Parties’ settlement agreement was also tainted and unenforceable under CCP §664.6 . . .
In writ proceeding, First District majority holds that temporary judge who failed to respond to or consent to disqualification motion was automatically disqualified and her rulings and orders were all void and must be vacated
Hayward v. Superior Court (Osuch)
(August 3, 2016)
California Court of Appeal 1 Civil A144823 (Div 2) 2 Cal.App.5th 10, 206 Cal.Rptr.3d 102, 2016 FA 1751, per Kline, PJ (Stewart, J, concurring; Richman, J, dissenting). Napa County: Price, J, writ petition granted. For petitioner: Keith Dolnick, and David Ezra, (949) 222-0426. For real party in interest: Robert Blevans, CFLS, (707) 251-5500. CFLP §§C.68.2, C.69.0.5.
In 1996, Jose Osuch married Tracy Hayward, the founder and owner of a fruit pureeing business, The Perfect Puree of Napa Valley (PPNV). In 2006, Tracy made him a 1% owner of PPNV. The couple later separated and Tracy filed for divorce in 2011. She fired her first disso attorney after she learned that he was once the law partner of Jose’s attorney, Robert Blevans. She then retained attorney John Munsill. In January 2012, the trial court ordered Tracy to pay more than $12,000 a month to Jose for pendente lite spousal support, plus 40% of any distributions or withdrawals from her businesses other than salary or from other specified taxable income. The order also required her to claim a refund of any overpaid taxes and to pay 40% of any refund to Jose.
In March 2012, the parties decided to retain a private judge to hear the disso and stipulated to the appointment of a Sacramento CFLS, Nancy Perkovich, to act as judge pro tempore under Cal Rules of Ct, rules 2.830-2.834. The stipulation outlined the things that the private judge was authorized to do and provided that the parties waived any conflict that might arise from her conducting settlement conferences and thereafter serving as hearing officer or trial judge. The parties and their attorneys signed the stipulation on March 28, Perkovich signed the oath of office on March 29, and the presiding judge signed the order designating her as temporary judge on April 3.
Tracy and Jose did not actually meet with Temp Judge Perkovich until the first settlement conference on October 30, 2012. At the conference, Perkovich orally disclosed that she had personal and professional contacts with both attorney Munsill and attorney Blevans, that she had hired each of them to act as private judges in some of her family law cases, and that each had hired her in that capacity in the past.
On March 26, 2013, Tracy replaced attorney Munsill with new counsel, Trevor Jackson, who was unaware of Perkovich’s verbal disclosures. When Jose moved for orders for attorney and expert witness fees, payment of spousal support arrearages, and restraints on Tracy’s ability to take distributions from PPNV without Jose’s consent or a trial court order, attorney Jackson gave notice that he would call the COO of PPNV to testify about the adverse effects of the requested restraints and would cross-examine Jose’s expert regarding her declaration. At the hearing, Perkovich refused to allow the COO or anyone else to testify, reasoning that the hearing was analogous to a law and motion proceeding, and stated that she would decide the matter on the declarations, exhibits, and pleadings. Jackson argued that Perkovich was going to rely on declarations submitted by Blevans regarding the disputed financial issues, while precluding the COO and Tracy from testifying regarding the actual operation of PPNV and other relevant matters. Moreover, Jackson complained, Perkovich would be making her decision re attorney and expert fees based on a declaration made by Blevans and before Jose had disclosed the extent and nature of his independent assets. Perkovich then ordered Tracy to pay $13,335 for Jose’s attorney’s fees, to advance $100,000 to him for future fees, and to pay $35,000 to his expert witness. When Tracy piped up to object with salty language, Perkovich told her she was in contempt.
On August 12, 2013, Perkovich “belatedly recognized” that Tracy was entitled to an evidentiary hearing on some of the motions at the prior hearing, vacated some of the orders, and scheduled new hearings. However, the judge ordered Tracy to advance $150,000 (not $100,000) to Jose for his attorney’s fees in connection with the new hearings. On September 5, Tracy filed a motion in the trial court, seeking to withdraw the stipulation and order, remove Perkovich as temporary judge, and reopen discovery, based on the added expense and attorney’s fees that were sure to result from the inconvenience of having to deal with Perkovich in Sacramento. On October 20, the trial court denied that motion. On October 28, Perkovich issued a ruling ordering Tracy to pay Jose 40% of the amount she had withdrawn from PPNV to pay her attorneys, or $109,201, plus interest, and issued a writ of execution for Jose’s spousal support arrearages.
On November 7, Jose filed a request in the trial court, seeking control and management of PPNV or the appointment of a receiver, due to Tracy’s alleged instability and inability to manage the company, and her use of company funds to pay her personal expenses, while evading the wage garnishment. He sought to have Tracy removed as CEO to be replaced by him, Tracy’s salary suspended and an equal salary paid to him, and the authorization to use distributions from PPNV to pay his spousal support arrearages, attorney’s fees, expert costs, and the private judge’s outstanding fees. Meanwhile, settlement negotiations were ongoing. According to attorney Blevans, he and attorney Jackson, along with two other business attorneys of Tracy’s, reached a Memorandum of Agreement (MOA) which Tracy signed the day before the hearing on Jose’s requests. However, Tracy and Jackson would later state that the MOA was negotiated without their participation and that Tracy had signed under threat of another adverse ruling from the private judge and the fear of losing her company.
On March 26, 2014, Tracy replaced attorney Jackson with two new attorneys, Keith Dolnick and David Ezra. On May 20, Jose filed a motion to enforce the MOA, per CCP §664.6 [enforce settlement that is written or recited on the record]. In opposition, the new attorneys contended that the MOA could not be enforced because Jose and Tracy had not served or waived FDDs and Tracy had signed the MOA under economic duress. Tracy followed up with another motion to withdraw the stipulation and the order appointing Perkovich as temporary judge, on the basis that she failed to comply with Cal Rules of Ct, rule 2.831(b) [temp judge must certify awareness of and compliance with applicable cannons of judicial ethics and Cal Rules of Ct], and lacked authority to rule on the pending motion. After the trial court denied Tracy’s motion, she petitioned the First District for a writ, but the justices denied her petition.
Tracy then sent Perkovich a request for a copy of engagement letters and written disclosures signed by her, along with any articles she had co-authored with attorney Blevans or seminars at which they had spoken together. Perkovich responded by email, stating that she had made oral disclosures of that information at her first meeting with the parties and their attorneys and forensics. On October 7, Tracy asked the presiding judge of the trial court to disqualify Perkovich on the grounds that she had failed to comply with the Canons of Judicial Ethics by failing to make required disclosures in writing regarding her mutual private judging relationships with attorney Blevans. Tracy stated that she had first learned of this arrangement through Perkovich’s recent email, and that her conduct (described as cold and dismissive to Tracy, but relaxed and helpful to Blevans) would lead a reasonable person to believe that she was biased. In support of Tracy ‘s request, attorney Jackson submitted a declaration, describing the difference in demeanor that Perkovich displayed to Jose and Blevans, as opposed to Tracy and him, and claiming that Perkovich had ex parte contact with Blevans in which they discussed the case. He also described comments made by the judge that seemed to suggest that she knew she appeared to favor Jose and Blevans. In addition, attorney Dolnick submitted a declaration describing an incident in which Perkovich and Blevans appeared to have impermissible ex parte contact.
On October 16, Perkovich sent a letter to the presiding judge, seeking to recuse herself from the case, noting Tracy’s pending disqualification request, and claiming that she had “ ‘become concerned about [her] personal safety in this case due to Tracy’s conduct.’ ” On November 7, the presiding judge issued an order, finding that Perkovich’s letter did not constitute the filing of a consent to disqualification, and that the failure to file a consent or a written verified answer, per CCP §170.3(c)(4), meant that she was deemed to have consented to the disqualification. The order stated that Perkovich was thus disqualified as Judge Pro Tem in the case and was precluded from further participation in the proceedings as of October 7, 2014. The order reassigned the case to trial court judge Diane Price.
After further proceedings on Jose’s request to reopen discovery and Tracy’s request to have Perkovich’s orders declared void and vacated, the trial court appointed a discovery referee, and ordered Tracy to pay Jose $36,000 for his attorney’s fees in dealing with her discovery opposition. On March 27, Tracy sought repayment of all fees paid to Perkovich, which the latter opposed on the basis that she had not violated any disclosure requirements. Meanwhile, the trial court made further orders regarding discovery and attorney’s fees for Jose. Perkovich sought declaratory relief regarding her fees, supported by a declaration from attorney Blevans and Jose.
Tracy then petitioned the First District for writ relief to challenge the trial court’s discovery orders and its decision to delay a hearing on her motion to set aside Perkovich’s orders. Acting on that petition, a First District majority voided Perkovich’s orders and remanded.
Multiple choice question . . .
The majority justices began by framing the “fundamental question” as whether Perkovich’s orders were void and should be set aside. They noted that Tracy had based her disqualification motion on the allegation that Perkovich had violated the Canons of Judicial Ethics by failing to disclose her personal or professional relationships with attorney Blevans in writing or on the record, and to obtain and file the parties’ written waiver to disqualification on that ground. Tracy had also alleged that Perkovich engaged in conduct that would lead a reasonable person to believe she was biased against her or to doubt her ability to be impartial. The panel explained that a judge has three options for responding to a disqualification request based on bias: request replacement by another judge without conceding bias; file a consent to disqualification; or file a written verified answer. Perkovich’s failure to choose any of those options, the justices continued, meant that she was deemed to have consented to disqualification and that the facts alleged regarding disqualification will be taken as true.
Wrong from the start . . .
The majority justices acknowledged that Perkovich had sent a letter seeking to recuse herself, but agreed with the lower court that the letter did not qualify as a response to Tracy’s request under the applicable statute. Moreover, the majority found, Jose had no right to dispute the grounds for disqualification which the judge did not contest. The justices reasoned that, taking the facts alleged as true, compliance with disclosure requirements in writing or on the record and the related requirements regarding disclosure waivers were extremely important for temporary judges, especially in the context here, and failure to comply was especially serious. The majority found that the information Perkovich was required to disclose: “a professional relationship between the temporary judge and counsel for one of the parties in which each had the power to determine the outcome of the other’s cases, thereby affecting each other’s financial and professional interests” was “clearly disqualifying.” The majority was not convinced that Tracy had waived disqualification, as Jose contended, but they were impressed by the fact that Perkovich could have made the same argument and chose not to. In the majority’s view, Perkovich seemed to display “complete indifference to the legal rules regarding the disqualification process specified in section 170.3.” Summing up, the majority concluded that all of Perkovich’s orders were void at the time they were issued and must be vacated.
The taint spreads, but dissipates . . .
Finally, the majority determined that the MOA could not be enforced under CCP §664.6 because the settlement was “tainted by the void rulings of a disqualified temporary judge” and enforcement would “undermine public confidence in the judiciary and the right of litigants to fair and impartial adjudication.” However, the trial court’s rulings were not similarly tainted and need not be vacated. In conclusion, the majority declined to require Perkovich to refund her fees in this proceeding because she was not a party to the action. The majority then remanded the matter for further proceedings in line with this opinion.
Dissent . . .
Dissenting Justice Richman did not agree with any of the majority’s determinations, found no basis for disqualification, and would also have found that Tracy’s petition was time-barred.
The majority here emphasizes that they are not holding that the facts alleged by Tracy in her disqualification request “have been determined to be true for any purpose other than establishing the basis of disqualification and consequences thereof.” They also make it clear that they are not “making an independent factual finding that Perkovich failed to verbally disclose the mutual judging relationship.” What they are saying, the majority declares, “is that by operation of the disqualification statute, the facts alleged [in Tracy’s request] and not disputed by the challenged judge must be taken as true for purposes of determining the basis and effect of a disqualification order.” And, because the allegations include Perkovich’s initial failure to comply with disclosure requirements in writing or on the record and a related failure to obtain a written waiver from the parties, an assumption that the allegations are true means that Perkovich’s disqualification includes all orders she made from the first to the last.
In a footnote, the majority details the reasons why Perkovich’s letter could not be considered a consent to disqualification in compliance with CCP §170.3. First, it was not filed, but was sent to the presiding judge directly. In addition, the letter “disavowed the allegations of the statement of disqualification” and “sought recusal on different grounds.” The letter could not be deemed an answer to the disqualification request because it was neither verified nor filed. In the majority’s view, rather than follow the statutory procedure, “Perkovich attempted to circumvent the disqualification motion by seeking recusal based on her professed fear of Tracy, a basis wholly independent of the motion for disqualification.”
While some may believe that the failure to strictly comply with disclosure requirements should not be grounds for disqualification and voiding of orders, the majority opines that this case dramatically demonstrates the wisdom of the requirements. Relying on Nagaraj, The Marriage of Family Law and Private Judging in California (2007) 116 Yale L.J. 1614, the majority points out that family law is the legal area where most private judging occurs and notes that more than half of the private judging cases in this state are family law cases. Thus, they reason, private judges should be particularly careful to comply with judicial canons, specially canon 4D(1)(b), which precludes the judge from engaging in “ ‘financial or business dealings that . . . involve the judge in frequent transactions or continuing business relationships with lawyers or other persons likely to appear before the court on which the judge serves.’ ” The majority also pointed to an article appearing in the official publication of the California State Bar Family Law Section, Hersh, Ethical Considerations in Appointing our Colleagues as Private Judge , 31 Family Law News 31 (issue No. 4, 2009), in which the author cautions that “the use by the ‘small and collegial’ family law bar ‘of our friends, colleagues, and prior opposing counsel as private judges unwittingly exposes all of us, as a community and as individuals, to potential liability for violations of the various ethical cannons, claims of cronyism, allegations of bias, complaints of self-dealing, and malpractice law suits.” In a footnote, the majority tells us that the author makes it a practice, and recommends, to send a letter to the person being considered for appointment, requesting detailed written disclosures of specified matters prior to the signing of the stipulation and order. Sounds like excellent advice.