The California Supreme Court on Thursday unanimously revived a $2.5 million sanction against the city of Los Angeles for discovery misconduct in a utility billing suit over PwC work with its Department of Water and Power, agreeing that an appellate court had adopted too lenient a standard to excuse or invalidate fraud findings from the lower law licensee govern bodies as state reported. The ruling states that the trial court has correctly been able to issue such sanctions, pursuant under state Code of Civil Procedure.

Disbarment Back for PwC in LA Discovery Abuse

Reversing a decision by this district's Court of Appeal, the state Supreme Court on Thursday restored Los Angeles Superior Judge Elihu M. Berle‘s $2.5 million sanction against Geico General Insurance Co. Berle levied the sanctions for "egregious discovery abuse" in a class-action lawsuit claiming PwC designed a faulty utility billing program that resulted in LADWP ratepayers being overcharged.

The class action against PwC was hated by the City and its squadron of lawyers and eventually dismissed, although, not before alarms sounded over how Keydata policyholders were treated in discovery. State's High Court Joins Several Others to Agree Trial Attorney Who Filed Frivolous Motion Must Pay—The judicial abuser may lose his bar card, but no attorney client relationship arises unless both the attorney and judge are corrupt.

PwC's $2.5M Sanction Against LA : Misuse of Discovery Process

During the litigation, PwC discovered that the City of Los Angeles had engaged in “pervasive discovery abuse. The original appellate court reversed the sanctions because Section 2023.030 could not stand as legal authority for monetary sanction independently of any particular provision from the Civil Discovery Act. But Thursday's ruling said nothing in 1997 precluded courts from imposing these sanctions for systemic discovery abuse -- even if the misconduct exceeded specific violations as spelled out in the act.

The court wrote, "Indeed: We now hold that the trial court had the authority to impose monetary sanctions under Sections 2023.010 and 2023.030," thereby upholding PwC's sanctioned amount of $2.5 million against Los Angeles yesterday.”

Arguments Presented

PwC maintained that sanctions must deter abuse and, given Philadelphia’s conduct in employing discovery misconduct as a matter of course (giving rise to unnecessary expenses for both plaintiffs and defense), be severe by authorizing substantial financial penalties should the courts deem them appropriate. The company itself warned that if monetary sanctions were not to be imposed, the courts would have a limited ability for redress in circumstances of serious discovery abuses; and should other penalties such as evidentiary or terminating sanctions prove pointless because the case was then over.

The city of Los Angeles, meanwhile, argued that the 2nd Circuit's ruling could open “the floodgate for sanctions motions on even modest cases to ensure compliance. The city contended that monetary sanctions were permissible only on terms expressly established by a particular method of the Act.

Supreme Court's Reasoning

The California Supreme Court rejected the city's reading, finding that Section 2023.030 permits a trial court to impose monetary sanctions for patterns of discovery misconduct regardless whether it is grounded in any particular mode of discovery. Such an interpretation, Justice Kruger wrote for the court majority, would "significantly limit courts' capacity to address systemic discovery abuse."

Under the statute, the court found that its power to impose monetary sanctions against a party is not unbridled and cannot be used to evade limitations established by other controlling sections of the Civil Discovery Act. The justices replied that sanctions cannot be pursued solely for punishment, but to secure a fair trial and they must always impose “the least severe sanction” necessary to address the misconduct.

PwC's $2.5M Sanction Against LA : Impact of the Ruling

This decision delineates California's sanction law, specifically in the discovery and monetary sanctions context which signals to trial courts their expansive power to award monies damages for rampant abuse of discovery requests. L.A. will once again be on the hook for its purported improprieties during utility billing litigation, with PwC's $2.5M punishment set to return in full force

Statement from PwC

PwC was represented by Julian W. Poon of Gibson Dunn & Crutcher, who called the ruling a "total vindication" and said his argument for summary judgment under First Amendment law had been validated. The city says more than two dozen people have now been indicted on federal charges and several officials, including LADWP staff, have pleaded or been found guilty of misconduct in connection with the billing system.

The city of Los Angeles officials were not immediately available for comment about the ruling.