BILL ANALYSIS Ó SENATE JUDICIARY COMMITTEE Senator Noreen Evans, Chair 2011-2012 Regular Session SB 603 (Berryhill) As Amended March 31, 2011 Hearing Date: May 10, 2011 Fiscal: No Urgency: No SK SUBJECT Vexatious Litigants: Represented Plaintiffs DESCRIPTION Existing law authorizes a court to declare a person to be a vexatious litigant when that person has repeatedly abused the judicial process by bringing meritless lawsuits in propria persona (for one's self) (pro per). This bill would remove the requirement that the action be brought in pro per so that a plaintiff represented by an attorney could be declared a vexatious litigant if he or she met existing statutory requirements. BACKGROUND Under existing law, a court may declare a person to be a vexatious litigant when that person represents himself or herself and has repeatedly abused the legal system by doing any of the following: (1) filed at least five unmeritorious lawsuits in the past seven years; (2) repeatedly relitigates, after a final adverse finding, the validity of the final determination or the actual cause of action against the same defendant; (3) repeatedly engages in tactics that are frivolous or solely intended to cause unnecessary delay; and (4) has previously been declared to be a vexatious litigant by a state or federal court in an action based upon the same or substantially similar facts. Current law permits a court to enter a prefiling order which prohibits a vexatious litigant from filing any new litigation in pro per ("pro per" refers to a plaintiff who represents himself or herself) without first obtaining permission of the presiding judge of the court where the litigation is to be filed. SB 603 (Berryhill) Page 2 of ? Existing law permits the judge to allow the filing of that litigation only if it appears that the litigation has merit and has not been filed for the purposes of harassment or delay. The court may also require the plaintiff to furnish a security to assure payment of reasonable expenses. In the spring of 2010, the Policy Coordination and Liaison Committee, the Trial Court Presiding Judges Advisory Committee, and the Civil and Small Claims Advisory Committee of the Judicial Council proposed legislation to improve the practice and procedure for courts dealing with vexatious litigants. That proposed legislation has been introduced by this Committee (SB 731 (Committee on Judiciary)), and is currently pending in the Assembly. As a part of its process, the Judicial Council committees circulated the proposal that would eventually become SB 731 during its spring 2010 invitation-to-comment cycle. Several of the comments received concerned "whether section 391.7 should be expanded to apply to a vexatious litigant represented by an attorney." The advisory committees did not incorporate such a provision in the legislative proposal and instead "decided to defer recommending legislation that would expand the applicability of section 391.7 to a vexatious litigant represented by counsel." This bill, sponsored by the Civil Justice Association of California, would expand the applicability of California's vexatious litigant statute to include plaintiffs represented by counsel. CHANGES TO EXISTING LAW 1.Existing law defines "vexatious litigant" to mean a person who does any of the following: a. In the immediately preceding seven years, filed, in pro per, at least five actions, other than in small claims court, that have been either: (1) finally determined adversely to the person or (2) unjustifiably permitted to remain pending at least two years without having been brought to trial or hearing; b. After a final adverse ruling against the person, repeatedly relitigates or attempts to relitigate, in pro per, either: (1) the validity of the final determination or (2) the actual cause of action against the same defendant; c. In any litigation while acting in pro per, repeatedly files unmeritorious motions, pleadings, or other papers, conducts unnecessary discovery, or engages in other tactics SB 603 (Berryhill) Page 3 of ? that are frivolous or solely intended to cause unnecessary delay; and d. Has previously been declared to be a vexatious litigant by a state or federal court in an action based upon the same or substantially similar facts. (Code Civ. Proc. Sec. 391.) Existing law provides that a defendant may make a motion for an order requiring a plaintiff to provide security when it can be shown that the plaintiff is a vexatious litigant and there is not a reasonable probability that he or she will prevail in the litigation. (Code Civ. Proc. Sec. 391.1.) After hearing the evidence upon the motion, if the court determines that the plaintiff is a vexatious litigant and that there is no reasonably probability that he or she will prevail, the court must order the plaintiff to furnish security in an amount determined by the court and for the benefit of the defendant. (Code Civ. Proc. Sec. 391.3.) If that security is not furnished, the lawsuit shall be dismissed. (Code Civ. Proc. Sec. 391.4.) This bill would delete "in pro per" from (b) and (c) above, thus expanding the applicability of these sections to include plaintiffs represented by counsel. This bill would specify that a vexatious litigant designation shall not attach to an attorney representing a vexatious client. 2.Existing law permits the court to enter a prefiling order which prohibits a vexatious litigant from filing any new litigation in pro per without first obtaining permission of the presiding judge of the court where the litigation is to be filed. Existing law permits the judge to allow the filing of that litigation only if it appears that the litigation has merit and has not been filed for the purposes of harassment or delay. (Code Civ. Proc. Sec. 391.7.) This bill would delete "in pro per" from this provision, thus expanding the applicability of this sections to include plaintiffs represented by counsel. 3.Existing law permits a trial court to order a party or the party's attorney to pay any reasonable expenses incurred by another party as a result of bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary delay. SB 603 (Berryhill) Page 4 of ? (Code Civ. Proc. Sec. 128.5.) Existing law provides that by presenting to the court a pleading, petition, written notice of motion or similar paper, an attorney is representing to the best of his or her knowledge, information, and belief that the following conditions are true: a. it is not being presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; b. the claims, defenses, and other legal contentions therein are warranted by existing law or a nonfrivolous argument for the extension, modification, or reversal or existing law or the establishment of new law; c. the allegations and other factual contentions have evidentiary support, or are likely to have that support after a reasonable opportunity for further investigation or discovery; and d. the denials of factual contentions are warranted on the evidence or are reasonably based on a lack of information or belief. (Code Civ. Proc. Sec. 128.7(b).) Existing law authorizes a court to impose sanctions against an attorney if the court determines that any of the above provisions in Section 128.7(b) have been violated. Existing law provides that a motion for sanctions shall be made separately from other motions or requests and shall describe the specific conduct alleged to violate Section 128.7(b). The court may also impose sanctions on its own motion, as specified. (Code Civ. Proc. Sec. 128.7(c).) This bill would require a court to make its decision on the record regarding a motion for sanctions pursuant to the above and to specify the reasons for the decision. 4.Existing law provides in family law cases that a court may base an award of attorney's fees and costs on the extent to which the conduct of each party or attorney furthers or frustrates the policy of the law to promote settlement of litigation and, where possible, to reduce the cost of litigation by encouraging cooperation between the parties and attorneys. Existing law requires the court in making an award of attorney's fees and costs-which are in the nature of a sanction-to take into consideration all evidence concerning the parties' incomes, assets, and liabilities. Under existing law, the court may not impose a sanction that imposes an SB 603 (Berryhill) Page 5 of ? unreasonable financial burden on the party against whom the sanction is imposed. (Fam. Code Sec. 271.) This bill would provide that when a court is requiring security of a vexatious litigant in family court litigation, the court's determination of that security shall be based on the same considerations as used in the section above. This bill would provide that the vexatious litigant statutes do not apply to litigation involving domestic violence, child custody, or child support. COMMENT 1.Stated need for the bill In support of the bill, the author writes: Excessive and unwarranted lawsuits have been identified as a significant problem in California that greatly hinders the state's economy. . . . Case law has held that once a person receives a vexatious litigant designation, thereafter they are still subject to having to file a bond if they hire an attorney but not prefiling approval by a judge. Additionally, there have been cases where a vexatious litigant gets someone to be their attorney to file a case, to only come off the case just to help the litigant get around the procedural requirements so that the harassment can continue. Just because someone has an attorney does not mean he or she is not acting as a vexatious litigant. A vexatious litigant status is imposed sparingly by judges and is a good tool to help control uncontrollable filings in a case; this bill would remove this distinction and allow a judge to find a person a vexatious litigant irrespective of whether he or she has an attorney if the level of abuse has reached such a level. Although there are some provisions on the books to protect against this problem, courts are often reluctant to employ them, moreover, when denying motions that would otherwise stop this conduct, they are not required to make written findings on their decisions which means there is no appeal of that issue. Wronged parties often have no recourse when an attorney acts on behalf of a client in bringing these claims but to engage in settlement (thereby encouraging nuisance suits) or pay for expensive litigation to take a principled stand. California's court system is already overwhelmed by SB 603 (Berryhill) Page 6 of ? the number of cases it has to deal with, so providing more scrutiny and authority to manage these cases will help reduce needless filings. Lawsuit abuse costs Californians millions of dollars every year and perpetuates a climate of fear for many small business owners. Consumers pay for frivolous lawsuits as businesses increase prices to cover their legal costs or shut down entirely. Sponsor Civil Justice Association of California writes: The vexatious litigant statute was enacted in 1963 in order to curb unwarranted litigation within California by allowing courts to require a security bond or approval of the court to file additional litigation (The California Vexatious Litigant Statute: A Viable Judicial Tool to Deny the Clever Obstructionists Access?, 72 S. Cal. L. Rev. 275, First Western Development Corp. v. Superior Court (1989) 212 Cal. App. 3d 860) Courts and commentators have observed that those who are found to be vexatious litigants cannot avoid the statute by thereafter hiring counsel because the purpose of the statute would be frustrated (The Vexatious Litigant, (1966) 54 Cal. L. Rev. 1769, Forrest v. Dept. of Corporations (2007) 150 Cal. App. 4th 183, Camerado Ins. Agency, Inc. v. Superior Court (1993) 12 Cal.App.4th 838, and In re Shieh (1993) 17 Cal.App.4th 1154). However, this has not been consistently applied, for example, a court recently found that the requisite approval to file additional litigation did not apply after a person hired an attorney (Flores v. Georgeson (2011) 191 Cal.App.4th 881) and in another the filing requirement was held to apply at the very beginning of a case, so that as long as an attorney represented the vexatious litigant at the beginning of a lawsuit it did not matter that the attorney withdrew (Shalant v. Girardi, 183 Cal.App.4th 545 (2010), review granted). Many vexatious litigants, even those with lawyers, file unwarranted lawsuits. Excessive and unwarranted lawsuits drive up business expenses, cost government additional money and increase the cost of goods and services for all Californians. Consumers pay for unjustified lawsuits as businesses increase their prices to cover legal costs or shut down. Additionally, employers cannot hire new employees or grow their business when they are spending precious capital in defending against meritless actions in litigation. SB 603 (Berryhill) Page 7 of ? This bill stems from one business' attempt to fight abusive tactics that have included legal threats, irrational motions to disqualify multiple judges, meritless ex-parte motions, and claims against unrelated third parties. It will cost this local business well over $300,000, even though the dispute is over a $6,500 claim. Businesses who are already struggling to stay afloat in this economic downturn should not have to waste resources on shakedown lawsuits instead of keeping their doors open or hiring more employees. 2.Purpose of vexatious litigant statute/current law already addresses improper behavior by lawyers Under existing law, a court may declare a person to be a vexatious litigant when that person has repeatedly abused the judicial process by bringing meritless lawsuits in pro per. This bill would remove the requirement that the action be brought in pro per, thus allowing a plaintiff represented by an attorney to be declared a vexatious litigant if he or she met existing statutory requirements. a. Statutory requirements Those statutory requirements law define a "vexatious litigant" to mean a person who does any of the following: (1) in the immediately preceding seven years, filed, in pro per, at least five actions, other than in small claims court, that have been either (a) finally determined adversely to the person or (b) unjustifiably permitted to remain pending at least two years without having been brought to trial or hearing; (2) after a final adverse ruling against the person, repeatedly relitigates or attempts to relitigate, in pro per, either (a) the validity of the final determination or (b) the actual cause of action against the same defendant; (3) in any litigation while acting in pro per, repeatedly files unmeritorious motions, pleadings, or other papers, conducts unnecessary discovery, or engages in other tactics that are frivolous or solely intended to cause unnecessary delay; or (4) has previously been declared to be a vexatious litigant by a state or federal court in an action based upon the same or substantially similar facts. Once a plaintiff is declared to be a vexatious litigant, a defendant may make a motion for an order requiring a plaintiff to provide security when it can be shown that the plaintiff is SB 603 (Berryhill) Page 8 of ? a vexatious litigant and there is not a reasonable probability that he or she will prevail in the litigation. After hearing the evidence upon the motion, if the court determines that the plaintiff is a vexatious litigant and that there is no reasonable probability that he or she will prevail, the court must order the plaintiff to furnish security in an amount determined by the court and for the benefit of the defendant to assure payment of reasonable expenses. If that security is not furnished, the lawsuit shall be dismissed. A vexatious litigant may also be subject to a prefiling order which prohibits that litigant from filing any new litigation in pro per without first obtaining permission of the presiding judge of the court where the litigation is to be filed. Existing law permits the judge to allow the filing of that litigation only if it appears that the litigation has merit and has not been filed for the purposes of harassment or delay. b. Purpose of vexatious litigant statute The vexatious litigant statute was enacted in 1963 to "curb the abuse of vexatious litigation" (3 Witkin, Cal. Procedure (5th) Actions Sec. 365), and to prevent abuse of the judicial process. In First Western Development Corp. v. Superior Court (1989) 212 Cal. App. 3d 860, the court noted: The vexatious litigant statutes were enacted to require a person found a vexatious litigant to put up security for the reasonable expenses of a defendant who becomes the target of one of these obsessive and persistent litigants whose conduct can cause serious financial results to the unfortunate object of his attack. The purpose of the statutory scheme is to deal with the problem created by the persistent and obsessive litigant who has constantly pending a number of groundless actions, often against the judges and other court officers who decide or were concerned in the decision of previous actions adversely to him. . . . A litigant who loses then burdens the courts with new actions and repeated appeals based on the same controversy and with no reasonable possibility of prevailing wastes valuable court time. It is axiomatic in our system of justice that every person is entitled to his day in court; however, a litigant is not entitled to two days in court. Ýcitations omitted] (Id. at 867-870). SB 603 (Berryhill) Page 9 of ? By applying only to pro per plaintiffs, the vexatious litigant statute distinguishes between plaintiffs who bring their cases in pro per and those who are represented by attorneys. In upholding this distinction, the First District Court of Appeal held that the statute's application "to persons proceeding in propria persona is not arbitrary or unreasonable. Attorneys are governed by prescribed rules of ethics and professional conduct, and, as officers of the court, are subject to disbarment, suspension, and other disciplinary sanctions not applicable to litigants in propria persona." (Taliaferro v. Hoogs, (1965) 236 Cal.App.2d 521.) c. Current already law addresses improper behavior by lawyers As the court in Taliaferro noted, current law already contains a number of sanctions that may be imposed on attorneys when they engage in improper conduct. As a result, limiting the vexatious litigant statute to actions brought by pro per plaintiffs is appropriate. For example, Code of Civil Procedure Section 128.5 permits a trial court to order a party or the party's attorney to pay any reasonable expenses incurred by another party as a result of bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary delay. Code of Civil Procedure Section 128.7 authorizes a court to impose sanctions against an attorney if the court determines that the attorney has violated any of the following by presenting to the court a pleading, petition, written notice of motion or similar paper: (1) the filing is primarily filed for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; (2) the claims, defenses, and other legal contentions therein are not warranted by existing law or a frivolous argument for the extension, modification, or reversal or existing law or the establishment of new law; (3) the allegations and other factual contentions do not have evidentiary support, or are not likely to have that support after a reasonable opportunity for further investigation or discovery; and (4) the denials of factual contentions are not warranted on the evidence or are not reasonably based on a lack of information or belief. Existing law also permits a court to impose sanctions against an attorney or a party for engaging in conduct that is a SB 603 (Berryhill) Page 10 of ? misuse of the discovery process. (Code Civ. Proc. Secs. 2023.010 - 2023.040.) Finally, existing law, the State Bar Act, provides that it is the duty of an attorney to do, among other things, the following and subjects the attorney to possible discipline for violation: (1) maintain the respect due to the courts of justice and judicial officers; (2) counsel or maintain those actions, proceedings, or defenses only as appear to him or her legal or just, except the defense of a person charged with a public offense; and (3) employ, for the purpose of maintaining the causes confided to him or her those means only as are consistent with truth, and never to seek to mislead the judge or any judicial officer by an artifice or false statement of fact or law. (Bus. & Prof. Code Sec. 6068.) On these points, the Consumer Attorneys of California write in opposition, ". . . sanctions law is carefully designed to punish bad tactics without discouraging innovative, cutting edge legal theories such as those involving civil rights. . . . The vexatious litigant statute was enacted to restrict the ability of unrepresented individuals to repeatedly initiate unmeritorious claims. The problem of attorney initiated vexatious litigation, although real, has already been addressed. The legislature has carefully reviewed California's sanctions statutes, and in 1994 enacted ÝSection 128.7] . . . to provide additional checks against 'frivolous' actions. The amendments were carefully crafted to permit sanctions against attorneys' improper conduct, and to address tactics whether engaged in by a plaintiff or defense attorney. Most importantly, the legislature strove to strike a balance in deterring bad tactics without chilling legitimate advocacy." IS THIS BILL NECESSARY GIVEN THAT OTHER PROVISIONS OF LAW ALREADY DEAL WITH IMPROPER TACTICS BY LAWYERS? 1.Does this bill have a possible chilling effect? By extending the vexatious litigant statute to represented plaintiffs, this bill would prevent a vexatious litigant from filing any new actions with or without a lawyer if a prefiling order was in place. Organizations that represent low-income clients raise concerns about the possible effects of the bill given that they may be testing novel legal theories to vindicate an important public right. On this point, California Rural Legal Assistance Foundation and Western Center on Law & Poverty SB 603 (Berryhill) Page 11 of ? write: . . . we believe that to extend this statute to counsel would have a chilling effect on vindicating important rights. Our clients benefit from private attorneys willing to take their cases; legal aid organizations lack the resources to handle all the cases presented to them. Sometimes they propose novel legal theories, perhaps after the in pro per litigant has tried and failed. DOES THIS BILL HAVE A POSSIBLE CHILLING EFFECT? COULD THIS BILL CHILL LEGITIMATE ADVOCACY? 2.Is this bill premature given that the California Supreme Court is currently considering this issue? Existing law provides that a vexatious litigant plaintiff may be subject to a prefiling order which prohibits him or her from filing any new litigation in pro per without first obtaining the judge's permission in the court where the litigation is to be filed. This bill would delete the term "in pro per." The effect of this change is to provide that a prefiling order would prohibit the vexatious litigant from filing any new litigation whether he or she is bringing the action in pro per or is represented by an attorney. As the sponsor notes, the recent decision in Shalant v. Girardi (2010) 183 Cal. App. 4th 545, review granted, is currently under review by the California Supreme Court. In Shalant, the vexatious litigant plaintiff was subject to a prefiling order that prohibited him from "filing any new litigation in propria persona in the courts of California without approval of the presiding judge of the court in which the action is to be filed." (Id. at 549.) While represented by counsel, the plaintiff Shalant filed an action alleging, among other things, breach of contract and breach of the covenant of good faith and fair dealing. Beginning about five months after the filing of the case and over the next year and a half, the plaintiff was represented by his original counsel, new counsel, the plaintiff himself, original counsel, and the plaintiff himself, in that order. At that point, the defendants filed a notice of the plaintiff's status as a vexatious litigant subject to a prefiling order, and a motion to dismiss the case on that basis. The trial court granted that motion, and the Second District Court of Appeal reversed the ruling, holding that a prefiling order issued under the vexatious litigant statute "governs only the initiation of a lawsuit, not what occurs during the SB 603 (Berryhill) Page 12 of ? prosecution of the litigation." (Id. at 554.) The California Supreme Court granted review of this case to decide the following question: If a vexatious litigant subject to a prefiling order files a lawsuit while represented by counsel, but counsel substitutes out or is otherwise relieved, may the litigant proceed in propria persona without first obtaining the approval of the presiding judge under Code of Civil Procedure section 391.7? As a result, the Court will decide whether or not a vexatious litigant plaintiff is in violation of a prefiling order if he or she is represented by counsel at the time the litigation is commenced but at some point during the litigation he or she becomes self-represented. This bill, by providing that a prefiling order would prohibit a vexatious litigant from filing any new litigation whether he or she is bringing the action in pro per or is represented by an attorney, generally concerns the issues to be decided by the Court. Proponents of the bill have raised the concern that vexatious litigants can "game" the system by filing an action while represented by counsel, then substituting out or relieving that counsel, and still proceeding with their action despite a prefiling order that may be in place. In deciding to review Shalant v. Girardi, the California Supreme Court is deciding just that question. As a result, the Committee should consider whether it is appropriate to approve of this measure while the Court decides the matter. On this point, the Consumer Attorneys of California, in opposition, write that because the court "is already reviewing this general issue in Shalant v. Girardi . . . Ýi]t is better policy to await a decision, review that decision, and then review changes if necessary." IS THIS BILL PREMATURE GIVEN THAT THE CALIFORNIA SUPREME COURT IS CURRENTLY CONSIDERING THIS ISSUE? 5. Additional support arguments California Citizens Against Lawsuit Abuse (CALA) writes in support of the bill, stating that the bill "will tackle the ongoing issue of vexatious litigants who continually re-litigate decided issues or file meritless and harassing claims. SB 603 is a vehicle that will tackle the excessive and unwarranted SB 603 (Berryhill) Page 13 of ? lawsuits in our state, which have been identified as a significant problem that greatly hinders the state's economy. Lawsuit abuse costs Californians millions of dollars every year and perpetuates a climate of fear among small business owners. Consumers pay for frivolous lawsuits too. Businesses simply increase prices to cover their legal costs or they shut down entirely." Supporter Crusader Insurance Company offers the following example in support of the bill: One of our policyholders was recently involved in an automobile accident, causing damage to a 1973 Chevy pickup truck camper. Based on our appraisal, we accepted liability and promptly offered $3,993.14 for the truck's damage. The truck's owner rejected that offer and demanded payment of $13,000. Rather than provide evidence in support of his demand, the truck's owner, through his counsel, threatened to inflict financial hardship through various forms of litigation activity, citing "You will spend over $100,000 in litigation so it would be less expensive for you to simply pay $13,000 now." Our company has since spent over $300,000 in defending against the incessant barrage of improper filings, motions and actions brought by that truck owner. . . . like all other expenses in the business world, those defense costs will be passed on to consumers; and the expense to the justice system will be borne by the taxpayers. Support : American Council of Engineering Companies; Association of California Insurance Companies; California Association of Bed and Breakfast Inns; California Chamber of Commerce; California Chapter of the American Fence Association; California Citizens Against Lawsuit Abuse (CALA); California Fence Contractors' Association; California Grocers Association; California Independent Grocers Association; California Hotel & Lodging Association; Crusader Insurance Company; Engineering Contractors' Association; Flasher Barricade Association; Marin Builders' Association; Valley Industry and Commerce Association; Western Electrical Contractors Association; one individual Opposition : California Rural Legal Assistance Foundation; Consumer Attorneys of California; Consumer Federation of California; Western Center on Law & Poverty HISTORY SB 603 (Berryhill) Page 14 of ? Source : Civil Justice Association of California Related Pending Legislation : SB 731 (Committee on Judiciary), which would clarify that existing law relating to vexatious litigants applies to matters in the Courts of Appeal and would create a process for the courts to follow when a vexatious litigant seeks removal from Judicial Council's vexatious litigant list, is pending in the Assembly. Prior Legislation : AB 1340 (Jones, Ch. 293, Stats. 2008), provided, among another things, that if a person who is not the conservatee and who has previously filed unmeritorious or harassing pleadings in a conservatorship proceeding, files an unmeritorious petition to terminate the conservatorship intended to harass or annoy the conservator, the petition is grounds for the court declare the person a vexatious litigant. AB 1891 (Niello, 2008), would have required a trial court to order a party, the party's attorney, or both to pay reasonable expenses incurred by another party as a result of any filing, action, or tactic that is frivolous, clearly unjustified, or otherwise substantially devoid of merit. AB 1891 failed passage in the Assembly Judiciary Committee. AB 1861 (Harman, 2002), would have enacted a new "Special Motion to Strike" to strike all or any part of a civil action complaint based on any privileged statement, testimony, or evidence made or offered at a parole hearing, if the complaint against the defendant, or any portion of that complaint, is filed by a plaintiff unrepresented by counsel and incarcerated as specified by the bill. AB 1861 failed passage in the Senate Public Safety Committee. **************