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U.S. Supreme Court,

Jan. 26, 2023

High court will hear sanctions request in water bill litigation

An appellate court threw out a $2.5 million sanctions award to PricewaterhouseCoopers.

The California Supreme Court on Wednesday agreed to consider a $2.5 million sanctions award over alleged discovery misconduct in long-running litigation over faulty billing software at the Los Angeles Department of Water and Power.

The case goes back to the city’s 2015 lawsuit against PricewaterhouseCoopers, which sold LADWP the software. That system proved to be a disaster, misbilling customers and leading to a $67 million settlement with customers. Jones v. City of Los Angeles, BC577267 (L.A. Super. Ct., filed April 1, 2015).

But then attorneys in the City Attorney’s Office or working under contract for the city attorney were accused of colluding with plaintiffs in order to reach a manufactured settlement without discovery so that the city and the plaintiffs could turn their focus to a lawsuit against PwC. The FBI ended up raiding the city attorney’s office and the offices of other attorneys and there have been guilty pleas.

After the allegations of collusion were made, PwC moved in 2020 for over $8 million in sanctions. Superior Court Judge Elihu M. Berle awarded the company $2.5 million. He found the city had abused the discovery process, often choosing not to review relevant documents or otherwise not disclosing information PwC sought in that litigation. But in October, a divided panel of the 2nd District Court of Appeal, Division 5, reversed the sanctions order.

Justice Carl H. Moor, writing for the majority, found that the sections of the Discovery Act the company cited did not allow for sanctions.

“We cannot evaluate on this record whether the sanctions awarded may have been an appropriate exercise of the trial court’s discretion under other discovery provisions because the defendant presented its costs in the motion below based on the general categories of misconduct described in section 2023.010, rather than on the defendant’s reasonable expenses incurred as a result of sanctionable conduct under discovery provisions other than sections 2023.010 and 2023.030,” Moor wrote, joined by Presiding Justice Laurence D. Rubin.

Julian W. Poon submitted a petition for review to the state Supreme Court in November which drew heavily from a concurring and dissenting opinion filed by Justice Elizabeth A. Grimes. Poon, a partner with Gibson Dunn & Crutcher LLP, argued the Los Angeles City Attorney’s Office colluded without outside counsel to seek an unjust settlement, disobeyed the trial court’s discovery orders and engaged in “a multi-year pattern of fraud.”

“There was no dispute in the trial court or on appeal that the City had engaged in misuse of the discovery process by resisting PwC’s discovery requests,” Poon wrote. “And there was no dispute that this misconduct was extreme and prolonged. Indeed, as Justice Grimes observed, ‘[t]his case presents a record of egregious discovery abuse that is unmatched in my experience.’”

He added that in “Grimes’ powerful dissent,” she wrote “the majority adopted ‘a principle announced for the first time today — one that has never before been applied in any published opinion or argued by counsel, one that was not raised in the trial court below, and one that was not raised by the City in this appeal.’”

A spokesperson for Gibson Dunn declined to comment on City of Los Angeles v. PricewaterhouseCoopers, S277211 (Cal., filed Nov. 23, 2022). Eric M. George, who represents the city as a partner with Ellis George Cipollone O’Brien Annaguey in Los Angeles, did not respond to an email seeking comment.

The notice posted on the Supreme Court’s website on Wednesday said Justice Joshua P. Groban “was recused and did not participate.”

“Pending review, the opinion of the Court of Appeal, which is currently published at 84 Cal.App.5th 466, may be cited, not only for its persuasive value, but also for the limited purpose of establishing the existence of a conflict in authority that would in turn allow trial courts to exercise discretion under Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 456, to choose between sides of any such conflict,” the court’s website stated.


Malcolm Maclachlan

Daily Journal Staff Writer

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