctions. Our focus here has been on Marciano’s willful
failure to produce any documents to
support his 35 affirmative defenses to the Iskowitz cross-complaint, which
necessitated two motions to compel
the production of those documents and two orders compelling production, and
then culminating in a dump of 15 million pages of disorganized documents. Marciano’s discovery abuse with respect to
Iskowitz’s first request for production of documents, was sufficient, in and of
itself, to warrant terminating sanctions.
Therefore, we need not address the other discovery violations underlying
the trial court’s imposition of terminating sanctions.
We also reject Marciano’s
contention the terminating sanctions were excessive and that a lesser sanction
should have been imposed. Early on, at a
hearing on July 7, 2008, the trial court admonished Marciano that if he were
“unable to provide substantive responses to interrogatories which are so very
focused on [Marciano’s] allegations, then it is going to appear to the trier of
fact, ultimately, or to the court on a subsequent motion, that in fact there
are no supporting documents; there is no evidentiary support; and
we are either going to be at summary judgment or a motion for terminating
sanctions.†(Italics added.) Further, prior to imposing terminating
sanctions, the trial court imposed monetary sanctions on 14 occasions over
a six-month period, to no avail. The
trial court did not act hastily in imposing a terminating sanction.
In sum, given the egregious
circumstances in this case, we cannot say the trial court abused its discretion
in selecting a terminating sanction. (
Brown, Leifer, Slatkin & Berns, supra, 7 Cal.App.4th at p. 36.)
2.
of damages.
a.
Marciano contends the default judgment violated due process
because the statement of damages was served only days before the default and
well after the conduct giving rise to the default. The argument is unavailing.
By way of background, the
relief granted to a plaintiff against a defaulting defendant cannot exceed that
demanded in the complaint, in the statement required by Code of Civil Procedure
section 425.11 [applicable to personal injury damages], or in the statement
provided for by Code of Civil Procedure section 425.115 [punitive
damages]. (Code Civ. Proc., § 580, subd.
(a).) The statement of damages must be
served “before a default may be taken.â€
(Id., § 425.11, subd.
(c), § 425.115, subd. (f).) A defendant
is entitled to actual notice of the liability to which he or she may be
subjected, “a reasonable period of time before default may be entered.†(Schwab
v. Rondel Homes, Inc. (1991) 53 Cal.3d 428, 435.)
Case law has held that
service of a statement of damages 15 days before entry of default satisfies the
reasonable notice requirement (Schwab v.
Southern California Gas Co. (2004) 114 Cal.App.4th 1308, 1323), as does
service of the statement of damages concurrently
with a motion for terminating sanctions.
(Electronic Funds Solutions, LLC
v. Murphy (2005) 134 Cal.App.4th 1161, 1178 (Electronic) [“Plaintiffs served their notice of punitive damages
concurrently with their motion for terminating sanctions. Because service occurred before the entry of
default, the notice of punitive damages was timelyâ€].)
Here, Gary, Theresa and
Carolyn served their requests for statement of damages on January 27, 2009,
which was 29 days before the trial court imposed terminating sanctions and
entered Marciano’s default on February 25, 2009. On this record, the Iskowitz parties’
statements of damages were timely.
As for Marciano’s contention
he was entitled to notice sufficient to provide him with an opportunity to
alter his discovery behavior, Electronic,
supra, 134 Cal.App.4th 1161, is on point.
There, the defendants complained that service of notice of punitive
damages concurrently with the motion
for terminating sanctions “violated their due process rights because the first
formal notice of the amount of punitive damages occurred after they had made the decision to ‘redact’ the computer hard drives. In other words, defendants argue[d] they
would not have misused the discovery process had they known their liability
could reach $24 million. The argument
implicitly suggests that had they received proper notice and chosen not to
participate in the lawsuit, they also had the option to destroy the evidence
requested in discovery. We reject this
contention.†(Id. at p. 1178, italics added, fn. omitted.)
In sum, Marciano’s
challenges to the timing of the service of statements of damages are meritless.
b. The
statements of damages did not bear the wrong case number.
Marciano
contends the statements of damages were void because they bore the wrong case
number, in that the statements of damages were served bearing only the case
number of Marciano’s action (No. BC384493) and did not show the case number of
the action in which the Iskowitz parties were seeking damages (No.
BC385790). Marciano also argues the
statement of damages improperly identified the Iskowitz parties as
“cross-complainants†when they were in fact plaintiffs.
These arguments are
meritless. Marciano could not possibly
have been confused by the statements of damages. Case No. BC384493 was consolidated with case
No. BC385790 and in the consolidated litigation, the trial court deemed
Gary, Carolyn and Theresa the cross-complainants. Further, the three statements of damages
clearly advised Marciano that Gary, Carolyn and Theresa were seeking
compensatory and punitive damages against Marciano on their claims against
Marciano. Marciano’s contention in this
regard is devoid of merit.
3. Contentions
relating to the pleadings.
a. No
merit to Marciano’s contention the cross-complaint was not well pled.
Marciano contends the
default judgment relies on a legally defective cross-complaint because many of
the allegedly libelous statements are barred by the statute of limitations,
were nonactionable opinion or were privileged.
However, Marciano’s argument fails to differentiate between the
essential elements of the tort of libel and affirmative defenses thereto.
Libel is defined by statute
as “a false and unprivileged
publication by writing, printing, picture, effigy, or other fixed
representation to the eye, which exposes any person to hatred, contempt,
ridicule, or obloquy, or which causes him to be shunned or avoided, or which
has a tendency to injure him in his occupation.†(Civ. Code, § 45, italics added.)
However, the one-year
statute of limitations for libel (Code Civ. Proc., § 340, subd. (c)),
which Marciano now invokes, is merely an affirmative defense, not an element of
the cause of action. Likewise, privilege
is pled as an affirmative defense, as was the case here (Marciano’s 15th
affirmative defense), unless the existence of privilege is shown on the face of
the complaint. (Cameron v. Wernick (1967) 251 Cal.App.2d 890, 894-895;
Cal.App.2d 110, 113.) Also, Marciano’s
answer pled (in the 5th affirmative defense) that some or all of the allegedly
libelous statements constituted subjective statements of opinion.
The imposition of
terminating sanctions, by which the trial court struck Marciano’s answer to the
Iskowitz cross-complaint and entered his default, eliminated all of Marciano’s
affirmative defenses. A judgment by
default “is said to ‘confess’ the material facts alleged by the plaintiff,
i.e., the defendant’s failure to answer has the same effect as an express
admission of the matters well pleaded in the complaint.†(Steven
M. Garber & Associates v. Eskandarian (2007) 150 Cal.App.4th 813, 823
[default entered as terminating sanction for discovery violations].) The entry of Marciano’s default operated as
an admission by him of the allegations of the cross-complaint by Gary, Theresa
and Carolyn. (Id. at p. 823.) The
affirmative defenses on which Marciano is relying to attack the sufficiency of
the cross-complaint have no bearing on whether the cross-complaint was well
pled.
b. Marciano’s
contention the default judgment was based on allegations beyond the
cross-complaint.
Marciano
contends the default judgment must be set aside because on the default proveup,
Gary, Theresa and Carolyn departed from the claims alleged in their
cross-complaint.
It is settled that the
“complaint delimits the legal theories a plaintiff may pursue and the nature of
the evidence which is admissible.
[Citation.] ‘The court cannot
allow a plaintiff to prove different claims or different damages at a default
hearing than those pled in the complaint.’
[Citation.]†(
1182.)
Because this matter is being
remanded for a new proveup hearing due to excessive damages (see Discussion §
4, post), it is unnecessary to
address whether the trial court awarded damages based on allegations which were
not pled in the complaint. For the
guidance of the trial court on remand (Code Civ. Proc., § 43), we simply reiterate
the principle that the complaint delimits the claims a plaintiff may pursue at
a default proveup hearing.
4. Excessiveness
of damages awarded on default proveup requires reversal and remand for a new
default proveup hearing before a different judge.
a. Standard
of appellate review of damages awarded on default proveup.
A defaulting defendant may
attack the amount of a default judgment on appeal on the ground it is excessive
as a matter of law. (
362-364.) Uva sets forth the applicable standard: “The power of an appellate
court to review the trier of fact’s determination of damages is severely
circumscribed. An appellate court may
interfere with that determination only where the sum awarded is so disproportionate
to the evidence as to suggest that the verdict was the result of
passion, prejudice or corruption [citations] or where the award is so out
of proportion to the evidence that it shocks the conscience of the
appellate court. [Citations.]†(Id. at pp.
363-364.) The Uva court examined the evidence presented at a default proveup
hearing to determine if the damages awarded were “totally unconscionable and
without evidentiary justification.†(
b. Damages
for injury to reputation were excessive.
A statement which is defamatory
on its face, such as a statement that tends to injure plaintiff in his or her
occupation, is libelous per se and actionable without proof of special
damage. (Civ. Code, § 45; 5 Witkin,
Summary of Cal. Law (10th ed. 2005) Torts, § 541, p. 794.) However, a plaintiff’s failure to prove
special damages is a factor in concluding that damages for injury to reputation
are excessive. (Weller v. American Broadcasting Companies, Inc. (1991) 232
Cal.App.3d 991, 1014.)
Here, the trial court
awarded $5 million to Gary, and $1 million each to Theresa and Carolyn, for
loss of professional and personal reputation.
Although Gary, Theresa and
Carolyn claimed that Marciano injured their professional reputation, they did
not present any evidence of lost clients or lost revenue. They made no attempt to quantify how the
injury to their reputation affected their earnings. There was no showing as to how Marciano’s
conduct impaired their earnings.
The only specificity was in
the following testimony by Gary: “I got
a call from a CPA in New York with a large accounting firm. . . . [¶]
And he said, ‘Gary, I’ve heard about this Marciano thing,
before I refer you to this potential client.’ †(Italics added.) However, Gary did not testify as to whether he landed that potential client.
Another witness at the
default proveup hearing was Murray Lugash, a client who had known Gary for 12
years. In the past, Lugash had referred
friends or associates to Gary. With
respect to the impact of Marciano’s attacks on Gary’s reputation, Lugash
testified as follows:
“Q And have you observed any reluctance on the
part of people to become involved with [Gary] in light of these attacks?
“A I don’t
know, and I didn’t think it was appropriate for me to ask them, so I just
let it lie.
“Q Did any of them hire [Gary]?
“A I don’t
know.†(Italics added.)
With respect to his own
business involvement with Gary, Lugash only testified he had put some things
“on hold†because Gary was so preoccupied with the Marciano matter. To wit:
“Q Now, in view of the amount of attention and
time that [Gary] has had to put into dealing with and defending himself against
Marciano’s attacks, has that affected any decisions you might make with respect
to your business involving [Gary]?
“A Only to
the extent that we’ve put a lot of things on hold because we didn’t feel that
we were getting his full attention, especially over the last year.†(Italics added.)
Lynne Doll, the president of
a public relations agency and head of its risk management crisis communications
practice, developed a five-year “reputation repair and management plan†to
repair the damage to the reputations of Gary and his firm. The projected cost of the public relations campaign
was $1,945,000.
On this record, in view of
the absence of any evidence of loss of clients, loss of potential clients, or
loss of revenue, the evidence does not begin to support the $7 million awarded
to Gary, Theresa and Carolyn as damages for injury to reputation.
c
Excessiveness of emotional distress damages.
As indicated,
the trial court awarded Gary, Theresa and Carolyn a total of
damages. The trial court allocated those
damages as follows: to Gary, $10 million
for “emotional distress†and $10 million for “shame, mortification and hurt
feelings;†to Theresa, $1 million for “emotional distress†and $1 million
for “shame, mortification and hurt feelings;†and to Carolyn, $1 million for
“emotional distress†and $1 million for “shame, mortification and hurt
feelings.†Despite the enormity of the
award for emotional distress, neither Gary, Theresa nor Carolyn’s emotional
distress was sufficiently severe to compel them to seek out psychotherapeutic
treatment. With respect to the issue of
damages, the testimony was minimal.
We summarize the brief testimony as follows:
(1) Expert
testimony.
Saul J. Faerstein, M.D., is a psychiatrist who
examined Gary, Theresa and Carolyn, solely for the purpose of determining the
result of Marciano’s conduct, and in order to make recommendations for their
future treatment.
With respect to Gary, Dr.
Faerstein opined the Marciano matter touched every aspect of Gary’s life, and
caused him “emotional distress symptoms, anxiety, . . . sleep problems.†For the first time in 2006, Gary was
diagnosed with high blood pressure, which had to be treated with
medication. Gary’s self-image also
suffered because his good name had been vilified. Gary feared for his own and his family’s
safety and became hypervigilant, which is a symptom of post-traumatic stress
syndrome. Gary’s physical manifestations
included a stress-related skin rash in 2008, as well as hair loss, a loss of
appetite, and more frequent sinus infections.
Dr. Faerstein opined Gary “
and “medication might also be important.†(Italics added.) “Through most of this, his therapist was [Theresa], . . . they leaned on each other for
support and help.†(Italics added.)
With respect to Theresa’s
damages, Dr. Faerstein testified Gary’s emotional distress was “infectious†and
Gary and Theresa’s domestic life was impacted.
Theresa also suffered sleeplessness, suffered from anxiety and somatic
symptoms, and felt afraid and isolated, as Gary became more withdrawn. Dr. Faerstein diagnosed Theresa as suffering
from “adjustment disorder with anxiety and depression.†He opined Theresa also would benefit from
supportive therapy and medication to deal with the damage caused by Marciano.
As for Carolyn, Dr.
Faerstein testified she felt she was being singled out by Marciano and felt
helpless, worried and isolated. She
began having physical symptoms, including heart palpitations, cried frequently,
had headaches, was hypervigilant, and had hyperventilation. Carolyn was so worried she consulted a
cardiologist, who reassured her there was nothing wrong with her heart and that
it was stress related. Dr. Faerstein
diagnosed Carolyn as having an “an adjustment disorder with mixed emotional
features[,] . . . meaning depression and anxiety.†Dr. Faerstein recommended Carolyn “seek
treatment and to have somebody evaluate with a medication, when necessary.â€
(2) Other
testimony.
At the default proveup, Gary
testified that Marciano’s attacks caused him the following physical
reactions: stress, high blood pressure,
skin problems, sinus infections, sleeplessness, hair loss, and aggravated his
asthma. Gary further testified that his
wife, Theresa, also suffered from stress and sleeplessness.
Alfred Hibdon, a CPA and
attorney who has known Gary for 36 years, testified that in the past three
years, Marciano’s attacks on Gary had taken their toll, so that
“every conversation was about Marciano, every minute all the time.†The situation had affected Gary mentally as
well as physically, “and it’s really sad to say, but [Gary] has aged over 10
years in my opinion. He’s gone totally
white-headed. And I know he doesn’t like
[to] hear this, but he’s lost a lot of his hair.â€
Carolyn and Theresa did not
testify at the August 26, 2009 default proveup hearing on damages, but the
trial court took judicial notice of their testimony during the July 17, 2009
default prove-up hearing on liability issues.
In substance,
Carolyn’s testimony at the earlier hearing was that she felt shock, disbelief
and anger at Marciano’s attacks. “This
was just so offensive and it was frustrating, because I couldn’t do anything
about it. It was all false, and I had no way of answering it so I was very
upset.â€
As for Theresa,
at the earlier hearing she testified she felt “embarrassed and humiliated†at
Marciano’s attacks, and felt “sick to [her] stomach.†She began fearing for her personal safety
because Marciano had been relentless.
(3) Award
of $24 million for emotional distress must be reversed as excessive.
On review of the
trial court’s award of damages on a default proveup, the award is reversible if
“the award is so out of proportion to the evidence that it shocks the
conscience of the appellate court.†(
364.) The emotional distress
damages awarded here, $20 million to Gary and $2 million apiece to Theresa and
Carolyn, readily meet that standard. It
is sufficient to note that neither Gary, Theresa, nor Carolyn obtained
psychotherapeutic treatment to cope with Marciano’s attacks. A plaintiff may recover damages for emotional
distress without having undergone psychotherapy. However, it stands to reason that severe
emotional distress which would warrant an award of $24 million in damages would
be supported by substantial damages incurred to treat such severe emotional
distress.
(4) Trial
court awarded duplicative damages for emotional distress.
Moreover, the
$24 million award of emotional distress damages was duplicative.
On his statement of damages,
on the line for general damages, Gary entered $10 million on the “Emotional
Distress†line. Then, on the line for
other general damages, Gary again entered $10 million and wrote “shame, mortification
and hurt feelings.†Similarly, Carolyn
and Theresa, on their statements of damages, each requested $1 million for
“emotional distress†and another $1 million for “shame, mortification and hurt
feelings.†The trial court awarded
damages to Gary, Carolyn and Theresa exactly as they had requested.
“The range of mental or
emotional injury subsumed within the rubric ‘emotional distress’ and for which
damages are presently recoverable ‘includes fright, nervousness, grief,
anxiety, worry, mortification, shock, humiliation and indignity, as well as
physical pain.’ [Citation.]†(Thing
v. La Chusa (1989) 48 Cal.3d 644, 648-649.)
Therefore, subsumed within the request for general damages for emotional
distress was the request for the subspecies of damages denominated “shame,
mortification and hurt feelings.â€
Further, there
was no attempt at the default proveup to differentiate between emotional
distress, shame, mortification and hurt feelings. Moreover, “[r]egardless of the nature or
number of legal theories advanced by the plaintiff, he is not entitled to more
than a single recovery for each distinct item of compensable damage supported
by the evidence. [Citation.] Double or duplicative recovery for the same
items of damage amounts to overcompensation and is therefore prohibited.†(Tavaglione
v. Billings (1993) 4 Cal.4th 1150, 1158-1159.)
The duplicative nature of
the emotional distress damages which were awarded by the trial court is an
additional basis for reversal of the judgment.
c. Punitive
damages award of $24 million also must be redetermined on remand.
Because punitive damages
must bear a reasonable relationship to compensatory damages or to the actual or
potential harm to the plaintiff (Bullock
v. Philip Morris USA, Inc. (2011) 198 Cal.App.4th 543, 563), the
reversal of the compensatory damage awards also requires reversal of the
punitive damage awards for a new determination in that regard.
5. Judicial
assignment issues.
a.
Reassignment to a different judge
on remand.
Code of Civil
Procedure section 170.1, subdivision (c) states: “At the request of a party
shall consider whether in the interests of justice it should direct that
further proceedings be heard before a trial judge other than the judge whose
judgment or order was reviewed by the appellate court.†(Italics added.) Said provision “was sponsored by the State
Bar of California and, according to the report of the Senate Committee on the
Judiciary, ‘[t]he reason for the change is that a judge who has had his
determinations reversed might not undertake a retrial with total
objectivity.’ (Sen. Com. on Judiciary,
Rep. on Sen. Bill No. 1633, Disqualification of Judges, p. 8.)†(People
v. Gulbrandsen (1989) 209 Cal.App.3d 1547, 1562.)
Here, the enormous
damages assessed by Judge White against Marciano, resting on the limited
evidentiary showing made by the Iskowitz cross-complainants in support of their
default proveup request, weigh in favor of directing that proceedings on remand
should be heard before a different judge.
We make the
further observation that Judge White repeatedly personalized the issue of
damages, stating: “I would not have
wanted to go through†what each of the Iskowitz parties went through, and “I
would not have wanted to have a career that I had worked 30-plus years to
maintain destroyed by some guy who thought it was amusing.†It is “improper for the jury to attempt to
measure the damage occasioned by the injury and the sufferings attendant upon
it, by asking themselves what sum they would take to endure what plaintiff has
endured, and must endure.†(
(1964) 61 Cal.2d 602, 609.) Where, as
here, the trial judge sits as the trier of fact, the trial judge is subject to
the same rules as the jury. (
79 Cal.App.2d 409, 410.)
Further, the trial court was mindful of Marciano’s picketing the
courthouse and repeatedly mentioned that fact at the default proveup. The trial court stated: “I am being asked to make the determination
of damages in this case. I can well
imagine what it must have been like to live through this, knowing as I do of
Mr. Marciano’s wealth, knowing as I do of Mr. Marciano’s tendency to flaunt [
case. He stops at nothing,
months on end, which I feel I must mention. [¶]
I’m sure that he would say that I am not unbiased, but after having
given him every opportunity to provide me with evidence and after having tried
again and again and again to require him to produce the evidence, and having
him flaunt [sic] the judicial
proceedings, having him flaunt [sic]
this court, and having picketed the
courthouse for months on end, I feel no pity for Mr. Marciano.†(Italics added.)
For all these
reasons, it would be appropriate for the default proveup on remand to be heard
by a different judge.
b.
Unnecessary to address Marciano’s
challenge to Judge White.
Marciano contends
Judge White’s bias deprived him of his constitutional due process right to an
impartial judge, and because an impartial judge is a basic requirement of due
process, his bias claim is not barred by his decision not to seek a writ of
mandate under Code of Civil Procedure section 170.3, subdivision (d), after
Judge White refused to disqualify herself.
By way of
background, on February 25, 2009, the trial court imposed terminating sanctions
against Marciano. On July 23, 2009,
prior to the default proveup hearing on damages, Marciano filed a verified
statement of disqualification against Judge White, who ordered the statement
stricken as untimely. Thereafter, the
trial court proceeded with the default proveup.
In view of our
determination that a different judge should hear the matter on remand, it is
unnecessary to address whether Judge White erred in striking the statement of
disqualification, or any related issues.
DISPOSITION
The February 25, 2009 order of dismissal is affirmed. The judgment entered August 26, 2009 is
reversed only with respect to the award of damages against Georges Marciano,
individually. In all other respects, the
judgment is affirmed; the entry of default against Marciano is
undisturbed. The matter is remanded
for a new default proveup hearing on damages.
On remand, the Presiding Judge of the Los Angeles Superior Court
shall assign the case to a different trial judge (Code Civ. Proc.,
§ 170.1, subd. (c)), who shall conduct a new damages proveup hearing to
determine the amount of Gary, Theresa and Carolyn’s damages on their
cross-complaint. The parties
shall bear their respective costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
KLEIN,
P.J.
We concur:
KITCHING,
J.
ALDRICH,
J.
Marciano individually, the plaintiffs were as follows: Marciano as trustee for Georges Marciano
Trust, M.D., Marciano 1987 Investment Trust, Georges Marciano Gift Trust FBO
Matthew, Georges Marciano Gift Trust FBO Scott, Scott Marciano - 1988
Investment Trust, Georges Marciano Gift Trust II FBO Kevin, Georges Marciano
Gift Trust II FBO Matthew, Georges Marciano Gift Trust II FBO Scott, Georges
Marciano Gift Trust II FBO Chloe, Georges Marciano 1994 Investment Trust FBO
Kevin, Georges Marciano 1994 Investment Trust FBO Scott, Georges Marciano 1994
Investment Trust FBO Matthew, Georges Marciano 1994 Investment Trust FBO Chloe,
Beverly Wilshire Properties, Beverly Hills Antiques, MSK Properties, Kevinair,
Fox Properties, Georges Marciano Holdings, Inc., Georges Marciano Finance,
Inc., Go Jeans USA, Just Jeans, Inc., and 9521 Sunset LLC.
clarity, we refer to the individual Iskowitz parties by their first names.
