Liu v. Trask CA2/7

Filed 10/3/16 Liu v. Trask CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

ALBERT LIU, B258112, B260517

Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC512303)
v.
ORDER MODIFYING OPINION;
PHILIP A. TRASK et al., NO CHANGE IN JUDGMENT

Defendants and Respondents.

The opinion filed September 15, 2016, and not certified for publication, is modified
as follows:

1. On page 30, delete footnote 14.

2. On page 30, at the end of the first full paragraph, add the following sentence:

On remand, Liu and the PPDG defendants will have an opportunity, after
resolution of Liu’s claims for violation of Labor Code sections 201 and 203, to make
appropriate requests for attorneys’ fees other than under Civil Code section 1717.

The paragraph should now read:

Liu argues that, because the trial court erred in vacating the voluntary dismissal of
his contract-related claims, his voluntary dismissal precluded an award of attorneys’ fees
to the PPDG defendants based on the attorneys’ fees provision in his employment
contract. Liu is correct. Civil Code section 1717, subdivision (b)(2), bars the PPDG
defendants’ claims for prevailing party attorneys’ fees. The PPDG defendants’ only
response is to suggest that the trial court did not err in vacating Liu’s dismissal, an
argument we have rejected. Because Liu successfully dismissed his contract-related
claims under section 581, the trial court erred in awarding attorneys’ fees to the PPDG
defendants. (See Gogri, supra, 166 Cal.App.4th at p. 274 [where trial court erred in
vacating voluntary dismissal that was timely under section 581, “[t]he trial court had no
authority to award [the defendant] Civil Code section 1717 attorney fees on [the
plaintiff’s] contract causes of action”]; Mesa Shopping Center-East, LLC v. Hill, supra,
232 Cal.App.4th at p. 902 [trial court has “no discretion to award fees” under Civil Code
section 1717 where action on contract is voluntarily dismissed].) On remand, Liu and the
PPDG defendants will have an opportunity, after resolution of Liu’s claims for violation
of Labor Code sections 201 and 203, to make appropriate requests for attorneys’ fees
other than under Civil Code section 1717.

This order does not change the judgment. Respondents’ petition for rehearing
is denied.

PERLUSS, P. J. SEGAL, J. ZELON, J.

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Filed 9/15/16 Liu v. Trask CA2/7 (unmodified version)
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

ALBERT LIU, B258112, B260517

Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC512303)
v.

PHILIP A. TRASK et al.,

Defendants and Respondents.

APPEAL from a judgment of the Superior Court of Los Angeles County,
Robert L. Hess, Judge. Reversed and remanded with directions.

Blecher Collins Pepperman & Joye, Maxwell M. Blecher, Howard K.
Alperin and Taylor C. Wagniere for Plaintiff and Appellant.

Law Office of Jeff Augustini and Jeff Augustini; Law Office of Peter Sloan
and Peter Sloan for Defendants and Respondents.

____________________
 INTRODUCTION

Dr. Albert Liu, a dentist, sued the Pacific Palisades Dental Group (PPDG) and its
principals for breach of contract, quantum meruit, fraud and deceit, Labor Code
violations, and other contract-related claims arising out of Liu’s employment with PPDG.
Liu appeals from the judgment entered after the trial court imposed terminating sanctions
because of Liu’s prelitigation misconduct of furtively obtaining and reviewing attorney-
client privileged email communications between PPDG and its attorneys, and testifying
falsely about his conduct at an evidentiary hearing.
Liu raises four issues on appeal. First, he argues that the trial court erred in
imposing terminating sanctions because his misconduct was not so egregious that there
was no possibility for a fair trial on the merits with the lesser sanction of disqualifying his
counsel. Second, he contends that, because he timely filed a request for dismissal
without prejudice of his contract-related claims, the trial court lacked jurisdiction to issue
terminating sanctions on those claims. Third, he argues that the trial court exceeded its
authority when, in addition to dismissing his claims with prejudice, the court enjoined
him from filing any claims in the future arising out of his employment with PPDG.
Finally, he contends that the trial court erred in awarding attorneys’ fees to PPDG and its
principals based on the attorneys’ fees provision in Liu’s employment contract after he
voluntarily dismissed his contract-related claims.
We agree with Liu’s first contention with respect to his Labor Code claims only,
and also with his second, third, and fourth contentions. Therefore, we affirm the
dismissal of Liu’s causes of action for quantum meruit and fraud and deceit, and
otherwise reverse the judgment.

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 FACTUAL AND PROCEDURAL BACKGROUND

A. Liu’s Employment Dispute with PPDG
In November 2009 Dr. Philip Trask hired Liu to work as a pediatric dentist with
PPDG, a partnership Trask had formed with another dentist, Dr. Philip Kamins. Liu’s
employment agreement provided that he would begin as a salaried, at-will “associate,”
but that on January 1, 2012 he would acquire the right to buy into PPDG as an equity
partner.
In August 2011 PPDG hired another pediatric dentist, Dr. Carrie Loewen, and
three months later, on November 15, 2011, Trask met with Liu to discuss his future with
PPDG. Trask informed Liu that PPDG was terminating Liu’s employment, effective
mid-December. Liu nevertheless expressed his intent to pursue buying into the
partnership and requested that Trask and Kamins provide him with a figure for doing so.
After this conversation with Trask, Liu began to seek advice concerning his employment
situation from his sister, Catherine Liu, who was an attorney.
Approximately two weeks later, on November 29, 2011, Liu met with Trask and
Kamins to discuss his request to buy into the partnership. Also present was Melanie
Boyd, the executive director of PPDG, who was responsible for PPDG’s day-to-day
financial operations. Liu came away from this meeting with the understanding that,
although PPDG was terminating his employment as an associate, his joining PPDG as a
partner remained a possibility, subject to further negotiation.
PPDG had scheduled Liu to see patients through December 13, 2011. On
December 2, however, Kamins and Boyd met Liu when he arrived at PPDG’s office,
informed him he was no longer employed there, and supervised Liu while he packed his
belongings and left the premises.
Upset by these developments, Liu discussed his legal options with his sister
Catherine. In March 2012 Liu and Catherine contacted another attorney, Ernest Price.
Liu retained Price to represent him, with Catherine’s assistance, in his dispute with

3
PPDG. Price and Catherine attempted unsuccessfully to settle the dispute through
mediation in December 2012.

B. Liu’s Lawsuit
On June 17, 2013 Liu filed this action against Trask, Kamins, their professional
corporations, and PPDG (the PPDG defendants). Liu alleged causes of action for breach
of contract (lost wages), violation of Labor Code sections 201 and 203,1 breach of the
implied covenant of good faith and fair dealing, quantum meruit, fraud and deceit, breach
of fiduciary duty and wrongful dissociation, and breach of implied-in-fact contract.
The PPDG defendants served Liu with a deposition notice and a request for
production of documents, asking for all documents in his possession that referred or
related to the PPDG defendants. At his deposition on July 26, 2013, Liu produced some
documents responsive to the PDDG defendants’ request, but stated he was still in the
process of giving other responsive documents to his attorney for review. Liu also stated
he had obtained some of the documents he was producing, including a copy of PPDG’s
partnership agreement, by printing them from PPDG’s computer system after he learned
PPDG was terminating him but before he stopped working there. He did so, he
explained, because he was confused and upset, “felt that there was something going on
here, something not on the up-and-up,” and he wanted to see if there was “anything that
would support the fact that [he] didn’t know what [was] going on.” He recalled printing
documents on two evenings, after he finished seeing patients, when no one else was in
the office.

1 Labor Code section 201 provides for, among other things, immediate payment of
wages upon an employee’s discharge. (Lab. Code, § 201.) Labor Code section 203
imposes a penalty when an employer willfully fails to comply with Labor Code section
201. (Id., § 203.)

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 On August 23, 2013 Price produced additional Bates-stamped documents
responsive to PPDG’s request, as well as other documents that were not Bates-stamped,2
accompanied by a cover letter that stated: “In preparing this production it appears that
confidential documents relative to PPDG were uncovered – these are not bate stamped
[sic] and this material is being returned to you. We have not and will not utilize it and
have not maintained copies.” The unstamped documents were email communications
among Trask, Kamins, Boyd, and Peter Sloan, an attorney PPDG had retained to advise it
on employment issues concerning Liu.
A week later, Sloan, who was representing the PPDG defendants in this action,
informed Price that the Bates-stamped documents produced on August 23 included
another six pages of emails between Sloan and PPDG. In response, Price stated that,
although initially he believed those emails were addressed to Liu, on closer inspection it
now appeared Liu may not have received them. Price stated that, after confirming this
with Liu, he would destroy the documents. Price later informed Sloan that he had
destroyed the documents and that neither Price nor Liu retained any copies.
Counsel for the PPDG defendants deposed Liu again on October 24, 2013, at
which time Liu explained how he came to possess the emails among Trask, Kamins,
Boyd, and Sloan. Liu testified that, shortly after Trask first informed him that PPDG
intended to terminate him, Liu was printing documents from PPDG’s computer system,
when he encountered a printer error. After fixing the problem, he went to the computer
on Boyd’s desk to clear pending print jobs. While at Boyd’s computer, Liu began “trying
to look for any information or data that would help explain why [PPDG] suddenly
terminated [him] for no good reason.” While doing so, he “quite accidently” clicked on

2 “Bates-stamped” refers to documents that are numbered sequentially pursuant to a
system designed by Edwin G. Bates for use “in connection with the sale of automatic
hand numbering machines.” (Bates Mfg. Co. v. Bates Numbering Mach. Co. (C.C.D.N.J.
1909) 172 F. 892, 893.)

5
the icon for Boyd’s email program, which opened her office email account.3 He then
“printed out some emails that [he] thought might explain what was going on.” Liu stated
that, at the time, he did not know Sloan was PPDG’s lawyer and “did not read the emails
very carefully to analyze [their] content.” Liu did not recall whether Boyd’s email
account contained folders for storing emails. He also stated Boyd’s computer was not
protected by a password.

C. The PPDG Defendants’ Motion for Terminating Sanctions
In November 2013 the PPDG defendants filed a motion for terminating sanctions
to dismiss Liu’s action with prejudice, or in the alternative to disqualify Liu’s counsel,
because of misconduct by Liu and his attorneys. Citing Liu’s deposition testimony
regarding the emails he printed from Boyd’s computer, the PPDG defendants argued that
Liu stole, reviewed, and maintained for more than two years “over 100 pages” of
privileged attorney-client email communications bearing directly on issues and strategies
relating to Liu’s claims against PPDG.4 The PPDG defendants argued that the only
remedy capable of fully alleviating the prejudice resulting from this misconduct was
dismissal of the action. They argued in the alternative that the court should disqualify
Liu’s attorneys because they possessed the privileged emails for “upwards of two years”
and admittedly had reviewed the substance of some if not all of the emails.
In his supporting declaration, Sloan stated that the “confidential documents”
referred to in, and returned with, Price’s August 23, 2013 letter were 33 privileged
attorney-client emails (“more than 100 pages”) between Sloan and PPDG concerning

3 Explaining what he was trying to do when he accidentally clicked on the email
icon, Liu stated, “I think most likely I was looking to open up [Internet] Explorer,
because I was waiting for my documents to print out.”

4 The PPDG defendants also alleged Liu stole “thousands” of pages of proprietary
and confidential information, including PPDG’s financial information and its confidential
patient information, but stated this was not the basis of their motion for terminating
sanctions.

6
Liu’s “termination and his partnership claims.” Sloan stated that “[t]hese extensive e-
mails effectively provided [Liu] with an entire ‘playbook’ as to [PPDG’s] considerations,
legal and factual, as to virtually all of the claims set forth in this action.”
In her supporting declaration, Boyd stated that, at all times during the relevant
period, her email program was protected by a password to prevent unauthorized access,
and Liu had no authority to access her email. Thus, she explained, “Liu either had to
‘hack into’ my system to access the emails, or alternatively must have waited for a day in
which I inadvertently failed to properly log out of the program to access those emails.”
She also stated that she maintained the emails she received from Sloan, sent to Sloan, or
was copied on and that involved Sloan in a separate folder of her email program labeled
“Attorneys.”
In his opposition to the motion, Liu contended that PPDG had failed to establish
that any of the documents were privileged or that, even if some of them were privileged,
dismissal or disqualification was warranted. In his declaration, Liu again recounted the
occasion on which, after clearing a printer error, he used Boyd’s computer,
“inadvertently” clicked on her email icon, and printed emails that appeared relevant to his
termination and request to buy into the partnership. He stated that he also discovered and
printed a copy of Loewen’s employment agreement and the PPDG partnership
agreement. Liu then described another occasion, several days later, when he printed
additional emails: “I noticed that Ms. Boyd’s computer was left on (as was typical) and
her inbox was left open. I saw, based on the subject line and a cursory read, additional
emails which appeared to involve me and my status at PPDG. As such, I printed those
emails as well.”
Liu also stated that, during his time at PPDG, all employees had unrestricted
access to the computer Boyd used, there was no password on either Boyd’s computer or
her email account, and he did not bypass any security protections to access the emails he
printed. He stated that the emails he printed were located in Boyd’s general “inbox,” not
in a folder labeled “Attorneys,” and that at the time he did not know who Peter Sloan was
or even that PPDG had retained counsel.

7
 According to Liu, he printed approximately 150 pages of emails from Boyd’s
computer. He stated that he reviewed the emails and Loewen’s employment agreement
within days of obtaining them before putting them in a box and never reviewing them
again, and that he never reviewed the partnership agreement. Liu estimated Sloan’s name
appeared in only 10 to 15 pages of the emails, and Liu denied any recollection of the
substance of those communications. Liu could not recall any emails regarding PPDG’s
litigation strategy or its position on his claims in this case. Liu stated that in March 2012
he gave Price a box containing approximately 700 documents relating to his employment
with PPDG, including the emails from Boyd’s computer, Loewen’s employment
agreement, and the PPDG partnership agreement, and that he did not personally retain
any copies of these documents.
Price stated in his declaration that, upon receiving the 700 documents from Liu in
March 2012, he conducted “a superficial review primarily to affirm Dr. Liu’s
employment contract and his time records,” but otherwise left these documents
untouched until December 2012, when he began to prepare for the mediation with PPDG.
“During this review,” Price stated, “I noticed for the first time certain email print-outs
that appeared to be communications between Mr. Sloan [who he knew was PPDG’s
lawyer ] and members of PPDG, to include what appeared to be also communications
between Mr. Sloan and . . . Dr. Liu” (italics omitted). Price stated he also discovered at
this time about 12 to 15 pages of emails that appeared to be communications between
Sloan and Trask or between Sloan and Kamins, which he segregated and stored in a
folder “marked with a yellow sticky ‘privileged’ and/or ‘confidential’ and/or ‘not for use’
sign.” Price stated that, to the best of his knowledge, no one in his office used or
reviewed the documents after he segregated them, at no time did he ever discuss the
contents of the documents with Liu, and his impression was that Liu had no specific
knowledge of them. These 12 to 15 pages, according to Price, were the documents he
returned to Sloan without Bates stamps on August 23, 2013, and neither his office nor
Catherine Liu retained any copies of the segregated documents after he returned them.
Price stated that at no time did he, his staff, or his colleagues review or use the segregated

8
documents, nor did he have any specific or general knowledge of what information those
dozen or so pages contained, other than they were emails addressed from or to Sloan.
Regarding the additional several pages of Bates-stamped emails between Sloan and
PPDG that he produced on August 23, Price repeated the explanation he had given Sloan
and reaffirmed that, after confirming that Liu had not received them, he immediately
destroyed all copies.
Catherine Liu stated in her declaration that, sometime after her brother consulted
her about his termination in mid-November 2011, she became “generally aware” he had
acquired copies of Loewen’s employment agreement, the PPDG partnership agreement,
and emails between Trask, Kamins, and Boyd on the subject of his termination and
request to buy into the partnership, but she did not see these documents and was not
aware the emails included correspondence with Sloan. She noted that at no time did her
brother discuss the substance of the emails in detail with her, other than to indicate they
concerned his termination and “rejection of his buy-in agreement.” Catherine stated that,
prior to the meeting in which her brother gave Price the box of 700 documents, she
“flipped through” the documents, saw they included, among other things, various emails,
but did not review any of the emails in detail, and did not retain copies of any of the
documents. She stated Price later advised her of his discovery of “what appeared to be a
limited number of email communications between [Sloan] and members of PPDG,” and
indicated to her that he was segregating them. Catherine Liu denied ever seeing, much
less reviewing or using, the segregated documents.
In a reply declaration, Sloan repeated that on August 23, 2013 Price returned to
him 33 of his attorney-client email communications with PPDG, that these totaled 105
pages, and that virtually all of the emails addressed “the very issues that are the subject of
this litigation.” Sloan attached 105 pages of what he claimed were redacted copies of
these emails, all from 2011, which included the following subject lines and dates:
“Partnership Agreement and Associate (employee) dentists option to buy in” (November
9) ; “Fwd: Our discussion yesterday - Re: Dr. Liu” (November 20); “Re: Our discussion
yesterday (Re: Dr. Liu #2 - NOT SENT TO HIM)” (November 20) ; “Dr. Liu”

9
(November 25); “RE: Proposed termination notice to Dr. Liu ??” (November 28) ; “Dr.
Liu termination ltr per employee agreement” (November 29) ; “November 29 meeting
with Dr. Liu” (November 30) ; “RE: PacPal Dentistry RE: Dir. [sic] Liu’s calculation of
buy-in” (November 30) ; “Competition Issues” (November 30) , “RE: Liu’s absence”
(December 1) ; “RE: severance” dated (December 5) ; “Peter Sloan legal fees”
(December 6) ; and “Employment Agreement” (December 6).
Several of these emails contained a signature block from “Peter Sloan [¶] Law
Offices of Peter Sloan.” Some of them included the language, “The information
contained in this email message is privileged, confidential and protected from disclosure.
If you are not the intended recipient, any dissemination, distribution or copying is strictly
prohibited.”

D. The Hearing on the PPDG Defendants’ Motion for Terminating Sanctions
At the January 16, 2014 hearing on the PPDG defendants’ motion, the court
identified two significant factual issues on which the parties presented conflicting
evidence: (a) the number of purportedly privileged attorney-client emails, and (b) the
circumstances under which Liu acquired the emails, in particular whether Boyd’s email
program was password-protected and how she stored the emails. The court set the matter
for an evidentiary hearing, at which Liu and Boyd would testify.
The evidentiary hearing began on January 24, 2014 and continued on four other
days. Price conceded at the outset that, because he did not examine or inventory the
purportedly privileged emails he returned to Sloan on August 23, 2013, he could not
dispute Sloan’s representation that those documents consisted of 105 pages. Before
testimony began, the trial court ordered that “the examinations . . . be focused on the
issues presented by this motion. In other words, we’re not getting into the underlying
dispute concerning what Dr. Liu was promised by Dr. Trask as far as a partnership or
anything like that.”
Boyd testified there were 17 computers at PPDG’s office, most of which shared
the same password, but her computer was protected by a unique password during the

10
entire time Liu worked there. She explained that other PPDG employees were not
allowed to use her computer because she maintained confidential financial and employee
information on her local hard drive. She stated that her hard drive and email program
were accessible only by using her unique password, and she never shared that password
with Liu or allowed him to use her computer. She testified that her routine was to log off
her computer each afternoon when she left work, so that her hard drive and email
program would not be accessible until she re-entered her password, although she
admitted she may have “missed a day” from time to time.
Boyd also testified that, during the time Liu worked at PPDG, her email program
automatically routed all incoming emails from Sloan or his secretary to a folder marked
“Attorneys,” so that these emails bypassed her general inbox. In the same way, her
computer automatically routed incoming emails from Trask or Kamins to folders labeled
with their names. Any emails she sent to anyone else were automatically stored in a
“sent” folder. Thus, according to Boyd, in November and December 2011 all of the 33
privileged emails were located in one of these separately labeled folders, and none was in
her general inbox.
Liu testified at the hearing that, although he stated during his deposition that he
printed documents from Boyd’s computer on two occasions, “in retrospect, it was three
times.” The first occurred on November 29, 2011, after his meeting with Trask, Kamins,
and Boyd to discuss his request to buy into the partnership. According to Liu, this was
the occasion on which he used Boyd’s computer to clear a printer error, “accidentally”
accessed Boyd’s email program, and printed the “vast majority” of the emails. Liu
admitted that he read these emails closely enough to know they contained advice to Trask
and Kamins regarding his termination and his request to buy into the partnership, and that
the emails contradicted what Trask and Kamins were telling him in their discussions with
him. Liu’s testimony was equivocal on whether, at this time, he knew Sloan was PPDG’s
lawyer: after stating he was “not sure” if he knew Sloan was PPDG’s lawyer, he admitted
he may have had an “inkling” Sloan was a lawyer, and then stated he “knew” Sloan was a
lawyer but did not know he performed services for PPDG.

11
 The second session of Liu’s email printing from Boyd’s computer occurred “a day
or two after” November 29, 2011, by which time Liu “had an idea” Sloan was an attorney
for PPDG. As he had on November 29, 2011, Liu printed these emails in the evening,
after he finished seeing patients.
Liu printed emails from Boyd’s computer a third time on December 8, 2011.
Although the PPDG defendants had told him on December 2, 2011 that he no longer
worked at PPDG, he believed Trask and Kamins still intended to give him a figure for
buying into the partnership. For this reason, Liu explained, he came to the office during
business hours on December 8 “to kind of see what was going on” and “to get more
financial information” regarding the partnership. He stated that Trask, Kamins, and Boyd
were not in the office, and that he used Boyd’s computer to access the financial
information he wanted “because it was more convenient, but I also wanted to see what
other updated emails there were regarding myself and this whole buy-in situation.”
When pressed by the trial court, Liu admitted he used Boyd’s computer because it had
“email concerning [his] termination,” and that his purpose in accessing and printing
emails from Boyd’s account was to collect evidence relating to his claim that he had a
right to buy into the partnership. The emails he printed included communications
between Boyd and Sloan concerning Liu’s employment dispute. Liu testified that he did
not recall Boyd’s email program had any separate folders, labeled “Attorneys” or
otherwise, but knew he printed emails only from her inbox.
Liu stated during his testimony that his memory of the events at issue was “a little
fuzzy” and “a little spotty.” The trial court admonished him several times for being
“evasive,” going off on “tangents,” “wander[ing],” and refusing to answer questions
asked by the court and counsel. For example, at one point during the hearing, the trial
court stated: “You’re choosing the words, and when I press you on it, then you change,
and you have been doing this throughout your testimony. When somebody presses you
on something then you change your testimony.” At another point, the court stated it was

12
“forming an adverse credibility determination” against Liu.5 The evidentiary hearing
concluded on February 4, 2014, with the court hearing argument from counsel. The court
took the matter under submission.

E. Liu’s Request for Dismissal of His Contract Claims Without Prejudice
On February 20, 2014, before the court issued its ruling on the PPDG defendants’
motion for terminating sanctions, Liu lodged with the court clerk a request to dismiss
without prejudice his causes of action for breach of contract (lost wages), breach of
implied covenant of good faith and fair dealing, breach of fiduciary duty and wrongful
dissociation, and breach of implied-in-fact contract. On February 25, 2014 the clerk
entered the dismissal.
Two days later, the PPDG defendants filed an ex parte application for an order
instructing the clerk “not to file Plaintiff’s Request for Dismissal Without Prejudice, or in
the alternative, to require Plaintiff to file a Dismissal With Prejudice.” The PPDG
defendants argued that the trial court should not allow Liu to dismiss any claims without
prejudice because he attempted to do so after “the commencement of trial,” in violation
of Code of Civil Procedure section 581, subdivision (c),6 and because his request was a
“tactical ploy” to “eviscerate” the evidentiary hearings the court had conducted.
The trial court construed the PPDG defendants’ application as a motion to set
aside Liu’s dismissal, set a briefing schedule for filing opposition and reply papers, and

5 On February 3, 2014, the fourth day of the evidentiary hearing, Liu filed a
statement to disqualify Judge Robert Hess for cause, contending, among other things, that
Judge Hess had determined that Liu was not credible before the parties had presented all
of their evidence. The trial court struck the statement of disqualification.

6 Code of Civil Procedure section 581, subdivision (c), provides: “A plaintiff may
dismiss his or her complaint, or any cause of action asserted in it, in its entirety, or as to
any defendant or defendants, with or without prejudice prior to the actual commencement
of trial.” Undesignated statutory references are to the Code of Civil Procedure.

13
set the matter for hearing on March 27, 2014. After hearing argument on March 27, the
trial court took the matter under submission.

F. The Trial Court’s “Tentative Decision After Bench Trial”
On April 22, 2014 the trial court issued a nearly 40-page “Tentative Decision
After Bench Trial” on the PPDG defendants’ motion for terminating sanctions. By
issuing a “tentative decision,” the trial court followed the procedure for issuing a
statement of decision after a court trial, as provided in section 632 and California Rules
of Court, rule 3.1590, even though an order on a motion generally does not require a
statement of decision (see Lien v. Lucky United Properties Inv., Inc. (2008) 163
Cal.App.4th 620, 623-624 [“[t]he requirement of a written statement of decision
generally does not apply to an order on a motion, even if the motion involves an
evidentiary hearing and even if the order is appealable”]), and even though the PPDG
defendants did not request a statement of decision.
The trial court found that, beginning at least on November 29, 2011, and on two
occasions thereafter, Liu printed and read numerous attorney-client communications
between PPDG and Sloan from Boyd’s computer, that Liu knew at the time these were
attorney-client communications, and that he selected them precisely because they
disclosed the PPDG defendants’ discussions with their attorneys. The court stated it did
not believe Liu accessed Boyd’s email program by accident, and found that Liu had to
open folders, including one labeled “Attorney,” in order to access the emails. The court
found that Liu’s purpose in going to PPDG’s office on December 8, 2011 was to print
additional emails from Boyd’s computer and that his other stated reasons were merely
excuses he intended to offer in the event that Trask, Kamins, or Boyd saw him and
questioned his presence. The court also found that, although Liu’s explanation for much
of his conduct was that he expected to buy into PPDG as a partner, he “neither reasonably
could have had, nor actually had, any such expectation after the events of the morning of
December 2nd,” and his professed expectation was an “after-the-fact attempt at self-
justification for his actions.”

14
 The court further determined that, after Liu printed the emails from Boyd’s
computer, he took them home and read them “to understand what was going on, and
because he was trying to collect evidence. Having gone to the trouble to purloin these
materials, and recognizing that these were attorney-client communications, the Court
believes it is a wholly reasonable inference that Dr. Liu read these documents carefully
and with great attention. . . . It is not unlikely that he read them repeatedly.” The court
inferred from the circumstances of Liu’s discussions with his sister and with Price, and
from Liu’s insistence that he did not appreciate the confidential nature of the emails, that
Liu “fully discussed” the content of the emails with his attorneys.
In recounting Liu’s testimony, the court noted numerous inconsistencies, and
expressed its disbelief of Liu’s account of events. The court also identified a number of
other considerations that undermined Liu’s credibility, including his refusal to respond to
questions, his tendency to argue with opposing counsel, the number of times counsel for
the PPDG defendants impeached his testimony at the hearing with his prior deposition
testimony, and the changes he made in his testimony on several subjects during the
hearing. The court stated it was “fully persuaded, well beyond a preponderance of the
evidence, that Dr. Liu, knowingly and deliberately, repeatedly testified falsely to material
matters while under oath during the evidentiary hearing. The Court is not persuaded that,
even today, Dr. Liu has fully disclosed the number of occasions on which he accessed
Ms. Boyd’s computer, nor has he been fully forthcoming concerning the spectrum of
materials he took. The Court finds that his purported reasons for believing what he did
was proper had no reasonable objective basis, that he did not in fact believe those reasons
at the time he accessed and copied the materials, and that each of the purported reasons is
an after-the-fact rationalization. [¶] . . . . The Court is persuaded that Dr. Liu knew his
acts were wrong at the time he did them, but committed the acts in a deliberate attempt to
secure personal advantage. Dr. Liu’s conduct was reprehensible on every level.”
Turning to the question of appropriate sanctions, the court cited Stephen Slesinger,
Inc. v. Walt Disney Co. (2007) 155 Cal.App.4th 736 (Slesinger) for the proposition that,
“when the plaintiff has engaged in misconduct during the course of the litigation that is

15
deliberate, that is egregious, and that renders any remedy short of dismissal inadequate to
preserve the fairness of the trial, the trial court has the inherent power to dismiss the
action.” (Id. at p. 764.) The court found that Liu’s conduct in accessing, printing, and
reviewing the emails was both deliberate and egregious, and that his false testimony
during the evidentiary hearing was “a significantly aggravating factor.” As for the
appropriate remedy, the court concluded that “[c]onsidering the documents in their
totality, it appears that Dr. Liu gained access to substantially all the e-mail
communications between PPDG and its attorneys relating to the period involving
discussions of Dr. Liu’s status, proposed buy-in, and termination,” and that “[n]othing
can erase Dr. Liu’s knowledge of the content of the privileged documents from his
mind.” The court recognized “the possibility that not all of Dr. Liu’s claims have
‘benefitted’ equally from his misconduct.” Nevertheless, the court was persuaded that
Liu’s misconduct was “repeated, egregious, and without either any reasonable basis for
believing it was proper or an actual belief that it was proper,” and that he “repeatedly and
deliberately testified falsely concerning his activities.” Consequently, the court ruled that
“the only appropriate response is terminating sanctions as to his entire action.”
The court’s tentative ruling was therefore to dismiss Liu’s action with prejudice.
The tentative decision also provided that, “[i]n order to make the terminating sanctions
effective against the possible assertion that dismissal of [Liu’s contract] claims prior to
issuance of this decision somehow deprived the Court of jurisdiction over the dismissed
claims, Dr. Liu is hereby permanently enjoined from commencing or prosecuting any
claims against any of these defendants arising from or relating to either the circumstance
or terms of Dr. Liu’s former employment with PPDG, or the ending of that relationship.”
The tentative decision further provided that Liu’s counsel would be disqualified from
representing him further in any matter relating to any of the PPDG defendants.
Pursuant to California Rules of Court, rule 3.1590(c)(4), applicable to statements
of decision after a court trial, the court’s tentative decision provided that it would become
the trial court’s statement of decision unless within 10 days any party requested a
statement of decision in compliance with Code of Civil Procedure section 632 and

16
California Rules of Court, rule 3.1590. Liu filed a request for a statement of decision.
The court concluded that the evidentiary hearing that began on January 24, 2014 came
within the meaning of a “trial” under Code of Civil Procedure section 581, subdivision
(c), and that, because Liu had not requested dismissal before the “commencement of
trial,” his dismissal was untimely. The trial court therefore vacated the dismissal entered
by the clerk on February 25.
The trial court also issued a “Statement of Decision After Bench Trial” on the
PPDG defendants’ motion for terminating sanctions, which did not differ materially from
the court’s tentative decision. The trial court entered judgment on June 10, 2014, and Liu
timely appealed.

H. The PPDG Defendants’ Motion for Attorneys’ Fees
On July 31, 2014 the PPDG defendants moved for an award of attorneys’ fees and
costs as prevailing parties, pursuant to the attorneys’ fees provision in Liu’s employment
agreement,7 Civil Code section 1717, and Code of Civil Procedure section 1032. The
trial court granted the motion and filed an amended judgment on November 4, 2014,
awarding the PPDG defendants $250,695.50 in attorneys’ fees and $12,349.25 in costs.
Liu timely appealed.

7 The agreement provided: “In the event of any litigation between the parties to
enforce any provision of this Agreement or to protect or establish any right or remedy of
any party hereunder, the substantially prevailing party shall be entitled to an award of all
legal fees and costs of proceedings, including but not limited to reasonable attorneys’
fees, fees owed to arbitrators, witness fees and expenses and accounting fees incurred by
such prevailing party in connection with such dispute.”

17
 DISCUSSION

A. The Trial Court Erred by Vacating Liu’s Dismissal of His Contract Claims
Without Prejudice
Liu argues that the trial court erred when it vacated the dismissal without prejudice
of his causes of action for breach of contract, breach of implied covenant of good faith
and fair dealing, breach of fiduciary duty and wrongful dissociation, and breach of
implied-in-fact contract. He contends the trial court incorrectly determined that his
request to dismiss those claims was untimely under Code of Civil Procedure section 581.
“Code of Civil Procedure section 581 allows a plaintiff to voluntarily dismiss,
with or without prejudice, all or any part of an action before the ‘actual commencement
of trial.’” (Gogri v. Jack In The Box Inc. (2008) 166 Cal.App.4th 255, 261 (Gogri), fn.
omitted; see § 581, subds. (b)(1), (c).)8 “Apart from certain . . . statutory exceptions, a
plaintiff’s right to a voluntary dismissal [before commencement of trial pursuant to
section 581] appears to be absolute. [Citation.] Upon the proper exercise of that right, a
trial court would thereafter lack jurisdiction to enter further orders in the dismissed
action.” (Gogri, at p. 261; accord, Wells v. Marina City Properties, Inc. (1981) 29 Cal.3d
781, 784; see S.B. Beach Properties v. Berti (2006) 39 Cal.4th 374, 380 [“[a] section 581
dismissal ‘is available to [a] plaintiff as a matter of right and is accomplished by filing
with the clerk a written request therefor,’” and “‘[i]f in proper form, the dismissal is
effective immediately’”].)

8 Code of Civil Procedure section 581, subdivision (b), provides in relevant part:
“An action may be dismissed in any of the following instances: [¶] (1) With or without
prejudice, upon written request of the plaintiff to the clerk, filed with papers in the case,
or by oral or written request to the court at any time before the actual commencement of
trial, upon payment of the costs, if any.” Section 581, subdivision (c), provides: “A
plaintiff may dismiss his or her complaint, or any cause of action asserted in it, in its
entirety, or as to any defendant or defendants, with or without prejudice prior to the
actual commencement of trial.”

18
 Code of Civil Procedure section 581, subdivision (a)(6), provides: “A trial shall
be deemed to actually commence at the beginning of the opening statement or argument
of any party or his or her counsel, or if there is no opening statement, then at the time of
the administering of the oath or affirmation to the first witness, or the introduction of any
evidence.” The California Supreme Court “has construed the phrase ‘commencement of
trial’ in section 581 to include ‘determinations on matters of law which dispose of the
entire case, such as some demurrers and pretrial motions. [Citations.]’ [Citation.]
Therefore, ‘commencement of trial’ under section 581 is not restricted to only jury or
court trials on the merits, but also includes pretrial procedures that effectively dispose of
the case.” (Gogri, supra, 166 Cal.App.4th at pp. 261-262, italics omitted; see Wells v.
Marina City Properties, Inc., supra, 29 Cal.3d at p. 785; Mary Morgan, Inc. v. Melzark
(1996) 49 Cal.App.4th 765, 769 [“[a] plaintiff is precluded from voluntarily dismissing
an action without prejudice under various circumstances short of a full trial,” including “a
general demurrer sustained without leave to amend, a general demurrer sustained with
leave to amend where no amendment is made within the allotted time, and where all
issues have been deemed admitted in defendant’s favor”].) “Because the trial court’s
application of section 581 to undisputed facts is a question of law, we apply the
independent standard in reviewing on appeal the trial court’s determination.” (Gogri, at
p. 262; accord, Lee v. Kwong (2011) 193 Cal.App.4th 1275, 1281.)9
The trial court concluded that Liu’s request for dismissal was untimely under
section 581 because Liu filed it a month after the court began the evidentiary hearing to
resolve the factual questions raised by the PPDG defendants’ motion for terminating

9 There are two cases suggesting that “[w]hen a court considers the ‘facts and
circumstances’ of a voluntary dismissal to evaluate ‘whether allowing the dismissal to
stand would be unfair or would endorse dishonest litigation tactics,’ its conclusion is
reviewed for an abuse of discretion.” (Mesa Shopping Center-East, LLC v. Hill (2014)
232 Cal.App.4th 890, 899-900; see Tire Distributors, Inc. v. Cobrae (2005) 132
Cal.App.4th 538, 544.) Here, however, the trial court did not engage in such an
evaluation. Rather, the court determined, based on the undisputed procedural facts of the
case, that trial “commenced on January 24, 2014, when the first witness was sworn.”

19
sanctions. The court determined that, for purposes of applying section 581, trial
commenced on January 24, 2014, when the first witness was sworn in at the hearing.
Nominally consistent with this determination, the trial court styled its tentative decision
and statement of decision on the PPDG defendants’ motion for terminating sanctions as
decisions issued “After Bench Trial.”

1. The Doctrines of Judicial Estoppel and Invited Error Do Not
Preclude Liu from Challenging the Trial Court’s Order Vacating the
Dismissal of His Contract Claims
As a preliminary matter, and contrary to the PPDG defendants’ contentions, the
doctrines of judicial estoppel and invited error do not bar Liu from arguing that the
hearing on the PPDG defendants’ motion for terminating sanctions was not a “trial”
under section 581. The PPDG defendants argue these doctrines apply because Liu filed a
request for a statement of decision pursuant to section 632 and California Rules of Court,
rules 3.1590 and 3.1591, and these provisions “apply only where a trial has occurred.”
“‘“Judicial estoppel precludes a party from gaining an advantage by taking one
position, and then seeking a second advantage by taking an incompatible position. . . .”’
The doctrine applies when ‘(1) the same party has taken two positions; (2) the positions
were taken in judicial or quasi-judicial administrative proceedings; (3) the party was
successful in asserting the first position (i.e., the tribunal adopted the position or accepted
it as true); (4) the two positions are totally inconsistent; and (5) the first position was not
taken as a result of ignorance, fraud, or mistake.’” (Aguilar v. Lerner (2004) 32 Cal.4th
974, 986-987; accord, Bucur v. Ahmad (2016) 244 Cal.App.4th 175, 187-188; see Minish
v. Hanuman Fellowship (2013) 214 Cal.App.4th 437, 449 [judicial estoppel is “an
extraordinary and equitable remedy that . . . must be ‘applied with caution and limited to
egregious circumstances’ [citations], that is, ‘“‘when a party’s inconsistent behavior will
otherwise result in a miscarriage of justice’”’”].)
Judicial estoppel has no application here. When Liu requested a statement of
decision, he did not take a position “totally inconsistent” with his current assertion that

20
the evidentiary hearing was not a “trial.” (Aguilar v. Lerner, supra, 32 Cal.4th. at p.
986.) In his request for a statement of decision, Liu stated that he did “not acknowledge
or concede” that the evidentiary hearings constituted a “bench trial” “on the merits,” and
he was not “waiv[ing] any right . . . to object to any such characterization.” In addition,
the trial court did not adopt an assertion by Liu that the evidentiary hearing was a bench
trial. To the contrary, the court took that position, and Liu responded.
Nor does the doctrine of invited error apply. “‘“Under the doctrine of invited
error, where a party, by his conduct, induces the commission of an error, he is estopped
from asserting it as grounds for reversal. [Citations.] Similarly an appellant may waive
his right to attack error by expressly or impliedly agreeing at trial to the ruling or
procedure objected to on appeal.”’” (Reilly v. Inquest Technology, Inc. (2013) 218
Cal.App.4th 536, 552, italics omitted; accord, Lockaway Storage v. County of Alameda
(2013) 216 Cal.App.4th 161, 181.) Nothing in the record suggests that Liu’s request for a
statement of decision induced the trial court to determine that the evidentiary hearing
constituted a “trial” under section 581. Rather, it appears the opposite occurred: the court
decided that the hearing on the PPDG defendants’ motion was a court trial and induced
Liu to ask for a statement of decision. Moreover, because Liu objected, both in his
opposition to the PPDG defendants’ ex parte application to set aside his dismissal and in
his request for a statement of decision, to the trial court’s characterization of the hearing
as a court trial, Liu did not expressly or impliedly agree to the trial court’s procedure.

2. The Trial Court Erred in Vacating Liu’s Dismissal of His
Contract Claims
On the merits, the trial court’s order vacating the dismissal of Liu’s contract
claims was erroneous. Whatever the trial court may have meant to suggest by styling its
tentative decision and statement of decision as decisions “After Bench Trial,” the
evidentiary hearing on the PPDG defendants’ motion for terminating sanctions was not a
trial on the merits of Liu’s claims. Throughout the proceeding, the trial court only
referred to it as an “evidentiary hearing,” and made clear that the purpose of the hearing

21
was to help resolve factual issues raised by the PPDG defendants’ allegation that Liu
obtained and reviewed privileged attorney-client communications. Indeed, during the
hearing the court emphasized that it was not conducting a trial on the merits by insisting
that the court did not want to “get into the merits” of Liu’s claims against the PPDG
defendants.
Essentially conceding that the hearing on the motion for terminating sanctions
“did not adjudicate the merits of the parties’ dispute,” the PPDG defendants argue that
the proceeding nevertheless qualified as a case-dispositive pretrial procedure that
terminated Liu’s right to dismiss his claims under section 581. Although there are some
situations, short of the commencement of trial, where the filing of a request for dismissal
is untimely and ineffective, what happened in this case is not one of them.
“[A] substantial and fairly complex body of case law has grown up involving
when—and when not—a plaintiff’s statutory right to dismiss pursuant to [section 581] is
cut off by the presence of some impending ‘dispositive’ procedure.” (Franklin Capital
Corp. v. Wilson (2007) 148 Cal.App.4th 187, 194 (Franklin).) The court in Franklin
reviewed numerous cases examining the timeliness of a voluntary dismissal under section
581 and distilled the following test: a voluntary dismissal is ineffective under section 581
“[w]hen the dismissal could be said to have been taken (a) in the light of a public and
formal indication by the trial court of the legal merits of the case, or (b) in the light of
some procedural dereliction by the dismissing plaintiff that made dismissal otherwise
inevitable.” (Franklin, at p. 200; see ibid. [“[t]he cases we have reviewed . . . suggest this
test as the accepted judicial gloss on the voluntary dismissal statute”].)10 Category (a)

10 The Franklin court noted one outlier among the many cases it reviewed,
Hartbrodt v. Burke (1996) 42 Cal.App.4th 168 (Hartbrodt). In Hartbrodt the defendant
filed a motion for terminating sanctions after the plaintiff violated a discovery order. (Id.
at pp. 171-172.) “[J]ust prior” to the hearing on the motion, the plaintiff filed a request
for dismissal of his complaint without prejudice. (Id. at p. 172.) The trial court rejected
that request, and the Court of Appeal affirmed: “In one last effort to salvage his case,
appellant attempted to voluntarily dismiss his case without prejudice and thereby deny to
respondents the finality obtained by imposition of the terminating sanction. This tactic

22
includes the court’s issuance of a tentative ruling on a dispositive motion, and category
(b) includes a plaintiff’s failure to oppose a dispositive motion. (See id. at p. 199.)
Courts have regularly adopted and applied this test, often referring to it as the “mere
formality” test.11 (See, e.g., Panakosta Partners, LP v. Hammer Lane Management, LLC
(2011) 199 Cal.App.4th 612, 633; Lewis C. Nelson & Sons, Inc. v. Lynx Iron Corp.
(2009) 174 Cal.App.4th 67, 76-80; Gogri, supra, 166 Cal.App.4th at pp. 262-273.)
At the time Liu filed his request for dismissal of his contract-related claims
without prejudice, the trial court had given no public, formal indication of the legal merits
of the case, and there was no procedural dereliction by Liu that made dismissal of his
case inevitable. The trial court issued its tentative decision on the PPDG defendants’
motion for terminating sanctions almost two months after Liu dismissed his contract
claims. And, while the trial court did express some skepticism of Liu’s testimony and his
attorneys’ arguments at the evidentiary hearing, the court gave no formal indication of

would simply defeat the trial court’s power to enforce its discovery orders.” (Id. at p.
175.) As the court in Franklin court observed in distinguishing Hartbrodt: “Hartbrodt
thus would appear to be based on the essential equities of the situation rather than a
precise ascertainment of when the statutory cutoff right ends. While we agree that
looking to the equities is good judicial policy, we are mindful that any consideration of
when the statutory right to voluntary dismissal terminates must be rationally connected to
the statutory phrase ‘commencement of trial.’ We must therefore respectfully . . . part
company with Hartbrodt to the degree that it might be read to stand for the idea that
equities alone can justify the termination of the statutory right.” (Franklin, supra, 148
Cal.App.4th at p. 207.)

11 The court in Franklin stated its test was “basically the one proposed” by the court
in Zapanta v. Universal Care, Inc. (2003) 107 Cal.App.4th 1167 (Zapanta), “which
employed the more elegant shorthand, ‘mere formality.’” (Franklin, supra, 148
Cal.App.4th at pp. 201-202.) In Zapanta the plaintiffs filed a request for dismissal
without prejudice one day before their opposition to the defendants’ motion for summary
judgment was due. (Zapanta, at p. 1169.) The court in Zapanta determined that the
plaintiffs’ request was timely under section 581 because, at the time they filed it, “the
opposition to the summary judgment motion was not past due, no hearing on the motion
had been held and no tentative ruling or other decision tantamount to an adjudication had
been made in [the defendants’] favor. In other words, the case had not yet reached a
stage where a final disposition was a mere formality.” (Id. at pp. 1173-1174.)

23
how it intended to rule on the motion. At the end of the hearing, the court took the matter
under submission, and at that time there were several possible adverse outcomes on the
motion that did not include dismissal of the action, such as disqualification of counsel or
orders imposing issue or evidence sanctions. Thus, even assuming Liu may have been
able to discern that the trial court was inclined to grant the motion for terminating
sanctions, a ruling to that effect was not a “mere formality” at the time Liu filed his
request for dismissal. (See Franklin, supra, 148 Cal.App.4th at pp. 201-202; Zapanta,
supra, 107 Cal.App.4th at p. 1174.) Liu may have thought he was going to lose his
contract claims and face the possibility of attorneys’ fees. But section 581 allowed Liu to
dismiss his contract claims when he did. (See Lewis C. Nelson & Sons, Inc. v. Lynx Iron
Corp., supra, 174 Cal.App.4th at p. 78 [“a plaintiff’s subjective lack of good faith in
seeking a dismissal does not, by itself, terminate the statutory right to dismiss”].) The
trial court erred in vacating Liu’s dismissal without prejudice of his contract-related
claims.

B. The Trial Court Erred in Granting Terminating Sanctions on Liu’s
Labor Code Claims, but Did Not Err in Granting Terminating Sanctions on
His Other Non-Contract Claims
“In the absence of express statutory authority, a trial court may, under certain
circumstances, invoke its limited, inherent discretionary power to dismiss claims with
prejudice.” (Lyons v. Wickhorst (1986) 42 Cal.3d 911, 915; accord, Atkinson v. Elk Corp.
(2003) 109 Cal.App.4th 739, 748-749.) In particular, “when the plaintiff has engaged in
misconduct during the course of the litigation that is deliberate, that is egregious, and that
renders any remedy short of dismissal inadequate to preserve the fairness of the trial, the
trial court has the inherent power to dismiss the action.” (Slesinger, supra, 155
Cal.App.4th at p. 764; see Osborne v. Todd Farm Service (2016) 247 Cal.App.4th 43, 51
(Osborne) [“California courts possess inherent power to issue a terminating sanction for
‘pervasive misconduct’”].) “The decision whether to exercise the inherent power to
dismiss requires consideration of all relevant circumstances, including the nature of the

24
misconduct (which must be deliberate and egregious, but may or may not violate a prior
court order), the strong preference for adjudicating claims on the merits, the integrity of
the court as an institution of justice, the effect of the misconduct on a fair resolution of
the case, and the availability of other sanctions to cure the harm.” (Slesinger, at p. 764.)
“[T]here are two important inquiries to be made by trial courts when determining whether
a plaintiff’s actions warrant a dismissal with prejudice. First, the court must discern
whether the plaintiff’s pattern of conduct was so ‘severe [and] deliberate’ as to constitute
extreme circumstances. [Citation.] Second, the court must look to see whether
alternatives less severe than dismissal are available. The ‘“sound exercise of discretion
requires the judge to consider and use lesser sanctions”’ unless the court’s authority
cannot possibly be otherwise vindicated.” (Lyons v. Wickhorst, at p. 917.)
We review a trial court’s exercise of its inherent power to impose terminating
sanctions for abuse of discretion. (Slesinger, supra, 155 Cal.App.4th at p. 765; see
Osborne, supra, 247 Cal.App.4th at p. 51.) In doing so, we view the record in the light
most favorable to the court’s ruling, draw all reasonable inferences in support of the
ruling, and defer to the trial court’s credibility determinations. (Slesinger, at p. 765;
accord, Osborne, at p. 51.) “We accept the trial court’s factual determinations
concerning misconduct if they are supported by substantial evidence.” (Osborne, at p.
51.)
Liu first contends the trial court erred in exercising its inherent power to dismiss
his action because his misconduct did not qualify as “egregious.” In support of this
contention, he argues that he did not obtain PPDG’s attorney-client emails illegally, was
honest in admitting how he obtained them, returned them shortly after litigation
commenced, never used them, and had no meaningful recollection of their contents.
The trial court did not abuse its discretion in concluding that Liu’s conduct was
egregious. Regardless of whether Liu violated the law, the court found that when he
obtained emails from Boyd’s computer on December 8, 2011 he did not have legitimate
access to any of PPDG’s computers and did not believe he did; that on other occasions he
used Boyd’s computer to obtain documents to which he did not have legitimate access

25
and did not believe he did; that he knew at the time he printed and reviewed the emails
they were PPDG’s privileged attorney-client communications; and that he retained
knowledge of their contents. The court also found that Liu repeatedly testified falsely
concerning the scope of his misconduct. Although Liu disagrees with this version of
events, he does not suggest the court’s findings were unsupported by substantial
evidence.
The trial court also did not abuse its discretion in determining that disqualification
of counsel was not an adequate remedy for Liu’s misconduct. As the trial court noted,
nothing could erase Liu’s knowledge of the content of the emails, and replacing counsel
would not solve the problem. Liu is incorrect in suggesting the court “had no idea” what
he learned from reading the emails because the PPDG defendants did not supply a
privilege log or other general summary of the content of the email. The subject lines and
dates of the redacted copies of the emails the PPDG defendants provided to the court
were, as the court found, “tantamount to a privilege log.” In his declaration in support of
the motion for terminating sanctions, Sloan also stated that the emails concerned PPDG’s
“considerations, legal and factual, as to virtually all of the claims set forth in this action.”
And the fact that Liu printed and retained the emails in what he admitted was an effort to
find “any information or data that would help explain why [PPDG] suddenly terminated
[him] for no good reason” suggests the emails contained information relevant to his
claims against PPDG.
We agree with Liu, however, that the trial court’s dismissal of his entire action
was overbroad, and that the court should not have dismissed his statutory claims under
the Labor Code. Labor Code sections 201 and 203 express “‘a fundamental public policy
of this state’” in favor of “[f]ull and prompt payment of wages due an employee.” (Davis
v. Farmers Insurance Exchange (2016) 245 Cal.App.4th 1302, 1331; see ibid. [“[t]he
wages an employer owes its employees are accorded ‘a special status’ under California
law”].) Courts should use extra caution in exercising discretion to dismiss such claims
for litigation-related misconduct. Moreover, because Liu’s claims under those statutes
turn principally on the straightforward questions of whether and when PPDG paid him

26
for the days he worked,12 his knowledge of the content of the emails would not
necessarily render a trial on those claims unfair. (See Mamika v. Barca (1998) 68
Cal.App.4th 487, 493 [“the critical computation required by section 203 is the calculation
of a daily wage rate, which can then be multiplied by the number of days of nonpayment,
up to 30 days”]; Norris-Wilson v. Delta-T Group, Inc. (S.D.Cal. 2010) 270 F.R.D. 596,
611 [plaintiffs’ claim under Labor Code section 201 “won’t require anything other than
basic computation to determine if they’re entitled to damages for not being paid on time
once their employment ended”].) Therefore, although the trial court did not abuse its
discretion in granting terminating sanctions on Liu’s other non-contract claims (i.e.,
quantum meruit and fraud and deceit), the court did abuse its discretion in imposing the
ultimate sanction of dismissal on Liu’s causes of action under Labor Code sections 201
and 203.13

C. The Trial Court Erred in Enjoining Future Claims by Liu Against
the PPDG Defendants
Citing no authority other than its discretion to issue terminating sanctions under
Slesinger, the trial court stated in its ruling: “The Court is aware that since the [motion
for terminating sanctions] was submitted Dr. Liu has purported to dismiss certain of the
claims in his Complaint without prejudice. . . . The Court has this date granted
defendants’ motion to vacate that dismissal without prejudice. However, the Court is
persuaded additional steps are necessary in order to make the terminating sanctions

12 Labor Code section 201 “provides that if an employer ‘discharges’ an employee,
wages earned and unpaid at the time of discharge are due and payable immediately.
Under [Labor Code] section 203, an employer’s willful failure to pay wages to a
‘discharged’ employee in accordance with [Labor Code] section 201 subjects the
employer to penalties.” (Smith v. Superior Court (2006) 39 Cal.4th 77, 80; see Lab.
Code, §§ 201, 203.)

13 On remand, the trial court may consider the appropriateness of lesser sanctions on
those claims.

27
effective against the possible assertion that dismissal of certain claims prior to issuance of
this decision somehow deprived the Court of jurisdiction over those dismissed claims. In
order to fully effectuate the Court’s imposition of sanctions, Dr. Liu is hereby
permanently enjoined from commencing or prosecuting any claims against any of these
defendants arising from or relating to either the circumstance or terms of Dr. Liu’s former
employment with PPDG, or the ending of that relationship, and is further enjoined from
assigning or otherwise transferring any of those claims.”
The trial court abused its discretion in issuing this injunction. The court in
Slesinger characterized the sanction of dismissal for litigation misconduct as “a drastic
remedy to be employed only in the rarest of circumstances.” (Slesinger, supra, 155
Cal.App.4th at p. 764, italics omitted.) The limited and extraordinary nature of the
dismissal remedy recognized in Slesinger does not authorize the imposition of sanctions
that go beyond dismissal of pending claims, such as enjoining the future filing of claims
that were timely dismissed without prejudice from the pending action or enjoining the
future filing of claims that were never even brought in the pending action. The trial
court’s injunction would do just that. Neither the trial court nor the PPDG defendants
cite any authority suggesting that a court has discretionary power to impose such a
sanction for litigation misconduct. (See Hambrick v. Healthcare Partners Medical
Group, Inc. (2015) 238 Cal.App.4th 124, 147 [trial court abuses its discretion when it
acts in accord with a mistaken view of the scope of its discretion]; Klein v. Chevron
U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1361 [“‘[a] trial court’s decision that rests on
an error of law is an abuse of discretion’”].)
Moreover, the PPDG defendants did not request an injunction in their motion for
terminating sanctions or during the hearing on that motion. Rather, the trial court issued
the injunction sua sponte, without giving notice to the parties that it was considering such
an injunction or hearing argument on whether it was appropriate to do so. This, too, was
an abuse of discretion because “[d]ue process mandates adequate notice and opportunity
to be heard prior to the imposition of sanctions.” (Barrientos v. City of Los Angeles
(1994) 30 Cal.App.4th 63, 70.) A trial court imposing sanctions “must keep in mind an

28
immutable principle that cuts across all areas of the law: sanctions may not be summarily
imposed. Due process demands more.” (In re Marriage of Duris and Urbany (2011) 193
Cal.App.4th 510, 511; see Barrientos v. City of Los Angeles, supra, 30 Cal.App.4th at p.
72 [trial court’s imposition of monetary sanctions without prior notice or opportunity to
be heard and for improper purpose was abuse of discretion].)

D. The Trial Court Erred in Awarding Attorneys’ Fees to the PPDG
Defendants
Liu contends that the trial court erred in awarding attorneys’ fees to the PPDG
defendants based on the attorneys’ fees provision in his employment contract because,
among other reasons, he voluntarily dismissed his contract-related claims, and therefore
the PPDG defendants were not prevailing parties. We review a trial court’s award of
attorneys’ fees and costs, including its determination that a litigant is a prevailing party,
for abuse of discretion, unless these issues involve interpreting a statute, in which case
they present a question of law we review de novo. (Goodman v. Lozano (2010) 47
Cal.4th 1327, 1332; see Almanor Lakeside Villas Owners Association v. Carson (2016)
246 Cal.App.4th 761, 774.)
Civil Code section 1717, subdivision (a), authorizes the trial court to award
reasonable attorneys’ fees to the prevailing party in a contract action if the contract
provides for such an award. (Civ. Code § 1717, subd. (a); Eden Township Healthcare
District v. Eden Medical Center (2013) 220 Cal.App.4th 418, 425.) Section 1717,
subdivision (b)(2), however, provides that, “[w]here an action has been voluntarily
dismissed . . . , there shall be no prevailing party for purposes of this section.” (Civ.
Code § 1717, subd. (b)(2); see Mesa Shopping Center-East, LLC v. Hill (2014) 232
Cal.App.4th 890, 902 [“‘[w]here an action [on a contract] has been voluntarily dismissed
. . . , there shall be no prevailing party for purposes of’ recovering attorney fees”].) Thus,
“[w]hen a plaintiff files a complaint containing causes of action within the scope of
section 1717 (that is, causes of action sounding in contract and based on a contract
containing an attorney fee provision), and the plaintiff thereafter voluntarily dismisses the

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action, section 1717 bars the defendant from recovering attorney fees incurred in
defending those causes of action, even though the contract on its own terms authorizes
recovery of those fees.” (Santisas v. Goodin (1998) 17 Cal.4th 599, 617; accord, Mitchell
Land and Imp. Co. v. Ristorante Ferrantelli, Inc. (2007) 158 Cal.App.4th 479, 485-486.)
Liu argues that, because the trial court erred in vacating the voluntary dismissal of
his contract-related claims, his voluntary dismissal precluded an award of attorneys’ fees
to the PPDG defendants based on the attorneys’ fees provision in his employment
contract. Liu is correct. Civil Code section 1717, subdivision (b)(2), bars the PPDG
defendants’ claims for prevailing party attorneys’ fees. The PPDG defendants’ only
response is to suggest that the trial court did not err in vacating Liu’s dismissal, an
argument we have rejected. Because Liu successfully dismissed his contract-related
claims under section 581, the trial court erred in awarding attorneys’ fees to the PPDG
defendants. (See Gogri, supra, 166 Cal.App.4th at p. 274 [where trial court erred in
vacating voluntary dismissal that was timely under section 581, “[t]he trial court had no
authority to award [the defendant] Civil Code section 1717 attorney fees on [the
plaintiff’s] contract causes of action”]; Mesa Shopping Center-East, LLC v. Hill, supra,
232 Cal.App.4th at p. 902 [trial court has “no discretion to award fees” under Civil Code
section 1717 where action on contract is voluntarily dismissed].)14

DISPOSITION

The judgment is reversed. The matter is remanded to the trial court with
directions (1) to vacate the order granting the PPDG defendants’ motion to vacate the
dismissal of Liu’s contract-related causes of action and to enter a new order denying that
motion, (2) to vacate the order dismissing Liu’s causes of action under Labor Code
sections 201 and 203 and the order enjoining Liu from bringing any future claims against
the PPDG defendants, and (3) to vacate the order granting the PPDG defendants’ motion

14 Liu does not challenge the trial court’s award of costs to the PPDG defendants.

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for attorneys’ fees and to enter a new order denying that motion. The trial court’s order
granting the PPDG defendants’ motion for terminating sanctions on Liu’s causes of
action for quantum meruit and fraud and deceit is affirmed. The parties are to bear their
costs on appeal.

SEGAL, J.

We concur:

PERLUSS, P. J.

ZELON, J.

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