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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication 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,

Plaintiff and Appellant,

v.

PHILIP A. TRASK et al.,

Defendants and Respondents.

 B258112, B260517

 (Los Angeles County

 Super. Ct. No. BC512303)

ORDER MODIFYING OPINION;

NO CHANGE IN JUDGMENT

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 
2

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.
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,

Plaintiff and Appellant,

v.

PHILIP A. TRASK et al.,

Defendants and Respondents.

 B258112, B260517

 (Los Angeles County

 Super. Ct. No. BC512303)

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.

____________________
2

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 attorneyclient 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. 
3

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 
4

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.) 
5

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.)
6

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. 
7

Liu’s “termination and his partnership claims.” Sloan stated that “[t]hese extensive emails 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. 
8

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 
9

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” 
10

(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 
11

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. 
12

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 
13

“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.
14

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 selfjustification for his actions.” 
15

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 
16

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 
17

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.” 
18

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.” 
19

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.” 
20

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 
21

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 
22

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 
23

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.) 
24

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 
25

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 
26

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 
27

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.
28

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 
29

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 
30

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.
31

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.