California Supreme Court Review: May 2023

The California Supreme Court recently accepted for review a case that litigating attorneys are sure to want to monitor as it touches upon discovery - an integral part of litigation. This month's column takes a look at City of Los Angeles v. PricewaterhouseCoopers, LLC and analyzes how the Court's decision may affect the discovery process.

In City of Los Angeles v. PricewaterhouseCoopers, LLC, 84 Cal.App.5th 466, 476 (2022), the City of Los Angeles ("City") entered into a contract with PricewaterhouseCoopers, LLC (PWC) to modernize the Los Angeles Department of Water and Power's (LADWP) billing system. After the new billing system was implemented and LADWP customers were inaccurately billed, the City filed a lawsuit against PWC alleging that PWC fraudulently induced the City to enter into the contract for the billing system and breached the contract. Id. As litigation progressed, PWC propounded various discovery requests to the City, including requests for production and deposition notices, and filed numerous motions to compel its requested discovery. Id. at 477-90. Eventually, the City filed a request for dismissal of its case against PWC with prejudice. Id. at 490. After the dismissal was entered, PWC filed a motion for monetary sanctions pursuant to California Code of Civil Procedure sections 2023.010 and 2023.030, seeking a baseline amount of $8,002,412 against the City for alleged egregious misuse of the discovery process. Id. at 492. The trial court granted PWC's motion and awarded sanctions against the City in the amount of $2.5 million, noting that a judge has broad discretion to impose monetary sanctions against anyone who has misused the discovery process and that the power to impose sanctions under the Civil Discovery Act, Code of Civil Procedure sections 2016.010 et seq. ("Discovery Act") supplemented, but did not supplant, the court's inherent power to deal with litigation abuse. Id. at 495.

The Courts of Appeal reversed the grant of sanctions and remanded the matter back to the trial court to enter a different order on the issue of monetary sanctions. Id. at 514. The Court of Appeal disagreed with PWC's argument that the trial court's inherent power to control the litigation includes the authority to impose monetary sanctions for discovery violations, finding instead that a trial court's inherent authority only includes the imposition of nonmonetary sanctions to remedy misconduct and ensure a fair trial, and that attorney fees as a sanction for misconduct may only be granted when authorized by statute or an agreement of the parties. Id. at 510.

The following question is now before the Court: Is a court's authority to impose monetary sanctions for misuse of the discovery process limited to circumstances expressly delineated in a method-specific provision of the Discovery Act, or do courts have independent authority to impose monetary sanctions for such discovery misconduct, including under Code of Civil Procedures sections 2023.010 and 2023.030?

If the Court agrees with the Court of Appeal, litigators seeking monetary sanctions will have to be careful about how they request them, as it would be insufficient to cite generally to Code of Civil Procedures sections 2023.010 and 2023.030. Instead, counsel will have to be sure that the monetary sanctions they seek are among those expressly set forth in the Discovery Act, otherwise they will not be entitled to recover their fees. And, if this more stringent standard for seeking monetary sanctions is adopted, we will have to wait and see if it encourages more slipshod discovery practices and whether it spurs parties negotiating contracts to craft provisions that ensure adequate recompense for fees incurred during the discovery process.

However, if the Court sides with the trial court and PWC, then it could open up the door for litigators expanding the grounds for which monetary sanctions for misuse of the discovery process may be sought. Either way, City of Los Angeles v. PricewaterhouseCoopers, LLC will affect not only how litigators seek monetary sanctions related to the discovery process, but also how they choose to conduct discovery in general, as sanctions are designed to influence how attentive litigators are to the discovery process. Litigators should keep an eye out for the Court's decision so that they can prepare themselves for how the discovery process and seeking sanctions for discovery misuse may shift.